M/s. Wheels India Ltd., CHENNAI V. DCIT, CHENNAI

ITA 1431/CHNY/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0700 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 14-02-2013
• Assessment Year: 2002-2003
• Appeal Filed On: 03-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Retrospective amendment; Question of law
• Section: 143(3); 80HHC; 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ITA NO.1431/MDS/2010 ASST. YEARS : 2002-03 M/S. WHEELS INDIA LIMITED, PADI, CHENNAI 600 050. PAN : AAACW0315K. (APPELLANT) V. THE DY . COMMISSIONER OF INCOME TAX, LARGE TAX PAYER UNIT CHENNAI 600 101. (RESPONDENT) APPELLANT BY : MR. R. VIJAYARAGHAVAN RESPONDENT BY : MR. SHAJI P. JACOB, ADDL.CIT DATE OF HEARING : 14 FEB 2013 DATE OF PRONOUNCEMENT : 28 FEB 2 013 O R D E R PER CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST T HE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) LTU, CHENNA I, DATED 08.7.2010 FOR THE ASST. YEAR 2002-03. THE ASSESSEE HAS RAISED ITA 1431/MDS/10 2 SEVERAL GROUNDS INCLUDING GROUND CHALLENGING THE RE OPENING OF ASSESSMENT UNDER SEC.147 OF THE I.T. ACT BY THE ASS ESSING OFFICER. 2. IN THIS CASE, ASSESSMENT WAS COMPLETED UNDER SE C.143(3) OF THE ACT ON 17.1.2005 DETERMINING TOTAL INCOME AT D.4,21,33,800/- AS AGAINST THE INCOME OF D.4,14,57,330/- RETURNED B Y THE ASSESSEE. WHILE COMPLETING ORIGINAL ASSESSMENT, THE ASSESSING OFFICER MADE DISALLOWANCE UNDER SEC.80HHC OF THE ACT, TREATING 9 0% OF INTEREST INCOME REIMBURSEMENT OF FAIR PRICE SHOP EXPENSES AN D WEIGHMENT CHARGES AS NOT DERIVED FROM INDUSTRIAL UNDERTAKING UNDER CLAUSE (BAA) OF EXPLANATION TO SEC.80HHC OF THE ACT. FURT HER, SALES TAX AND EXCISE DUTY WAS ALSO TREATED AS PART OF TURNOVER FO R THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SEC.80HHC OF THE ACT . 3. THE ASSESSING OFFICER LATER REOPENED THE ASS ESSMENT UNDER SEC.147 OF THE ACT AND REASSESSMENT WAS COMPL ETED ON 18.9.2009 UNDER SEC.143(3) READ WITH SEC.147 OF THE ACT, RECOMPUTING DEDUCTION CLAIMED UNDER SEC.80HHC OF TH E ACT. WHILE DOING SO, THE ASSESSING OFFICER EXCLUDED DEPB RECEI PTS FROM OUT OF COMPUTATION OF DEDUCTION UNDER SEC.80HHC OF THE ACT . THE ITA 1431/MDS/10 3 ASSESSING OFFICER ALSO INCLUDED MISCELLANEOUS INCOM E IN THE TOTAL TURNOVER FOR THE PURPOSE OF COMPUTATION OF DEDUCTIO N UNDER SEC.80HHC OF THE ACT. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED REASSESSMENT MADE BY THE ASSESS ING OFFICER, RECOMPUTING THE DEDUCTION UNDER SEC.80HHC OF THE AC T. 4. THE COUNSEL FOR THE ASSESSEE AT THE OUTSET SUB MITS THAT ASSESSMENT UNDER SEC.143(3) OF THE ACT WAS MADE ON 17.1.2005 MAKING DISALLOWANCE UNDER SEC.80HHC OF THE ACT AND THE ASSESSING OFFICER REOPENED THE ASSESSMENT UNDER SEC.147 OF TH E ACT BEYOND FOUR YEARS FROM THE END OF THE RELEVANT ASST. YEAR AND, THEREFORE, THE REASSESSMENT MADE IS BAD IN LAW SINCE THERE IS NO F AILURE ON THE PART OF THE ASSESSEE IN FURNISHING NECESSARY INFORMATION , MATERIALS REQUIRED FOR COMPLETION OF ASSESSMENT UNDER SEC.143 (3) OF THE ACT AS CONTEMPLATED IN PROVISO TO SEC.147 OF THE I.T. ACT. THE COUNSEL FOR THE ASSESSEE SUBMITS THAT ALL THE INFORMATION RELA TING TO ITS CLAIM UNDER SEC.80HHC OF THE ACT NECESSARY FOR COMPLETION OF ASSESSMENT WAS FURNISHED BEFORE THE ASSESSING OFFICER AND AFTE R EXAMINING THE INFORMATION FURNISHED, THE ASSESSING OFFICER MADE D ISALLOWANCE UNDER ITA 1431/MDS/10 4 SEC.80HHC OF THE ACT. HE SUBMITS THAT THERE IS NO FAILURE ON THE PART OF THE ASSESSEE IN FURNISHING THE INFORMATION NECES SARY FOR COMPLETION OF ASSESSMENT AND THEREFORE, THE REASSES SMENT MADE IS BAD IN LAW. 5. THE COUNSEL FOR THE ASSESSEE FURTHER SUBMITS T HAT IN ASSESSEES OWN CASE ON IDENTICAL FACTS AND CIRCUMST ANCES FOR THE ASST. YEAR 2001-02, THE ASSESSING OFFICER REOPENED THE ASSESSMENT TO RECOMPUTED THE DEDUCTION UNDER SEC.80HHC OF THE ACT AS WAS DONE FOR THE ASST. YEAR UNDER CONSIDERATION AND THI S TRIBUNAL IN ITA NO.13/MDS/2010 BY ORDER DATED 24.6.2010 QUASHED THE REASSESSMENT MADE BY THE ASSESSING OFFICER UNDER SE C.147 OF THE ACT. A COPY OF THE ORDER OF THE TRIBUNAL AS WELL AS A COPY OF THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER FO R THE ASST. YEAR 2001-02 ARE PLACED ON RECORD. 6. THE COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ASSESSMENT WAS REOPENED BY THE ASSESSING OFFICER IN VIEW OF THE AMENDMENT MADE TO SEC.80HHC OF THE ACT WITH RETROSP ECTIVE EFFECT FROM 01.4.1988. HE SUBMITS THAT ON IDENTICAL FACTS , THE HON'BLE DELHI ITA 1431/MDS/10 5 HIGH COURT IN THE CASE OF CIT V. SLL INVESTENTS LTD . (339 ITR 166), HELD THAT INVOKING THE PROVISO TO SEC.147 OF THE I. T. ACT TO REOPEN THE ASSESSMENT UNDER SEC.147 BEYOND FOUR YEARS IS BAD I N LAW AS THE RETROSPECTIVE AMENDMENT WAS NOT THERE IN SEC.80HHC OF THE ACT, AT THE TIME WHEN THE ASSESSEE FILED RETURN OF INCOME O R EVEN WHEN ORIGINAL ASSESSMENT WAS MADE. 7. THE DEPARTMENTAL REPRESENTATIVE SUPPORTED THE O RDER OF LOWER AUTHORITIES IN REOPENING THE ASSESSMENT. THE DEPARTMENTAL REPRESENTATIVE RELIES ON THE DECISION OF HON'BLE AL LAHABAD HIGH COURT IN THE CASE OF KARTHIKEYAN INTERNATIONAL V. CIT (32 9 ITR 539) FOR THE PROPOSITION THAT NOTICE ISSUED FOR REASSESSMENT BAS ED ON HON'BLE SUPREME COURTS DECISION IS VALID. 8. WE HAVE HEARD BOTH SIDES. PERUSED THE MATERIAL S ON RECORD AND THE ORDERS OF AUTHORITIES BELOW. WE FIND THAT THE ASSESSMENT WAS COMPLETED UNDER SEC.143(3) OF THE A CT ORIGINALLY AND REASSESSMENT WAS MADE BEYOND FOUR YEARS FROM TH E END OF RELEVANT ASST. YEAR. AS PER PROVISO TO SEC.147 OF THE ACT, WHEN AN ASSESSMENT IS MADE UNDER SEC.143 OF THE ACT, THE AS SESSMENT CANNOT ITA 1431/MDS/10 6 BE REOPENED UNDER SEC.147 WHEN THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO FURNISH NECESSARY PARTICULARS FOR C OMPLETION OF ASSESSMENT. HERE IN THIS CASE, THE ASSESSING OFFICE R, WHILE COMPLETING THE ASSESSMENT UNDER SEC.143(3) DISALLOW ED DEDUCTION UNDER SEC. 80HHC ON CERTAIN INCOMES TREATING THEM A S NOT DERIVED FROM INDUSTRIAL UNDERTAKING BY INVOKING THE PROVISI ONS OF CLAUSE (BAA) OF EXPLANATION TO SEC.80HHC OF THE ACT. WE FIND TH AT THE ASSESSMENT WAS MAINLY REOPENED TO EXCLUDE DEPB INCOME FROM THE PROFITS OF ASSESSEE IN COMPUTING DEDUCTION UNDER SEC.80HHC OF THE ACT AS THE PROVISIONS OF SEC.80HHC WERE AMENDED WITH RETROSPEC TIVE EFFECT. THE ASSESSING OFFICER ALSO INCLUDED MISCELLANEOUS I NCOME IN THE TURNOVER WHILE COMPUTING DEDUCTION UNDER SEC.80HHC OF THE ACT. 9. AT THE TIME OF FILING OF RETURN OF INCOME AND C OMPLETION OF ASSESSMENT UNDER SEC.143(3) OF THE ACT, THE ASSESSE E HAS PRODUCED ALL THE NECESSARY INFORMATION FOR THE PURPOSE OF CO MPUTING RELIEF UNDER SEC.80HHC OF THE ACT. HOWEVER, THERE WAS NO AMENDMENT TO PROVISION OF SEC.80HHC OF THE ACT TO EXCLUDE DEPB I NCOME AT THE STAGE OF COMPLETION OF ORIGINAL ASSESSMENT. THE HON'BLE DELHI HIGH ITA 1431/MDS/10 7 COURT, IN THE CASE OF CIT V. SIL INVESTENTS LTD. ( SUPRA), ON AN IDENTICAL FACTS HELD THAT ASSESSMENT CANNOT BE REOP ENED BEYOND FOUR YEARS BASED ON SUBSEQUENT RETROSPECTIVE AMENDMENT T O THE PROVISIONS OF SEC.80HHC OF THE ACT, OBSERVING AS UN DER :- 5. WE HAVE HEARD THE COUNSEL FOR THE REVENUE AND HAVE ALSO EXAMINED THE ORDERS PASSED BY THE AUTHORITIES BELOW . IT IS CLEAR THAT FOR INVOKING THE PROVISO TO S. 147 BEYOND THE PERIOD OF FOUR YEARS, THERE MUST BE FAILURE ON THE PART OF THE ASS ESSEE TO EITHER MAKE A RETURN UNDER S. 139 OR IN RESPONSE TO A NOTI CE UNDER S. 147/148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT FOR THAT ASSESSMENT YEAR. INSOFA R AS THE FILING OF THE RETURN IS CONCERNED, THAT IS NOT IN DISPUTE AND, THEREFORE, THE FOCUS IS ENTIRELY ON WHETHER THE ASSESSEE HAD F AILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR TH E ASSESSMENT. THE TRIBUNAL, ON AN EXAMINATION OF THE MATERIAL ON RECO RD, CONCLUDED THAT ALL THE RELEVANT FACTS WERE AVAILABLE ON RECOR D AND THAT IT COULD NOT BE SAID THAT AT THE TIME WHEN THE ASSESSE E FILED THE RETURN, HE HAD FAILED TO DISCLOSE FULLY AND TRULY A LL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT BECAUSE THE AMENDMENT WHICH WAS INTRODUCED RETROSPECTIVELY WAS NOT THERE AT ALL. TH E TRIBUNAL ALSO OBSERVED, AND IN OUR VIEW RIGHTLY SO, THAT THE LAW CANNOT CONTEMPLATE THE PERFORMANCE OF AN IMPOSSIBLE ACT. I T WAS NOT EXPECTED OF THE ASSESSEE TO FORESEE OR FORECAST A F UTURE AMENDMENT WHICH WAS TO BE BROUGHT INTO EFFECT RETRO SPECTIVELY. THEREFORE, THE TRIBUNAL HAS RIGHTLY CONCLUDED THAT THE PROVISO TO S. 147 COULD NOT BE INVOKED MERELY BECAUSE THERE WA S AN AMENDMENT IN THE FUTURE WHICH WAS INTRODUCED RETROS PECTIVELY AND COVERED THE PERIOD IN QUESTION. THE TRIBUNAL HA S CORRECTLY APPRECIATED THE LAW AND APPLIED THE SAME TO THE UND ISPUTED FACTS. WE SEE NO REASON TO INTERFERE WITH THE IMPUGNED ORD ER AS NO SUBSTANTIAL QUESTION OF LAW ARISES FOR OUR CONSIDER ATION. HOWEVER, WE MAKE IT CLEAR THAT WE HAVE ONLY EXAMINED THE JUR ISDICTIONAL ISSUE QUA VALIDITY OF THE S. 147 PROCEEDINGS AND HA VE NOT EXAMINED THE MERITS OF THE MATTER. THE APPEALS ARE DISMISSED. ITA 1431/MDS/10 8 THE DECISION OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF KARTHIKEYAN INTERNATIONAL V. CIT(SUPRA) SEEMS TO H AVE NO APPLICATION TO THE FACTS OF THE CASE SINCE IN THAT CASE, NOTICE WAS ISSUED WITHIN FOUR YEARS BASED ON HON'BLE SUPREME COURT DECISION TO REOPEN THE ASSESSMENT. EVEN THIS DECISION WAS IMPLIEDLY OVER- RULED BY THE HON'BLE SUPREME COURT IN THE LATEST DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF DCIT & OTHERS V. M/S. SIMPLEX CONCRETE PILES (INDIA) LTD. IN CIVIL APPEAL NO.2329 OF 2006 DATED 11 SEPT 2012, WHEREIN THE HON'BLE SUPREME COURT HELD THAT SUBSEQU ENT DECISION OF THE SUPREME COURT CANNOT BE THE BASIS FOR REOPENING OF THE ASSESSMENT BEYOND FOUR YEARS. 10. WE ALSO FIND THAT ON AN IDENTICAL FACTS, THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASST. YEAR 2001-02 QUAS HED THE REASSESSMENT MADE BY THE ASSESSING OFFICER IN RECOM PUTING THE DEDUCTION UNDER SEC.80HHC OF THE ACT BY EXCLUDING D EPB RECEIPTS FROM THE PROFITS OF THE BUSINESS. THE HON'BLE TRIB UNAL HELD AS UNDER:- ITA 1431/MDS/10 9 2. THE ASSESSEE IS ENGAGED IN THE MANUFACTURE AND EXPORT OF AUTOMOTIVE COMPONENTS. IT HAD EARNED DUTY DRAW BAC K OF RS. 1,47,68,218/- UNDER CENTRAL EXCISE DUTIES DRAW BACK RULES AND DEPB INCOME OF RS. 11,90,244/- WHICH ACCRUED TO IT ON ACCOUNT OF ITS EXPORT PERFORMANCE. FOR THE RELEVANT ASSESSMEN T YEAR, THE ASSESSMENT WAS ORIGINALLY COMPLETED U/S 143(3) WHI CH WAS SUBSEQUENTLY REOPENED U/S 147 R.W.S 148 IN WHICH VA RIOUS ADJUSTMENTS/DISALLOWANCES WERE MADE. VIDE ADDITION AL GROUND, THE ASSESSEE HAS CHALLENGED THE VALIDITY OF RE-ASSESSM ENT AS IT WAS DONE BEYOND THE PERIOD OF FOUR YEARS DESPITE THE FA CT THAT ASSESSEE HAD ALREADY FURNISHED ALL MATERIALS AND PARTICULARS FULLY AND TRULY BEFORE THE ASSESSING OFFICER. THIS ISSUE BEING OF VERY IMPORTANT AND GOING TO THE VERY ROOT OF THE MATTER WAS HEARD FIRST OF ALL. BOTH THE PARTIES ADVANCED THEIR ARGUMENTS. 3. AFTER HEARING BOTH SIDES, IT WAS FOUND THAT THE ASSESSEE HAD FILED AN APPEAL AGAINST THE ORDER OF THE LD. C IT(A) DATED 28.10.2009 BEFORE THE TRIBUNAL. THE ASSESSING OFFI CER HAS REOPENED THE ASSESSMENT U/S 147 BY ISSUE OF NOTICE U/S 148 ON 28.2.2008. THE RE-ASSESSMENT ORDER U/S 143(3) R .W.S 147 WAS COMPLETED ON 26.11.2008. THE ASSESSEE HAS NOW CHALLENGED THE REOPENING OF THE ASSESSMENT BEFORE US FOR THE FIRST TIME. WE HAVE ADMITTED THIS GROUND. ORIGINA LLY, THE ASSESSMENT FOR ASSESSMENT YEAR 2001-02 WAS COMPLET ED U/S 143(3) ON 31.3.2004. THE NOTICE FOR REOPENING THE ASSESSMENT WAS ISSUED U/S 148 ON 28.3.2008 WHICH I S BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE ASSESS MENT YEAR. ITA 1431/MDS/10 10 REOPENING OF THE ASSESSMENT BEYOND THE PERIOD OF F OUR YEARS FROM THE END OF THE ASSESSMENT YEAR IS FOUND TO BE WITHOUT JURISDICTION AND BAD IN LAW IN VIEW OF THE FOLLOWIN G DECISIONS: CIT VS PREMIER MILLS 296 ITR 157(MAD) CIT VS ELGI FINANCE 286 ITR 674 (MAD) MERCURY TRAVELS LTD VS CIT 258 ITR 533(CAL) CIT V INDIAN OVERSEAS BANK LTD 252 ITR 640 (MAD) CIT VS SIVA TRADERS 255 ITR 77 (KER) CIT VS FEMMER INDIA LTD 241 ITR 672(MAD) CIT VS FROAMER FRANCE 264 ITR 566(SC) CIT VS T.N TRANSPORT DEVELOP FINANCE CORPN. LTD 306 ITR 136 (MAD) 4. RESPECTFULLY FOLLOWING THE ABOVE DECISIONS, W E QUASH THE RE-ASSESSMENT AND ALLOW THE ASSESSEES APPEAL AND AS A SEQUENCE, DISMISS THE REVENUES APPEAL. 11. RESPECTFULLY FOLLOWING THE ORDER OF THE CO-ORD INATE BENCH OF THIS TRIBUNAL AND THE DECISION OF HON'BLE DELHI HIGH COURT (SUPRA), WE HOLD THAT THE REASSESSMENT MADE UNDER SEC.143(3) READ WITH SEC.147 OF THE I.T. ACT IS BAD IN LAW. THEREFORE, WE ANNUL THE REASSESSMENT MADE UNDER SEC.143(3) READ WITH SEC.14 7 OF THE ACT ITA 1431/MDS/10 11 FOR THE ASST. YEAR 2002-03 ALSO. SINCE WE HAVE HEL D THAT THE REASSESSMENT MADE UNDER SEC.143(3) READ WITH SEC.14 7 OF THE ACT IS BAD IN LAW, WE ARE NOT GOING INTO THE MERITS OF THE CASE. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. 13. ORDER PRONOUNCED ON THURSDAY, THE 28 TH DAY OF FEBRUARY 2013, AT CHENNAI. SD/- SD/- ( N.S. SAINI ) (CHALLA N AGENDRA PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED : 28 TH FEBRUARY 2013. JLS. C.C : APPELLANT/RESPONDENT/CIT(A)/CIT/D.R./G.FILE.