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Income Tax Appellate Tribunal, DELHI BENCH “E”, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI PRASHANT MAHARISHI
Date of Hearing : 23-06-2016 Date of Order : 01-07-2016 ORDER PER H.S. SIDHU : JM
The Assessee has filed these two Appeals against the separate impugned Orders dated 22.1.2014 & 27.1.2014 of Ld. CIT(A)-XII, New Delhi pertaining to assessment year 2007-08. Since these appeals pertains to same assessment year i.e. 2007-08 of the same assessee, hence, these appeals were heard together and are being disposed of by this common order for the sake of convenience.
The grounds raised in (AY 2007-08) read as under:-
1(i). That on the facts and circumstances of the case, the CIT(A) was not justified in confirming the order of the Assessing Officer regarding closure of the business without appreciating facts and written submissions of the appellant.
(ii) That finding about closure. of the business is illegal, arbitrary and without appreciating the facts and legal principles.
2(i) That the claim of expenses were in respect of the existing business and there being no dispute about the genuineness of the claim, orders of the lower authorities in rejecting the claim are without any legal and factual basis.
(ii) That all the claim of expenses are relating to year under reference and claim being in accordance with mercantile system of accounting, there is no ground or basis for disallowance of same.
(iii) That the Assessing Officer has even disallowed the expenses which are of statutory and incidental nature.
3(i). That on the facts and circumstances of the case, the Assessing Officer was not justified in considering interest income which is incidental to the business activities as income from other sources as against the claim of the assessee that same is part of business and assessable under the head business.
(ii) That the interest being on in relation to bank guarantees and margin money, the same is directly related to and incidental to business and as such there is no ground or basis for considering the interest under the head income from other sources.
(iii) That orders of the lower authorities are in total disregard to past history of the case.
4. That orders of the lower authorities are not justified on facts and the same are bad in law.”
The brief facts of the case are that the assessee filed its return declaring loss of Rs. 97,95,818/- under the head ‘Business & Profession’ on 31.10.2007. The same was processed and an intimation u/s. 143(1) was issued on 1.3.2009. Thereafter the case was selected for compulsory scrutiny. Notice u/s. 143(2) of the Income Tax Act, 1961 (hereinafter referred as the Act) was issued on 10.4.2008 which was duly served upon the assessee. Notice u/s. 142(1) alongwith detailed questionnaire was issued on 28.4.2009 which was also duly served on the assessee. In response thereto, Assessee’s Authorised Representative attended the assessment proceedings from time to time and the case was discussed and written replies were furnished to the AO. Thereafter, the AO completed the assessment u/s. 143(3) of the Act vide his 3 order dated 27.11.2009 and loss allowed to be carried forward at Rs. 2,35,50,357/-.
Aggrieved by the aforesaid order of the Assessing Officer dated 27.11.2009, assessee filed an appeal before the Ld. First Appellate Authority, who vide impugned Order dated 22.1.2014 has dismissed the appeal of the Assessee.
Aggrieved with the aforesaid finding of the Ld. CIT(A), Assessee is in appeal before the Tribunal.
At the time of hearing, ld. Counsel of the assessee stated that the issues involved in ground Nos.1, 2 & 3 have already been adjudicated and decided by the ITAT, Delhi, SMC-2 Bench vide its order dated 21.9.2015 passed in & 2106/Del/2014 (A.yrs. 2008-09 & 2009-10) and ITA No. 2077 & 2078/Del/2015 (A.yrs. 2010-11 & 2011-12) vide para no. 6 at page no. 7 & 8. He further stated that the Bench has set aside the issue in dispute to the AO to decide the issue afresh, under the law, after giving adequate opportunity of being heard to the assessee. He has also filed the copy of the aforesaid Tribunal’s order dated 21.9.2015.
On the contrary, Ld. DR relied upon the order passed by the Revenue authorities.
We have heard both the parties and perused the records especially the orders of the revenue authorities and the order of the Tribunal’s order dated 21.9.2015. For the sake of convenience, we are reproducing the relevant portion of the Tribunal’s order dated 21.9.2015 as under:-
“6. After hearing both the parties and perusing the aforesaid finding of the Ld. CIT(A), I find considerable cogency in the assessee’s submissions made before the Ld. CIT(A) that the assessee is a partnership firm and income under the head business has been computed at NIL and there is no case of any tax liability. The AO has made disallowance of claim of expenses on the ground that no business activities has been carried out during the year under reference. I also find from the record that the assessee is engaged in the business of lotteries and the business has never been closed or discontinued, as stated by the Ld.
Counsel of the assessee. The firm is still in existence and maintaining regular establishment and infrastructure. The lottery business is being carried out on in terms of agreement with Nagaland and Meghalaya Authorities. However, the business was discontinued by these authorities on the technical reasons and dispute which is still pending in arbitration. I find that the assessee has a regular establishment and incurred various expenses as a part of running business clearly establish that business has neither being closed or discontinued by the assessee.
In my view it is an established legal position that merely on the ground that there is no business receipt during the year, there cannot be any presumption about closure of the business. In view of the above, I note that neither the AO nor the Ld. CIT(A) has appreciated the facts and evidence filed by the Assessee before them which in my opinion, needs to be considered by the AO. In the interest of justice, we remit back the issues in dispute to the file of the AO with the directions to consider the written submission filed by the assessee before the Ld. CIT(A) and decide the case afresh, under the law, after giving adequate opportunity of being heard to the assessee.
Assessee is also directed to cooperate with the AO and filed all the evidences / documents to the AO to substantiate its case.”
After perusing the aforesaid finding, we are of the considered view that the on similar grounds, the issues were set aside to the file of the AO, by the Tribunal for fresh adjudication, after giving adequate opportunity of being heard to the assessee. Therefore, respectfully, following the Coordinate Bench decision of the Tribunal, as aforesaid, we are setting aside the issues involved in ground no. 1, 2 & 3 to the file of the AO for fresh adjudication, after giving adequate opportunity of being heard to the assessee.
In the result, the (AY 2007-08) is allowed for statistical purposes.
This appeal preferred by the Assessee against the order of the Ld. CIT(A) dated 27.1.2014 confirming the action of the AO wherein the AO passed the order u/s. 154 of the Act on 7.10.2010. He has rectified a mistake which is according to him apparent from record.
The purported mistake is setting off of carry forward business loss of Rs. 2,37,88,905/- with assessed income from other sources of Rs. 2,38,548/-. Consequently, the AO disallowed the set off of Rs. 2,38,548/- from income from other sources. On appeal before the Ld. CIT(A), Ld. CIT(A) dismissed the Appeal of the Assessee stating that interest has been earned on margin money against the issuance of Bank Guarantee and therefore, such interest income is business income and the same is not assessable as income from other sources and, therefore, carry forward business loss of Rs. 2,38,548/- originally allowed to the assessee is a contentious issue, which cannot be rectified u/s. 154 of the Act.
The Grounds of Appeal raised by the Assessee read as under:-
“1(i) That on the facts and circumstances of the case, the CIT(A) was not justified in confirming order u/s. 154 passed by the Assessing Officer and in disallowing claim of set off of carry forward business loss.
(ii) That there is no mistake in the original order of the AO as the set off was allowed on the basis of facts of the case, past history and relevant legal principles.
(iii) That in any case, the issue under reference is of debatable nature and orders of the AO and CIT(A) are not sustainable on facts and under the law.”
The Ld. Authorised Representative of the Assessee submitted that when there are two views on a particular aspect of taxation, the provisions of Section 154 cannot be invoked. He further submitted that the interest income on FDR given for Bank Guarantee is chargeable to tax as business income and not income from other sources and hence, this being a contentious issue, therefore, the provisions of Section 154 of the Act cannot be applied.
Ld. Departmental Representative relied upon the orders of the authorities below.
We have carefully considered the rival contentions.
Admittedly, where the Bank interest on Fixed Deposit which are pledged for Performance Guarantee is chargeable under the head ‘business income’ is supported by the decision of the Jurisdictional High Court in the case of CIT vs. Jaypee DSC Ventures Ltd. (2011)
335 ITR 132 (Del.). There are other contrary decisions also available and therefore, the issue becomes debatable with respect to the taxation of such interest income. When the issue is debatable the provisions of Section 154 cannot be invoked. The provisions of Section 154 can be invoked when there is apparent mistake which is glaring and patent. In the present case, we do not find any such mistake and, therefore, the Ld. CIT(A) has erred in upholding the provisions of section 154 invoked by the AO. In the result, we reverse the finding of the Ld. CIT(A) and cancel the order passed u/s. 154 dated 7.10.2010. In the result, the Appeal filed by the Assessee stands allowed.
In the result, the Assessee’s Appeal being (AY 2007-08) stands allowed for statistical purposes and (AY 2007-08) stand allowed.
Order pronounced in the Open Court on 01/07/2016.