Mercedes-Benz India Private Limited, Pune V. Deputy Commissioner of Income-tax,

ITA 1780/PUN/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1998 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 12-01-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 27-09-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K RASTOGI
• Assessee Lawyers: PRAMOD ACHUDAN
• Keywords: Rectification of order; Period of limitation; Difference of opinion; Time period of passing order; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 80IB; 148; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA , AM . / ITA NO. 1780 /PN/201 3 / ASSESSMENT YEAR : 20 0 3 - 04 MERCEDES - BENZ INDIA PVT. LTD., (FORMERLY KNOWN AS DAIMLERCHRYSLER INDIA PVT. LTD.) , E - 3, MIDC CHAKAN, PHASE III, CHAKAN INDUSTRIAL AREA, KURULI & NIGHOJE, TAL. KHED, PUNE 410501 . / APPELLANT PAN: AABCM1789L VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 9, PUNE . / RESPONDENT / APPELLANT BY : SHRI PRAMOD ACHUDAN / RESPONDENT BY : SHRI S .K. RASTOGI, CIT / DATE OF HEARING : 1 2 . 0 1 .201 6 / DATE OF PRONOUNCEMENT: 11 . 0 4 .201 6 / ORDER PER SUSHMA CHOWLA, J M : TH IS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT (A) - V , PUNE , DATED 0 2 . 0 7 .20 1 3 REL ATING TO ASSESSMENT YEAR 20 0 3 - 04 AGAINST ORDER PASSED UNDER SECTION 1 4 3(3) R.W.S. 147 OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - ITA NO. 1780 /PN/20 1 3 MERCEDES BENZ INDIA PVT. LTD. 2 1 . THE LEARNED CIT(A) ERRED IN UPHOLDING THE ACTION OF THE THEN ASSESSING OFFICER OF ISSUING A NOTICE UNDER SECTION 148 READ WITH SECTION 147 OF THE ACT WITHOUT CONSIDERING THE PROVISIONS OF THE SECOND PROVISO TO SECTION 147 OF THE ACT UNDER WHICH THE REASSESSMENT NOTICE ISSUED IS INVALID IN LAW. 2. THE LEARNED CIT(A) ERRED IN LAW BY UPHOLDING THE ACTION OF THE THEN ASSESSING OFFICER OF INITIATING REASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT ON ACCOUNT OF A CHANGE OF OPINION. 3. THE LEARNED CIT(A) ERRED BY UPHOLDING THE ACTION OF THE THEN ASSESSING OF FICER WHILE PASSING THE REASSESSMENT ORDER IN WITHDRAWING THE DEDUCTION UNDER SECTION 80 - IB OF THE ACT WHICH WAS GRANTED TO THE APPELLANT EARLIER. 4. THE LEARNED CIT(A) ERRED IN NOT ADJUDICATING ON ISSUE RELATING TO DENIAL OF DEDUCTION UNDER SECTION 80IB OF THE ACT BY THE THEN ASSESSING OFFICER IN RELATION TO CERTAIN ITEMS OF INCOME. 3. THE FIRST ISSUE RAISED BY THE ASSESSEE VIDE GROUNDS OF APPEAL NO.1 AND 2 IS JURISDICTIONAL ISSUE OF INVOKING JURISDICTION UNDER SECTION 147 / 148 OF THE ACT. THE ASSESSE E IS FURTHER AGGRIEVED BY THE ORDER OF CIT(A) IN WITHDRAWAL OF DEDUCTION CLAIMED UNDER SECTION 80IB OF THE ACT VIDE GROUND OF APPEAL NO.3. THE GROUND OF APPEAL NO.4 RAISED BY THE ASSESSEE IS NOT PRESSED AND HENCE, THE SAME IS DISMISSED AS NOT PRESSED. THE SAME IS DISMISSED AS NOT PRESSED. 4. BRIEFLY, IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE HAD IN THE ORIGINAL RETURN OF INCOME CLAIMED DEDUCTION UNDER SECTION 80IB OF THE ACT AT RS. 2,59,88,592/ - , WHICH WAS ALLOWED TO THE ASSESSEE VIDE ORDER PASSED UNDER SECTION 143(3) OF THE ACT. THEREAF TER, IT WAS NOTED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD NOT FURNISHED THE AUDIT REPORT IN FORM NO.10CCB, WHICH WAS MANDATORY FOR ALLOWING DEDUCTION UNDER SECTION 80IB OF THE ACT. THEREFORE, THE ASSESSING OFFICER RECORDED REASONS TO REOPEN ASSESSM ENT SINCE THE INCOME TO THE TUNE OF RS.2.59 CRORES HAD ESCAPED THE ASSESSMENT. THEREAFTER, NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE REQUESTED FOR THE REASONS FOR ISSUE OF NOTICE UNDER SECTION 148 OF THE AC T AND THE SAME WERE MADE AVAILABLE TO THE ASSESSEE. SUBSEQUENTLY, THE ASSESSEE FILED A LETTER, ACCORDING TO WHICH, THE DEDUCTION UNDER SECTION 80IB OF ITA NO. 1780 /PN/20 1 3 MERCEDES BENZ INDIA PVT. LTD. 3 THE ACT WAS CORRECTLY ALLOWED. IT WAS ALSO POINTED OUT BY THE ASSESSEE THAT IN VIEW OF THE DECISION OF TRIBUNAL RELATING TO ASSESSMENT YEAR 1999 - 2000 , EFFECT FOR WHICH IS YET TO BE GIVEN, THERE WOULD BE BROUGHT FORWARD LOSS ES TO THE ASSESSEE. THE ASSESSING OFFICER OBSERVED THAT IN VIEW OF THE ASSESSEE HAVING NOT FILED AUDIT REPORT IN FORM NO.10CCB, WHICH W AS MANDATORY, THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB OF THE ACT FOR THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER FURTHER HELD THAT HOWEVER, SUB SEQUENT TO GIV ING EFFECT TO TRIBUNALS ORDER, ALLOWABLE DEDUCTION UNDER SECTION 8 0IB OF THE ACT WOULD BE NIL AS THERE WAS LOSS. 5. THE CIT(A) REJECTED THE OBJECTIONS RAISED BY THE ASSESSEE AGAINST INVOKING OF JURISDICTION UNDER SECTION 147 / 148 OF THE ACT AND ALSO HELD THAT THE ACTION OF ASSESSING OFFICER IN INITIATING RE - ASSESSMENT PROCEEDINGS COULD NOT BE SAID TO BE CHANGE OF OPINION AS THE SAME WAS BASED ON INCORRECT FACTS DUE TO FAILURE ON THE PART OF ASSESSEE TO FURNISH THE AUDIT REPORT IN FORM NO.10CCB. THE SAID REPORT WAS FILED ALONG WITH AN APPLICATION UNDER SECTION 154 OF TH E ACT ON 30.08.2006 , ON THE BASIS OF WHICH THE ORDER UNDER SECTION 154 OF THE ACT WAS PASSED ON 28.02.2007 , IN WHICH THE DEDUCTION UNDER SECTION 80IB OF THE ACT WAS ALLOWED. THEREFORE, IT COULD NOT BE SAID THAT THERE WAS CHANGE OF OPINION WHILE INITIATING RE - OPENING ASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT. WITH REGARD TO MERITS OF THE ISSUE, THE CIT(A) HELD THAT THE SAID DEDUCTION UNDER SECTION 80IB OF THE ACT WAS WITHDRAWN ON ACCOUNT OF FACT THAT THE AUDIT REPORT IN FORM NO .10CCB WAS NOT FILE D BY THE ASSESSEE . HE FURTHER OBSERVED THAT EVEN THE ASSESSEE WAS NOT IN A POSITION TO FILE THE SAME, THEREFORE, THE DEDUCTION UNDER SECTION 80IB OF THE ACT WOULD NOT BE ALLOWED. FURTHER, IN VIEW OF LOSS, THE ASSESSEE WAS NOT ENTITLED TO CLAIM THE DEDUCT ION AND HENCE, THE ORDER OF ASSESSING OFFICER ON MERITS WAS ALSO UPHELD. ITA NO. 1780 /PN/20 1 3 MERCEDES BENZ INDIA PVT. LTD. 4 6. THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ORDER OF CIT(A). 7. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT IN THE RETURN OF INCOME, NO DEDUCTION WAS CLAIMED UNDER SECTION 80IB OF THE ACT BECAUSE OF BROUGHT FORWARD LOSSES. OUR ATTENTION WAS DRAWN TO THE COMPUTATION OF INCOME FILED, IN WHICH A NOTE WAS GIVEN VIS - - VIS NO CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT ON ACCOUNT OF LOSSES, WHICH IS PLACED AT PAGE 8 OF THE PAPER BOOK. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER HAD REJECTED THE CLAIM OF DEDUCTION AS NO AUDIT REPORT WAS FILED IN FORM NO.10CCB, COPY O F WHICH IS PLACED AT PAGE 46 OF THE PAPER BOOK. IN FURTHERANCE, THE ASSESSEE CLAIMS TO HAVE FILED AN APPLICATION UNDER SECTION 154 OF THE ACT AS NO OPPORTUNITY WAS GIVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS TO FILE FORM NO.10CCB, WHICH IS PLACED AT PAGES 10 TO 12 OF THE PAPER BOOK ALONG WITH COPY OF FORM NO.10CCB AT PAGES 14 TO 22 OF THE PAPER BOOK. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE DEDUCTION UNDER SECTION 80IB OF THE ACT WAS ALLOWED TO THE ASSESSEE UNDER S ECTION 154 OF THE ACT, COPY OF THE ORDER IS PLACED AT PAGES 24 TO 26 OF THE PAPER BOOK. THEREAFTER, NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED FOR WITHDRAWAL OF DEDUCTION UNDER SECTION 80IB OF THE ACT, WHICH IS PLACED AT PAGE 29 OF THE PAPER BOOK, WHI CH IN TURN, IS SUPPORTED BY THE REASONS FOR INITIATING RE - ASSESSMENT PROCEEDINGS, WHICH ARE PLACED AT PAGES 30 AND 31 OF THE PAPER BOOK. THE FIRST OBJECTION RAISED BY THE ASSESSEE WAS THAT THE NOTICE WAS ISSUED BEYOND FOUR YEARS I.E. FOR THE YEAR ENDING 3 1.03.2003 , THE NOTICE COULD BE ISSUED UP TO 31.03.2008 IN VIEW OF PROVISIONS OF SECTION 148 OF THE ACT , WHEREAS THE NOTICE WAS ISSUED ON 31.03.2009 . OUR ATTENTION WAS DRAWN TO THE ORDER OF CIT(A) AT PA RA 6 , WHERE WHILE UPHOLDING THE RE - ASSESSMENT PROCEEDI NGS UNDER SECTION 147 OF THE ACT, THE CIT(A) LOOKS AT THE INITIAL ITA NO. 1780 /PN/20 1 3 MERCEDES BENZ INDIA PVT. LTD. 5 ASSESSMENT YEAR AS ASSESSMENT YEAR 1995 - 96 . THE SECOND OBJECTION RAISED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS THAT WHERE DEDUCTION HAS BEEN CONSIDERED AND ALLOWED BY THE ASSESSING OFFICER AND ALL MATERIAL FACTS IN THIS REGARD WERE DISCLOSED BY THE ASSESSEE AND AVAILABLE BEFORE THE ASSESSING OFFICER, THEN THE RE - ASSESSMENT PROCEEDINGS INITIATED IN THE CASE AMOUNTS TO CHANGE OF OPINION, WHICH CANNOT BE ALLOWED. THE LEA RNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE DEDUCTION UNDER SECTION 80IB OF THE ACT HAS BEEN WITHDRAWN BECAUSE OF ADJUSTMENT OF BROUGHT FORWARD LOSSES. HE CONTEN D ED THAT WHERE THE DEDUCTION HAS BEEN DENIED TO THE ASSESSEE ON ACCOU NT OF FAILURE TO FILE THE AUDIT REPORT, THE SAME CAN BE RECTIFIED UNDER SECTION 154 OF THE ACT AS HELD BY PUNE BENCH OF TRIBUNAL IN NEMCO ENTERPRISES VS. ACIT (1993) 46 TTJ (PUNE) 110 . FURTHER, RELIANCE WAS PLACED ON THE DECISION OF HONBLE HIGH COURT OF CALCUTTA IN CIT VS. MAGNUM EXPORT (P) LTD. (2003) 262 ITR 10 (CAL) . 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF CIT(A). 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE FIRST ISSUE WHICH A RISES IN THE PRESENT APPEAL IS INVOKING OF JURISDICTION BY THE ASSESSING OFFICER UNDER SECTION 147 OF THE ACT BY RECORDING REASONS FOR REOPENING AND THEREAFTER, ISSUE OF NOTICE UNDER SECTION 148 OF THE ACT. IN ORDER TO APPRECIATE THE ISSUE, IT IS NECESSAR Y TO LOOK AT THE SE QUENCE OF EVENTS IN THE CASE, WHICH HAS BEEN FILED BY THE ASSESSEE, WHICH READS AS UNDER: - SR. NO. KEY EVENT DATE PAGE NO. 1 DATE OF FILING THE RETURN OF INCOME DECLARING GROSS TOTAL INCOME AS NIL UNDER NORMAL PROVISIONS OF ACT ON A CCOUNT OF SET - OFF OF BROUGHT FORWARD BUSINESS LOSSES OF PAST YEARS 31 - OCT - 03 REFER PAGE 8 OF THE PAPER BOOK FOR RELEVANT EXTRACT OF NOTES TO ITA NO. 1780 /PN/20 1 3 MERCEDES BENZ INDIA PVT. LTD. 6 RETURN 2 ORIGINAL ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT DETERMINING POSITIVE TOTAL INCOME AND RE JECTING THE CLAIM FOR DEDUCTION UNDER SECTION 80 - IB OF THE ACT 30 - MARH - 06 REFER PAGE 32 - 48 OF THE PAPER BOOK 3 RECTIFICATION APPLICATION UNDER SECTION 154 OF THE ACT FILED WITH THE AO ALONG WITH ACCOUNTANTS REPORT IN FORM 10CCB IN SUPPORT OF ITS CLAIM F OR DEDUCTION UNDER SECTION 80 - IB OF THE ACT 30 - AUG - 06 PAGE 10 - 23 OF THE PAPER BOOK 4 RECTIFICATION ORDER PASSED UNDER SECTION 154 OF THE ACT GRANTING DEDUCTION UNDER SECTION 80 - IB OF THE ACT 28 - FEB - 07 PAGE 24 - 28 OF THE PAPER BOOK 5 SECOND NOTICE UNDER SECTION 148 OF THE ACT INITIATING RE - ASSESSMENT FOR WITHDRAWAL OF DEDUCTION UNDER SECTION 80 - IB OF THE ACT 31 - MAR - 09 PAGE 29 OF THE PAPER BOOK 6 SUBMISSION FILED WITH AO IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE ACT REQUESTING TO TREAT REVISED RETUR N FILED ON 27 APRIL 2007 PURSUANT TO FIRST NOTICE UNDER SECTION 148 OF THE ACT AS RETURN FILED IN RESPONSE TO THE SAID NOTICE 30 - APR - 09 - 7 REASONS FOR INITIATING REASSESSMENT PROVIDED TO THE APPELLANT 15 - DEC - 09 PAGE 30 - 31 OF THE PAPER BOOK 8 SUBMISSION FILED WITH THE AO IN RESPONSE TO REASONS PROVIDED FOR INITIATING REASSESSMENT 22 - DEC - 09 PAGE 49 - 50 OF THE PAPER BOOK 9 SECOND REASSESSMENT ORDER PASSED UNDER SECTION 147 OF THE ACT DISALLOWING DEDUCTION UNDER SECTION 80 - IB OF THE ACT DUE TO NON - SUBMISSI ON OF AUDIT REPORT IN FORM 10CCB ALONG WITH THE RETURN OF INCOME 31 - DEC - 09 PAGE 35 - 36 OF THE APPEAL MEMO 10. IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE HAD FURNISHED THE RETURN OF INCOME ON 31.10.2003 AT RS.NIL BY SETTING OFF OF BROUGHT FORWARD BUSI NESS LOSSES OF PAST YEARS. THE COPY OF COMPUTATION OF TOTAL INCOME AND NOTES TO THE RETURN OF INCOME IS PLACED AT PAGES 1 TO 9 OF THE PAPER BOOK. AS PER NOTES ON CARRY FORWARD OF LOSSES , IT WAS POINTED OUT THAT AFTER ADJUSTMENT OF BROUGHT FORWARD LOSSES , THERE WOULD BE NO INCOME. VIDE NOTE NO.5, IT WAS FURTHER POINTED OUT THAT THE ASSESSEE HAD FULFILLED THE CONDITIONS UNDER SECTION 80IB OF THE ACT AND WAS ELIGIBLE FOR DEDUCTION BEGINNING FROM ASSESSMENT YEAR 1995 - 96 . HOWEVER, AS THERE WAS NO TAXABLE INC OME DURING THE PREVIOUS YEAR ENDING 31.03.2003 , THE DEDUCTION UNDER SECTION 80IB OF THE ACT WAS RS.NIL. IT WAS FURTHER STATED BY THE ASSESSEE THAT IF DURING THE ASSESSMENT PROCEEDINGS , THE ASSESSEE IS DETERMINED TO HAVE POSITIVE INCOME, THEN IT WOULD SUBM IT ITS CLAIM UNDER SECTION 80IB OF THE ACT. THE ORIGINAL ASSESSMENT ORDER WAS COMPLETED ITA NO. 1780 /PN/20 1 3 MERCEDES BENZ INDIA PVT. LTD. 7 UNDER SECTION 143(3) OF THE ACT, COPY OF WHICH IS PLACED AT PAGES 32 TO 48 OF THE PAPER BOOK, IN WHICH POSITIVE TOTAL INCOME WAS DETERMINED AT RS. 36,26,96,920/ - . WHIL E PASSING THE ASSESSMENT ORDER, THE ASSESSING OFFICER NOTED THAT THOUGH THE ASSESSEE VIDE ITS NOTE S TO THE RETURN OF INCOME VIDE PARA 5 HAD MENTIONED THAT IT WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB OF THE ACT FOR THE PERIOD OF 10 YEARS BEGINNING ASSE SSMENT YEAR 1995 - 96 , BUT THIS CLAIM OF THE ASSESSEE NEEDS TO BE REJECTED IN THE ABSENCE OF ANY AUDIT REPORT IN FORM NO.10CCB NOT BEING FILED WITH THE RETURN OF INCOME. FURTHER, THE ASSESSING OFFICER ALSO OBSERVED THAT THERE WERE NO LOSSES AS PER RECORD, W HICH COULD BE ALLOWED TO THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. PURSUANT TO THE ASSESSMENT ORDER BEING RECEIVED BY THE ASSESSEE, THE ASSESSEE FURNISHED THE RECTIFICATION APPLICATION UNDER SECTION 154 OF THE ACT ON 30.08.2006 ALONG WITH COPY OF ACC OUNTANTS REPORT IN FORM NO.10CCB, WHICH IS PLACED AT PAGES 10 TO 23 OF THE PAPER BOOK. THE ASSESSING OFFICER ACCEPTED THE CLAIM OF THE ASSESSEE AND GRANTED DEDUCTION UNDER SECTION 80IB OF THE ACT VIDE ORDER ASSESSEE AND GRANTED DEDUCTION UNDER SECTION 80IB OF THE ACT VIDE ORDER PASSED UNDER SECTION 154 OF THE ACT ON 28.02.20 07 , COPY OF THE ORDER IS PLACED AT PAGES 24 TO 28 OF THE PAPER BOOK. THE ASSESSING OFFICER HELD THAT ON VERIFICATION OF RECORD, IT WAS FOUND THAT THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB OF THE ACT AND SINCE THE MISTAKE WAS APPARENT FROM THE RECORD, THE ASSESSEES PLEA OF GRANT OF DEDUCTION UNDER SECTION 80IB OF THE ACT WAS ALLOWED. THEREAFTER, NOTICE UNDER SECTION 148 OF THE ACT, DATED 31.03.2009 INITIATING SECOND REASSESSMENT PROCEEDINGS FOR WITHDRAWING DEDUCTION UNDER SECTION 80IB OF THE ACT WAS ISSUED, COPY OF WHICH IS PLACED AT PAGE 29 OF THE PAPER BOOK AND COPY OF REASONS RECORDED FOR REOPENING ASSESSMENT IS PLACED AT PAGE S 30 - 31 OF THE PAPER BOOK, IN WHICH IT IS ADMITTED THAT ORIGINAL ASSESSMENT WAS COMPLETED ON 30.03.2006 AND THER EAFTER, ORDER UNDER SECTION 154 OF THE ACT WAS PASSED . D URING THE YEAR UNDER CONSIDERATION, THE ASSESSEE ITA NO. 1780 /PN/20 1 3 MERCEDES BENZ INDIA PVT. LTD. 8 WAS FOUND NOT TO HAVE SUBMITTED ANY AUDIT REPORT IN FORM NO.10CCB, WHICH WAS MANDATORY FOR ALL THE ASSESSEE S INCLUDING COMMERCIAL ASSESSEES. IN VIEW OF NON - SUBMISSION OF AUDIT REPORT , IT WAS OBSERVED THAT THE DEDUCTION ALLOWED UNDER SECTION 80IB OF THE ACT AMOUNTING TO RS.2.59 CRORES HAD ESCAPED THE ASSESSMENT WITHIN MEANING OF SECTION 147 OF THE ACT. THE ASSESSEE PARTICIPATED IN RE - ASSESSMENT PROCEED INGS, SOUGHT REASONS FOR REOPENING THE ASSESSMENT AND FILED OBJECTIONS THERETO. THE ASSESSMENT ORDER WAS PASSED UNDER SECTION 147 OF THE ACT ON 31.12.2009 DISALLOWING THE DEDUCTION CLAIMED UNDER SECTION 80IB OF THE ACT FOR NON - SUBMISSION OF AUDIT REPORT I N FORM NO.10CCB. 11. THE FIRST OBJECTION RAISED BY THE ASSESSEE IS THAT WHERE THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT HAS BEEN COMPLETED , UNDER THE PROVI SIONS OF SECTION 148 OF THE ACT NOTICE FOR REASSESSMENT COULD BE ISSUED WITHIN FOUR YEA RS FROM THE CLOSE OF THE YEAR, UNLESS THERE WAS FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. THE ASSESSMENT YEAR UNDER CONSIDERATION IS ASSESSMENT YEAR 2003 - 04 AND THE PERIOD OF FOUR YEARS EXPIRES ON 31.03.2008 , WHEREAS THE NOTI CE FOR REASSESSMENT IN THE PRESENT CASE HAS BEEN ISSUED ON 31.03.2009 . ADMITTEDLY, THE ASSESSEE HAD MADE DECLARATION OF COMPLETE FACTS IN THE RETURN OF INCOME AS REFERRED TO BY US IN THE PARAS HEREINABOVE, ALONG WITH COMPUTATION OF INCOME ITSELF. THE ASS ESSEE HAS FURNISHED A NOTE TO THE EFFECT THAT IT WAS ENTITLED TO THE BENEFIT OF CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT BEGINNING ASSESSMENT YEAR 1995 - 96 FOR A PERIOD OF 10 YEARS BUT SINCE THERE WAS NO TAXABLE INCOME DURING THE PREVIOUS YEAR ENDIN G 31.03.2003 , THE DEDUCTION UNDER SECTION 80IB OF THE ACT ALLOWABLE TO THE ASSESSEE WAS NIL. VIDE NOTE NO.5, IT WAS FURTHER SUBMITTED BY THE ASSESSEE THAT IF DURING THE COURSE OF ASSESSMENT PROCEEDINGS , POSITIVE INCOME IS DETERMINED IN THE HANDS OF ASSESS EE, THEN IT WOULD SUBMIT ITS CLAIM OF ITA NO. 1780 /PN/20 1 3 MERCEDES BENZ INDIA PVT. LTD. 9 DEDUCTION UNDER SECTION 80IB OF THE ACT. ADMITTEDLY, WHEN THE ORIGINAL ASSESSMENT ORDER DATED 30.03.2006 WAS PASSED UNDER SECTION 143(3) OF THE ACT , THE ASSESSING OFFICER DETERMINED THE POSITIVE INCOME AT RS.36,26,96, 920/ - . THE ASSESSING OFFICER IN THE BODY OF THE ASSESSMENT ORDER NOTES THAT THE ASSESSEE HAD MADE DECLARATION IN THIS REGARD THAT IT WOULD SUBMIT ITS CLAIM FOR SUCH DEDUCTION. HOWEVER, NO OPPORTUNITY WAS ALLOWED TO THE ASSESSEE TO SUBMIT ITS CLAIM. ON T HE OTHER HAND, THE ASSESSING OFFICER WAS OF THE VIEW THAT SINCE NO AUDIT REPORT IN FORM NO.10CCB WAS FILED ALONG WITH RETURN OF INCOME, THE ASSESSEE IS NOT ENTITLED TO THE SAID CLAIM . FIRST OF ALL, IT HAS BEEN HELD BY VARIOUS COURTS AND THE TR I BUNALS THAT THE FILING OF FORM NO.10CCB ALONG WITH RETURN OF INCOME IS DIRECTARY AND NOT MANDATORY IN NATURE. IN THE FACTS OF THE PRESENT CASE, WHERE THE INCOME COMPUTED IN THE HANDS OF ASSESSEE, BECAUSE OF ADJUSTMENT OF BROUGHT FORWARD LOSSES WAS NIL, THE ASSESSEE MADE DISCLOSURE TO THE EFFECT IN ITS RETURN OF INCOME AND ALSO SUBMITTED THAT IN CASE ANY POSITIVE INCOME WAS DETERMINED IN HIS HANDS, THEN IT SHOULD BE ALLOWED AN OPPORTUNITY INCOME WAS DETERMINED IN HIS HANDS, THEN IT SHOULD BE ALLOWED AN OPPORTUNITY TO FURNISH AUDIT REPORT. MERELY BECAUSE, THE AUDIT REPORT HAS NOT BEEN FILED AL ONG WITH RETURN OF INCOME CANNOT BE THE BASIS FOR REJECTION OF CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT AS HELD BY THE HONBLE MADHYA PRADESH HIGH COURT IN CIT VS. MEDICAPS LIMITED (2010) 323 ITR 554 (MP) AND OTHER DECISIONS AS RELIED UPON BY THE L EARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE. IN THIS REGARD, WE HOLD THAT WHERE THE ASSESSEE HAD FULLY AND TRULY DISCLOSED ALL THE MATERIAL FACTS VIS - - VIS COMPUTATION OF INCOME IN ITS HANDS, THE REASSESSMENT PROCEEDINGS, IF ANY, COULD BE INITIATED AGAINST THE ASSESSEE WITHIN FOUR YEARS FROM THE END OF RELEVANT YEAR AND WHERE THE REASSESSMENT PROCEEDINGS ARE INITIATED BEYOND THE PERIOD OF FOUR YEARS, THE SAME IS TO BE HELD TO BE INVALID. ITA NO. 1780 /PN/20 1 3 MERCEDES BENZ INDIA PVT. LTD. 10 12. WE FIND SUPPORT FROM THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN ANIL RADHAKRISHNA WANI VS. ITO (2010) 323 ITR 564 (BOM) , WHEREIN IT HAS BEEN HELD AS UNDER: - 7. THE PROVISO TO SECTION 147 OF THE INCOME - TAX ACT, 1961 STIPULATES, INTER ALIA THAT, WHERE AN ASSESSMENT UNDER SUB - SECTION (3) OF SECTION 143 HAS BEEN MADE, FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER SECTION 1 47 AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, FOR SUCH ASSESSMENT YEA R BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THAT ASSESSMENT YEAR. THE REVENUE HAS RELIED UPON SECTION 149(1)(B) UNDER WHICH NO NOTICE UNDER SECTION 148 CAN BE ISSUE D FOR THE RELEVANT ASSESSMENT YEAR AFTER FOUR YEARS, BUT NOT MORE THAN SIX YEARS HAVE ELAPSED FROM THE RELEVANT ASSESSMENT YEAR, UNLESS THE INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AMOUNTS OR IS LIKELY TO AMOUNT TO ONE LAKH OF RUPEES OR MORE. THE POWER TO REOPEN AN ASSESSMENT BEYOND A PERIOD OF FOUR YEARS BUT UP TO SIX YEARS UNDER SECTION 149(1)(B) IS SUBJECT TO THE REQUIREMENT SPELT OUT IN THE PROVISO TO SECTION 147. SECTION 149(1)(B) DOES NOT LIFT THE EMBARGO UNDER THE PROVISO TO SECTION 147 ON REOPENING AN ASSESSMENT BEYOND A PERIOD OF FOUR YEARS UNLESS THE CONDITIONS PRECEDENT ARE FULFILLED. SECTION 149(1) (B) PROVIDES THAT A NOTICE CANNOT BE ISSUED AFTER FOUR YEARS, BUT NOT MORE THAN AFTER SIX YEARS HAVE ELAPSED AFTER THE RELEVANT ASSESSMEN T YEAR, UNLESS THE INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT IS OR IS LIKELY TO AMOUNT TO RUPEES ONE LAKH OR MORE. THIS PROVISION HAS NOTHING TO DO WITH THE CONDITION PRECEDENT FOR REOPENING BEYOND FOUR YEARS, WHICH HAS TO BE FULFILLED IN ANY E VENT. THEREFORE, THE BASIC QUESTION THAT NEEDS TO BE ADDRESSED ON FACTS IS, AS TO WHETHER THERE WAS ANY FAILURE ON THE PART OF THE PETITIONER, AS THE ASSESSEE, TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. 1 3 . THE RECORDS O F PROCEEDINGS IN THE PRESENT CASE REFLECT THAT RETURN OF INCOME WAS FILED ON 31.10.2003 ALONG WITH WHICH A NOTE WAS APPENDED VIS - - VIS ITS CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT. THE ASSESSING OFFICER DURING THE COURSE OF ORIGINAL ASSESSMENT PRO CEEDINGS FAILED TO ALLOW ANY OPPORTUNITY TO THE ASSESSEE TO FURNISH THE AUDIT REPORT. HOWEVER, AFTER PASSING OF ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT, DATED 30.03.2006, THE ASSESSEE MOVED RECTIFICATION APPLICATION UNDER SECTION 154 OF THE ACT A LONG WITH COPY OF ACCOUNTANTS REPORT IN FORM NO.10CCB IN RESPECT OF ITS CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT. THE ASSESSING OFFICER ACCEPTED THE CONTENTION OF ASSESSEE AND OBSERVED THAT IT WAS A MISTAKE APPARENT FROM THE RECORD AND PASSED REC TIFICATION ORDER UNDER SECTION 154 OF THE ACT, DATED 28.02.2007 GRANTING DEDUCTION UNDER SECTION 80IB OF THE ACT . THESE ITA NO. 1780 /PN/20 1 3 MERCEDES BENZ INDIA PVT. LTD. 11 PROCEEDINGS REFLECT THAT A MISTAKE WHICH HAD CREPT IN THE ORDER OF ASSESSMENT WAS ACKNOWLEDGED BY THE ASSESSING OFFICER WHILE PASSING R ECTIFICATION ORDER. 1 4 . NOW, WE COME TO THE SECOND OBJECTION RAISED BY THE ASSESSEE THAT IN SUCH CIRCUMSTANCES, THE REASSESSMENT PROCEEDINGS INITIATED AGAINST THE ASSESSEE WERE CHANGE OF OPINION. WE FIND MERIT IN THE CLAIM OF ASSESSEE IN THIS REGARD, IN VIEW OF THE FACTS NARRATED ABOVE. ACCORDINGLY, WE HOLD THE REASSESSMENT PROCEEDINGS TO BE INVALID BOTH ON ACCOUNT OF BEING BEYOND FOUR YEARS AND ALSO ON ACCOUNT OF CHANGE OF OPINION. 1 5 . ANOTHER ASPECT TO BE NOTED IN THE CASE IS THAT AFTER ADJUSTMENT OF BROUGHT FORWARD LOSSES, THE INCOME DETERMINED IN THE HANDS OF ASSESSEE IS NIL AND THE BASIC REQUIREMENT OF SECTION 147 OF THE ACT IS THAT IN CASES WHERE THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FO R ANY ASSESSMENT YEAR, THEN HE MAY SUBJECT TO THE PROVISIONS OF THE ACT, ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME WHICH HAS ESCAPED ASSESSMENT. THE FIRST POINT OF START OF REASSESSMENT PROCEEDINGS IS THE REASON TO BELIEVE THAT ANY INCOME C HARGEABLE TO TAX HAS ESCAPED ASSESSMENT. SINCE AFTER ADJUSTMENT OF BROUGHT FORWARD LOSSES, THE INCOME IN THE HANDS OF ASSESSEE IS REDUCED TO NIL, AND WHERE THE ASSESSEE WOULD NOT BE ENTITLED TO THE BENEFIT OF DEDUCTION UNDER SECTION 80IB OF THE ACT IN THE ABSENCE OF ANY PROFITS, THERE IS NO MERIT IN REASSESSMENT PROCEEDINGS INITIATED AGAINST THE ASSESSEE. ACCORDINGLY, WE CANCEL THE SAME HOLDING THE RELEVANT PROCEEDINGS TO BE INVALID AND BEYOND LIMITATION PERIOD PRESCRIBED IN THE ACT. THE GROUNDS OF APPEA L NO.1 AND 2 RAISED BY THE ASSESSEE ARE THUS, ALLOWED. ITA NO. 1780 /PN/20 1 3 MERCEDES BENZ INDIA PVT. LTD. 12 1 6 . THE ISSUE IN GROUND OF APPEAL NO.3 DOES NOT SURVIVE AND ALSO BECOME ACADEMIC SINCE THE ASSESSEE IS NOT ENTITLED TO ANY CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT, IN VIEW OF INCOME BEING ASS ESSED IN THE HANDS OF ASSESSEE AT NIL FOR THE YEAR UNDER CONSIDERATION AFTER ADJUSTMENT OF BROUGHT FORWARD LOSSES. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 1 7 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 11 TH DAY OF APRIL , 201 6 . SD/ - SD/ - (PRADIP KUMAR KEDIA) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATE D : 11 TH APRIL , 201 6 . GCVSR GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - V , PUNE ; 4. / THE CIT - V, PUNE ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE