M/s Abhimanu Adventure Resorts Private Limited, Chandigarh V. DCIT/ACIT Circle, Parwanoo

ITA 127/CHANDI/2023

AI Insights

The case involves two appeals by M/s Abhimanu Adventure Resorts Private Limited against the orders of the CIT(A), which confirmed the Assessing Officer's rejection of the assessee's applications under section 154 for refunds of taxes paid under MAT. The Tribunal examined the assessments for the years 2012-13 and 2013-14, where the assessee had initially declared agricultural income separately and business income separately, leading to NIL tax demands. However, subsequent rectification applications by the assessee for refunds were rejected by the AO, who erroneously recalculated the income and tax liabilities. The Tribunal found that the AO's actions were beyond the scope of rectification under section 154 and were not supported by the necessary procedural steps, such as issuing a notice before rectification.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135482 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 06-08-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 08-03-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Deemed to accrue or arise in india; Reassessment proceedings; Set aside
• Section: 148; 10; 154; 143(3); 115JB; 143(1)

Judgement Text

आयकर अपीलीय अिधकरण,च᭛डीगढ़ ᭠यायपीठ “ए” , च᭛डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH ᮰ी आकाश दीप जैन, उपा᭟यᭃ एवं ᮰ी िवᮓम ᳲसह यादव, लेखा सद᭭य BEFORE: SHRI. AAKASH DEEP JAIN, VP & SHRI. VIKRAM SINGH YADAV, AM आयकर अपील सं./ ITA NO. 127 & 128/Chd/2023 िनधाᭅरण वषᭅ / Assessment Year : 2012-13 & 2013-14 M/s Abhimanu Adventure Resorts Private Limited Building No. C-126, Top Floor, Industrial Area, Phase VIII, Mohali बनाम The DCIT/ACIT Circle Parwanoo Parwanoo, Shimla ᭭थायी लेखा सं./PAN NO: AAJCA1546M अपीलाथᱮ/Appellant ᮧ᭜यथᱮ/Respondent िनधाᭅᳯरती कᳱ ओर से/Assessee by : Shri Sudhir Sehgal, Advocate and Shri A.K. Sood, C.A राज᭭व कᳱ ओर से/ Revenue by : Smt. Amanpreet Kaur, Sr. DR सुनवाई कᳱ तारीख/Date of Hearing : 07/08/2023 उदघोषणा कᳱ तारीख/Date of Pronouncement : 28/08/2023 आदेश/Order PER VIKRAM SINGH YADAV, A.M. : These are two appeals filed by the Assessee against the respective orders of the Ld. CIT(A), NFAC, Delhi each dt. 10/01/2023 pertaining to Assessment Year 2012-13 and 2013-14 respectively. Since common issues are involved, both these appeals were heard together and are being disposed off by this consolidated order. 2. In ITA No. 127/Chd/2023 pertaining to Assessment Year 2012-13, the assessee has taken following ground of appeal: “That the CIT (A) has erred in confirming the orders of the Assessing Officer rejecting the application of the assessee u/s 154 for not acknowledging and allowing refund of Rs 4,98,280/- on account of taxes inadvertently wrongly calculated under MAT and paid under self assessment at the time of filing of income tax return whereas no liability is due under MAT in the orders passed under section 143(3) r.w.s 147 dated 18.03.2016 and 27.09.2019 as there was an error in records which is required to be rectified u/s 154.” 2 3. During the course of hearing, the Ld. AR submitted that the assessee company owns 124 Bighas of agricultural land which consists of mostly Orchard. It was submitted that main business of the assessee company is in Tourism field by undertaking Eco Tourism including Hotel Resort and Spa at Village Ramshehar Nalagarh and agricultural activity on the land purchased. It was submitted that the assessee company filed its return of income for A.Y. 2012-13 on 30/09/2012 by including agricultural income of Rs. 23,60,000/- as business income and deduction under section 80IC(2) was claimed on the said income. Thereafter return of income was processed under section 143(1) and returned income was accepted. 4. It was submitted that subsequently, the assessment proceedings were reopened with reference to deduction claimed under section 80IC(2). In response, the assessee company filed its return of income wherein the agricultural income was shown separately and business income from Eco Tourism separately. The AO framed the assessment under section 143(3) r.w.s 147 dt. 14/12/2016 and during the assessment proceedings in para 4 of the assessment order, the AO discussed about agricultural income separately. Thereafter in para 5, the AO has given a categorical findings and accepted the revised computation of income and finally in para 6 has computed the income from business at NIL and agricultural income at Rs. 23,60,000/- and alongwith the assessment order in the computation form which was attached alongwith the assessment order, business income has been shown at NIL and agriculture income at Rs. 23,60,000/- and demand notice was issued declaring NIL demand vide order dt. 14/12/2016. 5. It was further submitted that the assessee was subject to another round of reopening and another notice under section 148 was issued entirely on different issue with regard to purchase of immovable property. In response, the assessee filed its return of income at the same income as per the earlier assessment 3 proceedings concluded under section 147 r.w.s 143(3) of the Act. It was submitted that thereafter assessment was completed and NIL demand was raised on the assessee. 6. It was submitted that the assessee separately moved an application under section 154 since there was no enforceable demand as the income has been assessed at NIL and refund was requested. It was submitted that the AO passed the order under section 154 by mentioning that there is mistake committed by the Department while faming the assessment and deemed income has been determined under section 154 as per computation made by the AO. It was submitted that the Ld. CIT(A) on further appeal has confirmed the order so passed by the AO against which the assessee has came in appeal before this Tribunal. 7. In the aforesaid factual matrix of the case, it was submitted by the ld AR that in the assessment order framed by the AO under section 147 r.w.s 143(3) dt. 19/12/2016, there is a categorical finding of the AO wherein AO has accepted the agriculture income separately and business income at NIL and the same is also evident from the computation Form attached to the assessment order. It was submitted that in the second round of reassessment proceedings, the AO has given certain comments that a claim having not been made in the original return, the same is not liable to be given but then in para 7, he has given certain findings and thereafter, the findings in the earlier assessment order has been confirmed. In light of above, it was submitted that the order passed under section 147 r.w.s 143(3) dt. 14/12/2016 has attained finality in so far as the assessee and the Department are concerned and since there is no change in the assessed income, no further action was required. 8. It was further submitted that in the garb of application moved by the assessee under section 154, the enhancement has been made by the AO which is void ab initio. It was submitted that the assessee had filed an application 4 under section 154 and in the garb of the said application which was rightly made for claiming refund, the deemed income of Rs. 23,54,772/- have been computed and the tax liability of Rs. 4,98,280/- has been calculated. It was submitted that without prejudice to the earlier submission that the matter has attained finality, it was submitted that the order passed under section 154 is illegal and void since it has resulted in enhancement of income and raising of demand and the AO was legally bound to issue the notice before allegedly rectifying the mistake if any and thus having not done so, he is legally debarred from enhancing the income and thus the issuance of notice before rectifying any order by the AO having not been done, the order so passed under section 154 deserves to be set aside. 9. It was further submitted that even otherwise, this alleged mistake which have been mentioned by the AO in his order is highly debatable which is outside the scope of rectification under section 154 of the Act. 10. Without prejudice to above, it was further submitted that even on merits, as per Clause (ii) to explanation (1) to Section 115JB, the income under section 10 is liable to be reduced and which has rightly been recalculated by the assessee and accepted by the AO in the order passed under section 147 r.w.s 143(3) dt. 14/12/2016 and thereafter another order passed under section 147 r.w.s 143(3) dt. 27/09/2019, the income determined by the AO vide order dt. 16/12/2019 have been computed at NIL and thus there is no infirmity in the claim of the assessee. 11. It was further submitted that the assessee has also placed reliance on the CBDT Circular No. 14 of 1955 wherein the Board has stated that the Department must not take advantage of ignorance of assessee to collect more tax than what is legitimately due. It was submitted that in the said Circular, it has been mentioned that wherever there is a refund due to assessee or other claim which had not been claimed the AO are bound to grant such relief. In light of above it 5 was submitted that the appeal filed by the assessee be allowed and the AO be directed to grant the refund alongwith interest. 12. Per contra, the Ld. DR has relied on the findings of the lower authorities and our reference was drawn to the findings of the Ld. CIT(A) which are contained at para 4.1& 4.2 of the impugned order which read as under: “4.1 I have perused the assessment order, order passed under section 154, written submissions and the facts of the case. In this case, assessment u/s 143(3) was completed vide order dated 14.12.2016 accepting 'Nil' returned income. Thereafter 'the case was again re-assessed u/s 143(3)/147 vide order dated 27.09.2019 accepting the returned income of the appellant at 'Nil' and agriculture income of Rs. 23,60,000/- . The appellant paid self-assessment tax amounting to Rs.4,98,280/- on the book profit of Rs.23,54,772/- declared as per return of income. The self-assessment tax of Rs.4,98,280/-was paid by the appellant on declared tax liability as per MAT provisions and the same has been duly given credit in the assessment order passed U/s 143(3) of the Income Tax Act, 1961. Subsequently, in the rectification application, the appellant pleaded that the self-assessment tax of Rs.4,98,280/- was not refunded even though the income returned was accepted. However, the AO noted that the appellant has paid self-assessment tax of Rs. 4,98,280/- on the book profit declared and accordingly, he rejected the rectification application. The AO is correct in his action, as he cannot reduce the income declared under 115JB which is derived from the P & L account prepared as per the provisions of companies Act. Further, it is pertinent to mention here that the appellant itself has declared the income in the return and shown tax liability under section 115JB of the Income Tax Act and paid the taxes as per MAT provisions. 4.2 It is seen that the appellant filed its return of income on 30.09.2012 declaring total income of Rs. Nil and deemed total income under section 115JB of Rs.23,54,772/-. No agricultural income was shown in the "Schedule- E I" of the return of income where the assessee has to declare such agricultural income. Moreover, the appellant has declared the income/profit from business or profession in "Schedule - BP" of the return at Rs. 23,54,772/-. The same profit was shown in "Part A- P & L" accounts of the return and declared as income under 115JB. As per Section 115JB of the I T Act, the deemed income u/s 115JB is required to be computed from the book profit shown in the P&L account drawn as per the Companies Act. The appellant has declared such book profit in the P & L account and paid taxes under MAT by filing return of income. Therefore, that income cannot be reduced as the appellant has drawn the P& L account as required by the provisions of Companies Act and MAT also has been paid on such book profit either increasing or reducing the items specified in explanation (1) of section 115JB. Reducing of agricultural income from P& L account prepared as per the companies Act is not the item specified in explanation (1) of section 115JB. The impugned agriculture income may be exempt for paying taxes when the company required to pay taxes under normal provisions of the I. T Act and not under MAT. The MAT is the minimum alternative taxes to be paid by the companies when their tax liability under normal provisions are less than the tax 6 payable under 115JB. Therefore, the A.O has rightly rejected the rectification application filed by the appellant.” 13. We have heard the rival contentions and purused the material available on record. There is no dispute that the book profits for the purposes of computing the tax liability u/s 115JB have to be computed as per profit/loss account prepared in accordance with Schedule III of the Companies Act. At the same time, explanation (1) to section 115JB provides for certain adjustments which can be made to the book profits and one of the adjustments so specified in clause (ii) talks about the amount of income to which any of the provisions of section 10 apply. In the instant case, the agriculture income of Rs 23,60,000/- is determined in terms of original assessment order passed u/s 143(3) r/w 147 dated 14/12/2016 and thereafter, in reassessment order passed u/s 143(3) r/w 147 dated 27/09/2019. The said agriculture is exempt under section 10(1) of the Act. Therefore, it was incumbent on part of the AO to recompute the tax computation for the purposes of determining the liability under section 115JB by reducing the said agriculture income from the book profits declared by the assessee even though the assessee has not done so in the return of income. We find that the same has effectively been done by the AO by determining NIL tax liability under both the normal provisions as well as MAT provisions while passing original assessment order passed u/s 143(3) r/w 147 dated 14/12/2016 and thereafter, in reassessment order passed u/s 143(3) r/w 147 dated 27/09/2019. Therefore, the assessee was well within its right to claim refund of taxes which was not granted even though the tax liability has been determined at NIL. The action of the AO while disposing off the assessee’s application u/s 154 recomputing the book profits by including the agriculture income is therefore clearly not sustainable in eyes of law. Firstly, there was no mistake in the original orders passed by the AO as we have seen above, secondly, there was no notice to the assessee before enhancing the income and thirdly, the AO in his zeal of disposing off the rectification application has failed to appreciate and consider the unambiguous provisions wherein the agriculture income is exempt 7 from the book profits for the purposes of computing the MAT liability. Even the ld CIT(A) has failed to appreciate the said provisions. Therefore, in light of aforesaid discussions, we are of the considered view that matter as far as tax liability of the assessee is concerned, it has been rightly determined originally at NIL under the MAT provisions of section 115JB and there is no basis for invoking the jurisdiction u/s 154. The assessee is accordingly eligible for refund of taxes which the AO is hereby directed to refund. In the result, the order of the ld CIT(A) is set-aside and the appeal of the assessee is allowed. 14. In ITA No. 128/Chd/2023 pertaining to Assessment Year 2013-14, the assessee has taken the following ground of appeal: “That the CIT (A) has erred in confirming the orders of the Assessing Officer rejecting the application of the assessee u/s 154 for not acknowledging refund of Rs 10,46,000/- on account of taxes inadvertently wrongly calculated under MAT and paid under self assessment at the time of filing of income tax return whereas no liability is due and assessed under MAT in the orders passed under section 143(3) dated 18.03.2016 as there was an error in records which is required to be rectified u/s 154.” 15. In this regard, the Ld. AR submitted that that assessee filed the computation of income alongwith balance sheet showing agricultural income and business income. Thereafter the assessee filed the revised computation of income, during the assessment proceedings reducing the agricultural income inadvertently shown as business income at Rs. 58,00,000/-. It was submitted that the revised claim as made by the assessee during the assessment proceedings has been taken into consideration by the AO in para 5 of the assessment order and the findings has been given in para 6 wherein the revised claim has been accepted and the income has been assessed at NIL and agricultural income separately. It was submitted that thereafter, the assessee moved an application under section 154 claiming the refund, the AO has rejected the same and tax amounting to Rs. 10,42,000/-has been determined on book profit. In the said 8 background, it was submitted by the ld AR that the facts and circumstances of the present case are exactly identical as in ITA No. 127/Chd/2023 and various contentions and arguments taken by the assessee therein may be considered for the present appeal. 16. Per contra, the Ld. DR has relied on the findings of the lower authorities and our reference was drawn to the findings of the Ld. CIT(A) which are contained in para 5.1 & 5.2 of the impugned order and contents therein read as under: “5.1 I have perused the assessment order, order passed under section 154, written submissions and the facts of the case. In this case, assessment u/s 143(3) was completed vide order dated 18.03.2016 accepting 'Nil' returned income. The appellant paid self-assessment tax amounting to Rs. 10,42,000/- on the book profit of Rs.49,24,282/- declared as per return of income. The self-assessment tax of Rs. 10,42,000/- was paid by the appellant on declared tax liability as per MAT provisions and the same has been duly given credit in the assessment order passed U/s 143(3) of the Income Tax Act, 1961. Subsequently, in the rectification application, the appellant pleaded that the self-assessment tax of Rs. 10,42,000/- was not refunded even though the income returned was accepted. However, the AO noted that the appellant has paid self-assessment tax of Rs. 10,42,000/- on the book profit declared and accordingly, he rejected the rectification application. The AO is correct in his action, as he cannot reduce the income declared under 115JB which is derived from the P & L account prepared as per the provisions of companies Act. Further, it is pertinent to mention here that the appellant itself has declared the income in the return and shown tax liability under section 115JB of the Income Tax Act and paid the taxes as per MAT provisions. 5.2 It is seen that the appellant filed its return of income on 01.10.2013 declaring total income of Rs. Nil and deemed total income under section 115JB of Rs.49,24,282/-. No agricultural income was shown in the "Schedule- E I" of the return of income where the assessee has to declare such agricultural income. Moreover, the appellant has declared the income from business or profession in "Shedule - BP" of the return at Rs. 49,24,282/-. The same profit was shown in "Part A- P & L" accounts of the return and declared as income under 115JB. As per Section 115JB of the I T Act, the deemed income u/s 115JB is required to be computed from the book profit shown in the P&L account drawn as per the Companies Act. The appellant has declared such book profit in the P & L account and paid taxes under MAT by filing return of income. Therefore, that income cannot be reduced as the appellant has drawn the P& L account as required by the provisions of Companies Act and MAT also has been paid on such book profit either increasing or reducing the items specified in explanation (1) of section 115JB. Reducing of agricultural income from P& L account prepared as per the companies Act is not the item specified in explanation (1) of section 115JB. The impugned agriculture income may be exempt for paying taxes 9 when the company required to pay taxes under normal provisions of the I. T Act and not under MAT. The MAT is the minimum alternative taxes to be paid by the companies when their tax liability under normal provisions are less than the tax payable under 115JB. Therefore, the A. O has rightly rejected the rectification application filed by the appellant. Accordingly, there is no denial of refund and reliefs due to the appellant as per the CBDT circular dated 11/04/1955 as the minimum alternative taxes paid by the appellant is the legitimate tax payable u/s 115JB of the I. T Act. Considering the above and also relevant provisions of section 115JB, I dismiss the grounds raised by the appellant.” 17. We have heard the rival contentions and purused the material available on record. As submitted by both the parties, the facts and circumstances of the case are identical to facts and circumstances of the case in ITA No. 127/CHD/2023 and therefore, our findings and directions contained in ITA No. 127/CHD/2023 shall apply mutatis mutandis to this appeal and the same is hereby allowed. 18. In the result, both the appeals filed by the assessee are allowed. Order pronounced in the open Court on 28/08/2023 Sd/- Sd/- आकाश दीप जैन िवᮓम ᳲसह यादव (AAKASH DEEP JAIN) ( VIKRAM SINGH YADAV) उपा᭟यᭃ / VICE PRESIDENT लेखा सद᭭य/ ACCOUNTANT MEMBER AG Date: 28/08/2023 आदेश कᳱ ᮧितिलिप अᮕेिषत/ Copy of the order forwarded to : 1. अपीलाथᱮ/ The Appellant 2. ᮧ᭜यथᱮ/ The Respondent 3. आयकर आयुᲦ/ CIT 4. िवभागीय ᮧितिनिध, आयकर अपीलीय आिधकरण, च᭛डीगढ़/ DR, ITAT, CHANDIGARH 5. गाडᭅ फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar