DCIT 9(2), MUMBAI V. MTZ POLY FILMS LTD, MUMBAI

ITA 3896/MUM/2011

• Counselvise Citation: 389619914 RSA 2011
• Duration Of Justice: 1 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 12-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P C MOURYA
• Keywords: Reason to believe; Reassessment proceedings
• Section: 147; 43B; 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI . . , ! , ' # BEFORE SHRI B.R. MITTAL, JUDICIAL MEMBER, AND SHRI RAJENDRA, ACCOUNTANT MEMBER . / ITA NO. 3896/MUM./2011 ( $ % &% / ASSESSMENT YEAR : 200506 ) DY. COMMISSIONER OF INCOME TAX CIRCLE9(2), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .. '( / APPELLANT $ V/S M/S. MTZ POLYFILMS LTD. NEW INDIA CENTRE 17, COOPERAGE ROAD MUMBAI 400 039 .... )*'( / RESPONDENT ' ' ./ + ./ PAN/GIR NO.AAACT0193N , - / REVENUE BY : MR. P.C. MOURYA $ %./ , - / ASSESSEE BY : MR. JITENDRA JAIN A/W MR. MAHESH O. RAJORA $ , /' / DATE OF HEARING 21.06.2012 0 12& , /' / DATE OF ORDER 04.07.2012 0 / ORDER PER B.R. MITTAL, J.M. THE PRESENT APPEAL PREFERRED BY THE REVENUE, IS DIR ECTED AGAINST THE IMPUGNED ORDER 7 TH MARCH 2011, PASSED BY THE COMMISSIONER (APPEALS)X X, MUMBAI, FOR ASSESSMENT YEAR 200506, ON THE FOLLOWI NG GROUNDS: M/S. MTZ POLYFILMS LTD. 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT THE REOPEN ING OF THE ASSESSMENT U/S 147 OF THE ACT WAS NOT VALID, OVERLO OKING THE FACT THAT THE ASSESSMENT WAS REOPENED WITHIN A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR TO MAKE A DISAL LOWANCE UNDER SECTION 43B WHICH IS STATUTORILY REQUIRED TO BE MAD E, BUT WAS OMITTED TO BE MADE IN THE ORIGINAL ASSESSMENT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN ANNULLING THE ASSESSMEN T MADE U/S 147 DESPITE THE FACT THAT THERE WAS ESCAPEMENT OF INCOM E WITHIN THE MEANING OF EXPLANATION 2(C)(I) OF SECTION 147 OF TH E ACT AND ALSO OVERLOOKING THE FACT THAT THE ASSESSING OFFICER HAD SUFFICIENT REASON TO BELIEVE THAT TAXABLE INCOME HAD ESCAPED ASSESSMENT IN AS MUCH AS THE MANDATORY DISALLOWANCE U/S 43B WAS NOT CORRECTL Y MADE IN THE ORIGINAL ASSESSMENT. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PA RTIES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW. 3. DURING THE COURSE OF HEARING, THE LEARNED DEPARTMEN TAL REPRESENTATIVE RELIED ON THE ORDER OF THE ASSESSING OFFICER. 4. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSE SSEE SUBMITTED BEFORE US THAT THE ORIGINAL ASSESSMENT WAS COMPLETE D ON 17 TH DECEMBER 2012, UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1 961 (FOR SHORT THE ACT ) AT A TOTAL INCOME OF ` NIL AFTER MAKING SEVERAL ADDITIONS AND ADJUSTMENTS OF BROUGHT FORWARD LOSSES OF EARLIER YEAR. WE OBSERVE THAT, IN THIS CASE, THE ASSESSING OFFICER INITIATED REASSESSMENT PROCEEDIN GS, INTERALIA, RECORDING THE REASONS AS UNDER: 2. THE REASONS FOR REOPENING OF THE ASSESSMENT IS A S UNDER: UNDER THE INCOME TAX ACT, 1961, AS APPLICABLE FROM THE ASSESSMENT YEAR 1984-85, CERTAIN DEDUCTIONS ARE ALLOWABLE ONLY ON ACTUAL PAYMENT OF EXPENDITURE AS SPECIFIED U/S. 43B OF THE ACT. FR OM FIRST APRIL, 1989, CESS, FEE OR ANY SUM PAYABLE BY THE ASSESSEE AS EMP LOYER BY WAY OF CONTRIBUTION TO ANY PROVIDENT FUND, SUPERANNUATION FUND, OR GRATUITY FUND ETC, OR ANY SUM PAYABLE TO AN EMPLOYEE AS BONU S OR COMMISSION FOR SERVICES RENDERED OR ANY SUM AS INTEREST ON ANY LOAN FROM ANY PUBLIC FINANCIAL INSTITUTION ARE ALSO DEDUCTIBLE ON ACTUAL PAYMENT BASIC. NO DEDUCTION IN RESPECT OF CONTRIBUTION TO THE ABOV E FUNDS IS HOWEVER; ALLOWABLE UNLESS SUCH HAS ACTUALLY BEEN PAID BEFORE THE STIPULATED DUE DATE AS SPECIFIED UNDER THE RELEVANT STATUS GOVERNI NG THE FUNDS. M/S. MTZ POLYFILMS LTD. 3 AS PER ASSESSMENT ORDER, AN AMOUNT OF RS.18300000/- HAS BEEN DISALLOWED U/S.43B OF THE IT ACT. AS PER TAX AUDIT REPORT ANNEXURE H, THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.21181479/- AND RS.3941532/- IN RESPECT OF INTEREST TO DENA BANK AN D G.I.D.C RESPECTIVELY AND WHICH HAS BEEN PAID BEFORE FILING OF RETURN OF THE INCOME. SO, AN AMOUNT OF RS.6823011/(25123011-18300 000) IS TO BE REQUIRED TO BE DISALLOWED. THIS HAS RESULTED UNDER ASSESSMENT OF INCOME OF RS.6823011/-. 3. YOU ARE ALSO REQUESTED TO FILE YOUR SUBMISSION I N THIS REGARD ON OR BEFORE 27-10-10 AT 12.30 P.M . 5. DURING THE COURSE OF HEARING, OUR ATTENTION WAS DRA WN TO THE ASSESSMENT ORDER DATED 17 TH DECEMBER 2007, PASSED UNDER SECTION 143(3) OF THE ACT, STATING THAT ` 39.00 LAKHS WAS DISALLOWED ON ACCOUNT OF INTEREST PAYABLE TO GIDC LAND. HOWEVER, IN THE APPEAL FILED BEFORE THE FIRST APPELLATE AUTHORITY, IT WAS HELD BY THE LEARNED COMMISSIONER (APPEALS) VIDE HIS ORDER DATED 2 ND FEBRUARY 2010, THAT DISALLOWANCE OF INTEREST OF ` 39.00 LAKHS BY THE ASSESSING OFFICER WAS MADE ON THE BASIS OF EARL IER YEAR BUT IN APPEAL, THE SAID DISALLOWANCE WAS DELETED AND FOLLOWING THE EAR LIER YEAR ORDER, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR UNDER CONSIDERATION I.E., 200506, WAS ALSO DELETED. IT W AS ALSO STATED THAT THE SAID INTEREST WAS OF ` 39,41,532, PAYABLE TO GIDC ON DEFERRED CREDIT FACI LITY AVAILED IN THE PAST ON THE LAND LEASED TO THE ASSES SEE. COPY OF THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) DATED 2 ND FEBRUARY 2010, IS PLACED AT PAGES13 TO 17 OF THE PAPER BOOK. WE OBSERVE THAT T HE DEPARTMENT FILED APPEAL AGAINST THE ABOVE ORDER OF THE LEARNED COMMI SSIONER (APPEALS) BEING ITA NO.3042/MUM./2010, AND THE TRIBUNAL, VIDE ITS O RDER DATED 27 TH JANUARY 2012, CONFIRMED THE ORDER OF THE LEARNED COMMISSION ER (APPEALS) AND DISMISSED THE GROUND OF APPEAL TAKEN BY THE DEPARTM ENT. WE ALSO OBSERVE THAT THE PROVISIONS OF SECTION 43B, IN RESPECT OF I NTEREST PAYABLE TO GIDC IS NOT APPLICABLE BECAUSE IT DID NOT RELATE TO THE AMO UNT BORROWED BY THE ASSESSEE FROM GIDC BUT RELATED TO THE LEASE OF LAND . SECTION 43B(D) RELATES TO DISALLOWANCE OF INTEREST ON LAND OR BORROWINGS, INTERALIA, FROM STATE FINANCIAL CORPORATION OR STATE INDUSTRIAL INVESTMEN T CORPORATION AND THIS WAS NOT THE INTEREST IN RESPECT OF LOAN OR BORROWIN G. HENCE, THE PROVISIONS OF SECTION 43B OF THE ACT ARE NOT ATTRACTED FOR NON PA YMENT OF THE INTEREST TO GIDC ON ACCOUNT OF LAND LEASED TO ASSESSEE. M/S. MTZ POLYFILMS LTD. 4 6. FURTHER, WE ALSO OBSERVE THAT IN RESPECT OF INTERES T AMOUNTING TO ` 2,11,81,479, TO DENA BANK, THE ASSESSING OFFICER, W HILE COMPLETING THE ASSESSMENT ORDER DATED 17 TH DECEMBER 2007, UNDER SECTION 143(3), DISALLOWED THE SAID INTEREST BY APPLYING THE PROVIS IONS OF SECTION 43B OF THE ACT AND THE LEARNED COMMISSIONER (APPEALS), VIDE HI S ORDER DATED 2 ND FEBRUARY 2010, CONFIRMED THE ACTION OF THE ASSESSIN G OFFICER ON THE GROUND THAT THE SAID INTEREST PAYABLE TO DENA BANK IS COVE RED BY PROVISIONS OF SECTION 43B OF THE ACT AND TO SUBSTANTIATE HIS POSI TION, REFERRED TO PARA5.3 OF THE ORDER PASSED BY THE LEARNED COMMISSIONER (AP PEALS). HE SUBMITTED THAT NO FURTHER APPEAL WAS FILED BY THE ASSESSEE AG AINST THE SAID ORDER OF THE LEARNED COMMISSIONER (APPEALS). THEREFORE, IN THE F IRST ROUND OF APPEAL, THE INTEREST RELATING TO DENA BANK HAD ALREADY BEEN DIS ALLOWED AND THE INTEREST PAYABLE TO GIDC IN RESPECT OF LAND WAS DISALLOWED B Y THE ASSESSING OFFICER BUT THE LEARNED COMMISSIONER (APPEALS) AS WELL AS T HE TRIBUNAL DELETED THE SAME ON THE GROUND THAT IT IS NOT COVERED BY THE PR OVISIONS OF SECTION 43B OF THE ACT. LEARNED COUNSEL CONTENDED THAT THE INITIAT ION OF REASSESSMENT PROCEEDINGS IN RESPECT OF THE ABOVE ITEMS WHICH HAD ALREADY BEEN CONSIDERED IN THE ORIGINAL GROUND OF APPEAL AND CON CLUDED BY THE APPELLATE AUTHORITIES IS NOT JUSTIFIED, AS NO INCOME CHARGEAB LE TO TAX HAS ESCAPED ASSESSMENT. 7. ON CONSIDERATION OF THE SUBMISSIONS OF THE LEARNED REPRESENTATIVES OF THE PARTIES AND THE ORDERS PASSED IN RESPECT OF THE ASSESSMENT COMPLETED UNDER SECTION 143(3) OF THE ACT, WE AGREE WITH THE LEARNED COUNSEL THAT THE LEARNED COMMISSIONER (APPEALS) HAS RIGHTLY HELD THA T THE ASSESSING OFFICER CANNOT INVOKE JURISDICTION UNDER SECTION 147, AGAIN TO DEAL WITH THE SAME ISSUE WHICH WERE NOT ONLY THE SUBJECT MATTER OF THE ORIGINAL ASSESSMENT BUT ALSO THE SUBJECT MATTER OF THE APPEAL AGAINST THAT ASSESSMENT. LEARNED DEPARTMENTAL REPRESENTATIVE HAS NOT DISPUTED THE AB OVE FACTS. HENCE, WE UPHOLD THE ORDER OF THE LEARNED COMMISSIONER (APPE ALS) IN ANNULLING THE RE M/S. MTZ POLYFILMS LTD. 5 ASSESSMENT PROCEEDINGS INITIATED BY THE ASSESSING O FFICER. ACCORDINGLY, THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) IS UPHE LD AND THE GROUND OF APPEAL TAKEN BY THE DEPARTMENT IS DISMISSED. 8. . /3 , '. , / 45 6 10. IN THE RESULT, REVENUES APPEAL IS DISMISSED. 0 , 2& ' 7 8$3 4 TH JULY 2012 2 , 9 6 ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH JULY 2012 SD/- ! ' RAJENDRA ACCOUNTANT MEMBER SD/- . . B.R. MITTAL JUDICIAL MEMBER MUMBAI, DATED: 4 TH JULY 2012 COPY TO : (1) THE ASSESSEE; (2) THE RESPONDENT; (3) THE CIT(A), MUMBAI, CONCERNED; (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, B BENCH, ITAT, MUMBAI. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT, MUMBAI BENCHES, MUMBAI