M/s. Exxon Mobil Lubricants (P) Ltd., Gurgaon V. DCIT, New Delhi

CO 361/DEL/2010

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7177 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 14 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 12-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 29-02-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 29-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G CHANDRA SHEKHAR
• Assessee Lawyers: V K SAKSENA
• Keywords: Reopening of assessment; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

ITA 4401/D/2010 & CO 361/D/2010 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `B NEW DELHI BEFORE SHRI K.G. BANSAL, ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.NO.4401/DEL/2010 ASSESSMENT YEAR : 2004-05 DY.COMMISSIONER OF INCOME TAX, VS EXXON MOBIL LU BRICANTS(P) LTD., CIRCLE 11(1), SIGNATURES TOWERS, TOWER-A, C.R. BUILDING, 3 RD FLOOR, SOUTH CITY-I, NH-8, NEW DELHI. GURGAON. C.O. NO. 361/DEL/2010 ASSESSMENT YEAR: 2004-05 EXXON MOBIL LUBRICANTS(P) LTD., VS DCIT, CIRCLE 11 (1), GURGAON. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI V.K. SAKSENA, CIT DR RESPONDENT BY : SHR I G. CHANDRA SHEKHAR, CA O R D E R PER CHANDRA MOHAN GARG, JUDICIAL MEMBER THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE HAVE BEEN PREFERRED AGAINST THE ORDER DATED 9.8.2010 OF LD. CIT(A)-XIII, NEW DELHI, BY WHICH HE ALLOWED THE APPEAL OF THE ASSESS EE AGAINST THE ASSESSMENT ORDER OF AO DATED 21.10.2009 DELETING THE DISALLOWA NCE OF RS. 2,13,71,745/- MADE BY THE AO BEING EXPENSES CONTINGENT IN NATURE. THE CASE IS PERTAINING TO ASSESSMENT YEAR 2004-05. ITA 4401/D/2010 & CO 361/D/2010 2 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE AO MADE THE ABOVE ADDITION BY HOLDING THAT THE ASSESSEE WAS ALLOWED P ROVISIONS ON ACCOUNT OF TRANSPORTATION, STORAGE AND HANDLING CHARGES ETC. A ND THESE PROVISIONS WERE NOT FOR ASCERTAINED LIABILITIES, HENCE, THE SUM OF RS. 2,13,71,745/- IS DISALLOWED AND, CONSEQUENTLY, THE SAME IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 3. THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) A ND FIRST OF ALL, DEALING WITH GROUND NO.1, THE LD CIT(A) HELD THE ACTION OF THE AO WITH REGARD TO INITIATION OF REASSESSMENT PROCEEDINGS TO BE VALID. FURTHER, DEALING WITH GROUNDS NO. 2 TO 8, THE LD. CIT(A)CONCLUDED THAT SU BSEQUENT PAYMENTS MADE AGAINST THE ACTUAL INVOICES EXCEED THE PROVISION CR EATED IN THE BOOK OF ACCOUNTS AND, THUS, IT FORTIFIES THE CONTENTION OF THE ASSESSEE THAT THE PROVISION WAS CREATED ON A RATIONAL AND CONSERVATIV E BASIS. THEREFORE, HE TOOK THE VIEW THAT THE PROVISION FOR EXPENSES CREAT ED WAS ASCERTAINABLE IN NATURE AND THE AO WAS NOT JUSTIFIED IN DISALLOWING THE ABOVE PROVISIONS. THE LD. CIT(A) DELETED THE ABOVE ADDITION. BEING A GGRIEVED BY THE SAID ORDER, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL ON FOLLOWING GROUNDS:- 1. THE ORDER OF THE LD. CIT(A) IS WRONG, PERVERS E, ILLEGAL AND AGAINST THE PROVISIONS OF LAW, LIABLE T O BE SET ASIDE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE DISALL OWANCE ITA 4401/D/2010 & CO 361/D/2010 3 OF RS.2,13,71,745/- MADE BY THE AO BEING EXPENSES CONTINGENT IN NATURE. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AME ND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. 4. THE ASSESSEE FILED CROSS OBJECTION NO. 361/DEL/2 010 ARISING FROM THE ABOVE APPEAL ON FOLLOWING GROUNDS:- 1.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN HOLDING TH AT THE INITIATION OF REASSESSMENT PROCEEDINGS BY THE AO UN DER SECTION 147 OF THE I.T. ACT, 1961 WAS VALID AND WAS NOT BASED ON A MERE CHANGE OF OPINION. 1.2 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) HAS ERRED IN NOT APPRECIATIN G THE INITIATION OF REASSESSMENT PROCEEDINGS WAS NOT BASE D ON ANY TANGIBLE MATERIAL ON RECORD AND WAS BASED ON CONJECTURES AND SURMISES. 5. WHILE DEALING WITH GROUND NO.1, THE LD. CIT(A) H ELD THAT REOPENING OF ASSESSMENT BY THE AO IS NOT BASED ON MERE CHANGE OF OPINION AND, THEREFORE, CANNOT BE REJECTED ON TECHNICAL GROUNDS AND HE CONC LUDED WITH THE OBSERVATION THAT THE INITIATION OF REASSESSMENT PRO CEEDINGS WAS VALID BUT WHILE DEALING WITH GROUNDS NO. 2 TO 8, THE LD. CIT( A) ALLOWED THE APPEAL OF THE ASSESSEE ON MERITS. HENCE, THIS APPEAL BY THE REVENUE AND IN CONSEQUENCE OF THE SAME, THE ASSESSEE FILED CROSS O BJECTION. ITA 4401/D/2010 & CO 361/D/2010 4 6. THE LD. COUNSEL APPEARING FOR THE ASSESSEE SUBMI TTED A COPY OF REASONS FOR NOTICE U/S 148 OF THE ACT, WHICH IS REP RODUCED AS UNDER:- EXXON MOBIL LUBRICANTS PVT. LTD. A.Y. 2004-05 REASONS FOR NOTICE U/S 148 OF THE IT ACT, 1961 ON VERIFICATION OF THE CASE RECORDS, IT HAS BEEN OBSERVED THAT PROVISIONS FOR EXPENSES LIKE TRANSPOR TATION, STORAGE, HANDLING CHARGES ETC. AMOUNTING TO RS.2,13,71,745/- IS NOT ASCERTAINED LIABILITY WHICH SHOULD HAVE BEEN DISALLOWED. IN THE ASSESSMENT COMPLETED U/S 143(3) OF THE I.T. ACT, THE SAME HAS NOT BEEN ADDED BACK/DISALLOWED. FROM THE FACTS DISCUSSED ABOVE, I HAVE REASON TO BELIEVE THAT THE INCOME OF THE ASSESSEE CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BECAUSE OF THE FAILURE ON PA RT OF THE ASSESSEE TO DISCLOSE ITS INCOME FULLY AND TRULY . ISSUE NOTICE U/S 148 OF THE I.T. ACT. SD/- (R. N. POONIA) DY.COMMISSIONER OF INCOME TAX DATED: 06.03.2009 CIRCLE 11(1), NEW DELHI 7. THE ASSESSEE FILED CROSS OBJECTIONS ON THE GROUN D THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE INITIATION OF PROCEEDINGS OF REASSESSMENT BY AO U/S 147 OF THE ACT WAS VALID WAS NOT BASED ON MERE CHANGE OF OPINION. THE ASSESSEE ALSO OBJECTED THAT THE INITI ATION OF REASSESSMENT PROCEEDINGS WAS NOT BASED ON ANY TANGIBLE MATERIAL ON RECORD AND IT WAS ONLY BASED ON CONJECTURES AND SURMISES. ITA 4401/D/2010 & CO 361/D/2010 5 8. REPLYING TO THE CROSS OBJECTIONS OF THE ASSESSEE , THE LD. DR SUPPORTED THE ACTION OF THE AO AND CONFIRMATION OF ITS VALIDI TY BY LD. CIT(A) BY SUBMITTING THAT DURING THE COURSE OF ORIGINAL ASSES SMENT PROCEEDINGS, THE ASSESSEE DID NOT SUBSTANTIATE AS TO HOW THE PROVISI ONS CREATED WERE ASCERTAINABLE IN NATURE. HE ALSO SUBMITTED THAT TH E RE-OPENING OF ASSESSMENT ACTION WAS APPROVED BY THE CIT(A) AS THE RE-OPENING OF ASSESSMENT UNDERTAKEN BY THE AO WAS NOT BASED ON MERELY CHANGE OF OPINION, AND, THEREFORE, IT CANNOT BE REJECTED ON TECHNICAL GROUN DS. 9. THE AR APPEARING BEFORE US FOR THE ASSESSEE RELI ED UPON THE JUDGEMENTS OF HONBLE HIGH COURT OF DELHI IN THE CA SES OF CIT VS SIMBHAOLI SUGAR MILLS LTD. REPORTED AS 333 ITR 470 (DELHI) AN D CIT VS INDIAN SUGAR AND GENERAL INDUSTRY EXPORT IMPORT CORPN. LTD. REPO RTED AS 170 TAXMANN 229 (DELHI) WHERE THE HONBLE HIGH COURT HELD THAT THE REASSES SMENT PROCEEDINGS U/S 148 READ WITH SECTION 147 OF THE AC T CANNOT BE INITIATED MERELY BASED ON THE AUDIT REPORT. IN CASE OF INDIA N SUGAR AND GENERAL INDUSTRY EXPORT IMPORT CORPN. LTD.(SUPRA), HONBLE HIGH COURT HELD THAT IF THERE IS NOTHING TO SUGGEST FROM THE LANGUAGE OF TH E NOTE OR PROCEEDINGS FOR REOPENING OF ASSESSMENT THAT THE AO HAD APPLIED HIS MIND FOR THE PURPOSE OF ISSUING NOTICE U/S 148 OF THE ACT, THEN, PROCEEDING S CANNOT BE CONSIDERED AS VALID. ITA 4401/D/2010 & CO 361/D/2010 6 10. IN THE CASE IN HAND, THE ASSESSEE SUPPORTED HIS CROSS OBJECTIONS AND OBJECTED THE APPEAL OF THE ASSESSEE BY SUBMITTING F OLLOWING CITATIONS:- 1. SUPREME COURT DECISION IN THE CASE OF CIT VS KELVIN ATOR OF INDIA LIMITED, 228 CTR 488 2. SUPREME COURT DECISION IN THE CASE OF CIT VS FORAME R FRANCE 264 ITR 567 3. GUJARAT HIGH COURT DECISION IN THE CASE OF KAIRA DI STRICT COOPERATIVE MILK PRODUCERS UNION LIMITED VS ACIT 22 0 ITR 194 4. DELHI HIGH COURT DECISION IN THE CASE OF JINDAL PHO TO FILMS LIMITED VS DCIT 234 ITR 170 5. DELHI HIGH COURT DECISION IN THE CASE OF CIT VS EIC HER LIMITED 294 ITR 310 6. CALCUTTA HIGH COURT DECISION IN THE CASE OF BERGER PAINTS INDIA LTD. VS JCIT 245 ITR 645 7. BOMBAY HIGH COURT DECISION IN THE CASE OF ASIAN PAI NTS LIMITED VS DCIT 308 ITR 195 8. SUPREME COURT DECISION IN THE CASE OF CIT VS A. GAJ APATHY NAIDU 53 ITR 114 9. DECISION OF DELHI ITAT IN THE CASE OF FREDERIC R HA RRIS (I) (P) LIMITED VS DCIT 81 ITD 227 10. DECISION OF PUNE HIGH COURT IN THE CASE OF VENKATES HWARA FARMS (P) LIMITED VS DCIT 84 ITD 212 11. SUPREME COURT DECISION IN THE CASE OF CALCUTTA COMP ANY LIMITED VS CIT 37 ITR 1 ITA 4401/D/2010 & CO 361/D/2010 7 11. AT THE OUTSET, WE OBSERVE THAT THE ASSESSEE HAS FILED A PAPER BOOK CONTAINING DOCUMENTS AND CITATIONS SPREAD IN 394 PA GES WITH A CERTIFICATE OF AUTHORIZED REPRESENTATIVE THAT THESE DOCUMENTS AND CITATIONS FROM SL. NO. 1 TO 29 WERE ON RECORD OF THE AO AS WELL AS CIT(A). AR ALSO POINTED OUT THAT FROM PAGE NO. 63 TO 75, THE COPY OF INVOICES, DETAI LS OF PAYMENTS RELATING TO THE PROVISIONS MADE FOR TRANSPORTATION, STORAGE AND HANDLING CHARGES WERE SUBMITTED BEFORE THE AO AT THE TIME OF ORIGINAL ASS ESSMENT PROCEEDINGS. BESIDES OTHER DOCUMENTS, THESE INVOICES WERE ALSO T AKEN INTO CONSIDERATION BY THE AO BEFORE PASSING THE ORIGINAL ASSESSMENT OR DER ON 22.12.2006. A COPY OF THE SAID ORDER HAS BEEN PLACED IN THE PAPER BOOK FROM PAGE NOS. 51 TO 56. 12. IN THE CASE OF SRI KRISHNA (P) LTD. VS ITO(1996 ) 87 TAXMAN 315(SC), THE HONBLE APEX COURT HELD THAT THE POWER CONFERRE D UPON THE ITO BY SECTION 147 AND 148 OF THE ACT IS NOT AN UNBRIDLED ONE. IT IS HEDGED WITH SEVERAL SAFEGUARDS CONCEIVED IN THE INTEREST OF ELI MINATING ROOM FOR ABUSE OF THIS POWER BY THE AO. IN THE CASE OF ITO VS LAKHMA NI MEWAL DAS (1976) 103 ITR 437 (SC) , IT WAS ALSO HELD BY HONBLE APEX COURT THAT THE P OWERS OF THE ITO TO REOPEN ASSESSMENT, THOUGH WIDE, ARE N OT PLENARY. THE WORDS OF THE STATUTE ARE REASON TO BELIEVE AND NOT REA SON TO SUSPECT. THE REOPENING OF AN ASSESSMENT AFTER A LAPSE OF MANY YE ARS IS A SERIOUS MATTER. ITA 4401/D/2010 & CO 361/D/2010 8 THE HONBLE SUPREME COURT CLEARLY HELD THAT THE PRO CEEDINGS U/S 147 AND 148 OF THE ACT CAN ONLY BE INITIATED WHEN THE AO IS HAVING REASON TO BELIEVE NOT MERELY ON THE SUSPECTED REASONS. 13. IN THE CASE OF CIT VS BHANJI LAVJI(1979) 79 ITR 582(SC) , HONBLE APEX COURT HELD THAT WHEN THE PRIMARY FACTS NECESSA RY FOR THE ASSESSMENT ARE FULLY AND TRULY DISCLOSED, THE ITO WILL NOT BE ENTITLED ON CHANGE OF OPINION TO COMMENCE PROCEEDINGS FOR REASSESSMENT. SIMILARLY, IF HE HAS RAISED A WRONG LEGAL INFERENCE FROM THE FACTS DISCL OSED, HE WILL NOT, ON THAT ACCOUNT, BE COMPETENT TO COMMENCE REASSESSMENT PROC EEDINGS. 14. IN THE PRESENT CASE, THE LD. DR DID NOT DISPUTE THAT THE AO INITIATED THE PROCEEDINGS OF REOPENING OF ASSESSMENT ON THE BASIS OF DOCUMENTS AND MATERIAL WHICH WAS VERY WELL BEFORE HIM AT THE TIME OF EARLIER ORIGINAL ASSESSMENT. IN THE CASE OF ITO VS NAWAB MIR BARKAT ALI KHAN BAHADUR (1974) 97 ITR 239 (SC), THE HONBLE SUPREME COURT HELD THAT HAVING SECOND THOUGHTS ON THE SAME MATERIAL, AND OMISSION TO DRAW THE CORRECT LEGAL PRESUMPTION DURING ORIGINAL ASSESSMENT, DO NOT WARR ANT THE INITIATION OF A PROCEEDING UNDER SECTION 147 OF THE ACT. IN THE PR ESENT CASE, WE ARE SATISFIED WITH THE ARGUMENT OF ASSESSEE THAT THE AO INITIATED THE REASSESSMENT PROCEEDINGS ON THE BASIS OF SAME MATER IAL AND DOCUMENTS WHICH WERE SUBMITTED TO HIM AT THE TIME OF ORIGINAL ASSESSMENT. ITA 4401/D/2010 & CO 361/D/2010 9 15. ON THE BASIS OF FOREGOING DISCUSSION, WE HOLD T HAT THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE AO PE RTAINING TO REOPENING OF ASSESSMENT AS THERE IS NOTHING TO SHOW FROM THE DOC UMENTS SUBMITTED BEFORE US AND THE REASONS, AS MENTIONED HEREINABOVE IN PAR A NO. 6 OF THIS ORDER, THAT AT THE TIME OF ISSUING NOTICE U/S 148, THERE W AS NO SUBSTANTIAL OR ADDITIONAL MATERIAL OR OPINION CONSIDERED BY THE AO AND WE ARE CONSTRAINED TO HOLD THAT THE AO INITIATED THE PROCEEDING WITHOU T ANY SUBSTANTIAL REASON TO BELIEVE THAT THERE IS ESCAPEMENT OF INCOME ON ACCOU NT OF FAILURE ON THE PART OF ASSESSEE TO SUBMIT THE TRUE AND FULL FACTS IN TH E CASE. 16. FURTHER, WE HOLD THAT THE INITIATION OF REASSES SMENT PROCEEDING WAS NOT BASED ON ANY TANGIBLE MATERIAL ON RECORD AND WA S MERELY BASED ON CONJECTURES AND SURMISES, WHICH IS NOT SUSTAINABLE. IN THE RESULT, THEREFORE, THE CO FILED BY THE ASSESSEE DESERVES TO BE ALLOWED 17. WITH THE ABOVE OBSERVATIONS, THE CO OF THE ASSE SSEE IS ALLOWED AND THE PROCEEDINGS U/S 147 AND 148 OF THE ACT ARE DECL ARED AS INVALID AS WE HAVE FOUND THAT THE PROCESS OF INITIATION OF REASSE SSMENT PROCEEDING WAS NOT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND TH E RULES MADE THEREUNDER. WE FURTHER HOLD THAT AS WE HAVE ALLOWED THE CROSS O BJECTIONS OF THE ASSESSEE HENCE, THE APPEAL BY THE REVENUE HAS BECOME INFRUCT UOUS. IT IS NEEDLESS TO DECIDE THE APPEAL OF THE REVENUE ON MERITS. ITA 4401/D/2010 & CO 361/D/2010 10 18. IN THE RESULT, THE CROSS OBJECTION OF THE ASSES SEE IS ALLOWED AND CONSEQUENTLY, THE APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.4.2012. SD/- SD/- (K.G. BANSAL) (CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 12TH APRIL, 2012 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR