NHANCE ENGINEERING SOLUTIONS PRIVATE LIMITED ,HYDERABAD vs. DY. COMMISSIONER OF INCOME TAX , CIRCLE-16(1), HYDERABAD

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH ‘B', HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA No. 1522/Hyd/2018 Assessment Year: 2013-14 Nhance Engineering vs. Dy. Commissioner of Solutions Pvt. Ltd., Income-tax, Hyderabad. Circle – 16(1), Hyderabad. PAN – AABCN9474D Appellant Respondent Assessee by: Shri N. Venkateswara Rao Revenue by: Shri Phani Raju Date of hearing: 07/02/2019 Date of pronouncement: 20/02/2019 O R D E R PER S. RIFAUR RAHMAN, AM:

This appeal filed by the assessee is directed against the order of CIT(A) – 4, Hyderabad, dated, 10/05/2018 for AY 2013-14. 2. Brief facts of the case are that the Assessee company filed its return of income for the AY 2013-14 on 02/12/2013, declaring total income of Rs. 39,26,388/- and book profit u/s 115JB at Rs. 16,54,169/-. The return was processed u/s 143(3) and subsequently the case was selected for scrutiny. Notices u/s 143(2) and 142(1) were issued and duly served on the assessee. In response to the said notices, the AR of the assessee furnished the information called for.

2.1 After going through the information furnished by the assessee, the AO observed that the assessee company had credited a sum of Rs. 20 lakhs under sales & other income on

2 I.T.A. No. 1522/Hyd/18 Nhance Engg. Solutions Pvt. Ltd., Hyd. account of sales of old furniture, which was shown in the computation of income as the slump sale and tax @ 20% was computed separately. When the AO asked the assessee to file submissions in support of its claim, it was state that the assessee company was looking for investors and proposed investors were not interested in the existing business of the company and hence, company decided to transfer the assets and employees of the existing division to its subsidiary and accordingly the net assets value of the fixed assets transferred was Rs. 68,78,403/- for consideration of Rs. 88,78,403/- and the difference of Rs. 20 lakhs gain was offered for taxation as per the provisions of the Act.

2.2 The AO after considering the submissions of the assessee, observed that as per the provisions of section 50B(3) of the Act, the assessee required to furnish in the prescribed form 3CEA along with the return of income, certified by an Accountant. He noted that assessee did not file form 3CEA along with return of income, but, the same was submitted during the course of hearings. The AO, therefore, did not allow the rebate in the income tax and the profit of Rs. 20 lakhs was treated as short profit and added to the total income on the reason that the assessee did not comply with the provisions of section 50B(3). He calculated the tax on Rs. 20,00,000/- on higher rate i.e. 30% instead of 20% as claimed by the assessee. 3. When the assessee preferred an appeal before the CIT(A), the CIT(A) confirmed the order of AO. 4. Aggrieved by the order of CIT(A), the assessee is in appeal before us raising the following grounds of appeal: “Based on the facts and circumstances of the case and in law, the learned Assessing Officer ("AO") / Learned Commissioner of Income-Tax (Appeals) erred in:

3 I.T.A. No. 1522/Hyd/18 Nhance Engg. Solutions Pvt. Ltd., Hyd. 1. Alleging that the capital gains on Slump sale not do not qualify under section 50B of the Income Tax Act, 1961 since appellant failed to file the Form 3CEA along with the return of Income. 2. Not appreciating the fact that the Form 3CEA is filed during the course of assessment proceedings and ignoring the judicial precedents in this regard. 3. Computing Gains on Slump sale @ 30% instead of special rate of 20%. 4. Initiating penalty proceedings u/s 274 r.w.s 271 of the Act. The Appellant also submits that each of the above grounds is independent and without prejudice to the other grounds of appeal preferred by the Appellant.”

4 I.T.A. No. 1522/Hyd/18 Nhance Engg. Solutions Pvt. Ltd., Hyd. assessment, it is as if filed along with the return of income. The AO is expected to accept the report when it is filed at the time of assessment. The claim of the assessee can be submitted only at the time of assessment when the case is selected for scrutiny. AO has to consider the submissions of the assessee when it is filed at the time of assessment. Even otherwise, the filing of report is curable even if it is not submitted along with the return of income. This cannot be the reason for the AO to deny the benefit which is lawfully eligible. Therefore, we direct the AO to accept the audit report and allow the benefit u/s 50B to the assessee. Accordingly, grounds raised by the assessee on this issue are allowed.

Sd/- Sd/- (P. MADHAVI DEVI) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, dated 20th February, 2019. kv Copy forwarded to: 1. Nhance Engineering Solutions Pvt. Ltd., Plot No. 167, Santosh Arcade, Kavuri Hills, Phase – II, Madhapur, Hyderabad – 34 2. DCIT, Circle – 16(1), 1st Floor, IT Towers, Hyderabad. 3. CIT(A) - 4, Hyderabad 4. Pr. CIT – 4, Hyderabad 5. The DR, ITAT, Hyderabad 6. Guard File