Dy. Commissioner of Income Tax , Circle-3(1), Hyderabad V. Rasun Exports Private Limited, Hyderabad

ITA 1721/Hyd/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3376 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-A
• Assessment Year: 2008-2009
• Appeal Filed On: 26-11-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR PANDEY
• Keywords: Audit objection; Tangible material; Difference of opinion; Assessment record; Change of opinion; Reassessment proceedings
• Section: 143(3); 10AA; 147; 148; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER I.T.A. NO. 1721/HYD/2019 & C.O.NO.05/HYD/2020 (ARISING IN ITA NO.1721/H/19) ASSESSMENT YEAR: 2008-09 DY. COMMISSIONER OF INCOME TAX, CIRCLE-3(1), HYDERABAD VS RASUN EXPORTS PRIVATE LIMITED, HYDERABAD [PAN: AABCR0773P] (APPELLANT) (RESPONDENT/CROSS - OBJECTOR) FOR REVENUE : SHRI SUNIL KUMAR PANDEY, DR FOR ASSESSEE : SHRI KRANTHI, AR DATE OF HEARING : 29-04-2021 DATE OF PRONOUNCEMENT : 10-06-2021 O R D E R PER S.S.GODARA, J.M. : THIS REVENUES APPEAL ITA NO.1721/HYD/2019 AND THE ASSESSEES CROSS-OBJECTION NO.5/HYD/2020 FOR AY.2008 -09 ARISE FROM THE CIT(A)-3, HYDERABADS ORDER DATED 04-0 9-2019 PASSED IN CASE NO.0160/DCIT-3(1)/CIT(A)-3/2016-17, IN PROCEEDINGS U/S.143(3) R.W.S.147 OF THE INCOME TAX A CT, 1961 [IN SHORT, THE ACT]. HEARD BOTH THE PARTIES. CASE FILE(S) PERUSED. ITA NO. 1721/HYD/2019 C.O.NO.5/HYD/2020 :- 2 -: 2. COMING TO REVENUES SOLE SUBSTANTIVE GRIEVANCE IN ITS APPEAL ITA NO.1721/HYD/2019 THAT THE CIT(A) HAS ERRE D IN LAW AND ON FACTS IN QUASHING THE IMPUGNED RE-OPENING, BO TH THE LEARNED REPRESENTATIVES TOOK US TO THE CORRESPONDING LO WER APPELLATE DISCUSSION READING AS UNDER: VII) GROUND NOS. 1, 2 AND 3 IN APPEAL RELATE TO RE OPENING OF THE ASSESSMENT U/S.147. THE APPELLANT FURTHER CONTENDED THESE GROUNDS THAT THE INITIATION OF PROCEEDINGS U/S.147 WAS WRON G AS THERE WAS NO OMISSION OR FAILURE ON THE PART OF THE APPELLANT IN DISCLOSING FULLY AND TRULY ALL MATERIAL FACTS. IT WAS ALSO CONTENDED THA T THE INITIATION OF PROCEEDINGS OF SECTION 147 WAS ERRONEOUS AS IT INVO LVED RESORTING TO LOOKING AT A NEW ISSUE OF DISALLOWANCE U/S.10AA IN CONTRAVENTION OF THE SETTLED PRINCIPLES. FACTS OF THE CASE, GROUNDS OF APPEAL, ASSESSMENT ORDER AND SUBMISSIONS OF THE APPELLANT W ERE PERUSED. IT IS SEEN THAT THE ASSESSMENT WAS REOPENED AFTER T AKING APPROVAL AS REQUIRED. THE REASONS RECORDED FOR THE REOPENING OF THE REASSESSMENT HAS TAKEN INTO ACCOUNT THE PROVISIONS OF SECTION 10 AA. THE REASONS INCLUDES TAKING INTO ACCOUNT THE EARLIER ASSESSMENT U/S.143(3) WHICH WAS COMPLETED FOR A.Y.2008-09 ON 24.11.2010. IT IS ALSO SEEN FROM THE ASSESSMENT RECORD THAT THE REASONS FOR REOPENIN G OF THE ASSESSMENT WAS COMMUNICATED TO THE APPELLANT COMPAN Y VIDE LETTER DATED 30.04.2015. SUBSEQUENTLY, THE ASSESSMENT I.E. 143(3) R.W.S. 147 WAS PASSED ON 31.03.2016. ON PERUSAL OF THE ASSESSMENT RECORD FOR ASST. YEAR 2008-09, IT IS NOTED THAT THE REOPENING OF THE ASSESSMENT WAS DUE TO RAP OBJECTION WHICH WAS OBJECTED TO BY THE DCIT, CIRCLE-3(1), HYD ERABAD VIDE LETTER DATED 28.11. 2014 ADDRESSED TO THE THEN CIT-ILL, HY DERABAD. SUBSEQUENTLY, THE ASSESSING OFFICER I.E. THE DCIT, CIRLCE-3(1), HYDERABAD VIDE LETTER DATED 04.07.2016 ADDRESSED TO THE PR.CIT-3, HYDERABAD SUBMITTED AS FOLLOWS:- 2. IN THIS CASE, THE AUDIT HAS POINTED OUT THE FOLL OWING OBJECTIONS: (A) AS PER ASSESSEE'S SUBMISSION THE COMPANY HAS SE T UP 100 PER CENT EXPORT ORIENTEC UNIT IN VSE7 AND ELIGIBLE FOR INCOME TAX EXEMPTION U/S. 10AA. BUT IN THE ASSESSMENT ORDER DE DUCTION WAS ALLOWED U/S.10A AND IF EXEMPTION FAILS, UNDER SECTI ON 10A, ASSESSEE LIABLE TO PAY TAX UNDER MAT ON BOOK PROFIT OF RS.3, 63,96,118/-. (B) AS PER SCHEDULE 8 OF CONSOLIDATED BALANCE SHEET AS ON 31.3.2009 RELATED FROM INVENTORIES, TOTAL CLOSING STOCK AS ON 31.3.2007 (LAST YEAR) WAS RS.4,27,31,552/- WHICH IS INCLUSIVE OF FI NISHED GOODS OF ITA NO. 1721/HYD/2019 C.O.NO.5/HYD/2020 :- 3 -: RS.28,43,879/-, WORK IN PROGRESS OF RS.3,59,33,625/ - AND RAW MATERIAL OF RS.39,54,048/-. AS PER SCHEDULE 16 RELA TED TO COST OF GOODS SOLD WHICH WAS DEBITED IN P & L ACCOUNT FOR T HE YEAR ENDED 31.3.2008 RELEVANT TO AY 2008-09 IT WAS SEEN THAT T OTAL DOSING STOCK OF LAST YEAR AMOUNTING TO RS.4,27,31,552/- WAS DEBI TED AS OPENING STOCK FOR THE YEAR UNDER CONSIDERATION FOR THE UNIT OF MINE AND HO WHERE AS SAME NEEDS TO BE DISTRIBUTED BETWEEN MINE & HO AND PROCESSING UNIT. AS PER SCHEDULE 16 OF PROCESSING U NIT RELATED TO COST OF GOODS SOLD WHICH WAS DEBITED TO P & L ACCOUNT FO R THE YEAR UNDER CONSIDERATION AN AMOUNT OF RS.39,54,048/- WAS DEBIT ED AS UNIT TRANSFER . HENCE, RS.39,54,048/- NEEDS TO BE REDUCE D FROM OPENING STOCK OF RS.4,27,31,552/- 3. SUBSEQUENTLY, THE ASSESSMENT WAS REOPENED AFTER OBTAINING THE APPROVAL FROM THE COMMISSIONER OF INCOME TAX. DURIN G THE COURSE OF REASSESSMENT PROCEEDINGS, THE ASSESSEE HAS SUBMITTE D CLARIFICATION IN THIS REGARD. 4. WITH REGARD TO EXEMPTION U/S.10A, IT IS SUBMITTE D THAT THE EXEMPTION MENTIONED IN THE ASSESSMENT ORDER UNDER S EC.10A IS A TYPOGRAPHICAL MISTAKE. IT SHOULD BE UNDER SEC. 10AA . THE ASSESSEE IS 100% EOU LOCATED IN SEZ AND ENTITLED FOR DEDUCTION U/S.10AA. THEREFORE, PAYMENT OF MAT IS NOT APPLICABLE TO IT. 4.1 WITH REGARD TO OPENING AND CLOSING STOCK/ IT WA S SUBMITTED BY THE ASSESSEE THAT THE FACTORY STARTED ITS COMMERCIA L PRODUCTION FROM 1.4.2007. THE RAW MATERIAL FOR MANUFACTURING POLIS HED GRANITE SLABS IS GRANITE BLOCKS. TO MEET THE REQUIREMENT OF RAW M ATERIAL, THE COMPANY IS TRANSFERRING GRANITE SLABS FROM ITS CAPT IVE MINES TO FACTORY. WHILE PREPARING THE FINANCIAL STATEMENTS O F MINE AS ON 31.3.2007 THE MATERIAL MARKED FOR FACTORY I.E. RS. 39,54,058/- WAS SHOWN IN THE CLOSING STOCK SCHEDULE AS RAW MATERIAL S IN MINE. SINCE THE FACTORY IS 100% EOU SEPARATE BOOKS OF ACCOUNTS WERE MAINTAINED FROM 1.4.2007. THE RAW MATERIAL EAR MARKED FOR FACT ORY OF RS. 39,54,058/- AS ON 31.3.2007 WAS TRANSFERRED TO FACT ORY DURING THE YEAR 200708. IN ADDITION TO THIS ANOTHER QUANTITY FOR RS. 42,45,107/- WAS ALSO TRANSFERRED TO FACTORY DURING THE YEAR 2007 - 08. THE RECEIPTS OF THE MATT-~RIAL WAS RECORDED AS INTER UNIT TRANSFERS / PURCHASE IN THE BOOKS OF ACCOUNTS OF FACTORY DURI NG THE YEAR 2007 - 08. 4.2 THE CONTENTION OF THE ASSESSEE IS VERIFIED AND FOUND THAT IT IS PURELY PRESENTATION MISTAKE AS STATED BY THE ASSESS EE RS.39,54,048/- WAS SHOWN IN THE OPENING STOCK IN TH E SCHEDULE OF COST OF GOODS SOLD OF HO AND MINES THE SAME WAS CRE DITED AS INTER UNIT TRANSFER TO PROCESSING PLANT UNDER SATES SCHED ULE DURING THE YEAR 2007-08. SO THERE IS NO EXCESS DEBIT OF RS. 39 ,54,048/- IN THE P&L ACCOUNT OF HO AND MINE. ITA NO. 1721/HYD/2019 C.O.NO.5/HYD/2020 :- 4 -: 5. IN VIEW OF THE ABOVE, THE PR.CIT IS REQUESTED TO WRITE TO THE AUDIT TO DROP THE OBJECTION. YOURS FAITHFULLY XXXXXX DY.COMMISSIONER OF INCOME TAX CIRCLE-3(1), HYDERABAD SUBSEQUENT TO THE ABOVE, THE THEN PR.CIT-3, HYDERAB AD VIDE LETTER DATED 17.10.2016 ADDRESSED TO THE PR. DIRECTOR OF A UDIT(CENTRAL), HYDERABAD STATED AS FOLLOWS: PLEASE REFER TO THE ABOVE. 2. THE AUDIT RAISED OBJECTION AS UNDER: 1. AS PER ASSESSEE'S SUBMISSION THE COMPANY HAS SET UP AN 100 PERCENT EXPORT ORIENTED UNIT IN VSEZ AND ELIGIBLE F OR INCOME TAX EXEMPTION U/S 10AA. BUT IN THE ASSESSMENT ORDER DED UCTION WAS ALLOWED U/S 10A AND IF EXEMPTION FALLS UNDER SECTIO N 10A, ASSESSEE LIABLE TO PAY TAX UNDER MAT ON BOOK PROFIT OF RS.3, 63,96,118/- AND TAX UNDER MAT WOULD BE RS.42,21,947/-. WHILE TAX UNDER NORMAL PROVISIONS WAS WORKED OUT TO BE RS.20,64,814/-. HENCE, ASSESSEE IS LIABLE TO PAY AN OTHER RS.21,57,133/- (RS.42,21,947-21,57,133). MOREOVER, FORM. 56F/AND 3CD REPORT WAS NOT PLACED ON RECORD. 2. AS PER SCHEDULE 8 OF CONSOLIDATED BALANCE SHEET AS ON 31.03.08 RELATED FORM INVENTORIES, TOTAL CLOSING STOCK AS ON 31.03.07 WAS RS..4,27,31,552/- WHICH IS INCLUSIVE OF FINISHED GO ODS OF RS.28,43,879/-, WORK IN PROGRESS OF RS.3,59,33,625/ - AND RAW MATERIAL OF RS.39,54,048/-. AS PER SCHEDULE 16 RELA TED FROM COST OF GOODS SOLD WHICH WAS DEBITED IN PROFIT & LOSS A/C F OR THE YEAR ENDED 31.03.08 RELEVANT TO ASST. YEAR 2008-09, IT WAS SEE N THAT TOTAL CLOSING STOCK OF LAST YEAR AMOUNTING TO RS. 4,27,31 ,552/- WAS DEBITED TO AS A OPENING STOCK FOR THE YEAR UNDER CONSIDERAT ION FOR THE UNIT OF MINE & HO AS AGAINST SAME NEEDS TO BE DISTRIBUTED B ETWEEN MINE & H.O. AND PROCESSING UNIT (ELIGIBLE UNIT FOR EXEMPTI ON). AS PER SCHEDULE 16 OF PROCESSING UNIT(ELIGIBLE UNIT) RELATED FROM C OST OF GOODS SOLD WHICH WAS DEBITED TO PROFIT & LOSS ACCOUNT [OR THE YEAR UNDER CONSIDERATION AN AMOUNT OF RS.3954048/- WAS DEBITED AS A UNIT TRANSFER. HENCE RS. 39,54,048/- NEEDS TO BE REDUCED FROM OPENING STOCK OF RS.4,27,31,552/- DEBITED TO MINE & H.O. (N ON ELIGIBLE UNIT). THE OMISSION RESULTED IN SHORT COMPUTATION OF INCOM E RS.39,54,048/-. 3. THE CASE WAS REOPENED U/S 147 AND ORDER U/S 143( 3) R:W.S. 147 WAS PASSED ON 31.03.2016. DURING THE COURSE OF ASSE SSMENT ITA NO. 1721/HYD/2019 C.O.NO.5/HYD/2020 :- 5 -: PROCEEDINGS, THE OBJECTIONS RAISED BY AUDIT WERE LO OKED INTO AND THE CLARIFICATIONS OF AO ARE AS UNDER: 1. WITH REGARD TO EXEMPTION U/S.10A, THE EXEMPTION MENTIONED IN THE ASSESSMENT ORDER UNDER SEC.10A IS A TYPOGRAPHICAL M ISTAKE. IT SHOULD BE UNDER SECTION 10AA. THE ASSESSEE IS 100% EOU LOC ATED IN SEZ AND ENTITLED FOR DEDUCTION U/S 10AA. THEREFORE, PA YMENT OF MAT IS NOT REQUIRED. A COPY OF THE LETTER DT.13.08.2015 FU RNISHED DURING SCRUTINY PROCEEDINGS IS ENCLOSED HEREWITH FOR READY REFERENCE. 2. WITH REGARD TO OPENING AND CLOSING STOCK, THE AS SESSEE SUBMITTED THAT RS.39,54,048/- WAS SHOWN IN THE OPENING STOCK IN THE SCHEDULE OF COST OF GOODS SOLD OF HO AND MINES. THE SAME WAS CREDITED AS INTER UNIT TRANSFER TO PROCESSING PLANT UNDER SALES SCHED ULE DURING THE YEAR 2007-08. SO THERE IS NO EXCESS DEBIT OF RS.39,54,04 8/- IN THE P&L ACCOUNT OF HO AND MINE. COPIES OF EXPLANATION SUBMI TTED BY THE ASSESSEE ARE ENCLOSED FOR READY REFERENCE. 4. IN VIEW OF THE ABOVE, THE OBJECTION AT PARA 21 O F LAR CITED ABOVE IS NOT MAINTAINABLE AND REQUIRES TO BE DROPPED FOR TRE ATING AS SETTLED. A COMMUNICATION TO THIS EFFECT MAY BE SENT TO THIS OF FICE AT THE EARLIEST. YOURS FAITHFULLY, XXXXXXXXXXX FROM THE FROM THE ASSESSMENT RECORD, IT IS SEEN REO PENING OF THE ASSESSMENT WAS ON A ISSUE WHICH WAS EXAMINED IN THE ORIGINAL PROCEEDINGS U/S.143(3) WHICH WAS PASSED ON 24.11.20 10. THIS ISSUE WAS WITH REGARD TO EXEMPTION U/S.10AA WHICH WAS CLA RIFIED IN THE ABOVE TWO LETTERS THAT DUE TO TYPOGRAPHICAL ERROR S ECTION 10AA WAS MISTAKEN FOR SECTION 10A. FURTHER, FROM THE ASSESSM ENT RECORD, IT CAN BE SEEN THE REASONS FOR REOPENING WERE BASED ON AN AUDIT OBJECTION. THE REOPENING OF AN ASSESSMENT NEEDS TO BE BASED ON A TANGIBLE MATERIAL WHICH HAS A LIVE-LINK WITH THE FORMATION O F THE BELIEF THAT THERE WAS AN ESCAPEMENT OF INCOME. IN THIS CONTEXT, THE RATIO OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. KELVIN ATOR OF INDIA LTD. (320 ITR 561)(SC) IS APPLICABLE. HENCE, IT CAN BE SEEN THAT THE REOPENING OF THE ASS ESSMENT WAS DUE TO A CHANGE OF OPINION AND AUDIT OBJECTION. IN THE CONTEXT OF THE CHANGE OF OPINION AND AUDIT OBJECTION IN THE APPELL ANT'S CASE, THE DECISIONS OF JURISDICTIONAL ITAT, HIGH COURT AND HO N'BLE SUPREME COURT ETC., HAVE BEEN PERUSED. THE GIST OF SOME OF THE DECISIONS ARE REPRODUCED BELOW: S.RANJITH REDDY VS DCIT (2013) 35 TAXMANN.COM 415 ( HYD, TRIB.) ITA NO. 1721/HYD/2019 C.O.NO.5/HYD/2020 :- 6 -: THE FACTS SUGGEST THAT THE INFORMATION THAT WAS CON SIDERED BY THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT WAS ALRE ADY ON RECORD AND IF THE ASSESSING OFFICER FAILED TO CONSIDER THE SAME FOR FRAMING THE ASSESSMENT BY ISSUING NOTICE UNDER SECTION 143( 2), HE WAS PRECLUDED FROM CONSIDERING THE SAME MATERIAL FOR RE OPENING OF THE ASSESSMENT UNDER SECTION 147, READ WITH SECTION 148 . ACCORDINGLY, THE ASSESSMENT IS QUASHED. DCIT VS LEE PHARMA (P) LTD (2012) 20 ITR(T) 409 (HY D, TRIB.) IN THE INSTANT CASE, THE ASSESSING OFFICER IN THE C OURSE OF ORIGINAL ASSESSMENT PROCEEDINGS HAD CALLED FOR THE PARTICULA RS REGARDING VARIOUS ITEMS OF INCOME GOING INTO THE COMPUTATION OF DEDUCTION UNDER SECTION 80HHC, FOR WHICH THE ASSESSEE 'HAD GIVEN TH E REQUISITE DETAILS AND PARTICULARS. NOW THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT TO HOLD THAT THE VERY SAME ITEMS OF RECE IPT HAS TO BE EXCLUDED IN COMPUTING RELIEF UNDER SECTION 80HHC. I N OTHER WORDS, THE ASSESSING OFFICER, ON A REAPPRAISAL OF THE VERY SAME DETAILS, WHICH WAS CALLED FOR BY HIM AND FURNISHED BY THE AS SESSEE, WOULD LIKE TO COME TO A DIFFERENT CONCLUSION. THIS CLEARL Y TANTAMOUNTS TO THAT REOPENING IS MERELY ON A CHANGE OF OPINION. THUS THE REOPENING IS MERELY ON A CHANGE OF OPINION OF THE ASSESSING OFFICER AND HE SHOULD HAVE TANGIBLE MATERIAL FOR FO RMING AN OPINION THAT THERE HAS BEEN AN ESCAPEMENT OF INCOME. 'REASO N TO BELIEVE' WILL NOT INCLUDE MERE CHANGE OF OPINION. RESPECTFULLY FO LLOWING THE RATIO LAID DOWN BY THE DELHI HIGH COURT IN THE CASE OF KE LVINATOR OF INDIA LTD. [2002] 256 ITR 1/123 TAXMAN 433, THE ORDER OF THE COMMISSIONER (APPEALS) IN TREATING THE REASSESSMENT MADE BY THE ASSESSING OFFICER AS NULL AND VOID, DESERVED TO BE UPHELD. AN AUDIT OPINION IN REGARD TO THE APPLICATION OR IN TERPRETATION OF LAW CANNOT BE TREATED AS INFORMATION FOR REOPENING THE ASSESSMENT UNDER SECTION 147(B). ITO VS OBJECT CONNECT INDIA (P) LTD (2014) 29 ITR(T ) 518 (HYD, TRIB.) IN VIEW OF THE RATIO LAID DOWN BY THE DELHI HIGH CO URT IN THE CASE OF USHA INTERNATIONAL LTD. (SUPRA) IT IS OPINED THAT T HE COMMISSIONER (APPEALS) HAS RIGHTLY QUASHED THE REOPENING OF ASSE SSMENT MADE BY THE ASSESSING OFFICER UNDER SECTION 147 OBSERVING T HAT THERE WAS ABSOLUTELY NO FRESH INFORMATION PROVIDED OR COLLECT ED. ACCORDINGLY, THE ORDER OF THE COMMISSIONER (APPEALS) IS UPHELD AND T HE GROUNDS RAISED BY THE REVENUE ON THIS ISSUE IS DISMISSED. THE HON'BLE A.P HIGH COURT [SRI KALYAN JYOTI SENGUP TA CJ, & SRI K.C. BHANU, J] VIDE ORDER IN I.T.T.A.NO.384 OF 2013 DATE D 30.08.2013 IN THE CASE OF CIT VS M/S.LEE PHARMA PVT. LTD.,[20 ITR (T) 499 (HYDERABAD)], WHILE UPHOLDING THE DECISION OF THE H ON'BLE ITAT, ITA NO. 1721/HYD/2019 C.O.NO.5/HYD/2020 :- 7 -: HYDERABAD ON THE ISSUE OF CHANGE OF OPINION AND ON AUDIT OBJECTIONS HAVE HELD THAT: ...... FURTHER, THE LEARNED TRIBUNAL HAD TAKEN A C ORRECT VIEW THAT AN AUDIT OPINION IN REGARD TO THE APPLICATION OR INTERPRETAT ION OF LAW CANNOT BE TREATED AS INFORMATION. FOR REOPENING THE ASSESSMEN T UNDER SECTION 147(B) OF THE INCOME TAX ACT THIS PROPOSITION OF LAW HAS B EEN DECIDED BY THE SUPREME COURT IN THE CASE OF INDIAN & EASTERN NEWSP APER SOCIETY V. COMMISSIONER OF INCOME TAX AND ALSO IN THE CASE OF COMMISSIONER OF INCOME TAX V. LUCAS TVS LTD. THEREFORE, NOTHING REM AINS TO BE DECIDED BY US IN THIS APPEAL. THE APPEAL IS ACCORDINGLY DISMISSED. THERE WILL BE NO ORDER AS TO COSTS. IT WOULD BE RELEVANT TO BRING TO NOTE THAT IN CASE OF CIT VS SHILP GRAVURES LTD [220 TAXMAN 382 (GUJ.HC), VARIOUS JUDI CIAL DECISIONS WERE RELIED UPON INCLUDING THE DECISION OF THE HON' BLE SUPREME COURT IN THE CASE OF CIT VS. LUCAS TVS LTD., [249 ITR. 30 6] (SC). IN THE CASE OF CIT VS. LUCAS TVS LTD., [249 ITR 306], THE HON'B LE SUPREME COURT WHILE AFFIRMING THE DECISION OF THE MADRAS HIGH COU RT IN 234 ITR 296 NOTED 'OPINION OF AUDIT PARTY REGARDING APPLICATION OR INTERPRETATION OF LAW DID NOT AMOUNT TO INFORMATION THEREFORE, REA SSESSMENT BASED ON OPINION OF AUDIT PARTY WAS NOT VALID. ON PERUSAL OF THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS . LUCAS TVS LTD., [234 ITR 296] IT IS SEEN THAT THE DECISION OF THE H ON'BLE SUPREME COURT IN INDIAN AND EASTERN NEWSPAPER SOCIETY VS, C IT [119 ITR 996] WAS APPLIED. ON PERUSAL OF THE LAND MARK DECISION I N THE CASE OF INDIAN AND EASTERN NEWSPAPER SOCIETY VS. CIT [119 I TR 996] IT WAS HELD IN PARA 11 AS UNDER: 'UNDER THAT SECTION, THE AUDIT BY THE COMPTROLLER A ND AUDITOR GENERAL IS PRINCIPALLY INTENDED FOR THE PURPOSES OF SATISFYING HIM WITH REGARD TO THE SUFFICIENCY OF THE RULES AND PROCEDUR ES PRESCRIBED FOR THE PURPOSE OF SECURING AN EFFECTIVE CHECK ON THE ASSES SMENT, COLLECTION AND PROPER ALLOCATION OF REVENUE. HE IS ENTITLED TO EXA MINE THE ACCOUNTS IN ORDER TO ASCERTAIN WHETHER THE RULES AND PROCEDURES ARE BEING DULY OBSERVED AND HE IS REQUIRED/ UPON SUCH EXAMINATION, TO SUBMIT A REPORT. HIS POWER IN RESPECT OF THE AUDIT OF INCOME-TAX REC EIPTS AND REFUNDS ARE OUTLINED IN THE BOARD'S CIRCULAR NO. 14/19/56-11, D ATED 28-7-1960. [INTERNAL AUDIT MANUAL, VOL.II, P.39J. PARAGRAPH 2 OF THE CIR CULAR REPEATS THE PROVISIONS OF SECTION 16 OF THE COMPTROLLER AND AUD ITOR-GENERAL'S (DUTIES, POWERS AND CONDITIONS OF SERVICE) ACT, 1971. AND PA RAGRAPH 3 WARNS THAT 'THE AUDIT DEPARTMENT SHOULD NOT IN ANY WAY SUBSTIT UTE ITSELF FOR THE REVENUE AUTHORITIES IN THE PERFORMANCE OF THEIR STA TUTORY DUTIES. PARAGRAPH 4 DECLARES: ITA NO. 1721/HYD/2019 C.O.NO.5/HYD/2020 :- 8 -: 'AUDIT DOES NOT CONSIDER IT ANY PART OF ITS DUTY TO PASS IN REVIEW THE JUDGMENT EXERCISED OR THE DECISION TAKEN IN INDIVID UAL CASES BY OFFICERS ENTRUSTED WITH THOSE DUTIES, BUT IT MUST BE RECOGNI ZED THAT AN EXAMINATION OF SUCH CASES MAY BE AN IMPORTANT FACTOR IN JUDGING THE EFFECTIVENESS OF ASSESSMENT PROCEDURE .... IT IS, HOWEVER, TO FORMIN G A GENERAL JUDGMENT RATHER THAN TO THE DETECTION OF INDIVIDUAL ERRORS O F ASSESSMENT, ETC., THAT THE AUDIT ENQUIRIES SHOULD BE DIRECTED.' THE CANONS OF JUDICIAL DISCIPLINE WHICH HAVE BEEN B ROUGHT OUT BY THE HON'BLE SUPREME COURT IN JAIN EXPORTS (P) LTD., AND OTHERS VS. UNION OF INDIA & OTHERS [3 SCC 579J, UNION OF INDIA & OTH ERS VS KAMIAKSHI FINANCE CORPORATION [55 ELT 433](SC) AND THE HON'BI E AP HIGH COURT IN THE CASE OF STATE OF ANDHRA PRADESH VS. CTO (169 ITR 564) ARE RESPECTFULLY FOLLOWED. THE HON'BLE AP HIGH COURT OF COURT IN THE CASE OF STATE OF ANDHRA PRADESH VS. CTO (169 ITR 564) WH ILE ADJUDICATING A CONTEMPT OF COURT CASE HELD: 'IT IS CLEAR FROM THE JUDICIAL PRONOUNCEMENTS ABOVE REFERRED TO THAT THE AUTHORITIES AND THE TRIBUNALS FUNCTIONING WITHIN TH E JURISDICTION OF THE COURT IN RESPECT OF WHOM THIS COURT HAS THE POWER OF SUPE RINTENDENCE UNDER ARTICLE 227 ARE BOUND TO FOLLOW THE DECISIONS OF TH IS COURT UNLESS, ON AN APPEAL, THE OPERATION OF THE JUDGMENT IS SUSPENDED. IT IS NOT PERMISSIBLE FOR THE AUTHORITIES AND THE TRIBUNALS TO IGNORE THE DECISIONS OF THIS COURT OR TO REFUSE TO FOLLOW THE DECISIONS OF THIS COURT ON THE PRETEXT THAT AN APPEAL IS FILED IN THE SUPREME COURT WHICH IS PENDING PR T HAT STEPS ARE BEING TAKEN TO FILE AN APPEAL. IF ANY AUTHORITY OR THE TR IBUNAL REFUSES TO FOLLOW ANY DECISION OF THIS COURT ON THE ABOVE GROUNDS, IT WOU LD BE CLEARLY GUILTY OF COMMITTING CONTEMPT OF THIS COURT AND IS LIABLE TO BE PROCEEDED AGAINST. WE HAVE COME ACROSS INNUMERABLE INSTANCES WHERE THE AUTHORITIES BELOW, ESPECIALLY AUTHORITIES ENTRUSTED WITH, THE COLLECTI ON OF TAXES AND EXCISE DUTIES, REFUSED TO FOLLOW THE DECISIONS OF THIS COU RT ON THE AROUND THAT APPEALS WERE EITHER FILED OR STEPS WERE BEING TAKEN , TO FILE APPEALS, AND RAISED FANTASTIC TAX DEMAND INITIATED PROCEEDINGS F OR RECOVERY OF SUCH TAXES. THE RESULT WAS THAT, THIS COURT WAS FLOODED WITH INNUMERABLE WRIT PETITIONS: WE NEED HARDLY OBSERVE THAT AIL THIS IS TOTALLY IRREGULAR AND SHOULD HAVE BEEN AVOIDED. WE CANNOT HELP PUTTING ON NOTICE AIL THE AUTHORITIES CONCERNED THAT THIS COURT WOULD NOT HES ITATE TO TAKE STEM ACTION FOR CONTEMPT IF DECISIONS OF THIS COURT ARE DISREGARDED UNLESS, THE OPERATION OF THE JUDGMENTS OF THIS COURT IS SUSPEND ED BY THE SUPREME COURT.' THE RATIO OF THE DIVISION BENCH DECISION OF THE BOM BAY HIGH COURT [S.H.KAPADIA & V.C.DAGA, 33.] IN THE CASE OF BANK O F BARODA VS H.C. SHRIVATSAVA (256 ITR 385) AS BROUGHT OUT IN PARA 16 OF THE JUDGEMENT/FINDINGS ARE BROUGHT TO NOTE AS THEY ARE ON THE ISSUE JUDICIAL DISCIPLINE. PARA 16 OF THE JUDGEMENT READS AS FOLLOWS: ITA NO. 1721/HYD/2019 C.O.NO.5/HYD/2020 :- 9 -: ''AT THIS JUNCTURE, WE CANNOT RESIST FROM OBSERVING THAT THE JUDGEMENT DELIVERED BY THE TRIBUNAL WAS VERY MUCH B INDING ON THE ASSESSING OFFICER. THE ASSESSING OFFICER WAS BOUND TO FOLLOW THE JUDGMENTS IN ITS LETTER AND SPIRIT. IT WAS NECESSAR Y FOR THE JUDICIAL UNITY AND DISCIPLINE THAT ALL THE AUTHORITIES BELOW THE TRIBU NAL MUST ACCEPT AS BINDING THE JUDGEMENT OF THE TRIBUNAL. THE ASSESSING OFFICE R BEING INFERIOR OFFICER VIS-S-VIS THE TRIBUNAL, WAS BOUND BY THE JUDGMENT O F THE TRIBUNAL AND THE ASSESSING OFFICER SHOULD NOT HAVE TRIED TO DISTINGU ISH THE SAME ON UNTENABLE GROUNDS. IN THIS BEHALF, IT WILL NOT BE O UT OF' PLACE TO MENTION THAT IN THE HIERARCHICAL SYSTEM OF COURTS WHICH EXI STS IN OUR COUNTRY, FT IS NECESSARY FOR EACH LOWER TIERS INCLUDING THE HIGH C OURT, TO ACCEPT LOYALLY THE DECISIONS OF THE HIGHER TIERS. IT IS INEVITABLE IN HIERARCHICAL SYSTEM OF COURTS THAT THERE ARE DECISIONS OF THE SUPREME APPE LLATE TRIBUNALS WHICH DO NOT ATTRACT THE UNANIMOUS APPROVAL OF ALL MEMBER S OF THE JUDICIARY. BUT THE JUDICIAL SYSTEM ONLY WORKS IF SOMEONE IS ALLOWE D TO HAVE THE LAST WORD, AND THAT LAST WORD ONCE SPOKEN IS LOYALLY ACC EPTED. THE BETTER WISDOM OF THE COURT BELOW MUST YIELD TO THE HIGHER WISDOM OF THE COURT ABOVE AS HELD BY THE SUPREME COURT IN THE MATTER OF CCE V. DUNLOP INDIA LTD. AIR 1985 SC 330. ' HENCE, GROUNDS NOS.1, 2 AND 3 RELATING TO REOPENING OF THE ASSESSMENT ARE ALLOWED AS THE REASSESSMENT IS QUASH ED AND TREATED AS VOID AB INITIO FOR THE REASONS CITED SUPRA. AS T HE REASSESSMENT HAS BEEN QUASHED IN THE CASE OF THE APPELLANT, GROUNDS OF APPEAL NO. 4, 5 AND 6 ARE ACADEMIC IN NATURE. 3. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RIVAL PLEADINGS AGAINST AND IN SUPPORT OF THE CIT(A)S FORE GOING DETAILED DISCUSSIONS QUA IMPUGNED RE-OPENING ISSUE. A PERUSAL THEREOF SUFFICIENTLY INDICATES THAT THE ASSESSING OFFICE R HAD CONTESTED THE REVENUES AUDIT OBJECTION ALLEGEDLY POINTI NG OUT ESCAPEMENT OF ASSESSEES TAXABLE INCOME WHICH IN TURN WAS ALSO APPROVED BY THE PR.CIT HAVING JURISDICTION (SUP RA). IT IS IN THIS CLINCHING FACTUAL BACKDROP THAT THE CIT(A) HAS APP LIED THE RATIO OF VARIOUS JUDICIAL PRECEDENTS (SUPRA) THAT THE S AME OUGHT NOT TO BE TAKEN AS AN INSTANCE OF ESCAPEMENT OF TAXABLE INCOME FROM BEING ASSESSED. THE REVENUE IS FAIR EN OUGH IN NOT DENYING ALL THESE CLINCHING ASPECTS IN ITS PLEADING S. WE THUS CONCLUDE THAT THE REVENUES AUDIT AUTHORITIES OBJECTI ON ITA NO. 1721/HYD/2019 C.O.NO.5/HYD/2020 :- 10 -: PITTED AGAINST THE ASSESSING OFFICERS OPINION HAVING JURISDICTION REGARDING INITIATION OF THE IMPUGNED RE-O PENING MECHANISM WHO DULY CONCLUDED THAT NO INCOME HAD ESCA PED ASSESSMENT; MUST MAKE WAY FOR THE LATTERS OPINION ONLY. WE ACCORDINGLY UPHOLD THE CIT(A)S IMPUGNED CONCLUSION QUASHING THE IMPUGNED RE-OPENING FOR THIS PRECISE REASON ALONE . THE REVENUES SOLE SUBSTANTIVE GROUND AS WELL AS MAIN AP PEAL ITA NO.1721/HYD/2019 FAIL ACCORDINGLY. 4. LEARNED AUTHORISED REPRESENTATIVE INVITED OUR ATTENTI ON TO ASSESSEES CROSS OBJECTION NO.5/HYD/2020 REGARDING MERITS OF THE VARIOUS ISSUES WHICH STAND RENDERED INFRUCTUOUS . ORDERED ACCORDINGLY. 5. THIS REVENUES APPEAL ITA NO.1721/HYD/2019 IS DISMISSED AND ASSESSEES CROSS OBJECTION C.O.NO.5/HY D/2020 IS DISMISSED AS INFRUCTUOUS. A COPY OF THIS COMMON O RDER BE PLACED IN THE RESPECTIVE CASE FILES. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH JUNE, 2021 SD/- SD/- (LAXMI PRASAD SAHU) (S.S.G ODARA) ACCOUNTANT MEMBER JUDICIAL MEM BER HYDERABAD, DATED: 10-06-2021 TNMM ITA NO. 1721/HYD/2019 C.O.NO.5/HYD/2020 :- 11 -: COPY TO : 1.DY.COMMISSIONER OF INCOME TAX, CIRCLE-3(1), HYDER ABAD. 2.RASUN EXPORTS PRIVATE LIMITED, 6-3-351, 4 TH FLOOR, RAVI CHAMBERS, ROAD NO.1, BANJARA HILLS, HYDERABAD. 3.CIT(APPEALS)-3, HYDERABAD. 4.PR.CIT-3, HYDERABAD. 5.D.R. ITAT, HYDERABAD. 6.GUARD FILE.