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Facts
The assessee filed its return of income for AY 2018-19, which was treated as invalid by the CPC, Bengaluru, because the turnover exceeded Rs. 1 crore, but the books were not audited. The CPC included rental income, Service Tax, and GST in the turnover for this purpose.
Held
The Tribunal held that invoking revisional jurisdiction under Section 264 does not bar the assessee from filing an appeal before the CIT(A). Furthermore, the Tribunal determined that rental income should be excluded from the turnover for the purpose of Section 44AB audit applicability.
Key Issues
Whether including Service Tax and GST in turnover for Section 44AB audit applicability is correct, and if filing an appeal after availing a revision petition is maintainable.
Sections Cited
139(9), 44AB, 264, 143(1)
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Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: HON’BLE SHRI MANU KUMAR GIRI & SHRI HON’BLE S.R. RAGHUNATHA
आदेश / O R D E R
PER MANU KUMAR GIRI (Judicial Member):
The captioned appeal filed by the assessee is directed against order of the Ld. Commissioner of Income Tax (Appeals) ADDL/JCIT(A) JODHPUR [CIT(A)] dated 30.08.2024 for Assessment Year 2018-19.
2. The sole grievance of the assessee is that whether the turnover/gross receipts include Service Tax, GST etc, are all outside the accounts of the assessee should have been audited u/s 44AB of the Act ?
Brief facts of the case are as under:
The assessee company had filed its return of income for AY 2018-19 declaring total income of Rs.94,20,220/-which was treated as ‘Invalid return u/s 139(9) of the act by the CPC vide its order dated 13.01.2020. This is a case where the CPC, Bangaluru treated the assessee’s return of income for the AY 2018-19 filed on 27.09.2018 as invalid on the ground that ‘taxpayer has shown receipt or income under ‘Profit and gains of Business or Profession’ more than Rs. 1 crore, however, the books of accounts have not been audited and the assessee has failed to file any satisfactory / reply explanation for the lapse. In fact, CPC, Bangaluru has taken into consideration rental income, Service Tax, GST etc for the purposes of turnover/gross receipts.
3. Aggrieved, assessee challenged the order of the assessee u/s 139(9) of the Act before the CIT(A), who followed the order of the ld.PCIT-1, Coimbattore dated 09.03.2020 on the petition filed by the Coimbattore vide order dated 09.03.2020 had dismissed the petition of the assessee filed u/s 264 of the Act and upheld the order u/s 139(9) of the CPC, Bengaluru.
Now assessee is in appeal before us.
4. Before us, the ld. counsel submitted that the CPC, Bangaluru has taken into consideration rental income, Service Tax, GST etc. for the purposes of turnover/gross receipts, when there is no profit element in Service Tax, GST. The ld. counsel further contended that the total turnover of the assessee is Rs.1,40,64,216/-, however, after separating the Service Tax, CGST, SGST, IGST, the sales of service worked out at Rs.82,05,784/-. He furthermore contended that the turnover does not include Service Tax, CGST, SGST, IGST, hence CPC, Bengaluru cannot declare the return invalid for the reason that the books of accounts have not been audited. He relied upon the various orders of the Tribunal.
Per contra, Ld. DR relied upon the impugned order and pleaded for the dismissal of the appeal. She further argued that the assessee cannot challenge the order passed u/s 139(9) as the same was already been dismissed by the ld.PCIT-1, Coimbattore vide order Act. Hence, she further contended the present parallel appeal is not maintainable.
We have heard the rival submission, perused the record of appeal papers.
7. Firstly, we deal with the maintainability of the appeal against the order of the CPC, Bengaluru dated 13.01.2020, in the light of the order of the ld.PCIT-1, Coimbarore vide order dated 09.03.2020 on the petition of the assessee filed u/s 264 of the Act.
The ld. counsel has placed on record the order of the co-ordinate Bench of the Tribunal in the case of Shri P. Krishnamurthy Vs The Income Tax Officer in dated 07.02.2024 for the maintainability of the present appeal wherein similar circumstances the Tribunal has entertained the appeal of the assessee.
We have gone through the order of the co-ordinate Bench of the Tribunal in the case of Shri P. Krishnamurthy Vs The Income Tax Officer referred supra wherein the Tribunal held as under:
AGT Electronics Ltd. :- 5 -: “3. Brief facts are that the assessee filed his return of income for the relevant assessment year 2013-14 on 04.08.2013 online. The return of income was processed u/s.143(1) of the Act and subsequently, taken up for scrutiny assessment by issuing notice u/s.143(2) of the Act. The AO framed assessment u/s.143(3) of the Act vide order dated 24.03.2016. The AO made addition of unexplained investment u/s.69 of the Act and also addition of bank interest. The assessee instead of filing of appeal before CIT(A) against this assessment order, preferred revision petition u/s.264 of the Act dated 11.06.2016 and the revision petition was considered by PCIT and dismissed vide order dated 28.03.2018 in C.No.9127/2/PCIT/PDY/264/2017-18.
4. Consequent to dismissal of revision petition by PCIT dated 28.03.2018, the assessee preferred appeal before CIT(A) in Form No.35 on 05.08.2018 with a delay of almost 2½ years. The assessee before CIT(A) explained the cause of delay and the CIT(A) noted the same in para 2 as under:-
2.0 As per the details available on record, the order was served on 24.03.2016 and appeal was filed on 05.08.2018, vide Form No.35, well outside the time limit prescribed u/s. 249(2)(b) of the Act. In this regard, the explained the cause of delay as under:
The Appellant instead of filing the appeal preferred revision petition u/s 264 of the Act on 11.06.2016 and the said revision petition was considered and dismissed in the order passed by the PCIT, Pondicherry in C.No.9127/2/PCIT/PDY/264/2017-18 dated 28.03. 2018. In the light of the decision of Jurisdictional High Court reported in 250 ITR 187 and followed by the Jurisdictional Bench of the Income Tax Appellate Tribunal in the case of M/s Premier Distilleries Ltd. in ITA.No.3185/2016 dated 14.06.2018, the present appeal is being preferred with a prayer for admission of the appeal by condoning the technical delay for adjudication of the issues arising from the assessment order on merits. 4.1 After considering the submissions of the assessee, the CIT(A) dismissed the appeal of assessee as not-maintainable, as the assessee has already taken recourse u/s.264 of the Act and once the assessee has opted alternative remedy, relying on the decision of Hon’ble Orissa High Court in the case of Orissa Rural Housing Development Corporation Ltd., vs. ACIT reported in (2012) 343 ITR 316, dismissed the appeal as not-maintainable by observing in para 3.0 as under:-
AGT Electronics Ltd. :- 6 -: 3.0 I have considered the submissions of the assessee. The assessee preferred to take recourse u/s 264 of the Act and filed an application to the PCIT, Pondicherry who admittedly dismissed the petition vide order C.No.9127/2/PCIT/PDYI264/2017-18 dated 28.03.2018. The assessee was therefore legally barred from agitating the same issue u/s 246A. In the case M/s Orissa Rural Housing Development Corpn Ltd(2012) 204 Taxman 673, it was held that remedy available to an assessee u/s 264 was an alternative remedy ,who does not want to avail remedy by way of an appeal and assessee was not permitted to pursue both remedies either simultaneously or one after another. Since the assessee already availed the remedy u/s 264, the present appeal is not maintainable. The appeal is therefore dismissed. Aggrieved, now assessee is in appeal before the Tribunal.
5. Before me, the ld. counsel for the assessee relied on the decision of Hon’ble High Court of Madras in the case of CIT vs. D. Lakshminarayanapathi reported in (2001) 250 ITR 187, wherein the Hon’ble Madras High Court has held that invoking the revisional jurisdiction does not constitute a bar for filing of appeal before Appellate Assistant Commissioner (AAC). The ld. counsel for the assessee assailed the order by arguing that the CIT(A) has relied on the decision of Hon’ble Orissa High Court, which is a nonjurisdictional High Court and now, he is relying on the decision of Jurisdictional High Court. The ld. counsel also relied on the Coordinate Bench decision in the case of Premier Distilleries Ltd., vs. DCIT in order dated 14.06.2018, wherein exactly on identical facts, the Tribunal held that when the assessee is invoking revisional jurisdiction u/s.264 of the Act, it cannot constitute a bar for invoking the appellate jurisdiction and hence, the appeal before CIT(A), in case revision petition is dismissed u/s.264 of the Act, is maintainable. In view of the above, the ld. counsel stated that the order of CIT(A) be set aside and CIT(A) be directed to consider the condonation petition as well as decide the issue on merits.
6. On the other hand, the ld. Senior DR argued that once the assessee is availing alternative remedy, the issue is fully covered by the decision of Hon’ble Orissa High Court in the case of Orissa Rural Housing Development Corporation Ltd., supra and even the provisions of the Act bars from filing of these appeals. The ld. Senior DR relied on CBDT circular No.229 dated 09.08.1977, wherein creation of new appellate authority namely Commissioner (Appeals) is defined and vide this circular, the CBDT has clarified ‘Other provisions’ under para 27.6 as under:-
AGT Electronics Ltd. :- 7 -: 27.6 Other provisions - The Finance (No. 2) Act, 1977 has amended a number of other provisions of, and made a few new provisions in, the Income-tax Act to provide for the appointment, jurisdiction, functions and powers of the Commissioners of Income-tax (Appeals), the procedure to be followed in appeals filed before them, and other related matters. These provisions are briefly indicated below :
Section 2(16A) - Definition of Commissioner (Appeals). Section 116(c) - Inclusion of Commissioner of Income-tax (Appeals) as an income-tax authority.
Section 117(1) - Appointment of Commissioner (Appeals). Section 119 - Board not to issue instructions, etc., so as to interfere with the discretion of the Commissioner (Appeals) in exercise of his appellate functions.
Section 121A - Jurisdiction of Commissioners (Appeals). Sections 125 and 125A - Appellate jurisdiction of Commissioner of Incometax excluded in cases where assessment functions of the Income-tax Officer are assigned to the Inspecting Assistant Commissioner.
Section 126 - Board may empower Commissioners (Appeals) to perform such functions in respect of such area or of such classes of persons or of such classes of income as may be specified by the Board by notification in the Official Gazette.
Sections 131, 133 and 134 - Commissioners (Appeals) to have the same powers as Appellate Assistant Commissioners in regard to discovery, production of evidence, etc.; to call for information; and to inspect registers of companies.
Section 154 - Rectification of mistakes by Commissioners (Appeals).
Sections 177(2), 189(2), 271, 271A and 272A - Commissioners (Appeals) to have the same powers as Appellate Assistant Commissioners in regard to imposition of penalty.
Section 245 - Commissioners (Appeals) authorised to set off refund against tax remaining payable. Section 245A - Inclusion of Commissioner (Appeals) as an income-tax authority for purposes of Chapter XIXA relating to settlement of cases.
AGT Electronics Ltd. :- 8 -: Sections 247 to 251 - Provisions relating to appeal by partner or person denying liability to deduct tax ; form of appeal and limitation; procedure in appeal; and powers of Appellate Assistant Commissioners in disposing of appeals to apply in relation to appeals before Commissioners (Appeals). Section 253 - Appeals against orders passed by Commissioners (Appeals) to lie to the Appellate Tribunal, and departmental appeals to the Tribunal against such orders to be authorised by the Commissioner of Income-tax.
Section 264 - Commissioners of Income-tax not to revise any order under that section in cases where an appeal lies against the order to the Commissioner (Appeals) but has not been made and the time within which such appeal may be made has not expired, or the assessee has not waived his right of appeal, or the order has been made the subject of an appeal to the Commissioner (Appeals).
Section 267 - Amendment of assessment in pursuance of orders passed in appeal by Commissioners (Appeals).
Sections 274 and 275 - Procedure for imposing penalty and bar of limitation for imposing penalties by Commissioners (Appeals).
Section 287 - Publication of information respecting any penalty imposed on a person prohibited until time for presenting an appeal to Commissioner (Appeals) has expired without an appeal having been presented or the appeal, if presented, has been disposed of.
Section 295 - Board empowered to frame rules specifying the circumstances in which, the conditions subject to which and the manner in which the Commissioner (Appeals) may permit an appellant to produce evidence which he did not produce or he was not allowed to produce before the Income-tax Officer.
In view of the above, the ld. Senior DR argued that the provisions of section 264 of the Act itself bars filing of appeal and the conditions mentioned in the provisions of section 264(4)(a) of the Act. He argued that once the provision itself does not permit for filing of alternative remedy, the assessee cannot file appeal before CIT(A) after availing the remedy u/s.264 of the Act.
I have heard rival contentions and gone through facts and circumstances of the case. I noted that the assessee has waived
“I am submitting the Petition u/s 264 of the I.T.Act 1961 in duplicate. The fees for Rs.500/- was paid on 22.04.16 and the challan is enclosed in the paper book page no:9. I am waving my right of appeal. Kindly Acknowledgement the Petition u/s 264 of the I.T.Act 1961 and oblige.”
No doubt, the assessee vide letter dated 11.06.2016 has waived his right of appeal but Hon’ble Madras High Court in the case of CIT vs. D. Lakshminarayanapathi, supra has considered this issue and held that the provisions dealing with appellate jurisdiction do not bar an appellant from invoking the appellate jurisdiction for filing of appeal before CIT(A), even though the assessee had invoked revisional jurisdiction u/s.264 of the Act. The Hon’ble Madras High Court considered this issue and held as under:- 1. Though there is no limitation on the exercise of the appellate power in the statute on the ground that the assessee had invoked the revisional power unsuccessfully, it is contended for the Revenue that such a limitation should be read into the provision dealing with appeals under the Income-tax Act. There is no provision in the Act in express terms, which supports the arguments so advanced by the Revenue. It is not disputed that the provisions dealing with the appellate authorities do not bar an appellant from invoking the jurisdiction, if he had invoked revisional jurisdiction, even though for invoking revisional jurisdiction, it is a pre-condition that the appellate jurisdiction should not have been invoked.
The argument advanced before us is that by inferential reasoning we should hold that if there is a limitation on exercise of revisional power a similar limitation should be read into the exercise of the appellate power. It does not require any authority to hold that it is not the province of the court to rewrite the law on the ground that the provision should have been worded in a different manner in order to make it seemingly consistent with some other provision. Moreover, it is wholly unnecessary for Parliament to impose the same kind of restriction for invoking different kinds of jurisdiction. It is open to the law-maker to provide more than one remedy to the aggrieved party and so long as such remedies are available, the aggrieved parties can certainly invoke them.
AGT Electronics Ltd. :- 10 -: 3. The Tribunal has rightly held that the assessee, notwithstanding his unsuccessful effort at having the order revised, could still file an appeal as invoking the revisional jurisdiction could not constitute a bar to the filing of an appeal. It is for the Legislature to impose such a bar if it considers it necessary to do so.
We, therefore, find no error in the order of the Tribunal. We answer the question as to "whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the Appellate Assistant Commissioner was justified in entertaining the assessee's appeal against the assessment even though the Commissioner of Income-tax had passed an order under Section 264 against the assessee and holding that the provisions of Section 154 were applicable and a revision was not barred by limitation" in favour of the assessee and against the Revenue. No costs. As the issue is covered by jurisdictional High Court, respectfully following the same, I set aside the order of CIT(A) holding the assessee’s appeal as not-maintainable and direct him to re-decide the appeal as per law on merits. In term of the above, appeal of the assessee is allowed for statistical purposes.
We also respectfully following the order of the co-ordinate Bench of Tribunal in the case of Shri P. Krishnamurthy Vs. The Income Tax reject the contentions of the revenue.
On the merits, whether the CPC, Bangaluru right in taking into consideration of rental income, Service Tax, GST etc for the purposes of the prima-facie adjustment u/s 143(1) of the Act, the assessee has put reliance on the following orders of the Hon’ble Courts/Tribunal:
AGT Electronics Ltd. :- 11 -: (i) State of A.P. Vs A.P. Paper Mills Ltd. [(2005) 1 SCC 719] (ii) State of Andhra Vs Shree Bajranga Jute Mill Ltd. [AIR 1955 AP 241] (iii) DCCT Vs Krishnaswamy Mudaliar and Sons [AIR 1954 Mad 8561] (iv) DIT-I Vs Mitchel Drilling International (P) Ltd. 380 ITR 130 (Delhi) (v) DIT-I Vs Schlumberger Asia Services Ltd. (2019) 414 1 (Uttarakhand) (vi) Eni India Ltd Vs JCIT, [2020] 116 taxmann.com 974 (Delhi-Trib].
Under the given facts and situation, to arrive the turnover of business for the purpose of tax audit u/s 44AB of the Act, the rental income of Rs.2,48,55,598/- has to be deducted from the total turnover of Rs.3,30,61,383/-. Thereby, the business turnover of the assessee for the impugned assessment year would be Rs.82,05,784/- which is less than Rupees One Crore and hence not liable for getting its books of account to be audited u/s 44AB of the Act. On perusal of the Income Tax Return filed by the assessee we find that the rental income of Rs.2,48,55,598/- has already been offered as income under the head house property in schedule HP in page number 71. Apart from that on perusal of the audited financials, the revenue from the operations of the assessee has been arrived at Rs. 3,30,61,383/- after deducting taxes collected on the revenue to the tune of Rs.57,99,084/- which includes taxes collected on rental income also. Therefore, the CPC, Begaluru has erred in treating the return as invalid for non-filing of audit report u/s 44AB of the Act, when it is not applicable to the assessee for the impugned assessment year.