ACIT, Cir-16(1), Hyderabad V. M/s. Nava Bharat Ventures, Hyderabad

ITA 1351/HYD/2011

• Counselvise Citation: 135122514 RSA 2011
• Duration Of Justice: 2 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 20-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V SIVA KUMAR
• Keywords: Reopening of assessment; Depreciation; Retrospective amendment; Bad and doubtful debts; Difference of opinion; Unabsorbed depreciation; Change of opinion
• Section: 143(3); 80HHC; 115JB; 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 1351/HYD/2011 ASSESSMENT YEAR 2003-04 THE ASST. CIT CIRCLE-16(1) HYDERABAD VS. M/S. NAVA BHARAT VENTURES (FORMERLY NAVA BHARAT FERRO ALLOYS LTD.) HYDERABAD PAN: AAACN7327C APPELLANT RESPONDENT APPELLANT BY: SRI SOLGY JOSE T. KOTTARAM RESPONDENT BY: SRI V. SIVA KUMAR DATE OF HEARING: 25.06.2014 DATE OF PRONOUNCEMENT: 09.07.2014 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-V, HYDERABAD DATED 09.05.2011 F OR ASSESSMENT YEAR 2003-04. 2. FOR THE A.Y. 2003-04, THE ASSESSEE FILED ITS RETURN OF INCOME ON 18.11.2003 DISCLOSING A TOTAL INCOME OF R S. 7,93,07,230. THE ORIGINAL ASSESSMENT U/S. 143(3) OF INCOME-TAX ACT, 1961 WAS COMPLETED DETERMINING THE TOTAL INCOME AT RS. 10,41,49,209. SUBSEQUENTLY, THE AO REOPENED THE ASSESSMENT U/S. 147 AND COMPLETED THE ASSESSMENT DETERMINING THE TOTAL INCOME OF THE ASSE SSEE AT RS. 9,48,91,413. 2 ITA NO. 1351/HYD/2011 M/S. NAVA BHARAT VENTURES ==================== 3. FACTS OF THE CASE ARE THAT THE ASSESSEE-COMPANY IS MANUFACTURING FERRO ALLOYS. ORIGINAL ASSESSMENT WA S COMPLETED U/S. 143(3) AND IN REPLY TO THE NOTICE U/ S. 148 ON 25.3.2010 THE ASSESSEE FURNISHED A STATEMENT THAT T HE RETURN IN RESPONSE TO NOTICE WAS FILED ON 26.4.2010 . THE ASSESSEE ALSO REQUESTED FOR REASONS RECORDED WHICH WERE FURNISHED BY THE AO. SUBSEQUENTLY SHOW-CAUSE LETTE RS WERE ISSUED AND ASSESSEE GAVE ITS ARGUMENTS WITH RE SPECT TO ALL THE ISSUES. THE AO THEN MADE ADDITION RECAL CULATING THE DEDUCTION U/S. 80HHC OF THE ACT. 4. ON FURTHER APPEAL BEFORE THE CIT(A), THE AR OF THE ASSESSEE ARGUED THAT NOTICE U/S. 148 WAS BARRED BY LIMITATION. IT WAS FURTHER STATED THAT NOTICE WAS ISSUED FOR RECOMPUTING DEDUCTION U/S. 80HHC AND THAT THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO PROVIDE THE REQUISITE INFORMATION. THE CIT(A) RELYING ON THE CASES OF (1 ) CIT VS. KELVINATOR OF INDIA (251 ITR 1) (FB) (DEL), (2) APO LLO HOSPITALS ENTERPRISES LTD. VS. ACIT (287 ITR 25) (M AD) AND (3) CIT VS. ABDUL RAHAMAN SAIT (306 ITR 142) (MAD) HELD THAT DURING THE ORIGINAL ASSESSMENT PROCEEDINGS U/S . 143(3) OF THE ACT, THE VERY DEDUCTION U/S. 80HHC WA S RECOMPUTED AND THE VERY DEDUCTION WAS SUBJECT MATTE R BEFORE THE CIT(A) VIDE ITA NO. 088/AC-16(1)/CIT(A)- V/2006- 07 DATED 09.03.2007. THEREAFTER, GIVING EFFECT TO THE ORDER OF THE CIT(A) AND ITAT AND PASSING OF ANOTHER ORDER U/S. 154, THE AO ISSUED NOTICE U/S. 148. THE CIT(A) FUR THER HELD THAT MORE THAN FOUR YEARS ELAPSED FROM THE END OF T HE FINANCIAL YEAR IN WHICH THE ORIGINAL RETURN WAS FIL ED. SECONDLY, NO NEW INFORMATION HAS COME FORTH AFTER COMPLETION OF THE ASSESSMENT U/S. 143(3) DATED 31.3 .2006. 3 ITA NO. 1351/HYD/2011 M/S. NAVA BHARAT VENTURES ==================== 5. FROM THE REASONS RECORDED, HE CONCLUDED THAT THE AO WANTED MERELY TO RECOMPUTE THE DEDUCTION U/S. 80 HHC ON THE BASIS OF INFORMATION PROVIDED BY THE ASSESSE E AS PER SCHEDULE-18 APPENDED TO THE ANNUAL REPORT AND T HIS IS ONLY CHANGE OF OPINION. THE CIT(A) HELD THAT THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS AND HENCE REOPENING OF THE ASSESSMENT ITSELF IS BAD IN LAW AND INVALID. AGGRI EVED, THE REVENUE IS IN APPEAL BEFORE US. 6. THE LEARNED DR RELIED ON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE DECISION OF THE CIT( A) THAT THERE IS CHANGE IN OPINION OF THE ASSESSING OFFICER IS NOT ACCEPTABLE IN VIEW OF THE FOLLOWING DECISIONS: (I) KALYANJI MAVJI & CO. VS. CIT, 102 ITR 287 (SC) (II) ALA FIRM VS. CIT 189 ITR 285 (SC) (III) CONSOLIDATED PHOTO AND FINVEST LTD. VS. ACIT, 281 ITR 394 (DEL) (IV) SOM DATT BUILDERS P. LTD. VS. DY. CIT, 280 ITR (AT) 229, (KOL) 7. THE DR FURTHER SUBMITTED THAT THE CIT(A) OUGHT TO HAVE GONE INTO THE MERITS OF THE CASE. THE CIT(A) ERRED IN HOLDING THAT THERE IS CHANGE IN OPINION BY THE ASSE SSING OFFICER. THE DR FURTHER SUBMITTED THAT THE CIT(A) ERRED IN HOLDING THAT THE ISSUANCE OF NOTICE U/S. 148 WERE N OT IN ORDER, SINCE NOTICE U/S. 148 WAS ISSUED ON 25.03.20 10 AFTER OBTAINING APPROVAL OF CIT-IV, HYDERABAD ON ACCORDAN CE WITH THE PROVISIONS U/S. 149 AND 151 OF THE IT ACT, 1961. 8. THE LEARNED COUNSEL FOR THE ASSESSEE WHILE SUPPORTING THE ORDER OF THE CIT(A) RELIED ON THE JU DGEMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. FOR AMER 4 ITA NO. 1351/HYD/2011 M/S. NAVA BHARAT VENTURES ==================== FRANCE (264 ITR 566) (SC) AND THE HONBLE HIGH COUR T OF ANDHRA PRADESH IN THE CASE OF MAHALAKSHMI MOTORS VS . DCIT (265 ITR 53). 9. WE FIND FROM THE REASONS RECORDED THAT NOTICE U/S. 148 WAS ISSUED TO RECOMPUTE DEDUCTION ALLOWED U/S. 80HHC OF THE ACT BASED ON THE INFORMATION CONTAINED IN THE ANNUAL REPORT AND ALSO INFORMATION FURNISHED IN 10CCAC DATED 26.11.2003 SUBMITTED ALONG WITH THE RE TURN OF INCOME FILED ON 28.11.2013. 10. WE ALSO NOTE THAT DURING THE ORIGINAL ASSESSMENT PROCEEDINGS U/S. 143(3) OF THE ACT, THE VERY DEDUCT ION U/S. 80HHC WAS RECOMPUTED. IN PARA 8 OF THE ORIGINAL OF THE ASSESSMENT U/S. 143(3) DATED 31.3.2006 IT HAS BEEN STATED AS FOLLOWS: '8. THE ASSESSEE-COMPANY CLAIMED DEDU- CTIONS UNDER CHAPTER VIA IN RESPECT OF 80IA AND 80HHC. HOWEVER, WHILE CLAIMING THE DEDUCTION U/S. 80HHC, THE ASSESSEE HAS NOT EXCLUDED THE DEDUCTION CLAIMED U/S. 80IA FROM THE ELIGIBLE PROFITS RESULTING IN VIOLATION OF PROVISIONS OF S. 80IA W.R.T. SUB-SEC. 9. ACCORDINGLY, THE DEDUCTION U/S. 80HHC IS RECOMPUTED AFTER DULY DISALLOWING THE DEDUCTION CLAIMED U/S. 80IA FROM THE ELIGIBLE PROFITS.' 11. THE PROVISO TO SECTION 147 IS AS UNDER: 'PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF RELEVANT 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 RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB- 5 ITA NO. 1351/HYD/2011 M/S. NAVA BHARAT VENTURES ==================== SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR.' 12. THEREFORE AS COULD BE SEEN FROM THE ABOVE PROVISO WHERE AN ASSESSMENT WAS ALREADY COMPLETED U/S 143(3 ) SUCH ASSESSMENT CANNOT BE REOPENED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THEREFORE IN THE APPELLANT'S CASE, SINCE ASSESSMENT WAS COMPLETED U/S 143(3) ON 31.3.2006 THE SAME CANNOT B E REOPENED AFTER FOUR YEARS FROM THE END OF THE ASSES SMENT YEAR I.E., THE ASSESSMENT CANNOT BE REOPENED BEYOND 31.3.2008 UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REAS ON OF THE FAILURE ON THE PART OF THE ASSESSEE IN DISCL OSING FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR COMPLETI ON OF ASSESSMENT FOR THAT ASSESSMENT YEAR. 13. AS CAN BE SEEN FROM THE REASONS RECORDED FOR ISSUE OF NOTICE U/S 148, IT WAS ISSUED TO RECOMPUTE THE DISALLOWANCE OF DEDUCTION ALLOWED U/S 80HHC BASED O N THE INFORMATION ALREADY AVAILABLE ON RECORD WHICH IS NO T PERMISSIBLE IN LAW SINCE THERE IS NO FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSING FULLY AND TRULY ALL MATE RIAL FACTS NECESSARY FOR COMPLETION OF ASSESSMENT AND, THEREFO RE, ISSUE OF NOTICE U/S. 148 IS BAD IN LAW. 14. OUR VIEW IS SUPPORTED BY THE JUDGEMENT OF DELHI HIGH COURT IN THE CASE OF CIT VS. PUROLATOR INDIA L TD. (343 ITR 155) (DEL). SECONDLY, IN THE CASE OF VOLTAS LT D. VS. ACIT (19 TAXMANN.COM 183) (BOM) IT WAS HELD AS UNDE R: 'THE ASSESSMENT FOR ASSESSMENT YEAR 2005-06 IS SOUGHT TO BE REOPENED BEYOND A PERIOD OF 6 ITA NO. 1351/HYD/2011 M/S. NAVA BHARAT VENTURES ==================== FOUR YEARS OF THE END OF THE RELEVANT ASSESSMENT YEAR. BOTH THE GROUNDS WHICH HAVE BEEN FORMULATED BY THE ASSESSING OFFICER FOR REOPENING THE ASSESSMENT PERTAIN TO EVENTS WHICH HAVE TAKEN PLACE AFTER THE ORDER OF ASSESSMENT WAS PASSED. THE FIRST OF THOSE IS THE JUDGMENT OF THE SPECIAL BENCH OF THE TRIBUNAL WHICH WAS DELIVERED ON 30.6.2010, ACCORDING TO WHICH UNABSORBED DEPRECIATION FOR THE PERIOD UP TO 1996-97 COULD BE CARRIED FORWARD AND SET OFF AGAINST THE INCOME UNDER ANY HEAD FOR A MAXIMUM PERIOD OF EIGHT ASSESSMENT YEARS. CONSEQUENTLY, ACCORDING TO THE ASSESSING OFFICER UNABSORBED DEPRECIATION PERTAINING TO ASSESSMENT YEAR 1994-95 COULD NOT HAVE BEEN SET OFF AGAINST THE INCOME FOR ASSESSMENT YEAR 2005-06. THE SECOND OF THOSE EVENTS IS A LEGISLATIVE AMENDMENT BROUGHT ABOUT BY THE FINANCE ACT OF 2009 WITH RETROSPECTIVE EFFECT FROM 1.4.2001. ACCORDING TO THE ASSESSING OFFICER INCOME WAS COMPUTED UNDER SECTION 115JB WITHOUT ANY ADDITION BEING MADE ON ACCOUNT OF PROVISION FOR DIMINUTION IN THE VALUE OF INVESTMENT AND PROVISION FOR DOUBTFUL DEBTS AND ADVANCES. BOTH THE REASONS WHICH HAVE BEEN INDICATED BY THE ASSESSING OFFICER MAY BE REFLECTIVE OF THE FACT THAT THERE IS AN ESCAPEMENT OF INCOME. BUT THAT IN ITSELF IS NOT SUFFICIENT TO VALIDATE THE REOPENING OF ASSESSMENT BEYOND A PERIOD OF FOUR YEARS. BEYOND THE PERIOD OF FOUR YEARS, THE POWER OF THE ASSESSING OFFICER IS STRUCTURED BY THE REQUIREMENT THAT THERE MUST BE A FAILURE ON THE PART OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS FOR THE ASSESSMENT. NEITHER THE REASONS WHICH HAVE BEEN COMMUNICATED TO THE ASSESSEE NOR FOR THAT MATTER THE ORDER PASSED ON THE OBJECTIONS RAISED CONTAINS ANY ALLEGATION OR STATEMENT THAT THERE HAS BEEN A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. WHILE A SUBSEQUENT DECISION OF A COURT OR A LEGISLATIVE AMENDMENT ENFORCED AFTER THE ORDER OF ASSESSMENT MAY LEGITIMATELY GIVE RISE TO AN INFERENCE OF AN ESCAPEMENT OF INCOME, BEFORE THE ASSESSING PROCEEDS TO REOPEN AN ASSESSMENT AFTER THE EXPIRY OF FOUR 7 ITA NO. 1351/HYD/2011 M/S. NAVA BHARAT VENTURES ==================== YEARS OF THE END OF THE RELEVANT ASSESSMENT YEAR, HE MUST NONETHELESS APPLY HIS MIND TO THE FUNDAMENTAL QUESTION AS TO WHETHER THERE HAS BEEN A FAILURE TO DISCLOSE ON THE PART OF THE ASSESSEE. IN THE PRESENT CASE, EX FACIE THERE IS NO SUCH ALLEGATION. MOREOVER, THE RETURN OF INCOME AND THE MATERIAL PLACED ON THE RECORD BY THE ASSESSEE TOGETHER WITH THE RETURN WOULD MAKE IT ABUNDANTLY CLEAR THAT THE ASSESSEE HAD SET FORTH THE BASIS OF ITS CLAIM AND THERE WAS NO SUPPRESSION OF MATERIAL FACTS. IN THESE CIRCUMSTANCES, AND FOR THE REASONS THAT ARE STATED HEREINABOVE, IT IS OPINED THAT THE FUNDAMENTAL CONDITION FOR REOPENING THE ASSESSMENT BEYOND A PERIOD OF FOUR YEARS HAS NOT BEEN FULFILLED. (PARA 9) IN THE RESULT, THE WRIT PETITION FILED BY ASSESSEE WAS TO BE ALLOWED.' 15. RESPECTFULLY FOLLOWING THE ABOVE DECISION, WE DISMISS THE DEPARTMENTAL APPEAL. 16. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMISSED . PRONOUNCED IN THE OPEN COURT ON 9 TH JULY, 2014 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER HYDERABAD, DATED THE 9 TH JULY, 2014 TPRAO COPY TO: 1. THE ASST. CIT, CIRCLE - 16 (1), ROOM NO. 612, 6 TH FLOOR , AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 2. M/S. NAVA BHARAT VE NTURES (FORMERLY NAVA BHARAT FERRO ALLOYS LTD.), 6-3-1109/1, RAJ BHAVAN ROAD, SOMAJIGUDA, HYDERABAD. 3. THE CIT(A) - V, HYDERABAD. 4. THE CIT - IV, HYDERABAD. 5. THE DR, B - BENCH, ITAT, HYDERABAD.