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Income Tax Appellate Tribunal, BANGALORE BENCHES “B”, BANGALORE
Before: Shri Chandra Poojari, AM & Shri George George K, JM
IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES “B”, BANGALORE Before Shri Chandra Poojari, AM & Shri George George K, JM ITA No.1314/Bang/2012 : Asst.Year 2003-2004 The Assistant Commissioner of M/s.Shriram Chits Income-tax, Circle 12(3) (Karnataka) Private Limited v. Bangalore. No.259/31, Ist Floor, 10th Cross, Wilson Garden Bangalore – 560 027. PAN : AACCS2078R. (Appellant) (Respondent) ITA No.1281/Bang/2012 : Asst.Year 2003-2004 M/s.Shriram Chits (Karnataka) The Assistant Commissioner Private Limited of Income-tax, Circle 12(3) v. No.259/31, Ist Floor, 10th Cross, Bangalore. Wilson Garden Bangalore – 560 027. (Appellant) (Respondent) Revenue by : Sri. Chetan R., Addl.CIT-DR Respondent by : Smt.Lalitha Rameshwaran, Advocate Date of Pronouncement : 30.11.2021 Date of Hearing : 29.11.2021 O R D E R Per George George K, JM These appeals were restored to the Tribunal by the judgment of the Hon’ble High Court in ITA No.1/2014 (judgment dated 23.10.2020).
The brief facts of the case are as follows: The assessee is a company doing chit business. For the relevant assessment year, the return of income was filed on 28.11.2003 declaring total loss of Rs.7,85,38,305. The memo of income filed along with the return of income, loss on own
2 ITA Nos.1314 & 1281/Bang/2012 M/s.Shriram, Chits (Karnataka) Pvt. Ltd. bidding amounting to Rs.7,14,76,102 was reduced from the total income. The assessee during auction, used to bid on its own. When the assessee succeeds in the bid, the difference between the value of chit and the amount at which the assessee bids at the auction is booked as a loss. The loss so booked was spread over to the remaining period of chit. In the assessment completed u/s 143(3) of the I.T.Act dated 28.02.2006, the amount of bid loss claimed in the profit and loss account vide schedule-I was disallowed and corresponding sum of Rs.7,20,32,155 was added to the returned income. Later, it was noticed that the bid loss was claimed in two places, namely, one in profit and loss account and the other in memo of income (prized chit balance – own) and the loss claimed in the memo of income became allowable. The assessee placed reliance on the judgment of the Hon’ble Apex Court in the case of Biharilal Investments Pvt. Ltd. reported in 299 ITR 1 (SC) for making such a claim.
The A.O. issued notice u/s 14 8 of the I.T.Act to bring to tax bid loss of Rs.7,14,76,102 claimed in the memo of income besides an amount of housing property income of Rs.26,632. Against the notice issued u/s 148 of the I.T.Act, the assessee filed objections vide letter dated 20.12.2020. The assessee raised objections regarding the reopening of assessment as well as allowability of adjustment of bid loss made vide memo of income. The objections of the assessee was dismissed and the Assessing Officer completed the reassessment u/s 147 r.w.s. 143(3) of the I.T.Act vide order dated 24.12.2010, wherein he had disallowed the bid loss claimed in the memo of income amounting to Rs.7,14,76,102.
3 ITA Nos.1314 & 1281/Bang/2012 M/s.Shriram, Chits (Karnataka) Pvt. Ltd. 4. Aggrieved, the assessee preferred an appeal to the first appellate authority. The assessee contended that the reopening is bad in law and also raised issues on merits. The CIT(A) dismissed the assessee’s contention that reopening of assessment is bad in law. As regards the issue on merits, the CIT(A) following the order of the Tribunal for assessment year 2005-2006 in ITA NBo.1547/Bang/2010 (order dated 13.10.2011), allowed the assessee’s claim on merits.
Aggrieved by the order of the CIT(A), both the assessee and the Revenue filed appeals before the Tribunal. The Tribunal vide its order dated 14.08.2013, dismissed the Revenue’s appeal (issue raised on merits) and allowed the assessee’s appeal (issue raised on validity of reopening of assessment).
Aggrieved by the order of the Tribunal, the Revenue has filed an appeal before the Hon’ble High Court u/s 260A of the I.T.Act. The Hon’ble High Court vide its judgment dated 23.10.2020 in ITA No.1/2014 upheld the reopening of assessment and restored the issue on merits to the files of the Tribunal. The Hon’ble High Court was considering the following question of law:- “(i) Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in allowing the bid loss without appreciating the fact that such Bid Loss pertains to period beyond the accounting period relevant to the assessment year under consideration and the same should not have been allowed for the sake of consistency? (ii) Whether on the facts and in the circumstances of the case the Tribunal was justified in law in placing reliance on its own order in the case of DHFL Vysya Housing Finance P. Ltd. (DVHP) ITA No.1416/Bang/2010 for A.Y.96-97 dated 11.01.2013 and holding that the reopening u/s 147 is bad in
4 ITA Nos.1314 & 1281/Bang/2012 M/s.Shriram, Chits (Karnataka) Pvt. Ltd. law without appreciating the fact that the department has not accepted the relied upon decision and the same has also been challenged before this Hon’ble High Court of Karnataka in ITA No.244/2013 ?”
6.1 In deciding the above question, the following findings were rendered by the Hon’ble High Court:- “7. Thus, from perusal of the order passed by the tribunal, it is evident that tribunal, in addition, has placed reliance on the decision in the case of DHFL VYSYA HOUSING LTD. rendered by the Tribunal, which has been set aside by his court in I.T,A.No.244/2013 vide judgment dated 23.09.2013. The tribunal has not taken note of the fact that the Assessing Officer had recorded reasons and has held that a statement of income from assessment has taken place due to failure to disclose fully and truly all material facts necessary on the part of the assessee. The tribunal has further held that it has not been disputed before the tribunal that proviso to Section 147 is not applicable to the fact situation of the case. 8. The contention of the assessee that the Assessing Officer has not recorded the finding that the assessee has failed to disclose fully and truly all material facts necessary for assessment does not deserve acceptance, which is evident from the satisfaction recorded by the Assessing Officer. Similarly, the question whether or not the Assessing Officer has recorded satisfaction in consonance with the requirements of Section 147 of the Act, has to be dealt with in the facts of each case. Therefore, the contention that the issue involved in this appeal is squarely covered by decision of the Supreme Court in NEW DELHI TELEVISION supra cannot be accepted. For the aforementioned reasons, the second substantial question of !aw is answered in favour of the revenue and against the assessee. In the result, the order dated 14.08.2013 passed by the tribunal is quashed and the matter is remitted to the tribunal for decision afresh in accordance with law. It is therefore, not necessary for us to deal with the first substantial question of law.”
Consequent to the remand by the Hon’ble High Court the appeals of the assessee and Revenue were heard on 29.11.2021. The issue raised in assessee’s appeal is regarding validity of reopening of assessment. The Hon’ble High Court
5 ITA Nos.1314 & 1281/Bang/2012 M/s.Shriram, Chits (Karnataka) Pvt. Ltd. had upheld the reopening of assessment, hence the appeal of the assessee in ITA No.1281/Bang/2012 is dismissed.
7.1 As regards the issue on merits, the learned AR submitted that in assessee’s own case for assessment year 2014-2015, the Hon’ble High Court had allowed the claim of deduction of bid loss. Therefore, it was prayed that the issue on merits is covered and the appeal of the Revenue is to be dismissed.
The learned Departmental Representative supported the order of the Assessing Officer.
We have heard rival submissions and perused the material on record. The Tribunal in its order dated 14.08.2013, had followed the Tribunal’s order for assessment year 2005-2006 and decided the issue in favour of the assessee. For the assessment year 2005-2006, as against the Tribunal’s order, the Revenue filed appeal before the Hon’ble High Court u/s 260A of the I.T.Act. The Hon’ble High Court vide judgment dated 07.12.2020 in ITA No.66 of 2012 restored the issue of deduction claimed for bid loss to the files of the A.O. for de novo consideration. The Hon’ble High Court directed the A.O. to follow the dictum laid down by the Hon’ble Apex Court in the case of Taparia Tools v. JCIT reported in 372 ITR 605 (SC). The relevant finding of the Hon’ble High Court in assessee’s own case for assessment year 2005-2006, reads as follows:-
“6. We have considered the submissions made by learned counsel for the parties and have perused the record. The
6 ITA Nos.1314 & 1281/Bang/2012 M/s.Shriram, Chits (Karnataka) Pvt. Ltd. Commissioner of Income Tax (Appeals) has placed reliance on the decision of the tribunal in the case of the assessee passed in I.T.A.No.601/Bang/2007 for the Assessment Year 2003-04. The tribunal had passed the aforesaid order by placing reliance on decision of Madras High Court in Bilahari Investments vs. CIT, 288 ITR 39. The aforesaid decision was affirmed by the Supreme Court in 299 ITR SC 1. In view of the aforesaid decision of the Supreme Court, the Commissioner of Income Tax (Appeals) taking into account the fact that the tribunal itself has allowed the claim of the assessee for Assessment Year 2003-04 has accepted the assessee's claim for deduction on account of bid loss for a sum of Rs.7,41,35,744/-. The aforesaid order has been affirmed by the tribunal. The tribunal while dealing with the claim of the assessee for bid loss has held as follows: As regard ground No.2, we find that the issue is covered by the decision of the ITAT in the assessee's own case for the Assessment Year 2003-04 and the department has followed its own case for the earlier year only to keep the issue alive on the ground that an appeal has been filed before the Hon'ble High Court of Karnataka. Since, the issue is covered by the decision of the tribunal in the assessee's own case and because an appeal is pending in the higher forum, it will not lose its precendential value. Therefore, we do not find any reason to interfere with the order of the CIT(A). This ground is accordingly rejected. 7. Thus, subsequently the very foundation of the order passed by the tribunal has disappeared as subsequently the order, on which it has placed reliance has been set aside by this court vide judgment dated 09.01.2015 passed in LT.A.No.920/2008 (CIT VS SHRlRAM CHITS (Karn.) PVT. LTD., BANGALORE, 375 ITR 289). Admittedly, In the instant case, the Assessing Officer has recorded a finding that the assessee has failed to substantiate its claim by producing evidence. However, the aforesaid aspect of the matter has neither been considered by the Commissioner of Income Tax (Appeals) nor the tribunal. The impugned order insofar as it pertains to allowing the claim of the assessee for bid loss is quashed. The matter is remitted to the Assessing Officer and the assessee is granted an opportunity to substantiate its claim for deduction of bid loss by adducing cogent material. Needless to state that the Assessing Officer shall decide the aforesaid issue in the light of decision of the Supreme Court in case of Taparia Tools vs. JCIT, 372 ITR 605 (SC). In view of preceding analysis, it is not necessary for us to answer the substantial questions of law. In the result, the appeal is disposed of.”
7 ITA Nos.1314 & 1281/Bang/2012 M/s.Shriram, Chits (Karnataka) Pvt. Ltd. 9.1 In the instant case, the CIT(A) and the Tribunal had followed the order of the Tribunal in assessee’s own case for assessment year 2005-2006. The Tribunal’s order for assessment year 2005-2006 has been set aside by the Hon’ble High Court in ITA No.66 of 2012 (supra). There is no information as regards the outcome of the remand by the Hon’ble High Court to A.O. for assessment year 2005-2006. Therefore, we deem it appropriate to restore this issue to the files of the A.O. The A.O. is directed to follow the dictum laid down by the Hon’ble Apex Court in the case of Taparia Tools v. JCIT (supra). It is ordered accordingly.
In the result, the appeal filed by the assessee is dismissed and the appeal filed by the Revenue is allowed for statistical purposes.
Order pronounced on this 30th day of November, 2021. Sd/- Sd/- (Chandra Poojari) (George George K) ACCOUNTANT MEMBER JUDICIAL MEMBER Bangalore; Dated : 30th November, 2021. Devadas G* Copy to : 1. The Appellant. 2. The Respondent. 3. The CIT(A) NFAC, Delhi. 4. The Pr.CIT, Bangalore. 5. The DR, ITAT, Bengaluru. 6. Guard File. Asst.Registrar/ITAT, Bangalore