Sri. DCIT CEN CIR-22, MUMBAI V. SHRIPAL S. MORAKHIA, MUMBAI

ITA 1546/MUM/2008

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1897 (ITAT-MUMBAI)
• Duration Of Justice: 8 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 26-08-2015
• Assessment Year: 2000-2001
• Appeal Filed On: 03-03-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Search and seizure; Capital receipt
• Section: 153A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI . . , , , , BEFORE SHRI R.C.SHARMA, AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO.1546/MUM/2008 ( / ASSESSMENT YEAR: 2000-01) D.C.I.T. CEN. CIR. 22 ROOM NO.403, 4 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI - 400020 / VS. SHRI SHRIPAL S. MORAKHIA 803/804, TULSIANI CHAMBERS, NARIMAN POINT, MUMBAI - 400021 ./ ./ PAN/GIR NO. : AAHPM4512E ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 15.09.2016 /DATE OF PRONOUNCEMENT: 25.11.2016 / O R D E R PER AMARJIT SINGH, JM: THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 20.12.2007 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) IV, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y.2000-01. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUND:- REVENUE BY: SHRI B.PRUSETH CIT-DR ASSESSEE BY: SHRI HIRO RAI ITA NO.1546/M/2008 A.Y. 2000-01 2 1.A ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE A.O. U/S.41(1) THOUGH THE A.O. HAD MADE SPEAKING ORDER ON THE ADDITION. 1.B. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN IGNORING THE FACT THAT A COLLUSIVE ARRANGEMENT EXISTED BETWEEN THE ASSESSEE AND THE BANK WHICH MADE THE LATTER TO FURNISH CERTIFICATE TO I.T. DEPARTMENT CONTRARY TO ACCEPTED BANKING POLICY AND NORMS REGARDING WRITE OFF OF IRRECOVERABLE LOANS. 2. THE APPELLANT CRAVES TO LEAVE TO ADD, TO AMEND AND / OR TO ALTER ANY OF THE GROUNDS OF APPEAL, IF NEED BE. 3. THE APPELLANT, THEREFORE, PRAYS THAT ON THE GROUNDS STATED ABOVE, THE ORDER OF THE CIT(A)-IV, MUMBAI MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME ON 31.10.2000 DECLARING TOTAL INCOME TO THE TUNE OF RS.3,82,76,438/-. THE RETURN WAS PROCESSED U/S.143(1) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) ON 27.02.2002. THERE WAS A SEARCH AND SEIZURE ACTION U/S.132 OF THE ACT ON SSKI GROUP AND BY WARRANT DATED 01.08.2003, ASSESSEES RESIDENCE AT 6A/2, PRITHVI APARTMENTS, 21, ALTAMOUNT ROAD, MUMBAI AND HIS OFFICE WITH OTHER GROUP COMPANIES WERE COVERED UNDER SEARCH. THE SEARCH UPON THE ASSESSEE WAS FINALLY CONCLUDED ON 06.09.2003. NOTICE U/S.153A OF THE ACT WAS ISSUED ON 23.04.2004. IN RESPONSE TO THE SAID NOTICE, RETURN OF INCOME DECLARING LOSS TO THE TUNE OF RS.3,82,76,438/- WAS FILED ON 28.05.2004. NOTICE U/S.143(2) OF THE ACT WAS ISSUED ON 21.04.2005. ITA NO.1546/M/2008 A.Y. 2000-01 3 DETAILED QUESTIONNAIRES U/S.142(1) WERE ISSUED ON 08.08.2005 AND 14.12.2005. THE ASSESSEE DERIVES BUSINESS INCOME BEING PROFESSIONAL FEE, TRADING IN SHARES AND INCOME FROM OTHER SOURCE BEING INTEREST AND RENT FROM SUBLET PROPERTY. DURING THE PREVIOUS YEAR, THE ASSESSEE SOLD RESIDENTIAL PROPERTY, CAPITAL GAIN ARISING OUT OF WHICH HAS BEEN OFFERED AS LONG TERM CAPITAL GAIN. THE ASSESSEE HAS CREDITED AN AMOUNT OF RS.1,74,61,842/- IN THE CAPITAL ACCOUNT ON ACCOUNT OF CESSATION OF LIABILITY BUT THE SAID AMOUNT WAS NOT INCLUDED IN TAXABLE INCOME, THEREFORE, THE SAID AMOUNT WAS ADDED TO THE INCOME OF THE ASSESSEE AND IT WAS ALSO FOUND THAT THE ASSESSEE HAS CLAIMED EXCESS SET OFF SHORT TERM CAPITAL LOSS TO THE TUNE OF RS.1,21,770/-, THEREFORE, THE SAME WAS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. THEREAFTER, THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS.5,99,39,389/-. FEELING AGGRIEVED THE ASSESSEE HAS FILED THE APPEAL BEFORE THE CIT(A) WHO ALLOWED THE CLAIM OF THE ASSESSEE, THEREFORE THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. LEGAL ISSUES:- 4. THE ASSESSEE HAS RAISED THE LEGAL ISSUES BEFORE US REGARDING THE LEGALITY OF THE ORDER PASSED BY THE ASSESSING AUTHORITY. THE LEARNED REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE ASSESSING OFFICER HAS REASSESSED THE INCOME OF THE ASSESSEE IN VIEW OF THE PROVISION U/S.143(3) R.W.S. 153A OF THE ACT WHICH IS WRONG AGAINST LAW AND FACTS SPECIFICALLY ON THE GROUND OF THAT THE SEARCH AND SEIZURE ACTION WAS ITA NO.1546/M/2008 A.Y. 2000-01 4 TAKEN AND WAS FINALLY CONCLUDED AGAINST THE ASSESSEE ON 06.09.2003 BUT NOTHING INCRIMINATING MATERIAL WAS FOUND WHICH LEADS TO THE REASSESSMENT OF THE INCOME OF THE ASSESSEE, THEREFORE THE ASSESSMENT ORDER DATED 28.03.2006 AND SUBSEQUENTLY THE ORDER PASSED BY THE CIT(A) IN QUESTION ARE WRONG AGAINST LAW AND FACTS IN VIEW OF THE LAW SETTLED IN [2015] 374 ITR 645 TITLED AS COMMISSIONER OF INCOME TAX VS. CONTINENTAL WAREHOUSING CORPORATION (NHAVA SHEVA) LTD. AND ALL CARGO GLOBAL LOGISTICS LTD. AND BOMBAY HIGH COURT IN CASE OF CIT VS. MURLI AGRO PRODUCTS LTD. (ITA NO.36 OF 2009) AND 259 CTR 281 (RAJ.) IN CASE TITLED AS JAI STEEL (INDIA) VS. ASST. CIT AND 380 ITR 573 (DEL) IN CASE TITLED AS CIT VS. KABUL CHAWLA. HOWEVER, ON THE OTHER HAND THE LEARNED REPRESENTATIVE OF THE DEPARTMENT HAS REFUTED THE SAID CONTENTIONS. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS FILED HIS RETURN OF INCOME ON 31.10.2000 DECLARING TOTAL INCOME TO THE TUNE OF RS.3,82,76,438/-. THE RETURN WAS PROCESSED U/S.143(1) OF THE ACT ON 27.02.2002. THEREAFTER, THE SEARCH AND SEIZURE ACTION U/S.132 OF THE ACT WAS INITIATED AGAINST SSLO GROUP AND AGAINST THE ASSESSEE BY VIRTUE OF WARRANT DATED 01.08.2003. NO DOUBT THE SEARCH ACTION WAS TAKEN AFTER THE EXPIRY OF ONE YEAR WHILE THE RETURN U/S.143(1) OF THE ACT WAS PROCESSED ON 27.02.2002. THEREAFTER, THE NOTICE WAS GIVEN TO THE ASSESSEE U/S.153A OF THE ACT AND THE ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTAL LOSS TO THE TUNE OF RS.3,82,76,438/-. ON APPRAISAL OF AN ENTIRE ORDER, IT CAME INTO THE NOTICE THAT DURING THE ASSESSMENT CESSION OF THE LIABILITIES BY THE BANK WAS CONSIDERED AS ITA NO.1546/M/2008 A.Y. 2000-01 5 REVENUE RECEIPT DESPITE CAPITAL RECEIPT AND THE DIFFERENCE OF EXCESS SET OFF SHORT TERM CAPITAL LOSS TO THE TUNE OF RS.1,21,770/- WAS DISALLOWED. THESE ASSESSMENTS ARE NOT THE RESULT OF SEARCH AND SEIZURE ACTION. NO NEW MATERIAL HAS BEEN FILED WHICH LEADS TO THE CIRCUMSTANCES THAT THE ASSESSMENT OF THE ASSESSEE IS REQUIRED TO BE DONE FURTHER IN VIEW OF THE PROVISION U/S.153A OF THE ACT. IN THE PRESENT CASE AT THE COST OF REPETITION THE ASSESSMENT WAS COMPLETED U/S.143(1) OF THE ACT ON 27.02.2002 AND SEARCH AND SEIZURE ACTION WAS TAKEN ON 01.08.2003 AFTER THE EXPIRY OF MORE THAN ONE YEAR BUT NO MATERIAL WAS FOUND, THEREFORE, IT IS QUITE CLEAR THAT THE ASSESSMENT MADE U/S.143(3) R.W.S.153A OF THE ACT IS NOT IN ACCORDANCE WITH LAW. IN THIS REGARD WE ALSO FOUND LAW SUPPORT OF [2015] 374 ITR 645 IN CASE TITLED AS COMMISSIONER OF INCOME TAX VS. CONTINENTAL WAREHOUSING CORPORATION (NHAVA SHEVA) LTD. AND ALL CARGO GLOBAL LOGISTICS LTD. AND BOMBAY HIGH COURT IN CASE OF CIT VS. MURLI AGRO PRODUCTS LTD. (ITA NO.36 OF 2009) AND 259 CTR 281 (RAJ.) IN CASE TITLED AS JAI STEEL (INDIA) VS. ASST. CIT AND 380 ITR 573 (DEL) IN CASE TITLED AS CIT VS. KABUL CHAWLA. ACCORDINGLY, THE ASSESSMENT U/S.143(3) R.W.S 153A OF THE ACT IS HEREBY ORDERED TO BE SET ASIDE. SO FAR AS THE ISSUE OF THE REVENUE IS CONCERNED WHICH DEALS WITH THE MERIT OF THE CASE. HOWEVER, THE CIT(A) HAD DECIDED THE ORDERS IN FAVOUR OF THE ASSESSEE BUT IN THE LEGAL ISSUE WE HAVE ARRIVED AT THIS CONCLUSION THAT THE ASSESSMENT ORDER IN QUESTION U/S.143(3) R.W.S.153A OF THE ACT IS WRONG AGAINST LAW AND FACTS AND IS HEREBY ORDERED TO BE SET ASIDE. ITA NO.1546/M/2008 A.Y. 2000-01 6 THEREFORE, IN VIEW OF THE SAID CIRCUMSTANCES THE APPEAL OF THE REVENUE IS ALSO HEREBY ORDERED TO BE DISMISSED. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH NOVEMBER. 2016. SD/- SD/- (R.C.SHARMA) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 25 TH NOVEMBER, 2016 MP / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / /(DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI