ACIT, CIRCLE-20(2), NEW DELHI vs. RHC IT SOLUTIONS PVT. LTD., NEW DELHI

The grounds raised by the Revenue read as under: 1. "Whether the Ld. CIT(A) has erred in law and on the facts case, in deleting the disallowance of Rs. 2,10,44,717/- on account of finance cost and depreciation of Rs. 6,90,799/- made by the AO without consideration the fact that assessee company had not commenced its business operations during the year at all. 2. Whether on the facts and under the circumstances of the case, the Ld. CIT (A) has erred in law to restrict the expenses to 20% from 50% made by AO without giving any justification. 3. The appellant craves to be allowed to add any fresh ground(s) of appeal and/or delete or amend any of the ground(s) of appeal.”

Facts in brief are that the assessee-company is engaged in the business of development of software. The assessee company e-filed its original return of income for A.Υ. 2015-16 on 30.11.2015 declaring loss of Rs. 4,00,44,189/-. The case was selected for scrutiny assessment under CASS and statutory notice u/s 143(2) of the Income-tax Act, 1961 [the Act, for short] was issued on 11.04.2016. 4. The Assessing Officer, during the course of assessment proceedings, held that the assessee company has not started its business operations during the year at all and has not recognized any revenue

Aggrieved, the assessee went in appeal before the ld. CIT(A). Following the decision of his predecessor in AY 2014-15, the CIT(A) held that just because assessee has not recognized any revenue during the year, does not mean that its business has not commenced and deleted the addition made on account of finance cost and depreciation. The CIT(A) further restricted the disallowance of other expenses to 20% from 50% made by the AO.

Now the aggrieved Revenue is in appeal before us.

Before us, none appeared on behalf of the assessee. However, we find that the assessee has filed written submissions. We decided to adjudicate the appeal with the assistance of the ld. DR. We have heard the ld. DR at length and perused the written submissions furnished on record.

In the written submissions, the assessee has furnished a copy of the Hon’ble ITAT in the assessee’s own case for assessment year 2012- 13. We find that the coordinate bench of ITAT in ITA No. 2755/Del/2017 for assessment year 2012–13 vide order dated 31.12. 2019 has held that:

Respectfully following the above ITAT order, we hold that as the assessee business has commenced as on 30.1.2012 and therefore there is no question of raising the issue of commencement of business in the impugned assessment year for disallowance of expenses. In view of the same, disallowance of expense on finance cost and depreciation is held

With respect to the ground No. 2 regarding restriction of the disallowance of expenses to 20% from 50%, the same is to be adjudicated along with appeal filed by the assessee in ITA no 2725/Del/2019 as the issues are common. The ground no 2 is therefore is left open.

In the result, appeal of Revenue in ITA No. 2416/DEL/2019 is dismissed. Order pronounced in open court on 23.05.2025. [SATBEER SINGH GODARA]