MAGS FINVEST P.LTD, MUMBAI V. PR CIT 5, MUMBAI

ITA 3034/MUM/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9909 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 27-04-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N P SINGH LD
• Assessee Lawyers: A L SHARMALD
• Keywords: Capital asset; Revision of order; Depreciation
• Section: 143(3); 14A; 263

Judgement Text

ITA NO.3034/MUM/2017 MAGS FINVEST PRIVATE LIMITED ASSESSMENT YEAR 2012-13 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI . . , , BEFORE SHRI D.T. GARASIA, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO. 3034/MUM/2017 ( / ASSESSMENT YEAR: 2012-13) MAGS FINVEST PRIVATE LIMITED 11,SILVER ARCH NEPEANSEA ROAD MUMBAI 400 006 / VS. PRINCIPAL COMMISSIONER OF INCOME TAX-5 AAYKAR BHAVAN ROOM NO. 515 M.K.ROAD MUMBAI- 400 020 ! ./ ./PAN/GIR NO. AADCM-6820-G ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) ASSESSEE BY : A.L.SHARMA,LD. AR REVENUE BY : N.P.SINGH, LD. CIT DR / DATE OF HEARING : 27/06/2017 / DATE OF PRONOUNCEMENT : 14/07/2017 ITA NO.3034/MUM/2017 MAGS FINVEST PRIVATE LIMITED ASSESSMENT YEAR 2012-13 2 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2012-13 CONTESTS INVOCATION OF REVISIONAL JURISDICT ION U/S 263 BY LD. COMMISSIONER OF INCOME-TAX-5, MUMBAI VIDE ORDER DAT ED 30/03/2017. 2. THE FACTS LEADING TO THE SAME ARE THAT THE A SSESSEE, BEING RESIDENT CORPORATE ASSESSEE, WAS ASSESSED U/S 143(3) FOR IMPUGNED AY AT RS.2,28,91,940/- AFTER SOLE ADDITION OF RS.7,92,846 /- U/S 14A AS AGAINST RETURNED INCOME OF RS.2,20,99,092/- E-FILED BY ASSESSEE ON 30/09/2012. 2.1 SUBSEQUENTLY, THE SAID ASSESSMENT WAS SUBJECTE D TO EXERCISE OF REVISIONAL JURISDICTION U/S 263 BY LD. CIT VIDE SHOW CAUSE NOTICE DATED 14/03/2017. IT WAS NOTICED THAT THE ASSESSEE HAD PU RCHASED A CAPITAL ASSET SAMUDRA MAHAL FLAT FOR RS.38.93 CRORES BY OBTAINING FRESH LOANS OF RS.17.68 CRORES FROM HDFC BANK AND RS.1.23 CRORES FROM MADHU KAPOOR AND CLAIMED INTEREST ON LOAN FOR RS.1.70 CRORES AND LOAN PROCESSING CHARGES OF RS.0.15 CRORES IN THE PROFIT & LOSS ACCOUNT WHEREAS THE SAME BEING ON ACCOUNT OF ACQUISITION OF CAPITAL ASSET, CALLED FOR DISALLOWANCE U/S 36(1)(III). THE LD. CIT FURTHE R NOTED THAT SIMILAR DISALLOWANCE WAS MADE IN AY 2014-15. THE ASSESSEE C ONTESTED THE SAME BUT COULD NOT FIND FAVOR WITH LD. CIT WHO BY I NVOKING REVISIONAL JURISDICTION U/S 263 SET ASIDE THE QUANTUM ASSESSME NT WITH A DIRECTION TO LD. AO TO REFRAME THE ASSESSMENT. AGGRIEVED BY THE ACTION OF LD. CIT, THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO.3034/MUM/2017 MAGS FINVEST PRIVATE LIMITED ASSESSMENT YEAR 2012-13 3 3. THE LD. COUNSEL FOR ASSESSEE [AR], WHILE DRAWING OUR ATTENTION TO THE DOCUMENTS PLACED IN THE PAPER BOOK, EXPLAINED T HAT THE SAID FLAT WAS PURCHASED FOR RS.38.93 CRORES VIDE AGREEMENT DATED 31/03/2011 AND THE SAME WAS GIVEN TO THE DIRECTOR OF THE COMPANY D URING APRIL, 2011 AND THEREFORE THE EXPENSES RELATING THERETO BEING R EVENUE IN NATURE WERE ALLOWABLE TO THE ASSESSEE. 3.1 OUR ATTENTION IS FURTHER DRAWN TO THE FACT THAT THE LD. CIT FAILED IN CORRECTLY APPRECIATING THE RELEVANT PROVISIONS OF S ECTION 36(1)(III) AS THEY STOOD AT THE RELEVANT TIME SINCE THE ASSESSMENT YEA R IN QUESTION WAS 2012-13 WHEREAS THE LD. CIT PLACED RELIANCE ON THE PROVISIONS OF SECTION 36(1)(III) AS AMENDED BY FINANCE ACT, 2015. AS PER THE APPLICABLE LAW, THE SAID DISALLOWANCE COULD BE MADE ONLY IF THERE WAS AN EXTENSION OF EXISTING BUSINESS AND NOT OTHERWISE. S INCE THE COMPANY WAS AN OLD COMPANY, THERE WAS NO EXTENSION OF EXIST ING BUSINESS AND THEREFORE, THE PROVISO WAS NOT APPLICABLE. FURTHER, THE LOAN PROCESSING CHARGES PAID BY THE ASSESSEE TO OBTAIN THE LOAN WAS REVENUE IN NATURE AS PER SETTLED LEGAL POSITION. 3.2 IT WAS FURTHER CONTENDED THAT COMPLETE DETAILS OF THE ACQUISITION OF PROPERTY ALONG WITH LOANS OBTAINED, INTEREST PAID E TC. WERE SUBMITTED DURING QUANTUM ASSESSMENT AND THE LD. AO AFTER DUE APPLICATION OF MIND ALLOWED THE CLAIM OF THE ASSESSEE AND THEREFOR E LD. CIT WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 263 . OUR ATTENTION HAS BEEN DRAWN TO VARIOUS SUBMISSIONS MADE BY ASSESSEE IN THIS REGARD DURING QUANTUM ASSESSMENT. 3.3 PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ACTIO N OF LD. CIT ON THE PREMISES THAT THE ASSESSEE NEVER USED THE SAID ASSET ITA NO.3034/MUM/2017 MAGS FINVEST PRIVATE LIMITED ASSESSMENT YEAR 2012-13 4 FOR ITS BUSINESS PURPOSES AND THE SAME WAS GIVEN FO R PERSONAL USE OF THE DIRECTOR AND THEREFORE, THE EXPENSE CLAIMED AGA INST THE SAME COULD NOT BE ALLOWED TO THE ASSESSEE. IN SUPPORT, OUR ATT ENTION HAS BEEN DRAWN TO THE FACT THAT THE ASSESSEE HAS NOT CLAIMED ANY DEPRECIATION AGAINST THE SAID PROPERTY DURING THE IMPUGNED AY WH ICH CONTRADICT THE ASSESSEES STAND THAT THE ASSET WAS PUT TO USE DURI NG THE YEAR. 3.4 THE LD. DR FURTHER CONTENDED THAT THE ASSESSEE WAS AN INVESTMENT COMPANY AND THE CASE OF THE ASSESSEE WAS SUBJECTED TO AN ASSESSMENT U/S 143(3) ON THE BASIS OF RECEIPT OF AIR INFORMATION REGARDING ACQUISITION OF IMMOVEABLE PROPERTY BY THE ASSESSEE DURING THE YEAR. HOWEVER, LD. AO FAILED TO EXAMINE THE ISSUE F ROM THE CORRECT PERSPECTIVE SINCE THE ASSET WAS NEVER PUT TO USE AN D THE ASSESSEE FAILED TO FULFILL THE BASIC CONDITION OF SECTION 36 (1)(III) TO CLAIM INTEREST EXPENDITURE AGAINST THE SAME AND THEREFORE, LD. CIT CORRECTLY INVOKED THE PROVISIONS OF SECTION 263 AS THIS WAS ONE OF FE W MECHANISM PROVIDED TO REVENUE UNDER LAW TO CONTEST THE QUANTU M ASSESSMENT. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED RELEVANT MATERIAL ON RECORD. AT THIS STAGE, WITHOUT DELVING MUCH DEEP ER INTO THE MERITS OF THE ASSESSEES CLAIM, THE ONLY QUESTION TO BE DECID ED BY US IS WHETHER THE TWIN CONDITIONS OF THE QUANTUM ORDER BEING ERRO NEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE ARE FULFILLED OR NOT SO AS TO JUSTIFY INVOCATION OF SECTION 263 ? 5. THE REASON CITED BY LD. CIT TO INVOKE THE SAME A RE THAT THE LD. AO FAILED TO MAKE THE INTEREST DISALLOWANCE U/S 36(1)( III) AS THE SAME WAS RELATABLE TO ACQUISITION OF THE PROPERTY NOT PUT TO USE DURING THE YEAR. PRIMA FACIE, IT APPEARS THAT THE ASSESSEE HAS SUFFERED SIMILAR ITA NO.3034/MUM/2017 MAGS FINVEST PRIVATE LIMITED ASSESSMENT YEAR 2012-13 5 DISALLOWANCE U/S 36(1)(III) IN AY 2014-15 AND THE A SSESSMENT FOR THAT YEAR FORMS THE BASIS FOR INVOCATION OF SECTION 263 IN THE IMPUGNED AY. THE ASSESSEE CLAIMS THAT THE ASSET WAS PUT TO USE D URING APRIL, 2011 WHEN THE SAME WAS GIVEN TO THE DIRECTOR BUT A PERUS AL OF THE FINANCIAL STATEMENTS FOR IMPUGNED AY REVEALS THAT NO DEPRECIA TION HAS BEEN CLAIMED AGAINST THE SAME. THE LD. AR HAS ALSO NOT E XPLAINED THE REASON FOR SIMILAR DISALLOWANCE IN AY 2014-15. 6. A PERUSAL OF THE DOCUMENTS PLACED IN THE PAPER BOOK REVEAL THAT ALTHOUGH THE LD. AO CALLED FOR THE DETAILS OF ACQUI SITION OF PROPERTY, DETAILS OF LOANS OBTAINED, INTEREST THEREUPON ETC. BUT IT NOWHERE EXAMINED THE ISSUE THAT WHETHER THE ASSET WAS, IN FACT, PUT TO USE DURING THE IMPUGNED AY AND WHETHER THERE WAS ANY EXTENSION OF EXISTING BUSINESS. WE FIND THAT THE ISSUE IS NOWHERE DISCUSS ED IN THE ASSESSMENT ORDER. PRIMA FACIE, THE LD. AO HAS FAILED TO EXAMINE THE ISSUE FROM THIS PERSPECTIVE. MOREOVER, THE ISSUE OF LOAN PROCESSING CHARGES WAS NEITHER INQUIRED IN ANY OF THE QUESTION NAIRE NOR DELVED UPON BY LD. AO ANYWHERE. 7. PROCEEDING FURTHER, WE ALSO NOTE THE DEEMING FIC TION CREATED BY NEWLY INSERTED EXPLANATION 2 TO SECTION 263 AS INSE RTED BY FINANCE ACT, 2015 W.E.F. 01/06/2015. AS PER CLAUSE (A) OF EXPLAN ATION 2, THE ORDER OF LD. AO SHALL BE DEEMED TO BE ERRONEOUS AND PREJUDIC IAL TO THE INTEREST OF THE REVENUE WHERE THE ORDER HAS BEEN PASSED WITHOUT MAKING INQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE. IN THE INSTANT CASE, WE ALREADY NOTE THAT THE LD. AO HAS NOT MADE ANY INQUI RY SO AS TO FIND OUT WHETHER THE PROVISO TO SECTION 36(1)(III) WAS APPLI CABLE TO THE ASSESSEE ITA NO.3034/MUM/2017 MAGS FINVEST PRIVATE LIMITED ASSESSMENT YEAR 2012-13 6 OR NOT AND THEREFORE, THE DEEMING FICTION OF LAW AP PLIES TO THE INSTANT CASE. 8. THE LD. AR HAS RELIED UPON THE RATIO OF JUDGMENT DELIVERED BY HONBLE BOMBAY HIGH COURT IN CIT VS. FINE JEWELLERY (INDIA) LTD. [372 ITR 303] BUT WE FIND THE SAME DISTINGUISHABLE ON FACTS SINCE IN THAT CASE RELEVANT QUERIES WERE PUT TO THE ASSESSEE DURING AS SESSMENT PROCEEDINGS AND LD. AO REACHED UPON A CONCLUSION AF TER DUE APPLICATION OF MIND WHICH WE FIND MISSING IN THE IN STANT CASE. 9. THEREFORE, FOR THE REASONS STATED HEREINABOVE AN D ON THE FACTS AND CIRCUMSTANCE, WE ARE NOT INCLINED TO INTERFERE WITH THE INVOCATION OF REVISIONAL JURISDICTION EXERCISED BY LD. CIT U/S 26 3 AT THIS STAGE. 10. RESULTANTLY, THE ASSESSEES APPEAL STANDS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH JULY, 2017. SD/- SD/- (D.T. GARASIA) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 14 .07.2017 SR.PS:- THIRUMALESH / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. , ( ) / THE CIT(A) 4. , / CIT CONCERNED 5. $'. , . , / DR, ITAT, MUMBAI 6. / / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI