TOPAZ HOLDINGS P.LTD, MUMBAI V. DCIT CC 31, MUMBAI

ITA 3922/MUM/2013

• Counselvise Citation: 392219914 RSA 2013
• Duration Of Justice: 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 17-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR P DANIEL
• Keywords: Principle of natural justice; Question of law
• Section: 234B; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'SMC' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT ITA NO. 3922/MUM/2013 (ASSESSMENT YEAR: 2006-07) M/S. TOPAZ HOLDINGS P. LTD. DCIT, CENTRAL CIRCLE 31 32, MADHULI, DR. A.B. ROAD AAYAKAR BHAVAN, M.K. ROA D WORLI, MUMBAI 400018 VS. MUMBAI 400020 PAN - AAACT5152F APPELLANT RESPONDENT APPELLANT BY: SHRI DHARMESH SHAH RESPONDENT BY: DR. P. DANIEL DATE OF HEARING: 08.01.2014 DATE OF PRONOUNCEMENT: 19.02.2014 O R D E R PER D. MANMOHAN, V.P. THIS APPEAL IS FILED AT THE INSTANCE OF THE ASSESSE E COMPANY AND IT PERTAINS TO A.Y. 2006-07. 2. THE FOLLOWING GROUNDS WERE URGED BEFORE THE TRIBUNA L:- 1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) HAS ERRED IN LAW AND IN FACTS IN PASSING THE ORDER U/S. 250 OF T HE ACT AND CONFIRMING THE ORDER OF THE ASSESSING OFFICER. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN PASSING THE ORDER IN GROSS VIOL ATION OF PRINCIPLES OF NATURAL JUSTICE. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN NOT APPRECIATING THAT NO INCOME FROM ATTACHED ASSETS CAN BE ASSESSED IN THE HANDS OF THE APPELLANT. 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN NOT GRANTING RELIEF OF LIABILIT Y AMOUNTING TO RS.2,25,309/- ON ACCOUNT OF INTEREST EXPENSE CLAIME D BY THE APPELLANT. 5. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE CALCULATION OF B OOK PROFIT U/S. 115JB AMOUNTING TO RS.1,37,983/-. ITA NO. 3922/MUM/2013 M/S. TOPAZ HOLDINGS P. LTD. 2 6. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN CHARGING INTEREST CHARGED U/S. 234A, 234B AND 234C OF THE ACT. 3. AT THE TIME OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE COMPANY SUBMITTED THAT THE COMPANY IS NOT INTERESTED IN PRE SSING GROUNDS 1, 2 AND 3. ACCORDINGLY GROUNDS 1, 2 AND 3 ARE DISMISSED. 4. VIDE GROUND NO. 4 THE ASSESSEE CONTENDS THAT THE CI T(A) ERRED IN NOT GRANTING RELIEF ON ACCOUNT OF INTEREST EXPENSES CLA IMED BY THE ASSESSEE. AS COULD BE NOTICED FROM PARA 5.3 OF THE ORDER OF THE CIT(A), ON IDENTICAL CIRCUMSTANCES, IN THE CASE OF ASSESSEE FOR A.Y. 200 4-05 AND 2005-06 AND ALSO IN THE CASE OF A RELATED PARTY, SHRI HITESH ME HTA FOR A.Y. 2005-06, THE APPEALS FILED BY THE ASSESSEES WERE DISMISSED. AT THE TIME OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE PLACED BEFORE ME A COPY OF THE ORDER PASSED BY THE ITAT H BENCH, MUMBAI IN THE CASE OF SHRI H ITESH MEHTA WHEREIN THE MATTER WAS SET ASIDE TO THE FILE OF THE CIT(A) TO ADJUDICATE AFRESH. 5. THE LEARNED COUNSEL APPEARING ON BEHALF OF THE REVE NUE ADMITTED THAT THE ISSUE STANDS SQUARELY COVERED BY THE AFORESTATE D DECISION, SINCE THE FACTS ARE IDENTICAL. IN VIEW OF THE ADMISSION OF THE COUN SEL FOR THE REVENUE I SET ASIDE THE MATTER TO THE FILE OF THE LEARNED CIT(A) TO RECONSIDER THE MATTER AFRESH. 6. GROUND NO. 5 IS WITH REGARD TO CALCULATION OF BOOK PROFIT UNDER SECTION 115JB, WHICH IS PURELY DEPENDING UPON THE AVAILABIL ITY OF THE LIABILITY ON ACCOUNT ON INTEREST EXPENDITURE CLAIMED BY THE ASSE SSEE AND BOTH THE PARTIES STATED THAT THE OUTCOME OF THIS ISSUE WOULD BE CONSEQUENTIAL TO THE DECISION TAKEN BY THE LEARNED CIT(A) IN RESPECT OF GROUND NO. 4 AND THEREFORE THIS ALSO DESERVES TO BE SET ASIDE. 7. HAVING REGARD TO THE STATEMENT OF BOTH THE PARTIES I SET ASIDE THIS ISSUE ALSO TO THE FILE OF THE CIT(A) TO RECONSIDER THE MATTER ACCORDINGLY. 8. GROUND NO. 6 IS WITH REGARD TO CHARGING OF INTEREST WHICH HAS TO BE RECOMPUTED CONSEQUENT TO THE FINAL INCOME AND TAXAB ILITY COMPUTED AFTER GIVING EFFECT TO THE ORDER OF THE ITAT AND THEREFOR E I SET ASIDE THE MATTER TO THE FILE OF THE CIT(A) FOR FRESH COMPUTATION. ITA NO. 3922/MUM/2013 M/S. TOPAZ HOLDINGS P. LTD. 3 9. AT THIS JUNCTURE THE LEARNED COUNSEL FOR THE ASSESS EE SUBMITTED THAT THERE IS AN ADDITIONAL GROUND WITH REGARD TO THE CO RRECTNESS OF TAXABILITY OF INCOME IN THE HANDS OF THE COMPANY WHICH NEEDS TO B E ADMITTED, SINCE IT IS PURE QUESTION OF LAW. THE FOLLOWING IS THE ADDITION AL GROUND: - THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT AS P ER THE DECISION OF THE HON'BLE SPECIAL COURT DATED 30.04.2010 IN MP NO . 41 OF 1999, THE ASSETS UNDER CONSIDERATION AND THE CONSEQUENTIAL IN COME BELONGS TO SHRI HARSHAD S. MEHTA AND HENCE THE INCOME ASSESSED BY THE ASSESSING OFFICER OUGHT TO HAVE BEEN TAXED IN THE H ANDS OF SHRI HARSHAD S. MEHTA AND NOT IN THE HANDS OF THE APPELL ANT. 10. IN THE PETITION FOR SEEKING ADMISSION OF THE ADDITI ONAL GROUND THE ASSESSEE SUBMITTED THAT THE ASSESSEE COMPANY IS AN ASSOCIATED ENTITY PROMOTED BY LATE SHRI HARSHAD MEHTA AND HIS FAMILY MEMBERS. HE IS A NOTIFIED PERSON UNDER THE PROVISIONS OF THE (TRIAL OF OFFENCES RELATING TO TRANSACTIONS IN SECURITIES) ACT. THE CUSTODIAN APPO INTED UNDER THE SPECIAL COURT ACT FILED A PETITION AGAINST THE LEGAL HEIRS OF LATE HARSHED MEHTA SEEKING DIRECTIONS OF THE SPECIAL COURT AT BOMBAY F OR SALE OF VARIOUS PROPERTIES FOR DISCHARGING THE DUES OF THE DISEASED , I.E. LATE HARSHAD MEHTA. THE HON'BLE SPECIAL COURT, BY ITS JUDGEMENT DATED 3 0.04.2010 GRANTED THE REQUEST OF THE CUSTODIAN. APPELLANTS ASSETS AND LI ABILITIES ARE ALSO DISCLOSED IN THE SAID REPORT BY THE CUSTODIAN. THE HON'BLE SP ECIAL COURT, IN THE ABOVE ORDER, HAS PROCEEDED ON THE BASIS THAT THE APPELLAN T IS A MEMBER OF HARSHAD MEHTA GROUP. AGGRIEVED BY THE SAID ORDER TH E APPELLANT HAS JOINED THE OTHER NOTIFIED ENTITIES AND FILED CIVIL PETITIO N IN THE SUPREME COURT, WHICH IS PENDING. IN VIEW OF THE FINDINGS OF THE SP ECIAL COURT, WHICH IS THE RULING JUDGEMENT AS ON DATE, ITS ASSETS CAN BE USED TO MEET THE LIABILITY OF LATE HARSHD MEHTA. THUS THE ASSESSEE CANT BE SAID TO BE A SEPARATE ENTITY. SINCE IT IS A PURE LEGAL ISSUE IT DESERVES TO BE AD MITTED IN THE LIGHT OF THE FOLLOWING DECISIONS: - I. NATIONAL THERMAL POWER CORPORATION VS. CIT 229 ITR 383 (SC) II. JUTE CORPORATION OF INDIA LTD. VS. CIT 187 ITR 688 (SC) III. AHMEDABAD ELECTRICITY CO. LTD. VS. CIT 199 ITR 351 (BOM) (FB) 11. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT AN IDENTICAL ISSUE HAS COME UP BEFORE THE ITAT H BENCH, MUMHAI IN THE CASE OF SHRI ITA NO. 3922/MUM/2013 M/S. TOPAZ HOLDINGS P. LTD. 4 HITESH S. MEHTA (ITA NO. 5587 TO 5589/MUM/2011 AND ITA NO. 5068/MUM/2011) WHEREIN THE BENCH OBSERVED THAT THIS IS A PURE LEGAL MATTER WHICH REQUIRES NO NEW FACTS ON RECORD; IN TH E LIGHT OF THE DECISION OF THE APEX COURT IN THE CASE OF NATIONAL THERMAL POWE R CO. LTD. VS. CIT 229 ITR 383 THE LEGAL GROUND WAS ADMITTED BUT, HOWEVER, OBSERVED THAT THIS GROUND IS PURELY ACADEMIC IN NATURE FOR THE REASON THAT IF THE HON'BLE SUPREME COURT DECIDES ON THE AID ISSUE IT HAS TO BE FOLLOWED BY EVERY AUTHORITY AND THEREFORE NO DIRECTION IS REQUIRED TO BE GIVEN BY THE AO IN THIS RESPECT. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMI TTED THAT THIS ISSUE HAS COME UP IN THE OTHER GROUP OF ASSESSEES WHEREIN THE ISSUE WAS DISPOSED OF ON THE SAME LINES, THAT TOO AFTER ADMITTING THE ADD ITIONAL GROUND AND HENCE, IN THE INSTANT CASE ALSO, THE GROUND MAY BE ADMITTE D AND DISPOSED OF ACCORDINGLY. 12. THE LEARNED COUNSEL APPEARING FOR THE REVENUE INITI ALLY ADMITTED THAT THE ISSUE STANDS COVERED BY THE AFORECITED DECISION AND DID NOT CHOOSE TO RAISE ANY CONTENTION WITH REGARD TO CORRECTNESS OF ADMISSION AND HENCE THE SAME WAS FOLLOWED IN THE SUBSEQUENT ORDERS, BASED O N THE CONCESSION. HOWEVER, WHEN THE BENCH NOW SOUGHT TO VERIFY THE CO RRECTNESS OF THE ADMISSION AND ASKED TO FILE WRITTEN SUBMISSIONS ON THIS ASPECT, THE LEARNED COUNSEL FOR THE REVENUE FILED HIS WRITTEN SUBMISSIO N WHEREIN IT WAS STATED THAT THE TRIBUNAL IS ENTITLED TO ADMIT AN ADDITIONA L GROUND IF IT ARISES OUT OF AN ORDER OF THE AO OR CIT(A) WHEREAS IN THE INSTANT CASE THE ISSUE WAS NEVER FORESEEN BY ANYONE. EVEN TODAY THERE IS NO DECISION BY ANY AUTHORITY TO TREAT THE ASSETS BELONGING TO THE SO CALLED GROUP AS THE ASSETS OF SHRI HARSHAD S. MEHTA. THE ADDITIONAL GROUND IS THUS RAISED ON A NO N-ISSUE WHICH IS NOT RAISED EVEN AS ON TODAY. THEREFORE IT CANNOT BE SAI D THAT THE FACTS ARE ALREADY ON RECORD OF THE AO OR CIT(A). HE HAS ALSO RELIED ON THE FOLLOWING DECISIONS IN SUPPORT OF HIS CONTENTION THAT WHERE T HE CLAIM BEFORE THE TRIBUNAL IS NOT SUPPORTED BY MATERIAL/DOES NOT EMER GE FROM FACTS ON RECORD IN THE ASSESSMENT PROCEEDINGS THE SAID GROUND CANNO T BE ADMITTED AT A LATTER STAGE: I. CIT VS. DALMIA DAIRY INDUSTRIES LTD. 12 DTR 25 (DEL HI) ITA NO. 3922/MUM/2013 M/S. TOPAZ HOLDINGS P. LTD. 5 II. AVON CYCLE INDUSTRIES LTD. VS. CIT 292 ITR 493 (P&H ) III. BUDHEWAL COOP SUGAR MILLS LTD. VS. DCIT 94 TTJ 307 (CHD.) 13. ON BEHALF OF THE ASSESSEE THE LEARNED COUNSEL FOR T HE ASSESSEE SUBMITTED THAT IT IS A PURE LEGAL GROUND AND GOES T O THE ROOT OF THE MATTER. SINCE THE INCOME FROM AN ATTACHED ASSET CANNOT BE C ONSIDERED AS INCOME OF THE APPELLANT, THE APPELLANT CANNOT BE EXPECTED TO EARN ANY INCOME ARISING OUT OF THE ASSET, WHICH ALSO PERTAINS TO LATE HARSH AD S. MEHTA. IT WAS ALSO HIGHLIGHTED THAT THE ORDER OF THE HON'BLE SPECIAL C OURT IS SUBJECT MATTER OF DISPUTE BEFORE THE HON'BLE SUPREME COURT. IT WAS AL SO SUBMITTED THAT CIT, CENTRAL CIRCLE-II IS A PARTY TO THE PROCEEDINGS BEF ORE THE SPECIAL COURT AND IN FACT THE REVENUE HAS ACTUALLY COLLECTED MUCH MORE B ELONGING TO THE OTHER NOTIFIED PERSONS TO MEET THE LIABILITIES OF LATE HA RSHAD MEHTA AND THUS THE FACTS CANNOT BE SAID TO BE NOT ON RECORD IN THE PRE SENT CASE. HE ALSO RELIED UPON THE DECISION OF THE ITAT SPECIAL BENCH IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. VS DCIT 137 ITD 26 (MUM) IN SUPPORT OF HIS CONTENTION THAT IF IT IS A LEGAL GROUND IT CAN BE RAISED BEFORE THE TR IBUNAL FOR THE FIRST TIME EVEN IF THE SAME IS NOT RAISED EARLIER BEFORE ANY TAX AU THORITIES. HE ALSO RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN T HE CASE NATIONAL THERMAL POWER CORPORATION VS. CIT 229 ITR 383 AND O THERS IN SUPPORT OF HIS CONTENTION THAT ADDITIONAL GROUNDS OF APPEAL CAN BE ADMITTED AT ANY STAGE SO LONG AS THE RELEVANT FACTS ARE ON RECORD AND SUC H GROUND COULD NOT BE RAISED EARLIER FOR GOOD REASONS. HE MAINLY EMPHASIS ED THE FACT THAT THE COMMISSIONER, CENTRAL CIRCLE-II BEING A PARTY TO TH E PROCEEDINGS BEFORE THE SPECIAL COURT, THE REVENUE IS AWARE OF THE PROCEEDI NGS AND HENCE THE FACTS ARE DEEMED TO BE ON THE RECORD OF THE AO AS WELL AS THE CIT(A). HE ALSO NARRATED THE EVENTS THAT OCCURRED BEFORE THE SPECIA L COURT. 14. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PER USED THE RECORD. IT IS NOT IN DISPUTE THAT EVEN AFTER THE DIRECTION OF THE SPECIAL COURT THE ASSESSEE COMPANY CHOSE TO FILE AN APPEAL IN ITS NAM E AND DID NOT RAISE THE CONTENTION THAT NO COMPANY WAS EXISTING. IT ALSO DE SERVES TO BE NOTICED THAT VIDE GROUND NO. 3 IN THE ORIGINAL GROUNDS OF APPEAL , AS IN THE CASE OF HARSHAD ESTATES PVT. LTD., THE ASSESSEE COMPANY RAI SED A PLEA THAT NO ITA NO. 3922/MUM/2013 M/S. TOPAZ HOLDINGS P. LTD. 6 INCOME FROM ATTACHED ASSETS CAN BE ASSESSED IN THE HANDS OF THE ASSESSEE BUT AT THE TIME OF HEARING THE ASSESSEE CHOSE TO WI THDRAW THIS GROUND, PRESUMABLY ON THE GROUND THAT BUT FOR THE SEPARATE ORDER OF ATTACHMENT THE ASSESSEE COMPANY IS A SEPARATE LEGAL ENTITY. IN OTH ER WORDS, THE ASSESSEE ON THE ONE HAND ADMITS THAT IT IS A SEPARATE LEGAL ENT ITY ASSESSABLE TO TAX BUT ON THE OTHER HAND IT MAKES A CONVERSE CLAIM BY WAY OF ADDITIONAL GROUND THAT THE ASSETS AND LIABILITIES BELONG TO LATE HARS HAD MEHTA AND HENCE THE INCOME OF THE ASSESSEE COMPANY ALSO SHOULD NOT BE A SSESSED IN ITS HANDS; IN MY CONSIDERED OPINION THE ASSESSEE CANNOT BE PERMIT TED TO BLOW HOT AND COLD. AT ANY RATE, THE MATTER IS SUBJUDICE BEFORE T HE HON'BLE SUPREME COURT AND THUS IT CANNOT BE SAID THAT THE FACTS ARE SETTL ED FINALLY. NONE OF THESE ISSUES WERE TAKEN UP BEFORE THE AO OR THE CIT(A) AN D HENCE IT CANNOT BE SAID THAT THE FACTS CONCERNING THE SO CALLED LEGAL ISSUE ARE ALREADY ON THE RECORD OF THE TAX AUTHORITIES. THE EXPRESSION RECO RD MEANS THE RECORD OF THE YEAR UNDER CONSIDERATION AND NOT THE HISTORY OF THE ASSESSEE SPANNING OVER SEVERAL YEARS. SINCE THIS ISSUE WAS NOT URGED BEFORE THE TAX AUTHORITIES AND THE FACTS CONCERNING THE SAME ARE NOT ESTABLISH ED OR AVAILABLE BEFORE THE AO/CIT(A), THE ASSESSEE CANNOT BE PERMITTED TO RAIS E ADDITIONAL GROUND FOR THE FIRST TIME BEFORE THE TRIBUNAL. 15. IT IS NO DOUBT TRUE THAT THE TRIBUNAL, IN THE CASE OF SHRI HITESH MEHTA AS WELL IN THE CASE OF HARSHAD ESTATES PVT. LTD., F ORMALLY ADMITTED ADDITIONAL GROUND BUT AT THE SAME TIME DISMISSED THIS AS ACADE MIC BUT THE REASON BEHIND THE SO CALLED ADMISSION WAS THAT THE FACTUAL MATRIX WAS NOT PROPERLY HIGHLIGHTED BY THE REVENUE. THE LEARNED COUNSEL FOR THE REVENUE SUBMITS THAT THE BENCH HAS NEVER ASKED FOR THE FACTS SPECIF ICALLY AND PROCEEDED TO ASSUME THAT THE FACTS ARE ALREADY ON RECORD. THUS T HE AFORECITED DECISION CANNOT BE CONSIDERED AS PRECEDENT ON THE ISSUE. AT ANY RATE, THE TRIBUNAL, IN THE ORDER STATED ABOVE, HAVE MERELY ADMITTED THIS G ROUND ONLY TO HOLD THAT IT IS ACADEMIC AT THIS JUNCTURE AND ACCORDINGLY REJECT ED THIS GROUND WHICH HIGHLIGHTS THAT IT IS NOT A PURE LEGAL ISSUE WHICH GOES TO THE ROOT OF THE MATTER AS OTHERWISE IT COULD NOT HAVE BEEN DISMISSE D AS ACADEMIC. UNDER THESE PECULIAR CIRCUMSTANCES IT IS NOT NECESSARY TO REFER THE MATTER TO A LARGER BENCH. SUFFICE TO SAY THAT THESE FACTS WERE NOT ON RECORD OF THE TAX ITA NO. 3922/MUM/2013 M/S. TOPAZ HOLDINGS P. LTD. 7 AUTHORITIES FOR THE ASSESSMENT YEAR UNDER CONSIDERA TION AND THE VERY FACT THAT THE ASSESSEE IS MAKING COUNTER CLAIMS WOULD SU GGEST THAT THE FACTS ARE NOT FINALLY SETTLED AND ON SUCH AN ISSUE ADDITIONAL GROUND CANNOT BE ADMITTED. I, THEREFORE, REJECT THE ADDITIONAL GROUN D SUMMARILY. 16. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PART LY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH FEBRUARY, 2014. SD/- (D. MANMOHAN) VICE PRESIDENT MUMBAI, DATED: 19 TH FEBRUARY, 2014 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 37, MUMBAI 4. THE CIT CENTRAL-II, MUMBAI CITY 5. THE DR, SMC BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.