M/s Srinivasa Builders, Bangalore V. DCIT, Bangalore

ITA 89/BANG/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63754 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 1997-1998
• Appeal Filed On: 23-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SARAVANAN
• Assessee Lawyers: P DINESH
• Keywords: Business income; Revised return
• Section: 260A; 154; 15

Judgement Text

PAGE 1 OF 9 ITA NO.89/ BANG/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.89/BANG/2012 (ASST. YEAR 1997-98) M/S SRINIVASA BUILDERS, NO.17, M G ROAD, BANGALORE. PA NO.AAEFS 9860 L VS THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1(1), BANGALORE-1. (APPELLANT) (RESPONDENT) DATE OF HEARING : 27.09.2012 DATE OF PRONOUNCEMENT : 19.10.2012 APPELLANT BY : SHRI P DINESH, ADVOCATE RESPONDENT BY : SHRI B SARAVANAN, JCIT OR DER PER GEORGE GEORGE K : THIS APPEAL INSTITUTED BY THE ASSESSEE IS DIRECTE D AGAINST THE ORDER OF THE CIT(A)-I, BANGALORE DATED 31/10/2011. THE RELEVANT ASSESSMENT YEAR IS 1997-98. 2. THE GROUNDS OF APPEAL RAISED READ AS FOLLOWS:- I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE ORDER OF THE ASSESSING OFFICER DECLINING TO ALLOW THE BENEFIT OF CARRY FORWARD OF BUSINESS LOSS FOR SET OFF IN THE SUBSEQU ENT YEAR WAS BAD IN LAW AND ACCORDINGLY LIABLE TO BE SET ASIDE. PAGE 2 OF 9 ITA NO.89/ BANG/2012 2 II) THE LEARNED CIT(A) FURTHER OUGHT TO HAVE APPRECIATE D THAT THE HONBLE APPELLATE TRIBUNAL AFTER CONSIDERI NG THE PROVISIONS OF SEC.139(3) RWS 139(1) OF THE ACT HAS HELD THAT THE APPELLANT WAS ENTITLED TO THE BENEFIT OF C ARRY FORWARD OF BUSINESS LOSSES FOR SET OFF IN THE SUBSE QUENT YEAR BY QUASHING THE ORDER UNDER SECTION 154 OF THE A CT AND WHICH HAS REACHED ITS FINALITY, ACCORDINGLY THE ASSESSING OFFICER OUGHT TO HAVE ALLOWED THE BENEFIT OF CARRY FORWARD OF BUSINESS LOSS FOR SET OFF IN THE SUBSEQUENT YEAR BY FOLLOWING THE DIRECTION OF THE HON BLE ITAT. III) THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT T HE ORDER OF THE TRIBUNAL DATED 30.8.2002 WAS CHALLENGE D IN APPEAL BEFORE THE HONBLE HIGH COURT OF KARNATAKA B Y THE APPELLANT ON TWO SPECIFIC ISSUES, ONE WITH REGARD T O THE ALLOWANCE OF INTEREST AND THE OTHER WITH REGARD TO APPLICATION OF SECTION 40(B) OF THE ACT AND ON THIS LIMITED PURPOSE THE ISSUE WAS RESTORED TO THE FILE OF THE ASSESSING OFFICER AND NOT THE ASSESSMENT IN ITS ENT IRETY. IV) THE LEARNED CIT(A) FAILED TO APPRECIATE THE ORDER P ASSED BY THE ASSESSING OFFICER WAS ONLY A CONSEQUENTIAL ORD ER TO CONSIDER ONLY TWO OF THE ISSUES RAISED BEFORE TH E HONBLE HIGH COURT AND THE HONBLE COURT HAD NOT SE T ASIDE THE ASSESSMENT ORIGINALLY MADE TO PASS FRESH ASSESSMENT ORDER DE-NOVO. V) THE LEARNED CIT(A) FURTHER ERRED IN HOLDING THAT SI NCE THE ASSESSING OFFICER HAS TO KEEP THE ISSUE WITH RE GARD TO CARRY FORWARD OF BUSINESS LOSS ALIVE HOLDING THAT BECAUSE IT IS SUBJUDICE BEFORE THE HIGH COURT OF KARNATAKA AND THE ASSESSING OFFICER IS RIGHT IN NOT ALLOWING THE BENEFIT OF CARRY FORWARD OF BUSINESS LO SS WITHOUT APPRECIATING THAT THE ISSUE WITH REGARD TO CARRY FORWARD OF BUSINESS LOSS REACHED ITS FINALITY AND OU GHT TO HAVE BEEN FOLLOWED IN ACCORDANCE WITH THE DIRECTION OF ITAT. PAGE 3 OF 9 ITA NO.89/ BANG/2012 3 3. BRIEFLY STATED THE FACTS ARE AS FOLLOWS:- THE ASSESSEE IS A FIRM. IT IS ENGAGED IN THE REA L ESTATE BUSINESS AND DEVELOPMENT OF BUILDING PROJECTS. THE CHRONOL OGICAL HISTORY IS EXPLAINED IN A TABULAR FORM IN THE IMPUGNED ORDER OF THE CIT( A) AT PAGES 1 TO 3. HOWEVER, TO UNDERSTAND THE FACTUAL BACKGROUND AND F OR READY REFERENCE, THE SAME IS REPRODUCED BELOW:- 06-01-1998 A RETURN OF AY 1997-98 WAS FILED DECLARI NG RETURN OF RS.5,29,268/-. THIS RETURN HAD BEEN SIGNED BY M.D. SHRI ADIKESAVULU. IN THIS RETURN THE INCOME HAD BEEN SH OWN AS UNDER INCOME FROM HOUSE PROPERTY - RS.54,70,688/- BUSINESS LOSS - RS.49 ,41,410/- INCOME - RS. 5,29,268/- 27-07-1998 THE ABOVE RETURN WAS REVISED. THIS WAS SIGNED BY SHRI K SRINIVASULU REDDY. INCOME WAS SHOWN AS UNDER INCOME FROM HOUSE PROPERTY - RS.89,11,328/- BUSINESS LOSS - RS.4 1,67,558/- INCOME - RS .47,43,770/- THE APPELLANT WAS THEN ENGAGED IN TWO PROJECTS, ONE IN MG ROAD, AND OTHER AT INDIRANAGAR, BANGALORE. 30-06-2000 AFTER SPECIAL AUDIT, UNDER SECTION 142(2 A) OF I T ACT, THE ASSESSMENT WAS COMPLETED ON THIS DAY DETERMINING TH E TOTAL LOSS AT RS.1,03,32,666/-. 12-01-2001 CIT(A) SET ASIDE THE ORDER DIRECTING THE AO TO REWORK THE WIP AND THE CONSEQUENT LOSS AND ALSO CONFIRMED THE ADDITIONS OF INTEREST UNDER SECTION 40(B) TO RELATI VES AND THE PARTNERS. 06-07-2001 THE AO REWORKED THE LOSS AT RS.1,47,11,7 36/-. 30-08-2002 ITAT CONFIRMED THE ORDER OF CIT(A) DT.12 .01.2001 VIDE ITA NO.164 OF 2001. 20-11-2002 AO WHILE GIVING EFFECT TO ORDER OF ITAT DETERMINED LOSS AT RS.74,85,743/-. 08-05-2003 THE ORDER DATED 20.11.02 WAS RECTIFIED U NDER SECTION 154 TO DETERMINE THE LOSS AT RS.74,84,239/-. 10-10-2003 THE ORDER DATED 08-05-2003 WAS RECTIFIED ON THE POINT THAT THE LOSS DETERMINED WAS NOT ELIGIBLE TO GET TH E BENEFIT OF CARRIED FORWARD AND THUS A NEW FRONT WAS OPENED. PAGE 4 OF 9 ITA NO.89/ BANG/2012 4 30-11-2004 THE ASSESSEE PREFERRED APPEAL AGAINST THIS NEW FRON T. CIT(A) VIDE ITA NO.275/DCIT-CC-2(1)/CIT(A)-IV-2004- 05 DISMISSED THE APPEAL AND AFFIRMED THE ORDER OF AO D ATED 10-10-2003. 13-042007 THE LEARNED ITAT DISMISSED THE ORDER OF C IT(A) DATED 30- 11-2004. THE DEPARTMENT HAS PREFERRED APPEAL TO HI GH COURT AGAINST THIS ORDER. 04-12-2007 THE HIGH COURT PARTLY ALLOWED THE APPEAL OF THE ASSESSEE FILED AGAINST THE ORDER OF ITAT DATED 30-08-2002. THE ISSUES AND DECISIONS ARE AS UNDER:- WHETHER INTEREST PAID @ 21% TO RELATIVES IS EXCESSI VE AND WHETHER ASSESSING OFFICER WAS RIGHT IN RESTRICTING IT TO 18%. ANSWER TO BOTH QUESTIONS WERE YES AND THUS A GAINST THE ASSESSEE. THE SECOND ISSUE WAS WHETHER INTEREST TO PARTNERS W HO PURCHASED THE SHARE OF RETIRED PARTNERS HAD BEEN CO MPUTED CORRECTLY ANSWER WAS NO AND THE MATTER WAS REMAND ED BACK TO THE ASSESSING OFFICER FOR RECOMPUTATION AFT ER HEARING THE ASSESSEE VIDE ITA NO.50/2003. 29-05-2009 THE ASSESSING OFFICER PASSED THE ORDER F OR GIVING EFFECT TO THE ORDER OF HIGH COURT DATED 04-12-2007. HE DETERMINED THE LOSS AT RS.61,18,071/- BUT HELD THAT SUCH LOSS IS NOT TO BE GIVEN THE BENEFIT OF CARRY FORWAR D. 4. THE OBSERVATION OF THE ASSESSING OFFICER IN HIS ORDER DATED 29-05-2009, REFUSING TO GIVE THE BENEFIT OF CARRIED FORWARD OF BUSINESS LOSS INCURRED IN THE ASSESSMENT YEAR 1997-98 READ AS FOLLOWS:- 14. AS PER THE RECASTED P&L ACCOUNT, ASSESSEE DERI VED LOSS TO THE EXTENT OF RS. (-) 61,18,071/-. HOWEVER , THE ASSESSEE FIRM IS NOT ENTITLED TO CARRY FORWARD THE S AID LOSS AS PER THE PROVISIONS OF SECTION 80 OF THE IT ACT, AS THE ASSESSEE HAS FAILED TO FILE THE RETURN OF INCOM E WITHIN THE TIME ALLOWED UNDER SECTION 139(1)/139(3) OF THE IT ACT. 15. ACCORDINGLY THE BUSINESS LOSS TO BE CARRY FORWAR D IS DETERMINED AT NIL. PAGE 5 OF 9 ITA NO.89/ BANG/2012 5 5. AGGRIEVED BY THE ABOVE OBSERVATION OF THE ASSESS ING OFFICER IN HIS ORDER DATED 29-05-2009, WHILE GIVING EFFECT TO THE HONBLE HIGH COURTS JUDGMENT DATED 4-12-2007, THE ASSESSEE FILED AN APP EAL BEFORE THE FIRST APPELLATE AUTHORITY. 6. THE CIT(A) AFTER REFERRING TO THE PROVISIONS OF SECTION 139(3) OF THE ACT, DISMISSED THE APPEAL OF THE ASSESSEE. THE RELEVANT FINDING OF THE CIT(A) READS AS FOLLOWS:- 5. APPARENTLY NEITHER THE ORIGINAL RETURN NOR THE REVISED RETURN HAD BEEN FILED WITHIN THE TIME PRESC RIBED UNDER SECTION 139(1) OF IT ACT EVEN IF THE RETURNS DID NOT SHOW LOSS AT THAT POINT OF TIME BECAUSE ADMITTE DLY AND APPARENTLY BOTH RETURNS SHOW LOSS OF RS.49,41,41 0/- / RS.41,67,558/- UNDER THE HEAD BUSINESS INCOME. SECTION 139(3) QUOTED ABOVE IS VERY CLEAR IN THIS RE GARD. IT DOES NOT SAY THAT THE TOTAL INCOME BE POSITIVE OR NEGATIVE BUT IN UNAMBIGUOUS TERMS ENVISAGES THAT IF THE ASSESSEE HAS INCURRED ANY LOSS UNDER THE HEAD BUSIN ESS OR CAPITAL GAINS AND HE CLAIMS THE BENEFIT OF CAR RY FORWARD OF SUCH LOSS FOR SET OFF IN SUBSEQUENT YEARS , IT IS MANDATORILY INCUMBENT UPON HIM TO FILE THE RETURN SHOWING SUCH LOSS WITHIN THE TIME PRESCRIBED UNDER SECTION 139(3) OF IT ACT. HERE ADMITTEDLY THE RETUR N HAS BEEN FILED BEYOND THE TIME LIMIT PRESCRIBED UNDE R SECTION 139(3) OF IT ACT. HENCE I FIND THE ASSESSI NG OFFICER WAS RIGHT IN REJECTING THE CLAIM OF THE ASS ESSEE OF THE BENEFIT OF CARRY FORWARD AND SET OFF OF SUCH BUSINESS LOSS. SUCH IS ALSO NOT A DEBATABLE ISSUE AND A MISTAKE APPARENT CAPABLE OF BEING RECTIFIED U /S 15 4 OF IT ACT. HENCE APPEAL IS DISMISSED. 6. BESIDES I AM NOT CONVINCED WITH THE ARGUMENT OF THE AR THAT THE ISSUE HAS BEEN SETTLED BY THE ITATS ORDER DATED 13-04-2007. THE ASSESSING OFFICER HAS TO PAGE 6 OF 9 ITA NO.89/ BANG/2012 6 KEEP THE ISSUE ALIVE BECAUSE IT IS SUBJUDICE BEFORE THE HONOURABLE HIGH COURT. HENCE HE DID THE RIGHT THIN G BY MAKING THE SPECIFIC ORDER OF NOT ALLOWING THE BENEF IT OF CARRY FORWARD AND SET OFF OF BUSINESS LOSS WHILE GIV ING EFFECT TO THE ORDER OF HIGH COURT DATED 04-12-2007 ON 29-05-2009 AND THUS REDUCING THE LOSS FURTHER EVEN THOUGH ISSUE INVOLVED WAS ALTOGETHER DIFFERENT. 7. THE ASSESSEE BEING AGGRIEVED IS IN APPEAL BEFOR E US. 8. THE LEARNED AR HAD FILED A PAPER BOOK OF 169 PA GES INTER ALIA CONTAINING THE WRITTEN SUBMISSIONS FILED BEFORE THE CIT(A), VARIOUS ORDERS OF THE ASSESSING OFFICER, THE CIT(A) AND THE ITAT. THE COPIES OF THE JUDGMENT OF THE HONBLE HIGH COURT DATED 4.12.2007 AND 5.12.2007 IN ASSESSEES OWN CASE ARE ALSO ENCLOSED. THE LEARNED AR RELIED ON THE WRITTEN SUBMISSION FILED BEFORE THE FIRST APPELLATE AUTHORI TY. 9. THE LEARNED DR ON THE OTHER HAND SUPPORTED THE ORDERS OF THE INCOME TAX AUTHORITIES. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS ON RECORD. THE TRIBUNAL IN ITA NO.314/BANG/2005 VI DE ORDER DATED 30 TH APRIL, 2007 HAD QUASHED THE ORDER PASSED BY THE CIT( A) REFUSING TO ALLOW THE SET OFF OF CARRY FORWARD LOSS INCURRED IN THE C URRENT YEAR AGAINST THE PROFITS OF THE FUTURE ASSESSMENT YEARS. THE TRIBUNA L HELD THAT THERE WAS A DECLARED INCOME FILED IN THE ORIGINAL RETURN OF INC OME FILED BY THE ASSESSEE AND ACCORDINGLY, THE PROVISIONS OF SECTION 139(3) RW S 139(1) OF THE ACT WILL HAVE NO APPLICATION AND ACCORDINGLY, THE DETERMINED LOSS IS REQUIRED TO BE CARRIED FORWARD FOR SET-OFF IN THE SUBSEQUENT YEAR. THE RELEVANT FINDING OF THE TRIBUNAL READ AS FOLLOWS:- PAGE 7 OF 9 ITA NO.89/ BANG/2012 7 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E RECORDS. FROM THE FACTS AVAILABLE ON RECORD, IT IS SEEN THAT THE ASSESSEE DID NOT DECLARE LOSS IN THE RETUR N ORIGINALLY FILED. THEREFORE, THERE IS NO VIOLATION OF THE PROVISIONS OF SEC.139(3) TO JUSTIFY WITHDRAWAL OF BE NEFIT OF CARRY FORWARD OF BUSINESS LOSS FOR THE RELEVANT ASSESSMENT YEAR. FURTHER IT IS PERTINENT TO NOTE T HAT THE RETURN FILED WAS CONSIDERED UNDER SECTION 143(3 ) OF THE ACT. IN FACT, THE ASSESSEE HAD SHOWN POSITIVE INCOME IN THE RETURN BUT IN THE ASSESSMENT LOSS WAS DETERM INED BY THE ASSESSING OFFICER. THIS BEING THE FACTUAL POSITION, IN OUR VIEW, THE ASSESSEE IS ENTITLED TO THE BENEFIT OF CARRY FORWARD OF BUSINESS LOSS. IT IS FU RTHER TO BE NOTED THAT THE ASSESSEE, IN THE ORIGINAL RETU RN FILED, DECLARED INCOME AND IN THAT CASE, WHETHER LOSS ULTIMATELY DETERMINED BY THE ASSESSING OFFICER WAS LIABLE TO BE CARRIED FORWARD OR NOT IS A DEBATABLE ISSUE. THEREFORE, IN SUCH SITUATION, INVOKING THE PROVISIO NS OF SEC.154 IS NOT AVAILABLE TO THE ASSESSING OFFICER. CONSIDERING ALL THESE FACTS, WE QUASH THE PROCEEDIN GS INITIATED UNDER SECTION 154 OF THE ACT. IT IS ORDE RED ACCORDINGLY. 10.1 THE ABOVE ORDER OF THE TRIBUNAL WAS CHALLENGE D BY THE REVENUE BEFORE THE HONBLE HIGH COURT BY FILING AN APPEAL UN DER SECTION 260A OF THE ACT. IT WAS AGREED BY BOTH THE PARTIES THAT THE APP EAL BEFORE THE HONBLE HIGH COURT IS PENDING ADJUDICATION AND IS YET TO BE DISPOSED OFF. 10.2 THE EARLIER ORDER OF THE TRIBUNAL DATED 30/8/ 2002 (ITA NO.167/BANG/2001) WAS SUBJECT MATTER OF APPEAL BY T HE ASSESSEE BEFORE THE HONBLE JURISDICTIONAL HIGH COURT AND THE APPEA L OF THE ASSESSEE WAS PARTLY ALLOWED VIDE ITS JUDGMENT DATED 4 TH DECEMBER, 2007 IN ITA NO.50/08. THE ISSUE AND THE DECISION OF THE HONBLE HIGH COUR T WERE AS UNDER:- PAGE 8 OF 9 ITA NO.89/ BANG/2012 8 WHETHER INTEREST PAID @ 21% TO RELATIVES IS EXCESS IVE AND WHETHER ASSESSING OFFICER WAS RIGHT IN RESTRICT ING IT TO 18%. ANSWER TO BOTH QUESTIONS WERE YES AND THUS AGAINST THE ASSESSEE. THE SECOND ISSUE WAS WHETHER INTEREST TO PARTNERS W HO PURCHASED THE SHARE OF RETIRED PARTNERS HAD BEEN COMPUTED CORRECTLY ANSWER WAS NO AND THE MATTER WA S REMANDED BACK TO THE ASSESSING OFFICER FOR RECOMPUTATION AFTER HEARING THE ASSESSEE. 10.3 WHILE GIVING EFFECT TO THE HONBLE HIGH COURT JUDGMENT DATED 4.12.2007, THE ASSESSING OFFICER HELD THAT THE LOSS CANNOT BE GIVEN THE BENEFIT OF CARRY FORWARD. WHEN THE TRIBUNAL ORDER D ATED 13 TH APRIL, 2007 IN ITA NO.314/BANG/2005 SPECIFICALLY STATES THAT THE AS SESSEE SHOULD BE GIVEN THE BENEFIT OF CARRY FORWARD OF LOSS INCURRED IN THE CURRENT YEAR AND THE SAME IS PENDING ADJUDICATION BEFORE THE HONBLE HIG H COURT, THE ASSESSING OFFICER SHOULD NOT HAVE CIRCUMVENTED THE TRIBUNAL O RDER WHILE GIVING EFFECT TO THE HIGH COURT JUDGMENT DATED 4/12/2007, WHICH I S TOTALLY A DIFFERENT PROCEEDING AND THE CIT(A) FELL IN ERROR IN CONFIRMI NG THE SAME. UNLESS THE TRIBUNAL ORDER DATED 13/4/2007 IN ITA NO.314/BANG/2 005 IS REVERSED, THE TRIBUNALS DIRECTION TO GIVE THE BENEFIT OF CARRY FO RWARD OF LOSS HOLDS GOOD AND THE SAME CANNOT BE IGNORED OR GIVEN A GO-BY. IT IS ORDERED ACCORDINGLY. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH DAY OF OCTOBER, 2012 SD/- SD/- (JASON P BOAZ) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER PAGE 9 OF 9 ITA NO.89/ BANG/2012 9 COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCERNE D. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/ BY ORDER SENIOR PRIVATE SECRETARY, ITAT, BANGALORE.