Smt. Hansaben Hirubhai Patel, Nadiad V. The Income Tax Officer, Ward-3(3), Anand

ITA 1001/AHD/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94454 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 10-09-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 07-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SURESH THAKKARA R
• Keywords: Reopening of assessment; Business expenditure; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings; Capital expenditure
• Section: 143(3); 142(1); 148

Judgement Text

IN THE INCOME TAX AP PELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI PRAMOD KUMAR , ACCOUNTANT MEMBER AND S.S. GODARA JUDICIAL MEMBER I . T. A. NO. 1001 / AHD/20 1 4 (ASS TT. YEAR 200 5 - 0 6 ) SMT. HANSABEN H. PATEL, PROP. OF PETLAD MAHA L AROGYA MANDAL PHARMACY, C/O. JANMAJAY H. PAT EL, PUNARVASU CLINIC, ADIAD PETLAD ROAD, NEAR RAILWAY CROSSIN G, NADIAD. PAN ADCPP 8979 N VS INCOME TAX OFFICER, WARD 3(3), R.K. BUILDING, NR.RALWAY STATON, PETLAD, DISTRICT NADIAD. (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI SURESH THAKKAR,A.R. REVENUE BY SMT. A N ITA HARDASANI,SR.D.R. / DATE OF HEARING : 10 - 09 - 2015 / DATE OF PRONOUNCEMENT : 29 - 09 - 2015 / O R D E R PER S.S. GODARA JUDICIAL MEMBER : THIS ASSESSEE S APPEAL FOR A . Y . 2005 - 06 A RISES FROM ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - I, BARODA IN CASE NO.CAB - I/317/2012 - 13 DATED 22 - 01 - 2014 , IN ITA NO . 1001/ AHD/201 4 ASSESSMENT YEAR 2005 - 06 SMT.HANSABEN H. PATEL. 2 PROCEEDINGS UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT,1961 FOR SHORT THE ACT . 2. THIS APPEAL RAISES TWO SUBSTANTIVE GROUNDS. THE FIRST ONE CHALLENGES LEGALITY OF THE REOPENING TAKEN RECOURSE TO BY THE ASSESSING OFFICER AND AFFIRMED BY THE CIT (A). THE LATTER GROUND CHALLENGES DISALLOWANCE OF SCIENTIFIC RESEARCH AND DEVELOPMENT EXPENSES OF RS.3,06,830/ - . WE COME TO FACTS OF THE CASE FIRST. THE ASSESSEE INDIVIDUAL MANUFACTURES A YURVEDIC MEDICINES. SHE FILED HER RETURN ON 31 - 3 - 2005 DECLARING LOSS OF RS.1, 24,201/ - . THE ASSESSING OFFICER FRAMED A REGULAR ASSESSMENT ASSESSING LOSS AS RS.68,810/ - AFTER MAKING VARIOUS ADDITIONS AGGREGATING TO RS.55,391/ - . THE ASSESSEE D ID NOT PREFER ANY APPEAL. THEREAFTER, THE ASSESSING OFFICER FORMED REASONS TO BELIEVE THAT A SSESSEE S INCOME LIABLE TO BE ASSESSED HAD ESCAPED ASSESSMENT. HE ISSUED SECTION 148 NOTICE . T HE ASSESSEE SOUGHT FOR REASONS THEREOF. THE CASE FILE COMPRISES OF REASONS OF REOPENING AT PAGE 13 OF THE PAPER BOOK THAT T HE A SSESS EE PAID A SUM OF RS.86,700/ - ON 20 - 10 - 2001 TO THE REGISTRAR, V.N. SOUTH GUJARAT UNIVERSITY AND RS.2,11,400/ - TO REGISTRAR S.P. UNIVERSITY AS FIRST INSTALMENT FOR DEVELOPMENT AND STANDARDIZATION OF ANTI MALARI A HERBAL MEDICINE WITHOUT COMPLYING WITH THE PROVISIONS OF RULE 6(7A) RESUL TING INTO IRREGULAR ALLOWANCE O F THE ABOVESTATED EXPENDITURE. T HE ASSESSEE FILED SEC.144A PETITION TO THE JOINT COMMISSIONER OF INCOME TAX. HE PASSED HIS ORDER/DIRECTIONS ON 31 - 12 - 2012 OBSERVING THEREIN THAT NO ITA NO . 1001/ AHD/201 4 ASSESSMENT YEAR 2005 - 06 SMT.HANSABEN H. PATEL. 3 CLAIM FOR DEDUCTION U/S. 35 OF THE ACT WAS MA DE AT THE TIME OF FILING ORIGINAL RETURN OF INCOME. 3. THE ASSESSING OFFICER ON THE OTHER HAND PR OCEEDED WITH THE RE - ASSESSMENT. HE SOUGHT FOR THE DETAILS OF THE EXPENSES AND RESEARCH REPORT IN QUESTION. HE QUOTED ASSESSEE S FAILURE IN PLACING ON RECORD THE NECESSARY DETAILS AND OBSERVED THAT THE SHE HAD NOT CLAIMED SECTION 35 DEDUCTION EVEN AFTER ISSUANCE OF SEC. 148 NOTICE. THE REASSESSMENT ORDER DATED 24 - 1 - 2013 READS THAT THE ASSESSEE COULD NOT ESTABLISH THE EXPENDITURE C LAIM FOR RESEARCH AND D EVELOPMENT OF R S .3,06,833/ - . THIS RESULTED IN THE IMPUGNED DISALLOWANCE. 4. THE ASSESSEE PREFERRED APPEAL CHALLENGING LEGALITY OF THE REOPENING AS WELL AS THE IMPUGNED DISALLOWANCE ON MERITS. THE CIT (A) HAD REJECTED BOTH THESE ARGUMENTS . THE RELEVANT FINDINGS ON MERITS ARE AS UNDER: - 5. I HAVE CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER OF THE A.O. AS WELL AS THE ENTIRE SUBMISSION MADE BY THE AR OF THE APPELLANT. THE FIRST GROUND OF APPEAL OF THE APPELLANT IS THAT ON THE FACTS AND CIRCUMST ANCES OF THE CASE, THE LD. AO IS NOT JUSTIFIED BOTH IN LAW AND ON FACTS TO REOPEN THE ASSESSMENT U/S 148 OF THE INCOME TAX ACT. WITH REGARD TO THIS GROUND OF APPEAL THE APPELLANT HAS MAINLY STATED THAT INITIALLY ASSESSMENT IN HER CASE WAS COMPLETED U/S 143 (3) ON 28/09/2007 AND THE SCIENTIFIC RESEARCH EXPENDITURE WAS ALLOWED AS BUSINESS EXPENDITURE. AS PER THE APPELLANT THERE AFTER ASSESSMENT WAS REOPENED ON THE GROUND THAT THE APPELLANT LADY WAS WRONGLY ALLOWED DEDUCTION OF RS. ITA NO . 1001/ AHD/201 4 ASSESSMENT YEAR 2005 - 06 SMT.HANSABEN H. PATEL. 4 2,98,100/ - BEING RESEARCH DEV ELOPMENT PAYMENT MADE TO UNIVERSITIES. AS PER THE APPELLANT SHE HAD SUBMITTED COMPLETE DETAILS OF EXPENSES RELATING TO SCIENTIFIC RESEARCH DEVELOPMENT EXPENSES INCURRED FOR THE BUSINESS PURPOSE TO THE AO. BUT THIS SUBMISSION OF THE APPELLANT IS NOT FOUND TO BE ACCEPTABLE. THE APPELLANT HAS NOT FURNISHED ANY DOCUMENTARY EVIDENCES WHICH COULD ESTABLISH THAT SHE HAD FILED COMPLETE DETAILS OF EXPENSES RELATING TO SCIENTIFIC RESEARCH DEVELOPMENT ON BEING ASKED BY THE AO AND SUCH DETAILS WERE CONSIDERED BY THE A O. IN MY OPINION OTHERWISE ALSO THE AO HAS BEEN GIVEN WIDE POWER U/S 147 AFTER ITS AMENDMENT W.E.F. 1989 AND THE AO CAN EVEN COVER THE CASES WERE THE ASSESSEE HAD FULLY DISCLOSED THE MATERIAL FACT. THE ONLY CONDITION FOR RE - OPENING OF CASE U/S 147 OF THE I .T. ACT IS THAT THE AO SHOULD HAVE REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. SUCH BELIEF CAN BE RAISED IN ANY MANNER AND IT IS NOT QUALIFIED BY A PRE - CONDITION OF FAITH AND TRUE DISCLOSURE OF MATERIAL FACT BY THE ASSESSEE AS CONTEMPLATED IN THE PRE - AMENDED SECTION 147 (A) OF THE ACT. IN THIS REGARD, THE SUPPORT IS DRAWN FROM THE DECISION OF HON'BLE HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF JAWAND SONS VS. CIT 195 - TAXMAN 144. RELIANCE IS ALSO PLACED IN THIS REGARD ON DE CISION OF HON'BLE ITAT, DELHI BENCH IN THE CASE OF MRS. GURINDERKAUR [202 ITD 189 (DELHI)]. FOR REOPENING OF ASSESSMENT U/S 147 OF THE IT ACT, THE AO SHOULD HAVE REASON TO BELIEVE ON THE BASIS OF TANGIBLE MATERIAL THAT THE INCOME CHARGEABLE TO TAX HAS ESCA PED ASSESSMENT. THE HON'BLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKER PVT LTD (2007), 291 ITR500 HAS HELD THAT IF A.O. HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAS ESCAPED ASSESSMENT, IT CAN BE SAID TO HAVE REASON TO BELIEVE THAT THE INCOME HAD ESCAPED ASSESSMENT. THE EXPRESSION CANNOT BE READ TO MEAN THAT THE AO SHOULD HAVE FINALLY ASCERTAINED THE FACT BY LEGAL EVIDENCE OR CONCLUSION. AT THE STAGE, THE FINAL OUTCOME OF THE PROCEEDINGS IS NOT RELEVANT. IN OTHER WORDS, AT THE INITIAL STAGE, WHAT IS REQUIRED IS ITA NO . 1001/ AHD/201 4 ASSESSMENT YEAR 2005 - 06 SMT.HANSABEN H. PATEL. 5 'REASON TO BELIEVE', BUT NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME. IN VIEW OF THESE FACTS, THE ABOVE SUBMISSION OF THE APPELLANT IS NOT ACCEPTABLE. THUS THE GROUND OF APPEAL NO. 1 OF THE APPELLANT IS DISMISSED. 5 .1 THE GROUND OF APPEAL NO. 2 OF THE APPELLANT IS THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. AO IS NOT JUSTIFIED BOTH IN LAW AND ON FACTS IN DISALLOWING SCIENTIFIC RESEARCH AND DEVELOPMENT EXPENSES OF RS. 3,06,833/ - . WITH REGARD TO THIS GROUN D OF APPEAL THE APPELLANT HAS SUBMITTED THAT IT FILED COMPLETE DETAILS OF EXPENSES RELATING TO SCIENTIFIC RESEARCH DEVELOPMENT EXPENDITURE INCURRED FOR THE BUSINESS PURPOSE TO THE LD A.O. AS PER THE APPELLANT HOWEVER, HE HAS NOT CONSIDERED THE DETAILS AND EVIDENCES. AS PER THE APPELLANT DURING THE COURSE OF ASSESSMENTS CERTIFICATES OF BOTH THE UNIVERSITIES VIZ. VEER NARMAD SOUTH GUJARAT UNIVERSITY AND SARDAR PATEL UNIVERSITY WERE GIVEN, WHICH HAD STARTED RESEARCH PROJECT 'DEVELOPMENT AND STANDARDIZATION OF HERBAL ANTI - MALARIAL DRUG'' WITH PETLAD MAHAL AROGYA MANDAL PHARMACY. AS PER THE APPELLANT THE CERTIFICATES CLEARLY STATE THAT THE PROPRIETARY CONCERN OF THE APPELLANT LADY, PETLAD MAHAL AROGYA MANDAL PHARMACY HAD PAID CONTRIBUTION TOWARDS THE RESEARCH AND DEVELOPMENT PROJECT UNDERTAKEN BY THE UNIVERSITIES. AS PER THE APPELLANT THUS, COMPLETE DETAILS WERE PROVIDED TO THE A.O. REGARDING RESEARCH AND DEVELOPMENT EXPENSES. AS PER THE APPELLANT THE LD A.O. HAS NOT ACCEPTED THE EXPLANATION AND EVIDENCES SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 5.2 IT IS FURTHER SUBMITTED BY THE APPELLANT THA T DURING THE COURSE OF REASSESSMENT PROCEEDINGS, THE MATTER WAS REFERRED TO JOINT COMMISSIONER OF INCOME TAX RANGE - 3 AND IT WAS BROUGHT TO THE KIND NOTICE OF THE JOINT COMMISSIONER OF INCOME TAX THE ABOVE FACTS. AS PER THE APPELLANT NO OPPORTUNITY WAS GRAN TED TO HER TO PROVE/JUSTIFY THE FACTS RELATING TO SCIENTIFIC RESEARCH EXPENSES. AS PER THE APPELLANT THE DIRECTION REFERS TO ITA NO . 1001/ AHD/201 4 ASSESSMENT YEAR 2005 - 06 SMT.HANSABEN H. PATEL. 6 THE DIFFERENCE OF FIGURES REGARDING RESEARCH AND DEVELOPMENT EXPENSES. AS PER THE APPELLANT MAJOR ATTENTION IS GIVEN BY THE JCIT O N THAT DIFFERENCE AND THE DIRECTIONS GIVEN TO AO ARE NOT CLEAR AND FURTHER A.O. HAS NOT PROPERLY ANALYZED AND APPRECIATED THE FACTS REGARDING RESEARCH AND DEVELOPMENT EXPENSES. 5.3 BUT THE ABOVE ENTIRE SUBMISSION OF THE AO IS NOT BASED ON ANY DOCUMENTARY E VIDENCE. THE AO IN THE ASSESSMENT ORDER HAS MENTIONED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE APPELLANT WAS ASKED TO SUBMIT THE RESEARCH REPORT FROM THE PARTIES TO WHOM THE PAYMENT HAS BEEN GIVEN FOR RESEARCH AND DEVELOPMENT AND ALSO STATE WH AT BENEFIT WAS ACCRUED TO THE BUSINESS OF THE APPELLANT AS A RESULT OF SUCH RESEARCH AND DEVELOPMENT THIS VITAL ASPECT IS NOT COVERED IN THE ABOVE SUBMISSION OF THE APPELLANT. THE APPELLANT HAS NOT REPLIED SPECIFICALLY WHETHER THERE WAS ANY RESEARCH REPORT FROM THE UNIVERSITIES TO WHICH PAYMENTS WERE MADE FOR RESEARCH AND DEVELOPMENT. THE APPELLANT HAS ALSO NOT EXPLAINED SPECIFICALLY AS TO HOW THE BENEFIT WAS ACCRUED TO HER BUSINESS BECAUSE OF PAYMENTS MADE TO THE ABOVE UNIVERSITIES FOR THE RESEARCH AND DEV ELOPMENT. THE APPELLANT, HAS NOT FURNISHED ANY EVIDENCES EVEN AT THE STAGE OF APPELLATE PROCEEDING ALSO TO PROVE THAT SHE WAS BENEFITED DUE TO THE RESEARCH CARRIED OUT BY THE UNIVERSITIES. SECTION 35 OF THE ACT CLEARLY STATES THAT ANY EXPENDITURE (NOT BEIN G IN THE NATURE OF CAPITAL EXPENDITURE) LAID OUT OR EXPENDED ON SCIENTIFIC RESEARCH RELATED TO THE BUSINESS SHALL BE ALLOWED. IT MEANS THAT THE EXPENDITURE HAS TO BE LAID OUT OR HAS TO BE EXPENDED ON SCIENTIFIC RESEARCH RELATED TO THE BUSINESS OF THE APPEL LANT. AGAIN THE APPELLANT HAD NOT CLAIMED THE EXPENDITURE OF RS. 3,06,833/ - U/S 35 OF THE ACT IN HER RETURN AS STATED BY THE AO IN THE ASSESSMENT ORDER. CONSIDERING THIS FACT, IT IS HELD THAT THE AO HAS CORRECTLY DISALLOWED THIS CLAIM OF EXPENDITURE OF RS. 3,06,833/ - AND THEREFORE THE SAME IS CONFIRMED. ITA NO . 1001/ AHD/201 4 ASSESSMENT YEAR 2005 - 06 SMT.HANSABEN H. PATEL. 7 THUS, THE GROUND OF APPEAL NO. 2 OF THE APPELLANT IS DISMISSED. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE CASE FILE. THE ASSESSEE INTERALIA ARGUES THAT THE IMPUGNED REOPENING IS BASED ON MERE CHANGE OF OPINION SINCE THE ASSESSING OFFICER HAD SOUGHT FOR ALL NECESSARY DETAILS IN THE REGULAR ASSESSMENT IN QUESTION. H ER SECOND ARGUMENT IS THAT SHE NEVER CLAIMED ANY WEIGHTED DEDUCTION U/S. 35(2AB) OF THE ACT RELEVANT FOR APPLICATION OF RULE 6(7A) OF THE INCOME TAX RULES. HER CASE IS THAT THE IMPUGNED DEDUCTION WAS CLAIMED ON ACTUAL EXPENDITURE BASIS BY TREATING THE SAM E AS WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF THE BUSINESS. THE REVENUE STRONGLY SUPPORTS THE CIT (A) S ORDER. IT IS TO BE SEEN THAT THE ASSESSING OFFICER HAD FRAMED REGULAR ASSESSMENT IN QUESTION ON 28 - 9 - 2007. WE FIND AT PAGE 6 OF THE PAPER BO OK THAT THE ASSESSEE HAD FILED PHOTO COPY OF HER RESEARCH AND DEVELOPMENT ACCOUNT WITH BILLS AND RECEIPT PHOTO - COPIES. PAGES 8 & 9 OF THE PAPER BOOK CONTAIN ASSESSING OFFICER S NOTICE ISSUED U/S. 142(1) OF THE ACT DATED 30 - 9 - 2007 SEEKING ASSESSEE S JUSTIFI CATION QUA THE ABOVE STATED RESEARCH AND DEVELOPMENT EXPENDITURE. THE ASSESSEE S REPLY THERETO IS DATED 19 - 9 - 2007 EXPLAINING THAT THE TWO RECIPIENT INSTITUTIONS/ PROJECTS STOOD APPROVED BY THE CENTRAL GOVT . A ND SHE HAD JOINED THE SAME AS I NDUSTRY PARTNER. THE CASE FILE CONTAINS THE RECIPIENTS CERTIFICATE S AT PAGES 17 AND 18. THE ASSESSING AUTHORITY DID NOT MAKE ANY DISALLOWANCE. ITA NO . 1001/ AHD/201 4 ASSESSMENT YEAR 2005 - 06 SMT.HANSABEN H. PATEL. 8 IT CHOSE TO ISSUE REOPENING NOTICE ALLEGING THAT THE ASSESSEE S DEDUCTION CLAIM DID NOT CONFIRM THE REQUIREMENT OF RULE 6(7A) OF THE RULES. THERE IS NOT DISPUTE THAT THIS RULE IS RELEVANT FOR DEDUCTION U/S. 35(2AB). IT HAS COME ON RECORD THAT THE ASSESSEE IN FACT CLAIMED ACTUAL DEDUCTION BY PLACING ON RECORD ALL NECESSARY DETAILS. T HE IMPUGNED REOPENING IS MERE CHANGE OF OPINION AND GOES CONTRARY TO THE FACTS ON RECORD. WE ACCORDINGLY QUASH THE SAME BY QUOTING HON BLE APEX COURT JUDGEMENT IN CIT V/S. KELVINATOR INDIA (2010) 322 ITR - 561. (SC). WE ARE OF THE VIEW ON MERITS AS WELL THAT THE ASSESSEE HA D ALREADY FILED RECIPIENTS CER TIFICATE S FOR PROVING THAT THE IMPUGNED EXPENDITURE CLAIMED ON ACTUAL BASIS IS ALLOWABLE. THE AUTHORITIES BELOW HAVE NOT DOUBTED THE SE TWO PAYEES. THEREFORE, THE ASSESSEE S PLEA DESERVES TO BE ACCEPTED ON MERITS AS WELL. WE ORDER ACCORDINGLY. 6 . THIS ASS ESSEE S APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON T U E S D A Y , THE 2 9 T H S E P , 2015 AT AHMEDABAD. S D / - S D / - (PRAMOD KUMAR) (S.S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD. DATE: - 2 9 - 09 - 2015 ITA NO . 1001/ AHD/201 4 ASSESSMENT YEAR 2005 - 06 SMT.HANSABEN H. PATEL. 9 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A), AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD