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Facts
The assessee, Hindon River Mills Ltd., appealed against orders for three assessment years (2007-08, 2008-09, 2009-10) concerning the classification of various incomes (interest, rent, written-back provisions) as 'income from other sources' instead of 'business income,' and the disallowance of revenue expenses, depreciation, and short-term capital loss. The assessee contended its business was not closed, only manufacturing activities were temporarily discontinued, impacting income classification and expense allowability.
Held
The tribunal noted the assessee's consistent failure to appear or present arguments despite numerous opportunities, demonstrating 'proverbial neglect' and a 'defiant attitude.' Given the absence of any defects pointed out or rebuttals made against the CIT(A)'s findings by the assessee, the tribunal affirmed the First Appellate Order.
Key Issues
The primary issues were the appropriate head of income for interest, rent, and written-back provisions (business income vs. other sources/house property) and the allowability of business expenses, depreciation, and capital loss when manufacturing operations are temporarily suspended but the business is not closed. A key procedural issue was the assessee's non-appearance.
Sections Cited
41(1), 43B
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Income Tax Appellate Tribunal, DELHI BENCH: ‘C’: NEW DELHI
Before: SHRI PRADIP KUMAR KEDIA & SHRI SUDHIR PAREEK
heard together and are being disposed off by this common order.
The grounds of appeal
raised by the assessee read as under: ITA No.- 95/Del/2011 “1. The Hon'ble Commissioner of Income Tax (Appeals) (hereinafter referred as "CIT (A)" has erred in confirming the order of the learned assessing officer in regard to taxing Interest Income of Rs.96,004/-Misc Income of Rs.35,37,337/- as well as excess provisions/liabilities written back of Rs.11,62,934/-as Income from other sources instead of business Income offered by the appellant. Such treatment is done in back ground that no business activities have been carried out during the year under consideration. It is therefore prayed that necessary directions should be given in this regard.
2. The Hon'ble CIT (A) has erred in confirming the order of the learned assessing, officer of restricting the allowance of expenses to the extent of Rs.5,43,610/-instead of the claim of revenue expenses to the extent of Rs.1,70,61,495/-. It is therefore prayed that all revenue expenses should be allowed in full.
3. The Hon'ble CIT (A) has erred in confirming the order of the learned assessing officer disallowing the depreciation claim of Rs.93,03,530/- in respect of the fixed assets. Such disallowance is made on the pretext that no production activities were carried out and accordingly, fixed assets are not used during the year and therefore, depreciation claim should not be allowed.
4. The Hon'ble CIT (A) has erred in confirming the order of the learned assessing officer in taxing rent receipts of Rs.77,28,585/- under the head "Income from other sources" as against "Income from house property" assessed by the learned assessing officer and as against "Income from business" offered by the appellant. The Hon'ble CIT (A) has failed to appreciate that such rental Income is generated for the short span of the period in which production activities are not carried out and such Income being for temporary period cannot be taxed either under Income from House Property as well as under residual category "Income from other sources".
5. Without prejudice to ground no.1, it is submitted that excess provisions/ liabilities written back should be taxed under Section Page 2 of 7 .- 95/Del/2011 and others Hindon River Mills Ltd. 41 (1) of Income Tax Act, 1961 as business Income only. The Hon'ble CIT (A) has failed to appreciate that such Income can not be taxed under the head "Income from other Sources". It is therefore prayed that necessary directions should be given in this regard. 6. Your appellant craves to add, alter, or amend any of the grounds of appeal on or before the date of hearing of appeal.”
ITA No.- 527/Del/2012 “1. The Hon'ble CIT (A) has erred in confirming the order of the learned assessing officer in taxing rent receipts of Rs.1.30,50,458/ under the head "Income from other sources" as against "Income from house property assessed by the learned assessing officer and as against "Income from business offered by the appellant. The Hon'ble CIT (A) has failed to appreciate that such rental Income is generated for the short span of the period in which production activities are not carried out and such Income being for temporary period can not be taxed either under Income from House Property as well as under residual category "Income from other sources". It is therefore prayed that necessary directions should be given in this regard.
The Hon'ble CIT (A) has erred in confirming the order of the learned assessing officer of disallowing the revenue expenses to the extent of Rs.53,91,883/- on the pretext that the appellant has not carried out any business during the year. It is submitted that the Business has never been closed but only manufacturing activities were discontinued for a temporary period. It is therefore prayed that all revenue expenses should be allowed in full.
The Hon'ble CIT (A) has erred in confirming the order of the learned assessing officer disallowing the depreciation claim of Rs.76,88,960/- in respect of the fixed assets. Such disallowance is made on the pretext that no production activities were carried out and accordingly, fixed assets were not used during the year and therefore, depreciation claim should not be allowed. It is submitted that the Business has never been closed but only manufacturing activities were discontinued for a temporary period. It is therefore prayed that necessary directions should be given in this regard.
The Hon'ble CIT (A) has erred in confirming the order of the learned assessing officer disallowing the Short Term Capital Loss on destruction of Assets amounting to Rs. 1,23,49,457/-. Such disallowance is done in view of the Hon'ble CIT (A) that proper
Page 3 of 7 .- 95/Del/2011 and others Hindon River Mills Ltd. details were not filed by the Appellant. However, all the details were duly filed during the Assessment proceedings. It is therefore prayed that necessary directions should be given in this regard. 5. Your appellant craves to add, alter, or amend any of the grounds of appeal on or before the date of hearing of appeal.
ITA No.- 4578/Del/2013 “1. That, in view of the facts and circumstances of the case, the CIT(A) has erred in law and on facts in enhancing the assessed income of the assess company without giving any notice to the assessee as required under the law.
That, the enhancement made by the CIT(A) by treating the lease income as income from other sources is illegal, bad in law and without jurisdiction.
The Hon'ble Commissioner of Income Tax (Appeals) (hereinafter referred as "CIT (A)" has erred in confirming the order of the learned assessing treating the Loss from Business as Loss from Other Sources amounting to Rs. 4,20,92,389/- on the pretext that no business has been carried on. It is submitted that the Business has never been closed but only manufacturing activities were discontinued for a temporary period. It is therefore prayed that necessary directions should be given in this regard.
That without prejudice in view of the facts and circumstances of the case, the CIT(A) has erred in not allowing deduction of Rs. 3,95,94,292/- being interest paid to bank and the same is allowable is view of provision of 43B.
The Hon'ble CII (A) has erred in confirming the order of the learned assessing officer disallowing the depreciation claim of Rs. 14,66,553/ in respect of the fixed assets. Such disallowance is made on the pretext that no production activities were carried out and accordingly, fixed assets are not used during the year and therefore, depreciation claim should not be allowed. It is submitted that the Business has never been closed but only manufacturing activities were discontinued for a temporary period. It is therefore prayed that all revenue expenses should be allowed in full.
The Hon'ble CIT (A) has erred in confirming the order of the learned assessing officer disallowing the revenue expenses to the extent of Rs. 20,74,375/- claimed in the return of Income on the Page 4 of 7 .- 95/Del/2011 and others Hindon River Mills Ltd. pretext that no Business activities have been carried out during the year. It is submitted that the Business has never been closed but only manufacturing activities were discontinued for a temporary period. It is therefore prayed that all revenue expenses should be allowed in full. 7. Your appellant craves to add, alter, or amend any of the grounds of appeal on or before the date of hearing of appeal.”
As per the case records, it is ostensible that unempteen opportunities have been given to the assessee without any avail.
The Assessee continues to remain in slumber. None has appeared on behalf of the assessee on any occasion. Having regard to incessant delays by repeated adjournments and considering the proverbial neglect shown by the assessee in pursuing the appeal and defiant attitude, the captioned matters are proceeded ex parte.
At the time of hearing, the Ld. CIT(DR) for the Revenue supported the order of AO as well as First Appellate Order. The Ld. CIT(DR) submitted that the first appellate order passed by the CIT(A) is quite a speaking order, which takes into account all the relevant facts, while deciding the appeal and therefore does not call for any interference.
Page 5 of 7 .- 95/Del/2011 and others Hindon River Mills Ltd. 6. We have perused the First Appellate Order and the Assessment Order. It is observed that the CIT(A) has examined the issues in controversy as raised by the assessee. In the absence of any defects pointed out on behalf of the assessee, we see no perceptible reason to interference with the First Appellate Order. We thus affirm the First Appellate Order in the absence of any attempt to rebut the findings of the CIT(A) by the assessee.
In the result, all captioned appeals are dismissed.
Order dictated and pronounced in the open Court on 11/11/2024.
Sd/- Sd/- [SUDHIR PAREEK] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 11/11/2024 POOJA