Income Tax Appellate Tribunal - Hyderabad
Dy.Cit, Circle-16(1),, Hyderabad vs M/S Nsl Renewable Power Ltd.,, ... on 18 November, 2016
ITA Nos 968 969 1242 and CO 59 of 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
Hyderabad ' B ' Bench, Hyderabad
Before Smt. P. Madhavi Devi, Judicial Member
AND
Shri B.Ramakotaiah, Accountant Member
ITA Nos.968 & 969/Hyd/2011
(Assessment Year: 2007-08)
M/s. Nuziveedu Seeds Ltd Vs Commissioner of Income Tax
Hyderabad (Central),
PAN: AABCN 6009 L Hyderabad
ITA No. 1242/Hyd/2014
(A.Y 2007-08) AND
C.O. No.59/Hyd/2014
(Arising out of ITA No.1242/Hyd/2014
Dy. CIT, Central Circle 7 Vs M/s. NSL Renewable Power Ltd
Hyderabad Hyderabad
PAN: AABCN 6009 L
For Assessee : Shri S. Rama Rao
For Revenue : Shri J. Siri Kumar, CIT(DR)
Date of Hearing: 22.08.2016
Date of Pronouncement: 18.11.2016
ORDER
Per Smt. P. Madhavi Devi, J.M.
All the above appeals are for the A.Y 2007-08. ITA No.968/Hyd/2011 is an appeal against the order of the CIT u/s 263 of the I.T. Act revising the assessment order u/s 143(3) of the Act while ITA No.969/Hyd/2011 is an appeal against the order of the CIT u/s 263 revising the order u/s 154 of the I.T. Act for the A.Y 2007-08. ITA No.1242/Hyd/2014 is the appeal filed by the Revenue against the relief given by the CIT (A) in an appeal by the assessee against the assessment order u/s 143(3) r.w.s. 263 of Page 1 of 11 ITA Nos 968 969 1242 and CO 59 of 2014 the I.T. Act and the cross objection is filed by the assessee against the denial of relief to the assessee by the CIT (A) against the assessment order passed u/s 143(3) r.w.s. 263 of the I.T. Act. Since common issues are involved in all these appeals, all the appeals were heard together and are disposed of by this common and consolidated order. Brief facts of the case leading to these appeals are as under:
2. The assessee is a company engaged in the business of seed production and also deriving income from lease rentals and renewable power generation. There was a search & seizure action u/s 132 of the I.T. Act in the case of the assessee's group of industries on 13.03.2007. Consequent to the search, a notice u/s 153A was issued to the assessee calling for various details. In response to the same, the AR of the assessee appeared and furnished the required information. During the assessment proceedings u/s 143(3) of the Act for A.Y 2006-07, the AO observed that the assessee has purchased land sites at Ibrahimbagh, Hyderabad, at Kandlakoya, Hyderabad and also at Sholinganallur, Chennai and that the assessee has made payments in cash also over and above the registered value of the lands. During the assessment proceedings, the assessee admitted that the cash payments for the purchase of the above lands are all out of its unaccounted income from sale of remnant seeds. The AO brought the difference of the undisclosed income utilized for the purchase of the lands to tax as undisclosed income of the assessee. As regards the investment of unaccounted income is concerned, the assessee offered the same in the A.Ys 2006-07 and 2007-08 as under:Page 2 of 11
ITA Nos 968 969 1242 and CO 59 of 2014 A.Y Unaccoun Unaccounted Income surrendered on ted sale of investment in land at account of investment in remnant Chennai and Hyderabad land at Chennai and seed as as per seized document Hyderabad as per return of per seized (Rs.) income (Rs.) document Chennai Hyderabad Chennai Hyderabad 06-07 2,65,61,097 2,75,41,662 4,53,21,167 97,00,000 2,77,52,000 07-08 2,07,32,443 0 0 1,38,60,000 1,68,00,000 Thus, it is seen that the assessee has offered Rs.3,74,52,000 for the A.Y 2006-07 and Rs.3,07,60,000 for the A.Y 2007-08. During the assessment proceedings u/s 143(3) the Act for the A.Y 2006- 07, the AO has held that the entire investment in the lands is made in the A.Y 2006-07 itself vide his order dated 31.12.2009. Similarly, vide order dated 31.12.2008, for the A.Y 2007-08, AO has treated a sum of Rs.5,31,350 only as undisclosed income of the assessee on account of unaccounted cash payments for purchase of the land at Kandlakoya, Hyderabad. He did not make any further addition but accepted the unaccounted income declared by the assessee towards the investments in land at Ibrahimbagh and Chennai during the relevant A.Y. Thereafter, the assessee filed an application u/s 154 of the Act, stating that for the A.Y 2007-08, the assessee has surrendered unaccounted investments towards purchase of land at Ibrahimbagh (Hyderabad) and Sholinganallur (Chennai) amounting to Rs.1,68,48,000 and Rs.1,38,60,000 respectively in its return of income but that the AO has made addition of Rs.1,68,94,917 and Rs.1,95,60,012 as unaccounted investments in the entire land in the assessment order for the A.Y 2006-07. It was stated that since the AO was of the view that the said amount should be assessed in the A.Y 2006-07 itself, it was prayed that the same should be deleted from the assessed income for the A.Y 2007-08 as it amounts to double addition and that the assessment order should Page 3 of 11 ITA Nos 968 969 1242 and CO 59 of 2014 be modified accordingly. The AO, after considering the assessee's application, accepted the assessee's contentions and held that the amount of Rs.1,68,48,000 returned/surrendered by the assessee as income for the A.Y 2007-08 is to be reduced from the income assessed, since the same has been added as the income for the A.Y 2006-07. Similarly, he also reduced the sum of Rs.1,38,60,000 shown by the assessee as income for the A.Y 2007-08 towards unaccounted investments for acquiring land at Sholinganallur (Chennai). The assessment order was accordingly rectified.
3. Subsequently, the CIT, u/s 263 of the Act, perused the assessment order and also the subsequent rectification order and observed that during the assessment proceedings u/s 143(3) of the Act, the AO has not considered that the assessee has also claimed profit from the sale of carbon credit as the deduction u/s 80IA of the Act, though the said profit is not derived from the industrial undertaking. He further observed that during the assessment proceedings for the A.Ys 2006-07 & 2007-08, the assessee has explained the source of unaccounted investments as the income from unaccounted sale of remnant seeds and though the assessee has offered a sum of Rs.2,07,32,443 as income from unaccounted sale of remnant seeds for the A.Y 2007-08, since the assessee has not made any investment during the relevant A.Y, the entire amount ought to have been brought to tax. He also observed that from the seized material, the assessee has transferred a sum of Rs.2.89 crores in cash through Angadias and by reducing the sum of Rs.3,07,60,000 by the AO u/s 154 of the Act, the sum of Rs.2.89 crores has escaped assessment. Thus, Page 4 of 11 ITA Nos 968 969 1242 and CO 59 of 2014 according to the CIT, the assessment order is both erroneous and also prejudicial to the interests of the Revenue. He accordingly issued a show cause notice to the assessee and the assessee submitted its written submission to the CIT. However, the CIT was not convinced with the assessee's contentions and directed the AO to complete the assessment for the A.Y 2007-08 afresh after giving the assessee a fair opportunity of hearing. Against this order of the CIT revising both the assessment order u/s 143(3) of the Act and also the order u/s 154 of the Act dated 18.06.2009, the assessee has filed two appeals ITA Nos.968 & 969/Hyd/2011 respectively before us.
4. The learned Counsel for the assessee submitted that the AO while completing the assessment u/s 143(3) of the Act has considered the issue at length, both on the allowability of deduction u/s 80IA and also the sources for the unaccounted investments in purchase of land at Hyderabad and also at Chennai before making the final assessment and also while passing the order u/s 154 of the Act. Thus, according to the learned Counsel for the assessee, the assessment order cannot be termed as erroneous and hence is not revisable u/s 263 of the I.T. Act. It was submitted that a detailed note on taxability of the receipts on sale of carbon credits was submitted to the AO during in the course of assessment proceedings and all the facts pertaining to it were explained to the AO and the AO after examining the same and after application of his mind, accepted the explanation of the assessee before passing the assessment order. Further, with regard to the taxing of the unaccounted income from the sale of remnant seeds (of Rs.2.89 crores), it was Page 5 of 11 ITA Nos 968 969 1242 and CO 59 of 2014 submitted that the cash portion of the sale consideration paid for purchase of land sites at Hyderabad and Chennai was explained to be initially paid by the agents (who were engaged to identify the land) for which they maintained the accounts and the money was later sent to them from Hyderabad through Angadias. It was submitted that since the AO has held that the entire investment in land was made during the previous year relevant to A.Y 2006-
07 itself, and since the assessee has offered the income from the sale of remnant seeds in the return of income for A.Y 2007-08 as well, not reducing the same from the assessed income for A.Y 2007-08 results in nothing but double addition which was rightly rectified by the AO during the 154 proceedings. Therefore, according to the learned Counsel of the assessee, the revision order is not sustainable. The assessee has also taken a ground of appeal No.2 that the order passed u/s 263 is erroneous and illegal as the learned CIT has passed a single order revising both the order u/s 143(3) and order u/s 154 passed by the AO. According to him, the learned CIT ought to have considered the facts of each of the order separately and passed independent orders.
5. The learned DR, on the other hand, supported the orders of the authorities below on the maintainability of the combined order of the CIT and also on the merits of the said order.
6. Having regard to the rival contentions and the material on record, we find that the CIT has revised the order u/s 143(3) and also u/s 154 of the Act by a combined order u/s 263 of the Page 6 of 11 ITA Nos 968 969 1242 and CO 59 of 2014 Act. The objection of the assessee, that the CIT ought to have passed independent and separate orders, is not sustainable because the order u/s 154 is only a rectification of a mistake apparent from record of an order passed under the provisions of the I.T. Act and therefore, forms part of the order which is rectified. The order u/s 154 has no independent existence and is part of assessment proceedings itself as held by the Hon'ble Apex Court in the case of S. Sankappa vs. Income Tax Officer, reported in (1968) 68 ITR 760 (S.C). Therefore, the CIT was within his powers u/s 263 to revise the order u/s 143(3) and also the order u/s 154 by way of a combined and a single order. Ground of appeal No.2 is accordingly dismissed.
7. As regards Ground No.4 with regard to entitlement of the assessee for claiming deduction u/s 80IA of the Act in respect of the receipts from the sale credit of carbon credits, we find that the CIT has held that the same is not allowable as a deduction u/s 80IA as it is not derived from an industrial undertaking. As far as this issue is concerned, we find that the allowability of the deduction u/s 80IA in respect of receipts from the sale of carbon credits is covered against the assessee by the decision of the Coordinate Bench of this Tribunal in the case of My Home Power Ltd vs. Dy.CIT in ITA No.1114/Hyd/2009 dated 2.11.2012 wherein the Coordinate Bench of this Tribunal has held that it is not a revenue receipt but is a capital receipt. Thus, while holding that such receipt is not eligible for a deduction u/s 80IA, the Tribunal has also held that the addition cannot be made as it is a capital receipt. Therefore, assessment order is clearly erroneous in so far as allowing the deduction u/s 80IA is concerned. But since Page 7 of 11 ITA Nos 968 969 1242 and CO 59 of 2014 it is held to be a capital receipt and cannot be brought to tax, it is not prejudicial to the interest of the Revenue.
8. The other ground on which the assessment has been revised, is that the unaccounted income from the sale of remnant seed of Rs.2.89 crores, has escaped assessment by virtue of the rectification order passed u/s 154 of the Act. It is the case of the assessee that the assessee has offered the income from sale of remnant seeds in its revised computation of income for A.Ys 2006-07 and 2007-08 and the AO while completing the assessment, has considered the same and has not made any adjustments towards unaccounted investments. It is submitted that the assessee has offered the unaccounted income as the source for investments in land in financial years 2005-06 and 2006-07 relevant to A.Ys 2006-07 & 2007-08 respectively but since the AO has treated the entire investment as made in the A.Y 2006-07 itself, not making any adjustment to the unaccounted income from the sale of remnant seeds in the A.Y 2007-08 also, will result in double taxation. The assessee has also filed a copy of the assessment order for A.Y 2006-07 wherein at page 10 of the assessment order, the AO has observed that the unaccounted investments in land made by the assessee is quantified during the year 2005-06 relevant to the A.Y 2006-07, since the assessee company has paid the cash and got the land registered during this A.Y. From the assessment order for the A.Y 2006-07, it is seen that the assessee has admitted a sum of Rs.2,77,52,000 towards undisclosed cash payment in the return of income filed by it and the AO has made a further addition of Rs.2,92,60,012 as unaccounted investment u/s 69 of the I.T Act. As seen from the Page 8 of 11 ITA Nos 968 969 1242 and CO 59 of 2014 table reproduced above from the CIT's order u/s 263, the unaccounted income from remnant seed for the A.Y 2006-07 is Rs.2,65,61,097, is included in the returned income of the assessee and further the addition of Rs.2,07,32,443 is also made in the A.Y 2006-07. Therefore, if the same is brought to tax in the A.Y 2007-08 also because the assessee has offered it, it is clearly a double taxation of the same amount. We have gone through the annual report of the assessee and find that this sum of Rs.2.07 crores is included in the returned income of the assessee for the A.Y 2007-08. The AO has considered the issue at length and thereafter accepted the assessee's contention while passing the order u/s 154 of the Act. Therefore, we are of the opinion that the assessment order is not erroneous and prejudicial to the interests of the Revenue. Therefore, the order of the CIT against the order u/s 154 is not sustainable.
9. The assessee has also raised an additional ground of appeal in ITANo.968/Hyd/2011 which is as under:
"The learned CIT ought not to have directed the AO to tax the receipt on sale of carbon credits of Rs.13,39,54,560 as revenue receipt without considering the fact that the said receipt is a capital receipt".
As far as this ground is concerned, we have already held that though the assessment order is erroneous, it is not prejudicial to the interests of the Revenue as the receipt from the sale of carbon credits of Rs.13,39,54,560 being a capital receipt is not taxable. Therefore, the direction of the CIT to tax the receipt as revenue receipt is not sustainable in view of the decision of the Coordinate Page 9 of 11 ITA Nos 968 969 1242 and CO 59 of 2014 Bench of the Tribunal in the case of My Home Power Ltd (cited Supra) which has been confirmed by the Hon'ble jurisdictional High Court vide order dated 19.02.2014 in Income Tax Appellate Tribunal Appeal No.60 of 2014. Therefore, we deem it fit and proper to direct the AO to allow the deduction u/s 80IA of the act in accordance with law.
10. In the result, appeal in ITA No.968/Hyd/2011 is partly allowed, while appeal in ITA No.969/Hyd/2011 is allowed.
ITA No.1242/Hyd/2014 & C.O. 59/Hyd/201411. ITA No.1242/Hyd/2014 is filed by the Revenue against the order of the CIT (A) in holding that the gain on sale of carbon credits is not taxable as it is a capital receipt. We find that the CIT (A) has followed the decision of the Coordinate Bench of this Tribunal in the case of My Home Power Ltd (cited Supra) which has been confirmed by the Hon'ble High Court and therefore, we see no reason to interfere with the same.
12. As regards the cross objection of the assessee against the order of the CIT (A) in confirming the action of the AO in making the addition of Rs.2.89 crores as representing the undisclosed income on sale of remnant seeds and investments in property, we have already held that the order u/s 263 on this issue is not sustainable. Therefore, the consequential addition also is not sustainable and the assessee's ground of appeal is accordingly allowed.
Page 10 of 11ITA Nos 968 969 1242 and CO 59 of 2014
13. In the result, Revenue's appeal is dismissed and the assessee's C.O. is allowed.
14. To sum up, assessee's appeal in ITA No.968/Hyd/2011 is partly allowed, assessee's appeal in ITA No.969/Hyd/2011 is allowed and Revenue's appeal ITA No.1242/Hyd/2014 is dismissed and assessee's C.O. 59/Hyd/2014 filed by the assessee is allowed.
Order pronounced in the Open Court on 18th November, 2016.
Sd/- Sd/-
(B.Ramakotaiah ) (P. Madhavi Devi)
Accountant Member Judicial Member
Hyderabad, dated 18th November, 2016.
Vinodan/sps
Copy to:
1 M/s. Nuziveedu Seeds Ltd 8-2-684/2/A, 4th Floor, NSL Icon Road No.12 Banjara Hills, Hyderabad 2 Dy.Commissioner of Income Tax, Central Circle 7 Hyderabad 3 CIT (Central) Hyderabad 4 Addl. CIT - Central Range-2 Hyderabad 5 The DR, ITAT Hyderabad 6 Guard File By Order Page 11 of 11