2016 (5) TMI 1542 - AT - Income Tax

Accrual of income - Trading addition in the case of assessee on the same receipts as shown by JV partner - alternate statutory remedy for deletion of same income as provided by the law u/s 2 64 - HELD THAT - JV members are caught in a peculiar position as in case of M/s. KIEL for the assessment year 2008-09 the time limit for filing revised return u/s 139(5) had already been expired on 31.03.2010 whereas assessment in case of assessee joint venture was completed on 29.12.2010 thus M/s. KIEL could not file the revised return of income. Thus the income from contract activity awarded by the Railway Vikas Nigam Ltd. has already been taxed in case of M/s. KIEL and its further taxation in hands of the assessee unambiguously tantamount to taxing the same income twice which is impermissible and against the principle of equity and justice and well settled principle of avoiding unjust enrichment of state. JV constituent having taken over all the responsibilities regarding execution of the work including administrative and financial support etc. department also has not disputed the facts of Kiran Infra s being lead partner. In these circumstances it cannot be assumed that department taxed the income in wrong hand. The concept of accrual of income is considered in the case of E. D. Sassoon Co. Vs CIT 1954 (5) TMI 2 - SUPREME COURT wherein it was held that what was sought to be taxed must be income. As per the harmonious reading of JV agreement respective obligation the project income was accruable to said Kiran Infra. Since the income was already taxed in the hands of Kiran Infra there is no occasion to hold that it accrued to the assessee so as to tax it again. Thus the action of the AO to tax the assessee on the income already taxed in the hands of M/s Kiran Infra tantamount to double addition which is not permissible in law. The petition U/s 264 was filed by M/s Kiran Infra on 04.03.2011 before CIT-II Jaipur to avoid the hardship proposed by the department in taxing the assessee again. The approach of the department is incomprehensible as on one hand it accepted the assessment in the hands of Kiran Infra then it desired to tax assessee as a logical consequence Kiran Infra approached under a statutory provision of law to revise the order u/s 264. Sec. 264 being a statutory remedy is to be exercised with judicious approach. If the CIT rejects the petition it also implies that department accepts the assessment in the hands of Kiran Infra. Assessee s predicament is discernible since the petition U/s 264 had been rejected time to file the revised return had already expired on 31.03.2010 and the income stood taxed in the hands of M/s Kiran Infra Engineering Ltd. This left the assessee in a precarious situation of denying the legal remedy; consequently the impugned appeal became necessary. The department cannot insist on unjust enrichment by taxing twice the same income in the pretext of some technicalities. No infirmity in the order of ld. CIT(A) in deleting the assessment and impugned additions in the hands of the assessee. The order of ld. CIT(A) is upheld and revenue grounds are rejected.

Summary

Issues Involved:
1. Deletion of addition of ? 1,04,00,661/- made by the AO.
2. Admission of additional grounds of appeal by the revenue.
3. Justification of CIT(A) in deciding a belated appeal without a speaking order for condonation of delay.
4. Justification of CIT(A) in accepting the appeal after rejection of petition u/s 264 in the case of one JV partner.

Issue-wise Detailed Analysis:

1. Deletion of Addition of ? 1,04,00,661/- by CIT(A):
The revenue appealed against the CIT(A)'s order which deleted the addition of ? 1,04,00,661/- made by the AO. The assessee, a joint venture (JV) consisting of three companies, formed to bid for a project by Rail Vikas Nigam Ltd. The lead partner, M/s Kiran Infra Engg. Ltd. (KIEL), executed the project and declared the income in its return. The AO, however, assessed the same income in the hands of the JV, leading to double taxation. The CIT(A) deleted the addition, holding that taxing the same income twice is against the fundamental principles of income tax, equity, and justice.

2. Admission of Additional Grounds of Appeal by Revenue:
The revenue filed an application to admit additional grounds of appeal, arguing that these were purely legal and necessary for proper disposal of the appeal. The Tribunal admitted the additional grounds after hearing both parties.

3. Justification of CIT(A) in Deciding Belated Appeal Without Speaking Order for Condonation of Delay:
The revenue contended that the first appeal was filed belatedly and the CIT(A) did not expressly condone the delay. The Tribunal found merit in the assessee's contention that the delay was due to pursuing an alternate statutory remedy u/s 264 by the lead partner KIEL. The CIT(A) had advised the assessee to seek other legal remedies, making the delay justifiable. Consequently, the Tribunal dismissed this additional ground of the revenue.

4. Justification of CIT(A) in Accepting Appeal After Rejection of Petition u/s 264:
The revenue argued that the appeal was not maintainable as the issue was already decided u/s 264 in the case of the lead partner KIEL. The Tribunal found that the 264 order was passed in the case of KIEL and not the assessee JV. Hence, the technical bar raised by the revenue was not applicable to the assessee JV. The Tribunal dismissed this additional ground as well.

Merits of the Case:
The Tribunal upheld the CIT(A)'s detailed order, which considered all relevant facts and documents. The CIT(A) found that the entire project was executed by KIEL, which declared the income in its return, leaving no income in the hands of the JV. The Tribunal agreed that taxing the same income twice was not permissible in law, citing the principle of real income and avoiding double taxation. The Tribunal also noted that the department's approach was inconsistent, as it accepted the assessment in KIEL's hands while attempting to tax the JV for the same income.

Conclusion:
The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s order to delete the addition of ? 1,04,00,661/- in the hands of the JV, thereby preventing double taxation. The Tribunal found no infirmity in the CIT(A)'s decision and rejected the revenue's grounds. The order was pronounced in the open court on 19/05/2016.