The ACIT, Patan Circle, Patan V. M/s. Ranjit Construction Co., Unjha

ITA 72/AHD/2012

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9689 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 30-06-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 10-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SANTOSH KARNANI
• Assessee Lawyers: SN SOPARKARAR
• Keywords: Business income; Difference of opinion; Change of opinion
• Section: 56

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD .. , ( .) , BEFORE SHRI G.D. AGARWAL,VICE PRESIDENT (AZ) AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ I.T.A. NO.72/AHD/2012 ( / ASSESSMENT YEAR : 2005-06) THE ACIT PATAN CIRCLE PATAN / VS. M/S.RANJIT CONSTRUCTION CO. 110, OLD MARKET YARD UNJHA 384 170 % & ./ ./ PAN/GIR NO. : AABFR 8746 F ( %( / APPELLANT ) .. ( )*%( / RESPONDENT ) %( + / APPELLANT BY : SHRI SANTOSH KARNANI, SR.DR )*%( , + / RESPONDENT BY : SHRI S.N.SOPARKAR, A.R. -. , /& / DATE OF HEARING 30/06/2015 0123 , /& / DATE OF PRONOUNCEMENT 17/07/2015 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-GANDHINAGAR [CIT(A) IN SHORT] DATED 11/10/2011 PERTAINING TO ASSESSMENT Y EAR (AY) 2005-06. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL:- (1) THE LEARNED CIT (APPEALS) HAS ERRED IN LAW AND ON FACTS IN TREATING THE RE-OPENING OF ASSESSMENT AS MERE CHANGE OF OPIN ION AND DIRECTING THAT RE-ASSESSMENT PROCEEDINGS BE ANNULLE D. HOWEVER, THERE COULD BE NO CHANGE OF OPINION. ITA NO.72/AHD/2 012 ACIT VS. M/S.RANJIT CONSTRUCTION ASST.YEAR 2005-06 - 2 - (2) THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON FA CTS IN LAW AND ON FACTS IN NOT DECIDING THE ISSUE OF ADDITION ON ACCOUNT OF EXCESS REMUNERATION PAID TO PARTNER TO THE EXTENT OF RS.39 ,92,754/- ON MERITS. (3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD.C IT(APPEALS) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. (4) IT IS THEREFORE PRAYED THAT THE ORDER OF THE LEARNE D CIT(APPEALS) MAY BE SET ASIDE AND THAT OF THE A.O. BE RESTORED TO TH E ABOVE EXTENT. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS REOPENED AND THE ASSESSMENT U/S.143(3) R.W.S. 147 OF THE INC OME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED V IDE ORDER DATED 10/12/2010. WHILE FRAMING THE ASSESSMENT, THE ASSE SSING OFFICER (AO IN SHORT) DISALLOWED THE EXCESS REMUNERATION PAID TO T HE PARTNERS AMOUNTING TO RS.39,72,754/-. AGAINST THE SAID ASSESSMENT ORD ER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS ALLOWED THE APPEAL WHILE HOLDING THE RE -ASSESSMENT PROCEEDINGS AS INVALID. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), NOW THE REVENUE IS IN APPEAL BEFORE US. 3. GROUND NOS.1 & 2 ARE DECIDED TOGETHER. THE LD.S R.DR SUBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN ANNULLING T HE ASSESSMENT. HE SUBMITTED THAT THE REASON FOR REOPENING THE ASSESS MENT WAS THAT THE ASSESSEE-FIRM PAID REMUNERATION OF RS.1,94,61,000/- TO ITS PARTNERS. THE GROSS TOTAL INCOME (RECEIPT) OF THE ASSESSEE FIRM W AS INCLUSIVE OF BANK INTEREST INCOME (RS.71,76,178), BOND INTEREST INCOM E (RS.14,81,852/-), INSURANCE CLAIM (RS.37,883), INTEREST RECEIVABLE ( RS.10,05,049/-, ITA NO.72/AHD/2 012 ACIT VS. M/S.RANJIT CONSTRUCTION ASST.YEAR 2005-06 - 3 - AGGREGATING TO RS.1,19,89,212/- WHICH CONSTITUTED I NCOME FROM OTHER SOURCE AS PER THE PROVISIONS OF SECTION 56 OF THE I .T.ACT, 1961. AS THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF CIVIL AND R OAD CONSTRUCTION NOT MONEY LENDING, ETC., THEREFORE, THE ASSESSEE FIRM I S NOT ELIGIBLE TO ALLOW REMUNERATION TO THE EXTENT OF INCOME RECEIVED FROM OTHER SOURCES OR ELIGIBLE FOR BUSINESS INCOME ONLY. AS PER THE DE FINITION OF BOOK PROFIT IN THE PROVISO TO SECTION 40(B)(V), ALL THESE INCOM ES WERE LIABLE TO BE EXCLUDED WHILE CALCULATING BOOK PROFIT FOR THE PURP OSE OF REMUNERATION AS THESE DO NOT FALL UNDER CHAPTER IVD OF THE I.T.ACT, 1961. THE LD.SR.DR SUBMITTED THAT THE LD.CIT(A) FAILED TO APPRECIATE T HE FACT THAT THE CASE WAS NOT REOPENED MERELY ON THE BASIS OF CHANGE OF O PINION. 3.1. ON THE CONTRARY, LD.COUNSEL FOR THE ASSESSEE S HRI S.N.SOPARKAR ON BEHALF OF ASSESSEE SUPPORTED THE ORDER OF THE LD.CI T(A) AND PLACED RELIANCE ON THE JUDGEMENT OF HONBLE HIGH COURT OF GUJARAT RENDERED IN THE CASE OF TULSI DEVELOPERS VS. DY.CIT REPORTED AT (2011) 59 DTR (GUJ.) 351. THE LD.COUNSEL FOR THE ASSESSEE ALSO P LACED RELIANCE ON THE JUDGEMENT OF HONBLE HIGH COURT OF CALCUTTA RENDERE D IN THE CASE OF MD.SERAJUDDIN & BROTHERS VS. CIT IN ITA NO.201 OF 2 003, DATED 17/05/2012. FURTHER, THE LD.COUNSEL FOR THE ASSESS EE PLACED RELIANCE ON THE JUDGEMENT OF HONBLE HIGH COURT OF GUJARAT REND ERED IN THE CASE OF CIT VS. J.J.INDUSTRIES REPORTED AT (2013) 35 TAXMAN N.COM 103(GUJ.). ITA NO.72/AHD/2 012 ACIT VS. M/S.RANJIT CONSTRUCTION ASST.YEAR 2005-06 - 4 - 3.2. IN REJOINDER, THE LD.SR.DR POINTED OUT THAT TH E AO IN ORIGINAL ASSESSMENT HAS NOT FORMED ANY OPINION WHAT TO SAY A BOUT THE CHANGE OF OPINION. HE DREW OUR ATTENTION TOWARDS THE ORIGINA L ASSESSMENT DATED 27/12/2007. HE DREW OUR ATTENTION TOWARDS PAGE NO. 13 OF THE PAPER- BOOK, WHERE THE ASSESSEE HAS ENCLOSED THE LEDGER AC COUNT OF INTEREST RECEIVABLE. HE SUBMITTED THAT THE DETAILS OF THE O THER INTEREST WAS NOT SUBMITTED BY THE ASSESSEE BEFORE THE AO, THEREFORE THERE WAS NO QUESTION OF FORMING THE OPINION. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD.CIT(A) WITHOUT ADVERTING ON THE MERIT OF THE CASE HAS DECIDED THE APPEAL IN FAVOUR OF ASSESSEE DECLARING THE RE-ASSESSMENT PROCEEDINGS AS INVALID. THERE IS NO DISPUTE WITH R EGARD TO THE LEGAL POSITION THAT, IN CASE, THE ASSESSEE HAS FURNISHED ALL THE DETAILS BEFORE THE AO AND THE AO HAS APPLIED HIS MIND AND FORMS AN OP INION WITH REGARD TO THE NATURE OF INCOME, ON THE SAME NO ASSESSMENT CAN BE RE-OPENED. HOWEVER, THE QUESTION REMAINS WHETHER IN THE CASE U NDER APPEAL THE ASSESSEE FURNISHED REQUISITE DETAILS ON WHICH A.O. HAD APPLIED HIS MIND?. DURING THE COURSE OF HEARING, THE LD.SR.DR POINTED OUT THAT IN PURSUANCE TO THE NOTICE OF THE AO, THE ASSESSEE HAS NOT FURNI SHED THE REQUISITE DETAILS WITH REGARD TO THE INTEREST RECEIVED BY THE ASSESSEE AND NATURE OF SUCH INTEREST, THEREFORE THE QUESTION WITH REGARD TO THE NATURE OF THE INTEREST INCOME BEING INCOME FROM OTHER SOURCES OR INCOME FROM ITA NO.72/AHD/2 012 ACIT VS. M/S.RANJIT CONSTRUCTION ASST.YEAR 2005-06 - 5 - BUSINESS WAS NOT CONSIDERED BY THE AO. THIS AVERME NT OF THE LD.SR.DR IS NOT REBUTTED BY THE ASSESSEE BY PLACING ANY MATERIA L ON RECORD. UNDER THESE FACTS, WE ARE OF THE CONSIDERED VIEW THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN ANNULLING THE ASSESSMENT SINCE THE AO IN THE ORIGINAL ASSESSMENT HAS NOT APPLIED HIS MIND WITH REGARD TO THE NATURE OF THE INTEREST AS THE REQUISITE DETAILS WERE NOT AVAILABL E WITH HIM. THEREFORE, WE HEREBY HOLD THAT REOPENING THE ASSESSMENT WAS VA LID. HOWEVER, THE LD.CIT(A) HAS NOT GIVEN ANY FINDING ON THE MERIT OF THE CASE, THEREFORE WE SET ASIDE THE ORDER OF THE LD.CIT(A) AND RESTORE THE MATTER TO HIS FILE WITH A DIRECTION TO DECIDE THE SAME ON MERIT. NEED LESS TO SAY THAT THE LD.CIT(A) WOULD AFFORD REASONABLE OPPORTUNITY OF HE ARING TO BOTH THE PARTIES. THUS, GROUND NOS.1 & 2 OF REVENUES APPEA L ARE ALLOWED FOR STATISTICAL PURPOSES. 5. GROUND NOS.3 & 4 ARE GENERAL IN NATURE WHICH REQ UIRE NO INDEPENDENT ADJUDICATION. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 17 TH DAY OF JULY, 2015 AT AHMEDABAD. SD/- SD/- ( .. ) ( ) ( . ) ( G.D. AGARWAL ) ( KUL BHARAT ) VICE PRESIDENT (AZ) JUDICIAL MEMBER AHMEDABAD; DATED 17 / 07 /2015 6/..-, .-../ T.C. NAIR, SR. PS ITA NO.72/AHD/2 012 ACIT VS. M/S.RANJIT CONSTRUCTION ASST.YEAR 2005-06 - 6 - !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. %( / THE APPELLANT 2. )*%( / THE RESPONDENT. 3. 789 : / CONCERNED CIT 4. : ( ) / THE CIT(A)-GANDHINAGAR 5. ;< )-89 , / 893 , 7 / DR, ITAT, AHMEDABAD 6. <= >. / GUARD FILE. / BY ORDER, *; ) //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 13.7.15 (DICTATION-PAD 11 - PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ..13.7.15 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.17.7.15 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 17.7.15 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER