LUPIN INVESTMENTS P.LTD, MUMBAI V. CIT 10, MUMBAI

ITA 3493/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92794 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 28-05-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 17-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S PADMAJA
• Keywords: Assessment record; Capital receipt
• Section: 143(3); 115JB; 263

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - A - BENCH , , BEFORE S/SH. I P BANSAL,JUDICIAL ME MBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 3493 /MUM/20 1 2 , / ASSESSMENT YEAR - 20 0 7 - 08 LUPIN INVESTMENTS P. LTD. 159, CST ROAD, KALINA SANTACRUZ (W) , MUMBAI - 400 098. PAN: AAACL 1070 G VS CIT - 10, MUMBAI AAYAKAR BHAWAN , M.K. ROAD MUMBAI - 20 ( / A PPELLANT ) ( / RESPONDENT ) /ASSESSEE BY :MS. VASANTI PATEL / REVENUE BY : MS. S. PADMAJA / DATE OF HEARING : 03 - 0 6 - 2015 / DATE OF PRONOUNCEMENT : 03 - 0 6 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DT. 29.2.2012 OF THE CIT - 10, PASSED U/S. 263 OF THE ACT, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL : THE APPELLANT OBJECTS TO THE ORDER DATED 29 FEBRUARY 2012 PASSED BY THE COMMISSIONER OF INCOME - TAX, 10, MUMBAI FOR THE AFORESAID ASSESSMENT YEAR ON THE FOLLOWING AMONG OTHER GROUNDS: 1. THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME - TAX UNDER SECTION 263 IS ULTRA VIRES AND CONTRARY TO THE PROVISIONS OF LAW AND THEREFORE OUGHT TO BE QUASHED. 2. THE LEARNED COMMISSIONER OF INCOME - TAX ERRED IN ASSUMING JURISDICTION UNDER SECTION 263 OF THE INCOME - TAX ACT. 3. THE LEARNED COMMISSIONER OF INCOME - TAX ERRED IN SET TING ASIDE THE ASSESSMENT ORDER DATED 29 SEPTEMBER 2009 AND IN DIRECTING THE ASSESSING OFFICER TO REFRAME THE ASSESSMENT. 4. THE LEARNED COMMISSIONER OF INCOME - TAX ERRED IN INVOKING THE PROVISIONS OF SECTION 263 AND HOLDING THAT THE ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 5. THE LEARNED COMMISSIONER OF INCOME - TAX OUGHT TO HAVE APPRECIATED THAT WAIVER OF LOAN OF RS. 27,24,71,386 WHICH WAS WRITTEN BACK IN THE PROFIT AND LOSS ACCOUNT WAS IN T HE NATURE OF CAPITAL RECEIPT AND WAS NOT LIABLE TO TAX. 6. THE LEARNED COMMISSIONER OF INCOME - TAX OUGHT TO HAVE APPRECIATED THAT THE AMOUNT OF RS. 27,24,71,386 REPRESENTED THE SHARE OF LOSS IN A PARTNERSHIP FIRM FOR WHICH NO DEDUCTION HAD BEEN CLAIMED BY THE APPELLANT. 7. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED COMMISSIONER OF INCOME - TAX OUGHT TO HAVE APPRECIATED THAT THE LEARNED ASSESSING OFFICER HAD ADOPTED ONE OF THE PLAUSIBLE VIEWS AND THEREFORE THE POWER OF REVISION UNDER SECTION 263 CANNO T BE EXERCISED. 8. THE LEARNED COMMISSIONER OF INCOME - TAX OUGHT TO HAVE APPRECIATED THAT THE LEARNED ASSESSING OFFICER HAD MADE NECESSARY ENQUIRIES IN THE COURSE OF THE ASSESSMENT AND THE REQUIRED DETAILS HAD BEEN DULY FILED BY THE APPELLANT WITH THE AS SESSING OFFICER. 3493/12 (07 - 08)LUPIN INVESTMENTS PVT. LTD. 2 9. WITHOUT PREJUDICE, THE LEARNED COMMISSIONER OF INCOME - TAX OUGHT TO HAVE APPRECIATED THAT THERE WOULD BE NO IMPACT ON INCOME OF THE APPELLANT. THEREFORE ORDER PASSED BY THE LEARNED ASSESSING OFFICER WAS NOT PREJUDICIAL TO THE INTERES T OF THE REVENUE. 10. EACH ONE OF ABOVE GROUNDS OF APPEAL IS WITHOUT PREJUDICE TO THE OTHER. 11. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND TO THE ABOVE GROUNDS OF APPEAL. 2. ASSESSEE - COMPANY, ENGAGED IN THE BUSINESS OF TRADING AND INVESTMENT IN SECURITIES ETC . FILED ITS RETURN OF INCOME ON 30/11/2011 DECLARING TO T AL INCOME AT RS.NIL , THE AO COMPLETED THE ASSESSMENT U/S. 143(3) OF THE ACT ON 29.9.2003 DETERMIN IN G THE INCOME OF THE ASSESSEE AT RS. 360/ - AND AS PER THE MAT CALCULATION MADE U/S. 1 15J OF THE ACT, INCOME OF THE ASSESSEE WAS CALCULATED AT RS.27.24 CRORES . ON PERUSAL OF THE ASSESSMENT RECORD, THE CIT FOUND THAT AN AMOUNT OF RS.27.24 CRORES HAD BEEN CREDITED TO THE P&L ACCOUNT UNDER THE HEAD BALANCE WRITTEN OFF, THAT IT WAS REDUCED FROM THE NET PROFI T WHILE COMPUTING THE TOTAL INCOME, THAT THE AMOUNT IN QUESTION WAS INCLUDED WHILE ARRIVING AT BOOK PROFIT U/S. 115JB OF THE ACT. IN VIEW OF THE ABOVE FACTS THE CIT HELD THAT OMISSION TO CONSIDER THE SAME IN THE REGULAR INCOME HAD RESULTED IN ESCAPEMENT OF INCOME TO THE EXTENT OF RS.27,24,93,938/ - , THAT THE ORDER PASSED BY THE AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REV ENUE. HE ISSUED NOTICE U/S. 263 OF THE ACT ON 15.3.2011. A FTER CONSIDERING THE SUBMISSION OF THE ASSESSEE HE H ELD THAT AN AMOUNT OF RS.27.24 CRORES HAD BEEN CREDIT ED TO THE P&L ACCOUNT , REFLECTED SHARE OF LOSS OF R S .30.49 CR. F ROM ORGO PHARMA C HEMICALS A FIRM FROM WHICH THE ASSESSEE HAD RETIRED IN THE AY 20 03 - 04, THAT ON 1.1.04 BUSINESS OF THE FIRM WAS TAKEN OVER BY M/S. LOBIN CARE PRODUCTS PVT. LTD.( LCCPL), THAT LCCPL AMALGAMATED WITH ZYMA L ABORATORIES LTD. (ZLL), THAT ON 1.3.04 ZLL ASSIGNED THE DEBT OF RS. 30.49 CR. S TANDING IN THE NAME OF THE ASSESSEE TO M/S. KOTWALA(I) LTD. T HROUGH A DEED OF ASSIGNMENT DT.27.3 .2004 FOR A CONSIDERATION OF RS.3.05 CR., THAT THE LIABILITY IN THE BOOKS OF ACCOUNT AGAINST THE ASSESSEE WAS SHOWN AT RS . 30.49CR, THAT M/S. K OTWALA (I) LTD. F ILED A SUIT AGAINST THE ASSESSEE IN B OMBAY H IGH C OURT TO RECOVER THE SAID AMOUNT, THAT THE MATTER WAS RESOLVED OUT OF COURT FOR A CONSIDERATION OF RS.3.25 CR., THAT THE ASSESSEE HAD THEREFORE, AFTER NETTING SQUARED OFF THE ENTRY APPEARING IN THE BOOKS BY SHOWING THE SAME AS INCOME IN THE P&L ACCOUNT, THAT SAME WAS CONSIDERED WHILE ARRIVING AT PROFIT U /S. 115JB, THAT IN COMPUTATION OF TOTAL INCOME THE ASSESSEE REDUCED IT , HE DIRECTED THE AO TO VERIFY THE CONTENTION OF THE ASSESSEE IN LIGHT OF THE JUDICIAL DECISION AND REASSESS THE INCOME ACCORDINGLY. 3. AGGRIEVED BY THE ORDER OF THE CIT, THE ASSESSEE HA D FILED AN APPEAL, BEFORE US, AS STATED EARLIER. DURING THE COURSE OF HEARING , THE AUTHORISED REPRESENTATIVE ( AR ) OF THE ASSESSEE ARGUED THAT ORDER OF THE AO PASSED U/S. 143(3) OF THE ACT WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INT EREST OF THE REV ENU E, THAT THE AO HAD MADE SPECIFIC ENQUIRIES ABOUT DISPUTED AM OUN T , THAT THE ASSESSEE HAD FILED DETAILED EXPLANATION ABOUT RS. 27.24CR. DURING THE ASSESSMENT PROCEEDINGS , THAT THE ORDER OF THE AO WAS PASSED AFTER CONSIDERING THE RELEVANT FACTS. SHE RELIED ON T HE CASE S OF 1. F INE JEWELLERY (INDIA) LTD.( 372 ITR 303 ) 2, GABRIEL INDIA LTD. (203 ITR 108(BOM.); 3. RELIANCE GAS TRA NSPORTATION INFRASTRUCTURE LTD.( 50 TAXMANN.COM 208 ) 4. ADITI DEVELOPERS (49 SOT 664 ); 5. VILAS P OLYMERS (341 ITR 537 ); 6. ANIL KUMAR S HARMA ( 335 ITR 83 ); 7. CADILA HEALTHCARE LTD. (51 TAXMANN.COM 255 ) 8. GEOFFREY MANNERS & CO. LTD. ( 221 ITR 695 ) THE AR REFERRED TO PG NO.13, 14 OF THE PAPER BOOK. THE DEPARTMENTAL R EPRESENTATIVE ( DR ) SUPPORTED THE ORDER OF THE CIT AND CONTENDED THAT T HERE WAS NON - APPLICATION OF MIND ON PART OF 3493/12 (07 - 08)LUPIN INVESTMENTS PVT. LTD. 3 THE AO ABOUT THE DISPUTED SUM. SHE RELIED UPON THE CASE OF INFOSYS TECHNOLOGIES LTD. ( 17 TAXMANN.COM 203 ) , DELIVERED BY THE H ONBLE KAR NATAKA H IGH C OURT . 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MA TERIAL BEFORE US. WE FIND THAT THE CIT HAD PASSED REVISIONARY ORDER AS HE WAS OF THE OPINION THAT THE AO HAD FAILED TO CONSIDER THE DISPUTED AM OUNT OF RS. 27.24 CR. W HILE CALCULATING THE INCOME OF THE ASSESSEE UNDER NORMAL PROVISIONS , THAT THE AO HAD MADE A SPECIFIC QUERY ABOUT THE AM OUNT IN QUESTION, THAT THE ASSESSEE HAD FILED THE COPY OF CONSENT AGREEMENT WITH M /S . KOTWALA (I) LTD. WE FIND THAT VIDE HIS Q UES .NO.9 TH E AO HAD DIRECTED THE ASSESSEE AS UNDER : - PLEASE SHOW - CAUSE WHY LOAN/DEBTS WAIVER OF RS.2 7,24,93,938/ - HAS NOT BE E N CONSIDERED AS INCOME. WE FURTHER FIND THAT THE ASSESSEE VIDE ITS LETTER DT.31.8.2009 FILED A DETAILED EXPLANATION IN THAT REGARD. IN THESE CIRCUMSTANCES IT CANNOT BE HELD THAT THERE WAS NON - APPLICATION OF MIND ON PART OF THE AO. AFTER RECEIVING THE EXPLANATION OF THE ASSESSEE , THE AO CHOSE NOT TO MENTION ANYTHING ABOUT THE WAIVER OF LOAN OF RS.27.24 CR. BUT, THIS FACT ALONE CANNOT BE CONSIDERED A VALID REASON FOR INVOKING THE PROVISIONS OF S ECTION 263 OF THE ACT. WE FIND THAT THE HONBLE JURISDICTIONAL HIGH COURT IS TAKING A CONSTANT STAND THAT IF THE AO DOES NOT MENTION ANYTHING IN HIS ASSESSMENT ORDER ABOUT A PARTICULAR FACT FOR WHICH HE HAD CALLED FOR THE DETAILS FROM THE ASSESSEE , THE CIT WOU LD NOT BE JUSTIFIED IN PASSING A REV ISIONARY ORDER. WE WOULD LIKE TO REPRODUCE THE RELEVANT PORTION OF THE ORDER IN CASE OF GABRIEL INDIA THE POWER OF SUO MOTU REVISION UNDER SUB - SECTION (1) OF SECTION 263 OF THE INCOME - TAX ACT, 1961, IS IN THE NATURE OF SUPERVISORY JURISDICTION AND CAN BE E XERCISED ONLY IF THE CIRCUMSTANCES SPECIFIED THEREIN EXIST. TWO CIRCUMSTANCES MUST EXIST TO ENABLE THE COMMISSIONER TO EXERCISE THE POWER OF REVISION UNDER THIS SUB - SECTION, VIZ., (I) THE ORDER SHOULD BE ERRONEOUS; AND (II) BY VIRTUE OF THE ORDER BEING ERR ONEOUS PREJUDICE MUST HAVE BEEN CAUSED TO THE INTERESTS OF THE REVENUE. AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH LAW. IF AN INCOME - TAX OFFICER ACTING IN ACCORDANCE WITH LAW MAKES CERTAIN ASSESSMENT, THE SAME CANNOT BE BRAN DED AS ERRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE, ACCORDING TO HIM, THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY. THIS SECTION DOES NOT VISUALISE A CASE OF SUBSTITUTION OF THE JUDGMENT OF THE COMMISSIONER FOR THAT OF THE INCOME - TAX OFFICER, WHO P ASSED THE ORDER, UNLESS THE DECISION IS HELD TO BE ERRONEOUS. CASES MAY BE VISUALISED WHERE THE INCOME - TAX OFFICER WHILE MAKING AN ASSESSMENT EXAMINES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME EITHER BY ACCEPTING THE ACCOUNTS OR BY MAKING SOME ESTIMATES HIMSELF. THE COMMISSIONER, ON PERUSAL OF THE RECORDS, MAY BE OF THE OPINION THAT THE ESTIMATE MADE BY THE OFFICER CONCERNED WAS ON THE LOWER SIDE AND LEFT TO THE COMMISSIONER HE WOULD HAVE ESTIMATED THE INCOME AT A HIGHER FIGURE THAN THE ONE DETERMINED BY THE INCOME - TAX OFFICER. THAT WOULD NOT VEST THE COMMISSIONER WITH POWER TO RE - EXAMINE THE ACCOUNTS AND DETERMINE THE INCOME HIMSELF AT A HIGHER FIGURE. THIS IS BECAUSE THE INCOME - TAX OFFICER HAS EXERCISED THE QUASI - JUDICIAL POWER VESTED IN HIM IN ACCORDANCE WITH LAW AND ARRIVED AT A CONCLUSION AND SUCH A CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIONER DOES NOT FEEL SATISFIED WITH THE CONCLUSION. IT MAY BE SA ID IN SUCH A CASE THAT IN THE OPINION OF THE COMMISSIONER THE ORDER IN QUESTION IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. BUT THAT BY ITSELF WOULD NOT BE ENOUGH TO VEST THE COMMISSIONER WITH THE POWER OF SUO MOTU REVISION BECAUSE THE FIRST REQUIREMEN T, NAMELY, THAT THE ORDER IS ERRONEOUS, IS ABSENT. SIMILARLY IF AN ORDER IS ERRONEOUS BUT NOT PREJUDICIAL TO THE INTERESTS OF THE REVENUE, THEN THE POWER OF SUO MOTU REVISION CANNOT BE EXERCISED. ANY AND EVERY ERRONEOUS ORDER CANNOT BE THE SUBJECT - MATTER O F REVISION BECAUSE THE SECOND REQUIREMENT MUST BE FULFILLED. THERE MUST BE SOME PRIMA FACIE MATERIAL ON RECORD TO SHOW THAT TAX WHICH WAS LAWFULLY EXIGIBLE HAS NOT BEEN IMPOSED OR THAT BY THE APPLICATION OF THE RELEVANT STATUTE, ON AN INCORRECT OR INCOMPLE TE INTERPRETATION, A LESSER TAX THAN WHAT WAS JUST HAS BEEN IMPOSED. WHEN EXERCISE OF STATUTORY POWER IS DEPENDENT UPON THE 3493/12 (07 - 08)LUPIN INVESTMENTS PVT. LTD. 4 EXISTENCE OF CERTAIN OBJECTIVE FACTS, THE AUTHORITY BEFORE EXERCISING SUCH POWER MUST HAVE MATERIALS ON RECORD TO SATISFY IT IN THAT REGARD. IF THE ACTION OF THE AUTHORITY IS CHALLENGED BEFORE THE COURT IT WOULD BE OPEN TO THE COURTS TO EXAMINE WHETHER THE RELEVANT OBJECTIVE FACTORS WERE AVAILABLE FROM THE RECORDS CALLED FOR AND EXAMINED BY SUCH AUTHORITY RESPECTFUL LY FOLLOWING THE AB OVE JUDGMENT, WE DECIDE THE EFFECTIVE GROUND OF APPEAL OF THE ASSESSEE IN FAV OU R OF THE ASSESSEE . AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD , JUNE ,2015. 3 , 2015 SD/ - SD/ - ( /I P BANSAL) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 03. 0 6 .2015 . . . JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5 . DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.