DCIT, New Delhi v. M/s NEC Engineering Pvt. Ltd., New Delhi

ITA 4965/DEL/2010 | 2006-2007
Pronouncement Date: 14-01-2011 | Result: Allowed

Appeal Details

RSA Number 496520114 RSA 2010
Assessee PAN AAACN0754F
Bench Delhi
Appeal Number ITA 4965/DEL/2010
Duration Of Justice 2 month(s) 1 day(s)
Appellant DCIT, New Delhi
Respondent M/s NEC Engineering Pvt. Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 14-01-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted E
Tribunal Order Date 14-01-2011
Date Of Final Hearing 13-01-2011
Next Hearing Date 13-01-2011
Assessment Year 2006-2007
Appeal Filed On 12-11-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES E: NEW DELHI BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER AND SHRI A.K. GARODIA ACCOUNTANT MEMBER ITA NOS. 4965 & 4966/DEL/2010 ASSESSMENT YEAR: 2006-07 & 2007-08 DCIT VS. NEC ENGINEERING PVT. LTD. CIRCLE 13(1) ROOM NO. 406 MANISHA BUILDING 3 RD FLOOR C.R. BLDG. I.P. ESTATE 75-76 NEHRU PLACE NEW DELHI. NEW DELHI. AAACN0754F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K. RAVI RAMCHANDARAN SR. D R RESPONDENT BY : SHRI SURINDER KU MAR JAIN CA ORDER PER I.P. BANSAL J.M. BOTH THESE APPEALS ARE FILED BY THE REVENUE. THEY ARE DIRECTED AGAINST TWO SEPARATE ORDERS PASSED BY LD. CIT(A) DA TED 3 RD AUGUST 2010 AND 11 TH AUGUST 2010 FOR ASSESSMENT YEARS 2006-07 & 07-08. 2. GROUNDS OF APPEAL IN BOTH THE APPEALS READ AS UN DER: - GROUNDS OF APPEAL FOR A.Y. 2006-07 : 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN ALLOWING THE EXPENDITURE U/S 37(1) OF THE ACT AS CLAIMED BY THE ITA NOS. 4965 & 4966/D/10 2 APPELLANT COMPANY IN ITS PROFIT AND LOSS ACCOUNT DE SPITE THE FACT THAT THERE WERE NO BUSINESS ACTIVITIES IN THE YEAR UNDER CONSIDERATION. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN HOLDING THAT IN EARLIER YEARS AND IN LATER YEARS THE ASSESSEE COMPANY HAD EARNED BUSINESS INCOME AS THE ASSESSEE COMPANY WAS NOT INVOLVED IN ANY BUSINESS ACTIVITY SINCE JUN E 2002. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN IGNORING THE DECISION OF THE SC IN THE CASE M/S BOMBAY STEAM NAVIGATION CO. P. LTD. VS. CIT (1965)56 ITR 52 WHE REIN IT WAS HELD THAT INCOME/LOSS FROM BUSINESS/PROFESSION IS CHARGE ABLE TO TAX ONLY IF THE BUSINESS/PROFESSION IS CARRIED OUT IN THE PREVI OUS YEAR. 4. THAT THE APPELLANT CRAVES TO BE ALLOWED TO ADD A NY FRESH GROUNDS OF APPEAL AND/OR DELETE OR AMEND ANY OF THE GROUNDS OF APPEAL. GROUNDS OF APPEAL FOR A.Y. 2007-08 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN ALLOWING THE EXPENDITURE U/S 37(1) OF THE ACT AS CLAIMED BY THE APPELLANT COMPANY IN ITS PROFIT AND LOSS ACCOUNT DE SPITE THE FACT THAT THERE WERE NO BUSINESS ACTIVITIES IN THE YEAR UNDER CONSIDERATION. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN HOLDING THAT IN EARLIER YEARS AND IN LATER YEARS THE ASSESSEE COMPANY HAD EARNED BUSINESS INCOME AS THE ASSESSEE COMPANY WAS NOT INVOLVED IN ANY BUSINESS ACTIVITY SINCE JUN E 2002. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN IGNORING THE DECISION OF THE SC IN THE CASE M/S BOMBAY STEAM NAVIGATION CO. P. LTD. VS. CIT (1965)56 ITR 52 WHE REIN IT WAS HELD THAT INCOME/LOSS FROM BUSINESS/PROFESSION IS CHARGE ABLE TO TAX ONLY IF THE BUSINESS/PROFESSION IS CARRIED OUT IN THE PREVI OUS YEAR. 4. THAT THE APPELLANT CRAVES TO BE ALLOWED TO ADD A NY FRESH GROUNDS OF APPEAL AND/OR DELETE OR AMEND ANY OF THE GROUNDS OF APPEAL. ITA NOS. 4965 & 4966/D/10 3 3. BOTH THE APPEALS WERE ARGUED TOGETHER BY BOTH TH E PARTIES HENCE FOR THE SAKE OF CONVENIENCE BOTH THESE APPEALS ARE DIS POSED OFF BY THIS CONSOLIDATED ORDER. 4. COMMON ISSUE INVOLVED IN THESE APPEALS IS REGARD ING DISALLOWANCE TO EXPENDITURE CLAIMED BY THE ASSESSEE ON THE GROUN D THAT ASSESSEE DID NOT CARRY ANY BUSINESS ACTIVITY DURING THE YEAR UND ER CONSIDERATION. IT IS THE CASE OF THE ASSESSEE THAT DUE TO GULF WAR THE ASSES SEE COULD NOT EXPORT THE GOODS AND THE ASSESSEE HAS NOW STARTED THE FABRICAT ION AND ERECTION BUSINESS IN THE DOMESTIC MARKET AND AS SUCH THERE W AS TEMPORARY LULL IN THE BUSINESS DUE TO CIRCUMSTANCES BEYOND THE CONTROL OF THE ASSESSEE HENCE ALL THESE EXPENDITURES SHOULD BE ALLOWED. 5. LD. CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE DESPITE THE FACT THAT IT WAS BROUGHT TO HIS NOTICE THAT THE TRIBUNAL VIDE ITS ORDER DATED 4.3.10 IN THE CASE OF THE ASSESSEE WITH RESPECT TO ASSESSM ENT YEAR 2004-05 IN ITA NO. 1295/DEL/08 HAS REMANDED BACK THE CASE OF THE A SSESSEE. THE DEPARTMENT IS AGGRIEVED HENCE IN APPEAL. 6. GROUND NO.1 TO 3 OF BOTH THESE APPEALS RELATES T O THE ABOVE SAID ISSUE. ITA NOS. 4965 & 4966/D/10 4 7. BEFORE US LD. AR HAS PLACED BEFORE US THE AFORE MENTIONED ORDER OF THE TRIBUNAL DATED 4.3.10 IN RESPECT OF A.Y. 2004-0 5 A COPY OF WHICH WAS ALSO GIVEN TO LD. DR. 8. IT WAS THE SUBMISSION OF LD. DR THAT LD. CIT(A) INSTEAD OF ACCEPTING THE CLAIM OF THE ASSESSEE STRAIGHT FORWARD EITHER SHOULD HAVE WAITED THE ORDER FOR A.Y. 2004-05 OR SHOULD HAVE CALLED FOR A REMAND REPORT FROM THE AO TO ASCERTAIN THE DIRECTIONS GIVEN BY THE TRIBUNA L IN THIS REGARD AND THEN TO RENDER HIS DECISION. THUS HE PLEADED THAT IT W OULD BE BETTER IF THE MATTER IS RESTORED TO THE FILE OF AO TO RE-ADJUDICATE THIS ISSUE AS PER DIRECTIONS GIVEN BY TRIBUNAL IN THE AFOREMENTIONED ORDER. 9. ON THE OTHER HAND RELYING UPON ORDER OF CIT(A) IT WAS PLEADED BY LD. AR THAT RELIEF HAS RIGHTLY BEEN GIVEN TO THE ASSESS EE AND THEREFORE ORDER OF CIT(A) SHOULD BE UPHELD. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS IN THE LIGHT OF MATERIAL PLACED BEFORE US. WE FOUND FORCE IN THE S UBMISSION OF LD.DR THAT IN ANY CASE LD. CIT(A) SHOULD HAVE ASCERTAINED THE ISSUES ON WHICH THE DIRECTIONS WERE GIVEN BY THE TRIBUNAL TO THE AO TO RECORD A FINDING OF FACT. LD.CIT(A) HAS STRAIGHTWAY RECORDED THE FINDINGS WIT HOUT REFERRING THE MATTER TO THE AO. THE TRIBUNAL IN RESPECT OF A.Y. 04-05 H AS ALREADY RESTORED THIS ITA NOS. 4965 & 4966/D/10 5 ISSUE TO THE FILE OF AO. THE RELEVANT OBSERVATIONS OF THIS TRIBUNAL IN THIS REGARD AS CONTAINED IN PARA 8 & 9 ARE REPRODUCED BE LOW: - 8. WE HAVE HEARD BOTH THE PARTIES ON THIS LIMITED ISSUE ABOUT THE ADMISSION OF ADDITIONAL EVIDENCES. ON PE RUSAL OF THE APPLICATION WE FIND THAT THE ASSESSEE HAS FILE D CERTAIN ADDITIONAL EVIDENCES IN THE FORM OF BALANCE SHEET O R STATEMENT OF ACCOUNT AS ON 31.3.08 AND31.3.09 ALONG WITH SOME SALE INVOICES FOR THE F.Y. 07-08 TO SUPPORT TH E ASSESSEES STAND THAT THE ASSESSEE REVIVED ITS BUSI NESS IN THE SUBSEQUENT YEARS AND THERE WAS NO CLOSURE OF BU SINESS IN THE YEAR UNDER CONSIDERATION. THESE DOCUMENTS G OES TO THE ROOT OF THE MATTER TO DECIDE AS TO WHETHER THE ASSESSEE CLOSED ITS BUSINESS FOR GOOD OR WHETHER IT WAS A LU LL PERIOD OR TEMPORARY SUSPENSION OF THE BUSINESS IN THE YEAR UN DER CONSIDERATION. IT IS ALSO CLEAR THAT EVIDENCES IND ICATING THAT THE PURCHASE AND SALE ACTIVITIES WERE CARRIED OUT I N SUBSEQUENT ASSESSMENT YEARS COULD NOT BE AVAILABLE AT THE TIME WHEN THE ASSESSMENT WAS MADE AND EVEN AT THE T IME WHEN THE IMPUGNED ORDER OF THE CIT(A) WAS PASSED ON4.1.08. THEREFORE FOR THE ENDS OF JUSTICE AND P ROPER ADJUDICATION OF THE MATTER WE ALLOW THE ASSESSEES APPLICATION AND ADMIT THESE DOCUMENTS FOR CONSIDERA TION. HOWEVER AS THESE DOCUMENTS WERE NOT AVAILABLE EITH ER BEFORE THE AO OR BEFORE THE CIT(A) NOR THE AO HAD A NY OCCASION OR OPPORTUNITY TO EXAMINE AND CONSIDER THE M WHILE PASSING THE ASSESSMENT ORDER IT WOULD BE FIT AND P ROPER FOR THE ENDS OF JUSTICE TO RESTORE THE MATTER BACK TO T HE FILE OF AO FOR HIS FRESH ADJUDICATION AFTER CONSIDERING ALL TH E EVIDENCES AND PARTICULARS THAT MAY BE PRODUCED BY THE ASSESSE E BEFORE HIM AND AFTER CONSIDERING ALL THE CONTENTION S AND THE ITA NOS. 4965 & 4966/D/10 6 SUBMISSIONS THAT MAY BE RAISED BY THE ASSESSEE BEFO RE HIM DURING THE COURSE OF FRESH ASSESSMENT PROCEEDINGS. THE AO SHALL CONSIDER ALL THE DOCUMENTS AND SUBMISSIONS TH AT MAY BE PLACED BEFORE HIM BY THE ASSESSEE AND THEN DECID E THE ISSUE BY PASSING A SPEAKING AND REASONED ORDER. TH E ASSESSEE SHALL FURNISH ALL THE RELEVANT DETAILS AND PAPERS BEFORE THE AO IN SUPPORT OF HIS CASE AND THE ASSES SEE SHALL ALSO BE AT LIBERTY TO MAKE HIS SUBMISSIONS AND CONT ENTIONS AS ASSESSEE MAY SO ADVISED WHICH WOULD BE CONSIDER ED BY THE AO. THE AO SHALL THEN DECIDE THE MATTER AS PER PROVISIONS OF LAW ON THE BASIS OF EVIDENCES AND MA TERIAL AVAILABLE ON RECORD. WE ORDER ACCORDINGLY. 9. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS TREATED TO BE ALLOWED FOR STATISTICAL PURPOSE. 11. IN THIS VIEW OF THE SITUATION FOR THE PRESENT YEARS ALSO WE RESTORE THE ISSUE TO THE FILE OF AO TO DECIDE THE SAME IN THE L INE AS DIRECTED BY THE TRIBUNAL FOR A.Y. 04-05. FOR STATISTICAL PURPOSES THESE GROUNDS OF THE REVENUE ARE ALLOWED. 12. THE ONLY ISSUE LEFT TO BE DECIDED IN THESE APPE ALS IS GROUND NO.4 & 5 FOR A.Y. 2007-08 THIS ISSUE HAS BEEN DISCUSSED BY THE AO IN PARA 4.1 TO 4.4. THE AO HAS LISTED 20 PARTIES FOR OUTSTANDING AGGREGATED SUM OF RS. 1 09 72 158/- AND FOUND THAT THESE SUMS WERE OUTSTA NDING SINCE 31.3.04 AND THEREFORE FOR THE PAST THREE YEARS THE ASSESS EE HAS NOT DISCHARGED SUCH LIABILITY AND THEREFORE HE TREATED SUCH LIAB ILITY OF THE ASSESSEE HAVING BEEN CEASED AND ADDED THE SAID AMOUNT U/S 41(1) OF THE INCOME TAX ACT ITA NOS. 4965 & 4966/D/10 7 1961 (ACT). IT HAS BEEN THE CASE OF THE ASSESSEE T HAT SUNDRY CREDITORS OUTSTANDING COULD NOT BE TREATED AS CEASED LIABILIT Y AS THE DELAY REALIZATION OF DEBTS CAUSES FOR NOT PAYING TO THE CREDITORS AS THE SAME WILL BE PAID WHEN REALIZATION IS MADE FROM THE DEBTORS. IT WAS SUBMITTED THAT THESE ARE OUTSTANDING LIABILITIES NOT WRITTEN OFF BY THE ASSE SSEE. THEREFORE COULD NOT BE TREATED AS CEASED LIABILITY. 13. LD. CIT(A) HAS DELETED SUCH ADDITION ON THE GRO UND THAT FOR APPLICATION OF SEC. 41(1) TWO CONDITIONS HAVE TO BE FULFILLED FIRSTLY; IN THE ASSESSMENT OF AN ASSESSEE AN ALLOWANCE OR DEDUCTIO N HAS BEEN MADE IN RESPECT OF ANY LOSS EXPENDITURE OR TRADING LIABILI TY INCURRED AND SECONDLY; THAT ANY BENEFIT IN RESPECT OF SUCH LOSS OR EXPENDI TURE IS OBTAINED BY WAY OF REMISSION OR CESSATION BY THE ASSESSEE DURING THE Y EAR OR IN A SUBSEQUENT YEAR. HE HAS FOUND THAT IN THE PRESENT CASE NEIT HER THERE IS REMISSION NOR THERE IS CESSATION OF THE LIABILITY. THE ASSESSEE HAS ALSO NOT OBTAINED ANY BENEFIT WHATSOEVER THEREFORE SEC. 41(1) IS NOT AP PLICABLE. LD. CIT(A) HAS REFERRED TO THE DECISION OF HONBLE DELHI HIGH COUR T IN THE CASE OF CIT VS. AUTO PINS INDIA 197 ITR 161 WHEREIN THE ORDER OF THE TRIBUNAL WAS UPHELD ON THE GROUND THAT THERE WAS NO EVIDENCE AT ALL TO HOLD THAT ANY LIABILITY HAD CEASED TO EXIST. THERE WAS CONSOLIDATION OF VARIOU S ACCOUNTS AND NO LIABILITY HAD BEEN WRITTEN OFF. LD. CIT(A) HAS ALS O REFERRED TO THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF LECUDIA TOR MYSORE AGENCIES P. LTD. VS. CIT 114 ITR 853 (KAR.) TO HOLD THAT EVE N THOUGH THE LIABILITY IS ITA NOS. 4965 & 4966/D/10 8 BARRED BY LIMITATION AND THERE IS NO ABANDONMENT OF CLAIM BY THE CREDITOR BUT STILL THERE IS NO CESSATION/REMISSION OF THE LI ABILITY AND AMOUNT COULD NOT BE ADDED TO THE TAXABLE INCOME U/S 41(1) OF THE ACT AND THUS LD. CIT(A) HAS DELETED THE DISALLOWANCE. 14. LD. AR RELYING UPON THE ORDER OF AO PLEADED THA T ADDITION WAS RIGHTLY MADE AND IT HAS WRONGLY BEEN DELETED BY LD. CIT(A). 15. ON THE OTHER HAND LD. AR RELYING UPON THE SUBM ISSIONS MADE BEFORE LD. CIT(A) SUBMITTED THAT THERE WAS NEITHER REMISSI ON NOR CESSATION OF ANY LIABILITY. THE SUNDRY CREDITORS WERE NEVER WRITTEN OFF. THEREFORE LD. CIT(A) HAS RIGHTLY HELD THAT SEC. 41(1) COULD NOT BE APPLI ED. 16. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS IN THE LIGHT OF MATERIAL PLACED BEFORE US. THE AO HAS ADDED THE SA ID SUM TO THE INCOME OF THE ASSESSEE ONLY ON THE GROUND THAT THE SAID LI ABILITY WAS OUTSTANDING IN THE BOOKS OF THE ASSESSEE FOR MORE THAN THREE YEARS . THESE CREDITORS HAVE NOT BEEN WRITTEN OFF IN THE BOOKS OF THE ASSESSEE. IT HAS NOT BEEN SHOWN BY THE REVENUE THAT WHETHER THERE WAS ANY REMISSION OR CESSATION OF THE LIABILITY OR ANY BENEFIT HAS ACCRUED TO THE ASSESSE E ON ACCOUNT OF THESE CREDITORS. THEREFORE WE ARE OF THE OPINION THAT T HERE IS NO INFIRMITY IN THE ORDER OF CIT(A) VIDE WHICH THE IMPUGNED ADDITION H AS BEEN DELETED. THESE GROUNDS OF THE REVENUE ARE DISMISSED. ITA NOS. 4965 & 4966/D/10 9 17. IN THE RESULT APPEAL OF THE REVENUE FOR A.Y. 2 006-07 IS ALLOWED FOR STATISTICAL PURPOSES AND APPEAL FOR A.Y. 2007-08 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON 14.1.11 (A.K. GARODIA) (I.P. BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER * KAVITA DATED: COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT