ITO Vs Lorven Projects Limited (ITAT Hyderabad)
ITAT Hyderabad: Rule 27 Cannot Be Used to Raise New Jurisdictional Challenge; Release Deed Issue Remanded for Verification of Loss Claim
The Hyderabad Bench of the Income Tax Appellate Tribunal, Hyderabad Bench dealt with Revenue’s appeal and the assessee’s Rule 27 application for AY 2015-16 in the case of Lorven Projects Ltd.
The assessee attempted to challenge the validity of the assessment by invoking Rule 27, contending that NFAC lacked jurisdiction as notices were issued prior to the CBDT notification conferring such powers. The Tribunal rejected this plea, holding that Rule 27 can only be used to support the CIT(A)’s order on grounds decided against the respondent, and not to introduce an entirely new legal issue that was neither raised nor adjudicated before the CIT(A).
On merits, the AO had treated ₹3.58 crore (reflected in Form 26AS with TDS) as business income arising from sale of land, whereas the assessee claimed that its 50% share in the land was released in favour of the co-owner through registered release deeds without consideration. The CIT(A) deleted the addition, holding that there was no evidence of receipt of consideration, disallowed the corresponding TDS credit, and observed that section 56(2)(vii)(b) could apply in the hands of the releasee.
The Tribunal noted that while deletion of the addition based solely on Form 26AS was justified, the CIT(A) failed to examine the assessee’s books and the allowability of development expenditure and loss claimed, especially when the land (treated as stock-in-trade) was released without consideration. Accordingly, the order of the CIT(A) was set aside on this limited aspect and the matter was remanded to the AO for proper verification after granting due opportunity to the assessee.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
