Shri V. Ananth Kumar Prop, Biligiri Granites V. The Asst. Commr. of Income Tax Circle 1 (1), Mysore

ITA/466/2008

AI Insights

The case involves an income tax appeal by Shri V. Ananth Kumar, the proprietor of Biligiri Granites, against the orders of the Income Tax Appellate Tribunal (ITAT) concerning the deduction under Section 80HHC for the block assessment period from 1988-89 to 1997-98. The primary contention was the computation of business income and the subsequent deductions allowed under Section 80HHC. Initially, the Assessing Officer and the Appellate Authority had computed the business income without considering the brought forward losses of 1994-95. However, the Tribunal later adjusted the business income by deducting these losses, which reduced the benefit under Section 80HHC. The High Court found that the Tribunal's action was beyond its jurisdiction as the issue of deducting brought forward losses was not raised in the earlier appeals.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 794168 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 01-07-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K V ARAVIND
• Assessee Lawyers: A SHANKAR; M LAVA
• Keywords: Block assessment; Brought forward losses; Income Tax; Miscellaneous petition; Section 80HHC
• Section: 254(2); 132; 80HHC; 72; 260-A

Judgement Text

" - 1 - IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 1ST DAY OF JULY, 2014 PRESENT THE HON’BLE MR.JUSTICE N.KUMAR AND THE HON’BLE MR.JUSTICE B.MANOHAR INCOME TAX APPEAL NO.466 OF 2008 BETWEEN: SHRI V. ANANTH KUMAR PROP, BILIGIRI GRANITES B.R.HILLS ROAD CHAMARAJANAGAR … APPELLANT (BY SRI.A SHANKAR AND M.LAVA , ADVOCATES) AND: THE ASST. COMMR. OF INCOME TAX CIRCLE 1 (1), SHILPASHREE BUILDINGS VIDYARANYAPURAM, MYSORE … RESPONDENT (BY SRI.K.V.ARAVIND, ADVOCATE) ***** THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT, 1961 ARISING OUT OF ORDER DATED 7.2.2008 PASSED IN MP NO.121/BANG/2007 & MP NO.123/BANG/2006, FOR THE BLOCK ASSESSMENT PERIOD 1988-89 TO 1997-98, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND TO ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE ITAT, IN - 2 - MP NO.121/BANG/2007 & MP NO.123/BANG/2006 DATED 7.2.2008 AND 6.2.2007. THIS APPEAL COMING ON FOR FINAL HEARING THIS DAY, N.KUMAR J., DELIVERED THE FOLLOWING:- JUDGMENT The assessee is a granite dealer and is assessed to tax. His premises was searched pursuant to issue of warrant of authorization under Section 132 of the Income Tax Act. The assessee filed his return pursuant to search. After processing the said return, an assessment order came to be passed on 14.3.2000. The subject matter of the controversy in this appeal is the extent to which the benefit under Section 80HHC is to be given to the assessee. In the said order, the business income of the assessee was taken as Rs.68,02,864/- and 94.77% of the said income amounting to Rs.64,48,686/- was exempted from payment of tax under Section 80HHC. The Assessing Authority took depreciation on trucks and equipment as claimed and - 3 - debited to the Profit and Loss account a sum of Rs.45,22,182/- and deducted 10% attributing to the earning hire charges i.e. Rs.4,52,218/- and thus, arrived at Rs.40,69,694/- as the balance allowable deduction under his business. Similarly, insofar as maintenance expenses are concerned, it was taken as Rs.5,51,561/-. Thus, the gross total income was taken as Rs.97,80,104/-. For the purpose of 80-HHC, the business income was taken at Rs.68,02,864/- and 94.77% was given deduction which works out to Rs.64,48,686/-. Aggrieved to this order, the assessee preferred an appeal to the Commissioner of Income Tax (Appeals). The Appellate Authority allowed the appeal in part. 2. Consequent to the order passed by the Appellate Authority, the Assessing Officer determined the business income as Rs.80,32,073/- and 94.77% deduction was allowed. Therefore, for the purpose of - 4 - deduction under Section 80HHC, the amount arrived at was Rs.76,11,995/-. The Revenue aggrieved by the said order preferred an appeal to the Tribunal. The Tribunal dismissed the appeal by its order dated 2.3.2006. Thereafter, the Revenue preferred Miscellaneous Petition No.123/2006 contending that an additional ground urged was not taken into consideration by the Tribunal before passing the order. The said additional ground urged was that CIT (Appeals) while disposing the appeal for the block assessment, ought to have considered the fact that the deduction under Section 80, 80HHC has to be computed only after setting off carried forward loss of earlier years. That was not a ground urged before the CIT (Appeals). In spite of the same, the said ground was accepted and the Tribunal proceeded to pass an order holding that in terms of provision of Section 72 of the Income Tax Act, the assessment has to be computed because unabsorbed loss has to be entered in the - 5 - assessment of every block year for ascertaining whether there could be a set off of profits and gains of the business of the assessee. In terms of the said order, the Assessing Authority passed an order. The gross total income was taken as Rs.86,59,157/-. The business income was treated as Rs.80,32,073/- and brought forward and losses of 1994-95 was calculated at Rs.28,57,706/- and the same was deducted and thus the business income was reduced to that extent. Thereby, to that extent, the benefit granted by the Assessing Authority was reduced. Therefore, the assessee preferred Miscellaneous Petition No.121/2007 pointing out that the Tribunal could not have passed the said order. It should have the effect of reducing the benefit granted by the Assessing Authority. However, the said petition came to be dismissed on the ground, it amounts to reviewing its order. Therefore, the assessee preferred this appeal challenging both the orders. - 6 - 3. We have heard learned counsel for the parties. 4. From the aforesaid facts set out, neither the Assessing Authority nor the First Appellate Authority deducted the brought forward losses of 1994-95, while computing the business income. When that is so, for the first time, the Tribunal could not have passed an order which has the effect of reducing the benefit granted by the Assessing Authority while passing the original assessment order, which was confirmed by the First Appellate Authority. Section 254(2) vests with the Tribunal, the power to rectify any mistake apparent from the record. Thus, it can amend any order passed by it under sub-section (1) and shall make such amendment if the mistake is brought to its notice by the assessee or the Assessing Officer. Therefore, when the Tribunal passes an order on 2.3.2006 confirming the order passed by the Assessing Authority in the appeal, it would not have considered a ground which was - 7 - neither urged before the Appellate Authority nor a ground which has the effect of taking away the benefit given to the assessee by the Assessing Officer. In that view of the matter, the order passed by the Tribunal in purported exercise of power under Section 254(2), cannot be sustained. Accordingly, we pass the following ORDER The appeal is allowed. The order passed by the Tribunal on 6.2.2007 is herby set aside. Consequently, the order passed by the Tribunal on 7.2.2008 is also set aside. Ordered accordingly. Sd/- JUDGE Sd/- JUDGE AHB "