Income Tax Appellate Tribunal - Hyderabad
Sunshine Granites Private Limited, ... vs Dy. Commissioner Of Income Tax , Central ... on 19 March, 2021
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "B": HYDERABAD
(THROUGH VIRTUAL CONFERENCE)
BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER
AND
SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER
ITA Nos. 924 & 925/H/2018
Assessment Years: 2013-14 & 2014-15
Sun shine Granites Pvt. Vs. Dy. Commissioner of
Ltd., Bengaluru Income-tax, Central
Circle - 1(2), Hyderabad.
PAN - AAOCS 6148Q
(Appellant) (Respondent)
Assessee by: Shri K.A. Sai Prasad
Revenue by: Shri Y.V.S.T. Sai
Date of hearing: 16/02/2021
Date of pronouncement: 19/03/2021
ORDER
PER L.P. SAHU, A.M.:
Both these appeals filed by the assessee are directed against the orders of Pr. CIT(Central), Hyderabad for AYs. 2013-14 & 2014-15 passed u/s 263 of the Income-tax Act, 1961 (in short 'the Act'). As the issue is identical in both the appeals, the same were clubbed and heard together and, :- 2 -: ITA Nos. 924 & 925/Hyd/18 S u ns hi ne G r an i t es P v t . L t d . , B a ng al o re . therefore, a common order is passed for the sake of convenience.
2. The grievance of the assessee in the grounds of appeal for both the years under consideration is that the Pr. CIT is not justified in invoking the provisions of section 263 and the holding that application of provisions of section 79 do not warrant in assessee's case.
3. To dispose of these appeals, we refer to the facts from AY 2013-14 being ITA No. 924/Hyd/2018.
4. Brief facts of the case are that assessee-company is engaged in the business of quarrying & trading of Granite. A Search and Seizure operations were conducted ;n the residential premises of Sri Ayub Khan on 25-02-2014, wherein documents pertaining to the assesse e company were found and seized. Lateron, the case was selected for scrutiny under CASS. The assessee-company originally filed its return of income for the Asst.Year 2013 -14 on 05-10-13 admitting loss of Rs. 95,75,711/- which was claimed to be allowed to be carried forward.
:- 3 -: ITA Nos. 924 & 925/Hyd/18 S u ns hi ne G r an i t es P v t . L t d . , B a ng al o re . 4.1 The DCIT, Central Circle -1(2), Hyderabad had completed the assessment u/s 143(3) of the IT Act on 31 -3- 2016 for AY 2013-14 and disallowed certain expenditure amounting to Rs. 13,97,874/- as the Assessee could not substantiated the expenditure under the heads Chemical Powder and land development expenditure by producing proper vouchers. The AO further disallowed the amounts of Rs. 30,60,082/- u/s. 40A(3) and Rs. 1,51,93,305/- u/s. 40(a)(ia). Thus the loss of Rs. 95,75,711/- returned by the Assessee has become income of Rs. 1,00,75,549/-. This income was set off against the brought forward loss of Rs, 3,90,63,682/- and the balance of Rs. 2,89,88,133/- was allowed to be carried forward to be set off against future profits.
5. By exercising his powers vested u/s 263 of the Act, the Pr. CIT (Central), Hyderabad, on perusal of the assessment record of the assessee, observed that the AO has not considered the provisions of section 79 of the IT Act and the order of the AO is not only erroneous but also :- 4 -: ITA Nos. 924 & 925/Hyd/18 S u ns hi ne G r an i t es P v t . L t d . , B a ng al o re . prejudicial to the interests of the revenue and, hence, set aside the assessment order with a direction to the AO to consider the provisions of section 79 of the Act and pass the assessment order afresh in accordance with law after giving an opportunity to the assessee of being heard. For the sake of clarity, we reproduce observations of the Pr. CIT(A) in his order to come to the above conclusion as under:
"3. On verification of record, it is noticed from Part B of note 1 of balance sheet for the year ended as on 31-03- 2013, as well as 31-03-2012, that the share holding pattern "JI .ne company has been changed substantially, as reproduced below:
FY 2012-13 FY 2011-12
Name of the % of share % of share
share holder holding for holding for
current report previous
period reporting
period
Ayub Khan 0.41% 50%
Dou Yangjun 0.41% 50%
Yali Stones 99.18% 0%
Hongkong Ltd.
4 It is observed from the above table that the shareholdings to the extent of 51% is not one and the same in the asst. years 2012-13 (the year of business toss) and asst. year 2013-14 (the year of set off of business loss). It is very much pertinent to mention here the provision of Section 79 of the Income Tax Act, 1961 wherein it was early held that in case there is a change :- 5 -: ITA Nos. 924 & 925/Hyd/18 S u ns hi ne G r an i t es P v t . L t d . , B a ng al o re .
in 51% of the shareholding then the earlier Losses cannot be set off against the profits of the company in subsequent years.
5. As mentioned earlier the Assessee company has incurred losses of Rs.3,90,63,682/- up to the assessment year 2012-13. At the same time, the shareholders up to the assessment year 2012'-13 are only Shri Ayub Khan (50%) and Shri Dou Yangiun (50%) whereas for the AY 2013-14 the shares of the company were not held by the same persons. As mentioned earlier 99.18% shares were held by Yali Stones Hongkong Limited which is a new company and which became a shareholder during the year under consideration i.e. AY 2013-14. Thus, it can be concluded 51% of the shareholding of the company was not held by the same shareholders for the AYs 2012-13 & 2013-14 respectively. Since 51% of the share has been changed from earner shareholders to newly joined shareholders i.e. Yali Stones Hongkong Limited. 718 assessee company is not eligible to set off the earlier year losses against the income earned for the AY 2013-14 as per specific provisions of Section 79 of the Income Tax Act, 1961. From a perusal of the assessment order, it is observed that the AO lost sight of the provisions of section 79 of the Income Tax Act and set off the earlier year losses against the income determined for the AY 2013-14 as such the order is erroneous.
6. Since the order passed u/s. 143(3) was erroneous as It is prejudicial to the interest of revenue, a notice u/s. 263 was Issued to the 8sseSseon 16-03-2017 and 18-09- 2017. The assessee chose not to appear and only sought for adjournment. Considering the request of the assessee the case was posted for hearing as on 11-10- 2017. However, on the date of appearing i.e 11-10-2017 also none appeared. Since the assessee is not interested in the pursuance of the case, lam opinion that the case is to b~ finalized. Accordingly, I proceed to decide the case CIs per the material available on record.
:- 6 -: ITA Nos. 924 & 925/Hyd/18 S u ns hi ne G r an i t es P v t . L t d . , B a ng al o re .
7. As mentioned in the preceding paragraph of this order, the AO has not considered the provisions of Section 79 of the Income Tax Act, 1961. Therefore, the order is riot only erroneous but also prejudicial to the interests of revenue. Accordingly, the assessment order passed for AY 2013-14 Is set aside with a direction to the AO to consider the provisions of Section 79 of the Income Tax Act. 1961 and pass the assessment order afresh in accordance with law after giving an opportunity to the assessee of being heard."
6. Aggrieved by the order of Pr. CIT, the assessee is in appeal before the ITAT.
7. Before us, the ld. counsel for the assessee contended that the Pr. CIT failed to appreciate the facts and circumstances of the case and did not warrant application of the provisions of section 79 and, therefore, invoking the provisions of section 263 is not as per law, hence, the order of the Pr. CIT may be set aside and that of the AO be restored.
8. The ld. DR, on the other hand, relied on the order of Pr. CIT and submitted that the Pr. CIT gave a categorical finding that the AO has not considered the provisions of section 79 of the Act as per table given supra in case of :- 7 -: ITA Nos. 924 & 925/Hyd/18 S u ns hi ne G r an i t es P v t . L t d . , B a ng al o re . change of shareholding pattern. He, therefore, submitted that the order of Pr. CIT be upheld.
9. Considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. On going through the assessment order, we notice that the AO has not taken any cognizance as there is a substantial material available on record that the income has escaped assessment. As pointed out by the Pr. CIT, the assessee is not eligible to set off the earlier losses against the income earned for the AY 2013 -14 as per specific provisions of section 79 of the Act, as the new shareholder i.e. Yali Hongkong Ltd. has acquired 99.18% shares. Firstly, the AO is an investigating officer and thereafter he is an adjudicating officer. It is the duty of the AO to make correct assessments as per income-tax law applicable for the relevant assessment year. The AO has lost sight of the provisions of section 79 of the Act and set off the earlier losses against the income determined for the AY 2013-14 is erroneous. Therefore, we do not find any infirmity in the order of Pr. CIT setting aside the order of :- 8 -: ITA Nos. 924 & 925/Hyd/18 S u ns hi ne G r an i t es P v t . L t d . , B a ng al o re . the AO with a direction to consider the provisions of section 79 of the Act and pass the assessment order afresh and upholding the order of the Pr. CIT, we dismiss the grounds raised by the assessee on this count.
10. As the facts and grounds are materially identical in AY 2014-15 to that of AY 2013-14, following the decision in AY 2013-14, we dismiss this appeal as well.
11. In the result, both the appeals of the assessee are dismissed.
Pronounced in the open court on 19 th March, 2021.
Sd/- Sd/-
(S.S. GODARA) (LAXMI PRASAD SAHU)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, Dated: 19 th March, 2021.
kv
:- 9 -: ITA Nos. 924 & 925/Hyd/18
S u ns hi ne G r an i t es P v t . L t d . , B a ng al o re . copy to :
1 Sunshine Granites (P) Ltd., C/o Ch. Parthasarathy & Co., 1-1-298/2/B/3, 1st Floor, Sowbhagya Avenue, St. No. 1, Ashoknagar, Hyderabad - 500 020.
2 DCIT, Central Circle - 1(2), 7 th Floor, Aaykar Bhavan, Basheerbagh, Hyderabad - 500 004 3 Pr. CIT(Central), Hyderabad.
4 Addl. CIT , CR-1, Hyderabad 5 ITAT, DR, Hyderabad.
6 Guard File.