ACIT, Circle-10(2), Kolkata, Kolkata V. M/s Oriental Carbon & Chemicals Ltd., Kolkata

ITA 1682/KOL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1223 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 23-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR
• Assessee Lawyers: MANISH TIWARI
• Keywords: Reopening of assessment; Tangible material; Bad and doubtful debts; Difference of opinion; Assessment record; Change of opinion; Reassessment proceedings
• Section: 143(3); 142(1); 148

Judgement Text

1 ITA NO.1682/KOL/2016 ORIENTAL CARBON & CHEMICALS LTD.,AY- 2009-10 , C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA ( ) BEFORE . . , /AND . . , ) [BEFORE SHRI P. M. JAGTAP, AM & SHRI A. T. VARKEY, JM] I.T.A. NO. 1682/KOL/2016 ASSESSMENT YEAR: 2009-10 ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-10(2), KOLKATA. VS. M/S. ORIENTAL CARBON & CHEMICALS LTD. (PAN: AAACO3006F) APPELLANT RESPONDENT DATE OF HEARING 05.03.2018 DATE OF PRONOUNCEMENT 23.03.2018 FOR THE APPELLANT SHRI SAURABH KUMAR, ADDL. CIT, SR . DR FOR THE RESPONDENT SHRI MANISH TIWARI, AR ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL PREFERRED BY REVENUE IS AGAINST THE ORD ER OF LD. CIT(A)-15, KOLKATA DATED 30.06.2016 FOR AY 2009-10. THE GROUNDS OF AP PEAL RAISED BY THE REVENUE ARE AS UNDER: 1. WHETHER THE LD. CIT(A) WAS CORRECT IN RELYING U PON THE DECISION IN THE CASE OF M/S. NRC LIMITED VS. CIT (A) AS DECIDED BY THE HONBLE B BEN CH OF THE ITAT, MUMBAI AS THE FACTS OF THE CASE IS DIFFERENT FROM THE CASE OF M/S. NRC LIM ITED? 2. WHETHER THE LD. CIT(A) WAS CORRECT IN NOT APPREC IATING THE FACT THAT THE ASSESSEE COMPANY DID NOT ADVANCE THE LOANS TO THE PARTIES FOR COMMER CIAL CONSIDERATION ABOUT 15 YEARS AGO AND THAT THERE IS NO MATERIAL ON RECORD TO SUGGEST THAT IT HAD EVER RECEIVED ANY INTEREST FROM THEM ? 3. WHETHER THE LD. CIT (A) WAS CORRECT IN NOT EXAMI NING THE FACT THERE IS NO MATERIAL ON RECORD THAT THE ASSESSEE COMPANY HAD ACTUALLY RECEI VED ANY INTEREST FROM THE DEBTORS ON ACCOUNT OF THE LOANS ADVANCED TO THEM AND THAT WHET HER HE WAS CORRECT IN NOT SEEKING A REMAND REPORT FROM THE A.O. WHO COULD HAVE EXAMINED THE VITAL ISSUES? 4. WHETHER THE LD. CIT(A) WAS CORRECT IN HOLDING TH AT WRITING OFF THE LOANS IN THE BOOKS OF ACCOUNT WAS SUFFICIENT CONDITION FOR ACCEPTING THAT BAD DEBTS HAVE ACTUALLY TAKEN PLACE WITHOUT LOOKING INTO THE SURROUNDING CIRCUMSTANCES. 2 ITA NO.1682/KOL/2016 ORIENTAL CARBON & CHEMICALS LTD.,AY- 2009-10 5. THAT THE APPELLANT CRAVES TO ADD, DELETE OR MODI FY ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 2. AT THE OUTSET ITSELF, THE LD. COUNSEL FOR THE AS SESSEE BROUGHT TO OUR NOTICE THAT IN THE APPEAL PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT (A) THE ASSESSEE COMPANY HAD RAISED THE LEGAL GROUND THAT THE AOS ACTION OF REOPENING TH E ASSESSMENT ORIGINALLY COMPLETED UNDER 143(3) TANTAMOUNT TO CHANGE OF OPINION WHICH GROUND HAS BEEN UPHELD BY THE LD. CIT(A) WHO THEREFORE HELD THE REOPENING ITSELF AB-I NITIO VOID. AND THIS DECISION OF LD CIT(A) HAS NOT BEEN CHALLENGED BY REVENUE IN THIS A PPEAL, AND THEREFORE EVEN IF FOR ARGUMENT SAKE REVENUE SUCCEEDS ON MERIT/GROUND RAI SED BEFORE US IN THE INSTANT APPEAL, THE REVENUE APPEAL CANNOT BE ALLOWED AS LONG AS THE DEC ISION OF LD CIT(A) ON LEGAL ISSUE STANDS NOT DISTURBED. FOR BUTTERING THIS FACT LD AR DREW O UR ATTENTION TO THE GROUNDS OF APPEAL OF ASSESSEE BEFORE THE LD. CIT(A) WHICH ARE GROUND NO. 1 AND GROUND NO. 2 ARE REPRODUCED AS UNDER: 1. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ASSESSING OFFICER ERRED IN LAW IN REOPENING THE ASSESSMENT HOLDING THAT ANY IN COME HAD ESCAPED ASSESSMENT IN THE ORIGINAL ASSESSMENT U/S. 143(3) OF THE INCOME TAX A CT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE REOPENING OF THE ORIGINAL ASSESSMENT IS BAD IN LAW AS IT IS BASED ON CHANGE OF OPINION O N SAME SET OF FACTS WHICH WERE EXAMINED AND ACCEPTED BY THE AO EARLIER AND SO, THE IMPUGNED ORDER U/S. 143(3)/147 NEEDS TO BE ANNULLED. IN ORDER TO SUBSTANTIATE THAT THE AO IN THE ORIGINA L ASSESSMENT PROCEEDINGS HAD INFACT ENQUIRED ABOUT THE VERY SAME ISSUE ON WHICH THE AO HAS BASED HIS REASON TO REOPEN THE ASSESSMENT ORDER, DREW THE ATTENTION OF LD. CIT(A) TO QUESTION NO. 13 OF NOTICE U/S. 142(1) DATED 20.06.2011 WHICH IS AS UNDER: DETAIL REGARDING THE BAD DEBT AND PROVISION FOR D OUBTFUL DEBT DEBITED TO P/L A/C. WITH NAME AND ADDRESS. 3. FOR THE AFORESAID QUESTION OF AO IN THE ORIGINAL ASSESSMENT COMPLETED U/S. 143(3) OF THE ACT, THE LD. CIT(A) TAKES NOTE OF ASSESSEES DE TAILED REPLY TO AO WHICH HAVE BEEN REPRODUCED FROM PAGE 3 TO 6 OF HIS ORDER AND THERE AFTER THE LD. CIT(A) HELD IN THE IMPUGNED ORDER AS UNDER AT PAGE 9 OF HIS ORDER: 3 ITA NO.1682/KOL/2016 ORIENTAL CARBON & CHEMICALS LTD.,AY- 2009-10 IT MEANT THAT THE AO HAD ALLOWED THE BAD DEBT AFTE R PROPER APPLICATION OF MIND. THUS, THERE WAS A 'CHANGE OF OPINION' ON THE PART OF THE AO WHI LE ISSUING THE NOTICE U/S. 148. THIS IS NOT ALLOWABLE UNDER THE PROVISIONS OF SECTION 147. FROM THE PERUSAL OF THE RECORDS, IT IS NOTED THAT T HE REASSESSMENT PROCEEDINGS WERE INITIATED BY THE AO WITH REFERENCE TO REASONS WHICH WERE FORM ED ON REAPPRAISAL OF FACTS ALREADY AVAILABLE ON RECORD AND UPON MERE CHANGE OF OPINION WITH REFERENCE THERETO. COPY OF NOTICE U/S 142(1) DATED 20.06.2011 AND THE REPLY OF THE ASSESSEE DATED 17.08.2011 WERE ON RECORD AT THE TIME OF PASSING OF THE ORDER U/S 143(3). THUS THE REASONS TO BELIEVE HAVE BEEN BASED ON REAPPRAISAL OF FACTS INFORMATION AND DETAILS WHICH WERE ON RECORD AT THE TIME OF PASSING THE ORDER U/S 143(3). NO NEW MATERI AL OR INFORMATION WAS GATHERED OR CAME IN POSSESSION OF THE AO SO AS TO JUSTIFY THE FORMAT ION OF BELIEF. THE REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT WERE FORMED AFTER EXA MINING THE ASSESSMENT RECORDS WHICH WERE AVAILABLE TO THE PREDECESSOR AO AND HAVE BEEN THUS FORMED ON MERE CHANGE OF OPINION ON THE FACTS ALREADY AVAILABLE ON RECORD. IT WAS NOT A CASE WHERE SUBSEQUENT TO COMPLETION OF THE REGULAR ASSESSMENT, SOME NEW INFORMATION OR MATERIAL WAS GATHERED OR WAS MADE AV AILABLE TO THE AO FROM OR BY SOME INDEPENDENT SOURCE; CONSEQUENT TO WHICH REASON TO B ELIEVE THAT INCOME CHARGEABLE TO TAX FOR A.Y. 2009-10 HAD ESCAPED ASSESSMENT WAS FORMED. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION O F SUPREME COURT IN THE CASE OF ACIT VS ICICI SECURITIES PRIMARY DEALERSHIP LTD. [2012] 348 ITR 299 (SC); 78 DTR 153 (SC) WHEREIN THE APEX COURT HELD THAT REOPENING OF ASSES SMENT ON CHANGE OF OPINION IS NOT MAINTAINABLE. THERE ARE A NUMBER OF JUDGEMENTS OF THE APEX COURT AND HIGH COURTS WHICH SUPPORT THE AFORESAID VIEW. CIT VS KELVINATOR OF INDIA LTD. [2010] 320 ITR 561 (SC), NYK LINE (INDIA) LTD. VS DY.CIT [2012] 346 ITR 361 (BORN), CIT VS ICICI BANK LTD. [2012] 349 ITR 482 (BORN) : 74 DTR 251 (BOM) BOMBAY HIGH COURT IN THE CASE OF RABO INDIA FINANCE LTD. VS DCIT [2012) 346 ITR 528 (BOM) NDT SYSTEMS VS ITO [2013] 81 DTR 1 (BORN) SIMILAR VIEWS WERE EXPRESSED BY THE BOMBAY AND DELH I HIGH COURTS IN THE FOLLOWING CASES: (1) MOSER BAER INDIA LTD. VS DCIT - [2013] 81 DTR 10 (D EL) (II) AVENTIS PHARMA LTD. VS ACIT - [2010J 323 ITR 570 (BOM) `(III) CIT VS JAGSON INTERNATIONAL LTD - [201 OJ 32 1 ITR 544 (DEL) (IV) ASTEROIDS TRADING AND INVESTMENTS P. LTD. VS D CIT - [2009] 308 ITR 190 (BOM) FROM THE AFORESAID JUDGEMENTS IT CAN BE SEEN THAT E VEN IN CASES OF REOPENING OF ASSESSMENT WITHIN A PERIOD OF FOUR YEARS FROM THE END OF THE R ELEVANT ASSESSMENT YEAR, THE AO HAS TO HAVE SOME NEW OR FRESH TANGIBLE MATERIAL, WHICH WOU LD WARRANT TAKING A VIEW DIFFERENT FROM THE ONE TAKEN DURING THE REGULAR ASSESSMENT PROCEED INGS. OTHERWISE, THE REOPENING OF THE ASSESSMENT WILL NOT BE SUSTAINABLE. 4 ITA NO.1682/KOL/2016 ORIENTAL CARBON & CHEMICALS LTD.,AY- 2009-10 HENCE, THE TECHNICAL OBJECTION RAISED BY THE ASSESS EE IS UPHELD AND THE ISSUE OF NOTICE U/S. 148 IS HELD TO BE ILLEGAL. SINCE, THE NOTICE U/S. 1 48 WAS ILLEGAL, THE SUBSEQUENT ASSESSMENT ORDER FRAMED IS VOID AB-INITIO. THUS, GROUNDS NO 1 & 2 RAISED BY THE ASSESSEE ARE ALLOWED. 4. WE THEREFORE NOTE THAT THE LD. CIT(A) HAS GIVEN RELIEF TO THE ASSESSEE IN THE IMPUGNED ORDER BY HOLDING THAT THE ACTION OF AO TO REOPEN ITSELF WAS VITIATED BECAUSE THE BASIS ON WHICH THE AO REOPENED THE ORIGINAL ASSESSM ENT WAS NOTHING BUT CHANGE OF OPINION AND CONSEQUENTLY HELD TO BE AB INITIO VOID, WHICH A CTION OF THE LD. CIT(A) HAS NOT BEEN CHALLENGED BY THE REVENUE BEFORE THE TRIBUNAL IS OB VIOUS ON PERUSAL OF THE GROUNDS OF APPEAL REPRODUCED ABOVE. THEREFORE, EVEN IF FOR AR GUMENT SAKE, WE HOLD THAT THE GROUNDS RAISED BY THE REVENUE IS ADJUDICATED IN FAVOUR OF THE REVENUE, STILL THE LD. CIT(A)S DECISION IN HOLDING THE NOTICE ISSUED TO REOPEN THE REASSESS MENT U/S. 148 OF THE ACT ITSELF AS VOID AB INITIO CANNOT BE DISTURBED. IN THE LIGHT OF THE AFO RESAID FACTS AND CIRCUMSTANCE, WE FIND FORCE IN THE ARGUMENT OF THE LD. AR THAT ADJUDICATION OF THIS APPEAL WILL BE ACADEMIC, WITHOUT REVENUE CHALLENGING THE IMPUGNED ORDER WHICH HELD T HE NOTICE TO REOPEN ITSELF AS VOID AB INITIO AND WE, THEREFORE, DISMISS THIS APPEAL OF T HE REVENUE BECAUSE IT WILL BE ONLY ACADEMIC IN NATURE. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER IS PRONOUNCED IN THE OPEN COURT ON 23.03.201 8 SD/- SD/- (P. M. JAGTAP) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 23RD MARCH, 2018 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT ACIT, CIRCLE-10(2), KOLKATA 2 RESPONDENT M/S. ORIENTAL CARBON & CHEMICALS LTD ., 31, NETAJI SUBHAS ROAD, KOLKATA-700 001. 3. THE CIT(A) KOLKATA 4. 5. CIT KOLKATA DR, ITAT, KOLKATA. / TRUE COPY, BY ORDER, SR. PVT. SECRETARY