Neural Developers Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 5641/DEL/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0268 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 03-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RINKU SINGH SENIOR
• Keywords: Business income; Depreciation; Opportunity of being heard; Principle of natural justice; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI. BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.5641/DEL./2016 (ASSESSMENT YEAR : 2011-12) ITA NO.5807/DEL./2017 (ASSESSMENT YEAR : 2012-13) ITA NO.3978/DEL./2018 (ASSESSMENT YEAR : 2013-14) M/S. NEURAL DEVELOPERS PVT. LTD., VS. ITO, WARD 3 (3), (PREVIOUSLY KNOWN AS CITIXSYS SOFTWARE NEW DELHI. (INDIA) PVT. LTD.), 34 D, MIG FLATS, SHEIKH SARAI, PHASE-I, NEW DELHI 110 017. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ABHIMANYU JHAMBA, ADVOCATE MS. HEMLATA RANGA, ADVOCATE REVENUE BY : MS. RINKU SINGH, SENIOR DR DATE OF HEARING : 14.03.2019 DATE OF ORDER : 29.03.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : SINCE COMMON QUESTIONS OF FACTS AND LAW HAVE BEEN R AISED IN THE AFORESAID APPEALS, THE SAME ARE BEING DISPOS ED OFF BY WAY OF COMPOSITE ORDER TO AVOID REPETITION OF DISCUSSION. ITA NO.5641/DEL./2017 ITA NO.5807/DEL./2018 ITA NO.3978/DEL./2019 2 2. THE APPELLANT, M/S. NEURAL DEVELOPERS PVT. LTD ( HEREINAFTER REFERRED TO AS THE ASSESSEE) BY FILING THE PRESEN T APPEALS BEING ITA NOS.5641/DEL/2016, 5807/DEL/2017 & 3978/DEL/201 8, SOUGHT TO SET ASIDE THE IMPUGNED ORDERS DATED 28.07.2016, 31.03.2017 & 27.02.2018 PASSED BY LD. CIT (APPEALS)-2, NEW DELH I QUA THE ASSESSMENT YEARS 2011-12, 2012-13 & 2013-14 RESPECT IVELY ON THE GROUNDS INTER ALIA THAT :- ITA NO.5641/DEL/2016 1. THAT THE LEARNED INCOME TAX OFFICER, WARD 3 (3), NE W DELHI (HEREAFTER REFERRED TO AS LD. AO FOR SHORT) H AS ERRED ON FACTS AND IN LAW IN NOT ALLOWING THE SALARIES PAID TO MRS. GOURI DHAWAN AND MR. KAMAL KARMAKAR AS A DEDUCTIBLE EXPEN SE FROM THE REVENUE OFFERED BY THE COMPANY. 2. THAT THE LD. AO HAS ERRED IN LAW IN DISREGARDING TH E EXPENSES INCURRED FOR BUSINESS PURPOSES AND ALSO TO MAINTAIN THE COMPANY UNDER THE PROVISIONS OF THE ACT. ITA NO.5807/DEL/2017 1. THAT THE LEARNED INCOME TAX OFFICER, WARD 6 (2), NE W DELHI (HEREAFTER REFERRED TO AS LD. AO FOR SHORT) H AS ERRED ON FACTS AND IN LAW IN NOT ALLOWING THE PROFESSIONAL C HARGES OF RS.36,00,000/- AS A DEDUCTIBLE EXPENSE FROM THE REV ENUE OFFERED BY THE COMPANY. 2. THAT THE LD. AO HAS ERRED IN LAW IN NOT ALLOWING TH E DIRECTORS REMUNERATION OF RS.8,63,374/- OF THE COMP ANY. ITA NO.3978/DEL/2018 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) ERRED IN SUMMARILY DISMISSING THE APPEAL FILED THE ASSESSEE WITHOUT DISCUSSING THE GROUNDS ON MERITS WHICH IS U NJUSTIFIED, ILLEGAL AND AGAINST THE PROVISIONS THE ACT. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT (A) ERRED IN STATING THAT THE ASSESSEE HAS NOT ATTEND T HE HEARINGS 011 ITA NO.5641/DEL./2017 ITA NO.5807/DEL./2018 ITA NO.3978/DEL./2019 3 VARIOUS DATES WHEN THE ASSESSEE DID NOT RECEIVE THE NOTICES DATED 11/01/18 (GOVT REGISTERED SPEED POST NUMBER ED68431 9910IN) AND DATED 22/01118 (GOVT REGISTERED SPEED POST NUMB ER ED6843209Q41 ) ISSUED TO THE ASSESSEE, WHICH IS UNJ USTIFIED ILLEGAL AND AGAINST-THE PROVISIONS OF THE ACT. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) ERRED IN STATING THAT NO ADDRESS WAS MENTIONED IN FORM 35, WHICH IS INCORRECT AS THE FORM 35 CLEARLY MENTIONS THE ADDRESS,' NEURAL DEVELOPERS PVT LTD, 34-D, MIG FLATS, SHEIKH SARAI, PHASE-I, NEW DELHI-I? MOREOVER, THE ASSESSMENT ORDE R WAS RECEIVED AT THE VERY SAME ADDRESS AND ALSO NOTICES AND OTHER COMMUNICATIONS FOR OTHER ASSESSMENTS PENDING WITH T HE INCOME TAX DEPARTMENT ARC RECEIVED AT THIS ADDRESS (SUPRA) ONLY, 4. WITHOUT PREJUDICE TO ABOVE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) ERRED IN DISMI SSING APPEAL FILED BY THE APPELLANT 'THEREBY HOLDING THE INCOME EARNED FROM BUSINESS OF SUBLETTING OF PREMISES AS WELL AS OFFIC E MAINTENANCE AS INCOME EARNED FROM OTHER SOURCES. 5. WITHOUT PREJUDICE TO ABOVE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) ERRED IN DISMI SSING APPEAL FILED BY THE APPELLANT' THEREBY CONFIRMING THE ADDI TION OF RS.62,89,739/- MADE BY THE AO BEING HE EXPENSES INC URRED TOWARDS BROKERAGE, BUILDING REPAIR AND MAINTENANCE, SALARY OF MAINTENANCE' STAFF AND DIRECTOR'S REMUNERATION, FIN ANCE COSTS, DEPRECIATION AND OTHER STATUTORY EXPENSES. 6. IN THE FACTS AND CIRCUMSTANCES OF THE-CASE, WHIL E THE ASSESSEE DID NOT GET JUSTICE FROM THE ASSESSING OFF ICER HE WAS DENIED THE PRINCIPLE OF NATURAL JUSTICE BY THE LD. CIT (A) ALSO WHICH IS UNJUSTIFIED, ILLEGAL AND AGAINST PROVISION S OF THE ACT. 7. THE ASSESSEE PRAYS THAT THE MATTER BE 'REMANDED BACK TO THE LD. CIT (A) FOR FRESH CONSIDERATION. 4. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ASSESSEE COMPANY IS INTO PROVIDING COMPUTER SOFTWARE DEVELOPMENT AND SOFTWARE CONSULTA NCY ETC. WITH ITA NO.5641/DEL./2017 ITA NO.5807/DEL./2018 ITA NO.3978/DEL./2019 4 SHRI BINEET JHA AND MRS. ARCHANA KASHYAP HOLDING 50 % EACH OF THE TOTAL SHARE-HOLDING OF THE COMPANY. AO NOTICED THAT DURING THE ASSESSMENT YEARS 2011-12 & 2012-13, ASSESSEE COMPAN Y MADE PAYMENT OF RS.6,63,000/- TO SHRI BINEET JHA AS DIRE CTORS REMUNERATION. ASSESSEE COMPANY HAS ALSO PAID SALAR Y OF RS.24,00,000/- EACH TO SHRI KAMAL KARMAKAR AND MRS. GAURI DHAWAN AS ITS EMPLOYEES, WHEREAS ASSESSEE COMPANY H AS REFLECTED IN THE PROFIT & LOSS ACCOUNT ONLY RENTAL INCOME OF RS.1,50,00,000/-, REIMBURSEMENT OF ELECTRICITY EXPENSES RECEIVED FROM TENANT AMOUNTING TO RS.24,31,949/- AND ANNUAL MAINTENANCE CHARGES (AMC) INCOME OF RS.37,14,032/-. AO DISALLOWED EXPE NDITURE ON ACCOUNT OF SALARY PAID TO SHRI KAMAL KARMAKAR AND M RS. GAURI DHAWAN CLAIMED BY THE ASSESSEE IN ITS PROFIT & LOSS ACCOUNT ON THE GROUND THAT ACTIVITIES OF SUB-LEASING OF PREMISES A ND PROVIDING ANCILLARY FACILITIES LIKE ELECTRICITY AND SECURITY ETC. DID NOT REQUIRE ANY SPECIAL APTITUDE OR INTELLECTUAL INPUT ON THE P ART OF THE EMPLOYEES SO AS TO MAKE HUGE PAYMENT OF RS.24,00,00 0/- EACH AS SALARY TO SHRI KAMAL KARMAKAR AND MRS. GAURI DHAWAN . 5. IN AY 2012-13, AO DISALLOWED DIRECTORS REMUNERA TION TO THE TUNE OF RS.8,63,374/- ON THE GROUND THAT THE AC TIVITIES OF SUB- LEASING OF PREMISES AND PROVIDING ANCILLARY FACILI TIES LIKE ITA NO.5641/DEL./2017 ITA NO.5807/DEL./2018 ITA NO.3978/DEL./2019 5 ELECTRICITY AND SECURITY ETC. DO NOT REQUIRE ANY SP ECIAL APTITUDE OR INTELLECTUAL INPUT. IN AY 2012-13, AO ALSO DISALLO WED AN AMOUNT OF RS.36,00,000/- CLAIMED BY THE ASSESSEE COMPANY O N ACCOUNT OF PROFESSIONAL CHARGES ON THE GROUND THAT THE ASSESSE E COMPANY IS CARRYING ON SIMPLE BUSINESS AS SUB-LETTING OF PREMI SES/PROVIDING OF FACILITIES OF ELECTRICITY AND SECURITY SERVICES ETC ., DO NOT REQUIRE ANY PROFESSIONAL SUPPORT. 6. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) BY WAY OF APPEALS WHO HAS PARTLY ALLOWED THE APPEALS FOR AYS 2011-12 & 2012-13 WHEREAS DISMISSED THE APPEAL FOR AY 2013-14 EX-PARTE. FEELING AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEALS. 7. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUNDS NO.1 & 2 OF ITA NO.5641/DEL/2016 (AY 2011-12) AND ITA NO.5807/DEL/2017 (AY 2012-13) 8. UNDISPUTEDLY, THE ASSESSEE HAS NOT CARRIED OUT A NY BUSINESS ACTIVITIES DURING THE YEARS UNDER ASSESSMENT AND HA S ONLY SHOWN RENTAL INCOME FOR SUB-LETTING THE PREMISES AND ON A CCOUNT OF ITA NO.5641/DEL./2017 ITA NO.5807/DEL./2018 ITA NO.3978/DEL./2019 6 REIMBURSEMENT OF ELECTRICITY EXPENSES AND ANNUAL MA INTENANCE CHARGES (AMC) WHICH HAS BEEN TREATED AS INCOME FRO M OTHER SOURCES. AO HAS ONLY ALLOWED THE DEDUCTION ON THE INCOME WHICH WERE DIRECTLY AND INEXTRICABLY LINKED WITH DERIVING OF THE INCOME FROM OTHER SOURCES AND THEREBY ALLOWED DEDUCTION ON THE INCOME SHOWN IN THE P&L ACCOUNT QUA LEASE RENTAL PAID AND POWER & FUEL. 9. AO IN AY 2011-12 DISALLOWED THE EXPENDITURE CLAI MED BY THE ASSESSEE TO THE TUNE OF RS.48,00,000/- IN ITS P &L ACCOUNT ON ACCOUNT OF SALARY PAID TO SHRI KAMAL KARMAKAR AND S MT. GAURI DHAWAN ON THE GROUND THAT ACTIVITIES OF SUB-LEASING PREMISES AND PROVIDING ANCILLARY FACILITIES LIKE ELECTRICITY AND SECURITY ETC., UNDERTAKEN BY THE ASSESSEE DURING THE YEAR UNDER AS SESSMENTS, DID NOT REQUIRE ANY EXPERT/SKILLED INPUT ON PART OF THE EMPLOYEES. 10. LD. CIT (A) HAS ALSO CONFIRMED THE ADDITION MAD E BY THE AO ON ACCOUNT OF DISALLOWANCE OF SALARY CLAIMED TO HAV E BEEN PAID TO SHRI KAMAL KARMAKAR AND SMT. GAURI DHAWAN FOR AY 20 11-12 AND DISALLOWANCE OF DDUCITON OF DIRECTORS REMUNERA TION AND PROFESSIONAL CHARGES FOR AY 2012-13. 11. LD. AR FOR THE ASSESSEE CONTENDED THAT WHEN SHR I KAMAL KARMAKAR AND SMT. GAURI DHAWAN HAVE ALREADY PAID TH E TAX ON THE SALARY RECEIVED BY THEM AS INDIVIDUAL TAX PAYEE, IT AMOUNTED TO ITA NO.5641/DEL./2017 ITA NO.5807/DEL./2018 ITA NO.3978/DEL./2019 7 DOUBLE TAXATION WHICH IS NOT PERMISSIBLE UNDER LAW. IT IS FURTHER CONTENDED BY THE LD. AR FOR THE ASSESSEE THAT WHEN THE ASSESSEE HAS NOT COMPLETELY ABANDONED IT BUSINESS, SUCH DEDUCTIO NS CANNOT BE DISALLOWED AND RELIED UPON THE DECISIONS RENDERED B Y HONBLE PUNJAB & HARYANA HIGH COURT IN NAKODAR BUS SERVICE PVT. LTD. VS. CIT (1989) 179 ITR 506 AND THE COORDINATE BENCH OF THE TRIBUNAL IN ITO VS. MOKUL FINANCE LTD. 110 TTJ 445 . 12. WHEN, UNDISPUTEDLY, IT IS NOT THE CASE OF THE A O THAT THE ASSESSEE HAS COMPLETELY ABANDONED ITS BUSINESS, DED UCTION ON ACCOUNT OF SALARY PAID TO SHRI KAMAL KARMAKAR AND S MT. GAURI DHAWAN CANNOT BE DENIED ON THE GROUND THAT ACTIVITI ES OF SUB- LEASING OF PREMISES AND PROVIDING ANCILLARY FACILIT IES LIKE ELECTRICITY AND SECURITY ETC. DID NOT REQUIRE ANY EXPERT/SKILLE D INPUT BY THE EMPLOYEES. BECAUSE IN SOME CIRCUMSTANCES OFFICIALS NEED TO BE RETAINED TO KEEP THE BUSINESS ALIVE WHICH HAS NOT B EEN COMPLETELY ABANDONED. AT THE SAME TIME, WE ARE OF THE CONSIDE RED VIEW THAT EVEN OTHERWISE, SALARY DRAWN BY SHRI KAMAL KARMAKAR AND SMT. GAURI DHAWAN WAS SUBJECTED TO TAX, THEY BEING SALAR IED TAX PAYEE, THOUGH AT LOWER RATE, AND IF IT IS AGAIN TAXED IN T HE HANDS OF ASSESSEE, IT WOULD AMOUNT TO DOUBLE TAXATION. ITA NO.5641/DEL./2017 ITA NO.5807/DEL./2018 ITA NO.3978/DEL./2019 8 13. SIMILARLY, AO IN AY 2012-13 DISALLOWED THE EXPE NDITURE CLAIMED BY THE ASSESSEE TO THE TUNE OF RS.36,00,000 /- AND RS.863,374/- ON ACCOUNT OF PROFESSIONAL CHARGES AND REMUNERATION PAID TO THE DIRECTORS RESPECTIVELY AND TREATED THE SAME AS INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOUR CES ON THE GROUND THAT NO BUSINESS WAS CARRIED OUT BY THE ASSE SSEE, WHICH HAVE BEEN UPHELD BY THE LD. CIT (A). HOWEVER, LD. CIT (A) HAS CONVERTED THE INCOME TREATED BY THE AO AS INCOME F ROM OTHER SOURCES TO BUSINESS INCOME. 14. WE ARE OF THE CONSIDERED VIEW THAT WHEN THE ADD ITION MADE BY THE AO HAS BEEN TREATED AS INCOME FROM THE BUSIN ESS AGAINST WHICH NO APPEAL HAS BEEN FILED BY THE REVENUE, BUSI NESS EXPENSES CLAIMED BY THE ASSESSEE CANNOT BE DISALLOWED. SO, WHEN THE ASSESSEE HAS NOT COMPLETELY ABANDONED ITS BUSINESS AND TO KEEP ITS BUSINESS STATUS ALIVE, DEDUCTION CLAIMED BY THE ASS ESSEE ON ACCOUNT OF REMUNERATION PAID TO THE DIRECTORS AND PROFESSIO NAL CHARGES CANNOT BE DISALLOWED, PARTICULARLY WHEN THE STATUS OF COMPANY IS UNDISPUTEDLY ALIVE. 15. MOREOVER, AO AS WELL AS LD. CIT (A) HAVE NOT DI SPUTED THE BOOKS OF ACCOUNT, NOR DECLARED THE EXPENSES AS BOGU S BUT HAVE MERELY DISALLOWED THE DEDUCTION CLAIMED BY THE ASSE SSEE ON THE ITA NO.5641/DEL./2017 ITA NO.5807/DEL./2018 ITA NO.3978/DEL./2019 9 GROUND THAT NO BUSINESS ACTIVITIES HAVE BEEN CARRIE D OUT BY THE ASSESSEE DURING THE YEAR UNDER ASSESSMENT. 16. HONBLE HIGH COURT OF PUNJAB & HARYANA IN CASE CITED AS NAKODAR BUS SERVICE PVT. LTD. (SUPRA) WHILE DECIDING THE IDENTICAL ISSUE HELD THAT, EXPENDITURE INCURRED IN RETAINING A STATUS OF A COMPANY/ASSESSEE DEDUCTION CLAIMED BY THE ASSESSEE ON ACCOUNT OF SALARY PAID TO ITS EMPLOYEES CANNOT BE DISALLOWED. 17. SIMILARLY, COORDINATE BENCH OF THE TRIBUNAL IN CASE CITED AS MOKUL FINANCE LTD. (SUPRA) WHILE DECIDING THE IDENTICAL ISSUE HELD THAT MERELY BECAUSE OF THE FACT THAT NO BUSINESS AC TIVITIES HAVE BEEN CARRIED OUT DURING THE YEAR UNDER ASSESSMENT EXPENS ES ON ACCOUNT OF SALARIES PAID TO THE EMPLOYEES CANNOT BE DISALLO WED BY RETURNING FOLLOWING FINDINGS :- 5. HAVING GIVEN OUR CAREFUL CONSIDERATION TO THE R IVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE ARE INCL INED TO UPHOLD THE CONCLUSIONS ARRIVED AT BY THE CIT(A). AS DR. GU PTA RIGHTLY CONTENDS, THE ASSESSEE BEING AN ARTIFICIAL JURIDICA L PERSON, IT NEEDS TO INCUR CERTAIN EXPENDITURE TO KEEP ITSELF A FLOAT AND HAVE ITS CONTINUED EXISTENCE. UNLIKE A NATURAL PERSON, A COMPANY CAN ONLY OPERATE THROUGH OTHER NATURAL PERSONS -WHETHER EMPLOYEES OR OTHERS. IT IS NOT THE CASE OF THE ASSESSING OFFI CER THAT THE EXPENDITURE OF THE ASSESSEE COMPANY ARE EXCESSIVE O R UNREASONABLE VIS-A-VIS ITS LEGITIMATE BUSINESS REQU IREMENTS. THE HON'BLE HIGH COURTS HAVE CONSISTENTLY HELD THAT IN THE CASE OF THE CORPORATE ASSESSEES SUCH EXPENSES HAVE TO BE AL LOWED AS DEDUCTION IRRESPECTIVE OF WHETHER OR NOT THE ASSESS EE IS ENGAGED IN ACTIVE BUSINESS AND EVEN IF ASSESSEE HAS ONLY PA SSIVE INCOMES. THE CIT(A) WAS, THEREFORE, JUSTIFIED IN HIS CONCLUS IONS. THAT IS, HOWEVER, NOT THE ONLY REASON WHY THE DISALLOWANCE M ADE BY THE ASSESSING OFFICER WAS UNSUSTAINABLE IN LAW. WE AGRE E WITH DR. GUPTA'S SECOND LINE OF ARGUMENT AS WELL. WE FIND TH AT THE WHOLE CAUSE OF ACTION DISALLOWANCE OF EXPENSES IS IN THE BACKGROUND OF ITA NO.5641/DEL./2017 ITA NO.5807/DEL./2018 ITA NO.3978/DEL./2019 10 ASSESSING OFFICER'S OBSERVATION THAT THE ASSESSEE D ID NOT CARRY OUT ANY BUSINESS TRANSACTIONS WHICH AT BEST WAS ASS ESSING OFFICER'S FINDING ABOUT AN ACTIVITY OF BUSINESS NOT BEING FUNCTIONAL IN THE RELEVANT PREVIOUS YEAR. IN OUR OP INION, NOT CARRYING ON BUSINESS ACTIVITY IN A PARTICULAR PERIO D CANNOT BE EQUATE WITH CLOSURE OF BUSINESS AS IT TAKES AN UNSU STAINABLY NARROW VIEW OF THE SCOPE OF CESSATION OF A BUSINESS . IN THE CASE OF LVE. VAIRAVAN CHETTIAR V. CIT [1969] 72 WR 114, THE IR LORDSHIPS OF HON'BLE MADRAS HIGH COURT WERE IN SEIS IN OF A SITUATION WHERE THE ASSESSEE HAD OBTAINED AN IMPORT LICENCE FOR DOING ARECANUT BUSINESS BUT DUE TO ADVERSE CONDITIO NS IN MARKET, HE TEMPORARILY SUSPENDED THE ARECANUT BUSINESS FOR THE ASSESSMENT YEAR IN QUESTION. NEVERTHELESS, HE WAS M AINTAINING THE ESTABLISHMENT AND WAS WAITING FOR IMPROVED MARK ET CONDITIONS IN ARECANUT. IT WAS THUS AN ADMITTED POS ITION THAT NO ACTIVITIES WERE CARRIED OUT SO FAR AS THIS PART OF THE BUSINESS WAS CONCERNED. ON THESE FACTS, THEIR LORDSHIPS TOOK NOT E OF THE POSITION THAT 'THERE IS NOTHING ON RECORD TO SHOW T HAT HE COMPLETELY ABANDONED OR CLOSED THE BUSINESS FOREVER . ON THE OTHER HAND, HIS BOOKS OF ACCOUNT REVEALED THAT HE W AS MEETING THE ESTABLISHMENT CHARGES AND INTEREST PAYMENTS AS DETAILED IN THE ACCOUNTS IN THE YEAR OF ACCOUNTS'. IT WAS THEN OBSERVED THAT THE QUESTION WHETHER THE BUSINESS IS BEING CARRIED ON MUST DEPEND IN EACH CASE ON ITS OWN FACTS AND NOT ON ANY GENERAL THEORY OF LAW. THEIR LORDSHIPS THEN REFERRED TO, WI TH APPROVAL, LORD SUMMER'S OBSERVATION IN IRC V. SOUTH BEHAR RAI LWAY CO. LTD. [1925] 12 TAX CASES 657 THAT BUSINESS IS NOT C ONFINED TO BEING BUSY; IN MANY BUSINESSES LONG INTERVALS OF IN ACTIVITY OCCUR .... 'THE CONCERN IS STILL A GOING CONCERN THOUGH A VERY QUIET ONE.' AFTER ELABORATE SURVEY OF JUDICIAL PRECEDENTS ON THE ISSUE, THEIR LORDSHIPS CONCLUDED, IN THE LIGHT OF, AS NOTE D ABOVE, THE FACTUAL POSITION THAT 'THERE IS NOTHING ON RECORD T O SHOW THAT HE COMPLETELY ABANDONED OR CLOSED THE BUSINESS FOREVER . ON THE OTHER HAND, HIS BOOKS OF ACCOUNT REVEALED THAT HE W AS MEETING THE ESTABLISHMENT CHARGES AND INTEREST PAYMENTS AS DETAILED IN THE ACCOUNTS IN THE YEAR OF ACCOUNT,' THAT THE LOSS IN ARECANUT BUSINESS, IN WHICH ADMITTEDLY NO ACTIVITY WAS CARRI ED OUT DURING THE RELEVANT PREVIOUS YEAR, WAS TO BE SET OFF AGAIN ST ASSESSEE'S BUSINESS INCOME IN THE YEAR. AS THE RATIO OF THE AF ORESAID JUDGMENT IS SUMMED UP IN THE ITR HEADNOTES AT P. 11 5 OF THE REPORT, 'AS THE ASSESSEE WAS MAINTAINING THE ESTABL ISHMENT AND WAITING FOR THE IMPROVED MARKET CONDITIONS IN ARECA NUTS AND THERE WAS NOTHING TO SHOW THAT HE COMPLETELY ABANDO NED OR CLOSED THE BUSINESS FOREVER, THE BUSINESS MUST BE D EEMED TO BE CONTINUING'. IN THE LIGHT OF THIS LEGAL POSITION,' IT WOULD FOLLOW THAT UNLESS THERE IS SOME MATERIAL ON RECORD TO SHO W THAT THE ASSESSEE HAS COMPLETELY ABANDONED THE SHARE DEALING BUSINESS, MERELY BECAUSE THERE ARE NO BUSINESS TRANSACTIONS I N THE RELEVANT PREVIOUS YEAR CANNOT BE REASON ENOUGH TO COME TO TH E CONCLUSION ITA NO.5641/DEL./2017 ITA NO.5807/DEL./2018 ITA NO.3978/DEL./2019 11 THE BUSINESS HAS COME TO AN END. IT COULD NOT THUS BE SAID; AS WAS THE CASE BEFORE THE HON'BLE MADRAS HIGH COURT, THAT THE ASSESSEE HAD 'COMPLETELY ABANDONED OR CLOSED THE BUSINESS FO REVER'. UNLESS THE BUSINESS IS ABANDONED OR CLOSED AND EVEN IF BUSINESS IS AT A DORMANT STAGE WAITING FOR PROPER MARKET CON DITIONS TO DEVELOP, THE EXPENDITURE INCURRED IN THE COURSE OF SUCH A BUSINESS IS TO BE ALLOWED AS DEDUCTION. FOR THIS RE ASON ALSO, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS NOT JUSTIFIED, AND THE CIT(A) RIGHTLY DELETED THE SAME. 18. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE AR E OF THE CONSIDERED VIEW THAT WHEN ASSESSEE HAS NOT COMPLETE LY ABANDONED ITS BUSINESS AND HAS KEPT THE BUSINESS STATUS OF TH E ASSESSEE COMPANY ALIVE, AS NOT AN IOTA OF EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE REVENUE THAT THE BUSINESS OF THE ASSE SSEE HAS COMPLETELY COME TO AN END, THE DEDUCTIONS CLAIMED B Y THE ASSESSEE ON ACCOUNT OF SALARIES PAID TO SHRI KAMAL KARMAKAR AND SMT. GAURI DHAWAN IN AY 2011-12 AND PROFESSIONAL CHARGES AND REMUNERATION TO THE DIRECTORS PAID IN AY 2012-13 AR E ALLOWABLE BUSINESS DEDUCTIONS. CONSEQUENTLY, GROUNDS NO.1 & 2 OF ITA NO.5641/DEL/2016 (AY 2011-12) AND ITA NO.5807/DEL/2 017 (AY 2012-13) ARE DETERMINED IN FAVOUR OF THE ASSESS EE. 19. SO FAR AS, APPEAL BEARING ITA NO.3978/DEL/2018 FOR AY 2013-14 IS CONCERNED, THE LD. CIT (A) HAS DISMISSED THE APPEAL EX-PARTE BY RECORDING THE FACT THAT NOTICES DATED 3 1.08.2017, 11.01.2018 AND 22.01.2018 ELICITED NO RESPONSE AND ASSESSEE HAS FAILED TO APPEAR BEFORE HIM, BUT HAS NOT BROUGHT ON RECORD ANY ITA NO.5641/DEL./2017 ITA NO.5807/DEL./2018 ITA NO.3978/DEL./2019 12 MATERIAL IF THE SAID NOTICES WERE EVER SERVED UPON THE ASSESSEE. MERE ISSUANCE OF NOTICE ON THE ADDRESS MENTIONED I N FORM NO.35 IS NOT SUFFICIENT TO TREAT THE NOTICE AS SERVED AS LD. CIT (A) HAD THE OPPORTUNITY TO SERVE THE ASSESSEE BY WAY OF DASTI N OTICE OR BY WAY OF SUBSTITUTE SERVICE. IN THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE HAS NOT BEEN PROV IDED WITH ADEQUATE OPPORTUNITY OF BEING HEARD, HENCE APPEAL B EING ITA NO.3978/DEL/2018 FOR AY 2013-14 IS ORDERED TO BE SE T ASIDE TO THE LD. CIT (A) TO DECIDE AFRESH AFTER PROVIDING AN OPP ORTUNITY OF BEING HEARD TO THE ASSESSEE. 18. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, ASSES SEES APPEALS BEARING ITA NOS.5641/DEL/2016 & 5807/DEL/2 017 FOR AYS 2011-12 & 2012 -13 RESPECTIVELY ARE ALLOWED AND ITA NO.3978/DEL/2018 FOR AY 2013-14 IS ALLOWED FOR STAT ISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 29 TH DAY OF MARCH, 2019. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 29 TH DAY OF MARCH, 2019 TS ITA NO.5641/DEL./2017 ITA NO.5807/DEL./2018 ITA NO.3978/DEL./2019 13 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-2, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.