SIMPLEX REALTY LTD, MUMBAI V. DCIT (OSD) CIR 7, MUMBAI

ITA 3829/MUM/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2497 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 26-02-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 30-05-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Search and seizure; Opportunity of being heard
• Section: 142(1); 153A; 10

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI . . , , ! '#, $ , % BEFORE SHRI B.R.BASKARAN, AM AND SHRI AMARJIT SINGH , JM / I.T.A. NO.4291/MUM/12, 4292/MUM/12, 4293/MUM/12, 4294/MUM/12, 4295/MUM/12, 4296/MUM/12 & 4297/MUM/12 ( $ & '& / ASSESSMENT YEAR: 2003-04, 2004-05, 2005-06, 2006-07 , 2007-08, 2008-09 & 2009-10) DY. COMMISSIONER OF INCOME TAX (OSD) I CENTRAL RANGE7 ROOM NO.413, 4 TH FLOOR, AAYAKAR BHAVAN, M.K.MARG, MUMBAI - 400020 / VS. M/S. SIMPLEX REALTY LTD. 30, KESHAV KHADYE MARG, SANT GHADGE MAHARAJ CHOWK MUMBAI - 400011 C.O.NO.151/MUM/14, 152/MUM/14, 153/M/14, 154/M/14, 155/M/14 (I.T.A. NO.4291/MUM/12, 4292/MUM/12, 4293/MUM/12, 4294/MUM/12 & 4295/MUM/12) ( $ & '& / ASSESSMENT YEAR: 2003-04, 2004-05, 2005-06, 2006-07 & 2007-08) M/S. SIMPLEX REALTY LTD. 30, KESHAV KHADYE MARG, SANT GHADGE MAHARAJ CHOWK MUMBAI - 400011 / VS. DY. COMMISSIONER OF INCOME TAX (OSD) I CENTRAL RANGE 7 ROOM NO.413, 4 TH FLOOR, AAYAKAR BHAVAN, M.K.MARG, MUMBAI - 400020 / I.T.A. NO.3829/MUM/2012 & 3830/MUM/2012 ( $ & '& / ASSESSMENT YEAR: 2008-09 & 2009-10) M/S. SIMPLEX REALTY LTD. 30, KESHAV KHADYE MARG, SANT GHADGE MAHARAJ CHOWK MUMBAI - / VS. DY. COMMISSIONER OF INCOME TAX (OSD) I CENTRAL RANGE 7 ROOM NO.413, 4 TH FLOOR, AAYAKAR BHAVAN, M.K.MARG, I.T.A. NO.4291-4297/MUM/2012, I.T.A.NO.3829-3830/M/2012 C.O.NO.151-155/MUM/2014 A.Y.: 2003-04 TO 2009-10 2 MUMBAI - 400020 ./ ./ PAN/GIR NO. : AAACT4056E ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 23.09.2016 !' /DATE OF PRONOUNCEMENT: 21.10.2016 #$ / O R D E R PER BENCH: THE REVENUE AS WELL AS ASSESSEE FILED THE ABOVE MEN TIONED APPEALS AND CROSS OBJECTION AGAINST THE DIFFERENT O RDERS PASSED BY THE COMMISSIONER OF INCOME TAX (APPEAL) 40 MUMBAI [HERE INAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y.2 003-04, 2004-05, 2005-06, 2006-07, 2007-08, 2008-09 & 2009-10. THE SE APPEALS AND CROSS OBJECTIONS ARE BEING TAKEN UP TOGETHER FOR AD JUDICATION BEING THE PARTIES ARE THE SAME AND THE MATTER OF CONTROVERSY IS ALSO SAME WHICH CAN CONVENIENTLY BE ADJUDICATED BY A SINGLE ORDER. ITA NO.4291/M/2012 (A.Y.2003-04):- 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWA NCE OF FOREIGN TRAVEL EXPENSES OF DIRECTORS AT RS.8,82,089 /- AS THE ASSESSEE BY: SHRI J.D.MISTRY & SATISH MODY DEPARTMENT BY: SHRI H.M. WANARE I.T.A. NO.4291-4297/MUM/2012, I.T.A.NO.3829-3830/M/2012 C.O.NO.151-155/MUM/2014 A.Y.: 2003-04 TO 2009-10 3 SAME WERE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 2. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF EXPEND ITURE IN RESPECT OF VRS PAID AT RS.43,43,280/- BEFORE THE INTRODUCTION OF SECTION 35DDA CLAIMED AT THE RATE O F 1/10 TH FOR EACH YEAR BY THE ASSESSEE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE ON ACCOU NT OF UNACCOUNTED COMMISSION EXPENSES PAID TO DIVYA TEXTI LE AGENCY AT RS.11,94,852/-. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED THE RETURN OF INCOME DECLARING TOTAL LOSS TO THE TUNE (-) RS.3 ,02,76,640/- ON 01.12.2003. THE ASSESSMENT U/S.143(3) OF THE INC OME TAX ACT, 1961 ( IN SHORT THE ACT) WAS COMPLETED ON 28.11.2005 D ETERMINING TOTAL LOSS TO THE TUNE OF (-)RS.3,00,34,350/-. THE ASSES SEE COMPANY WAS HAVING TEXTILE UNITS AT AKOLA AND MUMBAI AND PAPER UNIT AT GONDIA, MAHARASHTRA. DURING THE F.Y.2004-05 THERE WERE VES TING OF TEXTILE AND PAPER DIVISION TO OTHER COMPANIES AND THE NAME OF THE COMPANY WAS CHANGED TO M/S. SIMPLEX REALTY LIMITED W.E.F. 0 9.11.2005. A SEARCH AND SEIZURE ACTION U/S.132 OF THE ACT WAS CA RRIED OUT ON 16.10.2008 AND ON SUBSEQUENT DATES ON SIMPLEX GROUP OF COMPANIES AND ITS ASSOCIATES. THE OFFICE / RESIDENTIAL PREMI SES OF THE COMPANY AND ITS DIRECTORS / CONNECTED PERSONS WERE ALSO COV ERED. THE SIMPLEX GROUP IS ENGAGED IN THE BUSINESS OF REALITY, PAPER, TEXTILE AND FINANCE. THE GROUP IS MANAGED BY SHRI NANDAN S. DAMANI, CHAI RMAN AND MANAGING DIRECTOR OF M/S. SIMPLEX REALITY LTD. THE ALLEGATION I.T.A. NO.4291-4297/MUM/2012, I.T.A.NO.3829-3830/M/2012 C.O.NO.151-155/MUM/2014 A.Y.: 2003-04 TO 2009-10 4 AGAINST THIS GROUP WAS NOT OFFERING FULL INCOME FOR TAXATION, BOOKS OF ACCOUNTS ARE MANIPULATED BY RECORDING LOWER SALES P ROCEEDS / INFLATING EXPENSES, THE LAND PROPERTY AND OTHER ASSETS OWNED BY THE GROUP ARE EITHER NOT DECLARED OR UNDER DECLARED IN THE BOOKS, LARGE SUMS OF UNACCOUNTED CASH IN ACCEPTING BY SHOWING SALE AGREE MENTS AT LOWER PRICE AND SHRI NANDAN DAMANI HAS SPENT LARGE SUMS O F UNACCOUNTED CASH IN RECONSTRUCTING OF HIS BUNGALOW AT CUFFE PAR ADE AND ON THE INTERIORS. DURING THE COURSE OF SEARCH ACTION VARI OUS INCRIMINATING DOCUMENTS / BOOKS OF ACCOUNT ETC., WERE FOUND AND S EIZED. 4. THE SEARCH AND SEIZURE ACTION U/S.132 OF THE ACT WAS ALSO CONDUCTED AT THE ASSESSEES PREMISES 30, KESHAV KHA DYE MARG, SANT GHADGE MAHARAJ CHOWK, MUMBAI 400011 VIDE WARRANT OF AUTHORIZATION U/S.132 OF THE ACT BEARING NO.6390 DA TED 14.10.2008. DURING THE COURSE OF SEARCH, FOLLOWING JEWELER, CAS H AND DOCUMENTS WERE FOUND / SEIZED:- I.T.A. NO.4291-4297/MUM/2012, I.T.A.NO.3829-3830/M/2012 C.O.NO.151-155/MUM/2014 A.Y.: 2003-04 TO 2009-10 5 SR. NO. PREMISES COVERED FOUND SEIZED JEWELLERY CASH DOCUMENTS JEWELLERY CASH DOCUMENTS 1. M/S. SIMPLEX REALTY LTD., 30, KESHAV KHADYE MARG, SANT GHADGE MAHARAJ CHOWK, MUMBAI NIL 51,67,318 ANNEX A-1 TO A4 DTD. 16.10.08 A1 LOOSE PAPER FILE (CONTAINING 212 PAGES) A2 LOOSE PAPER FILE (CONTAINING 63 PAGES) A3 LOOSE PAPER FILE (CONTAINING 74 PAGES) A4- COMPUTER DATA BACKUP IN HARD DISK (TWO MAIN COPIES & TWO WORKING COPY) ANNEX.A1 DT.11.12.08 LOOSE PAPER FILE (CONTAINING 6 PAGES) NIL 50,00,000 ANNEX A-1 TO A4 DTD. 16.10.08 A1 LOOSE PAPER FILE (CONTAINING 212 PAGES) A2 LOOSE PAPER FILE (CONTAINING 63 PAGES) A3 LOOSE PAPER FILE (CONTAINING 74 PAGES) A4- COMPUTER DATA BACKUP IN HARD DISK (TWO MAIN COPIES & TWO WORKING COPY) ANNEX.A1 DT.11.12.08 LOOSE PAPER FILE (CONTAINING 6 PAGES) 5. THEREAFTER, PROCEEDING U/S.153A OF THE ACT WAS I NITIATED AND NOTICE DATED 19.01.2009 WAS ALSO SERVED UPON THE AS SESSEE IN THIS REGARD. AFTER THE SERVICE OF THE SAID NOTICE, THE ASSESSEE FILED THE I.T.A. NO.4291-4297/MUM/2012, I.T.A.NO.3829-3830/M/2012 C.O.NO.151-155/MUM/2014 A.Y.: 2003-04 TO 2009-10 6 RETURN OF INCOME DECLARING TOTAL LOSS TO THE TUNE O F (-)RS.3,33,20,800/-. THEREAFTER THE NOTICE U/S.143(2) AND 142(1) OF THE ACT WERE ALSO ISSUED AND SERVED UPON THE ASSESSEE. AFTER BEING G IVING PROPER OPPORTUNITY OF BEING HEARD, THE ASSESSMENT OF THE A SSESSEE WAS COMPLETED BY DECLARING THE LOSS TO THE TUNE OF (-)R S.1,70,80,931/-. THEREAFTER THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO PARTLY ALLOWED THE APPEAL, THEREFORE THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. HOWEVER, THE ASSESSEE HAS ALSO FILED TH E CROSS OBJECTION BY RAISING THE QUESTION OF VALIDITY OF THE ASSESSMENT U/S.153A OF THE ACT. 6. UNDER THE ISSUES RAISED BY THE ASSESSEE IN HIS C ROSS OBJECTION, THE ASSESSEE HAS RAISED THE QUESTION OF THE VALIDIT Y OF ORDER PASSED U/S.153A OF THE ACT. HOWEVER, ON THE OTHER HAND TH E LEARNED DEPARTMENTAL REPRESENTATIVE HAS REFUTED THE SAID CO NTENTION AND ARGUED THAT THE CROSS OBJECTION HAS BEEN FILED BY THE ASSE SSEE 431 DAYS DELAY THEREFORE THE SAME IS NOT LIABLE TO BE ENTERTAIN AN D THE CROSS OBJECTION IS LIABLE TO BE DISMISSED. THE ASSESSEE HAS RAISED THE LEGAL ISSUES IN HIS CROSS OBJECTION. MOREOVER, THE APPEAL OF THE R EVENUE IS PENDING AND WE ARE OF THE VIEW THAT ON THE POINT OF THE LEG AL ISSUES THE CROSS OBJECTION IS LIABLE TO BE DECIDED IN THE INTEREST O F JUSTICE. THEREFORE, THE DELAY HAS BEEN CONDONED SPECIFICALLY IN THE CIR CUMSTANCES WHEN THE LEGAL ISSUE CAN BE RAISED WITHOUT FILING THE CR OSS OBJECTION ALSO. IN THIS REGARD, WE ALSO FOUND SUPPORT OF LAW SETTLED I N [2006] 154 TAXMAN 80 (MP) IN CASE CITED AS DEPUTY COMMISSIONER OF INCOME I.T.A. NO.4291-4297/MUM/2012, I.T.A.NO.3829-3830/M/2012 C.O.NO.151-155/MUM/2014 A.Y.: 2003-04 TO 2009-10 7 TAX VS. TURQUOISE INVESTMENTS & FINANCE LTD. IN VIE W OF THE SAID CIRCUMSTANCES THE DELAY IS HEREBY CONDONED AND BEFO RE GOING FURTHER WE TAKE UP THE ISSUE IN CONNECTION WITH THE VALIDIT Y OF THE ORDER IN QUESTION PASSED U/S.153A OF THE ACT. THE LEARNED R EPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE AUTHORITY HAS GIVE N APPROVAL U/S.153D WITHOUT APPLICATION OF MIND BY VIRTUE OF LETTER NO.ADDL.C.I.T./CEN.RG.-7/APPROVAL 153D/2010-11/397 DATED 31.12.2010, THEREFORE IN THE SAID CIRCUMSTANCES THE ASSESSMENT U/S.153A OF THE ACT IS NOT JUSTIFIABLE IN VIEW OF T HE DECISION OF ITAT, MUMBAI IN ITA NO.4061/MUM/2012 TITLED AS SMT. SHREE LEKHA DAMANI VS. DCIT(OSD-1) CR-7 DATED 19.08.2015 AND IN ITA NO.S136-137/MUM/2013 AND 147-151/MUM/2013 IN CASE TITLED AS THE NAVBHARAT REFRIGERATION & INDUSTRIES LTD. VS. D CIT (OSD-1) C.R.-7. ON THE OTHER HAND THE LEARNED REPRESENTATI VE OF THE DEPARTMENT HAS STRONGLY RELIED UPON THE FINDING OF THE CIT(A) IN QUESTION. BEFORE GOING FURTHER IT IS NECESSARY TO ADVERT THE CONTENTS OF THE LETTER ON RECORD:- TO, 31 ST DECEMBER 2010 THE DCIT (OSD)-I MUMBAI SUB:- APPROVAL U/S.153D OF DRAFT ORDER U/S.143(3 ) R.W.S.153A IN THE CASE OF M/S. SIMPLEX REALTY LTD. FOR A.Y.2009-10 I.T.A. NO.4291-4297/MUM/2012, I.T.A.NO.3829-3830/M/2012 C.O.NO.151-155/MUM/2014 A.Y.: 2003-04 TO 2009-10 8 REF: NO. DCIT(OSD)-I/CR-7/APPR./2010-11 DATED 31.12.2010 AS PER THIS OFFICE LETTER DATED 20.12.2010, THE AS SESSING OFFICERS WERE ASKED TO SUBMIT THE DRAFT ORDERS FOR APPROVAL U/S.153D ON OR BEFORE 24.12.2010. HOWEVER, THIS DR AFT ORDER HAS BEEN SUBMITTED ON 31.12.2010. HENCE THERE IS N O MUCH TIME LEFT TO ANALYZE THE ISSUES OF DRAFT ORDER ON M ERIT. THEREFORE, THE DRAFT ORDER IS BEING APPROVED AS IT IS SUBMITTED. APPROVAL TO THE ABOVE SAID DRAFT ORDER IS GRANTED U/S.153D OF THE I.T.ACT, 1961. SD/- (SANDEEP KUMAR) ADDL. COMMISSIONER OF INCOME TAX CENTRAL RANGE-7, MUMBAI 7. ON APPRAISAL OF THE ABOVE MENTIONED LETTER IT IS QUITE CLEAR THAT THE APPROVAL HAS BEEN GIVEN U/S.153D OF THE ACT WIT HOUT APPLICATION OF MIND. IN THIS REGARD THE ITAT, MUMBAI HAS ALSO DELIVERED THE ORDER IN ITA NO.4061/MUM/2012 TITLED AS SMT. SHREEL EKHA DAMANI VS. DCIT(OSD-1) CR-7 DATED 19.08.2015 AND IN ITA NO .S136- 137/MUM/2013 AND 147-151/MUM/2013 IN CASE TITLED A S THE NAVBHARAT REFRIGERATION & INDUSTRIES LTD. VS. DCIT (OSD-1) C.R.-7. 8. RESPECTFULLY FOLLOWING THE ORDER OF CO-ORDINATE BENCH, WE ARE OF THE VIEW THAT THE ASSESSMENT U/S.153A OF THE ACT IS WRONG AGAINST LAW AND FACTS AND IS NOT LIABLE TO BE SUSTAINED IN THE EYES OF LAW, THEREFORE THE ASSESSMENT ORDER U/S153A OF THE ACT D ATED 31.12.2010 IS I.T.A. NO.4291-4297/MUM/2012, I.T.A.NO.3829-3830/M/2012 C.O.NO.151-155/MUM/2014 A.Y.: 2003-04 TO 2009-10 9 HEREBY ORDERED TO BE SET ASIDE. SINCE THIS LEGAL I SSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE, THER EFORE THERE IS NO NEED TO GIVE ANY FINDING RAISED BY THE REVENUE MENT IONED ABOVE BECAUSE THE SAME WOULD BE IN ACADEMIC IN NATURE. 9. ACCORDINGLY APPEAL OF THE REVENUE IS HEREBY ORDE R TO BE DISMISSED ITA NO.4292 TO 4297/M/2012 (A.Y.2004-05 TO 2009-10) :- 10. UNDER ALL THESE REVENUES APPEALS THE BRIEF FAC TS OF THE CASES ARE THE SAME AS MENTIONED IN ITA 4291/MUM/2012, HOWEVER THE FIGURE IS QUITE DIFFERENT. WHILE DECIDING THE ITA NO.4291/MU M/2013 FOR THE A.Y.2003-04, WE HAVE ORDERED TO SET ASIDE THE ASSES SMENT U/S. 153A OF THE ACT ON THE LEGAL ISSUES, THEREFORE WE SET AS IDE THE ASSESSMENT U/S.153A OF THE ACT IN THE SAID ASSESSMENT YEAR. A CCORDINGLY THE ALL THE ABOVE MENTIONED APPEALS OF THE REVENUE ARE HERE BY ORDERED TO BE DISMISSED. ITA NO.3829 TO 3830/M/2012 (A.Y.2008-09 TO 2009-10) : 11. IN BOTH THESE ASSESSEES APPEALS THE BRIEF FACT S OF THE CASES ARE THE SAME AS MENTIONED IN ITA 4291/MUM/2012, HOWEVER THE FIGURE IS QUITE DIFFERENT. WHILE DECIDING THE ITA NO.4291/MU M/2013 FOR THE A.Y.2003-04, WE HAVE ORDERED TO SET ASIDE THE ASSES SMENT U/S. 153A OF THE ACT ON THE LEGAL ISSUES, THEREFORE WE SET AS IDE THE ASSESSMENT I.T.A. NO.4291-4297/MUM/2012, I.T.A.NO.3829-3830/M/2012 C.O.NO.151-155/MUM/2014 A.Y.: 2003-04 TO 2009-10 10 U/S.153A OF THE ACT IN THE SAID ASSESSMENT YEAR. A CCORDINGLY THE BOTH THE APPEALS OF THE ASSESSEE ARE HEREBY ORDERED TO B E DISMISSED. C.O.151 TO 155/M/2014 (A.Y.2003-04 TO 2007-08): 12. IN ALL THE CROSS OBJECTIONS OF THE ASSESSEE THE BRIEF FACTS OF THE CASES ARE THE SAME AS MENTIONED IN ITA 4291/MUM/201 2, HOWEVER THE FIGURE IS QUITE DIFFERENT. WHILE DECIDING THE ITA NO.4291/MUM/2013 FOR THE A.Y.2003-04, WE HAVE ORDERED TO SET ASIDE T HE ASSESSMENT U/S. 153A OF THE ACT ON THE LEGAL ISSUES, THEREFORE WE S ET ASIDE THE ASSESSMENT U/S.153A OF THE ACT IN THE SAID ASSESSME NT YEAR. ACCORDINGLY ALL THE CROSS OBJECTIONS OF THE ASSESSE E ARE HEREBY ORDERED TO BE ALLOWED. 13. IN RESULT THE APPEAL FILED BY THE REVENUE AND A SSESSEE ARE HEREBY DISMISSED AND CROSS OBJECTION ARE HEREBY ORDERED TO BE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST OCTOBER , 2016. SD/- SD/- (B.R.BASKARAN) (AMARJIT SINGH) # / ACCOUNTANT MEMBER %& # /JUDICIAL MEMBER ' ( MUMBAI; )# DATED 21 ST OCTOBER, 2016 MP MP MP MP I.T.A. NO.4291-4297/MUM/2012, I.T.A.NO.3829-3830/M/2012 C.O.NO.151-155/MUM/2014 A.Y.: 2003-04 TO 2009-10 11 ) * +$!', -,'! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. * ( ) / THE CIT(A)- 4. * / CIT 5. -./ &&01 , 01' , ' ( / DR, ITAT, MUMBAI 6. /34 5 / GUARD FILE.