Travancore Textiles P Ltd., CHENNAI V. ITO, CHENNAI

ITA 149/CHNY/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 6610 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 21-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURESH PERIASAMYJCIT
• Assessee Lawyers: S SRIDHAR
• Keywords: Principle of natural justice; Set aside

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , . , BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./ ITA NO.: 149/CHNY/2019 / ASSESSMENT YEAR: 2013-14 M/S. THE TRAVANCORE TEXTILES P LTD., NO.12, (OLD NO.22), HADDOWS ROAD, CHENNAI 600 006. PAN: AAACT2492E V. THE INCOME TAX OFFICER, CORPORATE WARD 3(2), CHENNAI. ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE /RESPONDENT BY : SHRI SURESH PERIASAMY,JCIT /DATE OF HEARING : 30.12.2020 /DATE OF PRONOUNCEMENT : 27.01.2021 / O R D E R PER G. MANJUNATHA, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-7, CHENNAI, DATED 20.11.2018 AND PERTAINS TO THE ASSESSMENT YEAR 2013-14. 2 I.T.A. NO.149/CHNY/2019 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN ITS APPEAL:- 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 7, CHENNAI DATED 20.11.2018 IN I.T.A.NO.106/CIT(A)-7/2017-18 FOR THE ABOVE MENTIONED ASSESSMENT YEAR IS CONTRARY TO LAW, FACTS, AND IN THE CIRCUMSTANCES OF THE CASE. 2. THE CIT (APPEALS) ERRED IN SUSTAINING THE SHIFTING OF HEAD OF INCOME FROM INCOME FROM BUSINESS TO INCOME FROM OTHER SOURCES AND ERRED CONSEQUENTLY IN SUSTAINING SUCH RECOMPUTATION WITHOUT NOTICING THE DIRECTIONS ISSUED BY THE JURISDICTIONAL BENCH OF THE INCOME TAX APPELLATE TRIBUNAL IN THE FIRST ROUND PROCEEDINGS VIDE THEIR ORDER DATED 21.08.2017 AT PARA 5 IN I.T.A.NO.483/MDS/2017 AS WELL AS WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 3. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE NOTES ON ARGUMENTS FILED ON 10.11.2018 WAS COMPLETELY OVERLOOKED AND HENCE OUGHT TO HAVE APPRECIATED THAT THE SUSTENANCE OF THE RECOMPUTATION FORMING PART OF THE ASSESSMENT ORDER ON VARIOUS FACETS WAS WRONG, ERRONEOUS, UNJUSTIFIED, INCORRECT AND NOT SUSTAINABLE IN LAW. 4. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE MECHANICAL ADOPTION OF THE FINDINGS IN HER APPELLATE ORDER PERTAINING TO THE ASSESSMENT YEAR 2015-16 WAS WHOLLY UNJUSTIFIED AND OUGHT TO HAVE APPRECIATED THAT THE FACTUAL DISTINCTION WAS COMPLETELY OVERLOOKED AND BRUSHED ASIDE. 5. THE ACIT FAILED TO APPRECIATE THAT THERE WAS NO PROPER OPPORTUNITY GIVEN BEFORE PASSING OF THE IMPUGNED ORDER AND ANY ORDER PASSED IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE WOULD BE NULLITY IN LAW. 6. THE APPELLANT CRAVES LEAVE TO FILE ADDITIONAL GROUNDS/ARGUMENTS AT THE TIME OF HEARING. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF TEA AND COFFEE, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2013-14 ON 30.09.2013 DECLARING TOTAL INCOME OF RS.1,76,494/- ALONG WITH AGRICULTURAL INCOME OF RS.9,44,200/-. THE ASSESSMENT FOR THE IMPUGNED 3 I.T.A. NO.149/CHNY/2019 ASSESSMENT YEAR WAS COMPLETED U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) ON 23.10.2015 AND DETERMINED TOTAL INCOME OF RS.9,53,383/- BY MAKING CERTAIN DISALLOWANCE OF EXPENSES RELATABLE TO AGRICULTURAL INCOME. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY, HOWEVER COULD NOT SUCCEED. THE LD.CIT(A) FOR THE REASONS STATED IN HIS APPELLATE ORDER HAS AFFIRMED THE ADDITIONS MADE TOWARDS DISALLOWANCE OF EXPENSES. THE ASSESSEE CARRIED ON THE MATTER IN FURTHER APPEAL BEFORE THE ITAT. THE TRIBUNAL VIDE ITS ORDER DATED 21.08.2017 IN ITA NO.483/MDS/2017 HAS SET ASIDE THE ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO RE-EXAMINE THE CLAIM OF THE ASSESSEE REGARDING DISALLOWANCE OF EXPENDITURE INCURRED FOR AGRICULTURAL INCOME ON THE GROUND THAT THE ASSESSEE HAS MAINTAINED SEPARATE BOOKS OF ACCOUNT FOR AGRICULTURAL INCOME AND FOR INTEREST INCOME. 4. PURSUANT TO THE DIRECTIONS OF THE TRIBUNAL, THE AO HAS TAKEN UP THE CASE FOR EXAMINATION. DURING THE COURSE OF PROCEEDINGS BEFORE THE AO, THE LD.AO HAS ACCEPTED THE PLEA OF THE ASSESSEE REGARDING DISALLOWANCE OF EXPENSES RELATABLE TO AGRICULTURAL INCOME ON THE GROUND THAT THE ASSESSEE HAS MAINTAINED SEPARATE BOOKS FOR AGRICULTURAL ACTIVITY AND CONSEQUENTLY THE EXPENSES DISALLOWED ON PROPORTIONATE BASIS IS NOT CALLED FOR. HOWEVER, HE WENT ON TO 4 I.T.A. NO.149/CHNY/2019 CHANGE THE HEAD OF INCOME IN RESPECT OF INTEREST INCOME OFFERED BY THE ASSESSEE UNDER THE HEAD INCOME FROM BUSINESS AND HAS ALSO DISALLOWED EXPENSES CLAIMED AGAINST INTEREST INCOME ON THE GROUND THAT THERE IS NO NEXUS BETWEEN EXPENDITURE DEBITED INTO THE PROFIT & LOSS ACCOUNT AND INCOME EARNED FOR THE YEAR. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE CIT(A) AND COULD NOT SUCCEED. THE LD.CIT(A) FOR THE REASONS STATED IN HIS APPELLATE ORDER DATED 20.11.2018 AFFIRMED THE ADDITIONS MADE BY THE AO TOWARDS DISALLOWANCE OF EXPENSES AGAINST INTEREST INCOME. BEING AGGRIEVED BY THE CIT(A)S ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LD.AR FOR THE ASSESSEE, AT THE TIME OF HEARING REFERRING TO THE ORDER OF THE TRIBUNAL IN ITA NO.483/MDS/2017 SUBMITTED THAT IN FIRST ROUND OF LITIGATION THE ISSUE BEFORE THE TRIBUNAL WAS WHETHER ASSESSEE MAINTAINED SEPARATE BOOKS OF ACCOUNTS IN RESPECT OF AGRICULTURAL INCOME AND THUS, AO WAS RIGHT IN DISALLOWANCE OF PROPORTIONATE EXPENDITURE. THE TRIBUNAL UNDER THOSE FACTS HAS SET ASIDE THE ISSUE TO THE FILE OF THE AO TO RE-EXAMINE THE CLAIM OF THE ASSESSEE IN LIGHT OF SEPARATE BOOKS OF ACCOUNT MAINTAINED FOR AGRICULTURAL INCOME, BUT, THERE IS NO DISCUSSION ON THE ISSUE OF CHANGING HEAD OF INCOME RELATING TO INTEREST INCOME EARNED FOR THE 5 I.T.A. NO.149/CHNY/2019 YEAR. THE AO WITHOUT CONSIDERING THE ABOVE FINDINGS OF THE TRIBUNAL, HAVING ACCEPTED INCOME DECLARED BY THE ASSESSEE FROM AGRICULTURAL ACTIVITY WENT ON TO CHANGE HEAD OF INCOME IN RESPECT OF INTEREST INCOME EARNED FOR THE YEAR AND DISALLOWED PROPORTIONATE EXPENSES ON THE GROUND THAT EXPENDITURE DEBITED IN TO THE PROFIT AND LOSS ACCOUNT IS NOT RELATABLE TO INTEREST INCOME AND CONSEQUENTLY NOT ALLOWABLE AS DEDUCTION U/S.57(III) OF THE ACT. 6. THE LD.DR ON THE OTHER HAND STRONGLY SUPPORTING THE ORDER OF THE CIT(A) SUBMITTED THAT THE CIT(A) HAS CONSIDERED THE ISSUE AND AFTER CONSIDERING RELEVANT FACTS HAS RIGHTLY AFFIRMED DISALLOWANCES MADE BY THE AO TOWARDS EXPENDITURE CLAIMED AGAINST INTEREST INCOME AND HENCE THERE IS NO REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. IN THE FIRST ROUND OF LITIGATION, THE MATTER WENT UP TO THE TRIBUNAL AND THE TRIBUNAL IN ITS ORDER DATED 21.08.2017 IN ITA NO.483/MDS/2017 HAS SET ASIDE THE APPEAL TO THE FILE OF THE AO TO RE-EXAMINE THE CLAIM OF THE ASSESSEE REGARDING PROPORTIONATE DISALLOWANCE OF EXPENSES RELATABLE TO AGRICULTURAL ACTIVITY ON THE 6 I.T.A. NO.149/CHNY/2019 GROUND THAT THE ASSESSEE CLAIMS TO HAVE MAINTAINED SEPARATE BOOKS OF ACCOUNT FOR AGRICULTURAL OPERATIONS. THE LD.AO DURING SECOND ROUND OF LITIGATION HAS ACCEPTED THE CLAIM OF THE ASSESSEE REGARDING INCOME DECLARED FROM AGRICULTURAL OPERATIONS WITHOUT MAKING ANY DISALLOWANCE TOWARDS EXPENSES ON THE GROUND THAT THE ASSESSEE HAS MAINTAINED SEPARATE BOOKS OF ACCOUNT FOR AGRICULTURAL OPERATIONS AND THUS NO PROPORTIONATE DISALLOWANCE IS CALLED FOR, FOR EXPENSES. BUT, HAVING ACCEPTED AGRICULTURAL INCOME DECLARED BY THE ASSESSEE, HE WENT ON TO CHANGE THE HEAD OF INCOME RELATING TO INTEREST INCOME EARNED FOR THE YEAR AND HAS ALSO MADE DISALLOWANCE OF CERTAIN EXPENDITURE CLAIMED AGAINST INTEREST INCOME ON THE GROUND THAT SAID EXPENDITURE ARE NOT RELATABLE TO EARN INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES, WITHOUT CONSIDERING THE FACT THAT THE ITAT HAS SET ASIDE THE ISSUE TO THE FILE OF THE AO FOR THE PURPOSE OF EXAMINING THE CLAIM OF THE ASSESSEE REGARDING PROPORTIONATE DISALLOWANCE OF EXPENSES RELATABLE TO AGRICULTURAL INCOME. FURTHER, WHEN THE APPEAL HAS BEEN SET ASIDE FOR LIMITED PURPOSE OF EXAMINING A PARTICULAR ISSUE, THE AO HAS TO CONFINE HIMSELF TO THE ISSUE WHICH IS BEFORE HIM. IN THIS CASE, THE AO HAVING ACCEPTED THE CLAIM OF THE ASSESSEE REGARDING PROPORTIONATE DISALLOWANCE OF AGRICULTURAL EXPENSES, HAS WRONGLY WENT ON TO DISALLOW EXPENSES CLAIMED AGAINST INTEREST INCOME, EVEN THOUGH SAID ISSUE WAS NOT 7 I.T.A. NO.149/CHNY/2019 SUBJECT MATTER BEFORE THE TRIBUNAL AND FURTHER THERE IS NO DIRECTION FROM THE TRIBUNAL ON THE SAID ISSUE. WE, THEREFORE ARE OF THE CONSIDERED VIEW THAT THE ADDITIONS MADE BY THE AO TOWARDS PROPORTIONATE DISALLOWANCE OF EXPENSES CLAIMED AGAINST INTEREST INCOME IS NOT WITHIN HIS POWERS AND HENCE, DIRECT THE AO TO DELETE DISALLOWANCE MADE TOWARDS PROPORTIONATE EXPENSES CLAIMED AGAINST INTEREST INCOME. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 27 TH JANUARY, 2021 AT CHENNAI. SD/- SD/- ( ) (MAHAVIR SINGH) /VICE PRESIDENT ( . ) (G. MANJUNATHA) /ACCOUNTANT MEMBER /CHENNAI, /DATED, THE 27 TH JANUARY, 2021 RSR /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( ) /CIT(A) 4. /CIT 5. /DR 6. /GF.