Dy.Commissioner of Income Tax-5, Kanpur V. M/s Jagran TV Pvt. Ltd., Kanpur

ITA 600/LKW/2014

• Counselvise Citation: 60023714 RSA 2014
• Duration Of Justice: 1 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 18-09-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 07-07-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: THARANDEEP SINGH
• Keywords: Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER ITA NO.600/LKW/2014 ASSESSMENT YEAR:2006-07 DY. CIT-5 KANPUR V. M/S JAGRAN TV PVT. LTD. KANPUR TAN/PAN:AABCJ4394A (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI. RANJAN SRIVASTAVA, D.R. RESPONDENT BY: SHRI. THARANDEEP SINGH, ADVOCATE DATE OF HEARING: 18 09 2015 DATE OF PRONOUNCEMENT: 07 10 2015 O R D E R PER SUNIL KUMAR YADAV: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) ON A SOLITARY GROUND THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING RELIEF OF RS.44,29,871/- OUT OF ADDITION OF RS.1,25,35,118/- ON ACCOUNT OF PRE-OPERATIVE EXPENSES MADE BY THE ASSESSING OFFICER WITHOUT APPRECIATING THAT SUCH EXPENSES WERE ADDED BY THE ASSESSEE ITSELF DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND SUBSEQUENTLY CHALLENGED IN APPEAL. 2. THE FACTS IN BRIEF BORNE OUT FROM THE RECORD ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF BROAD CASTING OF NEWS AND CURRENT AFFAIRS - CHANNEL - 7 JTV. IT WAS THE FIRST YEAR OF THE OPERATION OF THE ASSESSEE COMPANY. THE ASSESSEE COMPANY OWNS A 24 HOURS NATIONAL HINDI CHANNEL IBN-7. THE MAIN SOURCE OF REVENUE OF THE ASSESSEE COMPANY IS SALE OF FREE COMMERCIAL TIME FOR ADVERTISEMENT. :- 2 -: DURING THE YEAR UNDER CONSIDERATION, THE TOTAL RECEIPTS OF THE ASSESSEE FROM SUCH ACTIVITIES ARE TO THE EXTENT OF RS.7,33,43,191/-. BESIDES THIS, THE ASSESSEE HAS ALSO DECLARED INCOME UNDER THE HEAD OTHER INCOME WHICH INCLUDES INTEREST ON BANK DEPOSITS, RENTAL INCOME AND BALANCES WRITTEN BACK. AGAINST THIS, THE ASSESSEE HAS CLAIMED THE EXPENDITURE OF RS.48,30,21,149/- RESULTING IN A NET LOSS OF RS.40,66,60,878/-. DURING THE ASSESSMENT PROCEEDINGS, IT WAS OBSERVED THAT THE ASSESSEE HAD CLAIMED AN EXPENDITURE OF RS.1,25,35,118/- ON ACCOUNT OF PRE-OPERATIVE EXPENSES WRITTEN BACK. A PERUSAL OF THE TAX AUDIT REPORT OF THE ASSESSEE COMPANY SHOWS THAT THE AMOUNT OF RS.1,25,35,118/- HAS BEEN SHOWN IN COLUMN-22(B) WHERE THE DETAILS/PARTICULARS OF THE INCOME OR EXPENDITURE OF PRIOR PERIOD CREDIT OR DEBITED TO THE PROFIT AND LOSS ACCOUNT WAS TO BE GIVEN. UNDER THESE CIRCUMSTANCES VIDE ORDER SHEET ENTRY DATED 18.09.2008, THE ASSESSEE WAS SPECIFICALLY REQUIRED BY THE ASSESSING OFFICER TO EXPLAIN WHY THE PRE-OPERATIVE EXPENSES OF RS.1,25,35,110/- WRITTEN OFF AND DEBITED TO THE PROFIT AND LOSS ACCOUNT MAY NOT BE DISALLOWED AND ADDED TO THE TOTAL INCOME, AS THE SAME WERE INCURRED BEFORE THE START OF THE BUSINESS. IN COMPLIANCE THERETO VIDE LETTER DATED 21.10.2008 FILED ON 22.10.2008, THE ASSESSEE FURNISHED A REVISED COMPUTATION OF INCOME. IN THE REVISED COMPUTATION, THE ASSESSEE HAS ADDED BACK THE AMOUNT OF RS.1,25,35,118/- UNDER THE HEAD PRE- OPERATIVE EXPENSES WRITTEN OFF AND HAS NOT CLAIMED IT TO BE A REVENUE EXPENDITURE WHILE FILING THE REVISED COMPUTATION OF INCOME. THE ASSESSEE VIDE ITS LETTER DATED 21.10.2008 SUBMITTED AS UNDER:- IT IS RESPECTFULLY AND VOLUNTARILY SUBMITTED WITHOUT ANY PRIOR NOTICE OR QUERY THAT THERE ARE SOME MISTAKES IN OUR COMPUTATION OF ASSESSABLE LOSS AND AS PER OUR INCOME-TAX RETURN'. :- 3 -: THEREFORE, OUR ASSESSABLE LOSS MAY PLEASE BE REDUCED FOR DIFFERENCE BETWEEN ASSESSABLE LOSS AS PER OUR INCOME TAX RETURN AND REVISED CHART OF ASSESSABLE LOSS. WE HONESTLY HOPE THAT THIS WILL MEET YOUR REQUIREMENT. WE WOULD BE TOO GLAD TO SUBMIT ANY FURTHER CLARIFICATIONS, INFORMATION OR DETAILS IF REQUIRED BY YOUR HONOR.' 3. FROM THE ABOVE LETTER, THE ASSESSING OFFICER HAS HELD THAT THE ASSESSEE HAS AGREED TO OFFER AN AMOUNT OF RS.1,25,35,118/- AS ITS INCOME AND HAS WITHDRAWN THE CLAIM OF EXPENSES OF RS1,25,35,118/-, AS THE SAME WAS INCURRED BEFORE THE START OF THE BUSINESS. ACCORDINGLY, ADDITION OF THE SAME WAS MADE. 4. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WITH THE SUBMISSION THAT THE ASSESSEE HAS REVISED ITS CLAIM ON THE BASIS OF ADVICE THAT THE CONCESSION MADE IS NOT ONLY CONTRARY TO THE FACTS ON RECORD BUT THE SAME WAS ALSO LEGALLY INCORRECT. ACCORDINGLY THE DETAILS OF CAPITAL WORK IN PROGRESS WHICH INCLUDED THE SO CALLED PRE-OPERATION EXPENSES, WAS FURNISHED BEFORE THE LD. CIT(A). HE HAS ALSO PLACED RELIANCE UPON THE AUDITORS REPORT. FURTHER IT WAS CONTENDED THAT THE EXPENSES WERE INCURRED AFTER SETTING UP BUT BEFORE COMMENCEMENT OF THE BUSINESS. HE HAS ALSO PLACED RELIANCE UPON VARIOUS JUDICIAL PRONOUNCEMENTS. IT WAS FURTHER CONTENDED THAT THE ASSESSEE-COMPANY SUCCESSFULLY LAUNCHED ITS 24 HOURS HINDI NEWS CHANNEL JTV CHANNEL 7 ON 27.3.2015 AND AFTER SUCCESSFUL TEST LAUNCH, IT STARTED ITS 24 HOURS COMMERCIAL OPERATION FROM 9.4.2005. ON 28.1.2005, THE MINISTRY OF INFORMATION AND BROADCASTING GRANTED ITS PERMISSION TO UPLINK THE TV CHANNEL. COPY OF APPROVAL LETTER WAS ALSO PLACED BEFORE THE LD. CIT(A). HE FURTHER PLACED RELIANCE UPON THE AUDITORS NOTE CERTIFYING THAT THE EXPENDITURE DIRECTLY RELATING TO :- 4 -: CONSTRUCTION ACTIVITY IS CAPITALIZED AND INDIRECT EXPENDITURE INCURRED DURING CONSTRUCTION PERIOD IS CAPITALIZED AS PART OF THE INDIRECT CONSTRUCTION COST TO THE EXTENT TO WHICH THE EXPENDITURE IS INDIRECTLY RELATED TO CONSTRUCTION OR IS INCIDENTAL THERETO. IN THE LIGHT OF THESE FACTS, IT WAS CONTENDED THAT THE EXPENDITURE WAS INCURRED BY THE ASSESSEE POST SETTING UP OF ITS BUSINESS. THE LD. CIT(A) CALLED A REMAND REPORT FROM THE ASSESSING OFFICER, ON WHICH COUNTER COMMENTS OF THE ASSESSEE WAS ALSO CALLED. BEING CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE, THE LD. CIT(A) HAS HELD THAT ALL THESE EXPENSES HAVE BEEN INCURRED AFTER 1.4.2005 I.E. AFTER SETTING UP OF THE BUSINESS AND AS SUCH ARE ALLOWABLE AS PERMISSIBLE DEDUCTION. THE ASSESSING OFFICER WAS ACCORDINGLY DIRECTED TO ALLOW DEDUCTION OF RS.44,29,871/-. ACCORDINGLY THE APPEAL WAS PARTLY ALLOWED. 5. AGGRIEVED, THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSION THAT BEFORE THE ASSESSING OFFICER ASSESSEE ITSELF HAS CONCEDED FOR ADDITION HAVING ACCEPTED THAT THE EXPENSES ARE PRO-OPERATIVE EXPENSES. ON THE BASIS OF THE SUBMISSION OF THE ASSESSEE, THE ADDITION WAS MADE. THEREAFTER HE TOOK A SUMMERSAULT BEFORE THE LD. CIT(A), BUT THE RELEVANT EVIDENCE WAS NOT FILED BEFORE THE ASSESSING OFFICER DURING THE COURSE OF REMAND PROCEEDINGS. THE LD. CIT(A) HAS IGNORED THE REMAND REPORT AND HAS REDUCED THE ADDITION. THEREFORE, THE ORDER OF THE LD. CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 6. THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT ALL THE RELEVANT EVIDENCE WAS PLACED BEFORE THE ASSESSING OFFICER DURING THE COURSE OF REMAND PROCEEDINGS. 7. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT THE ASSESSEE HAS SIMPLY :- 5 -: FILED THE COPY OF THE REMAND REPORT SUBMITTED BY THE ASSESSING OFFICER TO THE LD. CIT(A). HE HAS NOT FILED EVEN A SINGLE DOCUMENT BEFORE US ON THE BASIS OF WHICH THE LD. CIT(A) WAS CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE. DURING THE COURSE OF HEARING, A SPECIFIC QUERY WAS RAISED FROM THE LD. COUNSEL FOR THE ASSESSEE TO FURNISH ANY ACKNOWLEDGEMENT OF THE PRODUCTION OF THE DOCUMENTS, WHICH WERE FILED BEFORE THE LD. CIT(A) ON THE BASIS OF THE REMAND REPORT WAS CALLED, BEFORE THE ASSESSING OFFICER, BUT HE HAS SIMPLY PLACED RELIANCE UPON THE FINDINGS OF THE LD. CIT(A), AND NO EFFORT WAS MADE TO PLACE THE RELEVANT EVIDENCE BEFORE THE TRIBUNAL SO THAT THE CONTENTION OF THE ASSESSEE CAN BE APPRECIATED. 8. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT SINCE THIS APPEAL IS FILED BY THE REVENUE, IT IS THE DUTY OF THE REVENUE TO FILE ALL THE RELEVANT EVIDENCE BEFORE THE TRIBUNAL, BUT THIS CONTENTION OF THE ASSESSEE CANNOT BE ACCEPTED, AS THE TRIBUNAL IS THE LAST FACT FINDING BODY AND IS SUPPOSED TO EXAMINE ALL THE RELEVANT EVIDENCE ON THE BASIS ON WHICH THE LD. CIT(A) HAS GIVEN A FINDING. THE ASSESSING OFFICER HAS CATEGORICALLY MENTIONED IN HIS ORDER THAT THE RELEVANT EVIDENCE WAS NOT PRODUCED BEFORE HIM. SINCE IT IS A QUESTION OF FACT AS TO WHETHER THE EXPENSES WERE INCURRED BEFORE SETTING UP OF BUSINESS OR NOT, AND MORE SO BEFORE THE ASSESSING OFFICER THE ASSESSEE ITSELF HAS CONCEDED THAT THESE EXPENSES ARE PRE-OPERATIVE EXPENSES, IT CANNOT BE ALLOWED IN THE INSTANT ASSESSMENT YEAR WITHOUT VERIFYING THE CORRECT FACTS. IN THE LIGHT OF THESE FACTS, IT HAS BECOME NECESSARY FOR THE TRIBUNAL TO EXAMINE THE RELEVANT EVIDENCE ON THE BASIS OF WHICH THE ASSESSEE HAS CLAIMED THAT THESE EXPENSES WERE INCURRED AFTER SETTING UP AND BEFORE COMMENCEMENT OF BUSINESS. SINCE THE ASSESSEE HAS NOT FILED THE RELEVANT EVIDENCE BEFORE THE TRIBUNAL, WE ARE OF THE VIEW THAT THIS ISSUE REQUIRES A FRESH ADJUDICATION BY THE ASSESSING OFFICER. WE ACCORDINGLY SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE IT TO THE FILE OF THE :- 6 -: ASSESSING OFFICER WITH A DIRECTION TO RE-EXAMINE THE ISSUE AFRESH IN THE LIGHT OF THE DOCUMENTS FILED BY THE ASSESSEE. ACCORDINGLY, THE APPEAL OF THE REVENUE STANDS ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, APPEAL OF THE REVENUE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTIONED PAGE. SD/- SD/- [A. K. GARODIA] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 7 TH OCTOBER, 2015 JJ:2109 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR