M/s Divine Projects Private Limited, Ludhiana V. DCIT-CPC, Bangalore

ITA 226/CHANDI/2020

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 8234 (ITAT-CHANDIGARH)
• Duration Of Justice: 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 06-01-2021
• Assessment Year: 2018-2019
• Appeal Filed On: 06-03-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Opportunity of being heard; Wrong claim; Set aside; Capital Gains
• Section: 115JB; 143(1); 139(1); 64; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BE NCHES, SMC CHANDIGARH (VIRTUAL COURT) BEFORE: SHRI. N.K.SAINI, VICE PRESIDENT ITA NO.226/CHD/2020 ASSESSMENT YEAR :2018-19 M/S DIVINE PROJECTS PRIVATE LIMITED 30-31/B, SARABHA NAGAR, LUDHIANA- 141001 V S. THE DCIT - CPC BANGALORE PAN NO: AABCD9808P APPELLANT RESPONDENT ASSESSEE BY : SHRI SUDHIR SEHGAL, ADVOCATE REVENUE BY : SMT. MEENAKSHI VOHRA, ADDL. CIT DATE OF HEARING : 06/01/2021 DATE OF PRONOUNCEMENT : 06/01/2021 ORDER PER N.K. SAINI, VICE PRESIDENT THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A)-3, LUDHIANA DT. 30/12/2019. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L: 1. THAT THE LD. CIT(A)-3, LUDHIANA HAS ERRED IN DIS MISSING THE APPEAL OF THE ASSESSEE BY NOT TREATING THE CLAIM OF THE ASSESSEE THAT LONG TERM CAPITAL GAIN OF RS. 12,20,778/- EARNED BY THE SAID COMPANY WAS EXEM PT UNDER SECTION 10(38) OF THE INCOME TAX ACT, 1961. 2. THAT THE LD. CIT(A)-3, LUDHIANA HAS GROSSLY ERRE D IN CONFIRMING THE ACTION OF THE CPC OF DISALLOWING THE EXEMPTION U/S 10(38) BY WRON GLY ALLEGING THAT THE CERTIFICATE FROM THE CHARTERED ACCOUNTANT IN FORM N O. 64, IS NOT VERIFIED BY THE AUDITOR WITHOUT MAKING ANY PROPER VERIFICATION IN T HIS REGARD & SIMPLY ON THE BASIS OF HER PRESUMPTIONS. 3. THAT THE DETAILED SUBMISSIONS AS FILED BY THE AS SESSEE DURING THE COURSE OF APPELLATE PROCEEDINGS HAVE NOT BEEN CONSIDERED PROP ERLY. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROUNDS OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD OR DISPOSED OFF. FROM THE AFORESAID GROUNDS IT WOULD BE CLEAR THAT O NLY GRIEVANCE OF THE ASSESSEE RELATES TO THE ADDITION OF RS. 12,20,778/- WHICH WAS CLAIMED BY THE ASSESSEE AS EXEMPT UNDER SECTION 10(38) OF THE INCO ME TAX ACT 1961(HEREINAFTER REFERRED TO AS ACT). 3. FACTS OF THE CASE IN BRIEF ARE THAT THE RETURN O F INCOME WAS FILED BY THE ASSESSEE ON 16/10/2018 DECLARING AN INCOME OF RS. 1 2,12,000/- HOWEVER WHILE PROCESSING THE RETURN OF INCOME UNDER SECTION 143(1 ) OF THE ACT, THE CLAIM OF THE ASSESSEE FOR EXEMPTION UNDER SECTION 10(38) OF THE ACT WAS NOT ALLOWED. 4. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER: WITH DUE RESPECT, IT IS SUBMITTED AS UNDER: M/S. DIVINE PROJECTS PVT. LTD., IS A DOMESTIC COMPA NY AND IS ENGAGED IN BUSINESS OF INVESTMENT ACTIVITIES SINCE LONG AND WAS SUBJECT TO AUDIT UNDER COMPANIES ACT, 2013 AND WAS REQUIRED TO FILE ITS INCOME-TAX R ETURN ON OR BEFORE 31.10.2018 UNDER SECTION 139(1) OF THE ACT AND FILED ITS INCOM E-TAX RETURN ON 16.10.2018 I.E. IN-TIME, DECLARING A LOSS OF RS. 10,978/- AS PER PR OVISIONS OF INCOME-TAX ACT AFTER CLAIMING EXEMPTION OF RS. 12,21,778/- BEING LONG TE RM CAPITAL FROM VENTURE CAPITAL COMPANY UNDER SEC. 10(38) AND BOOK PROFITS AT RS.12,60,538/- AS PER PROVISIONS OF SECTION 115JB OF THE ACT AND THUS THE APPELLANT OPTED BOOK PROFITS FOR PAYMENT OF INCOME-TAX INCOME AT THE RATE OF 18. 5%. THE CPC, WHILE PASSING ORDER UNDER SECTION 143(1) O F THE ACT, MADE VARIOUS ADDITIONS TO RETURNED LOSS OF RS. 10,978/- AND COMP UTED THE TAXABLE INCOME AT RS. 12,12,000/- FOR THE PURPOSE OF LEVY OF INCOME-TAX A GAINST LAW AND FACTS OF THE CASE, AND THUS AN APPEAL IS FILED BEFORE YOUR KIND HONOR. GROUND OF APPEAL THE LEARNED ASSESSING OFFICER HAS GROSSLY ERRED IN L AW IN TREATING THE LONG TERM CAPITA! GAIN RS.12,21,778/- CLAIMED AS EXEMPT U/S 1 0(38) TO BE THE INCOME FROM BUSINESS & PROFESSION AGAINST LAW AND FACTS OF THE CASE. IT IS HEREBY PRAYED THAT ADDITIONS OF RS. 12,21, 778/-UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION BE DELETED AND LONG TERM CAPITAL GAINS RS. 12,21,77 8/- BE ALLOWED AS EXEMPT U/S 10(38) OF THE ACT. AS ALREADY SUBMITTED TO YOUR KIND HONOR HEREINABOVE , THE APPELLANT-COMPANY FILED ITS ITR DECLARING INCOMES AS UNDER AS PER 'CO MPUTATION OF INCOME' ENCLOSED: INCOME FROM BUSINESS & PROFESSION (-) 10978.00 SHORT TERM CAPITAL GAIN 1222.00 LONG TERM CAPITAL GAINS FROM VENTURE CAPITAL COMPANY RS. 12,21,778/- BEING EXEMP T NIL INCOME FROM OTHER SOURCES SHARE DIVIDEND RS.48516/- BEING EXEMPT U/S 10(34) NIL TOTAL INCOME AS PER PROVISION OF I. TAX RS. (-) 9756.00/- BOOK PROFITS UNDER SECTION 115, IB ADJUSTED BOOK PR OFITS 12,60.358/-, AND THE APPELLANT-COMPANY PAID INCOME-TAX AS PER PR OVISIONS OF SECTION OF SECTION 7115) B. WHILE PROCESSING THE ITR UNDER SECTION 143(1), THE CPC TREATED THE LONG TERM CAPITAL GAINS, EARNED FROM VENTURE CAPITAL COMPANY' , AS 'BUSINESS INCOME' AND DETERMINED THE BUSINESS INCOME AT RS. 12,12,000/- A GAINST LOSS OF RS. 10,978/- AND CHARGED INCOME-TAX @ 30% ON INCOME AT RS. 12,10,780 /- INSTEAD OF 18.5% ON BOOKPROFITS RS. 12,60,538/-. AS ALREADY SUBMITTED TO YOUR KIND HONOR THAT THE AP PELLANT EARNED LONG TERM CAPITAL GAINS RS. 12,21,778/- EARNED FROM VENTURE C APITAL FUND, WHICH IS EXEMPT IN THE HANDS OF THE INVESTOR UNDER SECTION 10(38) O F THE INCOME-TAX ACT, 1961. FORM NO.64 (RULE 12C), PROVIDING THE DETAILS AND CO NFIRMING THE QUANTUM OF LONG TERM CAPITAL GAINS BEING EXEMPT UNDER SECTION 10(38 ) OF THE INCOME-TAX ACT, 1961, DULY VERIFIED BY THE FUND MANAGERS AND CERTIF IED BY THE CHARTERED ACCOUNTANTS CONFIRMING THE COMPLIANCE OF PROVISIONS OF SECTION 115 U(5) , AS REQUIRED UNDER THE INCOME-TAX ACTL,961, IS ENCLOSED HEREWITH FOR YOUR KIND PERUSAL AND VERIFICATION. WITHOUT PREJUDICE TO THE ABOVE, IT IS FURTHER SUBMI TTED THAT AN ACTION OF THE CPC TO TREAT AN INCOME CLAIMED AS EXEMPT UNDER 10(38) O F THE ACT IN THE ITR AS 'BUSINESS INCOME' UNDER SECTION 143(1) OF THE ACT I S BEYOND THE SCOPE OF SECTION 143(1) , AS IT IS NEITHER ANY ARITHMETICAL ERROR NO R A WRONG CLAIM OF ANY DEDUCTION. KEEPING IN VIEW THE ABOVE FACTS AND FORM 64 (RULE 1 2C) AUTHENTICATING THE CAPITAL GAINS BE EXEMPT U/S 10(38), IT IS HEREBY PR AYED THAT ADDITIONS OF RS. 12,21,778/- IN INCOME UNDER, THE HEAD 'INCOME J'ROM BUSINESS AND PROFESSION' BE DELETED AND LONG TERM CAPITAL GAINS RS. 12,21,778/- BE ALLOWED AS EXEMPT UNDER SECTION 10(38) OF THE ACT. 5. THE LD. CIT(A) DID NOT FIND MERIT IN THE AFORESA ID SUBMISSIONS OF THE ASSESSEE AND DISMISSED THE APPEAL BY OBSERVING IN P ARA 3.2 OF THE IMPUGNED ORDER AS UNDER: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE A ND SUBMISSIONS OF THE APPELLANT. AS PER RETURN OF INCOME FILED BY THE ASS ESSEE, THE ASSESSE HAS CLAIMED AN AMOUNT OF RS. 12,21,7789/- BEING LONG TERM CAPIT AL GAIN FROM VENTURE CAPITAL COMPANY U/S 10(38) OF THE INCOME TAX ACT 19 61. WHILE PROCESSING THE RETURN OF INCOME, CPC TREATED THE LONG TERM CAPITAL GAINS EARNED FROM VENTURE CAPITAL COMPANY AS 'BUSINESS INCOME' AND DETERMINED THE BUSINESS INCOME AT RS. 12,12,000/- AGAINST LOSS OF RS. 10,978/- DECLAR ED BY THE ASSESSEE AS LOSS FROM BUSINESS AND PROFESSION. DURING THE APPEAL PROCEEDI NGS, THE ASSESSEE HAS FILED A COPY OF FORM NO 64 IN SUPPORT OF CLAIM OF LONG TERM CAPITAL GAINS. HOWEVER THE CERTIFICATE SUBMITTED BY THE ASSESSEE IS THOUGH STA MPED WITH SEAL OF M/S B.Y. & ASSOCIATES, CHARTED ACCOUNTANTS AND FAIRWIND ASSET MANAGER LIMITED MUMBAI BUT DOES NOT CARRY ANY SIGNATURE OR VERIFICATION BY THE AUDITORS OF THE AUTHENTICITY OF THE CERTIFICATE AS REQUIRED AS PER RULE 12C OF T HE INCOME TAX RULES. PROVISIONS OF RULE 12C ARE AS UNDER:- '(1) THE STATEMENT OF INCOME PAID OR CREDITED SHALL BE FURNISHED BY THE 30' INCOME IS PAID OR CREDITED, TO THE CHIEF COMMISSION ER OR COMMISSIONER OF INCOME TAX, WITH WHOSE JURISDICTION, THE PRINCIPLE OFFICE OF THE VENTURE CAPITAL COMPANY OR THE VENTURE CAPITAL FUND, AS THE CASE MAY BE, IS SITUATED. (2) THE STATEMENT OF INCOME PAID OR CREDITED WHICH IS TO BE FURNISHED UNDER SUB-SECTION (2) OF SECTION 115U BY THE VENTUR E CAPITAL COMPANY OR THE VENTURE CAPITAL FUND, AS THE CASE MAY BE, SHALL BE IN FORM NO. 64 DULY VERIFIED BY AN ACCOUNTANT IN THE MANNER INDICATED T HEREIN AND SHALL BE FURNISHED ELECTRONICALLY UNDER DIGITAL SIGNATURE. (3) THE DIRECTOR GENERAL OF INCOME TAX............. ................................ ' THEREFORE, NO RELIEF CAN BE ALLOWED TO THE ASSESSEE ON THE BASIS OF SUCH CERTIFICATE, SUBMITTED BY THE ASSESSEE WITHOUT VERI FICATION OF THE ACCOUNTANT. THEREFORE, THIS GROUND OF APPEAL IS DISMISSED. 6. NOW THE ASSESSEE IS IN APPEAL. 7. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBM ISSIONS MADE BEFORE THE LD. CIT(A) AND FURTHER SUBMITTED THAT THE LD. CIT(A ) WITHOUT APPRECIATING THE FACTS IN RIGHT PERSPECTIVE AND WITHOUT POINTING OUT ANY DEFECT IN THE CERTIFICATE ISSUED BY THE CHARTERED ACCOUNTANT, WAS NOT JUSTIFI ED IN DENYING THE EXEMPTION CLAIMED BY THE ASSESSEE UNDER SECTION 10(38) OF THE ACT ON ACCOUNT OF LONG TERM CAPITAL GAIN. 8. IN HIS RIVAL SUBMISSIONS THE LD. SR. DR STRONGLY SUPPORTED THE IMPUGNED ORDER PASSED BY THE LD. CIT(A). 9. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CA SE IT IS NOTICED THAT THE LD. CIT(A) ALTHOUGH ACCEPTED THAT THE ASSESSEE FURNISHE D THE COPY OF FORM NO. 64 IN SUPPORT OF ITS CLAIM FOR EXEMPTION UNDER SECTION 10(38) OF THE ACT ON ACCOUNT OF LONG TERM CAPITAL GAIN. HOWEVER THE SAID CLAIM W AS NOT ALLOWED BY MENTIONING THAT THE CERTIFICATE ISSUED DOES NOT CAR RY ANY SIGNATURE ON VERIFICATION BY THE AUDITORS FOR THE AUTHENTICITY O F THE CERTIFICATE. HOWEVER IT IS NOT CLEAR AS TO WHETHER THE SAID DEFICIENCY, IF ANY , WAS POINTED OUT TO THE ASSESSEE. ON THE CONTRARY THE CLAIM OF THE LD. COUN SEL FOR THE ASSESSEE WAS THAT THE SAID CERTIFICATE CARRIED THE SIGNATURE COPY OF WHICH IS PLACED AT PAGE NO. 13 TO 16 OF THE ASSESSEES COMPILATION. I THEREFORE CO NSIDERING THE CONTRARY STAND TAKEN BY THE LD. CIT(A) AND CLAIMED BY THE LD. COUN SEL FOR THE ASSESSEE, DEEM IT APPROPRIATE TO SET ASIDE THIS CASE BACK TO THE F ILE OF THE LD. CIT(A) TO BE ADJUDICATED AFRESH IN ACCORDANCE WITH LAW AFTER PRO PER VERIFICATION AS CLAIMED BY THE LD. COUNSEL FOR THE ASSESSEE AND BY PROVIDIN G DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 06/01/2021. SD/- ( N.K. SAINI) VICE PRESIDENT AG DATE: 06/01/2021 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. CIT 4. THE CIT(A) 5. DR, ITAT, CHANDIGARH 6. GUARD FILE