PEGASUS ASSET RECONSTRUCTION P. LTD, MUMBAI V. DCIT 3(2)(2), MUMBAI

MA 743/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5649 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 28 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 15-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 18-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Cost of acquisition
• Section: 143(3); 37(1)

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C , MUMBAI BEFORE SHRI G. MANJUNATHA, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER M.A. NO.743/MUM/2018 (ARISING OUT OF ITA NOS.1019/MUM/2017) ASSESSMENT YEAR: 2012-13 PEGASUS ASSET RECONSTRUCTION PRIVATE LTD. 54-55, 5TH FLOOR, FREE PRESS HOUSE, FREE PRESS JOURNAL MARG, NARIMAN POINT, MUMBAI 400 023. / VS. ACIT 3(2)(2) MUMBAI ( /ASSESSEE) ( / REVENUE) P.A. NO. AADCP3334Q / DATE OF HEARING : 12/04/2019 / DATE OF ORDER: 15/05/2019 / O R D E R PER G. MANJUNATHA (ACCOUNTANT MEMBER) THE ASSESSEE HAS FILED THIS MISCELLANEOUS APPLICATI ON U/S 254(2) OF THE INCOME TAX ACT, 1961 AND REQUESTED TO RECALL ORDER PASSED BY THE ITAT, MUMBAI C BENCH IN ITA NOS.1019/MUM/2017 DATED 25/07/2018 FOR ASSESSME NT YEAR 2012-13. 2. THE ASSESSEE HAS NARRATED FACTS AND MISTAKES STA TED TO BE APPARENT FROM THE ORDER OF THE ITAT, MUMBAI, DATED 25/07/2018 IN ITA NO.1019/MUM/2017. THE RELEVANT / ASSESSEE BY MS. MOKSHA MEHTA / REVENUE BY SHRI CHAITANYA ANJARIA 2 MA NO.743/MUM/2018 CONTENTS OF THE MISCELLANEOUS APPLICATION FILED BY THE ASSESSEE FOR AY 2012-13 ARE REPRODUCED HEREUNDER:- THE HON'BLE 'C' BENCH OF THE INCOME-TAX APPELLATE TRIBUNAL, MUMBAI ('ITAT') DISPOSED OFF THE CAPTIONED APPEAL VIDE ORD ER DATED JULY 25, 2018 ('THE APPELLATE ORDER') (RECEIVED BY THE APPLI CANT ON AUGUST 30, 2018). THE CAPTIONED APPEAL CHALLENGED THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) - 8, MUMBAI [' THE CIT(A)'], DATED OCTOBER, 2016, UPHOLDING ASSESSMENT ORDER PAS SED ULS. 143(3) OF THE INCOME-TAX ACT, 1961 ('THE ACT') BY THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE - 3(2)(2), MUMBAI ('THE A.O.') FO R THE CAPTIONED ASSESSMENT YEAR. [COPY OF THE APPELLATE ORDER IS EN CLOSED HEREWITH AS ANNEXURE 'A']. 2. THE PRESENT APPLICATION IS FILED TO PLEAD RECTI FICATION OF CERTAIN MISTAKES IN THE APPELLATE ORDER WHICH IS NA RRATED AS UNDER: 2.1. BRIEF FACTS: 2.1.1. APPLICANT IS IN THE BUSINESS OF ACQUIRING NO N-PERFORMING ASSETS ('NPAS') FROM BANKS AND REALISING THEM OVER A PERIO D OF TIME. AT THE TIME OF ACQUISITION OF NPAS, THE APPLICANT RECOGNISE THE SAME AS 'CURRENT ASSETS' AT COST OF ACQUISITION. IN THE COURSE OF RE ALIZATION OF SUCH NPAS, THE APPLICANT INCURS CERTAIN EXPENSES SUCH AS CONV EYANCE EXPENSES, LEGAL & PROFESSIONAL EXPENSES, TRAVELLING EXPENSES, RETAINERSHIP FEES, ETC. DURING THE PREVIOUS YEAR RELEVANT TO CAPTIONED ASSESSMENT YEAR, THE APPLICANT INCURRED RS. 37,22,563/-, OF THE SAID NATURE. IN BOOKS OF ACCOUNT, THE APPLICANT ADDED THE SAME TO THE COST O F NPA STANDING IN THE 'CURRENT ACCOUNT', ALTHOUGH THE EXPENSES ARE RE VENUE IN NATURE. UPON REALIZATION OF SUCH NPAS, THE APPLICANT RECOGN IZED BOTH, THE INCOME AND THE RELATED REVENUE EXPENSES, IN THE PRO FIT AND LOSS ACCOUNT, IN THE YEAR OF REALISATION OF NPAS, TO GIV E CORRECT PICTURE OF ACCOUNTING PROFIT OR LOSS ON A PARTICULAR NPA. 2.1.2. THESE EXPENSES, BEING REVENUE IN NATURE, OUG HT TO BE CLAIMED AS DEDUCTION IN THE YEAR OF INCURRENCE FOR COMPUTING I NCOME UNDER THE INCOME-TAX ACT, 1961 ('THE ACT'). ACCORDINGLY, THE APPLICANT CLAIMED THESE EXPENSES AS DEDUCTIBLE U/S. 37(1) OF THE ACT IN THE COMPUTATION OF INCOME IN THE YEAR IN WHICH THEY INCURRED. WHILE DO ING SO, THE APPLICANT ALSO SUO-MOTU ADDED BACK THE EXPENSES ON REALISATIO N OF NPA WHICH WERE DEBITED TO PROFIT AND LOSS ACCOUNT FOR THE FIN ANCIAL YEAR RELEVANT TO THE CAPTIONED ASSESSMENT YEAR, AS THE SAME WERE CLA IMED AS DEDUCTION IN EARLIER ASSESSMENT YEARS IN THE YEAR OF INCURREN CE. 2.1.3. THE AO DISALLOWED RS. 37,22,563/-, BEING REV ENUE EXPENSES INCURRED DURING THE YEAR, ON THE GROUND THAT THE SA ID EXPENSES WERE NOT 3 MA NO.743/MUM/2018 PASSCD THROUGH THE PROFIT AND LOSS ACCOUNT BUT WERE DEBITED TO THE COST OF THE ASSET, WHICH IS IN THE NATURE OF 'WORK-IN-PR OGRESS' IN THE BOOKS OF ACCOUNTS. THE AO HELD THAT SINCE THERE WAS NO SALE OR TRANSFER OF THE LOAN ASSET DURING THE YEAR, THE SAID EXPENDITURE CA NNOT BE CLAIMED IN THE YEAR UNDER CONSIDERATION. ON QUESTION OF YEAR O F ALLOWABILITY OF THE SAID EXPENSES, THE AO HELD THAT 'WHEN THE ASSET WOU LD BE SOLD, THE ENTIRE CARRYING AMOUNT OF THE 'WORK-IN-PROGRESS' CA N BE CLAIMED AS EXPENSE AGAINST THE INCOME ON SALE OF ASSET.' [EMPHASIS SUPPLIED] 2.1.4. AFORESAID DISALLOWANCE WAS UPHELD BY LEARNED CIT(A) WHICH WAS FURTHER CHALLENGED BY THE APPLICANT BEFORE THE HON' BLE TRIBUNAL. 2.1.5. DURING THE PENDENCY OF APPEAL, THE APPLICANT REALISED THAT THE AO NOT ONLY DISALLOWED REVENUE EXPENSES INCURRED DURIN G THE YEAR BUT ALSO DID NOT ALLOW EXPENSES DEBITED TO PROFIT AND LOSS A CCOUNT DURING THE YEAR (WHICH WERE SUO-MOTU ADDED BACK TO INCOME BY T HE APPLICANT IN ITS COMPUTATION OF INCOME), WHICH WERE DISALLOWED BY TH E AO IN THE EARLIER ASSESSMENT YEARS. 2.1.6. THE APPLICANT, ACCORDINGLY, RAISED AN ADDITI ONAL GROUND OF APPEAL (NUMBERED AS GROUND NO. 3) ON JUNE 15 2018, ALONG W ITH APPLICATION FOR ADMISSION OF ADDITIONAL GROUND VIDE ITS LETTER DATED JUNE 14, 2018, WITHOUT PREJUDICE TO THE MAIN GROUND ON DEDUCTIBILI TY OF EXPENSES IN THE YEAR OF INCURRENCE, TO MAKE AN ALTERNATE CLAIM THAT THE DEDUCTION OF THE SAID EXPENSES BE ALLOWED IN THE YEAR OF REALISATION OF NPA (IN LINE WITH AO'S FINDING, REFER PARA 2.1.3. ABOVE). [COPY OF AC KNOWLEDGED LETTER DATED JUNE 14, 2018 IS ENCLOSED HEREWITH AS ANNEXUR E 'B']. 2.2. PROCEEDINGS BEFORE HON'BLE TRIBUNAL: 2.2.1. DURING THE COURSE OF HEARING BEFORE THE HON' BLE BENCH, IT WAS SUBMITTED THAT THE MAIN GROUND, RELATING TO DEDUCTI ON OF EXPENSES IN THE YEAR OF INCURRENCE, WAS COVERED AGAINST THE APPLICA NT BY THE ORDER OF HON'BLE TRIBUNAL IN APPLICANT'S OWN CASE FOR EARLIE R ASSESSMENT YEARS. ACCORDINGLY, THE HON'BLE BENCH DECIDED TO FOLLOW IT S CO-ORDINATE BENCH'S ORDER FOR EARLIER ASSESSMENT YEARS. THE HON'BLE BEN CH'S DECISION ON THE MAIN GROUND APPEARS AT PARA 7, PG. NO. 6 OF THE ITA T ORDER. 2.2.2. IT WAS FURTHER SUBMITTED BEFORE THE HON'BLE BENCH THAT THE ADDITIONAL GROUND OF APPEAL, RAISING AN ALTERNATE C LAIM FOR DEDUCTION OF THE SAID EXPENSES IN THE YEAR OF REALISATION OF NPA , IS A COROLLARY TO THE AO'S FINDING, HENCE, OUGHT TO BE ALLOWED. THE HON'B LE BENCH, DURING THE COURSE OF HEARING, AGREED WITH THE CONTENTION OF TH E APPLICANT ON THE ADDITIONAL GROUND OF APPEAL. 2.2.3. THE HON'BLE BENCH DISPOSED OFF THE CAPTIONED APPEAL, VIDE THE APPELLATE ORDER DATED JULY 25, 2018. 2.3. ERROR IN THE APPELLATE ORDER: 4 MA NO.743/MUM/2018 2.3.1. IN THE APPELLATE ORDER, THE HON'BLE BENCH FO LLOWED ITS CO-ORDINATE BENCH'S ORDER IN APPLICANT'S OWN CASE FOR EARLIER A SSESSMENT YEARS AND DISMISSED THE MAIN GROUND OF APPEAL, RELATING TO AL LOWABILITY OF EXPENSES IN THE YEAR OF INCURRENCE. HOWEVER, THE HO N'BLE BENCH NEITHER GAVE ANY COMMENTS ON ADMISSION OF ADDITIONAL GROUND NOR DID IT GIVE ANY FINDING ON MERITS OF THE ADDITIONAL GROUND, THR OUGH WHICH APPLICANT HAD RAISED THE ALTERNATE CLAIM FOR DEDUCTION OF THE SAID EXPENSES IN THE YEAR OF REALISATION OF NPA. IN FACT, THERE IS NO ME NTION IN THE APPELLATE ORDER ABOUT THE ADDITIONAL GROUND FILED BY THE APPL ICANT. 2.3.2. THE APPLICANT HUMBLY SUBMITS THAT THE HON'BL E BENCH INADVERTENTLY OMITTED TO GIVE ANY DECISION ON THE A DDITIONAL GROUND, ON ADMISSION AS WELL AS ON MERITS OF THE GROUND. IT IS A SETTLED LAW THAT NO PREJUDICE SHOULD BE CAUSED TO PARTIES APPEARING BEF ORE THE TRIBUNAL WHICH IS ATTRIBUTABLE TO TRIBUNAL'S MISTAKE, OMISSI ON OR COMMISSION. NON-CONSIDERATION OF APPLICATION FOR ADMISSION OF A DDITIONAL GROUND AND NON-ADJUDICATION THEREON AMOUNT TO OMISSION WHICH W OULD FALL WITHIN THE MEANING OF 'MISTAKE APPARENT FROM RECORD' RECTIFIAB LE U/S. 254(2) OF THE ACT. IN THIS REGARD, THE APPLICANT RELIES ON THE DE CISION OF HON'BLE APEX COURT IN THE CASE OF HONDA SIEL POWER PRODUCTS LTD. V. CIT [2007] 295 ITR 466; HON'BLE DELHI HIGH COURT (FULL BENCH) IN C ASE OF LACHMAN DASS BHATIA HINGWALA (P.) LTD. V. ACIT [2011] 330 I TR 243; AND HON'BLE CHENNAI TRIBUNAL IN CASE OF ALSTOM LTD. VS DEPUTY C OMMISSIONER OF INCOME TAX 120051 95 TTJ 139. 3. IN LIGHT OF THE FOREGOING, THE APPLICANT MOST RE SPECTFULLY PRAYS THE HON'BLE TRIBUNAL MAY BE PLEASED TO RECALL ITS ORDER DATED JULY 25, 2018 TO DEAL WITH THE APPLICATION FOR ADMISSION OF ADDIT IONAL GROUND OF APPEAL, AND ADJUDICATE THE SAME ACCORDINGLY. FOR THIS ACT OF KINDNESS AND JUSTICE, WE SHALL EVER REMAIN GRATEFUL. 3. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THERE ARE CERTAIN ERRORS IN THE ORDER OF THE TRIBUNAL IN AS MUCH AS, THE TRIBUNAL HAS NOT ADMITTED AND ADJUDICATED ADDITIONAL GROUND OF APPEAL FILED BY THE ASSESSEE VIDE ITS PET ITION FOR ADMISSION OF ADDITIONAL GROUND DATED 14/06/2018. FURTHER, NON-CONSIDERATION OF A GROUND, CONSTITUTE MISTAKES APPARENT ON RECORD WHICH COULD BE RECTIFIED U/S 254 (2) OF THE ACT AND HENCE, THE ORDER OF THE TRIBUNAL MAY BE RECALLED FOR ABOVE REASONS. 4. THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT TH E ASSESSEE HAS FAILED TO MAKE OUT A CASE OF MISTAKES APPARENT ON RECORD IN THE OR DER OF THE TRIBUNAL AND WHAT THE ASSESSEES COUNSEL SEEKS IS REVIEW THE JUDGMENT OF THE TRIBUNAL, WHICH IS NOT 5 MA NO.743/MUM/2018 PERMISSIBLE U/S 254(2) OF THE ACT. THEREFORE, THE M ISCELLANEOUS APPLICATION FILED BY THE ASSESSEE MAY BE DISMISSED. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ISCELLANEOUS APPLICATION FILED BY THE ASSESSEE ALONG WITH ORDER OF THE TRIBU NAL IN ITA NO.1019/MUM/2017, DATED 25/07/2018, FOR AY 2012-13. WE FIND THAT THE ASSESSEE HAS FILED AN APPLICATION FOR ADMISSION OF ADDITIONAL GROUND VIDE ITS LETTER DATED 14/06/2018 BUT, THE SAID ADDITIONAL GROUND OF APPEAL FILED BY THE ASSESSEE I S NEITHER ADMITTED NOR ADJUDICATED BY THE TRIBUNAL. THEREFORE, WE ARE OF THE CONSIDERE D VIEW THAT NON-CONSIDERATION OF APPLICATION FILED FOR ADMISSION OF ADDITIONAL GROUN D CONSTITUTES MISTAKE APPARENT ON RECORD WHICH COULD BE RECTIFIED U/S 254(2) OF THE A CT, HENCE, WE RECALL THE ORDER OF THE TRIBUNAL DATED 25/07/2018 IN ITA NO.1019/MUM/2017 F OR THE LIMITED PURPOSE OF CONSIDERATION OF APPLICATION FILED BY THE ASSESSEE FOR ADMISSION OF ADDITIONAL GROUND VIDE ITS LETTER DATED 14/07/2018. WE MAKE IT CLEAR THAT OTHER GROUNDS OF APPEAL DECIDED BY THE TRIBUNAL SHALL NOT BE ARGUED BY THE ASSESSEE IN THE RECALLED PROCEEDINGS. 6. IN THE RESULT, MISCELLANEOUS APPLICATION FILED B Y THE ASSESSEE IS TREATED AS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15/05/2019. SD/- SD/- ( RAVISH SOOD ) (G. MANJUNATHA) ! ' /JUDICIAL MEMBER # ' / ACCOUNTANT MEMBER MUMBAI; DATED : 15/05/2019 F{X~{T? F{X~{T? F{X~{T? F{X~{T? P.S P.S P.S P.S / /. /./. /. !.. %!&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT (RESPECTIVE ASSESSEE) 6 MA NO.743/MUM/2018 2. !'# / THE RESPONDENT. 3. $# $# % ( ) / THE CIT, MUMBAI. 4. $# $# % / CIT(A)- , MUMBAI, 5. '()# ! * , $# # * , , / DR, ITAT, MUMBAI 6. )- . / GUARD FILE. / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI