M/s. Mahalaxmi Marketing P. Ltd., Kolkata V. DCIT, CC-1(4), Kolkata, Kolkata

ITSSA 103/KOL/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0187 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 12-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 07-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A K TULSYAN
• Keywords: Tax effect
• Section: 143(3); 153A; 132

Judgement Text

1 IT(SS)A NO. 117/KOL/2017 MAHALUXMI MARKETING P. LTD., AY 2011-12 , B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA ( ) BEFORE . , /AND . . , ) [BEFORE SHRI J. SUDHAKAR REDDY, AM & SHRI A. T. VA RKEY, JM] I.T(SS).A. NO. 117/KOL/2017 ASSESSMENT YEAR: 2011-12 DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1(4), KOLKATA. VS. M/S. MAHALUXMI MARKETING PVT. LTD. (PAN: AACCM0519R) APPELLANT RESPONDENT & I.T(SS).A. NO. 103/KOL/2017 ASSESSMENT YEAR: 2011-12 M/S. MAHALUXMI MARKETING PVT. LTD. VS. DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1(4), KOLKATA. APPELLANT RESPONDENT DATE OF HEARING 14.11.2018 DATE OF PRONOUNCEMENT 12.12.2018 FOR THE REVENUE SHRI VIJAY SHANKAR, CIT, DR FOR THE ASSESSEE SHRI A. K. TULSYAN, FCA ORDER PER SHRI A.T.VARKEY, JM BOTH THESE APPEALS PREFERRED BY THE REVENUE AS WELL AS THE ASSESSEE IS AGAINST THE ORDER OF THE LD. CIT(A)-20, KOLKATA DATED 15.06.201 7 FOR AY 2011-12. 2. AT THE OUTSET ITSELF, THE LD. COUNSEL FOR THE AS SESSEE HAS BROUGHT TO OUR ATTENTION TO THE FACT THAT THE REVENUE HAS PREFERRED THIS APPEAL WHICH HAVE TAX EFFECT OF RS.14,59,725/- 2 IT(SS)A NO. 117/KOL/2017 MAHALUXMI MARKETING P. LTD., AY 2011-12 WHICH IS LESS THAN RS. 20 LACS, THEREFORE, THE REVE NUES APPEAL IS NOT MAINTAINABLE IN THE LIGHT OF THE CBDT CIRCULAR NO.3/2018 DATED 11.07.2018 WHE REIN CBDT HAS DIRECTED AS UNDER: 3 . HENCEFORTH, APPEALS/ SLPS SHALL NOT BE FILED I N CASES WHERE THE TAX EFFECT DOES NOT EXCEED THE MONETARY LIMITS GIVEN HEREUNDER: SL. NO. APPEALS/SLPS IN INCOME-TAX MATTERS MONETARY LIMIT (IN RS) 1. BEFORE APPELLATE TRIBUNAL 20,00,000/- 2. BEFORE HIGH COURT 50,00,000/- 3. BEFORE SUPREME COURT 1,00,00,000/- IT IS CLARIFIED THAT AN APPEAL SHOULD NOT BE FILED MERELY BECAUSE THE TAX EFFECT IN A CASE EXCEEDS THE MONETARY LIMITS PRESCRIBED ABOVE. FILIN G OF APPEAL IN SUCH CASES IS TO BE DECIDED ON MERITS OF THE CASE. 4. FOR THIS PURPOSE, 'TAX EFFECT' MEANS THE DIFFERE NCE BETWEEN THE TAX ON THE TOTAL INCOME ASSESSED AND THE TAX THAT WOULD HAVE BEEN CHARGEABL E HAD SUCH TOTAL INCOME BEEN REDUCED BY THE AMOUNT OF INCOME IN RESPECT OF THE I SSUES AGAINST WHICH APPEAL IS INTENDED TO BE FILED (HEREINAFTER REFERRED TO AS 'D ISPUTED ISSUES). FURTHER, 'TAX EFFECT' SHALL BE TAX INCLUDING APPLICABLE SURCHARGE AND CES S. HOWEVER, THE TAX WILL NOT INCLUDE ANY INTEREST THEREON, EXCEPT WHERE CHARGEABILITY OF INTEREST ITSELF IS IN DISPUTE. IN CASE THE CHARGEABILITY OF INTEREST IS THE ISSUE UNDER DISPUT E, THE AMOUNT OF INTEREST SHALL BE THE TAX EFFECT. IN CASES WHERE RETURNED LOSS IS REDUCED OR ASSESSED AS INCOME, THE TAX EFFECT WOULD INCLUDE NOTIONAL TAX ON DISPUTED ADDITIONS. I N CASE OF PENALTY ORDERS, THE TAX EFFECT WILL MEAN QUANTUM OF PENALTY DELETED OR REDUCED IN THE ORDER TO BE APPEALED AGAINST. 3. IN PARA-13 OF THE SAID CIRCULAR IT HAS FURTHER BEEN CLARIFIED THAT THE REVISED MONETARY LIMITS WILL APPLY RETROSPECTIVELY. THE RELEVANT PA RA-13 OF THE CIRCULAR READS THUS: 13. THIS CIRCULAR WILL APPLY TO SLPS/APPEALS/CROSS OBJECTIONS/REFERENCES TO BE FILED HENCEFORTH IN SC/HCS/TRIBUNAL AND IT SHALL ALSO APP LY RETROSPECTIVELY TO PENDING SLPS/APPEALS/CROSS OBJECTIONS/REFERENCES. PENDING A PPEALS BELOW THE SPECIFIED TAX LIMITS IN PARA 3 ABOVE MAY BE WITHDRAWN/NOT PRESSED. 4. IN THE PRESENT CASE, THE TAX EFFECT IN THIS AP PEAL BY THE REVENUE IS LESS THAN RS.20,00,000/-. THOUGH THIS APPEAL HAD BEEN FILED BY THE REVENUE ON 29.08.2017 AND WAS WITHIN THE MONETARY LIMIT IN THE FORM OF TAX EFFECT FOR FILING APPEAL BEFORE TRIBUNAL, IN VIEW 3 IT(SS)A NO. 117/KOL/2017 MAHALUXMI MARKETING P. LTD., AY 2011-12 OF PARA-13 OF THE CIRCULAR OF CBDT, EVEN SUCH APPEA L WILL BE GOVERNED BY THE NEW MONETARY LIMITS LAID DOWN IN THE CBDT CIRCULAR NO.3 /2018 REFERRED TO ABOVE. 5. IT IS A SETTLED LAW THAT THE CIRCULARS ISSUED BY CBDT ARE BINDING ON THE REVENUE. THIS POSITION WAS CONFIRMED BY THE APEX COURT IN T HE CASE OF COMMISSIONER OF CUSTOMS VS INDIAN OIL CORPORATION LTD. REPORTED IN 267 ITR 272 WHEREIN THEIR LORDSHIPS EXAMINED THE EARLIER DECISIONS OF THE APEX COURT WITH REGARD TO BINDING NATURE OF THE CIRCULAR AND LAID DOWN THAT WHEN A CIRCULAR ISSUED BY THE BOARD REMAI NS IN OPERATION THEN THE REVENUE IS BOUND BY IT AND CANNOT BE ALLOWED TO PLEAD THAT IT IS NOT VALID OR THAT IT IS CONTRARY TO THE TERMS OF THE STATUTE. 5.1. IN THE EVENT, THE REVENUE FINDS AT A LATER POI NT OF TIME THAT THE TAX EFFECT IN THE APPEAL IS MORE THAN RS.20 LAKHS OR DESPITE LOW TAX EFFECT THE APPEAL OF THE REVENUE IS MAINTAINABLE, THE REVENUE IS AT LIBERTY TO MOVE THIS TRIBUNAL FO R RECALLING OF THIS ORDER. 6. IN VIEW OF THE ABOVE, WE HOLD THAT THE APPEAL FI LED BY THE DEPARTMENT, AGAINST THE IMPUGNED ORDER OF THE LD. CIT(A), IS CONTRARY TO TH E POLICY DECISION OF THE DEPARTMENT AND AS SUCH THE APPEAL FILED BY THE DEPARTMENT IS DISMI SSED IN LIMINE . 7. COMING TO ASSESSEES APPEAL IN IT(SS)A NO.103/KO L/2017. THE ASSESSEES APPEAL IS AGAINST THE ACTION OF LD. CIT(A) IN CONFIRMING AN A DDITION OF RS.1,28,96,000/-. BRIEFLY STATED FACTS AS OBSERVED BY THE AO ARE THAT THERE WAS A SEARCH U/S. 132 OF THE ACT IN THE CASE OF SHRI MAHENDRA SETHIA AND GROUP COMPANIES ON 30.1 1.2012 AND A DIARY WAS SEIZED FROM THE PREMISES OF SHRI MAHENDRA SETHIA WHICH REVEALED THAT THE ASSESSEE COMPANY [RESHMI GROUP] PAID TO SHRI MAHENDRA SETHIA AS COMMISSION @ 1% FROM 18 COMPANIES SHARE CAPITAL AND PREMIUM OF THOSE COMPANIES RS.1,68,53,0 00/- FOR HAVING CONTROL AND MANAGEMENT OVER THE AMALGAMATING COMPANIES. ACCORD ING TO AO, THIS AMOUNT REPRESENTS THE VALUE OF TOTAL INHERENT ASSET OF THE AMALGAMATI NG COMPANIES. THE AO NOTED THAT SINCE THIS AMOUNT WAS PAID BY THE ASSESSEE COMPANY TO SHR I MAHENDRA SETHIA AS COMMISSION IN THE ASSESSMENT YEAR 2010-11, THIS AMOUNT NEEDS TO B E ADDED AS INCOME FROM UNDISCLOSED 4 IT(SS)A NO. 117/KOL/2017 MAHALUXMI MARKETING P. LTD., AY 2011-12 SOURCE IN THE HAND OF ASSESSEE FOR THE ASSESSMENT Y EAR 2011-12. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO GAVE PARTIAL RELIEF TO THE ASSESSEE, BY TAKING NOTE THAT OUT OF 18 COMPANIES NAMED IN SEIZED PAGE OF DIARY, ONLY 14 COMPANIES GOT AMALGAMATED WITH ASSESSEE COMPANY, SO COMMISSION FO R SHRI MAHENDRA SETHIA GOT REDUCED TO THAT EXTENT AND THUS COMMISSION @ 1% FROM ONLY 1 4 COMPANIES SHARE CAPITAL AND PREMIUM OF THOSE COMPANIES WERE CONSIDERED/COMPUTED AND SO ASSESSEE GOT RELIEF OF RS.39,57,000/- AND LD. CIT(A) CONFIRMED RS.1,28,96, 000/-. REVENUES APPEAL WAS AGAINST THE RELIEF OF RS.39,57,000/-, WHICH AS HELD (SUPRA) IS HIT BY TAX EFFECT CIRCULAR OF CBDT STANDS DISMISSED. AND AGAINST THE CONFIRMATION OF RS.1,28,96,000/- THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE US. 8. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THERE WAS A SEARCH U/S. 132 OF THE ACT IN THE CASE OF SHRI MAHENDRA SETHIA AND GROUP COMPANIES ON 30.11.2012 (AY 2013-1 4) AND WE ARE ADJUDICATING THE ASSESSMENT FRAMED U/S. 153A READ WITH SEC. 143(3) O F THE ACT FOR AY 2011-12. WE NOTE THAT SHRI MAHENDRA SETHIAS PREMISES WERE SEARCHED U/S. 132 OF THE ACT AND HE WAS THE DIRECTOR OF THE ASSESSEE COMPANY DURING THE YEAR UN DER CONSIDERATION AS NOTED BY THE AO AT PARA 7 OF HIS ORDER. ACCORDING TO ANNEXURE AFFIXED WITH THE ASSESSMENT ORDER BY THE AO WHICH IS THE COPY OF A DOCUMENT DOWNLOADED FROM THE MINISTRY OF CORPORATE AFFAIRS WEBSITE, FROM WHERE WE NOTE THAT SHRI MAHENDRA SETH IA WAS DIRECTOR OF THE ASSESSEE COMPANY M/S. MAHALUXMI MARKETING PVT. LTD. IN THIS ASSESSMENT YEAR AND THAT HE WAS APPOINTED AS DIRECTOR FROM 02.02.2006 AND HAS CEASE D TO BE THE DIRECTOR ON 28.09.2011. WE NOTE THAT DURING SEARCH AT THE PREMISE OF SHRI MAHE NDRA SETHIA A DIARY WAS SEIZED AND FROM IT A PAGE OF THE DIARY (IDMS/13) DISCLOSED THE FOLL OWING WRITING/NOTING WAS FOUND: 5 IT(SS)A NO. 117/KOL/2017 MAHALUXMI MARKETING P. LTD., AY 2011-12 9. FROM A PERUSAL OF THE AFORESAID PAGE FROM DIARY REVEALS ON THE TOP THE ASSESSEE COMPANYS NAME AND THE NAME OF 18 PVT. LTD. COMPANI ES ALONG WITH THEIR RESPECTIVE SHARE CAPITAL, SHARE PREMIUM AND TOTAL OF IT. DOWN BELOW A SUM OF RS.1,62,53,000/- IS ALSO JOTTED DOWN, WHICH THE AO HAS ADDED IN THE HANDS OF ASSESS EE AS THE COMMISSION PAID BY THE ASSESSEE COMPANY TO SHRI MAHENDRA SETHIA FOR AMALGA MATING HIS COMPANIES TO ASSESSEE COMPANY WHOSE SHARES HAVE BEEN TRANSFERRED TO RASHM I GROUP. ON APPEAL, THE LD. CIT(A) TAKING NOTE THAT OUT OF THIS 18 PVT. LTD. COMPANIES ONLY 14 HAS AMALGAMATED WITH THE ASSESSEE COMPANY WAS PLEASED TO RESTRICT THE ADDITI ONS TO RS.1,28,96,000/- (I.E. 1% OF SHARE CAPITAL PLUS SHARE PREMIUM OF 14 COMPANIES). THUS, WE NOTE THAT THE AMOUNT OF INVESTMENTS 6 IT(SS)A NO. 117/KOL/2017 MAHALUXMI MARKETING P. LTD., AY 2011-12 OF THE 14 AMALGAMATING COMPANIES, TRANSFERRED TO TH E ASSESSEE COMPANY DUE TO THE AMALGAMATION ARE AS UNDER: 10. AS EARLIER STATED, IT IS NOTED THAT THOUGH THE NAME OF 18 COMPANIES HAVE BEEN WRITTEN ON THE SEIZED PAGE, ONLY THE FIRST 14 COMPANIES HAV E BEEN AMALGAMATED WITH THE ASSESSEE COMPANY W.E.F. 20.07.2011 (AY 2012-13) BY HONBLE H IGH COURTS ORDER DATED 27.06.2013. SINCE WE NOTE THAT PARA 8 OF AOS ORDER THE FIGURE OF RS.1,68,53,000/- WAS WRITTEN DOWN ON THE PAGE OF THE DIARY DATED 06.06.2010, THE AO CONS IDERED IT AS THE COMMISSION WHICH ASSESSEE COMPANY HAS GIVEN TO SHRI MAHENDRA SETHIA FOR AMALGAMATING THE COMPANIES NAMED THEREIN WITH THE ASSESSEE COMPANY WHICH WAS 1 % OF THE TOTAL SHARE CAPITAL PLUS PREMIUM OF ALL THESE COMPANIES. ON APPEAL, THE LD. CIT(A) TAKING NOTE THAT THE LAST FOUR COMPANIES WERE NOT AMALGAMATED WITH THE ASSESSEE CO MPANY, SO HE REDUCED THE COMMISSION AND GAVE A RELIEF OF RS.39,57,000/- AND CONFIRMED ADDITION OF RS.1,28,96,000/-. THE LD. AR DREW OUR ATTENTION TO THE FACT THAT THE DIARY ON WHICH THE NAME OF THE COMPANIES AND THEIR SHARE CAPITAL AND SHARE PREMIUM WRITTEN I S DATED 09.06.2010 WHICH FALLS IN THE RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION I.E. A Y 2011-12 AND ADMITTEDLY SHRI MAHENDRA SETHIA WAS THE DIRECTOR OF THE ASSESSEE CO MPANY TILL HE CEASED TO BE THE DIRECTOR WHICH WAS ON 23.09.2011 WHICH FALLS IN THE FOLLOWIN G /NEXT ASSESSMENT YEAR I.E. AY 2012- 7 IT(SS)A NO. 117/KOL/2017 MAHALUXMI MARKETING P. LTD., AY 2011-12 13 BY VIRTUE OF HONBLE HIGH COURT ORDER DATED 27.0 6.2013 (AY 2014-15) SO, THE LD. AR WONDERED AS TO HOW THE ASSESSEE COMPANY COULD HAVE PAID COMMISSION TO ITS OWN DIRECTOR WHEN IT WAS NOT EVEN AMALGAMATED WITH RASHMI GROUP OF COMPANIES. WE NOTE THAT THE AO HAS MADE THE ADDITION ON THE ASSUMPTION THAT THE FI GURE OF RS.1,68,53,000/- IS THE COMMISSION SHRI MAHENDRA SETHIA RECEIVED FOR AMALGA MATING THE COMPANIES NAMED IN THE SEIZED PAPER WITH THE ASSESSEE COMPANY. WE NOTE FR OM PARA 7 OF AOS ORDER THAT IN THE FINANCIAL YEAR PERTAINING TO THE RELEVANT AY I.E. FY 2010-11, THE NAME OF THE DIRECTOR OF THE ASSESSEE COMPANY WAS SHRI MAHENDRA SETHIA, SHRI GAUTAM GHOSH, SHRI HIMANSHU DAS AND SHRI PULAK CHAKRABORTY. AND AO NOTES THAT ONLY IN THE NEXT/SUBSEQUENT AY I.E. AY 2012-13 SHRI MAHENDRA SETHIA RESIGNED AND SHRI HIMA NSHU DAS AND SHRI PULAK CHAKRABORTY CONTINUED TO BE DIRECTORS OF THE ASSESS EE COMPANY. THE LD. DR COULD NOT CONTROVERT THIS FACT THAT SHRI MAHENDRA SETHIA HAS CEASED TO BE THE DIRECTOR OF THE ASSESSEE COMPANY ONLY FROM 23.09.2011 I.E. FROM THE ASSESSME NT YEAR 2012-13. WE HAVE GONE THROUGH THE WEBSITE COPY OF THE MINISTRY OF CORPORA TE AFFAIRS PLACED BY THE AO AS ANNEXURE TO THE ASSESSMENT ORDER FROM WHERE WE NOTE THAT SHRI MAHENDRA SETHIA WAS THE DIRECTOR OF THE ASSESSEE COMPANY FROM 02.02.2006 TO 23.09.2011. THE AMALGAMATION ORDER PASSED BY THE HONBLE HIGH COURT ON 27.06.2013, W.E .F. 20.07.2011 WHICH MEANS SHRI MAHENDRA SETHIA WAS THE DIRECTOR OF THE ASSESSEE CO MPANY WHEN IT GOT AMALGAMATED IN THE EYES OF LAW. THE AO HAS INFERRED THAT 1% COMMISSIO N OF THE SHARE CAPITAL PLUS PREMIUM OF THE COMPANIES AMALGAMATED WITH ASSESSEE COMPANY WHO SE CONTROL WAS WITH THE RASHMI GROUP WHICH HAD TAKEN OVER THE ASSESSEE COMPANY BY VIRTUE OF AMALGAMATION HAS PAID 1% TO SHRI MAHENDRA SETHIA IS ON A WRONG ASSUMPTION OF FACT. THE ASSESSEE COMPANY WAS AMALGAMATED WITH THE 14 COMPANIES ONLY IN THE AY 20 12-13 I.E. W.E.F. 27.07.2011 AS PER HONBLE HIGH COURTS ORDER AND NOT IN THE RELEVANT ASSESSMENT YEAR. THEREFORE, THE AO ERRED IN ASSUMING THAT THE RASHMI GROUP OF COMPANIE S HAS PAID 1% OF THE SHARE CAPITAL AND PREMIUM OF THE 14 AMALGAMATED COMPANIES TO SHRI MAH ENDRA SETHIA IN THIS YEAR, WHEN THE FACT WAS THAT SHRI MAHENDRA SETHIA REMAINED AS THE DIRECTOR OF THIS ASSESSEE COMPANY UP TO 23.09.2011 I.E. AY 2012-13 AND RESIGNED ONLY AFTER AMALGAMATION TOOK EFFECT ON 20.07.2011 IN THE EYES OF LAW AND, THEREFORE, IN TH E FACTS AS DISCUSSED, THE ADDITION IS ON 8 IT(SS)A NO. 117/KOL/2017 MAHALUXMI MARKETING P. LTD., AY 2011-12 WRONG ASSUMPTION OF FACT AND SO IS LEGALLY UNSUSTAI NABLE. NO OTHER EVIDENCE OTHER THAN WHAT WAS DISCUSSED ABOVE, DIRECT/INDIRECT TO SUGGES T THAT RASHMI GROUP HAS PAID RS.1,28,96,000/- WAS BROUGHT TO OUR NOTICE TO JUSTI FY SUSTAINING THE ADDITION. THEREFORE, WE DIRECT DELETION OF ADDITION OF RS.1,28,96,000/-. 7. IN THE RESULT, THE APPEAL BY THE REVENUE IS DI SMISSED AND THAT OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12TH DECEMBE R, 2018. SD/- SD/- (J. SUDHAKAR REDDY) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 12TH DECEMBER, 2018 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 APPELLANT DCIT, C.C-1(4), KOLKATA. 2 RESPONDENT M/S. MAHALUXMI MARKETING P. LTD., ORBI T HOUSE, GARSTIN PLACE, ROOM NO. 3B, 3 RD FLOOR, KOLKATA-700 001. 3 4 5 CIT(A)-20, KOLKATA. (SENT THROUGH E-MAIL) CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR