Appeal details
Counselvise Citation
[2012] 140 COUNSELVISE.COM (IT) 66328 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 2 month(s) 6 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
28-09-2012
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
B
Assessment Year
2003-2004
Appeal Filed On
22-07-2011
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER I.T.A. NO. 1282/HYD/2011 ASSESSMENT YEAR 2003-04 ASST. CIT CENTRAL CIRCLE-1 HYDERABAD VS. M/S. NAGARJUNA CONSTRUCTIONS CO. PVT. LTD., HYDERABAD PAN: AAACN7335C APPELLANT RESPONDENT I.T.A. NO. 1364/HYD/2011 ASSESSMENT YEAR 2003-04 M/S. NAGARJUNA CONSTRUCTIONS CO. PVT. LTD., HYDERABAD PAN: AAACN7335C VS. DEPUTY CIT CIRCLE-16(1) HYDERABAD APPELLANT RESPONDENT REVENUE BY: SRI V. SRINIVAS ASSESSEE BY: SRI S. RAMA RAO DATE OF HEARING: 02 .0 8 .2012 DATE OF PRONOUNCEMENT: 28.09.2012 O R D E R PER CHANDRA POOJARI, AM: THESE TWO APPEALS ARE CROSS APPEALS DIRECTED AGAIN ST THE ORDER OF THE CIT(A)-I, HYDERABAD DATED 24.5.2010 FOR ASSESSM ENT YEAR 2003-04. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF THE LEARNED CIT(A) IS ERRONEOUS IN LAW AND FACTS OF THE CASE. 2. THE LEARNED CIT(A) ERRED IN LAW AND FACTS OF THE CA SE IN COMPUTING THE PROFIT BEFORE THE TAX OF THE APPELLAN T AS RS. 1791.52 LAKHS FOR THE PURPOSE OF COMPUTATION OF INCOME FROM THE CONSOLIDATION. ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE, THE LEARNED COMMISSIONER OUGHT TO HAVE ADOPTED RS. 1745.46 LAKHS AS STATED BY THE ASSESSEE FOR THE SAID PURPOS E. I.T.A. NOS. 1282 & 1364/HYD/2011 M/S. NAGARJUNA CONSTRUCTIONS CO. PVT. LTD. ================================= 2 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE REOPENING OF A C OMPLETED ASSESSMENT ON MERE CHANGE OF OPINION IS BAD IN LAW AND ACCORDINGLY OUGHT TO HAVE SET ASIDE THE IMPUGNED OR DER AND DECLARED THE SAME AS NULL AND VOID. 3. THE REVENUE RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS . 4,36,86,816. 2. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE PROFIT OF THE STAND- ALONE OF THE COMPANY AS PER THE COMPUTATION FILED B Y IT WAS RS. 21,82,33,289 AND ANY FURTHER DEDUCTION OF RS. 4,36, 86,816 ON ACCOUNT OF SHARE OF PROFIT OF JVS IS NOT AN ALLOWAB LE DEDUCTION. 3. THE LD. CIT(A) FAILED TO APPRECIATE THAT IN VIEW OF THE ACCOUNTING POLICY, THE VARIATIONS IN PROFITS BEFORE TAX WERE D UE TO EXCLUSION OF CORRESPONDING AMOUNTS RELATING TO JVS AND THEREFORE , THE PROFITS ADOPTED IN COMPUTING THE INCOME RETURNED WERE NET O F THE PROFITS RELATABLE TO JVS. 4. FIRST WE WILL TAKE THE ISSUE WITH REGARD TO REOPENI NG OF ASSESSMENT. IN THIS CASE ORIGINAL ASSESSMENT WAS C OMPLETED U/S. 143(3) OF INCOME-TAX ACT, 1961 ON 27.3.2006 DETERMINING TA XABLE INCOME AT RS. 14,86,40,590 AS AGAINST THE RETURNED INCOME OF RS. 8,87,25,877. SUBSEQUENTLY NOTICE U/S. 148 OF THE ACT WAS ISSUED ON 19.3.2010. THE REASON RECORDED FOR REOPENING OF ASSESSMENT IS THAT THERE ARE VARIATIONS IN THE FIGURES SHOWN IN THE ANNUAL REPORT OF THE C OMPANY AND THE COMPUTATION STATEMENT FILED ALONG WITH RETU RN OF INCOME AS UNDER: SL. NO. DESCRIPTION AS PER COMPUTATION STATEMENT (RS.) AS PER ANNUAL REPORT (RS.) 1. PROFIT BEFORE TAX AS PER P&L A/C. 21,82,33,289 23,25,90,000 2. ADDITION: DEPRECIATION DEBITED TO P&L A/C. CONSIDERED SEPARATELY. 6,71,95,711 7,40,36,000 3. ADDITION: DEFERRED REVENUE EXPENDITURE WRITTEN OFF CONSIDERED SEPARATELY. 22,06,262 40,92,000 4. ADDITION: DONATIONS MADE DURING THE YEAR CONSIDERED SEPARATELY 14,77,474 15,30,000 TOTAL 28,91,12,736 31,22,48,000 5. THE VARIATIONS WERE DUE TO EXCLUSION OF CORRESPONDI NG AMOUNTS RELATING TO JOINT VENTURE AND HENCE IT IS EVIDENT T HAT THE FIGURES I.T.A. NOS. 1282 & 1364/HYD/2011 M/S. NAGARJUNA CONSTRUCTIONS CO. PVT. LTD. ================================= 3 ADOPTED IN THE COMPUTATION OF INCOME WERE NET OF TH OSE RELATING TO THE JOINT VENTURES. THE ASSESSEE FILED COMPUTATION OF INCOME IN WHICH THE STARTING POINT WAS ADOPTED FROM THE PROFITS OF RS. 21,82,33,289 WHICH IS THE PROFIT OF THE STAND-ALONE OPERATIONS OF THE COM PANY. THE ASSESSEE HAS DEDUCTED A SUM OF RS. 4,36,86,816 FROM THE ABOV E MENTIONED PROFITS TOWARDS SHARE INCOMES RECEIVED FROM JV PART NERSHIP FIRMS. IN VIEW OF THE ACCOUNTING POLICY THE VARIATIONS IN PRO FITS BEFORE TAX WERE DUE TO EXCLUSION OF CORRESPONDING AMOUNTS RELATING TO JOINT VENTURE AND THEREFORE, THE PROFITS ADOPTED IN COMPUTING THE INCOME RETURNED WERE NET OF THE PROFITS RELATABLE TO JOINT VENTURES . THE CLAIM OF EXEMPTION OF INCOME OF RS. 4,36,86,816 TOWARDS SHAR E INCOME FROM JOINT VENTURES (FIRMS) RESULTED IN EXCESS ALLOWANCE OF DEDUCTION TO THAT EXTENT. THIS ESCAPEMENT OF INCOME HAS OCCURRE D ON ACCOUNT OF FAILURE AND OMISSION ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR COMPUTAT ION OF TAXABLE INCOME. HENCE, THERE IS REASON TO BELIEVE THAT INCOME HAS E SCAPED FROM ASSESSMENT FOR THE ASSESSMENT YEAR 2003-04. 6. THE ASSESSEE REPLIED TO THE REOPENING OF ASSESSMENT A S FOLLOWS: AS IT WAS EXPLAINED DURING THE COURSE OF H EARING THAT THE REASONS FOR ISSUE OF THE NOTICE U/S 148 IS THE APPR EHENDED DIFFERENCE IN THE PROFIT BEFORE TAX AS PER THE CONSOLIDATED PROFI T AND LOSS ACCOUNT PUBLISHED IN COMPLIANCE WITH THE PROVISIONS OF THE COMPANIES ACT, 1956 PREPARED APPLYING THE GENERALLY ACCEPTED ACCOU NTING PRACTICES (GAAP) APPLICABLE IN INDIA WHICH TAKES INTO CONSIDE RATION THE ACCOUNTING STANDARDS ISSUED AND NOTIFIED BY THE NA TIONAL ACCOUNTING STANDARDS BOARD CONSTITUTED UNDER SECTION 145 OF TH E INCOME-TAX ACT, 1961 AND ACCOUNTING STANDARDS (AS) ISSUED BY THE IN STITUTE OF CHARTERED ACCOUNTANTS OF INDIA (ICAI) AND THE COMPU TATION OF INCOME OF THE NAGARJUNA CONSTRUCTION COMPANY LIMITED ON ST AND ALONE BASIS UNDER THE INCOME-TAX ACT, 1961 FOR THE PURPOSE OF R ETURN OF INCOME AND ASSESSMENT. I.T.A. NOS. 1282 & 1364/HYD/2011 M/S. NAGARJUNA CONSTRUCTIONS CO. PVT. LTD. ================================= 4 7. IN THE CONSOLIDATED PROFIT & LOSS ACCOUNT WHICH IS P REPARED AS A GENERAL PURPOSE FINANCIAL STATEMENT OF THE COMPANY APPLYING THE PROVISIONS OF ACCOUNTING STANDARD (AS) 21 CONSOLI DATED FINANCIAL STATEMENT. THE SAID STANDARD REQUIRES THE LINE BY LINE CONSOLIDATION OF EQUITY METHOD OF CONSOLIDATION IN THE PREPARATION O F CONSOLIDATED FINANCIAL STATEMENTS. UNDER THE LINE BY LINE, THE C ONSOLIDATION IS DONE BY COMBINING ITEM BY ITEM SO THAT THE NET RESULTS A PPEAR AS RESPECTIVE LINE ITEMS. WHEREAS, EQUITY IS THE RESIDUAL INTERES T IS ONLY ACCOUNTED. THE REQUIREMENT OF THE APPLICATION OF THE METHOD DE PENDS UPON THE NATURE OF ECONOMIC INTEREST AND ITS ECONOMIC SUBSTA NCE. 8. ACCORDINGLY, DURING THE PREVIOUS YEAR RELEVANT TO T HE ASSESSMENT YEAR 2003-04 THE CONSOLIDATED PROFIT & LOSS ACCOUNT IS PREPARED APPLYING THE ABOVE ACCOUNTING STANDARD AND THE PROF IT BEFORE TAX AS PER THE SAID CONSOLIDATED PROFIT & LOSS ACCOUNT IS R S. 2325.88 LAKH THE SAME IS EXPLAINED AND RECONCILED AS UNDER: ( RS. IN LAKHS) 9. AS THE ABOVE FIGURE INCLUDES STAND ALONE PROFIT BEF ORE TAX OF NCC AND PROFIT AFTER TAX OF JOINT VENTURES CONSOLIDATED AND TAXED SEPARATELY, THE SAME NEED TO BE EXCLUDED AS THE PROFITS AND GAI NS WERE ALREADY TAXED. THE ELIMINATION IS DONE AS PER THE DETAILS IN THE ANNEXED STATEMENT AND IS AS UNDER: PROFIT AS PER CONSOLIDATED PROFIT & LOSS ACCOUNT (BEFORE TAX) 2325.88 LESS: AMOUNT OF TAX PROVIDED IN THE JVS CONSOLIDATED ON LINE TO LINE BASIS AS THE SAME IS A SEPARATE LIABILITY OF JVS. NCC - KNR (JV) RS. NIL NCC SMJ (JV) RS. 21.00 LGE & C - NCC (JV) RS. 102.80 NCC_MAYTAS (JV) RS. 14.97 TOTAL PROVISION FOR TAX 138.77 PROFIT BEFORE TAX STAND ALONE AND PROFIT AFTER TAX IN JVS CONSOLIDATED 2187.11 LESS: ADJUSTMENT FOR PRIOR PERIOD ITEMS (NEGATIVE) 4.79 PROFIT BEFORE TAX TAKEN AS BASE FOR COMPUTATION OF INCOME (STAND ALONE NCC) 2182.32 I.T.A. NOS. 1282 & 1364/HYD/2011 M/S. NAGARJUNA CONSTRUCTIONS CO. PVT. LTD. ================================= 5 (RS. IN LAKHS) PROFIT BEFORE TAX TAKEN AS BASE FOR COMPUTATION OF INCOME (STAND ALONE NCC) 2182.32 LESS: PROFIT AFTER TAX INCLUDED IN THE CONSOLIDATED P&L A/C. EXCLUDED U/S. 10(2) OF THE INCOME-TAX ACT, 1961 NCC - KNR (JV) RS. 50.38 NCC - SMJ (JV) RS. 61.42 LG E&C NCC (JV) RS. 176.36 UNIECH - NCC (JV) RS. 140.44 NCC - MAYTAX (JV) RS. 25.77 SOMDUTT - NCC (JV) ( - ) RS. 15.19 SDB - NCC - NEC (JV) RS. 34.30 NCC - MAYTAS (JV) ( - ) RS. 17.20 NCC - SMC (JV) RS. 19.42 TOTAL AMOUNT EXCLUDED AS INCOME NOT PART OF THE GRO SS TOTAL INCOME TAX 436.86 PROFIT BEFORE TAX NCCL STAND ALONE 1745.46 10. THE ASSESSING OFFICER NOT SATISFIED WITH THE EXPLAN ATION OFFERED BY THE ASSESSEE. ACCORDING TO THE ASSESSIN G OFFICER THE ASSESSEE ALREADY EXCLUDED ALL INCOME AND ALL EXPENS ES RELATING TO THE PROFIT AND LOSS A/C. OF THE JV FIRMS IN ITS ACCOUNTS BEFORE ARRIVING AT THE PROFIT OF THE STAND ALONE ASSESSEE' S COMPANY, THE CLAIM OF EXEMPTION OF RS. 4,36,86,816 TOWARDS SHARE INCOME FROM JV FIRMS IS NOT WARRANTED FROM THE PROFIT OF T HE ASSESSEE. THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION OF RS. 4 ,36,86,816 FROM THE PROFIT OF STAND-ALONE ASSESSEE'S COMPANY. ACCORDINGLY WHILE COMPLETING THE RE-ASSESSMENT, HE ADDED RS. 4, 36,86,816. 11. ON APPEAL, THE CIT(A) OBSERVED THAT THE ASSESSEE HA S TAKEN PROFIT BEFORE TAX AS PER PROFIT AND LOSS A/C. AT RS . 21,82,33,289 FROM WHICH ASSESSEE REDUCED SHARE INCOME OF THE FIRMS (J VS) U/S. 10(2A) AT RS. 4,36,86,816 AND ARRIVED STAND ALONE PROFIT BEFO RE TAX OF THE COMPANY AT RS. 17,45,46,473. THEREAFTER THE VARIOU S EXPENSES WERE REDUCED LIKE ADJUSTMENT TOWARDS ADDITION OF DEPRECI ATION DEBITED TO THE PROFIT AND LOSS A/C., DEFAULT REVENUE EXPENDITURE, SHARE ISSUE EXPENSES, ASSETS DISCARDED, ETC., AND ARRIVED BUSINESS INCOME AT RS. 14,78,79,793. TO THIS, THE ASSESSEE ADDED CAPITAL GAIN OF RS. 7,6 0,797 AND ARRIVED AT FINAL FIGURE OF GROSS TOTAL INCOME AT RS. 14,86,40, 590. ACCORDING TO THE I.T.A. NOS. 1282 & 1364/HYD/2011 M/S. NAGARJUNA CONSTRUCTIONS CO. PVT. LTD. ================================= 6 CIT(A) THE FIGURE TAKEN BY THE ASSESSEE IN ITS PROF IT AND LOSS A/C. AT RS. 21,82,33,289 WAS ARRIVED AT AFTER REDUCING THE TAX PAID BY JVS AT RS. 138.77 LAKHS. IN OTHER WORDS, THE PROFIT SHOWN BY THE ASSESSEE'S PROFIT AND LOSS A/C. IS INCLUSIVE OF PROFIT AFTER TAX OF T HE JVS. HE OBSERVED THAT THE DEDUCTION OF INCOME FROM JVS WHILE CALCULA TING THE STAND ALONE COMPANY'S PROFIT IS NOT WRONG. HOWEVER, HE OBSERVE D THAT STATEMENT OF INCOME OF THE ASSESSEE COMPANY AND JVS AS FILED BEF ORE THE ASSESSING OFFICER SHOWS THE PROFIT BEFORE TAX AS PER THE COMP UTATION STATEMENT, IN FACT INCLUDES THE PROFIT AFTER TAX OF THE JVS ALSO. TO THAT EXTENT HE WAS IN AGREEMENT WITH THE OBSERVATION OF THE ASSESSING OFFICER THAT THE FIGURES ADOPTED IN THE COMPUTATION OF INCOME DOES N OT INCLUDE SHARE INCOME OF THE JVS. FINALLY, HE CONSIDERED THE INCO ME OF THE ASSESSEE AT STAND-ALONE BASIS AS FOLLOWS: (RS. IN LAKHS) INCOME - 33,890.44 (LESS) EXPENDITURE - 32,098.92 PROFIT BEFORE TAX - 1,791.52 12. ACCORDINGLY, HE DIRECTED THE ASSESSING OFFICER TO S UBSTITUTE RS. 1791.52 LAKHS IN PLACE OF RS. 1745.46 LAKHS AS PROF IT BEFORE TAX. AGAINST THIS BOTH REVENUE AND ASSESSEE ARE IN APPEAL BEFORE US. 13. THE LEARNED AR SUBMITTED THAT REOPENING OF ASSESSME NT IS BAD IN LAW. THE ORIGINAL ASSESSMENT IN THIS CASE WAS C OMPLETED ON 27.3.2006 U/S. 143(3) OF THE ACT. REOPENING NOTICE HAS BEEN ISSUED TO THE ASSESSEE ON 19.3.2010. ACCORDING TO THE AR THE RE IS NO FAILURE ON THE PART OF THE ASSESSEE TO FURNISH ALL THE INFORMA TION REQUIRED FOR THE PURPOSE OF ASSESSMENT AS THE ASSESSEE DISCLOSED ALL THE INFORMATION FULLY AND TRULY WHICH ARE NECESSARY FOR THE PURPOSE OF ASSESSMENT. HE SUBMITTED THAT WHEN THE ASSESSMENT IS COMPLETED U/S . 143(3) NO ACTION SHALL BE TAKEN AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AS IN THIS CASE ALL MATERIAL FACTS NECESSARY FOR THE PURPOSE OF ASSESSMENT HAVE BEEN PRODUCED BY THE ASS ESSEE. FURTHER, HE SUBMITTED THAT THE ASSESSEE HAS RAISED THIS GROU ND BEFORE THE CIT(A) I.T.A. NOS. 1282 & 1364/HYD/2011 M/S. NAGARJUNA CONSTRUCTIONS CO. PVT. LTD. ================================= 7 REGARDING VALIDITY OF REOPENING OF ASSESSMENT, BUT HE CLEVERLY NOT ADJUDICATED THIS ISSUE AND DECIDED THE SAME ON MERI T. ACCORDINGLY, HE SUBMITTED THAT REOPENING ITSELF IS BAD IN LAW WHICH HAS TO BE CANCELLED. 14. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THAT TH ERE IS NO DISCUSSION REGARDING THE ISSUE RELATING TO REOPENIN G BY THE CIT(A). THE ISSUE MAY BE REMITTED BACK TO THE FILE OF THE CIT(A ) FOR FRESH ADJUDICATION. 15. WE HAVE HEARD BOTH THE PARTIES AND PERUSED MATERIAL ON RECORD. IN THIS CASE, ADMITTEDLY, THE ASSESSEE RAISED THE G ROUND AS GROUND NO. 1 BEFORE THE CIT(A) AS FOLLOWS: '1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LEARNED ASSESSING OFFICER ERRED IN LAW AND FACTS OF THE CASE IN PASSING THE IMPUGNED ORDER UNDER SECTION 14 3(3) READ WITH SECTION 147 AS SUCH THE ASSESSMENT WAS ORIGINALLY COMPLETED ON DUE VERIFICATION OF ALL THE MATERIAL FACTS IN SUPPORT OF THE CLAIMS IN THE RETU RN OF INCOME AND THE PROCEEDINGS UNDER SECTION 147 ARE ON THE MERE CHANGE OF OPINION.' 16. THE CIT(A) INADVERTENTLY NOT ADJUDICATED THIS GROUN D. WITHOUT ADJUDICATING THE ISSUE RELATING TO THE REOPENING OF ASSESSMENT, HE ADJUDICATED THE GROUND RELATING TO ADDITION OF RS. 4,36,86,816 ON MERIT WHICH IS INAPPROPRIATE. BEING SO, IN OUR OPINION, THE CIT(A) HAS TO FIRST DECIDE THE ISSUE RELATING TO VALIDITY OF REOPENING OF ASSESSMENT AND THEREAFTER HE HAS TO DECIDE THE ISSUE RELATING TO T HE ADDITION ON MERIT. THEREFORE, WE REMIT THE ISSUE RELATING TO REOPENING OF ASSESSMENT TO THE FILE OF THE CIT(A) TO DECIDE THE SAME AND THEREUPON DEAL WITH THE ISSUE RELATING TO THE MERITS OF THE ADDITION OF RS. 4,36, 86,816. HOWEVER, IN THE EVENT THE ASSESSEE HAS NOT PRESSED THIS GROUND BEFORE HIM ON EARLIER OCCASION, HE HAS TO RECORD THE SAME. AT THIS STAGE WE REFRAIN OURSELVES FROM GOING INTO THE ISSUE RELATING TO THE MERIT OF THE ADDITION OF RS. 4,36,86,816 WHICH IS COMMON IN BOTH ASSESSEE AS WEL L AS REVENUE APPEALS. I.T.A. NOS. 1282 & 1364/HYD/2011 M/S. NAGARJUNA CONSTRUCTIONS CO. PVT. LTD. ================================= 8 17. IN THE RESULT, ASSESSEE APPEAL IS PARTLY ALLOWED FO R STATISTICAL PURPOSES AND REVENUE APPEAL IS DISMISSED AS INFRUCT UOUS. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH SEPTEMBER, 2012. SD/ - (SAKTIJIT DEY) JUDICIAL MEMBER SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 28 TH SEPTEMBER, 2012 TPRAO COPY FORWARDED TO: 1. THE ASST. COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE - 1, 7 TH FLOOR, AAYAKAR BHAVAN, L.B. STADIUM ROAD, BASHEERBA GH, HYDERABAD-500 004. 2. THE DEPUTY COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE - 3, AAYAKAR BHAVAN, HYDERABAD-500 004. 3 . M/S. NAGARJUNE CONSTRUCTIONS CO. PVT. LTD., C/O. SRI SAMUEL NAGADESI, CHARTERED ACCOUNTANT, 408, SRI RAMAKRISHN A TOWERS, BESIDES IMAGE HOSPITALS, AMEERPET, HYDERABAD-500 07 3. 4 . THE CIT(A) - I, HYDERABAD. 5 . THE CIT (CENTRAL), HYDERABAD. 6 . THE DR A BENCH, ITAT, HYDERABAD
