ACUITY HOLDINGS P.LTD, MUMBAI V. ITO 3(2)(2), MUMBAI

ITA 4979/MUM/2015

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5715 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 05-10-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SAMATHA MULLAMUDI
• Keywords: Depreciation; Unabsorbed depreciation; Set aside
• Section: 14A; 115JB; 205; 13; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A , MUMBAI BEFORE S HRI G. MANJUNATHA (AM ) AND SHRI RAM LAL NEGI (JM) ITA NO. 4979/MUM/2015 ASSESSMENT Y EAR: 2010 - 11 M/S ACUITY HOLDINGS PRIVATE LIMITED, C - 1 - 5, SARATHI CHS LTD., KHIRA NAGAR, S.V. ROAD , SANTACRUZ - (W), MUMBAI - 400016 PAN: AAFCM3366D VS. THE INCOME TAX OFFICER 3(2)(2), MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI PRAKASH JOTWANI ( A R ) REVENUE BY : SHRI SAMATHA MULLAMUDI (D R ) DATE OF HEAR ING: 1 5/ 11 /201 9 DATE OF PRONOUNCEMENT: 07 / 02 /20 20 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 31.07.2015 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 16 (FOR SHORT THE CIT(A) , MUMBAI, FOR THE ASSESSMENT YEAR 2010 - 11 , WHEREBY THE LD. CIT(A) HAS DISMISSED T HE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER PASSED BY THE AO U/S 154 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY ENGAGED IN THE ACTIVITY OF TRADING IN DERIVATIVES HAVING INCOME FROM SHORT TERM CAPITAL GAIN, DIVIDEND AND INTEREST FROM INVESTMENTS FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING THE TOTAL I NCOME AT RS. 15,707/ - . THE CASE WAS SELECTED FOR SCRUTINY AND THE AO PASSED THE ASSESSMENT ORDER U/S 143 (3) OF THE ACT DETERMINING THE TOTAL INCOME AT RS. 12,15,373/ - UNDER THE NORMAL PROVISION OF THE ACT AND RS. ( - )89,12,662/ - U/S 115JB OF THE ACT AFTER MAKING DISALLOWANCE OF EXPENSES TOWARDS CUSTODY 2 I TA NO. 4979 / MUM/2015 ASSESSMENT YEAR: 2010 - 11 CHARGES DELAY PAYMENT CHARGES AND OUT OF POCKET EXPENSES AMOUNTING TO RS. 95,765/ - CLAIMED BY THE ASSESSEE AND FURTHER MAKING DISALLOWANCE U/S 14A R.W.R. 8D OF THE INCOME TAX RULES. 3. SUBSEQUENTLY, ON THE B ASIS OF THE AUDIT REPORT POINTING OUT THAT LIABILITY U/S 115JB HAS BEEN INCORRECTLY WORKED OUT IN THE ASSESSMENT ORDER , AO ISSUED NOTICE U/S 154 OF THE ACT TO THE ASSESSEE ON 11.11.2013 FOR RECTIFICATION OF THE ASSESSMENT ORDER . IN RESPONSE THEREOF , THE AS SESSEES REPRESENTATIVE OPPOSED THE RECTIFICATION U/S 154 OF THE ACT. HOWEVER, THE AO REJECTING THE CONTENTION OF THE ASSESSEE PASSED THE ORDER U/S 154 OF THE ACT AND DETERMINED THE TOTAL INCOME U/S 115JB TO RS. 68,17,840/ - . THE ASSESSEE CHALLENGED THE ACT ION OF THE AO BEFORE THE LD. CIT (A). T HE LD. CIT (A) DISMISSED THE APPEAL OF THE ASSESSEE AND CONFIRMED THE ORDER PASSED BY THE AO. AGAINST THE SAID FINDINGS OF THE LD. CIT (A) THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4 . T HE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) ON THE FOLLOWING EFFECTIVE GROUNDS : - 1. THE LEARNED CIT (A) ERRED IN CONFIRMING THE ADDITION MADE BY THE AO IN ORDER U/S 154 OF THE INCOME TAX ACT, ALTHOUGH THERE WAS NO MISTAKE APPARENT FROM RECORD IN THE ASSESS MENT ORDER U/S 143 (3) DATED 04.01.2013. 2. THE LEARNED CIT (A) FAILED TO TAKE INTO CONSIDERATION THAT THE ISSUE IS DEBATABLE AND NO ADDITION CAN BE MADE BY PASSING AN ORDER U/S 154. 3. WITHOUT PREJUDICE, THE LEARNED CIT (A) ERRED IN COMPUTING THE ADJUSTED BOOK PROFIT U/S 115JB AT RS. 6,68,17,840/ - AS AGAINST RS. (1,00,64,922), AS PER THE RETURN OF INCOME, THEREBY NOT ALLOWING DEDUCTION OF RS. 7,92,35,053/ - CLAIMED AND ALLOWED, BEING UNABSORBED LOSS BROUGHT FORWARD AND THUS ERRONEOUSLY RAISING LIABILITY TO PAY TA X. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SINCE THE AO HAD DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS. 12,15,373/ - UNDER THE NORMAL PROVISIONS OF THE ACT AT RS. AND RS.( - ) 89,12,662/ - UNDER THE PROVISION OF MAT U/S 115JB AND PASSED THE ASSESSMENT ORDER U/S 143 (3 ) OF THE ACT , THE 3 I TA NO. 4979 / MUM/2015 ASSESSMENT YEAR: 2010 - 11 LD. CIT (A) OUGHT TO HAVE SET ASIDE THE ORDER PASSED BY THE AO U/S 154 OF THE ACT. THE LD. COUNSEL FURTHER POINTED OUT THAT T HE ASSESSEE HAD FURNISHED ALL RELEVANT DETAILS REQUIRED FOR COMPUTATION OF MINIMUM ALTERNATIVE TAX IN ORDER TO SUBSTANTIATE BOOK LOSS OF RS. 1,00,64,992/ - THE LD. COUNSEL FURTHER POINTED OUT THAT THE AO IN ITS NOTICE DATED 11.11.2013 HAD NOT INDICATED UNABSORBED LOSS OF EARLIER YEAR ALLOW ED BY THE PREDECESSOR IS A MISTAKE APPARE NT ON RECORD. THE AO HA D ALSO NOT INDICATED THAT WHETHER LOSS CLAIMED BY THE ASSESSEE WAS GENUINE OR NOT. THE LD. COUNSEL WITHOUT PREJUDICE SUBMITTED THAT THE LD. CIT (A) H A S ERRED IN COMPUTING THE ADJUSTED BOOK PROFIT U/S 115JB AT RS. 6,68,17,840/ - AS AGA INST RS. 1,00,64,922/ - AS PER THE RETURN OF INCOME THEREBY NOT ALLOWING DEDUCTION OF RS. 7,92,35,053/ - CLAIMED AND ALLOWED BEING UNABSORBED LOSS BROUGHT FORWARD AND THUS ERRONEOUSLY RAISING LIABILITY TO PAY TAX. THE LD. COUNSEL RELIED ON THE DECISION OF TH E ITAT, KOLKATA IN THE CASE OF DCIT VS. BINANI INDUSTRIES LTD., ITA NO. 144/KOL/2013, A.Y. 2009 - 10 , DECISION OF THE SMC BENCH OF CHANDIGARH TRIBUNAL IN THE CASE OF M/S CITY CLINIC PVT. LTD. VS. ACIT, ITA NO. 112/CHD/2017 TO SUBSTANTIATE ITS CLAIM. 6. ON T HE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTING THE ORDER PASSED BY THE LD. CIT (A) SUBMITTED THAT SINCE AS PER SECTION 115JB (2) (K) (III) THE AMOUNT OF LOSS FORWARD OR UNABSORBED DEPRECIATION WHICHEVER IS LESS AS PER THE BOOKS OF ACCOU NT IS TO BE TAKEN FOR THE COMPUTATION U/S 115JB, THE LD. CIT (A) HAS RIGHTLY UPHELD THE FINDINGS OF THE AO. THE LD. DR FURTHER SUBMITTED THAT SINCE THERE IS NO MERIT IN THE APPEAL OF THE ASSESSEE, THE SAME IS LIABLE TO BE SET ASIDE. 7. WE HAVE HEARD THE R IVAL SUBMISSIONS AND ALSO PERUSED THE MATERIAL ON RECORD IN THE LIGHT OF THE RIVAL CONTENTION OF THE PARTIES AND ALSO GONE THROUGH THE CASES RELIED UPON BY THE ASSESSEE AND THE REVENUE AUTHORITIES. THE LD. CIT (A) HAS UPHELD THE ORDER PASSED BY THE AO U/S 154 OF THE ACT BY FOLLOWING THE JUDGMENT OF THE HONBLE HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF WOOLLEN TEXTILES MILLS P. LTD. VS. CIT 111 ITR 205 AND THE JUDGMENT OF THE HONBLE HIGH COURT OF RAJASTHAN AND JAIPUR IN THE CASE OF CIT VS. BAGPATIA 4 I TA NO. 4979 / MUM/2015 ASSESSMENT YEAR: 2010 - 11 FOOD INDUSTRIES 175 CTR 173 (2002) . THE FINDINGS OF THE LD. CIT (A) ARE AS UNDER: - 4.3 IN SECTION 115JB (2)(K)(III) IT IS CLEARLY MENTIONED THAT THE AMOUNT OF LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION WHICHEVER IS LESS AS PER BOOKS OF ACCOUN T IS TO BE TAKEN FOR COMPUTATION U/S 115JB. THE HONBLE HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF INDIA WOOLLEN TEXTILE MILLS (P) LTD. VS. C.I.T. 111 ITR 205 (1978) HAS HELD THAT WHERE A STATUTORY PROVISION IS COMPLETELY LOST SIGHT OF THE MATTER CAN B E TREATED AN ERROR APPARENT ON RECORD FOR PURPOSE OF RECTIFICATION. IN THE CONCLUDING PARAGRAPH, THE HONBLE HIGH COURT GAVE ITS FINDINGS WHICH ARE REPRODUCED FOR READY REFERENCE AS UNDER: - SHRI B.S. GUPTA, LEARNED COUNSEL FOR THE ASSESSEE, ARGUED THAT T HE QUESTION WHETHER TAXATION RESERVE AND DIVIDEND RESERVE COULD NOT BE TREATED AS RESERVE, NOTWITHSTANDING THE EXPLANATION WAS A DEBATABLE QUESTION AND THEREFORE, THE ITO WAS NOT JUSTIFIED IN INVOKING S. 13 OF THE COMPANIES (PROFITS) SURTAX ACT, 1964. IT I S CLEAR FROM THE ORDER OF THE ITO THAT THE NOTICE UNDER S. 13 WAS ISSUED AS HE HAD COMPLETELY OVERLOOKED THE EXPLANATION. IT IS NOT DISPUTED THAT WHERE A STATUTORY PROVISION IS COMPLETELY LOST SIGHT OF THE MATTER CAN BE TREATED AS AN ERROR APPARENT ON RECO RD AND RECTIFIED UNDER S. 13 OF THE ACT. THE FURTHER QUESTION WHETHER THERE WAS ANY DEBATABLE ISSUE TO BE DECIDED BY THE ITO DESPITE THE EXPLANATION WAS A QUESTION WHICH THE ASSESSEE SHOULD HAVE RAISED BEFORE THE SUBORDINATE TRIBUNALS. FROM A PERUSAL OF TH E ORDERS OF THE ITO, THE AAC AND THE TRIBUNAL, WE DO NOT SEE THAT ANY SUCH QUESTION HAD BEEN RAISED. THE ASSUMPTION THROUGHOUT WAS THAT THE TAXATION RESERVE DIVIDEND RESERVE AND SURPLUS FALL WITHIN THE MISCHIEF OF THE EXPLANATION. WE ARE, THEREFORE, CONSTRAINED TO ANSWER THE REFERENCE AGAINST THE ASSESSEE. THERE WILL BE NO ORDER AS TO COSTS. 14. SIMILARLY, THE HONBLE HIGH COURT OF RAJASTHAN & JAIPUR BENCH IN THE CASE OF CIT VS. BAGPATIA FOOD INDUSTRIES 175 CTR 173 (2002) HAS HELD THAT IF THE EXCES SIVE RELIEF OF .. REBATE IS ALLOWED THEN PROVISIONS OF SECTION 154 CAN BE INVOKED. 5 I TA NO. 4979 / MUM/2015 ASSESSMENT YEAR: 2010 - 11 5. IN VIEW OF THE CASES CITED ABOVE, THE SUBMISSIONS OF THE APPELLANT HAS NO MERIT IN STATING THAT THE AO HAS NOT MENTIONED ANYTHING ABOUT THE ALLOWANCE OR DISALLOWANCE OF THE BROUGHT FORWARD LOSES OF THE PREVIOUS YEAR WHICH HAS BEEN SET OFF AGAINST THE BOOK PROFIT INCOME AS SPECIFIED IN SECTION 115JB. THE HONBLE HIGH COURT IN THE CASE OF ANNAMALLAIS AGENCIES (SUPRA) HAS CLARIFIED THAT THE RECORD FOR PURPOSES OF SECTION 154 IS NOT CONFINED TO ASSESSMENT ORDER ONLY BUT ALSO INCLUDES THE RETURN AND DOCUMENTS ACCOMPANYING IT. THEREFORE, THE SUBMISSION OF THE APPELLANT ON THIS ACCOUNT HAS NO MERIT. THE INFERENCE DRAWN BY THE AO IS BASED ON ALL MATERIAL INFORMATIONS AVAILABLE ON RECORD FILED BY THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ATTACHED WITH RETURN OF INCOME. SIMILARLY, AS DISCUSSED ABOVE THERE IS A CLEAR CUT VIOLATION OF THE STATUTE I.E. SECTION 115JB(2)(K)(III). THE COURT IN INDIA WOOLLEN TEXTILE M ILLS (P) LTD. (SUPRA) HAVE GIVEN A CLEAR CUT FINDING THAT WHERE STATUTORY PROVISIONS IS COMPLETELY LOST SIGHT OF, THE MATTER CAN BE TREATED AS AN ERROR APPARENT ON RECORD. WHILE FRAMING THE ASSESSMENT U/S 143 (3), THE A.O. COMPLETELY LOST SIGHT OF PROVISIO NS OF SECTION 115JB(2)(K)(III). THEREFORE, THE MISTAKE IS APPARENT FROM THE RECORD AND THE A.O. HAS CORRECTLY RECTIFIED THE MISTAKE U/S 154 OF THE I.T. ACT, THERE IS NO DEBATE ON THE ISSUE THAT BROUGHT FORWARD LOSS OR UNABSORBED DEPRECIATION, WHICHEVER IS LESS, IS TO BE TAKEN FOR COMPUTATION U/S 115JB OF THE ACT. 5.1 FROM PERUSAL OF THE SECTION IT IS CRYSTAL THAT MISTAKE WAS APPARENT FROM THE RECORD. THE ISSUE IS NOT DEBATABLE AT ALL AND A.O. HAS CORRECTLY GIVEN DEDUCTION FOR DEPRECIATION WHICH IS LESS THA N BROUGHT FORWARD LOSSES. IF AT ALL, ASSESSEE CAN HAVE ANY GRIEVANCE REGARDING QUANTUM OF CARRY FORWARD DEPRECIATION OR LOSS, THE SAME COULD HAVE BEEN POINTED OUT TO THE A.O. U/S 154 . 8. AS POINTED OUT BY THE LD. DR, U/S 115JB (2) (K)(III) OF THE ACT, TH E ASSESSEE IS ENTITLED FOR EITHER UNABSORBED DEPRECIATION OR BUSINESS LOSS WHICHEVER IS LESS. HOWEVER, IN THE PRESENT CASE SINCE THE AO HAD ERRED IN ALLOWING THE CLAIM OF CARRY FORWARD LOSSES AMOUNTING TO RS. 7,92,35,057/ - APART FROM THE BUSINESS WORKS OF RS. 6,68,17,840/ - , T HE LD. CIT (A) HAS RIGHTLY CONFIRMED THE ACTION OF THE AO. THE ORDER PASSED BY THE LD. CIT (A) IS BASED 6 I TA NO. 4979 / MUM/2015 ASSESSMENT YEAR: 2010 - 11 ON THE RATIO LAID DOWN BY THE HONBLE PUNJAB & HARYANA HIGH COURT AND THE HONBLE HIGH COURT OF RAJASTHAN RELIED UPON BY THE LD. CI T (A). 9. ON THE OTHER HAND, THE CASES RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE ARE DISTINGUISHABLE ON FACTS. HENCE, WE DO NOT FIND ANY LEGAL OR FACTUL INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A). ACCORDINGLY, WE UPHOLD THE FINDINGS OF THE LD. CIT (A) AND DISMISS THE ASSESSEES APPEAL. I N THE RESULT, APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2010 - 20 11 IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH FEBRUARY , 2020 . SD/ - SD/ - ( G. MANJUNATHA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 07 / 02 / 20 20 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE C IT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI