Automotive Manaufacturers P. Ltd, ... vs Department Of Income Tax

The Revenue has filed this appeal challenging the order dated 11.8.2011 passed by the ld.CIT(A)-21, Mumbai and it relates to assessment year 2008-09.

2. The Revenue is aggrieved by the decision of ld.CIT(A) in granting relief in respect of following two additions:

a) Determination of Annual Letting Value at Rs.40,73,809/- and

b) Disallowance of expenses towards pre-operative expenses amounting to Rs.15,35,59,355/-

ITA No.7839/M/11 2 3. We heard parties and perused the record. The assessee is a dealer in automobiles and also trading of fast moving consumer goods. The assessee had declared rental income of Rs.8760/- in aggregate in respect of three properties located at Secunderabad. The AO asked the assessee to furnish all the details in relation to let out properties in order to examine the correctness of Annual Letting Value disclosed by the assessee. However, the assessee did not file any reply. Hence, AO determined the ALV of all the three properties at Rs.40.82 lakhs and assessed the difference as income of the assessee. The AO also noticed that the assessee has started two new businesses, viz., dealing in Earth Moving Equipments and running Super Markets. The AO noticed that the assessee has not declared any expenditure relating to setting up of two new line of businesses i.e. no preoperative expenses was shown by the assessee. Though the AO called for explanation in this regard, yet the assessee failed to furnish any details and hence, the AO estimated the pre-operative expenses @ 0.5% of the aggregate expenses claimed by the assessee in its Profit and Loss account. The same worked out to Rs.15,35,59,355/- and the AO disallowed the above said amount as relating to Pre-operative expenses in setting up two new lines of business.

4. In the appellate proceedings, the ld.CIT(A) deleted both the disallowances and hence the revenue has filed this appeal before this Tribunal.

5. On perusal of the order passed by the ld.CIT(A), we notice that the assessee has furnished additional evidences before the ld.CIT(A) in respect of rental income and the same has been considered by the ld.CIT(A) for granting the relief to the assessee. However, we notice that the ld. CIT(A) has not confronted these additional evidences with the AO. This action of Ld CIT(A) clearly violates the provisions of Rule 46A of The ITA No.7839/M/11 3

Income Tax Rules, 1962. Under these set of facts and circumstances, we are of the view that the additional evidences filed by the assessee before the ld. CIT(A) should be examined by the AO and hence, this issue requires fresh consideration at the end of the AO. Accordingly, we set aside the order of ld.CIT(A) on this issue and restore the same to the file of the AO with a direction to examine this issue afresh by considering the relevant evidences that were/that may be filed by the assessee. After affording necessary opportunity of being heard to the assessee, the AO may take proper decision on this issue in accordance with law.

6. The next issue relates to determination of disallowance of preoperative expenses. We notice that the AO was constrained to estimate pre-operative expenses @ 0.5% of the aggregate expenses claimed by the assessee, since the assessee failed to furnish the details that were called for by the AO. We further notice that the ld.CIT(A) has deleted this addition without examining the necessary details. Before us, the Ld A.R submitted that the dealing in Earth moving equipments is only extension of the existing line of business and the Super markets were opened in the premises of Petrol pump already run by the assessee. Accordingly he submitted that the assessee did not incur any pre-operative expenses as presumed by the AO. However, we have noticed that the AO was constrained to estimate the pre-operative expenses, since the assessee failed to furnish the details/explanation.

7. Under this set of facts, we are of the view that this issue also requires fresh examination at the end of the AO. Accordingly, we set aside the order of the ld.CIT(A) on this issue and restore the same to the file of the AO with a direction to examine this issue afresh and take proper decision in accordance with law. The assessee is also directed to furnish ITA No.7839/M/11 4

all the details that may be called for by the AO and co-operate with the AO to arrive at a proper conclusion on this matter.

8. In the result, the appeal of the revenue is treated as allowed for statistical purposes.

The above order was pronounced in the open court on 29th June, 2015.

घोषणा खल ु े यायालय म दनांकः 29th June, 2015 को क गई ।

Sd sd

(आय.पी. बंसल/I.P. BANSAL) (बी.आर.बा करन/ B.R. BASKARAN) या यक सद य / Judicial Member लेखा सद य/Accountant Member

मुंबई Mumbai: 29th June, 2015.

व. न.स./ SRL , Sr. PS

आदे श क त ल प अ े षत/Copy of the Order forwarded to :

1. अपीलाथ / The Appellant

2. यथ / The Respondent.

3. आयकर आयु त(अपील) / The CIT(A)- concerned

4. आयकर आयु त / CIT concerned

5. वभागीय त न ध, आयकर अपील य अ धकरण, मंब ु ई/ DR, ITAT, Mumbai concerned गाड फाईल / Guard file.

6.

आदे शानस ु ार/ BY ORDER, True copy सहायक पंजीकार (Asstt. Registrar) आयकर अपील य अ धकरण, मंब ु ई /ITAT, Mumbai