DCIT 7(3), NAVI MUMBAI V. WEST COAST SAW PIPES LTD ( NOW M.S, U.B. STAINLESS LTD), MUMBAI

ITA 1634/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92395 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 05-03-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 28-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PAVAN KUMAR BEER LA
• Keywords: Business income; Bad and doubtful debts; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 147

Judgement Text

M/S WEST COAST SAW PIPES LTD (NOW M/S U B S STAINLESS LTD) ITA 1634 / M/20 13 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G, MUMBAI . . , , BEFORE SHRI N K BILLAIYA , ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBERITA ITA NO. : 1634 /MUM/20 13 (ASSESSMENT YEAR: 2006 - 07 ) DCIT - 7 (3) , ROOM NO. 615, 6 TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400 020 VS M/S WEST COAST SAW PIPES LTD (NOW M/S U B S STAINLESS LTD) 701, NARIMAN KENDRA, 20 DR . E MOSES ROAD, MUMBAI - 400 011 .: PAN: AAACW 0404 B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIJAY MEHTA RESPON DENT BY : SHRI PAVAN KUMAR BEERLA /DATE OF HEARING : 05 - 03 - 201 5 / DATE OF PRONOUNCEMENT : 17 - 04 - 201 5 ORDER , : PER VIVEK VARMA, JM: THE APPEAL IS FILED BY THE D EPARTMENT AGAINST THE ORDER OF CIT(A) - 13, MUMBAI, DATED 04.12.2012, WHEREIN THE SOLITARY ISSUE RAISED PERTAINS TO CANCELLATION OF REASSESSMENT PROCEEDINGS BY THE CIT(A). 2. THE FACTS ARE THAT THE ASSESSEE FILED ITS ROI ON 29.11.2000 DECLARING NIL INCOME. 3. REGULAR ASSESSMENT WAS FRAMED U/S 143(3) AT RS. 5,05,620/ - ON 30.12.2008. ON 14.03.2011, THE AO ISSUED NOTICE U/S 148, WHEREBY, HE RECORDED THE REASONS AS FOLLOWS, (I) O N PERUSAL OF THE TAX AUDIT REPORT AND OTHER DETAILS FURNISHED BY THE ASSESSEE, IT IS SEEN THAT IN SCHEDULE 18(11.4) NOTES TO FINANCIAL STATEMENT. IT WAS DISCLOSED THAT DURING THE YEAR, THE COMPANY HAS REACHED SETTLEMENT WITH ARCIL FOR REPAYMENT OF ITS M/S WEST COAST SAW PIPES LTD (NOW M/S U B S STAINLESS LTD) ITA 1634 / M/20 13 2 OUTSTANDING LOAN AS PER WHICH THE ASSESSEE HAS TO MAKE TOTAL PAYMENT OF RS. 1.80 CROR ES AGAINST OUTSTANDING LOAN OF RS. 2.79 CRORES. AS SETTLEMENT WAS DONE DURING THE YEAR AND AMOUNT OF RS. 0.99 CRORES (RS. 2.79 CRORES RS. 1.80 CRORES) ACCRUE TO THE ASSESSEE ON DISCHARGE OF ITS LIABILITY ON ACCOUNT OF LOAN. SINCE IT HAD ACCRUED TO THE AS SESSEE IN THE COURSE OF BUSINESS IT SHOULD HAVE BEEN TAXABLE AS BUSINESS INCOME. OMISSION TO DO SO HAS RESULTED IN UNDER ASSESSMENT OF INCOME OF RS. 99 LACS. IT HAS JUDICIALLY BEEN HELD IN THE CASE OF CIT VS. TV. SUNDARAM IYENGAR AND SONS LTD (222 ITR 344) (SC) THAT ANY AMOUNT THAT IS NOT TAXABLE IN THE YEAR OF RECEIPT AS BEING OF REVENUE CHARACTER, CHANGES ITS CHARACTER WHEN THE AMOUNT BECOMES THE ASSESSEE'S OWN MONEY BECAUSE OF LIMITATION OR BY ANY OTHER STATUTORY OR CONTRACTUAL RIGHT, AND THE AMOUNT SHO ULD BE TREATED AS INCOME OF THE ASSESSEE. (II) IT IS ALSO SEEN THAT AN AMOUNT OF RS.20,67,501/ - HAS BEEN ALLOWED ON ACCOUNT OF BAD DEBT CLAIM IN PROFIT & LOSS ACCOUNT. BUT SUNDRY DEBTORS REDUCED DURING THE YEAR ONLY RS. 10,91,33 - 1/ - AND FURTHER THERE WAS N O SALES DURING THE YEAR. WHILE REASSESSMENT PROCEEDING ON ABOVE MENTIONED ISSUE AT SERIAL NO. 1, THIS ISSUE ALSO REQUIRES TO BE VERIFIED . 4 . THE ASSESSEE FILED A LETTER IN RESPONSE TO THE NOTICE U/S 148, REQUESTING THE AO TO TREAT THE ORIGINAL RETURN TO BE RETURN IN RESPONSE TO NOTICE U/S 148. IN THIS LETTER, THE ASSESSEE MADE ITS FORMAL OBJECTIONS, WHICH WAS DEALT WITH BY THE AO IN HIS OBSERVATIONS MADE ON 05.09.2011. CONSEQUENT TO THIS, THE AO ISSUED NOTICES U/S 143(2) & 142(1). 5. IN THE REASSESSMENT PROCEEDINGS, THE ASSESSEE POINTED OUT THAT THE POINTS TAKEN BY THE AO PERTAINING TO UNSECURED LOANS AND BAD DEBTS HAVE BEEN ACTUALLY DEALT WITH BY THE AO IN REGULAR ASSESSMENT PROCEEDINGS. SINCE THE ISSUES HAD BEEN DEALT WITH, THEY CANNOT ONCE AGAIN BE MAD E SUBJECT MATTER IN REASSESSMENT PROCEEDINGS, AS THAT WILL AMOUNT T O CHANGE OF OPINION. 6. THE AO NEGATED THE ARGUMENTS AND ADDED BACK RS. 99.00 LACS AND 20,67,501/ - . 7. THE ASSESSEE TOOK THE ISSUE BEFORE THE CIT(A) AND REITERATED THE SUBMISSIONS. 8. IN THE PROCEEDINGS BEFORE THE CIT(A), T HE CIT(A) RECORDED HIS OBSERVATIONS , THAT IN T HE REGULAR ASSESSMENT PROCEEDINGS, ASSESSEE S RETURN WAS SELECTED FOR SCRUTINY. DURING ASSESSMENT M/S WEST COAST SAW PIPES LTD (NOW M/S U B S STAINLESS LTD) ITA 1634 / M/20 13 3 PROCEEDINGS, THE AO ISSUED A DETAILED QUESTIONNAIRE TO THE A SSESSEE, ASKIN G FOR DETAILS PERTAINING TO UNSECURED LOANS ALONG WITH OTHER DETAILS AND CONFIRMATIONS (POINT NO. 10), DETAILS OF SUNDRY CREDITORS FOR GOODS/SERVICES/EXPENSES ETC . (POINT NO. 14), DETAILS OF OTHER INCOME CREDITED UNDER DIFFERENT SUB HEADS, DETAILS OF BAD D EBTS WRITTEN OFF ALONG WITH DOCUMENTARY EVIDENCES AND VARIOUS OTHER DETAILS. THE ASSESSEE PROVIDED ALL THE DETAILS, AS CALLED FOR BY THE AO, WHO, T HEREAFTER , PASSED THE ASSESSMENT ORDER U/S 143 (3) DATED 30 - 12 - 2008, ASSESSING THE TOTAL INCOME AT RS. 5,05,6 20/ - AS AGAINST THE RETURNED NE OF RS. NIL. IN THE ASSESSMENT ORDER, THE AO MADE THE ADDITI ONS/DISALLOWANCES IN RESPECT OF (I) HOUSE PROPERTY INCOME (II) DISALLOWANCE OF DEPRECATION (III) DISALLOWANCE OF EXPENSES OUT OF LABOUR CHARGES . THE ASSESSEE TOOK UP THE LEGAL ISSUES AND MERITS BEFORE THE CIT(A). IN THE APPEAL, BEFORE THE CIT(A), THE ASSESSEE CHALLENGED THE REOPENING AND CONSEQUENTIAL REASSESSMENT PROCEEDINGS. THE CIT(A), TAKING UP THE LEGAL OBJECTIONS, FIRST, DECIDED THE SAME. 9. THE CIT(A), AFTER CONSIDERING THE SUBMISSIONS, OBSERVED, I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AS DISCUSSED ABOVE IN DETAIL. DURING THE YEAR, THE OUTSTANDING SECURED LOANS OF RS.2.17 CRORES WERE SETTLED AT RS.1.80 CRORES FOLLOWING THE AGREEMENT REACHED WITH ARC IL. AS DISCUSSED ABOVE, THIS FACT HAD BEEN SHOWN BY THE APPELLANT IN THE ACCOUNTS AND OTHER PLACES. THUS, ON THIS ISSUE THERE WAS A ENOUGH DISCLOSURE BY THE APPELLANT IN THE BOOKS OF ACCOUNTS/AUDITED ACCOUNTS/BALANCE SHEET/DIRECTOR'S REPORT. DURING ORIGINA L ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS ISSUED A DETAILED QUESTIONNAIRE TO THE APPELLANT. THUS, IT WAS EVIDENT THAT DURING ORIGINAL ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS CONSIDERED THIS ISSUE AND CHOSE NOT TO MAKE ANY ADDITION/DISAL LOWANCES ON THIS ISSUE. IN OTHER WORDS, THE ASSESSING OFFICER ACCEPTED APPELLANT'S STAND THAT WAIVER OF SUCH LOAN WAS NOT TAXABLE. THE SECOND ISSUE IS IN RESPECT OF BAD DEBTS WRITTEN OFF OF RS. 20,67,501/ - . ON THIS ISSUE ALSO, THERE WAS ENOUGH DISCLOSURE I N THE ACCOUNTS OF THE APPELLANT. DURING ORIGINAL ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS EXAMINED THIS ISSUE BY ISSUING A DETAILED QUESTIONNAIRE IN WHICH THE APPELLANT WAS ASKED TO FURNISH DETAILS OF BAD DEBTS WRITTEN OFF ALONG WITH THE DOCUMENTA RY EVIDENCES AND VARIOUS OTHER DETAILS. THUS, IT WAS EVIDENT THAT THIS ISSUE WAS ALSO EXAMINED BY THE ASSESSING OFFICER DURING ORIGINAL ASSESSMENT PROCEEDINGS. M/S WEST COAST SAW PIPES LTD (NOW M/S U B S STAINLESS LTD) ITA 1634 / M/20 13 4 THE ASSESSING OFFICER HAS RE - OPENED THE ASSESSMENT ON THE ABOVE TWO ISSUES. ON THE FIRST ISSUE, AS DISCUSSED ABOVE, THERE WAS SUFFICIENT DISCLOSURE MADE BY APPELLANT IN THE ACCOUNTS. THOUGH THE ASSESSING OFFICER HAS NOT DISCUSSED ANYTHING ON THIS ISSUE IN THE ASSESSMENT ORDER, BUT IT CANNOT BE SAID THAT DURING ORIGINAL ASSESSMENT PROCEEDINGS THE ASSE SSING OFFICER HAS NOT EXAMINED THIS ISSUE. IN THE FACTS AND CIRCUMSTANCES, REOPENING THE ASSESSMENT ON THE ISSUE WHICH HAS ALREADY BEEN EXAMINED BY THE ASSESSING OFFICER DURING ORIGINAL ASSESSMENT PROCEEDINGS AMOUNTS TO REVIEW OF EARLIER ASSESSMENT ORDER A S WELL AS REOPENING ON THE BASIS OF CHANGE OF OPINION WHICH IS NOT PERMISSIBLE UNDER THE ACT. SO FAR AS SECOND ISSUE IS CONCERNED, THE ASSESSING OFFICER HAD ISSUED A QUESTIONNAIRE ON THIS ISSUE AND HAS CONSIDERED THE DETAILS FILED BY THE APPELLANT RELATING TO BAD DEBT WRITTEN OFF. THUS, REOPENING OF COMPLETED ASSESSMENT ON THIS ISSUE ALSO AMOUNTS REVIEW OF HIS OWN ORDER AND REOPENING ON THE BASIS OF CHANGE OF OPINION WHICH IS NOT PERMISSIBLE UNDER THE ACT. THOUGH, IN THE CASE UNDER CONSIDERATION, THE REOPEN ING WAS MADE WITHIN 4 YEARS FROM THE END OF THE ASSESSMENT YEAR UNDER CONSIDERATION AND THEREFORE, THE PROVISO TO SEC. 147 WAS NOT APPLICABLE. HOWEVER, THERE WAS ENOUGH DISCLOSURE BY THE APPELLANT ON THESE TWO ISSUES IN THE ACCOUNTS AS WELL AS IN THE DETAI LS FLIED DURING ORIGINAL ASSESSMENT PROCEEDINGS AND THEREFORE, THE REOPENING WAS BASED ON CHANGE OF OPINION ONLY. IN THE CASE OF INDIA EASTERN NEWSPAPER SOCIETY VS. CIT, 119 ITR 996, THE SUPREME COURT HELD THAT 'IT IS A SETTLED POSITION IN LAW THAT WHERE A SSESSMENT SOUGHT TO BE REOPENED IS BEFORE THE EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT A. Y, THEN IN SUCH CASE, THE POWER TO REOPEN IS VERY WIDE. HOWEVER, EVEN THOUGH SUCH A POWER IS VERY WIDE, YET SUCH A POWER WOULD NOT JUSTIFY A REVIEW OF ASSESSMEN T ORDER ALREADY PASSED.' IN THE CASE OF IDEA CELLULAR LTD VS. DCIT, 301 ITR 407, THE BOMBAY HIGH COURT HELD THAT ONCE ALL THE MATERIAL WITH REGARD TO PARTICULAR ISSUE IS BEFORE THE ASSESSING OFFICER AND HE CHOOSES NOT TO DEAL WITH THE SAME, IT CANNOT BE SA ID THAT HE HAS NOT APPLIED HIS MIND TO ALL THE MATERIAL BEFORE HIM. FOLLOWING THIS DECISION, IN THE CASE UNDER CONSIDERATION, IT CAN BE SAID THAT THE ASSESSING OFFICER HAD APPLIED HIS MIND ON THESE TWO ISSUES, SINCE THE SUFFICIENT DETAILS/ INFORMATION PERT AINING TO THESE ISSUES WERE BEFORE THE ASSESSING OFFICER WHILE PASSING THE ORIGINAL ASSESSMENT ORDER. THEREFORE, REOPENING ON THE BASIS OF THESE TWO ISSUES AMOUNTS TO REVIEW OF OWN ORDER WELL AS REOPENING ON THE BASIS OF CHANGE OF OPINION WHICH IS NOT PERM ISSIBLE UNDER THE ACT. IN THE CASE OF KELIVINATOR OF INDIA,256 ITR 1, THE DELHI HIGH COURT HELD THAT WHEN ALL THE MATERIALS WITH REGARD TO PARTICULAR ISSUE WAS BEFORE ASSESSING OFFICER, PRESUMPTION CAN BE RAISED THAT HE APPLIED HIS MIND TO ALL THE FACTS IN VOLVED IN THE ASSESSMENT. IN THE CASE OF CARTINEE INDIA LTD VS ADDL.CIT, 314 ITR 275, THE SC HELD THAT ' EVEN WHERE REASSESSMENT IS SOUGHT TO BE DONE WITHIN 4 YEARS FROM THE END OF THE RELEVANT A. Y, THERE MUST BE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AND SUCH REASON TO BELIEVE SHOULD NOT BE ON ACCOUNT OF MERE CHANGE OF OPINION.' THUS, THE HON'BLE SC HELD THAT THE REOPENING ON THE BASIS OF CHANGE OF OPINION IS NOT M/S WEST COAST SAW PIPES LTD (NOW M/S U B S STAINLESS LTD) ITA 1634 / M/20 13 5 PERMISSIBLE EVEN WITHIN 4 YEARS FROM THE END OF THE RELEVANT A Y . IN VIEW OF THE ABOVE FACTS AND DISCUSSION, IT IS HELD THAT THE REOPENING MADE BY THE ASSESSING OFFICER ON THE BASIS OF THESE TWO ISSUES AMOUNTS TO REVIEW OF HIS OWN ORDER AND THE REOPENING WAS ON THE BASIS OF CHANGE OF OPINION WHICH IS NOT PERMISSIBLE UNDER THE ACT. THE REOPENING IS THEREFORE, HELD TO BE INVALID. CONSEQUENTLY, THE REASSESSMENT ORDER BASED ON SUCH INVALID REOPENING WAS ALSO BAD IN LAW . 9. THE CIT(A), THUS ALLOWED THE ASSES S EES APPEAL ON LEGAL GROUND. 10. AGAINST THIS ORDER OF THE CIT(A), THE DEPARTME NT IS IN APPEAL BEFORE THE ITAT. 11. BEFORE US, THE DR RELIED ON THE ORDER OF THE AO AND SUPPORTED THE REASSESSMENT PROCEEDINGS TO BE CORRECTLY MADE, AS THERE WAS NO D ISCUSSION ON THE ISSUE IN THE ASSESSMENT ORDER. 12. O N THE OTHER HAND, THE AR POINTED O UT THAT THE CIT(A) WENT THROUGH THE RECORDS AND THEN CAME TO THE CONCLUSION THAT THE ISSUES WERE ACTUALLY CONSIDERED BY THE AO IN THE QUESTIONNAIRE ISSUED IN THE REGULAR ASSESSMENT PROCEEDINGS. THIS MEANS THAT THE AO ACTUALLY CONSIDERED THE REPLY OF THE AS SESSEE ON THE ISSUE RAISED BY HIM. RAISING THE ISSUE ONCE AGAIN WOULD BE RESORTING TO A CHANGE OF OPINION OR REVIEW OF THE ISSUE. THE MERE FACT THAT THE AO DID NOT MENTION THE SAME IN HIS ORDER, WOULD NOT MEAN THAT THE ISSUE HAS NOT BEEN CONSIDERED. 13. W E HAVE HEARD THE RIVAL CONTENTIONS AND HAVE CONSIDERED THE CASE LAW CITED ON THE ISSUE BEFORE US. 14. THE FACT THAT THE ISSUES TAKEN UP IN REASSESSMENT PROCEEDINGS WERE ASKED BY THE AO IN REGULAR ASSESSMENT PROCEEDINGS AND QUESTION NOS. 10 & 14 IN THE QUE STIONNAIRE PROVES THE POINT BEYOND ANY DOUBT THAT THE ISSUE WAS DEALT WITH BY THE AO. AT THIS STAGE, WE CANNOT AGREE WITH THE DR ON THE POINT THAT , SINCE IN THE REGULAR ASSESSMENT , THE AO DID NOT MENTION ANYTHING ON THE ISSUE, MEANS THAT THE ISSUE AS NOT B EEN DEALT WITH. M/S WEST COAST SAW PIPES LTD (NOW M/S U B S STAINLESS LTD) ITA 1634 / M/20 13 6 SOMETHING ENQUIRED BY THE AO BUT CHOSE NOT TO DEAL WITH THE ISSUE DOES NOT MEAN THAT AO IGNORED THE ISSUE. IN OUR OPINION, IF THE AO ASKS FOR EXPLANATION IN THE QUESTIONNAIRE BUT CHOOSES TO NOT TO MENTION IT IN THE ASSESSMENT ORDER, WOULD M EAN, THAT THE AO WAS SATISFIED BY THE REPLY OF THE ASSESSEE AND THEREFORE, CHOSE TO REST THE ISSUE. 15. DELVING ON THE ISSUE ONCE AGAIN WOULD AMOUNT TO CHANGE OF OPINION. THIS HAS BEEN HELD BY THE VARIOUS COURTS & HONBLE DELHI HIGH COURT IN THE CASE OF C IT VS KELVINATOR OF INDIA, REPORTED IN 256 ITR 1 (DEL - FB) WAS ON THIS ISSUE ITSELF, I.E. IN CASE OF CHANGE OF OPINION, 148 CANNOT BE DONE. THE RATIO LAID DOWN IN THIS CASE WAS TAKEN BEFORE THE HONBLE SUPREME COURT , REPORTED IN 320 ITR 561 (SC), SUSTAINED THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF KELVINATOR OF INDIA (SUPRA), HOLDING THAT THE DECISION WAS CORRECT IN LAW. 16. WE, CONSIDERING THESE TWO DECISIONS AND OTHER DECISIONS, AS REFERRED TO BY THE CIT(A) IN THE IMPUGNED ORDER, ARE OF THE VIEW THAT THE ORDER OF THE CIT(A) CANNOT BE INTERFERED WITH. WE, THEREFORE, SUSTAIN THE ORDER OF THE CIT(A) AND AS A CONSEQUENCE REJECT THE GROUNDS OF APPEAL SINCE ALL THE GROUNDS ARE LINKED & PERTAINED TO REASSESSMENT ISSUE, ALL THE GROUNDS ARE REJEC TED. 17. AS A RESULT, THE APPEAL AS FILED BY THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17/04/ 2015. SD/ - SD/ - ( . . ) ( ) ( N K BILLAIYA ) ( VIVEK VARMA ) ACCOUNTANT MEMB ER JUDICIAL MEMBER MUMBAI, DATE: 17/04/ 201 5 M/S WEST COAST SAW PIPES LTD (NOW M/S U B S STAINLESS LTD) ITA 1634 / M/20 13 7 / COPY TO: - 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) THE CIT (A) - 1 3 , MUMBAI. 4) THE CIT , MC - 7 , MUMBAI/CIT , MC - 7 , MUMBAI . 5) , , / THE D.R. G BENCH, MUMBAI. 6) COPY TO GUARD FILE. / BY ORDER / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS