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Maanraj Trading Private Limited Poonam Chambers, 101E, 1st Floor, Dr. A. B. Road, Worli, Mumbai-400 018 Vs. Dy. CIT, Circle 6(3), Aayakar Bhavan, M. K. Road, New Marine Lines, Mumbai-400 020
June, 04th 2014
                     ""                           
      IN THE INCOME TAX APPELLATE TRIBUNAL "I" BENCH, MUMBAI

       .   ,                                   . . .. ,                                   
BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI DR. S. T. M. PAVALAN, JM

                      ./I.T.A. No. 3388/Mum/2009
                    (   / Assessment Year: 1998-99)
 Maanraj Trading Private Limited     Dy. CIT, Circle 6(3),
                           st
 Poonam Chambers, 101E, 1 Floor, / Aayakar Bhavan,
 Dr. A. B. Road, Worli,          Vs. M. K. Road, New Marine Lines,
 Mumbai-400 018                      Mumbai-400 020
      . /  . /PAN/GIR No. AAACM 0150 E
          ( /Appellant)                         :             (     / Respondent)

          / Appellant by                        :     Shri Percy Pardiwalla

            /Respondent by                      :     Smt. S. Padmaja, DR

                          /                     :     02.06.2014
                    Date of Hearing
                       /
                                                :     02.06.2014
            Date of Pronouncement

                                       / O R D E R

 PER D. KARUNAKARA RAO, AM:

        This is an appeal by the assessee against the order of the CIT(A)-XXVI, Mumbai
 dated 17.02.2009. The assessee raised various grounds on an additional ground in the
 appeal. One of the grounds raised by the assessee relates to the validity of the
 reassessment passed u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961. It is the legal
 contention of the assessee that the reassessment, which is made beyond the period of four
 years when there is no defect of disclosure from the assessee's side, is not valid.

 2.     In the regard, at the very outset, the Ld. Counsel for the assessee mentioned before
 us that the assessment made u/s.143(3) of the Act on 29.03.2001 was reopened on
                                             2
                                                        ITA No. 3388/Mum/2009 (A.Y. 1998-99)
                                                     Maanraj Trading Private Limited vs. Dy. CIT

31.03.2005 for three reasons and the said reasons are placed at page 12 of the paper book.
The Ld. Counsel brought out each of the three reasons and mentioned that the said
reasons are not sustainable legally for the following reasons. The assessment is reopened
either on the basis of the information already furnished by the assessee along with the
return of income or during the regular assessment proceedings, or there is no escapement
of income considering the similarity of tax rates (reason 2). Further, it is the submission
of the Ld. Counsel that the Assessing Officer (A.O.) attended to this issue during the
regular assessment proceedings and completed assessment u/s. 143(3) without making
any additions. Referring to each of the issues recorded in the reasons, the Ld. Counsel
brought our attention to the first issue relating to the application of the provision of
section 2(22)(e) of the Act to the sum of Rs.22.63 crores. In this regard, referring to the
said reason, the Ld. Counsel mentioned that the A.O. relied/referred to the Form 3CD
report, which was filed by the assessee along with the return of income. It was available
to the A.O. at the time of regular assessment. The Ld. Counsel mentioned that necessary
opinion was found by the A.O. on the applicability of the provision of section 2(22)(e) of
the Act to the said sum and opined against making addition. In this regard, the Ld.
Counsel brought our attention to the entries about the shareholding of the Director's on
the sister concerns and the details on substantial interest therein. The Ld. Counsel brought
our attention to pages 52 and 54 of the paper book (point no. 1 and point no. 9) to support
the same. A.O. did not make addition only after examining the applicability of the said
provision relating to the deemed dividend to the said sum. Further, taking us through the
orders of the A.O., the Ld. Counsel mentioned that there is no extraneous or tangible
material gathered by the A.O. which worked as a "live wire" for facilitating reopening of
the assessment validly. Considering the above, the Ld. Counsel mentioned that it is the
case of "change of opinion" and there is no failure on part of the assessee to disclose any
material/or facts necessary for making assessment in the return of income or in the
regular assessment. Therefore on this reasoning, the first issue relating to section 2(22)(e)
of the Act is misconceived. Therefore, it is the prayer of the assessee's counsel that the
reassessment made on this issue should be dismissed.



                                          3
                                                        ITA No. 3388/Mum/2009 (A.Y. 1998-99)
                                                     Maanraj Trading Private Limited vs. Dy. CIT

3.     On the other hand, Smt. S. Padmaja, the ld. CIT-DR for the Revenue relied
heavily on the reassessment order of the A.O. and the ld. CIT(A) and mentioned that the
reassessment should be upheld. She relied on the Allahabad High Court judgment in the
case of EMA India Ltd. vs. ACIT [2009] 226 CTR 659 (All) for the preposition that valid
reassessment made by the A.O. is valid when there is no application of mind by the A.O.
during the making of the regular assessment.

4.     We have heard both the parties on this issue and perused the orders of the Revenue
Authorities and the material placed before us. After assimilating the above referred facts
and arguments, we find that the arguments made out by the Ld. Counsel deserve merit on
this issue. It is undisputed fact that the material/or documents filed by the assessee is the
source of information for reopening by the A.O. on this issue relating to the provisions of
section 2(22)(e) of the Act. There is no tangible material gathered by the A.O. which
worked as a live wire for the A.O. to assume jurisdiction validly. We also find that the
A.O. already enquired into this issue during the making of the regular assessment.
Therefore, in our opinion, the reassessment made by the A.O. on the reasons recorded
invoking the provisions of section 2(22)(e) of the Act cannot be upheld. This part of the
ground is allowed.

5.     Reasoning no. 2 relates to the chargeability of the gains on sale of shares/units on
proper head of income. It is the case of the assessee that the assessee amalgamated four
of the concerns, who earned short term capital gains and offered the same under the head
`Capital Gains'. Per contra, it is the case of the A.O. that the said gains should be taxed
under the head `Business Income'. There is no dispute on the fact that the said gains are
short term capital gains and they are earned on the sale of shares/units. During the
proceedings before us, at the very outset, the Ld. Counsel brought our attention to page
no. 23 of the paper book and mentioned that the assessee reported the short term capital
gains of Rs.3,90,155/-. Further, he brought our attention to the copy of the reassessment
order and read out the "note" of the A.O. left on page 11 of the assessment order and the
same reads as under:
                                              4
                                                         ITA No. 3388/Mum/2009 (A.Y. 1998-99)
                                                      Maanraj Trading Private Limited vs. Dy. CIT

       "Note: As discussed in para (8) above, the Short Term Capital Gain
       received by the assessee amounting to Rs.3,90,155/- is treated as "Business
       Income". However, the same will not have any impact on the tax payable
       as well as in computation of total income."

       Reading the above, the Ld. Counsel mentions that the said amount even if taxed
under the head "Business Income", there is no tax implication, and therefore, there is no
tax yielding - concealment of income. There is no dispute on the fact that there is no
concealment of income on this account.

6.     The ld. DR has so special argument to make on this issue except relying on the
orders of the Revenue Authorities.

7.     On hearing both the parties and perusing the facts placed before us and after
perusing the above mentioned "note" of the A.O., we are of the opinion that no
concealment of income is made on this ground. Therefore, we affirm the argument of the
Ld. Counsel and dismiss the reassessment made by the A.O. on this account.




8.     The third reason given by the A.O. for reassessment relates to the capital nature
of the sum of Rs.1 lac paid by the assessee to M/s. S. V. Ghatalia & Associates. It is the
case of the Revenue that the said amount is a capital in nature as the expenditure is
incurred by the assessee for amalgamation of work. Mentioning that this issue is also a
subject matter of enquiry by the A.O. during the regular assessment proceedings, the Ld.
Counsel brought our attention to page 54 (point no. 4) as well as page 57 of the paper
book, containing the details of expenses vide Annexure 1 and mentioned that the said
details were available as disclosed by the assessee to the A.O. and the assessment was
completed without making addition on this account after examining the relevant details.
There is no defect of disclosure on this issue also on part of the assessee. Therefore, the
proviso to section 147 of the Act has no application. On perusal of the said pages, which
is a reply letter filed by the assessee to the A.O. vide his reply dated Nil, we find the issue
was the subject matter of enquiry during the regular assessment proceedings. Hence,
there is no reason for the A.O. to reexamine the same under the provision of section 147
                                             5
                                                      ITA No. 3388/Mum/2009 (A.Y. 1998-99)
                                                   Maanraj Trading Private Limited vs. Dy. CIT

of the Act. Therefore, the reassessment order made by the A.O. on this issue is not
sustainable. We also find the decision relied upon by the ld. DR from the judgment of the
Allahabad High Court does not relate to the provision of section 147 of the Act.
Therefore, the same is distinguishable on facts.

9.     Considering the above, we are of the opinion that the legal issue raised by the
assessee relating to the validity of the reassessment is decided in favour of the assessee.
Therefore, the adjudication of the other issues raised by the assessee becomes an
academic exercise. Therefore, the said grounds are dismissed as academic.

10.    In the result, the assessee's is partly allowed
                   

                  Order pronounced in the open court on 2nd June, 2014

               Sd/-                                       Sd/-
       (Dr. S. T. M. Pavalan)                       (D. Karunakara Rao)
          / Judicial Member                           / Accountant Member
  Mumbai;  Dated : 02.06.2014

. ../Roshani, Sr. PS
         /Copy of the Order forwarded to :
1.  / The Appellant
2.  / The Respondent
3.      () / The CIT(A)
4.       / CIT - concerned
5.                ,     ,  / DR, ITAT, Mumbai
6.      / Guard File
                                                     / BY ORDER,



                                              /  (Dy./Asstt. Registrar)
                                          ,   / ITAT, Mumbai

 
 
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