Dy.CIT, Circle-3(3), Hyderabad V. M/s Swarnandhra IJMII Integrated Township Development Co.Pvt..Ltd., Hyderabad

ITA 656/HYD/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69810 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 03-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKARA RAO
• Assessee Lawyers: INTURI RAMA RAO
• Keywords: Revision of order; Transfer pricing; Opportunity of being heard; Wrong claim; Revised return
• Section: 143(3); 260A; 246; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 656/HYD/2013 ASSESSMENT YEAR : 2007-08 DY. COMMISSIONER OF INCOME-TAX, APPELLANT CIRCLE 3(3), HYDERABAD. VS. M/S SWARNANDHRA IJMII INTEGRATED TOWNSHIP DEVELOPMENT COMPANY PVT. LTD., RESPONDE NT HYDERABAD. (PAN AAHCS3641P) APPELLANT BY : SHRI D. SUDHAKARA RAO RESPONDENT BY : SHRI INTURI RAMA RAO DATE OF HEARING : 13/08 /2013 DATE OF PRONOUNCEMENT : 2 7/09/2013 ORDER PER SAKTIJIT DEY, J.M.: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 19/02/2013 PASSED BY THE CIT(A)-IV, HYDERABAD IN ITA NO. 17/DC-3(3)/CIT(A)- IV/2012-13 FOR THE ASSESSMENT YEAR 2007-08. 2. BRIEFLY THE FACTS ARE, THE ASSESSEE IS A COMPANY PROMOTED BY THE AP HOUSING BOARD AND M/S IJM (INDIA ) INFRASTRUCTURE LTD. FOR THE PURPOSE OF DEVELOPING INTEGRATED TOWNSHIPS AND OTHER ALLIED CONSTRUCTION AND DEVELOPMENT WORKS. FOR THE IMPUGNED ASSESSMENT YEAR , THE ASSESSEE FILED ITS RETURN OF INCOME ON 30/10/20 07 DECLARING TOTAL INCOME OF RS. 15,95,32,740/-. ITA NO. 656/HYD/2013 M/S SWARNANDHRA IJMI INTEGRATED TOWNSHIP DEVELOPME NT CO. PVT. LTD. 2 SUBSEQUENTLY REVISED RETURN WAS FILED ON 22/08/2008 DECLARING INCOME OF RS. 56,17,006/- BEFORE SET OFF OF BROUGHT FORWARD LOSSES AND NIL INCOME AFTER SET OFF OF THE LOSSES. DURING THE SCRUTINY ASSESSMENT PROCEEDING, THE ASSESSING OFFICER MADE A REFERENCE TO THE TPO FOR DETERMINING THE ARMS LENGTH PRICE OF THE INTERNATI ONAL TRANSACTION. IN PURSUANCE TO THE ORDER PASSED BY TH E TPO A DRAFT ASSESSMENT ORDER HAS PASSED. THE ASSESSEE OBJECTED TO THE DRAFT ASSESSMENT ORDER BEFORE THE D RP. THE DRP HAVING CONFIRMED THE DRAFT ASSESSMENT ORDER , THE FINAL ASSESSMENT ORDER IN CASE OF ASSESSEE WAS PASSED U/S 143(3) READ WITH SECTION 144C(13) OF THE ACT ON 11/10/2011 ON THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL (IN SHORT DRP) BY MAKING THE FOL LOWING ADDITIONS/DISALLOWANCES: I) DISALLOWANCE TOWARDS COST OF LAND TRANSFERRED BY APHB - RS. 13,43,96,800/-. II) DISALLOWANCE OF INCENTIVE PAID TO IJIMI INDIA RS. 18,59,85,000/-. III) DISALLOWANCE OF CHARGES PAID TO IJIMI INDIA FO R DELAY IN HANDING OVER RS. 7,74,36,597/-. IV) DISALLOWANCE OF LAND COST ATTRIBUTABLE TO THE L AND SOLD BY APHB ON 500 LIG HOUSES SOLD BY IT RS. 1,92,19,200/-. V) DISALLOWANCE OF COST OF CONSTRUCTION OF HOUSES HANDED OVER TO APHB RS. 18,06,75,000/-. VI) DISALLOWANCE OF INTEREST PAID TO IJMI INDIA R S. 2,21,95,301/-. VII) ADJUSTMENT U/S 92CA(4) RS. 38,34,39,486/-. 3. AGAINST THE AFORESAID ASSESSMENT ORDER, THE ASSESSEE PREFERRED APPEAL BEFORE THE ITAT. DURING T HE PENDENCY OF APPEAL BEFORE THE ITAT, THE ASSESSING ITA NO. 656/HYD/2013 M/S SWARNANDHRA IJMI INTEGRATED TOWNSHIP DEVELOPME NT CO. PVT. LTD. 3 OFFICER INITIATED PROCEEDING FOR IMPOSITION OF PENA LTY U/S 271(1)(C) BY ISSUING SHOW CAUSE NOTICE ON 17/04/201 2. IN REPLY TO THE SHOW CAUSE NOTICE, THE ASSESSEE EXP LAINED THAT SINCE ITS APPEAL AGAINST THE ASSESSMENT ORDER IS PENDING BEFORE THE ITAT THE PENALTY PROCEEDING SHOU LD BE DROPPED. IT WAS SUBMITTED THAT ISALLOWANCES/ADDI TIONS MADE DUE TO DIFFERENCE OF INTERPRETATION OF PROVISI ONS OF ACT, HENCE, PENALTY U/S 271(1)(C) CANNOT BE LEVIED. THE ASSESSEE RELYING ON THE DECISION OF THE HONBLE SUP REME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCT S (P) LTD., [2010] 322 ITR 158 (SC) SUBMITTED THAT THERE MUST BE CONCEALMENT OF INCOME OR FURNISHING OF INACCURAT E PARTICULARS OF INCOME FOR INVOKING PROVISIONS OF SE CTION 271(1)(C) OF THE ACT. THE ASSESSING OFFICER, HOWEVE R, REJECTING THE CONTENTIONS OF THE ASSESSEE PASSED AN ORDER IMPOSING PENALTY OF RS. 20,86,60,998/- U/S 271(1)(C ) OF THE ACT. 4. THE ASSESSEE BEING AGGRIEVED OF THE PENALTY ORDE R PASSED BY THE ASSESSING OFFICER, PREFERRED APPEAL B EFORE THE CIT(A). 5. IN COURSE OF THE APPELLATE PROCEEDINGS, THE AR SUBMITTED THAT THE APPEAL BEFORE THE ITAT AGAINST T HE ASSESSMENT ORDER IN THE MEANWHILE HAS BEEN DISPOSED OFF BY THE TRIBUNAL BY DELETING THE FOLLOWING ADDITIONS : 1. DISALLOWANCE TOWARDS COST OF LAND TRANSFERRED BY APHB RS. 13,43,96,800/-. 2. DISALLOWANCE OF INCENTIVE PAID TO IJIMI INDIA RS. 18,59,85,000/- 3. DISALLOWANCE OF CHARGES PAID TO IJIMI INDIA FOR DELAY IN HANDING OVER RS. 7,74,36,597/-. ITA NO. 656/HYD/2013 M/S SWARNANDHRA IJMI INTEGRATED TOWNSHIP DEVELOPME NT CO. PVT. LTD. 4 4. DISALLOWANCE OF COST OF CONSTRUCTION OF HOUSES HANDED OVER TO APHB RS. 18,06,75,000/- 5. DISALLOWANCE OF INTEREST PAID TO IJMI INDIA RS . 2,21,95,301/-. THE ONLY ADDITION OF RS. 1,92,19,200/- TOWARDS LAND COST ATTRIBUTABLE TO THE LAND SOLD BY APHB ON 500 LIG HO USES SOLD WAS SUSTAINED BY THE TRIBUNAL. 6. THE AR OF THE ASSESSEE BRINGING THE SAID FACTS T O THE NOTICE OF THE CIT(A) SUBMITTED THAT IMPOSITION OF P ENALTY WITH REGARD TO THE ADDITIONS ALREADY DELETED NO MOR E SURVIVES. SO FAR AS THE ISSUE OF LEVY OF PENALTY ON THE DISALLOWANCE OF RS. 1,92,19,200/- SUSTAINED BY THE ITAT, IT WAS SUBMITTED THAT AS PER THE AGREEMENT THE ENTI RE LAND INCLUDING 13,728 SQ.YDS., WAS MADE AVAILABLE TO THE ASSESSEE FOR DEVELOPMENT OF THE INTEGRATED TOWNSHIP AND THAT THE ASSESSEE PAID COMPENSATION FOR THE ENTIRE LAND, INCLUDING FOR THE 13,728 SQ. YDS. HE, THEREFORE, CONTENDED THAT CONCLUSION OF THE ASSESSING OFFICER THAT LAND TO THE EXTENT OF RS. 13,728 SQ.YDS. HAD NOT BE EN TRANSFERRED IS WITHOUT ANY BASIS. THE ASSESSING OF FICER, HOWEVER, REJECTED THE CLAIM OF THE ASSESSEE. THE IT AT UPHELD THE DISALLOWANCE BY OBSERVING AS UNDER: 18. THE LAND WAS NOT REGISTERED IN FAVOUR OF THE ASSESSEE BY APHB. THE APHB IS ALWAYS THE OWNER OF THE IMPUGNED LAND. THERE IS NO QUESTION OF RETRANSFERRING OF THE SAID LAND TO APHB WHEN THE LAND ITSELF IS NOT REGISTERED IN FAVOUR OF THE ASSE SSEE AND THE COST OF THE LAND ATTRIBUTABLE TO THE FLATS HANDED OVER TO APHB CANNOT BE CLAIMED AS DEDUCTION IN THE HANDS OF THE ASSESSEE. THIS GROUND IS REJECTED. ITA NO. 656/HYD/2013 M/S SWARNANDHRA IJMI INTEGRATED TOWNSHIP DEVELOPME NT CO. PVT. LTD. 5 7. IT WAS CONTENDED ON BEHALF OF THE ASSESSEE BEFOR E THE FIRST APPELLATE AUTHORITY THAT PENALTY U/S 271 (1)(C) IS LEVIABLE WHEN THE ASSESSEE CONCEALS ITS INCOME OR FURNISHES INACCURATE PARTICULARS. IT WAS SUBMITTED THAT WHEN COMPENSATION IS PAID IN ACCORDANCE WITH THE AGREEMENT, WHICH IS PART OF THE RECORD BEFORE THE ASSESSING OFFICER AND THAT NONE OF THE INFORMATION FURNISHED IN THE RETURN OF INCOME HAD BEEN FOUND TO BE FACTUALLY INCORRECT THEN THERE WAS NEITHER CONCEALM ENT OF INCOME NOR FURNISHING OF INACCURATE PARTICULARS OF INCOME INVITING IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT. IN SUPPORT OF SUCH CONTENTION, THE ASSESSEE RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF CI T VS. RELIANCE PETRO PRODUCTS P. LTD., [2010] 322 ITR 158 (SC). 8. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND TAKING NOTE OF THE FACT THAT ITAT HA D ELETED MOST OF THE ADDITIONS, DELETED PENALTY IN RESPECT O F THOSE ADDITIONS, WHICH WERE DELETED BY THE ITAT. SO FAR A S THE ADDITION OF RS. 1,92,19,200/- SUSTAINED BY THE ITAT , THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASS ESSEE IN THE CONTEXT OF LAW LAID DOWN BY THE HONBLE SUPR EME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS P. LTD . (SUPRA), DELETED THE PENALTY IMPOSED BY HOLDING AS UNDER: THE FACTS IN THE APPELLANTS CASE ARE ALSO SIMILAR. THE APPELLANT HAS MADE A CLAIM OF LAND COST WHICH HAS BEEN FOUND INADMISSIBLE BY THE ASSESSING OFFICER. HOWEVER, THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY SPECIFIC FACTS OR DETAILS WHI CH WERE FOUND BY THE ASSESSING OFFICER TO BE INCORRECT , INACCURATE OR FALSE. WHETHER OR NOT THE EXPENDITURE CLAIMED BY THE APPELLANT IS ALLOWABLE IS A LEGAL IS SUE ITA NO. 656/HYD/2013 M/S SWARNANDHRA IJMI INTEGRATED TOWNSHIP DEVELOPME NT CO. PVT. LTD. 6 THAT DOES NOT IMPLY ANY INACCURACY IN THE PARTICULA RS FURNISHED BY THE APPELLANT. AS HELD BY THE SUPREME COURT, THE MERE MAKING OF AN INADMISSIBLE CLAIM OF DEDUCTION DOES NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS. FOLLOWING THE RATIO OF THE DECISION OF THE SUPREME COURT THE PENALTY U/S 271(1)(C) IS DIRECTED TO BE DELETED WITH REGARD TO THE CLAIM OF LAND COST OF RS. 1,92,19,200/-. 9. AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS O F APPEAL: I) THE LEARNED CIT(A) ERRED BOTH IN LAW AND ON FACT S OF THE CASE. II) THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE PENALTY U/S 271(1)(C) AND SHOULD NOT HAVE EQUATED THE CASE WITH A CASE OF WRONG CLAIM OF DEDUCTION. III) THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT IT IS NEITHER A CASE OF CLAIMING A DEDUCTION ( AS DEFINED UNDER CHAPTER VIA) NOR A CASE OF CLAIMING EXEMPTION (AS DEFINED UNDER CHAPTER III) SO AS TO HAVE A LEGAL IMPLICATION, BUT A CASE OF INVESTIGATI ON OF VARIOUS ISSUES, TO INCOME/DISALLOWANCES OF VARIO US EXPENSES ENHANCING THE INCOME RETURNED AND AS SUCH SHOULD HAVE HELD THAT THE ASSESSEE OUGHT NOT TO HAVE MADE SUCH A WRONG COMPUTATION OF INCOME CONSCIOUSLY. 10. WE HAVE HEARD THE SUBMISSIONS OF THE PARTIES AN D PERUSED THE MATERIAL ON RECORD INCLUDING THE ORDERS OF THE REVENUE AUTHORITIES. IT IS A FACT ON RECORD THA T THE ASSESSING OFFICER IN THE PRESENT CASE HAS PASSED TH E ORDER IMPOSING PENALTY U/S 271(1)(C) ON THE BASIS O F ADDITIONS MADE IN THE ASSESSMENT ORDER PASSED U/S 143(3) READ WITH SECTION 144C OF THE ACT. HOWEVER, THE AFORESAID ASSESSMENT ORDER WAS SUBJECTED TO APPEAL BEFORE THE ITAT AND THE ITAT VIDE ORDER DATED 31/12/2012 PASSED IN ITA NO. 2072/HYD/2011 HAD DELETED ALL THE ADDITIONS EXCEPTING THE ADDITION OF RS. ITA NO. 656/HYD/2013 M/S SWARNANDHRA IJMI INTEGRATED TOWNSHIP DEVELOPME NT CO. PVT. LTD. 7 1,92,19,200/- TOWARDS THE LAND COST ATTRIBUTABLE TO THE LAND SOLD BY APHB ON 500 LIG HOUSES SOLD BY IT. THEREFORE, AS WOULD BE EVIDENT, THE ASSESSING OFFIC ER HAD PASSED ORDER IMPOSING PENALTY BEFORE THE ORDER PASS ED BY THE ITAT DISPOSING OF THE ASSESSEES APPEAL AGAI NST ASSESSMENT ORDER. IN THIS CONNECTION, WE REFER TO SECTION 275(1A) OF THE ACT, WHICH READS AS UNDER: 275(1A) IN A CASE WHERE THE RELEVANT ASSESSMENT OR OTHER ORDER IS THE SUBJECT-MATTER OF AN APPEAL TO THE COMMISSIONER (APPEALS) UNDER SECTION 246 OR SECTION 246A OR AN APPEAL TO THE APPELLATE TRIBUNAL UNDER SECTIO N 253 OR AN APPEAL TO THE HIGH COURT UNDER SECTION 260A OR A N APPEAL TO THE SUPREME COURT UNDER SECTION 261 OR REVISION UNDER SECTION 263 OR SECTION 264 AND AN ORDER IMPOSING OR ENHANCING OR REDUCING OR CANCELLING PENALTY OR DROP PING THE PROCEEDINGS FOR THE IMPOSITION OF PENALTY IS PASSED BEFORE THE ORDER OF THE COMMISSIONER (APPEALS) OR THE APPE LLATE TRIBUNAL OR THE HIGH COURT OR THE SUPREME COURT IS RECEIVED BY THE CHIEF COMMISSIONER OR THE COMMISSIONER OR TH E ORDER OF REVISION UNDER SECTION 263 OR SECTION 264 IS PAS SED, AN ORDER IMPOSING OR ENHANCING OR REDUCING OR CANCELLI NG PENALTY OR DROPPING THE PROCEEDINGS FOR THE IMPOSIT ION OF PENALTY MAY BE PASSED ON THE BASIS OF ASSESSMENT AS REVISED BY GIVING EFFECT TO SUCH ORDER OF THE COMMI SSIONER (APPEALS) OR, THE APPELLATE TRIBUNAL OR THE HIGH CO URT, OR THE SUPREME COURT OR ORDER OF REVISION UNDER SECTIO N 263 OR SECTION 264: 11. A PLAIN READING OF THE AFORESAID SECTION, MAKES IT CLEAR THAT WHERE THE ASSESSING OFFICER HAS PASSED P ENALTY ORDER BEFORE THE DISPOSAL OF APPEAL AGAINST THE ASSESSMENT ORDER BY THE APPELLATE AUTHORITY I.E. CI T(A) OR ITAT, THEN, THE ORDER IMPOSING OR REDUCING OR CANCELLING PENALTY OR DROPPING THE PROCEEDINGS FOR THE IMPOSITION OF PENALTY MAY BE PASSED ON THE BASIS OF ASSESSMENT AS REVISED BY GIVING EFFECT TO SUCH ORDE R OF THE CIT(A) OR THE APPELLATE TRIBUNAL OR THE HIGH CO URT OR ITA NO. 656/HYD/2013 M/S SWARNANDHRA IJMI INTEGRATED TOWNSHIP DEVELOPME NT CO. PVT. LTD. 8 THE SUPREME COURT OR THE ORDER OF REVISION U/S 263 OR U/S 264. 12. IN THE PRESENT CASE, THE ITAT HAVING PASSED THE ORDER IN APPEAL DELETING ALL THE ADDITIONS EXCEPTIN G ONE, IT IS THE REQUIREMENT U/S 275(1A) THAT THE ASSESSIN G OFFICER MUST PASS AN ORDER GIVING EFFECT TO THE OR DER OF THE TRIBUNAL AND ONLY THEREAFTER CONSIDER THE ISSU E OF IMPOSITION OF PENALTY U/S 271(1)(C) AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IN THE AFORESAID VIEW OF THE MATTER, WE SET ASIDE THE ORDE R PASSED BY THE CIT(A) AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER, WHO SHALL CONSIDER T HE ISSUE OF IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT A FTER GIVING EFFECT TO THE ORDER OF THE TRIBUNAL AND AFTE R DULY GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE I N THE MATTER. ACCORDINGLY, THE GROUNDS RAISED BY THE REVE NUE ARE ALLOWED FOR STATISTICAL PURPOSES. 13. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 27/09/2013. SD/- SD/- (CHANDRA POOJARI) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMB ER HYDERABAD, DATED: 27 TH SEPTEMBER, 2013. KV ITA NO. 656/HYD/2013 M/S SWARNANDHRA IJMI INTEGRATED TOWNSHIP DEVELOPME NT CO. PVT. LTD. 9 COPY TO:- 1) DCIT, CIRCLE 3(3), 7 TH FLOOR, B BLOCK, IT TOWERS, AC GUARDS, HYDERABAD. 2) M/S SWARNANDHRA IJMII INTEGRATED TOWNSHIP DEVELO PMENT CO. PVT. LTD., 1-89/1, PLOT NO. 42 & 43, KAVURI HIL LS, PHASE- 1, MADHAPUR, HYDERABAD 500 081. 3) CIT(A)-IV, HYDERABAD. 4) CIT-III, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T ., HYDERABAD.