Elnet Technologies Limited, CHENNAI V. CIT, CHENNAI

ITA 751/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58039 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 26-03-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 25-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S MO HARANA
• Assessee Lawyers: V D GOPAL
• Keywords: Business income; Period of limitation; Set aside
• Section: 143(3); 142(1); 143(1); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE SHRI ABRAHAM P.GEORGE, ACCOUNTANT ME MBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO.751/MDS/2011 (ASSESSMENT YEAR: 2003-04) M/S. ELNET TECHNOLOGIES LTD TS 140, BLOCK 2 & 9, ELNET SOFTWARE CITY, RAJIV GANDHI SALAI, TARAMANI, CHENNAI-600 113. PAN: AAACE0785D VS. COMMISSIONER OF INCOME TAX-I, CHENNAI. (APPELLANT) (RESPONDENT) APPELLANT BY : MR. V.D.GOPAL, ADVOCATE RESPONDENT BY : MR. S.MO HARANA, CIT DR DATE OF HEARING : 26 TH MARCH, 2012 DATE OF PRONOUNCEMENT : 26 TH MARCH, 2012 O R D E R PER VIKAS AWASTHY, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY ASSESSEE IMPUGNING ORDER DATED 31.01.2011 PASSED UNDER SECTI ON 263 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED T O AS THE ACT). 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2003-04 ON 24.10.2003 ADMITTING TOTAL INCOME OF ` 1,17,09,203/-. THE RETURN WAS PROCESSED UNDER SECTION 143(1) ON 2.3.20 04. ITA NO.751/MDS/ 2011 2 SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) WAS ISSUED ON 8.10.2004. ANOTHER NOTICE UNDER SECTION 142(1) OF THE ACT WAS ISSUED REQUESTING THE ASSESSEE TO FURNISH CERTA IN DETAILS. THE ASSESSEE HAD CONSTRUCTED A BUILDING CALLED TID EL PARK AND LET OUT THE PROPERTY TO VARIOUS SOFTWARE COMPAN IES. THE ASSESSEE OFFERED THE INCOME FROM THE RENT RECEIPTS AS BUSINESS INCOME. THE ASSESSING OFFICER TOOK OBJECTI ON TO THE SAME AND ASKED THE ASSESSEE TO FILE OBJECTIONS FO R THE PROPOSAL TO TREAT THE RENTAL INCOME AS INCOME FROM HOUSE PROPERTY. THE ASSESSEE SUBMITTED THAT APART FROM PR OVIDING SPACE FOR SOFTWARE COMPANIES, THE ASSESSEE IS OFFER ING A PLUG AND PLAY FACILITY WITH ADEQUATE COMMON AREA TO THE SOFTWARE COMPANIES. IN ADDITION TO OTHER FACILITIES THE ASS ESSEE IS ALSO OFFERING UNINTERRUPTED POWER SUPPLY, AIR-CONDITIONI NG, GENERATOR BACKUP, WATER SUPPLY, MAINTENANCE OF COMM ON AREA AND SECURITY. THE ASSESSING OFFICER VIDE ORDER DATED 21.11.2005 ASSESSED THE INCOME OF THE ASSESSEE AT ` 6,45,70,945/- AND RAISED DEMAND OF ` 2,55,30,718/- INCLUDING INTEREST UNDER SECTION 234B, 234C & 234D. SIMILAR ISSUE WITH ITA NO.751/MDS/ 2011 3 REGARD TO THE INCOME OF THE ASSESSEE TO BE CONSIDER ED UNDER THE HEAD HOUSE PROPERTY INSTEAD OF BUSINESS INCOME FOR THE ASSESSMENT YEAR 2003-04 WAS TAKEN UP BY THE TRIBUNA L IN ITA NO.1797/MDS/96 & 1832/MDS/2006. THE TRIBUNAL VIDE ORDER DATED 3.1.2008 FOLLOWING THE EARLIER DECISION OF THE CO- ORDINATE BENCH OF THE TRIBUNAL DATED 31.10.2002 IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1996-97 IN ITA NO.1606/MDS/1999, HELD THAT THE INCOME OF THE ASSES SE WILL FALL UNDER THE HEAD INCOME FROM BUSINESS AND NOT INCOME FROM HOUSE PROPERTY. THUS, THE ISSUE WITH REGARD TO THE NATURE OF INCOME HAS ALREADY BEEN SETTLED BY THE TR IBUNAL IN ASSESSEES OWN CASE. 3. THE LEARNED CIT ISSUED NOTICE TO THE ASSESSEE UN DER SECTION 263 ON 1.9.2010 WITH THE OBSERVATION THAT IN THE PROFIT AND LOSS ACCOUNT, THE ASSESSEE HAD SHOWN AN AMOUNT OF ` 2,95,47,858/- AS EXTRAORDINARY ITEM. IN FORM 3CD (R EPORT UNDER SECTION 44AB) UNDER ITEM NO.20, THE ACCOUNTAN T HAS CERTIFIED THAT THE PROFIT CHARGEABLE TO TAX UNDER S ECTION 41 IS ` 2,95,47,858/-. HOWEVER THIS WAS NOT CONSIDERED BY T HE ASSESSEE TO ARRIVE AT THE TAXABLE INCOME. IT IS STA TED THAT THE ITA NO.751/MDS/ 2011 4 AMOUNT WAS OFFERED IN THE SUBSEQUENT ASSESSMENT YEA R 2004-05. BASED ON THE ACCOUNTANTS CERTIFICATE, THE AMOUNT WAS ASSESSABLE IN THE ASSESSMENT YEAR 2003-04 ITSEL F. NON- CONSIDERATION OF THE ABOVE DISCLOSURE HAS RESULTED IN UNDER- ASSESSMENT OF INCOME BY ` 295.47 LAKHS AND SHORT LEVY OF TAX AMOUNTING TO ` 144.69 LAKHS. 4. SHRI V.D.GOPAL, COUNSEL APPEARING ON BEHALF OF T HE ASSESSEE SUBMITTED THAT NOTICE DATED 1.9.2010 UNDE R SECTION 263 OF THE ACT HAS BEEN SERVED ON THE ASSESSEE AFTE R CONSIDERABLE DELAY AND THUS IS BARRED BY LIMITATION . HE SUBMITTED THAT AS PER THE PROVISIONS OF SECTION 263 (2), NO ORDER CAN BE REVISED AFTER EXPIRY OF TWO YEARS FROM THE END OF FINANCIAL YEAR IN WHICH THE ORDER SOUGHT TO BE REVI SED WAS PASSED. THE ASSESSMENT IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2003-04 WAS COMPLETED ON 21.11.2005 AND THE INCOME WAS ASSESSED AT ` 6,45,70,950/-. THUS, THE LIMITATION FOR ISSUING NOTICE UNDER SECTION 263 HA S EXPIRED ON 31.03.2008. HE CONTENDED THAT THE NOTICE SERVED UND ER SECTION 263 IS BAD IN LAW AND IS INVALID. LEARNED C OUNSEL POINTED OUT THAT REPLY TO NOTICE UNDER SECTION 263 WAS GIVEN ITA NO.751/MDS/ 2011 5 BY ASSESSEE ON 8.9.2010 WHICH IS PLACED AT PAGES 35 & 36 OF PAPER BOOK. 5. ON THE OTHER HAND, LEARNED D.R., SUPPORTED THE O RDER UNDER SECTION 263 PASSED BY THE LEARNED CIT. HE SUB MITTED THAT THE ASSESSING OFFICER GAVE EFFECT TO THE ORDER DATED 3.1.2008 OF ITAT PASSED IN ITA NO. 1797/MDS/2006 AND ITA NO.1832/MDS/2006 AND ACCORDINGLY PASSED ORDER ON 21.5.2008. THE RENTAL RECEIPTS WERE CONSIDERED BY H IM AS BUSINESS. IT IS FROM THIS DATE THAT THE LIMITATION FOR ISSUE OF NOTICE UNDER SECTION 263 WOULD START AND NOT FROM T HE DATE OF ORIGINAL ORDER DATED 21.11.2005. THE NOTICE ISSUED BY THE CIT IS THUS WELL WITHIN THE PRESCRIBED PERIOD OF LIMITA TION. 6. THE LEARNED COUNSEL, CONTROVERTING THE SUBMISSIO NS OF LEARNED DR., SUBMITTED THAT CIT-I, CHENNAI FAILED T O APPRECIATE THAT CONSEQUENTIAL ORDER PASSED BY ASSES SING OFFICER GIVING EFFECT TO THE TRIBUNALS ORDER ON 21 .05.2008 DOES NOT INVOLVE ANY CONSEQUENTIAL ASPECTS RELATING TO SECTION 41 AND AS A RESULT ORDER DATED 21.05.2008 CANNOT C ONFER JURISDICTION ON THE CIT TO REVISE THE ORDER PASSED ON ITA NO.751/MDS/ 2011 6 21.11.2005. THE LEARNED COUNSEL IN ORDER TO SUPPORT HIS CASE RELIED ON THE JUDGEMENTS PASSED BY THE HONBLE MADR AS HIGH COURT IN THE CASE OF CIT VS. SRIRAM ENGINEERING CON STRUCTION CO .LTD. REPORTED AS 330 ITR 568(MAD) AND THE JUDG EMENT OF HONBLE SUPREME COURT IN THE CASE OF ALAGENDRA FINA NCE LTD., REPORTED AS 293 ITR 1(SC). 7. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE DOCUMENTS ON RECORD. IT IS AN ADMITTED FACT THAT TH E ASSESSMENT IN THE CASE OF THE ASSESSEE FOR THE ASSE SSMENT YEAR 2003-04 WAS COMPLETED ON 21.11.2005 UNDER SECT ION 143(3) OF THE ACT. IT IS ALSO AN ADMITTED FACT THAT AN AMOUNT OF ` 2,95,47,858/-, CHARGEABLE TO TAX UNDER SECTION 41 S HOWN AS EXTRAORDINARY ITEM IN THE PROFIT AND LOSS ACCOUNT OF THE YEAR 2002-03 WAS NOT CONSIDERED BY THE ASSESSEE TO ARRIV E AT TAXABLE INCOME FOR THE RELEVANT ASSESSMENT YEAR 200 3-04. THE SAID AMOUNT WAS OFFERED TO TAX BY THE ASSESSEE IN THE SUBSEQUENT ASSESSMENT YEAR I.E. 2004-05. THE SAID A MOUNT WAS ALSO NOT TAKEN INTO CONSIDERATION BY THE ASSESS ING OFFICER WHILE FINALIZATION OF THE ASSESSMENT ON 21.11.2005. AS PER ITA NO.751/MDS/ 2011 7 THE PROVISIONS OF SUB-SECTION 2 OF SECTION 263 OF T HE ACT NO ORDER SHALL BE MADE UNDER SUB-SECTION(1) AFTER EXPI RY OF TWO YEARS FROM THE END OF FINANCIAL YEAR IN WHICH THE O RDER SOUGHT TO BE REVISED WAS PASSED. THE ABOVE PROVISION CLE ARLY INDICATES THAT THE ORIGINAL ORDER PASSED CAN BE REV ISED WITHIN THE PERIOD OF TWO YEARS FROM THE END OF THE FINANCI AL YEAR IN WHICH THE ORDER WAS PASSED. IN THE INSTANT CASE TH E ORIGINAL ORDER WAS PASSED ON 21.11.2005. THEREFORE LIMITATIO N PERIOD FOR REVISING THE SAID ORDER EXPIRES ON 31.03.2008. THE HONBLE DIVISION BENCH OF THE MADRAS HIGH COURT IN THE CASE OF SHRIRAM ENGINEERING CONSTRUCTION CO. LTD. (SUPRA ) HAS HELD THAT PERIOD OF LIMITATION HAS TO BE RECKONED F ROM THE DATE OF THE ORDER SOUGHT TO BE REVISED AND NOT FROM TH E DATE OF SUBSEQUENT ORDER. WHILE PASSING THE ABOVE SAID JUDG EMENT, THE DIVISION BENCH HAS RELIED ON THE JUDGEMENT OF H ONBLE SUPREME COURT IN THE CASE OF CIT VS. ALAGENDRAN FIN ANCE LTD. (SUPRA). A PERUSAL OF THE NOTICE DATED 1.9.201 0 ISSUED UNDER SECTION 263 SHOWS THAT THE ORDER REFERRED TO FOR REVISION IS THE ORIGINAL ASSESSMENT ORDER DATED 21.11.2005 U /S.143(3) AND NOT THE ORDER DATED 21.05.2008 AS CONTENDED BY THE ITA NO.751/MDS/ 2011 8 LEARNED DR. MOREOVER, IN VIEW OF THE JUDGEMENT OF T HE DIVISION BENCH OF THE HONBLE JURISDICTIONAL HIGH C OURT, THE CONTENTION OF THE LEARNED DR IS NOT TENABLE. 8. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED O PINION THAT NOTICE UNDER SECTION 263 ISSUED BY THE LEARNED CIT IS BARRED BY LIMITATION AND THUS THE IMPUGNED ORDER PA SSED BY HIM UNDER SECTION 263 IS NOT SUSTAINABLE IN THE EYE OF LAW. THE IMPUGNED ORDER IS THEREFORE SET ASIDE AND THE A PPEAL OF THE ASSESSEE IS ALLOWED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH MARCH, 2012. SD/- SD/- (ABRAHAM P.GEORGE) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 26 TH MARCH, 2012. SOMU COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6 ) G.F .