ZEST HOLDINGS P.LTD, MUMBAI V. ACIT CEN CIR 31, MUMBAI

ITA 334/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3196 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 13-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A G BHATKAR
• Assessee Lawyers: NILESH MEHTA
• Keywords: Rejection of books of accounts; Opportunity of being heard
• Section: 143(3); 234B; 115JB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL G, BENCH MUM BAI , , , BEFORE SHRI RAJENDRA, AM AND SHRI RAM LAL NEGI, JM ./ ITA NO.334/MUM/2015 ( / ASSESSMENT YEAR: 2011-12) M/S. ZEST HOLDINGS PVT. LTD., 32, MADHULI, DR. ANNIE BESANT ROAD, WORLI, MUMBAI- 400018. VS. THE ACIT, CC-31, ROOM NO.413, AAYAKAR BHAVAN, MUMBAI- 400 020. ./ ./ PAN/GIR NO. : AAACZ0443M ( / APPELLANT ) .. ( !' / RESPONDENT ) #$% /ASSESSEE BY : SHRI. NILESH MEHTA /REVENUE BY : SHRI A.G. BHATKAR & ' ( %) / DATE OF HEARING : 23/08/2016 *+,- ( %) / DATE OF PRONOUNCEMENT : 06/09/2016 !' / O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST ORDER DATED 20/10/2014 PASSED BY THE CIT (APPEALS)-40, MUMBAI F OR THE ASSESSMENT YEAR 2011-12, WHEREBY THE LD. CIT(A) DISMISSED THE APPEA L FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDER DATED 02/12/2013. 2. BRIEF FACTS OF THE CASE ARE THAT THE APPELLANT/ ASSESSEE IS A NOTIFIED ENTITY UNDER THE SPECIAL COURT (TRIAL OF OFFENCES RELATING TO TRANSACTIONS IN SECURITIES.) ACT, 1992 AND ALL ITS ASSETS INCLUDING BANK ACCOUNTS WERE ATTACHED 2 ITA NO 334/MUM/2015 ASSESSMENT YEAR: 2011-12 AND VESTED IN THE HANDS OF THE CUSTODIAN APPOINTMEN T UNDER THE SAID ACT. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE YEAR UN DER CONSIDERATION, DECLARING THE TOTAL INCOME OF RS. 53, 07,353/-. THE AO AFTER MAKING CERTAIN ADDITIONS COMPLETED ASSESSMENT ORDER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) AND DETERMINED THE TOTAL INCOM E OF THE ASSESSEE AT RS.98,13,465/-FOR TAX PURPOSES UNDER REGULAR PROVIS IONS. IN APPEAL THE LD. CIT(A) CONFIRMED THE ACTION OF THE AO. 3. STILL AGGRIEVED BY THE IMPUGNED ORDER, THE ASSES SEE IS IN APPEAL BEFORE THE TRIBUNAL. THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL:- 1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) OUGHT TO HAVE APPRECIATED THAT AS PER THE DECISION OF HONBLE SPE CIAL COURT DATED. 30/04/2010 IN MP NO. 41 OF 1999, THE ASSETS UNDER C ONSIDERATION AND THE CONSEQUENTIAL INCOME BELONGS TO SHRI. HARSH AD S. MEHTA AND HENCE THE INCOME ASSESSED BY THE ASSESSING OFFICER OUGHT TO HAVE BEEN TAXED IN THE HANDS OF SHRI. HARSHAD S. MEHTA A ND NOT IN THE HANDS OF THE APPELLANT. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) HAS ERRED IN LAW AND IN FACTS IN NOT GRANTING RELIEF OF LIABILIT Y AMOUNTING TO RS. 45,06,112/-, TOWARDS INTEREST EXPENDITURE CLAIMED B Y THE APPELLANT. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING CALCULATION OF BOOK PROFIT U/S 115JB AMOUNTING TO RS. 98,13,465/-. 3 ITA NO 334/MUM/2015 ASSESSMENT YEAR: 2011-12 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING INTEREST CHARGED U/S 231A, 234B, AND 234C OF THE ACT. 5. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN THE HANDS OF THE APPELLANT WAS SUBJECTED TO THE PROVISONS OF TDS AND HENCE ON THE SAID AMOUNT OF TA X NO INTEREST CAN BE COMPUTED U/S 234B AND 234C OF THE ACT. 4. BEFORE US, THE LD. AUTHORISED REPRESENTATIVE (A R) SUBMITTED THAT THE ASSESSEE DOES NOT WANT TO CONTEST GROUND NO. 1. ACC ORDINGLY, GROUND NO 1 OF THE APPEAL IS DISMISSED AS NOT PRESSED. 5. THE LD. AR FURTHER SUBMITTED THAT THE REMAINING GROUNDS OF APPEAL ARE COVERED BY THE DECISION DATED 29/09/2014 RENDERED B Y THE MUMBAI TRIBUNAL IN THE CASE OF CASCADE HOLDINGS PVT. LTD. VS DCIT M UMBAI, ITA NO. 2900/MUM/2013 FOR THE ASSESSMENT YEAR 2010-11. 6. ON THE OTHER HAND THE LD. DEPARTMENTAL REPRESE NTATIVE (DR) RELYING ON THE CONCURRENT FINDINGS OF THE AUTHORITIES BELOW, SUBMI TTED THAT THE LD. CIT(A) HAS RIGHTLY DISMISSED THE APPEAL OF THE ASSESSEE AND TH ERE IS NO SCOPE TO INTERFERE WITH THE IMPUGNED ORDER. 7. WE NOTICE THAT THE CO-ORDINATE BENCH HAS DEALT WITH THE IDENTICAL ISSUE IN THE CASE OF CASCADE HOLDING P. LTD VS DCIT MUMBAI ( SUPRA). GROUND NO 2 AND 3 OF THE PRESENT APPEAL ARE IDENTICAL TO GROUND NO 4 AND 5 OF THE AFORESAID CASE. THE CO-ORDINATE BENCH HAS DECIDED THESE CONNECTED G ROUNDS HOLDING AS UNDER:- 4 ITA NO 334/MUM/2015 ASSESSMENT YEAR: 2011-12 2.1. GROUNDS NO 4 AND 5 ARE INTERCONNECTED AND ARE ABOUT DISALLOWANCE OF INTEREST EXPENDITURE OF RS. 86,15,9 70/-(GOA-4) AND CALCULATION OF BOOK PROFIT U/S 115JB OF THE ACT. BE FORE US, AR STATED THAT IDENTICAL ISSUE HAD COME UP FOR ADJUDICATION B EFORE THE TRIBUNAL IN ONE OF THE GROUP CASES I.E. IN THE CASE OF EMINE NT HOLDINGS PVT. LTD.(ITA/82000/2010DT.12.02.2014), THAT MATTER WAS RESTORED BACK TO THE FILE OF THE FFA. DEPARTMENTAL REPRESENTATIVE (DR) LEFT TO THE ISSUE TO THE DISCRETION OF THE BENCH. 2.2. AFTER HEARING THE RIVAL CONTENTIONS, WE ARE OF THE OPINION THAT ISSUES RAISED IN THE GROUNDS NO. 4 & 5 SHOULD BE RE MANDED BACK TO THE FILE OF THE FAA. WE FIND THAT WHILE DECIDING TH E APPEAL IN THE CASE OF EMINENT HOLDINGS PVT. LTD., FOR THE AY 2007 -08(SUPRA),E BENCH OF TRIBUNAL HAS DECIDED THE ISSUE AS UNDER: 4. GROUND NOS. 4 & 5 ARE INTER-CONNECTED RELATING TO THE DISALLOWANCE OF INTEREST EXPENDITURE OF RS. 5,14,45 5/-.IN THIS REGARD, AT THE OUTSET, LD COUNSEL MENTIONED THAT AN IDENTIC AL ISSUE CAME UP FOR ADJUDICATION BEFORE THE ITAT, MUMBAI IN THE CAS ED OF HITESH S. MEHTA VS. DCIT VIDE ITA NO. 7726 & 7727/M/2010 DATE D 26.04.2013, WHEREIN THE TRIBUNAL SET ASIDE THE ISSU E TO THE FILES OF CIT(A) FOR ADJUDICATION OF THE ISSUE AFRESH BY ADJU DICATING THE RESPECTIVE GROUND RELATING TO THE REJECTION/RELIABI LITY OF THE BOOKS OF ACCOUNT. PARA 5 FROM THE SAID ORDER OF THE TRIBUNAL (SUPRA) IS RELEVANT IN THIS REGARD AND THE SAME READS AS UNDER : 5. GROUND NO.4 RELATES TO THE ACTION OF THE LD CI T(A) IN CONFIRMING THE LIABILITIES AMOUNTING TO RS. 11,24,99,052/- AND RS. 12,61,36,245/- RESPECTIVELY FOR THE AYS 2005-06 AND 2006-07 TOWARDS INTEREST EXPENDITURE CLAIMED BY THE ASSESSE E. IT IS PERTINENT TO NOTE THAT THE FINDINGS GIVEN IN PARA 3.3 ABOVE I N RESPECT OF REJECTION/ RELIABILITY OF THE BOOKS OF ACCOUNTS AND THE PROPOSED 5 ITA NO 334/MUM/2015 ASSESSMENT YEAR: 2011-12 ADJUDICATION OF THE LD CIT(A) IN VIEW OF THE SAID D IRECTION MAY HAVE DIRECT IMPACT ON THE ISSUE OF THE IMPUGNED LIABILIT Y, WE SET ASIDE THIS ISSUE TO THE FILES OF THE CIT(A) TO ADJUDICATE AFRE SH ALONG WITH THE ADJUDICATION OF THE RESPECTIVE GROUND PERTAINING TO THE REJECTION/ RELIABILITY OF THE BOOKS OF ACCOUNTS. 5. ON THE OTHER HAND, LD DR DUTIFULLY RELIED ON THE ORDER OF THE AO/CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE O RDERS OF THE REVENUE AUTHORITIES AS WELL AS THE ORDER OF THE TRI BUNAL IN THE CASE OF HITESH S. MEHTA (SUPRA). WHETHER THE INTEREST LI ABILITIES OF RS. 5,14,455/- CONSTITUTES ASCERTAINED ONE OR NOT IS AL SO LINKED TO THE ISSUE OF REJECTION OF BOOKS OF ACCOUNTS AS THE BOOK S OF ACCOUNT IS THE BASIS FOR COMPUTATION OF BOOK PROFITS U/S 115JA OF THE ACT. THIS IS COMMON ISSUE QUA THE ISSUE ADJUDICATED IN THE CASE OF THE HITESH S. MEHTA (SUPRA) AND MATTER WAS SET ASIDE. RESPECTFULLY FOLLOWING THE SAID ORDER OF THE TRIBUN AL, WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE RAISED IN GROUND NO.4 SHOULD BE SET ASIDE TO THE FILES OF THE CIT(A) FOR FRESH ADJU DICATION OF THE ISSUE AFTER GRANTING A REASONABLE OPPORTUNITY OF BEING HE ARD TO THE ASSESSEE. THE DECISION IF ANY SHOULD BE TAKEN ONLY AFTER CONSIDERING THE DECISION IN THE CASE OF HITESH S MEHTA, (SUPRA) . ACCORDINGLY, GROUND NOS. 4 & 5 ARE SET ASIDE. RESPECTFULLY, FOLLOWING THE ABOVE ORDER, WE ARE RE STORING BACK THE MATTER TO THE FILE OF THE FAA FOR FRESH ADJUDICATIO N. HE IS DIRECTED TO AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE A SSESSEE. GROUND NO.4 IS ALLOWED IN FAVOUR OF THE ASSESSEE, IN PART. IN VIEW OF THE ABOVE DISCUSSION GROUNDS NO.4 AND 5 ARE RESTORED BACK TO THE FILE OF THE FAA AND THE BOTH THE GROUND S ARE PARTLY ALLOWED IN FAVOUR OF THE ASSESSEE. 6 ITA NO 334/MUM/2015 ASSESSMENT YEAR: 2011-12 8. RESPECTFULLY, FOLLOWING THE ABOVE ORDER, WE RE STORE BACK THE MATTER TO THE FILE OF THE LD. CIT(A) FOR FRESH ADJUDICATION AFTER GIVING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. HENCE, GROUND NO. 2 AND 3 AR E PARTLY ALLOWED IN FAVOUR OF THE ASSESSEE. 9. GROUND NO 4 AND 5 OF PRESENT APPEAL ARE IDENTIC AL TO GROUND NO 6 OF THE AFORESAID CASE. THE CO-ORDINATE BENCH HAS DECIDED T HESE CONNECTED GROUNDS HOLDING AS UNDER:- 3.GROUND NO.6 IS ABOUT INTEREST TO BE CHARGED U/S. 234A,234B AND 234 C OF THE ACT. AT THE TIME OF THE HEARING BEFORE US, IT WAS AGREED BY THE REPRESENTATIVES OF BOTH THE SIDES THAT THE I DENTICAL ISSUE WAS DELIBERATED UPON AND DECIDED BY THE TRIBUNAL IN THE CASE OF M/S. TOPAZ HOLDINGS PVT. LTD. (ITA NO.2146/MUM/2013,AY.2 001- 02,DATED 18.06.2014).WE FIND THAT IN THE MATTER OF TOPAZ HOLDINGS PVT.LTD.(SUPRA),ONE OF THE GROUP CONCERNS, THE TRIB UNAL HAD DECIDED THE ISSUE AS UNDER: 3.NEXT GROUND OF APPEAL IS ABOUT LEVY OF INTEREST U/S. 234 OF THE ACT. BEFORE US, AR STATED THAT THE ASSESSEE WAS A N OTIFIED ENTITY, THAT THE PROVISIONS OF S. 234A, 234B AND 234C OF TH E ACT WERE DEEMED TO HAVE COMPLIED WITH, THAT THE ASSETS WERE ALREADY IN ATTACHMENT OF THE CUSTODIAN APPOINTED UNDER THE PRO VISIONS OF THE SPECIAL COURTS ACT, THAT THE TRIBUNAL IN THE CASE O F THE APPELLANT AND SEVERAL OTHER ENTITIES HAD HELD THE VIEW IN FAVOUR OF THE APPELLANT, THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF D IVINE HOLDINGS PVT. LTD. AND CASCADE HOLDINGS PVT. LTD. HAD HELD T HAT THE PROVISIONS OF SECTIONS 234A,234B AND 234C OF THE AC T WERE MANDATORY AND WERE APPLICABLE TO THE NOTIFIED ENTIT IES ALSO, THAT THE 7 ITA NO 334/MUM/2015 ASSESSMENT YEAR: 2011-12 ASSESSEE WAS IN THE PROCESS OF FILING AN APPEAL AGA INST THE SAID ORDER BEFORE THE HONBLE SUPREME COURT, THAT THE IN COME EARNED IN THE YEAR UNDER CONSIDERATION WAS SUBJECTED TO PROVI SIONS OF TDS, THAT THE CHANGEABILITY OF THE SECTION 234A, 234B AN D 234C OF THE ACT SHOULD BE AFTER CONSIDERING THE AMOUNT OF TAX DEDUC TIBLE AT SOURCE ON THE INCOME ASSESSED. THE APPELLANT RELIES IN THI S REGARD ON THE FOLLOWING DECISIONS. HE RELIED UPON THE CASES OF MO TOROLA INC. V. DCIT [95 ITD 269 (DEL.(SB)], SEDCO FORES DRILLING CO. LT D. [264 ITR 320],NGC NETWORK ASIA LLC [313 ITR 187] ,SUMMIT BHA TACHARYA [ 300 ITR (AT) 347 (BOM)(SB)], VIJAL GOPAL JINDAL [IT A NO. 4333/DEL/2009] & EMILLO RUIZ BERDEJO [320 ITR 190 ( BOM)].DR RELIED UPON THE CASES OF DEVINE HOLDINGS PVT. LTD. 3.1. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL BEFORE US. WE FIND THAT IN THE CASE OF DEVINE HOLDI NGS PVT. LTD. HONBLE BOMBAY HIGH COURT HAS HELD THAT PROVISIONS OF SECTION 234A, 234B AND 234C WERE APPLICABLE TO THE NOTIFIED PERSON ALSO. THEREFORE, UPHOLDING THE ORDER OF THE FAA TO THAT E XTENT, WE HOLD THAT PROVISIONS OF SECTION 234 OF THE ACT ARE APPLI CABLE. AS FAR AS CALCULATION PART IS CONCERNED, WE FIND MERITS IN TH E SUBMISSION MADE BY THE ASSESSEE. THEREFORE, WE ARE RESTORING BACK T HE ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION WHO WOULD DEC IDE THE ISSUE AFTER CONSIDERING THE AMOUNT TAXED DEDUCTIBLE AT SOURCE O N THE INCOME ASSESSED AND AFTER AFFORDING A REASONABLE OPPORTUNI TY OF HEARING TO THE ASSESSEE. GROUND NO.5 IS ALLOWED IN PART IN FAV OUR OF THE ASSESSEE. 10. RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE CO-ORDINATE BENCH ON THE IDENTICAL ISSUE, WE RESTORE THE ISSUE TO THE FILE O F AO FOR ADJUDICATING THE ISSUE 8 ITA NO 334/MUM/2015 ASSESSMENT YEAR: 2011-12 AFRESH AFTER GIVING PROPER OPPORTUNITY OF BEING HEA RD TO THE ASSESSEE. GROUND NO 4 AND 5 ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2011-12 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 06 TH SEPT., 2016 SD/- SD/- ( RAJENDRA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER & .' MUMBAI; / DATED: 06/09/2016 !'#$%&'&$ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT. 3. & 1% ( ) / THE CIT(A)- 4. & 1% / CIT 5. 45 !%6# , ) 6#- , & .' / DR, ITAT, MUMBAI 6. 7 8' / GUARD FILE. !' / BY ORDER, '4% !% //TRUE COPY// ()*+ (DY./ASSTT. REGISTRAR) , & .' / ITAT, MUMBAI PRAMILA