ATLAS EXPORTS (I) LTD, MUMBAI V. ASST CIT 12(1), MUMBAI

ITA 1800/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88701 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 17-09-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 15-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S PADMAJA
• Keywords: Reopening of assessment; Retrospective amendment; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 80HHC; 28

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - A BENCH , , BEFORE S/SH. I P BANSAL,JUDICIAL ME MBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.1800/MUM/2012, ! ! ! ! ' ' ' ' / ASSESSMENT YEAR-2001-02 ATLAS EXPORTS (INDIA), NEELKANTH COMM. CENTRE, 122/123 GROUND FLOOR, SAHAR ROAD PARSI WADA, ANDHERI (EAST), MUMBAI-400099. PAN:AAEFA5936F VS ACIT CIRCLE-12(1), AAYAKAR BHAVAN, M K ROAD, MUMBAI-20 ( #$ / ASSESSEE) ( %&#$ / RESPONDENT) !'( !'( !'( !'( ) ) ) ) /ASSESSEE BY :SHRI ISHWER PRAKASH RATHI * ) / REVENUE BY :MS. S. PADMAJA ! ! ! ! * ** * (+ (+ (+ (+ / DATE OF HEARING :30 - 03 -2015 ,-' * (+ / DATE OF PRONOUNCEMENT :30 -03-2015 ! ! ! ! , 1961 1961 1961 1961 * * * * 254 254 254 254( (( (1 11 1) )) ) (6( 7 (6( 7 (6( 7 (6( 7 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) ! PER RAJENDRA,A.M. CHALLENGING THE ORDER DATED 26.12.11 OF CIT(A)-23,M UMBAI THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX APPEALS HAS ERRED IN CONFIRMING THE REOPENING OF ASSESSMENT U/S 147. 2. YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR FURNISH FRESH AND DETAILED GROUNDS OF APPEALS. BRIEF FACTS ASSESSING OFFICER (AO) COMPLETED THE ASSESSMENT U/S 143(3) R.W.S 147 OF THE ACT ON 28.02.2006, COMPUTING TOTAL TAXABLE INCOME AT RS. 5.82 CRORES A S AGAINST THE RETURN INCOME OF RS.2.46 CRORES. THE MAIN REASON FOR VARIATION IN THE INCOME COMPUTE D WAS ON ACCOUNT OF DISALLOWANCE MADE BY HIM U/S.80HHC OF THE ACT,AMOUNTING TO RS. 9.85 CROR ES.AS PER THE AO THE ENTIRE CLAIM OF DEDUCTION U/S.80HHC WAS ON ACCOUNT OF DEPB CREDIT R ECEIVED BY THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR AND SAME WAS NOT ALLOWABLE AS PER THE PROVISIONS OF LAW.DURING THE APPELLATE PROCEEDINGS, THE FIRST APPELLATE AUTHORITY (FAA) HE LD THAT ASSESSEE WAS NOT ENTITLED TO DEDUCTION, THAT THE CONDITIONS ENVISAGED UNDER THIRD PROVISO O F THE SECTION WERE NOT SATISFIED. THE TRIBUNAL, DECIDING THE APPEAL,DIRECTED THE AO TO FOLLOW THE R ULING OF THE SPECIAL BENCH DELIVERED IN THE CASE OF TOPMAN EXPORTS AND KALPATARU COLOURS AND CHEMICA LS. THE AO PASSED THE ORDER U/S.143(3) R.W.S.254 ON 30.09.2010 DETERMINING THE INCOME OF T HE ASSESSEE AT RS.12.32 CRORES.AS PER THE AO THE ASSESSEE DID NOT APPEAR BEFORE HIM NOR DID IT F ILE ANY SUBMISSION THE AO DECIDED THE ISSUE ON MERITS 2. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FAA.IN THE SECOND ROUND OF APPEAL,BEFORE HIM,IT WAS ARGUED THA T THE AO HAD ERRED IN REOPENING THE ASSESSMENT U/S.147 BY ISSUE OF NOTICE DATED 22.03.2 005,THAT THE ORIGINAL ASSESSMENT WAS COMPLETED U/S.143(3) ON 31.03.2003, THAT THE REOPEN ING WAS ENTIRELY BASED ON CHANGE OF OPINION ABOUT THE ALLOWABILITY OF DEDUCTION U/S.80HHC ON DE PB AND DFRC BENEFITS,THAT THE REASSESSMENT WAS COMPLETED ON THE BASIS OF AMENDMEN T IN SECTION 80HHC EFFECTED IN DECEMBER 2 ITA NO. 1800/M/12 ATLAS EXPORTS (INDIA) 2005, THAT THE RETROSPECTIVE AMENDMENT TO SECTION 8 0HHC W.E.F.AY.1998-99 HAD COME AFTER RECORDING THE REASONS OF REOPENING BY THE AO, THAT THE REOPENING ON 26.03.2005 WAS PURELY BASED ON CHANGE OF OPINION,THAT THE ASSESSMENT WAS COMPLE TED AS PER THE AMENDED PROVISIONS. THE ASSESSEE PLACED RELIED ON THE ORDER OF THE VIJAY SI LK HOUSE (DELHI) (ITA/6147/MUM/2006) AND AHUJA EXPORTS (ITA/6036/MUM/2008). 3 .AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE A ND THE ASSESSMENT ORDER, THE FAA HELD THAT ORIGINAL ASSESSMENT ORDER WAS PASSED ON 31.03.2003, THE AO HAD NOT ALLOWED REDUCTION OF CCS FROM THE DIRECT COST FOR THE PURPOSE OF COMPUTATION OF DIRECT COST, THAT THERE WAS NO DISCUSSION IN THE ASSESSMENT ORDER OR THE WORKING OF THE DEDUCTIO N BY THE AO OF THE NATURE OF INCENTIVES,THAT IT COULD NOT BE SAID THAT THE AO HAD CONSIDERED THE IS SUE OF DEPB/DFRC AND HAD DECIDED THE ISSUE AT THE TIME OF COMPLETION OF ORIGINAL ASSESSMENT, T HAT THERE IS NO EVIDENCE THAT THE AO HAD MADE ANY ENQUIRY WITH REFERENCE TO THE NATURE OF INCENTI VES, THAT THE THEN FAA,THAT DURING THE FIRST ROUND OF APPEAL HAD NOT CONSIDERED THE ISSUE OF NAT URE OF INCENTIVES-SPECIFICALLY DEPB/DRFC. THE FAA REFERRED TO THE CASE OF NARAYAN DAS SUGNOMA L (ITA/7051/MUM/2007 DATED 26.05.2009) AND HELD THAT THE FACTS AND CIRCUMSTANCES OF BOTH T HE CASES WERE IDENTICAL. HE FURTHER HELD THAT THE AO HAD CITED CBDT CIRCULAR AS ONE OF THE BASIS FOR REOPENING THE ASSESSMENT, THAT THE AO HAD NOT CONSIDERED THE NATURE OF DEPB/DFRC INCENTIVES, THAT HE HAD MADE ENQUIRY ABOUT ALLOWABILITY OF REDUCING 10% OF CCS FROM THE DIRECT COST OF COMP UTATION, THAT BELIEF OF THE AO WAS JUSTIFIED BY THE LATER AMENDMENT MADE, THAT THE MATTER OF NAR AYAN DAS SUGNOMAL (SUPRA) WAS NOT CONSIDERED IN THE CASES OF VIJAY SILK HOUSE (SUPRA ) AND AHUJA EXPORTS. THE FAA CONFIRMED THE ORDER OF THE AO. 4 .BEFORE US,AUTHORISED REPRESENTATIVE (AR) CONTENDED THAT AMENDMENT TO SECTION 28 AND SECTION 80HHC WAS BROUGHT IN DECEMBER 2005,THAT BY A RETROS PECTIVE AMENDMENT CLAUSE 3(C) & 3(D) OF SECTION 28 WERE AMENDING, THAT REOPENING NOTICE WAS ISSUED IN MARCH 2005, THAT AT THAT POINT OF TIME THE LAW WAS IN FAVOUR OF THE ASSESSEE, THAT IT WAS MERE CHANGE OF OPINION HE REFERRED TO CASES OF VIJAY SILK HOUSE (MUMBAI) FOR THE AY-2001-02 AND 2002-03 (SUPRA) AND AHUJA EXPORTS (SUPRA). DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE FAA. 5 .WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL BEFORE US. WE FIND THAT WHILE REOPENING THE ASSESSMENT AO HAS RECORDED FOLLOWING REASONS; THE ASSESSEE HAS FILED RETURN OF INCOME FOR THE ABO VE-MENTIONED ASSESSMENT YEAR(2001-02) DECLARING TOTAL INCOME OF RS.2,46,44,996/-.ASSESSME NT WAS COMPLETED UNDER SECTION 143(3) ON 31.03.2003.THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 80HHC OF RS. 9,26,20,840/-. IT IS SEEN FROM THE WORKING OF DEDUCTION UNDER SECTION 80 HHC AND THE ASSESSEE HAS INCLUDED INCOME FROM SALE OF DEPB LICENCE, AN AMOUNT OF RS.669,72,8 38/-, WHILE COMPUTING THE DEDUCTION UNDER SECTION 80 HHC. HOWEVER, DEPB LICENCE IS NOT A LICE NSE GRANTED UNDER IMPORT (CONTROL) ORDER, 1955 MADE UNDER THE IMPORT AND EXPORT (CONTROL ACT, 1947) AND HENCE IT IS NOT AN INCENTIVE COVERED UNDER CLAUSE (III) OF SECTION 28 OF THE I T ACT. AS THE PROFIT OF SALE OF DEPB LICENCE IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80 HHC (3). IT IS ALSO NOT COVERED UNDER SECTION 28(IIB) AS IT CANNOT BE CALLED AS CASH ASSISTANCE AND UNDER SECTI ON 28(IIC) AS IT IS DIFFERENT FROM DUTY DRAWBACK REPAID OR REPAYABLE UNDER CUSTOM AND CENTR AL EXCISE DUTY DRAWBACK RULE, 1971. IT IS ALSO CLARIFIED BY THE CBDT VIDE FILE NO.153/9 3/2004 DATED 8TH SEPTEMBER, 2004 THAN THE PROFIT ON SALE OF DEPB IS NOT ELIGIBLE FOR DEDU CTION UNDER SECTION 80HHC. THEREFORE, I HAVE REASON TO BELIEVE THAT INCOME CHA RGEABLE TO TAX TO THE EXTENT OF RS.139,65,238/- HAS ESCAPED ASSESSMENT. ISSUE NOTIC E U/S.148. WE FURTHER FIND THAT THE RETROSPECTIVE AMENDMENT TA XING THE DEPB INCENTIVES WAS BROUGHT O STATUTE IN DECEMBER 2005 WHEREAS THE NOTICE FOR REO PENING THE ASSESSMENT WAS ISSUED IN MARCH 2005. AT THAT POINT OF TIME TAXING OF DEPB WAS NOT PART OF THE SECTION 28 OR 80HHC. THE AO 3 ITA NO. 1800/M/12 ATLAS EXPORTS (INDIA) HAD,DURING THE ORIGINAL ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT,TAKEN A VIEW AND THEREFORE THE NOTICE ISSUED BY HIM U/S.148 FOR REOPENING OF T HE ASSESSMENT WOULD FALL UNDER THE CATEGORY OF CHANGE OF OPINION. WE FIND THAT IN THE CASE OF AHUJ A EXPORTS ,VIJAY SILK MILLS AND PG ENTERPRISES (93 ITD 138) THE ISSUE STAND DECIDED IN FAVOUR OF T HE ASSESSEE.IN THE CASE OF AHUJA EXPORTS (SUPRA) THE TRIBUNAL HAS HELD AS UNDER: 11. WE HAVE HEARD BOTH SIDES AND PERUSED THE RELEVA NT MATERIAL ON RECORD. FROM THE REASONS FOR REOPENING, AS REPRODUCED ABOVE, IT IS SEEN THAT THE VIEW POINT OF THE LEARNED A.O. AT THAT TIME WAS THAT THE RECEIPTS ON SALE OF DEPB BENEFIT ETC. WERE TO BE TAXED U/S.28(IV) OF THE ACT. THERE IS NO REFERENCE TO ANY RETROSPECTIVE AMENDMENT CARRIED OU T BY TAXATION LAWS (AMENDMENT) ACT, 2005 IN SUCH REASONS. HOWEVER WHILE FRAMING THE ASSESSMENT THE ASSESSING OFFICER TOOK RECOURSE TO THE AMENDMENT TO SECTION 80HHC AND SECTION 28 OF TAXATI ON LAWS (AMENDMENT) ACT, 2005. IT IS A CASE IN WHICH ORIGINAL ASSESSMENT WAS COMPLETED U/S .143(3) ON 23.12.2003 AND THE REOPENING WAS DONE WITHIN A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. IN ORDER TO REOPEN ANY ASSESSMENT IT IS NECESSARY THAT THERE MUST BE R EASONS TO BELIEVE ON THE PART OF THE A.O. TO THE EFFECT THAT INCOME CHARGEABLE TO TAX ESCAPED ASSESS MENT. IN THE INSTANT CASE THE ASSESSING OFFICER DID NOT RESORT TO THE AMENDMENT TO TAXATION LAWS (A MENDMENT) ACT, 2005 FOR THE PURPOSE OF REOPENING THE ASSESSMENT. HIS OPINION WAS THAT THE RECEIPT ON SALE OF CREDIT BENEFIT / LICENSE ETC. WERE TO BE TAXED U/S.28(IV) OF THE ACT. IN OTHER WO RDS IT CONSTITUTED CHANGE OF OPINION FROM THE ONE ALREADY FOUND BY THE A.O. WHILE FINALIZING THE ASSE SSMENT WITHOUT TAKING NOTE OF THE AMENDMENT CARRIED OUT U/S.28 AND 80HHC BY THE TAXATION LAWS ( AMENDMENT) ACT, 2005. IT IS SETTLED LEGAL POSITION THAT REASSESSMENT CANNOT BE DONE ON THE BA SIS OF CHANGE OF OPINION. WHEN ALL THE FACTS WERE STATED BY THE ASSESSEE IN THE ORIGINAL RETURN AND REGULAR ASSESSMENT WAS FINALIZED ACCEPTING THE TREATMENT GIVEN TO INCOME FROM THE SALE OF DEPB AS SUCH, IT WAS NOT OPEN TO THE AO TO CHANGE HIS OPINION LATER ON FOR COMING TO THE CONCLUSION T HAT SUCH INCOME WAS TAXABLE U/S 28(IV). THE SITUATION WOULD HAVE BEEN OTHERWISE IF THE AO HAD I SSUED NOTICE OF REASSESSMENT ON THE BASIS OF SUBSEQUENT RETROSPECTIVE AMENDMENT LEADING TO THE E SCAPEMENT OF INCOME, IN WHICH CASE THE REASSESSMENT WOULD HAVE BEEN JUSTIFIED IN SUCH CIRC UMSTANCES. AS THE FACTS INDICATE THAT IT IS ONLY A CASE OF CHANGE OF OPINION DE HORS THE COGNIZANCE OF ANY SUBSEQUENT RETROSPECTIVE AMENDMENT, THE REASSESSMENT CANNOT BE UPHELD. THE LEARNED A.R. HAS PLACED ON RECORD A COPY OF AN ORDER PASSED BY THE MUMBAI BENCH OF THE TRIBUNAL IN IDENTICAL CI RCUMSTANCES IN VIJAY SILK HOUSE (MUMBAI) LTD. VS. DCIT IN ITA NO.6149/MUM/2006 FOR ASSESSMEN T YEAR 2001-2002. VIDE ORDER DATED 25.6.2010 THE TRIBUNAL IN THE ABOVE CASE HAS QUASHE D THE REASSESSMENT IN SIMILAR CIRCUMSTANCE. THE RELEVANT DISCUSSION HAS BEEN MADE IN PARA 2 FRO M WHERE IT CAN BE NOTICED THAT THE ORIGINAL ASSESSMENT IN THAT CASE WAS COMPLETED U/S.143(3) AN D REOPENING WAS DONE BY CONSIDERING SALE OF DEPB U/S.28(IV). THE LEARNED A.R. HAS ALSO PLACED O N RECORD ANOTHER ORDER IN THE CASE OF VIJAY SILK HOUSE (DELHI) LIMITED VS. DCIT DATED 31.12.200 7 IN ITA NO.6147/ MUM/2006 IN WHICH CASE ALSO SIMILAR VIEW HAS BEEN TAKEN AND THE REASSESSME NT HAS BEEN QUASHED. THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT BRING ON RECO RD ANY FACT TO DISTINGUISH THE CASES ALREADY DECIDED BY THE TRIBUNAL IN SIMILAR CIRCUMSTANCES. R ESPECTFULLY FOLLOWING THE PRECEDENTS WE HOLD THAT THE REASSESSMENT WAS WRONGLY INITIATED BY THE A.O. IN THE INSTANT CASE. THE SAME IS, THEREFORE, SET ASIDE. RESPECTFULLY FOLLOWING THE SAME,WE HOLD THAT REOPEN ING WAS NOT VALID. EFFECTIVE GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE. AS A RESULT,AP PEAL FILED BY THE ASSESSEE STANDS ALLOWED. 8(9 !'( : ; * 6 < * ( = >. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH ,MARCH,2015. 7 * ,-' @ A! 30 B,2015 - * 6 E SD/- SD/- ( /I P BANSAL) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, A! /DATE: 30.03.2015 SK 4 ITA NO. 1800/M/12 ATLAS EXPORTS (INDIA) 7 7 7 7 * ** * %(F %(F %(F %(F GF'( GF'( GF'( GF'( / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / #$ 2. RESPONDENT / %&#$ 3. THE CONCERNED CIT(A)/ H I , 4. THE CONCERNED CIT / H I 5. DR A BENCH, ITAT, MUMBAI / FJ6 %(! , , . . . 6. GUARD FILE/ 6 8 &F( %( //TRUE COPY// 7! / BY ORDER, K / = DY./ASST. REGISTRAR , /ITAT, MUMBAI.