M/s Aron Hurley kconcepts Pvt Ltd., Roorkee V. ACIT, Haridwar

ITA 844/DEL/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5398 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 25-05-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 14-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K JIWANI
• Assessee Lawyers: RAKESH GUPTA
• Keywords: Depreciation; Opportunity of being heard
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES SMC : DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA.NOS.844 & 845/DEL./2017 ASSESSMENT YEARS 2011-2012 & 2012-2013 M/S. ARON HURLEY KCONCEPTS PVT. LTD., C-18, INDUSTRIAL ESTATE, RAMNAGAR, ROORKEE PIN 247667 PAN AAECA4084F VS. THE ACIT CIRCLE HARIDWAR. (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI RAKESH GUPTA & SHRI SOMIL AGARWAL, ADVOCATES FOR REVENUE : SHRI V.K. JIWANI, SR.D.R. DATE OF HEARING : 26 .03.2018 DATE OF PRONOUNCEMENT : 03 .0 4 .2018 ORDER BOTH THE APPEALS BY THE ASSESSEE ARE DIRECTED AGA INST COMMON ORDERS OF THE LD. CIT(A), MUZAFFARNAGAR, DAT ED 30 TH MARCH, 2010, FOR THE A.YS. 2011-2012 AND 2012-2013, CHALLENGING THE CONFIRMATION OF DISALLOWANCE UNDER SECTION 80IC OF THE I.T. ACT, CONFIRMING DISALLOWANCE OF DE PRECIATION AND CONFIRMING DISALLOWANCE OF MANUFACTURING EXPENSES. 2 ITA.NOS.844 & 845/DEL./2017 M/S. ARON HURLEY KCONCEPTS PVT. LTD., ROORKEE. 2. BOTH THE APPEALS OF THE ASSESSEE ARE TIME BARRE D. THE RECORD REVEALS THAT VIDE ORDER DATED 17 TH OCTOBER, 2017, THE DELAY IN FILING THE APPEALS WAS CONDONED. I HAVE HE ARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES AND PER USED THE MATERIAL ON RECORD. BOTH THE APPEALS ARE DECIDED BY THIS COMMON ORDER. THE FACTS ARE HOWEVER TAKEN-UP FROM A .Y. 2011- 2012. ITA.NO.844/DEL./2017 A.Y. 2011-2012 : 3. THE ASSESSEE IS A PRIVATE LIMITED COMPANY. THE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF VIBRATION TESTING SYSTEM FOR DEFENCE, AEROSPACE AND AUTOMOBILE INDUSTRIES. THE ASSESSEE HAS BEEN CLAIMING DEDUCTIO N UNDER SECTION 80IC SINCE A.Y. 2004-2005. BUT, IN THIS YEA R UNDER CONSIDERATION, DEDUCTION HAS BEEN CLAIMED, AS THE A SSESSEE HAS SET-OFF THE INCOME OF THIS YEAR AGAINST THE BROUGHT FORWARD LOSSES OF THE LAST YEAR. EVEN OTHERWISE, AS PER FIN DINGS OF THE A.O, THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION UND ER SECTION 80IC OF THE ACT. A SURVEY WAS CONDUCTED AT THE BUSI NESS 3 ITA.NOS.844 & 845/DEL./2017 M/S. ARON HURLEY KCONCEPTS PVT. LTD., ROORKEE. PREMISES OF THE ASSESSEE ON 25.11.2008 PERTAINING T O F.YS. 2008-2009 AND A.Y. 2009-2010, DURING WHICH, FOLLOWI NG FACTS WERE FOUND. (1) FACTORY PREMISES WERE FOUND CLOSED. (2) LOCAL ENQUIRY WAS CONDUCTED AT THE TIME OF SURV EY ITSELF WHICH REVEALED THAT THE FACTORY WAS NOT IN OPERATIO N FOR LAST 4-5 YEARS. (3) BOOKS OF ACCOUNT ETC., WERE NOT FOUND IN THE PR EMISES OF THE ASSESSEE BUT IN THE NEARBY PREMISES OF M/S. SARASVATI DYNAMICS PVT. LTD., WHICH IS DOING THE SA ME TYPE OF BUSINESS (4) PLANT AND MACHINERY OF THE ASSESSEE WAS NOT FOU ND IN WORKING CONDITION. (5) STATEMENT OF SHRI VIPUL ARON, DIRECTOR OF THE C OMPANY WAS RECORDED. IT WAS SUBMITTED THAT THERE WAS WAT ER LOGGING IN THE FACTORY PREMISES AND SINCE JULY, 200 8, FACTORY IS CLOSED AND NO BUSINESS IS GOING ON. 4 ITA.NOS.844 & 845/DEL./2017 M/S. ARON HURLEY KCONCEPTS PVT. LTD., ROORKEE. 3.1. THE A.O, THEREFORE, NOTED THAT ASSESSEE-COMPA NY DID NOT HAVE ADEQUATE AMOUNT OF PLANT AND MACHINERY TO CARRY OUT ANY MANUFACTURING ACTIVITY. THE INCOME TAX INSPECTO R ALSO VISITED THE BUSINESS PREMISES OF THE ASSESSEE ON 29 TH DECEMBER, 2010, WHO HAS REPORTED THAT THERE WAS DUST ON THE P LANT AND MACHINERY AND THERE WERE NO SIGN OF MANUFACTURING A CTIVITY AND ALL THE MACHINERY WERE FOUND FULLY DETACHED FROM EL ECTRIC SUPPLY. AGAIN THERE WAS VISIT BY A.O. ON 26.11.2011 AND FACTORY WAS FOUND NOT IN WORKING CONDITION. THE A.O, THEREF ORE, NOTED THAT THERE WAS NO MANUFACTURING ACTIVITY DONE BY TH E ASSESSEE- COMPANY SO AS TO ELIGIBLE FOR DEDUCTION UNDER SECTI ON 80IC OF THE I.T. ACT. THE TOTAL EXPENSES ON ACCOUNT OF POWE R DURING THE YEAR WAS SHOWN AT RS.77,493/- THEREFORE, IT WAS NOT POSSIBLE FOR ASSESSEE-COMPANY TO DO ANY MANUFACTURING ACTIVI TY. THE A.O. NOTED THAT PRINCIPLE OF RESJUDICATA DO NOT APPLY TO THE INCOME TAX PROCEEDINGS. THE LD. CIT(A) ALLOWED THE CLAIM UNDER SECTION 80IC TO THE ASSESSEE-COMPANY FOR A.YS. 2007 -2008 AND 2008-2009 BUT FOR A.Y. 2009-2010, THE LD. CIT(A), D ISALLOWED THE CLAIM UNDER SECTION 80IC OF THE I.T. ACT. THE A .O, THEREFORE, 5 ITA.NOS.844 & 845/DEL./2017 M/S. ARON HURLEY KCONCEPTS PVT. LTD., ROORKEE. DISALLOWED THE MANUFACTURING EXPENSES AMOUNTING TO RS.12,14,242/- AND DEPRECIATION CLAIMED ON MACHINER Y AMOUNTING TO RS.2,42,440/- (TOTAL RS.14,56,682). TH E A.O. ALSO NOTED THAT AS THE ASSESSEE-COMPANY IS NOT DOING MAN UFACTURING WORK AND BUSINESS ONLY ON PAPER, THEREFORE, LOSS WI LL NOT BE ALLOWED TO BE CARRIED FORWARD IN SUBSEQUENT YEAR AN D THE SAME WERE DISALLOWED FOR A SUM OF RS.3,79,102/-. THE FAC TS ARE IDENTICAL IN SUBSEQUENT A.Y. 2012-2013 ALSO. 4. THE ASSESSEE CHALLENGED THESE ADDITIONS BEFORE LD. CIT(A). THE WRITTEN SUBMISSIONS OF THE ASSESSEE-COM PANY IS REPRODUCED IN THE APPELLATE ORDER IN WHICH THE ASSE SSEE HAS BRIEFLY EXPLAINED THAT SURVEY WAS DONE PRIOR TO CLO SE OF THE FINANCIAL YEAR. THEREFORE, IT IS NOT RELATED TO ASS ESSMENT YEAR UNDER APPEAL. THE ASSESSEE-COMPANY MAINTAINED THE S ALES TAX RETURN DOCUMENTS AND EXCISE RETURN DOCUMENTS TO SHO W MANUFACTURING ACTIVITY DONE BY ASSESSEE-COMPANY. TH E LD. CIT(A) IN A.Y. 2009-2010 ALLOWED THE CARRY FORWARD OF THE BUSINESS LOSSES. THE ASSESSEE-COMPANY PRODUCED SUFF ICIENT 6 ITA.NOS.844 & 845/DEL./2017 M/S. ARON HURLEY KCONCEPTS PVT. LTD., ROORKEE. EVIDENCE IN SUPPORT OF THE CLAIM OF DEDUCTION UNDER SECTION 80IC OF THE ACT. THE LD. CIT(A), HOWEVER, HELD THAT ASSESSEE- COMPANY WAS NOT DOING ANY MANUFACTURING ACTIVITY SO AS TO ELIGIBLE FOR DEDUCTION UNDER SECTION 80IC OF THE I. T. ACT. THE LD. CIT(A), IN A.Y. 2010-2011 HAS UPHELD THE DISALLOWAN CE OF DEDUCTION UNDER SECTION 80IC AND DEPRECIATION. THER EFORE, CLAIM OF ASSESSEE-COMPANY WAS REJECTED AS REGARDS D EDUCTION UNDER SECTION 80IC, MANUFACTURING EXPENSES AND DEPR ECIATION. HOWEVER, THE LD. CIT(A) DIRECTED THE A.O. TO ALLOW CARRY FORWARD OF THE BUSINESSES LOSSES AFTER MAKING COMPUTATION A S PER PROVISIONS OF THE ACT. 5. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND S UBMITTED THAT ITAT, DELHI A BENCH IN THE CASE OF THE SAME ASSESSEE IN DEPARTMENTAL APPEAL FOR A.YS. 2006-2007, 2007-2008 AND 2008-2009 VIDE ORDER DATED 26 TH JULY, 2016, CONFIRMED THE ORDER OF THE LD. CIT(A) IN GRANTING DEDUCTION UNDER SECTION 80IC OF THE I.T. ACT. THE DEPARTMENTAL APPEALS HAVE BEEN DISMISSED. 7 ITA.NOS.844 & 845/DEL./2017 M/S. ARON HURLEY KCONCEPTS PVT. LTD., ROORKEE. THE RELEVANT PARAS-9 AND 10 OF THE ORDER IS REPRODU CED AS UNDER: 9. WE HAVE PERUSED ALL THE RECORDS AND TAKEN INTO ACCOUNT THE SUBMISSIONS OF BOTH THE PARTIES. THE CIT(A) HAS RIGHTLY POINTED OUT THAT THE A.O HAS ALLOWED DEDUCT ION U/S 80IC OF THE ACT IN THE IMMEDIATELY PRECEDING YEARS. SURVEY SHOULD HAVE BEEN DONE BEFORE ALLOWING DEDUCTION U/S 80IC OF THE ACT IN THE VERY FIRST YEAR OF ITS CLAIM, BUT THE REVENUE HAS CONDUCTED THE SAME IN 2008. THE SURVEY TEAM FA ILED TO COLLECT THE EVIDENCES DURING THE SURVEY AS TO HOW T HE BUSINESS WAS CLOSED FOR THE ASSESSMENT YEAR 2008-09 . THE OPERATION WAS CLOSED IN NOVEMBER 2008 BECAUSE OF TH E NATURAL CALAMITIES. THE PRODUCTION OF ALL THE DOCU MENTS WERE PRODUCED BY THE ASSESSEE COMPANY BEFORE THE ASSESSING OFFICER RELATED TO THE BUSINESS OF THE AS SESSEE TO THE GOVERNMENT ORGANIZATION TILL SEPTEMBER 2006. TH ESE DOCUMENTS HAS CATEGORICALLY REVEALED THAT THE VERY FOUNDATION OF THE ASSESSING OFFICERS ORDER WAS NOT JUSTIFIED 8 ITA.NOS.844 & 845/DEL./2017 M/S. ARON HURLEY KCONCEPTS PVT. LTD., ROORKEE. AS THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 20 06-07 HAS MADE A CLEAR FINDINGS THAT THE ASSESSEE HAS PUR CHASED DIGITAL POWERS SUB ASSEMBLIES FOR WHICH INVOICE HAS BEEN RAISED BY M/S SARASWATI DYNAMICS PVT. LTD DATED 8/3/2006 AT PAGE 8 PARA 8 OF THE ASSESSMENT ORDER. THUS THE SUB ASSEMBLIES CANNOT BE TERMED AS THE AMPLIFIE R AS A WHOLE. IN THE SAME PARA, THE ASSESSING OFFICER MENT IONED THAT ASSESSEE HAD SOLD AMPLIFIER TO SHAR CENTRE, SRIHARIKOTA FOR RS.1,27,51,250/- FOR WHICH INVOICE HAS BEEN RAISED DATED 06.03.2006. BUT WHILE COMPUTING THE T OTAL INCOME THE ASSESSING OFFICER HAS MADE DISALLOWANCE FOR THE RECEIPT FOR AMPLIFIER FROM THE TOTAL INCOME AMOUNTI NG TO RS.1,27,51,250/- AND AS RELATES TO TOTAL EXPENSES H AS DISALLOWED PURCHASE OF AMPLIFIERS AS TO RS.57,20,00 0/-. THERE WAS MANUFACTURING ACTIVITY GOING ON DURING TH E RELEVANT ASSESSMENT YEARS. THE DISALLOWANCE WAS NOT PROPER AND THE REASON FOR DISALLOWANCE OF THE BENEF IT UNDER SECTION 80IC DOES NOT SUSTAIN. THUS, THE CIT(A) HAS RIGHTLY 9 ITA.NOS.844 & 845/DEL./2017 M/S. ARON HURLEY KCONCEPTS PVT. LTD., ROORKEE. HELD THAT A.O WAS NOT CORRECT WHILE DISALLOWING THE BENEFIT UNDER SECTION 80IC OF THE ACT. 10. IN THE RESULT, APPEALS ARE DISMISSED. 5.1. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED TH AT IN A.Y. 2010-2011, THE LD. CIT(A) VIDE ORDER DATED 15 TH FEBRUARY, 2016 HAS DIRECTED THE A.O. TO ALLOW CARRY FORWARD O F THESE LOSSES IN NEXT ASSESSMENT YEAR AS IS ALSO ALLOWED IN ASSES SMENT YEAR UNDER APPEAL. IT WOULD, THEREFORE, PROVE THAT ASSES SEE-COMPANY WAS CARRYING ON MANUFACTURING ACTIVITY. NO DEPARTME NTAL APPEAL HAVE BEEN FILED AGAINST THESE FINDINGS OF TH E LD. CIT(A). HE HAS SUBMITTED THAT REPORT OF THE INCOME TAX INSP ECTOR WAS NOT CONFRONTED TO THE ASSESSEE-COMPANY. HE HAS FURT HER SUBMITTED THAT THE MATTER MAY BE REMANDED TO THE A. O. FOR RECONSIDERATION OF THE ISSUE IN THE LIGHT OF ORDER OF THE TRIBUNAL. 6. ON THE OTHER HAND, LD. D.R. RELIED UPON THE ORD ERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT INCOME TAX INSPECTOR VISITED THE FACTORY PREMISES AND FOUND NO MANUFACTU RING ACTIVITY DONE BY THE ASSESSEE-COMPANY. HE HAS RELIE D UPON 10 ITA.NOS.844 & 845/DEL./2017 M/S. ARON HURLEY KCONCEPTS PVT. LTD., ROORKEE. DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F DCIT VS. ACE MULTI EXCISE SYSTEM LTD., 2017-TIOL-452 IN WHIC H IT WAS HELD THAT IF THE ASSESSEE WAS INITIALLY ENTITLED TO SECTION 80IB BENEFITS AS ELIGIBLE UNDERTAKING FOR 10 YEARS, IT W OULD NOT CONTINUE TO BE ELIGIBLE FOR SUCH BENEFIT IF IT NO LONGER SATISFIES ELIGIBILITY CONDITIONS BY VIRTUE OF ITS EXTENSION. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS, I AM OF THE VIEW THAT THE MATTER REQUIRES RECONSIDERATION AT TH E LEVEL OF THE A.O. THE ASSESSEE-COMPANY CLAIMED THAT SINCE ITS IN CEPTION IT IS GRANTED DEDUCTION UNDER SECTION 80IC OF THE I.T. ACT. LATER ON, IT WAS NOT GRANTED TO THE ASSESSEE-COMPANY. THE LD. CIT(A) FOR A.YS. 2006-2007, 2007-2008 AND 2008-2009 ALLOWE D THE DEDUCTION UNDER SECTION 80IC OF THE I.T. ACT, MEANI NG THEREBY, ASSESSEE-COMPANY WAS DOING MANUFACTURING ACTIVITY. THEREFORE, DEPRECIATION AND EXPENSES WERE ALLOWED. THE DEPARTM ENT FILED APPEAL BEFORE THE TRIBUNAL. HOWEVER, APPEALS OF THE DEPARTMENT HAVE BEEN DISMISSED VIDE ORDER DATED 26 TH JULY, 2016 (SUPRA). IN THE ASSESSMENT YEAR UNDER APPEALS, THE A.O. RELI ED UPON THE 11 ITA.NOS.844 & 845/DEL./2017 M/S. ARON HURLEY KCONCEPTS PVT. LTD., ROORKEE. SURVEY CONDUCTED IN THE PREMISES OF THE ASSESSEE PR IOR TO ASSESSMENT YEAR UNDER APPEAL, WHICH MAY NOT BE RELE VANT FOR THIS YEAR. FURTHER, INSPECTOR HAS VISITED THE PREMI SES OF THE ASSESSEE-COMPANY IN ASSESSMENT YEAR UNDER APPEALS O N 29 TH DECEMBER, 2010 AND A.O. ON 26 TH NOVEMBER, 2011 AND GAVE REPORT AGAINST THE ASSESSEE-COMPANY. BUT, ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE, SUCH REPORTS WERE NOT CONFRONTED TO THE ASSESSEE-COMPANY AND WAS NOT GIVE N RIGHT TO CHALLENGE THE SAME. THEREFORE, SUCH REPORT CANNOT B E READ IN EVIDENCE AGAINST THE ASSESSEE-COMPANY. THE LD. CIT( A) IN THE IMPUGNED ORDER ALLOWED THE CARRY FORWARD OF THE BUS INESS LOSSES WHICH WAS ALSO ALLOWED BY HIM IN A.Y. 2010-2011. IT WOULD MEAN THAT ASSESSEE-COMPANY WAS DOING MANUFACTURING/ BUSINESS ACTIVITY. THEREFORE, ALL THESE MATTERS CLE ARLY SUPPORT THE CONTENTION OF LEARNED COUNSEL FOR THE ASSESSEE THAT THE MATTER SHOULD BE RE-INVESTIGATED BY THE A.O. IN ACC ORDANCE WITH THE ORDER OF THE TRIBUNAL DATED 26 TH JULY, 2016 (SUPRA). I, ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIE S BELOW AND RESTORE ALL THE ISSUES INVOLVED IN THE PRESENT APPE ALS TO THE FILE 12 ITA.NOS.844 & 845/DEL./2017 M/S. ARON HURLEY KCONCEPTS PVT. LTD., ROORKEE. OF THE A.O. WITH A DIRECTION TO RE-DECIDE ALL THESE ISSUES IN ACCORDANCE WITH LAW, IN THE LIGHT OF ORDER OF THE T RIBUNAL IN THE CASE OF THE SAME ASSESSEE DATED 26 TH JULY, 2016 (SUPRA). THE A.O. SHALL GIVE REASONABLE, SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 8. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DELHI, DATED 03 RD APRIL, 2018. VBP/- COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT(A) CONCERNED 4. CIT CONCERNED 5. D.R. ITAT SMC BENCH, DELHI 6. GUARD FILE. // BY ORDER // ASSISTANT REGISTRAR : ITAT DELHI BENCHES : DELHI.