Gajanand Sundarlal (P) Ltd., BIKANER V. ITO, BIKANER

ITA 411/JODH/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3060 (ITAT-JODHPUR)
• Duration Of Justice: 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 22-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G R KOKANI
• Keywords: Depreciation; Reassessment proceedings
• Section: 234B; 147; 148; 2

Judgement Text

1 IN THE INCOME TAX APPELALTE TRIBUNAL: JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 411/JODH/2012 (A. Y. 2008-09) M/S GAJANAND SUNDERLAL PVT. LTD VS. INCOME-TAX OF FICER NAIYON KI GALI WARD 1(2) LAXMINATHJI KI GHATI BIKANER BIKANER PAN NO. : AAACG 7586 Q (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY : SHRI G.R. KOKANI DATE OF HEARING : 05/03/2013. DATE OF PRONOUNCEMENT : 04/04/2013. PER HARI OM MARATHA, J.M:- THIS APPEAL OF THE ASSESSEE FOR A.Y. 2008-09 IS DIR ECTED AGAINST THE ORDER OF THE LD. CIT(A), BIKANER DATED 31.10.20 12. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN MAKING INTEREST ADDITION F RS. 248717/-. AS THE ADDITION WAS MADE BEYOND TO THE REASON RECORDIN G U/S 2 143(3)/147 OF THE I.T. ACT, 1961. PROCEEDINGS OF R EASSESSMENT PROCEEDINGS WAS BAD IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN SUSTAINING INTEREST DISALLOWANC E EXTENT TO 9% AS AGAINST CHARGED BY THE A.O. @ 12%. THE LD. A.O. HAS GROSSLY ERRED IN MAKING INTEREST ADDITION OF RS. 248717/- I NTO RETURNED INCOME OF THE APPELLANT BECAUSE SOME MONEY WAS ADVA NCED EITHER TO THE DIRECTORS OR TO OTHER PERSONS. 3. THE LD. A.O. HAS ERRED IN CHARGING INTEREST U/S 234B & 234C OF THE I.T. ACT. 3. WE HAVE HEARD THE LD. D.R. AND HAVE CAREFULLY PE RUSED THE ENTIRE MATERIAL ON RECORD AS WELL AS THE WRITTEN SUBMISSIO NS FILED ON BEHALF OF THE APPELLANT. THE MAIN ISSUE OF THIS APPEAL IS TH AT NO ADDITION WAS MADE ON THE BASIS OF RECORDED REASONS WHILE TAKING ACTION U/S 147 R.W.S 148 OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT', FOR SHORT]. BEFORE WE PROCEED TO DECIDE THIS LEGAL ISSUE, WE WOULD LIKE TO NARRATE THE RELEVANT FACTS OF THIS IS SUE. 4. THE ASSESSEE IS A COMPANY WHICH IS ENGAGED IN MA NUFACTURING OF BUJIA AND PAPAD. IT FILED ITS RETURN OF INCOME [RO I] ELECTRONICALLY ON 28.9.2009 DECLARING TOTAL INCOME OF RS. 1,65,640/-. THEREAFTER, ACTION 3 U/S 147 R.W.S 148 OF THE ACT WAS INITIATED AFTER RE CORDING REQUISITE REASONS. THE ASSESSEE OBJECTED TO THE REASONS RECO RDED. IT WAS NOTICED THAT THE ASSESSEE HAD PURCHASED A FACTORY B UILDING ON 31.3.2008 AND IN THE BALANCE SHEET IT HAS CLAIMED D EPRECIATION AMOUNTING TO RS. 91,295/- TOWARDS LAND AND BUILDING . THE A.O. NOTICED THAT THE SUB-REGISTRAR VALUED THE FACTORY B UILDING FOR STAMP DUTY PURPOSES AT RS. 30 LAKHS AS AGAINST WHICH THE ASSESSEE HAS UNDER- VALUED THE SAME AT RS. 24 LAKHS AND HAS ENHANCED TH E VALUE OF BUILDING TO RS. 18,25,891/- AGAINST RS. 13,24,252/- FOR TAKI NG MORE BENEFIT OF DEPRECIATION AND THUS HAS EVADED TAX. ON THIS BASI S, ACTION U/S 147 R.W.S 148 OF THE ACT FOR REASSESSMENT WAS INITIATED . BUT IN THE ASSESSMENT ORDER, THE EXPLANATION TENDERED BY THE A SSESSEE QUA REASON RECORDED FOR REOPENING WAS FOUND TO BE A VALID DEDU CTION THEREFORE, NO ADDITION WAS MADE ON THAT COUNT. HOWEVER, THE A.O. HAS MADE ADDITION ON ACCOUNT OF INTEREST AMOUNTING TO RS. 2, 48,717/-. THE A.O. FOUND THAT THE ASSESSEE HAD PAID INTEREST TO CREDIT ORS AMOUNTING TO RS. 31,56,349/- TOWARDS SECURED AND UNSECURED LOANS AT RATES RANGING BETWEEN 9% TO 15% AND HAD ADVANCED INTEREST-FREE LO ANS/ADVANCES TO ITS TWO DIRECTORS, NAMELY, SHRI GAJANAND AGARWAL AN D SHRI CHIMANLAL AGARWAL WITHOUT CHARGING ANY INTEREST. BEING AGGR IEVED, THE ASSESSEE TOOK THE MATTER BEFORE THE LD. CIT(A) WHO HAS ONLY REDUCED THE 4 DISALLOWANCE OF INTEREST BY ADOPTING RATE OF 9% ONL Y. THE ASSESSEE IS FURTHER AGGRIEVED. 5. AFTER CONSIDERING THE SUBMISSIONS OF THE LD. D.R . AND GOING THROUGH THE WRITTEN SUBMISSIONS FILED ON RECORD, WE FIND THAT THE MAIN LEGAL ISSUE BEFORE US IS THAT ACTION U/S 147 R.W.S 148 OF THE ACT WAS INITIATED ON THE REASON THAT THE SOURCE OF AMOUNT I NVESTED FOR THE PURCHASE OF IMMOVABLE PROPERTY AT RS. 41,76,751/- H AS ESCAPED AS BUT THIS FACT WAS FOUND TO BE NOT CORRECT DURING ASSESS MENT PROCEEDINGS. THUS THE FACTUAL MATRIX WHICH EMERGES IS THAT THE R EASONS ON THE BASIS OF WHICH REASSESSMENT PROCEEDINGS WERE UNDERTAKEN W ERE FOUND TO BE NON-EXISTENT. THIS FACT COULD NOT BE DENIED BY THE LD. D.R. EITHER. HOWEVER, HE ASSERTED THAT THE REASSESSMENT PROCEEDI NGS HAVE BEEN CORRECTLY INITIATED. BUT THE LEGAL POSITION IN THI S REGARD IS THAT IN THE REASSESSMENT ORDER NO ADDITION IS MADE OR ELSE THE EXPLANATION OF THE ASSESSEE IS FOUND TO BE CORRECT IN RESPECT OF THE R EASONS GIVEN FOR ESCAPEMENT OF INCOME FROM TAX, THEN IN THAT CASE, T HE ORIGINAL JURISDICTION ASSUMED U/S 147 R.W.S 148 BECOMES INVA LID. HENCE THE ENTIRE REASSESSMENT ORDER HAS TO FAIL ON THAT BASI S ALONE. IN THIS REGARD, THERE ARE NUMEROUS DECISIONS, BUT FOR READY REFERENCE, WE WOULD LIKE TO MENTION THE FOLLOWING: 5 1. PRASHANT S. JOSHI VS. ITO [2010] 324 ITR 154 [BOM] 2. HINDUSTAN LEVER LTD VS. R.B. WADKARA [2004] 268 ITR 332 [BOM] 3. ITO VS. BIDBHANJAN INVESTMENT & TRADING CO. [P] LTD. [2011] 59 DTR 345 [MUM] [TRI] 6. THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE DECI SIONS, WE HOLD THAT REASSESSMENT PROCEEDINGS UNDERTAKEN U/S 147 R. W.S 148 OF THE ACT HAS TO BE STRUCK DOWN. WE, ACCORDINGLY, QUASH THE IMPUGNED PROCEEDINGS AND ALLOW THE APPEAL OF THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH APRIL 2013. SD/- SD/- [N.K. SAINI] [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 4 TH APRIL, 2013. VL COPY TO : 1. 2. THE APPELLANT 3. THE RESPONDENT 4. THE CIT 5. THE CIT(A) 6. THE DR ASSISTANT REGISTRAR