ITO, New Delhi V. M/s. Bholanath Industries Ltd., New Delhi

ITA 3582/DEL/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2905 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 08-08-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 04-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K JAIN
• Keywords: Depreciation; Business expenditure; Unabsorbed depreciation
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI B.P.JAIN, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 3582/DEL /2013 ASSTT. YEAR: 2009-10 ITO, WARD 2(4), ROOM NO. 381, C.R. BUILDING, NEW DELHI. VS BHOLANATH INDUSTRIES LTD., 6/19, 1 ST FLOOR, SINGLE STOREY, RAMESH NAGAR, NEW DELHI-110015 (PAN: AAACB0746K) (APPELLANT) (RESPONDENT) ITA NO. 3706/DEL /2013 ASSTT. YEAR: 2009-10 BHOLANATH INDUSTRIES LTD., NEW DELHI. VS ITO, WARD 2(4), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.K. JAIN, SR. DR RESPONDENT BY : NONE PRESENT DATE OF HEARING : 08.11.2017 DATE OF PRONOUNCEMENT: 27.12.2017 ORDER PER SUDHANSHU SRIVASTAVA, J.M. THESE ARE CROSS APPEALS FOR AY 2009-10. ITA NO. 3582/DEL/2013 HAS BEEN PREFERRED BY THE REVENUE AGA INST THE ITA 3582 & 3706/D/2013 ASSESSMENT YEAR 2009-10 2 | P A G E ORDER DATED 22.03.2013 PASSED BY THE LD. COMMISSION ER OF INCOME TAX (APPEALS)-V, NEW DELHI. THE FOLLOWING GROUNDS H AVE BEEN RAISED IN THIS APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE AS WELL AS IN LAW THE LD CIT(A) HAS ERRED IN RESTRI CTING THE DISALLOWANCE OF BROUGHT FORWARD DEPRECIATION TO RS. 87,92,149/- AS AGAINST RS. 4,19,90,966/- MADE BY TH E A.O. 2. THE LD CIT(A) IGNORED THE FINDINGS RECORDED BY THE A.O. AND THE FACT THAT THE ASSESSEE DID NOT SET OF THE LOSSES ON ACCOUNT OF DEPRECIATION AGAINST THE INCOM E CLAIMED EXEMPT U/S 10B OF THE I.T. ACT EARNED DURIN G THE TAX HOLIDAY PERIOD. 3. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RI GHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) O F APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 1.1 ITA NO. 3706/DEL/2013 HAS BEEN PREFERRED BY THE ASSESSEE ON THE FOLLOWING GROUNDS:- THE APPELLANT SEEKS TO TAKE THE FOLLOWING GROUNDS IN APPEAL, WHICH ARE WITHOUT PREJUDICE TO ONE ANOTH ER: A. THE ID. CIT (APPEALS) HAD WRONGLY DISALLOWED UNABSORBED DEPRECIATION PERTAINING TO PERIOD PRIOR TO A.Y 2001-02 IN THE ASSESSMENT YEAR 2009-10. IN EACH YEA R, THE DEPRECIATION OF PREVIOUS YEARS IS SUBMERGED IN THE DEPRECATION OF CURRENT YEAR WHICH CAN BE ALLOWED TO CARRY FORWARD & SET OFF IN SUBSEQUENT YEARS ALSO. B. THE LD. CIT (APPEALS) HAS FAILED TO NOTICE THAT THE APPELLANT HAS FURNISHED ALL THE RELEVANT INFORMATIO N, ITA 3582 & 3706/D/2013 ASSESSMENT YEAR 2009-10 3 | P A G E DOCUMENTS AND CLARIFICATIONS RELATED TO COMMISSION PAYMENT OF RS.24,39,930/- WHICH ESTABLISH GENUINENE SS OF ITS TRANSACTION AND THEREFORE, HE HAS WRONGLY DISALLOWED THE SAID THE BUSINESS EXPENSES. C. THE LD. CIT (APPEALS) HAS NOT GIVEN ANY FINDING AS TO WHY EXPENSES INCURRED ON AGRICULTURE HAVE BEEN DISALLOWED. D. THE COMMISSIONER (APPEALS) HAS FAILED TO CONSIDE R THE SUBMISSIONS MADE BY THE APPELLANTS COMPANY. 2. NONE WAS PRESENT FOR THE ASSESSEE WHEN THE APPEA LS WERE CALLED OUT FOR HEARING. A PERUSAL OF THE ENTRIES IN THE OR DER SHEET SHOWS THAT THIS APPEAL WAS FIRST LISTED FOR HEARING ON 3 RD OF DECEMBER 2013 AND HAS BEEN ADJOURNED ON FIVE EARLIER OCCASIONS ON THE REQUEST OF THE ASSESSEE. IT IS ALSO SEEN THAT THE APPEALS WERE ADJ OURNED TO 5 TH OF JUNE 2017 ON 14/03/2017 AND, THEREAFTER, THE ASSESSEE AP PROACHED THE HONBLE PRESIDENT OF THE ITAT WITH AN APPLICATION F OR PRE-PONEMENT OF THE APPEALS AND THE SAME WERE PRE-PONED FOR HEAR ING TO 25 TH MAY, 2017 VIDE ORDER OF THE HONBLE PRESIDENT DATED 17/0 4/2017. HOWEVER, ON 25 TH OF MAY 2017 ALSO THE ASSESSEE REQUESTED AN ADJOURN MENT. THUS, IT IS VERY MUCH EVIDENT THAT THE ASSESSEE IS NOT INTERESTED IN PROSECUTING THE APPEALS AND, THEREFORE, WE DEEM IT FIT TO HEAR THE APPEALS EX PARTE QUA THE ASSESSEE. ITA 3582 & 3706/D/2013 ASSESSMENT YEAR 2009-10 4 | P A G E 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E WAS CARRYING OUT THE BUSINESS OF PROCESSING OF WOOLLEN YARN AND EXPO RTING THE SAME DURING THE YEAR UNDER CONSIDERATION. THE ASSESSMENT WAS COMPLETED AT AN INCOME OF RS. 16,86,617/- AS AGAINST THE RETU RNED LOSS OF RS. 7,83,630/- AFTER MAKING DISALLOWANCE OF RS. 24,39,9 30/- ON ACCOUNT OF COMMISSION AND RS. 30,317/- ON ACCOUNT OF AGRICULTU RAL EXPENSES AND ALSO DISALLOWING TO CARRY FORWARD UNABSORBED DEPREC IATION AMOUNTING TO RS. 4,19,90,666/-. 3.1 AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEF ORE THE LD. FIRST APPELLATE AUTHORITY WHO GAVE PARTIAL RELIEF IN RESP ECT OF UNABSORBED DEPRECIATION BUT DISMISSED THE ASSESSEES CHALLENGE TO ADDITIONS ON ACCOUNT OF COMMISSION AND AGRICULTURE EXPENSES. 3.2 NOW, THE ASSESSEE IS IN APPEAL AGAINST ALL THE THREE ISSUES BEFORE THE ITAT WHEREAS THE DEPARTMENT IS CHALLENGING THE RESTRICTION OF DISALLOWANCE OF BROUGHT FORWARD DEPRECIATION. 4. THE LD. DEPARTMENTAL REPRESENTATIVE READ OUT EXT ENSIVELY FROM THE ASSESSMENT ORDER AND SUBMITTED THAT THE LD. FIR ST APPELLATE AUTHORITY HAD ERRED IN RESTRICTING THE DISALLOWANCE OF BROUGHT FORWARD DEPRECIATION BY IGNORING THE FINDINGS RECOR DED BY THE AO ITA 3582 & 3706/D/2013 ASSESSMENT YEAR 2009-10 5 | P A G E AND THE FACT THAT THE ASSESSEE HAD NOT SET OFF THE LOSSES ON ACCOUNT OF DEPRECIATION AGAINST THE INCOME CLAIMED EXEMPT UNDE R SECTION 10B OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED THE A CT) WHICH WAS EARNED DURING THE TAX HOLIDAY PERIOD. ON THE DISMIS SAL OF ASSESSEES GROUNDS RELATING TO COMMISSION EXPENSES AND AGRICUL TURE EXPENSES BY THE LD. CIT (APPEALS), THE LD. DEPARTMENTAL REPRESE NTATIVE PLACED RELIANCE ON THE ORDERS OF THE BOTH THE AUTHORITIES BELOW. 5. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIV E AND HAVE ALSO PERUSED THE MATERIAL ON RECORD. AS FAR AS THE ISSUE OF SET OFF OF BROUGHT FORWARD DEPRECIATION IS CONCERNED, IT IS SE EN THAT THE AO HAS DISALLOWED CARRY FORWARD OF DEPRECIATION PERTAINING TO ASSESSMENT YEAR 2000-01 TO ASSESSMENT YEAR 2009-10 AS WELL AS BROUGHT FORWARD UNABSORBED DEPRECIATION UP TO ASSESSMENT YEAR 01 02 AMOUNTING TO RS. 1,96,32,702/-. THE LD. CIT (APPEALS) HAS HELD T HAT BROUGHT FORWARD UNABSORBED DEPRECIATION OF 87,92,149/- PERT AINING TO THE YEARS PRIOR TO ASSESSMENT YEAR 2000 01 WAS NOT EL IGIBLE TO BE CARRIED FORWARD AND HAS ALLOWED PARTIAL RELIEF TO THE ASSES SEE . IT IS SEEN THAT THE LD. CIT (APPEALS) HAS NOT APPRECIATED THE AMEND MENT TO SECTION 10B OF THE ACT IN ITS CORRECT PERSPECTIVE. THE ISSU E IS NO LONGER RES ITA 3582 & 3706/D/2013 ASSESSMENT YEAR 2009-10 6 | P A G E INTEGRA IN VIEW OF THE JUDGMENTS OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS KEI INDUSTRIES LTD. (DATED 13 MA RCH, 2015) AND CIT V. TEI TECHNOLOGIES (P) LTD (ITA NO. 347/2011 & 206 7/2010) AND FOR PROPER ADJUDICATION OF THIS ISSUE IT IS REQUIRED TH AT THESE TWO JUDGMENTS OF THE HONBLE JURISDICTIONAL HIGH COURT BE CONSIDERED PRIOR TO REACHING A CONCLUSION IN THIS REGARD. HOWE VER, IT IS SEEN THAT THE RELEVANT DETAILS ARE NOT BEFORE US AND THE DETE RMINATION OF THE QUANTUM OF UNABSORBED DEPRECIATION TO BE ALLOWED TO BE SET OFF HAS TO BE NECESSARILY DONE BY THE AUTHORITIES BELOW. ACCOR DINGLY, WE RESTORE THE ISSUE OF UNABSORBED DEPRECIATION TO THE FILE OF THE LD. CIT (APPEALS) TO BE DECIDED AFRESH AFTER DUE EXAMINATIO N OF THE FACTS AND RELEVANT DETAILS AND ALSO CONSIDERING THE RATIO OF THE JUDGMENTS OF THE HONBLE HIGH COURT OF DELHI IN THE CASES OF CIT VS KEI INDUSTRIES LTD. AND CIT V. TEI TECHNOLOGIES (P) LTD (SUPRA) AND AFT ER GIVING DUE OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE. WE ALSO DIRECT THE ASSESSEE TO COOPERATE WITH THE PROCEEDINGS BEFORE T HE LD. FIRST APPELLATE AUTHORITY AND TO SUBMIT ALL THE RELEVANT DETAILS WHEN REQUIRED TO DO SO FAILING WHICH THE LD. FIRST APPEL LATE AUTHORITY WILL BE AT LIBERTY TO DECIDE THE ISSUE ON MERITS. THUS, THE GROUNDS OF BOTH THE ITA 3582 & 3706/D/2013 ASSESSMENT YEAR 2009-10 7 | P A G E PARTIES IN RESPECT OF UNABSORBED DEPRECIATION ARE A LLOWED FOR STATISTICAL PURPOSES AND THE APPEAL OF THE DEPARTME NT ALSO STANDS ALLOWED FOR STATISTICAL PURPOSES. 5.1 THE ASSESSEE HAS ALSO CHALLENGED THE DISALLOWAN CE OF COMMISSION AMOUNTING TO RS. 24,39,930/-. THE LD. CI T (APPEALS), WHILE CONFIRMING THE ADDITION HAS NOTED THAT THE AO HAD MADE THE DISALLOWANCE MERELY ON THE GROUND THAT THERE WAS NO AGREEMENT BETWEEN THE PARTIES. THE LD. CIT (APPEALS) HAS ALSO NOTED THAT THE AO HAS NOT QUESTIONED THE GENUINENESS OF THE PAYMEN TS BUT HAS RAISED QUERY ON THE GENUINENESS OF THE SERVICES REN DERED BY THE PERSONS RECEIVING COMMISSION. THEREAFTER, THE LD. C IT (APPEALS) HAS NOTED THAT THE ASSESSEE WAS ASKED TO FILE DETAILS O F SERVICES RENDERED BY THE RECIPIENTS OF THE COMMISSION, THE RATE AT WH ICH COMMISSION WAS PAID, THE QUALIFICATIONS OF THE COMMISSION AGEN TS AND THE DETAILS OF THE SALES BOOKED THROUGH THEM SO AS TO EXAMINE T HE GENUINENESS OF THE CLAIM PERTAINING TO PAYMENT OF COMMISSION. THE LD. CIT (APPEALS) HAS FURTHER NOTED THAT THE ASSESSEE DID N OT SUBMIT THE REQUIRED INFORMATION AND, THEREFORE, THE DISALLOWAN CE WAS BEING CONFIRMED. A PERUSAL OF THE IMPUGNED ORDER SHOWS TH AT THE LD. CIT ITA 3582 & 3706/D/2013 ASSESSMENT YEAR 2009-10 8 | P A G E (APPEALS) HAD RAISED THE QUERY ON 11/03/2013 REQUIR ING THE ASSESSEE TO FURNISH THE DETAILS BY 18/03/2013 WHICH WAS NOT COM PLIED BY THE ASSESSEE. THE IMPUGNED ORDER WAS PASSED ON 22/03/20 13. THUS, THE ASSESSEE DID NOT HAVE AMPLE TIME TO SUBMIT THE DETA ILS AS REQUIRED BY THE LD. FIRST APPELLATE AUTHORITY. ACCORDINGLY, IN THE INTEREST OF JUSTICE, WE DEEM IT FIT TO RESTORE THIS ISSUE ALSO TO THE FI LE OF THE LD. CIT (APPEALS) WITH THE DIRECTION TO EXAMINE IT AFRESH A FTER CALLING FOR THE REQUIRED DETAILS FROM THE ASSESSEE AND AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. WE ALSO DIRECT THE ASSESSEE TO COOPER ATE WITH THE PROCEEDINGS BEFORE THE LD. FIRST APPELLATE AUTHORIT Y AND TO SUBMIT ALL THE RELEVANT DETAILS WHEN REQUIRED TO DO SO FAILING WHICH THE LD. FIRST APPELLATE AUTHORITY WILL BE AT LIBERTY TO DECIDE TH E ISSUE ON MERITS. ACCORDINGLY, THIS GROUND OF THE ASSESSEE ALSO STAND S ALLOWED FOR STATISTICAL PURPOSES. 5.2 SIMILARLY, THE DISALLOWANCE OF RS. 30,117/- ON ACCOUNT OF AGRICULTURE EXPENSES HAS BEEN CONFIRMED BY THE LD. CIT (APPEALS) ON THE GROUND THAT NOTHING WAS BROUGHT ON RECORD BY TH E ASSESSEE DURING THE FIRST APPELLATE PROCEEDINGS TO REBUT THE OBSERVATIONS OF THE AO. IN THE INTEREST OF JUSTICE, WE DEEM IT FIT TO R ESTORE THIS ISSUE ALSO ITA 3582 & 3706/D/2013 ASSESSMENT YEAR 2009-10 9 | P A G E TO THE FILE OF THE LD. CIT (APPEALS) WITH THE DIREC TION TO EXAMINE IT AFRESH AFTER CALLING FOR THE REQUIRED DETAILS FROM THE ASSESSEE AND AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. WE ALSO DIR ECT THE ASSESSEE TO COOPERATE WITH THE PROCEEDINGS BEFORE THE LD. FIRST APPELLATE AUTHORITY AND TO SUBMIT ALL THE RELEVANT DETAILS WH EN REQUIRED TO DO SO FAILING WHICH THE LD. FIRST APPELLATE AUTHORITY WILL BE AT LIBERTY TO DECIDE THE ISSUE ON MERITS. ACCORDINGLY, THIS GROUN D OF THE ASSESSEE ALSO STANDS ALLOWED FOR STATISTICAL PURPOSES. 5.3 THUS, THE ASSESSEES APPEAL STANDS ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE FINAL RESULT, BOTH THE APPEALS ARE STAND ALLOWED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 27 TH DECEMBER, 2017. SD/- SD/- (B.P. JAIN ) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 27 TH DECEMBER, 2017 DRAGON ITA 3582 & 3706/D/2013 ASSESSMENT YEAR 2009-10 10 | P A G E COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER ASSISTANT REGI STRAR