ACIT RG 10(1), MUMBAI V. INFRASTRUCTURE LEASING & FINANCIAL SERVICES LTD, MUMBAI

ITA 1750/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7193 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 25-03-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 18-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K BALODIA
• Assessee Lawyers: D V LAKHANI
• Keywords: Reopening of assessment; Difference of opinion; Change of opinion; Reassessment proceedings; Set aside
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI. BEFORE SMT. P.MADHAVI DEVI, JM AND SHRI RAJENDRA SINGH,AM I.T.A. NOS.1749 & 1750/MUM/2009 (ASSESSMENT YEARS: 2000-01 & 2001-0 2) THE ASSISTANT COMMISSIONER OF INCOME TAX, RANGE-10(1), R.NO.455, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-20. VS. M/S. INFRASTRUCTURE LEASING & FINANCIAL SERVICES LTD. IL & FS FINANCIAL CENTRE, PLOT NO.22 BLOCK, BANDRA KURLA COMPLEX, BANDRA(E), MUMBAI-400 051. (APPELLANT) (RESPONDENT) APPELLANT BY : MR. N.K.BALODIA, CIT(DR) RESPONDENT BY : MR. D.V.LAKHANI O R D E R PER RAJENDRA SINGH: THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST THE DIFFERENT ORDERS BOTH DATED 6.1.2009 OF CIT(A) FOR THE ASSESSMENT YEARS 2000-01 & 2001-02. SINCE THE DISPUTE RAISED IN BOTH THE APPEALS IS IDENTICAL, TH ESE APPEALS ARE BEING DISPOSED OF BY A SINGLE CONSOLIDATED ORDER FO R THE SAKE OF CONVENIENCE. THE ONLY DISPUTE RAISED BY THE REVENUE IN BOTH THE APPEALS IS REGARDING LEGAL VALIDITY OF REOPENING OF THE ASSESSMENT FOR THESE YEARS UNDER SECTION 147 OF TH E INCOME TAX ACT. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSMENTS FOR THE ASSESSMENT YEARS 2000-01 AND 20 01-02 HAD BEEN COMPUTED BY THE ASSESSING OFFICER UNDER S ECTION 143(3) OF THE INCOME TAX ACT ON 19.3.2003 & 24.03.2 004 RESPECTIVELY. SUBSEQUENTLY, THE ASSESSING OFFICER NOTED THAT WHILE COMPUTING THE BOOK PROFIT UNDER SECTION 115JA , THE ASSESSING OFFICER HAD NOT ADDED THE LEASE EQUALIZAT ION RESERVE, THE AMOUNT SET ASIDE FOR INVESTMENT VALUATION AND N ON- ITA NOS.1749 & 1750/M/09 2 PERFORMING ASSETS (NPA) TO THE BOOK PROFIT, AS PER EXPLANATION TO SUB-SECTION (2) OF SECTION 115JA. IN VIEW OF THE AB OVE POSITION, THE ASSESSING OFFICER HAD REASON TO BELIEF THAT THE INCOME HAD ESCAPED ASSESSMENT ON THE ABOVE COUNTS AND ACCORDIN GLY AFTER RECORDING THE REASONS ON THE ABOVE LINES, HE REOPE NED THE ASSESSMENTS FOR THESE TWO YEARS BY ISSUING NOTICE UNDER SECTION 148 DATED 28.3.07 & 15.03.07 RESPECTIVELY A ND IN THE FRESH ASSESSMENT MADE THESE AMOUNTS WERE ADDED WHIL E COMPUTING THE BOOK PROFIT. 2.1 THE ASSESSEE CHALLENGED THE LEGAL VALIDITY OF THE REOPENING OF THE ASSESSMENT AND SUBMITTED BEFORE TH E CIT(A) THAT THE ASSESSMENTS IN THESE CASES HAD ALREADY BEE N CONFLICTED UNDER SECTION 143(3) AND THESE HAVE BEEN REOPENED A FTER A LAPSE OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSME NT YEARS AND THEREFORE, THE REOPENING OF THE ASSESSMENT WAS BAD IN LAW AS THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSE SSMENT. THE ASSESSEE PLACED RELIANCE ON THE JUDGEMENT OF THE HO NBLE BOMBAY HIGH COURT IN THE CASE OF GERMAN REMEDIES LT D. VS. DCIT., (287 ITR 494) AND ON THE JUDGEMENT OF THE AP EX COURT IN THE CASE OF CIT VS. FORAMER FRANCE, (264 ITR 566) I N WHICH THE REASSESSMENT PROCEEDINGS HAD BEEN QUASHED ON THE GR OUND THAT THE ASSESSMENT HAD BEEN REOPENED AFTER A LAPSE OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND ADMITTEDLY THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. THE C IT(A) WAS SATISFIED BY THE EXPLANATION GIVEN BY THE ASSESSEE. IT WAS OBSERVED BY HIM THAT IT WAS INCUMBENT UPON THE ASSE SSING OFFICER TO MENTION THE FACT OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE THE TRUE FACTS BEFORE REOPENING THE ASS ESSMENT AS HELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE O F HINDUSTAN LEVER LTD., (268 ITR 332). IN THIS CASE, THE CIT(A) ITA NOS.1749 & 1750/M/09 3 FURTHER NOTED THAT NOT ONLY THE ASSESSEE HAD DISCLO SED THE FACTS, BUT THE ASSESSING OFFICER HAD ALSO APPLIED HIS MIND TO THESE ISSUES WHILE FRAMING THE ASSESSMENT UNDER SECTION 1 43(3) BECAUSE IN THE ASSESSMENT MADE HE HAD DISALLOWED TH E PROVISION FOR NPA AND LEASE EQUALIZATION RESERVE. A S REGARDS THE AMOUNT SET ASIDE FOR INVESTMENT VALUATION, THE SAME HAD BEEN DULY DISCLOSED IN THE AUDITED ACCOUNTS . THERE WAS THUS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS RELATING TO THESE ISSUES IN THE ASSE SSMENT. THE CIT(A) ACCORDINGLY HELD THAT THE REASSESSMENT PROCE EDINGS WERE LEGALLY INVALID AND ACCORDINGLY QUASHED THE SAME. A GGRIEVED WITH THE DECISION OF THE CIT(A), THE REVENUE IS IN APPEAL IN BOTH THE ASSESSMENT YEARS BEFORE THE TRIBUNAL. 3. BEFORE US, THE LEARNED A.R. FOR THE ASSESSEE REI TERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. IT W AS SUBMITTED THAT THERE WAS NO DISPUTE IN THIS CASE TH AT ASSESSMENTS HAD BEEN REOPENED AFTER A LAPSE OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. IT WAS POI NTED OUT THAT IN THE ASSESSMENT ORDERS UNDER SECTION 143(3) DATED 19.3.2003 AND 24.03.2004 FOR THE ASSESSMENT YEARS 2000-01 & 2 001-02 RESPECTIVELY, THE ASSESSING OFFICER HIMSELF HAD DI SCUSSED THE ISSUE RELATING TO THE PROVISION FOR NPA AND LEASE E QUALIZATION RESERVE WHICH HAD BEEN ADDED BY HIM IN THE REGULAR ASSESSMENT AND THEREFORE, IT COULD NOT BE SAID THAT THE ASSESS EE HAD NOT DISCLOSED THE FACTS. FURTHER, THE FACT THAT LEASE E QUALIZATION RESERVE HAD BEEN NETTED BY THE ASSESSEE AGAINST THE LEASE RENTAL HAD BEEN DULY MENTIONED IN THE NOTES OF THE AUDITOR S PLACED ON RECORD. AS REGARDS THE AMOUNT SET ASIDE FOR INVESTM ENT VALUATION, IT WAS SUBMITTED THAT THIS HAD BEEN CLAI MED IN THE PROFIT AND LOSS ACCOUNT SEPARATELY AND THEREFORE, T HE FACT WAS CLEAR FROM THE PROFIT AND LOSS ACCOUNT PLACED ON RE CORD. THERE WAS THUS NO FAILURE ON THE PART OF THE ASSESSEE AND THE ITA NOS.1749 & 1750/M/09 4 REOPENING OF ASSESSMENT WAS BAD IN LAW. THE LEARNED A.R. PLACED RELIANCE ON THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1997-98 IN ITA NOS.838 & 5921/MUM/2006 IN WHICH YEAR ALSO THE ASSESSMENT HA D BEEN REOPENED ON SIMILAR GROUNDS WHICH HAD BEEN QUASHED BY THE TRIBUNAL. THE SAID DECISION WAS FOLLOWED BY THE TR IBUNAL IN THE ASSESSMENT YEAR 1998-99 IN ITA NO.4318/MUM/2007 IN WHICH YEAR ALSO ASSESSMENT WAS QUASHED. IT WAS ACCORDINGL Y PLEADED THAT THE REOPENING OF ASSESSMENT WAS BAD IN LAW AN D THE SAME SHOULD BE QUASHED THIS YEAR ALSO. 3.1 THE LEARNED D.R., ON THE OTHER HAND, SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND PLACED RELIANCE ON THE PROVISIONS OF EXPLANATION 1 TO SECTION 147 AS PER WHICH PRODUCTIO N BEFORE THE ASSESSING OFFICER OF BOOKS OF ACCOUNT, DOCUMENTS OR ANY OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD BE DISC OVERED WITH DUE DILIGENCE COULD NOT AMOUNT TO DISCLOSURE WITHIN THE MEANING OF PROVISO TO SECTION 147. HE PLACED RELIAN CE ON THE JUDGEMENT OF THE HIGH COURT OF MUMBAI IN THE CASE OF DR. AMINS PATHOLOGY LABORATORY VS. JCIT & ORS. ( 252 I TR 673) AND ON THE UNREPORTED JUDGEMENT OF HONBLE HIGH COURT O F ALLAHABAD IN THE CASE OF M/S. EMA INDIA LTD. IN CI VIL MISC. WRIT PETITION NO.181(TAX) OF 2007. 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE M ATTER CAREFULLY. THE DISPUTE IS REGARDING LEGAL VALIDITY OF THE REOPENING OF THE ASSESSMENT UNDER SECTION 147 OF THE INCOME T AX ACT. THERE IS NO DISPUTE THAT THE ASSESSMENTS IN THESE C ASES HAD ORIGINALLY BEEN COMPLETED UNDER SECTION 143(3) OF T HE ACT AND IN SUCH CASES WHERE THE ASSESSMENT HAVE BEEN MADE UNDE R SECTION 143(3), THE ASSESSMENT CAN BE REOPENED AFTE R A LAPSE OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR ONLY IF THERE IS A FAILURE ON THE PART OF THE ASSESSEE TO D ISCLOSE FULLY AND ITA NOS.1749 & 1750/M/09 5 TRULY ALL THE MATERIAL FACTS NECESSARY FOR ASSESSME NT. THE ASSESSMENTS HAD BEEN REOPENED BY THE ASSESSING OFFI CER AFTER A LAPSE OF FOUR YEARS FROM THE END OF THE RELEVANT AS SESSMENT YEARS ON THE GROUND THAT THE ASSESSING OFFICER IN T HE ASSESSMENT MADE UNDER SECTION 143(3) HAD FAILED TO ADD THE LEASE EQUALIZATION RESERVE, PROVISION FOR NPA AND THE AMOUNT SET ASIDE AS INVESTMENT VALUATION TO THE BOOK PROFI T. THE ISSUE IS WHETHER THE ASSESSEE HAD FAILED TO DISCLOSE THE MAT ERIAL FACTS RELATING TO THE ISSUES AT THE TIME OF ORIGINAL ASSE SSMENT. A PERUSAL OF THE ASSESSMENT ORDERS FOR THE TWO YEARS MADE UNDER SECTION 143(3) CLEARLY SHOWS THAT THE ASSESSING OFF ICER HAD HIMSELF DISCUSSED THE ISSUES RELATING TO LEASE EQUA LIZATION RESERVE AND NPA AND HAD MADE ADDITION IN THE ASSESS MENT AND THEREFORE IT COULD NOT BE SAID THAT THE FACTS RELA TING TO THESE ISSUES HAD NOT BEEN DISCLOSED BY THE ASSESSEE AT TH E TIME OF ORIGINAL ASSESSMENT. MOREOVER, NOTES ON ACCOUNTS BY THE AUDITORS FILED WITH THE RETURNS ALSO CLEARLY MENTIO NED THAT LEASE EQUALIZATION RESERVE HAD BEEN NETTED AGAINST LEASE RENTAL. AS REGARDS THE AMOUNT SET ASIDE FOR INVESTMENT VALUATI ON, WE FIND THAT THIS AMOUNT HAD CLEARLY CLAIMED AS A SEPARATE ITEM IN THE PROFIT AND LOSS ACCOUNT. THE AMOUNT BEING CLEAR FRO M THE PROFIT AND LOSS ACCOUNT PLACED ON RECORD, IT CANNOT BE SA ID THAT THE ASSESSEE HAD FAILED TO DISCLOSE THE NECESSARY FACTS . IT IS NOT A CASE THAT THE ASSESSEE HAD NOT DISCLOSED THE FACTS AND THE ASSESSING OFFICER HAD DISCOVERED THE FACTS ON A DET AILED EXAMINATION OF BOOKS OF ACCOUNTS OR OTHER EVIDENCE. THESE FACTS HAD BEEN GIVEN AT THE TIME OF ASSESSMENTS AND DULY DISCUSSED BY THE ASSESSING OFFICER IN THE ASSESSMENT OR EXPLI CITLY CLAIMED AS A SEPARATE ITEM IN THE PROFIT AND LOSS ACCOUNT. THEREFORE, IN OUR VIEW, IT COULD NOT BE SAID THAT THE ASSESSEE HA D FAILED TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS REL ATING TO THE ABOVE ISSUES. WE ALSO FIND THAT IN EARLIER YEARS AL SO, THE ASSESSING OFFICER HAD REOPENED THE ASSESSMENT ON SI MILAR ITA NOS.1749 & 1750/M/09 6 GROUNDS AFTER A LAPSE OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND THE REOPENING WAS NOT FOUND LEG ALLY IN ORDER BY THE TRIBUNAL AND THE SAME HAD BEEN QUASHED IN ASSESSMENT YEAR 1997-98 AND 1998-99 (SUPRA). WE THE REFORE SEE NO INFIRMITY IN THE ORDER OF THE CIT(A) QUASHING TH E REASSESSMENT PROCEEDINGS. 4.1 WE HAVE GONE THROUGH THE SAID JUDGEMENTS RELIE D UPON BY THE LEARNED D.R. AND FIND THAT BOTH THE CASES AR E DISTINGUISHABLE. IN THE CASE OF M/S. EMA INDIA LTD. (SUPRA) THE ASSESSMENT HAD BEEN REOPENED WITHIN A PERIOD OF FOU R YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR AND THEREF ORE THE ISSUE WHETHER THE ASSESSEE HAD DISCLOSED TRULY AND FULLY ALL MATERIAL FACTS WAS NOT BEFORE THE HIGH COURT, WHICH HAD DECIDED THE ISSUE ONLY ON THE GROUND WHETHER THERE WAS ANY CHANGE OF OPINION. THE JUDGEMENT OF HONBLE HIGH COURT OF BO MBAY IN THE CASE OF DR. AMINS PATHOLOGY LABORATORY (SUPRA) IS ALSO DISTINGUISHABLE. IN THAT CASE, THE ASSESSEE WAS FOL LOWING HYBRID SYSTEM OF ACCOUNTING AND AS PER THE SYSTEM FOLLOWED UNPAID PURCHASES OF RS.6,70,758/- WERE NOT ALLOWABLE. THE SE UNPAID PURCHASES WERE INDICATED IN THE BALANCE SHEET WHICH THE ASSESSING OFFICER DID NOT NOTICE AT THE TIME OF ORI GINAL ASSESSMENT AND ACCORDINGLY THE ASSESSMENT WAS SUBSE QUENTLY REOPENED AND THE REOPENING WAS AFTER A LAPSE OF FO UR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE HONB LE HIGH COURT HELD THAT IN THE ORIGINAL ASSESSMENT, THE ASS ESSING OFFICER HAD OVERLOOKED THE UNPAID PURCHASES AND THEREFORE I T COULD NOT BE SAID THAT THE ASSESSING OFFICER HAD OPINED ON TH IS ITEM IN THE ASSESSMENT. ACCORDINGLY, IT WAS HELD THAT REOPENING WAS NOT BASED ON CHANGE OF OPINION. THE HONBLE HIGH COURT ALSO HELD THAT MERE PRODUCTION OF BALANCE SHEET, PROFIT AND L OSS ACCOUNT AND BOOKS OF ACCOUNT DID NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF EXPLANATION 1 TO SECTION 147. IN THAT ITA NOS.1749 & 1750/M/09 7 CASE, THE ASSESSEE HAD NOT DECLARED CLEARLY THE UNP AID PURCHASES AND THESE WERE INDICATED ONLY IN THE BAL ANCE SHEET. THE CASE OF THE ASSESSEE IS DIFFERENT. IN THIS CASE , THE AMOUNT SET ASIDE FOR INVESTMENT VALUATION WAS EXPLICITLY S HOWN AS A SEPARATE ITEM IN THE PROFIT AND LOSS ACCOUNT AND TH EREFORE IT COULD NOT BE SAID THAT THE SAME HAS TO BE DISCOVERE D BY THE ASSESSING OFFICER WITH DUE DILIGENCE. ALL ITEMS OF EXPENDITURE ARE SHOWN IN THE PROFIT AND LOSS ACCOUNT AND IN CASE, A PARTICULAR ITEM IS CLEARLY SHOWN AS A SEPARATE ITEM IN THE PRO FIT AND LOSS ACCOUNT, IN OUR VIEW, IT CANNOT BE SAID THAT THE AS SESSEE HAD FAILED TO DISCLOSE TRULY AND FULLY ALL MATERIAL FAC TS RELATING TO THAT PARTICULAR CLAIM WHEN THE PROFIT AND LOSS ACCOUNT H AS BEEN FILED AS A PART OF THE RETURN OF INCOME. IN SO FAR AS OTH ER TWO ITEMS WHICH ARE MAJOR ITEMS ARE CONCERNED, THESE ITEMS HA VE BEEN DULY DISCUSSED BY THE ASSESSING OFFICER IN THE ASSE SSMENT ORDER ITSELF AND HAD ALSO BEEN ADDED IN THE REGULAR ASSES SMENT AND THEREFORE, IT COULD NOT BE SAID THAT FULL FACTS REL ATING TO THE SAME HAD NOT BEEN DISCLOSED. THEREFORE, WE HOLD THAT ON THE FACTS OF THIS CASE THERE WAS NO FAILURE ON THE PART OF THE A SSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELATIN G TO THESE ITEMS AT THE TIME OF ASSESSMENT. 5. IN VIEW OF THE FOREGOING DISCUSSION, THE REASSES SMENT MADE BY THE ASSESSING OFFICER IS HELD TO BE LEGALLY INVALID. ACCORDINGLY, THE ORDER OF THE CIT(A) QUASHING THE R EASSESSMENT PROCEEDINGS IS UPHELD IN BOTH THE YEARS. IN THE RE SULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON THIS 30 TH DAY OF MARCH, 2010. SD/- (SMT. P.MADHAVI DEVI ) SD/- ( RAJENDRA SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 30 TH MARCH , 2010. SOMU ITA NOS.1749 & 1750/M/09 8 COPY TO :- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-MC-X, MUMBAI. 4. THE CIT(A)-X, MUMBAI 5. THE DR I BENCH /TRUE COPY/ BY ORDE R ASSTT. REGISTRAR, I.T.A.T, MUMBAI