ITO 1(2)(2), MUMBAI V. LAXMI ASBESTOS PRODUCTS LTD, MUMBAI

ITA 5774/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2288 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 22-08-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 24-09-2013
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: NARAYAN ATAL
• Keywords: Business income; Business expenditure; Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & SHRI SANJAY GARG (JM) I.T.A. NO. 5774 /MUM/ 20 1 3 (ASSESSMENT YEAR 200 8 - 0 9 ) I.T.A. NO. 404/MUM/2015 (ASSESSMENT YEAR 2010 - 11) I.T.A. NO. 371/MUM/2015 (ASSESSMENT YEAR 2011 - 12) ITO 1(2)(2) ROOM NO. 527 5 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. VS. M/S. LAXMI ASBESTOS PRODUCTS LTD. 4 TH FLOOR, SHREE NIWAS HOUSE HAZARIMAL SOMANI MARG, FORT MUMBAI - 400 001. ( APPELLANT ) ( RESPONDENT ) PAN NO . AAACL1781E ASSESSEE BY SHRI NARAYAN ATAL DEPARTMENT BY SHRI A.B. KOLI DATE OF HEARING 22.8. 201 6 DATE OF PRONOUNCEMENT 26 . 10 . 201 6 O R D E R PER BENCH: - ALL THE APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST THE ORDERS PASSED BY LD CIT(A) - 7, MUMBAI AND THEY RELATE TO THE ASSESSMENT YEARS 2008 - 09, 2010 - 11 AND 2011 - 12. SINCE ISSUE URGED IN THESE APPEALS IS IDENTICAL IN NATURE, THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 2. THE SOLITARY ISSUE URGED IN THESE APPEALS IS WHETHER THE LD CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF EXPENSES CLAIMED BY THE ASSESSEE. LAXMI ASBESTOSE PRODUCTS LTD. 2 3. THE ASSESSEE COMPANY IS STATED TO BE CARRYING ON THE BUSINESS OF PROPERTY DEVELOPMENT. DURING THE YEARS UNDER CONSID ERATION, THE ASSESSEE DID NOT DISCLOSE ANY BUSINESS RECEIPTS, BUT CLAIMED VARIOUS TYPES OF EXPENSES. THE AO NOTICED THAT THE ASSESSEE HAS BEEN SHOWING THE PROPERTY DEVELOPMENT ACTIVITIES AS WORK IN PROGRESS IN THE EARLIER YEARS, BUT THE SAME WAS TRANSFE RRED TO INVESTMENT ACCOUNT DURING THE YEAR RELEVANT TO AY 2008 - 09. IT WAS SUBMITTED THAT THE ASSESSEE WAS IN POSSESSION OF LAND ADMEASURING 150012.32 SQ. MTS AND THE SAME WAS TOOK OVER BY THE GOVERNMENT UNDER URBAN LAND CEILING ACT. SUBSEQUENTLY THE ABO VE SAID ACT WAS REPEALED BY THE GOVERNMENT AND HENCE THE ASSESSEE HAS BEEN IN THE PROCESS OF REACQUIRING THE TITLE OVER THE LAND. DUE TO THE LEGAL PROCESS INVOLVED THEREIN, THE ASSESSEE COULD NOT CARRY ON ITS BUSINESS ACTIVITIES. ACCORDINGLY IT WAS CONTE NDED THAT THE ASSESSEE HAS STOPPED THE BUSINESS ACTIVITIES ON TEMPORARY BASIS DUE TO THE PROBLEM FACED BY IT IN CONNECTION WITH THE LAND. ACCORDINGLY IT WAS SUBMITTED THAT THE REGULAR BUSINESS EXPENSES INCURRED BY IT SHOULD BE ALLOWED AS DEDUCTION. 4. THE AO WAS NOT CONVINCED WITH THE SAID EXPENSES, SINCE THE ASSESSEE HAS TRANSFERRED THE LAND/PROPERTY TO ITS INVESTMENT ACCOUNT. ACCORDINGLY THE AO DISALLOWED VARIOUS EXPENSES CLAIMED BY THE ASSESSEE IN ALL THE THREE YEARS UNDER CONSIDERATION. THE L D CIT(A) TOOK THE VIEW THAT THE ASSESSEE HAS NOT CLOSED DOWN ITS BUSINESS, BUT IT WAS AT STAND STILL FOR TEMPORARY PERIOD. ACCORDINGLY HE ALLOWED THE EXPENSES CLAIMED BY THE ASSESSEE IN ALL THE THREE YEARS UNDER CONSIDERATION. THE REVENUE IS AGGRIEVED BY THE DECISION RENDERED BY LD CIT(A). 5. THE LD D.R SUBMITTED THAT THE LD CIT(A) HAS NOT GIVEN ANY FINDING WITH REGARD TO THE OBSERVATION OF THE AO THAT THE ASSESSEE HAS TRANSFERRED THE LAND AND RELATED EXPENSES TO INVESTMENT ACCOUNT. THE LD D.R SUBM ITTED THAT THE SAID ACTION OF THE ASSESSEE WOULD SHOW THAT THE ASSESSEE HAS PERMANENTLY LAXMI ASBESTOSE PRODUCTS LTD. 3 CLOSED DOWN ITS BUSINESS, IN WHICH CASE, THE EXPENSES CLAIMED BY THE ASSESSEE WERE RIGHTLY DISALLOWED BY THE AO. 6. ON THE CONTRARY, THE LD A.R SUBMITTED THAT THE A SSESSEE WAS CONSTRAINED TO TRANSFER THE LAND AND RELATED EXPENSES TO INVESTMENT ACCOUNT AS PER THE REQUIREMENT OF ACCOUNTING STANDARD - 13 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA. HE SUBMITTED THAT THE LD CIT(A) HAS RIGHTLY APPRECIATED T HAT THE ASSESSEE COULD NOT CARRY ON BUSINESS DUE TO VARIOUS CIRCUMSTANCES BEYOND THE CONTROL OF THE ASSESSEE. ACCORDINGLY HE SUBMITTED THAT THE EXPENSES WERE RIGHTLY ALLOWED BY LD CIT(A). 7. WE HEARD THE PARTIES AND PERUSED THE RECORD. WE NOTICE THA T THE AO HAS TAKEN NOTE OF THE FACT THAT THE ASSESSEE HAS TRANSFERRED THE LAND AND WORK IN PROGRESS AMOUNT TO INVESTMENT ACCOUNT AND ACCORDINGLY THE AO HAS TAKEN THE VIEW THAT THE EXPENSES INCURRED AGAINST INVESTMENT CANNOT BE ALLOWED AS DEDUCTION. WE N OTICE THAT THE LD CIT(A) HAS NOT ADDRESSED THIS POINT OF THE AO AND INSTEAD PROCEEDED TO DECIDE THE ISSUE ON THE BASIS THAT THERE WAS TEMPORARY STOPPAGE OF BUSINESS,. WHILE THE CASE OF THE AO IS THAT THE ASSESSEE HAS TOTALLY STOPPED THE BUSINESS. BEFORE U S, THE LD A.R SUBMITTED THAT THE ASSESSEE WAS CONSTRAINED TO TRANSFER THE LAND AND WIP AMOUNT TO INVESTMENT ACCOUNT AS PER AS - 13. THIS SUBMISSION APPEARS TO BE A NEW ONE, I.E., THE SAME HAS NOT BEEN SUBMITTED BEFORE THE TAX AUTHORITIES. WE ALSO NOTICE THAT THE LD CIT(A) HAS PASSED A CRYPTIC ORDER WITHOUT DULY ADDRESSING THE CASE OF THE AO. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THIS ISSUE REQUIRES FRESH EXAMINATION AT THE END OF LD CIT(A) IN ALL THE THREE YEARS UNDER CONSIDERATION. 8. AC CORDINGLY WE SET ASIDE THE ORDERS PASSED BY LD CIT(A) ON THIS ISSUE IN ALL THE THREE YEARS UNDER CONSIDERATION AND RESTORE THE SAME TO HIS FILE WITH THE LAXMI ASBESTOSE PRODUCTS LTD. 4 DIRECTION TO DECIDE THE SAME AFRESH BY DULY ADDRESSING THE CASE OF THE AO. THE ASSESSEE SHOULD BE PROV IDED WITH ADEQUATE OPPORTUNITY OF BEING HEARD. 9. IN THE RESULT, ALL THE THREE APPEALS OF THE REVENUE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 26 . 10 .2016 SD/ - SD/ - (SANJAY GARG ) (B.R.BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 26 / 10 / 20 1 6 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. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) PS ITAT, MUMBAI