Lanco Kondapalli Power Ltd, Hyderabad V. DCIT, Hyderabad

ITA 127/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61955 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 07-07-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 27-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M DAYAKAR
• Assessee Lawyers: S RAMA RAO
• Keywords: Reopening of assessment; Business income
• Section: 143(3); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 185/HYD/2011 ASSESSMENT YEAR 2001-02 DCIT CIRCLE-16(1) HYDERABAD VS. M/S. LANCO KONDAPALLI POWER PVT. LTD., HYDERABAD PAN: AAACK5423A ASSESSEE RESPONDENT ITA NO. 127/HYD/2011 ASSESSMENT YEAR 2001-02 M/S. LANCO KONDAPALLI POWER PVT. LTD., HYDERABAD PAN: AAACK5423A VS. DCIT CIRCLE-16(1) HYDERABAD ASSESSEE RESPONDENT REVENUE BY: SHRI M. DAYAKAR ASSESSEE BY: SHRI S. RAMA RAO DATE OF HEARING: 17. 0 7 .2012 DATE OF PRONOUNCEMENT: 17.07.2012 O R D E R PER CHANDRA POOJARI, AM: THE ABOVE APPEALS ARE CROSS APPEALS DIRECTED AGAINS T THE ORDER OF THE CIT(A)-V, HYDERABAD DATED 18.11.2010 F OR ASSESSMENT YEAR 2001-02. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL : A) THE ORDER OF THE LEARNED CIT(A) IS ERRONEOUS BOTH ON FACTS AND IN LAW. B) THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT THE PROVISIONS OF SEC. 147 ARE NOT APPLICABLE TO THE FACTS OF THE CASE AND THAT THE ASSESSMENT MADE U/S. 143(3) READ WITH SEC. 147 IS NOT VALID. ITA NOS. 185 & 122 / HYD/2011 M/S. LANCO KONDAPALLI POWER PVT. LTD. ============================ 2 C) THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION O F THE ASSESSING OFFICER IN TREATING THE INTEREST EARN ED OF RS. 25,74,968, RS. 26,36,802 AND RS. 34,76,199 ON MARGIN MONEY KEPT FOR PROVIDING BANK GUARANTEE AS THE INCOME FROM OTHER SOURCES. THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT THE SAID INCOME REPRESENTS BUSINESS INCOME AND NOT INCOME FROM OTHER SOURCES. D) THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THE FACT THAT ONLY THE NET INTEREST INCOME AFTER DEDUC TING THE EXPENDITURE IN EARNING SUCH INTEREST INCOME COULD BE TREATED AS INCOME FROM BUSINESS. E) THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THE FACT THAT SUCH INTEREST AROSE TO THE APPELLANT ON T HE DEPOSITS MADE BY IT IN THE PROCESS OF ITS BUSINESS ACTIVITY AND THE EARNING OF SUCH INCOME IS INEXTRICABLY LINKED TO THE ACTIVITY OF BUSINESS. 3. THE REVENUE RAISED THE FOLLOWING GROUND OF APPEAL: A) WHETHER THE HONBLE ITAT ERRED IN HOLDING THAT THE REIMBURSEMENT OF TAXES FOR WHICH THE COMPANY IS ELIGIBLE AS PER THE POWER PURCHASE AGREEMENT WITH APTRANSCO/APSEB IS NOT TO BE TREATED AS TAXABLE INCOME IN THE HANDS OF THE ASSESSEE. 4. AS SEEN FROM THE GROUNDS RAISED BY THE ASSESSEE, TH E MAIN ISSUE IS ON REOPENING OF ASSESSMENT AND THE ASSESSE E RAISED THE SAME BEFORE THE CIT(A) STATING THAT REOPENING OF AS SESSMENT U/S. 147 IS BAD IN LAW WHICH ISSUE WAS NOT AT ALL ADJUD ICATED BY THE CIT(A). THE CIT(A) WITHOUT ADJUDICATING THE ISSUE RELATING TO REOPENING OF ASSESSMENT, DISPOSED OF THE OTHER GROU NDS ON MERIT WHICH IS NOT PROPER. THE ISSUE RELATING TO REOPENI NG OF ASSESSMENT GOES TO THE ROOT OF THE MATTER. BEING SO, THIS ISS UE HAS TO BE ADJUDICATED FIRST BEFORE ADJUDICATING THE OTHER GRO UNDS RAISED BY THE ASSESSEE WHICH THE CIT(A) FAILED TO DO SO. IN OUR OPINION, IT IS FAIR AND PROPER TO SET ASIDE THE ORDER OF THE CIT(A ) AND REMIT BACK THE ISSUE RELATING TO REOPENING OF ASSESSMENT TO TH E FILE OF THE CIT(A) TO DECIDE THIS ISSUE FIRST AND THEREAFTER DE CIDE THE OTHER ISSUES RAISED BY THE ASSESSEE BEFORE HIM. ITA NOS. 185 & 122 / HYD/2011 M/S. LANCO KONDAPALLI POWER PVT. LTD. ============================ 3 5. ACCORDINGLY, THE ISSUE RELATING TO REOPENING OF ASS ESSMENT IS REMITTED BACK TO THE FILE OF THE CIT(A) FOR HIS CON SIDERATION TO DECIDE THE SAME IN ACCORDANCE WITH LAW. IT IS NEED LESS TO SAY THAT THE CIT(A) SHALL GIVE PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE BEFORE DECIDING THE SAME. 6. IN THE RESULT, ASSESSEE APPEAL IS PARTLY ALLOWED FO R STATISTICAL PURPOSES AND REVENUE APPEAL IS DISMISSED BEING INFR UCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH JULY, 2012. SD/ - (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 17 TH JULY, 2012 COPY FORWARDED TO: 1. THE DCIT, CIRCLE-16(1), ROOM NO. 612, 6 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 2. M/S. LANCO KONDAPALLI POWER PVT. LTD., LANCO HOUSE, PLOT NO. 4, SOFTWARE UNITS LAYOUT, HITEC CITY, MADHAPUR, HYDERABAD. 3. THE CIT(A)-V, HYDERABAD. 4. THE CIT-IV, HYDERABAD 5. THE DR B BENCH, ITAT, HYDERABAD. TPRAO