Sagar Drugs & Pharmaceuticals Ltd., Ahmedabad V. The Addl.CIT.,Range-8, Ahmedabad

ITA 3319/AHD/2008

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2146 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 02-02-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 03-10-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D S CHAUDHRY SRDR
• Assessee Lawyers: S N SOPARKAR SRAR
• Keywords: Retrospective amendment; Non compliance; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI N.S.SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.3319/AHD/2008 ASSESSMENT YEAR:2005-06 DATE OF HEARING:2.2.11 DRAFTED:3.2.11 SAGAR DRUGS & PHARMACEUTICALS LTD. SAGAR OPP. KAMDHENU COMPLEX, NR. SAHAJANAND COLLEGE, AMBAWADI, AHMEDABAD PAN NO.AADCS9311E V/S . ADDL. COMMISSIONER OF INCOME TAX, RANGE-8, AHMEDABAD (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI S.N. SOPARKAR, SR-AR RESPONDENT BY:- SHRI D.S. CHAUDHRY, SR-DR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-XIV, AHMEDABAD IN APPEAL NO. C IT(A)-XIV/ C. 8/324/2007-08 DATED 18-06-2008. THE ASSESSMENT WAS FRAMED BY ADDL .CIT RANGE-8, AHMEDABAD U/S143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 24-12-2007 FOR ASSESSMENT YEAR 2005-06. 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AGA INST THE ORDER OF CIT(A) IN CONFIRMING THE ADDITION U/S.94(7) OF THE ACT MADE B Y ASSESSING OFFICER. FOR THIS, ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUND NO.2 :- (2) THE LEARNED COMMISSIONER (APPEAL) ERRED IN CON FIRMING THE ADDITION OF RS.11,39,740/- U/S.94(7) OF THE I.T. ACT 1961. IT M AY BE NOTED THAT AS ON THE TRANSFER OF THE UNITS THE ASSESSEE COMPANY HAS COMP LIED THE PROVISIONS OF THE SAID SECTION BUT THE NON COMPLIANCE HAS BEEN OCCURR ED DUE TO THE RETROSPECTIVE AMENDMENTS MADE AFTER THE DATE OF TRA NSFER OF THE UNITS VIDE FINANCE (NO.2) ACT, 2004. ITA NO.3319/AHD/2008 A.Y 2005-06 SAGAR DRUGS & PHARMACEUTICALS LTD. V. ADDL. CIT, RNG-8 A BD PAGE 2 3. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF DYES, INTERMEDIATE S & FINE CHEMICALS. THE ASSESSEE FILED ITS RETURN OF INCOME ON 31-10-2005 D ECLARING TOTAL INCOME OF RS.1,92,58,090/-. SUBSEQUENTLY, REVISED RETURN WAS FINED ON 29-03-2007 SHOWING TOTAL INCOME OF RS.1,85,41,860/-. ON SCRUTINY, ASSE SSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED CAPITAL LOSS OF RS.11,39,740/- BUT HE DISALLOWED THE SAME TO THE EXTENT OF DIVIDEND INCOME EARNED INVOKING PROVI SIONS OF SECTION 94(7) OF THE ACT AS AMENDED VIDE FINANCE (NO.2) ACT, 2004 W.E.F 1-4- 2005. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS PURCHASED UNITS OF RELI ANCE MUTUAL FUND ON 06-02-2004 AND SOLD THE UNITS ON 06-07-2004 INCURRING LOSS OF RS.21,30,528/- AND THE DIVIDEND INCOME IS RS.11,39,740/- AND AO FOUND THAT THIS TRA NSACTION IS COVERED BY THE PROVISIONS OF SECTION 94(7) OF THE ACT AND HE DISAL LOWED THE SAME AS SHORT TERM CAPITAL LOSS TO THE EXTENT OF DIVIDEND RECEIPT OF R S.11,39,740/-. THE ASSESSEE BEFORE CIT(A) CLAIMED THAT IT HAS SOLD THE UNITS ON 07-07- 2004 AND IT HELD THAT THE UNITS FOR A PERIOD OF MORE THAN THREE MONTHS FROM THE RECORDED PURCHASE DATE. THEREFORE, THERE WAS NO VIOLATION OF PROVISIONS OF SECTION 94(7) ON THE DATE OF SALE, AS HAS BEEN HELD VIDE FINANCE (NO.2) ACT, 2004 WHICH WAS PRESENTED I N PARLIAMENT ON 08-07-2004 AND THE BILL RECEIVED ACCENT OF PRESIDENT OF INDIA ON 08-07-2004. THE SECTION 94(7) WAS AMENDED TO THE EXTENT THAT PROVISIONS OF SECTIO N 94(7) WILL BE APPLICABLE, IF THE UNIT IS SOLD WITHIN A PERIOD OF NINE MONTHS FROM TH E DATE OF PURCHASE. ALTHOUGH THIS AMENDMENT IS APPLICABLE W.E.F. 1-4-2005 ASSESSMENT YEAR 2005-06 AND SUBSEQUENT YEAR, ON THE DATE OF SALE, THE BILL WAS NOT PRESENT ED IN PARLIAMENT AND HENCE THIS PROVISION SHOULD NOT BE APPLIED IN ITS CASE. BUT TH E CIT(A) CONFIRMED THE DISALLOWANCE VIDE PARA-4.2 OF IS APPELLATE ORDER:- 4.2 I HAVE CONSIDERED THE FACTS OF THE CASE AND TH E SUBMISSION OF THE APPELLANT. HOWEVER, I AM NOT INCLINED TO AGREE WITH THE VIEWS OF THE APPELLANT. AS THE AMENDMENT MADE IN SEC. 94(7) IS APPLICABLE W ITH EFFECT FROM 1-4-2005, I.E. A.Y 2005-06, THE AO HAS RIGHTLY APPLIED THE PR OVISIONS OF THIS SECTION AND THE SAME IS HEREBY UPHELD. AGGRIEVED, ASSESSEE CAME IN SECOND APPEAL BEFORE US . 4. AT THE OUTSET, IT IS NOTICED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF REVENUE AND AGAINST THE ASSESSEE BY THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL OF AMRITSAR BENCH IN THE CASE OF SURI SONS V. ACIT (2009) 124 TTJ 800 ITA NO.3319/AHD/2008 A.Y 2005-06 SAGAR DRUGS & PHARMACEUTICALS LTD. V. ADDL. CIT, RNG-8 A BD PAGE 3 (ASR), WHEREIN THE TRIBUNAL HAS HELD THAT THERE WAS AN AMENDMENT TO CL.(B) TO S.94(7) W.E.F. 1 ST APRIL, 2005. UNDER THE IT ACT THOUGH THE SUBJECT O F THE CHARGE IS THE INCOME OF THE PREVIOUS YEAR, THE LAW TO BE APPLIED IS THAT IN FORCE IN THE ASSESSMENT YEAR, UNLESS OTHERWISE STATED OR IMPLIED. ANY AMENDMENT W HICH IS IN FORCE AT THE BEGINNING OF THE RELEVANT ASSESSMENT YEAR MUST GOVE RN THE CASE THOUGH THE AMENDMENT IS MADE AFTER THE INCOME UNDER ASSESSMENT YEAR UNDER CONSIDERATION IS EARNED. IN OTHER WORDS, THE IT ACT AS IT STANDS AME NDED ON 1 ST APRIL OF A FINANCIAL YEAR MUST APPLY TO THE ASSESSMENT FOR THAT YEAR. IT IS A CARDINAL PRINCIPLE OF THE TAX LAW THAT THE LAW TO BE APPLIED IS THAT IN FORCE IN THE ASSESSMENT YEAR UNLESS OTHERWISE PROVIDED EXPRESSLY OR BY NECESSARY IMPLIC ATION. THE SUBJECT OF CHARGE IS NOT THE INCOME OF THE YEAR OF ASSESSMENT, BUT THE I NCOME OF THE PREVIOUS YEAR. AS THE FINANCE ACTS COME INTO FORCE ON THE FIRST DAY O F APRIL EACH YEAR, THEREFORE, THE LAW TO APPLY IS THE LAW IN FORCE AT THE COMMENCEMEN T OF THE YEAR OF ASSESSMENT, I.E. THE FIRST DAY OF APRIL EACH YEAR. FOR A CHARGE ON T HE INCOME OF THE PREVIOUS YEAR, THE SUBSTANTIVE LAW OF THAT YEAR MUST BE APPLIED RELI ANCE JUTE & INDUSTRIES LTD. VS. CIT 186; (1979) 120 ITR 9211 (SC), CIT VS. ISTHMIAN STE AMSHIP LINES (19511) 20 ITR 572 (SC) AND M.K. VENKATACHALAM, ITO & ANR. VS. AND ON GOING THROUGH THE CONTEXT USED IN S. 94(7)(B), THE OBJECT OF THE LEGISLATURE, CIRCUMSTANCES UNDER WHICH THE STATUTE WAS AMENDED, THE CONCLUSION IS THAT THE AME NDED PROVISION IS APPLICABLE TO THE ASST. YR. 2005-06. THE ARGUMENT OF THE ASSESSEE THAT FINANCE (NO.2) ACT, 2004 RECEIVED ASSENT OF THE PRESIDENT ON 10 TH SEPT. 2004 AND IT IS NOT APPLICABLE TO THE FINANCIAL YEAR 2004-05 SINCE THE AMENDMENT CAME AFT ER THE CLOSE OF THE SIX MONTH OF THE FINANCIAL YEAR, HAS NO MERIT SINCE THE LEGISLAT URE CLEARLY MENTIONED IN THE ACT THE DATE FROM WHICH THE ACT IS EFFECTIVE I.E. 1 ST APRIL, 2005, AS SUCH THE PRESIDENTS ASSENT WILL RECKON BACK TO THE DATE FROM 1 ST APRIL, 2004 AND AS SUCH AMENDMENT IS APPLICABLE FOR THE FINANCIAL YEAR 2004-05 RELEVANT TO THE ASST. YR. 2005-06. HENCE, IN VIEW OF THE EXPRESS IMPLICATION BY THE ACT IN ITSEL F, THE SAME IS TO BE CONSTRUED AS APPLICABLE FOR THE ASST. YR. 2005-06. THE CIT(A) WA S THEREFORE JUSTIFIED IN SUSTAINING DISALLOWANCE UNDER S. 94(7)-I, RAAAJESHWAR PERSHAD VS. CIT (1986) 52 CTR (P&H) 305 APPLIED; KRISHSNA MOHAN AGRAWAL VS. CIT (2007) 295 ITR 190 ( ALL) AND KRIMTHARWI TEA ESTATE LTD. VS. STATE OF KERALA (199 \66) 60 ITR 262 (SC) IN VIEW OF EXPENSES ELUCIDATION IN THE FINANCE (NO.2) ACT, 200 4, ITSELF THAT THEE AMENDMENT TO S. 94(7)(B) IS APPLICABLE W.E.F. 1ST APRIL, 2005 TH E SAME APPLIED TO ASST. YR. 2005-06, NOTWITHSTANDING THE FACT THAT FINANCE (NO.2) ACT, 2 004, RECEIVED THE ASSENT OF THE ITA NO.3319/AHD/2008 A.Y 2005-06 SAGAR DRUGS & PHARMACEUTICALS LTD. V. ADDL. CIT, RNG-8 A BD PAGE 4 PRESIDENT ON 10 TH SEPT. 2004 I.E. AFTER THE END OF FIRST SIX MOTHS O F THE FINANCIAL YEAR 2004-05. WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF REV ENUE AND AGAINST THE ASSESSEE OF CO-ORDINATE BENCH OF AMRITSAR IN THE CASE OF SURI SONS (SUPRA) AND RESPECTFULLY FOLLOWING THE SAME, WE DISMISS THIS ISSUE OF ASSESS EES APPEAL. 5. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 04/02/2011 SD/- SD/- (N.S.SAINI) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, DATED : 04/02/2011 *DKP COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-XIV, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD