Income Tax Appellate Tribunal - Hyderabad
Nagarjuna Constructions Co. Ltd.,, ... vs Assessee on 16 September, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "B", HYDERABAD
BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER
AND
SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER
I.T.A. No. 689/HYD/2014
Assessment Year: 2003-04
Nagarjuna Constructions DY. Commissioner of
Co. Ltd., Vs Income Tax,
HYDERABAD Circle-16(1),
[PAN: AAACN7335C] HYDERABAD
(Appellant) (Respondent)
C.O. No. 12/HYD/2016
(in ITA No. 689/Hyd/2014)
Assessment Year: 2003-04
Asst. Commissioner of Nagarjuna Constructions
Income Tax, Vs Co. Ltd.,
Central Circle-1(1), HYDERABAD
HYDERABAD [PAN: AAACN7335C]
(Cross-Objector) (Respondent)
For Assessee : Shri S. Rama Rao, AR
For Revenue : Shri J. Siri Kumar, DR
Date of Hearing : 24-08-2016
Date of Pronouncement : 16-09-2016
ORDER
PER B. RAMAKOTAIAH, A.M. :
This is an appeal by assessee against the order of the Commissioner of Income Tax (Appeals)-I, Hyderabad dated I.T.A. No. 689/Hyd/2014 :- 2 -: C.O. No. 12/Hyd/2016 Nagarjuna Constructions Co. Ltd., 25-02-2014 on the issue of reopening u/s. 147 of the Income Tax Act [Act].
2. In the course of appeal proceedings, assessee filed an additional ground that CIT(A) has not considered appeal on merits and objected to the confirmation of addition made of Rs. 4,36,86,816/-. Revenue in its Cross-objection is mainly contesting that though the ITAT has specifically directed the CIT(A) to deal with the issue on merits of addition, Ld.CIT(A) has not examined and therefore, the issue may be remitted to the file of CIT(A) for deciding the merits of substantive addition.
3. In order to adjudicate the above contentions, it is necessary to refer to the proceedings in the earlier round of appeals as these orders are consequent to the ITAT directions given earlier. In this case original assessment was completed u/s. 143(3) of Income-tax Act [Act] on 27-03-2006 determining taxable income at Rs. 14,86,40,590/- as against the returned income of Rs. 8,87,25,877/-. Subsequently notice u/s. 148 of the Act was issued on 19-03-2010. The reason recorded for reopening of assessment is as under:
There are variations in the figures shown in the annual report of the company and the computation statement filed along with return of income as under:
I.T.A. No. 689/Hyd/2014 :- 3 -: C.O. No. 12/Hyd/2016 Nagarjuna Constructions Co. Ltd., Sl. As per computation As per annual Description No. statement (Rs.) report (Rs.)
1. Profit before tax as 21,82,33,289 23,25,90,000 per P&L A/c.
2. Addition: 6,71,95,711 7,40,36,000 Depreciation debited to P&L A/c. considered separately.
3. Addition: Deferred 22,06,262 40,92,000 revenue expenditure written off considered separately.
4. Addition: 14,77,474 15,30,000 Donations made during the year considered separately Total 28,91,12,736 31,22,48,000 The variations were due to exclusion of corresponding amounts relating to Joint Venture and hence it is evident that the figures adopted in the computation of income were net of those relating to the Joint Ventures. The assessee filed computation of income in which the starting point was adopted from the profits of Rs.
21,82,33,289/- which is the profit of the stand-alone operations of the company. The assessee has deducted a sum of Rs. 4,36,86,816/- from the above mentioned profits towards share incomes received from JV partnership firms. In view of the accounting policy the variations in profits before tax were due to exclusion of corresponding amounts relating to Joint Venture and therefore, the profits adopted in computing the income returned were net of the profits relatable to Joint Ventures. The claim of exemption of income of Rs. 4,36,86,816 towards share income from Joint Ventures (Firms) resulted in excess allowance of deduction to that extent. This escapement of income has occurred on account of I.T.A. No. 689/Hyd/2014 :- 4 -: C.O. No. 12/Hyd/2016 Nagarjuna Constructions Co. Ltd., failure and omission on the part of the assessee to disclose fully and truly all the material facts necessary for computation of taxable income. Hence, there is reason to believe that income has escaped from assessment for the AY. 2003-04.
4. Assessee replied to the reopening of assessment as follows: As it was explained during the course of hearing that the reasons for issue of the Notice u/s 148 is the apprehended difference in the profit before tax as per the consolidated profit and loss account published in compliance with the provisions of the Companies Act, 1956 prepared applying the Generally Accepted Accounting Practices (GAAP) applicable in India which takes into consideration the Accounting Standards issued and notified by the National Accounting Standards Board constituted under Section 145 of the Income-tax Act, 1961 and Accounting Standards (AS) issued by the Institute of Chartered Accountants of India (ICAI) and the Computation of Income of the Nagarjuna Construction Company Limited on standalone basis under the Income-tax Act, 1961 for the purpose of Return of Income and assessment.
In the consolidated Profit & Loss A/c which is prepared as a general purpose financial statement of the company applying the provisions of Accounting Standard (AS) 21 - Consolidated Financial Statement. The said standard requires the line by line consolidation of Equity Method of Consolidation in the preparation of Consolidated Financial Statements. Under the line by line, the consolidation is done by combining item by I.T.A. No. 689/Hyd/2014 :- 5 -: C.O. No. 12/Hyd/2016 Nagarjuna Constructions Co. Ltd., item so that the net results appear as respective line items. Whereas, equity is the residual interest is only accounted. The requirement of the application of the method depends upon the nature of economic interest and its economic substance.
Accordingly, during the previous year relevant to the assessment year 2003-04 the Consolidated Profit & Loss Account is prepared applying the above Accounting Standard and the Profit Before Tax as per the said Consolidated Profit & Loss Account is Rs. 2325.88 Lakhs, the same is explained and reconciled as under:
(Rs. in Lakhs) Profit as per Consolidated Profit & Loss 2325.88 Account (before tax) Less: Amount of tax provided in the JVs consolidated on line to line basis as the same is a separate liability of JVs.
NCC-KNR (JV) Rs. Nil
NCC SMJ (JV) Rs. 21.00
LGE & C-NCC (JV) Rs. 102.80
NCC_Maytas (JV) Rs. 14.97
Total provision for tax 138.77
Profit before tax stand alone and profit 2187.11
after tax in JVs consolidated
Less: Adjustment for Prior period items 4.79
(Negative)
Profit before tax taken as base for 2182.32
computation of income (stand alone NCC)
As the above figure includes stand alone profit before tax of NCC and profit after tax of Joint Ventures consolidated and taxed separately, the same need to be excluded as the profits and gains were already taxed. The elimination is I.T.A. No. 689/Hyd/2014 :- 6 -: C.O. No. 12/Hyd/2016 Nagarjuna Constructions Co. Ltd., done as per the details in the annexed statement and is as under:
(Rs. in Lakhs) Profit before tax taken as base for 2182.32 computation of income (stand alone NCC) Less: Profit after tax included in the consolidated P&L A/c. excluded u/s. 10(2) of the Income-tax Act, 1961 NCC-KNR (JV) Rs. 50.38 NCC-SMJ (JV) Rs. 61.42 LG E&C - NCC (JV) Rs. 176.36 Uniech- NCC (JV) Rs. 140.44 NCC-Maytax (JV) Rs. 25.77 Somdutt-NCC (JV) Rs. 15.19 (-) SDB-NCC-NEC (JV) Rs. 34.30 NCC-Maytas (JV) Rs. 17.20 (-) NCC-SMC (JV) Rs. 19.42 Total amount excluded as income not part 436.86 of the Gross Total Income Tax Profit before tax - NCCL stand alone 1745.46
5. The AO was not satisfied with the explanation offered by the assessee. According to the AO, assessee already excluded all income and all expenses relating to the Profit and Loss A/c. of the JV firms in its accounts before arriving at the profit of the stand alone assessee's company, the claim of exemption of Rs. 4,36,86,816/- towards share income from JV firms was not warranted from the profit of the assessee. The assessee was not eligible for deduction of Rs. 4,36,86,816/- from the profit of stand- alone assessee's company. Accordingly while completing the re- assessment, he added Rs. 4,36,86,816/-.
6. On appeal, the CIT(A) observed that assessee has taken profit before tax as per Profit and Loss A/c. at Rs. 21,82,33,289/-
I.T.A. No. 689/Hyd/2014
:- 7 -: C.O. No. 12/Hyd/2016
Nagarjuna Constructions Co. Ltd.,
from which assessee reduced share income of the firms (JVs) u/s. 10(2A) at Rs. 4,36,86,816/- and arrived stand alone profit before tax of the company at Rs. 17,45,46,473/-. Thereafter the various expenses were reduced like adjustment towards addition of depreciation debited to the Profit and Loss A/c., default revenue expenditure, share issue expenses, assets discarded, etc., and arrived business income at Rs. 14,78,79,793/-. To this, the assessee added capital gain of Rs. 7,60,797/- and arrived at final figure of gross total income at Rs. 14,86,40,590/-. According to the CIT(A) the figure taken by the assessee in its Profit and Loss A/c. at Rs. 21,82,33,289/- was arrived at after reducing the tax paid by JVs at Rs. 138.77 lakhs. In other words, the profit shown by the assessee's Profit and Loss A/c. is inclusive of profit after tax of the JVs. He observed that the deduction of income from JVs while calculating the stand alone company's profit is not wrong. However, he observed that statement of income of assessee- company and JVs as filed before the AO shows the profit before tax as per the computation statement, in fact includes the profit after tax of the JVs also. To that extent he was in agreement with the observation of the AO that the figures adopted in the computation of income does not include share income of the JVs. Finally, he considered the income of the assessee at stand-alone basis as follows:
(Rs. in Lakhs) Income - 33,890.44 (less) Expenditure - 32,098.92 Profit before tax - 1,791.52 6.1. Accordingly, he directed the AO to substitute Rs.
1791.52 Lakhs in place of Rs. 1745.46 Lakhs as profit before tax.
I.T.A. No. 689/Hyd/2014
:- 8 -: C.O. No. 12/Hyd/2016
Nagarjuna Constructions Co. Ltd.,
Consequent to the above, assessee and Revenue both are in appeal before the ITAT in ITA Nos. 1282 & 1364/Hyd/2011. It was the contention of assessee that preliminary issue on the objections regarding reopening u/s 147 were not adjudicated, whereas Revenue is aggrieved on the deletion of the amount by Ld. CIT(A). Considering the objections of the rival parties, the ITAT has restored the matter to the file of CIT(A) with the following directions:
"15. We have heard both the parties and perused material on record. In this case, admittedly, the assessee raised the ground as ground No. 1 before the CIT(A) as follows:
"1. On the facts and in the circumstances of the case the learned Assessing Officer erred in law and facts of the case in passing the impugned order under section 143(3) read with section 147 as such the assessment was originally completed on due verification of all the material facts in support of the claims in the return of income and the proceedings under section 147 are on the mere change of opinion."
16. The CIT(A) inadvertently not adjudicated this ground. Without adjudicating the issue relating to the reopening of assessment, he adjudicated the ground relating to addition of Rs. 4,36,86,816 on merit which is inappropriate. Being so, in our opinion, the CIT(A) has to first decide the issue relating to validity of reopening of assessment and thereafter he has to decide the issue relating to the addition on merit. Therefore, we remit the issue relating to reopening of assessment to the file of the CIT(A) to decide the same and thereupon deal with the issue relating to the merits of the addition of Rs. 4,36,86,816. However, in the event the assessee has not pressed this ground before him on earlier occasion, he has to record the same. At this stage we refrain ourselves from going into the issue relating to the merit of the addition of Rs. 4,36,86,816 which is common in both assessee as well as Revenue appeals". ( emphasis supplied)
7. Accordingly, Ld. CIT(A) adjudicated the issue of reopening by the impugned order in which the grounds raised by assessee are dismissed. Even though, Ld.CIT(A) did adjudicate the issue of reopening u/s. 147, CIT(A) did not adjudicate the issue on I.T.A. No. 689/Hyd/2014 :- 9 -: C.O. No. 12/Hyd/2016 Nagarjuna Constructions Co. Ltd., merits even though specifically directed by ITAT. Accordingly, Revenue raised the cross objection on the same point.
8. Before coming to Revenue's Cross-objection, it is necessary to examine assessee's contentions on reopening of assessment. In the impugned order, Ld.CIT(A) examined the contentions of assessee and held as under:
"07.0 The assessment records and the submissions of the appellant have been carefully considered. Under section 147, after its amendment w.e.f. 1-4-1989, wide power has been given to the Assessing Officer even to cover the cases where the assessee had fully disclosed the material facts. The only condition for action is that the Assessing Officer should have reason to believe that the income chargeable to tax had escaped assessment and such belief can be reached in any manner and is not qualified by a pre-condition of full and true disclosure of material facts by the assessee as contemplated In the pre-amended section 147(a) (Jawand and sons vs CIT(A) 326 ITR 39 P & H). The appellant's contention is that the Assessing Officer erred in re-opening the assessment after expiry of 4 years. In this connection, the finding of the Hon'ble Supreme Court in the case of Kelvinator India Limited needs to be mentioned where it has been held that the assessment can be reopened provided there is a tangible material to come to the conclusion that there was escapement of income from assessment and reason must have a link with the formation of the belief. Re-opening the assessment on the factual error noticed later amounts to tangible material which can be a valid reason for re-opening. Where assessment was re-opened u/s.147 after expiry of 4 years from the end of the relevant assessment year, the Assessing Officer must prove that assessee has not disclosed full material facts in relation to escaped income so as to give legality to the notice issued u/s.148 (Ferner India Ltd. vs. DCIT 241 ITR 0672) (Madras).
07.1 In the present case, there is no dispute to the fact that there has been a variation In the profits appeared in the computation of income and the profits reflected in the Annual Report which is tabulated as under:
I.T.A. No. 689/Hyd/2014 :- 10 -: C.O. No. 12/Hyd/2016 Nagarjuna Constructions Co. Ltd., S.No. Gist of objection As per computation As per Annual statement Report 1 Profit before tax as per 218233289 232590000 P&L account 2 Addition: Depreciation 67195711 74036000 debited to P&L account 3 Addition: Deferred 2206262 4092000 revenue expenditure 4 Addition: Donations made 1477474 1530000 during the year Total 289112736 312248000 As can be seen above, there is a variation even in the figures of donation, depreciation, deferred revenue expenditure apart from profit before tax.
There has been no mention or c1ariflcation/explanation regarding the difference In the amounts mentioned above. If It has been net of JV profits and expenses, the variation was not explained with any supporting documentation by the assessee in the return of Income or during the assessment proceedings. As can be seen from the order of the CIT(Appeals) referred above, even he had to deduce the profit before tax after going through the spread sheet (filed by the appellant during appeal proceedings) giving details of income and expenditure and working of profit before tax and profit after' tax of the appellant company on standalone basis and held "in my view, the Assessing Officer should adopt this figure (Rs.1791.52 lakhs) which is worked out by the assessee itself for the purpose of computation of income and this should be substituted for Rs.1745.46 lakhs as shown' in the computation of total income." This shows that the appellant failed to disclose all material facts necessary for assessment fully and truly. A pure finding of fact has been recorded by the Assessing Officer as to the variation in the profit reflected in the computation of income and the annual reports which· is a pre- condition for re-opening, therefore, it is held that the re-assessment proceedings have validly been initiated after forming the opinion that income chargeable to tax has escaped assessment. Accordingly, the re- opening of the assessment u/s.147 of I.T.Act is held valid".
9. Referring to the above order of Ld.CIT(A), it was the contention that there is no failure on the part of assessee in making full disclosure at the time of original assessment. It was submitted that on the basis of assessee's own statements, in spite of various reconciliations filed before the AO, successor AO after end of four years from the end of assessment year has reopened I.T.A. No. 689/Hyd/2014 :- 11 -: C.O. No. 12/Hyd/2016 Nagarjuna Constructions Co. Ltd., the assessment, on the so called mistakes. It was submitted that Ld.CIT(A) has more or less accepted that assessee has furnished all the relevant information and on that basis, he has adopted the figure 1791.52 lakhs as against 1745.46 Lakhs shown by assessee. It was submitted that this small discrepancy is also because the Ld.CIT(A) has not considered the detailed submissions made before him on 1st May, 2011 (placed at pg. 65 to 69), wherein the income of Rs. 34.30 Lakhs was directly included in the profit of the stand alone company from SDB-NCC-NEC[JV] and adjustment for prior period items (negative). If these two amounts were also considered by the Ld.CIT(A), the profit before tax of assessee NCCL stand alone profits would be Rs. 1745.46 lakhs. Therefore, there is no need for reopening the assessment in the first instance and further confirmation by the CIT(A) in the first round of appeal. Ld. Counsel relied on the following case law:
i. Fenner (India) Ltd., Vs. DCIT [241 ITR 672] (Madras); ii. Jawand Sons [326 ITR 39] (Punjab & Haryana);
iii. CIT Vs. Kelvinator of India Ltd., [320 ITR 561]; iv. Raj Rani Gulati Vs. UOI [329 ITR 370];
v. CIT Vs. Multiplex Trading & Industrial Co Ltd., [63 Taxmann.com 170 (Delhi)];
vi. Pr.CIT Vs. Samcor Glass Ltd., and Samtel Color Ltd., Hon'ble High Court of Delhi judgement dt. 12-10-2015 in ITA No. 768 769/2015;
10. Ld. DR, however, supported the order of the CIT(A) as far as reopening is concerned and requested for restoring the issue to the file of CIT(A) for deciding the issue on merits.
I.T.A. No. 689/Hyd/2014
:- 12 -: C.O. No. 12/Hyd/2016
Nagarjuna Constructions Co. Ltd.,
11. We have considered the rival contentions and perused the orders and documents placed on record. There is no doubt that AO has come to the conclusion that income has escaped assessment only on the basis of the statements and documents furnished before him in the course of assessment proceedings. As seen from the documents on record, it is also very clear that assessee has reconciled various receipts from the JVs and excluded them in computation of income filed. This was also accepted by the Ld.CIT(A) in his order dt. 24-05-2010, wherein he has held as under:
"04.0 I have gone through the fact of the case and the submission made by the appellant. I have also gone through the assessment record. I find from the computation of total income filed by the appellant that the appellant had taken the profit before tax as per P&L A/c at Rs.21,82,33,289/- from which profit exempt u/s.10(2A) being the share income of the firms (JVs) of Rs. 4,36,86,816/- has been reduced to arrive at the stand alone profit before tax of the company at Rs.17,45,46,473/-. To this, adjustments by way of addition of depreciation debited to P&L A/c, deferred revenue expenditure, share issue expenses, assets discarded and disallowances u/s.44AB have been made. Thereafter depreciation as admissible u/s.32 of the I.T. Act, deferred revenue expenditure allowable, rights issue expenditure u/s.35D, Bonus disallowed in earlier years and, paid during the year, bad debt and irrecoverable advance written off, prior period adjustments, profit on sale of assets and profit on sale of investments have been reduced to arrive at the business income of Rs.14,78,79,793/-. To this, the income under the head capital gains of Rs.7,60,797/- has been added to arrive at the gross total income of Rs.14,86,40,590/-. In fact, this is the income which was adopted as total income in the assessment order u/s.143(3) dated 27-3- 2006. While considering the figure of Rs.21,82,33,289/- in the statement of computation of total income, the appellant has reduced the tax paid by the JVs of Rs.138. 77 lakhs from this consolidated profit before tax of the appellant company and nine joint ventures totalling to Rs.2325.90 lakhs. This means that the profit before tax of Rs.21,82,33,289/- as per P&L A/c as mentioned in the computation of income is inclusive of the profit after tax of the JVs. Therefore, in my view, reduction of the share income from the JVs while calculating the stand alone profit of the company is not wrong in principle. By following this round about away, the appellant has arrived at the stand alone net profit before adjustments as discussed above, at Rs.17 ,45,46,473/-. The AO while reopening the assessment, I.T.A. No. 689/Hyd/2014 :- 13 -: C.O. No. 12/Hyd/2016 Nagarjuna Constructions Co. Ltd., has compared the profit before tax in P&L A/c as per the computation statement (Rs.21,82,33,289) and as per the Annual Report ( Rs.23,25,90,000) observing that the figure adopted in the computation of income was net of those relating to the joint ventures. However, the statement of income of the appellant company and the joint ventures as filed before the AD clearly shows that the profit before tax as per the computation statement in fact includes the profit after the tax of the JVs also. To that extent, I am not in agreement with the observation of the AO that the figure adopted in the computation of income does not include share of income of the JV".
11.1. As can be seen from the above order of the Ld.CIT(A), which was subject matter of earlier round of appeal, it is very clear that the entire proceedings were initiated only on the basis of assessee's Books of Account and statements filed before the AO and no fresh tangible material has come into consideration before the AO for reopening the assessment u/s 147. The provisions of Section 147 are as under:
"Sec.147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) :
Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year:
Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year:
I.T.A. No. 689/Hyd/2014
:- 14 -: C.O. No. 12/Hyd/2016
Nagarjuna Constructions Co. Ltd.,
Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment".
( emphasis supplied) 11.2. It is very clear from the above provision that AO cannot reopen the assessment in a case where scrutiny assessment u/s. 143(3) was completed after the end of four years from the relevant assessment year unless there is failure on the part of assessee to disclose fully and truly all the material facts necessary for his assessment. In this case, there is no such failure on the part of assessee. It is only appreciation of the facts wrongly by the AO which has lead to his belief that income has escaped assessment. Following the principles laid down by various case law relied on above, including the decision of Hon'ble Supreme Court in the case of Kelvinator India Ltd., (supra), we agree with assessee's contentions that re-opening of assessment is bad in law on the facts of the case.
11.3. Coming to the so called discrepancy confirmed by the Ld.CIT(A), the details were submitted before the Ld.CIT(A), vide the submissions made on 1st May, 2011, wherein it was reconciled as under:
"In the consolidated profit and loss account which is prepared as a general purpose financial statements of the company applying the provisions of Accounting Standards (AS) 21 - Consolidated Financial Statements. The said standard requires the line by lien consolidation or Equity Method of Consolidation in the preparation of Consolidated Financial Statements. Under the Line by Line the consolidation is done by combining item by item so that the net results appear as respective line items. Whereas, equity is the residual interest is only accounted. The I.T.A. No. 689/Hyd/2014 :- 15 -: C.O. No. 12/Hyd/2016 Nagarjuna Constructions Co. Ltd., requirement of the application of the method depends upon the nature of economic interest and its economic substance.
Accordingly, during the previous year relevant to the Assessment Year 2003-04 the Consolidated Profit and Loss Account is prepared applying the above Accounting standard and the Profit Before Tax as per the said Consolidated Profit and Loss Account is Rs. 2325.88 Lakh the same is explained and reconciled as under:
(Amount in Rs, Lakhs) Profit as per Consolidated Profit and Loss Account (Before Tax): Rs. 2325.88 Less : Amount of Tax provided in the JVs Consolidated on line to line to line basis as the Same is a separate liability of JVs.
NCC-KNR (JV) Rs. NIL
NCC-SMJ (JV) Rs. 21.00
LGE&C-NCC (JV) Rs. 102.80
NCC-MAYTAS (JV) Rs. 14.97
138.77
PROFIT BEFORE TAX STAND ALONE AND
PROFIT AFTER TAX IN JVS CONSOLIDATED: 2187.11
Less: Adjustment for Prior Period Items (Negative) 4.79
Profit Before Tax taken as base for computation of Income (stand alone NCC) 2182.32 As the above figure includes stand alone profit before tax of NCC and profit after tax of Joint Ventures consolidated and taxed separately the same need to be excluded as the profits and gains were already taxed. The elimination is done as per the details in the annexed statement and is as under:
(Rs. Lakhs) Profit Before Tax taken as base for computation Of Income (stand alone NCC) 2182.32 Less: Profit after tax included in the consolidated P&L A/c excluded Under Section 10(2) of the Income-tax Act, 1961 NCC-KNR (JV) Rs. 50.38^1 NCC-SMJ (JV) Rs. 61.42 LG E&C-NCC (JV) Rs. 176.36 UNITECH-NCC (JV) Rs. 140.44 NCC-MAYTAS (JV) Rs. 25.77 I.T.A. No. 689/Hyd/2014 :- 16 -: C.O. No. 12/Hyd/2016 Nagarjuna Constructions Co. Ltd., SOMDUTT-NCC(JV) (-) Rs. 15.19 SDB-NCC-NEC (JV) Rs. 34.30^2 NCC-MAYTAS (JV) (-) Rs. 17.20 NCC-SMC (JV) (-) Rs. 19.42 TOTAL AMOUTN EXCLUDED AS INCOME NOT PART OF THE GROSS TOTAL INCOME 436.86 Profit Before Tax - NCCL standalone 1745.46 From this the computation of income under the head 'Profits and Gains of Business or Profession' has been computed on standalone basis as given in the statement of computation enclosed to the Return of Income filed, processed and assessed under section 143(3) vide order dated 27-03- 2006.
^1. Rs. 6.93 grouped in other income in the consolidation ^2. Directly included in profit.
11.4. As can be seen from the above reconciliation furnished, Ld.CIT(A) in his order has missed two items; (i) Income from a JV directly taken under P&L A/c and (ii) Prior period adjustments which has lead to his confirmation of part amount to that extent in the first round of appeal. On examination of this reconciliation and the documents on record, we are of the opinion that assessee has correctly taken the income, which were examined in detail by the AO. It is to be noted that on the order u/s. 143(3), the matters have reached to ITAT also, mainly on the issue of deduction u/s.
80-IA. On the quantum of income, there are orders of CIT(A) and ITAT and the order of AO u/s. 143(3). On perusing those orders also, it cannot be stated that there is failure on the part of assessee in disclosing the incomes or material facts, as the claim u/s. 80-IA which was disallowed by AO pertain to various incomes earned by assessee on different projects. In view of that, it cannot be stated that assessee has not furnished necessary details in the course of assessment. Therefore, as there is no failure on the part of assessee to disclose fully and truly all the material facts necessary I.T.A. No. 689/Hyd/2014 :- 17 -: C.O. No. 12/Hyd/2016 Nagarjuna Constructions Co. Ltd., for assessment, the action of AO in reopening the assessment based on the very same documents placed on record is not according to law. Moreover, the same cannot be considered as 'tangible material' so as to reopen, as considered by the Ld.CIT(A) in her order. In view of this, we are of the firm opinion that the order of CIT(A) and the order of AO are to be set aside, as the very basis of initiation of proceedings are bad in law. Accordingly, assessee's grounds are allowed and appeal is allowed. The order of AO and Ld. CIT(A) on these proceedings are hereby set aside.
11.5. Consequent to holding that proceedings u/s. 147 are bad in law, there is no necessity to adjudicate the Cross-objection raised by the Revenue- that CIT(A) has not adjudicated the issue on merits. It is true that CIT(A) has not adjudicated the issue on merits even though directed by the ITAT but after perusing the order which was subject matter of appeal in earlier round, we are of the opinion that there is no necessity to examine the issue on merits, as assessee has correctly disclosed the incomes and reconciled them properly. In view of that, Cross-objection is considered as academic in nature and accordingly dismissed.
12. In the result, appeal of assessee is allowed and Cross- objection of Revenue is dismissed.
Order pronounced in the open Court on 16th September, 2016 Sd/- Sd/-
(P. MADHAVI DEVI) (B.RAMAKOTAIAH)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, Dated 16th September, 2016
TNMM
I.T.A. No. 689/Hyd/2014
:- 18 -: C.O. No. 12/Hyd/2016
Nagarjuna Constructions Co. Ltd.,
Copy to :
1. Nagarjuna Constructions Co. Ltd., Hyderabad. C/o. Sri S. Rama Rao, Advocate, Flat No. 102, Shriya's Elegance, Road No. 9, Himayatnagar, Hyderabad.
2. Deputy Commissioner of Income Tax, Circle-16(1), Hyderabad.
3. Asst. Commissioner of Income Tax, Central Circle-1(1), Hyderabad.
4. CIT(Appeals)-I, Hyderabad.
5. CIT (Central), Hyderabad.
6. D.R. ITAT, Hyderabad.
7. Guard File.