Sagar Cements Limited, Hyderabad V. Dy. Commissioner of Income Tax, Circle-3(1), Hyderabad

ITA 1523/Hyd/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2443 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 27-02-2018
• Assessment Year: 2009-2010
• Appeal Filed On: 31-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K SRINIVAS REDDY
• Assessee Lawyers: A V RAGHURAM
• Keywords: Depreciation; Opportunity of being heard; Principle of natural justice; Additional depreciation
• Section: 143(3); 115JB; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1523/HYD/2017 ASSESSMENT YEAR: 2009-10 SAGAR CEMENTS LTD., HYDERABAD. PAN AACCS8680H VS. DY. COMMISSIONER OF INCOME- TAX, CIRCLE 3(1), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI A.V. RAGHU RAM REVENUE BY : SHRI K. SRINIVAS REDDY DATE OF HEARING 27/02/2018 DATE OF PRONOUNCEMENT 28/02/2018 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 24/07/2017 OF LD. CIT(A) 3, HYDERABAD RELATING TO AY 2009-10. 2. BRIEFLY THE FACTS OF THE CASE ARE, ASSESSEE A CO MPANY, ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF CEMENT, FILED ITS RETURN OF INCOME ON 30/09/2009 DECLARING TOTAL LOSS AT RS. 55 ,63,80,291/- UNDER NORMAL PROVISIONS AND BOOK PROFIT U/S 115JB AT RS. 24,81,09,793/-. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AN D NOTICE U/S 143(2) WAS ISSUED ON 18/08/2010 AND DULY SERVED ON THE ASSESSEE. IN RESPONSE TO THE SAID NOTICES, THE LD. AR OF THE ASS ESSEE FILED THE INFORMATION AS CALLED FOR. THE AO COMPLETED THE ASS ESSMENT U/S 143(3) OF THE ACT DETERMINING THE LOSS OF RS. 17,77 ,82,451/- BY MAKING SOME ADDITIONS, AS AGAINST THE LOSS OF RS. 5 5,63,80,291/- DECLARED BY THE ASSESSEE. 2 ITA NO. 1523 /HYD/2017 SAGAR CEMENTS LTD. 2.1 SUBSEQUENTLY, AO OBSERVED THAT THERE WERE HUGE ADDITIONS OF PLANT AND MACHINERY VALUING RS. 291.29 CRORES (RS. 191.07 CRORES FOR MORE THAN 180 DAYS + RS. 100.62 CRORES FOR LESS THA N 180 DAYS). THE AO NOTICED FROM THE DIRECTORS REPORT THAT THE EXPA NDED UNIT COMMENCED PRODUCTION ON 22/01/2009. SUBSEQUENTLY, A FTER GIVING OPPORTUNITY TO THE ASSESSEE, THE AO PASSED ORDER U/ S 154 OF THE ACT ON 24/03/2015 RECTIFYING THE MISTAKE. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE P REFERRED AN APPEAL BEFORE THE CIT(A). 4. LD. CIT(A) HAS ISSUED NOTICE OF HEARING FIXING THE DATE ON 08/06/2017 AND 19/07/2017. ACCORDING TO HIM, IN BOT H OF THESE DAYS, NEITHER THE ASSESSEE NOR ITS REPRESENTATIVE APPEARE D BEFORE HIM. THEREFORE, THE CIT(A) DISMISSED THE APPEAL OF THE A SSESSEE ON THE GROUND THAT THERE WAS NO COMPLIANCE FROM THE ASSESS EE TO THE NOTICES ISSUED BY HIM FOR HEARING OF THE APPEAL. 4.1 EVEN ON MERITS, THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE BY HOLDING THAT NO DETAILS HAVE BEEN SUBMI TTED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM THAT THE MACHINERY WAS PURCHASED AND INSTALLED, PUT TO USE FOR MORE THAN 180 DAYS TO CLAIM ELIGIBLE DEPRECIATION INSPITE OF GIVING THREE OPPORTUNITIES. THEREFORE, GROUNDS RAISED BY THE ASSESSEE WERE DISMISSED. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSES SEE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-3, HYDERABAD, DISMISSING THE APPEAL OF THE APPELLANT IS ERRONEOUS , ILLEGAL AND UNSUSTAINABLE ON FACTS AND IN LAW, APART FROM BEING PASSED IN GROSS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. 2. THE COMMISSIONER (APPEALS) ERRED IN HOLDING THAT THE APPELLANT DID NOT APPEAR ON 08.06.2017 AND 19.07.20 17. THE COMMISSIONER (APPEALS) OUGHT TO HAVE APPRECIATED TH AT THE APPELLANT WAS REPRESENTED ON BOTH THE ABOVE DATES A ND ADJOURNMENT WAS GRANTED BY THE CIT(A). 3 ITA NO. 1523 /HYD/2017 SAGAR CEMENTS LTD. 3. THE COMMISSIONER (APPEALS) HAVING ACCEPTED THE P ETITION FOR ADJOURNMENT DATED 19.07.2017 SHOULD NOT HAVE DISMIS SED THE APPEAL. THE COMMISSIONER (APPEALS) HAVING, ACCEPTED THE PETITION FOR ADJOURNMENT WITHOUT DEMUR ERRED IN DIS MISSING THE APPEAL WITH A FINDING THAT 'THERE WAS NO RESPONSE'. 4. WITHOUT PREJUDICE TO ABOVE, THE COMMISSIONER (AP PEALS) ERRED IN SUSTAINING THE ORDER PASSED BY THE ASSESSI NG UNDER SECTION 154 OF THE ACT, WHICH RESTRICTED THE DEPREC IATION AND ADDITIONAL DEPRECIATION OF THE APPELLANT TO 50% OF THE CLAIM MADE AND ALLOWED IN THE SCRUTINY ASSESSMENT. 5. THE COMMISSIONER (APPEALS) FAILED TO APPRECIATE THAT THE ISSUE WHETHER THE MACHINERY IS PUT TO USE FOR MORE THAN 180 DAYS OR NOT, IS A FACTUAL ISSUE AND HAS TO BE DETER MINED BASED ON THE EVIDENCE AND IS NOT AMENABLE TO PROCEEDINGS UNDER SECTION 154 OF THE ACT. THE COMMISSIONER (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE SAID ISSUE A DEBATABLE IS SUE AND COULD NOT HAVE BEEN A SUBJECT MATTER OF PROCEEDING UNDER SECTION 154 OF THE ACT. 6. THE COMMISSIONER (APPEALS) ERRED IN UPHOLDING TH E FINDING OF THE ASSESSING OFFICER THAT THE CLINKERSATION MACHIN E IS NOT PROVED TO HAVE BEEN PUT TO USE FOR MORE THAN 180 DA YS IN SPITE OF THE FACT THAT IT IS USED BEFORE ACTUAL PRODUCTIO N AND THAT IT WAS PUT TO USE ON 18.09.2008. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT TH E TIME OF HEARING, IT IS PRAYED THAT THE HON'BLE TRIBUNAL MAY BE PLEASED TO ALLOW THE APPEAL. 6. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN THE PRELIMINARY GROUNDS OF APPEAL, THE A SSESSEE CONTENDED THAT EVEN THOUGH THE CIT(A) ACCEPTED THE ADJOURNMEN T PETITIONS, WHICH WERE FILED ON THE DATES OF HEARING ON 08/06/2 017 AND 19/07/2017, DISMISSED THE APPEAL ON THE GROUND THAT THERE WAS NO COMPLIANCE FROM THE ASSESSEE AGAINST THE NOTICES IS SUED FIXING THE APPEAL FOR HEARING, WHICH IS NOT PROPER AND NOT IN ACCORDANCE WITH LAW AS WELL AS GROSS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. IN SUPPORT OF HIS CONTENTION, LD. AR SUBMITTED AN AFFIDAVIT, AS P ER WHICH, THE PARTNER OF LD. AR, SHRI P. VINOD, ATTENDED THE OFFICE OF TH E CIT(A) TO SEEK ADJOURNMENT. THE CONTENTS IN THE AFFIDAVIT WERE EXT RACTED BELOW: THE ABOVE APPEAL IS FILED AGAINST THE ORDER PASSED BY THE HON'BLE CIT(A)-3, HYDERABAD DISMISSING THE APPEAL O F THE 4 ITA NO. 1523 /HYD/2017 SAGAR CEMENTS LTD. ASSESSEE/APPELLANT EXPARTE. IT IS SUBMITTED THAT I WENT TO THE OFFICE OF THE HON'BLE CIT(A)-3, HYDERABAD, ON DT.19 .07.2017 WITH ADJOURNMENT PETITION TO SEEK AN ADJOURNMENT FO R THREE WEEKS FOR PREPARING WRITTEN SUBMISSIONS IN THE APPE AL WHICH WAS PENDING ON THAT DATE. I WAS TOLD TO FILE ADJOUR NMENT PETITION IN 'INWARD SECTION OF THE O/O. CIT(A)-3, HYDERABAD AND THAT THEY WOULD BE RESCHEDULING THE DATE AND WOULD INTIMATE T HE NEXT DATE OF HEARING BY ISSUING FRESH NOTICE OF HEARING. ACCORDINGLY I HAVE FILED ADJOURNMENT PETITION IN THE TAPPAL OF TH E OFFICE OF THE HON'BLE CIT(A)-3, HYDERABAD. HOWEVER, THE LD. CIT(A ) DISMISSED THE APPEAL OF THE ASSESSEE EX-PARTE HAVIN G GIVEN AN INDICATION THAT THE DATE OF HEARING WILL BE RESCHED ULED TO A FUTURE DATE. FROM THE ABOVE, IT IS CLEAR THAT THE COUNSEL HAS AP PROACHED THE CIT(A)S OFFICE, WHO WAS ASKED TO SUBMIT THE ADJOUR NMENT PETITION, SO THAT HEARING DATE CAN BE REFIXED. FOR SOME REASON, THE OFFICE OF THE CIT(A) HAS NOT BROUGHT TO THE NOTICE OF CIT(A) ABOU T THE ADJOURNMENT PETITIONS AND THE LD. CIT(A) HAS DISMISSED THE APPE AL UNAWARE OF THE ABOVE FACTS. IT MAY NOT BE OUT OF PLACE TO MENTION THAT THE LD. COUNSEL STRONGLY OBJECTED TO THE ORDER PASSED BY THE LD. CI T(A) ON MERITS BY STATING THAT THE FACTUAL MATRIX OF THE CASE WAS NOT PROPERLY GONE INTO AND IN THIS REGARD, HE ADVERTED OUR ATTENTION TO TH E PAPER BOOK TO HIGHLIGHT THAT THE AO HAS TAKEN INTO CONSIDERATION FRESH MATERIAL WHILE PASSING ORDER U/S 154, WHICH IS NOT PERMISSIBLE IN LAW SINCE THE ORDER U/S 154 CAN BE PASSED ONLY WHEN THERE IS A MISTAKE APPARENT ON RECORD AND HE CANNOT TRAVERSE BEYOND THE MATERIAL ALREADY AVAILABLE ON RECORD. LD. COUNSEL SUBMITS THAT THE LD. CIT(A) HAVING ALREADY DECIDED THE MATTER ON MERITS NO PURPOSE WOULD BE SE RVED IF THE MATTER GOES BACK TO LD. CIT(A) FOR FRESH HEARING UN LESS THERE IS A DIRECTION TO THE CIT(A) THAT HE SHOULD NOT BE BOUND BY THE DECISION TAKEN EARLIER ON MERITS. 6.1 THEREFORE, CONSIDERING THE TOTALITY OF FACTS AN D CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT IN THE INTEREST O F NATURAL JUSTICE WE SET ASIDE THE ENTIRE ORDER OF THE CIT(A) IN TOTO AN D REMIT THE MATTER BACK TO THE FILE OF THE CIT(A) WITH A DIRECTION TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO REPRESENT ITS CASE O N MERITS AND 5 ITA NO. 1523 /HYD/2017 SAGAR CEMENTS LTD. DECIDE THE MATTER AFRESH IN ACCORDANCE WITH LAW AND PROVIDE PROPER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN THE M ATTER. ASSESSEE IS DIRECTED TO COMPLY WITH THE NOTICES/DIRECTIONS OF T HE CIT(A) TO EXPEDITE THE DISPOSAL OF APPEAL BY THE CIT(A). 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 28 TH FEBRUARY, 2018. SD/- SD/- (D. MANMOHAN) (S. RIFAUR RAHM AN) VICE PRESIDENT A CCOUNTANT MEMBER HYDERABAD, DATED: 28 TH FEBRUARY, 2018 KV COPY TO:- 1) SAGAR CEMENTS LTD., C/O S/SHRI K. VASANTKUMAR, AV RAGHURAM, P. VINOD & M. NEELIMA DEVI, ADVOCATES, 610 BAB UKHAN ESTATE, BASHEERBAGH, HYDERABAD 500 001. 2) DCIT, CIRCLE 3(1), SIGNATURE TOWERS, KONDAPUR ROAD, HYD. 3) CIT(A) 3, HYDERABAD 4) PR. CIT 3, HYD. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6)) GUARD FILE