Jt. CIT(OSD), Circle-3(1)(1), Ahmedabad V. M/s. N.K. Proteins Pvt. Ltd., Ahmedabad

ITA 489/AHD/2018

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 6591 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 01-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR SR ADOCATE
• Keywords: Reopening of assessment; Transactions in derivatives; Assessment record; Reason to believe; Reassessment proceedings; Set aside
• Section: 143(3); 234B; 43(5); 195; 43; 148

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD ( CONVENED THROUGH VIRTUAL COURT ) BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO. 489/AHD/2018 ( ASSESSMENT YEAR : 2011-12) JT.CIT(OSD) CIRCLE 3(1)(1), AHMEDABAD / VS. M/S. N. K. PROTEINS PVT. LTD. 7 TH FLOOR, POPULAR HOUSE, ASHRAM ROAD, AHMEDABAD ./ ./ PAN/GIR NO. : AAACN9377N ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI VINOD TANWANI, CIT.DR / RESPONDENT BY : SHRI S. N. SOPARKAR, SR. ADOCATE DATE OF HEARING 21/01/2021 !'# / DATE OF PRONOUNCEMENT 25/01/2021 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF IN COME TAX (APPEALS)-7, AHMEDABAD (CIT(A) IN SHORT), DATED 2 1.12.2017 ARISING IN THE ASSESSMENT ORDER DATED 29.12.2016 PASSED BY THE ASSESSING OFFICER (AO) UNDER S. 143(3) R.W.S. 147 OF THE INCO ME TAX ACT, 1961 (THE ACT) CONCERNING AY 2011-12. ITA NO. 489/AHD/18 [JT.CIT(OSD) VS. M/S. N. K. PROTEINS PVT. LTD.] A.Y. 2011-12 - 2 - 2. THE GROUNDS OF APPEAL RAISED BY REVENUE READ AS UNDER: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION OF RS.84,20,58,519/- MADE BY THE A.O. TOWARDS THE PURCHASE OF CASTOR SEEDS/SODA SEEDS ON NSEL PLATFORM. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME-TAX (A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER IN RESPECT OF ABOVE ISSUES . 3. WHEN THE MATTER WAS CALLED FOR HEARING, THE LEAR NED SENIOR COUNSEL FOR THE ASSESSEE IN THE CAPTIONED REVENUES APPEAL REFERRED TO THE REASONS RECORDED FOR INITIATING THE PROCEEDINGS UNDER S.147 OF THE ACT AND SUBMITTED THAT THE REASONS RECORDED WOULD S UGGEST THAT THE ASSESSMENT PROCEEDINGS OF THE ASSESSEE WERE REOPEN ED BY THE AO TO EXAMINE THE DETAILS IN RESPECT OF FUTURE AND OPTION LOSSES DEBITED TO THE P&L ACCOUNT WHICH HAD NOT BEEN CONSIDERED BY TH E AO DURING THE ORIGINAL ASSESSMENT PROCEEDINGS. HOWEVER, IN THE R E-ASSESSMENT PROCEEDINGS, THIS ISSUE WAS NOT TAKEN UP BY THE AO AT ALL. THE AO HAS MADE AN ADDITION OF RS.84,20,58,519/- TOWARDS PURCH ASE OF CASTOR SEEDS/ SODA SEEDS ON NSEL PLATFORM. WHEREAS, THE O NLY REASON RECORDED FOR REOPENING THE ASSESSMENT PROCEEDINGS W AS THE ISSUE OF ALLOWABILITY OF F&O LOSSES, SAME HAS NEITHER BEEN D ISCUSSED NOR QUESTIONED WHILE FRAMING THE ASSESSMENT. THE AO HA S ASSESSED AN ALTOGETHER DIFFERENT GENRE OF INCOME WITHOUT MAKING ANY ADDITIONS TOWARDS INCOME WHICH ALLEGEDLY ESCAPED ASSESSMENT A S NOTED IN THE REASONS RECORDED. SUCH ACTION OF THE AO IN EXPANDI NG THE SCOPE OF ASSESSMENT OF INCOME UNDER S.147 OF THE ACT WITHOUT MAKING ANY ADJUSTMENTS IN THE RETURNED INCOME FOR THE REASONS FOR WHICH ACTION UNDER S.147 OF THE ACT WAS TAKEN, IS WHOLLY UNSUSTA INABLE IN LAW. THE LEGAL PROPOSITION WAS CITED THAT WHERE FOR THE GROU ND ON WHICH ACTION UNDER S.147/S.148 OF THE ACT WAS INITIATED W ERE NOT ACTED UPON, NO ADDITIONS COULD BE MADE BY THE AO ON OTHER GROUNDS WHICH DID NOT FORM PART OF THE REASONS RECORDED FOR THE P URPOSES OF REASSESSMENT. IT WAS THUS SUBMITTED THAT THE ISSUE IS BEYOND THE ITA NO. 489/AHD/18 [JT.CIT(OSD) VS. M/S. N. K. PROTEINS PVT. LTD.] A.Y. 2011-12 - 3 - PALE OF CONTROVERSY ANYMORE. THE LEARNED SENIOR CO UNSEL RELIED UPON THE DECISION OF THE HONBLE GUJARAT HIGH COURT CIT V. MOHMED JUNED DADANI (2014) 355 ITR 172 (GUJ) WHICH ACCORDING TO HIM SQUARELY CLINCHES THE ISSUE. THE LEARNED SENIOR CO UNSEL THUS SUBMITTED THAT THE ORDER OF THE CIT(A) GRANTING REL IEF TO THE ASSESSEE CANNOT BE FAULTED. 4. THE LD. CIT.DR FOR THE REVENUE, ON THE OTHER HAN D, RELIED UPON THE ACTION OF THE AO AND SUBMITTED THAT THE POWER O F THE AO IS NOT CURTAILED FOR MAKING THE IMPUGNED ADDITIONS UNDER S .147 OF THE ACT. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. WE SHALL STRAIGHTWAY ADDRESS OURSELVES TO THE VALIDITY OF AD DITIONS MADE PURSUANT TO JURISDICTION ASSUMED UNDER S.147 OF THE ACT ON A GROUND ALTOGETHER DIFFERENT FROM THE GROUND FOR WHICH REAS ONS TOWARDS ESCAPEMENT WAS RECORDED UNDER S.148(2) OF THE ACT. 6. FOR THE SAKE OF EASY REFERENCE, REASONS RECORDED UNDER S.148(2) OF THE ACT BY THE AO IS REPRODUCED HEREUNDER: REASON FOR REOPENING OF ASSESSMENT IN CASE OF M/S N. K. PROTEINS LIMITED [AAACN9377N] FOR AY 2011-12 DURING THE YEAR UNDER CONSIDERATION ASSESSEE COMPAN Y HAS DEBITED AN AMOUNT OF RS. 446.34 LAKH ON ACCOUNT OF LOSS FROM F UTURE AND OPTION UNDER SCHEDULE 20 ADMINISTRATION AND SELLING EXPENS ES WHICH WAS ALLOWED DURING THE COURSE OF ORIGINAL ASSESSMENT. I T IS ALSO NOTICED THAT THE CHARTERED ACCOUNTANT CONDUCTING SPECIAL AUDIT H AS ALSO NOT MENTIONED ANY OBSERVATION IN HIS REPORT. THE ASSESSEE IN ITS SUBMISSION DURING COURSE OF ORI GINAL ASSESSMENT HAD STATED THAT THE COMPANY WAS NOT DEALING IN ANY SHAR E TRANSACTION. FURTHER IT WAS NOTICED FROM THE ASSESSMENT RECORDS OF N. K. INDUSTRIES FOR AY 2011-12 (GROUP COMPANY) THAT THE ASSESSING O FFICER HAS DISALLOWED RS.1,21,03,101 ON FUTURE AND OPTION LOSS STATING THAT THE HEDGING LOSS INCURRED IN FUTURE & OPTION TRANSACTIO NS ARE SPECULATIVE AS PER THE PROVISIONS OF SECTION 43(5) OF THE ACT. THE DETAILS REGARDING FUTURE & OPTION LOSS DEBITED IN PROFIT & LOSS ACCOUNT WERE NEITHER SOUGHT NOR FURNISHED DURING TH E COURSE OF ORIGINAL ASSESSMENT. PRIMA FACIE THE F&O LOSS IS RE QUIRED BE DISALLOWED. THUS UNDERSIGNED, HAVING GONE THROUGH T HE ABOVE ITA NO. 489/AHD/18 [JT.CIT(OSD) VS. M/S. N. K. PROTEINS PVT. LTD.] A.Y. 2011-12 - 4 - MENTIONED FACTS OF THE CASE IS OF THE OPINION THAT INCOME TO THE TUNE OF RS. 446.34 LAKH HAS ESCAPED ASSESSMENT WITH SHORT L EVY OF TAX OF RS. 209.98 LAKH AS DETAILED BELOW: DESCRIPTION AMOUNT RS. IN LAKH SURCHARGE @5% 6.70 TOTAL 140.60 EDUCATION CESS @3% 4.22 TOTAL TAX 144.82 INTEREST U/S 234A FOR ONE MONTH 1.45 INTEREST U/S 234B FROM 1.4.2011 TO 21.11.2014 @44% 63.71 TOTAL SHORT LEVY OF TAX 209.98 UNDER ASSESSMENT OF INCOME 446.34 INCOME TAX @30% 133.90 THUS, IT IS A FIT CASE FOR REOPENING OF ASSESSMENT U/S 148. 7. THE CIT(A) HAS DEALT WITH THE ISSUE IN FAVOUR OF THE ASSESSEE AND HAS SET ASIDE THE ADDITIONS CARRIED OUT BY THE AO ON A DIFFERENT GROUND HAVING REGARD TO THE FACT THAT NO ADDITIONS WERE MADE FOR THE GROUNDS FOR WHICH THE ASSESSMENT WAS REOPENED UNDER S.148 R.W.S. 147 OF THE ACT. THE RELEVANT OPERATIVE PARA OF THE ORD ER OF THE CIT(A) IS REPRODUCED HEREUNDER: 4.2 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORD ER, FACTS OF THE CASE AND THE SUBMISSIONS MADE BY THE APPELLANT. 1 H AVE ALSO CALLED FOR AND EXAMINED THE ASSESSMENT RECORDS IN THIS CASE AN D HAVE HELD A DISCUSSION WITH THE AO AS WELL. THE MAIN ARGUMENT O F THE APPELLANT IS THAT THE ASSESSMENT PROCEEDINGS WERE REOPENED BY TH E AO TO EXAMINE DETAILS IN RESPECT OF F&O LOSS DEBITED TO THE PROFI T AND LOSS ACCOUNT WHICH HAD NOT BEEN CONSIDERED BY THE AO DURING THE ORIGINAL ASSESSMENT PROCEEDINGS. HOWEVER, DURING THE REASSES SMENT PROCEEDINGS, THIS ISSUE WAS NOT BEEN TAKEN UP BY TH E AO AT ALL. THE APPELLANT HAS CONTENDED THAT THE AO WAS NOT EMPOWER ED TO ASSESS ANY INCOME THAT FOR WHICH THE REASONS HAD BEEN RECORDE D AND ASSESSMENT PROCEEDINGS HAD BEEN REOPENED. 4.2.1 A PERUSAL OF THE ASSESSMENT ORDER WHICH HAS B EEN REPRODUCED ABOVE SHOWS THAT THE AO HAS MENTIONED IN PARA -2 OF HIS ORDER THAT THE REOPENING WAS DONE SINCE DETAILS REGARDING F&O LOSS DEBITED TO THE PROFIT AND LOSS ACCOUNT HAD NEITHER BEEN SOUGHT FRO M NOR FURNISHED BY THE APPELLANT WHEN IN THE CASE OF ITS SISTER CONCER N, M/S. N.K. INDUSTRIES LTD., SUCH F&O LOSS HAD BEEN DISALLOWED BY THE AO. HOWEVER, SUBSEQUENT TO THIS NOTING, AT NO OTHER PLA CE IN THE ORDER HAS THE ISSUE OF F&O LOSS BEEN TAKEN UP. THE ADDITION T O THE APPELLANT'S TOTAL INCOME DURING THE REASSESSMENT PROCEEDINGS HA S BEEN ON ACCOUNT OF PURCHASE OF CASTOR SEEDS OF RS.50,00,88,283/- AN D PURCHASE OF SOYA SEEDS AT RS.34,19,70,236/- ON NSEL PLATFORM THROUGH BARTER SYSTEM. A PERUSAL OF THE REASONS RECORDED BY THE AO FOR REOPE NING THE ASSESSMENT ITA NO. 489/AHD/18 [JT.CIT(OSD) VS. M/S. N. K. PROTEINS PVT. LTD.] A.Y. 2011-12 - 5 - PROCEEDINGS FOR ASST. YEAR 2011-12 I.E. THE YEAR UN DER CONSIDERATION SHOWS THAT THE SPECIFIC REASON RECORDED BY THE AO FOR REOPENING THE CASE WAS THAT AN AMOUNT OF RS.446.34 LAKHS HAD BEEN DEBITED BY THE APPELLANT TO THE PROFIT AND LOSS ACCOUNT ON ACCOUNT OF LOSS FROM F&O WHICH WAS ALLOWED DURING THE COURSE OF ORIGINAL ASS ESSMENT PROCEEDINGS AND WHICH WAS REQUIRED TO BE DISALLOWED . THUS, THE AO HAD RECORDED THAT HE HAD REASON TO BELIEVE THAT INCOME TO THE TUNE OF RS.446.34 LAKHS HAD ESCAPED ASSESSMENT. THEREFORE, IT IS VERY CLEAR THAT THE ONLY REASON RECORDED FOR REOPENING THE ASSESSME NT PROCEEDINGS WAS THE ISSUE OF ALLOWABILITY OF F&O LOSSES WHICH HAS N OT BEEN DISCUSSED ANYWHERE IN THE IMPUGNED ORDER. A PERUSAL OF THE AS SESSMENT RECORDS ALSO SHOWS THAT THESE REASONS RECORDED BY THE AO HA VE NOT BEEN DROPPED DURING REASSESSMENT PROCEEDINGS AND NO FURT HER REASONS HAVE BEEN RECORDED IN RESPECT OF THE ADDITION FINALLY MA DE BY THE AO. THUS IT IS SEEN THAT IT IS A FACT THAT NO ADDITION HAD BEEN MADE BY THE AO ON THE ISSUE FOR WHICH THE ASSESSMENT PROCEEDINGS WERE REOPENED BUT ADDITION WAS MADE ON A TOTALLY NEW ISSUE FOR WHICH NO REASONS WERE RECORDED. 4.2.2 I THEREFORE FIND MERIT IN THE CONTENTION OF T HE APPELLANT. THE APPELLANT'S CASE IS SQUARELY COVERED BY THE DECISIO N OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. MOHMED JUNAID DADANI [2013] 30 TAXMANN.COM 1 (GUJARAT) WHEREIN THE HON. HIGH COURT HAS HELD THAT WHEN THE GROUND ON WHICH REOPENING WAS BASED, NO AD DITION IS MADE BY THE AO, HE COULD NOT MAKE ADDITIONS ON S OME OTHER GROUNDS WHICH DID NOT FORM PART OF THE REASONS RECO RDED BY HIM. 4.2.3 THE HON'BLE HIGH COURT OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. JET AIRWAYS (I) LTD. IN 195 TAXMAN 117 HAS ALSO HELD THAT IF AFTER ISSUING NOTICE U/S. 148 THE AO ACCEPTS THE CO NTENTION OF AN ASSESSEE AND HOLDS THAT THE INCOME WHICH HE INITIAL LY BELIEVED HAD ESCAPED ASSESSMENT, HAS NOT ACTUALLY ESCAPED ASSESS MENT, THEN HE CANNOT INDEPENDENTLY ASSESS SOME OTHER INCOME AND I F HE DOES, A FRESH NOTICE WOULD HAVE TO BE ISSUED U/S. 148 OF THE ACT. 4.2.4 THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. MON ARCH EDUCATIONAL SOCIETY 79 TAXMAN.COM 43 HAS ALSO TAKEN A SIMILAR VIEW AND HAS HELD THAT IF NO ADDITION IS MADE IN RESPECT OF REASONS RECORDED BY THE AO FOR REOPENING ASSESSMENT, THEN THE AO CAN NOT MAKE AN ADDITION ON ANY OTHER ISSUE IN RE-ASSESSMENT PROCEE DINGS. 4.2.5 IN THIS CASE, THE ASSESSMENT PROCEEDINGS WERE REOPENED BY THE AO AS PER THE REASONS RECORDED BY HIM ON THE ISSUE OF F&O LOSSES DEBITED TO THE PROFIT AND LOSS ACCOUNT. THE ADDITIO N HOWEVER HAS BEEN MADE ON ACCOUNT OF PURCHASES MADE ON NSEL PLATFORM WITHOUT CONSIDERATION. THIS ISSUE ON WHICH THE ADDITION HAS FINALLY BEEN MADE DOES NOT FORM PART OF THE REASONS RECORDED BY THE A O. NOWHERE DURING THE PROCEEDINGS HAS THE AO RECORDED FRESH REASONS I N RESPECT OF THESE PURCHASES AND NO NEW NOTICE U/S. 148 HAS BEEN ISSUE D. IN VIEW OF THESE FACTS AND THE DIRECT DECISIONS OF THE HON'BLE COURT S AS DISCUSSED ABOVE, I AM OF THE VIEW THAT THE AO WAS NOT JUSTIFIED IN M AKING AN ADDITION IN RESPECT OF PURCHASES OF CASTOR SEEDS/SOYA SEEDS SIN CE THIS ISSUE DID NOT FORM PART OF REASONS RECORDED BY HIM FOR REOPENING THE ASSESSMENT PROCEEDINGS. THE ISSUE FOR WHICH THE ASSESSMENT PRO CEEDINGS WERE REOPENED I.E. THE APPELLANT'S CLAIM OF F&O LOSSES H AS NOT BEEN ITA NO. 489/AHD/18 [JT.CIT(OSD) VS. M/S. N. K. PROTEINS PVT. LTD.] A.Y. 2011-12 - 6 - DISCUSSED ANYWHERE IN THE IMPUGNED ORDER. CONSIDER ING ALL THESE FACTS, IT IS HELD THAT THE RE-ASSESSMENT ORDER U/S. 143(3) READ WITH SECTION 147 OF THE I.T. ACT WAS BAD IN LAW AND IS QUASHED. GROUNDS OF APPEAL NOS. 1 & 2 ARE ACCORDINGLY ALLOWED. 8. THE LEGITIMACY OF ADDITION MADE IN THE RE-ASSESS MENT PROCEEDINGS DE HORS THE REASONS RECORDED IS IN QUESTION. IN THE CIRCUMSTANCES, WHERE THE GROUND ON WHICH THE JURISD ICTION UNDER S.147 OF THE ACT WAS EXERCISED HAVE NOT BEEN RECKON ED AND ACTED UPON IN THE RE-ASSESSMENT PROCEEDINGS AND NO ADDITI ONS WERE CARRIED OUT FOR ANY OF SUCH GROUNDS RECORDED, THE AO COULD NOT MAKE ADDITIONS ON AN ALTOGETHER DIFFERENT GROUND WHICH D ID NOT FORM PART OF THE REASONS RECORDED BY HIM AS HELD BY THE HONB LE GUJARAT HIGH COURT CIT V. MOHMED JUNED DADANI (2014) 355 ITR 172 (GUJ) AND OTHER JUDICIAL PRECEDENTS RECORDED BY THE CIT(A). THE REVENUE COULD NOT CONTROVERT ON FACTS THAT THE ADDITIONS OR PART THEREOF MADE DERIVES ITS GENESIS FROM THE GROUND TAKEN IN THE RE ASONS RECORDED. IN THE LIGHT OF SETTLED POSITION OF LAW, WE SEE NO ERROR IN THE FINDINGS GIVEN BY THE CIT(A) IN FAVOUR OF THE ASSES SEE. THE CIT(A) HAS RIGHTLY APPROACHED THE ISSUE AND CORRECTLY APPL IED THE LAW. WE THUS DECLINE TO INTERFERE. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMAR K EDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 25/01/2021 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) THIS ORDER PRONOUNCED ON 25/01/2021 ITA NO. 489/AHD/18 [JT.CIT(OSD) VS. M/S. N. K. PROTEINS PVT. LTD.] A.Y. 2011-12 - 7 - /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56)