ACIT 33(1), MUMBAI V. HARISH K.KHANNA, MUMBAI

ITA 1006/MUM/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9761 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 30-11-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 13-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Keywords: Unexplained expenditure; Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H, MUMBAI BEFORE D.T. GARASIA, JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO.1006/M/2015 ASSESSMENT YEAR: 2009-10 ACIT-33(1), ROOM NO.308, 3 RD FLOOR, BLDG. NO.C-11, PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI 400 051 VS. SHRI HARISH K. KHANNA, 301, RADKHIKA CHS, ASHA NAGAR, KANDIVALI EAST, MUMBAI-400 101 PAN: AACPK 9377N (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI DHARMESH SHAH, A.R. REVENUE BY : SHRI M.C. OMI NINGSHEN, D.R. DATE OF HEARING : 11.04.2017 DATE OF PRONOUNCEMENT : 28.07.2017 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 25.01.2012 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2009-10. 2. AT THE TIME OF HEARING, THE LD. A.R. HAS RAISED A PRELIMINARY OBJECTION AGAINST MAINTAINABILITY OF APPEAL FILED BY THE REVE NUE ON THE GROUND THAT TOTAL INCOME ASSESSED IS HUGE LOSS, THEREFORE TAX EFFECT IS NIL. HE FURTHER SUBMITTED THAT ASSESSEE HAS FILED THE RETURN FOR A.Y. 2009-10 BELATED, HENCE, NO CARRY FORWARD AND SET OFF IS ALLOWABLE UNDER THE ACT. TH E DUE DATE OF FILING THE RETURN FOR A.Y. 2009-10 WAS 30.09.09. HOWEVER, THE RETURN WAS FILED ON 11.11.09. THEREFORE, THE CARRY FORWARD LOSS IS NOT ELIGIBLE FOR SET OFF IN SUBSEQUENT YEAR. SINCE THE OBJECTION BY THE ASSESS EE IS REGARDING MAINTAINABILITY OF THE APPEAL FILED BY THE REVENUE, THEREFORE, WE TAKE UP THIS ITA NO.1006/M/2015 SHRI HARISH K. KHANNA 2 ISSUE OF MAINTAINABILITY OF APPEAL FILED BY THE REV ENUE. THE LD. A.R. HAS FILED THE OBJECTION AND SUBMITTED THAT THE PRESENT APPEAL IS FILED BY THE DEPARTMENT AGAINST THE ORDER OF LD. CIT(A) GRANTING RELIEF TO THE ASSESSEE BY APPLYING TELESCOPING THEORY AND TAXING THE NET UNEXPLAINED I NCOME I.E. AFTER ADJUSTING UNEXPLAINED INCOME AGAINST UNEXPLAINED EXPENDITURE. THE ASSESSEE SUBMITTED THAT IN APPEAL BEFORE THE LD. CIT(A), THE LD. CIT(A ) HAS ALSO OBJECTED TO THE GROUND RELATING TO SEVERAL ADDITIONS MADE BY ASSESS ING OFFICER (HEREINAFTER REFERRED TO AS THE AO) ON ACCOUNT OF UNEXPLAINED IN COME AND UNEXPLAINED EXPENDITURE. THE SAID GROUNDS OF APPEAL WERE DISPO SED OF BY LD. CIT(A) BY UPHOLDING MOST OF THE ISSUES RAISED BY THE AO. HOW EVER, SINCE THE ISSUE OF TELESCOPING THEORY WAS DECIDED IN FAVOUR OF THE ASS ESSEE, ASSESSEE DID NOT CHALLENGE THE GROUND REGARDING VALIDITY OF ADDITION UPHELD BY THE LD. CIT(A). 3. THE LD. A.R. RELIED UPON THE CIRCULAR NO.21/2015 DATED 10.12.2015 AND SUBMITTED THAT THE TAX EFFECT DOES NOT EXCEED MONIT ORY LIMIT OF RS.10 LAKHS BEFORE INCOME TAX APPELLATE TRIBUNAL, HENCE, THE AP PEAL SHOULD NOT BE FILED. HE FURTHER RELIED UPON THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S. TAJ LAND END LTD. VS. ACIT IN ITA NOS.3047 & 3048/MUM/2010 D ECIDED ON 27.07.2012 FOR ASSESSMENT YEARS 2004-05 & 2005-06 A ND SUBMITTED THAT IN THE SAID DECISION THE IDENTICAL ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE, HENCE, THIS ISSUE ALSO MAY BE ALLOWED . 4. ON THE OTHER HAND, THE LD. D.R. RELIED UPON THE ORDER OF THE REVENUE AUTHORITIES. 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. WE FIND THAT LD. CIT(A) HAS PARTLY ALLOWED THE ASSESSEES APPEAL BY OBSERVING AS UNDER: 16.1.2 I HAVE GONE THROUGH THIS GROUND OF TELESCOPING THEO RY RAISED BY THE ASSESSEE AND HAVE ALSO GONE INTO THE MERITS OF EACH OF THE GROUNDS RAISED ABOVE. OUT OF THE DISCUSSIONS ON PRE PAGES, A SUMMARY THAT EMERGES IS THAT AFTER GOING THROUGH THE VARIOUS EXP LANATIONS AND ACCEPTING SOME OF THE GROUNDS RAISED BY THE APPELLANT AND UPH OLDING THE ITA NO.1006/M/2015 SHRI HARISH K. KHANNA 3 ACTIONS OF THE AO ON THE OTHER GROUNDS, NET INCOME WHICH REMAINED UNEXPLAINED IN THE HANDS OF THE APPELLANT IS R.52,5 5,897/- AND THE UNEXPLAINED EXPENDITURE COMES TO RS.67,59,235/-. TH E ARGUMENT RAISED BY THE APPELLANT THAT EVEN IF IT WAS TO BE TAKEN TH AT HE HAD UNEXPLAINED INCOME, THEN THE INVESTMENT ON THE VARIOUS EXPENDIT URES WHICH REMAINED UNEXPLAINED, SHOULD BE GIVEN CREDIT TOO IF FOUND TO BE ACCEPTABLE SINCE THE SURVEY TEAM OR THE AO LATER HAVE NOT FOUN D ANY OTHER INVESTMENTS THAT REMAINED UNEXPLAINED OR COULD BE A TTRIBUTED TO THE UNEXPLAINED INCOME BEING SEEN IN THE CASE OF THE AP PELLANT. THEREFORE, IN MY CONSIDERED VIEW, NET OF THE UNEXPLAINED INCOM E TO THE EXPENDITURE IS WHAT NEEDS TO BE BROUGHT TO TAX, THE SAME COMES TO RS.15,03,381/-. THE LOSS AS DECLARED BY THE APPELLANT WOULD GET REDUCED ACCORDINGLY BY RS.15,03,381/-. IT IS DIRECTED TO BE TAKEN AT RS.1, 49,93,063/- INSTEAD OF RS.32,08,370/- ADOPTED BY THE AO. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. 6. FROM THE ABOVE ORDER OF THE LD. CIT(A), WE FIND THAT THE TAX EFFECT OF THE DEPARTMENTAL APPEAL IS BELOW THE LIMIT AS PRESC RIBED BY CBDT CIRCULAR NO.21/2015 DATED 10.02.2015. 7. DURING THE COURSE OF HEARING, THE LD. D.RS OBJE CTION IS THAT IN THIS CASE THERE IS A CURRENT YEAR LOSS AT RS.1,64,96,444/-. THEREFORE, IF THE LOSS IS TO BE CARRIED FORWARD THEN THE TAX EFFECT IS MORE THAN TH E LIMIT. BUT WE FIND THAT THE ASSESSEE HAS SUBMITTED THE DETAILS IN THE CHART WHI CH READ AS UNDER: CHART SHOWING DETAILS OF RETURNED INCOME OF THE RES PONDENT PARTICULARS ASSESSMENT YEAR HEADS OF INCOME INCOME FROM PROFIT AND GAINS OF BUSINESS OR PROFESSION INCOME UNDER THE HEAD SALARY LESS; DEDUCTION UNDER CHAPTER VIA TOTAL INCOME 2009-10 -1,64,96,444 - - 2010-11 -1,04,32.948 - - 2011-12 -10,84,441 - - 2012-13 BUSINESS DISCONTINUED 5,93,300 1,00,000 2013-14 - 5,15,860 - 2014-15 - 2,10,000 - 2015-16 - 2,60,000 - -1,64,96,444 -1,04,32.948 -10,84,441 4,93,300 5,15, 860 2,10,000 2,60,000 NOTE: THE DUE DATE FOR FILING OF RETURN FOR A.Y. 20 09-10 WAS 30.09.2009. HOWEVER, THE RETURN WAS FILED ON 11.11.2009. HENCE, THE RETURN WAS BELATED AND NO CARRY FORWARD AND SET-OFF IS ALLOWABLE UNDER THE ACT. 8. FROM THE ABOVE CHART AND THE NOTE, WE FIND THAT WHEN THE ASSESSEE HAS FILED THE BELATED RETURN NO CARRY FORWARD OF SET-OF F LOSS IS ALLOWABLE UNDER THE ACT. WE FIND THAT SIMILAR ISSUE HAS BEEN DECIDED B Y THE TRIBUNAL IN ITA ITA NO.1006/M/2015 SHRI HARISH K. KHANNA 4 NO.7135/M/2010 DECIDED ON 27.02.2014. FOR THE SAKE OF CONVENIENCE, THE RELEVANT PORTION IS REPRODUCED AS UNDER: 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE CITED ORDER OF THE TRIBU NAL (SUPRA). ON PERUSAL OF THE SAID ORDER OF THE TRIBUNAL, WE ARE OF THE OPINION THAT P ARA 5 TO 7 ARE RELEVANT IN THIS REGARD AND THE SAME ARE READ AS UNDER: WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL A S RELEVANT MATERIAL ON RECORD. THE RETURNED INCOME AND ASSESSED INCOME FOR BOTH THE YEARS ARE HAS UNDER: ASSESSMENT YEAR (A.Y.) RETURNED INCOME/(LOSS) (RS.) ASSESSED INCOME/(LOSS) (RS.) 2004 - 05 (31,77,12,979) (21,42,38,006) 2005 - 06 (25,86,96,170) (19,78,44,515) 5.1 THERE IS NO DISPUTE THAT THE RETURNED INCOME AS WELL AS THE ASSESSED INCOME ARE NEGATIVE, BEING A LOSS FOR BOTH THE YEAR S. THERE IS NO DISPUTE THAT FOR APPLYING THE INSTRUCTIONS REGARDING THE LIMIT P RESCRIBED BY THE CBDT FOR FILING OF THE APPEAL BY THE REVENUE, THE EFFECT OF THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND DELETED BY THE COMMISSION ER OF INCOME TAX(APPEALS) HAS TO BE TAKEN INTO ACCOUNT. BUT WHEN THE NET RESULT IS LOSS AND BY VIRTUE OF SECTION 79, THE SAID LOSS SHALL NO T BE CARRIED FORWARD AND SET OFF AGAINST THE INCOME OF THE SUBSEQUENT YEARS BY T HE REASON OF CHANGE OF MORE THAN 51% OF SHAREHOLDINGS OF THE ASSESSEE COMP ANY, THEN IN SUCH A SITUATION, IF THE TAX EFFECT IS LESS THAN THE LIMIT PRESCRIBED UNDER THE INSTRUCTIONS BY THE CBDT, THE APPEALS FILED BY THE REVENUE ARE NOT MAINTAINABLE AND LIABLE TO BE DISMISSED ON THIS GRO UND ALONE. 5.2 THE ASSESSEE HAS FILED THE DETAILS OF SHAREHOLD INGS DURING THE RELEVANT PERIOD AS UNDER: 5.3 AS IT IS CLEAR FROM THE DETAILS OF SHAREHOLDING THAT MORE THAN 51% OF THE SHARE HOLDING/VOTING RIGHTS HAVE CHANGED HANDS AND THEREFORE, THE BUSINESS LOSS FOR BOTH THESE YEARS IS NOT ELIGIBLE TO SET OF F IN THE SUBSEQUENT YEAR AS STIPULATED IN THE PROVISIONS OF SECTION 79 OF I T A CT. SR. NO. DATE OF AGM NAME OF THE SHAREHOLDERS NO. OF SHARES % OF HOLDING FINANCIAL YEAR END 1 2 3 09.09.04 28.07.05 15.09.06 IHCL ICICI EQUITY FUND IHCL IL & FS TRUST CO. LTD. IHCL 23,780,500 95,719,500 119,500,000 23,780,500 95,719,500 119,500,000 119,500,000 20% 80% 20% 80% MARCH 31, 2004 MARCH 31, 2005 ITA NO.1006/M/2015 SHRI HARISH K. KHANNA 5 6 ACCORDINGLY, WE HOLD THAT THE APPEAL FILED BY TH E REVENUE CANNOT BE TAKEN UP FOR DECISION ON MERITS AS THE TAX EFFECT I N THIS CASE IS ADMITTEDLY LESS THAN THE LIMIT PRESCRIBED IN THE CBDT CIRCULAR . WE, THEREFORE, DISMISS THE APPEALS FILED BY THE REVENUE AS NOT MAINTAINABL E. 7. WE MAY CLARIFY THAT THE ASSESSEE ITSELF HAS CLAI MED THAT THE LOSS OF THE YEARS UNDER CONSIDERATION CANNOT BE CARRIED FORWARD AND SET OFF IN THE SUBSEQUENT YEAR; THEREFORE, THE ASSESSEE IS NOT PER MITTED TO MAKE ANY SUCH CLAIM IN THE SUBSEQUENT YEAR. 6. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THA T THE APPEAL OF THE REVENUE CANNOT BE TAKEN FOR DECISION ON MERITS AS T HE TAX LIMIT IS LESS THAN THE LIMIT PRESCRIBED IN THE CBDT CIRCULAR. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 9. WE FIND THAT IN THE YEAR UNDER CONSIDERATION ASS ESSEE IS NOT ENTITLED FOR CARRY FORWARD OF CURRENT YEAR LOSS. THEREFORE, THE TAX EFFECT IS BELOW THE CIRCULAR LIMIT. HENCE, THE APPEALS IS NOT MAINTAIN ABLE. DURING THE COURSE OF HEARING, THE LD. A.R. HAS ALSO FILED THE PRAYER UND ER RULE 27 OF APPELLATE TRIBUNAL RULES, 1963 AND RAISED THE GROUNDS OF APPE AL IN TERMS OF RULE 27. WE HAVE GONE THROUGH THE APPLICATION AND FOUND THAT AS THE TELESCOPIC THEORY WAS DECIDED IN FAVOUR OF THE ASSESSEE, THE ASSESSEE DID NOT CHALLENGE THIS GROUND. BUT WHEN WE ARE DISMISSING THE DEPARTMENTAL APPEAL, THERE IS NO REASON TO ENTERTAIN THIS APPLICATION, HENCE, WE DO NOT ENTERT AIN THE PRAYER APPLICATION OF THE ASSESSEE AND HENCE, WE DISMISS THE SAME AND REV ENUES APPEAL IS ALSO DISMISSED AS NOT MAINTAINABLE, AS INDICATED ABOVE. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.07.2017. SD/- SD/- (MANOJ KUMAR AGGARWAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 28.07.2017. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI ITA NO.1006/M/2015 SHRI HARISH K. KHANNA 6 THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.