DCIT, Central Circle-1(2), Hyd, Hyderabad V. Pokarna Ltd., Sec'bad, Secunderabad

ITA 69/HYD/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6639 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 18-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M SITARAM
• Assessee Lawyers: K C DEVADAS
• Keywords: Audit objection
• Section: 143(3); 10B; 154

Judgement Text

ITA NOS 68 AND 69 AND CO 9 OF 2016 POKARNA LTD SECU NDERABAD PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI P.MADHAVI DEVI, JUDICIAL MEMBER & SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NOS. 68 & 69/HYD/2016 (ASSESSMENT YEAR: 2006-07) DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(2) HYDERABAD VS. M/S. POKARNA LTD 105, 1 ST FLOOR, SURYA TOWERS, S.P. ROAD SECUNDERABAD-03 PAN: AABCP 2100 Q (APPELLANT) (RESPONDENT) C.O. NO.9/HYD/2016 (ARISING OUT OF ITA NO.68/HYD/2016) A.Y. 2006-07 FOR REVENUE : SHR I M.SITARAM, DR FOR ASSESSEE : SHRI K.C. DEVADAS, AR DATE OF HEARING : 19/04/2016 DATE OF PRONOUNCEMENT : 29 /04/2016 O R D E R PER BENCH: ITA NO.68/HYD/2016 IS THE REVENUES APPEAL AGAINST THE ORDER OF THE CIT (A) DATED 11.9.2015 GRANTING DEDUC TION U/S 10B OF THE ACT, THOUGH THE SAME WAS DENIED TO THE ASSES SEE IN THE ASSESSMENT U/S 143(3) R.W.S. 147 OF THE I.T. ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY WHICH IS ENGAGED IN THE BUSINESS OF QUARRYING, PROCESSING AND EXPORT OF GRANITE PRODUCTS, MANUFACTURING AND TRADING OF APPA REL, FILED ITS RETURN OF INCOME FOR THE A.Y 2006-07 ON 9.11.2006 A DMITTING TOTAL INCOME AT RS.10,95,256 AND AFTER CLAIMING SET OFF OF CARRY FORWARD LOSS OF A.Y 2005-06 TO THE EXTENT OF PROFIT AVAILABLE, NET ITA NOS 68 AND 69 AND CO 9 OF 2016 POKARNA LTD SECU NDERABAD PAGE 2 OF 5 TAXABLE INCOME WAS DECLARED AT RS. NIL. THE ASSES SMENT U/S 143(3) WAS COMPLETED ON 13.10.2008 ACCEPTING THE SE TTING OFF OF CARRY FORWARD BUSINESS LOSS OF A.Y 2005-06. SUBSEQU ENTLY THE ASSESSMENT WAS REOPENED U/S 147 OF THE ACT OBSERVIN G THAT THE CARRIED FORWARD LOSS FOR A.Y 2005-06 IS TO BE SET O FF FROM THE PROFIT AND GAINS OF THE ASSESSEE COMPANY AND ONLY T HE LEFT OVER BALANCE WAS ALLOWABLE FOR THE PURPOSE OF DEDUCTION U/S 10B OF THE ACT AND SINCE THIS WAS NOT DONE BY THE AO AND T HE ENTIRE ALLOWABLE PROFIT WAS ALLOWED U/S 10B OF THE ACT, IT HAS RESULTED IN EXESS DEDUCTION U/S 10B OF THE ACT. AGGRIEVED, ASSE SSEE PREFERRED AN APPEAL BEFORE THE CIT (A) WHO ALLOWED THE SAME BY FOLLOWING THE DECISION OF THE HON'BLE ANDHRA PRADES H HIGH COURT IN ITTA NO.116/2014, DATED 25.02.2014 IN THE CASE O F APOLLO HEALTH STREET LTD WHEREIN THE DECISION OF THE SPECI AL BENCH OF THE ITAT, CHENNAI BENCH IN THE CASE OF SCIENTIFIC A TLANTA INDIA TECHNOLOGY LTD AND ALSO THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. YOKOGAWA INDIA LT D FOLLOWED AND IT HAS BEEN HELD THAT THE DEDUCTION U/S 10B SHO ULD BE FIRST EXCLUDED AT THE THRESHOLD AND ONLY THEREAFTER THE N ORMAL COMPUTATION OF INCOME AS PER OTHER PROVISIONS OF LA W, INCLUDING THE ADJUSTMENT OF BROUGHT FORWARD LOSSES AND DEPREC IATION IS TO TAKE PLACE. AGAINST THE RELIEF GRANTED BY THE CIT ( A), THE REVENUE IS IN APPEAL BEFORE US. 3. THE LEARNED DR RELIED UPON THE ORDER OF THE AO, WHILE THE LEARNED COUNSEL FOR THE ASSESSEE PLACED RELIANCE UP ON THE ORDER OF THE CIT (A). 4. AFTER HEARING BOTH THE PARTIES AND HAVING CONSID ERED THE RELEVANT METERIAL ON RECORD, WE FIND THAT THE ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HO N'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. YOKOGAW A INDIA LTD ITA NOS 68 AND 69 AND CO 9 OF 2016 POKARNA LTD SECU NDERABAD PAGE 3 OF 5 (SUPRA). WE FIND THAT THE CIT (A)S ORDER IS IN CON SONANCE WITH THE PRECEDENT OF THE ISSUE AND THEREFORE, WE SEE NO REA SON TO INTERFERE WITH THE ORDER OF THE CIT (A). REVENUES APPEAL IS ACCORDINGLY DISMISSED. C.O. NO.9/HYD/2016 (ARISING OUT OF ITA NO.68/HYD/20 16): 5. THIS CROSS OBJECTION WAS FILED BY THE ASSESSEE A GAINST THE REOPENING OF THE ASSESSMENT U/S 147 OF THE I.T. ACT . IT IS THE CASE OF THE ASSESSEE THAT THE REOPENING OF THE ASSESSMEN T WAS BASED ON AN AUDIT OBJECTION AND THEREFORE, SUCH A REOPENI NG IS NOT VALID. HE HAS DRAWN OUR ATTENTION TO THE ORDER OF T HE CIT (A), UPHOLDING THE REOPENING OF THE ASSESSMENT, THOUGH I T WAS ILLEGAL. 6. THE LEARNED DR, HOWEVER, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE AUDIT OBJE CTION WAS ONLY AN INFORMATION AVAILABLE BEFORE THE AO AND IT IS ON CONSIDERATION OF SUCH INFORMATION AND ONLY AFTER AP PLICATION OF MIND THAT THE AO HAS HAS COME TO THE CONCLUSION THA T THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. THER EFORE, ACCORDING TO HIM, THE REOPENING OF THE ASSESSMENT W AS VALID. 7. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL AVAILABLE ON RECORD, WE FIND THAT EXCEPT FOR STATIN G THAT THE REOPENING OF THE ASSESSMENT IS ON AN AUDIT OBEJCTIO N, THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT BROUGHT ON RECORD ANY MATERIAL TO DEMONSTRATE THAT THE AO HAS REOPENED THE ASSESSM ENT AS PER THE DIRECTIONS OF THE AUDIT PARTY ALONE AND WITHOUT APPLICATION OF MIND. WE ARE OF THE OPINION THAT THE INFORMATION AB OUT THE ESCAPMENT OF INCOME OF AN ASSESSEE CAN BE BROUGHT T O THE NOTICE OF THE AO FROM ANY QUARTER INCLUDING THE AUDIT OBJE CTION, BUT THE ITA NOS 68 AND 69 AND CO 9 OF 2016 POKARNA LTD SECU NDERABAD PAGE 4 OF 5 AO HAS TO APPLY HIS MIND BEFORE COMING TO THE CONCL USION THAT THE INCOME HAS ESCAPED ASSESSMENT AND THE ASSESSMEN T NEEDS REOPENING. BEFORE US, SINCE THERE IS NO MATERIAL T O COME TO THE CONCLUSION THAT THERE IS NO APPLICATION OF MIND BY THE AO FOR REOPENING OF THE ASSESSMENT, WE DO NOT SEE ANY MERI T IN THE OBEJCTIONS RAISED BY THE ASSESSEE. THE CROSS OBJECT ION IS ACCORDINGLY DISMISSED. ITA NO.69/HYD/2016 8. THIS IS REVENUES APPEAL AGAINST THE ORDER OF TH E CIT (A) IN SETTING ASIDE THE ORDER OF THE AO U/S 154 OF THE I. T. ACT DATED 26.03.2013. 9. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSMENT U/S 143(3) R.W.S. 147 OF THE ACT, WAS COMPLETED BY THE AO BY F IRST SETTING OFF THE BROUGHT FORWARD LOSS AND DETERMINING THE DEDUCT ION U/S 10B TO BE AT RS. NIL. SUBSEQUENTLY THE AO OBSERVED TH AT IN THE ASSESSMENT ORDER, THOUGH THE DEDUCTIONS U/S 10B WER E SHOWN AS NIL, THE TOTAL INCOME OF RS.60,14,913 STILL CO MPRISES OF DEDUCTION OF RS.7,95,01,572 U/S 10B OF THE ACT. HE, THEREFORE, PROPOSED RECTIFICATION U/S 154 OF THE ACT. SINCE TH ERE WAS NO RESPONSE FROM THE ASSESSEE TO THE SAID NOTICE, THE AO CARRIED OUT RECTIFICATION BY REDUCING THE EXEMPTION U/S 10B GRA NTED EARLIER. AGGRIEVED, THE REVENUE FILED AN APPEAL BEFORE THE C IT (A) WHO SET ASIDE THE ORDER OF THE AO U/S 154 BY OBSERVING THAT THE DISALLOWANCE OF THE DEDUCTION U/S 10B BEFORE ARRIVI NG AT THE TOTAL INCOME AVAILABLE FOR ABSORPTION OF BROUGHT FORWARD LOSS WAS HELD TO BE INCORRECT. AGAINST THE RELIEF GRANTED BY THE CIT (A), THE REVENUE IS IN APPEAL BEFORE US. ITA NOS 68 AND 69 AND CO 9 OF 2016 POKARNA LTD SECU NDERABAD PAGE 5 OF 5 10. UPON HEARING BOTH THE PARTIES, WE FIND THAT VID E ORDERS EVEN DATED IN THE ABOVE APPEALS, WE HAVE ALREADY HE LD THAT THE DEDUCTION U/S 10B IS TO BE ALLOWED PRIOR TO SET OFF OF BROUGHT FORWARD LOSSES OF THE EARLIER ASSESSMENT YEARS. IN VIEW OF THE ABOVE DECISION, THERE IS NO MERIT IN THE ORDER PASS ED U/S 154 OF THE ACT. IN VIEW OF THE SAME, WE DO NOT SEE ANY REA SON TO INTERFERE WITH THE ORDER OF THE CIT (A) ON THIS ISS UE ALSO. 11. IN THE RESULT, REVENUES APPEAL IS ALSO DISMISS ED. 12. TO SUM UP, BOTH THE REVENUES APPEALS AS WELL A S THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH APRIL, 2016. S D/ - S D/ - (S. RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 29 TH APRIL, 2016. VNODAN/SPS COPY TO: 1. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(2) , 3 RD FLOOR, POSNETT BHAVAN, TILAK ROAD, RAM KOTI, HYDERA BAD 2. M/S. POKARNA LTD., 105, 1 ST FLOOR, SURYA TOWERS, SP ROAD, SECUNDERABAD - 03 3. CIT(A) - 11, HYDERABAD 4. PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL), HYD ERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE BY ORDER