M/s. Deepsons Southend, New Delhi V. DCIT, New Delhi

ITA 5962/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3922 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 03-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Assessee Lawyers: S C MALHOTRA
• Keywords: Business income; Depreciation; Block assessment
• Section: 43B; 37(1); 139(5)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER I.T.A. NO.5962/DEL/2014 A.Y. : 2010-11 M/S DEEPSONS SOUTHEND, M-10, SOUTH EXTENSION, PART-II, NEW DELHI - 110 049 (PAN: AACFD1758J) VS. DCIT, CIRCLE 32(1), NEW DELHI (ASSESSEE) (RESPONDENT) ASSESSEE BY : SH. S.C. MALHOTRA, CA REVENUE BY : MS. ASHIMA NEB, SR. DR ORDER PER H.S. SIDHU : JM THE ASSESSEE HAS FILED THIS APPEAL AGAINST THE IMPUG NED ORDER DATED 28.8.2014 OF THE LD. CIT(A)-XXVI, NEW DELHI REL EVANT TO ASSESSMENT YEAR 2010-11. 2. THE GROUNDS RAISED IN THIS APPEAL READ AS UNDER: - 1. THAT THE ORDER OF THE LD. CIT(A) IS AGAINST FACTS AND LAW. 2. THAT THE LD. CIT(A) IS NOT JUSTIFIED IN RESTRICTING THE DISALLOWANCE OUT OF LEGAL AND PROFESSIONAL CHARGES AT RS. 4,20,000/- AND IN 2 DETERMINING THE ALLOWABLE EXPENDITURE AT RS. 50,000/- AS AGAINST CLAIM OF RS. 4,70,000/-. 3. THAT THE LD. CIT(A) IS NOT JUSTIFIED IN HOLDING THAT THE ENTIRE EXPENDITURE OF RS. 29,53,959/- UNDER THE HEAD RATES AND TAXES IS NOT ONLY CAPITAL BUT IS PENAL IN NATURE AND NOT ALLOWING THE SAME EITHER AND / OR U/S. 43B AND 24 OF THE INCOME TAX ACT, 1961 AND SUSTAINING THE DISALLOWANCE OF THE ABOVE SAID AMOUNT. 4. THAT THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF RS. 4565/- OUT OF EMPLOYEES CONTRIBUTION TOWARDS EPF AND ESI UNDER SECTION 36(1)(VA) OF THE INCOME TAX ACT, 1961. 5. THAT THE FURTHER GROUNDS SHALL BE SUBMITTED AT THE TIME OF HEARING. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM WHICH IS ENGAGED IN CARRYING ON TH E BUSINESS OF TRADING IN GARMENTS AND ACCESSORIES. IT ALSO DERIVES FROM HOUSE PRORTY. THE ASSESSEE FILED ITS RETURN OF INCOME DEC LARING INCOME OF 3 RS.1,91,40,837/-. THE RETURNED INCOME CONSISTS OF INCOME OF RS. 2,58,02,861/- FROM THE HOUSE PROPERTY AND BUSINESS L OSS OF RS. 46,15,732/-. AFTER CLAIMING SET OFF OF BUSINESS LOS S OF RS. 46,15,732/- AGAINST THE INCOME OF RS. 2,58,02,861/ - FROM THE HOUSE PROPERTY, THE NET CURRENT YEAR INCOME WAS SHOWN AT RS.2,11,87,129/- IN THE COMPUTATION OF INCOME ANNEXE D WITH THE RETURN OF INCOME. THEREAFTER, THE ASSESSEE ALSO CLAI MED SET OFF OF BROUGHT FORWARD DEPRECIATION OF RS.20,46,292/- AGAIN ST THE CURRENT YEAR INCOME OF RS.2,11,87,129/- AND ACCORDINGLY, TH E APPELLANT SHOWED INCOME OF RS.1,91,40,837/- IN THE ORIGINAL R OI. THE ASSESSEE, AFTER RE-APPORTIONING VARIOUS EXPENSES AMO NGST THE INCOME DERIVED FROM THE HOUSE PROPERTY AND BUSINESS, FILED A REVISED COMPUTATION OF INCOME DURING THE ASSESSMENT P ROCEEDINGS VIDE A LETTER DATED 22.02.2013 SHOWING INCOME OF RS.1 ,88,83,889/-. THE REVISED COMPUTATION OF INCOME WAS NOT ACKNOWLEDGE D BY THE AO AS THE SAME WAS NOT IN ACCORDANCE WITH THE PROVISIO NS OF SECTION 139(5) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFE RRED AS THE ACT). THE REVISED COMPUTATION OF INCOME CONSISTS OF IN COME OF RS.2,64,02,406/- FROM THE HOUSE PROPERTY AND BUSINESS LOSS OF RS.54,72,225/-. AFTER CLAIMING SET OFF OF BUSINESS LOSS OF RS.54,72,225/- AGAINST THE INCOME OF RS.2,64,02,406/ - FROM THE HOUSE PROPERTY IN THE REVISED COMPUTATION OF INCOME; THE CURRENT 4 YEAR INCOME WAS SHOWN AT RS.2,09,30,181/-. THEREAFTE R, CLAIMING SET OFF OF BROUGHT FORWARD DEPRECIATION OF RS.20,46,2 92/- AGAINST THE CURRENT YEAR INCOME OF RS.2,09,30,181/-, THE NET INCOME IN THE REVISED COMPUTATION WAS SHOWN AT RS.1,88,83,889/-. T HE CASE WAS PICKED UP UNDER SCRUTINY. ACCORDINGLY, THE AO COMPLE TED THE ASSESSMENT AT AN INCOME OF RS.2,62,64,130/- AND MADE THE VARIOUS ADDITIONS VIDE ORDER DATED 14.3.2014 PASSED U/S. 14 3(3) OF THE ACT. AGAINST THE AFORESAID ASSESSMENT ORDER, ASSESSEE APPE ALED BEFORE THE LD. CIT(A)-XXVI, NEW DELHI, WHO VIDE HIS IMPUGNE D ORDER DATED 28.08.2014 HAS PARTLY ALLOWED THE APPEAL OF THE ASSE SSEE. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE REVENU E IS IN APPEAL BEFORE THE TRIBUNAL. 4. DURING THE COURSE OF HEARING, LD. COUNSEL OF THE ASSESSEE HAS FILED A PAPER BOOK CONTAINING PAGES 1 TO 29 AND STATE D THAT THE GROUND NO. 2 AND 3 HAS BEEN COVERED BY THE ITAT, B BENCH, DELHI IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009-1 0 IN THE CASE DCIT VS. DEEPSONS SOUTHEND VIDE ORDER DATED 30.10.20 15, HENCE, HE REQUESTED TO FOLLOW THE SAME AND THE GROUND NO. 2 & 3 MAY BE ALLOWED. AS REGARDS GROUND NO. 4 RELATING TO DISALLO WANCE OF RS.4565/- U/S. 43B OF THE ACT READ WITH SECTION 2 CLA USE 24 SUB CLAUSE (X) OF THE INCOME TAX ACT, 1961 BEING PAYMENT S MADE LATE ON ACCOUNT OF ESI AND PROVIDENT FUND, HE SUBMITTED THA T THE 5 PAYMENTS WERE MADE BEFORE FILING OF THE DUE DATE OF THE RETURN OF INCOME AND IS ALLOWABLE UNDER SECTION 43B AND RELIED UPON THE FOLLOWING CASE LAWS:- - CIT VS. AIMIL LTD. (2010) 321 ITR 508 ((DEL) - CIT VS. ALOM EXTRUSIONS LTD. (2009) 319 ITR 306 5. ON THE CONTRARY, LD. DR RELIED UPON THE ORDER OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RELEV ANT RECORDS, ESPECIALLY THE IMPUGNED ORDER AS WELL AS THE ORDER OF THE ITAT, B BENCH, DELHI IN ASSESSEES OWN CASE FOR TH E ASSESSMENT YEAR 2009-10 IN THE CASE DCIT VS. DEEPSONS SOUTHEND VIDE ORDER DATED 30.10.2015. WE FIND THAT TRIBUNALS HAS DECIDE D THE SIMILAR AND IDENTICAL ISSUES IN THE PREVIOUS ASSESSMENT YEAR 2009-10 VIDE ORDER DATED 30.10.2015, AS RAISED IN GROUND NO. 2 IN THIS APPEAL. THE RELEVANT FINDING OF THE TRIBUNAL READ AS UNDER: - 8. IN GROUND NO. 3, THE REVENUE HAS CHALLENGED THE DELETION OF DISALLOWANCE OF RS.3,00,000/- MADE BY T HE AO U/S. 37(1) OF THE ACT. IN THE ASSESSMENT PROCEEDING S, THE AO NOTICED THAT THE ASSESSEE HAD PAID A SUM OF RS.3,00 ,000/- TO M/S. S.R. KAPOOR & COMPANY FOR APPEARING IN BLOC K 6 ASSESSMENT PROCEEDINGS. THE AO OBSERVED THAT SINCE NO BLOCK ASSESSMENT ORDER WAS PASSED IN THE CASE OF ASS ESSEE FIRM, THE EXPENSES BOOKED BY THE ASSESSEE MIGHT HAV E RELATED TO THE BLOCK ASSESSMENT COMPLETED IN THE CA SE OF THE PARTNER OR IN THE CASE OF OTHER CONCERN OF THE GROUP. HE, THEREFORE, DISALLOWED THE EXPENSES U/S. 37(1) OF THE ACT. THE LD.CIT(A) ALLOWED THE CLAIM OF ASSESSEE STATING THAT THE APPEALS AGAINST THE BLOCK ASSESSMENT PROCEEDINGS AR E PENDING AT THE STAGE OF TRIBUNAL AND THE BILL OF TH E CONSULTING FIRM NARRATING THE LEGAL FEE FOR REPRESE NTATION IN BLOCK ASSESSMENT PROCEEDINGS, IS ADDRESSED TO TH E ASSESSEE FIRM. 9. THE LD. DR CONTENDED THAT THE BLOCK ASSESSMENT PROCEEDINGS, INITIATED AS A RESULT OF SEARCH DATED 26.02.02, STOOD COMPLETED ON 27.02.2004 AND EVEN THE APPEAL B EFORE THE CIT(A) STOOD DISPOSED OF ON 20.12.2004. THEREFO RE, THERE IS NO REASON TO MAKE PAYMENT IN THE A.Y. 2009 -10 WITH RESPECT TO SUCH PROCEEDINGS WHICH STOOD COMPLETE D 3- 4 YEARS BACK. ON THE OTHER HAND, THE LD. COUNSEL FO R THE ASSESSEE CONTENDED THAT THE APPEALS AGAINST BLOCK ASSESSMENT PROCEEDINGS ARE STILL PENDING WITH ITAT A ND 7 THEREFORE, IT CANNOT BE SAID THAT THE IMPUGNED AMOU NT PAID TO THE CONSULTING FIRM DURING THE YEAR WAS NOT FOR THE PURPOSE OF BUSINESS OF THE FIRM. 10. HAVING CONSIDERED THE RIVAL SUBMISSION, WE FIND THAT THE NARRATION MADE ON BILL NO. SRK/4/(08-09)/154 DA TED 30.07.2008 IS TO FEE FOR REPRESENTATION IN BLOCK ASSESSMENT PROCEEDINGS BEFORE VARIOUS INCOME-TAX AUTHORITIES (IN RESPONSE TO NOTICES). WE HAVE PERU SED THE BLOCK ASSESSMENT ORDER, WHICH STOOD COMPLETED ON 27.02.2004. EVEN THE APPEALS AGAINST THE BLOCK ASSE SSMENT PROCEEDINGS STOOD DISPOSED OF ON 20.12.2004. THIS S HOWS THAT THE WORK ASSIGNED TO THE CONSULTING FIRM WAS COMPLETED IN F.Y. 2004-05. THE ASSESSEE HAS MAINTAI NED THE BOOKS OF ACCOUNT IN MERCANTILE SYSTEM AND HE DI D NOT MAKE ANY PROVISION IN THIS REGARD IN HIS BOOKS OF A CCOUNT. THEREFORE, THERE APPEARS NO GOOD REASON TO MAKE PAY MENT OF LEGAL FEE DURING THE YEAR FOR SUCH WORK WHICH STOO D COMPLETED 3-4 YEARS BEFORE THE PAYMENT OF SUCH FEE. THE APPEAL PROCEEDINGS BEFORE THE TRIBUNAL OR FURTHER A PPEAL PROCEEDINGS BEFORE THE HIGHER COURTS, TO OUR MIND, WOULD NOT BE COVERED BY THE NARRATION GIVEN IN THE ABOVE BILL. 8 THERE IS NO AGREEMENT ON RECORD TO INDICATE THAT TH E ASSESSEE MAY MAKE SUCH PAYMENTS WHENEVER HE THINKS F IT. THE ASSESSEE ALSO DID NOT EXPLAIN WHETHER ANY PROVIS ION FOR PAYMENT OF PRECEDING YEARS EXPENSES IN SUBSEQUENT YEARS, WAS MADE IN THE BOOKS OF ACCOUNT. IT IS ALSO A THING OF COMMON PRACTICE THAT NO CONSULTANT WOULD LEAVE ITS F EE UNPAID FOR SUCH A LONG PERIOD AFTER COMPLETION OF WO RK ASSIGNED TO HIM AS PER NARRATION GIVEN IN THE BILL. WE, THEREFORE, FIND THAT THE LD. CIT(A) HAS COMMITTED A N ERROR WHILE DELETING THE DISALLOWANCE MADE BY THE AO. ACCORDINGLY, GROUND NO. 3 OF APPEAL OF REVENUE STAN DS ALLOWED. 6.1 WE FURTHER FIND THAT THE TRIBUNAL VIDE ORDER DATED 30.10.2015 HAS DECIDED THE SIMILAR IN ASSESSEES OWN CASE, AS RAISED IN GROUND NO. 3 IN THIS APPEAL AS UNDER:- 13. GROUND NO. 5 CHALLENGES THE DELETION OF ADDITI ON OF RS.16,04,832/- MADE BY THE AO ON ACCOUNT OF EXPENSE S PERTAINING TO RATES AND TAXES U/S. 37(1) OF THE ACT . THE ASSESSEE DEBITED RS.16,04,832/- ON ACCOUNT OF EXPEN SES INCURRED TOWARDS RATES & TAXES, OUT OF WHICH A SUM OF RS.10,12,355/- WERE ATTRIBUTED TOWARDS PROPERTY INCO ME 9 AND REMAINING AMOUNT OF RS.5,92,477/- WAS CLAIMED AGAINST BUSINESS INCOME. THE ASSESSING OFFICER DISA LLOWED ALL THESE EXPENSES STATING THAT THE PAYMENTS OF RS.16,04,832/- WERE MADE TO MCD NOT BY THE ASSESSEE BUT BY SISTER CONCERN M/S. DEEPSONS DEPARTMENTAL STORES . IT WAS ALSO OBSERVED THAT THESE PAYMENTS WERE NOT IN THE NATURE OF HOUSE TAX BUT WERE CHARGES LEVIED BY MCD I N RESPECT OF COMPOUNDING AND REGISTRATION FEE FOR COMMERCIAL ACTIVITIES. THE AO THEREFORE, HELD THAT SINCE THESE EXPENSES WERE IN THE NATURE OF PENALTY IMPOSED BY MCD FOR ILLEGAL AND UNAUTHORIZED CONSTRUCTION, THES E EXPENSES WERE COVERED UNDER THE EXPLANATION TO SECTI ON 37(1) AND WERE NOT ALLOWABLE EXPENDITURE. THE LD. CIT (A) DELETED THIS DISALLOWANCE OBSERVING THAT IT IS IMMAT ERIAL WHO MAKES THE PAYMENT ON BEHALF OF THE ASSESSEE. WHA T IS TO BE SEEN IS THAT WHETHER THE PAYMENT RELATES TO A SSESSEE OR NOT AND HAS BEEN DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. THE LD.CIT(A) HAS ALSO GONE THROUGH THE LE DGER ACCOUNT OF RATES AND TAXES IN THE ASSESSEES BOOKS WHEREIN DEEPSONS DEPARTMENTAL STORES WAS SHOWN AS CREDITOR. T HE BILLS ISSUED BY MCD WERE ALSO FOUND IN RESPECT TO TH E 10 ASSESSEES BUSINESS PREMISES. HE FURTHER OBSERVED T HAT THE PAYMENTS WERE MADE BASED ON LAWS OF THE GOVERNMENT A ND IN CONNECTION WITH THE BUSINESS. THE BILLS OR RECEIP TS OF THE PAYMENTS NOWHERE SHOW THAT THE ALLEGED PAYMENTS WERE IN THE NATURE OF PENALTY. HE, THEREFORE, DELETED TH E DISALLOWANCE. 6.2 AFTER PERUSING THE AFORESAID FINDINGS OF THE I TAT, WE ARE OF THE CONSIDERED VIEW THAT THE ISSUES RAISED IN GROUND N O. 2 & 3 ARE SQUARELY COVERED BY THE AFORESAID ORDER OF THE TRIB UNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009-10, HENCE, RESPECTFULLY FOLLOWING THE ABOVE PRECEDENT, WE ALLOW TH E GROUND NO. 2 & 3 RAISED BY THE ASSESSEE. 7. WITH REGARD TO GROUND NO. 4 RELATING TO CONFIRMATI ON OF DISALLOWANCE OF RS.4565/- U/S. 43B OF THE ACT READ W ITH SECTION 2 CLAUSE 24 SUB CLAUSE (X) OF THE INCOME TAX ACT, 1961 BEING PAYMENTS MADE LATE ON ACCOUNT OF ESI AND PROVIDENT FU ND IS CONCERNED, WE FIND THAT IN THIS CASE THE PAYMENTS WERE M ADE BEFORE FILING OF THE DUE DATE OF THE RETURN OF INCOME AND H ENCE THE SAME IS ALLOWABLE UNDER SECTION 43B. OUR AFORESAID VIEW IS F ORTIFIED BY THE DECISION OF THE HONBLE SUPREME COURT OF INDIA IN TH E CASE OF CIT VS. ALOM EXTRUSIONS LTD. (2009) 319 ITR 306 WHEREIN , IT HAS BEEN 11 HELD THAT THE EMPLOYER'S CONTRIBUTION WAS LIABLE TO BE ALLOWE D, SINCE IT WAS DEPOSITED BY THE DUE DATE FOR THE FILING OF THE RET URN. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19/01/2018. SD/- SD/- [O.P. KANT] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 19/01/2018 SRBHATNAGAR COPY FORWARDED TO: - 1. ASSESSEE - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHE S 12