GENHERAL MACHINERY TECHNICAL SERVICES LTD, MUMBAI V. ASST CIT CIR 1(1), MUMBAI

ITA 1176/MUM/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3220 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 16-03-2016
• Assessment Year: 2002-2003
• Appeal Filed On: 09-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S SENT H IL KUMARAN
• Keywords: Reopening of assessment; Search and seizure; Tangible material; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL G BE NCH, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER / I .TA NO. 1176/MUM/2011 ( / ASSESSMENT YEAR: 2002-03 M/S. GENERAL MACHINERY & TECHNICAL SERVICES LTD., 1-B, PAREKH MAHAL, 1 ST FLOOR, VEER NARIMAN ROAD, MUMBAI-400 020 / VS. THE ACIT, CIRCLE - 1(1), MUMBAI ./ ./ PAN/GIR NO. AAACG 2083Q ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI SHARAD SHAH / RESPONDENT BY: SHRI S. SENTHIL KUMARAN / DATE OF HEARING :16.03.2016 ! / DATE OF PRONOUNCEMENT :27.05.2016 / O R D E R PER C.N. PRASAD, JM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF THE LD. CIT(A)-1, MUMBAI DATED 27.10.2010 PERTAINING TO AS SESSMENT YEAR 2002-03. 2. THE FIRST GROUND OF APPEAL OF THE ASSESSEE AGAIN ST THE ORDER OF THE LD. CIT(A) CHALLENGING THE REOPENING OF ASSESSM ENT BY THE ASSESSING OFFICER. THE ASSESSEE ALSO RAISED THE GR OUND CHALLENGING ITA NO. 1176/M/2011 2 THE ORDER OF THE LD. CIT(A) SUSTAINING THE DISALLOW ANCE TOWARDS REPAIRS AND MAINTAINS EXPENSES INCURRED BY THE ASSE SSEE. 3. WITH REGARD TO REOPENING OF THE ASSESSMENT, THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE FILED RETURN ON 31.10.2002 DECLARING INCOME OF RS. 15,05,790/- AND THE ASSESSM ENT WAS COMPLETED U/S. 143(3) ON 10.1.2005 DETERMINING INCO ME AT RS. 16,41,480/-. HE SUBMITS THAT LATER THE ASSESSMENT WAS REOPENED BY ISSUE OF NOTICE U/S. 148 AND COMPLETED THE REASSESS MENT ON 27.9.2007 U/S. 143(3) R.W. SEC. 147 DE TERMINING T HE INCOME OF THE ASSESSEE AT RS. 26,11,680/-. THE LD. COUNSEL F OR THE ASSESSEE SUBMITS THAT IN THE REASSESSMENT, THE ASSESSING OFF ICER DISALLOWED RS. 9,70,000/- BEING THE EXPENDITURE INCURRED ON REPAIR S AND MAINTENANCE. AT THE OUTSET, HE SUBMITS THAT NO TAN GIBLE MATERIALS HAVE COME ON RECORD AFTER COMPLETION OF ASSESSMENT U/S. 143(3) SO AS TO FORM AN OPINION BY THE ASSESSING OFFICER THAT THE INCOME HAS ESCAPED ASSESSMENT. REFERRING TO PAGE 2 & 3 OF THE PAPER BOOK WHICH ARE THE REASONS FOR REOPENING SUBMITS THAT TH E REASONS WERE CULLED OUT FROM THE RECORDS AND AS SUCH THERE IS NO TANGIBLE MATERIALS FOR ISSUE OF NOTICE U/S. 148 OF THE ACT. HE SUBMIT S THAT IT IS A MERE CHANGE OF OPINION FOR REOPENING THE ASSESSMENT AND TO DISALLOW THE EXPENSES INCURRED TOWARDS REPAIRS AND MAINTENANCE A ND REOPENING OF ASSESSMENT ON MERE CHANGE OF OPINION IS NOT PERM ISSIBLE IN LAW. HE PLACES RELIANCE ON THE FOLLOWING DECISIONS: 1. RALLIS INDIA LTD VS ACIT (323 ITR 54) (BOMBAY H. C) 2. GODREJ AGROVAT LTD. VS DCIT 323 ITR 97 (BOMBAY H. C ) 3. CIT VS KELVINATOR OF INDIA (320 ITR 561) (SC) ITA NO. 1176/M/2011 3 4. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT THIS GROUND HAS NOT RAISED BEFORE THE LD. CIT(A) AND FOR THE FI RST TIME THIS GROUND IS RAISED BEFORE THE TRIBUNAL. HE SUBMITS THAT THE MATTER HAS NOT BEEN EXAMINED BY THE LD. CIT(A). HE FURTHER SUBMIT S THAT THERE IS NO CHANGE OF OPINION. 5. HEARD BOTH SIDES, PERUSED THE ORDERS OF THE AUTH ORITIES BELOW AND THE DECISIONS RELIED ON BY THE LD. COUNSEL. WI TH REGARD TO THE SUBMISSIONS OF THE LD. DEPARTMENTAL REPRESENTATIVE THAT THE ISSUE OF REOPENING OF ASSESSMENT IS NOT RAISED BEFORE THE LD . CIT(A), WE ARE OF THE VIEW THAT THIS ISSUE IS PURELY A LEGAL ISSUE AN D ASSESSEE IS PERMITTED TO RAISE SUCH GROUND EVEN BEFORE THE TRIB UNAL, WHEN THERE IS NO NEED TO GO INTO EXAMINING FRESH FACTS IN VI EW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CORPN. LTD VS CIT (229 ITR 383). 6. THE REASONS FOR REOPENING OF THE ASSESSMENT ARE AS UNDER: DATED : 28.3.2007 IN THIS CASE, THE RETURN OF INCOME WAS FILED ON 31. 10.2002 DECLARING TOTAL INCOME AT RS. 15,05,790/-. THE CAS E WAS SELECTED FOR SCRUTINY. THE ASSESSMENT WAS COMPLETE D U/S. 143(3) OF THE ACT ON 10.1.2005 ON TOTAL INCOME OF R S. 16,41,680/- AND BOOK PROFIT OF RS. 13,88,488/-. ON GOING THROUGH THE RECORDS , IT IS NOTICED THAT THE ASSESSEE HAS CLAIMED A DEDUCTION OF RS. 14,75,016/- TOWARDS REPAIR CHARGES WHICH INCLUDES A SUM OF RS. 7,00,000/- PAID TO SHREE DUTTA INDUS (I) LTD FOR RE PAIR AND MAINTENANCE CHARGES AND RS. 2,70,000/- PAID TO K.S. CAMBATTA & OTHERS TOWARDS MONTHLY PAYMENT FOR JULY 2001 TO MARCH, 2002. IT IS SEEN FROM THE RECORDS THAT THE PAYMENT OF RS, 7,00,000/- REPRESENTS PAYMENT MADE T O ITA NO. 1176/M/2011 4 SHREE DUTTA INDUS (I) LTD, ANOTHER COMPANY. SIMILA RLY, THE AMOUNT OF RS. 2,70,000/- REPRESENTS THE MONTHLY CONTRIBUTION PAID TO THE CAMBATTA BLDG., TENANTS ASSOCIATION BUILDING REPAIR FUND SET UP FOR TAKING CARE OF PRESENT AND FUTURE CONTINGENT REPAIRS AND RENOVATIO N OF CAMBATTA BLDG.,(EROS BLDG.), LIFT MAINTENANCE AND O THER AMENITIES. AS SUCH, BOTH THESE EXPENDITURES ARE NO T ALLOWABLE DEDUCTIONS. I HAVE, THEREFORE, REASON TO BELIEVE THAT INCOME TO THE EXTENT OF RS. 9,70,000/- HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SEC. 147 OF THE I.T. ACT, 1961. 7. AS COULD BE SEEN FROM THE ABOVE REASONS RECORDED FOR THE REOPENING OF ASSESSMENT, THE ASSESSING OFFICER ON G OING THROUGH THE RECORDS NOTICED THAT ASSESSEE CLAIMED CERTAIN EXPEN DITURE TOWARDS REPAIRS AND MAINTENANCE AND ACCORDING TO HIM THIS I S NOT AN ADMISSIBLE EXPENDITURE. THEREFORE HE WAS OF THE OPI NION THAT THERE IS ESCAPEMENT OF INCOME WITHIN THE MEANING OF SEC. 147 OF THE ACT BY THE ASSESSEE. ON GOING THROUGH THE REASONS RECORDE D, WE FIND THAT NO TANGIBLE MATERIALS HAVE COME ON RECORD AFTER COMPLE TION OF ASSESSMENT SO AS TO BELIEVE THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. IT IS ONLY FROM THE RECORDS TH E ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE EXPENSES ARE NOT AL LOWABLE AND THEREFORE THERE IS ESCAPEMENT OF INCOME. IN OUR CON SIDERED VIEW, THIS IS ONLY A MERE CHANGE OF OPINION OF THE ASSESSING O FFICER TO REOPEN THE ASSESSMENT BASED ON THE MATERIALS ALREADY AVAIL ABLE ON RECORD WHICH IT IS NOT PERMISSIBLE UNDER LAW. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF RALLIS INDIA LTD (SUPRA) CONSI DERING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS KELV INATOR OF INDIA (SUPRA) HELD AS UNDER: ITA NO. 1176/M/2011 5 WE ARE CONSCIOUS OF THE CIRCUMSTANCE THAT IN THE P RESENT CASE THE REOPENING OF ASSESSMENT IS SOUGHT TO BE EF FECTED WITHIN A PERIOD OF FOUR YEARS OF THE EXPIRY OF THE RELEVANT ASSESSMENT YEAR. HOWEVER, IT IS NOW A WELL SETTLED POSITION OF LAW T HAT A MERE CHANGE OF OPINION WOULD NOT JUSTIFY THE ASSESSING O FFICER IN SEEKING A RECOURSE TO THE POWERS UNDER SECTIONS 14 7 AND 148 AND THERE MUST BE TANGIBLE MATERIAL BEFORE THE ASSESSIN G OFFICER TO PROVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASS ESSMENT. THE PRINCIPLE THAT THERE MUST BE TANGIBLE MATERIAL ON T HE BASIS OF WHICH AN ASSESSMENT IS SOUGHT TO BE REOPENED EVEN WITHIN A PERIOD OF FOUR YEARS IS NOW ESTABLISHED IN VIEW OF THE JUDGME NT OF THE HONBLE SUPREME COURT IN CIT VS. KELVINATOR OF INDI A LTD.(2010) 320 ITR 561. THE SUPREME COURT HAS HELD THUS(PAGE 564): THEREFORE, POST APRIL 1, 1989, POWER TO REOPEN IS MUCH WIDER. HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS REASON TO BELIEVE FAI LING WHICH, WE ARE AFRAID, SECTION 147 WOULD GIVE ARBITRARY POW ERS TO THE ASSESSING OFFICER TO REOPEN ASSESSMENTS ON THE BASIS OF MERE CHANGE OF OPINION, WHICH CANNOT BE PER SE RE ASON REOPEN. WE MUST ALSO KEEP IN MIND THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REVIEW AND POWER TO REA SSESS. THE ASSESSING OFFICER HAS NO POWER TO REVIEW; HE HAS THE POWER TO REASSESS. BUT REASSESSMENT HAS TO BE BAS ED ON FULFILMENT OF CERTAIN PRECONDITION AND IF THE CONCE PT OF CHANGE OF OPINION IS REMOVED, AS CONTENDED ON BEH ALF OF THE DEPARTMENT, THEN, IN THE GARB OF REOPENING OF T HE ASSESSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREA T THE CONCEPT OF CHANGE OF OPINION AS AN INBUILT TEST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFICER. HENCE, AF TER APRIL 1, 1989, THE ASSESSING OFFICER HAS POWER TO REOPEN, PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUS ION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. IN THE PRESENT CASE, THERE WAS AN ABSENCE OF TANGI BLE MATERIAL ON THE BASIS OF WHICH THE ASSESSMENT COULD HAVE BEEN REOPENED. THE REASON WHICH WEIGHED WITH THE ASSESS ING OFFICER IS EXTRANEOUS TO THE BASIS ON WHICH THE DEDUCTION CAN LEGITIMATELY BE CLAIMED UNDER SECTION 36(1)(VII). THIS IS A CASE O F A MERE CHANGE OF OPINION WITHOUT ANY TANGIBLE MATERIAL. THE REOP ENING OF THE ASSESSMENT ON THIS GROUND IS HENCE UNSUSTAINABLE. ITA NO. 1176/M/2011 6 FOLLOWING THE SAID DECISION WE HOLD THAT THE REASSE SSMENT IS BAD IN LAW FOR THE REASON THAT NO TANGIBLE MATERIAL HAS COME ON RECORD SUGGESTING ESCAPEMENT OF INCOME AND IT IS ON LY A MERE CHANGE OF OPINION OF THE ASSESSING OFFICER TO REOPEN THE A SSESSMENT BASED ON THE MATERIALS ALREADY AVAILABLE ON RECORD, IT IS NO T PERMISSIBLE UNDER LAW. THIS GROUND OF APPEAL IS ALLOWED. 7. SINCE WE HAVE HELD THAT THE REOPENING OF ASSESSM ENT IS BAD IN LAW, WE ARE NOT INCLINED TO GO INTO THE MERITS OF T HE DISALLOWANCE WHICH BECOMES ONLY AN ACADEMIC. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH MAY, 2016. SD/- SD/- (RAMIT KOCHAR) (C.N. PRASAD ) ' / ACCOUNTANT MEMBER $ %' /JUDICIAL MEMBER MUMBAI; (' DATED : 27 TH MAY, 2016 . % . ./ RJ , SR. PS ITA NO. 1176/M/2011 7 !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ) ( ) / THE CIT(A)- 4. ) / CIT 5. *+ ,%%-. , -.! , / DR, ITAT, MUMBAI 6. , /01 / GUARD FILE. / BY ORDER, *% //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI