NARANGS INTERNATIONAL HOTELS P.LTD, MUMBAI V. ADDL CIT RG 1(2), MUMBAI

ITA 369/MUM/2013

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1103 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 25-02-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 11-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S K MITRA
• Keywords: Business expenditure; Opportunity of being heard; Principle of natural justice; Earning of tax free income; Question of law; Reasonable cause; Non compliance; Onus to prove; Revised return
• Section: 43B; 143(3); 14A; 40(a)(ia); 80IB; 37(1); 147; 148

Judgement Text

B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.369, 370 , 721 & 722 / MUM/2013 ( / ASSESSMENT YEAR : 2006 - 07 ,2007 - 08, 2008 - 09, 2009 - 10) NARANGS INTERNATIONAL HOTEL S PRIVATE LTD. AMBASSADOR HOTEL, CHURCHGATE, MUMBAI - 400020 / V. ACIT - 1(2) AAYAKAR BHAVAN, MUMBAI 400020 ./ PAN : AAACN2084L ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY: SHRI. VIPUL JOSHI, ASSESSEE BY : SHRI. S.K MITRA (DR) / DATE OF HEARING : 04.09.2018 / DATE OF PRONOUNCEMENT : 30 .1 1 .2018 / O R D E R PER BENCH : THESE FOUR APPEALS, FILED BY ASSESSEE, BEING ITA NO. 369 , 370, 721 & 722 /MUM/2013, ARE DIRECTED AGAINST SEPARATE APPELLATE ORDER (S) DATED 31.10.2012 FOR AY 2006 - 07 AND 2007 - 08 RESPECTIVELY AND DATED 01.11.2012 FOR AY 2008 - 09 AND 2009 - 10 RESPECTIVELY , PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 2, MUMBAI (HEREINAFTER CALLED THE CIT(A)), , THE APPELLATE PROCEEDINGS HAD ARISEN BEFORE LEARNE D CIT(A) FROM SEPARATE ASSESSMENT ORDER (S) DATED 30.12.2009 AND 07.12.2010 PASSED BY LEARNED ASSESSING OFFICER (HEREINAFTER CALLED THE AO) U/S 147 R.W.S. 143(3) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) FOR AY 2006 - 07 AND 2007 - 08 RESPEC TIVELY AND DATED 29.12.2010 AND 30.12.2011 PASSED BY THE AO U/S 143(3) OF I.T.A. NO.369,370,721 & 722/MUM/2013 2 THE 1961 ACT RESPECTIVELY . SINCE COMMON ISSUES ARE INVOLVED, THESE APPEALS WERE HEARD TOGETHER AND DISPOSED OF BY THIS COMMON ORDER. FIRST , WE SHALL TAKE UP APPEAL OF THE ASSESSEE F OR AY 2006 - 07 . SINCE COMMON ISSUES ARE INVOLVED OUR DECISION FOR AY 2006 - 07 SHALL APPLY MUTATIS MUTANDIS TO THE SAME ISSUES IN AY 2007 - 08, 2008 - 09 AND 2009 - 10 RESPECTIVELY. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE MEMO OF APPEAL FILED WITH TH E INCOME - TAX APPELLATE TRIBUNAL, MUMBAI (HEREINAFTER CALLED THE TRIBUNAL) FOR AY 2006 - 07 IN ITA NO.369/MUM/2013, READ S AS UNDER: - ON THE FACTS AND IN LAW: 1. DISALLOWANCE OUT OF TRAVEL LING EXPENSES : RS.3,19,386/ - 1 ) THE L D. CIT(A) ERRED IN SUSTAINING THE DISALLOWANCE OF RS.3,19,386/ - OUT OF TRAVELLING EXPENSES INCURRED BY THE APPELLANT AND THAT RELYI NG ON THE GROUNDS TAKEN BY THE L D. PREDECESSOR CIT(A) IN A.Y. 2005 - 06. THE APPELLANTS SUBMITS THAT SINCE THEN THE ASSESSMENT FOR A.Y. 2005 - 06 HAS BEEN SET - ASIDE BY THE HON'BLE ITAT. THE APPELLANT FURTHER SUBMITS THAT, IN ANY CASE, THE DISALLOWANCE IS EXCESSIVE. 2. DISALLOWANCE OF RS. 1,56,449/ - TERMED AS PENALTIES AND FINE: I) THE L D. CIT(A) ERRED IN SUSTAINING THE DISALLOWA NCE OF RS.1,56,449/ - FOR THE EXPENDITURE INCURRED AND TERMED BY THE APPELLANT AS PENALTIES AND FINE. II) THE APPELLANT SUBMITS THAT THESE PAYMENTS WERE NOT MADE FOR ANY INFRINGEMENT OF LAW, AND ARE ONLY COMPENSATORY IN NATURE. 3. DISALLOWANCE OU T OF VEHICLE EXPENSES : RS.90,000/ - I) THE ID. CIT(A) ERRED IN SUSTAININ G THE DISALLOWANCE OF RS.90,000/ - INCURRED BY THE APPELLANT ON VEHICLE EXPENSES, AND FOR THAT RELYING ON THE GROUNDS TAKEN BY THE L D. PREDECESSOR CIT(A). I.T.A. NO.369,370,721 & 722/MUM/2013 3 II) THE L D. CIT(A) ERRE D IN FAILING TO APPRECIATE THAT PART OF CAR RUNNING EXPENSES WERE RECOVERED FROM THE DIRECTORS. III) HE FURTHER ERRED IN FAILING TO APPRECIATE THAT IF AT ALL THE ENTIRE EXPENDITURE INCURRED BY THE APPELLANT WAS FOR BUSINESS PURPOSES AND FULLY ALLOWABLE IN THE HANDS OF THE APPELLANT. IV) THE APPELLANTS SUBMITS THAT SINCE THEN THE ASSESSMENT FOR A.Y. 2005 - 06 HAS BEEN SET - ASIDE BY THE HON'BLE ITAT. V) THE APPELLANT FURTHER SUBMITS THAT, IN ANY CASE, THE DISALLOWANCE IS EXCESSIVE. 4. DISALLOWA NCE OF EXPENSES INCURRED FOR PALI HILL BUNGLOW: RS.5,00,000/ - I) THE L D. CIT(A) ERRED IN UPHOLDING THE ADDITION MADE BY THE A.O. ON ESTIMATE AT RS. 5 LACS BY HOLDING AS INCURRED ON ACCOUNT OF PERSONAL/ NON - BUSINESS ELEMENT AND NOT MADE WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES. II)THE L D. CIT(A) ERRE D IN UPHOLDING THE ADDITION OR RS . 5 LACS INCURRED BY THE APPELLANT ON THE COMPANY'S PROPERTY AT PA L I HIL L AND FOR THAT RELYING ON THE GROUNDS TAKEN BY THE L D. PREDECESSOR IN THE APPELLATE ORDER FOR A.Y. 2005 - 06. III) THE APPELLANT SUBMITS THAT THE ASSESSMENT FOR A.Y. 2005 - 06 HAS BEEN SET - ASIDE BY HON'BLE ITAT. IV) THE APPELLANT SUBMITS THAT, IN ANY CASE, THE DISALLOWANCE OF RS. 5 LACS ON ESTIMATE IS EXCESSIVE. 5. CLAIM FOR DEDUCTION U/S 80IA: I) THE L D. CIT(A) ERRED IN UPHOLDING THE A.O.'S ACTION IN DENYING THE DEDUCTION OF RS. 75,85,911/ - CLAIMED U/S 80IA. II) THE ID. CIT(A) ERRED IN FAILING TO APPRECIATE THAT IN ALL ASSESSMENTS FROM A.Y. 1996 - 97 TO A.Y. 2002 - 03 THE APP ELLANT'S CLAIM FOR DEDUCTION U/S 80IA HAS BEEN ALLOWED BY THE A.O. AND THAT THE DISALLOWANCE WAS MADE BY THE A.O. ON TECHNICAL GROUND THAT RETURN OF INCOME WAS NOT FILED BY THE DUE DATE U/S 139(1). III) THE L D. CIT(A) ERRED IN FAILING TO APPRECIATE THAT THE APPELLANT HAD GENUINE AND REASONABLE REASON FOR ITS FAILURE TO FURNISH RETURN OF INCOME IN TIME AND THAT A LIBERAL VIEW OUGHT TO HAVE BEEN TAKEN AS HELD BY VARIOUS COURTS. 6. DISALLOWANCE U/S 14A R.W.S. 8D: I.T.A. NO.369,370,721 & 722/MUM/2013 4 THE L D. CIT(A) ERRED IN UPHOLDING DISALLOWANCE AT 10% OF DIVIDEND EARNED, WHEREAS NO DISALLOWANCE U/S 14A R.W.S. 8D WAS JUSTIFIED. 7. NON - CONSIDERATION OF EXPENSES DISALLOWED IN EARLIER YEARS AND CLAIMED AS DEDUCTIONS IN A.Y. 2006 - 07, SUBJECT TO THE OUTCOME IN THE PENDING ASSESSMENTS PURSUANT TO ITAT ORDERS FOR EARLIER YEARS: I) THE L D. CIT(A) ERRED IN NOT CONSIDERING THE FOLLOWING DISALLOWANCES/ADDITIONS; A) PRIOR PERIOD EXPENSES: RS. 27,40,436/ - . B) NON - DE DUCTION OF TDS: RS. 4,48,69,244/ - . C) PRIOR PERIOD ADJUSTMENT (NET): RS . 31,74,810/ - . II) THE APPELLANT SUBMITS THAT THE ABOVE CLAIMS ARE ALTERNATE CLAIMS AND MADE WITHOUT PREJUDICE TO THE OUTCOME IN THE PENDING ASSESSMENTS PURSUANT TO THE ORDERS OF THE ITAT FOR EARLIER YEARS. YOUR APPELLANT CRAVES LEAVE TO ADD TO, ALTER, AME ND O R D ELETE ALL OR AN Y OF THE GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING. 3 . THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF HOTEL AND FLIGHT KITCHEN . THE ASSESSEE DID NOT FILED RETURN OF INCOME WITHIN DUE DATE AS PRESCRIBED U/S. 139(1) OF THE ACT, OR EVEN WI THIN THE TIME ALLOWED U/S. 139(4 ) OF THE 1961 ACT. A NOTICE U/S. 148 OF THE 1961 ACT WAS ISSUED TO THE ASSESSEE BY THE AO ON 18 .06.2008 AFTER RECORDING THE REASONS . THE AS SESSEE DID NOT FILE RETURN OF INCOME W ITHIN PERIOD OF 30 DAYS ALLOWED BY THE SAID NOTICE ISSUED BY THE AO U/S 148 OF THE 1961 ACT . THE ASSESSEE INST EAD FILED A LETTER DATED 14.07.2008 STATIN G THAT THE ASSESSEE IS COMPILING INFORMATION FROM BOOKS OF ACCOUNTS FROM VARIOUS UNITS IN ORDER TO FI LE RETURN OF INCOME AND FURTHER TIME OF THREE MONTHS WERE SOUGHT BY THE ASSESSEE FOR PREPARATION AND FILING OF RETURN OF INCOME. HOWEVER , EVEN AFTER LAPSE OF THREE MONTHS NO RETURN OF INCOME WAS FILED BY THE ASSESSEE . THE REMINDERS WERE ISSUED BY R EVENUE FROM TIME TO TIME WHILE A SSESSEE KEPT ON POSTPONING I.T.A. NO.369,370,721 & 722/MUM/2013 5 FILING OF RETURN OF INCOME ON THE GROUND THAT LITIGATION IS GOING ON BETWEEN TWO FACTIONS OF PROMOTER FAMILY WHICH IS DELAYING FINALIZATION AND ADOPTION OF ACCOUNTS. THE AFORESAID DISPUTE WAS BEFORE HONB LE SUPREME COURT AND IN I.A NO. 3/2009 IN CONNECTED PETITION (C) NO. 9 2 OF 2008 IN CONNECTED PETITION (C) 149/2003 IN CA NO. 366/1998 , WHEREIN VIDE ORDERS DATED 14 TH MAY, 2009, THE HONBLE SUPREME COURT WAS PLEASED TO PASS FOLLOWING ORDERS: WITHOUT PREJUDICE TO THE RIGHTS AND CONTENTIONS OF THE PARTIES APPEARING BEFORE US, WE DIRECT M/S. BSR & CO. TO PREPARE AND AUDIT THE ACCOUNT S OF THE COMPANY FOR THE FINANCIAL YEAR 2001,2002, 2003, 2004, 2005, 2006, 2007, 2008 AND 2009 BY 9 TH JULY 2009. THE MATTER TO COME UP ON 13 TH JULY 2009, AT THIS STAG E, WE DO NOT WISH TO PASS ANY ORDERS IN TERMS OF PRAYER CLAUSE (B) OF THE I.A. M/S. BSR & CO. IS ALSO DIRECTED TO SUBMIT A STATU S REPORT ON THE ACCOUNT BEFORE THE NEXT DATE. IT IS MAD E CLEAR THAT THE NON - APPLICAN T, IF SO ADVISED, MAY FILE A REPLY TO THE I.A BEFORE THE NEXT DATE OF HEARING. THE SAID ORDER OF HONBLE SUPREME COURT IS FILED BY THE ASSESSEE AND IS PLACED IN FILE , WHEREIN DIRECTIONS WERE ISSUED BY HON BLE SUPREME COURT TO M / S. BSR & C O. , CHARTERED A CCOUNTANTS TO PREPARE A ND AUDIT THE ACCOUNTS OF THE ASSESSEE COMPANY FOR THE FINANCIAL YEAR(S) 2001,2002, 2003, 2004, 2005, 2006, 2007, 2008 AND 2009 BY 9 TH JULY, 2009 . A FTER THE AUDIT WAS TAKEN UP IN PURSUANCE TO AFORESAID DIRECTIONS OF THE HONBLE SUPR EME COURT , THE ASSESSEE FINALLY FILED RETURN OF INCOME WITH REVENUE DECLARING TOTAL INCOME OF RS. 32,01,80,474/ - ALONG WITH ITS LETTER DATED 01.12.2009 . THE AO INTIMATED TO THE ASSESSEE VIDE LETTER DATED 10.12.2009 THAT THERE WERE SOME DEFECTS IN THE RETU RN OF INCOME FILED BY THE ASSESSEE ON 01.12.2009. THE DEFECTS WERE REMOVED BY THE ASSESSEE BY FILING FRESH RETURN OF INCOME ON 24.12.2009 WHEREIN THE INCOME DECLARED WAS RS. I.T.A. NO.369,370,721 & 722/MUM/2013 6 33,71,53,047/ - . W ITH THIS BACK GROUND , WE NOW PROCEED TO ADJUDICATE THIS APPEAL FILED BY THE ASSESSEE FOR AY 2006 - 07 . 4 . DISALLOWANCE OF F OREI GN T RAVELLING EXPENDITURE OF RS. 2,19,386/ - AND DOMESTIC T RAVEL EXPENSES OF RS.1,00,000/ - , AGGREGATING TO RS. 3,19,386/ - . THESE EXPENSES WERE DISALLOWED BY THE AO ON THE GROUNDS THAT SPOUSE S/FAMILY MEMBERS OF D IRECTORS HAVE ALSO TRAVELLED ALONG WITH DIRECTORS AND IT COULD NOT BE PROVED THAT THE SPOUSES/FAMILY MEMBERS OF D IRECTOR S VISIT / EXPENSES WERE WHOLLY AND EXCLUSIVELY CONNECTED WITH THE BUSINESS OF THE ASSESSEE. TH E ASSESSEE HAS ONLY GIVEN BALD STATEMENT THAT IN MANY BUSINESS TRIPS , PRESENCE OF SPOUSE IS DESIRABLE. THE AO REJECTED THE CONTENTION S OF THE ASSESSEE AS THE ASSESSEE FAILED TO DISCHARGE ITS ONUS TO PROVE THAT THE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF ITS BUSINESS AND ONLY BALD STATEMENTS WERE MADE WITHOUT ANY EVIDENCES BEING PLACED ON RECORD. IT WAS OBSERVED BY THE AO THAT EVEN IN DOMESTIC TRAVELLING, THE ASSESSEE HAS BOOKED EXPENSES ON TRIPS BY FAMILY MEMBERS OF THE DIRECTORS FOR WHICH NO COGENT E XPLANATION/EVIDENCE WAS GIVEN BY THE ASSESSEE TO PROVE THAT THESE EXPENSES WERE WHOLLY AND EXCLUSIVELY INCURRED FOR BUSINESS OF THE ASSESSEE , WHICH LED TO AN ADDITION OF AN AGGREGATE AMOUNT OF RS. 3,19,386/ - TOWARDS TRAVELLING EXPENSES BOTH FOREIGN AND D OMESTIC , OUT OF TOTAL TRAVELLING EXPENSES OF RS. 91,36,776/ - CLAIM ED BY THE ASSESSEE IN THE RETURN OF INCOME, VIDE ASSESSMENT ORDER DATED 30.12.2009 PASSED BY THE AO U/S 143(3) READ WITH SECTION 147 OF THE 1961 ACT. 4 .2 T HE MATTER REACHED BEFORE THE LD. CIT(A) AT THE BEHEST OF THE ASSESSEE AS THE ASSESSEE FILED FIRST APPEAL BEFORE LEARNED CIT(A). THE LD. CIT(A) WAS PLEASED TO DISMISS THE APPEAL OF THE ASSESSEE BY FOLLOWING HIS DECISION FOR THE EARLIER YEAR AY 2005 - 06 , VIDE APPELLATE ORDER DATED 31.10.20 12 PASSED BY LEARNED CIT(A), WHICH IS REPRODUCED HERE UNDER: - I.T.A. NO.369,370,721 & 722/MUM/2013 7 5.3 I HAVE GONE THROUGH THE ISSUE. IT IS SEEN THAT THE APPELLANT COULD NOT FURNISH ANY EVIDENCE TO SHOW THAT THE TRAVELING EXPENSES OF THE DIRECTORS' FAMILY MEMBERS ARE CONNECTED WITH THE BUSINESS CARRIED ON BY THE APPELLANT. SIMILAR ISSUE ALSO AROSE BEFORE MY PREDECESSOR FOR ADJUDICATION IN A.Y.2005 - 06 AND MY PREDECESSOR HAS HELD THAT THESE EXPENSES ARE PERSONAL EXPENSES AND UPHELD THE ADDITION MADE FOR AY 2005 - 06. 5.4 THERE IS NO CHANGE IN FACTS CONSISTENT WITH THE VIEW TAKEN FOR AY 2005 - 06 THE ADDITION IS SUSTAINED. GROUND NO. 2 IS DISMISSED. 4 . 3 NOW THE MATTER HAS REACHED BEFORE TRIBUNAL AS THE ASSESSEE HAD FILED SECOND APPEAL BEFORE THE TRIBUNAL. T HE LD. COUNS EL FOR THE ASSESSEE AT THE OUTSET SUBMITTED THAT THESE WERE TRAVELLING EXPENSES WHICH WERE INCURRED IN CONNECTION WITH VISITS OF SPOUSES AND CHILDREN ACCOMPANYING D IRECTORS OF THE ASSESSEE COMPANY. IT WAS SUBMITTED THAT LD. CIT(A) HAS MERELY FOLLOWED DECIS ION OF THE EARLIER ASSESSMENT YEAR I.E. AY 2005 - 06 . IT WAS SUBMITTED THAT TRIBUNAL IN ASSESSEE S OWN CASE FOR AY 2005 - 06 WAS P LEASED TO SET ASIDE AND RESTORE THE MATTER BACK TO THE FILE OF AO FOR FRESH ADJUDICATION FOR AY 2005 - 06 IN ITA NO. 3840/MUM/2010 , VIDE ORDERS DATED 07.11.2012. IT WAS SUBMITTED THAT SAID ORDERS OF TRIBUNAL FOR AY 2005 - 06 IS PLACED IN PAPER BOOK FILED BY THE ASSESSEE WITH TRIBUNAL , AT PAGE NO. 134 TO 13 9 . I T WAS SUBMITTED THAT IN ALL FAIRNESS THIS ISSUE SHOULD BE RESTORED BACK TO THE FILE OF AO FOR FRESH ADJUDICATION . O UR ATTENTION WAS ALSO DRAWN TO PAGE NO. 140 TO 145, WHEREIN FORM NO. 35 DATED 9 TH APRIL 2014 ( FILED WITH LEARNED CIT(A) ON 10 - 04 - 2014) FOR AY 2005 - 06 , GROUNDS OF APPEAL AND STATEMENT OF F ACT S FOR AY 2005 - 0 6 FILED BEFORE LD. CIT(A) FOR AY 2005 - 06 TO CHALLENGE THE ASSESSMENT FRAMED IN PURSUANCE TO THE APPELLATE ORDER PASSED BY THE TRIBUNAL DATED 07.11.2012 IS PLACED , WHEREIN THIS ISSUE IS CLAIM TO BE ADJUDICATED AFRESH BY AO IN PURSUANCE TO THE DIRECTIONS OF THE TRI BUNAL VIDE ASSESSMENT ORDER DATED 25.02.2014 U/S 143(3) READ WITH SECTION 254 OF THE 1961 ACT . I.T.A. NO.369,370,721 & 722/MUM/2013 8 THE ASSESSEE HAS HOWEVER NOT PLACED THE SAID ASSESSMENT ORDER PASSED BY THE AO IN PURSUANCE TO DIRECTION OF THE TRIBUNAL. 4 .4 . THE LD. DR RAISED NO OBJECTION TO THE RESTORATION OF THIS ISSUE ARISING IN THE GROUND OF APPEAL BACK TO THE FILE OF AO FOR FRESH ADJUDICATION 4 .5 A FTER CONSIDER ING RIVAL CONTENTION S AND PERUSING THE MATERIAL ON RECORD , WE ARE OF THE CONSIDERED VIEW THAT THIS ISSUE OF DISALLOWANCE OF FOR EIGN TRAVELLING EXPENSES AND DOMESTIC TRAVELLING EXPENSES, AGGREGATING TO RS. 3,19,386/ - IS TO BE RESTORED BACK TO THE FILE OF AO FOR FRESH ADJUDICATION ON MERITS IN ACCORDANCE WITH LAW AND WE RESTORE THIS ISSUE BACK TO FILE OF AO FOR FRESH ADJUDICATION AF TER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE , AS WHILE PASSING APPELLATE ORDER , THE LEARNED CIT(A) HAS FOLLOWED THE APPELLATE ORDER PASSED BY HIS PREDECESSOR FOR AY 2005 - 06 WHICH ITSELF WAS SET ASIDE BY THE TRIBUNAL. NEEDLESS TO SAY THAT THE AO SHAL L PROVIDE PROPER AND ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH PRINCIPLES OF NATURAL JUSTICE IN ACCORDANCE WITH LAW. THE RELEVANT EXPLANATIONS/EVIDENCES SUBMITTED BY THE ASSESSEE IN ITS DEFENCE SHALL BE ADMITTED BY THE AO AND A DJUDICATED ON MERITS IN ACCORDANCE WITH LAW. THIS GROUND OF APPEAL NUMBER 1 FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. WE ORDER ACCORDINGLY. 5 . THE SECOND ISSUE PERTAINS TO PENALTIES AND FINES DISALLOWED TO THE TUNE OF RS. 1,56,449/ - . THE AO OBSERVED FROM THE DETAILS OF MISCELLANEOUS EXPENSES FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDINGS WHICH AS PER AO INCLUDED AN AMOUNT OF RS. 1,56,449/ - TOWARDS PENALTIES AND FINES . T HE ASSESSEE WAS ASKED BY THE AO TO EXPLAIN THE SAME. THE ASSESSEE FURNISHED DETAIL AND IT WAS OBSERVED BY THE AO THAT THES E ARE IN NATURE OF PENAL PAYMENTS TOWARD LUXURY TAX ETC. AND THE SAME IS NOT ALLOWABLE AS BUSINESS DEDUCTION. THUS, THE AO DISALLOWED AN AMOUNT OF RS. 1,56,44 9/ - AND ADDED BACK THE I.T.A. NO.369,370,721 & 722/MUM/2013 9 SAID SUM TO THE INCOME OF THE ASSESSEE , VIDE ASSESSMENT ORDER DATED 30.12.2009 PASSED U/S 143(3) READ WITH SECTION 147 OF THE 1961 ACT. 5 .2 . THE MATTER TRAVELLED TO LD. CITA(A) AT THE BEHEST OF THE ASSESSEE AS THE ASSESSEE FILED F IRST APPEAL. THE ASSESSEE CONTENDED BEFORE LEARNED CIT(A) THAT THESE PAYMENTS ARE COMPENSATORY IN NATURE. THE LEARNED CIT(A) WAS PL EASED TO DISMISS THE CONTENTIONS OF THE ASSESSEE BY HOLDING AS UNDER , VIDE APPELLATE ORDER DATED 31.10.2012 : - 6.2 I HAVE G ONE THROUGH THE ISSUE. THE APPELLANT HAS ONLY STATED THAT THESE PAYMENTS ARE NOT PAID FOR ANY INFRINGEMENT OF LAW AND THE PAYMENTS ARE ONLY COMPENSATORY IN NATURE. BUT THE APPELLANT HAS NOT SUBSTANTIATED ITS CONTENTIONS WITH EVIDENCES. IN VIEW OF THIS, ADDITION IS SUSTAINED. GROUND NO. 3 IS DISMISSED. 5 .3 . THE ASSESSEE HAS COME IN AN APPEAL BEFORE THE TRIBUNAL AND IT I S CONTENDED BEFORE THE TRIBUNAL THAT PAYMENTS ARE COMPENSATORY IN NATURE AND ARE NOT PAID FOR INFRINGEMENT OF ANY LAW. THE DETAIL OF SAID PENALTIES ARE PLACED IN PAPER BOOK AT PAGE NO. 106 TO 118. ON P ERUSAL OF THESE DETAILS WHICH ARE PLACED IN PAPER BOOK FILED WITH T RIBUNAL , WE HAVE OBSERVED THAT THESE EXPENSES ARE TOWARD TRAFFIC CHALLAN , INTEREST , TAX ETC AND IN ALL FAIRNESS TO BOTH THE PARTIES , THE MATTER NEED TO BE SET ASIDE AND RESTORED TO FILE OF THE AO WHO SHALL ANALYSIS EACH AND EVERY CLAIM OF THESE EXPENSES AS CLAIMED BY THE ASSESSEE . THE ONU S IS ON THE ASSESSEE TO PLACE ALL DETAILS BEFORE THE AO AND IF THES E EXPENSES ARE FOUND TO BE PENAL IN NATURE AND HIT BY EXPLANATION 1 TO SECTION 37(1) , THE SAME SHALL BE DISALLOWED BY THE AO IN SET ASIDE PROCEEDINGS BUT IF THE SAME ARE FOUND TO BE COMPEN SATORY IN NATURE THE SAME SHALL BE ALLOWED BY THE AO . THE COMPLETE DETAILS ARE NOT FURNISHED BY THE ASSESSEE AND THE ASSESSEE IS DIRECTED TO PROVIDE DETAILS WITH RESPECT TO EACH OF THESE EXPENSES CLAIMED BY THE ASSESSEE WITH COGENT EVIDENCES TO SUBSTANTIAT E THAT THESE PAYMENTS ARE NOT PENAL IN NATURE. THUS , WE ARE RESTORING THIS ISSUE BACK TO THE FILE OF AO FOR FRESH ADJUDICATION AFTER CONSIDERING THE SUBMISSIONS OF THE I.T.A. NO.369,370,721 & 722/MUM/2013 10 ASSESSEE. NEEDLESS TO SAY THAT THE AO SHALL PROVIDE PROPER AND ADEQUATE OPPORTUNITY OF B EING HEARD TO THE ASSESSEE IN ACCORDANCE WITH PRINCIPLES OF NATURAL JUSTICE IN ACCORDANCE WITH LAW. THE RELEVANT EXPLANATIONS/EVIDENCES SUBMITTED BY THE ASSESSEE IN ITS DEFENCE SHALL BE ADMITTED BY THE AO AND ADJUDICATED ON MERITS IN ACCORDANCE WITH LAW. T HIS GROUND OF APPEAL NUMBER 2 FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. WE ORDER ACCORDINGLY. 6 . DISALLOWANCE OF VEHICLE E XPENSES OF RS. 90,000/ - . THE AO OBSERVED THAT THE ASSESSEE HAS INCURRED VEHICLE EXPENSES AND IT HAS YET TO DETERMINE THE PERQUIS ITE ENTITLEMENT OF EACH OF THE D IRECTORS VIDE NOTE 8 OF THE AUDITORS REPORT AS WELL AS THE EXPENSES INCURRED BY ASSESSEE ON BEHALF OF ITS D IRECTOR S. THE AO ALSO OBSERVED THAT IN EARLIER YEARS ASSESSMENTS, THE DISALLOWANCE HAS BEEN MADE ON ACCOUN T OF PERSONAL USE OF VEHICLES BY THE DIRECTOR. T HE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHAT ARE THE EXPENSES UNDER THE HEAD VEHICLE EXPENSES WHICH ARE INCURRED FOR PERSONAL/NON BUSINESS PURPOSE S . THE ASSESSEE DID NOT GIVE ANY DETAIL RATHER IT SUBMIT TED THA T THESE EXPENSES ARE B E ALLOWED AS PER LAW KEEPING IN MIND CONTRACTUAL OBLIGATION. THE AO REJECTED CONTENTION S OF THE ASSESSEE HOLDING THAT THE AUDITORS OF THE ASSESSEE COMPANY HAS STATED THAT PERQUISITE ENTITLEMENT OF THE DIRECTORS WERE YET TO BE FIXED AN D PERSONAL USAGE OF THE VEHICLES CANNOT BE RULED OUT AND HENCE THE ENTIRE EXPENSES CANNOT BE ALLOWED AS BUSINESS EXPENDITURE. T HE AO FOLLOWED THE EARLIER YEAR ORDER FOR AY 2005 - 06 AND AN DISALLOWANCE OF RS. 90,000/ - WAS MADE KEEPING IN VIEW THAT PERSONAL E LEMENT CANNOT BE RULED OUT IN THE VEHICLE EXPENSES IN RESPECT OF PERSONAL/NON BUSINESS USE OF VEHICLE BY THE THREE DIRECTORS AS THE SAME HAS NOT BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSE OF THE ASSESSEE , VIDE ASSESSMENT ORDER DATED 30.12.2 009 PASSED U/S 143(3) R.W.S. 147 OF THE 1961 ACT. 6 .2 T HE MATTER REACHED LD. CIT(A) AT THE BEHEST OF THE ASSESSEE AS THE ASSESSEE FILED FIRST APPEAL WITH LEARNED CIT(A). THE ASSESSEE SUBMITTED THAT PART OF VEHICLES WERE USED FOR COMPANYS BUSINESS. THE ASS ESSEE I.T.A. NO.369,370,721 & 722/MUM/2013 11 SUBMITTED THAT PART OF THE CAR RUNNING EXPENSES WERE RECOVERED FROM THE DIRECTORS AND THE DISALLOWANCE IS EXCESSIVE RATHER NO DISALLOWANCE IS CALLED FOR. THE LEARNED CIT(A) WAS PLEASED TO DISMISS THE APPEAL OF THE ASSESSEE BY FOLLOWING DECISION OF HI S PREDECESSOR FOR AY 2005 - 06 AND SUSTAINED DISALLOWANCE OF RS. 90,000/ - AS WAS MADE BY THE AO VIDE APPELLANT ORDER DATED 31.10.2012, BY HOLDING AS UNDER: - 7.3 I HAVE GONE THROUGH THE ISSUE. I FIND THAT THIS ISSUE IS A REPETITIVE ISSUE. MY PREDECESSOR HAS DECIDED THE ISSUE IN A.Y. 2005 - 06 AGAINST THE APPELLANT. PARA 24 OF THE APPELLATE ORDER IS EXTRACTED BELOW: GROUND OF APPEAL NUMBER FIVE IS AGAINST A DDITION OF ANY AMOUNT OF RS. 90, 000/ - ON ACCOUNT PERSONAL USE OF VEHICLES. THE AUDITORS IN THEIR SPECIA L AUDITORS REPORT STATED THAT DETAILS OF PERSONAL USE OF VEHICLES WAS NOT PROVIDED TO THEM. BEFORE ASSESSING OFFICER APPELLANT CO NTENDED THAT IN TERMS OF THE ITA T ORDER DISALLOWANCE OF AN AMOUNT OF RS. 6,600/ - PER DIRECTORS SHOULD BE ADEQUATE. ASSESSING OF FICER HAS CATEGORICALLY OBSERVED THAT THE ORDER RELIED UPON BY THE APPELLANT PERTAIN TO YEAR 1990 AND HAS NO SIGNIFICANCE FOR THE A.Y. UNDER CONSIDERATION. HE HAS PARTICULARLY ARGUED THAT LOOKING TO THE INFLATION AND INTEREST AND COSTS OVER A PERIOD OF 16 YEARS DISALLOWANCE OF RS. 30,000/ - PER YEAR PER DIRECTOR IS JUSTIFIED. I HAVE PERUSED THE FACTS OF THE CASE. I FIND THAT 16 YEARS BACK HON'BLE TRIBUNAL HAD CONFIRMED THE DISALLOWANCE OF RS. 6,600/ - . IF WE JUST TAKE INTO ACCOUNT THE COST INFLATION INDEX, TH E DISALLOWANCE MADE BY THE ASSESSING OFFICER WOULD BE A MOST REASONABLE FIGURE. CONSEQUENTLY, THE DISALLOWANCE MADE BY ASSESSING OFFICER IS UPHELD AND THE GROUND OF APPEAL IS REJECTED. THE FACTS ARE IDENTICAL TO THE FACTS IN A.Y. 2005 - 06. I AM OF THE VIEW THAT THE FAMILY MEMBERS ARE ALSO USING THE CARS OF THE APPELLANT COMPANY AND THE DISALLOWANCE MADE BY THE A.O. IS REASONABLE. ADDITION IS SUSTAINED. 6 .3 . THE MATTER HAS NOW REACHED TRIBUNAL AT THE BEHEST OF THE ASSESSEE AS THE ASSESSEE HAS FILED SECOND APPEAL AGAINST THE APPELLATE ORDER OF LEARNED CIT(A) . A T THE OUTSET LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT LD. CIT(A) HAS FOLLOWED THE DECISION OF HIS PREDECESSOR FOR AY 2005 - 06 AND THE AO ALSO FOLLOWED DECISION OF HIS PREDECESSOR FOR AY 2005 - 06. IT WAS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE I.T.A. NO.369,370,721 & 722/MUM/2013 12 THAT TRIBUNAL WAS PLEASED TO SET ASIDE AND RESTORE THIS ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION IN ASSESSEES OWN CASE WHILE ADJUDICATING APPEAL FOR AY 2005 - 06 IN ITA NO. 3 840/MUM/2010 , VIDE OR DER S DATED 07.11.2012 FOR AY 2005 - 06 WHICH IS PLACED IN PAPER BOOK FILED WITH THE TRIBUNAL AT PAGE NO. 134 TO 139. OUR ATTENTION WAS ALSO DRAWN TO PAGE NO. 140 TO 145 PLACED IN PAPER BOOK FILED WITH TRIBUNAL , WHEREIN FORM NO. 35 DATED 9 TH APRIL 2014 ( FILED WITH LEARNED CIT(A) ON 10 - 04 - 2014) FOR AY 2005 - 06 , GROUNDS OF APPEAL AND STATEMENT OF FACTS FOR AY 2005 - 06 AS FILED BEFORE LD. CIT(A) FOR AY 2005 - 06 TO CHALLENGE THE ASSESSMENT FRAMED IN PURSUANCE TO THE APPELLATE ORDER PASSED BY THE T RIBUNAL DATED 07.11.2012 IS PLACED, WHEREIN THIS ISSUE IS ADJUDICATED AFRESH BY AO IN PURSUANCE TO THE DIRECTIONS OF THE TRIBUNAL . 6 .4. THE LD. DR RAISED NO OBJECTION TO THE RESTORATION OF THIS GROUND OF APPEAL BACK TO THE FILE OF AO FOR FRESH ADJUDICA TION 6 .5 AFTER CONSIDERING RIVAL CONTENTION AND PERUSING THE MATERIAL ON RECORD , WE ARE OF THE CONSIDERED VIEW THAT THIS ISSUE OF DISALLOWANCE OF VEHICLE EXPENSES, AGGREGATING TO RS. 90,000/ - HAS TO BE RESTORED BACK TO THE FILE OF AO FOR FRESH ADJUDICATI ON ON MERITS IN ACCORDANCE WITH LAW AND WE RESTORE THIS ISSUE BACK TO FILE OF AO FOR FRESH ADJUDICATION AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE , AS WHILE PASSING APPELLATE ORDER , THE LEARNED CIT(A) HAS FOLLOWED THE APPELLATE ORDER PASSED BY HIS PREDECESSOR FOR AY 2005 - 06 WHICH ITSELF WAS SET ASIDE BY THE TRIBUNAL. . NEEDLESS TO SAY THAT THE AO SHALL PROVIDE PROPER AND ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH PRINCIPLES OF NATURAL JUSTICE IN ACCORDANCE WITH LAW. THE R ELEVANT EXPLANATIONS/EVIDENCES SUBMITTED BY THE ASSESSEE IN ITS DEFENCE SHALL BE ADMITTED BY THE AO AND BE ADJUDICATED ON MERITS IN ACCORDANCE WITH LA W. THE ISSUE IN THIS GROUND OF APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. WE ORDER ACCORDINGLY. I.T.A. NO.369,370,721 & 722/MUM/2013 13 7 . T HE NEXT ISSUE CONCERN S ITSELF WITH THE EXPENSE S INCURRED FOR PALI HILL BUNGALOW OWNED BY THE ASSESSEE WHICH WERE DISALLOWED BY THE AO TO THE TUNE OF RS. 5 LAC S ON THE GROUNDS THAT PART OF THE SAID BUNGALOW WAS USED FOR RESIDENCE OF DIRECT ORS AND ALSO PERQUISITE VALUE IN THE HANDS OF THE DIRECTORS AS WELL EXPENSES INCURRED BY THE ASSESSEE ON BEHALF OF THE DIRECTORS WAS NOT YET DETERMINED , AS REPORTED BY THE AUDITORS IN THEIR AUDIT REPORT VIDE NOTE NUMBER 8 . THE AO OBSERVED THAT THE ASSESSE E COMPANY HAS NOT QUANTIF IED THE EXPENSES IN RESPECT TO PALI HILL BUNGALOW WHICH WERE INCURRED FOR PERSONAL/NON BUSINESS IN NATURE AND THE ASSESSEE HAS GENERALLY STATED THAT THESE EXPENSE TO BE ALLOWED KEEPING IN VIEW MIND THE CONTRACTUAL OBLIGATION S OF T HE ASSESSEE. T HE AO REJECTED THE CONTENTION S OF THE ASSESSEE AND OBSERVED THAT THE AUDITORS OF THE ASSESSEE COMPANY HAS STATED THAT THE PERQUISITE ENTITLEMENT OF DIRECTORS ARE YET TO BE FIXED. THE AO O BSERVED THAT TOTAL EXPENSES ON REPAIR AND MAINTENANCE O F PALI HILL BUNGALOW AMOUNTED TO RS. 50,37,807/ - . THE AO ALSO OBSERVED THAT BESIDE S OTHER EXPENSES LIKE ELECTRICITY EXPENSES, RATES AND TAXES ETC. ARE ACCOUNTED FOR UNDER RESPECTIVE HEADS . THE AO ALSO OBSERVED THAT EXPENSES WHICH ARE BILLED UNDER PALI H ILL B UNGA LOW WERE IN THE NATURE OF BILLS FOR PAINTING, POLISH OF FURNITURE, WOODWORK, STONE WORK ETC/ AND SOME ELEMENT OF PERSONAL EXPENDITURE OF D IRECTORS CANNOT BE RULED OUT IN SUCH EXPENSES. IT WAS ALSO OBSERVED THAT PERQUISITE ENTITLEMENT OF THE DIRECTORS IS YET TO BE FINALIZED AND CONSIDERING THE SAME , THE AO DISALLOWED RS. 5 LAC ON ACCOUNT OF EXPENSES INCURRED WITH RESPECT TO PALI HILL B UNGALOW ON ACCOUNT OF PERSONAL/NON BUSINESS ELEMENT , AS EXPE NDITURE NOT BEING INCURRED WHOLLY AND EXCLUSIVE LY FOR THE PURPOSE S OF THE BUSINESS OF THE ASSESSEE , VIDE ASSESSMENT ORDER DATED 30.12.2009 PASSED U/S 147 READ WITH SECTION 143(3) OF THE 1961 ACT . 7 . 2 . THE MATTER REACHED LD. CIT(A) AT THE BEHEST OF THE ASSESSEE WHEREIN THE ASSESSEE FILED FIRST APPEAL A GAINST ASSESSMENT ORDER PASSED BY THE AO . THE ASSESSEE CONTENDED THAT PALI HILL BUNGALOW I.T.A. NO.369,370,721 & 722/MUM/2013 14 WAS OWNED BY ASSESSEE AND USED FOR BUSINESS PURPOSES. THE ASSESSEE PRAYED BEFORE LEARNED CIT(A) TO ALLOW THE ENTIRE EXPENSES. THE LEARNED CIT(A) UPHELD THE DISALLOWAN CE AS WERE MADE BY AO BY HOLDING AS UNDER , VIDE APPELLATE ORDER DATED 31.10.2012 PASSED BY LEARNED CIT(A) : - 8.4 I HAVE GONE THROUGH THE ISSUE. THIS ISSUE IS A REPETITIVE ISSUE AND MY PREDECESSOR HAS ALREADY DECIDED THE ISSUE AGAINST THE APPELLANT IN THE APPELLATE ORDER FOR A.Y. 2005 - 06, PARA 23 OF THE APPELLATE ORDER FOR A.Y. 2005 - 06 IS EXTRACTED BELOW : I HAVE PERUSED THE FACTS OF THE CASE. THE PROPERTY IS OWNERSHIP OF APPELLANT COMPANY IS NOT IN DOUBT. ACCORDING TO ASSESSING OFFICER PROPERTY IS NOT BEIN G USED BY APPELLANT AT ALL. THIS CONTENTION OF ASSESSING OFFICER WAS CONTROVENTED BY APPELLANT ON THE BASIS OF AN ORDER OF HON'BLE ITAT MUMBAI WHERE IT HAS BEEN CONFIRMED THAT 25% OF THE PROPERTY IS BEING USED FOR BUSINESS OF APPELLANT COMPANY. NO OTHER EV IDENCE HAS EITHER BEEN FILED BEFORE ASSESSING OFFICER OR BEFORE ME. IT IS NECESSARY TO LOOK INTO THE DECISION OF HON'BLE ITAT. THIS DECISION WAS DELIVERED AS LONG BACK AS 1986. MORE THAN 20 YEARS IN THE PAST. THE UTILIZATION OF THE PROPERTY IS A QUESTION O F FACT AND IS BOUND TO BE MAJOR CHANGE IN THE UTILIZATION OF THE PROPERTY PARTICULARLY BECAUSE THE FAMILY TREE GROWS AND THEREFORE, LEADING TO SHORTAGE OF SPACE. THIS IS NOT A CONJECTURE. THIS IS A LOGICAL CONCLUSION DRAWN FROM THE FACT THAT APPELLANT IS R ELYING ON AN ITAT ORDER WHICH IS 25 YEARS OLD. TO MY MIND THERE IS NO BASIS ON WHICH ONE CAN CONCLUDE THAT THIS SITUATION HAS NOT CHANGED IN THE LAST 25 YEARS. APPELLANT OUGHT TO HAVE BROUGHT ON RECORD DETAILED EVIDENCE THAT PROPERTY IS BEING USED BY THE A SSESSEE FOR ITS OWN USE. SINCE THIS HAS NOT BEEN DONE, THE OBJECTION CANNOT BE ACCEPTED. AS FAR AS APPELLANT'S CONTENTION THAT AUDITORS HAVE NOT UNDERSTOOD THE FACT IS CONCERNED, IT IS SURPRISING TO NOTE THAT APPELLANT IS OBJECTING TO AUDITORS REPORT, A RE PORT WHICH WAS PREPARED IN CONSULTATION WITH APPELLANT AND ITS STAFF AND IS ESSENTIALLY A REPORT OF THE APPELLANT SUBMITTED TO THE I.T. DEPARTMENT. IT IS A DIFFERENT MATTER THAT THE REPORT WAS AT THE INSTANCE OF THE I. T. DEPARTMENT BUT NEVERTHELESS IT IS A REPORT WHICH HAS BEEN SUBMITTED BY APPELLANT TO THE I. T. DEPARTMENT. HOW CAN AN APPELLANT OBJECT TO THIS I.T.A. NO.369,370,721 & 722/MUM/2013 15 REPORT OF AUDIT WHEN IN THE COURSE OF THE AUDIT THE AUDITORS ARE BOUND TO DISCUSS EVER ISSUE WITH THE REPRESENTATIVE OF APPELLANT BEFORE FORMING THEI R OPINION ON ANY ISSUE. MOREOVER, IN OBJECTING TO THE UNDERSTANDING OF AUDITORS, NO REASON HAS BEEN SPELT OUT BY THE APPELLANT. THEREFORE, THE OBJECTION AGAINST THE AUDIT REPORT IS MEANINGLESS AND CANNOT ACCEPTED. IN ANY VIEW, LOOKING INTO THE NATURE OF EX PENSES INVOLVED, ALL THE EXPENSES ARE OF PERSONAL NATURE. THERE IS NO PRIMA FACIE BASIS TO PUT ANY IOTA OF DOUBT ON THE OBSERVATIONS OF THE AUDITORS. THEREFORE, IT IS HELD THAT THE EXPENDITURES UNDER CONSIDERATION DEBITED TO THE PROFIT AND LOSS ACCOUNT ARE PERSONAL IN NATURE AND CANNOT BE ALLOWED. THE ACTION OF ASSESSING OFFICER IS UPHELD AND THE GROUND OF APPEAL IS REJECTED. 8.5 THERE IS NO CHANGE IN THE FACTS OF THE CASE. IT IS TRUE THAT THE DIRECTORS ARE STAYING WITH THEIR FAMILIES IN THE BUNGALOW. THE APPELLANT IS NOT ALSO CONSIDERING ANY PERQUISITE IN THE HANDS OF THE DIRECTORS. I FULLY AGREE WITH THE VIEWS OF MY PREDECESSOR EXPRESSED IN PARA 23 OF THE APPELLATE ORDER FOR A.Y. 2005 - 06. IN VIEW OF THIS, I AM OF THE VIEW THAT THE DISALLOWANCE MADE BY THE A.O. IS VERY REASONABLE AND I UPHOLD THE ADDITION MADE BY THE A.O. GROUND NO. 5 IS DISMISSED. THUS IN NUT - SHELL , THE LD. CIT(A) FOLLOWED THE DECISION OF HIS PREDECESSOR IN AY 2005 - 06, W HILE COMING TO CONCLUSION AGAINST THE ASSESSEE FOR IMPUGNED ASSESSME NT YEAR 2006 - 07 , WHEREIN THE APPEAL OF THE ASSESSEE STOOD DISMISSED . 7 .3 . THE MATTER HAS NOW REACHED TRIBUNAL AT THE BEHEST OF THE ASSESSEE WHO HAS FILED SECOND APPEAL WITH TRIBUNAL AGAINST THE APPELLATE ORDER PASSED BY LEARNED CIT(A) . T HE LD. COUNSEL FOR THE ASSESSEE SUBMITTED AT THE OUTSET THAT THE ASSESSEES APPEAL FOR AY 2005 - 06 HAS BEEN ADJUDICATED BY TRIBUNAL WHEREIN THE ISSUE HAS BEEN RESTORED TO THE FILE OF AO FOR FRESH ADJUDICATION IN ITA NO. 3840/MUM/2010 VIDE ORDERS DATED 07.11.2012 . THE SAID OR DER IS PLACED IN PAPER BOOK AT PAGE NUMBER 134 TO 139 , FILED WITH THE TRIBUNAL . I T WAS SUBMITTED THAT LD. CIT(A) HAS FOLLOWED THE DECISION FOR AY 2005 - 06 AND IN ALL FAIRNESS THIS ISSUE NEEDS TO BE RESTORED TO I.T.A. NO.369,370,721 & 722/MUM/2013 16 THE FILE OF AO FOR FRESH ADJUDICATION AFTER C ONSIDERING THE CONTENTION OF THE ASSESSEE. 7 .4 THE LEARNED DR DID NOT OBJECTED TO THE RESTORATION OF THIS ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION ON MERITS IN ACCORDANCE WITH LAW. 7 .5 AFTER CONSIDERING RIVAL CONTENTIONS AND PERUSING THE MATERI AL ON RECORD , WE ARE OF THE CONSIDERED VIEW THAT THIS ISSUE OF DISALLOWANCE OF EXPENSES RELATING TO PALI HILL BUNGALOW, AGGREGATING TO RS. 5,00,000/ - HAS TO BE RESTORED BACK TO THE FILE OF AO FOR FRESH ADJUDICATION ON MERITS IN ACCORDANCE WITH LAW AND WE RESTORE THIS ISSUE BACK TO FILE OF AO FOR FRESH ADJUDICATION AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE , AS THE LEARNED CIT(A) FOLLOWED THE DECISION OF HIS PREDECESSOR FOR AY 2005 - 06 WHICH ITSELF WAS SET ASIDE BY THE TRIBUNAL . NEEDLESS TO SAY THAT T HE AO SHALL PROVIDE PROPER AND ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH PRINCIPLES OF NATURAL JUSTICE IN ACCORDANCE WITH LAW. THE RELEVANT EXPLANATIONS/EVIDENCES SUBMITTED BY THE ASSESSEE IN ITS DEFENCE SHALL BE ADMITTED BY TH E AO AND ADJUDICATED ON MERITS IN ACCORDANCE WITH LAW. THIS GROUND OF APPEAL NUMBER 4 FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. WE ORDER ACCORDINGLY. 8. THE GROUND NUMBER 5 RAISED BY THE ASSESSEE CONCERNS ITSELF WITH DISALLOWANCE OF DEDUCTION U/S. 80IA OF THE 1961 ACT TO THE TUNE OF RS. 75,85,911/ - . THE ASSESSEE HAD IN ITS RETURN OF INCOME CLAIMED DEDUCTION TO THE TUNE OF RS. 75,85,911/ - U/S. 80IA IN RESPECT OF WIND MILLS INSTALLED IN TAMIL NADU . THE ASSESSEE HAD ALSO FILED AUDITOR S REPORT IN FORM NO. 10CCB ALONG WITH THE RETURN OF INCOME. THE IMPUGNED ASSESSMENT YEAR IS AY 2006 - 07 WHILE THE RETURN OF INCOME WAS ORIGINALLY FILED ON 01 ST DECEMBER 2009 WHEREIN THE ASSESSEE FILED THE SAID CLAIM OF DEDUCTION U/S 80IA ALONG WITH AUDIT R EPORT IN FORM NO. 10CCB. THE SAID RETURN OF INCOME WAS DEFECTIVE AND ON BEING POINTED OUT BY THE AO, THE ASSESSEE REMOVED THE DEFECT AND FILED I.T.A. NO.369,370,721 & 722/MUM/2013 17 ANOTHER RETURN OF INCOME ON 24 - 12 - 2009. IT IS UNDISPUTED FACT BETWEEN RIVAL PARTIES THAT THE RETURN OF INCOME WAS NOT FILED WITHIN THE TIME PRESCRIBED U/S. 139(1) AND ALSO IT WAS NOT FILED WITHIN THE TIME PRESCRIBED U/S. 139(4) OF THE 1961 ACT. THE AO NOTIFIED THE ASSESSEE THAT RETURN OF INCOME WAS NOT FILED WITHIN DUE DATE AS PRESCRIBED U/S 139(1) AND THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S. 80IA. THE ASSESSEE IN ITS REPLY DATED 29.12.2009 SUBMITTED THAT IT HAS COMPLIED WITH ALL THE CONDITIONS AS WERE STIPULATED UNDER SECTION 80IA(7) OF THE 1961 ACT AND THE DEDUCTION SHOULD BE ALLOWED TO THE ASSESSEE. THE AO REJECTED THE CONTENTIONS OF THE ASSESSEE BY REFERRING TO THE PROVISIONS OF SECTION 80AC OF THE 1961 ACT WHICH STIPULATED THAT DEDUCTIONS U/S. 80IA IS NOT ALLOWABLE TO TAX - PAYER UNLESS RETURN OF INCOME IS FURNISHED BEFORE THE DUE DATE AS SPECIFIED U/S. 139 (1) OF THE 1961 ACT. THE ASSESSEE SUBMITTED BEFORE THE AO THAT IT HAS A GENUINE REASON FOR FAILURE TO FURNISH RETURN OF INCOME IN TIME . THE CONTENTION WAS ALSO RAISED BY THE ASSESSEE THAT IN EARLIER ASSESSMENT YEARS , THE LD. CIT(A) WAS PLEASED TO DELETE PENALTY LEVIED BY THE AO U/S. 271F IN RESPECT OF FAILURE TO FURNISH RETURN OF INCOME. THUS, IT WAS PRAYED THAT LIBERAL VIEW MAY BE TAKEN IN RESPECT OF NON - FILING OF RETURN OF INCOME ON OR BEFORE THE DUE DATE . THE AO REJECTED THE CONTENTIONS OF THE ASSES SEE KEEPING IN VIEW CLEAR AND UNAMBIGUOUS PROVISIONS OF SECTION 80AC OF THE 1961 ACT WHEREIN NO EXCEPTION HAS BEEN PROVIDED AS THE RETURN OF INCOME WAS NOT FILED IN TIME WITHIN DUE DATE AS PRESCRIBED U/S 139(1) OF THE 1961 ACT, THE AO DISALLOWED THE CLAIM OF DEDUCTION U/S. 80IA, VIDE ASSESSMENT ORDER DATED 30.12.2009 PASSED U/S 143(3) READ WITH SECTION 147 OF THE 1961 ACT. 8.2 THE MATTER REACHED LD. CIT(A) AT THE BEHEST OF THE ASSESSEE WHEREIN THE ASSESSEE FILED FIRST APPEAL AGAINST ASSESSMENT ORDER AND TH E SUMMARISED CONTENTIONS OF THE ASSESSEE AS SUBMITTED BEFORE LEARNED CIT(A) ARE AS UNDER: - 9.1 DURING THE APPELLATE PROCEEDINGS, THE APPELLANT SUBMITTED THAT DISALLOWANCE WAS MADE ON TECHNICAL GROUND THAT RETURN OF INCOME WAS NOT FILED BY THE DUE DATE I.T.A. NO.369,370,721 & 722/MUM/2013 18 U /S. 139(1), HENCE CLAIM U/S. 80I A WAS REJECTED. PURSUANT TO THE ORDER DATED 14.5.2009, OF THE SUPREME COURT AUDIT COULD BE COMPLETED ON 11. 12.2009 AND RETURN FILED ON 1.12.2009 FOLLOWED BY REVISED RETURN ON 24.12.2009. IT WAS FURTHER SUBMITTED THAT SECTION 80IA BEING A MACHINERY PROVISION, REQUIRES TO BE LIBERALLY INTERPRETED IN THE SPECIAL CIRCUMSTANCES OF THE CASE. 1. CIT VS CONTIMETERS ELECTRICALS P. LTD. (2009) 178 TAXMAN 422 (DEL) 2. CIT VS ACE MULTITAXES SYSTEMS P. LTD. (2009) 317 ITR 307 (KAR) 3. CIT VS MEDICAPS LTD. (2010) 323 ITR 554 (MP) 8.3 THE LEARNED CIT(A) WAS PLEASED TO REJECT THE CONTENTIONS OF THE ASSESSEE, VIDE APPELLATE ORDER DATED 31.10.2012, BY HOLDING AS UNDER: 9.2 I HAVE GONE THROUGH THE ISSUE. THE PROVISIONS OF SECTION 80AC WAS INTRODUCED BY THE FINANCE ACT 2006 AND IT IS EFFECTIVE FROM A.Y. 2006 - 07. THE PROVISION OF SECTION 80AC OF THE I.T.ACT IS LOUD AND CLEAR THAT THE ASSESSEE WILL NOT BE ENTITLED FOR CLAIM U/S 80IB OF THE I.T.ACT UNLESS THEY FILE THE RETURN W ITHIN THE TIME ALLOWED U/S. 139(1) OF THE I.T.ACT. NO EXCEPTION ARE PROVIDED IN THE SECTION. THE A.O. WAS NOT GIVEN ANY DISCRETION TO RELAX THE STIPULATION. IN THESE CIRCUMSTANCES, I UPHOLD THE A.O.S ACTION IN DENYING THE DEDUCTION CLAIMED U/S 80IB OF THE I.T.ACT. 8.4 NOW THE MATTER HAS REACHED TRIBUNAL AT THE BEHEST OF THE ASSESSEE WHEREIN THE ASSESSEE HAS FILED AN SECOND APPEAL AGAINST THE APPELLATE ORDER PASSED BY LEARNED CIT(A). THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITTED THAT THERE WAS A DELAY IN FILING OF RETURN OF INCOME FOR THE IMPUGNED AY WHICH WAS FILED MUCH BEYOND THE TIME PRESCRIBED U/S 139(1) AND ALSO EVEN BEYOND THE TIME PRESCRIBED U/S 139(4) OF THE 1961 ACT AND THE ASSESSEE CLAIM FOR DEDUCTION U/S 80IA WAS NOT ALLOWED BY THE A UTHORITIES BELOW IN VIEW OF NEWLY INSERTED SECTION 80AC WHICH WAS INSERTED BY FINANCE ACT, I.T.A. NO.369,370,721 & 722/MUM/2013 19 2006 WEF 01.04.2006. OUR ATTENTION WAS DRAWN TO PAGE NO 141 OF THE PAPER BOOK FILED WITH THE TRIBUNAL, WHEREIN STATEMENT OF FACTS FOR AY 2005 - 06 FILED BEFORE THE LD. CIT(A) IS PLACED CHALLENGING THE ASSESSMENT FRAMED BY THE AO VIDE ORDERS DATED 25.2.2014 PASSED U/S 143(3) READ WITH THE SECTION 254 OF THE 1961 ACT. IT IS SUBMITTED THAT ACCOUNTS FOR ALL THESE YEARS FROM FINANCIAL YEAR 2001 TO 2009 COULD NOT BE FINALISED DUE TO LITIGATION/DISPUTE BETWEEN THE PROMOTERS OF THE ASSESSEE AND IT IS ONLY IN PURSUANCE OF DIRECTIONS OF HONBLE SUPREME COURT VIDE ORDERS DATED 14 TH MAY, 2009 , M/S BSR & CO. CHARTERED ACCOUNTANTS WERE APPOINTED TO COMPLETE THE ACCOUNTS AND CARRY OUT AUDIT OF THE ACCOUNTS OF THE ASSESSEE COMPANY FOR FINANCIAL YEAR 2001 TO 2009 . THE AFORESAID DISPUTE WAS BEFORE HONBLE SUPREME COURT AND IN I.A NO. 3/2009 IN CONNECTED PETITION (C) NO. 92 OF 2008 IN CONNECTED PETITION (C) 149/2003 IN CA NO. 366/1998 , VIDE ORDERS DATED 14 TH MAY, 2009, THE HONBLE SUPREME COURT WAS PLEASED TO PASS FOLLOWING ORDERS: WITHOUT PREJUDICE TO THE RIGHTS AND CONTENTIONS OF THE PARTIES APPEARING BEFORE US, WE DIRECT M/S. BSR & CO. TO PREPARE AND AUDIT THE ACCOUNT S OF THE COMPANY FOR THE FINANCIAL YEAR 2001,2002, 2003, 2004, 2005, 2006, 2007, 2008 AND 2009 BY 9 TH JULY 2009. THE MATTER TO COME UP ON 13 TH JULY 2009, AT THIS STAG E, WE DO NOT WISH TO PASS ANY ORDERS IN TERMS OF PRAYER CLAUSE (B) OF THE I.A. M/S. BSR & CO. IS ALSO DIRECTED TO SUBMIT A STATU S REPORT ON THE ACCOUNT BEFORE THE NEXT DATE. IT IS MAD E CLEAR THAT THE NON - APPLICANT, IF SO ADVISED, MAY FILE A REPLY TO THE I.A BEFORE THE NEXT DATE OF HEARING. IT WAS SUBMITTED THAT IT IS ONLY ON THE BASIS OF AUD ITED ACCOUNTS PREPARED AND DRAWN BY SAID FIRM M/S B S R & COMPANY , CHARTERED ACCOUNTANTS PURSUANT TO THE DIRECTIONS AS ARE CONTAINED IN THE AFORESAID ORDERS OF THE HONBLE SUPREME COURT , THE ASSESSEE WAS ABLE TO FILE RETURN OF INCOME IN THE MONTH OF DEC EMBER 2009 AND CLAIM FOR DEDUCTION U/S. 80IA WAS MADE IN THE SAID RETURN OF INCOME DULY I.T.A. NO.369,370,721 & 722/MUM/2013 20 SUPPORTED BY AUDIT REPORT IN FORM NO. 10CCB WAS SUBMITTED. IT IS CLAIMED THAT THE SAID CLAIM OF DEDUCTION U/S 80IA WAS WITH RESPECT TO WIND MILLS INSTALLED BY THE ASSES SEE AT TAMIL NADU. IT WAS SUBMITTED THAT FOR EARLIER YEARS, THE CLAIM OF DEDUCTION U/S 80IA WAS ALLOWED. IT WAS ALSO SUBMITTED THAT SECTION 80AC WAS INSERTED BY FINANCE ACT, 2006 WEF 01.04.2006 AND THIS IS THE FIRST YEAR WHEN THIS CONDITION OF FILING OF RE TURN OF INCOME WITHIN DUE DATE PRESCRIBED U/S 139(1) HAS COME INTO EFFECT FOR CLAIMING DEDUCTION U/S 80IA OF THE 1961 ACT. IT WAS SUBMITTED THAT THIS SECTION 80AC IS DIRECTORY IN NATURE AND NOT MANDATORY. OUR ATTENTION WAS ALSO DRAWN TO THE APPELLATE ORDER OF THE LD. CIT(A) FOR AY 2003 - 04 DATED 01.12.2006 WHEREIN PENALTY LEVIED U/S 271F OF THE 1961 ACT FOR FAILURE TO FURNISH RETURN OF INCOME FOR AY 2003 - 04 WAS DELETED BY LD. CIT(A) , WHICH IS PLACED IN PAPER BOOK/PAGE NO. 132 TO 133. IT WAS SUBMITTED THAT THERE WAS A DISPUTE BETWEEN THE PROMOTERS WHICH HAS LED TO THE NON PREPARATION OF THE ACCOUNTS IN TIME AS WELL AS NON FURNISHING OF THE RETURN OF INCOME WITH REVENUE IN TIME. OUR ATTENTION WAS ALSO DRAWN TO ORDERS OF TRIBUNAL FOR AY 2002 - 03 IN ITA NO. 53 46/MUM/2008 VIDE ORDERS DATED 11.05.2009 WHICH IS PLACED IN PAPER BOOK/ PAGE NO. 146 - 154 TO CONTEND THAT CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IA WAS RESTORED BY TRIBUNAL TO THE FILE OF THE AO FOR DENOVO DETERMINATION OF CLAIM OF DEDUCTION U/S 80IA. TH E ASSESSEE HAS RELIED UPON DECISION OF HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT V. SRI. S. VENKATAIAH IN ITA NO. 114/2013 , VIDE ORDERS DATED 26.07.2013 , WHEREIN CLAIM OF DEDUCTION OF THE ASSESSEE U/S 80IC WAS ALLOWED BY HONBLE ANDHRA PRADESH HIGH COURT DESPITE THE FACT RETURN OF INCOME WAS FILED BEYOND THE TIME STIPULATED U/S 139(1) WHICH WAS ADMITTEDLY IN VIOLATION OF SECTION 80AC OF THE 1961 ACT.THE ASSESSMENT YEAR BEFORE HONBLE ANDHRA PRADESH HIGH COURT WAS AY 2008 - 09 WHICH WAS POST INSE RTION OF SECTION 80AC BY THE FINANCE ACT,2006 WEF 01.04.2006. AT THIS STAGE IT WAS CONFRONTED TO THE LD. COUNSEL FOR THE ASSESSEE THAT HONBLE SUPREME COURT HAS RECENTLY HELD VIDE FIVE JUDGE CONSTITUTION BENCH IN THE CASE OF COMMISSIONER OF I.T.A. NO.369,370,721 & 722/MUM/2013 21 CUSTOMS(IMPORT S),MUMBAI V. DILIP KUMAR AND COMPANY & OTHERS IN CIVIL APPEAL NO. 3327 OF 2007 VIDE ORDERS DATED 30 TH JULY 2018 THAT EXEMPTION PROVISIONS ARE TO BE STRICTLY CONSTRUED. 8.5. THE LD. DR SUBMITTED THAT MATTER CAN BE RESTORED TO FILE OF AO 8.6 WE HAVE CONS IDERED RIVAL CONTENTION AND HAVE PERUSED THE MATERIAL ON RECORD. WE HAVE OBSERVED THAT THE ASSESSEE HAS MADE A CLAIM OF DEDUCTION TO THE TUNE OF RS. 75,85,911/ - U/S. 80IA OF THE 1961 ACT WITH RESPECT TO THE WIND MILLS INSTALLED IN TAMIL NADU . THE ASSESSEE HAS ADMITTEDLY FILED RETURN OF INCOME IN THE MONTH OF DECEMBER 2009 WHICH WAS ADMITTEDLY BEYOND THE TIME STIPULATED U/S 139(1) AND ALSO THE RETURN OF INCOME WAS FILED BEYOND THE TIME STIPULATED U/S 139(4) OF THE 1961 ACT. THERE IS NO DISPUTE THAT THE RETU RN OF INCOME WAS NOT FILED WITHIN THE TIME PRESCRIBED U/S 139(1) OF THE 1961 ACT. THE ASSESSEE HAS SUBMITTED THAT ITS CLAIM OF DEDUCTION U/S 80IA WAS DENIED BY REVENUE IN THIS YEAR UNDER CONSIDERATION BASED ON NEWLY INSERTED PROVISION IN THE 1961 ACT WHER EIN SECTION 80AC WAS INSERTED BY FINANCE ACT, 2006 WEF 01.04.2006. THE SAID S ECTION CLEARLY MANDATES THAT IN ORDER TO GRANT DEDUCTION U/S 80IA , THE RETURN OF INCOME HAS TO BE FILED WITHIN THE DUE DATE AS STIPULATED U/S 139(1) WHICH UNDISPUTEDLY THE ASSESS EE DID NOT COMPLY WITH. THE SECTION 80AC AS WAS APPLICABLE FOR THE IMPUGNED ASSESSMENT YEAR IS REPRODUCED HEREUNDER: DEDUCTION NOT TO BE ALLOWED UNLESS RETURN FURNISHED. 80AC. WHERE IN COMPUTING THE TOTAL INCOME OF AN ASSESSEE OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, 2006 OR ANY SUBSEQUENT ASSESSMENT YEAR, ANY DEDUCTION IS ADMISSIBLE UNDER SECTION 80 - IA OR SECTION 80 - IAB OR SECTION 80 - IB OR SECTION 80 - IC , NO SUCH DEDUCTION SHALL BE ALLOWED TO HIM UNLESS HE FURNISHES A RETURN OF HIS INCOME FOR SUCH ASSESSMENT YEAR ON OR BEFORE THE DUE DATE SPECIFIED UNDER SUB - SECTION (1) OF SECTION 139 . ] THE RETURN OF INCOME FOR THE IMP UGNED ASSESSMENT YEAR IS NOT CLEARLY FILED WITHIN THE TIME PRESCRIBED U/S. 139(1) NOR WAS IT FILED WITHIN TIME I.T.A. NO.369,370,721 & 722/MUM/2013 22 PRESCRIBED U/S 139(4) OF THE 1961 ACT. THE RETURN OF INCOME WAS FILED IN THE MONTH OF DECEMBER 2009 WHILE THE IMPUGNED ASSESSMENT YEAR UNDER CONS IDERATION IS AY 2006 - 07. THE PROVISIONS OF NEWLY INSERTED SECTION 80AC OF THE ACT CLEARLY MANDATE THAT FOR CLAIMING OF DEDUCTION U/S. 80IA , THE RETURN OF INCOME IS TO BE FILED WITHIN DUE DATE AS PRESCRIBED U/S. 139(1) OF THE ACT. THE ASSESSEE HAS , HOWEV ER, SUPPORTED ITS RETURN OF INCOME WITH AUDIT REPORT IN FORM NO 10CCB. IT IS CLAIMED THAT THE ASSESSEE AND /OR IS PROMOTERS/DIRECTORS WERE HAVING DISPUTE/LITIGATION WHICH ULTIMATELY REACHED HONBLE SUPREME COURT WHICH WAS THE MAIN REASONS FOR NON COMPLIANC E BY WAY OF NON FINALISATION OF THE ACCOUNTS BY THE ASSESSEE WHICH LED TO DELAY IN FILING OF RETURN OF INCOME WITH THE REVENUE IN TIME AS PRESCRIBED U/S 139(1) OF THE 1961 ACT . THE ASSESSEE HAD NOT FINALIZED ITS ACCOUNTS FOR FINANCIAL YEAR 2001 TO 2009 AND HONBLE SUPREME COURT WAS PLEASED TO ISSUE DIRECTIONS VIDE ORDERS DATED 14.05.2009 AS UNDER: - WITHOUT PREJUDICE TO THE RIGHTS AND CONTENTIONS OF THE PARTIES APPEARING BEFORE US, WE DIRECT M/S. BSR & CO. TO PREPARE AND AUDIT THE ACCOUNT S OF THE COMPANY FOR THE FINANCIAL YEAR 2001,2002, 2003, 2004, 2005, 2006, 2007, 2008 AND 2009 BY 9 TH JULY 2009. THE MATTER TO COME UP ON 13 TH JULY 2009, AT THIS STAG E, WE DO NOT WISH TO PASS ANY ORDERS IN TERMS OF PRAYER CLAUSE (B) OF THE I.A. M/S. BSR & CO. IS ALSO DIRECTED TO SUBMIT A STATU S REPORT ON THE ACCOUNT BEFORE THE NEXT DATE. IT IS MAD E CLEAR THAT THE NON - APPLICANT, IF SO ADVISED, MAY FILE A REPLY TO THE I.A BEFORE THE NEXT DATE OF HEARING. THE ASSESSEE HAS TAKEN A PLEA THAT THERE WAS A REASON ABLE CAUSE FOR NOT FURNISHING OF ITS RETURN OF INCOME IN TIME AS STIPULATED U/S 139(1) OF THE 1961 ACT WHICH WAS MAINLY THE DISPUTE /LITIGATION BETWEEN THE ASSESSEE AND/OR ITS PROMOTERS/DIRECTORS. THE TRIBUNAL IN THE CASE OF ITO V. S. VENKATAIAH REPORTED IN (2012) 22 TAXMANN.COM 2(HYD.) WHILE ADJUDICATING APPEAL FOR AY 2008 - 09 HAS ACCEPTED REASONABLE CAUSE FOR DELAY IN FILING OF RETURN OF INCOME BEYOND TIME STIPULATED U/S 139(1) I.T.A. NO.369,370,721 & 722/MUM/2013 23 FOR ALLOWING DEDUCTION U/S 80IC DESPITE IN BREACH O F SECTION 80AC OF THE 1961 AC T. THIS MATTER WENT TO HONBLE ANDHRA PRADESH HIGH COURT AT THE BEHEST OF REVENUE WHEREIN THE APPEAL OF THE REVENUE WAS DISMISSED BY HONBLE ANDHRA PRADESH HIGH COURT ON THE GROUNDS THAT IT DOES NOT RAISES ANY SUBSTANTIAL QUESTION OF LAW. IT IS NOW SETTLE D BY THE CONSTITUTION BENCH OF HONBLE SUPREME COURT IN THE CASE OF COMMISSIONER OF CUSTOMS(IMPORTS),MUMBAI V. DILIP KUMAR AND COMPANY & OTHERS IN CIVIL APPEAL NO. 3327 OF 2007 VIDE ORDERS DATED 30 TH JULY 2018 THAT EXEMPTION PROVISIONS ARE TO BE STRICTLY C ONSTRUED. THE CONCLUSION ARRIVED AT BY HONBLE SUPREME COURT IN THE AFORESAID DECISION ARE AS UNDER: 52. TO SUM UP, WE ANSWER THE REFERENCE HOLDING AS UNDER (1) EXEMPTION NOTIFICATION SHOULD BE INTERPRETED STRICTLY; THE BURDEN OF PROVING APPLICABILITY WOULD BE ON THE ASSESSEE TO SHOW THAT HIS CASE COMES WITHIN THE PARAMETERS OF THE EXEMPTION CLAUSE OR EXEMPTION NOTIFICATION. (2) WHEN THERE IS AMBIGUITY IN EXEMPTION NOTIFICATION WHICH IS SUBJECT TO STRICT INTERPRETATION, THE BENEFIT OF SUCH AMBIGUITY CAN NOT BE CLAIMED BY THE SUBJECT/ASSESSEE AND IT MUST BE INTERPRETED IN FAVOUR OF THE REVENUE. (3) THE RATIO IN SUN EXPORT CASE (SUPRA) IS NOT CORRECT AND ALL THE DECISIONS WHICH TOOK SIMILAR VIEW AS IN SUN EXPORT CASE (SUPRA) STANDS OVERRULED. THE ASSESSEE IS DIRECTED TO PRODUCE COMPLETE DETAILS OF LITIGATION/DISPUTE BETWEEN THE ASSESSEE AND/OR BETWEEN PROMOTERS/DIRECTORS ALONG WITH RELEVANT ORDERS OF THE HONBLE COURTS BEFORE THE AO TO PROVE THAT THERE WAS AN IMPOSSIBILITY OF GETTING THE ACCOUN TS PREPARED AND AUDITED FOR THE RELEVANT YEAR UNDER CONSIDERATION DUE TO SAID DISPUTE/LITIGATION. EVERY DISPUTE/ LITIGATION BETWEEN THE TAX - PAYER AND/OR BETWEEN ITS PROMOTERS/DIRECTORS CANNOT BE A REASON /JUSTIFICATION FOR NOT COMPLYING WITH THE STATUTORY R EQUIREMENTS AS OTHERWISE EVERY TAX - PAYER IN THIS COMPLEX BUSINESS ENVIRONMENT WILL TAKE REFUGE FOR NON COMPLIANCES OF STATUTORY OBLIGATION UNDER THE UMBRELLA OF INTER - SE DISPUTES/LITIGATIONS WHICH IS I.T.A. NO.369,370,721 & 722/MUM/2013 24 QUITE COMMON IN THIS COMPLEX BUSINESS ENVIRONMENT . THE ONUS IS ON THE ASSESSEE TO PROVE THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80IA OF THE 1961 ACT AND THAT IT HAD MET ALL THE REQUIREMENTS OF PROVISIONS OF SECTION 80IA AND THAT ITS CASE COMES STRICTLY WITHIN THE PARAMETERS OF THE CONDITIONS AS ARE ST IPULATED UN DER SECTION 80IA READ WITH SECTION 80AC OF THE 1961 ACT AND IT IS ONLY IN THE CASE OF SUPERVENING IMPOSSIBILITY OF THE PERFORMANCE WHICH CAUSED DELAY IN FINALISATION OF ACCOUNTS AND CONSEQUENT DELAY IN FILING OF RETURN OF INCOME WITHIN TIME STI PULATED U/S 139(1) OF THE 1961 ACT WHICH COULD BE CONSIDERED AS A REASONABLE CAUSE FOR NOT COMPLYING WITH REQUIREMENTS STIPULATED U/S 80AC FOR FILING RETURN OF INCOME WITHIN TIME AS MANDATED U/S 139(1). THUS, DOCTRINE OF SUPERVENING IMPOSSIBILITY HAS TO B E PRESSED AND PROVED BY THE ASSESSEEE FOR WHICH ONUS IS ON THE ASSESSEE. IF IN EVERY SITUATION OF DISPUTE/LITIGATION INTERSE BETWEEN TAX - PAYER AND/OR BETWEEN PROMOTERS , THE CLAIM OF DEDUCTION U/S 80IA OF THE 1961 ACT IS ALLOWED DESPITE RETURN OF INCOME B EING FILED BEYOND TIME AS STIPULATED U/S 139(1), THEN SECTION 80AC WILL BECOME OTIOSE. THE SAID SECTION 80AC WAS A NEWLY INSERTED SECTION WHICH WAS INSERTED BY FINANCE ACT, 2006 W.E.F. 01.04.2006 WHICH HAS BEEN SPECIFICALLY BROUGHT IN BY PARLIAMENT TO GR ANT EXEMPTION TO THOSE TAX - PAYERS WHO FILE THEIR RETURN WITHIN DUE DATE AS PRESCRIBED U/S 139(1) AND THIS IS THE FIRST YEAR WHEN THE SAID SECTION IS APPLICABLE. WITH THE AFORESAID OBSERVATIONS, WE ARE RESTORING THIS ISSUE BACK TO THE FILE OF THE AO FOR FRE SH ADJUDICATION OF THE ISSUE ON MERITS IN ACCORDANCE WITH LAW. THE ASSESSEE IS DIRECTED TO PRODUCE ALL RELEVANT RECORDS CONCERNING DISPUTE /LITIGATION AS WELL RELEVANT ORDERS OF HONBLE COURTS BEFORE THE AO TO PROVE SUPERVENING IMPOSSIBILITY OF PERFORMANCE . WE ORDER ACCORDINGLY. 9 . THE GROUND NUMBER 6 CONCERNS ITSELF WITH DISALLOWANCE UNDER SECTION 14A OF THE 1961 ACT R.W.R. 8D OF THE INCOME TAX RULES, 1962. THE DISALLOWANCE WAS MADE BY THE AO OF RS.16,102/ - U/S 14A OF THE 1961 ACT . THE ASSESSEE HAS RECEIVED DIVIDEND INCOME OF RS. 26,134/ - I.T.A. NO.369,370,721 & 722/MUM/2013 25 WHICH WAS CLAIMED AS AN EXEMPT INCOME U/S 10(34) OF THE 1961 ACT. THE LEARNED CIT(A) RESTRICTED THE DISALLOWANCE U/S 14A TO 10% OF THE DIVIDEND INCOME RECEIVED BY THE ASSESSEE. THE ASSESSEE HAS N OW FILED AN APPEAL WITH THE TRIBUNAL AGAINST THE APPELLATE ORDER OF LEARNED CIT(A) . THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITTED THAT THIS GROUND OF APPEAL BEARING NUMBER 6 IS NOT PRESSED AND THE SAME MAY BE DISMISSED AS NOT BEING PRESSED. THE LEARNED DR RAISED NO OBJECTION TO DISMISS AL OF THIS GROUND OF APPEAL AS NOT BEEN PRESSED . A FTER HEARING BOTH THE PARTIES AND PERUSING MATERIAL ON RECORD , WE DISMISS THIS GROUND NO. 6 RAISED BY THE ASSESSEE IN MEMO OF APPEAL FILED WITH THE TRIBUNAL AS N OT BEEN PRESSED. WE ORDER ACCORDINGLY. 10. THE ASSESSEE HAS ALSO RAISED GROUND NO. 7 WHEREIN THE ASS ESSEE HAS STATED THAT THERE WAS NON - CONSIDERATION OF EXPENSES DISALLOWED IN EARLIER YEAR AND CLAIMED AS DEDUCTION IN AY 2006 - 07, SUBJECT TO THE OUTCOME IN THE PENDING ASSESSMENT S PURSUANT TO ITAT ORDERS FOR EARLIER YEARS. IT WAS SUBMITTED THAT LD. CIT(A) H AS ERRED IN NOT CONSIDERING FOLLOWING DISALLOWANCE/ADDITIONS. A) PRIOR PERIOD EXPENSES: RS. 27,40,436/ - . B) NON - DE DUCTION OF TDS: RS. 4,48,69,244/ - . C) PRIOR PERIOD ADJUSTMENT (NET): RS. 31,74,810/ - . THE ASSESSEE HAS NOT PRESSED THIS GROUND OF APPEAL BEFORE THE TRIBUNAL NOR WAS IT PRESSED BEFORE LEARNED CIT(A) . THE LEARNED CIT(A) DISMISSED THE SAID GROUNDS OF APPEAL NOT BEEN PRESSED. UNDER THESE CIRCUMSTANCES , WE ARE ALSO DISMISSING THIS GROUND OF APPEAL AS NOT BEEN PRESSED. WE ORDER ACCORDINGLY. 11. THE ASSESSEE HAS ALSO RAISED AN ADDITIONAL GROUND OF APPEAL BEFORE THE TRIBUNAL WHICH IS CONCERNING CLAIM OF DEDUCT ION U/S 80HHD OF TH E 1961 ACT, , AS UNDER: - ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSING OFFICER OUGHT NOT TO HAVE MADE AN ADDITION OF RS 1,27,79,045 U/S 80HHD OF THE INCOME TAX I.T.A. NO.369,370,721 & 722/MUM/2013 26 ACT, 1961 AS THE RESERVE HAS BEEN UTILIZED FOR PURCHASE OF FIXED ASS ETS. IT IS CLAIMED THAT THE BASIC FACTS RELATING TO THIS ISSUE WAS BEFORE THE LEARNED AO DURING ASSESSMENT PROCEEDINGS . IT IS CLAIMED THAT THE AO ERRED IN MAKING ADDITION OF RS.1,27,79,045/ - U/S 80HH D OF THE 1961 ACT ON THE GROUNDS THAT RESERVES CREATED IN THE FINANCIAL YEAR ENDED 31.03.2000 WAS NOT UTILISED FOR PURCHASE OF FIXED ASSETS AS MAND ATED U/S 80HHD OF THE 1961 ACT AND THE DECISION OF THE AO VIDE ASSESSMENT ORDER IS PERVERSE .T HE ASSESSEE HAS F ILED ADDITIONAL PAPER BOOK CONTAINING 24 PAGES IN WHICH THE ASSESSEE HAS FILED AUDITED FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31.03.2000 TO 31.03.2005(PB/PAGE 3 - 23) . T HE ASSESSEE HAS ALSO FILED SUMMARY OF ADDITIONS MADE TO FIXED ASSETS FROM 31 .03.2001 TO 31.03.2011, AS UNDER TO CONTEND THAT THE ASSESSEE DID MADE PURCHASES OF FIXED ASSETS AND FINDING OF THE AO IS PERVERSE : - DETAILS OF ADDITIONS TO FIXED ASSETS (AMOUNT IN RS.) FINANCIAL YEAR ENDED AMBO AMMA AMAU DFK BFK CROISSANTS WINDMILL TOTAL 31/03/2001 2,654,991 1,440,662 86,276 6,565,699 200,472 25,045 24,075 10,997,220 31/03/2002 2,627,627 308,103 63,812 9,146,758 1,394,507 107,646 - 13,648,453 31/03/2003 14,426,263 1,820,833 3,298,537 9,434,737 26,124,308 781,651 - 55,886,329 31/03/2004 6,132,350 922,998 577,716 17,843,901 51,039,079 6,696,812 - 83,212,856 31/03/2005 2,750,909 1,687,542 417,798 30,151,860 12,099,046 537,523 3,200 47,647,878 31/03/2006 2,325,569 1,069,150 1,999,541 16,649,655 5,717,782 372,895 - 28,134,592 31/03/2007 2,531,413 5,854,894 2,996,961 3,421,367 11,607,363 136,136 - 26,548,134 31/03/2008 36,228,072 3,952,290 182,077 11,436,712 1,601,014 1,229,451 - 54,629,616 31/03/2009 3,928,045 6,072,068 2,516,027 8,557,827 8,737,462 1,375,590 - 31,187,019 31/03/2010 4,357,427 3,238,990 562,240 4,209,611 2,433,299 1,655,754 - 16,457,321 31/03/2011 3,079,667 1,636,154 837,115 216,614 2,634,937 744,305 - 9,148,792 1 1.2 . THE LD. DR SUBMITTED THAT THIS CLAIM WAS NOT RAISED BEFORE LD. CIT(A) AND THIS CLAIM IS RAISED FOR THE FIRST TIM E BE F ORE THE TRIBUNAL AND IT REQUIRES VERIFICATION BY LEARNED AO WHETHER ALL THE CONDITIONS AS STIPULATED UNDER SECTION 80HHD ARE MET OR NOT. IT WAS SUBMITTED THAT I.T.A. NO.369,370,721 & 722/MUM/2013 27 THE LEARNED AO VIDE ASSESSMENT ORDER SPECIFICALLY ADDED BACK SAID RESERVE TO THE INCOME OF THE ASSESSEE ON THE GROUNDS THAT THE ASSESSEE HAS NOT UTILISED THE RESERVE AS MANDATED U/S 80HHD . 11.3 WE HAVE CONSIDERED RIVAL CONTENTION S AND PERUSED THE MATERIAL ON RECORD . W E HAVE OBSERVED THAT THE AO HAS SPECIFICALLY ADDED BACK UNUTILISED RESERVES EARLIER CREATED FOR THE YEAR ENDED 31.03.2000 U/S 80HHD TO THE TUNE OF RS. 1,27,79,045/ - TO THE INCOME OF THE ASS ESSEE ON THE GROUNDS THAT THE SAID RESERVES WERE NOT UTILISED FOR PURCHASE OF FIXED ASSETS. THE ASSESSEE HAS NOW MADE A CLAIM THAT THE AO ERRED IN ADDING BACK SAID RESERVE U/S. 80HH D FOR FY ENDED 31 ST MARCH, 2000 TO THE INCOME OF THE ASSESSEE FOR THE IMPU GNED ASSESSMENT YEAR AS THE ASSESSEE HAS DU LY UTILISED THE SAID RESERVES CREATED IN FINANCIAL YEAR ENDED 31.03.2000 AS REQUIRED U/S. 80HH D FOR WHICH DETAILS WERE FILED VIDE ADDITIONAL PAPER BOOK (PAGE NUMBER 24), AS UNDER: - DETAILS OF ADDITIONS TO FIXED ASSETS (AMOUNT IN RS.) FINANCIAL YEAR ENDED AMBO AMMA AMAU DFK BFK CROISSANTS WINDMILL TOTAL 31/03/2001 2,654,991 1,440,662 86,276 6,565,699 200,472 25,045 24,075 10,997,220 31/03/2002 2,627,627 308,103 63,812 9,146,758 1,394,507 107,646 - 13,648,453 31/03/2003 14,426,263 1,820,833 3,298,537 9,434,737 26,124,308 781,651 - 55,886,329 31/03/2004 6,132,350 922,998 577,716 17,843,901 51,039,079 6,696,812 - 83,212,856 31/03/2005 2,750,909 1,687,542 417,798 30,151,860 12,099,046 537,523 3,200 47,647,878 31/03/2006 2,325,569 1,069,150 1,999,541 16,649,655 5,717,782 372,895 - 28,134,592 31/03/2007 2,531,413 5,854,894 2,996,961 3,421,367 11,607,363 136,136 - 26,548,134 31/03/2008 36,228,072 3,952,290 182,077 11,436,712 1,601,014 1,229,451 - 54,629,616 31/03/2009 3,928,045 6,072,068 2,516,027 8,557,827 8,737,462 1,375,590 - 31,187,019 31/03/2010 4,357,427 3,238,990 562,240 4,209,611 2,433,299 1,655,754 - 16,457,321 31/03/2011 3,079,667 1,636,154 837,115 216,614 2,634,937 744,305 - 9,148,792 THE ASSESSEE HAS ALSO FILED AUDITED FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31.03.2000 TO 31.03.2005(PB/PAGE 3 - 23). THUS, THE ASSESSEE HAS CLAIMED THAT PERVERSITY ENTERED INTO AN ASSESSMENT ORDER AND IT HAD BEEN PLEADED TO ADMIT THIS GROUND OF APPEAL. AFTER CONSIDERING RIVAL CONTENTIONS, WE ARE OF THE VIEW THAT THIS ADDITIONAL I.T.A. NO.369,370,721 & 722/MUM/2013 28 GROUND OF APPEAL NEEDS TO BE ADMITTED AS PE RVERSITY OF THE ORDERS OF THE AUTHORITIES GIVE RISE TO QUESTION OF LAW. MOREOVER, THE MANDATE OF THE ACT IS TO THE LEVY TAX ON THE CORRECT INCOME WHICH IS CHARGEABLE TO TAX AS PROVIDED UNDER THE PROVISIONS OF THE 1961 ACT, WHICH IS IN CONSONANCE WITH ARTIC LE 265 OF THE CONSTITUTION OF INDIA THAT NO TAX CAN BE LEVIED OR COLLECTED SAVE BY THE AUTHORITY OF LAW. THE FACTS ARE AVAILABLE ON FACTS BUT THEY NEED VERIFICATION. THE CONTENTION OF THE ASSESSEE THAT IT HAS COMPLIED WITH PROVISIONS OF SECTION 80HHD SO F AR AS UTILISATION OF THE RESERVE CREATED FOR THE FINANCIAL YEAR ENDED 31.03.2000 U/S 80HHD STRICTLY IN COMPLIANCE WITH REQUIREMENTS OF SECTION 80HHD REQUIRE S VERIFICATION OF FACTS AND CLAIM OF THE ASSESSEE IS TO BE DETERMINED AFTER VERIFICATION OF FACTS AS PRESENTED BY THE ASSESSEE BEFORE US . I N ALL FAIRNESS TO BOTH THE RIVAL PARTIES THIS IS SUE NEED TO BE RESTORED TO THE F ILE OF THE AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW ON MERITS. THUS, IN ORDER TO COMPUTE CORRECT INCOME IN THE HANDS OF THE ASSESSEE TO ADVANCE SUBSTANTIAL JUSTICE , WE ARE ADMITTING THIS ADDITIONAL GROUND OF APPEAL AND DIRECTING THE AO TO MAKE NECESSARY VERIFICATION S OF THE CLAIM AND CONTENTION OF THE ASSESSEE TO VERIFY WHETHER T HE ASSESSEE HAS FULFILLED ALL THE CONDITIONS AS ARE STIPULATED U/S. 80HH D SO AS TO BE ELI GIBLE FOR DEDUCTION U/S 80HHD ON MERITS IN ACCORDANCE WITH LAW. IT IS NOW SETTLED BY THE CONSTITUTION B ENCH OF HONBLE SUPREME COURT IN THE CASE OF COMMISSIONER OF CUS TOMS(IMPORTS ) ,MUMBAI V. DILIP KUMAR AND COMPANY & OTHERS IN CIVIL APPEAL NO. 3327 OF 2007 VIDE ORDERS DATED 30 TH JULY 2018 THAT EXEMPTION PROVISION S ARE TO BE STRICTLY CONSTRUED . THE CONCLUSION ARRIVED AT BY HONBLE SUPREME COURT IN THE AFORESAID DECISION ARE AS UNDER: 52. TO SUM UP, WE ANSWER THE REFERENCE HOLDING AS UNDER (1) EXEMPTION NOTIFICATION SHOULD BE INTERPRETED STRICTLY; THE BURDEN OF PROVING APPLICABILITY WOULD BE ON THE ASSESSEE TO SHOW THAT HIS CASE COMES WITHIN THE PARAMETERS OF THE EXEMPTION CLAUSE OR EXEMPTION NOTIFICATION. I.T.A. NO.369,370,721 & 722/MUM/2013 29 (2) WHEN THERE IS AMBIGUITY IN EXEMPTION NOTIFICATION WHICH IS SUBJECT TO STRICT INTERPRETATION, THE BENEFIT OF SUCH AMBIGUITY CANNOT BE CLAIMED BY THE SUBJECT/ASSESSEE AND IT MUST BE INTERPRETED IN FAVOUR OF THE REVENUE. (3) THE RATIO IN SUN EXPORT CASE (SUPRA) IS NOT CORRECT AND ALL THE DECISIONS WHICH TOOK SIMILAR VIEW AS IN SUN EXPORT CASE (SUPRA) STANDS OVERRULED. T HE ONUS IS ON THE ASSESSEE TO PROVE THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80HHD OF THE 1961 ACT AND THAT IT HAD MET ALL THE REQUIREMENTS OF PROVISIONS OF SECTION 80HHD AND ITS CASE COMES STRICTLY WITHIN THE FOUR CORNERS AND PARAMETERS OF THE CONDITIONS AS ARE STIPULATED UNDER SECTION 80HHD OF THE 1961 ACT. T HE ONUS IS ON THE ASSESSEE T O PROVE THAT THE AO WHILE FRAMING ASSESSMENT ERRED IN ADDING BACK RESERVES TO THE TUNE OF RS. 1,27,79,045/ - DURING THE IMPUGNED ASSESSMENT YEAR WHICH RESERVED WERE CREATED BY THE ASSESSEE IN THE FINANCIAL YEAR ENDED 31.03.2000 WITHIN PROVISIONS OF SECTION 80HHD OF THE 1961 ACT AND THE SAID RESERVE AMOUNT WAS UTILISED WITHIN TIME PERIOD AS MANDATED U/S 80HHD FOR THE PURPOSES AS ARE STIPULATED U/S 80HHD . WITH THE AFORESAID OBSERVATIONS, WE ARE RESTORING THIS ISSUE BACK TO THE FILE OF THE AO FOR FRESH ADJUDI CATION OF THE ISSUE ON MERITS IN ACCORDANCE W ITH LAW. WE ORDER ACCORDINGLY. 1 2 . IN THE RESULT APPEAL OF THE ASSESSEE IN ITA NO. 369/MUM/2013 FOR AY 2006 - 07 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. AY 2007 - 08 - ITA NO. 370/MUM/2013 13 . SINCE APPEAL FOR AY 2007 - 08 INVOLVES COMMON ISSUES AS WERE THERE IN AY 2006 - 07 , INCLUDING RAISING OF ADDITIONAL GROUND WITH RESPECT TO CLAIM OF DEDUCTION U/S 80HHD, OUR DECISION IN AY 2006 - 07 SHALL APPLY MUTATIS MUTANDIS TO THE ISSUES INVOLVED IN AY 200 7 - 08 . WE ORDER ACCORDINGLY. 14. IN THE RESULT APPEAL OF THE ASSESSEE IN ITA NO. 370/MUM/2013 FOR AY 2007 - 08 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NO.369,370,721 & 722/MUM/2013 30 AY 2008 - 09 - ITA NO. 721/MUM/2013 15 . THE ASSESSEE HAS ALSO RAISED AN GROUND NO. 4 IN MEMO OF APPEAL FI LED WITH TRIBUNAL WHICH IS CONCERNING SHORT DEDUCTION OF TDS TO THE TUNE OF RS.18,449/ - AND NON APPLICABILITY OF PROVISIONS OF SECTION 40(A)(IA) OF THE 1961 ACT. T HE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITTED THAT THIS GROUND OF APPEAL IS NOT PRE SSED AND IT IS PRAYED THAT THIS GROUND MAY BE DISMISSED AS NOT BEING PRESSED. THE LD. DR DID NOT RAISE ANY OBJECTION TO THE DISMISSAL OF THIS GROUND OF APPEAL . A FTER HEARING BOTH THE PARTIES AND CONSIDERING THE MATERIAL ON RECORD, WE DISMISS THIS GROUND O F APPEAL NUMBER 4 CONCERNING SHORT DEDUCTION OF TDS AND APPLICABILITY OF PROVISIONS OF SECTION 40(A)(IA) AS NOT BEEN PRESSED . SINCE OTHER ISSUES IN APPEAL FOR AY 2008 - 09 INVOLVES COMMON ISSUES AS WERE PRESENT IN AY 2006 - 07 , OUR DECISION IN AY 2006 - 07 ON OT HER ISSUES RAISED IN APPEAL FOR AY 2008 - 09 , SHALL APPLY MUTATIS MUTANDIS TO THE ISSUES INVOLVED IN AY 2008 - 09. 16. IN THE RESULT APPEAL OF THE ASSESSEE IN ITA NO. 721/MUM/2013 FOR AY 2008 - 09 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 2009 - 10 - ITA NO. 722/MUM/2013 17 . THE ASSESSEE HAS RAISED AN ADDITIONAL GROUND OF APPEAL WITH RESPECT TO DISALLOWANCE U/S. 43B OF THE 1961 ACT WITH RESPECT TO PAYMENT OF ADDITIONAL PROPER TY TAX(CHENNAI) OF RS. 32,10,870 / - WITH RESPECT TO HOTEL PROPERTY PALLAVA AT CHENNAI WHICH WAS CLAIMED TO BE PAID BY THE ASSESSEE ON 10.12.2008 AND THE ASSESSEE HAS CLAIMED THAT THE DEDUCTION IS ONLY ALLOWABLE BASED ON ACTUAL PAYMENT BASIS KEEPING IN VIEW PROVISIONS OF SECTION 43B OF THE 1961 ACT, FOR WHICH THIS ADDITIONAL GROUND OF APPEAL IS RAISED BY THE ASSESSEE . THIS IS A N ADDITIONAL GROUND OF APPEAL WHICH IS RAISED BY THE ASSES SEE FOR AY 2009 - 10 , AS UNDER: I.T.A. NO.369,370,721 & 722/MUM/2013 31 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSING OFFICER ERRED IN NOT ALLOWI NG A DEDUCTION OF RS. 32,10,870/ - FOR THE PAYMENT MADE ON 10.12.2008 AS ADDITIONAL PROPERTY TAX IN RESPECT OF THE HOTEL PROPERTY AT CHENNAI, WHICH IS ALLOWABLE AS DEDUCTION ON PAYMENT BASIS U/S 43B OF THE ACT IN A.Y. 2009 - 10' THE ASSESSEE HAS CLAIMED TO HAVE MADE PAYMENT TOWARD S ADDITIONAL PROPERTY TAX TO THE TUNE OF RS. 32,10,870/ - WITH RESPECT TO THE HOTEL PROPERTY - PALLAVA SITUATED AT CHENNAI AND CLAIM IS MADE THAT THE SAID EXPENDITURE IS TO BE ALLOWED ON PAYMENT BASIS KEEPING IN VIEW PROVISIONS OF SECTION 43B OF THE 1961 ACT. T HIS IS FRESH GROUND OF APPEAL RAISED BY THE ASS ESSEE AND IT IS CLAIMED THAT PROVISION WAS MADE WHILE PREPARING ACCOU NTS FOR AY 200 9 - 10 TOWARD S THIS HOTEL PROPERTY TAX( HOTEL PALLAVA, CHENNAI ) AND THE SAME WAS PAID ON 10 TH DEC, 2008 BUT DUE TO MISTAKE OF THE ASSESSEE, THE SAME WAS NOT CLAIMED. IT WAS SUBMITTED THAT THIS CLAIM FOR EXPENSES WERE DISALLOWED FOR AY 2008 - 09 A S THE PAYMENT WAS MADE ONLY ON 10.12.2008 WHICH IS BEYOND THE END OF THE FINANCIAL YEAR AS ALSO BEYOND THE TIME STIPULATED FOR FILING OF RETURN OF INCOME U/S 139(1). O UR ATTENTION WAS DRAWN TO THE ASSESSMENT ORD ER FOR AY 2008 - 09 AS UNDER: - 9. PROPE R TY TAX PAYMENT: FORM THE COMPUTATION OF INCOME FILED WITH THE RETURN OF INCOME, IT IS NOTICED THAT AN AMOUNT OF RS. 32,10,870/ - UNDER HEAD PROVISION FOR PROPERTY TAX (PALLAWA) HAS BEEN ADDED AND THE SAME AMOUNT HAS BEEN FURTHER CLAIMED AS ALLOWABLE DEDUCTI ON. VIDE ORDER SHEET NOTING DATED 17.12.2010, THE ASSESSEE WAS REQUIRED TO EXPLAIN AND FURNISH THE PROOF OF PAYMENT OF PROPERTY TAX DURING THE F.Y.2007 - 08 RELEVANT TO CURRENT A.Y. OR TILL THE DUE DATE OF FILING OF RETURN FOR THE CURRENT ASSESSMENT YEAR. TH E ASSESSEE HAS PRODUCED COPY OF PAYMENT OF PROPERTY TAX TO THE TUNE OF RS.32,10,870/ - WHICH IS PAID IN THE F.Y.2008 - 09 (PAYMENT DATE 10/12/2008). THE ASSESSEE HAS CLAIMED THAT THIS QUANTUM OF PROPERTY TAX PERTAIN TO ENHANCED VALUE OF PROPERTY TAX BY MUNICI PAL AUTHORITIES AFTER SURVEY ACTION AND HENCE THE SAME IS CLAIMED AS DEDUCTIBLE EXPENSES IN THE YEAR OF PROVISION MADE. THE ASSESSEE HAS ALSO CONTENDED THAT THIS EXPENDITURE DOES I.T.A. NO.369,370,721 & 722/MUM/2013 32 NOT FALL IN THE NATURE OF ITEMS COVERED IN SECTION 43B OF THE I.T. ACT. THIS CLAIM OF THE ASSESSEE IS NOT ACCEPTABLE AS THE PROPERTY TAX FALL UNDER SECTION 43B (A) OF THE ACT WHICH STARTS WITH 'ANY SUM PAYABLE BY ASSESSEE BY WAY OF TAX, DUTY, CESS OR FEE BY WHATEVER NAME CALLED UNDER ANY LAW FOR THE TIME BEING ENFORCED' AND THESE WORDINGS CERTAINLY TAKES CARE OF THE PROPERTY TAX. AS THE PROPERTY TAX PAYMENT IS MADE ON 10/12/2008,THE AMOUNT OF RS.32,10,870 IS DISALLOWED AS PER SECTION 43B OF THE ACT AND ADDED TO THE TOTAL INCOME. PENALTY PROCEEDINGS U/S 271(L)(C) ARE INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE ASSESSEE SUBMITTED THAT THE AO DISALLOWED THE SAID EXPENSES WHILE FRAMING ASSESSMENT FOR AY 2008 - 09 AND T HE LD. CIT(A) HAS ALSO DISALLOWED THE SAID EXPENSES WHILE ADJUDICATING APPEAL FOR AY 20 08 - 09, BY HOLDING AS UNDER: 8. GROUND NO. 5 IS RELATED TO THE PROPERTY TAX PAYMENT AT CHENNAI. 8.1 DURING THE ASSESSMENT PROCEEDINGS FROM THE COMPUTATION OF INCOME FILED WITH THE RETURN OF INCOME, THE AO NOTICED THAT AN AMOUNT OF RS.32,10,870/ - U NDER HEAD 'PROVISION FOR PROPERTY TAX' (PALLAVA) HAS BEEN ADDED AND THE SAME AMOUNT HAS BEEN FURTHER CLAIMED AS ALLOWABLE DEDUCTION. VIDE ORDER SHEET NOTING DATED 17/12/2010, THE ASSESSEE WAS REQUIRED TO EXPLAIN AND FURNISH THE PROOF OF PAYMENT OF PROPERTY TAX DURING THE F.Y.2007 - 08 RELEVANT TO CURRENT A.Y. OR TILL THE DUE DATE OF FILING OF RETURN FOR THE CURRENT ASSESSMENT YEAR. THE APPELLANT HAS PRODUCED COPY OF PAYMENT OF PROPERTY TAX TO THE TUNE OF RS.32,10,870/ - WHICH WAS PAID IN THE F.Y.2008 - 09 (PAYME NT DATE 10/12/2008). THE APPELLANT HAS CLAIMED THAT THIS QUANTUM OF PROPERTY TAX PERTAIN TO ENHANCED VALUE OF PROPERTY TAX BY MUNICIPAL AUTHORITIES AFTER SURVEY ACTION AND HENCE THE SAME IS CLAIMED AS DEDUCTIBLE EXPENSES IN THE YEAR OF PROVISION MADE. THE APPELLANT HAS ALSO CONTENDED THAT THIS EXPENDITURE DOES NOT FALL IN THE NATURE OF ITEMS COVERED IN SECTION 43B OF THE I.T. ACT. THIS CLAIM OF THE APPELLANT WAS NOT ACCEPTABLE AS THE PROPERTY TAX FALL UNDER SECTION 43B (A) OF THE ACT WHICH STARTS WITH 'ANY SUM PAYABLE BY ASSESSEE BY WAY OF TAX, DUTY, CESS OR FEE BY WHATEVER NAME CALLED UNDER ANY LAW FOR THE TIME BEING ENFORCED' AND THESE WORDINGS CERTAINLY TAKES CARE OF THE PROPERTY TAX. AS THE PROPERTY TAX PAYMENT IS MADE ON 10/12/2008, THE AMOUNT OF RS.32, 10,870 / - WAS I.T.A. NO.369,370,721 & 722/MUM/2013 33 DISALLOWED AS PER SECTION 43B OF THE ACT AND ADDED TO THE TOTAL INCOME. 8.2. DURING THE APPELLATE PROCEEDINGS, THE APPELLANT REITERATED THE SUBMISSION MADE BEFORE THE AO. 8.3. I HAVE GONE THROUGH THE ISSUE. IT IS VERY CLEAR THAT PROPERTY TAX IS ALSO COVERED UND ER THE PROVISIONS OF SECTION 43 B OF THE INCOME - TAX ACT. IT IS UNDISPUTED FACT THAT THE PROPERTY TAX OF RS.32,10,870/ - WAS NOT PAID DURING THE ACCOUNTING PERIOD OR BEFORE THE DUE DATE FOR FILING THE RETURN. IN VIEW OF THIS, I HOLD THAT R S.32,10,870/ - IS CORRECTLY DISALLOWED BY THE AO U/S 43B OF THE INCOME - TAX ACT. ADDITION IS UPHELD. 17 .2 . NOW , THE ASSESSEE HAS RAISED THIS GROUND OF APPEAL AS AN ADDITIONAL GROUND OF APPEAL BEFORE TRIBUNAL FOR AY 2009 - 10 . W E HAVE GONE THOUGH ASS ESSMENT O RDER FOR AY 2008 - 09 AS WELL APPELLATE ORDER PASSED BY LD. CIT(A) ORDER FOR AY 2008 - 09 AND WE HAVE ALSO CONSIDER ED STATEMENT OF FACT FILED BY THE ASSESSEE FOR AY 2009 - 10 ALONG WITH ADDITIONAL GROUND OF APPEAL AS AN ANNEXURE , WHICH READS AS UNDER: - STATEM ENT OF FACTS: THE APPELLANT OWNS AND RUNS INTERALIA 3 HOTELS, ONE OF WHICH IS LOCATED AT CHENNAI (AMBASSADOR PALLAVA). THE APPELLANT HAD CLAIMED A DEDUCTION FOR RS. 32,10,870/ - IN A.Y. 2008 - 09 FOR THE ADDITIONAL PROPERTY TAX WHICH WAS CLAIMED BY MUNICIPA L AUTHORITY DURING THE YEAR ENDED 31.3.2008, AND IN PREPARING THE ANNUAL ACCOUNTS OF THE COMPANY FOR Y.E. 31.3.2008 THE APPELLANT MADE A PROVISION FOR THE SAID ADDITIONAL CLAIM OF RS. 32,10,870/ - UNDER THE COMPANIES ACT, AND AS ADVISED MADE A CLAIM BEFORE THE ASSESSING OFFICER IN THE A.Y. 2008 - 09. THE APPELLANT IN SUPPORT FILED A COPY OF THE RECEIPT GIVEN BY THE MUNICIPAL CORP., CHENNAI FOR THE PAYMENT OF RS. 32,10,870/ - MADE ON 10.12.2008. HOWEVER THE A.O. DISALLOWED THE CLAIM FOR DEDUCTION IN THE ASSESSME NT FOR A.Y. 2008 - 09 MADE U/S 143(3) VIDE ORDER DTD. 29.12.2010 BY HOLDING AS UNDER: - 'THE ASSESSEE HAS ALSO CONTENDED THAT THIS EXPENDITURE DOES NOT FALL IN THE NATURE OF ITEMS COVERED IN SECTION 43 B OF THE I.T. ACT. THIS CLAIM OF THE ASSESSEE IS NOT ACCEPTABLE AS THE PROPERTY TAX FALL UNDER SECTION 43B(A) OF THE ACT WHICH STARTS WITH I.T.A. NO.369,370,721 & 722/MUM/2013 34 ANY SUM PAYABLE BY ASSESSEE BY WAY OF TAX, DUTY, CESS OR FEE BY WHATEVER NAME CALLED UNDER ANY LAW FOR THE TIME BEING ENFORCED' AND THESE WORDINGS CERTAINLY TAKES CARE OF THE PROPERTY TAX. AS THE PROPERTY TAX PAYMENT IS MADE ON 10.12.2008 THE AMOUNT OF RS. 31,10,870/ - IS DISALLOWED AS PER SECTION 436 OF THE ACT AND ADDED TO THE TOTAL INCOME.' 2. IN VIEW OF THE ABOVE THE APPELLANT FILED REVISED COMPUTATION OF TOTAL INCOME VIDE LETTER DTD. 31.3.2011 DURING ASSESSMENT PROCEEDINGS OF A.Y. 2009 - 10 AND REPEATED THE CLAIM AS UNDER - '4. THE ASSESSMENT FOR A.Y. 2008 - 09 HAS BEEN COMPLETED BY THE ADDL. CIT_1(2) VIDE ORDER DTD. 29.12 .2010 WHEREIN A DISALLOWANCE OF RS. 32,10,870/ - HAS BEEN MADE FOR THE ADDITIONAL PROPERTY TAX PAYABLE IN RESPECT OF PROPERTY AT CHENNAI, ON THE BASIS THAT AS THE PROPERTY TAX WAS PAID ON 10.12.2008, IT WAS NOT ELIGIBLE FOR A DEDUCTION IN THE ASSESSMENT FOR A.Y. 2008 - 09, AND IS TO BE ALLOWED ON PAYMENT BASIS U/S 43B IN A.Y.2009 - 10. 5. ACCORDINGLY WE ARE MAKING A CLAIM OF RS. 32,10,870/ - FOR THE PROPERTY TAX PAID ON 10.12.2008, WITHOUT PREJUDICE, ON PAYMENT BASIS U/S 43B IN A.Y. 2009 - 10 FOR WHICH WE ARE FILI NG A REVISED COMPUTATION OF INCOME.' 3. THE A.O. MADE THE ASSESSMENT FOR A.Y. 2009 - 10 ON 30.12.2011 U/S 143(3) WITHOUT DEALING WITH THE APPELLANT'S CLAIM AND DID NOT ALLOW THE CLAIM FOR DEDUCTION OF THE ADDITIONAL PROPERTY TAX OF RS. 32,10,870/ - IN RESPEC T OF THE HOTEL PROPERTY AT CHENNAI, WHICH WAS DEALT BY THE A.O. IN THE ASSESSMENT ORDER DATED 29.12.2010 FOR A.Y. 2008 - 09. AS STATED ABOVE IN PARA 1 HEREOF. 4. THE APPELLANT SUBMITS THAT ALL THE RELEVANT FACTS IN RESPECT OF THE ABOVE CLAIM OF RS. 31,10,870/ - ARE ALREADY ON THE RECORDS OF THE AO AND THE ADDITIONAL GROUND IS PURELY A LEGAL GROUND AND DOES NOT REQUIRE ANY DETAILED INVESTIGATION, HENCE PRAYS FOR ADMISSION. 1 7 .3 . IN OUR CONSIDER ED VIEW , THE ASSESSEE IS ENTITLED FOR THIS DEDUCTION TOW ARD ADDITIONAL PROPERTY TAX PAID TOWARDS HOTEL PALLAVA , CHENNAI AS PAYMENT HAS BEEN UNDISPUTEDLY MADE ON 10.12.2008 AND KEEPING IN VIEW PROVISION OF SECTION 43B (A) THIS EXPENDITURE IS TO BE I.T.A. NO.369,370,721 & 722/MUM/2013 35 ALLOWED AS DEDUCTION FOR AY 200 9 - 10 AS THE PAYMENT IS ACTUALLY MA DE BY THE ASSESSEE FOR THIS ADDITIONAL PROPERTY TAX BY THE ASSESSEE ON 10.12.2008 , AS PER FACTS EMERGING FROM RECORDS . WE ORDER ACCORDINGLY. 17. 2 SINCE , OTHER ISSUES IN APPEAL FOR AY 2009 - 10 INVOLVES COMMON ISSUES AS WERE CONTAINED IN AY 2006 - 07 , OUR DECISION IN AY 2006 - 07 ON OTHER ISSUES RAISED IN APPEAL FOR AY 2009 - 10 , SHALL APPLY MUTATIS MUTANDIS TO THE ISSUES INVOLVED IN AY 200 9 - 10 . WE ORDER ACCORDINGLY. 18. IN THE RESULT APPEAL OF THE ASSESSEE IN ITA NO. 722/MUM/2013 FOR AY 2009 - 10 IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. 19. IN THE RESULT ALL THE APPEALS FILED BY THE ASSESSEE IN ITA NO. 369 - 370, 721 - 722/MUM/2013 FOR AY 2006 - 07 TO AY 2009 - 10 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONO UNCED IN THE OPEN COURT ON 3 0 .11 .2018. 3 0 .11 .2018 S D / - S D / - ( MAHAVIR SINGH) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 3 0 .11 .2018 NISHANT VERMA SR. PRIVATE SECRETARY COPY TO 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE CIT(A) CONCERNED, MUMBAI 4 . THE CIT - CONCERNED, MUMBAI 5 . THE DR BENCH, 6 . MASTER FILE // TUE COPY// I.T.A. NO.369,370,721 & 722/MUM/2013 36 BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI