GAJALEE COASTAL FOODS P.LTD, MUMBAI V. ITO 8(1)(4), MUMBAI

ITA 5203/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100584 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 16-07-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 16-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K KRISHNA MURTHY
• Assessee Lawyers: ASHWIN S CHHAG
• Keywords: Invalid notice; Depreciation; Business expenditure; Question of law; Unabsorbed depreciation
• Section: 143(3); 148; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G, MUMBAI BEFORE SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO.5203/MUM/2012 ASSESSMENT YEAR: 2006-07 M/S. GAJALEE COASTAL FOODS PVT. LTD., KADAMGIRI COMPLEX, HANUMAN ROAD, VILE PARLE (E), MUMBAI-400057 PAN:AABCG3241K VS. ITO 8(1)(4) MUMBAI-400057 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ASHWIN S. CHHAG REVENUE BY : SHRI K. KRISHNAMURTHY CIT-DR DATE OF HEARING : 28.07.2015 DATE OF PRONOUNCEMENT : 12.08.2015 O R D E R PER D. KARUNAKARA RAO, AM: THE PRESENT APPEAL PREFERRED BY THE ASSESSEE, IS DI RECTED AGAINST THE IMPUGNED ORDER DATED 14.06.2012 PASSED BY THE CIT(A )-16, MUMBAI FOR THE AY-2006-07. THE CIT(A) DISMISSED THE APPEAL FIL ED BY THE ASSESSEE 2 ITA NO. 5203/M /2012 AGAINST THE ORDER OF ASSESSMENT U/S. 143(3) R.W.S. 147 OF THE INCOME TAX ACT (HEREINAFTER REFERRED THE ACT) PASSED BY THE ASSESSING OFFICER (AO) DATED 25.11.2011 FOR THE ASSESSMENT YEAR(AY) 2006-0 7. THE GROUNDS RAISED BY THE ASSESSEE READ AS FOLLOWS:- THE FOLLOWING GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CASE - 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XVI , MUMBAI [CIT (A)] ERRED IN NOT APPRECIATING THE FACTS OF THE CAS E PROPERLY AND ERRED IN SUSTAINING THE ADDITIONS MADE BY THE LEARNED ASS ESSING OFFICER OF RS.29,61,186/ - AS INTEREST EXPENDITURE BEING DISAL LOWED. THE LD. CIT(A) OUGHT TO HAVE HELD THAT THE SAME WAS ALLOWAB LE AS BUSINESS EXPENDITURE UNDER THE PROVISIONS OF SECTION 37 OF T HE INCOME TAX ACT, 1961. 2. THE LD. CIT (A) FURTHER ERRED IN ADDING BACK THE BALANCE AMOUNT OF INTEREST EXPENDITURE OF RS.29,71,865/ - BEING 50.09 % OF THE TOTAL INTEREST AMOUNT, TO THE INCOME OF THE APPELLANT, DE SPITE IT BEING PROPERLY ALLOWED BY THE LD. ASSESSING OFFICER. THE LD. CIT (A) ERRED IN DISREGARDING THE CIRCULAR PROVIDED BY THE APPELLANT , WHICH CLEARLY STATED THAT INTEREST ON FRESH LOAN TAKEN TO REPAY E ARLIER LOAN IS ALLOWED AS A DEDUCTION, WHEN PROVED TO THE SATISFACTION OF THE ASSESSING OFFICER, WHICH THE APPELLANT HAD RIGHTLY DONE. 3. THE LD. CIT (A) FURTHER ERRED IN NOT ALLOWING TH E BENEFITS OF UNABSORBED DEPRECIATION TO THE APPELLANT. THE LEARN ED CIT(A) OUGHT TO HAVE APPRECIATED THAT, AS PER THE PROVISIONS OF SECTION 32(2) OF THE INCOME TAX ACT, 1961 THE UNABSORBED DEPRECIATION IS SET OFF AGAINST CURRENT YEAR'S PROFITS AND LATER ON COULD BE SET OF F AGAINST INCOME EARNED FROM ANY OTHER HEAD. IN ADDITION TO THE ABOVE GROUNDS OF APPEAL, THE ASS ESSEE FURTHER PREFERRED ADDITIONAL GROUNDS OF APPEAL WHICH ARE AS UNDER:- WITH THIS, APPELLANT URGES TO THE HON'BLE BENCH TO ADMIT THE FOLLOWING ADDITIONAL GROUNDS OF APPEAL LEGAL IN NATURE, IN AD DITION TO THE EXISTING GROUNDS OF APPEAL FACTS OF WHICH ARE AVAILABLE ON T HE RECORD FOLLOWING THE NATIONAL THERMAL POWER VS. CIT 229 ITR 383(SC) (I) THAT THE PROCEEDING OF ASSESSMENT COMPLETED U/S .143(3) R.W.S 147VIDE ORDER DATED 25.11.11 VOID AB-INITIO AS BEIN G BAD IN LAW FOR WANT OF THE JURISDICTION; 3 ITA NO. 5203/M /2012 (A) AS THE ASSESSING OFFICER IS ERRED TO RECORD THE REASONS U/S.148, CONTRARY TO THE FACTS ON RECORD, WHILE REASSESS THE INCOME THAT THE APPELLANT HAD IN CONTRAST TO EARLIER YEARS 1ST TIME CLAIMED INTEREST EXPENSES WHICH INDICATES THAT INTEREST INCOME IS NO T RELATED TO THE PROPERTY CONCERNED. HENCE, THE APPELLANT HAD CLAIME D UNDUE EXPENSES FROM THE 'INCOME FROM THE HOUSE PROPERTY'. ACCORDIN GLY, THIS HAD RESULTED INTO UNDER ASSESSMENT OF INCOME TO THAT EX TENT. IT IS URGED THAT EVEN IN PAST APPELLANT HAD CLAIMED THE INTEREST AS EXPENSES, HENCE, THIS REOPENING PROCEEDING INITIATED WAS UNDER WRONG BELI EF OF FACTS RESULTED INTO LEGAL ERROR OF REOPENING U/S.148. (B) AS IT IS EVIDENT FROM THE REASONS RECORDED THAT THE REOPENING OF THE PROCEEDING WAS FROM THE FACTS AND MATERIAL AVAILABL E, RATHER THAN FRESH MATERIAL, WHICH WERE CONSIDERED IN THE PROCEEDING C OMPLETED U/S.143(3) VIDE ORDER DATED 19.12.2008, AS A RESULT OF WHICH T HIS PROCEEDING IS NOTHING BUT A REVIEW AND ON ACCOUNT OF CHANGE OF OP INION AND PATCH WORK OVER THE COMPLETED PROCEEDING U/S.143(3).THUS, IN THE PRETEXT OF REOPENING U/S.147,AO HAS EXTENDED THE LIMITATION PE RIOD TO DO THE ASSESSMENT U/S.143(3),WHICH IS OUTSIDE THE PURVIEW OF S.147. IT IS TRITE LAW THAT WHAT CANNOT BE DONE DIRECTLY, CANNOT BE DO NE INDIRECTLY AS WELL. (C) IN VIEW OF AFORESAID AS LD.CIT-8, MUMBAI HAD AC CORDED HIS APPROVAL TO RE-OPENING WITHOUT APPLICATION OF MIND HENCE, TH IS PROCEEDING IS BAD IN LAW AS VOID-AB-INITIO WITHOUT PREJUDICE TO THIS EVEN OTHERWISE, LD.CIT-8 HAD NO JURISDICTION TO ACCORD THE APPROVAL FOR REOP ENING U/S.147 R.W.S.151(2) OF THE INCOME TAX ACT,1961. (II) LD.CIT(A) ERRED TO ENHANCE THE ASSESSMENT AS H IS ACTION OF ENHANCEMENT WAS CONTRARY TO THE S.251(2) OF THE INC OME TAX ACT AND HENCE, MAY BE HELD AS WITHOUT JURISDICTION. 2. BEFORE US, AT THE VERY OUTSET, THE LEARNED COUNS EL BROUGHT OUR ATTENTION TO THE GROUNDS ORIGINALLY RAISED IN THE A PPEAL AND SUBMITTED THAT THE GROUNDS RELATES TO THE MERITS OF THE ADDIT ION MADE BY THE AO. FURTHER, THE LEARNED COUNSEL FOR THE ASSESSEE HAVE BROUGHT OUR ATTENTION TO THE ADDITIONAL GROUNDS FILED FOR THE FIRST TIME BEFORE US AND SUBMITTED THAT THE ADDITIONAL GROUNDS ARE OF LEGAL IN NATURE AND PERTAINS TO THE QUESTION OF LAW ARISING OUT OF THE FACTS WHICH ARE ALREADY ON THE RECORD. THEREFORE, RELYING UPON THE APEX COURT JUDGMENT IN T HE CASE OF NTPC LTD. (229 ITR 383) LD. COUNSEL PRAYED FOR ADMITTING THE SAID LEGAL GROUNDS. AFTER HEARING THE LEARNED DR FOR THE REVEN UE AND ON PERUSAL OF 4 ITA NO. 5203/M /2012 THE SAID ADDITIONAL GROUNDS, WHICH RELATE TO THE LE GAL ISSUES, WE FIND THAT THEY ARE REQUIRED TO BE ADMITTED. FURTHER, ALSO LEA RNED COUNSEL FOR ASSESSEE MENTIONED THAT LEGAL ISSUE RAISED IN ADDIT IONAL GROUND (C) GOES TO THE ROOTS OF THE MATTER, THEREFORE, THE SAME MAY BE ADJUDICATED IN PRIORITY OF THE REST OF THE LEGAL ADDITIONAL GROUND S. AFTER CONSIDERING THE SAME, WE PROCEED TO ADJUDICATE THE LEGAL ISSUE RAISE D IN ADDITIONAL GROUNDS AT GROUND (C) ON PRIORITY. THE SAID GROUND (C) OF ADDITIONAL GROUNDS: (C) IN VIEW OF AFORESAID AS LD.CIT-8, MUMBAI HAD AC CORDED HIS APPROVAL TO RE-OPENING WITHOUT APPLICATION OF MIND HENCE, TH IS PROCEEDING IS BAD IN LAW AS VOID-AB-INITIO WITHOUT PREJUDICE TO THIS EVEN OTHERWISE, LD.CIT-8 HAD NO JURISDICTION TO ACCORD THE APPROVAL FOR REOP ENING U/S.147 R.W.S.151(2) OF THE INCOME TAX ACT,1961. THE ABOVE ADDITIONAL GROUND (C) CONTAINS TWO LIMBS IN IT AND THEY ARE (I) CIT-8, MUMBAI HAD ACCORDED HIS APPROVAL TO RE-OPENI NG WITHOUT APPLICATION OF MIND, HENCE THIS PROCEEDING IS BAD I N LAW AS VOID AB-INITIO, AND (II) CIT-8 HAD NO JURISDICTION TO ACCORD THE APP ROVAL FOR RE-OPENING U/S. 147 R.W.S. 151(2) OF INCOME TAX ACT, 1961. IN ORDER TO SUBSTANTIATE HIS ARGUMENTS RELATING TO THE (II) LIMB OF THE ADDITIONAL GROUND (C) ABOVE, THE LEARNED COUNSEL FO R THE ASSESSEE HAS DRAWN OUR ATTENTION TO THE NOTICE DATED 30.03.2011 U/S. 148 OF THE INCOME TAX ACT, 1961 AND CATEGORICALLY MENTIONED TH AT THE SAID NOTICE WAS ISSUED AFTER OBTAINING THE NECESSARY SATISFACTI ON OF THE CIT-8, MUMBAI. THE COPY OF THE SAID NOTICE IS PLACED AT PA GE 3 OF THE APB. FURTHER, HE MENTIONED THAT THE SAID SATISFACTION IS NOT A VALID CONSIDERING THE PROVISIONS OF SECTION 151 OF THE ACT. HE READ O UT RELEVANT PROVISIONS AND THE SAME READS AS UNDER: 5 ITA NO. 5203/M /2012 IN A CASE OTHER THAN A CASE FALLING UNDER SUB-SECT ION (1), NO NOTICE SHALL BE ISSUED UNDER SECTION 148 BY AN ASSESSING O FFICER, WHO IS BELOW THE RANK OF JOINT COMMISSIONER, UNLESS THE JOINT CO MMISSIONER IS SATISFIED, ON THE REASONS RECORDED BY SUCH ASSESSIN G OFFICER, THAT IT IS A FIT CASE FOR THE ISSUE OF SUCH NOTICE. 3. EXPLAINING THE ABOVE PROVISIONS, LD. COUNSEL SUB MITTED THAT IT IS THE JT. CIT WHO IS REQUIRED TO BE SATISFIED IN THIS CAS E AND NOT THE CIT-8, MUMBAI. 4. THE LD. DR REPRESENTING THE REVENUE HAD RELIED U PON THE ORDERS PASSED BY THE AO AS WELL AS THE CIT(A). FURTHER, HE SUBMITTED THAT SINCE THE NOTICE HAS BEEN ISSUED BY THE CIT(A)-8 MUMBAI, WHO IS OBVIOUSLY A SENIOR OFFICER THAN THAT OF A JOINT COMMISSIONER, T HEREFORE, BY VIRTUE OF HIS DESIGNATION, HE IS COMPETENT TO APPROVE THE ISS UANCE OF THE NOTICE. 5. WE HAVE CAREFULLY GONE THROUGH THE NOTICE ISSUED BY RESPONDENT U/S. 148 OF THE INCOME TAX ACT, DATED 30.03.2011 WH EREIN IT HAS BEEN CATEGORICALLY MENTIONED THAT THE NOTICE IS BEING IS SUED AFTER OBTAINING THE NECESSARY SATISFACTION OF THE CIT-8, MUMBAI WHICH G OES TO SHOW THAT THE SAID NOTICE WAS ISSUED IN VIOLATION OF SECTION 151( 2) OF INCOME TAX ACT. AS PER THE SECTION 151(2) OF THE ACT, THE APPROVAL OF JOINT COMMISSIONER WAS REQUIRED TO HAVE BEEN TAKEN BECAUSE IT IS CLEAR LY MENTIONED IN PROVISIONS OF SECTION 151(2) OF THE ACT. IN THE PRE SENT CASE, IT IS UNDISPUTED FACT THAT THE SATISFACTION OF JOINT COMM ISSIONER HAS NOT BEEN TAKEN. [THE AFOREMENTIONED LEGAL PREPOSITION WAS SU PPORTED BY THE JURISDICTIONAL HIGH COURT IN W.P.NO. 722 OF 2011 TIT LING (DSJ COMMUNICATION LTD. VS. DCIT, CIRCLE-2(1) & ANR).] 6. BEFORE, WE DECIDE THE CONTENTIOUS ISSUE, WE SHAL L EXAMINE THE PROVISIONS OF SECTION 151 OF I.T. ACT, WHICH READS AS UNDER: '151. SECTION FOR ISSUE OF NOTICE.- 6 ITA NO. 5203/M /2012 (1) IN A CASE WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR SECTION 147 HAS BEEN MADE FOR THE RELEVANT A SSESSMENT YEAR, NO NOTICE SHALL BE ISSUED UNDER SECTION 148 B Y AN ASSESSING OFFICER, WHO IS BELOW THE RANK OF ASSISTANT COMMISS IONER OR DEPUTY COMMISSIONER, UNLESS THE JOINT COMMISSIONER IS SATI SFIED ON THE REASONS RECORDED BY SUCH ASSESSING OFFICER THAT IT IS A FIT CASE FOR THE ISSUE OF SUCH NOTICE. (2) PROVIDED THAT, AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, NO SUCH NOTICE SHALL BE I SSUED UNLESS THE CHIEF COMMISSIONER OR COMMISSIONER IS SATISFIED, ON THE REASONS RECORDED BY THE ASSESSING OFFICER AFORESAID, THAT I T IS A FIT CASE FOR THE ISSUE OF SUCH NOTICE. (3) IN A CASE OTHER THAN A CASE FALLING UNDER SUB-SECTI ON (1), NO NOTICE SHALL BE ISSUED UNDER SECTION 148 BY AN ASSESSING O FFICER, WHO IS BELOW THE RANK OF JOINT COMMISSIONER, AFTER THE EXP IRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLES S THE JOINT COMMISSIONER IS SATISFIED, ON THE REASONS RECORDED BY SUCH ASSESSING OFFICER, THAT IT IS A FIT CASE FOR THE IS SUE OF SUCH NOTICE. EXPLANATION.- FOR THE REMOVAL OF DOUBTS, IT IS HERE BY DECLARED THAT THE JOINT COMMISSIONER, THE COMMISSIONER OR THE CHI EF COMMISSIONER, AS THE CASE MAY BE, BEING SATISFIED O N THE REASONS RECORDED BY THE ASSESSING OFFICER ABOUT FITNESS OF A CASE FOR THE ISSUE OF NOTICE UNDER SECTION 148, NEED NOT ISSUE S UCH NOTICE HIMSELF. 7. FROM THE ABOVE EXTRACT, IT IS EVIDENT THAT THE N OTICE ISSUED WITH THE APPROVAL OF THE CIT BY THE AO HAS TO BE DECLARED AS AN INVALID NOTICE AS THE SAME IS NOT APPROVED BY THE JT.CIT. THEREFORE, THE REASSESSMENT MADE BY THE AO WITH SUCH INVALID NOTICE IS REQUIRED TO BE QUASHED. ON CONSIDERING THE AFOREMENTIONED FACTS AND CIRCUMSTAN CES AND LEGAL PROPOSITION, WE ALLOW THE ARGUMENTS OF LD. COUNSEL FOR ASSESSEE. ACCORDINGLY, SECOND LIMB OF THE ADDITIONAL GROUND ( C) IS ALLOWED AND IN FAVOUR OF THE ASSESSEE. 8. WE HAVE DECIDED THE PART OF THE ADDITIONAL GROUN D (C) IN FAVOUR OF THE ASSESSEE AND HELD RE-ASSESSMENT IS VOID. CONSID ERING OUR ABOVE DECISION, WE ARE OF THE CONSIDERED OPINION, ON OTHE R GROUNDS/THE ADDITIONAL GROUNDS THAT ADJUDICATION OF OTHER GROUND S BECOMES AN 7 ITA NO. 5203/M /2012 ACADEMIC EXERCISE. ACCORDINGLY, THE REST OF THE GRO UNDS ARE DISMISSED AS ACADEMIC. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF AUGUST, 2015. SD/- SD/- (AMIT SHUKLA) (D.KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 12.08.2015 SHARWAN P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR G BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.