ACIT, New Delhi V. M/s Sunair Hotels Ltd., New Delhi

ITA 703/DEL/2016

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 7779 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2012-2013
• Appeal Filed On: 09-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RASHMITA
• Keywords: Depreciation; Block assessment
• Section: 143(3); 37

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDENT AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER I.T.A. NO. 703 /DEL/201 6 A.Y. : 20 1 2 - 1 3 ACIT, CIRCLE 24(2), ROOM NO. 163, C.R. BUILDING, NEW DELHI VS. SUNAIR HOTELS LTD., A-7, 1 ST FLOOR, GEETANJALI ENCLAVE, NEW DELHI- 110 017 (PAN: AAACS1463L) (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) DEPARTMENT BY : MS. RASHMITA, SR. DR ASSESSEE BY : MS. SWEETY KOTHARI, CA DATE OF HEARING : DATE OF HEARING : DATE OF HEARING : DATE OF HEARING : 24.09.2018 24.09.2018 24.09.2018 24.09.2018 DATE OF ORDER : DATE OF ORDER : DATE OF ORDER : DATE OF ORDER : 2 22 27 77 7- -- -09 0909 09- -- -201 201 201 2018 88 8 ORDER ORDER ORDER ORDER PER PER PER PER K. K.K. K. NARASIMHA NARASIMHA NARASIMHA NARASIMHA CHARY, J.M. CHARY, J.M. CHARY, J.M. CHARY, J.M. THIS IS AN APPEAL BY THE REVENUE CHALLENGING THE O RDER DATED 02.11.2015 IN APPEAL NO. 658/14-15 FOR ASSESSMENT YEAR 2012-1 3 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-8, NEW DELHI (IN SHORT LD. CIT(A)), WHERE UNDER THE LD. CIT(A) DELETED THE ADDITION OF RS. 38,33,880/- ON ACCOUNT OF LEGAL AND PROFESSIONAL CHARGES AND RS. 71,57,151 /- ON ACCOUNT OF EXCESS CLAIM ON DEPRECIATION OF RS. 71,57,151/-. 2 2. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS E NGAGED IN THE BUSINESS OF RUNNING AND MANAGING HOTELS AND ALLIED ACTIVITIES. ASSESSEE HAS FILED ITS RETURN OF INCOME DECLARING INCOME OF RS. 7,03,16,430/- ON 27. 9.2012. THE CASE OF THE ASSESSEE WAS TAKEN UP FOR SCRUTINY AND ASSESSMENT U /S. 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT ACT) WAS COMPLETED BY THE AO ON 17.3.2015 AT TOTAL INCOME OF RS. 8,13,07,460/- BY MAKING TOTAL ADDITIO N OF RS. 1,09,91,031/- UNDER THE HEADS (I) DISALLOWANCE OF RS. 38,33,880/- ON ACCOUNT OF LEGAL & PROFESSIONAL CHARGES AND (II) WITHDRAWAL OF EXCESS DEPRECIATION CLAIM OF RS. 71,57,151/-. AGGRIEVED BY THE ASSESSMENT ORDER DAT ED 17.3.2015, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER DATED 02.11.2015 HAS PARTLY ALLOWED THE APPEAL OF THE ASS ESSEE BY FOLLOWING THE TRIBUNALS ORDER IN ASSESSEES OWN CASE FOR THE AS SESSMENT YEAR 2009-10 AND AY 2010-11. AGAINST THE IMPUGNED ORDER, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL 3. AT THE OUTSET, THE LD. A.R. FOR THE ASSESSEE SUB MITTED THAT BOTH THE ADDITIONS ARE COVERED BY THE DECISION OF THE TRIBUN AL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011-12, PASSED IN ITA NO. 4397 /DEL/2014, ORDER DATED 15.9.2017 AND PLACED THE COPY OF THE AFORESAID DECI SION OF THE TRIBUNAL. 4. ON THE OTHER HAND, THE LD. D.R., STRONGLY RELI ED UPON THE ORDER OF THE AO. 3 5. AFTER HEARING BOTH THE SIDES, WE FIND THAT TRIBU NAL IN ASSESSMENT YEAR 2011-12 HAS DEALT WITH AND DECIDED THE IDENTICAL IS SUE RELATING TO ADDITION ON ACCOUNT OF LEGAL AND PROFESSIONAL CHARGES IN ASSE SSEES OWN CASE VIDE ORDER DATED 15.09.2017 IN ITA NO. 4397/DEL/2014 (AY 2011 -12) VIDE PARA NO. 6 & 7 IN THE FOLLOWING MANNER:- 6. WE FIND THAT THE TRIBUNAL IN ASSESSMENT YEARS 2 009-10 AND 2010-11 HAS DEALT AND DECIDED THE IDENTICAL ISSUE IN THE AS SESSEE'S OWN CASE IN THE FOLLOWING MANNER:- 4. BRIEF FACTS APROPOS GROUND NO. 3 ARE THAT A SUM OF RS.1,37,57,137/- HAD BEEN DEBITED UNDER THE HEAD 'L EGAL & PROFESSIONAL CHARGES'. THE AO NOTICED THAT A SUM OF RS.14,33,347/- HAD BEEN PAID TO M/S ATUL SHANNA & A SSOCIATES FOR LITIGATION CHARGES AND PROFESSIONAL FEES FOR TH E CASES AGAINST VLS FINANCE LTD. THE AO OBSERVED THAT THIS PAYMENT TO MI S ATUL SHARMA & ASSOCIATES WAS TREATED AS EXPENSES NOT PAI D WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS IN THE PRECEDING ASSESSMENT YEARS AND WAS DISALLOWED U/S 37 OF THE 1 . T. ACT. HE, ACCORDINGLY, MADE AN ADDITION OF RS.14,33,347/-. 4.1. LD. CIT(A) FOLLOWING THE TRIBUNAL'S ORDER IN A SSESSEE'S OWN CASE FOR AY 2007-08 (SUPRA), ALLOWED THE ASSESSEE'S CLAIM BY OBSERVING AS UNDER:- 17. THE REVENUE HAS BROUGHT THE ISSUE HI APPEAL BEF ORE THE APPELLATE TRIBUNAL. THE LD. DR RELIED UPON THE ORDE R OF THE AO. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, DREW OUR ATTENTION TO THE DETAIL OF LITIGATION EXPE NSES IN ALL 4 THREE YEARS AND CONTENDED THAT ALL THE EXPENSES WER E INCURRED BY THE COMPANY IN RESPECT OF LITIGATION CA RRIED ON BY THE COMPANY AGAINST BLS FINANCE LTD., IN DIFFER ENT COURTS. NO EXPENSES PERTAINING TO PERSONAL LITIGATI ON OR OTHER LITIGATION OF THE DIRECTORS WERE DEBITED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. IF DIRECTORS WERE CARRYING ANY LITIGATION IN THEIR PERSONAL CAPACITY, THOSE EXPENS ES WERE SEPARATELY DEBITED IN THE PERSONAL ACCOUNT OF THE P ARTNERS AND NOT CLAIMED BY THE ASSESSEE COMPANY. IN THE LIG HT OF CATEGORICAL FINDING OF LD. CIT (A), IN OUR OPINION, IT WAS FOR THE REVENUE AUTHORITIES TO SHOW FROM THE DETAIL OF EXPENSES 'THAT EXPENSES DISALLOWED RELATED TO CRIMINAL' PROC EEDINGS AGAINST DIRECTORS, OR WERE OTHERWISE 'INADMISSIBLE AND WERE WRONGLY CLAIMED BY THE ASSESSEE COMPANY.' THIS HAS NOT BEEN SHOWN, THEREFORE, ON FACTS AND CIRCUMSTANC ES FOR THE CASE, WE ARE UNABLE TO INTERFERE WITH THE FINDI NG OF THE LD. CIT (A) THAT NO INADMISSIBLE EXPENDITURE WAS CL AIMED BY THE APPELLANT UNDER THE HEAD 'LITIGATION EXPENSES'. ADDITION 'MADE WAS RIGHTLY DELETED IN ALL THE THREE YEARS. THIS GROUND OF APPEAL IS ALSO REJECTED. ' 4.2. WE HAVE HEARD RIVAL SUBMISSIONS. THE ORDER OF THE LD. CIT(A) ON THE ISSUE IN QUESTION BEING IN CONFORMITY WITH T HE ORDERS OF THE ITAT FOR EARLIER YEARS AND THERE BEING NO CHANGE IN FACTS AND CIRCUMSTANCES, WE SEE NO REASON TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THE ISSUE IN QUESTION. GROUND NO. 3 IS DI SMISSED.' 7. SINCE SIMILAR FACTS ARE PERMEATING IN THIS YEAR ALSO AND ON SAME FACTS THERE HAS BEEN A CATEGORICAL FINDING BY THE TRIBUNA L IN THE EARLIER YEARS THAT THESE EXPENSES WERE INCURRED PURELY IN RESPECT OF LITIGATION CARRIED 5 OUT BY THE COMPANY IN THE COURSE OF ITS BUSINESS AN D THERE IS NO EXPENSE PERTAINING TO PERSONAL LITIGATION OR LITIGATION OF THE DIRECTORS. IN WAKE OF THESE FINDINGS WE DO NOT FIND ANY JUSTIFICATION IN THE ADDITION MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT (A). IT IS AN ADMITTED FACT THAT THE EXPENSES ON ACCOUNT OF DIRECTORS' LITIGATI ONS WERE, DEBITED SEPARATELY IN THEIR PERSONAL ACCOUNTS, WHICH WERE N OT CLAIMED BY THE ASSESSEE-COMPANY. IN THE LIGHT OF SUCH CATEGORICAL FINDING, WE DO NOT FIND ANY REASON TO DEVIATE FROM EARLIER' YEARS' PRECEDEN CE. ACCORDINGLY, THE ORDER OF THE LD. CJT (A) DELETING THE SAID ADDITION IS CONFIRMED. 6. AFTER PERUSING THE AFORESAID FINDING OF THE TRIB UNAL, WE NOTE THAT THE TRIBUNAL HAS CONFIRMED THE ORDER OF THE LD. CIT(A) BY FOLLOWING THE ORDER EARLIER ORDER OF THE TRIBUNAL IN ASSESSESSEES OWN CASE IN EARLIER YEARS, WHICH FINDING IS APPLICABLE ON THE FACTS OF THE PRESENT CASE ALSO, T HEREFORE, FOLLOWING THE JUDICIAL PRECEDENCE, WE CONFIRM THE ORDER OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND DISMISS THE GROUND RAISED BY THE REVENUE. 7. WE FURTHER FIND THAT TRIBUNAL IN ASSESSMENT YEAR 2011-12 HAS ALSO DEALT AND DECIDED THE IDENTICAL ISSUE RELATING TO ADDITIO N CLAIM OF DEPRECIATION IN ASSESSEES OWN CASE VIDE ORDER DATED 15.09.2017 IN ITA NO. 4397/DEL/2014 (AY 2011-12) VIDE PARA NO. 10 & 11 IN THE FOLLOWIN G MANNER:- 10. WE FIND THAT THIS ISSUE HAD ALSO COME UP FOR C ONSIDERATION BEFORE THE TRIBUNAL IN ASSESSMENT YEAR 2009-10 WHEREIN, THE TR IBUNAL HAS DECIDED THE MATTER IN THE FOLLOWING MANNER:- 6 5. BRIEF FACTS APROPOS GROUND NO.4 ARE THAT THE ASS ESSEE CLAIMED DEPRECIATION TO THE TUNE OF RS.36,53, 108/-. THE AO OBSERVED THAT IN ASSESSEE'S CASE IN THE BLOCK ASSESSMENT ORD ER U/ S 158BC DATED 29-11-02, THIS ISSUE WAS CONSIDERED AND DISAL LOWANCE OUT OF DEPRECIATION WAS MADE ON THE ASSETS WHICH WERE C ONSIDERED UNEXPLAINED. THIS DISALLOWANCE WAQS MADE IN SUBSEQU ENT ASSESSMENT YEARS BY THE AO. HE WITHDREW THE EXCESSI VE DEPRECIATION AS PER CALCULATION GIVEN IN THE CHART ENCLOSED AS ANNEXURE 2 TO THE TUNE OF RS. 99,31,096/- AND MADE THE ADDITION ACCORDINGLY. 5.1. IN APPEAL, LD. CIT (A), FOLLOWING ITAT'S ORDER FOR EARLIER YEARS, ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING AS U NDER:- '21. THE REVENUE IS AGGRIEVED AND HAS BROUGHT THE I SSUE IN APPEAL BEFORE THE APPELLATE TRIBUNAL. DURING THE CO URSE OF HEARING, A COPY OF ORDER OF ITAT 'D' BENCH, NEW DEL HI IN ITA NO. 2481 DELL 04 AND 3981 DELL 04 IN THE CASE OF DC1 T. CC-JJ VS. SUNAIR HOTEL LTD. (ASSESSEE COMPANY) DATED 26110120 07 WAS FILED BEFORE US. THE ORDER WAS PASSED IN THE APPEAL FILED BY THE REVENUE IN THE BLOCK ASSESSMENT. THE TRIBUNAL CONSI DERED THE QUESTION WHETHER ANY DISALLOWANCE BY TREATING EXPEN DITURE ON CONSTRUCTION AS BOGUS WAS JUSTIFIED THE TRIBUNAL NO TED THAT CERTAIN MATERIAL COLLECTED BY THE AD WAS NOT PUT TO THE ASS ESSEE BY THE AO SUBSEQUENTLY, ON DIRECTION OF THE APPELLATE AUTH ORITY, THE MATTER WAS RE-EXAMINED THE ASSESSEE HAD FURTHER PRO DUCED MATERIAL TO SHOW THAT COST OF CONSTRUCTION DECLARED WAS LOWER THAN SIMILAR COST SHOWN BY OTHER HOTELS. THE TRIBUN AL ALSO NOTED THAT COST OF CONSTRUCTION IN THE BOOKS WAS SUPPORTE D BY VALUATION CARRIED BY DVO. THE TRIBUNAL ACCORDINGLY SAW NO JUS TIFICATION FOR 7 UPHOLDING ANY DISALLOWANCE OR ADDITION ON ACCOUNT O F BOGUS EXPENSES ON CONSTRUCTION. THE ORDER OF THE ID. CIT( A) ON THE ISSUE WAS UPHELD BY THE TRIBUNAL. '22. IN THE LIGHT OF ABOVE ORDER OF THE TRIBUNAL, W E SEE NO JUSTIFICATION IN SUSTAINING ANY DISALLOWANCE OF DEP RECIATION. AS NOTED EARLIER, THE IMPUGNED DISALLOWANCE AS 'PROTE CTIVE' IS MADE SOLELY BASED ON SIMILAR DISALLOWANCE AND ADDITION M ADE IN THE BLOCK ASSESSMENT YEAR. NO NEW OR FRESH MATERIAL WAS PLACED ON RECORD TO JUSTIFY ADDITION / DISALLOWANCE OF DEPREC IATION IN THE THREE YEARS UNDER APPEAL. THE DISALLOWANCE IN BLOCK ASSESSMENT YEAR WAS DELETED BY LD. CIT (A) FOR THE REASON ALRE ADY DISCUSSED ABOVE. THE SAID ORDER HAS BEEN CONFIRMED BY ITAT AN D DISALLOWANCE OF DEPRECIATION OR OF EXPENSES CLAIMED TO BE INCURRED ON CONSTRUCTION HAS NOT BEEN SUSTAINED. TH E ASSESSEE HAS PLACED ALL THE RELEVANT MATERIAL ON RECORD TO JUSTI FY COST OF CONSTRUCTION. IN THE ABOVE CIRCUMSTANCES, WE UPHOLD THE ORDER OF THE CIT (A) DELETING THE DISALLOWANCE ON DEPRECIATI ON IN ALL THE YEARS BEFORE US. 5.2. WE HAVE HEARD RIVAL SUBMISSIONS. THE ORDER OF THE LD. CIT(A) ON THE ISSUE IN QUESTION BEING IN CONFORMITY WITH THE OR DERS OF THE ITAT FOR EARLIER YEARS AND THERE BEING NO CHANGE IN FACTS AN D CIRCUMSTANCES, WE SEE NO REASON TO INTERFERE IN THE ORDER OF LD. CIT( A) ON THE ISSUE IN QUESTION. GROUND NO. 4 IS DISMISSED.' 11. SINCE THE TRIBUNAL HAS CONFIRMED THE ORDER OF T HE LD. CIT (A) FOLLOWING THE ORDER OF THE TRIBUNAL IN THE ASSESSEE'S OWN CAS E IN EARLIER YEARS, WHICH FINDING IS APPLICABLE ON THE FACTS OF THE PRE SENT YEAR ALSO, THEREFORE, FOLLOWING THE JUDICIAL PRECEDENCE, WE CO NFIRM THE ORDER OF THE LD. CIT(A) AND DISMISS THE GROUNDS RAISED BY THE RE VENUE. 8 8. AFTER PERUSING THE AFORESAID FINDING OF THE TRIB UNAL, WE NOTE THAT THE TRIBUNAL HAS CONFIRMED THE ORDER OF THE LD. CIT(A) BY FOLLOWING THE ORDER EARLIER ORDER OF THE TRIBUNAL IN ASSESSESSEES OWN CASE IN EARLIER YEARS, WHICH FINDING IS ALSO APPLICABLE ON THE FACTS OF THE PRESENT CASE AL SO, THEREFORE, FOLLOWING THE JUDICIAL PRECEDENCE, WE CONFIRM THE ORDER OF THE LD . CIT(A) ON THE ISSUE IN DISPUTE AND DISMISS THE GROUND RAISED BY THE REVENUE. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27/09/2018. SD/- SD/- [ [[ [G.D. AGRAWAL] G.D. AGRAWAL] G.D. AGRAWAL] G.D. AGRAWAL] [ [[ [K. K.K. K. NARASIMHA NARASIMHA NARASIMHA NARASIMHA CHARY] CHARY] CHARY] CHARY] PRESIDENT PRESIDENT PRESIDENT PRESIDENT JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER DATE 27/09/2018 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES