FOREVER NEW APPARELS PVT. LTD., NEW DELHI V. ACIT, CIRCLE- 9(2), NEW DELHI

ITA 4440/DEL/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6133 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 04-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SURENDRA MEENA
• Keywords: Capital asset; Depreciation; Principle of natural justice; Capital expenditure
• Section: 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SH. PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO.4440/DEL/2017 ASSESSMENT YEAR : 2014-15 FOREVER NEW APPARELS PVT.LTD., B-304, NEW FRIENDS COLONY, NEW DELHI-110065. PAN : AABCF0689C VS. ACIT, CIRCLE-9(2), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY SH. RAVI PRATAP MALL, ADV. RESPONDENT BY SH. SURENDRA MEENA, SR.DR DATE OF HEARING 05.08.2019 DATE OF PRONOUNCEMENT 07.08.2019 O R D E R PER SUCHITRA KAMBLE, J.M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 17.05.2017 PASSED BY THE CIT(A)-37, NEW DELHI IN RE LATION TO ASSESSMENT YEAR 2014-15 ON THE FOLLOWING GROUNDS:- 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAS ERRED BOTH IN LAW AND ON FACTS IN DISMISSING THE APPEAL O F THE APPELLANT EX PARTE AND UPHOLDING THE ORDER OF ASSESSMENT FRAMED UNDER SECTION 143(3) OF THE INCOME TAX ACT. 1961 DETERMINING THE INCOME OF THE ASSESSEE AT RS. 2,76,05,008/- AS AGAINST THE DECLARED INCOME AT RS. 2,07,37,690/-. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) HAS GROSSLY ERRED IN LAW AND ON FACTS IN DISPOSING OFF THE APP EAL EXPARTE WITHOUT PROVIDING ANY OPPORTUNITY WHATSOEVER WHICH IS CLEAR LY AGAINST THE PRINCIPLES OF NATURAL JUSTICE, AND HENCE ORDER OF T HE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS UNSUSTAINABLE IN LAW. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) HAS ERRED ITA NO.4440/DEL/2017 ASSESSMENT YEAR : 2014-15 PAGE | 2 IN UPHOLDING THE FINDING OF THE LEARNED AO THAT LIC ENSE FEE OF RS. 54,56,120/- PAID TO M/S FOREVER NEW INTERNATIONAL P TY LTD. IS CAPITAL EXPENDITURE BEING INTANGIBLE ASSET ON WHICH DEPRECI ATION IS ALLOWABLE @ 25%, FAILING TO APPRECIATE THAT AFORESAID EXPENDITU RE IS INCURRED BY THE APPELLANT EACH YEAR AND BY INCURRING THE AFORESAID EXPENDITURE NO CAPITAL ASSET HAS CAME INTO EXISTENCE. 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN UPHOLDING THE FINDING OR THE LEARNED AO THAT EXPEND ITURE INCURRED OF RS. 30,83,587/- IN RESPECT OF TEMPORARY WOODEN PARTITIO NS AND STRUCTURES INSTALLED AT THE LEASED PREMISES WOULD BE ELIGIBLE FOR DEPRECIATION @ 10% AS PROVIDED IN RESPECT OF FURNITURE AND FITTINGS, F AILING TO APPRECIATE THAT EXPENDITURE INCURRED BY THE ASSESSEE IS PURELY ON T EMPORARY WOODEN PARTITIONS AND STRUCTURES WHICH IS ELIGIBLE FOR DEP RECIATION @100% AND HENCE DISALLOWANCE MADE OF RS. 27,75,228/- IS UNSUS TAINABLE IN LAW. 5. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) HAS ERRED IN FAILING TO APPRECIATE THAT TEMPORARY WOODEN STRU CTURE INSTALLED AT THE LEASED PREMISES HAD NOT RESULTED IN ANY CAPITAL EXP ENDITURE WHEREBY ANY CAPITAL ASSET HAS CAME INTO EXISTENCE, AND AS SUCH EXPENDITURE INCURRED BY THE APPELLANT IS ALLOWABLE AS REVENUE EXPENDITUR E. 6. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) HAS ERRED IN FAILING TO APPRECIATE THAT PROVISIONS OF EXPLANATIO N 1 TO SECTION 32(1) OF THE ACT IS INAPPLICABLE AS SUCH EXPLANATION IS APPLICAB LE ONLY WHERE AN ASSESSEE INCURS ANY EXPENDITURE BEING IN THE NATURE OF CAPITAL EXPENDITURE AND IS INCURRED ON THE CONSTRUCTION OF ANY STRUCTUR E BY WAY OF RENOVATION OR EXTENSION OF, OR IMPROVEMENT TO, THE BUILDING, W HEREAS EXPENDITURE INCURRED BY THE ASSESSEE IS FIRSTLY NOT A CAPITAL E XPENDITURE AND IN ANY CASE BY INCURRING THE EXPENDITURE THERE IS NO RENOV ATION OR EXTENSION OF, OR IMPROVEMENT TO, THE BUILDING. 7. THAT LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS GROSSLY ERRED IN UPHOLDING THE DISALLOWANCE MADE BY THE LEARNED AO F AILING TO APPRECIATE THAT DURING THE COURSE OF THE ASSESSMENT ONLY DETAI LS WERE CALLED FOR AND BEFORE MAKING THE DISALLOWANCE NO SPECIFIC SHOW CAU SE NOTICE WAS GIVEN TO THE APPELLANT, AND HENCE DISALLOWANCE MADE IS UNSUS TAINABLE IN LAW. ITA NO.4440/DEL/2017 ASSESSMENT YEAR : 2014-15 PAGE | 3 THE ABOVE GROUNDS OF APPEALS ARE INDEPENDENT OF, AN D WITHOUT PREJUDICE TO EACH OTHER. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEN D OR WITHDRAW ALL OR ANY GROUNDS HEREIN OR ADD ANY FURTHER GROUNDS AS MA Y BE CONSIDERED NECESSARY EITHER BEFORE OR DURING THE HEARING OF TH ESE GROUNDS. 2. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF TRADING OF WOMEN READYMADE APPARELS AND ACCESSORIES. THE ASSES SEE COMPANY FILED ITS RETURN DIGITALLY ON 11.02.2015 DECLARING INCOME OF RS. 2,07,37,690/-. NOTICE U/S 143(2) DATED 28.08.2015 WAS ISSUED AND S ERVED UPON THE ASSESSEE COMPANY. QUESTIONNAIRE ALONG WITH THE NOTI CES U/S 142(1) DATED 28.07.2016 AND 13.10.2016 WAS ISSUED TO THE A SSESSEE, ASKING TO SUBMIT THE REQUIRED INFORMATION. IN RESPONSE TO THE STATUTORY NOTICES, CA AND AR APPEARED FROM TIME TO TIME AND FIELD NECESSA RY DETAILS, WHICH ARE PLACED ON RECORD BY THE ASSESSING OFFICER. THE ASSE SSING OFFICER MADE ADDITION ON ACCOUNT OF CAPITALIZATION OF LICENSE FE E AMOUNTING TO RS. 40,92,090/- AND ALSO DISALLOWED DEPRECATION IN RESP ECT OF TEMPORARY CONSTRUCTION AMOUNTING TO RS. 27,75,228/-. 3. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) OBSERVED THAT THE NOT ICE WAS ISSUED TO ASSESSEE ON 05.05.2017 FIXING THE CASE FOR 18.05.20 17 AND THE COUNSEL OF THE ASSESSEE VIDE LETTER DATED 12.05.2017 MOVED AN APPLICATION FOR ADJOURNMENT WHICH WAS NOT UNACCOMPANIED WITH ANY VA LID POA. THEREFORE, THE MATTER WAS DECIDED EX-PARTE ON MERIT AND DISMISSED BY THE CIT(A). 4. THE LD. AR SUBMITTED THAT THE MATTER MAY BE REMA NDED BACK TO THE CIT(A) AND THE ASSESSEE WILL FILE RELEVANT DOCU MENTS BEFORE THE CIT(A). THE LD. AR FURTHER SUBMITTED THAT THE CIT(A) BE DIR ECTED TO FOLLOW PRINCIPLES OF NATURAL JUSTICE. ITA NO.4440/DEL/2017 ASSESSMENT YEAR : 2014-15 PAGE | 4 5. THE LD. DR RELIED UPON THE ORDER OF THE CIT(A) A ND THE ASSESSMENT ORDER. THE LD. DR FURTHER SUBMITTED THAT THE ASSESS EE WAS GIVEN PROPER OPPORTUNITY BY THE CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL T HE RELEVANT MATERIAL AVAILABLE ON RECORD. THE CIT(A) HAS DECIDE D THE APPEAL EX-PARTE ON MERIT AND ONLY ONCE THE NOTICE WAS ISSUED TO THE ASSESSEE AND HAS NOT GIVEN PROPER OPPORTUNITY TO FILE THE POA TO THE REP RESENTATIVES OF THE ASSESSEE. THEREFORE, IT WILL BE APPROPRIATE TO REMA ND BACK THIS MATTER TO THE FILE OF THE CIT(A) BY RESTORING THE APPEAL FILE D THEREIN AND DECIDE THE ISSUES A FRESH AFTER GIVING PROPER OPPORTUNITY TO T HE ASSESSEE BY FOLLOWING PRINCIPLES OF NATURAL JUSTICE. THE ASSESSEE WILL AL SO CURE THE DEFECT OF THE APPEAL FILED BEFORE THE CIT(A) WITHIN 30 DAYS AND W E DIRECT THAT THE CIT(A) WILL ACCORDINGLY GIVE THE HEARING TO THE ASS ESSEE AND DECIDE THE APPEAL WITHIN REASONABLE TIME. THUS, THE APPEAL FIL ED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 07 TH DAY OF AUGUST, 2019. SD/- SD/- (PRASHANT MAHARISHI) (SUCHITRA KAMBL E) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 07.08.2019 * AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ITA NO.4440/DEL/2017 ASSESSMENT YEAR : 2014-15 PAGE | 5 ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE FAIR ORDER IS PLACED FOR PRONOUNC EMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR DATE OF DISPATCH OF THE ORDER