Meghraj Corporate Services P.Ltd., Kalol V. The ACIT., Mehsana Circle, Mehsana

ITA 3323/AHD/2009

• Counselvise Citation: 332320514 RSA 2009
• Duration Of Justice: 2 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 09-08-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 15-12-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D K SINGH SR DR
• Assessee Lawyers: S N SOPARKAR SRAR
• Keywords: Search and seizure; Speculation loss
• Section: 143(3); 147; 148; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI, A.K.GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ITA NO.3323/AHD/2009 ASSESSMENT YEAR:2001-02 MEGHRAJ CORPORATE PVT. LTD., (NOW MERGED WITH SINTEX INTERNATIONAL LTD.,), NR. SEVEN GARNALA, KALOL (N.G.) PAN NO.AABCM 0729M V/S . ASSTT. COMMISSIONER OF INCOME-TAX, MEHSANA CIRCLE, MEHSANA /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI S.N.SOPARKAR, SR-AR /BY RESPONDENT SHRI D.K. SINGH, SR-DR /DATE OF HEARING 09-08-2012 /DATE OF PRONOUNCEMENT 21-09-2012 /O R D E R PER A.K.GARODIA, ACCOUNTANT MEMBER:- THIS IS ASSESSEES APPEAL DIRECTED AGAINST THE ORD ER OF COMMISSIONER OF INCOME-TAX (APPEALS)-GANDHINAGAR (CIT(A) FOR SHOR T) DATED 02-10-2009 FOR ASSESSMENT YEAR (A. Y.) 2001-02. GROUND NO.K 1 TO 3 ARE INTER-CONNECTED, WHICH READ AS UNDER:- 1. LD. CIT(A) ERRED IN HOLDING THE REOPENING U/S 1 47 OF THE ACT AS VALID. 2. LD. CIT(A) FURTHER ERRED IN HOLDING REOPENING TO BE VALID IN ABSENCE OF SATISFACTION BY CHIEF COMMISSIONER OR THE COMMISSIO NER OF REASONS RECORDED FOR ISSUANCE OF NOTICE U/S. 148 OF THE ACT AFTER LAPSE OF 5 YEAR FROM THE END OF THE ASSESSMENT YEAR UNDER CONSIDERA TION. ITA NO.3323/AHD/2009 A.Y. 2001-02 MEGHRAJ CORPORATE SERVICES P. LTD. V. ACIT, MSN CI R PAGE 2 3. LD. CIT(A) ERRED IN HOLDING NOTICE U/S.148 OF TH E ACT VOID AUTHORITIES BELOW INITIO AND THE ASSESSMENT ORDER PURSUANT TO S UCH NOTICE AS BAD IN LAW. 2. LD. AR OF THE ASSESSEE REITERATED THE SAME ARGUM ENT WHICH WERE MADE BEFORE LD. CIT(A). LD. DR OF THE REVENUE SUPPORTED THE ORDER OF LD. CIT(A). 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT THIS ISSUE WAS DECIDED BY LD. CIT(A) AT PARA NO. 2. 5 OF HIS ORDER, WHICH IS REPRODUCED BELOW:- 2.5 THE MATTER HAS BEEN CONSIDERED AND I AM AFRAID ON THIS GROUND THE APPELLANTS STAND CANNOT BE ACCEPTED. IN THIS CASE, NO ASSESSMENT U/S. 143(3) HAS BEEN UNDERTAKEN BEFORE THE ISSUANCE OF N OTICE U/S. 148 AND THEREFORE THERE IS NO QUESTION OF ASSESSING OFFICER HAVING TAKEN A STAND OR HAVING MADE UP HIS MIND IN THE EARLIER ROUND WHI CH GETS CHANGED DUE TO ISSUANCE OF NOTICE U/S. 148. AS THE COURTS H AVE HELD THAT PROCESSING U/S. 143(1) IS NOT AN ASSESSMENT. IN SUC H A SITUATION THE ASSESSING OFFICER HAVING FORMED A BELIEF THAT THE L OSS IN SHARES SHOWN IS IN FACT A SPECULATION LOSS, IS A GENUINE FORMATI ON OF BELIEF, ON THE BASIS OF WHICH IT CAN BE STATED PRIMA-FACIE THAT TH E INCOME HAS ESCAPED TAXATION. ALTHOUGH THE MATTER HAS BEEN REOPENED AFT ER FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR, YET THE FACT THAT O RIGINALLY ONLY A PROCESSING U/S. 143(1) HAD TAKEN PLACE, THE RIGOUR OF PROVISO OF SECTION 147 SHALL NOT BE APPLICABLE. FURTHER, THE APPELLANT S EMPHASIS ON EARLIER APPEALS BEFORE CIT(A) AND ITAT IS ALSO MISPLACED BE CAUSE THESE APPEALS, SEEN IN TOTALITY, ONLY CONFIRMED THE SCOPE OF APPLICABILITY OF SECTION 154 AND NOT THE MERITS OF THE ADDITIONS. HE NCE CONSIDERING ALL ASPECTS, IN MY VIEW, THE ASSESSING OFFICER WAS QUIT E JUSTIFIED IN REOPENING THE ASSESSMENT. THE GROUND, IS, THEREFORE , NOT ACCEPTED. 4. FROM THIS PARA OF THE ORDER OF LD. CIT(A), WE FI ND THAT IN THE PRESENT CASE, NO ASSESSMENT WAS MADE BY THE ASSESSING OFFIC ER (AO) U/S. 143(3) OF THE IT ACT AND ONLY PROCESSING WAS DONE U/S. 143(1) OF THE ACT AND UNDER THESE FACTS, IT WAS HELD BY THE LD. CIT(A) THAT THE AO HAS RIGHTLY FORMED A BELIEF THAT LOSS IN SHARE SHOWN IS IN FACT A SPECUL ATION LOSS AND THEREFORE, REOPENING IS VALID. WE DO NOT FIND ANY INFIRMITY IN THIS FINDING OF LD. CIT(A) AND ITA NO.3323/AHD/2009 A.Y. 2001-02 MEGHRAJ CORPORATE SERVICES P. LTD. V. ACIT, MSN CI R PAGE 3 HENCE, WE DECLINE TO INTERFERE WITH THE SAME. ALL T HESE GROUNDS OF THE ASSESSEE ARE REJECTED. 5. GROUND NO. 4 OF THE ASSESSEES APPEAL IS AS UNDE R:- 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS), GANDHINAGAR G ROSSLY ERRED IN CONFIRMING THE ADDITION ON ACCOUNT OF DISALLOWANCE OF APPELLANTS CLAIM OF BUSINESS LOSS OF RS.10,40,700/- IN UTTER DISREGA RD TO THE FACT THAT VERY SAME ADDITION WHICH WAS MADE EARLIER BY AN ORDER U/ S. 154 OF THE IT ACT WAS DELETED BY THE ITAT, AHMEDABAD BENCH D VIDE I TS ORDER DATED 28/2/2007. THE APPELLANT SAYS THAT THE ACTION OF THE AO IN MAK ING THE ADDITION/DISALLOWANCE OF RS.10,40,700/- AND THE ORD ER OF THE LEARNED CIT(A) IN UPHOLDING THE ACTION OF THE AO IS TANTAMO UNT TO NULLIFYING THE ORDER OF THE HONBLE ITAT AND IS IN CLEAR VIOLATION OF THE DOCTRINE OF JUDICIAL DISCIPLINE. 6. ON THIS ISSUE ALSO LD. AR OF THE ASSESSEE REITER ATED THE SAME ARGUMENTS WHICH WERE MADE BEFORE LD. CIT(A) AND LD. DR SUPPORTED THE ORDER OF LD. CIT(A). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATTER ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT THIS ISSUE WAS DECIDED BY LD. CIT(A) IN PARA-3.2 OF HIS ORDER, WHICH IS REPRODUCED BELOW:- 3.2. THE ISSUE HAS BEEN CONSIDERED. TO START WITH, THE APPELLANTS STAND THAT ITS MATTER HAS BEEN DECIDED BY THE ITAT IS ABS OLUTELY INCORRECT. THE ITAT, VIDE ITS ORDER DATED 218/03/2007, IN PARA-4.3 OF ITS ORDER HAS VERY CLEARLY STATED THAT THE CIT(A) HAS MISDIRECTED IN A DJUDICATING THE ISSUE WHILE DECIDING AN APPEAL AGAINST ORDER U/S. 154. TH EREFORE, WHAT THE ITAST HAS ONLY DECIDED IS THE SCOPE OF SECTION 154 AND NOT THE ISSUE ON MERITS. THE EXPLANATION TO SECTION 73 IS VERY CL EAR. IT ENCOMPASSES COMPANIES WHOSE BASIC INCOME IS UNDER THE HEAD INT EREST ON SECURITIES, INCOME FROM HOUSE PROPERTY, CAPITAL GAINS AND INCOME FROM OTHER SOURCES. AS AGAINST THAT, THE APPELLANT HAS BEEN SHOWING ITS INCOME FROM THE TRANSACTION IN SHARES AS BUSINESS I NCOME. THE EXPLANATION IS VERY UNAMBIGUOUS IN ITS TERMS AND DO ES NOT LEND ITSELF TO ANY FURTHER EXPANSION IN SCOPE. WHAT IS IMPORTANT I S THE NATURE OF INCOME SHOWN UNDER THE HEADS OF INCOME AND NOT THE NATURE OF INCOME ITA NO.3323/AHD/2009 A.Y. 2001-02 MEGHRAJ CORPORATE SERVICES P. LTD. V. ACIT, MSN CI R PAGE 4 EARNED UNDER GENERAL CONSIDERATION OR ANY OTHER ACT . IT ALSO USES THE WORDS BUSINESS OF A COMPANY ..CONSISTING IN PURC HASE OR SALE OF SHARES OF OTHER COMPANIES . THEREFORE, THE EXPLAN ATION IS RECOGNIZING THE FACT OF A COMPANY BEING IN THE BUSI NESS, YET IT MANDATES IT TO BE TREATED AS SPECULATION LOSS IN TH E CIRCUMSTANCES LISTED. THEREFORE, IN MY VIEW, THE TREATMENT METED OUT BY THE ASSESSING OFFICER IN THIS CONTEXT IS WELL JUSTIFIED AND BY IN VOKING THE EXPLANATION TO SECTION 73, THE BUSINESS LOSS OF RS.10,40700./- ON ACCOUNT OF TRANSACTION IN SHARES HAS TO BE TREATED AS SPECULAT ION LOSS. 8. FROM THE ABOVE PARA OF THE ORDER OF LD. CIT(A), IT IS SEEN THAT THIS ISSUE WAS DECIDED BY LD. CIT(A) AS PER EXPLANATION TO SEC TION 73 AND NOTHING COULD BE BROUGHT ON RECORD BY THE AR OF THE ASSESSEE TO S HOW THAT THIS EXPLANATION IS NOT APPLICABLE IN THE PRESENT CASE. REGARDING TH E TRIBUNALS ORDER AGAINST THE ORDER PASSED BY THE ASSESSING OFFICER U/S. 154 OF THE ACT, A CLEAR FINDING IS GIVEN BY LD. CIT(A) THAT TRIBUNAL HAS ONLY DECIDED THE SCOPE OF SECTION 154 OF THE ACT AND NOT THE ISSUE ON MERIT. THIS FINDING OF THE LD. CIT(A) ALSO COULD NOT BE CONTROVERTED BY LD. AR OF THE ASSESSEE. HENC E, WE DECLINE TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. THIS GROU ND IS ALSO REJECTED. 9. GROUND NO.5 OF THE ASSESSEES APPEAL IS AS UNDER :- 5. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS), GANDHINAGAR G ROSSLY ERRED IN CONFIRMING THE ADDITION/DISALLOWANCE OF RS.1,95,464 /- BEING DEDUCTION U/S. 35D IN UTTER DISREGARD TO THE FACT THAT VERY S AME ADDITION WHICH WAS MADE EARLIER BY AN ORDER U/S. 154 OF THE IT ACT WAS DELETED BY THE HONBLE CIT(A) ON VERIFICATION OF THE MERITS OF THE CLAIM AND THE SAID ORDER OF THE CIT(A) WAS ACCEPTED BY THE DEPARTMENT AND NO APPEAL ON THAT ISSUE WAS FIELD BY THE AO BEFORE THE ITAT. THE APPELLANT SAYS HAT THE LEARNED AO IS THEREFORE IN ERROR IN MAKING THE ADDITION ONCE AGAIN WHICH WAS EARLIER DELETED B Y THE CIT(A) UPON VERIFICATION OF THE FACT. THE LEARNED CIT(A) IS IN ERROR IN CONFIRMING SUCH ADDITION MADE BY THE AO WHICH WAS EARLIER DELETED B Y HIS PREDECESSOR. 10. ON THIS ISSUE ALSO LD. AR OF THE ASSESSEE REITE RATED SAME ARGUMENTS WHICH WERE MADE BEFORE LD. CIT(A). LD. DR OF THE RE VENUE SUPPORTED THE ORDER OF LD. CIT(A). ITA NO.3323/AHD/2009 A.Y. 2001-02 MEGHRAJ CORPORATE SERVICES P. LTD. V. ACIT, MSN CI R PAGE 5 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, AND P ERUSED THE MATERIAL ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES B ELOW. WE FIND THAT THIS ISSUE WAS DECIDED BY LD. CIT(A) IN PARA-4.2 OF HIS ORDER, WHICH IS REPRODUCED BELOW:- 4.2 THE MATTER HAS BEEN CONSIDERED AND I AM IN AGR EEMENT WITH THE ASSESSING OFFICER. AS FAR AS THE ISSUE THAT THE MAT TER STANDS ALREADY DECIDED BY CIT(A) AND ITAT IS CONCERNED THE SAME HA S BEEN DEALT IN EARLIER PARAGRAPHS. THE SAID DECISIONS WERE IN CONT EXT OF ORDER U/S. 154 AND HENCE HAVE NO APPLICABILITY TO THE PRESENT PROC EEDINGS. OTHERWISE, IT IS NOW JUDICIALLY WELL ACCEPTED THAT ALLOWANCE U /S. 35D HAS TO PERTAIN TO EXPENSES INCURRED FOR THE INITIAL CAPITAL RAISED BY THE COMPANY. IN THE PRESENT CASE, THE EXPENSES INCURRED ARE FOR THE SUB SEQUENT RAISE IN THE AUTHORIZED CAPITAL, A FACT NOT CONTROVERTED BY THE APPELLANT. THEREFORE, THERE IS NO SCOPE FOR ALLOWING THE DEDUCTION U/S. 3 5D. HENCE THE DISALLOWANCE MADE IS CONFIRMED. 12. FROM THE ABOVE PARA OF THE ORDER OF LD. CIT(A), WE FIND THAT CLEAR FINDING IS GIVEN BY HIM THAT SECTION 35D IS NOT APP LICABLE IN THE FACTS OF THE PRESENT CASE. BECAUSE THE EXPENDITURE INCURRED BY T HE ASSESSEE IS NOT FOR RAISING INITIAL CAPITAL AND FOR RAISING CAPITAL IN SUBSEQUENT YEARS, SECTION 35D CAN BE APPLICABLE IF THE ASSESSEE CAN SHOW THAT SUC H EXPENDITURE WAS INCURRED FOR EXTENSION OF THE UNDERTAKING OR IN CON NECTION WITH SETTING UP A NEW UNIT. NOTHING OF THIS SORT HAS BEEN BROUGHT ON RECORD BY LD. AR OF THE ASSESSEE AND HENCE, WE DECLINE TO INTERFERE IN THE ORDER OF LD. CIT(A) OF THIS ISSUE ALSO. THIS GROUND OF THE ASSESSEE IS REJECTED . 13. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- (KUL BHARAT) (A.K.GARODIA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, *DKP ! '- 21/09/2012 )*+ , --. --. --. --. /. /. /. /. / COPY OF ORDER FORWARDED TO:- ITA NO.3323/AHD/2009 A.Y. 2001-02 MEGHRAJ CORPORATE SERVICES P. LTD. V. ACIT, MSN CI R PAGE 6 1. / APPELLANT 2. / RESPONDENT 3. !+!-2 3 / CONCERNED CIT 4. 3- / CIT (A) 5. .67 ---2, -2 , )*+ / DR, ITAT, AHMEDABAD 6. 7:; <= / GUARD FILE. BY ORDER/ , /TRUE COPY/ >/) !? -2 , )*+ , STRENGTHEN PREPARATION & DELIVERY O F ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 04/09 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE NO 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 07/09 4) DATE OF CORRECTION 14/09 5) DATE OF FURTHER CORRECTION 6) DATE OF INITIAL SIGN BY MEMBERS 19/09 7) ORDER UPLOADED ON 21/09 8) ORIGINAL DICTATION PAD-PART HAS BEEN ENCLOSED IN THE FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 21/09