Appeal details
Counselvise Citation
[2012] 140 COUNSELVISE.COM (IT) 64792 (ITAT-COCHIN)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 8 month(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
14-09-2012
Appeal Filed By
Assessee
Bench Allotted
DB
Next Hearing Date
07-08-2012
Assessment Year
2005-2006
Appeal Filed On
14-01-2011
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO. 22/COCH/2011 ASSESSMENT YEAR: 2005-06 GTN INDUSTRIES LTD. (FORMERLY GTN TEXTILES LTD.), PLOT NO. 29, NAGARJUNA HILLS, HYDERABAD-82. [PAN: AAACG 8605N] VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1, ALUVA. (ASSESSEE -APPELLANT) (REVENUE-R ESPONDENT) ASSESSEE BY SHRI V.SATHYANARAYANAN, CA REVENUE BY MS. VANI RAJ, JR. DR DATE OF HEARING 07/08/2012 DATE OF PRONOUNCEMENT 14/09/2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINS T THE ORDER DATED 30-06-2009 PASSED BY THE LD. CIT, KOCHI U/S. 263 OF THE ACT FOR THE A SSESSMENT YEAR 2005-06. THE ASSESSEE IS QUESTIONING THE VALIDITY OF INITIATING REVISION PROCEEDINGS UNDER SEC. 263 OF THE ACT. 2. THE APPEAL IS BARRED BY LIMITATION BY 501 DA YS. THE ASSESSEE HAS FILED A PETITION SEEKING THE BENCH TO CONDONE THE DELAY ON THE GROUN D THAT THE DELAY HAS OCCURRED FOR THE REASONS BEYOND THE CONTROL OF THE ASSESSEE. IN THE PETITION, IT IS STATED THAT THE ASSESSEE HEREIN IS ASSESSED UNDER P.A. NO. AAACG 86 05N. THE ASSESSEE-COMPANY WAS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF COTTON YARN, FABRICS, ETC. ACROSS THE COUNTRY WITH THE NAME GTN TEXTILES LTD. DURING TH E FINANCIAL YEAR 2004-05, THE COMPANY HAD UNDERGONE BUSINESS REORGANISATION AND A CCORDINGLY, THE MANUFACTURING UNIT LOCATED IN ALUVA ALONE WAS CONTINUED THE OLD N AME GTN TEXTILES LTD, BUT WITH ANOTHER P.A. NO. AACCG 3925B. THE REMAINING FOUR U NITS CONTINUED TO BE WITH THE PRESENT ASSESSEE-COMPANY, HOWEVER, THE NAME OF THE ASSESSEE-COMPANY WAS CHANGED I.T.A. NO. 22/COCH/2011 2 INTO GTN INDUSTRIES LTD. THE HEAD OFFICE OF THE AS SESSEE COMPANY WAS ALSO SHIFTED TO HYDERABAD. THE ORDER PASSED BY THE LD. CIT U/S. 26 3 OF THE ACT WAS SERVED ON THE NEWLY FORMED COMPANY, M/S. GTN TEXTILES LTD. THOUG H THERE WAS AN ARRANGEMENT TO FORWARD THE CORRESPONDENCES RELATING TO THE ASSESSE E-COMPANY TO ITS HYDERABAD OFFICE, THE IMPUGNED ORDER WAS SOMEHOW MISPLACED AND IT WAS NOT RECEIVED AT THE HEAD OFFICE LOCATED AT HYDERABAD. THE ASSESSEE CAME TO KNOW OF THE REVISION ORDER ONLY WHEN THE ASSESSING OFFICER INITIATED PROCEEDINGS TO PASS THE ASSESSMENT ORDER TO GIVE EFFECT TO IT. THEREAFTER, THE ASSESSEE TOOK STEPS IN FILING THE P RESENT APPEAL. IT IS FURTHER SUBMITTED THAT THE ASSESSEE HAS BEEN VERY MUCH COMPLIANT IN A LL TAX MATTERS IN THE PAST AND THE DELAY IN FILING THE PRESENT APPEAL WAS CAUSED DUE T O REASONS BEYOND THE CONTROL OF THE ASSESSEE. ACCORDINGLY, IT WAS PRAYED THAT THE DELAY SHOULD KINDLY BE CONDONED. WE HAVE ALSO HEARD THE LD. DR ON THIS POINT. HAVING R EGARD TO THE SUBMISSIONS MADE IN THE PETITION, WE ARE OF THE VIEW THAT THERE WAS SUF FICIENT CAUSE FOR THE DELAY. ACCORDINGLY, WE CONDONE THE DELAY AND ADMIT THE APP EAL FOR HEARING. 3. THE FACTS RELATING TO THIS ISSUE ARE STATED IN B RIEF. THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ON 22-12-2006 DECLARING NIL INCOME UNDER THE NORMAL PROVISIONS OF THE ACT AND RS. 37,96,881/- UNDER THE PROVISIONS OF SEC. 115JB OF THE ACT. THE RETUR N WAS INITIALLY PROCESSED U/S. 143(1) OF THE ACT. SUBSEQUENTLY, IT WAS NOTICED BY THE AS SESSING OFFICER THAT THE ASSESSEE HAS NOT DISALLOWED ANY PORTION OF EXPENDITURE RELATABLE TO EXEMPTED INCOME AS PER THE PROVISIONS OF SEC. 14A OF THE ACT. ACCORDINGLY, T HE ASSESSMENT WAS RE-OPENED BY THE AO BY ISSUING NOTICE U/S. 148 OF THE ACT. 4. THEREAFTER, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT BY MAKING DISALLOWANCE OF PROPORTIONATE INTEREST OF RS.75,44, 930/- AS EXPENDITURE RELATABLE TO THE EXEMPTED INCOME U/S. 14A OF THE ACT, VIDE HIS ORDER DATED 27-11-2007 PASSED U/S. 143(3) R.W.S. 147 OF THE ACT. THE LD. CIT, WHILE E XAMINING THE RECORD OF THIS CASE, NOTICED THAT THE ASSESSING OFFICER DID NOT MAKE PRO PER ENQUIRY AND VERIFICATION IN RESPECT OF THE FOLLOWING FIVE ISSUES:- I.T.A. NO. 22/COCH/2011 3 (A) EXPENSES CLAIMED ON DIVIDENDS ON EQU ITY SHARES TREATED AS EXEMPT. (B) CLS LOAN FLUCTUATIONS, SWAPPING LOSS AND FOR EX LOSSES DEBITED TO P&L ACCOUNT. (C) PRIOR PERIOD EXPENSES OF RS. 2,27,517/-/ (D) FRESH LOANS TAKEN DURING THE YEAR IN THE ABS ENCE OF CONFIRMATION LETTERS. (E) QUANTITATIVE DETAILS OF YARN. 5. THE LD. CIT(A) INVOKED REVISIONARY PROCEEDINGS U /S. 263 OF THE ACT AND AFTER HEARING THE OBJECTIONS RAISED BY THE ASSESSEE, THE LD. CIT HELD THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S. 143(3) R .W.S. 147 IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. ACCOR DINGLY, HE SET ASIDE THE SAME WITH A DIRECTION TO THE ASSESSING OFFICER TO RE-DO THE SAM E AFRESH AFTER TAKING INTO ACCOUNT ALL THE ISSUES RAISED IN HIS ORDER. AGGRIEVED BY THE OR DER OF THE LD. CIT, ASSESSEE IS IN APPEAL BEFORE US. 6. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD. CIT DID NOT SPECIFICALLY POINT OUT ANY ERROR IN THE IMPUGNED ASSESSMENT ORDE R BUT HAS ONLY MADE VERY VAGUE OBSERVATIONS. HE FURTHER SUBMITTED THAT THE LD. CI T HAS PRESUMED THAT THE ASSESSING OFFICER DID NOT LOOK INTO THE MATTERS STATED IN THE REVISION ORDER. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE IMPUGNED AS SESSMENT ORDER HAS BEEN PASSED U/S. 147 OF THE ACT AND THE ASSESSING OFFICER DID N OT MAKE ANY ROVING ENQUIRIES INTO THE MATTERS WHICH HAVE ALREADY BEEN CONCLUDED AND HENCE THE PRESENT DIRECTION ISSUED BY THE LD. CIT TO THE ASSESSING OFFICER TO MAKE ROVING ENQUIRIES IS NOT IN ACCORDANCE WITH LAW. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE FOLLOWING CASE LAW IN RESPECT OF HIS CONTENTIONS:- (A) CIT VS. GABRIEL INDIA LTD. 203 ITR 109 (BOM). (B) CIT VS. ARVIND JEWELLERS 259 ITR 502 (GUJ.) (C) CIT VS. KASHINATH & CO. 170 ITR 28 (ALL.) (D) CIT VS. HERO AUTO LTD. 343 ITR 342 (DEL.) (E) ITO VS. D.G. HOUSING PROJECTS LTD. 329 ITR 328 (DEL.) (F) CIT VS. GIRDHARI LAL 331 ITR 330 (RAJ.) I.T.A. NO. 22/COCH/2011 4 (G) CIT VS. PRADEEPKUMAR TODI 325 ITR 96 (CAL.) (H) RIPPEN AHUJA VS. CIT 9 DTR (DELHI) (TRIB.) 226 7. ON THE CONTRARY, THE LD. DR SUBMITTED THAT THERE IS NO EVIDENCE IN THE ASSESSMENT ORDER TO SUGGEST THAT THE ASSESSING OFFI CER DID MAKE ANY ENQUIRY ON THE ISSUES POINTED OUT BY THE LD. CIT AND HENCE THE LD. CIT IS VERY WELL JUSTIFIED IN PASSING THE IMPUGNED ORDER. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE RECORD. ADMITTEDLY, THE IMPUGNED ASSESSMENT ORDER WAS RE-OP ENED BY THE ASSESSING OFFICER TO CONSIDER THE DISALLOWANCE OF EXPENDITURE U/S. 14A A S AGAINST THE EXEMPTED INCOME DISCLOSED BY THE ASSESSEE. UNDER THE PRESENT PROVI SIONS OF SECTION 147, THE ASSESSING OFFICER IS EMPOWERED TO ASSESSEE OR RE-ASSESS SUCH INCOME FOR WHICH NOTICE WAS ISSUED U/S. 148 OF THE ACT AND ALSO ANY OTHER INCOME CHARG EABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENT LY IN THE COURSE OF RE-ASSESSMENT PROCEEDINGS. 9. IN THE INSTANT CASE, RETURN OF INCOME FILED BY T HE ASSESSEE WAS INITIALLY PROCESSED U/S. 143(1) OF THE ACT. THERE AFTER THE IMPUGNED A SSESSMENT ORDER HAS BEEN PASSED U/S 143(3) R.W.S. 147 OF THE ACT. HENCE THE IMPUGN ED ASSESSMENT IS THE FIRST REGULAR ASSESSMENT DONE FOR THE YEAR UNDER CONSIDERATION. I N A REGULAR ASSESSMENT, THE ASSESSING OFFICER IS EXPECTED TO APPLY HIS MIND ON THE ISSUES WHICH COMES TO HIS NOTICE. 10. IT IS WELL SETTLED PROPOSITION THAT LACK OF EN QUIRY ON ANY OF THE ISSUES BY THE ASSESSING OFFICER WOULD RENDER THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. HENCE, WE DO NOT FIND AN Y INFIRMITY IN THE ORDER OF THE LD. CIT IN RESPECT OF THE ISSUES (B) TO (E) REFERRED TO IN PARAGRAPH 5 SUPRA, SINCE THERE IS NO EVIDENCE TO SUGGEST THAT THE AO DID APPLY HIS MIND ON THE SAID ISSUES AND FURTHER WE DO NOT FIND ANY DISCUSSION ABOUT THEM IN THE ASSESS MENT ORDER. HOWEVER, WITH REGARD TO THE ISSUE (A) RELATING TO EXPENSES CLAIMED ON DI VIDENDS, WE NOTICE THAT THE ASSESSING OFFICER HAS RE-OPENED THE ASSESSMENT U/S. 147 OF TH E ACT ONLY TO MAKE DISALLOWANCE OF I.T.A. NO. 22/COCH/2011 5 EXPENSES AGAINST EXEMPTED INCOME DECLARED BY THE AS SESSEE. THE ASSESSMENT WAS COMPLETED BY DISALLOWING A PORTION OF INTEREST EXPE NDITURE. HENCE, IT CANNOT BE HELD THAT THE AO DID NOT APPLY HIS MIND ON THAT ISSUE. WITH REGARD TO THE DISALLOWANCE OF ADMINISTRATIVE EXPENDITURE, THE HONBLE JURISDICTIO NAL KERALA HIGH COURT HAS HELD IN THE CASE OF CIT VS. DHANALAKSHMI BANK LTD (344 ITR259) THAT THE PROVISIONS OF RULE 8D SHALL APPLY FROM 2007-08 ONWARDS AND FOR EARLIER YE ARS NO DISALLOWANCE OF ADMINISTRATIVE EXPENSES IS CALLED FOR AS THERE IS N O PRECISE FORMULA FOR MAKING PROPORTIONATE DISALLOWANCE. ACCORDINGLY, WE SET ASI DE THE ORDER OF THE LD. CIT IN RESPECT OF ITEM NO. (A), REFERRED TO IN PARAGRAPH 5 SUPRA. 11. THE LD COUNSEL FOR THE ASSESSEE CONTENDED T HAT THE ESCAPEMENT OF INCOME, IF ANY, ON THE ISSUES POINTED OUT BY THE LD CIT COULD BE FOUND ONLY AFTER MAKING ROVING ENQUIRIES. WE ARE OF THE VIEW THE QUESTION WHETHER A ROVING ENQUIRY IS REQUIRED OR NOT CAN ONLY BE DECIDED ONLY AFTER STARTING THE PROCESS OF EXAMINATION OF THE ISSUES. IN THE INSTANT CASE, THE AO DID NOT EXAMINE THE ISSUES POI NTED BY LD CIT IN ITEM NO.(B) TO (E), REFERRED SUPRA AND HENCE THE QUESTION OF MAKING RO VING ENQUIRIES DOES NOT ARISE AT THIS STAGE. 12. IN VIEW OF THE FOREGOING DISCUSSIONS, WE CO NFIRM THE ORDER OF LD CIT WITH REGARD TO FOUR ISSUES LISTED AS ITEM NO.(B) TO (E), SUPRA AND SET ASIDE HIS ORDER ON THE ISSUE LISTED AS ITEM (A) SUPRA. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IS PARTLY ALLOWED. PRONOUNCED ACCORDINGLY O N 14-09-2012 SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 14TH SEPTEMBER, 2012 GJ I.T.A. NO. 22/COCH/2011 6 COPY TO: 1. GTN INDUSTRIES LTD. (FORMERLY GTN TEXTILES LTD.) , PLOT NO. 29, NAGARJUNA HILLS, HYDERABAD-82. 2.THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1, ALUVA. 3.THE COMMISSIONER OF INCOME-TAX, KOCHI. 4. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 5. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN
