JAGMOHAN KABRA HUF, MUMBAI V. PR CIT 31, MUMBAI

ITA 3244/MUM/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0334 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2009-2010
• Appeal Filed On: 04-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK JOHRIDR
• Keywords: Assessment record; Reassessment proceedings
• Section: 40A(3); 143(3); 147; 263; 2

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -JBENCH MUMBAI BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND C.N. PRASAD,JUDICIAL MEMBER ./I.T.A./3244/MUM/2017, /ASSESSMENT YEAR: 2009-10 M/S. JAGMOHAN KABRA HUF FLAT NO.304, B-WING, ACME COMPLEX, BUILDING NO.2, OPP. NEW LINK ROAD GOREGAON (W), MUMBAI-400 062. PAN :AAEH 5362 E VS. THE PR. CIT-31 ROOM NO.301, 3 RD FLOOR, C013 PRATYAKSHAKAR BHAVAN BANDRA KURLA COMPLEX MUMBAI-400 051. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI ALOK JOHRI-DR ASSESSEE BY: SHRI NITESH JOSHI / DATE OF HEARING: 13.07.2017 / DATE OF PRONOUNCEMENT: 04.08.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) / PER RAJENDRA, AM - CHALLENGING THE ORDER OF THE PCIT-31,MUMBAI,PASSED ON 22.03.2017,U/S.263 OF THE ACT,THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE-HUF IS ENGAGED IN TRADING IN ALUMINIUM PRODUCT OR GLASS WINDOWS AND RELATED PRODUCTS.IT FILED ITS RETURN OF INCOME ON 24/09/2009,DECLARING TOTAL INCOME OF RS.8,99,029/-. THE RETURN WAS PROCESSED U /S. 143 (1) OF THE ACT.LATER ON THE AO ISSUED A NOTICE U/S.148 ON 10/02/2014.THE ASSESSING OFFICE R(AO)COMPLETED THE ASSESSMENT U/S .143 (3) R.W.S.147 OF THE ACT,ON 09/02/ 2015,DETERMINING ITS INCOME AT RS.20,00, 830/-. 2. ON GOING THROUGH THE ASSESSMENT RECORDS,THE PCIT NO TICED THAT DURING THE YEAR UNDER CONSIDERA -TION THE ASSESSEE HAD TAKEN UNSECURED LOANS OF RS. 20 LAKHS FROM M/S. ALUWIND ARCHITECTURAL PRIVATE LTD.(AAPL), THAT ASSESSEE WAS HAVING SUBSTA NTIAL SHAREHOLDING OF 25% IN AAPL. REFERRING TO THE PROVISIONS OF SECTION 2 (22) (E) O F THE ACT, HE STATED THAT SAME HAD TO BE TREATED AS INCOME OF THE ASSESSEE UNDER THE HEAD DEEMED DIV IDEND.HE HELD THAT THE AO HAD NOT EXAMINED THE ISSUE DURING THE ASSESSMENT PROCEEDING S, THAT THE ORDER PASSED BY HIM WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E IN VIEW OF CLAUSE (A) TO EXPLANATION 2 BELOW SUBSECTION (1) OF SECTION 263 OF THE ACT. HE ISSUED A NOTICE TO THE ASSESSEE TO INITIATE REVISIONARY PROCEEDINGS. 2.1. IN RESPONSE TO THE NOTICE,THE ASSESSEE FILED SUBMIS SIONS ON 25/03/2016 AND 08/11/2016. REFERRING TO VARIOUS CASE LAWS,INCLUDING MALABAR IN DUSTRIAL CO. LTD(243ITR83)AND THE PROVI - 3244/M/17-JAGMOHAN KABRA(HUF) 2 SIONS OF SECTION 263,THE CIT HELD THAT THE ASSESSEE WAS OWNER OF 25% SHARES IN THE COMPANY DURING THE YEAR UNDER CONSIDERATION, THAT TRANSACTI ON OF RS. 10.48 LAKHS RELATED TO RICHES OF ALUMINIUM BARS,THAT THE ASSESSEE WAS BENEFICIAL OWN ER OF THE SHARES, THAT THE COMPANY HAD ACCUMULATED PROFITS AND HAD ADVANCED LOAN/DEPOSITS TO THE ASSESSEE, THAT THE PROVISIONS OF SECTION 2(22)(E)WERE APPLICABLE,THAT THE ISSUE BEFORE HIM W AS NOT DEBATABLE.FINALLY,HE HELD THAT THE OPENING BALANCE AS ON 01/04/2008T WAS 20,13,469/-,T HAT THE CREDIT OF RS. 86, 90, 000/-WERE NOT RELATE TO THE BUSINESS, THAT TOTAL TRANSACTIONS WOR KED OUT TO RS. 61, 90, 000/-THAT WERE NOT RELATED TO THE PURCHASE, THAT THE SAID AMOUNT HAD BEEN RECE IVED BY THE ASSESSEE IS LOAN/ADVANCE. HE DIRECTED THE AO TO EXAMINE THE ISSUE OF DEEMED DIVI DEND, AS HE HAD FAILED TO EXAMINE THE ISSUE IN THE ORDER PASSED U/S. 143(3) READ WITH SECTION 1 47 OF THE ACT. 3. DURING THE COURSE OF HEARING BEFORE US,THE AUTHORIS ED REPRESENTATIVE (AR) STATED THAT ORDER PASSED BY THE AO WAS NEITHER ERRONEOUS NOT PREJUDIC IAL TO THE INTEREST OF REVENUE, THAT THE ORDER PASSED BY THE CIT WAS BARRED BY LIMITATION.HE RELIE D UPON THE CASES OF ALAGENDRA FINANCE LTD. (293 ITR 1),LARK CHEMICALS LTD. (368 ITR 655)AND AM BUJA CEMENT LTD. (WRIT PETITION NUMBER 2095 OF 2006, DATED 01/10/2014).HE FURTHER ARGUED T HAT TRANSACTION ENTERED IN TO BY THE ASSESSEE AND AAPL WAS NOT LOAN OR DEPOSIT,THAT THE ACCOUNT W AS OF MUTUAL AND CURRENT ACCOUNT CATEGORY, THAT BETWEEN THE ASSESSEE AND AAPL.THE DEPARTMENTAL REPRESENTATIVE (DR) STATED THAT INTIMA - TION ISSUED U/S. 143 (1) COULD NOT BE TREATED AS AS SESSMENT ORDER,THAT THE REVISIONARY ORDER WAS PASSED WITHIN THE TIME LIMIT PRESCRIBED BY THE PROV ISIONS OF THE ACT,THAT ALAGENDRA FINANCE LTD.(SUPRA) CASE DOES NOT DEAL WITH 143(1) INTIMATI ONS,THAT THE AO WAS ASKED TO VERIFY THE FACTS, THAT THE HONBLE BOMBAY HIGH COURT HAD NOT CONSIDER ED THE ISSUE OF REGULAR ASSESSMENT VIS A VIS 143(1)INTIMATION. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.BEFORE PROCEEDING FURTHER,IN OUR OPINION,WE SHOULD DEAL WITH THE JURI SDICTIONAL ISSUE.AS PER THE PROVISIONS OF SECTION263(2) NO ORDER CAN BE PASSED UNDER SUB-SECT ION (1) AFTER THE EXPIRY OF TWO YEARS FROM THE END OF INITIALLY OF IN WHICH THE ORDER SOUGHT TO BE REVISED WAS PASSED.IN THIS CASE RETURN WAS PROCESSED AND AN INTIMATION U/S.143(1) WAS ISSUED O N 04/05/ 2010. REASSESSMENT PROCEEDINGS WERE COMPLETED ON 09/02/2015 AND THE CIT PASSED THE REVISIONARY ORDER,U/S. 263,ON 22/03/ 2017. IN OUR OPINION,TO DECIDE THE ISSUE OF TIME LIMIT, T HE CASE OF LARK CHEMICALS LTD. (SUPRA) OF THE HONBLE BOMBAY HIGH COURT WILL BE HELPFUL.FACTS OF THE MATTER WERE THAT THE ASSESSEE,FOR THE AY.2002-03,DECLARED A TOTAL INCOME OF RS. 30.98 LAK HS, THAT THE RETURN WAS ACCEPTED AND 3244/M/17-JAGMOHAN KABRA(HUF) 3 PROCESSED U/S.143(1) OF THE ACT.THE ASSESSMENT WAS REOPENED BY A NOTICE U/S.148 ON THE GROUND THAT THE ASSESSEE HAD PURCHASED IMPORTED GOODS AND CHEMICALS FROM THREE PARTIES WHO WERE BOGUS AND NON-GENUINE.BESIDES,THE UNSECURED LOANS I N THE NAME OF THE THREE PARTIES WERE NON- GENUINE.CONSEQUENT TO THIS,THE AO COMPLETED THE ASS ESSMENT U/S. 143 (3) R.W.S.147 AT A TOTAL INCOME OF RS.56.12 LAKHS.THE ADDITIONS TO THE INCOM E INCLUDED ONE U/S. 40A(3) ON ACCOUNT OF CASH PURCHASES FROM ONE OF THE THREE PARTIES AMOUNT ING TO RS. 1.25 CRORES. THEREAFTER,THE CIT ISSUED A SHOW-CAUSE NOTICE TO THE ASSESSEE U/S. 263 OF THE ACT SEEKING TO REVISE ISSUES DECIDED NOT ONLY IN THE ORDER OF REASSESSMENT BUT ALSO ISSU ES WHICH WERE IN FACT ACCEPTED AND ASSESSED BY THE INTIMATION U/S. 143(1) OF THE ACT.HE DIRECTED T O DO THE ASSESSMENT DE NOVO.IN THE APPELLATE PROCEEDINGS,THE TRIBUNAL HELD THAT IN THE ASSESSMEN T ORDER COMPLETED U/S.143(3)/147, AN ADDITION OF RS.25.14 LAKHS WAS MADE U/S.40A(3) ON ACCOUNT OF CASH PURCHASES FROM ONE OF THE THREE PARTIES,THAT THE ASSESSMENT ORDER ALSO RECORDED THE FACT THAT THERE WERE NO PURCHASES FROM THE OTHER TWO PARTIES,THAT THE ASSESSMENT ORDER WAS NOT ERRONEOUS AND THE JURISDICTION U/S. 263 COULD NOT BE EXERCISED.SO FAR AS THE OTHER ISSUES WERE CO NCERNED, THE TRIBUNAL HELD THAT THEY WERE NOT ISSUES ADJUDICATED UPON IN THE ASSESSMENT ORDER PAS SED U/S. 143 (3)R.W.S.147 AND THAT THE CIT WOULD HAVE NO JURISDICTION TO INITIATE PROCEEDING U /S. 263 ON THOSE ISSUES.THEREFORE, THE TRIBUNAL HELD THAT THE JURISDICTION U/S. 263 WAS BARRED BY T IME. ON APPEAL THE HONBLE COURT HELD AS UNDER: ..THERE WAS NO DISPUTE THAT EXCEPT THE ISSUE OF N ON-GENUINE PURCHASES ALL OTHER ISSUES DEALT WITH BY THE COMMISSIONER WERE NOT THE SUBJECT MATTE R OF THE REASSESSMENT ORDER. ALL THE OTHER ISSUES ON WHICH THE COMMISSIONER SOUGHT TO EXERCISE THE JURISDICTION U/S. 263 WERE CONCLUDED BY VIRTUE OF AN INTIMATION U/S. 143(1) WHICH ADMITTEDL Y WAS DONE BEYOND A PERIOD OF TWO YEARS PRIOR TO THE NOTICE ISSUED U/S. 263.SECTION 263(2) PROVID ES THAT NO ORDER WOULD BE MADE IN EXERCISE OF THE JURISDICTION U/S. 263(1) AFTER THE EXPIRY OF TW O YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER SOUGHT TO BE REVISED WAS PASSED. AD MITTEDLY, THE COMMISSIONER HAD NOT EXERCISED THE REVISIONAL JURISDICTION IN RESPECT OF THE INTIM ATION PASSED SECTION 143(1) WITHIN TWO YEARS OF ITS BEING PASSED.THEREFORE, THE EXERCISE OF THE JUR ISDICTION ON THOSE ISSUES U/S. 263 WAS TIME BARRED. MOREOVER, THE JURISDICTION U/S. 263 COULD N OT BE EXERCISED ON ISSUES WHICH WERE NOT SUBJECT MATTER OF CONSIDERATION WHILE PASSING THE O RDER OF REASSESSMENT U/S. 143(3) / 147 BUT A PART OF AN ASSESSMENT DONE EARLIER UNDER THE ACT.. .THAT THE CONTENTION THAT IN THE CASE OF BOGUS BILLS AND NON-GENUINE PURCHASES, I.E., WHERE THE ST ATE IS BEING DEFRAUDED THE LIMITATION AS PROVIDED U/S. 263 BE IGNORED COULD NOT BE ACCEPTED FOR THE REASON THAT NEITHER THE TRIBUNAL NOR IN THE APPELLATE JURISDICTION, COULD IGNORE THE MANDAT E OF LIMITATION PROVIDED UNDER THE ACT.THIS WAS AN ISSUE WHICH WOULD FALL WITHIN THE DOMAIN OF PARL IAMENT SO AS TO MAKE SUITABLE AMENDMENT TO THE LAW AFTER CONSIDERING THE VARIOUS COMPETING INT ERESTS. IN THE CASE OF ALAGENDRA FINANCE LTD. (293 ITR 1) O F THE HONBLE APEX COURT SIMILAR VIEW WAS TAKEN.FACTS OF THE MATTER WERE THAT IN THE ASSESSME NT ORDERS FOR THE AY.S 1994-95, 1995-96 AND 1996-97,ASSESSEES CLAIM RELATING TO LEASE EQUALISA TION FUND(LEF)WAS ACCEPTED.THEREAFTER 3244/M/17-JAGMOHAN KABRA(HUF) 4 ORDERS OF REASSESSMENT WERE INITIATED IN RESPECT OF THREE OTHER ITEMS BUT NOT THE ITEM RELATING TO LEF.LATER ON THE CIT,BY AN ORDER,DATED 29/03/2004,I NITIATED REVISION PROCEEDINGS ONLY IN RELATION TO THE ITEM LEF.THE TRIBUNAL HELD THAT THE REVISION PROCEEDINGS WERE BARRED BY LIMITATION,AS THEY WERE INITIATED MORE THAN FOUR YE ARS AFTER THE ORIGINAL ASSESSMENTS;AND THE HIGH COURT DISMISSED THE APPEAL THEREFROM.DECIDING THE M ATTER,THE HONBLE SUPREME COURT, CONFIRM - ED THE ORDER OF THE HONBLE BOMBAY HIGH COURT. CONSIDERING THE ABOVE DISCUSSION AND PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE UNDER APPEAL, WE HOLD THAT THE REVISIONARY ORDER OF THE CIT,WAS N OT PASSED WITHIN THE TIME LIMIT PRESCRIBED BY THE PROVISIONS OF SECTION 263 OF THE ACT.EFFECTIVE GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE.AS WE HAVE HELD THAT THE REVISIONARY ORDER PASSED BY THE CIT IS NOT A VALID ORDER,SO,WE ARE NOT DEALING WITH OTHER GROUNDS OF APPEAL. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS AL LOWED. ORDER PRONOUNCE D IN THE OPEN COURT ON 04 TH AUGUST, 2017. , 2017 SD/- SD/- ( /C.N.PRASAD ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 04.0 .2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR J BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.