M/s Magrath Properties (P) Ltd., Bangalore V. DCIT, Bangalore

ITA 424/BANG/2014

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 8671 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 25-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: FARHAT HUSSAIN QURESHI
• Assessee Lawyers: SEETHARAM
• Keywords: Additional evidence; Assessment record; Commercial expediency
• Section: 143(3); 115JB; 263; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER A ND SHRI JASON P.BOAZ, ACCOUNTANT MEMBER ITA NO. 424 / BANG/20 14 (ASSESSMENT YEAR: 20 06 - 07 ) M/S. MAGRATH PROPERTIES (P) LTD. 1 ST FLOOR, EMBASS Y POINT, 150, INFANTRY ROAD, BANGALORE - 560005. APPELLANT VS. DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE 12(1), BANGALORE. RESPONDENT APPELLANT BY: SHRI SEETHARAM, CA. RESPONDENT BY: SHRI FARHAT HUSSAIN QURESHI, CIT(DR) D ATE OF HEARING : 29/01/2015 DATE OF PRONOUNCEMENT: 06 /0 2 /2015 O R D E R PER SMT.P.MADHAVI DEVI, JM: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT, BANGALORE - III, DATED 06/02/2014 PASSED U/S 263 OF THE INCOME - TAX ACT, 19 61[HEREINAFTER REFERRED TO AS 'THE ACT']. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE - COMPANY WHICH HAD FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006 - 07 U/S 115JB OF THE ACT. THE ASSESSING OFFICER(AO) PASSED THE ASSESSMENT U/S 143(3) ON 12 /01/2008. ON PERUSAL OF THE ITA NO . 424 /BANG/20 1 4 M/S.MAGRATH PROPERTIES (P) LTD., PAGE 2 OF 6 ASSESSMENT RECORDS, THE CIT OBSERVED THAT THE ASSESSEE HAS PAID INTEREST ON LOANS AVAILED AND HAS ALSO ADVANCED LOANS TO ITS SISTER CONCERN S AND THAT LOAN TO ONE OF ITS SISTER CONCERN WAS WITHOUT INTEREST . THE CIT WAS THEREFOR E OF THE OPINION THAT THE AO OUGHT TO HAVE DISALLOWED INTEREST EXPENDITURE ON ACCOUNT OF INTEREST ADVANCED TO ITS SISTER CONCERN , M/S.DYNASTY STOCK HOLDING PVT. LTD., (DSHPL) . THEREFORE, HE ISSUED NOTICE U/S 263 ON 11/10/2010. DURING THE COURSE OF THE REVI SION PROCEEDINGS, THE ASSESSEE HAD STATED THAT IT HAS NOT CHARGED INTEREST IN VIEW OF MOU ENTERED INTO WITH ITS SISTER CONCERN AND THAT THE SAID MOU IS LOST AND IS NOT TRACEABLE. THE ASSESSEE FURTHER SUBMITTED A COPY OF THE AGREEMENT DATED 2/12/2010 INCOR PORATING ALL THE TERMS OF THE MOU DATED 18/6/2005 BEFORE THE CIT. THE CIT, HOWEVER, HELD THAT THE ASSESSEE HAS FAILED TO PROVE THE COMMERCIAL EXPEDIENCY BY NOT PRODUCING THE ORIGINAL MOU DATED 18/6/2005 AND THAT THE CLAIM OF LOSS OF THE ORIGINAL MOU DATED 18/6/2005 AND THE SUBSEQUENT MOU DATED 2/12/2010 IS PURELY AN AFTER - THOUGHT. HE FURTHER HELD THAT SINCE THE ORIGINAL MOU DATED 18/6/2005 WAS NOT REGISTERED, IT WAS A COLOURABLE DEVISE TO AVOID DISALLOWANCE OF INTEREST. HE, ACCORDINGLY, REVISED THE ASSESSM ENT ORDER AND DIRECTED THE AO TO PASS AN ORDER OF ASSESSMENT BY DISALLOWING THE INTEREST EXPENDITURE ON THE LOAN ADVANCED TO ASSESSEE S SISTER CONCERN . AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE ITAT ALONG WITH AN APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE. THE TRIBUNAL, VIDE ORDERS ITA NO . 424 /BANG/20 1 4 M/S.MAGRATH PROPERTIES (P) LTD., PAGE 3 OF 6 DATED 10/12/2012 HELD THAT ABSENCE OF ORIGINAL MOU DATED 18/6/2005 CANNOT BE FATAL TO THE CASE OF THE ASSESSEE BECAUSE BOTH THE ASSESSEE AND THE DSHPL AGREE THAT THERE WAS A MOU DATED 18/6/2005 AND THAT THE ORIGINAL IS ALSO LOST. IT ALSO OBSERVED THAT THE TERMS OF THE MOU DATED 18/6/2005 ARE THE SAME TERMS WHICH ARE IN THE MOU DATED 2/12/2010 AND SINCE MOU DATED 18/6/2005 AS WELL AS 2/12/2010 DOES NOT CREATE ANY RIGHT OR INTEREST IN THE IMMOVABLE PROPERTY, THE SAME DOES NOT REQUIRE REGISTRATION. THUS OBSERVING, THE TRIBUNAL SET ASIDE THE FINDING OF THE CIT AND DIRECTED THE CIT TO RE - EXAMINE THE CLAIM OF THE ASSESSEE WITH REGARD TO COMMERCIAL EXPEDIENCY AND DIRECTED THAT THE ASSESSEE BE GIVEN AN OPPORTUNITY TO ESTABLISH ITS CASE BY FILING ADDITIONAL EVIDENCE, IF NECESSARY. 3. IN THE REMAND PROCEEDINGS, THE CASE WAS POSTED FOR HEARING ON 28/3/2013. THE LEARNED COUNSEL FOR THE ASSESSEE APPEARED ON 21/3/2011 AND FILED HIS OBJECTION S DATED 20/3/2011 TO THE REVISION PROCEEDINGS. THE CIT HAS REPRODUCED GIST OF THE OBJECTIONS OF THE ASSESSEE AT PAGES 4 AND 5 OF HIS ORDER. OBSERVING THAT THE ITAT HAS REMANDED THE ISSUE TO THE FILE OF THE CIT TO EXAMINE THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE AND SINCE TH E ASSESSEE HAS NOT FURNISHED ANY ADDITIONAL EVIDENCE FOR RE - EXAMINATION WITH REGARD TO THE COMMERCIAL EXPEDIENCY, EXCEPT FOR THE OBJECTIONS DATED 20/3/2013, ANOTHER OPPORTUNITY WAS GIVEN TO THE ASSESSEE VIDE OFFICE LETTER DATED 28/11/2013 POSTING THE CASE FOR HEARING ON 10/12/2013. THE ASSESSEE ITA NO . 424 /BANG/20 1 4 M/S.MAGRATH PROPERTIES (P) LTD., PAGE 4 OF 6 SOUGHT AN ADJOURNMENT ON 10/12/2013 AND ALSO ON THE SUBSEQUENT DATE OF HEARING I.E. UP TO 31/1/2014. SINCE THE ASSESSEE HAS NOT SUBMITTED ANY FURTHER EVIDENCE IN SPITE OF SUFFICIENT OPPORTUNITY, THE CIT BY ORDER DA TED 6/2/2014 CONFIRMED THE EARLIER ORDER U/S 263 AND DIRECTED THE AO TO PASS ORDER GIVING EFFECT TO THE DIRECTIONS GIVEN IN THE ORDER U/S 263 DATED 31/1/2011 AND RECOMPUTED THE TOTAL INCOME OF THE ASSESSEE ACCORDINGLY. AGAINST THIS FINDING OF THE CIT, THE ASSESSEE IS IN APPEAL BEFORE US. 4. THOUGH THE ASSESSEE HAS RAISED THREE GROUNDS OF APPEAL STATING THAT THE REASONABLE OPPORTUNITY OF HEARING WAS NOT GIVEN TO THE ASSESSEE AND THAT THE ASSESSEE S REQUEST FOR ADJOURNMENT WAS REJECTED AND REASONS SUBMIT TED ON 20/3/2013 WERE NOT CONSIDERED BY THE CIT, THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT ADVANCE ANY ARGUMENT ON THESE GROUNDS. THE LEARNED COUNSEL FOR THE ASSESSEE ONLY SUBMITTED T HAT THE COUNSEL S WIFE SMT.JANAK I WAS SEVERELY ILL AND WAS ADMITTED T O THE HOSPITAL AND HE BEING THE LONE PERSON LOOKING AFTER HER AT SUCH TIME , HE HAD SOUGHT ADJOURNMENT BEFORE THE CIT, BUT UNFORTUNATELY THE CIT HAS NOT GRANTED FURTHER TIME BUT HAS CONCLUDED THE REVISION PROCEEDINGS. IN SUPPORT OF HIS CONTENTION, HE PLACE D BEFORE US MEDICAL CERTIFICATE ISSUED BY KUMARASWAMI HEALTH CENTRE, KOTTAY AM TO SHOW THAT HIS WIFE WAS AN IN - PATIENT OF THE HOSPITAL FROM 2/2/2014 TO 18/2/2014. HE SUBMITTED THAT HIS WIFE HAD FALLEN ILL IN THE MONTH OF JUNE 2013 AND HAD TO BE TAKEN TO ITA NO . 424 /BANG/20 1 4 M/S.MAGRATH PROPERTIES (P) LTD., PAGE 5 OF 6 VA RIOUS HOSPITALS BEFORE FINALLY BEING OPERATED IN FEBRUARY 2014 WHICH IS THE CAUSE OF NON - APPEARANCE OF THE COUNSEL AND NON - PRODUCTION OF ADDITIONAL EVIDENCE BEFORE THE CIT . THEREFORE, HE PRAYED THAT THE ASSESSEE BE GIVEN ANOTH ER OPPORTUNITY OF PRESENTING ITS CASE BEFORE THE CIT. THE LEARNED DEPARTMENTAL REPRESENTATIVE, HOWEVER, OPPOSED THE CONTENTIONS OF THE ASSESSEE AND SUBMITTED THAT EVEN DURING THE SECOND ROUND OF HEARING BEFORE THE CIT, THE ASSESSEE WAS GIVEN AMPLE OPPORTUNITY OF HEARING WHICH IT DID NOT AVAIL OF, AND THEREFORE, THE ASSESSEE HAS NO CASE. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE EARLIER PROCEEDINGS U/S 263 WERE SET ASIDE BY THE TRIBUNAL WITH A DIRECTION TO THE CIT TO CONSIDER THE ISSUE IN THE LIGHT OF COMMERCIAL EXPEDIENCY AND ALSO TO EXAMINE THE ADDITIONAL EVIDENCE, IF NECESSARY, FILED BY THE ASSESSEE. THE ASSESSEE HAS FAILED TO FILE EVEN THE ADDITIONAL EVIDENCE WHICH IT HAD ALREADY FILED BEFORE THE ITAT AND HAS ONLY FILED OBJECTIONS TO THE PROCEEDINGS U/263. AS NOTICED FROM THE ORDER OF THE CIT, THE EFFECTIVE HEARING OF THE PROCEEDINGS WERE FROM NOVEMBER 2013 TO FEBRUARY 2014. THEREFORE, TAKING THE ORAL SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE AS WELL AS THE MEDICAL CERTI FICATES INTO CONSIDERATION, WE ACCEPT THAT HE WAS PREVENTED BY SUFFICIENT REASONS FROM APPEARING BEFORE THE CIT AND DEEM IT FIT AND PROPER TO SET ASIDE THE ORDER OF THE CIT U/S 263 FOR THE PURPOSE OF GIVING THE ASSESSEE ANOTHER OPPORTUNITY OF PRESE NT ING ITA NO . 424 /BANG/20 1 4 M/S.MAGRATH PROPERTIES (P) LTD., PAGE 6 OF 6 IT S CASE BEFORE THE CIT. THE LEARNED COUNSEL FOR THE ASSESSEE OR THE ASSESSEE SHALL NOT TAKE ANY FURTHER ADJOURNMENT AND SHALL FILE ALL THE NECESSARY DETAILS BEFORE THE CIT WITHIN THE TIME STIPULATED OR DIRECTED BY THE CIT AND THE CIT SHALL CONSIDER THE ISS UE AFRESH IN THE LIGHT OF THE SAID ADDITIONAL EVIDENCE, IF ANY, FILED BY THE ASSESSEE. IF THE ASSESSEE FAILS TO SUBMIT THE DOCUMENTS WITHIN TIME GIVEN BY THE CIT, THE CIT SHALL BE FREE TO COMPLETE THE REVISION PROCEEDINGS IN ACCORDANCE WITH LAW ON THE BAS IS OF THE MATERIAL ON RECORD . 6. IN THE RESULT, THE ASSESSEE S APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRON OUNCED IN THE OPEN COURT ON 06 TH FEBRUARY, 201 5 . S D/ - S D/ - (JASON P BOAZ ) ( SMT. P.MADHAVI DEVI) ACCOUNT ANT MEMBER JUDICIAL MEMBER EKSRINIVASULU COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE T RIBUNAL BANGALORE