JATIN & CO., MUMBAI V. DCIT 17(2), MUMBAI

CO 173/MUM/2010

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6797 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-12-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 20-12-2011
• Assessment Year: 2000-2001
• Appeal Filed On: 14-09-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Difference of opinion; Reason to believe; Change of opinion
• Section: 80HHC; 148

Judgement Text

1 JATIN & CO IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI MUMBAI MUMBAI MUMBAI I I I I BENCH BENCH BENCH BENCH MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI T R SOOD T R SOOD T R SOOD T R SOOD, ,, , AM & AM & AM & AM & SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM ITA NO. ITA NO. ITA NO. ITA NO. 1175/MUM/2010 1175/MUM/2010 1175/MUM/2010 1175/MUM/2010 (ASST YEAR (ASST YEAR (ASST YEAR (ASST YEAR 2000 2000 2000 2000- -- -01 0101 01) )) ) & & & & CROSS OBJECTION NO. 173/MUM/2010 CROSS OBJECTION NO. 173/MUM/2010 CROSS OBJECTION NO. 173/MUM/2010 CROSS OBJECTION NO. 173/MUM/2010 THE ASST COMMR OF INCOME TAX 17(2), MUMBAI VS JATIN & CO 10 ASHOK BLDG - GROUND FLOOR 541C, ADENWALA ROAD MATUNGA (CR) MUMBAI 19 (APPELLANT (APPELLANT (APPELLANT (APPELLANT/ RESPONDENT / RESPONDENT / RESPONDENT / RESPONDENT ) )) ) (RESPONDENT (RESPONDENT (RESPONDENT (RESPONDENT/CROSS OBJECTOR /CROSS OBJECTOR /CROSS OBJECTOR /CROSS OBJECTOR) )) ) PAN NO. PAN NO. PAN NO. PAN NO. AAAFJ1158J AAAFJ1158J AAAFJ1158J AAAFJ1158J ASSESSEE BY SH ANANT N PAI REVENUE BY SH O N MAO DT.OF HEARING 20 TH DEC 2011 DT OF PRONOUNCEMENT 30 TH , DEC 2011 ORDER ORDER ORDER ORDER PER PER PER PER VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO, , , , JM JMJM JM THIS APPEAL BY THE REVENUE AND THE CROSS OBJECTI ON BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 9.11.2009 OF T HE CIT(A) FOR THE AY 2000-01. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUND IN I TS APPEAL: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEDUCTION U/S 80HHC ON DEPB CREDITS THOUGH THE ASSESSEE FAILED TO SATISFY CONDITIONS LAID DOWN IN TAXATION LAWS (AMENDMENT) A CT, 2005. 2.1 IN THE CROSS OBJECTION, THE ASSESSEE HAS RAISED THE FOLLOWING GROUND: [1.] ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN NOT QUASHING THE ASSESSMENT ORDER DATED 7-12-2007 PASSE D BY THE LEARNED ASSESSING OFFICER U\S 147 OF THE INCOME TAX ACT 1961 AS THE SAME WAS ILLEGAL AND WITHOUT JURISDICTION. 2 JATIN & CO THE LD CIT(A) HERE, MORE PARTICULARLY LOST SIGHT OF THE VITAL FACT THAT THE IMPUGNED ORDER WAS PASSED BY THE LEARNED ASSESS ING OFFICER WITHOUT SATISFYING THE MANDATORY JURISDICTIONAL PRE -CONDITION THAT HE SHOULD HAVE REASON TO BELIEVE THAT THE RESPONDENT S INCOME HAD ESCAPED ASSESSMENT BEFORE INITIATING PROCEEDINGS U\ S 147. 3 SINCE THE GROUND RAISED IN THE CROSS OBJECTION IS A LEGAL GROUND AND CHALLENGING THE VALIDITY OF THE REOPENING OF THE AS SESSMENT; THEREFORE, FIRST WE SHALL DEAL WITH THE CROSS OBJECTION OF THE ASSESSEE : CROSS OBJECTION NO. 173/MUM/2011 CROSS OBJECTION NO. 173/MUM/2011 CROSS OBJECTION NO. 173/MUM/2011 CROSS OBJECTION NO. 173/MUM/2011 4 THE ASSESSEE FILED ITS RETURN OF INCOME ON 6.9.20 00 DECLARING TOTAL INCOME OF ` 4,22,330/-. THERE WAS NO ASSESSMENT ON THE RET URN OF INCOME FILED BY THE ASSESSEE. SUBSEQUENTLY, THE CASE WAS REOPENED BY IS SUING NOTICE U/S 148 ON THE GROUND THAT AS PER THE LATEST AMENDMENT IN RESPECT OF DEDUCTION U/S 80HHC, DEDUCTION IS ALLOWABLE IN THE CASE WHERE THE TURNOV ER IS LESS THAN ` 10 CRORES. THE ASSESSING OFFICER COMPLETED THE REASSESSMENT BY REWORKING THE DEDUCTION U/S 80HHC WHEREBY THE EXCESS CLAIM OF DEDUCTION OF ` 38,00,945/- WAS DISALLOWED, PARTICULARLY ON THE GROUND OF DEPB. ON APPEAL, THE CIT(A) CONFIRMED THE VALIDITY OF THE REOPENING; HOWEVER, THE RELIEF ON THE ISSUE OF DEPB CREDIT NOT ALOWED. THEREFORE, BOTH THE REVENUE AND THE ASSESSE E HAVE CHALLENGED THE ORDER OF THE CIT(A). 5 THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THER E WAS NO REASON IN EXISTENCE FOR THE BELIEF THAT THE INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT. THEREFORE, THE NOTICE ISSUED U/S 148 BY THE ASSESSING OFFICER IS ON THE BASIS OF SPECULATION OR SUSPICIOUS ESCAPEMENT O F INCOME, WHICH CANNOT BE A REASON TO BELIEF THAT THE INCOME HAS ESCAPED ASSESS MENT. THE LD AR OF THE ASSESSEE FURTHER SUBMITTED THAT THE INFORMATION ON THE BASIS OF WHICH THE ASSESSING OFFICER FORMED A BELIEF THAT THE INCOME H AS ESCAPED ASSESSMENT 3 JATIN & CO SHOULD BE A DEFINITE INFORMATION AND NOT VAGUE. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF INCOME- TAX OFFICER V. LAKHMANI MEWAL DAS REPORTED IN 103 I TR 437. HE HAS FURTHER SUBMITTED THAT THE BELIEF MUST NOT BE A PRODUCT OF SPECULATION AND REASON TO BELIEVE IS NOT A THING AS A REASON TO SUSPECT. THE ASSESSING OFFICER CANNOT EXERCISE TO ISSUE NOTICE U/S 148 TO CONDUCT THE FAC TUAL ENQUIRY; BUT SHOULD HAVE DEFINITE INFORMATION TO BELIEF THAT THE INCOME ASSE SSABLE TO TAX HAS ESCAPED ASSESSMENT. HE HAS RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MADHYA PRADESH INDUSTRIES LTD. V. INCOME-T AX OFFICER REPORTED IN 57 ITR 637. THE LD AR HAS SUBMITTED THAT THE ASSESSING OFF ICER HAS RECORDED THE REASON WHEREIN THERE IS NO DEFINITE INFORMATION THAT THE R ATE OF DUTY DRAW BACK IS LESS THAN DEPB. TE LD AR HAS THUS SUBMITTED THAT WHEN TH E ASSESSING OFFICER WAS NOT SURE ABOUT THE RATE OF DUTY DRAW BACK WAS LESS THAN DEPB CREDIT, THEN THERE WAS NO DEFINITE INFORMATION AND REASON TO BELIEF THAT T HE INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT AND THE REOPENING IN THE PR ESENT CASE IS SPECULATION/SUSPICION SITUATION. THE ASSESSING OFF ICER HAS NOT MENTIONED IN THE REASONS RECORDED THAT THE ASSESSEE HAS NOT SATISFY THE PROVISIONS UNDER THIRD PROVISO TO SEC. 80HHC AND THEREFORE, DEPB IS LIABLE TO BE TAXED. 5.1 ON THE OTHER HAND, THE LD DR HAS SUBMITTED THAT AT THE TIME OF REOPENING OF THE ASSESSMENT, THERE SHOULD BE PRIMA FACIE REAS ON TO BELIEF THAT THE INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT. SINCE TH ERE WAS NO ASSESSMENT IN THE PRESENT CASE; THEREFORE, THERE IS NO QUESTION O F ANY CHANGE OF OPINION. HE HAS RELIED UPON THE FOLLOWING DECISIONS: I)ACIT V. RAJESH JHAVERI STOCK BROKERS P. LTD.291 I TR 500 II)MAHANAGAR TELEPHONE NIGAM LTD. V. CHAIRMAN, CBDT 246 ITR 13 III)RAMA SHANKAR GUPTA V. CWT 275 ITR 628 & IV)35 SOT 306 4 JATIN & CO 6 WE HAVE CONSIDERED THE RIVAL CONTENTION AS WELL A S RELEVANT MATERIAL ON RECORD. ADMITTEDLY, THERE WAS NO ASSESSMENT IN THE CASE IN HAND AND THEREFORE, THE FIRST PROVISO TO SEC. 147 DOES NOT APPLY IN THE CASE OF THE ASSESSEE. THUS, THE ONLY REQUIREMENT FOR EXERCISING THE JURISDICTION U/ S 148 IS EXISTENCE OF THE REASONS TO BELIEVE THAT THE INCOME ASSESSABLE TO TA X HAS ESCAPED ASSESSMENT AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF RA JESH JHAVERI STOCK BROKERS P. LTD RAJESH (SUPRA) THAT THE INITIAL REQUIREMENT IS REASON TO BELIEVE BUT NOT ESTABLISHED FACT OF ESCAPEMENT OF INCOME. AT THE ST AGE OF ISSUING NOTICE, THE ONLY QUESTION IS WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON HAVE FORMED THE REQUISITE BELIEF. WHETHER THE MATE RIAL WOULD CONCLUSIVE PROOF OF ESCAPEMENT IS NOT CONCERNED AT THAT STAGE. 6.1 IN THE CASE IN HAND, THE REASONS RECORDED BY TH E ASSESSING OFFICER ARE AS UNDER; SUB: REASON FOR REOPENING OF ASSESSMENT FOR AY 200 0-01 AS PER REQUEST YOUR LETTER DATED 3.9.2010, THE REA SON FOR REOPENING THE ASSESSMENT FOR A.Y. 2000-200 1 IS AS UNDER: LN VIEW OF THE BOARDS LATEST AMENDMENT IN RESPECT OF DEDUCTION U/S 80 HHC, THE SAID DEDUCTION IS ELIGIBL E ONLY IN RESPECT OF DEPB IN CASES WHERE THE TURNOVER IS LESS THAN RS. 10 CRORES. KEEPING IN VIEW THE RECENT AMENDMENT IN RES PECT OF DEDUCTION U/S 80 HHC, I HAVE REASON TO BELIEVE THAT ASSESSEE HAS INCORRECTLY CLAIMED DEDUCTION U/S 80 HHC ON DEP B CREDITS, RESULTING IN UNDER ASSESSMENT OF INCOME FOR AX. 200 0-01. 6.2 THE ASSESSEES OBJECTION IS THAT IN THE REASONS RECORDED BY THE ASSESSING OFFICER, THE ASSESSING OFFICER HAS NOT RECORDED THA T THE RATE OF DUTY DRAW BACK IS LESS THAN DEPB CREDIT AND THEREFORE, IN THE CASE OF THE ASSESSEE WHERE THE TURNOVER IS MORE THAN 10 CRORES, THEN IT IS ASSESSA BLE TO TAX. WE DO NOT AGREE WITH THE CONTENTION OF THE ASSESSEE BECAUSE WHEN TH E ASSESSING OFFICER HAS A 5 JATIN & CO REASON TO BELIEF THAT DUE TO AMENDMENT IN THE PROVI SIONS OF SEC. 80HHC THE DEDUCTION IN RESPECT OF DEPB IS ALLOWABLE ONLY IN T HE CASES WHERE THE TURNOVER IS LESS THAN RS 10 CRORES OF IF THE CONDITIONS, AS PRE SCRIBED UNDER THIRD PROVISO TO SEC. 80HHC ARE SATISFIED. SINCE THERE WAS NO ASSES SMENT AND THE TURNOVER OF THE ASSESSEE WAS MORE THAN RS 10 CRORES, THEN IN VIEW O F THE AMENDMENT IN THE RELEVANT PROVISIONS, IT CONSTITUTES A TANGIBLE MATE RIAL FOR THE REASON TO BELIEVE THAT THE INCOME ASSESSABLE TO TAX HAS ESCAPED ASSES SMENT. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) ON THIS ISSUE. 7 AS REGARDS THE ISSUE ON MERIT, THE CIT(A) HAS ALL OWED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE DECISION OF THE SPECIAL B ENCH OF THE TRIBUNAL IN THE CASE OF TOP MAN EXPORTS, WHICH HAS REVERSED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX V. KALPATARU COLOURS AND CHEMICALS REPORTED IN 328 ITR 451 (BOM). ACCORDING LY, FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA) THI S ISSUE IS DECIDED AGAINST THE ASSESSEE. 8 IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED WHEREAS THE CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON THE 30 TH , DAY OF DEC 2011. SD/ SD/- ( (( ( T R SOOD T R SOOD T R SOOD T R SOOD ) )) ) ACCOUNTANT MEMBER ( (( ( VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO ) )) ) JUDICIAL MEMBER PLACE: MUMBAI : DATED:30 TH , DEC 2011 RAJ* RAJ* RAJ* RAJ* 6 JATIN & CO COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI