M/s. M.D. Shah & Co., Ahmedabad V. The Income Tax Officer, Ward-3(3), Ahmedabad

ITA 2806/AHD/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94651 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 14-10-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 02-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRADIPKUMAR MAJUMDAR
• Assessee Lawyers: S N DIVETIA
• Keywords: Difference of opinion; Change of opinion
• Section: 142(1); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH AHMEDABAD BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER , AND SHRI S. S. GODARA, JUDICIAL MEMBER. ITA. NO. 2806/AHD/2013 (ASSESSMENT YEAR:2007-08) M/S. M.D. SHAH & CO. 570/1, REID ROAD, NR. AMAR CHAMBERS, RAILWAYPURA, KALUPUR, AHMEDABAD 380001 APPELLANT VS. THE INCOME-TAX OFFICER, WARD 3(3), AHMEDABAD RESPONDENT PAN: AAFFM7854H / BY ASSESSEE : SHRI S. N. DIVETIA, A.R. / BY REVENUE : SHRI PRADIP KUMAR MAJUMDAR, SR. D.R. /DATE OF HEARING : 14.10.2015 /DATE OF PRONOUNCEMENT : 30.10.2015 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2007-08, ARISES FROM ORDER OF THE CIT(A) - 6, AHMEDABAD, DATED 07.10.2013 PASSED IN PROCEEDINGS U/S.143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961, HEREINAFTER THE ACT. 2. THE INSTANT APPEAL RAISES TWO SUBSTANTIVE GROUND S. THE FIRST ONE CHALLENGES VALIDITY OF RE-OPENING IN QUESTION TAKEN RECOURSE TO BY THE ASSESSING ITA NO.2806/AHD/2013 (M/S. M. D. SHAH & CO. VS. ITO ) A.Y. 2007-08 - 2 - OFFICER AND AFFIRMED IN THE LOWER APPELLATE ORDER. THE SECOND GROUND ASSAILS CORRECTNESS OF INTEREST EXPENDITURE DISALLOWANCE OF RS.2,31,887/- ON THE GROUND THAT THE ASSESSEE HAD AVAILED UNSECURED LOANS FROM RELATIVES OF RS.19,40,230/- AND ITS PARTNERS WERE FOUND TO HAVE WITHDRAWN SUMS EXCEEDING THEIR SHARE CAPITAL RESULTING IN DEBIT BALANCES. 3. THE ASSESSEE FIRM TRADES IN INDUSTRIAL AND HARDW ARE ITEMS ON RETAIL AND SEMI WHOLESALE BASIS. IT FILED ITS RETURN ON 29.10 .2007 DECLARING INCOME OF RS.1,63,388/-. THE ASSESSING OFFICER TOOK UP SCRUT INY. HE ISSUED SECTION 142(1) NOTICE ALONG WITH A QUESTIONNAIRE ON 12.06.2 009. THE ASSESSEE FILED ITS REPLY ON 20.06.2009 ALONG WITH COPY OF AUDIT REPORT AND PARTNERS CAPITAL ACCOUNTS AND DETAILS OF UNSECURED LOANS. PAGE 3 OF THE PAPER BOOK IS A LETTER DATED 23.06.2009 ADDRESSED TO THE ASSESSING OFFICER FILING THE NECESSARY CAPITAL ACCOUNTS OF ASSESSEES TWO PARTNERS. THE ASSESSING OFFICER FRAMED REGULAR ASSESSMENT ON 14.07.2009. WE FIND THAT HE DID NOT M AKE ANY DISALLOWANCE OF THE INTEREST EXPENDITURE IN QUESTION QUA THE PARTNE RS DEBIT BALANCES. 4. A PERUSAL OF THE CASE FILE REVEALS THAT THE ASSE SSING OFFICER FORMED REASONS TO BELIEVE THAT ASSESSEES INCOME LIABLE TO BE ASSESSED HAD ESCAPED ASSESSMENT. HE ISSUED SECTION 148 NOTICE ON 13.09. 2010. THIS WAS FOLLOWED BY THE IMPUGNED RE-ASSESSMENT BEING FRAMED ON 05.12.20 11 DISALLOWING THE IMPUGNED INTEREST EXPENDITURE AMOUNT OF RS.2,31,887 /- IN VIEW OF THE FACT THAT THE ASSESSEE ON THE ONE HAND HAD AVAILED UNSECURED LOANS FROM RELATIVES OF RS.19,40,230/- CORRESPONDING TO THE ABOVE STATED IN TEREST AMOUNT AND ON THE OTHER HAND ITS PARTNERS HAD WITHDRAWN SUMS EXCEEDIN G THEIR SHARE CAPITAL RESULTING IN DEBIT BALANCES. 5. THE ASSESSEE PREFERRED APPEAL. WE FIND FROM THE CASE FILE THAT THE CIT(A) REJECTS ITS LEGAL GROUND CHALLENGES VALIDITY OF THE RE-OPENING IN QUESTION BY OBSERVING THAT THE SAME IS WITHIN 4 YEARS FROM THE END OF THE IMPUGNED ITA NO.2806/AHD/2013 (M/S. M. D. SHAH & CO. VS. ITO ) A.Y. 2007-08 - 3 - ASSESSMENT YEAR. THE LOWER APPELLATE ORDER APPEARS TO BE TOTALLY NON SPEAKING ON MERITS AS WELL. THIS LEAVES THE ASSESSEE AGGRIE VED. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE C ASE FILE. THE ASSESSEES FIRST ARGUMENT IS A LEGAL PLEA CHALLENGING VALIDITY OF THE RE-OPENING. IT REFERS TO THE PAPER BOOK AND STATES THAT IT HAD ALREADY FILED ALL RELEVANT DETAILS IN FURTHERANCE TO SPECIFIC QUERY BEING PUT BY THE ASSE SSING OFFICER DURING ITS SCRUTINY REGARDING THE INTEREST AMOUNT INCURRED AND PARTNERS CAPITAL ACCOUNT. ITS CASE IS THAT THE IMPUGNED RE-OPENING IS MERE CH ANGE OF OPINION AS THE ASSESSING OFFICER HAD EXAMINED THE ISSUE IN FIRST R OUND OF SCRUTINY ASSESSMENT. THE REVENUES ARGUMENTS STRONGLY SUPPORT THE IMPUGN ED RE-OPENING. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE RIVAL CON TENTIONS. THERE IS NO DISPUTE THAT THE ASSESSEE HAD FILED SPECIFIC REPLIES TO THE ASSESSING OFFICERS NOTICES ISSUED U/S.142(1) AND 143(2) OF THE ACT. PAGE 1 OF THE PAPER BOOK IS ITS LETTER DATED 20.06.2009 FILING COPY OF THE PARTNERS ACCOU NT. THE SAME IS FOLLOWED BY ANOTHER CORRESPONDENCE DATED 23.06.2009 ENCLOSING I TS TWO PARTNERS CAPITAL ACCOUNTS . THE ASSESSING OFFICER FRAMED REGULAR ASSESSMENT THEREAFTER. HE RE- OPENED THE SAME RESULTING IN THE IMPUGNED RE-ASSESS MENT DISALLOWING THE INTEREST EXPENDITURE IN QUESTION OF RS.2,31,887/-. WE ARE OF THE VIEW IN THESE PECULIAR FACTS AND CIRCUMSTANCES THAT THE ASSESSING OFFICERS ACTION IS MERE CHANGE OF OPINION NOT PERMISSIBLE AS PER THE CASE L AW OF CIT VS. KELVINATOR OF INDIA LTD. 320 ITR 561 . THE REVENUE AT THIS STAGE RAISES AN ARGUMENT THAT ASSESSEE HAS NOT FILED COPY OF THE RE-OPENING REASO NS. WE DO NOT AGREE TO THIS PLEA. IN OUR VIEW, THIS ARGUMENT EITHER WAY HAS TO BE REJECTED. IF THE RE-OPENING REASON PERTAINS TO INTEREST DISALLOWANCE, THEN, IT AMOUNTS TO MERE CHANGE OF OPINION AS INDICATED HEREINABOVE. IN CASE, THERE I S SOME OTHER REASON FOR THE IMPUGNED RE-OPENING NOT LEADING TO ANY DISALLOWANCE , WE QUOTE HONBLE JURISDICTIONAL HIGH COURT DECISION IN (2014) 355 ITR 172 (GUJARAT) CIT(A) VS. MOHMED JUNE D DADANI THAT WHEN THERE IS NO ADDITION FROM THE RE-O PENING REASON , NO FURTHER ITA NO.2806/AHD/2013 (M/S. M. D. SHAH & CO. VS. ITO ) A.Y. 2007-08 - 4 - DISALLOWANCE OR ADDITION COULD BE MADE ON SOME OTHE R GROUNDS NOT FORMING PART OF RE-OPENING REASONS. WE ACCORDINGLY ACCEPT ASSES SEES ARGUMENTS CHALLENGING VALIDITY OF THE RE-OPENING IN QUESTION. THE REVENU ES SUBMISSIONS ARE REJECTED. THE IMPUGNED RE-OPENING IS ACCORDINGLY QUASHED. TH IS RENDERS THE LATTER GROUND INFRUCTUOUS. 7. THIS ASSESSEES APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 30 TH DAY OF OCTOBER, 2015. SD/- SD/- (ANIL CHATURVEDI) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 30/10/2015 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )* + ,--. . /0 / DR, ITAT, AHMEDABAD 1 + 23 4 5 / GUARD FILE. BY ORDER / . // . /0