DCIT, New Delhi V. M/s. Delhi Automobiles Ltd., New Delhi

ITA 5652/DEL/2015

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1806 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC 3
• Next Hearing Date: 10-08-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 05-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S M PANDEY
• Keywords: Depreciation; Business expenditure; Question of law
• Section: 142(1)

Judgement Text

1 ITA NO. 5652/DEL/2015 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A. NO. 5652/DEL/20 15 (A.Y 2011-12) DCIT CIRCLE-7(1), ROOM NO. 403, C. R. BUILDING, I.P. ESTATE NEW DELHI (APPELLANT) VS DELHI AUTOMOBILES LTD. 14-C, SAGAR APARTMENTS, 6, TILAK MARG NEW DELHI AABCD7933P (RESPONDENT) APPELLANT BY SH. S. M. PANDEY, SR. DR RESPONDENT BY SH. ALOKE PERIWAL, CA ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER DATED 22/7/2015 PASSED BY CIT(A)-3, NEW DELHI FOR ASSESSMENT YEAR 2 011-12. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, LD.CIT(A) HAS ERRED IN DELETING ADDITION ON ACCOUNT OF MANAGEMENT AND OTHER EXPENSES OF RS.70,18,334/- MADE BY THE A.O. 3. THE RETURN OF INCOME WAS E-FILED ON 30/3/2013 DE CLARING LOSS OF RS. 53,40,530/-. THE CASE WAS SELECTED FOR SCRUTINY AS SESSMENT. NOTICES U/S 143(2) WAS ISSUED ON 23/9/2013 AND QUESTIONNAIRE U/ S 142(1) WAS ISSUED ON 26/9/2013 WHICH WERE DULY SERVED UPON THE ASSESSEE. IN RESPONSE, C.A OF THE DATE OF HEARING 20.11.2018 DATE OF PRONOUNCEMENT 22.11.2018 2 ITA NO. 5652/DEL/2015 ASSESSEE COMPANY ATTENDED THE PROCEEDING FROM TIME TO TIME. THE DETAILS WERE ASKED BY THE ASSESSING OFFICER AND THE ASSESSEE FIL ED BOOKS OF ACCOUNTS WHICH WAS DULY CHECKED. THE ASSESSEE SUBMITTED INCOME UN DER MISCELLANEOUS INCOME AND EXPENDITURE IN PROFIT AND LOSS ACCOUNT F OR THE YEAR ENDED 31 ST MARCH, 2011. THE ASSESSING OFFICER OBSERVED THAT N O SIGNIFICANT BUSINESS ACTIVITY WAS CARRIED OUT BY THE ASSESSEE DURING THE RELEVANT PERIOD AS WELL AS IN THE EARLIER YEARS. THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAS NOT DONE ANY BUSINESS ACTIVITY DURING THE YEAR, THEREFORE, THE BUSINESS EXPENSES CLAIMED DURING THE YEAR AT RS.70,18,334/-CANNOT BE ALLOWED AS BUSINESS EXPENDITURE, SINCE NO BUSINESS ACTIVITY WAS ACTUALL Y CARRIED OUT BY THE ASSESSEE, DURING THE PERIOD RELEVANT TO ASSESSMENT YEAR 2011-12. THUS, THE ASSESSING OFFICER MADE ADDITION OF RS.70,18,334/-. THE ASSESSING OFFICER ALSO DISALLOWED CLAIM OF DEPRECIATION AMOUNTING TO RS.1, 99,972/-. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT (A). THE CIT (A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 5. DURING THE HEARING, THE LD. AR SUBMITTED THAT SI MILAR ISSUE FOR ASSESSMENT YEAR 2010-11 HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN ASSESSEES OWN CASE. THEREFORE, THE IS SUE IS COVERED IN FAVOUR OF THE ASSESSEE IN THIS YEAR AS WELL. 6. THE LD. DR RELIED UPON THE ORDERS OF THE ASSESSI NG OFFICER AND CIT(A), BUT COULD NOT DISTINGUISH THE FACTUAL ASPECT MENTIO NED IN THE TRIBUNALS ORDER FOR A.Y. 2010-11 AND THE PRESENT ASSESSMENT YEAR. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE ISSUE DISCUSSED IN THE PRESENT APPEAL IS SIMILAR TO THE EARLIER ASSESSMENT YEAR WHICH WAS DECIDED BY THE TRIBUNAL I N ITA NO. 1999/DEL/2014 ACIT VS. DELHI AUTO MOBILES LTD. ORDER DATED 9/6/20 17 A.Y. 2010-11. THE TRIBUNAL HELD AS UNDER:- 3 ITA NO. 5652/DEL/2015 9. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN TH E PRESENT CASE, THE AO DISALLOWED ALL THE EXPENSES CLAIMED BY THE ASSESSEE FOR THE REASONS THAT THERE WAS NO BUSINESS ACTIVITY DURING THE YEAR UNDE R CONSIDERATION. ON THE CONTRARY, THE CLAIM OF THE ASSESSEE IS THAT THE BUS INESS WAS NOT CLOSED DOWN PERMANENTLY, THE ASSESSEE WAS FACING LULL AT BUSINE SS AND TO KEEP ITSELF A FLOAT, THE ASSESSEE COMPANY WAS REQUIRED TO INCUR V ARIOUS NECESSARY AND BARE MINIMUM EXPENSES. IN THE PRESENT CASE, THE COP Y OF PROFIT AND LOSS ACCOUNT PLACED AT PAGE NO. 13 OF THE ASSESSEES PAP ER BOOK REVEALED THAT THE ASSESSEE HAD MADE SALES OF RS.71,97,431.47 AND ALSO EARNED MISCELLANEOUS INCOME OF RS.4,05,13,194.14 IN THE PRECEDING YEAR. DURING THE YEAR UNDER CONSIDERATION, THE MISCELLANEOUS INCOME EARNED BY T HE ASSESSEE WAS OF RS.2,90,013/- BUT THERE WAS NO INCOME FROM SALES, T HE REASONS GIVEN BY THE ASSESSEE WAS THAT THERE WAS LULL IN BUSINESS BUT TH E BUSINESS ITSELF WAS NOT CLOSED. 10. ON A SIMILAR ISSUE THEIR LORDSHIPS OF THE HONB LE JURISDICTIONAL HIGH COURT AT DELHI, IN THE CASE OF CIT VS ANITA JAIN (S UPRA) OBSERVED IN PARA 3 AS UNDER: 3. MS. BANSAL, LEARNED COUNSEL FOR THE REVENUE, HA S DRAWN OUR ATTENTION TO THE OBSERVATION IN CIT V. LAHORE ELECTRIC SUPPLY CO. LTD. [1966] 60 ITR 1 (SC) TO THE EFFECT THAT THE 'MERE FACT THAT THE COM PANY HAD NOT GONE INTO LIQUIDATION WOULD NOT ESTABLISH THAT IT HAD THE INT ENTION TO DO BUSINESS'. THIS SUBMISSION LOSES SIGHT OF THE OBSERVATIONS MAD E AT PAGE 5 WHICH CLEARLY INDICATE THAT THE COURT CAME TO THE CONCLUS ION THAT THE ASSESSEE HAD CLOSED BUSINESS BECAUSE IT HAD NOT 'ESTABLISHED AN INTENTION TO RESUME IT'. SUCH IS NOT THE CIRCUMSTANCE OBTAINING IN THE PRESENT CASE. THIS CASE HAS BEEN APPLIED IN CIT V. VELLORE ELECTRIC CORPN. LTD. [2000] 243 ITR 529 (MAD.) WHERE IT HAS BEEN PITHILY NOTED THAT MAINTEN ANCE AND ESTABLISHMENT IS THE INDICATION OF INTENTION TO RES UME BUSINESS. IN KARSONDAS RANCHHODDASS V. CIT [1972] 83 ITR 1 (BORN .) IT WAS NOTED THAT THERE WERE TWO PERIODS OF ACTIVITY BEFORE AND AFTER THE INTERREGNUM OR PERIOD OF INACTIVITY WHICH WAS INDICATIVE THAT THE BUSINESS WAS NEVERTHELESS CONTINUED. WE ARE IN COMPLETE AGREEMEN T WITH THE VIEW TAKEN 4 ITA NO. 5652/DEL/2015 BY THE ITAT THAT THE PRESENT CASE IS AN EXAMPLE OF A LULL IN BUSINESS AND NOT CESSATION IN BUSINESS. 11. IN THE AFORESAID CASE THE DISALLOWANCE MADE BY THE AO WAS DELETED UP TO THE LEVEL OF THE TRIBUNAL AND THE HONBLE JUR ISDICTIONAL HIGH COURT HELD THAT THE VIEW TAKEN BY THE TRIBUNAL WAS JUSTIFIED A ND THERE WAS NO SUBSTANTIAL QUESTION OF LAW INVOLVED. IN THE PRESEN T CASE ALSO THE ASSESSEE COMPANY CONTINUED TO MAINTAIN AN ESTABLISHMENT WHIC H WAS THE INDICATION OF ITS INTENTION TO RESUME BUSINESS AND THE EXPENSES I NCURRED BY THE ASSESSEE WERE DIRECTLY RELATED TO THE BUSINESS OF THE ASSESS EE. THEREFORE, THE LD. CIT(A) WAS FULLY JUSTIFIED IN HOLDING THAT THE ASSESSEE HA D RIGHTLY CLAIMED THE ESTABLISHMENT EXPENSES TO RESUME ITS BUSINESS IN NE AR FUTURE. I, THEREFORE, DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FIND INGS GIVEN BY THE LD. CIT(A) AND ACCORDINGLY DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. 12. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSED. THUS, THE ISSUE CONTESTED HEREIN BY THE REVENUE IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2010-11. THE FACTUAL ASPECTS ARE IDENTICAL IN THE PRESENT ASSESSMENT YEA R AS WELL. THEREFORE, APPEAL OF THE REVENUE IS DISMISSED. 8. IN RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND NOVEM BER, 2018 . SD/- SD/- (N. K. BILLAIYA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 22/11/2018 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 5 ITA NO. 5652/DEL/2015 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 20 .11.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 20 .11.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 2 2 .11.2018 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 2 2 .11.2018 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 2 2 .11.2018 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 6 ITA NO. 5652/DEL/2015