HSBC SECURITIES AND CAPITAL MARKETS (INDIA) P.LTD, MUMBAI V. DCIT RG 4(1), MUMBAI

ITA 6950/MUM/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2745 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 13-08-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 16-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHRIKANT NAMDEO
• Assessee Lawyers: YOGESH A THAR
• Keywords: Depreciation; Rectification of order; Tangible material; Bad and doubtful debts; Revised return; Reason to believe
• Section: 143(3); 14A; 148; 139

Judgement Text

HSBC SECURITIES AND CAPITA L MARKETS (INDIA) PVT LTD ITA NO. 6950 /MUM/201 2 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H, MUMBAI , , BEFORE SHRI AMIT SHUKLA , JUDICIAL MEMBER AND SHRI RAMIT KOCHAR , ACCOUNTAN T MEMBER ITA NO. : 6 950 /MUM/20 1 2 ( ASSESSMENT YEAR: 200 2 - 0 3 ) HSBC SECURITIES AND CAPITAL MARKETS ( INDIA ) PVT LTD , 52/60 MAHATMA GANDHI ROAD, 6 TH FLOOR, FORT, MUMBAI - 400 0 01 .: PAN: A A A C J 1395 E VS DY. COMMISSIONER OF INCOME TAX RG 4 ( 1 ), R. NO. 640, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400 0 20 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI YOGESH A THAR RESPONDENT BY : SHRI SHRIKANT NAMDEO /DATE OF HEARING : 13 - 08 - 201 5 / DATE OF PRONOUNCEMENT : 10 - 11 - 201 5 ORDER , . . : PER AMIT SHUKLA, J M : THE AFORESAID APPEAL HA S BEEN FILED BY THE ASSESSEE AGAINST IMPUGNED ORDER DATED 01.08.2012 , PASSED BY CIT(A), MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) R.W.S. 147 FOR THE ASSESSMENT YEAR 2002 - 03. IN THE GROUNDS OF APPEAL, THE ASSESSEE HAS MAINLY CHALLENGED ; F IRSTLY , THE VALIDITY OF REOPENING THE ASSESSMENT U/S 147; SECONDLY , ADDITION OF RS. 23,67,054/ - ON ACCOU NT OF ALLEGED DIFFERENCE BETWEEN AMOUNT OF BROKERAGE INCOME AS PER THE ASSESSEES SERVICE TAX RETURN AND THE INCOME - TAX RETURN; AND THIRDLY , ENHANCEMENT BY CIT(A) OF RS. 28,85,037/ - FROM ADDITION OF RS. 19,02,674/ - MADE BY THE AO ON ACCOUNT OF ALLEGED DIFF ERENCE BETWEEN THE AMOUNT OF SERVICE TAX PAID. HSBC SECURITIES AND CAPITA L MARKETS (INDIA) PVT LTD ITA NO. 6950 /MUM/201 2 2 2. FACTS IN BRIEF QUA THE LEGAL ISSUE RAISED VIDE GROUND NO. 1 ARE THAT, ASSESSEE HAD FILED ITS RETURN OF INCOME U/S 139(1) FOR THE ASSESSMENT YEAR 2002 - 03 ON 31.10.2002 , DECLARING TOTAL INCOME OF RS. 14,65, 03,840/ - . THE SAID RETURN WAS PROCESSED U/S 143(1) ON 14.02.2003. THEREAFTER, THE ASSESSEE HAD FILED ITS REVISED RETURN OF INCOME ON 14.10.200 3 DECLARING TOTAL INCOME OF RS. 14,47,53,500/ - . THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY BY ISSUANCE OF NOTIC E U/S 143(2) AND ASSESSMENT WAS MADE VIDE ORDER U/S 143(3) DATED 28 TH JANUARY, 2005 , DETERMINING THE TOTAL INCOME AT RS.18,97,94,441/ - , AFTER MAKING FOLLOWING DISALLOWANCES / ADDITIONS : - (AMT. IN RS.) ADD: (1) OUT OF INTEREST CLAIM 26,77,452 ( 2) BAD DEBTS DISALLOWED 3,36,46,187 (3) DISALLOWANCE U/S 14A ON DIVIDEND 16,69,286 (4) PENALTY DISALLOWED 1,15,663 (5) SOFTWARE EXPENSES CAPITALIZED (AFTER DEPRECIATION) 16,19,363 (6) EXCESS DEPRECIATION ON SOFTWARE DISALLOWED 35,62,650 4,32,90,601 SUCH AN ADDITION WAS ALSO SUBJECT MATTER OF FIRST APPEAL BEFORE THE CIT(A). 3. AFTER COMPLETING THE ASSESSMENT IN THE AFORESAID MANNER, THE ASSESSEES CASE H AS BEEN REOPENED BY ISSUANCE OF NOTICE U/S 148 DATED 31.03.2009 WHIC H IS MUCH AFTER THE EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE SAID ASSESSMENT HAS BEEN SOUGHT TO BE REOPENED U/S 147 ON THE FOLLOWING REASONS RECORDED : - THE ASSESSEE FILED ITS RETURN OF INCOME ON 31.10.2002 DECLARING TOTAL INC OME AT RS.14,65,03,840/ - . THEREAFTER, THE ASSESSEE FILED ITS REVISED RETURN OF INCOME ON 14.10.2003 DECLARING TOTAL INCOME AT RS. 14,47,53,500/ - . THE ASSESSMENT U/S.143(3) WAS COMPLETED ON 28.01.2005 ASSESSING THE TOTAL INCOME AT RS.18,97,94,440/ - . THE TOT AL INCOME WAS REDUCED TO RS.15,24,88,580/ - VIDE RECTIFICATION ORDER U/S.154 DATED 12.05.2006. IT WAS SEEN FROM THE PROFIT AND LOSS ACCOUNT THAT THE ASSESSEE HAD DEBITED RS.1,57,07,000/ - BEING SERVICE TAX PAID. ON VERIFICATION OF COPIES OF SERVICE TAX RETU RNS FILED B Y THE ASS ESSEE IT IS SEEN THAT THE AMOUNT OF SERVICE TAX PAID WAS RS.1,37,86,326/ - AGAINST RS. 15,7 07, 00O/ - DEBITED TO P & L A/C. HSBC SECURITIES AND CAPITA L MARKETS (INDIA) PVT LTD ITA NO. 6950 /MUM/201 2 3 FURTHER, IT WAS SEEN FROM THE DETAILS THAT THE ASSESSEE HAS RECEIVED GROSS BROKERAGE OF RS. 25,38,55,000/ - (STATE D TO BE AS PER SERVICE TAX RETURN). ON VERIFICATION OF SERVICE TAX RETURN (FORM ST 3) THE GROSS BROKERAGE RECEIVED WAS RS. 27,56,68,965/ - AND THE SAME WAS SHOWN AS RS. 25,38,55,000/ - AS PER DETAILS FILED AND ACCOUNTED FOR RS. 25,14,88,000/ - IN P&L A/C. THU S, THERE WAS AN UNDER ASSESSMENT OF RS. 2,18,13,965/ - (RS. 27,56,68,965/ - MINUS RS. 25,38,55,000/ - ). IN VIEW OF THE ABOVE, I HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AT RS.2,18,13,965/ - AN D THIS CASE IS FIT FOR INITIAT ING PROCEEDINGS U/S.147 OF THE I.T. ACT. NOTICE U/S 148 ISSUED . IN RESPONSE TO SUCH A NOTICE , ASSESSEE FILED A VERY DETAILED OBJECTIONS BEFORE THE AO STATING THAT THE ISSUE WHICH HAS BEEN RAISED IN THE REASONS RECORDED WERE SPECIFICALLY EXAMINED AND LOOKED UPON BY THE AO INASMUCH AS ALL THE REQUISITE DETAILS AND REPLIES ON SERVICE TAX AND BROKERAGE WERE FILED. FURTHER, SO FAR AS ASSESSEE IS CONCERNED, IT HAS MADE WHOLLY AND TRULY ALL THE DISCLOSURES NECESSARY FOR THE ASSESSMENT AND NOT ONLY THAT THEY HAVE BEEN SUBJECTED TO SCRUTINY BY THE AO IN THE ORIGINAL ASSESSMENT PROCEEDINGS. HENCE IT WAS CONTENDED THAT SUCH A REOPENING IS BAD IN LAW. HOWEVER, THE AO REJECTED THE ASSESSEES OBJECTION AND COMPLETED THE ASSESSMENT U/S 147 R.W.S. 143(3) AFTER M AKING THE ADDITION OF RS. 2,37,34,639/ - . THIS ACTION OF THE AO FOR REOPENING THE ASSESSMENT U/S 147 HAS BEEN UPHELD BY THE CIT(A) ALSO. 4. BEFORE US LD. COUNSEL , SHRI YOGESH A THAR SUBMITTED THAT THE LD. AO DURING THE COURSE OF THE ORIGINAL ASSESSMENT PRO CEEDINGS HA D RAISED SPECIFIC QUERY WITH REGARD TO THE SERVICE TAX PAID AND ALSO DETAILS REGARDING BROKERAGE. THIS QUERY, HE POINTED OUT WAS RAISED VIDE POINT NO. 29 , ISSUED VIDE NOTICE DATED 25.10.2004 U/S 142(1). IN RESPONSE, THE ASSESSEE HAD SUBMITTED THE COPY OF SERVICE TAX ASSESSMENT ORDER AND ALSO THE DETAILS OF BROKERAGE ALONG WITH RETURN OF SERVICE TAX. ALL THESE DETAILS ARE APPEARING FORM PAGES 51 TO 60 OF THE PAPER BOOK. THUS , HE SUBMITTED THAT NOT ONLY THIS ISSUE HAS BEEN LOOKED UPON BUT ALSO HSBC SECURITIES AND CAPITA L MARKETS (INDIA) PVT LTD ITA NO. 6950 /MUM/201 2 4 TH ERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. HE FURTHER SUBMITTED THAT FROM THE PERUSAL OF THE REASONS RECORDED , IT CAN BE SEEN THAT THE AO IS ONLY MENTIONING ABOUT THE PROFIT AND LOSS ACCOUNT AND THE DETA ILS WHICH ARE ALREADY ON THE RECORD AND THERE IS NO WHISPER ABOUT ANY TANGIBLE MATERIAL COMING ON RECORD SO AS TO SUGGEST THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND THEREFORE, SUCH A REOPENING BEYOND THE PERIOD OF 4 YEARS CANNOT BE SUSTAI NED. IN SUPPORT OF HIS CONTENTION, HE RELIED UPON THE FOLLOWING DECISIONS : - 1 HIN DUSTAN LEVER LTD. V R B WADKAR [ 2004 ] 268 ITR 332 (BOM) 2 BHAVESH DEVELOPERS LTD. V AO [ 2010 ] 329 ITR 249 (BOM) 3 ROCK CASTLE PROPERTY PRIVATE LTD. V CIT WP 738 OF 2012(BO M) 4 KIMPLAS TRENTON FITTINGS LTD V ACIT [ 2011 ] 340 ITR 299(BOM) 5 CIT V PETROLEUM INDIA INTERNATIONAL [ 2013 ] 220 TAXMAN 11(BOM) 6 AGILSYS IT SERVICES INDIA (P) LTD. V DCIT [2013] 40TAXMAN.COM139(TRIB MUM) 7 GLOBAL SIGNALS CABLE PVT LTD VS DCIT WP NO. 747 OF 2014 (DEL) 8 BOMBAY STOCK EXCHANGE LTD VS DDIT WP NO. 2468 OF 2011(BOM) 9 TALATI & PANTHAKY ASSOCIATED (P) LTD. V DCIT [2014] 362 ITR 362 (BOM) 5. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER OF THE CIT(A) AND SUBMITTED THAT LD. CIT(A) IN PA RA 2.10 OF THE ORDER HAS POINTED OUT THAT THERE WAS DISCREPANCY IN THE AMOUNT SHOWN IN THE PROFIT AND LOSS ACCOUNT AND THE AMOUNT OF SERVICE TAX CLAIMED BY THE ASSESSEE IN THE RETURN OF INCOME. THE TAX AUDIT REPORT DID NOT DISCLOSE THE AMOUNT OF SERVIC E TAX WHICH HAS REMAINED UNPAID AFTER 31 ST MARCH, 2002 THOUGH DEDUCTED IN THE ACCOUNTS BUT IT WAS REPORTED THAT IT WAS PAID AFTER 31.03.2002. T HUS THE LD. CIT(A) HAS RIGHTLY POINTED OUT THAT THERE WAS SOME DISCREPANCY AND HENCE IT CANNOT BE SAID THAT THERE WAS A PROPER DISCLOSURE BY THE ASSESSEE . 6. WE HAVE CONSIDERED THE RIVAL CONTENTION S AND ALSO PERUSED THE RELEVANT MATERIAL PLACED ON RECORD QUA THE LEGAL ISSUE RAISED . IN CASE OF THE ASSESSEE, THE ASSESSMENT WAS COMPLETED U/S 143(3) AFTER EXAMINING ALL THE BOOKS OF ACCOUNTS AND CALLING FOR THE ENTIRE RECORD S INCLUDING THAT OF SERVICE TAX PAID, SERVICE TAX ASSESSMENT AND CHALLANS WHICH WAS REQUIRED BY THE AO TO BE PRODUCED BEFORE HIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS. AFTER EXAMINING ALL THESE D ETAILS AND ASPECTS, ASSESSMENT WAS COMPLETED U/S HSBC SECURITIES AND CAPITA L MARKETS (INDIA) PVT LTD ITA NO. 6950 /MUM/201 2 5 143(3). ON THE ISSUE OF BROKERAGE ALSO, THE ASSESSEE HAD FURNISHED ALL THE DETAILS AS REQUIRED BY THE AO AND THE SAME WERE EXAMINED. AFTER HAVING COMPLETED THE ASSESSMENT IN SUCH A MANNER THE SAME HAS BEEN S OUGHT TO BE REOPENED U/S 147 AFTER THE EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. SUCH A REOPENING HAS TO BE SCRUTINIZED WITHIN THE SCOPE AND AMBIT OF PROVISO TO SECTION 147 , INASMUCH AS , THERE IS A TIME LIMIT OF 4 YEARS PROVIDED FOR R EOPENING THE CASE . SUCH A N EMBARGO OF TIME LIMIT CAN BE LIFTED ONLY ON THE T WIN CONDITIONS : - FIRSTLY, THERE IS A FAILURE ON THE PART OF THE ASSESSEE TO FILE A RETURN OF INCOME U/S 139 OR IN RESPONSE TO NOTICE U/S 142(1 ) OR UNDER SECTION 148; AND SECONDLY , THERE IS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. UNLESS THESE TWIN CONDITIONS ARE SATISFIED, THE CASE CANNOT BE REOPENED AFTER THE EXPIRY OF 4 YEARS (FROM THE END OF THE RELEVA NT ASSESSMENT YEAR) . HERE IN THIS CASE, THERE IS NO DISPUTE ABOUT THE FIRST CONDITION AND HENCE , THE SAME IS NOT APPLICABLE. COMING TO THE SECOND CONDITION, IT IS EVIDENT FROM THE PERUSAL OF THE REASONS RECORDED THAT THE AO IS NOT REFERRING TO ANY T A N GI B LE MATERIAL COMING O N RECORD HAVING LIVE - LINK - NEXUS WITH THE INCOME CHARGEABLE TO TAX HAVING ESCAPED ASSESSMENT. HE I S M ERELY REFERRING TO THE PROFIT AND LOSS ACCOUNT AND THE COPIES OF SERVICE TAX RETURN FILED BY THE ASSESSEE IN THE ORIGINAL ASSESSMENT PRO CEEDINGS AND ALSO THE DETAILS OF BROKERAGE WHICH HAS ALREADY BEEN DISCLOSED BY THE ASSESSEE. HIS ONLY ALLEGATION IS THAT THERE HAS BEEN UNDER - ASSESSMENT EARLIER. THERE IS NO WHISPER ABOUT ASSIGNING ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. IT IS MANDATORY REQUIREMENT OF LAW THAT WHILE ACQUIRING A JURISDICTION TO REOPEN THE CASE BEYOND THE PERIOD OF 4 YEARS THE AO HAS ASCRIBE D THE FAILURE OF THE ASSESSEE IN THE REASONS RECORDED ITSELF. HERE IN THIS CASE OTHERWI SE ALSO THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO MAK E FULL AND TRUE DISCLOSURE O F MATERIAL FACTS RELATING TO THE PAYMENT OF SERVICE TAX AND BROKERAGE . HSBC SECURITIES AND CAPITA L MARKETS (INDIA) PVT LTD ITA NO. 6950 /MUM/201 2 6 7 . SO FAR AS THE OBSERVATIONS OF THE CIT(A), AS POINTED OUT BY THE DR BEFORE US, THE SAME IS ALSO NOT TENABLE; FIRSTLY , THERE IS NO SUCH FAILURE ASCRIBED BY THE AO IN THE REASONS RECORDED AND SUCH A REASONS CANNOT BE SUBSTITUTED BY THE OBSERVATION OF THE CIT(A) AND SECONDLY , THE ASSESSEE HAS DULY DISCLOSED THE SERVICE TAX PAID AS PER THE SERV ICE TAX RETURN AND ALSO AS PER THE PROFIT AND LOSS ACCOUNT . N OT ONLY THAT , THESE DETAILS HAVE BEEN DU LY PRODUCED AND DISCLOSED DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. THE DUTY OF THE ASSESSEE IS TO PLACE ALL THE RELEVANT MATERIAL FACTS AND DISCLOS E THE ENTIRE PARTICULARS TRULY AND FULLY. IT IS THEN UPON THE AO TO DRAW THE LEGAL AND FACTUAL INFERENCE. OTHERWISE ALSO, HERE IN THIS CASE THE ASSESSEE HAD FILED A RECONCILIATION STATEMENT OF SERVICE TAX WHICH TALLIES WITH THE ANNUAL ACCOUNTS AND ALSO AS PER THE SERVICE TAX RETURNS , AS PLACED IN THE PAPER BOOK AT PAGE 94. SIMILAR, RECONCILIATION HAS BEEN FILED REGARDING BROKERAGE ALSO . THUS, IN VIEW OF THE SAID SETTLED PROPOSITION OF THE LAW, IF THE ASSESSEE HAS DISCLOSED ALL THE PRIMARY AND NECESSARY FACT S AND NO FAILURE HAS BEEN ASCRIBED BY THE AO IN THE REASONS RECORDED THEN , SUCH A REOPENING BEYOND THE PERIOD OF 4 YEARS IS PROHIBITED BY THE PROVISO TO SECTION 147. THIS PROPOSITION, HAVE BEEN UPHELD BY THE VARIOUS DECISIONS INCLUDING THAT OF THE JURISDIC TIONAL HIGH COURT AS REFERRED AND RELIED UPON BY THE LD. COUNSEL. THUS, W E HOLD THAT REOPENING OF THE CASE / ASSESSMENT U/S 147 BY THE ISSUANCE OF NOTICE U/S 148 IS BAD IN LAW AND ACCORDINGLY IMPUGNED ASSESSMENT ORDER PASSED U/S 147 R.W.S. 143(3) IS VOID - A B - INITIO AND IS HEREBY QUASHED. 8 . IN VIEW OF THE FINDING GIVEN THEREIN, THE ISSUES RELATING TO MERITS HAVE BECOME PURELY TOO ACADEMIC , THEREFORE , SAME IS TREATED AS INFRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH NOVEMBER , 2015. SD/ - SD/ - ( ) ( ) (RAMIT KOCHAR ) ( AMIT SH UKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER HSBC SECURITIES AND CAPITA L MARKETS (INDIA) PVT LTD ITA NO. 6950 /MUM/201 2 7 MUMBAI, DATE: 10 TH NOVEMBER , 2015 / COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3) THE CIT (A) - 1 3 , MUMBAI. 4 ) THE CIT 7 , MUMBAI. 5 ) H , , / THE D.R. H BENCH, MUMBAI. 6 ) \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . * CHAVAN, SR.PS