DCIT, Circle-2(1), Hyderabad, Hyderabad V. IWM Constructions Private Limited, Hyderabad, Secunderabad

CO 68/HYD/2016

• Counselvise Citation: [2017] 123 COUNSELVISE.COM (IT) 2801 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 2 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 28-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 25-11-2016
• Court: TRIBUNAL
• Department Lawyers: A SITARAMA RAO
• Assessee Lawyers: M P LOHIA SHRI SAPAN CHOKSI
• Keywords: Reopening of assessment; Audit objection; Assessment record; Tax effect; Condonation of delay; Revised return; Reason to believe
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 956/HYD/2016 ASSESSMENT YEAR: 2005-06 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(1), HYDERABAD VS M/S. IWM CONSTRUCTIONS PRIVATE LIMITED, SECUNDERABAD [PAN: AAACI8728C] (APPELLANT) (RESPONDENT) C.O. NO. 68/HYD/2016 (IN ITA NO. 956/HYD/2016) ASSESSMENT YEAR: 2005-06 M/S. IWM CONSTRUCTIONS PRIVATE LIMITED, SECUNDERABAD [PAN: AAACI8728C] VS THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(1), HYDERABAD (CROSS-OBJECTOR) (RESPONDENT) FOR ASSESSEE : SHRI M.P. LOHIA, SHRI SAPAN CHOKSI, AR FOR REVENUE : SHRI A. SITARAMA RAO, DR DATE OF HEARING : 10-01-2017 DATE OF PRONOUNCEMENT : 28-02-2017 O R D E R PER B. RAMAKOTAIAH, A.M. : THESE ARE APPEAL BY REVENUE AND CROSS-OBJECTION BY ASSESSEE FOR AY. 2005-06 ON THE ORDER OF THE COMMISSI ONER OF INCOME TAX (APPEALS)-2, HYDERABAD DT. 27-01-2015. T HIS APPEAL IS I.T.A. NO. 956/HYD/2016 C.O.NO. 68/HYD/2016 M/S. IWM CONSTRUCTIONS PRIVATE LIMITED :- 2 - : FILED WITH A DELAY OF 438 (FOUR HUNDRED AND THIRTY E IGHT) DAYS. THE REASONS FOR DELAY IN FILING OF APPEAL ARE PECUL IAR AS FACTS LEADING TO THE REVENUE APPEAL REQUIRE CONSIDERATION O F SAME. ASSESSEE, WHICH IS ENGAGED IN THE BUSINESS OF EXECUT ION OF CIVIL CONTRACT WORKS HAS GOT A SUB-CONTRACT ON ENGINEERING, PROCUREMENT AND CONSTRUCTION (EPC) BASIS FROM SWARNA T OLLWAY PRIVATE LIMITED AND IN THE YEAR UNDER CONSIDERATION, DECLARED TOTAL INCOME OF RS. 2,24,34,901/-. SUBSEQUENTLY, IT FILED THE REVISED RETURN BEFORE COMPLETION OF ASSESSMENT, CLAIMING ADD ITIONAL TDS CREDIT OF RS. 34,04,382/-. 2. IN THE SCRUTINY ASSESSMENTS COMPLETED SUBSEQUENTLY, THE ASSESSING OFFICER (AO) DISALLOWED CERTAIN EXPENDITURE WHICH WAS ACCEPTED BY ASSESSEE AND NO FURTHER APPEAL WAS FILED . IT SEEMS THERE WAS AN AUDIT OBJECTION THAT AN AMOUNT OF RS. 1,70, 154/- HAS ESCAPED ASSESSMENT ON THE BASIS OF THE TDS CERTIFICATE S ON INTEREST INCOME. AO REOPENED THE ASSESSMENT BY ISSUING A NOTICE DT. 13-03-2012 I.E., AFTER FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. ASSESSEE REQUESTED FOR REASONS FOR REOPENING AND AFTER OBTAINING THE SAME, FILED OBJECTIONS THAT REOPENING CAN NOT BE DONE AFTER FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR A S THERE IS NO FAILURE ON THE PART OF ASSESSEE IN DISCLOSING INCOM E AND SCRUTINY ASSESSMENT HAS BEEN COMPLETED IN ITS CASE. THIS OBJE CTION WAS NOT DISPOSED-OFF BY THE AO, HOWEVER, HE COMPLETED THE ASS ESSMENT ADDING THE INTEREST INCOME OF RS. 1,70,154/- AND DEN YING THE TDS CLAIM MADE IN THE REVISED RETURN WHICH WAS ORIGINALLY GRANTED TO IT BY THE AO. I.T.A. NO. 956/HYD/2016 C.O.NO. 68/HYD/2016 M/S. IWM CONSTRUCTIONS PRIVATE LIMITED :- 3 - : 3. BEFORE THE LD.CIT(A), ASSESSEE FILED VARIOUS DETAI LED SUBMISSIONS QUESTIONING THE REOPENING ON VARIOUS LEGA L PRINCIPLES AND ALSO FURNISHING EVIDENCE THAT THE SO CALLED INTERES T INCOME WAS ADMITTED BY ASSESSEE IN EARLIER ASSESSMENT YEAR AY. 2 004-05. CIT(A) REFERRED THE MATTER TO THE AO, WHO ACCEPTED THE F ACT THAT THE SAID INCOME WAS OFFERED IN EARLIER YEAR BY STATING AS UNDER: 5. REGARDING ADDITION OF RS. 1,70,154/- TOWARDS IN TEREST INCOME, THE ASSESSEE SUBMITTED DETAILED EXPLANATION /RECONCILIATION AT PARA 3 ON PG. 8 OF ITS SUBMISSIONS. ASSESSEE OF FERED THE ABOVE INTEREST INCOME DURING THE AYS. 2004-05 AND 2006-07 . IT APPEARS FROM THE RECONCILIATION THAT INTEREST OF RS. 1,70,1 54/- ALREADY SUFFERED TAX. THIS INDICATES THAT REOPENING PER SE IS BAD IN LAW. H OWEVER, LD.CIT(A) AFTER PERUSING THE ASSESSMENT RECORD HAS N OTED IN HIS ORDER THAT THE BASIS FOR RE-ASSESSMENT WAS DUE TO AUDIT OBJECTION AND AFTER CONSIDERING THE FACTUAL AND LEGAL MATRIX, QUA SHED THE REOPENING AB INITIO. 4. REVENUE PREFERRED AN APPEAL ON 30-03-2015 AGAINS T THE ORDER OF CIT(A). HOWEVER, IN THE SAID APPEAL, ERRONEOUS G ROUNDS OF APPEAL WERE RAISED. IN SPITE OF GIVING OPPORTUNITY T O REVENUE, THE GROUNDS WERE NOT RECTIFIED. CONSEQUENTLY, VIDE ORDER DT. 20-11- 2015, THE APPEAL PREFERRED BY THE REVENUE WAS DISMISS ED. HOWEVER, IT IS OBSERVED THAT IF REVENUE STILL INTENDS TO PURSUE PROPER APPEAL, IT IS FOR THE CIT TO APPROVE THE NEC ESSARY GROUNDS AND FILE FRESH APPEAL, SEEKING CONDONATION IF ANY AS RE QUIRED. 5. CONSEQUENT TO THAT ORDER, THE CIT BEING SATISFIED THAT A SECOND APPEAL IS REQUIRED TO BE PREFERRED AND ACCORD INGLY VIDE HIS I.T.A. NO. 956/HYD/2016 C.O.NO. 68/HYD/2016 M/S. IWM CONSTRUCTIONS PRIVATE LIMITED :- 4 - : APPROVAL DT. 10-06-2016, THE ITO, HQRS., OSD O/O. CI T-2, HYDERABAD, DIRECTED THE ADDL. CIT THAT FRESH GROUNDS O F APPEAL WITH SLIGHT CORRECTIONS WERE APPROVED. CONSEQUENT TO TH AT, THE DCIT, CIRCLE-2(1) FILED THE PRESENT APPEAL DT. 16-06-2 016, WHICH WAS FOUND TO BE IN THE WRONG FROM AND INCOMPLETE. ACCORDINGLY, THE DEFECT MEMO WAS ISSUED AND REVISED FORM 36 WAS FI LED ON 25- 10-2016. SINCE THERE WAS A DELAY IN FILING THE APPEA L FROM THE DATE OF RECEIPT OF CIT(A)S ORDER TO AN EXTENT OF 437 DAYS, AO GAVE AN AFFIDAVIT SEEKING FOR CONDONATION OF DELAY. 5.1. AFTER CONSIDERING THE OBJECTIONS FROM ASSESSEE, TH E CONDONATION WAS GRANTED AND APPEAL WAS ADMITTED. 6. COMING TO THE MERITS OF ASSESSEE, THE REVENUE HAS RA ISED THE FOLLOWING GROUNDS: 1. THE CIT(APPEALS) ERRED IN LAW AND ON FACTS OF THE I N QUASHING THE ASSESSMENT ORDER WITHOUT LOOKING INTO THE MERITS O F THE CASE. 2. THE CIT(APPEALS) ERRED IN HOLDING THAT REOPENING OF ASSESSMENT IS BAD IN LAW WITHOUT APPRECIATING THAT THERE WAS REAS ON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AND THERE WAS F AILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MA TERIAL FACTS IN RETURN OF INCOME. 3. THE CIT(APPEALS) ERRED IN NOT APPRECIATING THE FACT THAT THE REOPENING IS VERY MUCH WITHIN THE AMBIT OF LAW AND IS SUPPORTED BY THE APEX COURT DECISION IN THE CASE OF CIT VS. PVS BEEDIES PVT. LTD., (1999) [237 ITR 13]. 4. ANY OTHER GROUND THAT WOULD BE RAISED DURING THE CO URSE OF APPELLATE PROCEEDINGS. 7. THUS, AS CAN BE SEEN FROM THE ABOVE, THE ONLY ISSU E FOR ADJUDICATION IS REOPENING OF THE ASSESSMENT WHICH WAS HELD BAD IN LAW. THE REVENUE GROUND IS ONLY ON THE REASON THAT TH ERE WAS I.T.A. NO. 956/HYD/2016 C.O.NO. 68/HYD/2016 M/S. IWM CONSTRUCTIONS PRIVATE LIMITED :- 5 - : REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENTS AND THERE WAS FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS IN RETURN OF INCOME. EVEN THOUGH THE RE VENUE RELIED ON THE DECISION IN THE CASE OF CIT VS. PVS BEEDIES PV T. LTD., (237 ITR 13), WE ARE NOT SURE HOW THIS CASE LAW WILL APPLY TO THE FACTS. FIRST OF ALL, THERE IS NO DISPUTE THAT THE ASSESSMENT WAS REOPENED AFTER THE END OF FOUR YEARS FROM THE RELEVANT ASSESSME NT YEAR. THE AMOUNT INVOLVED, AS ALREADY NOTED IN THE EARLIER ORDE R OF THE ITAT, IS ONLY RS. 1,70,154/-. PARA 3 FROM THE EARLIER ITA TS ORDER IN ASSESSEES OWN CASE REFERRED TO ABOVE IS AS UNDER: AS SEEN FROM THE ASSESSMENT ORDER, THE O NLY ISSUE ON WHICH ASSESSMENT WAS REOPENED WAS THAT INCOME OF RS. 1,70 ,154/- WAS NOT OFFERED TO INCOME, WHICH WAS ONLY ADDITION MADE IN THE ASSESSMENT ORDER. THUS, THE GROUNDS RAISED ARE NO T AT ALL CONNECTED TO THE ISSUE EITHER RAISED IN THE ASSESSM ENT ORDER OR THE ISSUE DECIDED BY THE LD.CIT(A) IN THE APPELLATE ORD ER. 8. THE PROVISIONS OF SECTION 147 PERMITS AO TO REOPEN THE ASSESSMENT WITHIN FOUR YEARS, EVEN IF THERE WAS AN ASS ESSMENT COMPLETED EARLIER. FOR REOPENING AFTER FOUR YEARS, THE CONDITION IS THAT THERE SHOULD BE FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSM ENT FOR THAT ASSESSMENT YEAR. AS SEEN FROM THE ORDER OF THE AO, TH E AUDIT HAS RAISED AN OBJECTION ON THE RECONCILIATION OF THE TDS CERTIFICATES, WHEREAS ASSESSEE HAS ALREADY OFFERED THE SAID INCOME IN EARLIER YEARS, WHICH FACT WAS ACCEPTED BY THE AO ON A REMAND BY THE CIT(A). IT INDICATES THAT ALL INFORMATION WAS FILED, TH EREFORE REVENUE AUDIT COULD EXAMINE. AO AFTER WARDS ACCEPTS TH E FACT THAT INCOME WAS ALREADY SUFFERED TAX. THUS, THERE IS NO BA SIS FOR REOPENING THE ASSESSMENT AT ALL. THE GROUNDS RAISED O N THIS ARE NOT I.T.A. NO. 956/HYD/2016 C.O.NO. 68/HYD/2016 M/S. IWM CONSTRUCTIONS PRIVATE LIMITED :- 6 - : VALID. INSTEAD OF OBTAINING RECONCILIATION OF INCOMES OFFERED AND TDS CLAIMED, THE ASSESSMENT WAS REOPENED. EVEN IF FOR ARGUMENT SAKE WE ADMIT THAT THE ASSESSMENT WAS REOPENED WITHIN THE PROVISIONS OF SECTION 147, STILL THERE IS NO MERIT IN C OMING IN APPEAL. WHEN THE FACT THAT ADDITION OF RS 1,70,154/- M ADE WAS NOT WARRANTED WAS ACCEPTED BY THE AO IN THE REMAND PRO CEEDINGS BEFORE THE CIT(A), REVENUE CANNOT MAKE ANY ADDITION IN THE IMPUGNED YEAR. WHY THE REVENUE HAS PREFERRED THE PRE SENT APPEAL IS KNOWN ONLY TO THE OFFICERS INVOLVED, AS WE DO NOT FIND ANY REASON THAT REVENUE SHOULD BE AGGRIEVED ON THE ORDER OF THE CI T(A). 9. ASSESSEE HAS MADE DETAILED SUBMISSIONS OBJECTING TO THE PRESENT APPEAL. THE SUMMARY OF THE OBJECTIONS ARE THAT THE CIT(A) HAS VALIDLY CONSIDERED THE REOPENING OF ASSESSMENT A S BAD IN LAW AND THE TAX EFFECT INVOLVED IS LESS THAN RS. 10 LAKHS AND AS PER THE BOARD CIRCULAR NO. 21/2015 ISSUED BY THE CBDT, DEPA RTMENT CANNOT PREFER AN APPEAL BEFORE THE ITAT. INSPITE OF TH AT CIRCULAR, THE REVENUE HAS PREFERRED THE APPEAL, IGNORING ITS OWN BOARD CIRCULAR. ASSESSEE ALSO OBJECTED TO THE SECOND ROUND OF LITIGATION AND CONDONATION OF DELAY FILED BY THE DEPARTMENT. IT H AS RAISED CROSS-OBJECTION RAISING VARIOUS OBJECTIONS ON THE APPE AL PREFERRED BY THE REVENUE. WE DO NOT INTEND TO ADJUDICATE EACH OF THE ISSUES BUT SUFFICE TO SAY THAT THERE IS NO APPLICATION OF MIND BY ANY OF THE OFFICERS INVOLVED IN THE APPEAL PREFERRED EITHER AT THE FIRST INSTANCE OR IN THE SECOND INSTANCE. MOREOVER, THE PRESENT APPEA L IS AGAINST THE BOARD CIRCULAR ON THE TAX EFFECT. THE FUNDAMENTAL P OINT WHICH THE OFFICERS HAVE IGNORED IS THAT EVEN IF RE-ASSESSMEN T IS UPHELD ON THE GROUNDS RAISED BY THE REVENUE, THERE CANNOT BE ANY ADDITION AS THE AO HIMSELF HAS ACCEPTED THAT ASSESSEE HAS OFFERE D THE I.T.A. NO. 956/HYD/2016 C.O.NO. 68/HYD/2016 M/S. IWM CONSTRUCTIONS PRIVATE LIMITED :- 7 - : INCOME IN EARLIER YEARS IN THE REMAND PROCEEDINGS B EFORE THE CIT(A). WITHOUT MAKING ANY COMMENTS, WE DISMISS THIS INFRUCTUOUS APPEAL OF REVENUE WHICH, IN OUR OPINION, REQUIRES TO BE DISMISSED WITH COSTS. HOWEVER, THERE IS NO ORDER TO COSTS. THE CROSS-OBJECTION IS ACADEMIC IN NATURE, ACCORDINGLY, THE CROSS- OBJECTION OF ASSESSEE IS ALSO DISMISSED. 10. IN THE RESULT, BOTH THE APPEAL OF REVENUE AS WELL AS CROSS- OBJECTION OF ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH FEBRUARY, 2017 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEM BER HYDERABAD, DATED 28 TH FEBRUARY, 2017 TNMM COPY TO : 1. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2( 1), HYDERABAD. 2. M/S. IWM CONSTRUCTIONS PRIVATE LIMITED, C/O. CHAKRADHAR & NANDAN, CHARTERED ACCOUNTANTS, 201, SRINATH RESIDENTIAL COMPLEX, S.D. ROAD, SECUNDERABA D. 3. CIT (APPEALS)-2, HYDERABAD. 4. THE CIT-2, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.