Income Tax Appellate Tribunal - Mumbai
Hind Filters Ltd , vs Assessee on 3 September, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH "H",
MUMBAI
BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND
DR. S.T.M PAVALAN, JUDICIAL MEMBER
ITA No. 2082/Mum/2012
Assessment Year : 2004-05
DCIT, Circle, 3(1) M/s. Hind Filters Ltd.
Room No.607, 6th Floor 15221 % 1522, Maker
Aayayak Bhavan Chambers-V
Mumbai-400 020. Vs. 221, Backbay Reclamation
Nariman Point
Mumbai-400 021.
PAN No.AAACH 0397 L
(Appellant) (Respondent)
Cross Objection No.69/Mum/2013
Arising out of ITA No. 2082/Mum/2012
Assessment Year : 2004-05
M/s. Hind Filters Ltd. DCIT(OSD)
Mumbai-400 021. Vs. Circle 3(1)
PAN No.AAACH 0397 L Mumbai-20.
(Appellant) (Respondent)
Assessee by Shri Divyesh Shah & Shri
:
Ravi Sawana
Revenue by : Shri Sanjeev Jain
Date of hearing : 03/09/2013
Date of Pronouncement : 17/09/2013
ORDER
PER B. RAMAKOTAIAH, AM:
Revenue appeal is against the orders of CIT(A) - 7 , Mumbai dated 07.12.2011. Assessee raised cross objection on the issues which are not 2 ITA No.2082/12 & CO/13 A.Y.04-05 Hind Filters Ltd.
adjudicated by the CIT(A), as he upheld the contentions of the assessee on the issue of reopening of the assessment.
2. Briefly stated, assessee has filed return for assessment year 2004- 05 on 26.10.2004, disclosing total income of Rs.3,32,89,345/-. Order under section 143(3) was passed on 29.12.2006 assessing total income at Rs.4,04,97,000/-. Later on, the AO seems to have received communication from Additional CIT-Range-1, Ujjain that assessee has received certain ICD advance from M/s. Dews Soya Ltd. in which assessee is a share holder, which can be treated as deemed dividend under section 2(22)(e) of the Act. This letter was received on 23.03.2009. consequent to that the AO issued notice under section 148 on 15.04.2009 i.e. after expiry of four years from the end of the assessment years. The assessee replied to the notice on 6th May, 2009, objecting the re-opening and further submitted that all issues were examined by the AO at the time of the original assessment. Thereafter, the AO cancelled the notice so issued under section 148 on 21st May, 2009. The AO however issued another fresh notice under section 148 on March 9, 2010 which was received by the assessee on 10th March, 2010. The assessee vide letter dated 22.03.2010 objected issuing another notice having cancelled the proceedings initiated, after assessee's submission dated 6th May, 2009. However, the AO continued the proceedings and made an addition of Rs.79,81,645/-. The assessee carried the matter before the CIT(A) and contested the issue on the reason of reopening of assessment u/s 147 and on merits.
3. The ld. CIT(A) examined the record and after elaborate discussion on the issues, accepted the assessee's contention and reassessment order of the AO was annulled. His final conclusion in para 4.6 is as under :-
3 ITA No.2082/12 & CO/13A.Y.04-05 Hind Filters Ltd.
"4.6 I have considered AO's order as well as the appellant's submission. Having considered both, I find that the second time re- opening by AO, on the same set of facts and information was completely incorrect and unjustified, as all the information were available on record at the time of original assessment. Further to that, I also find that once the case was reopened and decided by AO incorrect, hence re-opening of the assessment by another Assessing Officer on the same set of facts, cannot be held justified, otherwise it is completely mere change of opinion for re-opening the assessment. Taking note of the recent case law in the case of CIT vs. Kelvinator of India Ltd. (320 ITR 561)(SC), I consider it proper and appropriate to held that the re-opening of assessment is completely unjustified and incorrect. Accordingly the reassessment of the appellant's case is annulled."
3.1 Since, Ld.CIT(A) has decided the issue of jurisdiction, the other issue of addition u/s 2(22)(e) was considered infructuous. The Revenue in its appeal is contesting the finding of the ld. CIT(A) on the issue of re- opening and raised three grounds whereas the assessee in cross objection contested the addition made by the AO on merits.
4. With reference to issue of re-opening, as briefly stated above this is an assessment completed under section 143(3) earlier which was re- opened after four years from the end of assessment year. Therefore, the AO has to consider that there is failure on part of the assessee to disclose fully and truly all material facts necessary for his assessment, as per proviso to section 147. There is no such finding. As seen from the order of the AO also, we are unable to understand how there can be any addition under section 2(22)(e). Admittedly, the assessee is a share holder in M/s. Dewas Soya Pvt. Ltd. However, the fact is that the assessee company placed ICDs with M/s. Dewas Soya Pvt. Ltd. and not the other way. These ICDs are in fact mentioned in the balance sheet and submitted before the AO the relevant details. Since assessee has not received any money as loan from M/s. Dewas Soya, to the extent of ICDs which seem to be in the communication received from Ujjain, does not establish anything so as to consider invoking the provisions of section 4 ITA No.2082/12 & CO/13 A.Y.04-05 Hind Filters Ltd.
2(22)(e) in the case of the assessee. The AO in the course of reassessment examined the company transactions and list them in para-13 in page 8. The AO considered that current account advances from M/s. Dewas Soya Pvt. Ltd. to the extend of Rs.1.895 crores, as amount to be considered as loans and advances within the meaning of section 2(22)(e). Thereafter vide para-16 he arrives at the amount to be assessed as under:-
"16. After the perusal of the submission made by assessee, it was found that the Assessee company had income in current year of Rs.93,26,673/- after considering depreciation u/s. 32 of the IT Act, 1961. The Assessee had brought forward loss of Rs.(1345028). As such, the Assessee had accumulated profit within the meaning of section 2(22)(e) of Rs.79,81,645/-. Hence, an amount of Rs.79,81,645/- is added to the total income of the Assessee for assessment year 2004-05."
4.1 It was explained that since there is no facility of immediate transfer of funds at that point of time, funds are deposited in their place and correspondingly there was transfer of funds to the others account in Dewas/ Bombay and this facility was only for transferring funds from one place to another. Since inter-bank transfers are not prevalent at that point of time, this arrangement was being followed and these are trade advances. Even otherwise, it was submitted that it was the assessee who advanced funds first and later M/s. Dewas Soya deposits fund, therefore, it is not a loan from M/s. Dewas Soya Ltd. to the assessee but a loan from assessee to M/s. Dewas Soya Pvt. Ltd. This contention has not been considered by the AO at all even though the same was raised before AO.
4.2 Not only that, even calculation of the amount to be considered under section 2(22)(e) is not correct. The AO after arriving at the amount of so called advance from M/s. Dewas Soya Pvt. Ltd. considers that accumulated profit of the assessee company to determine the amount under section 2(22)(e), instead of accumulated profit in the hands of M/s. Dewas Soya. On examination of the issue on merits, it is noticed that it 5 ITA No.2082/12 & CO/13 A.Y.04-05 Hind Filters Ltd.
was the assessee who made ICDs with M/s. Dewas Soya Ltd. and not other way and further day to day advances are also from assessee to M/s. Dewas Soya Ltd. In view of this, question of invoking section 2(22)(e) does not arise, when a share holder advances money to the company. Not only that even, calculation of accumulated profit as stated above was wrong. For these reasons, we can not uphold the order of the AO even on merits. Coming to the issue of re-opening also, we do not see any reason to differ from the order of the CIT(A) as he has ultimately discussed the issue not only on facts of reopening but also on legal principles in his eleven page order. In view of the above, we do not see any merit in Revenue appeal. Accordingly, same is dismissed.
4.3 Even though we have considered the issue on merits while deciding the issue of reopening u/s 147, the assessee's cross objection need not be adjudicated, as the issue of re-opening was held to be bad in law. Therefore, the cross objection becomes academic in nature. Accordingly, the same is also rejected.
5. In the result, both Revenue appeal and Cross objection of Assessee are dismissed.
Order pronounced in the open court on 17th September, 2013.
Sd/- Sd/-
(DR. S.T.M PAVALAN ) (B. RAMAKOTAIAH )
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai, Dated: 17/09/2013.
Jv.
6 ITA No.2082/12 & CO/13
A.Y.04-05
Hind Filters Ltd.
Copy to: The Appellant
The Respondent
The CIT, Concerned, Mumbai
The CIT(A) Concerned, Mumbai
The DR " " Bench
True Copy
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.