The ACIT, Circle-4, Surat V. M/s. Sahajanand Medical Technologies Pvt.Ltd., Surat

ITA 153/AHD/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9459 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 23-12-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 16-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Business expenditure; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NOS.153AHD/2013 (ASSESSMENT YEAR:2006-07) ACIT, CIRCLE-4, ROOM NO.223, AAYAKAR BHAVAN, MAJURAGATE, SURAT APPELLANT VS. M/S. SAHAJANAND MEDICAL TECHNOLOGIES PVT. LTD., 304, SAHAJANAND HOUSE, PARSI STREET, SAIYEDPURA, SURAT 395 003 RESPONDENT PAN: AAACZ1196M /BY REVENUE : SHRI JAMES KURIAN, SR. D.R. /BY ASSESSEE : NONE /DATE OF HEARING : 23.12.2016 /DATE OF PRONOUNCEMENT : 17.01.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2006-07 A RISES AGAINST CIT(A)-II, SURAT ORDER DATED 31.10.2012, IN APPEAL NO. CAS- II/173/TRFD/11-12; IN PROCEEDINGS UNDER SECTION 115 WE(3) R.W.S. 115 WG OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. ITA NO. 153/AHD/2013 (ACIT VS. M/S.SAHAJANAND MEDIC AL TECHNOLOGIES PVT. LTD.) A.Y. 2006-07 - 2 - 2. FOR THE REASONS STATED IN CONDONATION PETITION D ATED 19.03.2013, WE CONDONE DELAY OF 8 DAYS IN FILING OF THE INSTANT AP PEAL. THE MAIN CASE IS ACCORDINGLY TAKEN UP FOR ADJUDICATION ON MERITS. 3. THIS REVENUES APPEAL RAISES TWO SUBSTANTIVE GRO UNDS IN CHALLENGING THE CIT(A)S ORDER QUASHING VALIDITY OF REOPENING B Y TERMING IT AS MERE CHANGE OF OPINION AS WELL AS IN DELETING FRINGE BEN EFIT ADDITION OF RS.85,44,040/- MADE BY THE ASSESSING OFFICER IN THE IMPUGNED RE-ASSESSMENT FRAMED ON 31.10.2011. WE COME TO THE BASIC FACTS FIRST. 4. THE ASSESSEE COMPANY MANUFACTURES BARE, MOUNTED AND INFINNIUM STENT USED IN MEDICAL SURGERIES. IT FILED RETURN O N 29.12.2006 DECLARING FRINGE BENEFITS OF RS.21,17,190/-. THE ASSESSING OFFICER FRAMED A REGULAR ASSESSMENT ON 21.05.2008 ACCEPTING THE SAME. HE TH EREAFTER FOUND REASONS TO BELIEVE THAT ASSESSEES FOLLOWING FRINGE BENEFITS H AD ESCAPED ASSESSMENT:- SR. NO. NATURE OF EXPENDITURE AMOUNT OF EXPS. AS PER P&L ACCOUNT RATE FBV TO BE ADOPTED FOR LEVY OF FBT FBV ADOPTED FOR LEVY OF FBT SHORT (+) / EXCESS (-) VALUATION OF FBV 1 SALES PROMOTION INCLUDING PUBLICITY (EXCLUDING ADVT. EXP. RS.30,44,684/-) 27453560 20% 5490712 NIL 5490712 2 CONFERENCE EXPENSES 21549788 20% 4309958 NIL 4309 958 3 CONVEYANCE, TOUR AND TRAVEL 1022683 5% 51134 1249321 1198187 4 USE OF HOTEL, BOARDING AND LODGING FACILITIES IN THE BUSINESS OF MANUFACTURE OF PRODUCTION NIL 5% NIL 58443 58443 NET UNDER VALUATION OF FRINGE BENEFIT VALUE 8544040 ITA NO. 153/AHD/2013 (ACIT VS. M/S.SAHAJANAND MEDIC AL TECHNOLOGIES PVT. LTD.) A.Y. 2006-07 - 3 - THE ASSESSING OFFICER THEN REOPENED THE ABOVE ASSE SSMENT AND FRAMED THE IMPUGNED RE-ASSESSMENT MAKING THE ADDITION IN Q UESTION OF RS.85,44,040/-. 5. WE COME TO THE LOWER APPELLATE PROCEEDINGS NOW. THE CIT(A) FIRST OF ALL ACCEPTS ASSESSEES LEGAL PLEA CHALLENGING VALID ITY OF REOPENING AS UNDER:- 3.3 I HAVE CONSIDERED THE FACTS OF THE-CASE, BASIS OF REOPENING AND SUBMISSIONS OF APPELLANT. AS IT MAY BE SEEN FROM THE REASONS RECOR DED BY AO, THE BASIS OF REOPENING THE ASSESSMENT WAS THAT HE WAS NOT ABLE T O ASSESS THE CONFERENCE EXPENSES, SALES PROMOTION EXPENSES AND CONVEYANCE E XPENSES ETC, WHILE COMPLETING THE REGULAR ASSESSMENT PROCEEDINGS AND I N HIS OPINION, ON AFORESAID EXPENSES, FBT HAS TO BE LEVIED WHICH REMAINED TO BE TAXED. THEREFORE, HE UNDERTOOK THE REMEDIAL ACTION BY ISSUING NOTICE U/S .115WH OF THE ACT. HOWEVER, THE ACTION OF AO OF REOPENING OF ASSESSMENT ON THE BASIS OF ABOVE GROUND IS NOT JUSTIFIABLE. NOT BEING ABLE TO LEVY THE FBT ON CO NFERENCE EXPENSES, SALES PROMOTION EXPENSES AND CONVEYANCE EXPENSES DURING REGULAR ASSESSMENT PROCEEDINGS, AO COULD NOT HAVE TAKEN THE RECOURSE O F REASSESSMENT PROCEEDINGS BY ISSUING NOTICE U/S.115WH OF THE ACT UNLESS HE WAS H AVING MATERIAL IN HIS POSSESSION TO BELIEVE THAT THERE IS ESCAPED ASSESSM ENT. REOPENING OF ASSESSMENT PROCEEDINGS CANNOT BE ALTERNATIVE TO THE REGULAR AS SESSMENT PROCEEDINGS IN ABSENCE OF FRESH MATERIAL. TO START REASSESSMENT PR OCEEDINGS, AO MUST HAVE REASON TO BELIEVE' AND THIS BELIEF SHOULD BE BASED ON REASONS WHICH ARE RELEVANT AND MATERIAL. THE CHANGE OF OPINION OR FORMING AN O PINION ON ANY ISSUE CANNOT BE TERMED AS REASON TO FORM BELIEF FOR REOPENING THE A SSESSMENT. IN THIS CASE, AO HAS NO NEW MATERIAL TO FORM THE OPINION THAT THERE IS E SCAPEMENT OF FBT BY APPELLANT. THE DETAILS RELATED TO CONFERENCE EXPENSES AND SALE S PROMOTION EXPENSES ETC. WERE ON RECORD IN THE RETURN OF FBT ITSELF. FOR THE LONG THREE YEARS, REGULAR ASSESSMENT OF FBT COMPLETED BY AO HIMSELF WAS ACCEPTED AND SUD DENLY HE CHANGED HIS OPINION THAT THE AFORESAID EXPENSES ARE CHARGEABLE TO FBT AND HE ISSUED NOTICE U/S. 115WH OF THE ACT REOPENING THE ASSESSMENT. IN SUCH SITUATION, TAKING ACTION U/S.115WH OF THE ACT ON THE BASIS OF CHANGE OF OPIN ION CANNOT BE ALLOWED. AS IT WAS HELD IN THE CASE CIT VS. BHANJI LAVJI (79 ITR 5 82) BY HON'BLE SUPREME COURT THAT WHEN THE PRIMARY FACTS NECESSARY FOR ASSESSMEN T ARE FULLY AND TRULY DISCLOSED, THE ITO WILL NOT BE ENTITLED ON CHANGE OF OPINION T O COMMENCE PROCEEDINGS FOR THE ASSESSMENT. SIMILARLY, IF HE HAS RAISED WRONG LEGAL INFERENCE FROM THE FACTS DISCLOSED, HE WILL NOT, ON THAT ACCOUNT, BE COMPETE NT TO COMMENCE REASSESSMENT PROCEEDINGS. FURTHER, IN THE CASE OF ITO VS. NAWAB MIR BARKAT ALI KHAN BAHADUR. (97 ITR 239), HON'BLE SUPREME COURT HELD THAT HAVIN G SECOND THOUGHTS ON THE SAME MATERIAL, AND OMISSION TO DRAW THE CORRECT LEG AL PRESUMPTION DURING ORIGINAL ASSESSMENT DO NOT WARRANT THE INITIATION OF PROCEED INGS U/S.147 OF I.T. ACT. HOWEVER, FROM THE FACTS OF THIS CASE, IT CAN BE SEE N THAT THE AO WAS NOT HAVING ANY NEW FACTUAL INFORMATION IN HIS POSSESSION TO FORM T HE OPINION THAT THERE IS ANY ESCAPEMENT OF FBT. HE HAS MERELY FORMED HIS OPINION ON THE BASIS OF FACTS AVAILABLE ON RECORD IN THE RETURN OF INCOME OF APPE LLANT. SUCH CHANGE OF OPINION CANNOT BE HELD VALID IN THE LIGHT OF AFORESAID DECI SIONS OF HON'BLE SUPREME COURT. ITA NO. 153/AHD/2013 (ACIT VS. M/S.SAHAJANAND MEDIC AL TECHNOLOGIES PVT. LTD.) A.Y. 2006-07 - 4 - IN SUCH SITUATION, REOPENING OF ASSESSMENT CANNOT B E HELD LEGAL; THEREFORE, THE WHOLE REASSESSMENT PROCEEDINGS STAND ANNULLED. 6. THE CIT(A)S ORDER THEREAFTER DELETES THE IMPUGN ED ADDITION ON MERITS AS WELL AS FOLLOWS:- 4.3 I HAVE GONE THROUGH THE FACTS OF THE CASE AND SUBMISSIONS OF THE APPELLANT AND FOUND THAT THE A.O. HAS MADE ADDITION BY BLATAN TLY IGNORING THE DETAILS OF EXPENSES AND SUBMISSIONS GIVEN BY APPELLANT. FROM T HE DETAILS OF EXPENSES, IT IS CLEAR THAT THE CONFERENCE EXPENSES AND SALE PROMOTION EXPENSES ETC, ARE APPARENTLY BUSINESS EXPENSES AND NO COVERED BY FBT. THE OTHER EXPENSES SUCH AS TRAVELLING, HOTEL EXPENSES AND CONVEYANCE ARE ALSO RELATED TO THE CONVENTION ATTENDED BY COMPANY PERSONNEL FOR BUSINESS PURPOSES . THE A.O. HAS NOT BEEN ABLE TO BRING ON RECORD ANY EVIDENCE THAT THE AFORESAID EXPENSES ARE NOT RELATED TO BUSINESS EXPENSES, THEREFORE COVERED BY FBT PROVISI ONS. HE HAS SIMPLY RELIED ON THE HEADINGS OF EXPENSES WITHOUT GOING INTO DETAILS OF THE SAME. IN SUCH SITUATION, IT IS HELD THAT THE ADDITION MADE BY A.O. IS WITHOU T ANY BASIS, ONLY ON PRESUMPTION, HENCE LIABLE TO BE DELETED. IN THE RESULT, ADDITION MADE BY AO IS DELETED AND GROUND OF APPEAL IS ALLOWED. 7. WE HAVE HEARD REVENUES VEHEMENT CONTENTION SUPP ORTING ASSESSING OFFICERS ACTION ON LEGALITY AS WELL AS MERITS. NO NE APPEARS AT ASSESSEES BEHEST DESPITE RPAD NOTICE. IT IS ACCORDINGLY PROC EEDED EX PARTE. THERE IS HARDLY ANY DISPUTE AS PER THE ABOVE EXPECTED FINDIN GS THAT THE ASSESSEE HAD DULY DISCLOSED ALL RELEVANT PARTICULARS OF ITS SALE S PROMOTION, CONFERENCE, CONVEYANCE AND OTHER EXPENSES WITH THE ORIGINAL RET URN AS ACCEPTED IN THE FORMER ROUND OF ASSESSMENT. THERE IS ADMITTEDLY NO TANGIBLE MATERIAL APART FROM THE ONE ALREADY ON RECORD EVEN SLIGHTLY INDICA TING THAT THERE HAS BEEN ANY UNDERSTATEMENT OF FRINGE BENEFIT AT ASSESSEES INSTANCE. WE THUS QUOTE HONBLE JURISDICTIONAL HIGH COURTS DECISION IN GEN ERAL MOTORS INDIA PVT. LTD. VS. CIT (2013) 354 ITR 244 (GUJARAT) TO OBSERVE THA T THE IMPUGNED REOPENING IN ABSENCE OF ANY TANGIBLE MATERIAL IS ME RE CHANGE OF OPINION NOT SUSTAINABLE IN THE EYES OF LAW. REVENUE FURTHER FA ILS TO REBUT THE CRUCIAL LOWER APPELLATE FINDINGS THAT ASSESSEES EXPENSES I N QUESTION ARE IN FACT IN THE NATURE OF ROUTINE BUSINESS EXPENSES NOT COVERED UND ER THE FRINGE BENEFIT ITA NO. 153/AHD/2013 (ACIT VS. M/S.SAHAJANAND MEDIC AL TECHNOLOGIES PVT. LTD.) A.Y. 2006-07 - 5 - REGIME. WE THUS FIND NO REASON TO INTERFERE IN WEL L REASONED CIT(A)S ORDER ON LEGALITY AS WELL AS MERITS. THE SAME STANDS CON FIRMED. 8. THIS REVENUES APPEAL IS DISMISSED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 17 TH DAY OF JANUARY, 2017.] SD/- SD/- ( MANISH BORAD ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 17/01/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 45 / GUARD FILE. BY ORDER / . // . /0