M/s. Sidharth Shivam and Company, Baroda V. The Income Tax Officer, Ward-1(2)(5), Baroda

ITA 2297/AHD/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8339 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 06-09-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ILA PARMAR
• Keywords: Reopening of assessment; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 40(b); 147; 148

Judgement Text

ITA NO. 2297/AHD/2016 SIDHARTH SHIVAM AND COMPANY VS. ITO ASSESSMENT YEAR: 2010-11 PAGE 1 OF 3 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR, VP AND MS. MADHUMITA ROY, JM] ITA NO. 2297/AHD/2016 ASSESSMENT YEAR: 2010-11 SIDHARTH SHIVAM AND COMPANY ................ ..APPELLANT AT & POST PADAMLA, BARODA [PAN : AAFFS 4714 E] VS. INCOME TAX OFFICER ... .........................RESPONDENT WARD 1(2)(5), BARODA APPEARANCES BY: TUSHAR HEMANI, FOR THE APPELLANT ILA PARMAR, FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 06.06.2019 DATE OF PRONOUNCING THE ORDER : 11.07.2019 O R D E R PER PRAMOD KUMAR, VICE PRESIDENT: 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HA S CHALLENGED THE CORRECTNESS OF THE ORDER DATED 6 TH MAY 2016 PASSED BY THE BY THE LD. CIT(A)-5, VADODA RA IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE IN COME-TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2010-11. 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE APPE LLANT HAS RAISED THE FOLLOWING GRIEVANCE:- 1. RE-OPENING IS BAD IN LAW 1.01 ON THE FACTS AND CIRCUMSTANCES OF YOUR APPELLA NT'S CASE AND IN LAW, THE ID. CIT (APPEAL) HAS ERRED IN CONFIRMING ACTION OF ID AO OF RE-OPENING OF ASSESSMENT PROCEEDINGS WHICH WAS RE-OPENED WITHO UT BRINGING ON RECORD ANY NEW DETAILS / EVIDENCES AND ALSO WITHOUT ALSO JUSTIFYING REASONS RECORDED FOR RE-OPENING. THE RE-OPENING IS DONE MERELY ON CHANGE OF OPINION AS REGULAR ASSESSMENT WAS ALREADY CARRIED OUT AND THE ISSUE UNDER CONSIDERATION WAS ALSO DISCUSSED UP ON. 1.02 YOUR APPELLANT THEREFORE PRAYS YOUR HONOR TO H OLD SO NOW AND DIRECT THE ID. AO TO TREAT THE ASSESSMENT BAD IN LAW. ITA NO. 2297/AHD/2016 SIDHARTH SHIVAM AND COMPANY VS. ITO ASSESSMENT YEAR: 2010-11 PAGE 2 OF 3 3. BRIEFLY STATED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THIS IS A CASE OF REOPENED ASSESSMENT AND THE REASSESSMENT WAS DONE W ITHIN FOUR YEARS. THE ASSESSMENT WAS REOPENED ON THE FOLLOWING GROUND:- AN ASSESSMENT U/S 143(3) OF THE ACT WAS COMPLETED ON 07.11.2012 DETERMINING THE TOTAL INCOME AT RS.3,70,260/-. DUR ING THE YEAR UNDER UNDER CONSIDERATION THE ASSESSEE HAS TAKEN UNSECURED LOAN FROM THE PARTNERS NAMELY SIDDHARTH J PATEL, JAIKRISHNA N PATEL, JAIKR ISHNA N PATEL (HUF), SHIVAM J PATEL, NATVARBHAI C PATEL. THE ASSESSEE HA D PAID INTEREST @ 15% P.A. TO THESE PARTNERS ON THE UNSECURED LOAN TAKEN. THE ASSESSEE IN THE PARTNERSHIP DEED HAS SPECIFICALLY MENTIONED THAT SI MPLE INTEREST AT THE RATE OF 12% OR ANY SUCH LOWER/ HIGHER RATE AS MAY BE PRESCR IBED UNDER SEE. 40(B)(IV) OF THE INCOME-TAX ACT, 1961 OR ANY OTHER APPLICABLE PROVISION, AS MAY BE IN FORCE FOR THE INCOME-TAX ASSESSMENT OF THE PARTNERS HIP FIRM FOR THE RELEVANT ACCOUNTING PERIOD, SHALL BE PAYABLE ON THE AMOUNT S TANDING TO THE CREDIT OF THE CAPITAL AND OR/CURRENT OR LOAN ACCOUNT OF THE P ARTNERS. AS PER SEC. 40(B)(IV) OF THE ACT THE EXCESS INTEREST PAID TO THE PARTNERS IS TO BE ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE, WHICH HAS RESULTED IN TO UNDER ASSESSMENT OF RS.2,22,105/-. 2. THEREFORE, I HAVE REASON TO BELIEVE THAT THE I NCOME OF RS.2,22,105/- HAS ESCAPED ASSESSMENT FOR THE ASST. YEAR 2010-11 WITHI N THE MEANING OF SECTION 147 OF THE ACT AND I AM SATISFIED THAT THE CASE IS A FIT ONE FOR ISSUANCE OF NOTICE U/S 148 OF THE INCOME-TAX ACT. 4. THE ASSESSEE DID OBJECT TO THE REOPENING BUT WIT HOUT ANY SUCCESS. IN APPEAL ALSO, THE REASSESSMENT WAS UPHELD. NOT SATISFIED, THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 6. THE BASIC PLEA OF THE ASSESSEE IS THAT BECAUSE A T THE ORIGINAL ASSESSMENT STAGE, ASSESSEE HAD, VIDE LETTER DATED 07.06.2012, FURNISHED CONFIRMATIONS IN RESPECT OF UNSECURED LOANS, AND EVEN AFTER PERUSING THESE DETAILS, THE ASSESSING OFFICER CHOSE NOT TO MAKE DISALLOWANCE @ 3%, THE AS SESSING OFFICER CANNOT REVISIT THIS DECISION BY REOPENING THE ASSESSMENT. RELIANCE WAS PLACED ON HONBLE JURISDICTIONAL HIGH COURTS JUDGEMENT IN THE CASE O F CLIANTHA RESEARCH LTD VS. DCIT [(2013) 35 TAXMANN.COM 61 (GUJ.)]. THAT PLEA, HOWE VER, IS INCORRECT FOR THE REASON THAT NO SUCH DETAILED ENQUIRIES TOOK PLACE IN THIS CASE, AND, IN ANY EVENT, THE RATE OF INTEREST DID NOT COME UP FOR CONSIDERATION AT ALL. AS HELD IN THE CASE OF GALA GYMKHANA PVT LTD VS. ACIT [(2012) 27 TAXMANN.COM 29 4 (GUJ)], MERE FURNISHING OF INFORMATION TO THE ASSESSING OFFICER CANNOT LEAD TO THE CONCLUSION THAT THE ASSESSING OFFICER HAS APPLIED HIS MIND TO IT. THAT PRECISELY IS THE SITUATION BEFORE US. WE, THEREFORE, REJECT THE PLEA OF THE ASSESSEE AND DECL INE TO INTERFERE IN THE MATTER. 7. GROUND NO. 1 IS DISMISSED. 8. IN GROUND NO.2, THE ASSESSEE APPELLANT HAS RAISE D THE FOLLOWING GRIEVANCE:- ITA NO. 2297/AHD/2016 SIDHARTH SHIVAM AND COMPANY VS. ITO ASSESSMENT YEAR: 2010-11 PAGE 3 OF 3 2. DISALLOWANCE TO THE TUNE OF RS.2,22,105/- UNDER SECTION 40(B)(IV) OF THE ACT ON THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS C ASE AND IN LAW, THE LD. CIT(APPEALS) HAS ERRED IN CONFIRMING ACTION OF LD. AO OF TREATING INTEREST PAID ON LOAN/DEPOSIT TO PARTNERS AS INTEREST PAID TO PAR TNERS ON THEIR CAPITAL AND THEREBY RESTRICTING INTEREST PAID AT THE RATE OF 12 % AS AGAINST AT 15% NOT APPRECIATING THAT INTEREST IS PAID ON DEPOSIT / LOA N AND THEREFORE THE PROVISIONS OF SECTION 40(B) ARE NOT TO BE APPLIED. THE LD. CI T(A) ALSO FAILED TO APPRECIATE THAT THE PAYMENT OF INTEREST IS ACCORDING TO THE PA RTNERSHIP DEED EXECUTED. 9. LEARNED COUNSEL FOR THE ASSESSEE FAIRLY ACCEPTED THAT SO FAR INTEREST PAYMENT IN EXCESS OF 12% P.A. IS CONCERNED, ITS DISALLOWANC E IS IN ORDER. HE NEVERTHELESS POINTED OUT THAT THIS PAYMENT IS AUTHORIZED BY SUPP LEMENTARY DEED AND IS DULY SHOWN AS INCOME IN THE HANDS OF THE RECIPIENT. THA T DOES NOT, HOWEVER, VITIATE THE DISALLOWANCE. WE, THEREFORE, CONFIRM THE DISALLOWA NCE AND DECLINE TO INTERFERE ON MERITS AS WELL. 10. GROUND NO.2 IS DISMISSED. 11. IN THE RESULT, THE APPEAL IS DISMISSED. PRONOU NCED IN THE OPEN COURT TODAY ON THE 11 TH JULY, 2019 SD/- SD/- MS. MADHUMITA ROY PRA MOD KUMAR (JUDICIAL MEMBER) (VICE PRESIDENT) AHMEDABAD, THE 11 TH DAY OF JULY, 2019 **BT COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD 1. DATE OF DICTATION:..ORDER PREPARED AS PER 3 PAGE S MANUSCRIPTS OF HONBLE VP-ATTACHED.10.07.19. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: ...10.07.2019.... 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S.: 11/07/2019... 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: .. 11/07/2019..... 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK : . 11/07/2019. 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK : . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER : . 8. DATE OF DESPATCH OF THE ORDER: ......