Ita/1036/2017 Of Gmr Infrastructure Limited v. The Dy. Commissioner Of Income-Tax

IN THE HIGH COURT OF KARNATAKA AT BENGALURUDATED THIS THE 6TH DAY OF JULY 20271 PRESENT| THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’BLE MR.JUSTICE HEMANT CHANDANGOUDAR.ILT.A. NO.1036 OF 2017 BETWEEN: GMR INFRASTRUCTURE LIMITEDNO.25/1, SKIP HOUSE.MUSEUM ROAD, BANGALORE-560025|REPRESENTED BY ITS MANAGING DIRECTOR.SRI. G. KIRAN KUMARAGED ABOUT 42 YEARS. ... APPELLAN[> (BY SRI. BALRAM R. RAO, ADV.,) AND* THE DY. COMMISSIONER OF INCOME-T AXCENTRAL CIRCLE-2(2)3RD FLOOR, C.R. BUILDINGQUEENS ROAD, BANGALORE-5S60001. ... RESPONDENT (BY SRI. K.V. ARAVIND, ADV.,) THIS I.T.A. IS FILED UNDER SECTION 260-A OF I.T.ACT,|1961L ARISING OUT OF ORDER DATED 28.0/7.20L/7 PASSED IN INO.1895/BANG/2016, FOR THE ASSESSMENT YEAR 2007-08,PRAYING TQ: I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED.ABOVE. II]. ALLOW THE APPEAL AND SET ASIDE THE ORDER OF THEINCOME-TAX APPELLATE TRIBUNAL DATED 28.07.2017 BEARING.IN ITA NO.1895/BANG/2016 FOR THE ASSESSMENT YEAR 2007-08.& ETC. THIS I.T.A. COMING ON FOR FINAL HEARING, THIS DAY,|ALOK ARADHE J.,DELIVERED THE FOLLOWING: | JUDGMENT This appeal under Section 260A of the Income Tax Act,1961 (hereinafter referred to as ‘the Act’, for short) has been|filed by the assessee against the order dated 28.07.2017passed by the Income Tax Appellate Tribunal (nereinafterreferred to as ‘the tribunal’ for short). The subject matter oftne appeal pertains to the Assessment Year 2007-08. Theappeal was admitted by a Bench of this Court vide orderdated 28.01.2019 on the following substantial questions oflaW! "a) Whether, on the facts and in thecircumstances of the case and in law, the tribunalwas right in holding tnat the Appellant is notentitled to raise a fresh claim during theassessment proceedings under section 153A ofthe Act pursuant to searcn action under section137 of the Act? D)Whether, on the facts and in the|circumstances of the case and in law, the Tribunal was Justified in confirming the decision ofcommissioner of Income-tax (Appeals) order andtherebyupholdingthedisallowanceOf|Rs.4,94,32,158/- under section 14A of the Act?” 2. Facts leading to filing of this appeal briefly stated aretnat the appellant is a Company incorporated under theCompanies Act, 1956 and is engaged in promotion ofinfrastructure developments. The appellant filed its return ofincome for the Assessment Year 2007-08 declaring returnedloss of Rs.5,87,56,498/- under normal provisions andnegative book profit of Rs.9,18,53,/36/- as per the|provisions of Section 115JB of the Act. An order of|assessment was passed under Section 143(1) of the Act on15.01.2009. fJnereafter, an application was filed underSection 154 of the Act before the Assessing Officer pointingout the discrepancy in the snort grant of TDS credit to theextent of Rs.8,79,156/-. An order of rectification was passedon 13.07.2010 by which refund of a sum of Rs.10,55,000/-was granted. Ihereafter, a searcn and seizure operationunder Section 1327 of the Act was initiated on 11.10.2012 anda notice under Section 153A of the Act was issued on! 17.02.2014. The appellant filed a letter requesting to treat|the original return of income filed on 31.10.2017 under|Section 139(1) of the Act as returned income in response tonotice under Section 153A of the Act. JTnereafter, noticesunder Sections 143(2) and 142(1) was issued to theassessee on O1.0/.2014. Anotner notice under Section|142(1) of the Act was issued on 16.02.2015 by which theassessee was required to furnish various details. Theassessee filed detailed reply to the notices on 25.02.2015|and 03.03.2015. The Assessing Officer thereafter passed anorder on 19.03.2015 by which following disallowances weremade by the Assessing Officer: (1)Additional disallowanceMadeUnderSection 14A of the Act of Rs.13,80,57,241/-|(Rs. 18,74,89,400/- less Rs.4,94,32,159/- and (11) Disallowance of claim madeUnderSection 37(1) of Rs.1,08,333/- being expenaiture|on account of club membership fees. (1)Additional disallowanceMadeUnderSection 14A of the Act of Rs.13,80,57,241/-|(Rs. 18,74,89,400/- less Rs.4,94,32,159/- and (11) Disallowance of claim madeUnderSection 37(1) of Rs.1,08,333/- being expenaiture|on account of club membership fees. 3. The Assessing Officer determined the total income atRs.Nilas|againsttneamountsof.returned.10SS OT Rs.5,87,56,498/- under normal provisions of the Act. The Assessing Officer, in the order of assessment made theinterest and administrative expenses under Section 14A ofthe Act to the extent of Rs.18,/74,89,400/- by reference tothe formula prescribed under Rule 80D of the Income TaxRules. The Commissioner of Income Tax (Appeals) affirmedtne order passed by the Assessing Officer. Tne assesseethereupon filed an appeal before the Tribunal. The Tribunal,|by order dated 28.07.2017, nas dismissed the appeal. In theaforesaid factual background, this appeal has been filed. 4 Learned counsel for the assessee submitted that the|Tribunal erred in not appreciating the|SUO motudisallowance|only made by the appellant out of abundant caution,|consideringSimilar|disallowance.made.intheDast|Assessment Years as there were no precedents. It is furthersubmitted that the Tribunal ought to have taken into accountthe well settled legal principle that the Assessing OfficerShould determine the taxable income of the assessee under|the Act as per the prevalent law and judgments which areapplicable to the fact situation of the case. Learned counselfor the assessee also placed reliance on the circular dated 11.04.1955 issued by the Central Board of Direct Taxes aswell as the decisions of Delhi High Court in"CIT Vs. BHARATALUMINIUM CO. LTD.' 163 TAXMAN 430and‘CIT Vs.JAI PARABOLIC SPRINGS LTD.’ 172 TAXMAN 258.It is.also submitted that tne Tribunal ougnt to Nave held that|cGisallowance under Section 14A of the Act In relation to theindirect taxes should be restricted to 1% - 2% of thedividend income only and the Tribunal erred in confirming thecGisallowanceunderSection 144ACO an)extent.of.Rs.4,94,32,158/-. It is also urged tnat the Tribunal erred innot appreciating that having regard to the second proviso toSection 153A, the completed assessment cannot be disturbedonly in case where there is any undisclosed income found inthe course of search or any incriminating documentsdisclosing any undisclosed income. It is also urged that theTribunal erred in confirming the decision of the Commissionerof Income Tax (Appeals) and in upholding disallowance ofRs.4,94,32,158/- under Section 14A of tne Act. 5. On the other hand, learned counsel for the revenue)submitted that the Tribunal nas rigntly placed reliance on the decision of Rajasthan High Court in|JAI STEELS (INDIA)JODHPURVs.ACIT'|36|TAXMANN,COM527and.therefore,nosubstantialquestionof|law.arises|for.consideration. 6. We nave considered the SUDMISSIONS made on potn sides and nave perused the record. Tne Tribunal, by placingrellance on the decision of JAI STEELS, SUPTa, nas neld that.tne assessment or re-assessment made in pursuance to|Section 153A of the Act, is not ade novoassessment and|§therefore, it was not open to the assessee to claim and be|allowed such deduction or allowance of expenditure which it nad not claimed in the original assessment proceedings.whicn in the case of the assessee stood completed vide order|dated 15.01.2009 passed under Section 143(1) of the Act.Tne Tribunal, in our opinion, nas followed the decision of Rajasthan High Court and we confer the view taken by.Rajasthan High Court in.JAI STEELS, SUPTa. For the aforementioned reasons, the substantialquestions of law are answered against the assessee and in|favour of tne revenue. �������������������������������������������������������������������������������������� ������������������������ ���