ACIT, CHENNAI vs. OM SHAKTHY AGENCIES (MADRAS) PVT LTD., CHENNAI

आयकर अपील�य अ�धकरण, ‘‘सी” �यायपीठ, चे�नई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI �ी धु�वु� आर.एल रे�डी, �या�यक सद�य एवं �ी एस जयरामन, लेखा सद�य के सम� Before Shri Duvvuru RL Reddy, Judicial Member & Shri S. Jayaraman, Accountant Member I.T.A.Nos.490, 491, 492, 493, 494, 495 & 496/Mds/2016 Assessment Years: 2005-06 to 2011-12 The Assistant Commissioner of M/s. Om Shakthy Agenies (Madras) Income Tax, Central Circle 3(1), Vs. Pvt. Ltd., T.S. 64, SIDCO Industrial 46, Nungambakkam High Road, Estate, Guindy, Chennai 600 032. Chennai 600 034. [PAN:AAACO3722E]

(अपीलाथ� /Appellant) (��यथ�/Respondent) अपीलाथ� क� ओर से / Appellant by : Shri G.M. Doss, CIT ��यथ� क� ओर से/Respondent by Shri K.R. Vasudevan, Advocate & : Shri N. Anush Shanker, C.A. सुनवाई क� तार�ख/ Date of hearing : 16.10.2017 घोषणा क� तार�ख /Date of Pronouncement : 31.10.2017 आदेश /O R D E R PER BENCH: This batch of seven appeals filed by the Revenue pertaining to same assessee are directed against the common rectification order passed the ld. Commissioner of Income Tax (Appeals) 18, Chennai dated 20.11.2015 relevant to the assessment years 2005-06, 2006-07, 2007-08, 2008-09, 2009-10, 2010-11 and 2011-12. In its appeals, the Revenue has raised the following common grounds in the assessment year 2005-06:

2 I.T.A. Nos. 490 to 496/M/16

“1. The order of the learned Commissioner of Income Tax (Appeals) is contrary to law and facts of the case. 2. The Id.CIT{A) erred in directing the Assessing Officer to identify the villages at Nandambakkam, Ramapuram and Puduvayol and verify the availability of banking facility therein. 2.1 The Id.CIT(A) erred in not appreciating that this procedure of effecting disallowance / deleting disallowance has already been done by the Assessing Officer while giving effect-to the order dt. 12.06.2015 in ITA No. 202-208/14-15 of the then Id. CIT(A). 2.2 The Id. CIT(A) ought to have appreciated that his direction to verify allowability of assessee's claim tantamounts to his admission that he could not conclusively decide himself, that there is an apparent mistake in the order of his predecessor and that the issue is debatable calling for further enquiry. 2.3 The ld. CIT(A) is not justified in entertaining the assessee's request for reconsidering his predecessor's decision in the garb of rectifying any mistake which was in fact, not apparent from record. 2.4 The ld. CIT(A) ought to have appreciated that the issue has already been dealt with by his predecessor vide his order in ITA Nos. 202-208/14-15 dt. 12.06.2015, and considering the plea of the assessee in this regard only tantamounts to reviewing of his predecessor's order, which is beyond the purview of provisions of section 154 of the IT Act. 2.5 Admitting but not accepting the Id. CIT(A)'s direction to allow the assessee's claim on the availability of banking facilities, the Id.CIT(A) having the powers co-terminus and coexistent as that of the Assessing Officer ought to have conducted the enquiries himself or remanded the issue to the Assessing Officer before his adjudication. 2.6 The Id.CIT(A) having directed to allow the assessee's claim based on the availability of banking facilities has erred in not examining whether the cash payments were made out of necessity/compulsion.

3 I.T.A. Nos. 490 to 496/M/16

3 The Id.CIT(A) erred in adjudicating the issue of disallowance on inflation in purchases not claimed in the assessee's petition for rectification. 3.1 The Id.CIT(A) having held that 25% disallowances in the original appellate order for inflation of purchases in respect of villages where banks are not available is to be retained, ought to have appreciated that though this is a passing remark, it has the effect of confirming once again the decision of his predecessor which is being contested by way of appeal before the Hon'ble ITAT by the Department on the ground that the disallowances to be made worked out to 32.58% as against 25% adopted by the Id.CIT(A). 4. For these grounds and any other grounds that may be raised during the course of the appeal proceedings, the order of the learned CIT(Appeals) may be set aside and that of the Assessing Officer be restored.” 2. It was submitted by the ld. DR that, after making various additions, the assessment under section 143(3) r.w.s. 153A of the Income Tax Act, 1961 [“Act” in short] was completed vide order dated 30.03.2013 by assessing total income of the assessee at ₹.1,95,51,081/- for the assessment year 2005-06, ₹.3,66,53,163/- for the assessment year 2006-07, ₹.35,56,66,484/- for the assessment year 2007-08, ₹.103,19,72,034/- for the assessment year 2008-09, ₹.19,41,11,104/- for the assessment year 2009-10, ₹.13,84,51,761/- for the assessment year 2010-11 and ₹.7,16,95,870/- for the assessment year 2011-12. It was the submission of the ld. DR that, against the additions, on appeal, the ld. CIT(A) has held that the cash purchases of land made by the assessee will not be subjected to the provisions under section 40A(3) of the Act by virtue of satisfying the

4 I.T.A. Nos. 490 to 496/M/16

exceptions provided in Rule 6DD(g) of IT Rules and also determined the difference in payment of consideration at ₹.6,36,66,379/-, which was not admitted in the return of income for the assessment year 2008-09. Against the appellate order dated 12.06.2015, the assessee filed rectification petition under section 154 of the Act before the ld. CIT(A) with regard to the facts not considered while adjudicating on the issues. By admitting the rectification petition filed by the assessee and considering the submissions of the assessee, the ld. CIT(A) rectified certain mistake apparent on record and also directed the Assessing Officer to give set off (deduction) with regard to the protective assessment made for the assessment year 2008-09.

2.1 It was the submission of the ld. DR that the ld. CIT(A) has no jurisdiction to review the appellate order already passed by the ld. CIT(A) vide his order dated 12.06.2015, which is beyond the scope of provisions of section 154 of the Act. It was also the submission that without conducting enquiries or remanding the issue to the Assessing Officer, the rectification order passed by the ld. CIT(A) is legally invalid. Further, it was submitted that without having raised an issue in the petition, the ld. CIT(A) has no jurisdiction to consider and adjudicate the issue of disallowance on inflation in purchases, which was sub-judiced and the appeal is pending before the Tribunal and prayed that the rectification order passed by the ld. CIT(A) should be set aside.

5 I.T.A. Nos. 490 to 496/M/16

4.1 With regard to the jurisdiction over passing rectification order by the ld. CIT(A), it is relevant here to reproduce the relevant provisions of section 154 of the Act, as under:

6 I.T.A. Nos. 490 to 496/M/16

“154. (1) With a view to rectifying any mistake apparent from the record an income-tax authority referred to in section 116 may,— (a) amend any order passed by it under the provisions of this Act ; (b) amend any intimation or deemed intimation under sub-section (1) of section 143. (c) amend any intimation under sub-section (1) of section 200A. (1A) Where any matter has been considered and decided in any proceeding by way of appeal or revision relating to an order referred to in sub-section (1), the authority passing such order may, notwithstanding anything contained in any law for the time being in force, amend the order under that sub-section in relation to any matter other than the matter which has been so considered and decided. (2) Subject to the other provisions of this section, the authority concerned— (a) may make an amendment under sub-section (1) of its own motion, and (b) shall make such amendment for rectifying any such mistake which has been brought to its notice by the assessee, and where the authority concerned is the Commissioner (Appeals), by the Assessing Officer also. (3) An amendment, which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this section unless the authority concerned has given notice to the assessee of its intention so to do and has allowed the assessee a reasonable opportunity of being heard. (4) Where an amendment is made under this section, an order shall be passed in writing by the income-tax authority concerned. (5) Subject to the provisions of section 241, where any such amendment has the effect of reducing the assessment, the Assessing Officer shall make any refund which may be due to such assessee. (6) Where any such amendment has the effect of enhancing the assessment or reducing a refund already made, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be issued under section 156 and the provisions of this Act shall apply accordingly.

7 I.T.A. Nos. 490 to 496/M/16

(7) Save as otherwise provided in section 155 or sub-section (4) of section 186 no amendment under this section shall be made after the expiry of four years from the end of the financial year in which the order sought to be amended was passed. (8) Without prejudice to the provisions of sub-section (7), where an application for amendment under this section is made by the assessee on or after the 1st day of June, 2001 to an income-tax authority referred to in sub-section (1), the authority shall pass an order, within a period of six months from the end of the month in which the application is received by it,— (a) making the amendment; or (b) refusing to allow the claim.” 4.2 On carefully going through the above provisions of section 154 of the Act as well as per the definition of “Income Tax Authorities”, the ld. CIT(A) is fully conferred upon the power to rectify any mistake apparent on record as pointed out either by the assessee or the Assessing Officer, as the case may be. Even by considering various sub-sections to the above section, we are of the considered opinion that the rectification order passed by ld. CIT(A) dated 20.11.2015 is legally valid. It is the prerogative of the ld. CIT(A), as to whether call for a remand report or to make any further inquiry or to consider the corroborative materials available on record, as conferred upon him as per the provisions of section 250 of the Act. During the course of rectification proceedings, on verification of corroborative evidences, which had escaped consideration of the ld. CIT(A) and has not been adjudicated upon in his impugned order dated12.06.2015, relating to the erroneous remand report of the Assessing Officer during the course of appellate proceedings of availability of bank branches in the villages Nandambakkam, Ramapuram

8 I.T.A. Nos. 490 to 496/M/16

and Puduvayal. The ld. CIT(A) considered the issue, in fact, it was the actual fact that because of similar village names, the Assessing Officer got confused in his remand report since similar villages exist inside the city of Chennai and went in wrong assumption that banking facilities exist in the villages. However, during the course of rectification proceedings, by considering the village map and verification of document copies to indicate survey numbers and village numbers, certificate of Village Administrative Officer, etc., which are located in other districts of Tamil Nadu, where the assessee has originally made the purchases and payments made in cash, since there was no banking facility at that time, the ld. CIT(A) was of the opinion that there is mistake crept in the appellate order dated 12.06.2015 and accordingly, he rectified the mistake.

4.3. However, with regard to the admission of petition under section 154 of the Act by the ld. CIT(A), by relying on the decision in the case of South India Surgical Co. (P) Ltd. v. ACIT 263 ITR 5 (Mad), it was the contention of the Department that only an higher appellate forum shall entertain the specific grounds for adjudication. In the case of South India Surgical Co. (P) Ltd. v. ACIT (supra), the specific ground not adjudicated by the Tribunal was raised before the Hon’ble High Court and in fact, become question of law and, the Hon’ble High Court has directed the Tribunal to adjudicate the ground. Had the assessee filed any petition under section 254(2) of the Act

9 I.T.A. Nos. 490 to 496/M/16

for adjudication of the ground, which was not considered by it, the Tribunal would have considered it. Ultimately, the matter was send back to the Tribunal for fresh consideration and the Hon’ble High Court has not assumed jurisdiction and adjudicated the ground on merits. Similarly, had the assessee filed appeals before the Tribunal pointing out the mistakes crept in the appellate order passed by the ld. CIT(A) dated 12.06.2015, the Tribunal would have remitted the matter back to the ld. CIT(A) for fresh adjudication/rectification of mistake and, the ld. CIT(A) is suppose to rectify the mistake crept in the appellate order. It is not the case of the Department that the ld. CIT(A) has not conferred upon the powers to rectify any mistake apparent on record and was done so, which requires interference of the Tribunal. The rectification order passed by the ld. CIT(A) is within the time limit provided under relevant provisions of section and not barred by limitation. Thus, the case law relied on by the Department has no application and warranted. In view of the above, we find no reason to interfere with the rectification order passed by the ld. CIT(A). Hence, the ground raised by the Revenue is dismissed for all the assessment years.

10 I.T.A. Nos. 490 to 496/M/16

order passed by the ld. CIT(A) dated 20.11.2015 as well as appellate order dated 12.06.2015 and Tribunal’s order dated 19.02.2016. In the rectification order at para 4.6, the ld. CIT(A) has mentioned that “25% disallowance in the original appellate order for inflation of purchases in respect of villages where banks are not available is to be retained”. This direction was given on the context that even if bank is not available disallowance cannot be made, but, the ld. CIT(A) was of the opinion that the assessee has inflated the purchase cost of the land in its books of account, as there was no banking facilities exist and therefore, the percentage of inflation as arrived at by the ld. CIT(A) based on the analysis made in Table A of appellate order dated 12.06.2015 at page 20 was 25%, which was again directed to be retained. The Department has not brought any material on record to consider the percentage of inflation of purchase cost either 25% or 32.58%. Otherwise also, the above said ground has no legs to stand before the Tribunal since the above issue has already been adjudicated by the Tribunal from para 11 to 15 vide its order dated 19.02.2016 in I.T.A. Nos. 1570 to 1576/Mds/2016 (assessee’s appeal) and I.T.A. Nos. 1998 to 2004/Mds/2015 (Revenue’s appeal) passed against the order of the ld. CIT(A) under section 143(3) r.w.s. 153A of the Act dated 12.06.2015 much before filing of the above appeals by the Revenue on 04.03.2016. Hence, the ground raised by the Revenue is dismissed for all the assessment years.

11 I.T.A. Nos. 490 to 496/M/16

6.1 We have heard rival contentions and perused the materials available on record. On perusal of the assessment order for the assessment year 2007-08, with regard to the sum of ₹.6,36,66,379/-, the Assessing Officer has held as under: “The reply was considered. Only after considering the assessee’s reply reproduced in the pre-assessment notice, the proposal to assess ₹.6,36,66,379/- in this Asst. Year 2007-08 substantively and the admitted income in the Asst. Year 2008-09 protectively was made in the pre-assessment notice for the reasons stated therein. But the assessee did not furnish any objections to the reasons discussed in the pre- assessment notice. Therefore, for the reasons stated in the pre- assessment notice (reproduced above), ₹.6,36,66,379/- is assessed in this year substantively and the admitted income in the Asst. year 2008- 09 protectively.” Similarly, for the assessment year 2008-09, the Assessing Officer has held as under: “…..For the detailed reasons discussed in the assessment order for the AY 2007-08, ₹.6,36,66,379/- is assessed protectively in the AY 2007-08. Out of the total admission of ₹.7,95,00,000/- in this transaction in this Asst. year, ₹.3,11,33,621/- (₹.9.48 crores minus ₹.6,33,66,379/-) is assessed substantively in this Asst. year and the balance protectively. Since an amount of ₹.7,95,00,000/- has already been admitted by the assessee in the return, no separate addition is made for ₹.3,11,33,621/- in the computation of total income”. 6.2 From the above, it is clear that ₹.6,33,66,379/- has been assessed substantively in the hands of the assessee in the assessment year 2007-08

12 I.T.A. Nos. 490 to 496/M/16

as well as protectively in the assessment year 2008-09. Once the undisclosed income of the assessee is assessed to tax substantively in the assessment year 2007-08, the same amount cannot be again assessed in the hands of the assessee for the assessment year 2008-09 and corresponding set off should be granted in the assessment year 2008-09 so that the said income is not assessed twice. The ld. DR has not given any valid reason for deleting the protective assessment once again made in the assessment year 2008-09 by the ld. CIT(A). We find no reason to interfere with the order passed by the ld. CIT(A) on this issue and accordingly, the ground raised by the Revenue is dismissed.

Sd/- Sd/- (S. JAYARAMAN) (DUVVURU RL REDDY) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai, Dated, the 31.10.2017 Vm/- आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant, 2.��यथ�/ Respondent, 3. आयकर आयु�त (अपील)/CIT(A), 4. आयकर आयु�त/CIT, 5. �वभागीय ��त�न�ध/DR & 6. गाड� फाईल/GF.