A.A.Modern rice Mill, CHENNAI V. ITO, Vellore

ITA 1741/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8503 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 09-06-2016
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: R KUMAR
• Keywords: Reopening of assessment; Unexplained investment; Depreciation; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 148

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . , . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI DUVVURU R L REDDY , JUDICIAL MEMBER ./ I T.A. NO. 17 41 /MDS/201 6 / ASSESSMENT YEAR :20 06 - 07 M/S. A.A. MODERN RICE MILL, C/O SRI T.N. SEETHARAMAN, ADVOCATE, # 384 (OLD NO. 196), LLOYDS ROAD, CHENNAI 600 086. [PAN: AA AFA9952F ] VS. THE INCOME TAX OFFICER, BUSINESS WARD I (4), VELLORE. ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI R. KUMAR , ADVOCATE / RESPONDENT BY : SHRI SUPRIYO PAL , J CIT / DATE OF HEAR ING : 06 . 0 9 .201 6 / DATE OF P RONOUNCEMENT : 28 . 0 9 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX ( APPEALS ) , CHE NNAI , DATED 0 3 . 0 3 .20 1 6 RELEVANT TO THE ASSESSMENT YEAR 2006 - 07. IN PRINCIPLE, THE ASSESSEE HAS CHALLENGED THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] AND ON MERITS, IT HAS CHALLENGED THE I.T.A. NO . 1 7 41 /M/ 16 2 CONFIRMA TION OF ADDITION .1,33,142/ - TOWARDS UNEXPLAINED INVESTMENT IN COLOUR SORTER MACHINE. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF RICE MILL AND FILED ITS RETURN OF INCOME ADMITTING TAXABLE INCOME AT .29,595/ - . THE RETURN FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ON 23.07.2007. THEREAFTER, THE CASE OF THE ASSESSEE WAS TAKEN FOR SCRUTINY AND THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 16.09.2008 ASSESSING THE T AXABLE INCOME AT .59,600/ - . 2.1 SUBSEQUENTLY, AFTER RECORDING THE REASONS FOR REOPENING OF ASSESSMENT THAT INVESTMENT MADE TOWARDS IMPORT OF COLOUR SORTER MACHINE ESCAPED ASSESSMENT , THE ASSESSMENT WAS REOPENED BY ISSUE OF NOTICE UNDER SECTION 148 OF THE ACT ON 29.03.201 1 AND SERVED ON THE ASSESSEE ON 30.03.2011 . THEREAFTER, AFTER SERVICE OF NOTICE UNDER SECTION 143(2) OF THE ACT DATED 24.04.2011, THE ASSESSEE S REPRESENTATIVE APPEARED AND PRODUCED BOOKS OF ACCOUNT AND FURNISHED DETAILS AS CALLED FOR. AFTER VERIFYING THE BOOKS OF ACCOUNT AND CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER HAS OBSERVED THAT THE COST OF COLOUR SORTER MACHINE WAS .15,02,934/ - AND THE BREAK UP GIVEN BY THE AR OF THE ASSESSEE HAS BEEN VERIFIED AND FOUND THAT THERE IS A DIFFERENCE OF .3,32,577/ - , BEING THE DIFFERENCE REQUIRED TO BE EXPLAINED. OUT OF THE ABOVE SUM OF .3,32,577/ - , I.T.A. NO . 1 7 41 /M/ 16 3 .1,99,435/ - PAID AS CUSTOM DUTY WAS ALREADY CAPITALIZED IN FOR THE ASSESSMENT YEAR 2005 - 06 AND THE SAME SHOULD NOT BE CONSIDERED FOR THE ASSESSMENT YEAR 2006 - 07. HOWEVER, SINCE FOR THE REMAINING AMOUNT OF .1,33,142/ - , THE ASSESSEE COULD NOT FURNISH ANY EVIDENCE, THE SAME WAS TREATED AS UNE XPLAINED INVESTMENT AND BROUGHT TO TAX. 2.2 THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). THE ASSESSEE FILED DETAILED WRITTEN SUBMISSIONS WITH REGARD TO BOTH THE ISSUES. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) SUSTAINED THE REOPENING OF ASSESSMENT. WITH REGARD TO UNEXPLAINED INVESTMENT, THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE WERE FORWARDED TO THE ASSESSING OFFICER TO FILE REMAND REPORT. AFTER CONSIDERING THE REMAND REPORT AND SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER. 3. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. BY RELYING UPON THE GROUNDS OF APPEAL, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT BASED ON THE VERY SAME SET OF BOOKS OF ACCOUNTS, BANK STATEMENT, EVIDENCE FOR PAYMENT, ETC. AS PLACED DURING THE COURSE OF ASSESSMENT PROCEEDINGS WITHOUT ANY ADDITIONAL FACTS OR MATERIAL EVIDENCE. THEREFORE, THE REOPENING OF ASS ESSMENT IS BAD IN LAW. WITH REGARD TO THE ADDITION TOWARDS UNEXPLAINED INVESTMENT, HE HAS SUBMITTED THAT THE AUTHORITIES BELOW HAVE FAILED TO TAKE I.T.A. NO . 1 7 41 /M/ 16 4 INTO ACCOUNT THE ACTUAL COST OF EQUIPMENT AND ITS PAYMENT MADE THROUGH BANK. THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER IS NOT WARRANTED. 4. ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 5. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WITH REGARD TO REOPENING OF ASSESSMENT, THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE IS THAT THE REASSESSMENT WAS DONE ONLY ON THE BASIS OF SAME SET OF FACTS, WHICH WERE ALREADY AVAILABLE ON RECORD AND IT CANNOT BE A GROUND FOR REOPENING OF THE ASSESSMENT. IT IS A SETTLED L AW THAT ON THE BASIS OF MATERIAL, IF THERE IS A PRIMA FACIE CAUSE AVAILABLE BEFORE THE ASSESSING OFFICER, HE CAN FORM THE OPINION THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. AFTER RECORDING REASONS FOR REOPENING OF ASSESSMENT, THE ASSESSMENT WAS REOPENED UNDER SECTION 147 OF THE ACT. THE WORD REASON IN THE PHRASE REASON TO BELIEVE WOULD MEAN CAUSE OR JUSTIFICATION. IN CASE THE ASSESSING OFFICER HAS A CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAS ESCAPED ASSESSMENT, ACTION U NDER SECTION 148 OF THE ACT CAN BE TAKEN. BUT OBVIOUSLY, THERE SHOULD BE RELEVANT MATERIAL ON WHICH A REASONABLE MAN COULD HAVE FORMED A REQUISITE BELIEF. WHETHER THIS MATERIAL(S) WOULD CONCLUSIVELY PROVE THE ESCAPEMENT OF INCOME IS NOT THE CONCERN AT THAT I.T.A. NO . 1 7 41 /M/ 16 5 PAR TICULAR STAGE. SO WHAT IS REQUIRED IS THE SUBJECTIVE SATISFACTION OF THE ASSESSING OFFICER BASED ON OBJECTIVE MATERIAL EVIDENCE. IN THE GIVEN CAS E, ORIGINAL ASSESSMENT WAS COMPLETED ON 16 . 09 .20 08 UNDER SECTION 143(3) OF THE ACT. THE REASON FOR REOPENING WA S RECORDED AS DISCUSSED ABOVE. 5.1 THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT IN THIS CASE, THE ASSESSING OFFICER HAVE NO TANGIBLE FRESH MATERIAL FOR THE REASSESSMENT FOR THAT ASSESSMENT YEAR. AS SEEN FROM THE REASONS RECORDED WHICH GIVES A CLE AR PICTURE THAT THE ASSESSING OFFICER HAS GOT MATERIAL EVIDENCE TO FORM HIS OPINION THAT INCOME HAS ESCAPED ASSESSMENT THAT IS WHY HE REOPENED THE ASSESSMENT AND ISSUED NOTICE UNDER SECTION 148 OF THE ACT. THERE CANNOT BE TWO OPINIONS. AT THAT POINT OF TI ME OF REOPENING WHEN THE REASONS ARE RECORDED AFTER FORMING OPINION OF ESCAPEMENT OF INCOME IS ONLY RELEVANT. HENCE, THE PLEA OF THE LD. COUNSEL FOR THE ASSESSEE IS NOT TENABLE IN THE EYES OF LAW. UNDER SECTION 147, THE ASSESSING OFFICER CAN EITHER ASSES S OR RE - ASSESS BUT FOR TAKING ACTION THERE UNDER, HE HAS TO RECORD REASONS THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IT IS ALSO MANDATED BY SECTION 148(2) TO RECORD REASONS IN WRITING. THE REASSESSMENT PROCEEDINGS UNDER SECTION 147 ARE FURTHER SUBJECT TO SECTIONS 148,149,150,151,152 AND 153. IN THE PRESENT CASE, WE ARE REQUIRED TO DECIDE THE LIMITED ISSUE REGARDING THE VALIDITY OF PROCEEDINGS UNDERTAKEN WITHIN FOUR YEARS OF THE ASSESSMENT YEAR IN QUESTION. THE ASSESSING OFFICER IS REQUIRED TO S EE IF THE I.T.A. NO . 1 7 41 /M/ 16 6 CONDITIONS LAID IN EXPLANATION 2(C) BECAUSE IN THIS CASE THE ASSESSMENT WAS COMPLETED U/S 143(3) ARE SATISFIED OR NOT. IN CASE, (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSED; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW RATE; OR (I II) SUCH INCOME HAS BEEN MADE THE SUBJECTIVE OF EXCESS RELIEF UNDER THIS ACT; OR (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED, THE ASSESSING OFFICER WOULD HAVE VALID COGNIZANCE U/S 147 OF THE ACT. THE REASONS RECORDED BY THE ASSESSING OFFICER CLEARLY DEMONSTRATES THAT THOUGH THE ASSESSEE PRODUCED BOOKS OF ACCOUNT, THE DISCREPANCY NOTICED BY THE ASSESSING OFFICER CAN ONLY BE POINTED OUT THAT DUE DILIGENT OF ASSESSING OFFICER. AS SUCH, THE PRODUCTION OF BOOKS ITSELF CANNOT CONSTITUTE FULL DISCLOSURE OF ALL MATERIAL FACTS FOR THE PURPOSE OF ASSESSMENT. BEING SO, WE ARE SATISFIED THAT THE ASSESSING OFFICER HAS REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. THIS FACT CONFERS JURISDICTION ON THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT. THE POWER UNDER SECTION 147 TO RE - ASSESS THE INCOME POST 1ST APRIL, 1989 ARE MUCH WIDER THAN THESE USED TO BE BEFORE. BUT STILL THE SCHEMATIC INTERPRETATION OF THE WORDS REASON TO BELIEVE FAILING WHICH SECTION 147 WOULD GIVE ARBITRARILY POWERS TO THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT ON THE POWER TO AN ASSESSING OFFICER TO REOPEN ANY AND EVERY ASSESSMENT ORDER WHICH WOULD SIMPLY AMOUNT TO A REVIEW. THE CONCEPT CHANGE OF OPINION IS AN IN - BUILT TEST TO CHECK THE ABUSE OF POWER BY THE ASSESSING OFFICER. ON T HE BASIS OF CHANGE OF OPINION WHICH , CANNOT BE PER SE A REASON I.T.A. NO . 1 7 41 /M/ 16 7 TO REOPEN THE ASSESSMENT. IN OUR OPINION, AS SEEN FROM THE ABOVE REASONS RECORDED, THE ASSESSING OFFICER WOULD HAVE ASCERTAINED THE ESCA PEMENT OF INCOME AT THE TIME OF ORIGINAL ASSESSMENT ALSO ONLY WITH DUE DILIGENT. HENCE, THE REOPENING IS HELD TO BE VALID. EVEN OTHERWISE, IT IS THE DUTY OF THE ASSESSEE TO BRING ALL THE FACTS TO THE KNOWLEDGE OF THE ASSESSING OFFICER AT THE TIME OF ORIGIN AL ASSESSMENT AND ONLY JUST FILING OF DOCUMENTS AT THE TIME OF ASSESSMENT IS NOT ENOUGH AND HE SHOULD BE DREW THE ATTENTION OF THE ASSESSING OFFICER TO ALL NECESSARY MATERIAL. CONSEQUENTLY, WE HOLD THAT THE ENTIRE ASSESSMENT IN THIS CASE IS VALID AND THERE FORE, THE REOPENING OF ASSESSMENT IS UPHELD. 6. COMING TO SECOND ISSUE OF UNEXPLAINED INVESTMENT, WITH REGARD TO THE COST OF EQUIPMENT IMPORTED BY THE ASSESSEE, THE ASSESSMENT ORDER DOES NOT SPEAK AS TO WHAT WAS THE ACTUAL COST OF THE EQUIPMENT AS PER T HE BILL OF LADING. IT IS NOT DISPUTED THAT THE PAYMENT TOWARDS IMPORT OF THE EQUIPMENT WAS MADE THROUGH BANKING CHANNEL. IN THE REMAND REPORT SUBMITTED BY THE ASSESSING OFFICER BEFORE THE LD. CIT(A), THE ASSESSING OFFICER HAS GIVEN HIS OBSERVATION THAT ON VERIFICATION OF EXCHANGE RATE FOR THE MONTH OF JANUARY, 2005, IT IS FOUND THAT THE ACTUAL RATE OF 100 JAPAN YEN ON 13.01.2005 [I.E. DATE OF DELIVERY OF MACHINE] WAS 42.55 INR. BUT, THE RATE ADOPTED IN BILL OF ENTRY WAS 42.700 INR. HENCE, IT IS SUBMITTED THAT THE RATE OF 42.55 INR MAY BE CONSIDERED WHILE PASSING THE ORDER . I.T.A. NO . 1 7 41 /M/ 16 8 FROM THE ABOVE OBSERVATION OF THE ASSESSING OFFICER, IT IS EVIDENT THAT HE HAS NOT MADE ANY INDEPENDENT ENQUIRY AND PROPERLY EXAMINED THE CASE OF THE ASSESSEE. B EFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS DEMONSTRATED THAT A CTUALLY, THE ASSESSING OFFICER HAS TAKEN THE VALUE AS ON 16.01.2005 UNDER THE BILL OF ENTRY FOR HOME CONSUMPTION DATED 13.01.2005 AT 100 YEN EQUAL TO 42.700 INR OR THE COST OF EQUIPMENT AT .13,03,498/ - AS PER CUSTOMS PROVISIONAL VALUE. THE COST OF IMPORTED MACHINE WAS PAID BY THE ASSESSEE ON 16.01.2006 THROUGH STATE BANK OF INDIA, TIRUVANNAMALAI BRANCH TOWARDS RETIREMENT OF LC ORIGINALLY OPENED ON 02.12.2014 BY CALCULATING THE COST FIXED AT 30,00,000 JAPANESE YEN EQUAL TO .11,70,357/ - AT THE THEN RATE OF 100 JPN YEN EQUAL TO 39.10 INR. BY FILING COPY OF CERTIFICATE ISSUED BY THE BANK, THE ABOVE COST OF EQUIPMENT AT .11,70,357/ - HAS BEEN DEBITED FROM ASSESSEE S ACCOUNT TOWARDS RETIREMENT OF LC FOR VALUE OF JAPANESE YEN 30,00,000/ - . WITHOUT CONSIDERING THIS ACTUAL FACT, THE LD. CIT(A) HAS CONFIRMED THE ADDITION MADE BY ASSESSING OFFICER. IN FACT, THE CUSTOMS AUTHORITIES HAVE TAKEN THE EXCHANGE RATE AT 42.700 INR FOR THE PURPOSE OF CUSTOMS DUT Y CANNOT BE THE VALUE OF THE EQUIPMENT WHEN THE ASSESSEE MADE THE ACTUAL PAYMENT TOWARDS COST OF EQUIPMENT AT THE EXCHANGE RATE OF 39.10 INR THROUGH BANK. THEREFORE, WE OF THE CONSIDERED OPINION THAT WITHOUT MAKING ANY INDEPENDENT ENQUIRY AND BY ASSUMING T HAT THE EXCHANGE RATE FOR CUSTOMS DUTY PAYMENT AS THE ACTUAL EXCHANGE VALUE OF THE COST OF THE EQUIPMENT, THE ADDITION MADE BY ASSESSING OFFICER CANNOT I.T.A. NO . 1 7 41 /M/ 16 9 BE SUSTAINED UNDER THE EYES OF LAW WHEN THE CERTIFICATE ISSUED BY THE BANK TOWARDS RELEASE OF PAYMENT WA S NOT DISPUTED BY THE DEPARTMENT . THE LD. CIT(A) HAS ALSO NOT ANALYSED THE ABOVE FACTS IN RIGHT PERSPECTIVE. UNDER THE ABOVE FACTS AND CIRCUMSTANCES, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDI TION MADE ON THIS ACCOUNT. THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 7 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THE 28 TH SEPTEMBER, 2016 AT CHENNAI. SD/ - SD/ - (A. MOHAN ALANKAMONY ) ACCOUNTANT MEMB ER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 28 . 0 9 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.