FAMILY INVESTMENT P.LTD, MUMBAI V. PRINCIPAL COMMISSIONER OF INCOME TAX-9, MUMBAI

ITA 1945/MUM/2015

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2254 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 17-06-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 06-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S KEMWAL
• Keywords: Opportunity of being heard; Deemed to accrue or arise in india; Corroborative evidences
• Section: 143(3); 115JB; 80G; 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI N.K . BILLAIYA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER / I .T.A. NO . 1945/MUM/2015 ( / ASSESSMENT YEAR : 2010 - 11 M/S. FAMILY INVESTMENT PVT. LTD., FP 145, RAM MANDIR ROAD, VILE PARLE (E), MUMBAI - 400 057 / VS. THE PRINCIPAL COMMISSIONER OF INCOME TX - 9, AAYAKAR BHAVAN, MUMBAI - 400 020 ./ ./ PAN/GIR NO. : AACFO 0520D ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI VIJAY MEHTA / RESPONDENT BY: SHRI S.S. KEMWAL / DATE OF HEARING : 30 . 11 .2015 / DATE OF PRONOUNCEMENT : 02 .12 .2015 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST THE ORDER OF THE PRINCIPAL CIT - 9, MUMBAI D ATED 24 .0 2 .201 5 PERTAINING TO ASSESSMENT YEAR 20 1 0 - 11 . 2. THE SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE PRINCIPAL CIT ERRED IN SETTING ASIDE THE ASSESSMENT ORDER PASSED BY THE AO A S NOT ONLY ERRONEOUS BUT ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE. ITA. NO. 1945/M/15 2 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSMENT WAS MADE U/S. 143(3) OF THE ACT VIDE ORDER DATED 24.12.2012 IN THE CASE OF THE ASSESSEE - COMPANY WHICH IS ENGAGED IN THE BUSINESS OF DEALING IN SHARES AND SECURITIES UNDER THE PORTFOLIO MANAGEMENT SCHEME. WHILE FRAMING THE ASSESSMENT O RDER U/S. 143(3) OF THE ACT, THE ASSESSING OFFICER OBSERVED THAT 15% OF BOOK PROFIT IS LESS THAN THE TAX PAYABLE ON THE INCOME ASSESSED UNDER THE NORMAL PROVISION OF THE ACT, PROVISIONS OF SEC. 115JB OF THE ACT WAS NOT APPLY. HENCE, FOR THE PURPOSE OF TAX ATION, TOTAL INCOME SHALL BE TAKEN AS PER THE NORMAL PROVISIONS OF THE ACT. 3.1. THIS ORDER DID NOT FIND FAVOUR WITH THE PRINCIPAL CIT WHO VIDE NOTICE U/S. 263 OF THE ACT DATED 22 ND SEPTEMBER, 2014 SOUGHT TO SET ASIDE THE ASSESSMENT ORDER HOLDING IT TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE RELEVANT OBSERVATIONS OF THE PRINCIPAL CIT READ AS UNDER : SCRUTINY OF YOUR BALANCE SHEET AND PROFIT AND LOSS ACCO UNT SHOWS THAT THE DONATION OF RS. 250,00,000/ - TO M/S. SHANTILAL SHANGHVI FOUNDATION HAS BEEN DEBITED TO THE PROFIT & LOSS A/C. ON PAYABLE BASIS. SINCE PAYING DONATION IS NOT A NORMAL BUSINESS EXPENSE, EXPENDITURE ON ACCOUNT OF DONATION MADE CAN BE DEBIT ED TO THE P&L A/C AS AND WHEN DONATIONS ARE PAID. IT CANNOT BE DEBITED ON PAYABLE BASIS. ACCORDINGLY YOUR BOOK PROFIT U/S. 115JB HAS NOT BEEN PREPARED AS PER PROVISIONS OF PART II SCHEDULE VI OF COMPANIES ACT, 1957, AND THE ASSESSING OFFICER ERRONEOUSLY ACCEPTED THE SAME IN THE ABOVE MENTIONED ASSESSMENT ORDER. ASSESSING OFFICER HAS NOT EXAMINED THIS ISSUE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AS IT IS SEEN THAT NO QUERY HAS BEEN RAISED ON THIS ISSUE. ACCORDINGLY, YOU ARE REQUIRED TO EXPLAIN AS TO WHY THE ORDER PASSED BY THE ASSESSING OFFICER DT. 24.12.2012 ACCEPTING YOUR BOOK PROFIT SHOULD BE TREATED AS ERRONEOUS AND PREJUDICIAL ITA. NO. 1945/M/15 3 TO THE INTEREST OF REVENUE AND WHY THE ISSUE SHOULD NOT BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH C ONSIDERATION. 3.2. FACTS RELATING TO THIS ISSUE ARE THAT DURING THE YEAR UNDER CONSIDERATION , THE ASSESSEE DEBITED ITS PROFIT AND LOSS ACCOUNT BY AN AMOUNT OF DONATION OF RS. 13,45,11,000/ - WHICH INCLUDED AN AMOUNT OF RS. 12.75 CRORES PAID/PAYABLE TO M/S. SHANTILAL SHANGHVI FOUNDATION . OUT OF RS. 12.75 CRORES, THE ASSESSEE COULD PAY ONLY RS. 10.25 CRORES ON OR BEFORE 31 ST MARCH, 2010 AND RS. 2.50 CRORES IS SHOWN AS LIABILITY UNDER SCHEDULE - J OF THE BALANCE SHEET. 3.3. THIS IS THE BONE OF CONTENTION BETWEEN THE PRINCIPAL CIT AND THE ASSESSEE. THE PRINCIPAL CIT IS OF THE FIRM BELIEF THAT THE ASSESSEE HAS CLAIMED THE AMOUNT WHICH HAS NOT BEEN PAID BY IT AND THEREFORE THE B OOK PROFIT U/S. 115JB OF THE ACT HAS NOT BEEN COMPUTED PROPERLY RESULT ING IN AN ASSESSMENT ORDER NOT ONLY ERRONEOUS BUT ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE. ACCORDINGLY, PRINCIPAL CIT SET ASIDE THE ASSESSMENT ORDER WITH A DIRECTION TO COMPLETE THE SAME AFRESH AFTER GIVING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND KEEPING IN VIEW THE DIRECTIONS FOR THE COMPUTATION OF BOOK PROFIT U/S. 115JB OF THE ACT. 4. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. 5. THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY SUBMITTED THAT THE ACTION OF THE PRINCIPAL CI T IS NOT ONLY AGAINST THE FACTS OF THE CASE BUT ALSO AGAINST THE PROVISIONS OF THE LAW. IT IS THE SAY OF THE LD. COUNSEL THAT THE ASSESSEE BEING A PRIVATE LIMITED COMPANY HAS PREPARED ITS ACCOUNT AS PER SCHEDULE - VI PART II & III OF COMPANIES ACT 1956 WHI CH IS MANDATORY FOR THE ASSESSEE. THE LD. COUNSEL FURTHER POINTED OUT ITA. NO. 1945/M/15 4 THAT THE ISSUES RAISED BY THE PRINCIPAL CIT HAVE BEEN EXAMINED BY THE AO DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS. THE LD. COUNSEL DREW OUR ATTENTION TO THE REPLY TO TH E QUERIES RAISED DURING THE ASSESSMENT PROCEEDINGS AND POINTED OUT THAT THERE WAS A SPECIFIC QUERY BY THE AO FOR WHICH A SPECIFIC ANSWER WAS GIVEN ALONGWITH NECESSARY SUPPORTING DETAILS/EVIDENCE. THE LD. COUNSEL CONTINUED TO STATE THAT ALL THE EVIDENCES R ELATING TO THE CLAIM OF DONATION WERE FURNISHED BEFORE THE AO AND THE SAME WERE DULY EXAMINED AND AFTER FULLY SATISFYING HIMSELF, THE AO HAS ALLOWED THE CLAIM OF DONATION. 5.1. THE LD. COUNSEL HEAVILY RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF APOL L O TYRES LTD 255 ITR 273 WHICH WAS FOLLOWED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF ADBHUT TRADING CO. P. LTD. 338 ITR 94 AND AGAIN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF M/S. FOREVER DIAMONDS PVT. LTD IN INCOME TAX APPEAL NO. 1609 OF 2013. IT IS THE SAY OF THE LD. COUNSEL THAT THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT AND FOLLOWED BY THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA) SQUARELY APPLY ON THE FCTS OF THE CASE AND THEREFORE THE ORDER OF THE PRINCIPLE CIT DESERVES TO BE SET ASIDE. 6. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE ORDER O F THE PRINCIPAL CIT. IT IS THE SAY OF THE LD. DR THAT THE CIT HAS VALIDLY AND LAWFULLY INVOKED THE POWERS VESTED UPON HIM U/S. 263 OF THE ACT AND THEREFORE THE ORDER SHOULD BE UPHELD. THE LD. DR RELIED UPON THE DECISION OF THE HONBLE MADRAS HIGH COURT I N THE CASE OF INDIAN TEXTILES 157 ITR 1212 AND HONBLE CALCUTTA HIGH COURT IN THE CASE OF ACTIVE TRADERS PVT. LTD. 214 ITR 583. ITA. NO. 1945/M/15 5 REPRESENTATIVES OF BOTH THE SIDES ALSO RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL C O. LTD. 243 ITR 83. 7. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND HAVE CAREFULLY PERUSED THE ORDER OF THE PRINCIPAL CIT. WE HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER MADE U/S. 143(3) OF THE ACT. 8. THE FIRST THING WHICH HAS TO BE CONSIDERED IS WHETHER THE LEARNED COMMISSIONER HAS RIGHTLY ASSUMED THE POWER UNDER SECTION 263 OF THE ACT. THE HONBLE SUPREME COURT IN MALABAR INDUSTRIAL CO. LTD. 243 ITR 83 HAS LAID DOWN THE FOLLOWING RATIO: - A BARE READING OF SECTION 263 OF THE INCOME - TAX ACT, 1961, MAKES IT CLEAR THAT THE PREREQUISITE FOR THE EXERCISE OF JURISDICTION BY THE COMMISSIONER SUO MOTU UNDER IT, IS THAT THE ORDER OF THE INCOME - TAX OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE COMMISSIONER HAS TO BE SATISFIED OF TWIN CONDITIONS, NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS ; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSEN T IF THE ORDER OF THE INCOME - TAX OFFICER IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE REVENUE RECOURSE CANNOT BE HAD TO SECTION 263(1) OF THE ACT. THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEIN G ERRONEOUS 9. NOW, LET US SEE IN THE LIGHT OF THE ABOVE RATIO WHETHER THE ASSESSMENT HAS BEEN MADE ON AN INCORRECT ASSUMPTION OF FACTS OR ITA. NO. 1945/M/15 6 AN INCORRECT APPLICATION OF LAW. THE FIRST OBSERVATION OF THE PRINCIPAL CIT IS THAT THE FULL DONATION CANNOT BE DE BITED ON PAYABLE BASIS AND THEREFORE THE BOOK PROFIT U/S. 115JB HAS NOT BEEN PREPARED AS PER THE PROVISIONS OF PART - II SCHEDULE - VI OF COMPANIES ACT 1956. WE DO NOT FIND ANY FORCE IN THIS OBSERVATION OF THE PRINCIPAL CIT. THE HONBLE SUPREME COURT IN THE CASE OF APOLLO TYRES (SUPRA) HAS MADE THE FOLLOWING OBSERVATIONS WHICH ARE VERY MUCH RELEVANT ON THE FACTS IN ISSUES. IF WE EXAMINE THE SAID PROVISION IN THE ABOVE BACKGROUND, WE NOTICE THAT THE USE OF THE WORDS IN ACCORDANCE WITH THE PROVISIONS OF PARTS II AND III OF SCHEDULE VI TO THE COMPANIES ACT WAS MADE FOR THE LIMITED PURPOSE OF EMPOWERING THE ASSESSING AUTHORITY TO RELY UPON THE AUTHENTIC STATEMENT OF ACCOUNTS OF THE COMPANY. WHILE SO LOOKING INTO THE ACCOUNTS OF THE COMPANY, AN ASSESSING OF FICER UNDER THE INCOME - TAX ACT HAS TO ACCEPT THE AUTHENTICITY OF THE ACCOUNTS WITH REFERENCE TO THE PROVISIONS OF THE COMPANIES ACT WHICH OBLIGATES THE COMPANY TO MAINTAIN ITS ACCOUNT IN A MANNER PROVIDED BY THE COMPANIES ACT AND THE SAME TO BE SCRUTINISED AND CERTIFIED BY THE STATUTORY AUDITORS AND WILL HAVE TO BE APPROVED BY THE COMPANY IN ITS GENERAL MEETING AND THEREAFTER TO BE FILED BEFORE THE REGISTRAR OF COMPANIES WHO HAS A STATUTORY OBLIGATION ALSO TO EXAMINE AND SATISFY THAT THE ACCOUNTS OF THE COM PANY ARE MAINTAINED IN ACCORDANCE WITH THE REQUIREMENTS OF THE COMPANIES ACT. IN SPITE OF ALL THESE PROCEDURES CONTEMPLATED UNDER THE PROVISIONS OF THE COMPANIES ACT, WE FIND IT DIFFICULT TO ACCEPT THE ARGUMENT OF THE REVENUE THAT IT IS STILL OPEN TO THE A SSESSING OFFICER TO RESCRUTINISE THIS ACCOUNT AND SATISFY HIMSELF THAT THESE ACCOUNTS HAVE BEEN MAINTAINED IN ACCORDANCE WITH THE PROVISIONS OF THE COMPANIES ACT. IN OUR OPINION, RELIANCE PLACED BY THE REVENUE ON SUB - SECTION (1A) OF SECTION 115J OF THE INC OME - TAX ACT IN SUPPORT OF THE ABOVE CONTENTION IS MISPLACED. SUB - SECTION (1A) OF SECTION 115J DOES NOT EMPOWER THE ASSESSING OFFICER TO EMBARK UPON A FRESH INQUIRY IN REGARD TO THE ENTRIES MADE IN THE BOOKS OF ACCOUNT OF THE COMPANY. 10. THE HONBLE SU PREM COURT FURTHER OBSERVED AS UNDER: BEYOND THAT, WE DO NOT THINK THAT THE SAID SUB - SECTION EMPOWERS THE AUTHORITY UNDER THE INCOME - TAX ACT TO PROBE INTO THE ITA. NO. 1945/M/15 7 ACCOUNTS ACCEPTED BY THE AUTHORITIES UNDER THE COMPANIES ACT. IF THE STATUTE MANDATES THAT INCOM E PREPARED IN ACCORDANCE WITH THE COMPANIES ACT SHALL BE DEEMED INCOME FOR THE PURPOSE OF SECTION 115J OF THE ACT, THEN IT SHOULD BE THAT INCOME WHICH IS ACCEPTABLE TO THE AUTHORITIES UNDER THE COMPANIES ACT. AND FINALLY THE HONBLE SUPREME COURT LAID DOWN THE RATIO OBSERVED AS UNDER: THEREFORE, WE ARE OF THE OPINION, THE ASSESSING OFFICER WHILE COMPUTING THE INCOME UNDER SECTION 115J HAS ONLY THE POWER OF EXAMINING WHETHER THE BOOKS OF ACCOUNT ARE CERTIFIE D BY THE AUTHORITIES UNDER THE COMPANIES ACT AS HAVING BEEN PROPERLY MAINTAINED IN ACCORDANCE WITH THE COMPANIES ACT. 11. THUS IT CAN BE SEEN THAT THE ONLY POWER VESTED UPON THE REVENUE AUTHORITIES IS THE POWER OF EXAMINING WHETHER THE BOOKS OF ACCOUNTS ARE CERTIFIED BY THE AUTHORITIES UNDER THE COMPANIES ACT. IT IS NOT THE CASE OF THE PRINCIPLE CIT THAT THE BOOKS OF ACCOUNT HAVE NOT BEEN PROPERLY CERTIFIED BY THE AUTHORITIES UNDER THE COMPANIES ACT THEREFORE THE OBSERVATIONS OF TH E PRINCIPAL CIT IS NOT ACCEPTABLE IN THE LIGHT OF THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT (SUPRA). 12. THE SECOND CONTENTION OF THE PRINCIPAL CIT IS THAT THE AO HAS NOT EXAMINED THIS ISSUE DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. 13. WE FIND THAT VIDE LETTER DATED 7 TH DECEMBER, 2012, THE ASSESSEE HAS FURNISHED (A) LEDGER ACCOUNT OF DONATION U/S. 80G ALONGWITH DONATION RECEIPTS (B) COPY OF ACKNOWLEDGEMENT OF RETURN OF INCOME AND BALANCE SHEET AND PROFIT AND LOSS ACCOUNT OF M/S. SHANT ILAL SHANGHVI FOUNDATION ALONGWITH ALL ITS SCHEDULE. THIS REPLY IS PLACED AT PAGE - 20 OF THE PAPER BOOK AND FROM PAGES 23 TO 38, WE FIND THE RECEIPTS OF DONATION TO M/S. SHANTILAL SHANGHVI FOUNDATION. ITA. NO. 1945/M/15 8 14. THUS, IT CAN BE SEEN THAT IN RESPONSE TO A SPECIF IC QUERY, THE ASSESSEE HAS FILED ALL THE RELATED DETAILS ALONGWITH SUPPORTING EVIDENCES. THEREFORE, IT CANNOT BE SAID THAT THE AO HAS NOT EXAMINED THIS ISSUE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE DECISIONS RELIED UPON BY THE LD. DR ARE ALTOGET HER ON DIFFERENT SET OS FACTS. IN THE CASE OF INDIAN TEXTILE (SUPRA), THE AO HAS ALLOWED RELIEF WITHOUT ANY VERIFICATION THEREFORE THE HONBLE MADRAS HIGH COURT UPHELD THE ORDER OF THE COMMISSIONER U/S. 263 OF THE ACT AND IN THE CASE OF ACTIVE TRADERS (SU PRA), THE HONBLE CALCUTTA HIGH COURT UPHELD THE ORDER OF TH E COMMISSIONER U/S. 263 FINDING THAT THE ASSESSMENT WAS MADE WITHOUT ENQUIRING INTO GENUINENESS AND CREDIT WORTHINESS OF SHAREHOLDERS. THUS, IT CAN BE SEEN THAT THE FACTS OF THE CASE IN HAND ARE TOTALLY DIFFERENT . THE AO HAS THOROUGHLY EXAMINED THE CLAIM AND MOST IMPORTANTLY THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT AS MENTIONED ELSEWHERE SQUARELY APPLY ON THE FACTS OF THE CASE. WE, THEREFORE, SET ASIDE THE ORDER OF THE PRINCIPAL CIT AN D RESTORED THAT OF THE AO MADE U/S. 143(3) OF THE ACT. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND DECEMBER , 2015 . SD/ - SD/ - ( PAWAN SINGH ) (N.K. BILLAIYA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 2 ND DECEMBER , 2015 . . ./ RJ , SR. PS ITA. NO. 1945/M/15 9 / 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