ITO 6(1)(3), MUMBAI V. BITUCORP TRADING P.LTD, MUMBAI

ITA 1747/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100866 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 09-02-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 13-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J R GARGDR
• Keywords: Audit objection; Tangible material; Bad and doubtful debts; Difference of opinion; Reason to believe; Change of opinion; Borrowed satisfaction
• Section: 143(3); 148

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.1747/MUM/2012 ASSESSMENT YEAR: 2003-04 ITO-6(1)(3), R. NO.508, 5 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 / VS. M/S BITUCORP TRADING PVT. LTD. 301, BAGAR APARTMENTS, 20/B, PALLI MALA ROAD, BANDRA (WEST), MUMBAI-400050 ( / REVENUE) ( '#$ /ASSESSEE) P.A. NO. AAACB5736H / REVENUE BY SHRI J.R.GARG-DR '#$ / ASSESSEE BY SHRI VIPUL JOSHI % & ' ( / DATE OF HEARING : 26/08/2015 ' ( / DATE OF ORDER: 23/09/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 27/12/2011 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI, QUASHING THE ORDER PASSED U/S 143(3) R.W.S 147 OF T HE M/S BITUCORP TRADING PVT. LTD. ITA NO.1747/MUM/2012 2 INCOME TAX ACT, 1961 (HEREINAFTER THE ACT), TREATIN G THE SAME AS CHANGE OF OPINION AND CONSEQUENTLY DELETING THE ADDITION OF BAD DEBTS AMOUNTING TO RS.5,26,500/- AND DISALLO WANCE OF INTEREST OF RS.11,57,288/- AND FURTHER ADDITION TOW ARDS TRANSPORTATION CHARGES AMOUNTING TO RS.7,23,479/-. 2. DURING HEARING OF THIS APPEAL, THE LD. DR, SHRI J.K.GARG, ADVANCED HIS ARGUMENTS, WHICH IS IDENTICA L TO THE GROUND RAISED, WHEREAS, SHRI VIPUL JOSHI, LD. COUNS EL FOR THE ASSESSEE, CONTENDED THAT THE REOPENING HAS BEEN MAD E AFTER FOUR YEARS, THEREFORE, IT IS NOT WITHIN THE PROVISI ON OF THE ACT. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACT S, IN BRIEF, ARE THAT THE ORIGINAL ASSESSMENT WAS FRAMED U/S 143 (3) ON 03 RD OCTOBER, 2005, ASSESSING THE TOTAL INCOME AT NIL. SUBSEQUENTLY, NOTICE U/S 148 OF THE ACT WAS ISSUED ON 19/02/2010. THE REASSESSMENT ORDER WAS PASSED ON 27/10/2010 ASSESSING THE TOTAL INCOME AT RS.24,07,3 40/- MAKING DISALLOWANCES ON ACCOUNT OF BAD DEBTS AT RS.5,26,500/-, INTEREST PAYMENT AT RS.11,57,288/- A ND ALLEGED EXCESS TRANSPORT CHARGES AT RS.7,23,479/-. BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS), THE REASS ESSMENT ORDER, SO FRAMED, WAS CHALLENGED WITH RESPECT TO VA LIDITY OF REOPENING AS WELL AS ON MERIT. BEFORE US, THE REVE NUE IS AGGRIEVED WITH RESPECT TO QUASHING THE REASSESSMENT ORDER WHICH OF-COURSE BEYOND THE PERIOD OF FOUR YEARS. W E NOTE THAT THE ORIGINAL ASSESSMENT WAS COMPLETED ON 03/10 /2005, WHEREAS, NOTICE U/S 148 WAS ISSUED ON 19/02/2010. WHILE M/S BITUCORP TRADING PVT. LTD. ITA NO.1747/MUM/2012 3 REOPENING THE ASSESSMENT, THE LD. ASSESSING OFFICER RECORDED THE REASONS, WHEREIN, THE MAJOR ADDITIONS WERE WITH RESPECT TO BAD DEBTS, INTEREST EXPENSES AND TRANSPORTATION CHARGES. THE ASSESSING OFFICER WAS OF THE VIEW THAT INCOME H AS ESCAPED ASSESSMENT. THE ASSESSEE CHALLENGED THE REO PENING AFTER THE EXPIRY OF A PERIOD OF FOUR YEARS FROM THE RELEVANT A.Y. 2003-04. NO DOUBT, THE ORIGINAL ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT. WE HAVE NOTED THE REASONS RE CORDED AND FOUND THAT THE POWER GRANTED TO THE ASSESSING O FFICER, TO REOPEN THE ASSESSMENT, AFTER EXPIRY OF FOUR YEARS, HAS NOT BEEN LAWFULLY EXERCISED. FOR EXERCISING SUCH POWER , THE PRIMARY CONDITIONS ARE THAT DISCLOSURE OF PRIMARY F ACTS AND INFERENCE HAS TO WITHDRAWN FROM THE PRIMARY FACTS, SO DISCLOSED ALONG WITH LEGAL INFERENCE. DISCLOSURE OF PRIMARY FACTS IS THE DUTY OF THE ASSESSEE AND DRAWING INFER ENCE IS UPON THE ASSESSING AUTHORITY. THE JURISDICTION CAN BE EXERCISED ONLY IF THERE IS OMISSION OR FAILURE ON T HE PART OF THE ASSESSEE, WHICH GIVES JURISDICTION TO THE REVENUE A UTHORITIES TO REOPEN/REASSESS THE INCOME OF THE ASSESSEE. THER E IS UNDISPUTED FINDING IN THE IMPUGNED ORDER THAT SUCH JURISDICTION HAS BEEN EXERCISED BY THE ASSESSING OF FICER MERELY ON THE CHANGE OF OPINION AND THAT TO BEYOND THE STIPULATED PERIOD. ANOTHER POINT NOTED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AS WELL AS BY THIS TRIBUNAL THAT IN THE CASE OF ASSESSEE, THE REASSESS MENT PROCEEDINGS WERE INITIATED ON THE BASIS OF AUDIT OB JECTION. THE ASSESSEE VIDE COMMUNICATION DATED 11/02/2008 FURNISHED DETAILED EXPLANATION ANNEXED WITH EVIDENC ES BEFORE M/S BITUCORP TRADING PVT. LTD. ITA NO.1747/MUM/2012 4 THE ASSESSING AUTHORITY. THUS, THERE IS ABSENCE OF TANGIBLE MATERIAL TO CONCLUDE THAT INCOME HAD ESCAPED ASSESS MENT. THE FOLLOWING DECISIONS SUPPORT THE CASE OF THE ASS ESSEE:- 1) JASHAN TEXTILES MILLS PVT. LTD. VS DCIT (2006) 284 ITR 542 (BOM) 2) LE PASSAGE TO INDIA TOURS & TRAVELS (P.) LTD. (56 D TR (DEL.)266) 3) SIEMENS INFORMATION SYSTEMS LTD. 295 ITR 333 (BOM) 4) GERMAN REMEDIES LTD. VS DY. CIT & ORS. (285 ITR 26) (BOM) 5) CIT VS KELVINATOR OF INDIA LTD. (2010)320 ITR 561 (SC) 6) HARYANA ACRYLIC MANUFACTURING COMPANY VS CIT (308 ITR 38)(DEL.) 7) GERMAN REMEDIES LTD. VS DCIT (2006) 287 ITR 494 (BOM.) 8) ASIAN PAINTS VS DY. CIT & ANR. (2009) 308 ITR 195 (BOM) 2.2. WE NOTE THAT THE RATIO LAID DOWN BY THE TRIBU NAL IN THE CASE OF SICOM HOUSING DEVELOPMENT (ITA NO.6405/MUM/2011) ORDER DATED 09/02/2015 BY THE MUM BAI BENCH OF THE TRIBUNAL SQUARELY COVERS THE CASE OF T HE ASSESSEE, WHICH IS REPRODUCED HEREUNDER:- M/S BITUCORP TRADING PVT. LTD. ITA NO.1747/MUM/2012 5 IF THE REASONS OF THE REOPENING BY THE ASSESSING O FFICER, CONCLUSION DRAWN IN THE IMPUGNED ORDER, MATERIAL AV AILABLE ON RECORD AND THE ASSERTIONS MADE BY THE LD. RESPECTIV E COUNSEL, IF KEPT IN JUXTAPOSITION AND ANALYZED, THERE IS UNC ONTROVERTED FINDING IN THE IMPUGNED ORDER THAT NECESSARY DETAIL S/MATERIAL FACTS WERE DULY AVAILABLE BEFORE THE ASSESSING OFFI CER WHILE FRAMING THE ORIGINAL ASSESSMENT. DURING ORIGINAL A SSESSMENT STAGE, THE CLAIM OF THE ASSESSEE WAS DULY ALLOWED B Y THE ASSESSING OFFICER. THE REOPENING OF DULY FRAMED AS SESSMENT WAS MERELY BASED UPON THE QUERY RAISED BY THE AUDIT PARTY. IN A LANDMARK DECISION THE HONBLE APEX COURT IN KELVINATOR OF INDIA LTD (2010) 320 ITR 561 HAS EVOL VED A BROAD PRINCIPLE. LIKEWISE IN GREEN WORLD CORPORATI ON VS ITO (2009) 314 ITR 81 (SC), THE HONBLE APEX COURT HELD THAT THE ORDER PASSED BY THE ASSESSING OFFICER AT THE DICTAT E OF THE CIT IS NULLITY. LIKEWISE THE HONBLE HIGH COURT OF R AJASHTHAN SYNTEX LTD. (2009) 313 ITR 221 HELD THAT INITIATIO N BASED ON THE OPINION OF THE ASSESSING OFFICER OF OTHER PARTY , IS BORROWED SATISFACTION NOT SUFFICIENT REASON TO BE LIEVE ESCAPEMENT OF INCOME. FURTHER, THE HONBLE APEX CO URT DISMISSED THE SLP OF THE DEPARTMENT (C NO.8167 OF 2 009) AGAINST THE AFORESAID DECISION FROM HONBLE RAJASHT HNA HIGH COURT. WE NOTE THAT THERE IS NO FINDING IN THE ASSE SSMENT ORDER THAT ANY INDEPENDENT ENQUIRY WAS MADE BY THE ASSESS ING OFFICER OF THE PRESENT ASSESSEE RATHER HE REOPENED THE ASSESSMENT MERELY ON THE BASIS OF QUERY RAISED BY T HE AUDIT PARTY AND THERE WAS NO NEW TANGIBLE MATERIAL CAME TO THE LIGHT OF THE ASSESSING OFFICER AND HE ACTED MERELY ON THE BORROWED SATISFACTION/QUERY RAISED BY THE AUDIT PARTY, THUS, THE RATIO LAID DOWN IN THE AFOREMENTIONED CASES SUPPORTS THE CASE OF THE M/S BITUCORP TRADING PVT. LTD. ITA NO.1747/MUM/2012 6 ASSESSEE. THE RATIO LAID DOWN IN INDIAN AND EASTER N NEWSPAPER SOCIETY VS CIT (119 ITR 996)(SC) FURTHER SUPPORTS THE CASE OF THE ASSESSEE. THE HONBLE APEX COURT HAS HELD AS UNDER:- THUS, CONTRARY TO THE DECISION OF THE SUPREME COUR T, THE INSTRUCTION OF THE BOARD DIRECTS THAT MERELY ON RAI SING OF AUDIT OBJECTION REMEDIAL ACTION BY INITIATING PROCEEDINGS OF REASSESSMENT BE TAKEN NOTWITHSTANDING THAT THE AUTH ORITY VESTED WITH POWER TO EXERCISE JURISDICTION FOR ISSU ING NOTICE IS NOT SATISFIED ABOUT EXISTENCE OF SUCH CIRCUMSTANCES WHICH MAY WARRANT EXERCISE OF SUCH POWER. TO SAY THE LEAST, SUCH ULTRA VIRES INSTRUCTIONS CANNOT BE PRESSED INTO SERVICE T O SAVE THE INITIATION OF PROCEEDINGS UNDER SECTION 147, IN THE ABSENCE OF HOLDING OF ANY BELIEF BY THE ASSESSING OFFICER, BY ARROGATING THE POWER TO ITSELF BY THE BOARD BY ISSUING SUCH DI RECTIONS CONTRARY TO THE PROVISIONS OF LAW AT THE PAIN OF SU BJECTING THE OFFICER TO PAIN OF EXPOSING HIM TO CHARGE OF INSUBO RDINATION. EVEN OTHERWISE, THE IMPORTANT WORDS U/S 147 OF THE ACT ARE HAS REASON TO BELIEVE AND THESE WORDS ARE STRONGE R THAN THE WORDS IS SATISFIED. THE BELIEF ENTERTAINED BY THE ASSESSING OFFICER MUST NOT BE ARBITRARY OR IRRATIONAL. IT MU ST BE REASONABLE OR IN OTHER WORDS, IT MUST BE BASED ON R EASONS, WHICH ARE RELEVANT AND MATERIAL. THE COURT, OF COUR SE, MAY NOT INVESTIGATE INTO THE ADEQUACY OF SUFFICIENCY OF THE REASONS WHICH HAVE WEIGHED WITH THE ASSESSING OFFICER INCOM ING TO SUCH BELIEF BUT THE COURT CAN CERTAINLY EXAMINE WHE THER THE REASONS ARE RELEVANT AND HAVE A BEARING ON THE MATT ERS IN REGARD TO WHICH THE ASSESSING OFFICER IS REQUIRED T HE ENTERTAIN THE BELIEF BEFORE ISSUANCE OF NOTICE U/S 147. SUCH BELIEF MUST BE IN GOOD FAITH AND CANNOT PRETENCE. THE WORD OM ISSION OR M/S BITUCORP TRADING PVT. LTD. ITA NO.1747/MUM/2012 7 FAILURE TO DISCLOSE TRULY AND FULLY ALL MATERIAL FA CTS NECESSARY FOR HIS ASSESSMENT FOR THAT YEAR POSTULATE A DUTY ON T HE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECE SSARY FOR ASSESSMENT. THE DISCLOSURE MUST BE FULL AND ALSO TR UE WHICH ARE IN THE KNOWLEDGE OF THE ASSESSEE AT THE RELEVAN T TIME, THUS, MATERIAL FACTS MEANS PRIMARY FACTS. IN THE P RESENT APPEAL THE ASSESSEE DULY DISCLOSED ALL MATERIAL FAC TS BEFORE THE ASSESSING OFFICER AND THATS WHY THE ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT AND IT WAS REOPENED BY THE ASSESSING OFFICER MERELY ON THE CHANGE OF OPINION, WHICH IS NOT PERMISSIBLE. EVEN ON THE BASIS OF REPLY OF THE ASSESSEE ON 08/05/2008, THE ASSESSING OFFICER WAS OF THE OPINIO N THAT THE CLAIM OF THE ASSESSEE AND THE LOSS ON SALE OF HOUSI NG LOAN PORTFOLIO WAS REVENUE IN NATURE. IT IS NOT THE CAS E THAT ANY NEW MATERIAL CAME TO THE POSSESSION OF THE ASSESSING OF FICER AT THE LATER STAGE WHICH WAS NOT MADE AVAILABLE DURING ORIGINAL ASSESSMENT PROCEEDINGS. IN VIEW OF THESE FACTS, WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LD. COMMIS SIONER OF INCOME TAX (APPEALS). IT IS AFFIRMED. 2.3. IF THE CASE LAWS CITED IN THE PRECEDING PARAS OF THIS ORDER AND THE FACTS AVAILABLE ON RECORD ARE KEPT IN JUXTAPOSITION AND ANALYZED, IT CAN BE CONCLUDED THA T THE ASSESSMENT FRAMED U/S 143(3) CAN BE REOPENED, AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR, ONLY BY REASONS OF FAILURE IF THE MATERIAL FA CTS ARE NOT FULLY AND TRULY DISCLOSED BY THE ASSESSEE FOR MAKIN G THE ASSESSMENT. IT IS ALSO NOTED THAT THE MATERIAL FAC TS WERE TAKEN BY THE ASSESSING OFFICER ONLY FROM THE MATERIAL ALR EADY DISCLOSED BY THE ASSESSEE AND IT IS FURTHER NOTED T HAT THESE M/S BITUCORP TRADING PVT. LTD. ITA NO.1747/MUM/2012 8 MATERIAL FACTS WERE DULY REQUIRED BY THE ASSESSING OFFICER THROUGH ISSUANCE OF NOTICE AND QUESTIONNAIRE, U/S 1 42(1) AND EVEN DURING THE ASSESSMENT PROCEEDINGS, WHICH WERE FILED BY THE ASSESSEE VIDE LETTER DATED 14/07/2005 AND 26/08 /2005, MEANING THEREBY, WHILE FRAMING THE ORIGINAL ASSESSM ENT, THE ASSESSING OFFICER HAS ALREADY CONSIDERED THESE FACT S AND THE ASSESSING OFFICER HAS NOWHERE DEMONSTRATED THAT INC OME HAD ESCAPED ASSESSMENT BY REASONS OF FAILURE, FOR CLAIM ING THE DEDUCTION ON ACCOUNT OF BAD DEBTS, INTEREST EXPENSE S AND TRANSPORT EXPENSES, ON THE PART OF THE ASSESSEE. TH US, IT CAN BE CONCLUDED THAT ASSESSMENT CAN ONLY BE REOPENED O NLY IN A CASE IF ANY TANGIBLE MATERIAL IS FOUND AT THE LATER STAGE BY THE ASSESSING OFFICER THAT THERE IS ESCAPEMENT OF INCOM E ON THE PART OF THE ASSESSEE, MEANING THEREBY, THERE MUST B E LIVE LINK BETWEEN THE REASONS AND THE FORMATION OF BELIEF. HO WEVER, THERE IS NO POWER TO REOPEN THE ASSESSMENT MERELY O N THE BASIS OF CHANGE OF OPINION AS WAS HELD BY HONBLE A PEX COURT IN KELVINATOR OF INDIA (SUPRA). THE RATIO LAID DOW N IN IPCA LABORATORIES 251 ITR 416 (BOM.) RELLIES INDIA 323 I TR 54 (BOM.), TANNA BUILDERS (P.) LTD. 198 CTR 541 (BOM.) , HINDUSTAN LEVER LTD. 268 ITR 332 (BOM.) SUPPORTS OU R VIEW. THERE WAS NO FRESH MATERIAL WITH THE ASSESSING OFFI CER FOR FORMING A BELIEF THAT INCOME HAD ESCAPED ASSESSMENT , MORE SPECIFICALLY WHEN THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE THE MATERIAL FACTS, THUS, WE F IND NO MERIT IN THE APPEAL OF THE REVENUE, BECAUSE REOPENING WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CHANGE OF OPINI ON. THUS, M/S BITUCORP TRADING PVT. LTD. ITA NO.1747/MUM/2012 9 WE AFFIRM THE STAND OF THE LD. COMMISSIONER OF INCO ME TAX (APPEALS). FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 26/08/2015. SD/ - (ASHWANI TANEJA) SD/ - (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER % & MUMBAI; ) DATED : 23/09/2015 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. +,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. 0 0 % 1 ( + ) / THE CIT, MUMBAI. 4. 0 0 % 1 / CIT(A)- , MUMBAI 5. 34 .' , 0 +( ' 5 , % & / DR, ITAT, MUMBAI 6. 6# 7& / GUARD FILE. / BY ORDER, /3+ . //TRUE COPY// / (DY./ASSTT. REGISTRAR) , % & / ITAT, MUMBAI