TaxTMI 
TaxTMI 
2018 (9) TMI 1749
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....d the question whether the department was entitled to any extension of limitation u/s 153(2A) of the Income Tax Act, 1961. 2. That the learned CIT (A) erred in not annulling/quashing the fresh assessment order dated 12.07.2007 passed in pursuance to the order of the Hon'ble M.P. High Court as the said assessment order is barred by limitation u/s 153(2A) of the Income Tax Act, 1961. That on the facts and in the circumstances of the case, the said assessment order being illegal and bad in law, it is therefore, prayed that the same may very kindly be now annulled/quashed. That the learned CIT(A) also erred in overlooking the fact that in the absence of any stay granted by any court as envisaged under clause (ii) of Explanation 1 to section 153, the period of limitation had to be reckoned from the date of the ITAT order of 11.12.2000. That on the facts and in the circumstances of the case the period of limitation having expired, the assessment order thus barred by limitation is illegal, without jurisdiction and bad in law and hence deserves to be annulled/quashed. 3. Without prejudice to the above, assuming though not admitting, even if the period of limitation is....
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....ls 220(2) from the expiry of 35 days from the date of service of original assessment order and demand notice till the date of fresh assessment order irrespective of the fact that the original assessment order had reached finality post ITAT setting it aside and in absence of any challenge to the contrary. That on the facts and in the circumstances of the case the interest charged u/s 220(2) is not only contrary to the provisions of section 220(2) but also to CBDT Circular No.334 of 03.04.1982 and it is prayed that interest u/s 220(2), if any, be charged in accordance with law. 2. Ground Nos.1 to 3 in the present appeal are related to limitation. These grounds of the assessee's appeal were decided by a separate order dated 24.4.2012, whereby the grounds of the assessee's appeals were rejected. Ground Nos.4 to 6 are against disallowing the claim of depreciation on leased assets i.e. milk cans. 3. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s 143(3) of the Income Tax Act, 1961 (hereinafter called as 'the Act'). In the earlier ground of litigation, matter travelled to the stage of the Hon'ble M.P. High Court....
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....bmitted that an indepth investigation was carried out, thereby it was revealed that entity where found, the assessee's claim to have purchased the asset was not capable of manufacturing such asset. He submitted that assesee instead of rebutting evidences gathered during the enquiry is making an attempt to find an escape route. 6. We have heard the rival submissions, perused the materials available on record and gone through the orders of the authorities below. The Ld. CIT(A) has given his finding of facts which are as under: "4.2 Now coming to the core issue of disallowance of depreciation on lease of milk canes of Rs. 1,08,27,800/-, it is to be stated at the very beginning itself that the enquiry conducted by AO in course of assessment proceedings and subsequent detailed enquiry conducted by this office, by which the appellant was confronted by detailed and specific show cause letter dated 24.8.2011, as has been extracted in para 3 above, have conclusively established beyond any doubt that no purchases of milk canes what so ever were made by the appellant company from Shri Mukesh Pantangiya. The appellant in response to such specific show cause notice issued, which is ....
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....ts and withdrawals in bank and other accounts were at the behest of the said Shri S.K. Bandi who had done it all by misusing and abusing the corporate personality of the appellant assessee, which is an instrumentality and a creation of Shri S.K. Bandi for his own vicious tax planning directly hit by the Apex Court judgement in the case of McDowel & Co. Ltd. Vs. CTO (1985) 154 ITR 148 (SC) and (iv) Depreciation on the assets viz. the milk cans as claimed by the appellant @ 100% of the alleged cost which has been refused by the A.O. is quite in order, the said assets having never been acquired nor therefore, owned and used by the appellant company for its business; and 4.2.1 Before concluding it would be further appropriate to extract observations made by Hon'ble High Court of M.P. in this behalf in para 18 of its order: "What was more a matter of serious concern was the forged and bogus claims made by assessee in claiming depreciation. All these claims on a detailed inquiry made by Director of Investigation at Bombay exposed the assessee in indulging in evading payment of tax. The assessee was given full opportunity to defend. They did avail of full op....
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.....4.1 Now coming to second part of claim being 20% of deferred revenue expenses of Rs. 42,52,163/-, the same are claimed to be incurred in the preceding financial year relevant to Assessment year 1995-96. Such a claim cannot be entertained both in facts and in law, during the year under consideration as the fact whether such expenses were genuinely incurred were never examined in the relevant assessment year and looking to the state of affairs of the appellant company in absence of proper scrutiny and examination of such claim of expenses in the relevant assessment year, such claim cannot be accepted in the present assessment year, more so when such claim was not pressed for deduction for 1/5th of expenses in the previous assessment year. The appellant apart from furnishing break up of expenses has failed to establish admissibility of 20% of such expenses during the year under consideration, as in the then prevailing position of law the concept of deferred revenue expenses was not recognised. The claim has to be examined in view of the law as applicable in the relevant assessment year and on that count such claim fails and is accordingly second part of ground no.4 is hereby dismisse....
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.... Rs.1,26,85,592/- Less: Depreciation to the extent allowed Rs. 6,58,815/- Net assessed income Rs.1,20,26,777/- R/O Rs.1,20,26,800/- From the above it is clear that in the assessment, only two disallowances were made. a) Disallowance u/s 35D Rs. 5,57,761/- b) Depreciation on milk canes Rs.1,08,27,800/- The above two disallowances were in dispute before the Appellate Authority apart from other claims raised by the assessee company at appeal stage. The above two disallowances were set aside by the ITAT, vide Para 31,32,33 & 35 of ITAT's order dated 11/12/2000 and only other hand annulled the assessment for want of valid service of notice u/s. 143(2). Thus, it is clear that entire assessment has been set aside and was restored to the file of AO for reconsideration 4) Against the said order of the IT AT and aggrieved by annulment of assessment, the department preferred appeal u/s 260A of the IT Act before the Hon'ble High Court of MP, Indore Bench, Indore. It is important to note that the department did not challenge the order of the IT AT setting aside the assessment on merits ....
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....e/ revisional authority and the cancellation/setting aside becomes final (i.e., it is not varied as a result of further appeals I revisions), no interest under s. 220(2) can be charged pursuant to the original demand notice. The necessary corollary of this position will be that even when the assessment is reframed, interest can be charged only after the expiry of 35 days from the date of service of demand notice pursuant to such fresh assessment order. ii) Where the assessment made originally by the ITO is either varied or even set aside by one appellate authority but, on further appeal, the original order of the ITO is restored either in part or wholly, the interest payable under s. 220(2) will be computed with reference to the due date reckoned from the original deemed notice and with reference to the tax finally determined,. The fact that during an intervening period, there was no tax payable by the assessee under any operative order would make no difference to this position. The forgoing legal position will apply mutatis mutandis to the proceedings under other direct taxes also. These instructions may be brought to the notice of all the officers worki....
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....at page No.676 to 689 of Paper book compilation -II). Considering the above submissions it is prayed that interest u/s 220(2) may kindly be deleted." 13. On the contrary, Ld. D.R. opposed the submissions. 14. The contention of the assessee is that the original assessment order was set aside by the ITAT with direction to make fresh assessment. It is further stated that the interest is charged only in respect of the demand raised as per the fresh assessment order. In support of this, Ld. Counsel for the assessee had relied upon the decision of the coordinate bench of M/s. Narad Investment & Trading Pvt. Ltd. Vs. DCIT and also the CBDT circular No.334 dated 3.4.1982. 15. We find merit in the contention of the Ld. Counsel for the assessee. In view of the CBDT circular No.334 dated 3.4.1982 and the decision of the coordinate bench in the case of M/s. Narad Investment & Trading Pvt. Ltd. Vs. DCIT, we direct the assessing officer to charge interest from the date when fresh assessment is made. This ground of the assessee's appeal is allowed. 16. Ground No.9 is general in nature and needs no separate adjudication. 17. In the result, appeal of the assessee is partly a....
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....nnot be allowed then naturally the corresponding income which was never in existence could not be brought to tax, if done so, in a way it would amount to rather admission on the part of the department that such transaction was a real transaction which is not the case of AO in any manner. Considering the aforesaid the Learned CIT (A) had correctly reduced the Lease Rent Income ofRs.20,57,142/- offered in the P & L account on leasing of such bogus claim of acquisition of milk cans 2. Regarding Ground No. 2 for deleting the addition of Rs. 8,88,593/- In this respect we would like to mention that the company during that year took on lease office premises at Mumbai w.e.f from 01/04/95 and paid rent of Rs. 5,41,6501- which has been capitalized, since the office premises were being furnished. Brokerage of Rs. 1,04,3701- was paid to Shri Sanjay Ahuja for getting the premises on rent. Since the company was already in business during the year, the said expenses are allowable as regular business expenses. In this respect we may submit that the Calcutta High Court in the case of CIT V /S Orient Beverage Ltd. reported in 203 ITR 553 held that brokerage expenses for ge....
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....assessed. Considering the above the Ld. CIT (A) has correctly directed to allow deduction ofRs.8,88,593/- from income assessed. 3. Regarding Ground No.3 for excluding Merchant Banking income of Rs. 27 Lacs :- The appellant had claimed exclusion of merchant banking fees of Rs. 27,00,0001- which was wrongly credited under the head income from merchant banking fee receivable from Mis Alaska Capital Market Pvt Ltd towards marketing of public issue of Mis Vikas Spinning & Weaving Mills Ltd. An MOU was entered into between the appellant company and MIs Alaska Capital Market Pvt Ltd on 20.09.1995. such MOV was conditional and was effective only if Public issue of MIs Vikas Spinning & Weaving Mills Ltd is opened before 31. 03 .l996 otherwise it will be terminated and the appellant will have no rights and/or obligations.Public issue of Rs. 48.50 lacs equity shares of Rs.l 0/- each of MIs Vikas Spinning & Weaving Mills Ltd. Was opened on 11.06.l996 i.e. much after 31.03.1996. After opening of the issue, it was under subscribed and only 74% of the issue was validly subscribed. The MP Stock Exchange and SEBI vide their letters dated 27.07.1996 and 05.08.1996 directed....
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....ces on record and could not he validly brought to tax merely on the basis of accounting entry as has been held by Hon 'ble Supreme court in the case of Bokaro Steel, Godhra Electricity Co. Ltd. and Shoorji Vallabhdas & Co ... (Supra) as noted above and Ld. CIT(A) accor.lingly directed the AO to exclude the Merchant banking income at Rs. 27 lacs from the total income assessed by him. It is, therefore, prayed that the above submission may kindly be taken on record and present Departmental Appeal may kindly be dismissed." 20. Ground No.1 is related to deleting the lease rent income of Rs. 20,57,148/-. 21. We have heard the rival submissions, perused the materials available on record and gone through the orders of the authorities below. After considering the totality of the facts and materials placed before us, we do not find any infirmity in the order passed by the Ld. CIT(A) as the assessing officer itself has considered the lease transaction as bogus and disallowed the depreciation. Under these facts, the revenue cannot now claim that the assessee has earned income from lease rent. This ground of the revenue's appeal is dismissed. 22. Ground No.2 is against del....
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....aid amount in the year in which it was credited or in the subsequent years and thus it is emphasized that there being no such real income and such income should not be brought to tax and reliance have been placed on celebrated decisions of the Hon'ble Supreme Couirt in this behalf as noted hereunder: a) CIT Vs. Bokaro Steel Ltd. (1999) 236 ITR 315 (SC) b) Godhra Electricity Co. Ltd. Vs. CIT (1997) 225 ITR 746 (SC) c) CIT Vs. Shoorji Vallabhadas & Co. (1962) 46 ITR 144 (SC) 4.5.2 It has already been noticed above that the appellant resorted to dubious accounting procedure and resorted to disclose highly inflated income by pressing a non genuine claim of lease rent of bogus purchases of milk cans on which a bogus claim of depreciation at Rs. 1.08 crores was pressed making abuse of provisions of 100% depreciation of assets valuing less than Rs. 5000/- each. Further even the genuine claim of deduction for business expenses at Rs. 8.8 lacs were capitalized to do so to show higher profitability. The said income from Merchant banking offered at Rs. 27 lakhs, as emerges from the facts on record was not real income accrued. The A.O. while banking on t....