M/s Shree Rajmoti Industries, RAJKOT-GUJARAT V. The Assistant Commr. Income Tax,Cir-2, RAJKOT-GUJARAT

ITA 41/RJT/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6816 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 27-01-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: USHA N SHROTE
• Assessee Lawyers: RD LALCHANDANI
• Keywords: Reopening of assessment; Earning of tax free income; Proportionate interest; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 147; 148; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH , RAJKOT BEFORE: SHRI RAJPAL YADAV, JUDICIAL MEMBER AND S H RI AMARJIT SINGH , ACCOUNTANT MEMBER [CONDUCTED THROUGH E - COURT AT AHMEDABAD] M/S. SHREE RAJMOTI INDUSTRIES, BHAVNAGAR ROAD, RAJKOT PAN: AAHFS6930M (APPELLANT) VS THE ACIT, CIRCLE - 2, RAJKOT (RESPONDENT) REV ENUE BY : S MT. USHA N. SHROTE , SR. D . R. ASSESSEE BY: S H RI R.D. LALCHANDANI , A.R. DATE OF HEARING : 06 - 12 - 2 017 DATE OF PRONOUNCEMENT : 21 - 12 - 2 017 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS IS A BUNCH OF SIX APPEALS DIRECTED AT THE INSTANCE OF THE ASSESSEE IN ASSESSMENT YEARS 2008 - 09 TO 2013 - 14. THOUGH THE LD. FIRST APPELLATE AUTHORITY HAS DECIDED APPEALS OF THE ASSESSEE VIDE ORD ER DATED 16 - 12 - 2015 BUT HE DECIDED THE APPEALS FOR ASSESSMENT YEAR 2008 - 09, 2009 - 10 AND 2010 - 11 BY WAY OF A COMMON ORDER AND REST BY SEPARATE ORDERS. I T A NO S . 37 TO 41 & 450 / RJT /20 16 A .Y. 2008 - 09 TO 2013 - 14 I.T.A NO S . 37 TO 41& 450/RJT /20 16 A.Y. 2008 - 09 TO 2013 - 14 PAGE NO M/S. SHREE RAJMOTI INDUSTRIES VS. ACIT 2 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEA L FOR ASSESSMENT YEAR 2008 - 09. : - 1. THE LEARNED CIT[A] ERRED IN CONFIRMING REOPENING THE ASSESSMENT U/S 147 OF THE ACT FOR ASSESSING DIVIDEND INCOME. ALL THE FACTS IN CONNECTION WITH DIVIDEND INCOME WERE BEFORE THE ASSESSING OFFICER. THE REOPENING OF THE ASSESSMENT IS NEITHER JUSTIFIED ON FACTS NOR JUS TIFIED IN LAW. 2. WITHOUT PREJUDICE TO GROUND NO.1, THE ADDITION OF RS.1,08,744/ - IN THE TOTAL INCOME ON ACCOUNT OF DIVIDEND FROM RAJKOT NAGRIK SAHKARI BANK IS UNWARRANTED AND UNJUSTIFIED. 3. WITHOUT PREJUDICE TO GROUND NO. 1 & 2, THE ASSESSING OFFI CER HAS NOT DISPOSED OFF THE OBJECTIONS TO RE - OPENING OF THE ASSESSMENT U/S 147 BY SPEAKING ORDER. THE LETTERS DATED 06 - 06 - 2014, 10 - 06 - 2014 AND 11 - 06 - 2014 ARE NOT SPEAKING ORDER. 3 . THE FACTS ON ALL VITALS POINTS ARE COMMON FOR ALL THESE ASSESSMENT YEAR S. T HEREFORE, FOR THE FACILITY OF REFERENCE, WE TAKE THE FACTS PRIMARILY FROM 2008 - 09. IT IS PERTINENT TO OBSERVE THAT ASSESSMENT YEARS 2008 - 09, 2009 - 10 AND 2010 - 11, ASSESSEE HAS CHALLENGED REOPENING OF THE ASSESSMENT AND THE GROUNDS TAKEN BY THE AS SES SEE IN ALL THESE THREE YEARS QUA THIS ISSUE IS VERBATIM SAME. FIRST , WE TAKE THE ISSUE RE GARDING REOPENING OF ASSESSMENT IN THESE ASSESSMENT YEARS. 4 . IN THIS CASE, ORIGINAL RETURN OF INCOME WAS FILED BY THE ASSES SEE DECLARING TOTAL INCOME OF RS . 84,49, 900/ - . SUBSEQUENTLY, THE CASE WAS REOPENED FOR ASSESSMENT U/S. 147 OF THE ACT BY ISSUING OF NOTICE U/S. 148 OF THE ACT ON 31 ST MARCH, 2014. T HE ASSESSEE HAS SH OWN DIVIDEND INCOME OF RS. 10,8 ,744/ - FROM RAJ KOT NAGRIK SAHKARI BANK I.T.A NO S . 37 TO 41& 450/RJT /20 16 A.Y. 2008 - 09 TO 2013 - 14 PAGE NO M/S. SHREE RAJMOTI INDUSTRIES VS. ACIT 3 AS EXEMPT INCOME. THE A SSESSING OFFICER OBSER VE D THAT THE ASSESSEE WAS NOT ELIGIBLE FOR EXEMPTION OF AFORESAID DIVIDEND INCOME AS PER THE PROVISION OF SECTION 10(34) R.W.S.115(O) OF THE A CT. HE FURTHER OBSERVED THAT AFORESAID BANK WAS NOT A COMPANY AND HAD NOT PAID ANY DIVID END DISTRIBUTION TAX AS PER SECTION 115 - 0 OF THE ACT. T HEREFORE, THE ASSESSING OFFICER CONCLUDED THAT EXEMPTION U/S 10(34) OF T HE ACT ON DIVIDEND INCOME RECEIVED FROM THE AFORESAID BANK WAS NOT AVAILABLE. 5 . AGGRIEVED ASSESSEE FILED APPEAL BEFORE T HE L D. CIT(A). THE LD. CIT(A) HAS SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER: - 5.0 DECISION: - 5.3 THE SECOND GROUND OF APPEAL IS REGARDING ADDITION OF RS. 1,08, 744/ - ON ACCOUNT OF DIVIDEND INCOME. THE APPELLANT HAS RECEIV ED THE DIVIDEND INCOME OF RS.7,50,130/ - FROM RAJKOT NAGRIK SAHKARI BANK WHICH IS CLAIMED AS EXEMPTED INCOME. THE ASSESSING OFFICER HAS HELD THAT THE RAJKOT NAGRIK SAHKARI BANK IS NOT A LIMITED COMPANY AND HENCE, NOT SUBJECT TO DIVIDEND TRANSACTION TAX. THE DIVIDEND INCOME RECEIVED BY THE APPELLANT IS NEITHER EXEMPTED U/S. 10(34), R.W.S.115 - O NOR SUBJECT TO DOUBLE TAXATION IN THE HANDS OF THE \ APPELLANT. THE APPELLANT HAS TAKEN THE PLEA THAT THE DIVIDEND INCOME SHOULD BE TREATED AS EXEMPTED INCOME EITHER HA S BEEN RECEIVED FROM RAJKOT NAGRIK SAHKARI BANK AS A PRIVATE LIMITED COMPANY IN THE STATUS OF THE COMPANY OR ON THE PRINCIPLE OF MUTUALITY. THE ASSESSEE WAS STATED AS AN INDIVIDUAL. 5.4 THE PRINCIPLE OF MUTUALITY DOES NOT APPLY TO THE RELATION HELD BE TWEEN THE RAJKOT SAHKARI BANK AND THE APPELLANT. THE RAJKOT NAGRIK SAHKARI BANK IS HELD AN AOP WHERE THERE ARE SO MANY MEMBERS AND THE APPELLANT IS ONE OF THE MEMBERS AMONGST THEM AND IS HOLDING MORE THAN 10% OF ITS SHARE DEPOSITS AND OTHER DEPOSITS. IN VI EW OF THE FACTS, THE DIVIDEND INCOME RECEIVED BY THE APPELLANT FROM RAJKOT NAGRIK SAHKARI BANK CANNOT BE TREATED AS EXEMPTED INCOME EITHER WAY. I HAVE CONSIDERED THE CITATION RELIED UPON BY THE APPELLANT WHERE THE FACTS DISCUSSED ARE DIFFERENT FROM THE FAC TS OF THE APPELLANT'S CASE. THE INTENTION OF THE LEGISLATURE BEHIND PROVISION U/S. 10(34) WAS TO COLLECT TAX AT ONE TIME IN FORM OF DIVIDEND DISTRIBUTION TAX AND AVOID ELEMENT OF DOUBLE TAXATION. IT IS CRYSTAL CLEAR THAT INCOME BY WAY OF DIVIDEND DISTRIBUT ION TAX HAS BEEN PAID U/S.115 - O OF THE IT. ACT IS EXEMPTED FROM LEVY OF INCOME - TAX. THE DIVIDEND RECEIVED FROM RAJKOT NAGRIK SAHKARI BANK IS NOT SUBJECT TO DIVIDEND DISTRIBUTION TAX. THEREFORE, THE DECISION OF THE ASSESSING OFFICER HAS BEEN JUSTIFIED IN TR EATING THE DIVIDEND I.T.A NO S . 37 TO 41& 450/RJT /20 16 A.Y. 2008 - 09 TO 2013 - 14 PAGE NO M/S. SHREE RAJMOTI INDUSTRIES VS. ACIT 4 INCOME AS TAXABLE AS PER THE PROVISIONS OF LAW. NO INTERFERENCE IS CALLED FOR ON THE ADDITION OF DIVIDEND INCOME MADE BY ASSESSING OFFICER IN THE ASSESSMENT ORDER. THE GROUND OF APPEAL IS DISMISSED FOR ALL THE ASSESSMENT YEARS OF 2008 - 0 9, 2009 - 10 AND 2010 - 11. 6 . WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD CAREFULLY . WE OBSERVED THAT ACCORDING TO THE PROVISION OF SECTION 10(34) OF THE ACT THE INCOME RECEIVED BY WAY OF DIVIDEND IS EXEMPTED IF DIVIDEND DISTRIBUTION TAX HAS BEEN PAID AS PER THE PROVISION OF SECTION 115 - 0 OF THE ACTS. WE HAVE FURTHER OBSERVED THAT RAJKOT NAGRIK SAHKARI BANK BEING NOT A COMPANY IS NOT SUBJECT TO PAYMENT OF DIVIDEND DISTRIBUTION TAX . THE DIVIDEND INCOME IS EXEMPT AS PER PROVISION OF SECTION 10(34) OF THE ACT AS REFERRED U/S.115 - O OF THE IT. ACT. THE PROVISIONS OF SECTION 10(34) ARE REPRODUCED AS UNDER : - 10( 34 ) ANY INCOME BY WAY OF DIVIDENDS REFERRED TO IN SECTION 115 - O : [ PROVIDED THAT NOTHING IN THIS CLAUSE SHALL APPLY TO ANY INCOME BY WAY OF DIVIDEND CHARGEABLE TO TAX IN ACCORDANCE WITH THE PROVISIONS OF SECTION 115BBDA ; ] WE OBSERVED THAT IT IS AN UNDISPUTED FACT T HE DIVIDEND RECEIVED FROM RAJKOT NAGRIK SAHKARI BANK WAS NOT SUBJECT TO DIVIDEND DISTRIBUTION TAX. AFTER TAKING INTO CONSIDERATION THE ABOVE FACTS AND FINDINGS OF THE LD. CIT(A) WE DO NOT FIND ANY REASON TO INTERFERE IN THE DECISION OF THE LD. CIT(A). THEREFORE, THE GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED ON THIS ISSUE. SIMILARLY THE IDENTICAL ISSUES IN APPEAL OF OTHER ASSESSMENT YEARS ARE ALSO DISMISSED. 7 . REGARDING GROUND OF APPEAL OF THE ASSESSEE RELATING TO REOPENING OF ASSESSMENT U/S. 147 OF THE ACT, WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULLY. THE LD. I.T.A NO S . 37 TO 41& 450/RJT /20 16 A.Y. 2008 - 09 TO 2013 - 14 PAGE NO M/S. SHREE RAJMOTI INDUSTRIES VS. ACIT 5 CIT(A) HAS UPHELD THE REOPENING OF ASSESSMENT U/S 147 OF THE ACT BY OBSERVING AS UNDER: - 5.2 IN THE FIRST GROUND OF APPEAL, THE APPELLANT HAS TAKEN ARGUMENT THAT THE ASSESSMENT WAS REOPENED BASED ON INFORMATION ON RECORD. IT IS SEEN THAT THE ASSESSEE HAS NOT APPLIED FOR REASONS RECORDED FOR REO PENING OF ASSESSMENT U/S.147 BY THE A.O. IF THE APPELLANT WAS NOT SATISFIED WITH THE REOPENING OF THE ASSESSMENT, HE OUGHT TO HAVE OBTAINED COPY OF REASONS RECORDED FOR REOPENING OF THE ASSESSMENT BY THE A.O. AND FILED AN OBJECTION AGAINST: THE REOPENING T HEREOF DURING THE COURSE OF ASSESSMENT PROCEEDINGS ITSELF. NEITHER THE APPELLANT HAS OBJECTED TO THE REOPENING OF THE ASSESSMENT NOR FURNISHED ANY DOCUMENTARY EVIDENCES FOR OBJECTION TO THE REASONS RECORDED BY THE A.O. FOR REOPENING OF THE ASSESSMENT DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS. THE APPELLANT HAS NOT FURNISHED FULL AND TRUE PARTICULARS AT THE TIME OF ORIGINAL ASSESSMENT AS REGARDS TO THE NATURE OF 'DIVIDEND INCOME 1 IN TERMS HOW THE DIVIDEND INCOME IS EXEMPTED. WHEN IT HAS COME TO THE KNOWLED GE OF THE ASSESSING OFFICER THAT THE COMPANY FROM WHICH THE APPELLANT RECEIVED SAID DIVIDEND INCOME IS NOT A REGISTERED COMPANY BUT RATHER AN AOP AND THUS FORMED AN OPINION THAT THE INCOME TO THAT EXTENT ESCAPED ASSESSMENT. AT THE STAGE OF ORIGINAL ASSESSM ENT PROCEEDINGS U/S. 143(3), THE ISSUE REGARDING DIVIDEND INCOME HAS NOT BEEN EXAMINED AND DISCUSSED BY THE A.O. IN THE ASSESSMENT ORDER AND TO THAT EXTENT THE INCOME HAD ESCAPED ASSESSMENT. THE FACTS OF THE CASE ARE DIFFERENT FROM THE FACTS IN THE CASE LA WS RELIED UPON BY THE APPELLANT IN SUPPORT. IN THE CASE OF USHA INTERNATIONAL V. DCIT (2015) 56 TAXMAN.COM (DEL) 157, IT HAS BEEN HELD THAT - 'WHERE THERE IS A NEED TO EXAMINE A PARTICULAR ISSUE WHICH IS NOT PRIMA FACIE ACCEPTABLE, A.O. FAILS TO EXAMINE TH E SAME DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND LATER DEVELOPMENT WARRANTS ITS EXAMINATION, IT WOULD NOT FALL WITHIN THE DOMAIN OF 'CHANGE OF OPINION' AT THE TIME OF INITIATION OF REASSESSMENT.' IT IS THEREFORE HELD THAT THE SUBMISSIONS MADE BY THE APPELLANT ARE INSUFFICIENT TO CONCLUDE THAT THERE WAS 'CHANGE OF OPINION' ON THE ISSUE OF DIVIDEND INCOME WHILE REOPENING OF THE ASSESSMENT U/S. 147 OF THE ACT. AFTER CONSIDERING THE ENTIRE FACTS OF THE CASE, I AM OF THE CONSIDERED OPINION THAT REOPENING O F ASSESSMENT IS VALID AND JUSTIFIED AS PER THE PROVISIONS OF THE INCOME TAX ACT, 1961. THE ACTION OF THE A.O. IS UPHELD. THIS GROUND OF APPEAL IS DISMISSED. WE NOTICED THAT THE ASSESSEE HAS SHOWN DIVIDEND INCOME OF RS. 10,8,744/ - FROM RAJKOT NAGRIK SAHKA RI BANK CLAIMED AS EXEMPT INCOME BUT THE ASSESSEE HAS NOT PROVIDED INFORMATION ABOUT THE NATURE OF THE IMPUGNED DIVIDEND INCOME. THE ASSESSING OFFICER OBSERVED THAT EXEMPTION U/S 10(34) OF THE ACT ON DIVIDEND INCOME RECEIVED FROM THE AOP WHICH IS NOT SUB JECT TO PAYMENT OF DIVIDEND DISTRIBUTION TAX ACCORDING TO PROVISION OF SECTION 115 - O ARE NOT I.T.A NO S . 37 TO 41& 450/RJT /20 16 A.Y. 2008 - 09 TO 2013 - 14 PAGE NO M/S. SHREE RAJMOTI INDUSTRIES VS. ACIT 6 AVAILABLE. THE ASSESSEE HAS NOT PROVIDED SUFFICIENT DETAILS WHICH COULD HAVE DEMONSTRATED THE ACTUAL NATURE OF THE DIVIDEND INCOME RECEIVED BY THE ASSESSEE. THEREF ORE, T O EXAMINE THE ISSUE OF AVAILABILITY OF EXEMPTION O N DIVIDEND INCOME THE CASE OF THE ASSESSEE WAS REOPENED U/S 147 OF THE ACT. CONSEQUENTLY DURING THE REASSESSMENT PROCEEDINGS THE CLAIM OF T HE ASSESSEE THAT DIVIDEND INCOME WAS EXEMPT AS PER SECTION 10(34) OF THE ACT WAS FOUN D TO BE INVALID . THER E FORE, A FTER CONSIDERING THE ABOVE FACTS AND MATERIAL ON RECORD, WE ARE INCLINED WITH THE DECISION OF THE LD. CIT(A). THEREFORE , THIS GROUND OF APPEAL OF THE ASSESSEE IS ALSO DISMISSED . SIMILARLY THE ID ENTICAL ISSUES IN APPEAL OF OTHER ASSESSMENT YEARS ARE ALSO DISMISSED. THE GROUND OF APPEAL NUMBER 2 PERTAINING TO DISALLOWANCE OF RS.2,91,796 FOR ASSESSMENT YEAR 2011 - 12. 8 . THE ASSESSING OFFICER HAS NOTICED THAT ASSESSEE HAD OBTAINED UNSECURED LOANS FROM RELATIVES AND PAID INTEREST @ 24%ON THE LOANS OBTAINED FROM THE RELATIVES ON THE OTHER HAND THE ASSESSEE HAS PAID INTEREST @12% ON THE LOANS OBTAINED FROM OTHER PERSONS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS TH E ASSESSEE FAILED TO SUBSTANTIATE THE PAYMENT OF INTEREST AT AN EXORBITANT RATE TO RELATED PARTIES AS AGAINST PREVAILING MARKET RATE OF INTEREST OF 12%. T HEREFORE, THE ASSESSING OFFICER HAD DISALLOWED THE EXCESS PART OF PROPORTIONATE INTEREST TO THE AMOUNT OF RS.291796/ U/S 40A(2) OF THE A CT. THE LD. CIT(A) HAS SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER . THE ASSESSING OFFICER HAS DISALLOWED OUT OF THE EXCESS PAYMENT OF INTEREST TO THE FRIENDS AND RELATIVES ON THE I.T.A NO S . 37 TO 41& 450/RJT /20 16 A.Y. 2008 - 09 TO 2013 - 14 PAGE NO M/S. SHREE RAJMOTI INDUSTRIES VS. ACIT 7 UNSECURED LOANS IN THE PROPORTIONATE AND EQUIVALENT TO AN AMOUNT EXC ESS TO THE PREVALENT MARKET RATES. THE A SSESSEE HAS FAILED TO SUBSTANTIATE T HE PAYMENT OF INTEREST @ 24% ON THE LOANS TO THE RELATIVES IN COMPARISON TO THE RATE OF 12% PREVALENT MARKET RATE OF INTEREST. T HE A SSESSEE HAD ALSO PAID THE INTEREST @ 12% ON UNSE CURED LOANS TO MANY OTHER PARTIES. AFTER C ONSIDERING THE FACTS IN THIS REGARD, WE OBSERVED THAT OUT OF THE IN TEREST PAID TO THE RELATIVE S DISALLOWANC E OF RS.2,91,796/ - MADE U/S.40A (2)(B) BY THE ASSESSING OFFICER IS REASONABLE AND JUSTIFIED. THE REFORE , WE DO N OT FIND ANY ERROR IN THE DECISION OF THE LD. CIT(A). THIS GROUND OF APPEAL IS DISMISSED. 9 . IN THE RESULT, ALL THE SIX APPEAL S OF THE ASSESSEE ARE DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OUR T ON 21 - 12 - 201 7 SD/ - SD/ - (RAJPAL YADAV ) ( AMARJIT SINGH ) J UDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 21 /12 /201 7 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, RAJKOT