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TMI Blog2020 (1) TMI 1302X X X X Extracts X X X X X X X X Extracts X X X X ..... taken as a basis for reopening of the assessment as it would amount of giving premium to an authority exercising qua judicial function to take the benefits of its own wrong. Reopening in the case in hand is unjustified. Accordingly, we dismiss the impugned order passed by the CIT(A) and quashed the reassessment order passed by the AO in the case in hand. Disallowance of Expenses - Business of the assessee is discontinued long back - HELD THAT:- As both the authorities mentioned in their respective orders that the assessee company engaged in the business of providing Power Distribution Management Service. It appears that the assessee is still carrying on his business as per the memorandum of association. Therefore, the assessee is entitled to debit the expenses in the profit and loss account for the impugned assessment year and he has rightly claimed as per Section 37(1) - Decided in favour of assessee. - ITA Nos. 68 and 69/CTK/2018 - - - Dated:- 28-1-2020 - C. M. Garg, Member ( J ) And L. P. Sahu, Member ( A ) For the Appellant : B. K. Mahapatra , FCA For the Respondents : Subhendu Datta , DR ORDER Per L. P. Sahu, Member A M These two appeals have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the learned CIT(Appeals) in confining the disallowance of expenses of ₹ 64,84,215/- is against the principles of natural justice, on mis-appreciation of facts, unjustified, arbitrary, erroneous, bad, both in the eye of law and on facts and legally untenable. b. That the learned lower authorities holding that the business of the assessee has been discontinued is on misconstruing/mis-appreciation of the facts, on irrelevant considerations, presumptions, conjectures and surmises, without any material evidence on record and contrary to facts, arbitrary, unjustified, erroneous and bad, both in the eye of law and on facts and legally untenable. c. That on the facts and in the circumstances of the case, the learned CIT(Appeals) sustaining the disallowance of expenses of ₹ 64,84,215/- by holding that the business of the assessee is discontinued long back is in utter disregard to the Orders of Hon'ble ITAT, Cuttack Bench, in assessee's own case in similar circumstances for the past years and is arbitrary, unjustified, wrong, erroneous and bad, both in the eye of law and on facts and legally untenable. d. That in similar circumstances, in the past assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In terms of sec. 19 of the Electricity Act, 2003 read with the applicable provisions of the Orissa Electricity Reforms Act. As the assessee's business license has been revoked and it's business has been discontinued, the assessee is not eligible for deduction of expenditure, In this respect the following judicial pronouncement holds good:- In order to avail deduction of expenditure, it Is necessary that the business, In respect of which expenses are Incurred, should be carried on by the assessee during the previous year. If the business has been closed or discontinued before the commencement of the previous year, no deduction in respect of such discontinued business is permissible while computing the taxable income of the previous year from other sources' L.M Chhabda . Sons Vs. CIT (1967) 65 ITR 638 (SC). In response to notice, the assessee filed his return of income electronically on 19.07.2016 declaring same loss as filed in the original return of income u/s. 139(1) of the Act. Subsequently, notice u/s. 142(1) of the Act was issued to the assessee. In compliance to the above notice, the authorized representative appeared before the AO and filed written ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee challenges the disallowance of business expenses of ₹ 64,84,215/- and contends that the same is fully allowable u/s. 37(1) of the Act. The AO has disallowed the expenses in question by observing as under in the assessment order: DISALLOWANCE OF EXPENDITURE On verification of the return of Income of the assessee the audited profit loss account for the year ended 31' March, 2011 the amount of ₹ 63,15,989/- as expenditure against income of ₹ 2,89,894/- from interest on deposits and exchange gain is not justified with adequate evidences. Further, in this instant case, it is found that the business of the assessee has been discontinued many years before the commencement of the previous year relevant to assessment year. So loss of ₹ 64,84,215/- claimed is not an allowable expenditure and it is also well proved, since the assessee has not given any explanation about the nature and source of the above expenditure of ₹ 63,15,989/- even after giving number of opportunities of being heard. Thus, the same is hereby disallowed and added back to taxable income of the assessee. 3.1 In the course of appeal hearing, the assessee has f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the AO was justified and the AO has rightly denied the carried forward loss as per the provisions of Income Tax Act, 1961. Ld. DR also submitted that the case law relied on by the ld. AR of the assessee is not applicable in the present facts of the case. 8. After hearing both the sides and perusing the entire material available on record along with the orders of both the authorities below, we observe that the assessee has challenged the reopening of the assessment and we have also gone through the reasons recorded by the AO, which has been quoted in the reassessment order. As per the reassessment order, it is clear that the assessment u/s. 143(3) of the Act was completed on 24.03.2014. The audit report on the basis of which the AO has recorded the reasons for reopening of the completed assessments were available with him. There was no any tangible material came to the knowledge of the AO. The same set of facts were already in the existence at the time of original assessment made by the AO. The AO reopened the case that the assessee had closed his business activity and the loss cannot be carried forward on the closed business. But there was no opinion formed in this rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d does not appear to be much relevant to the issue under consideration; and (ii) stating that the issue is whether the impugned expenses which have not been incurred to earn interest income can be allowed to be set off against the interest income and holding that the same is in negative is arbitrary, wrong, unjustified, erroneous and bad, both in the eye of law and on facts and legally untenable. c. That in similar circumstances, in the past assessment years, the 'disallowance of expenses and depreciation' having been decided in favour of the assessee, by the superior authority viz. the Jurisdictional ITAT Cuttack Bench, and the operation of the said IT AT orders not being stayed by the High Court, the learned AO as well as the CIT(Appeals) have committed judicial impropriety by not following the orders of his superior authorities in making the disallowance of expenses of ₹ 4,20,680/- and said disallowance of expenses of ₹ 4,20,680/- is uncalled for, arbitrary, erroneous, bad in law, illegal and deserves to be quashed on this ground alone. d. That on the facts and in the circumstances of the case, the learned CIT(Appeals) sustaining the disallowan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case is covered by the coordinate bench of the Tribunal in assessee's own cases for the assessment years 2004-2005 and 2006-2007 in ITA Nos. 163 164/CTK/2011, order dated 12.08.2011 and ITA No. 318/CTK/2011 for the assessment year 2007-2008, copies of which are placed on record. It was also submitted by the ld. AR of the assessee that the business of the assessee was not closed, therefore, the assessee is entitled to carry forward the loss and expenses claimed in the profit and loss account u/s. 37(1) of the Act, 1961. 14. On the other hand, ld. DR relied on the order of lower authorities and submitted that the business of the assessee has already been closed and no activity is undertaken during the assessment year under consideration, therefore, the expenses debited into the profit and loss account cannot be allowed u/s. 37(1) of the Income Tax Act and there is no any revenue generation as well as closing stock and opening stock shown by the assessee in the profit and loss account. Therefore, the order of the CIT(A) should be restored. 15. After hearing both the sides and perusing the entire material available on record along with the orders of authorities below, fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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