ACIT, CHENNAI V. M/s. Shriram Transport Finance Co. Ltd., CHENNAI

ITA 1118/CHNY/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4793 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-06-2011
• Assessment Year: 2000-2001
• Appeal Filed On: 09-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V D GOPAL
• Keywords: Invalid notice; Business income; Depreciation; Search and seizure; Tangible material; Difference of opinion; Revised return; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 147; 148; 154; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A CHENNAI (BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER) .. I.T.A. NO. 1118/MDS/2010 ASSESSMENT YEAR : 2000-01 THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE VI(2), CHENNAI 600 034. (APPELLANT) V. M/S SHRIRAM TRANSPORT FINANCE CO. LTD., MOOKAMBIKA COMPLEX, 3 RD FLOOR, NO.4, LADY DESIKA ROAD, MYLAPORE, CHENNAI 600 004. PAN : AAACS7018R (RESPONDENT) APPELLANT BY : SHRI SHAJI P. JACOB RESPONDENT BY : SHRI V.D. GOPAL O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : BY THIS APPEAL, REVENUE ASSAILS ORDER OF THE CIT(A PPEALS) HOLDING THE RE-ASSESSMENT PROCEEDINGS FOR THE IMPUG NED ASSESSMENT YEAR AS INVALID. 2. ASSESSEE, FOR THE IMPUGNED ASSESSMENT YEAR, FILE D ITS RETURN SHOWING BUSINESS INCOME ` 22,96,07,312/- BEFORE SETTING OFF BROUGHT I.T.A. NO. 1118/MDS/10 2 FORWARD DEPRECIATION. THE INCOME AFTER SETTING OFF BAD FORWARD DEPRECIATION WAS NIL. ASSESSEE ALSO RETURNED INCOM E OF ` 52,46,950/- BASED ON BOOK PROFIT UNDER SECTION 115JA OF INCOME- TAX ACT, 1961 (IN SHORT THE ACT). WHILE WORKING OUT SUCH BOOK PROF IT, ASSESSEE HAD ADDED BACK THE PROVISION FOR DIMINUTION IN THE VALU E OF ITS INVESTMENTS. THEREAFTER, ASSESSEE FILED A REVISED RETURN WHEREIN THE BUSINESS INCOME REMAINED THE SAME. BUT, NEVERTHELE SS, THE INCOME WORKED OUT UNDER SECTION 115JA OF THE ACT WAS BROUG HT DOWN TO ` 41,24,200/-. THE REASON GIVEN BY THE ASSESSEE WAS THAT PROVISION FOR DIMINUTION IN THE VALUE OF INVESTMENTS WAS NOT REQU IRED TO BE ADDED BACK. ASSESSMENT WAS COMPLETED ON 31.3.2003 BY THE A.O. UNDER SECTION 143(3) OF THE ACT. WHILE COMPLETING THE AS SESSMENT, IT SEEMS THE A.O. HAD NOT CONSIDERED THE REVISED RETUR N FILED BY THE ASSESSEE NOR HAD DETERMINED ITS INCOME UNDER SECTIO N 115JA OF THE ACT, SEPARATELY. SINCE CERTAIN ADDITIONS MADE BY T HE A.O. IN THE DETERMINATION OF TOTAL INCOME UNDER NORMAL PROVISIO NS, ASSESSEE FILED AN APPEAL BEFORE CIT(APPEALS). LD. CIT(APPEALS) WA S OF THE OPINION THAT THE ASSESSING OFFICER HAD FAILED TO CONSIDER T HE REVISED RETURN FILED BY THE ASSESSEE. HE REFERRED THE MATTER TO T HE A.O. WHEREUPON THE ASSESSING OFFICER SENT A REPORT TO THE EFFECT T HAT THE BOOK PROFIT AS I.T.A. NO. 1118/MDS/10 3 WORKED OUT IN THE ORIGINAL RETURN WAS CORRECT. LD. CIT(APPEALS) DIRECTED THE A.O. TO COMPUTE THE INCOME UNDER SECTI ON 115JA OF THE ACT AS PER THE ORIGINAL RETURN WITHOUT ALLOWING ASS ESSEES CLAIM REGARDING PROVISION FOR DIMINUTION IN THE VALUE OF INVESTMENTS. HOWEVER, IN THE CONSEQUENTIAL ORDER PASSED BY THE A .O. ALSO IT SEEMS THE BOOK PROFIT WAS NOT WORKED OUT. BUT, NEV ERTHELESS, BY AN ORDER PASSED UNDER SECTION 154 OF THE ACT, A.O. DET ERMINED THE BOOK PROFIT UNDER SECTION 115JA OF THE ACT AS PER THE OR IGINAL RETURN FILED. IN OTHER WORDS, DEDUCTION CLAIMED BY THE ASSESSEE T HROUGH ITS REVISED RETURN FOR PROVISION FOR DIMINUTION IN THE VALUE OF INVESTMENTS WAS NOT CONSIDERED. THEREAFTER, ON 19.1.2007, A NO TICE UNDER SECTION 154 WAS ISSUED TO THE ASSESSEE FOR A REASON THAT PROVISION FOR INTEREST TAX WHICH WAS NOT PERTAINING TO THE IM PUGNED ASSESSMENT YEAR COMING TO ` 90,06,019/-, WAS NOT ADDED WHILE COMPUTING BOOK PROFIT UNDER SECTION 115JA OF THE ACT. HOWEVER, TH E ASSESSEE OBJECTED TO THIS AND IT SEEMS ASSESSING OFFICER DID NOT PURSUE HIS PROPOSAL FOR RECTIFICATION ANY FURTHER. NEVERTHELE SS, ON 23.3.2007, HE ISSUED NOTICE UNDER SECTION 148 OF THE ACT AND PURS UANT TO SUCH NOTICE, A RE-ASSESSMENT WAS COMPLETED ON 20.11.2007 . IN SUCH RE- ASSESSMENT, ASSESSING OFFICER MADE AN ADDITION OF ` 90,06,019/- TO I.T.A. NO. 1118/MDS/10 4 THE INCOME ORIGINALLY COMPUTED BY THE ASSESSEE UNDE R SECTION 115JA OF THE ACT ` 1,74,89,825/- OR IN OTHER WORDS, ASSESSING OFFICER MADE AN ADDITION FOR THE PROVISION MADE BY THE ASSESSEE ON INTEREST TAX TO THE ORIGINALLY RETURNED INCOME. 3. ASSESSEE FILED AN APPEAL BEFORE THE CIT(APPEALS) QUESTIONING VALIDITY OF THE ACTION INITIATED UNDER SECTION 147 OF THE ACT. AS PER THE ASSESSEE, IN THE FIRST PLACE, THE RE-ASSESSMENT WAS INITIATED AFTER COMPLETION OF FOUR YEARS FROM THE END OF THE RELEVA NT ASSESSMENT YEAR EVEN THOUGH THE ORIGINAL ASSESSMENT WAS COMPLE TED AFTER SCRUTINY UNDER SECTION 143(3) OF THE ACT. AS PER T HE ASSESSEE, IT HAD FULLY AND TRULY DISCLOSED ALL MATERIAL FACTS NECESS ARY FOR ITS ASSESSMENT. ASSESSEE ALSO SUBMITTED THAT PROVISION FOR INTEREST TAX ` 90,06,019/- WAS AN ASCERTAINED LIABILITY. IT WAS B ROUGHT TO THE NOTICE OF LD. CIT(APPEALS) THAT IN THE INCOME-TAX ADJUSTME NT STATEMENT FILED, THE PROVISION MADE FOR INTEREST TAX WAS CLEARLY MEN TIONED, AND SUCH SUM WAS ADDED BACK IN THE NORMAL COMPUTATION AS WEL L. SINCE IT WAS A PROVISION FOR ASCERTAINED LIABILITY, NO ADDITION WAS REQUIRED FOR COMPUTATION UNDER SECTION 115JA OF THE ACT. ASSESS EE ALSO SUBMITTED THAT IN THE ORIGINAL ASSESSMENT, THE COMP UTATION OF INCOME I.T.A. NO. 1118/MDS/10 5 UNDER SECTION 115JA WAS CONSIDERED BY THE ASSESSING OFFICER IN GREAT MEASURE AND QUESTIONS WERE ASKED REGARDING LE ASE EQUALIZATION RESERVE WHICH WERE ANSWERED BY THE ASS ESSEE. THEREFORE, AS PER THE ASSESSEE, ASSESSING OFFICER H AD COMPUTED THE INCOME UNDER SECTION 115JA OF THE ACT AFTER APPLYIN G HIS MIND AND REOPENING WAS BASED ON A MERE CHANGE OF OPINION. A FTER GOING THROUGH THE SUBMISSIONS OF THE ASSESSEE, CIT(APPEAL S) HELD AT PARAS 11 AND 12 OF HIS ORDER AS UNDER:- 11. FROM THE FACTS GIVEN ABOVE, IT IS VERY CLEAR TH AT THE APPELLANT HAS DISCLOSED THE PROVISION MADE FOR INTE REST TAX IN HIS RETURN AND STATEMENTS AT THE ORIGINAL ASSESSMENT ST AGE ITSELF IN RESPECT OF WHICH THE ASSESSMENT HAS BEEN REOPENED U /S. 147 AFTER 4 YEARS, THOUGH THE ORIGINAL ASSESSMENT HAD B EEN COMPLETED U/S. 143(3). IN THE GIVEN CIRCUMSTANCES OF THE CASE NARRATED ABOVE, I AM OF VIEW THAT THE REOPENING OF THE ASSESSMENT IS NOT IN ORDER AND THE APPELLANTS OBJE CTION THAT THE REASSESSMENT IS BAD IN LAW HAS TO BE ACCEPTED. THE MAIN INGREDIENT FOR REOPENING AN ASSESSMENT AFTER 4 YEAR S FROM THE END OF THE ASSESSMENT YEAR, WHERE AN ASSESSMENT IS C OMPLETED U/S. 143(3), IS THAT THE INCOME ALLEGED TO HAVE ESC APED ASSESSMENT HAS TO BE ON ACCOUNT OF FAILURE BY THE AP PELLANT TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. IN THIS CASE, THE APPELLANT HAS CLEARL Y DISCLOSED THE PROVISION MADE FOR INTEREST TAX NOT RELATING TO THE CURRENT YEAR IN THE INCOME-TAX ADJUSTMENT AND IT WAS BEFORE THE ASSESSING OFFICER FOR ASSESSMENT. I ALSO FIND THAT THE ASSES SING OFFICER HAS GONE THROUGH THE ADJUSTMENT STATEMENT DEEPLY AND HAS RAISED A QUERY AS TO WHY THE LEASE EQUALIZATION RESER VE SHOULD NOT BE ADDED IN COMPUTING INCOME U/S. 115JA. HE HAD RA ISED NO QUERY I.T.A. NO. 1118/MDS/10 6 REGARDING PROVISION FOR INTEREST TAX, OBVIOUSLY BEIN G SATISFIED THAT IT CANNOT BE ADDED BACK. AT THE TIME OF SUBMI TTING HIS REPORT TO THE CIT AS LETTER DATED 09.10.2003, THE ASSESSING OFFICER HAS GONE THROUGH THE COMPUTATION U/S. 115JA AND AT THAT TIME ALSO HE CHOSE NOT TO ADD THE PROVISION FOR INT EREST TAX, THOUGH IT WAS AVAILABLE IN THE ADJUSTMENT STATEMENT . THEREFORE, THE PRESENT REASSESSMENT PROCEEDINGS CAN ONLY BE CON SIDERED AS ARISING ON ACCOUNT OF A CHANGE OF OPINION ON THE SA ME SET OF FACTS WHICH HAD ALREADY BEEN THERE BEFORE THE ASSESSING OF FICER AT THE TIME OF ORIGINAL ASSESSMENT AND THIS IS NOT A SUFFI CIENT GROUND FOR REOPENING THE ASSESSMENT. I AM OF THE OPINION THAT THE RATIO LAID DOWN BY THE MUMBAI BENCH OF THE ITAT IN THE CASE OF TRAVEL CLUB OF INDIA (P) LOTD VS. ITO (154 TAXMAN 195 AT) IS CLEARLY APPLICABLE IN THE APPELLANTS CASE. 12. IN VIEW OF THESE, BOTH ON THE GROUND OF THERE B EING NO FAILURE ON THE PART OF THE APPELLANT TO DISCLOSE FU LLY AND TRULY ALL MATERIAL FACTS RELEVANT TO ASSESSMENT, AND ALSO THE PRESENT ASSESSMENT BEING BASED ON A CHANGE OF OPINION ON TH E SAME SET OF FACTS, IT IS HEREBY HELD THAT SINCE THE ORIGINAL ASS ESSMENT HAD BEEN COMPLETED U/S. 143(3), THE REOPENING PROCEEDIN GS INITIATED BY THE ASSESSING OFFICER VIDE NOTICE U/S. 148 OF THE INCOME TAX ACT, 1961 ISSUED ON 23.03.2007 FOUR YEARS AFTER THE ASSESSMENT YEAR WAS OVER IS NOT VALID AS THE NOTICE UNDER SECTI ON 148 WAS NOT ISSUED ON OR BEFORE 31.03.2005 AS PER SECTION 147 O F THE INCOME TAX ACT. VIDE ORDER IN ITA NO.454/2006-07 DATED 07 .08.2008, MY PREDECESSOR HAD ALREADY STRUCK DOWN THE REOPENING ORDER UNDER SECTION 147 IN A.Y. 1999-2000 AND THE FACTS A RE SIMILAR IN THIS A.Y. ALSO. HENCE, THE ASSESSMENT MADE IN CONS EQUENCE OF SUCH AN INVALID NOTICE IS STRUCK DOWN AS BAD IN LAW . 4. NOW BEFORE US, LEARNED D.R. SUBMITTED THAT RE-AS SESSMENT WAS RIGHTLY DONE SINCE ASSESSEE HAD NOT DISCLOSED ALL M ATERIAL FACTS AT THE TIME OF ORIGINAL ASSESSMENT AND ASSESSING OFFICER N EVER REACHED ANY I.T.A. NO. 1118/MDS/10 7 OPINION WITH REGARD TO THE TREATMENT OF PROVISION F OR INTEREST TAX IN COMPUTING THE PROFITS UNDER SECTION 115JA OF THE AC T. 5. PER CONTRA, SUPPORTING THE ORDER OF LD. CIT(APPE ALS), LEARNED A.R. SUBMITTED THAT RE-ASSESSMENT WAS DONE AFTER FO UR YEARS BASED ON A CHANGE OF OPINION. ACCORDING TO HIM, ASSESSEE HAD SUBMITTED ALL THE PARTICULARS REGARDING CLAIM FOR DEDUCTION U NDER SECTION 115JA OF THE ACT AND ASSESSING OFFICER HAD ALSO CONSIDERE D SUCH COMPUTATION AND EVEN SOUGHT CLARIFICATIONS WHICH WE RE GIVEN. LEARNED A.R. SUBMITTED THAT THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO GIVE ALL PARTICULARS REQUIRED FOR ASSES SMENT AND ALSO IT DISCLOSED WHATEVER WAS NECESSARY. RELIANCE WAS PLA CED ON THE DECISION OF HON'BLE APEX COURT IN THE CASE OF CIT V . KELVINATOR OF INDIA LTD. (320 ITR 561). 6. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTIONS. RE-ASSESSMENT WAS DONE AFTER THE LAPSE OF FOUR YEAR S FROM THE END OF THE RELEVANT ASSESSMENT YEAR. ORIGINAL ASSESSME NT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT. FIRST P ROVISO TO SECTION 147 OF THE ACT, WHICH IS THUS APPLICABLE, IS REPROD UCED HEREUNDER:- I.T.A. NO. 1118/MDS/10 8 PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE R ELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVAN T ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETUR N UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY A ND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THA T ASSESSMENT YEAR. 7. A REOPENING CAN BE RESORTED TO AFTER FOUR YEARS ONLY WHEN THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLO SE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT, WHERE THE ORIGINAL ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF TH E ACT. THERE IS NO CASE FOR THE REVENUE THAT THE ASSESSEE HAD FAILE D TO GIVE OR DISCLOSE ALL MATERIAL PARTICULARS REGARDING COMPUTA TION MADE BY IT UNDER SECTION 115JA OF THE ACT. ASSESSEE HAD DISCL OSED PROVISION MADE FOR INTEREST TAX IN THE ADJUSTMENT STATEMENT A ND ASSESSING OFFICER HAD CAREFULLY CONSIDERED ITS COMPUTATION UN DER SECTION 115JA, BUT, NEVERTHELESS, DECIDED NOT TO MAKE AN AD DITION. THEREFORE, IT WAS A CONSCIOUS DECISION TAKEN BY THE ASSESSING OFFICER THAT SUCH AMOUNT WAS NOT TO BE ADDED BACK FOR THE P URPOSE OF COMPUTING BOOK PROFITS UNDER SECTION 115JA OF THE A CT. THERE IS NO I.T.A. NO. 1118/MDS/10 9 NEW RECORD THAT HAS COME TO THE HANDS OF THE REVENU E TO SHOW THAT THE ASSESSEE HAD NOT DISCLOSED ANY RELEVANT MATERIA L FACTS. CLEARLY, REOPENING WAS DONE BASED ON A CHANGE OF OPINION. H ON'BLE APEX COURT IN THE CASE OF KELVINATOR OF INDIA LTD. (SUPR A) OBSERVED AS HEREUNDER:- 4. ON GOING THROUGH THE CHANGES, QUOTED ABOVE, MADE TO S. 147 OF THE ACT, WE FIND THAT, PRIOR TO DIRECT TAX L AWS (AMENDMENT) ACT, 1987, REOPENING COULD BE DONE UNDE R ABOVE TWO CONDITIONS AND FULFILLMENT OF THE SAID CONDITIONS A LONE CONFERRED JURISDICTION ON THE AO TO MAKE A BACK ASSESSMENT, B UT IN S. 147 OF THE ACT (W.E.F. 1 ST APRIL, 1989), THEY ARE GIVEN A GO BY AND ONLY ONE CONDITION HAS REMAINED, VIZ., THAT WHERE THE AO HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, CONFERS JURISDICTION TO REOPEN THE ASSESSMENT. THEREFORE, POST 1 ST APRIL 1989, POWER TO REOPEN IS MUCH WIDER. HOWEVER, ONE NEEDS TO GIV E A SCHEMATIC INTERPRETATION TO THE WORDS REASON TO BELIEVE FAI LING WHICH, WE ARE AFRAID, S. 147 WOULD GIVE ARBITRARY POWERS TO TH E AO TO REOPEN ASSESSMENTS ON THE BASIS OF MERE CHANGE OF OPINION, WHICH CANNOT BE PER SE REASON TO REOPEN. WE MUST A LSO KEEP IN MIND THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REV IEW AND POWER TO REASSESS. THE AO HAS NO POWER TO REVIEW; HE HAS THE POWER TO REASSESS. BUT REASSESSMENT HAS TO BE BASE D ON FULFILLMENT OF CERTAIN PRE-CONDITION AND IF THE CON CEPT OF CHANGE OF OPINION IS REMOVED, AS CONTENDED ON BEHALF OF T HE DEPARTMENT, THEN, IN THE GARB OF REOPENING THE ASSE SSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEP T OF CHANGE OF OPINION AS AN IN-BUILT TEST TO CHECK ABUSE OF P OWER BY THE AO. HENCE, AFTER 1 ST APRIL, 1989, AO HAS POWER TO REOPEN, PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUS ION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS M UST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF. OUR VI EW GETS SUPPORT FROM THE CHANGES MADE TO S. 147 OF THE ACT, AS QUOT ED I.T.A. NO. 1118/MDS/10 10 HEREINABOVE. UNDER THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, PARLIAMENT NOT ONLY DELETED THE WORDS REASON TO BELIEVE BUT ALSO INSERTED THE WORD OPINION IN S. 147 OF T HE ACT. HOWEVER, ON RECEIPT OF REPRESENTATIONS FROM THE COM PANIES AGAINST OMISSION OF THE WORDS REASON TO BELIEVE, PARLIAMENT RE- INTRODUCED THE SAID EXPRESSION AND DELETED THE WORD OPINION ON THE GROUND THAT IT WOULD VEST ARBITRARY POWERS IN TH E AO. 8. WE ARE OF THE OPINION THAT LD. CIT(APPEALS) WAS JUSTIFIED IN QUASHING THE RE-ASSESSMENT PROCEEDINGS. NO REASON TO INTERFERE. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 24 TH JUNE, 2011. SD/- SD/- (GEORGE MATHAN) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 24 TH JUNE, 2011. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-V, CHENNAI-34 (4) CIT, CHENNAI-III, CHENNAI (5) D.R. (6) GUARD FILE