RAVISON AGRO INVESTMENTS P. LTD, MUMBAI V. ACIT CEN CIR 11, MUMBAI

ITA 6375/MUM/2010

• Counselvise Citation: 637519914 RSA 2010
• Duration Of Justice: 1 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 05-01-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 27-08-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR
• Assessee Lawyers: K V BESWAL
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 143(3); 133A; 14A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, D, MUMBAI BEFORE HONBLE PRESIDENT SHRI G.E.VEERABHADRAPPA AND SHRI D.K.AGARWAL (JM) ITA NO.6375/MUM/2010 (ASSESSMENT YEAR:2007-08) ITA NO. 6376/MUM/2010 (ASSESSMENT YEAR:2006-07) AND ITA NO. 6377/MUM/2010 (ASSESSMENT YEAR:2005-06) RAVISON AGRO INVESTMENTS PVT.LTD., 79/87, DATTARAM LAD PATH, KALA CHOWKI, NEAR HAKOBA MILLS, MUMBAI-400033. PAN:AABCR9224M ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-II, CGO BUILDING, 8 TH FLOOR, MUMBAI-400020 APPELLANT V/S RESPONDENT DATE OF HEARING : 5.1.2012 DATE OF PRONOUNCEMENT : 18.1.2012 APPELLANT BY : SHRI K.V.BESWAL RESPONDENT BY : SHRI C.G.K.NAIR O R D E R PER D.K.AGARWAL (JM) ALL THESE APPEALS FOR THE ASSESSMENT YEARS 2005-06, 2006-07 AND 2007-08 ARE DIRECTED AGAINST THE COMMON ORDER PASSED BY THE LD.CIT(A) DATED 26.7.2010 FOR THE ASSESSMENT YEARS 2005-06 TO 2008- 09. SINCE FACTS ARE IDENTICAL AND ISSUES INVOLVED A RE ITA NO.6375/MUM/2010 ITA NO. 6376/MUM/2010 ITA NO. 6377/MUM/2010 2 COMMON, ALL THESE APPEALS ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF TRADING OF PAINTING, SCULPTURES AND OTHER WORKS O F ART. A SEARCH AND SURVEY ACTION U/S 132 AND 133A O F THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) WAS CARRIED OUT ON 17.4.2007 IN THE CASE OF M/S OSIAN S CONNOISSEURS OF ART PVT.LTD. AND ITS ASSOCIATE CONCERNS. THE RESIDENTIAL AND OFFICE PREMISES OF T HE DIRECTORS SHRI NEVILLE TULI AND SHRI SANJEEV KHANDELWAL WERE ALSO SEARCHED. IN RESPONSE TO THE NOTICE ISSUED U/S 153C OF THE ACT, THE RETURNS WER E FILED SHOWING AN INCOME OF RS.3,96,255/-, RS.(-)1,66,942/- AND RS.82,48,059/- FOR THE ASSESSMENT YEARS 2005-06, 2006-07 AND 2007-08 RESPECTIVELY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER EXAMINED THE SEI ZED MATERIAL AND ALL OTHER MATERIAL AVAILABLE WITH HIM AT THE TIME OF ASSESSMENT PROCEEDINGS U/S 153C OF THE ACT. WHILE EXAMINING THE RELEVANT BALANCE SHEETS A ND PROFIT AND LOSS ACCOUNTS, THE ASSESSING OFFICER NOT ICED ITA NO.6375/MUM/2010 ITA NO. 6376/MUM/2010 ITA NO. 6377/MUM/2010 3 THAT THE ASSESSEE WAS EARNING EXEMPT INCOME IN THE FORM OF DIVIDEND BY EMPLOYING BORROWED FUNDS. IT WA S OBSERVED BY HIM THAT THE ASSESSEE WAS PAYING INTERE ST ON BORROWED FUNDS. HAVING REGARD TO CIRCUMSTANCES AND THE MATERIAL ON RECORD, THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY DISALLOWANCE SHOULD NOT BE MADE U/S 14A OF THE ACT READ WITH RULE 8D. THE ASSESS EE FURNISHED CALCULATION OF DISALLOWANCE U/S 14A READ WITH RULE 8D, BUT THE AO DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AND ACCORDINGLY MADE ADDITION U/S 14A READ WITH RULE 8D FOR THE ASSESSME NT YEAR 2005-06, RS.1,26,015/-, FOR THE ASSESSMENT YEA R 2006-07, RS.1,18,418/- AND FOR THE ASSESSMENT YEAR 2007-08 RS.1,54,964/-. 3. ON APPEAL, THE LD. CIT(A) WHILE OBSERVING THAT THE ASSESSEE HIMSELF HAS FURNISHED WORKING OF DISALLOWANCE U/S 14A READ WITH RULE 8D AND FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN DAGA CAPITAL MANAGEMENT PVT. LTD., 11 7 ITD 169 (MUM)(SB), UPHELD THE DISALLOWANCE MADE BY THE AO. ITA NO.6375/MUM/2010 ITA NO. 6376/MUM/2010 ITA NO. 6377/MUM/2010 4 4. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE COMMON GROUND NO.1 IN ALL THESE APPEALS EXTRACTED FROM ASSESSMENT YEAR 2005-06 READS AS UNDER : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN CONFIRMING ORDER OF THE AO PASSED U/S 143(3) R.W.S.153C WHICH IS BAD IN LAW VOID, AB INITIO. 6. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT HE DOES NOT WANT TO PRESS COMMON GROUND NO.1 RAISED IN ALL THE ASSESSMENT YEARS WHICH WAS NOT OBJECTED TO BY THE LD. DR. 7. THAT BEING SO AND IN THE ABSENCE OF ANY OTHER SUPPORTING MATERIALS PLACED ON RECORD, THE COMMON GROUND TAKEN BY THE ASSESSEE FOR ALL THE ABOVE ASSESSMENT YEARS IS, THEREFORE, REJECTED BEING NOT PRESSED. 8. THE COMMON GROUNDS NO.2 AND 2.1 IN ALL THESE APPEALS EXTRACTED FROM THE ASSESSMENT YEAR 2005-06 READ AS UNDER : 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF TH E ITA NO.6375/MUM/2010 ITA NO. 6376/MUM/2010 ITA NO. 6377/MUM/2010 5 AO FOR DISALLOWING A SUM OF RS.1,26,015/- U/S 14A OF THE ACT IN THE ABSENCE OF ANY NEW MATERIAL FOUND DURING THE SEARCH AND THIS DISALLOWANCE DOES NOT RELATE TO THE SEIZED MATERIAL DURING THE COURSE OF SEARCH. 2.1. THE BOMBAY HIGH COURT HAS HELD THAT RULE 8D IS PROSPECTIVE AND NOT APPLICABLE TO THE PREFERRED ASSESSMENT YEAR. 9. AT THE TIME OF HEARING, BOTH THE PARTIES HAVE AGREED THAT THIS ISSUE STANDS COVERED BY THE JUDGME NT OF HON'BLE JURISDICTIONAL HIGH COURT IN GODREJ & BO YCE MFG. CO. LTD., V/S. DCIT (2010) 328 ITR 81 (BOM.) THEREFORE, THE ISSUE MAY BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER. 10. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE O N RECORD, WE FIND MERIT IN THE PLEA OF THE PARTIES T HAT THE ISSUE STANDS COVERED BY THE RECENT JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN GODREJ & BOYCE MFG. CO. LTD. (SUPRA), WHEREIN THEIR LORDSHI PS AFTER CONSIDERING THE DECISION OF THE TRIBUNAL IN D AGA CAPITAL MANAGEMENT PVT. LTD. (SUPRA), WHILE HOLDI NG THAT THE PROVISIONS OF SUB-SECTIONS (2) AND (3) OF SEC.14A OF THE ACT ARE CONSTITUTIONALLY VALID HAV E ITA NO.6375/MUM/2010 ITA NO. 6376/MUM/2010 ITA NO. 6377/MUM/2010 6 HELD VIDE PLACITUM 88(VI) APPEARING AT PAGE 138 OF THE 328 ITR AS UNDER : (VI) EVEN PRIOR TO ASSESSMENT YEAR 2008-09, WHEN RULE 8D WAS NOT APPLICABLE, THE ASSESSING OFFICER HAS TO ENFORCE THE PROVISIONS OF SUB SECTION (1) OF SECTION 14A. FOR THAT PURPOSE, THE ASSESSING OFFICER IS DUTY BOUND TO DETERMINE THE EXPENDITURE WHICH HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. THE ASSESSING OFFICER MUST ADOPT A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FACTS AND CIRCUMSTANCES AFTER FURNISHING A REASONABLE OPPORTUNITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON THE RECORD; RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT WE SET ASIDE THE ORDERS PASSED BY THE REVENUE AUTHORITIES ON THIS ACCOUNT AND SEND BACK THE MATTER TO THE FILE O F THE ASSESSING OFFICER TO DECIDE THE SAME AFRESH I N THE LIGHT OF THE DIRECTIONS OF THE HON'BLE JURISDIC TIONAL HIGH COURT IN THE ABOVE CITED CASE AND ACCORDING T O LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND ACCORDINGLY THE GROUNDS TAKEN BY THE ASSESSEE ARE PARTLY ALLOWED FOR STATIS TICAL PURPOSES. 11. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. ITA NO.6375/MUM/2010 ITA NO. 6376/MUM/2010 ITA NO. 6377/MUM/2010 7 ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH JAN.,2012. SD SD (G.E.VEERABHADRAPPA) (D.K.AGARWAL) PRESIDENT JUDICIAL MEMBER MUMBAI, DATED 18TH JANUARY,2012. SRL: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI