ASHISH AVARSEKAR, MUMBAI V. DCIT CEN CIR 45, MUMBAI

ITA 7113/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83922 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2014
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 08-10-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 29-11-2012
• Court: TRIBUNAL
• Department Lawyers: S PADMAJA
• Assessee Lawyers: PALLAVI GUDKA
• Keywords: Reassessment proceedings
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A , MUMBAI BEFORE SHRI D. KARUNAKARA RAO, AM AND S HRI SANJAY GARG, JM I.T.A.NO. 7113/M/2012 (AY: 2007 - 2008) MR. ASHISH AVARSEKAR, 1252, PUSHPANJALI APARTMENTS, OLD PRABHADEVI ROAD, PRABHADEVI, MUMBAI 400 025. PAN:AAAPA6084A VS. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 45, AAYAKAR BHAVAN, MUMBAI - 400 020. (APPELLANT) (RESPONDENT) I.T.A.NO. 445//M/2013 (AY: 2007 - 2008) DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 45, AAYAKAR BHAVAN, MUMBAI - 400 020. VS. MR. ASHISH AVARSEKAR, 1252, PUSHPANJALI APARTMENTS, OLD PRABHADEVI ROAD, PRABHADEVI, MUMBAI 400 025. (APPELLANT) (RESPONDENT) I.T.A.NO. 7115 /M/2012 (AY: 2007 - 2008) MR. KISHOR AVARSEKAR, 1252, PUSHPANJALI APARTMENTS, OLD PRABHADEVI ROAD, PRABHADEVI, MUMBAI 400 025. PAN:AACPA6883F VS. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 45, AAYAKAR BHAVAN, MUMBAI - 400 020. (APPELLANT) (RESPONDENT) I.T.A.NO. 443//M/2013 (AY: 2007 - 2008) DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 45, AAYAKAR BHAVAN, MUMBAI - 400 020. VS. MR. KISHOR AVARSEKAR, 1252, PUSHPANJALI APARTMENTS, OLD PRABHADEVI ROAD, PRABHADEVI, MUMBAI 400 025. (APPELLANT) (RESPONDENT) I.T.A.NO. 7116/M/2012 (AY: 2007 - 2008) MR. ABHIJIT K AVARSEKAR, 1252, PUSHPANJALI APARTMENTS, OLD PRABHADEVI ROAD, PRABHADEVI, MUMBAI 400 025. PAN:AAAPA 5573 E VS. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 45, AAYAKAR BHAVAN, MUMBAI - 400 020. (APPELLANT) (RESPONDENT) I.T.A.NO. 444//M/2013 (AY: 2007 - 2008) DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 45, AAYAKAR BHAVAN, MUMBAI - 400 020. VS. MR. ABHIJIT AVARSEKAR, 1252, PUSHPANJALI APARTMENTS, OLD PRABHADEVI ROAD, PRABHADEVI, MUMBAI 400 025. (APPELLANT) (RESPONDENT) ASSESSEE BY : MS. PALLAVI GUDKA REVENUE BY : MS. S. PADMAJA DATE OF HEARING: 9.10.2014 DATE OF ORDER: 21 .10.2014 2 O R D E R PER D. KARUNAKARA RAO, AM : THERE ARE SIX APPEALS UNDER CONSIDERATION. OUT OF THEM, THREE APPEALS ARE FILED BY THE 3 DIFFERENT ASSESSEES AND THREE APPEALS ARE FILED BY THE REVENUE INVOLVING THE AY 2007 - 2008. ALL THESE APPEALS ARE FILED AGAINST THE SEPARATE ORDERS OF THE CIT (A) - 38, MUMBAI DATED 31.10.2012. SINCE, THE ISSUES RAISED IN ALL THE APPEALS ARE CONNECTED, THEREFORE, FOR THE SAKE OF CONVENIENCE, THEY ARE CLUBBED, HEARD COMBINEDLY AND DISPOSED OF IN THIS CONSOLIDATED ORDER. APPEAL WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAGRAPHS OF THIS ORDER. 2. FIRSTLY WE SHALL TAKE UP THE REVENUES APPEAL ITA NO.445/M/2013 IN THE CASE OF SHRI ASHISH AVARSEKAR AS A LEAD APPEAL. I ( SHRI ASHISH AVARSEKAR) (ITA NO.445/M/2013) (AY: 2007 - 2008) (REVENUES APPEAL) 3. THIS APPEAL IS FIELD AGAINST THE ORDER OF THE CIT (A) - 38, MUMBAI DATED 31.10.2012 AND THE REVENUE RAISED THE FOLLOWING GROUNDS IN THIS APPEAL WHICH READ AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN ALLOWING THE EXPENSES INCURRED FOR ISSUE O F IPO OF RS. 45,00,000/ - CLAIMED BY THE ASSESSEE WHILE COMPUTING LONG TERM CAPITAL GAINS ON SALE OF SHARES, WITHOUT CONSIDERING THAT THE LIABILITY TO INCURRED EXPENSES WAS ONLY WITH THE COMPANY AND NOT WITH THE ASSESSEE BEING SHARE HOLDER OF THE COMPANY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN ALLOWING THE AMOUNT OF RS. 45,00,000/ - AS EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH TRANSFER OF SHARES U/S 48(1) OF THE ACT WITHOUT EXAMINING INTO THE NATURE, DETAILS AND EXTENT OF SUCH EXPENSES PARTICULARLY WHEN THE ACTUAL EXPENDITURE INCURRED WAS ADMITTEDLY LESSER THAN THE CLAIMED AMOUNT. 4. AT THE OUTSET, BRINGING OUR ATTENTION TO THE ABOVE MENTIONED GROUNDS, MS. PALLAVI GUDKA , LD COUNSEL FOR T HE ASSESSEE MENTIONED THAT THE ONLY ISSUE INVOLVED IN THE APPEAL UNDER CONSIDERATION IS WHETHER THE EXPENSES INCURRED WITH REGARD TO THE SHARES TRANSFERRED ARE ALLOWABLE U/S 48(I) OF THE ACT. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTI ON TO THE ORDER OF THE TRIBUNAL IN THE CASE OF DCIT VS. MRS. PUSHPA AVARSEKAR VIDE ITA NOS. 446/MUM/2013 AND 7114/MUM/2012 FOR 3 THE AY 2007 - 2008 AND MENTIONED THAT AN IDENTICAL ISSUE WAS DECIDED BY THE TRIBUNAL VIDE ITS ORDER DATED 25.4.2014, WHEREIN THE TR IBUNAL UPHELD THE DECISION OF THE CIT (A) THAT THE EXPENDITURE INCURRED IN CONNECTION WITH THE TRANSFER OF SHARES IS AN ALLOWABLE EXPENDITURE IN TERMS OF SECTION 48(I) OF THE INCOME TAX ACT, 1961. SHE FURTHER PRAYED THAT CONSIDERING THE FACTS AND CIRCUMSTA NCES OF THE PRESENT CASE WITH THAT OF THE APPEAL DECIDED BY THE TRIBUNAL (SUPRA), THE INSTANT APPEAL MAY BE DECIDED IN THE SAME LINES. 5. ON THE OTHER HAND, LD DR DUTIFULLY RELIED ON THE ORDER OF THE AO. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE OR DERS OF THE REVENUE AUTHORITIES AS WELL AS THE CITED ORDER OF THE TRIBUNAL (SUPRA) DATED 25.4.2014. ON PERUSAL OF THE SAID ORDER OF THE TRIBUNAL, WE FIND THAT PARA 2.2 OF THE TRIBUNALS ORDER IS RELEVANT IN THIS REGARD. CONSIDERING THE IMPORTANCE OF THE S AID PARA AND ALSO FOR THE SAKE OF COMPLETENESS OF THIS ORDER, RELEVANT PORTION FROM THE SAID PARA 2.2 OF THE TRIBUNALS ORDER IS EXTRACTED WHICH READ AS UNDER: 2.2.. WITH THE ABOVE MENTIONED DETAILS, THE LD . CIT(A ) HAS NOTED THA T OUT O F 34 ,4 3 ,000 EQUITY SHARES OFFERED TO PUBLIC, 6,75 , 000 EQUITY SHARES H AVE BEEN D IV ES T E D OUT OF THE SHAREHOLDING HELD BY THE PROMOTER SHAREHO L DERS A N D TH E FRES H EQ UITY SH A RES I SSUED BY THE COMPANY TO THE PUBLIC IN T H E IPO W E R E 27 , 68 , 000 EQ UITY S HARES. AS I ND I CATED , THE TOTAL IPO EXPENSES WERE OF T HE OR D ER OFRS . 19 , 6 3, 28 , 5 47/ - AND THE N U MBER OF SHARES I SSUED TO PUB L IC I NCLUSIVE OF D I VESTMEN T OF S H ARES H ELD B Y THE PROMOTER SHAREHOLDERS WAS 34,43,000 EQU I TY SHARES. ACCO RDI NGL Y, THE IPO E XP E N S ES PER SHARE WORKED OUT TO RS.57 / - WHICH WAS R OU N DED O F T O RS . 60 / - B Y TH E ASSESS EE. T H E ASSESSEE HAS PAID HER SHARE OF IPO EXPENS E S AMO UNTIN G T O RS.L,14,00,000/ - (1,90 , 000 EQUITY SHARES @ RS.60/ - PER SHARE ) . IN TH I S CONNECT I ON , IT I S P E RTIN E NT TO MENTION THAT THE TRIBUNAL IN THE CASE OF USHARANI RAGHU N ATHA N VS . C IT - VI (I. T. APPEAL NO. 493 TO 495 (MDS) OF 2012 ) , HAS HELD AS U N DE R: - AS PER SECTION 48 , FROM THE FULL V A L UE O F CONS I DERA TI O N RECEIVED, EXP E NDITURE I NCURRED WHOLLY AN D EXCLUSIVELY IN CONNE C T ION WITH S UCH TRANSFER H A S TO BE D EDUCTED . THE TERM I N O LO AV USED IS 'I N CONNECT I O N WITH' SUCH TRANSFER. THERE IS NO DISPUTE THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE WAS FOR EFFECTING THE SALE OF THEIR SHARES. IT IS CLEARLY MENTIONED IN THE PROSPECTUS OF 'R' THAT THE ISSUE EXPENSES WERE TO BE BORNE PROPORTIONATELY BY THE 'R ' AND SELLIN G SHAREHOLDERS. THE ASSESSING OFFICER HIMSELF HAS ACKNOWLEDGED THAT THE IPO WAS FOR 35,68,250 EQUITY SHARES WHICH CONSIST ED OF FRESH ISSUE OF 22,70,700 EQUITY SHARES AND OFFER FOR SALE OF 12,97,550 EQU ITY SHARES BY THE ASSESSEE. NO DOUBT AS NOTED BY THE COMMISSIONER (APPEALS), A COMPANY WHILE MAKING AND IPO , HAD TO ABIDE BY THE STRICT NORMS LAID DO WN UNDER THE COMPANIES ACT AND FOR COMPLYING WITH SUCH NORMS IT MI GHT BE NECESSARY TO INCUR M ORE EXPENDITURE THAN AN ORDINARY SHAREHOLDER EFFECTI NG SALE OF HIS/HER SHARES. BUT ASSESSEE HERE HAD AN OPPORTUNITY TO SELL THEIR HO LDING IN ONE BLOCK THROUGH THE IPO. THIS CONVENIENCE RECEIVED BY THE ASSESSEE, IF WEIGHED AGAINST THE EXT RA EXPENDITURE INCU RRED FOR IPO , GETS MORE OR LESS BALANCE D. THERE IS NO DISPUTE THAT PRO RATA EXPENDITURE ALONE WAS CLAIMED BY THE ASSESSEE UNDER SECTION 48 . THERE IS ALSO NO DISPUTE THAT SUCH EXPENDITU RE WAS WHOLLY INCURRED FOR THE PURPOSE OF IPO. A LOOK AT THE ESCROW ACCO UNT CLEARLY SHOWS THAT CONCERNED ASSESSEES WERE TRANSFERRED FUNDS ONLY TO T HE EXTENT OF NET AMOUNTS AFTER MEETING EXPENSES. T HE COMMISSIONER (APPEALS) ANALYZED THE EXPENSES INCURRED AND CAME TO OPINION THAT THE LEGAL OBLIGATION 4 FOR INCUR RING SUCH EXPENSES WAS WITH 'R. NO DOUBT THIS MIGHT BE TRUE. JUST BECAUSE THE EXPENDITURE WAS INCURRED BASED ON A LEGAL OB LIGATION WOULD NOT RENDER SUCH EXPENDITURE AS SOMETHING NOT INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE SALE OF SHARES. E XPENSES HAVING BEE N INCURRED FOR THE IPO THROUGH WHICH ASSESSEE WERE ALSO ABLE TO SELL THEIR SH ARES, THE EXPENSES NECESSARILY WERE IN CONNECTION WITH SALE OF SUCH S HARES. THE ASSESSEE COULD TAKE ADVANTAGE OF CLAUSE (1) OF SECTION 48. THE ASSE SSEES HAD PROD UCED EVIDENCE IN THE FORM OF ESCROW ACCOUNT TO SHOW THAT THE Y HAD RECEIVED ONLY NET AMOUNT AFTER INCURRING THE EXPENSES. THE ASSESSEES A LSO PRODUCED PROSPECTUS OF IPO WHICH CLEARLY SHOWS THAT THEY WERE OBLIGED TO MEET PRO RATA SHARE OF IPO EXPENSES. THERE IS NO USE FOR THE REVENUE THAT ANY OF THE A SSESSEES CLAIMED MORE THAN HIS SHARE OF EXPENSES BASED ON THE RATIO OF SHARES SOLD . THEREFORE, THE DEDUCTION CLAIMED BY THE ASSESSEE FOR EXPENSES INCURRED WAS UNJUSTLY DISALLOWED. THIS DISALLOWED IS DELETED. ' IN VIEW OF THE FACT THAT THE LD.CIT(A) HAS CORRECTLY APPR ECIATED THE FACTS IN THE LIGHT OF THE ABOVE MENTIONED DECISION OF THE TRIB UNAL FOR DELETING THE IMPUGNED DISALLOWANCE/ADDITION, WE DO NOT FIND ANY JUSTIFIABLE REASON TO INTER FERE WITH THE SAME. THUS, THE DECISION OF THE LD.CIT(A) IS UPHELD ON THIS COUNT . 7. FROM THE ABOVE, WE FIND, WHILE ADJUDICATING THE ISSUE UNDER CONSIDERATION, THE TRIBUNAL HAS RELIED ON THE ORDER OF THE ITAT I N THE CASE OF USHARANI RAGHUNATHAN VS. CIT FOR THE PROPOSITION THAT JUS T BECAUSE THE EXPENDITURE WAS INCURRED BASED ON A LEGAL OBLIGATION WOULD NOT RENDER SUCH EXPENDITURE AS SOMETHING NOT INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE SALE OF SHARES, THEREFORE, THE DEDUCTION CLAIMED BY THE ASSESSEE FOR EXPENSES INCUR RED WITH REGARD TO TRANSFER OF SHARES IS ALLOWABLE U/S 48(I) OF THE ACT. CONSIDERING THE SAME, WE ARE OF THE OPINION THAT THE ORDER OF THE CIT (A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, THE APPEAL OF THE REVENUE IS DISMISSED. I.T.A.NO. 7113/M/2012 (AY: 2007 - 2008) (ASSESSEES APPEAL) 8. THIS APPEAL FILED BY THE ASSESSEE ON 29.11.2012 IS AGAINST THE ORDER OF THE CIT (A) - 38, MUMBAI DATED 31.10.2012 FOR THE ASSESSMENT YEAR 2007 - 2008. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUND WHICH READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE CIT (A) ERRED IN CONFIRMING THE INITIATION OF REASSESSMENT PROCEEDINGS U/S 147 OF THE INCOME TAX ACT, 1961. THE LD CIT (A) OUGHT TO HAVE HELD THAT THE REOPENING OF THE ASSESSMENT U/S 147 IS BAD IN LAW. THE APPELLANT PRAYS THAT THE REASSESSMENT PROCEEDINGS INITIATED MAY PLEASE BE HELD AS HELD IN LAW. 9. THE ONLY ISSUE INVOLVED IN THIS APPEAL RELATES TO THE CIT (A)S DECISION IN CONFIRMING THE VALIDITY OF THE REASSESSMENT PROCEEDINGS MADE BY THE AO U/S 147 OF THE ACT. CONSIDERING OUR DECISION GIVEN WHILE ADJUDICATING THE REVENUES APPEAL IN 5 THE ABOVE PARA S OF THIS ORDER VIDE ITA NO.445/M/2013, WHEREIN WE HAVE UPHELD THE ORDER OF THE CIT (A), IN OUR OPINION, THE ADJUDICATION OF THE ISSUE RAISED IN THE PRESENT APPEAL OF THE ASSESSEE BECOMES ACADEMIC. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IS DISMIS SED. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. II. ITA NO.443 /M/2013 (REVENUES APPEAL ) (SHRI KISHOR AVARSEKAR ) II I . ITA NO.444 /M/ 2013 (REVENUES APPEAL ) (SHRI ABHIJIT K. AVARSEKAR ) 11. THESE TWO APPEALS ARE FILED BY THE REVENUE AGAINST THE DIFFERENT ORDERS OF THE CIT (A) - 38, MUMBAI COMMONLY DATED 31.10.2012. IN THESE TWO APPEALS, REVENUE RAISED THE IDENTICAL GROUNDS WITH THAT OF THE ITA NO. 445/M/2013, WHICH IS ADJUDICATED BY US IN THE A BOVE PARAGRAPHS OF THIS ORDER. CONSIDERING THE COMMONNESS OF THE FACTS AND CIRCUMSTANCES AS WELL AS THE GROUNDS RAISED IN THESE APPEALS, THE ADJUDICATION AND DECISION GIVEN BY US IN THE APPEAL ITA NO. 445/M/2013 SQUARELY APPLIES TO THE PRESENT APPEALS TOO . THEREFORE , WE UPHELD THE OF THE CIT (A) IN THE PRESENT APPEALS. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE IN THE PRESENT APPEALS ARE DISMISSED. 12. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. I.T.A.NO. 7115/M/2012 (ASSESSEES APPEAL ) (MR. KISHORE AVARSEKAR) I.T.A.NO. 7116/M/2012 (ASSESSEES APPEAL) (MR. ABHIJIT K. AVARSEKAR) 13. THESE TWO APPEALS ARE FILED BY THE TO DIFFERENT ASSESSEE AGAINST THE DIFFERENT ORDERS OF THE CIT (A) - 38, MUMBAI COMMONLY DATED 31.10.2012. IN THESE TWO APPE ALS, ASSESSEES RAISED THE IDENTICAL GROUND WITH THAT OF THE ITA NO. 7113/M/2012, WHICH IS ADJUDICATED BY US IN THE ABOVE PARAGRAPHS OF THIS ORDER. CONSIDERING THE COMMONNESS OF THE FACTS AND CIRCUMSTANCES AS WELL AS THE GROUNDS RAISED IN THESE APPEALS, TH E ADJUDICATION AND DECISION GIVEN BY US IN THE APPEAL ITA NO. 445/M/2013 SQUARELY APPLIES TO THE PRESENT APPEALS TOO. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEES IN THE PRESENT APPEALS ARE DISMISSED AS ACADEMIC. 14. IN THE RESULT, BOTH THE APPEALS OF TH E ASSESSEES ARE DISMISSED. 15. CONCLUSIVELY, THREE APPEALS OF THE REVENUE AND THE THREE APPEALS OF THE ASSESSEES ARE DISMISSED. 6 ORDER PRONO UNCED IN THE OPEN COURT ON 21 ST OCTOBER, 2014. SD/ - SD/ - (SANJAY GARG) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 21 .10.2014. AT :MUMBAI OKK COPY TO : 1. APPELLANT 2. RESPONDENT 3. THE CIT (A), CONCERNED. 4. THE CIT CONCERNED. 5. THE DR A, BENCH, ITAT, MUMBAI. 6. GUARD FILE. // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI