INSTANT HOLDINGS LTD ( FORMERLY KNOWN AS KEC HOLDINGS LTD), MUMBAI V. DCIT RG 8(1), MUMBAI

ITA 6851/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9443 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2005-2006
• Appeal Filed On: 10-10-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHEKHAR L GAJABHIYE
• Assessee Lawyers: MANISH V SHAH
• Keywords: Reopening of assessment; Business income; Depreciation; Principle of natural justice; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings; Capital expenditure
• Section: 143(3); 37(1); 147; 148

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I MUMBAI . . , / BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER /AND , SHRI RAJENDRA, ACCOUNTANT MEMBER . / ITA NO. 6851/MUM/2011 / ASSESSMENT YEAR 2005-06 M/S. INSTANT HOLDINGS LIMITED, (FORMERLY KNOWN AS KEC HOLDINGS LIMITED), CEAT MAHAL, 1 ST FLOOR, 463, DR. ANNIE BESANT ROAD, WORLI, MUMBAI 400 030. PAN: AACCK 5600 M VS. DEPUTY CIT RANGE 8(1), MUMBAI. ( ! / APPELLANT ) ( '# ! / RESPONDENT ) ! $ / APPELLANT BY : SHRI MANISH V. SHAH '# ! % $ /RESPONDENT BY : SHRI SHEKHAR L. GAJABHIYE % &' / DATE OF HEARING : 19-11-2012 () % &' / DATE OF PRONOUNCEMENT : 05-12-2012 * / O R D E R PER RAJENDRA, AM THE APPELLANT HAS FILED THIS APPEAL AGAINST THE ORD ER DT. 13-07-2011 OF THE CIT(A)-16, MUMBAI ON THE FOLLOWING GROUNDS: GROUND I : 1.1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL)-16 MUMBAI [CIT (A)] ERRED IN HOLDING THAT THE DEPUTY COMMISSIONER OF INCOME TAX 8-(1), MUMBAI (THE AO) HAD GIVEN A FAIR AND REASONABLE ITA NO. 6851/MUM/2011 M/S. INSTANT HOLDINGS LIMITED, (FORMERLY KNOWN AS KEC HOLDINGS LIMITED) 2 OPPORTUNITY OF HEARING TO THE APPELLANT AND HAD NOT VIOLATED THE PRINCIPLES OF NATURAL JUSTICE. 1.2. THE APPELLANT PRAYS THAT THE SAID FINDING BY T HE CIT (A) BE REVERSED AND THE ORDER OF THE AO BE STRUCK DOWN AS BAD IN LAW FOR WANT OF NATURAL JUSTICE. WITHOUT PREJUDICE TO GROUND I ABOVE: GROUND II: REOPENING OF ASSESSMENT BAD IN LAW : 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE CIT(A) ERRED IN THE UPHOLDING THE ACTION OF THE AO IN REOPENING THE ASS ESSMENT UNDER SECTION 147 OF THE INCOME TAX ACT, 1961 (THE ACT). 2.2. THE APPELLANT PRAYS THAT THE REOPENING UNDER S ECTION 147 OF THE ACT BE HELD AS AB-INITIO VOID AND/OR OTHERWISE BAD-IN-LAW. WITHOUT PREJUDICE TO GROUND I AND GROUND II ABOVE: GROUND III: CHARGING INCOME FROM BUSINESS AS CAP ITAL GAINS 3.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN THE UPHOLDING THE ACTION OF THE AO IN CHARGING INCOME/ LOSS EARNED BY THE APPELLANT FROM BUYING AND SELLING OF SHARES AND SECURITIES AS CAPITAL GA INS, AS AGAINST BUSINESS INCOME AS OFFERED BY THE APPELLANT. 3.2 THE APPELLANT PRAYS THE INCOME/ LOSS FROM BUYIN G AND SELLING OF SHARES AND SECURITIES BE HELD AS CHARGEABLE UNDER THE HEAD PROFITS AND GAIN S OF BUSINESS AND PROFESSION AS OFFERED BY THE APPELLANT. WITHOUT PREJUDICE TO GROUND I AND GROUND II ABOVE: GROUND IV: DISALLOWANCE OF MISCELLANEOUS EXPENSES OF RS. 3,01,453/ - 4.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN THE UPHOLDING THE ACTION OF THE AO IN DISALLOWING THE M ISCELLANEOUS EXPENSES DEBITED TO THE PROFIT AND LOSS ACCOUNT OF THE APPELLANT. 4.2 THE APPELLANT PRAYS THAT DISALLOWANCE OF MISCEL LANEOUS EXPENSES BE DELETED. WITHOUT PREJUDICE TO GROUND I AND GROUND II ABOVE: GROUND V: DISALLOWANCE OF ADMINISTRATIVE EXPENSES OF RS.1,50,000/- AND GENERAL EXPENSES OF RS. 93,750/ - 5.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN THE UPHOLDING THE ACTION OF THE AO IN DISALLOWING OF TH E ADMINISTRATIVE EXPENSES AND GENERAL EXPENSES ON AD-HOC BASIS. 5.2 THE APPELLANT PRAYS THAT AD-HOC DISALLOWANCE IN RESPECT OF THE SAID ADMINISTRATIVE AND GENERAL EXPENSES BE DELETED. GROUND VI : THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER AND / O R AMEND ALL OR ANY OF THE FOREGOING GROUNDS OF APPEAL. BEFORE US, GROUND NO.1 WAS NOT PRESSED BY THE AUTHO RISED REPRESENTATIVE (AR). HENCE SAME IS TREATED AS DISMISSED. ITA NO. 6851/MUM/2011 M/S. INSTANT HOLDINGS LIMITED, (FORMERLY KNOWN AS KEC HOLDINGS LIMITED) 3 2. ASSESSEE-COMPANY, ENGAGED IN THE BUSINESS OF INVEST MENT ACTIVITIES, FILED ITS RETURN OF INCOME ON 31-10-2005 DECLARING TOTAL LOSS OF RS.(-)40.63 LAKHS. ASSESSING OFFICER (AO) FINALISED THE ASSESSMENT U/S. 143(3) O F THE INCOME TAX ACT, 1961(ACT) ON 31-12-2007 DETERMINING TOTAL INCOME AT RS. 7.64 CRORES UNDER THE NORMAL PROVISIONS OF THE ACT. LATER NOR A NOTICE U/S. 148 OF THE ACT DT. 26-03-2010 WAS ISSUED AND SERVED UPON THE ASSESSEE AFTER RECORDING THE REASONS FOR RE-OPENING THE ASSESSMENT. REASONS RECORDED FOR REOPENING THE ASSE SSMENT READ AS UNDER: RETURN OF INCOME FOR AY. 2005-06 WAS FILED BY THE ASSESSEE ON 31/10/2005, DECLARING LOSS OF RS.4063859/-. THE RETURN OF INCO ME WAS PROCESSED U/S. 143(1) OF THE I.T .ACT ON 31/03/2005, ACCEPTING THE RETURNED INCOME. ASSESSMENT U/S. 143(3) OF THE I.T. ACT WAS COMPLETED ON 31/12/ 2007, DETERMIN ING TOTAL INCOME AT RS.7,64,32,460/-. SUBSEQUENTLY, THE ASSESSMENT WAS RECTIFIED U/S.154 ON 26/03/2008 DETERMINING THE TOTAL INCOME AT RS.7,64,32,460/- AF TER ALLOWING BROUGHT FORWARD LOSSES OF RS.4,L2,45,595/-. 2. IT IS SEEN FROM THE PROFIT & LOSS ACCOUNT THAT A SSESSEE HAD DEBITED RS.44,90,600/- TOWARDS LOSS ON SALE OF INVESTMENT,(NET). AS PER PROVISIONS OF SECTION 37(1) OF THE INCOME TAX ACT, CAPITAL EXPENDITURE ARE NOT ALLOWED AS DEDUCTION IN COMPUTING INCOME UNDER THE HEAD PROFITS & GAINS FROM BUSINES 5 OR PROFESSIONS/ THUS, THE INCOME TO THE EXTENT OF RS.4490600/- HAS ESCAPED FR OM ASSESSMENT. 3. THEREFORE, IN VIEW OF THE ABOVE, I HAVE REASON T O BELIEVE THAT INCOME AMOUNTING TO RS.44,90,600/- OF THE ASSESSEE HAS ESCAPED ASSESSME NT WITHIN THE MEANING OF PROVISION OF SECTION 147 NOTICE U/S. 148 OF THE IT. ACT IS ISSUED. 2.1. IN RESPONSE TO THE NOTICE ISSUED BY THE AO, ASSESSE E-COMPANY VIDE ITS LETTER DT. 07-04-2010 REQUESTED HIM TO CONSIDER THE ORIGINAL R ETURN AS FILED IN RESPONSE TO NOTICE ISSUED U/S. 148 OF THE ACT. ON REQUEST OF THE ASSE SSEE, AO FURNISHED THE REASONS OF RE- OPENING TO THE ASSESSEE VIDE HIS OFFICE LETTER DT. 16-07-2010. ASSESSEE FILED OBJECTIONS BEFORE THE AO VIDE ITS LETTER DT. 04-08-2010.AS PER THE DECISION OF THE HONBLE SUPREME COURT DELIVERED IN THE CASE OF GKN DRIVESHA FT INDIA LTD. (259 ITR 19), OBJECTIONS FILED BY THE ASSESSEE WERE DEALT WITH BY THE AO BY HIS LETTER DT.06-08-2010. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, AO INITIATED THE REASSESSMENT PROCEEDINGS. DEALING WITH THE ISSUE OF SALE OF SHAR ES HE DETERMINED THE PROFIT/LOSS ON SALE OF EQUITY SHARES AS UNDER: PROFIT ON SALE OF UN-QUOTED EQUITY SHARES OF CALCUT TA ELECTRIC SUPPLY CO. LTD., (CESCL) DATE OF PURCHASE/SALE NO. OF SHARES RATE AMOUNT CEECL-PURCHASE 03/01/05 728,000 165.86 12,07,48,600 CESCL-SALE 14/02/05 728000 167.25 12,17,58,000 PROFIT ON SALE OF INVESTMENT 10,09,400 LOSS ON SALE OF EQUITY SHARES OF EVEREADY INDUSTRIE S LTD.,(EIL) ITA NO. 6851/MUM/2011 M/S. INSTANT HOLDINGS LIMITED, (FORMERLY KNOWN AS KEC HOLDINGS LIMITED) 4 DATE OF PURCHASE/SALE NO. OF SHARES RATE AMOUNT EVEREADY - PURCHASE 25,000 285.00 71,25,000 EVEREADY SALE 13/01/05 25,000 65.00 16,25,000 LOSS ON SALE OF INVESTMENT 55,00,000 NET LOSS ON SALE OF INVESTMENTS : RS. 44,90,600/- AFTER CONSIDERING THE ABOVE DETAILS, AO HELD THAT A SSESSEE HAD NOT PROVIDED THE DETAILS OF THE PURCHASE OF SHARES OF EIL, THAT ASSESSEE HAD BOOKED LOSS OF RS. 55 LAKHS WITH REGARD TO THE TRANSACTION OF EIL, THAT AS PER THE B ALANCE SHEET SHARES OF EIL WERE PURCHASED BEFORE 31 ST MARCH 2004,THAT THE SHARES SOLD WERE SHOWN UNDER T HE HEAD INVESTMENT, THAT ASSESSEE COULD NOT CLAIM THE INC OME ON SALE OF INVESTMENT UNDER THE HEAD BUSINESS, THAT THE LOSS WAS NOT FROM SELLING OF SHARES, THAT LOSS WAS RESULT OF SALE OF INVESTMENT, THAT THE LOSS WAS TO BE TREATED AS CAPITAL LOSS (LONG TERM). IN LIGHT OF THE ABOVE FACTS, AO HELD THAT LOSS DEBITED TO P& L A/C AMOUNTING TO RS. 44.9 LAKHS (RS. 55 LAKHS 10.09 LAKHS) WAS TO BE DISALLOWED A ND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. HOWEVER, HE HELD THAT SAME WAS TO BE TREATED AS LONG TERM CAPITAL LOSS (LTCL) AND ALLOWED TO BE CARRIED FORWA RD. 3. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY (FAA). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, HE HELD THAT THE APPELLANT WAS SHOWING CERTAIN INVESTMENT IN BOTH QUOTED AND UN-QU OTED SHARES AS INVESTMENT AS EVIDENT FROM THE BALANCE SHEETS OF AYS 2004-05 AND 2005-06, THAT INVESTMENT WAS SOLD BY THE APPELLANT IN THE YEAR UNDER CONSIDERATI ON, THAT LOSS ARISING FROM SALE OF INVESTMENTS SHOULD HAVE BEEN SHOWN AS CAPITAL LOSS, THAT APPELLANT HAD SHOWN THE SAME AS BUSINESS LOSS, THAT FROM THE BALANCE SHEET IT TRANSPIRED THAT THE APPELLANT HAD INCLUDED SHARES OF CESCL AND EIL DURING THE YEAR UN DER CONSIDERATION, THAT APPELLANT HAD EARNED PROFIT ON SALE OF SHARES OF CESCL AND HA D SUFFERED LOSS ON SALE OF SHARES OF EIL, THAT AO HAD GIVEN A SET-OFF BETWEEN THE TW O TRANSACTIONS AND DETERMINED THE CAPITAL LOSS AT RS. 45.9 LAKHS, THAT THE APPELLANT HAD NOT CHALL ENGED THE BASIC FACTS, THAT APPELLANT HAD FAILED TO GIVE SUFFICIENT REASON S TO SHOW AS TO HOW THE CAPITAL LOSS WAS CLAIMED AS BUSINESS LOSS, THAT AS A TRADER OF SHARES AND SECURITIES IF THE APPELLANT WAS HOLDING THE INVESTMENT AS STOCK-IN-TR ADE HE WAS FULLY JUSTIFIED TO SHOW THE PROFIT/LOSS AS BUSINESS PROFIT/LOSS, THAT IF TH E SECURITIES/SHARES WERE HELD AS INVESTMENT THE PROFIT/LOSS SHOULD HAVE BEEN SHOWN A S CAPITAL LOSS/PROFIT, THE FACTS OF APPELLANTS CASE JUSTIFIED THE ISSUANCE OF NOTICE U /S. 148 OF THE ACT, THAT JUDICIAL DECISIONS RELIED UPON BY THE ASSESSEE WERE DISTINGU ISHABLE ON FACTS, THAT THE ISSUANCE OF NOTICE U/S. 148 WAS ENTIRELY BASED ON THE APPELL ANTS FAILURE TO SHOW HIS INCOME/ LOSS CORRECTLY UNDER A PROPER HEAD. RELYING UPON T HE CASES OF RAYMOND WOOLLEN MILLS LTD., (236 ITR 34); DR. AMINS PATHOLOGY LABO RATORY (252 ITR 673); AND CHETTINAD CORPORATION LTD (200 ITR 320) HE HELD THA T THE RE-OPENING U/S. 147 R.W.S. 148 WAS JUSTIFIED. 4. BEFORE US, AR SUBMITTED THAT DURING THE ORIGINAL AS SESSMENT PROCEEDINGS, AO HAD ASKED FOR THE DETAILS ABOUT THE TRANSACTIONS-IN -QUESTION. HE REFERRED TO PAGE NOS. 14 AND 15 OF THE PAPER BOOK (PB) HE ALSO REFERRED T O THE REASONS RECORDED (PG. NOS. 42 AND 44 OF THE PB). HE FURTHER SUBMITTED THAT DE TAILS OF PROFIT/LOSS ON SALE OF INVESTMENT WAS SHOWN IN THE RETURN OF INCOME (PG. N O.46 OF THE PB),THAT THE MATTER ITA NO. 6851/MUM/2011 M/S. INSTANT HOLDINGS LIMITED, (FORMERLY KNOWN AS KEC HOLDINGS LIMITED) 5 WAS RE-OPENED AS A RESULT OF CHANGE OF OPINION, THA T THE AO HAD APPLIED HIS MIND WHILE FRAMING THE ORIGINAL ASSESSMENT, THAT AFTER C ONSIDERING THE SUBMISSIONS OF THE ASSESSEE AO HAD DECIDED THE ISSUE OF PROFITS/LOSS O N SALE OF SHARES, THAT IN THE RE- ASSESSMENT PROCEEDINGS AO WANTED TO CHANGE THE HEAD UNDER WHICH INCOME/LOSS OF THE SHARES HAS TO BE ASSESSED, THAT THE SAME COULD NOT BE FORM BASIS FOR INVOKING PROVISIONS OF ESCAPEMENT OF INCOME. HE FURTHER SU BMITTED THAT THERE WAS NO NEW TANGIBLE MATERIAL FOR INVOKING PROVISIONS OF SEC.14 7 & 148 OF THE ACT, THAT RE-OPENING WAS BADE IN LAW, THAT THERE WAS NO ESCAPEMENT OF IN COME. HE RELIED UPON THE CASES OF KELVINATOR OF INDIA LTD. (320ITR561) DADAJEE DHACKJ EE (ITA.4613/MUM/2005); H.V. TRANSMISSION (ITA NO.2230/MUM/2010); GERMAN RE MEDIES LTD.,(285ITR26); GLAXO SMITHKLINE PHARMACEUTICALS LTD., (27DTR1); AS IAN PAINTS LTD., [WP 1351 OF 2008]; AIPITA MARKETING P. LTD(201 SOT 302); BAPALA L & CO. EXPORTS (289 ITR 37); QUALCOMM INCORPORATED [WP ( C ) 7959/2010 (DELHI)]; ASTERIODS TRADING & INVESTMENTS P LTD., (308 ITR 190); IDEA CELLULAR (3 01 ITR 407); USHA INTERNATIONAL LTD (DELHI) (FB) 25 TXMANN.COM 200 AND ASHWAMEGH CO -OP HSG. SOC. LTD., (GUJ HC) [SCA NO. 12598/ 2012]. DEPARTMENTAL REPRESENTAT IVE (DR) SUBMITTED THAT THERE WAS REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSE SSMENT, THAT IT WAS NOT A CASE OF CHANGE OF OPINION, THAT SALE OF INVESTMENT WAS NOT INVESTIGATED, THAT NO SPECIFIC QUESTION WAS ASKED BY THE AO DURING THE ORIGINAL AS SESSMENT PROCEEDINGS WITH REGARD TO SALE OF THE SHARES. HE REFERRED TO PG. NO. 16 OF THE PB IN THIS REGARD. HE FURTHER REFERRED TO PG. NO. 8 AND 55 OF THE PB TO PROVE THA T THE ASSETS IN QUESTIONS WERE INVESTMENT. HE FINALLY SUBMITTED THAT ON SALE OF IN VESTMENT PROFIT/LOSS HAD TO BE SHOWN UNDER PROPER HEAD. HE RELIED UPON THE CASE O F YUVRAJ DELIVERED BY THE AURANGABAD BENCH OF THE HONBLE HIGH COURT OF BOMBA Y(315 ITR 84). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PERUSE D THE MATERIAL AVAILABLE ON FILE. IN THE CASE OF KELVINATOR INDIA HONBLE S UPREME COURT HAD (320ITR561) HAD FRAMED THE FOLLOWING QUESTION WHILE DECIDING THE AP PEALS FILED BEFORE IT: A SHORT QUESTION WHICH ARISES FOR DETERMINATION IN THIS BATCH OF CIVIL APPEALS IS, WHETHER THE CONCEPT OF CHANGE OF OPINION STANDS O BLITERATED WITH EFFECT FROM 1ST APRIL, 1989, I.E., AFTER SUBSTITUTION OF SECTION 14 7 OF THE INCOME-TAX ACT, 1961 BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987 ? AFTER CONSIDERING THE RIVAL SUBMISSIONS THE HONBLE APES COURT HELD AS UNDER: THE ASSESSING OFFICER HAS NO POWER TO REVIEW ; HE HAS THE POWER TO REASSESS. BUT REASSESSMENT HAS TO BE BASED ON FULFILMENT OF CERTA IN PRE-CONDITIONS AND IF THE CONCEPT OF CHANGE OF OPINION IS REMOVED, AS CONTE NDED ON BEHALF OF THE DEPARTMENT, THEN, IN THE GARB OF REOPENING THE ASSESSMENT, REVI EW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF CHANGE OF OPINION AS AN IN-B UILT TEST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFICER. 5.1. FROM THE ABOVE DECISION OF THE HONBLE SUPREME COUR T IT IS CLEAR THAT CONCEPT OF CHANGE OF OPINION HAS NOT OBLITERATED W.E.F. 01. 04. 1989. BUT, WHETHER THERE IS CHANGE OF OPINION OR NOT IN A CASE WILL DEPEND UPON THE FACTS OF A PARTICULAR CASE. IN THESE CIRCUMSTANCES QUESTIONS BEFORE US ARE WHETHER IN THE CASE UNDER CONSIDERATION WAS ANY OPINION FORMED BY THE AO DURING THE ORIGINA L ASSESSMENT AND CAN HIS ACTION OF REOPENING OF ASSESSMENT BE HELD CHANGE OF OPINIO N? AFTER PERUSING THE ORIGINAL ASSESSMENT ORDER AND VARIOUS PAGES OF THE PAPER BOO K RELIED UPON BY THE AR AND THE DR WE ARE OF THE OPINION THAT AO HAD NOT FORMED ANY OPINION ABOUT THE TRANSACTION- ITA NO. 6851/MUM/2011 M/S. INSTANT HOLDINGS LIMITED, (FORMERLY KNOWN AS KEC HOLDINGS LIMITED) 6 IN-QUESTION. ORIGINAL ORDER IS SILENT ABOUT THE PU RCHASE OR SALE OF SHARES OR THE RESULTANT LOSS OR THE HEAD UNDER WHICH SAME SHOULD BE ASSESSED. WE FIND THAT FACTS OF THE CASE UNDER CONSIDERATION ARE MORE OR LESS SIMIL AR TO THE CASE OF YUVRAJ DELIVERED BY THE AURANGABAD BENCH OF THE HONBLE BOMBAY HIGH COURT (SUPRA). IN THAT MATTER FACTS OF THE CASE WERE REPRODUCED BY THE COURT AS U NDER : THE PETITIONER RECEIVED A CONSIDERATION OF RS. 12 LAKHS ON SALE OF RIGHT TO PURCHASE AN OPEN PLOT IN PUNE AND DISCLOSED IT AS INCOME FOR THE ASS ESSMENT YEAR 1996-97. THE ASSISTANT COMMISSIONER ASSESSED THE INCOME AND PASSED AN ORDE R UNDER SECTION 143(3) OF THE INCOME- TAX ACT, 1961. THE DEPUTY COMMISSIONER PASSED AN ORDER IN 2000 STATING THAT HE HAD REASON TO BELIEVE THAT THE INCOME OF THE PETITIONER HAD ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 AND PROPOSED TO REASSESS THE INCOME FOR THE ASSESSMENT YEAR 1996-97. ASSESSEE CHALLENGED THE REOPENING OF THE CASE BY FI LING A WRIT PETITION. AFTER TAKING IN TO CONSIDERATION 14 JUDGMENTS OF VARIOUS COURTS; IN CLUDING THE CASE OF KELVINATOR INDIA DELIVERED BY THE HONBLE APEX COURT(SUPRA);CO URT HELD AS UNDER: WE HAVE PERUSED THE JUDGMENTS CITED ABOVE, AND CON SIDERED THE RELEVANT PROVISIONS OF THE INCOME-TAX ACT AND THE RULES AND THE MATERIAL PLACE D ON RECORD. WE HAVE PERUSED THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961, ON JANUARY 9, 1998. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIR CLE 2(1), DHULE, WHILE PASSING THE ASSESSMENT ORDER OBSERVED IN PARAGRAPH 3 THAT THE A SSESSEE HAD SOLD HIS RIGHT TO PURCHASE OPEN PLOT (NA) AT KOTHRUD, PUNE, AND COPY OF THE AG REEMENT OF ACQUISITION OF RIGHT TO PURCHASE AND DEED IN RESPECT OF RIGHT TO PURCHASE E XECUTED BY THE BUILDERS WERE FILED ON RECORD. AFTER SAYING SO THE ASSISTANT COMMISSIONER OBSERVED THAT SUBJECT TO THE ABOVE REMARKS THE TOTAL INCOME WAS COMPUTED AS PER THE CH ART MENTIONED IN THE ORDER. FROM THE PERUSAL OF THE ORDER WE DO NOT FIND ANY APPLICATION OF MIND ON THE PART OF THE ASSISTANT COMMISSIONER OF INCOME-TAX TO THE FACTS OF THE CASE , THE ISSUE TO BE DEALT WITH AND THE REASONS FOR PASSING THE ORDER. THE VALUE OF THE LAN D WAS NOT DETERMINED BY THE REVENUE. THE ISSUE RELATING TO CAPITAL GAIN OR CASUAL INCOME WAS ALSO NOT ADDRESSED BY THE REVENUE. IN THE LIGHT OF THE SAME, IN THE FACTS OF THE CASE, WE FIN D THAT THE ASSESSING OFFICER WAS JUSTIFIED IN ISSUING THE NOTICE UNDER SECTION 148 OF THE ACT ON MAY 17, 2000. 5.2. WORD OPINION IN OUR HUMBLE UNDERSTANDING IS A ME NTAL STATUS THAT ENVISAGES A DEFINITE THOUGHT PROCESS, AVAILABILITY OF MATERIA L WITH REGARD TO A PARTICULAR SUBJECT, DELIBERATION UPON VARIOUS ANGLES OF THE ISSUE-IN-QU ESTION AND FINALLY CHOOSING ONE OF THE ALTERNATIVES BY THE PERSON CONCERNED. IN OTHER WORDS IT IS A CULMINATION OF A INTELLECTUAL EXERCISE OF REACHING AT A DEFINITE CON CLUSION AFTER CONSIDERING AVAILABLE PIECES OF INFORMATION RELATED WITH A PARTICULAR ISS UE. IF INFORMATION ITSELF IS NOT PONDERED OVER THEN INFERENCES/CONCLUSIONS/OPINIONS CANNOT BE DRAWN/FORMED/ARRIVED AT. FACTS OF THE CASE UNDER CONSIDERATION REVEAL THAT N O QUESTION WAS RAISED BY THE AO ABOUT NET LOSS SUFFERED BY THE ASSESSEE ON SALE OF SHARES. WE HAVE COMPARED THE ORIGINAL ASSESSMENT ORDER WITH THE REASSESSMENT ORD ER. THERE IS A CLEAR AND VISIBLE DISTINCTION BETWEEN THE TWO. DURING THE REASSESSME NT PROCEEDINGS AO HAD CALLED FOR CERTAIN INFORMATION ABOUT SALE OF SHARES. AFTER AN ALYSING THE SAME HE HELD THAT THE TRANSACTION-IN-QUESTION WAS TO BE ASSESSED UNDER A PARTICULAR HEAD. IT WAS AN INFORMED DECISION, WHERE AS IN THE ORIGINAL ASSESSMENT AO HA S MENTIONED NOTHING ABOUT THE LOSS SUFFERED BY THE ASSESSEE. IN SHORT, WE FIND T HAT THERE IS NO APPLICATION OF MIND ON THE PART OF THE AO WITH REGARD TO THE FACT OF NET LOSS SUFFERED BY THE ASSESSEE ON SALE OF SHARES. SIMILARLY, THE REASONS FOR ACCEPTING OR REJECTING THE CLAIM OF THE ASSESSEE ARE MISSING IN THE ORIGINAL ORDER. WHILE GOING THR OUGH THE ORIGINAL ASSESSMENT ORDER WE HAVE FOUND THAT THE AO HAD DIRECTED THE ASSESSEE TO FILE DETAILS OF MAJOR EXPENSES ITA NO. 6851/MUM/2011 M/S. INSTANT HOLDINGS LIMITED, (FORMERLY KNOWN AS KEC HOLDINGS LIMITED) 7 DEBITED TO P & L A/C. VIDE HIS LETTER DATED 17.08. 2007 (PG.41OF THE PB). IN THE SAID LETTER NOTHING IS MENTIONED ABOUT THE SALE OF SHARE S. AS DISCUSSED EARLIER, RESULTANT LOSS/PROFIT ARISING OUT OF THE SAID TRANSACTION WAS NEVER LOOKED IN TO BY THE AO. WE HAVE ALSO PERUSED THE REPLY OF THE ASSESSEE, FILED IN RESPONSE TO THE ABOVE REFERRED LETTER OF THE AO. ASSESSEE-COMPANY HAD VIDE ITS LE TTER 21.09.2007 SUBMITTED VARIOUS DETAILS BEFORE THE AO .SAID REPLY OF THE ASSESSEE ( PG.42 OF THE PB) TALKS ABOUT DETAILS OF MAJOR EXPENSES DEBITED TO PROFIT AND LOSS ACCOUN T FILED BY IT. HEAD UNDER WHICH PROFIT/LOSS ARISING OUT OF THE SHARES IS NOT PART O F THE LETTER OF THE ASSESSEE OR THE ASSESSMENT ORDER. HEAD OF A PARTICULAR ITEM OF INC OME IS VERY IMPORTANT FACTOR TO DETERMINE THE TAX LIABILITY OF AN ASSESSEE FOR A P ARTICULAR AY. IN ABSENCE OF SUCH A VITAL PIECE OF INFORMATION, IT CAN EASILY BE SAID T HAT THE AO HAD NOT FORMED ANY OPINION ABOUT THE TRANSACTION IN QUESTION. IF PURP OSE BEHIND THE REASSESSMENT PROCEEDINGS IS TAKEN IN TO CONSIDERATION IT BECOMES CLEAR THAT THE PARLIAMENT WANTED THAT INFORMED DECISIONS SHOULD FORM BASIS FOR INVOK ING PROVISIONS OF SECTION 147/148 OF THE ACT. AS PER THE SETTLED PRINCIPLES OF LAW S OVEREIGN CANNOT DEMAND EVEN A SINGLE RUPEE FORM A TAXPAYER, IF IT IS NOT DUE. BUT , AT THE SAME TIME STATE CANNOT BE DEPRIVED OF THE TAXES THAT ARE DUE FROM CITIZENS. IT CAN ALSO BE SAID THAT FOR DETERMINING DUE TAXES A LOGICAL AND INFORMED ASSESS MENT IS THE BASIC PRE-CONDITION. SO, IF IN THE ORIGINAL ASSESSMENT PARTICULAR INCOME ESCAPES TAXATION AND RESULTS IN DEPRIVING THE EXCHEQUER ITS DUE REVENUE, IT IS THE DUTY OF THE AO TO REASSESS THE SAME. TO SAVE THE TAX-PAYERS FROM UNNECESSARY HARASSMENT BY OVER ENTHUSIASTIC TAX- ADMINISTRATORS HONBLE SUPREME COURT HAS HELD THAT CHANGE OF OPINION CANNOT AND SHOULD NOT FORM BASIS OF REASSESSMENT EXERCISE. AS EXISTENCE OF SECOND STEP OF A LADDER PRESUPPOSES THE FIRST STEP, SIMILARLY FOR CH ANGE OF OPINION THERE SHOULD BE A PRE-EXISTING OPINION. AS DISCUSSED EARLIER, IN THE PRESENT CASE AO HAD NOT FORMED ANY OPINION AND AS A RESULT THERE WAS NO CHANGE IN HIS OPINION. THEREFORE, CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE PRESENT CAS E WE UPHOLD THE ORDER OF THE FAA. 5.3. WE HAVE ALSO PERUSED THE OTHER CASE LAWS RELIED UPO N BY THE AR. WE FIND THAT IN THE CASE OF GERMAN REMEDIES LTD. (SUPRA) NOTICE OF REASSESSMENT WAS BASED ON MERE SUSPICION AND SAME WAS ISSUE IGNORING BINDING PRECEDENT. HONBLE BOMBAY HIGH COURT HAD HELD THAT THE ASSESSMENT ORDER PASSE D AFTER DETAILED DISCUSSION COULD NOT BE REOPENED WITHIN A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS THE AO HAD REASON TO BELIEVE THAT DUE TO SOME INHERENT DEFECT IN THE ASSESSMENT, INCOME CHARGEABLE TO TAX HAD BEEN UNDER -ASSESSED OR ASSESSED AT TOO LOW A RATE OR EXCESSIVE RELIEF HAS BEEN GRANTED OR EXCE SSIVE LOSS OR DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE UNDER THE ACT HAD BEEN COMPU TED. IT WAS FURTHER NOTICED BY THE COURT THAT A DECISION OF THE TRIBUNAL WAS BROUG HT TO THE NOTICE OF THE AO, BUT DECISION WAS TAKEN BY HIM WITHOUT REFERRING TO THE SAID DECISION. FINALLY IT WAS HELD - SINCE THE REOPENING OF THE ASSESSMENT WAS BASED ON CONJECTURES AND SURMISES AND WAS SOUGHT TO BE JUSTIFIED BY IGNORING BINDING DECISION S THE REOPENING OF THE ASSESSMENT WAS NOT VALID. IN OUR OPINION FACTS OF THE CASE ARE DIFFERENT FRO M THE FACTS OF GERMAN REMEDIES LTD. (SUPRA). IN THE CASE OF ASIAN PAINTS LTD.(SUPRA) HONBLE BOMBAY HIGH COURT HAS HELD THAT WHILE INVOKING THE PROVISIONS O F SECTION 147 HE CANNOT TAKE ADVANTAGE OF HIS OWN WRONG AND REOPEN THE ASSESSMEN T, AS AO HAS NO POWER TO REVIEW HIS OWN ORDERS. HONBLE BOMBAY HIGH COURT IN THE CASE OF ASTERIODS TRADING & INVESTMENTS P LTD. (SUPRA) HAS HELD THAT WHERE PE TITIONER HAS MADE FULL DISCLOSURE NECESSARY FOR CLAIMING A DEDUCTION UNDER A PARTICUL AR SECTION OF THE ACT AND THE AO, AFTER APPLYING HIS MIND TO RELEVANT RECORDS, HAD MA DE A SPECIFIC ORDER ALLOWING DEDUCTION, SUBSEQUENT ISSUE OF NOTICE ON THE GROUND THAT DEDUCTION UNDER THAT SECTION ITA NO. 6851/MUM/2011 M/S. INSTANT HOLDINGS LIMITED, (FORMERLY KNOWN AS KEC HOLDINGS LIMITED) 8 WAS WRONGLY ALLOWED WAS A RESULT OF CHANGE OF OPINI ON AND WAS INVALID. IN THE FULL BENCH DECISION OF USHA INTERNATIONAL LTD.(SUPRA) TH E HONBLE DELHI HIGH COURT HAS LAID DOWN RULES AS WHEN INVOKING OF PROVISIONS OF S ECTION 147 WOULD BE AGAINST THE LAW. IT WAS HELD THAT IF ANY QUERY IS RAISED AND DECIDED IN FAVOUR OF THE ASSESSEE BY THE AO REASSESSMENT PROCEEDINGS CANNOT BE UPHELD. SIMILARLY, IF QUERY IS RAISED BY THE AO AND IS ANSWERED BY THE ASSESSEE. WE FIND TH AT FACTS OF THE CASE, AS DISCUSSED EARLIER ARE DISTINGUISHABLE FROM THE MATTER OF USHA INTERNATIONAL LTD.(SUPRA). IN THE CASE OF ASHWAMEGH CO-OP HSG. SOC. LTD., HONBLE GUJ ARAT HIGH COURT HAD FOUND THAT ISSUE IN QUESTION; WHERE REASSESSMENT PROCEEDI NGS WERE INITIATED; WAS DELIBERATED UPON BY THE AO AND THE ASSESSEE HAD FILED DETAILED REPLY IN THAT REGARD. OTHER CASES RELIED UPON BY THE AR ARE ALSO DISTINGUISHABLE OF F ACTS, AS HELD BY THE FAA. AS A RESULT, GROUND 2AND 3 ARE DECIDED AGAINST THE ASSESSEE. 6. NEXT GROUND OF APPEAL IS ABOUT DISALLOWANCE OF MIS CELLANEOUS EXPENSES WRITTEN OFF AMOUNTING TO RS. 3.01 LAKHS. DURING T HE RE-ASSESSMENT PROCEEDINGS, AO FOUND THE APPELLANT HAD DEBITED RS. 3.01 LAKHS B EING 1/10 TH OF THE TOTAL EXPENSES UNDER THE HEAD MISCELLANEOUS EXPENSES WRITTEN-OFF. HE DIRECTED THE APPELLANT TO FURNISH JUSTIFICATION FOR THE SAID DEBIT ENTRY BECA USE AS PER THE PROVISIONS OF SECTION 35D OF THE ACT, THE SAME WAS NOT AN ALLOWABLE DEDUC TION TO A NON-BANKING FINANCIAL COMPANY (NBFC). AFTER CONSIDERING THE SUBMISSION O F THE ASSESSEE, HE HELD THAT IN VIEW OF THE SPECIFIC PROVISIONS OF SECTION 35D, THE DEDUCTION WAS ALLOWABLE TO A MANUFACTURING COMPANY AND NOT THE NBFC. HE FURTHER HELD THAT EVEN IF IT WAS ACCEPTED THAT THE EXPENDITURE HAD BEEN INCURRED ON INCREASE IN SHARE CAPITAL, THE APPELLANT WAS NOT ELIGIBLE FOR DEDUCTION. FINALLY, HE DISALLOWED AMOUNT OF RS. 3,01,403/- U/S. 35 OF THE ACT. IN THE APPELLATE PROCEEDINGS, FAA AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE-COMPANY HELD THAT THE ADDITIONS MADE BY TH E AO WERE BASED ON THE CORRECT APPRAISAL OF THE FACTS, THAT THE APPELLANT WAS A NB FC, THAT IT WAS A FINANCIAL INSTITUTION RECOGNIZED BY THE RBI GUIDELINES, THAT BY NO STRETC H OF IMAGINATION, IT COULD BE TAKEN AS INDUSTRIAL UNDERTAKING, THAT THE PROVISIONS OF S ECTION 35D WERE SPECIFIC AND ALLOWABLE ONLY TO AN INDUSTRIAL UNDERTAKING, THAT F INANCIAL INSTITUTIONS CANNOT BE TAKEN IN A LITERAL SENSE A INDUSTRIAL UNDERTAKING. DISMI SSING THE APPEAL FILED BY THE ASSESSEE, HE CONFIRMED THE ADDITIONS MADE BY THE AO. 6.1. BEFORE US, AR SUBMITTED THAT THE ESCAPEMENT OF THE AO WERE IN COMPLETE DISREGARD OF THE JUDGMENTS OF HONBLE HIGH COURT OF BOMBAY, THAT JURISDICTIONAL HIGH COURT HAD GIVEN A VIDE MEANING FOR WORDS INDUSTRIAL UNDERTAKING, THAT INDUSTRIAL UNDERTAKING WAS NOT NECESSARY CONFINED MANUFACTURE/ PRODUCTION OF ARTICLES. HE RELIED UPON THE CASES OF SHIP SCRAP TRADERS (251 ITR 806) AND EMIRATES COMMERCIAL BANK LTD.,(262 ITR 55). HE FURTHER SUBMITTED THAT THE D ISALLOWANCE WAS A RESULT OF FRESH ENQUIRY BY THE AO, THAT IN THE REASONS RECORDED THE RE WAS NO MENTION ABOUT THE PROPOSED DISALLOWANCE. HE RELIED UPON THE ORDERS O F THE TRAVANCORE CEMENTS LTD., (219 CTR 359); SUN ENGINEERING WORKS P. LTD., [198 ITR 297 (SC)]; VIPAN KHANNA (255 ITR 220). DR SUBMITTED THAT EXPENDITURE WAS I NCURRED FOR INCREASING IN SHARES, THAT ASSESSEE WAS NOT CARRYING OUT ANY MANUFACTURIN G/PRODUCTION ACTIVITY. 6.2. WE HAVE HEARD THE RIVAL SUBMISSIONS. IT IS AN UNDI SPUTED FACT THAT THE APPELLANT IS AN NBFC AND IS DEALING IN SHARES. AN FINANCIAL INSTITUTION RECOGNIZED BY ITA NO. 6851/MUM/2011 M/S. INSTANT HOLDINGS LIMITED, (FORMERLY KNOWN AS KEC HOLDINGS LIMITED) 9 THE RBI GUIDELINES CANNOT BE TREATED AN INDUSTRIAL UNDERTAKING. WORD INDUSTRIAL UNDERTAKING HAS A DEFINITE MEANING IN TAXATION LAWS AND AS PER OUR HUMBLE OPINION THE ASSESSEE IS NOT ENTITLED TO THE DEDUCTION U/S.35D O F THE ACT CLAIMING ITSELF AN INDUSTRIAL UNDERTAKING. AMORTISATION OF PRELIMINARY EXPENSES A RE COVERED BY THE PROVISIONS OF SECTION 35D AND THE DETAILS FILED BY THE APPELLANT WITH REGARD TO THE EXPENDITURE INCURRED DO NOT SUPPORT ITS CLAIM.AO HAS RIGHTLY PO INTED OUT THAT EVEN IF THE EXPENDITURE WAS FOR INCREASE OF SHARE CAPITAL IT WA S NOT TO BE ALLOWED. THEREFORE, WE ARE OF THE OPINION THAT ORDERS OF THE REVENUE AUTHO RITIES DO NOT NEED ANY INTERFERENCE FROM OUR SIDE. 6.2.1. IN THE CASE OF SHIP SCRAP TRADERS (SUPRA) PROVISIO NS DEALING WITH DEDUCTIONS UNDER SECTIONS 80 HHA AND 80-I HAVE BEEN DISCUSSED AND IT HAS NOTHING TO DO WITH THE SEC. 35D OF THE ACT. SIMILARLY, IN THE CASE OF EMIRATES COMMERCIAL BANK LTD (SUPRA) ISSUE OF INVESTMENT ALLOWANCE (SEC.32A) WAS DECIDED-ISSUE OF AMORTISATION OF CERTAIN PRELIMINARY EXPENSES (SEC. 35D) WAS NOT BEFORE THE HONBLE BOMBAY HIGH COURT. 6.3. AS FAR AS NON-RECORDING OF REASONS WITH REGARD TO M ISCELLANEOUS EXPENSES WRITTEN OFF IS CONCERNED, WE ARE OF THE OPINION TH AT AFTER THE AMENDMENT TO SECTION 147 W.E.F. 1.4.1989,THERE IS A TOTAL CHANGE IN THE LAW ABOUT THE RE-OPENING OF ASSESSMENTS. EXPLANATION 3 TO SECTION 147 OF THE AC T, INSERTED BY THE FINANCE (NO.2) ACT 2009, PROVIDES THAT THE AO MAY ASSESS OR REASSE SS THE INCOME IN RESPECT OF ANY ISSUE, WHICH HAS ESCAPED ASSESSMENT, AND SUCH ISSUE COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER SECTION 147 OF THE ACT NOTWITHSTANDING THAT THE REASONS FOR SUCH ISSUE HAVE NOT BEEN INCLUDED IN TH E REASONS RECORDED UNDER SUB- SECTION (2) OF SECTION 148. THE PROVISION NOWHERE P OSTULATES OR CONTEMPLATES THAT IT IS ONLY WHEN THERE IS SOME ADDITION ON THE GROUND ON W HICH REASSESSMENT HAD BEEN INITIATED, THAT THE ASSESSING OFFICER COULD MAKE AD DITIONS ON ANY OTHER GROUND ON THE BASIS OF WHICH INCOME MAY HAVE ESCAPED ASSESSMENT. THE REASSESSMENT PROCEEDINGS, THUS, COULD NOT BE HELD TO BE VITIATED. IN OTHER W ORDS THE EFFECT OF THE EXPLANATION IS THAT EVEN THOUGH THE NOTICE THAT HAS BEEN ISSUED UN DER SECTION 148 CONTAINING THE REASONS FOR REOPENING THE ASSESSMENT DOES NOT CONTA IN A REFERENCE TO A PARTICULAR ISSUE WITH REFERENCE TO WHICH INCOME HAS ESCAPED ASSESSME NT, THE AO MAY ASSESS OR REASSESS THE INCOME IN RESPECT OF ANY ISSUE WHICH H AS ESCAPED ASSESSMENT, WHEN SUCH ISSUE COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURS E OF THE PROCEEDINGS. COURTS ARE OF THE OPINION THAT THE PARLIAMENT HAVING USED THE WOR DS ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH H AS ESCAPED ASSESSMENT, THE WORDS AND ALSO CANNOT BE READ AS BEING IN THE ALT ERNATIVE. IT HAS BEEN FURTHER HELD BY THEM THAT ON THE CONTRARY, THE CORRECT INTERPRETATI ON WOULD BE TO REGARD THOSE WORDS AS BEING CONJUNCTIVE AND CUMULATIVE. IT IS OF SOME SIG NIFICANCE THAT PARLIAMENT HAS NOT USED THE WORD OR. THE LEGISLATURE DID NOT REST CO NTENT BY MERELY USING THE WORD AND. THE WORDS AND AS WELL AS ALSO HAVE BEEN USED TOGETHER AND IN CONJUNCTION. EVIDENTLY, WHAT PARLIAMENT INTENDS BY USE OF THE WO RDS AND ALSO IS THAT THE AO, UPON THE FORMATION OF A REASON TO BELIEVE UNDER SEC TION 147 AND THE ISSUANCE OF A NOTICE U/S. 148(2) MUST ASSESS OR REASSESS SUCH INC OME ; AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THE SECTION. IN THESE CIRCUMSTANCES WE ARE OF THE OPINION THAT THE AO / F AA WAS FOLLOWING A CORRECT LEGAL PATH WHEN HE HAD DISALLOWED /CONFIRMED THE AN AMOUN T OF RS.3.01 LAKHS UNDER THE HEAD MISCELLANEOUS EXPENSES WRITTEN-OFF. ITA NO. 6851/MUM/2011 M/S. INSTANT HOLDINGS LIMITED, (FORMERLY KNOWN AS KEC HOLDINGS LIMITED) 10 6.4. WE HAVE PERUSED THE CASE LAWS RELIED UPON BY THE AR . WE FIND THAT THE CASE OF SUN ENGINEERING WORKS P.LTD. (SUPRA) DEALS WITH PROVISION AS EXISTED BEFORE THE INSERTION OF EXPLANATION 3 TO THE SECTION AND HENCE NOT APPLICABLE TO THE CASE UNDER CONSIDERATION. WE FIND THAT DECISION OF TRAVANCORE CEMENTS LTD.(SUPRA) WAS OVERRULED BY DECISION OF THE FULL BENCH OF THE SAME HONBLE HIGH COURT DELIVERED IN THE CASE OF BEST WOOD INDUSTRIES AND SAW MILLS(331I TR63).IN THE CASE OF VIPIN KHANNA PRINCIPLES ENUMERATED BY THE DECISION OF SUN ENGINEERING WORKS P. LTD. (SUPRA)HAVE BEEN RELIED UPON. AS STATED EARLIER, D ECISION OF THE HONBLE SUPREME COURT DOES NOT DEAL WITH AMENDED PROVISIONS OF THE ACT. THEREFORE, GROUND NO.4 FILED BY THE APPELLANT COMPA NY IS DECIDED AGAINST IT. 7. LAST GROUND OF APPEAL DEALS WITH DISALLOWANCE OF AD MINISTRATIVE EXPENSES OF RS. 1.5 LAKHS AND GENERAL EXPENSES OF RS. 93,750/- RESPECTIVELY. DURING THE ASSESSMENT PROCEEDINGS, AO DIRECTED THE APPELLANT T O FURNISH THE DETAILS ALONG WITH THE DOCUMENTARY EVIDENCES REGARDING ADMINISTRATIVE EXPENSES AND GENERAL EXPENSES. IN ITS REPLY, ASSESSEE SUBMITTED DEBIT N OTES ISSUED BY THE KEC INTERNATIONAL LTD. (PARENT COMPANY) WITH REGARD TO ABOVE REFERRED TWO EXPENSES WERE IN THE NAME OF APPELLANT-COMPANY. AO HELD THAT APPELLANT HAD N OT FURNISHED ANY BILLS, VOUCHERS TO SUBSTANTIATE ITS CLAIM, THAT IN ABSENCE OF DOCUM ENTARY EVIDENCES SUCH AS BILLS, VOUCHERS AND BANK PASS BANK ENTRIES ETC., EXPENDITU RE CLAIMED BY THE ASSESSEE COULD NOT BE ALLOWED IN FULL. HE DISALLOWED 50% OF THESE EXPENSES CLAIMED UNDER THE HEAD ADMINISTRATIVE EXPENSES AND RS. 93,750/- UNDER TH E HEAD GENERAL EXPENSES. 7.1 IN THE APPELLATE PROCEEDINGS, FAA AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE-COMPANY AND DOCUMENTS AVAILABLE ON RECORD HELD THAT THE APPELLANT WAS NOT ABLE TO GIVE ANY EVIDENCE TO SUPPORTS ITS CLAIM DUR ING THE ASSESSMENT PROCEEDINGS, THAT IT HAD SUBMITTED ONLY A DEBIT NOTE RECEIVED FROM IT S PARENT COMPANY, THAT ASSESSEE DID NOT EXPLAIN THE BASIS OF ALLOCATION OF EXPENSES WIT H THE PARENT COMPANY, THAT THE BASIC REASON FOR SUCH ALLOCATION WAS NEVER SUBMITTED, THA T THE APPELLANT DID NOT PROVE THAT EXPENDITURE WAS ACTUALLY INCURRED FOR ITS BUSINESS, THAT DURING APPELLATE PROCEEDINGS ALSO APPELLANT HAD NOT PRODUCED ANY EVIDENCE TO SUP PORT ITS CLAIM. HE FINALLY HELD THAT EXPENDITURE WAS NOT INCURRED FOR THE PURPOSE O F BUSINESS OF THE ASSESSEE AND HE CONFIRMED THE ADDITION MADE BY THE AO. 7.2. BEFORE US, AR SUBMITTED THAT APPELLANT COMPANY HAD PRODUCED DEBIT NOTES RAISED BY THE KEC INTERNATIONAL LTD., INCLUDING THE BREAK OF THE ADMINISTRATIVE EXPENSES DURING THE ORIGINAL PROCEEDINGS, THAT THER E WAS NO ALLEGATION ABOUT NON- PAYMENT OF THE EXPENDITURE, THAT KEC INTERNATIONAL LTD., HAD ACTUALLY INCURRED THE EXPENSES. HE FURTHER SUBMITTED THAT THE AFORESAID DIS-ALLOWANCE WAS RESULT OF A FRESH ENQUIRY BY THE AO AND IN THE REASONS RECORDED, THER E WAS NO MENTION OF ADMINISTRATIVE EXPENSES. HE RELIED UPON THE CASES OF CHANDRA PRAKASH AGRAWAL (287ITR172); RAJAT TRADECOM INDIA P. LTD.,(120 ITD 48); SAINICO ENTERPRISES (4 SOT 445).DR SUBMITTED THAT NO DETAILS WERE FILED BY THE APPELLANT COMPANY, EXCEPT FOR THE DEBIT NOTE, BEFORE THE AO OR THE FAA, THAT BURDEN WAS ON THE ASSESSEE TO PROVE SUCH EXPENDITURE WAS INCURRED FOR BUSINESS, THAT IN THE ABSENCE OF EVIDENCES BY THE ASSESSEE, AO/FAA RIGHTLY DISALLOWED CONFIRMING THE PART EXPENDITURE CLAIMED TO HAVE BEEN INCURRED FOR UNDER THE HEAD ADMINISTRATIVE EX PENSES. 7.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. IT IS ITA NO. 6851/MUM/2011 M/S. INSTANT HOLDINGS LIMITED, (FORMERLY KNOWN AS KEC HOLDINGS LIMITED) 11 FOUND FROM THE RECORD THAT ASSESSEE HAD CLAIMED THE SAID EXPENDITURE ON THE BASIS OF DEBIT NOTE RECEIVED FROM THE PARENT COMPANY. NEITH ER BEFORE THE AO NOR BEFORE THE FAA APPELLANT HAD PRODUCED ANY EVIDENCE ESTABLISHIN G THE FACTS THAT THE SAID EXPENDITURE WAS DIRECTLY INCURRED FOR THE PURPOSES OF THE BUSINESS CARRIED ON BY THE ASSESSEE. IT WAS CLAIMED THAT ASSESSEE WAS SHARING THE EXPENDITURE WITH THE PARENT- COMPANY. THE BASIS FOR SHARING THE EXPENDITURE IN QUESTION WAS NEVER PRODUCED BEFORE ANY OF THE AUTHORITIES. AS PER THE SETTLED PRINCIPLES OF TAXATION, THE BURDEN FOR CLAIMING DEDUCTION IS ON ASSESSEE. WE FIND THAT IN THE CASE UNDER CONSIDERATION, INITIAL ONUS WAS NOT DISCHARGED BY THE APPELLANT COMPANY WI TH REGARD TO THE EXPENDITURE CLAIMED. WE FIND THAT CASES RELIED UPON BY THE AR NOT APPLICABLE TO THE FACTS OF THE CASE UNDER CONSIDERATION. IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE ORDER OF THE FAA NEEDS NO INTERFERENCE FROM OUR SIDE. GROUND NO.5 IS DECIDED AGAINST THE ASSESSEE. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH DECEMBER, 2012. * % () , -. 5 TH DECEMBER, 2012 ) % / 0 SD/- S D/- ( . . / I.P. BANSAL ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI, - DATE: 5 TH DECEMBER, 2012 TNMM * * * * % %% % '&1 '&1 '&1 '&1 21& 21& 21& 21& / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR I BENCH, ITAT, MUMBAI 6. GUARD FILE #1& '& //TRUE COPY// * * * * / BY ORDER, 3 33 3 / 4 4 4 4 DY./ASST. REGISTRAR , / ITAT, MUMBAI