DCIT CEN CIR 2, MUMBAI vs. GITANJALI INFRATECH LTD, MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा सद�य लेखा सद�य राजे�� राजे�� केकेकेके अनुसार अनुसार PER RAJENDRA, AM- लेखा लेखा सद�य सद�य राजे�� राजे�� अनुसार अनुसार Challenging the order dated 11.03.2013 of CIT(A)-36, Mumbai the Assessing Officer (AO) has filed the present appeal for the year under consideration.Assessee-company,engaged in the business related to infrastructure activities,filed its return of income on 30/09/2009 declaring income of Rs.7 lakhs.The case of the assessee was selected for scrutiny under CASS by issuing notice u/s.143(2) dated 23/08/2010.The AO completed the assessmnet u/s.143(3) of the Act,on 20/12/2011,assessing the income of the assessee at Rs.95.08 lakhs. 2.The solitary Ground of appeal is about allowing the expenses claimed by the assessee, under the head business expenditure.During the assessment proceedings,the AO found that it had received interest income from banks and bonds of Rs.1.83 crores, that against the said income it had claimed expenses of Rs.1.87 crores,that vide his order sheet noting dt.13.9 . 2011,he asked the assessee to explain as to why the said expenses should not be disallowed u/s.57(iii) of the Act.In its response, the assessee contended that it had received money from holding company from time to time that had been invested in various infrastructure projects, that the bank charges and other expenses were incurred for its business,that the activities of infrastructure had commenced, that the expenses were of revenue nature and had to be allowed.However,the AO was not convinced and held that it had made investments in six projects,that it had incurred personnel expenses of Rs.58.65 lakhs and office administrative expenses of Rs.19.34 lakhs against interest income of Rs.1.83 crores,that it had claimed business loss of Rs.88.08 lakhs,that most of the project were either on hold or at various stages of completion,that assessee should have capitalised personnel expenses and office

4729/M/13-Gitanjali Infratech administrative expenses to be added to the cost of the project.He referred to the case of Assam Bengal Cement Co.(27ITR34) and held that expenses incurred by it were to be capitalised,that during the year assessee had only interest income that was offered under the head income from other sources,that the expenses allowable against the same had to be incurred wholly and exclusively for earning the interest income, that it had paid interest to its holding company on the loan taken.Referring to provision of section 57(iii) he held that only interest payment made to the holding company to the tune of Rs.1,00,53,000/- was to be allowed,that it would not be eligible to claim personnel and administrative expenses against income from FDs and debentures.Finally, he disallowed the personnel expenses (Rs.58. 65 lakhs),office administrative expenses(Rs.19.34lakhs),depreciation- Rs.1.86 lakhs, interest on secured loan (Rs.2.56 lakhs) and bank charges (Rs.5.65 lakhs).The said amount was added to the total income of the assessee.

3.Aggrieved by the order of AO, the assessee preferred an appeal before the First Appellate Authority(FAA).Before him,the assessee produced a chart showing the nature of various expenses incurred by it and stated that it had set up the business, that most of the expenses related to development project undertaken by the company at Borivali and on land belonging to holding company,that the expenses incurred were revenue in nature.It relied upon the case of Saurashtra Cement (91ITR170). After considering the submission of the assessee and the assessment order the FAA passed one line order and same reads as under : “7.3 In view of the above this Ground of appeal is hereby allowed and the AO is directed to give effect accordingly.” 4.Before us,the Departmental Representative (DR) argued that the FAA had allowed the appeal without appreciating the facts.The Authorised Representative (AR)supported the order of the FAA.

We find that while deciding the appeal,the FAA has not given the reasons as to why the order of the AO was not justifiable.He simply reproduced the submissions of the assesee and put a seal of approval on it without assigning any reason.Such an order cannot be called a reasoned or speaking order.Provisions of section 250(6)are very clear and mandate that the FAA should pass an order that shows application of mind on his part.For allowing or disallowing the appeal of the assessee,he should give the reasons that can demonstrate as to why and how he arrived at a particular conclusion.As an adjudicating authority,he has to spell the reasons 2

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