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Before: Shri Amit Shukla & Shri L.P. Sahu
ORDER Per L.P. Sahu, A.M.: This is an appeal filed by the assessee against the order of ld. CIT(A)- 20, New Delhi dated 31.07.2017 for the assessment year 2013-14 on the following grounds :
The learned CIT(Appeals) has erred in passing impugned order without taking into consideration the explanations, evidence, executive instructions and legal provisions applicable and by simply reiterating the observations of A.O. which action of the CIT(Appeals) is arbitrary unjust and against the facts of the case.
2. The learned CIT(Appeals) has erred in confirming the addition of Rs.6,63,624.00 made by the A.O. submissions, explanation and legal
provisions which action of both the authorities below are arbitrary, unjust and against the facts of the case.
The brief facts of the case are that the assessee filed return of income on 30.09.2013 declaring an income of Rs.4,29,670/-. The case was selected for scrutiny under CASS and statutory notices were issued to the assessee. The assessee is engaged in the business of overhead electrification contracts for Indian Railways and the assessee is a proprietor of two firms, namely, Talupula Engineering Co. (in short ‘TEC’) and M/s. Talupula Industries (in short ‘TI’). The assessee has shown income of Rs.10,93,289/- from TEC and has shown loss of Rs.6,63,624/- from TI. On going through the profit and loss account of TI, the AO noticed that no work has been done in this unit and the administrative expenses and depreciation on assets have been claimed resulting into loss of Rs.6,63,624/-, the details of which are as under :
Salaries watch and wad staff 3,98,363.00 Electricity charges 38,353.00 Stores & Consumables 56,954.00 Office Expenses 8,399.00 Labour charges 38,873.00 Depreciation on assets 1,22,682.00 ------------------------------------------------------------- Total 6,63,624.00 ----------------------------------------------------------------- On being asked for justification of these expenses, the Assessee filed its reply vide letter dated 14.03.2016. The AO noticed from the letter submitted by the assessee that M/s. TI has not done any work from last few years. Therefore, the AO disallowed the expenses claimed for M/s. TI u/s. 37 of the Act and added the above expenses to the income of assessee, therefore, disallowing the loss claimed by the assessee.
In appeal, the assessee submitted a written reply before the ld. CIT(A) on different dates and relied on some case laws also. The assessee also submitted tax audit report u/s. 44AB of M/s. TEC only, in which there was no mention of any activity or claim of expenditure relating to M/s. TI. The ld. CIT(A) after considering the submissions of the assessee and the guidance note issued by the Institute of Chartered Accountant of India, para 5.19 of the Tax audit report u/s. 44AB of the Act (revised 2013 Edition), observed that there is no substance in the submissions made by the assessee regarding the loss claimed for M/s. TI. Accordingly, he confirmed the addition made by the AO. Aggrieved, the assessee is in appeal before the Tribunal.
The ld. AR of the assessee reiterated the submissions made before the lower authorities and also submitted a paper book and relied on some case laws, which are placed on record. Referring to page 38 of the paper books, which is the details of administrative expenses and also page 36, which are the details of fixed assets and depreciation, he submitted that the assessee has maintained regular books of account in respect to M/s. TI, but due to suspension of business in this unit, no audit was carried out by the Chartered Accountant. Therefore, the assessee is eligible to claim set off of losses from one unit to other unit. The AR also prayed that the matter may be set aside to the AO for verification of the expenditure actually incurred by the assessee.
On the other hand, the ld. DR relied on the order of the lower authorities and submitted that as per section 37, the assessee is not eligible to claim expenditure incurred for the closed unit. The assessee has also submitted before the lower authorities that no any activity has been carried out from the last few years, which shows that the unit was closed.
After hearing both the sides and perusing the entire material on record, we observe that out of two units, one, M/s. TEC was audited by the Chartered Accountant, but the other, M/s. TI was not got audited. On a query by the Bench, the ld. AR of the assessee submitted that complete books of account have been maintained for the unit, namely, M/s. TI and the expenditure so incurred are verifiable therefrom. It is not the case of the assessee that the second unit of the assessee, i.e., M/s. TI stood closed once for all. Merely because there was no business activity in the said unit, it cannot be said that the assessee would have no incurred any expenditure on such unit. On this aspect, the assessee has also relied on various cases laws before us. In presence of these facts, we restore the matter back to the file of the AO to decide the issue afresh after making proper verification of the expenditure incurred by the assessee from the books of accounts said to have been maintained by the assessee or otherwise, as the AO deems fit. In case, the expenditure actually incurred by the assessee are found verifiable, the AO shall decide the issue in accordance with law after considering various decisions relied by the assessee. Needless to say, the assessee shall be given reasonable opportunity of being heard. Accordingly, the appeal of the assessee deserves to be allowed for statistical purposes.