JCIT(OSD), Circle - 8, Kolkata, Kolkata V. M/s. TCG Urban Infrastructure Holdings Ltd., Kolkata

ITA 60/KOL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62114 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2002-2003
• Appeal Filed On: 12-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MAITRA ASSESSING OFFICER
• Assessee Lawyers: S K BAJAJ
• Keywords: Reopening of assessment; Reassessment proceedings
• Section: 148; 143(3); 142(1)

Judgement Text

I.T.A. NO.: 35 AND 60/KOL/2012 ASSESSMENT YEAR : 2002 - 03 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA B BENCH, KOLKATA [BEFORE SHRI PRAMOD KUMAR AM AND SHRI MAHAVIR SINGH JM] I.T.A. NO. : 35/KOL./2012 ASSESSMENT YEAR : 2002 - 03 TCG URBAN INFRASTRUCTURE HOLDINGS PVT LTD . .APPELLANT 9 B WOOD STREET, 4 TH FLOOR KOLKATA 700016 [ PAN : AADCS8821M ] VS. INCOME TAX OFFICER WARD 8(3), KOLKATA RESPONDENT I.T.A. NO.: 60/KOL./2012 ASSESSMENT YEAR : 2002 - 03 INCOME TAX OFFICER WARD 8(3), KOLKATA ..APPELLANT VS. TCG URBAN INFRASTRUCTURE HOLDINGS PVT LTD RESPONDEN 9 B WOOD STREET, 4 TH FLOOR KOLKATA 700016 [ PAN : AADCS8821M ] APPEARANCES BY: S K BAJAJ, FOR THE ASSESSEE A K MAITRA , FOR THE ASSESSING OFFICER DATE OF CONCLUDING THE HEAING : MAY 25 , 2012 DATE OF PRONOUNCING THE ORDER : MAY 25 , 2012 O R D E R PER PRAMOD KUMAR: 1. THESE CROSS APPEALS CHALLENGE CORRECTNESS OF THE ORDER DATED PASSED BY THE CIT(A) IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2002 - 03. AS THESE APPEALS INVOLVE INTERCONNECTED ISSUES AND WERE HEARD TOGETHER, BOTH OF THESE APPEALS ARE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER. 2. WE WILL FIRST TAKE UP THE AP PEAL FILED BY THE ASSESSEE. I.T.A. NO.: 35 AND 60/KOL/2012 ASSESSMENT YEAR : 2002 - 03 PAGE 2 OF 5 3. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE: FOR THAT THE LEARNED CIT(A) ERRED IN UPHOLDING THE VALIDITY OF IMPUGNED NOTICE DATED 28.3.2007 UNDER SECTION 148 OF THE INCOME TAX ACT, 1961, AND THE REASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE INCOME TAX ACT 1961 FOR ALLEGING ESCAPEMENT OF INCOME. HE FURTHER ERRED IN UPHOLDING THE ISSUE OF NOTICE UNDER SECTION 143(2) AND 142(1) OF THE INCOME TAX ACT, 1961. 4. TO ADJUDICATE ON THIS GRIEVANCE , ALL THAT IS NECESSARY TO EXAMINE IS THE VALIDITY OF REASONS RECORDED FOR REOPENING THE ASSESSMENT. THESE REASONS ARE SET OUT BELOW: TGC URBAN INFRASTRUCTURE HOLDINGS LTD. (PAN AADCS8821M) 9B, WOOD STREET, 3 RD FLOOR KOLKATA 700016 28.3.2007 ASSESSMENT YEAR 2002 - 03 IT IS SEEN THAT THE ASSESSEE HAS SHOWN ONLY INCOME DURING THE THE YEAR AS OTHER INCOME INTEREST FROM SUBSIDIARY COMPANIES OF RS 113,09,321 AND CONSULTANCY FEES OF RS 2,10,000 TOTALLING TO RS 115,19,321. THE NATURE O F BUSINESS, AS PER TAX AUDIT REPORT, IS REAL ESTATE, THOUGH NO INCOME UNDER THAT HEAD IS THERE. THE ASSESSEE DEBITED CONSULTANCY FEES OF RS 19,00,000 IN THE P & L ACCOUNT IN SCHEDULE 10 (ADMINISTRATIVE EXPENSES). EXPENDITURE ON CONSULTANCY FEES CANNOT BE RS 19,00,000 TO EARN CONSULTANCY FEES OF RS 2,10,000 AND THERE WAS NO INCOME FROM REAL ESTATE BUSINESS. HENCE, I HAVE REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT WITHIN THE MEANINGS OF SECTION 147 OF THE INCOME TAX ACT, 1961. ISSUE NOTICE UN DER SECTION 148 OF THE INCOME TAX ACT, 1961. SD/XX S SAHA ITO WARD 8(3), KOLKATA 5. IN RESPONSE TO ASSESSE ES REQUISITION TO KNOW THE REASONS OF REOPENING THE ASSESSMENT, THE ABOVE REASONS WERE DULY FURNISHED TO THE ASSESSEE. VIDE LETTER DATED 7 TH AUGUST 2007, THE ASSESSEE OBJECTED TO REOPENING THE ASSESSMENT ON THESE GROUNDS. THE CONTENTION OF THE ASSESSEE WAS THAT THE EXPENDITURE ON EARNING AN INCOME BEING MORE THAN I.T.A. NO.: 35 AND 60/KOL/2012 ASSESSMENT YEAR : 2002 - 03 PAGE 3 OF 5 INCOME CANNOT BE A GROUND FOR REOPENING THE ASSESSMENT. IT WAS ALSO CONTENDED TH AT IF THE QUANTUM OF EXPENDITURE INCURRED BY THE ASSESSEE IN EARNING INCOME IS TAKEN AS A REASON FOR REOPENING THE ASSESSMENT, ALL THE LOSS MAKING COMPANIES CAN BE CAN BE SUBJECTED TO REOPENING OF ASSESSMENT. WITHOUT PREJUDICE TO THESE ARGUMENTS, ASSESSEE ALSO STATED THAT EVEN ON MERITS CONSULTANCY FEES IS ALLOWABLE EXPENDITURE AND IT HAS BEEN ALLOWED IN THE OTHER ASSESSMENT YEARS AS WELL. NONE OF THESE SUBMISSIONS, HOWEVER, IMPRESSED THE ASSESSING OFFICER. VIDE LETTER DATED 17 TH AUGUST 2007, HE REJECTED T HESES SUBMISSIONS AND INTER ALIA OBSERVED THAT IT IS AN ESTABLISHED FACT THAT EARNING OF INTEREST FROM SUBSIDIARY COMPANIES DOES NOT REQUIRE ANY PROFESSIONAL SERVICE OR CONSULTANCY AND THAT THE ASSESSEES INCOME ONLY CONSISTS OF EARNING INTEREST INCOME FROM SUBSIDIARY COMPANIES AND PROFESSIONAL FEES. HE ALSO OBSERVED THAT THE ASSESSEE COULD NOT/ DID NOT EXPLAIN THE REASONS FOR PAYMENT OF RS 19,00,000 AS CONSULTANCY FEES FOR EARNING OF CONSULTANCY FEES OF RS 2,10,000 WHEN THE NATURE OF BUSINESS IS REAL ESTATE AND DURING THE YEAR UNDER REFERENCE THERE WAS NO INCOME/ LOSS FROM REAL ESTATE BUSINESS AND EARNING FROM SUBSIDIARY COMPANIES DOES NOT REQUIRE PROFESSIONAL CONSULTANCY AND HENCE IT IS NOT IN THE NATURE OF LOSS IN BUSINESS. THE AO THUS PROCEEDED W ITH REASSESSMENT PROCEEDINGS AND FRAMED THE IMPUGNED REASSESSMENT ORDER. AGGRIEVED, INTER ALIA, BY REOPENING OF ASSESSMENT, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. THE CIT(A) NOTED THAT, IN COMPLIANCE WITH THE LAW L AID DOWN BY HONBLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS LTD VS ITO ( 259 ITR 19) THE REASONS WERE DULY FURNISHED AND THE AO HAS DEALT WITH THE OBJECTIONS OF THE ASSESSEE. HE ALSO REFERRED TO OTHER JUDICIAL PRE CEDENTS IN SUPPORT OF CERTAIN PROPOSIT ION WHICH DID NOT DEAL WITH THE CORE GRIEVANCES RAISED ABOVE, BUT NONETHELESS CONFIRMED THE ACTION OF THE AO AS SUCH. THE ASSESSEE IS NOT SATISFIED AND IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DU LY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. I.T.A. NO.: 35 AND 60/KOL/2012 ASSESSMENT YEAR : 2002 - 03 PAGE 4 OF 5 7. WE HAVE NOTED THAT THE CIT(A) HAS NOT EVEN DEALT WITH CORE GRIEVANCE OF THE ASSESSEE TO THE EFFECT THAT THE REASONS WHICH HAVE BEEN RECORDED BY THE AO DO NOT INDICATE ANY AS SESSMENT OF INCOME. HE HAS DEALT WITH THE LEGAL ASPECTS WHICH ARE NOT EVEN IN DISPUTE; THE ENTIRE ERUDITE LEGAL ANALYSIS IS WHOLLY SUPERFLUOUS FROM THIS PERSPECTIVE. WHAT IS MATERIAL IS THAT T HE MERE FACT THAT EXPENDITURE ON CONSULTANCY FEES IN MORE THAN I NCOME FROM CONSULTANCY FEES CAN, BY NO STRETCH OF LOGIC, BE A GROUND TO ASSUME THAT THE INCOME HAS ESCAPED ASSESSMENT. NO DOUBT, EARNING INTEREST INCOME FROM SUBSIDIARY COMPANIES DOES NOT REQUIRE CONSULTANCY BUT THEN THE ASSESSEE ALSO HAD INCOME FROM CONS ULTANCY BUSINESS A FACT CONVENIENTLY OVERLOOKED BY THE AUTHORITIES BELOW. AS A MATTER OF FACT THE PRECISE REASONS RECORDED FOR REOPENING THE ASSESSMENT WAS THAT EXPENDITURE ON CONSULTANCY FEES CANNOT BE RS 19,00,000 TO EARN CONSULTANCY FEES OF RS 2,10, 000 AND THERE WAS NO INCOME FROM REAL ESTATE BUSINESS, BUT THEN THIS PROCEEDS ON THE FALLACIOUS ASSUMPTION THAT LOSSES CAN NEVER BE INCURRED. AS HONBLE BOMBAY HIGH COURT, IN THE CASE OF HINDUSTAN LEVER LTD. V. R.B. WADKAR [2004] 268 ITR 332 , HAS, INTER ALIA , OBSERVED THAT '.... IT IS NEEDLESS TO MENTION THAT THE REASONS ARE REQUIRED TO BE READ AS THEY WERE RECORDED BY THE ASSESSING OFFICER. NO SUBSTITUTION OR DELETION IS PERMISSIBLE. NO ADDITIONS CAN BE MADE TO THOSE REASONS. NO INFERENCE CAN BE ALLOWED TO BE DRAWN ON THE BASIS OF REASONS NOT RECORDED. IT IS FOR THE ASSESSING OFFICER TO DISCLOSE AND OPEN HIS MIND THROUGH THE REASONS RECORDED BY HIM. HE HAS TO SPEAK THROUGH THE REASONS .' THEIR LORDSHIPS ADDED THAT ' THE REASONS RECORDED SHOULD BE SELF - EXPLA NATORY AND SHOULD NOT KEEP THE ASSESSEE GUESSING FOR REASONS. REASONS PROVIDE LINK BETWEEN CONCLUSION AND THE EVIDENCE....'. HONBLE SUPREME COURT, IN THE CASE OF CIT V. KELVINATOR OF INDIA LTD. [2010] 320 ITR 561 HAS OBSERVED THAT ' REASONS MUST HAVE A LI VE LINK WITH FORMATION OF BELIEF '. VIEWED IN THIS PERSPECTIVE, THE REASONS, AS RECORDED BY THE ASSESSING OFFICER, WERE CERTAINLY LESS THAN SUFFICIENT TO COME TO THE CONCLUSION THAT ANY INCOME HAS ESCAPED THE ASSESSMENT. THE FACT THAT EXPENDITURE ON CONSULT ANCY FEES WAS MORE THAN INCOME FROM CONSULTANCY FEES AND THAT THERE WAS I.T.A. NO.: 35 AND 60/KOL/2012 ASSESSMENT YEAR : 2002 - 03 PAGE 5 OF 5 INCOME FROM REAL ESTATE BUSINESS, WHICH ARE THE ONLY REASON RECORDED FOR REOPENING THE ASSESSMENT, DID NOT INDICATE THAT ANY INCOME HAS ESCAPED ASSESSMENT. 8. IN VIEW OF THE ABOVE DISC USSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REOPENING THE ASSESSMENT. WE, THEREFORE, QUASH THE REASSESSMENT PROCEEDINGS. 9. GROUND NO. 1 IS THUS ALLOWED. 10. AS WE HAVE UPHELD ASSESSEES GRIEVANCE AGAINST VALIDITY OF REASSESSMENT PROCEEDINGS AND AS THE REASSESSMENT ITSELF IS QUASHED, ALL OTHER GRIEVANCES RAISE IN THE RESPECTIVE APPEALS ARE RENDERED ACADEMIC AND CALL FOR NO ADJUDICATION. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED IN THE TERMS INDICATED ABOVE AND THE APPEAL FILED BY THE ASSESSING OFFICER IS DISMISSED AS INFRUCTUOUS. PRONOUNCED IN THE OPEN COURT ON 25 TH MAY 2012. SD/XX SD/XX MAHAVIR SINGH PRAMOD KUMAR ( JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, THE 25 TH DAY OF MAY , 2012 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISRTRA R INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA SR PS