DCIT, New Delhi V. M/s. India Tourism Development Corporation Ltd., New Delhi

ITA 533/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61608 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 04-04-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 02-02-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Keywords: Depreciation; Principle of natural justice

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI C BENC H BEFORE SHRI U.B.S. BEDI, JM & SHRI A.N. PAHUJA, A M ITA NO.533/DEL/2012 ASSESSMENT YEAR:2008-09 DCIT CIRCLE 11(1), ROOM NO. 312,CR BUILDING,IP ESTATE, NEW DELHI V/S . M/S INDIA TOURISM DEVELOPMENT CORPORATION LTD., CORE-8, 6 TH FLOOR, SCOPE COMPLEX, 7 LODHI ROAD, CGO, NEW DELHI [PAN : AAACI 0825 J) (APPELLANT) (RESPONDENT) ASSESSEE BY NONE REVENUE BY SHRI SURENDER PAL, DR DATE OF HEARING 04-04-2012 DATE OF PRONOUNCEMENT 13-04-2012 O R D E R A.N.PAHUJA:- THIS APPEAL FILED ON 02.02.2012 BY THE REVENUE AGAI NST AN ORDER DATED 15.11.2011 OF THE LD. CIT(A)-XV, NEW DELHI, R AISES THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION OF ` ``2,75,62,582/- MADE ON ACCOUNT OF PRIOR PERIOD EXPENSES. 2. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF THE HEARING. 2. AT THE OUTSET, NONE APPEARED ON BEHALF OF THE A SSESSEE NOR ANY REQUEST FOR ADJOURNMENT HAS BEEN RECEIVED. CONSIDER ING THE NATURE OF ISSUE INVOLVED, THE BENCH DECIDED TO DISPOSE OF THE APPE AL AFTER HEARING THE LD. DR. ITA N O.533 /DEL./2012 2 3. FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE T HAT RETURN DECLARING INCOME OF ` ` `82,35,86,600/- FILED ON 02.02.2009 BY THE ASSESSEE , A PUBLIC SECTOR COMPANY, ENGAGED IN THE BUSINESS OF RUNNING HOTEL AND RESTAU RANTS, DUTY FREE SHOPS, AND MARKETING SERVICES ETC., WAS SELECTED FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REF ERRED TO AS THE ACT), ISSUED ON 06.08.2009. DURING THE COURSE OF ASSESSMENT PROCEE DINGS, THE ASSESSING OFFICER (A.O. IN SHORT) NOTICED THAT THE ASSESSEE C LAIMED DEDUCTION OF PRIOR PERIOD EXPENSES OF ` ` `2,95,04,820/- ,OF WHICH PRIOR PERIOD DEPRECIATION AMOUNTING TO ` ` ` 19,42,238/- WAS OFFERED TO TAX IN THE COMPUTATION O F INCOME. SINCE THE ASSESSEE FOLLOWED MERCANTILE SYSTEM OF ACCOUNTING W HILE IT DID NOT SUBMIT ANY EVIDENCE NOR SUBSTANTIATED AS TO HOW THE LIABILITY FOR EXPENSES COMPRISING THE AMOUNT OF ` ` ` 2,75,62,582/- (29504820-1942238) CRYSTALLISED IN TH E YEAR UNDER CONSIDERATION, THE AO WHILE RELYING ON THE DECISIO NS IN CIT VS. MOGUL LINE LTD. (BOM.) 46 ITR 590 AND SUTLEJ COTTON MILLS LTD. VS. CIT,116 ITR 1(SC), DISALLOWED THE CLAIM FOR DEDUCTION OF AFORESAID AMOUNT OF ` ` ` 2,75,62,582/-. 4. ON APPEAL, THE LD.CIT(A) WITHOUT EVEN ATTEMPTIN G TO DISTINGUISH THE DECISIONS RELIED UPON BY THE AO AND WITHOUT RECORDI NG ANY FINDINGS AS TO WHETHER OR NOT THE LIABILITY FOR EXPENSES COMPRISED IN THE AFORESAID AMOUNT OF ` ` `275,62,582/- CRYSTALLIZED IN THE YEAR UNDER CONSID ERATION, DELETED THE ADDITION IN THE FOLLOWING TERMS:- I HAVE GONE THROUGH THE ABOVE SUBMISSIONS OF THE AP PELLANT AND HAVE ALSO REQUIRED TO THE ITATS ORDER AND CIT(A)S ORDER IN APPELLANTS OWN CASE FOR PREVIOUS YEARS, ESPECIALLY ASSESSMENT YEAR 2001-02 OF ITATS ORDER AND CIT(A)S FOR ASSES SMENT YEAR 2005-06. SINCE THE FACTS IN THE YEAR UNDER CONSIDERATION ARE SAME AS IN EARLIER YEARS THEREFORE IN VIEW OF RULE OF CONSISTE NCY AND RESPECTFULLY FOLLOWING THE FINDINGS GIVEN BY ITATS IN ASSESSMENT YEAR 2001-02 AND CIT(A)S XV IN ASSESSMENT YEAR 200 5-06, THE ISSUE IS DECIDED IN FAVOUR OF THE APPELLANT. 5. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID FINDINGS OF THE LD. CIT(A).THE LD. DR WHILE INVITING OUR ATTENT ION TO THE IMPUGNED ORDER ITA N O.533 /DEL./2012 3 CONTENDED THAT THE LD. CIT(A) NEITHER ANALYSED THE NATURE OF EXPENSES NOR RECORDED ANY FINDINGS AS TO WHETHER OR NOT THE LIAB ILITY FOR VARIOUS EXPENSES COMPRISING THE AMOUNT OF ` ` `2,75,62,820/- CRYSTALLIZED FOR THE YEAR UNDER CONSIDERATION. IN THE ABSENCE OF ANY FINDINGS ON TH E NATURE OF EXPENSES, IT CAN BE CONCLUDED THAT FACTS IN THE YEAR UNDER CONSIDERATIO N ARE SAME AS PREVAILED IN THE EARLIER YEARS, MORE PARTICULARLY IN THE AY 2001-02 & 2005-06. THUS, RELIANCE BY THE LD. CIT(A) ON THE DECISIONS IN THE PRECEDING YE ARS IS TOTALLY MISPLACED.THE LD. DR ADDED THAT THE IMPUGNED ORDER IS CRYPTIC AND NON -SPEAKING ONE AND IS THEREFORE, REQUIRED TO BE SET ASIDE.. 6. WE HAVE HEARD THE LD. DR AND GONE THROUGH THE F ACTS OF THE CASE. WE FIND THAT NEITHER THE AO NOR THE LD. CIT(A) ANAL YSED THE NATURE OF EXPENSES NOR RECORDED ANY FINDINGS AS TO WHEN THE LIABILITY FOR THE AFORESAID EXPENSES COMPRISING THE AMOUNT OF ` ` `2,75,62,820/-, CRYSTALLIZED . ADMITTEDLY, THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTI NG. IT IS WELL SETTLED THAT ACCRUAL OF A STATUTORY LIABILITY DEPENDS UPON THE TERMS OF THE RELEVANT STATUTE. THE QUANTIFICATION OR ASCERTAINMENT CANNOT POSTPONE ITS ACCRUAL TO THE EXTENT OF ADMITTED LIABILITY. ON THE OTHER HAND, CONTRACTUAL LIABILITY ACCRUES WHEN THE BASIS FOR ITS QUANTIFICATION IS SETTLED BY AN AGREEMENT O R OTHERWISE. AS HELD BY THE HONBLE GUJRAT HIGH COURT IN THEIR DECISION IN SAU RASHTRA CEMENT & CHEMICAL INDUSTRIES LTD. VS. CIT, 213 ITR 523(GUJ) ,MERELY BECAUSE AN EXPENSE RELATES TO A TRANSACTION OF AN EARLIER YEAR IT DOES NOT BECOME A LIABILITY PAYABLE IN THE EARLIER YEAR UNLESS IT CAN BE SAID THAT THE LIABILITY WAS D ETERMINED AND CRYSTALLIZED IN THE YEAR IN QUESTION ON THE BASIS OF MAINTAINING ACCOUN TS ON THE MERCANTILE BASIS. IN EACH CASE WHERE THE ACCOUNTS ARE MAINTAINED ON THE MERCANTILE BASIS IT HAS TO BE FOUND IN RESPECT OF ANY CLAIM, WHETHER SUCH LIAB ILITY WAS CRYSTALLIZED AND QUANTIFIED DURING THE PREVIOUS YEAR SO AS TO BE REQ UIRED TO BE ADJUSTED IN THE BOOKS OF ACCOUNT OF THAT PREVIOUS YEAR. IF ANY LIAB ILITY, THOUGH RELATING TO THE EARLIER YEAR, DEPENDS UPON MAKING A DEMAND AND ITS ACCEPTANCE BY THE ASSESSEE AND SUCH LIABILITY HAS BEEN ACTUALLY CLAIM ED AND PAID IN THE LATER ITA N O.533 /DEL./2012 4 PREVIOUS YEARS IT CANNOT BE DISALLOWED AS DEDUCTION MERELY ON THE BASIS THE ACCOUNTS ARE MAINTAINED ON MERCANTILE BASIS AND THA T IT RELATED TO A TRANSACTION OF THE PREVIOUS YEAR, THE HONBLE HIGH COURT OBSERV ED. IT WAS FURTHER CONCLUDED THAT IT IS ACTUALLY KNOWN INCOME OR EXPENSES, THE R IGHT TO RECEIVE OR THE LIABILITY TO PAY WHICH HAS COME TO BE CRYSTALLIZED, WHICH IS TO BE TAKEN INTO ACCOUNT UNDER THE MERCANTILE SYSTEM OF MAINTAINING BOOKS OF ACCOU NT. AN ESTIMATED INCOME OR LIABILITY, WHICH IS YET TO BE CRYSTALLIZED, CAN ONL Y BE ADJUSTED AS A CONTINGENCY ITEM BUT NOT AS AN ACCRUED INCOME OR LIABILITY OF T HAT YEAR. 6.1. MOREOVER, AS POINTED OUT BY THE LD. DR, A M ERE GLANCE AT THE IMPUGNED ORDER REVEALS THAT THE ORDER PASSED BY THE LD. CIT(A) IS CRYPTIC AND GROSSLY VIOLATIVE OF ONE OF THE FACETS OF THE RULES OF NATURAL JUSTICE, NAMELY, THAT EVERY JUDICIAL/QUASI- JUDICIAL BODY/AUTHORITY MUST PASS REASONED ORDER, WHICH SHOU LD REFLECT APPLICATION OF MIND BY THE CONCERNED AUTHORITY TO T HE ISSUES/POINTS RAISED BEFORE IT. THE APPLICATION OF MIND TO THE MA TERIAL FACTS AND THE ARGUMENTS SHOULD MANIFEST ITSELF IN THE ORDER. SECTION 250(6) OF THE ACT MANDATES THAT THE ORDER OF THE CIT(A) WHIL E DISPOSING OF THE APPEAL SHALL BE IN WRITING AND SHALL STATE THE POIN TS FOR DETERMINATION, THE DECISION THEREON AND THE REASONS FOR THE DECISION. THE REQUIREMENT OF RECORDING OF REASONS A ND COMMUNICATION THEREOF BY THE QUASI-JUDICIAL AUTHORI TIES HAS BEEN READ AS AN INTEGRAL PART OF THE CONCEPT OF FAIR PRO CEDURE AND IS AN IMPORTANT SAFEGUARD TO ENSURE OBSERVANCE OF THE RUL E OF LAW. IT INTRODUCES CLARITY, CHECKS THE INTRODUCTION OF EXTR ANEOUS OR IRRELEVANT CONSIDERATIONS AND MINIMIZES ARBITRARINE SS IN THE DECISION-MAKING PROCESS. HONBLE JURISDICTIONAL HIG H COURT IN THEIR DECISION IN VODAFONE ESSAR LTD. VS. DRP,196 TAXMAN423(DELHI) HELD THAT WHEN A QUASI JUDICIAL AUTHORITY DEALS WITH A LIS, IT IS OBLIGATORY ON IT S PART TO ASCRIBE COGENT AND GERMANE REASONS AS THE SAME IS THE HEART AND SOUL O F THE MATTER AND FURTHER, THE SAME ALSO FACILITATES APPRECIATION WHEN THE ORDER I S CALLED IN QUESTION BEFORE THE ITA N O.533 /DEL./2012 5 SUPERIOR FORUM. WE MAY POINT OUT THAT A DECISION DOES NOT MERELY MEAN THE CONCLUSION. IT EMBRACES WITHIN ITS FOLD THE REASONS FORMING BASIS FOR THE CONCLUSION.[MUKHTIAR SINGH VS . STATE OF PUNJAB,(1995)1SCC 760(SC)]. 6.2 IN VIEW OF THE FOREGOING AND IN THE LIGHT O F VIEW TAKEN BY THE HONBLE GUJRAT HIGH COURT IN THE AFORECITED DECISION, ESPECIALLY W HEN THE LD. CIT(A) HAVE NOT RECORDED ANY FINDINGS AS TO WHETHER OR NOT THE LIAB ILITY IN RESPECT OF EACH OF THE CLAIM MADE BY THE ASSESSEE IN THE AMOUNT OF ` ` `2,75,62,820/-,CRYSTALLIZED IN THE YEAR UNDER CONSIDERATION, WE CONSIDER IT FAIR AND APPROPRIATE TO VACATE THE FINDINGS OF THE LD. CIT(A) AND RESTORE THE MATTER TO HIS FILE FOR DECIDING THE ISSUE RAISED IN THE GROUND NO.1 IN THE APPEAL, AFRESH I N ACCORDANCE WITH LAW IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENTS, INCLUDING THOSE REFERRED TO ABOVE, AFTER ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES , BRINGING OUT CLEARLY AS TO WHETHER OR NOT THE LIABILITY FOR EACH ITEM OF THE EXPENDITURE COMPRISING THE AMOUNT OF ` ` `2,75,62,820/-, REALLY CRYSTALLIZED IN THE HANDS OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. NEEDLESS TO SAY THAT WHILE REDECIDING THE APPEAL, THE LD. CIT(A) SHALL PASS A SPEAKING ORDER, KEEPING IN MIND, INTER ALIA, THE MANDATE OF PROVISI ONS OF SEC. 250(6) OF THE ACT. WITH THESE OBSERVATIONS, GROUND NO.1 I N THE APPEAL IS DISPOSED OF. 7. NO ADDITIONAL GROUND HAVING BEEN RAISED BEFORE US IN TERMS OF RESIDUARY GROUND NO.2 IN THE APPEAL, ACCORDINGLY, T HIS GROUND IS DISMISSED. 8. NO OTHER PLEA OR ARGUMENT WAS MADE BEFORE U S. 9. IN THE RESULT, APPEAL IS ALLOWED BUT FOR STA TISTICAL PURPOSES. SD/- SD/- ( U.B.S. BEDI) (A.N. PAHUJA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) ORDER PRONOUNCED IN OPEN COURT ITA N O.533 /DEL./2012 6 NS COPY OF THE ORDER FORWARDED TO :- 1. DCIT, CIRCLE 11(1), NEW DELHI. 2. M/S INDIA TOURISM DEVELOPMENT CORPN. LTD., CORE- 8, 6 TH FLOOR, SCOPE COMPLEX, 7 LODHI ROAD, CGO, NEW DELHI. 3. CIT CONCERNED. 4. CIT(A)-XV, NEW DELHI 5. DR, ITAT,C BENCH, NEW DELHI 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, DELHI