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Income Tax Appellate Tribunal, MUMBAI BENCHES, ‘J’ MUMBAI
Before: Shri Joginder Singh, & Shri Manoj Kumar Aggarwal
आदेश / O R D E R
Per Joginder Singh(Judicial Member) The Revenue is aggrieved by the impugned order dated 02/12/2016 of the Ld. First Appellate Authority, Mumbai and assessee has preferred cross objection. At the outset, the learned counsel for the assessee pointed out that the appeal of the Revenue is barred by limitation by 58 days. The learned DR pointed out the reasons of delay and by contending that the delay may be condoned. The learned counsel for the assessee contended that the delay may not be condoned.
1.1 We have considered the rival submissions and perused the material available on record. . In view of the assertions made by the ld. respective counsel, so far as, condonation of C.O. No.126/Mum/2017 M/s Junobo Hotels Pvt. Ltd. delay is concerned no doubt filing of an appeal is a right granted under the statute to the assessee and is not an automatic privilege, therefore, the assessee is expected to be vigilant in adhering to the manner and mode in which the appeals are to be filed in terms of the relevant provisions of the Act. Nevertheless, a liberal approach has to be adopted by the appellate authorities, where delay has occurred for bona- fide reasons on the part of the assessee or the Revenue in filing the appeals. In matters concerning the filing of appeals, in exercise of the statutory right, a refusal to condoned the delay can result in a meritorious matter being thrown out at the threshold, which may lead to miscarriage of justice. The judiciary is respected not on account of its power to legalize in justice on technical grounds but because it is capable of removing injustice and is expected to do so.
2.2. The Hon’ble Apex Court in a celebrated decision in Collector, Land Acquisition vs Mst. Katiji & Ors. 167 ITR 471 opined that when technical consideration and substantial justice are pitted against each other, the courts are expected to further the cause of substantial justice. This is for the reason that an opposing party, in a dispute, cannot have a C.O. No.126/Mum/2017 M/s Junobo Hotels Pvt. Ltd. vested right in injustice being done because of a non- deliberate delay. Therefore, it follows that while considering matters relating to the condonation of delay, judicious and liberal approach is to be adopted. If sufficient cause is found to exist, which is bona-fide one, and not due to negligence of the assessee, the delay needs to condoned in such cases. The expression ‘sufficient cause’ is adequately elastic to enable the courts to apply law in a meaningful manner, which sub- serves the end of justice- that being the life purpose of the existence of the institution of the courts. When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred. The Hon’ble Apex Court in Vedabhai vs Santaram 253 ITR 798 observed that inordinate delay calls of cautious approach. This means that there should be no malafide or dilatory tactics. Sufficient cause should receive liberal construction to advance substantial justice. The Hon’ble Apex Court in 167 ITR 471 observed as under:-
“3. The legislature has conferred the power to condone delay by enacting section 51 of the Limitation Act of 1963 in order to enable the courts to do substantial justice to parties by disposing of matters on de merits. The expression “sufficient cause” employed by the legislature is adequately elastic to enable the courts to apply the law in a meaningful manner
C.O. No.126/Mum/2017 M/s Junobo Hotels Pvt. Ltd. which subserves the ends of justice that being the life-purpose of the existence of the institution of courts. It is common knowledge that this court has been making a justifiably liberal approach in matters instituted in this court. But the message does not appear to have percolated down to all the others courts in the hierarchy.”
2.3. Furthermore, the Hon'ble Supreme Court in the case of Vedabai Alia Vaijayanatabai Baburao Patil vs. Shantaram Baburao Patil 253 ITR 798 held that the court has to exercise the discretion on the facts of each case keeping in mind that in construing the expression ‘sufficient cause’, the principle of advancing substantial justice is of prime importance. The court held that the expression “sufficient cause” should receive liberal construction.
2.4. The decision of the Tribunal in People Infocom Private Ltd. v/s CIT (ITA No.210/Mum/2013) order dated 19/05/2016, M/s Neutron Services Centre Pvt. Ltd vs ITO (ITA No.1180/Mum/2012) order dated 18/02/2016, Shri Saidatta Coop-. Credit Society Ltd. v/s ITO (ITA No.2379/Mum/2015) order dated 15/01/2016 and Mr. Nikunj Barot (Prop. Enigma) vs ITO (ITA No.4887/Mum/2015) order dated 06/01/2016, wherein, substantial delay was condoned, supports the case of the present Revenue. Having made the aforesaid
C.O. No.126/Mum/2017 M/s Junobo Hotels Pvt. Ltd. observation and various decisions discussed hereinabove, including from Hon’ble Apex Court, the circumstances narrated by the assessee, wherein, it has stated the reasons which caused the delay, therefore, the delay is condoned.
Now we shall take up the appeal of the Revenue on merit, wherein the ground raised pertains to allowing the capitalization of expenses to the tune of Rs. 3,85,37,106/- without appreciating that expenses in question were incurred prior to setting up of the business therefore, the assessee cannot be treated to have set up the business during financial year 2010-11.
During hearing, the learned DR Shri V K Chaturvedi advanced arguments which is identical to the grounds raised by claiming that even though the premises which was to be used as a hotel had been taken on lease by the assessee on 18th February 2011 and was under repair and renovation during F Y 2010-11 to make it fit to function as a hotel and, further, the hotel premises, taken on lease by the assessee company, was not ready to house the customer and the assessee was not in a position to take booking and, thus, the hotel was not ready to commence its business.
C.O. No.126/Mum/2017 M/s Junobo Hotels Pvt. Ltd. 5. On the other hand, the learned counsel for the assessee Shri Deven Vora defended the impugned order by explaining that it was the first year of business of the assessee and loss to the tune of Rs. 3.85 crore was incurred and defended the finding recorded by the learned CIT(A).
We have considered the rival submissions and perused the material available on record. Before adverting further, we are reproducing hereunder the finding recorded by the learned CIT(A), which are as under:
“5.3 I have perused the assessment order of the A.O. and the submissions made by the appellant. It is noted that during the course of assessment proceedings the A.O. noticed that the assessee company had accumulated loss of Rs. (-) 3,85,37,106/-. The assessee company had not shown any receipt during the year. During the year the operation of the company’s business had not started. All the preliminary expenses before starting of the business had been claimed as administrative and other expenses. Since, the business of the company had not started all these expenses should not have been claimed in the Purchase & L A/c. Since the company had not commenced its operation. The expenses claimed should have been capitalized. Therefore, the loss of Rs. (-) 3,85,37,106/- was disallowed by the A.O. The AR has vehemently opposed the disallowance and has submitted that the learned Assessing Officer has disallowed the expenses claiming that the expenses should have been capitalized. The Learned Assessing Officer ought to have at least allowed the said expenses to be capitalized. The Learned Assessing Officer has C.O. No.126/Mum/2017 M/s Junobo Hotels Pvt. Ltd. accepted the genuineness of the expenses and the issue is with treatment of the same in books and income tax return. On the similar facts and circumstances, the Learned Assessing Officer for Assessment Years 2012-13 and 2013-14 has allowed the expenses to be capitalized. We request your Honour to allow the expenses to be capitalized so as to claim Depreciation benefit as and when the Operations are commenced. It is noted that the Learned Assessing Officer has rightly noted that the business of the assessee has not commenced and the expenses cannot be allowed as revenue expenses. However, the AO should have allowed the said expenses to be capitalized as was done on the similar facts and circumstances for assessment years 2012-13 and 2013-14 where in the AO had allowed the expenses to be capitalized. In view of this discussion the AO is directed to allow the expenses to be capitalized so as to enable the claim depreciation benefit as and when the business operations of assessee are commenced. Accordingly this ground of appeal is partly allowed. ”
6.1 If the aforesaid factual finding recorded by the learned CIT(A) is analyzed, undisputedly, the assessee company has not shown any receipt during the year as the business operation of the assessee company had not started and the preliminary expenses, before starting of the business, had been claimed as administrative and other expenses. The stand of the assessee is that the disallowance was made by the learned Assessing Officer on the plea that such expenses should have been capitalized. The genuineness of incurring
C.O. No.126/Mum/2017 M/s Junobo Hotels Pvt. Ltd. of expenses has not been doubted by the learned Assessing Officer and the issue is with respect to the treatment of the same in the books of account and the return filed by the assessee. There is uncontroverted finding in the impugned order that for A.Ys. 2012-13 and 2013-14, the learned Assessing Officer allowed the expenses to be capitalized.
Thus, we find no infirmity in the direction of the learned CIT(A) to allow the expenses to be capitalized so as to enable the claim of depreciation benefit as and when the business operation of the assessee is commenced. The appeal of the Revenue is therefore having no merit, consequently dismissed.
So far as the cross-objection NO. 126/Mum/2017 is concerned, the learned counsel for the assessee advanced identical arguments by claiming that this cross objection is in support of the order of the first appellate authority. Since, we have dismissed the appeal of the Revenue therefore, this cross-objection as become infructuous.
C.O. No.126/Mum/2017 M/s Junobo Hotels Pvt. Ltd. 8. Finally, the appeal of the Revenue is dismissed and the cross-objection of the assessee is dismissed as infructuous.
This Order was pronounced in the open court in the presence of Ld. representatives from both sides at the conclusion of hearing on 16/08/2018.
Sd/- Sd/- (Manoj Kumar Aggarwal) (Joginder Singh) लेखा सद�य / ACCOUNTANT MEMBER �या�यक सद�य /JUDICIAL MEMBER मुंबई Mumbai; �दनांक Dated : 24/09/2018 f{x~{tÜ? P.S/.�न.स. आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant (Respective assessee) 2. ��यथ� / The Respondent. 3. आयकर आयु�त(अपील) / The CIT, Mumbai. 4. आयकर आयु�त / CIT(A)- , Mumbai, 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,