Jharkhand High Court
The Principal Commissioner Of ... vs M/S. Urmila Rcp Projects Pvt. Ltd. on 21 February, 2023
1
IN THE HIGH COURT OF JHARKHAND AT RANCHI
Tax Appeal No. 34 of 2020
The Principal Commissioner of Income Tax, Ranchi, Central Revenue
Building, 5A, Main Road, Ranchi, P.O.-G.P.O and P.S. Kotwali,
District-Ranchi. .... Appellant
Versus
M/s. Urmila RCP Projects Pvt. Ltd., RCP Complex, Kadru, P.O. & P.S.-
Kumhartoli Road, District-Ranchi. ..... Respondent
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CORAM: Hon'ble Mr. Justice Aparesh Kumar Singh
Hon'ble Mr. Justice Deepak Roshan
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For the Appellant : Mr. Ratnesh Nandan Sahay, Sr.S.C.
For the Respondent : M/s. Biren Poddar, Sr. Adv., Mahendra Choudhary,
Piyush Poddar, and Manav Poddar, Advocates
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5/21.02.2023 Heard learned counsel for the parties.
2. The instant appeal is directed against the Common Order dated
20.01.2020 passed by the learned Judicial Member, Income Tax
Appellate Tribunal, Ranchi (hereinafter to be referred as 'ITAT') in the
case being I.T.A No. 30/RAN/2017 for the Assessment year 2012-13,
whereby the learned ITAT has allowed the appeal of the respondent
assessee on merit by reversing the order of the CIT appeal.
3. The brief facts of the case lies in a narrow compass. On
30.09.2012 Assessee (respondent) filed return of income showing total
income of Rs.1,23,66,979/-. On 17.03.2015, assessment u/s 143(3) was
completed on total income of Rs.2,70,52,200/- making addition under 4
different heads total amounting to Rs. 1,99,25,726/-, inter alia,
disallowance of "Retention Money Deposit & Security Deposit"
amounting to Rs. 1,07,35,595/-.
Being aggrieved, Assessee filed an appeal before CIT(A).
On 04.10.2016, the CIT(A) allowed the appeal on other additions and
dismissed the appeal filed by the Assessee on disallowance of "Retention
Money deposit & Security Deposit" amounting to Rs. 1,07,35,595/-.
Thereafter, the Respondent-Assessee filed appeal before the learned
ITAT. The learned ITAT vide its common order dated 20.01.2020
allowed the appeal of the Assessee and the aforesaid disallowance of
Expenditure of Rs. 1,07,35,595/- on account of Security Deposit,
Retention Money deposit etc. was deleted.
On 04.09.2020, instant tax Appeal No.34 of 2020 has been filed
by the Revenue before this Court against the deletion of aforesaid
amount of Rs. 1,07,35,595/- on account of Security Deposit, Retention
Money deposit etc.
3. During course of proceedings, the respondent-Assessee has
raised a preliminary objection with regard to maintainability of this
appeal on the ground of tax effect as in view of Circular No. 3/2018
dated 11.07.2018 the monetary limit for filing appeal under 260A of the
Income Tax Act, 1961 shall be 1,00,00,000/- and above.
Pursuant to the aforesaid preliminary objection, learned counsel
for the appellant filed a supplementary affidavit on 11.07.2022 stating
therein that the instant appeal comes under exception as enumerated in
the aforesaid circular vide Clause No.10(C) i.e. "where revenue audit
objection in the case has been accepted by the department." annexing
therewith a Annexure-3 being letter dated 12.09.2017 written by Dy.
Commissioner of Income Tax, Circle-1, Ranchi to the Jt. Commissioner
of Income Tax, Range-1, Ranchi wherein it was stated "The case of the
assessee has been reopened under section 147 of the Act. Notice under
sections 147 and 148 has been issued on 11.08.2017 and also copy of
"Para-5, Excess allowance of business loss" being audit objection in this
case for this year.
The Respondent-assessee filed a reply/rejoinder on 05.12.2022
stating therein that the appellant IT department has filed the
Supplementary Affidavit in reply stating therein at paragraph 5 that the
audit objection of the Revenue Audit Department was sent to the CIT,
Ranchi for its approval and same was duly approved, relying upon the
letter dated 12.09.2017 (Annexure-3) written by the Assessing Officer,
Dy. Commissioner of Income Tax Circle-1 Ranchi to the Jt.
Commissioner of Income Tax, Ranchi, but a perusal of the said letter
shows that the same was not issued by CIT, Ranchi justifying the
approval. The Respondent further stated that in the aforesaid audit
objection, notice u/s 148 was issued on 11.08.2017 for disputed issue - in
respect of Excess allowance of business loss of Rs. 59,41,801/-
(Anenxure-3). Whereas in the instant Tax Appeal the disputed issue is in
respect of different issue of Rs. 1,07,35,959/- in respect of disallowance
of expenses under the head 'Retention Money Deposit and Security
Deposit'. As such in the instant tax appeal there is no relevance of the
aforesaid Audit Objection and the instant Tax Appeal is not hit by the
aforesaid audit objection as stated by the appellant IT department in its
supplementary affidavit.
Learned counsel for the appellant further filed 2nd supplementary
affidavit on 12.01.2023 annexing therewith the photocopy of the Order
passed u/s 263 on 09.01.2015 for the earlier Assessment year 2010-11
wherein the case of Assessment year 2010-11 was reopened by the CIT,
Ranchi on the ground of "Security Deposit & other deduction charged in
the P & L account as an expenses and as an income in the P & L
account." No order u/s 263 was passed for the year under consideration.
Thereafter, learned counsel for the appellant further filed 3rd
supplementary affidavit on 14.02.2023 annexing therewith the photocopy
of Central Scrutiny Report prepared by the Income Tax Department for
filing Appeal u/s 260A of the Income Tax Act before this Hon'ble High
Court wherein it has been mentioned by the Pr. Commissioner of Income
Tax, Ranchi in the background of the case that "At the instance of
objection raised by the Audit Team, the accessing officer accepted the
same and submitted a proposal for action u/s 263 of the I.T. Act. The Pr.
CIT, Ranchi passed an order dated 09.01.2015 u/s 263 of the I.T. Act
thereby setting-aside the original assessment order passed by the AO for
passing denovo assessment on the ground of Retention Money Deposit
and Security Deposit debited in the Profit and Loss Account."
4. Mr. R. N. Sahay, Sr. standing counsel for the revenue submits
that though for the Audit objection was raised for the three years
Assessment Year 2010-11, 2012-13 and 2013-14 and for the Assessment
year 2010-11 the auditor's objection of the revenue audit objection was
not accepted by the then assessing officer, however, for approval of the
same, the matter was sent to CIT, Ranchi. Thereafter, the CIT appeal
after going through the records proceeded to decide the matter under
Section 263 of the IT Act. Learned counsel contended that Assistant
Commissioner of Income Tax was not empowered to decide about the
audit objection and therefore the matter was sent to the CIT for
approval and since the CIT has proceeded to decide the case under
Section 263 of the Income Tax Act, it is presumed that audit objection
was accepted. Accordingly for the year under consideration i.e. for
Assessment year 2012-13 the disallowance was made relying upon the
same Audit Objection and the present appeal is not hit by Tax Effect.
5. Mr. Biren Poddar, learned senior counsel for the respondent-
assessee vehemently opposed the submission of learned counsel for the
revenue and submits that audit objection was not accepted by the revenue
even in the Assessment year 2010-11 and though the CIT had initiated
the proceeding under Section 263, but it never referred to the audit
objection and passed the order on other grounds. Moreover, in the
aforesaid audit objection, notice u/s 148 was issued on 11.08.2017 for
disputed issue in respect of Excess allowance of business loss of Rs.
59,41,801/- (Anenxure-3). Whereas in the instant Tax Appeal the
disputed issue is in respect of Rs. 1,07,35,959/- in respect of
disallowance of expenses under the head 'Retention Money Deposit and
Security Deposit'. As such in the instant tax appeal there is no relevance
of the aforesaid Audit Objection and the instant Tax Appeal is not hit by
the aforesaid audit objection as stated by the appellant IT department in
its Supplementary Affidavit. As such, it will be incorrect to say that audit
objection was accepted.
Learned senior counsel for the assessee further contended
that the instant appeal may be dismissed as not maintainable in view
of the Board's own circular fixing the monetary limit to file appeal
under 260A to the Act before the High Court.
6. In view of the preliminary objection we are deciding the instant
appeal at the admission stage itself. The sole point for consideration in
the instant appeal at this stage is "whether the appeal filed by the
revenue comes under the exception clause as enumerated in circular no.
3/2018 dated 11.07.2018"
7. Having heard learned counsel for the parties and after going
through the documents available on record and the different circulars
whereby monetary limit for filing appeal under 260A of the Income Tax
Act, 1961 has been fixed; it appears that in exercise of powers
conferred under section 268A of the Income Tax Act, 1961, the Central
Board of Direct Taxes (CBDT), vide its Circular No.3/2018 dated
11.07.2018 read with Circular No. 17/2019 [F. No. 279/MISC. 142/2007-
ITJ (PT.)], dated 08.08.2019 has fixed a monetary limit of tax effect of
Rs.1,00,00,000/- for filing appeal u/s 260A of the Act by the Income tax
department before the High Courts.
8. It is relevant to note here that we have in Tax Appeal No. 32 of
2020 between the same appellant and respondent for the Assessment
year 2010-11, vide our Order No. 12 dated 14.02.2023 have held at
paragraph Nos. 9 to 11 as under :-
"4. Clause (C) of para 10 of the aforesaid Circular No.3/2018
dated 11.07.2018 (Annexure-A) specifically provides that
adverse judgment should be contested on merits notwithstanding
with tax effect, where revenue audit objection in the case has been
accepted by the department. The appellant Revenue has filed the
supplementary affidavit stating therein at paragraph 6 thereof that
the Audit Objection in the case has not been accepted by the CIT,
Ranchi by Letter dated 14.02.2014 (Annexure-3) but a perusal of
the said letter shows that the same was not issued by CIT, Ranchi,
but was written by the Assessing Officer i.e. Asstt. Commissioner
of Income Tax, Ranchi. The last paragraph of the aforesaid letter
dated 14.02.2014 (Annexure-3) is as under:
"Since the security deposit has been taken by the
assessee in his accounts appropriately, and there is no revenue
loss in this regard, the audit objection raised by the Revenue audit
is not acceptable. But, since, tax effect in this case was more than
Rs.2,00,000/-, hence as per para- 3.2(a) of the instruction No. 09
of 2006 and instruction No. 16 of 2013 of the CBDT, New Delhi,
necessary direction from the Commissioner of the Income Tax was
sought. The Commissioner of Income Tax, Ranchi directed the A.O
to send the proposal for revision of assessment u/s 263 of the I.T.
Act, 1961. As per direction of the Commissioner of Income Tax,
Ranchi proposal for revision of assessment u/s 263 has been
submitted."
From bare perusal of the aforesaid paragraph it is clear
that the Audit Objection was not accepted by the department.
However, Commissioner of Income Tax, Ranchi directed the AO
to send the proposal of Revision u/s 263 of the Act and
accordingly such proposal was submitted by the AO i.e. Asstt.
Commissioner of Income Tax, Ranchi for the reason that tax effect
in the said case was more than Rs. 2,00,000/-.
It is not a case that the Revenue Audit Objection was
accepted by the department on the issue of allowance of
expenditure in respect of Retention Money and Security Deposit
and the proposal for revision of the case u/s 263 was sent because
of the reason that the tax effect was more than Rs.2,00,000/-. It has
been clearly mentioned in the said letter by the Assessing Officer
that- "since, the Security deposit has been taken by the assessee in
his accounts appropriately, and there is no revenue loss in this
regard, the audit objection raised by the revenue audit is not
acceptable."
4. Further, from perusal of the first paragraph of the Assessment
order u/s 143(3) read with Section 263 passed on 30.03.2016
(Annexure-1) it would transpire that the assessment order in the
instant appeal has been passed since an order u/s 263 dated
09.01.2015 was passed by the Commissioner of Income Tax,
Ranchi setting aside the original Assessment Order passed earlier
by the AO, on the grounds mentioned in the said Annexure-1. It is
no where mentioned that the said Assessment Order u/s 143(3)
read with Section 263 (Annexure-1) was passed due to any audit
objection having been accepted by the department. On the
contrary, the letter as contained in Annexure-3 annexed with the
supplementary affidavit under reply, shows that the audit objection
raised by the revenue audit against the Original Assessment Order
was not accepted by the Assessing Officer.
As a matter of fact, there is no mention of any Audit
Objection in any of the orders and/or communication issued by the
department to the Respondent assessee and /or brought to the
notice of ITAT by the department at the time of hearing before it
which took place on 07.11.2019 as mentioned in the ITAT order
itself at page 32 of the memo of appeal. Further the instant
memo of appeal was filed by the department on 26.08.2020
wherein also nothing has been mentioned about any Audit
objection having been accepted by the department at any point of
time, but in the supplementary affidavit under reply filed on
11.07.2022 for the first time the department has stated about Audit
Objection.
5. It is reiterated that from perusal of Annexure-3 annexed
with the supplementary affidavit under reply, it has been clearly
stated that "Since the security deposit has been taken by the
assessee in his accounts appropriately, and there is no revenue
loss in this regard the audit objection raised by the Revenue audit
is not acceptable." Thus, it is clear from Annexure-3 to the
supplementary affidavit filed by the appellant dated 11.07.2022
that the audit objection raised by revenue audit was not acceptable
to the appellant. However, since the Assistant Commissioner of
Income Tax was not empowered to decide on the audit objection
the file was sent for approval to the Commissioner of Income Tax.
It further transpires that the Commissioner of Income Tax instead
of accepting the audit objection proceeded to initiate a proceeding
under Section 263 and finally passed an order under the said
section as according to him the original assessment order passed
by the AO was erroneous in so far as it was prejudicial to the
interest of revenue."
9. In the case at hand, the appeal filed by the revenue in the year
2020 against the impugned order dated 20.01.2020, for Assessment
Year: 2012-13 appears to be not maintainable and liable to be
dismissed in limine, as the amount of disputed issue in the aforesaid
Tax Appeal is 1,07,35,595/- and the amount of tax in dispute on the
said disputed issue is Rs.34,83,281/- only (As stated by the appellant
in its 3rd supplementary affidavit) which is much below of Rs.
1,00,00,000/- and the alleged Audit Objection is in respect of "Excess
allowance of business loss' and not in respect of "Retention Money
Deposit & Security Deposit". Therefore, in view of the aforesaid
Circulars (Annexure-A & A/1 issued by CBDT) and also in view of
the settled proposition of law in this regard, the instant appeal filed by
the department is otherwise not maintainable and therefore liable to
be dismissed in limine.
10. Thus, it is crystal clear that on the one hand the tax effect in
the instant case is much below the monetary limit as enumerated in
Circular No. 3/2018 read with Circular No. 17 of 2019 and on the
other hand none of the exception clause much less the audit objection
is involved in this case and as such, we are having no hesitation in
dismissing this appeal on the question of maintainability itself.
Consequently, the instant appeal is dismissed at the admission
stage itself. However, there is no order as to costs.
(Aparesh Kumar Singh, J.)
(Deepak Roshan, J.)
Amardeep/
