M/S. AATUR HOLDINGS PVT.LTD., MUMBAI v. DCIT, CC-31, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A MUMBAI. BEFORE SHRI R.V. EASWAR SENIOR VICE-PRESIDENT AND SHRI J. SUDHAKAR REDDY ACCOUNTANT MEMBER. I.T.A. NO. 3 737/MUM/2009. ASSESSMENT YEAR : 2006-07. M/S AATUR HOLDINGS PVT. LTD. D Y. COMMISSIONER OF 32 MADHULI 3 RD FLOOR VS. INCOME TAX CC -31 DR. ANNIE BESANT ROAD MUMBAI. NEHRU CENTRE WORLI MUMBAI 400018. PAN : AABCA 1472C APPELLANT RESPONDENT APPELLANT BY : SHRI K.A. SHETTI. RESPONDENT BY : DR. P. DANIEL. O R D E R PER J. SUDHAKAR REDDY A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE CIT(APPEALS)-CENTRAL-IV MUMBAI DATED 24-04-2009 ON THE FOLLOWING GROUNDS : 1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HA S ERRED IN LAW AND IN FACTS IN PASSING THE ORDER U/S 250 OF THE AC T AND CONFIRMING THE ORDER OF THE ASSESSING OFFICER. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OU GHT TO HAVE APPRECIATED THAT THE NOTICES ISSUED BY THE ASSESSIN G OFFICER ARE INVALID AND HENCE THE ASSESSMENT ORDER U/S 143(3) O F THE ACT WAS ALSO VOID AB INITIO. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED IN LAW AND IN FACTS IN PASSING THE ORDER WITHOUT COMPLYING WITH THE PRINCIPLES OF NATURAL JUSTICE. 2 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HA S ERRED IN LAW AND IN FACTS IN CONFIRMING DISALLOWANCE NON ACCOUNT OF INTEREST EXPENSE AMOUNTING TO R.66 49 479/-. 5. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HA S ERRED IN LAW AND IN FACTS IN CONFIRMING DISALLOWANCE ON ACCOUNT OF AUDIT FEES AMOUNTING TO RS.15 000/-. 6. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HA S ERRED IN LAW AND IN FACTS IN CONFIRMING CALCULATION OF BOOK PROF IT U/S 115JB AMOUNTING TO RS.28 89 236/-. 7. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HA S ERRED IN LAW AND IN FACTS IN NOT APPRECIATING THAT THE INTEREST CHARGED U/S 234A 234B AND 234C OF THE ACT ARE INCORRECT. 8. THE APPELLANT CRAVES LEAVE OF YOUR HONOUR TO ADD TO ALTER AMEND AND/OR DELETE ALL OR ANY OF THE FOREGOING GROUNDS O F APPEAL. 2. THE ASSESSEE IS A COMPANY AND IS ENGAGED IN THE BUSINESS OF TRADING AND INVESTMENT IN SHARES. IT IS A NOTIFIED PERSON UNDER THE SPECIAL COURT (TRIAL OF OFFENCES RELATING TO TRANSACTIONS I N SECURITIES) ACT 1992 AND ALL ITS ASSETS INCLUDING BANK ACCOUNTS WERE ATT ACHED AND VESTED IN THE HANDS OF THE CUSTODIAN APPOINTED UNDER THE SAID ACT . 3. MR. K.A. SHETTI LEARNED COUNSEL FOR THE ASSESS EE SUBMITTED THAT THE ASSESSEE DOES NOT PRESS GROUND NO. 1 2 3 & 5 OF THIS APPEAL. IN VIEW OF THE ABOVE CIRCUMSTANCES THESE GROUNDS ARE DISMISSED AS NOT PRESSED. 4. COMING TO GROUND NO. 4 6 AND 7 THE LEARNED CO UNSEL SUBMITTED THAT THESE GROUNDS ARE COVERED BY VARIOUS DECISIONS OF THE TRIBUNAL INCLUDING THE ASSESSEES OWN CASE FOR ASS ESSMENT YEAR 2000-01. THE LIST OF CASES RELIED UPON BY HIM ARE AS FOLLOWS : 1. M/S AATUR HOLDING PVT. LTD. VS. DCIT ITA NO.147/M UM/08 DATED 13-06-2008. 2. M/S GROWMORE LEASING & INV. LTD. VS. DCIT ITA NO. 6412/MUM/08 DATED 21-12-2009. 3 3. M/S ORION TRAVELS PVT. LTD. VS. DCIT ITA NOS. 688 8 AND 6889/MUM/08 DATED 9-10-2009. 4. M/S PALLAVI HOLDINGS PVT. LTD. VS. DCIT ITA NO. 7 231/MUM/08 DATED 30-10-2009. 5. M/S PALLAVI HOLDINGS PVT. LTD. VS. DCIT ITA NO. 6 411/MUM/08 DATED 6-11-2009. 6. M/S TOPAZ HOLDINGS PVT. LTD. VS. DCIT ITA NOS. 68 93 AND 7230/MUM/08 DATED 23-11-2009. 7. M/S HARSH ESTATES PVT. LTD. VS. DCIT ITA NO. 6890 /MUM/08 DATED 15-01-2010. 8. M/S GROWMORE EXPORTS LTD. VS. DCIT ITA NO.3732/MU M/09 DATED 12-02-2010. 9. M/S PALLAVI HOLDING P. LTD. VS. DCIT ITA NO. 3540 /MUM/09 DATED 23-02-2010. HE PRAYED THAT THE FACTS AND CIRCUMSTANCES BEING ID ENTICAL THIS CASE ALSO MAY BE DISPOSED OF IN THE SAME MANNER. 5. DR. P. DANAIEL LEARNED SPECIAL COUNSEL APPEAR ING ON BEHALF OF THE REVENUE AGREED THAT THE ISSUES ARE COVERED BY THE DECISIONS CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE. 6. IN VIEW OF THE SUBMISSIONS MADE BY BOTH THE PAR TIES WE DISPOSED OF THE GROUNDS AS FOLLOWS. 7. SO FAR AS GROUND NO.4 IS CONCERNED IT WAS STAT ED ON BEHALF OF THE ASSESSEE THAT THE GROUND STANDS COVERED BY THE ORDER OF THE TRIBUNAL IN THE CONNECTED CASE OF ORION TRAVELS PVT. LTD. VS. D CIT IN ITA NO.6888/MUM/2008 (ASSESSMENT YEARS 2004-05 & 2005-0 6) DATED 9 TH OCTOBER 2009. A COPY OF THE SAID ORDER HAS BEEN FI LED. THE ISSUE RELATING TO THE ALLOWABILITY OF THE INTEREST AS LEGITIMATE B USINESS EXPENDITURE AROSE IN SIMILAR CIRCUMSTANCES IN THE CASE OF ORION TRAVE LS PVT. LTD. WHICH IS ALSO THE NOTIFIED PERSON UNDER THE SPECIAL COURT (T RIAL OF OFFENCES RELATING TO TRANSACTIONS IN SECURITIES) ACT. THE TRIBUNAL FOLLOWING ITS ORDER IN 4 ANOTHER GROUP CONCERN BY NAME M/S. AATUR HOLDINGS P VT. LTD. VS. DCIT WHICH WAS ALSO A NOTIFIED PERSON IN ITA NO.147/MUM /2008 (ASSESSMENT YEAR 2000-01) HELD THAT THE MATTER SHOULD BE REMAN DED TO THE CIT(A) FOR FRESH CONSIDERATION AFTER PROVIDING THE ASSESSEE O PPORTUNITY TO SUBSTANTIATE ITS CLAIM THAT THE INTEREST EXPENSES R ELATE TO THE FINANCIAL YEAR IN QUESTION AND IS A LEGITIMATE BUSINESS EXPENDITUR E. BOTH PARTIES BEFORE US ARE AGREED THAT THE FACTS OF THE PRESENT CASE AR E IDENTICAL WITH THE FACTS IN THE AFORESAID CASES DECIDED BY THE TRIBUNAL. THE REFORE RESPECTFULLY FOLLOWING THE ORDERS OF THE COORDINATE BENCHES WE RESTORE THE MATTER TO THE CIT(A) WITH THE SAME DIRECTIONS GIVEN IN THE AB OVE ORDERS OF THE TRIBUNAL. 8. AS REGARDS GROUND NO.6 IT IS STATED ON BEHALF O F THE ASSESSEE THAT IT IS CONSEQUENTIAL TO THE DECISION IN GROUND NO.4. IT IS ALSO STATED THAT THE INCOME OF THE ASSESSEE HAS BEEN COMPUTED BY THE ASS ESSING OFFICER UNDER SECTION 115JB OF THE ACT. THE LEARNED SPECIAL COUNS EL FOR THE INCOME-TAX DEPARTMENT DOES NOT DISPUTE THESE STATEMENTS MADE O N BEHALF OF THE ASSESSEE. THEREFORE THE ISSUE RAISED IN GROUND NO.6 NAMELY THE COMPUTATION OF THE BOOK PROFIT UNDER SECTION 115JB IS ALSO RESTORED TO THE CIT(A) FOR FRESH DECISION IN ACCORDANCE WITH LA W AND AFTER DUE OPPORTUNITY OF THE ASSESSEE. 9. AS REGARDS GROUND NO.7 OUR ATTENTION IS DRAWN T O PARAGRAPHS 23 TO 26 OF THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S. ORION TRAVELS PVT. LTD. IN THAT CASE ALSO INTEREST WAS LEVIED UNDER SECTION S 234A TO 234C. THE TRIBUNAL NOTICED THAT THE SPECIAL COURT IN ITS RULI NG HAD PROHIBITED THE NOTIFIED PERSONS FROM PAYING ADVANCE TAX CITING TH E PROVISIONS OF THE 5 SPECIAL COURTS (TRIAL OF OFFENCES RELATING TO TRANS ACTIONS IN SECURITIES) ACT. IT HAS BEEN SPECIFICALLY NOTICED BY THE SPECIA L COURT IN ITS RULING THAT IN CASE OF CONFLICT BETWEEN THE INCOME TAX ACT AND THE SPECIAL COURTS ACT THE LATTER SHOULD PREVAIL AND THOUGH THE INCOM E TAX ACT DIRECTS AN ASSESSEE TO PAY ADVANCE TAX A NOTIFIED PERSON CANN OT PAY SUCH TAX IN VIEW OF THE PROVISIONS OF THE SPECIAL COURTS ACT. ON THE BASIS OF THE RULING OF THE SPECIAL COURT THE TRIBUNAL HAS HELD THAT IT WA S IMPOSSIBLE FOR A NOTIFIED PERSON TO PAY ADVANCE TAX EVEN IF HE WANT ED TOO BECAUSE THERE WAS A STATUTORY DISABILITY IN PAYING THE ADVANCE TA X. IF ADVANCE TAX COULD NOT BE PAID BECAUSE OF THE SPECIAL PROVISIONS OF TH E SPECIAL COURTS ACT THE ASSESSEE CANNOT BE FAULTED FOR NOT PAYING THE S AME AND NO INTEREST UNDER SECTIONS 234A TO 234C OF THE INCOME TAX ACT C AN BE CHARGED FOR THE DEFAULT. THE TRIBUNAL ALSO NOTICED THAT EVEN T HOUGH LEVY OF INTEREST UNDER SECTION 234A IS FOR THE DELAY IN FILING THE R ETURN THE QUANTIFICATION OF THE INTEREST DEPENDS ON THE ADVANCE TAX PAID WHI CH COULD NOT BE PAID BY THE ASSESSEE BECAUSE OF THE SPECIAL COURTS ACT. FURTHER ALL THE ASSETS OF THE NOTIFIED PERSON INCLUDING THE BANK ACCOUNT WERE ATTACHED AND VESTED IN THE CUSTODIAN APPOINTED UNDER THE SPECIAL COURTS ACT. FOR THESE REASONS THE TRIBUNAL HELD THAT NO INTEREST CAN BE LEVIED ON A NOTIFIED PERSON UNDER SECTIONS 234A TO 234C OF THE INCOME TAX ACT. THE ASSESSEE BEFORE US IS ALSO A NOTIFIED PERSON UNDER THE SPECIAL COURTS ACT AND THEREFORE THE RULING OF THE TRIBUNAL IN THE CAS E OF ORION TRAVELS PVT. 6 LTD. (SUPRA) FULLY APPLIES TO THIS CASE. RESPECTFULLY FOLLOWING THE SAID ORDER WE DELETE THE INTEREST LEVIED UNDER THE ABOVE SECTIONS AND ALLOW THE GROUND. 10. GROUND NO. 8 IS GENERAL IN NATURE AND HENCE RE QUIRE NO ADJUDICATION. 11. IN THE RESULT THE APPEAL OF THE ASSESSEE IS A LLOWED IN PART. ORDER PRONOUNCED ON THIS 19 TH DAY OF APRIL 2010. SD/- SD/- (R.V. EASWAR) (J. SUDHAKAR REDDY) SENIOR VICE-PRESIDENT. ACCOUNTANT MEMBER. MUMBAI DATED : 19 TH APRIL 2010. COPY FORWARDED TO : 1. APPELLANT. 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR A-BENCH. (TRUE COPY) BY ORDER ASSTT. REGISTRAR ITAT MUMBAI BENCHES MUMBAI. WAKODE