Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, Hyderabad ‘A‘ Bench, Hyderabad
Before: Shri Laliet Kumar & Shri Manjunatha, G.
(िनधा�रण वष�/Assessment Year: 2010-11) Ascend Telecom Vs. Asstt. Commissioner of Infrastructure (P) Ltd Income Tax, Central Secunderabad Circle 3(2), Hyderabad PAN:AAEFA2381H (Appellant) (Respondent) िनधा��रती �ारा/Assessee by: Shri K.R. Vasudevan राज� व �ारा/Revenue by:: Smt. T Vijayalakshmi, CIT(DR) सुनवाई की तारीख/Date of hearing: 05/09/2024 घोषणा की तारीख/Pronouncement: 05/09/2024 आदेश/ORDER Per Manjunatha, G. A.M These are cross appeals filed by both the assessee as well as the Revenue for the A.Y 2010-11 against the common order dated 31/07/2020 of the learned CIT (A) 11 Hyderabad.
First, we will take up the appeal of the Revenue in ITA No.552/Hyd/2020. The Revenue raised the following grounds:
“1. The learned CIT (A) erred in both in law and on facts of the case in allowing relief to the assessee.
2. The ld CIT(A) erred in deleting the disallowance of Rs. 8,99,55, 124/- towards Operating & Maintenance expenses, when the Assessing Officer has clearly mentioned in the assessment order that during the search and post-search enquiries the appellant failed to furnish all the bills/vouchers, hence a detailed show cause notice was issued to the assessee company wherein all the facts relating to the bogus/accommodation entries of purchase bills/ unexplained & unverifiable expenses with various vendors have been pointed.
3. The Id CIT(A) erred in deleting the addition of Rs. 15,46,30,082/- towards unexplained work-in-progress capitalized in books without appreciating the fact that a detailed show cause notice was issued covering the issues of search involving claim of non-genuine/bogus purchases/ unexplained & unverifiable expenses, as applicable to various vendors as noticed during the search and survey proceedings conducted in the group cases.
4. The Id CIT(A) erred in not following the principle laid down by the jurisdictional High Court of Andhra Pradesh in the case of Gopal Lal Bhadruka vs DCIT 346 ITR 106, wherein it has held that for the purpose of section 153A/ 153C of the IT Act the AO can take into consideration material other than what was available during search and seizure operation for making an assessment.
The ld CIT{A) is not justified on facts and in law in deleting the addition ignoring the decision in the case of EN Gopa Kumar Vs CIT(2016) wherein it was held that the presence of incriminating material is not a requirement and the assessment u/s 153A can be made without there being any incriminating material.
6. The appellant craves leave to amend or alter any ground or add any other grounds which may be necessary.”
The brief facts of the case are that the assessee company has filed its return of income for the A.Y 2009-10 on Page 2 of 12 28/09/2010 which was revised on 23/01/2012 with a total loss of Rs.(-) 6,84,77,146/-. Subsequently, consequent to the amalgamation, the same was revised to loss of Rs.(-)112,73,62,010/- and assessed at loss of Rs.100,11,21,699/- vide assessment order passed u/s 143(3) of the I.T. Act, 1961 on 28.03.2013. Subsequently, the case was covered u/s 132 of the I.T. Act, 1961 on 23.12.2015 along with other group cases of M/s. Aster (P) Ltd. Thereafter, notice u/s 153A of the I.T. Act, 1961 dated 21.11.2016 was issued as applicable for the A.Ys 2010-11 to 2015-16 along with notice u/s 143(2) for A.Y 2016-17. Accordingly, the assessee filed its return of income dated 14.12.2016 with a loss of Rs.(-) 112,73,62,010/-. After considering the relevant details/submissions filed by the assessee, the Assessing Officer completed the assessment assessing business loss of Rs.79,72,99,200/- and brought forward losses as “NIL”.
In this regard, the learned DR drew our attention to the order passed by the Tribunal for the previous year whereby the Tribunal held as under:
“9. So far as the decision relied on by the learned counsel for the assessee in the case of R.G.Buildwell Engineers Ltd. 99 taxmann.com 284 is concerned, we find that in the said case, the books of accounts of the assessee were not rejected and it was also the case that in the past consistently such expenses were allowed in the scrutiny assessment. In our opinion, the said decision is not applicable as the case in hand is a search assessment where the material was found showing the unexplained expenditure incurred by the assessee. In the search proceedings it was mentioned that the assessee failed to substantiate the expenditure mentioned in the bills / vouchers. Similarly, the decision in the case of I.I.C.
Systems 44 taxmann.com 169 is also not applicable to the facts of the case on hand as in the present case, the Assessing Officer has brought on record the discrepancy in the bills and vouchers on test check basis. However, he has failed to quantify the expenditure which is required to be disallowed in the absence of supporting bills/vouchers/evidence. Hence, the ground raised by revenue is allowed for statistical purposes.
14. We have heard the rival contentions and perused the material available on record. It is also the submission of the learned AR that if given an opportunity, the assessee is in a position to substantiate with evidence to the satisfaction of the AO regarding actual expenditure incurred for the raising the capital assets. Even in the written submissions filed before us, the assessee at Para 3.2.10 has categorically submitted as under : “3.2.10 In this regard, we wish to submit that the Appellant had submitted sample bills before the learned AO for operating and maintenance expense based upon which he has made disallowance to the extent of 20% of operating and maintenance expense. The details furnished regarding operating and maintenance expense and submission of the Appellant are captured in Para 4 above. Further, additional invoices towards the CWIP expense submitted before the learned CIT(A) also forms part of page 86 to page 106 of the paper book.”
Considering the totality of the facts of the case, the submissions of the assessee and also on account of fact that the ld.CIT(A) had passed a non-speaking, cryptic and perfunctory order without dealing with the objection of the Assessing Officer, had allowed the ground of the assessee, therefore, in the interest of justice, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to grant one more opportunity to the assessee to substantiate its case by leading evidence to his satisfaction. The Assessing Officer shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. Though, in the written submission, the ld.AR had referred to certain decisions, those decisions are not applicable to the facts of the present case and moreover, none of these decisions were referred during the course of arguments before us. Accordingly, we allow the ground of the Revenue for statistical purposes and remand back the issue to the file of Assessing Officer.
Effective Ground No.6 is raised by the Revenue is regarding disallowance of Rs.8,79,00,000/- towards provision for "site restoration costs" without appreciating the facts brought on record by the Assessing Officer. The learned DR drew the attention of the Bench to Para 5.2 & 5.3 of the order passed by the Assessing Officer which read as under:
“5.2 Considering the above facts, it is noticeable that assessee has made similar claim for this A.Y. involving notional claim of provision. Hence, a detailed show cause was issued requesting information in detail along with re-working of quantum of claim made in Profit and Loss account/I.T. computation filed with Return of Income involving this issue of site restoration expenditure of provisional nature vide this office letter dated 10.04.2018. In response to same, assessee filed its submissions as called for vide its letter dated 04.05.2018. More or less reiterating the submissions made earlier For A.Y 2011-12 and A.Y. 2015-16. 5.3 After careful examination of assessee's submissions and also keeping in view the disallowances made on this issue for other A.Y.s i.e AY 2011-12 and 2015-16, assessee's claim is not acceptable as per I.T. Act in view of following reasoning: It is a fact on record that this is a clear provision which is a set aside amount for incurring in future years in the event of site restoration cost likely or unlikely to be incurred in the event of abandoning any tower sides in the interest of business. It is a fact on record that assessee has not incurred any such expenditure till date and could not submit any bills and vouchers and plain reading of above note/ facts clearly establishes that assessee is conveniently creating a provision for future possible likely or unlikely liability and claiming the same as present year attributable expenditure. This way of accounting/ claims are not allowable as per mercantile method of accounting read with the provisions of the I. T. Act as it isa mere provision which is neither accrued nor an ascertained liability and tantamount to skewed representation of Accounts.
Assessee's contention to treat as revenue expenditure is far stretched, devoid of merits and not entertainable as per provisions of I.T. Act. The citations relied upon by assessee are distinguishable on facts of case read with assessee’s line of business activity etc., and are no way relevant to the case on hand where in no such expenditure is incurred in the past and till date. Even certainty of incurring is also of remote possibility as per agreement clauses involving dismantling charges if any on such abandoning of tower sites is incurred under regular maintenance and repair works are duly taken care. Hence the balance likely expenditure if any is only to restore the site by earth fillings and stabilization of soil etc., if demanded by such owner on such likely constraints. Considering all these facts, assessee's reliance on various citations is no way relatable to assessee's line of business read with facts on hand. Hence all the Citations are distinguishable and are not applicable to assessee's case on facts and ratios of adjudication relied by assessee. It is an established law under the I.T. Act, no provision is allowable against an accrued income of this year and more so in the case of un-ascertained liabilities which are unlikely to occur in the near future. Hence, assessee plea is not acceptable on this count also. 5.4 In view of the above detailed discussion, assessee claims of site restoration cost of Rs. 8,79,00,000/- in the Audit report as discussed in detail as above is to disallowed as claimed mistakenly in the computation at correctly Rs.8,79,00,000/- as filed with the Return of Income and same is brought to tax as claimed for A. Y. 2012-13 . Addition: Rs.8,79,00,000/- Penalty proceedings u/s. 271(1)(c) are initiated separately for submission of inaccurate particulars of income”.
We have heard the rival contentions and perused the material available on record. We find the AO in this case made the additions on the ground that assessee has not incurred any such expenditure till date and could not submit any bills and vouchers and assessee was conveniently creating a provision for future possible likely or unlikely liability and claiming the same as present year attributable expenditure. We find that ld.CIT(A) deleted the additions the reasons of which are reproduced in preceding paras. Further, the ld.CIT(A) had taken on record the additional evidence filed by the assessee
Page 6 of 12 during the appellate proceedings without calling for the remand report or comments from the Assessing Officer.
In this regard, we may refer to section 250(4) of the Act and Rule 46A of Income Tax Rules, 1963. Section 250(4) of the Act provides as under\:
(4) The 81[***] 82[Commissioner (Appeals)] 84may, before disposing of any appeal, make such further inquiry as he thinks fit, or may direct the 83[Assessing] Officer to make further inquiry and report the result of the same to the 81[***] 82[Commissioner (Appeals)]. Similarly, Rule 46A of Income Tax Rules provides as under :
Production of additional evidence before the 8[Deputy Commissioner (Appeals)] 9[and Commissioner (Appeals)]. 46A. (1) The appellant shall not be entitled to produce before the 8[Deputy Commissioner (Appeals)] 9[or, as the case may be, the Commissioner (Appeals)], any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the 10[Assessing Officer], except in the following circumstances, namely :— where the 10[Assessing Officer] has refused to admit evidence which (a) ought to have been admitted ; or (b) where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the 10[Assessing Officer] ; or (c) where the appellant was prevented by sufficient cause from producing before the 10[Assessing Officer] any evidence which is relevant to any ground of appeal ; or (d) where the 10[Assessing Officer] has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal. (2) No evidence shall be admitted under sub-rule (1) unless the 11[Deputy Commissioner (Appeals)] 12[or, as the case may be, the Commissioner (Appeals)] records in writing the reasons for its admission. 13(3) The 14[Deputy Commissioner (Appeals)] 15[or, as the case may be, the Commissioner (Appeals)] shall not take into account any evidence produced under sub-rule (1) unless the 16[Assessing Officer] has been allowed a reasonable opportunity—
(a) to examine the evidence or document or to cross-examine the witness produced by the appellant, or (b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant. (4) Nothing contained in this rule shall affect the power of the 17[Deputy Commissioner (Appeals)] 18[or, as the case may be, the Commissioner (Appeals)] to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the assessment or penalty (whether on his own motion or on the request of the 19[Assessing Officer]) under clause (a) of sub-section (1) of section 251 or the imposition of penalty under section 271.]
The Rules were framed by the Board in accordance with the power conferred on it by section 295 of the Act and the Rules after being framed were laid before the Parliament. As the rules were duly framed by the Board and are statutory in nature, in our view, the power given to ld.CIT(A) are required to be exercised in accordance with the rules framed under the Act. From the bare perusal of Rules, it is abundantly clear that the ld.CIT(A) in case chooses to admit any additional evidence in that eventuality, he/she is under mandatory obligation to provide a reasonable opportunity to the Assessing Officer with a view to examine the evidence or document or permit to cross-examine the evidence produced by the assessee. Further, the law contemplates the Assessing Officer to produce any witness or document or evidence in rebuttal to the evidence produced by the assessee in the appellate proceedings.
In the present case, the ld.CIT(A) had decided the ground without calling for a remand report from the Assessing Officer. At this juncture, it was the submission of the learned AR that if given an opportunity, the assessee is in a position to substantiate with evidence to show that expenses were actually incurred in the year under consideration for site restoration.
Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to grant one more opportunity to the assessee to substantiate its case by leading evidence to his satisfaction. The Assessing Officer shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly.”
5. It was submitted that similar direction may kindly be passed for this issue before the Tribunal. The learned AR has no objection to that and it was submitted that similar directions be issued to the Assessing Officer to decide the issue after considering the material on record.
We have heard both the parties, perused the material available on record and gone through the order of the Tribunal. In our respectful understanding the issue involved in the present
Page 8 of 12 appeal is similar to the issue adjudicated by the Tribunal for the A.Y 2011-12 to 2014-15. Therefore, following our decision, we allow the ground of the Revenue and remand the issue back to the file of the Assessing Officer by issuing a similar direction. In the light of the above, both the grounds raised by the Revenue are allowed for statistical purposes and the remaining grounds raised by the Revenue are dismissed.
6.1 In the result, appeal filed by the Revenue is partly allowed for statistical purposes.
The assessee raised the following grounds: “1. Validity of assessment proceedings - Search proceeding in the absence of incriminating material. a) The learned CIT(A) erred in law and in facts by upholding the assessment proceedings concluded under section 153 A of the Income Tax Act, 1961 (the Act'). b) The learned CIT(A) ought to have appreciated that only undisclosed income or undisclosed assets detected during the search proceedings could be brought to tax under section 153A of the Act. c) The learned CIT(A) ought to have held that the order under section 153A of the Act is not tenable in law since the learned AO could not bringing on record any incriminating materials or undisclosed income found during the course of search proceedings. d) The learned CIT(A) ought to have appreciated that it is settled position of law that the regular assessment proceedings which are already completed for the year could be interfered under section 153A only on the basis of any incriminating material unearthed during the course of search.
2. Disallowance of brought forward losses of Amalgamating Company for AY 2008-09 invoking section 72A of the Act during AY 2010-11 Rs. 5,28,91,316 a) The learned CIT(A) and the learned AO erred in law and on facts in not allowing carry forward of losses of amalgamating company in the hands of Appellant invoking the provisions of section 72A of the Act during the AY 2010-11. b) The learned CIT(A) and learned AO failed to appreciate that, on failure to comply with conditions prescribed under section 72A(2) of the Act, the losses of amalgamating company can be treated as income of amalgamated company during the year in which the amalgamated company claims set-off of such losses. c) The learned CIT(A) ought to have observed that during the AY 2010-11I the Appellant has not set-off losses of the amalgamating company and hence, the learned AO has erred in invoking the provisions of section 72A of the Act for the year. d) The learned CIT(A) and the learned A0 erred in determining the brought forward losses of AY 2008-09 as nil by invoking provisions of section 72A without providing any Cogent reasons for the same. e) The learned CIT(A) and the learned AO ought to have observed that the Appellant has complied with the conditions prescribed under section 72A of the Act and hence, it is entitled for carry forward of losses pertaining to AY 2008-09 of the amalgamating company. The Appellant craves leave to add, alter, rescind and modify the grounds herein above or produce further documents, facts and evidence before or at the time of hearing of this appeal. For the above and any other grounds which may be raised at the time of hearing, it is prayed that necessary relief may be provided.”
8. Ground No.1 pertains to absence of incriminating material. At the outset, the learned AR submitted that since the Tribunal is remanding back the matter to the file of the Assessing
Page 10 of 12 Officer, therefore, this may be kept open to which the learned DR has no objection and she fairly submitted that the listed issue to be kept open and the matter may be set aside to the file of the Assessing Officer to decide the issue denovo.
Ground No.2 pertains to set off of brought forward losses of Amalgamating and Amalgamated company in terms of section 72A of the I.T. Act, 1961 r.w.s 79 of the I.T. Act, 1961. The learned AR submitted that the appellant has filed all the details with respect to brought forward business loss and unabsorbed depreciation of the amalgamating company. However, the learned CIT (A) has allowed losses relating to amalgamated company, but not allowed losses of amalgamating company. Therefore, he submitted that the matter may be remanded back to the file of the Assessing Officer and decide the issue afresh.
The learned DR has no objection for remanding this issue back to the file of the Assessing Officer.
We have heard the rival contentions and perused the material available on record. We find that the brought forward business losses and unabsorbed depreciation of the amalgamating company should be allowed in terms of section 72A r.w.s. 79 of the I.T. Act, 1961, provided all other conditions prescribed therein are satisfied. The assessee claimed that the relevant details to prove that the condition for claiming brought forward business losses and unabsorbed depreciation has been satisfied. He, further submitted that in case the appellant is not Page 11 of 12 satisfied with the condition, then it can be taxed when the amalgamated company claims set off of brought forward business losses or unabsorbed depreciation. Therefore, we are of the considered view that in this facts and circumstances of the case, the issue needs reexamination by the Assessing Officer. Thus, we set aside the order of the learned CIT (A) on this issue and restore the issue back to the file of the Assessing Officer for fresh consideration.
In the light of the above, appeal of the assessee is allowed for statistical purposes.