Kerala Shipping and Inland Navigation corpn ltd, Cochin V. The DCIT, Cochin

ITA 782/COCH/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73913 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 05-03-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 06-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LATHA V KUMAR
• Assessee Lawyers: RADH ESH L BHATTCA
• Keywords: Opportunity of being heard; Principle of natural justice

Judgement Text

ITA NO. 782/COCH/2013 KERALA SHIPPING & INLAND NAVIGATION CORPN LTD 1 IN THE INCOME TAX APPE L LA TE T R IBUNAL COCHIN BENCH , COCHIN BEFORE S/SH RI N.R.S. GANESAN, JM & B. R. BASKARAN, AM ITA NO. 782/COCH/2013 (ASST YEAR 2007 - 08 ) KERALA SHIPPING AND INLAND NAVIGATION CORPN. LTD GANDHI NAGAR , KOCHI 20 VS THE DY COMMR OF IN COME TAX CIRCLE 2(1), KOCHI ( APPELLANT) (RESPONDENT) PAN NO. AABCK4818L ASSESSEE BY SHRI RADH ESH L BHATT,CA REVENUE BY SMT LATHA V KUMAR, JR DR DATE OF HEARING 05 TH MARCH 2014 DATE OF PRONOUNCEMENT 7 TH MARCH 2014 OR D ER PER B.R. BAS KARAN, AM: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 27TH SEPT 2013 PASSED BY THE LD CIT(A ) - II, KOCHI AND IT RELATES TO THE AY 2007 - 08. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF THE LD CIT(A) IN CONFIRMING THE ACTION OF TH E AO DECLINING TO ALLOW SET OFF AND CARRY FORWARD OF LOSS FROM BUSINESS . 2 THE FACTS RELATING TO THE ISSUE ARE STATED IN BRIEF: THE ASSESSEE COMPANY IS WHOLLY OWNED BY GOVERNMENT OF KERALA AND IS ENGAGED IN THE BUSINESS OF FERRY SERVICE, CARGO WATER TRAN SPORTATION, REPAIRING AND MAINTENANCE OF MARINE VESSELS, BOAT BUILDING ETC. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION BEFORE THE DUE DATE PRESCRIBED FOR FILING OF THE RETURN. SINCE THE STATUTORY AUDIT OF THE ACCOUNTS OF ITA NO. 782/COCH/2013 KERALA SHIPPING & INLAND NAVIGATION CORPN LTD 2 THE ASSESSEE WAS NOT COMPLETED BY THAT POINT OF TIME , THE ASSESSEE FILED ITS RETURN OF INCOME ON THE BASIS OF PROVISIONAL ACCOUNTS. THE ASSESSEE ALSO FILED TAX AUDIT REPORT ALONG WITH THE RETURN OF INCOME, WHEREIN THE AUDITOR HAD MADE THE FOLLOWING QUALIFICA TION: WE REPORT THAT THE STATUTORY AUDIT OF M/S KERALA SHIPPING & INLAND NAVIGATION CORPORATION LTD (PA N AABCK4818L ) , ERNAKULUM, KOCHI 682 030 FOR THE YEAR 2006 - 07 IS BEING CONDUCTED BY M/S JAYAN & KRISHNANKUTTY, CHARTERED ACCOUNTANTS ERNAKULUM IN PURSUAN CE OF THE PROVISIONS OF THE COMPANIES ACT, 1956 AND THE AUDIT IS NOT COMPLETED AS ON DATE AND HENCE THEIR AUDIT REPORT IS NOT ANNEXED. A COPY OF THE UNAUDITED BALANCE SHEET AS AT 31 ST MARCH 2007 AND PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED ON THAT DATE ALO NG WITH THE DOCUMENTS DECLARED BY THE RELEVANT ACT TO BE PART OF OR ANNEXED TO ARE ENCLOSED. 2.1 THE AO TOOK THE VIEW THAT THE PROVISION AL PROFIT AND LOSS ACCOUNT AND B ALANCE S HEET FILED BY THE ASSESSEE AND ALSO THE TAX AUDIT REPORT RELATING THERETO CA NNOT BE SAID TO BE COMPLETE AND FLAWLESS IN THE ABSENCE OF AUTHENTIC REPORT OF THE FINANCIAL STATEMENTS (I.E., AUDITED FINANCIAL STATEMENTS) . HENCE, THE AO DID NOT RECOGNIZE THE LOSS RETURNED BY THE ASSESSEE AND ACCORDINGLY ASSESSED THE INCOME FROM BUSINE SS AT NIL FIGURE. IN EFFECT, THE AO DID NOT ALLOW THE SET OFF OF LOSS AND ALSO CARRY FORWARD LOSS CLAIMED BY THE ASSESSEE UNDER THE HEAD INCOME FROM BUSINESS . IN THE APPEAL FILED BY THE ASSESSEE, THE LD CIT(A) CONFIRMED THE ACTION OF THE AO AND HENCE, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 3 WE HAVE HEARD THE RIVAL CONTENTION S AND CAREFULLY PERUSED THE RECORD. ADMITTEDLY , THE ASSESSEE HAS FILED THE RETURN OF INCOME WITHIN THE DUE DATE PRESCRIBED U/S 139(1) OF THE ACT. SINCE THE ASSESSEE COMP ANY IS OWNED BY THE GOVERNMENT OF ITA NO. 782/COCH/2013 KERALA SHIPPING & INLAND NAVIGATION CORPN LTD 3 KERALA, IT IS SUBMITTED THAT THE STATUTORY AUDIT OF THE ASSESSEE COMPANY HAS TO BE CARRIED OUT BY THE AUDITOR APPOINTED BY THE COMP TROLLER OF AUDITOR GENERA L OF INDIA. ACCORDING TO THE LD AR, THERE WAS A DELAY IN APPOINTI NG THE STATUTORY AUDITORS AND CONSEQUENTLY THERE WAS DELAY IN COMPLETING THE AUDIT OF THE ASSESSEE COMPANY UNDER THE PROVISIONS OF COMPANIES ACT. HENCE, THE ASSESSEE COMPANY WAS CONSTRAINED TO FILE THE RETURN OF INCOME ON THE BASIS OF PROVISIONAL FINANCIA L STATEMENTS. THE LD AR SUBMITTED THAT THE AUDIT OF THE ASSESSEE COMPANY FOR THE YEAR UNDER CONSIDERATION HAS SINCE BEEN COMPLETED. 4. WE HAVE ALREADY NOTICED THAT THE ASSESSING OFFICER DID NOT RECOGNIZE THE LOSS FROM BUSINESS DECLARED BY THE ASSES SEE ONLY FOR THE REASON THAT IT WAS CLAIMED ON THE BASIS OF PROVISIONAL FINANCIAL STATEMENTS, WHICH THE AO CONSIDERED AS AN UN AUTHENTICATED ONE. HOWEVER, THE LD A.R HAS NOW SUBMITTED THAT THE STATUTORY AUDIT OF THE ASSESSEE COMPANY FOR THE YEAR UNDER CONS IDERATION HAS SINCE BEEN COMPLETED, MEANING THEREBY, THE ASSESSEE IS HAVING AUDITED FINANCIAL STATEMENTS WITH IT. ACCOR DINGLY WE ARE OF THE VIEW THAT IN THE INTEREST OF NATURAL JUSTICE, THE L OSS FROM BUSINESS RETURNED BY THE ASSESSEE MAY BE EXAMINED AFRES H ON THE BASIS OF THE AUDIT ED FINANCIAL STATEMENTS . ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD CIT(A) AND RESTORE THE MATTER BACK TO THE FILE OF THE AO WITH THE DIRECTION TO RE - DO THE ASSESSMENT AFRESH ON THE BASIS OF AUDIT ED ACCOUNTS AND FINANCIAL ST ATEMENT S AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH LAW , AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ITA NO. 782/COCH/2013 KERALA SHIPPING & INLAND NAVIGATION CORPN LTD 4 4 IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS TREA TED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE O PEN COURT ON THIS 7 TH DAY OF MAR 2014 . SD/ - SD/ - ( N.R.S. GANESAN ) ( B.R. BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER COCHIN: DATED 7 TH MAR 201 4 RAJ* COPY TO: 1. APPELLANT KERALA SHIPPING & INLAND NAVIGATION CORPN LTD, GANDHI NAGAR, KOCHI - 20 2. RESPONDENT THE DY COMMR OF INCOME TAX, CIRCLE 2(1), KOCHI 3. CIT(A) 4. CIT , - 5. DR 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN