Arvind Mills Ltd., ( Now Arvind Ltd., ), Ahmedabad V. The Dy.CIT, Circle-1(1)(1), Ahmedabad

CO 3/AHD/2015

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2108 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 8 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 14-11-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 05-01-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: APARNA M AGARWAL
• Keywords: Invalid notice; Retrospective amendment
• Section: 115JB

Judgement Text

, A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR ./ I.T.A. NO. 3206/AHD/2014 WITH CROSS OBJECTION NO. 03/AHD/2015 ( ASSESSMENT YEAR : 2005-06) DCIT CIRCLE-1(1)(1), AHMEDABAD / VS. M/S. ARVIND MILLS LTD. NARODA ROAD, AHMEDABAD ./ ./ PAN/GIR NO. : AABCA2398D ( APPELLANT /RESPONDENT ) .. ( RE SPONDENT /CROSS OBJECTOR ) / REVENUE BY : SMT. APARNA M. AGARWAL, CIT.D.R. / ASSESSEE BY : SHRI VARTIK CHOKSHI, A.R. DATE OF HEARING 01/11/2018 !'# / DATE OF PRONOUNCEMENT 14/11/2018 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)- XVI, AHMEDABAD (CIT(A) IN SHORT) DATED 26.09.2014 EMANATING FROM THE ASSESSMENT ORDER DATED 04.03.2013 PASSED B Y THE ASSESSING OFFICER (AO) UNDER S.143(3) R.W.S. 147 OF THE INCOM E TAX ACT, 1961 (THE ACT)CONCERNING AY 2005-06. ITA NO.3206/AHD/14 WITH CO NO. 3/AHD/2015 [DCIT VS. M/S. ARVIND MILLS LTD.] A.Y. 2005-06 - 2 - 2. THE ASSESSEE HAS ALSO FILED CROSS OBJECTION IN T HE AFORESAID REVENUES APPEAL. 3. IN THE CAPTIONED APPEAL, THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT IN QUASHING THE REOPENING OF THE ASSESSMENT U/S147 OF THE I.T.ACT, 1961. 2. THE CIT(A) HAS NOT APPRECIATED THE FACT THAT THE AO AFTER VERIFICATION OF THE CASE RECORDS NOTICED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.13,00,00,000/- AS DIMINUTION IN THE VALUE OF INV ESTMENT AND THE SAME IS DUE TO THE DECLINE IN THE VALUE OF INVESTMENT IN TW O OF ITS OVERSEAS SUBSIDIARY AND THE ADDITION HAS BEEN MADE AFTER CON SIDERING VARIOUS DECISION OF JUDICIAL AUTHORITIES. 4. BRIEFLY STATED, THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING NIL INCOME FOR THE AY 2005-06. THE RETURN WAS SUBJ ECTED TO SCRUTINY ASSESSMENT AND THE ASSESSMENT WAS COMPLETED UNDER S .143(3) OF THE ACT ON 31.12.2008 WHERE THE INCOME WAS ASSESSED AT NIL AS PER THE NORMAL PROVISIONS OF THE ACT, WHEREAS THE BOOK PROF IT FOR THE PURPOSES OF MAT WAS SIMULTANEOUSLY COMPUTED AT RS.67,11,77,4 84/-. THE AFORESAID ORDER WAS FURTHER RECTIFIED UNDER S.154 O F THE ACT AND THE BOOK PROFIT FOR THE PURPOSES OF MAT WAS REVISED AT RS.26,03,13,803/-. SUBSEQUENT TO THE COMPLETION OF THE ASSESSMENT UNDE R S.143(3) OF THE ACT, A NOTICE UNDER S.148 OF THE ACT WAS ISSUED ON 30 TH MARCH, 2012 AND THE COMPLETED ASSESSMENT UNDER S.143(3) OF THE ACT WAS THUS REOPENED TO INCLUDE CERTAIN INCOME WHICH HAS ALLEGE DLY ESCAPED ASSESSMENT EARLIER. 5. AS PER THE REASONS RECORDED AND THE RE-ASSESSMEN T ORDER FRAMED CONSEQUENT THERETO, IT IS OBSERVED THAT THE RE-ASSE SSMENT WAS MADE TO INCLUDE RS.13,00,00,000/- TOWARDS DIMINUTION IN THE VALUE OF INVESTMENT AND CONSEQUENTLY TO INCREASE THE ASSESSE D BOOK PROFIT TO THIS EXTENT. STATEDLY, THE ACTION UNDER S.147/148 OF THE ACT WAS ITA NO.3206/AHD/14 WITH CO NO. 3/AHD/2015 [DCIT VS. M/S. ARVIND MILLS LTD.] A.Y. 2005-06 - 3 - GUIDED BY THE CONSIDERATION OF THE RETROSPECTIVE AM ENDMENT IN THE PROVISIONS OF SECTION 115JB BY FINANCE ACT (NO.2), 2009 W.R.E.F. 01/04/2001. IT WAS OBSERVED BY THE AO THAT THE FIN ANCE (NO.2) ACT, 2009 HAS INSERTED CLAUSE (I) TO EXPLANATION 1 TO SECTION 115JB OF THE ACT W.R.E.F. APRIL 1 ST , 2001 WHICH ENJOINS THAT THE AMOUNTS SET ASIDE AS PROVISION FOR DIMINUTION IN THE VALUE OF ANY ASSET IN THE STATEMENT OF PROFIT AND LOSS IS REQUIRED TO BE EXCLUDED FOR THE PURPOSES OF DETERMINATION OF BOOK PROFITS FOR THE PURPOSES OF SECTION 115JB OF THE ACT. THE AMENDMENT IS THUS MADE APPLICABLE TO THE AY 2004-05 IN CONSIDERATION ALSO AND CONSEQUENTLY THE BOOK PROFIT IS UNDER-ASSESSED IN TERMS OF SECTION 115JB OF THE ACT WITH RESPECT T O DIMINUTION IN VALUE OF INVESTMENTS DEBITED IN THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE. THE BOOK PROFIT WAS THUS INTER ALIA INCREASED TO THE EXTENT OF RS.13 CRORE AND RE-DETERMINED AT RS.39,03,13,803 /- IN THE PROCEEDINGS UNDER S.143(3) R.W.S. 147 OF THE ACT. 6. IN THE FIRST APPEAL, THE CIT(A) REVERSED THE ACT ION OF THE AO AND HELD THAT PROCEEDINGS UNDER S.147 OF THE ACT IS NOT SUSTAINABLE TO GIVE EFFECT TO THE RETROSPECTIVE AMENDMENT IN THE PROVIS IONS OF SECTION 115JB OF THE ACT. 7. AGGRIEVED BY THE RELIEF GRANTED BY THE CIT(A), T HE REVENUE HAS PREFERRED THE APPEAL BEFORE THE TRIBUNAL. 8. WHILE LEARNED DR FOR THE REVENUE HAS RELIED UPON THE ORDER OF THE AO. THE LEARNED AR FOR THE ASSESSEE, ON THE OT HER HAND, PLACED RELIANCE ON THE ORDER OF THE CIT(A). ALLEGING WRON GFUL USURPATION OF THE JURISDICTION UNDER S.147 OF THE ACT, THE LEARNE D AR ALSO REFERRED TO THE CROSS OBJECTION OF THE ASSESSEE AND SUBMITTED T HAT NOTWITHSTANDING THE CONCLUSION RIGHTLY DRAWN BY THE CIT(A) TOWARDS LACK OF JURISDICTION UNDER S.147 OF THE ACT IN FAVOUR OF TH E ASSESSEE, THE CIT(A) ALSO OUGHT TO HAVE INVALIDATED THE ACTION UN DER S.147 OF THE ITA NO.3206/AHD/14 WITH CO NO. 3/AHD/2015 [DCIT VS. M/S. ARVIND MILLS LTD.] A.Y. 2005-06 - 4 - ACT ON THE GROUND THAT REOPENING UNDER S.148 OF THE ACT IS NOT PERMISSIBLE TO RE-COMPUTE THE BOOK PROFIT UNDER S.1 15JB OF THE ACT IN THE PROCEEDINGS UNDER S.147 OF THE ACT. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE MAINTAINABILITY OF JURISDICTION UNDER S.147 OF THE ACT IS CENTRAL TO THE CONTROVERSY IN THE INSTANT CASE. THE DEFENSE PADDL ED ON BEHALF OF THE ASSESSEE FOR LACK OF JURISDICTION UNDER S.147 OF TH E ACT ARE TWO FOLDS; (I) THE RETROSPECTIVE AMENDMENT IN THE PROVISIONS O F THE ACT DOES NOT ENTITLE THE AO TO REOPEN A COMPLETED ASSESSMENT IN VIEW OF THE EMBARGO PLACED IN FIRST PROVISO TO SECTION 147 OF T HE ACT & (II) PROVISIONS OF SECTION 147 OF THE ACT CANNOT BE INVO KED WHERE THERE IS NO RESULTANT CHANGE IN TAX LIABILITY AS THE ASSESSE E HAS ALREADY PAID MUCH HIGHER TAX EVEN IF THE PURPORTED ESCAPEMENT AS ALLEGED IS TAKEN INTO ACCOUNT FOR THE PURPOSES OF DETERMINATION OF B OOK PROFITS. 10. AT THE OUTSET, WE NOTICE THAT IN THE INSTANT CA SE, THE ASSESSMENT WAS EARLIER FRAMED UNDER S.143(3) OF THE ACT AND TH E NOTICE HAS BEEN ISSUED UNDER S.147 OF THE ACT PROPOSING RE-ASSESSME NT AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE AY 2005-06 IN QUE STION. THE FIRST PROVISO TO SECTION 147 OF THE ACT, IN SUCH A SITUAT ION, IMPOSES ADDITIONAL FETTERS ON THE AO IN ADDITION TO THE CON DITIONS STIPULATED IN THE MAIN PROVISION THEREOF. THE FIRST PROVISO NECE SSITATES THAT ACTION UNDER S.147 OF THE ACT IS PERMISSIBLE IN THE CASE O F COMPLETED ASSESSMENT UNDER S.143(3) OF THE ACT AFTER THE EXPI RY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR ONLY W HERE ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY THE REA SON OF FAILURE ON THE PART OF THE ASSESSEE TO INTER ALIA DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT OF THE RELE VANT ASSESSMENT YEAR. THUS THE PREREQUISITE UNDER FIRST PROVISO EN JOINS THAT UNLESS THERE IS A FAILURE ON THE PART OF THE ASSESSEE TO D ISCLOSE MATERIAL FACTS FULLY AND TRULY, THE REOPENING IS NOT PERMISSIBLE I N LAW. IF, IN FACT, ITA NO.3206/AHD/14 WITH CO NO. 3/AHD/2015 [DCIT VS. M/S. ARVIND MILLS LTD.] A.Y. 2005-06 - 5 - INCOME WAS FOUND TO BE UNDER-ASSESSED BUT SAME CANN OT BE ASCRIBED TO ANY FAILURE OR OMISSION ON THE PART OF THE ASSESSEE TO DISCLOSE MATERIAL FACTS BUT OWING TO A RETROSPECTIVE AMENDMENT IN LEG AL POSITION SUBSEQUENT TO WHAT PREVAILED AT THE TIME OF ORIGINA L ASSESSMENT, THE REOPENING IS NOT POSSIBLE. NOTICE UNDER FIRST PROVI SO TO SECTION 147 OF THE ACT IS MADE RELATABLE TO SOME OMISSIONS OR DEFA ULTS OF THE ASSESSEE AND CANNOT BE MADE RELATABLE TO MERELY SOME ACTION TAKEN A-NEW ON THE PART OF THE LEGISLATURE. NO ASSESSEE CAN BE IM PUTED WITH FAILURE TO DISCLOSE MATERIAL FACTS WITH REFERENCE TO A LAW WHI CH WAS NON-EXISTENT AT THE TIME OF ORIGINAL ASSESSMENT. A RETROSPECTIV E AMENDMENT IN LAW AT A SUBSEQUENT DATE CANNOT BE DEEMED TO BE ANY KIN D OF FAILURE ON THE PART OF THE ASSESSEE TOWARDS DISCLOSURE BY ANY STRE TCH OF IMAGINATION. THEREFORE, IT IS MANIFEST THAT THE STRINGENT CONDIT IONS OF FIRST PROVISO TO SECTION 147 OF THE ACT ARE NOT FULFILLED IN THE INSTANT CASE. 11. SEEN FROM A DIFFERENT PERSPECTIVE, THE EXPRESSI ON DISCLOSE IN FIRST PROVISO POSTULATES A PRE-EXISTING KNOWLEDGE. A PERSON CAN POSSIBLY DISCLOSE SOMETHING, HE IS PRIVY TO. A RETR OSPECTIVE AMENDMENT OF LAW CANNOT BE VISUALIZED BY AN ASSESSE E WHICH MAY LEAD TO ANY KIND OF FAILURE TO DISCLOSE. THEREFORE, THE CONDITIONS PRESCRIBED IN THE FIRST PROVISO CANNOT BE SAID TO B E FULFILLED AND THUS THE ACTION OF THE AO UNDER S.147 OF THE ACT AFTER T HE EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR IN QUESTI ON IS CLEARLY TIME BARRED AND THEREFORE, VITIATED IN LAW. 12. THE AO INITIATED PROCEEDINGS UNDER S.147 OF THE ACT READ WITH PROVISO THEREOF SOLELY ON THE GROUNDS OF RETROSPECT IVE INSERTION OF CLAUSE (I) TO EXPLANATION 1 TO SECTION 115JB OF THE ACT WHEREBY PROVISIONS FOR DIMINUTION IN THE VALUE OF ANY ASSET IS REQUIRED TO BE ADDED TO THE BOOK PROFIT FOR THE PURPOSES OF SECTIO N 115JB OF THE ACT. AS OBSERVED IN THE PRECEDING PARAGRAPHS AND AS ECHO ED IN DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SADBH AV ENGINEERING ITA NO.3206/AHD/14 WITH CO NO. 3/AHD/2015 [DCIT VS. M/S. ARVIND MILLS LTD.] A.Y. 2005-06 - 6 - LTD. VS. DCIT (2014) 45 TAXMANN.COM 388 (GUJ) AND V ODAFONE WEST LTD. VS. ACIT (2013) 33 TAXMANN.COM 67 (GUJ), RETRO SPECTIVE AMENDMENT IN LAW DOES NOT GIVE RISE TO ANY FAILURE TO DISCLOSE MATERIAL FACTS AS CONTEMPLATED IN THE FIRST PROVISO. 13. THUS, APPARENTLY THE ORDER OF THE CIT(A) IN SET TING ASIDE THE RE- ASSESSMENT ORDER BASED ON AN INVALID NOTICE UNDER S .148 OF THE ACT CANNOT BE FAULTED IN LAW. CONSEQUENTLY, THE APPEAL OF THE REVENUE IS REQUIRED TO BE DISMISSED ON THIS GROUND ALONE AS DO NE BY THE CIT(A). 14. SO VIEWED, WE DO NOT CONSIDER IT EXPEDIENT TO D ELINEATE ALTERNATIVE OBJECTION TOWARDS INVALIDITY OF ASSUMPT ION OF JURISDICTION AS PER THE CROSS OBJECTION OF THE ASSESSEE. 15. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. THE CROSS OBJECTION OF THE ASSESSEE IS ALSO DISMISSED AS INFR UCTUOUS. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 14/11/2018 S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 TRUE COPY /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 14/11/2018 ITA NO.3206/AHD/14 WITH CO NO. 3/AHD/2015 [DCIT VS. M/S. ARVIND MILLS LTD.] A.Y. 2005-06 - 7 - 1.DATE OF DICTATION ON 01.11.2018 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E OTHER MEMBER 02.11.2018 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER