SALIL TRADING & INVESTMENT COMPANY,MUMBAI vs. ACIT 18(3), MUMBAI

The assessee has raised the following grounds:-

The learned Commissioner of Income-tax (A) erred in not admitting the legal issue raised by way of additional ground challenging the reopening of assessment as bad in law and at the same time also confirming the reopening of the assessment on the ground that the reopening was done in view of decision of Special Bench without appreciating the fact there was no reason to believe that any income has escaped assessment and hence, the reopening of assessment is bad in law, unjustified and liable to be quashed.

The brief facts of the case are that the assessee filed its return of income on 10.10.2007 declaring total income to the tune of Rs.2,53,011/-. The said return was processed u/s.143(1)of the Income Tax Act, 1961 ( in short “the Act”). Subsequently, the assessment was reopened u/s.147 of the ITA No.3635.M.13 A.Y. 2007-08 Act after duly recording the reasons for reopening. Thereafter, notice u/s.148 of the Act was issued on 02.02.2011 and duly served upon the assessee. The assessee filed revised return of income on 04.03.2011 and declared total income to the tune of Rs.80,89,560/-. Thereafter, notices u/s.143(2) and 142(1) of the Act were issued and served upon the assessee. The assessee is a partnership firm having partners Mr. Kishore Musale & Chhaya Kishore Musale. The said firm was engaged in the business of buying, selling and dealing in shares, stocks and securities with or without delivery. The assessee paid interest to the tune of Rs.2,07,89,876/- which was not allowed in accordance with provision u/s.14A of the Act, therefore, an amount of Rs.78,36,545/- was added to the income of the assessee. The assessee challenged the reopening u/s.143(3) r.w.s.147 of the Act and also challenged the addition before CIT(A) who confirmed the order passed by the Assessing Officer, hence the assessee has filed the present appeal before us. The appeal is time barred by 3 days which is allowed as the same was not so long.

Under this issue the assessee has challenged the reopening u/s.148 of the Act. The representative of the assessee nowhere appeared before the court despite service. Therefore, he was proceeded against Ex-parte. No documents of any kind were placed on record to which it can be assumed that the order passed by the Assessing Officer u/s.148 of the Act is wrong against law and facts. Since the assessee did not appear before us and failed to produce any material in support of his contention, therefore, we are of ITA No.3635.M.13 A.Y. 2007-08 the view that the assessee failed to prove this fact that the reopening u/s.148 of the Act is wrong against law and facts. Therefore, in the said circumstances, we upheld the order passed by CIT(A) in question. Accordingly, this issue is decided in favour of the revenue against the assessee.

Under this issue the assessee has challenged the addition to the tune of Rs.78,36,545/- u/s.14A of the Act. The present assessment is for A.Y.2007- 08 to which the provision u/s.14A r.w.Rule 8D of the Act is not directly applicable which has been applied by the Assessing Officer in the instant case. In view of the law settled in Godrej & Boyce Mfg. Co. 328 ITR 81 (Bom), we are of the view that the confirmation of the order of the CIT(A) is not justifiable. Therefore, the order of the CIT(A) is hereby ordered to be set aside and Assessing Officer is hereby directed to re-compute the expenditure incurred to earn the exempt income specifically in view of the law settled in Godrej & Boyce Mfg. Co. 328 ITR 81 (Bom) by giving an opportunity of being heard to the assessee in accordance with law. Accordingly, this issue is decided in favour of the assessee against the revenue