M/s Progressive Constructions Ltd.,, Hyderabad v. DCIT, Hyderabad

ITA 209/HYD/2008 | 2002-2003
Pronouncement Date: 13-01-2010 | Result: Allowed

Appeal Details

RSA Number 20922514 RSA 2008
Assessee PAN AABCP2274M
Bench Hyderabad
Appeal Number ITA 209/HYD/2008
Duration Of Justice 1 year(s) 11 month(s) 2 day(s)
Appellant M/s Progressive Constructions Ltd.,, Hyderabad
Respondent DCIT, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 13-01-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 13-01-2010
Date Of Final Hearing 11-01-2010
Next Hearing Date 11-01-2010
Assessment Year 2002-2003
Appeal Filed On 11-02-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B HYDERABAD BEFORE SHRI G.C.GUPTA VICE PRERSIDENT AND SHRI AKBER BASHA ACCOUNTANT MEMBER ITA NO.282/HYD/08 : ASSESSMENT YEAR 2000-01 ITA NO.210/HYD/08 : ASSESSMENT YEAR 2002-03 DY. COMMISSIONER OF INCOME TAX CIRCLE 16(3) HYDERABAD V/S. M/S. PROGRESSIVE CONSTRUCTIONS LTD. HYDERABAD. (PAN - AABCP 2274 M) (APPELLANT) (RESPONDENT) AND ITA NO.208/HYD/08 : ASSESSMENT YEAR 2000-01 ITA NO.209/HYD/08 : ASSESSMENT YEAR 2002-03 M/S. PROGRESSIVE CONSTRUCTIONS LTD. HYDERABAD. (PAN - AABCP 2274 M) V/S. DY. COMMISSIONER OF INCOME TAX CIRCLE 16(3) HYDERABAD (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI E.S.NAGENDRA PRASAD ASSESSEE BY : SHRI V.RAGHAVENDRA RAO O R D E R PER AKBER BASHA ACCOUNTANT MEMBER: THERE ARE FOUR APPEALS IN THIS BUNCH. THEY ARE CRO SS- APPEALS FOR TWO YEARS AND HENCE THERE ARE FOUR IN ALL. THEY ARE DIRECTED ITA NO.282/HYD/08 & 3 ORS M/S. PROGRESSIVE CONSTRUCTIONS LTD. HYD 2 AGAINST TWO SIMILAR BUT SEPARATE ORDERS OF THE CIT(A) V HYDERABAD BOTH DATED 30.11.2007 FOR ASSESSMENT YEARS 2000-01 AND 2002-0 3. SINCE FACTS OF THE CASE AND ISSUES INVOLVED IN BOTH THESE APPEAL S ARE COMMON THEY ARE BEING DISPOSED OFF BY THIS COMMON ORDER FOR T HE SAKE OF CONVENIENCE. 2. FACTS OF THE CASE IN BRIEF AS TAKEN FROM THE APPEA L FOR ASSESSMENT YEAR 2000-01 ARE THAT THE ASSESSEE IS A COMPANY E NGAGED IN THE BUSINESS OF EXECUTION OF CONSTRUCTION CONTRACTS. IT H AS FILED THE ORIGINAL RETURN ON 29.11.2000 SHOWING INCOME OF RS.6 4 9 26 630 AFTER CLAIMING DEDUCTION UNDER S.80HHBA OF RS.82 70 815 . A SSESSMENT WAS ORIGINALLY COMPLETED ON 28.2.2003 UNDER S.143 (3) OF THE ACT ACCEPTING THE RETURNED INCOME AND THEREBY ACCEPTING THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER S.80HHBA IN ITS ENTIRETY. SUBSEQUENTLY THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE BY INCLUDING THE RECEIP TS OF RS.1 29 40 611 SHOWN UNDER THE HEAD 'OTHER REVENUE' I N THE PROFIT OF THE HOUSING PROJECT HAS CLAIMED EXCESS DEDUCTION U/S. 80HHBA OF THE ACT. OBSERVING THAT ON ACCOUNT OF ALLOWANCE OF SUCH EXCE SS CLAIM OF DEDUCTION UNDER S.80HHBA SUBSTANTIAL AMOUNT OF TAXABLE INCOME HAS ESCAPED ASSESSMENT; THE ASSESSING OFFICER REOPENED THE ASSESSMENT U/S. 147 OF THE ACT. IN THE COURSE OF REASSESSMENT THE ASSE SSING OFFICER NOTED THAT THE OTHER REVENUE SHOWN AT RS.1 29 40 611 COMPRISED OF ITEMS LIKE COMMISSION FROM SUB-CONTRACTOR MACHINERY HIRE CHARGES FROM WORK CONTRACTORS MACHINERY HIRE CHARGES FROM OTHERS INTEREST EARNED FROM BANKS AND INTEREST EARNED FROM OTHERS BESI DES OTHER INCOME OF RS.56 84 582. THE SAID OTHER INCOME IN TURN HE NOTED COMPRISED OF A SUM OF RS.50 35 872 SHOWN AS RECEIVED FROM SALE OF DBM A SUM OF RS.2 49 770 TOWARDS DISCOUNT RECEIVED FROM SUPPLIERS AND A SUM OF RS.3 98 940 FROM SALE OF SCRAP. HE NOTED T HAT THE ABOVE ITA NO.282/HYD/08 & 3 ORS M/S. PROGRESSIVE CONSTRUCTIONS LTD. HYD 3 RECEIPTS SHOWN UNDER THE HEAD OTHER REVENUE DO NOT CONST ITUTE PROFIT DERIVED FROM EXECUTION OF HOUSING PROJECT IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS L TD. V/S. CIT(262 ITR 278). HE ACCORDINGLY ISSUED A SHOW-CAUSE NOTI CE TO THE ASSESSEE PROPOSING TO DISALLOW THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER S.80HHBA IN RELATION TO THE OTHER RECEIPTS NOTED ABOVE AND ULTIMATELY NOT SATISFIED WITH THE EXPLANATION OF TH E ASSESSEE IN RESPONSE THERETO HE COMPUTED THE EXCESS AMOUNT OF DEDUCTION UND ER S.80HHBA CLAIMED BY THE ASSESSEE ASSESSMENT RS.22 27 304 AND ADDING BACK THE SAME COMPLETED THE RE-ASSESSMENT ON A TOTAL INCOME OF RS.7 09 70 144 VIDE ORDER OF ASSESSMENT DATED 30.11.2 005 PASSED UNDER S.143(3) READ WITH S.148 OF THE ACT. 3. ASSESSEE CONTESTED THE REASSESSMENT THUS MADE NOT ONLY QUESTIONING THE LEGALITY AND VALIDITY OF THE REOPENI NG OF THE ASSESSMENT BUT ALSO THE ADDITIONS MADE ON MERITS. THE CIT(A) WH ILE UPHOLDING THE LEGALITY AND VALIDITY OF THE INITIATION OF THE PROCE EDINGS UNDER S.147 OF THE ACT UPHELD THE ACTION OF THE ASSESSING OFFICER IN EXCL UDING FROM THE SCOPE OF COMPUTATION OF RELIEF UNDER S.80HHBA ONLY THE CO MMISSION FROM SUB-CONTRACTORS OF RS.46 55 893; INTEREST RECEIVED F ROM BANKS OF RS.15 75 622; MACHINERY HIRE CHARGES RECEIVED FROM WORK CONTRACTORS AND FROM OTHERS OF RS.7 37 182 AND RS.2 85 150; AND IN TEREST EARNED FROM OTHERS OF RS.2 182. AS FOR THE AMOUNT OF RS.50 35 872 RECEIVED ON SALE OF DBM THE CIT(A) HELD THAT SINCE THE PROFIT ELEMENT ATTRIBUTABLE TO ABOVE SALE HAS BEEN COMPUTED AT RS.8 53 581 THE ASSE SSING OFFICER SHOULD EXCLUDE ONLY THAT AMOUNT IN RESPECT OF SALE OF DB M. HE ALSO DIRECTED THE ASSESSING OFFICER NOT TO EXCLUDE THE AMOUNTS O F RS.3 98 940 BEING INCOME OF THE ASSESSEE FROM SALE OF SCRAP AND OF RS.2 49 770 ITA NO.282/HYD/08 & 3 ORS M/S. PROGRESSIVE CONSTRUCTIONS LTD. HYD 4 REPRESENTING DISCOUNT RECEIVED FROM SUPPLIER. THE CIT (A) THUS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 4. WHILE THE ASSESSEE HAS PREFERRED THE APPEAL ITA NO.208/HYD/08 CONTESTING THE ACTION OF THE CIT (A) NOT ONLY IN UPHOLDING THE LEGALITY AND VALIDITY OF THE RE-ASSESSMEN T BUT ALSO ON THE MERITS IN RELATION TO VARIOUS ITEMS IN RELATION TO WH ICH DISALLOWANCE OF DEDUCTION UNDER S.80HHBA MADE BY THE ASSESSING OFFICER HAS BEEN UPHELD THE REVENUE HAS PREFERRED ITS APPEAL ITA NO.2 82/BYD/08 CONTESTING THE RELIEF GRANTED BY THE CIT (A). BUT FO R THE AMOUNTS INVOLVED FACTS OF THE CASE AND ISSUES INVOLVED IN THE AP PEALS FOR THE ASSESSMENT YEAR 2002-03 ARE IDENTICAL AND HENCE WE ARE N OT GOING TO THE DETAILS OF THE SAME. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT T HE CIT [A] IS NOT JUSTIFIED IN SUSTAINING THE VALIDITY OF THE INITIATION OF THE ASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT. THE DE CISION IN THE CASE OF ACIT VS. RAJESH JAVERI STOCK BROKERS P LTD RE PORTED IN 291 ITR 500 RELIED UPON BY THE CIT(A) IN THE IMPUGNED ORDER IS NOT APPLICABLE TO THE CASE UNDER CONSIDERATION. IN THAT CASE THE ORIGINAL ASSESSMENT WAS DONE UNDER SECTION 142 [1] AND NOT 143 [3] OF THE ACT. THE CIT(A) HAS NOT VERIFIED THE RECORDS TO FIND OUT WH ETHER THE AUDIT CORRESPONDENCE WAS THE REASON FOR REOPENING THE ASSESSMENT. INITIATION OF PROCEEDINGS UNDER SECTION 147 IS TOTALLY I NVALID AS IT WAS NOT DONE ON THE BASIS OF THE ASSESSING OFFICER'S OWN BELIEF BUT THE SAME WAS PROMPTED BY THE DIRECTIONS OF THE COMMISSIONER. THE PRI NCIPLES LAID DOWN BY THE APEX COURT IN THE CASE OF SIRUPUR PAPER MI LLS VS. CIT REPORTED IN 77 ITR 6 HAVE NOT BEEN FOLLOWED BEFORE INITIATING THE PROCEEDINGS UNDER S.147 OF THE ACT. ON MERITS HE SUBMIT TED THAT THERE ITA NO.282/HYD/08 & 3 ORS M/S. PROGRESSIVE CONSTRUCTIONS LTD. HYD 5 IS A NEXUS BETWEEN THE INTEREST RECEIPTS OF RS.15 75 622 ON THE ONE HAND AND THE INTEREST EXPENDITURE ON THE OTHER AND T HEREFORE IT IS ONLY A NET OUT GO OF INTEREST. IN REALITY THEREFORE THE RE IS NO INCOME AT ALL BY WAY INTEREST AND AS SUCH THERE IS NO QUESTION OF INCLUSION OF ANY INTEREST FOR BEING TREATED AS NOT DERIVED FROM THE BUSINESS OF T HE ASSESSEE. THE ASSESSEE ALREADY DISALLOWED RS.8 53 581 BEING THE INCOME F ROM THE DBM FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80HHBA AND HENCE EXCLUDING THE SAME AGAIN IS NOT CORRECT. THE DEPARTMENT IS ALSO NOT CORRECT IN HOLDING THAT THE AMOUNT OF RS.46 55 893 BEI NG THE COMMISSION RECEIVED FROM SUB-CONTRACTORS IS NOT DERIVED FROM THE BUSINESS OF THE ASSESSEE ELIGIBLE FOR DEDUCTION UNDER SECTIO N 80HHBA OF THE ACT. IN THE ASSESSEE'S OWN CASE THIS BENCH OF THE TRI BUNAL FOR THE ASSESSMENT YEAR 1997-98 AND 1998-99 HELD THAT THE AMOU NT PAID TO THE SUB-CONTRACTORS IS EXPENDITURE IN THE HANDS OF THE A SSESSEE. THE SAID EXPENDITURE IS OUT OF THE RECEIPTS FROM CONTRACT W ORK WHICH IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHBA OF THE ACT. IT IS SUBMITTED THAT MACHINERY HIRE CHARGES AND RECEIPT CHARGES FROM WORK CONTRACTORS OF RS.7 31 182 AND RS.2 85 150 RESPECTIVELY ARE DERIVE D FROM THE BUSINESS OF THE CONTRACT ELIGIBLE FOR THE SAID DEDUCTION. ALTERNATIVELY IT IS SUBMITTED THAT THE EXPENDITURE INCURRED AND DEBITE D IN ACCOUNTS IN RESPECT OF THE MACHINERY HIRE CHARGES AND THE NET INCOME ONLY SHOULD HAVE BEEN EXCLUDED FROM THE MACHINERY HIRE CHARGES AS BE ING NOT DERIVED FROM THE BUSINESS. HE RELIED ON THE DECISION OF T HE DELHI HIGH COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD RE PORTED IN 256 ITR 1 IN SUPPORT OF HIS CONTENTION WITH REGARD TO THE VALIDI TY OF JURISDICTION. 6. ON THE OTHER HAND THE LEARNED DEPARTMENTAL R EPRESENTATIVE SUBMITTED THAT INITIATION OF ASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT IS PERMISSIBLE AS THE SAME IS WITHIN 4 YEARS FROM T HE END OF THE ITA NO.282/HYD/08 & 3 ORS M/S. PROGRESSIVE CONSTRUCTIONS LTD. HYD 6 RELEVANT ASSESSMENT YEAR. THE ORDER OF ASSESSMENT ORIGINAL LY PASSED BY THE ASSESSING OFFICER IS WITHOUT DUE APPLICATION OF MIND. SUCH APPLICATION OF MIND IN THIS CASE CAN BE FOUND OUT FROM THE ORDER OF ASSESSMENT ITSELF IN AS MUCH AS THE ORDER OF ASSESSMENT DOES NOT CONTAIN ANY DISCUSSION ON THE PARTICULAR ISSUE AND AS SUCH TH E SAME MAY BE HELD TO HAVE BEEN RENDERED WITHOUT ANY APPLICATIO N OF MIND. IN THE CASE OF GIRILAL AND COMPANY VS ITO REPORTED IN 300 ITR 432 [BOM] THE HON'BLE HIGH COURT HELD THAT EVEN REASSESSMENT AFTER FOU R YEARS IS VALID. IN SUPPORT OF HIS CONTENTIONS THE LEARNED DEPARTMENTA L REPRESENTATIVE HAS RELIED ON THE FOLLOWING DECISIONS- (A) PHOOLCHAND BAJRANGLAL & ANR. V/S. ITO(203 ITR 456)-SC (B) VENUS INDUSTRIAL CORPORATION V/S. ACIT (236 ITR 742)- P&H (C) CONSOLIDATED PHOTO & FINVEST LTD V/S. JCIT(281 ITR 39 4)- DEL. (D) RAMA BOILED MODERN RICE MILL V/S. ITO (280 ITR (AT)16 7) HE ALSO RELIED ON THE ORDERS OF THE LOWER AUTHORITIES O N MERITS BESIDES CITING A NUMBER OF CASES IN SUPPORT THEREOF. 7 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND FROM THE ASSESSMENT ORDERS T HAT THE ASSESSING OFFICER INITIATED THE REASSESSMENT PROCEEDINGS 'IN ORDER TO VERIFY' THE CLAIM OF THE ASSESSEE WITH REGARD TO DEDUCTION UNDER SECTION 80HHBA OF THE ACT. IT IS EVIDENT THEREFORE THAT AT TH E TIME OF REOPENING SINCE THE SO CALLED VERIFICATION WAS YET TO BE DONE THE ASSESSING OFFICER DID NOT HAVE REASON TO BELIEVE THAT THE INCOME ESCAPED ASSESSMENT. WE ALSO FIND THAT THE ASSESSMENTS WERE DONE ORIGINALLY FOR T HE YEARS UNDER APPEAL UNDER SECTION 143 [3] OF THE ACT AFTER PROLONG ED HEARING ON ITA NO.282/HYD/08 & 3 ORS M/S. PROGRESSIVE CONSTRUCTIONS LTD. HYD 7 VARIOUS DATES AND AFTER CALLING FOR SEVERAL DETAILS FROM THE ASSESSEE SPECIFICALLY IN RELATION TO CLAIM FOR DEDUCTION UNDER SE CTION 80HHBA OF THE ACT. THIS IS CLEARLY EVIDENT FROM THE LETTER ISSUED BY THE ASSESSING OFFICER TO THE ASSESSEE ON 5-11-2002 A COPY OF WHICH IS AL SO AVAILABLE IN THE PAPER-BOOK FILED BY THE ASSESSEE. AN ASSESSMENT UNDER SE CTION 143 [3] OF THE ACT MEANS THAT THE ASSESSMENT WAS MADE AFTER CON SIDERING ALL THE RELEVANT DETAILS IN TERMS OF CLAUSE [E] OF THE SECT ION 114 OF THE INDIAN EVIDENCE ACT 1872 AS HELD BY THE DELHI HIGH CO URT IN THE CASE OF CIT VS. KELVINATOR INDIA LIMITED REPORTED IN 256 ITR 1. THE BALANCE SHEET AND SCHEDULES FROM THE ANNUAL REPORT CONSIDERED IN THE IMPUGNED RE-ASSESSMENT PROCEEDINGS WERE PART OF THE RETUR NS ORIGINALLY FILED AND THE ORIGINAL ASSESSMENTS WERE COMPLETED ON THE BASIS OF SUCH MATERIAL/INFORMATION ALREADY AVAILABLE ON RECORD. I N THIS VIEW OF THE MATTER WE ARE OF THE CONSIDERED OPINION THAT WHEN SUF FICIENT ENQUIRIES WERE MADE BY THE ASSESSING OFFICER BY CALLING UPON THE ASSE SSEE TO FURNISH VARIOUS DETAILS BY ENTERING INTO CORRESPONDENCE A ND ISSUING QUESTIONNAIRE AND THE MATTER WAS DELIBERATED OVER SE VERAL DATES OF HEARING BEFORE THE ASSESSING OFFICER COULD ARRIVE AT CON CLUSION THAT THE ASSESSEE WAS ENTITLED TO A PARTICULAR RELIEF UNDER SECTION 80HHBA THEN IN RELATION TO THAT VERY ISSUE IT CANNOT BE SAID THAT THE ASSESSMENT WAS ORIGINALLY MADE WITHOUT DUE APPLICATION OF MIND. AN Y DIFFERENT VIEW OF THE MATTER WOULD IN SUCH A CASE WOULD ARISE OUT OF ONLY A CHANGE OF OPINION UNLESS THE EARLIER VIEW IS PERVERSE OR ILLOGICA L. THE DEPARTMENT DID NOT BRING ON RECORD ANY COGENT MATERIAL TO SHOW TH AT THE EARLIER CONCLUSION ARRIVED AT BY THE ASSESSING OFFICER IS PERVERSE O R OTHERWISE NOT LOGICAL OR VALID. THE DECISIONS RELIED UPON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE ARE CLEARLY DISTINGUISHAB LE ON THE FACTS AND CIRCUMSTANCES OF THE CASE UNDER CONSIDERATION. IN THIS VIEW OF THE MATTER INITIATION OF PROCEEDINGS UNDER S.147 OF THE ACT IN THE FACTS AND ITA NO.282/HYD/08 & 3 ORS M/S. PROGRESSIVE CONSTRUCTIONS LTD. HYD 8 CIRCUMSTANCES OF THE PRESENT CASE IS NOT LEGAL OR VALID. AND AS SUCH THE SAME CANNOT BE SUSTAINED. THE AUDIT REPORT MERELY GIVE S AN OPINION WITH REGARD TO INELIGIBILITY OF AN ASSESSEE TO DEDUCTION UNDE R SECTION 80HHBA OF THE ACT AND THAT ITSELF CANNOT ENABLE THE DEPARTM ENT TO REOPEN THE ASSESSMENT WHICH WAS COMPLETED ON DUE APPLICATION OF MIND A ND AFTER MAKING NECESSARY ENQUIRIES. IN THE CIRCUMSTANCES WE HOLD TH AT REOPENING OF THE ASSESSMENT FOR BOTH THE YEARS UNDER CON SIDERATION IN THIS CASE IS NOT LEGAL OR VALID AND CONSEQUENTLY THE I MPUGNED RE- ASSESSMENTS MADE ARE LIABLE TO BE CANCELLED. WE DO SO ACCO RDINGLY ALLOWING THE GROUNDS OF APPEAL OF THE ASSESSEE QUESTIONI NG THE LEGALITY AND VALIDITY OF THE RE-ASSESSMENTS MADE. 8. IN VIEW OF OUR DECISION ON THE LEGALITY AND VALID ITY OF THE RE- ASSESSMENTS MADE UNDER S.147 OF THE ACT IT IS REDUNDANT F OR US TO GO INTO THE CONTENTIONS OF THE PARTIES ON MERITS. 9. IN THE RESULT WHILE THE APPEALS FILED BY THE ASSESSE E ARE ALLOWED THE APPEALS FILED BY THE REVENUE ARE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 13TH JANUARY 2010 SD/- SD/- (G.C.GUPTA) (AKBER BASHA) VICE PRESIDENT. ACCOUNTANT MEMBER. DT/- 13TH JANUARY 2010 COPY FORWARDED TO: 1. M/S. PROGRESSIVE CONSTRUCTIONS LTD. 7TH FLOOR RAGHAV A 'N' BLOCK R.R.TOWERS CHIRAG ALI LANE HYDERABAD 01. 2. DY. COMMISSIONER OF IT CIRCLE-16(3) HYDERABAD. ITA NO.282/HYD/08 & 3 ORS M/S. PROGRESSIVE CONSTRUCTIONS LTD. HYD 9 3. CIT(A) V HYDERABAD . 4. COMMISSIONER OF INCOME TAX IV HYDERABAD. 5. DEPARTMENTAL REPRESENTATIVE ITAT HYDERABAD. B.V.S.