D.C.I.T. Cir - 1/Kol., Kolkata V. M/s AVERY INDIA LTD., Haryana

ITA 1825/KOL/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4785 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 27-07-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 10-12-2012
• Court: TRIBUNAL
• Assessee Lawyers: SHASHANK KASATCA; MA NISH SHETH
• Keywords: Tangible material; Difference of opinion; Reason to believe; Change of opinion; Revenue expenditure; Reassessment proceedings; Capital expenditure
• Section: 143(3); 142(1); 115JB; 37(1); 147; 148; 10; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH A , KOLKATA [BEFORE HONBLE SHRI M.BALAGANESH, AM & SHRI K.NA RASIMHA CHARY, JM] ITA NO.1812/KOL/2012 ASSESSMENT YEAR : 2003-04 AVERY INDIA LTD. -VERSUS- A.C.I.T., CIRCLE-1, KOLKATA KOLKATA (PAN:AACCA 4694 B) ( APPELLANT ) (RESPONDENT) ITA NO.1825/KOL/2012 ASSESSMENT YEAR : 2003-04 D.C.I.T., CIRCLE-1, -VERSUS- AVERY INDIA LTD. KOLKATA KOLKATA (PAN:AACCA 4694 B) ( APPELLANT ) (RESPONDENT) FOR THE ASSESSEE : SHRI SHASHANK KASAT,CA & SHRI MA NISH SHETH, FCA FOR THE DEPARTMENT : SHRI SALLONG YADEN, ADDL. CIT DATE OF HEARING : 27.07.2016. DATE OF PRONOUNCEMENT : 03.08.2016. ORDER PER SHRI M.BALAGANESH, AM THIS APPEAL OF THE ASSESSEE AND THE REVENUE ARISE OUT OF THE ORDER OF THE LEARNED CIT(A) IN APPEAL NO. 1010/CIT(A)-XXIV/C-1/1 1-12 DATED 27.09.2012 FOR THE ASST YEAR 2003-04 PASSED AGAINST THE ORDER OF A SSESSMENT FRAMED BY THE LEARNED AO U/S 143(3)/147 OF THE INCOME TAX ACT, 1961 (HER EINAFTER REFERRED TO AS THE ACT). BOTH THE APPEALS ARE TAKEN UP TOGETHER AND DISPOSED OFF BY A COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEE HAS RAISED A PRELIMINARY OBJECTION ON THE VALIDITY OF REASSESSMENT PROCEEDINGS U/S 147 OF THE ACT. THE BRIEF FACTS OF THIS ISSUE IS THAT THE LD. AO HAD SOUGHT TO REOPEN THE ASSESSMENT FOR THE PURPOSE OF DISALLOWING THE INTEREST EXPENDITURE OF RS.51,48,511/- TREATING THE SAME AS CAPITAL IN NATURE AND HAD ALSO SOUGHT TO TREAT CERTAIN ITEMS TO BE ADDED BACK FOR THE PURPOSE OF COMPUTING BOOK ITA NOS1812&1825/KOL/2012 M/S. AVERY INDIA LTD. A.YR.2003-04 2 PROFITS U/S 115JB OF THE ACT. THE REASONS RECORDED BY THE AO FOR REOPENING THE ASSESSMENT ARE REPRODUCED HEREUNDER :- IT IS SEEN FROM SCHEDULE 'P' DEALING WITH EXTRAORD INARY ITEM THAT A SUM OF RS.51 ,48,511/- WAS SPENT BY E ASSESSEE TOWARDS SETTLEMEN T OF CLAIM WITH UNITED BANK OF INDIA. THE BACKGROUND AS APPARENT FROM ITEM NO.7 OF THE NO TES TO THE FINANCIAL STATEMENTS IS THAT IN THE YEAR 1979, THE ASSESSEE CAME OUT WITH A PUBLIC ISSUE OF ITS SHARES WHICH WAS OVER-SUBSCRIBED. IN ORDER TO ISSUE THE REFUND TO TH E SHARE APPLICANTS FOR SUCH OVER- SUBSCRIPTION, THE ASSESSEE APPROACHED TO THE U.B.I. TO ACT AS ITS BANKER FOR THE PURPOSE OF REFUND TO THE SHARE APPLICANTS. THE UBI CALCULAT ED THE TOTAL DUES OF RS.1 ,75,00,000/- PLUS INTEREST. FOR RECOVERY OF DUES FROM THE ASSESS EE U.B.I. FILED SUIT AGAINST THE ASSESSEE BEFORE CALCUTTA HIGH COURT. THE MATTER WAS REFERRED TO DEBT RECOVERY TRIBUNAL AND THEN CAME BACK TO CALCUTTA HIGH. COURT . THE ASSESSEE MADE OUT OF COURT SETTLEMENT WITH U.B.I. TO PAY RS.75,00,000/- WHICH WAS PAID IN THE FINANCIAL YEAR 2002- 03 RELEVANT TO A.YR.2003-04. OUT OF RS.75,00,000/-- A SUM OF RS.51,48,511/- (SHOWN AS EXTRAORDINARY ITEM) WAS RECORDED AS INTEREST. THE A MOUNT OF RS.51,48,511/ WHICH HAS BEEN RECORDED AS INTEREST IS CAPITAL EXPENDITURE AS IT RELATES TO SHARE ISSUE EXPENSES. BUT ASSESSEE CLAIMED IT AS REVENUE EXPENDITURE. THIS IN COME HAS ESCAPED ASSTT. FOR R.51 ,48,511/-. AGAIN THE ASSESSEE CLAIMED FOLLOWING DED UCTION WHILE CALCULATING BOOK PROFIT U/S.115JB :- RS. 1 VOLUNTARY RETIREMENT SCHEME 2,65,84,234/- 2 RAW MATERIAL COMPONENT WRITTEN OFF 30,54,0001- 3 MIS-APPROPRIATION OF INVENTORY 51,48,511/- 4 SETTLEMENT CLAIM WITH UBI 2,66,186/- 5 PRIOR PERIOD EXPENSES/ITEMS 35,56,000/- TOTAL 3,86,08,931/- THE LIST OF ADJUSTMENT (PLUS OR MINUS) FOR THE PURP OSE OF COMPUTATION OF BOOK PROFIT U/S.115JB IS LIMITED TO THE SPECIFIC ITEMS AS SPECI FIED IN EXPLANATION BELOW SECOND PROVISO 10 SECTION 115JB. AS DECIDED BY HON'BLE SUP REME COURT IN THE CASE OF APPOLO TYRE LTD VS. CIT (255 ITR 273), NO ADJUSTMENT OTHER THAN WHAT HAS BEEN SPECIFIED IN EXPLANATION BELOW SECOND PROVISO TO SECTION 115JB I S' ALLOWABLE FOR THE PURPOSE OF COMPUTATION OF BOOK PROFIT. THIS IS HOW IT IS SEEN THAT BOOK PROFIT CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IN VIEW OF THE ABOVE, I HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX FOR RS.51,48,511/- (AS DISCUSSED IN PARA-I) AND BOOK PR OFIT FOR RS.3,86,08,931/- CHARGEABLE TO TAX ESCAPED ASTT. WITHIN THE MEANING OF SEC.147. NOTICE U/S 148 IS ISSUED ACCORDINGLY. 3. THE LD. AR STATED THAT THE ASPECT OF ALLOWABIL ITY OF INTEREST EXPENDITURE IN THE SUM OF RS.51,48,511/- WAS EXAMINED IN DETAIL BY THE LD. AO DURING THE ORIGINAL SCRUTINY ASSESSMENT PROCEEDINGS COMPLETED U/S 143(3) OF THE ACT ON 29.03.2006. THE LD. AR ARGUED THAT THIS INTEREST WAS PAID AS PART OF THE S ETTLEMENT PROCESS AGREED WITH U.B.I. BASED ON OUT OF COURT COMPROMISE MEMO FILED BEFORE THE HONBLE CALCUTTA HIGH COURT FOR A SUM OF RS.75,00,000/- AND AS PER THE AS SESSEES BOOKS A SUM OF ITA NOS1812&1825/KOL/2012 M/S. AVERY INDIA LTD. A.YR.2003-04 3 RS.23,51,489/- WAS REMAINING AS AMOUNTS DUE TO U.B .I. TOWARDS PRINCIPAL PORTION AND ACCORDINGLY THE ASSESSEE TREATED THE REMAINING SUM OF RS.51,48,511/- (75,00,000- 23,51,489) AS ATTRIBUTABLE TOWARDS INTEREST AND CLA IMED THE SAME AS REVENUE EXPENDITURE IN ITS RETURN. THE LD. AR BROUGHT TO OU R ATTENTION THAT AS AGAINST THE CLAIM OF RS.1,75,00,000/- BY U.B.I. AGAINST THE ASSESSEE FOR WHICH SUIT PROCEEDINGS WERE PENDING BEFORE DEBTS RECOVERY TRIBUNAL AND ALSO IN CALCUTTA HIGH COURT A SUM OF RS.75,00,000/- WAS ARRIVING AS OUT OF COURT SETTLEM ENT AND ASSESSEE HAD MADE THE SAID PAYMENT TO U.B.I. THIS VERY SAME ISSUE WAS SUBJECTE D TO DUE VERIFICATION BY ISSUANCE OF SPECIFIC QUESTIONNAIRE U/S 142(1) OF THE AO BY T HE LD. AO DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS VIDE PROCEEDINGS UN DER REFERENCE NO.ACIT/CIRCLE- 1/AVERY INDIA /2005-06/D-287 DT. 26.10.2005 VIDE QU ESTIONNAIRE NO.16 WHICH IS REPRODUCED AS UNDER :- 16. AS PER SCHEDULE P. RS.51,48,511/- HAS BEEN DEB ITED AS SETTLEMENT OF CLAIM WITH UNITED BANK OF INDIA. PLEASE FURNISH THE DETAILS OF CLAIMS TO JUSTIFY THE CLAIM OF EXPENDITURE. FURTHER ANOTHER QUESTIONNAIRE WAS ALSO ISSUED BY TH E LD. AO VIDE PROCEEDINGS UNDER REFERENCE NO.ACIT/CIR-1/KOL/AACCA4694B/2005-06/566 DATED 14.12.2005 VIDE QUESTIONNAIRE NO.3 WHICH IS REPRODUCED AS UNDER :- 3. TO FILE THE DETAILS OF EXPENSES IN FORM OF MISC . EXPENSES, BAD DEBT WITH LEDGER COPY AND ALSO FILE THE EVIDENCE REGARDING SETTLEMENT OF CLAIM WITH UNITED BANK. 4. THE ASSESSEE IN RESPONSE TO THE SAID QUESTION NAIRE FILED ITS REPLY VIDE LETTER DT. 15.03.2006 WHICH WAS FILED IN PERSON BEFORE THE LD. AO AND THE RELEVANT PARAGRAPH-11 OF THE SAID REPLY IS REPRODUCED AS UNDER : 11. IN RESPECT OF THE ASSESSEE'S CLAIM TOWARDS SET TLEMENT OF DISPUTE WITH UNITED BANK OF INDIA [HEREINAFTER REFERRED TO AS 'UBI'], THE ASSES SEE PREFERS TO PUT ON RECORD THE BRIEF HISTORY OF THE MATTER: IN THE YEAR 1979, THE ASSESSEE CAME OUT WITH A PUB LIC ISSUE OF ITS SHARES WHICH WAS OVERSUBSCRIBED. TOWARDS ISSUANCE OF REFUND ORDERS T O UNSUCCESSFUL APPLICANTS THE ASSESSEE APPROACHED UBI TO ACT AS ITS BANKER WHICH WERE MADE PAYABLE BY ALL BRANCHES OF UBI OR THROUGH STATE BANK OF INDIA WHERE UBI HAD NO BRANCH. THE ASSESSEE OPENED A BANK ACCOUNT WITH UBI FOR THIS PURPOSE, BEING ACCOU NT NO. A-139. THE. ASSESSEE EXECUTED AN INDEMNITY IN FAVOUR OF UBI TO MAKE GOOD AN CLAIMS, PAYMENTS, ACTIONS, LOSSES, DAMAGES, COSTS, CHARGES AND EXPENSES ON DEM AND BY THE BANK, IN CASE OF ANY UNDUE LOSS TO THE BANK ARISING OUT OF THIS DEAL. ITA NOS1812&1825/KOL/2012 M/S. AVERY INDIA LTD. A.YR.2003-04 4 ANDREW YULE & COMPANY ACTED AS THE REGISTRAR TO THE ISSUE AND WAS WORKING ON THE ISSUE OF SHARES AND / OR REFUND ORDERS ISSUED TO UN SUCCESSFUL APPLICANTS. ANDREW YULE INFORMED UBI IN NOVEMBER, 1979 THAT ABOUT TWO LAKHS REFUND ORDERS WOULD BE ISSUED. THE ASSESSEE INFORMED UBI THAT THE TOTAL AMOUNT TO BE REFUNDED WOULD BE APPROXIMATELY RS. 19,48,26,441/- AND AN INITIAL ARRANGEMENT WAS M ADE FOR MAKING PAYMENT TO UBI FOR 'AN AMOUNT OF RS. 11,59,90,372/-. AT THE REQUEST OF THE ASSESSEE, UBI TRANSFERRED A SUM OF RS. 25,00,500/- TO STATE BANK OF INDIA FOR HONOU RING REFUND ORDERS AT PLACES WHERE UBI HAD NO BRANCH IN THE SAID ACCOUNT NO. A-139. TH E ASSESSEE DEPOSITED FUNDS FROM 'LIME TO FOR WHICH UBI GAVE CREDIT TO THE ASSESSEE AND AT THE SAME TIME DEBITED THE SAID ACCOUNT WITH THE AMOUNTS PAID AGAINST THE REFUND OR DERS. . THE STATE BANK OF INDIA HAD PAID TO THE EXTENT OF R S.1,29,143/- ONLY OUT OF RS. 25,00,000/- TRANSFERRED TO IT THE BALANCE AMOUNT WA S UTILIZED BY THE ASSESSEE FOR OTHER PURPOSES. AFTER MAKING ALL NECESSARY ADJUSTMENTS, T HE OUTSTANDING CLAIMS OF UBI STOOD AT RS. 20.04,500/- WITH INTEREST AND BANK CHARGES A S ON APRIL 21. 1980 WHICH WAS DEBITED TO THE SAID ACCOUNT NO. A-139. IN APRIL, 1980, THE ASSESSEE REQUESTED UBI TO HAND OVER THE PAID REFUND ORDERS TO ANDREW YULE FOR PREPARATION OF PROPER STATEMENTS AN D RECONCILIATION OF THE SAME. THE ASSESSEE UNDERTOOK TO PRODUCE OR RETURN THOSE REFUN D ORDERS TO UBI WHENEVER ASKED FOR AND THEY UNDERTOOK TO KEEP THE LATTER FULLY INDEMNI FIED AGAINST ANY 10$5 OR MISUSE OF THE SAID ORDERS. AFTER SUCH UNDERTAKING, ANDREW YULE HA D OBTAINED THE PAID REFUND ORDERS. FROM 1 ST JANUARY 1982, ANDREW YULE CEASED TO ACT AS THE REG ISTRAR AND CHOKSEY BHARGAVA AND COMPANY BECOME THE REGISTRAR TO THE IS SUE OF THE ASSESSEE. IN APRIL, 1989 AVERY INDIA LIMITED, FURTHER REQUESTED UBI TO HAND OVER THE ENCASHED REFUND ORDERS TO CHOKSEY BHARGAVA AND THE LATTER ON AN UND ERTAKING AND TRUST TO RETURN OR DELIVER TO UBI OBTAINED THE REMAINING ENCASHED REFU ND ORDERS. AFTER ALL ADJUSTMENTS THE TOTAL AMOUNT DUE FROM THE ASSESSEE TO UBI IN ACCOUNT NO. A- 139, WORKED OUT TO RS. 1,75,26,638.55, INCLUDING I NTEREST AS ON 31ST MARCH 1991. REPEATED REQUESTS MADE BY THE ASSESSEE TO ANDREW YU LE AND CHOKSEY BHARGAVA TO DELIVER THE ENCASHED REFUND PAY ORDERS AND THE LIST THEREOF, THE STATEMENT OF ACCOUNTS AND COMPUTERISED TABULATIONS OF THE ENCASHED REFUND S PAY ORDERS TURNED FUTILE. UBI INSTITUTED A SUIT IN 1991 VIDE SUIT NO. 276 OF 1991 IN THE CALCUTTA HIGH COURT PRAYING, INTERALIA, FOR RECOVERY OF A SUM OF RS, 1,75,26,638 .55 WITH FURTHER INTEREST FROM 1 ST APRIL 1991 TILL REALISATION AT THE RATE OF 18% PER ANNUM FROM THE ASSESSEE. DURING PENDENCY OF THE SUIT, 'THE RECOVERY OF DEBTS DUE TO BANKS AN D FINANCIAL INSTITUTIONS ACT, 1993' CAME INTO FORCE AND FOLLOWING SECTION 31 OF THE SAI D ACT, THE SUIT WAS TRANSFERRED FROM THE HON'BLE CALCUTTA HIGH COURT TO THE DEBTS RECOVE RY TRIBUNAL ESTABLISHED UNDER THE AFORESAID ACT. NO OBJECTION WAS TAKEN IN THE HIGH C OURT FOR NOT TRANSFERRING THE CASE. THE SAME WAS RENUMBERED AS T.A NO. 163 OF 1996. THE ASSESSEE IN APPLICATIONS BEFORE THE DEBT RECOVE RY TRIBUNAL PRAYED FOR RETURN OF THE PLAINT ON THE GROUND THAT THE TRIBUNAL HAD NO .JURI SDICTION TO ENTERTAIN THE TRANSFERRED APPLICATION IN VIEW OF THE FRAME OF THE SUIT AND NA TURE OF THE RELIEFS PRAYED FOR THEREIN BY UBI. THE TRIBUNAL DISPOSED OF THE APPLICATIONS F ILED BY ANDREW YULE, CBOKESY BHARGAVA AND THE ASSESSEE [HEREINAFTER REFERRED TO AS THE 'APPLICANTS'] BY HOLDING THAT THE TRIBUNAL HAS JURISDICTION TO DECIDE THE CLAIM O F UBI. ALL THE APPLICANTS FILED SEPARATE APPLICATIONS BEFORE THE HON 'BLE CALCUTTA HIGH COURT UNDER ARTICLE 227 OF THE CONSTITUTION OF INDIA CHALLENGING THE ORDERS PASSED BY THE TRIBUNAL. THE SAID APPLICATIONS WERE CONTESTED BY UBI. THE HONBLE HIGH COURT AFTER HEARING PASSED AN ORDER SETTING ASIDE THE IMPUGNED ORDERS OF THE TRIB UNAL AND DIRECTING THE TRIBUNAL TO ITA NOS1812&1825/KOL/2012 M/S. AVERY INDIA LTD. A.YR.2003-04 5 TRANSMIT BACK THE RECORDS OF SUIT NO. 276 OF 1991 ( RENUMBERED AS T.A NO. 163 OF 1996) FOR ADJUDICATION BY THE HIGH COURT ON THE GROUND TH AT THE SCOPE AND AMBIT OF THE 1993 ACT IS CONFINED TO THE RECOVERY OF DEBTS DUE TO BAN KS AND FINANCIAL INSTITUTIONS AND THE EXPRESSION DEBT' CAN ONLY BE RELATED TO A SPECIFIC AND QUANTIFIED AMOUNT FOR THE PURPOSES OF THE SAID ACT AND NOT IN RESPECT OF AN U NDETERMINED SUM WHICH IS REQUIRED TO BE ASCERTAINED UPON AN ENQUIRY TO BE CONDUCTED TRIB UNAL. THE HIGH COURT WAS OF THE VIEW THAT SINCE THE SUIT HAS BEEN FRAMED AS ONE FOR DAMAGES AND COMPENSATION WHICH IS REQUIRED TO BE QUANTIFIED BEFORE DECREE, THE ME IS SUFFICIENT TO TAKE THE SUIT OUT OF THE AMBIT OF THE 1993 ACT WHICH DEALS WITH THE RECOVERY OF SPECIFIED AMOUNTS. MEANWHILE, DURING THE FINANCIAL YEAR 2002-03 THE AS SESSEE AGREED TO AN OUT OF COURT SETTLEMENT WITH UBI FOR A CONSIDERATION OF RS, 7,50 0,000/- AS FULL AND FINAL SETTLEMENT AGAINST THE PENDING DISPUTE WITH UBI. CONSEQUENTLY , THE PAYMENT WAS MADE ON 16TH . JANUAARY, 2003. IT IS HUMBLY SUBMITTED THAT THE DIS PUTE WAS FINALLY SETTLED AND THE ULTIMATE LIABILITY OF THE ASSESSEE CRYSTALLIZED ONL Y DURING THE PREVIOUS YEAR RELEVANT TO THE SSESSMENL YEAR UNDER REFERENCE. COPY OF THE ORD ER SHEET OF THE HON'BLE CALCUTTA HIGH COURT RECORDING THE SETTLEMENT BETWEEN THE ASS ESSEE AND UBI AND THEREBY DISMISSING THE SUIT IS ENCLOSED AND MARKED AS ANNEX URE-17. THE AMOUNT PAID HAD BEEN ADJUSTED AGAINST A LIABILI TY OF RS. 2,351,489/- AS APPEARING IN THE BOOKS OF ACCOUNTS OF THE COMPANY AND BALANCE OF RS. 5,148.,511/- HAS BEEN RECORDED AS AN INTEREST AND DISCLOSED AS AN EXTRA O RDINARY ITEM IN THE FINANCIAL STATEMENTS OF THE COMPANY. IN VIEW OF THE ABOVE, THE ASSESSEE WOULD WISH TO SU BMIT THAT THE AFORESAID EXPENDITURE WAS INCURRED BY IT DURING THE COURSE OF CONDUCT OF ITS BUSINESS AND WAS THUS INEXTRICABLY LINKED TO ITS BUSINESS. THE AFORESAID EXPENDITURE W AS WHOLLY AND EXCLUSIVELY INCURRED BY THE ASSESSEE FOR THE PURPOSES OF ITS BUSINESS AND I S THEREFORE ALLOWABLE .AS A DEDUCTIBLE EXPENDITURE UNDER SECTION 37(1) OF THE ACT. 5. BASED ON THIS SUBMISSION THE LD. AO CAME TO A CONCLUSION THAT THE SAID CLAIM OF THE INTEREST EXPENDITURE IN THE SUM OF RS.51,48,511 /- WAS ALLOWABLE AS REVENUE EXPENDITURE AND ACCORDINGLY ACCEPTED THE CLAIM OF T HE ASSESSE IN THE ORIGINAL SCRUTINY ASSESSMENT PROCEEDINGS COMPLETED U/S 143(3) OF THE ACT ON 29.03.2006.. THE LD. AR ARGUED THAT THE AO HAD FORMED HIS OPINION AFTER DUL Y SATISFYING HIMSELF ON THE MATERIALS AVAILABLE ON RECORD AND THERE WAS NO TANG IBLE MATERIAL AVAILABLE WITH HIM WARRANTING THE REOPENING OF THE ASSESSMENT AND IN A NY CASE IT WOULD ONLY TANTAMOUNT TO CHANGE OF OPINION ON THE PART OF THE LD. AO. IN SUPPORT OF HIS ARGUMENT HE PLACED RELIANCE ON THE DECISION OF THE HONBLE SUPREME COU RT IN THE CASE OF KELVINATOR OF INDIA LIMITED REPORTED IN 320 ITR 561(SC). 6. THE LD. AO ALSO SOUGHT TO MAKE CERTAIN ADDITI ONS TO THE BOOK PROFITS COMPUTED U/S 115JB TOWARDS VOLUNTARY RETIREMENT SCHEME DEBITED I N THE SUM OF RS.2,65,84,234; RAW ITA NOS1812&1825/KOL/2012 M/S. AVERY INDIA LTD. A.YR.2003-04 6 MATERIAL COMPONENTS WRITTEN OFF RS.30,54,000/-; M IS-APPROPRIATION OF INVENTORY RS.35,56,000/-; PRIOR PERIOD EXPENSES RS.2,66,186 /-. IN THIS REGARD THE LD. AR BROUGHT TO THE ATTENTION OF THE BENCH THAT THESE AS PECTS WERE DULY CONSIDERED BY THE LD. AO VIDE SPECIFIC QUESTIONNAIRES ISSUED DURING THE C OURSE OF ORIGINAL ASSESSMENT PROCEEDINGS ON 26.10.2005 FOR WHICH REPLY WAS GIVEN BY THE ASSESSEE AS FOLLOWS :- A)VOLUNTARY RETIREMENT EXPENSES : RS.2,65,85,234/- REPLY WAS GIVEN VIDE PARA NO.4 VIDE LETTER DATED 16.11.2005 FILED IN PERSON BEFOR E THE AO. B)MIS-APPROPRIATION OF INVENTORIES : RS.35,56,000/- REPLIED BY THE ASSESSEE VIDE PARA NO.4 IN LETTER DATED 25.11.2005 FILED BEFORE THE LD . AO ON 02.12.2005. C)RAW MATERIAL COMPONENTS WRITTEN OFF : RS.30,54,00 0/- REPLIED BY THE ASSESSEE VIDE PARA-1 IN LETTER DATED 13.02.2006 SUBMITTED BEFORE THE LD. AO ON THE SAME DAY. 7. WITH REGARD TO PRIOR PERIOD EXPENSES IN THE S UM OF RS.2,66,186/- THE LD. AR SUBMITTED THAT THE SAME WAS ALREADY DISALLOWED BY T HE LD. AO IN THE ORIGINAL SCRUTINY ASSESSMENT PROCEEDINGS. ACCORDINGLY HE ARGUED THAT ALL THE ISSUES THAT WERE CONTEMPLATED BY THE LD. AO TO BE ADJUDICATED IN THE RE-ASSESSMENT PROCEEDINGS WERE ALREADY PART OF ADJUDICATION AND DETAILED VERIFICAT ION IN THE ORIGINAL SCRUTINY ASSESSMENT PROCEEDINGS BASED ON WHICH AN OPINION WA S FORMED BY THE LD. AO BY ACCEPTING THE CLAIM OF THE ASSESSEE. HE PLACED RELI ANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA LT D (SUPRA ) AND ARGUED THAT THE DECISION TO REOPEN THE ASSESSMENT WOULD ONLY TANTAM OUNT THE CHANGE OF OPINION ON THE PART OF THE LD. AO AND ACCORDINGLY PRAYED FOR QUASH ING OF THE REASSESSMENT PROCEEDINGS. 8. IN RESPONSE TO THIS, THE LD. DR ARGUED THAT T HE ASPECT OF CHANGE OF OPINION WOULD ARISE ONLY WHEN TWO VIEWS ARE POSSIBLE. HE ARGUED T HAT THE AO HAD TAKEN A WRONG VIEW ON THE ISSUES THAT WERE SUBJECTED TO RE-ASSESS MENT. HENCE IT WOULD NOT TANTAMOUNT TO CHANGE OF OPINION. ACCORDINGLY HE VEH EMENTLY SUPPORTED THE ORDER OF THE LD. AO. HE FURTHER STATED THAT THE LD. CIT(A) H AD PLACED RELIANCE ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS RAJESH JHAVERI STOCK BROKER (P)LTD. REPORTED IN 291 ITR 500 (SC). ITA NOS1812&1825/KOL/2012 M/S. AVERY INDIA LTD. A.YR.2003-04 7 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE DETAILED PAPER BOOK FILED BY T HE ASSESSEE COMPRISING OF VARIOUS QUESTIONNAIRES ISSUED BY THE LD. AO ON THE SUBJECT MENTIONED ISSUES AND VARIOUS REPLIES FILED BY THE ASSESSEE ON THE VERY SAME ISSU ES BEFORE THE LD. AO IN THE ORIGINAL SCRUTINY ASSESSMENT PROCEEDINGS, AMONG OTHERS. AT THE OUTSET WE FIND THAT RELIANCE PLACED BY THE LD. DR ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS RAJESH JHAVERI STOCK BROKER (P)LTD (SUPRA) IS NO T APPLICABLE TO THE FACTS OF THE INSTANT CASE IN VIEW OF THE FACT THAT ASSESSMENT WA S ORIGINALLY COMPLETED U/S 143(1) OF THE ACT IN THE CASE OF RAJESH JHAVERI STOCK BROKER (P)LTD AND THE HONBLE APEX COURT HELD THAT NO OPINION WOULD HAVE BEEN FRAMED BY THE AO IN THAT CASE AS ASSESSMENT WAS COMPLETED U/S 143(1) OF THE ACT. HENCE REOPENIN G OF THE ASSESSMENT THEREON WOULD NOT TANTAMOUNT TO CHANGE OF OPINION. WHEREAS IN THE INSTANT CASE, ORIGINAL ASSESSMENT PROCEEDINGS WERE COMPLETED U/S 143(3) ON 29.03.2006 AFTER RAISING A SPECIFIC QUESTIONNAIRE WITH REGARD TO ALL THE ISSUE S UNDER DISPUTE AND AFTER GOING THROUGH THE DETAILED SUBMISSIONS MADE BY THE ASSESS EE ON THE VERY SAME ISSUES. HENCE IN THESE CIRCUMSTANCES, IT CAN ONLY BE CONSTRUED T HAT THE LD. AO HAD CLEARLY FORMED AN OPINION ON THE SUBJECT MENTIONED ISSUES DURING THE ORIGINAL ASSESSMENT PROCEEDINGS AND COMPLETED THE SAME ACCORDINGLY. REOPENING THE A SSESSMENT TO TAKE A DIFFERENT VIEW ON THE VERY SAME ISSUE WOULD ONLY LEAD TO ABUS E OF POWER ON THE PART OF THE LD. AO TO REVIEW HIS OWN DECISION WHICH IS NOT CONTEMPL ATED UNDER THE SCHEME OF RE- ASSESSMENT PROCEEDINGS WITHIN THE MEANING OF SECTIO N 147 OF THE ACT. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF THE HONBLE APE X COURT IN THE CASE OF KELVINATOR OF INDIA LTD. (SUPRA). IN CIT VS. KELVINATOR OF INDIA LTD. [2010] 320 ITR 561 (SC) [AFFIRMING CIT VS. KELVINATOR OF INDIA LTD. [2002] 256 ITR 1 ( DELHI) (FB)] J. KAPADIA HELD THAT THE CONCEPT OF CHANGE OF OPINION MUST BE TREATED AS AN IN-BUILT TEST TO CHECK ABUSE OF POWER BY ASSESSING OFFICER AND TH AT THE REASONS MUST HAVE A LIVE LINK WITH FORMATION OF BELIEF. IMPORTANT EXCERPT OF THE DECISION IS REPRODUCED HEREUNDER: ' HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATI ON TO THE WORDS REASON TO BELIEVE, FAILING WHICH SECTION 147 WOULD GIVE ARBITRARY POWE RS TO THE ASSESSING OFFICER TO REOPEN ASSESSMENTS ON THE BASIS OF MERE CHANGE OF OPINION, WHICH CANNOT BE PER SE REASON TO REOPEN. ONE MUST ALSO KEEP IN MIND THE C ONCEPTUAL DIFFERENCE BETWEEN ITA NOS1812&1825/KOL/2012 M/S. AVERY INDIA LTD. A.YR.2003-04 8 POWER TO REVIEW AND POWER TO REASSESS. THE ASSESSIN G OFFICER HAS NO POWER TO REVIEW; HE HAS THE POWER TO REASSESS, BUT THE REASSESSMENT HAS TO BE BASED ON FULFILMENT OF CERTAIN PRE-CONDITIONS AND IF THE CONCEPT OF CHANG E OF OPINION IS REMOVED AS CONTENDED ON BEHALF OF THE DEPARTMENT, THEN IN THE GARB OF REOPENING THE ASSESSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF CHANGE OF OPINION A S AN IN- BUILT TEST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFICER. HENCE, AFTER 1-4-1989 , THE ASSESSING OFFICER HAS POWER TO REOPEN, PROVIDED THE RE IS TANGIBLE MATERIAL TO COME TO CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FR OM ASSESSMENT. UNDER THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, THE PARLIAMENT NOT ONLY DELETED THE WORDS REASON TO BELIEVE BUT ALSO INSERTED THE WORD OPINION IN SE CTION 147. HOWEVER, ON RECEIPT OF REPRESENTATIONS FROM THE COMPANIES AGAINST OMISSION OF THE WORDS REASON TO BELIEVE, THE PARLIAMENT REINTRODUCED THE SAID EXPRESSION AND DELETED THE WORD OPINION ON THE GROUND THAT IT WOULD VEST ARBITRARY POWERS IN THE A SSESSING OFFICER.' 10. WITH REGARD TO THE ISSUE OF PRIOR PERIOD EXP ENSES OF RS.2,66,186/- WE FIND THAT THE SAME HAS ALREADY BEEN ADDED BACK IN THE ORIGINA L SCRUTINY ASSESSMENT PROCEEDINGS UNDER THE NORMAL COURSE OF THE ACT. IN ANY CASE, T HE SAME CANNOT BE ADDED FOR THE PURPOSE OF SECTION 115JB OF THE ACT AS IT DOES NOT FALL UNDER THE MANDATORY CONDITIONS CONTEMPLATED IN EXPLANATION TO SECTION 115JB OF THE ACT. SIMILARLY THE OTHER ITEMS CONTEMPLATED IN THE REASONS RECORDED TO BE ADDED BA CK IN THE COMPUTATION OF BOOK PROFITS U/S 115JB OF THE ACT I.E VRS COMPENSATION, RAW MATERIAL COMPONENTS WRITTEN OFF AND MISAPPROPRIATION OF INVENTORIES ALSO WOULD NOT FALL UNDER THE MANDATORY ADDITIONS TO BOOK PROFITS AS PER EXPLANATION TO SEC TION 115JB OF THE ACT. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF APOLLO TYRES LTD VS CIT 255 ITR 273(SC), WE HAVE NO HESITATION TO CO NCLUDE THAT THE SAID ITEMS DOES NOT FALL UNDER THE ITEMS TO BE ADDED BACK FOR THE P URPOSE OF COMPUTATION OF BOOK PROFIT U/.S 115JB OF THE ACT. 11. IN VIEW OF THE AFORESAID FINDINGS AND RESPE CTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF KELVINATOR OF INDIA LTD. (SUPRA) AND APOLLO TYRES LTD SUPRA , WE QUASH THE REASSESSMENT PROCEED INGS INITIATED BY THE LD. AO AND ACCORDINGLY ALLOW THE GROUNDS 1 & 2 RAISED BY THE A SSESSEE. SINCE THE REASSESSMENT IS QUASHED ON TECHNICAL GROUNDS, WE DONT DEEM IT FIT TO ADJUDICATE THE OTHER GROUNDS OF THE ASSESSEE AND THE REVENUE. ITA NOS1812&1825/KOL/2012 M/S. AVERY INDIA LTD. A.YR.2003-04 9 12. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 03.08.2016. SD/- SD/- [K.NARASIMHA CHARY] [M.BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEMBE R DATE: 03.08.2016. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . AVERY INDIA LTD., PLOT NO.50-59, SECTOR-25, BALLABG ARH -121004 (HARYANA). 2 THE A.C.I.T., CIRCLE-1, KOLKATA. 3 . THE CIT(A)-XXIV, KOLKATA, 4. THE CIT-I, KOLKATA. 5 . DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES ITA NOS1812&1825/KOL/2012 M/S. AVERY INDIA LTD. A.YR.2003-04 10