Quippo Infrastructure Limited(Formerly Known as Quippo Construction Equipment Limited), Hyderabad V. Asst. Commissioner of Income Tax, Circle-16(1), Hyderabad

ITA 818/Hyd/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4300 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 22-04-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 03-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KOMALI KRISHNA
• Keywords: Depreciation; Carry forward of business losses; Opportunity of being heard; Principle of natural justice; Wholly owned subsidiary; Revised return
• Section: 43B; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A ', HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN , ACCOUNTANT MEMBER ITA NO. 818 / HYD/201 8 ASSESSMENT YEAR: 20 13 - 14 QUIPPO INFRASTRUCTURE LTD. (FORMERLY KNOWN AS QUIPPO CONSTRUCTION EQUIPMENT LTD.) , HYDERABAD. PAN A AACQ1735F VS. ASST. COMMISSIONER OF INCOME - TAX, CIRCLE 16 ( 1 ), HYDERABAD A PPELLANT RESPONDENT ASSESSEE BY: S H RI AMIT AGARWAL REVENUE BY: S MT. KOMALI KRISHNA DATE OF HEARING: 22 / 0 4 / 201 9 DATE OF PRONOUNCEMENT: 10 / 0 5 /201 9 O R D E R PER S. RIFAUR RAHMAN , AM: T H IS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A) 4 , HYDERABAD, DATED, 1 2 / 0 2 /201 8 FOR AY 20 13 - 14. 2. BRIEF FACTS OF THE CASE ARE, ASSESSEE COMPANY ENGAGED IN THE BUSINESS OF INFRASTRUCTURE/CONSTRUCTION EQUIPMENT RENTAL SERVICES, FILED ITS RETURN OF INCOME FOR THE A.Y. 2012 - 13 DECLARING TOTAL LOSS AT RS.1,90,60,005/ - AND CLAIMED REFUND OF RS. 84,75,171/ - . LATER, THE A SSESSEE COM PANY FILED REVISED RETURN OF INCOME ADMITTING LOSS AT RS. 1,90,60,005/ - AND CLAIMED REFUND OF RS. 1,03,02,554/ - . THE CASE WAS SELECTED FOR SCRUTINY AND ACCORDINGLY THE ASSESSING OFFICER ISSUED NOTICES. IN RESPONSE TO THE NOTICES, THE AR OF THE A SSESSEE AP PEARED AND FILED THE INFORMATION. AFTER CONSIDERING THE I.T.A. NO. 818 /HYD/1 8 QUIPPO INFRASTRUCTURE LTD., HYD. 2 INFORMATION, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT BY MAKING ADDITION OF RS. 1,84,71,549/ - TOWARDS DISALLOWANCE OF EXCESS DEPRECIATION, RS. 8,00,000/ - TOWARDS SITE EXPENSES AND ASSESSED TOTAL INCOME AT RS. 2,11,544/ - . 3. WHEN THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), THE CIT(A) DELETED THE DISALLOWANCE MADE TOWARDS EXCESS DEPRECIATION AND WITH REGARD TO THE ADDITION TOWARDS SITE EXPENSES, SUSTAINED THE ADDITION TO THE EXTENT OF 50% I.E. RS. 4,00,000/ - AS AGAINST THE ADDITION OF RS. 8,00,000/ - MADE BY THE AO. 4. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) [HERE - IN - AFTER REFERRED TO AS LD. CIT(APPEALS)L WAS NOT JUSTIFIED & GROSSLY ERRED IN CONFIRMING 50% OF AD - HOC DISALLOWANCE OF SITE EXPENSES TO THE TUNE OF RS. 4,00,000/ - . 2.0 THAT ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE, THE LD. CIT (APPEALS) WAS NOT JUSTIFIED & GROSSLY ERRED IN CONFIRMING THE ACTION OF THE AO IN ALLEGING THAT THE CLAIM OF BUSINESS LOSS WAS WITHDRAWN AFTER THE SAME WAS QUESTIONED BY HIM DURING THE COURSE OF ASSESSMENT, WHEREAS TO THE CONTRARY IT WAS THE APPELLANT WHICH HAD WITHDRAWN THE CLAIM AND BROUGHT THE SAID FACT OF THE WITHDRAWAL TO THE KNOWLEDGE OF THE AO. 3.0 THAT THE APPELLANT CRAVES LEAVE TO ADD, TO AMEND, MODIFY, RESCIND, SUPPLEMENT OR ALTER ANY OF THE GROUNDS STATED HERE - IN - ABOVE, EITHER BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL. 5. AS REGARDS GROUND NO. 1 REGARDING DISALLOWANCE OF SITE EXPENSES, THE AO OBSERVED THAT THE ASSESSEE COMPANY PRODUCED VOUCHERS/BILLS PERTAINING TO THESE EXPENSES, FROM WHICH IT WAS FOUND THAT SOME OF THE VOUCHERS WERE SELF - MADE I.T.A. NO. 818 /HYD/1 8 QUIPPO INFRASTRUCTURE LTD., HYD. 3 AND DID NOT CONTAIN FULL DETAILS. WHEN THE AO ASKED THE ASSESSEE TO EXPLAIN, IT WAS STATED THAT SOMETIMES IT IS NOT POSSIBLE TO RECORD ALL THE PARTICULARS. THE AO, ACCORDINGLY, DISALLOWED AN AMOUNT OF RS. 8,00,000 / - TOWARDS NON - MAINTENANCE OF PROPER VOUCHERS IN RESPECT OF SITE EXPENSES. 6. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CIT(A) OBSERVED THAT DURING THE COURSE OF APPEAL PROCEEDINGS, THE ASSESSEE SUBMITTED CERTAIN BILLS/VOUCHERS. KEEPING IN VIEW OF CERTAIN VOUCHERS, WHICH WERE NOT PROPERLY MAINTAINED, THE CIT(A) SUSTAIN ED 50% OF THE DISALLOWANCE OUT OF THE DISALLOWANCE OF RS. 8,00,000/ - MADE BY THE AO. 7. BEFORE US, L D. AR SUBMITTED THAT THE AO DID NOT SPECIFICALLY SOUGHT FOR ANY DETAILS RELATING TO SITE EXPENSES AND RESORTED TO ADHOC DISALLOWANCE, WHICH IS MERELY BA SED ON ASSUMPTIONS AND HENCE NOT SUSTAINABLE. IN THIS REGARD, HE RELIED ON DECISION OF THE ITAT, KOLKATA IN THE CASE OF WASHABARIE TEA CO. PVT. LD. VS. DCIT [1997] 59 TTJ 693 (CAL.) WHEREIN IT WAS HELD THAT NO PART OF STAFF WELFARE EXPENSES COULD BE DISAL LOWED WHERE IT COULD NOT BE PROVED THAT THE EXPENSES WERE NOT PROPERLY VOUCHED. 7.1 THE LD. AR FURTHER SUBMITTED THAT THE AO MADE AN ADHOC DISALLOWANCE OF SITE EXPENSES WITHOUT PROVIDING ANY OPPORTUNITY OF BEING HEARD TO THE ASSESSEE NOR REQUISITIONING ANY DOCUMENTS OR DETAILS FROM THE ASSESSEE AND HENCE, THIS AMOUNTS TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. IN THIS REGARD HE RELIED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF SARUPCHAND HUKAMCHAND IN RE., [1945] 13 ITR 245 (BOM.) WH EREIN IT WAS HELD THAT IN FAIRNESS AND IN LAW, I THINK, IT IS THE DUTY OF THE AUTHORITY ENTRUSTED WITH THE TASK OF RECORDING ITS FINDING, TO GIVE EVERY OPPORTUNITY TO OTHER SIDE TO I.T.A. NO. 818 /HYD/1 8 QUIPPO INFRASTRUCTURE LTD., HYD. 4 MEET THE CASE WHICH THE AUTHORITY THOUGH WAS IN EXISTENCE. WITHOUT GIVING SUCH OPPORTUNITY TO THE ASSESSEE IT IS NOT PROPER TO RELY ON ANY EVIDENCE OR ANY FACT WHICH HE ULTIMATELY TAKES INTO CONSIDERATION FOR ARRIVING AT HIS CONCLUSION. 8. LD. DR, ON THE OTHER HAND, RELIED ON THE ORDER OF CIT(A). 9. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE NOTICE THAT AO MADE ADHOC DISALLOWANCE, MERELY, OBSERVING THAT CERTAIN VOUCHERS/BILLS DOES NOT CARRY ANY DETAILS OR VOUC HERS ARE NOT MAINTAINED PROPERLY. CIT(A) HAS REDUCED THE ADHOC DISALLOWANCE. IN OUR VIEW IT IS NOT PROPER FOR AO TO MAKE ADHOC DISALLOWANCE. HE SHOULD HAVE DETERMINED THE ACTUAL EXPENSES, FOR WHICH, ASSESSEE HAS NOT MAINTAINED PROPER VOUCHERS. THEREFORE, W E REMIT THIS ISSUE BACK TO THE FILE OF AO TO VERIFY THE VOUCHERS THOROUGHLY AND MAKE DISALLOWANCE ONLY TO THE EXTENT ASSESSEE HAS NOT MAINTAINED PROPER BILLS/VOUCHERS. THE ASSESSEE MAY BE GIVEN PROPER OPPORTUNITY OF BEING HEARD BEFORE MAKING ANY DISALLOWAN CE. ACCORDINGLY, GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 10. AS REGARDS GROUND NO.2, WITHDRAWING THE CLAIM OF BUSINESS LOSS, THE AO OBSERVED THAT O N GOING THROUGH THE AUDITED FINANCIAL STATEMENTS, IT IS SEEN THAT THERE IS A CHA NGE IN THE SHARE HOLDING PATTERN OF THE ASSESSEE COMPANY. FOR THE YEAR ENDING 31 - 03 - 2012, SREI INFRASTRUCTURE FINANCE LTD. WAS HOLDING 100%EQUITY IN THE ASSESSEE COMPANY. AS SUCH THE ASSESSEE COMPANY WAS WHOLLY OWNED SUBSIDIARY OF SREI INFRASTRUCTURE FINA NCE LTD . FURTHER, HE OBSERVED THAT D URING THE YEAR, THE SHAREHOLDING OF SREI GOT REDUCED TO 45.45% AND M/S QUIPPO INFOCOM LTD ACQUIRED 54.55% OF SHARE HOLDING AND BECAME THE HOLDING COMPANY. FURTHER THE ASSESSEE COMPANY I.T.A. NO. 818 /HYD/1 8 QUIPPO INFRASTRUCTURE LTD., HYD. 5 DECLARED PROFIT BEFORE TAX AT RS. ( - ) RS. 10,47,02,000/ - .IN T HE COMPUTATION OF INCOME, TOTAL INCOME WAS COMPUTED AT ( - ) RS. 1,90,60,010/ - . 10.1 THE ASSESSEE COMPANY WAS ASKED AS TO WHY THE LOSS MAY NOT BE ALLOWED TO BE CARRIED FORWARD. THE ASSESSEE COMPANY FILED A LETTER STATING THAT THE ASSESSEE COMPANY INADVERTENTLY CARRIED FORWARD THE LOSSES OF PREVIOUS YEARS 2008 - 09 AND 2009 - 10 RELEVANT TO THE ASSESSMENT YEARS 2009 - 10 AND 2010 - 11 AMOUNTING TO RS. 2,36,93,302/ - AND RS. 13.05.08.841/ - RESPECTIVELY IN ITS RETURN OF INCOME. I T WAS FURTHER STATED THAT VIDE ITS RETURN OF INCOME FOR THE A. Y . 2015 - 16 HAS WITHDRAWN THE AFORESAID LOSSES AND HAS NOT CLAIMED ANY CARRY FORWARD AND SET OFF OF THE SAME TILL DATE. IT FURTHER REQUESTED THAT THE CLAIM OF CARRY FORWARD OF BUSINESS LOSSES AMOUNTING TO RS. 15,42,02,143/ - BE TREATED AS WITHDRAWN WHILE COMPLETING THE ASSESSMENT U/S 143(3) OF THE ACT. 10.2 THE AO OBSERVED THAT T HE ASSESSEE COMPANY AS PER PROVISIONS OF SEC. 79 WAS NOT PE RMI TTED TO CARRY FORWARD OF LOSSES. HAD THE MISTAKE BEEN INADVERTENT , THE ASSESSEE COMPANY OUGHT TO HAVE FILED THE REVISED RETURN OF INCOME WHICH IT DID NOT DO. ONLY ON BEING QUESTIONED BY THE DEPARTMENT, THE ASSESSEE COMPANY FILED A LETTER WITHDRAWING THE CLAIM. THUS, THE AO DENIED THE CLAIM OF THE ASSESSEE COMPANY OF CARRY FO RWARD LOSSES . 11. THE SUBMISSIONS OF THE ASSESSEE WERE EXTRACTED BY THE CIT(A) IN HIS ORDER AT PAGES 11 TO 13 AND AFTER CONSIDERING THE SAME, THE CIT(A) CONFIRMED THE ADDITION MADE BY THE AO. 12. THE LD. AR SUBMITTED THAT THE ASSESSEE VIDE MODIFICATION LETTER FILED ON 16/03/2016 LODGED FOR WITHDRAWAL OF I.T.A. NO. 818 /HYD/1 8 QUIPPO INFRASTRUCTURE LTD., HYD. 6 THE CARRY FORWARD OF LOSSES. HE SUBMITTED THAT, THE AO IS OBLIGED TO CONSIDER FRESH CLAIM FILED VIDE MODIFICATION LETTER MADE , DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IN THIS REGARD, HE RELIED ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PRUTHVI BROKERS & SHAREHOLDERS [2012] 349 ITR 336 WHICH DEALT WITH A CLAIM FOR DEDUCTION U/S 43B MADE VIA LETTER AND NOT IN THE RETURN OF INCOME. THE HONBLE COURT HELD THAT AN ASSESSEE IS ENTITLED TO RAISE ADDITIONAL GROUNDS NOT MERELY IN TERMS OF LEGAL SUBMISSIONS, BUT ALSO ADDITIONAL CLAIMS NOT MADE IN THE RETURN FILED BY IT. 13. LD. D R SUBMITTED THAT THE ASSESSEE FILED RETURN OF INCOME ON 30/11/2013 AND THE ASSESSEE ALSO FILED REVISED RETURN OF INCOME ON 30/03/2015. HE CONTENDED THAT THE ASSESSEE COULD HAVE RECTIFIED THE ABOVE MISTAKE IN THE REVISED RETURN OF INCOME, HENCE, THE AO IS R IGHT IN DENYING THE ASSESSEES CLAIM. 14. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE NOTICE THAT THE SHARE HOLDING PATTERN IN THE COMPANY AND CONTROLLING INTEREST HAD UNDERGONE CHANGE. IT IS TRUE THAT ASSESSEE IS NOT ELIGIBLE TO CARRY FORWARD THE LOSS. THIS MISTAKE WAS POINTED OUT BY AO AND THE SAME WAS ACCEPTED BY ASSESSEE BY FILING ACCEPTANCE LETTER INSTEAD OF MODIFYING THE RETURN OF INCOME. AO MAY NOT HAVE POWER TO ALLOW THE ABOVE MISTAKE BUT AS PER THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF PRUTHVI BROKERS & SHAREHOLDERS (SUPRA), THE APPELLATE AUTHORITIES HAVE POWER TO ALLOW THE LEGAL CLAIM OF THE ASSESSEE. LD. CIT(A) COULD HAVE APPRECIATED THE FACTS AND ALLOWED THE CLAIM OF THE ASSESSEE. THEREFORE, WE DIRECT THE AO TO VERIFY THE CLAIM OF THE ASSESSEE AND ACCORDINGLY ALLOW THE CLAIM OF THE ASSESSEE. I.T.A. NO. 818 /HYD/1 8 QUIPPO INFRASTRUCTURE LTD., HYD. 7 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 10 TH MAY , 201 9. SD/ - ( P. MADHAVI DEVI ) JUDICIAL MEMBER SD/ - ( S. RIFAUR RAHMAN ) ACCOUNTANT MEMBER HYDERABAD, DATED 10 TH MAY , 201 9. KV COPY FORWARDED TO: 1. QUIPPO INFRASTRUCTURE LTD., NAC CAMPUS, IZZAT NAGAR POST, KONDAPUR, CYBERABAD, HYDERABAD 500 032 . 2 . ACIT , CIRCLE 16(1), 2 ND FLOOR B BLOC, INCOME TAX TOWERS, MASAB TANK, HYDERABAD. 3 . CIT (A) - 4 , HYDERABAD 4. PR. CIT 4 , HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE