DCIT (OSD) 3(1), MUMBAI V. HIND FILTERS LTD, MUMBAI

ITA 2082/MUM/2012

• Counselvise Citation: 208219914 RSA 2012
• Duration Of Justice: 1 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 03-09-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 29-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DIVYESH SHAH
• Keywords: Depreciation; Difference of opinion; Deemed dividend; Change of opinion
• Section: 143(3); 32; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND DR. S.T.M PAVALAN, JUDICIAL MEMBER ITA NO. 2082/MUM/2012 ASSESSMENT YEAR : 2004-05 DCIT, CIRCLE, 3(1) ROOM NO.607, 6 TH FLOOR AAYAYAK BHAVAN MUMBAI-400 020. VS. M/S. HIND FILTERS LTD. 15221 % 1522, MAKER CHAMBERS-V 221, BACKBAY RECLAMATION NARIMAN POINT MUMBAI-400 021. PAN NO.AAACH 0397 L (APPELLANT) (RESPONDENT) CROSS OBJECTION NO.69/MUM/2013 ARISING OUT OF ITA NO. 2082/MUM/2012 ASSESSMENT YEAR : 2004-05 M/S. HIND FILTERS LTD. MUMBAI-400 021. PAN NO.AAACH 0397 L VS. DCIT(OSD) CIRCLE 3(1) MUMBAI-20. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI DIVYESH SHAH & SHRI RAVI SAWANA REVENUE BY : SHRI SANJEEV JAIN DATE OF HEARING : 03/09/2013 DATE OF PRONOUNCEMENT : 17 / 0 9 /2013 O R D E R PER B. RAMAKOTAIAH, AM: REVENUE APPEAL IS AGAINST THE ORDERS OF CIT(A) 7 , MUMBAI DATED 07.12.2011. ASSESSEE RAISED CROSS OBJECTION ON THE ISSUES WHICH ARE NOT ITA NO.2082/12 & CO/13 A.Y.04-05 HIND FILTERS LTD. 2 ADJUDICATED BY THE CIT(A), AS HE UPHELD THE CONTENT IONS OF THE ASSESSEE ON THE ISSUE OF REOPENING OF THE ASSESSMENT. 2. BRIEFLY STATED, ASSESSEE HAS FILED RETURN FOR AS SESSMENT YEAR 2004- 05 ON 26.10.2004, DISCLOSING TOTAL INCOME OF RS.3,3 2,89,345/-. ORDER UNDER SECTION 143(3) WAS PASSED ON 29.12.2006 ASSES SING TOTAL INCOME AT RS.4,04,97,000/-. LATER ON, THE AO SEEMS TO HAVE RECEIVED COMMUNICATION FROM ADDITIONAL CIT-RANGE-1, UJJAIN T HAT ASSESSEE HAS RECEIVED CERTAIN ICD ADVANCE FROM M/S. DEWS SOYA LT D. IN WHICH ASSESSEE IS A SHARE HOLDER, WHICH CAN BE TREATED AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT. THIS LETTER WAS RECEIVED ON 23.03.2009. CONSEQUENT TO THAT THE AO ISSUED NOTICE UNDER SECTI ON 148 ON 15.04.2009 I.E. AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEARS. THE ASSESSEE REPLIED TO THE NOTICE ON 6 TH MAY, 2009, OBJECTING THE RE-OPENING AND FURTHER SUBMITTED THAT ALL ISSUES WE RE EXAMINED BY THE AO AT THE TIME OF THE ORIGINAL ASSESSMENT. THEREAFT ER, THE AO CANCELLED THE NOTICE SO ISSUED UNDER SECTION 148 ON 21 ST MAY, 2009. THE AO HOWEVER ISSUED ANOTHER FRESH NOTICE UNDER SECTION 1 48 ON MARCH 9, 2010 WHICH WAS RECEIVED BY THE ASSESSEE ON 10 TH MARCH, 2010. THE ASSESSEE VIDE LETTER DATED 22.03.2010 OBJECTED ISSUING ANOTH ER NOTICE HAVING CANCELLED THE PROCEEDINGS INITIATED, AFTER ASSESSEE S SUBMISSION DATED 6 TH MAY, 2009. HOWEVER, THE AO CONTINUED THE PROCEEDING S AND MADE AN ADDITION OF RS.79,81,645/-. THE ASSESSEE CARRIED TH E MATTER BEFORE THE CIT(A) AND CONTESTED THE ISSUE ON THE REASON OF REO PENING OF ASSESSMENT U/S 147 AND ON MERITS. 3. THE LD. CIT(A) EXAMINED THE RECORD AND AFTER ELA BORATE DISCUSSION ON THE ISSUES, ACCEPTED THE ASSESSEES CONTENTION A ND REASSESSMENT ORDER OF THE AO WAS ANNULLED. HIS FINAL CONCLUSION IN PARA 4.6 IS AS UNDER :- ITA NO.2082/12 & CO/13 A.Y.04-05 HIND FILTERS LTD. 3 4.6 I HAVE CONSIDERED AOS ORDER AS WELL AS THE AP PELLANTS SUBMISSION. HAVING CONSIDERED BOTH, I FIND THAT THE SECOND TIME RE- OPENING BY AO, ON THE SAME SET OF FACTS AND INFORMA TION WAS COMPLETELY INCORRECT AND UNJUSTIFIED, AS ALL THE IN FORMATION WERE AVAILABLE ON RECORD AT THE TIME OF ORIGINAL ASSESSM ENT. FURTHER TO THAT, I ALSO FIND THAT ONCE THE CASE WAS REOPENED A ND DECIDED BY AO INCORRECT, HENCE RE-OPENING OF THE ASSESSMENT BY AN OTHER ASSESSING OFFICER ON THE SAME SET OF FACTS, CANNOT BE HELD JU STIFIED, OTHERWISE IT IS COMPLETELY MERE CHANGE OF OPINION FOR RE-OPENING THE ASSESSMENT. TAKING NOTE OF THE RECENT CASE LAW IN THE CASE OF C IT VS. KELVINATOR OF INDIA LTD. (320 ITR 561)(SC), I CONSIDER IT PROP ER AND APPROPRIATE TO HELD THAT THE RE-OPENING OF ASSESSMENT IS COMPLE TELY UNJUSTIFIED AND INCORRECT. ACCORDINGLY THE REASSESSMENT OF THE APPELLANTS CASE IS ANNULLED. 3.1 SINCE, LD.CIT(A) HAS DECIDED THE ISSUE OF JURIS DICTION, THE OTHER ISSUE OF ADDITION U/S 2(22)(E) WAS CONSIDERED INFRU CTUOUS. THE REVENUE IN ITS APPEAL IS CONTESTING THE FINDING OF THE LD. CIT(A) ON THE ISSUE OF RE- OPENING AND RAISED THREE GROUNDS WHEREAS THE ASSESS EE IN CROSS OBJECTION CONTESTED THE ADDITION MADE BY THE AO ON MERITS. 4. WITH REFERENCE TO ISSUE OF RE-OPENING, AS BRIEFL Y STATED ABOVE THIS IS AN ASSESSMENT COMPLETED UNDER SECTION 143(3) EARLIE R WHICH WAS RE- OPENED AFTER FOUR YEARS FROM THE END OF ASSESSMENT YEAR. THEREFORE, THE AO HAS TO CONSIDER THAT THERE IS FAILURE ON PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HI S ASSESSMENT, AS PER PROVISO TO SECTION 147. THERE IS NO SUCH FINDING. A S SEEN FROM THE ORDER OF THE AO ALSO, WE ARE UNABLE TO UNDERSTAND HOW THE RE CAN BE ANY ADDITION UNDER SECTION 2(22)(E). ADMITTEDLY, THE AS SESSEE IS A SHARE HOLDER IN M/S. DEWAS SOYA PVT. LTD. HOWEVER, THE FA CT IS THAT THE ASSESSEE COMPANY PLACED ICDS WITH M/S. DEWAS SOYA P VT. LTD. AND NOT THE OTHER WAY. THESE ICDS ARE IN FACT MENTIONED IN THE BALANCE SHEET AND SUBMITTED BEFORE THE AO THE RELEVANT DETAILS. SINCE ASSESSEE HAS NOT RECEIVED ANY MONEY AS LOAN FROM M/S. DEWAS SOYA, TO THE EXTENT OF ICDS WHICH SEEM TO BE IN THE COMMUNICATION RECEIVED FROM UJJAIN, DOES NOT ESTABLISH ANYTHING SO AS TO CONSIDER INVOKING THE P ROVISIONS OF SECTION ITA NO.2082/12 & CO/13 A.Y.04-05 HIND FILTERS LTD. 4 2(22)(E) IN THE CASE OF THE ASSESSEE. THE AO IN THE COURSE OF REASSESSMENT EXAMINED THE COMPANY TRANSACTIONS AND LIST THEM IN PARA-13 IN PAGE 8. THE AO CONSIDERED THAT CURRENT ACCOUNT ADVANCES FRO M M/S. DEWAS SOYA PVT. LTD. TO THE EXTEND OF RS.1.895 CRORES, AS AMOU NT TO BE CONSIDERED AS LOANS AND ADVANCES WITHIN THE MEANING OF SECTION 2( 22)(E). THEREAFTER VIDE PARA-16 HE ARRIVES AT THE AMOUNT TO BE ASSESSE D AS UNDER: 16. AFTER THE PERUSAL OF THE SUBMISSION MADE BY AS SESSEE, IT WAS FOUND THAT THE ASSESSEE COMPANY HAD INCOME IN CURRE NT YEAR OF RS.93,26,673/- AFTER CONSIDERING DEPRECIATION U/S. 32 OF THE IT ACT, 1961. THE ASSESSEE HAD BROUGHT FORWARD LOSS OF RS.( 1345028). AS SUCH, THE ASSESSEE HAD ACCUMULATED PROFIT WITHIN TH E MEANING OF SECTION 2(22)(E) OF RS.79,81,645/-. HENCE, AN AMOUN T OF RS.79,81,645/- IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE FOR ASSESSMENT YEAR 2004-05. 4.1 IT WAS EXPLAINED THAT SINCE THERE IS NO FACILIT Y OF IMMEDIATE TRANSFER OF FUNDS AT THAT POINT OF TIME, FUNDS ARE DEPOSITED IN THEIR PLACE AND CORRESPONDINGLY THERE WAS TRANSFER OF FUNDS TO THE OTHERS ACCOUNT IN DEWAS/ BOMBAY AND THIS FACILITY WAS ONLY FOR TRANS FERRING FUNDS FROM ONE PLACE TO ANOTHER. SINCE INTER-BANK TRANSFERS AR E NOT PREVALENT AT THAT POINT OF TIME, THIS ARRANGEMENT WAS BEING FOLLOWED AND THESE ARE TRADE ADVANCES. EVEN OTHERWISE, IT WAS SUBMITTED THAT IT WAS THE ASSESSEE WHO ADVANCED FUNDS FIRST AND LATER M/S. DEWAS SOYA DEPO SITS FUND, THEREFORE, IT IS NOT A LOAN FROM M/S. DEWAS SOYA LTD. TO THE A SSESSEE BUT A LOAN FROM ASSESSEE TO M/S. DEWAS SOYA PVT. LTD. THIS CON TENTION HAS NOT BEEN CONSIDERED BY THE AO AT ALL EVEN THOUGH THE SAME WA S RAISED BEFORE AO. 4.2 NOT ONLY THAT, EVEN CALCULATION OF THE AMOUNT T O BE CONSIDERED UNDER SECTION 2(22)(E) IS NOT CORRECT. THE AO AFTER ARRIVING AT THE AMOUNT OF SO CALLED ADVANCE FROM M/S. DEWAS SOYA PVT. LTD. CONSIDERS THAT ACCUMULATED PROFIT OF THE ASSESSEE COMPANY TO DETER MINE THE AMOUNT UNDER SECTION 2(22)(E), INSTEAD OF ACCUMULATED PROF IT IN THE HANDS OF M/S. DEWAS SOYA. ON EXAMINATION OF THE ISSUE ON MERITS, IT IS NOTICED THAT IT ITA NO.2082/12 & CO/13 A.Y.04-05 HIND FILTERS LTD. 5 WAS THE ASSESSEE WHO MADE ICDS WITH M/S. DEWAS SOYA LTD. AND NOT OTHER WAY AND FURTHER DAY TO DAY ADVANCES ARE ALSO FROM ASSESSEE TO M/S. DEWAS SOYA LTD. IN VIEW OF THIS, QUESTION OF I NVOKING SECTION 2(22)(E) DOES NOT ARISE, WHEN A SHARE HOLDER ADVANC ES MONEY TO THE COMPANY. NOT ONLY THAT EVEN, CALCULATION OF ACCUMUL ATED PROFIT AS STATED ABOVE WAS WRONG. FOR THESE REASONS, WE CAN NOT UPHO LD THE ORDER OF THE AO EVEN ON MERITS. COMING TO THE ISSUE OF RE-OPENIN G ALSO, WE DO NOT SEE ANY REASON TO DIFFER FROM THE ORDER OF THE CIT(A) A S HE HAS ULTIMATELY DISCUSSED THE ISSUE NOT ONLY ON FACTS OF REOPENING BUT ALSO ON LEGAL PRINCIPLES IN HIS ELEVEN PAGE ORDER. IN VIEW OF THE ABOVE, WE DO NOT SEE ANY MERIT IN REVENUE APPEAL. ACCORDINGLY, SAME IS D ISMISSED. 4.3 EVEN THOUGH WE HAVE CONSIDERED THE ISSUE ON MER ITS WHILE DECIDING THE ISSUE OF REOPENING U/S 147, THE ASSESS EES CROSS OBJECTION NEED NOT BE ADJUDICATED, AS THE ISSUE OF RE-OPENING WAS HELD TO BE BAD IN LAW. THEREFORE, THE CROSS OBJECTION BECOMES ACADEMI C IN NATURE. ACCORDINGLY, THE SAME IS ALSO REJECTED. 5. IN THE RESULT, BOTH REVENUE APPEAL AND CROSS OBJ ECTION OF ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH SEPTEMBER, 2013. SD/- SD/- (DR. S.T.M PAVALAN ) JUDICIAL MEMBER (B. RAMAKOTAIAH ) ACCOUNTANT MEMBER MUMBAI, DATED: 17/09/2013. JV. ITA NO.2082/12 & CO/13 A.Y.04-05 HIND FILTERS LTD. 6 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.