NSL Power & Infratech Ltd., S'bad, Hyderabad V. ITO, Ward-16(2), Hyderabad

ITA 1219/HYD/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1452 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 23-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M RAVINDER SAI
• Assessee Lawyers: S RAMA RAO
• Keywords: Bonafide belief; Non-deduction of tax
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 1219/HYD/2011 ASSESSMENT YEAR: 2006-07 N.S.L. POWER & INFRATECH LTD., APPELLAN T SECUNDERABAD. (PAN AACCN0773A) VS. INCOME-TAX OFFICER, RESPONDENT WARD 16(2), HYDERABAD APPELLANT BY : SHRI S. RAMA RAO RESPONDENT BY : SHRI M. RAVINDER SAI DATE OF HEARING : 27/11/2012 DATE OF PRONOUNCEMENT : 24/0 1/2013 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT-IV, HYDERABAD DATED 23/03/2011 FOR THE ASSESSMENT YEAR 2006-07. 2. THERE WAS A DELAY OF 26 DAYS IN FILING THE APPEA L BEFORE THE TRIBUNAL AGAINST THE ORDER OF COMMISSIONER OF I NCOME TAX U/S.263. THE ASSESSEE SUBMITTED THAT THEY WERE UND ER THE BONAFIDE BELIEF THAT NO APPEAL NEED TO BE FILED AGA INST THE ORDER OF CIT TILL REASSESSMENT IS MADE. HOWEVER, O N THE 2 ITA NO. 1219/HYD/11 NSL POWER & INFRATECH LTD. ADVICE OF THE LEGAL COUNSEL THEY FILED THE APPEAL A GAINST THE ORDER OF CIT BELATEDLY. 3. HEARD BOTH PARTIES. ON THE FACTS AND CIRCUMSTANC ES OF THE CASE WE DEEM IT FIT IN THE INTEREST OF JUSTICE TO C ONDONE THE DELAY IN FILING THE APPEAL AND TAKE UP THE SAME ON MERITS. 4. FOR THE ASSESSMENT YEAR 2006-07 THE ASSESSEE FIL ED RETURN ON 30.11.2006 ADMITTING NIL INCOME OF RETURN . THE ASSESSMENT U/S.143(3) WAS COMPLETED ON 17.11.2008. THE CIT PASSED ORDER UNDER SECTION 263 OF THE I.T. ACT 1961 , DIRECTING THE ASSESSING OFFICER TO REVISE THE ORDER OF ASSESS MENT ON THE FOLLOWING ISSUES:- 5. THE FIRST ISSUE WAS THAT IN RESPECT OF PAYMENT O F RS.1,83,176 OF PROFESSIONAL CHARGES AND PAYMENT OF RS.9,71,452/- OF INTEREST CHARGES THERE WAS NO PROO F OF DEDUCTION OF PAYMENT OF TDS. THEREFORE CIT HELD TH AT THIS ATTRACTED THE PROVISION OF SECTION 201(IA) UNDER WH ICH INTEREST WAS REQUIRED TO BE LEVIED. THE CIT FOUND THAT IN R ESPECT OF PROFESSIONAL CHARGES THE ASSESSEE HAD DEDUCTED TAX AT SOURCE AT RS.8,968/- AND PAID THE SAME INTO GOVERNMENT ACC OUNT ON 20.11.06. FURTHER HE HELD THAT THE TAX TO BE DEDUC TED AT SOURCE IS RS.15,000/- AND NOT RS.8,968/- AS MADE BY THE ASSESSEE. SIMILALRLY IN RESPECT OF INTEREST LIABIL ITY ALSO AO HAD NOT LEVIED INTEREST U/S 201(1A). IN THE CIRCUMSTANC ES HE DIRECTED THAT INTEREST U/S.201(IA) BE LEVIED ON THE ABOVE NON DEDUCTION/ SHORT DEDUCTION. AGGRIEVED THE ASSESSEE IS ON APPEAL. 3 ITA NO. 1219/HYD/11 NSL POWER & INFRATECH LTD. 6. THE SCOPE OF POWER OF THE COMMISSIONER OF INCOME TAX FOR REVISING THE ASSESSMENT U/S.143(3) WOULD BE LIM ITED TO THE ALLOWANCE MADE BY THE ASSESSING OFFICER IN ARRIVING AT THE TOTAL INCOME OF THE ASSESSEE OR INCOME NOT INCLUDED IN AR RIVING AT THE TOTAL INCOME OF THE ASSESSEE. THEREFORE, THE S COPE OF THE ORDER U/S.263 IS RESTRICTED TO THE INCOME AND EXPEN DITURE TAKEN INTO ACCOUNT WHILE ARRIVING AT THE TAXABLE IN COME AS DETERMINED BY THE ASSESSING OFFICER IN THE ORDER OF ASSESSMENT. THE FAILURE TO DEDUCT TAX AT SOURCE AN D LEVY OF INTEREST THERE ON ARE TO BE CONSIDERED UNDER SEPARA TE PROVISIONS U/S.201(1) AND 201(IA). THEY ARE SEPARA TE ORDERS AND CANNOT BE PART OF THE ASSESSMENT PROCEEDINGS. THEREFORE, WE ARE OF THE OPINION THAT THE FIRST REASON FOR REV ISING THE ORDER OF ASSESSMENT U/S.143(3) ON ACCOUNT OF NON-LE VY OF INTEREST U/S.201(IA) CANNOT BE SUSTAINED AND THE OR DER OF CIT DIRECTING THE ASSESSING OFFICER TO LEVY INTEREST U/ S.201(IA) IN RESPECT OF PROFESSIONAL CHARGES AND INTEREST HELD A RE HEREBY DELETED. 7. THE SECOND ISSUE IS REGARDING LOANS AGGREGATING TO RS.17 LAKHS ADVANCED BY THE ASSESSEE TO M/S. ADARSH DEVEL OPERS (P) LTD. THE CIT WAS OF THE OPINIONS THAT THE AGREEMEN T DT.19.3.2005 FOR GRANT OF LOAN PROVIDED FOR LEVY OF INTEREST BY THE BORROWER BUT THE ASSESSEE HAD NOT OFFERED ANY CORRESPONDING INTEREST INCOME. HE HAD EXTRACTED TH E AGREEMENT BETWEEN THE ASSESSEE AND M/S. ADARSH DEVE LOPERS (P) LTD WHEREIN THE AMOUNTS GIVEN BY WAY OF UNSECUR ED LOANS SHALL CARRY A COUPON RATE OF 4% PER ANNUM FOR THE F IRST QUARTER 4 ITA NO. 1219/HYD/11 NSL POWER & INFRATECH LTD. OF THE INVESTMENT AND THEREAFTER THE COMPANY WILL R ESET THE SAME TO SUCH HIGHER LEVEL AS MAY BE MUTUALLY AGREED AMONG THE SHAREHOLDERS. SUCH INTEREST SHALL BE PAYABLE T O THE INVESTOR EITHER ANNUALLY OR CUMULATIVELY AT THE TIM E OF REPAYMENT OF LOAN. SUCH INTEREST PAYMENTS WILL BE SUBJECT TO TDS. THE CIT FELT THAT WHEN THE AGREEMENT PROVIDES FOR COUPON RATE @ 4% THE ASSESSING OFFICER SHOULD HAVE EXAMINED THE ISSUE FURTHER. 8. BEFORE, THE LEARNED COUNSEL FOR THE ASSESSEE SUB MITTED THAT BY VIRTUE OF AN AGREEMENT DATED 19 TH MARCH, 2005 ENTERED INTO BY THE COMPANY, M/S ADARSH DEVELOPERS PVT. LTD . AND ITS PROMOTERS, THE COMPANY AGREED TO INVEST MONIES IN M /S ADARSH DEVELOPERS PVT. LTD. EQUIVALENT TO 25% OF ITS SHARE CAPITAL. IT IS SUBMITTED THAT ACCORDINGLY, THE COMPANY WAS TO B E ALLOTTED 5,00,000 EQUITY SHARES OF RS. 10 EACH AT THE RATE O F RS. 11 PER SHARE OF THE SAID M/S ADARSH DEVELOPERS PVT. LTD. SUBSEQUENTLY, IT WAS AGREED TO ALLOT THE SHARES AT THE FACE VALUE ONLY, WHICH AGGREGATED TO RS. 50,00,000/ IN A DDITION THERETO, THE COMPANY OR ITS NOMINEE WAS TO INVEST R S. 23,50,000 IN THE FORM OF UNSECURED LOAN CARRYING CO UPON RATE OF 4% PER ANNUM INITIALLY FOR THE FIRST QUARTER WIT H LIABILITY FOR INCREASE THEREAFTER. 9. IT IS FURTHER SUBMITTED THAT AT THE END OF THE Y EAR UNDER CONSIDERATION, THE COMPANY INVESTED RS. 50,00,000 T OWARDS SHARE CAPITAL AND RS. 17,00,00,000 AS AN UNSECURED LOAN IN THE SAID M/S ADARSH DEVELOPERS PVT. LTD., WHICH IN TURN INVESTED 5 ITA NO. 1219/HYD/11 NSL POWER & INFRATECH LTD. THE MONIES IN ANOTHER COMPANY, NAMELY, M/S SAPHIRE INFRASTRUCTURE PVT. LTD. 10. FURTHER, IT IS SUBMITTED THAT SUBSEQUENTLY, DIS PUTES AROSE ON THE LANDS ACQUIRED BY M/S SAPHIRE INFRASTRUCTURE PVT. LTD., WHEREBY MISUNDERSTANDINGS AROSE BWETEEN THE COMPANY AND THE SAID M/S ADARSH DEVELOPERS PVT. LTD. AND THERE WAS A PROTRACTED LITIGATION, WHICH WAS AGREED TO BE SETTL ED IN AN AMICABLE MANNER. AS A COMPROMISE, THE COMPANY DESIR ED TO HAVE A DIRECT INVESTMENT IN SAPHIRE RATHER THAN THR OUGH ADARSH. IT IS FURTHER SUBMITTED THAT BY VIRTUE OF A N AGREEMENT DATED 25 TH SEPTEMBER, 2008 ENTERED INTO BY THE COMPANY, M/S EMBASSY REAL ESTATE PROPERTIES AND HOLDINGS PVT. LT D. (FORMERLY ADARSH DEVELOPERS PVT. LTD.) AND ITS PROM OTERS, THE COMPANY WAS ENTITLED TO TAKE UP 8.33% DIRECT SHAREH OLDING IN SAPHIRE IN LIEU OF ITS 25% SHAREHOLDING IN ADARSH. IT IS SUBMITTED THAT BY VIRTUE OF THE SAID AGREEMENT AND IN ORDER TO ENABLE THE COMPANY TO HOLD 8.33% SHAREHOLDING IN SA PHIRE, THE COMPANY WAS TO RELINQUISH THE UNSECURED LOAN OF RS. 23,50,000 ADVANCED BY IT TO EMBASSY AND ALSO SELL T HE 5,00,000 EQUITY SHARES OF EMBASSY HELD BY IT TO THE PROMOTERS OF EMBASSY OR THEIR NOMINEES. 11. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD, WE FIND THAT THE COMPANYS ENTIRE UNSECURED LOAN TO EMBASSY GOT CONVERTED INTO SHARE CAPITAL OF SAPHIRE ALL BY VIRTUE OF THE AFORESAID WRITTEN AGREEMENTS AND NOT ANY ORAL UNDER STANDING. IT APPEARS THAT THE COMPANY HAS NOT DERIVED ANY INT EREST FROM M/S ADARSH DEVELOPERS PVT. LTD. AS SUCH, NO INTERES T HAS BEEN 6 ITA NO. 1219/HYD/11 NSL POWER & INFRATECH LTD. PROVIDED IN THE COMPANYS BOOKS ON THE UNSECURED LO AN ADVANCED TO M/S ADARSH DEVELOPERS PVT. LTD. FURTHER , IT IS CLEAR FROM THE AGREEMENT THAT THE UNSECURED LOAN SHALL CARRY A COUPON RATE OF 4% PER ANNUM FOR THE FIRST QUARTER OF THE INVESTMENT AND THEREAFTER, THE COMPANY WILL RESET T HE SAME TO SUCH HIGHER LEVEL AS MAY BE MUTUALLY AGREED AMONG T HE SHAREHOLDERS. THE WORD SHALL ONLY INDICATES THAT THERE IS NO CERTAINTY AND IN THIS CASE THE COMPANY HAS NOT DERI VED ANY INTEREST FROM M/S ADARSH DEVELOPERS PVT. LTD. WE AR E, THEREFORE, OF THE OPINION THAT THE ORDER OF CIT IS TO BE SET- ASIDE AND THE ASSESSEES GROUND OF APPEAL ON THIS I SSUE IS TO BE ALLOWED. WE ORDER ACCORDINGLY. 12. THE NEXT ISSUE IS REGARDING CLAIM OF DISALLOWAN CE OF RS.5,35,748/- AS FACTORY MAINTENANCE. THE ASSESSEE ACQUIRED A PROPERTY IN AUCTION FROM DEBT RECOVERY TRIBUNAL. HOWEVER, THE SAID AUCTION WAS SET ASIDE BY THE HONBLE HIGH COURT OF KARNATAKA. IN THE MEANWHILE, THE ASSESSEE TOOK POS SESSION OF THE PROPERTY AND INCURRED AN EXPENDITURE OF RS.5,35 ,000 AS MAINTENANCE OF PLANT AND MACHINERY. ACCORDING TO T HE CIT THE ASSESSEE HAD NEITHER PRODUCED ANY EVIDENCE NOR THE ASSESSING OFFICER HAD CONSIDERED THE ISSUE. WHILE WE DO NOT AGREE WITH CIT REGARDING THE DIRECTION TO STRAIGHTAWAY DISALLO W THE EXPENDITURE, WE SET ASIDE THIS ISSUE TO THE FILES O F ASSESSING OFFICER FOR RECONSIDERING THE ALLOWABILITY OF EXPEN DITURE ON THE BASIS OF EVIDENCE FILED BY THE ASSESSEE IN THIS REG ARD. 13. WITH THE RESULT THE ORDER OF CIT IS PARTLY SET ASIDE FOR FRESH CONSIDERATION BY THE ASSESSING OFFICER. 7 ITA NO. 1219/HYD/11 NSL POWER & INFRATECH LTD. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 24 TH JANUARY, 2013. SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGHAV AN) ACCOUNTANT MEMBER JUDICIAL MEMBE R HYDERABAD, DATED: 24 TH JANUARY, 2013. KV COPY TO:- 1) NSL POWER & INFRATECH LTD., C/O S. RAMA RAO, ADVOCATE, 3-6-643, SHRIYAS ELEGANCE, FLAT NO. 102, ST. NO. 9, HIMAYATNAGAR, HYDERABAD 29. 2) ITO, WARD 16(2), HYDERABAD. 3) THE CIT-IV, HYDERABAD 4) THE DEPARTMENTAL REPRESENTATIVE, I.T.A .T., HYDERABAD.