ORCHID HOLDINGS PRIVATE LIMITED,CHENNAI vs. DCIT, CHENNAI

आयकर अपील�य अ�धकरण, ‘‘सी’’ �यायपीठ, चे�नई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI �ी ए. मोहन अलंकामणी, लेखा सद�य एवं �ी धु�वु� आर.एल रे�डी, �या�यक सद�य के सम� Before Shri A. Mohan Alankamony, Accountant Member & Shri Duvvuru RL Reddy, Judicial Member अपील सं./I.T.A.No.684/Mds/2017 �नधा�रण वष�/Assessment Year:2011-12 M/s. Orchid Holdings Pvt. Ltd. [Now The Deputy Commissioner of Vs. known as Orchid Healthcare Pvt. Ltd.] Income Tax, No. 1, 6th Floor, Crown Court, New No. Corporate Circle 5(1), 128 (Old No. 34), Cathedral Road, Chennai 34. Chennai 600 086. [PAN:AAACO0399K] (अपीलाथ� /Appellant) (��यथ�/Respondent) आयकर अपील सं./I.T.A.No.683/Mds/2017 �नधा�रण वष�/Assessment Year:2012-13 M/s. Orchid Health Care Pvt. The Deputy Commissioner of Ltd.[Formerly known as M/s. Orchid Income Tax, Vs. Holdings (P) Ltd.], No. 1, 6th Floor, Corporate Circle 5(1), Crown Court, New No. 128 (Old No. Chennai 34. 34), Cathedral Road, Chennai 600 086. [PAN:AAACO0399K] (अपीलाथ� /Appellant) (��यथ�/Respondent) अपीलाथ� क� ओर से / Appellant by : Shri B. Ramakrishnan, C.A. ��यथ� क� ओर से/Respondent by : Shri A.V. Sreekanth, JCIT सुनवाई क� तार�ख/ Date of hearing : 03.04.2017 घोषणा क� तार�ख /Date of Pronouncement : 23.06.2017 आदेश /O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER:

Both the appeals filed by same assessee group are directed against different orders of the ld. Commissioner of Income Tax (Appeals) 3, Chennai both dated 31.01.2017 relevant to the assessment years 2011-12 and 2012- 13. We shall take up the appeal for the assessment year 2011-12. I.T.A. No. 684/Mds/2017

2.1 Brief facts of the case are that the assessee has filed its return of income on 30.09.2011 declaring a loss of ₹.3,04,85,863/-. On perusal of the records, the Assessing Officer has noticed that the assessee has income from dividend, interest and capital gain and found that the assessee has credited the same in the Profit and Loss account and has claimed various expenses like interest and other expenditure to the extent of ₹.3,04,85,863/- as business loss thereby becoming eligible to carry forward the same for subsequent years. Since the assessee was not doing any business, the Assessing Officer was of the opinion that the assessee was not eligible to claim the expenses in relation to the business and business loss shall not be allowed to be carried forward. Since there is an escapement of income, notice under section 148 of the Act was issued on 17.03.2016 and the assessee vide its reply date 19.03.2016 requested to treat the original return of income filed on 30.09.2011 as return of income filed in response to notice under section 148 of the Act. Notice under section 143(2) r.w.s. 129 of the Act dated 15.09.2016 was issued to the assessee. Vide letter dated 15.09.2016, the reasons for reopening were also given to the assessee and was requested to appear with all the supporting documents in favour of its claim. Since none appeared on behalf of the assessee, the Assessing Officer has finalized the assessment under section 144 r.w.s. 147 of the Act on 18.11.2016 by assessing total income of the assessee at ₹.1,39,05,988/- after making various disallowances.

2.2 The assessee carried the matter in appeal before the ld. CIT(A) and raised various grounds including reopening of assessment under section 147 of the Act. After considering the submissions of the assessee and facts of the case, the ld. CIT(A) dismissed the appeal filed by the assessee.

2.3 On being aggrieved, the assessee is in appeal before the Tribunal and challenged reopening of assessment as well as confirmation of disallowances. With regard to reopening of assessment under section 147 of the Act, the ld. Counsel for the assessee has submitted that the assessee has filed all details before the Assessing Officer and no new material is available with the Assessing Officer for reopening of assessment under section 147 of the Act. He further argued that various expenses accounted in the Profit and Loss account were disallowed and brought to tax and therefore, he argued that the reopening of assessment is bad in law in the absence of any new materials brought on record. On merits, he argued that the assessee was not given sufficient opportunities to file all the details before the Assessing Officer for verification, therefore, the Assessing Officer has concluded the assessment under section 144 of the Act and prayed that the assessee may be given one more opportunity of being heard to file all the details before the Assessing Officer to decide the disallowances afresh.

2.4 On the other hand, the ld. DR strongly supported the orders of authorities below.

2.5 We have heard both sides, perused the materials available on record and gone through the orders of authorities below. In this case, by recording reasons and communicating the same to the assessee, assessment was completed under section 144 r.w.s. 147 of the Act since there was no response from assessee’s side except to treat the original return filed as return of income filed in response to the notice under section 148 of the Act. It is an admitted fact that the assessee has not contested the reasons recorded for reopening of assessment before the Assessing Officer. The assessee has not responded to the notice under section 143(2) r.w.s. 129 of the Act. The ld. CIT(A) has observed that the original assessment was completed under section 143(1) of the Act. He further opined that the Assessing Officer had tangible material on the basis of which reasons to believe have been formed by the Assessing Officer, which was not contested by the assessee before the Assessing Officer, the ld. CIT(A) has held that the Assessing Officer has rightly assumed jurisdiction and reopened the assessment by following the decision in the case of DCIT & Another v. Zuari Estate Development and Investment Co. Ltd. 370 ITR 661. Thus, we find no reason to interfere with the order passed by the ld. CIT(A) on this issue and accordingly, the ground raised by the assessee is dismissed.

I.T.A. No. 683/Mds/2017

4.1 The Assessing Officer has noticed during the course of assessment proceedings that the assessee has received exempted income of ₹.1,10,99,331/- in the form of dividend in respect of investment made. The investment balance as on 01.04.2011 was ₹.77,08,99,140/- and as on 31.03.2012 it was ₹.77,12,01,919/-. From the financial statement, the Assessing Officer has noticed that the assessee has paid interest charges and claimed expenses in its profit and loss account. Therefore, the Assessing Officer was of the opinion that the assessee could not have earned exempt income from the said investments without incurring any expenditure. Accordingly, by applying the provisions of Rule 8D, the Assessing Officer has worked out the expenditure component for earning exempt income to the extent of ₹.4,19,38,494/- and disallowed the same.

4.2 The assessee carried the matter in appeal before the ld. CIT(A). After considering the submissions of the assessee and by following various decisions the ld. CIT(A) restricted the disallowance under section 14A r.w. Rule 8D to the extent of dividend income earned by the assessee. Against the order of the ld. CIT(A), the assessee is in appeal before the Tribunal.

4.3 We have heard the rival contentions. Against the exempt income of ₹.1,10,99,331/-, by applying the provisions of Rule 8D, the Assessing Officer determined the expenditure component for earning exempt income to the extent of ₹.4,19,38,494/- and disallowed the same. By following the decision of the Hon’ble Jurisdictional High Court in the case of Redington (India) Ltd. v. Addl. CIT 77 taxmann.com 257 as well as decision of the Tribunal in the case of Rayalla Corporation (P) Ltd. v. DCIT dated 16.10.2015 for the assessment year 2011-12, the ld. CIT(A) has rightly restricted the disallowance to the extent of exempt income earned by the assessee. Therefore, we find no infirmity in the order passed by the ld. CIT(A) on this issue and accordingly, the ground raised by the assessee is dismissed.

Order pronounced on the 23rd June, 2017 at Chennai.