Aayojan Investment Pvt. Ltd., ( Now merged with Aagam Holding Pvt. Ltd.), V. The ACIT, Valsad Circle, Valsad

ITA 1765/AHD/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94753 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 30-11-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 15-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VILAS V SHINDE
• Keywords: Earning of tax free income; Reason to believe
• Section: 143(3); 234B; 14A; 147; 148

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA NO.1765/AHD/2015 /BLOCK ASSTT. YEAR: 2005-2006 AAYOJAN INVESTMENT PVT. LTD. (NOW MERGED WITH AAGAM HOLDING PVT. LTD.) PLOT NO.16, C.K. PAR NR. RIVER PAR, N.H. NO.8 ATUL 396 020. PAN : AAACA 3866 H VS ACIT, VALSAD CIRCLE VALSAD. ./ ITA NO.1766/AHD/2015 /BLOCK ASSTT. YEAR: 2005-2006 ANUBHAV INVESTMENT PVT. LTD. (NOW MERGED WITH AAGAM HOLDING PVT. LTD.) PLOT NO.16, C.K. PAR NR. RIVER PAR, N.H. NO.8 ATUL 396 020. PAN : AAACA 3896 P VS ACIT, VALSAD CIRCLE VALSAD. %& / (APPELLANT) '( %& / (RESPONDENT) ASSESSEE BY : MS. URVASHI SODHAN, AR REVENUE BY : SHRI VILAS V. SHINDE, DR / DATE OF HEARING : 30/11/2015 / DATE OF PRONOUNCEMENT: 01/12/2015 )*/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: ITA NO.1765, 1766/AHD/2015 2 THE PRESENT TWO APPEALS ARE DIRECTED AT INSTANCE O F THE ASSESSEES AGAINST SEPARATE ORDERS OF EVEN DATED I.E. 1.4.2015 PASSED BY THE LD.CIT(A), VALSAD ON THE RESPECTIVE APPEALS OF THE ASSESSEES IN THE ASSTT.YEAR 2005-06. 2. THE GROUNDS OF APPEAL TAKEN BY BOTH THE ASSESSEE S ARE NOT IN CONSONANCE WITH THE RULE 8 OF THE INCOME TAX (APPEL LATE TRIBUNAL) RULES, 1963 - THEY ARE DESCRIPTIVE AND ARGUMENTATIV E IN NATURE. IN BRIEF THE GRIEVANCE OF THE APPELLANTS ARE THREE FOL DS VIZ. (A) THAT THE LD.AO HAS ERRED IN REOPENING OF THE ASSESSMENT BY I SSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT AFTER EXPIRY OF FOUR Y EARS FROM THE END OF THE ASSESSMENT YEAR, (B) THE CIT(A) HAS ERRED IN CO NFIRMING THE ADDITION OF RS.6,60,573/- AND RS.10,94,375/- WITH T HE AID OF SECTION 14A OF THE ACT IN THE CASE OF AAYOJAN INVESTMENTS P . LTD., AND ANUBHAV INVESTMENT PVT. LTD. RESPECTIVELY. THE LD.CIT(A) H AS ALSO ERRED IN CONFIRMING THE CHARGING OF INTEREST UNDER SECTION 2 34A, 234B AND 234C OF THE ACT. 3. SINCE GROUND NO.1 IN BOTH THE APPEALS ARE COMMON , WHEREBY, THEY HAVE CHALLENGED REOPENING OF THE ASSESSMENT BY ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT, THEREFORE, WE TAKE TH IS GROUND TOGETHER IN BOTH THE APPEALS. 4. BRIEF FACTS IN THE CASE OF ANUBHAV INVESTMENT PV T. LTD. ARE THAT THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 25.1 0.2005 DECLARING TOTAL INCOME AT RS.1,69,310/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND AN ORDER UNDER SECTION 143( 3) OF THE INCOME TAX ACT WAS PASSED ON 26/11/2007. THE INCOME OF TH E ASSESSEE WAS DETERMINED AT RS.3,11,121/-. THE ASSESSMENT WAS RE OPENED UNDER SECTION 147 OF THE INCOME TAX ACT BY RECORDING REAS ONS. NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED ON 14.3.2012. IN THE CASE OF AAYOJAN ITA NO.1765, 1766/AHD/2015 3 INVESTMENT PVT. LTD. RETURN OF INCOME WAS FILED ON 25.10.2005 DECLARING TOTAL LOSS AT RS.4,39,250/-. THE CASE OF THE ASSES SEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND ASSESSMENT ORDER UNDER SECT ION 143(3) PASSED ON 31.12.2007 WHEREBY INCOME OF THE ASSESSEE WAS AS SESSED AT TOTAL LOSS OF RS.1,67,355/-. IN OTHER WORDS, THE AO HAS REDUCED THE LOSS AS AGAINST CLAIMED BY THE ASSESSEE. THE ASSESSMENT HA S BEEN REOPENED UNDER SECTION 147 OF THE INCOME TAX ACT, 1961 AND N OTICE UNDER SECTION 148 WAS ISSUED ON 14.3.2012. REOPENING OF THE ASSE SSMENT HAS BEEN UPHELD BY THE LD.CIT(A). 5. LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, DRE W OUR ATTENTION TOWARDS THE REASONS RECORDED BY THE AO. COPY OF TH E REASONS IS AVAILABLE ON PAGE NO.23 IN THE CASE OF ANUBHAV INVE STMENTS AND ON PAGE NO.24 IN THE CASE OF AAYOJAN INVESTMENT. 6. WITH THE ASSISTANCE OF THE LD. REPRESENTATIVES, WE HAVE GONE THROUGH THE REASONS. WE FIND THAT THE REASONS ARE VERBATIM SAME EXCEPT SOME VARIATION IN FIGURES. THEREFORE, FOR T HE FACILITY OF REFERENCE, WE TAKE UP THE REASONS FROM ANUBHAV INVESTMENT, WHI CH READ AS UNDER: ANNEXURE-I REASONS RECORD FOR ISSUANCE OF NOTICE U/S 148 IN TH E CASE OF M/SANUBHAV INVESTMENT LTD. FOR A.Y, 2005-06: ON VERIFICATION OF THE DETAILS FILED BY THE ASSESSE E IN RESPECT OF COMPUTATION OF INCOME AND PROFIT & LOSS ACCOUNT, IT IS REVEALED THAT THE ASSESSEE HAS SHOWN DIVIDEND INCOME OF RS.2 2,24,110/- WHICH IS EXEMPT U/S 10(33) OF THE I.T. ACT, 1961. AS PROVIDED UNDER THE PROVISION OF SECTION 14 A, 'F OR THE PURPOSE OF COMPUTING THE TOTAL INCOME UNDER THIS CHAPTER, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT.' ITA NO.1765, 1766/AHD/2015 4 BY INSERTING THE PROVISIONS OF SECTION 14A, THE LEG ISLATURE HAS MADE AN ATTEMPT TO CURB THE PRACTICE USED TO REDUCE THE TAX PAYABLE ON THE NON-EXEMPT INCOME BY DEBITING TEE EX PENSES INCURRED TO EARN THE EXEMPT INCOME AGAINST TAXABLE INCOME. EXPENSES INCURRED CAN BE ALLOWED ONLY TO THE EXTENT THEY ARE RELATABLE TO EARNING OF TAXABLE INCOME. MOREOVER, A S PER RATIO LAID DOWN BY HON'BLE GUJARAT HIGH COURT IN THA CASE OF G UJARAT GINNING & MFG. CO. V/S CIT (1997) 107 ITR 590 (GUJ) AND CIT V/S CITY OF AHEMDABAD SPNG. & MFG. CO. LTD. (1981) 129, ITR 507, 514 (GUJ), IT WAS HELD THAT WHERE THE INCOME OF AN ASSESSEE IS DERIVED UNDER DIFFERENT HEADS OF INCOME AS RECOGNIZ ED IN SECTION 14, BEFORE DECIDING THE QUESTION REGARDING PERMISSI BLE EXPENSES TO BE DEDUCTED FROM THE TOTAL INCOME FOR THE PURPOS ES OF COMPUTATION OF TAXABLE INCOME THE EXPENSES HAVE ALS O TO BE APPORTIONED HEAD-WISE. IT IS ALSO OBSERVED THAT THE ASSESSEE HAS MAINTAINE D 'COMPOSITE ACCOUNT' OF EXPENDITURE FOR THE EXEMPTED INCOME AND NON- EXEMPTED INCOME. THE ASSESSEE HAS SHOWN DIVIDEND IN COME OF RS.22,24,110/- WHICH IS EXEMPT U/S 10(33) OF THE AC T, EXPENDITURE OF RS.24,99,094/- (OPERATION EXPENSES O F RS.22,79,574/- + INTEREST RS. 4,090/- + DEPRECIATIO N RS. 2,15,430/-) BY DEBITING THE EXPENSES INCURRED TO EA RN THE EXEMPT INCOME OF RS.22,24,110/-AGAINST TAXABLE INCOME OF RS.28,54,825/-. CONSIDERING THE FACTS OF THE CASE, THAT COMPOSITE A CCOUNT OF EXPENDITURE IS MAINTAINED, IT IS QUITE POSSIBLE THA T EXPENSES MAY HAVE BEEN CHARGED TO PROFIT FOR EARNING EXEMPT INCO ME. KEEPING IN VIEW, I HAVE REASON TO BELIEVE THAT INCOME TO TH E EXTENT OF RS.10,94,375/- HAS ESCAPED ASSESSMENT. NOTICE U/S 1 48 IS BEING ISSUED TO TAX INCOME ESCAPING ASSESSMENT, WITHIN TH E MEANING OF SECTION 147 OF THE ACT. ISSUE NOTICE U/S. 148 OF TH E I.TACT. SD/- ASSISTANT COMMISSIONER OF INCOME TAX VALSAD CIRCLE, VALSAD 7. INTERDICTION PROVIDED IN THE PROVISO APPENDED TO SECTION 147 OF THE INCOME TAX ACT PUTS EMBARGO ON THE POWER OF THE AO TO REOPEN AN ASSESSMENT IN THE CASES WHERE FOUR YEARS HAVE BEEN EXPIRED AND THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) OF THE A CT. THE ASSESSMENT CANNOT BE REOPENED UNLESS IT IS ESTABLIS HED THAT THE ITA NO.1765, 1766/AHD/2015 5 ASSESSEE HAS FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT FOR THAT ASSESSMENT YE AR. ADMITTEDLY, THE ASSESSMENTS AT THE FIRST INSTANCE IN BOTH THE C ASES WERE MADE UNDER SECTION 143(3) OF THE ACT. THE NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT HAS BEEN ISSUED ON 14.3.2012 I.E. EX PIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. FOUR YEARS HA D EXPIRED ON 31.3.2011. IN THESE FACTS AND CIRCUMSTANCES, THE A SSESSMENT COULD BE REOPENED IF THE AO DEMONSTRATED THAT THE INCOME CHA RGEABLE TO TAX HAS ESCAPED ASSESSMENT, FOR THE FAILURE OF THE ASSESSEE TO DISCLOSE ALL THE MATERIAL FACTS FULLY AND TRULY. A PERUSAL OF THE R EASONS NOWHERE SHOWS THAT ANY MATERIAL FACT WAS NOT DISCLOSED FULLY AND TRULY BY THE ASSESSEE. THE LD.AO WANTED TO VERIFY THE DETAILS ALREADY SUBM ITTED BY THE ASSESSEE. THE LD.AO HAS VERIFIED THE DETAILS ALREA DY SUBMITTED BY THE ASSESSEE. IT IS SO CLEAR FROM THE READING OF THE F IRST PARAGRAPH OF THE REASONS EXTRACTED (SUPRA), THEREFORE, IN OUR OPINIO N, THE LD.AO WAS NOT JUSTIFIED IN REOPENING OF THE ASSESSMENT. WE ALLOW THIS GROUND IN BOTH THE APPEALS OF THE ASSESSEES AND QUASH THE ASSESSME NT ORDERS. 8. SINE WE HAVE QUASHED THE ASSESSMENT ORDERS, THER EFORE, WE DO NOT DEEM IT NECESSARY TO GO INTO OTHER ISSUES. 9. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE COURT ON 1 ST DECEMBER, 2015 AT AHMEDABAD. SD/- SD/- (MANISH BORAD) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 01 /12/2015