BLACK GOLD HOLDING P.LTD, MUMBAI V. PR CIT -5, MUMBAI

ITA 2484/MUM/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2452 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 29-04-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 30-04-2015
• Court: TRIBUNAL
• Department Lawyers: N P SINGH
• Assessee Lawyers: KETAN L VAJANI
• Keywords: Corroborative evidences; Assessment record
• Section: 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B, BENC H MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI RAM LAL NEGI, JM ./ ITA NO.2484/MUM/2015 ( / ASSESSMENT YEAR : 2010-2011) BLACK GOLD HOLDING PVT. LTD., 6/7 TH FLOOR, SEA CREST, 17/17A, DR. B.I.ROAD, WALKESHWAR, MUMBAI-400008 VS. PRINCIPAL COMMISSIONER OF INCOME TAX-5, MUMBAI-400020 ./ ./PAN/GIR NO. : AADCB 5608 D ( /APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI KETAN L. VAJANI /REVENUE BY : SHRI N.P.SINGH ! / DATE OF HEARING : 29/04/2016 ! /DATE OF PRONOUNCEMENT 22 /07/2016 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), MUMBAI, FOR THE ASSESSMENT YEAR 2010-2011, IN THE M ATTER OF ORDER PASSED U/S.263 OF THE I.T.ACT, ON THE FOLLOWING GRO UNDS :- OBJECTION AGAINST INVOKING PROVISIONS OF SECTION 263 OF THE INCOME-TAX ACT 1961 (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE PRINCIPAL COMMISSIONER OF INCOME-TAX, HEREINAFTER REFERRED TO AS THE 'PR. CIT', HAS ERRED IN INVOKING THE PROVISIONS OF SECTI ON 263 OF THE INCOME TAX ACT, 1961 IN THE CASE OF THE APPELLANT. (B) YOUR APPELLANT RESPECTFULLY SUBMITS THAT THE PR OVISIONS OF SECTION 263 OF THE ACT CANNOT BE INVOKED IN ITS CASE CONSID ERING THE FOLLOWING FACTS OF THE CASE THAT DURING THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS ALL THE DETAILS AND DOCUMENTS AS REGARDS THE SALE OF SC RAP WAS FILED WITH THE ASSESSING OFFICER. ITA NO.2484/15 2 THAT THE ASSESSING OFFICER HAS MADE DUE INQUIRIES IN THE MATTER AND AFTER VERIFYING THE DETAILS AND DOCUMENTS HAVE ACCEPTED THE SALE PRICE OF SCRAP AT RS. 84 LAKHS. THAT THERE WAS NO REASON FOR THE ASSESSING OFFICE R TO DISBELIEVE THE GENUINENESS OF THE TRANSACTION OF THE APPELLANT . THAT ACCORDINGLY THE ORDER OF THE ASSESSING OFFIC ER CANNOT BE SAID TO BE ERRONEOUS. (C) YOUR APPELLANT FURTHER SUBMITS THAT AS PER SETT LED LEGAL POSITION, THE CIT DOES NOT HAVE POWER OF REVIEW THE ASSESSMEN T ORDER UNDER THE GARB OF REVISION AND FURTHER THAT THE CIT DOES NOT HAVE POWER TO DIRECT THE MANNER IN WHICH INQUIRY SHOULD BE DONE B Y THE ASSESSING OFFICER. (D) ON THE FACTS OF THE CASE, THE PR. CIT HAS EXCEE DED THE POWER AVAILABLE U/S.263 OF THE ACT AND ACCORDINGLY THE OR DER PASSED U/S.263 OF THE ACT IS NOT VALID. (E) IN VIEW OF THE ABOVE, THE APPELLANT PRAYS THAT THE ORDER DATED 25 TH FEBRUARY, 2015, PASSED U/S.263 OF THE ACT SHALL BE QUASHED. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSIN ESS OF PURCHASING, SELLING, ACQUIRING AND DEALING IN ALL TYPES OF SHAR ES AND SECURITIES AND ALSO BUSINESS OF PURCHASE, ACQUIRE, SALE AND LEASE OF AL L TYPES OF PROPERTIES. FOR THE YEAR UNDER CONSIDERATION RETURN OF INCOME W AS FILED DECLARING INCOME AT RS.98,97,963/- ON 13-10-2010. THE AO COMP LETED ASSESSMENT U/S.143(3) ON 13-3-2013 ASSESSING INCOME AT RS.1,01 ,24,213/-. THEREAFTER CIT CALLED FOR THE ASSESSMENT RECORDS WH EREIN HE OBSERVED THAT THE ASSESSEE COMPANY HAD OFFERED INCOME OF RS. 1,06.36,257/- WHICH COMPRISES OF SALES OF RS. 84,00,000/- AND INTEREST INCOME OF RS.22,36,257/-. AGAINST THIS INCOME THE ASSESSEE HA D NEITHER CLAIMED ANY PURCHASE CONSIDERATION NOR THERE WAS ANY OPENIN G BALANCE OF ANY GOODS. IT HAD CLAIMED EXPENSES OF RS.6,53,581/- IN RESPECT OF ITA NO.2484/15 3 ADMINISTRATIVE EXPENSES AS PER PROFIT AND LOSS ACCO UNT. PERUSAL OF THE ASSESSMENT RECORDS FURTHER REVEAL THAT THE PROMOTER OF THE ASSESSEE COMPANY HAD ENTERED INTO A TRIPARTITE AGREEMENT ON 18/01/08 WITH TRANSFEROR ADINATH BUILDERS AND SHRI RAGHUNATH SOMA NL FOR ASSIGNMENT TRANSFER OF SCRAP IN FAVOUR OF THE TRANSFEREE FOR A CONSIDERATION OF RS.1/- ONLY. IT WAS OBSERVED BY CIT THAT FOR MERE CONSIDER ATION OF RS. 1/- THE TRANSFEREE HAD TO DEPOSIT WITH THE TRANSFEROR A SUM OF RS. 6.75 CRORE. THE AGREEMENT ALSO PROVIDED THAT IF THE TRANSFEROR WAS UNABLE TO SELL/ASSIGN THE SCRAP TO THE TRANSFEREE WITHIN 3 MONTHS, THE TR ANSFEROR WOULD PAY A COMPENSATION OF RS. 30 CRORE. IT HAS BEEN CLAIMED B Y THE ASSESSEE THAT SUBSEQUENT TO THIS AGREEMENT THE PARTIES RECONCILED THAT ANTICIPATED LIABILITIES WOULD ACTUALLY NOT RESULT IN OUTGO OF A NY FUNDS AND THEREFORE DECIDED TO NOT TO MAKE ANY SECURITY DEPOSIT. THE CI T FOUND THAT NO SUPPORTING EVIDENCE OR ANY REVISED AGREEMENT COPY W AS FURNISHED IN SUPPORT OF THE ABOVE CLAIM. THE PROMOTER ASSIGNED T HIS SCRAP TO THE ASSESSEE COMPANY WHICH IN TURN WAS SOLD TO M/S. SPE CTRA INDUSTRIES LTD. FOR RS.84,00,000/-. HOWEVER, AGAINST THIS SALE THE ASSES SE RECEIVED A SUM OF PS. 2.51 CRORE IN ADVANCE. FROM THE ASSESSME NT RECORDS IT WAS ALSO FOUND THAT THE VALUE OF THE UNDERLYING ASSET I .E. SCRAP COULD BE MANY TIMES MORE THAN WHAT HAS BEEN SHOWN IN THE BOOKS OF THE ACCOUNTS OF THE ASSESSEE. IT IS QUITE UNLIKELY THAT ANY PRUDENT BUS INESSMAN WOULD DISPOSE OF ITS SCRAP WORTH RS. 84,00,000/- FOR RS. 1/-. MOR EOVER, IT IS ALSO UNLIKELY THAT WHEN THE SCRAP WAS OF SUCH INSIGNIFICANT VALU E, THE PARTIES WOULD ENTER INTO TRIPARTITE AGREEMENT AND PUT DOWN TERMS AND CONDITIONS OF ITA NO.2484/15 4 SECURITY DEPOSITS OF RS. 6.75 CRORES FOR ASSIGNMENT / SCRAP RESPECTIVELY. BESIDES THE ASSESSEE RECEIVED ADVANCE SALES CONSIDE RATION WHICH WAS SEVERAL TIMES THE VALUE OF THE ASSET. THEREFORE, CI T OBSERVED THAT THERE WERE CERTAIN UNDERLYING VALUES TO THIS TRANSACTION WHICH REMAINED TO BE LOOKED INTO BY THE AO IN THE COURSE OF ASSESSMENT P ROCEEDINGS. THE ASSESSMENT RECORDS DID NOT THROW ANY LIGHT AS TO WH ETHER THIS ASPECT WAS EXAMINED BY THE AO OR NOT, EVEN THOUGH THIS ASPECT REQUIRED PROPER ENQUIRY OR INVESTIGATION, AS PER CIT. ACCORDING CIT SET ASIDE THE ASSESSMENT ORDER FOR FRAMING DE-NOVO ORDER WITH A D IRECTION TO THE AO TO BRING ON RECORD ALL THE RELEVANT MATERIALS RELATING TO THE ABOVE ISSUE AFTER MAKING NECESSARY ENQUIRIES AND INVESTIGATION AND DE CIDE THE MATTER AS PER LAW AFTER ACCORDING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE COMPANY. 4. IT WAS ARGUED BY LD. AR THAT DURING ORIGINAL PRO CEEDINGS ALL DETAILS WERE FILED WITH REGARD TO SALE OF SCRAP AND THE AO AFTER MAKING ENQUIRY ACCEPTED THE SALE PRICE OF SCRAP AT RS.84 LAKHS. AC CORDINGLY NO FAULT CAN BE FOUND ON AOS PART WITH REGARD TO SALE PROCEEDS OF RS.84 LAKHS. AS PER LD. AR WHEN THE AO HAS TAKEN ONE OF THE POSSIBLE VI EW, THE CIT(A) HAS NO JURISDICTION TO REPLACE HIS VIEW IN PLACE OF VIEW T AKEN BY THE AO. IT WAS FURTHER CONTENDED THAT THE ASSIGNMENT OF SCRAP BY A DINATH BUILDERS ( THE TRANSFEROR ) TO ANAND AGARWAL ( THE TRANSFEREE) WAS IN EFFECT A PART OF THE SCHEME OF UNDERSTANDING BETWEEN THE PARTIES TO THE TRIPARTITE AGREEMENT. THE AGREEMENT REQUIRED A DEPOSIT OF RS.6.75 CRORES TO BE GIVEN BY ANAND AGARWAL TO ADINATH BUILDERS PVT. LTD. AS PART OF FU LFILLMENT OF HIS ITA NO.2484/15 5 COMMITMENT TOWARDS THE SETTLEMENT I.E. TO TAKE CARE OF ANY UNFORESEEN LIABILITIES. THIS AMOUNT OF SECURITY DEPOSIT WAS TO BE GIVEN IN PURSUANCE OF THE ABOVEMENTIONED POINTS AND HAD NO DIRECT RELATIO N WITH THE ASSIGNMENT OF SRAP. SINCE THE UNFORESEEN AND UNANTICIPATED LIA BILITIES DID NOT CRYSTALLIZE, THE SECURITY DEPOSIT WAS FINALLY NOT M ADE. AS SUCH, IT CAN BE OBSERVED THAT THIS TRANSACTION HAD NO EFFECT ON THE SALE OF SCRAP. 5. WITH REGARD TO THE AMOUNT OF RS.30 CRORES WHICH THE TRANSFEROR WAS TO PAY TO THE TRANSFEREE FOR NON-PERFORMANCE OF HIS PART OF THE OBLIGATION UNDER THE SETTLEMENT, DOES NOT RELATE TO THE ASSIGN MENT OF SCRAP BUT TO THE ABOVEMENTIONED POINTS OF DISPUTE SETTLEMENT. HOWEVE R, THE AMOUNT WAS NOT REQUIRED TO BE PAID BY THE TRANSFEROR ON ACCOUN T OF TIMELY DISCHARGE OF OBLIGATIONS BY THE PARTIES. LD. AR ALSO RELIED ON T HE FOLLOWING JUDICIAL PRONOUNCEMENTS IN SUPPORT OF THE PROPOSITION THAT O RDER OF AO CANNOT BE SAID TO BE ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE :- I) CIT VS. GABRIAL INDIA LTD., 203 ITR 108 (BOM); II) CIT VS. SUNBEAM AUTO LTD., 332 ITR 167 (DEL.); III) CIT VS. VIKAS POLYMERS, 341 ITR 537 (DEL.); IV) CIT VS. LEISURE WEAR EXPORTS LTD., 341 ITR 166( DEL) V) CIT VS. KANDA RICE MILLS, 178 ITR 446 (P&H); AND VI) CIT VS. SMT. D VALLIAMMAL, 230 ITR 695 (MAD.) IN VIEW OF THE ABOVE SUBMISSION, IT WAS CONTENDED THAT ORDER PASSED BY THE AO AFTER MAKING ENQUIRY CANNOT BE SAID TO BE ER RONEOUS INSOFAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. 6. ON THE OTHER HAND, IT WAS ARGUED BY LD. CIT DR T HAT NO ENQUIRY HAS BEEN MADE BY THE AO, WHICH IS CLEAR FROM THE ASSESS MENT ORDER. AS PER LD. DR THE ASSESSEE DID NOT PRODUCE ANY SUCH AGREEM ENT TO SHOW AS TO HOW THE ABOVE ASSIGNMENT OF SCRAP WAS DONE BY ITS P ROMOTER/DIRECTOR ITA NO.2484/15 6 FROM HIS INDIVIDUAL CAPACITY TO THE COMPANY. RELIAN CE WAS PLACED ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE O F AMALGAMATIONS 238 ITR 963 IN SUPPORT OF THE PROPOSITION THAT AN INCOR RECT ASSUMPTIONS OF FACTS BY THE AO RENDERS AN ASSESSMENT ORDER AS ERRO NEOUS. RELIANCE WAS ALSO PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO LTD., 243 ITR 83 IN SUPPORT O F THE PROPOSITION THAT NON-APPLICATION OF MIND ON THE PART OF AO ON THE FA CTS SO COLLECTED BY HIM ALSO SATISFY THE REQUIREMENT OF THE ORDER BEING ERR ONEOUS. 7. WE HAVE CONSIDERED RIVAL CONTENTIONS, GONE THROU GH THE ORDERS OF AUTHORITIES BELOW AND ALSO DELIBERATED ON THE JUDIC IAL PRONOUNCEMENTS CITED BY LD. AR AND DR DURING THE COURSE OF HEARING BEFORE US. FROM THE RECORD WE FOUND THAT THE AO EVIDENTLY DID NOT APPLY HIS MIND TO THE ADMITTED FACT, WHICH CAME TO THE NOTICE OF THE CIT, THAT THERE WAS NO WRITTEN AGREEMENT OF ASSIGNMENT OF SCRAP BY THE PRO MOTER/DIRECTOR TO THE ASSESSING COMPANY. THE AO COMPLETELY OMITTED THE IS SUE IN QUESTION FROM CONSIDERATION THAT ASSIGNMENT OF SCRAP IN FAVO R OF THE ASSESSEE COMPANY WITHOUT ANY VALID WRITTEN AGREEMENT, WHICH LED HIM TO FRAME THE ASSESSMENT ORDER IN AN ARBITRARY MANNER. THE ERRONE OUS NATURE OF THE ASSESSMENT ORDER LED TO THE ASSESSMENT OF THE SALE PROCEEDS OF THE SCRAP IN THE HANDS OF THE ASSESSEE COMPANY, WHEREAS THE SAID PROPERTY BELONGED TO ITS PROMOTER/DIRECTOR SHRI ANAND AGARWA L. SUCH A VIEW OF THE AO IS UNSUSTAINABLE IN LAW. THUS, IT IS CLEAR FROM THE ABOVE THAT THE AO HAS FRAMED THE ASSESSMENT WITHOUT APPLICATION OF MI ND AND WITHOUT MAKING ANY ENQUIRY WITH REGARD TO THE FACT THAT ANY PRUDENT BUSINESS MAN ITA NO.2484/15 7 WOULD DISPOSE OF SCRAP WORTH OF RS.84,00,000/- FOR RS.1/- ONLY. THE AO HAS ALSO NOT TRIED TO FIND OUT FOR SUCH INSIGNIFICA NT VALUE OF SCRAP, SECURITY DEPOSIT OF RS.6.75 CRORES WAS GIVEN. IT WAS ALSO NO T ENQUIRED AS TO WHY THE ASSESSEE RECEIVED ADVANCE SALE CONSIDERATION WH ICH WAS THREE TIMES THE VALUE OF THE ASSETS. MERELY FRAMING ASSESSMENT WITHOUT MAKING ANY ENQUIRY AND WITHOUT APPLICATION OF MIND RENDERS THE ORDER OF AO AS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT SETTING ASIDE THE ASSESSMENT ORDER FOR FRAMING AFRESH AFTER MAKING NE CESSARY INQUIRIES. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22/07/ 2016. SD/- SD/- ( RAM LAL NEGI ) ( R.C.SHARMA ) $ / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER MUMBAI ; () DATED 22 / 07/2016 . .+/PKM , . / PS &'() *)' / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 0 ( ) / THE CIT(A), MUMBAI. 4. 0 / CIT 5. 123 4 , ! 4 , / DR, ITAT, MUMBAI 6. 35 / GUARD FILE. 1 //TRUE COPY//