M/s Jaico Automobile Engineering Company Pvt Ltd , Bangalore V. The Deputy Commissioner of Income Tax Circle-11(5), Bangalore

ITA 125/BANG/2022

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 8171 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 21-02-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Tax effect; Set aside; Capital Gains
• Section: 271(1)(c); 143(3); 133A; 234B

Judgement Text

ITA No.125/Bang/2022 M/s. Jaico Automobile Engineering Company Pvt. Ltd., Bangalore IN THE INCOME TAX APPELLATE TRIBUNAL “C’’ BENCH: BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA No.125/Bang/2022 Assessment Year: 2007-08 M/s. Jaico Automobile Engineering Company Pvt. Ltd. 9/10, II Stage, D.K. Industrial Area Mahadevapura Bangalore 560 048 PAN NO : AAACJ5640E Vs. Deputy Commissioner of Income-tax Circle-4(1)(1) Bangalore APPELLANT RESPONDENT Appellant by : Smt. Sheetal Borkar, A.R. Respondent by : Shri Praveen Karanth, D.R. Date of Hearing : 12.09.2022 Date of Pronouncement : 12.09.2022 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: This appeal by assessee is directed against order of CIT(A) dated 19.3.2018. The assessee has raised following grounds of appeal:- 1. The CIT (A) ought to have appreciated that the Show Cause Notice is defective in that it did not specify the reason for initiating the penalty proceedings under Section 271(1)(c) of the Act. Rs.9,62,91,447/- ITA No.125/Bang/2022 M/s. Jaico Automobile Engineering Company Pvt. Ltd., Bangalore Page 2 of 10 2. The learned CIT(A) ought to have followed the judgment of the High Court of Karnataka in the case of M/s.SSA Emerald Meadows vs reported in ............... ITR .... and ought to have cancelled the penalty in toto. Rs.9,62,91,447/- • 3. The learned CIT(A) ought to have appreciated that there was no possession handed over as required under the Act and hence the capital gain determined itself is bad in law. Rs.9,62,91,447/- 4. The learned CIT(A) ought to have appreciated that the levy of penalty under Section 271(1)(c) for the relevant assessment year is opposed to law and to the principles of natural justice and accordingly he ought not to have confirmed the levy of penalty. Rs.9,62,91,447/- 5. The learned CIT(A) ought to have appreciated that there being no concealment or furnishing of inaccurate particulars of income, the levy of penalty under Section 271(1)(c) was unwarranted. Rs.9,62,91,447/- 6. The learned CIT(A) ought to have appreciated that the assessing authority having failed to indicate to the proceedings initiated either for concealment of income or furnishing of inaccurate particulars in the show cause notice, the penalty proceedings initiated were bad in law and consequently the penalty levied is also bad in law and liable to be deleted as held by the jurisdictional High Court and accordingly he ought to have cancelled the penalty levied. Rs.9,62,91,447/- 7. The learned CIT(A) ought to have appreciated that the assessing officer should - have accepted the various explanation given by the Appellant in the course of the assessment proceedings which would justify the claim of the Appellant and accordingly he ought to have refrained from holding that there was justifiable penalty to be levied under Section 271(1)(c) of the Act. Rs.9,62,91,447/- 8. The learned CIT(A) ought to have appreciated that the Appellant had disclosed all the materials and given explanation towards justification of the claim and accordingly there was no reason to confirm the levy of penalty under Section 271(1)(c) of the Act. Rs.9,62,91,447/- ITA No.125/Bang/2022 M/s. Jaico Automobile Engineering Company Pvt. Ltd., Bangalore Page 3 of 10 9. Without prejudice, the levy of penalty as confirmed by the learned CIT(A) is arbitrary, excessive and ought to be deleted in full. General 10 For these and such other grounds that may be urged at the time of hearing, the Appellant prays that the appeal may be allowed. General TOTAL TAX EFFECT Rs.9,62,91,447/- 2. Facts of the case are that the assessee company is engaged in the business of bus body building and fabrication. The assessee filed its return of income for the relevant assessment year on 31.01.2008 declaring a total income of Rs.6,52,46,566/-. The assessee had received a sum of Rs.14,00,00,000/- from M/s. Gopalan Enterprises. The assessee originally executed an agreement on 11.08.2006 for sale of the property consisting of land and industrial building for a sum of Rs.19,44,38,720/-. However, the same did not get materialize and the assessee had entered into fresh agreement on 29.11.2006 for a consideration of Rs.14 crores due to reduction in area of land and building. The agreement was split into two parts i.e., one towards consideration for sale of the land and building at Rs.9 crores and the balance Rs.5 crores towards sale of improvement. Here again the consideration for the land was fixed at Rs.7,20,00,000/- and consideration for building was determined at Rs.1,80,00,000/-. The assessee had worked out the long-term capital gains in respect of land, whereas the consideration of the building was reduced out of WDV. Thus, the long-term capital gains were offered to tax at Rs.5,55,31,547/-. Out of the amount of Rs.5 crores received towards the improvement the assessee had shown Rs.1,63,70,521/- as expenses and the balance was offered for taxation. Sri S K Ajmera, General Manager-Finance was examined and after obtaining the statement from him, the assessing authority did not accept the explanation of the profit out of improvement and taken into consideration of Rs. 5 crores also towards land and building and ITA No.125/Bang/2022 M/s. Jaico Automobile Engineering Company Pvt. Ltd., Bangalore Page 4 of 10 determined the capital gains at Rs.10,55,31,547/- without allowing the expenses claimed. The assessing authority further did not allow the traveling expenses to the tune of Rs.1,68,371/- alleging the same to be personal expenses of the Directors and their spouses. The assessing authority further disallowed Rs.17,26,100/- being the 11% of Rs.1,56,91,814/- which was shown as drawn by one of the Directors Sri B. S Chadha alleging the expenses claimed is required to be disallowed to this extent as relatable to the amounts advanced to the Directors and thus not for business purposes without appreciating that no part of the borrowed funds had been advanced to the Director. 2.1 Further, in the course of survey under Section 133A of the Income-tax Act,1961 ['the Act' for short], it was found that there were sale of scrap, out of which the assessee had recorded Rs.31,45,974/- in the books of accounts. The remaining amount of Rs.25,76,253/- was not available in the books of accounts. The assessee explained that out of sale of scrap to the tune of Rs.25,76,253/-, Rs.10 lakhs was offered in the relevant assessment year. However, the assessing authority alleged that no receipt had been proved to have been included and consequently the sum of Rs.25,76,253/- was added to the declared income as undisclosed 2.2 The assessee had received an amount of Rs. 30 crores from Ms. IDEB Investments Private Ltd during the relevant assessment year in pursuance of Joint Development Agreement. The assessing authority found that there was Joint Development Agreement executed between the assessee and M/s. IDEB on 30th March, 2007 and on the same date, there was an agreement for sale between the assessee company and M/s. IDEB. Further, on the very same date a General Power of Attorney was also executed by the assessee in ITA No.125/Bang/2022 M/s. Jaico Automobile Engineering Company Pvt. Ltd., Bangalore Page 5 of 10 favour of M/s. IDEB. Having taken into account all the documents together, the assessing authority held that the transfer was complete during the relevant year by virtue of the provisions of Section 2(47)(v) of the Act and accordingly the capital gains was required to be assessed to tax in the relevant year. The assessing authority declined to accept the explanation of the assessee that the provisions of Section 2(47)(v) of the Act had no application since M/s. IDEB was not put in possession of the property in question before the end of the financial year relevant to the assessment year. Consequently, the long-term capital gains of Rs.43,61,72,341/- was brought to tax. Thus, a total amount of Rs.52,22,60,152/- was assessed to tax. Interest under Sections 234A, 234B, 234C and 234D of the Act had also been levied by the assessing authority. 2.3 The original assessment order under Section 143(3) of the Act was passed on 17.04.2009 determining the total income at Rs. 52,22,60,1521. The assessing authority made the following additions: 1. Travel expenses disallowed. Rs.1,68,371/- 2. Excess interest expenses disallowed Rs.17,26,100/- 3. Unaccounted scrap sales: Rs.25,76,253/- 4. Capital gain on transfer of property to M/s. Gopalan Enterprises was determined at Rs. 10,55,31,547/- as against Rs.5,55,31,547/-. 5. Capital gain on transfer of property to M/s. IDEB was determined at Rs.43,61,72,341/- as against Rs. NIL. 2.4 Aggrieved by the above, the assessee filed an appeal before the CIT (Appeals) who vide his order dated 30.06.2010 gave partial relief but substantially confirmed the additions. Both the Assessee and the Revenue filed appeals before the Tribunal. The Tribunal vide order 111r111111111N11111100111111MEremil ITA No.125/Bang/2022 M/s. Jaico Automobile Engineering Company Pvt. Ltd., Bangalore Page 6 of 10 dated 30.04.2012 set aside the assessment in respect of the above grounds for fresh adjudication. Accordingly, the assessee was given an opportunity by the assessing authority and the assessee’s representative appeared and further furnished the letter dated 19.02.2014. The assessing authority directed further details to be furnished and without giving reasonable opportunity, proceeded to complete the assessment under Section 143(3) r w.s. 144 r.w.s 254 of the Act, wherein the additions made in the original assessment were again repeated and the total income was determined at Rs 52,22,60,152/- without giving proper weightage to the submissions of the assessee and also the evidence produced. Consequently, the impugned demand of Rs.14,92,91,556/- has been determined, which included interest under Sections 234A, 234B and 234C of the Act. After appropriation of the payment, a net demand of Rs. 10,40,51,465/- was made, which included interest under Section 234D of the Act 2.5 While doing so, the assessing officer has initiated penalty proceedings under Section 271(1)(c) of the Act and issued a show cause notice. However, on account of the fact that there was change in Management, there was no trace of the assessment order or the penalty notice alleged to have been served. The Management was not aware of such a service and it was only when recovery proceedings were initiated, they were able to enquire the matter with the Department and came to know about the service. In the prevailing circumstances, the penalty notice though issued by the Assessing Officer could not be responded to. The assessing officer has proceeded to levy the penalty u/s 271(1)(c) of the Act alleging concealment in his order. Consequently, penalty of Rs.9,62,91,447/- has been levied. Hence, the appeal. ITA No.125/Bang/2022 M/s. Jaico Automobile Engineering Company Pvt. Ltd., Bangalore Page 7 of 10 3. Against this assessee filed appeal before Ld. CIT(A) belatedly. Initially, the assessee has not filed any condonation petition. Later, the assessee explained the delay before Ld. CIT(A) as follows:- “The assessment order dated 28 02.2014 passed under section 143(3) r w s. 254 of the IT Act, 1961 appeared to have ben sent to the Company’s last known address. The appellant-company was managed by the family members of the shareholders and there was in-fight and the previous Management had left while transferring their shares and the present Management when they took over they were not aware of the various proceedings with regard to the past income-tax cases. It was only when recovery pressure was given to them by the Revenue, it was understood that some orders have been passed which required attention It was thereafter with the help of the Chartered Accountant who represented the cases of the Appellant-company, the assessing officer has been approached who had provided copies of the assessment order and the demand notice. From the copies it is found the order has been dispatched on 04.032014 However, the orders had never reached responsible person on account of the situation prevailed thereon for the reasons stated hereinabove and accordingly no attention could be given to the orders. It is not even clear as to whether the orders have been served on the right person None of the orders could be traced However, without further loss of time, the present Management of the Appellant-company proceeded with the filing of appeal on account of the impugned additions which are unwarranted Accordingly, this appeal is being filed within time from the date of receipt of copies of the order However, if there is delay in connection with the service of the original order, the delay is under unavoidable circumstances, beyond the control of the Appellant company. In the circumstances, it is prayed that the delay if any in filing the appeal before the learned CIT(A) may kindly be condoned and the appeal may please be admitted to disposed of on merits.” 4. The Ld. CIT(A) observed as follows in his order:- “8. It seems that the appellant was aware of the delay. This letter was prepared in 2014 and addressed to the then CIT(A)-IV. However, the same was not brought out initially by the assessee in the current appellate proceedings. 10. I have gone through the reasons mentioned and I find that no evidence is provided for so called fight between the shareholders, management, etc. Further, no evidence is provided for other similar reasons mentioned in the letter. In fact, the appellant had initially ITA No.125/Bang/2022 M/s. Jaico Automobile Engineering Company Pvt. Ltd., Bangalore Page 8 of 10 submitted incorrect date of service in form 35 so that the appeal appears to have been filed in time.” 6. Against this assessee is in appeal before us. At the outset, it is observed there was even delay before Tribunal in filing the appeal. However, it was made clear by a letter written by Ld. CIT(A), Unit-8, Bangalore dated 16.8.2022. The CIT(DR), Bangalore stating that CIT(A)-9 passed order on 19.3.2018 on inspection of the speed post register, it is found that there was no dispatch entry with regard to the impugned CIT(A) order. It was noticed that as follows:- “Later, the assessee has submitted the documents related to the appeal on 07-03-2018. After considering the documents available on record, the CIT(Appeal)-9, Bengaluru passed order on 19-03- 2018 with signature on the all the pages of appellate order as seen from the records ay . S1able in this office. AO/DDO doesn't appear to have dispatched the appeal order as seen from the last page of the order where his stamp is seen but without the details of the dispatch details. The speed post register for the relevant month, week and day has been inspected by my inspector where there is no dispatch entry for this assessee (copies of the relevant page of this speed post register are enclosed) - Enclosure 1 The AU 8 as on today was erstwhile of CIT(Appeal)-9, Bengaluru. The dispatch entries of this case verified in this window. The Status is showing as "Pending for Dispatch" and Email Delivery Status column is showing as "Email not Enable" (copy of the screenshot of the page is enclosed) - Enclosure 2 It can be concluded that the appellate order in the case of this assessee has remained to be dispatched by the then AO/ DDO who was supposed to dispatch it to the assessee once it was duly signed by the then CIT(A).” ITA No.125/Bang/2022 M/s. Jaico Automobile Engineering Company Pvt. Ltd., Bangalore Page 9 of 10 7. In view of this, we are of the opinion that the impugned order of CIT(A) has not been served to the assessee. Hence, there cannot be any delay in filing this appeal before this Tribunal. However, we noticed from the order of CIT(A) that there was a delay in filing appeal before CIT(A). The Ld. CIT(A) has not admitted the appeal and dismissed in limine and he has not assigned any reasons why the delay in filing the appeal should not be condoned. There was no allegation by Ld. CIT(A) that assessee acted in a malafide manner. In our opinion, the Ld. CIT(A) ought to have passed the detailed order by explaining the reasons why he has not admitted the appeal. The Ld. D.R. pointed out that the assessee has not filed the proper condonation petition before Ld. CIT(A). Hence, it was not admitted. Had the assessee failed to file any formal condonation petition, the same should not have brought to the knowledge of the assessee, which Ld. CIT(A) failed to do so. Hence, in the interest of justice, we restore entire issue in dispute to the file of Ld. CIT(A) with a direction to assessee to file a proper condonation petition and thereafter the Ld. CIT(A) has to consider the condonation petition in accordance with law. If he condones the delay, then he should decide the appeal on merit. Since we have remitted the issue in dispute with regard to condonation of appeal to Ld. CIT(A), at this stage, we refrain from going into the other issues raised by the assessee before us. ITA No.125/Bang/2022 M/s. Jaico Automobile Engineering Company Pvt. Ltd., Bangalore Page 10 of 10 8. In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 12 th Sept, 2022 Sd/- (Beena Pillai) Judicial Member Sd/- (Chandra Poojari) Accountant Member Bangalore, Dated 12 th Sept, 2022. VG/SPS Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore.