EMPIRE FOOTWEAR, MUMBAI V. DCIT CEN CIR 20, MUMBAI

ITA 1491/MUM/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2639 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 11-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AJAY R SINGH
• Keywords: Reopening of assessment; Business income; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SM C BENCH , MUMBAI BEFORE SRI MAHAVIR SINGH, J UDICIAL MEMBER ITA NO .1491/MUM/2015 (A.Y.:2005 - 06 ) M/S. EMPIRE FOOTWEAR, YORK HOUSE, COLABA CAUSEWAY, COLABA, MUMBAI 400 039 VS. THE DY. COMMISSIONER OF INCOME TAX, CEN T. CIRCLE - 20, MUMBAI PAN:AAAEF 5754 H APPELLANT .. RESPONDENT APPELLANT BY .. SHRI AJAY R. SINGH, AR RESPONDENT BY .. SHRI JITENDRA KUMAR YADAV, DR DATE OF HEARING .. 14 - 07 - 2016 DATE OF PRONOUNCEMENT .. 14 - 06 - 2016 O R D E R PER MAHAVIR SINGH , JM : THIS APPEAL BY THE ASSESSEE IS ARISING OU T OF THE ORDER OF THE CIT (A) - 39 , MUMBAI PASSED IN APPEA L NO. CIT (A) - 39 / IT - 24/2013 - 14 DATED 19 - 12 - 2014 . RE - ASSESSMENT WAS FRAMED BY THE DCIT, CENTRAL CIRCLE - 20, MUMBAI FOR THE ASSESSMENT YEAR 2005 - 06 VIDE HI S ORDER DATED 28 - 03 - 2013 PASSED U/S 143(3) READ WITH SECTION 147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT). 2. THE FIRST ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF THE LEARNED CIT (A) IN UPHOLDING THE REOPENING OF ASSESSMENT U/S 148 OF THE ACT BEYOND FOUR YEARS DESPITE THE FACT THAT THE FACT THAT THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT. FOR THIS, THE ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.1: - 1. REOPENING OF ASSESSMENT: I. THE LEARNED CIT (A) ERRED IN U PHOLDING THE REOPENING OF ASSESSMENT VIDE NOTICE U/S. 148 OF THE ACT, DT. 28/3/2012 AS NO NEW FACTS HAD COME TO THE NOTICE OF THE ASSESSING OFFICER ENABLING HIM TO FORM REASON TO BELIEF THAT INCOME HAS ESCAPED. ITA NO. 7262 /MUM/20 1 4 2 3. BRIEFLY STATED FACTS LEADING TO THE ABOV E ISSUE ARE T HAT FOR THE ASSESSMENT YEAR 2005 - 06, THE ASSESSEE F I LED ITS RETURN OF INCOME ON 02 - 10 - 2005. THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143 (3) OF THE ACT ON 28 - 12 - 2007. SUBSEQUENTLY, THE AO ISSUED NOTICE U/S 148 OF THE ACT DATED 28 - 03 - 2012 I.E. BEYOND FOUR YEARS. THE REASON RECORDED IN THE REOPENING ASSESSMENT IS ENCLOSED AT PAGE 65 OF THE ASSESSEES PAPER BOOK WHICH READS AS UNDER: - IN THIS CASE, THE ASSESSEE HAS FILED RETURN OF INCOME ON 2.10.2005 DECLARING TOTAL INCOME OF RS.27,81,620/ - . AFT ERWARDS, THE ASSESSMENT U/S. 143(3) OF THE ACT HAS BEEN COMPLETED ON 28.12.2007 ASSESSING THE TOTAL INCOME AT RS.28,20,810/ - . THE ASSESSEE DERIVES INCOME FROM TRADING ACTIVITY OF SHOES AND SPORTS APPARELS AND ACCESSORIES. THE ASSESSEE DOES ITS TRADING ACTI VITY AS A COMMISSION AGENT. 2. ON PERUSAL OF THE RECORDS THIS IS NOTICED THAT THE ASSESSEE HAS ENTERED INTO THE COMMISSION AGREEMENT DATED 01.02.2003 WITH ADIDAS INDIA MARKETING PVT. LTD. NEW DELHI. AS PER THE SAID AGREEMENT ADIDAS INDIA MARKETING PVT. LTD. NEW DELHI IS THE PRINCIPALS AND THE ASSESSEE IS THE COMMISSION AGENTS . AS PER THE SAID AGREEMENT THE ASSESSEE HAS AGREED TO OPERATE A STORE FOR RETAILING AND SELLING THE PRODUCTS OF THE PRINCIPALS FROM THE SHOP NO.1 & 2 YORK HOUSE, COLABA, MUMBAI AS COMMISSION AGENTS. AS PER PARA 4 OF THE SAID AGREEMENT THE PRINCIPALS HAS AGREED TO PROVIDE COMMISSION OF 24% OF THE NET SALE VALUE AT REGULAR SALES AFFECTED BY THE COMMISSION AGENTS. ON PERUSAL OF THE PROFIT & LOSS A/C. FOR THE YEAR ENDED 31.03.200 5 FILED ALONG WITH THE RETURN OF INCOME THIS IS NOTICED THAT NET SALES OF THE PRODUCT DURING THE YEAR WAS RS.2,92,98,469/ - AND THE COMMISSION OF 24% ON IT WORKS OUT TO RS.70,31,633/ - . HOWEVER THE RECEIPT OF COMMISSION HAS BEEN SHOWN AT RS.65,69,525/ - ONLY BY THE ASSESSEE AS AGAINST THE SAID RECEIPT OF RS.70,31,633/ - . THE SAID RECEIPT OF COMMISSION OF RS.65,69,523/ - WAS ALLOWED IN THE ASSESSMENT ORDER DTD. 28.12.2007. THUS, INCOME TO THE EXTENT OF RS.4,62,110/ - HAS ESCAPED ASSESSMENT. 3. FURTHER, THE ASSES SEE IN THE RETURN OF INCOME HAS NOT MADE DISCLOSURE REGARDING COMMISSION AGREEMENT DTD. 01.02.2003 AND THE BASIS ON WHICH THE RECEIPT OF COMMISSION OF RS.65,69,523/ - IS ARRIVED AT IN THE PROFIT & LOSS A/C. FURTHER, AUDITOR OF ASSESSEE HAS WRONGLY CERTIFI ED SUCH CLAIM WITHOUT EVEN GIVING ANY NOTE FOR THE SAME. THE ASSESSEE, DURING THE ASSESSMENT PROCEEDINGS, HAS ALSO NOT MADE FULL AND TRUE DISCLOSURE REGARDING THE RECEIPT OF COMMISSION TO THE ASSESSING OFFICER. THUS, I AM OF THE VIEW THAT THIS ESCAPEMENT I S BECAUSE OF FAILURE ON PART OF ASSESSEE, BY NOT DISCLO SING THE FACTS TRULY AND FULLY. 4. T HE LEARNED COUNSEL FOR THE ASSESSEE FIRST OF ALL TOOK ME THROUGH THE ORIGINAL ASSESSMENT ORDER WHICH IS PASSED U/S 143 (3) OF THE ACT AND ENCLOSED AT PAGES 56 AN D 57 ITA NO. 7262 /MUM/20 1 4 3 OF THE ASSESSEES PAPER BOOK. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO DREW MY ATTENTION TO THE NOTICE ISSUED U/S 142 (1) OF THE ACT AND THE QUESTIONNAIRE ISSUED ALONG WITH THE SAME, WHICH ARE ENCLOSED AT PAGES 16 TO 19 OF THE ASSESSEES PAPER BOOK. FROM THESE, THE LEARNED COUNSEL FOR THE ASSESSEE DREW MY ATTENTION QUESTIONNAIRE DATED 12 - 06 - 2007. THE RELEVANT QUESTION NOS. 2, 11 AND 16 OF THE SAME READS AS UNDER: - 2. DETAILS OF BUSINESS ACTIVITIES DURING THE YEAR. 11. DETAILS OF STOCK BY GIVING QUAN TITY DETAILS ITEM WISE OF OPENING STOCK, PURCHASE, SALES AND CLOSING STOCK. 16. DETAILS OF COMMISSION INCOME. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO STATED THAT THE AO HAS APPLIED HIS MIND IN RESPECT OF RECEIPT OF COMMISSION DECLARED AT RS.65,69,523 / - AND FRAMED ASSESSMENT U/S 143(3) OF THE ACT. SUBSEQUENTLY, THE AO GOING INTO THE RECORDS NOTICED THAT THE COMMISSION AS PER THE AGREEMENT DATED 01 - 02 - 2003 WITH ADDIDAS INDIA MARKETING PVT. LTD., NEW DELHI HAS EARNED COMMISSION @24% ON A TOTAL SALE OF RS .2,92,98,469/ - . ACCORDING TO THE AO THE COMMISSION IS WORKED OUT AT RS.7 0 ,31,633/ - . ACCORDINGLY, THE DIFFERENCE IS OF ONLY RS.4,62,110/ - . ACCORDING TO THE AO, THIS AMOUNT HAS ESCAPED ASSESSMENT. THE LEARNED COUNSEL FOR THE ASSESSEE EXPLAINED THAT THIS FACT WAS VERY MUCH AVAILABLE BEFORE THE AO AND THE AO HAS FRAMED ASSESSMENT U/S 143 (3) OF THE ACT AFTER GOING THROUGH ALL THE DETAILS AVAILABLE BEFORE HIM. THE LEARNED COUNSEL FOR THE ASSESSEE EXPLAINED THAT IN TERMS OF THE PROVISIONS OF SECTION 147 OF THE AC T THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT FOR THIS ASSESSMENT YEAR. ACCORDINGLY, THE REOPENING OF THE ASSESSMENT IS VERY MUCH BAD IN LAW. HE ALSO ARGUED ON MERITS THAT THE ENTI RE COMMISSION AMOUNT OF RS.65,69,523/ - WAS DISCLOSED UP TO THE DATE OF 16 TH MARCH, 2005. ACCORDING TO HIM, THE SALE FOR BALANCE 15 DAYS WAS ASSESSEES OWN SALE ON WHICH NO COMMISSION WAS PAID BUT ONLY THE PROFIT WAS OFFERED BY THE ASSESSEE. FOR THIS THE LE ARNED COUNSEL FOR THE ASSESSEE TOOK ME THROUGH THE PROFIT & LOSS ACCOUNT WHEREIN HE HAS DECLARED THE PROFIT OF RS.4,57,993/ - FOR THE BALANCE 15 DAYS TRANSACTIONS . THE LEARNED COUNSEL FOR THE ASSESSEE ITA NO. 7262 /MUM/20 1 4 4 ALSO DREW MY ATTENTION TO THE PROFIT & LOSS ACCOUNT AND TRADING ACCOUNT WHICH IS ENCLOSED AT PAGE 8 OF THE ASSESSEES PAPER BOOK. HE EXPLAINED BEFORE THE AO DURING THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS AS WELL AS DURING THE REASSESSMENT PROCEEDINGS. HE FURTHER ARGUED THAT IN RESPONSE TO THE NOTICE I SSUED BY THE AO DATED 30 - 05 - 2008 WHEREIN THE VERY SAME QUERY WAS RAISED AND THE RELEVANT PORTION OF THE LETTER READS AS UNDER: - PARTICULARS OF MISTAKE PROPOSED TO BE RECTIFIED IT IS NOTICED THAT AS PER COMMISSION AGREEMENT DATED 1.2.2003 BETWEEN YOU AND M/S. ADIDAS INDIA MARKET ING P. LTD., NEW DELHI, THE COMMISSION AGENT HAVE TO OPERATE A STORE FOR RETAILING AND SELLING PRODUCTS OF THE PRINCIPAL AND THE PRINCIPAL WILL PROVIDE 24% ON NET SALE VALUE AS COMMISSION. IN THE P & L ACCOUNT, AS ON 31.3.2005, THE TOTAL SALES OF PRODUCT WAS RS.2,92,469/ - AND THE COMMISSION @24% SHOULD HAVE BEEN RS.70,31,633/ - AS AGAINST THIS COMMISSION HAS BEEN SHOWN BY YOU OF RS.65,69,633/ - ONLY. THIS HAS RESULTED UNDER ASSESSMENT OF INCOME TO THE EXTENT OF RS.4,61,110/ - BY SHOWING SHORT RECEIPT OF COMMISSION. THE ASSESSEE HAS EXPLAINED THE ABOVE QUERY VIDE LETTER DATED 05 - 06 - 2008 THAT THE ENTIRE COMMISSION WAS BOOKED AT RS.65,69,523/ - AND FURTHER PROFIT BOOKED ON SALES EFFECTED FROM 17 - 03 - 2005 AT RS.4,57,993/ - . ACCORDING TO THE L EARNED COUNSEL FOR THE ASSESSEE THERE IS NO DISCREPANCY EVEN ON MERITS AND EVEN THE ISSUE OF REOPENING IS BAD IN LAW. 5. FROM THE ABOVE FACTS, IT IS CLEAR THAT FIRST OF ALL THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL M ATERIAL FACTS NECESSARY FOR COMPLETION OF THE ASSESSMENT FOR THE RELEVANT ASSESSMENT YEAR. I FIND FROM THE RECORDS THAT THE ENTIRE MATERIAL WAS AVAILABLE BEFORE THE AO DURING THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS AND ADMITTEDLY THE ASSESSMENT W AS FRAMED U/S 143 (3) OF THE ACT. IT IS ALSO A FACT THAT THE REOPENING NOTICE U/S 148 OF THE ACT WAS ISSUED BEYOND FOUR YEARS AND THE ASSESSEES CASE CONSEQUENTLY DOES FALL UNDER THE PROVISO TO SECTION 147 OF THE ACT. I FIND THAT THIS ISSUE IS SQUARELY COV ERED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE C ASE OF CIT VS FO R A MER FRAN CE (2003) 264 ITR 567 (SC) AFFIRMING THE DECISION OF THE ITA NO. 7262 /MUM/20 1 4 5 HONBLE ALLAHABAD HIGH COURT IN THE CASE OF FORAMER VS CIT (2001) 247 ITR 436HAS HELD THAT EVEN AFTER AMENDMENT IN SECTION 147 OF THE ACT BY DIRECT TAX LAWS (AMENDMENT) ACT 1987, WITH EFFECT FROM APRIL 1, 1989, UNDER THE PROVISO WHERE THE ORIGINAL ASSESSMENT HAS BEEN MADE U/S 143(3) OF THE ACT AND NOTICE ISSUED U/S 148 OF THE ACT BEYOND FOUR YEARS AFTER THE END OF THE RELEVANT ASSESSMENT YEAR, AND THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE MATERIAL FACTS FULLY AND TRULY NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR, REASSESSMENT NOTICE IS BAD IN LAW. IN TERMS OF THE ABOVE AND IN THE GIVEN FACTS OF THE CASE, I AM OF THE VIEW THAT THE REOPENING IS BAD IN LAW AND EVEN ON MERITS; THE ASSESSEE HAS A CASE AS DISCUSSED ABOVE. ACCORDINGLY, ASSESSEES APPEAL IS ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNC ED IN THE OPEN COURT ON 14 /07/2016. SD/ - ( MAHAVIR SINGH ) JUDICIAL MEMBER MUMBAI , DATED 14 /7 / 201 6 LAKSHMIKANTA DEKA/SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ASSISTANT REGISTRAR ITAT, MUMBAI 1. THE APPELL ANT 2. THE RESPONDENT. 3. THE CIT ( A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// ITA NO. 7262 /MUM/20 1 4 6 DATE INITIAL DICTATION PAD ATTACHED WITH THE DRAFT ORDER YES 1. DRAFT DICTATED ON 14 - 07 - 16 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 14 - 07 - 16 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER . 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 FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER .