ACIT, Bangalore V. M/s Rockline Constructions, Bangalore

ITA 366/BANG/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0633 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 31-01-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 12-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ETWA MUNDA CITIII
• Assessee Lawyers: N SURYANARAYANA IRS
• Keywords: Business income; Depreciation; Unabsorbed depreciation

Judgement Text

ITA.366/BANG/2012 PA GE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'C', BANGALORE BEFORE SHRI. N. BARATHVAJA SANKAR, VICE PRESIDENT AND SMT. N. V. VASUDEVAN, JUDICIAL MEMBER I.T.A NO.366/BANG/2012 (ASSESSMENT YEAR : 2008-09) ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE - 1(1), BANGALORE .. APPELLANT V. M/S. ROCKLINE CONSTRUCTIONS, NO.9/2, MUSEUM ROAD, BANGALORE 560 001 .. RESPONDENT PAN : AABFR7146P APPELLANT BY : SHRI. ETWA MUNDA, CIT-III RESPONDENT BY : SHRI. N. SURYANARAYANA, IRS DATE OF HEARING : 31.01.2013 DATE OF PRONOUNCEMENT : O R D E R PER N. BARATHVAJA SANKAR, VICE PRESIDENT : THIS IS AN APPEAL PREFERRED BY THE REVENUE IN THE CASE OF THE ASSESSEE, M/S. ROCKLINE CONSTRUCTIONS, BANGALORE, F OR THE ASSESSMENT YEAR 2008-09, AGAINST THE APPELLATE ORDER DATED.25. 01.2011 OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, BANGALORE. ITA.366/BANG/2012 PA GE - 2 02. THE BRIEF FACTS AS CULLED OUT FROM THE RECORDS ARE THAT THE ASSESSEE IS A REGULAR INCOME-TAX ASSESSEE AND FOR T HE ASSESSMENT YEAR 2008-09 IT FILED A RETURN OF INCOME DECLARING NIL I NCOME AFTER SETTING OFF OF BROUGHT FORWARD LOSSES AND UNABSORBED DEPREC IATION. THE INCOME WAS LATER REVISED AT RS.20,10,372/-. IN THE PROCEEDINGS U/S.143(3) OF THE IT ACT, THE ASSESSING OFFICER NOT ICED THAT THE ASSESSEE'S MAIN BUSINESS AS REVEALED IN FORM 3CD IS ONE OF REAL ESTATE DEVELOPERS. A PERUSAL OF THE PROFIT AND LOSS ACCOU NT REVEALED THAT THE ASSESSEE IS IN RECEIPT OF INCOME FROM THE FOLLOWING SOURCES : CONTRACT RECEIPTS .. RS.1,46,00,000 HIRE CHARGES .. RS. 4,95,224 COMMISSION .. RS. 2,57,043 INTEREST ON INCOME TAX REFUND .. RS. 5,67 1 SALE OF SCRAP .. RS. 89,000 DIVIDEND ON MUTUAL FUND .. RS. 5,75,338 PROFIT ON SALE OF FLAT .. RS.1,34,54,000 RENT .. RS. 2,97,839 AFTER DISCUSSION WITH THE ASSESSEE'S REPRESENTATIVE , FOR THE REASONS RECORDED IN THE ASSESSMENT ORDER (PAGE NOS.2 TO 6), THE ASSESSING OFFICER WAS OF THE VIEW THAT A MAJORITY EXPENDITURE CLAIMED IN THE PROFIT AND LOSS ACCOUNT WAS NOT ESTABLISHED AS RELA TING TO BUSINESS AND, THEREFORE, THE BOOK RESULTS CANNOT BE RELIED ON AND HENCE REJECTED THE BOOK RESULTS. THE TOTAL INCOME WAS DERIVED BY ESTI MATING THE BUSINESS INCOME AT 4% OF GROSS CONTRACT RECEIPTS, HIRE CHARG ES, COMMISSION AND ITA.366/BANG/2012 PA GE - 3 SALE OF SCRAP AND IGNORING EXPENDITURE CLAIMED INCL UDING THE EXPENDITURE ON WHICH TDS WAS NOT MADE. INCOME FROM SALE OF FLAT WAS BROUGHT TO TAX FULLY AS NO EXPENDITURE RELATABL E TO IT WAS FOUND. THE INCOME WAS ASSESSED BY THE ASSESSING OFFICER AS UNDER : INCOME FROM BUSINESS : I) 4% OF RS.1,54,41,267 .. RS. 6,17,651 (14600000+495224+257043+89000) II) PROFIT ON SALE OF FLAT .. RS.1,34,54,000 RS.1,40,71,651 INCOME FROM HOUSE PROPERTY (AS RETURNED) .. RS. 1,64,387 INCOME FROM OTHER SOURCES : RENT FROM SUB-LEASE PROPERTY.. RS. 63,000 INTEREST ON IT REFUND .. RS. 5,671 .. RS. 68,671 RS.1,43,04,709 LESS : UNABSORBED DEPRECIATION BROUGHT FORWARD.. RS. 8,00,096 LESS : BUSINESS LOSS BROUGHT FORWARD .. RS. 41,62,338 RS. 93,42,275 THUS THE INCOME WAS ASSESSED AT RS.93,42,275/-. AG GRIEVED BY THIS ORDER OF THE ASSESSING OFFICER THE ASSESSEE MOVED T HE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 03. REGARDING THE REJECTION OF BOOKS, THE LEARNED F IRST APPELLATE AUTHORITY HAS HELD AS UNDER : 'HOWEVER, I FIND THE ABOVE COMPUTATION SHOWS THE AS SESSEE HAS SHOWN DIVIDEND INCOME OF RS.575,338.33 PAISA WITHOU T MAKING ITA.366/BANG/2012 PA GE - 4 ANY CORRESPONDING DISALLOWANCE U/S.14A OF I.T. ACT READ WITH RULE 8D OF I. T. RULES, 1962. THEREFORE, THE COMPU TATION OF INCOME IS HELD INCORRECT. BESIDES, THE MISMATCH OF EXPENDITURE CLAIMED BY THE APPELLANT FOR FOREIGN TRAVEL OF PART NERS IN P & L A/D AND THOSE GIVEN DURING THE ASSESSMENT PROCEEDIN G, NOT YET BEING RECONCILED ALSO PROVE THAT THE BOOKS OF ACCOU NTS ARE INCORRECT AND INCOMPLETE. IT ALSO SHOWS THAT COMPL ETE BILLS AND VOUCHERS HAD NOT BEEN PROVIDED TO THE AUDITORS FOR AUDIT. HENCE THE FIRST ISSUE IS DECIDED AGAINST THE APPELLANT AN D IN FAVOUR OF THE REVENUE.' FROM THE ABOVE FINDING OF THE COMMISSIONER OF INCOM E-TAX (APPEALS) IT CAN BE SEEN THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS UPHELD THE ACTION OF THE ASSESSING OFFICER IN REJEC TING THE BOOK RESULTS. 04. REGARDING THE OTHER ISSUE OF ESTIMATING THE PRO FIT AT 4%, THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS OBSERVED A S UNDER : 'IT IS OBSERVED THAT IN VIEW OF THE FACT THAT THE A SSESSEE HAS SHOWN PROFIT OF RS.40,99,630/- AND NOT LOSS FROM BUSINESS . THERE IS NO NECESSITY TO UPHOLD THE A.O'S STAND THAT PROFIT SHO ULD BE ESTIMATED AT 4%. THIS ISSUE IS DECIDED IN FAVOUR OF THE APPE LLANT.' 05. NOW THE REVENUE IS AGGRIEVED AND IS ON SECOND A PPEAL BEFORE US WITH THE FOLLOWING GROUNDS OF APPEAL : I) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN DELETING THE ADDITION MADE BY THE ASSESSIN G OFFICER IN ITA.366/BANG/2012 PA GE - 5 RESPECT OF CONTRACT AND OTHER RELATED RECEIPTS AGGR EGATING TO RS.1,54,41,267/- BY REJECTING THE BOOKS OF ACCOUNTS AND CONSEQUENTLY ESTIMATING THE PROFITS @ 4% ON THE AFO RESAID RECEIPTS. II) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) HAS ERRED IN REJECTING THE ESTIMATION MADE BY THE ASSES SING OFFICER AT 4% WHILE CONFIRMING THE ORDER OF THE ASSESSING O FFICER IN REJECTING THE BOOKS OF ACCOUNT, THUS PASSING A SELF CONTRADICTORY APPEAL ORDER. III) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEA LS) HAS ERRED IN TAKING THE PROFIT ON SALE OF FLAT AS P ART OF THE BUSINESS RECEIPTS CONSISTING OF CONTRACT RECEIPTS, HIRE CHARGES, COMMISSION AND SALE OF SCRAP AGGREGATING TO RS.1,54 ,41,267/-. IV) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) HAS ERRED IN NOT APPRECIATING THAT THE PROFIT ON SALE O F FLAT HAS NO CONNECTION WITH THE CONTRACT BUSINESS AND IS INDEPE NDENT OF THE ASSESSEE'S MAIN BUSINESS CONSISTING OF CONTRACT , HIRING AND COMMISSION. 06. AT THE TIME OF HEARING THE LEARNED CIT-DR RELIE D ON THE GROUNDS OF APPEAL AND REITERATED THE SAME AS HIS SUBMISSION S. THAT APART, HE REITERATED THE CONTENTS OF THE ASSESSMENT ORDER ALS O. 07. PER CONTRA, THE LEARNED REPRESENTATIVE OF THE A SSESSEE, SHRI. N. SURYANANARAYANA, SUPPORTED THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) AND PLEADED THAT THERE IS NO N EED TO DISTURB THE SAME. ITA.366/BANG/2012 PA GE - 6 08. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CONSIDE RED THE FACTS AND MATERIALS ON RECORD INCLUDING THE APPELLATE ORD ER AND ASSESSMENT ORDER. AFTER A CAREFUL CONSIDERATION OF THE ENTIRE MATERIAL BEFORE US IN THE LIGHT OF THE SUBMISSIONS MADE BEFORE US WE FIND THAT THE LEARNED FIRST APPELLATE AUTHORITY THOUGH CONFIRMED THE FIND ING OF THE ASSESSING OFFICER IN REJECTING THE BOOK RESULTS IN SO MANY WO RDS, HAS NOT GIVEN ANY SPEAKING ORDER IN RESPECT OF THE ESTIMATION OF PROFIT AT 4% BY THE ASSESSING OFFICER. ON THE OTHER HAND HE HAS MADE A VERY CRYPTIC ORDER IN ONE PARAGRAPH, WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE. IN OUR CONSIDERED VIEW, THIS IS A FIT CA SE FOR RESTORING THE MATTER BACK TO THE FILE OF THE COMMISSIONER OF INCO ME-TAX (APPEALS) WITH A DIRECTION TO PASS A SPEAKING ORDER IN RESPEC T OF THE ISSUE RELATING TO ESTIMATION OF PROFIT AT 4% BY THE ASSESSING OFFI CER, OF COURSE AFTER GIVING EFFECTIVE OPPORTUNITY OF HEARING TO THE ASSE SSEE. THUS THE REVENUE'S APPEAL IS ALLOWED FOR STATISTICAL PURPOSE AND NEEDLESS TO SAY THAT THE ASSESSEE SHOULD COOPERATE WITH THE COMMISS IONER OF INCOME- TAX (APPEALS) BY PRODUCING THE DETAILS THAT WOULD B E REQUIRED OF IT BY THE COMMISSIONER OF INCOME-TAX (APPEALS). ITA.366/BANG/2012 PA GE - 7 09. IN THE RESULT, THE REVENUE'S APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 08.02.2013. SD/- SD/- (N. V. VASUDEVAN) (N. BARATHVAJA SANKAR) JUDICIAL MEMBER VICE PRESIDENT