The Asstt. Commissioner of Income Tax, Circle-2(1)(2), Baroda V. M/s. Nexus Softwar Ltd., Vadodara

ITA 588/AHD/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9383 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 13-09-2019
• Assessment Year: 2006-2007
• Appeal Filed On: 09-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PF JAIN
• Keywords: Reopening of assessment; Income from undisclosed sources; Bonafide belief; Tax effect; Reassessment proceedings
• Section: 148

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ ITA NOS. 588 & 590/AHD/2017 / ASSESSMENT YEAR: 2006-07 & 2009-10 ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE 2(1)(2), BARODA VS. M/S. NEXUS SOFTWARE LTD., 2, SUVARNPURI SOCIETY, NAVA BAZAR, KARJAN, VADODARA PAN : AAACN 6794 K / (APPELLANT) / (RESPONDENT) REVENUE BY : SHRI VINOD TANWANI, SR DR ASSESSEE BY : SHRI P F JAIN, AR ' / DATE OF HEARING : 13/09/2019 / DATE OF PRONOUNCEMENT: 23/09/2019 / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE PRESENT TWO APPEALS ARE DIRECTED AT THE INSTANC E OF THE ASSESSEE AGAINST A CONSOLIDATED ORDER OF THE LEARNED CIT(A)- 12, AHMEDABAD DATED 29.11.2016 PASSED IN ASSESSMENT YEARS 2006-07 AND 2 009-10. 2. THE GROUNDS TAKEN BY THE REVENUE ARE AS FOLLOWS: - AY 2006-07 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. C.I.T. (A) ERRED IN HOLDING THAT THERE IS NO MATERIAL WITH THE AO ENABLING HIM TO FORM A BONAFIDE BELIEF OF ESCAPEMENT OF INCOME IN APPELLAN TS HAND AND THEREFORE THE RESULTANT NOTICE U/S. 148 ON A PURPORTED FOUNDATION IS INVALID IN LAW WITHOUT PROPER APPRECIATION OF REASONS RECORDED FOR REOPENI NG OF ASSESSMENT WHEREIN THE A.O. RECORDED FINDING TO THE EFFECT THAT ' DURI NG THE COURSE OF POST SEARCH PROCEEDINGS, IT WAS NOTICED THAT ASSESSEE GROUP HAD INTRODUCED ITS UNACCOUNTED INCOME IN THE FORM OF SHARE CAPITAL /PR EMIUM THROUGH VARIOUS FICTITIOUS SHELL COMPANIES AND THAT THE ASSESSEE CO MPANY HAD SUBSCRIBED TO ITA NOS. 588 & 590/AHD/2017 ACIT VS. NEXUS SOFTWARE LTD FOR AY: 2006-07 & 2009-10 2 THE SHARE CAPITAL OF PRADEEP OVERSEAS LTD. AND PRAD EEP ENTERPRISE LTD AT PREMIUM'. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. C.I.T. (A) ERRED IN DELETING ADDITION OF RS. 1.09 CRORES WITHO UT APPRECIATING THAT THE ASSESSEE ITSELF HAD ADMITTED TO HAVE INVESTED RS. 1 .09 CRORES FOR WHICH THE ASSESSEE DID NOT FURNISH ANY EVIDENCE REGARDING SOU RCE OF INCOME FOR MAKING INVESTMENT OF RS. 1.09 CRORES AND THAT THE ASSESSEE DID NOT CONTEND THAT IT HAD NOT MADE INVESTMENT IN SHARES OF PRADEEP ENTERP RISE LTD AND PRADEEP OVERSEAS LTD. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. C.I.T. (A) ERRED IN DELETING COMMISSION INCOME OF RS. 93,895/- BY HOLDING THAT 'IN VIEW OF THE FACT THAT THE REASSESSMENT PROCEEDINGS THEMS ELVES HAVE BEEN HELD TO BE BAD IN LAW AND VOID AB INITIO IN PARA NO. 5.1, CONS EQUENT ADDITION WOULD NOT SURVIVE, AND THEREFORE THE ADDITION STANDS DELETED' , WITHOUT APPRECIATING THAT THE ISSUE OF COMMISSION INCOME WAS NOT PART AND PAR CEL OF THE REASONS RECORDED FOR REOPENING OF ASSESSMENT, AND WITHOUT C OMMENTING ON THE A.O'S FINDING ON THE ISSUE IN THE ASSESSMENT ORDER. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. C.I.T. (A) ERRED IN QUASHING REASSESSMENT PROCEEDINGS AND DELE TING ADDITION OF RS. 1.09 CRORES BEING INVESTMENT IN SHARES OF PRADEEP OVERSE AS LTD. AND PRADEEP ENTERPRISE LTD. AND COMMISSION INCOME OF RS. 93,93, 895/-, BY RELYING ON THE ORDER OF HON'BLE INCOME TAX SETTLEMENT COMMISSION A DDL. BENCH-II, MUMBAI'S ORDER DATED 07-11-2014 IN S.A. NO. GJ/AHCC -1/002/20I3-14/IT AND GJ/AHDCC-1/003/2013-14/11 WITHOUT APPRECIATING THAT ON THE DATE OF REASONS RECORDED FOR REOPENING OF ASSESSMENT AND DA TE OF FINALIZATION OF ASSESSMENT, THE ABOVE REFERRED OF HON'BLE INCOME TA X SETTLEMENT COMMISSION WAS NOT IN EXISTENCE, AND CONSEQUENTLY PURSUANT TO THE ABOVE REFERRED ORDER OF HON'BLE INCOME TAX SETTLEMENT COMMISSION, MUMBAI , THE LD. C.I.T. (A) OUGHT TO HAVE RESTORED THE ISSUE TO THE FILE OF THE A.O. FOR DECIDING THE ISSUE AFRESH. AY 2009-10 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. C.I.T. (A) ERRED IN HOLDING THAT THERE IS NO MATERIAL WITH THE AO ENABLING HIM TO FORM A BONAFIDE BELIEF OF ESCAPEMENT OF INCOME IN APPELLAN TS HAND AND THEREFORE THE RESULTANT NOTICE U/S. 148 ON A PURPORTED FOUNDATION IS INVALID IN LAW WITHOUT PROPER APPRECIATION OF REASONS RECORDED FOR REOPENI NG OF ASSESSMENT WHEREIN THE A.O. RECORDED FINDING TO THE EFFECT THAT ' DURI NG THE COURSE OF POST SEARCH PROCEEDINGS, IT WAS NOTICED THAT ASSESSEE GROUP HAD INTRODUCED ITS UNACCOUNTED INCOME IN THE FORM OF SHARE CAPITAL /PR EMIUM THROUGH VARIOUS ITA NOS. 588 & 590/AHD/2017 ACIT VS. NEXUS SOFTWARE LTD FOR AY: 2006-07 & 2009-10 3 FICTITIOUS SHELL COMPANIES AND THAT THE ASSESSEE CO MPANY HAD SUBSCRIBED TO THE SHARE CAPITAL OF PRADEEP OVERSEAS LTD. AND PRAD EEP ENTERPRISE LTD AT PREMIUM'. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. C.I.T. (A) ERRED IN DELETING ADDITION OF RS.50 LACS WITHOUT AP PRECIATING THAT THE ASSESSEE ITSELF HAD ADMITTED TO HAVE INVESTED RS. 50 LACS FO R WHICH THE ASSESSEE DID NOT FURNISH ANY EVIDENCE REGARDING SOURCE OF INCOME FOR MAKING INVESTMENT OF RS. 50 LACS AND THAT THE ASSESSEE DID NOT CONTEND T HAT IT HAD NOT MADE INVESTMENT IN SHARES OF PRADEEP ENTERPRISE LTD AND PRADEEP OVERSEAS LTD. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. C.I.T. (A) ERRED IN QUASHING REASSESSMENT PROCEEDINGS AND DELE TING ADDITION OF RS. 50 LACS BEING INVESTMENT IN SHARES OF PRADEEP OVERSEAS LTD. AND PRADEEP ENTERPRISE LTD. BY RELYING ON THE ORDER OF HON'BLE INCOME TAX SETTLEMENT COMMISSION ADDL. BENCH-II, MUMBAI'S ORDER DATED 07- 11-2014 IN S.A. NO. GJ/AHCC-1/002/20I3-14/IT AND GJ/AHDCC-1/003/2013-14 /11 WITHOUT APPRECIATING THAT ON THE DATE OF REASONS RECORDED F OR REOPENING OF ASSESSMENT AND DATE OF FINALIZATION OF ASSESSMENT, THE ABOVE R EFERRED OF HON'BLE INCOME TAX SETTLEMENT COMMISSION WAS NOT IN EXISTENCE, AND CONSEQUENTLY PURSUANT TO THE ABOVE REFERRED ORDER OF HON'BLE INCOME TAX S ETTLEMENT COMMISSION, MUMBAI, THE LD. C.I.T. (A) OUGHT TO HAVE RESTORED T HE ISSUE TO THE FILE OF THE A.O. FOR DECIDING THE ISSUE AFRESH 3. WHEN THESE APPEALS WERE CALLED OUT FOR HEARING, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THESE APPEALS OF THE RE VENUE NEED TO BE DISMISSED ON ACCOUNT OF LOW TAX EFFECT IN VIEW OF T HE RECENT CBDT CIRCULAR NO. 17 OF 2019 DATED 08.08.2019 WHEREBY THE MONETAR Y LIMITS FOR FILING THE APPEAL BY THE REVENUE BEFORE THE TRIBUNAL WAS ENHAN CED FROM RS.20 LAKHS TO RS.50 LAKHS. THIS INSTRUCTION IS APPLICABLE TO THE PENDING CASES ALSO. THEREFORE, THE PRESENT APPEALS OF THE REVENUE ARE L IABLE TO BE DISMISSED AS NON-MAINTAINABLE AS HELD BY THIS TRIBUNAL IN THE CA SE OF ITO VS. DINESH MADHAVLAL PATEL IN ITA NO.1398/AHD/2004 FOR AY 199 8-99 VIDE A CONSOLIDATED ORDER DATED 14.08.2019. ITA NOS. 588 & 590/AHD/2017 ACIT VS. NEXUS SOFTWARE LTD FOR AY: 2006-07 & 2009-10 4 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE FAIRLY ADMITTED THAT THE TAX EFFECT INVOLVED IN EACH APPEAL IS LESS THAN THE LIM IT PRESCRIBED BY THE AFORESAID CBDT CIRCULAR. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF APPLICABLE LEGAL POSITION. AS LEARNED COUNSEL RIGHTLY CONTENDS, THE PRESENT AP PEALS OF THE REVENUE ARE NO LONGER MAINTAINABLE IN VIEW OF THE RECENT CBDT C IRCULAR NO. 17 OF 2019 DATED 08.08.2019. THE MANDATORY LIMIT FOR CASES IN WHICH REVENUE CAN CHALLENGE THE RELIEF GRANTED BY THE CIT(A) NOW STAN DS ENHANCED TO RS.50 LAKHS. THIS CONCESSION GRANTED BY THE CENTRAL BOAR D OF DIRECT TAXES (CBDT) IS RETROSPECTIVE IN EFFECT INASMUCH AS IT APPLIES T O ALL PENDING APPEALS AS WELL. IN VIEW OF THE ABOVE POSITION, THE APPEALS F ILED BY THE REVENUE ARE NO LONGER MAINTAINABLE AND MUST BE DISMISSED AS SUCH. 6. IT IS, HOWEVER, MADE CLEAR THAT ON RE-VERIFICATI ON AT THE END OF THE ASSESSING OFFICER IT COMES OUT THAT THE TAX EFFECT OF MORE THAN RS.50 LAKHS IS BEING INVOLVED IN THE APPEAL OR THE APPEAL FALLS WI THIN THE EXEMPTION CLAUSE OF THE CIRCULAR, THEN THE REVENUE WILL BE AT LIBERT Y TO FILE MISCELLANEOUS APPLICATION TO RECALL THE TRIBUNAL ORDER. THE APPLI CATION SHOULD BE FILED WITHIN TIME LIMIT PRESCRIBED IN THE ACT. 7. IN THE RESULT, APPEALS OF THE REVENUE ARE DISMIS SED DUE TO LOW TAX EFFECT. ORDER PRONOUNCED IN THE COURT ON 23 RD SEPTEMBER 2019 AT AHMEDABAD. SD/- SD/- (AMARJIT SINGH) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 23/09/2019 BIJU T., SR.PS ITA NOS. 588 & 590/AHD/2017 ACIT VS. NEXUS SOFTWARE LTD FOR AY: 2006-07 & 2009-10 5 ' '() *) / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! # / CONCERNED CIT 4. # ( ) / THE CIT(A) 5. & ! , ! , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION- 13.09.2019.. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER .13.09.2019 OTHER MEMBER 23.09.2019. 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S. - 23.09.2019. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 23.09.2019 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK23.0 9.2019 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER 8. DATE OF DESPATCH OF THE ORDER