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Income Tax Appellate Tribunal, MUMBAI BENCH “L”, MUMBAI
Before: SHRI B.R. BASKARAN & SHRI PAWAN SINGH
PER PAWAN SINGH, JM: 1. The present appeal filed by the Revenue is directed against the order dated 20.02.2004 of the CIT(A)-33, Mumbai for Assessment Year(AY)
1994-95 on the following grounds of appeal:
1. “In the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that reopening of the assessment for AY. 1994-95 is misconceived and bad in law.
2. In the facts and in the circumstances of the case and in law, the learned CIT(A) erred in cancelling the assessment and thereby allowing the claim of the assessee of broken period interest of Rs. 1,53,89,788/-” The appellant prays that the order of the Ld. CIT(A) on the above grounds set aside and that of the AO restored.
The brief fact of the case are that assessee filed his return of income in respect of AY1994-95, declaring total income of Rs. 89,67,26,090/- on 29.11.1994. The case was selected for scrutiny and after giving proper hearing, the AO determined the total income of assessee of Rs. 96,36,15,820/- vide order dated 28.02.1997.
3. The AO subsequently re-opened the assessment by issuing notice dated 25.05.2001 u/s 148 of the Act on the following reasons:
(i) For applying the provisions of section 14A to the tax exempt income since the provisions were brought on the statute by the Finance Act, 2001 w.r.e.f. 1-4-1962. (ii) For examining the claim for deduction of expenses on expatriate staff. (iii) For considering the allowance of Broken Period Interest on securities sold. (iv) For examining the deduction allowed for interest-tax (v) For examining the allowance on account of entertainment expenses.
It is pertinent to note the assessment had been re-opened after the expiry of four years from the end of the Assessment Year without pointing out that there is failure on the part of the assessee to disclose fully and truly all material facts necessary for computing the total income. Thereafter, the AO completed the re-opened assessment by making various additions.
4. The order of AO was challenged by the assessee before CIT(A), inter alia, challenging the validity of reopening of assessment.
The CIT(A) accepted plea of the assessee with regard to the validity of reopening and accordingly decided the same in favour of the assessee with the following observation:
“I have perused the order passed by the AO and the submissions made by the AR respectively. The assessment was reopened on various counts. However, as per the circular of CBDT one of these did not survive and three were found not to been tenable by the AO himself. Insofar as the broken period interest on securities sold during the year is concerned, considering the history of assessments in the appellants own case the reason recorded by the AO is not tenable at all. The appellants have kept in the paper book filed, relevant extracts of the assessment orders right from the assessment year 1991-92 upto 1997-98 from which it is clear that the broken period interest paid on purchase of securities which remained unsold at the end of the relevant previous year has been disallowed by the AO and allowance has been made for the broken period interest disallowed in the earlier years in respect of securities which were sold during the relevant previous year. Considering the facts of the case, I am firmly of the view that the AO’s contention for reopening the assessment on this ground is misconceived. The AO has not recorded any finding to the effect that there has been any failure on the part of the assessee to fully and truly disclose all material facts in this connection. Therefore, reopening cannot be done beyond the period of four years from the end of the relevant assessment year. The re-opening order passed by the AO is bad in law and is therefore cancelled. ”
Aggrieved by the order of CIT(A) dated 20.02.204, the revenue has filed present appeal.
We have heard the AR of the revenue and AR of the assessee and perused the available on record.
There is no disputed that original assessment of assessee in respect of AY 1994-95 was completed on 28.02.1997, further there no dispute of notice of reopening was issued on 25.05.2001. Thus it can be noticed that the reopening was beyond four years from the end of the assessment year under consideration. We have earlier noticed that the AO has not recorded any finding that there was failure on the part of assessee to disclose fully and truly all material facts in this connection, which is a mandatory condition prescribed in the first proviso to sec. 147 of the Act.
Since the AO has not complied the mandatory condition prescribed in the first proviso to section 147 of the Act, on this count alone the re-opening of assessment is liable to be quashed. Hence we do not find any infirmity in the order passed by Ld CIT(A) on this issue. The ld. AR challenged the validity of re-opening on the following grounds also:
(a) The reasons recorded by the AO does not bear the date and hence it is not known as to whether the AO recorded the reasons at the time of issuing notice. (b) The notice issued by the AO is silent about the disapproval to be obtained from CIT(A) (c) The issue relating to proper period of interest is consistent issue arising every year and hence the same cannot constitute escapement of income.
Since we have upheld the order of Ld CIT(A) on the first ground discussed above, we do not find it necessary to address other grounds urged by Ld A.R.
The ld. DR, however, could not contradictory the factual aspects submitted by ld. AR.
In view of the above, we are of the view that the order of CIT(A), setting aside of the order of the AO by cancelling the reopening, does not require any interference.
In the above circumstances the appeal of the Revenue is dismissed.
C.No. 40/Mum/2005
1.The notice of the appeal No.3555/ Mum/2004 was served upon the assessee on 29.12.2004 and on receipt of the notice the present C.O was filed by the assessee on the following grounds:: 1.The CIT(A) ought to have held that the AO erred in not accepting the respondents claim that the broken period interest paid on securities purchased during the year should be allowed as a deduction in arriving at the business income of the respondents. 2.Without prejudice to (1) above, the CIT(A) ought to have held that the AO erred in disallowing the amount of Rs. 1,53,89,788/- being broken period interest on securities sold during the previous year relevant to the assessment year 1994-95.
2. Since the appeal of the Revenue is dismissed, hence the CO. of the assessee has become infructuous.
In the result, appeal of the Revenue is dismissed and the cross objection of the Assessee has become infructuous and also dismissed.
Order pronounced in the open court on this 9th October, 2015.