VANANCHAL PROPETIES P. LTD, MUMBAI V. ACIT 2(3),

ITA 4996/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7789 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 18-02-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 07-10-2015
• Court: TRIBUNAL
• Department Lawyers: MRS BEENA SANTOSH
• Assessee Lawyers: SANJAY KAPADIA
• Keywords: Business expenditure; Opportunity of being heard; Principle of natural justice
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER I.T.A. NO. 4996/M/2015 (ASSESSMENT YEAR: 2010 - 2011 ) M/S. VANANCHAL PROPERTIES PVT LTD., MOHANLAL JAIN & CO., CHARTERED ACCOUNTANTS, 10, CHARTERED HOUSE, GR. FLOOR, DR. C.H. STREET, MARINE LINES, MUMBAI 400 002. / VS. ACIT - 2(3), MUMBAI. ./ PAN : A ABCV7969F ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI SANJAY KAPADIA / RESPONDENT BY : MRS. BEENA SANTOSH, DR / DATE OF HEARING : 22 .02.2017 / DATE OF PRONOUNCEMENT : 17 .03.2017 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 7.10.2015 IS AGAINST THE ORDER OF THE CIT (A) - 6, MUMBAI DATED 13.8.2015 FOR THE ASSESSMENT YEAR 2010 - 2011. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE CIT (A) ERRED IN PASSING AS EX - PARTE ORDER WITHOUT AFFORDING PROPER OPPORTUNITY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE CIT (A) ERRED IN UPHOLD ING THE DISALLOWANC E OF EXPENSES MADE BY LD AO OF R S. 7,70,70,676/ - AND THE REASON ASSIGNED FOR DOING SO ARE WRONG AND CONTRARY TO THE PROVISIONS OF INCOME TAX ACT AND RULES MADE THERE UNDER. 2. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTE NTION TO THE GROUNDS AND SUBMITTED THAT THE CIT (A) PASSED THE ORDER EX - PARTE WITHOUT AFFORDING PROPER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IN EFFECT, THE DISALLOWANCE OF EXPENSES AMOUNTING TO RS. 7,70,70,676/ - STANDS CONFIRMED. ACCORDING TO THE A SSESSEE THE SAME CONSTITUTES UNREASONABLE ORDER. 2 3. BEFORE US, IT IS THE ARGUMENT OF THE LD COUNSEL FOR THE ASSESSEE THAT THE MATTER NEEDS TO REVISIT FILE OF THE AO FOR FRESH ADJUDICATION. BRINGING OUR ATTENTION TO THE ASSESSMENT ORDER, LD AR SUBMITTED TH AT THE ASSESSMENT ORDER DATED 12.3.2013 WAS ALSO EX - PARTE ORDER PASSED U/S 144 OF THEACT. ASSESSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. NIL CLAIMING LOSS OF RS. 7,69,86,000/ - AND THE SAME WAS ASSESSED AT RS. 84,676/ - DISALLOWING T HE ENTIRE CLAIM OF EXPENSES AMOUNTING TO RS.7,70,70,676/ - . MATTER TRAVELLED TO THE FIRST APPELLATE AUTHORITY. 4. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, CIT (A) CONFIRMED THE SAID DECISION OF THE AO IN TOTO WITHOUT PROVIDING OPPORTUNI TY OF HEARING TO THE ASSESSEE . LD AR MADE APPEARANCES BEFORE THE CIT (A). HOWEVER, CIT (A) DISMISSED THE ADDITION ON MERIT AS WELL. THE CONTENTS OF PARA 3.1 OF THE CIT (A)S ORDER CONFESS THE DECISION OF THE FAA ON MERITS. IT IS THE CLAIM OF THE CIT (A) THAT NO EXPLANATIONS AND DETAILS WERE GIVEN TO JUSTIFY THE CLAIM OF SUCH HUGE EXPENSES. AGGRIEVED WITH THE ABOVE ORDER OF THE CIT (A), ASSESSEE IS IN APPEAL BEFORE US WITH THE ABOVE GROUNDS. 5. IN CONNECTION WITH THE ISSUES RELATING TO PRINCIPLES OF NATU RAL JUSTICE, IT IS THE CLAIM OF THE ASSESSEE THAT WHILE THE ASSESSMENT ORDER WAS PASSED U/S 144 OF THE ACT, THE CIT (A) PASSED THE ORDER IN AN EX - PARTE MANNER. THOUGH THE CIT (A) HELD THAT THE ASSESSEE FAILED TO ESTABLISH THE CORRECTNESS AND ALLOWABILITY OF THE EXPENSES AMOUNTING TO RS. 7,70,70,676/ - , THE FACT IS THAT PROPER OPPORTUNITY WAS NOT GRANTED TO THE ASSESSEE FOR FURNISHING THE EVIDENCES AND EXPLANATIONS. BRINGING OUR ATTENTION TO PAGE 10 OF THE PAPER BOOK IE THE COPY OF THE ITR - VI FOR THE AY 201 0 - 2011, LD COUNSEL FOR THE ASSESSEE DEMONSTRATED THAT THE SAID EXPENSES IN FACT ARE NOT BUSINESS EXPENSES, THEY CONSTITUTE SHORT TERM CAPITAL LOSS (PAGE NO.8 OF THE PAPER BOOK) . THESE FACTS WERE NOT CONSIDERED PROPERLY BY THE LD CIT (A) BY PASSING A SPE AKING ORDER. IT IS THE REQUEST OF THE LD AR THAT THE MATTER SHOULD BE REMANDED TO THE FILE OF THE AO. 6. WE HAVE HEARD LD REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFOR E US. AFTER HEARING BOTH THE PARTIES, WE FIND MERIT IN THE LD ARS ARGUMENT. THEREFORE, IN OUR OPINION, THE MATTER SHOULD REMANDED TO FILE OF THE AO. ACCORDINGLY WE ORDER. AO IS DIRECTED TO EXAMINE THE CLAIM OF THE ASSESSEE AND DECIDE THE ISSUE AFRESH W HETHER 3 THE SAID CLAIM CONSTITUTES SHORT TERM CAPITAL LOSS. IN SUCH CASE, THE SAME CANNOT BE CONFUSED WITH THE BUSINESS EXPENSES WHILE MAKING ASSESSMENT. ACCORDINGLY, WE REMAND THE ENTIRE ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION IN THE LIGHT OF THE OBSERVATIONS GIVEN ABOVE. AO SHALL GRANT A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AS PER THE SET PRINCIPLES OF NATURAL JUSTICE. THUS, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOU NCED IN THE OPEN COURT ON 1 7 T H MARCH, 2017. S D / - S D / - ( PAWAN SINGH (D. KARUNAKARA RAO) (JUDICIAL MEMBER) ACCOUNTANT MEMBER MUMBAI ; 17.03.2017 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI