M/s. Chennai Garments, CHENNAI V. ACIT, CHENNAI

ITA 1807/CHNY/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57855 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 23-01-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 25-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K P GOPAKUMAR
• Keywords: Reopening of assessment; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 80HHC; 147; 148

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI C BENCH, CHENNAI. BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER & SHRI GEORGE MATHAN, JUDICIAL MEMBER I.T.A. NO. 1807/MDS/2010 ASSESSMENT YEAR: 2004-05 M/S. CHENNAI GARMENTS, FLAT NO.5, 3 RD FLOOR,32, 92 ND STREET, 18 TH AVENUE, ASHOK NAGAR, CHENNAI 600 083. [PAN: AABFC9957F] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, BUSINESS CIRCLE III, CHENNAI 600 034. . (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SAROJ KUMAR PARIDA, ADVOCATE REVENUE BY : SHRI K.P. GOPAKUMAR, JCIT DATE OF HEARING : 23.01.2012 DATE OF PRONOUNCEMENT : 27.01.2012 ORDER PER N.S. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LD. CIT(A) VIII, CHENNAI DATED 30.07.2010 IN ITA NO. 13 4/09-10 PASSED IN ASSESSMENT YEAR 2004-05. SHRI SAROJ KUMAR PARIDA, A DVOCATE REPRESENTED ON BEHALF OF THE ASSESSEE AND SHRI K.P. GOPAKUMAR, JCIT REPRESENTED ON BEHALF OF THE REVENUE. 2. THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APP EAL: I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1807/M/10 807/M/10 807/M/10 807/M/10 2 1 . THE ORDER OF THE COMMISSIONER OF INCOME TAX (A PPEALS) IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N CONFIRMING THE REOPENING OF THE ASSESSMENT AND MAKING ADDITION IN RESPECT OF ISSUE FOR WHICH ALL PARTICULARS HAVE ALREADY BEEN FILED ALONG WITH THE RETURN WHILE COMPLETING THE ASSESSMENT U/S 143(3). 3. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE ORIGINAL ASSESSMENT U/S 143(3) WAS COMPLET ED ON 31.03.2006 AFTER CONSIDERING ALL THE PARTICULARS FILED BEFORE HIM. N OTICE U/S 148 WAS ISSUED ON 30.03.2009 AND WHICH WAS SENT TO ASSESSEE BY POST O N 04.02.2009 IS BEYOND 4 YEAR FROM THE END OF THE ASSESSMENT YEAR. 4. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT ADDITION MADE IN THE REASSESSMENT HAS ARISEN O NLY DUE TO CHANGE OF OPINION AND NOT ON ACCOUNT OF CONCEALMENT OF ANY PA RTICULARS BY THE APPELLANT; HENCE THE ORDER IS TO BE QUASHED AS BEIN G WITHOUT JURISDICTION. 5. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT REOPENING IS PURELY BASED ON CHANGE OF OPINION AND HENCE IS ERRONEOUS IN LAW. THE APPELLANT RELIES ON THE DECISION OF THE APEX COURT IN THE CASE OF KELVINATOR INDIA LTD - 2010 TIOL - SC - IT. 6. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN REDUCING QUOTA S ALES OF RS.1935093/- FROM TOTAL EXPORT AND REDUCED THE 80HHC RELIEF AVAILABLE TO THE APPELLANT AND TREATED THE QUOTA SALES AS LOCAL SALES. 7. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE QUOTA SALES OF ` .1935093/- WAS NEVER INCLUDED IN TOTAL EXPORT TURNOVER OF ` .231102294/- BY THE APPELLANT. HENCE IT CAN NOT BE REDUCED FROM THE EXPORT TURNOVER. 8. THE APPELLANT CRAVES LEAVE TO FILE ADDITIONAL GROUNDS AT THE TIME OF HEARING. 3. AT THE OUTSET, THE LD. AR RAISED THE JURISDICTI ONAL GROUND REGARDING VALIDITY OF REOPENING OF THE ASSESSMENT. THE LD. AR SUBMITTED THAT ON THE BASIS OF RECORDED REASONS, REOPENING OF AN ASSESSME NT CANNOT BE MADE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1807/M/10 807/M/10 807/M/10 807/M/10 3 UNDER SECTION 147 OF THE ACT OF AN ASSESSMENT, WHIC H WAS ORIGINALLY COMPLETED UNDER SECTION 143(3) OF THE ACT. 4. ON THE OTHER HAND, THE LD. DR SUPPORTED THE REO PENING OF THE ASSESSMENT. 5. WE FIND THAT THE REASONS RECORDED UNDER SECTION 148 READS AS UNDER: REASONS FOR REOPENING OF ASSESSMENT FOR AY 2004-05 : THE ASSESSEES RETURN FOR THE AY 2004-05 WAS ASSES SED U/S 143(2) ON 08.12.2006 BY ADDL. CIT, RANGE III, C HENNAI. THE FIRM IS IN GARMENTS BUSINESS AND ITS TOTAL SA LE IS EXPORT SALE AND CLAIMED DEDUCTION U/S 80HHC ` .71,64,030/-. IN THE YEAR ASSESSEE EARNED INCOME BY WAY OF QUOTA SAL E ` .19,35,093/- AND INCLUDED THAT AMOUNT IN THE EXPORT TURNOVER FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 80HHC. IN THE ASSESSMENT ORDER, THE AO OBSERVED THAT THE QUOTA SALE SHOULD BE CONSIDERED AS LOCAL SALE, AND THEREF ORE, HE PROCEEDED TO RE-COMPUTE THE ELIGIBLE DEDUCTION U/S 80HHC. HE DETERMINED AN ALLOWABLE DEDUCTION OF ` .68,58,976/- INSTEAD OF ` .71,64,030/- CLAIMED BY THE ASSESSEE. BUT IT APPARENT THAT THE WORKINGS OF 80HHC, AS MAD E IN THE ASSESSMENT ORDER, WAS NOT CORRECT AND THUS ASSE SSEE WAS ALLOWED EXCESS DEDUCTION U/S 80HHC. HOWEVER, AGAINST THAT ASSESSMENT ORDER, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). LD. CIT(A) DECIDED THE ISSUE OF ALLOWABILITY OF DEDUCTION U/S 80HHC TO THE FIRM DIF FERENT ASPECT AND DIRECTED TO ALLOW FULL DEDUCTION AT ` .71,64,030/- FROM DIFFERENT REASONS. FROM THE APPELLATE ORDER IT IS APPARENT TH AT ASSESSEE HAS NOT AGITATED THE ISSUE OF TREATING THE QUOTA SA LE AS LOCAL SALES AND REWORKING OF DEDUCTION ON THAT BASIS. LEA RNED CIT(A) PASSED THE ORDER WITHOUT DISCUSSING THE ISSUE AS RA ISED BY AO IN THE ASSESSMENT ORDER ITSELF. THEREFORE, I HAVE REASON TO BELIEVE THAT ASSESSEE WAS ALLOWED EXCESSIVE DEDUCTION IN THE ASSESSMENT AND S O INCOME I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1807/M/10 807/M/10 807/M/10 807/M/10 4 CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THEREFORE , NOTICE U/S 148 IS ISSUED IN THIS CASE. ISSUE NOTICE U/S 148 OF THE I.T. ACT ON THIS DATE. 6. IT IS AN ESTABLISHED POSITION OF LAW THAT FOR R EOPENING AN ASSESSMENT, THERE MUST BE REASONS TO BELIEVE THAT INCOME CHARGE ABLE TO TAX HAS ESCAPED ASSESSMENT. FURTHER, SUCH REASON MUST BE RECORDED B EFORE ISSUANCE OF NOTICE. THE REASONS SO RECORDED MUST BE BASED ON SO ME RELEVANT MATERIAL AND MUST NOT BE VAGUE. APPLYING THE ABOVE SETTLED L EGAL POSITION IN THE INSTANT CASE, WE FIND THAT THE ASSESSING OFFICER HA S SIMPLY RECORDED THAT THERE WAS SOME CALCULATION MISTAKE IN THE ORIGINAL ORDER OF THE ASSESSMENT AND THEREBY EXCESS DEDUCTION UNDER SECTION 80HHC WA S ALLOWED TO THE ASSESSEE. HOWEVER, IT IS NOT CLEAR FROM THE RECORDE D REASONS THAT WHAT WAS THE CALCULATION MISTAKE AND HOW EXCESSIVE DEDUCTION UNDER SECTION 80HHC WAS ALLOWED TO THE ASSESSEE. FURTHER, THE ASSESSING OFFICER RECORDED THAT THE LD. CIT(A) DIRECTED TO ALLOW DEDUCTION UNDER SE CTION 80HHC AT ` .71,64,030/- BY CONSIDERING DIFFERENT ASPECT, BUT N OT REASONS RECORDED IN THE ASSESSMENT ORDER. FROM THIS RECORDING, IT IS NO T CLEAR AS TO WHICH ASPECTS WERE CONSIDERED BY THE LD. CIT(A) FOR ALLOWING DEDU CTION UNDER SECTION 80HHC TO THE ASSESSEE AT ` .71,60,030/-. FURTHER, IT IS ALSO NOT CLEAR WHETHER THE DEPARTMENT ACCEPTED THAT ORDER OF THE LD. CIT(A ) OR FILED ANY FURTHER APPEAL THERE AGAINST. WE FIND THAT THE HONBLE MADR AS HIGH COURT IN THE CASE OF S. HARINIVAS CHOWDRY V. ACIT 246 ITR 256 (M AD) HAS HELD THAT THE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1807/M/10 807/M/10 807/M/10 807/M/10 5 INFERENCE OF THE ESCAPEMENT SHOULD BE CLEARLY INDIC ATED IN THE GROUND FOR REOPENING A COMPLETED ASSESSMENT. THE REASONS FOR R EOPENING MUST BE OBJECTIVE AND NOT VAGUE, FARFETCHED OR FANCIFUL. FU RTHER, THE HONBLE DELHI HIGH COURT IN THE CASE OF SARTHAK SECURITIES CO. P. LTD. V. ITO [2010] 329 ITR 110 (DEL) HAS HELD THAT THE REASONS RECORDED SH OULD BE CLEAR AND UNAMBIGUOUS AND NOT SUFFER FROM ANY VAGUENESS. 7. IN VIEW OF THE ABOVE, IN OUR CONSIDERED OPINION REOPENING OF THE ASSESSMENT ON THE ABOVE RECORDED REASONS CANNOT BE SUSTAINED. WE, THEREFORE CANCEL THE IMPUGNED ASSESSMENT AND ALLOW THE GROUND OF THE APPEAL OF THE ASSESSEE. 8. IN VIEW OF OUR ABOVE DECISION, THE OTHER GROUN DS OF APPEAL TAKEN IN THIS APPEAL BY THE ASSESSEE HAVE BECOME MERELY ACAD EMIC IN NATURE AND HENCE INFRUCTUOUS. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 27.01.2012. SD/- SD/- (GEORGE MATHAN) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER CHENNAI, DATED, THE 27.01.2012 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.