ACIT - 1(2)(1), MUMBAI V. LAXMI ASBESTOS PRODUCTS LTD., MUMBAI

ITA 856/MUM/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7844 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 07-02-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: NARAYAN ATAL
• Keywords: Business expenditure

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA NO.856/MUM/2017 ASSESSMENT YEAR: 2013-14 ACIT-1(2)(1), ROOM NO.535, 5 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400020 VS M/S LAXMI ASBESTOS PRODUCTS LTD. SHREENIWAS HOUSE, 4 TH FLOOR, HAZARIMAL SOMANI MARG, FORT, MUMBAI-400001 ( / REVENUE) ( ! ' /ASSESSEE) PAN. NO. AAACL1781E # $ % ' & / DATE OF HEARING : 09/08/2018 % ' & / DATE OF ORDER: 09/08/2018 / REVENUE BY SHRI NISHANT SAMAIYA- DR ! ' / ASSESSEE BY SHRI NARAYAN ATAL ITA NO.856/MUM/2017 M/S LAXMI ASBESTOS PRODUCTS LTD. 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 22/11/2016 OF THE LD. FIRST APPELLATE AUTHORI TY, MUMBAI, DELETING THE DISALLOWANCE OF EXPENDITURE OF RS.1,17,45,828/-, RELYING UPON VARIOUS JUDICIAL PRONOUNCEMENT AND WITHOUT APPRECIATING THE FACT THA T THE ASSESSEE DID NOT CARRY OUT ANY ACTIVITY AND THE ONL Y INCOME CHARGEABLE TO TAX IS UNDER THE HEAD INCOME FROM OT HER SOURCES. 2. DURING HEARING, THE LD. DR, SHRI NISHANT SAMAIYA, STRONGLY DEFENDED THE ASSESSMENT ORDER BY CONTENDING THAT THE FIRST APPELLATE AUTHORITY MEREL Y FOLLOWED THE ORDER OF EARLIER YEAR AND GRANTED RELI EF TO THE ASSESSEE WITHOUT EXAMINING THE FACTS. THE CRUX OF T HE ARGUMENT IS IN SUPPORT OF THE ADDITION MADE BY THE LD. ASSESSING OFFICER. ON THE OTHER HAND, SHRI NARAYAN ATAL, LD. COUNSEL FOR THE ASSESSEE DEFENDED THE IMPUGNED ORDER BY CONTENDING THAT FOR ASSESSMENT YEAR 2008-09, THE ITA NO.856/MUM/2017 M/S LAXMI ASBESTOS PRODUCTS LTD. 3 MATTER WAS CONSIDERED BY THE TRIBUNAL AND FINALLY S ENT TO THE LD. COMMISSIONER OF INCOME TAX (APPEAL). 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PO RTION OF THE ORDER OF THE TRIBUNAL DATED 26/10/2016 (ITA NO.5774/MUM/2013, ETC) FOR READY REFERENCE AND ANALYSIS:- ALL THE APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST THE ORDERS PASSED BY LD CIT(A)-7, MUMBAI AND THEY R ELATE TO THE ASSESSMENT YEARS 2008-09, 2010- 11 AND 2011- 12. SINCE ISSUE URGED IN THESE APPEALS IS IDENTICAL IN NATURE, THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DIS POSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENC E. 2. THE SOLITARY ISSUE URGED IN THESE APPEALS IS WHE THER THE LD CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANC E OF EXPENSES CLAIMED BY THE ASSESSEE. 3. THE ASSESSEE COMPANY IS STATED TO BE CARRYING ON THE BUSINESS OF PROPERTY DEVELOPMENT. DURING THE YEARS UNDER CONSIDERATION, THE ASSESSEE DID NOT DISCLOSE ANY BU SINESS RECEIPTS, BUT CLAIMED VARIOUS TYPES OF EXPENSES. TH E AO NOTICED THAT THE ASSESSEE HAS BEEN SHOWING THE PROP ERTY DEVELOPMENT ACTIVITIES AS WORK IN PROGRESS IN THE EARLIER YEARS, BUT THE SAME WAS TRANSFERRED TO INVESTMENT ACCOUNT DURING THE YEAR RELEVANT TO AY 2008-09. IT WAS SUBMITTED THAT THE ASSESSEE WAS IN POSSESSION OF LA ND ADMEASURING 150012.32 SQ. MTS AND THE SAME WAS TOOK OVER BY THE GOVERNMENT UNDER URBAN LAND CEILING ACT . ITA NO.856/MUM/2017 M/S LAXMI ASBESTOS PRODUCTS LTD. 4 SUBSEQUENTLY THE ABOVE SAID ACT WAS REPEALED BY THE GOVERNMENT AND HENCE THE ASSESSEE HAS BEEN IN THE P ROCESS OF REACQUIRING THE TITLE OVER THE LAND. DUE TO THE LEGAL PROCESS INVOLVED THEREIN, THE ASSESSEE COULD NOT CA RRY ON ITS BUSINESS ACTIVITIES. ACCORDINGLY IT WAS CONTENDED T HAT THE ASSESSEE HAS STOPPED THE BUSINESS ACTIVITIES ON TEM PORARY BASIS DUE TO THE PROBLEM FACED BY IT IN CONNECTION WITH THE LAND. ACCORDINGLY IT WAS SUBMITTED THAT THE REGULAR BUSINESS EXPENSES INCURRED BY IT SHOULD BE ALLOWED AS DEDUCT ION. 4. THE AO WAS NOT CONVINCED WITH THE SAID EXPENSES, SINCE THE ASSESSEE HAS TRANSFERRED THE LAND/PROPERTY TO I TS INVESTMENT ACCOUNT. ACCORDINGLY THE AO DISALLOWED VARIOUS EXPENSES CLAIMED BY THE ASSESSEE IN ALL THE THREE YEARS UNDER CONSIDERATION. THE LD CIT(A) TOOK THE V IEW THAT THE ASSESSEE HAS NOT CLOSED DOWN ITS BUSINESS, BUT IT WAS AT STAND STILL FOR TEMPORARY PERIOD. ACCORDINGLY HE AL LOWED THE EXPENSES CLAIMED BY THE ASSESSEE IN ALL THE THREE Y EARS UNDER CONSIDERATION. THE REVENUE IS AGGRIEVED BY TH E DECISION RENDERED BY LD CIT(A). 5. THE LD D.R SUBMITTED THAT THE LD CIT(A) HAS NOT GIVEN ANY FINDING WITH REGARD TO THE OBSERVATION OF THE A O THAT THE ASSESSEE HAS TRANSFERRED THE LAND AND RELATED E XPENSES TO INVESTMENT ACCOUNT. THE LD D.R SUBMITTED THAT THE SAID ACTION OF THE ASSESSEE WOULD SHOW THAT THE ASS ESSEE HAS PERMANENTLY CLOSED DOWN ITS BUSINESS, IN WHICH CASE , THE EXPENSES CLAIMED BY THE ASSESSEE WERE RIGHTLY DISAL LOWED BY THE AO. 6. ON THE CONTRARY, THE LD A.R SUBMITTED THAT THE A SSESSEE WAS CONSTRAINED TO TRANSFER THE LAND AND RELATED EX PENSES TO INVESTMENT ACCOUNT AS PER THE REQUIREMENT OF ACCO UNTING STANDARD-13 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA. HE SUBMITTED THAT THE LD CIT( A) HAS RIGHTLY APPRECIATED THAT THE ASSESSEE COULD NOT CAR RY ON BUSINESS DUE TO VARIOUS CIRCUMSTANCES BEYOND THE CO NTROL OF ITA NO.856/MUM/2017 M/S LAXMI ASBESTOS PRODUCTS LTD. 5 THE ASSESSEE. ACCORDINGLY HE SUBMITTED THAT THE EXP ENSES WERE RIGHTLY ALLOWED BY LD CIT(A). 7. WE HEARD THE PARTIES AND PERUSED THE RECORD. WE NOTICE THAT THE AO HAS TAKEN NOTE OF THE FACT THAT THE ASS ESSEE HAS TRANSFERRED THE LAND AND WORK IN PROGRESS AMOUNT TO INVESTMENT ACCOUNT AND ACCORDINGLY THE AO HAS TAK EN THE VIEW THAT THE EXPENSES INCURRED AGAINST INVESTM ENT CANNOT BE ALLOWED AS DEDUCTION. WE NOTICE THAT THE LD CIT(A) HAS NOT ADDRESSED THIS POINT OF THE AO AND I NSTEAD PROCEEDED TO DECIDE THE ISSUE ON THE BASIS THAT THE RE WAS TEMPORARY STOPPAGE OF BUSINESS,. WHILE THE CASE OF THE AO IS THAT THE ASSESSEE HAS TOTALLY STOPPED THE BUSINESS. BEFORE US, THE LD A.R SUBMITTED THAT THE ASSESSEE WAS CONSTRAI NED TO TRANSFER THE LAND AND WIP AMOUNT TO INVESTMENT ACC OUNT AS PER AS-13. THIS SUBMISSION APPEARS TO BE A NEW O NE, I.E., THE SAME HAS NOT BEEN SUBMITTED BEFORE THE TAX AUTH ORITIES. WE ALSO NOTICE THAT THE LD CIT(A) HAS PASSED A CRYP TIC ORDER WITHOUT DULY ADDRESSING THE CASE OF THE AO. U NDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THIS IS SUE REQUIRES FRESH EXAMINATION AT THE END OF LD CIT(A) IN ALL TH E THREE YEARS UNDER CONSIDERATION. 8. ACCORDINGLY WE SET ASIDE THE ORDERS PASSED BY LD CIT(A) ON THIS ISSUE IN ALL THE THREE YEARS UNDER CONSIDER ATION AND RESTORE THE SAME TO HIS FILE WITH THE DIRECTION TO DECIDE THE SAME AFRESH BY DULY ADDRESSING THE CASE OF THE AO. THE ASSESSEE SHOULD BE PROVIDED WITH ADEQUATE OPPORTUNI TY OF BEING HEARD. 9. IN THE RESULT, ALL THE THREE APPEALS OF THE REVE NUE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 2.2. WE FIND THAT IDENTICAL QUESTION AROSE FOR EA RLIER ASSESSMENT YEARS WITH RESPECT TO VARIOUS TYPES OF EXPENDITURE, WHEREIN ALSO, THE ASSESSEE SHOWED PROP ERTY ITA NO.856/MUM/2017 M/S LAXMI ASBESTOS PRODUCTS LTD. 6 DEVELOPMENT ACTIVITIES AS WORK IN PROGRESS AND SA ME WAS TRANSFERRED TO INVESTMENT ACCOUNT. CONSIDERING THE SUBMISSIONS FROM BOTH SIDES AND EXPLANATION OF THE ASSESSEE THAT THE ASSESSEE WAS CONSTRAINED TO TRANS FER THE LAND AND WIP AMOUNT TO INVESTMENT ACCOUNT AS PER AS -13. THIS SUBMISSION WAS NEVER RAISED BEFORE THE TAX AUTHORITIES. EVEN THE LD. COMMISSIONER OF INCOME TA X (APPEAL), ADJUDICATED THE ISSUE WITHOUT ADDRESSING THE OBSERVATION MADE IN THE ASSESSMENT ORDER AND THE EXPLANATION OF THE ASSESSEE. THUS, BEING ON IDENTIC AL FACTS AS DONE BY THE TRIBUNAL IN ITS ORDER DATED 26/10/20 16, WE RESTORE THIS APPEAL TO THE FILE OF THE LD. COMMISSI ONER OF INCOME TAX (APPEAL) TO EXAMINE THE FACTS/EXPLANATIO N OF THE ASSESSEE/OBSERVATION MADE IN THE ASSESSMENT ORD ER AFRESH AND AFTER PROVIDING DUE OPPORTUNITY TO THE L D. ASSESSING OFFICER AS WELL AS TO THE ASSESSEE AND DE CIDE IN ACCORDANCE WITH LAW. THE ASSESSEE BE GIVEN OPPORTUN ITY TO SUBSTANTIATE ITS CLAIM. THUS, THE APPEAL OF THE REV ENUE IS ALLOWED FOR STATISTICAL PURPOSES ONLY. ITA NO.856/MUM/2017 M/S LAXMI ASBESTOS PRODUCTS LTD. 7 FINALLY, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 09/08/2018. SD/- SD/- ( RA MIT KOCHAR ) (JOGINDER SINGH) ! ' / ACCOUNTANT MEMBER # ' /JUDICIAL MEMBER # $ MUMBAI; ( DATED : 09/08/2018 F{X~{T? P.S/. . . $#%&'(')% / COPY OF THE ORDER FORWARDED TO : 1. *+,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. 0 0 # 1' ( *+ ) / THE CIT, MUMBAI. 4. 0 0 # 1' / CIT(A)- , MUMBAI 5. 34 .' , 0 *+& * 5 , # $ / DR, ITAT, MUMBAI 6. 6 7$ / GUARD FILE. / BY ORDER, / (DY./ASSTT. REGISTRAR) , # $ / ITAT, MUMBAI