Income Tax Appellate Tribunal - Mumbai
Allanasons Ltd., Mumbai vs Assessee on 10 June, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "J", MUMBAI
BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND
DR. S.T.M. PAVALAN, JUDICIAL MEMBER
ITA No.457/Mum/2002
Assessment Year : 1994-95
M/s. Allana Sons Ltd. Dy. Commissioner of
Allana House, Income tax , Circle-1(1)
4 J.A Allana Road, Room No.579, 5th Floor
Vs.
Colaba Aayakar Bhavan
Mumbai. M.K.Road
PAN :AAACA 2533 D Mumbai-400 020.
(Appellant) (Respondent)
ITA No.224/Mum/2002
Assessment Year : 1994-95
Dy. Commissioner of M/s. Allana Sons Ltd.
Income tax , Circle-1(1) Vs. Allana House
Mumbai-400 020. Mumbai.
(Appellant) (Respondent)
ITA No.225/Mum/2002
Assessment Year : 1995-96
Dy. Commissioner of M/s. Allana Sons Ltd.
Income tax , Circle-1(1) Vs. Allana House
Mumbai-400 020. Mumbai.
(Appellant) (Respondent)
ITA No.458/Mum/2002
Assessment Year : 1995-96
M/s. Allana Sons Ltd. Dy. Commissioner of
Allana House Vs. Income tax , Circle-1(1)
Mumbai. Mumbai-400 020.
(Appellant) (Respondent)
ITA No.524/Mum/2000
Assessment Year : 1996-97
Dy. Commissioner of M/s. Allana Sons Ltd.
Income tax , Circle-3(1) Vs. Allana House
Mumbai-400 020. Mumbai.
(Appellant) (Respondent)
2 ITA No.224/M/02 & 457/M/02(A.Y.94-
95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/M/06(96-97)
Allana Sons Ltd.
C.O.No.403/Mum/2006
Assessment Year : 1996-97
M/s. Allana Sons Ltd. Dy. Commissioner of
Allana House Vs. Income tax , Circle-3(1)
Mumbai. Mumbai-400 020.
(Appellant) (Respondent)
Revenue by : Shri S.D. Srivastava
Respondent by : Shri P.J. Pardiwala, Smt
V.B. Patel and Shri A.R.
Shah
Date of hearing : 10.06.2013
Date of Pronouncement : 19.06.2013
ORDER
PER B. RAMAKOTAIAH, A.M:
These are cross Appeals by assessee and Revenue against the orders of CIT(A). Main appeals are by Revenue on deletion of amounts added by AO invoking Sec. 2(22)(e). Since common issues are involved, these appeals are heard together and decided by this common order. We have heard the ld. DR and the ld. Counsel for the assessee in detail.
2. The appeal in assessment year 1996-97 is the main appeal consequent to which assessments for assessment years 1994-95 and 1995-96 were re-opened by the AO on the issue. Therefore appeal in assessment year 1996-97 was decided first.
3 ITA No.224/M/02 & 457/M/02(A.Y.94-
95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/M/06(96-97) Allana Sons Ltd.
ITA No.524/M/2000 (Assessment Year : 1996-97) The revenue has raised the following grounds :-
"1.On the facts and circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs.26,07,00,000/- made on account of deemed dividend under section 2(22)(e) of the I.T. Act.
2. On the facts and circumstances of the case and in law, the ld. CIT(A) has erred in directing the A.O. in not to set off the losses incurred under one of the head of the export against the profits of the other head of the export as done by the A.O. for computation of deduction under section 80HHC of the Act.
3. On the facts and circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs.3,24,000/- being the interest income received on deposits against the letting out of premises, which was added to the income from the House Property by the A.O."
2.2 Ground No.1 is on the issue of addition of Rs.26,07,00,000/- made on account of deemed dividend under section 2(22)(e) of the Income tax Act, 1961(the Act). The assessee is engaged in the business of export of consumable goods such as meat, coffee etc. and purchases these items from sister concerns. In a way, it acts as an exporter of the goods manufactured by the sister concern and charges service fee on the export proceeds. The AO found that the assessee has running account with four sister concerns out of which in three sister concerns it has more than 10% share holding and with one concern even though it had no share holding there are common share holding by other concerns. AO examined the transactions between the assessee company and other group concerns and after analyzing the transactions and obtaining instructions under section 144A from the 4 ITA No.224/M/02 & 457/M/02(A.Y.94-
95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/M/06(96-97) Allana Sons Ltd.
Addl. Commissioner, he made an addition of above amount as deemed dividend under section 2(22)(e) of the Act. The main reason for making the addition was that those companies have advanced funds to the assessee and therefore those loans/advances which were out of the profits of those companies were to be considered as deemed dividend under the provisions. The four concerns and amounts involved are :-
1. M/s. Frigorifico Allana Ltd. Rs.16.68 crores
2. M/s. Frigerio Conserva Allana Ltd. Rs. 2.72 crores
3. M/s. Indagro Foods Ltd. Rs. 1.45 crores
4. M/s. Allana Cold Storage Ltd. Rs. 5.22 crores 2.3 The AO analyzed the transaction from page-2 of the order to page-9 of the order to arrive at the above amounts. It was the contention of the assessee that the assessee purchases goods from the sister concerns on credit and the amounts are settled as and when export proceeds are received. Sometimes the bank made adjustments directly from the export proceeds with packing credit loans. It is also submitted that in F.Y. 1994-95, relevant to assessment year 1995-96 assessee had to avail packing credits from the banks, even though it was not required, to keep the sanctioned limits. The assessee was asked to utilize the funds and so in the month of March'95, assessee availed packing credit limit and advanced the funds to four sister concerns. It was submitted that during the year those sister concerns paid various amounts to the assessee which it has received. During the course of enquiry, the assessee also obtained the account copies 5 ITA No.224/M/02 & 457/M/02(A.Y.94-
95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/M/06(96-97) Allana Sons Ltd.
from the sister concerns wherein they have maintained separate ledger accounts, one for trading activity and other for advanced accounts. On the basis of accounts, it was submitted that the assessee never obtained any loan from the sister concerns and therefore, question of invoking deemed dividend provisions does not arise.
2.4 The AO analysed the transactions and on the reason that the advanced loan would be set off to the amounts outstanding towards purchases, considered the payments made by the sister concerns as deemed dividend and arrived at amount of Rs.26,07,00,000/- to consider them as deemed dividends.
2.5 The assessee contested the same before CIT(A) and explained the transactions and made detailed submissions both on facts and on law. The ld. CIT(A) after considering the same deleted by stating as under:-
"On this ground of appeal direction were issued by the Additional Commissioner of Income-tax Renge-3. The appellant had received certain payments from the following parties during the previous year relevant to assessment year 1996-97.
1. M/s. Frigorifico Allana Ltd.
2. M/s. Frigerio Conserva Allana Ltd.
3. M/s. Indogro Foods Ltd.
4. M/s. Allana Cold Storage Ltd.
The said for companies are sister concerns of the appellant They are also involved in processing activities which results in the endproduct for the appellant's export activities. As the appellant as well as the four other 6 ITA No.224/M/02 & 457/M/02(A.Y.94-
95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/M/06(96-97) Allana Sons Ltd.
entitles had major share holding in each other, the A.O. treated the amounts received by the appellant as deemed dividend as per provisions of section 2(22) (e) of the Income-tax act, 1961. The said addition is objected to by the appellant in the present appeal. It would be relevant to refer to provisions of section 2(22) (e) which reads as under:
"Dividend" includes:
Any payment by a company, not being a company in which the public are substantially interested, of any sum ( whether as representing a part of the assets of the company or otherwise) ( made after the 31st day of May, 1987, by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares ( not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereinafter in this clause referred to as the said concern) or any payment by any such company on behalf, or for the individual benefit, or any such shareholder, to the extent to which the company in either case possesses accumulated profit.
It would thus appear that any payment made by a closely hold company to a major share holder by way of advance or loan is taxable as dividend in view of the deeming provisions of section 2(22) (e). Though the A.O. came to the conclusion that the said amount were in the nature of deemed dividend, the appellant's contention is that the said amounts were merely repayments made by the four companies on account of certain advances made by the appellant in the month of March, 1995 relevant to assessment year 1995-96. The appellant is stated to have made the said advances to the four companies on account of directions issued by the appellant's bankers as the appellant had not availed of credit from the banks with effect from 1st January, 1995. A letter to that effect issued by the appellant's bankers namely Union Bank of India has also been produced before me during the course of appellate proceedings. It is also stated that most of the amounts were returned to the appellant in the month of April 1995 itself and that such action was resorted to continue the credit facilities sanctioned by the appellant's bankers. It is contended that if such loan facilities were not availed, the bankers would have reduced the credit facilities of the appellant which in turn would have adversely affected the appellant's business activities. The A.O. did not accept the appellant's contention on the ground that at the point when advances were made to the four companies, large amounts were due from the 7 ITA No.224/M/02 & 457/M/02(A.Y.94-
95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/M/06(96-97) Allana Sons Ltd.
appellant and that such amounts were in fact payments made to take care of amounts due to the fur companies on account of supply of processed meat made to the appellant. It is submitted that the four companies had maintained separate accounts on account of loan as well as on account of supplies and that such amounts were noticed off as per direction of the appellant's bankers. It is also brought to my notice that the appellant was paying the four companies only on receipt of export proceeds which would take a few months from the date of export.
3. The Additional Commissioner of Income tax while issuing direction u/s 144 A relied on the ratio of decision in the case of Sumati Dayal 214 ITR 80........ . where it was held that mere accounting entries are not conclusive evidence and one must look at all the facts and circumstances of the case. It is however, seen that in the case of Ms. Sumati Dayal their lordships were concerned with the receipt of a number of jackpots received on a regular basis by a housewife. It is thus, clear that the appellant's case is not similar to that reported in the case of Ms. Sumati Dayal. The appellant has also brought to my notice, the decision on the Kerala High Court in the case of P.V. John 181 ITR 1 where it was held that when deeming provisions are to be applied the same is to be applied very strictly and that there should be no doubt of whatsoever nature about the taxability of the same . The other decision of the same high court in the case of K. Sridharan 201 ITR 973 has observed that in case, the explanation of the assessee is that the payments in question was only repayment of earlier loan advances the provisions of sec. 2(22) (e) would not applicable. I am in agreement with the appellant that the deeming provisions should be restricted to what the section says and not extended further into un-chartered areas. I am thus of the considered opinion that the conclusion arrived at by the A.O. as well as by the Additional Commissioner of Income tax cannot be considered as being based either on the facts or circumstances of the case. In the light of the same, the addition made by the A.O. on account of deemed dividend u/s 2(22) (e) of the Income tax Act, 1961 is hereby deleted."
2.6 The ld. DR pointed out the findings of the AO to submit that the Ld. CIT(A) was not correct in deleting the addition as the assessee has obtained loans from the sister concern and referred to various annexures enclosed to the assessment order to reiterate the findings made by the AO and Addl. CIT under section 144A. The ld. Counsel in 8 ITA No.224/M/02 & 457/M/02(A.Y.94-
95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/M/06(96-97) Allana Sons Ltd.
reply referred to the account copy placed to submit that the assessee was always indebted to the sister concerns so on facts, question of making deemed dividend does not arise. Further it was submitted that addition with reference to M/s Allana Cold Storage Ltd. also does not arise as assessee is not a share holder in the said company and as decided by the Special Bench of the ITAT in the case of ACIT vs. Bhaumik Colour Lab (2009) (18 DTR (Mumbai) (SB) Tribunal 451) and as approved by the Hon'ble Bombay High Court in case of CIT V. Universal Medicare Pvt. Ltd. (324 ITR 263) (2010)(Bom.). It was the submission that the order of CIT(A) is correct on facts and law. 2.7 We have considered the rival contentions and have gone through the various documents placed on the record. First of all, we find it difficult to agree with the approach of the AO in de-linking the transaction which was carried over from earlier year. As accepted by the authorities, the assessee was asked by the banks to avail packing credit limit so as to maintain limits for the next year and in the month of March,1995, it had to utilize packing credit facilities and had advanced it to various sister concerns on which there is no dispute. As seen from the ledger copies placed on record as on 31.3.1995 M/s. Frigorifico Allana Ltd. has received total amount of Rs.21.00 crores, M/s. Frigerio Conserva Allana Ltd. has received total amount of Rs.8.05 crores, M/s. Allana Cold Storage Ltd. has received an amount of Rs.6.46 crores and M/s. Indagro Foods Ltd. has received amount of Rs.2.55 crores in March, 1995. It is further noticed that those companies maintained separate advance account 9 ITA No.224/M/02 & 457/M/02(A.Y.94-
95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/M/06(96-97) Allana Sons Ltd.
as against assessee's combined account and repaid the amounts from 1.4.1995 to 31.3.1996. However, there is always an outstanding amount to be repaid to the assessee during the course of the year and at the end of the year as on 31.3.1996 closing balance were as under:
1. M/s. Frigorifico Allana Ltd. ....... Rs. 4.32 crores
2. M/s. Frigerio Conserva Allana Ltd. ..... Rs. 5.33 crores
3. M/s. Allana Cold Storage Ltd. ..... Rs.1.54 crores
4. M/s. Indagro Foods Ltd. ... Rs. 1.60 crores
2.8 Thus, as seen from the ledger accounts, those companies were paying outstanding amounts received as on 31.3.1995 to the assessee company during the year and still at the end of the year has to pay the balance amount also as stated above. Therefore, on facts it is not loans or advance given by that company to the assessee company but reimbursement of the loans received during the earlier year. 2.9 The argument of the A.O that these amounts should have been adjusted to the outstanding purchase account and therefore, the amounts became advance in the year cannot be accepted as assessee has to receive/pay large amounts to the sister concern as part of business activity. The purchases are being settled after export proceeds are received and mostly adjusted by banks first and passing entries thereon. Therefore, on the facts we do not see any reason to uphold the revenue's contentions.
2.10 Apart from that, as far as addition with reference to M/s. Allana Cold Storage Ltd. was concerned (Rs.5.22 crores) the assessee is not share holder in the said company. Therefore, following the principles 10 ITA No.224/M/02 & 457/M/02(A.Y.94-
95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/M/06(96-97) Allana Sons Ltd.
laid down by Hon'ble Bombay High Court in the case of Universal Medicare Pvt. Ltd.(supra) the amount cannot be brought to tax under the provisions of section 2(22)(e) of the Act. For these reasons, we uphold the order of Ld. CIT(A), which is correct on facts and on law, accordingly the ground is rejected.
3. Ground No.2, pertains to the issue of set off of loss incurred in one of the heads of export against the profits of other exports i.e. loss in trading to be set off to profit in manufacturing exports. Ld. Counsel fairly admitted that this issue is against the assessee not only by the decision of Hon'ble Supreme Court in case of Ipca Laboratories (266 ITR 521) but also consequent to the amendment brought to the statute retrospectively. Accordingly, order of Ld. CIT(A) is set aside and that of A.O is restored. The ground is allowed.
4. Ground No.3 pertains to the issue of notional interest. The issue in this case is with reference to addition made by the AO on the interest free deposit received from the tenant at 18% as annual letting value. The Ld. CIT(A) following the orders in earlier years deleted the same.
4.1 It was fairly admitted that this issue is covered against the revenue and in favour of the assessee by the orders in earlier years. For the sake of record ITAT order dated 28.2.2006 in assessment year 1992-93 in ITA No.6071/Mum/97 is extracted as under:-
"7. The last ground pertains to the direction of the CIT(A) to delete the addition of Rs.2,70,000 being 11 ITA No.224/M/02 & 457/M/02(A.Y.94-
95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/M/06(96-97) Allana Sons Ltd.
notional addition on account of interest on interest free advances in respect of property. This issue is covered in favour of the assessee by the decision of the Hon'ble Bombay High Court in assessee's own case, wherein vide order dated 19.9.2000, in ITA No.1019 of 2000, ITA No.3159/Mum/92 their lordships dismissed the revenue's appeal following their judgment dated 05.06.2000 in ITA No.265 of 2000. In this view of the matter the ground is rejected."
4.2 Respectfully following the same, since the issue is covered by the Jurisdictional High Court also, we uphold the order of Ld.CIT(A) and dismiss the ground.
5. In the result, revenue's appeal is partly allowed. C.O.403/Mum/06 (Assessment Year 1996-97)
6. In this the assessee has raised cross objections on the two issues which are as under:-
"1. The CIT(A) erred in not adjudicating that the alleged deemed dividend should be considered as a part of business income and not as income from other sources and that the same be treated as operational income and be considered while giving consequential deduction under section 80HHC.
2. The CIT(A) erred in not adjudicating that in any case, to the extent of Rs.80.00 lakhs, there was a double addition and the same was not warranted."
6.1. With reference to ground No.1 it does not arise, as deemed dividend has already been deleted by Ld. CIT(A) which was confirmed by us in revenue appeal. Therefore, there is no need to adjudicate the ground, accordingly rejected.
12 ITA No.224/M/02 & 457/M/02(A.Y.94-
95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/M/06(96-97) Allana Sons Ltd.
6.2 Ground No.2 is with reference to an error which crept in the working of the AO of deemed dividend. Since the entire deemed dividend is deleted the examination of the double addition is not required. The ground is rejected as academic in nature. However, in case the orders are reversed by any higher judicial authority, the A.O is to examine this aspect by verification of the amount to be considered under section 2(22)(e).
7. In the result, the cross objection is dismissed. ITA No.224/Mum/2002 (Assessment Year : 1994-95):
8. The revenue has raised the following two grounds:-
"1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in directing the Assessing Officer to delete the addition as per Ground Nos. 2 to 2(22)(e) of the Income tax Act, 1961.
2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in directing the Assessing Officer to delete the addition of notional interest of Rs.3,24,000/- being 18% of the interest free deposit accepted by the appellant from the lessee Rs.1,80,000/-"
8.1 Ground No.1 is with reference to addition made under section 2(22)(e) consequent to the findings/observations by the AO while completing assessment in assessment year 1996-97. However in this year, instead of examining the loans as was done in assessment year 1996-97, the Assessing Officer picked up the amounts of reimbursements made by the sister concerns to the assessee company. The Assessing Officer was of the view that the sister companies paid more amount than what was required to be 13 ITA No.224/M/02 & 457/M/02(A.Y.94-
95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/M/06(96-97) Allana Sons Ltd.
reimbursed and to that extent assessee has received excess amount of Rs.2.87 crores from M/s. Frigorifico Allana Ltd. and accordingly the amount was treated as deemed dividend under section 2(22)(e). 8.2 The assessee explained that while making exports on behalf of the sister concerns, the assessee incurs expenditure like freight, transport etc. related to exports which was required to be immediately reimbursed by the sister concerns and fund received represented reimbursement of such expenses. Further reimbursement, on account of packing credit availed by sister concerns but adjusted by banks from the assessee account on exports also was involved. Further reimbursement at 3.5% on account of export proceeds, charged by the assessee as service charges from their sister concern has to be considered. The Assessing Officer while accepting that expenditure incurred for exports was reimbursed however, did not agree with the two other reimbursements explained by the assessee to arrive at the so called excess receipts as loans /advances which are to be treated as deemed dividend under section 2(22)(e). Ld.CIT(A) after considering the factual position deleted the same by stating as under :-
"Ground No.2 to 5 relate to the addition of a sum of Rs.2,87,64,892/- as deemed dividend u/s 2(22)(e) of the Income Tax Act.
Facts of the case in brief are that the appellant is related to fur sister concerns namely M/s. Frigorifico Allana Ltd., M/s. Frigerio Conserve Allana Ltd., M/s. Indogro Foods Ltd., and M/s. Allana Cold Storage Ltd., The above four sister concerns process meat and the same is sent to the applicant for export. So far as the accounts of the above four concerns are concerned they are credited with the cost price of the goods to be exported. In this connection, it is mentioned that so far as debits in the above accounts are concerned, this reflect the expenses incurred by the appellant and service charges @ 3.5% During the course of export of goods, the 14 ITA No.224/M/02 & 457/M/02(A.Y.94-
95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/M/06(96-97) Allana Sons Ltd.
appellant also gets certain amounts from the above four concerns for setting off its service charges and other expenses.
In this regard, the Ld. Counsel of the appellant submitted that the appellant exported the goods on behalf of its sister concerns in A. Yr. 1996-97 and in that year also the sister concern made payments to the appellant and the same were treated as deemed dividend u/s 2 (22)(e) of the Income Tax Act and an addition of Rs.26,07,00,000/- was made on this account. It is brought to my notice that the addition of Rs.26,07,00,000/- made by the Assessing Officer for A. Yr.1996-97 came to be deleted by the Ld.CIT(Appeals). The Ld.CIT(Appeals) has held that on the identical facts that the credit on debit entries in the accounts of the four concerns in fact are business transactions and the same are not loans and advances made to the assessee. Taking me to the past history of the case on identical issue, the Ld. Counsel made submissions before me during the course of hearing of the present appeal along the same lines as in the past. Copy of the appellate order-Appeal No. CIT(A)-XLIII/AC3(1)/IT.34/99-2000 dated 29.10.1999 was placed before me and reliance was placed on the submissions made during the course of appeal for the aforesaid Asstt. Year and the same were reiterated.
I have carefully considered the submissions made and contentions raised in appeal before me. I have also perused the appellate order mentioned above. It is noticed that this issue of deemed dividend has been dealt with at length in the appellate order passed in respect of A. Yr. 1996-97. I am of the considered view that in respect of the year under appeal also there is no plausible reason for me to in any manner depart form the view taken by my Ld. Predecessor. I am in full agreement with the view taken by my Ld. Predecessor on an identical issue under appeal. Accordingly I hold that the Assessing Officer is not justified in making an addition of Rs.2,87,64,892/- as deemed dividend u/s 2(22)(e) of the Income Tax Act The addition is therefore deleted."
8.3 After considering the rival submissions and examining the facts on record, we do not see any reason to interfere with the order of CIT(A). The Assessing Officer was not correct in allowing reimbursement only on freight, transport etc. pertaining to exports and not considering packing credit and service charges which were also reimbursed by the sister concerns. As explained, the sister 15 ITA No.224/M/02 & 457/M/02(A.Y.94-
95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/M/06(96-97) Allana Sons Ltd.
concerns availed packing credits from the banks as the rate of interest was less but, they do not make any direct export. Since exports are through assessee company, banks adjusted the loans from the export proceeds received by the assessee company in its bank account. These amounts are being adjusted by journal entries by making necessary debit notes and are being reimbursed by sister concerns. AO was not correct in considering only one such reimbursement ignoring the other two in arriving at the so called excess payment. On facts, there is no reason to consider any amount as loan received from sister concern to the assessee company. Therefore we uphold the order of CIT(A) accordingly the ground is rejected.
8.4 Ground 2 pertains to the issue of addition of notional interest of Rs.3,24,000/-. For the reasons stated therein in ground No.3 in revenue appeal for assessment year 1996-97, we uphold the order of CIT(A) and reject the ground.
9. In the result, appeal is dismissed.
ITA No.457/Mum/2002 (Assessment Year : 1994-95):
10. The assessee has raised the following three grounds in its appeal:-
"I. The ld. CIT(A) III Mumbai has erred in not accepting the contention of the appellant that there were no reasons before the Assessing Officer for validly initiating reassessment proceedings under section 148 r.w.s. 147 of the Act.
The appellant submits that the ld. CIT(A) ought to have appreciated that there were no valid reasons before the Assessing Officer for reopening assessment proceedings in question. The reasons mentioned by him in the assessment order are based 16 ITA No.224/M/02 & 457/M/02(A.Y.94-
95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/M/06(96-97) Allana Sons Ltd.
on incorrect facts and therefore, are not valid reasons.
Without prejudice to the above and only in the alternative it is submitted that the reference made to the assessment proceedings for the AY 1996-97 is not a correct reason, since the additions made in the said order have been deleted by the ld. CIT(A).
It is, therefore, submitted that reassessment proceedings are bad-n-law and Tribunal is requested to pass an order to that effect.
II. The ld. CIT(A) has erred in not granting relief under section 80HHC of the Act by relying upon the judgment of the Tribunal in the case of Ipca laboratories which does not lay correct principles of interpreting the provisions of the said section. In appellant's own case for earlier and subsequent years, the CIT(A) has granted relief's on identical issue of ignoring the "losses" while determining the eligible relief under section 80HHC of the Act.
It is, therefore, submitted that he ought to have followed earlier and subsequent years' appellate orders and he ought to have granted relief prayed for which were originally allowed.
III. The ld. CIT(A) has erred in not directing the Assessing Officer in the matter of charging of interest under section 234B of the Act."
10.1 Ground No.1 pertains to the issue of re-opening of the assessment. As stated earlier the Assessing Officer re-opened the assessment consequent to the finding in assessment year 1996-97. The assessee has contested the same before ld. CIT(A). The ld. CIT(A) dismissed the assessee's contentions by stating as under :-
"I have considered the arguments and submissions of the appellant. I have also gone through the assessment order for assessment year 1994-95 in which the Assessing Officer has clearly mentioned that during the course of assessment proceedings for A.Yr. 1996-97, books of accounts for A.Yr. 1994- 95 were also seen which show huge transactions with the above companies which attract the provisions of section 2(22)(e). The appellant has not produced any evidence in support of this contentions 17 ITA No.224/M/02 & 457/M/02(A.Y.94-
95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/M/06(96-97) Allana Sons Ltd.
that the books for A.Y. 1994-95 were not produced before the Assessing Officer. This point has been considered by me and it is seen that the observations of the Assessing Officer that the books of accounts were produced before him is evident from the fact that in fact there existed huge transactions as mentioned by him. This suggest that the books of account were produced before him. In addition to the above, I find that even if the books of accounts are not produced, the history of the case suggest that appellant is engaged in export of goods on behalf of its sister concerns and there are huge transactions. For example for re-opening the assessment for A.Yr.1995-96, there is sufficient material in the assessment order for A.Yr. 1996-97. The comparison of the assessment order for A.Yr. 1996-97 clearly suggest that there are Opening credit balances of the sister concerns which suggest that similar transactions were there in the earlier years also and therefore, I am of the view that Assessing Officer has rightly re-opened the assessment under section 147 of the income tax Act. Accordingly, this Ground of appeal is decided against the appellant."
10.2 The ld. Counsel for the assessee reiterated the submissions made before the ld. CIT(A) that recording of the reasons was not correct and further also submitted that the assessee was not supplied with the reasons for reopening in the course of assessment proceedings, therefore following the principle laid down by the Hon'ble High Court in the case of CIT vs. Videsh Sanchar Nigam (340 ITR 66)(Bom) the re-opening is bad in law.
10.2.1 After considering the rival contentions, we are of the view that there is no merit in the assessee's contentions since the assessment was not made under section 143(3) earlier and only processing under section 143(1) was done. We are of the opinion that the Assessing Officer was correct in re-opening the assessment on the basis of his findings in assessment year 1996-97, though such 18 ITA No.224/M/02 & 457/M/02(A.Y.94-
95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/M/06(96-97) Allana Sons Ltd.
findings are not upheld ultimately. Following the principles laid down by the Hon'ble Supreme Court in the case of ACIT vs Rajesh Jhaveri Stock Brokers P. Ltd, 291 ITR 381(SC), the re-opening of the assessment where return of income was accepted under section 143(1) can be permitted. The contention that the reasons were not communicated to the assessee can not be accepted. In the absence of any evidence on record and as this contention requires examination of record, this can not be accepted at this stage, which was not raised earlier. Be that as it may, we are of the opinion that this ground does not have any merit. Accordingly same is rejected. 10.3 Ground No.2 is against action of the Assessing Officer in setting off of loss in trading account to the profit of manufacturing export account. As seen from the order the Assessing Officer has set off such trading export loss amounting to Rs.3,73,68,776/- to the profit from manufacturing export of Rs.2,60,79,731/-. The Assessing Officer arrived at eligible deduction u/s 80HHC at (-)Rs.53,042/-, loss thereby restricting to nil. This adjustment is as per amended provisions of Act, therefore we uphold the order of CIT(A) and dismiss the assessee's ground.
10.4 Ground No.3 is with reference to calculation of interest w.r.t. section 234B which is consequential in nature. This ground is accordingly dismissed.
10.5 The appeal is dismissed 19 ITA No.224/M/02 & 457/M/02(A.Y.94-
95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/M/06(96-97) Allana Sons Ltd.
ITA No.225/Mum/2002 (Assessment Year : 1995-96):
11. In this, the revenue has raised only one ground which is as under :-
"1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in directing the Assessing Officer to delete the addition as per Ground No.2 to 5 relating to the addition of sum of Rs.2,87,64,892/- as deemed dividend under section 2(22)(e) of the income tax Act, 1961."
11.1 It was submitted that the amount involved was not Rs.2.86 crores as stated in the ground but the amount was Rs.5,32,83,448/- in this year. As in last year, the Assessing Officer considered excess reimbursement of expenditure at above amount as deemed dividend without considering the reimbursement of packing credit and service charges. The ld. CIT(A) after considering the facts similar to the order passed in assessment year 1994-95, has deleted the addition for the same reasons. Since the facts are similar, for the reasons stated therein in ITA No.224/Mum/02 against ground No.1 of the revenue, this ground is also rejected as we do not see any merit in the action of the Assessing Officer.
12. In the result, appeal is dismissed.
C.O. 458/Mum/2002 (Assessment Year : 1995-96):
13. The assessee has raised the following two grounds "I. The ld. CIT(A) III Mumbai has erred in not accepting the contention of the appellant that there were no reasons before the Assessing Officer for validly initiating reassessment proceedings under section 148 r.w.s. 147 of the Act.
20 ITA No.224/M/02 & 457/M/02(A.Y.94-
95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/M/06(96-97) Allana Sons Ltd.
The appellant submits that the ld. CIT(A) ought to have appreciated that there were no valid reasons before the Assessing Officer for reopening assessment proceedings in question. The reasons mentioned by him in the assessment order are based on incorrect facts and therefore, are not valid reasons.
Without prejudice to the above and only in the alternative it is submitted that the reference made to the assessment proceedings for the AY 1996-97 is not a correct reason, since the additions made in the said order have been deleted by the ld. CIT(A).
It is, therefore, submitted that reassessment proceedings are bad-n-law and Tribunal is requested to pass an order to that effect.
II. The ld. CIT(A) has erred in not directing the Assessing Officer in the matter of charging of interest under section 234B of the Act."
13.1 Ground No.1and 2 are academic in nature as addition made by the Assessing Officer stands deleted. Therefore there is no need to adjudicate ground No.1 and 2. Accordingly C.O. is dismissed.
14. In the result, appeal of the revenue in ITA No.524/M/2000 is partly allowed and in ITA No.224/Mum/2002 and in ITA No.225/Mum/2002 and Cross objections and cross appeals filed by the assessee are dismissed.
Order pronounced in the open court on 19th June 2013.
Sd/- Sd/-
(DR. S.T.M. PAVALAN) (B. RAMAKOTAIAH)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai, Dated: 19th June, 2013.
Jv.
Copy to: The Appellant
The Respondent
The CIT, Concerned, Mumbai
21 ITA No.224/M/02 & 457/M/02(A.Y.94-
95);225/M/02 & 458/M/02(95-96);524/M/00 & C.O.403/M/06(96-97) Allana Sons Ltd.
The CIT(A) Concerned, Mumbai The DR " " Bench True Copy By Order Dy/Asstt. Registrar, ITAT, Mumbai.