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Income Tax Appellate Tribunal, DELHI BENCH “B”, NEW DELHI
Before: MS. SUCHITRA KAMBLE & SH. PRASHANT MAHARISHI
This appeal by the assessee is directed against the order dated 17.05.2017 passed by the CIT(A)-37, New Delhi in relation to assessment year 2014-15 on the following grounds:-
1. “That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in dismissing the appeal of the appellant ex parte and upholding the order of assessment framed under section 143(3) of the Income Tax Act. 1961 determining the income of the assessee at Rs. 2,76,05,008/- as against the declared income at Rs.2,07,37,690/-.
2. That the learned Commissioner of Income Tax (Appeals) has grossly erred in law and on facts in disposing off the appeal exparte without providing any opportunity whatsoever which is clearly against the principles of natural justice, and hence order of the learned Commissioner of Income Tax (Appeals) is unsustainable in law. 3. That the learned Commissioner of Income Tax (Appeals) has erred in upholding the finding of the learned AO that license fee of Rs. 54,56,120/- paid to M/s Forever New International Pty Ltd. is capital expenditure being intangible asset on which depreciation is allowable @ 25%, failing to appreciate that aforesaid expenditure is incurred by the appellant each year and by incurring the aforesaid expenditure no capital asset has came into existence.
4. That the learned Commissioner of Income Tax (Appeals) has erred in upholding the finding or the learned AO that expenditure incurred of Rs. 30,83,587/- in respect of temporary wooden partitions and structures installed at the leased premises would be eligible for depreciation @ 10% as provided in respect of furniture and fittings, failing to appreciate that expenditure incurred by the assessee is purely on temporary wooden partitions and structures which is eligible for depreciation @100% and hence disallowance made of Rs. 27,75,228/- is unsustainable in law.
5. That the learned Commissioner of Income Tax (Appeals) has erred in failing to appreciate that temporary wooden structure installed at the leased premises had not resulted in any capital expenditure whereby any capital asset has came into existence, and as such expenditure incurred by the appellant is allowable as revenue expenditure.
6. That the learned Commissioner of Income Tax (Appeals) has erred in failing to appreciate that provisions of Explanation 1 to section 32(1) of the Act is inapplicable as such Explanation is applicable only where an assessee incurs any expenditure being in the nature of capital expenditure and is incurred on the construction of any structure by way of renovation or extension of, or improvement to, the building, whereas expenditure incurred by the assessee is firstly not a capital expenditure and in any case by incurring the expenditure there is no renovation or extension of, or improvement to, the building.
7. That learned Commissioner of Income Tax (Appeals) has grossly erred in upholding the disallowance made by the learned AO failing to appreciate that during the course of the assessment only details were called for and before making the disallowance no specific show cause notice was given to the appellant, and hence disallowance made is unsustainable in law.
The above grounds of appeals are independent of, and without prejudice to each other. That the appellant craves leave to add, alter, amend or withdraw all or any grounds herein or add any further grounds as may be considered necessary either before or during the hearing of these grounds.”
2. The assessee company is engaged in the business of trading of women readymade apparels and accessories. The assessee company filed its return digitally on 11.02.2015 declaring income of Rs. 2,07,37,690/-. Notice u/s 143(2) dated 28.08.2015 was issued and served upon the assessee company. Questionnaire along with the notices u/s 142(1) dated 28.07.2016 and 13.10.2016 was issued to the assessee, asking to submit the required information. In response to the statutory notices, CA and AR appeared from time to time and field necessary details, which are placed on record by the Assessing Officer. The Assessing Officer made addition on account of capitalization of license fee amounting to Rs. 40,92,090/- and also disallowed deprecation in respect of temporary construction amounting to Rs. 27,75,228/-.
Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) observed that the notice was issued to assessee on 05.05.2017 fixing the case for 18.05.2017 and the counsel of the assessee vide letter dated 12.05.2017 moved an application for adjournment which was not unaccompanied with any valid POA. Therefore, the matter was decided ex-parte on merit and dismissed by the CIT(A).
The Ld. AR submitted that the matter may be remanded back to the CIT(A) and the assessee will file relevant documents before the CIT(A). The Ld. AR further submitted that the CIT(A) be directed to follow principles of natural justice.
The Ld. DR relied upon the order of the CIT(A) and the assessment order. The Ld. DR further submitted that the assessee was given proper opportunity by the CIT(A).
We have heard both the parties and perused all the relevant material available on record. The CIT(A) has decided the appeal ex-parte on merit and only once the notice was issued to the assessee and has not given proper opportunity to file the POA to the Representatives of the assessee. Therefore, it will be appropriate to remand back this matter to the file of the CIT(A) by restoring the appeal filed therein and decide the issues a fresh after giving proper opportunity to the assessee by following principles of natural justice. The assessee will also cure the defect of the appeal filed before the CIT(A) within 30 days and we direct that the CIT(A) will accordingly give the hearing to the assessee and decide the appeal within reasonable time. Thus, the appeal filed by the assessee is partly allowed for statistical purpose.
In the result, the appeal of the assessee is partly allowed for statistical purpose.
Order pronounced in the open court on 07th day of August, 2019.