SME GROWTH FUND, MUMBAI V. CIT - 15, MUMBAI

ITA 2638/MUM/2013

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0651 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2008-2009
• Appeal Filed On: 05-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KUMAR SANJAY
• Keywords: Opportunity of being heard; Additional evidence
• Section: 142(1)

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -IBENCH MUMBAI , . . , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND C. N. PRASAD,JUDICIAL MEMBER ./I.T.A./2638/MUM/2013, /ASSESSMENT YEAR: 2008-09 ./I.T.A./2878/MUM/2015, /ASSESSMENT YEAR: 2008-09 ./I.T.A./2639/MUM/2013, /ASSESSMENT YEAR: 2009-10 SME GROWTH FUND SME DEVELOPMENT CENTRE GROUND FLOOR, C-11, G-BLOCK, BANDRA KURLA COMPLEX, BANDRA (E) MUMBAI-400 051. PAN:AAETS 6697 R VS. INCOME TAX OFFICER-15(1)-3 124, MATRU MANDIR, 1 ST FLOOR, TARDEO MUMBAI-400 007. ( /APPELLANT) ( / RESPONDENT) / REVENUE BY: SHRI KUMAR SANJAY-CIT-DR /ASSESSEE BY: SHRI NITESH JOSHI / DATE OF HEARING: 15/11/2017 / DATE OF PRONOUNCEMENT: 08/02/2018 , / PER RAJENDRA A.M. - CHALLENGING THE ORDER DATED 07/03/2013 & 8/3/2013 OF THE CIT-15,MUMBAI,PASSED U/S.263 OF THE ACT FOR ASSESSMENT YEARS 2008-09 AND 2009-10 RE SPECTIVELY AND ORDER,DATED 13/02/2015 OF CIT(A)-17,MUMBAI, FOR AY 2008-09 THE ASSESSEE HA S FILED THE PRESENT APPEALS. ASSESSEE-TRUST IS A VENTURE CAPITAL FUND ,WAS CREAT ED UNDER A TRUST DEED,DATED 23.6.04 BY A UNIT SCHEME OF SIDBI SME VENTURE FUND ALONGWITH SOM E OTHER NATIONALIZED BANKS. M/S. SIDBI TRUSTEE CO. LTD IS THE TRUSTEE OF THE FUND AN D M/S. SIDBI VENTURE CAPITAL LTD. IS THE INVESTMENT MANAGER OF THE FUND.THE DATES OF FILING OF RETURN, DATES OF ASSESSMENT ORDERS, DATES OF 263 ORDERS FOR BOTH THE YEARS ARE TABULATE D AS UNDER :- ITA NO. ROI FILED ON RETURNED INCOME ASSESSMENT DT. ASSESSED INCOME DT. OF ORDER OF CIT(A)/CIT 2878/MUM/2015 29/09/2008 NIL 16/01/2014 RS.76,85,90 4/- 13/02/2015 2638/M/2013 29/09/2008 NIL 29/10/2010 - 07/03/2015 2639/M/2013 30/09/2009 NIL 23/09/2011 - 08/03/2013 2. VIDE ITS APPLICATION,DATED 11/3/14,THE ASSESSEE HAS MADE A REQUEST TO ADMIT ADDITIONAL EVIDENCES. IN ITS APPLICATION,THE ASSESSEE HAD MEN TIONED THAT IT IS A DETERMINATE TRUST, THAT EACH OF THE BENEFICIARIES WERE TAXABLE ON THEIR RES PECTIVE SHARES OF INCOME FROM THE TRUST, THAT IT WOULD OBTAIN AND KEEP ON RECORD CONFIRMATIONS FR OM CONTRIBUTORS STATING THAT SHARES OF INCOME RECEIVED FROM INCOME WAS INCLUDED IN THEIR R ETURN OF INCOME,THAT SOME OF THE CONFIR- MATIONS WERE SUBMITTED DURING 263 PROCEEDINGS, THAT IT HAD OBTAINED CONFIRMATION FROM ITA NO.2638/M/13;2878/M/15&2639/M/13 SME GROWTH FUND 2 CONTRIBUTORS THAT WERE PSU BANKS AND FINANCIAL INST ITUTIONS, THAT IN THE CONFIRMATION THOSE INSTITUTIONS HAD QUANTIFIED THE AMOUNT OF TAXES PAI D BY EACH OF THEM ON THEIR SHARES OF INCOME RECEIVED FROM THE ASSESSEE,THAT IT WAS NOT POSSIBLE TO OBTAIN CONFIRMATION AT SHORT NOTICE FROM PSU BANKS,THAT SHOW CAUSE NOTICE U/S. 263 WAS RECEI VED ON 4/01/2013, THAT THE LAST HEARING WAS ON 16/01/13, THAT THE TAX PAYMENT CONFIRMATIONS ESTABLISHED THAT INCOME HAD BEEN DULY ASSESSED IN THE HANDS OF CONTRIBUTORS AND TAXES HAD BEEN PAID THEREON, THAT THE CONFIRMATIONS SUPPORTED THE ARGUMENT THAT WHEN THE BENEFICIARIES HAD PAID THE TAX, SAME INCOME COULD NOT BE TAXED IN THE HANDS OF THE ASSESSEE . 2.1. DURING THE COURSE OF HEARING BEFORE US, THE AR MAD E SAME SUBMISSION AND REFERRED TO PG.S1 TO 11 OF THE PB CONTAINING ADDITIONAL EVIDENC ES.THE DR LEFT THE ISSUE OF ADMITTING ADDITIONAL EVIDENCES TO THE DISCRETION OF THE BENCH . 2.2. WE HAVE PERUSED THE ADDITIONAL EVIDENCES.WE FIND TH AT ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE FOR NOT PRODUCING THEM BEFORE THE CIT DURING THE REVISIONARY PROCEEDINGS. IN OUR OPINION THESE DOCUMENTS ARE IMPORTANT TO DECIDE THE ISSUE RAISED IN THE APPEALS FILED BEFORE US.THEREFORE, WE ADMIT THE SAME,AS PER THE P ROVISIONS OF RULE 29 OF THE ITAT RULES. ITA/2638/MUM/2013 3. THE ASSESSEE HAD FILED ITS RETURN OF INCOME IN ITR- V ON 30/09/ AS STATED EARLIER.THE FIRST RETURN OF INCOME OF THE ASSESSEE TRUST WAS FILED FO R A.Y. 2005-06.THE CIT AFTER GOING THROUGH THE NOTICES,DATED 19.01.2010 AND 23.06.2010,ISSUED U/S. 142 (1) OF THE ACT,HELD THAT THERE WAS NOT EVEN A WHISPER ABOUT THE ISSUE OF LIABILITY OF THE ASSESSEE AS REPRESENTATIVE ASSESSEE AS PROVIDED IN SECTION 161(1) OF THE ACT, THAT IN THE ORDER SHEET OF THE ASSESSMENT PROCEEDINGS THERE WAS NO DISCUSSION OR QUERY ON THAT ISSUE.AFTE R CALLING FOR AND EXAMINING THE ASSESSMENT PROCEEDINGS FOR AY.2009-10 AS WELL AS EARLIER YEARS ,THE CIT HELD THAT THE ASSESSMENT ORDER PASSED BY AO WAS ERRONEOUS AND PREJUDICIAL TO THE I NTEREST OF REVENUE. AN OPPORTUNITY OF BEING HEARD WAS GIVEN TO THE ASSESSEE BY ISSUING A SHOW CAUSE. THE ASSESSEE FILED SUBMISSION ON 10/1/12013 AND 16. 1.2013.AFTER CONSIDERING THE SAME,THE CIT HELD THAT UPTO AY.2007-08,THE ASSESSEE HAD BEE N CLAIMING EXEMPTION U/S 10(23FB) OF THE ACT,THAT THE RETURN FOR THAT AY. WAS FILED ON F ORM ITR 7,THAT SCHEDULE L TO THE RETURN RELATING TO PARTICULARS OF THE TRUST WERE ALSO DULY FILLED UP,THAT THE STATUS IN WHICH THE RETURN WAS FILED, WAS STATED IN THE COMPUTATION OF INCOME ATTACHED WITH THE RETURN OF INCOME AS AOP,THAT IT HAD FILED THE RETURN OF INCOME AS A REP RESENTATIVE ASSESSEE U/S. 160 AND FULFILLED THE LIABILITY PROVIDED U/S.161(1) OF THE ACT FOR TH E AY. 2007-08,THAT AN AMENDMENT TO THE SEC.10(23 FB)WAS INTRODUCED BY FINANCE ACT, 2007 W. E.F 1-4-08, ,THAT THE AMENDMENT WENT TO THE ROOT OF THE ALLOWABILITY OF EXEMPTION U/S.10 (23FB),THAT THE NOTICES ISSUED U/S 142(1) ON ITA NO.2638/M/13;2878/M/15&2639/M/13 SME GROWTH FUND 3 19-1-2010 AND 23-06-2010 AND THE ORDER SHEET MAINT AINED BY THE AO DID NOT DEPICT EVEN A WHISPER OF ENQUIRY ABOUT THE AMENDMENT,THAT IN THE ASSESSMENT ORDER THERE WAS NOTHING ABOUT EXAMINA -TION BY THE AO REGARDING APPLICABILITY OF AMENDED PROVISION,THAT THE ASSESSMENT ORDER PASSED FOR AY.2008-09 WAS ALMOST A REPLICA OF THE ASSESSMENT ORDER FOR AY. 2006-07 AND HAD BEEN DRAFTED IN A MECHANICAL STEREOTYPED MA NNE,THTAT THERE WAS NO QUERY WHATSOEVER DURING THE ASSESSMENT PROCEEDINGS ABOUT SEC. 166 OF THE ACT, WHICH HAD BEEN INVOKED ON PAGE 2 OF THE ASSESSMENT ORDER,THAT THE SLIP-SHOD M ANNER IN WHICH THE ASSESSMENT PROCEEDINGS HAD BEEN CARRIED OUT WERE EVIDENT WHEN IT WAS NOTIC ED THAT EVEN THE FINDING OF DISTRIBUTION OF THE INCOME OF TRUST TO THE CONTRIBUTORS WAS NOT BOR NE OUT BY THE INFORMATION GATHERED BY THE AO DURING THE ASSESSMENT PROCEEDINGS.HE FURTHER OBS ERVED THAT IF THE STAND OF THE ASSESSEE WAS TO BE EXAMINED AS PER RULE 12C OF I.T.RULES 196 2 THE STATEMENT OF DISTRIBUTED INCOME WAS REQUIRED TO BE FURNISHED BY THE 30 TH NOVEMBER OF THE FINANCIAL YEAR FOLLOWING THE PREVIOUS YEAR DURING WHICH SUCH INCOME IS DISTRIBUT ED, THAT THE STATEMENT WAS TO BE FURNISHED TO THE CCIT OR CIT OF VENTURE CAPITAL FUND,THAT THE AO HAD NOT EXAMINED AS TO WHETHER SUCH A SUBMISSION IN PRESCRIBED FORM NO.64 DULY VER IFIED AND CERTIFIED BY A CA HAD BEEN MADE WITHIN THE TIME PRESCRIBED ALONGWITH THE ENCLO SURES,THAT FAILURE OF THE AO TO EXAMINE MATERIAL FACTS RELATING TO AN ASSESSMENT WOULD TURN THE ASSESSMENT ORDER AS ERRONEOUS,THAT THERE WAS NOT EVEN AN IOTA OF EVIDENCE OF ANY APPLI CATION OF 'JUDICIAL MIND' OR 'AWARENESS OF THE ISSUES' INVOLVED REFLECTED IN THE ASSESSMENT RE CORDS, NOTICES OR THE ASSESSMENT ORDER,THAT IT WAS ONLY PURE MECHANICAL EXERCISE WITHOUT PROPER AP PLICATION OF MIND WHICH THE AO HAD INVOLVED HIMSELF IN,THAT THE ARGUMENTS OF THE ASSES SEE ON THIS ASPECT WERE DEVOID OF ANY SUBSTANCE,THAT THE ASSESSMENT ORDER WAS ALSO PREJUD ICIAL TO THE INTEREST OF REVENUE,THAT AFTER THE AMENDMENT THE INCOME OF THE ASSESSEE-TRUST WAS NOT EXEMPT UNDER SEC. 10(23FB),THAT THE ASSESSEE HAD TILL AY.2007-08 HAD FILED THE RETURNS IN THE STATUS OF REPRESENTATIVE ASSESSEE,THAT AFTER AMENDMENT THE ASSESSEE CONVENIENTLY CHANGED I TS STAND.HE ALSO HELD THAT EVERY REPRESEN -TATIVE ASSESSEE,EVEN IF THE CLAIM OF MISTAKEN TICK ING OF A WRONG BOX BY THE ASSESSEE WAS ADMITTED BUT NOT ACCEPTED, AS PER SECTION 161 OF TH E ACT,WAS LIABLE TO ASSESSMENT IN ITS OWN NAME IN RESPECT OF TRUST INCOME,THAT THE PLAIN LANG UAGE AND PLACEMENT OF THE SECTION MADE IT ABUNDANTLY CLEAR THAT IT MERELY PROVIDED FOR A SIT UATION WHICH COULD BE UTILISED,BUT DID NOT IN ANY WAY OVER-RIDE THE LIABILITY IN SECTION 161 OF T HE ACT.REFERRING TO THE PROVISIONS OF SECTION 166 HE HELD THAT IT WAS AN ENABLING PROVISION FOR R EVENUE,THAT IT DID NOT GIVE AN OPTION TO ASSESSEE,THAT THE ASSESSEE'S OWN CONDUCT TILL AY. 2 007-08 WAS AS PER SECTION 161 OF ACT,THAT MERELY BECAUSE THERE WAS AMENDMENT TO THE ACT, THE ASSESSEE COULD NOT BE ALLOWED TO CHANGE ITS STAND. IN ANY CASE, THIS ASPECT WAS REQUIRED TO BE EXAMINED IN DETAIL BY THE AO, WHICH HE ITA NO.2638/M/13;2878/M/15&2639/M/13 SME GROWTH FUND 4 HAD FAILED TO DO,THAT THE REQUIREMENTS OF RULE 12C WERE ALSO TO BE COMPLIED WITH,THAT IN VIEW OF THE AMENDMENT TO SECTION 10(23FB)INCOME SHOULD H AVE BEEN TAXED IN THE HANDS OF THE ASSESSEE.HE DIRECTED THE AO TO FRAME A FRESH ASSESS MENT ORDER. 4. DURING THE COURSE OF HEARING BEFORE US,THE AR ARGUE D THAT INCOME SHOULD BE ASSESSED IN THE HANDS OF CONTRIBUTORS,THAT ASSESSEE WAS A REPRESENT ATIVE ASSESSEE,THAT IT WAS A VENTURE CAPITAL - IST,THAT UPTO AY.2007-08 IT WAS CLAIMING EXEMPTION U/S.10(23)(FB)R.W.S. 115,THAT FROM AY. 2008-09,THE DEFINITION OF VENTURE CAPITALIST CHANGE D,THAT IT DID NOT CLAIM EXEMPTION, THAT THE AO VERIFIED THE CLAIM THAT THE CONTRIBUTORS HAD PAI D THE TAXES, THAT HE HAD RIGHTLY ASSESSED ITS INCOME AT NIL,THAT AO HAD APPLIED HIS MIND ABOUT CL AIM OF ASSESSEE BEING REPRESENTATIVE ASSESSEE.HE REFRRED TO PG NO 54, 72, 89, TO 96 AND PG-177 OF THE PB SPECIALLY QUESTION NO.2 AT PG.177,WHERE AO HAD MADE SPECIFIC QUERY ABOUT CONTR IBUTORS,THAT IT HAD MADE RELEVANT DISCLOSURES IN THE RETURN OF INCOME AND AUDIT REPOR T,THAT THE AO HAD CONSIDERED THE AVAILABLE MATERIAL AND PASSED AN ORDER,THAT HIS ORDER WAS NEI THER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE,THAT IT HAD PRODUCED CONFIRMAT ION FROM 9 OF THE CONTRIBUTORS,THAT ONCE THE CONTRIBUTORS HAD PAID THE TAXES THERE WAS NO JUSTIF ICATION IN TAXING THE SAME INCOME IN THE HANDS OF THE ASSESSEE.HE REFERRED TO THE CASES OF G ABRIEL INDIA LTD.(203 ITR108),MALABAR INDUSTIRAL CO.(243 ITR 83),INDIA ADVANTAGE FUND-VII (ITA/178/BANG/2012 AY 2008-09 DTD, 17/10/14), (ITA NO./191 & ORS.OF 2015 DTD. 1/2/2017 )OF THE HON'BLE KARNATAKA HIGH COURT, INDIAN CORPORATE LOAN SECURITIZATION TRUST -2008 ,S ERIES-14(ITA 3986/MUM/2013 AY 09-10 DTD. 17/2/17).THE DR SUPPORTED THE ORDER OF THE CIT AND STATED THAT ASSESSEE WAS CHANGING ITS GOAL POSTS,THAT AO DID NOT APPLY HIS MIND,THAT HE DID NOT RAISE ANY QUESTION EVEN WHEN THERE WAS CHANGE IN DEFINITION OF VENTURE CAPITALIS T,THAT HE DID NOT DELIBERATE UPON THE ISSUE AS TO WHETHER IT WAS APPLICATION OF INCOME,THAT THE AS SESSEE HAD TO PAY THE TAXES, THAT IT HAD PAID ADVANCE TAX, THAT THE ARGUMENT THAT LIABILITY TO P AY TAXES WAS OF THE CONTRIBUTORS WAS AN AFTERTHOUGHT. IN HIS REJOINDER,THE AR STATED THAT THE AO MADE REF ERENCE TO SECTION 161 AND IRREVOCABILITY OF THE TERMS OF TRUST DEED , THAT HE HAD GRANTED REFU ND AFTER CONSIDERING AVAILABLE MATERIAL, THAT THE LIABILITY TO PAY TAX WAS AS PER THE ACT AND NOT AS PER TRUST DEED. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ASSESSEE IS A VENTURE CAPITAL FUND THAT WAS CREATE D UNDER A TRUST BY A UNIT SCHEME OF SIDBI SME VENTURE FUND,THAT M/S. SIDBI TRUSTEE CO. LTD W AS THE TRUSTEE OF THE FUND AND M/S. SIDBI VENTURE CAPITAL LTD. WAS THE INVESTMENT MANAG ER OF THE FUND,THAT TILL AY.2007-08 IT WAS CLAIMING EXEMPTION U/S.10(23(FB)OF THE ACT,THAT IN THE YEAR UNDER APPEAL CHANGE WAS ITA NO.2638/M/13;2878/M/15&2639/M/13 SME GROWTH FUND 5 INTRODUCED IN THE DEFINITION OF TERM VENTURE CAPITA LIST,THAT THE ASSESSEE FILED RETURN SHOWING NIL INCOME AND CLAIMED THAT THE INCOME WAS TO BE AS SESSED IN THE HANDS OF THE CONTRIBUTORS, THAT THE CIT REFERRED TO THE TRUST DEED AND HELD TH AT INCOME WAS TAXABLE IN THE HANDS OF THE ASSESSEE,HE ALSO HELD THAT THE ORDER OF THE AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE,THAT THE ASSESSEE HAD FILED ADDITIONAL EVID ENCES BEFORE US.WE HAVE ALREADY HELD THAT THE PAGES 1-11 SUBMITTED BEFORE US,WERE RELEVANT TO DECIDE THE ISSUE.THE CIT DID NOT HAD THE BENEFIT OF THOSE DOCUMENTS.THEREFORE,IN THE INTERES T OF JUSTICE,WE ARE REMITTING BACK THE MATTER TO THE FILE OF THE CIT.HE IS DIRECTED TO DEC IDE THE ISSUE AFRESH AFTER AFFORDING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE A ND AFTER CONSIDERING THE CASES RELIED BEFORE US BY IT.EFFECTIVE GROUND OF APPEAL IS ALLOWED IN F AVOUR OF THE ASSESSEE,IN PART. ITA/2878/MUM/2015,AY.2008-09: 6. AS PER THE DIRECTIONS OF THE CIT,THE AO PASSED A FR ESH ORDER AND ASSESSED THE INCOME IN THE HANDS OF THE ASSESSEE.THE FIRST APPELLATE AUTHORITY(FAA)CONF IRMED HIS ORDER.AS WE HAVE SENT BACK THE MATTER TO THE FILE OF CIT,SO,THE ORDER PASSED BY THE AO AN D FAA IN PURSUANCE OF THAT ORDER WOULD NOT SURVIVE.APPEAL FILED BY THE ASSESSEE STANDS ALLOWED . ITA/2639/MUM/2013/AY.2009-10: 7. THE CIT,INVOKING THE PROVISIONS OF SECTION 263 OF T HE ACT,FOR THE AY.2009-10 ALSO DIRECTED THE AO TO MAKE FRESH ASSESSMENT.EXCEPT FOR THE DIFFERENCE OF AY.,THERE WAS NO CHANGE IN THE ORDER OF THE CIT. FOLLOWING OUR ORDER FOR THE EARLIER AY.,WE DIR ECT THE CIT TO DECIDE THE ISSUE AFRESH,AS DIRECTED IN OUR ORDER FOR THE AY.2008-09.EFFECTIVE GROUND FOR T HIS AY.IS ALLOWED IN PART. AS A RESULT,ITA/2878/MUM/2015 IS ALLOWED AND THE OT HER TWO APPEALS STAND PARTLY ALLOWED. . /2878/MUM/2015 . ORDER PRONOUNCED IN THE OPEN COURT O N 8 TH FEBRUARY,2018. 8 , 2018 SD/- SD /- ( . . / C.N.PRASAD ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 08.02.2018. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR I BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.