M/s. Sumitomo Corporation India Pvt. Ltd., New Delhi V. JCIT (OSD), New Delhi

CO 47/DEL/2012

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7976 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 29 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 05-11-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 06-08-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 07-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C S AGGARWAL SHRI R P MALL SHR
• Keywords: Difference of opinion; Assessment record; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 142(1); 147; 148; 154; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : G : NEW DELHI BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER ITA NO. 5664/DEL/2011 ASSESSMENT YEAR: 2003- 2004 JCIT (OSD), CIRCLE-9(1), M/S. SUMITOMO CORPORATION INDIA ROOM NO. 163 VS. PVT. LTD. C.R. BUILDING, NEW DELHI. 4 TH FLOOR, DLF CENTRE, SANSAD MARG, NEW DELHI. (APPELLANT) (RES PONDENT) CO NO. 47/DEL/2012 (IN ITA NO. 5664/DEL/20 11) ASSESSMENT YEAR: 2 003- 2004 M/S. SUMITOMO CORPORATION INDIA VS. JCIT (OS D) PVT. LTD. 4 TH FLOOR, DLF CENTRE, CIRCLE 9 (1), ROOM NO. 163 SANSAD MARG, NEW DELHI. C.R . BUILDING, (PAN : AABCS1887M) NEW DELHI. (APPELLANT) (RESP ONDENT APPELLANT BY : SHRI NEERAJ KUMAR, SR.DR RESPONDENT BY : SHRI C.S. AGGARWAL, ADVOCATE, SHRI R. P. MALL, ADVOCATE SHRI GAUTAM JAIN, FCA DATE OF HEARING : 06/08/2012 DATE OF PRONOUNCEMENT : /2012 ORDER PER I.C. SUDHIR, JUDICIAL MEMBER ITA NO. 5664/DEL/2011 & CO NO. 47/DEL/2012 2 THE REVENUE HAS QUESTIONED THE FIRST APPE LLATE ORDER ON THE SOLE GROUND THAT THE LD. CIT(A) HAS ERRED IN PRESSING TH E ASSTT. PROCEEDINGS U/S 147 / 143 (3) OF THE ACT INITIATED BY THE AO. 2. THE RELEVANT FACTS ARE THAT ASSESSMENT U/S 143(3) OF THE ACT WAS FRAMED ON 28.3.2006. SUBSEQUENTLY IT WAS NOTICED AS PER PARA 17 (A) OF 3CD REPORT THAT THE ASSESSEE HAD CLAIMED PROVISION FOR GRATUITY MADE ON ACCRUAL BASIS AMOUNTING TO RS. 1,45,42,573/- WHICH WAS NOT ALLOWABLE. IT WAS NOTED THAT ASSESSEE HAD ADDED BACK AN AMOUNT OF RS. 94,01,147/- ONLY UNDER THE HEAD PROVISION FOR GRATUITY MADE ON ACCR UAL BASIS AMOUNTING TO RS. 14542573/- WHICH WAS NOT ALLOWABLE. IT WAS NOTE D THAT ASSESSEE HAD ADDED BACK AN AMOUNT OF RS. 94,01.147/- ONLY UNDER THE HEAD PROVISION FOR GRATUITY. IT RESULTED IN EXCESS ALLOWANCE OF PROVI SION FOR GRATUITY AMOUNTING TO RS. 51,41,426/-. IT WAS HELD THAT THIS IS ESCAPEMENT OF INCOME ON ACCOUNT OF FAILURE ON THE PART OF THE ASS ESSEE TO ADD THE SAME IN ITS COMPUTATION OF INCOME AND ALSO THE FAILURE TO F URNISH THE COMPLETE DETAILS IN SUPPORT OF ITS CONTENTION OF HAVING PAID THE AMOUNT WITH NECESSARY DOCUMENTARY EVIDENCE. AFTER RECORDING REA SON THAT INCOME AMOUNTING TO RS. 51,41,426/- HAS ESCAPED ASSESSMENT , NOTICE U/S 148 OF THE ACT WAS ISSUED ON 4.3.2010 WITH PRIOR APPROVAL OF THE COMMISSIONER OF INCOME TAX. IN RESPONSE THE ASSESSEE FILED A LETTER DATED 6.4.2010 REQUESTING THAT THE RETURN FILED EARLIER ON 28.11.2 003 MAY BE TREATED AS A RETURN FILED IN RESPONSE TO NOTICE U/S 148 OF THE A CT. THE ASSESSMENT U/S ITA NO. 5664/DEL/2011 & CO NO. 47/DEL/2012 3 147 / 143(3) DISALLOWING RS. 51,41,426/- ON ACCOUNT OF PROVISION FOR GRATUITY WAS ACCORDINGLY FRAMED ON 29.12.2010. BEFO RE THE LD. CIT(A) THE ASSESSEE REITERATED THE OBJECTIONS RAISED BEFORE TH E AO THAT ALL THE FACTS / INFORMATION WERE AVAILABLE WITH THE AO AT THE TIME OF MAKING THE ASSESSMENT U/S 143 (3) OF THE ACT. THUS ACTION OF T HE AO IN REOPENING THE ASSESSMENT IS BAD IN LAW AS THE SAME IS BASED ON A MERE CHANGE OF OPINION OR RE-APPRECIATION OF THE SAME FACTS WITHOUT THEIR BEING ANY CHANGED CIRCUMSTANCES OR ADDITIONAL FACTS OR FRESH INFORMAT ION BETWEEN THE PASSING OF THE ORDER U/S 143(3) OF THE ACT AND THE DATE OF ISSUANCE OF NOTICE U/S 148 OF THE ACT. PROVISO TO SECTION 147 OF THE ACT W AS ALSO REFERRED WHICH RESTRICTS THE POWER OF THE AO TO REOPEN THE ASSESSM ENT AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR ONLY IF THERE IS FAILURE ON THE PART OF THE ASSESSEE TO FILE THE RET URN OF INCOME U/S 139, 142 (1) AND 148 AND THAT ALL MATERIAL FACTS NECESSARY F OR THE ASSESSMENT HAS BEEN TRULY AND FULLY DISCLOSED DURING THE COURSE OF ASSESSMENT U/S 143(3) OF THE ACT. BEING SATISFIED WITH THESE SUBMISSIONS THE LD. CIT(A) HAS HELD THAT THE REOPENING OF THE ASSESSMENT U/S 148 IN THE PRES ENT CASE IS NOT VALID AND HE HAS QUASHED THE ASSESSMENT. AGGRIEVED REVENU E IS IN APPEAL BEFORE THE TRIBUNAL. 3. IN SUPPORT OF THE GROUND THE LD. DR HAS BA SICALLY PLACED RELIANCE ON THE ASSTT. ORDER. HE SUBMITTED THAT INFORMATION REG ARDING GRATUITY EXPENSES WAS THERE BUT THE SAME WAS NOT COMMENTED UPON BY TH E AO IN ITS ORIGINAL ITA NO. 5664/DEL/2011 & CO NO. 47/DEL/2012 4 ASSTT. ORDER HENCE THE LD. CIT(A) IS NOT JUSTIFIED IN SAYING THAT THERE WAS CHANGE OF OPINION ON THE ISSUE DUE TO WHICH REOPENI NG WAS INITIATED. 4. THE LD. AR ON THE CONTRARY TRIED TO JUST IFY THE FIRST APPELLATE ORDER ON THE ISSUE. HE REITERATED THE SUBMISSIONS MADE BE FORE THE AUTHORITIES BELOW. HE POINTED OUT THAT THE ASSESSEE FILED ITS R ETURN OF INCOME DECLARING A TOTAL INCOME OF RS. 1,98,64,250/-. ALONGWITH THE RETURN OF INCOME IT HAD FILED AUDITORS REPORT AS WELL AS ITS ANNUAL FINANCI AL STATEMENT, WHICH SHOWED THAT AS PER THE 3CD REPORT A PROVISION FOR GRATUITY HAD BEEN MADE ON AN ACCRUAL BASIS AMOUNTING TO RS. 1,45,42,573/-. HOWEV ER WHILE COMPUTING ITS TOTAL INCOME IT ADDED BACK AND MADE DISALLOWANCE OF RS. 94,01.147/- OUT OF THE AFORESAID SUM REPRESENTING PROVISION FOR GRATUI TY OUT OF THE GRATUITY DEBITED IN PROFIT AND LOSS ACCOUNT. IN THIS REGARD HE REFERRED PAGE NO. 18 OF THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE (IN SHORT PB(A)). THE ASSESSEE COMPANY HAD THUS CLAIMED A DEDUCTION ONLY OF RS. 51,41,426/-. THE LD. AR REFERRED PAGE NOS. 1 TO 57 OF THE PB (A ). THESE ARE COPIES OF RETURN OF INCOME, FINANCIAL STATEMENT AND TAX AUDIT OR REPORTS. HE ALSO REFERRED PAGE NO. 58 TO 86 OF THE PB(A). THESE ARE COPIES OF ANNEXURES 1 TO XV FILED ALONGWITH THE RETURN OF INCOME. HE SUBMITT ED FURTHER THAT DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, THE AO HAD ISSUED A QUESTIONNAIRE DATED 10.8.2005 WHEREBY HE VIDE QUERY NO. 13 HAD DIRECTED THE ASSESSEE TO COVER THE DETAILS OF CONTRIBUTION O F ESI, PF AND GRATUITY EXPENSES WITH THE DUE DATE AND ACTUAL DATE OF PAYME NT AND VIDE QUERY NO. ITA NO. 5664/DEL/2011 & CO NO. 47/DEL/2012 5 18 SPECIFICALLY REQUIRED THE ASSESSEE THAT WHILE TH E PROVISION FOR GRATUITY AMOUNTING TO RS. 1.45 CRORES BE NOT ADDED BACK TO T HE INCOME. IN SUPPORT HE REFERRED PAGE NOS. 108 TO 110 OF THE PB (ASSESEE ) I.E. COPY OF THE QUESTIONNAIRE DATED 10.8.2005. HE SUBMITTED THAT IN RESPONSE TO THE AFORESAID QUESTIONNAIRE THE ASSESSEE HAD FILED ITS SUBMISSION DATED 4.10.2005 ALONGWITH THE SUPPORTING DOCUMENT, A COPY THEREOF HAS BEEN MADE AVAILABLE AT PAGE NOS. 111 TO 115 OF THE PB (A ). LD. AR SUBMITTED THAT THE AO HAD EXAMINED THE DETAILS AS WERE FURNIS HED AS PER ANNEXURE XI. HE REFERRED PAGE NOS. 180 TO 320 OF THE PB (A) I.E. COPY OF REPLY DATED 10.12.2010 OF THE ASSESSEE ALONGWITH THE DETAILS PR OVISION OF PAYMENT OF GRATUITY ACTUALLY PAID AND BONUS PAID BEFORE THE DU E DATE OF FILING OF THE RETURN. LD. AR ALSO REFERRED PAGE NOS. 91, 102, 257 , 260 AND 278 TO 380 OF THE PB(A). THESE ARE THE COPIES OF BANK STATEMENTS EVIDENCING PAYMENT OF BONUS AND GRATUITY AND REPLY DATED 10.12.2010 AND 2 7.12.2010 ALONGWITH ANNEXURES TO THE AO. HE ALSO REFERRED REPLY OF THE ASSESSEE DATED 13.10.2005 FILED BEFORE THE AO DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, A COPY THEREOF HAS BEEN MADE AVAILABLE AT PAGE NOS. 116 AND 117 OF THE PB(A). HE POINTED OUT THAT ALONGWITH THE REPLY DATED 4.10.2005 (PAGE NO. 111 TO 115 OF PB(A), THE ASSESSEE HAD ALS O PROVIDED THE EVIDENCE (AS ANNEXURE XI) TO SUBSTANTIATE THAT THE PAYMENT H AS BEEN MADE AND THEREAFTER ON 5.1.2006, IT FURNISHED THE PROOF OF P AYMENT TO GRATUITY. HE POINTED OUT THAT SUMMARY OF PAYMENT MADE AVAILABLE AT PAGE NO. 309 OF ITA NO. 5664/DEL/2011 & CO NO. 47/DEL/2012 6 THE (PB(A)) WHICH SHOWS THAT THE PAYMENT WERE ACTUA LLY MADE IN THE FINANCIAL YEAR 2002-03 TOWARDS GRATUITY OF RS. 45,5 7,381/- AND OF RS. 5,84,090/- TOWARDS BONUS HAD BEEN PAID IN THE FINAN CIAL YEAR 2003-04 BEFORE THE DUE DATE OF FILING OF THE RETURN. THE LD . AR POINTED OUT THAT THE AO THEREAFTER VIDE HIS ORDER OF ASSESSMENT U/S 143( 3) DATED 28.3.2006 AFTER THE DETAILED INQUIRY AND AFTER CONSIDERING TH E AFORESAID SUBMISSIONS AND EVIDENCES PLACED ON RECORD, HAD ACCEPTED THE SU BMISSIONS OF THE ASSESSEE IN THE ORDERS OF THE ASSESSMENT AND AS SUC H HE HAD NOT MADE ANY DISALLOWANCE, AS NONE WAS WARRANTED IN LAW IN RESPE CT OF AFORESAID SUM AND COMPUTED THE TOTAL INCOME OF THE ASSESSEE AT RS. 4, 87,28,530/- AND MADE AN ADJUSTMENT OF RS. 2,88,64,284/- AS PER THE ORDER OF THE TPO. ON 4.3.2010 THE AO HOWEVER ISSUED A NOTICE U/S 148 OF THE ACT WHICH IS BEYOND A PERIOD OF FOUR YEARS FROM THE END OF THE A SSESSMENT YEAR. THE ASSESSEE HAD FILED ITS OBJECTION AGAINST THE INITIA TION OF PROCEEDINGS U/S 147 OF THE ACT, INTER ALIA CONTENDING THAT SINCE ASSES SMENT HAS BEEN OPENED WITHOUT ANY FRESH MATERIAL AND LIABILITY OF THE SUM OF RS. 51,41,426/- HAS DULLY BEEN CONSIDERED IN THE ORIGINAL ASSESSMENT PR OCEEDINGS, AS SUCH REASSESSMENT PROCEEDINGS ARE UNSUSTAINABLE IN LAW. THE ASSESSEE ALSO HAS FURNISHED THE PROOF OF PAYMENT OF THE GRATUITY ACTU ALLY PAID AND BONUS PAID BEFORE DUE DATE OF FILING OF THE RETURN. THE AO DID NOT AGREE WITH THE OBJECTIONS RAISED BY THE ASSESSEE AND FRAMED ASSESS MENT U/S 147 ON 29.12.2010 DISALLOWING THE PROVISION FOR GRATUITY ALLEGEDLY AMOUNTING TO RS. ITA NO. 5664/DEL/2011 & CO NO. 47/DEL/2012 7 51,41,426/- ON THE GROUND THAT ASSESSEE HAD NOT FUR NISHED THE COMPLETE DETAILS IN SUPPORT OF THE CLAIM THAT THE SAME HAS A CTUALLY BEEN PAID DESPITE THE FACT THAT THE AMOUNT TOWARDS THE GRATUITY ONLY AGGREGATING TO RS. 45,57,381/- AND WHICH TOO HAD BEEN ACTUALLY PAID AN D WAS DULY EXAMINED IN THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDING S. LIKEWISE REMAINING SUM OF RS. 5,84,045/- REPRESENTING THE AMOUNT PAYAB LE BONUS WHICH TOO HAD BEEN PAID AS WAS STATUTORILY REQUIRED BEFORE TH E DUE DATE OF FILING OF RETURN OF INCOME AND WAS ALSO DULY EXAMINED AND ALL OWED IN THE ORIGINAL ASSESSMENT PROCEEDINGS. ACCEPTING THE SUBMISSION O F THE ASSESSEE THAT INITIATION OF REOPENING PROCEEDINGS U/S 147 WAS BAR RED BY LIMITATION PRESCRIBED UNDER PROVISO TO 147 OF THE ACT THE LD. CIT(A) HAS RIGHTLY COME TO THE CONCLUSION THAT INITIATION OF REOPENING PROC EEDINGS WAS BARRED AND THE ASSESSMENT MADE IN THEREOF HAS BEEN RIGHTLY QUA SHED. IN SUPPORT HE PLACED RELIANCE ON THE FOLLOWING DECISIONS A) SHIPRA SRIVASTAVA VS. ACIT REPORTED IN 319 IT R 221 (DEL) B) KLM ROYAL DUTCH AIRLINES V CIT AT PAGE 63, P LACITUM 19 REPORTED IN 292 ITR 49 (DEL) C) PANCHARATNA CEMENT PVT. LTD. VS. UNION OF IND IA AND OTHERS REPORTED IN 317 ITR 259 (GAU) D) BAPALAL AND COMPANY EXPORTS VS. JCIT. AT PAGE 45 PLACITUM REPORTED IN 12 289 ITR 37 (MAD) E) ACIT V OP CHAWLA AT PAGE 101 PARA 12 AND, PAG E 103 PARA 13 REPORTED IN 114 ITD 69 (DEL) ( TM ) I) CIT VS. KELVINATOR OF INDIA LTD. 320 ITR 561 (SC) WHICH AFFIRMED A FULL BENCH DECISION OF THIS COURT IN THE CASE OF CIT V. KELVINATOR OF INDIA LTD : 256 ITR 1 FB (DEL). II) JINDAL PHOTO FILMS LTD VS. DEPUTY CIT AND ANO THER 234 ITR 170 III) TECHSPAN INDIA PVT. LTD. VS. ITO 283 ITR 2 12 (DEL) ITA NO. 5664/DEL/2011 & CO NO. 47/DEL/2012 8 IV.) RITU INVESTMENTS (P) LTD. VS. DCIT W.P. N O. 7515/2010 (DEL) V.) CIT VS RAJ KUMAR MAHAJAN 340 ITR 570 (4 JAN UARY 2012) (DEL) VI.) B.L.B. LTD. VS. ACIT W.P.(C) 6884/2010 (1 D ECEMBER 2011)(DEL) VII.) CIT VS MUNJAL SHOWA LTD. 205 TAXMAN 351 (3 FEBRUARY 2012)(DEL) VIII.) SATNAM OVERSEAS LIMITED AND ANR. VS ACIT 32 9 ITR 237 (DEL) IX) TRACTEBEL INDUSTRY ENGG. VS ADIT 198 TAXMAN 408 (24 JANUARY 2011) (DEL) X.) ATMA RAM PROPERTIES (P) LTD. VS DCIT REPORT ED IN 343 ITR 141 (GAUHATI) 1. ASSAM CO. LTD. VS UOI 275 ITR 609 HC (GAUHATI ) 2. AUSTIN ENGG. CO. LTD. VS JCIT HC (GUJARAT) 312 ITR 70 3. HINDUSTAN LEVER LTD. VS R.B. WADKAR 268 ITR 33 2 HC (BOM) 5. CONSIDERING THE ABOVE SUBMISSIONS AND RELATED PROVI SIONS OF LAW, WE FIND THAT FOR INITIATION OF REOPENING PROCEEDINGS U /S 147 OF THE ACT ESPECIALLY WHERE THE ORIGINAL ASSESSMENT HAS BEEN FRAMED U/S 1 43 (3) OF THE ACT, SOME TIME LIMIT HAS BEEN PRESCRIBED IF THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN U/S 139 OR IN RESPONSE TO A NOTICE ISSUED U/S 142(1) OR SECTION 148 OR TO DISCLOSE FULLY AND TRUL Y ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSTT. YEAR. THIS TIME LIMIT IS 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. WE TH US FIND THAT UNDER THIS PROVISO TO SECTION 147 FOR COMPUTING THE TIME LIMIT THREE MORE CONDITIONS ARE REQUIRED TO BE FULFILLED. FIRSTLY THE ORIGINAL ASSESSMENT HAS BEEN FRAMED U/S 143 (3) OF THE ACT. SECONDLY THAT AN INCOME CHA RGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REAS ON OF THE FAILURE ON THE PART OF THE ASSESEE TO MAKE RETURN U/S 139 OR I N RESPONSE TO A NOTICE ISSUED U/S 142(1) OR SECTION 148. AND THIRDLY THE A SSESSEE HAS DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR TH ESE ASSESSMENTS FOR THAT ITA NO. 5664/DEL/2011 & CO NO. 47/DEL/2012 9 ASSESSMENT YEAR. IN THE CASE OF THE PRESENT ASSESSE E BEFORE US, ADMITTEDLY THE ORIGINAL ASSESSMENT WAS FRAMED U/S 143 (3) OF T HE ACT. THERE IS ALSO NO DISPUTE THAT WHEN NOTICE U/S 148 WAS ISSUED FOUR YE ARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR WAS EXPIRED. NOW WE HAVE T O EXAMINE THE COMPLIANCE OF REMAINING CONDITIONS ESPECIALLY AS TO WHETHER THE ASSESSEE HAD DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NE CESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR REGARDING THE INCOME WHICH THE AO WAS HAVING REASONS TO BELIEVE THAT THE INCOME CHARGEABLE TO TA X HAD ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR. ON PERUSAL OF RECORD WE FIND THAT DURING THE COURSE OF ORIGINAL ASSESSMENT THE AO HAD ISSUED A QUESTIONNAIRE DATED 10.8.2005 WHEREBY VIDE QUERY NO. 13 HE HAD DI RECTED THE ASSESSEE TO PROVIDE THE DETAILS OF CONTRIBUTION OF ESI, PF AN D GRATUITY EXPENSES WITH THE DUE DATE AND ACTUAL DATE OF PAYMENT AND VIDE QU ERY NO. 18 SPECIFICALLY REQUIRED THE ASSESSEE THAT WHY THE PROVISION FOR GR ATUITY AMOUNTING TO RS. 1.45 CRORES BE NOT ADDED BACK TO THE INCOME. THESE QUERIES ARE REPRODUCED BELOW FOR READY REFERENCE :- QUERY NO. 13 : 13. PLEASE GIVE THE DETAILS OF CONTRIBUTION OF ESI AND PF & GRATUITY EXPENSES WITH THE DUE DATE AND ACTUAL DATE OF PAYMENT. QUERY NO. 18: 18. PLEASE EXPLAIN WHY THE PROVISION FOR GRA TUITY AMOUNTING TO RS. 1.45 CRORES HAS NOT BEEN ADDED BACK TO INCOME WHIC H IS NOT ALLOWABLE AS DEDUCTION U/S 40A(7). ITA NO. 5664/DEL/2011 & CO NO. 47/DEL/2012 10 6. FOLLOWING REPLY WAS SUBMITTED BY THE ASSES SEE VIDE ITS LETTER DATED 4.10.2005 ALONGWITH THE SUPPORTING DOCUMENTS 8. NOTE ON PROVISION FOR GRATUITY WHY RS. 1.45 CRORES NOT TO BE ADDED BACK TO THE INCOME. THE DETAIL OF PROVISION FOR GRATUITY IS A S UNDER :- PARTICULARS AMOUNT (RS.) AMOUNT (RS.) PROVISION FOR GRATUITY AS ON 31.03.2002 57,01,918/- ADD: PROVISION MADE DURING THE YEAR (NOT PAID) 4,41,407/- ADD: PROVISION MADE FOR GRATUITY SHOWN AS PRIOR PERIOD ADJUSTMENT (NOT PAID) 89,59,740/- 94,01,147/- PROVISION FOR GRATUITY AS ON 31.3.2003 1,51,03,065 THE COMPANY HAS ACTUALLY PAID A SUM O F RS. 45,57,381/- TOWARDS GRATUITY TO THE EMPLOYEES WHO HAV E RETIRED / LEFT THE COMPANY DURING THE FINANCIAL YEAR 2002-03. THE TA X AUDITOR HAS REPORTED OF RS. 1,45,42,573/- AS DISALLOWANCE U/S 40A(7) OF THE ACT UNDER CLAUSE 17 (I) OF THE REPORT, THE BREAK UP OF THE AMOUNT IS AS UNDER :- PARTICULARS AMOUNT (RS.) PROVISION FOR GRATUITY MADE DURING THE YEAR NOT PAID (AS MENTIONED ABOVE) 94,01,147/- GRATUITY ACTUALLY PAID TO EMPLOYEES DURING PREVIOUS YEAR ENDING 31.3.2003 45,57,381/- PROVIS ION FOR BONUS (PAID BEFORE DUE 5,84,045/- ITA NO. 5664/DEL/2011 & CO NO. 47/DEL/2012 11 DATE OF FILING OF RETURN U/S 139(1) PROVISION FOR GRATUITY AS ON 31.03.2003 1,45,42,573/- THE EVIDENCE IN SUPPORT OF PAYMENT OF BONU S OF RS. 5,84,045/- AND GRATUITY OF RS. 45,57,381/- IS ENCLOS ED AS ANNEXURE 11. 7. AGAIN VIDE ITS REPLY DATED 5.1.2006 TH E ASSESSEE ALSO FURNISHED THE PROOF OF PAYMENT OF GRATUITY TO THE EMPLOYEES. ALONGWITH REPLY DATED 4.10.2005 THE ASSESSEE HAD ALSO PROVIDED THE EVIDEN CE TO SUBSTANTIATE THAT THE PAYMENT HAS BEEN MADE AND THEREAFTER ON 5.1.200 6 IT FURNISHED THE PROOF OF PAYMENT OF GRATUITY. CONSIDERING ALL THESE SUBMISSIONS AND MATERIAL AVAILABLE ON RECORD THE AO VIDE HIS ORDER DATED 28. 3.2006 FRAMED THE ASSESSMENT U/S 143(3) OF THE ACT AND ACCEPTED THE S UBMISSIONS OF THE ASSESSEE SINCE HE DID NOT MAKE ANY DISALLOWANCE. HE COMPUTED TOTAL INCOME OF THE ASSESSEE AT RS. 4,87,28,530/- AND MAD E AN ADJUSTMENT OF RS. 2,88,64,284/- AS PER THE ORDER OF THE TPO. 8. SUBSEQUENTLY THE AO RECORDED THE FOLLOWING REASONS AND ISSUED NOTICE U/S 148 OF THE ACT ON 4.3.2010 :- REASONS FOR ISSUE OF NOTICE U/S 148 IN THE CASE OF M/S SUMITOMO CORPORATION (INDIA) PVT. LTD. A.Y. 2003-2004 ASSESSMENT IN THIS CASE WAS COMPLETED U/S 143(3) ON 28.3.2006 AT AN INCOME OF RS. 4,87,28,530/- AS AGAINST RETURNED INC OME OF RS. 1,98,64,250/-. IT HAS NOW BEEN NOTICED THAT AS PER PARA 17 (1) OF 3CD REPORT, THE ASSESSEE HAS CLAIMED PROVISION FOR GRATUITY MADE ON ACCRUAL BASIS AMOUNTING TO RS. 1,45,42,573/- WHICH WAS NOT ALLOWABLE. THE ASSESSEE HAS ADDED BACK AN ITA NO. 5664/DEL/2011 & CO NO. 47/DEL/2012 12 AMOUNT OF RS. 94,01,147/- ONLY UNDER THE HEAD PROVI SION FOR GRATUITY. THIS HAS RESULTED IN EXCESS ALLOWANCE OF PROVISION FOR G RATUITY AMOUNTING TO RS. 51,41,426/- WHICH IS TO BE ADDED TO THE ASSESSED IN COME. THE ESCAPEMENT OF INCOME HAS BEEN ON ACCOUNT OF FAI LURE ON THE PART OF THE ASSESSEE TO TRULY AND FULLY DISCLOSE ALL THE MA TERIAL FACTS NECESSARY FOR ASSESSMENT. IN VIEW OF THE ABOVE, I HAVE REASON TO BELIEVE THAT AN AMOUNT OF RS. 51,41,426/- HAS ESCAPED ASSESSMENT WITHIN TH E MEANING OF SECTION 147 OF THE IT ACT, 1961. SINCE THE ASSESSMENT HAS BEEN COMPLETED U/S 143(3) OF THE ACT AND PERIOD OF 4 YEARS HAS ELAPSED, PROPOSED IS HEREBY SUBMITTE D ALONGWITH THE RELEVANT ASSESSMENT RECORD TO THE COMMISSIONER OF I NCOME TAX, DELHI III, NEW DELHI FOR CONSIDERATION AND NECESSARY APPROVAL IN ACCORDANCE WITH THE PROVISO APPENDED WITH SECTION 151 (1) OF THE IT ACT , 1961 FOR ISSUANCE OF NOTICE U/S 148 OF THE IT ACT. 9. THE OBJECTION OF THE ASSESSEE REMAINED THA T THE NOTICE ISSUED BY THE AO U/S 148 WAS BEYOND A PERIOD OF FOUR YEARS FROM T HE END OF THE ASSTT. YEAR, HENCE IT WAS BARRED BY LIMITATION UNDER THE P ROVISO TO SECTION 147 OF THE ACT. IT WAS SUBMITTED THAT THERE IS NO ESCAPEME NT OF INCOME AS THERE IS NO EXCESS ALLOWANCE MADE SINCE THE ASSESSEE HAD ACT UALLY PAID RS. 45,57,381/- AS GRATUITY WHICH WAS THE ONLY SUM CLAI MED OUT OF THE PROVISION AND THAT RS. 5,84,045/- (WHICH IS A PART SUM OF ALL EGED ESCAPEMENT REPRESENTING PROVISION FOR BONUS) WHICH TOO HAD BEE N PAID BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME AND WAS DULY SUPPORTED BY THE DOCUMENTARY EVIDENCE. IT WAS OBJECTED BY THE ASSESS EE THAT SINCE ASSESSMENT HAS BEEN OPENED WITHOUT ANY FRESH MATERI AL AND ALLOWABILITY OF THE SUM OF RS. 51,41,426/- HAS DULY BEEN CONSIDERED IN THE ORIGINAL ITA NO. 5664/DEL/2011 & CO NO. 47/DEL/2012 13 ASSESSMENT PROCEEDINGS AS SUCH, THE REASSESSMENT PR OCEEDINGS ARE UNSUSTAINABLE IN LAW. THE AO REJECTED THE OBJECTION AND FRAMED THE ASSESSMENT U/S 147 READ WITH SECTION 143(3) OF THE ACT IN QUESTION. 10. PERUSAL OF REASONS RECORDED FOR INITIATIO N OF REOPENING PROCEEDINGS, REPRODUCED HEREINABOVE SUGGEST THAT THE AO FORMED H IS BELIEF ON THE BASIS OF PARA NO. 17 (1) OF THE 3CD REPORT (PAGE NO. 51 O F THE PAPER BOOK (A) ), WHEREIN IT HAS BEEN MENTIONED THAT PROVISION FOR GR ATUITY MADE ON ACCRUAL BASIS AMOUNTING TO RS. 1,45,42,573/- SHOULD NOT BE ALLOWED BY INVOKING THE PROVISIONS OF SECTION 40A(7) OF THE ACT. WE ALSO FI ND SUBSTANCE IN THE CONTENTION OF THE ASSESSEE THAT THE AO COMPLETELY O VERLOOKED THE RECORD OF THE ASSESSMENT BEFORE INITIATING THE PROCEEDINGS WH ICH INTER ALIA REFLECTED THAT THE ASSESSEE HAD CLAIMED ONLY DEDUCTION OF RS. 45,57,381/- TOWARDS GRATUITY AND RS. 5,84,045/- REPRESENTED THE LIABILI TY TOWARDS BONUS WHICH TOO HAD BEEN PAID ( PAGE 178-320 OF PB(A)) BEFORE T HE DUE DATE OF FILING OF THE RETURN OF INCOME. UNDER THESE CIRCUMSTANCES WE DO NOT FIND ANY INFIRMITY IN THE CONCLUSION OF THE LD. CIT(A) THAT ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT HAD BEEN TRULY AND FULLY DISCLOS ED DURING THE COURSE OF ORIGINAL ASSESSMENT U/S 143(3) OF THE ACT, HENCE IN ITIATION OF REASSESSMENT PROCEEDINGS U/S 147 / 148 WAS ILLEGAL IN VIEW OF TH E SPECIFIC PROVISO TO SECTION 147 OF THE ACT. AS PER THIS PROVISO AS DISC USSED ABOVE SPECIFIC RESTRICTIONS HAVE BEEN PUT ON THE AO WHILE REOPENIN G THE CASE COMPUTED U/S 143(3) OF THE ACT. THERE WAS NEITHER FRESH MATE RIAL SURFACED AFTER THE ITA NO. 5664/DEL/2011 & CO NO. 47/DEL/2012 14 ORIGINAL ASSESSMENT NOR IN THE REASSESSMENT PROCEED INGS DISALLOWANCE MADE BY THE AO WHICH WAS NOT MADE BY HIS PREDECESSO R IN THE ORIGINAL ASSESSMENT ORDER, WAS BASED ON SUPPRESSION OF PRIMA RY INFORMATION ON THE PART OF THE ASSESSEE. IN THIS REGARD WE FIND STRENG TH FROM THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. KELVIN ATOR OF INDIA (SUPRA) AND THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF KLM ROYAL DUTCH AIRLINES VS. CIT (SUPRA),M/S. EICHER LTD.(SUPRA) UNI TED ELECTRICAL CO. (P) LTD. VS CIT (SUPRA). IN ITS DECISION IN THE CASE OF ATMA RAM PROPERTIES (P) LTD. VS. DCIT (SUPRA), THE HONBLE DELHI HIGH COURT HAS BEEN PLEASED TO HOLD AS UNDER :- 15. THE REASONS RECORDED ABOVE DO STATE THAT THE A PPELLANT ASSESSEE HAD FAILED TO FULLY AND TRULY DISCLOSE THE FACTS BUT DO NOT INDICATE WHY AND HOW THE ASSESSEE HAD FAILED TO MAKE FULL AND TRUE DISCLOSURE OF THE MATERIAL FACTS. MERE REPETITION OR QUOTING THE LANGUAGE OF THE PROVISO IS NOT SUFFI CIENT. THE BASIS OF THE AVERMENT / STATEMENT SHOULD BE EITHER STATED OR SHOULD BE APPARENT / LUCID / EXPLAINED FROM THE REC ORD. 11. AGAIN IN THE CASE OF CIT VS. EICHER LTD. [2007] 294 ITR 310, A DIVISION BENCH OF THE DELHI HIGH COURT HAS HELD AS UNDER :- APPLYING THE PRINCIPLES LAID DOWN BY THE FULL BENC H OF THIS COURT AS WELL AS THE OBSERVATIONS OF THE PUNJAB AN D HARYANA HIGH COURT, WE FIND THAT IF THE ENTIRE MATERIAL HAD BEEN PLACED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AT THE TIME WHEN THE ORIGINAL ASSESSMENT WAS MADE AND THE ASSESSING OFFICER APPLIED HIS MIND TO THAT MATERIAL AND ACCEPTED THE VIEW CANVASSED BY THE ASSESSEE, THEN M ERELY BECAUSE HE DID EXPRESS THIS IN THE ASSESSMENT ORDER , THAT BY ITSELF WOULD NOT GIVE HIM A GROUND TO CONCLUDE THAT INCOME HAS ESCAPED ASSESSMENT AND, THEREFORE, THE ASSESSME NT NEEDED TO BE REOPENED. ON THE OTHER HAND, IF THE AS SESSING OFFICER DID NOT APPLY HIS MIND AND COMMITTED A LAPS E, THERE ITA NO. 5664/DEL/2011 & CO NO. 47/DEL/2012 15 IS NO REASON WHY THE ASSESSEE SHOULD BE MADE TO SUF FER THE CONSEQUENCES OF THAT LAPSE. 12. UNDER THESE CIRCUMSTANCES WE ARE NOT INC LINED TO INTERFERE WITH THE FIRST APPELLATE ORDER ON THE ISSUE. THE SAME IS UPH ELD. THE GROUND IS THUS REJECTED. 13. CONSEQUENTLY APPEAL IS DISMISSED. CO NO. 47/D/2012 14. THE ASSESSEE HAS RAISED FOLLOWING OBJECTION S AGAINST THE FIRST APPELLATE ORDER :- 1) THAT WITHOUT PREJUDICE TO THE FINDING OF THE LE ARNED COMMISSIONER OF INCOME TAX (APPEALS), THAT THE PROCEEDINGS UNDER SE CTION 147 OF THE ACT HAVE NOT BEEN VALIDLY INITIATED, SHE OUGHT TO HAVE FURTHER DISPOSED OFF THE GROUNDS NO. 3,4 & 5 RAISED BEFORE HER IN ACCORDANCE WITH LAW, WHICH READS AS UNDER : 3 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO HAS ERRED IN DISALLOWING GRATUITY AND B ONUS AMOUNTING TO RS. 51,41,426/- DISREGARDING THE FACTS OF THE CASE AND COMPLETE EVIDENCE FURNISHED IN THIS REGARD BY THE APPELLANT 4. WITHOUT PREJUDICE TO OUR APPLICATION U/S 154 O F THE ACT, THE AO HAS ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW ERRED IN NOT GIVING THE CREDIT OF THE TAXES APP ROPRIATELY WITHHELD AND THOSE PAID BY WAY OF ADVANCE TAX AND / OR SELF ASSESSMENT TAX . 5. THAT ON THE FACTS AND CIRC UMSTANCES OF THE CASE AND I N LAW, THE AO ERRED IN INITIATIN G PENALTY PROCEEDINGS UNDER SECTION 271 READ WITH 274 OF T HE ACT. 2) THAT THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) OUGHT TO HAVE HELD THAT THE DISALLOWANCE MADE ON ACCOUNT OF PROVISION FOR GRATUITY OF RS. 51,41,426/- WAS NOT TENABLE IN LAW AS THE SA ME WAS DULY PAID BEFORE FILING OF THE RETURN OF INCOME. ITA NO. 5664/DEL/2011 & CO NO. 47/DEL/2012 16 15. IN VIEW OF OUR FINDING ON THE VALIDITY OF NOTICE ISSUED U/S 148 OF THE ACT HEREIN ABOVE IN THE APPEAL PREFERRED BY THE REV ENUE, WE FIND THAT THE ISSUES RAISED IN THE CROSS OBJECTION HAVE BECOME AC ADEMIC ONLY SINCE WE HAVE ALREADY WARRANTED ABOVE APPEAL PREFERRED B Y REVENUE THAT NOTICE ISSUED U/S 148 WAS INVALID AND THE ASSESSMENT MADE IN FURTHERANCE THERETO HAS THUS BEEN RIGHTLY QUASHED BY THE LD. CIT(A). TH E OBJECTIONS RAISED THUS HAD BEEN REQUIRED ADJUDICATION. THE CROSS OBJECTION IS ACCORDINGLY REJECTED. 16. IN SUMMARY BOTH APPEAL AND CROSS OBJECTI ON ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 5.11.2012. SD/- SD/- ( T.S. KAPOOR) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 5.11.2012 *VEENA COPY OF ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER DEPUTY REGISTRAR, ITAT