ITO, Ward-3(2), Visakhapatnam V. Movva Lakshmi, , Visakhapatnam

ITA 431/VIZ/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6504 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 14-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C DAS
• Keywords: Audit objection; Tax effect
• Section: 40A(3); 234B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . . , BEFORE SHRI D . MANMOHAN , VICE PRESIDENT & SHRI D.S. SUNDER SINGH , ACCOUNTANT MEMBER . / I . T .A.NO. 431 /VIZ/ 201 7 ( / ASSESSMENT YEAR: 2006 - 07 ) INCOME TAX OFFICER WARD - 3(2) VISAKHAPATNAM VS. MOVVA LAKSHMI D.NO.49 - 53 - 13/4 PAYALA ENCLAVE B.S.LAYOUT VISAKHAPATNAM [ PAN : A KXPM7465N ] ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : SHRI K.C.DAS , D R / RESPONDENT BY : S HRI G.V.N.HARI, AR / DATE OF HEARING : 04 . 1 2 .2017 / DATE OF PRONOUNCEMENT : 06 . 1 2 .2017 / O R D E R PER D. MANMOHAN , VICE PRESIDENT : THIS APPEAL IS FILED AT THE INSTANCE OF THE REVENUE AND IT PERTAINS TO A.Y. 2006 - 07. THE ONLY ISSUE IS WITH REGARD TO THE DISALLOWANCE OF EXPENDITURE U/S 40A(3) OF I.T.ACT TO THE TUNE OF RS.2,28,600/ - . 2 ITA NO . 431 /VIZ/201 7 MOVVA LAKSHMI, VISAKHAPATNAM 2 . THE ASSESSEE DECLARED INCOME OF RS.2,67,923/ - , WHEREAS THE ASSESSMENT WAS COMPLETED ON TOTAL INCOME OF RS.5,96,323/ - AND TAX PAYABLE THEREON WORKS OUT TO RS.1,41,164/ - EXCLUDING INTEREST CHARGEABLE U/S 234A, 234B AND 234C OF THE ACT. THE ASSESSEE PURCHASE D AGRICULTURAL LAND DURING THE FINANCIAL YEAR 2004 - 05 AND PAYMENTS TOWARD S SUCH PURCHASES WERE MADE IN CASH. SUBSEQUENTLY, THE LANDS WERE CONVERTED INTO NON AGRICULTURAL LANDS BY MAKING LAY OUTS AND BY TREATING IT AS STOCK IN TRADE. THE CASE OF THE ASSES SEE WAS THAT AT THE TIME OF PURCHASE OF LAND IT WAS NOT FOR THE PURPOSE OF CARRYING ON REAL ESTATE BUSINESS AND HENCE, THE PROVISIONS OF SECTION 40A(3) WOULD NOT BE APPLICABLE ; AT ANY RATE, IT WAS NOT INCURRED DURING THE RELEVANT FINANCIAL YEAR. THE ASSES SING OFFICER(AO) REJECTED THE CONTENTION OF THE ASSESSEE, WHEREAS THE LD.CIT(A) VERIFIED THE DETAILS AND ACCEPTED THE CLAIM BY OBSERVING AS UNDER : 5. I HAVE CONSIDERED THE SUBMISSIONS AND PERUSED THE DETAILS FILED. IT IS NOT IN DISPUTE THAT THE IMPUGNED LAND WAS PURCHASED BY THE ASSESSEE IN THE YEAR 2004 - 05 BY PAYMENT OF CASH; AND THE EXPENDITURE WAS DEBITED IN PROFIT AND LOSS ACCOUNT DURING TH E SUBJECT FINANCIAL YEAR 2005 - 06. IT IS ALSO NOT IN DISPUTE THAT THE PAYMENT FOR THE LAND WAS MADE DURING THE F INANCIAL YEAR 2004 - 05. THOUGH THE CLAIM FOR EXPENDITURE BY DEBITING THE PROFIT AND LOSS ACCOUNT WAS MADE IN THE FINANCIAL YEAR 2005 - 06, THE CASH PAYMENT WAS NOT MADE DURING THE YEAR. THEREFORE, THE PROVISIONS OF SECTION 40A(3) WOULD NOT BE APPLICABLE FOR THE SUBJECT YEAR. ACCORDINGLY, THE AO IS DIRECTED TO DELETE THE IMPUGNED ADDITION. 3. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THIS TRIBUNAL. AS COULD BE NOTICED FROM THE MANDATORY AUTHORI S ATION/DIRECTION GIVEN BY THE 3 ITA NO . 431 /VIZ/201 7 MOVVA LAKSHMI, VISAKHAPATNAM COMMISSIONER U/S 253 OF THE ACT , THERE IS NO CLARITY AS TO WHAT ARE THE GROUNDS WHICH WERE APPROVED BY THE COMMISSIONER; IT MERELY SAYS, THAT THE AO IS DIRECTED TO FILE AN APPEAL AGAINST THE ORDER OF THE CIT(A) - 1, VISAKHAPATNAM. IN THE GROUNDS OF APPEAL ANNEXED TO FORM 36, THE ITO CHAL LENGES THE ORDER OF THE CIT(A) ON MERITS AND ALSO RAISES A PLEA THAT THOUGH THE TAX EFFECT IS BELOW THE MONETARY LIMIT PRESCRIBED BY THE CBDT FOR FILING APPEAL BEFORE ITAT, THE CASE IS COVERED BY EXCEPTION IN PARA 8( C ) OF INSTRUCTION NO.21/2015 DATED 10.12.2015. TAXMAN N S INCOME TAX RULES , 2016 , FROM PAGES 3.32 TO 3.37 , REFERS TO THE METHODOLOGY TO BE FOLLOWED BY COMMISSIONER WHILE AUTHORI S ING THE AO TO FILE AN APPEAL. COMMISSIONERS HAVE TO ENSURE THAT APPEALS TO ITAT ARE FILED ONLY WHEN THERE IS PR OPER JUSTIFICATION ; AN APPEAL NEED NOT BE FILED ON THE GROUND THAT THERE IS REVENUE AUDIT OBJECTION, UNLESS THE FINDINGS OF CIT(A) ARE PERVERSE IN THE OPINION OF PR.CIT AND SUCH REASONS ARE TO BE RECORDED. IT WAS ALSO RECOMMENDED THAT WHILE GIVING THE COMM ENTS, THE CITS SHOULD ENSURE MENTIONING THE DETAILED GROUNDS OF APPEAL TO THE AO SO AS TO ENABLE HIM TO FILE APPEAL ONLY ON SUCH GROUNDS. ITEMS 7 AND 8 OF THE INSTRUCTIONS , REGARDING STANDARD OPERATING PROCEDURE F OR FILING APPEAL , ARE RELEVANT IN THIS CON NECTION WHICH ARE REPRODUCED HEREUNDER : 7. DECISION BY THE CIT ON THE SCRUTINY REPORT 4 ITA NO . 431 /VIZ/201 7 MOVVA LAKSHMI, VISAKHAPATNAM A. ISSUE WISE DECISION OF THE CIT, AS TO WHETHER APPEAL IS TO BE FILED OR NOT, MAY BE RECORDED WITH REASONS, KEEPING IN VIEW THE LINE OF ARGUMENT THE DR IS EXPECTED T O TAKE BEFORE ITAT AT THE TIME OF HEARING : ISSUE NO.1 ISSUE NO.2.. AND SO ON AGGREGATE TAX EFFECT ON ISSUES PROPOSED TO BE CONTESTED IN THE ITAT B. GROUNDS OF APPEAL TO BE RAISED BEFORE THE ITAT MAY BE FRAMED IN RESPECT OF THE ISSUES NOT ACCEPTED BY THE CIT. C. IN CASE OF A COMBINED ORDER OR ORDER IN A GROUP CASE, INVOLVING MORE THAN ONE ASSESSEE FALLING UNDER JURISDICTION OF DIFFERENT CSIT, THE CIT SHALL COMMUNICATE THE STAND TAKEN ON COMMON ISSUES TO THE CIT HAVING JURISDICTION OVER OTH ER CASE(S). 8. CATEGORIZATION OF FINAL DECISION BY CIT A. THE APPEAL IS NOT TO BE FILED I. AS THE ORDER IS ACCEPTABLE ON MERITS, OR II. EVEN THOUGH THE ORDER IS NOT ACCEPTABLE, APPEAL IS NOT BEING FILED ONLY ON THE CONSIDERATION THAT THE TAX EFFECT I S LESS THAN THE LIMIT PRESCRIBED IN THE CBDTS INSTRUCTION ON MONETARY LIMITS. B. APPEAL IS TO BE FILED ON THE GROUNDS OF APPEAL FRAMED ABOVE I. AS THE ORDER IS NOT ACCEPTABLE ON MERITS, OR 5 ITA NO . 431 /VIZ/201 7 MOVVA LAKSHMI, VISAKHAPATNAM II. THOUGH TAX EFFECT IS BELOW THE PRESCRIBED LIMIT, THE CASE FALLS UNDER THE EXCEPTIONS (TO BE SPECIFIED) OF THE INSTRUCTION OF CBDT ON MONETARY LIMITS. III. AUTHORISATION UNDER SECTION 253(2) OF THE I.T.ACT IS ISSUED SEPARATELY. APPEAL TO BE FILED ACCORDINGLY. 3.1. ON CAREFUL PERUSAL OF THE SAME IT INDICATE S THAT THE CI T S HAVE TO RECORD THEIR DECISION ISSUE - WISE AND ALSO NOTICE TAX EFFECT AND FORWARD RELEVANT AUTHORI S ATION LETTER AND GROUNDS OF APPEAL TO THE CONCERNED. 3.2. SINCE THE GROUNDS HAVE TO BE SPECIFIED BY THE COMMISSIONER , IF THE TAX EFFECT IS LOW, REASONS AS TO WHY AN APPEAL IS TO BE PREFERRED EVEN ON MATTERS CONCERNING APPRECIATION OF FACTS , SUCH AS THE PRESENT MATTER , NEEDS TO BE RECORDED . THE AO RELIED UPON CBDT INSTRUCTION 21/2015 DATED 10.12.2015, WHEREAS IN THE SUBSEQUENT CIRCULARS I.E. CIRCULAR NO.5 /2017 DATED 23.01.2017, THE BOARD CLARIFIED THAT FILING OF APPEALS IN CASES WHERE THERE IS REVENUE AUDIT OBJECTION SHOULD NOT BE A MATTER OF ROUTINE. 4. NO EVIDENCE WHATSOEVER IS PLACED EVEN BEFORE US TO PROVE THAT THE FACTS DETERMINED BY LD.CIT(A) ARE PE RVERSE. HAVING REGARD TO CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE AO IS BOUND BY THE CIRCULAR ISSUED BY CBDT AND HE COULD NOT HAVE PREFERRED APPEAL IN A CASE 6 ITA NO . 431 /VIZ/201 7 MOVVA LAKSHMI, VISAKHAPATNAM WHETHER THE TAX EFFECT IS LESS THA N TH E SPECIFIED LIMIT AND THAT TOO IN THE ROUTINE MANNER. IT IS ALSO DOUBTFUL AS TO WHETHER THE COMMISSIONER CONCERNED HAS DIRECTED THE AO TO RAISE THIS GROUND. IT DOES NOT EMANATE FROM THE AUTHORI S ATION ISSUED BY THE COMMISSIONER. 5. EVEN ON MERITS WE DO NOT FIND ANY INFIRMITY IN THE FINDING OF CIT(A ) THAT THE DISALLOWANCE IS NOT PERMISSIBLE IN THIS YEAR. 6 . IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED AS UNADMITTED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 6 TH DEC 20 17 . SD / - SD/ - ( . . ) ( . ) ( D.S. SUNDER SINGH ) ( D. MANMOHAN ) / ACCOUNTANT MEMBER / VICE PRESIDENT /VISAKHAPATNAM /DATED : 06 .12.2017 L. RAMA, SPS 7 ITA NO . 431 /VIZ/201 7 MOVVA LAKSHMI, VISAKHAPATNAM / COPY OF THE ORDER FORWARDED TO: - 1. / THE APPELLANT - INCOME TAX OFFICER, WARD - 3(2), VISAKHAPATNAM 2. / THE RESPONDENT MOVVA LAKSHMI, D.NO.49 - 53 - 13/4,PAYALA ENCLAVE B.S.LAYOUT, VISAKHAPATNAM 3 . THE PR.COMMISSIONER OF INCOME TAX - 1, VISAKHAPATNAM 4 . , , / DR, ITAT, VISAKHAPATNAM 5 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM