DCIT,Central Circle - 7, Hyderabad V. M/s A B Holding Company, Hyderabad

ITA 963/HYD/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91702 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 03-06-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 16-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Assessee Lawyers: P RAVI SESHAGIRI RAO
• Keywords: Depreciation; Search and seizure; Opportunity of being heard; Principle of natural justice; Revised return
• Section: 143(3); 142(1); 147; 132; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI P. M. JAGTAP, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER ITA.NO.963 & 964/HYD/2014 ASSESSMENT YEARS 2008-2009 & 2009-2010 DCIT, CENTRAL CIRCLE-7 HYDERABAD. VS. M/S. AB HOLDING COMPANY HYDERABAD. PAN AACFA9763G (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. P. RAVISESHAGIRI RAO FOR REVENUE : MR. D. SUDHAKAR RAO DATE OF HEARING : 03.06.2015 DATE OF PRONOUNCEMENT : 05.06.2015 ORDER PER P.M. JAGTAP, A.M. THESE TWO APPEALS ARE PREFERRED BY THE REVENUE ARE DIRECTED AGAINST THE COMMON ORDER OF THE LD. CI T(A)-VI, HYDERABAD DATED 10.01.2014 PASSED FOR A.YS. 2008-20 09 AND 2009-2010. 2. THE RELEVANT FACTS OF THE CASE GIVING RISE TO T HESE APPEALS ARE AS FOLLOWS. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHIP FIRM WHICH IS ENGAGED IN THE BUSINESS O F TRADING IN MARBLES AND GRANITES, WITH SPECIALIZATION INLAYING DESIGNS ON MARBLES AND GRANITES. THE RETURN OF INCOME FOR THE A.Y. 2008- 09 WAS FILED BY IT ON 31.03.2009 DECLARING TOTAL IN COME OF RS.53,32,122. A SEARCH AND SEIZURE ACTION UNDER SE CTION 132 WAS CONDUCTED IN THE CASE OF M/S. MIDWEST GRANITES P. LTD., (MGPL) ON 24.07.2008. DURING THE COURSE OF THE S AID ACTION, CERTAIN MATERIAL PERTAINING TO THE ASSESSEE WAS FOU ND. A NOTICE 2 ITA.NO.963 & 964/HYD/2014 M/S. AB HOLDINGS COMPANY, HYDERABAD. UNDER SECTION 153C THEREFORE WAS ISSUED BY THE A.O. ON 16.04.2010 CALLING INTER ALIA FOR THE RETURN OF INC OME FOR A.Y. 2008-09. IN RESPONSE TO THE SAID NOTICE, THE RETURN OF INCOME FOR A.Y. 2008-09 WAS FILED BY THE ASSESSEE ON 10.11 .2010 DECLARING TOTAL INCOME OF RS.27,55,824. IN THE SAID RETURN, ADDITIONAL CLAIM FOR DEPRECIATION ON BUILDING AND I NTEREST PAID ON LOAN AVAILED FOR THE PURPOSE OF BUILDING WAS MAD E BY THE ASSESSEE AND THEREBY, LOWER INCOME WAS DECLARED. TH IS ADDITIONAL CLAIM OF THE ASSESSEE WAS NOT ENTERTAINE D BY THE A.O. ACCORDING TO HIM, THE PROVISIONS OF SECTION 15 3C WERE TO ASSESS THE ADDITIONAL INCOME AND THE SAME BEING BEN EFICIAL TO THE REVENUE ONLY, THE ASSESSEE COULD NOT TAKE ADVAN TAGE OF THE SAID PROVISIONS TO MAKE NEW/ADDITIONAL CLAIMS. HE T HEREFORE COMPLETED THE ASSESSMENT FOR A.Y. 2008-09 UNDER SEC TION 143(3) READ WITH SECTION 153C ON THE INCOME AS ORIG INALLY DECLARED BY THE ASSESSEE AT RS.53,32,122. 3. FOR A.Y. 2009-2010, THE RETURN OF INCOME WAS ORIGINALLY FILED BY THE ASSESSEE ON 30.09.2010 DECL ARING TOTAL INCOME OF RS.28,07,290. SUBSEQUENT TO THE SEARCH AC TION IN THE CASE OF M/S. MIDWEST GRANITES P. LTD., A NOTICE UNDER SECTION 142(1) WAS ISSUED BY THE A.O. ON 16.04.2010 CALLING FOR THE RETURN OF INCOME FOR A.Y. 2009-2010. IN RESPONS E TO THE SAID NOTICE, THE RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 14.10.2010 DECLARING A LOSS OF RS.15,72,020 AFTER M AKING ADDITIONAL/NEW CLAIM FOR DEDUCTION ON ACCOUNT OF DE PRECIATION ON BUILDING AND INTEREST PAID ON LOAN AVAILED FOR T HE PURPOSE OF BUILDING. ACCORDING TO THE A.O. THERE WAS NO REASON GIVEN BY THE ASSESSEE FOR DECLARING MORE INCOME IN THE RETUR N FILED IN RESPONSE TO THE NOTICE ISSUED UNDER SECTION 142(1) BY MAKING NEW/ADDITIONAL CLAIMS. HE THEREFORE COMPLETED THE A SSESSMENT 3 ITA.NO.963 & 964/HYD/2014 M/S. AB HOLDINGS COMPANY, HYDERABAD. UNDER SECTION 143(3) FOR A.Y. 2009-2010 VIDE ORDER DATED 31.12.2010 ON TOTAL INCOME AS DECLARED BY THE ASSES SEE IN THE RETURN OF INCOME ORIGINALLY FILED AT RS.28,07,290. 4. AGAINST THE ORDERS PASSED BY THE A.O. FOR A.YS. 2008-2009 AND 2009-2010, APPEALS WERE PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A). DURING COURSE OF AP PEALLATE PROCEEDINGS BEFORE THE LD. CIT(A), IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THAT THE ASSESSMENT UNDER SECTION 1 53C/153A IS COMPLETELY A FRESH ASSESSMENT AND THERE IS NO EM BARGO PLACED BY LAW ON DECLARATION OF CORRECT AMOUNTS OF INCOME BY MAKING CORRECT CLAIMS FOR EXPENSES/DEPRECIATION. IT WAS CONTENDED THAT THE A.O. THEREFORE WAS NOT JUSTIFIED IN LAW IN NOT ENTERTAINING THE ADDITIONAL/NEW CLAIM OF THE AS SESSEE FOR DEPRECIATION AND INTEREST MADE IN THE RETURN OF INC OME FILED FOR A.Y. 2008-2009 IN RESPONSE TO THE NOTICE ISSUED UND ER SECTION 153C. IN SUPPORT OF THIS CONTENTION, RELIANCE WAS PLACED BY THE ASSESSEE ON THE DECISION OF MUMBAI BENCH OF THI S TRIBUNAL IN THE CASE OF DCIT VS. EVERSMILE CONSTRUCTION CO. P. LTD., (ITA.NO.4235/MUMBAI DATED 30.08.2011) AND IN THE CA SE OF FAISAL ABBAS VS. DCIT (ITA.NO.3485 & 3487 (ITAT, MU MBAI) DATED 25.10.2011) WHEREIN IT WAS HELD THAT EXPENSES WHICH WERE NOT CLAIMED IN THE ORIGINAL RETURN/ASSESSMENT COULD BE CLAIMED IN THE ASSESSMENT UNDER SECTION 153A/153C. 5. THE LD. CIT(A) FOUND MERIT IN THE CONTENTION RA ISED BY THE ASSESSEE AND DIRECTED THE A.O. TO ADOPT THE INCOME AS DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME FI LED IN RESPONSE TO THE NOTICE UNDER SECTION 153C FOR A.Y. 2008-2009 FOR THE FOLLOWING REASONS GIVEN IN HIS IMPUGNED ORD ER. 4 ITA.NO.963 & 964/HYD/2014 M/S. AB HOLDINGS COMPANY, HYDERABAD. AS REGARD TO THE A.Y. 2008-09, THE FACT REVEALS TH AT ORIGINAL RETURN OF INCOME WAS FILED ON 31.03.2009 A ND RETURN IN RESPONSE TO NOTICE U/S.153C WAS FILED ON 14.10.2010 AND THE LOWER INCOMES SHOWN IN RETURN OF INCOME FILED SUBSEQUENTLY WAS ON ACCOUNT OF HIGH ER CLAIMS OF INTEREST ON TERM LOAN AND THE DEPRECIATIO N, WHICH ARE CLAIMED TO BE SUPPORTED BY RELEVANT EVIDENCES/INFORMATION. HOWEVER, THE A.O. REJECTED T O CONSIDER THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S. 153C ON THE SIMPLE GROUND THAT ASSESSEE FAILED TO GIVE REASONS FOR SHOWING LOWER INCOME IN THE SAID SUBSEQUENT RETURN AND THE PROVISIONS OF SEC. 153C ARE TO ASSESS THE ADDITIONAL INCOME OF ASSESSE E OR TO BENEFICIAL OF REVENUE ONLY. THE 'APPELLANT'S OBJECTION ON THE SAID PROPOSITION IS VALIDLY JUSTIF IED, FOR THE REASON THAT THERE IS A FUNDAMENTAL DIFFEREN CE BETWEEN ASSESSMENT UNDER SECTION 147 AND ASSESSMENT AS PER PROVISIONS OF SEC. 153A/153C, WITH ASSESSMENT U/S. 153A/153C ARE COMPLETELY A SET OF FRESH ASSESSMENT AND THE RETURN OF INCOME FURNISHED U/S. 153A/153C, TREATED AS IF SUCH RETURN WERE A RETURN REQUIRED TO BE FURNISHED U/S. 139(1) OF LT. ACT. ACCORDINGLY, THE A.O. IS DUTY BOUND TO BRI NG THE COGENT MATERIAL TO DISPROVE THE CLAIMS OF ASSESSEE. IN THIS CASE THE ADDITIONAL CLAIMS TOWARD S INTEREST ON TERM LOAN AND DEPRECIATION WERE MADE WITH RELEVANT SUPPORT OF EVIDENCE, AS SUCH THE CLAI MS MADE IN RETURN OF INCOME FILED IN RESPONSE TO NOTIC E U/S. 153C COULD NOT HAVE BEEN REJECTED SUMMARILY AND WITHOUT BRINGING ANY CONTRARY INFORMATION ON RECORD. FURTHER, THERE IS NO INFORMATION AS DISCOVE RED THROUGH THE SEIZED MATERIAL TO INDICATE THAT THE INCOME OF THE APPELLANT IS MORE THAN INCOME INDICAT ED IN THE RETURN FILED IN RESPONSE TO NOTICE U/S. 153C . THUS ON FACTS, THE CLAIMS MADE IN REVISED RETURN FO R THE YEAR UNDER REFERENCE, WHICH HAS BEEN TREATED AS RETURN FILED AS PER PROVISIONS OF SEC. 139, COULD N OT HAVE BEEN REJECTED WITHOUT GIVING ANY FINDING OR WI TH HELP OF COGENT EVIDENCE TO SHOW THAT SUCH CLAIMS AR E WRONG AND THE INCOME OF THE .ASSESSEE IS MORE THAN WHAT HAS BEEN SHOWN IN RETURN OF INCOME. FOR THE SAID REASONS, THE A.O. IS NOT JUSTIFIED IN ADOPTING THE INCOME AS PER ORIGINAL RETURN OF INCOME BY IGNORING THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S.153C/142(1). 5 ITA.NO.963 & 964/HYD/2014 M/S. AB HOLDINGS COMPANY, HYDERABAD. EVEN ON THE BASIS OF JUDICIAL DECISIONS RELIED UPON BY THE APPELLANT, THE DEDUCTIONS CLAIMED IN THE PROCEEDINGS U/S.153A/153C CANNOT BE REJECTED SIMPLY ON THE GROUND THAT SUCH DEDUCTIONS WERE NOT CLAIMED IN ORIGINAL ASSESSMENT. THE JUDICIAL DECISI ONS WERE ALSO OF THE VIEW THAT DEDUCTIONS NOT CLAIMED I N ORIGINAL RETURNS, CAN BE CLAIMED IN RETURN OF INCOM E FILED U/S.153A. IT WAS FURTHER HELD THAT ONCE THE RETURN OF INCOME FILED U/S.153A/153C IS DEEMED TO BE A RETURN OF INCOME FILED U/S.139 AND ALL OTHER PROVISIONS WOULD APPLY. 6. AS REGARDS A.Y. 2009-2010, THE LD. CIT(A) ALSO FOUND MERIT IN THE CONTENTION OF THE ASSESSEE THAT THE ADDITIONAL/NEW CLAIM MADE FOR DEDUCTION ON ACCOUNT OF INTEREST AND DEPRECIATION BY WAY OF THE REVISED RET URN VALIDLY FILED IN RESPONSE TO THE NOTICE UNDER SECTION 142(1 ) OUGHT TO HAVE BEEN ENTERTAINED BY THE A.O.. HE ACCORDINGLY D IRECTED THE A.O. TO ADOPT THE INCOME FOR A.Y. 2009-2010 AS DECL ARED BY THE ASSESSEE IN THE REVISED RETURN OF INCOME FOR THE FO LLOWING REASONS GIVEN IN PARAGRAPH NO.5.4 OF HIS IMPUGNED O RDER. 5.4. AS FAR AS, AY 2009-10 IS CONCERNED, THE ORIGINAL RETURN AS WELL AS THE RETURN IN RESPONSE T O NOTICE U/S. 142(1) WERE FILED SUBSEQUENT TO THE DATE OF SEARCH. THE ORIGINAL RETURN FILED ON 30.09.2009 WHEREAS THE REVISED FILED ON 14.10.2010. THE REVISED RETURN IS CONSIDERED TO BE WITHIN THE LIMITS PRESCRIBED BY LAW AND SINCE THE REVISED RETURN IS ACCOMPANIED BY THE RELEVANT STATEMENTS/INFORMATION, IT MAY NOT BE CORRECT ON THE PART OF THE A.O. TO CONCLUDE THAT THE APPELLANT/ASSESSEE NOT FURNISHED THE REASONS FOR ADMITTING THE LOWER INCOME, IN THE SUBSEQUENT RETURN OF INCOME FURNISHED IN RESPONSE TO THE NOTICE U/S. 142(1). THERE IS NO LAW, THAT WITHHOLD THE ASSESSEE FIRM FURNISHING THE REVISED RETURN, AS PER THE LAW AND IT IS FOR THE A.O. TO VERIFY THE CLAIMS, BEFORE DECIDING ON THE VALIDITY OF RETURN AND ALLOWABILITY OR OTHERWISE OF THE CLAIMS MADE, IN COMPUTING THE TOTAL INCOME. IN THIS CASE, THE CLAIMS ON ACCOUNT OF HIGHER INTEREST ON TERM LOAN 6 ITA.NO.963 & 964/HYD/2014 M/S. AB HOLDINGS COMPANY, HYDERABAD. AND DEPRECIATION ARE VERIFIABLE AND THERE IS NO INFORMATION AT THE DISPOSAL OF A.O. AS TRACED FROM THE SEIZED MATERIAL, TO SHOW THAT THE APPELLANT HAS HIGHER INCOMES THAN THE INCOME ADMITTED IN REVISED RETURN FILED IN RESPONSE TO THE NOTICE U/S.142(1). ACCORDINGLY, I AM OF THE CONSIDERED OPINION THAT A.O. IS NOT JUSTIFIED IN IGNORING THE RETURNED INCOME AS PER REVISED RETURN AND ADOPTING THE INCOME IN ORIGINAL RETURN OF INCOME, WITHOUT BRINGING MATERIAL FACTS ON RECORD AND WITHOUT HOLDING THAT REVISED RETURNS IS NOT VALID. HENCE, THE GROUND OF APPEAL FOR AY 2009-10 IS TREATED AS ALLOWED. 7. AGGRIEVED BY THE ORDERS OF THE LD. CIT(A) FOR A .YS. 2008-2009 AND 2009-2010, THE REVENUE HAS PREFERRED THESE APPEALS BEFORE THE TRIBUNAL ON THE FOLLOWING GROUND S : GROUNDS IN A.Y. 2008-2009 : 1. THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) IS CONTRARY TO THE PROVISIONS OF LAW AND AGAINST ALL CANNONS OF NATURAL JUSTICE. 2. THE LD. CIT(A) HAS ERRED IN ALLOWING THE ENHANCED CLAIMS OF INTEREST ON LOANS AND DEPRECIATION IN THE PROCEEDINGS UNDER SECTION 153C OF THE I.T. ACT 3. THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LD. CIT(A) OUGHT TO HAVE DISMISSED THE ENHANCED CLAIMS RELATING TO INTEREST AND DEPRECIATION AND RESTORE THE INCOME ADMITTED IN THE RETURNS OF INCOME FILED ORIGINALLY. 4. THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE ASSESSMENT OR REASSESSMENT MADE PURSUANT TO NOTICE UNDER SECTION 153C IS NOT DENOVO ASSESSMENT; AND THEREFORE, THERE IS NO MERIT IN THE GROUND TO MAKE A NEW CLAIM OF DEDUCTION OR ALLOWANCE DURING ASSESSMENT/REASSESSMENT UNDER SECTION 153C, WHERE ADMITTEDLY THE REGULAR ASSESSMENTS ARE SHOWN AS COMPLETED ASSESSMENTS ON THE DATE OF INITIATION OF ACTION UNDER SECTION 132. 7 ITA.NO.963 & 964/HYD/2014 M/S. AB HOLDINGS COMPANY, HYDERABAD. GROUNDS IN A.Y. 2009-2010 : 1. THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) IS CONTRARY TO THE PROVISIONS OF LAW AND AGAINST ALL CANNONS OF NATURAL JUSTICE. 2. THE LD. CIT(A) HAS ERRED IN ALLOWING THE ENHANCED CLAIMS OF INTEREST ON LOANS AND DEPRECIATION IN THE PROCEEDINGS INITIATED UNDER SECTION 142(1) OF THE I .T. ACT. 3. THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED CIT(A) OUGHT TO HAVE DISMISSED THE ENHANCED CLAIMS RELATING TO INTEREST AND DEPRECIATION AND RESTORE THE INCOME ADMITTED IN THE RETURNS OF INCOME FILED ORIGINALLY. 8. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. T HE LEARNED D.R. HAS NOT RAISED ANY CONTENTION TO DISPUTE THE D ECISION RENDERED BY THE LD. CIT(A) VIDE HIS IMPUGNED ORDER THAT THE ADDITIONAL/NEW CLAIM MADE BY THE ASSESSEE FOR DEDUC TION ON ACCOUNT OF INTEREST AND DEPRECIATION IN THE RETURN FILED IN RESPONSE TO NOTICE UNDER SECTION 153C FOR A.Y. 2008 -2009 AND IN THE REVISED RETURN VALIDLY FILED IN RESPONSE TO THE NOTICE ISSUED UNDER SECTION 142(1) FOR A.Y. 2009-2010 OUGH T TO HAVE BEEN ENTERTAINED BY THE A.O. AS THERE IS NO BAR IN THE RELEVANT PROVISIONS TO MAKE SUCH CLAIMS. HE HOWEVER HAS CONT ENDED THAT THE LD. CIT(A) AFTER HAVING ENTERTAINED THE SA ID CLAIMS, SHOULD HAVE GIVEN AN OPPORTUNITY TO THE A.O. TO VER IFY THE SAME ON MERITS. A PERUSAL OF THE IMPUGNED ORDER OF THE L D. CIT(A) ALSO SHOWS THAT NEITHER THE LD. CIT(A) HAS GIVEN AN Y SPECIFIC FINDING ON THE MERIT OF THE ASSESSEES CLAIM NOR HA S HE DIRECTED THE A.O. TO VERIFY THE SAME ON MERIT AND THIS POSIT ION IS NOT DISPUTED EVEN BY THE LD. COUNSEL FOR THE ASSESSEE. WE THEREFORE, MODIFY THE IMPUGNED ORDER OF THE LD. CIT (A) AND RESTORE THE MATTER TO THE FILE OF THE A.O. FOR THE LIMITED PURPOSE 8 ITA.NO.963 & 964/HYD/2014 M/S. AB HOLDINGS COMPANY, HYDERABAD. OF DECIDING THE ISSUE RELATING TO THE ASSESSEES CL AIM FOR DEPRECIATION ON OFFICE BUILDING AND INTEREST ON LOA N AVAILED FOR THE SAID BUILDING ON MERIT IN ACCORDANCE WITH LAW A FTER VERIFYING ALL THE RELEVANT ASPECTS. NEEDLESS TO OBS ERVE THAT THE A.O. SHALL AFFORD PROPER AND SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE WHILE DECIDING THESE ISSUES. 9. IN THE RESULT, APPEALS OF THE REVENUE ARE TREAT ED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 05.06.2 015. SD/- SD/- (V. DURGA RAO) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 05 TH JUNE, 2015. VBP/- COPY TO 1. THE DCIT, CENTRAL CIRCLE-7, 8 TH FLOOR, AAYAKAR BHAVAN, L.B. STADIUM ROAD, BASHEERBAGH, HYDERABAD 500 004 . 2. M/S. AB HOLDING COMPANY, PLOT NO.58A & B, IDA, JEEDIMETLA, HYDERABAD. 3. COMMISSIONER OF INCOME TAX (APPEALS)-VI, HYDERAB AD. 4. COMMISSIONER OF INCOME TAX (CENTRAL), HYDERABAD. 5. D.R. I.T.A.T. B BENCH, HYDERABAD. 6. GUARD FILE