M/s Lepakshi Knowledge Hub Pvt Ltd , Bangalore V. Assistant Commissioner of Income TAx Circle-4(1)(1), Bangalore

ITA 1260/BANG/2018

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 9643 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Next Hearing Date: 17-10-2022
• Assessment Year: 2013-2014
• Appeal Filed On: 16-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Principle of natural justice; Rule 8D
• Section: 234B; 14A; 251

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH : BANGALORE BEFORE SMT. BEENA PILLAI, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER Appeal No. Appellant Respondent Assessment Year ITA No. 1229/Bang/2018 The Joint Commissioner of Income-tax(OSD), Circle – 4(1)(1), Bangalore. M/s. Leepakshi Knowledge Hub Pvt. Ltd., No. 26/1, 1 & 2 nd Floor, IBIS Hotel, Hosur Road, Bangalore – 560 068. PAN: AABCL4609G 2013-14 ITA Nos. 1260 & 1261/Bang/2018 M/s. Lepakshi Knowledge Hub Pvt. Ltd., No. 26/1, 1 & 2 nd Floor, IBIS Hotel, Hosur Road, Bangalore – 560 068. PAN: AABCL4609G The Deputy Commissioner of Income Tax, Circle – 4(1)(1), Bengaluru. 2013-14 The Assistant Commissioner of Income Tax, Circle – 4(1)(1), Bengaluru. 2014-15 Assessee by : Shri Adarsh G, CA Revenue by : Shri Sunil Kumar Singh, CIT-DR Date of Hearing : 18-10-2022 Date of Pronouncement : 28-10-2022 ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present appeals by assessee as well as revenue has been filed against the orders passed by Ld.CIT(A)-4, Bangalore dated Page 2 of 8 ITA Nos. 1229, 1260 & 1261/Bang/2018 15/04/2016 and 27/01/2017 for A.Ys. 2013-14 and 2014-15 respectively on following grounds of appeal: ITA No. 1229/Bang/2018: “1. The Order of the Ld. CIT(A), in so far as it is prejudicial to the interest of the Revenue, is opposed to law and the fact and circumstances of the case. 2. On the facts of the case, Whether the decision of the Ld CIT(A) is right in allowing relief to the assessee in respect to cost of land which was never produced by the assessee before the AO, thus violating the provision of Rule 46A of the IT Rule. 3. On facts of the case, Whether decision of the Ld CIT(A) is right in allowing depreciation on the building by ignoring the Inspectors report which clearly establishes that the building was not put to use during the relevant period. 4. On facts of the case, Whether the decision of the Ld CIT(A) is right in allowing the appeal of the assessee despite the fact that the provisions to section 14A makes it clear that the expenditure has to be worked out as per Rule 8D(2)(ii) &, 8D(2)(iii). 5. On facts of the case, whether the decision of the Ld CIT(A) is right in allowing the appeal of the assessee as the same contravenes the provisions of section 14A and also the Ld CIT(A) has not followed the instructions laid down in the Board's Circular No. 5/2014 dated 11/02/2014 wherein, the Board's has made it clear that the disallowance u/s. 14A r.w.r 8D has to be made even where the tax payer in a particular year has not earned any exempted income. 6. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the CIT(A) in so far as it relates to the above grounds may be reversed and that of the Assessing Officer may be restored. 7. The appellant craves leave to add, alter, amend and delete any of the grounds that may be urged.” ITA No. 1260/Bang/2018: “1. The orders of the authorities below in so far as these are against the appellant are opposed to law, weight of evidence, natural justice, probabilities, facts and circumstances of the appellant's case. 2. The appellant denies itself to be assessed on a total income of Rs.89,78,91,176/- as directed by the learned CIT(A) as against the returned loss of Rs.1,31,61,607/- under the facts and circumstances of the case. Page 3 of 8 ITA Nos. 1229, 1260 & 1261/Bang/2018 3. The learned CIT(A) erred in upholding the action of the assessing officer in bringing to tax the proceeds from sale of land of Rs.54.16 crores in the assessment year 2013-14 instead of the assessment year 2014-15 under the facts and circumstances of the case. 4. The authorities below failed to appreciate the fact that realisation of sale proceeds was uncertain and thus the appellant could not recognise income in the impugned assessment year as per 'Accounting Standard 9 — Revenue Recognition' under the facts and circumstances of the case. 5. a) The mandatory condition of issue of notice under section 251(2) of the Act for enhancing the assessment has not been complied with and thus the direction of the learned CIT(A) to disallow the development cost of Rs.83,48,21,799/- has no legs to stand the test of law. b) The action of the learned CIT(A) in directing the assessing officer to disallow the development cost of Rs.83,48,21,799/- amounts to enhancement which is impermissible without the issue of notice under section 251(2) of the Act under the facts and circumstances of the case. 6. Without prejudice, the learned CIT(A) ought to have allowed deduction of Rs.83,48,21,799/- towards land development cost against the proceeds from sale of land under the facts and circumstances of the case. 7. The authorities below failed to appreciate the fact that the land development expenses incurred of Rs.83,48,21,799/- were fully supported by documentary evidence and thus the expenses ought to have been allowed under the facts and circumstances of the case. 8. Without prejudice, the disallowance made is highly excessive and needs to be substantially reduced under the facts and circumstances of the case. 9. Grounds on disallowance of depreciation: a) The learned CIT(A) erred in confirming the disallowance of depreciation on furniture and fixtures of Rs.17,84,666/- under the facts and circumstances of the case. b) The learned CIT(A) erred in confirming the disallowance of depreciation on office equipment of Rs.3,64,700/- under the facts and circumstances of the case. c) The learned CIT(A) erred in confirming the disallowance of depreciation on computers of Rs. 9,208/- under the facts and circumstances of the case. d) The authorities below grossly erred in holding that the furniture & fixtures, office equipment and computers were not put to use under the facts and circumstances of the case. Page 4 of 8 ITA Nos. 1229, 1260 & 1261/Bang/2018 10. The appellant denies itself liable to be levied interest under section 234B of the Act and further the computation of interest was not provided to the appellant as regard to the rate, period and method of calculation of interest under the facts and circumstances of the case. The appellant expressly urges that the period of levy of interest is not in accordance with section 234B of the Act. 11. Without prejudice, the interest levied under section 234B of the Act requires to be waived off under the facts and circumstances of the case. 12. The appellant craves leave to add, alter, delete or substitute any of the grounds urged above. 13. In view of the above and other grounds that may be urged at the time of the hearing of the appeal, the appellant craves that the appeal may be allowed in the interest of equity and justice.” ITA No. 1261/Bang/2018: “1. The orders of the authorities below in so far as these are against the appellant are opposed to law, weight of evidence, natural justice, probabilities, facts and circumstances of the appellant's case. 2. The learned CIT(A) grossly erred in holding that the proceeds from sale of land of Rs.54.16 crores is taxable in the assessment year 2013-14 instead of the assessment year 2014-15 under the facts and circumstances of the case. 3. The authorities below failed to appreciate the fact that the land development expenses incurred of Rs.83,48,21,799/- were fully supported by documentary evidence and thus the expenses ought to have been allowed under the facts and circumstances of the case. 4. Without prejudice, the appellant denies itself to be assessed on a loss of Rs.1,20,05,10,737/- as directed by the CIT(A) as against the returned loss of Rs.67,88,75,348/- under the facts and circumstances of the case. 5. The appellant denies itself liable to be levied interest under section 234B of the Act and further the computation of interest was not provided to the appellant as regard to the rate, period and method of calculation of interest under the facts and circumstances of the case. The appellant expressly urges that the period of levy of interest is not in accordance with section 234B of the Act. 6. Without prejudice, the interest levied under section 234B of the Act requires to be waived off under the facts and circumstances of the case. 7. The appellant craves leave to add, alter, delete or substitute any of the grounds urged above. Page 5 of 8 ITA Nos. 1229, 1260 & 1261/Bang/2018 8. In view of the above and other grounds that may be urged at the time of the hearing of the appeal, the appellant craves that the appeal may be allowed in the interest of equity and justice.” 2. At the outset, the Ld.AR submitted that the assessee had accounted for sale of land measuring 2,706.51 acres for an amount of Rs.54.16 crores, for the F.Y. 2012-13 relevant A.Y. 2013-14. However, before the books of accounts of assessee were finalised, the assessee was in receipt of show cause notice dated 03/07/2013 from Government of Andhra Pradesh, Industries & Commerce(INF) directing to assessee to show cause as to why MOU dated 22/12/2008 and the follow up G.O. Rt.No. 112, Industries & Commerce (INF) Department dated 21/02/2009, should not be cancelled for the alleged violations of certain clauses of MOU dated 22/12/2008. 3. It is submitted that due to the SCN issued, the assessee was uncertain of crystallising the sale for the relevant AY being 2013- 14 and therefore did not consider the revenue that was initially booked as income for A.Y. 2013-14. Subsequently, during F.Y. 2013-14 relevant to A.Y. 2014-15, an order was passed by Government of Andhra Pradesh on 13/02/2014 cancelling the allotment of land against which assessee preferred writ petition before Hon’ble Andhra Pradesh High Court. The assessee thus considered the revenue from the sale of land during A.Y. 2014-15 on accrual basis. 4. Assessee had also claimed certain depreciation on furniture, fixtures for the A.Y. 2013-14. 5. It is submitted that, the Ld.AO while passing the assessment order for A.Y. 2013-14 made addition in the hands of the assessee being received from sale of land amounting to Page 6 of 8 ITA Nos. 1229, 1260 & 1261/Bang/2018 Rs.54,16,05,500/-. The Ld.AO also disallowed the expenses claimed on payment basis and the depreciation claimed by assessee. 6. For A.Y. 2014-15, the Ld.AO while passing the assessment order disallowed the development expenditure claimed by the assessee amounting to Rs.85,47,91,910/-. It is the submission of Ld.AR that there is double disallowance in respect of the receipt from sale of land due to the disallowance made for A.Y. 2013-14 on accrual basis, and offered as income by the assessee in A.Y. 2014-15 which has not been considered. 7. It is the submission of the Ld.AR that in the event, the income from sale of land is to be taxed for A.Y. 2013-14, then the cost incurred for such sale must also be considered during the same A.Y. For A.Y. 2013-14, assessee in its appeal is also raised issue of enhancement wherein no notice u/s. 251 was issued to assessee. 8. In the revenue’s appeal filed for A.Y. 2013-14, the issue is in respect of violating the provisions of Rule 46A of IT Rules. The Ld.DR submitted that assessee at the time of hearing before the Ld.CIT(A), filed documents / evidences in respect of cost of land which was not produced before the Ld.AO and therefore there is violation of principles of natural justice. 9. Considering the totality of submission made by both sides for A.Ys. 2013-14 and 2014-15, we deem it appropriate to remand all these issues back to Ld.CIT(A) for fresh consideration, based on the evidences filed by assessee. The Ld.CIT(A) is directed to call for remand report in respect of the evidences filed by assessee from the Ld.AO in accordance with law. It is also directed that Page 7 of 8 ITA Nos. 1229, 1260 & 1261/Bang/2018 the sale consideration of the land must be taxed in the hands of the assessee in the correct year as per law and expenditure claimed against such sale also must be considered in the same A.Y. The assessee is directed to furnish all evidences in support of the claims made in both the years under consideration which shall be verified by the authorities in accordance with law, having regards to the investigation that was pending before the CBI Court. Needless to say that proper opportunity of being heard must be granted to assessee. Accordingly, all the issues raised by assessee as well as revenue for A.Ys. under consideration are remanded to the Ld.CIT(A) with above direction. Accordingly the appeals filed by assessee as well as revenue for A.Ys. 2013-14 and 2014-15 stands partly allowed for statistical purposes. In the result, all the appeals filed by assessee and revenue stands partly allowed for statistical purposes. Order pronounced in the open court on 28 th October, 2022. Sd/- Sd/- (LAXMI PRASAD SAHU) (BEENA PILLAI) Accountant Member Judicial Member Bangalore, Dated, the 28 th October, 2022. /MS / Page 8 of 8 ITA Nos. 1229, 1260 & 1261/Bang/2018 Copy to: 1. Appellant 4. CIT(A) 2. Respondent 5. DR, ITAT, Bangalore 3. CIT 6. Guard file By order Assistant Registrar, ITAT, Bangalore