TMI Blog2014 (6) TMI 539X X X X Extracts X X X X X X X X Extracts X X X X ..... rial available before the AO is wrong and insufficient. – Decided against Revenue. Revenue appeal before the tribunal - Commissioner has not given his reasons as to why he has authorised the AO to file an appeal on this issue - Held that:- AO has raised a soulless ground which deserves to be dismissed in limine. We could have saved a lot of time had the Commissioner not given his authorisation on such frivolous issues. On the contrary, it is incumbent upon the Commissioner, as a supervisory authority, to admonish the AO for making an addition without basic understanding of legal position. - In fact this is a peculiar case where even the Commissioner (Administration) who is supposed to supervise the proper functioning of the AO, under his charge, has allowed him to file appeals without properly examining the assessment order and the order of the learned CIT(A), which results in unnecessary expenditure to the assessee when appeal is filed by the Revenue and the assessee had to undergo the trauma of engaging counsel and paying substantial fees to defend the case when the Revenue has no case at all. - a token cost of ₹ 5,000/- imposed upon the revenue - Decided against the rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brought to tax a sum of Rs.12,76,655/-. 6. Section 69C refers to a situation where the source of expenditure is not properly explained. Section 69C reads as under: - 69C. Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year. A careful perusal of the relevant provision shows that when an assessee incurs expenditure from known sources section 69C does not get attracted; in order to invoke the section it has to be shown that the assessee had not explained about the source of such expenditure or part thereof. In the instant case there is no dispute with regard to the source of expenditure and it is also not in dispute that the assessee incurred expenditure. It is not the case of the Revenue that the assessee claimed it as business expenditure. It was only added to the capital work-in-progress . 7. Assessee contended befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rden on the assessee has been discharged with all available details furnished, as called for by the AO. The names, address PAN were available before him. In fact it is not that as though the expenses were not explained, the disallowance is based only on the reason that there was no justification for the same. From the facts of the case, it is held that the conditions precedent for invoking provisions of section 69C are absent in this case, that the expenditure has been explained by adducing evidence and other relevant material and hence it was not open to the AO to disallow the said expenditure or to treat the same as deemed income under s. 69C of the I.T. Act. When the books of account have been maintained and expenditure recorded with full details and supported by vouchers, then no addition can be made under S. 69C vide CIT Vs. Pratap Singh Amar Singh (1993) 200 ITR 788 (Rajasthan). Under the circumstances, the addition made under s. 69C cannot be sustained and is hereby deleted. A plain look at the findings of the CIT(A) clearly indicate that the AO was desperate to make addition initially under section 40(a)(ia) of the Act thereafter under section 69C of the Act by stretc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;ble CIT(A) is justified in law in allowing the capitalization of expenses Rs.18,83,222/- representing expenditure of penal nature incurred by assessee for breach on contract. 11. This issue was dealt with in para 3.2 of the assessment order. During the course of assessment proceedings the AO noticed that the assessee capitalised a sum of Rs.18,83,222/- referable to rent, rates, fees, taxes, etc. under the head capital work-in-progress . The Assessing Officer was of the opinion that the actual rent works out to Rs.28,000/- whereas the assessee claimed more. Similarly, a sum of Rs.8,00,000/- paid to Fisheries Development Fund was considered as a payment in the nature of penalty. The assessee also paid a sum of Rs.7,88,845/- for extension of implementation agreement for Anni Hydroelectric Project. This was also treated as in the nature of penalty within the meaning of provisions of section 37 of the Act. In his opinion these amounts cannot be permitted to be capitalised. It is not in dispute that no expenditure was claimed as deduction but if the expenditure has to be treated as capital in nature the assessee may claim depreciation in the subsequent years. The total disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee having not commenced commercial operations, the expenditure incurred in the normal course was capitalised. This expenditure pertains to extension fees for implementation of its project and it was paid to Himachal Pradesh Energy Development Agency. Assessee produced copy of the letter from Himachal Pradesh Energy Development Corporation. Thus, it was contended that it cannot be treated as expenditure in the nature of penalty. 14. With regard to the balance disallowance it was stated that it is not understood as to why the AO disallowed a sum of Rs.2,800/-. 15. Having regard to the circumstances of the case the learned CIT(A) directed the AO to permit the assessee to capitalise the sum of Rs.15,91,645/- by observing as under: - 5.4 I have considered the submissions as made and perused the documents as filed which were earlier filed before the AO. As per letter from the Directorate of Fisheries and in the context of setting up ANNI (5.00 MW), Hydro Electric Project in Kullu District (Himachal Pradesh) for the purpose of grant of NOC, as per said letter, it was decided to charge Rs.8,00,000/- as fishery development fund in lieu of loss of fishery resources. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be presumed that it is concerned with the excess rent claimed, if any, but because of the smallness of the amount he did not argue in detail. Even the learned D.R. could not furnish any details as to how this sum Rs.2,800/- was arrived at. In fact the learned CIT(A) has set aside the disallowance mainly on the ground that the AO sought to disallow without assigning any specific reason or details. The learned counsel for the assessee adverted our attention to pages 42 and 43 of the paper book to highlight that the payment of Rs.8,00,000/- and Rs.7,88,845/- are in the normal course of business and they cannot be treated as penalty. 17. Having regard to the circumstances and contentions of the learned counsel for the assessee as well as the learned D.R. in this regard we are of the firm view that the order passed by the CIT(A) does not call for any interference on this issue and we hold accordingly. 18. Grounds No. 3 4 pertain to the addition made by the AO under section 68 of the Act which was set aside by the CIT(A). These grounds are extracted for immediate reference: - 3. On the facts and in the circumstances of the case, the Hon'ble CIT(A) is justified in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initial onus was discharged by furnishing details such as confirmation letter and source of money; the assessee had forwarded a letter of M/s. Toptrack Garments Pvt. Ltd. stating that the said company had paid a sum of Rs.62,000,000/- towards share application money. In fact, the total share application money, as per the Balance Sheet, pending allotment as on 31.03.2007, is Rs.67,19,610/- out of which Rs.45,14,610/- was received in the current year. The AO rejected the letter from M/. Toptrack Garments Pvt. Ltd. for the reason that the confirmation was not signed by the Director of the company and the address of the company is the same as that of the assessee company. 21. The case of the assessee, on the other hand, was that in response to the notice dated 04.08.2009 the assessee furnished details of increase in share capital with name and address of the party, PAN, confirmation and bank statement to prove the source of fund. Details showing the cheque number, date and amount received along with confirmation letter from M/s. Toptrack Garments Pvt. Ltd. are on record. Merely because the said company has the same correspondence address it will not make the transaction non-genuine. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the details of cheques issued by the appellant detailing the cheque no. date and amounts were furnished. The appellant has also filed confirmation letter from Top Track Garments Pvt. Ltd. Said letter was signed by an authorized signatory. There is also on record a copy of the Board Resolution passed by the company on 12 January, 2008 authorizing one Mr. J.S. Rana to sign all papers, confirmations and all other documents as may be required to be submitted to the authorities. However, it was deemed necessary to remand the matter to the file of the AO to conduct necessary and proper enquiry in order to verify the claim as made by the appellant. The fresh material as furnished by the appellant such as confirmation letter signed by the director during the course of hearing of the appeal were thus remitted back to the AO. Copies of bank statement of the appellant, annual report, copy of IT return for A.Y. 2007-08 of the appellant i.e. all documents furnished in continuation of the details already filed before the AO, were remitted back to the AO for examination of report. 6.4. After conducting necessary enquiry and after examining the documents that were filed before the CIT(A) d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited purpose and to conduct proper enquiry with reference to the material already on record and that furnished afresh before the CIT(A), which was in continuation of the material already furnished. Under the circumstances, the case of the appellant comes within the ambit of Rule 46A. In the light of these findings and also the conclusion of the AO that no adverse inference can be drawn in the light of the facts which are on record, it is held that addition made under section 68 requires to be deleted. Therefore, addition of Rs.45,14,610/- is hereby deleted. 24. The AO, as usual, submitted in ground No. 3 that the CIT(A) was justified in deleting the addition and justified in admitting the additional evidence. However, even assuming that the Revenue is aggrieved by the order of the CIT(A), even at this stage the learned D.R. could have placed some material to contradict the findings of the learned CIT(A); except submitting that the learned CIT(A) should not have admitted the additional evidence under Rule 46A of the I.T. Rules, no material was filed by the Revenue to support their stand. 25. On the other hand, the learned counsel for the assessee submitted that even sans th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion that the plea raised before the Tribunal has some force. It is a very rare scenario in the Tribunal that the AO personally takes care to assist the Departmental Representative by furnishing necessary details to support the plea raised by him. In fact this is a peculiar case where even the Commissioner (Administration) who is supposed to supervise the proper functioning of the AO, under his charge, has allowed him to file appeals without properly examining the assessment order and the order of the learned CIT(A), which results in unnecessary expenditure to the assessee when appeal is filed by the Revenue and the assessee had to undergo the trauma of engaging counsel and paying substantial fees to defend the case when the Revenue has no case at all. 27. Having regard to the circumstances of the case we are of the firm view that the order passed by the learned CIT(A) does not call for any interference. We hold accordingly. 28. As we have already mentioned, on account of improper action on the part of the Commissioner of Income Tax as well as the AO, the assessee had to engage a counsel and incur substantial expenditure to defend its case. Therefore we award a token cost ..... X X X X Extracts X X X X X X X X Extracts X X X X
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