M/s.GMR Sports Private Limited, Bangalore V. Deputy Commissioner of Income-Tax, Bangalore

ITA 1754/BANG/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7419 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 21-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 07-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BISWARANJAN SASWAL
• Assessee Lawyers: SUNIL JAIN
• Keywords: Depreciation; Business expenditure; Rectification of order
• Section: 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO. 1754 /BANG/201 6 ASSESSMENT YEAR : 20 08 - 09 M/S. GMR SPORTS PVT. LTD., NO. 25/1, SKIP HOUSE, MUSEUM ROAD, BANGALORE 560 025. PAN: A ADCG0588P VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(2), BANGALORE. APPELLANT RESPONDENT ASSESSEE BY : SHRI SUNIL JAIN, C. A. REVENUE BY : SHRI BISWARANJAN SASWAL, CIT DR DATE OF HEARING : 09 . 10 .2017 DATE OF PRONOUNCEMENT : 31 .10 .2017 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE ORDER OF CIT (A) 11, BENGALURU DATED 29.08.2016 FOR ASSESSMENT YEAR 2008 09. 2. GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER:- GROUND I: REVIEW / RE-EXAMINE ANY ISSUE IN THE PROC EEDING U/S 153A: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE ACTION OF ASSESSI NG OFFICER IN DETERMINING TOTAL INCOME AT RS.2,66,740/- AS AGAINS T THE AMOUNT OF RETURNED LOSS OF (-) RS.2,89,66,908/- UNDER NORMAL PROVISIONS ON COMPLETION OF ASSESSMENT U/S 143(3) RWS 153A OF THE IT ACT, 1961. 2. THE CIT(A) FAILED TO APPRECIATE AND OUGHT TO HAV E HELD THAT HAVING REGARD TO THE SECOND PROVISO TO SECTION 153A, THE C OMPLETED ASSESSMENT(S) CANNOT BE DISTURBED EXCEPT ONLY IN TH E CASE WHERE THERE IS ANY UNDISCLOSED INCOME FOUND IN THE COURSE OF SE ARCH OR ANY INCRIMINATING DOCUMENTS POINTING TOWARDS SUCH UNDIS CLOSED INCOME IS FOUND IN COURSE OF SEARCH OR IN THE COURSE OF ASSES SMENT PROCEEDINGS U/S.153A OF THE INCOME TAX ACT, 1961. ITA NO.1754/BANG/2016 PAGE 2 OF 14 3. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD T HAT IN THE PRESENT CASE, NO INCRIMINATING MATERIAL HAS BEEN FOUND WHIC H REQUIRES RE- EXAMINATION/REVIEW OF ANY OF THE ITEMS WHICH WERE T HE SUBJECT MATTER OF EXAMINATION IN COURSE OF ORIGINAL ASSESSMENT PRO CEEDINGS OR IN THE PROCEEDINGS UNDER SECTION 153A READ WITH SECTION 14 3(3) / 143(1) OF THE INCOME-TAX ACT, 1961. 4. THE APPELLANT THEREFORE PRAYS THAT THE ORDER PAS SED BY THE ASSESSING OFFICER U/S 143(3) RWS 153A OF THE IT ACT , 1961 IS ARBITRARY, CONTRARY TO THE PROVISIONS OF LAW, AND THE SETTLED LEGAL POSITION AND HENCE IS LIABLE TO BE QUASHED. GROUND II: AMORTIZING THE AMOUNT OF BUSINESS EXPEND ITURE AND DEPRECIATION AGGREGATING OF RS. 2,92,58,647/-: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE ACTION OF THE ASS ESSING OFFICER IN AMORTIZING THE AMOUNT OF BUSINESS EXPENDITURE AND D EPRECIATION AGGREGATING OF RS. 2,92,58,647/- IN TEN INSTALLMENT S ON THE GROUND THAT THE BUSINESS OF THE APPELLANT YET TO COMMENCE IN AS MUCH AS IPL SEASON-I COMMENCED FROM APRIL 18 TH , 2008. 2. THE APPELLANT PRAYS THAT THE ASSESSING OFFICER B E DIRECTED TO ALLOW THE CLAIM OF BUSINESS EXPENDITURE OF RS.2,91,06,793 /- AND DEPRECIATION OF RS. 1,51,854/-. SINCE THE ACTIVITIES UNDERTAKEN BY THE APPELLANT AND ON WHICH SUCH EXPENSES WERE INCURRED AFTER SET UP O F BUSINESS OF THE APPELLANT IMMEDIATELY AFTER AWARD OF FRANCHISE BY B CCI. GROUND III: DISALLOWANCE OF CLAIM OF OPERATING AND ADMINISTRATIVE EXPENSES OFRS.2,91 ,06,793/-: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE ACTION OF ASSESSI NG OFFICER IN DETERMINING THE INCOME AT RS.2,66,800/- AS AGAINST THE AMOUNT OF RETURNED BUSINESS LOSS OF RS.2,89,66,908/- WHICH WA S ACCEPTED AND DETERMINED IN THE ASSESSMENT COMPLETED U/S. 143(1) VIDE INTIMATION DATED JANUARY 17, 2011 AS WELL. 2. HE FURTHER ERRED IN NOT CONSIDERING THAT THE SAI D AMOUNT OF BUSINESS LOSS WAS ALLOWED TO BE CARRIED FORWARD AND SET OFF AGAINST THE INCOME OF ASSESSMENT YEAR 2010-11 VIDE RECTIFICATION ORDER DATED APRIL 16, 2013 DURING THE COURSE OF ORIGINAL ASSESSMENT PROCE EDINGS. 3. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD T HAT THE BUSINESS LOSS PERTAINING TO THE ASSESSMENT YEAR UNDER CONSID ERATION WHICH WAS GIVEN SET OFF IN ASSESSMENT YEAR 2010-11 DURING THE ORIGINAL ASSESSMENT PROCEEDINGS HAVE ATTAINED FINALITY AND H ENCE CANNOT BE DISTURBED IN THE PROCEEDINGS U/S. 153A OF THE INCOM E TAX ACT, 1961. 4. THE APPELLANT THEREFORE PRAYS THAT THE ASSESSING OFFICER BE DIRECTED TO ALLOW THE CLAIM OF BUSINESS LOSS OF RS.2,89,66,9 08/- AND SET OFF OF SAME IN SUBSEQUENT ASSESSMENT YEARS AS PER THE DECI SION GIVEN IN ITA NO.1754/BANG/2016 PAGE 3 OF 14 ORIGINAL ASSESSMENT PROCEEDINGS. WITHOUT PREJUDICE TO THE ABOVE: GROUND IV: DISALLOWANCE OF CLAIM OF OPERATING AND A DMINISTRATIVE EXPENSES OF RS.2,91 ,06,793/-: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE ACTION OF ASSESSI NG OFFICER IN NOT ALLOWING DEDUCTION TOWARDS OPERATING AND ADMINISTRA TIVE EXPENSES OF RS.2,91,06,793/- AND CLAIM OF DEPRECIATION AS PER I NCOME TAX OF RS.1,51,854/- TREATING THE SAME AS ENDURING IN NATU RE INSTEAD OF ALLOWING DEDUCTION OF SAME IN THE SUBSEQUENT ASSESS MENT YEAR I.E. ASSESSMENT YEAR 2009-10 IN WHICH THE IPL - FIRST SE ASON TOOK PLACE AS ALL THE EXPENSES INCURRED WERE REVENUE IN NATURE AN D WERE INCURRED AFTER SET UP OF BUSINESS SO AS TO BE READY TO PARTI CIPATE IN IPL SEASON- 1 WHICH TOOK PLACE FROM APRIL 18, 2008 TO JUNE 1, 2 008. 2. THE APPELLANT THEREFORE PRAYS THAT THE ASSESSING OFFICER BE DIRECTED TO ALLOW DEDUCTION OF OPERATING AND ADMINISTRATIVE EXPENSES OF RS.2,91,06,793/- AND CLAIM OF DEPRECIATION AS PER I NCOME TAX OF RS.1,51,854/- IN THE SUBSEQUENT ASSESSMENT YEAR I.E . ASSESSMENT YEAR 2009-10 SINCE ALL THESE EXPENSES WERE INCURRED AFTE R SET UP OF BUSINESS SO AS TO BE READY TO PARTICIPATE IN IPL SE ASON -1 WHICH TOOK PLACE FROM APRIL 18, 2008 TO JUNE 1, 2008. GROUND V: THE APPELLANT CRAVES LEAVE TO ADD, ALTER AND/OR AME ND ALL OR ANY OF THE FOREGOING GROUNDS OF APPEAL. 3. REGARDING GROUND NO. 1, IT IS SUBMITTED BY THE L EARNED AR OF THE ASSESSEE THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL ORDER RENDERED IN THE CASE OF ACIT VS. M/S CORNERSTONE PROPERTIES PVT . LTD. IN ITA NO. 1714 TO 1717/BANG/2013 DATED 08.09.2017. HE SUBMITTED A COP Y OF THIS TRIBUNAL ORDER. LEARNED DR OF THE REVENUE SUPPORTED THE ORDER OF CI T (A). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIN D THAT THE ISSUE REGARDING VALIDITY OF THE PROCEEDINGS U/S 153A IS DISCUSSED A ND DECIDED BY THE LEARNED CIT (A) IN PARAS 6.2.1 TO 6.2.5 OF HIS ORDER AND HE NCE, FOR READY REFERENCE, THESE PARAS ARE REPRODUCED HEREIN BELOW:- ITA NO.1754/BANG/2016 PAGE 4 OF 14 ITA NO.1754/BANG/2016 PAGE 5 OF 14 ITA NO.1754/BANG/2016 PAGE 6 OF 14 ITA NO.1754/BANG/2016 PAGE 7 OF 14 ITA NO.1754/BANG/2016 PAGE 8 OF 14 ITA NO.1754/BANG/2016 PAGE 9 OF 14 ITA NO.1754/BANG/2016 PAGE 10 OF 14 ITA NO.1754/BANG/2016 PAGE 11 OF 14 ITA NO.1754/BANG/2016 PAGE 12 OF 14 5. AS PER THESE PARAS REPRODUCED FROM THE ORDER OF CIT (A), IT IS SEEN THAT THERE IS NO FINDING TO THE EFFECT THAT ANY INCRIMINATING MAT ERIAL WAS FOUND IN SEARCH. AS PER THE ASSESSMENT ORDER ALSO, THERE IS NO REFERENC E TO ANY INCRIMINATING MATERIAL FOUND IN SEARCH. LEARNED CIT (A) HAS DECID ED THE ISSUE AGAINST THE ASSESSEE ON THIS BASIS THAT THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CANARA HOUSING DEVELOPMENT CO. VS. DCIT, 274 CTR 122 IS APPLICABLE AND NOT THE SUBSEQUENT JUDGMENT O F HONBLE KARNATAKA HIGH ITA NO.1754/BANG/2016 PAGE 13 OF 14 COURT RENDERED IN THE CASE OF CIT VS. LANCY CONSTRU CTION, 383 ITR 168 BECAUSE IN THIS LATER JUDGMENT, THE EARLIER JUDGMEN T RENDERED IN THE CASE OF CANARA HOUSING DEVELOPMENT CO. VS. DCIT (SUPRA) WAS NOT CONSIDERED. IN THE TRIBUNAL ORDER CITED BY THE LEARNED AR OF THE ASSES SEE, BOTH THESE JUDGMENTS WERE DULY CONSIDERED AND IT WAS HELD THAT AS PER TH E EARLIER JUDGMENT RENDERED IN THE CASE OF CANARA HOUSING DEVELOPMENT CO. VS. D CIT (SUPRA), THIS WAS NOT A RATIO LAID DOWN THAT EVEN IF NO INCRIMINATING MAT ERIAL IS FOUND IN SEARCH, SECTION 153A CAN BE INVOKED BECAUSE IN THAT CASE, I NCRIMINATING MATERIAL WAS FOUND IN SEARCH AND INVOCATION OF SECTION 153A WAS NOT IN DISPUTE. THE CO ORDINATE BENCH FURTHER HELD THAT AS PER THE LATER J UDGMENT RENDERED IN THE CASE OF CIT VS. LANCY CONSTRUCTION (SUPRA), IN THE ABSEN CE OF ANY INCRIMINATING MATERIAL FOUND IN SEARCH, THE ASSESSMENT PROCEEDING S U/S 153A OF THE I. T. ACT IS BAD IN LAW. WE FEEL THAT UNDER THESE FACTUAL AN D LEGAL POSITION, THE LD. CIT(A) SHOULD RECORD A CATEGORICAL FINDING AS TO WHETHER A NY INCRIMINATING MATERIAL WAS FOUND IN COURSE OF SEARCH OR NOT. IF IT IS FOUND T HAT NO INCRIMINATING MATERIAL WAS FOUND IN COURSE OF SEARCH THEN IT SHOULD BE HELD TH AT THE PROCEEDINGS INITIATED BY AO U/S. 153A ARE NOT VALID BY FOLLOWING THE LATE R JUDGEMENT OF HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS . LANCY CONSTRUCTION (SUPRA) AND IF IT IS FOUND THAT ANY INCRIMINATING M ATERIAL WAS FOUND IN COURSE OF SEARCH, THEN THESE PROCEEDINGS SHOULD BE HELD VALID AND ISSUE ON MERIT SHOULD BE DECIDED AFRESH. IN VIEW OF THIS DECISION, THE O THER GROUNDS RAISED ON MERIT ARE NOT REQUIRED TO BE DECIDED AT THIS STAGE. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (SUNIL KUMAR YADAV) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 31 ST OCTOBER, 2017. /MS/ ITA NO.1754/BANG/2016 PAGE 14 OF 14 COPY TO: 1. APP ELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.