Smt. Hemangini Sameer Sinha, Ahmedabad V. The ACIT.,Cent.Circle-1(1), Ahmedabad

ITSSA 830/AHD/2010

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 0026 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 21-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 23-01-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 21-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P VAISHNAV
• Assessee Lawyers: P M MEHTA
• Section: 153A

Judgement Text

, , , , , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BENCH, AHMEDABAD .., ! ! ! ! ' #$, BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER (SS) !./ I.T(SS).A. NO.830/AHD/2010 ( & '& & '& & '& & '& / / / / ASSESSMENT YEAR : 2001-02) SMT.HEMANGINI SAMEER SINHA 14, NEW VAISHALI SOCIETY OPP. ASHISH SCHOOL BODAKDEV, AHMEDABAD / VS. THE ACIT CENTRAL CIRCLE-1(1) AHMEDABAD ( !./)* !./ PAN/GIR NO. : AAWPP 5275 A ( (+ / // / APPELLANT ) .. ( ,-(+ / RESPONDENT ) (+ . / APPELLANT BY : SHRI P.M. MEHTA, AR ,-(+ / . / RESPONDENT BY : SHRI O.P. VAISHNAV, CIT-DR ' 0 / $1 / / / / DATE OF HEARING : 23/01/2014 23' / $1 / DATE OF PRONOUNCEMENT : 21/02/2014 4 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-I, AHMEDABAD (CIT(A) FOR SHORT) DATED 12/10/2010 PERTAINING TO ASSESSMENT Y EAR (AY) 2001-02. THE ASSESSEE HAS RAISED THE FOLLOWING CONCISED GRO UNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN REJECTING THE ASSESSEES CONTENTION THAT IT WAS NOT A FIT CASE FOR INVOKING THE PROVISIONS OF SECTION 153A AND HE FURT HER ERRED IN NOT UPHOLDING THE ASSESSEES CONTENTION THAT THE IMPUGN ED ASSESSMENT ORDER WAS BAD IN LAW. IT(SS)A NO.830/ AHD/2010 SMT. HEMANGINI SAMEER SINHA VS. ACIT ASST.YEAR 2001-02 - 2 - 2. WITHOUT PREJUDICE, ON THE FACTS AND IN THE CIRCUMST ANCES OF THE CASE, THE CIT(A) SHOULD HAVE FURTHER REALIZED THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN EMBARKING UPON THE PRO CESSING AND SCRUTINY OF THE ASSESSMENT IN A FASHION WHICH WAS P ERMISSIBLE IN REGULAR ASSESSMENTS U/S.143(3) BUT NOT IN ASSESSMEN T MADE U/S.153A. 3. WITHOUT PREJUDICE, ON THE FACTS AND IN THE CIRCUMST ANCES OF THE CASE, THE CIT(A) ERRED IN UPHOLDING THE DISALLOWANC E OF CLAIM FOR EXPENSES IN A SUM OF RS.6,18,175. 4. THE ASSESSEE CRAVES LEAVE TO ADD, ALTER, AMEND AND/ OR WITHDRAW ANY GROUND OR GROUNDS OF APPEAL EITHER BEFORE OR DU RING THE COURSE OF HEARING OF THE APPEAL. 2. AT THE OUTSET, THE LD.COUNSEL FOR THE ASSESSEE S UBMITTED THAT HE DOES NOT WISH TO PRESS GROUND NOS.1 & 2. THE LD.CIT-DR HAS NO OBJECTION. THEREFORE, THE GROUND NOS.1 & 2 OF ASSESSEES APPE AL ARE HEREBY DISMISSED AS NOT PRESSED. 3. GROUND NO.4 IS GENERAL IN NATURE, NEEDS NO INDEP ENDENT ADJUDICATION. 4. NOW, THE ONLY GROUND REMAINING IS GROUND NO.3 WH ICH READS AS UNDER:- 3. WITHOUT PREJUDICE, ON THE FACTS AND IN THE CIR CUMSTANCES OF THE CASE, THE CIT(A) ERRED IN UPHOLDING THE DISALLOWANC E OF CLAIM FOR EXPENSES IN A SUM OF RS.6,18,175. 4.1. BRIEFLY STATED FACTS OF THE CASE ARE THAT A S EARCH OPERATION U/S.132(2) WAS CONDUCTED IN THE CASE OF SAVVY GROUP ON 14/02/2007. A SEARCH WAS ALSO CONDUCTED AT THE RESIDENTIAL PREMIS ES OF THE ASSESSEE. SUBSEQUENTLY, IN THE CASE OF THE ASSESSEE, THE ASSE SSMENT U/S.143(3) OF IT(SS)A NO.830/ AHD/2010 SMT. HEMANGINI SAMEER SINHA VS. ACIT ASST.YEAR 2001-02 - 3 - THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 30/12/2008. WHILE FRAMING THE ASSESSMENT, THE AO HAS MADE DISALLOWANCE OF EXPENSES OF RS.6,18,175 /-. AGAINST THIS, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS, DISMISSED THE APPEAL. NOW, THE A SSESSEE IS FURTHER IN APPEAL BEFORE US. 5. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT B OTH THE AUTHORITIES WERE NOT JUSTIFIED IN DISALLOWING THE CLAIM OF THE ASSESSEE. HE SUBMITTED THAT THE AO TREATED THE BUSINESS LOSS AS DEBT AND D ID NOT ALLOW THE SAME ON THE BASIS THAT THE ASSESSEE IS REQUIRED TO PROVE THAT THE DEBT HAS BECOME BAD IN THAT YEAR. WHILE DOING SO, THE AO HAS PLACED RELIANCE ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT REND ERED IN THE CASE OF DHALL ENTERPRISES REPORTED AT 207 CTR 729 (GUJ.) AN D ALSO THE DECISION OF THE DELHI TRIBUNAL RENDERED IN THE CASE OF CIT V S. INDIA THERMIC CORPORATION (56 ITD 307 B BENCH DATED 29/09/2005) . HE SUBMITTED THAT THE LD.CIT(A) ALTHOUGH HAS RECORDED THE SUBMIS SION OF THE ASSESSEE THAT THE HONBLE SUPREME COURT IN THE CASE OF TRF L TD. HAS REVERSED THE RATIO LAID DOWN IN THE CASE OF DHALL ENTERPRISES. HE SUBMITTED THAT THE LD.CIT(A) CONCLUDED THAT THE PAYMENT MADE IN F.Y. 1 998-99 WAS IN THE NATURE OF ADVANCE PAYMENT FOR GETTING THE RIGHT TO CONDUCT BUSINESS OF IIT COURSE. HOWEVER, ERRONEOUSLY HAS RECORDED THE FINDING THAT THE BUSINESS OF THE ASSESSEE IS CLOSED DOWN AND ANY LO SS RELATING TO SUCH CLOSED DOWN BUSINESS CANNOT BE ALLOWED. HE SUBMITT ED THAT THE BUSINESS WAS CERTAINLY CONTINUED MUCH AFTER F.Y. 2000-01 WHI CH IS RELEVANT TO THIS APPEAL. HE DREW OUR ATTENTION TOWARDS PAGE NO.4 0 OF THE PAPER-BOOK, IT(SS)A NO.830/ AHD/2010 SMT. HEMANGINI SAMEER SINHA VS. ACIT ASST.YEAR 2001-02 - 4 - WHEREIN PROFIT & LOSS A/C. FROM 01-04-2000 TO 31-3- 2001 OF BINMARY SYSTEMS IS PLACED. THE ASSESSEE HAS SHOWN DIRECT I NCOMES COURSES FEE INCOME A/C. A SUM OF RS.3,86,769/-. HE ALSO DREW OUR ATTENTION TOWARDS PAGE NOS.41 & 42 OF THE PAPER-BOOK, WHEREIN COURSES FEE INCOME ACCOUNT IS PLACED. 5.1. ON THE CONTRARY, SR.CIT-DR SUPPORTED THE ORDER S OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT IN THIS CASE THE AO DISALLOWED THE CLA IM ON THE BASIS THAT THE AMOUNT CLAIMED AS EXPENSES IN THE RELEVANT FINA NCIAL YEAR IS IN THE NATURE OF PRIOR PERIOD EXPENSE, SINCE THE PAYMENT W AS MADE IN FY 1998- 99. THE ASSESSEE IS NOT ELIGIBLE TO CLAIM THIS EXP ENDITURE IN THE RELEVANT FINANCIAL YEAR, SINCE THE EXPENDITURE PERTAINS TO A PRIOR PERIOD. FURTHER, THE AMOUNT IS NOT IN THE NATURE OF DEBT, WHICH COUL D BE WRITTEN OFF. THE ASSESSEE HAS NOT SUBMITTED EVIDENCE TO CORROBORATE HER CLAIM THAT DEBT HAD INDEED BECOME BAD. THE AO OBSERVED THAT THE AS SESSEE CLAIMED THE EXPENSES IN P&L A/C. IN THE NATURE OF REVENUE AND D EDUCTION OF THE SAME IS CLAIMED IN THE YEAR UNDER CONSIDERATION. HE OBSERVED THAT THE EXPENDITURE ARE IN THE NATURE OF CAPITAL EXPENDITUR E ARE LIABLE TO BE DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF TH E ASSESSEE. HE ALLOWED THE EXPENDITURE TO THE EXTENT OF RS.75,000/ - BY OBSERVING THAT THE ASSESSEE HAS TO PAY RS.75,000/- PER YEAR TO DACP (P ) LTD. AS PER THE TERMS OF THE AGREEMENT FILED BY THE ASSESSEE, BEING EXPENDITURE PERTAINING TO THIS YEAR AND BEING RECURRING IN NATU RE. THE LD.CIT(A) IT(SS)A NO.830/ AHD/2010 SMT. HEMANGINI SAMEER SINHA VS. ACIT ASST.YEAR 2001-02 - 5 - CAME TO THE CONCLUSION THAT THE PAYMENT WAS MADE IN THE F.Y. 1998-99 IN THE NATURE OF ADVANCE PAYMENT FOR GETTING THE RIGHT TO CONDUCT THE BUSINESS OF IIT COURSE, AS EXPLAINED BEFORE THE A.O . HE FURTHER OBSERVED THAT IT IS ALSO ADMITTED FACT THAT THE BUSINESS WA S CLOSED DOWN. IN THE CIRCUMSTANCES, ANY LOSS RELATING TO SUCH CLOSED DOW N BUSINESS CANNOT BE ALLOWED, EVEN THOUGH THE ASSESSEE MAY BE JUSTIFIED IN SUBMITTING THAT THE AMOUNT WRITTEN OFF WAS IN THE NATURE OF BUSINESS LO SS AND WAS ADMISSIBLE U/S.28 OF THE ACT. THE LD.COUNSEL FOR THE ASSESSEE HAS POINTED OUT THAT THE BUSINESS WAS, IN FACT, NOT CLOSED DOWN AS OBSERVED BY THE LD.CIT(A). HE HAS DRAWN OUR ATTENTION TOWARDS PAGE NOS.40 TO 42 O F THE PAPER-BOOK, WHEREIN THE P&L A/C. AND THE COURSES FEE INCOME ACC OUNT ARE ENCLOSED. 6.1. AFTER CONSIDERING THE TOTALITY OF THE FACTS, WE ARE OF THE VIEW THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN DISALLO WING THE CLAIM WHEN THE BUSINESS WAS STILL IN EXISTENCE. THE AO HAS TA KEN CONTRADICTORY STANDS, ON THE ONE HAND HE TREATS THE EXPENDITURE A S CAPITAL IN NATURE, ON THE OTHER HAND TREATS THE SAME AS PRIOR PERIOD EXPE NSES AND ALLOWS DEDUCTION OF RS.75,000/- BEING PAYMENT MADE IN THI S YEAR. IN OUR VIEW, THE LD.CIT(A) HAS RIGHTLY CONCLUDED THAT PAYMENT MA DE IN THE F.Y. 1998- 99 WAS IN THE NATURE OF ADVANCE PAYMENT FOR GETTING THE RIGHT TO CONDUCT THE BUSINESS OF IIT COURSE. HOWEVER, HE REJECTED T HE CLAIM OF BUSINESS LOSS ON THE BASIS THAT THE BUSINESS WAS CLOSED DOWN . THE LD.COUNSEL FOR THE ASSESSEE HAS DEMONSTRATED BEFORE THIS TRIBUNAL THAT BUSINESS WAS IN FACT CARRIED OUT EVEN IN THE YEAR UNDER APPEAL. TH EREFORE, WE HEREBY IT(SS)A NO.830/ AHD/2010 SMT. HEMANGINI SAMEER SINHA VS. ACIT ASST.YEAR 2001-02 - 6 - DIRECT THE AO TO DELETE THE DISALLOWANCE. THUS, TH IS GROUND OF ASSESSEES APPEAL IS ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN COURT ON THE DATE MENTIONED HER EINABOVE AT CAPTION PAGE SD/- SD/- ( .. ) (' #$) ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 21/ 02 /2014 71.., .../ T.C. NAIR, SR. PS 4 / ,$8 98'$ 4 / ,$8 98'$ 4 / ,$8 98'$ 4 / ,$8 98'$/ COPY OF THE ORDER FORWARDED TO : 1. (+ / THE APPELLANT 2. ,-(+ / THE RESPONDENT. 3. !! $ ': / CONCERNED CIT 4. ':() / THE CIT(A)-I, AHMEDABAD 5. 8 #; ,$ , , / DR, ITAT, AHMEDABAD 6. ;<& =0 / GUARD FILE. 4' 4' 4' 4' / BY ORDER, -8$ ,$ //TRUE COPY// > >> >/ // / !) !) !) !) ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 5.2.14(DICTATION-PAD 11- PAG ES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 6.2.14 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH FAIR ORDER PLACED BEFORE OTHER MEMBER 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.21.2.14 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 21.2.14 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER .. 10. DATE OF DESPATCH OF THE ORDER