A.P.State Agro Industries Development Corpn.Ltd., Hyderabad V. ITO, Hyderabad

ITA 1789/HYD/2008

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7522 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 22-02-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 29-12-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARI LAL NAIK
• Assessee Lawyers: S RAMA RAO
• Keywords: Tangible material; Reason to believe; Reassessment proceedings
• Section: 143(3); 142(1); 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.1789/HYD/2008 ASSTT. YEAR: 2002-03 AP STATE AGRO INDUSTRIES DEVELOPMENT CORPORATION LTD., HYDERABAD. INCOME - TAX OFFICER, WARD-1(1),HYDERABAD. (APPELLANT) ITA NO.8/HYD/2009 ASSESSMENT YEAR 2002-03 INCOME-TAX OFFICER, - WARD-1(1),HYDERABAD. (APPELLANT (RESPONDENT) AP STATE AGRO INDUSTRIES DEVELOPMENT CORPORATION LTD., HYDERABAD. (RESPONDENT) ASSESSEE BY : SRI S. RAMA RAO DEPARTMENT BY : SRI HARILAL NAIK DATE OF HEARING : 29-02-2012. DATE OF PRONOUNCEMENT : 07-03-2012. ORDER PER SAKTIJIT DEY, J.M. THESE CROSS APPEALS HAVE BEEN DIRECTED AGAINST THE ORDER DATED 27-10-2008 PASSED IN ITA NO.306/CIT(A)- II/07-08 BY THE CIT (A), HYDERABAD. SINCE COMMON ISSUES ARE INVOLVED IN THESE CROSS APPEALS, THESE A RE ITA NOS. 1789 OF 2008 & 8/HYD/09 AP STATE AGRO INDUSTRIES, HYD. =============================== 2 TAKEN UP, HEARD TOGETHER AND DISPOSED OF BY THIS COMBINED ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST LET US DEAL WITH ITA NO.1789/HYD/08 FILE D BY THE ASSESSEE. THOUGH THE ASSESSEE HAS RAISED 5 GRO UNDS OF APPEAL, GROUND NO.3 WHICH IS PURELY A JURISDICTI ONAL AND LEGAL ISSUE IS TAKEN UP FIRST FOR ADJUDICATION. IN THIS GROUND, THE ASSESSEE HAS CHALLENGED THE INITIATION OF PROCEEDINGS UNDER SECTION 147 OF THE I T ACT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A STATE GOVERNMENT UNDERTAKING ENGAGED IN THE ACTIVIT Y OF DEVELOPMENT OF AGRICULTURE IN THE STATE OF ANDHRA P RADESH BY HIRING AND SELLING TRACTORS AND OTHER AGRICULTUR AL IMPLEMENTS TO THE AGRICULTURISTS. FOR THE ASSESSME NT YEAR 2002-03, THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 31-1-2005 MAKING VARIOUS DISALLOWANCES WHICH INCLUDED PRIOR PERIOD ADJUSTMEN T OF RS.10,82,16,659/-. SUBSEQUENTLY, A NOTICE UNDER SE CTION 148 WAS ISSUED ON 2-4-2007 REOPENING THE ASSESSMENT COMPLETED UNDER SECTION 143(3) OF THE ACT. THE REA SON FOR REOPENING THE ASSESSMENT AS MENTIONED IN THE OR DER PASSED UNDER SECTION 147 OF THE ACT READS THUS: DURING THE YEAR THE ASSESSEE HAS CLAIMED PRIOR PERIOD EXPENDITURE OF RS.16,90,15,348/-. HOWEVER, THE DISALLOWANCE WAS MISTAKENLY TAKEN AT RS.10,82,16,659/-. IN VIEW OF THIS A NOTICE UNDER SECTION 148 WAS ISSUED AND WAS SERVED ON 2-4-2007. ITA NOS. 1789 OF 2008 & 8/HYD/09 AP STATE AGRO INDUSTRIES, HYD. =============================== 3 ULTIMATELY ON 24-12-2007, THE ASSESSING OFFICER PAS SED RE- ASSESSMENT ORDER BY DISALLOWING PRIOR PERIOD EXPEND ITURE OF RS.16,90,15,348/-. BEING AGGRIEVED BY THE AFORESAI D ORDER OF THE ASSESSING OFFICER, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT (A). HAVING FAILED BEFORE THE CIT (A), THE PRES ENT APPEAL HAS BEEN FILED BEFORE US. 4. DURING THE COURSE OF HEARING, THE LEARNED AUTHOR ISED REPRESENTATIVE OF THE ASSESSEE CONTENDED THAT THE R E-OPENING OF ASSESSMENT UNDER SECTION 147 IS WITHOUT AUTHORIT Y OF LAW ON TWO COUNTS WHICH ARE (I) THE ASSESSING OFFICER HAS NO JURISDICTION TO REOPEN THE ASSESSMENT AFTER EXPIRY OF 4 YEARS IN TERMS WITH THE PROVISO TO SECTION 147 OF THE ACT. (II) THERE IS NO NEW OR TANGIBLE MATERIAL BEFORE THE ASSESSING OFFICER ON THE BASIS OF WHICH HE COULD HAVE FORMED THE BELIEF THAT THE INCOME HAS ESCAPED ASSESSMENT. IN SUPPORT OF HIS CONTENTION, THE LEARNED AUTHORISE D REPRESENTATIVE DREW OUR ATTENTION TO THE AUDITED ST ATEMENTS OF ACCOUNTS FILED BEFORE THE ASSESSING OFFICER WHICH I S AT PAGE-54 OF THE PAPER BOOK WHEREIN PRIOR PERIOD ADJUSTMENT O F RS.16,90,15,348/- CLAIMED BY THE ASSESSEE WAS VERY MUCH MENTIONED. ACCORDING TO THE ASSESSEE, THERE BEING NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND T RULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, THE AS SESSING OFFICER HAS NO AUTHORITY TO INITIATE ACTION UNDER S ECTION 147 OF THE ACT AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. THE LEARNED AUTHORISED REPRESENTA TIVE FOR THE ASSESSEE ALSO PLACED RELIANCE ON THE ORDER DATE D 7 TH OCTOBER, 2011 OF ITAT, MUMBAI BENCHES, MUMBAI PASSE D IN ITA NOS. 1789 OF 2008 & 8/HYD/09 AP STATE AGRO INDUSTRIES, HYD. =============================== 4 ITA NO.2230/MUM/2010 WHEREIN IT HAS BEEN HELD THAT IN THE ABSENCE OF ANY TANGIBLE MATERIAL, ASSESSMENT CANNOT BE REOPENED. HE FURTHER RELIED ON THE FOLLOWING CASE LAW IN SUPPORT OF HIS CONTENTIONS: I) CIT VS. KELVINATOR OF INDIA LTD., ( 320 ITR 561 (SC) II) IDEA CELLULAR INDIA LTD. ( 301 ITR 407) (BOM) III) CIT VS. FORAMER FRANCE (264 ITR 566 (SC) IV) INDUCTO ISPAT ALLOYS LIMITED VS. ACIT (320 ITR 458 (GUJARAT) AND V) INDIAN OIL CORPORATION VS. DCIT (327 ITR 272 (BOM) THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE REASONING OF THE CIT (A). 5. BEFORE ADJUDICATING UPON THE ISSUE, IT IS ESSENT IAL TO BEAR IN MIND THE FOLLOWING DATES AND EVENTS. DATE EVENTS 31-10-2002 RETURN OF INCOME FILED 31-01-2005 ASS ESSMENT ORDER PASSED UNDER SECTION 143(3) 02-4-2007 NOTICE ISSUED U/S 148 24-12-2007 ORD ER PASSED U/S 147 ON PERUSAL OF THE ABOVE DATES, THE FACT EMERGES THA T ACTION UNDER SECTION 147 OF THE ACT HAS BEEN TAKEN AFTER E XPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR IN D ISPUTE I.E., ASSESSMENT YEAR 2002-03 WHEN THE NOTICE UNDER SECTI ON 148 WAS ISSUED ON 2-4-2007. AT THIS STAGE, IT WILL BE WORTHWHILE TO LOOK INTO THE FIRST PROVISO TO SECTION 147 OF THE A CT WHICH IS EXTRACTED HEREUNDER FOR READY REFERENCE. ITA NOS. 1789 OF 2008 & 8/HYD/09 AP STATE AGRO INDUSTRIES, HYD. =============================== 5 PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FRO M THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION ( 1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY A ND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSME NT, FOR THAT ASSESSMENT YEAR. A PLAIN READING OF THE AFORESAID PROVISO MAKES IT C LEAR THAT IN A CASE WHERE THE ASSESSMENT HAS BEEN MADE UNDER SECTI ON 143(3) OR UNDER SECTION 147, THE ASSESSING OFFICER CAN INITIATE PROCEEDINGS FOR RE-OPENING BEFORE EXPIRY OF FOUR YE ARS FROM THE END OF THE ASSESSMENT YEAR IN QUESTION. ONLY IN CA SE OF THE FOLLOWING EXCEPTIONS, THE LIMITATION OF FOUR YEARS WILL NOT APPLY. 1) THE ASSESSEE HAS FAILED TO FILE A RETURN UNDER SECT ION 139 2) THE ASSESSEE HAS FAILED TO FILE A RETURN IN RESPONS E TO NOTICE ISSUED UNDER SECTION 142(1) OR 148. 3) THE ASSESSEE HAS FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FROM TH AT ASSESSMENT YEAR. THE FIRST TWO CONDITIONS ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. SO FAR AS THE THIRD CONDITION IS CON CERNED, IT CANNOT BE SAID THAT THERE WAS ANY FAILURE ON THE PA RT OF THE ASSESSEE IN DISCLOSING FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. THE AUDITED ACCOUNTS SU BMITTED BEFORE THE ASSESSING OFFICER CLEARLY DEMONSTRATES T HE CLAIM OF ITA NOS. 1789 OF 2008 & 8/HYD/09 AP STATE AGRO INDUSTRIES, HYD. =============================== 6 PRIOR PERIOD ADJUSTMENT OF RS.16,90,15,348 PAID BY THE ASSESSEE (PAGE-54 OF THE PAPER BOOK). IN FACT, IN THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) READ W ITH SECTION 147 OF THE ACT, THE ASSESSING OFFICER ADMIT S HIS MISTAKE OF DISALLOWING THE PRIOR PERIOD EXPENSES OF RS.10,8 2,16,659/- INSTEAD OF RS.16,90,15,348/-. IN THE AFORESAID FAC TS AND THE CIRCUMSTANCES, THE ACTION OF THE ASSESSING OFFICER IN REOPENING THE ASSESSMENT AFTER EXPIRY OF FOUR YEARS IS WITHOU T AUTHORITY OF LAW AND THEREFORE CANNOT BE SUSTAINED. APART FR OM THE FACT THAT THE INITIATION OF PROCEEDINGS IS BARRED BY LIM ITATION, THE RE- ASSESSMENT PROCEEDINGS IS ALSO BAD IN LAW AS THERE WAS NO NEW OR TANGIBLE MATERIAL BEFORE THE ASSESSING OFFIC ER ON THE BASIS OF WHICH, HE COULD HAVE A REASON TO BELIEVE T HAT THE INCOME HAS ESCAPED ASSESSMENT. IN THIS REGARD, WE A LSO GET SUPPORT FROM THE RATIO OF ORDER OF ITAT, MUMBAI BEN CH AND OTHER DECISIONS RELIED UPON BY THE ASSESSEE. AS ADM ITTED BY THE ASSESSING OFFICER IN HIS REASSESSMENT ORDER THE REASON FOR REOPENING OF THE ASSESSMENT WAS BECAUSE OF A MISTAK E COMMITTED BY HIM IN COMPUTING THE DISALLOWANCE OF P RIOR PERIOD EXPENSES. IN OUR VIEW, THE ASSESSING OFFICER CERTAINLY IS NOT PERMITTED IN LAW TO TAKE RECOURSE OF SECTION 14 7 FOR RECTIFYING A MISTAKE COMMITTED BY HIM. SECTION 147 OF THE I T ACT IS ONLY MEANT FOR ASSESSMENT OF ESCAPED INCOME AND NOT FOR RECTIFYING THE MISTAKES. THEREFORE, IN OUR CONS IDERED VIEW, THE INITIATION OF REASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR UNDER DISPUTE IS VITIATED AND THE RE-ASSESSMEN T ORDER PASSED IN CONSEQUENCE THEREOF IS LIABLE TO BE QUASH ED. SINCE WE HAVE DECIDED THE GROUND OF APPEAL PERTAINING TO JURISDICTIONAL AND LEGAL ISSUE, THE OTHER GROUNDS R AISED IN THIS APPEAL ARE NOT ADJUDICATED UPON. HENCE THE APPEAL I S ALLOWED. ITA NOS. 1789 OF 2008 & 8/HYD/09 AP STATE AGRO INDUSTRIES, HYD. =============================== 7 6. ITA NO.8/HYD/09 (REVENUES APPEAL) :- IN VIEW OF OUR FINDINGS GIVEN IN THE ASSESSEES AP PEAL VIZ., ITA NO.1789/HYD/08, THIS APPEAL FILED BY THE REVENUE HAS BECOME INFRUCTUOUS AND ACCORDINGLY DISMISSED AS SUC H. ORDER PRONOUNCED IN THE OPEN COURT ON 07 -03-201 2. SD/- SD/- (D. KARUNAKARA RAO) ACCOUNTANT MEMBER SD/- (SAKTIJIT DEY) JUDICIAL MEMBER DATED THE 7 TH MARCH, 2012. COPY FORWARDED TO: 1. ITO,WARD-1(1), 4 TH FLOOR, AAYAKAR BHAVAN, HYDERABAD. 2. AP STATE AGRO INDUSTRIES DEVELOPMENT CORPORATION LTD., 504, HERMITAGE COMPLEX, HILLS FORT ROAD, FORT ROAD, HYDERABAD. 3. CIT (A)-II, HYDERABAD. 4. THE CIT CONCERNED, HYDERABAD 5. THE DR, ITAT, HYDERABAD JMR* ITA NOS. 1789 OF 2008 & 8/HYD/09 AP STATE AGRO INDUSTRIES, HYD. =============================== 8 ITA NOS. 1789 OF 2008 & 8/HYD/09 AP STATE AGRO INDUSTRIES, HYD. =============================== 9