M/s. Motrik Investment Pvt.Ltd., Baroda V. The Income tax Officer,Ward-4(2), Baroda

ITA 1842/AHD/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9959 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 30-11-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 24-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N P PATEL
• Keywords: Reopening of assessment; Audit objection; Difference of opinion; Change of opinion
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ./ ITA NO. 1842/AHD/2012 / ASSESSMENT YEAR : 2006-2007 MOTRIK INVESTMENT PVT LTD, B-3, CHANDAN METAL COMPOUND, NR BIDC, GORWA ROAD, BARODA-390016 PAN : AABCM 4266 E VS ITO, WARD 4 (2), BARODA / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI TUSHAR P. HEMANI, AR REVENUE BY : SHRI N.P. PATEL, SR. DR / DATE OF HEARING : 30/11/2016 / DATE OF PRONOUNCEMENT: 01/12/2016 / O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-III, BARODA DA TED 12.06.2012 AND PERTAINS TO ASSESSMENT YEAR 2006-07. 2. THE GROUNDS OF APPEAL READ AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF YOUR APPELLANTS CASE AS WELL AS IN LAW, THE LD. CIT(A)-III, BARODA HAS ERRED IN CONFIRMING LD. AOS ACTION OF VALIDITY OF RE-OPENING OF COMPLETED ASSESSMENT PROC EEDINGS U/S 143(3) OF THE ACT AND THAT TOO MERELY BASED ON REVENUE AUDIT OBJECTION. 2. ON THE FACTS AND CIRCUMSTANCES OF YOUR APPELLANTS CASE AS WELL AS IN LAW, THE LD. CIT(A)-III, BARODA HAS ERRED IN CONFIRMING ADDITION U/S 14A OF THE ACT TO THE TUNE OF RS.1,00,000/- ON AD-HOC BASIS. 3. IN THIS CASE, THE ASSESSMENT WAS REOPENED BY THE AO ON THE FOLLOWING REASONS RECORDED BY HIM:- THE INCOME OF THE ASSESSEE WAS INCLUDED EXEMPTED IN COME OF RS.5,14,772/- [INCOME FROM SHARE IN PROFIT FROM DUTAME ENTERPRISE S, MUMBAI AS COMPUTED IN FIRMS CASE. THE ASSESSEE HAD NOT OFFERED ANY D ISALLOWANCE OF EXPENDITURE FOR EARNING THE EXEMPTED INCOME DISALLOWANCE REQUIR ED TO BE MADE U/S 14A SMC-ITA NO 1842/AHD/2012 MOTRIK INVESTMENT PVT LTD VS. ITO AY : 2006-2007 2 READ WITH RULE 8D OF THE INCOME-TAX RULES, 1962 IN VIEW OF DECISION IN THE CASE OF DAGA CAPITAL MANAGEMENT PVT LTD. 3.1 THE ASSESSEE HAD OBJECTED TO THE ABOVE REASONS FOR REOPENING BEFORE THE AO BY SUBMITTING AS UNDER:- 1.02 IN THIS REGARDS, WE STRONGLY OBJECT TO THE B ASIS FOR REOPENING OF ASSESSMENT PROCEEDINGS. IT IS AMPLY CLEAR THAT THE ONLY REASON FOR REOPENING OF ASSESSMENT PROCEEDINGS IS THE DECISION IN THE CA SE OF DAGA CAPITAL MANAGEMENT PVT LTD AS INDICATED IN REASONS RECORDED FOR REOPENING. HERE, WE WISH TO SUBMIT THAT. RE-ASSESSMENT PROCEED INGS LACK JURISDICTION SO FAR AS TO THE FACT THAT CHANGE OF OPINION CANNOT BE MERE REASON FOR REOPENING OF ASSESSMENT PROCEEDINGS. IN THIS REGARDS, STRONG RELIANCE IS PLACED ON DECISION BY HON'BLE SUPREME COURT OF INDIA IN THE C ASE OF COMMISSIONER OF INCOME TAX, DELHI V/S KELVINATOR OF INDIA LIMITED C IVIL APPEAL NOS. 2009- 2011 OF 2003 (COPY ENCLOSED HEREWITH). 1.03 OVER AND ABOVE THAT, WE STRONGLY RELY ON THE DECISION BY HON'BLE HIGH COURT OF BOMBAY IN CASE OF GODREJ & BOYCE MFG. CO L TD, MUMBAI V/S DY. COMMISSIONER OF INCOME TAX, RANGE 10(2), MUMBAI & A NR. ARISING OUT OF INCOME TAX APPEAL NO. 626 OF 2010 AND WRIT PETITION NO.758 OF 2010 WHEREBY DECISION IN THE CASE OF DAGA CAPITAL MANAGE MENT PVT LTD HAS BEEN DISTINGUISHED SPECIFICALLY HOLDING THAT AS THE PROV ISIONS OF RULE 8D OF INCOME TAX RULES WHICH HAVE BEEN NOTIFIED WITH EFFECT FROM 24TH MARCH, 2008 SHALL APPLY WITH EFFECT FROM ASSESSMENT YEAR 2008-09. 1 .04 IN VIEW OF ABOVE, THERE IS LACK OF JURISDIC TION TO INVOKE PROVISIONS OF SECTION 14A OF THE ACT SO FAR AS A.Y. 2006-07 IS CO NCERNED. 3.2 HOWEVER, THE AO CHOSE NOT TO RESPOND TO THE ABO VE OBJECTION TO THE REOPENING AND PROCEEDED TO MAKE THE ASSESSMENT. 4. UPON ASSESSEES APPEAL, THE LD. CIT(A) ACCEPTED THAT THE DECISION OF ITAT MUMBAIS SPECIAL BENCH IN THE CASE OF DAGA CAP IGAL MANAGEMENT PVT LTD, (2008) 119 TTJ (MUM) (SB) 289 REGARDING RETROS PECTIVE APPLICABILITY OF RULE 8D HAS BEEN REVERSED BY THE HONBLE BOMBAY HI GH COURT IN THE CASE OF GODREJ & BOYCE MFG CO. LTD VS. DCIT (REPORTED IN 328 ITR 81 (BOM HC), BUT HE NOTED THAT THIS ORDER OF HONBLE BOMBAY HIGH COURT WAS PASSED SMC-ITA NO 1842/AHD/2012 MOTRIK INVESTMENT PVT LTD VS. ITO AY : 2006-2007 3 AFTER THE REASONS FOR REOPENING OF THE ASSESSMENT W ERE RECORDED; HENCE, ON THE DATE OF RECORDING OF THE REASONS, THE AO HAD TH E REASONS TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT. HOWEVER, LD. CI T(A) FURTHER OPINED THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, A ESTIMATED AMOUNT OF DISALLOWANCE OF RS.1 LAKH WAS CONSIDERED REASONABLE . 5. AGGRIEVED BY THE ABOVE ORDER OF LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 6. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RE CORDS. I FIND THAT ADMITTEDLY AS EXPOUNDED BY THE HONBLE HIGH COURT I N THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD., REPORTED IN 328 ITR 8 1 (BOM HC), RULE 8D WAS NOT APPLICABLE IN THE CONCERNED ASSESSMENT YEAR . IN SUCH CIRCUMSTANCES, AOS REASONS RECORDED FOR REOPENING BEING THE DECIS ION OF ITAT IN THE CASE OF DAGA CAPITAL AND MANAGEMENT PVT LTD (SUPRA) CANN OT BE TAKEN AS ACCEPTABLE REASONS FOR REOPENING. ADMITTEDLY, THE FACTS OF THE CASE INDICATE THAT IT WAS THE CHANGE OF OPINION ON THE PART OF TH E AO AND AS SETTLED BY THE HONBLE APEX COURT IN A CATENA OF CASE LAWS, INCLUD ING THAT OF CIT VS KELVINATOR OF INDIA LTD, REPORTED IN 320 ITR 561 (S C), THE ASSESSMENT ON MERE CHANGE OF OPINION IS NOT PERMISSIBLE. AS ON T HE FACTS OF THE CASE, THE AO HAVING ONCE MADE THE ASSESSMENT WITHOUT MAKING T HE DISALLOWANCE U/S 14A AND THEREAFTER REOPENING THE ASSESSMENT ON THE BASIS OF ITAT DECISION IN THE CASE OF DAGA CAPITAL AND MANAGEMENT PVT LIMI TED (SUPRA), WHICH WAS SET ASIDE BY THE HONBLE JURISDICTIONAL HIGH CO URT, CANNOT BE UPHELD. 6.1 ON MERITS ALSO, IT IS NOTED THAT THE ACT POSTUL ATES DISALLOWANCE OF PROPORTIONATE EXPENDITURE TO BE COMPUTED BY THE AO. IN THIS CASE, LD. CIT(A) HAS SET ASIDE THE AOS COMPUTATION AND HAS S UBSTITUTED THE SAME WITH SOME AD-HOC ESTIMATE. THIS ACTION IS ALSO NOT SUSTAINABLE. ACCORDINGLY, SMC-ITA NO 1842/AHD/2012 MOTRIK INVESTMENT PVT LTD VS. ITO AY : 2006-2007 4 I SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 7. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 1 ST DECEMBER, 2016 AT AHMEDABAD. SD/- SHAMIM YAHYA (ACCOUNTANT MEMBER) AHMEDABAD; DATED 01/12/2016 *BIJU T., SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD