M/s. Convertech Equipment Pvt. Ltd., New Delhi V. DCIT, New Delhi

CO 274/DEL/2010

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7166 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 25-05-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 22-05-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 25-08-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIKAS SURYAVANSHI
• Keywords: Reopening of assessment; Business income; Depreciation; Accommodation entries; Assessment record; Commercial expediency; Reason to believe
• Section: 143(3); 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH B BB B : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND SHRI SHRI SHRI SHRI RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER ITA NO ITA NO ITA NO ITA NOS SS S. .. .3580/DEL/2010 & 3581/DEL/2010 3580/DEL/2010 & 3581/DEL/2010 3580/DEL/2010 & 3581/DEL/2010 3580/DEL/2010 & 3581/DEL/2010 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEARS SS S : : : : 2002 2002 2002 2002- -- -03 & 2003 03 & 2003 03 & 2003 03 & 2003- -- -04 0404 04 DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF INCOME INCOME INCOME INCOME TAX, TAX, TAX, TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -3(1), 3(1), 3(1), 3(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. VS. VS. VS. VS. M/S CONVERTECH EQUIPMENT M/S CONVERTECH EQUIPMENT M/S CONVERTECH EQUIPMENT M/S CONVERTECH EQUIPMENT PVT.LTD., PVT.LTD., PVT.LTD., PVT.LTD., F FF F- -- -90/6, OKHLA INDUSTRIAL AREA, 90/6, OKHLA INDUSTRIAL AREA, 90/6, OKHLA INDUSTRIAL AREA, 90/6, OKHLA INDUSTRIAL AREA, PHASE PHASE PHASE PHASE- -- -1, 1,1, 1, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. PAN : AAACC0815E. PAN : AAACC0815E. PAN : AAACC0815E. PAN : AAACC0815E. (APPELLANT) (RESPONDENT) CROSS CROSS CROSS CROSS- -- -OBJECTION NO.274/DEL/2010 OBJECTION NO.274/DEL/2010 OBJECTION NO.274/DEL/2010 OBJECTION NO.274/DEL/2010 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : 2003 : 2003 : 2003 : 2003- -- -04 0404 04 M/S CONVERTEC M/S CONVERTEC M/S CONVERTEC M/S CONVERTECH EQUIPMENT H EQUIPMENT H EQUIPMENT H EQUIPMENT PVT.LTD., PVT.LTD., PVT.LTD., PVT.LTD., F FF F- -- -90/6, OKHLA INDUSTRIAL AREA, 90/6, OKHLA INDUSTRIAL AREA, 90/6, OKHLA INDUSTRIAL AREA, 90/6, OKHLA INDUSTRIAL AREA, PHASE PHASE PHASE PHASE- -- -1, 1,1, 1, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. PAN : AAACC0815E. PAN : AAACC0815E. PAN : AAACC0815E. PAN : AAACC0815E. VS. VS. VS. VS. DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -3(1), 3(1), 3(1), 3(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI VIKAS SURYAVANSHI, SR.DR. ASSESSEE BY : SHRI ANIL CHOPRA, CA. ORDER ORDER ORDER ORDER PER G. PER G. PER G. PER G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VP VPVP VP : : : : ITA NO.3580/DEL/2010 ITA NO.3580/DEL/2010 ITA NO.3580/DEL/2010 ITA NO.3580/DEL/2010 : : : :- -- - THE ONLY GROUND RAISED IN THIS APPEAL BY THE REVEN UE READS AS UNDER:- ITA-3580 & 3581/D/2010 & C.O.274/D/2010 2 THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS.2942534/- MADE BY AO ON ACCOUNT OF COMMISSION PAID TO DIRECTORS OF THE COMPANY IGNORIN G THE FACT THAT IT WAS NOT AN ALLOWABLE EXPENDITURE WITHI N THE MEANING OF SECTION 36(1)(II) OF THE I.T.ACT, 1961. 2. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL PLACED BEFORE US. WE FIND THAT THIS ISSUE IS SQUARELY COV ERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT IN ASSESSEES OWN CASE FOR AY 2004- 05 & 2005-06. IN AY 2004-05 ALSO, THE ASSESSING OF FICER DISALLOWED THE COMMISSION PAID TO DIRECTORS UNDER SECTION 36(1)(II ) ON THE SIMILAR GROUND WHICH WAS DELETED BY LEARNED CIT(A) AND THE DEPARTMENT HAD FILED THE APPEAL BEFORE THE ITAT. THE ITAT, IN ITA NO.3473/DEL/2007, UPHELD THE ORDER OF THE CIT(A) AND HELD AS UNDER:- THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LEARNED CIT(APPEALS) DATED 23.5.2007 PASSED FOR ASSESSMENT YEAR 2004-05. IN THE FIRST GROUND OF AP PEAL, THE GRIEVANCE OF REVENUE IS THAT THE LEARNED CIT(AP PEALS) HAS ERRED IN DELETING THE ADDITION OF RS.42,07, 128 /- WHICH HAS BEEN ADDED BY MAKING A DISALLOWANCE OUT OF THE COMMISSION PAID TO THE DIRECTORS WITH THE AID OF SE CTION 36(1)(II) OF THE INCOME-TAX ACT, 1961. 2. THE BRIEF FACT OF THE CASE ARE THAT THE ASSESSEE HAS FILED THE RETURN OF INCOME ON 30 TH OCTOBER, 2004 DECLARING AN INCOME OF RS.1,09,11,508/-. ON SCRUTINY OF THE ACCOUNT, LEARNED ASSESSING OFFICER FOUND THAT ASSESSEE HAD P AID COMMISSION TO THE TWO DIRECTORS SHRI TARUN SANON AN D SHRI RAVI SAHNON AT THE RATE OF 3% OF TOTAL SALES, AMOUN TING TO RS.21,03,564/- TO EACH DIRECTOR WHICH WORKED OUT TO ITA-3580 & 3581/D/2010 & C.O.274/D/2010 3 RS.42,07,128/-. IN THE OPINION OF THE ASSESSING OF FICER, THE COMMISSION PAID TO THE DIRECTORS COULD BE PAID AS A PROFIT OR DIVIDEND INCOME TO THESE PERSONS AS PER SEC. 36( 1)(II) OF THE ACT AND, THEREFORE, THIS AMOUNT CANNOT BE ALLOW ED TO THE ASSESSEE. IN THIS WAY, LEARNED ASSESSING OFFIC ER HAS DISALLOWED THE PAYMENT OF COMMISSION AMOUNTING TO `RS.42,07,122/- TO BOTH THE DIRECTORS. 3. DIS-SATISFIED WITH THE DISALLOWANCE MADE BY THE AO, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LE ARNED CIT(APPEALS). IT IS SUBMITTED THAT BOTH THE DIRECT ORS ARE FULL TIME QUALIFIED DIRECTORS. SHRI RAVI SANON IS MBA F ROM THE FACULTY OF MANAGEMENT STUDIES, DELHI UNIVERSITY AND WAS HAVING 23 YEARS OF EXPERIENCE IN THE INDUSTRY. DUE TO THEIR EFFORTS THE COMPANY HAS ACHIEVED REMARKABLE GROWTH AS COMPARED TO THE LAST YEAR. THE SALES IN THIS YEAR INCREASED BY 46% AND PROFIT BEFORE TAXATION INCREASED BY 109% AS COMPARED TO THE LAST YEAR. THE COMMISSION ON SALES WAS ALSO PAID IN EARLIER YEARS WHICH WERE ALLOWED TO TH E ASSESSEE EVEN IN AN ASSESSMENT MADE UNDER SEC. 143( 3) BY THE ASSESSING OFFICER. IT WAS ALSO POINTED OUT THAT THE ASSESSEE HAS PROPOSED DIVIDEND OF RS.9,16,500/- AS AGAINST PAID UP CAPITAL OF RS.6,11,000/-. IT IS 150% OF TH E PAID UP CAPITAL. SIMILAR DIVIDEND WAS ALSO PROPOSED IN THE LAST YEAR. THE TAX ON DIVIDEND IN THE CURRENT YEAR AND IN EARLIER YEARS HAS BEEN DISCLOSED IN THE P & L ACCOUNT. ACC ORDING TO THE ASSESSEE, THE COMMISSION PAID TO BOTH THE DI RECTORS WAS WHOLLY AND EXCLUSIVELY BASED ON PERFORMANCE OF ASSESSEES BUSINESS AND COMMERCIAL EXPEDIENCY. THE RE IS NO VIOLATION TO SEC. 36(1)(II) OF THE ACT. IT WAS ALSO CONTENDED THAT THE DIRECTORS ARE ASSESSED TO TAX AT ITA-3580 & 3581/D/2010 & C.O.274/D/2010 4 MAXIMUM RATE AND COMMISSION RECEIVED HAS BEEN SHOWN IN THEIR RETURNS AS TAXABLE INCOME. THERE IS NO RE DUCTION OF TAX LIABILITY EITHER BY THE ASSESSEE OR BY THE DIRE CTORS. 4. THE LEARNED CIT(APPEALS) HAS GONE THROUGH THE CONTENTIONS OF THE ASSESSEE AND DELETED THE DISALLO WANCE. 5. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY AND FOUND TH AT IN ASSESSMENT YEAR 2003-04, ASSESSEE HAS PAID COMMISSI ON @ 3% OF TOTAL SALES TO THE DIRECTORS. THIS COMMISS ION WAS ALLOWED TO THE ASSESSEE BY THE ASSESSING OFFICER IN AN ASSESSMENTS MADE UNDER SEC. 143(3) ON 30 TH NOVEMBER, 2005. IN THIS YEAR, THE TURNOVER OF ASSESSEE HAS I NCREASED AND IT HAS PAID THE COMMISSION ON THE SAME LINE. T HERE IS NO CHANGE OF CIRCUMSTANCE WHICH CAN PERSUADE THE ASSESSING OFFICER TO DISALLOW THE CLAIM OF ASSESSEE . THEREFORE, AFTER GOING THROUGH THE ORDER OF THE LEA RNED CIT(APPEALS) ON THIS ISSUE, WE DO NOT SEE ANY GOOD REASON TO INTERFERE IN THE FINDINGS OF THE LEARNED 1 ST APPELLATE AUTHORITY. THIS GROUND OF APPEAL IS REJECTED. 3. WHEN THE SIMILAR ISSUE AROSE IN AY 2005-06, THE ITAT AGAIN FOLLOWING ITS OWN ORDER FOR AY 2004-05, UPHELD THE ORDER OF THE LEARNED CIT(A) DELETING THE DISALLOWANCE OF COMMISSION PAID TO DIRECTORS. ADMITTEDLY, THE FACTS OF THE YEAR UNDER CONSIDERATI ON ARE IDENTICAL. THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE DECISIO N OF ITAT IN ASSESSEES OWN CASE, WE UPHOLD THE ORDER OF LEARNED CIT(A) AND DISMISS THE REVENUES APPEAL. ITA-3580 & 3581/D/2010 & C.O.274/D/2010 5 ITA NO.3581/DEL/2010: ITA NO.3581/DEL/2010: ITA NO.3581/DEL/2010: ITA NO.3581/DEL/2010:- -- - 4. THE ONLY GROUND RAISED IN THIS APPEAL BY THE REV ENUE READS AS UNDER:- THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOL DING REOPENING THE ASSESSMENT U/S 147 AS INVALID AND CONSEQUENTLY ANNULLING ORDER U/S 143(3)/147, CONSID ERING THE FACT THAT RATIOS OF DECISION OF THE HONBLE SUP REME COURT IN PHOOL CHAND BAJRANG LAL V. CIT (1993) 203 ITR 456 ARE APPLICABLE IN THIS CASE. 5. AT THE TIME OF HEARING BEFORE US, IT IS STATED B Y THE LEARNED DR THAT IN THE ORIGINAL ASSESSMENT PASSED UNDER SECTIO N 143(3), THE ISSUE OF PAYMENT OF COMMISSION TO THE DIRECTORS WAS NOT E XAMINED. SINCE THE COMMISSION PAID TO DIRECTORS WAS NOT ALLOWABLE UNDER THE PROVISIONS OF SECTION 36(1)(II), THE ASSESSMENT WAS REOPENED BY INVOKING THE POWERS UNDER SECTION 147. THE CIT(A) CANCELLED THE REOPENING WITHOUT PROPERLY APPRECIATING THE FACTS O F THE CASE. HE, THEREFORE, SUBMITTED THAT THE ORDER OF THE CIT(A) S HOULD BE REVERSED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. IN SUPPORT OF HIS CONTENTION, HE RELIED UPON THE DECISION OF HONBLE APEX COURT IN THE CASE OF PHOOL CHAND BAJRANG LAL AND ANOTHER VS. INC OME TAX OFFICER AND ANOTHER 203 ITR 456. 6. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, STATED THAT THE ORIGINAL ASSESSMENT WAS COMPLETED UNDER SE CTION 143(3). REOPENING WAS MADE AFTER FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THEREFORE, AS PER PROVISO TO SECT ION 147, THE ASSESSMENT CANNOT BE REOPENED UNLESS THERE IS FAILU RE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERI AL FACTS. IN THIS CASE, ITA-3580 & 3581/D/2010 & C.O.274/D/2010 6 ADMITTEDLY, THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ANY MATERIAL FACT. THEREFORE, PROVISO TO SECTION 1 47 WAS SQUARELY APPLICABLE. ON THIS POINT, HE RELIED UPON THE DECI SION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF HARYANA AC RYLIC MANUFACTURING CO. VS. CIT AND ANOTHER 308 ITR 38. HE ALSO STAT ED THAT THE FACTS IN THE CASE OF PHOOL CHAND BAJRANG LAL (SUPRA) RELIED UPON BY THE LEARNED DR IS ALTOGETHER DIFFERENT. HE, THEREFORE, SUBMITT ED THAT THE ORDER OF LEARNED CIT(A) SHOULD BE SUSTAINED. 7. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. THE ASS ESSMENT YEAR UNDER CONSIDERATION IS AY 2003-04 AND NOTICE UNDER SECTION 148 WAS ISSUED ON 31 ST MARCH, 2009. THUS, ADMITTEDLY, THE NOTICE UNDER S ECTION 148 WAS ISSUED AFTER MORE THAN FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. IT IS ALSO NOT IN DISPUTE THAT OR IGINAL ASSESSMENT WAS COMPLETED UNDER SECTION 143(3). SECTION 147 READS AS UNDER:- IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THA T ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY B E, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN THIS SE CTION AND IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEV ANT ASSESSMENT YEAR) : ITA-3580 & 3581/D/2010 & C.O.274/D/2010 7 PROVIDE PROVIDE PROVIDE PROVIDED DD D THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR TH E RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM TH E END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PAR T OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) O F SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY A LL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THAT ASSESS MENT YEAR. 8. FROM THE PROVISO TO SECTION 147, IT IS EVIDENT T HAT WHERE AN ASSESSMENT WAS MADE UNDER SECTION 143(3), NO ACTION CAN BE TAKEN UNDER SECTION 147 AFTER THE EXPIRY OF FOUR YEARS FR OM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS INCOME CHARGEABLE T O TAX HAS ESCAPED ASSESSMENT BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR HIS ASSESSMENT. ADMITTEDLY, IN THIS CASE, ORIGINAL ASSESSMENT WAS C OMPLETED UNDER SECTION 143(3) AND ASSESSMENT WAS REOPENED AFTER MO RE THAN FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THEREFORE, SUCH REOPENING CAN BE SUSTAINED ONLY IF THERE WAS FAILUR E ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS. THE COPY OF REASONS RECORDED IS PLACED AT PAGE 19 OF THE ASSESS EES PAPER BOOK IN WHICH ASSESSING OFFICER HAS MENTIONED THAT FROM A P ERUSAL OF THE ASSESSMENT RECORD FOR AY 2003-04 (I.E. THE YEAR UND ER APPEAL), IT IS REVEALED THAT THE ASSESSEE COMPANY HAD PAID COMMISS ION AND BONUS OF ` 29,29,948/- TO THE DIRECTORS OF THE COMPANY WHO ARE ALSO MAJOR SHAREHOLDERS OF THE COMPANY. HE ALSO OBSERVED THAT ON SIMILAR GROUND, ADDITION HAS BEEN MADE IN AY 2006-07. THER EFORE, HE FORMED ITA-3580 & 3581/D/2010 & C.O.274/D/2010 8 AN OPINION THAT THERE WAS ESCAPEMENT OF INCOME. FR OM THESE REASONS RECORDED, IT IS EVIDENT THAT THERE WAS NO FAILURE O N THE PART OF THE ASSESSEE TO DISCLOSE ANY MATERIAL FACT. THE FACT O F PAYMENT OF COMMISSION TO THE DIRECTORS AND THAT THE DIRECTORS ARE THE MAJOR SHAREHOLDERS WAS ALREADY ON RECORD AND THE ASSESSIN G OFFICER GATHERED THESE FACTS ONLY FROM THE PERUSAL OF THE ASSESSMENT RECORD. THEREFORE, IN OUR OPINION, PROVISO TO SECTION 147 WOULD BE SQU ARELY APPLICABLE IN THE CASE OF THE ASSESSEE. THE LEARNED DR HAS RELIE D UPON THE DECISION OF HONBLE APEX COURT IN THE CASE OF PHOOL CHAND BA JRANG LAL (SUPRA). HOWEVER, WE FIND THAT THE ISSUE BEFORE THE HONBLE APEX COURT WAS ALTOGETHER DIFFERENT. IN THAT CASE, THERE WAS A SU BSEQUENT INFORMATION CAME TO THE KNOWLEDGE OF THE DEPARTMENT IN WHICH TH E MANAGING DIRECTOR OF THE CREDITOR COMPANY HAD ACCEPTED THAT COMPANY HAD NOT ADVANCED ANY LOAN DURING THE RELEVANT PERIOD TO THE ASSESSEE. THE ASSESSMENT YEAR BEFORE THE HONBLE APEX COURT WAS A Y 1963-64 AND THE QUESTION WAS WHETHER THERE WAS FRESH INFORMATIO N SO AS TO EMPOWER THE ASSESSING OFFICER TO REOPEN THE ASSESSM ENT UNDER SECTION 147(A). THE HONBLE APEX COURT UPHELD THE REOPENING ON THE GROUND THAT THE SUBSEQUENT INFORMATION WAS DEFINITE , SPECIFIC AND RELIABLE, THEREFORE, NOTICE FOR REASSESSMENT WAS VA LID. SECTION 147 HAS BEEN AMENDED WITH EFFECT FROM 1.4.1989 AND IN THE A MENDED SECTION 147, THERE IS NO SUB-SECTION LIKE SECTION 147(A) OR 147(B). ON THE OTHER HAND, NOW THERE IS A PROVISO TO SECTION 147. WE HA VE ALREADY DEALT WITH THE PROVISO AND HAVE ARRIVED AT A FINDING THAT AS PER PROVISO TO SECTION 147, REOPENING OF ASSESSMENT WAS NOT VALID. WE FIND THAT THE HONBLE JURISDICTIONAL HIGH COURT HAS CONSIDERED TH IS ISSUE IN THE CASE OF HARYANA ACRYLIC MANUFACTURING CO. (SUPRA) WHEREI N THE ASSESSMENT YEAR UNDER CONSIDERATION WAS 1998-99. THEREFORE, T HE LAW APPLICABLE IN THE CASE OF THE ASSESSEE IS SIMILAR TO THE LAW A PPLICABLE BEFORE THE HONBLE DELHI HIGH COURT. THE HONBLE JURISDICTION AL HIGH COURT HELD AS UNDER:- ITA-3580 & 3581/D/2010 & C.O.274/D/2010 9 ALLOWING THE PETITION, (I) THAT THE REASONS RECORD ED DID NOT INDICATE THE FAILURE ON THE PART OF THE PETITIONER TO DISCLOSE F ULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT FOR THE ASSESSMENT YEAR 1998-99. WHILE IN THE REASONS SUPPLIED TO THE PETI TIONER THERE WAS NO MENTION OF THE ALLEGATION THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS, IN THE REASONS SHOWN IN THE SAID FORM TO THE COUNTER-AFFIDAVIT THE RE WAS A SPECIFIC ALLEGATION THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELATIN G TO ACCOMMODATION ENTRIES RAISED FROM ONE OF THE COMPANIES TO THE EXT ENT OF RS.5 LAKHS. THUS, ONE OF THE CONDITIONS PRECEDENT FOR REMOVING THE BAR AGAINST TAKING ACTION AFTER THE SAID FOUR YEAR PERIOD REMAI NED UNFULFILLED. CONSEQUENTLY, THE NOTICE UNDER SECTION 148 BASED ON THE RECORDED REASONS SUPPLIED TO THE PETITIONER AS WELL AS THE C ONSEQUENT ORDER WERE WITHOUT JURISDICTION AS NO ACTION UNDER SECTIO N 147 COULD BE TAKEN BEYOND THE FOUR YEAR PERIOD. 9. THE RATIO OF THE ABOVE DECISION WOULD BE SQUAREL Y APPLICABLE TO THE CASE OF THE ASSESSEE BECAUSE IN THE CASE OF THE ASSESSEE ALSO, IN THE REASONS RECORDED, THERE IS NO MENTION OF FAILUR E ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR ASSESSMENT. IN VIEW OF THE ABOVE, RESPECTFULLY FOL LOWING THE ABOVE DECISION OF HONBLE JURISDICTIONAL HIGH COURT, WE U PHOLD THE ORDER OF LEARNED CIT(A) AND DISMISS THE REVENUES APPEAL. C.O. NO.274/DEL/2010 : C.O. NO.274/DEL/2010 : C.O. NO.274/DEL/2010 : C.O. NO.274/DEL/2010 :- -- - 10. IN THE CROSS-OBJECTION, THE ASSESSEE HAS CLAIME D THAT EVEN ON MERITS, THE PAYMENT OF COMMISSION TO DIRECTORS IS A LLOWABLE. HOWEVER, WHEN THE REASSESSMENT ITSELF HAS BEEN QUASHED, THE ADDITION MADE IN SUCH REASSESSMENT DOES NOT SURVIVE. THEREFORE, THE CROSS-OBJECTION OF ITA-3580 & 3581/D/2010 & C.O.274/D/2010 10 THE ASSESSEE HAS BECOME INFRUCTUOUS. THE SAME IS D ISMISSED AS INFRUCTUOUS. 11. IN THE RESULT, THE APPEALS OF THE REVENUE AS WE LL AS CROSS- OBJECTION OF THE ASSESSEE ARE DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 25 TH MAY, 2012. SD/- SD/- ( (( (RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV) )) ) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 25.05.2012 VK. COPY FORWARDED TO: - 1. ASSESSEE : M/S CONVERTECH EQUIPMENT PVT.LTD., F-90/6, OKHLA INDUSTRIAL AREA, PHASE-1, NEW DELHI. 2. RESPONDENT : DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(1), NEW DELHI. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR