DCIT, New Delhi V. M/s. Haryana Petrochemicals Ltd., New Delhi

ITA 3789/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3718 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 09-06-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 09-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTY
• Keywords: Depreciation; Commercial expediency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C NEW DELHI) BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO.3789/DEL/2010 ASSESSMENT YEAR : 2003-04 DCIT, VS. M/S HARYANA PETROCHEMICALS LTD., CIRCLE 12(1), K-24A, 1 ST FLOOR, HAUZ KHAS, NEW DELHI NEW DELHI PAN NO.AAACH 3004 B (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. MONA MOHANTY, SR. DR RESPONDENT BY : NONE ORDER PER I.P. BANSAL, JM: THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DIRECTED AGA INST THE ORDER DATED 26 TH MAY, 2010 PASSED BY THE LEARNED CIT(A), NEW DELHI FOR AS SESSMENT YEAR 2003-04. THE GROUNDS OF APPEAL READ AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW , THE ORDER OF THE CIT(A) IS WRONG, PERVERSE, ILLEGAL AND AGAI NST THE PROVISIONS OF LAW WHICH IS LIABLE TO BE SET ASIDE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF `21 LACS MA DE OUT OF LEASE RENT BY THE ASSESSING OFFICER WHEREIN THE FACT S OF THE CASE CLEARLY STATE THAT THE COPIES OF LETTERS OF CORRESPONDENCE FILED BY THE ASSESSEE ARE SELF GENERATED AND HOLD NO EVIDENTIARY VALUE WHICH CAN ACT AS A PROOF THAT THE LEASE RENT RECEIVED BY THE ASSESSEE COMPANY IS ACTUALLY `63 LACS AND NOT `84 LACS AS CONCLUDED IN T HE ASSESSMENT ORDER. 2 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE MADE ON DEPRECIATION TO 50% OF `1,20,090/- THOUGH THE ORDER MADE BY THE ASSESSING OFFICER HAS BEEN ACCEPTED IN PRINCIPLE. 2. THE RETURN OF INCOME WAS FILED BY THE ASSESSEE AT A LOS S OF `2,42,08,178/- ON 28 TH FEBRUARY, 2003 WHICH HAS BEEN ASSESSED AT A LOSS OF `2 ,19,88,088/- VIDE ASSESSMENT ORDER DATED 28 TH NOVEMBER, 2005 PASSED U/S 143(3) OF THE I.T. ACT, 1961 (THE ACT). TWO ADDITIONS WERE MADE. ONE ADDITION OF `21 LACS WAS MADE, ON THE GROUND THAT LEASE RENT WAS NOT DECLARED. ANOTHER ADD ITION OF `1,20,090/- WAS MADE ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION. ASSES SING OFFICER HAS DISCUSSED THE FIRST ADDITION ON PAGE 2 OF THE ASSESSMENT ORDER. IT WAS NOTICED BY THE ASSESSING OFFICER THAT ASSESSEE WAS TO RECEIVE LEASE RENT WITH REGARD TO PLANT AND MACHINERY AND LAND AND BUILDING AT THE RATE OF `7 LACS PER MONTH AND ANNUAL RENT OF `84 LACS AND AS AGAINST THAT IT HAS DECLARED ONLY RENT OF `63 LACS. HE REQUIRED THE ASSESSEE TO EXPLAIN THE DIFFERENCE OF `21 LACS WHICH WAS N OT FOUND TO BE DECLARED. IN RESPONSE, ASSESSEE HAS SUBMITTED THAT THE LESSEE VIDE ITS L ETTER DATED 18 TH FEBRUARY, 2003 HAD MADE A REQUEST FOR THE WAIVER OF LEASE R ENT IN VIEW OF TECHNICAL TROUBLES IN THE OPERATION OF LEASED PLANT & MACHINERY. CORRESPONDENCE EXCHANGE BETWEEN THE ASSESSEE AND THE LESSEE WAS ALSO FILED TO SUPPORT S UCH CONTENTION. HOWEVER, ASSESSING OFFICER DID NOT ACCEPT SUCH CONTENTION OF THE ASSESSEE ON THE GROUND THAT IT IS UNLIKELY THAT THE ENTIRE PLANT AND M ACHINERY HAD STARTED GIVING TROUBLE ALL OF A SUDDEN. ASSESSING OFFICER OBSERVED TH AT THE LETTERS FILED BY THE ASSESSEE WERE SELF GENERATED AND HAVE NO EVIDENTIARY VALUE. I T IS ON THESE GROUNDS ADDITION OF `21 LACS WAS MADE TO THE RETURN LOSS. 3. THE SECOND ADDITION MADE BY THE ASSESSING OFFICER IS A SUM OF `1,20,090/-. THE ASSESSEE CLAIMED 25% DEPRECIATION ON THE COST OF FURNIT URE AND FIXTURES AMOUNTING TO `8,40,604/-. THE ASSESSEE WAS REQUIRED TO EX PLAIN AS TO WHY THE 3 DEPRECIATION SHOULD NOT BE ALLOWED AT 10%. IN ABSENCE OF REPLY RECEIVED FROM THE ASSESSEE, THE DIFFERENCE IN THE RATE OF DEPRECIATION WAS CALCU LATED AT `1,20,090/- AND WAS ADDED TO THE INCOME OF THE ASSESSEE. 3.1 BOTH THE AFOREMENTIONED ADDITIONS WERE CHALLENGED IN AP PEAL FILED BEFORE CIT(A). 3.2 WITH REGARD TO FIRST ADDITION, IT WAS SUBMITTED T HAT THOUGH THE ASSESSEE WAS TO RECEIVE MONTHLY RENT OF `7 LACS BUT DURING THE YEAR U NDER CONSIDERATION IT RECEIVED RENT OF ONLY 9 MONTHS. IT WAS SUBMITTED THAT THERE WAS TECHNICAL PROBLEMS IN THE LEASED PLANT DURING THE YEAR AND THE LESSEE WAS NOT ABLE TO OPERATE THE PLANT, THEREFORE, HE REQUESTED THE LESSOR TO WAIVE THE TOTAL LEASE RENTA LS FOR THE PERIOD FROM SEPTEMBER, 2002 TO FEBRUARY, 2003 VIDE LETTER DATED 18 TH FEBRUARY, 2003. THE LESSOR AFTER CONSIDERING ALL THE FACTS AND CIRCUMSTANCES HAD TAKEN A DECISION ON THE BASIS OF BUSINESS PRUDENCE AND COMMERCIAL EXPEDIENCY AND HAD WAIVED THE LEASE AND HIRE CHARGES OF THE PLANT FOR A PERIOD OF THREE MONT HS FROM DECEMBER, 2002 TO FEBRUARY, 2003 VIDE LETTER DATED 20 TH FEBRUARY, 2003. COPY OF BOTH THE LETTERS WERE FURNISHED. THE CREDIT NOTE OF `21 LACS WAS ISSUED TO WARDS THE LEASE RENT FOR LESSEES CLAIM TOWARDS PROBLEMS IN PLANT AND BUSINESS OP ERATIONS VIDE CREDIT NOTE ISSUED DATED 24 TH FEBRUARY, 2003 AND COPY OF THAT CREDIT NOTE WAS ALSO FILED. 3.3 SO AS IT RELATES TO ADDITION MADE ON ACCOUNT OF DEPR ECIATION, IT WAS SUBMITTED THAT THE COMPANY HAD TO CHANGE ITS OFFICE OV ER THE PERIOD OF YEARS A COUPLE OF TIMES DUE TO CONTINUING LOSSES. AS ON DATE, T HE COMPANY DOES NOT HAVE ANY FURNITURE WORTH THE NAME. THERE ARE HARDLY 15 TO 20 CHAIRS TODAY AS COMPARED TO MORE THAN 100 EMPLOYEES WORKING IN THE OFFICE EARLIER. FURNITURE ITEMS WERE ALSO GIVEN TO EMPLOYEES FOR THEIR USE, WHICH HAVE NOT BEEN RETURNED BY THEM WHEN THEY 4 HANDED OVER THE CHARGE. THE WDV OF FURNITURE IS ALMOST N IL AS EITHER THE FURNITURE ITEMS ARE LOST OR DESTROYED. EXCESS DEPRECIATION WAS PROV IDED TO COVER UP THESE LOSSES AND WRITE OFF THE ITEMS, WHICH WERE NOT EXISTING. 3.4 LEARNED CIT(A) AFTER CONSIDERING ALL THESE SUBMISSIO NS HAS DELETED THE FIRST ADDITION ON THE GROUND THAT THE ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER MERELY ON ASSUMPTION AS THERE WAS NO MATERIAL ON RECORD TO SUPPORT ASSESSING OFFICERS CONTENTION. SO AS IT RELATES TO SECOND ADDIT ION, LEARNED CIT(A) HAS GIVEN PART RELIEF OF 50% OF THE ADDITION. IN THIS MANNER, LEA RNED CIT(A) HAS DECIDED THE APPEAL, THE DEPARTMENT IS AGGRIEVED WITH THE ORDER PASSED B Y LEARNED CIT(A) AND HENCE HAS FILED THE AFOREMENTIONED APPEAL. 3.5 NOTICE OF HEARING WAS SENT TO ASSESSEE. HOWEVER, NONE W AS PRESENT ON THE DATE OF HEARING. EARLIER ALSO, THIS APPEAL WAS FIXED ON 28 TH FEBRUARY, 2011, ON WHICH DATE NOBODY REPRESENTED ON BEHALF OF THE ASSESSEE. TH EREFORE, IN THESE CIRCUMSTANCES, WE PROCEED TO DECIDE THE PRESENT APPEAL ON MER ITS AFTER HEARING THE LEARNED DR, EXPARTE QUA THE ASSESSEE. 3.6 LEARNED DR RELYING UPON THE ORDER OF ASSESSING OFFIC ER PLEADED THAT THE ADDITION WAS RIGHTLY MADE BY THE ASSESSING OFFICER, AS ASSESSEE COULD NOT ADDUCE REASONABLE EVIDENCE FOR NOT DECLARING THE LEASE INCOME WITH REGARD TO ALL THE 12 MONTHS. SHE SUBMITTED THAT LEARNED CIT(A) HAS WRONGLY A LLOWED THE RELIEF TO THE ASSESSEE. SIMILARLY, ON OTHER GROUNDS ALSO, SHE RELIED UPO N THE ASSESSMENT ORDER. 3.7 WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE BY L EARNED DR. WE HAVE ALSO CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AN D ORDER PASSED BY LEARNED CIT(A). IT HAS BEEN THE CASE OF THE ASSESSEE BEFORE AS SESSING OFFICER AND 5 LEARNED CIT(A) THAT LESSEE OF THE MACHINERY AND PLANT AND LAND AND BUILDING HAD ISSUED A LETTER TO THE ASSESSEE STATING THAT DUE TO TROUBLE IN PLANT, THE RENT FOR THE PERIOD OF SEPTEMBER, 2002 TO FEBRUARY, 2003 SHOULD BE WAIV ED AND COPY OF SUCH LETTER WAS ALSO FILED BEFORE THE ASSESSING OFFICER. IT HA S BEEN THE SUBMISSION OF THE ASSESSEE THAT THE LESSOR AFTER CONSIDERING ALL THE FACTS AN D CIRCUMSTANCES HAD TAKEN A PRUDENT DECISION ON THE BASIS OF COMMERCIAL EXPEDIENCY T O WAIVE THE MONTHLY RENT FOR THREE MONTHS. A CREDIT NOTE WAS ALSO ISSUED IN FAV OUR OF THE LESSEE AND ALL THESE FACTS ARE RECORDED IN THE ORDER OF CIT(A). THE LESSEE IN TH E PRESENT CASE IS M/S HINDUSTAN POLYESTER LINES PAN NO. AACFH 1215 N, AND IS BEING ASSESSED AS ACIT, CIRCLE REWARI. THESE PARTICULARS HAVE BEEN MENTIONED IN THE ORDER OF CIT(A) IN THE WRITTEN SUBMISSION OF THE ASSESSEE WHICH HAVE BEEN REP RODUCED. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT HE COULD NOT MAKE VERIF ICATION OF THESE FACTS FROM THE LESSEE AS THE WHEREABOUT OF THE LESSEE WERE NOT KNOWN. WITH OUT BRINGING ANY MATERIAL ON RECORD, THE ASSESSING OFFICER COULD NOT HAV E REJECTED THE CLAIM OF THE ASSESSEE PARTICULARLY IN VIEW OF THE FACTS THAT ALL THE EV IDENCE RELATING TO WAIVER OF LEASE RENT FOR THREE MONTHS WERE FILED. ADDITION COULD NO T BE MADE SIMPLY BY OBSERVING THAT THE EVIDENCE FILED BY THE ASSESSEE IS SELF GENERA TED. THERE IS NO MATERIAL ON RECORD TO CONTROVERT THE SUBMISSION OF THE ASSESSEE THAT, IN FACT, LEASE RENT FOR THREE MONTHS WAS WAIVED ON ACCOUNT OF NON-OPERA TION OF PLANT BY THE LESSEE. MOREOVER, THE ASSESSEE HAS RETURNED A LOSS OF MORE TH AN `2/- CRORES AND IT HAS BEEN ASSESSED AT A LOSS OF MORE THAN `2 CRORES. THEREF ORE, THERE WAS NO GAIN TO THE ASSESSEE FOR NON-DISCLOSURE OF THE AMOUNT, IF THE SAME WAS RECEIVED. THEREFORE, WE FIND NO INFIRMITY IN THE FINDINGS RECORDED BY THE LEAR NED CIT(A) WHEREBY ADDITION OF `21 LACS HAS BEEN DELETED. WE DECLINE TO INTERFERE IN SUCH DELETION AND GROUND NO.2 OF THE REVENUE IS DISMISSED. 6 4. APROPOS GROUND NO.3, AFTER CONSIDERING THE SUBMISS ION OF THE ASSESSEE MADE BEFORE CIT(A) AND THE FINDINGS RECORDED BY LEARNED CIT (A), WE DECLINE TO INTERFERE AND THIS GROUND OF THE REVENUE IS ALSO DISMISSED. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMI SSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 10.06.20 11. SD/- SD/- ( SHAMIM YAHYA ) ( I.P. BANSAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 10.06.2011. NS COPY FORWARDED TO:- 1. ACIT, CIRCLE 12(1), NEW DELHI. 2. M/S HARYANA D.D. AUTO PVT. LTD., B-30, G.T. KARNAL ROAD AREA, NEW DELHI. 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY. BY ORDER (ITAT, NEW DELHI).