The ITO, Ward-4(3), Ahmedabad V. M/s. Hynoup Food & Oil Indus.Ltd., Ahmedabad

ITA 2784/AHD/2008

• Counselvise Citation: 278420514 RSA 2008
• Duration Of Justice: 3 year(s) 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 31-01-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 05-08-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K GUPTA
• Assessee Lawyers: S V AGARWAL
• Keywords: Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD C BENCH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI B.P. JAIN, ACCOUNTANT MEMBER ITA NO.2784 & 3095/AHD/2008 ASSESSMENT YEAR:2002-03 INCOME TAX OFFICER, WARD-4(3), AHMEDABAD HYNOUP FOOD & OIL INDUS. LTD., MARUTI HOUSE, OPP. AIR INDIA, ASHRAM ROAD, AHMEDABAD PAN NOAAACH5534M / V/S . / V/S . HYNOUP FOOD & OIL INDS. LTD., MARUTI HOUSE, OPP. AIR INDIA, ASHRAM ROAD, AHMEDABAD INCOME TAX OFFICER, WARD-4(3), AHMEDABAD / APPELLANT .. / RESPONDENT /ASSESSEE BY SHRI S.V.AGARWAL, AR / / REVENUE BY SHRI S.K. GUPTA, CIT-DR / DATE OF HEARING 31-01-2012 !'# / DATE OF PRONOUNCEMENT 03-02-2012 $ $ $ $ / // / ORDER PER B.P. JAIN, ACCOUNTANT MEMBER:- THESE CROSS-APPEALS OF THE REVENUE AND THE ASSESSEE ARISE FROM THE ORDER OF LD. COMMISSIONER OF INC-TAX (APPEALS)-VIII, AHMEDAB AD DATED 23-05-2008 FOR THE ASSESSMENT YEAR 2002-03. THE REVENUE HAS RAISED THE FOLLOWING GROUND OF APPEAL:- ITA NO.2784/AHD/2008 (BY THE REVENUE). 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACT S OF THE CASE IN DIRECTING TO ALLOW THE INTEREST EXPENSES RELATED TO METAL FORM I NDUSTRIES AND HYGENIC PALM OIL PVT. LTD. ITA NO.2784 & 3095/AHD/2008 A.Y. 2002-03 ITO WD-4(3) ABD V. HYNOUP FOOD & OIL INDS. LTD. PAGE 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL:- ITA NO.3095/AHD/2008 (BY THE ASSESSEE) (1) THE LEARNED COMMISSIONER OF I. TAX (APPEALS) H AS ADMITTED BUT ERRED IN DISMISSING ADDITIONAL GROUND OF APPEAL THAT A.O HAS ERRED IN REOPENING ASSESSMENT U/S.147 BY CHANGE OF OPINION AND DISALLO WED INTEREST U/S/36(1)(III) ON BORROWED FUNDS. (2) THE LEARNED COMMISSIONER OF I. TAX (APPEALS) HA S ERRED IN CONFIRMING DISALLOWANCE OF INTEREST U/S.36(1)(III) IN RESPECT OF LOANS & ADVANCE GIVEN TO HYTAISUM MAGNETICS LTD. AND NEELU INVESTMENT PVT. L TD. 2. FIRST OF ALL, WE TAKE UP THE APPEAL OF THE ASSES SEE IN ITA NO.3095/AHD/2008 AND IN PARTICULAR THE GROUND NO.1 WHICH IS A LEGAL GROUND. THE BRIEF FACTS ARE THAT THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING OF EDI BLE OIL, IT FILED ITS RETURN OF INCOME ON 31-10-2002 DECLARING NIL INCOME. THE SAME WAS PROCESSED U/S. 143(1) OF THE ACT. THE ASSESSEE SUBSEQUENTLY FILED THE REVISED RE TURN ON 01-11-2004 AT NIL INCOME WHICH WAS ASSESSED AT NIL INCOME ONLY U/S. 143(3) VIDE ASSESSING OFFICERS ORDER DATED 28-01-2005. IT WAS SUBSEQUENTLY NOTICED BY THE AO THAT ASSESSEE- COMPANY HAD GIVEN INTEREST FREE LOAN OF RS.8,85,85, 369/- TO DIRECTORS, SISTER CONCERNS OR FIRMS, WHERE THE DIRECTORS ARE EITHER D IRECTOR, PARTNER OR MEMBER. IT WAS ALSO NOTICED THAT ASSESSEE HAS PAID FINANCIAL CHARG ES ON SECURED LOANS & UNSECURED LOANS. SINCE THE INTEREST FREE LOANS HAVE BEEN GIVE N BY THE ASSESSEE WHICH ATTRACTED THE PROVISIONS OF SECTION 36(1)(III) OF THE ACT, TH EREFORE THE INTEREST PROPORTIONATELY TO THE EXTENT OF RS.19,47,076/- WAS TO BE DISALLOWED. THEREFORE THE AO HAD THE REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX FOR TH E IMPUGNED ASSESSMENT YEAR HAD ESCAPED ASSESSMENT. ACCORDINGLY, THE AO PROCEEDED T O ISSUE THE NOTICE U/S.148 AND COMPLETED THE ASSESSMENT U/S.144 R.W.S. 147 OF THE ACT. 3. BEFORE THE LD. CIT(A) REOPENING OF THE ASSESSMEN T WAS CHALLENGED. THE LD. CIT(A) DISMISSED THE GROUND OF THE ASSESSEE ON THE SAID LEGAL ISSUE. 4. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE A RGUED THAT THERE IS A CHANGE OF OPINION BY THE ASSESSING OFFICER. IN SUPP ORT OF HIS ARGUMENT, LD. AR INVITED OUR ATTENTION TO THE PAPER BOOK NO.1 AT PAGES 7 TO 15 WHICH IS A LETTER TO THE ITO, ITA NO.2784 & 3095/AHD/2008 A.Y. 2002-03 ITO WD-4(3) ABD V. HYNOUP FOOD & OIL INDS. LTD. PAGE 3 WARD-4(3), AHMEDABAD DATED 29-11-2004, WHERE THE AS SESSEE HAD SUBMITTED ALL THE DETAILS WITH REGARD TO INTEREST FREE ADVANCES IN RE SPONSE TO NOTICE OF THE AO DATED 10-09-2004 AVAILABLE AT PAPER BOOK NO.1 AT PAGES 1 AND 2, IN THE ORIGINAL ASSESSMENT. IN THE NOTICE U/S.142(1) AT QUERY 3, 5. 6, 9, 13 AND 14. THE AO WARD- 4(3), AHMEDABAD HAD RAISED MANY QUESTIONS WHICH WER E REPLIED AND WERE EXPLAINED VIDE LETTER DATED 29-11-2004 MENTIONED HEREINABOVE. AFTER BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSEE, THE AO DID NOT MAKE AN Y ADDITION ON ACCOUNT OF INTEREST FREE ADVANCES. THEREFORE, THE AO CANNOT BE PERMITTE D TO CHANGE HIS OPINION WITH REGARD TO SAID MATTER HAVING THE SAME FACTS AS IN T HE ORIGINAL ASSESSMENT. THERE IS NO OTHER MATERIAL AVAILABLE WITH THE AO FOR REOPENI NG THE ASSESSMENT. LD AR RELYING UPON THE DECISIONS OF VARIOUS COURTS OF LAW, IN SPE CIFIC RELIED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE HYNOUP FOOD AND OIL INDUSTRIES LTD. V. ACIT (2008) AS REPORTED IN 307 ITR 115, WHERE ON SIMILAR FACTS THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT THE CHANGE OF OPINION WOULD NOT CONFER JURISDICTIONAL ON THE ASSESSING OFFICER TO I SSUE NOTICE U/S.148 AND ACCORDINGLY THE HONBLE HIGH COURT HELD THE NOTICE U/S.148 OF T HE ACT WAS NOT VALID. THE REVENUE PREFERRED SLP BEFORE THE HONBLE SUPREME COURT OF I NDIA, WHICH WAS DISMISSED ON 20-04-2009 BY THE HONBLE SC REPORTED IN 313 ITR (3 0) (STATUTE). 5. LD. CIT-DR ON THE OTHER HAND ARGUED THAT THERE W AS NO CHANGE OF OPINION AND RELIED UPON THE ORDERS OF BOTH THE AUTHORITIES BELOW. LD. CIT-DR ALSO RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CA SE OF DR. AMINS PATHOLOGY LABORATORY V. JCIT (2001) 252 ITR 673 (BOM). 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE ARGUMENTS MADE BY LEARNED COUNSEL FOR THE ASSESSEE ARE FOUND TO BE CONVINCING. SINCE THE ASSESSING OFFICER AS PER NOTICE U/S. 142( 1) OF THE ACT DATED 10-09-2004 HAD RAISED EXTENSIVELY QUERIES WITH REGARD TO LOANS AND ADVANCES WHICH WERE EXPLAINED BY THE ASSESSEE VIDE ITS LETTER DATED 29- 11-2004. THEREFORE, THERE ARE NO NEW FACTS OR MATERIAL ON RECORD BEFORE THE AO WITH WHICH HE COULD FORM THE OPINION THAT THE INCOME OF THE ASSESSEE HAD ESCAPED ASSESSM ENT. THE SAID FACTS ON WHICH THE AO HAD REOPENED THE ASSESSMENT ARE THE SAME FAC TS WHICH WERE AVAILABLE BEFORE THE AO AT THE TIME OF THE ORIGINAL ASSESSMEN T. SUCH A CHANGE OF OPINION WOULD NOT CONFER JURISDICTIONAL ON THE AO TO ISSUE NOTICE U/S.148 OF THE ACT. RELYING ITA NO.2784 & 3095/AHD/2008 A.Y. 2002-03 ITO WD-4(3) ABD V. HYNOUP FOOD & OIL INDS. LTD. PAGE 4 UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH CO URT IN ASSESSEES OWN CASE (SUPRA) FOR A.Y. 1992-93, THE NOTICE ISSUED U/S.148 OF THE ACT IN THE PRESENT ASSESSMENT IS INVALID AND THE ASSESSMENT MADE BY TH E AO IS THEREFORE QUASHED. THUS, GROUND NO.1 OF THE ASSESSEE IS ALLOWED. 7. AS REGARDS GROUND NO.2, THE ISSUE DECIDED BY TH E LD. CIT(A) ON MERIT I.E. GROUND NO.2 OF THE ASSESSEE AND THE REVENUES APPEA L IN ITA NO.2784/AHD/2008 DO NOT SURVIVE. IN THE FACTS AND CIRCUMSTANCES OF T HE CASE AND OUR DECISION IN GROUND NO.1 OF THE ASSESSEES APPEAL HEREINABOVE THE APPEA L OF THE ASSESSEE IS ALLOWED AND THAT OF REVENUE IS DISMISSED. 8. IN THE RESULT, APPEAL OF ASSESSEE IN ITA NO.3095/AHD/2008 IS ALLOWED AND THAT APPEAL OF REVENUE IN ITA NO.2784/AHD/2008 IS DISMISSED. % $ !'# &'( 03 / 02 /201 2 ! , - . / THIS ORDER PRONOUNCED IN OPEN COURT ON 03/02/ 201 2. SD/- SD/- ( BHAVNESH SAINI ) ( B.P. JAIN ) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) &'(- 03/02/2012 1 / DKP* $ $ $ $ 223 223 223 223 43' 43' 43' 43' / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. ''27 8 / CONCERNED CIT 4. 8- / CIT (A) 5. 3;. 2227, 27#, 1 / DR, ITAT, AHMEDABAD 6. .>? @% / GUARD FILE. BY ORDER/ $ , /TRUE COPY/ A/1 ' 27#, 1 /