M/s. AB Multiplex Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 739/DEL/2014

• Counselvise Citation: 73920114 RSA 2014
• Duration Of Justice: 1 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 22-06-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 10-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN RAWAL
• Keywords: Business income; Business expenditure
• Section: 133A

Judgement Text

1 ITA NO. 739/DEL/2014 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC NEW DELHI BEFORE SHRI S. V. MEHROTRA, ACCOUNTANT MEMBER I.T.A .NO.-739/DEL/2014 (ASSESSMENT YEAR-2009-10) AB MULTIPLEX PVT. LTD. RECTANGLE-1, D-4 SAKET DISTRICT CENTRE NEW DELHI AAFCA5541C (APPELLANT) VS ACIT CENTRAL CIRCLE-21 NEW DELHI (RESPONDENT) APPELLANT BY NONE RESPONDENT BY SH. ROBIN RAWAL, JCIT ORDER PER S. V. MEHROTRA, AM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) XII, NEW DELHI DATED 4 TH NOVEMBER 2013 IN APPEAL NO. 384/2013-14 FOR ASSESSM ENT YEAR 2009-10. 2. NOTICE WAS SENT TO THE ASSESSEE THROUGH REGIST ERED POST AT THE ADDRESS GIVEN IN FORM 36. HOWEVER, ON THE DATE OF HEARING NEITHE R ANY ADJOURNMENT APPLICATION WAS FILED BY THE ASSESSEE NOR ANYONE APPEARED ON BE HALF OF THE ASSESSEE. I, THEREFORE, PROCEED TO DECIDE THE APPEAL ON MERITS Q UA ASSESSEE-APPELLANT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA D FILED RETURN DECLARING A LOSS OF RS. NIL . THE ASSESSING OFFICER HAS OBSERVED TH AT THIS CASE BELONGS TO ABW GROUP WHERE SURVEY U/S 133A WAS CONDUCTED ON 29 TH DECEMBER 2008. HE NOTED DATE OF HEARING 22.06.2015 DATE OF PRONOUNCEMENT .06.2015 2 ITA NO. 739/DEL/2014 FROM THE PROFIT AND LOSS ACCOUNT THAT ASSESSEE HAD SHOWN GROSS RECEIPTS OF RS.4,74,179/-, THE DETAILS OF WHICH WERE AS UNDER, AS PER SCHEDULE L OF THE BALANCE SHEET. MISCELLANEOUS INCOME RS. 4,74,000/- SHORT & ACCESS RS. 178 RS. 4,74,178 4. FROM THESE DETAILS HE CONCLUDED THAT THERE WAS N O BUSINESS INCOME. HE REFERRED TO FOLLOWING DECISIONS TO CONCLUDE THAT S INCE NO BUSINESS WAS CARRIED OUT BY THE ASSESSES DURING THE YEAR, THE QUESTION OF CO MPUTATION OF BUSINESS INCOME DOES NOT ARISE. (I) SPB BANK LTD. VS. CIT (1980) 126 ITR 773 (KER)/PERF ECT POTTERY CO. LTD. VS. CIT (1987) 166 ITR 196 (MP)/ RANI J SARALA DEVI VS. CIT (1962) 46 ITR 83; (AP). (II) CIT VS. BANGALORE TRANSPORT CO. (1967) 66 ITR 373 ( SC) 5. HE, ACCORDINGLY, DID NOT ACCEPT THE LOSS DECLARE D IN PROFIT AND LOSS ACCOUNT ON RS.1,12,987/- TREATING THE BUSINESS INCOME AT RS . NIL. HOWEVER, CONSIDERING THE BUSINESS EXPEDIENCY ONLY THE STATUTORY EXPENSES I.E AUDIT FEES OF RS.38,605/-AND FILING FEE OF RS.928/- TOTALING TO RS.39,533/- WERE ALLOWED. ACCORDINGLY HE COMPUTED THE ASSESSEES INCOME AS UNDER:- GROSS RECEIPTS AS DECLARED RS. 4,74,179 LESS: EXPENSES AS DISCUSSED ABOVE RS. 39,533/- NET TAXABLE INCOME RS.4,34,646/- ROUNDED OFF RS. 4,34,650/- 4. BEFORE LD. CIT(A), THE ASSESSEE HAD MADE FOLLOWI NG SUBMISSIONS:- (A) THE ASSESSEE BEING A PRIVATE LTD COMPANY, WAS E NGAGED IN THE BUSINESS OF BUILDERS AND DEVELOPERS, FILED ITS RETURN OF INCOME ON 27 TH NOVEMBER 2009, DECLARING A LOSS OF RS.2,14,470/- THROUGH E-FILING. THE ACCOUNTS OF THE ASSESSEE 3 ITA NO. 739/DEL/2014 COMPANY WERE AUDITED BY THE AUDITORS M/S ASHOK BHAR TIA & CO. AND AUDIT REPORT FOR FINANCIAL YEAR 2008-09 WAS SUBMITTED ON 28 TH AUGUST 2009: (B) THE ASSESSEE COMPANY WAS REGULARLY MAINTAINING BOOKS OF ACCOUNTS IN ITS REGULAR COURSE OF BUSINESS AND HAVING AN ESTABLISHE D OFFICE, EMPLOYEES AND INFRASTRUCTURE. FURTHER ITS COMMERCIAL PROJECT CO RPORATE SUIT WAS UNDER CONSTRUCTION AT IFFCO CHOWK, GURGAON DURING THE YEA R UNDER CONSIDERATION. A SUM OF RS.293.76 LAKHS WAS INCURRED ON IT UNDER DIF FERENT HEAD OF CONSTRUCTION DURING THE YEAR UNDER CONSIDERATION AND WAS ADDED T O THE INVENTORIES (PROJECT UNDER CONSTRUCTION) WHICH WERE CARRIED OVER TO NEXT YEAR (S) AND TOTAL VALUE OF INVENTORIES CARRIED OVER AS SUCH WAS RS. 1151.82 LA KHS AS ON 31 ST MARCH 2009. (C) THE EXPENSES DIRECTLY RELATED TO PROJECT WER E DEBITED UNDER CONSTRUCTION BY ASSESSEE COMPANY AS PER ITS ACCOUNTING POLICIES WH ICH HAVE BEEN CONSISTENTLY FOLLOWED AND OFFICE REMUNERATION AND ROC FILING FEE WERE CLAIMED AS EXPENSES IN THE PROFIT AND LOSS ACCOUNT BEING ADMINISTRATIVE EX PENSES AND NOT DIRECTLY RELATED TO THE FIRM. IT WAS FURTHER SUBMITTED THAT SUCH EXPEN SES WERE REQUIRED TO BE INCURRED EVEN IF NO PROJECT WAS GOING ON AND NO BUSINESS WAS BEING CARRIED ON DURING THE YEAR BUT TO MAINTAIN THE LIFE OF THE COMPANY AND TH E ACCOUNTING POLICIES FOLLOWED BY THE COMPANY ARE ALSO MENTIONED BY THE AUDITORS OF THE COMPANY IN THE AUDIT REPORT. (D) THE LOSS AS PER PROFIT AND LOSS ACCOUNT WAS REJ ECTED WITHOUT REJECTING THE BOOKS OF ACCOUNT. (E) THE ASSESSEES PRACTICE OF REVENUE RECOGNITION BASED ON THE COMPLETED PROJECT HAS BEEN ACCEPTED IN TOTO. 4 ITA NO. 739/DEL/2014 (F) IN RESPONSE TO ASSESSING OFFICERS QUERY VIDE Q UESTION NO. 24 & 25 DATED 18 TH AUGUST 2011 THE ASSESSEE FURNISHED THE DETAILS OF OPENING STOCK AND THE CLOSING STOCK (WORK IN PROGRESS) WITH EVIDENCE OF V ALUATION (PROJECT WISE). THE ASSESSEE SUBMITTED THAT THE DETAILS OF PROJECT UNDE R CONSTRUCTION HAD BEEN FURNISHED IN SCHEDULE H ATTACHED TO THE BALANCE SHEET. AS R EGARDS RELIANCE PLACED BY ASSESSING OFFICER ON VARIOUS DECISIONS NOTED EARLIE R, THE ASSESSEE POINTED OUT THAT THOSE CASE LAWS RELATED TO THE CASES WHERE BUSINESS OF THE ASSESSEE WAS CLOSED BEFORE THE YEAR UNDER REFERENCE. (G) THE ASSESSEE HAS BEEN CARRYING ON THE BUSINESS OF BUILDERS AND DEVELOPERS AND THE SAME WAS SET UP AND COMMENCED MUCH BEFORE T HE YEAR UNDER CONSIDERATION. (H). THE ASSESSEE HAD CLAIMED ONLY THOSE ADMINISTRA TIVE EXPENSES WHICH WERE NOT DIRECTLY ATTRIBUTABLE TO THE PROJECT. THEREFOR E, ASSESSING OFFICER SHOULD HAVE ALLOWED FOR THE OFFICE RENT ALSO ALONG WITH AUDIT F EE AND ROC FILING FEE. THE ASSESSSEE RELIED ON VARIOUS CASE LAWS. 5. LD. CIT(A) SUMMARILY DISMISSED THE ASSESSEES AP PEAL INTER ALIA, OBSERVING THAT ASSESSEE HAD NO BUSINESS ACTIVITY DURING THE Y EAR . I HAVE CONSIDERED THE SUBMISSIONS OF LD. DR. THE SUBMISSIONS MADE BY ASS ESSEE BEFORE THE LD. CIT(A) INTER ALIA, REGARDING CORPORATE SUIT AT IFFCO CH OWK UNDER CONSTRUCTION WAS VALUED AT THE YEAR END AT RS.1151.02 HAS NOT BEEN CONTROVERTED BY THE DEPARTMENT. ALL THE EXPENSES DIRECTLY ATTRIBUTABLE TO THE PROJECT WERE CHARGED TO THE CONSTRUCTION WORK IN PROGRESS ACCOUNT AND ONLY THOSE ADMINISTRATIVE EXPENSES WHICH WERE NECESSARY FOR MAINTENANCE OF BASIC INFRA STRUCTURE OF THE COMPANY, WERE CLAIMED BY ASSESSEE IN PROFIT AND LOSS ACCOUNT . UNDER SUCH CIRCUMSTANCES, I FAIL TO UNDERSTAND AS TO HOW A FINDING HAS BEEN ARR IVED BY AUTHORITIES BELOW THAT NO 5 ITA NO. 739/DEL/2014 BUSINESS ACTIVITY WAS CARRIED OUT BY ASSESSEE. THE OFFICE RENT CLAIMED BY ASSESSEE WAS A NECESSARY BUSINESS EXPENDITURE AND, THEREFORE , COULD NOT BE DENIED TO ASSESSEE. I, THEREFORE, SET ASIDE THE ORDER OF LD . CIT (A) AND DIRECT THE ASSESSING OFFICER TO ALLOW THE OFFICE RENT ALSO ALONG WITH AU DIT FEES AND FILING FEE AND COMPUTE THE INCOME ACCORDINGLY. 6. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 23 RD OF JUNE 2015. SD/- (S. V. ME HROTRA) ACCOUNTANT MEMBER DATED:- 23 /06/2013 *R. NAHEED* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT A SSISTANT REGISTRAR ITAT NEW DELHI 6 ITA NO. 739/DEL/2014 DATE 1. DRAFT DICTATED ON 22.06.2015 PS 2. DRAFT PLACED BEFORE AUTHOR 23.06.2015 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS .06.2015 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK .06.2015 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 7 ITA NO. 739/DEL/2014