SUSHILA CONSTRUCITON P.LTD, MUMBAI V. ITO 7(2)(4), MUMBAI

ITA 1982/MUM/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92910 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2015
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Next Hearing Date: 19-05-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 07-04-2015
• Court: TRIBUNAL
• Department Lawyers: V K BORA SR
• Assessee Lawyers: S C AGRAWAL
• Keywords: Tangible material; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 148

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ./I.T.A. NO. 1982/M/2015 ( AY: 2006 - 2007 ) SUSHILA CONSTRUCTION LTD., SHOP NO.6, B WING, MANOJ CHS LTD, SHANKAR GHANEKAR ROAD, MUMBAI 400 025. / VS. ITO 7(2)(4), 6 TH FLOOR, R.NO.618, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. ./ PAN : AACS7279Q ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI S.C. AGRAWAL / RESPONDENT BY : SHRI V.K. BORA, SR. AR / DATE OF HEARING : 17 .6.2015 / DATE OF PRONOUNCEMENT :17 .6.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 7.4.2015 IS AGAINST THE ORDER OF THE CIT (A) - 14, MUMBAI DATED 28.1.2015 FOR THE ASSESSMENT YEAR 2006 - 2007. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN CONFIRMING THE RE - OPENING OF ASSESSMENT WITHOUT APPRECIATING THE FACT THAT THE RE - OPENING IS BAD IN LAW. SINCE, A. RE - OPENING IS BASED ON THE OPINION OF AUDIT PARTY. B. IN THE ORIGINAL ASSESSMENT DETAILS WERE SUBMITTED. C. U/S 148 REVIEW OF ORIGINAL ASSESSMENT IS NOT PERMITTED. D. ASSESSMENT CANNOT BE RE - OPENED ON MERE CHANGE OF OPINION. E. THERE WAS NO FAILURE TO DISCLOSE THE MATERIAL FACTS. F. ASSESSMENT CANNOT BE RE - OPENED TO MAKE DISALLOWANCE U/S 40(A)(IA) OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN CONFIRMING THE DISALLO WANCE U/S 40(A)(IA) OF THE ACT R S. 60,427/ - WITHOUT APPRECIATING THE FACT THAT A. THE PORTFOLIO MANAGEMENT FEES PAID TO ASK REYMON D JAMES IS NOT IN THE NA TURE OF PROFESSIONAL FEES. 2 B. THAT M/S. ASK REYMOND JAMES HAS FILED HIS RETURN OF INCOME AND INCLUDED THE SAID AMOUNT IN THEIR INCOME. THEREFORE, THE DISALLOWANCE IS NOT JUSTIFIED. 2. ASSESSEE RAISED THE ABOVE GROUNDS INVOLVING TWO ISSUES NAMELY; (I) VALIDITY OF THE RE - ASSESSMENT AND (II) ON MERITS THE ISSUE OF DISALLOWANCE OF RS. 60,427/ - U/S 40(A)(IA) OF THE ACT, WHICH REMAINS PAYABLE AS ON 31.3.2006. BRIEFLY STATED, RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE, WHO IS ENGAGED IN THE BUSINESS OF SHARE TRADING ACTIVITY, FILED NIL RETURN OF INCOME. THE SCRUTINY ASSESSMENT WAS COMPLETED DETERMINING THE TOTAL LOSS OF RS. 17,574/ - . THE ASSESSMENT WAS RE - OPENED BY ISSUING THE NOTICE U/S 148 OF THE ACT ON 30.3.2011 FOR REASON OF BRING TO TAX THE PROFE SSIONAL FEES DEBITED TO THE P & L ACCOUNT, AS THE SAID CLAIM WAS MADE WITHOUT EFFECTING TDS. FURTHER, AO WANTED TO TAX THE INTEREST RECEIVED OR PAID ON THE UNSECURED LOANS CLAIMED IN THE RETURN OF INCOME. ASSESSING OFFICER COMPLETED THE RE - ASSESSMENT PRO CEEDINGS U/S 143(3) R.W.S 147 OF THE ACT, DETERMINING THE TOTAL INCOME OF RS. 1,12,310/ - . IN THE RE - ASSESSMENT, AO MADE CERTAIN ADDITIONS I.E., (I) ADDITION ON ACCOUNT OF PROFESSIONAL FEES (RS. 60,427/ - ) AND (II) ADDITION OF RS. 69,460/ - U/S 36(1)(III) ON ACCOUNT OF INTEREST. AGGRIEVED WITH THE SAME, ASSESSEE FILED THE APPEAL BEFORE THE CIT (A), WHO GRANTED PART RELIEF TO THE ASSESSEE I.E., THE ADDITION ON ACCOUNT OF INTEREST WAS DELETED AND PARA 5 OF THE IMPUGNED ORDER IS RELEVANT IN THIS REGARD. THAT LE AVES THE ADDITION OF RS. 60,427/ - RELATING TO THE PROFESSIONAL FEES / PORTFOLIO MANAGEMENT FEES (PMS FEES). AGGRIEVED AND DISSATISFIED WITH THE PART RELIEF GRANTED BY THE CIT (A), ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. DURING THE PROCEEDINGS BEFORE THE TRIBUNAL, ON THE SOLITARY ISSUE OF ADDITION ON ACCOUNT OF PROFESSIONAL FEES / PMS FEES, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE RE - ASSESSMENT PROCEEDINGS ARE INVALID CONSIDERING THE FACT THAT THE ISSUE WAS SUBJECT MATTER OF SCRUTINY DURING THE ORIGINAL ASSESSMENT PROCEEDINGS. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO PAGE 72, ITEM NO.1 OF THE LETTER OF THE ASSESSEE DATED 2.8.2008 AND THE SAID ITEM RELATES TO THE DETAILS OF PMS FEES PAID. IT IS RELEVANT TO MENTION H ERE THAT THERE IS NO INFORMATION RELATING TO THE TDS OF THE SAID FEES. ON MERITS, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT TDS WAS NOT DEDUCTED ON THE SAID AMOUNT AND THE AMOUNT WAS PAYABLE AT THE END 3 OF THE FINANCIAL YEAR. FOR THIS, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE LEDGER EXTRACT OF THE PMS FEES ACCOUNT PLACED AT PAGE 74 OF THE PAPER BOOK. FURTHER, HE SUBMITTED THAT THE AMOUNTS WERE SUBSEQUENTLY PAID WITHOUT EFFECTING TDS. ASSESSEE RELIED ON VARIOUS DECISIONS TO SUBSTANTIATE T HE ARGUMENT THAT THE ASSESSMENT WAS INVALIDLY RE - OPENED. OTHERWISE, HE CONCEDE TO THE POINT THAT THE ASSESSEE HAS NO CASE ON MERITS. 4. ON THE OTHER HAND, LD DR FOR THE REVENUE FILED A JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF EXPOR T CREDIT GUARANTEE CORPORATION OF INDIA LTD VS. ADDITIONAL COMMISSIONER OF INCOME TAX [2013] 30 TA XMANN.COM 211 (BOMBAY), WHICH IS RELEVANT FOR THE PROPOSITION THAT WHERE THERE IS COMPLETE FAILURE ON THE PART OF ASSESSING OFFICER TO APPLY HIS MIND, DURING THE ORIGINAL ASSESSMENT PROCEEDINGS, TO POINT ON WHICH ASSESSMENT IS SOUGHT TO BE REOPENED, IT CAN BE SAID THAT THERE IS TANGIBLE MATERIAL AND REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. HE ALSO RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED ON TO THE RECORD AND THE PRECEDENTS RELIED ON BY LD REPRESENTATIVES OF BOTH THE PARTIES. THE CORE ISSUE INVOLVED IS THE VALIDITY O F THE REOPENING OF THE ASSESSEE. IN THIS REGARD, ON PERUSAL OF THE PAPER BOOK FILED BEFORE US, WE FIND THE CONTENTS OF THE PAGE 72 ARE RELEVANT AND THEREFORE, THE SAME ARE EXTRACTED AS UNDER: DATE 02.08.2008 TO THE INCOME TAX OFFICER - 7(2)(4), AAYAKAR BHAVAN, MUMBAI. DEAR SIR, WITH REFERENCE TO ABOVE ASSESSMENT, WE ARE SUBMITTING HEREWITH THE FOLLOWING DETAILS. 1. DETAILS OF PMDS FEES PAID. WE HAVE PAID RS. 60,427/ - TO M/S. ASK RAYMOND JAMES FOR TOWARD PORTFOLIO MANAGEMENT BASE FEES AND DEBIT NOTE. 6. FROM THE ABOVE, IT IS EVIDENT THAT THERE IS NO INQUIRY BY THE ASSESSING OFFICER ON THE POINT OF THE TDS DETAILS AND THE DETAILS OF PAYMENTS PAID OR PAYABLE. WHAT IS SUBMITTED BY THE ASSESSEE IS ONLY ABOUT THE DETAILS OF PMS FEES PAID I.E., NATURE OF THE P AYMENTS, TO WHOM THE PAYMENT WAS MADE ETC . THROUGH THE ABOVE INQUIRY, 4 WHICH IS GENERAL IN NATURE, IN MY OPINION, AO HAS NO CASE TO FORM AN OPINION ON THE ISSUE UNDER CONSIDERATION, FOR WHICH THE ASSESSMENT IS RE - OPENED, SPECIALLY FOR THE PURPOSE OF APPLYI NG THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT TO THE SAID PMS FEES / PROFESSIONAL FEES PAYMENT. CONSIDERING THE FAILURE OF THE ASSESSEE AND THE ASSESSING OFFICER, I AM OF THE OPINION THAT THE ISSUE OF NOTICE U/S 148 OF THE ACT IS NOT VALID AND THEREFO RE, THE RELEVANT GROUND NO.1 RAISED BY THE ASSESSEE SHOULD BE DISMISSED. 7. ON MERITS, IT IS AN ADMITTED POSITION THAT THE PROVISIONS OF SECTION 40(A )(IA) OF THE ACT CLEARLY APPLYS TO THE FACTS OF THE CASE AS THE AMOUNTS WERE PAID ON 31.3.2006 AND THE PAY MENTS WERE NOT MADE WITHOUT EFFECTING THE TDS AS CONSIDERED BY THE LD COUNSEL FOR THE ASSESSEE. THUS, ON MERITS ALSO ASSESSEE FAILS. ACCORDINGLY, GROUND NO.2 IS DISMISSED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPE N COURT ON 17 TH JUNE, 2015. SD/ - (D. KARUNAKARA RAO) ACCOUNTANT MEMBER MUMBAI ; 17.6 .201 5 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT - 4. / 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI