Exim Rajathi India (P) Ltd., Nagapattinam V. ACIT, Thanjavur

ITA 984/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61155 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 04-06-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 06-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR
• Assessee Lawyers: T BANUSEKAR
• Keywords: Depreciation; Notional interest; Capital expenditure
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH CHENN AI BEFORE SHRI ABRAHAM P.GEORGE ACCOUNTANT MEMBER AND SHRI V.DURGA RAO, JUDICIAL MEMBER .. ITA NO.983 & 984/MDS./2011 ASSESSMENT YEARS:2006-07 & 2007-08 M/S.EXIM RAJATHI INDIA (P) LTD., 11,FIRST LINE BEACH ROAD, NAGAPATTINAM 611 001 VS. THE JOINT COMMISSIONER OF INCOME TAX, THANJAVUR RANGE, THANJAVUR. PAN AABCE 1762 D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI T.BANUSEKAR C.A. RESPONDENT BY : SHRI K.E.B.RENGARAJAN JR. STANDING COUNSEL DATE OF HEARING : 04.06.12 DATE OF PRONOUNCEMENT : 04. 06.12 O R D E R PER ABRAHAM P.GEORGE ACCOUNTANT MEMBER : THESE ARE APPEALS FILED BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2006-07 & 2007-08 WHICH ARE DIRECT ED AGAINST AN ORDER DATED 24.02.11 OF COMMISSIONER OF INCOME TAX(APPEALS)-II, TIRUCHIRAPPALLI. ITA. 983 & 984/MDS/11 2 2. THESE APPEALS HAVE BEEN FILED WITH A DELAY OF 3 4 DAYS FOR WHICH CONDONATION PETITION HAS BEEN FILED BY TH E ASSESSEE. REASONS SHOWN BEING SATISFACTORY, DELAY IS CONDONED AND APPEALS ARE ADMITTED. 3. GROUNDS TAKEN FOR THE YEARS ARE COMMON AND READ AS UNDER:- 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS) DISMISSING THE APPELLANTS APPEAL AS INFRUCTUOUS ON THE GROUND THAT THE ASSESSMENT ORDER APPEALED AGAINST HAS BEEN SET ASIDE DE NOVA BY THE ADMIN COMMISSIONER OF INCOME TAX IN EXERCISE OF HIS POWER UNDER SECTION.263 OF THE INCOME TAX ACT IS ERRONEOUS AGAINST THE PROVISIONS OF LAW AND CONTRAR Y TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE COMMISSIONER OF INCOME TAX(APPEALS) SHOULD HAVE FOUND THAT IN THE LIGHT OF THE SPECIFIC ISSUES RAISED BY THE COMMISSIONER OF INCOME TAX WHILE ISSUING THE NOTICE UNDER SECTION.263, THE ORDER OF THE COMMISSIONER OF INCOME TAX UNDER SECTION.263 OF THE ACT SHOULD BE CONSTRUED AS SETTING ASIDE THE ASSESSMENT ONLY TO THE EXTENT AS IT DEALS WITH THE SPECIFIC ISSUES RAISED UNDER SECTION.263 OF THE ACT AND ONLY IN RESPECT OF WHICH THE APPELLANT WAS GIVE N AN OPPORTUNITY TO MAKE ITS SUBMISSIONS. ITA. 983 & 984/MDS/11 3 3. FOR THESE REASONS DEDUCTION FOR ANY OTHER REASON ADDUCED AT THE TIME OF HEARING IT IS PRAYED THAT TH E HONBLE ITAT MAY BE PLEASED TO SET ASIDE THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS) DATED 24.02.2011 DISMISSING THE APPELLANTS APPEAL AS INFRUCTUOUS AS ERRONEOUS AGAINST THE POINT OF LAW AND CONTRARY TO FACTS AND CIRCUMSTANCES OF THE CASE AND DIRECT THE COMMISSIONER OF INCOME TAX(APPEALS) TRICHY TO DISPOSE OFF THE APPEAL FILED BY THE APPELLANT IN ITA NO.343/2009-10 ON MERIT AND RENDER JUSTICE. 4. SHORT FACTS APROPOS ARE THAT ORIGINAL ASSESSMEN TS FOR BOTH THESE YEARS UNDER SECTION 143(3) OF THE ACT WE RE COMPLETED ON 23.12.2008 & 30.12.2009 RESPECTIVELY. AGGRIEVED BY CERTAIN ADDITIONS, ASSESSEE MOVED IN A PPEAL BEFORE THE COMMISSIONER OF INCOME TAX(APPEALS) FOR BOTH THE YEARS. WHILE THE SAID APPEAL WAS PENDING BEFORE T HE COMMISSIONER OF INCOME TAX(APPEALS), PROCEEDINGS UN DER SECTION.263 WERE INITIATED BY COMMISSIONER OF INCOM E TAX- II,TIRUCHIRAPALLI FOR BOTH THE YEARS AND BOTH THE A SSESSMENTS WERE SET ASIDE THROUGH ORDERS DATED 15.02.2011 FOR A REASON THAT ASSESSING OFFICER HAD NOT EXAMINED CERTAIN ASP ECTS AND ISSUES RELATING TO THE ASSESSMENTS. APPEALS OF THE ASSESSEE AGAINST ORIGINAL ASSESSMENT UNDER SECTION.143(3) OF THE ACT WERE DISMISSED BY THE COMMISSIONER OF INCOME TAX(AP PEALS) ON 24.02.2011, SINCE ACCORDING TO HIM, COMMISSIONER OF INCOME TAX, TIRUCHIRAPPALLI HAD ON 15.02.2011 SET A SIDE THE IMPUGNED ASSESSMENT ORDERS. ITA. 983 & 984/MDS/11 4 5. NOW BEFORE US THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE ISSUES ON WHICH PROCEED INGS UNDER SECTION.263 OF THE ACT WERE INITIATED AND ISS UES ON WHICH ASSESSEE WAS IN APPEAL AGAINST THE ORIGINAL ASSESSMENT ORDERS UNDER SECTION.143(3) OF THE ACT W ERE DIFFERENT. ACCORDING TO HIM, COMMISSIONER OF INCOM E TAX(APPEALS) ERRED IN NOT ADJUDICATING ON THE GROUN DS RAISED BY THE ASSESSEE BEFORE HIM DESPITE THE FACT THAT T HESE GROUNDS WERE NOT RELEVANT TO THE ISSUES ON WHICH TH E COMMISSIONER OF INCOME TAX-II TIRUCHIRAPPALLI HAD S ET ASIDE THE ORDERS UNDER SECTION.263 OF THE ACT. DEPARTMEN TAL REPRESENTATIVE FAIRLY AGREED THAT THE MATTER REQUI RED TO BE RECONSIDERED BY THE COMMISSIONER OF INCOME TAX(APP EALS). 6.1 WE HAVE PERUSED THE ORDERS AND HEARD CONTENTIO NS. FOR ASSESSMENT YEAR 2006-07, THE ISSUES ON WHICH TH E ASSESSEE HAD FILED AN APPEAL BEFORE THE COMMISSIONE R OF INCOME TAX(APPEALS) WERE AS UNDER:- AMOUNT INVOLVED GODOWN EXPENSES-LAND DEVELOPMENT: SUMS PAID FOR RED HILL PROPERTY CLAIMED AS REVENUE BY THE ASSESSE E AND TREATED AS CAPITAL EXPENDITURE BY THE AC 10,46,000.00 NEW GODOWN EXPENSES A PORTION OF THE SAME WAS PAID TO RED HILLS PROPERTY AND HENCE TREATED AS CA PITAL EXPENDITURE BY ASSESSING OFFICER 1,35,000.00 GODOWN EXPENSES A PORTION OF THE SAME WAS PAID TO RED HILLS PROPERTY AND HENCE TREATED AS CAPITAL EXPENDITURE BY ASSESSING OFFICER 6,90,000.00 LEGAL AND PROFESSIONAL CHARGES DISALLOWANCE OF EXCESS CLAIM FOR WHICH NO RECONCILIATION WAS FILED. 1,72,500.00 6.2 FOR ASSESSMENT YEAR 2007-08, THE ISSUES ON WHIC H ASSESSEE WAS ON APPEAL BEFORE THE COMMISSIONER OF I NCOME ITA. 983 & 984/MDS/11 5 TAX(APPEALS) WERE AS UNDER:- AMOUNT INVOLVED DISALLOWANCE OF CLAIM OF DEPRECIATION ON SKODA AND BMW 14,30,001.00 DISALLOWANCE UNDER SECTION.14A OF INVESTMENT IN SHARES OF BREEZE HOTELS 1,09,14,889.00 ADDITION OF DEMED INTEREST FROM THE INVESTMENTS MADE IN M/S.JENNAY HOTELS 65,69,192.00 ADDITION OF NOTIONAL INTEREST ON ADVANCES MADE TO OUTSIDERS 88,57,602.00 DISALLOWANCE OF FORWARD CONTRACT EXPENSES 10,37,52,195.00 6.3. AS AGAINST THE ABOVE, COMMISSIONER OF INCOME TAX HAD SET ASIDE THE ASSESSMENT FOR A.Y. 2006-07 FOR CONSI DERATION OF THE FOLLOWING:- 1. INTEREST CLAIMED ON LOAN BORROWED FOR INVESTMENT IN THE SHARES OF M/S.JENNY HOTELS (P) LTD IS NOT ALLOWABLE AS THE SA ME WAS NOT PAID FOR BUSINESS PURPOSES. 2. ASSESSEE INVESTED IN SHARES AND DEBENTURES OF M/ S.JENNY HOTELS (P) LTD. THE BENEFIT OF ` 50 LAKHS ARISING OUT OF THE SAME OUGHT TO BE TAXED UNDER SECTION.28(IV) BEING BENEFIT ARISING FROM BUSINESS. 3. SHARE APPLICATION MONEY RECEIVED FROM M.RAJASEKA R, N.MURUGESAN AND M.CHANDRIKA AS WELL AS LOAN TAKEN F ROM ASSOCIATES/RELATIVES NOT LOOKED INTO. 4. ENQUIRIES NOT MADE ON ACCOUNT OF WHETHER TDS PAY ABLE IN RESPECT OF EXPENDITURE INCURRED AND WHETHER THE SAM E HAS BEEN DEDUCTED AND DEPOSITED IN GOVERNMENT ACCOUNT OR NOT . 5. ENQUIRIES NOT MADE ON ACCOUNT OF AGENCY COMMISSI ON PAID. 6. INVESTMENT MADE IN SHARES OF BREEZE HOTELS LTD. ASSESSING OFFICER NOT LOOKED INTO THE SOURCES OF INVESTMENT, CLAIM OF DEDUCTION IN RESPECT OF SUCH INVESTMENT IN ORDER TO CHECK THE APPLICABILITY OF THE PROVISIONS OF SEC 68/14A. ITA. 983 & 984/MDS/11 6 6.4. FOR ASSESSMENT YEAR 2007-08, COMMISSIONER O F INCOME TAX HAD SET ASIDE THE ASSESSMENT ON THE FOL LOWING ISSUES:- 1. ASSESSING OFFICER HAD NOT EXAMINED THE DETAILS O F SHARES AND DEBENTURES PURCHASED FROM M/S.JENNYS HOTELS AND THE YEAR IN WHICH THE SHORT TERM CAPITAL GAINS IS CHARGEABLE TO TAX ON SALE OF THE SHARES AND DEBENTURES.. 2. INVESTMENT MADE IN SHARES OF BREEZE HOTELS LTD. ASSESSING OFFICER NOT LOOKED INTO THE SOURCES OF INVESTMENT, CLAIM OF DEDUCTION IN RESPECT OF SUCH INVESTMENT IN ORDER TO CHECK THE APPLICABILITY OF THE PROVISIONS OF SEC 68/14A. 6.5 THUS THE APPEALS FILED BY THE ASSESSEE FOR BOT H THE YEARS WERE ON SUBSTANTIALLY DIFFERENT ISSUES, VIS--VIS T HE ISSUES FOR WHICH PROCEEDINGS UNDER SECTION 263 WERE INITIATED AND COMPLETED BY THE COMMISSIONER OF INCOME TAX. WE AR E THEREFORE, OF THE OPINION THAT THE COMMISSIONER OF INCOME TAX(APPEALS) WAS OBLIGED UNDER LAW TO DEAL WITH THE GROUNDS TAKEN BY ASSESSEE FOR THE RESPECTIVE ASSESSMENT YEA RS, SINCE ORDERS UNDER SECTION.263 DID NOT COVER THESE ASPECT S. WE THEREFORE, SET ASIDE THE ORDERS OF THE COMMISSIO NER OF INCOME TAX(APPEALS) FOR BOTH THE ASSESSMENT YEARS A ND REMIT THE MATTER BACK TO THE COMMISSIONER OF INCOME TAX(A PPEALS) FOR CONSIDERATION IN ACCORDANCE WITH LAW. ITA. 983 & 984/MDS/11 7 6. IN THE RESULT, THE APPEALS OF THE ASSESSEE FOR BOTH THE YEARS ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT AFTER CONCLUSION OF HEARING ON MONDAY, THE 4 TH JUNE, 2012. SD/- SD/- ( V.DURGA RAO ) (ABRAHAM P.GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED 4 TH JUNE, 2012. K S SUNDARAM COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE ITA. 983 & 984/MDS/11 8