DCIT, CHENNAI V. Shri Sunil G.Duseja, CHENNAI

ITA 233/CHNY/2004

• Counselvise Citation: 23321714 RSA 2004
• Duration Of Justice: 11 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 21-08-2015
• Assessment Year: 1999-2000
• Appeal Filed On: 28-01-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: N DEVANATHAN
• Keywords: Reopening of assessment; Period of limitation; Reasonable cause; Reason to believe
• Section: 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL S M C BENCH, CHENNAI ... , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER ./ ITA NOS.232 & 233/MDS/2004 & C.O. NOS.14 & 15/MDS/2008 (IN I.T.A. NOS.232 & 233/MDS/2004) ' #$' / ASSESSMENT YEARS : 1998-99 & 1999-2000 THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE II(2), CHENNAI - 600 034. V. SHRI SUNIL G. DUSEJA, 4, 22 ND STREET, KASTURI ESTATE, CHENNAI - 600 086. PAN : AAUPS 7413 F ( APPELLANT) ( RESPONDENT & CROSS-OBJECTOR) &' ( ) / APPELLANT BY : SHRI A.V. SREEKANTH, JCIT *+&' ( ) / RESPONDENT BY : SH. N. DEVANATHAN, ADVOCATE , # ( -. / DATE OF HEARING : 21.08.2015 /0$ ( -. / DATE OF PRONOUNCEMENT : 04.09.2015 / O R D E R BOTH THE APPEALS OF THE REVENUE ARE DIRECTED AGAI NST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I II, CHENNAI, DATED 19.09.2003 AND PERTAIN TO ASSESSMENT YEARS 19 98-99 AND 1999-2000. THE ASSESSEE HAS ALSO FILED CROSS-OBJEC TIONS AGAINST THE VERY SAME ORDER OF THE CIT(APPEALS). THEREFORE , I HEARD THE 2 I.T.A. NOS.232 & 233/MDS/04 C.O. NOS.14 & 15/MDS/08 APPEALS AND CROSS-OBJECTIONS TOGETHER AND DISPOSING OF THE SAME BY THIS COMMON ORDER. 2. SHRI A.V. SREEKANTH, THE LD. DEPARTMENTAL REPRES ENTATIVE, SUBMITTED THAT THE ASSESSEE RECEIVED INTEREST INCOM E AND CLAIMED THE SAME UNDER THE HEAD BUSINESS. REFERRING TO T HE ASSESSMENT ORDER, THE LD. D.R. SUBMITTED THAT THE ASSESSEE REC EIVED INTEREST FROM KARNATAKA BANK AND INDIAN BANK. THE ASSESSEE HAS ALSO RECEIVED INTEREST FROM HEERAL CONSTRUCTIONS PVT. LT D., HARESH CHAND, SHYAM G. DUSEJA, GEE GEE HIRE PURCHASE AND L EASING P. LTD. AND SNS EXPORTS INDIA LTD. ACCORDING TO THE LD. D.R., OTHER THAN KARNATAKA BANK AND INDIAN BANK, ALL OTHER PART IES ARE RELATED TO THE ASSESSEE AND THE ASSESSEE IS ALSO DIRECTOR I N THE COMPANIES. REFERRING TO THE ASSESSMENT ORDER, THE LD. D.R. POI NTED OUT THAT THE CLAIM OF THE ASSESSEE THAT HE WAS CARRYING ON MONEY LENDING BUSINESS WAS NOT SUBSTANTIATED BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER FOUND THAT THE MONEY LENDING BUSI NESS WAS NOT CARRIED ON REGULAR INTERVALS. THE ASSESSEE HAS NOT CARRIED OUT THE REGULAR INTEREST ACCRUAL IN HIS BOOKS OF ACCOUNT ON A MONTHLY, BIMONTHLY BASIS. THE MONEY WAS NOT LENT TO GENERAL PUBLIC. SINCE THE INTEREST INCOME WAS RECEIVED ONLY FROM THE BANK S AND FIVE RELATED PARTIES, THE ASSESSING OFFICER CAME TO A CO NCLUSION THAT THE 3 I.T.A. NOS.232 & 233/MDS/04 C.O. NOS.14 & 15/MDS/08 ASSESSEE IS NOT DOING ANY MONEY LENDING BUSINESS. THEREFORE, INTEREST INCOME ACCRUED TO THE ASSESSEE HAS TO BE C LASSIFIED UNDER THE HEAD INCOME FROM OTHER SOURCES AND NOT UNDER THE HEAD BUSINESS. THE LD. D.R. PLACED HIS RELIANCE ON TH E JUDGMENT OF THE APEX COURT IN TUTICORIN ALKALI CHEMICALS AND FERTIL IZERS LTD. (1997) 227 ITR 172. REFERRING TO THE REASON RECORDED BY T HE ASSESSING OFFICER FOR REOPENING, THE LD. D.R. POINTED OUT THA T THE ASSESSEE DISCLOSED LOSS IN THE REGULAR RETURN. IN ORDER TO VERIFY WHETHER BORROWED FUNDS WERE FOR THE BUSINESS PURPOSES OR NO T, THE ASSESSING OFFICER REOPENED THE ASSESSMENT UNDER SEC TION 147 OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). 3. ON THE CONTRARY, SH. N. DEVANATHAN, THE LD.COUNS EL FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE FILED CROSS-O BJECTIONS AGAINST THE FINDINGS OF THE CIT(APPEALS) CONFIRMING THE REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT. THE LD.CO UNSEL SUBMITTED THAT THERE WAS A DELAY OF 1389 DAYS IN FI LING THE CROSS- OBJECTIONS. REFERRING TO THE AFFIDAVIT FILED BY TH E ASSESSEE, THE LD.COUNSEL SUBMITTED THAT THE GROUNDS OF APPEAL FIL ED BEFORE THE TRIBUNAL WAS RECEIVED ON 28.01.2004 AND THE SAME WA S HANDED OVER TO THE ASSESSEES AUDITOR, M/S B.P. JAIN & CO. THE CROSS- 4 I.T.A. NOS.232 & 233/MDS/04 C.O. NOS.14 & 15/MDS/08 OBJECTIONS OUGHT TO HAVE FILED ON OR BEFORE 26.02.2 004. HOWEVER, IN FACT, THERE WAS A DELAY OF 1389 DAYS IN FILING THE CROSS-OBJECTIONS. 4. THE LD.COUNSEL FOR THE ASSESSEE FURTHER SUBMITTE D THAT THIS TRIBUNAL, BY AN ORDER DATED 11.05.2007, ALLOWED THE APPEALS OF THE REVENUE. AFTER THAT, THE ASSESSEE CHANGED HIS REPR ESENTATIVE AND ENGAGED THE PRESENT COUNSEL. ACCORDING TO THE LD. COUNSEL, THE EARLIER REPRESENTATIVE FOR THE ASSESSEE M/S B.P. JA IN & CO. FAILED TO TAKE ACTION BY FILING CROSS-OBJECTIONS. THEREFORE, AFTER THE APPEALS WERE RESTORED ON FILE BY RECALLING THE EARLIER ORDE R, THE ASSESSEE FILED THE CROSS-OBJECTIONS. HENCE, THE DELAY MAY B E CONDONED AND THE CROSS-OBJECTIONS MAY BE TAKEN ON FILE. 5. BY WAY OF REJOINDER, SHRI A.V. SREEKANTH, THE LD . D.R. SUBMITTED THAT THERE WAS NO REASONABLE CAUSE IN NOT FILING THE CROSS- OBJECTIONS WITHIN THE PERIOD OF LIMITATION, THEREFO RE, THERE IS NO REASON TO CONDONE THE DELAY OF 1389 DAYS IN FILING THE CROSS- OBJECTIONS. 6. I HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHE R SIDE AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE ASSES SEE FILED THE CROSS-OBJECTIONS ALONG WITH APPLICATION FOR CONDONA TION OF DELAY OF 1389 DAYS. THE FACT THAT THE ASSESSEE ENGAGED M/S B.P. JAIN & 5 I.T.A. NOS.232 & 233/MDS/04 C.O. NOS.14 & 15/MDS/08 CO., A FIRM OF CHARTERED ACCOUNTANTS, FOR DEFENDING THE APPEALS FILED BY THE REVENUE IS NOT IN DISPUTE. IT IS ALSO NOT I N DISPUTE THAT THE APPEALS OF THE REVENUE WERE ALLOWED BY THIS TRIBUNA L EX-PARTE BY AN ORDER DATED 11.05.2007. THEREAFTER THE ASSESSEE FILED MISCELLANEOUS PETITION IN M.P. NOS.147 & 148/MDS/20 07. THE TRIBUNAL, AFTER HEARING BOTH THE PARTIES, RECALLED ITS EARLIER ORDER AND RESTORED THE APPEALS ON FILE. THEREAFTER, THE ASSE SSEE CHANGED HIS REPRESENTATIVE AND ENGAGED THE PRESENT COUNSEL TO F ILE THE CROSS- OBJECTIONS. THEREFORE, THIS TRIBUNAL IS OF THE CON SIDERED OPINION THAT THERE WAS A REASONABLE CAUSE FOR NOT FILING THE CRO SS-OBJECTIONS WITHIN THE PERIOD OF LIMITATION. ACCORDINGLY, THE DELAY IN FILING THE CROSS-OBJECTIONS TO THE EXTENT OF 1389 DAYS IS HERE BY CONDONED AND THE CROSS-OBJECTIONS ARE ADMITTED. 7. NOW COMING TO THE MERIT OF THE CROSS-OBJECTIONS, THE ONLY CLAIM OF THE ASSESSEE IS WITH REGARD TO REOPENING O F THE ASSESSMENT. REFERRING TO THE REASON FOR REOPENING THE ASSESSMENT, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER REOPENED THE ASSESSMENT TO VERIFY WHETHER T HE BORROWAL WAS FOR THE BUSINESS PURPOSE. IN THIS CASE, NO DISALLO WANCE WAS MADE BY THE ASSESSING OFFICER AND THE ASSESSING OFFICER TREATED THE INTEREST INCOME AS INCOME FROM OTHER SOURCE. HOW EVER, THE 6 I.T.A. NOS.232 & 233/MDS/04 C.O. NOS.14 & 15/MDS/08 CIT(APPEALS) ALLOWED THE CLAIM OF THE ASSESSEE BY A SSESSING THE SAME UNDER THE HEAD BUSINESS. IT IS NOT THE CASE OF THE REVENUE, ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE, THAT THE ASSESSEE HAS CLAIMED EXCESS DEDUCTION. JUST TO VERIFY WHETH ER THE BORROWAL WAS FOR BUSINESS PURPOSE AND THERE WAS ANY EXCESS D EDUCTION, THE ASSESSMENT CANNOT BE REOPENED. REFERRING TO SECTIO N 147 OF THE ACT, THE LD.COUNSEL SUBMITTED THAT THE ASSESSING OF FICER HAS TO EXPRESS HIS OPINION WHERE THE ASSESSEE HAS CLAIMED EXCESS ALLOWANCE OR DEDUCTION IN THE RETURN OF INCOME. IN THIS CASE, IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE ASSESSEE HAS CLAIMED EXCESS DEDUCTION. THEREFORE, REOPENING OF THE ASSE SSMENT UNDER SECTION 147 OF THE ACT IS NOT JUSTIFIED. 8. ON THE CONTRARY, THE LD. D.R. SUBMITTED THAT THE RETURNS FILED BY THE ASSESSEE FOR BOTH THE ASSESSMENT YEARS UNDER CONSIDERATION WERE PROCESSED UNDER SECTION 143(1) (A) OF THE ACT. LATER ON, THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 148 O F THE ACT ON 29.05.2001. ACCORDING TO THE LD. D.R., THE INCOME RECEIVED FROM BANK AND OTHER COMPANIES HAS TO BE TREATED AS INCO ME FROM OTHER SOURCES. THEREFORE, THE INTEREST PAYMENT CANNOT B E ALLOWED AS EXPENDITURE. SINCE THE ASSESSEE CLAIMED INTEREST P AYMENT AS 7 I.T.A. NOS.232 & 233/MDS/04 C.O. NOS.14 & 15/MDS/08 EXPENDITURE, THE ASSESSING OFFICER RIGHTLY REOPENED THE ASSESSMENT. 9. I HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHE R SIDE AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE ASSES SING OFFICER REOPENED THE ASSESSMENT BY RECORDING HIS REASON AS FOLLOWS:- THE ASSESSEE HAS BEEN CLAIMING HUGE LOSS UNDER BUSINESS. NET RESULT: LOSS 31839/- FOR THE ASSESSMENT YEAR 1999-2000. WHETHER THE WHOLE BORROWAL WAS FOR BUSINESS PURPOSE, TO CONSIDER EXCESS DEDUCTION, INCOME ESCAPED ASSESSMENT . ISSUE NOTICE UNDER SECTION 148 . THEREFORE, FROM THE ABOVE NOTING OF THE ASSESSING O FFICER RECORDING HIS REASON, IT IS OBVIOUS THAT TO CONSIDER WHETHER THE WHOLE BORROWAL WAS FOR BUSINESS PURPOSE AND TO CONSIDER WHETHER TH E ASSESSEE CLAIMED ANY EXCESS DEDUCTION, THE ASSESSING OFFICER REOPENED THE ASSESSMENT. 10. I HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 147 OF THE ACT. SECTION 147 CLEARLY SAYS THAT IF THE A SSESSING OFFICER HAS REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY ISSUE NO TICE UNDER SECTION 148 OF THE ACT TO ASSESS OR REASSESS SUCH I NCOME. EXPLANATION 2(B) TO SECTION 147 OF THE ACT CLEARLY SAYS THAT 8 I.T.A. NOS.232 & 233/MDS/04 C.O. NOS.14 & 15/MDS/08 UNDERSTATING OF INCOME OR CLAIMING EXCESS LOSS, DED UCTION, ALLOWANCE OR RELIEF IN THE RETURN IS ALSO DEEMED TO BE ESCAPEMENT OF INCOME. WHAT IS NECESSARY IS THAT THE ASSESSING OF FICER HAS REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAS ES CAPED ASSESSMENT. THEREFORE, IT IS OBLIGATORY ON THE PAR T OF THE ASSESSING OFFICER TO RECORD HIS REASON WHICH MADE HIM TO BELI EVE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR. IN THIS CASE, THE ASSESSING OFFIC ER REOPENED THE ASSESSMENT BY ISSUING NOTICE UNDER SECTION 148 OF T HE ACT TO VERIFY WHETHER THE BORROWAL WAS FOR BUSINESS PURPOSE AND W HETHER THE ASSESSEE CLAIMED EXCESS DEDUCTION. THE ASSESSING O FFICER HAS NOT FORMED ANY OPINION THAT THE ASSESSEE CLAIMED EXCESS DEDUCTION THEREBY THE INCOME OTHERWISE CHARGEABLE TO TAX ESCA PED ASSESSMENT. THIS TRIBUNAL IS OF THE CONSIDERED OPI NION THAT TO VERIFY OR TO CONSIDER WHETHER THE ASSESSEE CLAIMED EXCESS DEDUCTION OR BORROWED LOAN FOR BUSINESS PURPOSE, THE CONCLUDED A SSESSMENT CANNOT BE REOPENED. IN VIEW OF THE LANGUAGE EMPLOYE D BY THE PARLIAMENT IN SECTION 147 OF THE ACT, THE ASSESSING OFFICER HAS TO NECESSARILY RECORD THE REASON WHICH MADE HIM TO BEL IEVE THAT THE ASSESSEE CLAIMED EXCESS DEDUCTION OR LOSS. IN THE ABSENCE OF ANY SUCH OBSERVATION BY THE ASSESSING OFFICER IN THE RE ASON FOR 9 I.T.A. NOS.232 & 233/MDS/04 C.O. NOS.14 & 15/MDS/08 REOPENING THE ASSESSMENT, THIS TRIBUNAL IS OF THE C ONSIDERED OPINION THAT REOPENING OF THE ASSESSMENT IS NOT JUSTIFIED. ACCORDINGLY, THE ORDER OF THE CIT(APPEALS) CONFIRMING THE REOPENING OF ASSESSMENT, IS SET ASIDE AND CROSS-OBJECTIONS FOR BOTH THE ASSE SSMENT YEARS ARE ALLOWED. 11. IN VIEW OF THE ABOVE, THE APPEALS OF THE REVENU E BECOME INFRUCTUOUS, THEREFORE, BOTH THE APPEALS FILED BY T HE REVENUE ARE DISMISSED. 12. IN THE RESULT, I.T.A. NOS.232 & 233/MDS/2004 AR E DISMISSED AND THE CROSS-OBJECTIONS IN C.O. NOS.14 & 15/MDS/20 08 ARE ALLOWED. ORDER PRONOUNCED ON 4 TH SEPTEMBER, 2015 AT CHENNAI. SD/- ( ... ) (N.R.S. GANESAN) /JUDICIAL MEMBER /CHENNAI, 2 /DATED, THE 4 TH SEPTEMBER, 2015. KRI. ( *-34 54$- /COPY TO: &' /APPELLANT / *+&' /RESPONDENT / , 6- () /CIT(A)-III, CHENNAI-34 / , 6- /CIT,CHENNAI-I, CHENNAI / 4#7 *- /DR / 8' 9 /GF.