DCIT, Circle-3(3), (I/c), Hyderabad, Hyderabad V. Udai Health Care Private Limited, Hyderabad, Hyderabad

CO 11/HYD/2015

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2537 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 5 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-10-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 23-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K J RAO
• Assessee Lawyers: AJAY GANDHI
• Keywords: Business income; Depreciation; Reasonable cause; Assessment record; Condonation of delay; Revenue expenditure
• Section: 143(3); 132

Judgement Text

ITA NOS 1549 TO 1551 AND CO 11 75 AND 76 UDAI HEALTH CARE P LTD HYDERABAD PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NOS.1549 TO 1551/HYD/2014 & 1546/HYD/2014 (ASSESSMENT YEARS: 2008-09 TO 2011-12) DY. COMMISSIONER OF INCOME TAX, CIRCLE 3(3) HYDERABAD VS M/S. UDAI HEALTH CARE PVT. LTD, 5-9-94 CHAPEL ROAD HYDERABAD PAN: AAACU 6405 G C.O. NOS.11, 75 AND 76/HYD/2015 (ARISING OUT OF ITA NOS.1549 TO 1551/HYD/2014) (AYS 2008-09, 2009-10 & 2010-11) FOR REVENUE SHRI K.J. RAO, DR FOR ASSESSEE SHRI AJAY GANDHI O R D E R PER BENCH: THE ABOVE APPEALS ARE FILED BY THE REVENUE FOR THE A.YS 2008-09 TO 2011-12, WHILE THE CROSS OBJECTIONS ARE FILED BY THE ASSESSEE FOR THE A.YS 2008-09 TO 2010-11 AGAINST THE ORDERS OF THE CIT (A) DATED 5 TH AUGUST, 2014. ITA NOS.1549 TO1551/HYD/2014 & COS.11,75&76/HYD/2015: 2. THESE ARE THE APPEALS FILED BY THE REVENUE AND T HE CROSS OBJECTIONS FILED BY THE ASSESSEE FOR THE A.YS 2008-09, 2009- 10 & 2010-11 RESPECTIVELY. 3. BRIEF FACTS OF THE CASE ARE THAT THERE WAS A SEA RCH AND SEIZURE OPERATION U/S 132 OF THE I.T. ACT IN THE CA SE OF ONE DR. VED DATE OF HEARING : 03.11.2016 DATE OF PRONOUNCEMENT : 30.11.2016 ITA NOS 1549 TO 1551 AND CO 11 75 AND 76 UDAI HEALTH CARE P LTD HYDERABAD PAGE 2 OF 7 PRAKASH & OTHERS AT HIS RESIDENTIAL PREMISES AT HYD ERABAD ON 24.12.2010. AS PER THE APPRAISAL REPORT, THE ASSESS EE COMPANY M/S UDAI HEALTHCARE PVT LTD IS ALSO TO BE ASSESSED U/S143(3) OF THE ACT. ACCORDINGLY A NOTICE U/S 153C DATED 2.2.12 WAS ISSUED TO THE ASSESSEE COMPANY CALLING FOR THE RETURNS OF INC OME FOR THE RELEVANT A.YS. THE ASSESSEE FILED ITS RETURNS OF INC OME AND THEREAFTER DURING THE ASSESSMENT PROCEEDINGS U/S 14 3(3) R.W.S. 153C OF THE ACT, THE AO ADDED THE INTEREST CLAIMED ON THE BUILDING ACQUIRED AND BROUGHT IT TO TAX. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) WHO DELETED THE ADDITION AND AGAINST THE RELIEF GRANTED BY THE CIT (A), THE REVENUE IS IN APPEAL BEFORE US, WHILE THE ASSESSEE HAS FILED CROS S OBJECTIONS ON THE MAINTAINABILITY OF THE ASSESSMENTS ITSELF. 4. WE FIND THAT THE CROSS OBJECTIONS ARE FILED WITH A DELAY OF 51 DAYS FOR THE A.Y 2008-09, 329 DAYS FOR THE A.Y 2009-10 AND 334 DAYS FOR THE A.Y 2010-11 RESPECTIVELY. THE ASSES SEE HAS ALSO FILED AN APPLICATION FOR CONDONATION OF DELAY ALONG WITH AN AFFIDAVIT, EXPLAINING THE REASONS FOR THE DELAY. IN THE AFFIDAVIT IT IS STATED THAT THE ASSESSEE HAD BEEN ADVISED BY HIS CO NSULTANT THAT THE CROSS OBJECTIONS ARE NOT TO BE FILED. HOWEVER, ON CHANGE OF CONSULTANT, THE ASSESSEE WAS ADVISED TO FILE CROSS OBJECTIONS AND THEREFORE, IT HAS RESULTED IN THE DELAY IN FILING O F THE C.O. BY THE NEW CONSULTANT AND THEREFORE, THE DELAY WAS ON ACCO UNT OF GENUINE AND REASONABLE CAUSE AND REQUESTED FOR COND ONATION OF DELAY. THE LEARNED DR, HOWEVER, OPPOSED THE CONDONA TION OF DELAY. CONSIDERING THE REASONS GIVEN BY THE ASSESSE E FOR DELAY IN FILING OF THE CROSS OBJECTIONS AND HAVING CONSIDERE D THE RIVAL CONTENTION AND BEING SATISFIED WITH THE REASONS FOR THE DELAY THAT ITA NOS 1549 TO 1551 AND CO 11 75 AND 76 UDAI HEALTH CARE P LTD HYDERABAD PAGE 3 OF 7 IT IS NOT WILLFUL AND WANTON, WE ARE INCLINED TO CO NDONE THE DELAY FOR ALL THE YEARS IN FILING OF THE COS. 5. THE MAIN OBJECTION OF THE ASSESSEE IN THE C.O IS THAT THE AO HAS ERRED IN ASSUMING JURISDICTION AND INITI ATED PROCEEDINGS U/S 153C OF THE ACT WHEN NO MATERIAL WA S FOUND RELATING TO THE ASSESSEE, MUCH LESS MATERIAL INDICA TING CONCEALMENT OF INCOME OR FACTS. SINCE THIS ISSUE IS GERMANE TO THE INITIATION OF THE ASSESSMENT PROCEEDINGS IN THE CAS E OF THE ASSESSEE, IT WAS CONSIDERED NECESSARY TO DIRECT THE LEARNED DR TO PRODUCE THE COPY OF THE SATISFACTION RECORDED IN TH E CASE OF THE ASSESSEE AS WELL AS THE PERSONS SEARCHED. THE LEARN ED DR HAS PRODUCED COPIES OF THE DOCKET SHEET ORDERS BOTH IN THE CASE OF THE ASSESSEE AS WELL AS THE PERSONS SEARCHED AND HAS AL SO FILED A REPORT OF THE RESPECTIVE AOS INDICATING THAT THE SA TISFACTION REQUIRED FOR INITIATING ACTION U/S 153C OF THE ACT IS NOT AVAILABLE ON RECORD. FROM THE NOTE WHICH PURPORTEDLY IS THE SA TISFACTION RECORDED IN THE CASE OF THE ASSESSEE, IT IS SEEN TH AT THE AO HAS RELIED UPON THE OBSERVATIONS IN THE APPRAISAL REPOR T THAT THE INCOME BELONGS TO THE ASSESSEE HEREIN. ADMITTEDLY, THE OFFICER PREPARING THE APPRAISAL REPORT IS NOT THE AO OF EIT HER THE PERSONS SEARCHED OR THE ASSESSEE HEREIN. THEREFORE, THIS DO CUMENT CANNOT BE CONSIDERED AS A SATISFACTION NOTE. HAVING GONE THROUGH THE ASSESSMENT RECORDS OF THE ASSESSEE AS WELL AS THE P ERSONS SEARCHED, WE HAVE NOT BEEN ABLE TO FIND THE SATISFA CTION RECORDED WHICH IS NECESSARY FOR INITIATING PROCEEDINGS U/S 1 53C OF THE ACT. IN VIEW OF THE SAME, WE HOLD THAT THE AO HAS NOT EX ERCISED PROPER JURISDICTION FOR INITIATING THE ASSESSMENT PROCEEDI NGS U/S 153C OF THE ACT. THE ASSESSMENTS ARE THEREFORE, INVALID AND THE CROSS OBJECTIONS OF THE ASSESSEE ARE ALLOWED AND CONSEQUE NTLY ITA NOS 1549 TO 1551 AND CO 11 75 AND 76 UDAI HEALTH CARE P LTD HYDERABAD PAGE 4 OF 7 REVENUES APPEALS ARE DISMISSED. IN FACT, THE ISSUE IN REVENUE APPEALS IS SIMILAR TO THE ONE WHICH WAS DISCUSSED I N A.Y 2011-12 LATER. THE FINDING OF THE CIT (A) IS NOT CONTROVERT ED. THUS, THERE IS NO MERIT IN REVENUE APPEALS AS WELL. ITA NO.1546/HYD/2015 A.Y 2011-12 6. THIS IS REVENUES APPEAL FOR THE A.Y 2011-12. 7. BRIEF FACTS RELATING TO THIS CASE ARE THAT THE R ELEVANT FINANCIAL YEAR IS THE YEAR IN WHICH THE SEARCH HAS TAKEN PLACE. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE AO OBSERVED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.75,64,495 TOWARDS THE INTEREST ON LOAN. THE ASSE SSEE HAD CLAIMED THE SAME TO BE THE AMOUNT PAID ON LOAN TAKE N FROM BANK FOR PURCHASE OF LAND FOR THE COMPANY. THE AO OBSERV ED THAT AS PER THE APPRAISAL REPORT, THE COMPANY HAD NOT GENER ATED ANY INDEPENDENT BUSINESS AND THAT THE BUSINESS IS SHOWN TO HAVE BEEN CARRIED OUT IN FUTURE YEARS ONLY. HE WAS OF TH E OPINION THAT THE ASSESSEE HAS FLOATED ANOTHER COMPANY M/S. UDAI HOSPITALS PVT LTD TO ENABLE THE ASSESSEES CLAIM OF INTEREST PAID TO CENTRAL BANK OF INDIA ON THE LAND ACQUIRED AND THAT THE LAN D HAS NOT BEEN PUT TO USE FOR THE BUSINESS PURPOSES AND THERE FORE, THE COST INCURRED ON THE ASSETS WILL HAVE TO BE CAPITALIZED AND CANNOT BE TREATED AS REVENUE EXPENDITURE. THE ASSESSEE SUBMIT TED BEFORE THE AO THAT A BUILDING EXISTED ON THE LAND AND RENT AL INCOME THEREFROM WAS OFFERED IN THE A.Y 2008-09 AND THEREFO RE THIS LAND IS PUT TO USE FOR BUSINESS OF THE ASSESSEE. HOWEVER , THE AO OBSERVED THAT AS PER THE DEPRECIATION SCHEDULE FURN ISHED BY THE ASSESSEE, NO BUILDING EXISTED IN THE BLOCK OF ASSET S SHOWN, ON WHICH RENT WAS RECEIVED AND EVEN AS PER THE APPRAIS AL REPORT, NO BUILDING EXISTED ON LAND AT THE TIME OF SEARCH OPER ATION. THEREFORE, HE TREATED THE RENT AMOUNT OF RS.4,50,00 0 AS INCOME ITA NOS 1549 TO 1551 AND CO 11 75 AND 76 UDAI HEALTH CARE P LTD HYDERABAD PAGE 5 OF 7 FROM OTHER SOURCES IN FINANCIAL YEAR 2008-09 RELEVA NT TO A.Y 2009-10. AO OBSERVED THAT THE ASSESSEE COMPANY HAD TAKEN OVER MANAGEMENT OF M/S UDAI CLINIC, THE PROPRIETARY CONC ERN OF SRI VED PRAKASH, LATER CONVERTED INTO A COMPANY M/S. UD AI HOSPITALS PVT. LTD. AND THAT THE ASSESSEE COMPANY ONLY MANAGE S THE HOSPITAL AND FOR THIS IT PAID REMUNERATION TO DR. V ED PRAKASH AND SUBSEQUENTLY, TO THE COMPANY M/S UDAI HOSPITALS PVT LTD. THEREFORE, HE WAS OF THE OPINION THAT THE EXPENDITU RE ON LAND HAS NO RELATION TO THE BUSINESS RECEIPTS OF THE COMPANY AS THE LAND WAS NOT USED FOR BUSINESS PURPOSES OF THE ASSESSEE AND THEREFORE, THE EXPENDITURE NEEDS TO BE DISALLOWED AS IN EARLIE R YEARS. THEREFORE, HE DISALLOWED THE SUM OF RS.75,64,495 AN D BROUGHT IT TO TAX. ON APPEAL, THE CIT (A) DELETED THE SAME AND AGAINST THE RELIEF GRANTED BY THE CIT (A), THE REVENUE IS IN AP PEAL BEFORE US. 8. WHILE THE LEARNED DR RELIED UPON THE ORDER OF TH E AO AND ALSO THE GROUNDS RAISED BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE CIT (A). 9. HAVING REGARD TO THE RIVAL CONTENTIONS, WE FIND THAT THE ASSESSEE HAD CLAIMED INTEREST ON LOAN TAKEN BY THE ASSESSEE FROM THE CENTRAL BANK OF INDIA FOR PURCHASE OF A LANDED PROPERTY. ACCORDING TO THE AO, AT THE TIME OF SEARCH, THERE W AS NO BUILDING AND THE ASSESSEE HAS ALSO NOT REFLECTED ANY SITE IN ITS FIXED ASSETS SCHEDULE. WE FIND THAT THE CIT (A) HAS CONSIDERED T HE CONTENTS OF THE SALE DEED AND COME TO THE CONCLUSION THAT THERE WAS A BUILDING ON THE LAND AT THE TIME OF PURCHASE OF THE PROPERTY IN 2007. THE CIT (A) HAS ALSO NOTICED THAT THE PHOTOGR APHS OF THE BUILDING WERE ANNEXED TO THE SALE DEED AND HAS ALSO CONSIDERED THE ELECTRICITY AND WATER BILLS FOR THE RELEVANT PE RIOD TO COME TO ITA NOS 1549 TO 1551 AND CO 11 75 AND 76 UDAI HEALTH CARE P LTD HYDERABAD PAGE 6 OF 7 THE CONCLUSION ABOUT THE EXISTENCE OF THE BUILDING. THE ASSESSEE HAD ALSO SUBMITTED THAT THE SAID BUILDING WAS DEMOL ISHED IN 2010 AND THEREFORE, THERE WAS NO BUILDING EXISTING ON TH E DATE OF SEARCH 24.12.2010. THE ASSESSEE HAS ALSO FILED A COPY OF T HE SALE DEED BEFORE US AND THE ANNEXURE TO THE SALE DEED IS THE PHOTOGRAPH OF THE BUILDING. ASSESSEE ALSO DREW OUR ATTENTION TO T HE ACCOUNTS OF THE EARLIER YEARS WHEREIN THE RENTAL INCOME HAS BEE N DECLARED BY THE ASSESSEE. THE ASSESSEE HAS ALSO SHOWN THAT THE ASSESSEE HAS RECEIVED BUSINESS INCOME WHICH HAS BEEN OFFERED TO TAX. THEREFORE, IT IS CLEAR THAT THE ASSESSEE HAS GENERA TED BUSINESS INCOME DURING THE RELEVANT A.Y AND THE LAND AND BUIL DING THEREON WERE USED BY THE ASSESSEE FOR ITS BUSINESS PURPOSES AND HAS ALSO BEEN USED SUBSEQUENTLY BY CONSTRUCTION OF A NEW BUI LDING THEREON WHICH HAS BEEN USED BY DR. VED PRAKASH FOR CARRYING ON THE BUSINESS OF THE UDAY HOSPITALS LTD. THEREFORE, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE CIT (A). 10. IN THE RESULT, REVENUES APPEAL IS DISMISSED. 11. TO SUM UP, APPEALS FILED BY THE REVENUE FOR ALL THE A.YS ARE DISMISSED AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE FOR ALL THE A.YS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER, 2016. SD/- SD/- (B.RAMAKOTAIAH) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 30 TH NOVEMBER, 2016. VINODAN/SPS ITA NOS 1549 TO 1551 AND CO 11 75 AND 76 UDAI HEALTH CARE P LTD HYDERABAD PAGE 7 OF 7 COPY TO: 1 DY. COMMISSIONER OF INCOME TAX, CIRCLE 3(3) , 7 TH FLOOR, B BLOCK, IT TOWERS, AC GUARDS, HYDERABAD 2 M/S. UDAI HEALTH CARE P LTD, 5-9-94 CHAPEL ROAD, HYDERABAD 500001 3 CIT (A)-IV HYDERABAD 4 CIT III HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER