AKHAND ASSOCIATES,SIKAR vs. ITO, WARD-1, SIKAR, SIKAR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. No. 386/JP/2022 fu/kZkj.k o"kZ@Assessment Years : 2012-13 cuke Akhand Associates ITO Saini Mandir Opp. S. K. Vs. Ward -1, Sikar Collage, Shekhpura Road, Sikar LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AASFA 7936 M vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Sandeep Jhanwar (C.A.) jktLo dh vksj ls@ Revenue by : Smt Monisha Chaudhary (Addl. CIT) a lquokbZ dh rkjh[k@ Date of Hearing : 14/03/2023 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 23/03/2023 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal is filed by assessee and is arising out of the order of the National Faceless Appeal Centre, Delhi dated 29/09/2022 [here in after (Ld. NFAC/CIT(A)] for assessment year 2012-13, which in turn arise from the order of the ITO Ward 1, Sikar dated 29.12.2017.

2 ITA No. 386/JP/2022 Akhand Associates vs. ITO, Ward 1, Sikar

“1. Under the facts and circumstances of the case, the ld. CIT(A) has erred in not quashing the reopening of the case and the consequential assessment order passed under section 147/143(3), which is bad in law. 2. Under the facts & circumstances of the case the ld. CIT(A) has erred in confirming the addition of Rs. 6,74,000/- made by the Assessing Officer, Ward 1, Sikar by treating said amount as capital expenditure/loss instead of revenue expenditure which was deposited by assessee to department of mines for taking contract of royalty recovery and added the same in total income of the assessee. 3. The assessee craves right to add, alter or amend any of the grounds of appeal.”

the information available with the Department, the proceedings u/s

147 of the IT. Act, 1961 were initiated after recording reasons by

the AO. Notice u/s 148 of the Act was issued on 27.02.2017 and

duly served. The reassessment u/s 143(3)/147 was completed on

29.12.2017 at an assessed income of Rs. 1,09,500/- against

returned loss of Rs. 5,64,503/-. While completing the assessment

the ld. AO made an addition of Rs. 6,74,000/- being the amount

paid to mining department, while doing so ld. AO stated that as the

assessee has not earned any income against this payment and

thus, the said some was treated as capital expenditure.

before the ld CIT(A) for the addition made by the ld. AO. The

3 ITA No. 386/JP/2022 Akhand Associates vs. ITO, Ward 1, Sikar

relevant findings is recorded by the ld. CIT(A) in para 6 of his order

and the same is reiterated here in below:

“6. I have considered the written submission of the appellant and the order of AO in detail. Having respectfully considered the judgments of various courts, in this case, the fact remains that the appellant is trying to make it a case of foreseeable losses whereas no such precedent or subsequent year contract is made available in the appellant's case. The appellant merely deposited a sum and it is not known whether the same was subsequently refunded or adjusted against subsequent contracts, if any, with the mining department. There is also no detail of forfeiture of amount by the Department of Mines. There is no copy of contract and the reply of the appellant after several opportunities appears to be vague. The primary onus was on the appellant to explain the valid reasons for not making the addition/disallowance of Rs.6,74,000/- as capital expenditure. In the given circumstances, both at the assessment stage despite opportunities provided to furnish satisfactory supporting documents and now at the appellate stage, the appellant chose to remain silent and has failed to discharge the onus of justifying the claim of capital expenditure of Rs.6,74,000/- with any documentary evidence, thus, it is held that the AO reasonably made the disallowance. The same is hereby confirmed. Ground No. 2 of the appeal is dismissed.”

filed before the ld. CIT(A), this appeal is filed before us challenging

the finding of the lower authorities, as per the grounds raised by the

assessee at para 2 above. In support of the grounds so raised the

ld. AR of the assessee submitted an application praying to admit

the additional evidence. The prayer of the assessee is reiterated

here in below:

“The present appeal is filed against the appeal order passed u/s 250 of the Income Tax Act, 1961 (the Act) dated 29.09.2022. In the grounds of appeal, three grounds of appeal were raised, of which ground No.1 & 2

4 ITA No. 386/JP/2022 Akhand Associates vs. ITO, Ward 1, Sikar

are against the specific addition made and ground no. 3 is general in nature. In ground no. 1 & 2 of the appeal, the appellant has challenged the addition of Rs.6,74,000/- in respect of disallowance of loss by treating it to be capital loss in nature in the year under consideration. The loss represents forfeiture of pre deposit amount for not commencing royalty collection contract. We would like to mention here that the assessee could not submit the copy of agreement for collection of royalty before lower authorities. The ld. CIT(A) confirmed the addition of ld. AO by mentioning that the assessee has not produced copy of contract with mining department. Therefore it is now thought fit to submit copy of agreement for collection of royalty as additional evidences vide this letter. The said additional evidences are necessary to understand the exact facts and circumstances of the case and its lawful adjudication. We thus request your Honour to kindly admit the same and oblige. Power to admit additional evidence Further, it is settled principle of law that your Honour has the power to admit additional evidence filed by the appellant, if the appellant has sufficient cause for not producing the same during assessment proceedings, to advance the cause of justice. Reliance in this regard is placed on the following: • Hon'ble Madhya Pradesh High Court in case of CIT vs. Shiya Dawoodi Bohara Jamat [2008] 170 Taxman 293 held that Whether every appellant in appeal has a right to file additionalevidence in support of its case and if appellate authority feels that additionalevidence is material for deciding controversy involved in that case, then in interest of justice, same can always be allowed to be filed even at appellate stage - Held, yes. • Hon'ble Delhi High Court in the case of Chandra Kant Chanubhai Patel v. CIT [2011] (13 taxmann.com 131) held that where fresh evidence produced by appellant was without any blemish, then in order to advance cause of justice, evidence was to be admitted. Thus, in view of the above, we request your Honour to kindly admit the additional evidence produced by the appellant as it is well within the jurisdiction of your Honour. We may further submit that this additional evidence goes to the root of the matter and is necessary to examine the issue. Thus, it is requested to admit the same in the interest of natural justice.”

Since, the agreement is in addition to the challan of payment made

by the assessee and as the ld. CIT(A) while rendering the judgment

5 ITA No. 386/JP/2022 Akhand Associates vs. ITO, Ward 1, Sikar hold a view that the assessee has not submitted copy of contract /

agreement vide para 6 of his order the same is produced in support

of the challan of payment already placed before the lower authority.

In addition to the above contention / evidences the ld. AR of the

assessee also submitted that the cost of executing the collection of

royalty was higher then the cost of paying the fees to the state

government. The ld. AR of the assessee further submitted that the

ld. AO has called for the details from the mining department u/s.

133(6) of the Act which has also been submitted by the mining

department vide letter dated 16.11.2019. All these evidences

makes it clear that the assessee has paid the royalty collection

contract amount to state government which is not in the nature of

capital or in the enduring benefit to the assessee. The expenditure

thus, is merely a commitment fees which is not receivable in future

or not adjustable in future benefit. Therefore, the said amount paid

is nothing but a business decision to reduce the loss by paying the

commitment fees rather incurring more expenditure in arranging

the collection work at the site. Based on these set of argument the

ld. AR submitted that the finding of the lower authorities are against

the facts placed on record. To support the contentions so raised ld.

AR of the assessee submitted following documents:

6 ITA No. 386/JP/2022 Akhand Associates vs. ITO, Ward 1, Sikar

S. No. Particular Page No. 1 Copy of royalty collection agreement 01-05 entered into between assessee and department of Mines and Geology, Rajasthan 2 Copy of Ledger account Royalty 06 Installment, Balia 3 Copy of acknowledgement receipts of 07-11 installment on various dates 4 Copy of bank statement showing 12-13 payment of installment on various dates 5 Copy of cash book showing payment of 14-15 installment on various dates.

authorities. The ld. Sr. Dr. also submitted that the assessee has not

appeared before the ld. CIT(A) even though the opportunity were

granted to the assessee and has not submitted the documents

required so the prayer for admission of additional evidence is also

not appropriate. The assessee has not clarified before the lower

authority about the terms of the contract of payment of the Royalty.

Based on these arguments she has supported the orders of the

lower authority.

placed on record. The ld. AR of the assessee submitted the copy of

the challans paid to the mining department. The head under which

7 ITA No. 386/JP/2022 Akhand Associates vs. ITO, Ward 1, Sikar the money paid is neither refundable to the assessee nor

adjustable against the future receipt to the assessee. Even the

mining department has confirmed the receipt of the payment

challan by the assessee and this information was collected by the

AO u/s. 133(6) of the Act. The ld. CIT(A) has contended that the

expenditure incurred by the assessee is capital expenditure. The

observation so arrived is without any basis or reasoning by the ld.

CIT(A). The term capital expenditures are typically one-time large

purchases of fixed assets that will be used for revenue generation

over a longer period or expenditure incurred for enduring benefit to

the assessee. Whereas Revenue expenditures are typically

referred to as ongoing operating expenses, which are short-term

expenses that are used in running the daily business operations.

Thus, based on these basic difference of expenditure and on

careful examination of the challans placed on record we are of the

considered view that the expenditure incurred by the assessee are

not in nature of any enduring benefit to the assessee but in fact

days to day routine expenditure in the nature of revenue

expenditure. Based on these observations we vacate the addition

of Rs.6,74,000/-.

8 ITA No. 386/JP/2022 Akhand Associates vs. ITO, Ward 1, Sikar In the result, appeal of the assessee is allowed.

Order pronounced in the open Court on 23/03/2023 Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judcial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 23/03/2023 *Ganesh Kr. आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- M/s Akhand Associates, Sikar 1. izR;FkhZ@ The Respondent- ITO, Ward- 1, Sikar 2. vk;dj vk;qDr@ CIT 3. 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File { ITA No. 386/JP/2022} vkns'kkuqlkj@ By order सहायक पंजीकार@Aेेज. त्महपेजतंत