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Income Tax Appellate Tribunal, DELHI BENCH “SMC, NEW DELHI
Before: SHRI H.S. SIDHU
ORDER Assessee has filed this Appeal against the impugned Order dated 01.08.2016 passed by the Ld. CIT(A)-35, New Delhi relevant to assessment year 2013-14 on the following grounds:-
1. That the AO was not justified in making addition of Rs. 2,65,000/- by disallowing 1/2th out of the total expenses Rs. 5,31,200/- incurred by the assessee under various heads in normal course of business, on the basis of no business income. A list of expenses incurred by the assessee in various heads is also enclosed in Appendix- A. Out of them some expenses like insurance, salary to driver, accounting charges is fixed in nature cannot be denied, so the same may be allowed.
2. The assessee has occurred business in different financial year. A list of occurred business is enclosed in Appendix-B.
That on the facts and in the circumstances of the present case the charging interest u/s. 234B is illegal, arbitrary and against the settled law on the subject.
4. That the appellant craves leave to reserve to itself the right to add, alter amend, substitute and vary any ground of appeal at and before the time of hearing.
In view of the above, it is therefore, prayed that both the above grounds of the appellant may kindly be accepted and additions deleted.”
The brief facts of the case are that the assessee filed its return of income on 18.09.2013 declaring Rs. 2,23,939/- as income. The AO disallowed an amount of Rs. 2,65,600/- which make 50% of total expenses incurred by the assessee under various heads which is essential in normal course of business on the basis of no business income occurred by the assessee. Accordingly, the assessment u/s. 143(3) of the I.T. Act was completed by the AO by passing the assessment order on 28.1.2016 and assessed the income at Rs. 5,65,420/- vide order dated 28.01.2016. 2
3. Against the aforesaid assessment, the assesee appealed before the Ld. CIT(A), who vide his impugned order dated 01.08.2016 dismissed the appeal of the assessee by upholding the action of the AO.
Aggrieved with the order of the Ld. CIT(A), Assessee is in appeal before the Tribunal.
At the time of hearing, Ld. Counsel of the assessee has filed a small Paper Book containing pages 1 to 18 having the copy of ITR acknowledgement AY 2013-14 and its Computation of Total Income, Balance sheet and Schedules, ITR acknowledgement AY 2012-13 and its computation of total income, Balance sheet & Schedules.
He also filed a chart mentioning therein that in preceding assessment year i.e. 2012-13 no disallowance was made by the Department. Therefore, he requested that following the consistent view of the preceding assessment year i.e. AY 2012-13, the disallowance in dispute may be deleted and appeal of the assessee may be allowed accordingly. To support his contention, he filed the copies of the following decisions and relied thereupon. i) VSP Stores Pvt. Ltd. vs. DCIT (ITA no.
4613/Del/2011) ii) Kesha Appliancse P. Ltd. ITO (ITA No.
2715/Del/2016).
6. On the other hand, Ld. DR relied upon the order of the authorities below and requested that the same may be upheld.
I have heard both the parties and perused the records available with me especially the orders of the revenue authorities and the Paper Book containing pages 1 to 18 having the copy of ITR acknowledgement AY 2013-14 and its Computation of Total Income, Balance sheet and Schedules, ITR acknowledgement AY 2012-13 and its computation of total income, Balance sheet & Schedules and the Comparative Chart for AY 2012-13 & 2013-14. I note that assessee is engaged in the business of automobile consultancy and advisory services and the existence of business is not in dispute.
The books of accounts of the assessee are duly audited u/s. 44AB of the Act and the return of income for AY 2012-13 was accepted u/s. 143(1) of the Act. I further note that genuineness of the expenses is not in dispute and the expenses have been incurred to keep the business running. The AO has himself accepted 50% of the expenses and as such there is no ground or justification for making 50% adhoc disallowance or any allegation that business is not in existence. For the sake of convenience, I am reproducing hereunder the Comparative Chart submitted by the assessee’s counsel:
COMPARATIVE CHART Particulars Assessment Year Assessment Year 2013-14 2012-13 Income NIL NIL Expenses Rs. 5,31,211/- Rs. 6,99,808/- Disallowance Adhoc 50% Rs. 2,65,000/- No disallowance.
7.1 After perusing the aforesaid Comparative Chart, I find that AO in the preceding year 2012-13 has not made any disallowance.
Therefore, following the consistent view adopted by the Department, in the preceding assessment year as aforesaid, the adhoc addition made by the AO and upheld by the Ld. CIT(A) to the extent of Rs. 2,65,000/- in the present assessment year 2013-14 is hereby deleted. My aforesaid view is fortified by the decision of the ITAT, ‘H’ Bench, New Delhi dated 30.03.2016 passed in the case of VSP Stores Private Limited vs. DCIT wherein, the Tribunal has held as under:-
“5. We have heard the rival submissions and perused the material on record. It is a fact that the assessee has not shown any receipt from business or profession during the year but claimed expenses in the nature of Establishment Expenses, Administrative and General Expenses, Financial Charges and the Depreciation under the head profit and gains of the Business or profession. Before us, the assessee has submitted detail of expenses of similar nature incurred from assessment year
2002-03 to 2014-15. The expenses of similar nature have been allowed to the assessee in earlier and subsequent years and the claim of the assessee has even been allowed in the scrutiny assessment completed in assessment year 2002-03. Thus, we are of the considered opinion that the principle of consistency requires that the assessee should have been allowed the similar expenses claimed under the head profit and gains from business or profession in the year under consideration also. The jurisdictional High Court in the case of CIT versus Dalmia Promoters Developers
Private Limited (supra) has held that where there are no material change in facts in subsequent year, view taken for earlier years would continue on principle of consistency.
The relevant finding of the Hon’ble High Court is as under:
“7. The question in the above backdrop is whether the Tribunal was justified in upholding the order passed by the CIT(A) on the principles of consistency.
In Radhasoami Satsang’s case (supra), the apex Court declared that although the principles of res judicata do not apply to IT proceedings, each assessment year being a unit by itself, yet in cases, where a fundamental aspect permeating through different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it may not be appropriate to allow that position to be changed in a subsequent year. Their Lordships extracted with approval the following passage from Hoystead vs. Commr. of Taxation (1926)
AC 155 (PC) :
"Parties are not permitted to begin fresh litigations because of the view they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the Court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted, and there is abundant authority reiterating that principle."
8. The Court reiterated the following observation made by it in Parashuram Pottery
Works Co. Ltd. vs. ITO. 1977 CTR (SC) 32 :
(1977) 106 ITR 1 (SC) :
"At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity."
9. Following the above decisions, this Court
has in A.R.J. Security Printers’ case (supra) and CIT vs. Neo Poly Pack (P) Ltd. (2000) 245
ITR 492 (Del), held that even when the doctrine of res judicata does not apply to income-tax proceedings, where an issue has been decided consistently in a particular manner for earlier assessment years, the same view should prevail even during the subsequent years unless there is a material change in the facts. The law is, therefore, fairly well settled. For rejecting the view taken for the earlier assessment years, there must be a material change in the fact situation.
There is no gainsaying that the previous view will have no application even in cases where the law itself has undergone a change but before an earlier view can be upset or digressed from, one of the two must be demonstrated namely a change in the fact situation or a material change in law whether enacted or declared by the Supreme Court.
The CIT(A) and the Tribunal have in the instant case correctly held that there was no change in the fact situation. The income earned on fixed deposits for the previous three assessment years was, in the context of the very same facts and circumstances as are relevant for the year under consideration, treated as business income of the assessee. In the absence of a change in facts or any Addl. input there was no compelling reason for taking a different view. The CIT(A) and the Tribunal were, therefore, justified in holding that the view taken for the earlier assessment years continued to be applicable even for the year under consideration.”
Further, from the details filed for the earlier and subsequent years, we find that the assessee was engaged in professional activity and maintained infrastructure in the form of office space and also incurred travelling expenses. It is quite possible that the assessee may not have been able to bring business or professional receipt during the year, however, he was required to maintain the office setup and other infrastructure to remain in the profession. The fact that assessee was engaged in the profession is evident from the details filed for subsequent years as the assessee has shown receipt from professional activity in assessment year 2012-13 and 2014-15. In the case of CIT versus Rajendra Prasad Moody (supra), while deciding the issue for deduction for expenses under the head income from other sources, the Hon’ble court has held that what section 57(iii) requires is that the expenditure must be laid out or expended wholly and exclusively for the purpose of making or earning income and the section does not require that this purpose must be fulfilled in order to qualify the expenditure for deduction and it does not say that the expenditure shall be deductible only if any income is made or earned. The same principle applies for allowability of deduction of expenditure under the head profit and gains of business. Thus in our considered view the expenses of Rs. 12,51,610/- debited by the assessee in the profit and loss account and claimed under the head profit and gains of the business are allowable both on the principle up consistency as well as business expediency. Accordingly the findings of the Ld. Commissioner of Income-tax( Appeals) on the issue in dispute are reversed.
7. The Assessing Officer has also disallowed the depreciation of Rs. 94,330/-on building on the ground that the building was let out and the rental income from the same was claimed under the head income from house property and thus necessary deduction has already been allowed under that head. Before the Assessing Officer, the assessee submitted that depreciation was claimed on the building which was for the personal use of the assessee, notwithstanding the fact that the substantial portion of the building was rented out and the standard deduction under section 24 was claimed and therefore the depreciation claimed in the circumstances merits to be suitably adjusted vis-a-vis the claim preferred. However the Assessing Officer disallowed the entire depreciation of Rs. 94,330/-. The Ld. Commissioner of Income- tax( Appeals) have noted in his order that there was no serious objections from the assessee for the proposed action of the Assessing Officer and even no arguments were made before him in appellate proceedings. The disallowance of depreciation was accordingly confirmed by the Ld. Commissioner of Income-tax( Appeals). However before us, the Ld. Authorised Representative disputed the findings recorded by the Ld. Commissioner of Income-tax( Appeals) that the assessee has not objected in respect of the disallowance before either the AO or the CIT (A). Without going into the dispute as whether the assessee objected or not, it is clear that part of the building was let out and therefore the depreciation corresponding to that part cannot be allowed to the assessee. In subsection (2) of section 38 of the Act, it is clearly laid down that where any building is not exclusively used for the purpose of business or profession the deductions under clause (ii) of subsection (1) of section 32 shall be restricted to fair proportionate part thereof which the Assessing Officer may determine having regard to the use of such building for the purpose of business or profession. Thus in view of the clear provisions of the Act in this regard, we restore the issue to the file of the Assessing Officer and direct the Assessing officer to allow the depreciation in accordance with the provisions of section 38(2) of the Act. Accordingly the ground No 1 is allowed partly for statistical purpose and ground No. 2 of the appeal is allowed……….”
Keeping in view of the facts and circumstances of the case and respectfully following the aforesaid precedent, I delete the addition in dispute and allow the grounds raised by the assessee.
In the result, the Appeal filed by the Assessee stands allowed.
Order pronounced on 20/06/2018.