The Deputy Commissioner of Income Tax, Circle-3(1), Visakhapatnam V. Patchava Srinivas Babu, Visakhapatnam

MA 2/VIZ/2020

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 0635 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 17-02-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 29-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SATYANARAYANA RAJU
• Keywords: Depreciation; Audit objection; Tax effect
• Section: 143(3); 254(2); 32

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM (THROUGH WEB - BASED VIDEO CONFERENCING PLATFORM) , . . , BEFORE SHRI N.K.CHOUDHRY, HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, HONBLE ACCOUNTANT MEMBER M . A.NO. 0 2 /VIZ/20 20 (ARISING OUT OF I.T.A. NO. 461 /VIZ/201 9 ) ( / A SSESSMENT Y EAR : 20 08 - 09 ) DEPUTY COMMISSIONER OF INCOME TAX CIRCLE - 3(1) VISAKHAPATNAM VS. SHRI PATCHAVA SRINIVAS BABU D.NO.1 - 84 - 21/2 VENGAMAMBA NIVAS SECTOR 4, MVP COLONY VISAKHAPATNAM [PAN : AGIPP2022K] ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : SHRI B.SATYANARAYANA RAJU, DR / RESPONDENT BY : SHRI I.KAMA SASTRY, AR / DATE OF HEARING : 12.02.2021 / DATE OF PRONOUNCEMENT : 17 .02.2021 / O R D E R P ER D.S.SUNDER SINGH , ACCOUNTANT MEMBER : THE ASSESSEE FILED THE RETURN OF INCOME ADMITTING TOTAL INCOME OF RS.44,90,082/ - . THE ASSESSMENT WAS COMPLETED ON ESTIMATION BASIS, ESTIMATING PROFIT @11.5% OF GROSS RECEIPTS AND DETERMINED THE TOTAL INCOME AT RS.1 ,5 6 , 77 ,0 49 / - IN THE ORDER PASSED U/S 143(3) R.W.S. 147 OF THE ACT DT.30.01.2014. THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND THE 2 M .A. NO . 0 2 /VIZ/20 20 , A.Y.20 08 - 09 SRI PATCHAVA SRINIVAS BABU , VISAKHAPATNAM LD.CIT(A) ALLOWED THE APPEAL . AGAINST THE ORDER OF THE LD.CIT(A) THE REVENUE HAS FILED APPEAL BEFORE TH E TRIBUNAL AND THE SAME WAS D ISMISSED BY THE TRIBUNAL IN ITS ORDER DATED 23.08.2019 ON TAX EFFECT , SINCE , THE TAX EFFECT INVOLVED IN THIS CASE WAS LESS THAN RS.50,00,000/ - I.E. BELOW THE LIMIT FOR FILING THE APPEAL AS PER CBDT CIRCULAR NOTIFICATION NO.279/MIS C/M - 93/2018 - ITJ DATED 20.08.2019. AGAINST WHICH THE DEPARTMENT HAS FILED MISCELLANEOUS APPLICATION REQUESTING TO RECALL THE ORDER, STATING THAT THE APPEAL IS COVERED BY EXCEPTIONS IN PARA 10 OF THE CBDT CIRCULAR NO.3/2018 . 2. DURING THE HEARING OF MI SCELLANEOUS PETITION , THE LD.DR REQUESTED TO RECALL THE ORDER , SINCE , THE CASE IS COVERED BY EXCEPTIONS IN PARA NO.10 OF THE CBDT CIRCULAR NO.3/2018 AND THE DECISION OF THE LD.CIT (A) IS CONTRARY TO THE DECISION OF HONBLE ANDHRA PRADESH HIGH COURT SUPRA IN INDWELL CONSTRUCTIONS V S. CIT (232 ITR 776) AND THE DECISION OF G.RAJA GOPALA RAO VS. DCIT IN ITA NO.293/VIZ/2016 DATED 20.01.2017, THEREFORE, REQUESTED TO RECALL THE ORDER AND DECIDE THE CASE ON MERITS . 3. ON THE OTHER HAND, THE LD.AR ARGUED THAT THE CASE IS NOT COVERED BY EXCEPTIONS IN PARA NO.10 OF THE CBDT CIRCULAR NO.3/2018 AND THERE IS NO CASE FOR RECALLING THE ORDER. THE ASSESSEE ALSO FILED PAPER BOOK CONTAINING 3 M .A. NO . 0 2 /VIZ/20 20 , A.Y.20 08 - 09 SRI PATCHAVA SRINIVAS BABU , VISAKHAPATNAM NINE PAGES E NCL O SI NG THE COPY THE COPY OF LETTER OF ACIT, CIRCLE - 3(1), ADDRESSED TO THE COMMISSIONER OF INCOME TAX (APPEALS) - 1 VIDE F.NO.ACIT/CIR - 3(1)/VSP/REM.RPT./PSR/2017 - 18 DATED 05.07.2017 AND ARGUED THAT THE DEPARTMENT HAS NOWHERE MENTIONED IN APPEAL MEMO OR THE GROUNDS OF APPEAL THAT THE CASE WA S COVERED BY THE EXCEPTIONS AND THU S SUBMITTED THAT FR E SH PLEA IS NOT PERMITTED IN MISCELLANEOUS PETITION. LD.AR FURTHER ARGUED THAT EVEN IT IS ACCEPTED THAT THE CASE WAS REOPENED ON ACCOUNT OF REVENUE AUDIT OBJECTION, THE SAID OBJECTION WAS NOT ACCEPTED BY THE DEPARTMENT AND THE SAME IS EVIDENT FROM THE LETTER OF ACIT, CIRCLE - 3(1) ADDRESSED TO THE COMMISSIONER OF INCOME TAX (APPEALS) - 1 IN F.NO.ACIT/CIR - 3(1)/VSP/ REM.RPT./PSR/2017 - 18 DATED 05.07.2017, HENCE, ARGUED THAT THE CASE DOES NOT FALL UNDER EXCEPTIONS AS CLAIMED BY THE DEPARTMENT, HENCE REQUESTED TO DISMISS THE MISCELLANEOUS APPLICATION OF THE DEPARTMENT. 4. WE HAVE HEARD BOTH THE PARTIES, GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND ALSO THE ORDER OF THIS TRIBUNAL DATED 23.08.2019. THE TRIBUNAL HAS DISMISSED THE APPEAL O F THE REVENUE AS WITHDRAWN, SINCE THE TAX EFFECT IN THIS CASE WAS BELOW RS.50,00,000/ - . THE CONTENTION OF THE DEPARTMENT IS THAT THE CASE WA S COVERED BY EXCEPTION IN PARA NO.10 OF 4 M .A. NO . 0 2 /VIZ/20 20 , A.Y.20 08 - 09 SRI PATCHAVA SRINIVAS BABU , VISAKHAPATNAM CBDT CIRCULAR 3/2018, SINCE THERE WAS REVENUE AUDIT OBJECTION, THEREFORE REQUESTED TO RECALL THE ORDER. FOR THE SAKE OF CLARITY AND CONVENIENCE, WE EXTRACT RELEVANT PART OF THE MISCELLANEOUS APPLICATION OF THE REVENUE WHICH READS AS UNDER : IT IS TO SUBMIT THAT THE HONBLE ITAT HAS DISMISSED THE APPEAL MAINLY ON THE LOW TAX EFFECT WITHOUT CONSIDERING THE FACT THAT THE CASE OF THE ASSESSEE IS COVERED UNDER EXCEPTIONS LAID DOWN IN PARA 10 OF THE CBDT CIRCULAR NO.3/2018. IT IS FURTHER SUBMITTED THAT THE LD.CIT(A) IS NOT CORRECT IN LAW IN ALLOWING DEPRECIATION WHEN THE INCOME WAS ESTIM ATED BY THE ASSESSING OFFICER, IS NET OF ALL DEDUCTION INCLUDING DEPRECIATION U/S 32 OF THE ACT. FURTHER, THE LD.CIT(A) OUGHT TO HAVE CONSIDERED THAT THE BOOKS OF ACCOUNT WERE REJECTED BY THE ASSESSING OFFICER AND THE NET PROFIT WAS ES TIMATED @11.5% ON GROSS RECEIPTS AND THEREFORE ANY DEDUCTION ALLOWABLE UNDER THE PROVISIONS OF SECTIONS 30 TO 38 SHALL BE DEEMED TO HAVE BEEN ALREADY GIVEN FULL EFFECT TO AND NO FURTHER DEDUCTION UNDER THOSE SECTIONS SHALL BE ALLOWED IN THE LIGHT OF DECISI ON OF HONBLE ITAT, VISAKHAPATNAM, IN THE CASE OF G.RAJA GOPALA RAO VS. DCIT IN ITA NO.293/VIZ/2016, DATED 20.01.2017. THIS ASPECT NEEDS RECONSIDERATION BY THE HONBLE ITAT. THE EXCEPTIONS LAID DOWN IN PARA NO.10 OF CBDT CIRCULAR READS AS UNDER : 10. A DVERSE JUDGMENTS RELATING TO THE FOLLOWING ISSUES SHOULD BE CONTESTED ON MERITS NOTWITHSTANDING THAT THE TAX EFFECT ENTAILED IS LESS THAN THE MONETARY LIMITS SPECIFIED IN PARA 3 ABOVE OR THERE IS NO TAX EFFECT: (A) WHERE THE CONSTITUTIONAL VALIDITY OF THE PROVISIONS OF AN ACT OR RULE IS UNDER CHALLENGE, OR (B) WHERE BOARD'S ORDER, NOTIFICATION, INSTRUCTION OR CIRCULAR HAS BEEN HELD TO BE ILLEGAL OR ULTRA VIRES, OR (C) WHERE REVENUE AUDIT OBJECTION IN THE CASE H AS BEEN ACCEPTED BY THE DEPARTMENT, OR 5 M .A. NO . 0 2 /VIZ/20 20 , A.Y.20 08 - 09 SRI PATCHAVA SRINIVAS BABU , VISAKHAPATNAM (D) WHERE THE ADDITION RELATES TO UNDISCLOSED FOREIGN ASSETS/ BANK ACCOUNTS. 4.1. INSTANT CASE DOES NOT FALL UNDER CLAUSE (A),(B) AND (D) ABOVE. WITH REGARD TO THE REVENUE AUDIT OBJECTION, P ERUSAL GROUNDS OF APPEA L AND THE AUTHORISATION DOES NOT INDICATE ANY OF THE EXCEPTIONS MENTIONED IN PARA NO.10 OF TH E SAID CIRCULAR. DURING THE APPEAL HEARING ALSO THE LD.DR DID NOT MAKE ANY MENTION WITH REGARD TO THE REVENUE AUDIT OBJECTION IN THE CASE. E VEN OTHER WISE, ACIT, CI RCLE - 3(1) ADDRESSED A LETTER TO THE COMMISSIONER OF INCOME TAX (APPEALS) - 1 VIDE F.NO.ACIT/CIR - 3(1)/VSP/REM.RPT./PSR/2017 - 18 DATED 05.07.2017 STATING THAT THE REV E NUE AUDIT OBJECTION WAS NOT ACCEPTED BY THE DEPARTMENT. FOR THE SAKE OF CLARI TY WE, EXTRACT RELEVANT PART THE LETTER AO CITED WHICH READS AS UNDER: AS THE HALF MARGIN STAGE, THE THEN DCIT, CIRCLE - 3(1), VISAKHAPATNAM REPLIED VIDE LETTER DTD.03.05.2011 THAT THE OBJECTIONS RAISED BY THE AUDIT PARTY WERE NOT ACCEPTABLE. CONSEQUENT TO THIS, THIS OFFICE RECEIVED A LETTER DTD.12.08.2011 ISSUED BY DY.ACCOUNTANT GENERAL (ITRA), O/O THE AG(C&RA), HYDERABAD, CALLING FOR A REPORT ON THESE OBJECTIONS. LATER, ON 24.04.2012, THE THEN CHIEF COMMISSIONER OF INCOME TAX (OSD) HAD WRITTEN A LETTER FOR DROPPING OF OBJECTIONS RAISED SINCE THEY WERE NOT ACCEPTABLE. 4.2. TAKING INTO CONSIDERATION OF ALL THE ABOVE FACTS, IT IS CLEAR THAT THE DEPARTMENTS CASE IS NOT COVERED BY EXCEPTIONS IN C IRCULAR NO.3/2018 AND 6 M .A. NO . 0 2 /VIZ/20 20 , A.Y.20 08 - 09 SRI PATCHAVA SRINIVAS BABU , VISAKHAPATNAM WE FIND NO MISTAKE IN THE ORDER OF THIS TRIBUNAL WHICH NEEDS TO BE RECALLED OR ANY MODIFICATION IS REQUIRED U/S 254(2) OF THE INCOME TAX ACT. HENCE, THE MISCELLANEOUS APPLICATION FILED BY THE DEPARTMENT IS DISMISSED. 5 . IN THE RESULT, MISCELLANEOUS APPLICATION FILED BY THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH FEBRUARY, 2021. SD/ - S D/ - ( ) ( . . ) (N.K.CHOUDHRY) (D.S.SUNDER SINGH) / JUDICIAL MEMBER / ACCOUNTANT MEMBER DATED : 17 .02.2021 L.RAMA, SPS / COPY OF THE ORDER FORWARDED TO : - 1 . / THE REVENUE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 3(1) VISAKHAPATNAM 2 . / THE ASSESSEE SHRI PATCHAVA SRINIVAS BABU, D.NO.1 - 84 - 21/2 VENGAMAMBA NIVAS, SECTOR 4, MVP COLONY, VISAKHAPATNAM 3. THE PR. COMMISSIONER OF INCOME TAX - 1 , VISAKHAPATNAM 4. THE COMMISSIONER OF INCOME TAX (APPEALS) - 1, VISAKHAPATNAM 5 . , , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM