M/s. ALLANASONS LTD., MUMBAI V. DCIT CIR - 3(1), MUMBAI

CO 403/MUM/2006

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8772 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 6 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 19-06-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: K
• Next Hearing Date: 31-01-2013
• Assessment Year: 1996-1997
• Appeal Filed On: 19-12-2006
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P J PARDIWALA SMT V B PATEL; A R SHAH
• Assessee Lawyers: S D SRIVASTAVA
• Keywords: Business income; Deemed dividend; Notional interest; Reassessment proceedings
• Section: 143(3); 80HHC; 234B; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH J, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO.457/MUM/2002 ASSESSMENT YEAR : 1994-95 M/S. ALLANA SONS LTD. ALLANA HOUSE, 4 J.A ALLANA ROAD, COLABA MUMBAI. PAN :AAACA 2533 D VS. DY. COMMISSIONER OF INCOME TAX , CIRCLE-1(1) ROOM NO.579, 5 TH FLOOR AAYAKAR BHAVAN M.K.ROAD MUMBAI-400 020. (APPELLANT) (RESPONDENT) ITA NO.224/MUM/2002 ASSESSMENT YEAR : 1994-95 DY. COMMISSIONER OF INCOME TAX , CIRCLE-1(1) MUMBAI-400 020. VS. M/S. ALLANA SONS LTD. ALLANA HOUSE MUMBAI. (APPELLANT) (RESPONDENT) ITA NO.225/MUM/2002 ASSESSMENT YEAR : 1995-96 DY. COMMISSIONER OF INCOME TAX , CIRCLE-1(1) MUMBAI-400 020. VS. M/S. ALLANA SONS LTD. ALLANA HOUSE MUMBAI. (APPELLANT) (RESPONDENT) ITA NO.458/MUM/2002 ASSESSMENT YEAR : 1995-96 M/S. ALLANA SONS LTD. ALLANA HOUSE MUMBAI. VS. DY. COMMISSIONER OF INCOME TAX , CIRCLE-1(1) MUMBAI-400 020. (APPELLANT) (RESPONDENT) ITA NO.524/MUM/2000 ASSESSMENT YEAR : 1996-97 DY. COMMISSIONER OF INCOME TAX , CIRCLE-3(1) MUMBAI-400 020. VS. M/S. ALLANA SONS LTD. ALLANA HOUSE MUMBAI. (APPELLANT) (RESPONDENT) ITA NO.224/M/02 & 457/M/02(A.Y.94- 95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/ M/06(96-97) ALLANA SONS LTD. 2 C.O.NO.403/MUM/2006 ASSESSMENT YEAR : 1996-97 M/S. ALLANA SONS LTD. ALLANA HOUSE MUMBAI. VS. DY. COMMISSIONER OF INCOME TAX , CIRCLE-3(1) MUMBAI-400 020. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI S.D. SRIVASTAVA RESPONDENT BY : SHRI P.J. PARDIWALA, SMT V.B. PATEL AND SHRI A.R. SHAH DATE OF HEARING : 10.06.2013 DATE OF PRONOUNCEMENT : 19.06.2013 O R D E R PER B. RAMAKOTAIAH, A.M: THESE ARE CROSS APPEALS BY ASSESSEE AND REVENUE AGA INST THE ORDERS OF CIT(A). MAIN APPEALS ARE BY REVENUE ON DELETION OF AMOUNTS ADDED BY AO INVOKING SEC. 2(22)(E). SINCE COMMON ISSUES ARE INVOLVED, THESE APPEALS ARE HEARD TOGETHER AND DECIDED BY THIS COMM ON ORDER. WE HAVE HEARD THE LD. DR AND THE LD. COUNSEL FOR THE A SSESSEE IN DETAIL. 2. THE APPEAL IN ASSESSMENT YEAR 1996-97 IS THE MAI N APPEAL CONSEQUENT TO WHICH ASSESSMENTS FOR ASSESSMENT YEAR S 1994-95 AND 1995-96 WERE RE-OPENED BY THE AO ON THE ISSUE. THER EFORE APPEAL IN ASSESSMENT YEAR 1996-97 WAS DECIDED FIRST. ITA NO.224/M/02 & 457/M/02(A.Y.94- 95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/ M/06(96-97) ALLANA SONS LTD. 3 ITA NO.524/M/2000 (ASSESSMENT YEAR : 1996-97) THE REVENUE HAS RAISED THE FOLLOWING GROUNDS :- 1.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDIT ION OF RS.26,07,00,000/- MADE ON ACCOUNT OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE I.T. ACT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING T HE A.O. IN NOT TO SET OFF THE LOSSES INCURRED UNDER ON E OF THE HEAD OF THE EXPORT AGAINST THE PROFITS OF THE O THER HEAD OF THE EXPORT AS DONE BY THE A.O. FOR COMPUTATION OF DEDUCTION UNDER SECTION 80HHC OF THE ACT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDIT ION OF RS.3,24,000/- BEING THE INTEREST INCOME RECEIVED ON DEPOSITS AGAINST THE LETTING OUT OF PREMISES, WH ICH WAS ADDED TO THE INCOME FROM THE HOUSE PROPERTY BY THE A.O. 2.2 GROUND NO.1 IS ON THE ISSUE OF ADDITION OF RS.2 6,07,00,000/- MADE ON ACCOUNT OF DEEMED DIVIDEND UNDER SECTION 2( 22)(E) OF THE INCOME TAX ACT, 1961(THE ACT). THE ASSESSEE IS ENGA GED IN THE BUSINESS OF EXPORT OF CONSUMABLE GOODS SUCH AS MEAT , COFFEE ETC. AND PURCHASES THESE ITEMS FROM SISTER CONCERNS. IN A WA Y, IT ACTS AS AN EXPORTER OF THE GOODS MANUFACTURED BY THE SISTER CO NCERN AND CHARGES SERVICE FEE ON THE EXPORT PROCEEDS. THE AO FOUND TH AT THE ASSESSEE HAS RUNNING ACCOUNT WITH FOUR SISTER CONCERNS OUT O F WHICH IN THREE SISTER CONCERNS IT HAS MORE THAN 10% SHARE HOLDING AND WITH ONE CONCERN EVEN THOUGH IT HAD NO SHARE HOLDING THERE A RE COMMON SHARE HOLDING BY OTHER CONCERNS. AO EXAMINED THE TRANSACT IONS BETWEEN THE ASSESSEE COMPANY AND OTHER GROUP CONCERNS AND AFTER ANALYZING THE TRANSACTIONS AND OBTAINING INSTRUCTIONS UNDER SECTI ON 144A FROM THE ITA NO.224/M/02 & 457/M/02(A.Y.94- 95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/ M/06(96-97) ALLANA SONS LTD. 4 ADDL. COMMISSIONER, HE MADE AN ADDITION OF ABOVE AM OUNT AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT. THE MAI N REASON FOR MAKING THE ADDITION WAS THAT THOSE COMPANIES HAVE ADVANCED FUNDS TO THE ASSESSEE AND THEREFORE THOSE LOANS/ADVANCES WHICH W ERE OUT OF THE PROFITS OF THOSE COMPANIES WERE TO BE CONSIDERED AS DEEMED DIVIDEND UNDER THE PROVISIONS. THE FOUR CONCERNS AND AMOUNT S INVOLVED ARE :- 1. M/S. FRIGORIFICO ALLANA LTD. RS.16.68 CRORES 2. M/S. FRIGERIO CONSERVA ALLANA LTD. RS. 2 .72 CRORES 3. M/S. INDAGRO FOODS LTD. RS. 1.45 CRORES 4. M/S. ALLANA COLD STORAGE LTD. RS. 5.22 CRORES 2.3 THE AO ANALYZED THE TRANSACTION FROM PAGE-2 OF THE ORDER TO PAGE-9 OF THE ORDER TO ARRIVE AT THE ABOVE AMOUNTS. IT WAS THE CONTENTION OF THE ASSESSEE THAT THE ASSESSEE PURCHA SES GOODS FROM THE SISTER CONCERNS ON CREDIT AND THE AMOUNTS ARE SETTL ED AS AND WHEN EXPORT PROCEEDS ARE RECEIVED. SOMETIMES THE BANK MA DE ADJUSTMENTS DIRECTLY FROM THE EXPORT PROCEEDS WITH PACKING CRED IT LOANS. IT IS ALSO SUBMITTED THAT IN F.Y. 1994-95, RELEVANT TO ASSESS MENT YEAR 1995-96 ASSESSEE HAD TO AVAIL PACKING CREDITS FROM THE BANK S, EVEN THOUGH IT WAS NOT REQUIRED, TO KEEP THE SANCTIONED LIMITS. TH E ASSESSEE WAS ASKED TO UTILIZE THE FUNDS AND SO IN THE MONTH OF M ARCH95, ASSESSEE AVAILED PACKING CREDIT LIMIT AND ADVANCED THE FUNDS TO FOUR SISTER CONCERNS. IT WAS SUBMITTED THAT DURING THE YEAR THO SE SISTER CONCERNS PAID VARIOUS AMOUNTS TO THE ASSESSEE WHICH IT HAS R ECEIVED. DURING THE COURSE OF ENQUIRY, THE ASSESSEE ALSO OBTAINED T HE ACCOUNT COPIES ITA NO.224/M/02 & 457/M/02(A.Y.94- 95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/ M/06(96-97) ALLANA SONS LTD. 5 FROM THE SISTER CONCERNS WHEREIN THEY HAVE MAINTAIN ED SEPARATE LEDGER ACCOUNTS, ONE FOR TRADING ACTIVITY AND OTHER FOR ADVANCED ACCOUNTS. ON THE BASIS OF ACCOUNTS, IT WAS SUBMITTE D THAT THE ASSESSEE NEVER OBTAINED ANY LOAN FROM THE SISTER CO NCERNS AND THEREFORE, QUESTION OF INVOKING DEEMED DIVIDEND PRO VISIONS DOES NOT ARISE. 2.4 THE AO ANALYSED THE TRANSACTIONS AND ON THE REA SON THAT THE ADVANCED LOAN WOULD BE SET OFF TO THE AMOUNTS OUTST ANDING TOWARDS PURCHASES, CONSIDERED THE PAYMENTS MADE BY THE SIST ER CONCERNS AS DEEMED DIVIDEND AND ARRIVED AT AMOUNT OF RS.26,07,0 0,000/- TO CONSIDER THEM AS DEEMED DIVIDENDS. 2.5 THE ASSESSEE CONTESTED THE SAME BEFORE CIT(A) A ND EXPLAINED THE TRANSACTIONS AND MADE DETAILED SUBMISSIONS BOTH ON FACTS AND ON LAW. THE LD. CIT(A) AFTER CONSIDERING THE SAME DELE TED BY STATING AS UNDER:- ON THIS GROUND OF APPEAL DIRECTION WERE ISSUED BY THE ADDITIONAL COMMISSIONER OF INCOME-TAX RENGE-3. THE APPELLANT HAD RECEIVED CERTAIN PAYMENTS FROM THE FOLLOWING PARTIES DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 1996-97. 1. M/S. FRIGORIFICO ALLANA LTD. 2. M/S. FRIGERIO CONSERVA ALLANA LTD. 3. M/S. INDOGRO FOODS LTD. 4. M/S. ALLANA COLD STORAGE LTD. THE SAID FOR COMPANIES ARE SISTER CONCERNS OF THE APPELLANT THEY ARE ALSO INVOLVED IN PROCESSING ACTI VITIES WHICH RESULTS IN THE ENDPRODUCT FOR THE APPELLANTS EXPORT ACTIVITIES. AS THE APPELLANT AS WELL AS THE FOUR OT HER ITA NO.224/M/02 & 457/M/02(A.Y.94- 95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/ M/06(96-97) ALLANA SONS LTD. 6 ENTITLES HAD MAJOR SHARE HOLDING IN EACH OTHER, THE A.O. TREATED THE AMOUNTS RECEIVED BY THE APPELLANT AS DE EMED DIVIDEND AS PER PROVISIONS OF SECTION 2(22) (E) OF THE INCOME-TAX ACT, 1961. THE SAID ADDITION IS OBJECTED TO BY THE APPELLANT IN THE PRESENT APPEAL. IT WOULD BE RE LEVANT TO REFER TO PROVISIONS OF SECTION 2(22) (E) WHICH R EADS AS UNDER: DIVIDEND INCLUDES: ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, O F ANY SUM ( WHETHER AS REPRESENTING A PART OF THE ASSETS OF THE COMPANY OR OTHERWISE) ( MADE AFTER THE 31 ST DAY OF MAY, 1987, BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER, BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES ( NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH O R WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN PER CENT OF THE VOTING POWER, OR TO A NY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST (HEREINAFTER IN THIS CLAUSE REFERRED TO AS THE SAID CONCERN) OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF, OR FOR THE INDIVIDUAL BENEFIT, O R ANY SUCH SHAREHOLDER, TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULATED PROFIT. IT WOULD THUS APPEAR THAT ANY PAYMENT MADE BY A CLOSELY HOLD COMPANY TO A MAJOR SHARE HOLDER BY WAY OF ADVANCE OR LOAN IS TAXABLE AS DIVIDEND IN VIEW OF T HE DEEMING PROVISIONS OF SECTION 2(22) (E). THOUGH THE A.O. CAME TO THE CONCLUSION THAT THE SAID AMOUNT WERE IN THE NATURE OF DEEMED DIVIDEND, THE APPELLANTS CONTENTI ON IS THAT THE SAID AMOUNTS WERE MERELY REPAYMENTS MADE B Y THE FOUR COMPANIES ON ACCOUNT OF CERTAIN ADVANCES M ADE BY THE APPELLANT IN THE MONTH OF MARCH, 1995 RELEVA NT TO ASSESSMENT YEAR 1995-96. THE APPELLANT IS STATED TO HAVE MADE THE SAID ADVANCES TO THE FOUR COMPANIES ON ACC OUNT OF DIRECTIONS ISSUED BY THE APPELLANTS BANKERS AS THE APPELLANT HAD NOT AVAILED OF CREDIT FROM THE BANKS WITH EFFECT FROM 1 ST JANUARY, 1995. A LETTER TO THAT EFFECT ISSUED BY THE APPELLANTS BANKERS NAMELY UNION BANK OF IND IA HAS ALSO BEEN PRODUCED BEFORE ME DURING THE COURSE OF APPELLATE PROCEEDINGS. IT IS ALSO STATED THAT MOST OF THE AMOUNTS WERE RETURNED TO THE APPELLANT IN THE MONTH OF APRIL 1995 ITSELF AND THAT SUCH ACTION WAS RESORTED TO CONTINUE THE CREDIT FACILITIES SANCTIONED BY THE AP PELLANTS BANKERS. IT IS CONTENDED THAT IF SUCH LOAN FACILITI ES WERE NOT AVAILED, THE BANKERS WOULD HAVE REDUCED THE CRE DIT FACILITIES OF THE APPELLANT WHICH IN TURN WOULD HAV E ADVERSELY AFFECTED THE APPELLANTS BUSINESS ACTIVIT IES. THE A.O. DID NOT ACCEPT THE APPELLANTS CONTENTION ON T HE GROUND THAT AT THE POINT WHEN ADVANCES WERE MADE TO THE FOUR COMPANIES, LARGE AMOUNTS WERE DUE FROM THE ITA NO.224/M/02 & 457/M/02(A.Y.94- 95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/ M/06(96-97) ALLANA SONS LTD. 7 APPELLANT AND THAT SUCH AMOUNTS WERE IN FACT PAYMEN TS MADE TO TAKE CARE OF AMOUNTS DUE TO THE FUR COMPANI ES ON ACCOUNT OF SUPPLY OF PROCESSED MEAT MADE TO THE APPELLANT. IT IS SUBMITTED THAT THE FOUR COMPANIES HAD MAINTAINED SEPARATE ACCOUNTS ON ACCOUNT OF LOAN AS WELL AS ON ACCOUNT OF SUPPLIES AND THAT SUCH AMOUNTS WER E NOTICED OFF AS PER DIRECTION OF THE APPELLANTS BAN KERS. IT IS ALSO BROUGHT TO MY NOTICE THAT THE APPELLANT WAS PA YING THE FOUR COMPANIES ONLY ON RECEIPT OF EXPORT PROCEE DS WHICH WOULD TAKE A FEW MONTHS FROM THE DATE OF EXPO RT. 3. THE ADDITIONAL COMMISSIONER OF INCOME TAX WHILE ISSUING DIRECTION U/S 144 A RELIED ON THE RATIO OF DECISION IN THE CASE OF SUMATI DAYAL 214 ITR 80.. . WHER E IT WAS HELD THAT MERE ACCOUNTING ENTRIES ARE NOT CONCL USIVE EVIDENCE AND ONE MUST LOOK AT ALL THE FACTS AND CIRCUMSTANCES OF THE CASE. IT IS HOWEVER, SEEN THAT IN THE CASE OF MS. SUMATI DAYAL THEIR LORDSHIPS WERE CONCE RNED WITH THE RECEIPT OF A NUMBER OF JACKPOTS RECEIVED O N A REGULAR BASIS BY A HOUSEWIFE. IT IS THUS, CLEAR THA T THE APPELLANTS CASE IS NOT SIMILAR TO THAT REPORTED IN THE CASE OF MS. SUMATI DAYAL. THE APPELLANT HAS ALSO BROUGHT TO MY NOTICE, THE DECISION ON THE KERALA HIGH COURT IN THE CASE OF P.V. JOHN 181 ITR 1 WHERE IT WAS HELD THAT WHEN DEEMING PROVISIONS ARE TO BE APPLIED THE SAME IS TO BE APPLIED VERY STRICTLY AND THAT THERE SHOULD BE NO D OUBT OF WHATSOEVER NATURE ABOUT THE TAXABILITY OF THE SAME . THE OTHER DECISION OF THE SAME HIGH COURT IN THE CASE O F K. SRIDHARAN 201 ITR 973 HAS OBSERVED THAT IN CASE, TH E EXPLANATION OF THE ASSESSEE IS THAT THE PAYMENTS IN QUESTION WAS ONLY REPAYMENT OF EARLIER LOAN ADVANCE S THE PROVISIONS OF SEC. 2(22) (E) WOULD NOT APPLICABLE. I AM IN AGREEMENT WITH THE APPELLANT THAT THE DEEMING PROVI SIONS SHOULD BE RESTRICTED TO WHAT THE SECTION SAYS AND N OT EXTENDED FURTHER INTO UN-CHARTERED AREAS. I AM THUS OF THE CONSIDERED OPINION THAT THE CONCLUSION ARRIVED AT B Y THE A.O. AS WELL AS BY THE ADDITIONAL COMMISSIONER OF I NCOME TAX CANNOT BE CONSIDERED AS BEING BASED EITHER ON T HE FACTS OR CIRCUMSTANCES OF THE CASE. IN THE LIGHT OF THE SAME, THE ADDITION MADE BY THE A.O. ON ACCOUNT OF DEEMED DIVIDEND U/S 2(22) (E) OF THE INCOME TAX ACT , 1961 IS HEREBY DELETED. 2.6 THE LD. DR POINTED OUT THE FINDINGS OF THE AO T O SUBMIT THAT THE LD. CIT(A) WAS NOT CORRECT IN DELETING THE ADDITION AS THE ASSESSEE HAS OBTAINED LOANS FROM THE SISTER CONCERN AND REFERRED TO VARIOUS ANNEXURES ENCLOSED TO THE ASSESSMENT ORDER TO REITE RATE THE FINDINGS MADE BY THE AO AND ADDL. CIT UNDER SECTION 144A. TH E LD. COUNSEL IN ITA NO.224/M/02 & 457/M/02(A.Y.94- 95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/ M/06(96-97) ALLANA SONS LTD. 8 REPLY REFERRED TO THE ACCOUNT COPY PLACED TO SUBMIT THAT THE ASSESSEE WAS ALWAYS INDEBTED TO THE SISTER CONCERNS SO ON FA CTS, QUESTION OF MAKING DEEMED DIVIDEND DOES NOT ARISE. FURTHER IT W AS SUBMITTED THAT ADDITION WITH REFERENCE TO M/S ALLANA COLD STORAGE LTD. ALSO DOES NOT ARISE AS ASSESSEE IS NOT A SHARE HOLDER IN THE SAID COMPANY AND AS DECIDED BY THE SPECIAL BENCH OF THE ITAT IN THE CAS E OF ACIT VS. BHAUMIK COLOUR LAB (2009) (18 DTR (MUMBAI) (SB) TRIBUNAL 451) AND AS APPROVED BY THE HON'BLE BOMBAY HIGH COURT IN CAS E OF CIT V. UNIVERSAL MEDICARE PVT. LTD. (324 ITR 263) (2010)(BOM.). IT WAS THE SUBMISSION THAT THE ORDER OF CIT(A) IS CORRECT ON F ACTS AND LAW. 2.7 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND HA VE GONE THROUGH THE VARIOUS DOCUMENTS PLACED ON THE RECORD. FIRST OF ALL, WE FIND IT DIFFICULT TO AGREE WITH THE APPROACH OF THE AO IN DE-LINKING THE TRANSACTION WHICH WAS CARRIED OVER FROM EARLIER YE AR. AS ACCEPTED BY THE AUTHORITIES, THE ASSESSEE WAS ASKED BY THE BANK S TO AVAIL PACKING CREDIT LIMIT SO AS TO MAINTAIN LIMITS FOR THE NEXT YEAR AND IN THE MONTH OF MARCH,1995, IT HAD TO UTILIZE PACKING CREDIT FAC ILITIES AND HAD ADVANCED IT TO VARIOUS SISTER CONCERNS ON WHIC H THERE IS NO DISPUTE. AS SEEN FROM THE LEDGER COPIES PLACED ON RECORD AS ON 31.3.1995 M/S. FRIGORIFICO ALLANA LTD. HAS RECEIVED TOTAL AMOUNT OF RS.21.00 CRORES, M/S. FRIGERIO CONSERVA ALLANA LTD. HAS RECEIVED TOTAL AMOUNT OF RS.8.05 CRORES, M/S. ALLANA COLD STORAGE LTD. HAS RECEIVED AN AMOUNT OF RS.6.46 CRORES AND M/S. INDAGRO FOODS LTD. HAS RECEIVED AMOUNT OF RS.2.55 CRORES IN MARCH, 1995. IT IS FURTHER NOTICED THAT THOSE COMPANIES MAINTAINED SEPARATE AD VANCE ACCOUNT ITA NO.224/M/02 & 457/M/02(A.Y.94- 95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/ M/06(96-97) ALLANA SONS LTD. 9 AS AGAINST ASSESSEES COMBINED ACCOUNT AND REPAID THE AMOUNTS FROM 1.4.1995 TO 31.3.1996. HOWEVER, THERE IS ALWAYS AN OUTSTANDING AMOUNT TO BE REPAID TO THE ASSESSEE DURING THE COUR SE OF THE YEAR AND AT THE END OF THE YEAR AS ON 31.3.1996 CLOSING BALA NCE WERE AS UNDER: 1. M/S. FRIGORIFICO ALLANA LTD. . RS. 4.32 CRORES 2. M/S. FRIGERIO CONSERVA ALLANA LTD. .. RS. 5.3 3 CRORES 3. M/S. ALLANA COLD STORAGE LTD. .. RS.1 .54 CRORES 4. M/S. INDAGRO FOODS LTD. RS . 1.60 CRORES 2.8 THUS, AS SEEN FROM THE LEDGER ACCOUNTS, THOSE C OMPANIES WERE PAYING OUTSTANDING AMOUNTS RECEIVED AS ON 31.3.1995 TO THE ASSESSEE COMPANY DURING THE YEAR AND STILL AT THE END OF THE YEAR HAS TO PAY THE BALANCE AMOUNT ALSO AS STATED ABOVE. THEREFORE, ON FACTS IT IS NOT LOANS OR ADVANCE GIVEN BY THAT COMPANY TO THE ASSES SEE COMPANY BUT REIMBURSEMENT OF THE LOANS RECEIVED DURING THE EARL IER YEAR. 2.9 THE ARGUMENT OF THE A.O THAT THESE AMOUNTS SHOU LD HAVE BEEN ADJUSTED TO THE OUTSTANDING PURCHASE ACCOUNT AND TH EREFORE, THE AMOUNTS BECAME ADVANCE IN THE YEAR CANNOT BE ACCEPT ED AS ASSESSEE HAS TO RECEIVE/PAY LARGE AMOUNTS TO THE SISTER CONC ERN AS PART OF BUSINESS ACTIVITY. THE PURCHASES ARE BEING SETTLED AFTER EXPORT PROCEEDS ARE RECEIVED AND MOSTLY ADJUSTED BY BANKS FIRST AND PASSING ENTRIES THEREON. THEREFORE, ON THE FACTS WE DO NOT SEE ANY REASON TO UPHOLD THE REVENUES CONTENTIONS. 2.10 APART FROM THAT, AS FAR AS ADDITION WITH REFER ENCE TO M/S. ALLANA COLD STORAGE LTD. WAS CONCERNED (RS.5.22 CRORES) T HE ASSESSEE IS NOT SHARE HOLDER IN THE SAID COMPANY. THEREFORE, FOLLO WING THE PRINCIPLES ITA NO.224/M/02 & 457/M/02(A.Y.94- 95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/ M/06(96-97) ALLANA SONS LTD. 10 LAID DOWN BY HONBLE BOMBAY HIGH COURT IN THE CASE OF UNIVERSAL MEDICARE PVT. LTD.(SUPRA) THE AMOUNT CANNOT BE BROU GHT TO TAX UNDER THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. FOR THESE REASONS, WE UPHOLD THE ORDER OF LD. CIT(A), WHICH IS CORRECT ON FACTS AND ON LAW, ACCORDINGLY THE GROUND IS REJECTED. 3. GROUND NO.2, PERTAINS TO THE ISSUE OF SET OFF OF LOSS INCURRED IN ONE OF THE HEADS OF EXPORT AGAINST THE PROFITS OF O THER EXPORTS I.E. LOSS IN TRADING TO BE SET OFF TO PROFIT IN MANUFACTURING EXPORTS. LD. COUNSEL FAIRLY ADMITTED THAT THIS ISSUE IS AGAINST THE ASSE SSEE NOT ONLY BY THE DECISION OF HONBLE SUPREME COURT IN CASE OF IPCA LABORATORIES (266 ITR 521) BUT ALSO CONSEQUENT TO THE AMENDMENT BROUGHT TO TH E STATUTE RETROSPECTIVELY. ACCORDINGLY, ORDER OF LD. CIT(A) IS SET ASIDE AND THAT OF A.O IS RESTORED. THE GROUND IS ALLOWED . 4. GROUND NO.3 PERTAINS TO THE ISSUE OF NOTIONAL IN TEREST. THE ISSUE IN THIS CASE IS WITH REFERENCE TO ADDITION MA DE BY THE AO ON THE INTEREST FREE DEPOSIT RECEIVED FROM THE TENANT AT 1 8% AS ANNUAL LETTING VALUE. THE LD. CIT(A) FOLLOWING THE ORDERS IN EARL IER YEARS DELETED THE SAME. 4.1 IT WAS FAIRLY ADMITTED THAT THIS ISSUE IS COVER ED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE BY THE ORDERS IN EARLIER YEARS. FOR THE SAKE OF RECORD ITAT ORDER DATED 28.2.2006 IN ASSESSMENT YEAR 1992-93 IN ITA NO.6071/MUM/97 IS EXTRACTED AS UNDER:- 7. THE LAST GROUND PERTAINS TO THE DIRECTION OF TH E CIT(A) TO DELETE THE ADDITION OF RS.2,70,000 BEING ITA NO.224/M/02 & 457/M/02(A.Y.94- 95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/ M/06(96-97) ALLANA SONS LTD. 11 NOTIONAL ADDITION ON ACCOUNT OF INTEREST ON INTERES T FREE ADVANCES IN RESPECT OF PROPERTY. THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE HONBLE BOMBAY HIGH COURT IN ASSESSEES OWN CASE, WHEREIN VIDE ORDER DATED 19.9.2000, IN ITA NO.1019 OF 2000, ITA NO.3159/MUM/92 THEIR LORDSHIPS DISMISSED THE REVENUES APPEAL FOLLOWING THEIR JUDGMENT DATED 05.06.2000 IN ITA NO.265 OF 2000. IN THIS VIEW OF THE MATTER THE GROUND IS REJECTED. 4.2 RESPECTFULLY FOLLOWING THE SAME, SINCE THE ISSU E IS COVERED BY THE JURISDICTIONAL HIGH COURT ALSO, WE UPHOLD THE O RDER OF LD.CIT(A) AND DISMISS THE GROUND. 5. IN THE RESULT, REVENUES APPEAL IS PARTLY ALLOWE D. C.O.403/MUM/06 (ASSESSMENT YEAR 1996-97) 6. IN THIS THE ASSESSEE HAS RAISED CROSS OBJECTIONS ON THE TWO ISSUES WHICH ARE AS UNDER:- 1. THE CIT(A) ERRED IN NOT ADJUDICATING THAT THE ALLEGED DEEMED DIVIDEND SHOULD BE CONSIDERED AS A PART OF BUSINESS INCOME AND NOT AS INCOME FROM OTHER SOURCES AND THAT THE SAME BE TREATED AS OPERATIONAL INCOME AND BE CONSIDERED WHILE GIVING CONSEQUENTIAL DEDUCTION UNDER SECTION 80HHC. 2. THE CIT(A) ERRED IN NOT ADJUDICATING THAT IN ANY CASE, TO THE EXTENT OF RS.80.00 LAKHS, THERE WAS A DOUBLE ADDITION AND THE SAME WAS NOT WARRANTED. 6.1. WITH REFERENCE TO GROUND NO.1 IT DOES NOT ARI SE, AS DEEMED DIVIDEND HAS ALREADY BEEN DELETED BY LD. CIT(A) WHI CH WAS CONFIRMED BY US IN REVENUE APPEAL. THEREFORE, THERE IS NO NE ED TO ADJUDICATE THE GROUND, ACCORDINGLY REJECTED. ITA NO.224/M/02 & 457/M/02(A.Y.94- 95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/ M/06(96-97) ALLANA SONS LTD. 12 6.2 GROUND NO.2 IS WITH REFERENCE TO AN ERROR WHICH CREPT IN THE WORKING OF THE AO OF DEEMED DIVIDEND. SINCE THE EN TIRE DEEMED DIVIDEND IS DELETED THE EXAMINATION OF THE DOUBLE A DDITION IS NOT REQUIRED. THE GROUND IS REJECTED AS ACADEMIC IN NA TURE. HOWEVER, IN CASE THE ORDERS ARE REVERSED BY ANY HIGHER JUDICIAL AUTHORITY, THE A.O IS TO EXAMINE THIS ASPECT BY VERIFICATION OF THE AM OUNT TO BE CONSIDERED UNDER SECTION 2(22)(E). 7. IN THE RESULT, THE CROSS OBJECTION IS DISMISSED. ITA NO.224/MUM/2002 (ASSESSMENT YEAR : 1994-95): 8. THE REVENUE HAS RAISED THE FOLLOWING TWO GROU NDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDIT ION AS PER GROUND NOS. 2 TO 2(22)(E) OF THE INCOME TAX ACT, 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDIT ION OF NOTIONAL INTEREST OF RS.3,24,000/- BEING 18% OF THE INTEREST FREE DEPOSIT ACCEPTED BY THE APPELLANT FRO M THE LESSEE RS.1,80,000/- 8.1 GROUND NO.1 IS WITH REFERENCE TO ADDITION MADE UNDER SECTION 2(22)(E) CONSEQUENT TO THE FINDINGS/OBSERVATIONS BY THE AO WHILE COMPLETING ASSESSMENT IN ASSESSMENT YEAR 1996-97. H OWEVER IN THIS YEAR, INSTEAD OF EXAMINING THE LOANS AS WAS DONE IN ASSESSMENT YEAR 1996-97, THE ASSESSING OFFICER PICKED UP THE AMOUNT S OF REIMBURSEMENTS MADE BY THE SISTER CONCERNS TO THE A SSESSEE COMPANY. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SISTER COMPANIES PAID MORE AMOUNT THAN WHAT WAS REQUIRED T O BE ITA NO.224/M/02 & 457/M/02(A.Y.94- 95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/ M/06(96-97) ALLANA SONS LTD. 13 REIMBURSED AND TO THAT EXTENT ASSESSEE HAS RECEIVED EXCESS AMOUNT OF RS.2.87 CRORES FROM M/S. FRIGORIFICO ALLANA LTD. AND ACCORDINGLY THE AMOUNT WAS TREATED AS DEEMED DIVIDEND UNDER SECTION 2(22)(E). 8.2 THE ASSESSEE EXPLAINED THAT WHILE MAKING EXPORT S ON BEHALF OF THE SISTER CONCERNS, THE ASSESSEE INCURS EXPENDITUR E LIKE FREIGHT, TRANSPORT ETC. RELATED TO EXPORTS WHICH WAS REQUIRE D TO BE IMMEDIATELY REIMBURSED BY THE SISTER CONCERNS AND FUND RECEIVED REPRESENTED REIMBURSEMENT OF SUCH EXPENSES. FURTHER REIMBURSEME NT, ON ACCOUNT OF PACKING CREDIT AVAILED BY SISTER CONCERNS BUT AD JUSTED BY BANKS FROM THE ASSESSEE ACCOUNT ON EXPORTS ALSO WAS INVOL VED. FURTHER REIMBURSEMENT AT 3.5% ON ACCOUNT OF EXPORT PROCEEDS , CHARGED BY THE ASSESSEE AS SERVICE CHARGES FROM THEIR SISTER C ONCERN HAS TO BE CONSIDERED. THE ASSESSING OFFICER WHILE ACCEPTING T HAT EXPENDITURE INCURRED FOR EXPORTS WAS REIMBURSED HOWEVER, DID NO T AGREE WITH THE TWO OTHER REIMBURSEMENTS EXPLAINED BY THE ASSESSEE TO ARRIVE AT THE SO CALLED EXCESS RECEIPTS AS LOANS /ADVANCES WHICH ARE TO BE TREATED AS DEEMED DIVIDEND UNDER SECTION 2(22)(E). LD.CIT(A ) AFTER CONSIDERING THE FACTUAL POSITION DELETED THE SAME BY STATING AS UNDER :- GROUND NO.2 TO 5 RELATE TO THE ADDITION OF A SUM O F RS.2,87,64,892/- AS DEEMED DIVIDEND U/S 2(22)(E) OF THE INCOME TAX ACT. FACTS OF THE CASE IN BRIEF ARE THAT THE APPELLANT IS RELATED TO FUR SISTER CONCERNS NAMELY M/S. FRIGORIF ICO ALLANA LTD., M/S. FRIGERIO CONSERVE ALLANA LTD., M/ S. INDOGRO FOODS LTD., AND M/S. ALLANA COLD STORAGE LT D., THE ABOVE FOUR SISTER CONCERNS PROCESS MEAT AND THE SAME IS SENT TO THE APPLICANT FOR EXPORT. SO FAR AS THE ACCOUNTS OF THE ABOVE FOUR CONCERNS ARE CONCERNED T HEY ARE CREDITED WITH THE COST PRICE OF THE GOODS TO BE EXPORTED. IN THIS CONNECTION, IT IS MENTIONED THAT SO FAR AS DEBITS IN THE ABOVE ACCOUNTS ARE CONCERNED, THIS RE FLECT THE EXPENSES INCURRED BY THE APPELLANT AND SERVICE CHARGES @ 3.5% DURING THE COURSE OF EXPORT OF GOODS , THE ITA NO.224/M/02 & 457/M/02(A.Y.94- 95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/ M/06(96-97) ALLANA SONS LTD. 14 APPELLANT ALSO GETS CERTAIN AMOUNTS FROM THE ABOVE FOUR CONCERNS FOR SETTING OFF ITS SERVICE CHARGES AND OT HER EXPENSES. IN THIS REGARD, THE LD. COUNSEL OF THE APPELLANT SUBMITTED THAT THE APPELLANT EXPORTED THE GOODS ON BEHALF OF ITS SISTER CONCERNS IN A. YR. 1996-97 AND IN THA T YEAR ALSO THE SISTER CONCERN MADE PAYMENTS TO THE APPELL ANT AND THE SAME WERE TREATED AS DEEMED DIVIDEND U/S 2 (22)(E) OF THE INCOME TAX ACT AND AN ADDITION OF RS.26,07,00,000/- WAS MADE ON THIS ACCOUNT. IT IS BROUGHT TO MY NOTICE THAT THE ADDITION OF RS.26,07,00,000/- MADE BY THE ASSESSING OFFICER FOR A. YR.1996-97 CAME TO BE DELETED BY THE LD.CIT(APPEALS ). THE LD.CIT(APPEALS) HAS HELD THAT ON THE IDENTICAL FACTS THAT THE CREDIT ON DEBIT ENTRIES IN THE ACCOUNTS OF THE FOUR CONCERNS IN FACT ARE BUSINESS TRANSACTIONS AND THE SAME ARE NOT LOANS AND ADVANCES MADE TO THE ASSESSEE. TA KING ME TO THE PAST HISTORY OF THE CASE ON IDENTICAL ISS UE, THE LD. COUNSEL MADE SUBMISSIONS BEFORE ME DURING THE COURSE OF HEARING OF THE PRESENT APPEAL ALONG THE S AME LINES AS IN THE PAST. COPY OF THE APPELLATE ORDER-A PPEAL NO. CIT(A)-XLIII/AC3(1)/IT.34/99-2000 DATED 29.10.1 999 WAS PLACED BEFORE ME AND RELIANCE WAS PLACED ON THE SUBMISSIONS MADE DURING THE COURSE OF APPEAL FOR TH E AFORESAID ASSTT. YEAR AND THE SAME WERE REITERATED. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE AND CONTENTIONS RAISED IN APPEAL BEFORE ME. I HAVE ALSO PERUSED THE APPELLATE ORDER MENTIONED ABOVE. IT IS NOTICED THAT THIS ISSUE OF DEEMED DIVIDEND HAS BEEN DEALT W ITH AT LENGTH IN THE APPELLATE ORDER PASSED IN RESPECT OF A. YR. 1996-97. I AM OF THE CONSIDERED VIEW THAT IN RESPEC T OF THE YEAR UNDER APPEAL ALSO THERE IS NO PLAUSIBLE REASON FOR ME TO IN ANY MANNER DEPART FORM THE VIEW TAKEN BY M Y LD. PREDECESSOR. I AM IN FULL AGREEMENT WITH THE VI EW TAKEN BY MY LD. PREDECESSOR ON AN IDENTICAL ISSUE U NDER APPEAL. ACCORDINGLY I HOLD THAT THE ASSESSING OFFIC ER IS NOT JUSTIFIED IN MAKING AN ADDITION OF RS.2,87,64,8 92/- AS DEEMED DIVIDEND U/S 2(22)(E) OF THE INCOME TAX ACT THE ADDITION IS THEREFORE DELETED. 8.3 AFTER CONSIDERING THE RIVAL SUBMISSIONS AND EXA MINING THE FACTS ON RECORD, WE DO NOT SEE ANY REASON TO INTERFERE WI TH THE ORDER OF CIT(A). THE ASSESSING OFFICER WAS NOT CORRECT IN AL LOWING REIMBURSEMENT ONLY ON FREIGHT, TRANSPORT ETC. PERTA INING TO EXPORTS AND NOT CONSIDERING PACKING CREDIT AND SERVICE CHAR GES WHICH WERE ALSO REIMBURSED BY THE SISTER CONCERNS. AS EXPLAINE D, THE SISTER ITA NO.224/M/02 & 457/M/02(A.Y.94- 95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/ M/06(96-97) ALLANA SONS LTD. 15 CONCERNS AVAILED PACKING CREDITS FROM THE BANKS AS THE RATE OF INTEREST WAS LESS BUT, THEY DO NOT MAKE ANY DIRECT EXPORT. SINCE EXPORTS ARE THROUGH ASSESSEE COMPANY, BANKS ADJUSTED THE LOANS FROM THE EXPORT PROCEEDS RECEIVED BY THE ASSESSEE COMPANY IN ITS BA NK ACCOUNT. THESE AMOUNTS ARE BEING ADJUSTED BY JOURNAL ENTRIES BY MA KING NECESSARY DEBIT NOTES AND ARE BEING REIMBURSED BY SISTER CONC ERNS. AO WAS NOT CORRECT IN CONSIDERING ONLY ONE SUCH REIMBURSEMENT IGNORING THE OTHER TWO IN ARRIVING AT THE SO CALLED EXCESS PAYME NT. ON FACTS, THERE IS NO REASON TO CONSIDER ANY AMOUNT AS LOAN RECEIVE D FROM SISTER CONCERN TO THE ASSESSEE COMPANY. THEREFORE WE UPHOL D THE ORDER OF CIT(A) ACCORDINGLY THE GROUND IS REJECTED. 8.4 GROUND 2 PERTAINS TO THE ISSUE OF ADDITION OF N OTIONAL INTEREST OF RS.3,24,000/-. FOR THE REASONS STATED THEREIN IN GR OUND NO.3 IN REVENUE APPEAL FOR ASSESSMENT YEAR 1996-97, WE UPHO LD THE ORDER OF CIT(A) AND REJECT THE GROUND. 9. IN THE RESULT, APPEAL IS DISMISSED. ITA NO.457/MUM/2002 (ASSESSMENT YEAR : 1994-95): 10. THE ASSESSEE HAS RAISED THE FOLLOWING THREE GRO UNDS IN ITS APPEAL:- I. THE LD. CIT(A) III MUMBAI HAS ERRED IN NOT ACCEPTING THE CONTENTION OF THE APPELLANT THAT THERE WERE NO REASONS BEFORE THE ASSESSING OFFICER FOR VALIDLY INITIATING REASSESSMENT PROCEEDINGS UND ER SECTION 148 R.W.S. 147 OF THE ACT. THE APPELLANT SUBMITS THAT THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT THERE WERE NO VALID REASON S BEFORE THE ASSESSING OFFICER FOR REOPENING ASSESSMENT PROCEEDINGS IN QUESTION. THE REASONS MENTIONED BY HIM IN THE ASSESSMENT ORDER ARE BASED ITA NO.224/M/02 & 457/M/02(A.Y.94- 95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/ M/06(96-97) ALLANA SONS LTD. 16 ON INCORRECT FACTS AND THEREFORE, ARE NOT VALID REASONS. WITHOUT PREJUDICE TO THE ABOVE AND ONLY IN THE ALTERNATIVE IT IS SUBMITTED THAT THE REFERENCE MADE TO THE ASSESSMENT PROCEEDINGS FOR THE AY 1996-97 IS NOT A CORRECT REASON, SINCE THE ADDITIONS MADE IN T HE SAID ORDER HAVE BEEN DELETED BY THE LD. CIT(A). IT IS, THEREFORE, SUBMITTED THAT REASSESSMENT PROCEEDINGS ARE BAD-N-LAW AND TRIBUNAL IS REQUESTED TO PASS AN ORDER TO THAT EFFECT. II. THE LD. CIT(A) HAS ERRED IN NOT GRANTING RELIEF UNDER SECTION 80HHC OF THE ACT BY RELYING UP ON THE JUDGMENT OF THE TRIBUNAL IN THE CASE OF IPCA LABORATORIES WHICH DOES NOT LAY CORRECT PRINCIPLES OF INTERPRETING THE PROVISIONS OF THE SAID SECTION. IN APPELLANTS OWN CASE FOR EARLIER AND SUBSEQUENT YEARS, THE CIT(A) HAS GRANTED RELIEFS ON IDENTICAL ISSUE OF IGNORING THE LOSSES WHILE DETERMINING TH E ELIGIBLE RELIEF UNDER SECTION 80HHC OF THE ACT. IT IS, THEREFORE, SUBMITTED THAT HE OUGHT TO HAVE FOLLOWED EARLIER AND SUBSEQUENT YEARS APPELLATE ORDERS AND HE OUGHT TO HAVE GRANTED RELIEF PRAYED F OR WHICH WERE ORIGINALLY ALLOWED. III. THE LD. CIT(A) HAS ERRED IN NOT DIRECTING THE ASSESSING OFFICER IN THE MATTER OF CHARGING OF INTEREST UNDER SECTION 234B OF THE ACT. 10.1 GROUND NO.1 PERTAINS TO THE ISSUE OF RE-OPENIN G OF THE ASSESSMENT. AS STATED EARLIER THE ASSESSING OFFICER RE-OPENED THE ASSESSMENT CONSEQUENT TO THE FINDING IN ASSESSMENT YEAR 1996-97. THE ASSESSEE HAS CONTESTED THE SAME BEFORE LD. CIT( A). THE LD. CIT(A) DISMISSED THE ASSESSEES CONTENTIONS BY STATING AS UNDER :- I HAVE CONSIDERED THE ARGUMENTS AND SUBMISSIONS OF THE APPELLANT. I HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 1994-95 IN WHICH THE ASSESSING OFFICER HAS CLEARLY MENTIONED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.YR. 1996-97, BOOKS OF ACCOUNTS FOR A.YR. 1994 - 95 WERE ALSO SEEN WHICH SHOW HUGE TRANSACTIONS WITH THE ABOVE COMPANIES WHICH ATTRACT THE PROVISIONS OF SECTION 2(22)(E). THE APPELLANT HAS N OT PRODUCED ANY EVIDENCE IN SUPPORT OF THIS CONTENTION S ITA NO.224/M/02 & 457/M/02(A.Y.94- 95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/ M/06(96-97) ALLANA SONS LTD. 17 THAT THE BOOKS FOR A.Y. 1994-95 WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER. THIS POINT HAS BEEN CONSIDERED BY ME AND IT IS SEEN THAT THE OBSERVATIO NS OF THE ASSESSING OFFICER THAT THE BOOKS OF ACCOUNTS WERE PRODUCED BEFORE HIM IS EVIDENT FROM THE FACT THAT IN FACT THERE EXISTED HUGE TRANSACTIONS AS MENTIONED BY HIM. THIS SUGGEST THAT THE BOOKS OF ACCOUNT WERE PRODUCED BEFORE HIM. IN ADDITION TO TH E ABOVE, I FIND THAT EVEN IF THE BOOKS OF ACCOUNTS AR E NOT PRODUCED, THE HISTORY OF THE CASE SUGGEST THAT APPELLANT IS ENGAGED IN EXPORT OF GOODS ON BEHALF O F ITS SISTER CONCERNS AND THERE ARE HUGE TRANSACTIONS . FOR EXAMPLE FOR RE-OPENING THE ASSESSMENT FOR A.YR.1995-96, THERE IS SUFFICIENT MATERIAL IN THE ASSESSMENT ORDER FOR A.YR. 1996-97. THE COMPARISON OF THE ASSESSMENT ORDER FOR A.YR. 1996-97 CLEARLY SUGGEST THAT THERE ARE OPENING CREDIT BALANCES OF T HE SISTER CONCERNS WHICH SUGGEST THAT SIMILAR TRANSACTIONS WERE THERE IN THE EARLIER YEARS ALSO A ND THEREFORE, I AM OF THE VIEW THAT ASSESSING OFFICER HAS RIGHTLY RE-OPENED THE ASSESSMENT UNDER SECTION 147 OF THE INCOME TAX ACT. ACCORDINGLY, THIS GROUND OF APPEAL IS DECIDED AGAINST THE APPELLANT. 10.2 THE LD. COUNSEL FOR THE ASSESSEE REITERATED TH E SUBMISSIONS MADE BEFORE THE LD. CIT(A) THAT RECORDING OF THE RE ASONS WAS NOT CORRECT AND FURTHER ALSO SUBMITTED THAT THE ASSESSE E WAS NOT SUPPLIED WITH THE REASONS FOR REOPENING IN THE COURSE OF ASS ESSMENT PROCEEDINGS, THEREFORE FOLLOWING THE PRINCIPLE LAID DOWN BY THE HONBLE HIGH COURT IN THE CASE OF CIT VS. VIDESH SA NCHAR NIGAM (340 ITR 66)(BOM) THE RE-OPENING IS BAD IN LAW. 10.2.1 AFTER CONSIDERING THE RIVAL CONTENTIONS, WE ARE OF THE VIEW THAT THERE IS NO MERIT IN THE ASSESSEES CONTENTION S SINCE THE ASSESSMENT WAS NOT MADE UNDER SECTION 143(3) EARLIE R AND ONLY PROCESSING UNDER SECTION 143(1) WAS DONE. WE ARE OF THE OPINION THAT THE ASSESSING OFFICER WAS CORRECT IN RE-OPENING TH E ASSESSMENT ON THE BASIS OF HIS FINDINGS IN ASSESSMENT YEAR 1996-97, T HOUGH SUCH ITA NO.224/M/02 & 457/M/02(A.Y.94- 95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/ M/06(96-97) ALLANA SONS LTD. 18 FINDINGS ARE NOT UPHELD ULTIMATELY. FOLLOWING THE P RINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF ACIT VS RAJESH JHAVERI STOCK BROKERS P. LTD, 291 ITR 381(SC), THE RE-OPEN ING OF THE ASSESSMENT WHERE RETURN OF INCOME WAS ACCEPTED UNDE R SECTION 143(1) CAN BE PERMITTED. THE CONTENTION THAT THE REASONS W ERE NOT COMMUNICATED TO THE ASSESSEE CAN NOT BE ACCEPTED. I N THE ABSENCE OF ANY EVIDENCE ON RECORD AND AS THIS CONTENTION REQUI RES EXAMINATION OF RECORD, THIS CAN NOT BE ACCEPTED AT THIS STAGE, WHI CH WAS NOT RAISED EARLIER. BE THAT AS IT MAY, WE ARE OF THE OPINION T HAT THIS GROUND DOES NOT HAVE ANY MERIT. ACCORDINGLY SAME IS REJECTED. 10.3 GROUND NO.2 IS AGAINST ACTION OF THE ASSESSING OFFICER IN SETTING OFF OF LOSS IN TRADING ACCOUNT TO THE PROFIT OF MAN UFACTURING EXPORT ACCOUNT. AS SEEN FROM THE ORDER THE ASSESSING OFFIC ER HAS SET OFF SUCH TRADING EXPORT LOSS AMOUNTING TO RS.3,73,68,776/- T O THE PROFIT FROM MANUFACTURING EXPORT OF RS.2,60,79,731/-. THE ASSE SSING OFFICER ARRIVED AT ELIGIBLE DEDUCTION U/S 80HHC AT (-)RS.53 ,042/-, LOSS THEREBY RESTRICTING TO NIL. THIS ADJUSTMENT IS AS P ER AMENDED PROVISIONS OF ACT, THEREFORE WE UPHOLD THE ORDER OF CIT(A) AND DISMISS THE ASSESSEES GROUND. 10.4 GROUND NO.3 IS WITH REFERENCE TO CALCULATION O F INTEREST W.R.T. SECTION 234B WHICH IS CONSEQUENTIAL IN NATURE. THIS GROUND IS ACCORDINGLY DISMISSED. 10.5 THE APPEAL IS DISMISSED ITA NO.224/M/02 & 457/M/02(A.Y.94- 95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/ M/06(96-97) ALLANA SONS LTD. 19 ITA NO.225/MUM/2002 (ASSESSMENT YEAR : 1995-96): 11. IN THIS, THE REVENUE HAS RAISED ONLY ONE GROUND WHICH IS AS UNDER :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECT ING THE ASSESSING OFFICER TO DELETE THE ADDITION AS PER GROUND NO.2 TO 5 RELATING TO THE ADDITION OF SUM OF RS.2,87,64,892/- AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE INCOME TAX ACT, 1961. 11.1 IT WAS SUBMITTED THAT THE AMOUNT INVOLVED WAS NOT RS.2.86 CRORES AS STATED IN THE GROUND BUT THE AMOUNT WAS RS.5,32,83,448/- IN THIS YEAR. AS IN LAST YEAR, THE ASSESSING OFF ICER CONSIDERED EXCESS REIMBURSEMENT OF EXPENDITURE AT ABOVE AMOUNT AS DEE MED DIVIDEND WITHOUT CONSIDERING THE REIMBURSEMENT OF PACKING CR EDIT AND SERVICE CHARGES. THE LD. CIT(A) AFTER CONSIDERING THE FACTS SIMILAR TO THE ORDER PASSED IN ASSESSMENT YEAR 1994-95, HAS DELETED THE ADDITION FOR THE SAME REASONS. SINCE THE FACTS ARE SIMILAR, FOR THE REASONS STATED THEREIN IN ITA NO.224/MUM/02 AGAINST GROUND NO.1 OF THE REVENUE, THIS GROUND IS ALSO REJECTED AS WE DO NOT SEE ANY M ERIT IN THE ACTION OF THE ASSESSING OFFICER. 12. IN THE RESULT, APPEAL IS DISMISSED. C.O. 458/MUM/2002 (ASSESSMENT YEAR : 1995-96): 13. THE ASSESSEE HAS RAISED THE FOLLOWING TWO GROUN DS I. THE LD. CIT(A) III MUMBAI HAS ERRED IN NOT ACCEPTING THE CONTENTION OF THE APPELLANT THAT THER E WERE NO REASONS BEFORE THE ASSESSING OFFICER FOR VALIDLY INITIATING REASSESSMENT PROCEEDINGS UNDER SECTION 148 R.W.S. 147 OF THE ACT. ITA NO.224/M/02 & 457/M/02(A.Y.94- 95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/ M/06(96-97) ALLANA SONS LTD. 20 THE APPELLANT SUBMITS THAT THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT THERE WERE NO VALID REASON S BEFORE THE ASSESSING OFFICER FOR REOPENING ASSESSMENT PROCEEDINGS IN QUESTION. THE REASONS MENTIONED BY HIM IN THE ASSESSMENT ORDER ARE BASED ON INCORRECT FACTS AND THEREFORE, ARE NOT VALID REASONS. WITHOUT PREJUDICE TO THE ABOVE AND ONLY IN THE ALTERNATIVE IT IS SUBMITTED THAT THE REFERENCE MADE TO THE ASSESSMENT PROCEEDINGS FOR THE AY 1996-97 IS NOT A CORRECT REASON, SINCE THE ADDITIONS MADE IN T HE SAID ORDER HAVE BEEN DELETED BY THE LD. CIT(A). IT IS, THEREFORE, SUBMITTED THAT REASSESSMENT PROCEEDINGS ARE BAD-N-LAW AND TRIBUNAL IS REQUESTED TO PASS AN ORDER TO THAT EFFECT. II. THE LD. CIT(A) HAS ERRED IN NOT DIRECTING THE ASSESSING OFFICER IN THE MATTER OF CHARGING OF INTEREST UNDER SECTION 234B OF THE ACT. 13.1 GROUND NO.1AND 2 ARE ACADEMIC IN NATURE AS AD DITION MADE BY THE ASSESSING OFFICER STANDS DELETED. THEREFORE THE RE IS NO NEED TO ADJUDICATE GROUND NO.1 AND 2. ACCORDINGLY C.O. IS D ISMISSED. 14. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO. 524/M/2000 IS PARTLY ALLOWED AND IN ITA NO.224/MUM/2002 AND IN IT A NO.225/MUM/2002 AND CROSS OBJECTIONS AND CROSS APPE ALS FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH JUNE 2013. SD/ - SD/ - (DR. S.T.M. PAVALAN) JUDICIAL MEMBER (B. RAMAKOTAIAH) ACCOUNTANT MEMBER MUMBAI, DATED: 19 TH JUNE, 2013. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI ITA NO.224/M/02 & 457/M/02(A.Y.94- 95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/ M/06(96-97) ALLANA SONS LTD. 21 THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.