Shantikrupa Estate Pvt. Ltd., Ahmedabad V. The ACIT, (OSD) Circle-8, Ahmedabad

ITA 1252/AHD/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0617 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 11-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Depreciation; Opportunity of being heard; Maximum Marginal Rate; Assessment record; Reason to believe
• Section: 143(3); 142(1); 14A; 263

Judgement Text

ITA NO . 1252 / AHD/20 1 5 A.Y. 20 10 - 11 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH, AHMEDABAD BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO. 1 25 2 / AHD /201 5 ASSESSMENT YEAR : 20 10 - 11 SHANTIKRUPA ESTATE PVT. LTD. , VS. A.C.I.T. (OSD), 901, MILESTONE BUILDING, CAIRCLE - 8, AHMEDABAD. OPP. T.V. TOWER, DRIVE IN ROAD, THALTEJ, AHMEDABAD 380 054. [ PAN A AI CS 1495 E ] (APPELLANT ) (RESPONDENT) A PPELLANT BY : S HRI S.N. SOPARKAR, A.R. RE SPONDENT BY : S HRI ANIL KUMAR, C.I.T. (D.R.) DATE OF HEARING : 2 1 .0 6 . 20 16 DATE OF PRONOUNCEMENT : 09. 0 9 .2016 O R D E R PER S.S. GODARA , J.M. TH IS ASSESSEE S APPEAL FOR A SSESSMENT Y EAR 20 10 - 11 , ARISE S FROM ORDER OF THE PR. CIT - 4 , AHMEDABAD DATED 1 3. 0 3 .201 5 , IN P ROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. WE COME TO RELEVANT FACTS FIRST . T HIS ASSESSEE IS COMPANY DEALING IN REAL ESTATE DEVELOPMENT/ CONSTRUCTION ACTIVIT IES . IT FIL E D RETURN STATING INCOME OF RS.23,33,424/ - . T HE A SSESSING OFFICER COMPLETED REGULAR ASSESSMENT INTER ALIA MAKING DISALLOW ANCES/ADDITIONS UNDER SECTION 14A , DEPRECIATION OF CELLULAR PHONES AND THAT OF UNABSO R BED BUSINESS LOSSES AMOUNTING TO RS.6,10,847/ - , RS. 56,512/ - & RS. 30,08,008/ - ; RESPECTIVELY. ITA NO . 1252 / AHD/20 1 5 A.Y. 20 10 - 11 PAGE 2 OF 6 3. IT TRANSPIRES FROM THE CASE FILE THAT THE CIT THEREAFTER FORMED REASON TO BELIEVE THAT THE ABOVE STATED REGULAR ASSESSMENT FRAMED IN ASSESSEE S CASE WAS ERRONEOUS CAUSING PREJUDICE TO THE INTEREST OF THE REVENUE. HE SOUGHT TO R E VISE THE SAME UNDER SECTIO N 263 OF THE ACT VIDE SHOW CAUSE NOTICE DATED 21.01.2015 AS FOLLOWS : - 2. ON VERIFICATION OF ASSESSMENT RECORDS, IT IS SEEN THAT FOR A . Y . 2010 - 11, THE ASSESSEE COMPANY HAD PAID THE INTEREST TO PERSONS SPECIFIED U/S. 40A(2)(B) OF THE ACT AS UNDER : - SR. NO . NAME OF PERSON AMOUNT PERCE - NTAGE RELATIONSHIP EXCESS INTEREST PAID(RS) 1. MR. VASANT S. ADANI 15,10,821 / - 10% DIRECTOR 00 2. MUNDRA PORT & SPECIAL ECONOMIC ZONE 81,07,398 / - 18% RELATIVE OF THE DIRECTOR IS DIRECTOR IN THE COM PANY 36,03,288 IT WAS FURTHER OBSERVED THAT THE ASSESSEE COMPANY HAD PAID INTEREST @ 18 PERCENT TO MUNDRA PORT & SPECIAL ECONOMIC ZONE (MPSEZ) AMOUNTING TO RS.81,07,398/ - WHEREIN RELATIVE OF THE DIRECTOR IS DIRECTOR IN THE COMPANY . THE PAYM ENT MADE T O MPSEZ FALLS WITHIN THE AMBIT OF PROVISIONS OF SECTION 40(A)(2)(B) OF THE ACT. HOWEVER, SHRI VASANT S ADANI, DIRECTOR, WAS PAID INTEREST @ 10 PERCENT. THE ASSESSEE HAS PAID INTEREST @ 10 PERCENT TO SHRI VASANT S ADANI, WHICH WAS AT PAR TO THE PERCENTAGE O F INTEREST ON LOANS AVAILABLE IN THE OPEN MARKET. HENCE THE PAYMENT OF INTEREST MADE TO MPSEZ WAS REQUIRED TO BE RESTRICTED TO THAT EXTENT AS AGAINST @18 PERCENT CLAIMED BY THE ASSESSEE. 2.2. THE ASSESSING OFFICER FAILED TO EXAMINE THE ISSUE WITH RE GARD TO INTEREST PAID TO THESE TWO PERSONS U/S. 40A(2)(B) OF THE ACT, FOR THE YEAR UNDER CONSI DERATION, I N LIGHT OF CORRECT FACT S AS AVAILABLE I N THE ASSESSMENT RECORDS , AS WELL AS BY MAKING RELEVANT INQUIRY AND CALLING FOR DETAILS IN THIS RE GARD, AND THE REBY, ACCEPTED YOUR DISALLOWABLE CLAIM WHILE COMPUTING THE T A XABLE INCOME. THEREFORE, THE ASSESSMENT ORDER HAS BEEN PASSED BY THE ASSESSING OFFICER ON WRONG ASSUMPTION OF FACTS AND WITHOUT APPLYING PROPER PROVISIONS OF INCOME TAX ACT AND WITHOUT DUE APPLIC ATION OF MIND. HENCE, THE ABOVE ASSESSMENT ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO T H E INTEREST OF REVENUE . IN THIS REGARD RELIANCE IS PLACED ON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD . VS . CIT(SC) 243 IT R 83. I, THEREFORE, PROPOSE TO REVISE THE SAID ORDER U/S. 263 OF THE ACT. ITA NO . 1252 / AHD/20 1 5 A.Y. 20 10 - 11 PAGE 3 OF 6 4. THE ASSESSEE FILED REPLY IN T ER ALIA PLEADING THAT THE A SSESSING OFFICER HAD MADE ALL ENQUIRI E S , EXAMINED THE RELEVANT MATERIAL QUA THE INTER E ST ISSUE T H ER EBY CHOOSING NOT TO MAK E SECTION 40 A (2)(B) DISALLOWANCE , INTEREST @ 18% PAID TO MPSEZ W A S OUT OF BUSI N E S S EXP EDIENCY NOT IDENTICAL TO THAT IN CASE OF MR . V ASANT S. A DANI @ 10% UNDER SECTION 36(1)(III) OF THE ACT. AND THAT SECTION 40 A (2)(B) DID NOT APPLY IN CASE OF ITS BUSINESS NEEDS. THE CIT REJECTED THE SAID EXPLANATION IN THE ORDER UNDER CHALLENGE AS FOLLOWS : - 4. ASSESSEE REPLY IN THE ABOVE MATTER HAS BEEN CONSIDERED CAREFULLY BUT NOT FOUND TENABLE. THE ASSESSING OFFICER FAILED TO EXAMINE THE ISSUE WITH REGARD TO INTER ES T PAID TO THE PERSON COVERED U/S. 40A(2)(B) OF THE ACT , I N THE LIGHT OF CORRECT FACTS AS AVAILABLE IN THE ASSESSMENT RECORD AND/OR BY MAKING RELEVANT INQUIRY AND CALLING FOR DETAILS IN THIS REGARD AND THEREBY ACCEPTED CLAIM OF THE ASSESSEE WITHOUT PROPER VER IFICATION. THEREFORE, THE ASSESSMENT ORDER HAS BEEN PASSED BY THE ASSESSING OFFICER ON WRONG ASSUMPTION OF FACTS AND WITHOUT APPLYING PROPER PROVISIONS OF I NCOME TAX ACT A ND WITHOUT DUE APPLICATION OF MIND. HENCE THE ABOVE ASSESSMENT ORDER IS ERRONEOUS I N SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. IN THIS REGARD RELIANCE IS PLACED ON THE JUDGEMENT OF THE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT (SC) 243 ITR 83. IN VIEW OF ABOVE MENTIONED FACTS, I THEREFORE, SET - ASIDE THE ASSESSMENT ORDER PASSED BY THE A O TO THIS EXTENT. THE ASSESSING OFFICER IS DIRECTED TO PASS CONSEQUENTIAL ORDER AFTER PROPER VERIFICATION OF THE ISSUE AND AFTER GIVING ASSESSEE OPPORTUNITY OF BEING HEARD. THE ASSESSING OFFICER IS DIRECTED TO GIVE EF FECT OF THIS O R DER EXPEDITIOUSLY. 5. WE HAVE HEARD RIVAL SUBMISSIONS. CASE FILE PERUSED. THERE IS NO DISPUTE THAT THE CIT S SOLE REASONING IN SECTION 263 SHOW CAUSE NOTICE FOLLOWED BY HIS ORDER UNDER CHALLENGE IS THAT THE A SSESSING OFFICER ACCEPTED I MPUGNED INTEREST CLAIM OF RS.81,07,398/ - @ 18% PAID TO MPSEZ AS AGAINST THAT @ 10% IN CASE OF SHRI VASANT ADANI AMOUNT ING TO RS.15,10,821/ - . THERE IS FURTHER NO QUARREL THAT ALL THREE OF THEM ARE SPECIFIED PARTIES UNDER SECTION 40A ( 2 ) (B) OF THE ACT. FIRST WE COME TO CIT S OBSERVATION THAT THE A SSESSING OFFICER DID NOT EXAMINE THE ISSUE BY MAKING PROPER ENQUIRIES. IT IS AN UNDISPUTED FACT THAT THE A SSESSING OFFICER HAD FRAMED A REGULAR ASSESSMENT. HE ISSUED SECTION 142(1) NOTICE DATED 23.12.2011 . P AGE NO . 28 OF THE PAPER BOOK IS A COPY THEREOF ITA NO . 1252 / AHD/20 1 5 A.Y. 20 10 - 11 PAGE 4 OF 6 RAIS I NG SPECIFIC QUERY SEEKING DETAILS OF THE IMPUGNED INTEREST EXPENSES. THIS QUESTION RAISED IS AT SL. N O.19. THE ASSESS E E FILED REPLY THERETO PLACING ON RECORD ALL NECES SA RY DETAILS FOR THE INTER EST EXPENDI TURE IN QUESTION. PAGE NO. 35 IS ANNEXURE - III DEPICTING COMPARATIVE CHART OF THE TWO PAYEES. LEARNED DEPARTMENTAL REPRESENTATIVE RAISES A VERY STRONG OBJECTION THAT THE ASS ESSEE HAS NOT DELIBERATELY PLACED ON RECORD ANNEXURES - I & II FILED BEFORE THE CIT. WE PUT UP A SPECIAL QU E RY AS T O WHETHER THERE IS ANY ATTEMPT TO MISLEAD THE BENCH OR CONTEN T S OF THE REL E VANT PAPER BOOK ARE NOT CORRECT. THE REPLY RECEIVED IS IN NEGATIVE. THE R EVENUE S OBJECTION IS ACCORDINGLY OVERRULED. 6. WE PROC E ED FURTHER TO NOTICE THAT THE ASS ESSEE HAD ACQUIRED THE SUM IN QUESTION O F R S.5 CRORES IN LIEU OF RESERVING 50000 SQ . M TR . PLOT IN ITS PROJECT SUBMIT TED IN CORRES PONDENCE WITH THE PAYEE DAT E D 04.08.2008. I T ACCEPTED MPS E Z S BOOKING WITHDRAWAL ON 0 1. 0 4.2009 SOUGHT VIDE LETTER DATED 17.03.2009 WITH I NTEREST STIPULATION @ 18% TILL ACTUAL PAYMENT. PAGE 38 OF THE PAPER BOOK I S AS SESSEE S LEDGER MAIN T AINED DISCLOSING PAYMENT OF RS.5 CRORES AND INTEREST IN QUESTION MADE BETWEEN 1 8. 0 2.2010 TO 26.03.2010. A LL THIS FOLLOWED THE REGU L AR ASSESSMENT DATED 28. 0 5.2012 NOT MAKING ANY INTEREST DISALLOWANCE. THESE F ACTS INDICATES T HAT TH E A SSESSING OFFICER HAD MADE ALL DUE ENQUIRIES, EXAMINED THE INTEREST ISSUE IN QUESTION AND FIND IT A FIT CASE FOR NOT INVOKING SECTION 40 A(2)(B) OF THE ACT. 7. SHRI ANIL KUMAR, L EARNED C.I.T. (D.R.) A T THIS STAGE RELIES UPON SECTION 263 E XPLANATION 2 INSERTED IN T H E ACT BY THE FIN ANCE ACT 2015 W.E.F. 01.06.2015 ENVISAGING EXERCISE OF REVISION JURISDICTION EVEN WHEN AN ASSESSMENT IS FRAMED WITHOUT ANY ENQU IRES AND VERIF ICATION WHICH SHOULD HAV E BE EN , IN THE OP I NION OF REVISIONAL AUTHORITY, DEEMED TO BE ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTER E ST OF TH E REVENUE. HE CITES A CO - ORDINATE BENCH DECISION OF CROMPTON G REAVES L IMITED VS. CIT - ITA NO.1994/M UM/2013 AND 2836/MUM/2014 D E CIDED ON 0 1. 0 2.2016 HOLDING THE ABOVE EXPLANATION TO SECTION 263 OF ITA NO . 1252 / AHD/20 1 5 A.Y. 20 10 - 11 PAGE 5 OF 6 THE ACT AS RETROSPECTIVE IN NATURE. THE ASSESSEE AT THIS STAGE INFORMS US THAT ANO T HER CO - ORD INATE BENCH IN ITA NO S . 870 & 1234/AHD/2014 DECIDED ON 20.05.2016 IN THE CASE OF J AYANT H M URTHY VS. DCIT HOLDS THE ABOVE STATED FORM ER DECISION AS PER IN CURI A M AND SECTION 263 E XP LANATION 2 TO BE ONLY HAV I NG PROSPECTIVE OPERATION. THE R EVENUE S ARGUMENT ON INADEQUATE ENQUIRY ASPECT IS ACCORDINGLY REJECTED. WE RELY O N HON BLE JURISDICTIONAL HIGH COURT S DECISION IN CIT VS. AMIT CORPORATION ( 2013 ) 213 TAXMAN 19 ( GUJ ARAT ) HOLDING THAT SECTION 263 IS NOT TO BE INVOKED FOR MAKING FURTHER ENQUIR IES IN CASE THE A SSESSING OFFICER HAD ACCESS TO ALL RECORDS AND HE FRAMED ASSES SMENT AFTER MAKING THE RELEVANT ENQU IRIES. WE ACCEPT ASS ESSEE S ARGUMENT CHALLENG ING THE CIT S VIEW T HAT THE A SSESSING OFFICER OUGHT TO HAVE MADE FURTHER ENQUI R IES AS NAR R ATED HEREINABOVE ACCORDINGLY. 8. NEXT ARGUMENT OF THE ASSESSEE IS THAT IT IS PAYE E M/S MPSEZ HAS ALREADY BEEN ASSESSED AT MAXIMUM MARGINAL RATE. IT QUOTES BOARD S CIRCULAR DATED 06.07.1968 CLARIFYING THAT AN INTEREST EXPENDITURE IS NO T TO BE DISALLOWED IN CASE THERE IS NO TAX SAVING AT PAYEE S BEHALF. L EARNED AUTHORISED REPRESENTATIVE PLA CES ON RECORD M/S MPSEZ S RETURN FILED FOR THE IMPUGNED ASSESSMENT YEAR ITSELF STATING NET TOTAL INCOME OF RS.1,27,39,970 / - I.E. TAXABLE AT MAXIMUM RATE. THERE IS NO REBUTTAL COMING AT REV ENUE S INSTANCE. W E NOTE T HAT HON BLE JURISDICTIONAL HIGH COURT IN TAX APPAL NO . 428 AND 431 OF 2015 PCIT VS. GUJ ARAT GAS & FINANCE S ERVICES LIMITED DECIDED ON 07.07.2015 ADOPTS THE VERY VIEW IN DENYING ELIGIBILITY OF SECTION 4 0A(2)(B) OF THE A CT IN IDENTICAL FACTS WHERE THE PAYEE IN QUESTION STOOD ASSESSED AT MA X IMUM MAR GINAL RATE. 9. ASSESSEE S THIRD ARGUMENT IS THAT ITS INTEREST OUTGO OF 18% & 10% IN QUESTION IS VERY MUCH DISTINGUISHABLE . WE HAVE ALREADY INDICATED IN PRECEDING PARAGRAPHS THAT ASSESSEE HAD INCURRED 10% INTEREST QUA A CLAIM RAISED UNDER S ECTION 36(1|)( II) OF THE A CT IN RESPECT OF CAPITAL BORROW E D AS AGAINST THAT @ 18% IN QUESTION ARISING FROM RETEN T ION OF ITA NO . 1252 / AHD/20 1 5 A.Y. 20 10 - 11 PAGE 6 OF 6 BOOKING ADVANCES OF RS.5 CRORES. THESE TWO INTEREST SUMS STAND ON DIFFERENT FOOTINGS. WE FIND THAT HON BLE JURISDICTIONAL HIGH COURT IN CASE OF CIT VS. SARJAN REALTIES LIMITED (2014) 227 TAXMAN 225 (GUJ) IS OF THE VIEW THAT SECTI O N 40A (2)(B) DISALLOW A NCE DOES NOT ARISE BECAUSE OF THE MERE FACT THAT AN ASSESSEE HAS PAID DIFFERENT INTEREST RATE TO DIFFERENT PAYEES THEREBY COMPARING THE SAME IN ORDER TO HOL D THE HIGHER OUTGO AS EXCESSIVE . T HERE IS NO ISSUE THAT THE CITS FINDING IN QUESTION TAKE INTO ACCOUNT ASS ESSEE S INTEREST EXPENSES DIFFERENCE I.E. 18% AND 10% (SUPRA) FOR DIRECTING A SSESSING OFFICER TO FRAME A FRESH ASSESSMENT. WE TAKE INTO CONSIDERA TION ALL THE ABOVE STATED FACTS AND LEGAL DEVELOPMENT S TO OBSERVE THAT THESE TWO INTEREST SUMS ARISE IN TOTALLY DIFFERENT BACKGROUNDS NOT HAVING ANY SIMILARITY. WE ARE FURTHER OF THE OPINION THAT THE CIT HAS ERR E D IN DIR E CTING THE A SSESSING OFFICER TO FRA ME A FRESH ASSESSMENT IN THESE PECULIAR FACTS AND CIRCUMSTANCES. WE ACCEPT ASS ESSEE S ARGUMENTS TO REVERSE THE CIT S ORDER UND E R CHALLENG E IN VIEW OF OUR DISCUSSIONS HEREINABOVE. NO OTHER POINT WAS ARGUED IN THE COURSE OF HEARING EXCEPT THOSE SPECIFICALL Y DEALT IN OUR INSTANT ADJUDICATION . 10. IN THE RESULT, THIS ASSESSEE S APPEAL IS ALLOWED. P RONOUNCED IN THE OPEN COURT TODAY ON THE 9 TH DAY OF SEPTEMBER, 2016. SD/ - SD/ - MANISH BORAD S.S. GODARA (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, THE 9 TH DAY OF SEPTEMBER , 2016 PBN/* COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPEL LATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD