Deputy Commissioner Of Income Tax, Circle- 1(1)(1), Bangalore V. M/s. Avasarala Technologies Private Limited, Bangalore

ITA 112/BANG/2020

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5772 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2020
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 23-09-2020
• Assessment Year: 2013-2014
• Appeal Filed On: 22-01-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRADEEP KUMAR CIT BENGALURU
• Keywords: Opportunity of being heard; Set aside
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI. A. K. GARODIA, ACCOUNTANT MEMBER AND SMT . BEENA PILLAI , JUDICIAL MEMBER ITA NO S . 112 TO 114 /BANG/20 20 ASSESSMENT YEARS : 2013-14, 2014-15 AND 2015-16 DCIT, CIRCLE 1(1)(1), BENGALURU. VS. M/S. AVASARALA TECHNOLOGIES PVT. LTD., SY. NO. 60K CHOODAHALLI SOMANAHALLI GATE, 26 TH KM KANAKAPURA ROAD, BENGALURU 560 082. PAN : AABCA 2381 E APPELLANT RESPONDENT REVENUE BY : SHRI. PRADEEP KUMAR, CIT (DR)(ITAT), BENGALURU ASSESSEE BY : NONE DATE OF HEARING : 23.09.2020 DATE OF PRONOUNCEMENT : 30 .09.2020 O R D E R PER ARUN KUMAR GARODIA, AM: THESE THREE APPEALS ARE FILED BY THE REVENUE AND THESE ARE DIRECTED AGAINST THREE SEPARATE ORDERS OF LEARNED CIT(A) 1, BENGALURU ALL DATED 27.07.2019 FOR ASSESSMENT YEARS 2013-14, 2014-15 AND 2015-16. ALL THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE REPRODUCE GROUNDS RAISED BY THE REVENUE IN THESE APPEALS: ITA NOS. 112 TO 114/BANG/2020 PAGE 2 OF 6 ITA NO.112/BANG/2020 1. THE ORDER OF THE LEARNED CIT (APPEALS), IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE, IS OPPOSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD. CIT (A) ERRED IN TREATING THE ENTIRE FINANCE COST OF RS. 14,33,75,968/- AS INCURRED FOR GENERAL BUSINESS PURPOSES AND THEREBY ALLOWING DEDUCTION CLAIMED U/S 36(1)(III) OF THE ACT. 3. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS HUMBLY PRAYED THAT THE ORDER OF THE LD. CIT (A) BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, TO AMEND OR DELETE ANY OF THE GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF APPEAL. ITA NO.113/BANG/2020 1. THE ORDER OF THE LEARNED CIT (APPEALS), IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE, IS OPPOSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD. CIT (A) ERRED IN TREATING THE ENTIRE FINANCE COST OF RS. 16,82,78,535/- AS INCURRED FOR GENERAL BUSINESS PURPOSES AND THEREBY ALLOWING DEDUCTION CLAIMED U/S 36(1)(III) OF THE ACT. 3. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS HUMBLY PRAYED THAT THE ORDER OF THE LD. CIT (A) BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, TO AMEND OR DELETE ANY OF THE GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF APPEAL. ITA NO.114/BANG/2020 1. THE ORDER OF THE LEARNED CIT (APPEALS), IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE, IS OPPOSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD. CIT (A) ERRED IN TREATING THE ENTIRE FINANCE COST OF RS. 25,65,26,859/- AS INCURRED FOR GENE. RAT BUSINESS PURPOSES AND THEREBY ALLOWING DEDUCTION CLAIMED U/S 36(1)(III) OF THE ACT. ITA NOS. 112 TO 114/BANG/2020 PAGE 3 OF 6 3. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS HUMBLY PRAYED THAT THE ORDER OF THE LD. CIT (A) BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, TO AMEND OR DELETE ANY OF THE GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF APPEAL. 3. THESE APPEALS WERE FIXED FOR HEARING FOR THE FIRST TIME ON 03.06.2020. ON THIS DATE, NONE APPEARED ON BEHALF OF THE ASSESSEE AND THEREFORE, HEARING WAS ADJOURNED TO 23.09.2020 AND NOTICE OF HEARING WAS SENT TO THE ASSESSEE BY RPAD WHICH HAS BEEN DULY SERVED ON THE ASSESSEE AS PER THE ACKNOWLEDGMENT CARD AVAILABLE ON RECORD. IN SPITE OF THIS, NONE APPEARED ON BEHALF OF THE ASSESSEE ON THIS DATE OF HEARING AND THERE IS NO REQUEST FOR ADJOURNMENT ALSO AND THEREFORE, THESE APPEALS WERE HEARD EX-PARTE QUA THE ASSESSEE. LEARNED DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDERS. 4. WE HAVE CONSIDERED THE SUBMISSIONS OF LEARNED DR OF THE REVENUE AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. FIRST, WE REPRODUCE PARA NO.18 OF THE ASSESSMENT ORDER PASSED BY THE AO FOR ASSESSMENT YEAR 2013-14 BECAUSE IN THIS PARA, THERE IS WORKING OF THE DISALLOWANCE MADE BY THE AO IN ALL THESE 4 YEARS: 18. AN ALTERNATIVE GROUND WAS RAISED BY THE ASSESSEE THAT THE ADMINISTRATIVE EXPENSES PASSED IN THE ORIGINAL COMPUTATION NEEDS TO BE DELETED FROM THE AS 7 CALCULATIONS AND CLAIMED IN FULL IN THE YEAR OF INCURRING THE SAME. THIS STAND IS ALSO NOT ACCEPTABLE AS IT IS IN VIOLATION OF THE MATCHING PRINCIPLE AND THE SAID COSTS HAVE BEEN CATEGORIZED BY THE ASSESSEE AS BEING COSTS ATTRIBUTABLE TO THE PROJECT BY THE ASSESSEE. IN VIEW OF THE ABOVE FACTS AND DISCUSSIONS, IT IS CLEAR THAT THE FINANCE CHARGES NEED TO BE CONSIDERED FOR THE PURPOSE OF RECOGNISING REVENUE AS PER AS 7. ACCORDINGLY, THE FINANCIAL YEAR WISE RECALCULATION OF COSTS INCURRED AND THE CALCULATION OF REVENUE RECOGNITION AS PER THE COMPANY AND THE IMPACT OF THE INCREASED REWORKED FINANCE CHARGES IS GIVEN BELOW ITA NOS. 112 TO 114/BANG/2020 PAGE 4 OF 6 AS DISCUSSED, AN AMOUNT OF RS 14,33,75,968 HAS BEEN CLAIMED IN THE P&L ACCOUNT OF AY 13-14 IN VIOLATION OF THE AS 7, ACCORDINGLY, I AM CONSTRAINED TO DISALLOW THE SAME AND ADD IT TO THE TOTAL INCOME OF THE ASSESSEE. PENALTY PROCEEDINGS ARE INITIATED UNDER SECTION 271(1)(C) FOR FILING INACCURATE PARTICULARS. 5. FROM THE ABOVE PARA REPRODUCED FROM THE ASSESSMENT ORDER, IT IS SEEN THAT THE AO HAS WORKED OUT THE DISALLOWANCE AS PER ACCOUNTING STANDARD AS 7. AS PER THE ORDER OF LEARNED CIT(A) FOR ASSESSMENT YEAR 2013-14, IT IS SEEN THAT IN PARA 4.3.7 OF HIS ORDER, IT IS NOTED BY LEARNED CIT(A) THAT IN COURSE OF HEARING, HE HAS CALLED FOR THE STATEMENT CONTAINING VOLUMINOUS DATA MAINTAINED BY THE ASSESSEE FOR COMPUTATION OF THE PERCENTAGE COMPLETION IN RESPECT OF VARIOUS WORKS EXECUTED DURING THE YEAR AS PER AS 7. HE HAS FURTHER NOTED THAT IT IS A DETAILED STATEMENT COVERING 327 COLUMNS, 1 FOR EACH PROJECT HAVING 120 ROWS. LEARNED CIT(A) HAS REPRODUCED THE STATEMENT CONTAINING 120 ROWS IN RESPECT OF 1 PROJECT AND THEREAFTER, IN PARA 4.3.8 OF HIS ORDER, LEARNED CIT(A) HAS HELD THAT AS PER THIS STATEMENT, THE ASSESSEE HAD WORKED OUT THE INTEREST COMPONENT BASED ON THE UTILIZATION OF FUNDS FOR THE SAID WORKS. WE FIND THAT LEARNED CIT(A) HAS SIMPLY DECIDED THE ISSUE ON THE BASIS OF THIS STATEMENT HE OBTAINED FROM THE ASSESSEE WITHOUT CONFRONTING THE SAME TO THE ITA NOS. 112 TO 114/BANG/2020 PAGE 5 OF 6 AO AND WITHOUT OBTAINING ANY REMAND REPORT FROM THE AO. IN OUR CONSIDERED OPINION, LEARNED CIT(A) SHOULD HAVE OBTAINED REMAND REPORT FROM THE AO IN THIS REGARD ALTHOUGH WE ARE AWARE THAT LEARNED CIT(A) CAN CALL FOR THE STATEMENT FROM THE ASSESSEE AND CAN ADMIT THE SAME BUT BEFORE DECIDING THE ISSUE ON THE BASIS OF SUCH STATEMENT OBTAINED BY HIM FROM THE ASSESSEE, IN THE INTEREST OF JUSTICE, IT SHOULD BE CONFRONTED TO THE OTHER SIDE ALSO FOR HIS COMMENTS. SINCE THIS WAS NOT DONE, WE FEEL IT PROPER TO RESTORE THE ENTIRE MATTER BACK TO THE FILE OF CIT(A) FOR A FRESH DECISION AFTER OBTAINING REMAND REPORT FROM THE AO. WE FIND THAT THE ORDER OF LEARNED CIT(A) AND AO ARE IDENTICAL IN ALL THESE THREE YEARS AND THEREFORE, IN ALL THESE THREE YEARS, WE SET ASIDE THE ORDER OF LEARNED CIT(A) AND RESTORE THE MATTER BACK TO HIS FILE FOR A FRESH DECISION AFTER OBTAINING REMAND REPORT FROM THE AO AND AFTER ALLOWING ADEQUATE OPPORTUNITY OF BEING HEARD TO BOTH SIDES. 6. IN THE RESULT, ALL THESE THREE APPEALS OF THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE. SD/- SD/- (BEENA PILLAI) (A.K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED: 30 TH SEPTEMBER, 2020. /NS/* ITA NOS. 112 TO 114/BANG/2020 PAGE 6 OF 6 COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.