SHANKARLAL C. MUNDHRA HUF, MUMBAI v. ITO 24(3)(3), MUMBAI

ITA 3895/MUM/2009 | 2002-2003
Pronouncement Date: 07-05-2010 | Result: Allowed

Appeal Details

RSA Number 389519914 RSA 2009
Assessee PAN AADHS2654B
Bench Mumbai
Appeal Number ITA 3895/MUM/2009
Duration Of Justice 10 month(s) 20 day(s)
Appellant SHANKARLAL C. MUNDHRA HUF, MUMBAI
Respondent ITO 24(3)(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 07-05-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted J
Tribunal Order Date 07-05-2010
Assessment Year 2002-2003
Appeal Filed On 17-06-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI J BENCH MUMBAI BEFORE SHRI N.V. VASUDEVAN (JUDICIAL MEMBER) AND SHRI PRAMOD KUMAR (ACCOUNTANT MEMBER) ITA NO.3895/MUM./2009 ASSESSMENT YEAR : 2002-03 DATE OF HEARING 30.4.2010 SHANKARLAL C. MUNDHRA (HUF) B-701 JAMUNOTRI SADAN LINK ROAD BANGUR NAGAR GOREGAON (W) MUMBAI 400 090 AADHS2654B .. APPELLANT VS INCOME TAX OFFICER 24(3(3) C10 PRATYAKSHA KAR BHAVAN BANDRA (E) MUMBAI 400 051 RESPONDENT APPELLANT BY : SHRI NIRANJAN ATAL RESPONDENT BY : SHRI L.K. AGRAWAL O R D E R PER PRAMOD KUMAR A.M. 1. THIS IS AN APPEAL FILED BY THE ASSESSEE AND IS D IRECTED AGAINST THE ORDER DATED 26 TH MARCH 2009 PASSED BY THE LEARNED CIT(A) FOR THE A SSESSMENT YEAR 2002-03. ITA NO.3895/MUM./2009 SHANKARLAL C. MUNDHRA [2] 2. LEARNED REPRESENTATIVES AGREE THAT THE OUTCOME OF T HIS APPEAL WILL BE THE SAME AS OF ASSESSEES APPEAL FOR THE ASSESSMENT YEA R 2000-01 WHICH WAS HEARD ALONG WITH THIS APPEAL. 3. VIDE OUR ORDER OF EVEN DATE WE HAVE ALLOWED THE AS SESSEES APPEAL FOR THE ASSESSMENT YEAR 2000-01 AND OBSERVED AS FOLLOWS:- 4. WE FIND THAT THE VERY BASIS OF DISALLOWANCE OF BUSINESS EXPENSES WAS THAT THERE WAS NO BUSINESS ACTIVITY DURING THE YEAR. THIS FINDING ABOUT AN ACTIVITY OF BUSINESS NOT BEING FUNCTIONAL IN THE RELEVANT PREVIOUS YEAR AND IT CANNOT BE EQUATED WITH CESSATI ON OF BUSINESS WHICH COULD HAVE BEEN A REASON GOOD ENOUGH FOR IMPUGNED D ISALLOWANCE. NOT CARRYING OUT BUSINESS ACTIVITY IS ONE THING AND CES SATION OF BUSINESS IS QUITE ANOTHER. YET UNLESS THE BUSINESS ITSELF CEAS ES THERE CANNOT BE ANY GOOD REASON TO DISALLOW BONAFIDE BUSINESS EXPENSES JUST BECAUSE THERE IS NO BUSINESS ACTIVITY. IN THE CASE OF L. VERAVAN CHE TTIAR VS CIT 72 ITR 114 HONBLE MADRAS HIGH COURT HAD AN OCCASION TO D EAL WITH A SITUATION IN WHICH ASSESSEE HAD OBTAINED AN IMPORT LICENSE FOR DOING ARECANUT BUSINESS BUT DUE TO ADVERSE MARKET CONDITI ONS ASSESSEE TEMPORARILY SUSPENDED ARECANUT BUSINESS FOR ASSESSM ENT YEAR IN QUESTION. NEVERTHELESS THE ASSESSEE WAS MAINTAININ G AN ESTABLISHMENT AND WAS WAITING FOR BETTER TIMES IN ARECANUT BUSINE SS. ON THESE FACTS THEIR LORDSHIPS OF HONBLE MADRAS HIGH COURT TOOK N OTE OF THE POSITION THAT THERE IS NOTING ON RECORD TO SHOW THE ASSESSE E HAS COMPLETELY ABANDONED OR CLOSED THE BUSINESS FOREVER AND THA T ON THE OTHER HAND HIS BOOKS OF ACCOUNT REVEALED THAT HE WAS MEETING E STABLISHMENT CHARGES AND INTEREST PAYMENTS AS DETAILED IN THE AC COUNTS. IT WAS THEN OBSERVED THAT WHETHER BUSINESS WAS BEING CARRIED ON OR NOT MUST DEPEND IN EACH CASE ON ITS OWN FACTS AND NOT ON AN Y GENERAL THEORY OF LAW. THEIR LORDSHIPS THEN REFERRED TO WITH APPROVA L LORD SUMMERS OBSERVATION IN IRC VS SOUTH BEHAR RAILWAY CO. (1925 ) 12 TAX CASE 657 THAT BUSINESS IS NOT CONFINED TO BEING BUSY IN MAN Y BUSINESS LONG INTERVALS OF INACTIVITY OCCUR. IT IS THUS FREE FRO M ANY DOUBT THAT MERELY BECAUSE THERE IS NO ACTIVITY IN BUSINESS IT CANNOT BE INFERRED THAT BUSINESS ITSELF HAS COME TO AN END. THERE HAS TO BE SOMETHING TO SHOW OR AT LEAST INDICATE THAT BUSINESS IS ABANDONED OR CLO SED FOREVER. 5. VIEWED IN THE ABOVE PERSPECTIVE THERE IS NO GOO D REASON TO COME TO THE CONCLUSION THAT THE ASSESSEE HAD DISCONTINUE D BUSINESS. IT WAS A PERIOD OF INACTIVITY THOUGH A PRETTY LONG PERIOD O F INACTIVITY PRECEDED AND FOLLOWED BY BUSINESS AS USUAL. UNDER THESE CIRC UMSTANCES THE AUTHORITIES BELOW WERE CLEARLY IN ERROR IN NOT ALLO WING THE NORMAL ESTABLISHMENT EXPENSES WHICH THE ASSESSEE WAS REQUI RED TO INCUR EVEN IN ITA NO.3895/MUM./2009 SHANKARLAL C. MUNDHRA [3] THIS STAGE OF HIBERNATION. WE ACCORDINGLY DIRECT TH E ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCES. 6. AS WE HAVE ALLOWED THE EXPENSES BEING ALLOWED AS DEDUCTION IN COMPUTING THE BUSINESS INCOME THE ALTERNATIVE GRIE VANCE RAISED BY THE ASSESSEE SEEKING DEDUCTION OF THESE EXPENSES FROM INTEREST INCOME IS RENDERED ACADEMIC AND INFRUCTUOUS. IT DOES NOT CALL FOR ANY ADJUDICATION AT THIS STAGE. 4. RESPECTFULLY FOLLOWING THE ABOVE DECISION WE UPHOL D THE GRIEVANCE OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPU GNED DISALLOWANCES. THE ASSESSEE GETS THE RELIEF ACCORDINGLY. 5. IN THE RESULT APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT TODAY ON 7 TH DAY OF MAY 2010. SD/- (N.V. VASUDEVAN) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI; DAY OF MAY 2010 COPIES OF THE ORDER FORWARDED TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT MUMBAI (4) CIT(A) MUMBAI (5) DR J BENCH (6) GUARD FILE TRUE COPY BY ORDER ETC. ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PRADEEP J. CHOWDHURY MUMBAI BENCHES SR. PRIVATE SECRETARY ITA NO.3895/MUM./2009 SHANKARLAL C. MUNDHRA [4] DATE INITIAL 1. DRAFT DICTATED ON 3.5.2010 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 4.5.2010 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4.5.2010 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 4.5.2010 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 4.5.2010 SR.PS/PS 6. DATE OF PRONOUNCEMENT 7.5.2010 SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER