PRAKASH AUTO, ULHASNAGAR V. CIT 23, MUMBAI

ITA 4309/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8357 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 15-04-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 30-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ARISES O
• Keywords: Business income; Notional interest; Revised return
• Section: 143(3); 263; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C MUMBAI BEFORE SHRI JOGINDER SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 4309/MUM/2013 ASSESSMENT YEAR 2008-09 PRAKASH AUTO PLOT NO.4, BEHIND SAIBABA MANDIR, KALYAN AMBERNATH ROAD,ULHASNAGAR 421003. VS. THE CIT - 23 C-10, 3 RD FLOOR, PRATYAKSHA KAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI- 400051. PAN: AAAFP6436H ( APPELLANT ) .. ( RESPONDENT ) DATE OF HEARING: 21 /11/2016 DATE OF PRONOUNCEMENT: 13/02/2017 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEAR IS 2008-09. IT IS DIRECTED AGAINST THE ORDER U /S 263 OF THE INCOME TAX ACT 1961 (THE ACT) PASSED BY THE COMMISSIONER OF INCOME TAX (CIT) 23, MUMBAI AND ARISES OUT OF ORDER U/S 143( 3). 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: I. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE & IN LAW THE LEARNED CIT, 23 MUMBAI HAS ERRED IN HOLDING THAT THE ORDER OF THE AO U /S 143(3) DATED 20.03.2013 WAS PREJUDICIAL TO THE INTEREST OF THE R EVENUE. II. ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE & IN LAW THE ACTION OF THE ASSESSING OFFICER OF ASSESSING THE CORRECT INCOME O F THE APPELLANT BY CONSIDERING THE LOSS AS PER THE AUDITED STATEMENTS OF ACCOUNT, BO OKS OF ACCOUNT AND THE APPELLANT BY: SHRI M.N. NANDGAO N KAR, AR RESPONDENT BY: SHRI ANADI VERMA , DR ITA NO. 4309/MUM/2013 2 RECORDS OF THE APPELLANT WHILE PASSING THE ORDER U/S 143(3) IS NOT PREJUDICIAL TO THE INTEREST OF THE REVENUE AS HELD BY THE LEARNED CI T, 23, MUMBAI. III. ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE & IN LAW THE ACTION OF THE AO OF A) ALLOWING DEDUCTION OF RS. 3,14,060/- ON ACCOUNT O F DEFICIENCY COMPUTED U/S 32(1)(III) B) NOT INVOKING THE PROVISIONS OF THE SECTION 2(22 )(E) OF THE ACT C) NOT CONSIDERING NOTIONAL INTEREST ON INTEREST FR EE REFUNDABLE DEPOSITS RECEIVED FROM LICENSEES AS INCOME OF THE APPELLANT WHILE PASSING THE ORDER U/S 143(3) ARE NOT PREJUDICI AL TO THE INTEREST OF THE REVENUE AS CONCLUDED BY THE LEARNED CIT,23 MUMBAI. 3. IN A NUTSHELL, THE FACTS ARE THAT THE ASSESSING OFFICER (AO) MADE ASSESSMENT U/S 143(3) OF THE ACT ON 28.12.2010 DETE RMINING THE NET LOSS AT RS. 30,32,710/-. THEN THE CIT ISSUED A SHO W CAUSE NOTICE TO THE ASSESSEE ON 22.02.2013 STATING THAT (I) THE AO HAD COMMITTED AN ERROR BY CONSIDERING THE REVISED COMPUTATION FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS DISREGARDING THE PROVISIO NS OF SECTION 139(5), (II) THE AO HAD NOT EXAMINED THE ADMISSIBIL ITY OF SET OFF LOSS OF RS. 3,14,060/- ON SALE OF FURNITURE, (III) THE A O HAD NOT EXAMINED APPLICABILITY OF SECTION 2(22)(E) OF THE ACT AND (I V) THE AO HAD NOT ASSESSED INTEREST AS ANNUAL LETTING VALUE OF THE PR OPERTIES. IN RESPONSE TO IT, THE AR OF THE ASSESSEE FILED A W RITTEN SUBMISSION BEFORE THE CIT ON 22.03.2013 STATING THA T (I) THE ASSESSEE HAD FILED A REVISED COMPUTATION OF INCOME DURING TH E ASSESSMENT PROCEEDINGS AS IT WAS NOTICED THAT IN THE COMPUTATI ON OF INCOME ON THE BASIS OF WHICH THE RETURN OF INCOME WAS FILED H AD SOME CLERICAL ERRORS RESULTING IN LOSS OF RS. 25,45,058/- INSTEAD OF THE CORRECT LOSS OF RS. 1,00,89,133/-, (II) DURING THE FINANCIAL YEAR 2 007-08 FURNITURE OWNED AND USED IN BUSINESS WAS SOLD AND THE SAME WA S DULY WRITTEN OFF IN THE BOOKS OF ACCOUNTS, (III) THE COMPANY HAD NOT MADE ANY PAYMENT OF ADVANCE OR LOAN TO THE ASSESSEE DURING T HE YEAR AND THE ITA NO. 4309/MUM/2013 3 TRANSACTION WAS ACTUALLY PART PAYMENT OF THE AMOUNT RECEIVED IN THE FINANCIAL YEAR 2006-07 AND THEREFORE THE PROVISIONS OF SECTION 2(22)(E) ARE NOT APPLICABLE AND (IV) WITHOUT A SPEC IFIC EXPLICIT PROVISION OF LAW, NO FICTIONAL INCOME CAN EVER BE S OUGHT TO BE TAXED. THE CIT WAS NOT CONVINCED WITH THE ABOVE EXPLANATI ON OF THE ASSESSEE AS (I) THE AO HAS NO AUTHORITY UNDER THE A CT TO ACCEPT THE REVISED COMPUTATION OF INCOME FILED DURING THE COUR SE OF ASSESSMENT, (II) THE AO HAS NOT VERIFIED THE FACTS REGARDING TH E ADMISSIBILITY OF SET OFF LOSS OF RS. 3,14,060/- ON SALE OF FURNITURE AGA INST THE BUSINESS INCOME, (III) THE AO HAS NOT VERIFIED THE FACTS REL ATING TO THE APPLICATION OF SECTION 2(22)(E) AND (IV) THE AO HAS NOT EXAMINED THE ISSUE THAT THE NOTIONAL INTEREST ACCRUED ON REFUNDA BLE DEPOSITS WAS LIABLE TO BE TAXED AS ANNUAL LETTING VALUE. IN VIEW OF THE ABOVE, THE CIT SET ASIDE THE ORDER DATED 28.12.2010 PASSED BY THE AO AS ERRONEOUS AND PREJUD ICIAL TO THE INTEREST OF REVENUE. HE DIRECTED THE AO TO MAKE A F RESH ASSESSMENT IN THE LIGHT OF THE OBSERVATIONS MADE BY HIM. 4. THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ABOVE ORDER DATED 28.03.2013 OF THE CIT. THE LEARNED COUNSEL OF THE ASSESSEE RELIES ON THE DECISION IN THE CASE OF CIT VS. PRUTHVI BROKERS & SHAREHOLDERS (P) LTD . (2012) 349 ITR 336 (BOM); CIT VS. BHARAT ALUMINIUM CO. LTD. (2008) 303 ITR 256 (DEL) AND M/S. PERLOS TELECOMMUNICATION & ELECTRONIC COMPONENTS INDIA (P) LTD. VS. ACIT (ITA NO. 1037/MDS/2013) FOR A.Y. 2008-09 OF ITAT, C HENNAI. HE REFERS TO (I) THE BALANCE OF (- RS. 26,20,506/-) CA RRIED TO THE BALANCE SHEET IN PARTNERS ACCOUNT (P. 44 OF THE P/B), (II) THE RENTAL INCOME OF RS. 74,68,626/- (P. 43A OF THE P/B), (III) THE ORIG INAL COMPUTATION OF TOTAL INCOME (P. 30 OF THE P/B), (IV) THE REVISED C OMPUTATION OF TOTAL ITA NO. 4309/MUM/2013 4 INCOME (P. 31 OF THE P/B) AND (V) THE SUBMISSION MA DE BY THE ASSESSEE BEFORE THE AO (P. 27-28 OF THE P/B). 5. PER CONTRA , THE LEARNED DR RELIES ON THE JUDGEMENT OF THE HONBLE SUPREME COURT IN GOETZE (INDIA) LTD. VS CIT (2006) 157 TAXMAN 1 (SC). IT IS ALSO SUBMITTED BY HIM THAT THE FINANCE ACT, 2015 HAS INSERTED EXPLANATION 2 IN SECTION 263(1) W.E.F. JUNE 1 ST 2015 WHICH IS CLARIFICATORY IN NATURE. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE FACT REMAINS THAT IN THE CO MPUTATION OF INCOME FILED ALONG WITH THE RETURN OF INCOME, THE A SSESSEE HAD CLAIMED LOSS TO C/F RS. 11,12,127/-. IN THE REVISED COMPUTATION OF INCOME FILED DURING THE COURSE OF ASSESSMENT PROCEE DINGS, THE ASSESSEE CLAIMED LOSS TO C/F OF RS. 48,61,095/-. 6.1 WE BEGIN WITH THE DECISIONS RELIED ON BY THE LE ARNED COUNSEL OF THE ASSESSEE. IN PRUTHVI BROKERS & SHAREHOLDERS (P) LTD ., THE HONBLE HIGH COURT HELD : THUS, IT IS CLEAR THAT THE SUPREME COURT DID NOT HOL D ANYTHING CONTRARY TO WHAT WAS HELD IN THE PREVIOUS JUDGEMENTS TO THE EFFEC T THAT EVEN IF A CLAIM IS NOT MADE BEFORE THE ASSESSING OFFICER, IT CAN BE MADE BE FORE THE APPELLANT AUTHORITIES. THE JURISDICTION OF THE APPELLATE AUTHORITIES TO ENT ERTAIN SUCH A CLAIM HAS NOT BEEN NEGATED BY THE SUPREME COURT IN THIS JUDGEMENT. IN FA CT THE SUPREME COURT MADE IT CLEAR THAT THE ISSUE IN THE CASE WAS LIMITED TO THE POWER OF THE ASSESSING AUTHORITY AND THAT THE JUDGEMENT DOES NOT IMPINGE ON THE POWER OF THE TRIBUNAL UNDER SECTION 254. IN BHARAT ALUMINIUM CO. LTD., THE HON'BLE DELHI HIGH COURT HAS HELD THAT THE CIT HAVING NOT FOUND THE ASSESSMENT O RDER ERRONEOUS IN WHICH THE AO ALLOWED THE LEGITIMATE BUSINESS EXPEND ITURE BY ACCEPTING CORRECTIONS IN THE ORIGINAL RETURN MADE T HROUGH A LETTER, HE HAD NO POWER TO REVISE THE SAME. ITA NO. 4309/MUM/2013 5 IN M/S. PERLOS TELECOMMUNICATION & ELECTRONIC COMPONEN TS INDIA (P) LTD ., THE ASSESSEE HAD FILED REVISED COMPUTATION OF IN COME BEFORE THE AO AT THE TIME OF ASSESSMENT PROCEEDINGS CLAIMI NG EXPENDITURE WHICH WERE ERRONEOUSLY DISALLOWED U/S 37(7) WHILE F ILING THE RETURN OF INCOME . THE TRIBUNAL HELD : IN OUR CONSIDERED OPINION, THE ASSESSEE HAS NOT FILE D ANY FRESH CLAIM. IT IS NOT THE CASE WHERE THE ASSESSEE IS CLAIMING ADDITIONAL DEDU CTION OR EXEMPTION. IN THE INCOME TAX ACT, DEDUCTIONS AND EXEMPTIONS ARE DEALT W ITH IN SEPARATE CHAPTERS OF THE ACT AND HAVE DIFFERENT CONNOTATION. THE ASSESSEE IS ONLY CLAIMING EXPENDITURE WHICH WAS LEFT OUT AT THE TIME OF FILING OF ORIGINA L RETURN. DURING ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS POWER TO MAKE UPWARD AND DOWNWARD ADJUSTMENT IN THE INCOME RETURNED BY THE ASSESSEE. WH ERE THE ASSESSEE HAS NOT CLAIMED CERTAIN EXPENDITURES CLEARLY EVIDENT FROM RECO RDS AND IT COMES TO THE KNOWLEDGE OF ASSESSING OFFICER AT THE TIME OF ASSESS MENT PROCEEDINGS, THE ASSESSING OFFICER SHOULD GRANT RELIEF TO THE ASSESSEE. 6.2 NOW WE ADVERT TO THE DECISION RELIED ON BY THE LEARNED DR. IN GOETZE (INDIA) LTD , THE ASSESSMENT YEAR IN QUESTION WAS 1995-96. THE RETURN WAS FILED ON 30.11.1995 BY THE ASSESSEE FOR THE ASSESSMENT YEAR IN QUESTION. ON 12.01.1998, THE ASSESSEE SOUGH T TO CLAIM A DEDUCTION BY WAY OF A LETTER BEFORE THE AO. THE DED UCTION WAS DISALLOWED BY THE AO ON THE GROUND THAT THERE WAS N O PROVISION UNDER THE INCOME TAX ACT TO MAKE AMENDMENT IN THE R ETURN OF INCOME BY MODIFYING AN APPLICATION AT THE ASSESSMEN T STAGE WITHOUT REVISING THE RETURN OF INCOME. THE ASSSESSEES APPE AL BEFORE THE CIT(A) WAS ALLOWED. HOWEVER, THE FURTHER APPEAL OF THE DEPARTMENT BEFORE THE ITAT WAS ALLOWED. THE ASSESSEE APPROACHE D THE HON'BLE SUPREME COURT AND SUBMITTED THAT THE TRIBUNAL WAS W RONG IN UPHOLDING THE ORDER OF THE AO. THE HON'BLE SUPREME COURT DISMISSED THE CIVIL APPEAL FILED BY THE ASSESSEE AND MADE IT CLEAR THAT THE ISSUE IN THIS CASE IS LIMITED TO THE POWER OF THE ASSESSING AUTHORITY AND DOES NOT IMPINGE ON THE POWER OF THE ITAT U/S 154 OF THE ACT. ITA NO. 4309/MUM/2013 6 TO SUM UP, IT HAS BEEN HELD IN GOETZE (INDIA) LTD. THAT THE ASSESSEE CANNOT AMEND A RETURN FILED BY HIM BEFORE THE AO FOR MAKING A CLAIM FOR DEDUCTION OTHER THAN BY FILING A REVISED RETURN. 6.3 AS NARRATED HERE-IN-ABOVE, THE DIFFERENCE BETWE EN THE ORIGINAL COMPUTATION OF INCOME AND REVISED ONE BECAUSE THE R ENTAL INCOME OF RS. 22,44,075/- HAS BEEN CONSIDERED SEPARATELY BY T HE ASSESSEE IN THE REVISED ONE. IN VIEW OF THE ABOVE, THE CASE OF THE ASSESSEE IN THE INSTANT APPEAL IS DISTINGUISHABLE FROM THE DECISION S RELIED ON BY THE LEARNED COUNSEL. 6.4 WE HAVE GONE THROUGH THE ASSESSMENT ORDER PASSE D BY THE AO U/S 143(3) OF THE ACT AND FIND THAT HE HAS NOT VERI FIED (I) THE CLAIM OF DEDUCTION MADE BY THE ASSESSEE OF DEFICIENCY OF RS. 3,14,060/-, (II) THE IMPLICATION OF PROVISIONS OF SECTION 2(22)(E) A ND (III) THE ISSUE OF TAXABILITY OF NOTIONAL INTEREST. 6.5 IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT (2000) 109 TAXMAN 66 (SC), IT HAS BEEN HELD BY THE HON'BLE SUP REME COURT THAT WERE THE ASSESSING OFFICER HAD ACCEPTED ENTRY IN ST ATEMENT OF ACCOUNT FILED BY THE ASSESSEE, IN ABSENCE OF ANY SUPPORTING MATERIAL WITHOUT MAKING ANY ENQUIRY, EXERCISE OF JURISDICTION BY THE COMMISSIONER U/S 263(1) WAS JUSTIFIED. 6.6 THE RATIO LAID DOWN BY THE HONBLE SUPREME COUR T IN GOETZE (INDIA) LTD AND MALABAR INDUSTRIAL CO. LTD SQUARELY APPLIES TO THE INSTANT CASE. IN VIEW OF THE ABOVE WE HOLD THAT THE CIT HAS RIGHTLY PASSED ORDER U/S 263 IN THE PRESENT CASE. 7. IN THE RESULT, THE APPEAL IS DISMISSED. ITA NO. 4309/MUM/2013 7 ORDER PRONOUNCED IN THE OPEN COURT ON 13/02/2017 SD/- SD/- (JOGINDER SINGH) ( N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED: 13/02/2017 BISWAJIT, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI