Ashok Shetty , Udupi V. The Deputy Commissioner of Income TAx Circle-1 , Udupi

ITA 1249/BANG/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7571 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 16-04-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T N PRAKASH
• Keywords: Rectification of order
• Section: 40(a)(ia); 10B; 250; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 1249 / BANG/201 8 ASSESSMENT YEAR : 2 0 11 - 1 2 SHRI ASHOK SHETTY, PROP: ASHOK IMPEX (100% EOU), RAJ TOWERS, OPP: CITY BUS STAND, UDUPI 576 101. PAN: ADBPM5671P VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1, UDUPI. APPELLANT RESPONDENT ASSESSEE BY : SHRI NARENDRA SHARMA, ADVOCATE R EVENUE BY : SHRI T.N. PRAKASH, ADDL. CIT (DR) DATE OF HEARING : 0 2 .0 4 .2019 DATE OF PRONOUNCEMENT : 09 .0 4 .2019 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AND THE SAME IS DIRECTED AGAINST THE ORDER OF LD. CIT (A)-10, BANGALORE DATED 09.01.2018 FOR ASSESSMENT YEAR 2011-12. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. 1. THE IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX [APPEALS] AND ORDER GIVING EFFECT R.W.S ORDER MADE U/S 154 THAT OF THE LEARNED ASSESSING OFFICER TO THE EXTENT WHICH IS AGAINST THE APPELLANT IS OPPOSED TO LAW, WEIGHT OF EVIDENCE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE. 2. THE APPELLANT DENIES ITSELF LIABLE TO BE ASSESSED ON A TOTAL INCOME OF RS.5,78,200J- AS DETERMINED BY THE LEARNED ASSESSING OFFICER AND CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME-TAX [APPEALS], ON THE FACTS ANDCIRCUMSTANCES OF THE CASE. 3. THE LEARNED ASSESSING OFFICER WHO IS STATUTORILY BOUND TO EXECUTE A DIRECTION GIVEN BY THE HONOURABLE COMMISSIONER (APPEALS), IS NOT ITA NO.1249/BANG/2018 PAGE 2 OF 5 JUSTIFIED AND HAD FAILED TO ADHERE TO THE DOCTRINE OF 'JUDICIAL DISCIPLINE' IN AS MUCH AS BY NOT ADHERING TO THE DIRECTION GIVEN BY THE HIGHER UPS IN AN OGE RELATED PROCEEDINGS AND TOOKARBITRARY PROPOSITIONS IN RECTIFICATION ORDER AND THUS CREATED TOTALLY CHAOTIC SITUATIONS WHEN SUCH DIRECTION OF LD. COMMISSIONER (APPEAL) IN AN ORDER DT. 21.08.2014 HAD ATTAINED FINALITY SUBSEQUENT TO THIS HONOURABLE TRIBUNAL'S ORDER. 4. THE LEARNED COMMISSIONER OF INCOME-TAX [APPEALS] WAS NOT JUSTIFIED IN CONFIRMING THE DENIAL OF DEDUCTION UNDER FIRST PROVISO TO SECTION 40A(IA) OF THE ACT MADE BY THE LEARNED ASSESSING OFFICER, CLAIMED BY THE APPELLANT IN ACCORDANCE WITH ORDER MADE U/S 250 OF THE ACT, DT. 21.08.2014, PARA 6.4 THEREOF AND UNDER THE FACTSAND CIRCUMSTANCES OF THE CASE. 5. THE LD. COMMISSIONER WHO ORDERED FOR DISALLOWANCE VI] S 40(A)(IA) AND PROVIDE THE DEDUCTION OF RS. 38,94,144/- ON PAYMENT BASIS VIDE ORDER DT. 21.08.2014, PARA 6.4 THEREOF, BUT TOOK A 'U-TURN' AND OPINED SUCH DEDUCTION IS ALREADY BEEN ALLOWED WHILE PASSING THE IMPUGNED ORDER. HENCE, THE LD. COMMISSIONER (APPEALS)FAILED TO APPLY THE TAXATION PRINCIPLES CONSISTENTLY AND MAINTAIN UNIFORMITY AND ALLOWED 'TOTALLY CHAOTIC SITUATIONS' TO CONTINUE. 6. THE OFFICERS BELOW ERRED IN THE ORDER, IN AS MUCH AS THE LD. AO TOOK ARBITRARY POSITION IN AN OGE RELATED PROCEEDING AND THE LD. COMMISSIONER (APPEALS) TOOK DIFFERENT STANDS ON SAME ISSUE IN TWO ROUNDS OF APPEALS. TAKING SUCH DIFFERENT POSITIONS CAN NEVER LEND FINALITY TO ANY JUDICIAL ORDERS AND WILL LEAD TO PROTRACTEDLITIGATION. 7. THE LD. AO FAILED TO ADHERE TO THE CBDT INSTRUCTION AND ABIDE BY SPIRITS OF F. NO. 279/MISCJ141/2015-ITJ AND PASS THE OGE AS LAID OUT IN THE ABOVE BOARDINSTRUCTION. 8. WITHOUT PREJUDICE TO ANY OTHER GROUND, THE LEARNED ASSESSING OFFICER HASCONTRADICTED AND APPLIED DOUBLE STANDARD IN PROVIDING THE CORRECT DEDUCTION U/S 10B OVER THE YEARS AND WITHIN THE RELEVANT YEARS TOO. FOR THE ASSESSMENT YEAR2010-11, THE LEARNED AO HAD DISALLOWED A SUM OF RS. 16,63,756/- U/S 40 A(IA)BUT FAILED TO CONSIDER SUCH INCREASED PROFITS OF THE BUSINESS WHILE WORKING OUTTHE DEDUCTION U/S 10B AND EFFECTIVELY DID NOT PROVIDE SUCH 'TELESCOPED LARGERDEDUCTION' AS CLAIMED BY THE LEARNED AO IN THE ORDER MADE OUT IN SECTION 154 OFTHE ACT. SIMILAR ADDITION OF RS. 3,22,706/- WAS MADE FOR THE AY 2011-12 TOO.HOWEVER, WHILE GRANTING THE RELIEF CRAVED UNDER FIRST PROVISO TO SECTION 40A(IA),THE LEARNED AO TOOK 'ARBITRARY PLEA' IN AN OGE RELATED PROCEEDING, THAT NO SUCHDEDUCTION IS PERMISSIBLE AS THE SAME IS COVERED AND 'TELESCOPED' UNDER LARGEREXEMPTION U/S10B OF THE ACT, WHICH IS INCORRECT FROM THE FACE OF THE ORDER MADEON 26.02.2015. THUS, THE LEARNED AO HAS FAILED TO APPLY THE CORRECT LEGALPROVISIONS ITA NO.1249/BANG/2018 PAGE 3 OF 5 OF THE ACT, FAILED TO TAKE DEFINITE STAND, APPLY THE LEGAL PROVISIONSCONSISTENTLY AND TO EXTEND THE EQUITY TO THE APPELLANT HENCE CAUSED DOUBLEJEOPARDIZE TO THE APPELLANT. 9. THE LEARNED ASSESSING OFFICER FAILED TO CARRY FORWARD THE UNABSORBED DEDUCTION OF SECTION 40A (IA) TO THE SUCCESSIVE YEARS AND EXTEND THE CONSEQUENTIAL RELIEF IN THEOGE RELATED PROCEEDING. 10. WITHOUT PREJUDICE TO ANY OTHER GROUND, WHILE PASSING THE ORDER GIVING EFFECT, THELEARNED ASSESSING OFFICER HAVING DISALLOWED U] S 40(I)(A) ACT, OUGHT TO HAVERECOMPUTED THE DEDUCTION ULS 10B OF THE ACT AND ALLOWED THE DEDUCTION ULS 10BACCORDINGLY AFTER CONSIDERING SUCH ENHANCED BUSINESS PROFITS. THE APPELLANT CRAVES LEAVE OF THIS HON'BLE TRIBUNAL TO ADD, ALTER, MODIFY, DELETE OR SUBSTITUTE ANY OR ALL OF THE ABOVE GROUNDS OF APPEAL AS MAY BE NECESSARY AT THE TIME OFHEARING OF THE APPEAL. FOR THESE AND OTHER GROUNDS, WHICH ARE MUTUALLY EXCLUSIVE THAT MAY BE URGED AT THETIME OF HEARING OF APPEAL, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED FOR THEADVANCEMENT OF SUBSTANTIAL CAUSE OF JUSTICE AND EQUITY. 3. IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT ALTHOUGH AS MANY AS 10 GROUNDS ARE RAISED BY ASSESSEE, BUT ISSUE INVOLVED IS ONLY ONE AS TO WHETHER THE AMOUNT IN QUESTION BEING THE DISALLOWANCE MADE U/S. 40(A)(IA) IN ASSESSMENT YEAR 2010-11 OF RS. 38,94,144/- SHOULD BE ALLOWED IN ASSESSMENT YEAR 2011-12. HE SUBMITTED THAT THIS ISSUE WAS DECIDED BY CIT (A) AS PER PARA 5 TO 5.4 OF HIS ORDER AND IT WAS HELD BY HIM THAT SINCE IN ASSESSMENT YEAR 2010-11, THE ASSESSEE WAS ALLOWED DEDUCTION U/S. 10B ON THE INCOME AFTER DISALLOWANCE U/S. 40(A) (IA), NO REDUCTION IS ALLOWABLE IN THE PRESENT YEAR IN RESPECT OF THAT AMOUNT. HE SUBMITTED THAT WHEN DEDUCTION IS ALLOWABLE AS PER LAW IN THE PRESENT YEAR, SAME SHOULD BE ALLOWED. THE LD. DR OF REVENUE SUPPORTED THE ORDER OF CIT(A). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND WE REPRODUCE THE RELEVANT PARAS FROM THE ORDER OF CIT (A). THE SAME ARE AS UNDER. 5. DECISION 5.1 I HAVE GONE THROUGH THE WRITTEN SUBMISSION OF THE A/R, THE STATEMENT OF FACTS AND GROUNDS OF APPEAL. I HAVE ALSO PERUSED THE ORDER DATED 07.09.2015 PASSED BY THE AO ALONG WITH THE ORDER OFTHE CIT(A)AND THE ASSESSMENT ORDERS FOR THE A.Y. 2010-11 AND 2011-12. 5.2 IN THE A.Y. 2010-11 THE APPELLANT HAD CLAIMED DEDUCTION U/S 10B ITA NO.1249/BANG/2018 PAGE 4 OF 5 AMOUNTING TO RS.5,43,27,205/- WHICH WAS DISALLOWED BY THE AO. HE ASSESSED THE TOTAL INCOME AS BELOW: RETURNED INCOME RS. 4,96,380/- DEDUCTION U/S 10B DISALLOWED RS.5,43,27,205/- DISALLOWANCE U/S 40(A)(IA) RS. 16,63,756/- DISALLOWANCE U/S 40(A)(IA) RS. 67,43,269/- TOTAL INCOME RS.6,32,30,610/- 5.3 IN THE ORDER FOR THE A.YS. 2010-11 AND 2011-12 THE CIT(A)DIRECTED AS BELOW: 'FOR THE DETAILED DISCUSSIONS IN THIS ORDER, I AM OF THE CONSIDERED VIEW THAT THE APPELLANT HAS SATISFIED THE CONDITION PRECEDENT FOR DEDUCTION U/S 10B AND HENCE I DIRECT TO ALLOWTHE SAME FOR BOTH THE YEARS.' WITH REGARD TO THE DISALLOWANCE U/S 40(A)(IA) THE CIT(A) CONFIRMED THE ADDITION OF RS.16,63,756/-. OUT OF THE AMOUNT OF RS.67A3,269/- THE CIT(A) DELETED THE ADDITION OF RS. 28A9,125/- AND DIRECTED THAT THE BALANCE AMOUNT OF RS.38,94,144/- SHOULD BE ALLOWED IN THE A.Y. 2011- 12. 5.4 THE ABOVE ORDER OF THE CIT(A) HAS BEEN CAREFULLY CONSIDERED. WITH THE ABOVE DIRECTION OF THECIT(A)THE TOTAL INCOME OF THE APPELLANT HAS EFFECTIVELY BECOME THE INCOME DECLARED IN THE RETURN OFINCOME; THERE REMAINS TO MORE DISALLOWANCES. THE DISALLOWANCE U/S 40(A)(IA) CARRIED MEANING WHEN THE CLAIM OF DEDUCTION U/S 10B WAS DISALLOWED BECAUSE IT WOULD RESULT IN AN ENHANCED TAXABLE INCOME. NOW THAT THE ENTIRE AMOUNT OF RS.543,27,205/- CLAIMED U/S LOB HAS BEEN ALLOWED BY THECIT(A) THE DISALLOWANCE U/S 40(A)(IA) BECOMES INFRUCTUOUS ESPECIALLY WHEN THE DISALLOWED AMOUNT U/S 40(A)(IA) IS PART OF THE EXPENDITURE WHICH RESULTED IN THE PROFIT OF RS.543,27,205/- WHICH WAS CLAIMED AS EXEMPT U/S 10B. SO I FIND FORCE IN THE LOGIC OF THE AO THAT WHILE ALLOWING THE DEDUCTIONU/S 10B THE DISALLOWANCE U/S 40(A)(IA) IS DEEMED TO HAVE CONSIDERED. TO PUT IT SIMPLY, WHEN THEORIGINAL CLAIM OF DEDUCTION OF THE APPELLANT HAS ALREADY BEEN ALLOWED THERE REMAINS NO DISALLOWED AMOUNT. THEREFORE, I AM OF THE CONSIDERED VIEW THAT THE APPELLANT CANNOT CLAIM THE ALLOWANCE OF THEAMOUNT OF RS.38,94,144/- IN THE A.Y. 2011-12 WHICH WAS DISALLOWED U/S 40(A)(IA) IN THE A.Y. 2010-11.ACCORDINGLY, I UPHOLD THE ORDER OF THE AO. 5. FROM THE ABOVE PARAS REPRODUCED FROM THE ORDER OF CIT (A), WE FIND THAT IN PARA 5.3 OF HIS ORDER, THIS IS THE BASIS ADOPTED BY CIT (A) THAT THE ASSESSEE CANNOT CLAIM THE ALLOWANCE OF THE AMOUNT OF RS.38,94,144/- IN THE A.Y. 2011-12 WHICH WAS DISALLOWED U/S 40(A)(IA) IN THE A.Y. 2010-11 BECAUSE THE DISALLOWANCE IN A. Y. 2010 11 U/S 40A (IA) HAS NOT RESULTED ITA NO.1249/BANG/2018 PAGE 5 OF 5 IN INCREASE OF TAXABLE INCOME IN THAT YEAR BECAUSE OF DULL DEDUCTION ALLOWED U/S 10B. THIS FINDING OF CIT (A) COULD NOT BE DISLODGED BY THE LEARNED AR OF THE ASSESSEE AND THEREFORE, WE FEEL THAT THERE IS NO INFIRMITY IN THE ORDER OF CIT (A) ON THIS ISSUE. MOREOVER, THE ASSESSEE HAS BEEN ALLOWED DEDUCTION U/S 10B IN THE PRESENT YEAR. IF THIS CLAIM OF THE ASSESSEE FOR DEDUCTION OF RS.543,27,205/- U/S 40A (IA) IS ALLOWED IN THE PRESENT YEAR, IT WILL RESULT INTO DECREASE OF GROSS TOTAL INCOME AND AS A CONSEQUENCE, THE DEDUCTION ALLOWABLE U/S 10B WILL GO DOWN BY THE SAME AMOUNT WITH NO IMPACT ON THE ULTIMATE TAXABLE INCOME. FOR THIS REASON ALSO, THE CLAIM OF THE ASSESSEE IS OF ACADEMIC INTEREST ONLY WITH NO IMPACT ON THE ULTIMATE TAXABLE INCOME. WE THEREFORE, DECLINE TO INTERFERE IN THE ORDER OF CIT (A). 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE. SD/- SD/- (PAVAN KUMAR GADALE) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 09 TH APRIL, 2019. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.