Casa Grande Private Limited, CHENNAI V. DCIT, CHENNAI

CO 12/CHNY/2015

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1151 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 19 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 28-08-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-08-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 09-02-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DEVANATHAN
• Assessee Lawyers: PATHLAVATA PEERYA IRS
• Keywords: Depreciation; Competent authority
• Section: 80IB; 145

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , ! ' , # $% BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.2187/MDS/2014 & C.O.NO.12/MDS/2015 (IN ITA NO.2187/MDS/2014) ( / ASSESSMENT YEAR : 2010-2011) THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I(3), CHENNAI 600 034. (APPELLANT) VS M/S. CASA GRANDE PVT. LTD NEW NO.111, OLD NO.59, L.B. ROAD, CHENNAI 600 041 [PAN: AACCC 2758A] ( RESPONDENT/ CROSS OBJECTOR) / APPELLANT BY : SHRI. PATHLAVATA PEERYA, IRS, CIT. / RESPONDENT BY : SHRI. DEVANATHAN, ADVOCATE /DATE OF HEARING : 20.08.2015 /DATE OF PRONOUNCEMENT : 28.08.2015 & / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THE APPEAL BY THE REVENUE AND CROSS OBJECTION BY T HE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE CO MMISSIONER OF I.T.A.NO.2187/MDS/2014 & C.O. NO.12/MDS/2015 :- 2 -: INCOME-TAX (APPEALS)-I, CHENNAI FOR THE ASSESSMENT YEAR 2010-2011 VIDE ORDER DATED 26.05.2014. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 2.1 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DIRECTING THE ASSESSING OFFI CER TO ALLOW THE ENTIRE CLAIM OF 10,59,37,589/- UNDER SECTION 80IB(10) OF THE I.T. ACT WHICH WAS DISALLOWED BY TH E ASSESSING OFFICER ON THE GROUND THAT CERTAIN EXPENDITURE DEBITED IN 80IB UNITS WERE LESS AND THE EXPENDITURE DEBITED IN NON 80IB UNITS WERE MORE, SO AS TO GAIN MORE DEDUCTION FROM 80IB AND REDUCE THE TAXABLE PROFITS FROM THE NON 80IB UNITS. 2.2 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THE REWORKING O F EXPENDITURE MADE BY THE ASSESSING OFFICER BETWEEN 80IB AND NON 80IB UNITS. 3. THE ASSESSEE IN CROSS OBJECTION HAS RAISED THE FOLL OWING GROUNDS:- 2. THE ASSESSEE OUGHT TO HAVE APPRECIATED THAT TH E APPEAL LACKS MAINTAINABILITY IN THE LIGHT OF THE FACT THAT THERE WAS NO APPLICATION OF MIND AND DISCRETION WAS PROPERLY EXE RCISED BY THE CIT. 3. THE ASSESSEE OUGHT TO HAVE APPRECIATED THE DECIS ION OF THE ITAT ( WHICH IN THE CASE OF SRI VARADARAJA TEXT ILES REPORTED IN 9 ITD 469 (MAD) BEEN ACCEPTED BY THE REVENUE) IN SUPPORT OF THE CONTENTION OF THE RESPONDENT , VIZ SECTION 253(2) OF THE ACT PROVIDES THAT THE COMMISSIONER MAY, IF HE OBJECTS TO ANY ORDER PASSED BY THE COMMISSIONER (APPEALS) DIRECT THE ITO TO FILE A N APPEAL TO THE TRIBUNAL AGAINST THE ORDER. BUT, THI S DOES NOT MEAN THAT EVERY ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) WHICH INTERFERES WITH THE ASSESSMENT MADE BY THE ITO CAN BE OBJECTED TO. THE OBJECTION MUST BE REASONABLE AND RATIONAL CANNOT BE MADE WITHOUT REGARD TO THE CORRECTNESS OF THE ORDER APPEALED AGAINST. THE POWER ITSELF IS A DISCRETION ARY POWER AND IS COUPLED WITH THE DUTY TO ACT FAIRLY. THE I.T.A.NO.2187/MDS/2014 & C.O. NO.12/MDS/2015 :- 3 -: EXERCISE OF THIS POWER IS ALSO A MATTER OF REVIEW B Y THE TRIBUNAL BECAUSE AN ADMINISTRATIVE TRIBUNAL IS DUTY BOUND TO DETERMINE WHETHER THE POWER OF THE COMMISSIONER HAS BEEN EXERCISED IN A MANNER THAT COMPLIES WITH CERTAIN IMPLIED LEGAL REQUIREMENT. D E SMITHS JUDICIAL REVIEW OF ADMINISTRATIVE ACTION I N AT PAGE 323 STATES THAT IN SOME CONTEXT IT MAY BE CONF INED TO THE QUESTION WHETHER THE COMPETENT AUTHORITY HAS KEEP WITHIN THE FOUR CORNERS OF THE ACT AND WHETHER IT HAS ACTED IN GOOD FAITH, BUT USUALLY THEY WILL PERS UE THEIR INQUIRY FURTHER AND WILL CONSIDER WHETHER THE REPO SITORY OF A DISCRETION ALTHOUGH ACTING IN GOOD FAITH HAS A BUSED ITS POWER BY EXERCISING IT FOR AN INADMISSIBLE PURP OSE OR AN IRRELEVANT GROUNDS OR WITHOUT REGARD TO RELEVANT CONSIDERATION OR WITH GROSS UNREASONABLE . WE FIN D THE FOLLOWING STATEMENT OF LAW ON THIS POINT: THE EMPHASIS THAT THE COURT HAVE RECENTLY PLACED ON AN IMPLIED DUTY TO EXERCISE DISCRETIONARY POWERS FAIRL Y MUST NORMALLY BE UNDERSTOOD TO MEAN A DUTY TO ADOPT A FA IR PROCEDURE. BU THERE IS NO DOUBT THAT THE IDEAL OF FAIRNESS IS ALSO A SUBSTANTIVE PRINCIPLE. IT IS IM PLICIT IN THE CONCEPT OF A JUDICIAL DISCRETION, AND IT INCLUD ES A DUTY TO BE IMPARTIAL AND NOT TO DISCRIMINATE ON UNACCEPT ABLE GROUNDS OR TO DELAY THE MAKING OF A DECISION TO THE PREJUDICE OF FUNDAMENTAL RIGHTS. 4. THE LEARNED AO OUGHT TO HAVE APPRECIATED THAT TH E COMPUTATION OF RELIEF U/S.80IB (10) IS BASED ON FAC TS NAMELY, (I) THAT THE RESPONDENT MAINTAINED SEPERATE BOOKS (II) THAT THE BOOKS WERE NOT REJECTED BYTHE APPELL ANT. (III) METHOD OF ACCOUNTING WAS NOT REJECTED IN TERM S OF SECTION 145 OF THE ACT. (IV) THAT THE APPELLANT FAIELD TO APPRECIATE THAT T HE PROJECT WS NEARING COMPLETETION AND HENCE NO OUTFLOW OF FUNDS REQUIRED. (V) THAT THE RESPONDENT HAS RESERVOIR OF FUNDS IN I TS HAND IN THE LIGHT OF REALIATIONOF SALE PRICE AND OPENING BA LANCE OF RESERVES. (VI) THE 80IB PROJECT WAS NOT MINGLED WITH REGULAR PROJECTS IN THE LIGHT OF SEPARATE INFRASTRUCTURE. 5. THE ORDER OF THE COMMISSIONER OF INCOME TAX (AP PEALS) HAS BEEN BASED ON ANALYSIS OF ABOVE FACTS AND THUS REQUIRES NO TINKERING ON FACTS. I.T.A.NO.2187/MDS/2014 & C.O. NO.12/MDS/2015 :- 4 -: 4. THERE WAS A DELAY OF 122 DAYS IN FILING OF CROSS-O BJECTION. THE ASSESSEE FILED A CONDONATION PETITION FOR CONDONING A DELAY OF 148 DAYS. IT WAS STATED THAT DELAY WAS DUE TO CIRCUMST ANCES BEYOND THE ASSESSEES CONTROL. THE ASSESSEE PLACED RELIANCE ON THE JUDGMENT IN THE CASE OF DEHRI ROHTAS LIGHT RAILWAY VS. DISTRICT BOARD BH OJPUR AND ORS 1992 SCR (2) 155, 1992 SCC (2) 598 AND ALSO P LACED RELIANCE ON THE JUDGMENT OF RAM NATH SAHU & ORS. VS. GOBARDHAN SAO & ORS. 2002(3) SCC 195 . WE HAVE GONE THROUGH THE PETITION. THE ASSESSEE HAS NOT EXPLAINED THE EXACT REASON FOR DELAY IN FIL ING THE CROSS OBJECTION. THE REASON ADVANCED BY THE ASSESSEE IS G ENERAL IN NATURE. THE ASSESSEE JUSTIFIED THE DELAY ONLY WITH REFERENC E TO THE AFFIDAVIT FILED BY THE DIRECTOR AND IT CANNOT BE SAID THAT TH ERE IS ANY GOOD AND SUFFICIENT REASON TO CONDONE THE DELAY. IT CLEARLY SHOWS THAT THE DELAY WAS DUE TO THE NEGLIGENCE AND INACTION ON THE PART OF THE ASSESSEE. THE ASSESSEE COULD HAVE VERY WELL AVOIDED THE DELAY BY THE EXERCISE OF DUE CARE AND ATTENTION. BEING SO, THERE IS NO SUF FICIENT AND GOOD REASON FOR THE DELAY OF 122 DAYS AND EVEN THE NUMBE R OF DAYS OF DELAY MENTIONED IN AFFIDAVIT IS ALSO INCORRECT. THEREFO RE, WE DECLINED TO CONDONE THE DELAY AND THUS THE CROSS OBJECTION FILE D BY THE ASSESSEE IS DISMISSED . I.T.A.NO.2187/MDS/2014 & C.O. NO.12/MDS/2015 :- 5 -: 5. COMING TO THE APPEAL OF THE REVENUE , THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER HAS FOUND THAT CERTAIN E XPENDITURE DEBITED IN ACCOUNTS OF UNIT ENTITLED FOR DEDUCTION U/S.80IB IS LESS, WHERE AS SUCH EXPENDITURE DEBITED IN ACCOUNTS OF UNIT NOT E NTITLED FOR DEDUCTION U/S.80IB WAS MORE, SO AS TO GAIN MORE DEDUCTION U/S 80IB AND REDUCE THE TAXABLE PROFITS FROM THE NON-80IB UNIT. ACCORDI NGLY, THE ASSESSING OFFICER REWORKED THE PROFITS OF UNIT ENTITLED FOR D EDUCTION U/S.80IB AND NON-80IB UNITS ON PRO-RATA BASIS WITH REFERENCE TO INCREASE IN INVENTORY RATIO (80IB UNIT 63.5% AND NON 80IB UNI T -36.5%). AFTER REALLOCATING THE EXPENDITURE BETWEEN 80IB UNIT AND NON 80IB UNITS, THE ASSESSING OFFICER RESTRICTED THE ELIGIBLE DEDUC TION U/S.80IB (10) TO G8,97,33,422/- AGAINST THE CLAIM OF G10,59,37,589/- MADE BY THE ASSESSEE. AGGRIEVED, THE ASSESSEE PREFERRED AN APP EAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). 6. THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED T HAT THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE HAS OBJE CTED FOR SUCH REALLOCATION OF EXPENDITURE ON THE BASIS OF INCREME NTAL INVENTORY RATIO, STATING THAT THE COMPANY WAS MAINTAINING SEPARATE ACCOUNTS FOR 80LB AND NON 80LB UNITS WHICH WERE AUDITED BY THE QUALI FIED CHARTERED ACCOUNTANTS AND THE ALLOCATION OF EXPENDITURE WAS O N ACTUARIAL BASIS. THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE HAS FURTHER ARGUED I.T.A.NO.2187/MDS/2014 & C.O. NO.12/MDS/2015 :- 6 -: THAT THE REWORKING OF THE EXPENDITURE BY THE ASSESS ING OFFICER WITHOUT REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE WAS NOT PERMISSIBLE UNDER LAW. IT WAS SUBMITTED BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) THAT THE ASSESSEE WAS RUNNING SIX OTHER P ROJECTS IN ADDITION TO THE 80IB PROJECT. WITH REGARD TO APPORTIONMENT O F INTEREST, THE ID. AR HAS SUBMITTED THAT SINCE 80IB UNIT HAS GOT MORE SURPLUS FUNDS AS THE PROJECT WAS NEARING COMPLETION AND ADVANCES TOW ARDS FLATS WERE BEING RECEIVED ON THEIR REGISTRATION, THE COMPANY W AS HAVING SURFEIT OF FUNDS OVER LIABILITIES AND HAS PUT THEM IN ITS OTHE R NON 80IB UNITS. THE COMMISSIONER OF INCOME TAX (APPEALS) FURTHER OBSERV ED THAT IN THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER HAS HA ND-PICKED SOME OF THE HEADS OF EXPENDITURE FOR REWORKING OUT OF SEVER AL HEADS OF EXPENDITURE DEBITED TO THE P&L ACCOUNT. THE ASSESSI NG OFFICER HAS PICKED UP THOSE HEADS WHICH WERE FOUND TO HAVE BEEN DEBITED AT A LOWER AMOUNT IN 80IB UNITS AND MORE IN NON 80LB UNI TS TO JUSTIFY SUCH THEORY THAT THE ASSESSEE HAS DELIBERATELY HIKED UP THE EXPENDITURE IN NON 80IB UNITS SO AS TO REDUCE THE TAXABLE PROFITS AND CLAIM MORE DEDUCTION BENEFITS FROM THE 80LB UNIT. THE EXPENDIT URE LIKE CONSTRUCTION EXPENSES, SALES AND GENERAL EXPENSES WHICH WERE SHOWN OTHER WAY ROUND WERE NOT TOUCHED, SINCE THEY WERE CONVINCING TO THE ASSESSING OFFICER THIS THEORY OF THE ASSESS ING OFFICER CANNOT BE I.T.A.NO.2187/MDS/2014 & C.O. NO.12/MDS/2015 :- 7 -: ACCEPTED. IT WAS BEYOND ANYBODY'S IMAQINATION THA T THE ASSESSEE WILL DELIBERATELY HIKE UP THE EXPENDITURE OF NON 80LB UN ITS UNDER SOME HEADS AND NOT OTHERS. IF THE AO IS LOGICAL THEN, NO T BEING SATISFIED WITH THE ACCOUNTS, HE SHOULD HAVE REJECTED THE BOOKS FIR ST AND ESTIMATED THE ENTIRE EXPENDITURE BETWEEN THE 80IB UNIT AND NO N 80IB UNITS ON SOME SCIENTIFIC BASIS. REALLOCATING THE EXPENDITURE ON CERTAIN PRESUMPTION AND CHOOSING ONLY A FEW HEAD WHERE THE EXPENDITURE DEBITED IN 80IB UNITS IS MORE, WAS NOT WARRANTED. T HE ASSESSING OFFICER SHOULD HAVE REFRAINED FROM SUCH REALLOCATIO N WHEN SEPARATE SET OF ACCOUNT S WERE MAINTAINED AND SUBJECTED TO AUDIT WHICH FACT WAS NOT DISPUTED BY HIM. THE COMMISSIONER OF INCOME TA X (APPEALS) HAS NOT FOUND ANY MERIT IN SUCH REALLOCATION OF EXPENDI TURE BETWEEN 80IB AND NON 80IB UNITS ON MERE CONJECTURE AND REJECTED THE REWORKING OF THE ELIGIBLE 80IB DEDUCTION BY THE ASSESSING OFFICE R. AGGRIEVED, THE REVENUE PREFERRED AN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. THE COMMISSIONER OF INCOME TAX (APPEALS) DE LETED THE ADDITION MADE BY THE ASSESSING OFFICER WITHOUT ANY BASIS. THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER SUGGEST THAT THE ASSESSEE LOWERED THE PROFITS OF THE UNITS NOT ENJOYING DEDUC TION U/S.80IB, SO AS TO REDUCE THE LIABILITY OF TAX. IT IS APPROPRIATE TO REMIT THE ISSUE BACK I.T.A.NO.2187/MDS/2014 & C.O. NO.12/MDS/2015 :- 8 -: TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTI ON TO EXAMINE THE DETAILS FURNISHED BY THE ASSESSEE WITH REGARD TO AL L EXPENSES INCLUDING INTEREST, FINANCE CHARGES, DEPRECIATION AND OTHER G ENERAL ADMINISTRATIVE EXPENSES ON THE BASIS OF INCREMENTAL INVENTORY OF WORK IN PROGRESS FROM EARLIER ASSESSMENT YEAR TO THIS AS SESSMENT YEAR, AFTER GIVING DUE CREDIT TO THE INFLOW OF FUNDS, IF ANY IN BOTH UNITS. THE ASSESSING OFFICER SHALL INDEPENDENTLY EXAMINE THE I SSUE AFTER PROPER ENQUIRY. WITH THESE OBSERVATIONS, WE ARE REMITTING THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDE RATION. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.2187/MDS/2014 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE CROSS OBJECTION NO.12/MDS/2015 OF THE ASSESSEE IS D ISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 28TH DAY OF AUGU ST, 2015, AT CHENNAI. SD/- SD/- ( ! ' ) (CHALLA NAGENDRA PRASAD) # / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER !' /CHENNAI. #$ /DATED:28.08.2015. KV $% &' (' /COPY TO: 1. ) APPELLANT 2. / RESPONDENT 3. * ( )/CIT(A) 4. * /CIT 5. '+, - /DR 6. ,. / /GF. I.T.A.NO.2187/MDS/2014 & C.O. NO.12/MDS/2015 :- 9 -: