M/s Swan Silks , Bangalore V. The Deputy Commissioner of Income TAx Circle-6(1)(2), Bangalore

ITA 1595/BANG/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 0702 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 13-08-2020
• Assessment Year: 2012-2013
• Appeal Filed On: 15-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S V RAVISHANKAR
• Keywords: Depreciation; Principle of natural justice; Earning of tax free income; Revised return; Capital Gains
• Section: 234B; 14A; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N. V. VASUDEVAN, VICE PRESIDENT AND SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER ITA NO. 1595 , 1596 /BANG/201 8 ASSESSMENT YEAR : 2012-13, 2014-15 M/S. SWAN SILK PVT. LTD., NO.40, 4 TH CROSS, SWAN HOUSE, RICHMOND ROAD, BANGALORE 560 025. PAN : A ACCS 4515 R VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 6(1)(2), BANGALORE. APPELLANT RESPONDENT ASSESSEE BY : SHRI. S. V. RAVISHANKAR , A DVOCATE REVENUE BY : SHRI . PRIYADARSHI MISHRA , J CIT (DR)(ITAT), BENGALURU DATE OF HEARING : 14 . 1 2 .20 20 DATE OF PRONOUNCEMENT : 22 . 1 2 .20 20 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE 2 APPEALS BY THE ASSESSEE DIRECTED AGAINST THE DIFFERENT ORDERS OF CIT(A) FOR THE ASSESSMENT YEARS 2012-13 AND 2014-15. THE ASSESSEE RAISED FOLLOWING GROUNDS OF APPEAL. THESE APPEALS ARE HEARD TOGETHER AND DISPOSED OFF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE, AS IT BELONGS TO THE SAME ASSESSEE. 2. ITA NO.1595/BANG/2018 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX [APPEALS] IN SO FAR AS IT IS AGAINST THE APPELLANT ARE OPPOSED TO LAW, EQUITY AND ITA NOS.1595, 1596/BANG/2018 PAGE 2 OF 12 WEIGHT OF EVIDENCE, NATURAL JUSTICE, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE APPELLANT DENIES ITSELF LIABLE TO BE ASSESSED TO TOTAL LOSS OF RS. (-)79,85,450/-AS AGAINST THE RETURNED INCOME OF RS. (-)2,06,89,572/- ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE LEARNED CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCES OF RS. 10,43,680/- BEING A PORTION OF TRAVELLING EXPENDITURE INCURRED FOR THE PURPOSE OF BUSINESS, WITHOUT APPRECIATING THAT THE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF BUSINESS ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THE LEARNED AUTHORITIES BELOW FELL IN ERROR IN ASSUMING THAT THE TRAVEL EXPENDITURE WAS TO BE DEMONSTRATED BY CORRELATING TO THE ORDERS OBTAINED, WHICH IS AKIN TO THE REVENUE SITTING IN THE ARM CHAIR OF THE APPELLANT TO ASCERTAIN THE PURPOSE OF EVERY EXPENDITURE, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THE LEARNED CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF RS.3,50,291/- BEING BUSINESS DEVELOPMENT EXPENDITURE, INCURRED FOR THE PURPOSE OF BUSINESS ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. THE LEARNED CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF RS. 44,796/- BEING EXPENDITURE ON CLUBS, WHICH WERE NECESSARY FOR HOSTING VISITING CLIENTS ETC, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. THE LEARNED CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITIONS OF RS. 24,26,050/- BEING ESTIMATED SALE OF SCRAP SILK YARN, BY ACCEPTING THE PREMISE THE AO THAT THE SCRAP WAS ALSO TO BE VALUED AT THE MARKET RATES, WHEN(THE APPELLANT HAS DETAILED THE REASONS FOR SALE OF SCRAP, THUS ARRIVING AT THE ERRONEOUS FINDING THAT THE ADDITIONS MADE WERE TO BE SUSTAINED, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 8. THE AUTHORITIES BELOW ERRED ON FACTS IN NOT APPRECIATING THAT THE SALE OF SCRAP COULD NOT BE EQUATED TO THE SALE OF REGULAR GOODS AND THUS ARRIVED AT A PERVERSE FINDING THAT THE GOODS WERE TO BE VALUED AT THE RATES AS ARRIVED AT BY THE AO ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 9. THE LEARNED AUTHORITIES BELOW ERRED IN NOT APPRECIATING THE DOCUMENTS FILED BEFORE THE LOWER AUTHORITIES TO ARRIVE AT THE PERVERSE FINDING THAT THE VARIOUS SCRAP YARN SOLD WERE OF THE SAME QUALITY AS NEW GOODS, ON THE BASIS OF CONJECTURES, SURMISES AND PRESUMPTIONS AND WITHOUT ESTABLISHING THE SAME WITH COGENT MATERIAL AND COMPLETELY DISREGARDING THE MATERIAL PLACED ON RECORD BY THE APPELLANT BY ESTIMATING THE COST OF THE GOODS, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 10. THE AUTHORITIES BELOW WERE BOTH IN ERROR IN NOT APPRECIATING THAT THE ESTIMATION OF INCOME COULD BE RESORTED TO ONLY WHEN THE BOOKS OF THE ITA NOS.1595, 1596/BANG/2018 PAGE 3 OF 12 APPELLANT WERE REJECTED, WHICH IN THE INSTANT CASE HAS NOT BEEN DONE AND THE AUTHORITIES BELOW HAVE NOT INDICATED THAT THERE WERE INFIRMITY OR COMPLEXITY IN THE ACCOUNTS TO RESORT TO ESTIMATION OF EXPENSES, AND THE ENTIRE ESTIMATED DISALLOWANCES ARE REQUIRED TO BE DELETED, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 11. THE APPELLANT CRAVES LEAVE OF THIS HON'BLE TRIBUNAL, TO ADD, ALTER, DELETE, AMEND OR SUBSTITUTE ANY OR ALL OF THE ABOVE GROUNDS OF APPEAL AS MAY BE NECESSARY AT THE TIME OF HEARING. 12. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF APPEAL, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED FOR THE ADVANCEMENT OF SUBSTANTIAL CAUSE OF JUSTICE AND EQUITY. 3. THE ASSESSEE RAISED THE ADDITIONAL GROUNDS AS FOLLOWS: 1. THE LEARNED CIT(A) WAS NOT JUSTIFIED IN APPRECIATING THAT THE AO HAS NOT RECORDED PROPER SATISFACTION BEFORE PROCEEDING TO COMPUTE THE DISALLOWANCE IN RELATION TO EXEMPT INCOME ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. WITHOUT PREJUDICE AND NOT CONCEDING THAT NO DISALLOWANCE WAS CALLED FOR, THE DISALLOWANCE IF ANY OUGHT TO BE RESTRICTED TO 0.5% OF THE VALUE OF INVESTMENT WHICH HAVE EARNED DIVIDEND DURING THE YEAR, ON THE FACT AND CIRCUMSTANCES OF THE CASE. 3. THE APPELLANT CRAVES LEAVE OF THIS HON'BLE TRIBUNAL, TO ADD, ALTER, DELETE, AMEND OR SUBSTITUTE ANY OR ALL OF THE ABOVE GROUNDS OF APPEAL AS MAY BE NECESSARY AT THE TIME OF HEARING. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF APPEAL, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED FOR THE ADVANCEMENT OF SUBSTANTIAL CAUSE OF JUSTICE AND EQUITY. 4. THE ASSESSEE PRAYED THAT ADDITIONAL GROUND BE ADMITTED IN THE INTEREST OF ADVANCEMENT OF NATURAL JUSTICE AND THESE GROUNDS WERE INADVERTENTLY NOT RAISED ON EARLIER OCCASION AND THERE IS NO NECESSITY OF INVESTIGATION OF ANY FRESH FACTS ON THIS ISSUE AND ALSO PLACED RELIANCE ON THE JUDGMENT OF SUPREME COURT IN THE CASE OF NTPC VS. CIT 229 ITR 383. THE DR DID NOT PUT ANY STRONG OBJECTION FOR ADMISSION OF ADDITIONAL GROUNDS. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THERE IS NO NECESSITY OF INVESTIGATION OF ANY FRESH FACTS ON THIS ISSUE AND THERE ITA NOS.1595, 1596/BANG/2018 PAGE 4 OF 12 IS GOOD AND SUFFICIENT REASON FOR NOT RAISING THIS GROUND IN EARLIER OCCASION. ACCORDINGLY, BY PLACING RELIANCE ON THE JUDGMENT OF SUPREME COURT IN THE CASE OF NTPC CITED SUPRA, WE ADMIT THE ADDITIONAL GROUND FOR ADJUDICATION. 6. GROUND NOS.1 AND 2 IN MAIN GROUNDS OF APPEAL IS GENERAL WHICH DO NOT REQUIRE ADJUDICATION. 6.1 GROUND NOS.2 AND 3 WITH REGARD TO DISALLOWANCE OF TRAVELLING EXPENDITURE. THE FACTS ARE THAT THE ASSESSEE CLAIMED AN EXPENDITURE OF RS.41,74,722/- AS TRAVELLING EXPENSES. MAJOR PORTION OF PAYMENTS RELATING TO DIRECTORS CREDIT CARD PAYMENT. ACCORDING TO THE AO, THERE WAS PERSONAL ELEMENT INVOLVED IN THIS EXPENDITURE INCURRED BY THE DIRECTOR OF RS.10,43,680/- OUT OF RS.41,74,722/-. ON APPEAL, CIT(A) CONFIRMED THE DISALLOWANCE WITHOUT ANY SPEAKING ORDER. AGAINST THIS, ASSESSEE IS IN APPEAL BEFORE US. 6.2 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE CONTENTION OF THE AR IS THAT THE ASSESSEE PLACED ALL BILLS AND VOUCHERS AND RECEIPTS WITH REGARD TO THIS EXPENDITURE. THE ASSESSEE BEING A LIMITED COMPANY, THERE IS NO QUESTION OF ANY PERSONAL ELEMENT IN INCURRING THIS EXPENDITURE. THIS EXPENDITURE WAS INCURRED ON ACCOUNT OF BUSINESS EXPEDIENCY FOR THE PURPOSE OF BUSINESS. WE HAVE GONE THROUGH THE CASE RECORDS. THE ASSESSEE INCURRED AN EXPENDITURE OF RS.41,74,722/-, MOST OF THE PAYMENTS ARE MADE BY DIRECTORS CREDIT CARD. THE ASSESSEE HAS NOT SUBSTANTIATED THE TRAVEL EXPENDITURE AS IT IS WHOLLY AND EXCLUSIVELY MADE OUT FOR BUSINESS. THERE IS EVERY CHANCE OF PERSONAL ELEMENT ATTACHED TO THIS EXPENDITURE. IT IS THE DUTY OF THE ASSESSEE THAT THE EXPENDITURE IS WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS. THOUGH THE AO DISALLOWED ITA NOS.1595, 1596/BANG/2018 PAGE 5 OF 12 EXPENDITURE ON ADHOC BASIS, THE CIT(A) CONFIRMED THE SAME WITHOUT PASSING SPEAKING ORDER. IN OUR OPINION, IT IS APPROPRIATE TO REMIT THE ISSUE BACK TO THE FILE OF AO TO PIN POINT THE EXACT EXPENDITURE WHICH IS PERSONAL IN NATURE AND WHERE THE DIRECTORS ARE BENEFITTED BY SUCH EXPENDITURE. ACCORDINGLY, THIS ISSUE IS REMITTED TO THE AO FOR A FRESH CONSIDERATION. 7. GROUND NO.5 IS WITH REGARD TO DISALLOWANCE OF BUSINESS DEVELOPMENT EXPENDITURE OF RS.3,50,291/-. ON THIS ISSUE, THE AO OBSERVED THAT THE ASSESSEE HAS INCURRED BUSINESS DEVELOPMENT EXPENDITURE AT RS.40,01,169/-. THESE PAYMENTS ARE ALSO MADE BY DIRECTORS THROUGH CREDIT CARD. THE AO DISALLOWED 25% OF 14,01,167/- AT RS.3,50,290/-. ON APPEAL, CIT(A) CONFIRMED THE DISALLOWANCE. AGAINST THIS, ASSESSEE IS IN APPEAL BEFORE US. 7.1 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. AS DISCUSSED IN EARLIER PARA, THIS EXPENDITURE WAS ALSO DISALLOWED BY AO ON ADHOC BASIS WHICH IS NOT PROPER. HE SHOULD SPECIFY WHICH PART OF THE EXPENDITURE IS PERSONAL IN NATURE INCURRED BY THE DIRECTOR. ACCORDINGLY, WE REMIT THE ISSUE BACK TO THE FILE OF AO AND DIRECT THE ASSESSEE TO PRODUCE ALL DETAILS OF THIS EXPENDITURE AND THEREAFTER AO HAS TO RE-EXAMINE THE ISSUE AFRESH. 8. NEXT GROUND IS WITH REGARD TO DISALLOWANCE OF CLUB EXPENSES AT RS.44,796/-. THE ASSESSEE INCURRED AN EXPENDITURE OF RS.89,592/- UNDER THE HEAD CLUBS. ASSESSEE NOT FURNISHED THE DETAILS OF EXPENDITURE ON BEHALF OF WHOM THIS EXPENDITURE IS INCURRED THOUGH IT WAS TREATED THAT THIS WAS INCURRED TOWARDS FOREIGN BUYERS. THE AO DISALLOWED 50% OF RS.89,592/-, AT RS.44,796/-. ITA NOS.1595, 1596/BANG/2018 PAGE 6 OF 12 8.1 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. AS DISCUSSED IN THE EARLIER PARA, THE ASSESSEE HAS TO ESTABLISH THAT THIS EXPENDITURE WAS INCURRED ONLY EXCLUSIVELY FOR THE PURPOSE OF BUSINESS BY PLACING NECESSARY EVIDENCE SO AS TO ENTERTAIN THE FOREIGN BUYERS. ACCORDINGLY, THIS ISSUE IS REMITTED TO THE FILE OF AO FOR FRESH CONSIDERATION. 9. NEXT GROUND IS WITH REGARD TO SALE OF SCRAP OF SILK YARN AT RS.24,26,050/-. THE ASSESSEE SHOWN IN THE SALE RECEIPTS FROM SALE OF SCRAP SILK YARN OF 3,547 KGS FOR RS.18,30,350/-. ACCORDING TO AO, THE VALUE OF SCRAP SILK YARN AT RS.1,200/- PER KG. HE WORKED OUT THE SALE VALUE OF 3547 KGS AT RS.1200/- PER KG. AND WORKED OUT AT RS.42,56,400/-. THUS, THE ASSESSEE DISCLOSED THE VALUE OF RS.18,30,350/- AND THERE WAS A DIFFERENCE BETWEEN THE VALUE DETERMINED BY AO AND THE VALUE DECLARED BY ASSESSEE WORKED OUT AT RS.24,26,050/- AND CONSIDERED AS SUPRESSED INCOME OF ASSESSEE ON THIS ACCOUNT AND MADE ADDITION TOWARDS THIS. AGAINST THIS, ASSESSEE IS IN APPEAL BEFORE. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE LEARNED AR DREW OUT ATTENTION TO THE BELOW MENTIONED CHART WHICH IS AS FOLLOWS: ITA NOS.1595, 1596/BANG/2018 PAGE 7 OF 12 ITA NOS.1595, 1596/BANG/2018 PAGE 8 OF 12 11. FROM THE ABOVE CHART, WE OBSERVE THAT THERE ARE VARIOUS SCRAPS LIKE SALE OF ACRYLIC YARN, SALE OF NOIL YARN, SALE OF SILK YARN, SALE OF SLEEVER, SALE OF SPUN SILK YARN, SALE OF VISCOSE YARN. EACH ONES VALUE IS DIFFERENT AND THE AO UNIFORMLY TAKEN THE VALUE OF EACH ITEM PER KG. AT RS.1200/- PER KG. WHICH IS NOT PROPER. ACCORDINGLY, WE DIRECT THE AO TO CONSIDER EACH TYPE OF ITEM SEPARATELY TO DETERMINE THE VALUE OF IT AND THEN THERE IS DIFFERENCE BETWEEN VALUE ADOPTED BY THE ASSESSEE AND TO THE VALUE COMPUTED BY THE AO, HE CAN SUSTAIN THE ADDITION ON THIS COUNT. WITH THIS OBSERVATION, WE REMIT THIS ISSUE TO THE FILE OF AO FOR FRESH CONSIDERATION. 12. THE ADDITIONAL GROUND WITH REGARD TO DISALLOWANCE UNDER SECTION 14A OF THE INCOME TAX ACT, 1961. BOTH THE ASSESSMENT ORDER AND CIT(A) ORDER IS VERY SILENT ON THIS ISSUE. THE AO HAS TO DISCUSS THE REASONS FOR DISALLOWANCE UNDER SECTION 14A AND HE HAS TO RECORD SATISFACTION. WITH THIS OBSERVATION, WE REFER THE ISSUE BACK TO THE FILE OF AO FOR PASSING SPEAKING ORDER ON THIS ISSUE. 13. IN THE RESULT, ITA NO.1595/BANG/2019 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 14. ITA NO.1596/BANG/2018 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX [APPEALS] IN SO FAR AS IT IS AGAINST THE APPELLANT ARE OPPOSED TO LAW, EQUITY AND WEIGHT OF EVIDENCE, NATURAL JUSTICE, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE APPELLANT DENIES ITSELF LIABLE TO BE ASSESSED TO AN INCOME OF RS. 11,57,408/- AS AGAINST THE RETURNED INCOME OF RS. NIL AFTER SET OFF OF BROUGHT FORWARD LOSS ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE LEARNED CIT(A) WAS NOT JUSTIFIED IN APPRECIATING THAT THE CAPITAL GAINS OF RS. 59,94,346/- OFFERED INADVERTENTLY IN THE RETURN OF INCOME, AND NOT DELETED DURING ASSESSMENT PROCEEDINGS BY THE AO, OUGHT TO HAVE BEEN DELETED, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NOS.1595, 1596/BANG/2018 PAGE 9 OF 12 4. THE LEARNED CIT(A) WAS NOT JUSTIFIED IN APPRECIATING THAT THE SALE OF THE TDR, WERE NOT EXIGIBLE TO CAPITAL GAINS AS HELD BY VARIOUS AUTHORITIES AND THE SAME OUGHT TO HAVE BEEN DELETED IN THE ORDER PASSED, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THE LEARNED CIT(A) HAS ERRED IN LAW IN APPRECIATING THAT IT IS SETTLED POSITION OF LAW THAT 'CONSENT DOES NOT CONFER JURISDICTION' AND THE INCOME OF RS.59,94,346/ - NOT DELETED BY THE AO, OUGHT TO HAVE BEEN DELETED BY THE CIT(A), ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. THE LEARNED CIT(A) WAS NOT JUSTIFIED IN LAW IN APPRECIATING THAT THE AO OUGHT TO HAVE GRANTED THE BENEFIT ACCRUING TO THE APPELLANT, BY DELETING THE CAPITAL GAINS OFFERED TO TAX INADVERTENTLY, IN CONSONANCE WITH CIRCULAR NO. 14 [XL-35] OF 1955, DATED APRIL 11, 1955, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. THE LEARNED CIT(A) WAS NOT JUSTIFIED IN LAW IN APPRECIATING THAT THE APPELLANT HAD AN INHERENT RIGHT TO MAKE FRESH CLAIM BEFORE THE APPELLATE AUTHORITY WHICH WAS NOT MADE BY WAY OF REVISED RETURN IN RESPECT OF AN ITEM OF INCOME THAT WAS NOT TAXABLE UNDER THE LAW BUT OFFERED WRONGLY / INADVERTENTLY IN THE ORIGINAL RETURN OF INCOME. 8. THE LEARNED CIT(A) OUGHT TO HAVE DELETED THE ADDITION OF RS. 11,57,408/- FROM VARIOUS SOURCES WHICH HAS BEEN PROPERLY ACCOUNTED AND EXPLANATION OFFERED DURING ASSESSMENT PROCEEDINGS, WHILE THE CIT(A) HAS STOPPED SHORT OF DELETING THE ADDITION AND DIRECTED THE AO TO SET OFF THE INTEREST AGAINST THE BROUGHT FORWARD LOSS, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 9. THE APPELLANT CRAVES LEAVE OF THIS HON'BLE TRIBUNAL, TO ADD, ALTER, DELETE, AMEND OR SUBSTITUTE ANY OR ALL OF THE ABOVE GROUNDS OF APPEAL AS MAY BE NECESSARY AT THE TIME OF HEARING. 10. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF APPEAL, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED FOR THE ADVANCEMENT OF SUBSTANTIAL CAUSE OF JUSTICE AND EQUITY. 15. THE ASSESSEE RAISED THE ADDITIONAL GROUNDS AS FOLLOWS: 1. THE APPELLANT DENIES THE LIABILITY TO PAY INTEREST UNDER SECTION 234B OF THE ACT IN VIEW OF THE FACT THAT THERE IS NO LIABILITY TO ADDITIONAL TAX AS DETERMINED BY THE ASSESSING OFFICER. WITHOUT PREJUDICE, THE RATE, PERIOD AND ON WHAT QUANTUM THE INTEREST HAS BEEN LEVIED ARE NOT IN ACCORDANCE WITH THE LAW AND ARE NOT DISCERNABLE FROM THE ORDER AND HENCE DESERVES TO BE CANCELLED ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE APPELLANT CRAVES LEAVE OF THIS HON'BLE TRIBUNAL, TO ADD, ALTER, DELETE, AMEND OR SUBSTITUTE ANY OR ALL OF THE ABOVE GROUNDS OF APPEAL AS MAY BE NECESSARY AT THE TIME OF HEARING. ITA NOS.1595, 1596/BANG/2018 PAGE 10 OF 12 3. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF APPEAL, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED FOR THE ADVANCEMENT OF SUBSTANTIAL CAUSE OF JUSTICE AND EQUITY. 16. GROUND NOS.1 AND 2 ARE GENERAL, DOES NOT REQUIRE ADJUDICATION. GROUND NOS.3 TO 7 IS WITH REGARD TO NON-CONSIDERATION OF EXEMPTED CAPITAL GAIN OF 59,94,346/- FOR THE PURPOSE OF DETERMINING LOSS. IN THIS CASE, THERE WAS INCOME FROM CAPITAL GAIN OF RS.59,94,346/-. THIS CAPITAL GAIN IS EXEMPTED UNDER SECTION 10(38) OF THE INCOME TAX ACT, 1961. HOWEVER, THE SAME WAS INCLUDED BY ASSESSEE AS INCOME WHILE FILING RETURN OF INCOME AND ACCORDINGLY COMPUTED LOSS. BY THIS ACTION OF THE ASSESSEE, LOSS IS REDUCED BY 59,94,346/-. THIS CAPITAL GAIN IS LONG TERM WHICH IS EXEMPTED FROM TAX AND IT CANNOT BE CONSIDERING FOR COMPUTING THE INCOME OR LOSS OF THE ASSESSEE AND IT SHOULD GO OUT OF THE COMPUTATION OF INCOME. THIS PLEA OF THE ASSESSEE NOT CONSIDERED BY THE CIT(A). HENCE, IN THE INTEREST OF JUSTICE, WE REMIT THIS ISSUE BACK TO THE FILE OF CIT(A) FOR PROPER ADJUDICATION INSTEAD OF DISMISSING THE ISSUE AS INFRUCTUOUS BY CIT(A). 17. NEXT GROUND IS WITH REGARD TO ADDITION OF RS.11,57,408/- AS INTEREST INCOME FROM OTHER SOURCES. THE AO BROUGHT INTO TAX AN AMOUNT OF RS.11,57,408/- UNDER HEAD INTEREST INCOME. ACCORDING TO AO, THE ASSESSEE RECEIVED INTEREST FROM FOLLOWING PARTIES: 1. KOTAK MAHINDRA BANK LTD., - 22,77039/- 2. SBI - 34,295/- 3. BESCOM - 39,875/- TOTAL 23,49,209/- ITA NOS.1595, 1596/BANG/2018 PAGE 11 OF 12 18. THE AO OBSERVED THAT ASSESSE DECLARED INTEREST INCOME OF RS.12,73,688/- AND THERE WAS UNDER STATEMENT OF INTEREST INCOME ON THIS GROUND AT RS.10,75,521/-. SIMILARLY, THERE WAS AN RECEIPT OF INCOME OF RS.81,887/- FROM THE EXECUTIVE ENGINEER. THIS WAS NOT OFFERED TO TAX. THE AO BROUGHT THESE TWO AMOUNTS TOTALING RS.11,57,408/- UNDER HEAD INCOME FROM OTHER SOURCES. THE CONTENTION HERE IS THAT THERE IS A BROUGHT FORWARD LOSS AND DEPRECIATION IN THE RETURN OF INCOME AND THIS INTEREST INCOME SHOULD BE SET OFF OUT OF THE BROUGHT FORWARD LOSS AND DEPRECIATION AND THE NET RESULT WILL BE CONSIDERED TO DETERMINE THE INCOME OF THE ASSESSEE. 19. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE ORDER OF THE CIT(A) ON THIS ISSUE IS VERY CRYPTIC. SHE HAS NOT DEALT THE ISSUE IN PROPER PROSPECTIVE. THE AO IS NOT CORRECT IN NOT CONSIDERING THE SET OFF OF BROUGHT FORWARD LOSS AND DEPRECIATION WHILE COMPUTING THE INCOME OF THE ASSESSEE. HENCE, WE REMIT THIS ISSUE TO THE FILE OF CIT(A) TO PASS A SPEAKING ORDER ON THIS ISSUE AND DECIDE ACCORDINGLY. 19.1 THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE IS OMITTED AS DISCUSSED IN PARA 5 OF THIS ORDER. 19.2 THE ADDITIONAL GROUND IS WITH REGARD TO CHARGING OF INTEREST UNDER SECTION 234B WHICH IS CONSEQUENTIAL AND MANDATORY IN NATURE AND SO SHALL COMPUTE IT AS PER LAW WHILE PASSING GIVING EFFECT ORDER TO CIT(A). 20. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.1596/BANG/2018 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NOS.1595, 1596/BANG/2018 PAGE 12 OF 12 21. IN THE COMBINED RESULT, THE APPEALS OF THE ASSESSEE IN ITA NO.1595,1596/BANG/2018 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE. SD/- SD/- (N. V. VASUDEVAN) (CHANDRA POOJARI) VICE PRESIDENT ACCOUNTANT MEMBER BANGALORE, DATED: 22 ND DECEMBER, 2020. /NS/* COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.