M/s. INDAGRO FOODS LTD., MUMBAI V. ACIT - 2(2), MUMBAI

ITA 1333/MUM/2006

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8913 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 14-01-2010
• Assessment Year: 1999-2000
• Appeal Filed On: 24-02-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRAVAN KUMAR
• Assessee Lawyers: P J PARDIWALA
• Keywords: Reason to believe
• Section: 143(3); 80HHC; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A,MUMBAI BEFORE SHRI R.S. SYAL (AM) & SHRI R.S. PADVEKAR (J M) I.T.A.NO.1333/MUM/2006 (A.Y. 1999-2000) M/S. INDAGRO FOODS LTD., ALLANA HOUSE, 4, J.A. ALLANA MARG, COLABA, MUMBAI-400 001. VS. ASST.COMMR. OF INCOME-TAX, RANGE-2(2), AAYKAR BHAVAN, M.K.ROAD, MUMBAI-400 020. APPELLANT RESPONDENT APPELLANT BY SHRI P.J. PARDIWALA. RESPONDENT BY SHRI S HRAVAN KUMAR. O R D E R PER R.S. SYAL, AM : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDE R PASSED BY THE CIT(A) ON 27-01-2006 IN RELATION TO THE ASSESSMENT YEAR 1 999-2000. 2. THE FIRST GROUND IS AGAINST THE MAKING OF RE-ASS ESSMENT WHEN THE REASONS RECORDED IN THE ASSESSMENT ORDER FOR THE INITIATIO N OF RE-ASSESSMENT PROCEEDINGS WERE ULTIMATELY FOUND TO BE NOT SUSTAINABLE BY THE AO. 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE A SSESSEE FILED ITS RETURN DECLARING INCOME OF RS.35,98,981/- UNDER THE NORMAL PROVISIONS OF THE ACT AND RS.11,54,083/- UNDER SEC. 115JA. THE RETURN WAS PRO CESSED U/S. 143(1). NOTICE U/S. 148 DATED 21-07-2003 WAS ISSUED FOR THE FOLLOW ING REASONS SET OUT IN THE ASSESSMENT ORDER : IT WAS OBSERVED FROM THE RECORDS THAT THE ASSESSEE COMPANY WHILE COMPUTING ITS BOOK PROFIT U/S 115JA HAS WRONGLY CAL CULATED DEDUCTION U/S 80HHC SEPARATELY FOR THE PURPOSE OF S ECTION 115JA. THE SAME IS NOT ALLOWABLE. THE DEDUCTION U/S 80HHC TO BE REDUCED FROM THE BOOK PROFIT IS TO BE THE SAME AS CALCULATE D UNDER THE NORMAL PROVISIONS OF INCOME. ITA 1333/M/06 2 ALSO IT WAS SEEN THAT THE ASSESSEE HAS DEBITED RS.9 7,61,296/- AS DONATIONS PAID IN THE P&L ACCOUNT. HOWEVER, THE ASS ESSEE HAS NOT FILED PROOF OF PAYMENT OF RS.25 LACS ONLY ALONG WIT H ITS RETURN OF INCOME. THERE IS NO PROOF ON RECORD REGARDING PAYME NT OF THE BALANCE AMOUNT OF RS.72,61,296/-. SINCE THERE IS NO THING TO SHOW THAT SUCH EXPENDITURE WAS ACTUALLY INCURRED, THE SA ME SHOULD HAVE TO ADDED TO THE BOOK PROFIT OF THE ASSESSEE FOR COM PUTATION OF INCOME U/S 115JA. THE ASSESSEE HAS FAILED TO BRING THE ABOVE DESCRIBED FACTS ON RECORD. 4. ASSESSMENT WAS COMPLETED ON TOTAL INCOME OF RS.2,22,59,180/- UNDER THE REGULAR PROVISIONS WHICH WAS FOUND TO BE HIGHER THA N THE INCOME U/S.115JA. IN THIS COMPUTATION OF TOTAL INCOME, THE AO DID NOT AL LOW ANY DEDUCTION U/S.80HHC. HE ADOPTED GROSS TOTAL INCOME AS PER THE RETURN OF INCOME AT RS.2,24,48,602/- AND THEREFROM ALLOWED DEDUCTION U/S.80G AT RS.1,89, 420/-. 5. THE ASSESSEE WAS UNSUCCESSFUL ON ITS CHALLENGE TO CONTINUE WITH THE RE- ASSESSMENT PROCEEDINGS IN THE ABSENCE OF THE AO MAK ING ANY ADDITION ON ACCOUNT OF THE REASONS RECORDED BY HIM U/S.148. 6. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE REL EVANT MATERIAL ON RECORD. THE REASONS WHICH LED TO THE RE-OPENING OF THE ASSE SSMENT HAVE BEEN SET OUT ABOVE. THE FIRST REASON, AS TAKEN NOTE BY THE AO I N NOTICE U/S.148 IS THAT DEDUCTION U/S.80HHC WAS REQUIRED TO BE REDUCED FROM THE BOOK PROFITS ON THE BASIS OF THE CALCULATION UNDER THE NORMAL PROVISIO NS OF INCOME. ON PAGE 3 OF THE ASSESSMENT ORDER, THE AO ACCEPTED CONTENTION OF THE ASSESSEE BY RECORDING : THE CONTENTION OF THE ASSESSEE IS ACCEPTABLE AS FA R AS COMPUTATION OF DEDUCTION U/S.80HHC FOR COMPUTING THE BOOK PROFITS U/S.115JA IS CONCERNED. THEREAFTER, HE PROCEEDED BY NOT ALLOWING THE DEDUCTION U/S.80HH C FOR DIFFERENT REASONS OTHER THAN THOSE MENTIONED IN THE REASONS FOR THE I NITIATION OF RE-ASSESSMENT PROCEEDINGS. IT BECOMES APPARENT THAT THE AO GOT SA TISFIED WITH THE ASSESSEE AND DROPPED THIS REASON. ITA 1333/M/06 3 7. THE SECOND REASON TAKEN NOTE BY THE AO FO R INITIATING THE RE-ASSESSMENT PROCEEDINGS IS THAT THE ASSESSEE DID NOT FILE ANY P ROOF OF PAYMENT OF RS.25 LAKHS TOWARDS DONATION PAID AND ALSO THERE WAS NO PROOF R EGARDING THE BALANCE AMOUNT OF RS.72,61,296/-. IT WAS ALSO OPINED THAT SUCH AMO UNT OF RS.97.61 LAKHS SHOULD HAVE BEEN ADDED TO THE BOOK PROFITS OF THE ASSESSEE FOR COMPUTATION OF INCOME U/S.115JA. WHEN WE TURN TO THE COMPUTATION OF TOTAL INCOME AT THE END OF THE ASSESSMENT ORDER U/S 143(3) READ WITH SEC. 147, IT IS SEEN THAT NO DISALLOWANCE EITHER OF RS.25 LAKHS OR OF RS.72.61 LAKHS OR SUM T OTAL OF BOTH AT RS.97.61 LAKHS WAS MADE BY THE AO. IT IS, THEREFORE, DISCERNIBLE T HAT BOTH THE REASONS FOR WHICH THE AO INITIATED RE-ASSESSMENT PROCEEDINGS DID NOT FIND PLACE IN THE COMPUTATION OF TOTAL INCOME. IN OTHER WORDS, THE AO HIMSELF OPI NED IN THE ASSESSMENT ORDER THAT THERE WAS NO ESCAPEMENT OF INCOME ON ACCOUNT O F THE REASONS RECORDED BY HIM IN THE NOTICE U/S.148. 8. THE LD. A.R. HAS RELIED ON THE UNREPORTED JUDGME NT OF THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. JET AIRWAYS (I ) LTD. DATED 12-04-2010 FOR CONTENDING THAT ONCE THE ITEMS IN RESPECT OF WHICH THE ASSESSMENT WAS RE- OPENED WERE NOT FINALLY CONSIDERED BY THE AO AS LEA DING TO THE ESCAPEMENT OF ANY INCOME, HE COULD NOT LEGALLY TAKE COGNIZANCE OF OTHER ITEMS OF INCOME COMING TO HIS NOTICE DURING THE COURSE OF SUCH RE-A SSESSMENT PROCEEDINGS WHICH ESCAPED ASSESSMENT. ON THE CONTRARY, THE LD. D.R. CONTENDED THAT THERE COULD NOT BE FOUND ANY FAULT IN THE INITIATION OF RE-ASSE SSMENT PROCEEDINGS AS THE AO WAS PRIMA FACIE OF THE VIEW THAT INCOME HAS ESCAPE D ASSESSMENT. HE, THEREFORE, SUPPORTED THE IMPUGNED ORDER. 9. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CAS E OF JET AIRWAYS (I) LTD. (SUPRA) HAS LAID DOWN THAT UNLESS THE INCOME IN RES PECT OF WHICH NOTICE WAS ITA 1333/M/06 4 ISSUED U/S.148 SWELLED THE TOTAL INCOME AS COMPUTED BY THE AO, THE AO CANNOT MAKE ADDITION IN RESPECT OF OTHER ITEMS OF INCOME C OMING TO HIS NOTICE DURING THE COURSE OF PROCEEDINGS UNDER THE SECTION. IT IS APPA RENT FROM THE LANGUAGE OF SEC. 147 ITSELF WHICH PROVIDES THAT : THE AO .MAY..ASSESS OR RE-ASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CH ARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTIC E SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THE SECTION. IT IS, THEREFORE, VIVID THAT AS LONG AS THE REASONS RECORDED BY THE AO BEFORE ASSUM ING JURISDICTION U/S.147 EXIST FULLY OR PARTLY , THERE CANNOT BE ANY FETTER ON HIS POWERS TO ASSESS OR RE- ASSESS ANY OTHER INCOME ALSO WHICH EARLIER ESCAPED ASSESSMENT BUT COMES TO HIS NOTICE DURING THE COURSE OF PROCEEDINGS U/S.147. IF , HOWEVER, THE REASONS ON THE BASIS OF WHICH THE ASSESSMENT WAS RE-OPENED, ARE NO T TRANSLATED INTO ACTUAL ADDITION IN THE ASSESSMENT U/S.143(3) READ WITH SEC . 147, THE AO CANNOT MAKE ADDITION IN RESPECT OF ANY OTHER INCOME WHICH EARL IER ESCAPED ASSESSMENT THAT COMES TO HIS NOTICE DURING THE COURSE OF SUCH RE-AS SESSMENT PROCEEDINGS. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF JE T AIRWAYS (I) LTD. (SUPRA) HAS HELD THE SAME THING. THE HONBLE BOMBAY HIGH COURT IN THE ABOVE CASE TOOK SUPPORT FROM THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN CIT V. SHRI RAM SINGH (2008) 306 ITR 303 (RAJ.) IN WHICH CASE ALSO IT HAS BEEN HELD THAT ONCE THE AO CAME TO THE CONCLUSION THAT THE INCOME WITH RESPECT TO WHICH HE HAD ENTERTAINED REASON TO BELIEVE COULD HAVE ESCAPED A SSESSMENT, WAS FOUND TO HAVE BEEN EXPLAINED, HIS JURISDICTION CAME TO STOP AT THAT AND HE DID NOT CONTINUE TO POSSESS JURISDICTION TO PUT TO TAX ANY OTHER INC OME, WHICH SUBSEQUENTLY CAME TO HIS NOTICE IN THE COURSE OF RE-ASSESSMENT PROCEE DINGS, WHICH WAS FOUND TO HAVE ESCAPED ASSESSMENT EARLIER. A FAIR READING OF THESE TWO JUDGMENTS MANIFESTS THAT IF NO ESCAPEMENT OF INCOME IS FOUND TO HAVE ACTUALLY TAKEN PLACE ON ACCOUNT OF THE REASONS WHICH LED TO THE ISSUANCE OF NOTICE U/S.148, THEN THE ITA 1333/M/06 5 AO CANNOT ASSESS OR RE-ASSESS ANY OTHER INCOME WHIC H COMES TO HIS NOTICE DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS. 10. ADVERTING TO THE FACTS OF THE INSTANT C ASE, IT IS NOTICED THAT AS BOTH THE ISSUES FOR WHICH THE ASSESSMENT WAS RE-OPENED DID NOT FIND THEIR PLACE IN THE ASSESSMENT ORDER AS LEADING TO THE ESCAPEMENT OF IN COME, THERE WAS NO JUSTIFICATION FOR THE AO TO CONTINUE WITH THE RE-A SSESSMENT PROCEEDINGS. WE, THEREFORE, ALLOW THE FIRST GROUND OF APPEAL. 11. IN VIEW OF OUR DECISION ON THE FIRST GROUND, T HE OTHER GROUNDS HAVE BECOME ACADEMIC IN NATURE AS THE JURISDICTION OF TH E AO WAS OUSTED TO ASSESS OR RE-ASSESS ANY OTHER INCOME WHICH CAME TO HIS NOTICE DURING THE COURSE OF PROCEEDINGS UNDER THE SECTION. WE, THEREFORE, SET A SIDE THE ASSESSMENT ORDER ON THIS LEGAL ISSUE. 12. IN THE RESULT, THE APPEAL IS ALLOWED. PRONOUNCED ON THE 14TH DAY OF JA NUARY, 2011. SD/- SD/- (R.S. PADVEKAR) (R.S. SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 14TH JANUARY , 2011. NG: COPY TO : 1.ASSESSEE. 2.DEPARTMENT. 3 CIT(A)-II,MUMBAI. 4 CIT,MC-II,MUMBAI. 5.DR,A BENCH,MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST.REGISTRAR, ITAT, MUMBAI. ITA 1333/M/06 6 DETAILS DATE INITIALS DESIGNA TION 1. DRAFT DICTATED ON 11-01-2010 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 11-11-2010 SR.PS/ 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/ AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER *