FAG BEARINGS iNDIA lIMITED, Baroda V. ACIT., Circle-1(2), Baroda

CO 36/AHD/2008

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7292 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 5 month(s) 5 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 06-07-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 17-04-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 01-02-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: P O MANEJA BARODA
• Keywords: Reopening of assessment; Depreciation; Tangible material; Difference of opinion; Assessment record; Reason to believe; Change of opinion; Revenue expenditure; Reassessment proceedings
• Section: 143(3); 10B; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD D BENCH BEFORE: SHRI D.K. TYAGI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTAN T MEMBER I.T.A. NO.4564/AHD/2007 A. Y. 2001-02 WITH C.O. NO.36 OF 2008 (BY ASSESSEE) THE ACIT, CIRCLE(2) BARODA APPELLANT VS. M/S FAG BEARING INDIA LTD. AT & P.O. MANEJA BARODA RESPONDENT DEPARTMENT BY : SHRI B.L. YADAV, SR. D.R. ASSESSEE BY : SHRI MILIN MEHTA, A.R. DATE OF HEARING : 21.05.2012 DATE OF PRONOUNCEMENT 06.07.2012 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER THESE REVENUES APPEAL AND ASSESSEES C.O. ARE AGAI NST THE ORDER OF LD.CIT(A)-1,BARODA DATED 25.09.2007 PASSED IN AP PEAL NO.CAB/1-327/06-07. 2. THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPE AL:- 1(A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN QUASHING THE AS SESSMENT MADE U/S 147 R.W.S. 143(3) ON 27.11.2006 MERELY ON THE GROUND THAT, IN THE ORIGINAL ASSESSMENT, THE ASSESS ING OFFICER HAD NOTED THE EXISTENCE OF TWO UNITS AND HAD CALLED FOR SEPARATE ACCOUNTS OF THE EOU UNIT, WITHOUT APPRECIA TING THAT I.T.A. NO.4564/AHD/2007 A. Y. 2001-02 WITH CO NO.36/AHD/2008 2 THE PROVISIONS OF SECTION 147 R.W. EXPLANATION 2(C) (I), AS AMENDED W.E.F. 01.04.1989, NO MORE REQUIRE INFORMA TION OR NEW MATERIAL BUT ONLY REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT IRRESPECTIVE OF THE SOURCE AND T HE BASIS OF THE SAME, WHICH MAY INCLUDE REAPPRAISAL OF THE S AME MATERIAL FOLLOWING A FINDING IN ANOTHER YEAR, AS WA S THE CASE HERE. (B) THE LD. CIT(A) ERRED IN DECIDING THE MATTER WIT HOUT CONSIDERING THE BINDING DECISION OF THE JURISDICTIO NAL HIGH COURT IN THE CASE OF PRAFUL CHUNNILAL PATEL & VASAN T CHUNNILAL PATEL VS. ACIT 236 ITR (GUJ) LAYING DOWN: MERELY B ECAUSE DURING THE ASSESSMENT PROCEEDINGS THE RELEVANT MATE RIAL WAS ON RECORD OR COULD HAVE BEEN WITH DUE DILIGENCE DIS CERNED BY THE ASSESSING OFFICER FOR THE PURPOSE OF ASSESSING A PARTICULAR ITEM OF INCOME CHARGEABLE TO TAX, IT CANNOT BE INFE RRED THAT THE ASSESSING OFFICER MUST NECESSARILY HAVE DELIBER ATED OVER IT AND TAKEN IT OUT WHILE ASCERTAINING THE TAXABLE INCOME OR THAT HE HAD FORMED ANY OPINION IN RESPECT THEREOF. IN OUR VIEW, THE WORDS ESCAPED ASSESSMENT WHERE THE RETU RN IS FILED, ARE APT TO COVER THE CASE OF DISCOVERY OF A MISTAKE IN THE ASSESSMENT CAUSED BY EITHER AN ERRONEOUS CONSTR UCTION OF THE TRANSACTION OR DUE TO ITS NON-CONSIDERATION, OR , CAUSED BY A MISTAKE OF LAW APPLICABLE TO SUCH TRANSFER OR TRA NSACTION. (PP.839-40 OF 236 ITR), THUS RENDERING THE CONSIDER ATION OF CHANGE OF OPINION AS IRRELEVANT. (C ) THE LD. CIT(A) ERRED IN QUASHING THE ASSESSMEN T BY RELYING ON CERTAIN DECISIONS WHICH IMPLIEDLY STAND OVERRULED BY THE SUPREME COURT DECISION IN THE CASE OF ACIT V S. RAJESH JHAVERI STOCK BROKERS PVT. LTD. 291 ITR 500 (SC) IN REGARD TO THE AMENDED PROVISIONS OF SECTION 147. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN CANCELING THE A LLOCATION OF DEPRECIATION ON RESIDENTIAL QUARTERS AND DTA PROCES SING MACHINE AND ADVERTISEMENT EXPENSES TO THE EXPORT OR IENTED UNIT (EOU) IN THE RATIO OF TURNOVER, IN COMPUTATION OF DEDUCTION U/S 10B OF THE ACT. 3. AS REGARDS GROUND NO.1 WHICH RELATES TO REOPENI NG OF THE ASSESSMENT BY THE A.O. U/S 147 OF THE ACT, BRIEF FA CTS ARE THAT THE ORIGINAL RETURN OF INCOME WAS FILED ON 30.10.2001 WHICH WAS PROCESSED U/S 143(1)(A) ON 23.11.2002 RESULTING IN REFUND OF RS.2,93,32,621 /-. THEREAFTER ASSESSMENT I.T.A. NO.4564/AHD/2007 A. Y. 2001-02 WITH CO NO.36/AHD/2008 3 U/S 143(3) WAS COMPLETED ON 30.03.2004. SUBSEQUENT LY, A NOTICE U/S 148 OF THE ACT WAS ISSUED ON 29.03.2006. ON THE ASSESSEE S REQUEST, THE REASONS FOR REOPENING WERE INTIMATED, THE SAME ARE REPRODUCED A S UNDER:- IN THIS CASE THE ASSESSEE FILED THE RETURN OF INCO ME FOR A.Y. 2001-02. IT IS NOTICED THAT THE ASSESSEE HAS NOT APPORTIONED THE DEPRECIATION ON RESIDENTIAL BUILDIN G, MOTOR CARS AND DATA PROCESSING MACHINES BETWEEN ITS DTA A ND EOU IN THE RATIO OF THEIR TURNOVER FOR THE PURPOSE OF C OMPUTATION OF BENEFIT U/S 10B AND THE ENTIRE AMOUNT HAS BEEN C HARGED TO THE DTA ONLY AND THE ASSESSEE HAS CHARGED DEPRECIAT ION ON DATA PROCESSING MACHINES OF RS.10,528/- ONLY IN RES PECT OF ITS EOU. THE AMOUNT OF DEPRECIATION ON RESIDENTIAL BUI LDING RS.2,92,645/-, THE DEPRECIATION ON MOTOR CAR IS RS. 7,16,656/- AND THE DEPRECIATION ON DATA PROCESSING MACHINES IS RS.50,21,626/-. IT IS ALSO NOTICED THAT THE ASSESS EE HAS CLAIMED THE ENTIRE AMOUNT OF RS.84.85 LAKHS ON ACCO UNT OF ADVERTISING EXPENSES TO THE DTA UNIT ONLY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y. 2003-04, IT WAS FOUND AND HELD THAT THE ABOVE MENTIONED EXPENSES AND DEPRECIA TION IN RESPECT OF THE ABOVE ASSETS ARE TO BE CHARGED TO TH E EOU ALSO IN ORDER TO COMPUTE THE BENEFIT U/S 10B IN THE RATI O OF TURNOVER OF EOU AND DTA BECAUSE THESE EXPENSES AND THESE ASSETS IS RELATABLE TO THE EOU ALSO. AS PER SUBMIS SION OF THE ASSESSEE, THE TURNOVER OF THE EOU IS APPROXIMATELY 1/5 TH OF THE TOTAL TURNOVER DURING THE A.Y. 2001-02 HENCE IT IS CLEARLY THAT THE ASSESSEE HAS CLAIMED MORE BENEFITS U/S 10B THAN IT IS ENTITLED TO, BY NOT CLAIMING THESE EXPENSES AND DEPRECIATION IN RESPECT OF ITS EOU. AT THE SAME TI ME, BY INDULGING INTO THIS EXERCISE THE ASSESSEE HAS REDUC ED ITS TAXABLE PROFIT TO THE EXTENT AS DISCUSSED ABOVE.. IN VIEW OF THESE FACTS, THEN THE INCOME TO THE EXTENT AS DISCU SSED ABOVE HAS ESCAPED ASSESSMENT. 4. THE ASSESSEE OBJECTED TO THE REOPENING OF THE A SSESSMENT VIDE ITS LETTER DATED 04.10.2006. ON MERITS OF THE ISSUE OF APPORTIONING EXPENSES BETWEEN EOU AND THE DTA, DETAILED SUB MISSIONS WERE MADE BY THE ASSESSEE BEFORE THE A.O. HOWEVER, THE A.O. REJECTED THE SAM E AND EFFECTED REALLOCATION OF EXPENSES WHICH RESULTED IN AN ADDITION OF RS.49, 01,141/-. I.T.A. NO.4564/AHD/2007 A. Y. 2001-02 WITH CO NO.36/AHD/2008 4 5. AGGRIEVED BY THIS ORDER OF THE A.O. ASSESSEE WE NT IN APPEAL BEFORE THE LD. CIT(A). WHILE AGITATING THE GROUND TAKEN B Y THE ASSESSEE BEFORE THE LD. CIT(A) REGARDING REASSESSMENT PROCEEDINGS, THE CONT ENTION OF THE ASSESSEE WAS THAT THE A.O. HAD ALREADY FRAMED REGULAR ASSESS MENT U/S 143(3). DURING THESE ASSESSMENT PROCEEDINGS FULL DETAILS WITH REGA RD TO THE CLAIM OF DEDUCTION U/S 10B WERE FURNISHED BY HIM AND THE MATTER WAS EX AMINED BY THE A.O. AT THE TIME OF ORIGINAL ASSESSMENT, AFTER TAKING INTO CONSIDERATION THE DETAILED REPLY FURNISHED BY THE ASSESSEE GIVING THE BASIS OF ALLOCATION OF EXPENSES BETWEEN THE DTA AND THE EOU UNIT. IT WAS ALSO ARGU ED THAT THE A.O. HAD APPLIED HIS MIND TO THESE FACTS AND THE ASSESSEES CLAIM AT THE TIME OF ORIGINAL ASSESSMENT U/S 143(3) OF THE ACT AND DECIDED NOT TO MAKE ANY ADJUSTMENT TO THE PROFITS OF THE EOU. IN THIS REGARD, THE ASSESS EE REFERRED TO THE NOTICE/QUESTIONNAIRE ISSUED BY THE A.O. ON 18.03.20 04, A COPY OF WHICH WAS ALSO PLACED ON RECORD IN WHICH SPECIFIC CLARIFICATI ON IN RESPECT OF CLAIM U/S 10B WAS SOUGHT AT SL. NO.13 OF THAT LETTER. IT WAS ALS O EXPLAINED THAT THE ASSESSEE REPLIED TO THIS QUERY VIDE ITS LETTER DATED 25.03.2 004 IN WHICH THE DETAIL WORKING OF THE P & L ACCOUNT OF THE EOU HAD BEEN FURNISHED GIVING THE ALLOCATION OF COMMON EXPENSES ALONG WITH THE BASIS OF THE ALLOCAT ION. THE A.O. EXAMINED THE ISSUE AND CONSIDERED THE ASSESSEES CLAIM AT TH E TIME OF ORIGINAL ASSESSMENT AND AFTER APPLICATION OF HIS MIND TOOK A DECISION NOT TO MAKE ADJUSTMENTS TO THE PROFITS OF THE EOU UNIT. IT WAS FURTHER ARGUED THAT FOR THE REOPENING OF THIS ASSESSMENT THE A.O. HAS RELIED UP ON ONLY THE ASSESSMENT RECORD AND THE RETURN OF INCOME FURNISHED BY THE AS SESSEE DURING THE COURSE OF REGULAR ASSESSMENT PROCEEDINGS SOWING THAT IT IS ME RELY A REAPPRECIATION OF THE I.T.A. NO.4564/AHD/2007 A. Y. 2001-02 WITH CO NO.36/AHD/2008 5 SAME EVIDENCE AVAILABLE WITH HIM ON RECORD. THUS I T WAS ARGUED BEFORE LD. CIT(A) THAT IT AMOUNTS TO A CHANGE OF OPINION. PLA CING RELIANCE ON VARIOUS CASE LAWS IT WAS ARGUED THAT REOPENING OF ASSESSMENT HAS BEEN CANCELLED UNDER SIMILAR CIRCUMSTANCES INVOLVING CHANGE OF OPINION O N THE SAME SET OF FACT AND MATERIAL AVAILABLE ON RECORD. THE ASSESSEE PARTICU LARLY RELIED UPON THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF TECHSPAN IND IA P. LTD. V. ITO 283 ITO 212 (DEL) STATING THAT THE FACTS IN THIS CASE ARE ALMOS T IDENTICAL. RELIANCE WAS ALSO PLACED ON THE FOLLOWING DECISIONS:- (A) GARDEN SILK MILLS P. LTD. V. DCIT & ANOTHER, 237 ITR 668(GUJ). (B) STARTRONIC INVESTMENT CONSULTANTS P. LTD. V. DCIT IN ITA NO.2196/A/2002, ITAT AHMEDABAD. (C) GRUH FINANCE LTD. V. JT. CIT (ASSTT), 243 ITR 482 (GUJ) (D) CIT V. RAO THAKUR NARAYN SINGH 56 ITR 234 (SC ). 6. AFTER TAKING INTO CONSIDERATION THE SUBMISSIONS OF THE ASSESSEE LD. CIT(A) QUASHED THE REASSESSMENT PROCEEDINGS UNDERTA KEN BY THE A.O. BY OBSERVING AS UNDER:- I HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT IS PER TINENT TO POINT OUT THAT THE ASSESSING OFFICER IN THE ORIG INAL ASSESSMENT ORDER U/S. 143(3) DATED 30-3-2004 HAS RE CORDED IN THE FIRST PARA OF THE ORDER THAT 'THE ASSESSEE I S HAVING TWO DIFFERENT UNITS; ONE WHICH WAS ENGAGED IN THE BUSIN ESS SINCE 1962 AND THE OTHER UNIT SET UP AS 100% EXPORT ORIEN TED UNIT IN 1966-67. AFTER GOING THROUGH THE CASE RECORDS AN D ON THE BASIS OF DETAILS PLACED ON THE RECORD THE ASSESSMEN T PROCEEDINGS ARE FINALIZED...........'. FURTHER, IT IS NOTED THAT THE ASSESSING OFFICER VIDE PARA 13 OF ITS LETTER / QUESTIONNAIRE DATED 18-3-2004 HAD SPECIFICALLY REQUIRED THE APPEL LANT 'TO FURNISH CERTIFIED COPY OF THE PROFIT AND LOSS ACCOU NT AND THE BALANCE SHEET OF THE UNIT (EOU) CLAIMING EXEMPTION OF INCOME U/S. 10B OF THE IT ACT' AND 'TO FURNISH THE SAME AL ONG WITH THE DETAILS OF SALES /PURCHASES, OTHER INCOME AND M AJOR I.T.A. NO.4564/AHD/2007 A. Y. 2001-02 WITH CO NO.36/AHD/2008 6 EXPENSES. IN CASE OF FAILURE, IT IS PROPOSED TO DIS ALLOW YOUR CLAIM AND CONSIDER THE SAME AS TAXABLE INCOME...... .....'. THE APPELLANT VIDE ITS LETTER DATED 25-3-2004 FURNISHED THE DETAILS AT PARA 11 BY STATING THAT WE ENCLOSE HEREWITH DETA ILED WORKING OF PROFIT AND LOSS ACCOUNT FOR THE YEAR END ED 31-03- 2001 FOR OUR SAID EOU (WHICH ALSO INCLUDES ALLOCATI ON OF COMMON EXPENSES ALONG WITH THE BASIS OF THEIR ALLOC ATION INCURRED FOR SAID EOU) AT ANNEXURE-AL. WE ALSO ENCL OSE HEREWITH COMPLETE BREAK UP OF PROFIT AND LOSS ACCOU NT AS PER SCHEDULE-VI OF THE COMPANIES ACT, SHOWING SEP ARATELY FOR EOU AND OTHER UNIT AT ANNEXURE-AM..... .........'. IN THIS WAY, IT IS OBSERVED THAT THE RELEVANT DETAILS HAD BEEN ASKED FOR BY THE ASSESSING OFFICER AND HAD BEEN FUR NISHED BY THE APPELLANT DURING THE ORIGINAL ASSESSMENT PROCEE DINGS. IT IS NOT THE ASSESSING OFFICER'S CASE THAT THE APPELL ANT FAILED TO FURNISH THE DETAILS CALLED FOR. ON THE OTHER HAND, THE ASSESSING OFFICER HAS CLEARLY MENTIONED IN THE BEGI NNING OF THE ASSESSMENT ORDER, WHICH IS A SPEAKING ORDER, TH AT HE HAD FINALIZED THE ASSESSMENT PROCEEDINGS AFTER GOING TH ROUGH THE CASE RECORDS AND ON THE BASIS OF DETAILS PLACED ON THE RECORDS. IT IS A MATTER OF RECORD THAT THE ASSESSIN G OFFICER ACCEPTED THE APPELLANT'S CLAIM OF ALLOCATION OF EXP ENSES FOR THE EOU UNIT. THAT BEING SO THERE IS NO MATERIAL BR OUGHT ON RECORD TO SHOW THAT THE RELEVANT DETAILS AND ALL TH E NECESSARY INFORMATION WERE NOT AVAILABLE ON RECORD. IT IS OBV IOUS THAT THE ASSESSING OFFICER APPLIED HIS MIND TO THE FACTS AND OTHER MATERIAL AVAILABLE BEFORE HIM AND ALLOWED THE APPEL LANT'S CLAIM U/S.LOB OF THE ACT IN RESPECT OF THE EOU. THE ASSESSING OFFICER HAS THUS CLEARLY CHANGED HIS OPINION WITH R EGARD TO THE SAME SET OF FACTS AND MATERIALS, ON WHICH HE HAD AL READY APPLIED HIS MIND, WHEN HE ISSUED NOTICE U/S. 148 OF THE ACT AND RESORTED TO THE RE-ALLOCATION OF EXPENSES BETWE EN THE EOU AND DTA IN THE RATIO OF THEIR TURNOVER. IN THIS CONTEXT, THE STRONG RELIANCE OF THE APPELLANT ON THE DECISIO N OF THE DELHI HIGH COURT IN THE CASE OF TECHSPAN INDIA P. L TD. (SUPRA) APPEARS VERY APT AND LOGICAL. THE HON'BLE DELHI HIG H COURT RECORDED THE FOLLOWING FACTS AND HELD AS UNDER: 'THE UNDERTAKING OF THE ASSESSEE ENGAGED IN THE BUSINESS OF DEVELOPMENT AND EXPORT OF COMPUTER SOFT WARE WAS IN A 'SOFTWARE TECHNOLOGY PARK' (STP) AND WAS E LIGIBLE FOR DEDUCTION U/S. I0A OF THE INCOME-TAX ACT, 1961. IN RESPECT OF THE A.Y. 2001-02, THE ASSESSEE FILED A RETURN OF INCOME. DURING THE ORIGINAL ASSESSMENT PROCEEDINGS, A DETAI LED INQUIRY WAS CONDUCTED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER ISSUED A SHOW CAUSE NOTICE ON MAR CH 9, 2004, REQUIRING THE ASSESSEE TO INDICATE THE ALLOCA TION OF EXPENSES TO THE SOFTWARE DIVISION AND THE FULFILLME NT JR I.T.A. NO.4564/AHD/2007 A. Y. 2001-02 WITH CO NO.36/AHD/2008 7 DIVISION AND EVEN SUGGESTED ALLOCATION ON PROPORTIO NATE BASIS. THE ASSESSEE HAD GIVEN A DETAILED REPLY JUSTIFYING THE ALLOCATION MADE BY IT. AFTER A DETAILED EXAMINATION OF THE SAME, THE ASSESSMENT WAS COMPLETED AND A DEDUCTION U/S. 10A TO THE EXTENT OF RS.4,86,62,452/- WAS ALLOWED. SUBSEQUENTLY, NOTICE WAS ISSUED U/S. 148 ON THE GRO UND THAT THE DEDUCTION U/S.LOA HAD BEEN ALLOWED IN EXCESS. THE HON'BLE DELHI HIGH .COURT,' ON A WRIT PETITION AGAINST THE NOTICE OF RE-ASSESSMENT HELD THAT 'IT W AS EVIDENT THAT NO NEW MATERIAL CAME TO LIGHT AND ON THE SAME SET OF FACTS, THE SUBSEQUENT ASSESSING OFFICER MERELY HAD A CHANGE OF OPINION WITH REGARD TO DEDUCTION U/S. 10A ALLOWE D TO THE ASSESSEE. IN THIS VIEW OF THE MATTER, THE REOPENING OF THE ASSESSMENT WOULD NOT BE JUSTIFIED AND WOULD BE WITH OUT JURISDICTION. ACCORDINGLY, THE REOPENING OF THE ASS ESSMENT BY ISSUANCE OF NOTICE U/S. 148.............. AND PROCE EDINGS PURSUANT THERETO ARE LIABLE TO BE QUASHED.' IT IS OBSERVED THAT THE FACTS IN THE APPELLANT'S CA SE ARE VERY SIMILAR TO THIS CASE. UNDER THE CIRCUMSTANCES, IT IS HELD THAT THE REASSESSMENT PROCEEDINGS UNDERTAKEN BY THE ASSESSING OFFICER AFTER COMPLETING THE ORIGINAL ASS ESSMENT U/S. 143(3) ARE BAD IN LAW AND ARE, THEREFORE, QUAS HED. AGGRIEVED BY THIS ORDER OF LD. CIT(A), NOW THE RE VENUE IS IN APPEAL BEFORE US. 7. AT THE TIME OF HEARING LD. D.R. VEHEMENTLY SUPP ORTED THE ACTION OF THE A.O. IN REOPENING THE ASSESSMENT OF THE ASSESSE E IN THIS CASE BY STATING THAT IN THE ORIGINAL ASSESSMENT PROCEEDINGS THE A.O . HAS NOT MADE ANY OPINION ABOUT THE ALLOCATION OF EXPENSES BETWEEN THE DTA AN D EOU AS THERE IS NO EXPRESS OPINION ANYWHERE IN THE ASSESSMENT ORDER. SINCE THERE WAS NO OPINION MADE BY THE A.O., QUESTION OF CHANGE OF OPINION DOE S NOT ARISE AND THEREFORE, THE REOPENING OF ASSESSMENT HAS RIGHTLY BEEN DONE W HICH MAY KINDLY BE UPHELD. PLACING RELIANCE ON THE DECISION OF HONBL E APEX COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS P. LTD REPORTED IN 291 ITR 500 (SC) LD. D.R. ARGUED THAT FOR FORMATION OF BELIEF THAT A SSESSEES INCOME HAS I.T.A. NO.4564/AHD/2007 A. Y. 2001-02 WITH CO NO.36/AHD/2008 8 ESCAPE ASSESSMENT, THE PRINCIPLE OF CHANGE OF OPINI ON WILL NOT COME IN ITS WAY AND THEREFORE, HE PRAYED FOR SETTING ASIDE THE ORDE R PASSED BY LD. CIT(A) AND RESTORE THAT OF THE A.O. ON THE ISSUE OF REOPENING OF ASSESSMENT U/S 147 OF THE ACT. 8. LD. COUNSEL OF THE ASSESSEE, ON THE OTHER HAND, REITERATING THE SAME SUBMISSIONS AS MADE BEFORE LD. CIT(A) FURTHER SUBMITTED THAT IT IS A CASE OF CHANGE OF OPINION ON THE PART OF THE A.O. AS IN THE ORIGINAL ASSESSMENT AFTER TAKING INTO CONSIDERATION THE DETAILED REPLY OF THE ASSESSEE THE A.O. DECIDED NOT TO MAKE ANY ADJUSTMENT TO THE PROFITS OF EOU. FOR MAKING THIS SUBMISSION RELIANCE WAS PLACED BY HIM ON PAGES 67, 76 AND 78 TO 80 OF THE PAPER BOOK AND ON THE FOLLOWING CASE LAWS:- (I) STARTRONIC INVESTMENT CONSULTANTS PVT LTD V. DC IT, ITAT, AHD (ITA NO.2196/A/2002) (II) GARDEN SILK MILLS (P) LTD V. DCIT 237 ITR 66 8 (GUJ) (III) CIT V. KELVINATOR OF INDIA LTD. 320 ITRE 56 1 (SC) (IV) 283 ITR 212 (DELHI) 9. HEARD BOTH THE PARTIES AND PERUSED THE RECORD. WE FIND THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURIN G AND TRADING OF BALL AND ROLLERS BEARING HAVING TWO UNITS; ONE WHICH IS IN E XISTENCE SINCE 1962 AND THE OTHER UNIT SET UP AS 100% EXPORT ORIENTED UNIT IN 1 966-67. THE ORIGINAL ASSESSMENT WAS COMPLETED BY THE A.O. WITHOUT MAKING ANY ADJUSTMENT IN THE PROFIT OF EOU. THIS ASSESSMENT HAS BEEN REOPENED A FTER RECORDING THE REASONS TO THE EFFECT THAT DURING THE ASSESSMENT PROCEEDING S FOR ASSESSMENT YEAR 2003-04 IT WAS FOUND THAT ALLOCATION OF EXPENSES BE TWEEN THE DTA AND EOU I.T.A. NO.4564/AHD/2007 A. Y. 2001-02 WITH CO NO.36/AHD/2008 9 UNIT HAS NOT BEEN PROPERLY DONE AND EXPENSES ARE TO BE CHARGED TO THE EOU ALSO AND IN ORDER TO COMPUTE THE BENEFIT U/S 10B IN THE RATIO OF TURN OVER OF EOU AND THE DTA BECAUSE THESE EXPENSES ARE RELATABL E TO THE EOU ALSO. THE ASSESSEES CASE IS THAT THE QUESTION OF SUCH CLAIM WAS SUBJECT MATTER OF ENQUIRY AT THE STAGE OF ORIGINAL ASSESSMENT PROCEEDINGS WIT H A QUESTIONNAIRE DATED 18.03.2004 IN WHICH VIDE PARA 13 OF THIS LETTER THE A.O. SPECIFICALLY REQUIRED THE ASSESSEE TO FURNISH CERTIFIED COPY OF THE PROFIT AN D LOSS ACCOUNTS AND THE BALANCE SHEET OF THE UNIT EOU CLAIMING EXEMPTION OF INCOME U/S 10B OF THE ACT AND TO FURNISH THE SAME ALONG WITH THE DETAIL OF SA LES/PURCHASES, OTHER INCOME AND MAJOR EXPENSES. IN CASE OF FAILURE IT WAS PROP OSED TO DISALLOW THE CLAIM AND CONSIDER THE SAME AS TAXABLE INCOME OF THE ASSE SSEE (PAGE 67 OF THE PAPER BOOK). THE ASSESSEE VIDE ITS LETTER DATED 25.03.20 04 FURNISHED THE DETAIL AT PARA 11 BY STATING THAT REQUIRED DETAILS ARE ENCLOS ED ALONG WITH WORKING OF PROFIT AND LOSS ACCOUNTS FOR THE YEAR ENDING 31.03. 2001 FOR EOU UNIT. THESE DETAILS ALSO INCLUDED ALLOCATION OF COMMON EXPENSES ALONG WITH THE BASIS OF ALLOCATION INCURRED FOR THE SAID EOU. COMPLETE BRE AK UP OF THE PROFIT AND LOSS ACCOUNTS, AS PER SCHEDULE-VI OF THE COMPANIES ACT, SHOWING SEPARATELY FOR EOU AND OTHER UNITS WAS ALSO FURNISHED. THESE DETAILS ARE AVAILABLE AT PAGES 76 AND 78 TO 80 OF ASSESSEES PAPER BOOK. AFTER CONSIDERI NG THESE DETAILED SUBMISSIONS OF THE ASSESSEE THE A.O. HAD ACCEPTED T HE ASSESSEES CLAIM, THOUGH THIS FACT WAS NOT RECORDED IN THE BODY OF TH E ASSESSMENT PROCEEDINGS. SINCE THE ASSESSMENT ORDER IS SOUGHT TO BE REOPENED WITHIN THE PERIOD OF FOUR YEARS, THE ONLY GROUND ON WHICH THE ASSESSEE HAS CH ALLENGED THE REOPENING IS THAT IN AS MUCH AS THE A.O. HAD, DURING THE COURSE OF ORIGINAL ASSESSMENT I.T.A. NO.4564/AHD/2007 A. Y. 2001-02 WITH CO NO.36/AHD/2008 10 PROCEEDINGS, EXAMINED THE MATTER AND IF THE SECOND VIEW IS TAKEN NOW, IT IS CASE OF CHANGE OF OPINION AND THEREFORE IMPERMISSIB LE. AFTER GOING THROUGH THE PAPER BOOK WE FIND FORCE IN THE CONTENTION OF THE A SSESSEE THAT ON THE BASIS OF SAME MATERIAL THE A.O. CANNOT REOPEN THE ASSESSMENT EVEN WITHIN THE PERIOD OF FOUR YEARS. 10. IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD . REPORTED IN 320 ITR 561 (SC) HONBLE SUPREME COURT HAS HELD AS UNDER:- 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 O F THE INCOME-TAX ACT, 1961, BY THE DIRECT TAX LAWS (AMEND MENT) ACTS, 1987 AND 1989. AFTER THE AMENDMENT, THE ASSE SSING OFFICER HAS TO HAVE REASON TO BELIEVE THAT INCOME H AS ESCAPED ASSESSMENT, BUT THIS DOES NOT IMPLY THAT THE ASSESS ING 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 CHECK THE ABUSE OF POWER. HENCE AFTE R APRIL 1, 1989, THE ASSESSING OFFICER HAS POWER TO REOPEN AN ASSESSMENT, PROVIDED THERE IS TANGIBLE MATERIAL T O COME TO THE CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASON MUST HAVE A LINK WITH THE FORMA TION OF THE BELIEF. 11. THE FACT THAT IN THE BODY OF ORIGINAL ASSESSME NT ORDER THE A.O. DID NOT GIVE ANY SPECIFIC FINDING ACCEPTING THE CLAIM O F THE CLAIM OF THE ASSESSEE MAKES NO DIFFERENCE IF THE ISSUE WAS PROCESSED AT T HE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS. IT IS WELL SETTLED THAT IF THE ENTIRE MATERIAL HAS BEEN PLACED BY THE ASSESSEE BEFORE THE A.O. AT THE TIME WHEN THE ORIGINAL ASSESSMENT WAS MADE AND THE A.O. APPLIED HIS MIND T O THAT MATERIAL AND ACCEPTED THE VIEW TAKEN BY THE ASSESSEE. MERELY BE CAUSE HE DID NOT EXPRESS THIS IN THE ASSESSMENT ORDER THAT BY ITSELF WOULD N OT COME AS A GROUND TO A I.T.A. NO.4564/AHD/2007 A. Y. 2001-02 WITH CO NO.36/AHD/2008 11 CONCLUDE THAT ASSESSEE HAS ESCAPED ASSESSMENT AND T HEREFORE, THE ASSESSMENT NEEDED TO BE REOPENED. ON THE OTHER HAND, IF THE A .O. DID NOT APPLY HIS MIND AND OMITTED A LAPSE, THERE IS NO REASON WHY THE ASS ESSEE SHOULD BE MADE TO SUFFER THE CONSEQUENCE OF THAT LAPSE. IN THE CASE OF M/S STARTRONIC INVESTMENT CONSULTANTS PVT. LTD. VS. ITO IN ITA NO.2196/AHD/20 02, ON IDENTICAL FACTS HONBLE ITAT, AHMEDABAD PLACING RELIANCE ON THE DEC ISION OF JURISDICTIONAL HIGH COURT HAS HELD AS UNDER:- WE HAVE HEARD THE PARTIES AND CONSIDERED THE SUBMISSIONS. IT IS TRUE THAT THE ASSESSMENT HAS BE EN REOPENED WITHIN FOUR YEARS FROM THE END OF THE ASSE SSMENT YEAR AND IN VIEW OF THE DECISION OF THE GUJARAT HIG H COURT IN THE CASE OF PRAFFUL CHUNILAL PATEL [236 ITR 832] WH EREIN IT WAS HELD THAT ASSESSMENT CAN BE REOPENED EVEN IN CA SES WHERE THERE HAS BEEN COMPLETE DISCLOSURE OF ALL THE RELEVANT FACTS NECESSARY FOR ASSESSMENT AND THE WORDS ESCAP ED ASSESSMENT ARE APT TO COVER THE CASE OF DISCOVERY OF A MISTAKE IN THE ASSESSMENT CAUSED BY EITHER AN ERRON EOUS CONSTRUCTION OF THE TRANSACTION OR DUE TO ITS NON-C ONSIDERATION OR CAUSED BY A MISTAKE OF LAW APPLICABLE TO SUCH TR ANSFER OR TRANSACTION. BUT IN THE PRESENT, IN OUR OPINION, I S NOT A ONE OF THAT TYPE. HERE, THE ASSESSING OFFICER HAS SPECIFI CALLY ASKED FOR THE DETAILS AND THE ASSESSEE HAD SUBMITTED THE DETAILS OF PAYMENTS AND ONLY THEREAFTER THE ASSESSMENT HAS BEE N COMPLETED IN THESE CIRCUMSTANCES, TO SAY THAT THERE WAS NO CONSCIOUS DECISION HAS BEEN TAKEN IN THE ASSESSMENT ORDER MAY NOT BE PROPER. THE CASE, IN OUR OPINION, WOULD FALL WITHIN THE GARB OF ANOTHER DECISION OF GUJARAT HIGH COURT IN THE CASE OF GARDEN SILK MILLS (P) LTD. VS. DCIT [15 1 CTR 533] WHEREIN THE COURT QUASHED THE REOPENING WHERE IN TH E ORIGINAL ASSESSMENT, THE ASSESSEES CLAIM WAS ACCEP TED. IN THAT CASE, IT SEEMS THAT THE ASSESSING OFFICER HAS ACCEPTED THE CLAIM OF THE ASSESSEE AFTER CONSIDERING THE DEC ISION RENDERED BY THE GUJARAT HIGH COURT IN ANOTHER CASE AND THEREAFTER THE ASSESSMENT WAS REOPENED AS THE CLAIM WAS NOT RIGHTLY ALLOWED. IN VIEW OF THIS FACT, THE CIT(A) CONCLUDED THAT THE ASSESSING OFFICER CONSCIOUSLY APPLIED HIS MIND IN THE ORIGINAL ASSESSMENT AND THAT WAS THE REASON FOR QUA SHING THE REASSESSMENT. BUT IN THE PRESENT CASE, ACCORDING T O HIM, THE ASSESSEE HAD FURNISHED INFORMATION ABOUT THE IMPUGN ED PAYMENT BEFORE THE ASSESSING OFFICER (WITHOUT GIVIN G ANY I.T.A. NO.4564/AHD/2007 A. Y. 2001-02 WITH CO NO.36/AHD/2008 12 REASONS REGARDING ITS ALLOWABILITY AS REVENUE EXPEN DITURE) AND CONSIDERS THAT AFTER CONSCIOUS APPLICATION OF M IND, THE ASSESSING OFFICER HAS ACCEPTED THE CLAIM. THE COUR T IN THE CASE OF GARDEN SILK MILLS (P) LTD. (SUPRA) CLEARLY STATED THAT THE CONSISTENT VIEW IS THAT EVEN AFTER AMENDMENT O F SEC. 147 MERE CHANGE OF OPINION DOES NOT CONFER JURISDIC TION ON THE ITO TO INITIATE PROCEEDINGS FOR REASSESSMENT ME RELY BY RESORTING TO EXPLANATION 1 ON THE BASIS OF CHANGE O F OPINION. THE ASSESSING OFFICER MADE INQUIRY ABOUT THE CLAIM OF THE ASSESSEE AND ASKED FOR THE DETAILS, WHICH WERE FURN ISHED. THEREFORE, IN THESE CIRCUMSTANCES, IN OUR OPINION, IT CANNOT BE STATED THAT IT WAS NOT A CONSCIOUS DECISION OF THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE. SIMILA RLY, THE DELHI HIGH COURT IN THE CASE OF JINDAL PHOTO FILMS LTD. V S. DCIT [234 ITR 170] HELD THAT WHERE A CLAIM HAS BEEN CONS IDERED IN THE ORIGINAL ASSESSMENT WITHOUT ANY FURTHER MATERIA L ON RECORD, IT CANNOT BE REOPENED AND IT WOULD AMOUNT T O CHANGE OF OPINION, WHICH IS NOT PERMISSIBLE EVEN AFTER THE AMENDMENT AND THE CASE FALLS WITHIN THE FOUR YEARS TIME LIMIT. WE, THEREFORE, HOLD THAT REOPENING WAS NOT PROPER AND QUASH THE SAME. EVEN OTHERWISE, WE FIND THAT THE EXPENDITURE ON MEMBERSHIP FEES PAID TO VADODARA STO CK EXCHANGE IS COVERED BY THE MADRAS HIGH COURT IN THE CASE OF CIT VS. S. VENKATASUBRAMANIAM [207 CTR (MAD) 88] WH EREIN THE COURT HELD THAT THE PAYMENT OF ADMISSION FEES A S WELL AS CONTRIBUTION TO INFRASTRUCTURE DEVELOPMENT FUND TO ACQUIRE THE MEMBERSHIP OF COIMBATORE STOCK EXCHANGE AND TO CARR Y ON THE BUSINESS AT THE TERMINAL OF THE STOCK EXCHANGE IS REVENUE EXPENDITURE. IN VIEW OF THIS ALSO THE REOPENING DO ES NOT SEEM TO BE JUSTIFIED. WE, ACCORDINGLY, HOLD THAT R EOPENING OF ASSESSMENT WAS INVALID AND CANCEL THE ASSESSMENT. 12. THE CASE LAW OF HONBLE APEX COURT, RELIED UPO N BY THE REVENUE IN THE CASE OF RAJESH JHAVERI STOCK BROKERS PVT. LTD . (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THIS CASE BECAUSE IN THAT CASE NO SCRU TINY ASSESSMENT U/S 143(3) OF THE ACT WAS DONE IN THE FIRST PLACE AND THE RETURN FILED BY THE ASSESSEE WAS PROCESSED U/S 143(1)(A) OF THE ACT AND IN VIEW OF T HIS REASSESSMENT PROCEEDINGS U/S 147 OF THE ACT WERE HELD TO BE VALI D BY THE HONBLE APEX COURT. THE FACTS OF THIS CASE ARE INDISPUTABLY DISTINGUISH ED. I.T.A. NO.4564/AHD/2007 A. Y. 2001-02 WITH CO NO.36/AHD/2008 13 13. IN VIEW OF THE ABOVE DISCUSSION, THE ORDER PAS SED BY LD. CIT(A) QUASHING THE REASSESSMENT PROCEEDINGS UNDERTAKEN BY THE A.O. AFTER COMPLETING THE ORIGINAL ASSESSMENT U/S 143(3) OF TH E ACT, DOES NOT REQUIRE ANY INTERFERENCE ON OUR PART AND THE SAME IS HEREBY UPH ELD. 14. IN VIEW OF OUR DECISION UPHOLDING THE ORDER OF LD. CIT(A), QUASHING THE ASSESSMENT ORDER PASSED BY THE A.O., THE OTHER GROUNDS TAKEN BY THE REVENUE IN ITS APPEAL AND BY THE ASSESSEE IN THE C. O. DO NOT REQUIRE ANY ADJUDICATION. 15. IN THE RESULT, THE APPEAL OF THE REVENUE AS WE LL AS THE C.O. OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 06.07.2012 SD/- SD/- (A. MOHAN ALANKAMONY) (D.K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER TRUE COPY N.K. CHAUDHARY, SR. P.S. / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. / CONCERNED CIT 4. - / CIT (A) 5. , ! , '# / DR, ITAT, AHMEDABAD 6. $% &' / GUARD FILE. BY ORDER/ , ) / ' * ! , '# +