M/S EMMAI PHARMA LTD, MUMBAI V. THE ACIT CIR 4(1) INV, MUMBAI

ITA 1808/MUM/2006

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4422 (ITAT-MUMBAI)
• Duration Of Justice: 9 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 24-02-2015
• Assessment Year: 1995-1996
• Appeal Filed On: 17-03-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K KARDA M
• Assessee Lawyers: V K TULSIAN
• Keywords: Bogus Share capital; Charitable institution; Bonafide belief; Reasonable cause; Condonation of delay
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI . . , , BEFORE S/SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, J UDICIAL MEMBER ./ I.T.A. NO. 745 /MUM/ 2003 ( / ASSESSMENT YEAR : 1995 - 96 ) EMAAI PHARMA LIMITED, B/9, BHANQWADI, KALBADEVI ROAD, BOMBAY - 400002 / VS. INCOME TAX OFFICER 4(1)(4), ROOM NO.637, 6 TH FLOOR, AAYAKAR BHAVAN, MUMBAI - 40 0020 ( / APPELLANT ) .. ( / RESPONDENT ) ./ I.T.A. NO. 1808/MUM/2006 ( / ASSESSMENT YEAR : 1995 - 96 ) EMAAI PHARMA LIMITED, B/9, BHANQWADI, KALBADEVI ROAD, BOMBAY - 400002 / VS. ASST.COMMISSIONER OF IN COME TAX 4(1), MUMBAI. ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN. : ITO4(1)(4)101 - E, MUMBAI / APPELLANT BY : SHRI V K TULSIAN / RESPONDENT BY : SHRI A K KARDAM / DATE OF HEARING : 16 .12. 2015 / DATE OF PRONOUNCEMENT : 6. 1.2016 O R D E R PER B.R.BASKARAN,AM : BOTH THE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS PASSE D BY LD CIT(A) AND BOTH THE APPEALS RELATE TO THE ASSESSMENT YEAR 1995 - 96. ITA NO S.745/MUM/2003 1808/MUM/2006 2 2. THE APPEAL NUMBERED AS ITA NO.1808/M/06 IS BARRED BY LIMITATION BY 3 YEARS AND 76 DAYS. THE ASSESSEE HAS FILED A PETITION WITH THE PRAYER TO THE BENCH TO CONDONE THE DELAY IN F ILING THE APPEAL. THE LD COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE PREFERRED APPEAL BEFORE THE LD CIT(A) CHALLENGING THE ORDER PASSED BY THE AO U/S 143(3) OF THE ACT. THE LD CIT(A) PARTIALLY CONFIRMED THE ADDITION AND RESTORED ONE IS SUE RELATING TO SHARE APPLICATION MONEY TO THE FILE OF THE AO. THE LD COUNSEL SUBMITTED THAT THE ASSESSEE WAS ADVISED THAT A FRESH ASSESSMENT ORDER WOULD BE PASSED AND IT CAN FILE APPEAL THEREAFTER ONLY IN RESPECT OF ALL THE ADDITIONS. IN THE SET ASIDE P ROCEEDINGS, THE AO DECIDED THE ISSUE RELATING TO SHARE APPLICATION MONEY AGAINST THE ASSESSEE AND THE LD CIT(A) ALSO CONFIRMED THE SAME. HENCE THE ASSESSEE FILED APPEAL CHALLENGING ALL THE ADDITIONS CONFIRMED BY LD CIT(A) IN BOTH OF HIS ORDERS BY FILING A SINGLE APPEAL BEFORE THE TRIBUNAL. THE ASSESSEE WAS UNDER BONA FIDE BELIEF THAT THE COURSE OF ACTION ADOPTED BY IT WAS CORRECT. HOWEVER, WHEN THE BENCH POINTED OUT THAT THE ASSESSEE SHOULD HAVE FILED APPEAL CHALLENGING THE FIRST ORDER PASSED BY LD CIT(A ), THE ASSESSEE REALISED ITS MISTAKE AND ACCORDINGLY FILED ANOTHER APPEAL WITH DELAY AS POINTED OUT BY THE TRIBUNAL. 3. THE LD A.R SUBMITTED THAT THE ASSESSEE WAS NOT KEEPING THE MATTER IDLE, BUT WAS PURSUING THE ASSESSMENT ORDER CONTINUOUSLY. SINCE THE ASSESSEE WAS WRONGLY ADVISED AND SINCE THE ASSESSEE ALSO ENTERTAINED BONAFIDE BELIEF, THE APPEAL WAS NOT FILED AGAINST THE FIRST ORDER OF LD CIT(A). HE SUBMITTED THAT ACTING ON THE WRONG ADVICE OF THE COUNSEL IS A REASONABLE CAUSE AND ACCORDINGLY PRAY ED THAT THE DELAY MAY BE CONDONED. HE FURTHER SUBMITTED THAT THE TECHNICALITIES SHOULD NOT COME IN THE WAY OF JUSTICE AS HELD BY HONBLE SUPREME COURT IN THE CASE OF COLLECTOR, LAND ITA NO S.745/MUM/2003 1808/MUM/2006 3 ACQUISITION VS. MST. KATIJI AND OTHERS (167 ITR 471)(SC) AS THERE IS NO D ELIBERATE DELAY ON THE PART OF THE ASSESSEE. THE LD A.R ALSO PLACED RELIANCE ON VARIOUS OTHER CASE LAWS ALSO. 4. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE ASSESSEE HAS NOT SHOWN SUFFICIENT CAUSE FOR THE DELAY IN FILING THE APPEAL AND ACCORDINGLY OPPOSED THE PETITION FILED BY THE ASSESSEE. 5. WE HAVE HEARD THE PARTIES ON THIS PRELIMINARY ISSUE AND PERUSED THE RECORD. WE NOTICE THAT THE ASSESSEE WAS AGGRIEVED BY THE THREE TYPES OF ADDITIONS MADE IN THE ORIGINAL ASSESSMENT ORDER. IN THE APPE AL PREFERRED BEFORE THE LD CIT(A), THE FIRST APPELLATE AUTHORITY CONFIRMED TWO ADDITIONS AND RESTORED ONE MATTER TO THE FILE OF THE AO. IN THE SET ASIDE PROCEEDINGS, THE AO AGAIN CONFIRMED THE ADDITION PERTAINING TO THE THIRD ISSUE ALSO AND THE LD CIT(A) ALSO CONFIRMED THE SAME. AFTER THE RECEIPT OF SECOND ORDER OF LD CIT(A), THE ASSESSEE FILED APPEAL BEFORE THE TRIBUNAL CHALLENGING ALL THE THREE ADDITIONS. ACCORDING TO THE ASSESSEE, IT HAS ACTED IN A BONAFIDE MANNER ON THE ADVICE GIVEN BY ITS EARLIER C OUNSEL. SUBSEQUENTLY, IT APPEARS THAT THE ASSESSEE REALISED THE MISTAKE WHEN THE TRIBUNAL WAS HEARING THE APPEAL FILED BY THE ASSESSEE AND ACCORDINGLY FILED ANOTHER APPEAL CHALLENGING THE TWO ADDITIONS CONFIRMED BY LD CIT(A) IN HIS FIRST ORDER. 6. T HUS, WE NOTICE THAT THE ASSESSEE WAS NOT PROPERLY ADVISED IN THIS MATTER AND WE ALSO NOTICE THAT THE ASSESSEE WAS ACTING IN A BONAFIDE MANNER AS PER THE ADVICE GIVEN IT. THE HONBLE MADRAS HIGH COURT HAS HELD IN THE CASE OF SREENIVASA CHARITABLE TRUST VS. DEPUTY CIT (280 ITR 357) HAS HELD THAT NO HARD AND FAST RULE CAN BE LAID DOWN IN THE MATTER OF CONDONATION OF DELAY AND THE COURTS SHOULD ADOPT A PRAGMATIC APPROACH ITA NO S.745/MUM/2003 1808/MUM/2006 4 AND THE COURTS SHOULD EXERCISE THEIR DISCRETION ON THE FACTS OF EACH CASE KEEPING IN MIND THAT IN CONSTRUING THE EXPRESSION SUFFICIENT CAUSE THE PRINCIPLE OF ADVANCING SUBSTANTIAL JUSTICE IS OF PRIME IMPORTANCE AND THE EXPRESSION SUFFICIENT CAUSE SHOULD RECEIVE A LIBERAL CONSTRUCTION. 7. THE HONBLE SUPREME COURT HAS OBSERVED IN THE CAS E OF COLLECTOR, LAND ACQUISITION VS. MST. KATIJI AND OTHERS (SUPRA) THAT WHEN SUBSTANTIAL JUSTICE AND TECHNICAL CONSIDERATIONS ARE PITTED AGAINST EACH OTHER, THE CAUSE OF SUBSTANTIAL JUSTICE DESERVES TO BE PREFERRED, FOR THE OTHER SIDE CANNOT CLAIM TO HAV E A VESTED RIGHT IN INJUSTICE BEING DONE BECAUSE OF A NON - DELIBERATE DELAY. 8. THE CO - ORDINATE CHENNAI BENCH OF TRIBUNAL HAS HELD IN THE CASE OF CHANK MOHAMMED ABUBEKER P LTD VS. DCIT (ITA 1628/M/2010 DATED 16.12.2010) HELD THAT THE ALTERNATIVE AVENUE S BEING PURSUED BY THE ASSESSEE CONSTITUTES SUFFICIENT CAUSE FOR CONDONING THE DELAY. 9. IN THE INSTANT CASE, WE NOTICE THAT THE ASSESSEE HAS BEEN WRONGLY ADVISED THAT IT CAN FILE ONLY ONE APPEAL COVERING ALL THE DISPUTED MATTERS. IT IS NOT A CASE, W HERE THE ASSESSEE HAS KEPT SILENT AFTER THE RECEIPT OF THE FIRST ORDER OF THE LD CIT(A). SINCE ONE OF THE MATTERS WAS RESTORED TO THE FILE OF THE ASSESSING OFFICER, THE ASSESSEE CAN BE SAID TO HAVE PURSUED THE MATTER BEFORE THE AO, THEREAFTER BEFORE THE L D CIT(A) AND TRIBUNAL. IT IS PERTINENT TO NOTE THAT THE ASSESSEE HAS FILED APPEAL BEFORE THE ITAT CHALLENGING ALL THE THREE ISSUES, WHICH IN FACT VINDICATES THE EXPLANATIONS GIVEN BY THE ASSESSEE THAT IT WAS ADVISED TO FILE APPEAL BEFORE THE TRIBUNAL COVE RING ALL THE ISSUES, AFTER THE RECEIPT OF RESULT OF SET ASIDE PROCEEDINGS. LATER, WHEN THE ASSESSEE REALISED ITS MISTAKE WHILE PURSUING THE APPEAL BEFORE THE TRIBUNAL, IT TOOK STEPS TO FILE ANOTHER APPEAL ALONG WITH THE ITA NO S.745/MUM/2003 1808/MUM/2006 5 PETITION FOR CONDONING THE DELAY. UNDER THESE SET OF FACTS AND IN THE INTEREST OF PROMOTING CAUSE OF JUSTICE, WE ARE OF THE VIEW THAT THE DELAY IN FILING THIS APPEAL SHOULD BE CONDONED. IN OUR VIEW, THE SAID ACTION WILL PROMOTE THE CAUSE OF JUSTICE. ACCORDINGLY, WE CONDONE THE DELAY AND ADMIT THE APPEAL FOR HEARING. 10. THE ISSUES URGED IN BOTH THE APPEALS ARE GIVEN BELOW: - (A) REJECTION OF CLAIM OF SET OFF OF BANK INTEREST EARNED ON OVERSUBSCRIBED SHARE APPLICATION MONEY AGAINST SHARE ISSUE EXPENSES. (B) ADDITION OF RS.31,962/ - DI SCLOSED IN THE ASSET SIDE OF BALANCE SHEET. (C) ADDITION OF SHARE APPLICATION MONEY OF RS.11,65,000/ - . 11. WE HEARD THE PARTIES ON THE ABOVE SAID ISSUES AND PERUSED THE RECORD. THE FIRST ISSUE RELATES TO REJECTION OF CLAIM OF BANK INTEREST EARNED ON T HE SHARE APPLICATION MONEY KEPT IN THE BANK ACCOUNT. THE ASSESSEE HAD ISSUED SHARES TO PUBLIC . T HE SAID ISSUE WAS OVERSUBSCRIBED. AS PER THE TERMS AND CONDITIONS RELATING TO PUBLIC ISSUE , THE SHARE APPLICATION MONEY HAD TO BE KEPT IN A SEPARATE BANK ACC OUNT, WHICH EARNED INTEREST INCOME. THE ASSESSEE CLAIMED SET OFF OF THE SAME AGAINST THE SHARE ISSUE EXPENSES, WHICH WAS REJECTED BY BOTH THE TAX AUTHORITIES. WE NOTICED THAT THE CLAIM OF THE ASSESSEE IS ALLOWABLE AS PER THE FOLLOWING DECISIONS: A) J M SHARES AND STOCK BROKERS LTD V/S DCIT (2004) 83 TTJ (MUM) 1052; AND B) AARTI INDUSTRIES LTD V/S DCIT (2005) 95 TTJ (AHD) 14 CONSISTENT WITH THE VIEW TAKEN ON THE ABOVE CITED DECISION OF THE TRIBUNAL, WE SET ASIDE THE ORDER OF LD. CIT(A) AND D IRECT THE AO TO ALLOW THE CLAIM OF THE ASSESSEE. ITA NO S.745/MUM/2003 1808/MUM/2006 6 12. THE NEXT ISSUE RELATES TO THE ADDITION OF RS.31962/ - BEING AN AMOUNT APPEARED IN THE ASSESSEES BALANCE - SHEET. THE LD. AR SUBMITTED THAT THE SAME REPRESENTS ACCUMULATED LOSSES , WHICH WAS SHOWN IN THE AS SET SIDE OF THE BALANCE - SHEET UNDER THE SUB - H EAD MISCELLANEOUS EXPENSES. HE SUBMITTED THAT THIS AMOUNT WAS NOT CLAIMED BY THE ASSESSEE IN I T S PROFIT AND LOSS ACCOUNT AND HENCE DISALLOWANCE CONFIRMED BY LD CIT(A) IS LIABLE TO BE DELETED. WE FIND MERIT IN THE CONTENTION OF THE LD.AR . THE AMOUNT, WHICH WAS NEVER CLAIMED AS A DEDUCTION IS NOT LIABLE FOR DISALLOWANCE. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THIS DISALLOWANCE. 13. THE NEXT ISSUE RELATES T O ADDITION OF RS.11.65,000/ - , BEING SHARE APPLICATION MONEY RECEIVED FROM A PERSON NAMED AS SHRI RAKESH JAIN. THE LD. AR SUBMITTED THAT T HE ASSESSEE HAS FURNISHED THE DETAILS OF SHARE APPLICATION AND ALSO THE PAN OF THE ABOVE SAID APPLICANT ALONG WITH ADD RESS BEFORE THE TAX AUTHORITIES. HE FURTHER SUBMITTED THAT THE ASSESSEE , BEING A PUBLIC LIMITED COMPANY , HAS RECEIVED THE SHARE APPLICATION MONEY FROM VARIOUS PERSONS . H ENCE, AS PER THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF LOVELY EXPO RT LTD, WHEREIN IT WAS HELD THAT IT IS OPEN TO THE DEPARTMENT TO MOVE AGAINST THE SHARE APPLICANTS IN ACCORDANCE WITH LAW , THE IMPUGNED DISALLOWANCE IS LIABLE TO BE DELETED . THE LD. AR ALSO PLACED RELIANCE ON THE ORDER RENDERED BY THE HONBLE DEL H I HIGH COURT IN THE CASE OF CIT VS. OASIS HOSPITALITIES PVT. LTD. (2011) 333 ITR 119 . 14. SINCE THE ASSESSEE HAS FURNISHED ALL THE DETAILS RELATING TO THE SHARE APPLICANT SHRI RAKESH JAIN AND ALSO HIS PAN, WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE. IT IS FURTHER NOTICED THAT THE ASSESSEE HAS RECEIVED THE SHARE APPLICATION MONEY THROUGH PUBLIC ISSUE. ITA NO S.745/MUM/2003 1808/MUM/2006 7 A CCORDINGLY , WE SET ASIDE THE ORDER OF LD. CIT(A) ON THIS ISSUE A ND DIRECT THE AO TO DELETE THE IMPUGNED ADDITION. 15. IN THE RESULT, BOTH APPEAL S OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 6TH JAN,2016 . SD SD ( / SANDEEP GOSAIN) ( . . / B.R.BASKARAN) /JUDICIAL MEMBER /ACCOUNTANT MEMBER MUMBAI ; DATED .. 6 TH JAN ,201 6 . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI