CASCADE HOLDINGS PVT. LTD., MUMBAI V. A.C.I.T. CEN. CIR.31, MUMBAI

ITA 191/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79347 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 07-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P DANIEL
• Keywords: Rejection of books of accounts; Opportunity of being heard; Principle of natural justice
• Section: 234B; 14A; 115JB; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO. 191/MUM/2013 (ASSESSMENT YEAR: 2008-09) M/S. CASCADE HOLDINGS PVT. LTD. 32, MADHULI, 3 RD FLOOR DR. ANNIE BESANT ROAD NEHRU CENTRE, WORLI MUMBAI-400 018. VS. ACIT, CC - 31 ROOM NO.409, AAYAKAR BHAVAN M.K. MARG MUMBAI-400 020. (APPELLANT) (RESPONDENT) P ERMANENT ACCOUNT N O. : AAACC 5768 N ASSESSEE BY : SHRI DHARMESH SHAH RE VENUE BY : DR. P. DANIEL DATE OF HEARING : 08/07/2014 DATE OF PRONOUNCEMENT : 16/07/2014 O R D E R PER VIJAY PAL RAO, JUDICIAL MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 19/11/2012 OF CIT(A) FOR THE ASSESSMENT YEAR 20008- 09. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS :- 1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) HAS ERRED IN LAW AND IN FACTS IN PASSING THE ORDER U/ S. 250 OF THE ACT. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN PASSING THE ORDER WITHOUT COMPL YING WITH THE PRINCIPLES OF NATURAL JUSTICE. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN NOT APPRECIATING THAT NO INCOME FROM ATTACHED ASSETS CAN BE ASSESSED IN THE HANDS OF THE APPELLAN T. ITA NO.191/M/13 AY:08-09 2 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN NOT GRANTING RELIEF OF LIABILIT Y AMOUNTING TO RS. 86,15,970/-, TOWARDS INTEREST EXPENDITURE CLAIMED B Y THE APPELLANT. 5. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING CALCULATION OF BOOK PROFIT U/ S. 115JB AMOUNTING TO RS. 24,76,980/-. 6. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING INTEREST CHARGED U/ S. 234A, 234B AND 234C OF THE ACT. 2. AT THE TIME OF HEARING THE LD. AR OF THE ASSESSE E HAS STATED THAT THE ASSESSEE DOES NOT PRESS GROUND NOS.1 TO 3 AND THE S AME MAY BE DISMISSED AS NOT PRESSED. THE LD. DR HAS RAISED NO OBJECTION IF THE GROUND NOS. 1 TO 3 ARE DISMISSED AS PRAYED BY THE A SSESSEE. ACCORDINGLY GROUND NOS. 1 TO 3 ARE DISMISSED BEING NOT PRESSED. 3. GROUND NO.4 IS REGARDING DISALLOWANCE OF INTERES T EXPENSES AMOUNTING TO RS.86,15,970/-. THE FACTS EMERGING FRO M RECORD AND RELEVANT TO THIS ISSUE ARE THAT THE ASSESSEE HAD BO RROWED MONEY FROM FAMILY BROKERAGE FIRMS FOR MAKING INVESTMENT IN SHA RES AND SECURITIES PRIOR TO 08/06/1992. THE ASSESSEE HAS CLAIMED DEDUC TION ON ACCOUNT OF INTEREST PAYABLE TO THESE CREDITORS. AN AMOUNT OF R S.3,72,82,860/- WAS SHOWN AS INTEREST PAYABLE TO THESE BROKERAGE FIRMS FOR THE YEAR UNDER CONSIDERATION. OUT OF THE SAID AMOUNT A DISALLOWANC E OF RS.2,86,66,890/- WAS MADE SUO MOTO BY ASSESSEE IN V IEW OF SECTION 14A OF THE INCOME TAX ACT AND REMAINING AMOUNT OF RS.86 ,15,970/- WAS CLAIMED AS DEDUCTION. THE AO HAS DISALLOWED THE CLA IM OF THE ASSESSEE BY OBSERVING THAT THE SAID CLAIM OF THE ASSESSEE WA S MERELY A CONTINGENT LIABILITY AS THE CUSTODIAN HAS RAISED A CLAIM OF SU CH INTEREST FROM THE ASSESSEE AND OTHER FAMILY MEMBERS TO BE PAYABLE TO BROKERAGE FIRM ON ACCOUNT OF THESE OUTSTANDING AND THAT THE MATTER WA S PENDING BEFORE THE SPECIAL COURT. FURTHER, THE AO HELD THAT THERE WAS NO NEXUS OF INTEREST ITA NO.191/M/13 AY:08-09 3 INCOME WITH THE INTEREST EXPENSES. ON APPEAL CIT(A) HAS CONFIRMED THE ACTION OF THE AO BY FOLLOWING THE ORDER FOR THE ASS ESSMENT YEAR 2007-08. 4. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMIT TED THAT THIS ISSUE WAS CONSIDERED AND DECIDED BY THIS TRIBUNAL FOR THE ASSESSMENT YEAR 2007-08 AND SET ASIDE TO THE RECORD OF THE CIT(A) V IDE ORDER DATED 24/01/2014. LD. DR HAS RELIED UPON THE ORDERS OF AU THORITIES BELOW. 5. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS MATERIAL AVAILABLE ON RECORD, WE NOTE THAT IDENTICAL ISSUE H AS BEEN CONSIDERED AND DECIDED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007-08 AS UNDER :- 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE ORDER OF THE TRI BUNAL IN THE CASE OF HITESH S. MEHTA (SUPRA). WHETHER THE INTERE ST LIABILITIES OF RS.86,15,970/-CONSTITUTES ASCERTAINED ONE OR NOT I S ALSO LINKED TO THE ISSUE OF REJECTION OF BOOKS OF ACCOUNTS AS THE BOOKS OF ACCOUNT IS THE BASIS FOR COMPUTATION OF BOOK PROFITS U/S 11 5JA OF THE ACT. THIS IS COMMON ISSUE QUA THE ISSUE ADJUDICATED IN T HE CASE OF THE HITESH S. MEHTA (SUPRA) AND MATTER WAS SET ASIDE. R ESPECTFULLY FOLLOWING THE SAID ORDER OF THE TRIBUNAL, WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE RAISED IN GROUND NO.3 SHOULD BE SET ASIDE TO THE FILES OF THE CIT (A) FOR FRESH ADJUDICATION OF THE ISSUE AFTER GRANTING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE DECISION IF ANY SHOULD BE TAKEN ONLY AFTER CONS IDERING THE DECISION IN THE CASE OF HITESH. S MEHTA, (SUPRA). A CCORDINGLY, GROUND NOS.4 & 6 ARE SET ASIDE. 5.1 FOLLOWING THE EARLIER DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE WE SET ASIDE THIS ISSUE TO THE RECORD OF CIT(A ) WITH THE SAME DIRECTION AS GIVEN IN THE ASSESSMENT YEAR 2007-08. 6. GROUND NO.5 IS REGARDING COMPUTATION OF BOOK PRO FIT UNDER SECTION 115JB. WE HAVE HEARD THE LD. AR AS WELL AS THE LD. DR AND CONSIDERED RELEVANT MATERIAL ON RECORD. THIS GROUND IS CONSEQU ENTIAL TO GROUND NO.4. FURTHER AN IDENTICAL ISSUE WAS CONSIDERED BY THIS T RIBUNAL IN ASSESSEES ITA NO.191/M/13 AY:08-09 4 OWN CASE FOR THE ASSESSMENT YEAR 2001-02 VIDE ORDER 18/06/2014 IN ITA NO.2142/M/2013 IN PARA-6 AS UNDER :- 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE ORDER OF THE TRI BUNAL IN THE CASE OF HITESH S. MEHTA (SUPRA). WHETHER THE INTERE ST LIABILITIES OF RS. 69,68,020/- CONSTITUTES ASCERTAINED ONE OR NOT IS ALSO LINKED TO THE ISSUE OF REJECTION OF BOOKS OF ACCOUNTS AS T HE BOOKS OF ACCOUNT IS THE BASIS FOR COMPUTATION OF BOOK PROFIT S U/S 115JA OF THE ACT. THIS IS COMMON ISSUE QUA THE ISSUE ADJUDIC ATED IN THE CASE OF THE HITESH S. MEHTA (SUPRA) AND MATTER WAS SET ASIDE. RESPECTFULLY FOLLOWING THE SAID ORDER OF THE TRIBUN AL, WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE RAISED IN GROUND NO.3 SHOULD BE SET ASIDE TO THE FILES OF THE CIT (A) FOR FRESH ADJ UDICATION OF THE ISSUE AFTER GRANTING A REASONABLE OPPORTUNITY OF BE ING HEARD TO THE ASSESSEE. THE DECISION IF ANY SHOULD BE TAKEN ONLY AFTER CONSIDERING THE DECISION IN THE CASE OF HITESH S ME HTA, (SUPRA). ACCORDINGLY, GROUND NOS.4 IS SET ASIDE. 6.1 SINCE THIS ISSUE IS CONSEQUENTIAL TO THE ISSUE RAISED IN GROUND NO.4 AND FURTHER AN IDENTICAL ISSUE WAS SET ASIDE T O THE RECORD OF CIT(A) FOR FRESH ADJUDICATION BY THIS TRIBUNAL IN ASSESSE ES OWN CASE FOR ASSESSMENT YEAR 2001-02, THEREFORE, FOLLOWING THE R ULE OF CONSISTENCY WE SET ASIDE THIS ISSUE TO THE TO THE RECORD OF CIT(A) FOR FRESH ADJUDICATION WITH THE SAME DIRECTIONS AS GIVEN FOR THE ASSESSMEN T YEAR 2001-02. 7. GROUND NO.6 IS REGARDING INTEREST CHARGED UNDER SECTION 234A, 234B AND 234C OF THE INCOME TAX ACT. 7.1 WE HAVE HEARD THE LD. AR AND THE LD. DR AND CON SIDERED THE RELEVANT MATERIAL ON RECORD. THE LD. AR HAS SUBMITT ED THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED AND DECIDED BY THIS TRIBU NAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2007-08 AND IT WAS SET ASIDE TO THE RECORD OF CIT(A) ON BOTH COUNTS AS CHARGEABILITY OF INTERE ST UNDER SECTION 234A, 234B AND 234C IN RESPECT OF NOTIFIED PERSONS AS WEL L AS ON MERITS WERE ALSO SET ASIDE TO THE RECORD OF CIT(A). ON THE OTHE R HAND THE LD. DR HAS RELIED UPON THE DECISION OF THIS TRIBUNAL DATED 17 /09/2013 IN CASE OF ITA NO.191/M/13 AY:08-09 5 M/S. TOPAZ HOLDING PVT. LTD. IN ITA NO.7295/MUM/201 2 FOR ASSESSMENT YEAR 2000-01 AND SUBMITTED THAT THE TRIBUNAL HAS HE LD THAT SECTION 234A, 234B AND 234C ARE APPLICABLE EVEN IN THE CASE OF NOTIFIED PERSON. 7.2 HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD WE NOTE THAT FOR THE ASSESSMENT YEAR 2007-08 IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL IN PARA-10 AS UNDER :- 10. THE ABOVE GROUNDS RAISED BY THE REVENUE ARE RE LATING TO THE SOLITARY LEGAL ISSUE OF CHARGEABILITY OF INTEREST U /S. 234A, 234B AND 234C OF THE INCOME TAX ACT, 1961 AND THE APPLIC ABILITY OF THE SAID PROVISIONS TO THE NOTIFIED PERSONS. WHILE ADJU DICATING THE ASSESSEES' APPEALS, IN THE ABOVE PARAGRAPHS OF THIS ORDER WE HAVE SET ASIDE THE ISSUE RELATING TO THE DEDUCTION OF IN TEREST EXPENDITURE, TO THE FILES OF THE CIT (A) AND DIRECT ED THE CIT (A) TO ADJUDICATE THE MATTER AFRESH. IN VIEW OF THE DIRECT IONS GIVEN IN THE ASSESSEES' APPEALS, THE LIABILITY OF THE ASSESSEES U/S 234A, 234B AND 234CSQUARELY DEPENDS UPON THE PROPOSED ADJUDICA TION OF THE CIT (A) IN THE SET ASIDE PROCEEDINGS. THEREFORE, CO NSIDERING THE CONSEQUENTIAL NATURE OF THE GROUNDS, WE ARE OF THE CONSIDERED OPINION THAT THE GROUND NOS. 1 AND 2 RAISED BY THE REVENUE ARE SET ASIDE. 7.3 AS IT IS CLEAR FROM THE DECISION OF THE TRIBUNA L THAT THIS ISSUE FOR ASSESSMENT YEAR 2007-08 WAS SET ASIDE TO THE RECORD OF CIT(A) FOR DECIDING THE LEGAL ASPECT OF CHARGEABILITY OF INTER EST AND THE CONSEQUENTIAL ASPECT ON MERITS BECAUSE THE OTHER IS SUES/ADDITIONS WERE ALSO SET ASIDE TO THE RECORD OF CIT(A). FOR THE YEA R UNDER CONSIDERATION ALSO THE OTHER ISSUES HAVE BEEN SET ASIDE TO THE RE CORD OF CIT(A), THEREFORE, THIS ISSUE IS REQUIRED TO BE CONSIDERED AND DECIDED AFTER THE ADJUDICATION OF THE OTHER ISSUES OF ADDITIONS. ACCO RDINGLY, WE SET ASIDE THIS ISSUE TO THE RECORD OF CIT(A) FOR DECIDING THE QUANTUM INTEREST UNDER SECTION 234A, 234B AND 234C IN CONSEQUENCE OF OTHER ISSUES ON MERITS AFTER CONSIDERING THE DECISION RELIED UPON BY THE P ARTIES. AS REGARDS THE ISSUE OF CHARGEABILITY OF INTEREST U/S. 234A, 234B AND 234C THIS IS NOW ITA NO.191/M/13 AY:08-09 6 SETTLED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. DIVINE HOLDINGS PVT. LTD. 209 TAXMANN 467(BOM.) 8. GROUND NO.7 IS GENERAL IN NATURE WHICH DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH JULY, 2014. SD/- SD/- (D. KARUNAKARA RAO) ACCOUNTANT MEMBER (VIJAY PAL RAO ) JUDICIAL MEMBER MUMBAI, DATED: 16/07/2014. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.