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Income Tax Appellate Tribunal, DELHI BENCH: ‘A’ NEW DELHI
Before: SHRI B.P.JAIN & SHRI SUDHANSHU SRIVASTAVA
ITA 3582 & 3706/D/2013 Assessment year 2009-10 order dated 22.03.2013 passed by the Ld. Commissioner of Income Tax (Appeals)-V, New Delhi. The following grounds have been raised in this appeal:-
“1. On the facts and in the circumstances of the case the as well as in law the Ld CIT(A) has erred in restricting the disallowance of brought forward depreciation to Rs. 87,92,149/- as against Rs. 4,19,90,966/- made by the A.O.
2. The Ld CIT(A) ignored the findings recorded by the A.O. and the fact that the assessee did not set of the losses on account of depreciation against the income claimed exempt u/s 10B of the I.T. Act earned during the tax holiday period.
The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.”
1.1 has been preferred by the assessee on the following grounds:-
“The appellant seeks to take the following grounds in appeal, which are without prejudice to one another: A. The Id. CIT (Appeals) had wrongly disallowed unabsorbed depreciation pertaining to period prior to A.Y 2001-02 in the assessment year 2009-10. In each year, the depreciation of previous years is submerged in the deprecation of current year which can be allowed to carry forward & set off in subsequent years also.
B. The ld. CIT (Appeals) has failed to notice that the appellant has furnished all the relevant information, ITA 3582 & 3706/D/2013 Assessment year 2009-10 documents and clarifications related to commission payment of Rs.24,39,930/- which establish genuineness of its transaction and therefore, he has wrongly disallowed the said the business expenses. C. The ld. CIT (Appeals) has not given any finding as to why expenses incurred on agriculture have been disallowed. D. The Commissioner (Appeals) has failed to consider the submissions made by the appellants company.”
None was present for the assessee when the appeals were called out for hearing. A perusal of the entries in the order sheet shows that this appeal was first listed for hearing on 3rd of December 2013 and has been adjourned on five earlier occasions on the request of the assessee. It is also seen that the appeals were adjourned to 5th of June 2017 on 14/03/2017 and, thereafter, the assessee approached the Hon’ble President of the ITAT with an application for pre-ponement of the appeals and the same were pre-poned for hearing to 25th May, 2017 vide order of the Hon’ble President dated 17/04/2017. However, on 25th of May 2017 also the assessee requested an adjournment.
Thus, it is very much evident that the assessee is not interested in prosecuting the appeals and, therefore, we deem it fit to hear the appeals ex parte qua the assessee.
ITA 3582 & 3706/D/2013 Assessment year 2009-10 3. The brief facts of the case are that the assessee was carrying out the business of processing of woollen yarn and exporting the same during the year under consideration. The assessment was completed at an income of Rs. 16,86,617/- as against the returned loss of Rs. 7,83,630/- after making disallowance of Rs. 24,39,930/- on account of commission and Rs. 30,317/- on account of agricultural expenses and also disallowing to carry forward unabsorbed depreciation amounting to Rs. 4,19,90,666/-.
3.1 Aggrieved, the assessee preferred an appeal before the Ld. first appellate authority who gave partial relief in respect of unabsorbed depreciation but dismissed the assessee’s challenge to additions on account of commission and agriculture expenses.
3.2 Now, the assessee is in appeal against all the three issues before the ITAT whereas the Department is challenging the restriction of disallowance of brought forward depreciation.
The Ld. departmental representative read out extensively from the assessment order and submitted that the Ld. first appellate authority had erred in restricting the disallowance of brought forward depreciation by ignoring the findings recorded by the AO ITA 3582 & 3706/D/2013 Assessment year 2009-10 and the fact that the assessee had not set off the losses on account of depreciation against the income claimed exempt under section 10B of the Income Tax Act, 1961 (hereinafter called ‘the Act’) which was earned during the tax holiday period. On the dismissal of assessee’s grounds relating to commission expenses and agriculture expenses by the Ld. CIT (Appeals), the Ld. departmental representative placed reliance on the orders of the both the authorities below.
We have heard the Ld. departmental representative and have also perused the material on record. As far as the issue of set off of brought forward depreciation is concerned, it is seen that the AO has disallowed carry forward of depreciation pertaining to assessment year 2000-01 to assessment year 2009-10 as well as brought forward unabsorbed depreciation up to assessment year 01 – 02 amounting to Rs. 1,96,32,702/-. The Ld. CIT (Appeals) has held that brought forward unabsorbed depreciation of 87,92,149/- pertaining to the years prior to assessment year 2000 – 01 was not eligible to be carried forward and has allowed partial relief to the assessee . It is seen that the Ld. CIT (Appeals) has not appreciated the amendment to section 10B of the Act in its correct perspective. The issue is no longer res ITA 3582 & 3706/D/2013 Assessment year 2009-10 integra in view of the judgments of the Hon’ble Delhi High Court in the case of CIT vs Kei Industries Ltd. (dated 13 March, 2015) and CIT v. TEI Technologies (P) Ltd (ITA No. 347/2011 & 2067/2010) and for proper adjudication of this issue it is required that these two judgments of the Hon’ble jurisdictional High Court be considered prior to reaching a conclusion in this regard. However, it is seen that the relevant details are not before us and the determination of the quantum of unabsorbed depreciation to be allowed to be set off has to be necessarily done by the authorities below. Accordingly, we restore the issue of unabsorbed depreciation to the file of the Ld. CIT (Appeals) to be decided afresh after due examination of the facts and relevant details and also considering the ratio of the judgments of the Hon’ble High Court of Delhi in the cases of CIT vs Kei Industries Ltd. and CIT v. TEI Technologies (P) Ltd (supra) and after giving due opportunity to the assessee to present its case. We also direct the assessee to cooperate with the proceedings before the Ld. first appellate authority and to submit all the relevant details when required to do so failing which the Ld. first appellate authority will be at liberty to decide the issue on merits. Thus, the grounds of both the ITA 3582 & 3706/D/2013 Assessment year 2009-10 parties in respect of unabsorbed depreciation are allowed for statistical purposes and the appeal of the Department also stands allowed for statistical purposes.
5.1 The assessee has also challenged the disallowance of commission amounting to Rs. 24,39,930/-. The Ld. CIT (Appeals), while confirming the addition has noted that the AO had made the disallowance merely on the ground that there was no agreement between the parties. The Ld. CIT (Appeals) has also noted that the AO has not questioned the genuineness of the payments but has raised query on the genuineness of the services rendered by the persons receiving commission. Thereafter, the Ld. CIT (Appeals) has noted that the assessee was asked to file details of services rendered by the recipients of the commission, the rate at which commission was paid, the qualifications of the commission agents and the details of the sales booked through them so as to examine the genuineness of the claim pertaining to payment of commission. The Ld. CIT (Appeals) has further noted that the assessee did not submit the required information and, therefore, the disallowance was being confirmed. A perusal of the impugned order shows that the Ld. CIT ITA 3582 & 3706/D/2013 Assessment year 2009-10 (Appeals) had raised the query on 11/03/2013 requiring the assessee to furnish the details by 18/03/2013 which was not complied by the assessee. The impugned order was passed on 22/03/2013. Thus, the assessee did not have ample time to submit the details as required by the Ld. first appellate authority. Accordingly, in the interest of justice, we deem it fit to restore this issue also to the file of the Ld. CIT (Appeals) with the direction to examine it afresh after calling for the required details from the assessee and after giving due opportunity to the assessee. We also direct the assessee to cooperate with the proceedings before the Ld. first appellate authority and to submit all the relevant details when required to do so failing which the Ld. first appellate authority will be at liberty to decide the issue on merits.
Accordingly, this ground of the assessee also stands allowed for statistical purposes.
5.2 Similarly, the disallowance of Rs. 30,117/- on account of agriculture expenses has been confirmed by the Ld. CIT (Appeals) on the ground that nothing was brought on record by the assessee during the first appellate proceedings to rebut the observations of the AO. In the interest of justice, we deem it fit to restore this issue also ITA 3582 & 3706/D/2013 Assessment year 2009-10 to the file of the Ld. CIT (Appeals) with the direction to examine it afresh after calling for the required details from the assessee and after giving due opportunity to the assessee. We also direct the assessee to cooperate with the proceedings before the Ld. first appellate authority and to submit all the relevant details when required to do so failing which the Ld. first appellate authority will be at liberty to decide the issue on merits. Accordingly, this ground of the assessee also stands allowed for statistical purposes.
5.3 Thus, the assessee’s appeal stands allowed for statistical purposes.
In the final result, both the appeals are stand allowed for statistical purposes. Order is pronounced in the open court on 27th December, 2017.