DCIT, CHENNAI V. Hi Tech Housing Projects Private Limited, CHENNAI

ITA 1990/CHNY/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7753 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 14-09-2015
• Court: TRIBUNAL
• Keywords: Principle of natural justice

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI , ! ' ! # . $% & '( BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NOS.1989, 1990 & 1991/MDS/2015 / ASSESSMENT YEARS:2009-10, 2011-12 & 2012-13 THE DY. COMMISSR. OF INCOME TAX, CORPORATE CIRCLE-2(2), ROOM NO.512, 5 TH FLOOR, WANAPARTHY BLOCK, 121, M.G.ROAD, CHENNAI-600 034. VS. M/S.HI-TECH HOUSING PROJECTS (P) LTD., MEENA KAMPALA ARCADE, 3 RD FLOOR, A-BLOCK, B-WING, 113-114, SRI THEYAGARAYA ROAD, T. NAGAR, CHENNAI-600 017. [PAN:AAACH2527C] ( )* / APPELLANT) ( +,)* /RESPONDENT) / APPELLANT BY : MS. VIJAYALAKSHMI, CIT /RESPONDENT BY : MS. ASHIKSHAH, CA / DATE OF HEARING : 07.11. 201 6 / DATE OF PRONOUNCEMENT : 28 .12. 2016 - / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE THREE APPEALS OF THE REVENUE ARE DIRECTED AGAINST THE COMMON ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-6, CHENNAI, DATED 01.06.2015 IN ITA NOS.82 & 270/CIT( A)-6/2014-15 ITA NO.1989,1990 & 1991 /MDS/2015 :- 2 -: AND ITA NO.124/CIT(A)-6/2015-16 PERTAINING TO ASSES SMENT YEARS 2009-10, 2011-12 & 2012-13. SINCE ISSUES INVOLVED IN THESE THREE APPEALS OF REVENUE ARE COMMON IN NATURE, THESE APP EALS ARE CLUBBED TOGETHER, HEARD TOGETHER, DISPOSED OFF BY THIS COMM ON ORDER FOR THE SAKE OF CONVENIENCE. 2. IN THESE CASES, THERE WERE DISALLOWANCES FOR TH E ASSESSMENT YEARS 2009-10, 2011-12, & 2012-13 AT ` 71,65,208/-, ` 5,45,56,876/- & ` 22,54,51,308/- RESPECTIVELY U/S.36(1)(III) AND SEC .14A READ WITH RULE 8D OF THE INCOME TAX RULES MADE BY THE LD. ASSESSING OFFI CER. AGGRIEVED, THE ASSESSEE CARRIED THE APPEAL BEFORE THE LD.CIT(A). 3. ON APPEAL, LD.CIT(A) RECOMPUTED THE DISALLOWAN CE U/S.36(1)(III) AND SEC.14A READ WITH RULE 8D OF THE RULES BY ADMIT TING CERTAIN FRESH DOCUMENTS WHEREIN ASSESSEE EXPLAINED THE AVAILABILI TY OF OWN FUNDS AND EARNING OF NO EXEMPTED INCOME FROM THE INVESTMENTS. ACCORDINGLY, LD.CIT(A) HAD GIVEN CERTAIN RELIEF WITHOUT CONFRONT ING THE LD. ASSESSING OFFICER BY CALLING THE REMAND REPORT FROM THE AO. AS SUCH THE REVENUE RAISED THE FOLLOWING GROUNDS. 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO THE LAW AND FACTS OF THE CASE. 2.1 THE ID. CIT(A) OUGHT NOT TO HAVE EXCLUDED THE I NTEREST PAID TO M/S. BEST LAND REALTY LTD FOR THE PURPOSE OF INVEST MENTS FOR RULE 8D. 2.2 THE ID. CIT(A) OUGHT TO HAVE APPRECIATED THAT W HEN THE INTEREST PAYMENT TO M/S. BEST LAND REALTY LTD. WAS DISALLOWED U/S 36(1)(III) OF THE ACT AS THE SAME WAS FOR NON-B USINESS ITA NO.1989,1990 & 1991 /MDS/2015 :- 3 -: PURPOSES AND THAT THE LOAN WAS UTILIZED FOR THE PUR POSE OF PURCHASE OF ZOCPS, THE INTEREST PAID THEREON IS ATT RACTED BY CLAUSE 2 OF RULE 8D. 2.3 THE ID. CIT(A) OUGHT NOT TO HAVE HELD THAT THE ZOCPS ARE NOT GOING TO EARN ANY TYPE OF INCOME TILL THE OPTION TO CONVERT THEM INTO SHARES IS EXERCISED AND THAT THEY REMAIN AS NO N-IHCOME EARNING ASSETS. 2.4 THE ID. CIT(A) OUGHT TO HAVE APPRECIATED THAT T HERE IS OPTION FOR THE ASSESSEE TO REDEEM THE ZOCPS AND EVEN IF DO ESNT EARN ANY INCOME AT THE PRESENT, CAN BE EQUATED WITH THAT OF THE SHARES WHERE NO DIVIDEND IS DECLARED OR EARNED DURI NG THE PERIOD. 2.5 THE ID. CIT(A) OUGHT NOT TO HAVE REDUCED THE IN VESTMENTS MADE IN ZOCPS FROM THE TOTAL INVESTMENTS FOR THE PU RPOSE OF CALCULATING STEP 3 OF RULE 8D(2)(III). 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) BE SET ASIDE AND THAT OF TH E ASSESSING OFFICER BE RESTORED. 4. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE ORDER OF LOWER AUTHORITIES. THE AO DISALLOWED U/S.36(1)(III) AND SEC.14A READ WITH RULE 8D OF THE RULES CONSIDERING THE DIVERSION OF F UNDS BY THE ASSESSEE FOR NON-BUSINESS PURPOSES AND NON-INCOME YIELDING INVES TMENTS. HOWEVER, IN THE COURSE OF HEARING, THE CIT(A) ADMITTED CERTAIN FRESH DOCUMENTS IN THE FORM OF FUND FLOW STATEMENT AND DETAILS OF INVE STMENTS. THESE DOCUMENTS WERE NOT MADE AVAILABLE TO THE AO BEFORE DELETING CERTAIN DISALLOWANCES BY CIT(A). IN OUR OPINION, THERE IS A VIOLATION OF ITA NO.1989,1990 & 1991 /MDS/2015 :- 4 -: PRINCIPLES OF NATURAL JUSTICE AND ALSO THERE IS VIO LATION OF RULE 46A OF INCOME TAX RULES, 1962. ACCORDINGLY, IN OUR OPINIO N, IT IS APPROPRIATE TO SET ASIDE THE ORDER OF THE LD.CIT(A) AND REMIT T HE ISSUE TO THE FILE OF LD.CIT(A) TO CONFRONT THE DOCUMENTS WHICH ARE FILE D FIRST TIME BEFORE HIM AND CALLED FOR REMAND REPORT FROM THE AO AND TH EREAFTER DECIDE THE ISSUE IN DISPUTE. WITH THIS OBSERVATION, WE RE MIT THE ENTIRE ISSUE IN DISPUTE TO THE FILE OF LD.CIT(A) FOR FRESH CONSIDER ATION. 5. IN THE RESULT, ALL THE APPEALS OF THE REVENUE A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH DECEMBER, 2016, AT CHENNAI. SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) & / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 28 TH DECEMBER, 2016 K S SUNDARAM +,-- ./-0/ / COPY TO: - 1 . / APPELLANT 3. - 1-!' / CIT(A) 5. /23- 4 / DR 2. / RESPONDENT 4. - 1 / CIT 6. 3&-5 / GF