MAHAMERU TRADING CO. P. LTD MUMBAI vs ITO WD 5(2)(3) MUMBAI

आयकर आयकर आयकर आयकर अपीलीय अपीलीय अपीलीय अपीलीय अिधकरण अिधकरण अिधकरण अिधकरण, मुंबई मुंबई मुंबई मुंबई IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES ‘B’ MUMBAI सवौी आय.पी. बंसल, याियक सदःय एवं एवं एवं एवं ौी संजय अरोड़ा, लेखा सदःय के सम । BEFORE SHRI I.P.

BANSAL, JUDICIAL MEMBER /AND SHRI SANJAY ARORA, ACCOUNTANT MEMBER ITA NO.6236/MUM/2011, A.Y.

2004-05 M/s.Mahameru Trading Co. (P) Ltd.

394C, Lamington Chambers, Lamington Road, Mumbai 400 004 PAN AAACM 7131M (Appellant ) Vs.

The Income Tax Officer Ward 5(2)(3), Mumbai. (Respondent) Appellant by : Shri Rakesh Joshi Respondent by : Shri Mourya Pratap Date of hearing : 08/07/2014 Date of pronouncement : 08/07/2014 ORDER PER I.P.BANSAL, J.M, This is an appeal filed by the assessee and it is directed against the order passed by Ld.

CIT(A)-9, Mumbai dated 12/7/2011 for assessment year 2004-05.

Grounds of appeal read as under: 1) On the facts and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in reopening the assessment u/s 147 after 4 year and without recording proper reasons for reopening.

2) On the facts and circumstances of the case as welt as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in not allowing the unabsorbed business toss of Rs.

71,44,340/- to be set off and carry forward to the subsequent year without considering the facts and circumstances of the case.

3) On the facts and circumstances of the case as well, as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in not ITA NO.6236/MUM/2011, A.Y.

2004-05 2 allowing the unabsorbed business loss of Rs.

71,44,340/- to be set off and carry forward to the subsequent year without appreciating the fact that the loss belongs to A Y 1999-2000, 2001-2001 & 2001-02 and returns for these years were filed on time and accepted by the department.

2. rtment.

2.

Revised grounds of appeal of the assessee read as under: “1) On the facts and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in reopening the assessment u/s 147 after 4 years without considering the facts and circumstances of the case.

2) On the facts and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in not allowing to carry forward current year as well as brought forward business Loss to the subsequent years without considering the facts and circumstances of the case.” 3.

While arguing the appeal, it was submitted by Ld.

AR that Ld.

CIT(A) has committed an error in upholding the validity of the reassessment order.

He submitted that the reasons for which the assessment proceedings were reopened do not contain any income which is made subject matter to taxation in the re- assessment order.

He invited our attention to the reasons, copy of which is placed at page 1 of the paper book and which read as under: “The assessee filed its Return of Income on 30/10/2004 declaring a total loss of Rs.13,345/- after claiming an exemption of Rs.9,46,200/- on the dividend income earned during the year.

The return was processed u/s.

143(1) of the Act on 12/01/2005. accepting the returned loss.

It is seen from the return filed by the assessee that during the assessee has received Rs.9,46,200/- as dividend which is shown as income in the P&L Account and claimed as exempt in the computation of income the assessee has debited Rs.13,345/- as business expenses and claimed as loss from business and carried forward the same to the next year.

It is also seen that on page 12 coloumn 15 under the head Nature of business or Profession the assessee has declared its business as “Trading in shares and securities”. curities”.

Since the assessee has admittedly carrying on business of trading in shares and securities the dividend received of Rs.9,46,200/- cannot be claimed as exempt under the head Business/profession.

Hence, the dividend earned of Rs.9,46,200/- on which the assessee has wrongly claimed exemption is to be withdrawn and the amount of Rs.9,46,200/- should be brought to tax under the head income from Business/Profession.

ITA NO.6236/MUM/2011, A.Y.

2004-05 3 In view of the above, I have reason to believe that income of Rs.9,46,200/- has escaped assessment and needs to be brought to tax.” 3.1 Referring to aforementioned reasons it was submitted by him that assessment was reopened for the reason that income of Rs.9,46,200/- has escaped the assessment.

He submitted that the said amount represent dividend income which is exempted under section 10(34) of the Income Tax Ac 1961 ( the Act) He submitted that the following computation of income has been made by the AO in the reassessment order.

I.

Income from Business: Net Profit as per P&L A/c.

Rs.

9,32,855 Less Dividend income (exempt) Rs.

9,46,200 (-) Rs.

13,345 Add: Disallowance u/s.14A as discussed Rs.

13,345 Gross Total Income Nil Total Income Nil 3.2 Referring to above computation he submitted that there was no escapement of income with respect to a sum of Rs.9,46,200/- as the same has been held to be exempted by the AO and to that extent there was no escapement of income.

Ld.

AR has relied upon decision of Hon’ble Bombay High Court in the case of CIT vs.

Jet Airways (India) Ltd., 331 ITR 231, in which it has been held that AO may assess or re-assess the income in respect of any issue which comes to his notice subsequently in the course of proceedings though the reasons for such issues were not included in the notice; however, if after issuing a notice under section 148 of the Income Tax Act, 1961, the AO accepted the contention of the assessee and holds that the income on which he has initially formed a reason to beli on to believe had escaped assessment, as a matter of fact not escaped assessment, it is not open to him independently to assess some other income.

2004-05 4 3.3 Thus, it was pleaded by Ld.

AR that reassessment proceedings should be held invalid.

4.

On the other hand, Ld.

DR relied upon the order passed by Ld.

CIT(A), vide which it has been held that reassessment proceedings have rightly been carried out.

5.

We have heard both the parties and their contentions have carefully been considered.

From the conjoint reading of the reasons and computation made in the reassessment order, it is clear that the income on which the AO has initially formed a reason to believe that it had escaped assessment did not as a matter of fact escaped assessment.

Therefore, the case of the assessee will squarely fall within the ambit of aforementioned decision of Hon’ble Bombay High Court i.e. in the case of Jet Airways (India) Ltd. (supra).

Following the said decision we hold that reassessment proceedings in the present case are not valid.

Therefore, the impugned assessment is invalid and is quashed.

6.

Since we have held that reassessment proceedings are not valid and assessment order is quashed, we need not to go into the merits of the other issues which have also been raised in the present appeal.

With these observations we allow the appeal filed by the assessee.

7.

In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open court on 08/07/2014 आदेश क" घोषणा खुले यायालय म% &दनांकः 08/07/2014 को क" गई । Sd/- Sd/- (संजय अरोड़ा /SANJAY ARORA ) (आय.पी. बंसल / I.P.

BANSAL) लेखा सदःय / ACCOUNTANT MEMBER याियक सदःय / JUDICIAL MEMBER मुंबई Mumbai; &दनांक Dated 08/07/2014 ITA NO.6236/MUM/2011, A.Y.

2004-05 5 आदेश आदेश आदेश आदेश क" क" क" क" ूितिल,प ूितिल,प ूितिल,प ूितिल,प अमे,षत अमे,षत अमे,षत अमे,षत/Copy of the Order forwarded to : 1. अपीलाथ/ / The Appellant 2. ू0यथ/ / The Respondent.

3. आयकर आयु1(अपील) / The CIT(A)- 4. आयकर आयु1 / CIT 5.

1 / CIT 5. ,वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai 6. गाड फाईल / Guard file. आदेशानुसार आदेशानुसार/ BY ORDER, स0या,पत ूित //True Copy// उप उप उप उप/सहायक सहायक सहायक सहायक पंजीकार पंजीकार पंजीकार पंजीकार (Dy./Asstt.

Registrar) आयकर आयकर आयकर आयकर अपीलीय अपीलीय अपीलीय अपीलीय अिधकरण अिधकरण अिधकरण अिधकरण, मुंबई / ITAT, Mumbai व.िन.स./Vm, Sr.

PS