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Order Under Section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. These two appeal by assessee under section 253 of the Income-tax Act (the Act) are directed against the order of ld. CIT(A)-13, Mumbai dated M 16 & 2546 M 13- Prajatma Trading Co. Pvt. Ltd. 14.01.2013 and ld. CIT-7, Mumbai dated 29.11.2011 respectively for the Assessment Year (AY) 2006-07. 2. First we are taking the appeal . The assessee has raised the following grounds of appeal.
1 Order U/sec 263 : 1.1. The Hon'ble Commissioner of Income tax-7, (for brevity "The CIT-7") erred in law, on facts and under the circumstances of the case, in invoking and passing an order dated 29/03/2011 under Section 263 of the Income tax Act 1961 on the ground that the order U/sec 143(3) dated 11/12/2008 passed by the Dy.C.I.T. Cir.7(1) ,Mumbai (for brevity' A.O.'), is "erroneous and prejudicial" to the interest of revenue" as the appellant had not carried out any business during the year and therefore erred in allowing business expenses and losses against income from other sources and capital gain. 1.2. The said Notice U/sec 263 of the Act, is void and without any jurisdiction as provided in clause ( c) to the Explanation 1 to Sec 263 as an appeal against the order passed U/sec 143(3) was pending before the Hon'ble ITA Tribunal and the said CIT-7 issued Notice U/sec 263 on 01/02/2011 ,i.e., after receipt of order of Hon'ble C.I.T.(Appeals) dated 09/06/2010. 1.3. Without Prejudice, the said order U / sec 263 is to be set aside as the said A.O. had elaborately considered the facts, documents and assessment order of preceding assessment years while passing his order U / sec 143(3) and after application of his mind taken a view to allow the business expenditure and allowed to set-off business losses during the year against capital gain income. The said CIT-7 erred in misinterpreting the decision of Supreme Court in the case of Malabar Industrial Co. Ltd. V/s CIT 243 ITR 83 wherein it was held that when two views are possible then it cannot be called an order prejudicial to the Revenue.
The perusal of Form 36 reveals that the impugned order was passed by ld.
CIT-7 on 29.03.2011 and the appeal was filed on 27.12.2006. The appeal is apparently barred by 2033 days of period of prescribed period of limitation.
In support of application for condonation of delay, the assessee has filed an affidavit of Mr. Vinay Kumar Agarwal, Director of the assessee-company.
In the affidavit, the assessee contended that assessment order u/s 143(3) was passed on 11.12.2008. Aggrieved by the addition in the assessment order M 16 & 2546 M 13- Prajatma Trading Co. Pvt. Ltd. dated 11.12.2008, the assessee filed appeal before the ld. CIT(A) and the same was dismissed vide order dated 09.06.2010. Further, aggrieved, the assessee filed appeal before the ITAT on 10.11.2010 in ITA No. 7725/Mum/2010. Subsequently, the assessment order was revised by ld. CIT vide order dated 29.03.2011. The ld. CIT while setting-aside the order passed u/s 143(3) dated 11.12.2008 directed the Assessing Officer (AO) to pass the assessment order afresh. The assessee has not filed any appeal immediately on passing the order dated 29.03.2011 on the good faith and belief that order u/s 263 is merely direction to the AO. Further, assessment order u/s 143(3) r.w.s. 263 was passed on 31.10.2011. Against the order dated 30.10.2011, the assessee filed appeal before the ld. CIT(A) and the same was dismissed on 28.012.2012. And that the assessee has already filed appeal before the Tribunal in ITA No. 2546/Mum/2013 (listed along with this appeal). The assessee further pleaded that on 07.11.2016 when the appeal ITA No. 2546/Mum/2013 was listed on 07.11.2016, the Member of this Bench asked the assessee as to why the appeal against the order passed u/s 263 dated 29.03. 2011. The ld. AR of the assessee explained the reason of not filing under the bonafide. The deponent further contended that the Member of this Bench directed them to file appeal and to pray for condonation of delay. Thus the appeal is filed along with the condonation of delay. M 16 & 2546 M 13- Prajatma Trading Co. Pvt. Ltd.
We have heard the ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the Revenue on the application for condonation of delay and perused the material available on record. The ld. AR of the assessee argued on the similar line as contended in the affidavit.
On the other hand, the ld. DR for the Revenue strongly objected the grounds taken in the application for condonation of delay. The ld. DR for the Revenue argued that the assessee has made a baseless deposition in the affidavit about the direction of the Member of this Bench. The ld. DR for the Revenue argued that there is inordinate delay of 2033 days in filing the appeal against the order u/s 263. The assessee is a Corporate entity associated with corporate groups, have been represented by professionally qualified representative before various authorities during the assessment, first appellate stage as well as before the Tribunal. The assessee cannot claim the ignorance of the provisions of law and take the limitation issue so casually. In support of this submission, the ld. AR of the assessee relied upon the decision of Hon’ble Apex Court in case of Esha Bhattachargee vs. Managing Committee of Raghunathpur Nafar Accademy (2013 5 CTC 547.
In addition to the submission, the ld. DR for the Revenue filed written synopsis opposing the application of condonation of delay.
We have considered the rival submission of the parties and perused the material available on record. We have further perused the order-sheet dated M 16 & 2546 M 13- Prajatma Trading Co. Pvt. Ltd. 07.11.2016 in ITA No.2546/M2013. The perusal of order-sheet in ITA No. 2546/Mum/2013 reveals that this appeal was listed before this combination (consisting of both ld. Accountant Member and Judicial Member). The order-sheet further reveals that the assessee requested for adjournment and the matter was simply adjourned for 20.02.2017. The contention deposed in the affidavit is contrary to the record. Even otherwise, the Bench has no business to advise or direct the parties to or not to file appeal against particular order. The assessee has not disclosed any reason except mentioning of genuine belief and their impression that order u/s 263 is merely a direction. In our considered view, the assessee has not explained sufficiently the cause of delay in filing the present appeal. The assessee failed to explain as to why the assessee was prevented in filing the appeal within period of limitation. Moreover, the contentions regarding the advice of Member are baseless.
No doubt that there should be a liberal, pragmatic, justice oriented approach while dealing with the application for condonation of delay. The sufficient cause for condonation of delay must be understood in a proper spirit and philosophy and the purpose behind the legislative intend. The concept of liberal approach must be weigh with the conception of reasonableness and should not be allowed as a total unfettered free play. The parties seeking contention of delay must show bonafidies and reasonableness with the ITA No.7597 M 16 & 2546 M 13- Prajatma Trading Co. Pvt. Ltd. ground of condonation of delay. The parties should not adopt unreasonable and totally unfettered free play while seeking the condonation of delay. In our view, the assessee failed to explain the cause of condonation of delay, the reasons disclosed by the assessee is not plausible one. Hence, the application for condonation of delay by the assessee is dismissed. In the result, appeal of the assessee is not admitted and thus, dismissed being time barred.
In the result, appeal of the assessee is dismissed.
The assessee has raised the following grounds of appeal:
1. The Commissioner of Income tax (Appeals) 13, Mumbai, (Hereinafter referred to as ld. CIT A") has erred in law, on facts and in the circumstances of the case in not setting aside the Assessment order dt. 31.10.2011 passed under Section 143(3) r.w.s 263 (the said order") of the Income Tax Act 1961 (Hereinafter referred to as "The Act") by the Deputy Commissioner of Income Tax 7(1),6th Floor, Aayakar Bhavan, M K Road, Mumbai-400020 (Hereinafter referred to as lithe A.O.").
2. The “CIT A" has erred in law, on facts and in the circumstances of the case in not setting aside the said order being beyond jurisdiction since based on change of opinion of the Ld CIT-7 and followed by the Ld A.O., and even the provisions of Section 263 of the Act was wrongly invoked and initiation of the proceedings under the said section is void ab-initio. 3. The “CIT A" has erred in law, on facts and in the circumstances of the case in accepting the grounds for initiation of the proceedings under Section 263 of the Act, as while passing Assessment order u/s 143(3) dt 11.12.2008 all the facts and law had been considered by the A.O., hence such proceedings for reopening was bad in law and void ab-initio. WITHOUT PREJUDICE: 4. The “CIT A" has erred in law, on facts and in the circumstances of the case in concluding and confirming that the appellant since not carried out business during the year, thereby disallowing all the expenses, not allowing adjustment of brought forward losses, ignoring the fact of the preceding years wherein the department had assessed the income under the head "Profits or gains from Business or profession". 5. The “CIT A" has erred in law, on facts and in the circumstances of the case in not considering business loss of Rs.11,01,65,651 before adjusting the Capital 6 M 16 & 2546 M 13- Prajatma Trading Co. Pvt. Ltd.
gains of Rs.2,17,30,800/- as assessed by his predecessor A.O., vide Assessment order u/s 143(3) dt 11.12.2008 and assessing income under the head Capital Gains and Income from other sources.
6. The “CIT A" has erred in law, on facts and in the circumstances of the case in assessing income from Dividend as Income from Other source instead of business income, as done the in preceding and succeeding assessments.
7. The "CIT A" erred in law, on facts and under the circumstances of the case, in accepting the conclusion by the A.O., that no business activities were carried out during the year and thereby disallowing loss of Rs.11,01,65,651 as arrived by the predecessor A.O., vide his order u/s 143(3) dt 11.12.2008.
8. The "CIT A" erred in law, on facts and under the circumstances of the case, in accepting A.O.,' s assessment of various incomes under the head 'Income from other sources' than Income from business as was originally done in the Assessment order u/s 143(3) dt 11.12.2008.
The "CIT A" erred in law, on facts and under the circumstances of the case in accepting the conclusion of the A.O., that all the loans and advances given by the appellant were not for business of the appellant on the one hand and states that the assessee company is a Loan company and is also engaged in Trade and investments in goods and securities for which the funds are utilized.
10. The appellate crave leave to add, alter, modify or submit, re submit afresh any or all the grounds of appeal
or any supporting evidences or as may be required in connection with the grounds herein of appeal on or before hearing of the same.
9. Brief facts of the case are that the filed return of income for relevant AY on 31.10.20107 declaring total loss of Rs. 23,60,12,399/-. The assessment was completed on 11.12.2008 assessing Net loss of Rs. 8,74,66,576/-.
Subsequently, the assessment was revised by ld. CIT vide order dated 29.03.2011. The ld. CIT while passing order under section 263 held that the AO had not considered the issue of “head of income” under which the income was offered by assessee for assessment. In pursuance of direction of ld. CIT u/s 263 of the Act. The AO passed order u/s 143(3) r.w.s. 263 of the Act ( due to typing mistake mentioned u/s. 254). The AO assessed the interest income of Rs. 66,222/-, commitment charges of Rs. 3,31,695/- and dividend income of Rs. 2,17,30,800/- under the head “Income from Other M 16 & 2546 M 13- Prajatma Trading Co. Pvt. Ltd. Sources”. As there was no business income during the year, thus, the assessee’s claim for setting off of brought forward Business Loss, speculation loss was not allowed by AO. On appeal before the ld. CIT(A) the action of AO was sustained. Thus, further aggrieved by the order of ld. CIT (A) the assessee filed the present appeal before us.
We have heard the ld. AR of the assessee and ld. DR for the Revenue and perused the material available on record. The ld. AR of the assessee submitted that Ground No.1 to 3 relates to the order u/s 263 of the Act and cannot be raised in the present appeal and thus, these ground of appeal
are not pressed. Further, Grounds No. 4 to 6 are general and needs no specific adjudication. Considering the contention of ld. AR of the assessee, Grounds No. 1 to 6 is dismissed.
11. Ground No. 7, 8 & 9 relates to disallowance of loss as no business activity is carried out by the assessee during the relevant AY. The ld. AR of the assessee argued that the order u/s 143(3) was completed on 11.12.2008 assessing business loss of Rs. 11,01,65,651/- before setting-aside of Long Term Capital Gain as against the business loss of Rs. 13,46,68,476/-. The AO disallowed interest expenditure of Rs. 2,35,30,715/- out of total interest expenditure claim of Rs. 15,05,69,831/- following the order for preceding year i.e. AY 2005-06, the assessee filed appeal before the ld. CIT(A) against the order. The ld. CIT(A) confirmed the original assessment order u/s ITA No.7597 M 16 & 2546 M 13- Prajatma Trading Co. Pvt. Ltd. 143(3) vide order dated 09.06.2010. Further, aggrieved, the assessee filed appeal before the Tribunal vide ITA No. 7725/Mum/2010. The appeal of the assessee was decided by Tribunal by order dated 04.03.2016 and all the issue raised in the appeal is restored back to the file of AO with the direction to decided afresh. It was argued the ld. CIT revised the order passed under section 143(3) holding it the prejudicial to the interest of Revenue as no business was carried out during the AY 2006-07 and entire interest expenditure of Rs. 15,05,69,831/- was ordered to be disallowed. It was further argued that the assessee is a Non-banking Finance Company and was also carrying business of share trading, speculation and finance. There was a temporary lull in the share trading business due to market condition which does not tantamount to closing the business of share trading. The mere fact that the assessee not engaged due to bad market condition cannot be treated as there was no business activity. On the other hand the ld DR for the revenue supported the order of the authorities below. It was further argued that there is no evidence of business activities of the assessee for the year under consideration.
12. We have considered the rival submissions of the parties and have gone through the orders of the authorities below. We have seen that the disallowance of expenditure and the disallowance of loss were restored back to the file of AO in assessee’s appeal for the year under consideration.