Appeal Details
Counselvise Citation
[2012] 140 COUNSELVISE.COM (IT) 65786 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
5 month(s) 16 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
26-10-2012
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Next Hearing Date
15-10-2012
Assessment Year
2005-2006
Appeal Filed On
10-05-2012
Judgement Text
ITA NOS. 2228-2235/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NOS. 2228 TO 2233/DEL/2012 A.YRS. : 2003-04 TO 2008-09 BESTECH (INDIA) PVT. LTD., C/O KAPIL GOEL, ADVOCATE, A-1/25, SECTOR-15, ROHINI, DELHI 110 085 (PAN : AABCB6551B) VS. C.I.T., CENTRAL, GURGAON 4 TH FLOOR, HSIDC BUILDING, UDYOG VIHAR, PHASE-V, GURGAON I.T.A. NOS. 2234 & 2235/DEL/2012 A.YRS. : 2007-08 & 2008-09 BESTECH HOSPITALITIES PVT. LTD., C/O KAPIL GOEL, ADVOCATE, A-1/25, SECTOR-15, ROHINI, DELHI 110 085 (PAN : AACCB2540F) (APPELLANT) VS. C.I.T., CENTRAL, GURGAON 4 TH FLOOR, HSIDC BUILDING, UDYOG VIHAR, PHASE-V, GURGAON (RESPONDENT) ASSESSEE BY : SH. KAPIL GOEL, ADV. DEPARTMENT BY : MRS. AN U RADHA MISRA, C.I.T. (D.R.) ORDER ORDER ORDER ORDER PER PER PER PER BENCH BENCH BENCH BENCH THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINS T THE RESPECTIVE ORDERS OF THE LD. COMMISSIONER OF INCOME T AX (CENTRAL), GURGAON PASSED U/S. 263 OF THE I.T. ACT FOR THE ASS ESSMENT YEARS 2003-04 TO 2008-09. ITA NOS. 2228-2235/DEL/2012 2 2. SINCE THE ISSUES ARE COMMON AND THE APPEALS WE RE HEARD TOGETHER AND THESE ARE BEING CONSOLIDATED BY THIS C OMMON ORDER FOR THE SAKE OF CONVENIENCE. WE ARE ADJUDICATING THE ISSUE WITH REFERENCE TO THE FACTS AND FIGURES OF THE ASSESSMEN T YEAR 2003-04. 3. THE GROUNDS RAISED IN ASSESSMENT YEAR 2003-04 READ AS UNDER:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, LD. COMMISSIONER OF INCOME TAX ERRED IN ASSUMING JURISDICTION U/S. 263 OF THE ACT WITHOUT APPRECIATING THAT PROCEEDINGS INITIATED VIDE IMPUGNE D SHOW CAUSE NOTICE DATED 31.1.2012 ARE TIME BARRED A S ORDER RELEVANT FOR COMPUTING TIME LIMITATION CAN BE ONLY ORIGINAL 143(3)/143(1) ORDER / INTIMATION AS TH E CASE MAY AS HELD BY SC IN ALAGENDRAN FINANCE 293 ITR PAGE 1 APPLIED BY BOMBAY HIGH COURT IN ICICI AND ASHOKA BUILDCON CASES 325 ITR 574. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, LD. COMMISSIONER OF INCOME TAX ERRED IN ASSUMING JURISDICTION U/S. 263 OF THE ACT IN CONTRAVENTION OF MANDATORY JURISDICTIONAL CONDITIONS THAT IS, ERRONEOUS AND PREJUDICIAL TO INTERESTS OF REVENUE AS INTERPRETED BY SUPREME COURT IN MALABAR INDUSTRIAL CASE 243 ITR 83; MAX INDIA CA SE 295 ITR 282. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. COMMISSIONER OF INCOME TAX ERRED IN ASSUMING JURISDICTION U/S. 263 OF THE ACT WITHOUT ITA NOS. 2228-2235/DEL/2012 3 APPRECIATING THAT UNDERLYING ORDERS PASSED BY ASSESSING OFFICER U/S. 153A / 143(3) (SEARCH ASSESSMENT) CONFINING IT TO SEARCH / INCRIMINATING MATERIAL BASED ON PREDOMINANT JUDICIAL VIEW AS EXPRESSED IN NUMBER OF CASE LAWS AS ON DATE, IS BEYOND THE PURVIEW OF REVISION FOR ROUTINE DISALLOWANCES. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. COMMISSIONER OF INCOME TAX ERRED IN ASSUMING JURISDICTION U/S. 263 OF THE ACT ACTING ON DICTATE / DIRECTION / COMPULSION OF AUDIT WING. 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. COMMISSIONER OF INCOME TAX ERRED IN ASSUMING JURISDICTION U/S. 263 OF THE ACT ON MERE BASIS OF P&H HIGH COURT ORDER IN THE CASE OF ABHISH EK INDUSTRIES WHERE SAME STOOD IMPLIEDLY OVERRULED BY LATER SC RULING IN CASE OF MUNJAL SALES 298 ITR 298 AS EXPLAINED BY MUMBAI BENCH, ITAT IN CASE OF METRO EXPORTERS 29 SOT 531. 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. COMMISSIONER OF INCOME TAX ERRED IN ASSUMING JURISDICTION U/S. 263 OF THE ACT WHERE THE ASSESSING OFFICER HIMSELF TOOK A PLAUSIBLE VIEW AS FAR AS SCOPE OF UNDERLYING 153A / 143(3) ASSESSMENT ETC. IS CONCERNED. 7. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. COMMISSIONER OF INCOME TAX IN ITA NOS. 2228-2235/DEL/2012 4 DIRECTING TO ASSESSING OFFICER TO DISALLOW INTERES T U/S. 36(1)(III) OF THE ACT ON BORROWINGS AT FLAT RATE OF 12% FOR ASSESSEES BUSINESS / COMMERCIAL INVESTMENTS (ADVANCE GIVEN FOR PROPERTIES; SHARE APPLICATION MONEY; SHARE CAPITAL IN SISTER CONCERNS). 8. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. COMMISSIONER OF INCOME TAX ERRED IN DIRECTING THE ASSESSING OFFICER TO DISALLOW INTERE ST U/S. 36(1)(III) OF THE ACT ON BORROWINGS AT FLAT RATE O F 12% WITHOUT APPRECIATING THAT OWN / NON-INTEREST BEAR ING FUNDS AVAILABLE TO ASSESSEE FAR EXCEEDS STATED BUSINESS PURPOSE INVESTMENTS. 9. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. COMMISSIONER OF INCOME TAX ERRED IN DIRECTING TO ASSESSING OFFICER TO DISALLOW INTERES T U/S. 36(1(III) OF THE ACT ON MECHANICAL CALCULATIONS OF INTEREST AMOUNT. 4. IN THIS CASE LD. COMMISSIONER OF INCOME TAX NOTE D THAT ON PERUSAL OF THE BALANCE SHEET OF THE ASSESSEE IT SHO WS THAT ASSESSEE HAD MADE THE INVESTMENT IN EQUITY SHARES. THE BA LANCE SHEET FURTHER REVEALS THAT THE ASSESSEE HAS INVESTED A SU M OF ` 36,00,000/- IN EQUITY SHARES OF THE OTHER COMPANIES/ SISTER CON CERN COMPANIES. THE BALANCE SHEET FURTHER SHOWS THAT THE ASSESSEE H AS ALSO INVESTED A SUM OF ` 25,00,000/- AS SHARE APPLICATION MONEY. BA LANCE SHEET OF THE ASSESSEE FURTHER SHOWS THAT FOR THE CURRENT FIN ANCIAL YEAR THE BORROWED FUNDS OF THE ASSESSEE STANDS AT ` 11,34,12 3/-. PROFIT AND LOSS ACCOUNT OF THE ASSESSEE COMPANY SHOWS THAT THE EXPEN SES OF ` ITA NOS. 2228-2235/DEL/2012 5 4,59,249/- WERE INCURRED BY THE ASSESSEE BY WAY OF INTEREST. THUS, LD. COMMISSIONER OF INCOME TAX OBSERVED THAT THE ASS ESSEE HAS INVESTED BORROWED FUNDS IN EQUITY SHARES AND SHARE APPLICATION MONEY, DIVIDEND INCOME WHERE FORM IS EXEMPT FROM TAX. LD. COMMISSIONER OF INCOME TAX REFERRED TO THE DECISION OF THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE M/S ABHISH EK INDUSTRIES. REFERRING TO THE SAID JUDGEMENT, LD. COMMISSIONER OF INCOME TAX OBSERVED THAT IT CAN BE SEEN THAT ALL THE RECEIPTS RECEIVED BY THE ASSESSEE FROM ALL THE SOURCES DO NOT HAVE ANY DIFFER ENT COLOUR AND THEY CAN BE EASILY USED FOR INVESTMENT BY WAY OF SHA RE CAPITAL OF SISTER CONCERNS. LD. COMMISSIONER OF INCOME TAX OBSERVE D THAT THESE RECEIPTS DO NOT HAVE ANY SEPARATE IDENTIFICATION A ND HAVE BEEN USED FOR THE INVESTMENT IN SHARE CAPITAL FROM WHICH EXEMPT INCOME SUCH AS DIVIDEND INCOME HAS BEEN EARNED BY THE ASSESSEE. LD. COMMISSIONER OF INCOME TAX FURTHER OBSERVED THAT IN THE INSTAN T CASE THE ASSESSEE HAS PAID INTEREST ON LOAN FUNDS. THE PROPORTIONATE INTEREST ON THE AMOUNT OF INVESTMENT IN EQUITY SHARES OF ` 36,00,000/ - AND SHARE APPLICATION MONEY OF ` 25,00,000/- FOR THE RESPECTIV E PERIODS DURING THE F.Y. IS NEEDED TO BE DISALLOWED @ 12% PER ANNUM. HENCE, LD. COMMISSIONER OF INCOME TAX ISSUED A NOTICE U/S. 263 OVER THE ASSESSEE. ASSESSEE INTER-ALIA SUBMITTED THAT THE AS SESSEE HAS ADEQUATE INTEREST FREE FUNDS. IT WAS FURTHER SUBMIT TED THAT INTEREST ON BORROWED CAPITAL HAS BEEN PAID FOR STRATEGIC INVES TMENT MADE BY THE ASSESSEE COMPANY IN SHARES / SHARE APPLICATION MONEY . A CHART WAS FURTHER GIVEN WHEREBY IT WAS SHOWN THAT ASSESSEE HA D ADEQUATE OWN FUNDS IN THIS REGARD. LD. COMMISSIONER OF INCOME TAX WAS NOT CONVINCED BY THE ABOVE SUBMISSIONS. HE HELD THAT TH E ARGUMENTS OF THE ASSESSEE THAT NO PART OF INTEREST BEARING LOANS HAS BEEN UTILIZED FOR ITA NOS. 2228-2235/DEL/2012 6 INVESTMENT IN SHARES CAPITAL OF SISTER CONCERN OR I N SHARE APPLICATION MONEY AND THE INVESTMENT HAS BEEN MADE OUT OF INTERNA L ACCRUALS HAS SPECIFICALLY BEEN NAVIGATED IN THE DECISION MADE BY THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF ABHISHEK INDU STRIES CASE. REFERRING TO THE SAID DECISION, LD. COMMISSIONER OF INCOME TAX OBSERVED THAT IT HAS BEEN MENTIONED THAT ALL INVESTM ENTS HAVE BEEN MADE BY THE ASSESSEE FROM COMMON KITTY AND AT THE SAME TIME INTEREST HAS BEEN PAID ON LOAN TAKEN. A SUM OF ` 36,00,000/- HAS BEEN INVESTED IN EQUITY SHARES OF OTHER COMPANIES AN D ` 25,00,000/- HAS BEEN INVESTED AS SHARE APPLICATION MONEY. L D. COMMISSIONER OF INCOME TAX OPINED THAT HAD THIS MONEY NOT BEEN INVE STED AS SUCH IN SISTER CONCERNS, IT WOULD HAVE BEEN AVAILABLE TO TH E ASSESSEE FOR ITS BUSINESS PURPOSES AND TO THAT EXTENT IT MAY NOT H AVE BEEN NECESSARY TO BORROW FROM THE BANKS AND PAY INTEREST . THEREFORE, LD. COMMISSIONER OF INCOME TAX HELD THAT THIS CASE I S SQUARELY COVERED BY THE JUDGEMENT OF THE HONBLE PUNJAB AND HAR YANA HIGH COURT DECISION IN THE CASE OF ABHISHEK INDUSTRIES. ACCORDINGLY, LD. COMMISSIONER OF INCOME TAX HELD THAT HE WAS OF THE OPINION THAT THE ASSESSMENT ORDER HAS BEEN PASSED WITHOUT CONSI DERING ABOVE MENTIONED ASPECT AND WITHOUT DISALLOWING PROPORTIO NATE INTEREST @ 12%. HE FURTHER HELD THAT THE ASSESSMENT ORDE R WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. ACCORDI NGLY, ASSESSING OFFICER WAS DIRECTED TO REVISE THE ASSESSMENT ORDE R AFTER DISALLOWING PROPORTIONATE INTEREST. 5. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEA L BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. WE FIND THAT IN THIS CASE THE ITA NOS. 2228-2235/DEL/2012 7 ASSESSEE HAS MADE INVESTMENT OF ` 36,00,000/- IN EQ UITY SHARES OF THE OTHER COMPANIES/ SISTER CONCERN COMPANIES AND AL SO INVESTED A SUM OF ` 25,00,000/- AS SHARE APPLICATION MONEY. THE ASSESSEE COMPANY HAS ALSO BORROWED FUNDS OF ` 11,34,123/- AN D THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE COMPANY HAS SHOWN EXP ENSES OF ` 4,59,249/- WERE INCURRED BY THE ASSESSEE BY WAY OF INTEREST. IN THIS BACKGROUND, LD. COMMISSIONER OF INCOME TAX OPIN ED THAT THAT THE ASSESSEE HAS INVESTED BORROWED FUNDS IN EQUITY SHARES AND SHARE APPLICATION MONEY, DIVIDEND INCOME WHERE FORM IS EX EMPT FROM TAX. IN THIS REGARD, LD. COUNSEL OF THE ASSESSEE HAS INT ER-ALIA CONTENDED THAT ASSESSEE HAD SUFFICIENT OWN / NON-INTEREST BEA RING FUNDS AVAILABLE TO THE ASSESSEE WHICH FAR EXCEEDED THE INVESTMENT MADE BY THE ASSESSEE IN OTHER CONCERNS. IT HAS BEEN FURTHER CONTENDED THAT THE LOAN WERE GIVEN FOR BUSINESS PURPOSES AND WERE COMME RCIALLY EXPEDIENT TRANSACTION. 7. UPON CAREFUL CONSIDERATION, WE FIND THAT LD. COMMISSIONER OF INCOME TAX IN THIS REGARD HAS NOT GIVEN A FINDING ON THE SUBMISSION OF THE ASSESSEE THAT THE ASSESSEE HAD SUFFICIENT OWN / NON INTEREST BEARING FUNDS AVAILABLE AND IT HAS BEEN CLAIMED TH AT SUCH FUNDS WITH THE ASSESSEE FAR EXCEEDED INVESTMENT MADE IN THE SIS TER CONCERN. WE FIND THAT THE LD. COMMISSIONER OF INCOME TAX HAS DE CIDED THE ISSUE ITA NOS. 2228-2235/DEL/2012 8 AGAINST THE ASSESSEE BY REFERRING THE DECISION OF T HE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE M/S ABHISHEK IND USTRIES. IN THIS REGARD, WE NOTE THAT THE LD. COMMISSIONER OF INCOME T AX HAS NOT GIVEN A FINDING ON THE ARGUMENTS OF THE ASSESSEE THA T IT HAS MORE / ADEQUATE NON-INTEREST BEARING FUNDS FOR MAKING THOS E INVESTMENTS. FACTUAL FINDING IN THIS REGARD IS NECESSARY AND WIL L GO TO THE ROOT OF THE MATTER. WE FURTHER NOTE THAT IT HAS BEEN ONE OF THE ASSESSEES PLEA THAT INVESTMENT WAS MADE FOR COMMERCIAL EXPEDIENC Y. THIS ASPECT HAS ALSO NOT BEEN ADDRESSED BY THE LD. COMMIS SIONER OF INCOME TAX. UNDER THE CIRCUMSTANCES, IN OUR CONSIDE RED OPINION, THE MATTER IN THIS CASE NEEDS TO BE REMITTED TO THE FILE OF THE LD. COMMISSIONER OF INCOME TAX TO CONSIDER THE ISSUE AF RESH AND THE LD. COMMISSIONER OF INCOME TAX SHOULD ADDRESS THE ARGUME NTS OF THE ASSESSEE THAT THE ASSESSEE HAS ADEQUATE NON- INTERE ST BEARING FUNDS FOR MAKING THE INVESTMENTS AND THEY ARE INVESTED FOR COMMERCIAL EXPEDIENCY. THE ASSESSEE IS ALSO DIRECTED TO SUBMI T THE DETAILS IN THIS REGARD. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX AND REMIT BACK THE ISSUE TO THE FILE OF THE LD. COMMISSIONER OF INCOME TAX. IN THIS REGARD WE PLACE RELIANCE UPON APEX COURT DECISION IN THE CASE OF KAPURCHAND SHRIMA L VS. CIT, 131 ITR 451, FOR THE PROPOSITION THAT THE APPELLATE AUTHOR ITY HAS JURISDICTION AS ITA NOS. 2228-2235/DEL/2012 9 WELL AS THE DUTY TO CORRECT THE ERRORS IN THE PROCE EDINGS UNDER APPEAL AND ISSUE PROPER DIRECTION AS NECESSARY. 8. IN THE RESULT, ALL THE EIGHT APPEALS FILED BY T HE ASSESSEE STAND ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 26/10/2012. SD/- SD/- [ [[ [A.D. JAIN A.D. JAIN A.D. JAIN A.D. JAIN] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 26/10/2012 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES
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