M/s. Shahenshah Apparels and Accessories Pvt.Ltd,(formerly known as Selling Services Pvt.Ltd), Pune V. Deputy Commissioner of Income tax, Pune

CO 12/PUN/2017

• Counselvise Citation: [2017] 119 COUNSELVISE.COM (IT) 3505 (ITAT-PUNE)
• Duration Of Justice: 5 month(s) 2 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 09-08-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 07-03-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: HARI KRISHAN
• Keywords: Search and seizure; Share purchase agreement; Additional evidence; Reasonable cause; Assessment record
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI D. KARUNAKAR A RAO, AM . / ITA NO.344/PUN/2016 / ASSESSMENT YEAR : 2004-05 DCIT, CIRCLE-6, PUNE . APPELLANT VS. M/S. SANSHAH SELLING SERVICES PVT. LTD., 3 RD FLOOR, TOWER E, TECH PARK-I, NEAR DON BOSCO HIGH SCHOOL, YERAWADA, PUNE 06 PAN : AAFCS1431H . RESPONDENT C.O. NO.12/PUN/2017 (ARISING OUT OF ITA NO.344/PUN/2016) / ASSESSMENT YEAR : 2004-05 M/S. SHAHENSHAH APPARELS AND ACCESSORIES PVT. LTD., (FORMERLY KNOWN AS SANSHAH SELLING SERVICES PVT. LTD., 3 RD FLOOR, TOWER E, TECH PARK-I, NEAR DON BOSCO HIGH SCHOOL, YERAWADA, PUNE 06 PAN : AAFCS1431H . APPELLANT VS. DCIT, CIRCLE-6, PUNE . RESPONDENT ASSESSEE BY : SHRI HARI KRISHAN REVENUE BY : SHRI ACHAL SHARMA, ADDL.CIT DATE OF HEARING : 01.08.2017 / DATE OF PRONOUNCEMENT: 09.08.2017 / ORDER PER D. KARUNAKARA RAO, AM : THERE ARE REVENUES APPEAL AND A CO UNDER CONSIDERA TION. ITA NO.344/PUN/2016 IS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-12, PUNE DATED 14-12-2015 AND CO NO.12/PUN/2017 IS FILED BY THE AS SESSEE WITH THE DELAY OF 330 DAYS. ITA NO.344/PUN/2016 & CO NO.12/PUN/2017 M/S. SANSHAH SELLING SERVICES PVT. LTD. 2 2. IN CONNECTION WITH THE CROSS OBJECTION, ASSESSEE FILED AN APPLICATION FOR CONDONATION OF DELAY. LD. COUNSEL FOR THE ASSESSEE READ OUT THE CONTENTS OF PARA NO.7 AND REQUESTED FOR CONDONING THE SAID DELAY OF 330 DAYS. THE SAID PARA NO. 7 READS AS UNDER : 7(A) THE IST NOTICE OF HEARING OF THE APPEAL FILED BY THE REVENUE WAS RECEIVED BY THE ASSESSEE ON 07 TH MARCH, 2016. ACCORDINGLY, THE CROSS OBJECTIONS BY THE ASSESSEE WERE REQUIRED TO BE FILLED ON OR BEFORE 6 TH APRIL, 2016. THE CROSS OBJECTIONS, HOWEVER, HAVE BEEN FILED ON 03 RD MARCH, 2017. THUS, THERE IS A DELAY OF 330 (THRE E HUNDRED AND THIRTY) NUMBER OF DAYS IN FILING OF THE CROSS OBJECTIONS BY THE ASSESSEE. (B) THE CROSS OBJECTIONS COULD NOT BE FILED EARLIER BECAUSE, THE MATTER WAS NOT APPRECIATED BY THE ASSESSEE FROM THIS PERSPECTIVE, AS THE ASSESSEE IS NOT EXPERT IN THE INCOME TAX APPEAL RELATED MATTERS. THE MATTER HAS BEEN NOW APPRECIATED FROM THIS PERSPECTIVE BY OUR COUNSEL, WHEN HE SAT DOWN T O PREPARE THE APPEAL AND THE PAPER BOOK FOR THIS APPEAL. ACCORDINGLY, ON RECEIV ING THE ADVICE FROM OUR COUNSEL ON 28-02-2017, WE HAVE IMMEDIATELY TAKEN STEPS TO FILE THE CROSS OBJECTIONS. 3. FROM THE ABOVE, THE REASONS GIVEN BY THE ASSESSE E ARE VERY GENERAL AND SAME FALLS SHORT OF THE MEANING OF THE REASONABLE CAUSE . THE ASSESSEE TRIED TO PLEAD HIS INNOCENCE IN TAX MATTERS WHEN HE IS ACTUALLY ASSIST ED BY THE ABLE COUNSELS. CONSIDERING THE SAME, WE ARE OF THE OPINION THAT IT IS NOT A FIT CASE FOR CONDONING THE DELAY. ACCORDINGLY, THE DELAY IN FILING OF THE CRO SS OBJECTION IS NOT CONDONED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED AS NOT MAINTAINABLE. 4. IN THE RESULT, THE CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED. ITA NO.344/PUN/2016 (BY REVENUE) : 5. THE GROUNDS RAISED BY THE REVENUE IN THE APPEAL READS AS UNDER : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF INTEREST FROM INCOME FROM HOUSE PROPERTY. 2. WHETHER THE LD.CIT(A) WAS CORRECT IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF CAPITAL LOSS ON SALE OF IMMOVABLE P ROPERTY MADE BY THE ASSESSING OFFICER. ITA NO.344/PUN/2016 & CO NO.12/PUN/2017 M/S. SANSHAH SELLING SERVICES PVT. LTD. 3 6. BRIEFLY STATED RELEVANT FACTS ARE THAT THE ASSES SEE BELONGS TO PANCHSHIL GROUP OF CASES. THERE WAS SEARCH AND SEIZURE ACTION U/S. 132 OF THE ACT ON THIS GROUP ON 11-09-2009. DURING THE COURSE OF ASSESSMENT PROCEE DINGS, THE AO NOTICED THE CLAIM OF INTEREST DEDUCTION AND CLAIM OF CAPITAL LOSS IN THE RETURN OF INCOME. AO COMPLETED THE ASSESSMENT DETERMINING THE TOTAL INCOME AT RS.4 ,42,841/- AGAINST THE RETURNED LOSS OF RS.47,100/-. AO DISALLOWED THE CAPITAL LOS S OF RS.1,16,33,586/- ALONG WITH THE CLAIM OF INTEREST EXPENDITURE TO THE EXTENT OF RS.9 ,47,731/-. THESE ARE THE ROUTINE DISALLOWANCES MADE BY THE AO WITHOUT HAVING ANY SUP PORT OR STRENGTH OF ANY INCRIMINATING MATERIAL GATHERED DURING THE SEARCH A CTION. THE ASSESSMENT WAS COMPLETED U/S.153A OF THE ACT ON 23-12-2011. THE R EGULAR ASSESSMENT APPEARS TO BE COMPLETED AND A NON-ABATED ASSESSMENT. NORMALLY , THE ABOVE REFERRED ROUTINE ADDITIONS ARE NOT PERMITTED TO BE MADE U/S.153A OF THE ACT IN CASE OF NON-ABATED ASSESSMENTS. 7. CIT(A) DELETED THE ABOVE REFERRED ADDITIONS AND THE REFERENCE TO THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT JUDGMENT IN THE CASE OF M/S. CONTINENTAL WAREHOUSING LTD. 374 ITR 645 AND THE SP ECIAL BENCH DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ALL CARGO GLOB AL LOGISTICS VIDE ITA NO.5022/MUM/2010 IS GIVEN IN THE ORDER. CONTENTS OF PARA 8.3 OF THE CIT(A) ARE RELEVANT. FROM THE SAID PARAGRAPH, IT IS EVIDENT T HAT THE CIT(A) AFTER CALLING FOR A REMAND REPORT FROM THE AO ON CERTAIN ADDITIONAL EVI DENCES HELD THAT THERE IS NO CASE FOR MAKING SUCH ADDITIONS. THEREFORE, HE DIRECTED THE AO TO ALLOW THE CLAIM OF CAPITAL LOSS. CONTENTS OF PARA 9 OF THE CIT(A)S D ECISION ARE RELEVANT. IN VIEW OF THE SAID RELIEF ON MERITS, THE CIT(A) DID NOT GO INTO T HE LEGAL ISSUE AND THEREFORE, HE DID NOT ADJUDICATE THE LEGAL ISSUE RAISED BY THE ASSESS EE RELATING TO THE REQUIREMENT OF THE INCRIMINATING MATERIAL IN CASES OF NON-ABATED A SSESSMENTS. FURTHER, REGARDING THE DISALLOWANCE ON ACCOUNT OF CLAIM OF INTEREST EX PENDITURE, THE CIT(A) APPRECIATED ITA NO.344/PUN/2016 & CO NO.12/PUN/2017 M/S. SANSHAH SELLING SERVICES PVT. LTD. 4 THE FACT THAT ASSESSEE HAS TOOK THE INTEREST FREE L OAN FROM RELATED PARTIES AND ALSO CONSIDERED AVAILABILITY OF SUFFICIENT INTEREST FREE FUNDS REQUIRED FOR MAKING INVESTMENTS. CONTENTS OF PARA 7.3 GIVES THE FINDIN G ON THIS ISSUE. THUS, THE CIT(A) DECIDED BOTH THE ISSUES ULTIMATELY IN FAVOUR OF THE ASSESSEE. 8. BEFORE US, IN CONNECTION WITH THE CROSS OBJECTIO NS FILED BY THE ASSESSEE, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT, IF THE CO FILED BY THE ASSESSEE IS DISMISSED AS NOT MAINTAINABLE DUE TO THE DELAY IN FILING THE SAME, IT WAS ADVOCATED THAT HE MAY BE PERMITTED TO RAISE LEGAL ISSUE RELATING TO THE R EQUIREMENT OF INCRIMINATING MATERIAL FOR MAKING ADDITIONS. FURTHER, HE BROUGHT OUR ATTE NTION TO THE ASSESSMENT ORDER (PARA 3) AND MENTIONED THAT THE BASIS FOR DISALLOWA NCE OF CAPITAL LOSS AND INTEREST EXPENDITURE IS ONLY THE CONTENTS IN THE RETURN OF I NCOME AND NO INCRIMINATING MATERIAL IS EITHER REFERRED OR DISCUSSED IN BOTH OR DERS OF THE AO AND THE CIT(A). REFERRING TO THE ABOVE MENTIONED BINDING JUDGMENTS (SUPRA), LD. COUNSEL FOR THE ASSESSEE SUGGESTED THE ADDITIONS MADE BY THE AO ON BOTH THE COUNTS SHOULD BE DISMISSED AS THEY ARE ROUTINE ADDITIONS, WHICH ARE NOT SUPPORTED BY ANY INCRIMINATING DOCUMENTS. FURTHER, LD. AUTHORISED R EPRESENTATIVE SUMMED UP BY STATING THAT THE DECISION OF CIT(A) GIVEN IN PARA 7 .3 (REGARDING INTEREST DISALLOWANCE) AND IN PARA NO.8.3 (REGARDING CAPITAL LOSS) IS FAIR AND IT SHOULD BE AFFIRMED WITHOUT ANY CHANGES. 9. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATI VE FOR THE REVENUE RELIED HEAVILY ON THE ORDER OF THE AO AND ARGUED FOR REVER SING THE DECISION OF CIT(A) ON BOTH THE ISSUES. HE ALSO BASED THE LEGAL GROUND OR ALLY RAISED TO THE INCRIMINATING MATERIAL BASED ADDITIONS. 10. WE HEARD BOTH THE PARTIES ON BOTH THE ISSUES RA ISED BEFORE US. SO FAR AS THE ADDITIONS MADE ON ACCOUNT OF INTEREST DISALLOWANCE AND CAPITAL LOSS DISALLOWANCE ARE ITA NO.344/PUN/2016 & CO NO.12/PUN/2017 M/S. SANSHAH SELLING SERVICES PVT. LTD. 5 CONCERNED, IT IS AN UNDISPUTED FACT THAT THERE IS N O INCRIMINATING MATERIAL PERTAINING TO THE SAID ADDITIONS AND THE ASSESSEE. THE CIT(A) ALTHOUGH DISMISSED THE LEGAL GROUND ON TECHNICAL GROUNDS, HE ACTUALLY DELETED BO TH THE ADDITIONS ON MERITS. THE SAME IS EVIDENT FROM THE CONTENTS OF PARA NOS.7.3 A ND 8.3 OF HIS ORDER. FOR THE SAKE OF COMPLETENESS OF THIS ORDER, RELEVANT LINES FROM BOTH THE PARAGRAPHS ARE EXTRACTED AS UNDER : 7.3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IT I S SEEN FROM THE SCHEDULE 3 OF THE BALANCE SHEET FILED THAT APPELLANT HAD TAKEN TERM LOAN FOR THE PU RPOSE OF HOUSE PROPERTY AND BALANCE OF LOAN AS ON 01-04-2003 WAS RS.45,56,088/- AND SAME HAD REDUCED TO NIL AT THE END OF THE YEAR. INTEREST OF RS.9,47,560/- WAS PAID TO THE BANK ONLY WHICH IS EVIDENT FROM SCHEDULE-14 OF THE PROFIT AND LOSS ACC OUNT FOR THE YEAR. THERE IS NO OTHER INTEREST-BEARING FUND. IN VIEW OF THE FACTS THAT LOAN WAS EARLIER TAKEN FOR PURCHASE OF PROPERTY AND INTEREST WAS PAID DURING T HE YEAR, THE SAME IS ELIGIBLE FOR DEDUCTION U/S.24 OF THE ACT. I THEREFORE FIND MERI T IN THE CONTENTION OF THE APPELLANT AND GROUND RAISED IS HEREBY ALLOWED. 11. FROM THE ABOVE, REGARDING THE ADDITION ON ACCOU NT OF INTEREST DISALLOWANCE, IT IS EVIDENT THAT THE CIT(A) HAS RIGHTLY GAVE RELIEF ON THIS ACCOUNT. REVENUE HAS NOT BROUGHT ANY CONFLICTING INFORMATION TO OUR NOTICE T O HOLD THE DECISION OTHERWISE. AS SUCH, NO INCRIMINATING MATERIAL IS FILED OR REFERRE D TO IN THE ORDERS OF AO/CIT(A). THEREFORE, WE ARE OF THE OPINION THAT THE ORDER OF THE CIT(A) IS FAIR AND REASONABLE ON THIS ISSUE. ACCORDINGLY, GROUND NO.1 RAISED BY THE REVENUE IS DISMISSED. 12. REGARDING THE OTHER ADDITION RELATING TO CLAIM OF CAPITAL LOSS, THE CONTENTS FROM PARA NO.8.3 ARE ALSO EXTRACTED IN THE FOLLOWIN G PARAGRAPH : 8.3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .I HAV E CONSIDERED THE CIRCUMSTANCES AND IT IS SEEN THAT APPELLANT PURCHASED THE PROPERTY BY WAY OF SHA RE CERTIFICATE ISSUED BY THE SELLER COMPANY AND SAME COULD NOT BE READILY TRACED BY THE APPELLANT AS ASSESSMENT FOR AY 2004-05 WAS CARRIED OUT DURING 2011 AND THE PROPERT Y WAS PURCHASED BY ISSUE OF CERTIFICATES ON 18-01-1995. I, THEREFORE, AGREE TH AT APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE, HENCE, ADDITIONAL EVIDENCES ARE A DMITTED FOR ADJUDICATION. AO HAD NOT OBJECTED TO THE FACTUM OF ISSUE OF SHARE CERTIF ICATES BY THE SELLER COMPANY M/S. SAMEER PREMISES PVT. LTD. AND THE FACT THAT OFFICE G-4 & G-5 WAS SOLD TO THE APPELLANT BY ISSUING 1250 SHARE CERTIFICATES FOR WH ICH RESOLUTION WAS PASSED BY THE BOARD OF DIRECTORS OF THE SELLER COMPANY ON 10-12-1 994. GROSS COST OF THE BUILDING ACQUIRED HAS BEEN STATED IN THE BLOCK OF FIXED ASSE TS AT RS.1,34,44,274/- IN THE ITA NO.344/PUN/2016 & CO NO.12/PUN/2017 M/S. SANSHAH SELLING SERVICES PVT. LTD. 6 SCHEDULE OF FIXED ASSETS. IN VIEW OF THESE FACTS, THERE IS NO JUSTIFICATION TO DISALLOW CAPITAL LOSS CLAIMED BY THE APPELLANT. THE GROUND RAISED BY THE APPELLANT IS HEREBY ALLOWED. 13. FROM THE ABOVE, IT IS EVIDENT THAT THE DECISION OF THE AO IS MERELY BASED ON HIS CONCLUSIONS DRAWN ON THE DOCUMENTS ALREADY AVAI LABLE ON THE ASSESSMENT RECORD. AS SUCH, NO INCRIMINATING MATERIAL WAS RELIED UPON OR MENTIONED TO BE PERMITTED. AS SUCH, THE CIT(A) DELETED THE CLAIM OF CAPITAL LOSS ON MERITS. IN OUR VIEW, SUCH ADDITIONS ARE NOT SUSTAINABLE IN THE ASSESSMENT U/S .153A OF THE ACT IN RESPECT OF THE NON-ABATED ASSESSMENT MADE. THEREFORE, FOR THIS RE ASON ALSO, WE AFFIRM THE ORDER OF THE CIT(A). ACCORDINGLY, GROUND NO.2 RAISED BY THE REVENUE IS DISMISSED. 14. TO SUM UP, THE CROSS OBJECTION FILED BY THE ASS ESSEE AND THE APPEAL FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON THIS 09 TH DAY OF AUGUST, 2017. SD/- SD/- (SUSHMA CHOWLA) (D.KARUNAKARA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; DATED : 09 TH AUGUST, 2017. SATISH / COPY OF THE ORDER IS FORWARDED TO : THE APPELLANT; THE RESPONDENT; ( ) THE CIT(A)-12, PUNE / THE CIT-12, PUNE , , / DR A, ITAT, PUNE; / GUARD FILE. / BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY, ITAT, PUNE BENCHES, PUNE