M/s. Natraj Industries, Tal-Umergaon V. The Income tax Officer, Vapi Ward-2, Vapi

ITA 1722/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6124 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 31-05-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 26-04-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA SRDR
• Assessee Lawyers: M J SHAH
• Keywords: Reopening of assessment; Business income; Search and seizure; Tangible material; Difference of opinion; Corroborative evidences; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 80IB; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI N.S.SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.1722/AHD/2007 ASSESSMENT YEAR :2001-02 DATE OF HEARING:31.5.10 DRAFTED:31.5.10 M/S. NATRAJ INDUSTRIES, PLOT NO.1215, SARIGAM GIDC, AL. UMBERGAON, PAN NO.AACFN0499G V/S . INCOME TAX OFFICER, VAPI WARD-2, VAPI (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI M.J. SHAH, AR RESPONDENT BY:- SHRI C.K. MISHRA, SR-DR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-VALSAD IN APPEAL NO.CIT(A)/VLS /264/06-07 DATED 22-01-2007. THE ASSESSMENT WAS FRAMED BY ITO, WARD-2, VAPI U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HI S ORDER DATED 06-10-2006 FOR ASSESSMENT YEAR 2001-02. 2. THE ONLY ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) IN UPHOLDING REOPENING OF ASSESSMENT U/S.147 R.W.S 148 OF THE ACT. FOR THIS, ASSESSEE HAS RAISED THE FOLLOWING THREE EFFECTIVE GROUNDS:- 1. THE C.I.T.(APPEALS) ERRED IN LAW AS WELL AS ON FACTS IN UPHOLDING THE REOPENING NOTICE UNDER SECTION 148 OF THE INCOME TA X ACT, 1961. 2. THE C.I.T.(APPEALS) FAILED TO APPRECIATE THAT TH E REASSESSMENT NOTICE UNDER SECTION 148 WAS BAD IN LAW A SIT DID NOT FULFIL THE CONDITION PRECEDENT FOR CARRYING OUT REASSESSMENT IN THE CASE OF THE ASSESS EE 3. WITHOUT PREJUDICE TO THE ABOVE MENTIONED TWO LEG AL GROUNDS, THE C.I.T. (APPEALS) FURTHER ERRED IN NOT CONSIDERING INCOME O F RS.22,00,000/- AS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB OF THE ACT. 3. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT THE ASSESSING OFFICER REOPENED THE ASSESSMENT BY INVOKING THE PROVISIONS OF SEC. 147 OF THE ACT AS THE ITA NO.1722/AHD/2007 A.Y. 2001-02 M/S.. NARAJ INDS. V. ITO WD-2 VLS PAGE 2 AO HAS WRONGLY ALLOWED THE CLAIM DEDUCTION U/S.80IB OF THE ACT ON THE FOLLOWING DISCLOSURE MADE DURING THE SURVEY:- 1] STOCK RS. 2,20,601/- 2] ADVANCE RECEIVABLE RS.19,79,399/- TOTAL RS.22,00,000/- BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE CIT( A), ASSESSEE CONTENDED THAT REOPENING IS BASED ON CHANGE OF OPINION REGARDING T AXABILITY OF CERTAIN INCOME OR CERTAIN DEDUCTION WHICH HAS ALREADY BEEN EXAMINED B Y THE AO IN THE ORIGINAL ASSESSMENT. THE AO HAS NOT ACCEPTED THE EXPLANATIO N OF THE ASSESSEE AND PROCEEDED TO MAKE DISALLOWANCE IN THE REOPENED ASSE SSMENT ON ACCOUNT OF CLAIM OF DEDUCTION U/S.80IB OF THE ACT. THE CIT(A) ALSO CONF IRMED THE REOPENING BY GIVING FOLLOWING FINDING IN HIS APPELLATE ORDER:- 4. THE A.O HAS RE-OPENED THE AM IN VIEW OF THE FAC T THAT DEDUCTION U/S.80IB WAS ALLOWED IN THE ORIGINAL ASSESSMENT ON INCOME DE CLARED DURING THE COURSE OF SURVEY, FOR WHICH THE APPELLANT IS NOT ELIGIBLE. THE A.O. HAD, THEREFORE, REASON TO BELIEVE THAT CERTAIN INCOME IS ESCAPING A SSESSMENT AND THEREFORE, PROVISIONS OF SECTION 147 WERE INVOKED. I HAVE CONS IDERED THE SUBMISSION OF THE A.R AS WELL AS OBSERVATION OF THE A.O. IN THE A SSESSMENT ORDER. UNDER THE SPECIFIC PROVISIONS OF SECTION 147, THE POWERS OF T HE A.O ARE AMPLITUDE. IT HAS BEEN IN THE CASE RAYMOND WOOLEN MILLS V/S. I.T.O. R EPORTED IN 36 ITR 34 (SUPREME COURT) THAT IN DETERMINING AS TO WHETHER, COMMENCEMENT OF REOPENING ASSESSMENT ARE VALID, IT HAS ONLY TO BE S EEN WHETHER THERE WAS PRIMA FACIE SOME MATERIALS ON THE BASIS OF WHICH DE PARTMENT CAN REOPEN THE CASE. IN VIEW OF HE AFORESAID FACTUAL AND LEGAL POS ITION, THE APPELLANTS CONTENTION THAT A.O HAS ERRED IN RE-OPENING THE ASS ESSMENT HAS NO MERIT IN IT AND THEREFORE, THE APPELLANTS GROUND NO.1 IS DISMISSED. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. 4. BEFORE US LD. COUNSEL FOR THE ASSESSEE, SHRI M.J . SHAH REFERRED TO PAGE-5 OF ASSESSEES PAPER BOOK, WHERE THE REASONS FOR REOPEN ING ARE RECORDED, WHICH READS AS UNDER:- THE ASSESSEE IS A REGISTERED FIRM ENGAGED IN THE B USINESS OF MANUFACTURING OF ALUMINIUM SULPHATE (ALUM). RETURN OF INCOME FOR A.Y. 2001-2002 WAS FILED ON 25.10.2001 DECLARING TOTAL INCOME A RS.26,03,767 /-. A SURVEY U/S.133A OF THE IT ACT WAS CARRIED OUT ON 25-09-2000 AT THE BUS INESS PREMISES OF THE ASSESSEE. DURING THE COURSE OF SURVEY THE ASSESSEE OFFERED AN ADDITIONAL INCOME OF RS.22,00,000/- (RS.2,20,601/- ON ACCOUNT OF EXCESS STOCK AND RS.19,79,399/- ON ACCOUNT OF ADVANCES/ RECEIVABLES) OVER AND ABOVE THE REGULAR INCOME FOR F.Y. 2000-2001 RELEVANT TO A.Y. 2001-2002. THE ASSESSEE HAS CREDITED THE AMOUNT OF RS.22,00,000/- DISCLOSED AS STOCK AND RECEIVABLE U/S.133A, IN P&L A/CS AFTER ARRIVING A GROSS PROFIT AND ALSO CLAIMED EXEMPTION U/S.80IB ON THIS AMOUNT ALSO. THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT U/S.143(3) WAS COMPLETED ON 22/01/2003 O N THE TOTAL TAXABLE ITA NO.1722/AHD/2007 A.Y. 2001-02 M/S.. NARAJ INDS. V. ITO WD-2 VLS PAGE 3 INCOME OF RS.27,37,680./-. WHILE FINALIZING THE ASS ESSMENT THE CLAIM OF THE ASSESSEE HAS BEEN ALLOWED CONSIDERING THE AMOUNT OF RS.22,00,000/- AS BUSINESS INCOME WITHIN THE MEANING OF SECTION 80IB OF THE IT ACT. SINCE THE AMOUNT WAS DISCLOSED IN RESPONSE TO ACTION U/S.133A CARRIED OUT IS MADE ON ACCOUNT OF STOCK AND RECEIVABLE, IT CAN NOT BE TREA TED AS INCOME DERIVED FROM MANUFACTURING ACTIVITIES OF THE ASSESSEE WITHIN THE MEANING OF SECTION 80IB. I HAVE THEREFORE, REASON TO BELIEVE THAT THE DEDUCTIO N GRANTED ON RS.22,00,000/- @ 25% OF RS.5,50,000/- U/S.80IB IS E XCESSIVE AND THEREFORE INCOME TO THAT EXTENT CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SEC. 147 OF THE ACT. LD. COUNSEL FOR THE ASSESSEE STATED THAT THIS ISSUE IS SQUARELY COVERED BY THE TRIBUNALS DECISION IN ITA NO.2486/AHD/2007 IN THE CASE OF M/S.APURVA CHEMICALS V. ITO DATED 09-04-2010, WHEREIN THE TRIBUNAL IN THE ASSO CIATED PARTYS CASE AS MENTIONED IN THE ORIGINAL ASSESSMENT AS WELL AS RE- ASSESSMENT HAS ALREADY BEEN CONSIDERED. HE REFERRED TO THE PROCEEDINGS OF ORIGI NAL ASSESSMENT AS NOTED BY AO IN THE ORDER THAT AN ACTION HAS BEEN CONDUCTED U/S.133 A OF THE ACT IN THIS CASE ALSO. HE STATED THAT ACIT VAPI IN THE FACTORY PREMISES DU RING THE COURSE OF SURVEY, A GROUP OF POLYSOL CHEMICALS OFFERED ADDITIONAL INCOM E OF RS.1.10 CRORES. OUT OF THIS, THE ASSESSEE HAS DISCLOSED AS UNDER:- NAME STOCK RS. ADVANCES/ RECEIVABLES RS. CASH RS TOTAL RS. 1.APURVA CHEMICALS 1,09,196/- 49,84,804/- 0 5175000/- 2. GUJARAT POLYSOL CHEMICALS PVT. LTD. 7,89,616/- 18,10,384/- 0 2600000/- 3. NATRAJ INDUSTRIES 2,20,601/- 19,79,399/-` 0 2200000/- 4. S.B. ENTERPRISE 16,150/- 10,04,350/- 4,500/- 1025000/- THE ASSESSING OFFICER AFTER SCRUTINY OF THE CASE AN D VERIFYING SUPPORTING EVIDENCE ALONG WITH AUDIT REPORT AS WELL AS DETAILS PRODUCE DISCUSS POINTS FOR ASSESSMENT. HE AGAIN DISCUSSED THE MATTER REGARDING SURVEY PROCEED INGS AND VERIFIED THE SURVEY REPORT AND OTHER EVIDENCE PRODUCED BY THE SURVEY TE AM AT THE TIME OF SURVEY PROCEEDINGS AND NOTED THAT THE ASSESSEE HAS OFFERED ADDITIONAL INCOME AND PAID TAX ON RS.22 LAKH. LD. COUNSEL FOR THE ASSESSEE STATED THAT THE TRIBUNAL HAS DISCUSSED THIS FACT AND QUASHED RE-ASSESSMENT PROCEEDINGS VID E PARA-5.4, 5.5 & 6 AS UNDER:- 5.4 ADMITTEDLY, IN THE CASE UNDER CONSIDERATION TH ERE IS NO CHANGE OF LAW AND NO FRESH MATERIAL HAS COME ON RECORD ENABLING THE A O TO INVOKE THE POWERS UNDER SECTION 147 OF THE ACT. THE INSTANT CASE IS A CASE OF MERE CHANGE OF ITA NO.1722/AHD/2007 A.Y. 2001-02 M/S.. NARAJ INDS. V. ITO WD-2 VLS PAGE 4 OPINION WHICH DOES NO PROVIDE JURISDICTION TO THE A O TO INITIATE PROCEEDINGS UNDER SECTION 147 OF THE ACT. HERE WE MAY ALSO REFE R TO A DECISION OF THE HONBLE GUJARAT HIGH COURT IN GARDEN SILK MILLS PVT . LTD.[1999], 237 ITR 668 , WHILE EXPRESSING SIMILAR VIEWS, OBSERVED. THE REASONS RECORDED BY THE ASSESSING OFFICER WHIC H LED O THE BELIEF ABOUT THE ESCAPEMENT OF ASSESSMENT DISCLOSE THAT TH E PRESENT CASE IS NOTHING BUT MERE CHANGE OF OPINION ON THE FACTS WHI CH WERE ALREADY BEFORE THE ASSESSING OFFICER WHILE MAKING HE FIRST ASSESSMENT TO WHICH CONSCIOUS APPLICATION OF MIND IS REFLECTED FROM THE PROCEEDINGS, AND ALLOWED IN THE COMPUTATION AND WHICH HAS NOT BEEN D ISPUTED BY THE REVENUE. 5.5 SIMILARLY IN CIT V. KELVINATOR OF INDIA LTD. [ 2002] 256 ITR 1 (DELHI), HONBLE DELHI HIGH COURT HELD THAT SECTION 147 OF T HE ACT DOES NOT POSTULATE CONFERMENT OF POWER UPON THE ASSESSING OFFICER TO I NITIATE REASSESSMENT PROCEEDINGS UPON HIS MERE CHANGE OF OPINION. WHILE AFFIRMING THE SAID DECISION, HONBLE APEX COURT RECENTLY HELD IN THEIR DECISION DATED 18.1.2010 IN CIT V. KELVINATOR OF INDIA LTD., 320 IR 561 (SC) IN CIVIL APPEAL NOS. 2009-2011 OF 2003 AS FOLLOWS: ON GOING THROUGH THE CHANGES, QUOTED ABOVE, MADE T O SECTION 147 OF THE ACT, WE FIND THAT, PRIOR TO DIRECT TAX LAWS (AM ENDMENT) ACT, 1987, RE-OPENING COULD BE DONE UNDER ABOVE TWO CONDITIONS AND FULFILLMENT OF THE SAID CONDITIONS ALONE CONFERRED JURISDICTION ON THE ASSESSING OFFICER TO MAKE A BACK ASSESSMENT, BUT IN SECTION 1 47 OF THE ACT [WITH EFFECT FROM 1 ST APRIL,1989], THEY ARE GIVEN A GO-BY AND ONLY ONE CONDITION HAS REMAINED, VIZ., THAT WHERE THE ASSESS ING OFFICER HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMEN T, CONFERS JURISDICTION TO RE-OPEN THE ASSESSMENT. THEREFORE, POST-1 ST APRIL, 1989, POWER TO RE-OPEN IS MUCH WIDER. HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS REASON TO BE LIEVE FAILING WHICH, WE ARE AFRAID, SECTION 147 WOULD GIVE ARBITRARY POW ERS TO THE ASSESSING OFFICER TO RE-OPEN ASSESSMENTS ON THE BAS IS OF MERE CHANGE OF OPINION, WHICH CANNOT BE PER SE REASON T O RE-OPEN. WE MUST ALSO KEEP IN MIND TO CONCEPTUAL DIFFERENCE BET WEEN POWER TO REVIEW AND POWER TO REASSESS. THE ASSESSING OFFICER HAS NO POWER TO REVIEW; HE HAS THE POWER TO REASSESS. BUT RE-ASSESS MENT HAS TO BE BASED ON FULFILLMENT OF CERTAIN PRE-CONDITION AND I F THE CONCEPT OF CHANGE OF OPINION IS REMOVED, AS CONTENDED ON BEH ALF OF THE DEPARTMENT, THEN, IN THE GARB OF RE-OPENING THE ASS ESSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF CH ANGE OF OPINION, AS AN IN-BUILT TEST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFICER. HENCE, AFTER 1 ST APRIL, 1989, ASSESSING OFFICER HAS POWER TO RE-OPE N, PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO TH E CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REAS ONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF. 6. THE FACTS AND CIRCUMSTANCES AS GIVEN HEREINABOVE IN THE CASE UNDER CONSIDERATION, WHEN VIEWED IN THE LIGHT OF AFORESAI D DECISIONS, LEAD TO ONLY ONE CONCLUSION THAT THE ASSESSING OFFICER RE-OPENED HE ASSESSMENTS ON A MERE CHANGE OF OPINION AND ON THE SAME SET OF FACTS AS WERE AVAILABLE BEFORE ITA NO.1722/AHD/2007 A.Y. 2001-02 M/S.. NARAJ INDS. V. ITO WD-2 VLS PAGE 5 HIM DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEE DINGS. IT IS WELL-SETTLED HAT IF A NOTICE UNDER SECTION 148 OF THE ACT HAS BE EN ISSUED WITHOUT THE JURISDICTIONAL FOUNDATION U/S. 147 OF THE ACT BEING AVAILABLE TO THE ASSESSING OFFICER, THE NOTICE AND THE SUBSEQUENT PROCEEDINGS WILL BE WITHOUT JURISDICTION AND THUS, LIABLE TO BE STRUCK DOWN. IN THESE CIRCUM STANCES, WE QUASH THE IMPUGNED ASSESSMENT ORDER AND ALLOW THE GROUND NOS. 1 & 2 RAISED IN THE APPEAL. AS A COROLLARY, THE ORDER GROUND NO.3 RAISE D IN THE APPEAL DOES NOT SURVIVE FOR ADJUDICATION AND IS THEREFORE, TREATED AS INFRUCTUOUS. ON THE OTHER HAND, LD. SR-DR, SHRI C.K. MISHRA SUPP ORTS THE ORDER OF LOWER AUTHORITIES. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE AS NARRATED ABOVE. WE FIN D THAT ISSUE THIS SIMILAR ISSUE IS IN OTHER GROUP CASE I.E. IN THE CASE OF M/S. APURVA CHEMICALS (SUPRA), TRIBUNAL HAS CONSIDERED EXACTLY THE SAME FACTS AND THERE IS NO C HANGE IN THE FACTS OF THE CASE. TAKING IT AS EXACTLY COVERED ISSUE, AND ALSO TAKING A CONSISTENT VIEW, WE QUASH THE RE-ASSESSMENT PROCEEDINGS AND THIS ISSUE OF THE ASS ESSEES APPEAL IS ALLOWED. 6. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 04/06/2010 SD/- SD/- (N.S.SAINI) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, DATED : 04/06/2010 *DKP COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-VLS 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD