ASST CIT CEN CIR 46, MUMBAI V. SUN INVESTMENTS P. LTD, MUMBAI

ITA 4077/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2918 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2005-2006
• Appeal Filed On: 04-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJUNATHA SWAMY
• Keywords: Business income; Bad and doubtful debts; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI E BENCH, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER. ITA. NO. 4077/MUM/2014 (ASSESSMENT YEAR:2005-06) ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE- 46, MUMBAI -20 APPELLANT VS. M/S. SUN INVESTMENTS PVT. LTD. 5A, JINDAL MANSION, DR. G. DESHMUKH MARG, MUMBAI 400026 RESPONDENT PAN: AAACS0389M /BY APPELLANT : SHRI MANJUNATHASWAMY, CIT D.R., & SHRI VINOD KUMAR, D.R. /BY RESPONDENT :SHRI RAKESH JOSHI, A.R. /DATE OF HEARING : 14.06.2016 /DATE OF PRONOUNCEMENT : 24.06.2016 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY REVENUE AGAINST THE O RDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-38, MUMBAI, DA TED 28.02.2014 FOR A.Y. 2005-06 ON FOLLOWING GROUNDS: ITA NO.4077/MUM/14 A.Y. 05-06 [ACIT VS. M/S. SUN IN VESTMENTS P. LTD.] PAGE 2 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD CIT(A) ERRED IN HOLDING THAT THE A.O. HAS WRONGLY ASSUMED THE JURISDICTION U/S. 147 OF THE ACT, WITHOUT APPRECIATING THE FACT THAT THE A.O. HAD REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AND THAT MERE PRODUCTION OF BOOKS OF A/C OR A FOOT-NOTE IN THE COMPUTATION OF INCOME DOES NO T NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF FIRST PROVISO TO SEC. 147 AS MENTIONED IN EXPLANATION 1 TO SEC 147 OF THE ACT.' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD CIT(A) ERRED IN TREATING THE 'LO SS ON SALE OF INVESTMENT' AMOUNTING TO RS. 7,30,31,599/- AS BUSINESS LOSS, WITHOUT APPRECIATING THE FACT THAT T HE LOSS PERTAINED TO SALE OF LONG TERM INVESTMENT AS EXHIBITED IN SCHEDULE E OF THE BALANCE SHEET, BEING A CAPITAL LOSS.' 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD CIT(A) ERRED IN DELETING THE ADD ITION MADE ON ACCOUNT OF BAD DEBTS WRITTEN OFF AMOUNTING TO RS.10,97,05,670/- WITHOUT APPRECIATING THE FACT THAT THE PROVISION FOR 'DOUBTFUL RECEIVABLE' OF RS. 10,97,05,670/- HAS NOT WRITTEN OFF IN THE HOODS OF ACCOUNT BY THE ASSESSEE FOR A. Y.2005-06.' 2. ASSESSEE IS A NON BANKING FINANCE COMPANY CARRYI NG ON THE ACTIVITIES OF DEALING IN SHARES & SECURITIES, L ENDING ETC. ASSESSEE FILED ITS RETURN OF INCOME DECLARING NIL I NCOME. THE ASSESSMENT U/S.143(3) OF THE ACT WAS COMPLETED ON 24.12.2007 MAKING CERTAIN ADDITIONS AND DETERMINING TOTAL INCOME AT RS. NIL. SUBSEQUENTLY THE ASSESSMENT WAS REOPENED BY THE ACIT, CIRCLE 9(1), NEW DELHI ON THE GROUND T HAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.7,30,31,599/- IN THE P & L ACCOUNT TOWARDS 'LOSS ON SALE OF INVESTMENTS'. ASSESSING OFFICER WAS OF THE VIEW THAT THE LOSS PERTAINED TO SALE OF LONG ITA NO.4077/MUM/14 A.Y. 05-06 [ACIT VS. M/S. SUN IN VESTMENTS P. LTD.] PAGE 3 TERM INVESTMENT AS EXHIBITED IN SCHEDULE 'E' OF THE BALANCE SHEET AND THIS BEING A CAPITAL LOSS, SHOULD HAVE BE EN DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSE SSEE. ACCORDINGLY, NOTICE U/S.148 OF THE ACT WAS ISSUED O N 30.03.2010, REQUIRING THE ASSESSEE TO FILE THE RETU RN OF INCOME WITHIN 30 DAYS. IN RESPONSE TO THE SAID NOTICE, ASS ESSEE COMPANY FILED A RETURN OF INCOME ON 19.04.2010. FUR THER ON SCRUTINY OF THE COMPUTATION OF INCOME, IT WAS NOTIC ED BY ASSESSING OFFICER THAT THE ASSESSEE COMPANY CLAIMED DEDUCTION OF RS.10,97,05,670/- ON ACCOUNT OF WRITTEN OFF INTE REST ON OCD'S. ASSESSEE WAS ASKED TO EXPLAIN WHY THE SAME S HOULD NOT BE DISALLOWED. FROM THE RECORDS, IT WAS FOUND T HAT THE ASSESSEE HAS MADE PROVISION FOR DOUBTFUL RECOVERABL E DURING THE YEAR IMMEDIATELY PROCEEDING THE YEAR UNDER CONS IDERATION. WHILE COMPUTING THE ASSESSABLE INCOME, ASSESSEE ALS O CLAIMED THE SAME DEDUCTION DURING THE YEAR UNDER CONSIDERAT ION. ASSESSEE CLAIMED THE SAME AS BAD DEBTS. SINCE THE A SSESSEE HAS NOT WRITTEN OFF THE SAME AS BAD DEBTS, THE ASSE SSING OFFICER DISALLOWED THE SUM OF RS.10,97,05,670/- AND ADDED T HE SAME TO THE INCOME OF ASSESSEE. THE ASSESSMENT U/S.147/ 143(3) OF THE ACT WAS COMPLETED ON 29.12.2010 DETERMINING TOT AL INCOME AT RS.18,27,37,269/-. 2.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF O F ASSESSEE AND AFTER CONSIDERING THE SAME, CIT(A) ALLOWED THE GROUND OF ASSESSEE. ITA NO.4077/MUM/14 A.Y. 05-06 [ACIT VS. M/S. SUN IN VESTMENTS P. LTD.] PAGE 4 2.2 THE STAND OF ASSESSEE HAS BEEN THAT SINCE PROCE EDINGS HAVE BEEN INITIATED U/S.147 OF THE ACT ON THE BASIS OF INFORMATION/MATERIAL AVAILABLE WITH THE ASSESSING O FFICER AND NO NEW TANGIBLE INFORMATION/MATERIAL CAME TO THE KN OWLEDGE OF ASSESSING OFFICER SUBSEQUENT TO THE CONCLUSION OF O RIGINAL ASSESSMENT. MOREOVER, THE PROCEEDINGS HAVE BEEN IN ITIATED FOR THE REASONS FOR WHICH RECTIFICATION PROCEEDINGS U/S .154 OF THE ACT HAD BEEN INITIATED EARLIER, WHICH HAD NOT YET B EEN CONCLUDED AND NO ORDER HAS BEEN PASSED IN THIS REGA RD TILL DATE. THIS SHOWS THAT PROCEEDINGS HAVE BEEN INITIA TED ON MERE CHANGE OF OPINION. ASSESSMENT PROCEEDINGS U/S.154 OF THE ACT WAS PENDING ON THE SAME ISSUE AND NOT CONCLUDED U/S .147 OF THE ACT INITIATED BY ASSESSING OFFICER WERE AB INIT IO, ESPECIALLY WHEN EXCEPT THE RETURN AND ITS ENCLOSURES, NO OTHER MATERIAL OR INFORMATION WAS IN THE POSSESSION OF THE ASSESSING OFFICER. 2.3 IN THIS CASE, ASSESSMENT WAS RE-OPENED U/S. 147 OF THE ACT ON THE GROUND THAT ASSESSEE HAD DEBITED AN AMOU NT OF RS. 7,30,31,599/- IN THE P&L ACCOUNT TOWARDS LOSS ON SA LE OF INVESTMENTS, WHICH BEING LONG TERM CAPITAL GAIN SHO ULD NOT HAVE BEEN ALLOWED AS BUSINESS LOSS. THE LOSS WAS O N ACCOUNT OF SALE OF SHARES. ASSESSEE HAD BEEN SHOWING THE S HARES AS INVESTMENTS IN THE BALANCE SHEET, HOWEVER, FOR THE A.Y. 1992- 93 AND A.Y. 1993-94 ASSESSING OFFICER TREATED THE S ALE OF SHARES AS BUSINESS INCOME/LOSS AND COMPLETED THE AS SESSMENT U/S 143(3) OF THE ACT. THE SAID ORDERS HAVE ALSO B EEN CONFIRMED BY THE CIT(A) FOR BOTH THE YEARS. THEREA FTER, ITA NO.4077/MUM/14 A.Y. 05-06 [ACIT VS. M/S. SUN IN VESTMENTS P. LTD.] PAGE 5 ASSESSEE HAS BEEN CONSISTENTLY SHOWING THE SALE OF SHARES AS BUSINESS INCOME OR LOSS WHICH HAS ALSO NOT BEEN DIS TURBED BY THE ASSESSING OFFICER TILL A.Y. 2005-06. THE RETUR N OF INCOME FILED FOR THE ASSESSMENT YEAR 2005-06 CONTAIN A FOO TNOTE IN THE COMPUTATION OF TOTAL INCOME THAT THE COMPANY IS HOL DING SHARES, DEBENTURES ETC. AS INVESTMENTS IN GROUP COM PANIES AND THE GAIN OR LOSS ON DISPOSAL OF SHARES/DEBENTUR ES HAVE BEEN TREATED AS BUSINESS INCOME/LOSS AS PER THE LAS T ASSESSMENTS. ONCE SUCH NOTE HAS BEEN APPENDED AND T HE ASSESSMENT HAS BEEN CONCLUDED U/S 143(3) OF THE ACT , THERE WOULD BE NO REASON FOR THE REOPENING OF THE ASSESSM ENT ON THE SAID GROUND. ASSESSING OFFICER IS NOT PERMITTED TO REVIEW U/S. 147 OF THE ACT OF THE EARLIER DECISION TAKEN BY HIM IN THE ABSENCE OF THERE BEING ANY MATERIAL TO COME TO A DI FFERENT CONCLUSION. IT IS A SETTLED PROPOSITION OF LAW THAT REASON TO BELIEVE CAN NEVER BE THE OUTCOME OF A CHANGE OF OPI NION. THIS VIEW IS SUPPORTED BY HONBLE SUPREME COURT DECISION IN THE CASE OF CIT VS. KELVINATOR INDIA LTD. [320 ITR 561] AND CIT VS. FORAMER FRANCE [264 ITR 567] ARE APPLICABLE TO THE FACTS OF THE CASE OF ASSESSEE. SINCE, ASSESSING OFFICER HAS CHA NGED HIS OWN EARLIER DECISION, SO, CIT(A) WAS JUSTIFIED IN HOLDI NG THAT ASSESSING OFFICER HAS WRONGLY ASSUMED THE JURISDICT ION U/S.157 OF THE ACT. SAME IS UPHELD. 3. NEXT ISSUE IS WITH REGARD TO BUSINESS LOSS OF RS.7,30,31,599/- ON SALE OF SHARES TREATED AS CAPIT AL LOSS, WHICH IS DISALLOWED BY ASSESSING OFFICER. ITA NO.4077/MUM/14 A.Y. 05-06 [ACIT VS. M/S. SUN IN VESTMENTS P. LTD.] PAGE 6 3.1 IN APPEAL, VARIOUS CONTENTIONS WERE RAISED ON B EHALF OF ASSESSEE AND IN RESPONSE TO SAME, REMAND REPORT WAS CALLED FOR AND SAME FURNISHED TO THE ASSESSEE FOR COMMENT AND HAVING CONSIDERED THE SAME, CIT(A) OBSERVED THAT AS SESSMENT WAS RE-OPENED U/S.147 OF THE ACT ON THE GROUND THAT ASSESSEE HAD DEBITED AN AMOUNT OF RS.7,30,31,599/- IN P&L AC COUNT TOWARDS LOSS ON SALE OF INVESTMENTS WHICH BEING L ONG TERM CAPITAL GAINS SHOULD NOT BE ALLOWED AS BUSINESS LOS S. THE LOSS IS ON ACCOUNT OF SALE OF SHARES. ASSESSEE HAS BEEN SHOWING THE SHARES AS INVESTMENTS IN THE BALANCE SHEET, HOWEVER , FOR A.Y. 1992-93 AND A.Y. 1993-94, ASSESSING OFFICER TREATED THE SALE OF SHARES AS BUSINESS INCOME/LOSS AND COMPLETED THE AS SESSMENT U/S.143(3) OF THE ACT. THE SAID ORDERS HAVE ALSO B EEN CONFIRMED BY CIT(A) FOR BOTH THE YEARS. ASSESSING OFFICER HIMSELF HAD ASSESSED THE INCOME OR LOSS ON ACCOUNT OF SALE UNDER THE HEAD PROFIT & GAINS FROM BUSINESS INSTE AD OF INCOME OF CAPITAL GAINS SHOWN BY ASSESSEE, WHICH HAS BEEN FOLLOWED BY ASSESSEE CONSISTENTLY. ASSESSING OFFIC ER HAS NOT GIVEN ANY REASON EXCEPT STATING THAT THE ASSESSEE H AD SHOWN THE SAID SHARES AS LONG TERM INVESTMENTS IN THE BAL ANCE SHEET. IN THIS REGARD, CIT(A) OBSERVED THAT ASSESSEE HAS B EEN SHOWING SAID SHARES AS INVESTMENTS IN THE BALANCE SHEET AND SINCE THE DEPARTMENT HAD ALTERED THE NATURE OF INCOME FROM CA PITAL GAINS TO BUSINESS INCOME, ASSESSEE ACCEPTED THE SAID DECI SION OF THE DEPARTMENT AND HAS BEEN OFFERING THE INCOME UNDER T HE HEAD BUSINESS, THOUGH THE SAID SHARES HAVE BEEN CONTIN UED TO BE SHOWN AS INVESTMENTS IN THE BALANCE SHEET. FACTS HA VE NOT ITA NO.4077/MUM/14 A.Y. 05-06 [ACIT VS. M/S. SUN IN VESTMENTS P. LTD.] PAGE 7 BEEN DIFFERENT TO THE EARLIER A.YS. 1992-93 & 1993- 94, WHEREIN ASSESSING OFFICER HIMSELF TREATED THE SALE OF SHARE S AS BUSINESS INCOME/LOSS. IN THIS VIEW, ASSESSING OFFICER CANNO T KEEP CHANGING THE HEAD OF INCOME WITHOUT BRINGING NEW MA TERIAL ON RECORD. THEREFORE, LOSS ON SALE OF SHARES OF RS.7, 30,31,599/- WAS RIGHTLY DIRECTED TO BE TREATED AS BUSINESS LOSS . THIS REASONED FACTUAL FINDING OF CIT(A) NEEDS NO INTERFE RENCE FROM OUR SIDE. WE UPHOLD THE SAME. 4. NEXT ISSUE IS WITH REGARDS TO DISALLOWANCE OF BA D DEBTS OF RS.10,97,05,670/- MADE BY ASSESSING OFFICER, WHICH WAS CONFIRMED BY CIT(A). 4.1 IN APPEAL, VARIOUS CONTENTIONS WERE RAISED ON B EHALF OF ASSESSEE AND IN RESPONSE TO SAME, REMAND REPORT WAS CALLED FOR AND SAME WAS CONFRONTED TO THE ASSESSEE AND HAV ING CONSIDERED THE FACTS AND CIRCUMSTANCES AND INCLUDIN G REMAND REPORT AND REPLY TO SAME, CIT(A) GRANTED RELIEF TO THE ASSESSEE BY OBSERVING THAT FOR A.Y. 2004-05 ASSESSEE COMPANY DEBITED PROVISION FOR DOUBTFUL INTEREST RECEIVABLE OF RS. 1 0,97,05,670/- IN THE P&L ACCOUNT BUT ADDED THE SAME IN THE COMPUT ATION OF INCOME SINCE MERE PROVISION CANNOT BE ALLOWED AS DE DUCTION. DURING A.Y. 2005-06 ASSESSEE HAS WRITTEN OFF INTERE ST RECEIVABLE AND CLAIMED THE SAME AS ALLOWABLE DEDUCT ION IN THE COMPUTATION OF INCOME. SINCE THE PROVISION WAS DEBI TED IN P&L ACCOUNT LAST YEAR THE SAME WAS NOT DEBITED ONCE AGA IN IN THE P&L ACCOUNT THIS YEAR. INSTEAD THE ASSESSEE CLAIMED DEDUCTION ONLY IN THE COMPUTATION OF INCOME FOR A.Y. 2005-06. ASSESSEE ITA NO.4077/MUM/14 A.Y. 05-06 [ACIT VS. M/S. SUN IN VESTMENTS P. LTD.] PAGE 8 EXPLAINED NECESSARY ENTRIES WERE PASSED IN THE BOOK S OF ACCOUNT WITH REFERENCE TO WRITE OFF OF BAD DEBTS. THE ENTRIES PASSED BY ASSESSEE HAVE BEEN VERIFIED AND FOUND TO BE CORRECT. SO, FOLLOWING THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF TRF LTD. VS CIT [323 1TR 397], THE ADDITION MADE ON ACCOUNT OF BAD DEBTS WRITTEN OFF OF RS. 10,97,05,67 0/- WAS RIGHTLY DELETED BY CIT(A). THIS REASONED FACTUAL F INDING OF CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPH OLD THE SAME. 5. AS A RESULT, APPEAL FILED BY REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON THIS THE 24 TH DAY OF JUNE, 2016. SD/- SD/- ( RAJESH KUMAR ) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBE R MUMBAI: DATED 24/06/2016 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. / ASSESSEE 3. %&%'( ) / CONCERNED CIT 4. )- / CIT (A) 5.-./00'(, '( , %& / DR, ITAT, MUMBAI 6./4567 / GUARD FILE. BY ORDER / , / % , '( , %&