NANDA GOPAL GANDHAM, NEW DELHI V. ITO, WARD- 62(1), NEW DELHI

ITA 6108/DEL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2133 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 29-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAUSHLENDRA TIWARI
• Keywords: Depreciation; Opportunity of being heard
• Section: 37

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH D+SMC, NEW DELHI BEFORE : SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 6108/DEL/2017 ASSESSMENT YEAR: 2013-14 MR. NANDA GOPAL GANDHAM, C - 47, LG-II, MALVIYA NAGAR, NEW DELHI. PAN- AEAPG 7392H (APPELLANT) VS. INCOME - TAX OFFICER, WARD 62(1), NEW DELHI (RESPONDENT) ASSESSEE BY SH. RAJEEV MAGO, C.A. REVENUE BY SH. KAUSHLENDRA TIWARI, SR. DR ORDER PER L.P. SAHU, A.M.: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A)- 20, NEW DELHI DATED 31.07.2017 FOR THE ASSESSMENT Y EAR 2013-14 ON THE FOLLOWING GROUNDS : 1. THE LEARNED CIT(APPEALS) HAS ERRED IN PASSING IMPU GNED ORDER WITHOUT TAKING INTO CONSIDERATION THE EXPLANATIONS, EVIDENCE, EXECUTIVE INSTRUCTIONS AND LEGAL PROVISIONS APPLICABLE AND BY SIMPLY REITERATING THE OBSERVATIONS OF A.O. WHICH ACTION OF THE CIT(APP EALS) IS ARBITRARY UNJUST AND AGAINST THE FACTS OF THE CASE. 2. THE LEARNED CIT(APPEALS) HAS ERRED IN CONFIRMING T HE ADDITION OF RS.6,63,624.00 MADE BY THE A.O. SUBMISSIONS, EXPLAN ATION AND LEGAL DATE OF HEARING 14.08.2018 DATE OF PRONOUNCEMENT 04 .09.2018 ITA NO. 6108/DEL/2017 2 PROVISIONS WHICH ACTION OF BOTH THE AUTHORITIES BEL OW ARE ARBITRARY, UNJUST AND AGAINST THE FACTS OF THE CASE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED RETURN OF INCOME ON 30.09.2013 DECLARING AN INCOME OF RS.4,29,670/-. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND STATUTORY NOTICES WERE ISSUED TO THE ASSESSEE. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF OVERHEAD ELECTRIFICATION CONTRACTS FOR INDIAN RAILWAYS AND THE ASSESSEE IS A PROPRIETOR OF TWO FIRMS, NAMELY, TALUPULA ENGINEERING CO. (IN SHORT TEC) A ND M/S. TALUPULA INDUSTRIES (IN SHORT TI). THE ASSESSEE HAS SHOWN INCOME OF RS.10,93,289/- FROM TEC AND HAS SHOWN LOSS OF RS.6,63,624/- FROM T I. ON GOING THROUGH THE PROFIT AND LOSS ACCOUNT OF TI, THE AO NOTICED T HAT NO WORK HAS BEEN DONE IN THIS UNIT AND THE ADMINISTRATIVE EXPENSES AND DE PRECIATION ON ASSETS HAVE BEEN CLAIMED RESULTING INTO LOSS OF RS.6,63,62 4/-, THE DETAILS OF WHICH ARE AS UNDER : SALARIES WATCH AND WAD STAFF 3,98,363.00 ELECTRICITY CHARGES 38,353.00 STORES & CONSUMABLES 56,954.00 OFFICE EXPENSES 8,399.00 LABOUR CHARGES 38,873.00 DEPRECIATION ON ASSETS 1,22,682.00 -------------------------------------------------- ----------- TOTAL 6,63,624.00 -------------------------------------------------- --------------- ON BEING ASKED FOR JUSTIFICATION OF THESE EXPENSES, THE ASSESSEE FILED ITS REPLY VIDE LETTER DATED 14.03.2016. THE AO NOTICED FROM THE LETTER SUBMITTED BY THE ASSESSEE THAT M/S. TI HAS NOT DONE ANY WORK FROM LAST FEW ITA NO. 6108/DEL/2017 3 YEARS. THEREFORE, THE AO DISALLOWED THE EXPENSES CL AIMED FOR M/S. TI U/S. 37 OF THE ACT AND ADDED THE ABOVE EXPENSES TO THE I NCOME OF ASSESSEE, THEREFORE, DISALLOWING THE LOSS CLAIMED BY THE ASSE SSEE. 3. IN APPEAL, THE ASSESSEE SUBMITTED A WRITTEN REPL Y BEFORE THE LD. CIT(A) ON DIFFERENT DATES AND RELIED ON SOME CASE LAWS ALS O. THE ASSESSEE ALSO SUBMITTED TAX AUDIT REPORT U/S. 44AB OF M/S. TEC ON LY, IN WHICH THERE WAS NO MENTION OF ANY ACTIVITY OR CLAIM OF EXPENDITURE RELATING TO M/S. TI. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE GUIDANCE NOTE ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANT OF INDIA, PARA 5.19 OF THE TAX AUDIT REPORT U/S. 44AB OF THE ACT ( REVISED 2013 EDITION), OBSERVED THAT THERE IS NO SUBSTANCE IN THE SUBMISSI ONS MADE BY THE ASSESSEE REGARDING THE LOSS CLAIMED FOR M/S. TI. AC CORDINGLY, HE CONFIRMED THE ADDITION MADE BY THE AO. AGGRIEVED, THE ASSESSE E IS IN APPEAL BEFORE THE TRIBUNAL. 4. THE LD. AR OF THE ASSESSEE REITERATED THE SUBMIS SIONS MADE BEFORE THE LOWER AUTHORITIES AND ALSO SUBMITTED A PAPER BOOK A ND RELIED ON SOME CASE LAWS, WHICH ARE PLACED ON RECORD. REFERRING TO PAGE 38 OF THE PAPER BOOKS, WHICH IS THE DETAILS OF ADMINISTRATIVE EXPENSES AND ALSO PAGE 36, WHICH ARE THE DETAILS OF FIXED ASSETS AND DEPRECIATION, HE SU BMITTED THAT THE ASSESSEE HAS MAINTAINED REGULAR BOOKS OF ACCOUNT IN RESPECT TO M/S. TI, BUT DUE TO SUSPENSION OF BUSINESS IN THIS UNIT, NO AUDIT WAS C ARRIED OUT BY THE CHARTERED ACCOUNTANT. THEREFORE, THE ASSESSEE IS EL IGIBLE TO CLAIM SET OFF OF LOSSES FROM ONE UNIT TO OTHER UNIT. THE AR ALSO PRA YED THAT THE MATTER MAY ITA NO. 6108/DEL/2017 4 BE SET ASIDE TO THE AO FOR VERIFICATION OF THE EXPE NDITURE ACTUALLY INCURRED BY THE ASSESSEE. 5. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE R OF THE LOWER AUTHORITIES AND SUBMITTED THAT AS PER SECTION 37, T HE ASSESSEE IS NOT ELIGIBLE TO CLAIM EXPENDITURE INCURRED FOR THE CLOSED UNIT. THE ASSESSEE HAS ALSO SUBMITTED BEFORE THE LOWER AUTHORITIES THAT NO ANY ACTIVITY HAS BEEN CARRIED OUT FROM THE LAST FEW YEARS, WHICH SHOWS THAT THE U NIT WAS CLOSED. 6. AFTER HEARING BOTH THE SIDES AND PERUSING THE EN TIRE MATERIAL ON RECORD, WE OBSERVE THAT OUT OF TWO UNITS, ONE, M/S. TEC WAS AUDITED BY THE CHARTERED ACCOUNTANT, BUT THE OTHER, M/S. TI WAS NO T GOT AUDITED. ON A QUERY BY THE BENCH, THE LD. AR OF THE ASSESSEE SUBM ITTED THAT COMPLETE BOOKS OF ACCOUNT HAVE BEEN MAINTAINED FOR THE UNIT, NAMELY, M/S. TI AND THE EXPENDITURE SO INCURRED ARE VERIFIABLE THEREFROM. I T IS NOT THE CASE OF THE ASSESSEE THAT THE SECOND UNIT OF THE ASSESSEE, I.E. , M/S. TI STOOD CLOSED ONCE FOR ALL. MERELY BECAUSE THERE WAS NO BUSINESS ACTIV ITY IN THE SAID UNIT, IT CANNOT BE SAID THAT THE ASSESSEE WOULD HAVE NO INCU RRED ANY EXPENDITURE ON SUCH UNIT. ON THIS ASPECT, THE ASSESSEE HAS ALSO RE LIED ON VARIOUS CASES LAWS BEFORE US. IN PRESENCE OF THESE FACTS, WE RESTORE T HE MATTER BACK TO THE FILE OF THE AO TO DECIDE THE ISSUE AFRESH AFTER MAKING PROP ER VERIFICATION OF THE EXPENDITURE INCURRED BY THE ASSESSEE FROM THE BOOKS OF ACCOUNTS SAID TO HAVE BEEN MAINTAINED BY THE ASSESSEE OR OTHERWISE, AS THE AO DEEMS FIT. IN CASE, THE EXPENDITURE ACTUALLY INCURRED BY THE ASSE SSEE ARE FOUND VERIFIABLE, THE AO SHALL DECIDE THE ISSUE IN ACCORDANCE WITH LA W AFTER CONSIDERING ITA NO. 6108/DEL/2017 5 VARIOUS DECISIONS RELIED BY THE ASSESSEE. NEEDLESS TO SAY, THE ASSESSEE SHALL BE GIVEN REASONABLE OPPORTUNITY OF BEING HEARD. ACC ORDINGLY, THE APPEAL OF THE ASSESSEE DESERVES TO BE ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH SEPTEMBER, 2018. SD/- SD/- (AMIT SHUKLA) (L.P. S AHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 4 TH SEPTEMBER, 2018 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI