Iffco Ebazar Ltd., New Delhi V. ACIT Circle-12(1), New Delhi

ITA 6534/DEL/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 9233 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2016-2017
• Appeal Filed On: 05-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAKASH DUBEY
• Keywords: Depreciation; Revenue expenditure
• Section: 143(3); 142(1); 143(2); 13

Judgement Text

ITA NO.6534/DEL/2019 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC-I, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER (THROUGH VIDEO CONFERENCE) ITA NO. 6534/DEL/2019 A.Y. : 2016-17 IFFCO EBAZAR LTD., C-1, DISTRICT CENTRE SAKET PLACE, NEW DELHI 110 017 (PAN: AAKCA1714G) VS. ACIT, CIRCLE 12(1), NEW DELHI (APPELLANT) (RESPONDENT) ORDER PER H.S. SIDHU, JM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE IMPUGNED ORDER DATED 28.6.2019 PASSED BY THE LD. CIT(A)-4, NEW DELHI, IN RELATION TO ASSESSMENT YE AR 2016-17 ON THE FOLLOWING GROUNDS:- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES AND IN LAW, THE IMPUGNED ORDER DATED ASSESSEE BY SH. NITIN GULATI, ADV. DEPARTMENT BY SH. PRAKASH DUBEY, SR. DR. ITA NO.6534/DEL/2019 2 17.12.2018 PASSED BY THE LD. CIT(A) IS WITHOUT JURISDICTION, ILLEGAL, BAD IN LAW AND VOID AB INITI O. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (A) HAS ERRED IN UPHOLDING THE FINDINGS OF THE LD. ASSESSING OFFICER WHO HAD ERRED IN HOLDING THAT THE ASSESSEE IS STILL IN THE PROCESS OF SETTING UP OF BUSINESS AND THEREFORE THE BUSINESS OF THE ASSESSEE HAS NOT COMMENCED DURING THE YEAR. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF THE CLAIM OF BUSINESS LOSS MADE BY THE ASSESSEE IN RETURN OF THE INCOME. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CITA (A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE FINDINGS OF THE LD. ASSESSING OFFICER WHO HAD ERRED IN ASSESSING THE INTEREST AND MISCELLANEOUS INCOME OF RS. 1,21,659/- UNDER THE HEAD INCOME FROM OTHER SOURCES AS AGAINST THE CLAIM OF THE ASSESSEE THAT THE SAID INCOME FORMS PART OF THE PROFIT AND GAINS OF BUSINESS. 5. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE FINDINGS OF THE LD. ASSESSING OFFICER WHO HAD ERRED IN DISALLOWING ITA NO.6534/DEL/2019 3 THE CARRY FORWARD OF LOSS FOR THE YEAR, AS CLAIMED IN THE RETURN OF INCOME, BY WRONGLY INVOKING/APPLYING THE PROVISION OF SECTION 79 OF THE INCOME TAX ACT, 1961. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR VARY ANY OF THE ABOVE GROUNDS DURING THE PENDENCY OF THE APPEAL. 2. FACT RELATING TO THE ISSUE ARE THAT ASSESSEE FIL ED ITS RETURN OF INCOME ON 03.10.2016 DECLARING LOSS OF RS. 1,34,46, 032/-. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND T HE NOTICE U/S. 143(2) OF THE INCOME TAX ACT, 1961 (IN SHORT AC T) DATED 02.8.2017 WAS ISSUED AND SERVED UPON THE ASSESSEE. THEREAFTER THE NOTICE U/S. 142(1) OF THE ACT DATED 1 0.5.2018 ALONGWITH QUESTIONNAIRE WAS ISSUED AND SERVED UPON THE ASSESSEE. IN RESPONSE TO THE SAME, THE LD. AR OF TH E ASSESSEE APPEARED AND FILED ALL THE NECESSARY DOCUMENTS SUPP ORTING THE CLAIM OF THE ASSESSEE. THE ASSESSEE COMPANY IS TO CA RRY ON ITS BUSINESS ON ITS OWN OR THROUGH FRANCHISEE ARRANGEM ENTS OF BUYING, SELLING, IMPORTING, EXPORTING, MARKETING, DI STRIBUTING IN WHOLESALE BASIS OR OTHERWISE ANY KIND OF SERVICES, G OODS, MATERIAL AND ITEMS WHATSOEVER IN NATURE. DURING THE YEAR UNDER CONSIDERATION, ASSESSEE HAS DECLARED LOSS OF ITA NO.6534/DEL/2019 4 RS. 1,34,46,032/- IN ITS ITR. ON PERUSAL OF THE COMP UTATION OF INCOME AND FINANCIALS SUBMITTED BY THE ASSESEE, WHI CH THE AO HAS REPRODUCED IN PARA NO. 2 OF THE ASSESSMENT ORDER AND FOUND THAT OUT OF TOTAL REVENUE OF RS. 1,26,864/-, T HERE IS ONLY RS. 5,175/- REVENUE FROM OPERATIONS AND RS. 1,21,659/- OTHER INCOME WHICH COMPRISES OF INCOME INTEREST INCOME AN D MISCELLANEOUS INCOME DURING THE WHOLE FINANCIAL YEA R. FROM THIS INCOME ASSESSEE HAS DEDUCTED TOTAL EXPENSE OF RS. 142,69,475/- IN THE P&L ACCOUNT AND THEREFORE NE T PROFIT OF (-) RS. 1,41,42,611/- HAS BEEN DETERMINED WHICH HAS BEEN SUBSEQUENTLY ARRIVED AT LOSS OF RS. 1,34,46,031/- AFTE R GIVING EFFECT UNDER THE PROVISION OF INCOME TAX ACT. AFTE R CONSIDERING THE REPLY FILED BY THE ASSESSEE, THE AO WAS OF THE VIEW THAT ASSESSEE FILED DETAILS VIDE LETTER DATED 12.11.2018 WHEREIN PURCHASE AND SALE OF GOODS (HARPIC) STATED TO HAVE MADE FROM M/S SHYN INDUSTRIES ON 19.5.2015 OF RS. 506 3/- AND M/S A&B HOUSEKEEPERS PVT. LTD. ON 25.5.2015 FOR RS. 5175/- RESPECTIVELY. ASSESSEE HAS EXPLAINED ABO UT SETTING UP AND COMMENCEMENT OF BUSINESS AND CONCLUDED STA TING THAT THE BUSINESS OF THE ASSESSEE IS DULY SET UP AS WELL COMMENCED IN THE CONCERNED ASSESSMENT YEAR AS THE ASSESSEE ITA NO.6534/DEL/2019 5 EFFECTUATED THE SALE AND PURCHASE DURING THE CONCER NED ASSESSMENT YEAR. THE SALES OR PURCHASE IN MINISCULE HAVING REGARD TO EXPENDITURE INCURRED DID NOT DISENTITLE T HE ASSESSEE THAT SUCH EXPENDITURE WOULD BE DISALLOWED. CONSIDER ING THE FACTS OF THE CASE THE ASSESSEE IS ONLY SHOWN SINGLE PURCHASE AND SALE DURING THE FIRST QUARTER, THEREAFTER NO BU SINESS TRANSACTION TO GENERATE REVENUE HAS BEEN MADE IN TH E WHOLE FINANCIAL YEAR. THIS SHOWS THE TRANSACTION WAS NOT RELATED TO BUSINESS AND THE NATURE OF EXPENSE DEBITED IN THE P &L ACCOUNT ALSO DOES NOT RELATES TO BUSINESS OPERATIONS RATHER IT IS OF IN THE NATURE OF CARRYING OUT RESEARCH AND ANALYSIS, FEASI BILITY FOR THE BUSINESS I.E. ACTIVITY PRIOR TO SETTING UP AND COMME NCEMENT OF BUSINESS. THE AO WAS ALSO OF THE VIEW THAT ASSESSE ES OUTLETS STARTED ITS OPERATION IN APRIL, 2016 HAS NOT BEEN D ISPUTED BY THE ASSESSEE WHICH IS IN THE PERQUISITE FOR CARRYIN G OUT TRADING ACTIVITY AS IN THE CASE OF THE BUSINESS OF THE ASSE SSEE. ACCORDINGLY, SHOW CAUSE NOTICE DATED 6.12.2018 WAS I SSUED TO THE ASSESSEE ASKING THEREIN AS TO WHY THE EXPENSES DEBITED IN THE PROFIT AND LOSS ACCOUNT SHOULD NOT BE DISALLOWE D BEING THERE WAS NO BUSINESS OPERATIONS DURING THE YEAR UN DER CONSIDERATION. IN RESPONSE TO THE SAME, THE ASSESSEE FILED A ITA NO.6534/DEL/2019 6 REPLY DATED 11.12.2018 ALONGWITH DOCUMENTARY EVIDENCE S. THE EXPLANATION OF THE ASSESSEE WAS CONSIDERED BY THE A O, BUT NOT ACCEPTED BY HOLDING THAT ASSESEE HAS ONLY SHOWN SIN GLE PURCHASE AND SALE DURING THE FIRST QUARTER, THEREAFT ER NO BUSINESS TRANSACTION TO GENERATE REVENUE HAS BEEN M ADE IN THE WHOLE FINANCIAL YEAR AND DISALLOWED THE BUSINESS LO SS CLAIMED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION AND ALSO INVOKED THE PROVISIONS OF SECTION 79 OF THE I.T. ACT , 1961. AFTER CONSIDERING THE REPLY FILED BY THE ASSESSEE, HE COMP LETED THE ASSESSMENT U/S. 143(3) OF THE ACT DATED 17.12.2018. AGGRIEVED BY THE SAME, ASSESSEE FILED ITS APPEAL BEF ORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER DATED 28.6.2019 AND DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED WIT H THE IMPUGNED ORDER DATED 28.6.2019, ASSSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. AT THE TIME OF HEARING, LD. COUNSEL FOR THE ASSESS EE DRAW MY ATTENTION TOWARDS PAPER BOOK FILED BY THE ASSESS EE CONTAINING PAGES 1-131 IN WHICH THE ASSESSEE HAS FI LED ITS WRITTEN SUBMISSIONS ON THE ISSUES IN DISPUTE ALONGW ITH 04 ANNEXURES WHICH INCLUDES THE LIST OF EMPLOYEES HIRE D BY THE ITA NO.6534/DEL/2019 7 ASSESSEE, ALONGWITH FORM 6 OF THE CEO OF THE COMPA NY; INVOICES OF FIXED ASSETS SUCH AS COMPUTER AND OTH ER PERIPHERALS, COPY OF INVOICE OF IFFCO KISAN SEZ LTD .. SUPPORTING WITH WRITTEN SUBMISSIONS FILED BY THE AS SESSEE ASSESSEE HAS ALSO FILED VARIOUS CASE LAWS RENDERED BY THE VARIOUS HIGHER COURTS. LD. COUNSEL FOR THE ASSESSEE ESPECIALLY DRAW MY ATTENTION TOWARDS THE ITAT B BENCH, DELHI DECISION IN THE CASE OF ITO VS. AMRIT FOODS (P) LTD. (1984) 10 ITD 681 (DELHI) DATED 12.3.1984, A COPY OF WHICH WAS ATTACH ED IN THE PAPER BOOK AT PAGES 33-38 AND STATED THAT IT IS A W ELL SETTLED LAW THAT EVEN A SINGLE TRANSACTION MAY CONSTITUTE BUSINESS AS DEFINED IN SECTION 2(13). IT IS NOT ESSENTIAL THERE SHOULD BE SERIES OF TRANSACTIONS, BOTH OF PURCHASE AND OF SAL E TO CONSTITUTE TRADE, AS THE CASE OF THE ASSESSEE. THERE FORE, HE STATED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOU R OF THE ASSESSEE BY THE AFORESAID DECISION OF THE ITAT, DELH I BENCH ITO VS. AMRIT FOODS (P) LTD.(SUPRA). 3.1 LD. COUNSEL FOR THE ASSESSEE FURTHER STATED THAT ASSESSEE COMPANY WAS INCORPORATED ON 05.10.2011 UNDER THE COMPANIES ACT, 1956 WITH THE NAME ASSET INFRA DEVE LOPMENT ITA NO.6534/DEL/2019 8 LTD.. THEREAFTER THE NAME OF THE COMPANY WAS CHANGE D TO IFFCO EBAZAR LTD. BY A SPECIAL RESOLUTION PASSED IN THE EXTRA ORDINARY MEETING (EGM) DATED 25.3.2015 WHICH WAS DUL Y ACCEPTED BY THE REGISTRAR OF COMPANIES. HE FURTHER STATED THAT IN ADDITION TO THE EXPENSE THAT HAD BEEN INCUR RED BY THE ASSESSEE IN CONNECTION WITH SETTING UP OF THE BUSIN ESS, ASSESSEE ALSO IN THE FIRST OF QUARTER OF 2015 PURCH ASED ITS VARIOUS FIXED ASSETS SUCH AS COMPUTER AND OTHER PER IPHERALS THROUGH THE INVOICES WHICH ARE PLACED ON RECORD WIT H THE WRITTEN SUBMISSIONS OF THE ASSESSEE. HE SPECIFICALL Y ARGUED THAT ASSESSEE HAS COMMENCED ITS BUSINESS IN THE SAID ASS ESSMENT YEAR, AS THE ASSESSEE HAS MADE ITS SALE OF GOODS I .E. HARPIC AND PURCHASE ITS EVIDENT FROM THE TABLE MENTIONED I N THE WRITTEN SUBMISSIONS ATTACHED AS ANNEXURE A-3 MEANI NG THEREBY THAT THE ASSESSEE WAS DULY SET UP AND COMM ENCEMENT IN THE RELEVANT ASSESSMENT YEAR HAS EFFECTUATED THE SALE OF GOODS I.E HARPIC AND PURCHASE DURING THE CONNECTED ASSESSMENT YEARS. BUT THE AO AS WELL AS LD. CIT(A) HA S WRONGLY GIVEN THE FINDING THAT ASSESSEE HAS NEVER C OMMENCED ITS BUSINESS IN THE YEAR UNDER CONSIDERATION. TO S UPPORT THIS ARGUMENTS, HE DRAW MY ATTENTION TOWARDS THE JUDGMENT OF THE ITA NO.6534/DEL/2019 9 ITAT IN THE CASE OF ITO VS. AMRIT FOODS (P) LTD. (SU PRA) WHICH HE HAS FILED WITH THE PAPER BOOK AND STATED THAT TH E ISSUE IN DISPUTE MAY BE DECIDED IN FAVOUR OF THE ASSESSEE BY DELETING THE ADDITION IN DISPUTE. LD. COUNSEL FOR THE ASSESS EE HAS ALSO ARGUED ALL THE ISSUES MENTIONED IN THE GROUNDS OF APPEAL. 4. ON THE CONTRARY, LD. DR RELIED UPON THE ORDERS P ASSED BY THE AO AS WELL AS LD. CIT(A) AND STATED THAT AO AS W ELL AS LD. CIT(A) HAS MADE THE ADDITION AND CONFIRMED THE ADDI TION IN DISPUTE ON THE BASIS OF THE DOCUMENTARY EVIDENCES F IELD BY THE ASSESSEE AS WELL AS ON THE CASE LAWS RELIED UPON BY THE ASSESSEE. HE REQUESTED THAT THE APPEAL FILED BY THE ASSESSEE MAY BE DISMISSED. 5. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RE LEVANT RECORDS ESPECIALLY THE DOCUMENTARY EVIDENCES FILED BY THE ASSESSEE ALONGWITTH THE DECISION OF THE ITAT, DELHI B BENCH IN THE CSSE OF ITO VS. AMRIT FOODS (P) LTD. (SUPRA), I A M OF THE VIEW THAT THE ASSESSEE HAS COMMENCED ITS BUSINESS I N THE SAID ASSESSMENT YEAR AS THE ASSESSEE HAD MADE ITS SALE A ND PURCHASE I.E. HARPIC WHICH IS EVIDENT FROM THE TABLE BELOW ITA NO.6534/DEL/2019 10 WHICH HAS ALREADY BEEN MENTIONED IN THE WRITTEN SUBMISSIONS:- S.NO. NAME OF THE PARTY NAME OF GOOD OR SERVICE PURCHASED AMOUNT PURHCASE /SALE 1. M/S SHYN INDUSTRIES HARPIC 5175 PURCHASE 2. M/S A&B HOSEKEEPERS PVT. LTD. HARPIC 5175 SALE PARTICULARS FY 2015-16 FY 2016-17 FY 2017-18 SALES / TURNOVER 5,175 48,49,79,551 4,24,84,09,212 5.1 KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AS EXPLAINED ABOVE AND THE TRANSACTION MADE BY THE ASSESSEE DURING THE ASSESSMENT YEAR IN DISPUTE DETAILS OF TH E SAME ARE REPRODUCED ABOVE AS WELL AS IN VIEW OF THE ITAT B BENCH, DELHI DECISION IN THE CASE OF ITO VS. AMRIT FOOD S (P) LTD. (1984) 10 ITD 681 (DELHI) DATED 12.3.1984 (SUPRA), WHEREIN IT WAS HELD AS UNDER:- ITA NO.6534/DEL/2019 11 IT IS WELL SETTLED THAT EVEN A SINGLE TRANSACTION MAY CONSTITUTE BUSINESS AS DEFINED IN SECTION 2(13). IT IS NOT ESSENTIAL THAT THERE SHOULD BE A SERIES OF TRANSACTIONS, BOTH OF PURCHASE AND SALE TO CONSTITUTE TRADE. EVEN A SINGLE PURCHASE FOLLOWED BY A SINGLE SALE, MAY BE REGARDED AS BUSINESS AND A SINGLE SUCH TRANSACTION OUTSIDE AN ASSESSEES LINE OF BUSINESS AN ADVENTURE IN THE NATURE OF TRADE. NEITHER REPETITION NOR CONTINUITY OF SIMILAR TRANSACTIONS IS NECESSARY TO CONSTITUTE A TRANSACTION AN ADVENTURE IN THE NATURE OF TRADE. IT IS ALSO WELL SETTLED THAT WHERE A PURCHASE IS MADE WITH THE INTENTION OF RESALE, IT DEPENDS UPON THE CONDUCT OF THE ASSESSE AND THE CIRCUMSTANCES OF THE CASE WHETHER THE VENTURE IS ON CAPITAL ACCOUNT OR IN THE NATURE OF TRADE. IN THE INSTANT CASE, CERTAIN FACTS ADMITTED PROVED ON RECORD WERE (I) THAT THE ASSESSEE, IN VIEW OF THE MANUFACTURING AND TRADING ACTIVITIES ITA NO.6534/DEL/2019 12 CARRIED ON BY IT, COULD NOT HAVE MADE USE OF THE MARGARINE PLANT, MORE SO WHEN THE RAW MATERIAL REQUIRED FOR RUNNING THE SAID PLANT WAS AVAILABLE ONLY IN A VANASPATI MANUFACTURING UNIT AND THE ASSESSEE WAS NOT SUCH A UNIT, (II) THAT THE PLANT PURCHASED HAD NO CLOSE LINK WITH THE ASSESSEES BUSINESS WHICH WAS MANUFACTURE AND SALE OF DESI GHEE, (III) THAT THE INTEREST PAID BY THE ASSESSEE ON FUND BORROWED FOR BUYING PLANT WAS NOT ADDED TO THE COST OF THE PLANT BUT WAS CLAIMED AND ALLOWED AS REVENUE EXPENDITURE ACCOUNT OF THE ASSESSEE UNDER APPROPRIATE HEADS, AND (IV) THAT DEPRECIATION HAD NOT BEEN ALLOWED TO THE ASSESSEE IN RESPECT OF THE PLANT AT ANY TIME. SINCE THE MARGARINE PLANT WAS A PLANT, THE SAME HAD TO BE SHOWN IN THE BALANCE SHEET AS SUCH UNDER THE HEAD PLANT AND MACHINERY. THERE WAS NO OTHER WAY BUT TO SHOW IT AS SUCH. IT WAS WRONG TO INFER FROM THAT, AS DONE BY THE ITO, THAT THE MARGARINE PLANT WAS ALWAYS INCLUDED IN THE FIXED ASSETS AND NOT ITA NO.6534/DEL/2019 13 IN THE CURRENT ASSETS IN THE BALANCE SHEETS. CLEARLY, THE ASSESSEE HAD PURCHASED THE MARGARINE PLANT, WHICH WAS NOT IN ITS LINE OF BUSINESS, WITH THE INTENTION OF RESELLING IT FOR PROFIT AND, BY ITS CONDUCT, HAD TREATED THE TRANSACTION AS AN ADVENTURE IN THE NATURE OF TRADE. THERE WAS CLOSE PROXIMITY BETWEEN THE PURCHASE OF THE PLANT AND ITS SALE. APPLYING THE LAW AS SET OUT ABOVE TO THE FACTS OF THE CASE, IT WAS CLEAR THAT THE TRANSACTION IN QUESTION WAS AN ADVENTURE IN THE NATURE OF TRADE AND THE PROFIT ARISING THEREFROM HAD BEEN CORRECTLY TREATED BY THE FIRST APPELLATE AUTHORITY AS BUSINESS PROFIT. 5.2 IN VIEW OF THE AFORESAID DISCUSSIONS AS WELL AS IN VIEW OF THE AFORESAID PRECEDENT, I AM OF THE VIEW THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESS EE BY THE AFORESAID DECISION OF THE ITAT AS REPRODUCED ABOVE, HENCE, RESPECTFULLY FOLLOWING THE SAME, I AM OF THE VIEW TH AT IT IS WELL SETTLED LAW THAT EVEN A SINGLE TRANSACTION MAY CONS TITUTE ITA NO.6534/DEL/2019 14 BUSINESS AS DEFINED IN SECTION 2(13). IT IS NOT ASK ING THERE SHOULD BE A SERIES OF TRANSACTION. BOTH OF PURCHASE AND THE SALE TO CONSTITUTE TRADE. THEREFORE, I DELETE THE ADDITI ON IN DISPUTE. SINCE THE ADDITION IN DISPUTE IS DELETED AS AFORESA ID, THE OTHER GROUNDS ARGUED BY THE ASSESSEE HAVE BECOME ACADEMIC AND HENCE, NEED NOT BE ADJUDICATED. 6. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. THE DECISION IS PRONOUNCED IN THE OPEN COURT ON 07.01.2021. SD/- (H.S. SIDHU) JUDICIAL MEMBER SRB COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR, ITAT, NEW DELHI