Davanagere Harihar Urban Development Authority, Davangere V. ITO, Davangere

ITA 1330/BANG/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0271 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 05-07-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 16-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWAPNA DAS
• Keywords: Depreciation; Diversion of income; Additional evidence; Validity of assessment
• Section: 147; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B, BANGALORE BEFORE SHRI A.K.GARODIA, AM (SMC) ITA NOS.1330,1331 & 1332(B)/2013 (ASSESSMENT YEARS : 2004-05 TO 2006-07) DAVANGERE URBAN DEVELOPMENT AUTHORITY, DEVARAJ URS LAYOUT, A BLOCK, DAVANAGERE PAN NO.AAALD0556E APPELLANT VS THE INCOME TAX OFFICER, WARD-1, DAVANAGERE RESPONDENT ASSESSEE BY : NONE REVENUE BY : SMT. SWAPNA DAS, JCIT DATE OF HEARING : 05-07-2016 DATE OF PRONOUNCEMENT : 15-07- 2016 O R D E R PER SHRI A.K.GARODIA, AM: ALL THESE THREE APPEALS ARE FILED BY THE ASSESSEE WHICH ARE DIRECTED AGAINST THE ORDER OF THE LD.CIT( A), HUBLI DATED 22-03-2013 FOR THE ASSESSMENT YEARS : 2004-0 5 TO 2006-07 RESPECTIVELY. 2. THESE APPEALS WERE FILED IN THE YEAR 2013 AND TILL 17-05-2016, SHRI S. RAMASUBRAMANIAN, CA AND THE LD. AR OF THE ASSESSEE WAS APPEARING BEFORE THE TRIBUNAL AND ON VARIOUS OCCASIONS, THE HEARING WAS ADJOURNED ON HIS REQUEST . THEREAFTER, ON 17-05-2016, HE APPEARED AND SUBMITTE D A LETTER, AS PER WHICH, IT WAS INTIMATED BY HIM THAT HE IS ITA NOS.1330-132(B)/2013 2 WITHDRAWING HIS POWER OF ATTORNEY IN RESPECT OF ALL THESE APPEALS. HE ALSO SUBMITTED THAT THE ASSESSEE WAS ALSO INFORMED ABOUT THIS THAT HE IS WITHDRAWING FROM THI S CASE. ACCORDINGLY, ON THIS DATE ALSO I.E.17-05-2016, THE HEARING WAS ADJOURNED AND THE CASE WAS FIXED FOR HEARING ON 22- 06-2016. A NOTICE OF HEARING WAS ALSO SENT TO THE ASSESSEE B Y RPAD. ON THIS DATE ALSO I.E. ON 22-06-2016, NONE APPEARED ON BEHALF OF THE ASSESSEE AND THEREAFTER, THE CASE WAS ADJOURNED TO 05-07- 2016 AND THE NOTICE OF HEARING WAS AGAIN SENT. ON T HIS DAY ALSO, NONE APPEARED ON BEHALF OF THE ASSESSEE AND S INCE THESE ARE OLD APPEAL AND UNDER THESE FACTS, I FIND NO JUS TIFICATION IN ADJOURNING THE HEARING OF THESE APPEALS AND HENCE, THE APPEALS WERE HEARD EX-PARTE QUA THE ASSESSEE . 3. LEARNED DR OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 4. I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. D R OF THE REVENUE. 5. THE GROUNDS RAISED BY THE ASSESSEE IN ALL THESE APPEALS ARE REPRODUCED BELOW; IN ITA NO.1330(BANG)/2013(AY: 2004-05) 1. THAT THE ORDER OF THE LEARNED CIT (A) IN SO FAR IT IS PREJUDICIAL TO THE INTERESTS OF THE APPELLANT I S BAD AND ERRONEOUS IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 2 . VALIDITY OF ASSESSMENT U/S 147 ITA NOS.1330-132(B)/2013 3 2 . 1 THAT THE ASSESSMENT MADE U/S 147 WITHOUT SERVICE OF NOTICE U/S 148 IS VOID AB INITIO . 2 . 2 THAT THE LEARNED CIT (A) ERRED IN LAW AND ON FACTS IN HOLDING THAT THE ASSESSING OFFICER HAS RIGHTLY ASSUMED JURISDICTION U/S 147 OF THE ACT EVEN THOUGH THE ASSESSING OFFICER DID NOT HAVE ANY REASONS TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT. 2 . 3 THAT THE LEARNED CIT (A) ERRED IN LAW AND ON FACTS I N UPHOLDING THE ASSESSMENT U/S 147 OF THE ACT TH OUGH T HE R ECO R DED R EASONS W ERE NOT FURNISHED TO THE APPE L L A N T . 3 . V A LID I TY OF ASSESSME NT : 3 . 1 THA T THE LEARNED ASSESS I NG OFF I CE R HAV IN G ACCEPTE D THE RET U RN OF I NCOME F IL ED O N 2 9 - 03 -2007 , ERRED IN LAW AND ON FACTS I N ISSUING THE NOT I CE U/S 143(2) ON 15-10-2008 WHICH IS BE Y OND THE TIME LIMIT PRESCRIBED I N THE PROVISO TO SECTION 143(2) OF THE ACT AND THEREFORE ALL THE SUBSEQUENT PROCEEDINGS AND ASSESSMENT ARE VOID AB I N I T I O . 4 . STATUS OF THE APPELLANT : 4 . 1 THAT THE LEARNED CIT (A) ERRED IN LAW AND ON FACTS IN ASSESSING THE APPELLANT IN THE STATUS OF ASSOCIATION OF PERSON (AOP) . 5 . DIVERSION OF INCOME AT SOURCE : 5 . 1 THAT THE LEARNED CIT (A) ERRED IN LAW AND ON FACTS IN TAXING THE INCOME IN THE HANDS OF THE APPELLANT THOUGH THE INCOME I S DIVERTED AT SOURCE . 5 . 2 TH AT T HE L EA R N ED C IT (A) ERRED I N L A W A ND ON F AC TS I N TAXIN G THE I NC O ME I N T HE HA N DS OF THE A PPE LL AN T I G N OR I NG TH E F A C T THAT T HE AP PE L LA N T H AS N O C O NTROL O V E R TH E FUNDS A N D O NLY TH E ST ATE GOVE R NM E N T HAS RI G H T OVER THE FU N DS . 6 COMPUTATION : 6 . 1 THE METHOD OF DETERMINATION OF PROFITS IS NOT IN ACCORDANCE WITH THE ACCEPTED ACCOUNTING PRINCIPLES AND STANDARDS . ITA NOS.1330-132(B)/2013 4 6 . 2 THAT THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT INCOME FROM THE ENTIRE PROJECT SHOULD HAVE BEEN COMPUTED BY TAKING INTO ACCOUNT ALL EXPENSES INCURRED INCLUDING THE PAST AND FUTURE EXPENSES . 6 . 3 THAT THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS I N UPHOLDING COMPUTATION OF I NCOME BY THE ASSESSING OFF I CER BASED ON CURRENT YEAR EXPENSES ONLY . 6 . 4 THAT THE LEA R NED CIT(A) ERRED IN L AW AND ON FACTS I N NOT A LL OW I NG DEP R EC I AT IO N . 6. 5 TH AT T H E L EARNED CIT( A ) ERR ED I N L AW AN D O N FACTS I N TREAT I NG THE AD D I T I O NA L GRO UND R EG A RD I NG DEP R ECIA T IO N A S ADDIT I ONA L E V I D ENC E AND WRONGL Y INV OK I NG R ULE 4 6A OF I NCO ME TA X RULES . HE OU G H T T O HAVE DISP O SED OFF THE GRO UND A S A N O RMAL G ROUND . 6.0 RATE OF TAX : 6 . 1 THAT THE LEARNED CIT (A) ERRED IN LAW AND ON FACTS IN CHARGING TAX A T MAX I MUM MARGINAL RATE . ADDITIONAL GROUNDS 7. THAT THE L EARNED ASSESS I NG OFF I CER ERRED I N LAW AND ON FACTS I N I SSU IN G THE NOT I CE U/S 1 48 OF THE ACT ON 04-02-2008 EVEN THOUGH THE TIME L I M I T FOR I SSU I NG THE NOTICE U/S 143(2) OF THE ACT W I TH RESPECT TO RETURN F I LED ON 29 - 03 - 2007 EXP I RES ONLY ON 31 - 03 - 2008. 8 . THAT THE ASSESSMENT MADE U/S 144 READ WITH SECTION 147 IS BAD IN LAW AS A VALID RETURN FILED ON 29 - 03-2007 WAS SUBSISTING ON THE DATE OF ALLEGED ISSUE OF NOTICE U/S 148 OF THE ACT (I.E ON 04- 02-2008) 9. THAT TH E ASSESSMENT MADE U/S 144 OF THE A C T ON 30 - 12 - 2008 I S BARRED B Y L I MITAT I ON AS BE I NG BEY O N D TH E PE RIO D P RESCR I B E D U/ S 1 53 OF THE ACT . EACH OF THE ABOVE GROUNDS I S WITHOUT PREJUDICE TO ONE ANOTHER AND THE APPELLANT CRAVES LEAVE OF THE HON ' BLE INCOME TAX APPELLATE TRIBUNAL TO ADD , DELETE , AMEND ITA NOS.1330-132(B)/2013 5 OR OTHERW I SE MOD I FY EITHER ALL OR ANY OF THE ABOVE GROUNDS EITHER BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL . IN ITA NO.1331(BANG)/2013 (AY: 2005-06) 1. THAT THE ORDER OF THE LEARNED CIT (A) IN SO FAR I T IS PREJUDICIAL TO THE INTERESTS OF THE APPEL L ANT I S BAD AND ERRONEOUS IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE . 2 . VALIDITY OF ASSESSMENT U/S 147 : 2 . 1 THAT THE ASSESSMENT MADE U/S 147 WITHOUT SERVICE OF NOTICE U/S 148 I S V O I D AB I N I T I O . 2 . 2 THAT THE LEARNED CIT (A) ERRED IN LAW AND ON FACTS IN HOLD I NG THAT THE ASSESS I NG OFF I CER HAS R I GHTLY ASSUMED JURISD I CT I ON U/S 147 OF THE ACT EVEN THOUGH THE ASSESS I NG OFFICER DID NOT HAVE AN Y R EASONS TO BELIE V E THAT THE INCOME HAS ESCAPED ASSESSMENT . 2 . 3 T HA T T HE L EA R N E D CI T (A) E R RED IN LA W AND ON F AC T S I N U PHOLD IN G THE ASS E SSM E N T U/S 147 O F T HE A C T TH OUGH THE RECORDED R E ASO N S WERE NOT FURN I S HE D T O T H E APPE LL A NT . 3 . V AL I D I T Y OF ASSESSMENT : 3.1 TH AT TH E L EAR NE D A S SES S I NG OFF I C ER H A VING ACC E P T ED T HE R E TUR N O F I NCOME FI L ED ON 29-03 -2 007 , ERRE D I N LAW AND ON F AC T S IN I SSUING THE N O T I CE U / S 1 43(2) ON 15-10-2 008 W HI CH I S BE Y OND T H E T I ME L I M I T P R ESCR I BED I N T HE PROVISO TO SECTION 143(2) OF THE AC T A N D T HE R EFO R E A LL THE S U BSEQUENT P R OCEED I NGS AND ASSE S SMENT ARE VO I D AB I NITIO . 4 STAT U S OF THE APPE L LAN T : 4 . 1 THAT THE L EA R NED CIT (A) ERRED IN LAW AND ON FAC T S IN ASSESS I NG THE APPE LL AN T I N THE STATUS OF ASSOCIAT I ON OF PE R SON (AOP) . ITA NOS.1330-132(B)/2013 6 5. DIVERSION OF INCOME AT SOURCE : 5 . 1 THAT THE LEARNED CIT (A) ERRED IN L AW AND ON FACTS IN TAX I NG THE INCOME I N THE HANDS OF THE APPELLANT THOUGH THE I NCOME IS DIVERTED AT SOURCE . 5 . 2 TH A T THE LEARNED CIT ( A ) ERRE D I N LA W AND ON FACTS I N T AX I NG TH E IN COME I N THE H A NDS OF THE APPELLAN T IGNORIN G THE FAC T THAT THE APPELLANT HAS NO CONTRO L O V ER THE FUNDS AND O N LY THE STAT E GOVE RNM EN T H AS RIGH T OV E R THE FU NDS . 6. COMPUTATION : 6 . 1 THE METHOD OF DETERMINATION OF PROFITS I S NOT IN ACCORDANCE W I TH THE ACCEPTED ACCOUNT I NG PR I NCIPLES AND STANDARDS . 6 . 2 THAT THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT INCOME FROM THE ENT I RE PROJECT SHOULD HAVE BEEN COMPUTED BY TAKING INTO ACCOUNT A L L EXPENSES INCURRED INCLUDING THE PAST AND FUTURE EXPENSES . 6 . 3 THAT THE LEARNED CIT(A) E R RED I N LAW AND ON FACTS IN UPHOLDING COMPUTAT I ON OF I NCOME BY THE ASSESS I NG OFF I CER BASED ON CURRENT YEAR EXPENSES ON L Y . 6.4 T HAT THE L EA RN ED CIT(A) ER R ED I N L AW AND ON FACTS I N NOT A L LOWING DEPREC I ATION . 6 . 5 THAT THE LEARNED CIT(A) ER R ED I N LAW A N D ON F AC TS I N TREATI NG THE ADDIT I O N A L GR O UND REG A RD I NG DEPR E C I A T I O N AS ADD I T I ONAL E VI DENCE AND WRONGLY INVOKIN G RU L E 46A OF INCOME TA X RULES . HE OUGHT TO H A V E DISPOSED OFF THE G ROUND AS A NORMAL GROUN D . 6 . 0 RATE OF TAX : 6 . 1 THA T T HE L EA RN ED CIT ( A) E R RED I N L AW AND ON FAC T S I N C HARG I NG TAX AT MAX I MUM M ARG I NA L R ATE . ITA NOS.1330-132(B)/2013 7 ADDITIONAL GROUNDS 7.THAT THE L EARNED ASSESS I NG OFFICER ERRED I N LAW AND ON FACTS I N ISSU I NG THE NOT I CE U/S 148 OF THE ACT ON 04 - 02-2008 E V EN T HOUGH THE T I ME LI M I T FOR I SSU I NG THE NOT I CE U/S 143 ( 2) OF THE ACT WITH RESPECT TO RETURN FILED ON 29-03- 2007 EXPIRES ONLY ON 31 - 03 - 2008 . 8 . THAT THE ASSESSMENT MADE U/S 144 READ W I TH SECTION 147 I S BAD I N LAW AS A VAL I D RETURN F I LED ON 29 - 03-2007 WAS SUBSISTING ON THE DATE OF ALLEGED ISSUE OF NOT I CE U/S 148 OF THE ACT (I . E ON 04-02-2008) 9. THAT THE ASSESSMENT MADE U/S 144 O F THE ACT ON 30-12-200 8 I S BA RR E D BY LIMIT A TION AS BE I NG BE Y O N D T H E PER I OD PRESCR I BED U / S 153 O F THE AC T . EACH OF THE ABOVE GROUNDS IS WITHOUT PREJUDICE TO ONE ANOTHER AND THE APPELLANT CRAVES LEAVE OF THE HON ' BLE INCOME TAX APPELLATE TRIBUNAL TO ADD , DELETE , AMEND OR OTHERWISE MODIFY EITHER ALL OR ANY OF THE ABOVE GROUNDS EITHER BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL . IN ITA NO.1332(BANG)/2013(AY: 2006-07) 1. THAT THE ORDER OF THE LEARNED CIT (A) IN SO FAR IT IS PREJUDICIAL TO THE INTERESTS OF THE APPELLANT I S BAD AND ERRONEOUS I N LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE . 2. VALIDITY OF ASSESSMENT U/S 147 : 2 . 1. THAT THE ASSESSMENT MADE U/S 147 WITHOUT SERVICE OF NOTICE U/S 148 IS VOID AB INITIO 2.2. THAT THE L EARNED CIT (A) ERRED IN LAW AND ON FACTS IN HOLDING THAT THE ASSESSING OFFICER HAS R I GHTLY ASSUMED JUR I SD I CT I ON U/S 147 OF THE ACT EVEN THOUGH THE ASSESS I NG OFFICER D I D NOT HAVE ANY REASONS TO BE LI EVE T HAT THE INCOME HAS ESCAPED ASSESSMENT. ITA NOS.1330-132(B)/2013 8 2 . 3 THA T T HE L EA R NED CIT (A) ERRED IN LAW AND ON FACTS I N U PHOLD I NG T HE A SS ESSMEN T U/S 147 OF THE AC T THOUGH THE RE CO R D ED REASON S WERE NOT FURNISHED TO THE APPELLANT . 3. S TA T U S OF TH E APP ELLANT : 3 . 1 THAT THE L EARNED CI T (A) ERRED I N LAW AND O N FACTS IN A SS E SSING THE A PPE LL ANT I N T H E STATUS OF ASSOCIAT I O N OF PERSO N (AOP) . 4 . D I VERS I ON OF I NCOME A T SOURCE : 4 . 1 THAT THE LEARNED CIT (A) ERRED I N L AW AND ON FACTS I N T AXING THE I NCOME IN THE HANDS OF THE APPE L LANT THOUGH T H E I N COME I S DIVE R TED AT SOURCE . 4 .2 THAT THE LEARNED CIT (A) ERRED I N L AW AND ON FACTS IN TAX I NG THE I NCOME I N THE HANDS OF THE APPELLANT IGNOR I NG THE FACT THAT THE APPELLANT HAS NO CONTRO L OVE R THE FUNDS AND ONLY THE STATE GOVERNMENT HAS R I GHT OVER THE FUNDS . 5. COMPUTATION : 5 . 1 THE METHOD OF DETERM I NATION OF PROF I TS I S NOT IN ACCORDANCE WITH THE ACCEPTED ACCOUNTING PR I NCIPLES AND STANDARDS . 5 . 2 THAT THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT INCOME FROM THE ENTIRE PR O JECT SHOULD HAVE BEEN C OMPUT E D B Y TAK I NG INTO ACCOUNT ALL E X PENSES INCU R RED I NC L UDING T H E PAST AND FUTURE EXPENSES . ITA NOS.1330-132(B)/2013 9 5 . 3 THAT THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN UPHO L DING COMPUTATION OF INCOME BY THE ASSESSING OFFICER BASED ON CURRENT YEAR EXPENSES ONLY . 5 . 4 THAT THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN NOT ALLOWING DEPRECIATION . 5.5 THAT THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN TREATING THE DDITIONAL GROUND REGARDING DEPRECIATION AS ADDITIONAL EVIDENCE AND WRONGLY INVOKING RULE 46A OF INCOME TAX RULES . HE OUGHT TO HAVE DISPOSED OFF THE GROUND AS A NORMAL GROUND . 6.0 RATE OF TAX : 6 . 1 THAT THE L EARNED CIT (A) ERRED IN LAW AND ON FACTS IN CHARGING TAX AT MAX I MUM MARG I NAL RATE . E A C H O F THE ABOVE GROUNDS I S WITHOUT PREJU D IC E TO O N E ANOTHER AND THE APPELLANT CRAVES LE A VE OF T H E HON ' BLE I N C OME T A X AP PELLAT E T RI BU NAL T O ADD , DELETE , A MEN D OR OTHERW IS E M O D I FY EI T HER AL L OR A NY OF THE ABO V E G ROUNDS EITHER BEFORE OR AT THE TIME OF HEAR I NG OF TH I S APPEAL . 6. I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. DR OF THE REVENUE AND AFTER GOING THROUGH THE ORDERS OF THE A UTHORITIES BELOW, I FIND THAT IN THE IMPUGNED ORDER, THE LD. C IT(A) HAS DECIDED ALL THE OBJECTIONS OF THE ASSESSEE IN A DET AILED MANNER AND I FIND THAT THERE IS NO INFIRMITY THEREIN AND T HEREFORE, I ITA NOS.1330-132(B)/2013 10 DECLINE TO INTERFERE WITH THE IMPUGNED ORDER OF THE LD. CIT(A) ON ANY OF THE ISSUES. ACCORDINGLY, ALL THE GROUNDS R AISED IN ALL THESE THREE ASSESSMENT YEARS ARE REJECTED. 7. IN THE RESULT, ALL THE THREE APPEALS OF THE ASS ESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MEN TIONED IN CAPTIONED PAGE. SD/- (A.K.GARODIA) ACCOUNTANT MEMBER D A T E D : 15-07-2016 PLACE: BANGALORE AM* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER AR, ITAT, BANGALORE ITA NOS.1330-132(B)/2013 11 1. DATE OF DICTATION .. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P. S. .. 4 DATE ON WHICH THE ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT .. 5. DATE ON WHICH THE ORDER COMES BACK TO THE SR. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE .. 7. IF NOT UPLOADED, FURNISH TH E REASON FOR DOING SO. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER DOES FOR XEROX & ENDORSEMENT . 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK. 11 THE DATE ON WHICH THE FILE GOES T O THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER. 12 THE DATE ON WHICH THE FILE GOES TO THE DISPATCH SECTION FOR DISPATCH OF THE TRIBUNAL ORDER 13 DATE OF DISPATCH OF ORDER