DCIT CEN CIR 7(3), MUMBAI V. KETAN PRAVINCHANDRA KAMDAR, MUMBAI

ITA 996/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9722 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 29-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Keywords: Business income; Business expenditure; Search and seizure
• Section: 143(3); 153A; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A , MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD , JUDICIAL MEMBER ITA NO. 996 /MUM/ 2016 : A.Y : 2007 - 08 DCIT, CENTRAL CIRCLE - 7(3), ERSTWHILE DCIT CENT RAL CIRCLE - 42, MUMBAI (APPELLANT) VS. SHRI KETAN PRAVINCHANDRA KAMDAR 111, LOHA BHAVAN, P.D MELLO RD., CARNAC BUNDER, MUMBAI 400 009 PAN : AA BPK6092R (RESPONDENT) APPELLANT BY : SHRI V. JUSTIN RESPONDENT BY : SHRI PARESH SHAPARIA DATE OF HEARING : 03 / 07 /201 7 DATE OF PRONOUNCEMENT : 31 /0 7 /201 7 O R D E R PER G.S. PANNU , AM : THE CAPTIONED APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) - 49 , MUMBAI DATED 2. 12 .201 5 , PERTAINING TO THE ASSESSMENT YEAR 20 07 - 08 , WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE ASSESSING OFFICER DATED 30 . 3 .201 4 UNDER SECTION 153A R.W.S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. IN ITS APPEAL, REVENUE HAS RAISED THE FOLLOWING G ROUNDS OF APPEAL: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE AO TO TREAT THE INCOME FROM SALE AND PURCHASE OF SHARES 2 SHRI KETAN PRAVINCHANDRA KAMDAR ITA NO. 996/MUM/2016 AS STCG AS AGAINST BUSINESS INCOME RELYING ON THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF ALL CARGO GL OBAL LOGISTICS LTD. VS. DCIT WITHOUT APPRECIATING THE FACT THAT THE DECISION OF THE BOMBAY HIGH COURT IN THIS CASE HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND SLP HAS BEEN FILED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF INTEREST OF RS.36,97,888/ - RELYING ON THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. VS. DCIT WITHOUT APPRECIATING THE FACT THAT THE DECISION OF THE BOMBAY HIGH COURT IN THIS CASE HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND SLP HAS BEEN FILED. 3. IN THIS CASE, THE FACTS RELEVANT TO UNDERSTAND THE CONTROVERSY IN THE ABOVESTATED GROUNDS OF APPEAL CAN BE UNDERSTOOD AS FOLLOWS. THE ASSESSEE IS AN INDIVIDUAL CONNECTED TO ONE, M/S K. AMISHKUMAR TRADING PVT. LTD. IN WHOSE CASE A SEARCH AND SEIZURE ACTION WAS CARRIED OUT BY THE D EPARTMENT ON 24.11.2011. SUBSEQUENTLY, A NOTICE U/S 153 A (1)(A) OF THE ACT WAS ISSUED AND SERVED ON THE ASSESSEE ON 6.5.2013 IN TERMS OF WHICH T HE ASSESSEE WAS REQUIRED TO FURNISH HIS RETURN OF INCOME. IN COMPLIANCE, ASSESSEE FURN ISHED THE RETURN OF INCOME ON 6.6.2013 DECLARING TOTAL INCOME AT RS.4 , 16 , 98 , 51 0 / - IN CONTRAST TO THE INCOME OF RS.4,15,28,209/ - DECLARED IN THE RETURN OF INCOME ORIGINALLY FILED U/S 139 OF THE ACT ON 25.10.2007. NOTABLY, AN ASSESSMENT WITH RESPECT TO THE RETURN FILED U/S 139 WAS COMPLETED BY THE ASSESSING OFFICER U/S 143(3) OF THE ACT ON 16.12.2009 AT AN INCOME OF RS.4,16,82,370/ - . THE DIFFERENCE IN THE INCOME RETURNED IN THE RETURN FILED U/S 139 AND U/S 153A(1)(A) OF THE ACT IS NOT RELEVANT FOR OUR PURPO SE . IN THE RETURN OF INCOME FILED U/S 139 OF THE ACT , THE INCOME FROM BUSINESS WAS DECLARED AT RS.2,03,10,191/ - , THE SAME WAS ASSESSED IN THE ORDER PASSED U/S 143(3) AT RS.2,04,64,355/ - ; AND , IN THE RETURN FILED IN RESPONSE TO THE 3 SHRI KETAN PRAVINCHANDRA KAMDAR ITA NO. 996/MUM/2016 NOTICE U/S 153A(1)(A), A N INCOME OF RS.2,04,64,355/ - WAS DECLARED. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE INCOME DECLARED UNDER THE HEAD BUSINESS AND PROFESSION, INTER - ALIA, INCLUDED A CLAIM OF EXPENSES OF RS.36,97,888/ - ON ACCOUNT OF INT EREST, BANK CHARGES, ETC. AGAINST THE REMUNERATION EARNED FROM THE PARTNERSHIP FIRM, M/S. A.K. ENTERPRISES. THE ASSESSING OFFICER DISALLOWED THE EXPENDITURE OF RS.36,97,888/ - AND DETERMINED THE INCOME UNDER THE HEAD BUSINESS AND PROFESSION AT RS.2,38,53 ,915/ - . THE SAID ADDITION WAS CHALLENGED IN APPEAL BEFORE THE CIT(A) ON VARIOUS GROUNDS WHICH, INTER - ALIA , INCLUDED THE ISSUE OF JURISDICTION. ON THE ISSUE OF JURISDICTION, ASSESSEE CONTENDED THAT THE IMPUGNED ADDITION WAS BEYOND THE SCOPE OF THE IMPUGNE D ASSESSMENT. IN SUPPORT, ASSESSEE EXPLAINED THAT ON THE DATE OF SEARCH, ASSESSMENT FOR THE INSTANT YEAR STOOD COMPLETED U/S 143(3) OF THE ACT ON 16.12.2009 AND THE SAME WAS NOT PENDING AND, THEREFORE, IN TERMS OF THE SECOND PROVISO TO SEC. 153A (1) OF THE ACT, SUCH AN ASSESSMENT DID NOT ABATE. IN THIS BACKGROUND, IT WAS CONTENDED BY THE ASSESSEE THAT IN VIEW OF THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD., WHICH HAS SINCE BEEN APPROVED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD., 374 ITR 645 (BOM) , IMPUGNED ADDITION COULD NOT BE MADE UNLESS ANY INCRIMINATING MATERIAL WAS FOUND IN THE COURSE OF SEARCH RELATING TO THE IMPUGNED ISSUE . THE CIT(A) HAS RECORDED A FINDING IN PARA 8.2 OF HIS ORDER, WHICH IS AS UNDER : - 8.2 IN THE PRESENT ASSESSMENT ORDER PASSED U/S 153A, THE A.O HAS NOT SHOWN THAT THE DISALLOWANCE OF RS.36,97,888/ - IS ON ACCOUNT OF ANY INCRIMINATING MATERIAL REVEALED BECAUSE OF THE SEARCH OR POST 4 SHRI KETAN PRAVINCHANDRA KAMDAR ITA NO. 996/MUM/2016 S EARCH ENQUIRY . THEREFORE, RELYING ON THE ABOVE SAID DECISION IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD., I FIND THAT THERE IS NO MERIT IN DISALLOWING THE BUSINESS EXPENSES OF RS.36,97,888 - AND ASSESSING THE BUSINESS INCOME AT RS.2,38,53,915/ - . THE A. O IS DIRECTED TO ALLOW THE EXPENSE OF RS.36,97,888/ - AS DONE IN THE ASSESSMENT ORDER DATED 16.12.2009. [UNDERLINED FOR EMPHASIS BY US] IN TERMS THEREOF, THE CIT(A) HAS CONCLUDED THAT THERE WAS NO INCRIMINATING MATERIAL REVEALED BECAUSE OF THE SEARCH OR POST - SEARCH ENQUIRIES , WHICH WOULD ENABLE THE ASSESSING OFFICER TO MAKE THE IMPUGNED ADDITION IN THE ASSESSMENT FINALISED U/S 153A R.W.S. 143(3) OF THE ACT. ACCORDINGLY, THE ADDITION HAS BEEN DELETED. AGAINST THE AFORESAID ACTION OF THE CIT(A), REVEN UE IS IN APPEAL BEFORE US. 4. BEFORE US, THE LD. CIT - DR HAS NOT CONTROVERTED THE FACTUAL FINDING OF THE CIT(A) THAT THE SEARCH OR POST - SEARCH INQUIRIES HAVE NOT REVEALED ANY INCRIMINATING MATERIAL WITH RESPECT TO THE ADDITIONS IN DISPUTE. SO HOWEVER, THE POINT SOUGHT TO BE RAISED IS T HAT THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD., (SUPRA) HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AS AN SLP HAS BEEN FILED IN THE HON'BLE SUPREME COURT. 5. ON THE OTHER HAND, THE LEARNED REPRESENTATIVE FOR THE RESPONDENT - ASSESSEE HAS SUPPORTED THE DECISION OF THE CIT(A) BY PLACING RELIANCE ON THE SAME. 6. HAVING REGARD TO THE RIVAL STANDS, IN OUR VIEW, THE ORDER OF CIT(A) DESERVES TO BE AFFIRMED INASMUCH AS IT IS BASED ON THE JUDGMENT OF THE 5 SHRI KETAN PRAVINCHANDRA KAMDAR ITA NO. 996/MUM/2016 HON'BLE BOMBAY HIGH COURT IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD., (SUPRA), WHICH CONTINUES TO HOLD THE FIELD. FACTUALLY SPEAKING, INSOFAR AS THE INSTANT ASSESSMENT YEAR IS CONCERNED, ON THE DATE OF INITIATION OF SEARCH, I.E. 24.11.2011, NO ASSESSMENT WAS PENDING , AND IT STOOD FINALISED IN VIEW OF THE ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE ACT DATED 16.12.2009 . THEREFORE, INSOFAR AS THE ISSUES WHICH HAD BECOME FINAL IN THE ASSESSMENT FINALISED U/S 143(3) OF THE ACT IS CONCERNED , ADDITIONS COULD B E MADE IN THE IMPUGNED ASSESSMENT ONLY IF ANY INCRIMINATING MATERIAL WAS FOUND IN THE COURSE OF SEARCH OR IN POST - SEARCH INQUIRIES , A PROPOSITION WHICH HAS BEEN APPROVED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD., (SUPR A) . IN THE ABSENCE OF ANY INCRIMINATING MATERIAL, AS MADE OUT BY THE CIT(A), THE IMPUGNED ADDITION HAS BEEN RIGHTLY DELETED BY THE CIT(A) AS BEING LACKING IN JURISDICTION. 7. NOTABLY, ANOTHER ADDITION IN DISPUTE RELATES TO THE ACTION OF ASSESSING OFFICER IN TREATING THE INCOME FROM SALE AND PURCHASE OF SHARES AS BUSINESS INCOME AS AGAINST SHORT TERM CAPITAL GAIN DECLARED BY THE ASSESSEE. ON THIS ASPECT ALSO, IT IS FACTUALLY EMERGING THAT IN THE ORIGINAL ASSESSMENT ORDER DATED 16.12.2009, THE LONG TERM AS WELL AS THE SHORT TERM CAPITAL GAIN DECLARED BY THE ASSESSEE ON SALE AND PURCHASE OF SHARES AND MUTUAL FUNDS WAS ACCEPTED AS SUCH, BUT IN THE IMPUGNED ASSESSMENT ORDER PASSED U/S 153A R.W.S. 143(3) OF THE ACT , THE SHORT TERM CAPITAL GAIN HAS BEEN TINKER ED BY THE ASSESSING OFFICER AND TREATED AS BUSINESS INCOME. HERE ALSO, THERE IS NO REFERENCE BY THE ASSESSING OFFICER TO ANY INCRIMINATING MATERIAL FOUND IN THE COURSE OF SEARCH OR POST - SEARCH INQUIRIES TO JUSTIFY HIS TREATMENT OF SHORT TERM 6 SHRI KETAN PRAVINCHANDRA KAMDAR ITA NO. 996/MUM/2016 CAPITAL GAI N AS BUSINESS INCOME . THEREFORE, ON THIS ASPECT ALSO, THE CIT(A) IS JUSTIFIED IN DELETING THE ADDITION. ON THIS ASPECT, ANOTHER FACET WHICH HAS BEEN NOTED BY THE CIT(A) IS THAT THERE IS INCONSISTENCY ON THE PART OF THE ASSESSING OFFICER WITH REGARD TO TR EATMENT OF INCOME FROM SALE AND PURCHASE OF SHARES EVEN WHILE PASSING ASSESSMENT ORDER S U/S 153A R.W.S. 143(3) OF THE ACT FOR THE VARIOUS ASSESSMENT YEARS. AS PER THE T ABULATION IN PARA 9 OF THE ORDER OF CIT(A), IT IS SEEN THAT FOR OTHER ASSESSMENT YEARS, EVEN IN THE ASSESSMENTS MADE U/S 153A R.W.S. 143(3) OF THE ACT ON EVEN DATE (I.E. 30.3.2014 ) , THE SHORT TERM CAPITAL GAIN HAS BEEN ACCEPTED BY THE ASSESSING OFFICER, SUCH ASSESSMENT YEARS BEING ASSESSMENT YEARS 2009 - 10, 2010 - 11 AND 2011 - 12. OBVIOUSLY, SUCH AN INCONSISTENCY DOES NOT JUSTIFY THE ACTION OF THE ASSESSING OFFICER. THEREFORE, ON THIS PLEA ALSO, WE FIND THAT THE CIT(A) WAS QUITE JUSTIFIED IN SETTING - ASIDE THE ACTION OF THE ASSESSING OFFICER INASMUCH AS THERE IS NO CONTROVERSION TO SUCH FACT - SITUATION ELUCIDATED BY THE CIT(A) IN HIS ORDER . 8. IN THE RESULT, WE FIND NO MERIT IN THE GROUNDS OF APPEAL RAISED BY THE REVENUE, WHICH ARE HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 1 S T JULY, 2017. SD/ - SD/ - (RAVISH SOOD) JUDICIAL MEMBER ( G.S. PANNU ) ACCOUNTANT MEMBER MUMBAI, DATE : 3 1 S T JULY, 2017 * SSL * 7 SHRI KETAN PRAVINCHANDRA KAMDAR ITA NO. 996/MUM/2016 COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, A BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, MUMBAI