2013 (8) TMI 743 - AT - Income Tax

Re-opening of assessment u/s 147 of the Income Tax Act Late filing of return Held that - There is no denial of the fact that assessee has taxable income and even admitted the same under provision of section 115JB. The return of income also was not filed in time and return filed was beyond time limits permitted so an invalid one. - as the assessee has not furnished return of income eventhough has taxable income, we uphold the proceedings under section 147. The grounds are rejected. - Decided against the assessee. Sale of depreciable asset - Benefit of Indexation - assessee claimed that the assessee has not claimed any depreciation from assessment year 2000-01 and so provision of section 50 are not applicable Held that - contention of assessee not acceptable - Reliance has been placed upon the Hon ble Kerala high Court in the case of CIT vs. Sakthi Metal Depot 2010 (1) TMI 659 - Kerala High Court and Chhabria Trust vs. ACIT 2003 (5) TMI 479 - ITAT MUMBAI - From the year 2000-01 assessee neither filed returns nor offered income under house property , so as to consider that asset was not used for business - , the contention of the assessee that asset was deemed to be capital asset and not business asset cannot be accepted. - Decided against the assessee. Interest u/s. 234B, 234C and 234D - Interest u/s. 234B, 234C and 234D cannot be levied as the assessee is a notified person and the provisions of the Special Court (Trial of offences relating to transactions in Securities) Act 1992 will prevail Held that - Reliance has been placed upon the judgment in the case of CIT vs. Divine Holdings Pvt. Ltd. 2012 (4) TMI 100 - BOMBAY HIGH COURT - levy of interest u/s. 234A, 234B and 234C is mandatory Decided against the Assessee.

Summary

Issues Involved:
1. Validity of reopening the assessment under section 147.
2. Classification of capital asset as short-term or long-term.
3. Disallowance of interest on loans.
4. Computation of book profit under section 115JB.
5. Levy of interest under sections 234A, 234B, and 234C.

Issue-wise Detailed Analysis:

1. Validity of Reopening the Assessment under Section 147:
The assessee challenged the reopening of assessment under section 147, arguing that no proper reasons were recorded and relying on case law such as Prashant S. Joshi vs. ITO and Ramkrishna Ramnath vs. ITO. The revenue countered with similar case law where reopening was upheld. The Tribunal found that the assessee had taxable income, did not file the return in time, and hence, the reopening was justified under Explanation 2(a) of section 147. The grounds challenging the reopening were rejected.

2. Classification of Capital Asset as Short-term or Long-term:
The assessee claimed a long-term capital loss on the sale of property, while the AO treated it as a short-term capital gain under section 50 due to depreciation claimed in earlier years. The Tribunal upheld the AO's decision, citing case law such as CIT vs. Sakthi Metal Depot and Prabodh Investment and Trading Company Private Limited, which supported the treatment of gains from depreciable assets as short-term. The Tribunal rejected the assessee's contention that the asset should be considered an investment and not a business asset.

3. Disallowance of Interest on Loans:
The AO disallowed the interest claimed by the assessee, considering it contingent and lacking a direct nexus with term deposits. The Tribunal remanded the issue back to the CIT(A) for fresh consideration, following the precedent set in similar group cases like Fortune Holdings Pvt. Ltd. vs. DCIT.

4. Computation of Book Profit under Section 115JB:
The assessee's ground regarding the computation of book profit under section 115JB was dismissed as infructuous since the assessment was made under normal provisions, not under section 115JB. The Tribunal allowed the assessee to raise the issue if assessed under section 115JB in the future.

5. Levy of Interest under Sections 234A, 234B, and 234C:
The Tribunal upheld the levy of interest under sections 234A, 234B, and 234C, referencing the judgment in CIT vs. Divine Holdings Pvt. Ltd., which stated that the Special Court Act does not affect the liability to pay interest under the Income Tax Act. The Tribunal noted that the matter was referred for reconsideration in another case but found no reason to deviate from the existing judgment.

Conclusion:
The appeal was partly allowed, with the issue of disallowance of interest on loans remanded for fresh consideration, while other grounds were rejected or dismissed as infructuous. The order was pronounced on 23rd August 2013.