Home linkers, V. DCIT, Circle-12(1),

ITA 3760/DEL/2005

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6523 (ITAT-DELHI)
• Duration Of Justice: 10 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 23-12-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 23-09-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TRAJANTHAN
• Keywords: Reopening of assessment; Tangible material; Revenue expenditure; Capital expenditure
• Section: 234B; 147; 148

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C : NEW DELHI BEFORE SHRI H.S.SIDHU , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI , ACCOUNTANT MEMBER I TA NO . 3760/DEL/2005 (ASSESSMENT YEAR: 2001 - 02 ) M/S. HOME LINKERS E - SERVICES PVT. LTD., N - 53, PANCHSHEEL PARK, NEW DELHI VS. DCIT CIRCLE - 12(1), NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. RAKESH GUPTA, ADV SH. TARUN KUMAR, ADV RESP ONDENT BY: SH . TRAJANTHAN, SR. DR DATE OF HEARING 23 / 12 /201 5 DATE OF PRONOUNCEMENT 08 / 03 /2016 O R D E R PER PRASHANT MAHARISHI , A . M . 1 . THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 29.07.2005 OF LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) - XV, NEW DELHI FOR THE ASSESSMENT YEAR 2001 - 02. THE FOLLOWING GROUNDS HAVE BEEN RAISED: - 1. THAT HAVING REGARD TO FACTS & CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD AO IN REOPENING THE IMPUGNED ASSESSMENT MORE SO WHEN STATUTORY CONDITIONS WERE NOT COMPLIED WITH. 2. IN ANY VIEW OF THE MATTER AND IN ANY CASE, REOPENING OF THE IMPUGNED ASSESSMENT AND CONSEQUENT FRAMING OF THE IMPUGNED ORDER IS BAD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. T HAT HAVING REGARD TO FACTS & CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD AO IN PASSING THE IMPUGNED ASSESSMENT ORDER MORE SO WHEN NOTICE U/S, 143(2) WAS NOT SERVED UPON THE ASSESSEE WITHIN THE STATUTOR Y ALLOWABLE PERIOD. 4. THAT HAVING REGARD TO FACTS & CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN MAKING DISALLOWANCE OF RS.16,1L,836/ - OUT OF THE EXPENSES INCURRED ON DEVELOPMENT OF WEBSITE O N THE GROUND THAT SUCH EXPENSES WERE INCURRED PRIOR TO THE COMMENCEMENT OF BUSINESS OF THE APPELLANT. 5. IN ANY VIEW OF THE MATTER AND IN ANY CASE, ACTION OF LD CIT(A) IN CONFIRMING THE DISALLOWANCE OF DEFERRED REVENUE EXPENDITURE IS BAD IN LAW AND AGAIN ST THE FACTS AND CIRCUMSTANCES OF THE CASE. PAGE 2 OF 4 6. THAT HAVING REGARD TO FACTS & CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN DISALLOWING WEB SITE DEVELOPMENT AND SOFTWARE EXPENSES AMOUNTING TO RS .41,50,981/ - ON THE GROUND THAT IT WAS CAPITAL EXPENDITURE. 7. THAT HAVING REGARD TO FACTS & CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CON FIRMING THE DISALLOWANCE OF RS. 163,084/ - BEING THE AMOUNT OF SALARY/WAGES /BONUS/TRAVELLI NG AND CONVEYANCE/ RENT ETC. ON THE GROUND THAT THE SAME WERE INCURRED PRIOR TO THE COMMENCEMENT OF BUSINESS OF THE APPELLANT. 8. THAT HAVING REGARD TO FACTS & CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND) ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN SUSTAINING THE DISALLOWANCE OUT OF TOTAL! DISA LLOWANCE OF RS.20,461/ - U/S. 14A. 9. THAT HAVING REGARD TO FACTS & CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING IN CHARGING INTEREST U/S. 234B & 234D AND SUCH INTEREST WAS NOT LIABLE TO BE DEMANDED, MORE SO WHEN THERE WAS NO ORDER FOR CHARGING OF INTEREST IN THE BODY OF THE ASSESSMENT ORDER. 2 . F IRST GROUND OF APPEAL OF ASSESSEE IS A GAINST THE REOPENING OF THE ASSESSMENT. 3 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF PROVIDING OF E - COMMERCE BASED SERVICES TO ITS CUSTOMERS IN INDIA AND ABROAD. IT FILED ITS RETURN OF INCOME DECLARING A LOSS OF RS.4386719/ - ON 31.10.2001 AND THE RETURN WAS PROCESSE D U/S 143(1) ON 27.03.2002. NOTICE U/S 148 WAS ISSUED ON 20.02.2004 AND THE REASONS RECORDED ARE AS UNDER: - RETURN OF INCOME DECLARING A LOSS OF RS.43,86,858/ - HAS BEEN FILED ON 31.10.2001. THE BUSINESS OF THE ASSESSEE IS PROVISION OF E - COMMERCE HOSED SE RVICES TO US CUSTOMERS IN INDIA AND ABROAD. THIS BUSINESS IS ESSENTIALLY CARRIED ON WEBSITE. IN THE AUDITED P&L AC HAS DEBITED A SUM OF RS.4,50,981/ - ON ACCOUNT OF WEBSITE DEVELOPMENT. THE SAME IS A CAPITAL EXPENDITURE AND HENCE NOT AN ALLOWABLE DEDUCTION. SECONDLY, THE ASSESSEE HAS ALSO CLAIMED L HE DEFERRED REVENUE EXPENSE OF RS.23,37,043/ - , WHICH IS NOT AN ALLOWABLE DEDUCTION UNDER THE FT ACT. I HAVE REASONS TO BELIEVE THAT INCOME TO THE TUNE OF RS.64,88,024/ - HAS ESCAPED ASSESSMENT. ISSUE NOTICE U/S 148 O F THE IT ACT, 1961. 4 . ACCORDING TO THE REASON S RECORDED THE ASSESSEE HAS A . DEBITED A SUM OF RS.4150981/ - ON ACCOUNT OF WEBSITE DEVELOPMENT AND THE SAME IS SAID TO BE CAPITAL IN EXPENDITURE AND HENCE NOT ALLOWABLE DEDUCTION AND PAGE 3 OF 4 B . CLAIMED DEFERRED REVENUE EXPENDITURE OF RS.2337043/ - WHICH IS NOT ALLOWABLE AS DEDUCTION UNDER THE INCOME TAX ACT. 5 . THE APPELLANT CHALLENGED REOPENING OF ASSESSMENT BEFORE THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) UNSUCCESSFULLY AND THEREFORE IS IN APPEAL BEFORE US ON THAT GROUND. 6 . THE LD AR OF THE ASSESSEE SUBMITTED THAT REOPENING HAS BEEN MADE WITHOUT THERE BEING ANY TANGIBLE MATERIAL AND ONLY ON THE REAPPRAI SAL OF THE EXISTING MATERIAL ON RECORD. THE LD AR CONTENDED THAT IN THE PRESENT CASE THE REASONS SPEAKS THAT THERE WAS AN ESCAPEMENT OF INCOME ONLY ON THE BASIS OF ORIGINAL RETURN FILED BY THE ASSESSEE WHICH WAS ACCEPTED U/S 143(1) OF THE ACT WITHOUT SCRUT INY AND NOTHING MORE. THEREFORE HE STATED THAT IT WAS NOTHING BUT REAPPRAISAL OF THE EARLIER PROCEEDINGS WHICH IS NOT PERMITTED BY LAW. HE ALSO RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD 320 ITR 561 AND OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ORIENT CRAFT LTD. 154 ITR 536. THEREFORE HE SUBMITTED THAT APPEAL OF THE ASSESSEE SHOULD SUCCEED ON THIS POINT ONLY. 7 . THE LD DR RELIED UPON THE ORDER OF LOWER AUTHORITIES. 8 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AS WELL AS THE ORDER OF THE LOWER AUTHORITIES ON THE BASIS OF THE REASONS RECORDED WHICH ARE REPRODUCED ABOVE. CERTAINLY IT SHOWS THAT REOPENING IS MADE ONLY ON THE BASIS OF REAPPRAISAL OF EXISTING MATERIAL THOUGH ASSESSMENT IS MADE U/S 143(1) OF THE ACT. THERE IS NO WHISPER IN THE REASON RECORDED OF ANY TANGIBLE MATERIAL WHICH CAME INTO THE POSSESSION OF THE AO SUBSEQUENT TO THE ISSUE OF INTIMATION AND THEREFORE IT REFLECTS ARBITRARY EXERCISE OF POWER CONFERRED U/S 147 OF THE ACT. H ONBLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. KELVINATOR INDIA LTD. (SUPRA) AND HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ORIENT CRAFT LTD (SUPRA) BOTH THE DECISION ARE ON SIMILAR LINE AND THEREFORE RESPECTFULLY FOLLOWING THE SAME THE APPEAL O F THE ASSESSEE SUCCEEDS AGAINST THE ASSUMPTION OF JURISDICTION U/S 147 OF THE ACT WITHOUT ANY TANGIBLE MATERIAL ON GROUND OF REOPENING U/S 47 OF THE ACT NO T IN ACCORDANCE WITH LAW. THEREFORE WE REVERSE THE FINDING OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) AND HOLD THAT NOTICE U/S 148 OF THE ACT AND REASONS PAGE 4 OF 4 RECORDED U/S 147 ARE NOT BASED ON ANY TANGIBLE MATERIAL AND HENCE NOTICE U/S 148 IS QUASHED. THEREFORE GROUND NO1 OF THE APPEAL IS ALLOWED. 9 . AS WE HAVE ALREADY QUASHED THE REOPENING PROCEEDI NG U/S148 OF THE ACT. THE OTHER GROUNDS OF APPEAL BECOME INFR U CTUOUS AND THEREFORE THE Y ARE NOT ADJUDICATED. 10 . IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 8 / 03 /2016 . - SD / - S D / - ( H.S.SIDHU ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 0 8 / 03 / 2016 A K KEOT COPY FORWARDED TO 1 . APPLICANT 2 . RESPONDENT 3 . CIT 4 . CIT (A) 5 . DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI