Venkatalakshmi Textiles Pvt. ltd., Tiruppur V. DCIT, Tiruppur

CO 113/CHNY/2016

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2491 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 24 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 09-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 16-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T BANUSEKAR
• Assessee Lawyers: V NANDA KUMAR
• Keywords: Reopening of assessment; Reasonable cause; Tangible material; Difference of opinion; Condonation of delay; Reason to believe; Change of opinion
• Section: 143(3); 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . . . , . , & BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER I.T.A.NO.1467/MDS/2016 & C.O.NO.113/MDS/2016 ( / ASSESSMENT YEAR: 2006-07) THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, TIRUPUR. VS M/S. VENKATALAKSHMI TEXTILES PVT.LTD., 335, MANGALAM ROAD, TIRUPUR-641 604. PAN: AAACV7208A ( /APPELLANT) (RESPONDENT/CROSS OBJECTOR) / APPELLANT BY : MR. V.NANDAKUMAR, JCIT /RESPONDENT BY : MR.T.BANUSEKAR, C.A /DATE OF HEARING : 17 TH AUGUST, 2016 /DATE OF PRONOUNCEMENT : 9 TH NOVEMBER, 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM: THE APPEAL AND THE CROSS OBJECTION ARE FILED BY TH E REVENUE AND THE ASSESSEE RESPECTIVELY AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)- 3, COIMBATORE DATED 31.12.2015 IN ITA NO.128/2014- 15 PASSED UNDER SECTION 143(3) R.W.S 147 & 250(6) OF THE ACT. 2. THE APPEAL FILED BY THE REVENUE IS BARRED BY LIM ITATION OF 56 DAYS. THE REVENUE HAS FILED AN AFFIDAVIT EXPL AINING THE REASON FOR THE DELAY IN FILING THE APPEAL BY STATIN G THAT, THERE WAS AN UNINTENTIONAL DELAY IN MOVEMENT OF THE APPEA L FILE FROM TIRUPUR TO HEADQUARTERS AND THEREFORE PRAYED F OR 2 ITA NO.1467/MDS/2016 CONDONATION OF DELAY IN FILING THE APPEAL. CONSIDER ING THE SUBMISSIONS OF THE REVENUE, WE ARE SATISFIED THAT T HERE WAS REASONABLE CAUSE FOR THE DELAY IN FILING THE APPEAL BY THE REVENUE. HENCE IN THE INTEREST OF JUSTICE, WE HERE BY CONDONE THE DELAY IN FILING THE APPEAL AND ADMIT TH E SAME FOR ADJUDICATION. 3. THE REVENUE HAS RAISED SEVERAL GROUNDS IN ITS APPEAL, HOWEVER, THE CRUX OF THE ISSUE IS AS FOLLOWS:- THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN HOLDING THAT THE REOPENING OF ASSESSMENT MADE BY THE LEARNED ASSESSING OFFICER UNDER SECTION 147 OF THE ACT IS BAD IN LAW AND BARRED BY LIMITATION. 4. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN ITS C ROSS OBJECTION, HOWEVER, THE CRUX OF THE ISSUE IS THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BY N OT QUASHING THE ORDER OF THE LEARNED ASSESSING OFFICER AS THE REOPENING WAS BAD IN LAW. 5. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A DOMESTIC COMPANY ENGAGED IN THE BUSINESS OF MANUFA CTURE OF COTTON FABRIC FILED ITS RETURN OF INCOME ON 27.1 0.2007 FOR 3 ITA NO.1467/MDS/2016 THE ASSESSMENT YEAR 2006-07 DECLARING TOTAL INCOME OF ` 18,03,593/-. THE ASSESSMENT WAS COMPLETED UNDER SEC TION 143(3) OF THE ACT ACCEPTING THE RETURNED INCOME OF RS.18,03,593/-. HOWEVER, THE LEARNED ASSESSING OFFI CER ISSUED NOTICE UNDER SECTION 148 OF THE ACT DATED 1 5.03.2013 AND ONCE AGAIN REOPENED THE ASSESSMENT UNDER SECTI ON 147 OF THE ACT BECAUSE THE LEARNED ASSESSING OFFICER OP INED THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY THE MATERIAL FACTS REGARDING THE PA YMENT OF COMPENSATION TO EMPLOYEES TOWARDS RETRENCHMENT IN CONNECTION WITH THE CLOSURE OF THE UNDERTAKING FOR RS.1,26,79,950/- WHICH WAS EMBEDDED IN THE STATEMEN T OF AFFAIRES OF THE ASSESSEE COMPANY UNDER THE HEAD LA BOUR WELFARE EXPENSES. THE LEARNED ASSESSING OFFICER FU RTHER JUSTIFIED THE REOPENING BY OBSERVING AS UNDER:- 5. THE CONTENTION/SUBMISSION OF THE ASSESSEE ARE CONSIDERED. THE FACT OF THE MATTER IS THAT THE ASSE SSEE DID NOT MAKE TRUE OR FULL DISCLOSURE AT THE TIME OF FILING THE RETURN OR DURING THE COURSE OF ASSESSMENT PROCEEDIN GS. TO ELABORATE, THE ASSESSEE HAS NOWHERE MENTIONED OR STATED DURING THE ASSESSMENT PROCEEDINGS THAT THE AMOUNT PAID WAS RETRENCHMENT COMPENSATION AS REQUIRED UNDER SECTION 25FFF OF THE INDUSTRIAL DISP UTES ACT, 1947. JUST BECAUSE THE CIT HAD STATED IN HIS REVISION PROCEEDINGS, THAT WHAT WAS PAID WAS RETRENCHMENT COMPENSATION DOES NOT AUTOMATICALLY LE AD TO THE CONCLUSION THAT THE ASSESSING OFFICER WAS 4 ITA NO.1467/MDS/2016 APPRISED OF THIS FACT AT THE TIME OF ASSESSMENT. TH E ASSESSMENT ORDER WAS MADE ON 17.12.2008 AND THE REVISION ORDER U/S.263 WAS MADE MUCH LATER, 28 TH MARCH, 2011 TO BE PRECISE AND THE TIME GAP WAS 2 YEARS AND 3 MONTHS AND THE CIT MAY HAVE COME TO KNOW OF THIS FA CT DURING THE INTERVENING PERIOD. THE CONTENTION OF TH E ASSESSEE IS NOT FACTUAL AND THEREFORE NOT ACCEPTABL E AND NO MATERIALS HAVE BEEN FILED IN SUPPORT OF THEIR CL AIM. THE CRUX OF THE MATTER IS WHETHER THE ASSESSING OFF ICER WAS GIVEN THE FULL AND TRUE DETAILS ABOUT THE NATUR E OF COMPENSATION AT THE TIME OF ASSESSMENT. THE ANSWER IS AN EMPHATIC NO, AND THE AO WAS WELL WITHIN HIS JURISDICTION IN INVOKING THE PROVISIONS OF SECTION 147 AFTER 4 YEARS ON THIS ISSUE. 6. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) AFTER CONSIDERING THE ISSUE ARRIVED AT TH E FOLLOWING FINDING:- 6.1 THE FIRST GROUND OF APPEAL IS REGARDING THE V ALIDITY OF THE NOTICE U/S.147. THE ASSESSING OFFICER DISCUS SED THE APPLICABILITY OF THE 3 RD PROVISO OF SECTION 147. THE RELEVANT ISSUE IS WHETHER THE FIRST PROVISO TO SECTION 147 I S APPLICABLE IN THIS CASE OR NOT. THERE IS NO OMISSIO N ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS NECESSARY FOR THE APPELLANT. AS THE NOTICE U/ S.147 HAS BEEN ISSUED BEYOND THE FOUR YEARS THE VALIDITY OF THE NOTICE WILL HAVE TO BE CONSIDERED UNDER THE FIRST P ROVISO TO SECTION 147. AS NO OMISSION ON THE PART OF THE ASSESSEE TO DISCLOSE THE MATERIAL, ON WHICH THE REOPENING HAS BEEN DONE, IS MADE OUT BY THE ASSESSING OFFICER, CHALLENGE TO THE VALIDITY OF THE NOTICE U/S.147 IS SUSTAINABLE. AS REGARDS, THE CARRY FORWARD BUSINESS LOSSES, SUBJECT TO CONDITIONS RELE VANT PROVISIONS OF THE INCOME TAX ACT, IT SHALL BE ALLOW ED, IF IT IS IN ACCORDANCE WITH THE SAID SECTION. 7. AT THE OUTSET, WE FIND THAT THE LEARNED COMMISSI ONER OF INCOME TAX (APPEALS) HAS HELD THAT THERE WAS NO OMI SSION 5 ITA NO.1467/MDS/2016 ON THE PART OF THE ASSESSEE TO DISCLOSE THE MATERIA LS ON WHICH THE REOPENING HAS BEEN DONE. FURTHER, THE ASSESSEE HAS NOT FAILED TO PRODUCE ITS BOOKS OF ACCOUNTS BEFORE THE LEARNED ASSESSING OFFICER AND THERE IS NO FINDING BY THE LE ARNED ASSESSING OFFICER IN THAT REGARD. THEREFORE, IT IS NOT APPROPRIATE FOR THE LEARNED ASSESSING OFFICER TO ST ATE THAT THE COMPENSATION PAID TO EMPLOYEES TOWARDS RETRENCHMENT WAS CAMOUFLAGED UNDER THE HEAD LABOUR WELFARE EXPENSES IN THE PROFIT & LOSS ACCOUNT AND BALANCE SHEET OF THE ASSE SSEE. MOREOVER, WHEN THE LEARNED COMMISSIONER OF INCOME T AX (APPEALS) HAS CATEGORICALLY HELD THAT AS NO OMISSI ON ON THE PART OF THE ASSESSEE TO DISCLOSE THE MATERIAL, ON W HICH THE REOPENING HAS BEEN DONE IS MADE OUT BY THE ASSESSIN G OFFICER, CHALLENGE TO THE VALIDITY OF THE NOTICE U/ S.147 IS SUSTAINABLE, HAVING MADE SUCH FINDING HE OUGHT TO HAVE QUASHED THE ASSESSMENT ORDER BECAUSE THE ASSESSMENT ORDER HAS NO LEGS TO STAND WHEN THE REOPENING IS FO UND TO BE BAD IN LAW. IT IS PERTINENT TO MENTION THAT WHEN TH E ASSESSEE HAS DISCLOSED ALL THE MATERIAL FACTS BEFORE THE LD. A.O WHILE COMPLETING THE ASSESSMENT U/S.143(3) OF THE ACT, RE OPENING 6 ITA NO.1467/MDS/2016 THE ASSESSMENT ONCE AGAIN IS BAD IN LAW IN THE ABSE NCE OF ANY FRESH TANGIBLE MATERIALS AS HELD BY THE DECISIO NS OF THE HONBLE SUPREME COURT IN THE CASE CIT VS. KELVINATO R OF INDIA LTD. REPORTED IN 320 ITR 561(SC). THE GIST OF THE DECISION IS REPRODUCED HEREIN BELOW FOR REFERENCE:- THE CONCEPT OF CHANGE OF OPINION ON THE PART OF THE ASSESSING OFFICER TO REOPEN AN ASSESSMENT DOES NOT STAND OBLITERATED AFTER THE SUBSTITUTION OF SECTION 147 OF THE INCOME-TAX ACT, 1961, BY THE DIRECT TAX LAWS (AMENDMENT) ACTS, 1987 AND 1989. AFTER THE AMENDMEN T, THE ASSESSING OFFICER HAS TO HAVE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, BUT THIS DOES NOT IM PLY THAT THE ASSESSING OFFICER CAN REOPEN AN ASSESSMENT ON MERE CHANGE OF OPINION. THE CONCEPT OF CHANGE OF OPINION MUST BE TREATED AS AN IN-BUILT TEST TO CHE CK THE ABUSE OF POWER. HENCE AFTER APRIL 1, 1989, THE ASSE SSING OFFICER HAS POWER TO REOPEN AN ASSESSMENT, PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUS ION THAT THERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASON MUST HAVE A LINK WITH THE FORMATION OF THE B ELIEF. FOR THE ABOVE STATED REASON, WE DO NOT FIND MERIT I N THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WHO HAD FURTHER DIRECTED THE LEARNED ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE IF IT IS IN ACCORDANCE WI TH THE PROVISIONS OF THE ACT. HENCE, WE HEREBY QUASH THE O RDER OF THE LEARNED ASSESSING OFFICER AND ACCORDINGLY THE O RDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ST ANDS 7 ITA NO.1467/MDS/2016 MODIFIED. SINCE WE HAVE STRAIGHTAWAY EXPLORED THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WH ILE DECIDING THE ISSUE, WE ARE OF THE CONSIDERED VIEW T HAT THE OTHER ARGUMENTS ADVANCED BY THE LEARNED AUTHORIZED REPRESENTATIVE DOES NOT REQUIRED TO BE ADDRESSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 9 TH NOVEMBER, 2016 SD/- SD/- ( . . . ) ( . ) (N.R.S.GANESAN) ( A.M OHAN ALANKAMONY ) ! # / JUDICIAL MEMBER # / ACCOUNTANT MEMBER ! /CHENNAI, & /DATED 9 TH NOVEMBER, 2016 SOMU *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF .