Abhasree Projects Ltd., Kolkata vs Department Of Income Tax

IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH: KOLKATA

[Before Hon'ble Shri Mahavir Singh, JM & Hon'ble Shri B.P.Jain, AM ]

I.T.A Nos.606 & 607/Kol/2009 Assessment Years: 2001-02 & 2002-03

I.T.O., Ward-12(3) Vs. M/s.Abhasree Projects Ltd. Kolkata Kolkata (Appellant) (Respondent) (PAN:AACCA 2641 L)

For the Appellant : Shri Dilip Kumar Rakshit, Sr.DR,JCIT For the Respondent : None

Date of hearing : 07.04.2015. Date of pronouncement: 20.04.2015. ORDER

Per Shri B.P.Jain, AM :

These two appeals of the Revenue arise from two different orders of ld.CIT(A)- XXXII, Kolkata for Assessment Years 2001-02 and 2002-03 each dated 20.01.2009.

2. Identical grounds have been taken in both the appeals which are reproduced herein below :

"Whether on the facts and in the circumstances of the case, Ld.CIT(A) was correct in treating the receipt of service charges as 'Income from Other Sources' without appreciating the detailed discussion in the assessment order."

3. Since the issue involved in both the appeals is identical we therefore take up the appeal for A.Yr.2001-02 in ITA No.606/Kol/2009 first and order herein below shall be identically applicable to ITA No.607/Kol/2009 for A.Yr.2002-03.

4. In the Revenue's appeal in ITA No.606/Kol/2007 the brief facts of the case are that the assessee purchased shares for Rs.10,09,33,553/- and sold the same for Rs.9,98,56,042/- incurring a loss of Rs.10,77,411/-. AO was of the view that the loss arising out of the sale transaction is a speculation loss by virtue of explanation to Section 73 of the Act and shall not be allowed. The assessee was required by the AO 2 ITA Nos.606&607/Kol/2009 M/s Abhasree Projects Ltd.

A.Yrs.2001-02 & 2002-03

to explain why loss arising out of purchase and sale of shares should not be treated as speculation loss by virtue of explanation to section 73 of the Act. It was stated by the assessee that gross total income of the assessee consists of only income from other sources aggregating Rs.23,09,444/- higher than the negative business income of Rs.12,19,634/- and accordingly the provision of explanation to section 73 does not apply to the assessee company. AO did not accept the explanation of the assessee and applied the provisions to explanation to section 73 of the Act and added Rs.10,77,411/- to the income of the assessee for setting off the same against the speculation profit, if any, in future. The AO while disallowing observed that the main activity of the assessee company during the year was buying and selling of shares and business service charges from which it is clear that assessee's service charges are nothing but business activity of the assessee company which is to be assessed as business income by referring to the Memorandum and Articles of Association which shows that the main object of the company is to acquire property and lease the same for business purpose which again shows the business activity charges which would fall under the income from other sources as business of the assessee company.

5. The ld. CIT(A) following the doctrine of consistency vide para 6.4.of his order reversed the order of AO and directed the AO to assess the service charges received by the assessee under the head 'income from other sources' as claimed by the assessee and further held that from the order for A.Yr.1996-97 and 1998-99 u/s 143(3) of the Act in assessee's own case the receipt of service charges has been accepted as income from other sources by the department and accordingly in the impugned year the income from other sources has been higher than the business income the explanation to section 73 of the A ct is not applicable to the assessee's case for the impugned year. The ld. CIT(A) relied upon the decision of the Hon'ble Bombay High Court in the case of Baijnath Brijmohan and Sons (P) Ltd 161 ITR 234 and the decision of the Hon'ble Supreme Court in the case of Berger paints India Ltd. vs CIT 266 ITR 98 (SC) and the decision of Hon'ble Calcutta High Court in the case of Hindustan Motors Ltd. 192 ITR 619.

3 ITA Nos.606&607/Kol/2009 M/s Abhasree Projects Ltd.

A.Yrs.2001-02 & 2002-03

6. The ld. Departmental Representative relied upon the order of AO. None appeared on behalf of the assessee.

7. We have heard the ld. DR and perused the materials available on record. The undisputed fact in the present case are that assessment of the assessee has been made u/s 143(3) of the Act for A.Yr. 1996-97 and 1998-99 where the receipt of service charges by the assessee has been treated as income from other sources and in A.Yr.1996-97 the AO had examined the applicability of explanation to section 73 of the Act which was found not applicable in assessee's own case and therefore the facts of the present case are identical to the facts in assessee's own for A.Yr.1996-97 and thereafter upto A.Yr.1998-99 which has been assessed u/s 143(3) of the Act. In the present case the facts are all identical and the revenue has not brought on record any fresh facts before any of the authorities below or also before us. The revision of the decision in the subsequent year i.e. in the impugned year than A.Yr.1996-97 to 1998- 99 will not lead injustice to the parties and therefore to avoid injustice, in the absence of any fresh facts the principle of res judicata has to be applied in the present facts and circumstances of the case. The Hon'ble Bombay High Court in the case of Baijnath Brijmohan and Sons (P)Ltd (supra) has observed as under :-

"In H. A. Shah & Co. v, CIT/EPT [1 956] 30 ITR 618, a Division Bench of this court comprising, Chagla C. J. and Tendolkar J., was called upon to examine the question whether the principle of res judicata was applicable to income tax authorities. It has been held by the Division Bench that as a general rule, the principle of res judicata is not applicable to decisions of income tax authorities. An assessment for a particular year is final and conclusive between the parties only in relation to that year and the decision given in an assessment for an earlier year is not binding either on the assessee or the Department in a subsequent year. But this rule is subject to limitations, for there should be a finality and certainty in all litigations including litigation arising out of the Income tax Act, and an earlier decision on "the same question cannot be reopened if that decision is not arbitrary or perverse, if it had been arrived at after due inquiry, if no fresh facts were placed before the Tribunal giving the later decision and if the Tribunal giving the earlier decision has taken into consideratjon all material evidence. There is also a further limitation, namely that the effect of revising a decision in a subsequent year should not lead to injustice and the court must always be anxious to avoid injustice to the assessee· We must make it clear that in order to preclude the.. income tax authorities from changing their stand,' the prejudice likely to be' caused thereby should be such that an advantage which the assessee could have got, if the income tax authorities had taken the stand taken in the relevant assessment year right from the beginning, should be lost to the assessee. In the present case, it is clear that there is no such prejudice caused to the 4 ITA Nos.606&607/Kol/2009 M/s Abhasree Projects Ltd.

A.Yrs.2001-02 & 2002-03 assessee and hence even if it was open to the assessee to take up the contention as set out above, that contention must be rejected."

7.1. The Hon'ble Calcutta High Court in the case of Hindustan Motors Ltd. (supra) has held as under :

"It should also be noted in this connection that the agreements were all entered into long before the relevant accounting periods. The royalty has been paid since 1971-72. Payments have been allowed for all these years up to the assessment year 1975-76 as revenue expenditure without any dispute. It is for the first time in the course of the assessment year 1976-77 that the Income tax Officer took the stand that these expenditures are not allowable. It was contended on behalf of the Department that there was no rej judicata in income tax matters. It is true that there is no res judicata but there must be some substantial ground for one Income tax Officer to differ from the view taken by another income tax Officer in an earlier assessment year.

In that view of the matter, question No.1 must be answered in the affirmative and in favour of the assessee. Therefore, the question raised in R.A.No.683/(Cal) of 1984 which is also a common question in all the assessment years of this case is answered in the affirmative and in favour of the assessee."

7.2. In the facts and circumstances of the case though in general principle of res judicata is not applicable to income tax authorities but if there are no fresh facts placed before any of the authorities below or before us then after considering all the material available on record and the decision taken earlier by the AO for A.Yr.1996- 97 and 1998-99 and in the circumstances and facts of the case we find no infirmity in the order of ld. CIT(A), who has rightly deleted the addition so made by the AO. The sole ground of the revenue in this appeal is dismissed.

7.3. We are now taking ITA No.607/Kol/2009 for A.Yr. 2002-03. Since the facts in the present appeal are identical with the facts in revenue's appeal in ITA No.606/Kol/2009 as observed earlier, accordingly our order in ITA No.606/Kol/2009 herein above is identically applicable in the present facts and circumstances of the case. Aaccordingly the appeal of the Revenue in ITA No.607/Kol/2009 is also dismissed.

5 ITA Nos.606&607/Kol/2009 M/s Abhasree Projects Ltd.

A.Yrs.2001-02 & 2002-03

8. In the result both the appeals of the revenue in ITA No.606/Kol/2009 and ITA No.607/Kol/2009 are dismissed.

Order pronounced in the court on 20.04.2015.

Sd/- Sd/- [ Mahavir Singh ] [B.P.Jain] Judicial Member Accountant Member

Date: 20.04.2015.

R.G.(.P.S.)

Copy of the order forwarded to:

1. M/s.Abhasree Projects Ltd., 11/1, Sarat Bose Road, Kolkata-700020.

2 I.T.O., Ward-12(3), Kolkata.

3. CIT(A)- XXXII, Kolkata. 4. CIT- Kolkata

CIT(DR), Kolkata Benches, Kolkata.

True Copy, By order,

Asst. Registrar, ITAT, Kolkata Benches