The ACIT, Circle-5, Ahmedabad V. Clique Holdings Pvt. Ltd., Ahmedabad

ITA 784/AHD/2006

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 7733 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 15-06-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 30-03-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N DIVATIA
• Keywords: Reason to believe; Revenue expenditure; Set aside
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER DATE OF HEARING : 15/06/09 DRAFTED ON: 13/07/09 ITA NO.784/AHD/2006 ASSESSMENT YEAR : 2001-02 THE ASST.CIT CIRCLE-5 AHMEDABAD VS. CLIQUE HOLDINGS P.LTD. (AMALGAMATED WITH REAL VALUE MARKETING SERVICES LTD.) 101, VIRAT APARTMENT NEHRU PARK VASTRAPUR, AHMEDABAD PAN/GIR NO. : AABCC 4961 C (APPELLANT) .. (RESPONDENT) AND CO NO.115/AHD/2009 [ OUT OF ITA NO.784/AHD/2006 ] (ASSESSMENT YEAR 2001-02) CLIQUE HOLDINGS P.LTD. VS. ACIT, AHMEDABAD A HMEDABAD ASSESSEE BY : SHRI S. N. DIVATIA REVENUE BY : SHRI JAYANT JHAVERI, SR.DR O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS APPEAL IS BY THE REVENUE AGAINST THE ORDER OF THE LD.CIT(APPEALS)-XI, DATED 17/01/2006 AND THE C ROSS OBJECTION BY THE ASSESSEE THEREOF. ITA NO.784/AHD /2006 & CO NO.115/AHD/2009 ACIT VS. CLIQUE HOLDINGS PVT.LTD. ASST.YEAR -2001-02 - 2 - 2. THE SOLE ISSUE INVOLVED IN THIS APPEAL IS AGAIN ST THE ORDER OF THE LD. CIT(APPEALS) ERRED IN LAW AND ON F ACTS WHILE DELETING AN ADDITION OF RS.29,00,000/- MADE B Y ASSESSING OFFICER ON ACCOUNT OF CONSULTANCY FEES IN VIEW OF THE RELIEF GRANTED TO BAAZEE COM. INDIA PVT.LTD. IN A.Y. 2001-02. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE- COMPANY FILED ITS ORIGINAL RETURN OF INCOME DECLARI NG AN INCOME OF RS.8,49,976/- ON 31/10/2001 AND THE SAME WAS PROCESSED ON 18/1/2003 ACCEPTING THE RETURN. THE C ASE WAS RE-OPENED FOR THE REASONS THAT THE ASSESSEE- COMPANY HAS RECEIVED AN ADVANCE OF RS.3.48 CRORES FROM BAAZEE COM. INDIA PVT.LTD. AS ON 1 ST MARCH 2001. THE SAME WAS SHOWN AS AN ADVANCE IN THE BALANCE SHEET AS AT 31 ST MARCH 2001 AND NO PART OF THE SAME WAS OFFERED FOR TAXATION AS INCOME DURING THE ASSESSME NT YEAR 2001-02. THE COMPANY WAS AMALGAMATED WITH ONE ITA NO.784/AHD /2006 & CO NO.115/AHD/2009 ACIT VS. CLIQUE HOLDINGS PVT.LTD. ASST.YEAR -2001-02 - 3 - COMPANY KNOW AS REAL VALUE MARKETING SERVICES LTD. VIDE AN ORDER OF HONOURABLE HIGH COURT OF BOMBAY DT.26 TH APRIL-2002 AS ON AND WITH EFFECT FROM 1 ST APRIL- 2001. THE INCOME TAX RETURN OF REAL VALUE MARKETIN G SERVICES LTD. FOR ASSESSMENT YEAR 2002-03 WAS SELEC TED FOR LIMITED SCRUTINY. INFORMATION UNDER SECTION 133(6 ) OF THE ACT WAS SOUGHT FROM BAAZEE COM. INDIA PVT.LTD. ABO UT 3.48 CRORES. ALL THE OTHER INFORMATION PROVIDED B Y REAL VALUE MARKETING SERVICES LTD. WAS COLLABORATED BY BAAZEE COM. EXCEPT THE TR4EATMENT OF RS.3.48 CRORE S BY THEM TO THE ASSESSEE-COMPANY. M/S. BAAZEE COM. IN DIA PVT.LTD. INFORMED THAT OUT OF THE ABOVE SUM AN AMOU NT OF RS.1,37,75,000/- HAS BEEN WRITTEN OFF AS CONSULTANC Y CHARGES BY THEM DURING THE YEAR ENDED 31 ST MARCH-2001 AND THE BALANCE OF RS.2,10,25,000/- DURING THE YEAR ENDED 31 ST MARCH-2002 RELEVANT TO ASSESSMENT YEAR 2001- 02 AND 2002-03 RESPECTIVELY. BASED ON THE ABOVE INFORMATION, IT WAS BELIEVED THAT THE INCOME OF THE ITA NO.784/AHD /2006 & CO NO.115/AHD/2009 ACIT VS. CLIQUE HOLDINGS PVT.LTD. ASST.YEAR -2001-02 - 4 - ASSESSEE-COMPANY HAS ESCAPED ASSESSMENT FOR ASSESSMENT YEAR 2001-02. ACCORDINGLY, THE RE- ASSESSMENT PROCEEDINGS WERE INITIATED UNDER SECTION 147 OF THE INCOME TAX ACT AND A NOTICE UNDER SECTION 14 8 WAS ISSUED ON 25/11/2003 AND SERVED ON THE ASSESSEE - COMPANY ON 15/12/2003. IN REPLY TO THAT, ASSESSEE - COMPANY VIDE ITS LETTER DATED 12/01/2004 REQUESTED TO TREAT ITS ORIGINAL RETURN AS RETURN IN RESPONSE TO NOTICE UNDER SECTION 148. THE INCOME TAX ASSESSMENT OF BAAZEE COM. FOR ASSESSMENT YEAR 2001-02 WAS COMPLETED UNDER SECTION 143(3) WHEREIN THE ENTIRE AMOUNT OF RS.1,37,75,000/- WAS DISALLOWED BY THE ASSESSING OFFICER, BY HOLDING THAT THE ENTIRE AMOUN T OF RS.3.48 CRORES WAS AN ADVANCE TILL 14/04/2001. M/S . BAAZEE COM. INDIA PVT.LTD. HAS FILED A REVISED RETU RN FOR ASSESSMENT YEAR 2002-03 TO PROTECT THEMSELVES. THE Y ALSO PREFERRED AN APPEAL TO THE COMMISSIONER OF INCOME TAX(A)-VI MUMBAI. THE APPEAL HAS BEEN DISPOSED OF ITA NO.784/AHD /2006 & CO NO.115/AHD/2009 ACIT VS. CLIQUE HOLDINGS PVT.LTD. ASST.YEAR -2001-02 - 5 - VIDE AN ORDER DATED 1 ST DECEMBER 2004 WHEREIN A SUM OF RS.29 LAKHS OUT OF RS.1,37,75,000/- HAS BEEN ALLOW ED BY THE CIT(A) VIDE ORDER NO.CIT(A)-VI/ITO 6(2)(2)/IT-1 6/04-05 DATED 01/12/2004 AS EXPENSES RELATED TO ASSESSMENT YEAR 2001-02. NEITHER THE DEPARTMENT NOR THE ASSES SEE IN THAT CASE, I.E. BAAZEE COM. INDIA PVT.LTD. HAVE PRE FERRED AN APPEAL AGAINST THE CIT(A)S ORDER TO INCOME TAX APPELLATE TRIBUNAL. HENCE THE ALLOWANCE OF RS.29 L AKHS AS EXPENDITURE UNDER THE HEAD OF CONSULTANCY FEES ACHIEVED FINALITY IN THE CASE OF BAAZEE COM. INDIA PVT.LTD. ACCORDINGLY, THE LEARNED ACIT HAS MADE A N ADDITION OF RS.29,00,000/- TO THE APPELLANTS INCOME TO SYNCHRONIZE THE ASSESSEE COMPANYS ASSESSMENT WITH THE ASSESSMENT OF BAAZEE COM.INDIA PVT.LTD. 4. IN APPEAL, THE LD. CIT(APPEALS) HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER:- 5. I HAVE PERUSED THE FACTS OF THE CASE AND SUBMISSIONS OF THE A.R. OF THE APPELLANT CAREFULLY. I ITA NO.784/AHD /2006 & CO NO.115/AHD/2009 ACIT VS. CLIQUE HOLDINGS PVT.LTD. ASST.YEAR -2001-02 - 6 - HAVE ALSO PERUSED THE DECISIONS, AS REFERRED ABOVE, RELIED UPON BY THE A.R. AND THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. 5.1. AS IT COULD BE SEEN FROM THE AGREEMENT, THE APPELLANT WAS NOT ENTITLED TO ADJUST THE SECURITY DEPOSIT TOWARDS CONSULTANCY CHARGES DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR. HOWEVER, THE SAME FALLS IN NEXT YEAR. THE APPELLA NT IS SEEN TO HAVE OFFERED THE SAME FOR NEXT YEAR. 5.2. IT IS SEEN FROM THE ASSESSMENT ORDER OF REAL VALUE MARKETING SERVICES LTD., FOR THE ASSESSMENT YEAR 2002-03 THAT RS.29 LAKHS IS SEEN TO HAVE BEEN ASSESSED IN THE HANDS OF REAL VALUE MARKETING SERVICES LTD. THE REAL VALUE MARKETING SERVICES LT D., IS THE NEW NAME OF THE APPELLANT FOR THE ASSESSMENT YEAR 2002-03 ONWARDS CONSEQUENT TO MERGER BY THE APPELLANT COMPANY. 5.3. THE OBSERVATION OF THE ASSESSING OFFICER IN C ASE OF REAL VALUE MARKETING SERVICES IS REPRODUCED HEREWITH:- CONSIDERING THE POSSIBILITY OF M/S. CLIQUE HOLDINGS PVT.LTD. AGITATING THE TREATMENT OF RS.29 LAKHS AS THEIR INCOME FOR ASSESSMENT YEAR 2001-02 IN THE APPEALS, THE SAID SUM OF RS.29 LAKHS IS BEING TREATED AS INCOME OF THE ASSESSEE COMPANY FOR CURRENT YEAR ON PROTECTIVE BASIS. IN CASE M/S.CLIQUE HOLDINGS PVT.LTD. ULTIMATELY SUCCEEDS IN DELETION OF THE SUM OF RS.29 LAKHS AS INCOME FOR THE ASSESSMENT YEAR 2001-02 THEN RS.29 LAKHS WILL BECOME PERMANENTLY AS INCOME OF THE ASSESSEE FOR THE CURRENT YEAR. ITA NO.784/AHD /2006 & CO NO.115/AHD/2009 ACIT VS. CLIQUE HOLDINGS PVT.LTD. ASST.YEAR -2001-02 - 7 - 5.4. THEREFORE, IN THE LIGHT OF ABOVE, THE ADDITION MADE BY THE ASSESSING OFFICER IN APPELLANTS CASE F OR THE ASSESSMENT YEAR UNDER CONSIDERATION IS UNWARRANTED. THEREFORE, THE ADDITION OF RS.29 LAKH S IS DELETED. 5. THE LD. DEPARTMENTAL REPRESENTATIVE HAS RELIE D ON THE ORDER OF THE ASSESSING OFFICER. 6. THE LD. AUTHORISED REPRESENTATIVE OF THE ASSE SSEE HAS RELIED ON THE ORDER OF THE LD. CIT(APPEALS). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIA LS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSES SEE HAS CLAIMED TO HAVE RECEIVED RS.3.48 CRORES AS ADVANCE FROM BAAZEE COM. INDIA PVT. LTD. THE ASSESSEE HAS S HOWN THE SAME AS ADVANCE IN ITS BALANCE SHEET AND NO POR TION OF THE SAID AMOUNT WAS TAKEN IN PROFIT & LOSS ACCOU NT DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. IN THE ORIGINAL ASSESSMENT MADE IN THE CASE OF THE ASSESSE E THE ABOVE ADVANCE WAS DULY ACCEPTED BY THE ASSESSING ITA NO.784/AHD /2006 & CO NO.115/AHD/2009 ACIT VS. CLIQUE HOLDINGS PVT.LTD. ASST.YEAR -2001-02 - 8 - OFFICER . HOWEVER, LATER ON IT WAS OBSERVED THAT TH E ASSESSMENT OF BAAZEE COM. INDIA PVT. LTD. OUT OF AB OVE AMOUNT OF RS.3.48 CRORES RS.29 LAKHS WAS ALLOWED AS DEDUCTION BY THE LD. CIT(APPEALS). THEREFORE, THE ASSESSING OFFICER INITIATED REASSESSMENT PROCEEDING S IN THE CASE OF THE ASSESSEE AND ASSESSED RS.29 LAKHS A S INCOME OF THE YEAR UNDER CONSIDERATION WHICH WAS ALLOWED AS REVENUE EXPENDITURE IN THE HANDS OF BAAZ EE COM. INDIA PVT. LTD. FOR THE YEAR UNDER CONSIDERATI ON. ON APPEAL, THE LD. CIT(APPEALS) OBSERVED THAT AS PER T HE AGREEMENT ENTERED INTO BY THE ASSESSEE AND BAAZEE COM. INDIA PVT. LTD. THE ASSESSEE WAS NOT ENTITLED TO APPROPRIATE ANY AMOUNT OUT OF ADVANCE OF RS.3.48 CR ORES DURING THE YEAR UNDER CONSIDERATION AND THE FIRST A MOUNT WHICH WAS DUE TO THE ASSESSEE UNDER THAT AGREEMENT WAS ONLY ON 14.4.2001. FURTHER, THE LD. CIT(APPEALS ) ALSO OBSERVED THAT RS.29 LAKHS IN QUESTION WAS ALSO ASSE SSED AS ASSESSEES INCOME DURING THE ASSESSMENT YEAR 2002-0 3 ITA NO.784/AHD /2006 & CO NO.115/AHD/2009 ACIT VS. CLIQUE HOLDINGS PVT.LTD. ASST.YEAR -2001-02 - 9 - ALSO. IN VIEW OF THIS, THE LD. CIT(APPEALS) DELETE D THE ADDITION OF RS.29 LAKHS FOR THE YEAR UNDER CONSIDER ATION. WE FIND THAT THE REVENUE HAS NOT BEEN ABLE TO BRING ANY MATERIAL BEFORE US TO SHOW THAT RS.29 LAKHS ACCRUED TO THE ASSESSEE AT ANY POINT OF TIME DURING THE RELEVANT P REVIOUS YEAR ON ACCOUNT OF ANY SERVICE RENDERED BY THE ASSESSEE. FURTHER, IT IS OBSERVED THAT THE ADDITIO N WAS MADE SOLELY ON THE BASIS OF APPELLATE ORDER PASSED IN THE CASE OF BAAZEE COM. INDIA PVT. LTD. WHERE THE ASSE SSEE WAS NOT A PARTY AND IT WAS NOT SHOWN THAT THE SAID APPELLATE ORDER WAS PASSED AFTER ALLOWING OPPORTUNI TY OF HEARING TO THE ASSESSEE. THE REVENUE HAS BROUGHT N O MATERIAL BEFORE US TO SHOW THAT THE EVIDENCE WHICH WERE RELIED UPON BY THE LD. CIT(APPEALS) IN THE CASE OF BAAZEE COM. INDIA PVT. LTD. WERE CONFRONTED TO THE ASSESSE E AND THE ASSESSEE WAS NOT ABLE TO REBUT THOSE EVIDENCES. AS THE EVIDENCES ON WHICH RS.29 LAKHS WAS TREATED AS INCOME OF THE ASSESSEE AND THE ASSESSEE WAS NOT ITA NO.784/AHD /2006 & CO NO.115/AHD/2009 ACIT VS. CLIQUE HOLDINGS PVT.LTD. ASST.YEAR -2001-02 - 10 - ALLOWED THE PROPER OPPORTUNITY TO REBUT THE SAME, I N OUR CONSIDERED OPINION, THAT MATERIAL CANNOT BE READ AG AINST THE ASSESSEE . WE ALSO FIND THAT THE ASSESSING OFFI CER HAS GIVEN THE FINDING ON THE BASIS OF FINDING OF THE LD . CIT(APPEALS) IN SOME OTHER CASE AND NOT ON THE BASI S OF THE ANY EVIDENCE OR MATERIAL WHICH WAS EXAMINED BY HIMSELF AFTER FOLLOWING THE PROPER PROCEDURE. FURTH ER, WE FIND THAT NO SPECIFIC ERROR IN THE FINDING OF THE L D. CIT(APPEALS) IN THE INSTANT CASE COULD BE POINTED O UT BY THE LD. DEPARTMENTAL REPRESENTATIVE. IN ABSENCE OF THE ABOVE, WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(APPEALS). IT IS CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 8. THE SECOND AND THIRD GROUNDS OF APPEAL READ AS UNDER:- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-XI, AHMEDABAD OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER TO THE ABOVE EXTENT. ITA NO.784/AHD /2006 & CO NO.115/AHD/2009 ACIT VS. CLIQUE HOLDINGS PVT.LTD. ASST.YEAR -2001-02 - 11 - 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D. CIT(A)-XI, AHMEDABAD MAY BE SET ASIDE TO THE ABOVE EXTENT AND THAT OF THE ASSESSING OFFICER BE RESTORED TO THE ABOVE EXTENT. 9. THE ABOVE GROUNDS OF APPEAL ARE GENERAL IN NATUR E REQUIRE NO ADJUDICATION BY US. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. IN ASSESSEES CROSS OBJECTION NO.115/AHD/2009, THE FOLLOWING GROUNDS HAVE BEEN RAISED:- 1.1. THE LD. CIT(A) HAS ERRED IN LAW IN CONFIRMING THAT REOPENING OF ASST. UNDER SECTION 147 WAS VALID AND LEGAL. 1.2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. LD. CIT(APPEALS) OUGHT NOT TO HAVE HELD THAT NOTICE UNDER SECTION 147 AS VALID IN LAW. 2.1. THE LD. CIT(A) OUGHT TO HAVE HELD THAT ASSESSI NG OFFICER HAD NO REASON TO BELIEVE THAT THERE WAS ESCAPEMENT OF INCOME. 11. SINCE IN THE INSTANT CASE ONLY ADDITION MADE IN THE REASSESSMENT ORDER WAS OF RS.29 LAKHS WHICH WAS DEL ETED BY THE LD. CIT(APPEALS) AND AS DELETION OF THE SAME HAS BEEN CONFIRMED BY US IN THE APPEAL OF THE REVENUE, ITA NO.784/AHD /2006 & CO NO.115/AHD/2009 ACIT VS. CLIQUE HOLDINGS PVT.LTD. ASST.YEAR -2001-02 - 12 - THEREFORE THE GROUNDS RAISED BY THE ASSESSEE IN ITS CROSS OBJECTION HAS BECOME ACADEMIC AND THEREFORE, REQUIRES NO ADJUDICATION BY US . THEREFORE THEY AR E DISMISSED. 13. IN THE RESULT, THE APPEAL OF THE REVENUE AS WEL L AS THE CROSS OBJECTION FILED BY THE ASSESSEE BOTH ARE DISMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 24/07/2009. SD/- SD/- ( MAHAVIR SINGH) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT ME MBER AHMEDABAD; DATED 24/07/2009 T.C. NAIR COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RE SPONDENT 3. THE CIT CONCERNED. 4. THE LD. CIT (APPEALS)- XI,AHMEDABAD 5. THE DR, AHMEDABAD BENCH. 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD