ITO Vs. M/s. Theobroma Foods Pvt. Ltd. (ITAT Mumbai)
Conclusion: Since CIT(A) had admitted additional evidences without complying with rule 46A which was fatal to sustaining of appellate order passed by CIT(A), therefore, the matter was restored to CIT(A) for fresh adjudication.
Held: Assessee was engaged in the business of manufacturing and dealing in Food Products. Assessee had taken on lease for a period of five year a new bakery at Bandra . which was extensively renovated to make it operational. Assessee had claimed expenses which were incurred for making cabins, wall partitions, fixing tiles , labour charges, plumbing , drainage, civil work and other repairs and renovation expenses to be revenue expenditure while AO was contending the same to be capital in nature. Assessee during the course of appellate proceedings before CIT(A) submitted for the first time additional evidences by way of invoices and bills concerning expenditure in question and same were admitted by CIT(A) while adjudicating appeal of assessee in its favour. AO was aggrieved by decision of CIT(A) in admitting additional evidences without complying with rule 46A. It was held the view taken by AO could not be faulted as assessee had failed to establish that expenditure claimed was in the revenue field. Principles of natural justice were breached by CIT(A) by not calling for remand report from the AO as well non recording of reasons and justification for admitting additional evidences which was fatal to sustaining of appellate order passed by CIT(A). Thus, assessee was directed to file all necessary evidences and explanations before in its defence including complete details of renovation work undertaken by it and the matter was restored to CIT(A) for fresh adjudication after complying with rule 46A..
FULL TEXT OF THE ITAT JUDGEMENT
This appeal, filed by Revenue, being ITA No. 765/Mum/2017, is directed against appellate order dated 28.10.2016 in Appeal No. CIT(A)-8/IT-344/15-16, passed by learned Commissioner of Income Tax (Appeals)-8, Mumbai (hereinafter called ―the CIT(A)”), for assessment year(AY) 2012-13, the appellate proceedings had arisen before learned CIT(A) from the assessment order dated 31.03.2015 passed by learned Assessing Officer (hereinafter called ―the AO”) u/s 143(3) of the Income-tax Act, 1961 (hereinafter called ―the Act”) for AY 2012-13.
2. The grounds of appeal raised by Revenue in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called ―the tribunal‖) read as under:-
1. ” Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was right in deleting the addition on account of extensive repairs and renovation of the leased premises without appreciating the fact that these expenses were capital in nature and that the Explanation to section 30 also provides for treatment of expenses as Capital Expenditure for rented premises.”
2. ” Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating the fact that the expenses on repairs and renovation, as per para 1 above, were of enduring nature and were not in the form of current repairs”
3. ” Whether on the facts and circumstances of the case and in law, the Ld. CIT{A) has erred in admitting additional evidences in form of invoices/ bills and not granting opportunity to the AO under Rule 46A to give comments”
4. “The appellant prays that the order of CIT(A) on the above ground be set aside and that of the Assessing Officer be restored.”
5. “The appellant craves leave to amend or alter any ground or add a new ground which may be necessary.
3. The brief facts of the case are that the assessee is engaged in the business of manufacturing and sale of food products. During the course of assessment proceedings conducted by the AO u/s 143(3) read with Section 143(2) of the 1961 Act, the AO observed from the accounts of the assessee that it has incurred Repairs and Maintenance expenses which were debited to Profit and Loss account, as under:-
