Income Tax Appellate Tribunal - Delhi
Dcit, New Delhi vs M/S. Paradise Infrastructure Pvt. ... on 29 May, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'F', NEW DELHI
BEFORE SH. AMIT SHUKLA, JUDICIAL MEMBER
AND
SH. O.P. KANT, ACCOUNTANT MEMBER
ITA No. 708/Del/2015
Assessment Year: 2008-09
DCIT, Vs. M/s. Paradise Infrastructure
Central Circle -25, New Pvt. Ltd.,
Delhi Room No. 6, 4th Floor, 141/143,
SaiBhuvan, Lohar Chawl,
Shamaldas Gandhi Marg,
Kalbadevi, Mumbai
PAN : AADCP4693C
(Appellant) (Respondent)
Appellant by Sh. Atiq Ahmed, Sr.DR
Respondent by None
Date of hearing 16.05.2018
Date of pronouncement 29.05.2018
ORDER
PER O.P. KANT, A.M.:
This appeal by the Revenue is directed against order dated 17/11/2014 passed by the Ld. Commissioner of Income-tax (Appeals)-XII, New Delhi [in short 'the Ld. CIT(A)'] for assessment 2008-09 raising following grounds:
1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs.1,51,46,272/-
being 1/10th of the total of the expenses claimed under the head 'preoperative expenses'.
2ITA No.708/Del2015
2. The order of the CIT(A) is erroneous and is not tenable on facts and in law.
3. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.
2. Briefly stated facts of the case are that the assessee filed return of income on 30/09/2008, declaring loss of Rs.25,61,94,155/-. The case was selected for scrutiny and notice under section 143(2) of the Income-tax Act, 1961(in short the 'Act') was issued and complied with. The Assessing Officer completed assessment under section 143(3) on 24/12/2009 after making certain additions/disallowances to the returned income. Aggrieved, the assessee filed appeal before the Ld. CIT(A), who partly allowed the appeal. Aggrieved with the relief allowed, the Revenue in appeal before the Tribunal raising the grounds as reproduced above.
3. The sole effective ground raised by the Revenue is related to addition of Rs.1,51,46,272/- deleted by the Ld. CIT(A). 3.1 The Ld. DR relying on the order of the Assessing Officer submitted that addition in question has been deleted by the Ld. CIT(A) without giving a proper finding on the nature of expenses and how the same were allowed under section 37(1) of the Act. 3.2 None appeared on behalf of the assessee despite notifying the date of hearing and thus case was heard ex parte qua the assessee.
3.3 We have heard the submission of the Ld. DR and perused the relevant material on record. The Assessing Officer has noted that the company was incorporated on 24/12/2004 and this is 3 ITA No.708/Del2015 the first year of the operation of the assessee company. The activities of the company have been stated as to acquire, take or give on lease, develop, renovate, improve properties including infrastructure project. The Assessing Officer observed that during the year under consideration the assessee only received commission and interest income from advances made to various concerns. The Assessing Officer noted that the assessee claimed expenditure of Rs.35,64,00,510/-, which included preoperative expenses of Rs.14,81,26,459/-. The assessee in the revised computation of income filed on 29/11/2009, added back the said amount of preoperative expenses to the income filed, and accordingly, the Assessing Officer made addition for preoperative expenses of Rs.14,81,26,459/-. The Assessing Officer also observed claim of preliminary expenses amounting to Rs.15,86,984/- under section 35D the Act, which has been disallowed. The Assessing Officer further observed that, in addition to the preoperative expenses and preliminary expenses, the assessee made claim of expenditure of Rs.15,14,62,722/- under various heads of expenditure. The Assessing Officer further noted that many of the expenditure were in the nature of preoperative being company not in operation and only part of the business was commenced. The assessee explained that expenditure have been incurred wholly and exclusively for the purpose of the business and Fringe Benefit Tax (FBT) was also paid on those expenses, wherever it was required. The Assessing Officer rejected the contention of the assessee and observed that the expenses include expenses on installation of the software package and extensive travel by the directors of the company.
4ITA No.708/Del2015 According to the Assessing Officer, these expenses were in the nature of preliminary expenses . He disallowed 1/10th of the total expenses which was worked out to Rs.1,51,46,272/-. 3.4 Before the Ld. CIT(A), the assessee submitted that preoperative expenses has already been disallowed by the assessee and there was no reason for further disallowance. The assessee submitted that the Ld. AO failed to mention reasons and basis for reaching to the conclusion that expenses in question were of preoperative nature, over and above the preoperative expenses already disallowed by the assessee. According to the assessee ad-hoc addition was not permitted in the case of the company. The Ld. CIT(A) allowed the appeal of the assessee observing as under:
"1.7 That 'H' Bench of ITAT in ACIT vs Vee Gee Industrial Enterprises, ITA No. 1/Del/2011 and ITA No. 2/Del/2011, order dated 12.07.2013, following the judgment of Hon'ble Rajasthan High Court in the case of Jai Steel India vs CIT, 259 CTR (Raj) 281 held that in the proceeding u/s 153A the addition can be made only on the basis of incriminating material found during the search. Hence, disallowance of 1/10th of telephone, car running and maintenance and depreciation was found to be justified. For the sake of convenience, the relevant para 15 of the judgment is reproduced below:
"In respect of second ground of appeal regarding disallowance of telephone, car expenses etc we observe that no incriminating material was found in respect of such expenses which could enable the Assessing Officer to disallow a part of it during the proceedings u/s 153A. this has been held in various pronouncements of various courts and the latest being by Hon'ble Rajasthan High Court in the case of Jai Steels India vs CIT in 259 CTR (Raj) 281, where the Hon'ble Court has held that in case of Assessment u/s 153A, the completed assessment can be tinkered only on the basis of incriminating material found during the search. Therefore, in the present case without any incriminating material Assessing Officer was not 5 ITA No.708/Del2015 justified in making disallowance. Therefore, ground no. 2 is also allowed. "
1.8 That it is brought to your kind notice that the fact of the appellant's case is very similar to the fact of the aforesaid case of Vee Gee Industrial Enterprises decided by the Ld. Jurisdictional ITAT. In appellant's case also the search and seizure was conducted on 11.05.2007 and no incriminating document was found in respect of aforesaid disallowance of 1/10th of expenditure under different heads totaling to Rs. 1,51,46,272/- but such disallowance was made only on ad hoc basis and also on presumption. Thus, in the light of aforesaid latest judgment of Ld. Jurisdictional ITAT, your goodself is requested to kindly delete the disallowance of Rs. 1,51,46,272/-."
3.5 In our opinion, the Ld. CIT(A) has merely reiterated the submission of the assessee and has not analyzed the nature of expenses. The Ld. CIT(A) has only blamed the Assessing Officer for making disallowance on estimate basis, but he himself has not analyzed the true nature of expenses as to whether those expenses were in the nature of preoperative or incurred wholly and exclusively for the purpose of the business. Before us, also neither the assessee has been represented, nor amount-wise particular of the expenses for installation of software packages and travel by the directors has been filed. Since issue in dispute has been decided by the Ld. CIT(A) without proper analysis and reasoning, we feel it appropriate to restore the issue to the file of the Ld. CIT(A) for deciding a fresh after providing adequate opportunity of being heard to both the parties. Accordingly, the ground No. 1 of the appeal, is allowed for statistical purposes.
4. The ground No. 2 and 3 of the appeal being generally nature, we are not required to adjudicate upon.
6ITA No.708/Del2015
5. In the result, the appeal filed by the Revenue is allowed for statistical purposes.
The decision is pronounced in the open court on 29th May, 2018.
Sd/- Sd/-
(AMIT SHUKLA) (O.P. KANT)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 29th May, 2018.
RK/-(D.T.D.)
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
Asst. Registrar, ITAT, New Delhi