SUPREME CAPITAL MANAGEMENT LTD., MUMBAI V. I.T.O.3(3)(4), MUMBAI

ITA 6933/MUM/2012

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9230 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2002-2003
• Appeal Filed On: 16-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V JUSTEINSR
• Assessee Lawyers: NISHITH KHATRILD ARS
• Keywords: Depreciation; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

ITA NO.6933/MUM/2012 SUPREME CAPITAL MANAGEMENT LIMITED ASSESSMENT YEAR 2002-03 IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI , , BEFORE SHRI MAHAVIR SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO. 6933/MUM/2012 ( / ASSESSMENT YEAR: 2002-03) S UPREME CAPITAL MANAGEMENT L TD. 612, RAHEJA CHAMBERS 231, NARIMAN POINT MUMBAI 400 021 / VS. INCOME TAX OFFICER 3(3)(4) AAYKAR BHAVAN M.K.ROAD MUMBAI 400 020 ./ ./PAN/GIR NO. AAACS-7243-J ( /APPELLANT ) : ( !' / RESPONDENT ) A SSESSEE BY : NITESH JOSHI & NISHITH KHATRI,LD.ARS RE VENUE BY : V.JUSTEIN,SR.AR / DATE OF HEARING : 31/08/2017 / DATE OF PRONOUNCEMENT : 04/10/2017 ITA NO.6933/MUM/2012 SUPREME CAPITAL MANAGEMENT LIMITED ASSESSMENT YEAR 2002-03 2 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2002-03 ASSAILS THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)- 7 [CIT(A)], MUMBAI APPEAL NO. CIT(A)-7/IT-203/08-09 DATED 16/08/2012 QUA CONFIRMATION OF CERTAIN DISALLOWANCES. THE ASSESSEE HAS ALSO CONTESTED THE REASSESSMENT PROCEEDINGS ON LEGA L GROUNDS. THE ASSESSMENT WAS FRAMED BY INCOME TAX OFFICER-3(3)(4), MUMBAI ON 17/12/2007 U/S 143(3) READ WITH SECTION 147 OF THE INCOME TAX ACT, 1961. 2.1 FACTS LEADING TO THE SAME ARE THAT THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE WAS SUBJECTED TO AN ASSESSMENT U/S 143(3) READ WITH SECTION 147 OF THE INCOME TAX ACT ON 17/12/2007 WHERE THE LOSS OF THE ASSESSEE WAS RE-DETERMINED AT RS.17,529/-. THE ORIGINAL RETURN OF INCOME WAS FILED ON 31/10/2002 AT LOSS OF RS.12,48, 340/- WHICH WAS ACCEPTED IN SCRUTINY ASSESSMENT U/S 143(3) ON 10/11 /2004. 2.2 THE REASSESSMENT PROCEEDINGS WERE INITIATED ON THE PREMISES THAT THE ASSESSEE EARNED EXEMPT DIVIDEND INCOME OF RS.98 ,720/- DURING THE YEAR AND CLAIMED EXPENSES OF RS.4,38,685/- AGAINST THE SAME. FURTHER, THE ASSESSEE DID NOT ACTUALLY CARRY OUT ANY BUSINES S ACTIVITY DURING THE YEAR BUT CLAIMED DEPRECIATION OF RS.11,66,816/- AND PRELIMINARY EXPENSES OF RS.63,998/- BESIDES OTHER EXPENSES AND THE SAME HAS RESULTED INTO UNDERASSESSMENT OF INCOME TO THE TUNE OF RS.12,48,340/- WITHIN THE MEANING OF EXPLANATION 2(C)(IV) TO SECTI ON 147. CONSEQUENTLY, ITA NO.6933/MUM/2012 SUPREME CAPITAL MANAGEMENT LIMITED ASSESSMENT YEAR 2002-03 3 NOTICE U/S 148 DATED 30/03/2007 WAS ISSUED AND SERV ED ON THE ASSESSEE WHICH WAS FOLLOWED BY STATUTORY NOTICES U/S 143(2) & 142(1). 2.3 THE ASSESSEE CONTESTED THE REASSESSMENT PROCEED INGS ON THE PREMISES THAT ALL DETAILS WERE SUBMITTED DURING SCR UTINY ASSESSMENT PROCEEDINGS AND LD. AO, WITH DUE APPLICATION OF MIN D, ACCEPTED THE CLAIM OF THE ASSESSEE. HOWEVER, NOT CONVINCED, LD. AO, WHILE UPHOLDING REASSESSMENT PROCEEDINGS RE-COMPUTED LOSS AT RS.17, 529/-. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITHO UT ANY SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 16/08/2 012 WHERE THE ASSESSEE CONTESTED THE REASSESSMENT PROCEEDINGS ON LEGAL GROUNDS AS WELL AS ON MERITS. AGGRIEVED, THE ASSESSEE IS IN FU RTHER APPEAL BEFORE US. 4.1 THE LD. REPRESENTATIVE FOR ASSESSEE [AR], CONTE STED THE REASSESSMENT PROCEEDINGS, FIRSTLY, BY CONTENDING TH AT ALL DETAILS WERE MADE AVAILABLE DURING ORIGINAL SCRUTINY ASSESSMENT PROCEEDINGS AND THE LD. AO DULY CONSIDERED THE SAME AND ALLOWED THE ASS ESSEES CLAIM. OUR ATTENTION WAS DRAWN TO THE FACT THAT NO NEW TANGIBL E MATERIAL CAME TO THE POSSESSION OF LD. AO SO AS TO JUSTIFY REASSESSMENT PROCEEDINGS. 4.2 THE LD. AR FURTHER CONTESTED THE QUANTUM ADDI TION BY DRAWING OUR ATTENTION TO THE FACT THAT THE EXPENDITURE MAINLY C ONSIST OF PRELIMINARY EXPENSES AND DEPRECIATION WHICH WERE STATUTORY DEDU CTIONS AND ARISING FROM EARLIER YEARS AND THEREFORE, ALLOWABLE TO THE ASSESSEE. 4.3 PER CONTRA, LD. DR PLACED RELIANCE ON THE STAND OF LOWER AUTHORITIES AND CONTENDED THAT REASSESSMENT PROCEED INGS WERE RIGHTLY INVOKED SINCE THERE WAS EXCESSIVE CLAIM OF DEPRECIA TION. 5. SINCE THE LEGAL GROUNDS GOES TO THE ROOT OF THE MATTER, WE TAKE UP THE SAME FIRST. IT IS NOTED THAT ASSESSMENT YEAR IN VOLVED IS 2002-03 AND ITA NO.6933/MUM/2012 SUPREME CAPITAL MANAGEMENT LIMITED ASSESSMENT YEAR 2002-03 4 REASSESSMENT NOTICE HAS BEEN ISSUED ON 30/03/2007 A ND HENCE, THE SAME IS WITHIN FOUR YEARS FROM END OF RELEVANT AY. IN THIS SITUATION, THE ONLY REQUIREMENT TO BE FULFILLED IN ORDER TO RESORT TO REASSESSMENT PROCEEDINGS, AS PER SECTION 147, WAS THAT THE LD. A O HAD SOME REASONS TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPE D ASSESSMENT. FURTHER, WE NOTE THAT EXPLANATION 2(C)(IV) TO SECTI ON 147 HAS BEEN INVOKED BY LD. AO SINCE EXCESSIVE LOSS OR DEPRECIAT ION HAD BEEN GRANTED TO THE ASSESSEE. WE FURTHER FIND THAT EXPLA NATION-2 CREATES A DEEMING FICTION AND HAS TO BE CONSTRUED STRICTLY. T HIS EXPLANATION PROVIDES FOR SITUATION, WHERE INCOME IS DEEMED TO H AVE ESCAPED ASSESSMENT. THEREFORE, APPLYING THE STATUTORY PROVI SIONS TO THE ISSUE IN HAND, WE ARE INCLINED TO HOLD THAT REASSESSMENT PRO CEEDINGS WERE RIGHTLY INVOKED BY LD. AO. THEREFORE, THE LEGAL GROUND RAIS ED BY THE ASSESSEE STANDS DISMISSED. 6. PROCEEDING FURTHER ON MERITS, WE FIND THAT THE E XPENDITURE CLAIMED BY THE ASSESSEE MAINLY CONSIST OF DEPRECIATION, PRE LIMINARY EXPENSES AND CERTAIN OTHER EXPENSES. WE AGREE WITH THE CONTE NTION OF THE LD. AR THAT THE DEPRECIATION ALLOWANCE IS AN STATUTORY ALL OWANCE AND THE SAME HAS TO BE ALLOWED MANDATORILY IN TERMS OF EXPLANATI ON-5 TO SECTION 32. FURTHER, DOCUMENTS ON RECORD REVEAL THAT PRELIMINAR Y EXPENSES WERE INCURRED IN EARLIER YEARS AND A PORTION OF THE SAME IS BEING CLAIMED BY THE ASSESSEE EVERY YEAR IN TERMS OF SECTION 35D. TH EREFORE, THE SAME HAS NO LINKAGE WITH THE CONTINUITY OF BUSINESS BY T HE ASSESSEE AND HENCE ALLOWABLE TO THE ASSESSEE. THE OTHER EXPENSES CONSIST OF ITEMS LIKE AUDITORS REMUNERATION, RATES & TAXES, AND MISCELLA NEOUS EXPENSES ETC. AND THESE CONSTITUTE INSIGNIFICANT PORTION OF TOTA L ITA NO.6933/MUM/2012 SUPREME CAPITAL MANAGEMENT LIMITED ASSESSMENT YEAR 2002-03 5 EXPENDITURE CLAIMED BY THE ASSESSEE. WE FIND THE SA ME TO BE NECESSARY SO AS TO MAINTAIN THE CORPORATE ENTITY AND HENCE, A LLOWABLE TO THE ASSESSEE. RESULTANTLY, WE UPHOLD THE ASSESSEE CLAI M OF THESE EXPENDITURE UNDER BUSINESS HEAD AND HENCE, DELETE THE DISALLOWANCES ON MERITS. 7. IN NUTSHELL, THE ASSESSEES APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04 TH OCTOBER, 2017. SD/- SD/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 04. 10.2017 SR.PS:- THIRUMALESH ! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. ) ( ) / THE CIT(A) 4. ) / CIT CONCERNED 5. !$, , , , / DR, ITAT, MUMBAI 6. -. / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI