SALIL TRADING & INVESTMENT COMPANY, MUMBAI V. ACIT 18(3), MUMBAI

ITA 3635/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8028 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 17-02-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 08-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Opportunity of being heard; Earning of tax free income; Tangible material; Difference of opinion; Revised return; Reason to believe; Change of opinion
• Section: 142(1); 14A; 148

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNALE BENCH, MUMB AI BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO.3635/MUM/2013 ( / ASSESSMENT YEAR: 2007-08) M/S. SALIL TRADING & INVESTMENT COMPANY 164, SENAPATI BAPAT MARG, MATUNGA (W), MUMBAI - 400016 / VS. ACIT 18(3) R. NO.219, PIRAMAL CHAMBERS, LALBAUGH MUMBAI - 400012 ./ ./ PAN/GIR NO. AAXFS1327F ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 17.02.2017 /DATE OF PRONOUNCEMENT:. 28.02.2017 / O R D E R PER AMARJIT SINGH, JM: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST T HE ORDER DATED 06.02.2013 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-29, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO THE A.Y.2007- 08. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- A) REOPENING OF ASSESSMENT U/S.148 IS BAD IN LAW AN D LIABLE TO BE QUASHED ASSESSEE BY: NONE REVENUE BY: SHRI SAMBIT MISHRA ITA NO.3635.M.13 A.Y. 2007-08 2 1. THE LEARNED COMMISSIONER OF INCOME-TAX (A) ERRED IN NOT ADMITTING THE LEGAL ISSUE RAISED BY WAY OF ADDITIONAL GROUND CHALLENGING THE REOPENING OF ASSESSMENT AS BAD IN LAW AND AT THE SAME TIME ALSO CONFIRMING THE REOPENING OF THE ASSESSMENT ON THE GROUND THAT THE REOPENING WAS DONE IN VIEW OF DECISION OF SPECIAL BENCH WITHOUT APPRECIATING THE FACT THERE WAS NO REASON TO BELIEVE THAT ANY INCOME HAS ESCAPED ASSESSMENT AND HENCE, THE REOPENING OF ASSESSMENT IS BAD IN LAW, UNJUSTIFIED AND LIABLE TO BE QUASHED. 2. THE LD. CIT(A) FAILED TO APPRECIATE THAT THERE WAS NO NEW TANGIBLE MATERIAL OR EVIDENCE BROUGHT ON RECORD FOR REOPENING OF THE ASSESSMENT AND HENCE, THE REOPENING OF THE ASSESSMENT IS MERE CHANGE OF OPINION AND IS THUS, BAD IN LAW AND LIABLE TO BE QUASHED. 3. WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT(A) FAIL ED TO APPRECIATE THAT THE RETURN FILED IN RESPONSE TO NOTICE U/S.148 OF THE ACT REVISING THE TOTAL INCOME WAS WITHOUT PREJUDICE TO THE RIGHT OF THE APPELLANT TO CONTEST THE ISSUE AND HENCE, THE APPELLANT HAS RIGH TLY CONTESTED THE ISSUE OF REOPENING OF THE ASSESSMENT, THOUGH BY WAY OF ADDITIONAL GROUND OF APPEAL AND THIS BEING LEGAL ISSUE, THE BONA FIDES AND CONDUCT OF THE APPELLANT COULD NOT BE DOUBTED AND HENCE, THE REOPENING OF THE ASSESSMENT IS BAD IN LAW AND LIABL E TO BE QUASHED. WITHOUT PREJUDICE TO ABOVE, ON MERITS: B) DISALLOWANCE U/S.14A OF THE ACT 4. THE LEARNED COMMISSIONER OF INCOME-TAX (A) ERRED IN CONFIRMING THE DISALLOWANCE MADE U/S.14A OF THE ACT MERELY ON THE GROUND THAT THE APPELLANT HAS ITSELF MADE THE DISALLOWANCE WHILE FILING REVISED RETURN I N RESPONSE TO NOTICE ISSUED U/S.148 AND THE ASSESSED INCOME CANNOT BE LOWER THAN THE RETURNED INCOME WITHOUT APPRECIATING THE FACT THAT THE DISALLOWANCE MADE U/S.14A AND OFFERED TO TAX IN RETURN FILED IN RESPONSE TO NOTICE U/S.148 OF THE ACT WAS WITHOUT PREJUDICE TO THE RIGHTS OF THE APPELLANT TO CONTEST THE ITA NO.3635.M.13 A.Y. 2007-08 3 SAID ISSUE AND HENCE, THE DISALLOWANCE CONFIRMED WITHOUT ADJUDICATING THE ISSUE ON MERITS IS UNJUSTI FIED AND THE DISALLOWANCE MADE U/S.14A OF THE ACT IS LIA BLE TO BE DELETED. 5. THE LD. CIT(A) FAILED TO APPRECIATE THAT SINCE THE DISALLOWANCE IN THE RETURN FILED IN RESPONSE TO NOT ICE U/S.148 WAS WITHOUT PREJUDICE, THE LD. AO CORRECTLY DEALT THE ISSUE ON MERITS AND THEN MADE DISALLOWANC E U/S.14A BY SPEAKING ORDER ON MERITS AND HENCE, THE LD. CIT(A) OUGHT TO HAVE DECIDED THE ISSUE ON MERIT S OF THE CASE AND NOT MERELY DISMISSING THE APPEAL ON THE GROUND THAT APPELLANT ITSELF DISALLOWED IN REVI SED RETURN AND THUS, THE DISALLOWANCE CONFIRMED U/S.14A OF THE ACT IS WITHOUT ANY JUSTIFICATION AND LIABLE TO BE DELETED. 6. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE APPELL ANT IS IN THE BUSINESS OF DEALING IN SHARES AND THE SHA RES WERE HELD AS STOCK IN TRADE AND THAT THE DIVIDEND INCOME WAS RECEIVED MERELY AS INCIDENTAL TO THE CARRYING ON OF THE BUSINESS OF SHARE TRADING AND HENCE, THE PROVISIONS OF SECTION 14A OF THE ACT DOE S NOT APPLY TO THE INSTANT CASE OF THE APPELLANT AND THE DISALLOWANCE THUS MADE U/.S14A OF THE ACT IS WITHOU T ANY JUSTIFICATION AND LIABLE TO BE DELETED. 7. WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT(A) FAIL ED TO APPRECIATE THAT RULE 8D WAS NOT APPLICABLE FOR THE IMPUGNED A.Y.2007-08 AND HENCE, THE DISALLOWANCE MADE OF INTEREST EXPENSES DIRECTLY RELATED TO EARNI NG OF SHARE TRADING PROFIT APPLYING PROVISIONS OF SEC. 14A OF THE ACT IS WITHOUT ANY JUSTIFICATION AND LIABLE TO BE DELETED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED ITS RETURN OF INCOME ON 10.10.2007 DECLARING TOTAL INCOME TO THE TUNE OF RS.2,53,011/-. THE SAID RETURN WAS PROCESSED U/S.143(1)OF THE INCO ME TAX ACT, 1961 ( IN SHORT THE ACT). SUBSEQUENTLY, THE ASSESSMENT WAS REOPENED U/S.147 OF THE ITA NO.3635.M.13 A.Y. 2007-08 4 ACT AFTER DULY RECORDING THE REASONS FOR REOPENING. THEREAFTER, NOTICE U/S.148 OF THE ACT WAS ISSUED ON 02.02.2011 AND DUL Y SERVED UPON THE ASSESSEE. THE ASSESSEE FILED REVISED RETURN OF INC OME ON 04.03.2011 AND DECLARED TOTAL INCOME TO THE TUNE OF RS.80,89,560/- . THEREAFTER, NOTICES U/S.143(2) AND 142(1) OF THE ACT WERE ISSUED AND SE RVED UPON THE ASSESSEE. THE ASSESSEE IS A PARTNERSHIP FIRM HAVING PARTNERS MR. KISHORE MUSALE & CHHAYA KISHORE MUSALE. THE SAID FIRM WAS ENGAGED I N THE BUSINESS OF BUYING, SELLING AND DEALING IN SHARES, STOCKS AND S ECURITIES WITH OR WITHOUT DELIVERY. THE ASSESSEE PAID INTEREST TO THE TUNE OF RS.2,07,89,876/- WHICH WAS NOT ALLOWED IN ACCORDANCE WITH PROVISION U/S.14 A OF THE ACT, THEREFORE, AN AMOUNT OF RS.78,36,545/- WAS ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE CHALLENGED THE REOPENING U/S.143(3) R.W.S. 147 OF THE ACT AND ALSO CHALLENGED THE ADDITION BEFORE CIT(A) WHO CONFIRMED THE ORDER PASSED BY THE ASSESSING OFFICER, HENCE THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. THE APPEAL IS TIME BARRED BY 3 DAYS WHICH IS A LLOWED AS THE SAME WAS NOT SO LONG. ISSUE NO.1:- 4. UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED THE REOPENING U/S.148 OF THE ACT. THE REPRESENTATIVE OF THE ASSESSEE NOWHER E APPEARED BEFORE THE COURT DESPITE SERVICE. THEREFORE, HE WAS PROCEEDED AGAINST EX-PARTE. NO DOCUMENTS OF ANY KIND WERE PLACED ON RECORD TO WHIC H IT CAN BE ASSUMED THAT THE ORDER PASSED BY THE ASSESSING OFFICER U/S. 148 OF THE ACT IS WRONG AGAINST LAW AND FACTS. SINCE THE ASSESSEE DID NOT APPEAR BEFORE US AND FAILED TO PRODUCE ANY MATERIAL IN SUPPORT OF HIS CONTENTIO N, THEREFORE, WE ARE OF ITA NO.3635.M.13 A.Y. 2007-08 5 THE VIEW THAT THE ASSESSEE FAILED TO PROVE THIS FAC T THAT THE REOPENING U/S.148 OF THE ACT IS WRONG AGAINST LAW AND FACTS. THEREFO RE, IN THE SAID CIRCUMSTANCES, WE UPHELD THE ORDER PASSED BY CIT(A) IN QUESTION. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE REVENUE AGAINST THE ASSESSEE. ISSUE NO.2:- 5. UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED THE ADDITION TO THE TUNE OF RS.78,36,545/- U/S.14A OF THE ACT. THE PRESENT ASS ESSMENT IS FOR A.Y.2007- 08 TO WHICH THE PROVISION U/S.14A R.W.RULE 8D OF TH E ACT IS NOT DIRECTLY APPLICABLE WHICH HAS BEEN APPLIED BY THE ASSESSING OFFICER IN THE INSTANT CASE. IN VIEW OF THE LAW SETTLED IN GODREJ & BOYCE MFG. CO. 328 ITR 81 (BOM), WE ARE OF THE VIEW THAT THE CONFIRMATION OF THE ORDER OF THE CIT(A) IS NOT JUSTIFIABLE. THEREFORE, THE ORDER OF THE CIT(A ) IS HEREBY ORDERED TO BE SET ASIDE AND ASSESSING OFFICER IS HEREBY DIRECTED TO RE-COMPUTE THE EXPENDITURE INCURRED TO EARN THE EXEMPT INCOME SPEC IFICALLY IN VIEW OF THE LAW SETTLED IN GODREJ & BOYCE MFG. CO. 328 ITR 81 ( BOM) BY GIVING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCOR DANCE WITH LAW. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE 6. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS HEREBY PARTLY ALLOWED FOR STATISTICAL PURPOSE. ITA NO.3635.M.13 A.Y. 2007-08 6 ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH FEBRUARY, 2017 . SD/- SD/- (D.KARUNAKARA RAO) (AMARJIT SINGH) ! / ACCOUNTANT MEMBER ' #! /JUDICIAL MEMBER MUMBAI; DATED : 28 TH FEBRUARY, 2017 MP MP MP MP / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & ( ) / THE CIT(A)- 4. & / CIT 5. #' (###) , #) , / DR, ITAT, MUMBAI 6. ( *+, / GUARD FILE. / BY ORDER, ## //TRUE COPY// / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI