AUREOS INIDA ADVISERS P. LTD, MUMBAI V. DCIT 9(1), MUMBAI

ITA 4741/MUM/2011

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0954 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 08-04-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 13-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SACHCHIDANAND DUBE
• Assessee Lawyers: DIVYESH I SHAH
• Keywords: Business expenditure; Opportunity of being heard; Principle of natural justice

Judgement Text

1 4741 AIPL AY - 06 - 07 , INCOME TAX APPELLATE TRIBUNAL,MUMBAI - A BENCH , , BEFORE S/SH. I P BANSAL,JUDICIAL MEMB ER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 4741 /MUM/20 11 , / ASSESSMENT YEAR - 2006 - 07 AUREOS INDIA ADVISERS PVT. LTD. 303,VAIBHAV CHAMBERS, BANDRA KURLA COMPLEX, BANDRA(E), MUMBAI - 51. PAN: AAFCA 5909 A VS D Y. CIT 9(1) AAYKAR BHAVAN,M K ROAD, MUMBAI - 20 ( / ASSESSEE ) ( / RESPONDENT ) /ASSESSEE BY :SHRI DIVYESH I. SHAH / REVENUE BY :SHRI SACHCHIDANAND DUBE / DATE OF HEARING : 08 - 0 4 - 2015 / DATE OF PRONOUNCEMENT : 08 - 0 4 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJEDRA,A . M . - CHALLENGING THE ORDER DT. 24.03.2011 OF THE CIT(A) - 19 MUMBAI,ASSESSEE - COMPANY HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1.1 LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 19{CIT(A)} ERRED IN HOLDING THAT THE APPELLANT WAS ONLY IN THE PROCESS OF SETTING UP OF THE COMPANY WITHOUT CONSIDERING THAT FACT THE BUSINESS OF THE APPELLANT WAS SET UP. 1.2 CIT (A) ERRED IN UPHOLDING AND CONFIRMING THE ACTION OF AO ON ALLEGED GROUND THAT INSPITE OF SEVERAL OPPORTUNITY WAS GRANTED BUT NO DETAILS OF EXPENSES INCURRED WERE FILED BEFORE AO. 1.3 THE CIT(A) ERRED IN NOT GIVING THE PROPER OPPORTUNITY OF BEING HEARD WITHOUT PROVIDING REMAND REPORT FR O M THE AO AND AS SUCH IN VIOLATION OF PRINCIPAL OF NATURAL JUSTICE. 1. 4 THE CIT (A) ERRED IN NOT ALLOWI NG BUSINESS LOSS RS 40,76,206. 2. ASSESSEE - COMPANY,ENGAGED IN THE BUSINESS AS INVESTMENT MANAGERS, INVESTMENT ADVISER, FILED ITS RETURN OF INCOME ON 21.11.2006 , DECLARING TOTAL LOSS OF RS . 39,00,425/ - .THE AO COMPLETED THE ASSESSMENT U/S.143(3) OF THE ACT ON DATED 31.03.2006 ,DETERMINING THE INCOME OF THE ASSESSEE AT RS. 1,75,780/ - . EFFECTIVE GROUND OF APPEAL IS ABOUT ADDITION MADE BY THE AO ON THE GROUND THAT BUSINESS OF THE ASSESS EE WAS NOT SETTLED DURING THE YEAR UNDER CONSIDERATION. DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT DURING THE YEAR THE ASSESSEE HAD SHOWN ONLY OTHER INCOME OF RS. 1,75,781/ - WHICH WAS INTEREST INCOME RECEIVED ON FD MADE WITH STANDARD CHARTERED BANK,THA T THE ASSESSEE HAD RECEIVED RS.2,20,65,000/ - AS SHARE APPLICATION MONEY,THAT OUT OF THE SAME IT MADE FDR OF RS.2,10,00,000/ - WITH STANDARD CHARTERED BANK ON WHICH THE INTEREST HAD BEEN EARNED, THAT THE ASSESSEE HAD CLAIMED EXPENDITURE TOTALING TO RS.40,76,2 06/ - . THE AO DIRECTED THE ASSESSEE TO EXPLAIN AND JUSTIFY THE CLAIM MADE BY IT REGARDING THE BUSINESS EXPENDITURE OF RS.40.76 LACS. AS PER AO ASSESSEE HAD NOT CARRIED OUT ANY BUSINESS ACTIVITIES 2 4741 AIPL AY - 06 - 07 DURING THE YEAR UNDER APPEAL, THAT IT HAD NOT FURNISHED ANY D ETAILS IN THIS REGARD. FINALLY , HE DISALLOWED THE EXPENSES CLAIMED IN THE PROFIT AND LOSS ACCOUNT BY THE ASSESSEE FIRM AMOUNTING TO RS.40.76 LACS. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFERRED AN APPEAL BEFOR E THE FIRST APPELLATE AUTHORITY (FAA). BEFORE HIM IT WAS SUBMITTED THA T ASSESSEE WAS INCORPORATED TO CARRYON BUSINESS AS INVESTMENT MANAGERS AND TO EXECUTE ALL KIND OF FINANCIAL ADVISORY AND SUPERVISORY SERVICES, THAT DURING THE YEAR IT STARTED IDENTIFYING POTENTIAL VENTURE CAPITAL FUNDS/PRIVAT E EQUITY FUNDS/TO WHOM THE SERVICES OF INVESTMENT ADVISER COULD BE OFFERED, THAT THE COMPANY HAD UNDERTAKEN SOURCING AND STRUCTURING INVESTMENT OPPORTUNITIES FOR INVESTMENTS, THAT IT HAD UNDER TAKEN COLLECTION AND ANALYSIS OF INFORMATION AS REGARDS THE ECO NOMIC, POLITICAL AND REGULATORY MATTERS AFFECTING INDIAN MARKETS. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER, S HE HELD THAT THE ASSESSEE WAS IN PROCESS OF SETTING UP OF COMPANY, THAT BUSINESS ACTIVITIES HAD NOT ACTUALLY COMME NCED, THAT UNDERTAKING STEP TO IDENTIFY POTENTIAL VENTURE CAPITAL FUND COULD N OT BE TERMED BUSINESS ACTIVITY, T HAT THE SUBMISSION MADE BY THE ASSESSEE WAS NOT CORROBORAT ED BY ANY EVIDENCE OR MATERIAL, THAT INSPITE OF SEVERAL OPPORTUNITIES GRANTED BY THE AO I T HAD NOT FILED ANY DETAIL IN THIS REGARD. FINALLY, THE FAA CONFIRMED THE ORDER OF THE AO. 4. BEFORE US,AUTHORISED REPRESENTATIVE (AR) CONTENDED THAT THE ASSESSE HAD FILED NECESSARY DETAILS BEFORE AO ABOUT EXPENDITURE INCURRED , THAT AO DID NOT CONSIDER THE E XPLA NA TION FILED BY IT, THAT THE AO HAD NOT MENTIONED THE DATES ON WHICH OPPORTUNITIES WERE GIVEN TO THE ASSESSEE FOR FILING THE DETAILS OF EXPENDITURE, THAT THE ALLEGATION OF NON - FILING OF DETAILS WAS BASELESS, THAT THE FAA HAD CALLED FOR REMAND REPORT FR OM THE AO, THAT SHE DID NOT PROVIDE A COPY OF THE REMAND REPORT TO THE ASSESSEE. HE REFERRED TO THE PAGES 43 TO 47 , 58 TO 61 AND 82 TO 85 OF THE PAPER BOOK. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT WHILE DECIDI NG THE APPEAL,THE FAA HAS MENTIONED REMAND REPORT IN THE COLUMN 8 AGAINST THE ENTRY PRESENT ON BEHALF OF THE DEPARTMENT.BUT,WE DO NOT FIND ANY MENTION OF THE REMAND REPORT IN THE ASSESSMENT ORDER.IT IS ALSO NOT CLEAR AS TO WHETHER THE COPY OF THE REMAND RE PORT WAS GIVEN TO THE ASSESSEE OR NOT AND THUS IT WAS GIVEN AN OPPORTUNITY TO REBUT THE STAND TAKEN BY THE AO.IN OUR OPINION, IF THE FAA CALLS FOR A REMAND REPORT FROM THE AO THEN HE SHOULD HIGHLIGHT THE CONCLUSION DRAWN BY THE AO.CALLING OF A REPORT FROM T HE OFFICERS OF FIE L D FORMATION IS NOT A DAY - TODAY ACTIVITY.FAA USE THAT POWER IN LIMIT CASES AND UNDER CERTAIN CIRCUMSTANCES ONLY.IT IS POSSIBLE THAT AO MAY FURNISH A REMAND REPORT THAT COULD BE IN FAVOUR OF THE ASSESSEE . IN THESE CIRCUMSTANCES, IT IS IMPE RATIVE ON PART OF THE FAA NOT ONLY TO MENTION THE REASON S FOR CALLING THE REMAND REPORT, BUT ALSO TO NARRATE THE FACTS MENTIONED BY THE AO. REMAND REPORT IS CALLED UNDER THE PROVISIONS OF SECTION 250(4) OF THE ACT BY THE FAAS WHICH EMPOWER S THEM TO MAKE FUR THER ENQUIRY. PRINCIPLES OF NATURAL JUSTICE ENVISAGE THAT IF AN ADVERSE INFERENCE IS TAKEN AGAINST THE ASSESSEE, HE HAD TO BE INFORMED ABOUT THE SAME AND HAD TO BE GIVEN A REA SONABLE OPPORTUNITY OF HEARING. WE FIND THAT THE FAA NOT FOLLOWED THE PROPER PROCED URE. IT IS ALSO FOUND THAT NEITHER THE AO NOR THE FAA CONSIDERED DOCUMENTS SUBMITTED BY THE ASSESSEE DURING THE ASSESSMENT /APPELLATE PROCE EDINGS. IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT IN THE INTEREST OF JUSTICE THE MATTE R SHOULD BE RESTOR ED BACK TO THE FILE OF FAA FOR FRESH ADJUDICATION. THE FAA IS DIRECTED TO FURNISH A COPY OF THE REMAND REPORT TO THE ASSESSEE AND AFFORD IT A REASONABLE OPPORTUNITY OF 3 4741 AIPL AY - 06 - 07 HEA RING BEFORE DECIDING THE ISSUE. THE FAA WOULD CONSIDER THE DOCUMENTS PRODUCED OR TO BE PRODUCED BY THE ASSESSEE BEFORE DECIDING THE APPEAL. THUS, PARTLY REVERSING THE ORDER OF THE FAA WE DECIDE THE EFFECTIVE GROUND OF A PPEAL IN FAVOUR OF THE ASSESSEE, IN PART. AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS PARTLY AL LOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH , APRIL ,2015. 8 , 2015 SD/ - SD/ - ( /I P BANSAL) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBE R / MUMBAI, /DATE: 08 .0 4 .2015 SK / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.