TABOOK FIN & INVT. P.LTD ( NOW MERGED WITH MAESTRO VENTURES P.LTD), MUMBAI V. ITO 1(3)(3), MUMBAI

ITA 106/MUM/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2477 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 02-03-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 05-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUJIT BANJAR
• Keywords: Reopening of assessment; Opportunity of being heard; Audit objection; Earning of tax free income; Reason to believe
• Section: 14A; 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI . . , , ! , ' BEFORE S/SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND AMARJIT SINGH, JUDICIAL MEMBER / I.T.A. NO.106/M/12 ( / ASSESSMENT YEAR: 2005-06) TABOOK FIN. & INVT. PVT. LTD. (NOW MERGED WITH MAESTRO VENTURES PVT. LTD.) PIRAMAL TOWER, GANPATRAO KADAM MARG, LOWER PAREL, MUMBAI 400013 / VS. INCOME TAX OFFICER 1(3)(3) MUMBAI $ ./ % ./ PAN/GIR NO. : AAACT1552D ( $& / APPELLANT ) .. ( '($& / RESPONDENT ) ASSESSEE BY: SHRI RONAK DOSHI DEPARTMENT BY: SHRI SUJIT BANJAR ) / DATE OF HEARING: 26.08.2015 *+, ) /DATE OF PRONOUNCEMENT: 18.11.2015 - / O R D E R PER AMARJIT SINGH, JM: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T ORDER DATED 17.02.2012 OF THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS)-2, MUMBAI [HEREINAFTER REFERRED TO AS THE LEARNED CIT(A)] I T RELATED TO THE ASSESSMENT YEAR 2005-06. THE GROUND BY THE ASSESSEE GIVE RISE TO FOLLOWING ISSUES:- A. VALIDITY OF REOPENING OF ASSESSMENT B. COMPUTATION OF DISALLOWANCE U/S. 14A OF THE ACT. ITA NO.106/M/12 ASSESSMENT YEAR: 2005-06 2 2. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD S. THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED U/S. 143(1) OF THE ACT. SUBSEQUENTLY, THE ASSESSING OFFICER REOPENED THE ASSESSMENT BY ISSUAN CE OF NOTICE U/S 147 OF THE ACT, ON ACCOUNT OF AUDIT OBJECTION WITH REGARD TO C OMPUTATION OF DISALLOWANCE MADE U/S 14A OF THE ACT. IN THE REOPENED ASSESSMEN T, ASSESSING OFFICER ADOPTED THE DISALLOWANCE WORKED OUT BY THE AUDIT PARTY AT R S.15379624/-. ACCORDINGLY, HE DISALLOWED THE SAME U/S 14A OF THE ACT. BEFORE LEARNED CIT(A) THE ASSESSEE CHALLENGED THE VALIDITY OF REOPENING AS WELL AS THE DISALLOWANCE COMPUTED BY THE ASSESSING OFFICER, BUT COULD NOT SUCCEED, HENCE , THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 3. FIRST ISSUE RELATES TO THE VALIDITY OF REOPENING OF ASSESSMENT. WE HAVE NOTICED THAT THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT BY RECORDING FOLLOWING REASONS:- IN THIS CASE THE RETURN OF INCOME HAS BEEN FILED O N 28.10.2006 DECLARING TOTAL INCOME OF RS.1,26,17,125/- AND ADJUSTED BOOK PROFIT U/S.115JB OF RS.2,89,73,877/- WHICH HAS BEEN PROCESSED U/S.143(1 ) OF THE I.T.ACT, 1961 ON 30/03/2006 ON THE RETURNED INCOME OF RS.1,26,17,125 /- AND ADJUSTED BOOK PROFIT OF RS.2,89,73,877/-. FROM THE RECORDS, IT IS NOTICED THAT THE ASSESSEE H AS MADE DISALLOWANCE OF RS.1,29,97,468/- U/S.14A OF THE I.T. ACT, 1961 IN R ESPECT OF INTEREST PAID FOR EARNING EXEMPT INCOME INSTEAD OF DISALLOWANCE OF RS.1,41,75 ,539/-. THIS HAS RESULTED INTO UNDER ASSESSMENT OF BOOK PROFIT OF RS.23,82,156/- A S WELL AS UNDER ASSESSMENT OF INCOME OF RS.23,82,156/-. IN THESE CIRCUMSTANCES, I HAVE REASON TO BELIEVE TH AT THE ASSESSMENT OF THE ASSESSEE FOR AY. 2005-06 HAS ESCAPED ASSESSMENT TO THE EXTENT OF RS.23,82,158/- IN RESPECT OF BOOK PROFIT COMPUTED U/S.115JB OF THE I. T. ACT 4. PERUSAL OF THE ABOVE SAID REASONS WOULD SHOW THA T THE ASSESSING OFFICER HAS APPLIED HIS MIND ON THE AUDIT OBJECTION AND HAS TAKEN AN INDEPENDENT VIEW TO COME TO THE CONCLUSION THAT THERE IS AN ESCAPEME NT OF INCOME. HOWEVER THE ORIGINAL ASSESSMENT FILED BY THE ASSESSEE WAS PROCE SSED U/S 143(1) OF THE ACT. UNDER THIS CIRCUMSTANCE, WE ARE OF THE VIEW THAT LD . CIT(A) WAS JUSTIFIED IN UPHOLDING THE VALIDITY OF REOPENING OF ASSESSMENT. ITA NO.106/M/12 ASSESSMENT YEAR: 2005-06 3 5. THE NEXT ISSUE RELATES TO COMPUTATION OF DISALLO WANCE U/S. 14A OF THE ACT. WE HAVE NOTICED THAT THE ASSESSING OFFICER SIMPLY A DOPTED THE WORKING GIVEN BY THE AUDIT PARTY WITHOUT PROPERLY CONSIDERING THE EX PLANATION FURNISHED BY THE ASSESSEE. WE, FURTHER, NOTICE THAT THE LD. CIT(A) HAS UPHELD THE COMPUTATION MADE BY THE ASSESSING OFFICER WITHOUT CRITICALLY AN ALYSING THE SAME. WE HAVE ALSO NOTICED THAT THE LEARNED CIT(A) HAS MADE REFER ENCE TO THE PROVISION OF RULE 8D BUT THE HONBLE JURISDICTIONAL BOMBAY HIGH COUR T IN THE CASE OF GODREJ BOYCE MFG. CO. 328 ITR 81 (BOMBAY) HAS UPHELD THAT RULE 8D SHALL HAVE OPERATION PROSPECTIVELY FROM ASSESSMENT YEAR 2008-0 9 ONWARDS, UNLESS THE DISALLOWANCE HAS TO BE COMPUTED ON A REASONABLE BAS IS. HENCE, THE ACTION OF LD. CIT(A) IN REFERRING TO PROVISION TO RULE 8D FOR THE YEAR UNDER CONSIDERATION DOES NOT SEEM JUSTIFIABLE. SINCE THE EXPLANATIONS OF THE ASSESSEE WITH REGARD TO THE WORKING OF DISALLOWANCE U/S. 14A OF THE ACT WER E NOT CONSIDERED PROPERLY AND SINCE THE ASSESSING OFFICER DID NOT REFER TO THE ACCOUNTS OF THE ASSESSEE, WE ARE OF THE VIEW THAT THIS ISSUE REQUIRES FRESH EXAM INATION AT THE END OF ASSESSING OFFICER. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND REFER THIS MATTER TO THE FILE OF ASSESSING OFFICER FOR FRESH CONSIDERATION AFTER PROVIDING NECESSARY OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS HER EBY PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH NOVEMBER, 2015 SD/- S D/- (B.R.BASKARAN) (AMARJIT SINGH) / ACCOUNTANT MEMBER ! /JUDICIAL MEMBER MUMBAI; / DATED : 18 TH NOVEMBER, 2015 MP MP MP MP ITA NO.106/M/12 ASSESSMENT YEAR: 2005-06 4 / COPY OF THE ORDER FORWARDED TO : 1. $& / THE APPELLANT 2. '($& / THE RESPONDENT. 3. 0 ( ) / THE CIT(A)- 4. 0 / CIT 5. 123 '!! , , / DR, ITAT, MUMBAI 6. 345 6 / GUARD FILE. / BY ORDER, (1 '! //TRUE COPY// / !' (DY./ASSTT. REGISTRAR) '# $ , / ITAT, MUMBAI