M/S. DKP ENGINEERS & CONSTRUCTIONS PVT. LTD., MUMBAI V. ITO 10(2)(1), MUMBAI

ITA 573/MUM/2011

• Counselvise Citation: 57319914 RSA 2011
• Duration Of Justice: 3 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 06-02-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 20-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJEEV JAIN
• Assessee Lawyers: RAHUL K HAKANI; DR K SHIVARAM
• Keywords: Business income; Depreciation; Business expenditure; Unabsorbed depreciation
• Section: 145; 154; 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI , / ! ! ! ! ' . . # . . !$ , % BEFORE SHRI RAJENDRA, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER /. ITA NO. 573/MUM/2011 $& $& $& $& !'& !'& !'& !'& / ASSESSMENT YEAR: 2007-08 M/S. DKP ENGINEERS & CONSTRUCTIONS PVT. LTD. 23, KAILAS NAGAR, M.G. ROAD, GHATKOPAR (W) MUMBAI-400 077 $ $ $ $ / VS. ITO 10(2)(1) MUMBAI. ( () / APPELLANT) ( *+() / RESPONDENT) PERMANENT ACCOUNT NO. :- AAACJ 3215 H $&,- . / ASSESSEE BY : DR. K. SHIVARAM & SHRI RAHUL K. HAKANI ! / . / REVENUE BY : SHRI SANJEEV JAIN 0 / O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE LD.CIT(A)-22, MUMBAI DATED 26.11.2010 FOR THE ASSES SMENT YEAR 2007-08. 2. GROUND NO. 1 IS NOT PRESSED BY THE ASSESSEE AND HENCE THE SAME DOES NOT REQUIRE ANY ADJUDICATION. 3. GROUND NO. 2 RELATES TO THE ASSESSMENT OF BUSINE SS PROFITS AT RS. 30 LAKHS BEING INCOME DECLARED DURING SURVEY AND CONSEQUENT DISALLOWANCE OF BUSINESS EXPENSES OF RS.1,33,544/-. IN GROUND NO. 3, THE ASS ESSEE HAS AGITATED THE ACTION OF THE LD.CIT(A) IN CONFIRMING THE ACTION OF THE AO IN NOT ALLOWING SET OFF OF THE $! / - / DATE OF HEARING : 20.02.2014 12' / - / DATE OF PRONOUNCEMENT : 26.02.2014 ITA NO. 573/MUM/2011 M/S. DKP ENGINEERS & CONSTRUCTIONS PVT. LTD. ASSESSMENT YEAR: 2007-08 2 BROUGHT FORWARD BUSINESS LOSSES AND UNABSORBED DEPR ECIATION OF THE EARLIER YEARS BEING ASSESSMENT YEARS 2005-06 AND 2006-07 TO THE E XTENT OF RS.5,34,803/- 4. BRIEFLY STATED, THE ASSESSEE, A COMPANY ENGAGED IN THE BUSINESS OF BUILDERS & DEVELOPERS AND OF CIVIL CONSTRUCTION WHO FOLLOWED T HE METHOD OF ACCOUNTING AS PER SECTION 145 OF THE INCOME-TAX ACT, IN RESPECT OF TH E REVENUE GENERATED FROM BUSINESS ACTIVITY AND REVENUE ON SALE OF PRESIDENTI AL PREMISES. A SURVEY WAS CONDUCTED UNDER SECTION 133A OF THE ACT AT THE ASSE SSEES PLACE ON 22.03.2007, DURING WHICH, THE STATEMENT OF DIRECTOR OF THE ASS ESSEES COMPANY MR. KISHOR PATEL WAS RECORDED ON OATH. IN THE SAID STATEMENT, THE DI RECTOR OF THE ASSESSEES COMPANY HAD DECLARED A BUSINESS PROFIT OF RS. 30 LAKHS FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSEE WHILE FILING THE RETURN , DECLARED A TOTAL INCOME OF RS.23,47,928/- WHICH INCLUDED THE ADDITIONAL INCOME DECLARED DURING THE SURVEY ACTION. HOWEVER, THE CLAIM OF THE ASSESSEE WAS THAT THE BUSINESS PROFIT CAME TO RS.28,66,456/- DUE TO THE CLAIM OF POST SURVEY EXPE NSES, WHICH WERE NOT TAKEN INTO ACCOUNT WHILE ESTIMATING INCOME FOR ADVANCE TAX. IN THE ASSESSMENT FRAMED, THE AO MADE AN ADDITION OF RS.1,33,544/- ON THE BASIS OF I NCOME DECLARED AS PER RECORDED STATEMENT OF MR. KISHOR PATEL IN SURVEY ACTION. IN ADDITION, THE AO FURTHER DID NOT ALLOW SET OFF OF BUSINESS LOSS AND UNABSORBED DEPRE CIATION AS CLAIMED BY THE ASSESSEE TO THE EXTENT OF RS.5,34,803/-. ON APPEAL, THE LD.CIT(A) CONFIRMED THE ACTION OF THE AO. AGGRIEVED BY THE IMPUGNED DECISIO N, THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE US. 5. HAVING HEARD BOTH THE SIDES AND PERUSED THE MATE RIAL ON RECORD, IT IS PERTINENT TO MENTION THAT THE ISSUE RAISED IN GROUN D NO 2 AS REGARDS THE DISALLOWANCE OF BUSINESS EXPENSES IS COVERED BY THE DECISION OF THE TRIBUNAL DATED 20.06.2013 IN THE CASE OF OTHER GROUP CONCERN M/S. SHRRESHAY ENGG. PVT. LTD VS. ACIT , IN ITA NO.670/MUM/2011, WHEREIN THE TRIBUNAL HAS HELD THAT THE EXPENSES ARE TO BE ALLOWED BY AO AFTER VERIFICATION. THE SAI D DECISION IS ALSO FOLLOWED IN THE CASE OF M/S. PATEL BUILDERS AND DEVELOPERS PVT. LTD. VS. IT O IN ITA NO. 572/M/2011 VIDE ORDER DATED 03.01.2014. THE RELEVANT FINDINGS OF THE TRIBUNAL IN THE CASE OF M/S. SHRRESHAY ENNG. PVT. LTD IS EXTRACTED HEREUNDE R:- ITA NO. 573/MUM/2011 M/S. DKP ENGINEERS & CONSTRUCTIONS PVT. LTD. ASSESSMENT YEAR: 2007-08 3 6. WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND A LSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE LD. COUNSEL FOR THE ASSESSEE HAS INV ITED OUT ATTENTION TO THE STATEMENT OF ESTIMATED PROFIT PREPARED FOR THE PURPOSE OF ADV ANCE TAX AS ON 15.03.2007 GIVEN ON PAGE NO. 73 OF HIS PAPER-BOOK TO SHOW ABOVE THE BAS IS OF THE SAID ESTIMATE. IN THE SAID STATEMENT, PROFIT AS PER TRIAL BALANCE WAS TAKEN AT 1.58,00,000/- AND AFTER DEDUCTING PROVISION FOR INTEREST ON UNSECURED LOAN OF RS.16,0 0,000/- MADE ON ESTIMATED BASIS, NET PROFIT ON RS.1,42,00,000/- WAS WORKED OUT FOR T HE PURPOSE OF ADVANCE TAX. THE LD. COUNSEL OF THE ASSESSEE HAS ALSO INVITED OUT ATTENT ION TO THE STATEMENT PLACED AT PAGE NO. 99 OF HIS PAPER-BOOK GIVING THE DETAILS OF EXPE NSES INCURRED PRIOR TO SURVEY AND EXPENSES INCURRED AFTER SURVEY. A PERUSAL OF THE SA ID DETAILS SHOWS THAT THE IMPUGNED EXPENSES OF RS.8,17,7462/- COMPRISED OF EXPENSES IN CURRED DURING THE POST SURVEY PERIOD UNDER VARIOUS ROUTINE HEADS INCLUDING THE MA JOR AMOUNT OF INTEREST ON UNSECURED LOANS FOR WHICH PROVISION OF RS.16,00,000 /- WAS MADE BY THE ASSESSEE ON ESTIMATED BASIS WHILE COMPUTING PROFIT FOR THE PURP OSE OF ADVANCE TAX ON AS 15.03.2007. A COPY OF PROFIT & LOSS ACCOUNT OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION IS PLACED AT PAGE NO. 72 OF THE PAPER -BOOK WHICH SHOWS THAT THE INCOME OF RS.15,00,000/- SURRENDERED BY THE ASSESSEE DURIN G THE COURSE OF SEPARATELY DECLARED AS INCOME AND THE ENTIRE ROUTINE EXPENSES INCLUDING THE EXPENSES IN QUESTION INCURRED DURING THE POST SURVEY PERIOD WERE DEBITED THE PROF IT AND LOSS ACCOUNT. IN OUR OPINION, ALL THESE FACTS AND FIGURES APPEARING IN THE RELEVA NT FINANCIAL STATEMENTS CLEARLY SHOW THAT THE AMOUNT EXPENSES OF RS.8,17,7462/- WERE CLA IMED BY THE ASSESSEE AS REGULAR BUSINESS EXPENSES INCURRED DURING THE POST SURVEY P ERIOD AGAINST REGULAR BUSINESS INCOME WHICH RESULTED IN REDUCTION OF ITS REGULAR B USINESS INCOME WHICH WAS ESTIMATED AT RS.1,42,00,000/- AS ON 15.03.2007 FOR ADVANCE TA X PURPOSE TO THAT EXTENT. IT APPEARS THAT THE AO AND THE LD.CIT(A), HOWEVER, MIS CONCEIVED THE CLAIM OF THE ASSESSEE FOR THE SAID EXPENSES AS THAT OF AGAINST T HE ADDITIONAL INCOME OF RS.15,00,000/- DECLARED DURING THE COURSE OF SURVEY AND MADE DISALLOWANCE OF THE SAID EXPENSES ON THE BASIS OF THIS MISCONCEPTION WITHOUT CONSIDERING OR EXAMINING THE SAID CLAIM ON MERIT BEING THE CLAIM FOR REGULAR BUSINESS EXPENSES OF POST SURVEY PERIOD AGAINST REGULAR BUSINESS INCOME. WE, THEREFORE, SET ASIDE THEIR ORDERS ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE AO WITH A DIR ECTION TO CONSIDER AND ALLOW THE CLAIM OF THE ASSESSEE FOR THE IMPUGNED EXPENSES AS REGULA R BUSINESS EXPENSES ON MERIT AFTER THE NECESSARY VERIFICATION GROUND NO. 1 AND 2 OF TH E ASSESSEES APPEAL ARE ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSE. IN THE PRESENT CASE, THE FACTS INVOLVED ARE SIMILAR TO THE FACTS INVOLVED IN THE CASE OF GROUP CONCERN AS AFOREMENTIONED WHICH IS EVIDENT FR OM THE RELEVANT PORTION OF THE SAID ORDER OF THE TRIBUNAL AND THE POSITION IS NOT DISPUTED BY THE LD.DR ALSO. THEREFORE, FOLLOWING THE AFOREMENTIONED ORDER OF TH E TRIBUNAL, WE SET ASIDE THE IMPUGNED ORDER OF THE LD.CIT(A) ON THIS ISSUE AND R ESTORE THE MATER TO THE FILE OF THE AO WITH A SIMILAR DIRECTION GIVEN BY THE TRIBUN AL IN THE CASE OF SHRRESHAY ENGG. PVT. LTD. AND THEREBY ALLOW THE CLAIM OF THE ASSESS EE FOR THE IMPUGNED EXPENSES AS REGULAR BUSINESS EXPENSES ON MERIT AFTER NECESSARY VERIFICATION. ACCORDINGLY, GROUND NO. 2 IS ALLOWED FOR STATISTICAL PURPOSE. ITA NO. 573/MUM/2011 M/S. DKP ENGINEERS & CONSTRUCTIONS PVT. LTD. ASSESSMENT YEAR: 2007-08 4 6. ON THE ISSUE RAISED IN GROUND NO.3 AS REGARDS TH E ALLOWABILITY OF SET OFF OF THE BROUGHT FORWARD BUSINESS LOSSES AND UNABSORBED DEPR ECIATION OF THE EARLIER YEARS BEING ASSESSMENT YEARS 2005-06 AND 2006-07 TO THE E XTENT OF RS.5,34,803/-, IT IS PERTINENT TO MENTION THAT IN THE AFOREMENTIONED GRO UP CASE IN ITA NO. 570/MUM/2011 FOR THE ASSESSMENT YEAR 2007-08, THE T RIBUNAL HAS DECIDED A SIMILAR ISSUE AND THE FINDINGS READS AS FOLLOWS:- AS ALREADY NOTED, THE CLAIM OF THE ASSESSEE FOR SE T OFF OF BROUGHT FORWARD LOSS AND UNABSORBED DEPRECIATION WAS NOT CONSIDERED AT A LL BY THE AO WHILE FRAMING THE ASSESSMENT. THE ASSESSEE, THEREFORE, MOVED AN A PPLICATION U/S 154 BEFORE THE AO FOR CONSIDERING THE SAID CLAIM AND TAKING TH E NOTE OF THIS, THE LD.CIT(A) DIRECTED THE AO TO DISPOSE OF THE SAID APPLICATION FILED BY THE ASSESSEE U/S 154 EXPEDITIOUSLY. SINCE THE AO HAS STILL NOT DISPOSED OF THE SAID APPLICATION DESPITE THE SPECIFIC DIRECTION GIVEN BY THE LD.CIT(A), THE LD. COUNSEL FOR THE ASSESSEE HAS URGED THAT A DIRECTION MAY BE AGAIN GIVEN TO TH E AO TO DISPOSE OF THE APPLICATION FILED BY THE ASSESSEE U/S 154. WE, ACCO RDINGLY DIRECT THE AO TO DISPOSE OF THE APPLICATION FILED BY THE ASSESSEE U/ S 154 EXPEDITIOUSLY WITHOUT ANY FURTHER DELAY. GROUND NO. OF THE ASSESSEES APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSE. IN VIEW OF THE SIMILAR FACTS INVOLVED IN THE ASSESS EES CASE, WHEREIN THE PRESENT ASSESSEE HAS ALSO MOVED AN APPLICATION U/S 154 BEFO RE THE AO FOR CONSIDERING THE SAID CLAIM, WHICH IS NOT DISPUTED BY THE REVENUE, W E, FOLLOWING THE AFOREMENTIONED DECISION, DIRECT THE AO TO DISPOSE OF THE APPLICATI ON FILED BY THE ASSESSEE U/S 154 EXPEDITIOUSLY WITHOUT ANY FURTHER DELAY. ACCORDINGL Y, GROUND NO. 3 IS ALLOWED FOR STATISTICAL PURPOSE. 7. GROUND NO. 4 IS CONSEQUENTIAL IN NATURE AND HENC E THE SAME DOES NOT REQUIRE ANY ADJUDICATION. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 0 / 12' 3$ 26 TH 4! , 201 4 2 / 5 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF FEBRUARY, 2014. SD/- SD/- ( / RAJENDRA ) ( ' ' ' ' . . # # # # . . !$ !$ !$ !$ / DR. S.T.M. PAVALAN) / ACCOUNTANT MEMBER / JUDICIAL MEMBER /MUMBAI, 3$ /DATED: 26.02.2014. $ . ./ P.S.*SRIVASTAVA ITA NO. 573/MUM/2011 M/S. DKP ENGINEERS & CONSTRUCTIONS PVT. LTD. ASSESSMENT YEAR: 2007-08 5 COPY TO: () / THE APPELLANT *+() / THE RESPONDENT 7 8 / THE CIT, CONCERNED, MUMBAI 7 8 / THE CIT(A) CONCERNED, MUMBAI 9!:5 *-$ /THE DR D BENCH 5 & ; / GUARD FILE. +9- *- //TRUE COPY// 0$ / BY ORDER < / = DY/ASSTT. REGISTRAR, , / ITAT, MUMBAI.