DCIT, Coimbatore V. M.P.S.Steel Castings Pvt. Limited, Coimbatore

ITA 1377/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96109 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 28-09-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 04-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Keywords: Reopening of assessment; Search and seizure; Tangible material; Difference of opinion; Change of opinion
• Section: 143(3); 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . , ! # $ , % & BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO .1377/MDS/2015 ( / ASSESSMENT YEAR: 2008-09) THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-I, 63-A, RACE COURSE ROAD, COIMBATORE. VS M/S. M.P.S. STEEL CASTINGS LTD. 103, EXCELLENCE BUILDING, RACE COURSE ROAD, COIMBATORE-641 018. PAN:AACCM1643G ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. A.V.SREEKANTH, JCIT /RESPONDENT BY : NONE /DATE OF HEARING : 28 TH SEPTEMBER, 2015 /DATE OF PRONOUNCEMENT : 30 TH SEPTEMBER, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1, COIMBAT ORE DATED 5.3.2015 FOR THE ASSESSMENT YEAR 2008-09. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 'THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT REASSESSMENT IS PERMISSIBLE E VEN OF INFORMATION WAS OBTAINED AFTER PROPER INVESTIGAT ION FROM THE MATERIAL ON RECORD OR FROM ANY ENQUIRY OR RESEARCH INTO FACTS OR LAW - INFORMATION NEED NOT BE FROM AN EXTERNAL SOURCE HAS HELD BY THE SUPREME COURT IN THE CASE OF KALYANJI MAVJI & CO. VS. CIT (102 ITR 287). 2 ITA NO.1377/MDS/2015 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT CHANGE OF OPINION COMES TO THE RESCUE OF THE ASSESSEE ONLY WHEN THE ASSESSING OFFICER HAS TAKEN ONE OF THE PERMISSIBLE VIEWS AT THE TIME OF ORIGINAL PROCEEDINGS. A WRONG APPLICATION O F LAW CANNOT BE HELD AS PERMISSIBLE VIEW AND THAT CAN ALWAYS BE CHANGED FOR APPRECIATING LAW AS HELD BY THE HON'BLE ITAT, KOLKATTA IN THE CASE OF SAM DUTT BUILDERS P.LTD. VS. DCIT REPORTED IN 98 ITD 78 ON THE BASIS OF THE VIEWS OF THE HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT IN 243 ITR 83. 3. IN SPITE OF NOTICE SERVED ON THE ASSESSEE, NONE APPEARED ON BEHALF OF THE ASSESSEE/RESPONDENT. THER EFORE, WE PROCEED TO DISPOSE OFF THE APPEAL, AFTER HEARING THE DEPARTMENTAL REPRESENTATIVE AND PERUSING THE RECORD S . 4. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT COMM ISSIONER OF INCOME TAX (APPEALS) ALLOWED THE APPEAL OF THE A SSESSEE HOLDING THAT REOPENING OF ASSESSMENT IS VOID AB INI TIO. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF TH E ACT ON 31.12.2010 DETERMINING THE NET LOSS OF THE COMPA NY AT ` 39,70,173/- FOR THE ASSESSMENT YEAR 2008-09. THE ASSESSMENT WAS REOPENED UNDER SECTION 147 OF THE AC T FOR THE REASON THAT ASSESSEE FAILED TO DEDUCT TAX AT SO URCE TOWARDS PORT CHARGES AND WHARFAGE CHARGES CONSEQUEN T TO WHICH INCOME CHARGEABLE TO TAX UNDER SECTION 40(A)( IA) ESCAPED ASSESSMENT. DEPARTMENTAL REPRESENTATIVE SUB MITS 3 ITA NO.1377/MDS/2015 THAT THAT REOPENED ASSESSMENT WAS COMPLETED UNDER S ECTION 143(3) READ WITH SECTION 147 ON 23.01.2014 DISALLOW ING ` 44,31,471/- UNDER SECTION 40(A)(IA) REPRESENTING PO RT CHARGES AND WHARFAGE CHARGES INCURRED BY THE ASSESS EE. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT IN THE COU RSE OF REOPENED ASSESSMENT ASSESSEE CONTENDED THAT PORT TR UST IS A GOVERNMENT AGENCY AND THE PAYMENT MADE TO IT DOES N OT ATTRACT TDS. DEPARTMENTAL REPRESENTATIVE SUBMITS TH AT THE EXPLANATION OF THE ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER FOR THE REASON THAT PORT TRUST IS TAXABLE ENTITY AND ITS INCOME CHARGED TO INCOME-TAX THEREFO RE, SINCE THE PAYMENTS MADE BY THE ASSESSEE ARE LIABLE TO TAX AND THE ASSESSEE FAILED TO DEDUCT AND REMIT THE TDS, THE EX PENSES WERE DISALLOWED UNDER SECTION 40(A)(IA) BY RIGHTLY REOPENING THE ASSESSMENT. 5. WE HAVE PERUSED THE ORDER OF ASSESSING OFFIC ER AND THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS ) AND CONSIDERED THE ARGUMENTS ADVANCED BY THE DEPARTMENTAL REPRESENTATIVE. THE ASSESSMENT WAS REOPENED UNDER SECTION 147 OF THE ACT TO DISALLOW P ORT EXPENSES AND WHARFAGE CHARGES PAID BY THE ASSESSEE TO PORT 4 ITA NO.1377/MDS/2015 TRUST FOR THE REASON THAT NO TDS WAS DEDUCTED ON SU CH PAYMENTS. ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT REOPENING OF ASSESSMENT IS VOID AB INITIO SINCE THE DETAILS IN RESPECT OF PAYMENTS MADE TOWAR DS PORT CHARGES AND WHARFAGE CHARGES WERE ALL REFLECTED IN THE RETURNS OF INCOME AND THE ASSESSING OFFICER WHILE C OMPLETING THE ASSESSMENT UNDER SECTION 143(3) EXAMINED ALL TH ESE DETAILS AND CONCLUDED THE ASSESSMENT. THE COMMISSIO NER OF INCOME TAX (APPEALS) HELD THAT ASSESSMENT WAS RE OPENED BY THE ASSESSING OFFICER STATING THAT SUBSEQUENT VE RIFICATION OF THE RECORDS SHOWED THAT ASSESSEE HAD CLAIMED EXPENDITURE TOWARDS PORT CHARGES AND WHARFAGE CHARG ES BUT HAD NOT DEDUCTED TAX AT SOURCE, THEREFORE THE ASSES SMENT WAS REOPENED UNDER SECTION 147 OF THE ACT. THE COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT IT I S ONLY FROM THE RETURN OF INCOME, THE ASSESSING OFFICER HA S CONCLUDED THAT THERE WAS ESCAPEMENT OF INCOME AND REOPENED THE ASSESSMENT UNDER SECTION 147 OF THE AC T AND THERE WAS NO TANGIBLE MATERIAL BROUGHT ON RECORD BY THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT. FOLLOWI NG THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF 5 ITA NO.1377/MDS/2015 KELVINATOR OF INDIA LTD. (320 ITR 561) THE COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT IN THE ABSENCE OF TANGIBLE MATERIAL CAME TO RECORD AFTER C OMPLETION OF ASSESSMENT UNDER SECTION 143(3) OF THE ACT ASSES SMENT IS VOID AB INITIO AS IT IS ONLY MERE CHANGE OF OPINION . WHILE HOLDING SO, THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED AS UNDER:- 'AS SEEN FROM FACTS, THE ASSESSMENT IN THIS CASE WA S COMPLETED U/S 143(3) VIDE ORDER DATED 31.12.2010 DETERMINING NET LOSS AT (-) RS.39, 70, 173/-. THE ASSESSING OFFICER IN HIS ORDER STATED, 'SUBSEQUENT VERIFICATION OF THE RECORDS SHOWED THAT THE ASSESSEE HAD CLAIMED EXPENDITURE OF RS.32,30,270/- TOWARDS P ORT CHARGES AND RS. 12,01,201/- TOWARDS WHARFAGE CHARGES, BUT H AD NOT DEDUCTED TAX AT SOURCE FROM THE ABOVE EXPENDITURE. THE ASSESSMENT WAS, THEREFORE, RE-OPENED U/S 147 OF THE ACT'. AS S EEN FROM FACTS, THE DETAILS OF EXPENDITURE TOWARDS PORT CHARGES AND THE WHARFAGE DETAILS WERE CLAIMED IN THE RETURN OF INCOME FILED BEFORE THE ASSESSING OFFICER. IT IS ONLY FROM THIS RETURN OF I NCOME THE ASSESSING OFFICER HAS CONCLUDED THAT THERE WAS ESCAPEMENT OF INCOME AND ASSESSMENT WAS THEREFORE RE-OPENED U/S 147 OF THE INCOME TAX ACT, 1961. THERE WAS NO TANGIBLE MATERIAL BROUGHT ON RECORD BY THE ASSESSING OFFICER TO RE-OPEN THE ASSE SSMENT. THE HON'BLE APEX COURT IN THE CASE OF CIT VS KELVINATOR OF INDIA REPORTED IN 320 ITR 561 OBSERVED THAT'' ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS 'REASON TO BE LIEVE' FAILING WHICH, WE ARE AFRAID, SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO R EOPEN ASSESSMENTS ON THE BASIS OF 'MERE CHANGE OF OPINION ', WHICH CANNOT BE PER SE REASON TO REOPEN. WE MUST ALSO KEEP IN MIND THE CONCEPTUAL DIFFERENCE BETWEEN POWE R TO REVIEW AND POWER TO REASSESS. BUT REASSESSMENT HAS TO BE BASED ON FULFILMENT OF CERTAIN PRE-CONDITIONS AND I F THE CONCEPT OF 'CHANGE OF OPINION' IS REMOVED, AS CONTENDED ON BEHALF OF THE DEPARTMENT, THEN, IN THE GARB OF R EOPENING THE ASSESSMENT, REVIEW WOULD TAKE PLACE. ONE MUST T REAT THE CONCEPT OF 'CHANGE OF OPINION' AS AN IN-BUILT TEST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFICER. HENC E, AFTER 1ST APRIL, 1989, THE ASSESSING OFFICER HAS POWER TO REOPEN, PROVIDED THERE IS 'TANGIBLE MATERIAL' TO CO ME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LINK WITH THE FORMATION OF THE BELIEF ' 6 ITA NO.1377/MDS/2015 7. RELYING ON THE DECISION OF THE HON'BLE APEX COURT AS DISCUSSED ABOVE, THERE IS NO MERIT IN THE RE-ASSESS MENT PROCEEDINGS AND CONSEQUENTLY ASSESSMENT FRAMED THER E UNDER IS HELD TO BE VOID AB INITIO. THE GROUNDS OF APPEAL ARE ALLOWED.' 6. ON GOING THROUGH THE ABOVE ORDER, WE DO NOT FIN D ANY INFIRMITY IN THE FINDINGS OF THE COMMISSIONER OF IN COME TAX (APPEALS) IN HOLDING THAT REASSESSMENT MADE UNDER S ECTION 143(3) READ WITH SECTION 147 IS VOID AB INITIO AND THUS REJECT THE GROUNDS RAISED BY THE REVENUE. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER, 2015. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDRA PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED 30 TH SEPTEMBER, 2015 SOMU 12 32 /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .