ACE Infracity Developers P.Ltd, Ghaziabad v. DCIT, Central Circle, Noida

ITA 1087/DEL/2018 | 2015-2016
Pronouncement Date: 05-03-2021 | Result: Allowed

Appeal Details

RSA Number 108720114 RSA 2018
Assessee PAN AAKCA8693E
Bench Delhi
Appeal Number ITA 1087/DEL/2018
Duration Of Justice 3 year(s) 22 day(s)
Appellant ACE Infracity Developers P.Ltd, Ghaziabad
Respondent DCIT, Central Circle, Noida
Appeal Type Income Tax Appeal
Pronouncement Date 05-03-2021
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 05-03-2021
Last Hearing Date 16-02-2021
First Hearing Date 16-02-2021
Assessment Year 2015-2016
Appeal Filed On 13-02-2018
Judgment Text
1 ITA NO. 1087/DEL/2018 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE MS SUCHITRA KAMBLE JUDICIAL ME MBER AND DR. B. R. R. KUMAR ACC OUNTANT MEMBER I.T.A. NO. 1087/DEL/20 18 (A.Y 2015-16) (THROUGH VIDEO CON FERENCING) ACE INFRACITY DEVELOPERS P. LTD. B-47 SURYA NAGAR GHAZIABAD GHAZIABAD UTTAR PRADESH AAKCA8693E (APPELLANT) VS DCIT CENTRAL CIRCLE NOIDA UTTAR PRADESH (RESPONDENT) ORDER PER SUCHITRA KAMBLE JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST ORDER DATED 29/12/2017 PASSED BY CIT(A)-IV KANPUR FOR ASSESSMENT YEAR 201 4-15. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. THE LD. CIT(A) HAS GROSSLY ERRED ON FACTS AS WELL AS IN LAW IN CONFIRMING THE ORDER PASSED BY THE LD. AO WHICH IS EX FACIE IL LEGAL ARBITRARY AND WITHOUT JURISDICTION BEING AGAINST THE PROVISIONS OF INCOME TAX ACT 1961 AND PRINCIPLES OF NATURAL JUSTICE. 2. THE LD. CIT(A) HAS GROSSLY ERRED ON FACTS AS WELL AS IN LAW IN CONFIRMING DISALLOWANCE OF SET OFF OF DEPRECIATION AND BUSINES S LOSS AMOUNTING TO RS. 21 58 600/- BEING RS. 20 52 510/- OF THE CURRENT YE AR UNABSORBED DEPRECIATION RS. 99 831/- UNABSORBED DEPRECIATION OF EARLIER YEAR AND RS. 6 260/- UNABSORBED BUSINESS LOSS OF EARLIER YEAR AG AINST THE SURRENDERED APPELLANT BY SH. V. K. AGARWAL AR RESPONDENT BY SH. SATPAL GULATI CIT DR DATE OF HEARING 16.02.2021 DATE OF PRONOUNCEMENT 05.03.2021 2 ITA NO. 1087/DEL/2018 INCOME OF RS. 2.47 CR. 3. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT AS BUILDER. A SEARCH AND SEIZURE OPERA TION U/S 132 OF THE INCOME TAX ACT 1961 WAS CONDUCTED ON 4/7/2014 ON THE PREM ISES OF THE ASSESSEE COMPRISING ACE GROUP OF CASES. THE ORIGINAL RETURN OF INCOME WAS FILED ON 27/09/2015 AT A LOSS OF RS. 20 52 510/- AS UNOBSERV ED DEPRECIATION TO BE CARRIED FORWARD. DURING SEARCH PROCEEDINGS AN AMOU NT OF RS. 2 47 00 000/- WAS SURRENDERED AND THUS RETURN WAS REVISED AND FIL ED ON 8/7/2016 SHOWING TOTAL INCOME OF RS. 2 25 41 400/- AFTER SETTING OFF UNOBSERVED DEPRECIATION OF THE CURRENT YEAR AND THAT OF PRECEDING ASSESSMENT Y EARS. THE ASSESSEE COMPANY COMMENCED BUSINESS OPERATION SINCE 1/3/2014 AND IT IS AN ADMITTED FACT AS STATED IN PARA 6 OF THE ASSESSMENT ORDER TH AT AN AMOUNT OF RS. 26 30 36 962/- HAS BEEN INCURRED ON CONSTRUCTION OF GROUP HOUSING CONSTRUCTION WAS MERELY 18.25% OF THE ESTIMATED COS T OF PROJECT. THUS REVENUE WAS NOT RECOGNIZED DURING THE YEAR. THE AS SESSING OFFICER MADE ADDITION OF RS. 21 58 600/- ON ACCOUNT OF ADMISSION OF UNDISCLOSED INCOME AND ASSESSED THE TOTAL INCOME AT RS. 2 47 00 000/- 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER THE ASS ESSEE FILED APPEAL BEFORE CIT(A). THE CIT(A) DISMISSED THE APPEAL OF THE AS SESSEE. 5. THE LD. AR SUBMITTED THAT THE LD. CIT(A) CONFIRM ED THE ADDITION ON THE GROUND THAT THE NATURE OF THE SURRENDER OF INCOME I S AN UNEXPLAINED INVESTMENT U/S 69 OF THE ACT. THERE EXIST SPECIFIC PROVISIONS U/S 115BBE W.E.F. 01.04.2013 IN THE PROVISION OF INCOME TAX STATUTE A ND BY VIRTUE OF SUB-SECTION (2) OF SECTION 115BBE NO SET OFF OF LOSS U/S 69 CA N BE ALLOWED. HOWEVER SUB- SECTION 2 OF 115BBE AS APPLICABLE IN AY 2015-16. T HE LD. AR ALSO RELIED UPON THE CBDT CIRCULAR NO. 11/2019 DATED 19.06.2019. THE LD. AR RELIED UPON THE FOLLOWING CASE LAWS:- I) VIJAYA HOSPITALITY AND RESORTS LTD. V. CIT [419 ITR 322 (KAR. HC)] 3 ITA NO. 1087/DEL/2018 II) M/S SANGEET RESORTS VS DCIT; 2020-TIOL-468-1TAT -CHD III) M/S STAR PLY BOARD LTD VS PCIT; 2020-TIOL-611- ITAT-CHD IV) M/S. INNOVATIVE CONSTRUCTION PVT. LTD. VS ACIT ITA NO. 1084/MUM/2019 (A.Y 2013-14) DATED 11/1/2020. THEREFORE IT IS CLEARLY ESTABLISHED THAT SET OF F OF BROUGHT FORWARD LOSSES/DEPRECIATION AGAINST THE INCOME ASSESSED U/S 69 IS ALLOWABLE IN AY 2015- 16. HAD IT NOT BEEN SO THERE WAS NO NEED FOR ANY AMENDMENT IN SEC 115BBE. THE VERY FACT THAT NOW W.E.F. AY 2017-18 T HE PROVISION HAS BEEN AMENDED PROVES CONCLUSIVELY THAT EARLIER THERE WAS NO BAR FOR ADJUSTING BROUGHT FORWARD LOSSES/ DEPRECIATION AGAINST THE IN COME ASSESSED U/S 69. ACCORDINGLY EVEN IF FOR THE SAKE ARGUMENT IT IS SA ID THAT THE SURRENDER OF RS. 2 47 00 000/- IS UNDER SEC 69 THE ASSESSEE IS STIL L ENTITLED TO GET SETOFF OF LOSS/DEPRECIATION AGAINST THE ADDITIONS OF RS. 2 47 00 000/-. THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER HAS MADE THE D ISALLOWANCE ON THE GROUND THAT DEPRECIATION/LOSSES CANNOT BE CLAIMED AGAINST THE SURRENDERED INCOME OF BUSINESS AMOUNTING TO RS. 2.47 CR. SINCE THE SURRENDERED INCOME PERTAINS TO BUSINESS OF THE APPELLANT BEING IN RELATION TO PURC HASE BILLS DEPRECIATION/LOSS WAS RIGHTLY CLAIMED BY THE APPELLANT. EVEN THE ASSE SSING OFFICER HAS TAXED THE SURRENDERED INCOME AS INCOME FROM BUSINESS. THE LD. AR FURTHER SUBMITTED THAT THE CIT(A] CONFIRMED THE ADDITION ON THE GROUN D THAT THE NATURE OF THE SURRENDER OF INCOME IS ON UNEXPLAINED INVESTMENT U/ S 69 OF THE ACT. THERE EXIST SPECIFIC PROVISIONS U/S 115BBE W.E.F. 01.04.2 013 IN THE PROVISION OF INCOME TAX STATUTE AND BY VIRTUE OF SUB-SECTION (2] OF SECTION 115BBE NO SET OFF OF LOSS CAN BE ALLOWED U/S 69. THE LD. AR SUBM ITTED THAT DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAS N OT CONSIDERED ANY ISSUE PERTAINING TO SECTION 69 AS IS EVIDENT FROM THE ASS ESSMENT ORDER ITSELF. BY NOW IT IS JUDICIALLY SETTLED THAT THE CIT(A) DID NOT HA VE ANY JURISDICTION TO MAKE SUCH ADDITION/DISALLOWANCE ON THE ISSUES WHICH WERE NEVE R CONSIDERED BY THE ASSESSING OFFICER. THOUGH THE POWERS OF CIT (A) ARE CO-TERMINUS WITH THE POWERS OF THE ASSESSING OFFICER YET HE HAS JURISDIC TION ONLY ON THOSE ITEMS 4 ITA NO. 1087/DEL/2018 WHICH HAVE BEEN CONSIDERED BY THE AO IRRESPECTIVE O F THE FACT WHETHER THE ISSUE IS SUBJECT MATTER OF APPEAL OR NOT HE DOES NO T HAVE ANY JURISDICTION OVER THOSE ISSUES WHICH HAVE NOT BEEN CONSIDERED BY THE AO BECAUSE THEY WILL BE SUBJECT MATTER OF REVISION U/S 263 OR REASSESSMENT U/S 147. IF CIT(A) TRIES TO EXAMINE THOSE ISSUES WHICH HAVE NOT BEEN CONSIDERED BY THE AO SEC. 147 AS WELL AS SEC. 263 WILL BECOME REDUNDANT AND THE COND ITIONS FOR THEIR OPERATION WILL BE NULLIFIED. THIS VIEW IS FULLY SUPPORTED BY VARIOUS JUDGMENTS OF HONBLE APEX COURT HIGH COURT AND HONBLE JURISDICTIONAL I TAT AS UNDER: (A) SH. VIKRANT PURI VS ACIT; 142 & 5789/DEL/2013; DT. 04/03/2016 (B) HOLCIM (INDIA) PVT. LTD. V/S DCIT 2013-TIOI-9 03-ITAT-DEL (C) CIT VS. RAI BAHADUR HARDUTROY MOTILAL CHAMARIA (1967) 66 ITR 443 (SC) (D) CIT VS. SARDARI LAL & CO. 251 ITR 864 (DEL)(FB) (E) CIT(A) VS. UNION TYRES; 240 ITR 556 (DEL) 6. THE LD. DR SUBMITTED THAT THE ASSESSING OFFICER AS WELL AS THE CIT(A) HAS GIVEN A DETAILED FINDING AS TO WHY THE SET OFF OF D EPRECIATION REQUIRES TO BE CONFIRMED AND RELIED UPON THE ASSESSMENT ORDER AND THE ORDER OF THE CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE SUBMISSION MADE BY THE LD. AR RELATED TO CBDT CIRCULAR NO. 11/2019 DATED 19/06/2019 ARE VERY MUCH RELEVANT IN THE PRESENT APPEAL BEFORE US. BEFORE THAT SECTION 115BBE HAS TO BE TA KEN INTO ACCOUNT. THE EXTRACT OF SECTION 115BBE IS AS FOLLOWS: '115BBE. (1) WHERE THE TOTAL INCOME OF AN ASSESSEE INCLUDES ANY INCOME REFERRED TO IN SECTION 68 SECTION 69 SECTION 69A SECTION 69B SECTION 69C OR SECTION 69D THE INCOME- TAX PAYABLE SHALL BE THE A GGREGATE OF (A) THE AMOUNT OF INCOME-TAX CALCULATED ON INCOME REFE RRED TO IN SECTION 68 SECTION 69 SECTION 69A SECTION 69B SECTION 69C O R SECTION 69D AT THE RATE OF THIRTY PER CENT; AND (B) THE AMOUNT OF INCOME-TAX WITH WHICH THE ASSESSEE W OULD HAVE BEEN CHARGEABLE HAD HIS TOTAL INCOME BEEN REDUCED BY THE AMOUNT OF INCOME 5 ITA NO. 1087/DEL/2018 REFERRED TO IN CLAUSE (A). (2) NOTWITHSTANDING ANYTHING CONTAINED IN THIS ACT NO DEDUCTION IN RESPECT OF ANY EXPENDITURE OR ALLOWANCE SHALL BE ALLOWED TO TH E ASSESSEE UNDER ANY PROVISION OF THIS ACT IN COMPUTING HIS INCOME REFER RED TO IN CLAUSE (A) OF SUB-SECTION (1).' FROM PERUSAL OF SECTION 115BBE IT IS VERY CLEAR T HAT ANY EXPENSE OR ALLOWANCE SHALL NOT BE ALLOWED FROM THE INCOME ASSE SSED U/S 69 BUT THIS SECTION DOES NOT INDICATE THAT SET OFF OF BROUGHT F ORWARD BUSINESS LOSSES SHALL NOT BE ALLOWED FROM INCOME ASSESSED U/S 69 FOR THE PURPOSE OF CALCULATING TAX U/S 115BBE. THIS IS FURTHER CONFIRMED BY THE AMENDM ENT MADE UNDER THE FINANCE ACT 2016 WHICH IS APPLICABLE FROM AY 2017 -18. RELEVANT EXTRACT OF THE AMENDED PROVISION IS REPRODUCED AS UNDER: 115BBE. (2) NOTWITHSTANDING ANYTHING CONTAINED IN THIS ACT NO DEDUCTION IN RESPECT OF ANY EXPENDITURE OR ALLOWANCE OR SETOFF OF ANY LOSS SHALL BE ALLOWED TO THE ASSESSEE UNDER ANY PROVISION OF THIS ACT IN COMPUTING HIS INCOME REFERRED TO IN CLAUSE (A) OF SUB-SECTION (1] . AS PER THE FINANCE ACT 2016 AMENDMENT FOR DISALL OWANCE OF SET OFF OF BROUGHT FORWARD LOSSES AGAINST THE INCOME ASSESSED U/S 68 HAS BEEN INSERTED W.E.F. 01/04/2017 I.E. FROM AY 2017-18. THIS ISSU E HAS ALREADY BEEN CLARIFIED BY THE CBDT ITSELF VIDE CIRCULAR NO. 11/2019 DT. 19 /06/2019. RELEVANT EXTRACTS OF THE CIRCULAR ARE AS UNDER: 2 THE MATTER HAS BEEN REFERRED TO THE BOARD SO THAT A CONSISTENT APPROACH IS ADOPTED BY THE ASSESSING OFF ICERS WHILE APPLYING PROVISION OF SECTION 115BBE IN ASSESSMENTS FOR PERI OD PRIOR TO THE ASSESSMENT YEAR 2017-18. 3. THE BOARD HAS EXAMINED THE MATTER. THE CIRCULAR NO . 3/2017 OF THE BOARD DATED 20TH JANUARY 2017 WHICH CONTAINS EXPLA NATORY NOTES TO THE PROVISIONS OF THE FINANCE ACT 2016 AT PARA 46.2 REGARDING AMENDMENT MADE IN SECTION 115BBEJ2] OF THE ACT MENTIONS THAT CURRENTLY THERE IS UNCERTAINTY ON THE ISSUE OF SET-OFF OF LOSSES AGAIN ST INCOME REFERRED TO IN 6 ITA NO. 1087/DEL/2018 SECTION 115BBE. IT ALSO FURTHER MENTIONS THAT THE PRE-AMENDED PROVI SION OF SECTION 115BBE OF THE ACT DID NOT CONVEY THE INTENTION THAT LOSSES SHALL NOT BE ALLOWED TO BE SET-OFF AGAINST INCOME REFERRED TO IN SECTION 115BB E OF THE ACT AND HENCE THE AMENDMENT WAS MADE VIDE THE FINANCE ACT 2016. THUS KEEPING THE LEGISLATIVE INTENT BEHIND AMENDMENT IN SECTION 115BBE(2) VIDE T HE FINANCE ACT 2016 TO REMOVE ANY AMBIGUITY OF INTERPRETATION THE BOARD I S OF THE VIEW THAT SINCE THE TERM 'OR SET OFF OF ANY LOSS' WAS SPECIFICALLY INSE RTED ONLY VIDE THE FINANCE ACT 2016 W.E.F. 01.04.2017 AN ASSESSEE IS ENTITLED TO CLAIM SET-OFF OF LOSS AGAINST INCOME DETERMINED UNDER SECTION 115BBE OF THE ACT T ILL THE ASSESSMENT YEAR 2016-17. SINCE CBDT CIRCULAR NO. 11/2019 DATED 19. 06.2019 WAS ISSUED AFTER THE ORDER OF THE CIT(A) THE CIT(A) DID NOT H AVE THE BENEFIT OF THE CIRCULAR. THEREFORE WE ARE OF THE VIEW THAT THE CIRCULAR APP LIES IN THE PRESENT ASSESSEES CASE AS THE ASSESSMENT YEAR BEFORE US IS THAT OF A. Y. 2015-16 AND TILL A.Y. 2016-17 THE ASSESSEE IS ENTITLED TO CLAIM SE-OFF O F LOSS AGAINST INCOME DETERMINED UNDER SECTION 115BBE OF THE ACT. THE APP EAL OF THE ASSESSEE IS ALLOWED. 7. IN RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON THIS 05 TH DAY OF MARCH 2021. SD/- SD/- (B. R. R. KUMAR) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 05/03/2021 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 7 ITA NO. 1087/DEL/2018 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI