KISHENS ACCOUNTING SOLUTIONS P.LTD, MUMBAI V. ITO 9(2)(2), MUMBAI

ITA 7581/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2723 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 03-06-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 19-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PASSED
• Keywords: Opportunity of being heard; Revenue expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI . . , , !' # $%, & , ' BEFORE SHRI R.C.SHARMA, AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO.7581/MUM/15 ( &( ') / ASSESSMENT YEAR: 2011-12) M/S. KISHENS ACCOUNTING SOLUTIONS PVT. LTD. OFFICE NO.404, 4 TH FLOOR, NEAR BORIVALI PETROL PUMP, BORIVALI WEST, MUMBAI - 400092 ( / VS. INCOME TAX OFFICER 9(2)(2) AAYAKAR BHAVAN, CHURCHAGATE, MUMBAI /. /. PAN/GIR NO. : AADCK7393L ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 03.06.2016 !' /DATE OF PRONOUNCEMENT:23.09.2016 #$ / O R D E R PER AMARJIT SINGH, JM: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST T HE ORDER DATED 29.10.2014 FILED BY THE ASSESSEE PASSED BY COMMISSI ONER OF INCOME TAX (APPEALS) 20, MUMBAI [HEREINAFTER REFERRED TO AS TH E CIT(A)], MUMBAI RELEVANT TO A.Y.2011-12. ASSESSEE BY: SHRI SUSHIL U. LAKHANI DEPARTMENT BY: SHRI B.S.BIST ITA 7581/M/14 A.Y.2011-12 2 2. THE APPELLANT HAS RAISED THE FOLLOWING GROUNDS:- 1. DISALLOWANCE OF RENT OF RS.215,000/-:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE AO ERRED IN DISALLOWING RS.215,000/- BEING COMPENSATIO N PAID BY THE ASSESSEE UNDER THE AGREEMENT FOR EXTRA AMENITI ES FOR USE OF PREMISE. 2. DISALLOWANCE OF DEFFERRED REVENUE EXPENDITURE RS. 25,880/- BEING 1/5 TH OF THE PRE-OPERATIVE EXPENSE:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE AO HAS ERRED IN TREATING THE PRE-OPERATIVE EXPENSES AS COVERED U/S.35D AND DISALLOWED 1/5 TH OF THE SAME CLAIMED BY THE ASSESSEE. 3. ADDITION U/S.69C OF RS.58,635/-:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE AO ERRED IN MAKING AN ADDITION OF RS.58,635/- ON THE G ROUNDS THAT THERE WERE NEGATIVE CASH BALANCES APPEARING IN THE CASH BOOK ON VARIOUS DATES. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED ITS RETURN OF INCOME ON 09.09.2011 DECLARING TOTAL LOSS TO THE TU NE OF RS.95,789/-. THE RETURN WAS PROCESSED U/S.143(1) OF THE INCOME TAX A CT, 1961 ( IN SHORT THE ACT). SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCR UTINY AND NOTICE U/S.143(2) OF THE ACT WAS ISSUED ON 27.09.2012. LA TER ON NOTICE U/S.142(1) OF THE ACT WAS ISSUED ON 16.08.2013 AND 11.12.2013 AND 03.01.2014. THEREAFTER, THE ASSESSING OFFICER DISALLOWED CERTAI N EXPENSES AND ASSESSED THE INCOME OF THE ASSESSEE TO THE TUNE OF RS.2,11,5 07/-. SINCE THE ASSESSEE WAS NOT SATISFIED WITH THE ASSESSMENT ASSESSED BY T HE ASSESSING OFFICER, THEREFORE, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A), WHO CONFIRMED THE ORDER OF THE ASSESSING OFFICER, THEREFORE THE A SSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO.1:- 4. UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED THE CONFIRMATION OF DISALLOWANCE OF RENT TO THE TUNE OF RS.2,15,000/-. THE RENT HAS BEEN PAID ITA 7581/M/14 A.Y.2011-12 3 BY THE ASSESSEE TO THE LICENSOR UNDER THE HEAD AGRE EMENT OF AMENITIES LIES AT PAGE 14 OF THE PAPER BOOK. THIS AGREEMENT IS THE P ART AND PARCEL OF THE LEAVE AND LICENSE AGREEMENT EXECUTED BY THE LICENSE E I.E. ASSESSEE AND THE LICENSOR. THE CIT(A) HAS DECLINED THIS PIECE OF EV IDENCE ON THE GROUND OF THAT THE SAID AGREEMENT FOR EXTRA AMENITIES NOWHERE SPEAKS ABOUT THIS FACT THAT WHAT KIND OF AMENITIES WAS BEING PROVIDED BY T HE LICENSOR. THE VOUCHERS PRODUCED BY THE LICENSEES / ASSESSEE HAS A LSO BEEN DECLINED. WE ARE OF THE VIEW THAT THESE GROUNDS ARE NOT SUFFICIE NT TO DENY THE CLAIM OF THE ASSESSEE. THE LEAVE AND LICENCE AGREEMENT DATED 06 .01.2011 WHICH LIES AT PAGE ONE OF THE PAPER BOOK. WHEREAS THE OTHER AGRE EMENT FOR EXTRA AMENITIES IS ALSO ON RECORD WHICH WAS EXECUTED BY T HE LICENSOR/ ASSESSEE FOR PAYING AN AMOUNT OF RS.55,000/- AS AMENITIES CH ARGES FOR THE PERIOD W.E.F DECEMBER 2010 TO DECEMBER 2013. THE VERACITY OF THESE DOCUMENTS ARE REQUIRED TO BE ASCERTAINED BY THE ASSESSING OFF ICER AS WELL AS THE CIT(A) BUT THEY DID NOT DO. THE LICENSOR HAS ALSO CONFIRMED THE PAYMENT FOR EXTRA AMENITIES WHICH HAS BEEN PRODUCED BEFORE US AND LIES AT 17 OF THE PAPER BOOK. FURTHER THE TDS HAS ALSO BEEN DEDUCTED BY THE ASSESSEE TO THE TUNE OF RS.19,250/- AND THE CHALLAN IN THIS REGARD HAS ALSO BEEN PRODUCED WHICH LIES AT PAGE 25 OF THE PAPER BOOK. THE LICEN SOR HAS ALSO PRODUCED THE AFFIDAVIT CONFIRMING THE TRANSACTION WHICH LIES AT PAGE 42 OF THE PAPER BOOK. THE ASSESSEE / LICENSEE HAS ALSO PRODUCED TH E BANK STATEMENT ON RECORD WHICH LIES AT PAGE 29 OF THE PAPER BOOK. AL L THESE PIECE OF EVIDENCES SPEAKS ABOUT THE PAYMENT TO THE TUNE OF R S.55,000/- W.E.F DECEMBER 2010 TO DECEMBER 2013. IN VIEW OF SAID CI RCUMSTANCES WE ARE OF THE VIEW THAT THE LEARNED CIT(A) HAS WRONGLY APP RECIATED THE EVIDENCES PRODUCED BEFORE HIM BUT DID NOT CONSIDER THE RELEVA NT EVIDENCE ON RECORD, THEREFORE IN VIEW OF THE SAID CIRCUMSTANCES WE OF T HE VIEW THAT THE FINDING OF THE CIT(A) IS WRONG AGAINST LAW AND FACTS THEREF ORE THE SAME IS NOT ITA 7581/M/14 A.Y.2011-12 4 LIABLE TO BE SUSTAINABLE IN THE EYES OF LAW. THERE FORE, WE SET ASIDE THE FINDING ON THIS ISSUE AND ALLOWED THE PAYMENT OF TH E RENT TO THE TUNE OF RS.2,15,000/- ON ACCOUNT OF EXTRA AMENITIES FOR THE PERIOD DECEMBER 2010 TO DECEMBER 2013. ACCORDINGLY, THIS ISSUE IS DECID ED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. ISSUE NO:-2 5. UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF DEFERRED REVENUE EXPENDITURE TO THE TUNE OF RS.25,8 80/-. THE ASSESSING OFFICER DISALLOWED THE SAME ON THE GROUND OF THAT T HE PAID UP CAPITAL OF THE ASSESSEE COMPANY WAS ONLY RS.1,00,000/- AND ONLY 5% OF THE SAME CAN BE ALLOWED U/S.35D OF THE ACT. THEREFORE, THE ASSESSE E WAS FOUND ELIGIBLE FOR DEDUCTION CLAIMED OF RS.1000/- BEING 1/5 TH CLAIM OF RS.5000/- AGAINST THE TOTAL CLAIM OF RS.26,880/-. THE APPELLANT HAD INCU RRED CERTAIN PREOPERATIVE EXPENSES AMOUNTING TO RS.1,35,395/-. IN EARLIER T HIS AMOUNT WAS DEFERRED AND CLAIMED OVER A PERIOD OF 5 YEARS. THE ASSESSIN G OFFICER DISALLOWED THE SAID EXPENSES ON THE GROUND OF THAT THE SAME WAS NO T ALLOWABLE U/S.35D OF THE ACT. THE CONTENTION OF THE APPELLANT IS THAT T HE APPELLANT DID NOT RAISE ANY CLAIM U/S.35D OF THE ACT BUT HAS DEFERRED REVEN UE EXPENSES. THE ONLY QUESTION WHICH IS REQUIRED TO BE DECIDED BY US IS T HAT WHETHER THE DEFERRED REVENUE EXPENSE IS REQUIRED TO BE ALLOWED OR NOT. IN THIS REGARD THE MATTER OF CONTROVERSY HAS BEEN ADJUDICATED BY THE HONBLE HIGH COURT OF BOMBAY IN CASE OF COMMISSIONER OF INCOME TAX 2, MUMBAI V /S. RAYMOND LTD. [2012] 21 TAXMANN.COM.60 WHEREIN IT IS SPECIFICALLY HELD THAT THE PREOPERATIVE EXPENSES WHICH ARE IN NATURE OF REVENU E IS LIABLE TO BE ALLOWED IN THE INTEREST OF JUSTICE. IN VIEW OF THE SAID CI RCUMSTANCES WE ARE OF THE VIEW THAT THE LEARNED CIT(A) HAS WRONGLY CONFIRMED THE ORDER OF ASSESSING OFFICER WHICH IS NOT LIABLE TO BE SUSTAINABLE IN TH E EYES OF LAW. IN VIEW OF ITA 7581/M/14 A.Y.2011-12 5 THE ABOVE SAID LAW WE ARE OF THE VIEW THAT THE CIT( A) HAS WRONGLY CONFIRMED THE ORDER PASSED BY THE ASSESSING OFFICER , THEREFORE, WE SET ASIDE THE ORDER OF CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO ALLOW THE DEFERRED REVENUE EXPENSES TO THE TUNE OF RS.25,880/-. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. ISSUE NO.3:- 6. UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED THE CONFIRMATION OF DISALLOWANCE TO THE TUNE OF RS.58,635/- U/S.69C OF THE ACT. THE CONTENTION OF THE ASSESSEE IS THAT THE EMPLOYEES OF THE APPELL ANT INCURRED VARIOUS EXPENSES ON BEHALF OF THE APPELLANT FROM TIME TO TI ME. THE ACCOUNTANT OF THE APPELLANT USED THE ACCOUNT FOR THESE EXPENSES O N THE DATE ON WHICH EXPENSES WERE INCURRED BY THE EMPLOYEE AND NOT ON T HE DAY ON WHICH IT WAS REIMBURSED TO THE EMPLOYEES. THESE CIRCUMSTANC ES LEFT TO NEGATIVE BALANCE BEING REFLECTED IN THE CASH BOOK. HOWEVER, IN SOME CASES THE EXPENSES AND WITHDRAWAL FROM THE BANK WERE ON THE S AME DATE. AS THE EXPENSES WERE BOOKED BEFORE WITHDRAWAL ENTRY, THERE FORE THERE WAS NO NEGATIVE BALANCE. THE AUTHORITY WAS OF THE VIEW TH AT NO DOUBT THERE WAS NEGATIVE ENTRY IN THE CASH BOOK BUT IT WAS ALSO ON RECORD THAT NO CASH LIES WITH THE ASSESSEE COMPANY. THE ASSESSEE COMPANY WI THOUT HAVING CASH WERE CLAIMING THE EXPENDITURE, THEREFORE, THE ASSES SING OFFICER DECLINED THE CLAIM OF THE ASSESSEE AND THE CIT(A) HAS ALSO C ONFIRMED THE SAME. ON SEEING THE CASH BOOK THE AUTHORITY DISALLOWED THE C LAIM. THE MATTER WAS NOT PROPERLY EXAMINED BY THE AUTHORITY TO ARRIVE AT THIS CONCLUSION THAT THE EXPENDITURE WAS JUSTIFIABLE OR NOT. THE CONTENTION OF THE ASSESSEE WAS NOT DISCUSSED AT ALL. ALL THE NEGATIVE CASH BALANCE WA S ADDED TO THE INCOME OF THE ASSESSEE U/S.69C OF THE ACT. THE EXPENDITURE I S IN CONNECTION WITH THE ITA 7581/M/14 A.Y.2011-12 6 EXPENDITURE INCURRED BY THE EMPLOYEE OF THE ASSESSE E DUE TO THEIR EXIGENCY. ALL WORK AND THEREAFTER THIS EXPENDITURE WAS ENTERE D INTO THE CASH BOOK WITHOUT REIMBURSEMENT TO THE SAID EMPLOYEES. HOWEV ER, AFTER THE REIMBURSEMENT ON RECORD THE ENTRIES WERE RECORDED I N THE ACCOUNT BOOKS. THIS CONTENTION WAS NOT DISCUSSED BY THE ASSESSING OFFICER AS WELL AS CIT(A). THEREFORE, IN VIEW OF THE SAID CIRCUMSTANC ES WE ARE OF THE VIEW THAT THE EXPENDITURE TO THE TUNE OF RS. 58,635/- IS REQUIRED TO BE FURTHER EXAMINED IN VIEW OF THE ACCOUNTS BOOK / MATERIAL AV AILABLE ON RECORD IN ACCORDANCE WITH LAW. THEREFORE, WE SET ASIDE THE F INDING OF THE CIT(A) ON THIS ISSUE AND MATTER IS HEREBY ORDERED TO BE RESTO RED TO THE ASSESSING OFFICER FOR RE-EXAMINATION OF THIS ISSUE BY GIVING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH LAW. ACCO RDINGLY THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVEN UE. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY ALLOWED FOR STATISTICAL PURPOSE . ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD SEPTEMBER , 2016. SD/- SD/- (R.C.SHARMA) (AMARJIT SINGH) # / ACCOUNTANT MEMBER %& # /JUDICIAL MEMBER ' ( MUMBAI; )# DATED : 23 RD SEPTEMBER, 2016 MP MP MP MP ITA 7581/M/14 A.Y.2011-12 7 + ,&#$- .-)# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. * ) ( / THE CIT(A)- 4. * / CIT 5. -./ &&01 , 01' , ' ( / DR, ITAT, MUMBAI 6. /34 5 / GUARD FILE. ( / BY ORDER, - & //TRUE COPY// //% /(DY./ASSTT. REGISTRAR) , ' ( / ITAT, MUMBAI