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Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: SHRI RAJESH KUMAR & SHRI RAVISH SOOD
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the assessee against the order dated 13.12.2019 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2013-14.
2. The grounds are reproduced as under: “1. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in not considering the return filed in response to notice under section 148 declaring total income of Rs.3,22,254/- and assessed the income on the basis of original return filed declaring Rs.1,77,98,254/-under section 139(1) of the Income Tax Act, 1961. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the total income at Rs. 1, 77,98, 254/- without any addition being made on reasons recorded under section 147 of the Income Tax Act, 1961.
3. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming Rs. 1,74,76,000/- without considering that the profits earned on the 2 M/s. Cello Arth Crown project were offered for tax in earlier assessment years as same income cannot be taxed twice. 4. The Ld. CIT(A) erred in confirming the charging of interest under section 234B and 234C of the Income Tax Act 1961. 5. The Assessee craves leave to add further grounds or to amend or alter the existing grounds of appeal on or before the date of hearing.”
3. The only issue raised by the assessee in the various grounds of appeal is against the order of Ld. CIT(A) affirming the order of AO thereby upholding the addition of Rs.1,74,76,000/- which represented the profit of the project offered to tax in the earlier year on the basis percentage completion method followed by the assesse. The facts in brief are that the assessee has wrongly showed/ returned in the original income tax return the total profits arising from the project instead of current year profit.
The facts in brief are that assessee filed the return of income on 12.09.2013 declaring total income of Rs.1,77,98,250/- which was wrong as out of the said income Rs.1,74,76,000/- related to earlier assessment years and offered to tax in those years. The current income relating to the current year was Rs. 3,22,254/-. The case of the assessee was selected under scrutiny and assessment was completed under section 143(3) of the Act vide order dated 29.03.2016 accepting the returned income. However, a demand of Rs.74,38,420/- was raised on the assessee. On going through the assessment order the assessee noticed that by mistake it has stated the entire profit of the project by mistake instead of returning the profit earned during the year. Pertinent to state that assessee is following the percentage completion method and has been offering to tax the income on the basis of percentage of completion of work every year. According to the method of
5. Since the total profits accrued on the project from AY 2009- 10 to 2012-13 were Rs.1,77,98,254/- therefore the profit to be declared during the year was to be Rs.3,22,254/-, however, by mistake the assessee returned the total profit of Rs.1,77,98,254/- resulting into income being retuned twice to the tune of Rs.1,74,76,000/-. The assessee also moved rectification application on 07.04.2016 and requested the AO to rectify the assessment order on the ground that income has already been assessed in the earlier years, however, the assessee despite moving a couple of letters further reminders thereafter requesting the AO to rectify the assessment order yielded no result. Thereafter, the case of the assessee was reopened by issuing notice under section 147 of the Act by issuing notice u/s 148 of the Act dated 23.03.2017 for the reason that assessee has made payment under the head Architect fee, professional fee, brokerage charges amounting to Rs.38,00,500/- without directing tax at source @ 10% and thus the entire amount was to be disallowed under section 40(a)(ia) of the Act. In response to the said notice the assessee filed the return of income on 21.11.2018 declaring correct income of Rs.3,22,254/-, however, in the assessment framed the AO rejected the income declared by the assessee in the return filed in response to section 148 of the Act and took the income of Rs.1,77,98,250/- declared in the original return of income while no addition was made of the expenses for non deduction of tax u/s 40(a)(ia) of the Act.
4 M/s. Cello Arth Crown 6. In the appellate proceedings the Ld. CIT(A) confirmed the order of AO by observing that no return has been filed in response to notice issued under section 148 of the Act on the ground that it was not stated that the return is filed in response to notice under section 148 of the Act and therefore held it to be a revised return which was an invalid return under the Act. The Ld. CIT(A) noted that as per the tax audit report dated 05.09.2013 the net profit as per P&L account was shown at Rs.1,77,98,254/- whereas the balance sheet and P&L Account signed on 21.11.2018 showed a current profit of Rs.3,22,254/-. The Ld. CIT(A) held that assessee has not filed any return in response to notice under section 148 of the Act and held that the reassessment proceedings can not be taken advantage and is not for the purpose of making claims which were not made in the original return of income and thus dismissed the appeal of the assessee.
After hearing both the parties and perusing the material on record, the undisputed facts are that the assessee is following percentage completion method for returning the income accruing on the project undertaken by the assessee. We notice from the records before us that the total profits on the said project were Rs.1,77,98,254/- the details whereof are as under: Sr. No. AY Profit declared Year wise 1. 2009-10 9,60,000
2010-11 22,74,000
2011-12 34,14,000
4. 2012-13 1,08,28,000
2013-14 3,22,254
Total Profit 1,77,98,254 Less Profit declared in 1,74,76,000 earlier years Profit declared during the 3,22,254 year
The assessee has already offered Rs.1,74,76,000/- from A.Y. 2009-10 to A.Y. 2012-13 and the profit to be returned in the current year was Rs.3,22,254/-, however, by mistake the assessee has wrongly mentioned the entire amount of profit in the return of income filed originally which got assessed under section 143(3) of the Act and resulted into a demand of Rs.74,38,420/-. The assessee has also filed a rectification application under section 154 of the Act on 07.04.2016 requesting the AO to rectify the said assessment order. We also note that thereafter also the assessee requested through a couple of letters for giving effect to the rectification application, however, the same did not find favour with the AO. In the meantime the case of the assessee was reopened under section 148 of the Act for the reason that the TDS has not been taken on some payments made on account of virtual architect fee, professional fee etc. which are not allowable as expenses.
In the return in response to notice under section 148 the assessee filed the return of correct income of Rs.3,22,254/- however, the AO rejected the same on the ground that the assessee has reduced its income in the return filed in response to notice under section 148 of the Act which is not acceptable and thus took the income of Rs.1,77,98,254/- which was 6 M/s. Cello Arth Crown returned as per original return of income filed on 12.09.2013 and assessed vide order dated 29.03.2016. Now the main issue before us is whether the order of Ld. CIT(A) is correct in rejecting the genuine claim of the assessee that income can not be taxed twice as has been done in the present case. We also note that Ld. CIT(A) has gone a step ahead than the AO stated that return filed in response to section 148 of the Act did not mention that it is filed in response to notice under section 148 of the Act and treated the same as revised return of the return filed on 12.09.2013 and treated the same as invalid. In our opinion, the order of Ld. CIT(A) suffers from serious infirmities as he has not considered the issue of double taxation and also the fact that return filed in response to notice under section 148 of the Act has been acknowledged by the AO in the assessment order and only the reassessment proceeding has to be done on the basis of return filed in response to notice under section 148 of the act. In our opinion, the department should not be allowed to take the advantage of any mistake committed by the assessee which may result prejudice to the assessee in double taxation of the same income. In the present case, Rs.1,74,76,000/- has been assessed from A.Y. 2009-10 to A.Y. 2012-13 and therefore to tax the income again on the plea that assessee has wrongly returned the income on the original return of income and not giving effect to the rectification filed by the assessee is totally wrong and against the principle of natural justice. In our opinion, this income needs to be reduced from the return of income of the assessee as there is no provision in the income tax law to assess the same income twice. Even otherwise, the stand of the AO is not acceptable as in the reopened proceedings the issue which was subject matter of reopening i.e. non deduction of tax on 7 M/s. Cello Arth Crown certain expenses amounting to Rs.38,00,500/- has not been added in the reassessment order and once the item proposed in the reasons recorded under section 148(2) did not find place in the assessment order, no other addition can be made and income returned as per return in response to notice under section 148 of Rs.3,22,254/- has to be accepted. The case of the assessee finds support from the decision of the jurisdictional High Court in the case of CIT vs. Jet Airways (India) Ltd. in ITA No.2328 of 2011 order dated 6th May 2014. In view of these facts, we are inclined to set aside the order of Ld. CIT(A) and direct the AO to reduce Rs.1,74,76,000/- from the income of the assessee. Accordingly, the appeal of the assessee is allowed.
10. At the time of hearing, the Ld. A.R. also brought to our notice that the AO has not allowed the credit of advance tax paid of Rs.3,15,000/- for the year and requested the bench to issue necessary directions to the AO. In our view, the issue is required to be examined at the level of AO to verify and allow the same after affording a reasonable opportunity of hearing to the assessee. The prayer of the assesse is allowed for statistical purpose.
In the result, the appeal of the assessee is allowed as stated above.