FATEHPURIA TRANSFORMERS AND WITCHGEARS PVT. LTD,JAIPUR vs. DCIT, CIRCLE-1, JAIPUR
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Income Tax Appellate Tribunal, JAIPUR BENCHES,”A” JAIPUR
Before: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No.387/JP/2023
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Jh jkBkSM+ deys'k t;arHkkbZ] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No.387/JP/2023 fu/kZkj.k o"kZ@Assessment Years : 2011-12 cuke Fatehpuria Transformers and DCIT, Vs. Switchgears Pvt. Ltd. Circle-1, P. O. Machwa P. O. Machwa Jaipur Kalwar Road, Jaipur, Rajasthan LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAACF 3456 E vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Sh. Sanjeev Kumar Mathur jktLo dh vksj ls@Revenue by: Sh. A. S. Nehra (Addl. CIT) lquokbZ dh rkjh[k@Date of Hearing : 07/11/2023 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 04/12/2023 vkns'k@ORDER
PER: RATHOD KAMLESH JAYANTBHAI, AM
This appeal filed by assesseeis arising out of the order of the National Faceless Appeal Centre, Delhi dated 28/04/2023 [here in after (NFAC)] for assessment year 2011-12, which in turn arise from the order of the Assessing Officer dated 13.11.2018 passed under section 143(3) of the Income Tax Act, 1961 [ here in after Act ].
2 ITA No. 387/JP/2023 Fatehpuria Transformers and Switchgears Pvt. Ltd. vs. DCIT 2. In this appeal, the assessee has raised following grounds: - 1.The learned CIT(A) has erred in not appreciating the fact that reopening the assessment under section 147 of the Act was merely on the basis of change of opinion. 2.The learned CIT(A) has erred in not appreciating the fact that deduction under Section 801A has been correctly allowed in the original assessment order u/s 143(3) of the Income Tax Act, 1961 with reference to the profits of the Unit (wind mills without considering the unabsorbed depreciation of that Unit for earlier assessment years, since such unabsorbed depreciation has been set off against other income in earlier years. 3.The learned CIT(A) has erred in not appreciating the fact that despite Section 801A(5), the requirement to treat the undertaking as the only business of the assessee is from the "initial assessment year" and not from the year of commencement of generation/distribution of power. 4. The learned CIT(A) has erred in not deleting the addition made by Ld AO on account of deduction claimed u/s 801A of the Act of Rs. 686000 by wrongly interpreting the provision of the Act, CBDT Circular and by wrongly applying the sec 801A(10) of the Income Tax Act, 1961. 5. The Petitioner craves the right to add, alter or in any way amend the grounds of appeal before or during the course of the hearing of the appeal.
Succinctly, the fact as culled out from the records is thatthe assessee is engaged in the business of manufacturing and trading of transformers and electric equipment. The assessee filed its e-return of income on 26.07.2011 declaring total income of Rs. 28,86,490/-. Further the case was completed u/s 143(3) of the IT. Act, 1961 at the total income of Rs. 61,93,260/- on 21.02.2014 by making certain additions. While doing so, the AO disallowed the assessee's claim of deduction u/s 80IA of the Act in respect of power generation unit of Rs. 19,93,833/-. Subsequently, the AO
3 ITA No. 387/JP/2023 Fatehpuria Transformers and Switchgears Pvt. Ltd. vs. DCIT came to know that, while filing the original return of income, the assessee claimed deduction u/s 80IA of the Act in respect of power generation unit without deducting notional brought forward losses and depreciation relating to earlier AYs. Similarly, while framing the original assessment order u/s 143(3) of the Act, the AO accepted the same and, therefore, allowed excess deduction u/s 80IA of the Act to the extent of Rs.6,86,000/-, contravening the legal provisions as contained u/s 801A(5) of the Act. Accordingly, the AO had reason to believe that income chargeable to tax to the extent of Rs.6,86,000/- had escaped assessment within the meaning of section 147 of the Act. In view of this, the AO initiated proceedings u/s.147 of the Act by way of issuing a notice u/s 148 of the Act dated 28.03.2018, requiring the assessee to furnish a return of income within 30 days from the date of receipt of the notice. In response thereto, the assessee filed return of income on 23.10.2018 and, thereafter, issued the statutory notices u/s. 143(2) and 142(1) of the Act and conducted hearings with the Authorized Representative (AR) of the assessee. Accordingly, after considering the submissions made by the AR, the AO completed the re-assessment proceedings, vide order u/s. 147 rws 143(3) of the Act dated 12.11.2018, determining the total income of the assessee at Rs.68,79,580/-. While doing
4 ITA No. 387/JP/2023 Fatehpuria Transformers and Switchgears Pvt. Ltd. vs. DCIT so, the AO disallowed excess claim of deduction u/s.80IA of the Act to the extent of Rs.6,86,000/-.
Aggrieved from the order of the ld. AO, assessee preferred an appeal before ld. CIT(A)/NFAC. The relevant finding of the ld. CIT(A)/NFAC recorded in paras 6.6 to 9.0 of his order and the same is reproduced herein below:- “4.1 In order to dispose of the appeal, the assessee was provided with several opportunities of hearing and called for written submissions and documentary evidence in support of the grounds of appeal raised. However, the assessee has not availed any of the opportunities of being heard, except seeking adjournment on one occasion. The details of opportunities of being heard provided to the assessee are tabulated below for ready reference: -
Sl. No. Date of Notice/letter u/s 250 of Date of hearing Ramarks the Act 1. 13.01.2021 19.01.2021 Requested for adjourned on 22.01.2021 2. 20.07.2022 29.07.2022 No response 3. 01.11.2022 Open date No response 4. 12.04.2023 19.04.2023 No response
4.2 As seen from the above, it is clearly evident that the assessee was provided with sufficient time and adequate number of opportunities of being heard, but in vain. To be precise, over a period of two years and three months, the assessee was afforded four opportunities of being heard, but the assessee neither availed any of the said opportunities of hearing nor filed any written submissions so far. 4.3 Accordingly, I am of the considered view that no useful purpose will be served in keep on adjourning the case without there being any response from the assessee. Further, as highlighted in the preceding paragraph, it is amply clear that the principles of natural justice and fair play have been duly followed by this authority. Thus, the appeal filed by the assessee is being disposed of on merits of the case, after considering the submissions made by the assessee in the form of
5 ITA No. 387/JP/2023 Fatehpuria Transformers and Switchgears Pvt. Ltd. vs. DCIT grounds of appeal and statement of facts, in the subsequent paragraphs of this order. xxxxx xxxxx xxxx xxxx 6.6 I have carefully considered the grounds of appeal raised by the assessee and examined the issue under dispute in the light of the facts and circumstances of the case as emanating from the impugned assessment order and relevant provisions of the statute. Also, I have given due consideration to the submissions made by the assessee in the shape of statement of facts (supra). 7.0 Ground Nos. 1 & 2: AGAINST REOPENING OF THE ASSESSMENT: 7.1 Vide Ground No.1, it is the contention of the assessee that reopening of the assessment proceedings are not valid inasmuch as, at the time of completing the original assessment u/s 143(3) of the Act dated 21.02.2014, it had fully and truly disclosed all the material facts necessary for assessment. I have carefully considered the contention of the assessee and examined the same in the light of the factual matrix of the case. 7.2At the outset, in the instant case, it is an admitted fact that the assessment was reopened u / s 147 of the Act after four years from the end of the relevant AY and, therefore, the first proviso to section 147 of the Act is attracted. Coming to the issue of whether the assessee had fully and truly disclosed all the material facts necessary for assessment at the time of filing the return of income u/s.139(1) of the Act or during the course of scrutiny assessment proceedings u/s.143(3) of the Act, as the case may be, it is observed that, in spite of the assessee aware of the fact that there were notional unabsorbed business loss and depreciation allowance relating to earlier AYS in respect of power generation unit, while computing deduction u/s.80IA of the Act, the assessee did not deduct such notional business loss or depreciation allowance, as the case may be, from profits of power generation unit. 7.3In view of the above, I am of the considered opinion that the assessee had failed to disclose fully and truly all the material facts necessary for its assessment. Thus, Ground No.1 raised by the assessee on this issue is dismissed. ME TAY DEPARTMEN 7.4Coming to Ground No.2, it is the contention of the assessee that the AO reopened the assessment merely on the basis of change of opinion. I have carefully perused the assessee's submissions and examined the same in the light of the legal provisions of the statute. 7.5At this juncture, it may be noted that, as explained elsewhere in this order, while framing the original assessment order u/s.143(3) of the Act, the AO contravened the provisions of section 80IA(5) of the Act and, therefore, allowed excess deduction u/s.801A of the Act to the extent of Rs.6,86,000/-. Under the
6 ITA No. 387/JP/2023 Fatehpuria Transformers and Switchgears Pvt. Ltd. vs. DCIT circumstances, I am of the considered opinion that the concept of change of opinion has no locus standi inasmuch as, in the first instance, the AO ought to have disallowed the excess deduction claimed by the assessee of Rs.6,86,000/-. Thus, Ground No.2 raised by the assessee on this issue is dismissed. 8.0GROUND NOs. 3, 4 & 5: DISALLOWANCE OF DEDUCTION U/S. 801A OF THE ACT: 8.1As explained elsewhere in this order, the only issue on merits of the case under the dispute in the instant case is whether the AO is justified in disallowing deduction u/s.801A of the Act to the extent of Rs.6,86,000/-. 8.2. As seen from the facts of the case, while filing the return of income, the assessee disclosed profits and gains derived from power generation unit to the extent of Rs * 0.26 ,80.144/. and the same was claimed as deduction u/s.80IA of the Act. However, while passing the original assessment order u/s.143(3) of the Act dated 21.02.2014, the AO disallowed a sum of Rs.19,93,833/- on a different ground and allowed deduction for the balance amount of Rs * 0.6 ,86,000/- At this juncture, it may be noted that, while computing deduction u/s.801A of the Act in respect of power generation unit, as envisaged u/s.801A(5) of the Act, the assessee did not deduct losses of power generation unit pertaining to earlier AYS, which were set off against income of other business units/manufacturing units. 8.3In view of the above, the AO reopened the assessment and applied the provisions of section 801A(5) of the Act, which resulted in disallowance of deduction to the extent of Rs.6,86,000/-. 8.4Coming to the appellate proceedings, as explained elsewhere in this order (para no.4.1), even after availing of sufficient time and adequate number of opportunities of being heard, the assessee did not comply. with any of the notices issued u/s.250 of the Act. 8.5 Be that as it may, as seen from the grounds of appeal, the main line of argument taken by the assessee is that since earlier years unabsorbed depreciation and business loss of power generation unit were set off against other income/other business income in earlier years itself, the same cannot be once again set off against the current year profits of power generation unit. Also, the assessee contended that the AO has not considered the requirement to treat the undertaking as only business of the assessee is from initial AY and not from the year of commencement of generation of power. 8.6I have given my thoughtful consideration to the submissions ofthe assessee and carefully examined the same in the light of the factual matrix of the case and judicial precedents on this issue.
7 ITA No. 387/JP/2023 Fatehpuria Transformers and Switchgears Pvt. Ltd. vs. DCIT 8.7At the outset, it may be noted that, as per the provisions of section 80IA(1) and (2) of the Act, deduction of an amount equivalent to 100% of profits and gains derived from the eligible business may, at the option of the assessee, be claimed for any ten consecutive years out of fifteen years beginning from the year in which the undertaking or the unit begins to operate any infrastructure facility. 8.8 Further, as per the sub-section (5) of section 80IA of the Act, which starts with a non obstante clause that notwithstanding anything contained in any other provisions of the statute, the profits and gains of eligible business shall for the purpose of determining the quantum of deduction, for the AY succeeding the initial AY or any other subsequent AY, be computed as if such eligible business were the only source of income of the assessee during the PY relevant to initial AY and to every subsequent AY upto and including the AY for which the determination is to be made. 8.9 At this juncture, it is also important to note that the CBDT, vide Circular No.1 of 2016 dated 15.02.2016, has clarified that initial assessment year would mean the first year opted for by the assessee for claiming deduction u/s.80IA of the Act and, therefore, once such initial assessment year is opted for by the assessee, he shall be entitled to claim deduction for ten consecutive assessment years beginning from the year in respect of which he has exercised such option subject to fulfillment of conditions prescribed in the section. 8.10Accordingly, it is amply clear from the statute as well as clarification issued by the CBDT (supra), by virtue of the provisions of section 801A(5) of the Act, profits and gains from eligible business for the purpose of deduction u/s.80IA of the Act shall be computed after deduction of notional brought forward losses and depreciation of eligible business in spite of the fact that they have already been set off against other income or non eligible business income, as the case may be, in earlier AYS itself. 8.11In this regard, reliance is place on the following judicial precedents: (i) Microlabs Ltd. vs. ACIT (2015) 56 taxmann.com 160 (Kar.) (ii) ACIT vs. Goldmine Shares and Finance Pvt. Ltd. (2008) 113 ITD 209 (Ahmd.) (SB) (iii) Khinvasara Investment Pvt. Ltd. vs. JCIT (2008) 110 ITD 198 (Pun.) (iv) CIT vs. Reliance Energy Ltd (2021) 127 taxmann.com 69 (SC) 8.12In all the above mentioned decisions, it has been categorically held by the various judicial authorities that profits and gains from the eligible business, for the purpose of determination of quantum of deduction u/s.801A of the Act, has to be computed considering that such eligible business were the only source of the income of the assessee during the PY relevant to the initial AY and every subsequent AY upto which the determination of deduction u/s.80IA of the Act is made. While doing so, set off of losses/unabsorbed depreciation against other
8 ITA No. 387/JP/2023 Fatehpuria Transformers and Switchgears Pvt. Ltd. vs. DCIT income/non eligible business income of the assessee has to be ignored and the said set off of losses is to be treated as losses being carried forward and after deducting said losses from the income of eligible business for the year under consideration, the profits of the business to be reckoned. 8.13 In view of the aforementioned statutory position in terms of section 801A(5) of the Act and respectfully following the judicial precedents, including the decisions of the Hon'ble High Court of Karnataka in the case of Microlabs Ltd. vs. ACIT (supra) and the Hon'ble Supreme Court in the case of CIT vs. Reliance Energy Ltd (supra), I am of the considered opinion that, in the instant case, the AO has rightly deducted brought forward nominal loss/depreciation set off against other income/non eligible business income in the earlier AYS, from the profits of eligible business i.e., power generation unit of the current AY and, thereby, denied the assessee's claim of deduction u/s.80IA of the Act to the extent of Rs.6,86,000/-. Thus, the grounds of appeal raised by the assessee on this issued is dismissed. 9.0 In the result, the appeal filed against the order u/s.147 rws 143(3) of the Act for the AY 2011-12 is dismissed.”
The ld. AR of the assessee the date of hearing granted by the ld. CIT(A) was of the covid period. The ld. AR assessee on the date of hearing stated on the bar that the assessee on the last date of hearing sought for an adjournment and therefore, the assessee deprived of hearing on merits. The ld. AR of the assessee further stated that in the case of the assessee similar issue is decided by the ld. CIT(A) in favour of the assessee and therefore, since the assessee was ex-parte before the ld. CIT(A), the assessee prayed one more opportunity of being head before the ld. CIT(A).
The ld DR is heard who relied on the findings of the lower authorities and more particularly advanced the similar contentions as stated in the
9 ITA No. 387/JP/2023 Fatehpuria Transformers and Switchgears Pvt. Ltd. vs. DCIT order of the ld. CIT(A). The ld. DR also submitted that though the assessee is exparte but the appeal has been decided considering the merits of the case and therefore, objected to the prayer of the assessee.
We have heard the rival contentions and perused the material placed on record. The bench noted that the assessee was given four opportunities by the ld. CIT(A). The first notice vide which the assessee sought the adjournment and there after the two notices were issued in the covid period and in the last opportunity only seven days’ time was granted. The bench also noted from the arguments of the ld. AR of the assessee that a similar issue has been decided in other assessment year in favour of the assessee. Therefore, we are of the considered view that the assessee is deprived of justice. Based on these set of facts we are inclined to accept the request of the ld. AR of the assessee to set aside the case to the file of the ld. CIT(A), to decide the case of the assessee after giving proper opportunity of being heard to the assessee. At the same time, the assessee is directed to represent and present all the facts before the ld. CIT(A) and should not ask for adjournment of philanderer’s grounds. At this stage, we remand back the matter without commenting upon the merits of the case
10 ITA No. 387/JP/2023 Fatehpuria Transformers and Switchgears Pvt. Ltd. vs. DCIT and ld. CIT(A) is directed to pass an appropriate order in accordance with law.
In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 04/12/2023.
Sd/- Sd/- ¼lanhi xkslkbZ ½ ¼ jkBkSM deys’k t;arHkkbZ ½ (Sandeep Gosain) (Rathod Kamlesh Jayantbhai) U;kf;dlnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 04/12/2023 *Ganesh Kumar, PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Fatehpuria Transformers and Switchgears Pvt Ltd., Kalwar Road 2. izR;FkhZ@ The Respondent- DCIT, Circle-01, Jaipur 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZQkbZy@ Guard File (ITA No. 387/JP/2023) vkns'kkuqlkj@ By order, सहायकपंजीकार@Aेेज. त्महपेजतंत
