I.T.A. No. 375/Coch/2014, (Assessment Year: 2005-2006). Case: Padinjarekara Agencies Pvt. Ltd. Vs The Assistant Commissioner of Income Tax. ITAT (Income Tax Appellate Tribunal)
| Case Number | I.T.A. No. 375/Coch/2014, (Assessment Year: 2005-2006) |
| Counsel | For Appellant: Iype John, CA and For Respondents: K.K. John, Sr. DR |
| Judges | N.R.S. Ganesan, Member (J) and Chandra Poojari, Member (A) |
| Issue | Companies Act, 1956 - Section 211; Income Tax Act, 1961 - Sections 10, 115JB, 139, 143(1), 143(2), 143(3), 147, 148, 148, 149, 150, 151, 152, 153, 43B |
| Judgement Date | October 17, 2014 |
| Court | ITAT (Income Tax Appellate Tribunal) |
Order:
Chandra Poojari, Member (A), (ITAT Cochin Bench)
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This appeal filed by the assessee is directed against the order dated 05-12-2013 passed by the CIT(A)-IV, Kochi for the assessment year 2005-06.
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There was a delay of 160 days in filing the above appeal by the assessee before the Tribunal. The assessee has filed a petition seeking condonation of delay and also has filed an affidavit explaining the reasons for delay in filing the appeal before the Tribunal within the due date. The assessee submitted that one of the issues involved in this appeal was the applicability of the accounting standards. The CIT(A) has not considered this aspect. In the recent judgment in the case of CIT vs. Punjab Stainless Steel Industries & Ors. (364 ITR 144), the Supreme Court has held that meaning given by body of Accountants having statutory recognition can be adopted. So based on the accounting standards, the petitioner was entitled to the claim. This judgment was rendered by the Apex Court only on 05-05-2014 and the copy of the income tax report reporting this case was received only on 07-06-2014. According to the assessee, the delay occurred due to reasons beyond assessee's control and there was no willful latches or omissions or neglect on the part of the assessee in filing the appeal within the due date. The assessee pleaded that if the delay was not condoned and the appeal not admitted, it would cause serious and irreparable hardship and monetary loss to the assessee.
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The Ld. DR has not raised any serious objection for condonation of delay in filing the appeal by the assessee.
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We have heard both the parties and perused the record. We find that there exists reasonable cause for not filing the appeal in time and the reasons advanced by the assessee for the delay are bona fide. Being so, we condone the delay in filing the appeal by the assessee and admit the appeal for adjudication.
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Regarding the first issue relating to re-opening of assessment, the Ld. AR submitted that the only reason recorded is that agricultural income reduced from the net profit is Rs. 81,47,859/- in place of Rs. 5,229 in normal computation. Section 115JB stipulates that the amount of income to which the provisions of sec. 10 applies can be reduced from the net profit only if such amount is credited to the P & L account. No agricultural income was credited to the P & L account other than Rs. 5,228/- included in the other income. Correct computation of book profit was Rs. 1,04,79,620/-.
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The Ld. AR submitted that the limited objection was that the sum substracted as agricultural income was not credited to the P & L account, as such this figure could not be substracted from the net profit. Being so, the Ld. AR submitted that if the amount of Rs. 81,47,859/- was credited to P & L account, he reasons recorded cannot survive and the notice under section 148 would be without authority of law. According to the Ld. AR, there was no case for the AO that it was not agricultural income but the case was only that it was not credited to P & L account.
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The Ld. AR submitted that the CIT(A) referred to the Revenue's stand that profit or loss on the disposal of an asset was to be duly incorporated in the profit and loss account of a company prepared in accordance with Parts II & KKK of Schedule VI to the Companies Act, 1956, the net profit per which is to be adopted by it for computing the 'book profit' under the MAT provisions including 115JB. As such there was no basis for excluding the profit derived from the sale of its agricultural land outside the Municipal limits and was exempt income under section 10. The Ld. AR submitted that the CIT(A) relied on the order of the Cochin Bench of the Tribunal in the case of Harrisons Malayalam Ltd. in I.T.A. No. 54/Coch/2009 and 60/Coch/2009 dated 12-05-2009 wherein it was held that profit accounted on sale of agricultural land namely Rubber Estate was not to be considered for the purpose of computing book profit under section 115JB of the Act. Accordingly, the CIT(A) held that the income was agricultural income and deleted the addition of Rs. 23.69 lakhs. Admittedly, the amount was credited to the P & L account and was eligible for deduction. According to the Ld. AR, the order of the CIT(A) proved that the reasons recorded was based on wrong assumption of facts.
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The Ld. AR submitted that the notice issued under section 148 was on wrong assumption of facts that the sale of Kumarakam property was disclosed in the P & L account, being so, the notice was liable to be quashed in view of the judgment of the Rajasthan High Court in the case of Khem Singh Sankhla vs. Union of India (266 ITR 485) wherein it was held that reasons based on wrong assumption of facts that certain income were disclosed amounts, and other alleged reasons which appear to have been interpolated without the initial of any officer could not be accepted as valid reasons for issuance of notice under section 148 and the impugned notice was quashed. According to the CIT(A), the notice under section 148 was also liable to be quashed also in view of the judgment of the Bombay High Court in the case of Siemens Information System Ltd. vs. ACIT (2007) (293 ITR 548) holding that when notice under section 148 is issued based on a non-existing reasons and had been issued under the mistaken belief, notice was not valid since there was total non application of mind and notice was based on that reasons would amount to non application of mind.
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The Ld. AR submitted that the case of AO was only that the law does not require AO to limit himself to only the ground on which assessment was reopened. The Ld. AR relied on the judgment of Apex Court in the case of CIT vs. Sun Engineering Works P. Ltd. (1992) (198 ITR 297) wherein it was held that in proceedings under section 147, the AO may bring to charge items of income which had escaped assessment other than or in addition to that item or items which led to the issuance of...
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