INDIAN LEAD LTD, THANE V. DCIT RG 3(2), MUMBAI

ITA 6143/MUM/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70826 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 07-08-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 10-08-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: PRAVIN KHANNA IZRFKHZ DH LS
• Keywords: Business income; Business expenditure; Additional evidence; Revenue expenditure; Capital expenditure
• Section: 68; 144

Judgement Text

M/S INDIAN LEAD LIMITED - 1 - VK;DJ VIHYH; VF/KDJ.K VKBZ U;K;IHB EQACBZ ESAA IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MU MBAI JH JKTSUNZ FLAG YS[KK LNL; ,OA JH VFER 'KQDYK U;KF;D LNL; DS LE{ K BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA JUDICIAL MEMBER VK;DJ VIHY LA[;K /ITA NO.6143/MUM/2010 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR:- 2006-07 M/S INDIAN LEAD LIMITED GOKUL NAGAR, L.B.S. MARG, MAJIWADA, THANE 400 061. CUKE@ VS. DCIT RG 3(2) AAYKAR BHAVAN, M.K. ROAD, MUMBAI 400 061. PAN:- AAACI0379K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VIHYKFKHZ DH VKSJ LS @ APPELLANT BY SHRI PRAVIN KHANNA IZR;FKHZ DH VKSJ LS @ RESPONDENT BY SHRI O.P. SINGH VKNS'K@ VKNS'K@ VKNS'K@ VKNS'K@ ORDER PER RAJENDRA SINGH, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 14.10.2009 OF CIT(A) FOR THE ASSESSMENT YEAR 2006-0 7. THE ASSESSEE IN THIS APPEAL HAS RAISED DISPUTES ON TWO DIFFERENT GROUNDS WHICH RELATE TO DISALLOWANCE OF EXPENSES AND ADDITION ON ACCOUNT OF LOANS U/S 68 OF THE IT ACT. 2. WE FIRST TAKE UP THE DISPUTE RELATING TO DISALLO WANCE OF EXPENSES. THE AO DURING THE ASSESSMENT PROCEEDINGS NOTED THAT DES PITE SEVERAL OPPORTUNITIES NOBODY APPEARED ON BEHALF OF THE ASSE SSEE TO FURNISH DETAILS AND EVIDENCES. THE AO, THEREFORE, COMPLETED ASSESSM ENT EX-PARTE U/S 144 OF THE INCOME TAX ACT. THE AO NOTED THAT THE ASSESSEE HAD CLAIMED BUSINESS EXPENSES OF RS. 3693669/- BUT NO BUSINESS ACTIVITY HAD BEEN CARRIED OUT LQUOKBZ DH RKJH[K@ DATE OF HEARING 07-08-2013 ?KKS'K.KK DH RKJH[K@ DATE OF PRONOUNCEMENT 14-8-2013 M/S INDIAN LEAD LIMITED - 2 - DURING THE YEAR. HE, THEREFORE, ALLOWED ONLY THE MO NITORY EXPENSES REQUIRED FOR RUNNING THE COMPANY AT RS. 1,00,000/- AND THE B ALANCE CLAIM WAS DISALLOWED. 3. THE ASSESSEE DISPUTED THE DECISION OF AO AND SUB MITTED BEFORE CIT(A) THAT THE ASSESSEE COMPANY WAS UNDER LOCK OUT AND HA D BEEN DECLARED A SICK COMPANY BY BIFR. THERE WAS, THEREFORE, TEMPORARY SU SPENSION OF THE BUSINESS ACTIVITY AND THE BUSINESS HAD NOT BEEN CLO SED PERMANENTLY. THE ASSESSEE HAD INCURRED DAY TO DAY EXPENSES FOR REVIV AL OF THE COMPANY WHICH SHOULD BE ALLOWED AS BUSINESS INCOME. CIT(A) HOWEVE R DID NOT ACCEPT THE CONTENTIONS RAISED. IT WAS OBSERVED BY HIM THAT IT WAS NOT POSSIBLE THAT THE COMPANIES WOULD GO INTO PRODUCTION IN THE COMING YE ARS. IT WAS ALSO OBSERVED BY HIM THAT THE EXPENSES CLAIMED TO HAVE B EEN INCURRED FOR REVIVAL AND RECONSTRUCTION OF THE COMPANY, HAD NOT BEEN INC URRED FOR THE PURPOSE OF BUSINESS AND AT THE BEST THIS COULD BE CATEGORIZED AS CAPITAL EXPENDITURE AND NOT AS REVENUE EXPENDITURE. CIT(A) ACCORDINGLY UPHE LD THE DISALLOWANCE MADE BY AO, AGGRIEVED BY WHICH THE ASSESSEE IS IN A PPEAL BEFORE TRIBUNAL. 4. BEFORE US, LEARNED AR FOR THE ASSESSEE SUBMITTED THAT THE BUSINESS WAS UNDER SUSPENSION BECAUSE THE COMPANY HAD BECOME SICK AND THE BUSINESS HAD NEVER BEEN CLOSED. THE ASSESSEE HAD TH EREFORE TO INCUR DAY TO DAY EXPENSES. HE REFERRED TO THE DETAILS OF EXPENSE S AT PAGE 6 OF THE PAPERBOOK WHICH RELATE TO ESTABLISHMENT EXPENSES, P OWER AND FUEL EXPENSES, VEHICLE EXPENSES AND LEGAL AND PROFESSIONAL FEES ET C., WHICH WAS CLEARLY OF REVENUE IN NATURE. IT WAS ALSO POINTED OUT THAT THE EXPENDITURE HAD COME DOWN COMPARED TO THE EXPENSES OF THE IMMEDIATE PREC EDING YEAR. THE LEARNED AR ALSO POINTED OUT THAT THE SAME ISSUE HAD ALREADY BEEN CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE I N ASSESSMENT YEAR 2004- 05 IN WHICH THE TRIBUNAL VIDE ORDER DATED 26.4.2013 IN ITA 6142/MUM/2010 HELD THAT EXPENSES HAVE TO BE ALLOWED AS BUSINESS EXPENSES AS THE BUSINESS OF THE ASSESSEE HAD NOT CL OSED. THE FACTS IN THE PRESENT CASE ARE IDENTICAL AND THEREFORE THE CLAIM HAS TO BE ALLOWED. THE LEARNED DR ON THE OTHER HAND PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. M/S INDIAN LEAD LIMITED - 3 - 5. WE HAVE HEARD BOTH THE PARTIES PERUSED THE RECOR DS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REG ARDING ALLOWABILITY OF EXPENSES AMOUNTING TO RS. 3693669/- CLAIMED BY THE ASSESSEE AS BUSINESS EXPENDITURE. THE AO ALLOWED ONLY A SUM OF RS. 1,00, 000/- OUT OF THESE EXPENSES HOLDING THAT THE ASSESSEE HAD NOT CARRIED ANY BUSINESS ACTIVITY. IN APPEAL CIT(A) HAS HELD THAT THERE WAS NO POSSIBILIT Y OF STARTING THE BUSINESS AGAIN AND, THEREFORE, EXPENSES ARE NOT ALLOWABLE. A LTERNATIVELY HE ALSO HELD THAT THE EXPENSES WERE OF THE NATURE OF CAPITAL AND THUS COULD NOT BE ALLOWED. WE FIND THAT SIMILAR DISALLOWANCE ON THE G ROUND OF NO BUSINESS ACTIVITY HAD BEEN MADE BY AO IN ASSESSMENT YEAR 200 4-05 OF THE EXPENSES CLAIMED AT RS. 2,14,27,876/-. THE ASSESSEE HAD DISP UTED THE MATTER BEFORE TRIBUNAL AND THE TRIBUNAL IN THE ORDER DATED 26.4.2 013 (SUPRA) HELD THAT THE EXPENDITURE WAS NOT CAPITAL IN NATURE AND SINCE THE RE WAS NO PERMANENT CLOSURE OF THE BUSINESS AND BUSINESS WAS UNDER REHA BILITATION SCHEME/ REVIVAL SCHEME DUE TO FINANCIAL DIFFICULTIES, THE E XPENSES HAD TO BE ALLOWED. TRIBUNAL ALSO OBSERVED THAT THE ASSESSEE WAS DOING ITS BEST TO RESTART THE PRODUCTION ACTIVITY AS WAS CLEAR FROM THE RENEWAL O F FACTORY LICENSE. THE ASSESSEE HAD ALSO TAKEN LOAN TO REPAY OUTSTANDING D UES OF THE BANK TO WHOM THE ASSETS OF THE ASSESSEE WERE MORTGAGED. TRIBUNAL ALSO OBSERVED THAT EVEN IF THE ASSESSEE WAS NOT ABLE TO RESTART THE BUSINES S THERE WILL BE NO USE OF ANY SUCH LOSS CARRED FORWARD. THE TRIBUNAL, THEREFO RE, ALLOWED THE CLAIM OF THE ASSESSEE. FACTS IN THE PRESENT YEAR ARE IDENTIC AL. THEREFORE, RESPECTIVELY FOLLOWING THE DECISION OF TRIBUNAL IN ASSESSMENT YE AR 2004-05 (SUPRA), WE SET ASIDE THE ORDER OF CIT(A) AND ALLOW THE CLAIM O F THE ASSESSEE. 6. THE SECOND DISPUTE IS REGARDING ADDITION U/S 68 OF THE IT ACT. THE AO NOTED THAT THE TOTAL OUTSTANDING LOAN AS ON 31.3.20 06 WAS RS. 187432260/- AS AGAINST THE OUTSTANDING AMOUNT OF RS. 174814096/ - ON 31.3.2005. THERE WAS THUS ADDITION TO THE UNSECURED LOAN BY RS. 1261 8164/- DURING THE YEAR. THE ASSESSEE DID NOT FILE ANY LOAN CONFIRMATIONS NO R ANY MATERIAL TO ESTABLISH THE IDENTITY AND CAPABILITY OF THE CREDIT ORS. THE AO THEREFORE ADDED A SUM OF RS. 12618164/- AS INCOME OF THE ASSESSEE U /S 68 OF THE IT ACT. IN APPEAL CIT(A) OBSERVED THAT THE ASSESSEE DID NOT FI LE ANY EVIDENCE TO PROVE M/S INDIAN LEAD LIMITED - 4 - THE IDENTITY AND CREDITWORTHINESS OF THE CREDITORS. THE ASSESSEE FILED CONFIRMATIONS FROM FIVE PARTIES ONLY SUBSEQUENT TO THE DATE OF HEARING ON 14.10.2009. CIT(A) DID NOT ADMIT THE ADDITIONAL EVI DENCES ON THE GROUND THAT THE ASSESSEE HAD NOT BEEN PREVENTED BY ANY SUF FICIENT CAUSE FROM PRODUCTION OF THE SAME BEFORE THE AO DURING THE ASS ESSMENT PROCEEDINGS. CIT(A) ACCORDINGLY CONFIRMED THE ADDITION MADE BY AO U/S 68 OF THE INCOME TAX ACT. AGGRIEVED BY THE DECISION OF CIT(A), THE A SSESSEE IS IN APPEAL BEFORE TRIBUNAL. 7. BEFORE US, LEARNED AR FOR THE ASSESSEE SUBMITTED THAT THE CONFIRMATIONS HAD BEEN FILED BEFORE CIT(A) ON THE D ATE OF HEARING WHICH WERE REQUIRED TO BE CONSIDERED FOR THE PURPOSE OF ADJUDI CATION OF THE ISSUE. IT WAS POINTED OUT THAT THE COPIES OF CONFIRMATIONS HAD BE EN PLACED AT PAGES 29 TO 32 OF THE PAPER BOOK. IT WAS ALSO SUBMITTED THAT IN ASSESSMENT YEAR 2004-05 ALSO THE ASSESSEE HAD FILED CONFIRMATIONS BEFORE CI T(A) WHICH HAD NOT BEEN ACCEPTED BY HIM BUT THE TRIBUNAL ADMITTED THE ADDIT IONAL EVIDENCE AND SENT THE MATTER TO THE FILE OF AO FOR PASSING AFRESH ORD ER. IT WAS, THEREFORE, REQUESTED THAT THE ISSUE MAY BE SET ASIDE. THE LEAR NED DR ON THE OTHER HAND PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 8. WE HAVE PERUSED THE RECORDS AND CONSIDERED MATTE R CAREFULLY. THE DISPUTE IS REGARDING ADDITION ON ACCOUNT OF LOANS U /S 68 OF THE INCOME TAX ACT. THE AO HAD MADE THE ADDITION ON THE GROUND THA T THE ASSESSEE HAD NOT FILED CONFIRMATIONS FROM THE CREDITORS NOR ANY EVID ENCE TO ESTABLISH THE IDENTITY AND CAPACITY OF THE CREDITORS. CIT(A) HAS CONFIRMED THE ADDITION. THE ASSESSEE FILED CONFIRMATIONS BEFORE HIM WHICH WAS N OT ADMITTED BY HIM. WE FIND THAT THE ASSESSMENT ORDER HAS BEEN PASSED BY A O EX-PARTE. THE ASSESSEE WAS A SICK COMPANY AND WAS UNDER REHABILIT ATION SCHEME BY BIFR. THEREFORE, IN SUCH A SITUATION THE DIFFICULTY FACED BY THE ASSESSEE IN FILING THE CONFIRMATION AND OTHER EVIDENCE BEFORE AO HAS TO BE APPRECIATED AND THESE ADDITIONAL EVIDENCES IN OUR VIEW WERE REQUIRED TO B E CONSIDERED BY CIT(A) AS THE SAME WERE USEFUL IN DECIDING THE ISSUE. WE, THE REFORE, IN THE INTEREST OF JUSTICE ADMIT THE ADDITIONAL EVIDENCES IN THE FORM OF LOAN CONFIRMATIONS AS DONE BY THE TRIBUNAL IN ASSESSMENT YEAR 2004-05 (SU PRA). WE ACCORDINGLY M/S INDIAN LEAD LIMITED - 5 - SET ASIDE THE ORDER OF CIT(A) ON THIS ISSUE AND RES TORE THE MATTER TO THE FILE OF AO FOR PASSING AFRESH ORDER AFTER NECESSARY EXAMINA TION AND AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. 9. THE ASSESSEE HAS ALSO FILED AN ADDITIONAL GROUND REGARDING TREATMENT OF INCOME OF RS. 197800/- RECEIVED FROM SALE OF SCR AP AS INCOME FROM OTHER SOURCES BY THE AO. THE ASSESSEE HAS ALSO RAISED SPE CIFIC GROUND BEFORE CIT(A) WHICH WAS NOT ACCEPTED BY HIM BEING THE GROU ND NO. 2. WE, THEREFORE, ADMIT THE ADDITIONAL GROUND WHICH IS ARISING FROM T HE ORDERS OF AUTHORITIES BELOW. THE ASSESSEE HAS CLAIMED THAT THE INCOME HAD ARISEN FROM SALE OF SCRAP. HOWEVER, WE FIND THAT NATURE OF RECEIPT HAS NOT BEEN EXAMINED BY THE AUTHORITIES BELOW. WE, THEREFORE, CONSIDER IT NECES SARY THAT ISSUE BE EXAMINED AFRESH BY THE AO. WE ACCORDINGLY RESTORE T HIS ISSUE TO THE FILE OF AO FOR PASSING AFRESH ORDER AFTER NECESSARY EXAMINA TION AND AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. 5. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED ON 14-8-2013 SD/- SD/- (AMIT SHUKLA) (RAJENDRA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER SKS SR. P.S, MUMBAI DATED 14.8.2013 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, I BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI