ROYAL CONSTRUCTION CO., MUMBAI V. ACIT 12(3), MUMBAI

ITA 4717/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70922 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2004-2005
• Appeal Filed On: 16-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEEPAK RIPOTE
• Keywords: Tangible material; Difference of opinion; Change of opinion
• Section: 143(3); 37(1); 148

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO , JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ./I.T.A. NO. 4717/M/2012 ( / ASSESSMENT YEAR : 2004 - 20 05 ) ROYAL CONSTRUCTION CO., 139, SEKSARIA CHAMBERS, N.M. ROAD, FORT, MUMBAI 400 023. / VS. ACIT - 12(3), AAYAKAR BHAVAN, 2 ND FLOOR, NEW MARINE LINES, MUMBAI 400 020. ./ PAN : AAAFR 8978 G ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI VIJAY MEHTA / RESPONDENT BY : SHRI DEEPAK RIPOTE, DR / DATE OF HEARING : 22 .8.2013 / DATE OF PRONOUNCEMENT : 4.9 .2013 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 16.7.2012 IS AGAINST THE ORDER OF CIT (A) - 10, MUMBAI DATED 25.5.2012 FOR THE ASSESSMENT YEAR 2004 - 2005. 2. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: THE LD CIT ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACT THAT THE ASSESSMENT ORDER PASSED U/S 143(3) R.W.S 147 IS BASED ON MERE CHANGE OF OPINION & SHOULD BE QUASHED BEING BAD IN LAW . 3. BRIEFLY STATE RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BUILDERS AND DEVELOPERS . ASSESSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 54,44,830/ - . ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 1.12.2006 ACCEPTING THE TOTAL INCOME RETURNED BY THE ASSESSEE. SUBSEQUENTLY, THE CASE WAS REOPENED US/ 147 AND NOTICE U/S 148 WAS ISSUED ON THE 26.3.2009. THE REASONS GIVEN BY THE AO REOPENING OF THE ASSESSMENT ARE (I) BORROWED CAPITAL IS NOT UTILIZED FOR THE PURPOSE OF THE BUSINESS BUT GIVEN TO ITS PARTNER FOR THEIR PERSONAL USE AND THEREFORE, INTEREST OF RS. 12,05,738/ - CLAIMED BY 2 THE ASSESSEE IS NEITHER ADMISSIBLE U/S 36(1)(III) NOR U/S 37(1) OF THE ACT ; AND (II) BASED ON THE TDS CERTIFICATE , THE ASSESSEE HAS RECEIVED JOB WORK CHARGES OF RS. 2,43,000/ - FOR WHICH T DS OF RS. 48,800/ - WAS CLAIMED BY THE ASSESSEE AND THE INCOME IS NOT OFFERE D TO TAX. TH IS DECISION AND THE REASONS GIVEN BY THE AO IN THE REOPENING THE ASSESSMENT IS THE SUBJECT MATTER OF THE PRESENT APPEAL. 4. AT THE OUTSET, SHRI VIJAY MEHTA, LD COUNSE L FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE GROUND NO.1 AND MENTIONED THAT THE SAID GROUND RELATES TO THE REOPENING OF THE ASSESSMENT WHICH WAS COMPLETED ON 1.12.2006 U/S 143(3) OF THE ACT. IN THIS REGARD, LD COUNSEL BROUGHT OUR ATTENTION TO THE REASO NS RECORDED BY THE AO WHICH IS PLACED AT PAGE 19 OF THE PAPER BOOK. ON PERUSAL, IT IS NOTICED THAT IN THE REASONS, AO PROPOSED TO DISALLOW THE INTEREST PAID U/S 36(1)(III) OF THE ACT AND ALSO TO TAX SOME INCOME BASED ON THE TDS CERTIFICATES. ALL THE RELEV ANT PAPERS ARE AVAILABLE IN THE RETURN AND DURING THE ASSESSMENT PROCEEDINGS BEFORE THE AO. LD COUNSEL ALSO MENTIONED THAT THOUGH NO ADDITION WAS MADE ON ACCOUNT OF TDS CERTIFICATES, EXCEPT CHANGE IN THE HEAD OF INCOME. REFERRING TO THE PROPOSED DISALLOWAN CES U/S 36(1)(III), LD COUNSEL MENTIONED THAT THERE IS NO TANGIBLE MATERIA L IN HIS POSSESSION FOR FACILITATING THE GENERATION OF THE REASONABLE BELIEF THAT THERE IS A ESCAPEMENT OF INCOME. HE MERELY PICKED UP THIS ISSUE ON THE FIGURES OF THE FINANCIAL STA TEMENT WHICH IS ALREADY AVAILABLE IN THE RECORD DURING THE REGULAR ASSESSMENT PROCEEDINGS AND MENTIONED THAT IT IS A CASE OF CHANGE OF OPINION AS WELL. LD COUNSEL FILED A BUNCH OF CASE LAWS FOR DEMONSTRATING THAT AO IS BARRED FROM REOPENING THE CONCLUDED A SSESSMENTS WHEN HE DOES NOT HAVE ANY TANGIBLE MATERIAL WHICH ACTS AS A LIVEWIRE FOR FORMING REASONABLE BELIEF TO INFER THAT THERE IS A CONCEALMENT OF INCOME OR PARTICULARS. IN SUCH CASES, RE - ASSESSMENT IS REQUIRED TO BE QUASHED. 5. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE AO AND CIT (A). 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDE RS OF THE REVENUE AUTHORITIES. IT IS AN UNDISPUTED FACT THAT THERE IS NO TANGIBLE MATERIAL WITH THE AO WHILE REOPENING THE REGULAR ASSESSMENT WHICH WAS CO MPLETED U/S 143(3) OF THE ACT . THIS IS A CASE OF RE - OPENING OF THE ASSESSMENT ONLY AFTER REVISITING THE 3 PAPERS ALREADY AVAILABLE ON RECORD. CIT (A) REJECTED THE ASSESSEES EXPLANATION IN THIS REGARD AND ON OBSERVING THAT , IN THE LIST OF QUERIES RAISED IN THE QUESTIONERS, NO QUERY WAS RELATED TO THE DIS - ALLOWABILITY OF INTEREST U/S 36(1)(III) OF THE ACT AND THEREFORE, NO OPINION IS FORMED DURING THE REGULAR ASSESSMENT . CIT (A) DISMISSED THE ASSESSEES ARGUMENT AND CONFIRMED THE INVOKING OF THE PROVISIONS OF SECTION 148 OF THE ACT REJECTING THE ASSESSEES ARGUMENT THAT THE REOPENING PROCEEDINGS ARE BASED ON THE PRINCIPLE OF CHANGE OF OPINION . BUT THE FACT IS THAT IN THE ABSENCE OF TANGIBLE MATERIAL WHICH IS MANDATORY FOR RE - OPENING OF THE ASSESSMENT WHI CH IS DISTINCTLY THE FACT OF THIS CASE , THE ISSUE OF NOTICE U/S 148 IS INVALID . IT IS THE REQUIREMENT OF THE LAW THAT THE EXISTENCE OF TANGIBLE MATERIAL REFLECTING THE FACT OF CONCEALMENT OF INCOME OR FURNISHING OF THE INACCURATE PARTICULARS IS THE REQUIR EMENT . NOW IT IS THE TRITE LAW THAT THE AO MUST POSSESS TANGIBLE MATERIAL FOR ASSUMING JURISDICTION UNDER THE SAID PROVISIONS. THESE VIEWS ARE CONFIRMED BY THE LIST OF DECISIONS FILED BEFORE US. 1. ASIAN PAINTS LTD. VS. DCIT (308 ITR 105) (BOM) 2. CIT VS. ORIE NT CRAFT LTD. (354 ITR 536) (DEL.) 3. TELCO DADAJEE DHACKJEE LTD VS. DCIT IN ITA NO.4613/M/2005 4. MANU M. PARPIA VS. DCIT IN ITA NO. 8507/M/2010 5. HINDUSTAN HARDY SPICER LTD. VS. ITO IN ITA NO.2629/M/2013 6. PAYASH SECURITIES P. LTD. VS. DCIT IN ITA NO.650/M/2013 7. DC IT VS. BINANI INDUSTRIES LTD IN ITA NO.650/M/2013 7. ON PERUSAL OF THE SAME, CONSIDERING THE ABSENCE OF TANGIBLE MATERIAL, WE FIND THAT THE CIT (A) ORDER IS REQUIRED TO BE REVERSED. AS SUCH, AO REOPENED THE ASSESSMENT RELYING ONLY ON THE PAPERS AVAILABL E ON RECORDS. THEREFORE, WE AGREE WITH THE ARGUMENTS OF THE LD AR FOR THE ASSESSEE. ON MERITS ALSO , IT IS THE CASE OF THE ASSESSEE THAT THERE IS SUFFICIENT INTEREST FREE FUNDS TO COVER THE INTEREST FREE ADVANCES GIVEN BY THE ASSESSEE AND THEREFORE, THE P RESUMPTION WOULD BE THAT SUCH ADVANCES WERE GIVEN FROM INTEREST FREE FUNDS AND NOT FROM THE INTEREST BEARING FUNDS AS HELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES AND POWER LTD [2009] 313 ITR 340. WITHOUT GOING INTO THE MERIT, IN OUR 4 VIEW, THE ASSESSEE SHOULD SUCCEED ON THE LEGAL ISSUE ITSELF . ACCORDINGLY, THE GROUND NO.1 RAISED BY THE ASSESSEE IS ALLOWED. GROUND NO.2, CONSIDERING ITS ACADEMIC NATURE, IS DISMISSED AS ACADEMIC. 8. IN THE RESULT, APPEAL OF THE ASSESSEE I S ALLOWED . ORDER PRON OUNCED IN THE OPEN COU RT ON 4 TH SEPTEMBER , 2013. SD/ - S D/ - (VIJAY PAL RAO) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 4.9. 2013 . . ./ OKK , SR. PS / 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 . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI