ACIT, Kota V. M/S DASWANI CLASSES LTD., Kota

ITA 370/JPR/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5169 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 20-04-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R S DAGUR CIT DHK
• Keywords: Business income; Business expenditure; Opportunity of being heard

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO.370/JP/15 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11 THE ACIT, CIRCLE-I, KOTA CUKE VS. M/S DASWANI CLASSES LTD. 638, C.A.D. CIRCLE, DADABARI, KOTA LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AACCD 0680 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI SHRAWAN KUMAR GUPTA (ADV.) JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.S DAGUR. (ADDL. CIT ) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 22.08.2016 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : /08/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A), KOTA DATED 10.02.2015 WHEREIN THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN TREATING THE INCOME OF RS. 3,91,911/- AS BUSINES S INCOME, WHICH WAS TREATED BY THE AO AS INCOME FROM OTHER SOURCES SI NCE THE ASSESSEE DID NOT CONDUCT ANY COACHING BUSINESS DURING THE YEAR. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN ALLOWING THE BUSINESS EXPENDITURE OF RS. 70,78,5 18/- DISALLOWED BY THE AO ON THE GROUND THAT THE ASSESSEE HAD NOT CARRIED OUT ANY BUSINESS DURING THE YEAR UNDER CONSIDERATION. ITA NO. 370/JP/15 ACIT, CIRCLE-1, KOTA VS. M/S DASWANI CLASSES LTD. K OTA 2 2. BRIEFLY STATED, THE FACTS RELEVANT FOR BOTH THE GROUNDS OF APPEAL ARE THAT THE ASSESSEE IS CARRYING ON THE BUSINESS OF COACHIN G OF STUDENTS FOR VARIOUS COURSES. FOR THE YEAR UNDER CONSIDERATION, THE ASS ESSEE HAS DISCLOSED BUSINESS RECEIPTS OF RS 3,91,911 WHICH THE ASSESSING OFFICER TREATED AS INCOME FROM OTHER SOURCES BY OBSERVING THAT THE ASSESSEE HAS NOT CARRIED OUT ANY BUSINESS DURING THE YEAR AND IT DID NOT PRODUCE ANY DOCUMENT S OF FEES RECEIPTS/FEE REGISTER DURING THE YEAR. THE ASSESSING OFFICER FU RTHER HELD THAT THE ASSESSEE COMPANY HAD SHOWN INCOME IN THE NAME OF FEES RECEIP T FOR THE PURPOSES OF CLAIMING BUSINESS EXPENSES AND AS THE ASSESSEE COM PANY HAD NO BUSINESS INCOME DURING THE YEAR, QUESTION OF ALLOWABLE BUSIN ESS EXPENDITURE DOES NOT ARISE. HE ACCORDINGLY DISALLOWED THE WHOLE OF THE E XPENDITURE AMOUNTING TO RS 70,78,518 AND BROUGHT TO TAX RECEIPTS OF RS 3,91,91 1 AS INCOME FROM OTHER SOURCES. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD CIT(A) WHO HAS OBSERVED IN HIS ORDER AS UNDER: THE AO DURING THE COURSE OF HEARING NEITHER ASKED ANY DETAILS NOR RAISED ANY QUERY REGARDING TREATMENT OF THE SAID RE CEIPT. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF COACHING CLASSES FOR MANY YEARS AND HAS BEEN SHOWING INCOME UNDER THE HEAD BUSINESS. THE P ERUSAL OF ORDER SHEET SHOW THAT THE ASSESSEE WAS NEVER CONFRONTED N OR ANY QUERY WAS RAISED. CHANGING HEAD OF INCOME, WITHOUT CALLING F OR THE DETAILS AND WITHOUT RAISING ANY QUERY, WAS NOT JUSTIFIED. THE A O IS THEREFORE DIRECTED TO TREAT THE SAME AS BUSINESS INCOME. THIS GROUND O F APPEAL IS ALLOWED. 2.1 DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS DISCLOSED BUSINESS RECEIPTS O F RS 3,91,911 DURING THE YEAR AS COMPARED TO BUSINESS RECEIPTS OF RS 1.29 CR IN A Y 2009-10, RS 2.62 CR IN AY 2008-09 AND RS 8.56 CR IN AY 2007-08. THE REASON F OR THE FALL HAS BEEN STATED TO BE TOUGH COMPETITION IN THE COACHING BUSINESS. H OWEVER, THE SAME CANNOT BE A BASIS FOR RE- CHARACTERISING THE BUSINESS REC EIPTS AS INCOME FROM OTHER SOURCES AND DISALLOWING WHOLE OF THE EXPENSES. AS FAR AS DETAILS OF THE ITA NO. 370/JP/15 ACIT, CIRCLE-1, KOTA VS. M/S DASWANI CLASSES LTD. K OTA 3 BUSINESS RECEIPTS ARE CONCERNED, THE LD AR DRAWN OU R ATTENTION TO LEDGER ACCOUNT OF FEE RECEIPTS WHICH IS AVAILABLE AT PAGE 1-2 OF THE PAPERBOOK. FURTHER, THE LD AR SUBMITTED THAT THE AO MADE THE D ISALLOWANCE OR ADDITION WITHOUT PROVIDING ANY OPPORTUNITY OF BEING HEARD TO THE ASSESSEE NOR HE ISSUED ANY SHOW CAUSE NOTICE BEFORE MAKING SUCH DI SALLOWANCE OR ADDITION. DURING THE COURSE OF ASSESSMENT PROCEEDING THE LD. AO ONLY REQUIRED THE ASSESSEE TO FILE THE DETAILS. IN RESPONSE THERETO, THE ASSESSEE ADMITTEDLY FILED THE DETAILS AND PRODUCED THE BOOKS OF ACCOUNTS WHIC H WERE AUDITED. AFTER RECEIVING DETAILS, HE DID NOT ASK THE ASSESSEE THAT WHY THE BUSINESS INCOME OR RECEIPTS SHOULD NOT BE TREATED AS INCOME FROM OTHE R SOURCES AND WHY THE ENTIRE BUSINESS EXPENDITURE SHOULD NOT BE DISALLOWE D. THE AO MUST HAVE ISSUED A SHOW CAUSE IN THE INTEREST OF NATURAL JUST ICE BUT HE DID NOT DO SO AND MADE A HUGE DISALLOWANCE. IT IS VERY SETTLED LEGAL POSITION THAT THE ASSESSEE IS ENTITLED TO OPPORTUNITY TO SHOW CAUSE AS TO WHY NOT THE INCOME OF THE ASSESSEE IS DETERMINED IN THE MANNER AS PROPOSED B Y THE ASSESSING OFFICER BUT IN THE INSTANT CASE, NO SUCH TYPE OF OPPORTUNITY HA D BEEN PROVIDED HENCE THE ADDITION SO MADE MAY KINDLY BE DELETED IN FULL. IN SUPPORT, RELIANCE WAS PLACED ON DECISION OF SANG HI BROTHERS (INDORE) LIMITED VS. INSPECTING ACIT 122 CTR 19 (MP), MALIK PACKAGIN G VS. CIT 284 ITR 374 (ALL.), AND T.C. N. MENON VS. ITO 96 ITR 148 (KER.) 2.3 THE LD DR IS HEARD WHO HAS RELIED UPON THE ORDE R OF THE AO AND SUBMITTED THAT THE ASSESSEE FAILED TO MAINTAIN AND SUBMIT THE FEE REGISTER BEFORE THE AO AND IN ABSENCE OF DETAILS, THE AO WAS JUSTIFIED IN TREATING THE BUSINESS RECEIPTS AS INCOME FROM OTHER SOURCES AND DISALLOWING THE BUSINESS EXPENSES AS CLAIMED BY THE ASSESSEE. ITA NO. 370/JP/15 ACIT, CIRCLE-1, KOTA VS. M/S DASWANI CLASSES LTD. K OTA 4 2.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS AN UNDISPUTED FACT THAT THE ASSES SEE IS IN THE BUSINESS OF COACHING FOR LAST MANY YEARS AND HAS BEEN CONSISTEN TLY SHOWING COACHING REVENUES WHICH HAVE BEEN ACCEPTED BY THE REVENUE. IN THE YEAR UNDER CONSIDERATION, ADMITTEDLY THE BUSINESS IS NOT DISCO NTINUED THOUGH THERE IS A SUBSTANTIAL FALL IN THE COACHING REVENUES AS CLAIME D BY THE ASSESSEE, THE FIRST QUESTION THAT ARISES FOR CONSIDERATION IS THE NATUR E OF BUSINESS RECEIPTS WHICH HAVE BEEN RE-CHARACTERISED AS INCOME FROM OTHER SOU RCES BY THE ASSESSING OFFICER. THE LD AR HAS SUBMITTED THE LEDGER ACCOUNT OF FEE RECEIPTS WHICH IS REQUIRED TO BE VERIFIED BY THE ASSESSING OFFICER TO DETERMINE THE TRUE CHARACTER OF SUCH RECEIPTS WHETHER THEY ARE ARISING FROM TH E COACHING ACTIVITIES OR FROM OTHER SOURCES. THE SECOND QUESTION THAT ARISES FOR CONSIDERATION IS WHETHER THE FALL IN THE BUSINESS RECEIPTS, EVEN THOUGH THE BUSINESS OF COACHING IS NOT DISCONTINUED, IS A GOOD ENOUGH REASON TO DISALLOW T HE WHOLE OF THE BUSINESS EXPENDITURE AS CLAIMED BY THE ASSESSEE. IN OUR VIE W, THESE ARE MATTERS WHICH REQUIRE DETAILED EXAMINATION BY THE ASSESSING OFFIC ER. FURTHER, IT IS A CLEAR CASE WHERE THE ASSESSEE HAS BEEN PENALISED UNILATERALLY WITHOUT PROVIDING IT AN OPPORTUNITY TO PRESENT ITS CASE BEFORE THE ASSESSIN G OFFICER. AFTER HEARING BOTH THE PARTIES, WE HEREBY SET ASIDE THE MATTER UNDER D ISPUTE BEFORE US AND REMAND IT TO THE FILE OF THE ASSESSING OFFICER TO D ECIDE A FRESH AFTER PROVIDING REASONABLE OPPORTUNITY TO THE ASSESSEE. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS AL LOWED FOR STATISTICAL PURPOSES. ITA NO. 370/JP/15 ACIT, CIRCLE-1, KOTA VS. M/S DASWANI CLASSES LTD. K OTA 5 ORDER PRONOUNCED IN THE OPEN COURT ON /08/ 2016. ( KUL BHARAT ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- / 08/2016 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ACIT, CIRCLE-1, KOTA 2. IZR;FKHZ@ THE RESPONDENT- M/S DASWANI CLASSES LTD. KOTA 3. VK;DJ VK;QDR@ CIT , KOTA 4. VK;DJ VK;QDRVIHY@ THE CIT(A), KOTA 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.370/JP/2015) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR.