Dy. CIT, Circle-161), Hyderabad V. M/s. Navionics Technologies Pvt. Limited, Hyderabad

ITA 1638/HYD/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74682 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 01-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A V RAGHURAM
• Keywords: Reopening of assessment; Audit objection; Cost of acquisition; Difference of opinion; Assessment record; Change of opinion
• Section: 143(3); 10B; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO. 1634/HYD/2012 ASSESSMENT YEAR 2006-07 THE INCOME TAX OFFICER WARD-16(2) HYDERABAD VS. M/S. NAVIONICS SYSTEM PVT. LTD., HYDERABAD PAN: AABCN6655Q [ASSESSEE] [RESPONDENT] ITA NO. 1638/HYD/2012 ASSESSMENT YEAR 2006-07 THE DEPUTY CIT CIRCLE-16(1) HYDERABAD VS. M/S. NAVIONICS TECHNOLOGIES PVT. LTD., HYDERABAD PAN: AABCN2101P [ASSESSEE] [RESPONDENT] APPELLANT BY: SMT. K. HARITHA RESPONDENT BY: SRI A.V. RAGHURAM DATE OF HEARING: 12.03.2014 DATE OF PRONOUNCEMENT: 12.03.2014 ORDER PER CHANDRA POOJARI, AM : THE ABOVE APPEALS BY THE REVENUE ARE DIRECTED AGAI NST DIFFERENT ORDERS OF THE CIT(A)-V, HYDERABAD DATED 6 .8.2012 FOR ASSESSMENT YEAR 2006-07 IN RESPECT OF TWO DIFFE RENT ASSESSEES. SINCE BOTH THE ASSESSEES BELONG TO SAME GROUP AND THE ISSUE IN BOTH THE APPEALS BEING THE SAME, T HESE APPEALS ARE CLUBBED TOGETHER, HEARD TOGETHER AND AR E BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. ITA NOS. 1634 & 1638/HYD/2012 M/S. NAVIONICS SYSTEM PVT. LTD. & ANR. ================================== 2 2. FIRST WE WILL TAKE UP THE REVENUE APPEAL IN ITA NO. 1634/HYD/2012 FOR A.Y. 2006-07 IN RESPECT OF M/S. NAVI ONICS SYSTEMS (P) LTD. THE GROUND RAISED BY THE REVENUE IS AS BELOW: '(1) THE CIT(A) OUGHT TO HAVE NOT CONCLUDED THAT THERE I S CHANGE OF OPINION OF THE ASSESSING OFFICER DESPITE THE FACT THE ASSESSEE HAS NOT COMPLIED THE PROVISIONS FOR ALLOWI NG EXEMPTION. THUS, THE CIT(A) ERRED IN TREATING THE CASE AS NULL AND VOID IGNORING THE EXPLANATIONS TO 2 ND PROVISO TO SECTION 147.' 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE- COMPANY, ENGAGED IN THE BUSINESS OF SOFTWARE DEVELO PMENT, FILED ITS RETURN OF INCOME FOR A.Y. 2006-07 ON 15.1 0.2006 CLAIMING EXEMPTION OF RS. 68,05,484 U/S. 10B OF INCO ME-TAX ACT, 1961 AND ADMITTING TOTAL INCOME AT 'NIL'. ASS ESSMENT U/S. 143(3) WAS COMPLETED ON 28.11.2008 BY ACCEPTING THE INCOME RETURNED. SUBSEQUENTLY, THE ASSESSING OFFIC ER DISALLOWED EXEMPTION U/S. 10B OF THE ACT AMOUNTING TO RS. 68,05,484 AND DONATION OF RS. 5,00,000 AND COMPLETE D THE ASSESSMENT AT RS. 73,05,484 ON 27.12.2011 RAISING A DEMAND OF RS. 41,55,690. 4. IN THIS CASE, WHILE COMPLETING ASSESSMENT U/S 143(3 ) ON 28-11-2008 BY ACCEPTING THE RETURNED INCOME, EXE MPTION U/S 10B OF THE ACT WAS ALLOWED TO THE ASSESSEE AS HA D BEEN DONE IN EARLIER YEARS. THEREAFTER, ON 17-2-2011 NO TICE U/S ITA NOS. 1634 & 1638/HYD/2012 M/S. NAVIONICS SYSTEM PVT. LTD. & ANR. ================================== 3 148 WAS ISSUED TO THE ASSESSEE AND THE CASE WAS REO PENED. EXEMPTION U/S 10B OF THE ACT WAS DISALLOWED BY GIVIN G THE FOLLOWING REASONS: 'DURING THE COURSE OF SCRUTINY PROCEEDINGS, THE ASS ESSEE HAS NOT FILED A CERTIFICATE IN FORM 56G UNDER RULE 16E FOR CLAIMING DEDUCTION U/S 10B. THEREFORE, THE CASE WAS REOPENED U/S 147 AND NOTICE U/S 148 WAS SERVED ON THE ASSESSEE. IN R ESPONSE TO THE NOTICES ISSUED, SRI V SRINATH, CA AND AUTHORIZE D REPRESENTATIVE OF THE ASSESSEE APPEARED. IN VIEW OF THE NON- COMPLIANCE TO THE ABOVE PROVISIONS, THE CLAIM OF AS SESSEE U/S 10B IS DISALLOWED. THEREFORE, THE CLAIM OF ASSESSEE U/S 10B IS DISALLOWED. THE ASSESSEE HAS MADE DONATION OF RS. 6 ,89,443 AND CLAIMED THE SAME AS EXPENDITURE. IN THE ABSENCE OF PROOF, THE SAME IS DISALLOWED AND ADDED BACK TO THE INCOME RETURNED. ACCORDINGLY, THE ASSESSMENT IS COMPLETED AS UNDER: INCOME AS PER ORDER U/S. 143(3) NIL ADD: 1. DISALLOWANCE U/S. 10B RS. 31,34,004 2. DONATION DISALLOWED RS. 6,89,443 38,23,447 AGAINST THIS THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) CHALLENGING REOPENING OF ASSESSMENT. 5. THE CIT(A) RELIED ON THE JUDGEMENT OF DELHI HIGH CO URT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. (25 6 ITR 1) AND ALSO ON THE JUDGEMENT OF MADRAS HIGH COURT IN THE C ASE OF APOLLO HOSPITALS ENTERPRISES LTD. VS. ACIT (287 ITR 25). THE MADRAS HIGH COURT IN THE CASE OF APOLLO HOSPITALS E NTERPRISES LIMITED VS ACIT (2006) 287 ITR 25, HELD THAT THE PO WER TO REOPEN AN ASSESSMENT WAS NOT CONFERRED BY THE LEGIS LATURE WITH THE INTENTION TO ENABLE AN ASSESSING OFFICER T O REOPEN THE FINAL DECISION MADE AGAINST THE REVENUE IN RESP ECT OF ITA NOS. 1634 & 1638/HYD/2012 M/S. NAVIONICS SYSTEM PVT. LTD. & ANR. ================================== 4 QUESTIONS THAT DIRECTLY AROSE FOR DECISION IN EARLI ER PROCEEDINGS. IF THAT WERE NOT THE LEGAL POSITION IT WOULD RESULT IN PLACING AN UNRESTRICTED POWER OF REVIEW IN THE H ANDS OF THE ASSESSING AUTHORITIES DEPENDING ON THEIR CHANGING M OODS. THE AUTHORITY CANNOT REOPEN THE ASSESSMENT ORDER PA SSED BY A MERE CHANGE OF OPINION OR BY DRAWING A DIFFERENT INFERENCE FROM THE SAME FACTS AS WERE EARLIER AVAILABLE. 6. FURTHER HE RELIED ON THE JUDGEMENT OF MADRAS HIGH COURT IN THE CASE OF CIT VS. ABDUL RAHAMAN SAIT (20 08) 306 ITR 142 (MAD), THE HON'BLE HIGH COURT HELD THAT THE ASSESSMENT OF THE ASSESSEE WAS COMPLETED U/S 143(3). LATER IT WAS OBSERVED THAT THE LONG TERM CAPITAL GAINS OF RS. 4,46,000, AS ADMITTED BY THE ASSESSEE AND ACCEPTED IN THE ASSESSMENT ORDER, ARISING FROM THE SALE OF THE ASSE SSEE'S PROPERTY WAS NOT COMPUTED CORRECTLY, BECAUSE THE VA LUE AS ON APRIL 1, 1981, ADOPTED ON THE ESTIMATE OF RS. 6 LAK HS FOR ARRIVING AT THE INDEXED COST OF ACQUISITION WAS NOT SUPPORTED BY ANY EVIDENCE AND IN CONSONANCE WITH THE FAIR MAR KET VALUE DECLARED BY THE ASSESSEE IN THE RETURN OF WEALTH FI LED BY HIM FOR THE AY 1989-90. PROCEEDINGS U/S 147 WERE INITIAT ED. ASSESSEE'S RESPONSE TO THE NOTICE ISSUED U/S 148 WAS THAT NO INCOME HAD ESCAPED ASSESSMENT SINCE ALL DOCUMENTS F ILED BY THE ASSESSEE WERE EXAMINED BEFORE THE COMPLETION OF THE ITA NOS. 1634 & 1638/HYD/2012 M/S. NAVIONICS SYSTEM PVT. LTD. & ANR. ================================== 5 ASSESSMENT. A NOTICE U/S 143(2) DATED NOV 3, 2000 WA S ISSUED FOR REOPENING OF THE ASSESSMENT. THE ASSESSEE CONTE NDED THAT THE REOPENING OF THE ASSESSMENT WAS NOT RIGHT, AS I T WAS BASED ON THE AUDIT OBJECTION OR CHANGE IN THE METHO D OF VALUATION SPECIALLY WHEN ALL THE MATERIALS WERE PLA CED BEFORE THE AO WERE EXAMINED BEFORE THE PASSING OF THE ORIG INAL ORDER DATED [AN 30, 1998. THE AO CONTENDED THAT INC OME HAD ESCAPED ASSESSMENT AS THERE WAS DIFFERENCE BETWEEN THE VALUE OF THE PROPERTY ADOPTED FOR THE PURPOSE OF CO MPUTING CAPITAL GAINS, THE INCOME TAX RETURNS AND THE VALUE OF THE PROPERTY MENTIONED IN THE WEALTH TAX RETURNS. THE COMMISSIONER (APPEALS) HELD THAT THE VALUE OF THE P ROPERTY ADOPTED BY THE ASSESSEE FOR THE PURPOSE OF WEALTH T AX DID NOT STOP HIM FOR CONTENDING OTHERWISE IN THE PROCEEDING S FOR CALCULATING TAX ON CAPITAL GAINS AND THAT THE ADOPT ION OF A CERTAIN VALUE FOR WEALTH TAX PURPOSES COULD NOT BE MADE THE BASIS FOR WORKING OUT CAPITAL GAINS, THOUGH IT WAS PRIMA FACIE SUFFICIENT FOR REOPENING THE ASSESSMENT. THE FINDIN G OF THE COMMISSIONER (APPEALS) THAT REOPENING OF THE ASSESS MENT WAS HELD TO BE IN ORDER WAS NOT ACCEPTED AS UNDER R ULE 27 OF THE INCOME TAX RULES, 1962. 7. IN VIEW OF THE ABOVE DISCUSSION, HE OBSERVED THAT T HE AO DID NOT EVEN POSSESS A SINGLE SHRED OF PAPER OR EVIDENCE ITA NOS. 1634 & 1638/HYD/2012 M/S. NAVIONICS SYSTEM PVT. LTD. & ANR. ================================== 6 BEYOND WHAT WAS ALREADY PRESENT IN THE FILE DURING THE COURSE OF ASSESSMENT U/S 143(3) OF THE ACT. AN EXAMINATION OF THE ASSESSMENT RECORD SHOWS THAT THE FULL DETAILS PERTA INING TO THIS CASE AND THIS PARTICULAR ISSUE AT HAND WERE OB TAINED BY THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS . AFTER CONSIDERING ALL THE MATERIAL AT HAND, THE EXEMPTION WAS ALLOWED BY THE ASSESSING OFFICER. THIS HAD BEEN DON E EVEN IN THE EARLIER YEARS. HE OBSERVED THAT RECORDING OF RE ASONS FOR REOPENING IS NOTHING BUT A CHANGE OF OPINION. ACCO RDINGLY HE QUASHED THE RE-ASSESSMENT ORDER. AGAINST THIS THE REVENUE IS IN APPEAL BEFORE US. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE HAVE CAREFULLY GONE THROUGH REASONS RECORDED BY THE AO FOR REOPENING OF ASSESSMENT AS I N PARA 5.4 OF CIT(A) ORDER. THERE IS NO DOUBT FROM READIN G OF THESE REASONS RECORDED, THAT ALL THE RELEVANT FACTORS WER E DISCLOSED BY THE ASSESSEE DURING THE ORIGINAL ASSESSMENT AS T HE ORIGINAL ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT VIDE ORDER DATED 28.11.2008 AND THE DEDUCTION CLAIMED BY THE A SSESSEE U/S. 10B OF THE ACT WAS GRANTED. NOTICE FOR REOPENI NG OF ASSESSMENT WAS GIVEN ON 17.2.2011. IN OUR OPINION, THERE IS NO FAILURE TO TRULY AND FULLY DISCLOSE ALL MATERIAL FACTS FOR THE PURPOSE OF ASSESSMENT BY THE ASSESSEE. IT IS ONLY A QUESTION ITA NOS. 1634 & 1638/HYD/2012 M/S. NAVIONICS SYSTEM PVT. LTD. & ANR. ================================== 7 OF DRAWING INFERENCE FROM THESE FACTS. THE INFEREN CE FROM THE AVAILABLE DOCUMENTS ON RECORD HAS TO BE DRAWN B Y THE ASSESSING OFFICER. SINCE THE AO DID NOT DRAW THE C ORRECT INFERENCE OR FAILED TO DRAW INFERENCE, IT DOES NOT MEAN THAT THERE WAS NON-DISCLOSURE OF ALL FACTS BY THE ASSESS EE. BEING SO, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE ARE COMPLETELY IN AGREEMENT WITH THE FINDI NG OF THE CIT(A) AND HE HAS NOT COMMITTED AN ERROR IN COMING TO THE CONCLUSION THAT THE ASSESSEE HAS DISCLOSED ALL MATE RIAL FACTS AND THEY WERE BEFORE THE AO AT THE TIME OF COMPLETI ON OF ORIGINAL ASSESSMENT U/S. 143(3) OF THE ACT AND IN TH E PRESENT CASE, IN OUR OPINION, THE EXPLANATION TO SECOND PRO VISO TO SECTION 147 OF THE ACT HAS NO APPLICATION. ACCORDI NGLY, THE GROUND RAISED BY THE IN ITA NO. 1634/HYD/ 2012 IS REJ ECTED AND THE APPEAL IS DISMISSED. ITA NO. 1638/HYD/12 M/S. NAVIONICS TECHNOLOGIES PVT. LTD. 9. THE GROUNDS RAISED BY THE REVENUE IN THIS APPEAL AR E AS UNDER: 1. THE CIT(A) ERRED BOTH ON FACTS AND CIRCUMSTANCES OF THE CASE IN HOLDING THAT THE REOPENING OF ASSESSMENT IS BAD IN LAW. 2. THE CIT(A) OUGHT TO HAVE CONSIDERED THE FACT THAT T HE ASSESSEE FAILED TO FURNISH THE REQUISITE CERTIFICATE DULY SI GNED BY AN AUDITOR IN FORM NO. 56G AD REQUIRED UNDER RULE 16E OF IT RULES, 1962, AND AS SUCH IS NOT ENTITLED FOR CLAIM OF EXEMPTION U/S. 10B OF THE ACT. 3. THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT IN THE ABSENCE OF THE REQUISITE CERTIFICATE IN FORM NO. 56G, THE E XEMPTION ALLOWED U/S. 10B IN THE ORIGINAL ASSESSMENT U/S. 14 3(3) RESULTED ITA NOS. 1634 & 1638/HYD/2012 M/S. NAVIONICS SYSTEM PVT. LTD. & ANR. ================================== 8 IN ESCAPEMENT OF INCOME AND THE SAME IS CORRECTLY R EOPENED AND THE ESCAPED INCOME HAS BEEN BROUGHT TO TAX IN THE R EOPENED ASSESSMENT U/S. 143(3) R.W.S. 147. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS SEEN THAT THE FACTS AND CIRCUMSTANCES OF THIS ARE SIMILAR AND IDENTICAL TO THAT OF THE APPEAL IN ITA NO. 1634/HYD/2012 IN RESPECT OF M/S. NAVIONICS SYSTEMS PVT. LTD. WE HAVE ALREADY DISCUS SED THE ISSUE IN THE SAID APPEAL AND THE GROUND RAISED BY T HE REVENUE ON THE SAME IS REJECTED AND DISMISSED. FOLLOWING T HE SAME RATIO, THE ABOVE GROUNDS OF THE REVENUE ARE REJECTE D AND THIS APPEAL OF THE REVENUE IS ALSO DISMISSED. 11. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH MARCH, 2014. SD/- (P. MADHAVI DEVI) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 12 TH MARCH, 2014 TPRAO COPY FORWARDED TO: 1. THE ITO, WARD-16(2), ROOM NO. 615, 6 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD-500 004. 2. THE DEPUTY CIT, CIRCLE-16(1), ROOM NO. 612, 6 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD-500 004. 3. M/S. NAVIONICS SYSTEM PVT. LTD., 8-2-293/82/2/L /350A, VENKATESWARA COLONY, ROAD NO. 12, BANJARA HILLS, HY DERABAD. 4. M/S. NAVONICS TECHNOLOGIES PVT. LTD., 8-2-293/82 /L/350A, VENKATESWARA COLONY, ROAD NO. 12, BANJARA HILLS, HY DERABAD. ITA NOS. 1634 & 1638/HYD/2012 M/S. NAVIONICS SYSTEM PVT. LTD. & ANR. ================================== 9 5. THE CIT(A)-V, HYDERABAD. 6. THE CIT-IV, HYDERABAD. 7. THE DR BENCH 'A', ITAT, HYDERABAD