Additional grounds and document not submitted before AO is allowed and remitted to file of AO for reconsideration

IN THE INCOME TAX APPELLATE TRIBUNAL

DELHI BENCH “A” NEW DELHI

BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND

SHRI C.M. GARG, JUDICIAL MEMBER

I.T.A. No. 169/Del/2010

A.Y.: 2006-07

M/s Allied Motors Limited,

5, Scindia House,

Connaught Place,

New Delhi – 110001

(PAN: AAACA1522C)

(Appellant)

Vs.

DCIT, Circle 1(1),

New Delhi

I.T.A. No. 3964/Del/2011

A.Y.: 2007-08

(Respondent)

M/s Allied Motors Limited,

5, Scindia House,

Connaught Place,

New Delhi – 110001

(PAN: AAACA1522C)

(Appellant)

Vs.

ITO, WARD-1(3),

New Delhi

 (Respondent)

Assessee by: Sh. U.N. Marwah, FCA & Sh. Anil Kumar, FCA

Department by: S h. Bhim Singh, Sr. D.R.

ORDER

PER SHAMIM YAHYA

These appeals by the assessee against the orders of the Ld. Commissioner of Income Tax (A)-IV, New Delhi for the assessment year 2006-07 & 2007-08.

2. Since the appeals were heard together and some of the issues are common, hence, these appeals are being consolidated and disposed of by this common order for the sake of

convenience.

3. The grounds raised in Asstt. Year 2006-07 and additional grounds raised read as under:-

“1. That on the facts and in the circumstances of the appellant company’s case the Ld. Commissioner of Income Tax (A) erred in law in upholding the order of DCIT, Circle 1(1), New Delhi in treating a sum of Rs. 36,00,000/- representing income from joint venture with M/s Auto Link (I) Pvt. Ltd., as “income from other sources” as against “Business income” declared by the appellant.

2. That on the facts and in the circumstances of the appellant company’s case the Ld. Commissioner of Income Tax (A) erred in allowing relief of expenses amounting to Rs. 16,20,000/- only out of a sum of Rs. 92,09,548/- disallowed by the DCIT, Cir 1(1), New Delhi, thereby upholding disallowance of expenses at Rs. 75,89,548/-.

3. That alternatively on the facts and in the circumstances of the Appellant Company’s case the DCIT, Circle (1), New Delhi erred in not allowing credit for brought forward unabsorbed depreciation of earlier years, against the income assessee by him under the head “Other Sources”.

That the appellant craves, leave to add, alter, amend, substitute, forego any or all the grounds of appeal before or at the time of hearing.”

ADDITIONAL GROUND

That the Assessing Officer failed to record a finding determining the amount of business losses to be carried forward to subsequent years available for adjustment in future as per provisions of law.”

4. The grounds raised in Asstt. Year 2007-08 and additional grounds raised read as under:-

“1. That on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (A) has erred in giving findings at para 20 of his order that “Appeal of the assessee is dismissed”, whereas part relief has been allowed.

2. That on the facts and in the circumstances of the Appellant Company’s case the Ld. Commissioner of Income Tax (A) erred in law in upholding the order of Assessing Officer , Ward 1(3), New Delhi in assessing a sum of Rs. 36,00,000/- representing income from joint venture with M/s Auto Link (I) Pvt. Ltd., under the head “income from other sources” as against “Business income” declared by the appellant.

3. That on the facts and in the circumstances of the appellant company’s case the Ld. Commissioner of Income Tax (A) erred in law in upholding the order of Assessing Officer, Ward 1(3), New Delhi in treating a sum of Rs. 33,04,594/- representing ‘Balances Written Off’ in the books of account, as “income from other sources” as against “Business Income” declared by the appellant.

3.1 That on the facts and in the circumstances of the appellant company’s case the Ld. Commissioner of Income Tax (A) erred in allowing relief of expenses attributable to Najafgarh Workshop at ` 34,85,215/- only out of Rs. 44,45,661/- claimed by the Appellant, New Delhi, detailed as under:-

3.2 That on the facts and in the circumstances of the Appellant Company’s case the Ld. Commissioner of Income Tax (A) erred in allowing relief of expenses attributable to Scindia House and General Expenditure at `2,49,550/- (representing on account of General Expenses Rs. 1,20,000/- and on account of Filling fee Rs. 1,29,500). Only out of a sum of Rs. 36,02,315/- claimed by the appellant for the reasons stated in the impugned order.

4. That on the facts and in the circumstances of the Appellant Company’s case the Ld. Commissioner of Income Tax (A), erred in law in upholding the order of the Assessing Officer in not allowing credit for brought forward unabsorbed depreciation of earlier years, against the income assessed by him under the head “other sources.”

That the appellant craves, leave to add, alter, amend, substitute, forego any or all the grounds of appeal before or at the time of hearing.”

ADDITIONAL GROUND

That the Assessing Officer failed to record a finding determining the amount of business losses to be carried forward to subsequent years available for adjustment in future as per provisions of law.”

5. In these appeals the main ground of appeal raised is that Ld. Commissioner of Income Tax (A) erred in treating the income of Rs. 36 lacs which represented the income from joint venture with Auto Link Enterprises (I) Pvt. Ltd. as income from other sources, as against the business income declared by the assessee.

Furthermore, it has been assailed that the Ld. Commissioner of Income Tax (A) erred in upholding the order of the Assessing Officer regarding the disallowance of business expenses on the ground that the business of the assessee has closed down.

6. In this cases the Assessing Officer has observed that assessee company was earlier authorized distributor of Maruti Udyog Limited (MUL) and it was engaged in the sale and servicing of vehicles manufactured by MUL. However, this business activity was stopped during the previous year relevant to assessment year 2006-07. There was no business activity related to MUL. However, during the period the assessee company had a Joint Venture agreement with M/s Autolink Enterprises I Pvt. Ltd. to undertake the activity of repair and maintenance of vehicles, which was a different activity. Assessing Officer further observed that assessee company had considered the receipt of Rs. 36 lacs on account of joint venture agreement as business receipt / income. Accordingly, assessee claimed other expenses on account of business of the assessee. Assessing Officer observed that no sale or purchase of trading goods indicating the business activity have been established by the assessee during the financial year. Assessing Officer came to the conclusion that income earned from joint venture agreement should be taxed under the head of income from other sources. In this regard, Assessing Officer allowed the depreciation on equipments installed in the workshop. The Assessing Officer held that since the business activity of the assessee has discontinued, there was no justification for allowing the business expenses

claimed by the assessee.

7. Upon assessee’s appeal Ld. Commissioner of Income Tax (A) in principle agreed with the order of the Assessing Officer, but he allowed some of the expenditure in this regard.

8. Now the assessee is in appeal before us and it has been submitted by the assessee that assessee was conducting business of:

(i) purchase / sale of cars as dealers of Hindustan Motors and thereafter as dealers of MUL which was terminated by letter dated 04.9.2002 w.e.f. 03.3.2003 (A.Y. 2003-04);

(ii) Petrol Pump business as Preet Vihar, Vikas Marg, Delhi was terminated by BPCL on 16.5.2000. The assessee disputed the termination and eventually Hon’ble Supreme Court of India held that termination to be illegal and restored the license. The said business was recommenced in assessment year 2003-04. In this regard, assessee submitted letter dated 20.11.2012 of BPCL and order of the Hon’ble Apex Court dated 16.12.2011;

(iii) motor workshop business as Najafgarh to repair cars, buses and trucks etc.

9. Considering the above, we find that there is no mention in the orders of the authorities below that assessee was also engaged in the petrol pump business. Assessee is submitting that petrol pump license was terminated by the BPCL on 16.5.2000, but was eventually restored upon Hon’ble Apex Court decision in this regard.

We find that the commencement of the petrol pump business occurred much after the orders of the Ld. Commissioner of Income Tax (A) in this regard. Hence, we find that the additional

documents in the shape of letter of BPCL dated 20.11.2012 and order of the Hon’ble Apex Court dated 16.12.2011 were not before the Ld. Commissioner of Income Tax (A) or the Assessing Officer. In our considered opinion, this also need to be considered in arriving at the conclusion whether the assessee was carrying any business.

10. We further find that some of the expenses have been allowed by the Ld. Commissioner of Income Tax (A) in assessment year 2007-08 which have not been allowed by the Ld. Commissioner of Income Tax (A) for the assessment year 2006-07. We further find that the additional ground raised before us is that Assessing Officer failed to record a finding determining the amount of business losses to be carried forward to the subsequent years available for adjustment in future, as per provisions of law. This was not raised before the Ld. Commissioner of Income Tax (A).

11. In these circumstances, we note that assessee has submitted certain additional documents which were not before the authorities below as well as raised certain grounds which were also not before the authorities below. Under the circumstances, in our considered opinion, interest of justice will be served if the matter is remitted to the file of the Assessing Officer to consider the issues afresh. The Assessing Officer shall consider all the documents and submissions of the assessee as well as the additional grounds raised by the assessee. Needless to add that the assessee should be given adequate opportunity of being heard.

12. In the result, both the appeals filed by the Assessee stand allowed for statistical purposes.

Order pronounced in the Open Court on 03/5/2013.

Sd/- Sd/-

[C.M. GARG] [SHAMIM YAHYA]

JUDICIAL MEMBER ACCOUNTANT MEMBER

Date: 03/5/2013

SRBHATNAGAR

Copy forwarded to: -

1. Appellant

2. Respondent

3. CIT

4. CIT (A)

5. DR, ITAT

TRUE COPY

By Order,

Assistant Registrar,

ITAT, Delhi Benches