COMMISSIONER OF INCOME TAX AND THE DEPUTY COMMISSIONER OF INCOME TAX Vs. M.N. DASTUR AND COMPANY PRIVATE LIMITED

JUDGEMENT

(1.) THIS Appeal is by the Revenue challenging the order of the Tribunal, which has set aside the order of the Appellate Authority as well as the Assessing Authority, wherein, an addition of Rs. 60,92,527/ - as unaccounted expenditure under Section 69 of the Income Tax Act (hereinafter referred to as the 'Act', for brevity) was made.

(2.) THE facts leading to this appeal are as under: M.N. Dastur and Company Private Limited, the Assessee. voluntarily filed the returns of income on 08.02.1995 declaring an income of Rs. 7,64,22,786/ -. The assessment under Section 143(3) was completed by the Assessing Officer on 26.03.1997 after making several additions. The total income was determined at Rs. 11,58,81,750/ -. The additions were made on various grounds including additions of Rs. 26,85,972/ - by disallowing the payment of brokerage on investments. The additions made in the original assessment were challenged by filing appeal before the CIT(A) and thereafter before the Tribunal. While the appeal was pending before the Tribunal on the original assessment, the Assessing Officer issued a notice under Section 148 of the Act dated 26.09.2000 which was served on the Assessee on 06.10.2000. The assessment under Section 143(3) read with Section 147 in pursuance to the said notice was completed on 26.03.2002 by making an addition of Rs. 60,92,527/ -. The Assessing Officer mentioned in the reassessment order that, certain Banks and Financial institutions whose names are found in the assessment order had paid a sum of Rs. 60,92,527/ - astensibly as brokerage to Sri. J.T. Amrith Singh (hereinafter referred to as 'JTAS', for short) on business mobilized by him to the listed banks from the Assessee company. Though the sum paid by the banks to the JTAS was shown as transactions of brokerage, but the Assessing Officer felt that in reality it was part of the interest payable to the Assessee company, which was diverted at inception and was paid to. JTAS on the instruction of the Assessee company. Thus, according to the Assessing Officer, the said payment constituted unexplained expenditure in the hands of the Assessee company.

(3.) AGGRIEVED by the said order, the Assessee preferred an appeal to the Tribunal. The Tribunal held that, when the income is earned by a third party and disclosed by such party, an item of income, which the Assessee is not entitled to receive and which has no bearing on the ultimate computation of income of the Assessee, it cannot be said that he deliberately did not disclose the said income. The proceedings initiated for re -assessment was clearly barred by time, as the re -assessment ought to have been completed before 31.03.1999. There is an interpolation in the order of satisfaction passed by the Assessing Officer. Therefore, the said reasons recorded do not constitute a sufficient cause for re -opening the assessment. Thus the order passed by the Appellate Authority as well as by the Assessing Authority was set aside. Aggrieved by the said order, the revenue is in appeal.