Shri Bharatkumar D.Jain, Surat V. The Income tax Officer,Ward-3(3), Surat

ITA 2589/AHD/2008

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2319 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 06-01-2011
• Assessment Year: 2000-2001
• Appeal Filed On: 14-07-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMIT KAUR
• Assessee Lawyers: M J SHAH
• Keywords: Reassessment proceedings
• Section: 147; 131; 148

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI MAHAVIR SINGH, JM AND D.C.AGRAWAL, AM SHRI BHARATKUMAR D. JAIN, PROP. M/S MANISHA SYNTHETICS, BUNGLOW NO.3, ABHINAV PARK, BEHIND SURYAKIRAN APTT., GHOD DOD ROAD, SURAT. VS. THE INCOME-TAX OFFICER, WARD 3(3), SURAT. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI M. J. SHAH, AR RESPONDENT BY:- SMT. SUMIT KAUR, DR O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FO LLOWING GROUNDS :- (1) THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD . CIT(A) HAS ERRED IN UPHOLDING THE ACTION OF THE AO OF INITIATI NG AND COMPLETING THE REASSESSMENT PROCEEDINGS U/S 147 OF THE ACT WITHOUT APPRECIATING THE FACT THAT (A) THE NOTICE OF REOPENING U/S 148 HAS BEEN ISSUED AFT ER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSME NT YEAR, AND (B) THE ESTIMATION OF ALLEGED ESCAPEMENT OF INCOME WAS BELOW RS.1,00,000/- AND EVEN THE INCOME ASSESSED AS PER T HE IMPUGNED ORDER ALSO REMAINED BELOW RS.1,00,000/- WHICH MAKES THE ENTIRE REASSESSMENT PROCEEDINGS TIM E BARRED AND BAD IN LAW, REQUIRING OUTRIGHT ANNULMENT. ITA NO.2589/AHD/2008 ASST. YEAR 2000-01 ITA NO.2589/AHD/2008 ASST. YEAR 2000-01 2 (2) WITHOUT PREJUDICE TO GROUND NO.1, EVEN OTHERWISE ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.93,206/- OUT OF L EGITIMATE INTEREST EXPENSES BASED ON CONJECTURES AND SURMISES , WITHOUT APPRECIATING THE FACT THAT : (A) THE APPELLANT COULD NOT RECOVER THE INTEREST ON ACC OUNT OF MOST PECULIAR CIRCUMSTANCES WHEN HIS ADVANCES ITSELF WER E AT STAKE, AND (B) THE BUSINESS PRUDENCE OF A BUSINESSMAN HAS TO BE JU DGED ABOVE THE INCOME-TAX LAW. AND HENCE THE SAID DISALLOWANCE IS ABSOLUTELY INCOR RECT AND BAD-IN- LAW, AND NEEDS TO BE DELETED. 2. AT THE OUTSET THE LD. AR FOR THE ASSESSEE SUBMIT TED THAT GROUND NO.1 GOES TO THE ROOT OF THE MATTER AND IF IT IS DECIDED IN FAVOUR OF THE ASSESSEE OTHER GROUNDS BECOME ACADEMIC. 3. THE FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAG ED IN THE BUSINESS OF CHEQUE DISCOUNTING IN THE NAME OF M/S MANISH SYNTHE TICS BEING PROPRIETARY CONCERN OF THE ASSESSEE. THE ASSESSEE H AD GIVEN INTEREST FREE LOAN OF RS.35 LACS TO M/S SHANTI ENTERPRISE ON 21.0 7.1999 OUT OF INTEREST BEARING OVERDRAFT RECEIVED FROM BANK. THE ASSESSEE IS PAYING INTEREST ON THE FUNDS BORROWED FROM BANK BUT IT HAS BEEN TRANSF ERRED AS INTEREST FREE LOAN TO THE SISTER CONCERN. STATEMENT OF THE ASSESS EE WAS ALSO RECORDED UNDER SECTION 131 OF THE ACT ON 29.11.2004 TO CONFI RM ABOVE TRANSACTIONS. THE ORIGINAL RETURN WAS FILED ON 29.0 6.2000 ON AN INCOME OF RS.1,93,074/- WHICH WAS APPARENTLY ACCEPTED. ACCORD INGLY NOTICE UNDER SECTION 148 WAS ISSUED ON 29.03.2007 AND SERVED ON ASSESSEE ON 31.3.2007 FOR DISALLOWING THE PAYMENT OF INTEREST. THE AO FINALLY SOUGHT TO MAKE ADDITION OF RS.93,206/- BEING THE ALLEGED D ISALLOWANCE OF INTEREST. THE ASSESSEE CHALLENGED THE REOPENING OF THE ASSESSMENT ON THE ITA NO.2589/AHD/2008 ASST. YEAR 2000-01 3 GROUND THAT ALLEGED INCOME IS LESS THAN RS.1 LAC AN D, THEREFORE, IT IS HIT BY SECTION 149 WHICH DEBARS THE REOPENING OF THE ASSES SMENT AFTER EXPIRY OF FOUR YEARS IF ESCAPED INCOME IS LESS THAN RS.1 LACS . THE LD. CIT(A) HOWEVER, CONFIRMED THE REOPENING ON THE GROUND THAT INTEREST FREE ADVANCES WAS OF THE SUM OF RS.35 LACS AND, THEREFOR E, IT IS NOT HIT BY SECTION 149. 4. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE MATERIAL ON RECORD. THE REASONS RECORDED BY THE AO FOR REOPENIN G ASSESSMENT ARE AS UNDER UNDER:- IN VIEW OF THE INFORMATION GATHERED, THE ASSESSEE HAD MADE INTEREST FREE LOAN AND ADVANCE OF RS.35 LACS TO M/S SHANTI ENTERP RISE, OUT OF INTEREST BEARING FUNDS BORROWED FROM THE BANK. THEREFORE, I AM SATISFIED THAT INCOME EXCEEDING RS.1 LAC HAVE ESCAPED THE ASSESSME NT. IN THIS REGARD SECTION 149 AS RELIED ON BY THE LD. AR IS REPRODUCED BELOW : SEC.149 [(1) NO NOTICE UNDER SECTION 148 SHALL BE ISSUED FOR THE RELEVANT ASSESSMENT YEAR,- [(A) IF FOUR YEARS HAVE ELAPSED FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS THEN CASE FALLS UNDER CLAUSE (B); (B) IF FOUR YEARS BUT NOT MORE THAN SIX YEARS HAVE ELAPSED FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS THE INCOME CHARGEAB LE TO TAX WHICH HAS ESCAPED ASSESSMENT AMOUNTS TO OR IS LIKELY TO AMOUNT TO ONE LAKH RUPEES OR MORE FOR THAT YEAR.] EXPLANATION IN DETERMINING INCOME CHARGEABLE TO T AX WHICH HAS ESCAPED ASSESSMENT FOR THE PURPOSES OF THIS SUB-SECTION, TH E PROVISIONS OF EXPLANATION -2 OF SECTION 147 SHALL APPLY AS THEY APPLY FOR THE PURPO SES OF THAT SECTION] (2) IF THE PERSON ON WHOM A NOTICE UNDER SECTION 14 8 IS TO BE SERVED IS A PERSON TREATED AS THE AGENT OF A NON-RESIDENT UNDER SECTIO N 163 AND THE ASSESSMENT, REASSESSMENT OR RECOMPUTATION TO BE MADE IN PURSUAN CE OF THE NOTICE IS TO BE MADE ON HIM AS THE AGENT OF SUCH NON-RESIDENT, THE NOTICE S HALL NOT BE ISSUED AFTER THE EXPIRY OF A PERIOD OF TWO YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. ITA NO.2589/AHD/2008 ASST. YEAR 2000-01 4 FROM THE BARE READING OF THE PROVISIONS OF SECTION 149 IT IS NOTICED THAT IF ASSESSMENT SOUGHT TO BE REOPENED IS BEYOND FOUR YEA RS OF THE RELEVANT ASST. YEAR BUT NOT MORE THAN 6 YEARS THEN INCOME ES CAPED ASSESSMENT SHOULD BE RS.1 LAC OR MORE FOR THAT YEAR. THE UNDIS PUTED FACTS ARE THAT ASSESSEE HAS GIVEN AN ADVANCE OF RS.35 LACS BUT WH AT IS SOUGHT TO BE DISALLOWED IS INTEREST PAID BY THE ASSESSEE TO THE BANK ON SUCH BORROWINGS WHICH IS ONLY RS.93,206/-. FIRSTLY, THE AO FAILED T O SHOW IN THE REASONS RECORDED AS TO WHAT IS THE AMOUNT OF ESCAPED INCOME . EVEN ON THIS GROUND REOPENING CANNOT BE SUSTAINED. BUT AS ASSESS MENT IS SOUGHT TO BE REOPENED AFTER 4 YEARS FROM THE RELEVANT ASST. YEAR THEN AO IS TO NECESSARILY MENTION FOLLOWING INGREDIENTS IN THE RE ASONS RECORDED. THEY ARE - 1. NAME OF THE ASSESSEE, 2. ASST. YEAR INVOLVED 3. AMOUNT OF INCOME ESCAPED 4. REASONS OF ESCAPEMENT 5. FAILURE OF THE ASSESSEE TO DISCLOSE MATERIAL FACT T RULY AND FULLY NECESSARY FOR HIS ASSESSEE AND 6. FINALLY ESCAPED INCOME SHOULD BE ABOVE RS.1 LAC AS PER SECTION 149. IF ANY OF THESE INGREDIENTS IS NOT FOUND SATISFIED REOPENING CANNOT BE UPHELD. SINCE IT IS A CLEAR CASE WHERE INCOME ESCAP ED ASSESSMENT IS RS.93,206/- BEING THE AMOUNT OF INTEREST SOUGHT TO BE DISALLOWED THEN REOPENING IS HIT BY SECTION 149 AND, THEREFORE, LIA BLE FOR BEING QUASHED. ACCORDINGLY, REOPENING IS QUASHED AND APPEAL FILED BY THE ASSESSEE IS ALLOWED. ITA NO.2589/AHD/2008 ASST. YEAR 2000-01 5 5. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER WAS PRONOUNCED IN OPEN COURT ON 13.1.11. SD/- SD/- (MAHAVIR SINGH) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED : 13.1.11. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR 1.DATE OF DICTATION 11/1/2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 12/1/ 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..