Mangalam Fashions 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 No.1712/Kol/2012 Assessment Year: 2004-05

D.C.I.T., Circle-7, Vs. M/s.Mangalam Fashions Ltd. Kolkata Kolkata (Appellant) (Respondent) (PAN:AACCM9294 P)

For the Appellant : Shri P.N.Barnwal, JCIT For the Respondent : Shri Anil Kochar & Shri S.L.Kochar, Advvocate

Date of hearing : 08.04.2015. Date of pronouncement: 29.04.2015. ORDER

Per Shri B.P.Jain, AM :

This appeal of the Revenue arises out of the order of ld.CIT(A)-VIII, Kolkata dated 24.08.2012 for Assessment Year 2004-05.

2. The Revenue has raised the following grounds of appeal :-

"1. That under the facts and circumstances of the case, the Ld.CIT(Appeals)-VIII, Kolkata, erred in quashing the reopening of assessment u/s 147/143(3) and bad in law.

2. That under the facts and circumstances of the case, the Ld. CIT(Appeals)-VIII, Kolkata, erred in allowing interest of Rs.47,72,070 towards business expenditure and erred in allowing deduction of Rs.7,72,357 u/s 24 of the IT Act."

3. The brief facts of the case as regards ground no.1 are that earlier an assessment u/s 143(3) was made on 27.11.2006 determining assessable income at Rs.1,67,41,790/- . A notice u/s 148 of the Income Tax Act was issued on 21.03.2011 and an assessment has been made on 31.12.2011 at Rs.2,22,86,217/- composition of which shows that the AO accepted and adopted the income of Rs.1,67,41,790/- as already determined u/s 143(3) on 27.11.2006 and to this income the A.O. has added Rs.47,72,070/- towards interest and Rs.7,72,357/- u/s 24 of the Act.

2 ITA No.1712/Kol/2012 M/s.Mangalam Fashions Ltd..

A.Yr.2004-05

3.1. Before the Id. CIT(A) the assessee challenged the jurisdiction and initiation of proceedings u/s 148 of the Act. Accordingly he made written submissions which are reproduced at pages 3, 4 and 5 in paras 5.l.2 and 5.l.3 in the order of Id. CIT(A). The Id. CIT(A) after considering the submissions of assesee vide para 5.3..4. of his order considering the proviso to section 147 of the Act and the decision of Hon'ble Supreme Court in the case of CIT vs Kelvinator of India Ltd. (2010) 320 ITR 561 (SC) was of the view that no re-assessment can be done on mere change of opinion. There was no tangible material available with the AO to conclude that there is an escapement of income from assessment. He relied upon the decision of various courts of law and ultimately quashed the assessment so framed u/s 148/143(3) of the Act.

4. We have heard the rival contentions and perused the facts of the case. The undisputed facts of the present case are that proceedings uls 147 of the Act were initiated by issuing notice uls 148 of the act on 21.03.2011 whereas original assessment was made on 27.11.2006 which means more than four years have elapsed since the end of the A.Y.2004-05. The original assessment was framed uls 143(3) of the Act. The first proviso to section 147 of the Act lays down the proposition that where an assessment has been made then no action shall be taken after expiry of four years from the end of the relevant assessment year unless any income chargeable to tax has escaped assessment by reason of failure on the part of the assessee to make a return u/s 139 of the Act or to disclose fully and truly all material facts necessary for the assessment. In the present case the AO has to establish that there is a failure on the part of the assessee as contemplated in the first proviso to section 147 of the Act to disclose fully and truly all material facts necessary for assessment. It is pertinent to mention that AO has accepted the computation of income as already determined in the order uls 143(3) of the Act. While making the original assessment u/s 143(3) of the Act all the documents were with the AO which itself establishes that the assessee had made all the disclosures and all the material facts necessary for assessment were available with the AO in the original assessment. There was no lapse attributed on the part of the assessee for making true and correct disclosure of its income for the impugned year. Initiation of re-assessment proceedings in fact in the present case is 3 ITA No.1712/Kol/2012 M/s.Mangalam Fashions Ltd..

A.Yr.2004-05

merely a change of opinion on the part of the AO and reliance is placed on the decision of the Hon 'ble Supreme Court in the case of CIT vs Kelvinator of India Ltd (supra) where it has been held that re-assessment cannot be done on mere change of opinion. Reliance is also placed on the decision of the Hon'ble Supreme Court in the case of CIT vs Bhanji Lavji 79 ITR 582(SC) and ITO vs Nawab Meer Bhakta Ali 97 ITR 239 (SC). There was no tangible material or any evidence brought on record by the AO to establish that there was non disclosure of any material on the part of the assessee. In the circumstances and facts of the case notice u/s 148 was issued on 21.03.2011 for A.Yr.2004-05 which is beyond four years from the end of A.Yr.2004- 05 in view of the first proviso to section 147, the proceedings u/s 147 of the Act cannot be initiated since there is no failure on the part of the assessee to disclose all material facts necessary for assessment. Accordingly we find no infirmity in the order of the Id. CIT(A), who has rightly quashed the assessment made u/s 147/143(3) of the Act. Thus ground no. 1 of the revenue is dismissed.

5. As regards ground no.2 of the revenue the brief facts of the case are that after acquisition of the property the assessee incurred capital expenditure of Rs.61,91,975/-. Accordingly the deduction of interest was limited to Rs.8,21729/- for the impugned year. The said interest was computed with reference to the amount of loan fund and interest claimed with the cost of expenditure of Rs.61,91,975/- incurred by the assessee. Therefore excess amount of Rs.47,72,070/- was disallowed by the AO.

5.1. The Id. CIT(A) vide para 5.2.1. after considering the submissions of the assessee deleted the same.

6. The Id. DR relied upon the order of AO. The Id. Counsel for the assessee relied upon the submissions made before Id. CIT(A) and the order of Id. CIT(A).

7. We have heard the rival contentions and perused the facts of the case. It is an undisputed fact that the assessee incurred capital expenditure of Rs.61.91.975/- after acquisition of the property. The assessee became the owner of the property and the 4 ITA No.1712/Kol/2012 M/s.Mangalam Fashions Ltd..

A.Yr.2004-05

relevant liability as reflected in the statement of accounts by demerger of erstwhile Wood Park Ltd as per the scheme approved by the Hon'ble High Court of Kolkata. Accordingly it is not a case where one may say that capital expenditure was incurred by the assessee. Similarly the disallowance is considered to be uncalled for as the deduction has been allowed after due consideration of the facts of the case while framing the order u/s 143(3) of the Act and there was no change in the entire set of facts and therefore we find no infirmity in the order of ld. CIT(A), who has rightly deleted the addition. Ground No.2 of the revenue is dismissed.

8. In the result the appeal of the revenue in ITA NO.1712/Kol.2012 is dismissed.

Order pronounced in the court on 29.04.2015 Sd/- Sd/- [ Mahavir Singh ] [B.P.Jain] Judicial Member Accountant Member

Date: 29.04.2015.

R.G.(.P.S.)

Copy of the order forwarded to:

1. M/s.Mangalam Fashions Ltd., 22, Camac Street, Kolkata-700016.

2 D.C.I.T., Circle-7, Kolkata.

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

5. CIT(DR), Kolkata Benches, Kolkata.

True Copy, By order,

Asst. Registrar, ITAT, Kolkata Benches