DCIT CEN CIR 5(1), MUMBAI V. HUBTOWN LTD, MUMBAI

ITA 962/MUM/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0687 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2012-2013
• Appeal Filed On: 10-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIRAL DOSHI
• Keywords: Reassessment proceedings; Set aside
• Section: 115JB; 133(6); 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.962/M/2017 ASSESSMENT YEAR: 2012-13 DCIT, CENT. CIR. 5(1), R.NO.1928, 19 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI 400 021 VS. M/S. HUBTOWN LTD., AKRUTI TRADE CENTRE, 6 TH FLOOR, ROAD NO.7, MAROL-MIDC ANDHERI(E), MUMBAI 400 093 PAN: AAACA6101D (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI VIRAL DOSHI, A.R. REVENUE BY : SHRI B. SRINIVAS CHAUDHARI, D.R. SHRI ARUNKUMAR SINGH, D.R. DATE OF HEARING : 17.05.2019 DATE OF PRONOUNCEMENT : 31.05.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 30.09.2016 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2012-13. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: '1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, LD. CIT(A) ERRED IN HOLDING THAT THE AMOUNT OF RS. 30,00,00,000/- SE T APART BY THE ASSESSES AS DRR IS NOT A RESERVE WITHIN THE MEANING OF EXPLANATION L(B ) TO SECTION 115 JB OF THE ACT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 25,00,000/- MADE U/S 6 B OF THE ACT EVEN THOUGH THE ASSESSEE WAS UNABLE TO ESTABLISH THE IDENTITY AND C REDITWORTHINESS OF THE LENDER AND THE GENUINENESS OF TRANSACTION. ITA NO.962/M/2017 M/S. HUBTOWN LTD. 2 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.24,29,082/- ON ACCOUNT OF DISALLOWANCE OF INTEREST EXPENDITURE BY THE AO EVEN THOUGH THE ASSESSEE FAIL ED TO ESTABLISH THE IDENDITY AND CREDITWORTHINESS OF THE PARTIES FROM WHOM THE L OAN WAS TAKEN AND ALSO FAILED TO ESTABLISH THE GENUINENESS OF THE TRANSACTIONS. 4. THE APPELLANT PRAYS THAT THE ORDER OF COMMISSION ER OF INCOME-TAX (APPEAL) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AS SESSING OFFICER BE RESTORED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND S OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 3. THE ISSUE IN 1ST GROUND OF APPEAL IS AGAINST THE ORDER OF LD. CIT(A) HOLDING THAT AMOUNT OF RS.30 LAKHS SET APART BY THE ASSESSEE AS DRR IS NOT WITHIN THE MEANING OF EXPLAN ATION 1(C) TO SECTION 115JB OF THE ACT. 4. THE FACTS IN BRIEF ARE THAT THE AO ON THE PERUSA L OF RETURN OF INCOME AND OTHER DETAILS FILED BY THE ASSESSEE O BSERVED THAT ASSESSEE HAS SET APART RS.30 CRORES TOWARDS THE DEB ENTURES AND REDEMPTION RESERVE OUT OF PROFIT OF THE CURRENT YEA R. THE ASSESSEE WAS ASKED TO JUSTIFY THE ALLOWABILITY OF T HE SAID DEBENTURES REDEMPTION RESERVE FROM BOOK PROFIT CLA USE TO EXPLANATION 1 TO SECTION 115JB OF THE ACT WHICH WAS REPLIED BY THE ASSESSEE VIDE WRITTEN SUBMISSION DATED 18.03.20 14 SUBMITTING THAT DURING THE YEAR UNDER CONSIDERATION THE COMPANY ISSUED DEBENTURES OF RS.245 CRORE AND THERE FORE WHILE FINALIZING THE ACCOUNTS FOR THE YEAR ENDED 31.03.20 12 COMPANY HAS APPROPRIATED RS.30 CRORES TOWARDS DEBENTURES R EDEMPTION RESERVE OUT OF THE PROFIT OF THE YEARS. THE LD. A. R. SUBMITTED THAT THE ASSESSEE COMPANY HAS CREDITED DEBENTURES R EDEMPTION RESERVE TO THE EXTENT OF RS.30 CRORES UNDER THE PRO VISIONS OF SECTION 117C OF THE COMPANIES ACT, 1956. WHILE FIL ING THE RETURN OF INCOME FOR A.Y. 2012-13 THE SAID APPROPRI ATION TOWARDS REDEMPTION RESERVE HAS BEEN REDUCED FROM BO OK PROFIT ITA NO.962/M/2017 M/S. HUBTOWN LTD. 3 AS PER EXPLANATION 1 TO SECTION 115JB OF THE ACT. THE REPLY OF THE ASSESSEE DID NOT FIND FAVOUR WITH THE AO AND TH E AO CAME TO THE CONCLUSION THAT THE RESERVE SET ASIDE IS IN THE NATURE OF RESERVE WHICH IS NOT COVERED IN THE DEFINITION OF S PECIFIED RESERVE AND THEREFORE SQUARELY COVERED WITHIN THE AMBIT OF DISALLOWANCE FOR THE PURPOSE OF CALCULATION OF BOOK PROFIT UNDER SECTION 115JB OF THE ACT AND ADDED BACK TO THE INCOME OF THE ASSE SSEE BY OBSERVING THAT IN .AY. 2010-11 AND 2011-12 ALSO THE SIMILAR SETTING APART WAS ADDED BACK TO THE PROFIT OF THE A SSESSEE. 5. THE LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESSE E BY FOLLOWING THE DECISION OF HONBLE JURISDICTIONAL BO MBAY HIGH COURT IN THE CASE OF CIT VS. RAYMOND LTD [2012] 21 TAXMANN.COM 60 (BOM.). 6. THE LD. A.R. AT THE OUTSET, SUBMITTED THAT THE I SSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE CO- ORDINATE BENCH OF THE TRIBUNAL IN ITS OWN CASE IN I TA NO.7696/M/2014 A.Y. 2011-12 VIDE ORDER DATED 30.06. 2017 WHICH WAS PASSED BY FOLLOWING THE DECISION OF THE H ONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RAYMOND LT D. (SUPRA). THE LD. A.R. THEREFORE PRAYED BEFORE THE BENCH THAT THE GROUND RAISED BY THE REVENUE MAY KINDLY BE DISMISSED IN VI EW OF THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL. 7. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE O RDER OF AUTHORITIES BELOW AND GROUNDS RAISED IN THE MEMORAN DUM OF APPEAL. 8. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD INCLUDING THE DECISION OF THE CO-ORDINATE BE NCH OF THE ITA NO.962/M/2017 M/S. HUBTOWN LTD. 4 TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.7696/M/20 14 (SUPRA), WE OBSERVE THAT THE IDENTICAL ISSUE HAS BE EN DECIDED IN FAVOUR OF THE ASSESSEE. THE OPERATIVE PART IS REPR ODUCED AS UNDER: 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. IN OUR CONSIDERED OPINION, HAVING REGARD TO THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF RAYMOND LTD. (SUPRA) AS WELL AS THE DECISION OF OUR COORDINATE BENCH IN THE CASE OF JSW ENERGY (SUPRA), THE IMPUGNED ISSUE IS NO LONGER RES INTEGRA. IN THE CASE OF JSW ENERGY (SUPRA), THE TRIBUNAL WAS CONSIDERING THE DE DUCTIBILITY OF THE AMOUNT SET APART AS DEBENTURE REDEMPTION RESERVE FOR THE PURPO SES OF COMPUTING THE BOOK PROFITS U/S 115JB OF THE ACT. AFTER DETAILED DISCUS SION, IT HAS BEEN HELD THAT ADJUSTMENT OF THE AMOUNT OF DEBENTURE REDEMPTION RE SERVE MADE WHILE COMPUTING THE BOOK PROFITS U/S 115JB OF THE ACT IS PERMISSIBLE AND IS WITHIN THE PURVIEW OF THE LAW. THE DECISION OF CIT(A) IS IN CO NSONANCE WITH THE AFORESAID LEGAL POSITION AND EVEN BEFORE US, NO CONTRARY DECISION H AS BEEN BROUGHT OUT BY THE REVENUE AND AS A CONSEQUENCE, WE HEREBY AFFIRM THE DECISION OF CIT(A) ON THIS ASPECT. THUS, THE REVENUE FAILS IN ITS APPEAL. 9. SINCE THE FACTS IN THE YEAR UNDER CONSIDERATION ARE IDENTICAL, WE, THEREFORE, RESPECTFULLY FOLLOWING TH E DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL UPHOLD THE ORDER OF LD. CIT(A) BY DISMISSING THE GROUND RAISED BY THE REVENUE. 10. THE ISSUE RAISED IN 2 ND GROUND OF APPEAL IS AGAINST THE DELETION OF ADDITION OF RS.25 LAKHS BY LD. CIT(A) A S MADE BY THE AO UNDER SECTION 68 OF THE ACT FOR FAILING TO ESTAB LISH IDENTITY, CREDITWORTHINESS OF THE LENDER AND GENUINENESS OF T HE TRANSACTION WHEREAS THE ISSUE IN THE 3 RD GROUND IS AGAINST THE DELETION OF INTEREST OF RS. 24,29,082/- ON LOANS WH ERE IDENTITY, CREDITWORTHINESS AND GENUINENESS NOT PROVED. 11. THE FACTS IN BRIEF ARE THAT THE AO OBSERVED FRO M THE BALANCE SHEET AND TAX AUDIT REPORT THAT ASSESSEE HA S TAKEN LOAN FROM THREE PARTIES AS PER DETAILS BELOW: 1. JAISHWAR COMMERCIAL PVT. 1 ST FLOOR 60/D, COLOOROLA STREET, KOLKATA 25,00,000 2 SEASITE FINANCE LIMITED (OPENING BALANCE) ITA NO.962/M/2017 M/S. HUBTOWN LTD. 5 18 RN MUKHERJEE ROAD KOLKATA 1,00,00,000 3 COMPANION TRADE FINANCE PVT. LTD. 294, B.B. GANGULY STREET KOLKATA (OPENING BALANCE) 25,00,000 IN ORDER TO ASCERTAIN THE VERACITY OF THE LENDERS, THEIR EXISTENCE, THE DDIT, KOLKATA INVESTIGATION WAS REQUESTED TO MA KE THE ENQUIRIES ABOUT THESE PARTIES AND CREDITWORTHINESS WHO DEPUTED HIS INSPECTOR TO CONDUCT THE ENQUIRY AND TO SERVE S UMMONS UNDER SECTION 131 OF THE ACT. HOWEVER, THE INSPECTO R REPORTED THAT NONE OF THE PARTIES WERE EXISTING ON THE SAID ADDRESSES AND ACCORDINGLY A SHOW CAUSE NOTICE WAS ISSUED TO THE A SSESSEE AS TO WHY THESE LOANS SHOULD NOT BE ADDED TO THE INCOME O F THE ASSESSEE WHICH WAS REPLIED VIDE WRITTEN SUBMISSIONS DATED 27.03.2015 ACCOMPANYING CONFIRMATIONS OF ACCOUNT A LONG WITH FINANCIALS OF THE SAID LENDERS AND REQUESTED THE AO TO ISSUE NOTICES UNDER SECTION 133(6) TO OBTAIN THE FURTHER INFORMATION. THEREAFTER, THE AO REJECTING THE CONTENTION OF THE ASSESSEE ADDED SUM OF RS.25 LAKHS BEING LOAN RAISED DURING THE YEA R AS UNPROVED AND UNEXPLAINED AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE UNDER SECTION 68 OF THE ACT. 12. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT LD. CIT(A) HAS CALLED FOR A REMAND REPORT FROM THE AO IN THE APPELLATE PROCEEDINGS AND DURING THE REMAND PROCEEDINGS THE AO ISSUED NOTICE UNDER SECTION 133( 6) TO THE LOAN PARTIES AND WERE DULY REPLIED BY THESE PARTIES BY SUBMITTING ALL THE NECESSARY EVIDENCES AND LD. CIT( A) ON THE BASIS OF THE REMAND REPORT CAME TO THE CONCLUSION T HAT GENUINENESS OF THE LOAN FROM M/S. JCPL HAS ALREADY BEEN ACCEPTED IN THE REASSESSMENT PROCEEDINGS IN 2010-11 AND THERE IS NO JUSTIFICATION FOR TREATING THE LOAN OF RS.25 LAKHS FROM M/S. ITA NO.962/M/2017 M/S. HUBTOWN LTD. 6 JCPL AS UNEXPLAINED IN A.Y. 2012-13 THE YEAR UNDER CONSIDERATION AND THUS DELETED THE ADDITION. CONSEQ UENTLY THE INTEREST EXPENDITURE OF RS.24,29,082/- WAS ALSO HEL D TO BE ALLOWABLE UNDER SECTION 36(1)(III) OF THE ACT. WE ARE IN AGREEMENT WITH THE CONCLUSION DRAWN BY THE LD. CIT(A) AS WE D O NOT FIND ANY INFIRMITY OR ANOMALY IN THE SAME AND ACCORDINGL Y GROUND NO.2 & 3 RAISED BY THE REVENUE ARE DISMISSED. 13. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.05.2019. SD/- SD/- ( RAM LAL NEGI) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 31.05.2019. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASS TT. REGISTRAR, ITAT, MUMBAI.