M/s. BAKER SECURITIES P. LTD., MUMBAI v. ITO - 4(1)(1), MUMBAI

CO 94/MUM/2006 | 2002-2003
Pronouncement Date: 27-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 9419923 RSA 2006
Assessee PAN AAACB2295F
Bench Mumbai
Appeal Number CO 94/MUM/2006
Duration Of Justice 5 year(s) 4 month(s) 6 day(s)
Appellant M/s. BAKER SECURITIES P. LTD., MUMBAI
Respondent ITO - 4(1)(1), MUMBAI
Appeal Type Cross Objection
Pronouncement Date 27-07-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted H
Tribunal Order Date 27-07-2011
Date Of Final Hearing 20-07-2011
Next Hearing Date 20-07-2011
Assessment Year 2002-2003
Appeal Filed On 21-03-2006
Judgment Text
1 ITA NO. 6353/MUM/2005 CO 94/M/2006 (ASST YEAR 2002-03 ) IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI H BENCH MUMBAI BENCHES MUMBAI BEFORE SHRI P M JAGTAP AM & SHRI VIJAY PAL RAO J M ITA NO. 6353/MUM/2005 (ASST YEAR 2002-03 ) THE INCOME TAX OFFICER WARD 4 (1)(1) MUMBAI VS M/S BAKER SECURITIES P LTD UNIT NO.5 7 TH FLOOR CENTRE NO.1 WTC CUFF PARADE MUMBAI400 005 (APPELLANT) (RESPONDENT) CO NO. 94/MUM/2006 M/S BAKER SECURITIES P LTD UNIT NO.5 7 TH FLOOR CENTRE NO.1 WTC CUFF PARADE MUMBAI400 005 VS THE INCOME TAX OFFICER WARD 4 (1)(1) MUMBAI (CROSS OBJECTOR) (RESPONDENT) PAN NO. AAACB2295F ASSESSEE BY SHRI VIPUL JOSHI REVENUE BY SHRI PER VIJAY PAL RAO JM THE APPEAL BY THE REVENUE AND THE CROSS OBJECTION B Y THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 26.8.2005 OF THE C IT(A) FOR THE AY 2003-04. ITA NO. 6353/MUM/2005(BY THE REVENUE) 2 THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS IN IT S APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT(A) ERRED IN REDUCING THE DISALLOWANCE OF CLAIM OF EXEMP TION OF DIVIDEND INCOME FROM RS 4 02 359/- TO RS. 1 2 359/- WITHOUT ANY PROP ER REASONING OR LOGIC OR BASIS/CRITERION AND WITHOUT CONTRADICTING THE REASONS FOR ALLOWING THE DISALLOWANCE AS GIVEN IN THE ASSESSMENT ORDER. 2 ITA NO. 6353/MUM/2005 CO 94/M/2006 (ASST YEAR 2002-03 ) 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE CIT(A) ERRED IN DELETING TH DISALLOWANCE OF COMMISSI ON PAYMENT OF RS 5 10 074/- WITHOUT APPRECIATING THAT MERE FILING OF C ONFIRMATION OF COMMISSION PAYMENT BY ITSELF DOES NOT ESTABLISH THE GENUINENES S OF THE EXPENSE UNLESS SUPPORTED BY OTHER EVIDENCES AS REQUIRED DEPENDING O N THE FACTS OF THE CASE. 3 THE LD AR OF THE ASSESSEE HAS RAISED PRELIMINARY OBJECTION IN THIS CASE THAT THE REVENUE HAS FILED A DIFFERENT ASSESSMENT ORDER ALON G WITH MEMO OF APPEALS WHEREAS THE ASSESSEE WAS SERVED WITH A DIFFERENT ASSESSMENT ORDER. HE HAS THUS SUBMITTED THAT THE REVENUE CANNOT PURSUE THE APPEAL BY RELYIN G UPON AN ASSESSMENT ORDER WHICH WAS NOT SERVED UPON THE ASSESSEE. THUS THE L D AR HAS RAISED A PRELIMINARY OBJECTION ON THE MAINTAINABILITY OF THE APPEAL OF T HE REVENUE. 3.1 ON THE OTHER HAND THE LD DR HAS SUBMITTED THAT IN THIS CASE INADVERTENTLY THE DRAFT ASSESSMENT ORDER DATED 29.12.2004 WAS SER VED UPON THE ASSESSEE WHEREAS THE ASSESSING OFFICER PREPARED A FINAL ASSESSMENT ORDER . HE HAS FURTHER POINTED OUT THAT THOUGH THERE WAS NO MATERIAL DIFFERENCE IN BOT H THE ORDERS ONLY CERTAIN MISTAKES WERE RECTIFIED WHILE PREPARING THE FINAL A SSESSMENT ORDER. HE HAS FILED A REPORT FROM THE ASSESSING OFFICER EXPLAINING THE CI RCUMSTANCES UNDER WHICH THE ASSESSEE WAS SERVED A DRAFT ORDER INSTEAD OF FINAL ASSESSMENT ORDER. 4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD. UNDISPUTEDLY THE ASSESSEE WAS SERVED WITH THE ASSESSMENT ORDER DATED 29.12.2004 WHICH IS NOT IDENTICAL TO THE ASSESSME NT ORDER FILED BY THE REVENUE ALONG WITH THE APPEAL MEMO; THOUGH THE ISSUE AND THE MAT ERIAL FINDING IN BOTH THE ORDERS ARE THE SAME. THE ASSESSEE CHALLENGED THE ASSESSME NT ORDER WHICH WAS SERVED ON THE ASSESSEE BEFORE THE CIT(A) AND THE CIT(A) PASSE D THE IMPUGNED ORDER ON THE BASIS OF THE ORDER WHICH WAS CHALLENGED BY THE ASS ESSEE. SINCE THERE IS NO INFIRMITY IN THE ORDER SERVED ON THE ASSESSEE EXCEPT SOME MIN OR VARIATION IN COMPARISON TO 3 ITA NO. 6353/MUM/2005 CO 94/M/2006 (ASST YEAR 2002-03 ) THE ORDER FILED BY THE REVENUE; THEREFORE FOR PROC EEDINGS BEFORE US THE RELEVANT ORDER IS ONE WHICH WAS SERVED ON THE ASSESSEE ON TH E BASIS OF WHICH THE CIT(A) HAS PASSED THE IMPUGNED ORDER. 4.1 EVEN OTHERWISE THE ORDER OF THE CIT(A) MERGED WITH THE ASSESSMENT ORDER WHICH WAS CHALLENGED BEFORE THE CIT(A). IN THESE C IRCUMSTANCES WE CONSIDER THE ASSESSMENT ORDER WHICH WAS SERVED UPON THE ASSESSE E AS THE IMPUGNED ASSESSMENT ORDER FOR PROCEEDINGS BEFORE US. SINCE THE ORDER WHICH IS SERVED UPON THE ASSESSEE HAS BEEN FILED BEFORE US; THEREFORE WE PROPOSED TO PROCEED WITH THE MATTER AND DECIDE THE SAME BY TAKING INTO CONSIDERATION THE AS SESSMENT ORDER WHICH WAS SERVED UPON THE ASSESSEE AND WAS ALSO SUBJECT MATTE R OF APPEAL BEFORE THE CIT(A). 5 GROUND NO.1 IN THE APPEAL OF THE REVENUE IS REGAR DING DISALLOWANCE U./S 14A. 5.1 THE ASSESSEE HAS SHOWN DIVIDEND INCOME OF RS. 4 02 359/- AND THE SAME WAS EXEMPTED U/S 10(33) OF THE I T ACT. THE ASSESSIN G OFFICER NOTED THAT THE ASSESSEE CLAIMED THE TOTAL INTEREST PAYMENT OF RS. 12 19 752 /-. AFTER ANALYZING THE BALANCE SHEET OF THE ASSESSEE THE ASSESSING OFFICER DISALL OWED THE CLAIM OF INTEREST EXPENDITURE TO THE EXTENT OF RS. 4 02 359/- BEIN G RELATED TO EXEMPTED DIVIDEND INCOME. 5.2 ON APPEAL THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE TO THE EXTENT OF RS. 3 LACS AND CONFIRMED THE DISALLOWANCE TO THE EXTENT O F RS. 1 02 359/-. 6 BEFORE US THE LD DR HAS SUBMITTED THAT THE ASSES SING OFFICER HAS EXAMINED THE FUNDS AVAILABLE WITH THE ASSESSEE AS WELL AS TH E APPLICATION OF THE FUNDS AND GIVEN A FINDING THAT THE INTEREST BEARING FUNDS HAV E BEEN UTILIZED BY THE ASSESSEE FOR INVESTMENT IN SHARES; THEREFORE THE ENTIRE INTERES T CLAIMED BY THE ASSESSEE 4 ITA NO. 6353/MUM/2005 CO 94/M/2006 (ASST YEAR 2002-03 ) ATTRIBUTABLE TO EARNING OF EXEMPTED DIVIDEND INCOME . HE HAS RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 6.1 ON THE OTHER HAND THE LD AR OF THE ASSESSEE HA S SUBMITTED THAT THE ASSESSEE WAS HAVING SUFFICIENT FUNDS IN THE SHAPE OF FREE RESERVES AND ITS OWN SHARE CAPITAL TO INVEST IN THE SHARES. DURING THE YEAR UNDER CON SIDERATION THE ASSESSEE HAD TAKEN A LOAN OF RS. 38 25 000/- OUT OF WHICH RS. 25 LACS WAS TOTALLY INTEREST FREE. HE HAS FURTHER POINTED OUT THAT DURING THE YEAR THE FRESH INVESTMENT IS ONLY TO THE EXTENT OF RS. 14 58 371/- AS AGAINST THE INCREASE OF THE SHA RE CAPITAL TO THE EXTENT OF RS. 54 LACS. THE LD AR FURTHER CONTENDED THAT RATHER THE B ORROWED FUNDS WERE REDUCED DURING THE YEAR UNDER CONSIDERATION. THUS THE ASSE SSEE HAS NOT UTILIZED ANY BORROWED FUNDS FOR THE PURPOSE OF INVESTMENT IN THE SHARES. HE HAS RELIED UPON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS RELIANCE DE UTILITIES & POWER LTD REPORTED IN 18 DTR (MUM) 1 AND SUBMITTED THAT WHEN THE ASSESSEE IS A SHARE BROKER THEN INTEREST EXPENDITURE IS ALLOWABLE UNDER THE PROVISIONS OF SEC. 36(1)(III) OF THE I T ACT AND NO DISALLOWANCE IS CA LLED FOR U/S 14A. 6.2 HE HAS REFERRED THE COMPARATIVE DETAILS OF SOUR CE OF FUNDS AND APPLICATION OF THE FUNDS FOR VARIOUS YEARS AT PAGE 11 OF THE PAPER BOOK. HE HAS ALSO REFERRED THE DIVIDEND INCOME AND INVESTMENT IN SHARES DURING THE VARIOUS YEARS AND THE DETAILS OF DIVIDEND RECEIVED AND INVESTMENT PLACED AT PAGE 12 OF THE PAPER BOOK. 7 WE HAVE CONSIDERED THE RIVAL CONTENTION AND PERUS ED THE RELEVANT MATERIAL ON RECORD. AFTER CAREFUL ANALYSIS OF THE DETAILS OF THE AVAILABLE INTEREST FREE FUNDS WITH THE ASSESSEE AND APPLICATION OF FUNDS IT IS CLEA R THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEES INVESTMENT AS ON 31.3 .2002 IS RS. 3 51 43 106/- WHEREAS THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE WAS RS. 2 68 57 000/- AS THE LD AR 5 ITA NO. 6353/MUM/2005 CO 94/M/2006 (ASST YEAR 2002-03 ) HAS SUBMITTED THAT OUT OF THE LOAN OF RS. 38.25LACS RS. 25 LACS WAS INTEREST FREE; BUT THIS EXPLANATION WAS NOT AVAILABLE WITH THE ASSESSI NG OFFICER AT THE TIME OF ASSESSMENT. MOREOVER IN VIEW OF THE LATEST DECISI ON OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG P LTD VS ACIT REP ORTED IN 328 ITR 81 THE MATTER IS REQUIRED TO BE RECONSIDERED AND DECIDE AFRESH. ACC ORDINGLY THIS ISSUE IS REMANDED TO THE RECORD OF THE ASSESSING OFFICER FOR VERIFIC ATION AND EXAMINATION AND DECIDE THE ISSUE AFRESH AFTER CONSIDERING THE CONTENTION O F THE ASSESSEE AND IN LIGHT OF THE LATEST DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG P LTD (SUPRA). 8 GROUND NO.2 IS REGARDING DISALLOWANCE OF COMMISSI ON PAYMENT. 8.1 THE ASSESSING OFFICER DISALLOWED THE COMMISSION PAID BY THE ASSESSEE ON THE GROUND THAT DESPITE OPPORTUNITY GIVEN THE ASSESSEE DID NOT FURNISH THE DETAILS OF THE COMMISSION PAID. ON APPEAL THE ASSESSEE HAS CONTE NDED BEFORE THE CIT(A) THAT THE ASSESSING OFFICER MADE THE ADDITION IN HASTE ARBITRARY AND WITHOUT GIVING PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE THE CIT(A) AFTER ANALYZING THE FACT THAT THE ASSESSING OFFICER ISSUED NOTICE ON 27.12 .2004 CALLING FOR DETAILS ON 31.12.2004 WHEREAS THE ASSESSMENT ORDER WAS PASSED ON 29.12.2004 ITSELF. THE CIT(A) HAS FURTHER NOTED THAT EVEN THE DETAILS WERE MADE A VAILABLE TO THE ASSESSING OFFICER ON 28.12.2004 BEFORE PASSING THE IMPUGNED ASSESSMEN T ORDER. THEREFORE THE REASON FOR DISALLOWANCE OF THE COMMISSION PAYMENT BY THE A SSESSING OFFICER IS NOT SUSTAINABLE AND IN VIOLATION OF NATURAL JUSTICE. 9 WE HAVE HEARD THE LD DR AS WELL AS THE LD AR OF T HE ASSESSEE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD DR CONTEND ED THAT THE ASSESSEE FAILED TO 6 ITA NO. 6353/MUM/2005 CO 94/M/2006 (ASST YEAR 2002-03 ) FURNISH THE DETAILS AND THE RELEVANT RECORDS BEFORE THE ASSESSING OFFICER; ACCORDINGLY THE ASSESSING OFFICER DISALLOWED THE COMMISSION PAY MENT. 9.1 ON THE OTHER HAND THE LD AR HAS REITERATED THE CONTENTION AS RAISED BEFORE THE CIT(A) AND POINTED OUT THAT THE ASSESSING OFFIC ER WHILE MAKING THIS ADDITION HAS VIOLATED THE PRINCIPLES OF NATURAL JUSTICE AS THE A SSESSEE WAS NOT GIVEN PROPER OPPORTUNITY EVEN AS PROVIDED IN THE NOTICE DT 27.1 2.2004 BEFORE ISSUING THE IMPUGNED ASSESSMENT ORDER. 10 AFTER CONSIDERING THE RIVAL CONTENTION AND OTHER RELEVANT MATERIAL ON RECORD AT THE OUTSET WE NOTE THAT THE CIT(A) HAS BROUGHT OUT CERTAIN FACTS WHICH CLEARLY SHOW THAT THE ADDITION WAS MADE WITHOUT GIVING PROP ERTY OPPORTUNITY AND CONSIDERING THE DETAILS FILED BY THE ASSESSEE. THE CONTENTION OF THE ASSESSEE AND THE FINDINGS OF THE CIT(A) ARE REPRODUCED AS UNDER: THE LD COUNSEL HAS POINTED OUT TO THE NOTICE ISSUE D BY THE ASSESSING OFFICER DATED 27.12.2004 CALLING FOR THE DETAILS ON 31.12.2 004 IN WITHIN 4 WORKING DAYS AND THAT THE ENTIRE DETAILS WERE MADE AVAILABLE TO T HE ASSESSING OFFICER ON 28.12.2004. BUT THE ASSESSING OFFICER IN HIS HASTE COMPLETED THE ASSESSMENT ON 29.12.2004 ITSELF THOUGH HIS NOTICE ITSELF DATED 27.12.2004 ASKING THE ASSESSEE TO FURNISH THE PARTICULARS BY 3112.2004. T HE APPELLANT HAS THEREFORE ARGUED THAT THE ADDITION DESERVES TO BE DELETED ON T HE GROUND OF VIOLATION OF NATURAL JUSTICE ITSELF. THE APPELLANT HAS FURTHER AR GUED THAT EVEN ON MERIT ON RECORD OF THE ASSESSING OFFICER IS FROM NO. 26 I GIVI NG THE DETAILS OF THE CONCERNED PERSONS TO WHOM COMMISSION HAS BEEN PAID WHICH INCLUDES THE PAN NO. CONFIRMATIONS AND COPIES OF LEDGER ACCOUNT S. THE ISSUE HAS BEEN EXAMINED. THERE IS NO DOUBT THAT THE ASSESSING OFFICER HAS PASSED THE ASSESSMENT ORDER ON 2.12.2004 EVEN THOUG H THE DATE SPECIFIED IN THE NOTICE ISSUED ON 27.12.2004 WAS ITSELF 31.12.20 04 AND FROM THE FACTS IT IS APPARENT THAT TH3 DETAILS FILED BEFORE THE ASSESSIN G OFFICER DID NOT GET THE ATTENTION IT DESERVED. EVEN ON MERITS IT IS APPAREN T THAT THE DETAILS FILED BY THE APPELLANT AND ON RECORD OF THE ASSESSING OFFICER INCLU DING FORM NO.26 I 7 ITA NO. 6353/MUM/2005 CO 94/M/2006 (ASST YEAR 2002-03 ) CONFIRMATIONS AND DETAILED LEDGER ACCOUNTS CLEARLY S HOWS THAT THE ADDITION MADE WAS UNCALLED FOR AND THE SAME IS ACCORDINGLY DEL ETED. 10.1 FROM THE ABOVE FINDINGS OF THE CIT(A) IT IS E STABLISHED THAT THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF COMMISSION P AID IS NOT SUSTAINABLE IN VIEW OF THE FACT THAT THE ASSESSEE WAS NOT GIVEN TIME UPTO 31.12.2004 FOR FILING DETAILS WHEREAS THE ASSESSMENT ORDER ITSELF HAS BEEN FRAM ED ON 29.12.2004. ACCORDINGLY WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE CIT(A) IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER . CO NO.94/MUM/2006(BY THE ASSESSEE) 11 THE ASSESSEE HAS RAISED THE ONLY GROUND IN ITS C ROSS OBJECTION AS UNDER: THE LD CIT ERRED IN ALLOWING ONLY RS. 3 LACS OUT O F INTEREST EXPENSE OF RS. 4 02 359/- BY APPLYING THE PROVISIONS OF SEC. 14 A OF THE I T ACT. 12 SINCE THE DISALLOWANCE MADE U/S 14A HAS BEEN DEL ETED BY THE CIT(A) TO THE EXTENT OF RS. 3 LACS OUT OF RS. 4 02 359/-; THEREFO RE BOTH THE REVENUE AS WELL AS THE ASSESSEE HAVE CHALLENGED THE ORDER OF THE CIT(A) WI TH RESPECT TO THE PART RELIEF GIVEN FOR THE DISALLOWANCE MADE U/S 14A. WE HAVE AL READY CONSIDERED AND ADJUDICATED THE ISSUE IN THE EARLIER PART OF THIS O RDER WHILE DECIDING GROUND NO.1 OF THE REVENUES APPEAL; ACCORDINGLY THE CROSS OBJECT ION FILED BY THE ASSESSEE IS TREATED AS SET ASIDE TO THE RECORD OF THE ASSESSING OFFICER ON THE SAME TERMS AS FINDINGS OF THE GROUND NO.1 OF THE REVENUES APPEAL . 8 ITA NO. 6353/MUM/2005 CO 94/M/2006 (ASST YEAR 2002-03 ) 13 IN THE RESULT THE APPEAL FILED BY THE REVENUE I S PARTLY ALLOWED WHEREAS THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSE. ORDER PRONOUNCED ON THE 27 TH DAY OF JULY 2011. SD/- SD/- ( P M JAGTAP ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 27 TH JULY 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR ITAT MUMBAI