DCIT Central Circle 2, Madurai V. Jumbo Fireworks (I) Pvt. Limited, Sivakasi

ITA 1880/CHNY/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8204 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 06-06-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M SRINIVASA RAO
• Assessee Lawyers: PETCHI THANGAVEL
• Keywords: Search and seizure; Set aside
• Section: 143(3); 153A; 68; 69; 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: CHENNAI . . . , ! ' # , $ #% BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NOS.1880 & 1881/CHNY/2018 & '& /ASSESSMENT YEAR: 2013-14 & 2014-15 DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, MADURAI. VS. M/S. JUMBO FIREWORKS (I) PVT. LTD., BELL VILLA, NO.80, VELLAYUTHAM ROAD, SIVAKASI 626 123. [PAN: AACCJ 6310P] ( () /APPELLANT) ( *+() /RESPONDENT) () , - / APPELLANT BY : SHRI M. SRINIVASA RAO, JCIT *+() , - /RESPONDENT BY : MS. PETCHI THANGAVEL, CA . , /$ /DATE OF HEARING : 05.03.2019 01' , /$ / DATE OF PRONOUNCEMENT : 28 .03.2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER : THESE TWO APPEALS FILED BY THE REVENUE DIRECTED AG AINST THE COMMON ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-19, CHENNAI (HEREINAFTER CALLED AS CIT(A)) DATED 27.1 0.2017 FOR THE ASSESSMENT YEARS (AYS) 2013-14 & 2014-15. 2. SINCE, THE IDENTICAL FACTS AND ISSUES ARE INVOLV ED IN THESE APPEALS, WE PROCEED TO DISPOSE THE SAME VIDE THIS COMMON ORD ER. ITA NOS.1880 & 1881/CHNY/2018 (AYS: 2013-14 & 2014- 15) :- 2 -: 3. FOR THE SAKE OF CONVENIENCE AND CLARITY THE FACT S RELEVANT FOR THE AY 2013-14 IN ITA NO.1880/CHNY/2018 ARE STATED HERE IN. 4. THE REVENUE RAISED THE FOLLOWING GROUNDS OF APPE AL IN ITA NO.1880/CHNY/2018 FOR AY 2013-14: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS ERRONEOUS ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW. 2. THE ID.CIT(A) HAS ERRED IN ALLOWING THE SET OFF OF BROUGHT FORWARD LOSSES AMOUNTING TO RS.25,38,692/- FOR THE AY 2013- 14 AGAINST ADDITIONS MADE U/S.68 IN THE ASSESSMENT MADE U/S.14 3(3) R.W.S.153A, WHEN THE RETURN OF INCOME WAS ORIGINALL Y FILED BY THE ASSESSEE-COMPANY BEYOND THE DUE DATE STIPULATED U/S .139(1) OF THE IT ACT. 3. THE ID.CIT(A) HAS ERRED IN OVERLOOKING THE PROVI SIONS OF SECTION 139(3) OF THE ACT WHICH SAYS THAT A LOSS RETURN OUG HT TO HAVE BEEN FILED BY AN ASSESSEE ON OR BEFORE THE DUE DATE SPEC IFIED U/S.139(1) IN ORDER TO CLAIM THE CARRY-OVER OF ANY BUSINESS LOSS INCURRED BY SUCH ASSESSEE. 4. THE LD.CIT(A) HAS FAILED TO APPRECIATED THE FACT THAT WHILE ALLOWING SET OFF OF CURRENT YEAR LOSS AND BROUGHT-FORWARD BU SINESS LOSSES AGAINST THE UNEXPLAINED INCOME ASSESSED U/S.68 OF T HE ACT, THERE IS A PRIMARY REQUIREMENT SPECIFIED IN SECTION 139(3) WHI CH MANDATES AN ASSESSEE TO FILE A RETURN OF INCOME ON OR BEFORE TH E DUE DATE STIPULATED IN SEC.139(1). 5. THE ID.CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT RETURN FILED IN RESPONSE TO NOTICE U/S.153A(A) CANNOT BE EQUATED WI TH A RETURN FILED SECTION 139(1). IF AT ALL THE ASSESSEE HAD FILED IT S ORIGINAL RETURN U/S.139(1) ON OR BEFORE THE DUE DATE SPECIFIED THER EIN, CLAIMING ITS LOSS TO BE CARRIED OVER AS PER SEC.139(3), THE ASSE SSEE IS NOT LEGALLY ALLOWED TO CLAIM BROUGHT FORWARD LOSSES IN A RETURN FILED IN RESPONSE TO NOTICE U/S.153A(A) OF THE ACT. 6. THE ID.CIT(A) FAILED TO NOTE THAT ONLY FOR THE P URPOSE OF ISSUING NOTICE U/S.142(1), FOR MAKING ENQUIRIES, OR FOR PRO DUCING ACCOUNTS OR DOCUMENTS, POINTS OR MATTER BEFORE THE ASSESSMENT U /S.153 IS MADE, IT IS PROVIDED IN SECTION 153A(1)(A) THAT PROVISIO NS OF THIS ACT SHALL APPLY AS IF SUCH RETURN WERE REQUIRED TO BE FURNISH ED U/S.139. THEREFORE, SECTION 139(1) IS A BASIC SECTION UNDER WHICH EVERY ASSESSEE IS REQUIRED TO FILE ITS RETURN OF INCOME S PECIFICALLY WHEN THE ASSESSEE HAS DETERMINED ITS LOSS, SUCH ASSESSEE NEE DS TO FILE A LOSS RETURN. ITA NOS.1880 & 1881/CHNY/2018 (AYS: 2013-14 & 2014- 15) :- 3 -: 7. THE LD.CIT(A) OUGHT TO HAVE CONSIDERED SECTION 8 0 WHICH PROVIDES THAT NO LOSS WHICH IS NOT DETERMINED IN PURSUANCE O F A RETURN FILED IN ACCORDANCE WITH SEC.139(3) SHALL BE CARRIED FORWARD AND SET OFF U/S.72(1). SO, FOR DETERMINING A LOSS TO BE CARRIED FORWARD, THE RETURN SHOULD HAVE BEEN FILED WITHIN THE TIME SPECIFIED U/ S.139(1). THE LD.CIT(A) OUGHT TO HAVE CONSIDERED THE PROVISIONS O F SECTION 80 READ WITH SEC.139(3) WITH REGARD TO TREATMENT OF BROUGHT -FORWARD BUSINESS LOSS OF AN ASSESSEE IN AN ASSESSMENT DETERMINING A POSITIVE INCOME. 8. THE ID.CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT TO CONSIDER AND TREAT A RETURN WHICH IS FILED IN RESPONSE TO NO TICE ISSUED U/S.153A AS IF IT WERE A RETURN FILED U/S.139, IN THE CASE O F THE ASSESSEE CLAIMING BUSINESS LOSS TO BE CARRIED FORWARD U/S.13 9(3), HE SHOULD HAVE FILED THE RETURN ORIGINALLY U/S.139(1), WITHIN THE STIPULATED TIME. 9. THE ID. CIT(A) OUGHT TO HAVE UPHELD THE ACTION O F THE AC IN NOT ALLOWING THE SET-OFF OF BROUGHT- FORWARD BUSINESS L OSS AGAINST THE INCOME ASSESSED U/S.68 OF THE ACT. 10. FOR THESE GROUNDS AND ANY OTHER GROUND INCLUDIN G AMENDMENT OF GROUNDS THAT MAY BE RAISED DURING THE COURSE OF THE APPEAL PROCEEDINGS, THE ORDER OF LEARNED CIT(APPEALS) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. RELIEF CLAIMED IN APPEAL THE ORDER OF THE LEARNED CIT (APPEALS) MAY BE SET A SIDE AND THAT OF THE ASSESSING OFFICER BE RESTORES. 5. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE RESPONDENT-ASSESSEE IS A COMPANY INCORPORATED U NDER THE PROVISIONS OF THE COMPANIES ACT, 1956. IT IS ENGAG ED IN THE BUSINESS OF MANUFACTURING AND SALE OF FIREWORKS. THE RETURN OF INCOME FOR THE AY 2013-14 & 2014-15 WAS FILED BELATEDLY ON 07.11.2013 DISCLOSING LOSS OF RS. 3,37,165. SUBSEQUENTLY, THE SEARCH AND SEIZURE OPERATION U/S. 132 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) WERE CONDUCTED IN THE BUSINESS PREMISES OF ASSESSEE-COMPANY AND ITS DIREC TORS ON 16.10.2014. DURING THE COURSE OF SEARCH AND SEIZUR E OPERATION CERTAIN INCRIMINATING DOCUMENTS RELATING TO THE ASSESSEE-CO MPANY WERE FOUND ITA NOS.1880 & 1881/CHNY/2018 (AYS: 2013-14 & 2014- 15) :- 4 -: AND SEIZED AND BASED ON THE INCRIMINATING MATERIAL AND THE STATEMENT GIVEN BY THE DIRECTOR OF THE ASSESSEE-COMPANY, ASSE SSED ADDITIONS OF RS. 60,76,270/- FOR THE ASSESSMENT YEAR 2013-14 AND RS. 1,74,51,600/- FOR ASSESSMENT YEAR 2014-15 WAS MADE RESPECTIVELY A ND THESE ADDITIONS WERE MADE U/S.68 OF THE ACT AND THE ADDITIONS WERE TAXED UNDER THE PROVISIONS OF S. 115BBE R/W S. 68 OF THE ACT VIDE ASSESSMENT ORDER DATED 28.12.2016 PASSED U/S. 143(3) R/W S. 153A OF THE ACT. 6. BEING AGGRIEVED BY THE ASSESSMENT ORDER, AN APPE AL WAS PREFERRED BEFORE LD. CIT(A), WHO VIDE IMPUGNED ORDER WHILE CO MPUTING THE ADDITION OF RS. 60,76,270/- FOR ASSESSMENT YEAR 2013-14 AND RS. 1,74,51,600/- FOR THE ASSESSMENT YEAR 2014-15 DIRECTED THE AO TO SET OFF OF THE BROUGHT FORWARD BUSINESS LOSS AGAINST THE INCOME ASSESSED U /S. 68 OF THE ACT. TAKING NOTE OF THE AMENDMENT MADE TO THE PROVISIONS OF S. 115BBE OF THE ACT THAT SET OFF OF LOSS AGAINST THE INCOME ASS ESSED U/S. 68 OF THE ACT WAS NOT PERMISSIBLE ONLY W.E.F 2017-18. BEING AGGR IEVED BY THE ABOVE DECISION, THE REVENUE IS IN APPEAL BEFORE IN THE PR ESENT GROUNDS OF APPEAL. 7. IT IS CONTESTED BEFORE US THAT THERE WERE NO BRO UGHT FORWARD BUSINESS LOSSES, WHICH ARE DETERMINED AND ALLOWED T O BE CARRIED FORWARD, AS THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012-13 WAS FILED BEYOND THE DUE DATE FOR FILING OF RETURN OF I NCOME SPECIFIED U/S. ITA NOS.1880 & 1881/CHNY/2018 (AYS: 2013-14 & 2014- 15) :- 5 -: 139(1) OF THE ACT. IT IS FURTHER NOTED THAT THE BUS INESS LOSS CANNOT BE SET OFF AGAINST INCOME FROM OTHER SOURCES OF THE CURREN T YEAR. THUS, IT IS SUBMITTED THAT THE ORDER OF LD. CIT(A) IS AGAINST T HE PLAIN PROVISION OF S. 80 AS WELL AS S. 71 & 72 OF THE ACT AND THEREFORE, PRAYED FOR REVERSAL OF THE ORDER OF LD. CIT(A). 8. ON THE OTHER HAND, THE LD. SR. COUNSEL PLACED RE LIANCE ON THE ORDER OF LOWER AUTHORITIES AND HE FAIRLY ADMITTED THAT IN THE CURRENT YEAR LOSSES SHOULD BE SET OFF AGAINST THE INCOME ASSESSED. 9. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. THE ONLY ISSUE THAT ARISES FOR CONSIDERATIO N IS WHETHER OR NOT THE LD. CIT(A) IS CORRECT IN DIRECTING THE AO TO SET OF F OF THE BROUGHT FORWARD BUSINESS LOSSES AGAINST THE INCOME ASSESSED U/S. 68 R/W S. 115BBE OF THE ACT. INDISPUTEDLY, THE UNDISPUTED INCOME WAS A SSESSED U/S. 68 OF THE ACT. FROM THE ASSESSMENT YEAR 2013-14, THE AMO UNT OF ADDITIONS, MADE U/S. 68 OF THE ACT SHOULD BE TAXED UNDER THE P ROVISIONS OF S. 115BBE OF THE ACT. NO DOUBT, FROM THE ASSESSMENT Y EAR 2017-18 ONWARDS, THE PROVISIONS OF S. 115BBE OF THE ACT HAV E BEEN AMENDED TO THE EFFECT THAT NO SET OFF OF LOSSES CAN BE ALLOWED AGAINST THE INCOME ASSESSED U/S. 68, 69 AND 69A OF THE ACT. THIS AMEN DMENT IS NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION. HOWEVE R, IT IS BOUND DUTY OF THE LD. CIT(A) TO EXAMINE THE AVAILABILITY OF THE B ROUGHT FORWARD BUSINESS ITA NOS.1880 & 1881/CHNY/2018 (AYS: 2013-14 & 2014- 15) :- 6 -: LOSSES BEFORE DIRECTING THE AO TO SET OFF OF THE SU CH LOSSES. THE AO GAVE CATEGORICAL FINDING THAT THERE WAS NO BROUGHT FORWARD BUSINESS LOSSES AVAILABLE FOR SET OFF AS THE RETURN OF INCOM E IN THE EARLIER ASSESSMENT YEARS WERE FILED BEYOND THE DUE DATE FOR FILING THE RETURN OF INCOME. NO MATERIAL WAS BROUGHT ON RECORD CONTROV ERTING THIS FINDING OF AO. FURTHER, THE PROVISION OF S. 72 OF THE ACT PRO VIDES FOR SET OFF OF BROUGHT FORWARD BUSINESS LOSSES AGAINST THE CURRENT YEARS BUSINESS PROFITS ONLY. THUS, THE FINDING OF THE LD. CIT(A) I S PERVERSE AND CONTRARY TO THE MATERIAL ON RECORD AND THEREFORE, WE REVERSE TH E FINDING OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THE ORDER OF THE A SSESSMENT. 10. IN THE RESULT, APPEAL FILED BY THE REVENUE FOR ASSESSMENT YEAR 2013-14 IS ALLOWED. ITA NO.1881/CHNY/2018 FOR ASSESSMENT YEAR 2014-15: 11. SIMILARLY IN THE ASSESSMENT YEAR 2014-15, IT IS THE CONTENTION OF THE ASSESSEE THAT IT IS A CASE OF SET OFF OF CURRENT YE AR LOSSES AND THEREFORE, SET OFF SHOULD BE ALLOWED. HOWEVER, ON THE PERUSAL OF THE ASSESSMENT ORDER, IT IS CLEAR THAT THE AO HAD NOT DISCUSSED AN Y MATERIAL ABOUT THE AVAILABILITY OF LOSS AND THEREFORE, WE RESTORE THIS MATTER BACK TO THE FILE OF AO FOR THE PURPOSE OF VERIFICATION OF THE AVAILABIL ITY OF THE LOSSES AS WELL AS ELIGIBILITY OF SET OFF OF SUCH LOSS AGAINST THE INCOME ASSESSED U/S. 68 OF THE ACT AND WE, MAKE IT VERY CLEAR THAT THE ISSUE O F AVAILABILITY OF LOSSES ITA NOS.1880 & 1881/CHNY/2018 (AYS: 2013-14 & 2014- 15) :- 7 -: AS WELL AS THE ELIGIBILITY OF SET OFF OF SUCH LOSSE S IN TERMS OF S. 71 OF THE ACT AGAINST THE INCOME ASSESSED U/S. 115BBE ARE LEF T UPON. 12. IN THE RESULT, APPEAL FILED BY THE REVENUE FOR ASSESSMENT YEAR 2014-15 IS PARTLY ALLOWED. ORDER PRONOUNCED ON THE 28 TH DAY OF MARCH, 2019 IN CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ! ' # ) (INTURI RAMA RAO) $ /ACCOUNTANT MEMBER /CHENNAI, 2 /DATED: 28 TH MARCH, 2019. EDN, SR. P.S , */3 4 54'/ /COPY TO: 1. () /APPELLANT 2. *+() /RESPONDENT 3. . 6/ ( )/CIT(A) 4. . 6/ /CIT 5. 47 */ /DR 6. & 8 /GF