Hyundai Motor India Ltd., Kancheepuram V. Additional, CHENNAI

ITA 1784/CHNY/2010

• Counselvise Citation: 178421714 RSA 2010
• Duration Of Justice: 4 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 21-05-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 21-10-2010
• Court: TRIBUNAL
• Department Lawyers: JOE SEBASTIAN
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Reopening of assessment; Retrospective amendment; Tangible material
• Section: 143(3); 80HHC; 194C; 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . . . , . !' , # $ % [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.218/MDS/2010 / ASSESSMENT YEAR : 2009-10 THE ASSTT. COMMISSIONER OF INCOME-TAX TDS CIRCLE II CHENNAI VS. M/S HYUNDAI MOTOR INDIA LTD PLOT NO.H-1, SPICOT INDUSTRIAL PARK IRRUNGATTUKOTTAI SRIPERUMBADUR TALUK KANCHEEPURAM 602 105 [PAN AAACH 2364 M] ] ( &' / APPELLANT) ( ()&' /RESPONDENT) ./ I.T.A.NO.1784/MDS/2010 / ASSESSMENT YEAR : 2002-03 M/S HYUNDAI MOTOR INDIA LTD PLOT NO.H-1, SPICOT INDUSTRIAL PARK IRRUNGATTUKOTTAI SRIPERUMBADUR TALUK KANCHEEPURAM 602 105 VS. THE ADDL. COMMISSIONER OF INCOME-TAX LARGE TAXPAYER UNIT CHENNAI [PAN AAACH 2364 M] ] ( &' / APPELLANT) ( ()&' /RESPONDENT) DEPARTMENT BY : SHRI JOE SEBASTIAN, CIT ASSESSEE BY : SHRI R. VIJAYARAGHAVAN, ADVOCATE / DATE OF HEARING : 21 - 05 - 2015 / DATE OF PRONOUNCEMENT : 17 - 0 7 - 2015 ITA NO. 218 & 1784/10 :- 2 -: / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THE REVENUE FILED APPEAL FOR ASSESSMENT YEAR 200 9-10 AND THE ASSESSEE FILED APPEAL FOR ASSESSMENT YEAR 2002- 03. THEREFORE, WE HEARD BOTH THE APPEALS TOGETHER AND DISPOSE OF THE SAME BY THIS COMMON ORDER. 2. LES US FIRST TAKE THE REVENUES APPEAL FOR THE ASSE SSMENT YEAR 2009-10. 3. THE ONLY ISSUE ARISES FOR CONSIDERATION IS NON-DEDU CTION OF TDS U/S 194C OF THE ACT. 4. SHRI JOE SEBASTIAN, LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE ENGAGED ITSELF IN THE BUSINESS OF MANUFACTURING AND SALE OF PASSENGER CARS. DURING T HE COURSE OF BUSINESS ACTIVITY, THE ASSESSEE ENTERED INTO AN AG REEMENT WITH M/S HANIL AUTOMATIVE INDIA PVT. LTD. FOR MANUFACTURING THE COMPONENTS REQUIRED FOR MANUFACTURING OF PASSENGER CARS. REFE RRING TO THE ORDER OF THE ASSESSING OFFICER, THE LD. DR POINTED OUT TH AT THE ASSESSEE ENTERED INTO JOB WORKS WITH VARIOUS COMPANIES FOR T HE PURPOSE OF PURCHASING THE REQUIRED SPARE PARTS FOR MANUFACTURI NG PASSENGER CARS. ACCORDING TO THE LD. DR, WHEN THE ASSESSEE ENTERED INTO WORKS CONTRACT WITH OTHER MANUFACTURERS, IT HAS TO NECESS ARILY DEDUCT TAX U/S ITA NO. 218 & 1784/10 :- 3 -: 194C OF THE ACT AT THE TIME OF MAKING THE PAYMENT O R CREDITING THE AMOUNT IN THE ACCOUNT OF THE RESPECTIVE PERSONS. T HE LD. DR FURTHER SUBMITTED THAT THE VENDOR OF THE ASSESSEE MANUFACT URE THE GOODS EXCLUSIVELY FOR THE ASSESSEE AND THE GOODS MANUFAC TURED BY THE VENDOR CANNOT BE SOLD TO ANYONE OTHER THAN THE ASS ESSEE. REFERRING TO THE ASSESSMENT ORDER, MORE PARTICULARLY PARA 4.3 .5, THE LD. DR SUBMITTED THAT IN FACT THE VENDOR WAS PROHIBITED FR OM MANUFACTURING THE SAME COMPONENT FOR OTHER PARTIES THEREFORE, THE VENDER IS MANUFACTURING THE GOODS FOR SUPPLYING THE SAME TO T HE ASSESSEE. THE LD. DR FURTHER SUBMITTED THAT THE VENDOR MANUFACTUR E THE GOODS AS PER THE SPECIFICATION PROVIDED BY THE ASSESSEE THEREFO RE, THE SAME CANNOT BE USED FOR OTHER COMPANIES WHO ARE ENGAGED IN THE BUSINESS OF MANUFACTURING THE PASSENGER CARS. THE LD. DR FURTH ER SUBMITTED THAT THE SAME CANNOT BE SOLD IN THE OPEN MARKET. REFERR ING TO THE COPY OF THE AGREEMENT MORE PARTICULARLY CLAUSE 12.5.1, THE LD. DR SUBMITTED THAT THE ASSESSEE HAS A RIGHT TO AUDIT THE VENDOR S PRODUCTION PROCESS AND THE QUALITY ASSURANCE SYSTEM EMPLOYED FOR MANUF ACTURING THE PARTS ORDER BY THE ASSESSEE. THEREFORE, ACCORDING TO THE LD. DR, THE ENTIRE MANUFACTURING PROCESS WAS DONE ON THE GUIDAN CE OF THE ASSESSEE. MOREOVER, REFERRING TO CLAUSE 5.1 OF THE AGREEMENT, THE LD. DR SUBMITTED THAT THE ASSESSEE SHALL SUPPLY THE RA W MATERIAL FOR THE PURPOSE OF MANUFACTURING THE SPARE PARTS ORDERED BY THE ASSESSEE. ITA NO. 218 & 1784/10 :- 4 -: ACCORDING TO THE LD. DR, SINCE THE ENTIRE PARTS WER E MANUFACTURED BY THE VENDOR ON THE BASIS OF THE MATERIAL SUPPLIED BY THE ASSESSEE, THE ASSESSEE IS LIABLE FOR DEDUCTING TAX U/S 194C OF T HE ACT ON THE PAYMENT MADE TO VENDORS. THE LD. DR CLARIFIED THAT IT IS NOT A CASE OF MERE PURCHASE OF SPARE PARTS. IT IS A CASE OF WORKS CONTRACT BY SUPPLYING THE RAW MATERIAL BY THE ASSESSEE, THEREF ORE, THE CIT(A) IS NOT JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSE E. REFERRING TO THE ORDER OF THE CIT(A), THE LD. DR SUBMITTED THAT THE CIT(A), WITHOUT GOING TO THE MATERIAL FACTS OF THE CASE, ALLOWED TH E CLAIM ON THE BASIS OF CERTAIN CASE LAW. ACCORDING TO THE LD. DR, EACH CASE LAW HAS TO BE APPLIED TO THE FACTS OF THE CASE. SINCE THE FACTS OF THE CASE CLEARLY ESTABLISH THAT THE ASSESSEE ENGAGED THE VENDOR FOR MANUFACTURING THE SPARE PARTS BY SUPPLYING THE RAW MATERIAL, ACCORDIN G TO THE LD. DR, THE ASSESSEE IS LIABLE TO DEDUCT TAX AT THE TIME OF PAY MENT OR AT THE TIME OF CREDITING THE SAME IN THE ACCOUNTS OF THE RESPEC TIVE VENDORS. 5. ON THE CONTRARY, SHRI R. VIJAYARAGHAVAN, LD. COUNSE L FOR THE ASSESSEE SUBMITTED THAT IN THE COURSE OF ITS BUSINE SS ACTIVITY, ADMITTEDLY, THE ASSESSEE ENTERED INTO AN AGREEMENT FOR MANUFACTURING SPARE PARTS BY SUPPLYING THE RAW MATERIAL AND THE ASSESSEE HAS ALSO ENTERED INTO AN AGREEMENT FOR PURCHASE OF THE GOODS . WHEREVER THE ASSESSEE ENGAGED THE VENDORS FOR MANUFACTURING THE SPARE PARTS BY SUPPLYING THE RAW MATERIAL, THE ASSESSEE HAS TREAT ED THE SAME AS ITA NO. 218 & 1784/10 :- 5 -: WORKS CONTRACT AND TAX WAS DEDUCTED. THE DISPUTE I S ONLY WITH REGARD TO PURCHASE OF SPARE PARTS DIRECTLY FROM THE VENDOR S. ACCORDING TO THE LD. COUNSEL, IN RESPECT OF PURCHASES, THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX U/S 194C OF THE ACT. REFERRING TO THE PROVISIONS OF SECTION 194C, THE LD. COUNSEL CLARIFIED THAT 194C IS APPLIC ABLE ONLY IN RESPECT OF WORKS CONTRACT AND NOT FOR PURCHASE OF THE GOODS. EVEN OTHERWISE, ACCORDING TO THE LD. COUNSEL, THE RECIPIENT OF THE AMOUNT HAS ALREADY PAID THE TAXES. THE CONFIRMATION LETTERS FROM THE RESPECTIVE VENDORS WERE ALSO FILED. ACCORDING TO THE LD. COUNSEL, ALL THE VENDORS HAVE PAID THE TAXES IN ADVANCE UNDER THE SCHEME OF THE INCOME -TAX ACT. THEREFORE, THERE IS NO QUESTION OF DISALLOWING THE CLAIM OF THE ASSESSEE. THE LD. COUNSEL FURTHER SUBMITTED THAT T HE RECIPIENTS/VENDORS HAVE CONFIRMED THE PAYMENT OF IN COME TAX AND THE COPY OF CONFIRMATION LETTERS ARE AVAILABLE AT PAGES 1 TO 15 OF THE PAPER BOOK. 6. THE LD. COUNSEL FURTHER SUBMITTED THAT IN HINDUSTAN SHIPYARD LTD VS STATE OF ANDHRA PRADESH [2000] 119 STC 533, THE APEX COURT HAD AN OCCASION TO CONSIDER AN IDENTICAL ISSUE. A SHIP BUILDER ENTERED INTO A CONTRACT TO BUILD, LAUNCH, FIT EQUIP, TEST A ND COMPLETE A SPECIFIED NUMBER OF VESSELS AT A SHIP YARD AND TO DELIVER TH EM. THE BUILDING OF THE VESSELS WAS TO BE UNDER THE INSTRUCTIONS AND SP ECIFICATIONS PROVIDED BY THE RESPECTIVE PARTIES. THE BUILDER HA S TO FURNISH ALL ITA NO. 218 & 1784/10 :- 6 -: LABOUR, MACHINERY, MATERIALS, EQUIPMENT ETC FOR THE CONSTRUCTION OF THE VESSELS TO MAKE THEM COMPLETELY READY. IN THOSE CI RCUMSTANCES, THE APEX COURT FOUND THAT THE CONTRACT IN QUESTION INVO LVE SALE OF THE RESPECTIVE VESSEL WITHIN THE MEANING OF ANDHRA PRAD ESH GENERAL SALES TAX ACT, 1957. THE LD. COUNSEL HAS ALSO PLACED HIS RELIANCE ON VARIOUS OTHER CASE LAWS AND SUBMITTED THAT EVEN THOUGH THE SPARE PARTS WERE MANUFACTURED BY THE RESPECTIVE VENDORS ON THE BASIS OF THE SPECIFICATION AND TECHNICAL DETAILS PROVIDED BY THE ASSESSEE, STILL THE SAME HAS TO BE TREATED AS SALE AND NOT AS WORKS CONTRACT. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO GONE THROUGH THE PROVISIONS OF SECTION 194C OF THE ACT. SEC. 194C(7) EXPLANATION DEFINES THE WORD WORK. FOR THE PURPO SE OF CONVENIENCE, WE ARE REPRODUCING BELOW EXPLANATION (IV) TO SEC. 1 94C(7) OF THE ACT: (IV) WORK SHALL INCLUDE (A) ADVERTISING; (B) BROADCASTING AND TELECASTING INCLUDING PRODUCTION OF PROGRAMMES FOR SUCH BROADCASTING OR TELECASTING; (C) CARRIAGE OF GOODS OR PASSENGES BY ANY MODE OF TRANSPORT OTHER THAN BY RAILWAYS (D) CATERING; (E) MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO THE REQUIREMENT OR ITA NO. 218 & 1784/10 :- 7 -: SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM SUCH CUSTOMER, BUT DOES NOT INCLUDE MANUFACTURING OR SUPPLYING A P RODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM A PERSON, OTHER THAN SUCH CUSTOMER.] 8. FROM THE ABOVE DEFINITION, THE WORK INCLUDES MANU FACTURING OR SUPPLYING A PRODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM SUCH CU STOMER. THE ABOVE DEFINITION SPECIFICALLY EXCLUDES THE PRODUCT MANUFACTURED BY USING THE MATERIAL FROM A PERSON OTHER THAN THE CUS TOMER. THEREFORE, EVEN THOUGH THE PRODUCT WAS MANUFACTURED AS PER THE SPECIFIC REQUIREMENT OF THE ASSESSEE AND THE SPECIFICATION P ROVIDED BY THE ASSESSEE IF THE MATERIAL WAS NOT SUPPLIED BY THE A SSESSEE THEN IT MAY NOT FALL WITHIN THE DEFINITION OF WORK U/S 194C. IN THIS BACKDROP, LET US NOW EXAMINE THE AGREEMENT SAID TO BE ENTERED INT O BETWEEN THE PARTIES. THE ASSESSEE HAS FILED COPY OF THE SAMPL E AGREEMENT SAID TO BE ENTERED INTO BETWEEN HE ASSESSEE AND M/S HANIL AUTOMOTIVE INDIA PVT. LTD. THE TITLE OF THE AGREEMENT IS DESCRIBED AS BASIC PURCHASE AGREEMENT AND EXECUTED ON 2.1.2008. CLAUSE 3.1 OF THE AGREEMENT PROVIDES THAT THE ASSESSEE SHALL FURNISH THE VENDO R WITH DRAWINGS, DOCUMENTS, SAMPLES ETC. OF THE ORDERED PARTS SO AS TO ENABLE THE VENDOR TO MANUFACTURE THE PRODUCT. THIS CLAUSE FUR THER PROVIDES FOR ITA NO. 218 & 1784/10 :- 8 -: PROVIDING MOULDS, MACHINERY, FACILITIES AND/OR RAW MATERIALS. AT CLAUSE 5.1 OF THE AGREEMENT, THE ASSESSEE HAS TO SUPPLY T HE RAW MATERIAL, SEMI FINISHED PRODUCTS, PRODUCTS ETC. THE MATERIAL SUPPLIED BY THE ASSESSEE SHALL BE USED EXCLUSIVELY FOR MANUFACTURIN G THE PRODUCTS ORDERED BY THE ASSESSEE. THE VENDOR HAS NO RIGHT TO DIVERT THE MATERIAL FOR OTHER USE. FROM THE ABOVE AGREEMENT, IT IS OBVIOUS THAT APART FROM PROVIDING DRAWINGS, DOCUMENTS, SAMPLES, MOULDS, MACHINERY, FACILITIES, THE ASSESSEE HAS ALSO TO PR OVIDE RAW MATERIAL SO AS TO ENABLE THE VENDOR TO MANUFACTURE THE PRODUCTS ORDERED BY THE ASSESSEE. THE VENDOR HAS NO RIGHT TO USE THE RAW M ATERIAL SUPPLIED BY THE ASSESSEE FOR ANY OTHER USE. THEREFORE, THE AG REEMENT NOW FILED BEFORE THE TRIBUNAL DISCLOSES THAT THE ASSESSEE HA S TO SUPPLY THE RAW MATERIAL AND THE VENDOR HAS TO MANUFACTURE THE PROD UCTS ORDERED BY THE ASSESSEE EXCLUSIVELY FOR THE ASSESSEE ON THE BASIS OF THE SPECIFICATION/DRAWING PROVIDED. 9. THE ASSESSING OFFICER, AFTER GOING THROUGH THE AGRE EMENT, FOUND THAT THE AGREEMENT EXECUTED BY THE ASSESSEE WITH VARIOUS VENDORS DO NOT HAVE THE NORMAL FEATURES OF CONTRACT FOR SALE. THIS AGREEMENT, ACCORDING TO THE ASSESSING OFFICER, IS A CONTRACT FOR WORK. THEREFORE, THE ASSESSING OFFICER FOUND THAT THE ASS ESSEE HAS TO DEDUCT TAX. THE CIT(A), ON THE BASIS OF THE WRITTEN SUBMI SSION FILED BY THE ASSESSEE, CALLED FOR THE REMAND REPORT FROM THE ASS ESSING OFFICER. THE ITA NO. 218 & 1784/10 :- 9 -: CIT(A), AFTER REPRODUCING THE REMAND REPORT FILED B Y THE ASSESSING OFFICER AND THE OBJECTIONS OF THE ASSESSEE, FOUND THAT THE SUPPLIES MADE BY THE ASSESSEE OTHER THAN THOSE UNDER THE JO B WORK BASIS IS PURE CONTRACT OF SALE, THEREFORE, SEC. 194C IS NOT APPLICABLE. WHILE CONCLUDING THAT OTHER THAN THOSE UNDER JOB WORK BAS IS, THE SALES HAS TO BE TREATED AS ONE OF CONTRACT FOR SALE, THE CIT(A) MADE A REFERENCE ABOUT THE AGREEMENT ENTERED INTO BETWEEN THE PARTIE S AT PARA 11.1 OF HIS ORDER. REFERRING TO CLAUSE 5.1 OF THE AGREEMEN T, THE CIT(A) FOUND THAT THIS CLAUSE IS MEANT FOR JOB WORK GIVEN BY THE ASSESSEE TO THE VENDORS. THE CIT(A) HAS ALSO FOUND THAT THE BASIC PURCHASE AGREEMENT IS AN OMNIBUS PROVIDING FOR BOTH JOB WORK AS WELL AS THE SALE OF PARTS. HOWEVER, THE CIT(A) HAS NOT QUANTIF IED WHAT ARE THE COMPONENTS WHICH WERE ORDERED BY THE ASSESSEE ON C ONTRACT BASIS AND WHAT ARE THE COMPONENTS WHICH WERE PURCHASED BY THE ASSESSEE AS ONE OF CONTRACT FOR SALE. AFTER MAKING A GENERA LIST DISCUSSION, THE CIT(A) REFERRED TO VARIOUS CASE LAWS AND CONCLUDED THAT OTHER THAN THOSE UNDER JOB WORK BASIS THE SUPPLIES MADE BY THE VENDOR ARE OF PURE CONTRACT OF SALE. THE CONTENTION OF THE ASSE SSEE BEFORE THIS TRIBUNAL IS THAT IN RESPECT OF THE SPARE PARTS ORDE RED BY THE ASSESSEE ON WORKS CONTRACT BASIS, TAX WAS DEDUCTED AND ONLY IN RESPECT OF COMPONENTS PURCHASED OTHER THAN CONTRACT FOR WORK, TAX WAS NOT DEDUCTED. DURING THE COURSE OF HEARING, IT WAS NOT BROUGHT TO THE ITA NO. 218 & 1784/10 :- 10 -: NOTICE OF THE BENCH THAT WHICH CLAUSES IN THE AGREE MENT ENABLE THE ASSESSEE TO PURCHASE THE SPARE PARTS OTHER THAN THE ONE IN WORKS CONTRACT. CLAUSE 5.1 AS POINTED OUT BY THE CIT(A), REFERS TO MANUFACTURE OF GOODS ON WORKS CONTRACT. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THAT THE CIT(A) HIMS ELF CAME TO THE CONCLUSION THAT THE ASSESSEE HAS TO DEDUCT TAX IN RESPECT OF THE RAW MATERIAL SUPPLIED UNDER THE WORKS CONTRACT. IN THE ABSENCE OF ANY OTHER PROVISIONS IN THE AGREEMENT WHICH ENABLE THE ASSESSEE TO PURCHASE THE GOODS DIRECTLY OTHER THAN THE RAW MATE RIAL SUPPLIED, IT IS NOT KNOWN HOW THE CIT(A) CAME TO THE CONCLUSION THA T THE MATERIAL SUPPLIED BY THE VENDOR IS PURE CONTRACT FOR SALE. 10. THE ASSESSEE HAS FILED A COPY OF THE LETTER DATED 13.11.2009 FROM HANIL AUTOMOTIVE INDIA PVT. LTD. IN THIS LETT ER, M/S HANIL AUTOMOTIVE INDIA PVT. LTD ADMITS THAT FOR JOB WORK OF AUTOMOBILE PARTS TO THE CUSTOMERS, THE COMPANY QUOTES THE PRICE FOR JOB WORK ONLY. THE MATERIAL WOULD BE SUPPLIED BY THE CUSTOMER AND THE COMPANY IN TURN CARRIES OUT THE JOB WORK AND RETURNS THE FINIS HED GOODS TO THE RESPECTIVE CUSTOMERS. M/S HANIL AUTOMOTIVE INDIA P VT. LTD. MANUFACTURE SPARE PARTS TO VARIOUS OTHER MANUFACTUR ES OF MOTOR CARS OTHER THAN THE ASSESSEE. SINCE THE AGREEMENT DOES NOT CLARIFY WHETHER THE GOODS PURCHASED BY THE ASSESSEE IS ONE OF CONTRACT FOR SALE OR WORKS CONTRACT, THIS TRIBUNAL IS OF THE CO NSIDERED OPINION THAT ITA NO. 218 & 1784/10 :- 11 -: THE MATTER NEEDS TO BE RE-EXAMINED BY THE ASSESSING OFFICER. THE CIT(A) HAS ALREADY OBSERVED AFTER REFERRING TO CLAU SE 5.1 OF THE AGREEMENT THAT THIS CLAUSE IS MADE FOR WORKS CONTRA CT. HOWEVER, HE FAILED TO POINT OUT WHAT IS THE OTHER CLAUSE WHICH ENABLES THE ASSESSEE TO PURCHASE THE GOODS ON CONTRACT FOR SALE. THE CI T(A) HAS MADE A GENERAL OBSERVATION THAT THE AGREEMENT IS A COMPREH ENSIVE ONE WHICH PROVIDES FOR PURCHASE OF GOODS UNDER A CONTRACT ALS O. AS ALREADY OBSERVED, THERE IS NO CLAUSE IN THE AGREEMENT BROUG HT TO THE NOTICE OF THE BENCH WHICH WOULD SUGGEST ANY CONTRACT FOR SALE OF GOODS. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPIN ION THAT GIVING ONE MORE OPPORTUNITY TO THE ASSESSEE TO PLACE THE MAT ERIAL FACTS BEFORE THE ASSESSING OFFICER WOULD PROMOTE THE CAUSE OF JU STICE. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE A ND THE ENTIRE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL REEXAMINE THE ISSUE AFRESH ON THE BAS IS OF THE AGREEMENT SAID TO BE ENTERED INTO BY THE ASSESSEE AND THE VE NDORS AND THEREAFTER FIND OUT WHETHER IT IS A SIMPLE PURCHASE OF GOODS BY THE ASSESSEE UNDER A CONTRACT FOR SALE OR THE AGREEMENT IS FOR WORKS CONTRACT. THE ASSESSING OFFICER SHALL ALSO VERIFY WHETHER THE RESPECTIVE VENDORS/RECIPIENTS OF THE MONEY HAVE PAID THE RESPE CTIVE TAXES AS PER THE CONFIRMATION LETTER FILED BY THEM. WITH THE AB OVE OBSERVATION, THE ITA NO. 218 & 1784/10 :- 12 -: ENTIRE ISSUE IS REMITTED BACK TO THE FILE OF THE AS SESSING OFFICER FOR RE- EXAMINATION. 11. NOW, COMING TO THE ASSESSEES APPEAL FOR ASSESSMEN T YEAR 2002-03, THE FIRST ISSUE IS WITH REGARD TO REOPENIN G OF ASSESSMENT. 12. SHRI R. VIJAYARAGHAVAN, LD. COUNSEL FOR THE ASSESSE E SUBMITTED THAT THE ASSESSMENT PROCEEDING WAS ORIGI NALLY COMPLETED U/S 143(3) OF THE ACT ON 29.3.2005 DETERMINING THE TOTAL INCOME AT ` 35,19,38,277/-. THE ASSESSEE ALSO FILED AN APPEAL BEFORE THE CIT(A) AND THE CIT(A) BY ORDER DATED 29.2.2008 PARTLY ALLO WED THE CLAIM OF THE ASSESSEE. HOWEVER, THE ASSESSING OFFICER FOUND THAT DEDUCTION U/S 80HHC WAS WRONGLY ALLOWED IN THE ORIGINAL ASSES SMENT ORDER. THEREFORE, HE REOPENED THE ASSESSMENT U/S 147 BY I SSUING NOTICE U/S 148 OF THE ACT ON 17.3.2009. ACCORDING TO THE LD. COUNSEL, THE ASSESSMENT YEAR UNDER CONSIDERATION IS 2002-03. TH E NOTICE U/S 148 WAS ISSUED ONLY ON 17.3.2009 WHICH IS BEYOND FOUR Y EARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE LD. COUNSEL F URTHER POINTED OUT THAT THERE IS NO ALLEGATION AGAINST THE ASSESSEE T HAT THERE WAS ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TH E MATERIAL FACTS WHICH ARE NECESSARY FOR COMPLETING THE ASSESSMENT. IN F ACT, THE ASSESSING OFFICER REOPENED THE ASSESSMENT ONLY ON THE BASIS O F THE RETROSPECTIVE AMENDMENT MADE BY THE LEGISLATURE IN SECTION 80HHC( 3) OF THE ACT. ITA NO. 218 & 1784/10 :- 13 -: ACCORDING TO THE LD. COUNSEL, THE ASSESSEE IS EXPE CTED TO FILE THE RETURN OF INCOME ON THE BASIS OF LAW WHICH PREVAILS ON THE LAST DAY OF THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR. THE ASSESSEE IS NOT EXPECTED TO ANTICIPATE THE AMENDMENT MADE BY TH E PARLIAMENT IN 2005 RETROSPECTIVELY WHILE FILING THE RETURN OF INC OME FOR THE ASSESSMENT YEAR 2002-03. THEREFORE, ACCORDING TO T HE LD. COUNSEL, THERE IS NO NEGLIGENCE ON THE PART OF THE ASSESSEE IN DISCLOSING THE MATERIAL FACTS RELEVANT FOR COMPLETING THE ASSESSME NT, HENCE THE REOPENING OF ASSESSMENT IS NOT VALID. 2. ON THE CONTRARY, SHRI JOE SEBASTIAN, THE LD. DR SUB MITTED THAT THE ASSESSING OFFICER HAS EVERY AUTHORITY TO R EOPEN THE ASSESSMENT PROVIDED THERE IS A TANGIBLE MATERIAL AV AILABLE ON RECORD TO SHOW THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. ACCORDING TO THE LD. DR, THE ORIGINAL ASSESSMENT WA S IN FACT COMPLETED ON 29.3.2005. THE AMENDMENT TO SECTION 80HHC(3) BY INSERTING SECOND, THIRD AND FOURTH PROVISO WAS MADE BY TAXATI ON LAWS (AMENDMENT) ACT, 2005 WITH RETROSPECTIVE EFFECT FRO M 1.4.1998. SINCE THE AMENDMENT BADE BY TAXATION LAWS (AMENDMENT) ACT , 2005 WAS NOT AVAILABLE IN THE STATUTE BOOK WHEN THE ORIGINAL ASSESSMENT ORDER WAS PASSED, THE ASSESSING OFFICER COULD NOT TAKE NO TE OF THE SAME WHILE COMPLETING THE ASSESSMENT. ACCORDING TO THE LD. DR, THE ITA NO. 218 & 1784/10 :- 14 -: RETROSPECTIVE AMENDMENT MADE WITH EFFECT FROM 1.4.1 998 WOULD BE APPLICABLE FOR THE YEAR UNDER CONSIDERATION, THEREF ORE, THE ASSESSING OFFICER, IN ORDER TO GIVE EFFECT TO THE RETROSPECTI VE AMENDMENT MADE BY THE PARLIAMENT BY TAXATION LAWS (AMENDMENT)ACT, 2005, REOPENED THE ASSESSMENT BY ISSUING NOTICE U/S 148 ON 17.3.2 009. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. AS RIGHTLY SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, EVERY TAX PAYER I S FILING RETURN OF INCOME ON THE BASIS OF THE LAW STANDS AS ON THE LAS T DAY OF THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDE R CONSIDERATION. THE ASSESSMENT YEAR UNDER CONSIDERATION IS 2002-03, THEREFORE, THE ASSESSEE IS EXPECTED TO FILE THE RETURN OF INCOME O N THE BASIS OF THE LAW WHICH PREVAILS AS ON 31.3.2002. THE ASSESSEE CANNOT BE EXPECTED TO ANTICIPATE THE RETROSPECTIVE AMENDMENT MADE BY THE PARLIAMENT BY TAXATION LAWS (AMENDMENT) ACT, 2005, WHILE FILING THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2002-03. MOREOVER, IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE FAILED T O FURNISH/DISCLOSE THE MATERIAL FACTS WHICH ARE RELEVANT FOR COMPLETIN G THE ASSESSMENT. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT IN THE ABSENCE OF ANY NEGLIGENCE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELEVANT FOR COMPLETING THE ASSESSME NT ON THE BASIS OF ITA NO. 218 & 1784/10 :- 15 -: THE LAW WHICH PREVAILS AS ON 31.3.2002, THE ASSESSM ENT CANNOT BE REOPENED ON THE BASIS OF THE RETROSPECTIVE AMENDMEN T MADE IN THE YEAR 2005. THIS TRIBUNAL IS OF THE CONSIDERED OPI NION THAT PROVISO TO SEC. 147 IS VERY CLEAR THAT AFTER EXPIRY OF FOURS F ROM THE END OF THE RELEVANT ASSESSMENT YEAR, THE ASSESSING OFFICER CAN NOT REOPEN THE ASSESSMENT WHICH WAS COMPLETED U/S 143(3) OF THE A CT UNLESS THERE WAS NEGLIGENCE ON THE PART OF THE ASSESSEE IN DISC LOSING FULLY AND TRULY ALL MATERIAL FACTS RELEVANT FOR COMPLETING THE ASSE SSMENT. IN THIS CASE, THE ASSESSEE HAS DISCLOSED ALL MATERIAL FACTS RELE VANT FOR COMPLETING THE ASSESSMENT AND THE ASSESSMENT WAS REOPENED BY T HE ASSESSING OFFICER ONLY ON THE BASIS OF THE RETROSPECTIVE AMEN DMENT MADE BY THE PARLIAMENT IN THE YEAR 2005. AS ALREADY OBSERVED, THE ASSESSEE IS NOT EXPECTED TO ANTICIPATE THE RETROSPECTIVE AMENDMENT THAT MAY BE MADE BY THE PARLIAMENT IN FUTURE. THEREFORE, THE REOPEN ING OF ASSESSMENT U/S 147 IS BAD IN LAW. ACCORDINGLY, THE CONSEQUENT IAL ASSESSMENT MADE BY THE ASSESSING OFFICER CANNOT STAND IN THE E YE OF LAW. 4. THE LD. COUNSEL HAS ALSO ADVANCED HIS ARGUMENT ON M ERIT WITH REGARD TO EXCLUSION OF PROCESSING CHARGES AND DISALLOWANCE OF DEDUCTION U/S 80HHC ON EXPORT INCENTIVE. SINCE THI S TRIBUNAL FOUND THAT REOPENING OF THE ASSESSMENT IS BAD IN LAW, IT MAY NOT BE NECESSARY TO DEAL WITH THE ARGUMENTS OF THE LD. COU NSEL ON MERIT. ITA NO. 218 & 1784/10 :- 16 -: ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES AR E SET ASIDE AND THE APPEAL OF THE ASSESSEE IS ALLOWED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE I.T.A.NO. 218/MDS/2010 IS ALLOWED FOR STATISTICAL PURPOSES AN D THAT OF THE ASSESSEE I.T.A.NO.1784/MDS/2010 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH OF JULY, 2015, AT CHENNAI. SD/- SD/- ( . !' ) (A. MOHAN ALANKAMONY) # / ACCOUNTANT MEMBER ( . . . ) ) (N.R.S. GANESAN) / JUDICIAL MEMBER / CHENNAI ! / DATED: 17 TH JULY, 2015 RD !' # $% &% / COPY TO: 1 . '( / APPELLANT 4. ) / CIT 2. #*'( / RESPONDENT 5. %+, # - / DR 3. ) () / CIT(A) 6. ,/ 0 / GF