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Income Tax Appellate Tribunal, Hyderabad ‘ A ‘ Bench, Hyderabad
Before: Shri R.K. Panda & Shri Laliet Kumar
IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ A ‘ Bench, Hyderabad Before Shri R.K. Panda, Accountant Member AND Shri Laliet Kumar, Judicial Member
ITA No.453/Hyd/2016 Assessment Year: 2011-12 Shanta Sriram Constructions Vs The Deputy Commissioner Private Limited, of Income Tax, Hyderabad. Circle 3(1), Hyderabad. PAN : AADCS4180M. (Appellant) (Respondent) Assessee by: Sri S. Ramarao Revenue by: Sri K.P.R.R. Murthy. Date of hearing: 21.07.2022 Date of pronouncement: 22.07.2022
O R DE R Per Laliet Kumar, J.M.
This appeal is filled by the assessee feeling aggrieved with the order of Commissioner of Income Tax (Appeals) – 3, Hyderabad for the assessment year 2011-12 on the following grounds :
“1. The order of the ld.CIT(A) is erroneous both on facts and in law. 2. The ld.CIT(A) erred in confirming the action of the Assessing Officer in disallowing expenditure of Rs.8,89,810/- by applying the provisions of Section 14A of the Act.
The ld.CIT(A) erred in confirming the action of the Assessing Officer in making further addition of Rs.65,88,633/- without considering the fact that the income was correctly admitted in the return of income. 4. The ld.CIT(A) erred in confirming the action of the Assessing Officer in making addition of Rs.1,65,707/- while computing the income under the head “House Property”. 5. The ld.CIT(A) erred in confirming the action of the Assessing Officer in making addition of Rs.4,01,195/- on account of interest.”
At the outset, the Ld.AR for the assessee had submitted that the assessee is not pressing ground Nos.1 and 5. As the assessee is not pressing ground Nos 1 and 5, the same are dismissed as not pressed.
The brief facts of the case are that assessee is in the business of real estate and filed its return of income electronically for A.Y. 2011-12 on 21.11.2011 admitting total income of Rs.2,95,36,440/-. The case has been selected for scrutiny and subsequently, notices u/s 143(2) dt.21.09.2012 and 30.09.2013 were issued and served on the assessee. Notice u/s 142(1) dt.26.08.2013 along with questionnaire was issued to the assessee calling for various details. In response to the said notice, Asst. General Manager of the assessee company had appeared and submitted the details as called for. On verification of the material available on record, Assessing Officer completed the assessment and passed order dt.21.03.2014 u/s 143(3) of the Act determining the total income at Rs.3,75,81,785/- after making additions u/s 14A and 131 of the Act, income from house property and on account of interest income.
Feeling aggrieved with the order of Assessing Officer, assessee carried the matter before ld.CIT(A), who partly allowed the appeal of the assessee.
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Feeling aggrieved with the order of ld.CIT(A), assessee is in now in appeal before us.
In respect to ground No.2, ld.AR for the assessee submitted that the addition was made by the Assessing Officer disallowing the expenditure by applying the provisions of section 14A of the I.T. Act. The Assessing Officer arrived at a disallowance of Rs.8,89,810/-. The assessee submitted that out of the said addition, Rs.8,38,472/- representing addition on account of Rule 8D(2)(ii) was allowed and addition of Rs.51,339/- made under Rule 8D(2)(iii) was sustained.
a) Ld.AR for the assessee submitted that it did not derive any income which is exempt from tax and therefore, provisions of sec.14A have no application.
b) He further submitted that as no income is derived, therefore, the assessee did not incur any expenditure.
On the strength of the above said submissions, it was submitted that the addition made by the Assessing Officer be deleted.
On the other hand, the Ld. DR for the revenue relied upon the orders passed by the lower authority. It was also the contention of the ld.DR that on account of the amendment in section 14A, the matter may kindly be remitted back to the file of the Assessing Officer for de novo examination.
We have heard the rival contentions of the parties and perused the material available on record. The co-ordinate Bench of the Tribunal in the case of Shalivahana Green Energy in ITA No.65/Hyd/2022 vide order dt.19.07.2022 had held as under :-
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“5. We have heard the rival arguments made by both the sides and perused the record. We find the Assessing Officer in the instant case made addition of Rs.1,36,34,221/- by invoking the provisions of section 14A r.w. Rule 8D. We find the learned CIT (A) sustained the addition. It is the submission of the learned Counsel for the assessee that since the assessee has not received any dividend income, therefore, no addition is called for. We find the Finance Act 2022 has drastically amended the provisions of section 14A and a Coordinate Bench of the Tribunal has held the amendment to be retrospective in nature i.e. w.e.f. 1.4.1962. We, therefore, in the interest of justice deem it fit and proper to restore the issue to the file of the Assessing Officer with a direction to decide the issue afresh in the light of the amendments to the provisions of section 14A by the Finance Act, 2022 and decide the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.”
Respectfully following the decision of the co-ordinate Bench of the Tribunal in the above said case, we remand back the issue to the file of the Assessing Officer for examining afresh the issue of disallowance under section 14A of the Act. Accordingly, ground No.2 is allowed for statistical purposes.
With respect to Ground No.3, it was the contention of ld.AR that the addition was made by the Assessing Officer to the tune of Rs.65,88,633/-. It is submitted that the Assessing Officer considered this addition at Para No.4 of the assessment order. It was submitted that there was survey u/s 133A of the Act which was converted to search. The Managing Director was examined on oath and filed an Affidavit admitting an additional income of Rs.65,88,633/- which was not offered in the return of income filed as substantial income was admitted in the Return of Income. The assessee in this regard, submitted as under:
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a) The assessee maintained proper books of accounts and as per the books of account, the income including the other income amounted to Rs.2,96,42,972/- b) From the final accounts, it can be seen that there was a huge work-in-progress amounting to Rs.78,89,29,253/- as against sales of Rs.36,16,95,120/- and, therefore, the profit rate of 7% cannot be made applicable to the facts. c) The assessee is in the business of real estate and huge area remained unsold by the end of the year and, therefore, the profit could not be derived as expected. It is submitted that for the assessment year 2012-13 admission was made but not added at the time of assessment as in the year under consideration. The said amount was not added for the said year. d) The Assessing Officer did not point out any omission in the books of account and no addition could have been made by the Assessing Officer.
On the other hand, the Ld.DR for the Revenue drew our attention to paragraph 3.4 and 3.5 of the order passed by the CIT(A) wherein it was categorically mentioned that as there was fall in the turnover, the management of the assessee, after passing of few days, had acknowledged and offered the additional income of ₹ 65,88,633/- to the income already declared.
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We have considered the rival contention of the parties and perused the material available on record, including the judgments cited at bar during the course of hearing by both the parties. In this case, a survey was conducted by the Revenue on 13th September 2013, thereafter the managing director of the assessee company vide affidavit dated 23 September 2013 acknowledged and agreed to declare the additional income of Rs.65,88,633/-. The Ld. CIT(A), while analyzing the facts of the present case had mentioned that the above said declaration of Rs.65,88,633/- was not made by the managing director without any basis, rather it was a conscious decision on the part of the official of the assessee to declare the above said income. The CIT(A) mentioned that if the profit of the assessee is estimated at the rate of 7% on the gross turnover, then the additional income offered by the assessee by way of affidavit would be in consonance thereof. However, if taxable income declared by the assessee is considered, then the income would be estimated at the rate of 5.17%. In our view, the profit declared by the assessee, was far less than the industry average of 8%. However, in the present case, the assessee has claimed that there was closing work in progress for an amount of Rs.78,89,29,233/- as against the sales of Rs.36,06,95,120/-. In our opinion, the work in progress cannot be considered for the purpose of estimating the income of the assessee. Further, we are of the opinion that the affidavit given by the assessee, was a conscious decision of the assessee and was given after due calculation of the income of the assessee at the rate of 7%. In fact by giving the affidavit to the revenue admitting to declare the additional income, the assessee has prevented the Assessing Officer to proceed further and examine the other material available with the Assessing Officer and also the books of account of the
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assessee. Further, we may like to point out that even after submitting the affidavit, there was no retraction on the part of the assessee. In view of the above, we do not find any merit in the contention of the learned counsel for the assessee and accordingly, the issue is decided against the assessee. Thus, ground No.3 is dismissed.
Ground No.4 is with respect to addition of Rs.1,65,707/- while computing the income under the head “House Property”.
14.1. With respect to ground No.4, ld.AR for the assessee in his written submissions averred that there was a dispute with regard to the area and the lessee was paying lesser amount which was admitted and further submitted that there was no information that the assessee had received higher amount. It is submitted that the Assessing Officer considered this addition at Para No.5 of the assessment order. It was submitted that the assessee had not declared the rental income of Rs.2,36,724/- being the difference between rental income receivable as per rental agreement and rental income received as shown in return of income and hence, after allowing deduction of 30% under section 24, the balance amount of Rs.1,65,707/- was added to the total income of the assessee. 14.2. With regard to the above said addition, ld.CIT(A) found that the explanation of the assessee that there was dispute with regard to the area, amenities and services provided and hence, the lessee was making payment of Rs.75 per sft., as reasonable. He however, directed the Assessing Officer to verify with lessee
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i.e., M/s. Life Style whether it had paid rent of Rs.75/- per sft., or Rs.77 per sft., and to take action accordingly.
On the other hand, ld.DR had relied upon the orders of lower authorities.
We have heard the rival submissions and perused the material available on record. With respect to ground No.4, we perused para 4.3.2. wherein the direction was given by the ld.CIT(A) to the Assessing Officer while making addition and we do not find any error in that direction and in view of the above, the Assessing Officer is directed to comply with the said direction. Accordingly, ground No.4 is allowed.
In the result, the appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the Open Court on 22nd July, 2022.
Sd/- Sd/- (RAMA KANTA PANDA) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad, dated 22nd July, 2022. TYNM/SPS
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Copy to: S.No Addresses 1 Shanta Sriram Constructions Pvt. Limited, Hyderabad. C/o. Flat No.102, Shriya’s Elegance, 3-6-643, Street No.9, Himayatnagar, Hyderabad – 500029. 2 Deputy Commissioner of Income Tax, Circle 3(1), Hyderabad. 3 CIT(Appeals) – 3, Hyderabad. 4 PCIT – 3, Hyderabad. 5 DR, ITAT ‘A’ Bench, Hyderabad. 6 Guard File By Order
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