Dynamic Continental (P) Ltd, v. CIT Delhi IV,

ITA 2067/DEL/2008 | 2003-2004
Pronouncement Date: 29-01-2010 | Result: Allowed

Appeal Details

RSA Number 206720114 RSA 2008
Assessee PAN AAACD2278C
Bench Delhi
Appeal Number ITA 2067/DEL/2008
Duration Of Justice 1 year(s) 8 month(s) 2 day(s)
Appellant Dynamic Continental (P) Ltd,
Respondent CIT Delhi IV,
Appeal Type Income Tax Appeal
Pronouncement Date 29-01-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 29-01-2010
Date Of Final Hearing 09-12-2009
Next Hearing Date 09-12-2009
Assessment Year 2003-2004
Appeal Filed On 27-05-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH B DELHI ] BEFORE SHRI C. L. SETHI JM SHRI K. D. RANJA N AM I. T. APPEAL NO. 2067 (DEL) OF 2008. ASSESSMENT YEAR : 2003-04 M/S. DYNAMIC CONTINENTAL PVT. LTD. C OMMISSIONER OF INCOME-TAX K - 28 GREEN PARK EXTN. VS. D E L H I : IV N E W D E L H I - 16. N E W D E L H I. P A N / G I R NO. AAA CD 2278 C. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI U. N. MARWAHA C. A.; & SHRI ANIL KUMAR C. A.; DEPARTMENT BY : SHRI STEPHEN GEORGE [CIT] - D .R.; O R D E R. PER K. D. RANJAN AM : THIS APPEAL BY THE ASSESSEE FOR ASSESSMENT YEAR 200 3-04 ARISES OUT OF THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX DELHI - IV NEW DEL HI PASSED UNDER SECTION 263 OF THE INCOME-TAX ACT 1961 [HEREINAFTER REFERRED TO AS TH E ACT]. 2. THE ONLY ISSUE FOR CONSIDERATION RELATES TO CANC ELLING THE ASSESSMENT UNDER SECTION 263 OF THE ACT ON THE GROUND THAT THE ASSESSING OFF ICER HAD ALLOWED EXPENDITURE CLAIMED UNDER THE HEAD 'BUILDING RENOVATION WRITTEN OFF' A MOUNTING TO RS. 26 84 404/- AS AGAINST RS.2 65 404/- BEING 10 PER CENT OF THE AMOUNT WRITT EN OFF. THE FACTS OF THE CASE STATED IN BRIEF 2 I. T. APPEAL NO. 2067 (DEL) OF 2008. ARE THAT THE ASSESSEE DEBITED AN AMOUNT OF RS.26 52 404/- TO PROFIT AND LOSS ACCOUNT UNDER THE HEAD 'BUILDING RENOVATION ACCOUNT WRITTEN OFF'. DU RING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS SUBMITTED THAT THESE EXPENSES WERE INCURRED ON TWO RENTED PREMISES LOCATED AT RAJA GARDEN AND SHIVAJI MARG. THESE PREMISES WERE LATER VACATED AND THE EXPENDITURE ON UNUSED BUILDING WAS DEBITED TO PROFIT AND LOSS ACCOUNT. S INCE THE ASSESSEE HAD NOT SUBMITTED THE JUSTIFICATION AS TO HOW SUCH EXPENDITURE WAS ALLOWA BLE AS REVENUE EXPENDITURE WHEREAS THE SAME SHOULD HAVE FORMED PART OF FIXED ASSETS AND AL SO THE ASSESSEE ITSELF HAD SUBMITTED THAT SUCH EXPENDITURE WAS INCURRED FOR THE PURPOSE OF BO OSTING UP THE SALES THE BENEFIT OF ENDURING NATURE WAS SOUGHT TO BE DRAWN FROM SUCH AS SETS. THE ASSESSING OFFICER DISALLOWED 10 PER CENT OF THE AMOUNT ON AD-HOC BASIS. 3. SUBSEQUENTLY THE ASSESSEE FILED APPEAL BEFORE T HE LD. CIT (APPEALS) AND THE LD. CIT (APPEALS) VIDE HIS ORDER DATED 31ST APRIL 2008 DIR ECTED THE ASSESSING OFFICER TO DELETE THE ADDITION. 4. THEREAFTER THE LD. CIT DELHI-V NEW DELHI ISSU ED NOTICE UNDER SECTION 263 OF THE ACT ON THE GROUND THAT THE ASSESSING OFFICER HAD DI SALLOWED ONLY AN EXPENDITURE OF RS.2.65 LAKHS BEING 10 PER CENT OF THE TOTAL EXPENDITURE AT RS.26 53 104/- WHEREAS THE ENTIRE EXPENDITURE OF RS.26 53 104/- INCURRED ON RENOVATIO N OF BUILDING WAS REQUIRED TO BE DISALLOWED. THE MISTAKE COMMITTED BY THE AO THUS R ESULTED INTO UNDER ASSESSMENT OF INCOME TO THE EXTENT OF RS.23.88 LAKHS. 5. DURING THE COURSE OF PROCEEDINGS UNDER SECTION 2 63 OF THE ACT IT WAS SUBMITTED BY THE ASSESSEE THAT THE AO HAS EXERCISED HIS FACULTIES AN D CONDUCTED COMPLETE ENQUIRY ON THE SUBJECT AS WAS DEEMED BY HIM AND PASSED A SPEAKING ORDER ON THE ISSUE BEFORE MAKING THE DISALLOWANCE OF 10 PER CENT OF THE TOTAL EXPENDITUR E OF RS.26 53 101/- WHICH COMES TO RS.2 65 340/-. IT WAS ALSO SUBMITTED THAT SINCE TH E MATTER WAS CONSIDERED AND DECIDED IN APPEAL NO ACTION CAN BE TAKEN UNDER SECTION 263 IN VIEW OF PROVISIONS OF SECTION 263(1)(C) OF THE ACT AS EXCLUSION UNDER SECTION 263(1)(C) OF THE ACT WAS APPLICABLE TO THE FACTS OF THE CASE. THE LD. COMMISSIONER HOWEVER WAS OF THE VIEW THAT HE HAD POWER TO SET ASIDE THE ASSESSMENT ORDER AND SEND THE MATTER FOR FRESH ASSE SSMENT IF HE WAS SATISFIED THAT FURTHER 3 I. T. APPEAL NO. 2067 (DEL) OF 2008. ENQUIRIES WERE NECESSARY AND THE ORDER OF THE ASSES SING OFFICER WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE. SHE PLACED RELIANCE ON THE DECISIO N OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF SWARUP VEG. PRODUCTS 187 ITR 412 (ALL). SH E ALSO PLACED RELIANCE ON OTHER DECISIONS. AS REGARDS THE ARGUMENTS OF THE ASSESS EE THAT THE LD. CIT (A) HAS DELETED 1/10TH OF THE EXPENSES OF RS.2 65 404/- THUS THE CASE COU LD NOT BE REOPENED UNDER SECTION263 WAS NOT ACCEPTABLE ON THE GROUND THAT THE LD. CIT (A) H AD CONSIDERED THE ISSUE ONLY OF AD-HOC DISALLOWANCE MADE OUT OF RENOVATION EXPENSES. HE D ID NOT ADJUDICATE UPON THE NATURE OF BUILDING RENOVATION EXPENSES WRITTEN OFF THOUGH H E HAS NOTED IN HIS ORDER THAT THESE EXPENSES HAD BEEN INCURRED IN ASSESSMENT YEAR 1997- 99 TO 1999-2000 AND THE SAME HAD BEEN CLAIMED TO BE WRITTEN OFF IN THE INSTANT ASSESSMENT YEAR. THE LD. CIT HAS NOT COMMENTED AS TO WHETHER THOSE EXPENSES WERE CAPITAL IN NATURE OR RE VENUE EXPENDITURE. IT WAS ALSO NOT CLEAR AS TO WHETHER THE ASSESSEE HAD CLAIMED THESE EXPENS ES TO BE DEFERRED REVENUE EXPENDITURE IN PREVIOUS YEAR IN WHICH THEY WERE INCURRED. ACCORDI NGLY THE LD. CIT (APPEALS) HAD NOT ADJUDICATED UPON THE ISSUE OF ALLOWANCE OF BUILDING RENOVATION EXPENSES. HENCE THE EXPLANATION (C) OF SUB-SECTION (1) OF SECTION 263 W AS NOT APPLICABLE. SHE THEREFORE SET ASIDE THE ORDER MADE ON 31ST MARCH 2006 FOR FRESH ADJUDI CATION ON THE ISSUE. 6. BEFORE US THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE EXPENSES WERE INCURRED DURING THE PREVIOUS ASSESSMENT YEAR RELEVANT TO ASSESSMENT YEAR 1997-98 WHICH IS EVIDENT FROM FINDINGS RECORDED BY THE LD. CIT (APPEALS) IN HIS O RDER. THE EXPENDITURE WAS INCURRED IN EARLIER YEARS HAD BEEN FULLY VERIFIED IN ASSESSMENT FOR THOSE YEARS. THE ASSESSING OFFICER HAS ALSO ACCEPTED THE BASIC PRINCIPLE THAT THE ASSESSEE WAS DERIVING THE BENEFIT OVER THE LEASED PERIOD AND THUS WAS JUSTIFIED IN CLAIMING EXPENDITU RE OVER THE SPREAD OUT PERIOD OF LEASE. THE ASSESSEE COMPANY HAD NOT SOLD OR SALVAGED THE FITTI NGS BUT HOWEVER USED WHATEVER EQUIPMENT / ATTACHMENT PENAL OR DUCTING OF RAJA GAR DEN AT SHIVAJI MARG AND THEN SHIVAJI MARG TO GREEN PARK. THEREFORE THE ASSESSING OFFIC ER HAD ONLY MADE A PRESUMPTION OF DISALLOWANCE OF 10 PER CENT OF RS.26 53 404/-. THE ENTIRE AMOUNT OF RS.26 53 404/- WAS ENTIRELY NOT TO BE DISALLOWED. IT WAS FURTHER SUBM ITTED THAT THE ADHOC DISALLOWANCE OF EXPENSE @10% HAS BEEN DELETED BY THE LD. CIT (APPEALS) AND THE REVENUE HAS NOT PREFERRED FURTHER APPEAL ON THE ISSUE AND THEREFORE THE MATTER HAS B ECOME FINAL. SINCE THE ASSESSMENT ORDER HAS MERGED IN THE ORDER OF THE LD. CIT (A) THE LD. CIT HAS NO JURISDICTION TO INVOKE THE JURISDICTION UNDER SECTION 263 OF THE ACT IN VIEW O F EXCLUSION PROVIDED UNDER SECTION 4 I. T. APPEAL NO. 2067 (DEL) OF 2008. 263(1)(C) OF THE ACT. ON THE OTHER HAND THE LD. S R. [CIT] - DR SUPPORTED THE ORDER OF THE LD. CIT BY STATING THAT THE LD. CIT (A) HAD NOT DISCUSS ED VARIOUS DIMENSIONS OF THE CASE AND THEREFORE THE EXCLUSION CLAUSE (C) TO SECTION 263( 1) WILL NOT BE APPLICABLE. ACCORDINGLY THE LD. CIT HAD JURISDICTION TO CANCEL THE ASSESSMENT U NDER SECTION 263 OF THE ACT. 7. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE THAT THE ASSESSEE HAD INCURRED EXPENDITURE IN 1997 AND THE EXPENDITURE WAS CLAIMED AS DEFERRED REVENUE EXPENDITURE OVER TH E PERIOD OF THE LIFE OF THE ASSETS. THE ASSESSING OFFICER HAD DISALLOWED THE AMOUNT ON THE GROUND THAT THE ASSESSEE HAD NOT GIVEN THE ENTIRE DETAILS AND THE DISALLOWANCE WAS ACCORDINGLY RESTRICTED ON AD HOC BASIS. HOWEVER ON APPEAL THE LD. CIT HAS FOUND THAT THE ENTIRE EXPEND ITURE WRITTEN OFF IN THE BOOKS OF ACCOUNTS AT RS.26 53 404/- WAS ALLOWABLE AS DEDUCTION. THE LD . CIT (A) HAS ALSO DISCUSSED THAT THE ASSESSING OFFICER HAD NEITHER DISPUTED ANY OF THE F ACTS NOR HAD BROUGHT ANY DETAIL ON RECORD TO SHOW THAT THE EXPENDITURE INCURRED BY IT WAS FOR FI XED ASSETS I.E. CAPITAL IN NATURE. THE ASSESSING OFFICER LOOKING INTO THE EXPLANATION SUBM ITTED BY THE ASSESSEE HAD ONLY DISALLOWED 10 PER CENT OF THE EXPENSES ON AD HOC BASIS WHICH HAS BEEN FOUND TO BE UNSUSTAINABLE IN VIEW OF DECISION OF HON'BLE SUPREME COURT IN THE CA SE OF DAKHINESHWARI COTTON MILLS VS. CIT 26 ITR 775 (SC). RELIANCE WAS ALSO PLACED ON T HE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF DHEERAJLAL GIRDHARILAL 26 ITR 736 (SC). FROM THE ABOVE FACTS IT IS CLEAR THAT THE LD. CIT (A) HAS ONLY DISCUSSED THE AD HOC DISALLOWA NCE BUT THE FACT REMAINS THAT THE ENTIRE ISSUE OF CLAIM OF RS.26 53 404/- WAS BEFORE HIM. I T IS A SETTLED LAW THAT THE LD. CIT (A) HAD CONCURRENT POWERS WITH THAT OF THE ASSESSING OFFICE R. IF THE ENTIRE AMOUNT WAS TO BE DISALLOWED HE COULD HAVE ENHANCED THE ASSESSMENT B Y ISSUE OF SHOW CAUSE NOTICE BUT THE SAME WAS NOT DONE. THEREFORE THE ISSUE RELATING T O CLAIM OF RS.26 53 404/- WAS BEFORE THE LD. CIT (A) AND ACCORDINGLY THE ISSUE RAISED BY TH E ASSESSING OFFICER IN ASSESSMENT ORDER HAS MERGED WITH THE ORDER OF THE LD. CIT (APPEALS). HO N'BLE SUPREME COURT IN THE CASE OF CIT VS. ARBUDA MILLS LTD. 231 ITR 50 (SC) HAS HELD THAT THE POWERS OF THE LD. COMMISSIONER UNDER SECTION 263(1) OF THE ACT SHALL BE DEEMED ALW AYS TO HAVE EXTENDED TO SUCH MATTERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEALS . THE CONSEQUENCE OF AMENDMENT MADE WITH RETROSPECTIVE EFFECT IS THAT POWERS UNDER SECT ION 263 OF THE LD. COMMISSIONER SHALL EXTEND AND SHALL BE DEEMED ALWAYS EXTENDED TO SUCH MATTERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN APPEAL. LIKEWISE IN THE CASE OF CIT VS . CORBORANDUM UNIVERSALS LTD. 240 ITR 5 I. T. APPEAL NO. 2067 (DEL) OF 2008. 99 (MAD.) HON'BLE MADRAS HIGH COURT HAS HELD THAT T HE LD. CIT HAS POWER OF REVISION UNDER SECTION 263(1) OF INCOME-TAX ACT 1961 IN RESPECT O F MATTERS WHICH WERE NOT THE SUBJECT MATTER OF APPEAL. LIKEWISE ITAT DELHI BENCH IN T HE CASE OF CENTRAL WAREHOUSING CORPORATION VS. CIT 307 ITR (AT) 52 (DEL.) HAS HELD THAT IN A CASE WHERE THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER WAS DISPUTED IN APPEAL THE LD. COMMISSIONER COULD NOT EXERCISE JURISDICTION UNDER SECTION 263 OF THE ACT IN RESPECT OF MATTERS CONSIDERED AND DECIDED IN APPEAL. IN THE CASE BEFORE US THE MATT ER WAS BEFORE THE LD. C IT (A) WHICH HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. THE LD. CI T (APPEALS) HAD FOUND THAT NO AD HOC DISALLOWANCE COULD BE MADE OUT OF THE CLAIM. WE ARE NOT GOING INTO THE MERITS OF THE CASE WHETHER THE AMOUNT WAS ALLOWABLE OR NOT. BUT THE F ACTS REMAIN THAT THE DISALLOWANCE OF RS 2 65 340/- OUT OF RS.26 53 404/- WAS SUBJECT MATTER OF APPEAL BEFORE THE LD. CIT (A) AND HENCE IN VIEW OF CLAUSE (C) OF EXPLANATION TO SECTI ON 263 THE LD. COMMISSIONER HAS NO JURISDICTION TO REVISE THE ORDER. ACCORDINGLY WE SET ASIDE THE ORDER OF COMMISSIONER U/S 263 OF THE ACT AND RESTORE THE ORDER OF ASSESSING OFFIC ER. 8. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 29TH JANUARY 2010. SD/- SD/- [ C. L. SETHI ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 29TH JANUARY 2010. *MEHTA * COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 6 I. T. APPEAL NO. 2067 (DEL) OF 2008. 2. RESPONDENT. 3. CIT 4. CIT (APPEALS) 5. DR ITAT NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR ITAT. 7 I. T. APPEAL NO. 2067 (DEL) OF 2008.