GL Litmus Events Pvt. Ltd., New Delhi V. ACIT, Central Circle-17, New Delhi

ITA 7602/DEL/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 0157 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 30-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIMA
• Assessee Lawyers: S K TULSIYAN
• Keywords: Rejection of books of accounts; Depreciation; Unabsorbed depreciation
• Section: 143(3); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI K.NARASIMHA CHARY, JUDICIAL MEMBER ITA NO.-7602/DEL/2018 (ASSESSMENT YEAR: 2013-14) GL LITMUS EVENTS PVT. LTD., B-90, SECOND FLOOR, VISHWAKARMA COLONY, NEW DELHI VS. ACIT, CENTRAL CIRCLE-17 NEW DELHI. PAN NO. AADCG6909N APPELLANT RESPONDENT ASSESSEE BY SH. S.K. TULSIYAN, ADV . REVENUE BY MS. ANIMA, SR. DR DATE OF HEARING: 19/07/2021 PRONOUNCEMENT ON 19/07/2021 ORDER PER K. NARASIMHA CHARY, JM AGGRIEVED BY THE ORDER DATED 20/9/2018 PASSED IN A PPEAL NO. 100/16-17, BY THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS)-27, NEW DELHI (LD. CIT(A)), IN THE CASE OF M/S GL LIT MUS EVENTS PRIVATE LIMITED (THE ASSESSEE) FOR THE ASSESSMENT YEAR 20 13-14, ASSESSEE PREFERRED THIS APPEAL. 2 2. BRIEF FACTS OF THE CASE RELEVANT FOR THE DISPOSA L OF THIS APPEAL ARE THAT THE ASSESSEE FILED RETURN OF INCOME FOR THE AS SESSMENT YEAR 2013-14 DECLARING AN INCOME OF RS. 2,84,22,950/-, UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION. BY ORDER DATED 18/3/2016 P ASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT), THE INCOME OF THE ASSESSEE WAS ASSESSED AT RS. 3,07,80,614/-. LEA RNED ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE WHIC H WERE MAINTAINED ON CASH BASIS. LEARNED ASSESSING OFFICER REJECTED THE EXPENSES CLAIMED BY THE ASSESSEE TO THE EXTENT OF RS. 5,24,742/-, DEPRE CIATION TO THE TUNE OF RS. 5,25,034/-AND THE UNABSORBED DEPRECIATION OF RS . 13,07,888/-. 3. AGGRIEVED BY SUCH AN ACTION OF THE LEARNED ASSES SING OFFICER ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) AND ARGUED THAT ALL THE EXPENSES THAT HAVE BEEN DISALLOWED BY THE LEARNED A SSESSING OFFICER AND THE SAME WERE INCURRED IN THE ORDINARY COURSE OF AC TIVITIES BEING CARRIED OUT BY THE ASSESSEE AND NO COGENT REASONS FOR DISAL LOWANCE OF SUCH AMOUNTS WERE GIVEN BY THE LEARNED ASSESSING OFFICER . LD. CIT(A), HOWEVER, OBSERVED THAT THE ISSUE RELATING TO THE ME THOD OF ACCOUNTING WAS CONTINUING FROM EARLIER YEARS ON IDENTICAL FACT S AND DURING THE APPELLATE PROCEEDINGS FOR THE ASSESSMENT YEAR 2012- 13 ALSO, ON IDENTICAL FACTS HIS PREDECESSOR HAD TAKEN THE VIEW THAT INASM UCH AS THE LD. DRP HAD REJECTED THE ACCOUNTING SYSTEM ON CASH BASIS FO LLOWED BY THE ASSESSEE FOR 2011-12 AND DIRECTED THE ASSESSEE TO F OLLOW THE ACCRUAL BASIS OF ACCOUNTING SYSTEM,WHILE RESPECTFULLY FOLLO WING THE SAME FOR THIS YEAR ALSO THE DISALLOWANCE MADE BY THE LEARNED ASSE SSING OFFICER WAS TO BE CONFIRMED. ON THIS PREMISE LD. CIT(A) AFFIRMED T HE ASSESSMENT ORDER WITH ALL ITS ADDITIONS AND DISMISSED THE APPEAL. 3 4. ASSESSEE IS, THEREFORE, AGGRIEVED AND PREFERRED THIS APPEAL STATING THAT AS RIGHTLY OBSERVED BY THE LD. CIT(A) FACTS IN VOLVED IN THIS CASE ARE SIMILAR TO THE FACTS INVOLVED FOR THE EARLIER ASSES SMENT YEARS 2011-12 AND 2012-13; THAT A COORDINATE BENCH OF THIS TRIBUNAL F OR THE ASSESSMENT YEAR 2011-12 RETURNED A FINDING THAT THE CASH METHOD OF ACCOUNTING WHICH IS FOLLOWED BY THE ASSESSEE FOR THE IMPUGNED ASSESSMEN T YEAR AS WELL AS SUBSEQUENTLY, CANNOT BE REJECTED AND INCOME OF THE ASSESSEE SHOULD NOT BE COMPUTED ON MERCANTILE METHOD OF ACCOUNTING. LD. AR FURTHER SUBMITTED THAT THIS VIEW TAKEN BY THE TRIBUNAL FOR THE ASSESSMENT YEAR 2011-12 IS FOLLOWED BY THE TRIBUNAL IN ASSESSEES O WN CASE FOR THE ASSESSMENT YEAR 2012-13 ALSO SINCE THERE IS NO CHAN GE IN FACTS OR IN LAW, THE CONSISTENT VIEW TAKEN BY THE TRIBUNAL IN ASSESS EES OWN CASE FOR THE EARLIER ASSESSMENT YEARS MAY BE FOLLOWED AND THE AD DITIONS MADE ON THE PREMISE OF THE METHOD OF ACCOUNTING HAS TO BE DELET ED. COPIES OF THE ORDERS FOR THE EARLIER ASSESSMENT YEARS ARE FILED A ND FORM PART OF RECORD. 5. PER CONTRA, LD. DR PLACED HEAVY RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THERE ARE NO V ALID GROUNDS TO INTERFERE WITH THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE GONE THROUGH THE RECORD IN THE LIGHT OF THE SUBMISSIONS MADE ON EITHER SIDE. IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2011-12 IN ITA NO. 2502/DEL/2015 A COORDINATE BENCH OF THIS TRIBUNAL DEALT WITH THE ISSUE OF METHOD OF ACCOUNTING IN DET AIL, AND IN CONCLUSION HELD THAT,- 36. THEREFORE, IT IS EVIDENT FROM THE DECISION OF T HE HONOURABLE SUPREME COURT THAT THE BOOKS OF ACCOUNTS AND THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE CAN BE DISCARDED, ONLY IF THE PROPER PROFITS, 4 REAL INCOME, THERE FROM CANNOT BE DEDUCED. THEREFOR E, IF AN ASSESSING OFFICER DESIRES TO REJECT THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE, HE MUST GIVE A COGENT REASON, WHICH C LEARLY SHOWS THAT PROFITS OF THE BUSINESS CANNOT BE CORRECTLY DEDUCED FROM THE METHOD OF ACCOUNTING EMPLOYED BY THE ASSESSEE. IN THE PRESENT CASE, THE LEARNED ASSESSING OFFICER HAS NOT SHOWN ANY REASON FOR WHIC H IF AN ASSESSEE FOLLOWS CASH BASIS OF ACCOUNTING, THE PROFITS CANNO T BE DEDUCED CORRECTLY. EVEN OTHERWISE, THE REAL INCOME OF THE A SSESSEE IS REQUIRED TO BE TAXED. IN THE PRESENT CASE ASSESSEE ITSELF HAS S HOWN THAT THOUGH IT HAS RAISED THE BILLS BUT SOME OF THE BILLS HAVE NOT BEEN RECEIVED TILL NOW BECAUSE OF PROTRACTED LITIGATION WHICH ITSELF PROVE S THAT EVEN IN THE MERCANTILE SYSTEM OF ACCOUNTING SUCH INCOME HAS NOT ACCRUED. NOTHING MORE COULD HAVE BEEN SHOWN AS AN INCOME THEN WHAT I S RECEIVED BY THE ASSESSEE. IT IS NOT THE CASE OF THE REVENUE THAT AS SESSEE HAS NOT SHOWN INCOME WHAT HAS BEEN RECEIVED BY IT. IT IS ALSO NOT THE CASE OF THE REVENUE THAT EXPENDITURE CLAIMED BY THE ASSESSEE HA S NOT BEEN PAID. IN VIEW OF THIS, BOTH RECEIPTS AND OUTFLOW OF CASH ARE UNDISPUTED. IN VIEW OF THIS, WE ARE OF THE VIEW THAT THE CASH METHOD OF AC COUNTING, WHICH IS FOLLOWED BY THE ASSESSEE FOR THE IMPUGNED ASSESSMEN T YEAR AS WELL AS SUBSEQUENTLY, CANNOT BE REJECTED AND THE INCOME OF THE ASSESSEE SHOULD NOT BE COMPUTED ON MERCANTILE METHOD OF ACCOUNTING. FOR THE ASSESSMENT YEAR 2012-13 ALSO, ANOTHER COORD INATE BENCH OF THIS TRIBUNAL FOLLOWED THE VIEW TAKEN FOR THE ASSESSMENT YEAR 2011-12 AND IN ITA NO. 2682 /DEL/ 2017, BY ORDER DATED 17/1/2020 H ELD THAT THE ACTION OF THE LEARNED ASSESSING OFFICER IN REJECTING THE C ASH SYSTEM OF ACCOUNTING, AS FOLLOWED BY THE ASSESSEE, AND HIS SU BSEQUENT COMPUTATION OF INCOME IS GROSSLY INCORRECT AND THEREFORE, REJEC TED THE SAME. 7. IN VIEW OF THE ABOVE, CASH METHOD OF ACCOUNTING, WHICH IS FOLLOWED BY THE ASSESSEE CONSISTENTLY AND ALSO FOR THE IMPUGNED ASSESSMENT YEAR, CANNOT BE REJECTED AND THE INCOME OF THE ASSESSEE SHOULD NOT BE COMPUTED ON MERCANTILE METHOD OF ACCO UNTING. 5 8. ASSESSEE HAS PLACED ON RECORD FOLLOWING CHART EX PLAINING THE ADDITIONS/DISALLOWANCES MADE BY THE ASSESSING OFFIC ER : PARTICULARS A MT AMT REMARKS SALE OF SERVICES 3,07,87,365 ACCEPTED AS SUCH BY A,0 LESS: EXPENSES I BANK CHARGES 281 DISALLOWED BY AO II RENT 4.67.5 79 DISALLOWED BY A.O, III COMMUNICATION COSTS 100 DISALLOWED BE A.O, IV LEGAL AND PROFESSIONAL FEES 6,750 V PRINTIN G & STATIONERY 150 DISALLOWED BY A.O. VI MISCELLANEOUS EXPENSES 56.632 DISALLOWED BY A.O, VII ADVANCES WRITTEN OFF 1, 99, 000 ADDED BACK BY ASSESSEE VIII INTEREST EXPENSE 13, 34, 934 ADDED BACK BY ASSESSEE COMP IX DEPRECIATION AS PER CO ACT 1,26,014 21,91.440 ADDED BACK BY ASSESSEE COMP OF NET PROFIT FOR YEAR AS PER CASH AC ACCOUNT 2,85,95,925 ADD: EXPENSES DISALLOWED BY ASSESSEE SUO MOTO I ADVANCES WRITTEN OFF 1, 99, 000 II INTEREST EXPENSE 13,34,934 III DEPRECIATION UNDER CO ACT 1.26,014 16 , 59,948 LESS: I DEPRECIATION AS PER I T ACT 5,25.0.14 DISALLOWED BY A.O. II UNABSORBED DEPRECIATION 13,07.888 18,32,922 DISALLOWED BY A.O, TAXABLE INCOME AS RETURNED BY ASSESSEE ASSESSES 2,84,22,951 9. IT IS, THEREFORE, CLEAR THAT OUT OF THE TOTAL EX PENSE OF RS. 21,91,440/-DEBITED BY THE ASSESSEE IN ITS CASH P&L ACCOUNT, THE ASSESSEE SUO MOTO ADDED BACK A SUM OF RS. 16,59,948/-. IN V IEW OF THE FINDING OF THE TRIBUNAL FOR THE EARLIER ASSESSMENT YEARS OF 20 11-12 AND 2012-13, WE 6 ARE OF THE CONSIDERED OPINION THAT THE ADDITION MAD E ON ACCOUNT OF THE METHOD OF ACCOUNTING AND THE SPECIFIC ADDITION OF R S. 5,24,742/- ON ACCOUNT OF EXPENSES AND RS. 5,25,034/-ON ACCOUNT OF DEPRECIATION AS PER THE I.T. ACT CANNOT BE SUSTAINED. THE ASSESSEE IS A LSO ENTITLED TO CLAIM THE UNABSORBED DEPRECIATION OF RS. 13,07,888/-FROM THE ASSESSMENT YEAR 2012-13. WE THEREFORE, DIRECT THE LEARNED ASSESSING OFFICER TO DELETE THE ADDITION OF RS. 23, 57, 664/-. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 TH DAY OF JULY, 2021 SD/- SD/- (N.K. BILLAIYA) (K. NARSIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 19/07/2021