The KCP Ltd., Chennai V. THE DCIT, Vijayawada

ITA 165/VIZ/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8728 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 06-05-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DEBAKUMAR SONOWAL
• Keywords: Business income; Revision of order; Depreciation; Cost of acquisition; Valuation report
• Section: 143(3); 263

Judgement Text

ITA NO.165/VIZAG/2015 THE KCP LTD., CHENNAI 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . .. . . . . . ' , % BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./I.T.A.NO.165/VIZAG/2015 ( / ASSESSMENT YEAR: 2010-11) THE KCP LTD., CHENNAI DCIT, CIRCLE - 1, VIJAYAWADA [PAN NO. AAACT8046J ] ( ' / APPELLANT) ( ()' / RESPONDENT) / APPELLANT BY : SHRI C. SUBRAHMANYAM, AR / RESPONDENT BY : SHRI DEBA KUMAR SONOWAL, DR / DATE OF HEARING : 05.03.2018 / DATE OF PRONOUNCEMENT : 09.03.2018 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST ORDER OF THE COMMISSIONER OF INCOME TAX PASSED U/S 263 VIDE ORDE R DATED 26.3.2015 FOR THE ASSESSMENT YEAR 2010-11. ITA NO.165/VIZAG/2015 THE KCP LTD., CHENNAI 2 2. THIS APPEAL AGAINST ORDER PASSED U/S 263 OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT') BY THE COMMI SSIONER OF INCOME TAX (CIT). THE ASSESSEE HAS RAISED NUMBER OF GROUN DS DESCRIPTIVE AND ARGUMENTATIVE AND ALL THE GROUNDS OF APPEAL ARE REL ATED TO THE ORDER OF THE LD. CIT PASSED U/S 263 OF THE ACT. IN THIS CAS E, THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT BY AN ORDER DATED 2 9.3.2013 AND DETERMINED THE TOTAL INCOME AT ` 88,18,99,940/-. THE SAID ORDER WAS TAKEN UP BY THE CIT FOR REVISION U/S 263 OF THE ACT AND OBSERVED THAT THE FOLLOWING ISSUES WERE NOT EXAMINED BY THE ASSES SING OFFICER(A.O).: I. THE ASSESSEE HAD ADMITTED THE RENTAL RECEIPTS OF ` 12,28,020/- AGAINST THE RECEIPTS AS PER TDS CERTIFICATES AMOUNT ING TO ` 25,71,820/- ON WHICH THE TDS DEDUCTED WAS AT ` 3,39,268/-. II. THE ASSESSEE HAD CLAIMED THE DEPRECIATION ON MOTOR CARS @ 50% AGAINST THE ALLOWABLE DEPRECIATION OF 15%. III. THE ASSESSEE HAD ADMITTED CAPITAL LOSS OF ` 1,28,65,575/- AND CLAIMED THE INDEXED COST OF ACQUISITION OF SHARES A T ` 2,48,65,574/-. 3. BEFORE THE LDCIT THE LD. A.R. SUBMITTED THAT THO UGH THE TDS CERTIFICATE SHOWS ` 25,71,820/- TOWARDS THE RENTAL RECEIPTS, A SUM OF ` 13,31,800/- WAS ADMITTED AS A RENTAL INCOME TOWARDS LAND IN THE PROFIT ITA NO.165/VIZAG/2015 THE KCP LTD., CHENNAI 3 & LOSS ACCOUNT, HENCE THERE WAS NO DIFFERENCE IN TH E RENTAL INCOME ADMITTED BY THE ASSESSEE. THE LD. A.R. CLARIFIED T HAT THE ENTIRE RECEIPTS OF ` 25,71,820/- WERE ADMITTED AS RENTAL INCOME UNDER H OUSE PROPERTY FOR ` 12,28,020/- AND BUSINESS INCOME OF ` 13,31,800/-, HENCE, THERE IS NO UNDER ASSESSMENT WHICH IS PREJUDICIAL TO THE INT EREST OF THE REVENUE, HENCE REQUESTED TO DROP THE PROCEEDINGS U/S 263 OF THE ACT ON THIS ISSUE. 4. WITH REGARD TO THE SECOND ISSUE OF DEPRECIATION, THE LD. A.R. SUBMITTED BEFORE THE CIT THAT THE ASSESSEE HAD CLAI MED THE DEPRECIATION @ 50% ON COMMERCIAL VEHICLES WHICH WERE PUT TO USE FOR BUSINESS PURPOSE. THE ASSESSEE HAS INCLUDED THE ASSESTS IN THE BLOCK AND ONCE THE ASSETS ARE INCLUDED IN THE BLOCK OF ASSETS THER E IS NO SCOPE FOR REMOVING THEM FROM THE BLOCK OF ASSETS. SINCE THE ASSESSEE HAS TAKEN THE COMMERCIAL VEHICLES AND PUT TO USE FOR BUSINESS PURPOSE, THE LD. A.R. ARGUED THAT THE SAME ARE ELIGIBLE FOR DEPRECIA TION @ 50%. THE LD. A.R. ALSO SUBMITTED THAT THE ASSESSEE WAS CLAIMING DEPRECIATION @ 50% ON THE SAME ASSETS RIGHT FROM 2007-08 ONWARDS AND T HE SAME WAS ALLOWED BY THE AO. THEREFORE, THERE IS NO CHANGE O F FACTS IN THE YEAR UNDER CONSIDERATION. FURTHER, THE LD. A.R. SUBMITT ED THAT ONCE THE ASSET IS INCLUDED IN THE BLOCK OF ASSETS, THE SAME CANNOT BE DELETED FROM THE ITA NO.165/VIZAG/2015 THE KCP LTD., CHENNAI 4 BLOCK OF ASSETS, HENCE, THERE IS NO CASE FOR TAKING UP THE CASE FOR REVISION U/S 263 OF THE ACT WHICH CAUSED FINANCIAL INJURY TO THE REVENUE. 5. WITH REGARD TO THE THIRD ISSUE, THE ASSESSEE HAD SUBMITTED THAT THE ASSESSEE HAD PURCHASED 1,20,000 SHARES OF M/S. SUDA LAGUNTA SUGARS LIMITED DURING THE FINANCIAL YEAR 2009-10 FOR A CON SIDERATION OF ` 1,20,00,000/- BY AN AGREEMENT DATED 10.6.2004. THE SAID SHARES WERE SOLD FOR SAME CONSIDERATION, WHICH RESULTED IN INDE XED COST OF ACQUISITION OF ` 2,48,65,274/- AND CAPITAL LOSS OF RS.1,28,65,274/- THE LD. A.R. ARGUED THAT THE SHARES WERE PURCHASED AS P ER THE AGREEMENT AND SOLD AS PER THE AGREEMENT FOR THE SAME CONSIDER ATION, WHICH RESULTED IN CAPITAL GAIN LOSS. THE LD. COMMISSIONER NOT BEING CONVINCED WITH THE ARGUMENTS OF THE LD. A.R., PASSED THE ORDER U/S 263 AND DIRECTED THE A.O. TO DISALLOW THE CAPITAL INDEXATION LOSS CLAIMED BY THE ASSESSEE AND WITH REGARD TO THE OTHER ISSUES THE LD. CIT SET ASIDE THE ORDER OF THE A.O. U/S 263 OF THE ACT. 6. AGGRIEVED BY THE ORDER OF THE LD. CIT, THE ASSES SEE IS IN APPEAL BEFORE US. DURING THE APPEAL HEARING, THE LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT AND ARGUED THAT THERE IS NO ERROR WHICH CAUSED PREJUDICE TO THE INTEREST OF THE REVEN UE, HENCE, THERE IS NO CASE FOR REVISION U/S 263 OF THE ACT. LD. A.R. RELI ED ON THE DECISION OF ITA NO.165/VIZAG/2015 THE KCP LTD., CHENNAI 5 HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. OSW AL AGRO MILLS LTD. 197 TAXMAN 0025 (2011) AND THE DECISION OF ITAT HYDERAB AD A BENCH IN THE CASE OF DCIT VS. COROMANDAL BIO TECH INDUSTRIES (I) LTD. (2012) 31 CCH 0142. 7. ON THE OTHER HAND, THE LD. D.R. RELIED ON THE O RDERS OF THE LD. CIT. 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT AS DISCUSSED ABOVE. THE LD. A.R. RELIED ON THE DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. OSWAL AGRO MILLS LTD. (SUPRA). THE LIMITED ISSUE FOR ADJUDICATION IN THIS CASE IS WHETHER THE A.O. HAS E RRED IN FRAMING THE ASSESSMENT, WHICH IS PREJUDICIAL TO THE INTEREST OF THE REVENUE OR NOT. IN THIS CASE, THE CIT TAKEN UP THE REVISION OF THE ASS ESSMENT U/S 263 OF THE ACT FOR NOT EXAMINING THE RENTAL RECEIPTS UNDERSTAT ED BY THE ASSESSEE COMPARED TO THE TDS RECEIPTS AS PER FORM NO.26AS AN D THE EXCESS DEPRECIATION CLAIMED BY THE ASSESSEE IN RESPECT OF MOTOR CARS AND LONG TERM CAPITAL GAIN LOSS CLAIMED BY THE ASSESSEE. TH OUGH THE LD. A.R. SUBMITTED DURING THE COURSE OF HEARING THAT THE ASS ESSEE HAD ADMITTED THE RENTAL RECEIPTS UNDER TWO HEADS I.E. HOUSE PROP ERTY INCOME AND THE LAND. THE SAME WAS NOT EXAMINED BY THE A.O. THE A .O. DID NOT CALL FOR ITA NO.165/VIZAG/2015 THE KCP LTD., CHENNAI 6 THE DETAILS AND THE ASSESSEE ALSO FAILED TO FURNISH THE DETAILS BEFORE THE A.O. THERE WAS NO WHISPER WITH REGARD TO THE DIFFE RENCE OF RENTS ADMITTED BY THE ASSESSEE IN THE RETURN OF INCOME CO MPARED TO FORM NO.26AS. DURING THE ASSESSMENT PROCEEDINGS, NO SUC H DETAILS WERE CALLED FOR BY THE A.O. NOR THE ASSESSEE DID SUPPLY THE DETAILS. SIMILARLY, WITH RESPECT TO THE DEPRECIATION, THE ASSESSEE HAD CLAIMED THE DEPRECIATION @ 50%, WHEREAS AS PER THE RULES, DEPRE CIATION IS ALLOWABLE ON MOTOR CARS WAS ONLY @ 15%. THERE WAS NO HIRE IN COME ADMITTED BY THE ASSESSEE IN THE RETURN OF INCOME. SIMILARLY, N EITHER THE A.O. CALLED FOR THE DETAILS NOR THE ASSESSEE HAD FURNISHED THE DETAILS. THE ASSESSEE REQUIRED TO DEMONSTRATE THAT THE ASSESSEE HAS USED THE VEHICLES IN THE BUSINESS OF HIRING. MERELY REGISTERING THE VEHICLE S FOR COMMERCIAL PURPOSE DOES NOT MAKE ENTITLE THE ASSESSEE FOR HIGH ER RATE OF DEPRECIATION. IN RESPECT OF INDEXED CAPITAL GAIN L OSS, THE ASSESSEE HAD PURCHASED THE SHARES AT ` 10/- PER SHARE AND SOLD THE SHARES AT THE SAME RATE OF ` 10/-. THE ASSESSEE HAS CLAIMED THE INDEXED COST O F ACQUISITION AT ` 2,48,65,574/-. THE LD. A.R. SUBMITTED DURING THE COURSE OF HEARING THAT THE A.O. NEITHER CALLED FOR THE DET AILS NOR THE DETAILS WERE FURNISHED BEFORE THE A.O. THE ONLY ARGUMENT O F THE LD. A.R. WAS THAT SINCE THE BOOKS OF ACCOUNTS WERE PRODUCED, IT IS DEEMED THAT THE A.O. HAS CONSIDERED ALL THE ISSUES, HENCE, THERE IS NO ERROR IN THE ITA NO.165/VIZAG/2015 THE KCP LTD., CHENNAI 7 ASSESSMENT ORDER. LD. A.R.S SUBMISSION IS THAT T HE MERE PRODUCTION OF BOOKS OF ACCOUNTS ENSURES THE COMPLETE VERIFICATION OF ALL THE ISSUES. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT TH E A.O. HAS NOT VERIFIED THE RENTAL RECEIPTS DEPRECIATION AND THE SALE OF S HARES DURING THE ASSESSMENT PROCEEDINGS. MERE PRODUCTION OF BOOKS OF ACCOUNTS CANNOT BE CONSTRUED THAT THE AO HAD VERIFIED THE COMPLETE INFORMATION. IT IS OBLIGATION ON THE PART OF THE ASSESSEE TO DEMONSTRA TE THAT THE AO HADE IN FACT CONSIDERED AND DECIDED THE ISSUES RAISED BY THE CIT IN THE ASSESSMENT. THOUGH THE ASSESSEE HAS PURCHASED THE SHARES AT ` 10/- AND SOLD AT ` 10/-, THERE IS A METHOD OF VALUATION OF THE UNLIST ED COMPANYS SHARES TO DETERMINE THE MARKET VALUE AND IT IS REQUIRED TO BE CERTIFIED BY THE QUALIFIED ACCOUNTANT. IN THIS CAS E, THE LD. A.R. SUBMITTED THAT NO REPORT OF THE ACCOUNTANT IS AVAIL ABLE WITH HIM WITH REGARD TO THE VALUATION OF SHARES AS ON THE DATE OF SALE OR AS ON THE DATE OF PURCHASE OF SHARES TO DETERMINE THE COST OF ACQUISITION OR TO DETERMINE THE MARKET VALUE TO COMPUTE THE CAPITAL G AAINS. THE LD. A.R. RELIED ON THE CASE LAW OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. OSWAL AGRO MILLS LTD. (SUPRA), WHICH IS RELATED TO THE ALLOWABILITY OF DEPRECIATION IN CASE OF BUSINESS COMES TO STAND STI LL BUT NOT THE ISSUE WITH REGARD TO THE ORDER PASSED U/S 263 OF THE ACT. HONBLE DELHI HIGH COURT HELD THAT PASSIVE USE OF THE ASSET IS ALSO RE COGNISED AS USAGE FOR ITA NO.165/VIZAG/2015 THE KCP LTD., CHENNAI 8 THE PURPOSE OF DEPRECIATION. THE CASE LAW RELIED U PON BY THE LD. A.R. IS DISTINGUISHABLE ON FACTS WITH THAT OF THE ASSESSEE S CASE. SIMILARLY, IN THE CASE OF DCIT VS. COROMANDAL BIO TECH INDUSTRIES (I) LTD., THE ISSUE IS WITH REGARD TO THE ALLOWABILITY OF DEPRECIATION ON BLOCK OF ASSETS BUT NOT WITH REGARD TO THE ISSUE OF ORDER PASSED U/S 26 3 OF THE ACT. AS DISCUSSED EARLIER, IN THE PRESENT CASE, THE ISSUE I S LIMITED WHETHER THE CIT HAS RIGHTLY INVOKED THE PROVISIONS U/S 263 OF T HE ACT OR NOT. THE ASSESSEE HAS RECEIVED THE RENTS AS PER FORM NO.26AS A SUM OF ` 25 LAKHS, WHEREAS THE ASSESSEE HAD ADMITTED A SUM OF ` 12,28,020/- IN THE RETURN OF INCOME AND THE A.O. HAS NOT EXAMINED THE ISSUE WITH REGARD TO THE REMAINING AMOUNT OF ` 13,31,800/- WHICH SHOULD HAVE BEEN BROUGHT TO TAX BY THE A.O., SIMILARLY, THE ASSESSEE HAD CLA IMED THE DEPRECIATION @ 50%. THE A.O. HAS NEITHER CALLED FOR THE DETAILS NOR THE ASSESSEE HAD DEMONSTRATED THAT THE MOTOR CARS WERE USED FOR THE PURPOSE OF RUNNING THEM ON HIRE. WITH REGARD TO THE CAPITAL GA INS, THE ASSESSEE HAD PURCHASED SHARES AT ` 10/- PER SHARE AND SOLD THE SAME AT ` 10/- PER SHARE AND CLAIMED THE LONG TERM CAPITAL LOSS OF ` 1,28,65,574/- WITH INDEXED COST OF ACQUISITION AT ` 2,48,65,574/-. BUT THERE WAS NO VALUATION REPORT SUBMITTED BY THE ASSESSEE TO ARRIV E AT THE MARKET VALUE AS REQUIRED BY THE INCOME TAX RULES. THEREFORE, TH E A.O. CLEARLY COMMITTED AN ERROR WHICH IS PREJUDICIAL TO THE INTE REST OF THE ITA NO.165/VIZAG/2015 THE KCP LTD., CHENNAI 9 REVENUE AND THE LD.CIT HAS RIGHTLY TAKEN UP THE CAS E FOR REVISION U/S 263. HOWEVER, THE CIT(A) WHILE REMITTING THE MATTE R BACK TO THE FILE OF THE A.O., HAD DIRECTED THE A.O. TO DISALLOW THE CAP ITAL LOSS BASED ON COST OF INFLATION INDEX AND REMITTED THE REMAINING TWO I SSUES FOR RE- ADJUDICATION. HOWEVER, WE ARE OF THE CONSIDERED OP INION THAT ALL THE THREE ISSUES REQUIRED TO BE REMITTED BACK TO THE FI LE OF THE A.O. TO RE-DO THE ASSESSMENT AFRESH ON MERITS. ACCORDINGLY, WHIL E UPHOLDING THE ORDER OF THE CIT PASSED U/S 263 OF THE ACT, WE REMIT THE MATTER BACK TO THE FILE OF THE A.O. ALL THE THREE ISSUES WITH A DIREC TION TO RE-DO THE SAME AFRESH ON MERITS. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 9 TH MAR18. SD/- SD/- ( . ) ( . .. . . . . . ' ) (V. DURGA RAO) (D.S. SUNDER SINGH) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 09.03.2018 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE KCP LTD., RAMAKRISHNA BUILDI NGS, NO.2, P.V. CHERIAN CRESCENT, EGMORE, CHENNAI. 2. / THE RESPONDENT THE DCIT, CIRCLE-1(1), VIJAYAWA DA 3. + / THE CIT, VIJAYAWADA 4. + ( ) / THE CIT (A), VIJAYAWADA ITA NO.165/VIZAG/2015 THE KCP LTD., CHENNAI 10 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM