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D.C.I.T., Circle 32 (1) , New Delhi Versus Deepsons Southend

2016 (1) TMI 772 - ITAT DELHI

Admission of additional evidence - Held that:- The written submission supported by documentary evidence was forwarded to the AO for his examination and comments and the AO furnished remand report dated 26.06.2012 on the same. The copy of the remand report of the AO was also provided to the Assessee who also filed rejoinder before the ld.CIT(A). After considering the contentions of both the parties, the ld. CIT(A) observed that the additional evidences filed are relevant and vital that would go t .....

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eal of the assessee on this issue because mere change in the profit sharing ratio would not amount to reconstitution of the partnership for the purpose of section 78 of the Act. It is not in dispute that all the partners after reconstitution of firm remained same and there is no instance of any incoming or outgoing partner. It is also borne out on record that the firm was incurring continuous losses and filing returns of income as such. if there is change in the constitution of a firm by way of .....

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efore, in our considered opinion, the ld. CIT(A) has rightly allowed carry forward losses to be set off, as claimed by the assessee - Decided in favour of assessee

Disallowance u/s. 37(1) - CIT(A) deleted the addition - Held that:- The narration made on bill No. SRK/4/(08-09)/154 dated 30.07.2008 is “To fee for representation in Block assessment proceedings before various Income-tax authorities (In response to notices)”. We have perused the block assessment order, which stood complete .....

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ere is no agreement on record to indicate that the assessee may make such payments whenever he thinks fit. We, therefore, find that the ld. CIT(A) has rightly deleting the disallowance made by the AO - Decided in favour of assessee

Addition of expenses towards repair of the building - CIT(A) allowed partial relief - Held that:- There is no good reason to interfere with the conclusion reached by the ld. CIT(A). The ld. CIT(A) while deciding this issue has taken into consideration the s .....

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iture were incurred by the assessee irrespective of the fact the same were paid by his sister concern. The bills raised were in the name of assessee and in the ledger account of assessee, the sister concern is shown as creditor. The expenditures were in the nature of annual commercial use charges, registration charges and regularization charges etc. The documentary evidences furnished by the assessee nowhere depict the nature of payment to be that of penalty in contravention of any law. In fact .....

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d in the preceding assessment years 2002-03 to 2006-07 on the identical facts. The record nowhere reveals whether the loan taken by the assessee was a term loan for construction/renovation etc. of building, or it was working capital loan taken for the purpose of business. No documentary evidences of the bank are available before us to ascertain this fact. Secondly, the ld. CIT(A) has failed to consider the new fact emerged only in the year under consideration, inasmuch as three floors of the bui .....

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rs were showing continuous debit balances. All these facts need verification at the stage of Assessing Officer before finally deciding the issue. We, therefore, think it appropriate to remand the issue to the file of Assessing Officer to decide the same afresh - Decided in favour of revenue by way of remand.

Addition made u/s. 68 - CIT(A) allowed claim - Held that:- we find no justification to interfere with the order of the ld. CIT(A). It is notable that the lender is an old creditor .....

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Decided in favour of assessee - ITA No. 3710/Del./2013 - Dated:- 30-10-2015 - SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER For The Appellant by : Smt. Parwinder Kaur, Sr. DR For The Respondent by : Sh. Prakash Yadav, Adv. and Sh. S.C. Malhotra, C.A. ORDER Per L.P. Sahu, Accountant Member: This is an appeal filed by the Revenue against the order dated 06.03.2013 of ld. CIT(A)-XXVI, New Delhi for the assessment year 2009-10. 2. The brief facts of the case are that the as .....

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essment order before the ld. CIT(A) who allowed the appeal of the assessee vide the impugned order. It is this order which has been challenged by the Revenue in this appeal on the following grounds : 1. Whether the CIT(A) is justified in admitting the additional evidences filed by the assessee at appellate stage in spite of the fact that assessee does not fulfill the mandatory conditions of rule 46A. 2. Whether the CIT(A) has erred in the facts and circumstances of the case in holding that the c .....

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allowing relief of ₹ 24,379/- out of the addition of ₹ 57,212/-. 5. Whether in the facts and circumstances of case the CIT(A) is justified in deleting the addition of ₹ 16,04,832/- holding that the expense claimed was not towards penalty. 6. Whether in the facts and circumstances of case the CIT(A) is justified in deleting the addition of ₹ 60,79,928/- made u/s. 36(1)(iii). 7. Whether in the facts and circumstances of case the CIT(A) is justified in deleting the addition .....

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ld. CIT(A) has wrongly deleted various additions made by the AO ignoring the facts that the additions were made by the AO on cogent reasons based on the record. On the other hand, the ld. AR of the assessee relied upon the order of the ld. CIT(A) on various grounds. 4. We have heard the rival submissions, perused the material available on record and the orders of the authorities below. 5. As far as ground No. 1 raised by the Revenue is concerned, the record reveals that the assessee moved an app .....

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.2012 on the same. The copy of the remand report of the AO was also provided to the Assessee who also filed rejoinder before the ld.CIT(A). After considering the contentions of both the parties, the ld. CIT(A) observed that the additional evidences filed are relevant and vital that would go to root of the matter while deciding the issues to which they relate. He, therefore, admitted the same on record. We do not find any incongruity in this conclusion of the ld. CIT(A). The ld. DR failed to poin .....

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d year to year. As per computation of income, the assessee had shown business loss of ₹ 80,54,133/- and has claimed set off of this loss against income of ₹ 1,48,80,947/- shown from house property. The remaining house property income of ₹ 68,26,815/- was also set off by adjusting the brought forward unabsorbed depreciation of the same amount and thus has shown nil income in the return. On 02.04.2007, the firm was reconstituted as a going concern concept, which has taken over th .....

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s are same. He, therefore, observed that the case of the assessee is not covered by the provisions of section 187 and the brought forward losses of another firm is not allowed to be set off in terms of section 78 of the Income Tax Act. The ld. CIT(A) accepted the contention of the assessee and brought forward loss was allowed to be set off, holding that in the instant case, there was only change in the profit sharing ratio of the partners, which was merely a change in the terms and conditions of .....

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ng ratio would not amount to reconstitution of the partnership for the purpose of section 78 of the Act. It is not in dispute that all the partners after reconstitution of firm remained same and there is no instance of any incoming or outgoing partner. It is also borne out on record that the firm was incurring continuous losses and filing returns of income as such. The ld. Assessing Officer has invoked the provisions of section 78 of the Act, which reads as under : 78. (1) Where a change has occ .....

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n incurring the loss to have it carried forward and set off against his income. A perusal of above provisions shows that if there is change in the constitution of a firm by way of a retirement or death of any partner, then the firm is not entitled to have carried forward and set off so much of the loss proportionate to the share of a retired or deceased partner which exceeds his share of profits. In the instant case, the reconstitution of the firm is not made as a result of retirement of any par .....

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the AO u/s. 37(1) of the Act. In the assessment proceedings, the AO noticed that the assessee had paid a sum of ₹ 3,00,000/- to M/s. S.R. Kapoor & Company for appearing in block assessment proceedings. The AO observed that since no block assessment order was passed in the case of assessee firm, the expenses booked by the assessee might have related to the block assessment completed in the case of the partner or in the case of other concern of the group. He, therefore, disallowed the ex .....

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A) stood disposed of on 20.12.2004. Therefore, there is no reason to make payment in the A.Y. 2009-10 with respect to such proceedings which stood completed 3-4 years back. On the other hand, the ld. Counsel for the assessee contended that the appeals against block assessment proceedings are still pending with ITAT and therefore, it cannot be said that the impugned amount paid to the consulting firm during the year was not for the purpose of business of the firm. The block assessment was complet .....

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. Even the appeals against the block assessment proceedings stood disposed of on 20.12.2004. This shows that the work assigned to the consulting firm was completed in F.Y. 2004-05. But the liability was not created due to non issuing of bill by the Consulting Firm . We are agree with the arguments made done by Ld. AR. . The assessee has maintained the books of account in mercantile system and he did not make any provision in this regard in his books of account in earlier years. There is no agree .....

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ee had debited expenses of ₹ 3,95,353/- towards repair of the building, out of which the expenses attributable to property income were shown at ₹ 1,80,000/- and remaining expenses of ₹ 2,15,353/- were claimed against business income. The AO, however, considering the fact that out of the total five floors of the building, three floors have been let out during the year and remaining two were used by assessee firm, apportioned these expenses in the ratio of 60:40 and allowed ͅ .....

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t the actual expenses in respect of the repair and maintenance of building were ₹ 3,54,271/- and remaining expenses of less than ₹ 5000/- amounting to ₹ 40,633/- were for other repairs and maintenance. He, therefore, apportioned the expenses of ₹ 3,54,721/- in the ratio of 60:40 and held the sum of ₹ 2,12,833/- attributable towards property income and remaining expenses of ₹ 1,82,521/- were allowed against business income, thereby giving relief of ₹ 24,3 .....

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ount. Accordingly, ground No. 4 of Revenue s appeal is dismissed. 13. Ground No. 5 challenges the deletion of addition of ₹ 16,04,832/- made by the AO on account of expenses pertaining to rates and taxes u/s. 37(1) of the Act. The assessee debited ₹ 16,04,832/- on account of expenses incurred towards rates & taxes, out of which a sum of ₹ 10,12,355/- were attributed towards property income and remaining amount of ₹ 5,92,477/- was claimed against business income. The A .....

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ruction, these expenses were covered under the explanation to section 37(1) and were not allowable expenditure. The ld. CIT(A) deleted this disallowance observing that it is immaterial who makes the payment on behalf of the assessee. What is to be seen is that whether the payment relates to assessee or not and has been duly accounted for in the books of account. The ld.CIT(A) has also gone through the ledger account of rates and taxes in the assessee s books wherein Deepsons Departmental Stores .....

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. We do not find any error in the finding of CIT(A) that the impugned expenditure were incurred by the assessee irrespective of the fact the same were paid by his sister concern. The bills raised were in the name of assessee and in the ledger account of assessee, the sister concern is shown as creditor. The expenditures were in the nature of annual commercial use charges, registration charges and regularization charges etc. The documentary evidences furnished by the assessee nowhere depict the n .....

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vs. Loke Nath & Co. (1984) 17 Taxmann 209 (Del) wherein it has been held that the expenditure of payment of compensation incurred by the assessee has to be regarded as an integral part of the profit earning process of the assessee. In view of this discussion, we dismiss ground No. 5 of the Revenue s appeal. 15. Grounds Nos. 6 & 7 challenge the deletion of addition of ₹ 60,79,928/- on account of disallowance of interest and ₹ 65,374/- as bank charges (mentioned in ground No. 7 .....

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o year without charging any interest from them. The partner s capital account for all the three years are showing debit balance. The debit balance in partner s capital account can be seen earlier year also. In the financial year ended 31.03.2007, the partner s debit balance were ₹ 3,79,25,886/- which is increased to ₹ 4,70,72,619/- as on 31.03.2008. The balance is reduced to ₹ 3,87,66,293/- as on 31.03.2009 because of crediting partner s capital on account of the extra income t .....

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. CIT(A) deleted the addition made by AO on account of disallowance of interest and bank charges paid to the bank. 17. We have heard the rival submissions on the issue and have gone through the entire record available before us. In the assessment order, the AO has disallowed the interest expenditure of ₹ 60,79,928/- paid to the bank and expenditure incurred on bank charges of ₹ 53,374/- on the ground that these expenditure were not made for the purpose of business. In this context, w .....

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en by the assessee are very poor. The assessee has credited rental income in the profit and loss account, therefore, it is resulting into profit in the F.Y. 2008-09. From the examination of balance sheet, incorporated in the assessment order and the appellate order, we find that the assessee has taken loan from Punjab National Bank, which are continuously decreasing. This shows that the assessee is making payment to the bank. The balance sheet further shows that the capital account of the partne .....

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e record nowhere reveals whether the loan taken by the assessee was a term loan for construction/renovation etc. of building, or it was working capital loan taken for the purpose of business. No documentary evidences of the bank are available before us to ascertain this fact. Secondly, the ld. CIT(A) has failed to consider the new fact emerged only in the year under consideration, inasmuch as three floors of the building are let out by the assessee and remaining two floors were used for business .....

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he stage of Assessing Officer before finally deciding the issue. We, therefore, think it appropriate to remand the issue to the file of Assessing Officer to decide the same afresh after making thorough enquiry in the light of observations made above and by way of speaking order. Needless to say, the assessee shall be given reasonable opportunity of being heard. Accordingly, grounds Nos. 6 & 7 of the Revenue s appeal are allowed for statistical purposes. 18. The next and last ground No.8 chal .....

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