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Income Tax Appellate Tribunal, “C”, BENCH MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH, JM
O R D E R PER R.C.SHARMA (A.M): These are the cross appeals filed by the revenue and assessee against the order of CIT(A), Mumbai, for the assessment years 2005-06 to 2010-2011, in the matter of order passed u/s.143(3) of the I.T.Act.
2 & ITA Nos.1895&1921/13 2. First we shall take up the appeals filed by the revenue i.e.ITA Nos.2027 to 2032/M/2013, wherein the common grievance taken by the revenue is as under :- “On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in directing to accept the revised return without considering the fact that the return in response to notice u/s.153A was not filed within the prescribed time limit.”
The appellant craves leave to add, to amend and/or to alter any of the grounds of appeal
, if need be.
3. The appellant, therefore, prays that on the grounds stated above, the order of the CIT(A)-37, Mumbai, may be set aside and that of the Assessing Officer restored.
3. Facts and circumstances in all the years under consideration are pari materia, therefore, all the appeals were heard together and now decided by this consolidated order for the sake of convenience and brevity. Rival contentions have been heard and record perused. Facts in brief are that a search and seizure action u/s. 132 and survey action u/s. 33A of the I.T.Act, 1961 was carried out on 21.08.2009 in the case of the assessee alongwith other associated persons and companies of M/s. Twinkle Group. For the assessment year 2005-06, the assessee filed his original return of income on 25-10-2005 declaring total income of Rs.51,64,770/-. In response to notice u/s.153A, the appellant filed his return of income on 11.03.2011 declaring total income at Rs.51,64,770/- being the same as shown in the return of income filed u/s.139(1). The assessment u/s.143(3) r.w.s.153A of the Act was completed on 29.12.2011 determining taxable income at Rs.90,14,720/-.
3 & ITA Nos.1895&1921/13 4. Before the CIT(A) the assessee has raised a ground regarding AO’s action in not taking cognizance of revised return of income filed in response to notice u/s.153A. By the impugned order the CIT(A) directed the AO to accept the revised return after having the following observations :- “4.7.6 On perusal of the long list of events narrated by the ld. AR impinging upon the legality of the revised block return filed by him for various assessment years, I find that ultimately Ld.A.O. added the some amount of Rs.31,21,712/- as per the revised statement of the appellant dt.19.12.2011 vide para 8.4 of the assessment order. Ld. A.O. has further held in para 8.4 of the assessment order that the so called revised return filed on 19.12.2011 was not valid as the return filed u/s.153A were belated. However, he has only taken cognizance of the confirmation of the additional income, in the said revised return/statement. 4.7.7. On perusal of the provisions of sec.153A of the I.T. Act it is seen that there is no prescription for not granting extension of time for filing of return but there is also no provision for granting any such extension. Similarly, there is no provision regarding revising or not revising of Block return filed u/s.153A. 4.7.8 At this stage, it may be worthwhile to see what can be revised by referring to sec.139(5). Though this section is not being invoked, the principles remain the same. 4.7.9 In order to enable the assessee to furnish a revised return under section 139(5), one of the three conditions to be satisfied is whether the assessee had discovered any omission or any wrong statement in the original return. There are three ingredients in it: They are "discovers" ,"any omission" and "any wrong statement". The meaning given to the term "Discover" in the Oxford English Dictionary is the finding out or bringing to light that which was previously unknown”. Vol. 3 page 433). The literal meaning of the term “discovers‟ is to uncover that which was hidden, concealed or unknown from everyone, to get first sight or knowledge of, to get knowledge of what has existed but has been not known to the discoverer. In Addl. CIT v. Radhey Shyam [1979] 1 Taxman 29 (All), it was held that the word "omission" connotes an unintentional act or neglect to perform what the law requires. However, the meaning and scope of word "discovers" have been earlier explained by the Hon'ble Supreme Court in India United Ml1Is Ltd. v . CEPT (1955) 27 ITR 20 in the context of section 15 of the EPT Act 1940 (which is equivalent to section 34 of the IT Act, 1922 and relates to issuance of notice for reassessment) where it held that 'Tt will therefore be correct to say 4 & ITA Nos.1895&1921/13 that when a person comes to know of a fact of which he had no previous knowledge he discovers that fact, whether his want of knowledge is due to its not having been in existence during the material period, or to its having been unknown to him, even though it might have been inexistence. The word thus being one of wide import, what meaning it bears in any particular enactment must depend on the context. Thus, apparently a discovery of a fact can be made later on, irrespective of whether the "fact in question" was in existence earlier or came in existence later? Though the expression "discover" has been explained in the context of reopening of an EPT assessment and it gives a right to the department to tax the item which was discovered by it subsequent to filing of original return by the assessee, yet we feel that there is no reason to restrict its meaning to "uncovering of facts already in existence at the time of filing of original return". Section 15 of the EPT Act or section 34 of the IT Act, 1922 or section 147 of the IT Act, 1961 gives power to the department to tax profit or income that has escaped assessment and which came to the knowledge of the Department subsequently. It can take into consideration all the facts and events that were in existence at the time of recording of the reasons for issuance of notice and which have a bearing on taxability of income. The issuance of a notice to tax escaped income cannot be confined to the facts in existence at the time of making original assessment. The AO has to consider facts which came into existence after making of original assessment till the issuance of notice. 4.7.10 Hon'ble Apex Court further held that: "If section 34 of the IT Act, 1922 or section 147 of the IT Act, 1961 gives power to the AO to tax escaped income then section 139 gives right to the assessee to improve upon his return if conditions laid down therein are satisfied The scope or effect of "discovery" cannot, therefore, be confined to the facts in existence at the time of filing original return. The equity also demands that Department and the taxpayers should be placed at par, so far as right to declare or right to tax the escaped income is concerned. If Department can take assistance of facts which subsequently came into existence, then taxpayer can also revise his income on the basis of subsequent events. 4.7.11 The proposition, that when a revised return is filed by the assessee, the original return is totally substituted and the revised return alone has to be taken into consideration in completing the assessment, is generally acceptable. The view, that the revised return obliterates the earlier return, has been taken in Chief CIT (Admn.) v. Machine Tool Corpn. of India Ltd. [1993] 67 Taxman 363 (Kar.), CITv. Arun Textile „C‟ [1991] 192 ITR 700 (Guj.) & CIT v. Mangolore Chemicals & Fertilisers Ltd. [1991] 58 Taxman 508 (Kar.). 4.7.12 It is also to be seen that we have to keep the principles of real Income in mind while seeing the legality of revised return filed by the 5 & ITA Nos.1895&1921/13 appellant. In general, the concept of real income can be invoked under the circumstances where technically income has accrued .bur really no income has been or could have been received by the assessee. The Hon‟ble Apex Court had considered the concept of real income in the State Bank of Travancore v. CIT [1986] 158 ITR 1021 24 Taxman 337 (SC) and summed up the propositions as under: ( i) it is the income which has really accrued or arisen to the assessee that is taxable, ( ii) even though there may be a surrender of income, which in theory may have accrued, but if no income has resulted in reality, such hypothetical income cannot be taxed, ( iii) in case of a diversion of income at source under any statute or by overriding title there would no income to the assessee, ( iv) the conduct of the parties in treating the income in a particular manner is material evidence to check whether real income has accrued to the assessee or not, (v) a liability to tax can arise only when there is a legal right to receive. 4.7.13 Even in the case of M/s.Goetze (I) Ltd. vs. CIT 157 Taxman - 1(SC), it has been held that an assessee can amend return filed by him for making a claim of deduction only by filing of revised return. Ld.A.O. having accepted the figures incorporated in the revised return cannot now turn back and say that revised return so filed was invalid, specifically when it was filed before the conclusion of the assessment proceedings u/s.153A of the Act. In any case, there is no quarrel on the quantum of the addition made and the sum offered by the appellant in his revised return of income. In effect, revised return filed by the appellant and the figures accepted by the Ld. AO in the assessment order being the same, the revised return should be treated as a valid return in view of the decision in the case of M/s.Goetze (I) Ltd (supra). Accordingly, ground Nos.3 & 4 are allowed.”
Against the above order of CIT(A), the revenue is in appeals before us.
We have considered rival contentions, carefully gone through the orders of the authorities below and found from the record that during the course of search assessee had surrendered certain amount for the entire period covered by the search with a liberty to change the composition of income amongst the years covered by the search. In response to notice u/s.153A, the assessee filed revised return, offering the income which what has been surrendered during the course of search. The AO has 6 & ITA Nos.1895&1921/13 accepted the revised income shown in the return, but held that revised return was not valid. The CIT(A) after following the decision of Hon’ble Supreme Court in the case of M/s.Goetze (I) Ltd(supra), held that the AO having accepted the figures incorporated in the revised return cannot now turn back and say that revised return so filed was invalid, specifically when it was filed before the conclusion of the assessment proceedings u/s.153A of the Act. Since there is no quarrel on the quantum of the addition made and the sum offered by the assessee in his revised return of income filed by the assessee and the figures accepted by the AO in the assessment order being the same, we do not find any infirmity in the order of CIT(A) for treating the revised return as valid return.
As the facts and circumstances in all the years under consideration are same, following the reasoning given hereinabove, the appeals filed by the revenue for all the years under consideration are dismissed.
In the result, appeals of the revenue are dismissed.
Now, we shall take up the appeals filed by the assessee i.e. ITA Nos.1895&1921/Mum/2013.
Both these appeals filed by the assessee are against the order of CIT(A) for assessment year 2008-09 & 2010-2011, wherein the common grievance of the assessee in both these appeals is for disallowance made by the AO and confirmed by the CIT(A) u/s.14A r.w.Rule 8D of Rs.3,68,367/- in A.Y.2008-09 and Rs.19,81,776/- in the A.Y.2010-2011.
We have considered rival contentions and found that the issue under consideration is covered by the order of the Tribunal in the case of 7 & ITA Nos.1895&1921/13 group concern of assessee i.e. M/s Twinkle Enviro Tech. Ltd., passed in ITA Nos.2099 to 2104/Mum/2013 and other connected appeals, vide order dated 15-6-2015. The precise observation of the Tribunal was as under :- “11. We have gone through the orders of the authorities below and found that as per the audited balancesheet, the assessee has made substantial investment in group concern as a strategic investment. As per the decision of coordinate bench, strategic investment are required to be excluded from total investment while working out disallowance under Rule 8D. The precise observation of the Tribunal in case of M/s Smart Chip Ltd. (supra) was as under :- “6. We have considered the rival contentions, carefully perused the record, gone through the orders of authorities below and the judicial pronouncement referred by the lower authorities as well as ld. Representatives of both the parties during the course of hearing before us. From the record we found that the Assessee has made investment in group company which was 100% subsidiary of the Assessee. The investment was made as strategic investment for the purpose of business wherein the sole intention was to carryout the business purpose of the Assessee-company. With regard to the disallowance of interest, the ld. CIT(A) has recorded the categorical findings to the effect that the investment was made by the assessee from its own fund and not from any borrowed funds. By refereeing Annexure 'A' filed by the assessee, the ld. CIT(A), observed that after verifying the bank statement as placed on record, the entire fund was so invested was out of the Assessee's own fund. The reliance was placed on the decision of jurisdictional High Court in the case of Commissioner of Income-tax v. Reliance Utilities and Power Ltd.. [2009] 178 TAXMAN 135 (BOM.) to the effect that the presumption for investment will be that the Assessee company has made the investment out of its own fund rather than borrowed fund. Findings so recorded by the ld. CIT(A) was not controverted by the revenue by placing any substantial evidence. Hence, we do not find any infirmity in the order of ld. CIT(A) in deleting the disallowance of Rs.33,90,461/-made by the AO on account of interest expenditure by applying the provisions of section 14A of the Act r.w.r.8D of the Rules.” In view of the above, ground taken by the assessee in all the years for computing disallowance under rule 8D is restored back to the file of AO with a direction to recompute the same by excluding strategic investment made in the group concerns which is Rs.11.30 crores in the A.Y.2009-10, Rs.26.44 crores for A.Y.2008-09 and Rs.11.30 crores in A.Y.2010-11, respectively. We direct accordingly.”
As the facts and circumstances during the year under consideration are same, respectfully following the order of the Tribunal in its group cases, we direct the AO to recompute the disallowance made u/s.14A r.w.Rule 8D in both the years under consideration by following the direction of Tribunal given hereinabove.
Accordingly, the both appeals of the assessee are allowed for statistical purposes. 14. In the result, appeals of the revenue are dismissed, whereas appeals of the assessee are allowed for statistical purposes. Order pronounced in the open court on this 23/12/2015.