M/s. Sridevi Dairy Farms (P) Ltd, Bangalore V. DCIT, Bangalore

ITA 1095/BANG/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57436 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-12-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 20-09-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ARCHANA CHOWDHRY CITII
• Assessee Lawyers: P C CHADAGA ITP
• Keywords: Fair market value; Reassessment proceedings
• Section: 143(3); 153A; 147; 132

Judgement Text

PAGE 1 OF 17 ITA NOS.1093 TO 1095/BANG/20 10 1 INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES B BEFORE SHRI N K SAINI, ACCOUNANT MEMBER AND SHRI GEORGE GEORGE K, JUDICIAL MEMBER ITA NOS.1093 TO 1095/BANG/2010 (ASST. YEARS 2002-03 TO 2004-05) M/S SRIDEVI DAIRY FARMS (P) LTD., NO.356, 24 TH B CROSS, 9 TH MAIN, II STAGE, BANASHANKARI, BANGALORE-560 070. PAN :AAACCS6259. VS THE DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE- 1(1), BANGALORE. (APPELLANT) (RESPONDENT) DATE OF HEARING 12.01.2012 DATE OF PRONOUNCEMENT 20.01.2012 APPELLANT BY : SHRI P C CHADAGA, I TP RESPONDENT BY : SMT. ARCHANA CHOWDHRY , CIT-II O R D E R PER GEORGE GEORGE K : THESE THREE APPEALS OF THE ASSESSEE COMPANY ARE DI RECTED AGAINST THE ORDERS OF THE LD. CIT (A)-VI, BANGALORE DATED 22.7.2010 FOR THE ASSESSMENT YEARS (AYS) 2002-03 AND 2003-04 AND DATED 26.7.2010 FOR THE AY 2004-05 RESPECTIVELY. I. ITA NOS.1093 & 1094/B/2010 AYS 2002-03 & 03-04 : 2. THE ASSESSEE COMPANY (THE APPELLANT HENCEFORTH ) HAS RAISED FOUR IDENTICAL GROUNDS FOR THE AYS UNDER DISPUTE, IN WHI CH, GROUND NOS.1 & 4 BEING GENERAL IN NATURE AND NO SPECIFIC ISSUES INVO LVED, THEY HAVE BECOME PAGE 2 OF 17 ITA NOS.1093 TO 1095/BANG/20 10 2 NON-CONSEQUENTIAL. IN THE REMAINING GROUNDS, THE C RUX OF THE QUESTION IS CONFINED TO A SOLITARY ISSUE, NAMELY: THE AUTHORITIES BELOW ERRED IN TAKING A STAND THAT THE LOAN AVAILED BY THE APPELLANT FOR THE CONSTRUCTION OF FAMILY MART AND NOT FOR THE PURPOSE OF THE BUSINESS CARRIED BY THE APPELLANT. II. ITA NO.1095/B/2010 AY 2004-05: 2.1. FOR THIS AY, THE APPELLANT HAD RAISED A CORE ISSUE IN ITS THREE GROUNDS THAT THE CIT (A) ERRED IN CONFIRMING THE AOS ACTION IN DISALLOWING 1/5 TH OF INTEREST ON THE BANK LOAN ON THE GROUND THAT TH E ISSUE HAD BECOME FINAL BY VIRTUE OF THE ORIGINAL AS SESSMENT PROCEEDINGS. 3. AS THE ISSUES IN THESE APPEALS FOR ALL THE AYS UNDER CHALLENGE BEING ALMOST IDENTICAL AND RATHER INTER-LINKED PERT AINED TO THE SAME APPELLANT, FOR THE SAKE OF CONVENIENCE AND BREVITY, THEY WERE HEARD, CONSIDERED TOGETHER AND DISPOSED OFF BY THIS COMMON ORDER. 4. BRIEFLY STATED, THE APPELLANT WAS IN RECEIPT OF INCOME FROM DAIRY AND AGRICULTURE. THERE WAS AN ACTION U/S 132 OF THE ACT ON 24.8.2006 IN THE PREMISES OF THE APPELLANT AND CONSEQUENT OF WHICH, THE APPELLANT, AS REQUIRED, FURNISHED ITS RETURNS OF INCOME FOR THE A YS UNDER DISPUTE. LET US NOW DEAL WITH THE ISSUES PERTAINED TO TH E AYS 2002-03 & 03-04. PAGE 3 OF 17 ITA NOS.1093 TO 1095/BANG/20 10 3 ITA NOS.1093 & 1094/B/2010 AYS 2002-03 & 03-04 I. (I) DURING THE COURSE OF REASSESSMENT PROCEEDINGS U/S 1 53A OF THE ACT, IT WAS NOTICED BY THE AO THAT THE APPELLANT , IN ITS P & L ACCOUNT, HAD DEBITED RS.22,95,433/- AND RS.35,26,310/- FOR T HE AYS 2002-03 AND 2003-04 RESPECTIVELY AS FINANCE CHARGES AND OTHER EX PENSES. BEING QUERIED, IT WAS EXPLAINED THAT THE APPELLANT HAD AVAILED LOA NS FROM VARIOUS FINANCIAL INSTITUTIONS FOR DIFFERENT PURPOSES WHICH INCLUDED BUSINESS, PURCHASE OF CAR AND CONSTRUCTION OF SHOPPING MALL STYLED FAMILY MART UNDER JOINT VENTURE. IT WAS NOTICED BY THE AO THAT THE LOAN SANCTIONED BY REPCO BANK (A/C NO.44) WAS SPECIFICALLY FOR THE PURPOSE OF CONSTRUCT ION OF SHOPPING MALL; THAT THE SAID MALL WAS JOINTLY OWNED WITH TWO OTHER PERSONS AND INTENDED TO BE LET-OUT; WITH REGARD TO DEDUCTION TOWARDS INTERE ST PAID/PAYABLE; THE AO TOOK A VIEW THAT IT CANNOT BE CLAIMED UNDER THE HEA D INCOME FROM BUSINESS AND, ACCORDINGLY, THE INTEREST OF RS.12,03,504/- AND RS.22,84,970/- OUT OF RS.22.95 LAKHS AND RS.35.26 LAKHS CLAIMED AS DEDUCT IONS FOR THE AYS 02-03 AND 03-04 RESPECTIVELY WAS DISALLOWED. (II) AGGRIEVED, THE APPELLANT H AD, FOR BOTH THE AYS, APPROACHED THE CIT (A) FOR RELIEF. AFTER CONSIDERING THE APPE LLANTS SUBMISSIONS, THE CIT (A) HAD, IN HIS IDENTICAL REASONING, CONFIRMED THE DISALLOWANCES MADE BY THE AO. THE REASONS SET-OUT BY THE CIT (A) FOR CONF IRMING THE STAND OF THE AO FOR THE AY 02-03 WERE THAT 3.2.3. ON PERUSAL OF LETTER OF SANCTION OF LOAN BY THE REPATRIATES CO-OPERATIVE FINANCE & DEVELOPMENT BANK LTD., CHENNAI ON 15.05.2001, IT IS NOTICED THAT THE LOAN OF RS.290 LAKHS WAS SANCTIONED FOR THE PURPOSE OF PAGE 4 OF 17 ITA NOS.1093 TO 1095/BANG/20 10 4 CONSTRUCTION OF SHOPPING MALL WHICH IS NAMED AS FA MILY MART. IT IS ALSO EVIDENT FROM THE RECORD THAT THE BUSINESS OF THE APPELLANT UNDER THE ASSESSMENT YEAR UNDER CONSIDERATION WAS SALE OF MILK AND CURD, AS P ER SECTION 36(1)(III) OF THE INCOME TAX ACT, THE AMOUN T OF INTEREST PAID IN RESPECT OF THE CAPITAL BORROWED FO R THE PURPOSE OF BUSINESS OR PROFESSION IS ONLY AN ALLOWAB LE DEDUCTION. THE APPELLANT HAS TAKEN THE LOAN FOR TH E PURPOSE OF THE CONSTRUCTION OF THE SHOPPING MALL PA RT OF WHICH WAS LET OUT IN SUBSEQUENT YEAR AND AFTER THAT THE ENTIRE SHOPPING MALL WAS SOLD. IT IS WELL SETTLED THAT THE DEDUCTION UNDER SECTION 36(1)(III) CAN ONLY BE ALLOW ED WHEN THE ASSESSEE ESTABLISHES THAT THE MONEY BORROWE D WAS UTILIZED FOR THE BUSINESS CARRIED ON DURING THE ASSESSMENT YEAR. IT HAS BEEN HELD BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. SUJANI TEXT ILE PVT. LTD [151 ITR 653] THAT IT IS FOR THE ASSESSEE TO PROVE THAT EACH OF THE LOAN ON WHICH THE INTEREST H AS BEEN PAID IN THE YEAR IN QUESTION WAS UTILIZED FOR H IS BUSINESS CARRIED ON DURING THE YEAR. IN THE CASE OF THE APPELLANT, THE APPELLANT FAILED TO PROVE THAT THE B ORROWED FUND HAVE BEEN UTILIZED FOR THE PURPOSE OF THE BUSI NESS CARRIED ON DURING THE YEAR CONTRARY TO THAT THE AGREEMENT WITH THE BANK PROVES THAT THE LOAN WAS GI VEN FOR THE PURPOSE OF CONSTRUCTION OF THE SHOPPING COM PLEX, THE INCOME FROM WHICH IS OFFERED IN THE SUBSEQUENT YEARS UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND UNDER THE HEAD CAPITAL GAINS. THEREFORE, THE INT EREST EXPENSES DISALLOWED BY THE ASSESSING OFFICER ARE NO WAY CONNECTED WITH THE BUSINESS OF THE APPELLANT CARRIE D ON DURING THE YEAR. IT HAS ALSO BEEN HELD BY THE HONBL E MADRAS HIGH COURT IN THE CASE OF CIT V. M.S. VENKATESWARAN THAT INTEREST PAID ON BORROWED CAPITAL WILL BE ALLOWED AS DEDUCTION ONLY IF THE CAPITAL WAS BORROWED AND USED FOR THE PURPOSE OF BUSINESS IF IT IS USED FOR PURPOSE OTHER THAN BUSINESS THEN INTEREST TO THE EXTENT TO WHICH THE CAPITAL WAS SO USED WILL NO T BE ALLOWED AS PERMISSIBLE DEDUCTION UNDER THE PROVISIO NS OF PAGE 5 OF 17 ITA NOS.1093 TO 1095/BANG/20 10 5 SECTION 36(1)(III) OF THE INCOME TAX ACT. THE ASSESSING OFFICER APPLIED THE SAME PRINCIPLE WHILE DISALLOWIN G THE INTEREST OF RS.12,03,504/- OUT OF THE INTEREST EXPE NSES OF RS.22,95,433/- CLAIMED BY THE APPELLANT IN THE PR OFIT AND LOSS ACCOUNT. THE ASSESSING OFFICER AFTER EXAM INING THE UTILIZATION OF THE BORROWED FUND CAME TO THE CONCLUSION THAT OUT OF THE INTEREST OF RS.22,95,433 /- CLAIMED, THE INTEREST EXPENSES OF RSW.12,03,504/- A RE DIRECTLY RELATED TO THE CONSTRUCTION OF THE SHOPPING MALL AND NOT FOR THE PURPOSE OF THE BUSINESS CARRIED ON DURING THE YEAR. THEREFORE, THE ASSESSING OFFICER WAS JUST IFIED IN DISALLOWANCE OF INTEREST OF RS.12,03,504/-. FOR THE AY 2003-04 TOO, THE C IT (A) HAD TAKEN THE SIMILAR VIEW AND, ACCORDINGLY, CONFIRMED THE STAND OF THE AO . (III) AGITATED, THE APPELLA NT HAS COME UP WITH THE PRESENT APPEALS. IT WAS THE CONTENTION OF THE APPELLANT TH AT THE CIT (A) ERRED IN NOT APPRECIATING THE APPELLANTS SUBMISSION THAT TH E FAMILY MART WAS CONSTRUCTED AS A PART OF THE APPELLANTS BUSINESS A CTIVITY AND, HENCE, EVEN THOUGH THE INCOME THERE-FROM MIGHT HAVE BEEN ASSESS ED UNDER THE HEAD PROPERTY IN THE SUBSEQUENT YEARS, IN THE ASSESSMENT YEARS UNDER APPEAL, THE INTEREST ON BORROWED CAPITAL IS ALLOWABLE U/S 36(1) (III) OF THE ACT. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: S.G. MERCANTILE CORPORATION P. LTD V. CIT (1972) 83 ITR 700 (SC); & S.A. BUILDERS V. CIT (A) & ANR. 288 ITR 1 (SC) (IV) ON THE OTHER HAND, THE LD. D R ARGUED THAT THE APPELLANT HAD AVAILED THE BANK LOAN ALONG WITH OTHER TWO PERS ONS EXCLUSIVELY FOR THE PURPOSE OF CONSTRUCTION OF A SHOPPING MALL WHICH HA S APTLY BEEN EXPOSED BY THE AO IN HIS IMPUGNED ORDERS UNDER CHALLENGE. TH IS HAS BEEN SUSTAINED BY PAGE 6 OF 17 ITA NOS.1093 TO 1095/BANG/20 10 6 THE CIT (A) IN A JUDICIOUS MANNER. IT WAS, THEREFO RE, PLEADED THAT THE STAND OF THE AUTHORITIES BELOW REQUIRES NO INTERVENTION O F THIS BENCH . (V) WE HAVE CAREFULLY CONSIDER ED THE RIVAL SUBMISSIONS, DILIGENTLY PERUSED THE RELEVANT CASE RECORDS AND ALS O THE CASE LAWS ON WHICH THE APPELLANT HAS PLACED ITS CONFIDENCE. (VI) AT THE OUT-SET, WE WOULD LIKE TO REITER ATE, AS RIGHTLY HIGHLIGHTED BY THE CIT (A) IN HIS IMPUGNED ORDERS UN DER DISPUTE, THAT THE LOAN AMOUNT OF RS.290 LAKHS WAS SANCTIONED FOR THE PURPOSE OF CONSTRUCTION OF A SHOPPING MALL WITH TWO OTHER PERSONS. THIS FA CT HAS SINCE BEEN DEPICTED BY THE LETTER OF SANCTION OF LOAN DATED 15.5.2001 BY THE REPATRIATES CO- OPERATIVE FINANCE & DEVELOPMENT BANK LTD, CHENNAI [ COURTESY: PAGE 44 OF PB AR DT. 12.1.2012]. SECTION 36(1)(III) OF THE ACT P RESCRIBES THAT DEDUCTION CAN BE ALLOWED IF THE ASSESSEE ESTABLISHES THAT THE MONEY BORROWED HAS BEEN UTILIZED FOR THE BUSINESS CARRIED ON BY IT DURI NG THE ASSESSMENT YEAR. THIS HAS NOT BEEN PROVED EFFECTIVELY WITH ANY DOCUMEN TARY EVIDENCE BY THE APPELLANT. AT THIS JUNCTURE, IT IS MORE APPROPRIATE TO RECOLLECT THE RULING OF THE HONBLE MADRAS HIGH COURT ON A SIMILAR ISSUE IN THE CASE OF CIT V. SUJANI TEXTILE PVT. LTD REPORTED IN 151 ITR 653 (MAD) WHER EIN IT HAS BEEN OBSERVED THAT IT IS FOR THE ASSESSEE TO PROVE THAT EACH OF THE L OAN ON WHICH THE INTEREST HAS BEEN PAID IN THE YEAR IN QUESTION WAS UTILIZED FOR HIS BUSINESS CARRIED ON DURING THE YEAR. INCIDENTALLY, THE PRESENT APPELLANT HAS NOT BROUGHT ON RECORD ANY DOCUMENTARY EVIDENCE T O PROVE THAT THE LOAN ON WHICH INTEREST PAID IN THE YEARS IN QUESTION WAS UTILIZED FOR ITS BUSINESS CARRIED ON DURING THE YEAR. MOREOVER, IT HAS NOT BE EN EXPLICITLY PROVED THAT PAGE 7 OF 17 ITA NOS.1093 TO 1095/BANG/20 10 7 THE CONSTRUCTION OF THE SHOPPING COMPLEX FOR WHICH IT AVAILED BANK LOAN GOT ANYTHING TO DO WITH ITS DAIRY BUSINESS DURING THE REL EVANT PERIOD UNDER CONSIDERATION. WE HAVE, WITH DUE RESPECTS, PERUSED THE CASE LAWS ON WHICH THE APPELLANT PLACED RELIANCE AND TO REITERATE THAT THE RULINGS OF THE HONBLE APEX COURT ARE ON THE DIFFERENT FOOTING WHICH HAVE NO RELEVANCE TO THE ISSUE ON HAND. (VII) CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE ISSUE AS RECOUNTED SUPRA AND IN CONFORMITY WITH THE RULING OF THE HONBLE MADRAS HIGH COURT CITED, WE ARE OF THE CONSIDERED VIEW THA T THE STAND OF THE AUTHORITIES BELOW IS IN CONFORMITY WITH THE PROVISIO NS OF THE ACT AND ALSO WITH THE JUDICIAL VIEW ON A SIMILAR ISSUE. IT IS O RDERED ACCORDINGLY. THUS, THE APPEALS FOR THE AYS 2002-03 AND 2003-04 STAND DECID ED AGAINST THE APPELLANT. LET US NOW MOVE ON TO DEAL WIT H THE APPELLANTS GRIEVANCE FOR THE AY 2004-05. II. ITA NO.1095/B/2010 AY 2004-05: (I) THE MAIN GRIEVANCE OF THE APPELLANT WAS THAT FOR HAVING DISALLOWED THE INTEREST ON THE LOAN TAKEN FOR CONST RUCTION OF FAMILY MART IN THE ASSESSMENT YEARS 2002-03 AND 2003-04, THE AO SHO ULD HAVE ALLOWED 1/5 TH OF SUCH INTEREST IN THE ASSESSMENT YEAR UNDER CONSI DERATION AS PER LAW. FOR HAVING FAILED TO GET ANY RELIEF AT THE REASSESS MENT PROCEEDINGS, THE APPELLANT HAD APPROACHED THE FIRST APPELLATE AUTHOR ITY WITH A PLEA THAT DURING THE YEAR UNDER CONSIDERATION, IT HAD SHOWN TH E INCOME UNDER THE HEAD HOUSE PROPERTY FROM LETTING OUT FAMILY MART FOR WHICH THE BORROWINGS PAGE 8 OF 17 ITA NOS.1093 TO 1095/BANG/20 10 8 WERE MADE FROM REPCO BANK. THEREFORE, IT WAS ARGUE D, THE INTERESTS WHICH HAVE BEEN DISALLOWED IN THE AYS 2002-03 AND 2003-04 TO BE ALLOWED AS PER EXPLANATION TO S.24 OF THE ACT. (II) AFTER CONSIDERATION OF THE APPELLANTS CONT ENTIONS, THE CIT (A) HAD, IN FACT, DEALT WITH THE ISSUE IN A COMPREH ENSIVE AND ILLUSTRATIVE MANNER, THE RELEVANT PORTIONS OF HIS FINDINGS ARE E XTRACTED AS UNDER: 3.3.2. ON PERUSAL OF THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT ON 14.11.2005 IN THE ORIGINAL ASSESSMENT PROCEEDINGS, IT IS NOTICED THAT EVEN THO UGH THE APPELLANT DECLARED THE INCOME UNDER THE HEAD I NCOME FROM HOUSE PROPERTY AT RS.16,49,654/- AFTER CLAIMIN G THE DEDUCTIONS U/S 24 OF THE ACT WHICH INCLUDES REDUCTION OF FAIR MARKET VALUE BY MUNICIPAL TAXES OF RS.3,12,925/-, DEDUCTION EQUAL TO 30% OF THE ANNUAL VALUE AND THE INTEREST ON THE BORROWED CAPITAL TO THE EXT ENT OF RS.27,78,255/- FROM WHICH IT IS EVIDENT THAT THE IN TEREST IN THE BORROWED CAPITAL CLAIMED BY THE APPELLANT HAS BEEN ALLOWED AS DEDUCTION. 3.3.3. ON PERUSAL OF THE RECORDS, IT IS NOTICED TH AT THE APPELLANT FILED THE RETURN OF INCOME U/S 139(1) OF THE ACT ON 30.10.2004 DECLARING TOTAL INCOME AT RS.20,58,63 50/-, THE RETURN WAS PROCESSED U/S 143(1) AND THE RESULTA NT REFUND OF RS.1,93,559/- WAS ISSUED TO APPELLANT. T HE ASSESSMENT WAS TAKEN UP UNDER SCRUTINY BY ISSUE OF NOTICE U/S 143(2) OF THE ACT AND THE ORDER U/S 143 OF THE ACT WAS PASSED ON 14.11.2005 ACCEPTING THE RETURNED INCOME. THEREFORE, PASSING ORDER U/S 143(3) OF THE ACT IN THE ORIGINAL ASSESSMENT PROCEEDINGS, RETURNED IN COME BECOME FINAL. THE TOTAL INCOME DECLARED IN THE RE TURN OF INCOME FILED IN RESPONSE TO NOTICE U/S 153A IS THE SAME WHICH WAS DECLARED IN THE RETURN OF INCOME FILED U/ S 139(1) AND ACCEPTED U/S 143(3) OF THE ACT. IN THE RETURN PAGE 9 OF 17 ITA NOS.1093 TO 1095/BANG/20 10 9 OF INCOME FILED U/S 139(1) OF THE ACT, THE APPELLAN T OFFERED THE INCOME UNDER THE HEAD INCOME FROM HOUS E PROPERTY AT RS.16,49,654/- AFTER CLAIMING DEDUCTION U/S 24 OF THE ACT ON INTEREST ON BORROWED CAPITAL AT RS.27,78,255/-FOR CONSTRUCTION OF THE SHOPPING COMP LEX INCOME FROM WHICH IS SHARED BY THREE CO-OWNERS INCLU DING THE APPELLANT. THUS, THE ABOVE ARGUMENT IS IN REGAR D TO THE INCOME WHICH HAVE BECOME FINAL IN ORIGINAL ASSESSMENT PROCEEDINGS. THEREFORE, THE ISSUE IS TO BE DETERMINED HERE IS AS TO WHETHER THE APPELLANT IS ENTITLED TO AGITATE THE ISSUES WHICH BECOME FINAL I N THE ORIGINAL ASSESSMENT PROCEEDINGS?, CONSIDERING THE F ACT THAT IN THE PROCEEDINGS U/S 153A THE INCOME UNDER T HE HEAD INCOME FROM HOUSE PROPERTY WAS ACCEPTED AS ASSESSED IN THE REGULAR ASSESSMENT PROCEEDINGS WITH OUT ANY MODIFICATION. CLAUSE (B) OF SUB-SECTION (1) OF S. 153A PROVIDES THAT AFTER THE RETURN IS FILED IN RESPONSE TO NOTICE U/S 153A, THE AO SHALL ASSESS OR REASSESS THE TOTAL INCOME OF SIX ASSESSMENT YEAR IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIO US YEAR IN WHICH SEARCH IS CONDUCTED OR REQUISITION IS MADE, THE WORDING ASSESS OR REASSESS THE TOTAL INCOME USED IN S.153A IS SIMILAR TO THE WORDING USED IN S.147 OF T HE ACT WHICH PROVIDE THAT IF THE ASSESSING OFFICER HAS RE ASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPE D ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF S.148 TO 153, ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX W HICH HAS ESCAPED ASSESSMENT. THE PURPOSE OF USING THE WORDS ASSESS OR REASSESS IN S.147 HAS BEEN FURNISHED EV EN THOUGH THE INCOME IS ASSESSABLE UNDER THE ACT, AND ALSO WHERE THE RETURN OF INCOME HAS BEEN FURNISHED BUT N O ASSESSMENT HAS BEEN MADE, S. 147 EMPOWERS THE AO TO ASSESS THE INCOME FIRST TIME WHICH HAVE BEEN ESCAPED WHEREAS IN THE CASE WHERE THE ASSESSMENT HAS ALREAD Y BEEN COMPLETED U/S 143(1) OR 143(3) OR 147, THE AO FOR TAXING THE ESCAPED INCOME HAS TO REASSESS THE INCOME. S.153A OF THE ACT ALSO PROVIDE FOR THE TWO SITUATIO NS PAGE 10 OF 17 ITA NOS.1093 TO 1095/BANG/2 010 10 DISCUSSED ABOVE, I.E., IN THE CASE WHERE NO RETURN OF INCOME HAS BEEN FILED OR THE RETURN OF INCOME FILED BUT NO ASSESSMENT HAS BEEN MADE, THE INCOME HAS TO BE ASSESSED AND WHERE THE INCOME HAS ALREADY BEEN ASSESSED U/S 143(1) OR 143(3) OR 147, THE INCOME H AS TO BE REASSESSED. THE ONLY DIFFERENCE BETWEEN THE PROCEEDINGS U/S 153A TO BROUGHT ESCAPED INCOME TO T AX IS THAT IN THE CASE OF S. 153A AS THE SEARCH IS CON DUCTED, THE AO HAS NOT TO FOLLOW THE PROCEDURE LAID DOWN U/ S 148, 149 AND 151 OF THE ACT WHICH IS EVIDENT FROM T HE PLAIN READING OF S. 153A WHICH BEGINS WITH NOT WITHSTANDING ANYTHING CONTAINED IN SECTION 139, SECT ION 147, SECTION 148, SECTION 149, SECTION 151 AND SECT ION 153, SIMILARLY, TIME LIMIT PRESCRIBED UNDER SECTION 153 WILL NOT BE APPLICABLE TO THE PROCEEDINGS U/S 153A BECAUSE, THE TIME LIMIT FOR MAKING ASSESSMENT OR REASSESSMENT HAVE BEEN PROVIDED IN S.153B OF THE ACT. THE READING OF THE SECTIONS 153A, 153B, 153C AND 15 3D WHERE THE WORD ASSESS OR REASSESS, ASSESSMENT OR REASSESSMENT, ASSESS OR REASSESS, AND ASSESSMENT OR REASSESSMENT ARE USED MAKES IT CLEAR THAT ALL THE PRINCIPLES FOR DETERMINATION OF THE INCOME OF REASSESSMENT WILL BE APPLICABLE IN THE CASES OF REASSESSMENT U/S 153A OF THE ACT. IN THE CASE OF T HE APPELLANT, AS THE INCOME RETURNED HAS ALREADY BECOM E FINAL IN THE ORIGINAL ASSESSMENT PROCEEDINGS, THE E SCAPED INCOME BROUGHT TO TAX UNDER THE PROCEEDINGS U/S 153 A THUS COMES UNDER REASSESSMENT AND IN THE REASSESSME NT PROCEEDINGS, THE APPELLANT CANNOT AGITATE THE ISSUE S WHICH HAVE BECOME FINAL IN THE ORIGINAL ASSESSMENT PROCEEDINGS. (III) EXTENSIVELY QUOTING THE RAT IOS LAID DOWN BY THE JUDICIARY, CHIEFLY, IN THE CASES OF MADHAVJEE DAMODAR THACKERSAY V. CIT 3 ITR 457 (BOM ); HIRALAL V. CIT 121 ITR 89 (RAJ); SIR SHADILAL AND SONS V. CIT 92 ITR 453 (ALL); PAGE 11 OF 17 ITA NOS.1093 TO 1095/BANG/2 010 11 CWT V. RAVINDRAN 107 ITR 547 (KER); CWT V. BALLARPUR INDUSTRIES LTD 118 ITR 711 (BOM) ; CHETTINAD CORPORATION PVT. LTD. V. CIT 147 ITR 57 (MAD) THE CIT (A) HAD FURTHER OBSERVED THAT THE HONBLE SUPREME COURT IN THE CASE OF CIT V. SU N ENGINEERING WORKS PVT. LTD (198 ITR 297) AFTER ANALYZING SEVERAL DECISIONS INCLUDING THE DECISIONS QUOTED ABOVE HELD THAT THE TRIBUNAL RIGHTLY FOUND THAT THE LOSS WHICH THE ASSESSEE WANTED TO BE SET OFF AGAINST THE ESCAPED INCOME COULD NOT BE ALLOWED TO BE SET OFF BECAUSE IN THE ORIGINAL ASSESSMENT PROCEEDINGS, NO SET OFF WAS CLAIMED OR PERMITTED AND THE ORIGINAL ASSESSMEN T HAD ACQUIRED FINALITY WHEN THE APPEAL AGAINST THE OR DER OF ASSESSMENT FAILED BEFORE THE APPELLATE ASSISTANT COMMISSIONER AND THE ASSESSEE TOOK NO FURTHER STEPS TO AGITATE THE ISSUE. THE TRIBUNAL WAS ALSO RIGHT IN CONCLUDING THAT THE ITEMS WHICH THE ASSESSEE WANTED TO BE TAKEN INTO ACCOUNT IN THE PROCEEDINGS UNDER SECT ION 147 OF THE ACT WERE UNCONNECTED WITH THE ESCAPEMENT OF INCOME. THE HIGH COURT CLEARLY FELL IN ERROR IN HOL DING OTHERWISE. SINCE THE ORIGINAL ASSESSMENT HAD BEEN CONCLUDED FINALLY AGAINST THE ASSESSEE, IT WAS NOT PERMISSIBLE FOR THE ASSESSEE IN THE REASSESSMENT PROCEEDINGS TO SEEK A REVIEW/REVISION OF THE CONCLU DED ASSESSMENT FOR THE PURPOSE OF COMPUTATION OF THE ESCAPED INCOME. IN VIEW OF THE ABOVE, IT IS CLEAR THAT ONCE THE ORI GINAL (ASSESSMENT) HAS BEEN CONCLUDED, THE APPELLANT CANN OT AGITATE THE ISSUE WHICH BECOME FINAL IN THE ORIGINA L ASSESSMENT PROCEEDINGS. (IV) NOT SATISFIED WITH THE OBSERVATION S OF THE CIT (A), THE APPELLANT HAS COME UP BEFORE THIS BENCH FOR RELIEF. IT WAS CONTENDED THAT THE APPELLANT HAD SHOWN THE INCOME UNDER THE HEAD HOUSE PROPERTY FROM PAGE 12 OF 17 ITA NOS.1093 TO 1095/BANG/2 010 12 LETTING OUT FAMILY MART AND, THEREFORE, 1/5 TH OF THE INTEREST WHICH HAS BEEN DISALLOWED IN THE AYS 2002-03 AND 03-04, BUT, AS P ER S.24 OF THE ACT WHICH STATES THAT WHERE THE PROPERTY HAS BEEN ACQUIRED OR CONSTRUCTED WITH BORROWED CAPITAL, THE INTEREST, IF ANY, PAID ON SUCH BORROWED CAPITAL FOR THE PERIOD PRIOR TO PREVIOUS YEAR IN WHICH THE PROPERTY H AS BEEN ACQUIRED OR CONSTRUCTED, AS REDUCED BY ANY PART THEREOF ALLOWED A S DEDUCTION UNDER ANY OTHER PROVISION OF THIS ACT, SHALL BE DEDUCTED UNDE R THIS CLAUSE IN EQUAL INSTALLMENT FOR THE SAID PREVIOUS YEAR AND FOR EACH OF FOUR IMMEDIATELY SUCCEEDING PREVIOUS YEAR. IT WAS, FURTHER, CONTENDED THAT EVEN IF THE INTEREST DURING THE PERIOD OF CONSTRUCTION OF FAMI LY MART U/S 36(1)(III) HAD NOT BEEN CLAIMED, THE SAME OUGHT TO HAVE BEEN ALLOW ED SUO MOTU BY THE AO IN HIS ORDER DATED 31.12.2008 AS ALL THE THREE ORDE RS HAVE BEEN PASSED SIMULTANEOUSLY. WITH REGARD TO THE OBSERVATION OF T HE CIT(A) THAT SINCE THE ORIGINAL ORDER WAS CONCLUDED U/S 143(3) OF THE ACT ACCEPTING THE RETURNED INCOME, THE ISSUE WHICH HAD BECOME FINAL CANNOT BE RE-AGITATED U/S 153A OF THE ACT, IT WAS CONTENDED THAT THE RULING OF THE HO NBLE SUPREME COURT IN THE CASE OF SUN ENGINEERING WORKS PVT. LTD CITED SU PRA WAS RENDERED IN THE CONTEXT OF PROCEEDINGS U/S 147 OF THE ACT; THAT THE PROCEEDINGS U/S 147 AND 153A OF THE ACT ARE DIFFERENT IN THE SENSE THAT ONC E A SEARCH TAKES PLACE, A RE-ASSESSMENT FOR THE PERIOD PRESCRIBED IN THE SECT ION IS A MUST WHETHER THERE IS ESCAPEMENT OR NOT WHICH MEANS THE ORIGINAL ASSESSMENT IS TOTALLY EFFACED AND A FRESH ASSESSMENT HAS TO BE MADE. THO UGH CONCEDED THAT NO CLAIM WAS MADE DURING THE PROCEEDINGS U/S 153A OF T HE ACT ALSO, IT WAS CONTESTED THAT SUCH A CLAIM HAD BEEN MADE U/S 36(1) (III) OF THE ACT ITSELF IN THE EARLIER YEARS. IT WAS, FURTHER, ARGUED THAT EVE N THE PRESENT CLAIM OF THE APPELLANT WAS WITHOUT PREJUDICE TO ITS CLAIM TH AT THE INTEREST DURING THE PAGE 13 OF 17 ITA NOS.1093 TO 1095/BANG/2 010 13 CONSTRUCTION PERIOD WAS ALLOWABLE DURING THE AYS 20 02-03 AND 03-04. STRONG RELIANCE WAS PLACED IN THE RULINGS OF THE HO NBLE SUPREME COURT IN THE CASES OF (I) NATIONAL THERMAL POWER CO. LTD V. CIT (229 ITR 323- SC) AND (II) GOETZ (INDIA) LTD V. CIT (284 ITR 323 SC ). THE LD. D R PRESENT WAS DULY HEARD . (V) AT A GLIMPSE OF THE ASSES SMENT ORDER CONCLUDED U/S 143(3) READ WITH S. 153A OF THE ACT, IT WAS NOTICED THAT N EITHER THERE WAS ANY TRACE OF THE APPELLANT PUT A CLAIM OF 1/5 TH OF INTEREST [FOR HAVING DISALLOWED SUCH INTEREST ON BANK LOAN FOR CONSTRUCTION OF FAM ILY MART IN THE AYS 2002-03 AND 03-04] NOR WAS THERE ANY OBSERVATION OF THE AO IN REJECTING THE CLAIM. (VI) REVERTING BACK TO THE ISSUE ON HAND, THE MAIN CONTENTION OF THE APPELLANT COMPANY BEING THAT THE INTERESTS WH ICH HAVE BEEN DISALLOWED IN THE AYS 2002-03 AND 03-04 OUGHT TO HA VE BEEN ALLOWED IN THE AY UNDER CONSIDERATION. TO SUPPORT ITS CONTENTION, THE APPELLANT TOOK SHELTER UNDER EXPLANATION TO S.24 OF THE ACT WHICH SAYS: EXPLANATION-WHERE THE PROPERTY HAS BEEN ACQUIRED OR CONSTRUCTED WITH BORROWED CAPITAL, THE INTEREST, IF ANY, PAYABLE ON SUCH CAPITAL BORROWED FOR THE PERIOD PRIO R TO THE PREVIOUS YEAR IN WHICH THE PROPERTY HAS BEEN ACQUIRED OR CONSTRUCTED, AS REDUCED BY ANY PART THERE OF ALLOWED AS DEDUCTION UNDER ANY OTHER PROVISION OF TH IS ACT, SHALL BE DEDUCTED UNDER THIS CLAUSE IN EQUAL INSTALLMENTS FOR THE SAID PREVIOUS YEAR AND FOR EACH OF THE FOUR IMMEDIATELY SUCCEEDING PREVIOUS YEARS. HOWEVER, IN THE PRESENT CASE THE ORIGINAL ASSESSMEN T WAS CONCLUDED U/S 143(3) OF THE ACT IN WHICH THE APPELLANT HAD DECLAR ED UNDER THE HEAD PAGE 14 OF 17 ITA NOS.1093 TO 1095/BANG/2 010 14 INCOME FROM HOUSE PROPERTY AFTER CLAIMING DEDUCTIO N U/S 24 OF THE ACT, AMONG OTHERS, INTEREST ON THE BORROWED CAPITAL TO T HE EXTENT OF RS.27.78 LAKHS. THIS ACTION OF THE APPELLANT UNAMBIGUOUSLY E XHIBITS THAT THE INTEREST ON THE BORROWED CAPITAL CLAIMED BY THE APPELLANT HAS DULY BEEN ALLOWED AS DEDUCTION. THUS, ONCE THE ASSESSMENT WAS ORIGINALL Y CONCLUDED U/S 143(3) OF THE ACT, THE INCOME SO ASSESSED HAS BECOME FINAL. INCIDENTALLY, THE TOTAL INCOME DECLARED IN THE RETURN OF INCOME, IN COMPLIA NCE TO S.153A OF THE ACT WAS ALSO THE SAME AS ADMITTED WHILE FURNISHING THE RETURN U/S 139(1) OF THE ACT WHICH WAS ACCEPTED BY THE REVENUE U/S 143 (3) OF THE ACT AFTER DUE VERIFICATION AND ALSO CONSIDERATION OF THE DETAILS SO FURNISHED WHEREIN THE APPELLANT HAD OFFERED RS.16,49,654/- UNDER THE HEAD INCOME FROM HOUSE PROPERTY AFTER CLAIMING DEDUCTION U/S 24 OF THE ACT (ON INTEREST ON BORROWED CAPITAL OF RS.27.78 LAKHS FOR CONSTRUCTION OF FAMILY MART, INCOME FROM IT WAS SHARED BY THE CO-OWNERS INCLUDING THE AP PELLANT). ACCORDINGLY, THE INCOME OF THE APPELLANT HAD BECOME FINAL IN THE ORIGINAL ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT. WHILE CONCLUDIN G THE PROCEEDINGS U/S 153A OF THE ACT TOO, THE INCOME UNDER THE HEAD INC OME FROM HOUSE PROPERTY WAS ACCEPTED AS HAS BEEN ASSESSED IN THE R EGULAR/ORIGINAL ASSESSMENT U/S 143(3) OF THE ACT WITHOUT ANY ALTERAT ION. (VII) AS DELIBERATED UPON BY T HE CIT (A) IN HIS IMPUGNED ORDER, THE RELEVANT PORTION OF WHICH HAS BEEN EXTRACTED SU PRA, WE ARE IN AGREEMENT WITH THE OBSERVATIONS OF THE CIT (A) THAT THE INCOM E RETURNED BY THE APPELLANT HAS ALREADY BECOME FINAL IN THE ORIGINAL A SSESSMENT PROCEEDINGS; ONLY THE ESCAPED INCOME BROUGHT TO TAX IN THE PROCEE DINGS U/S 153A ACT AND, THEREFORE, THE APPELLANT CANNOT AGITATE AN ISSUE DU RING REASSESSMENT PAGE 15 OF 17 ITA NOS.1093 TO 1095/BANG/2 010 15 PROCEEDINGS WHICH HAS ALREADY REACHED ITS FINALITY IN THE ORIGINAL ASSESSMENT PROCEEDINGS ITSELF. (VIII) IT IS MOST APPROPRIATE TO RECALL THE R ULING OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF SIR SHADILAL AN D SONS V. CIT [92 ITR 453 (ALL)] IN WHICH, THE HONBLE COURT HAS HELD THA T ON REASSESSMENT, THE ENTIRE ASSESSMENT IS NOT OPEN AND, THEREFORE, A CLA IM FOR EXPENDITURE WHICH HAVE BEEN DISALLOWED DURING THE ORIGINAL ASSESSMENT PROCEEDINGS CANNOT BE RE-AGITATED ON THE ASSESSMENT BEING REOPENED FOR BR INGING TO TAX INCOME WHICH HAD ESCAPED THE ASSESSMENT. IT WAS FURTHER HELD THAT THE CONTROVERSY IN REASSESSMENT WAS CONFINED TO THE MATT ER WHICH WAS RELEVANT IN RESPECT OF THE INCOME WHICH HAD NOT BEEN BROUGHT TO TAX DURING THE COURSE OF THE ORIGINAL ASSESSMENT. (IX) YET IN AN IDENTICAL RULING, THE HONBLE K ERALA HIGH COURT IN THE CASE OF CWT V. RAVINDRAN REPORTED IN 107 ITR 54 7 (KER) HAD HELD THAT DURING THE REASSESSMENT PROCEEDINGS INITIATED BY THE WTO TO ASSESS THE ESCAPED NET WEALTH U/S 17(1) OF THE W.T. ACT, 1957, AN ASSESSEE COULD NOT, DURING THE REASSESSMENT PROCEEDINGS TO TAX THE ESCA PED NET WEALTH, BE ALLOWED TO SEEK RE-COMPUTATION OF NET WEALTH AND RE DOING OF THE ASSESSMENT AND BE ALLOWED A CLAIM WHICH THE ASSESSEE HAS FAILE D TO MAKE AT THE TIME OF THE REGULAR ASSESSMENT, ESPECIALLY WHEN THAT THE ASS ESSMENT OF THE ASSESSEE HAD BECOME FINAL, THE BENCH OBSERVED THAT THERE WAS NO MATERIAL DIFFERENCE IN THIS RESPECT BETWEEN THE PROVISIONS O F THE INCOME-TAX ACT, 1961 AND THE WEALTH-TAX ACT, 1957. PAGE 16 OF 17 ITA NOS.1093 TO 1095/BANG/2 010 16 (X) ABOVE ALL, THE HONBLE SU PREME COURT IN ITS RULING IN THE CASE OF CIT V. SUN ENGINEERING WORKS PVT. LTD. [198 ITR 297 (SC)] OBSERVED THAT THE LOSS WHICH THE ASSESSEE WANTED TO BE SET OFF AG AINST THE ESCAPED INCOME COULD NOT BE ALLOWED TO BE SET OFF BECAUSE IN THE ORIGINAL ASSESSMENT PROCEEDINGS, NO SET OFF WAS CLAIMED OR PERMITTED AND THE ORIGINAL ASSESSMENT HAD ACQUIRED FINALITY WHEN THE APPEAL AGA INST THE ORDER OF ASSESSMENT FAILED BEFORE THE APPELLATE ASST. COMMIS SIONER AND THE ASSESSEE TOOK NO FURTHER STEPS TO AGITATE THE ISSUE. WE HAVE PERUSED THE CASE LAWS ON WHICH THE APPEL LANT REPOSED ITS CONFIDENCE AND TO REITERATE THAT THE RATIOS LAI D DOWN BY THE JUDICIARY ARE NOT DIRECTLY APPLICABLE TO THE ISSUE UNDER DISPUTE W HICH IS ON A DIFFERENT FOOTING. (XI) TAKING INTO ACCOUNT ALL THE FACTS AND CIR CUMSTANCES OF THE ISSUE AS DISCUSSED IN THE FOREGOING PARAGRAPHS, WE ARE OF THE CONSIDERED VIEW THAT THE CIT (A) WAS JUSTIFIED IN TAKING A STA ND THAT THE APPELLANT CANNOT AGITATE THE ISSUE WHICH HAS ALREADY BECOME FI NAL IN THE ORIGINAL ASSESSMENT PROCEEDINGS. IT IS ORDERED ACCORDINGLY. 5. IN THE RESULT , THE APPELLANTS APPEALS FOR THE ASSESSMENT YEARS 200203, 2003-04 AND 2004-05 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH DAY OF JANUARY, 2012 SD/- SD/- (N K SAINI) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER PAGE 17 OF 17 ITA NOS.1093 TO 1095/BANG/2 010 17 COPY TO:- 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONC ERNED 4. THE CIT(A) CONCERNED 5. THE DR 6. GF MSP/- BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.