TMI Blog2013 (9) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer for re-opening the assessment are not in conformity with the principles laid down by the Courts. Merely because the assessee had some difficulties in filing of return of income, it cannot be said that the notice issued under section 148, is bad-in-law. The interest income itself is more than Rs. 60,00,000 and the assessee also had income from capital gains – Decided against the Assessee. Date of acquisition for nature of capital gain – Held that:- Date of acquisition should be as per the contract notes for the reasons that the Assessing Officer has taken the cost of acquisition of shares based on these very contract notes - One part of the contract note cannot be accepted and the other part rejected – Decided in favor of Assessee. Interest u/s 234A, 234B, 234C of the Income Tax Act - Assessee is a notified person under the Special Court (Trial of Offences relating to Transactions in Securities) Act, 1992 – Held that:- All its assets including bank accounts were attached and vested in the hands of the Custodian appointed under the said Act. From the date of functioning of the Court i.e., 1.6.1992, the distribution of monies in case of notified person will be decided by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied her with details which were required for drawing the books of account and filing her return. She, therefore, it was submitted, was neither able to complete her books nor file her return. The submission made before the Assessing Officer has been reproduced on Page-1 to 6 of the assessment order. The Assessing Officer then issued a detailed questionnaire under section 142(1) asking the appellant to file details in particular format. The requisition made by the A.O. under section 142(1) has been reproduced from Pages-7 to 10 of the assessment order. The A.O. then called for information from the custodian who refused referring to Spl Courts order to the effect that the custodian was not an agent of the notified persons and was therefore, not bound to comply with the information called for under section 133(6) of the Act. It was communicated to the A.O. that the details called for should be obtained from the notified persons only. The A.O. therefore, had no option but to complete the assessment under section 144 of the Act. The A.O. obtained a copy of the bank statement for current account no.I-305 with the State Bank of Mysore. The A.O. found that the total credit in the bank acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t declared by the appellant at Rs. 1,63,23,106. 5. The learned CIT(A) has erred in law and in facts in confirming the disallowance of interest expenditure amounting to Rs. 44,94,771. 6. The learned CIT(A) has erred in law and in facts in confirming the addition made on account of unexplained credit entries in the bank account amounting to Rs. 2,76,745." 4. Before us, learned Counsel, Mr. Vijay Mehta, appearing on behalf of the assessee, submits that grounds no.1 and 2, are general in nature and require no separate argument. 5. On ground no.3, learned Counsel took this Bench through the reasons of re-opening, which are at Pages-88 and 89 of assessee's paper book and submits that the re-opening is bad-in-law. According to him, the assessee being a family member of Harshad Mehta, it does not mean that the assessee has income which has escaped assessment. Secondly, possession of large quantity of securities, according to him, also does not call for any re-opening, as holding of large quantity of securities does not necessarily mean that the assessee has income, which has escaped assessment. Thirdly, learned Counsel submits that the assessments cannot be re-opened merely because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were attached by the custodian and, hence, the assessee is not in a position to carry out any business; (ii) interest payable as well as receivable are the subject matter of dispute before the Special Court. He submits that existence of business of a notified entity is accepted by the Assessing Officer in the assessment order dated 17th November 2008, for assessment year 2004-05. He also submits that in the case of sister concern, the Tribunal has, on earlier circumstances, accepted existence of business. It is further argued that the interest liability existed even prior to notification and the claim of expenses made by the assessee for assessment year 1990-91 was allowed. He further submits that even as per the provisions of Special Courts Act, and the order in application no.155 of 1994, dated 7th June 1994, passed by the Special Court, the existing liability has to be seen. Learned Counsel contends that the assessee acquired assets out of the loan taken from notified entities and all these were under the control of custodian. Had there been no loan taken, there would not have been any interest income which was subject to tax by the Assessing Officer. The interest income and int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of income. He points out that no ground was taken before the Commissioner (Appeals) challenging the re-opening and this is a fresh ground taken before this Bench. 11. On the issue of capital gains, the learned Special Counsel submits that the contract notes referred to by the assessee are from the sister concerns and from the close relatives and, hence, not reliable. He points out that the husband, wife, brother-in-law, sister-in-law, etc., are from different entities and each gave contract notes. Under these circumstances, the Assessing Officer wanted independent evidence for the purpose of determination of date of acquisition. In the absence of such independent evidence, the Special Counsel submits that the date of notification was rightly taken at the date of acquisition. 12. On the claim of interest, Special Counsel submits that the assessee has not filed return of income and under these circumstances, no claim for expenditure can be allowed as per the judgment of Hon'ble Supreme Court in Goetz (India) Ltd. v/s CIT, (2006) 284 ITR 323 (SC). He submits that the claim has been made at the appellate stage and, hence, cannot be allowed. 13. On the issue of addition under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a reason to believe that the income has escaped assessment. In our opinion, it cannot be said that the reasons recorded by the Assessing Officer for re-opening the assessment are not in conformity with the principles laid down by the Courts. Merely because the assessee had some difficulties in filing of return of income, it cannot be said that the notice issued under section 148, is bad-in-law. The interest income itself is more than Rs. 60,00,000 and the assessee also had income from capital gains. Consequently, we rejected the contention of the assessee and uphold the re-opening. 20. Coming to ground no.4, which is on the issue of computation of long term capital gains, we are of the considered opinion that the date of acquisition should be as per the contract notes for the reasons that the Assessing Officer has taken the cost of acquisition of shares based on these very contract notes. One part of the contract note cannot be accepted and the other part rejected. It is well known that the price of shares are fluctuating and the cost of acquisition of a particular date would not definitely be the same as on another date. The Revenue cannot take contradictory stands. In view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a notified person under the Special Court (Trial of Offences relating to Transactions in Securities) Act, 1992, and all its assets including bank accounts were attached and vested in the hands of the Custodian appointed under the said Act. From the date of functioning of the Court i.e., 1.6.1992, the distribution of monies in case of notified person will be decided by the Special Court. The taxes do not have the priority in settlement. Even if a notified person had wanted to pay the advance tax it was not within his control to do so. He has to make an application to the custodian and only he can permit payment of advance tax after obtaining approval from the Special Court. The Special Court in its ruling has observed as under:- "Where a Notified Party is prevented by reason of Notification, from doing things which are required to be done by him under other Acts or contracts. In such cases, if the provision of the Special Courts Act prevents a Notified Party from doing that thing, then by reason of this legal disability, no penalty or interest can be levied on that party. Thus, no penalty or interest can be levied on that party. Thus no penalty or interest can be imposed for non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IBILIA" (law cannot compel you to do the impossible). Assessee cannot therefore be foisted with interest liability under section 234A, 234B and 234C. Interest under section 234B and 234C are directly related to payment of advance tax and hence is not leviable on notified persons. Even though levy of interest under section 234A is really on the delay of filing the return which is a default committed by the assessee, the quantification of the same depends on the advance tax paid which, in this case, is not within the control of the assessee. Hence, interest under section 234A cannot also be levied in the case of a person a notified person under the Special Court (Trial of Offences relating to Transactions in Securities) Act, 1992, and all its assets including bank account were attached and vested in the hands of the Custodian appointed under the said Act. 25. The co-ordinate bench in the case of Divine Holdings P. Ltd. v/s DCIT, in ITA no.180/Mum./2000, dt. 26.6.2001, has held that CIT(A) is right in admitting the appeal of the notified person even though the tax on the returned income has not been paid by him. In coming to this conclusion they had relied on the above passage of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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