FORBES & COMPANY LATD ( SUCCEESOR TO CAMPBELL KNITWEAR LTD), MUMBAI V. ITO 2(1)(2)NEW MARINE LINES, MUMBAI

ITA 1293/MUM/2010

• Counselvise Citation: 129319914 RSA 2010
• Duration Of Justice: 2 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 29-05-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 17-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANOJ MISHRA
• Assessee Lawyers: GIRISH DAVE
• Keywords: Reopening of assessment; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 147; 148; 143(3)

Judgement Text

FORBES & CO. LTD. I.T.A. NO. 1293/MUM/20 10 PAGE 1 O F 6 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER & SHRI VIVEK VARMA, JUDICIAL MEMBER I.T.A. NO. 1293/MUM/2010 ASSESSMENT YEAR : 2003-04 M/S. FORBES & COMPANY LIMITED, (SUCCESSOR TO CAMPBELL KNITWEAR LTD), FORBES BUILDING, CHARANJIT MARG, FORT, MUMBAI 400 001. PAN: AAACC 0433A VS. INCOME TAX OFFICER 2(1)(2), MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : MR. GIRISH DAVE. RESPONDENT BY : MR. MANOJ MISHRA. DATE OF HEARING: 29-05-2012. DATE OF PRONOUNCEMENT: 06-06-2012. O R D E R PER VIVEK VARMA, JM : THE APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST T HE ORDER OF CIT(A) 4, MUMBAI, DATED 17-12-2009. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : I. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN UPHOL DING THE ACTION OF THE INCOME-TAX OFFICER IN RE-OPENING THE ASSESSM ENT UNDER SECTION 148 OF THE ACT WITHOUT APPRECIATING THAT THE ASSESS MENT COULD NOT BE REOPENED MERELY ON THE BASIS OF CHANGE OF OPINION O N THE SAME SET OF FACTS. II. WITHOUT PREJUDICE TO GROUND NO. I ABOVE, AND I N THE ALTERNATIVE, THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN UPHOL DING THE ACTION OF THE INCOME-TAX OFFICER IN DISALLOWING AN AMOUNT OF RS.54,41,071/- BEING PROVISION FOR QUALITY CLAIMS RECEIVED FROM CU STOMERS BY TREATING THE SAME AS AN UNASCERTAINED LIABILITY. FORBES & CO. LTD. I.T.A. NO. 1293/MUM/20 10 PAGE 2 O F 6 3. GROUND NO. 1 IS LEGAL, ON THE ISSUE OF REOPENING OF ASSESSMENT U/S 148 BY THE AO. TO DEAL WITH THE ISSUE OF REOPEN ING, WE HAVE TO TAKE INTO ACCOUNT THE FACTUAL ASPECTS, STARTING FRO M THE FILING OF THE RETURN. THE ASSESSEE FILED ITS RETURN OF INCOME ON 13-11-2003, DECLARING AN INCOME OF RS. 15,654/- (AFTER SET OFF OF BROUGHT FORWARD LOSSES AT RS. 1,45,97,419). DURING THE ASSESSMENT P ROCEEDINGS, THE ASSESSEE FILED WRITTEN SUBMISSIONS DATED 13-12-2005 AND 30-01-2006 ALONG WITH DETAILS AND CLARIFICATIONS AS ASKED FOR BY THE AO. THE AO FRAMED THE ASSESSMENT ON 28-02-2006, AT AN INCOME O F RS. 4,12,875/- U/S 143(3). 4. ON 26-03-2008, THE AO ISSUED NOTICE U/S 148 AND SERVED IT ON THE ASSESSEE ON 27-03-2008. 5. THE ASSESSEE, THERE UPON REQUESTED THE AO FOR SU PPLY OF REASONS RECORDED BY THE AO FOR INITIATING ASSESSMEN T PROCEEDINGS VIDE LETTER DATED 27-03-2008. THE AO, IN RESPONSE TO THE REQUEST OF THE ASSESSEE, SUPPLIED THE REASONS ON 01-04-2008, WHICH THE ASSESSEE RECEIVED ON 03-04-2008. THEREAFTER, THE RE-ASSESSME NT PROCEEDINGS WERE TAKEN UP AND ASSESSMENT ORDER U/S 143(3) R.W. SECTION 148, WAS FRAMED ON 03-11-2008. 6. BEFORE THE CIT(A), THE ASSESSEE PLEADED THE INFI RMITY OF ACTION TAKEN BY THE AO IN INITIATING THE REASSESSMENT PROC EEDINGS. THESE WERE REJECTED BY THE CIT(A), HE THEREFORE, SUSTAINE D THE REASSESSMENT PROCEEDINGS. FORBES & CO. LTD. I.T.A. NO. 1293/MUM/20 10 PAGE 3 O F 6 7. BEING AGGRIEVED, THE ASSESSEE IS NOW BEFORE THE ITAT. 8. BEFORE US, THE A.R. APPEARING ON BEHALF OF THE A SSESSEE POINTED OUT THE INFIRMITY OF INITIATION OF RE-ASSESSMENT PR OCEEDINGS. THE A.R. PLACED BEFORE US THE PAPER BOOK (APB), WHEREIN, SUB MISSIONS DATED 13-12-2005 AND 30-01-2006 HAD BEEN PLACED AND SOUGH T OUR ATTENTION ON THE REASONS RECORDED BY THE AO AND THE ISSUE DEA LT WITH BY THE AO FRAMING THE REGULAR ASSESSMENT DATED 28-02-2006 AND SUBMISSIONS MADE ON THE ISSUE BY THE ASSESSEE IN ITS WRITTEN SU BMISSIONS ON THE DATES AS MENTIONED ABOVE. 9. THE A.R. POINTED AT PAGE NO. 5, WHICH PERTAINED TO THE REPLY GIVEN BY THE AO ON THE REQUEST OF FOR THE REASONS. THE REASONS RECORDED BY THE AO READ AS UNDER: ASSESSMENT U/S. L43 (3) WAS COMPLETED ON 28/2/2006 AND INCOME ASSESSED WAS RS. 4,13,875/-. AFTER VERIFICATION OF CASE RECORDS, IT IS SEEN THA T ASSESSEE HAS DEBITED TO PROFIT AND LOSS ACCOUNT RS. 54,41,071/- UNDER TH E HEAD CLAIM. AS PER THE LEDGER OF CLAIM ACCOUNT, RS. 54,41,071/- IS A PROVISION FOR CUSTOMERS CLAIM. ASSESSEE HAS DEBITED RS. 5,27,621/ - TOWARDS PROVISION FOR CUSTOMERS CLAIM IN RESPECT OF GARMEN TS SOLD TO ESPIRIT AND RS. 49,13,450/- AS PROVISION FOR CUSTOMERS CLAI M PROVIDED FOR EXPORT MADE TO PACIFIC WAVE @ 5% OF RS. 9,82,69,000 /-. THESE ARE THE UNASCERTAINED LIABILITY, THEREFORE, IT SHOULD N OT BE ALLOWED. THE A.R. IN HIS SUBMISSIONS FURTHER POINTED OUT THA T THESE REASONS ON WHICH THE AO HAD REOPENED THE ASSESSMENT WAS DEALT THREADBARE BY THE AO FRAMING THE REGULAR ASSESSMENT AND POINTED O UT THAT IN WRITTEN SUBMISSIONS DATED 13-12-2005, THE REPLY ALONG WITH COMPLETE DETAILS (PAGE 11, POINT NO. 11 PLACED BEFORE THE AO) WERE P LACED WHICH READ AS UNDER: FORBES & CO. LTD. I.T.A. NO. 1293/MUM/20 10 PAGE 4 O F 6 11. DETA1LS OF CLAIMS PAID DURING 2002-03 RS 5463797/- STATEMENT ATTACHED (PG 140-142). THE A.R. FURTHER POINTED OUT THAT ONCE AGAIN VIDE L ETTER DATED 30-01- 2006, THE ASSESSEE SUBMITTED ON THE IMPUGNED ISSUE AND ONCE AGAIN SUBMITTED COMPLETE DETAILS ALONG WITH COPIES OF CLA IM MADE BY THE BUYERS IN U.S. (THE ASSESSEE HAS EXTRACTED THE RELE VANT PAGE OF THE PAPER BOOK PLACED BEFORE THE AO) AS UNDER: DETAILS OF CLAIMS PAID RS.5463797/- THESE CLAIMS PAID PERTAIN TO AMOUNTS PAID DURING TH E YEAR IN RESPECT OF QUALITY CLAIMS TOWARDS MECHANDISE SUP PLIED TO OVERSEAS CUSTOMERS PRIMARILY THEY ARE ON ACCOUNT OF DEFECTIVE GARMENTS, COLOUR FASTNESS, WRONG COLLAR A ND CUFF ATTACHMENT, POOR STICHING,DYEING HAMMING PROBL EM, ETC. ALL SUCH CLAIMS ARE PAID WITHIN THE PERMISSIBL E LIMITS LAID DOWN BY RESERVE BANK OF INDIA (PG 233-234). ON POINTING OUT THE REASONS RECORDED BY THE AO FOR INITIATING RE- ASSESSMENT PROCEEDINGS AND HOW IT HAS BEEN DEALT WI TH BY THE AO AND THE ASSESSEE AT THE REGULAR ASSESSMENT STAGE, THE A .R. EMPHASISED THAT IT IS A CLEAR CASE OF CHANGE OF OPINION ON THE ALREADY DEALT WITH ISSUE BY THE SUCCEEDING AO. THE A.R. SUBMITTED THAT THE ISSUE IS NOW COVERED BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT V/S KELVINATOR OF INDIA LTD. REPORTED IN 320 ITR 561, WHEREIN THE HON'BLE SUPREME COURT (HEADNOTE) HELD AS UNDER: THE CONCEPT OF 'CHANGE OF OPINION' ON THE PART OF T HE ASSESSING OFFICER TO REOPEN AN ASSESSMENT DOES NOT STAND OBLITERATED AFT ER THE SUBSTITUTION OF SECTION 147 OF THE INCOME-TAX ACT, 1961, BY THE DIR ECT TAX LAWS (AMENDMENT) ACTS, 1987 AND 1989. AFTER THE AMENDMEN T, THE ASSESSING OFFICER HAS TO HAVE REASON TO BELIEVE THAT INCOME H AS ESCAPED ASSESSMENT, BUT THIS DOES NOT IMPLY THAT THE ASSESSING OFFICER CAN REOPEN AN ASSESSMENT ON MERE CHANGE OF OPINION. THE CONCEPT OF 'CHANGE O F OPINION' MUST BE TREATED AS AN IN-BUILT TEST TO CHECK THE ABUSE OF P OWER. HENCE AFTER APRIL 1, 1989, THE ASSESSING OFFICER HAS POWER TO REOPEN AN ASSESSMENT, PROVIDED FORBES & CO. LTD. I.T.A. NO. 1293/MUM/20 10 PAGE 5 O F 6 THERE IS 'TANGIBLE MATERIAL' TO COME TO THE CONCLUS ION THAT THERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASON MUST H AVE A LINK WITH THE FORMATION OF THE BELIEF. THE HON'BLE SUPREME COURT THUS DISMISSED THE CIVIL APPEAL FILED BY THE REVENUE. THE A.R. FURTHER SUBMITTED THAT EVEN THE H ON'BLE JURISDICTIONAL HIGH COURT AT BOMBAY IN THE CASE OF PURITY TECHTEXTILE PVT. LTD. V/S ACIT, REPORTED IN 325 ITR 459 HAS REL IED UPON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF KE LVINATOR OF INDIA LTD. (SUPRA). HE, THEREFORE, CONCLUDED THAT SINCE T HE ISSUE ON WHICH THE REVENUE HAS INITIATED THE RE-ASSESSMENT PROCEEDINGS HAS BEEN DEALT WITH BY THE AO IN REGULAR ASSESSMENT, THE INITIATIO N OF REASSESSMENT PROCEEDINGS IS BAD IN LAW AND HAS TO BE STRUCK DOWN . 10. THE D.R. RELIED UPON HE VIEWS TAKEN BY THE REVE NUE AUTHORITIES. 11. WE HAVE HEARD EITHER SIDE AND HAVE PERUSED THE MATERIAL BROUGHT ON RECORD IN THE FORM OF APB. ON GOING THRO UGH THE RELEVANT EVIDENCE AND WRITTEN SUBMISSIONS, WE HAVE TO TAKE A CONSCIOUS VIEW THAT ACTUALLY THE ISSUE HAD BEEN GONE INTO BY THE A O WHO FRAMED THE REGULAR ASSESSMENT U/S 143(3). WE CANNOT IGNORE THE DETAILS WHICH HAVE BEEN FILED BY THE ASSESSEE BEFORE THE AO. THES E DETAILS, THE MANNER IN WHICH THE REPLIES HAVE BEEN FILED, ALONG WITH SUPPORTING DOCUMENTS, SIMPLY PROVE THAT THESE COULD NOT HAVE B EEN FILED SUO MOTO . THESE DETAILS HAD BEEN CALLED FOR BY THE AO AND IN RESPONSE TO WHICH THESE REPLIES HAD BEEN FILED. SINCE THE AO HAS INITIATED THE RE- ASSESSMENT PROCEEDINGS ON THE SAME FACTS AND ON THE SAME FIGURES, AS SHOWN BY THE ASSESSEE IN ITS BOOKS, WE ARE OF THE C ONSIDERED OPINION FORBES & CO. LTD. I.T.A. NO. 1293/MUM/20 10 PAGE 6 O F 6 THAT NO TANGIBLE MATERIAL HAD BEEN BROUGHT ON RECORD BY THE AO, WHICH COULD HAVE GIVEN HIM SOME VALID REASON TO INI TIATE THE REASSESSMENT PROCEEDINGS. WE ARE INCLINED TO HOLD T HAT THE REASSESSMENT PROCEEDINGS WERE BAD IN LAW. WE, THERE FORE, HOLD THAT THE NOTICE U/S 148 ISSUED ON 26-03-2008 AS VOID , AND CONSEQUENTLY THE PROCEEDINGS ARE VOID AB INITIO . 12. SINCE WE HAVE HELD THAT THE REASSESSMENT PROCEE DINGS ARE BAD IN LAW AND HENCE VOID, WE DO NOT FIND ANY REASON TO GO INTO THE MERITS, AS IN GROUND NO. 2. 13. THE APPEAL, FILED BY THE ASSESSEE IS THUS ALLOW ED. 14. IN THE RESULT, APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 06/06/2012. SD/- SD/- (B.RAMAKOTAIAH) ( VIVEK VARMA ) ACCOUNTNAT MEMBER JUDIC IAL MEMBER MUMBAI: 06/06/2012. P/-*