Realty Value India Pvt. Ltd., Hyderabad V. ITO,Ward 3(2), Hyderabad

ITA 690/HYD/2014

• Counselvise Citation: 69022514 RSA 2014
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 25-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 15-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: S RAMA RAO
• Keywords: Depreciation; Additional evidence; Unabsorbed depreciation
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO.389 & 690/HYD/2014 ASSESSMENT YEAR 2008-2009 REALTY VALUE INDIA P. LTD., HYDERABAD. PAN AADCR6334G VS. THE INCOME TAX OFFICER, WARD 3(2) HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. S. RAMA RAO FOR REVENUE : MR. RAJAT MITRA DATE OF HEARING : 25.03.2015 DATE OF PRONOUNCEMENT : 31.03.2015 ORDER PER B. RAMAKOTAIAH, A.M. THESE TWO APPEALS ARE FOR THE A.Y. 2008-2009 BY ASSESSEE AGAINST THE ORDERS OF THE LD. CIT(A)-IV, H YDERABAD DATED 13.12.2013 AND 17.01.2014 CONFIRMING THE ADDI TION MADE UNDER SECTION 144 AS WELL AS PENALTY UNDER SE CTION 271(1)(C) OF THE I.T. ACT, 1961. 2. BRIEFLY STATED, ASSESSEE COMPANY IS ENGAGED IN THE REAL ESTATE BUSINESS AND FILED RETURN OF INCOME DEC LARING LOSS OF RS.7,82,380. DURING THE COURSE OF ASSESSMENT PROCEE DINGS MANY NOTICES WERE ISSUED BY THE A.O. BUT THERE WAS NO COMPLIANCE FROM ASSESSEE. IN VIEW OF NON-COMPLIANC E TO THE NOTICE, A SHOW CAUSE LETTER DATED 04.12.2010 WAS IS SUED TO THE ASSESSEE WHY THE ASSESSMENT SHOULD NOT BE COMPLETED UNDER SECTION 144 OF THE I.T. ACT PROPOSING DETAILS OF TH E SUNDRY CREDITORS TO AN EXTENT OF RS.81,15,738 AND ALSO DIS ALLOWANCE OF 2 ITA.NO.389 & 690/HYD/2014 REALTY VALUE INDIA P. LTD., HYDERABAD 25% OF THE EXPENDITURE DEBITED TO P & L ACCOUNT UND ER TWO HEADS. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE MA NAGING DIRECTOR APPEARED BUT SINCE THERE WAS NO BUSINESS A CTIVITIES IN THE COMPANY, DUE TO PROBLEMS IN REAL ESTATE BUSINES S SOUGHT TIME FOR PRODUCTION OF BOOKS. THE CASE WAS AGAIN AD JOURNED TO 16.12.2010 AND ASSESSEE SEEMS TO HAVE NOT APPEARED AND ACCORDINGLY, A.O. COMPLETED THE ASSESSMENT AS PROPO SED IN THE SHOW CAUSE NOTICE DETERMINING THE INCOME AT RS.90,3 4,580 UNDER SECTION 144 OF THE I.T. ACT. HE ALSO INITIATE D PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) AND LEVIED PENA L. 2.1. BEFORE THE LD. CIT(A), IT WAS CONTENDED THAT MANAGING DIRECTOR COULD NOT APPEAR DUE TO MALARIA F EVER AND FILED ADDITIONAL EVIDENCE BEFORE THE LD. CIT(A) CON TESTING THE ACTION OF THE A.O. AND ADDITIONS MADE THEREIN. LD. CIT(A), HOWEVER, ON THE REASON THAT NO EVIDENCE WAS FURNISH ED IN SUPPORT OF THE CONTENTION THAT ASSESSEE COULD NOT A PPEAR BEFORE THE A.O. UPHELD THE ACTION OF THE A.O. IN IN VOKING THE PROVISIONS OF SECTION 144 OF THE I.T. ACT. LD. CIT( A) ALSO REJECTED THE ADDITIONAL EVIDENCE FILED AND UPHELD THE ACTION OF THE A.O. IN BRINGING TO TAX THE OUTSTANDING SUNDRY CREDITORS AT RS.81,15,738 AND ALSO DISALLOWANCE OF EXPENDITURE A T 25%. ASSESSEE IS AGGRIEVED AND RAISED VARIOUS GROUNDS BE FORE US. 1. THE ORDER OF THE LD. CIT(A) IS ERRONEOUS BOTH ON F ACTS AND IN LAW. 2. THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF TH E A.O. IN COMPLETING THE ASSESSMENT U/S.144 OF THE I.T. AC T WITHOUT PROVIDING PROPER OPPORTUNITY TO THE APPELLA NT HEREIN. 3. THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF TH E A.O. IN TREATING THE AMOUNT OF RS.81,15,738/- AS THE INC OME 3 ITA.NO.389 & 690/HYD/2014 REALTY VALUE INDIA P. LTD., HYDERABAD OF THE APPELLANT INSPITE OF THE FACT THAT THE ASSES SEE FILED LETTERS OF CONFIRMATION FROM THE PERSONS WHO KEPT THE AMOUNT IN TRUST WITH THE APPELLANT AS ADVANCE F OR PAYMENT TO THE VENDORS OF THE LAND. 4. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION O F THE A.O. IN DISALLOWING 25% OF THE EXPENSES UNDER THE HEAD WORKMEN AND STAFF WELFARE OF RS.30,30,671/-, OUT OF WHICH RS. 16 LAKHS REPRESENTS THE REMUNERATI ON PAID TO DIRECTORS OF THE ASSESSEE COMPANY. 5. THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF TH E A.O. IN DISALLOWING 25% OF THE EXPENDITURE OF RS.37,74,218/- UNDER VARIOUS HEADS ON ADHOC BASIS WITHOUT APPRECIATING THE FACT THAT THE EXPENDITURE IS GENUINE AND WAS WHOLLY LAID OUT FOR THE PURPOSE OF BUSINESS OF THE APPELLANT. 6. THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF TH E A.O. IN NOT ALLOWING UNABSORBED DEPRECIATION OF RS.1,14,789/-. 7. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 3. LD. COUNSEL AT THE OUTSET SUBMITTED THAT ASSESS EE BEING A COMPANY HAS ITS ACCOUNTS AUDITED AND REFERR ED TO THE AUDITED P & L ACCOUNT TO SUBMIT THAT ASSESSEE HAD O NLY COMMISSION INCOME TO AN EXTENT OF RS.59,14,298 WHIC H RESULTED IN LOSS AFTER THE EXPENDITURE DURING THE Y EAR. THE AMOUNTS BROUGHT TO TAX BY THE A.O. ARE OUTSTANDING LIABILITIES AGAINST WHICH ASSESSEE ALSO HAD LOANS AND ADVANCES TO AN EXTENT OF RS.74,66,255. JUST BECAUSE THE OUTSTANDI NG LIABILITIES ARE NOT EXPLAINED, THE SAME CANNOT BE T HE INCOME WITHOUT EXAMINING OF THE DETAILS WHETHER THE CREDI TS HAVE OCCURRED IN THIS YEAR OR NOT, THE SOURCE OF VARIOUS FUNDS. LD. COUNSEL ALSO REFERRED TO THE ORDER OF THE LD. CIT(A ) TO SUBMIT THAT ADDITIONAL EVIDENCE FILED BEFORE THE LD. CIT(A ) WAS NOT ADMITTED AND THEREFORE, THERE IS NO OPTION THAN TO RAISE AN 4 ITA.NO.389 & 690/HYD/2014 REALTY VALUE INDIA P. LTD., HYDERABAD ADDITIONAL GROUND BEFORE THE ITAT CONTESTING THE AC TION OF THE LD. CIT(A). IT WAS SUBMITTED THAT ASSESSEE CAN JUST IFY THE CLAIMS IN THE P & L ACCOUNT AND BALANCE SHEET BEFOR E THE A.O. IF ANOTHER OPPORTUNITY WAS GIVEN. 4. LEARNED D.R. SUBMITTED THAT ASSESSEE HAS NOT APPEARED BEFORE THE ASSESSING OFFICER. THEREFORE, A CTION OF THE A.O. AND LD. CIT(A) ARE JUSTIFIED. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE AUTHORITIES. EVEN THOUGH A.O. HAS GIVEN MANY OPPORTUNITIES AND ALSO ISSUED SHOW CAUSE NOTICES PROPOSING ADDITIONS UNDER SECTION 144, JUST BECAUSE ASSESSEE MANAGING DIRECTOR COULD NOT APPEAR ON THE GIVEN DAT E, IN OUR VIEW, THE ADDITIONS COULD NOT BE MADE WITHOUT ANALY ZING THE BUSINESS ACTIVITY OF ASSESSEE. A.O. CAN ENQUIRE EXP ENDITURE CLAIMS MADE IN THE P & L ACCOUNT. HOWEVER, THE OUTS TANDING SUNDRY CREDITORS OR LIABILITIES ARE NOT FROM THE P & L ACCOUNT BUT ARE BALANCE SHEET AMOUNTS. THE OUTSTANDING AMOU NT CANNOT BECOME INCOME, UNLESS IT IS ESTABLISHED THAT THE CREDITS WERE RECEIVED DURING THE YEAR AND FURTHER THEY ARE UNEXPLAINED. NOTHING WAS BROUGHT ON RECORD BY THE A .O. AND ONLY THE OUTSTANDING AMOUNT WAS BROUGHT TO TAX WITH OUT EXAMINING THE NATURE OF THE AMOUNTS. MOREOVER, WHEN ASSESSEE SOUGHT TO FILE ADDITIONAL EVIDENCE, IN OUR VIEW, LD. CIT(A) REJECTED ADMISSION OF THE SAME WITHOUT ANY V ALID REASON. ASSESSEE IS JUSTIFYING THAT MANAGING DIRECT OR COULD NOT APPEAR BEFORE THE A.O. ON THE GIVEN DATE DUE TO ILL -HEALTH. IF LD. CIT(A) HAS ANY DOUBT ABOUT THE CLAIMS MADE, THEN IT IS FOR THE LD. CIT(A) TO ASK ASSESSEE TO FURNISH NECESSARY EVI DENCES. WITHOUT DOING SO THE CONTENTION CANNOT BE REJECTED ON THE REASON THAT NECESSARY EVIDENCE WAS NOT FURNISHED. E VEN 5 ITA.NO.389 & 690/HYD/2014 REALTY VALUE INDIA P. LTD., HYDERABAD OTHERWISE, THE ADDITIONS PER SE CANNOT BE JUSTIFIED WITHOUT EXAMINING THE CONTENTIONS. IN VIEW OF THIS, WE HAVE NO HESITATION IN SETTING ASIDE THE ORDER OF THE LD. CI T(A) AND A.O. AND RESTORE THE ASSESSMENT TO THE FILE OF A.O. TO D O IT AFRESH, AS PER THE FACTS OF THE CASE AND LAW ON THE SUBJECT. N EEDLESS TO SAY THAT ASSESSEE SHOULD BE GIVEN DUE OPPORTUNITY I N THE PROCEEDINGS. IN CASE ASSESSEE DOES NOT APPEAR OR FA ILS TO APPEAR BEFORE THE A.O. OR FAILS TO SUBSTANTIATE THE CLAIMS, THEN A.O. IS FREE TO INVOKE PROVISIONS OF THE ACT IN COM PLETING THE ASSESSMENT. THE ORDERS OF AUTHORITIES ARE SET ASIDE AND ASSESSMENT IS RESTORED TO THE FILE OF A.O. ACCORDIN GLY, ASSESSEES GROUNDS IN ITA.NO.389/HYD/2014 ARE CONSI DERED ALLOWED FOR STATISTICAL PURPOSES. ITA.NO.690/HYD/2014 6. THE A.O. WITHOUT WAITING FOR THE ORDER OF THE L D. CIT(A), LEVIED PENALTY. SINCE THE ASSESSMENT ITSELF IS SET ASIDE, PENALTY ORDER DOES NOT SURVIVE. ACCORDINGLY, THE OR DERS OF THE AUTHORITIES IN THE ISSUE OF LEVY OF PENALTY ARE ALS O ACCORDINGLY SET ASIDE. A.O. IS FREE TO INITIATE THE PROCEEDINGS AFRESH IN THE ASSESSMENT PROCEEDINGS WHICH ARE RESTORED TO HIM. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA.NO.389/HYD/2014 IS ALLOWED FOR STATISTICAL PURP OSES AND ITA.NO.690/HYD/2014 OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.03.201 5. SD/- SD/- (SAKJIT DEY) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACOUNTANT MEMB ER HYDERABAD, DATED 31 ST MARCH, 2015 VBP/- 6 ITA.NO.389 & 690/HYD/2014 REALTY VALUE INDIA P. LTD., HYDERABAD COPY TO : 1. REALTY VALUE INDIA P. LTD., HYDERABAD C/O. MR. S. RAMA RAO, ADVOCATE, FLAT NO.102, SHRIYA S ELEGANCE, H.NO.3-6-643, STREET NO.9, HIMAYATNAGAR, HYDERABAD 500 029. 2. THE INCOME TAX OFFICER, WARD 3(2), HYDERABAD 3. CIT(A)-IV, HYDERABAD 4. CIT-III, HYDERABAD 5. D.R. ITAT B BENCH, HYDERABAD 6. GUARD FILE