NATIONWIDE PHARMASSIST DISTRIBUTION PVT. LTD ( NOW MERGED WITH BIGDEAL MERCANTILE P. LTD), MUMBAI V. ITO WD 7(1)(1),

ITA 5648/MUM/2008

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2938 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-03-2015
• Assessment Year: 1998-1999
• Appeal Filed On: 08-09-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMIR TEKRIWALDR
• Assessee Lawyers: J D MISTRY; NEERAJ SETH
• Keywords: Business income; Depreciation; Difference of opinion; Revised return; Reassessment proceedings
• Section: 143(3); 148; 139

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI B BENCH , ,, , !'# , ,, , $ BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & SAKTIJIT DEY,JUDICIAL MEMBER /.ITA NO.5648 & 49/MUM/2008,& 5650/MUM/08, % & /ASSESSMENT YEAR-1998-99,2000-01 & 2002-03 NATIONWIDE PHARMASSIST DISTRIBUTION PRIVATE LIMITED (NOW MERGED WITH BIGDEAL MERCANTILE PVT. LTD.) NICHOLAS PIRAMAL TOWER, GANPATRAO KADAM MARG, LOWER PAREL, MUMBAI-400 013. PAN: AAACN 3346 F VS INCOME TAX OFFICER WARD 7(1)(1) MUMBAI. ( / APPELLANT) ( / RESPONDENT) %'# /ASSESSEE BY : SHRI J.D. MISTRY & SHRI NE ERAJ SETH / REVENUE BY : SHRI SAMIR TEKRIWAL-DR / DATE OF HEARING : 08.10.2015 / DATE OF PRONOUNCEMENT : 14 -10-2015 , 1961 1961 1961 1961 254 254 254 254( (( (1 11 1) )) ) )*# ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER BENCH - CHALLENGING THE ORDER DATED 06.06.2008 OF CIT(A)-VI I,MUMBAI,THE ASSESSEE HAS FILED APPEALS FOR THE ABOVE MENTIONED THREE ASSESSMENT YE ARS. ITA NO.5648/MUM/2006(AY 1998-99): ASSESSEE-COMPANY,FILED ITS RETURN OF INCOME ON 30.1 1.1998,DECLARING TOTAL INCOME OF RS.6.06 LACS.UNDER THE PROVISIONS OF SECTION 115JA OF THE A CT.THE RETURN OF INCOME WAS PROCESSED U/S. 143(1) ON 8.11.99 ACCEPTING THE RETURNED INCOM E. 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ,FOR TH E AY.2001-02,IT WAS OBSERVED THAT THE MEMORANDUM OF ASSOCIATION AND THE ARTICLES STATED T HAT THE MAIN OBJECT OF THE ASSESSEE WAS TO CARRYON BUSINESS IN THE FIELD OF PHARMACEUTICAL PRODUCTS, THAT ADVANCING MONEY TO EARN INTEREST WAS LISTED IN THE OBJECTS INCIDENTAL OR AN CILLARY TO THE ATTAINMENT OF THE MAIN OBJECTS, THAT NO PURCHASE AND SALE /DISTRIBUTION OF PHARMACE UTICAL PRODUCTS HAD TAKEN PLACE DURING THAT AY.REFERRING TO THE JUDGMENT OF GLMPEX (PVT.)LTD.( 176 CTR 112) AND TUTICORIN ALKALIES AND CHEMICALS PVT. LTD.(227 ITR 172)THE AO HELD THA T THE INTEREST INCOME OF RS.50.43 LACS WAS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SO URCES, THAT THE EXPENDITURE LAID OUT WHOLLY AND EXCLUSIVELY FOR EARNING THE INTEREST INC OME WOULD BE ALLOWABLE U/S. 57(III) OF THE ACT. THE AO OBSERVED THAT THE INCOME CHARGEABLE TO TAX F OR THE YEAR UNDER APPEAL HAD ESCAPED ASSESSMENT.ACCORDINGLY,A NOTICE U/S. 148 OF THE ACT WAS ISSUED TO THE ASSESSEE ON 7.2. 2005. DURING THE REASSESSMENT PROCEEDINGS,THE AO HELD THA T THE INTEREST INCOME RECEIVED BY THE ASSESSEE -COMPANY HAD TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES, THAT THE EXPENSES CLAIMED BY IT WERE NOT ALLOWABLE,THAT THE BUSINESS OF THE ASSESSEE HAD NOT COMMENC -ED,THAT IN RESPONSE TO NOTICE ISSUE U/S.148 THE AS SESSEE HAD CHOSEN TO SHOW THE INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES.D ETERMINING THE INCOME OF THE ASSESSEE U/S. 143(3) R.W.S 147 OF THE ACT AT RS.50.43 LACS O N 20.9.2005. THE AO INITIATED PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT.IN RESPONSE T O THE PENALTY NOTICE THE ASSESSEE FILED ITS 5648-49 &50/08NATIONWIDE PHARMASSIT/08-98-99,00-01 & 02-03 2 REPLY ON 18.12.2005.AFTER CONSIDERING THE SUBMISSIO N OF THE ASSESSEE THE AO LEVIED THE PENALTY OF RS.17.65 LACS FOR FURNISHING OF INACCURA TE PARTICULARS OF INCOME VIDE HIS ORDER DATED 8.3.2006. 3. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM,IT WAS CONTENDE D THAT THE REVISED RETURN WAS FILED UNDER PROTEST, THAT OUT OF ABUNDANT CAUTION THE INT EREST INCOME WAS SHOWN UNDER THE HEAD INCOME FROM OTHER SOURCES, THAT THE QUANTUM APPEAL WAS CONFIRMED BY THE FAA, THAT NO FURTHER APPEAL TO THE TRIBUNAL WAS FILED TO AVOID U NNECESSARY LITIGATION, THAT THE REVISED RETURN WAS FILED WITHOUT MAKING ANY ADDITION,THAT THERE WA S NO CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AN D THE PENALTY ORDER,THE FAA HELD THAT RIGHT FROM THE VERY FIRST AY.THE AO HAD HELD THAT I NTEREST INCOME WAS TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES AS THE ASSESSEE DID NOT CARRY ON ANY BUSINESS, THAT THE ASSESSEE CHANGED HIS OPINION,THAT INITIALLY IT TRE ATED THE INTEREST INCOME AS BUSINESS INCOME, THAT LATER ON HE FILED REVISED RETURN TREATING THE SAME AS INCOME FROM OTHER SOURCES, THAT THE FAA HAD CONFIRMED THE ADDITION MADE BY THE AO FOR A Y.S 1996-97 AND 97-98 ON 19.6.2003, THAT EVEN AFTER THE DECISION OF THE FAA THE ASSESSE E DID NOT FILE THE RETURN SUO MOTU, THAT HE FILED REVISED RETURN ONLY AFTER NOTICE U/S. 148 WAS ISSUED, THAT THE REVISED RETURN WAS FILED OUT OF COMPULSION. HE FURTHER HELD THAT BUT FOR THE NOT ICE ISSUED U/S. 148 OF THE ACT THE ASSESSEE WOULD NOT HAVE FILED REVISED RETURN OF INCOME, THAT BECAUSE OF THE REVISED INCOME AND ASSESSED INCOME BEING THE SAME THE ASSESSEE WAS NO T ABSOLVED OF PENALTY U/S. 271(1) (C). FINALLY,SHE CONFIRMED THE ORDER OF THE AO. THE FAA GAVE THE DETAILS OF FILING OF RETURN, DATE OF ISSUE OF 148 NOTICES AND PENALTY LEVIED FOR CONCEALMENT FOR ALL THE THREE YEARS AS UNDER : PARTICULARS A.Y.1998-99 A.Y.2000-01 A.Y.2002-03 ORIGINAL RETURN OF INCOME FILED ON 30.11.1998 29.11 .2000 31.10.2002 RETURNED INCOME AS PER ORIGINAL RETURN RS.6,06,201/ - -5,91,088/- -38,75,934 CIT(A) ORDER FOR A.Y. 1996-97 AND 97-98 19.06.2003 19.06.2003 19.06.2003 NOTICE U/S. 148 ISSUED ON 07.02.2005 25.08.2005 25. 08.2005 RETURN OF INCOME IN RESPONSE TO 148 NOTICE FILED ON 01.07.2005 30.01.2006 30.01.2006 INCOME AS PER REVISED RETURN OF INCOME FILED AS ABOVE RS.50,43,524/- RS.57,31,959/- RS.6,30,347/- INCOME ASSESSED AS PER ORDER U/S. 143(3) R.W.S. 147 RS.50,43,524/- RS.57,31,959/- RS.6,30,347/- PENALTY LEVIED RS.17,65,233/- RS.22,06,805/- RS.2,2 5,034/- 4. DURING THE COURSE OF HEARING BEFORE US,AUTHORISED R EPRESENTATIVE (AR) STATED THAT THE ASSESSEE COULD NOT FILE RETURN OF INCOME OF THE YE AR UNDER APPEAL WITHOUT GETTING NOTICE U/S.148 OF THEACT,THAT THE STIPULATED TIME FOR FILI NG OF RETURN AS PER PROVISIONS OF SECTION 139 WAS OVER, THAT THE ORDER FOR THE AY 01-02 WAS PASSE D ON 30.1.2004.HE REFERRED TO PG-21 OF THE PAPER BOOK AND STATED THAT REASONS FOR RE-OPENI NG OF THE ASSESSMENT WERE NOT SUPPLIED TO THE ASSESSEE.HE RELIED UPON THE CASES OF BENNET COL EMAN & CO. (33 TAXMANN.COM 227), AMIT JAIN( 33 TAXMANN.COM 178) AND PROCTER AND GAMB LE HYGIENE HEATH CARE LTD. (INCOME TAX APPEAL (L)NO.946 OF 2012 DT.12.3.2013).DEPARTME NTAL REPRESENTATIVE(DR)SUPPORTED THE ORDER OF THE FAA AND RELIED UPON THE CASES OF ZOOM COMMUNICATION AND PSP INDUSTRIES.HE CONTENDED THAT IT WAS NOT A CASE OF CHANGE OF HEAD OF INCOME,THAT THE INCOME HAS INCREASED 5648-49 &50/08NATIONWIDE PHARMASSIT/08-98-99,00-01 & 02-03 3 SUBSTANTIALLY TO RS.50.43 LACS FROM RS.6.06 LACS,TH AT IT KEPT SILENCE FOR TWO YEARS AND CHANGED THE HEAD ONLY AFTER NOTICE U/S. 148 WAS ISSUED, IT COULD NOT BE TERMED AS REVISED RETURN. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATION WAS RE-OPENDED ON THE BASIS OF THE ASSESSMENT PROCEEDINGS COMPLETED FOR THE AY 2001-02 , THAT THE ONLY DISPUTE BETWEEN THE AO AND THE ASSESSEE WAS THE HEAD OF INCOME UNDER WHICH THE INTEREST INCOME WAS TO BE OFFERED, THAT THE NOTICE U/S.148 OF THE ACT WAS ISSUED TO TH E ASSESSEE IN FEBRUARY 2005, THAT IN RESPONSE TO THE NOTICE IT FILED A LETTER DT.30 TH JUNE 2005 REQUESTING FOR THE REASONS FOR THE REOPENING,THAT IT FILED A REVISED RETURN OF INCOME ON 1.7.2005,THAT IT HAD OFFERED INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES, TH AT THE FAA HAD UPHELD THE ORDER OF THE AO FOR THE AY 2001-02, THAT HE HAD HELD THAT INTERE ST INCOME COULD NOT BE ASSESSED AS BUSINESS INCOME, THAT THE ASSESSEE DID NOT PREFER A NY APPEAL BEFORE THE TRIBUNAL, THAT WHILE FILING THE RETURN IN RESPONSE TO SECTION 148 THE AS SESSEE SUO MOTO OFFERED THE INTEREST UNDER THE HEAD INCOME FROM OTHER SOURCES,THAT A NOTE IN THAT REGARD WAS FILED ALONG WITH THE RETURN.WE FIND THAT THE REASSESSMENT PROCEEDINGS WE RE INITIATED BY THE AO CONSIDERING THE ASSESSMENT ORDER PASSED FOR 2001-02, THAT THE ASSES SEE CAME TO KNOW ABOUT THE ORDER OF THE FAA FOR THAT YEAR ONCE IT RECEIVED THE ORDER OF THE FAA,THAT IN RESPONSE TO THE NOTICE U/S. 148 IT DECIDED TO OFFER THE INTEREST INCOME UNDER THE H EAD INCOME FROM OTHER SOURCES.THE ASSESSEE DECIDED NOT TO AGITATE THE MATTER BEFORE T HE TRIBUNAL AND OFFERED THE INCOME UNDER A PARTICULAR HEAD.THIS IN ITSELF CANNOT BE TERMED FUR NISHING OF INACCURATE PARTICULARS.BASIC FACTS ABOUT THE INCOME WERE AVAILABLE ON THE FILE FROM TH E DAY ONE.CONSIDERING THESE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE FOR THE YEAR UNDER AP PEAL, WE ARE OF THE OPINION THAT IT HAD NOT FURNISHED INACCURATE PARTICULARS OF THE INCOME OR H AD CONCEALED THE PARTICULARS OF INCOME.WE HAVE GONE THROUGH THE CASES RELIED UPON BY THE ASS ESSEE.WE FIND THAT IN THE CASE OF PROCTER & GAMBLE HYGIENE AND HEALTHCARE LTD.(SUPRA), ONE OF T HE ISSUE WAS FRAMED AS UNDER : J. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE TRIBUNAL IS JUSTIFIED IN DELETING THE PENALTY IMPOSED WITHOUT A PPRECIATING THE FACT THAT THE TRIBUNAL ITSELF CONFIRMED THE DISALLOWANCE OF DEPRECIATION A ND FURTHER DIRECTED THE AO TO TREAT THE SAME AS INCOME FROM OTHER SOURCES? DECIDING THE ISSUE THE HONBLE COURT OBSERVED AS UN DER : 10. SO FAR AS QUESTION (J) IS CONCERNED, THE TRIBU NAL DELETED THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE SAID ACT. THE GRIEVANCE OF THE R EVENUE IS THAT PENALTY OUGHT NOT TO HAVE BEEN DELETED AS RESPONDENT-ASSESSEE CLAIMED RENTAL INCO ME RECEIVED BY IT AS BUSINESS INCOME AND HAD ALSO CLAIMED DEPRECIATION ON THE SAME. HOWEVER, THE SAME WAS DISALLOWED BY THE ASSESSING OFFICER. IN THESE CIRCUMSTANCES, IT IS U RGED THAT PENALTY SHOULD NOT HAVE BEEN DELETED. THE TRIBUNAL BY THE IMPUGNED ORDER HAS RE CORDED A FINDING OF FACT THAT THERE WAS A COMPLETE DISCLOSURE OF ALL FACTS ON THE PART OF THE RESPONDENT-ASSESSEE. THE RESPONDENT- ASSESSEE CLAIMED RENTAL INCOME TO BE CHARGEABLE TO TAX UNDER THE HEAD 'BUSINESS INCOME'. THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT IT IS TO BE TAXED UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. THE TRIBUNAL IN THE QUANTUM PROCEEDINGS CONCLUDED THAT THE RENTAL INCOME IS TO BE CHARGED UNDER THE HEAD INCOME FRO M THE OTHER SOURCES.THEREFORE, THERE WAS SCOPE FOR DIFFERENCE OF OPINION.MOREOVER, THIS COUR T BY ORDER DATED 26 TH FEBRUARY, 2013 IN INCOME TAX APPEAL(L) NO.2117 OF 2012 IN THE MATTER OF CIT VS. M/S. BENNET COLEMAN & CO., LTD. HAS TAKEN A VIEW THAT WHERE ALL THE FACTS ARE DISCLOSED AND THERE IS ONLY A CHANGE OF HEAD OF INCOME UNDER WHICH THE INCOME IS TO BE TAXED THE N PENALTY UNDER SECTION 271(1)(C) OF THE SAID ACT IS NOT JUSTIFIED. THIS IS PARTICULARLY SO IN THE ABSENCE OF THE REVE NUE POINTING OUT ANY FACTS TO SHOW/ESTABLISH THAT THE CLAIM OF THE ASSES SEE TO TAX THE RENTAL INCOME UNDER THE HEAD BUSINESS INCOME AND THE CLAIM FOR DEPRECIATION WA S NOT BONAFIDE. THEREFORE, WE SEE NO REASON TO ENTERTAIN QUESTION (J). 5648-49 &50/08NATIONWIDE PHARMASSIT/08-98-99,00-01 & 02-03 4 CONSIDERING THE ABOVE CASE AND THE FACT THAT THE DI SPUTED AMOUNT WAS PART OF THE RETURN FILED BY THE ASSESSEE,WE REVERSE THE ORDER OF THE FAA AND DECIDE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. ITA NOS.5649/MUM/2008,& 5650/MUM/08, ASSESSMENT YEA R-2000-01 & 2002-03: FOLLOWING OUR ORDER FOR THE AY 1998-99 WE DECIDE T HE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE, AS THE FACTS AND CIRCUMSTANCES ARE IDENTICAL TO THE FACTS OF THAT AY. AS A RESULT,ALL THE APPEALS FILED BY THE ASSESSEE S TAND ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH OCTOBER,2015. 14 '# ,2015 SD/- SD/- ( !'# / SAKTIJIT DEY) ( ( / RAJENDRA) ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /MUMBAI, /DATE: 14.10. 2015 . . . .. . JV.SR.PS. +# ,&# / 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/ %1 //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.