The Moran Tea Co. (I) Ltd.(now Merged with Mcleod Russel India Ltd. ), Kolkata V. CIT, - II, Kolkata, Kolkata

ITA 440/KOL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62144 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 21-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJOY KUMAR SINGH
• Assessee Lawyers: A K GUPTA
• Keywords: Earning of tax free income
• Section: 263; 63; 143(3); 260A

Judgement Text

I.T.A. NO.: 440/ KOL. / 2012 ASSESSMENT YEAR : 2007-08 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA C BENCH, KOLKATA BEFORE SHRI PRAMOD KUMAR (ACCOUNTANT MEMBER), AND SHRI MAHAVIR SINGH (JUDICIAL MEMBER) I.T.A. NO.: 440/ KOL. / 2012 ASSESSMENT YEAR : 2007-08 THE MORAN TEA CO. (I) LTD., ..APPELLANT (NOW MERGED WITH MCLEOD RUSSEL INDIA LTD.) C/O. MCLEOD RUSSEL INDIA LIMITED, 4, MANGOE LANE, SURENDRA MOHAN GHOSH SARANI, KOLKATA-700 001 [PAN :AABCT 2119 D] -VS.- COMMISSIONER OF INCOME TAX-II .....RESPONDENT, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 APPEARANCES BY: SHRI A.K. GUPTA, FOR THE APPELLANT SHRI AJOY KUMAR SINGH, CIT(D.R.), FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : JULY 25, 2012 DATE OF PRONOUNCING THE ORDER : JULY 27, 2012 O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSEE-APPELLANT HA S CHALLENGED CORRECTNESS OF THE ORDER DATED 27.02.2012 PASSED BY THE COMMISSIONER I.T.A. NO.: 440/ KOL. / 2012 ASSESSMENT YEAR : 2007-08 PAGE 2 OF 5 OF INCOME TAX UNDER SECTION 263 READ WITH SECTION 1 43(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2007-08. 2. BRIEFLY STATED THE MATERIAL FACTS ARE LIKE THIS. ON 10.02.2012, THE COMMISSIONER ISSUED A SHOW-CAUSE NOTICE CALLING UPO N THE ASSESSEE TO REQUIRE SHOW-CAUSE AS TO WHY THE ASSESSMENT ORDER P ASSED UNDER SECTION 143(3) NOT BE SUBJECTED TO THE REVISION PRO CEEDINGS. IN A VERY BRIEF AND SOMEWHAT CRYPTIC NOTICE, THE COMMISSIONER HAD OBSERVED THAT I HAVE CALLED FOR AND EXAMINED THE ASSESSMENT RECO RD FOR ASSESSMENT YEAR 2007-08. IT APPEARS THAT THE ORDER PASSED BY T HE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF REVENUE . EVEN THOUGH THE SAID SHOW-CAUSE NOTICE DID NOT DEAL WITH ANY SPECIFIC ISSUES IN THE ASSESSMENT ORDER, IT APPEARS THAT DURING THE COURSE OF THE PROCEEDINGS, THE ASSESSEE EXPLAINED AS FOLLOWS :- 1.0. INTEREST OF RS.39,69,000/- ADDED BACK IN THE ORDER U/S 143(3), LATER DELETED BY THE ID. CIT(A). 1.1. AFTER SCRUTINY OF THE RECORDS, THE ASSESSING OFFICER HAS DISALLOWED AN AMOUNT OF RS.39,69,000/-, IN THE ASSE SSMENT ORDER U/S 143(3), BEING INTEREST ON RS.3,78,00,000/- AND ADDE D IT BACK TO THE TOTAL COMPOSITE INCOME OF THE ASSESSEE, BEFORE APPL YING RULE 8 OF THE INCOME TAX RULES, 1962. 1.2. AGAINST THE ASSESSMENT ORDER U/S 143(3), THE ASSESSEE HAS FILED AN APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS)IV, WHEREIN THE LD. CIT(A) HAS DELETED THE DISALLOWANCE ON CONTENTION WHICH IS AS STATED HEREIN BELOW THERE IS NO PROVISION IN THE INCOME TAX ACT WHICH PERMITS THE AO TO TAX NOTIONAL OR HYPOTHETICAL INCO ME. WHAT CAN BE BROUGHT TO TAX IS ONLY THE REAL INCOME WHICH HAS BEEN ACCRUED DURING THE RELEVANT YEAR. I ALSO NOTE THAT THE APPELLANT HAD SUBSTANTIAL FUND S OF ITS OWN OUT OF WHICH IT COULD LEND INTEREST-FREE ICDS T O I.T.A. NO.: 440/ KOL. / 2012 ASSESSMENT YEAR : 2007-08 PAGE 3 OF 5 BODIES CORPORATE. ON THESE FACTS, THEREFORE, I DO N OT FIND ANY SUBSTANCE IN THE AOS ACTION OF ASSESSING NOTIO NAL INTEREST OF RS.39,69,000/- WHICH THE APPELLANT NEVE R EARNED [EMPHASIS, ADDED] 1.3. IN PURSUANCE OF THE ABOVE ORDER OF CIT(A), WE HAVE FILED A PETITION BEFORE YOUR GOODSELF TO KINDLY GIVE EFFECT TO THE O RDER OF LD, CIT(A) VIDE LETTER DATED 16-05-2010 FIIED ON 16-06-2010, AND ON 29-10-2010. ON GIVING EFFECT TO THE SAME, THE ABOVE DISALLOWANCE WOULD BE NULLIFIED. 1.4 IN THE LIGHT OF THE ABOVE SUBMISSION, IT IS OBS ERVED THAT SINCE THERE IS NO DISALLOWANCE ON SUCH GROUND, THE QUESTION OF SUBMIT TING ANY CLARIFICATION DOES NOT ARISE IN THIS CASE. IN CASE YOUR GOODSELF REQUIRES ANY FURTHER CLARIFICATION, THE SAME WOULD BE PROVIDED AT THE EA RLIEST BEFORE YOUR GOODSELF. 2.0. DISALLOWANCE MADE IN THE 143(3) ORDER OF RS.1 .15,310/- U/S 14A, BEFORE APPLICATION OF RULE 8 2.1. IN THE ASSESSMENT ORDER U/S 143(3), DISALLOWA NCE HAS BEEN MADE BY THE LD. ASSESSING OFFICER U/S.14A, ON THE CONTENTIO N THAT SUCH EXPENSES ARE RELATED TO THE EARNING OF EXEMPT INCOME. 2.2. THESE EXPENSES WERE A DEDUCTION FROM THE BUSI NESS INCOME, AND ON BEING DISALLOWED WERE ADDED BACK TO THE BUSINESS IN COME. HENCE, RULE 8 IS RIGHTLY APPLIED IN THE ABOVE CIRCUMSTANCES. IN LIGH T OF THE ABOVE SUBMISSION, IT IS OBSERVED THAT THERE IS NO QUESTION OF UNDER A SSESSMENT OF INCOME. IN CASE YOUR GOODSELF REQUIRES ANY FURTHER CLARIFICATI ON, THE SAME WOULD BE PROVIDED AT THE EARLIEST BEFORE YOUR GOODSELF. HOPE THE ABOVE SUBMISSION CLARIFIES. FURTHER SUBMIS SION WOULD BE PROVIDED ON HEARING FROM YOU. 3. CIT WAS, HOWEVER, NOT SATISFIED WITH THE SUBMISS IONS SO MADE BY THE ASSESSEE AND EVEN THOUGH HE NOTED THAT THE ISSU ES ARE COVERED IN FAVOUR OF THE ASSESSEE BY THE APPELLATE ORDERS. HE PROCEEDED TO EXERCISE HIS REVISION POWERS BY, INTER ALIA, OBSERVING AS FO LLOWS :- BEFORE ME, IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THAT THESE ISSUES ARE COVERED BY THE DECIS ION OF THE LEARNED CIT(A) AND THE HONBLE ITAT. I.T.A. NO.: 440/ KOL. / 2012 ASSESSMENT YEAR : 2007-08 PAGE 4 OF 5 I HAVE CONSIDERED THE SUBMISSION AND PERUSED THE RECORD. IT IS FOUND THAT THE DECISIONS OF THE LEARN ED CIT(A) AND THE HONBLE ITAT HAVE NOT BEEN ACCEPTED BY THE DEPARTMENT AND APPEALS U/S. 260A HAVE BEEN FILED BE FORE THE HONBLE HIGH COURT. THE VERY FACT THAT THE ISSU E HAVE GONE BEYOND THE REVENUE AUTHORITIES FOR ADJUDICATIO N ENTAILS THAT THE FINAL WORD HAS TO COME FROM THE CO URT(S). THE LAW ON THIS DISPUTE IS NOT SETTLED AS YET. THE A.O. IS DIRECTED TO EXCLUSIVELY COMPUTE THE TA X ON THE ADDITION/ DISALLOWANCE OF RS.39,69,000/- AND RS.1,53,310/- WITHOUT APPLICATION OF RULE 8 TO THES E AMOUNTS. THE ASSESSMENT IS REVISED ACCORDINGLY. THE ASSESSEE IS NOT SATISFIED WITH THE STAND TAKEN BY THE LD. CIT AND IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND CONSIDER ED FACTS OF THE CASE IN THE LIGHT OF APPLICABLE LEGAL POSITION. A P LAIN READING OF THE IMPUGNED REVISION ORDER SHOWS THAT THE LD. CIT HAS TRAVELLED WELL BEYOND HIS JURISDICTION AND EXERCISE IN THE MATTER OF REVISION POWERS UNDER SECTION 263. THE LAW IS FAIRLY WELL SETTLED T HAT WHEN ASSESSING OFFICER TAKES A POSSIBLE VIEW OF THE MATTER, EVEN T HOUGH LD. CIT MAY NOT AGREE WITH THE SAME, THE POWERS UNDER SECTION 2 63 CANNOT BE INVOKED. IT WAS SO HELD BY THE HONBLE SUPREME COUR T IN THE CASE OF MALABAR INDUSTRIES CO. -VS.- CIT REPORTED IN 243 IT R 83 (SC). IN THE CASE BEFORE US, NOT ONLY THE ASSESSING OFFICER TOOK A REASONABLE VIEW OF THE MATTER, THE VIEW SO TAKEN WAS ALSO APPROVED BY THE APPELLATE FORUMS. IN SUCH A POSITION, IT CANNOT BE SAID THAT THE VIEW TAKEN BY THE ASSESSING OFFICER CAN BE SUBJECTED REVISION PROCEED INGS UNDER SECTION I.T.A. NO.: 440/ KOL. / 2012 ASSESSMENT YEAR : 2007-08 PAGE 5 OF 5 263. THE IMPUGNED REVISION ORDER, THEREFORE, CANNOT MEET ANY JUDICIAL APPROVAL. WE, THEREFORE, QUASH THE IMPUGNED ORDER. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH DAY OF JULY, 2012. SD/- SD/- MAHAVIR SINGH PRAMOD KUMAR (JUDICIAL MEMBER) (ACC OUNTANT MEMBER) KOLKATA, THE 27 TH DAY OF JULY, 2012 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.