Pennar Holdings Private Limited, Hyd, Hyderabad V. ITO, Ward 2(4), Hyd, Hyderabad

ITA 718/HYD/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2534 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 01-05-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 16-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L R AMJI RAO
• Keywords: Bonafide belief; Reasonable cause; Scheme of amalgamation
• Section: 115JB; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD SMC - B BENCH : HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT ITA.NO.717 & 718 /HYD/2016 ASSESSMENT YEAR 2011 - 2012 M/S. PENNAR HOLDINGS PRIVATE LIMITED (PREVIOUSLY KNOWN AS M/S. THAPTI TRADING PVT LTD, THE ASSESSEE M/S. ZEN TRADING PVT LTD IS AMALGAMATED IN M/S. THAPTI TRADING PVT LTD) HYDERABAD. PAN: AACCT 3413 D VS. INCOME TAX OFFICER, WARD - 3(2), HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE: SHRI MOHD. AFZAL FOR REVENUE : SHRI L. RAMJI RAO, DR DATE OF HEARING : 10 .10.2017 DATE OF PRONOUNCEMENT : 10 .10.2017 ORDER PER D. MANMOHAN, VP. THESE APPEALS BY ASSESSEE - COMPANY ARE DIRECTED AGAINST ORDERS PASSED BY LD. CIT(A) - 5, HYDERABAD. IN FACT THOUGH THE APPEALS PERTAIN TO SAME ASSESSMENT YEAR, THEY ARISE OUT OF TWO DIFFERENT ORDERS PASSED BY ASSESSING OFFICER I.E., RETURN OF INCOME PROCESSED U/S 143(1) OF THE ACT AND RECTIFICATION PETITION FILED U/S 154 OF THE ACT. 2. AT THE OUTSET IT MAY BE NOTICED THAT THERE WAS A DE LAY IN FILING APPEALS BEFORE FIRST APPELLATE AUTHORITY RESULTING IN DISMISSAL OF APPEAL S BY LD. CIT(A) AND THUS ASSESSEE PREFERRED SECOND APPEAL S BEFORE THE TRIBUNAL. 3. ASSESSEE IS A PRIVATE LIMITED COMPANY. IT DECLARED A LOSS OF RS. 23,611/ - ON 26.09.20 11. RETURN OF INCOME HAVING B EEN FILED U/S 139(1) OF THE ACT, THE SAME COULD HAVE BEEN PROCESSED ACCORDINGLY I.E., ACCEPTING THE ADMITTED LOSS OF RS. 23,611/ - . ASSESSEE IS AN INVESTMENT COMPANY AND IT EARNED DIVIDEND INCOME OF RS. 7,71,861/ - DURING THE Y EAR , WHICH IS EXEMPT U/S 10(34) OF THE INCOME TAX ACT, 1961. THOUGH IT WAS CLAIMED ACCORDINGLY, INADVERTENTLY ASSESSEE HAS NOT GIVEN THE CO MPUTATION OF 2 MINIMUM ALTERNATE TAX (MAT) PAYABLE U/S 115JB OF THE ACT. IN FACT THE ONLY SOURCE OF INCOME FOR ASSESSE E IS INCOME FROM DIVIDENDS EARNED OUT OF INVESTMENTS MADE BY ACQUIRING SHARES VIZ., M/S. PENNAR INDUSTRIES LTD. DIVIDEND INCOME IS NOT TAXABLE UNDER MAT PROVISIONS AS THE SAME IS REDUCED FROM TOTAL INCOME WHILE COMPUTING TAXABLE INCOME AS PER EXPLANATION - 1 OF SECTION 115JB OF THE INCOME TAX ACT, 1961. HOWEVER WHILE FILING RETURN OF INCOME U/S 139(1) OF THE ACT, INADVERTENTLY ASSESSEE HAS NOT COMPUTED BOOK PROFITS I N RETURN OF INCOME I.E., THE SCHEDU LE OF MAT WAS NOT FILLED PROPERL Y. 4. HOWEVER IN SCHEDULE - E1, WHICH IS IN RESPECT OF DETAILS OF EXEMP T INCOME, ASSESSEE CLEARLY SHOWED THE EXEMPTION ALLOWABLE WITH REGARD TO DIVIDEND INCOME. THE RETURN OF INCOME WAS HOWEVER PROCESSED U/S 143(1) OF THE ACT WHEREIN DEEMED TOTAL INCOME WAS COMPUTED AT RS. 7,48,250/ - AND RAISED A DEMAND OF RS. 1,59,600/ - . SINCE THE COMPUTATION OF BO OK PROFITS IS NOT MADE ACCORDING TO EXPLANATION - 1 OF SECTION 115JB OF THE ACT, APART FROM THE FACT THAT IN THE ABSENCE OF FILING OF COMPUTATION OF MAT PAYABLE U/S 115JB OF TH E ACT, RETURN OF INCOME COULD HAVE BEEN TREATED AS DEFECTIVE U/S 139(9) OF THE ACT AND ASSESSEE COULD HAVE BEEN GIVEN AN OPPORTUNITY. A RECTIFICATION PETITION WAS FILED ON 03.05.2012 AGAINST PROCESSING OF RETURN DATED 20.01.2012 SEEKING CORRECTION OF EARL IER ORDER WHEREIN COMPUTATION U/S 115JB WAS WRONGLY MADE. HOWEVER THE CENTRAL PROCESSING CENTRE CONFIRMED ACTION OF A.O. ON THE GROUND THAT IN COMPUTERIZED P ROCESSING, COMPUTATION U/S 115JB OF THE ACT IS PROPER. SINCE THE EARLIER RECTIFICATION PETITION W AS FILED U/S 154 OF THE ACT TO THE CENTRAL PROCESSING CENTRE, ONE MORE PETITION WAS FILED U/S 154 OF THE ACT BEFORE THE CONCERNED OFFICER SEEKING RECTIFICATION. 5. IN THE MEANTIME, ASSESSEE FILED APPEAL S BEFORE THE FIRST APPELLATE AUTHORITY PENDING SECOND RECTIFICATION PETITION. ACCORDINGLY , APPEALS WERE FILED AGAINST PROCESSING OF RETURN U/S 143(1) OF THE ACT AS WELL AS RECTIFICATION PETITION U/S 154 OF THE ACT WITH A DELAY OF 498 DAYS AND 397 DAYS RESPECTIVELY. AT TH E POINT OF TIME WHEN APPEALS W ERE FILED, ASSESSEE WAS KNOWN AS M/S. ZEN TRADING PVT LTD. HIGH COURT OF JUDICATURE AT HYDERABAD FOR THE STATE OF TELANGANA AND THE STATE OF ANDHRA PRADESH SANCTIONED SCHEME OF AMALGAMATION OF SEVERAL COMPANIES INCLUDING M/S. ZEN TRADING PRIVATE LIMITED AND NOW IT IS KNOWN AS M/S. PENNAR HOLDING PRIVATE LIMITED. 3 6 . THOUGH ASSESSEE FILED PETITION SEEKING CONDONATION OF DELAY, LD. CIT(A) REJECTED THE APPEALS MAINLY ON THE GROUND THAT THERE IS AN INORDINATE DELAY IN FILING APPEALS AND THEY ARE NOT SUPPORTED BY SUFFICIENT CAUSE. HE ALSO OBSERVED THAT EVEN IF ASSESSEES CASE IS PRIMA FACIE STRONG ON MERITS IT DOES NOT CALL FOR SYMPATHY AND DELAY SHOULD NOT BE CONDONE D OUT OF BENEVOLENCE TO THE PARTY SEEKING RELIEF UNLESS ASSESSEE PROVES THAT IT WAS NOT GUILTY OF NEGLIGENCE WHATSOEVER. FURTHER AGGRIEVED, ASSESSEE PREFERRED APPEAL S BEFORE THE TRIBUNAL. 7 . LD COUNSEL FOR THE ASSESSEE SUBMITS THAT ON MERITS ASSESSEE HA S A STRONG PRIMA FACIE CASE INASMUCH AS THE ONLY INCOME I.E., DIVIDEND INCOME EARNED BY ASSESSEE IS EXEMPT U/S 10(34 ) OF THE ACT AND EVEN AS PER PROVISIONS OF SECTION 115JB OF THE ACT THERE WOULD BE NO TAXABLE INCOME IF ASSESSING OFFICER PROPERLY COMPUTES THE INCOME . IT WAS CONTENDED THAT IN INCOME TAX MATTERS THE DUTY OF ASSESSING OFFICER IS TO COLLECT APPROPRIATE TAX AND NOT TO ENCASH UPON MISTAKES COMMITTED BY ASSESSEE AND HE OUGHT TO HAVE BROUGHT TO THE NOTICE OF ASSESSEE AS PROVIDED U/S 139(9) OF THE ACT , WHICH IN TURN PLACES A RESPONSIBILITY ON ASSESSING OFFICER TO INTIMATE THE DEFECT TO ASSESSEE BY GIVING HIM AN OPPORTUNITY TO RECTIFY THE DEFECT WITH IN A PERIOD OF 15 DAYS FROM THE DATE OF SUCH INTIMATION OR WITHIN SUCH FURTHER PERIOD WHEREAS IN THE INSTANT CASE, NO SUCH OPPORTUNITY WAS ALSO GIVEN BY A.O. ASSESSEE WAS UNDER BONAFIDE BELIEF THAT PROCESSING OF RETURN OF INCOME CONTAINS A MISTAKE APPARENT FROM RECORD AND IT I S RECTIFIABLE U/S 154 OF THE ACT. IT WAS THUS CONTENDED THAT DELAY IS SUPPORTED BY A REASONABLE CAUSE. 8 . THOUGH THE LD DR CONTENDED THAT THERE IS AN ABNORMAL DELAY, HE AGREED WITH THE FACT THAT ON MERITS THERE IS NO CASE FOR CHALLENGI NG THE COMPUTATION MADE BY ASSESSEE - COMPANY, EVEN UPON APPLICATION OF SECTION 115JB OF THE ACT . I N SUCH CASE , AN APPROPRIATE COURSE OF ACTION COULD HAVE BEEN TO ISSUE A NOTICE U/S 139(9) OF THE ACT WHICH WAS NOT DONE IN THE INSTANT CASE. 9 . I HAVE CAREFUL LY CONSIDERED RIVAL SUBMISSIONS AND PERUSED RECORD. IT IS NOT IN DISPUTE THAT ON MERITS ASSESSEES INCOME IS EXEMPT FROM TAX, EVE N AFTER APPLICATION OF SECTION 115JB OF THE ACT. THE CIRCUMSTANCES ALSO INDICATE THAT ASSESSEE HAS A REASONABLE CAUSE EVEN IN NOT PREFERRING AN APPEAL . P ROBABLY IT MAY BE ON THE BASIS OF TOO MUCH EXPECTATION FROM ASSESSING OFFICER , WHO IS BOUND BY CIRCULAR ISSUED BY 4 THE CBDT (NO. 14 OF 1955, DATED 11.4.1955) TO COLLECT APPROPRIATE TAX EV EN IF ASSESSEE COMMITS MISTAKES . UNDER T HESE CIRCUMSTANCES, I CONDONE THE DELAY AND ALLOW THE APPEALS FILED BY ASSESSEE. 10 . IN THE RESULT, ORDERS PASSED BY LD. CIT(A) ARE HEREBY SET ASIDE WITH A DIRECTION TO HIM TO DISPOSE OF THE APPEALS ON MERITS. PRONOUNCED ACCORDINGLY IN THE OPEN COURT ON 1 0 TH OCTOBER, 2017. SD/ - (D. MANMOHAN) VICE PRESIDENT HYDERABAD, DATED: 10 TH OCTOBER, 2017 OKK, SR.PS COPY TO 1. MOHD. AFZAL, ADVOCATE, 11 - 5 - 465, SHERSONS RESIDENCY, FLAT NO.402, CRIMINAL COURT ROAD, RED HILLS, HYDERABAD 500 004. 2. ITO, WARD - 3(2), SIGNATURE TOWERS, KONDAPUR, HYDERABAD. 3. CIT (A) - 5, HYDERABAD. 4. PR. CIT - 5, HYDERABAD. 5. D.R. ITAT B - SMC BENCH, HYDERABAD. 6. GUARD FILE