M/s. Mahalakshmi Traders, CHENNAI V. ACIT, CHENNAI

ITA 1789/CHNY/2002

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57797 (ITAT-CHENNAI)
• Duration Of Justice: 9 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 11-01-2012
• Assessment Year: 1995-1996
• Appeal Filed On: 20-11-2002
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K E B RANGAR AJAN JR
• Keywords: Reopening of assessment; Difference of opinion; Reason to believe; Change of opinion
• Section: 80HHC; 147; 148; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER ITA NOS.1789 & 1790/MDS/2002 (ASSESSMENT YEARS: 1995-96 & 1997-98) M/S. MAHALAKSHMI TRADERS, 248, LINGHI CHETTY STREET, CHENNAI-600 001. PAN: AAAFM0930F GI:M-8306 VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-VIII, CHENNAI-600 006. (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SHRI K. E.B.RANGARAJAN, JR. STANDING COUNSEL DATE OF HEARING : 11 TH JANUARY, 2012 DATE OF PRONOUNCEMENT : 11 TH JANUARY, 2012 O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THESE APPEALS HAVE BEEN FILED BY THE ASSESSEE FOR ASSESSMENT YEARS 1995-96 AND 1997-98 AGAINST THE OR DER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) DAT ED 2.8.2002. IN THE FIRST ROUND THE TRIBUNAL HAD DECI DED THE LEGAL ISSUE REGARDING REOPENING OF THE ASSESSMENT UNDER S ECTION 147 READ WITH SECTION 148 OF THE ACT BY HOLDING THA T THE ASSESSMENT COULD NOT HAVE BEEN REOPENED UNDER SECTI ON 147 ITA NOS. 1789 & 1790/MDS/2002 2 BUT THERE BEING COMPUTATIVE ERROR/MISTAKE IT SHOULD HAVE BEEN RECTIFIED UNDER SECTION 154 OF THE ACT BY THE ASSES SING OFFICER HIMSELF. AGAINST THIS FINDING, THE REVENUE WENT IN APPEAL BEFORE THE HONBLE JURISDICTIONAL HIGH COURT, WHICH IN ITS WISDOM SET ASIDE THE TRIBUNALS ORDER AND HAS GIVE N A DIRECTION THAT THE APPEALS MAY BE DECIDED ON MERITS OF THE CASE. 2. BOTH THE APPEALS WERE FIXED FOR HEARING AS DIREC TED BY THE HONBLE HIGH COURT BUT, DESPITE DUE SERVICE OF NOTICE, NO ONE CAME PRESENT TO REPRESENT THE CASE OF THE ASSE SSEE, HENCE, THESE APPEALS WERE HEARD EX-PARTE. WE MAY M ENTION THAT EVEN BEFORE THE HONBLE HIGH COURT THE CASE OF THE ASSESSEE REMAINED UNREPRESENTED. 3. THESE APPEALS ARE DIRECTED AGAINST THE COMMON OR DER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) FOR BOTH THE YEARS. THE ORIGINAL ASSESSMENT WAS COMPLETED ON 24.05.1996 UNDER SECTION 143(1)(A) FOR THE ASSESSME NT YEAR 1995-96 AND IN THE CASE OF ASSESSMENT YEAR 1997-98 IT WAS COMPLETED ON 13.03.1998 UNDER SECTION 143(1)(A). TH E ASSESSEE CARRIES ON BUSINESS IN THE PURCHASE AND SA LE OF IRON ITA NOS. 1789 & 1790/MDS/2002 3 AND STEEL ITEMS, ETC. IT HAD FILED RETURN OF INCOM E ON 30.10.1995 FOR ASSESSMENT YEAR 1995-96. INTIMATION WAS PASSED UNDER SECTION 143(1)(A) ON 24.05.1996. NOTI CE UNDER SECTION 143(2) OF THE ACT COULD BE ISSUED ON OR BE FORE 31.10.1996. NOTICE UNDER SECTION 148 WAS SERVED ON THE ASSESSEE ON 23.12.1999. THE ASSESSEE HAS SHOWN TOTA L SALES OF ` 93,00,845/- AND THE EXPORT SALES HAVE BEEN SHOWN AT 17,03,119/-. THE PROFIT OF THE BUSINESS HAS BEE N SHOWN AT ` 8,13,916/-. THE ASSESSEE HAS CLAIMED DEDUCTION UNDE R SECTION 80HHC OF ` 8,17,219/- HOWEVER, ON LOCAL SALES OF ` 75,97,725/-, NO PROFIT HAS BEEN SHOWN. THE ASSESSI NG OFFICER HAS FOUND THAT THE ASSESSEE, WHILE WORKING OUT CLA IM UNDER SECTION 80HHC, HAS TAKEN INDIRECT COST AT ` 37,100/- WHEREAS, AS PER DEFINITION OF INDIRECT COST GIVEN IN EXPLA NATION (D) TO SUB-SECTION (3) OF SECTION 80HHC, IT SHOULD HAVE BEEN TAKEN AS ` 1,28,666/-. ACCORDING TO ASSESSING OFFICER, THE ASS ESSEE FIRM HAS CLAIMED EXCESS DEDUCTION WHICH HAS RESULT ED TO THAT EXTENT IN ESCAPEMENT OF INCOME. THE ASSESSING OFF ICER FURTHER OBSERVED THAT THE UNDERSIGNED HAS CAREFULL Y VERIFIED THE WORKING OF THE CLAIM OF THE DEDUCTION UNDER SEC TION ITA NOS. 1789 & 1790/MDS/2002 4 80HHC FURNISHED BY THE ASSESSEE AND THE SAME APPEAR ED TO BE ERRONEOUS. THEREFORE, THE CORRECT WORKING OF THE CLAIM OF DEDUCTION UNDER SECTION 80HHC HAS BEEN WORKED OUT. THE MAIN GRIEVANCE OF THE ASSESSEE BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) WAS THAT THE ASSESSMENT/INTIMATION PASSED UNDER SECTION 143(1)(A ) ON 24.05.1996, HAS BECOME FINAL IN VIEW OF THE CBDTS CIRCULAR NO.549 DATED 31.10.1989 AND THEREFORE, THE REOPENIN G IS BAD IN LAW BECAUSE IT WAS DONE MERELY ON THE BASIS OF A CHANGE OF OPINION. THE ASSESSEE ALSO QUESTIONED THE MODE OF CALCULATION OF DEDUCTION UNDER SECTION 80HHC AND R EDUCING THE CLAIM BY ` 1,31,912/-. THE OTHER OBJECTION WAS REGARDING ADDITION OF ` 75,977/- MADE UNDER THE HEAD ESTIMATED PROFITS UNDER LOCAL TURNOVER. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS UPHELD THE REOPENING OF ASSESSMENT AND SO ALSO THE ADDITION OF ` 1,31,912 BUT HAS DELETED THE ADDITION OF ` 75,977/-. 4. THE ONLY ISSUE FOR OUR CONSIDERATION THEREFORE I S THE MODE OF CALCULATION OF DEDUCTION UNDER SECTION 80-H HC AND ITA NOS. 1789 & 1790/MDS/2002 5 THE VALIDITY OF REOPENING OF ASSESSMENT. AT THE TIM E OF HEARING, WE HAD NO BENEFIT OF ANY ASSISTANCE FROM T HE ASSESSEES SIDE AND HENCE WE HAVE HEARD ONLY THE LE ARNED D.R. 5. TO START WITH, WE WOULD LIKE TO EXTRACT PARA NOS . 5 TO 9 OF THE HONBLE HIGH COURTS DECISION, WHICH ARE RELEVA NT FOR THE DISPOSAL OF THESE CASES:- 5. LEARNED STANDING COUNSEL APPEARING FOR THE REVENUE, PLACING RELIANCE ON THE DECISION REPORTED IN (2007) 291 ITR 500 ASST.CIT VS. RAJESH JHAVERI STOCK BROKERS P.LTD., CONTENDS THAT THE TRIBUNAL COMMITTED SERIOUS ERROR THAT THE CHANGE OF OPINION COULD NOT BE A GROUND FOR REOPENING THE ASSESSMENT. HE FURTHER POINTED OUT THAT WHEN THE MATERIALS ARE AVAILABLE WARRANTING REOPENING OF THE ASSESSMENT, PARTICULARLY AS REGARDS WORKING OUT THE RELIEF U/S.80HHC, THE TRIBUNAL SHOULD HAVE CONSIDERED THE SAME WHILE TAKING UP THE PLEA OF THE ASSESSEE AS TO THE RELEVANCY OF SECTION 147 OF THE ACT. 6. IN THE DECISION REPORTED IN (2007) 291 ITR 500 ASST.CIT VS. RAJESH JHAVERI STOCK BROKERS P.LTD., THE APEX COURT POINTED OUT THAT TH E EXPRESSION REASON TO BELIEVE IN SECTION 147 WOULD MEAN CAUSE OR JUSTIFICATION. IF THE ASSESSING OFFI CER HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAD ESCAPED ASSESSMENT, IT COULD BE SAID TO HAVE REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. THE APEX COURT FURTHER POINTED OUT THAT THE CASE OF AN INTIMATION UNDER SECTION ITA NOS. 1789 & 1790/MDS/2002 6 143(1)(A) IS ALSO COVERED BY THE MAIN PROVISION OF SECTION 147 AS SUBSTITUTED WITH EFFECT FROM 1.4.198 9. THUS THE MAIN PROVISION OF SECTION 147 COVERS THE CASE OF THE INTIMATION FOR THE PURPOSES OF REASSESSMENT. THUS IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT, IT CONFERS JURISDICTION TO REOPEN THE ASSESSMENT. SO LONG AS INGREDIENTS ARE FULFILLED, T HE OFFICER IS FREE TO INITIATE PROCEEDINGS UNDER SECTI ON 147 OF THE ACT. 7. CONSIDERING THE FACT THAT THE GRANT OF RELIEF U/S.80HHC OF THE ACT IN DEDUCTING THE INDIRECT COST WAS CONTRARY TO THE PROVISIONS THEREIN, UNDER EXPLANATION (B) TO SUB-SECTION (3), THE ASSESSING AUTHORITY TOOK STEPS TO REOPEN THE ASSESSMENT U/S.147 OF THE ACT. IN THE LIGHT OF THE ABOVE, WE D O NOT THINK THAT THE TRIBUNAL WOULD BE JUSTIFIED IN EXPRESSING ITS OPINION THAT THE ASSESSMENT COULD HAVE BEEN RECTIFIED U/S.154 OF THE ACT INSTEAD OF REOPENING THE ASSESSMENT U/S.147 OF THE ACT. 8. THE QUESTION AS TO WHETHER THE PROCEEDINGS SHOULD BE TAKEN U/S.147 OR 157 OF THE ACT IS A MATTER WHICH IS PURELY IN THE REALM OF THE ASSESSIN G OFFICER AND IT IS NOT FOR THE TRIBUNAL TO SUGGEST W HICH COURSE WOULD BE A BETTER COURSE SUSTAINABLE ON FACTS AND IN LAW. THE TRIBUNAL AS AN APPELLATE AUTHORITY HAS TO TEST THE CORRECTNESS OF THE EXERCI SE OF JURISDICTION ON MERITS THEREON. 9. HAVING REGARD TO THE ABOVE, IN THE FACT THAT THE TRIBUNAL HAD SUMMARILY ACCEPTED THE VIEW OF THE ASSESSEE TO SET ASIDE THE ASSESSMENT, WE HAVE NO HESITATION IN SETTING ASIDE THE ORDER OF THE TRIBUN AL IN RESTORING THE APPEAL TO THE FILES OF THE TRIBUNA L TO CONSIDER THE CASE ON MERITS AND TO PASS ORDERS IN ACCORDANCE WITH LAW. ITA NOS. 1789 & 1790/MDS/2002 7 6. WE ARE OF THE OPINION THAT THE LEARNED COMMISSIO NER OF INCOME TAX(APPEALS) HAS NOT CONSIDERED THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF VIPIN KHANNA VS. CIT 255 ITR 220 AND CBDTS CIRCULAR NO. 549 DATED 31.10.1989 AS WELL AS THE DECISION IN THE CAS E OF M/S. KRISHNA MAHAL VS. ACIT REPORTED IN 256 ITR 333(MAD ) INCLUDING THE DECISION OF HONBLE APEX COURT RENDER ED IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS P.LTD., (2007) 291 ITR 500, WHICH ARE VERY RELEVANT ON THE SUBJECT TO DECIDE THE VALIDITY OF ASSUMPTION OF JURISDICTION UNDER SE CTION 147/148 OF THE ACT. THE OTHER ISSUE REGARDING RE-WO RKING OF ELIGIBLE DEDUCTION UNDER SECTION 80HHC HAS ALSO NOT BEEN PROPERLY CONSIDERED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). THEREFORE, WE ARE UNABLE TO DECIDE BO TH THE ISSUES ON MERITS, UNLESS WE HAVE GOT FULL AND FINAL FACTS BEFORE US. ACCORDINGLY, WE SET ASIDE BOTH THE APPEALS TO T HE FILE OF THE COMMISSIONER OF INCOME TAX(APPEALS) WITH A DIRE CTION THAT HE SHALL GIVE A COMPLETE FINDING IN VIEW OF TH E ABOVE MENTIONED DECISIONS REGARDING VALIDITY OF REOPENING AS WELL AS HE SHALL ALSO CONSIDER OTHER RELEVANT DECISIONS WHI CH MAY BE ITA NOS. 1789 & 1790/MDS/2002 8 RELIED BEFORE HIM. HE SHALL ALSO TAKE INTO CONSIDER ATION THE SUBMISSION OF THE ASSESSEE REGARDING COMPUTATION OF ELIGIBLE DEDUCTION. THE ISSUE REGARDING ADDITION UNDER THE H EAD ESTIMATED PROFITS UNDER LOCAL TURNOVER STANDS ALR EADY DECIDED AND IS NO LONGER SUBJUDICE. WITH THE ABOVE OBSERVAT ION, WE DISPOSE OF BOTH THE APPEALS. 7. IN THE RESULT, BOTH THE APPEALS ARE PARTLY ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON 11 TH JANUARY, 2012 AT CHENNAI. SD/- SD/- (DR. O.K.NARAYANAN) (HARI OM MARATHA) VICE PRESIDENT JUDICIAL MEMBER CHENNAI, DATED THE 11 TH JANUARY, 2012. SOMU COPY TO: (1) APPELLANT ( 4) CIT(A) (2) RESPONDENT (5) D.R. (3) CIT (6) G.F.