NCC Ltd., Hyd, Hyderabad V. ACIT, Central Circle-1, Hyd, Hyderabad

ITA 465/HYD/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6065 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 24-11-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 24-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: U MINICHANDRAN
• Assessee Lawyers: S RAMA RAO
• Keywords: Reopening of assessment; Business income; Depreciation; Tangible material; Difference of opinion; Assessment record; Reason to believe; Change of opinion; Revenue expenditure
• Section: 143(3); 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 465/HYD/2015 ASSESSMENT YEAR: 2004-05 NCC LTD., HYDERABAD PAN AAACN7335C VS. ASST. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE 1, HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S. RAMA RAO REVENUE BY : SMT. U. MINICHANDRAN DATE OF HEARING : 23-02-2017 DATE OF PRONOUNCEMENT : 10-03-2017 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS IS AN APPEAL OF THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX(A) - XI, HYD ERABAD, DATED 30/01/2015 FOR AY 2004-05. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT A SSESSEE IS A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED AND I S ENGAGED IN THE CONSTRUCTION OF INFRASTRUCTURE PROJECTS. THE ACTIVI TIES CARRIED ON BY THE ASSESSEE INCLUDE DEVELOPMENT OF PROJECTS ON ITS OWN . THE ASSESSEE ALSO IS ASSOCIATED WITH VARIOUS ORGANISATIONS FOR T HE DEVELOPMENT OF PROJECTS AND FOR THIS PURPOSE IT ENTERED INTO JOINT VENTURE AGREEMENTS. THE ASSESSEE FILED ITS RETURN OF INCOME ON 31/10/20 04 AND THE ASSESSMENT WAS COMPLETED U/S 143(3) ON 26/12/2006 B Y DISALLOWING THE CLAIM OF RS. 5,58,75,854/- U/S 80IA. THE INCOME WAS ASSESSED AT RS. 18,05,42,415/-. WHEN THE ASSESSEE CARRIED THE M ATTER IN APPEAL BEFORE THE CIT(A), THE CIT(A) HAS CONFIRMED THE OR DER OF AO. 2 ITA NO. 465/H/15 NCC LTD., HYDERABAD. 3. THEREAFTER, THE AO ISSUED NOTICE U/S 148 ON 21/0 2/2011 ON THE GROUND THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. THE REASONS FOR ISSUING THE SAID NOTICE ARE AS UNDE R: (I) THE ASSESSEE HAD CLAIMED AN AMOUNT OF RS. 2,7 4,59,431/- AS DEDUCTION U/S 10(2A) BEING SHARE OF PROFIT RECEI VED BY THE ASSESSEE AS PARTNER IN FIRMS WHICH WERE SEPARATELY ASSESSED AS SUCH. BUT IT WAS SEEN THAT THIS DEDUCTION WAS CLAIM ED WITHOUT FIRST OFFERING THE SHARE OF PROFIT EITHER IN THE PR OFIT & LOSS ACCOUNT OR IN THE COMPUTATION OF TOTAL INCOME. HENC E, THIS AMOUNT OF RS. 2,74,59,431/- WAS REQUIRED TO BE DISA LLOWED AND BROUGHT TO TAX. (II) THE ASSESSEE HAD DEBITED RS. 9,08,10,000/- TO THE P & L A/C BUT HAD ADDED BACK ONLY RS. 7,79,62,059/- IN THE ST ATEMENT OF COMPUTATION. THUS THERE WAS SHORT COMPUTATION OF IN COME TO THE EXTENT OF RS. 1,28,47,941/-. (III) THE ASSESSEE COMPANY HAS CLAIMED AND WAS ALLO WED A REDUCTION OF RS. 17,12,60,539 SAID TO BE PROFITS FR OM JVS ALREADY TAXED AND INCLUDED IN THE CONSOLIDATED ACCOUNTS. HO WEVER THERE IS A LOSS OF RS. 5,14,71,000 FROM ONE OF THE JV NAM ELY M/S UNITECH-NCC-JV WHICH OUGHT TO HAVE BEEN REDUCED FRO M THE TOTAL PROFIT OF RS. 17,12,60,000. INSTEAD THE ASSESSEE HA S ALLOWED THE LOSS TO BE ADJUSTED AGAINST THE STAND ALONE PROFIT OF THE COMPANY. THIS RESULTED IN ESCAPEMENT OF INCOME TO THE TUNE O F RS. 5,14,71,000. 4. IN RESPONSE TO THE SAID NOTICE, THE AR OF THE AS SESSEE STATED THAT THERE WAS NO MISTAKE IN THE COMPUTATION OR THE ORDER PASSED U/S 143(3) CONSIDERING ALL MATERIAL FACTS AVAILABLE ON RECORD. NO NEW FACTS HAVE EMERGED TO CREATE BELIEF THAT INCOME HAS ESCAP ED ASSESSMENT. IT IS A MERELY CHANGE OF OPINION. FURTHER, IT WAS S UBMITTED THAT THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO TRULY AND FULLY DISCLOSE ALL THE MATERIAL FACTS. 5. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE AO COMPUTED THE TOTAL INCOME AT RS. 27,51,20,787/- BY MAKING VARIOUS 3 ITA NO. 465/H/15 NCC LTD., HYDERABAD. ADDITIONS INCLUDING THE ADDITION OF RS. 2,74,59,431 /- ON ACCOUNT OF EXCESS DEDUCTION OF PROFIT OF JV ALLOWED. 6. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE P REFERRED AN APPEAL BEFORE THE CIT(A). 7. WITH REGARD TO INITIATION OF PROCEEDINGS U/S 147 , THE ASSESSEE SUBMITTED THAT ITS EXPLANATION GIVEN IN AY 2003-04 MAY BE TREATED AS EXPLANATION FOR THE ASSESSMENT YEAR UNDER CONSIDERA TION. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CI T(A) UPHELD THE ACTION OF THE AO IN REOPENING THE ASSESSMENT U/S 14 7 OF THE ACT AND THE ADDITIONS MADE IN SUCH ASSESSMENT, THE CIT(A) S USTAINED THE ADDITION OF RS. 2,74,59,431/- BEING THE INCOME PERT AINING TO THE JV AND DELETED THE ADDITION OF RS. 1,28,47,941/- ON AC COUNT OF DEPRECIATION RELATING TO JV. THE OTHER ADDITION OF RS. 5,14,71,000/- ON ACCOUNT OF LOSS OF JV WAS SUSTAINED BY THE CIT(A). 8. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1) THE ORDER OF THE LEARNED CIT (A) IS ERRONEOUS TO THE EXTENT IT IS PREJUDICIAL TO THE APPELLANT HEREIN. 2) THE LEARNED CIT (A) ERRED IN HOLDING THAT THE RE OPENING OF THE ASSESSMENT U/S 147 IS VALID THE LEARNED CIT (A) OUG HT TO HAVE SEEN THAT ALL THE INFORMATION NECESSARY WAS FILED A LONG WITH THE RETURN OF INCOME AND THE REGULAR ASSESSMENT WAS COM PLETED U/S 143(3) OF THE I.T. ACT AND THERE WAS NO INFORMATION AFTER COMPLETION OF THE ASSESSMENT PROCEEDINGS THAT THERE IS ANY ESCAPEMENT OF INCOME. 3) THE LEARNED CIT (A) ERRED IN CONFIRMING THE ADDI TION OF RS.2, 74,59,431/- BEING THE INCOME PERTAINING TO THE JOIN T VENTURES. 4) ANY OTHER GROUND OR GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING. 4 ITA NO. 465/H/15 NCC LTD., HYDERABAD. 9. AS REGARDS THE REOPENING OF ASSESSMENT U/S 147 O F THE ACT, THE AR OF THE ASSESSEE SUBMITTED THAT SIMILAR ISSUE CAM E UP FOR CONSIDERATION BEFORE THE COORDINATE BENCH OF THIS T RIBUNAL IN ASSESSEES OWN CASE FOR AY 2003-04 IN ITA NO. 689/H YD/2014 VIDE ORDER DATED 16/09/2016 WHEREIN THE COORDINATE BENCH SET ASIDE THE ORDERS OF CIT(A) AND AO BY HOLDING THAT THE VERY BA SIS OF INITIATION OF PROCEEDINGS ARE BAD IN LAW. HE, THEREFORE, PLEADED THAT THE ISSUE IN THE CURRENT AY IS SIMILAR TO THAT OF AY 2003-04, TH E ORDERS OF REVENUE AUTHORITIES MAY BE SET ASIDE. A COPY OF THE SAID OR DER IS AVAILABLE ON RECORD. 10. THE LD. DR, ON THE OTHER HAND RELIED ON THE ORD ERS OF REVENUE AUTHORITIES. 11. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD. AS SUBMITTED BY THE AR OF THE ASSESSEE, IN AY 2003-04 UNDER SIMILAR FACTS AND CIRCUMSTANCES, THE COORDINA TE BENCH HAS SET ASIDE THE ORDERS OF THE REVENUE AUTHORITIES BY OBSE RVING AS UNDER: 11. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS AND DOCUMENTS PLACED ON RECORD. THERE IS NO DOUBT THAT AO HAS COME TO THE CONCLUSION THAT INCOME HAS ESCAPED ASSESSMENT ONLY ON THE BASIS OF THE STATEMENTS AND DOCUMENTS FURNISHED BEFORE HIM IN THE COURSE OF ASSESSMENT PROCEEDINGS. AS SEEN FROM THE DOCUMENTS ON RECORD, IT IS ALSO VERY CLEAR THAT ASSESSEE HAS RECONCILED VARIOUS RECEIPTS FROM THE JVS AND EXCLUDED THEM IN COMPUTATION OF INCOME FILE D. THIS WAS ALSO ACCEPTED BY THE LD.CIT(A) IN HIS ORDE R DT. 24-05-2010, WHEREIN HE HAS HELD AS UNDER: 04.0 I HAVE GONE THROUGH THE FACT OF THE CASE AND THE SUBMISSION MADE BY THE APPELLANT. I HAVE ALSO GONE THROUGH THE ASSESSMENT RECORD. I FIND FROM THE COM PUTATION OF TOTAL INCOME FILED BY THE APPELLANT THAT THE APP ELLANT HAD TAKEN THE PROFIT BEFORE TAX AS PER P&L A/C AT RS.21,82,33,289/- FROM WHICH PROFIT EXEMPT U/S.10(2 A) BEING THE SHARE INCOME OF THE FIRMS (JVS) OF RS. 4,36,86,816/- HAS BEEN REDUCED TO ARRIVE AT THE ST AND ALONE PROFIT BEFORE TAX OF THE COMPANY AT RS.17,45, 46,473/- 5 ITA NO. 465/H/15 NCC LTD., HYDERABAD. . TO THIS, ADJUSTMENTS BY WAY OF ADDITION OF DEPREC IATION DEBITED TO P&L A/C, DEFERRED REVENUE EXPENDITURE, S HARE ISSUE EXPENSES, ASSETS DISCARDED AND DISALLOWANCES U/S.44AB HAVE BEEN MADE. THEREAFTER DEPRECIATION AS ADMISSIBLE U/S.32 OF THE I.T. ACT, DEFERRED REVENUE EXPENDITURE ALLOWABLE, RIGHTS ISSUE EXPENDITURE U/S .35D, BONUS DISALLOWED IN EARLIER YEARS AND, PAID DURING THE YEAR, BAD DEBT AND IRRECOVERABLE ADVANCE WRITTEN OF F, PRIOR PERIOD ADJUSTMENTS, PROFIT ON SALE OF ASSETS AND PR OFIT ON SALE OF INVESTMENTS HAVE BEEN REDUCED TO ARRIVE AT THE BUSINESS INCOME OF RS.14,78,79,793/-. TO THIS, THE INCOME UNDER THE HEAD CAPITAL GAINS OF RS.7,60,797/- HAS B EEN ADDED TO ARRIVE AT THE GROSS TOTAL INCOME OF RS.14,86,40,590/-. IN FACT, THIS IS THE INCOME WHIC H WAS ADOPTED AS TOTAL INCOME IN THE ASSESSMENT ORDER U/S .143(3) DATED 27-3-2006. WHILE CONSIDERING THE FIGURE OF RS.21,82,33,289/- IN THE STATEMENT OF COMPUTATION O F TOTAL INCOME, THE APPELLANT HAS REDUCED THE TAX PAID BY T HE JVS OF RS.138. 77 LAKHS FROM THIS CONSOLIDATED PROFIT B EFORE TAX OF THE APPELLANT COMPANY AND NINE JOINT VENTURES TO TALLING TO RS.2325.90 LAKHS. THIS MEANS THAT THE PROFIT BEF ORE TAX OF RS.21,82,33,289/- AS PER P&L A/C AS MENTIONED IN THE COMPUTATION OF INCOME IS INCLUSIVE OF THE PROFIT AF TER TAX OF THE JVS. THEREFORE, IN MY VIEW, REDUCTION OF THE SH ARE INCOME FROM THE JVS WHILE CALCULATING THE STAND ALO NE PROFIT OF THE COMPANY IS NOT WRONG IN PRINCIPLE. BY FOLLOWING THIS ROUND ABOUT AWAY, THE APPELLANT HAS ARRIVED AT THE STAND ALONE NET PROFIT BEFORE ADJUSTMENTS AS DISCUS SED ABOVE, AT RS.17 ,45,46,473/-. THE AO WHILE REOPENIN G THE ASSESSMENT, HAS COMPARED THE PROFIT BEFORE TAX IN P &L A/C AS PER THE COMPUTATION STATEMENT (RS.21,82,33,289) AND AS PER THE ANNUAL REPORT ( RS.23,25,90,000) OBSERVING THAT THE FIGURE ADOPTED IN THE COMPUTATION OF INCOME WAS NET OF THOSE RELATING TO THE JOINT VENTURES. HOWEVER, THE STATEMENT OF INCOME OF THE APPELLANT COMPANY AND THE JOINT VE NTURES AS FILED BEFORE THE AD CLEARLY SHOWS THAT THE PROFI T BEFORE TAX AS PER THE COMPUTATION STATEMENT IN FACT INCLUD ES THE PROFIT AFTER THE TAX OF THE JVS ALSO. TO THAT EXTEN T, I AM NOT IN AGREEMENT WITH THE OBSERVATION OF THE AO THAT TH E FIGURE ADOPTED IN THE COMPUTATION OF INCOME DOES NOT INCLU DE SHARE OF INCOME OF THE JV. 11.1. AS CAN BE SEEN FROM THE ABOVE ORDER OF THE LD.CIT(A), WHICH WAS SUBJECT MATTER OF EARLIER ROUN D OF APPEAL, IT IS VERY CLEAR THAT THE ENTIRE PROCEEDING S WERE INITIATED ONLY ON THE BASIS OF ASSESSEES BOOKS OF ACCOUNT AND STATEMENTS FILED BEFORE THE AO AND NO F RESH 6 ITA NO. 465/H/15 NCC LTD., HYDERABAD. TANGIBLE MATERIAL HAS COME INTO CONSIDERATION BEFOR E THE AO FOR REOPENING THE ASSESSMENT U/S 147. THE PROVISIONS OF SECTION 147 ARE AS UNDER: SEC.147. IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THA T ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY AS SESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153 , ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH H AS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURS E OF THE PROCEEDINGS UNDER THIS SECTION, OR RECOMPUTE THE LOSS OR THE DEPRECIA TION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT Y EAR CONCERNED (HEREAFTER IN THIS SECTION AND IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR) : PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTIO N 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSE SSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOU R YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEA BLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF TH E FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FO R THAT ASSESSMENT YEAR: PROVIDED FURTHER THAT NOTHING CONTAINED IN THE FIRST PROVISO SHALL APPLY IN A CASE WHERE ANY INCOME IN RELATION TO ANY ASSET (I NCLUDING FINANCIAL INTEREST IN ANY ENTITY) LOCATED OUTSIDE INDIA, CHARGEABLE TO TA X, HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR: PROVIDED ALSO THAT THE ASSESSING OFFICER MAY ASSESS OR REASSESS SUCH INCOME, OTHER THAN THE INCOME INVOLVING MATTERS WHI CH ARE THE SUBJECT MATTERS OF ANY APPEAL, REFERENCE OR REVISION, WHICH IS CHAR GEABLE TO TAX AND HAS ESCAPED ASSESSMENT. ( EMPHASIS SUPPLIED) 11.2. IT IS VERY CLEAR FROM THE ABOVE PROVISION TH AT AO CANNOT REOPEN THE ASSESSMENT IN A CASE WHERE SCRUTINY ASSESSMENT U/S. 143(3) WAS COMPLETED AFTER THE END OF FOUR YEARS FROM THE RELEVANT ASSESSMENT YEAR UNLESS THERE IS FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS NEC ESSARY FOR HIS ASSESSMENT. IN THIS CASE, THERE IS NO SUCH FAILURE ON THE PART OF ASSESSEE. IT IS ONLY APPRECIATION O F THE FACTS WRONGLY BY THE AO WHICH HAS LEAD TO HIS BELIE F THAT INCOME HAS ESCAPED ASSESSMENT. FOLLOWING THE PRINCIPLES LAID DOWN BY VARIOUS CASE LAW RELIED ON 7 ITA NO. 465/H/15 NCC LTD., HYDERABAD. ABOVE, INCLUDING THE DECISION OF HONBLE SUPREME CO URT IN THE CASE OF KELVINATOR INDIA LTD., (SUPRA), WE AGREE WITH ASSESSEES CONTENTIONS THAT RE-OPENING OF ASSESSMENT IS BAD IN LAW ON THE FACTS OF THE CASE. AS THE ISSUE UNDER CONSIDERATION IS MATERIALLY IDEN TICAL TO THAT OF AY 2003-04 AND IN THE CURRENT AY ALSO, THE AO HAS MADE THE ADDITION BASED ON THE INFORMATION ALREADY AVAILABLE ON THE R ECORD TO COMPLETE THE ASSESSMENT U/S 143(3). THERE IS NO NEW INFORMAT ION OR DATA FOUND BY THE AO, BUT, MERELY BASED ON THE CHANGE OF OPINI ON, COMPLETED THE ASSESSMENT. ALL THE INFORMATION WHICH WERE REQUIRED TO COMPLETE THE REASSESSMENT WAS ALREADY AVAILABLE WITH THE AO, WHI CH SHOWS THAT THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR THE ASSE SSMENT. THEREFORE, RESPECTFULLY FOLLOWING THE CONCLUSIONS DRAWN THEREI N BY THE COORDINATE BENCH, WE SET ASIDE THE ORDER OF CIT(A) AND THE ORD ER OF AO AND ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. PRONOUNCED IN THE OPEN COURT ON 10 TH -MARCH, 2017. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHM AN) JUDICIAL MEMBER ACC OUNTANT MEMBER HYDERABAD, DATED: 10 TH MARCH, 2017. KV COPY TO:- 1) NCC LTD., C/O SRI S. RAMA RAO, ADVOCATE FLAT NO. 102, SHRIYAS ELEGANCE, 3-6-643, STREET NO. 9, HIMAYAT NAGAR, HYDERABAD 500 029 2) ACIT, CENTRAL CIRCLE 1(1), HYD. 3) CIT(A) - XI, HYDERABAD 4 PR. CIT (CENTRAL), HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE 8 ITA NO. 465/H/15 NCC LTD., HYDERABAD. S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER