CASCADE HOLDINGS P.LTD, MUMBAI V. ASST CIT CEN CIR 31, MUMBAI

ITA 5404/MUM/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 3083 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 10-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 28-08-2012
• Court: TRIBUNAL
• Department Lawyers: DHARMESH SHAH IZRFKHZ FD LS
• Keywords: Rejection of books of accounts; Opportunity of being heard; Principle of natural justice
• Section: 234B; 115JB

Judgement Text

VK;DJ VIHYH; VF/KDJ.K ** LH U;K;IHB EQACBZ ESAA IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI JH TH + ,L + IUUW] YS[KK LNL; ,OA JH IOU FLAG ] U;KF;D LNL; DS LE{KA BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH , JUDICIAL MEMBER VK;DJ VIHY LA[;K@ ITA NO 5404 / MUM/2012 ( FU/KKZJ.K OKZ / ASSESSMENT YEAR: 2009 - 10 ) M/S CASCADE HOLDINGS PVT. LTD. 32, MADHULI, 3 RD FLOOR, DR. ANNIE BESANT ROAD, NEHRU CENTRE, WORLI, MUMBAI 400018. VS.` ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 31, MUMBAI. LFKK;H YS[KK LA[;K@TH VKB VKJ LA[;K@ PAN/GIR NO. AAACC5768N APPELLANT RESPONDENT ORDER PER G.S. PANNU, AM THE CAPTIONED APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) (HEREINAFTER REFERRED TO AS THE CIT(A) FU/KZKFJFR FD VKSJ LS @ ASSESSEE BY SHRI DHARMESH SHAH IZR;FKHZ FD VKSJ LS @ RESPONDENT BY DR. P. DANIEL LQUOKBZ FD RKJH[K @ DATE OF HEARING 14 .0 9 .2015 ?KKSK.KK FD RKJH[K@ DATE OF PRONOUNCEMENT 30 . 9 .2015 VK;DJ VIHY LA[;K@ ITA NO 5404/MUM/2012 ( FU/KKZJ.K OKZ / ASSESSMENT YEAR: 2009 - 10) 2 | P A G E DATED 26.02.2012, WHICH IN TURN HAS ARISEN FROM AN ORDER PASSED BY THE ASSESSING OFFICER U/S 1 43(3) OF THE INCOME TAX ACT, 1961( HEREINAFTER REFERRED TO AS THE ACT) DATED 14.10.2011 PERTAINING TO ASSESSMENT YEAR 2009 - 10 2 IN THIS APPEAL, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN PASSING THE ORDER U/ S. 250 OF THE ACT. 2. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN PASSING THE ORDER WITHOUT COMPLYING WITH THE PRI NCIPLES OF NATURAL JUSTICE. 3. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN NOT APPRECIATING THAT NO INCOME FROM ATTACHED ASSETS CAN BE ASSESSED IN THE HANDS OF THE APPELLANT. 4. THE LEARNED COMMISSIONER OF INCOME - T AX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN NOT GRANTING RELIEF OF LIABILITY AMOUNTING TO RS. 86,15,970/ - , TOWARDS INTEREST EXPENDITURE CLAIMED BY THE APPELLANT. 5. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN CONFI RMING CALCULATION OF BOOK PROFIT U/ S. 115JB AMOUNTING TO RS. 30,16,472/ - . 6. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING INTEREST CHARGED U/S. 234A, 234B AND 234C OF THE ACT. 3. IN BRIEF THE BACKGROUND O F THE CASE IS THAT THE ASSESSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF COMPANIES ACT, 1956, AND IS A NOTIFIED ENTITY UNDER THE SPECIAL COURT (TRIAL OF OFFENCES RELATING TO TRANSACTION IN SECURITIES) ACT, 1992 AND ALL THE ASSETS INCLUDING BANK AC COUNTS HAVE BEEN ATTACHED AND VESTED IN THE HANDS OF THE CUSTODIAN BY VIRTUE OF SUCH NOTIFICATION. VK;DJ VIHY LA[;K@ ITA NO 5404/MUM/2012 ( FU/KKZJ.K OKZ / ASSESSMENT YEAR: 2009 - 10) 3 | P A G E 3 . 1 INSOFAR AS THE GROUND OF APPEAL NOS. 1 TO 3 ARE CONCERNED, THE SAME HAVE NOT BEEN PRESSED AT THE TIME OF HEARING, AND, THEREFORE, GROUND NOS. 1 TO 3 AR E DISMISSED AS NOT PRESSED. 3 . 2 IN GROUND OF APPEAL NO. 4, THE ISSUE RELATES TO DISALLOWANCE OF INTEREST TO THE EXTENT OF RS. 86,15,970/ - . THE CLAIM OF INTEREST EXPENDITURE WAS MADE BY THE ASSESSEE WITH REGARD TO MONIES BORROWED FROM FAMILY BROKERAGE FIRM S FOR MAKING INVESTMENT IN SHARES AND SECURITIES PRIOR TO 8.6.1992. THE ASSESSING OFFICER DISALLOWED THE CLAIM ON THE GROUND THAT IT WAS MERELY A CONTINGENT LIABILITY. THE CIT(A) FOLLOWING HIS DECISION IN THE CASE OF A GROUP CONCERN, NAMELY, M/S EMINENT HOLDINGS PVT. LTD. FOR ASSESSMENT YEAR 2007 - 08, DISMISS ED THE STAND OF THE ASSESSEE. 3 . 3 BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT IN THE CASE OF M/S EMINENT HOLDINGS PVT. LTD. (SUPRA), THE TRIBUNAL VIDE ITS ORDER DATED 12.02.2014 IN ITA NO. 8200/MUM/2010, FOR ASSESSMENT YEAR 2007 - 08, HAS CONSIDERED A SIMILAR ISSUE AND HAS RESTORED THE MATTER BACK TO THE FILE OF CIT(A) FOR A FRESH ADJUDICATION. IT WAS A COMMON POINT BETWEEN THE PARTIES THAT THE AFORESAID GROUND BE ALSO SET ASIDE TO THE FILE OF CIT(A) FOR FRESH ADJUDICATION AFTER GRANTING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. IN THIS CONTEXT, THE RELEVANT DISCUSSION IN THE ORDER OF THE TRIBUNAL DATED 12.02.2014 (SUPRA) READS AS UNDER: - 4. GROUND NOS.4 & 5 ARE INTER - CONNECTED RELATING TO THE DISALLOWANCE OF INTEREST EXPENDITURE OF RS. 5,14,455/ - . IN THIS REGARD, AT THE OUTSET, LD COUNSEL MENTIONED THAT AN IDENTICAL ISSUE CAME UP FOR ADJUDICATION BEFORE THE ITAT, MUMBAI IN THE CASE OF HITESH S. MEHTA VS. D CIT VIDE ITA NO.7726 & 7727/M/2010 DATED 26.4.2013, WHEREIN THE TRIBUNAL SET ASIDE THE ISSUE TO THE FILES OF CIT (A) FOR ADJUDICATION OF THE ISSUE AFRESH BY ADJUDICATING THE RESPECTIVE GROUND RELATING TO THE REJECTION / RELIABILITY OF THE BOOKS OF ACCOUNT. PARA 5 FROM THE SAID ORDER OF THE TRIBUNAL (SUPRA) IS RELEVANT IN THIS REGARD AND THE SAME READS AS UNDER: 5. GROUND NO.4 RELATES TO THE ACTION OF THE LD CIT (A) IN CONFIRMING THE LIABILITIES AMOUNTING TO RS. 11,24,99,052/ - AND RS. 12,61,36,245/ - RESPE CTIVELY VK;DJ VIHY LA[;K@ ITA NO 5404/MUM/2012 ( FU/KKZJ.K OKZ / ASSESSMENT YEAR: 2009 - 10) 4 | P A G E FOR THE AYS 2005 - 06 AND 2006 - 07 TOWARDS INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE. IT IS PERTINENT TO NOTE THAT THE FINDINGS GIVEN IN PARA 3.3 ABOVE IN RESPECT OF REJECTION / RELIABILITY OF THE BOOKS OF ACCOUNTS AND THE PROPOSED ADJUDICATION OF THE LD CIT (A) IN VIEW OF THE SAID DIRECTION MAY HAVE DIRECT IMPACT ON THE ISSUE OF THE IMPUGNED LIABILITY, WE SET ASIDE THIS ISSUE TO THE FILES OF THE CIT (A) TO ADJUDICATE AFRESH ALONG WITH THE ADJUDICATION OF THE RESPECTIVE GROUND PERTAINING TO THE REJ ECTION / RELIABILITY OF THE BOOKS OF ACCOUNTS. 5. ON THE OTHER HAND, LD DR DUTIFULLY RELIED ON THE ORDER OF THE AO/CIT (A). 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE ORDER OF THE TRIBUNAL IN THE C ASE OF HITESH S. MEHTA (SUPRA). WHETHER THE INTEREST LIABILITIES OF RS. 5,14,455/ - CONSTITUTES ASCERTAINED ONE OR NOT IS ALSO LINKED TO THE ISSUE OF REJECTION OF BOOKS OF ACCOUNTS AS THE BOOKS OF ACCOUNT IS THE BASIS FOR COMPUTATION OF BOOK PROFITS U/S 115 JA OF THE ACT. THIS IS COMMON ISSUE QUA THE ISSUE ADJUDICATED IN THE CASE OF THE HITESH S. MEHTA (SUPRA) AND MATTER WAS SET ASIDE. RESPECTFULLY FOLLOWING THE SAID ORDER OF THE TRIBUNAL, WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE RAISED IN GROUND NO.4 SHOULD BE SET ASIDE TO THE FILES OF THE CIT (A) FOR FRESH ADJUDICATION OF THE ISSUE AFTER GRANTING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE DECISION IF ANY SHOULD BE TAKEN ONLY AFTER CONSIDERING THE DECISION IN THE CASE OF HITESH S MEHT A, (SUPRA). ACCORDINGLY, GROUND NOS.4 & 5 ARE SET ASIDE. 3.5 FOLLOWING THE AFORESAID PRECEDENT, WE SET - ASIDE THE ISSUE OF DISALLOWANCE OF INTEREST EXPENDITURE OF RS. 86,15,970/ - TO THE FILE OF CIT(A) FOR FRESH ADJUDICATION AS PER LAW AFTER GRANTING A RE ASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THUS ON THIS ASPECT, ASSESSEE SUCCEEDS FOR STATISTICAL PURPOSES. 4. IN GROUND OF APPEAL NO. 5 , THE ISSUE RELATES TO THE COMPUTATION OF BOOK PROFIT FOR THE PURPOSE OF SECTION 115JB OF THE ACT. 4.1 THE LD. REPRESENTATIVE E XPLAINED THAT THE DISPUTE IN THIS GROUND IS WITH RESPECT TO DETERMINATION OF BOOK - PROFIT U/S 115JB OF THE ACT QUA THE AMOUNT OF DISALLOWANCE UNDER THE NORMAL PROVISIONS OF THE ACT. THE DISALLOWANCE OF INTEREST CLAIMED UNDER THE NORMA L PROVISIONS OF THE ACT, HAVE ALREADY BEEN SET ASIDE BY US TO THE FILE OF CIT(A) WHILE DETERMINING THE GROUND OF APPEAL NO. 4 IN THE ABOVE PARAS. VK;DJ VIHY LA[;K@ ITA NO 5404/MUM/2012 ( FU/KKZJ.K OKZ / ASSESSMENT YEAR: 2009 - 10) 5 | P A G E FOR THE PURPOSE OF MAINTAINING CONSISTENCY, EVEN THE ISSUE RELATING TO COMPUTATION OF BOOK PROFIT U/S 115JB QU A THE INTEREST EXPENDITURE IS ALSO SET ASIDE TO THE FILE OF CIT(A). NEEDLESS TO MENTION , THE CIT(A) SHALL CONSIDER THE PLEA OF ASSESSEE IN ACCORDANCE WITH LAW AND, THEREFORE, PASS AN ORDER AFRESH ON THIS ASPECT ALSO. 4.2 THUS INSOFAR AS GROUND OF APPEAL NO. 5, IS CONCERNED, ASSESSEE SUCCEEDS FOR STATISTICAL PURPOSES. 5. BY WAY OF GROUND OF APPEAL NO. 6, THE ASSESSEE HAS CHALLENGED THE CHARGING OF INTEREST U/S 234A, 234B AND 234C OF THE ACT. 5.1 ON THIS ASPECT THE LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT IN ASSESSMENT YEAR 2010 - 11, THE TRIBUNAL IN ASSESSEES OWN CASE VIDE ITA NO. 2900/MUM/2013, DATED 29.09.2014, HAS CONSIDERED A SIMILAR ISSUE AND THE FOLLOWING DISCUSSION IN THE ORDER OF THE TRIBUNAL IS REL EVANT: - 3.GROUND NO.6 IS ABOUT INTEREST TO BE CHARGED U/S.234A,234B AND 234 C OF THE ACT.AT THE TIME OF THE HEARING BEFORE US, IT WAS AGREED BY THE REPRESENTATIVES OF BOTH THE SIDES THAT THE IDENTICAL ISSUE WAS DELIBERATED UPON AND DECIDED BY THE TRIBUNAL IN THE CASE OF M/S. TOPAZ HOLDINGS PVT. LTD. (ITA NO.2146/MUM/2013,AY.2001 - 02,DATED 18.06.2014).WE FIND THAT IN THE MATTER OF TOPAZ HOLDINGS PVT.LTD.(SUPRA),ONE OF THE GROUP CONCERNS, THE TRIBUNAL HAD DECIDED THE ISSUE AS UNDER: 3.NEXT GROUND OF APPEAL IS ABOUT LEVY OF INTEREST U/S. 234 OF THE ACT.BEFORE US, AR STATED THAT THE ASSESSEE WAS A NOTIFIED ENTITY,THAT THE PROVISIONS OF S. 234A, 234B AND 234C OF THE ACT WERE DEEMED TO HAVE COMPLIED WITH,THAT THE ASSETS WERE ALREADY IN ATTACHMENT OF THE CUSTODIAN APPOINTED UNDER THE PROVISIONS OF THE SPECIAL COURTS ACT,THAT THE TRIBUNAL IN THE CASE OF THE APPELLANT AND SEVERAL OTHER ENTITIES HAD HELD THE VIEW IN FAVOUR OF THE APPELLANT,THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF DIVINE HOLDINGS PVT. LTD. AND CASCADE HOLDINGS PVT. LTD. HAD HELD THAT THE PROVISIONS OF SECTIONS 234A,234B AND 234C OF THE ACT WERE MANDATORY AND WERE APPLICABLE TO THE NOTIFIED ENTITIES ALSO,THAT THE ASSESSEE WAS IN THE PROCESS OF FILING AN APPEAL AGAINST THE SAID ORDER BEFORE THE HO NBLE SUPREME COURT,THAT THE INCOME EARNED IN THE YEAR VK;DJ VIHY LA[;K@ ITA NO 5404/MUM/2012 ( FU/KKZJ.K OKZ / ASSESSMENT YEAR: 2009 - 10) 6 | P A G E UNDER CONSIDERATION WAS SUBJECTED TO PROVISIONS OF TDS,THAT THE CHANGEABILITY OF THE SECTION 234A, 234B AND 234C OF THE ACT SHOULD BE AFTER CONSIDERING THE AMOUNT OF TAX DEDUCTIBLE AT SOURCE ON THE INC OME ASSESSED. THE APPELLANT RELIES IN THIS REGARD ON THE FOLLOWING DECISIONS. HE RELIED UPON THE CASES OF MOTOROLA INC. V. DCIT [95 ITD 269 (DEL.(SB)], SEDCO FORES DRILLING CO. LTD. [264 ITR 320],NGC NETWORK ASIA LLC [313 ITR 187] ,SUMMIT BHATACHARYA [ 300 ITR (AT) 347 (BOM)(SB)], VIJAL GOPAL JINDAL [ITA NO. 4333/DEL/2009] & EMILLO RUIZ BERDEJO [320 ITR 190 (BOM)].DR RELIED UPON THE CASES OF DEVINE HOLDINGS PVT. LTD. 3.1.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT IN THE CASE OF DEVINE HOLDINGS PVT. LTD. HONBLE BOMBAY HIGH COURT HAS HELD THAT PROVISIONS OF SECTION 234A, 234B AND 234C WERE APPLICABLE TO THE NOTIFIED PERSON ALSO.THEREFORE, UPHOLDING THE ORDER OF THE FAA TO THAT EXTENT,WE HOLD THAT PROVISIONS OF SECTION 234 OF THE ACT ARE APPLICABLE.AS FAR AS CALCULATION PART IS CONCERNED,WE FIND MERITS IN THE SUBMISSION MADE BY THE ASSESSEE.THEREFORE, WE ARE RESTORING BACK THE ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION WHO WOULD DECIDE THE ISSUE AFTER CONSIDERING THE AMOUNT TAXED DEDUCTIBLE AT SOURCE ON THE INCOME ASSESSED AND AFTER AFFORDING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. GROUND NO.5 IS ALLOWED IN PART IN FAVOUR OF THE ASSESSEE. 5.2 RESPECTFULLY FOLLOWING THE AFORESAID DECISION, THE ISSUE R ELATING TO THE APPLICABILITY OF THE PROVISIONS OF SECTION 234A, 234B AND 234C OF THE ACT, IS HELD AGAINST THE ASSESSED IN VIEW OF THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF DIVINE HOLDINGS PVT. LTD. SO HOWEVER , THE MATTER IS RESTORED BACK TO THE FILE OF ASSESSING OFFICER FOR RECOMPUTING THE INTEREST CHARGEABLE U/S 234A, 234B AND 234C OF THE ACT, AFTER CONSIDERING THE AMOUNT OF TAX DEDUCTIBLE AT SOURCE ON THE INCOME ASSESSED. NEEDLESS TO MENTION, AO SHALL ALLOW THE ASSESSEE A REASONABLE OPPORT UNITY OF BEING HEARD BEFORE PASSING AN ORDER AFRESH CHARGING INTEREST U/S 234A, 234B AND 234C OF THE ACT, AS PER LAW. THUS GROUND OF APPEAL NO. 6 IS PARTLY ALLOWED. 5.3 BEFORE PARTING, WE WOULD LIKE TO MENTION THAT ASSESSEE HAS RAISED AN ADDITIONAL GROUND WHICH READS AS UNDER: - VK;DJ VIHY LA[;K@ ITA NO 5404/MUM/2012 ( FU/KKZJ.K OKZ / ASSESSMENT YEAR: 2009 - 10) 7 | P A G E THE LD. CIT(A) OUGHT TO HAVE APPRECIATED T AS PER THE DECISION OF HONBLE SPECIAL COURT DATED 30.04.2010 IN MP NO. 41 OF 1999, THE ASSETS UNDER CONSIDERATION AND THE CONSEQUENTIAL INCOME BELONGS TO SHRI HARSHAD S. MEHTA AND HENCE THE INCOME ASSESSED BY THE ASSESSING OFFICER OUGHT TO HAVE BEEN TAXED IN THE HANDS OF SHRI HARSHAD S. MEHTA AND NOT IN THE HANDS OF THE APPELLANT. 5.4 AT THE TIME OF HEARING, LD. REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE DO ES NOT WISH TO PRESS THE AFORESAID ADDITIONAL GROUND OF APPEAL. ACCORDINGLY, WE DISMISS THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IN LIMINE. 6 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED , AS ABOVE. ORDER PRON OUNCED IN THE OPEN COURT ON THIS 3 0 T H DAY OF SEPTEMBER 2015. S D / - S D / - ( PAWAN SINGH ) (G.S. PANNU) (JUDICIAL MEMBER/ U;KF;D LNL; ) (ACCOUNTANT MEMBER/ YS[KK LNL; ) MUMBAI DATED 3 0 - 09 - 2015 SKS SR. P.S, COPY TO: THE APPELLANT THE RESPONDENT THE CONCERNED CIT(A) THE CONCERNED CIT THE DR, C BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI