MAHAMERU TRADING CO. P. LTD, MUMBAI V. ITO WD 5(2)(3), MUMBAI

ITA 6236/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79294 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 08-07-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 09-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOURYA PRATAP
• Keywords: Business expenditure; Reason to believe; Reassessment proceedings
• Section: 147; 148

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B MUMBAI . . , , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER /AND SHRI SANJAY ARORA, ACCOUNTANT MEMBER ITA NO.6236/MUM/2011, A.Y. 2004-05 M/S.MAHAMERU TRADING CO. (P) LTD. 394C, LAMINGTON CHAMBERS, LAMINGTON ROAD, MUMBAI 400 004 PAN AAACM 7131M (APPELLANT ) VS. THE INCOME TAX OFFICER WARD 5(2)(3), MUMBAI. (RESPONDENT) APPELLANT BY : SHRI RAKESH JOSHI RESPONDENT BY : SHRI MO URYA PRATAP DATE OF HEARING : 08/07/20 14 DATE OF PRONOUNCEMENT : 08/07/2014 ORDER PER I.P.BANSAL, J.M, THIS IS AN APPEAL FILED BY THE ASSESSEE AND IT IS DIRECTED AGAINST THE ORDER PASSED BY LD. CIT(A)-9, MUMBAI DATED 12/7/2011 FOR ASSESSMENT YEAR 2004-05. GROUNDS OF APPEAL READ AS UNDER: 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LEARNE D ASSESSING OFFICER IN REOPENING THE ASSESSMENT U/S 147 AFTER 4 YEAR AND W ITHOUT RECORDING PROPER REASONS FOR REOPENING. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WE LT AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LEARNE D ASSESSING OFFICER IN NOT ALLOWING THE UNABSORBED BUSINESS TOSS OF RS. 71,44, 340/- TO BE SET OFF AND CARRY FORWARD TO THE SUBSEQUENT YEAR WITHOUT CONSID ERING THE FACTS AND CIRCUMSTANCES OF THE CASE. 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WE LL, AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LEARNE D ASSESSING OFFICER IN NOT ITA NO.6236/MUM/2011, A.Y. 2004-05 2 ALLOWING THE UNABSORBED BUSINESS LOSS OF RS. 71,44, 340/- TO BE SET OFF AND CARRY FORWARD TO THE SUBSEQUENT YEAR WITHOUT APPREC IATING THE FACT THAT THE LOSS BELONGS TO A Y 1999-2000, 2001-2001 & 2001-02 AND RETURNS FOR THESE YEARS WERE FILED ON TIME AND ACCEPTED BY THE DEPART MENT. 2. REVISED GROUNDS OF APPEAL OF THE ASSESSEE READ A S UNDER: 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LEARNED ASSES SING OFFICER IN REOPENING THE ASSESSMENT U/S 147 AFTER 4 YEARS WITHOUT CONSIDERIN G THE FACTS AND CIRCUMSTANCES OF THE CASE. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WE LL AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LEARNED ASSES SING OFFICER IN NOT ALLOWING TO CARRY FORWARD CURRENT YEAR AS WELL AS BROUGHT FORWA RD BUSINESS LOSS TO THE SUBSEQUENT YEARS WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. WHILE ARGUING THE APPEAL, IT WAS SUBMITTED BY LD . AR THAT LD. CIT(A) HAS COMMITTED AN ERROR IN UPHOLDING THE VALIDITY OF THE REASSESSMENT ORDER. HE SUBMITTED THAT THE REASONS FOR WHICH THE ASSESSMEN T PROCEEDINGS WERE REOPENED DO NOT CONTAIN ANY INCOME WHICH IS MADE SUBJECT MAT TER TO TAXATION IN THE RE- ASSESSMENT ORDER. HE INVITED OUR ATTENTION TO THE REASONS, COPY OF WHICH IS PLACED AT PAGE 1 OF THE PAPER BOOK AND WHICH READ A S UNDER: THE ASSESSEE FILED ITS RETURN OF INCOME ON 30/10/2 004 DECLARING A TOTAL LOSS OF RS.13,345/- AFTER CLAIMING AN EXEMPTION OF RS.9,46, 200/- ON THE DIVIDEND INCOME EARNED DURING THE YEAR. THE RETURN WAS PROCESSED U /S. 143(1) OF THE ACT ON 12/01/2005. ACCEPTING THE RETURNED LOSS. IT IS SEEN FROM THE RETURN FILED BY THE ASSESSEE T HAT DURING THE ASSESSEE HAS RECEIVED RS.9,46,200/- AS DIVIDEND WHICH IS SHOWN AS INCOME IN THE P&L ACCOUNT AND CLAIMED AS EXEMPT IN THE COMPUTATION OF INCOME THE ASSESSEE HAS DEBITED RS.13,345/- AS BUSINESS EXPENSES AND CLAIMED AS LOS S FROM BUSINESS AND CARRIED FORWARD THE SAME TO THE NEXT YEAR. IT IS ALSO SEEN THAT ON PAGE 12 COLOUMN 15 UNDER THE HEAD NATURE OF BUSINESS OR PROFESSION THE ASSES SEE HAS DECLARED ITS BUSINESS AS TRADING IN SHARES AND SECURITIES. SINCE THE ASSE SSEE HAS ADMITTEDLY CARRYING ON BUSINESS OF TRADING IN SHARES AND SECURITIES THE DI VIDEND RECEIVED OF RS.9,46,200/- CANNOT BE CLAIMED AS EXEMPT UNDER THE HEAD BUSINES S/PROFESSION. HENCE, THE DIVIDEND EARNED OF RS.9,46,200/- ON WHICH THE ASSES SEE HAS WRONGLY CLAIMED EXEMPTION IS TO BE WITHDRAWN AND THE AMOUNT OF RS.9 ,46,200/- SHOULD BE BROUGHT TO TAX UNDER THE HEAD INCOME FROM BUSINESS/PROFESSION. ITA NO.6236/MUM/2011, A.Y. 2004-05 3 IN VIEW OF THE ABOVE, I HAVE REASON TO BELIEVE THAT INCOME OF RS.9,46,200/- HAS ESCAPED ASSESSMENT AND NEEDS TO BE BROUGHT TO TAX. 3.1 REFERRING TO AFOREMENTIONED REASONS IT WAS SUBM ITTED BY HIM THAT ASSESSMENT WAS REOPENED FOR THE REASON THAT INCOME OF RS.9,46,200/- HAS ESCAPED THE ASSESSMENT. HE SUBMITTED THAT THE SAI D AMOUNT REPRESENT DIVIDEND INCOME WHICH IS EXEMPTED UNDER SECTION 10(34) OF TH E INCOME TAX AC 1961 ( THE ACT) HE SUBMITTED THAT THE FOLLOWING COMPUTATION OF INCOME HAS BEEN MADE BY THE AO IN THE REASSESSMENT ORDER. I. INCOME FROM BUSINESS: NET PROFIT AS PER P&L A/C. RS. 9,32,855 LESS DIVIDEND INCOME (EXEMPT) RS. 9,46,200 (-) RS. 13,345 ADD: DISALLOWANCE U/S.14A AS DISCUSSED RS. 13,345 GROSS TOTAL INCOME NIL TOTAL INCOME NIL 3.2 REFERRING TO ABOVE COMPUTATION HE SUBMITTED THA T THERE WAS NO ESCAPEMENT OF INCOME WITH RESPECT TO A SUM OF RS.9,46,200/- AS THE SAME HAS BEEN HELD TO BE EXEMPTED BY THE AO AND TO THAT EXTENT THERE WAS NO ESCAPEMENT OF INCOME. LD. AR HAS RELIED UPON DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. JET AIRWAYS (INDIA) LTD., 331 ITR 231, IN WHICH IT HAS BEEN HELD THAT AO MAY ASSESS OR RE-ASSESS THE INCOME IN RESPECT OF ANY IS SUE WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF PROCEEDINGS THOUGH TH E REASONS FOR SUCH ISSUES WERE NOT INCLUDED IN THE NOTICE; HOWEVER, IF AFTER ISSUING A NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT, 1961, THE AO ACCEPTED THE CONTENTION OF THE ASSESSEE AND HOLDS THAT THE INCOME ON WHICH HE HAS INITIALLY FORMED A REASON TO BELIEVE HAD ESCAPED ASSESSMENT, AS A MATTER OF FACT NOT ES CAPED ASSESSMENT, IT IS NOT OPEN TO HIM INDEPENDENTLY TO ASSESS SOME OTHER INCO ME. ITA NO.6236/MUM/2011, A.Y. 2004-05 4 3.3 THUS, IT WAS PLEADED BY LD. AR THAT REASSESSMEN T PROCEEDINGS SHOULD BE HELD INVALID. 4. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER PASSED BY LD. CIT(A), VIDE WHICH IT HAS BEEN HELD THAT REASSESSMENT PROCE EDINGS HAVE RIGHTLY BEEN CARRIED OUT. 5. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. FROM THE CONJOINT READING OF THE REASO NS AND COMPUTATION MADE IN THE REASSESSMENT ORDER, IT IS CLEAR THAT THE INCOME ON WHICH THE AO HAS INITIALLY FORMED A REASON TO BELIEVE THAT IT HAD ESCAPED ASSE SSMENT DID NOT AS A MATTER OF FACT ESCAPED ASSESSMENT. THEREFORE, THE CASE OF TH E ASSESSEE WILL SQUARELY FALL WITHIN THE AMBIT OF AFOREMENTIONED DECISION OF HON BLE BOMBAY HIGH COURT I.E. IN THE CASE OF JET AIRWAYS (INDIA) LTD. (SUPRA). FOL LOWING THE SAID DECISION WE HOLD THAT REASSESSMENT PROCEEDINGS IN THE PRESENT CASE ARE NOT VALID. THEREFORE, THE IMPUGNED ASSESSMENT IS INVALID AND IS QUASHED. 6. SINCE WE HAVE HELD THAT REASSESSMENT PROCEEDINGS ARE NOT VALID AND ASSESSMENT ORDER IS QUASHED, WE NEED NOT TO GO INTO THE MERITS OF THE OTHER ISSUES WHICH HAVE ALSO BEEN RAISED IN THE PRESENT A PPEAL. WITH THESE OBSERVATIONS WE ALLOW THE APPEAL FILED BY THE ASSES SEE. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08/07/2014 ! ' #$ % &'( 08/07/2014 ' ) SD/- SD/- ( /SANJAY ARORA ) ( . . / I.P. BANSAL ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; &' DATED 08/07/2014 ITA NO.6236/MUM/2011, A.Y. 2004-05 5 ! ! ! ! ' '' ' *+, *+, *+, *+, -,$+ -,$+ -,$+ -,$+ / COPY OF THE ORDER FORWARDED TO : 1. ./ / THE APPELLANT 2. *0./ / THE RESPONDENT. 3. 1 ( ) / THE CIT(A)- 4. 1 / CIT 5. ,2) *+' , , / DR, ITAT, MUMBAI 6. )3 4 / GUARD FILE. !' !' !' !' / BY ORDER, 0,+ *+ //TRUE COPY// 5 55 5 / 6 6 6 6 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . ' . ./ VM , SR. PS