Shree Laxmi Jewellery Pvt. Ltd., CHENNAI V. ACIT, CHENNAI

CO 15/CHNY/2017

• Counselvise Citation: [2017] 119 COUNSELVISE.COM (IT) 3443 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 18 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 12-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 31-07-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 23-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: T BANUSEKAR
• Keywords: Tangible material; Speculation loss; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A BENCH, CHENNAI . . . , . , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.3345/MDS/2016 ( / ASSESSMENT YEAR: 2009-10) THE ACIT, CENTRAL CIRCLE 1(3), CHENNAI 34. VS M/S. SHREE LAXMI JEWELLERY PVT. LTD., NO.99, USMAN ROAD, T.NAGAR, CHENNAI 600 017. PAN: AAACL1289M ( /APPELLANT) ( /RESPONDENT) & CO NO.15/MDS/2017 (IN ITA NO.3345/MDS/2016) M/S. SHREE LAXMI JEWELLERY PVT. LTD., NO.99, USMAN ROAD, T.NAGAR, CHENNAI 600 017. VS THE ACIT, CENTRAL CIRCLE 1(3), CHENNAI 34. PAN: AAACL1289M ( /APPELLANT) ( /RESPONDENT) /REVENUE BY : SHRI V. SREENIVASAN, JCIT /ASSESSEE BY : SHRI T. BANUSEKAR, FCA !' /DATE OF HEARING : 01.08.2017 #$!' /DATE OF PRONOUNCEMENT : 12.09.2017 / O R D E R PER A. MOHAN ALANKAMONY, AM: THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY T HE ASSESSEE ARE ARISING OUT OF THE ORDER PASSED BY THE LD. 2 IT A NO.3345/MDS/2016 & CO NO.15/MDS/ 2017 COMMISSIONER OF INCOME TAX (APPEALS)-15, IN ITA NO.109/CIT(A)-15/15-16 FOR THE ASSESSMENT YEAR 2009 -10 PASSED U/S.250(6) R.W.S 143(3) & 147 OF THE ACT . 2. THE REVENUE HAS RAISED SEVERAL GROUNDS IN ITS A PPEAL, HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD.CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.1,05,59,900/- MADE BY THE LD.AO WHO HAD HELD IT TO BE SPECULATION LOSS AND THEREFOR E CANNOT BE SET OFF AGAINST NORMAL BUSINESS LOSS. 3. THE ASSESSEE HAS RAISED THREE GROUNDS IN ITS APP EAL HOWEVER THE CRUX OF THE ISSUE IS WITH RESPECT TO RE OPENING U/S.147 & 148 OF THE ACT. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PRIVATE LIMITED COMPANY ENGAGED IN THE MANUFACTURIN G AND TRADING OF BILLION AND JEWELRY, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 24.02.2009, DECLARING TO TAL INCOME OF RS.59,75,709/-. THEREAFTER ORDER U/S.143(3) OF THE ACT WAS PASSED ON 27.12.2011 DETERMINING TOTAL INCOME OF RS.64,67,840/-. SUBSEQUENTLY THE ASSESSMENT WAS RE OPENED 3 IT A NO.3345/MDS/2016 & CO NO.15/MDS/ 2017 U/S.147 OF THE ACT AND NOTICE U/S.148 OF THE ACT WA S ISSUED ON 30.03.2014 AND FINALLY ASSESSMENT ORDER WAS PASSED U/S. 143(3) R.W.S147 OF THE ACT ON 27.03.2015, WHEREIN THE LD.A O DISALLOWED THE SETTING OFF THE LOSS OF RS.1,05,59,900/- INCURR ED TOWARDS COMMODITY TRADING VIZ., BULLION, BY HOLDING THAT IT IS A SPECULATION LOSS WHICH CANNOT BE SET-OFF AGAINST THE NORMAL BUS INESS INCOME OF THE ASSESSEE. 5. ASSESSEES CROSS OBJECTION ON RE-OPENING U/S.147 & 148 OF THE ACT:- THE ASSESSEE HAD CHALLENGED THE REOPENING U/S.147 & 148 OF THE ACT VIDE ITS LETTER DATED 12.11.2013 ON THE FOLLOWING GROUNDS: (I) ASSESSMENT CANNOT BE REOPENED ON THE BASIS OF INFORMATION AVAILABLE WITH THE LD.AO AT THE TIME OF ORIGINAL SCRUTINY ASSESSMENT. (II) CONDITION PRECEDENT FOR ASSUMPTION OF JURISDIC TION U/S.147 OF THE ACT BEYOND THE PERIOD OF 4 YEARS HAV E NOT BEEN SATISFIED BECAUSE THE ASSESSEE HAD DISCLOSED FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR THE ASSESSMENT BEFORE THE LD.AO. 4 IT A NO.3345/MDS/2016 & CO NO.15/MDS/ 2017 THE LD.AO HELD THE REOPENING U/S.147 OF THE ACT TO BE VALID BY OBSERVING AS FOLLOWS: 5. THE OBJECTIONS FILED BY THE ASSESSEE WERE DISPOSED VIDE ORDER DATED 29.09.2014 AS UNDER: PRODUCTION BEFORE THE ASSESSING OFFICER OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD W ITH DUE DILIGENCE HAVE BEEN DISCOVERED BY THE ASSESSING OFF ICER WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEA NING OF THE FOREGOING PROVISO.' THIS HAS BEEN REITERATED BY THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF CONSOLIDATED PHOTO & FINVEST LTD. V. AC IT [2006] 151 TAXMAN 41 AS UNDER: ' ... THE ARGUMENT THAT PRODUCTION OF THE ACCOUNT B OOKS AND OTHER DOCUMENTARY EVIDENCE RELEVANT FOR ASSESSMENT MUST IMPLY A FULL AND TRUE DISCLOSURE OF ALL MATERIAL FA CTS MUST BE REJECTED OUT OF HAND IN THE LIGHT OF THE PROVISIONS OF EXPLANATION (1) .. ' 5.2 FURTHER, THE PROCEDURE LAID DOWN UNDER THE ACT AND THE HON'BLE SUPREME COURT'S DECISION IN THE CASE OF MLS.KELVINATOR & CO. LTD. HAVE BEEN FOLLOWED WHILE REOPENING THE ASSESSMENT PROCEEDINGS IN THE INSTANT CASE. IN THE ABOVE MENTIONED CASE, THE HON'BLE SUPREME COURT HAD DISCU SSED THE EFFECT OF AMENDMENT TO SEC. 147 OF THE INCOME TAX A CT, 1961 WHEREIN THE APEX COURT HAS DISTINGUISHED BETWEEN TH E EXPRESSIONS 'REASONS TO BELIEVE' AND 'OPINION'. THE APEX COURT HAD STATED, 'ASSESSING OFFICER HAS POWER TO R E-OPEN, PROVIDED THERE IS 'TANGIBLE MATERIAL' TO COME TO TH E CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BEL IEF. .. ' 5 IT A NO.3345/MDS/2016 & CO NO.15/MDS/ 2017 THERE HAS BEEN RECORDING OF REASONS FOR REOPENING, BASED ON TANGIBLE MATERIAL, TO COME TO THE CONCLUSION THAT T HERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. IN THIS REGARD, IT IS ALSO IMPORTANT TO QUOTE SOME OF THE OBSERVATIONS MADE BY THE HON'BLE GUJARAT HC, IN THE CASE OF PRAFUL CHUNILAL PATEL VS ACIT, 236 ITR 832, WHILE U PHOLDING THE ISSUE OF NOTICE U/S. 148 WHICH IS AS FOLLOWS: 'THE PROVISIONS OF SECTION 147 REQUIRE THAT THE ASS ESSING OFFICER SHOULD HAVE REASON TO BELIEVE THAT ANY INCO ME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, THE WORD 'REASON' IN THE PHRASE 'REASON TO BELIEVE' WOULD MEAN CAUSE OR JUSTIFICATION. IF THE ASSESSING OFFICER HAS A CAUSE OR JUSTIFICATION TO THINK OR SUPPOSE THAT INCOME HAD E SCAPED ASSESSMENT, HE CAN BE SAID TO HAVE A REASON TO BELI EVE THAT SUCH INCOME HAD ESCAPED ASSESSMENT. THE WORDS 'REAS ON TO BELIEVE' CANNOT MEAN THAT THE ASSESSING OFFICER SHO ULD HAVE FINALLY ASCERTAINED THE FACTS BY LEGAL EVIDENCE. TH EY ONLY MEAN THAT HE FORMS A BELIEF FROM THE EXAMINATION HE MAKE S AND IF HE LIKES FROM ANY INFORMATION THAT HE RECEIVES. IF HE DISCOVERS OR FINDS OR SATISFIES HIMSELF THAT THE TAXABLE INCOME HAS ESCAPED ASSESSMENT, IT WOULD AMOUNT TO SAYING THAT HE HAD R EASON TO BELIEVE THAT SUCH INCOME HAD ESCAPED ASSESSMENT. TH E JUSTIFICATION FOR HIS BELIEF IS NOT TO BE JUDGED FR OM THE STANDARDS OF PROOF REQUIRED FOR COMING TO A FINAL D ECISION. ' 5.3 FURTHER, REOPENING IS BASED ON A NEW FINDING O F FACT, TOTALLY DIFFERENT FROM THE ISSUES DEALT IN THE ORIG INAL ASSESSMENT. SINCE, THE ASSESSING OFFICER HAD NOT AP PLIED HIS MIND AND FORMED ANY OPINION ON THE ISSUES FOR WHICH THE CASE HAS BEEN RE-OPENED DURING THE ORIGINAL SCRUTINY PRO CEEDINGS, IT CANNOT BE ARGUED THAT REASSESSMENT IS BASED ON C HANGE IN OPINION AND HENCE FOR THE SAME REASON, THE ASSESSEE IS WRONG 6 IT A NO.3345/MDS/2016 & CO NO.15/MDS/ 2017 IN STATING THAT THE ISSUES FOR WHICH THE CASE WAS R EOPENED AT PRESENT HAVE ALREADY BEEN DISCLOSED BY THE ASSESSEE AND DEALT BY THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT . IN VIEW OF THE ABOVE, IT IS THUS ESTABLISHED THAT T HE REASSESSMENT IS AS PER LAW. HENCE THE ASSESSEE'S OBJECTION TO REOPENING IS HERE BY REJECTED. THIS ORDER IS PASSED AS PER THE DIRECTION LAID OUT BY THE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA ) LTD VS. ITO 2591TR 19 AND ASSESSEE'S COOPERATION IS SOUGHT IN THE CONTINUANCE OF THE ASSESSMENT PROCEEDINGS U/S. 147 ... 5.1 ON APPEAL, THE LD.CIT(A) UPHELD THE ORDER OF TH E LD.AO BY BRIEFLY STATING AS FOLLOWS: 4.2 THE MATTER IS CONSIDERED. THE AO IS PARA 2-5 O F THE IMPUGNED ORDER HAS GIVEN ELABORATE REASONS ON THE ASSUMPTION OF JURISDICTION UNDER SECTION 147 OF THE ACT. ON CONSIDERATION OF HE SAME, I DO NOT FIND ANY INFIRMI TY IN THE ACTIONS OF THE AO. THE ASSESSMENT PROCEEDINGS ARE H ELD TO BE VALID, AND GROUNDS OF APPEAL RAISED IN THIS REGARD STAND DISMISSED. 5.2 BEFORE US THE LD.AR SUBMITTED THAT THE ASSESSEE HAD PRODUCED ALL THE RELEVANT DOCUMENTS REQUIRED FOR AS SESSMENT BEFORE THE LD.AO AT THE TIME OF ORIGINAL SCRUTINY A SSESSMENT. MOREOVER THE ASSESSMENT IS REOPENED BEYOND THE PERI OD OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THEREFORE THE NECESSARY CONDITION SUCH AS FILING OF RETURN U/ S.139 OF THE ACT WITHIN THE DUE DATE OF FILING THE RETURN OR TO DISC LOSE FULLY AND TRULY 7 IT A NO.3345/MDS/2016 & CO NO.15/MDS/ 2017 ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT WAS COMPLIED WITH. HENCE THE LD.AO DID NOT HAVE ANY JURISDICTIO N TO REOPEN THE ASSESSMENT IN THE CASE OF THE ASSESSEE WHICH IS BEYOND 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE LD.DR ON THE OTHER HAND RELIED ON THE ORDER OF THE LD.AO AND THE LD.CIT(A). 5.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE MATERIALS AVAILABLE ON RECORD. THE LD.AO IN HI S ORDER HAD RELIED ON MANY CASE LAWS, HOWEVER HE HAS NOT MENTIO NED AS TO WHAT WAS THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ANY MATERIAL FACT FULLY AND TRULY WHICH WAS NECESSARY A T THE TIME OF ASSESSMENT ON THE EARLIER OCCASION U/S.143(3) OF TH E ACT. IT IS APPARENT FROM THE FACTS OF THE CASE THAT THE ASSESS EE HAS PRODUCED THE DETAILS WITH RESPECT TO THE LOSS OF RS .1,05,50,900/- AT THE TIME OF ORIGINAL ASSESSMENT. THERE IS NO CON TRARY FINDING BY NEITHER THE LD.AO NOR THE LD.CIT(A) THAT THE ASS ESSEE HAD CONCEALED THESE FACTS AT THE TIME OF ORIGINAL ASSES SMENT. THE LD.REVENUE AUTHORITIES HAS ALSO NOT BROUGHT OUT A C ASE THAT ANY FRESH TANGIBLE MATERIAL HAS SURFACED AFTER THE ORIG INAL ASSESSMENT MADE U/S.143(3) OF THE ACT. CONSIDERING THESE 8 IT A NO.3345/MDS/2016 & CO NO.15/MDS/ 2017 ASPECTS, THE DECISIONS CITED BY THE LD.AR APPLIES T O THE CASE OF THE ASSESSEE. THE MOST RELEVANT CASE LAWS ARE EXTR ACTED HEREIN BELOW FOR REFERENCE: (I) HONBLE JURISDICTIONAL APEX COURT IN CIT V. KELVIN ATOR OF INDIA LTD REPORTED IN 320 ITR 0561 HAD HELD THAT AFTER 1 ST APRIL,1989, AO HAS POWER TO REOPEN THE ASSESSMENT U NDER S.147 PROVIDED AO HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AND THERE IS TANGIBLE MATERIAL T O COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME; MERE CHANGE OF OPINION CANNOT PER SE BE REASON TO REOP EN. (II) HONBLE HIGH COURT OF MADRAS IN TANMAC INDIA V. DCIT REPORTED IN 97 CCH 0189 HAD HELD THAT DEPARTMENT CANNOT BE PERMITTED TO AVAIL OF THE EXTENDED TIME LIMIT IN THE ABSENCE OF ANY NEW OR TANGIBLE MATERIAL, WHEN THE TIME FOR SCRUTINY ASSESSMENT HAD ELAPSED, PRIOR TO ISSUE OF IMPUGNED NOTICE U/S 148. (III) HONBLE HIGH COURT OF MADRAS IN CIT V. SCHWING STETTER INDIA P. LTD REPORTED IN 378 ITR 0380 HAD HELD THAT WHEN ASSESSING OFFICER FAILS TO RECORD ANYWHERE HIS SATI SFACTION OR BELIEF THAT INCOME CHARGEABLE TO TAX ESCAPED ASSESS MENT ON ACCOUNT OF FAILURE OF ASSESSEE TO DISCLOSE TRULY AN D FULLY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT, NOTICE ISS UED U/S 147 BEYOND PERIOD OF FOUR YEARS IS WHOLLY WITHOUT JURIS DICTION AND CANNOT BE SUSTAINED. 5.4 CONSIDERING THE FACTS OF THE CASE AND THE DECIS ION CITED BY THE LD.AR SUPRA, WE ARE OF THE CONSIDERED VIEW THAT THE REVENUE HAS NO JURISDICTION TO REOPEN THE CASE OF T HE ASSESSEE U/S.147 OF THE ACT WHICH IS BEYOND THE PERIOD OF FO UR YEARS FROM 9 IT A NO.3345/MDS/2016 & CO NO.15/MDS/ 2017 THE END OF THE RELEVANT ASSESSMENT YEAR, FURTHER TH E ASSESSEE HAD FULLY AND TRULY DISCLOSED ALL MATERIALS AT THE TIME OF ORIGINAL ASSESSMENT U/S 143(3) OF THE ACT AND NO FRESH MATER IALS HAD SURFACED FOR THE ASSESSMENT TO BE REOPENED. THEREFO RE, WE HEREBY QUASH THE ORDER OF THE LD.AO PASSED U/S.147 R.W.S143(3) OF THE ACT DATED 27.03.2015. SINCE WE HAVE ALLOWED THE CROSS OBJECTION OF THE ASSESSEE ON THE ISSUE WITH RESPECT TO JURISDICTION, WE DO NOT FIND IT NECESSARY TO ADJUDI CATE THE APPEAL OF THE REVENUE ON MERITS BECAUSE IT WOULD ONLY BE A CADEMY. 6. IN THE RESULT, THE CROSS OBJECTION OF THE ASSESS EE IS ALLOWED AND APPEAL OF THE REVENUE IS DISMISSED IN LIMINI . ORDER PRONOUNCED ON 12 TH SEPTEMBER, 2017 AT CHENNAI. SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER SD/- ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER %& /CHENNAI, '( /DATED 12 TH SEPTEMBER, 2017 RSR 10 I TA NO.3345/MDS/2016 & CO NO.15/MDS/ 2017 () *+,+ /COPY TO: 1. /ASSESSEE 2. /REVENUE 3. ( )/CIT(A) 4. - /CIT 5. +./ 0 /DR 6. /12 /GF