Appeal details
Counselvise Citation
[2016] 132 COUNSELVISE.COM (IT) 4481 (ITAT-KOLKATA)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 1 month(s) 2 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
20-07-2016
Appeal Filed By
Assessee
Bench Allotted
C
Next Hearing Date
14-07-2016
Assessment Year
1998-1999
Appeal Filed On
17-06-2013
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI WASE EM AHMED, AM] I.T.A NO. 1921/KOL/20 13 ASSESSMENT YEAR : 1998-9 9 EPCOS INDIA PVT. LTD. -VS.- A.C.I.T., CI RCLE-11, KOLKATA KOLKATA [PAN : AAACI 6950 Q] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI ANUP SINHA, AR FOR THE RESPONDENT : SHRI DEBASHIS LAHIR I, JCIT, SR.DR DATE OF HEARING : 14.07.2016. DATE OF PRONOUNCEMENT : 20.07.2016. ORDER PER N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 11.03.2013 OF C.I.T.(A)-XII., KOLKATA RELATING TO A.Y.1998-99. 2. GROUNDS OF APPEAL RAISED BY THE ASSESSEE READ AS FOLLOWS :- 1. THAT ON THE. FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACT ION OF THE ASSESSING OFFICER (HEREIN AFTER REFERRED TO AS THE 'AO') AND THEREBY REJECTIN G THE GROUND TAKEN BY THE APPELLANT IN REGARD TO INITIATION OF REASSESSMENT PROCEEDINGS UN DER THE PROVISIONS OF SECTION 147 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS TH E 'ACT') AFTER A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR WHEN N ONE OF THE CONDITIONS SPECIFIED IN THE PROVISO TO SECTION 147 OF THE ACT ARE SATISFIED. 2. THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER AND THEREBY REJECTING THE GROUND TAKEN BY THE APPELLANT IN REGA RD TO INITIATION OF THE REASSESSMENT PROCEEDINGS UNDER THE PROVISIONS OF SECTION 147 OF THE ACT ON THE BASIS OF CHANGE OF OPINION. 3. THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE AO IN ADDING THE BAD DEBTS 2 ITA NO.1921/KOL/2013 EPCOS INDIA PVT.LTD. A.YR.1998-99 2 WRITTEN OFF WHILE COMPUTING THE BOOK PROFIT UNDER S ECTION 115JA OF THE ACT IN THE REASSESSMENT PROCEEDINGS ON THE ALLEGED GROUND RAIS ED BY THE AO THAT THE AFORESAID AMOUNT REPRESENTS PROVISION FOR DOUBTFUL DEBTS WHEN IT WAS CLARIFIED BEFORE HIM THAT THE ABOVE AMOUNTS REPRESENTS ACTUAL WRITE OFF OF BAD DE BTS AND AS SUCH NO ADDITION WAS MADE BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDIN GS AFTER ACCEPTING THE ARGUMENT PREFERRED BY THE APPELLANT. 4. THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE AO IN ADDING THE BAD DEBTS WRITTEN OFF WHILE COMPUTING THE BOOK PROFIT UNDER S ECTION 115JA OF THE ACT ON THE ALLEGED GROUND THAT THE APPELLANT HAS SUBMITTED THAT IT DOE S NOT INTEND TO PRESS FOR THIS GROUND WHEN THE APPELLANT HAS CLEARLY STATED IN THE SUBMIS SION FILED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) THAT NO ADDITION SHOULD BE MADE FOR BAD DEBT WRITTEN OFF WHILE ARRIVING AT THE BOOK PROFIT UNDER SECTION 115JA OF THE ACT. 5.THAT THE APPELLANT CRAVES LEAVE TO ADD TO AND/OR AMEND, ALTER, MODIFY OR RESCIND THE GROUNDS HEREINABOVE BEFORE OR AT THE TIME OF HEARIN G OF THE APPEAL. 3. THE ASSESSEE IS A COMPANY. IT IS A SUBSIDIARY C OMPANY OF EPCOS A.G.GERMANY. IT IS ENGAGED IN THE MANUFACTURE AND SALE OF SOFT FERRITE S COMPONENTS. FOR A.Y.1998-99 THE ASSESSEE FILED RETURN OF INCOME DECLARING LOSS OF R S.16,21,04,200/-. AN ORDER OF ASSESSMENT WAS PASSED BY THE AO U/S 143(3) OF THE I NCOME TAX ACT, 1961 (ACT) ON 06.02.2001. IN THE AFORESAID ASSESSMENT ORDER THE T OTAL LOSS OF THE ASSESSEE WAS DETERMINED BY THE AO AT A SUM OF RS.3,66,28,773/-. HOWEVER, THE TOTAL INCOME OF THE ASSESSEE WAS DETERMINED ON THE BASIS OF BOOK PROFIT S U/S 115JA OF THE ACT AT RS.23,88,234/-. IN THE COURSE OF ASSESSMENT PROCEED INGS U/S 143(3) OF THE ACT, THE AO HAD RAISED A SPECIFIC QUERY WITH REGARD TO THE CLAI M OF THE DEDUCTION MADE BY ASSESSEE IN THE PROFIT AND LOSS ACCOUNT OF A SUM OF RS.13,99 ,101/- ON ACCOUNT OF BAD DEBTS. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THA T THE ASSESSEE HAD CLAIMED THE AFORESAID SUM IN THE PROFIT AND LOSS ACCOUNT AS PRO VISION FOR DOUBTFUL DEBTS. HOWEVER, IN THE CLARIFICATION FILED BY THE ASSESSEE BEFORE AO V IDE NOTE DATED 11.09.2000 THE ASSESSEE HAD CLARIFIED THAT THE SAID SUM OF RS.13,99,101/- R EPRESENTS ACTUAL BAD DEBTS WRITTEN OFF AND GAVE COMPLETE PARTICULARS. THE FOLLOWING WAS T HE NOTE FILED BY THE ASSESSEE :- SUB : DEBTS AMOUNTING TO RS. 13,99,101/- 3 ITA NO.1921/KOL/2013 EPCOS INDIA PVT.LTD. A.YR.1998-99 3 IN RESPONSE TO THE QUERIES RAISED BY THE LEARNED JO INT COMMISSIONER OF INCOME TAX, WE WOULD LIKE TO SUBMIT OUR REPRESENTATION AS UNDER :- 1. THE PARTICULARS OF THE CUSTOMER ARE GIVEN BELOW :- NAME COUNTRY INVOICE INVOICE AMOUNT AMO UNT CONVERSION NO.&DT. VALUE REALIZED UNREALIZED INR SEMAR ITALY 95E0046 USD USD USD 1399101 2-2-96 55972 17736 38236 2. THE MATERIALS VALUED USD 38236 ARE REJECTED BY THE CUSTOMER AND DEBIT NOTE DT. 25.2.97 FOR AN EQUIVALENT AMOUNT WAS RAISE D. 3. WE HAVE APPROACHED RESERVE BANK OF INDIA THROU GH OUR AUTHORIZED DEALER CITI BANK NA FOR GRANTING PERMISSION TO WRITE OFF THE UNREALISED AMOUNT. CITI BANK AFTER GETTING APPROVAL OF RESERVE BANK OF INDIA ACC EPTED THE REDUCTION IN VALUE OF EXPORTED GOODS AND RELEASED THE RELEVANT GK NUMBER U/S 6C 13 OF FOREIGN EXCHANGE MANNUAL,1997. 4. IN VIEW OF THE SUBMISSION MADE ABOVE, THE SAME SHOULD BE CONSIDERED AS IRRECOVERABLE AND WRITTEN OFF BUT NOT AS PROVISION . THE REJECTED MATERIALS CANNOT BE USED FOR ANY OTHER PURPOSE AND COST ON RETURNING TH E SAME SHALL BE MUCH HIGHER THAN BENEFIT LIKELY TO ACCRUE. 5. THE PHOTOCOPIES OF RELEVANT DOCUMENTARY EVIDENCE AS MENTIONED BELOW ARE SUBMITTED : A) DEBIT NOTE OF SEMAR B) LETTER OF CITI BANK NA RELEASING GR FORM C) SECTION 6C 13 OF FOREIGN EXCHANGE CONTROL MANNUA L, 1997. 4. IN THE ASSESSMENT COMPLETED U/S 143(3) OF THE AC T THE AO DID NOT MAKE ANY ADDITION ON ACCOUNT OF PROVISION FOR BAD DEBTS MADE IN THE P ROFIT AND LOSS ACCOUNT BY THE ASSESSEE, EITHER IN THE COMPUTATION OF TOTAL INCOME IN THE NORMAL PROVISION OF THE ACT OR IN THE DETERMINATION OF BOOK PROFITS AND COMPUTATIO N OF TAX THEREON U/S 115JA OF THE ACT. 5. WHILE THE MATTER STOOD THUS, THE AO ISSUED NOTI CE U/S 148 OF THE ACT DATED 30.06.2014. THE REASONS RECORDED BY THE AO WHILE IS SUING NOTICE U/S 148 WERE AS FOLLOWS :- 4 ITA NO.1921/KOL/2013 EPCOS INDIA PVT.LTD. A.YR.1998-99 4 REASONS FOR R EOPENING THE ASSESSMENT THIS ASSESSMENT OF THE COMPANY FOR ASSESSMEN T YEAR 1998 -1999 WAS COMPLETED U/S 143(3)/115JA ON 06.02.2001 AT A TAX ABLE INCOME OF RS..3,86,234/-. THE NET PROFIT AS PER PROFIT & LOSS ACCOUNTS FOR ASSESSMENT YEAR 1998-1999 WAS ARRIVED AT AFTER TAKING INTO ACCOUNT EXPENSES DEBI TED ON PROVISION FOR BAD AND DOUBTFUL DEBTS AMOUNTING TO RS.13,99,000/-. THE MADRAS HIGH COURT IN THE CASE OF BEARD CE LL LTD. REPORTED IN 244 ITR 256 HAS HELD THAT PROVISION FOR DOUBTFUL DEBTS/ADVANCE IS ALL UNASCERTAINED LIABILITY AND LIABLE TO BE ADDED IN BOOK PROFIT COMPUTATION U/S. 115JA CONSIDERING THE PROVISION OF EXPLANATION-C TO SECT ION 115JA AND THE ABOVE DECISION THE OMISSION IN NOT TAKING INTO THE PROVI SION FOR BAD AND DOUBTFUL DEBTS TO THE TUNE OF RS.13,99,000/- RESULTED IN UNDERASSESSMENT OF BOOK PROFIT OF RS.4,19,700/- BEING 30% OF RS..13,99,000/-. I HAVE THEREFORE REASON TO BELIEVE THAT INCOME AMOUNTING TO RS.4,19,700/- HAS ESCAPED ASSESSMENT. 6. BY LETTER DATED 06.10.2005 THE ASSESSEE SPECIFI CALLY BROUGHT TO THE NOTICE OF THE AO THAT A SUM OF RS.13,99,101/- WAS IN FACT BAD DEBTS WRITTEN OFF AND NOT PROVISION FOR BAD AND DOUBTFUL DEBTS. IT WAS SUBMITTED THAT EVEN ASSU MING IT WAS BAD AND DOUBTFUL DEBTS THE SAME CANNOT BE ADDED TO THE BOOK PROFITS DETERM INED U/S 115JA OF THE ACT AS IT CANNOT BE SAID THAT IT WAS A PROVISION FOR UNASCERT AINED LIABILITY WITHIN THE MEANING OF EXPLANATION C TO SECTION 115JA(2) OF THE ACT. THE AO HOWEVER, MADE A REFERENCE TO THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CA SE OF DCIT VS BEARD CELL LTD. 244 ITR 256 (MAD) WHEREIN IT WAS HELD THAT PROVISION F OR BAD AND DOUBTFUL DEBTS WAS AN UNASCERTAINED LIABILITY AND HAD TO BE TO ADDED TO T HE BOOK PROFITS. THE AO THEREAFTER HELD THAT PROVISION FOR BAD DEBTS WAS AN UNASCERTAI NED LIABILITY AND HAD TO BE ADDED BACK TO THE COMPUTATION OF BOOK PROFITS AS PER EXPL ANATION (C) TO SECTION 115JA(2) OF THE ACT. 7. ON APPEAL BY THE ASSESSEE THE CIT(A) CONFIRMED THE ORDER OF AO. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 5 ITA NO.1921/KOL/2013 EPCOS INDIA PVT.LTD. A.YR.1998-99 5 8. WE WILL FIRST CONSIDER GROUND NO. 1 RAISED BY T HE ASSESSEE FOR CONSIDERATION. ONE OF THE CONTENTIONS ON THE VALIDITY OF REASSESSMENT PRO CEEDINGS U/S 147 OF THE ACT RAISED BY THE ASSESSEE BEFORE CIT(A) WAS THAT THE PROCEEDINGS U/S 147 OF THE ACT WERE INITIATED FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND IN VIEW OF THE PROVISO TO SECTION 147 OF THE ACT SUCH INITIATION OF RE-ASSESS MENT PROCEEDINGS CAN BE MADE ONLY WHEN THERE IS A FAILURE ON THE PART OF THE ASSESSEE FULLY AND TRULY DISCLOSED MATERIAL FACTS. THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE IN THIS REGARD WAS THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS A SKED TO PROVIDE DETAILS OF THE PROVISION FOR BAD & DOUBTFUL DEBTS DEBITED TO P&L A CCOUNT IN SCHEDULE -11 UNDER THE HEAD 'EXPENSES' AMOUNTING TO RS. 13,99,000/- AND TH E PARTICULARS OF CUSTOMER WHOSE PROVISION WAS DEBITED TO P&L ACCOUNT. IN RESPONSE T O THE SAME THE ASSESSEE VIDE LETTER DATED 11-09-2000 HAD PROVIDED THE REQUIRED DETAILS. IN THE SAID LETTER IT WAS SUBMITTED THAT THE AFORESAID DEBTS WERE PERTAINING TO AN EXPO RT OF MATERIALS TO M/S. SEMAR, ITALY SOLD VIDE INVOICE DATED 02-02-1996 THAT ULTIMATELY BECAME IRRECOVERABLE. IT WAS ALSO CLARIFIED IN THE ABOVE LETTER THAT IT WAS BAD DEBTS WRITTEN OFF AND NOT THE PROVISION FOR BAD DEBTS. IT WAS SUBMITTED THAT MATERIALS WERE SOL D VIDE THE INVOICE DATED 02-02-1996 BY THE APPELLANT WERE REJECTED BY THE CUSTOMER AND FOR WHICH A DEBIT NOTE WAS ISSUED ON 25-02-1997. SUBSEQUENTLY, THE ASSESSEE APPROACHED T HE RBI FOR GRANTING PERMISSION TO WRITE OFF THE UNREALISED AMOUNT. THE CITI BANK AFTE R GETTING APPROVAL OF RBI ACCEPTED THE REDUCTION IN VALUE OF EXPORTED GOODS AND RELEAS ED THE RELEVANT GR UNDER THE FOREIGN EXCHANGE MANUAL, 1997. IT WAS SUBMITTED THAT IT WAS ONLY ON THE BASIS OF THE ABOVE REPRESENTATION MADE BY THE ASSESSEE VIDE LETTER DAT ED 11-09- 2000, THE CLAIM FOR BAD DEBTS WRITTEN OFF WAS ALLOWED BY THE AO IN THE ASSE SSMENT ORDER U/S 143(3) OF THE ACT DATED 06-02-2001 FOR BOTH UNDER THE NORMAL PROVISIO NS OF THE ACT AS WELL AS UNDER BOOK PROFIT U/S 115JA OF THE ACT. IT WAS ARGUED THA T IT WOULD BE CLEAR FROM THE ABOVE THAT ALL THE INFORMATION AND DETAILS ON THE BASIS O F WHICH THE AO HAD REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT WERE DULY SUBMIT TED BY THE ASSESSEE IN THE COURSE OF THE ASSESSMENT PROCEEDINGS AND WERE AVAILABLE BE FORE THE THEN AO AT THE TIME OF 6 ITA NO.1921/KOL/2013 EPCOS INDIA PVT.LTD. A.YR.1998-99 6 COMPLETION OF ASSESSMENT PROCEEDINGS U/S 143(3). TH E THEN AO AFTER CONSIDERING THE SAID DOCUMENTS/INFORMATION/DETAILS FILED BY THE ASS ESSEE HAD CHOSEN NOT TO ADD BACK THE BAD DEBTS WRITTEN OFF IN COMPUTING BOOK PROFIT U/S 115JA OF THE ACT. 9. THE LEARNED COUNSEL DREW OUR ATTENTION TO THE P ROVISIONS OF SEC.147 OF THE ACT, AND THE PROVISO THERETO WHICH READS THUS: SEC.147: IF THE ASSESSING OFFICER HAS REASON TO B ELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY AS SESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, A SSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH H AS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURS E OF THE PROCEEDINGS UNDER THIS SECTION, OR RECOMPUTE THE LOSS OR THE DEPRECIA TION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT Y EAR; CONCERNED . PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSM ENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR Y EARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TA X HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON TH E PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTI CE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THAT ASSESSMENT Y EAR' 10. IT WAS SUBMITTED THAT AS PER THE PROVISO TO SE C. 147 OF THE ACT, WHERE AN ASSESSMENT U/S 143(3) OR 147 HAS BEEN MADE FOR THE RELEVANT AS SESSMENT YEAR, NO ACTION CAN BE TAKEN UNDER THIS SECTION UNLESS ANY INCOME CHARGEAB LE TO TAX HAS ESCAPED ASSESSMENT FOR THE SAID ASSESSMENT YEAR BY REASON OF FAILURE O N THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR AS SESSMENT. IT WAS EMPHASIZED THAT WHAT IS FAILURE TO FULLY AND TRULY DISCLOSE MATERIAL FAC TS NECESSARY FOR ASSESSMENT OF THE RELEVANT ASSESSMENT YEAR, CANNOT BE AT THE WILL OF THE AO. IT WAS SUBMITTED THAT IN THE CASE OF THE ASSESSEE, RETURN OF INCOME WAS FILED O N 20-11-1998 ALONG WITH RELEVANT DETAILS AND/OR DOCUMENTS. FURTHER, THE AUDITED ACCO UNTS AND TAX AUDIT REPORT HAD BEEN 7 ITA NO.1921/KOL/2013 EPCOS INDIA PVT.LTD. A.YR.1998-99 7 FILED ALONG WITH THE RETURN OF INCOME, AND THE SAME WERE AVAILABLE ON RECORD AT THE TIME OF ORIGINAL ASSESSMENT. ON PERUSAL OF THE SAME IT C OULD BE SEEN THAT ALL THE INFORMATION AND DETAILS ON THE BASIS OF WHICH THE AO HAS REASON S TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT WERE DULY SUBMITTED IN THE COURSE OF THE ASSESSMENT PROCEEDINGS AND WERE AVAILABLE BEFORE THE THEN AO AT THE TIME OF COMPLET ION OF ASSESSMENT PROCEEDINGS U/S 143(3). HENCE, THERE IS NO FAILURE ON THE PART OF T HE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. IT WA S REITERATED THAT IN A SITUATION WHERE THE AO ISSUES NOTICE U/S 148 BEYOND THE PERIOD OF 4 YEA RS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, THE PRIMARY CONDITIONS OF FAILURE ON THE PART OF THE ASSESSEE AS MENTIONED IN THE SAID SECTION NEEDS TO BE SATISFIED BY THE AO EVEN PRIOR TO ASSUMING JURISDICTION TO REOPEN ASSESSMENT U/S 147. SINCE T HE ASSESSEE HAS MADE FULL AND TRUE DISCLOSURE OF ALL THE MATERIAL FACTS FOR HIS ASSESS MENT, THE REOPENING OF THE ASSESSMENT BY THE AO STANDS BARRED AND IN SUCH CASE NOTICE ISS UED UNDER SECTION 148 OF THE ACT, AFTER EXPIRY OF 4 YEARS FROM THE END OF RELEVANT YE AR IS NOT SUSTAINABLE. IT WAS POINTED OUT THAT IN THE PRESENT CASE, THE AO HAS ISSUED NO TICE FOR REOPENING OF THE COMPLETED ASSESSMENT FOR THE AY 1998-99 VIDE NOTICE DATED 30- 06-2004, I..E BEYOND THE PERIOD OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEA R. IN SUCH A SITUATION, THE SAID NOTICE IS TIME BARRED AND IS BAD IN LAW AS THE SAME IS CON TRARY TO THE PROVISIONS OF SEC. 147 OF THE ACT. REFERENCE IS INVITED, TO THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CIT -VS.- FORAMER FRANCE (2003) 264 ITR 566 (SC)WHE REIN THE APEX COURT DISMISSED THE DEPARTMENTAL APPEAL AGAINST THE DECISION OF THE ALLAHABAD HIGH COURT WHEREIN IT WAS HELD THAT WHERE THERE WAS NO FAILURE ON THE PAR T OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS, THE NOTICE ISSUED UNDER S ECTION 148 OF THE ACT BEYOND A PERIOD OF 4 YEARS WAS TO BE QUASHED BEING WITHOUT JURISDICTIO N. RELIANCE WAS PLACED ON THE DECISION IN THE CASE OF ICICI BANK LTD. -VS.- DC IT (2004) 268 ITR 203 (BOM.) WHEREIN IT WAS HELD THAT U/S 147 CONCLUDED ASSESSME NTS CAN BE REOPENED BEYOND A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEARS ONLY IF THERE IS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND T RULY ALL MATERIAL FACTS NECESSARY FOR THE 8 ITA NO.1921/KOL/2013 EPCOS INDIA PVT.LTD. A.YR.1998-99 8 PURPOSE OF ASSESSMENT. REFERENCE WAS ALSO MADE TO T HE DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF TANTIA CONSTRUCTION CO LT D -VS.- DCIT (2002) 257 ITR 84 (CAL) WHEREIN IT WAS HELD THAT TWO PRIMARY CONDITIO NS BY WHICH THE AO HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAP ED ASSESSMENT FOR ANY ASSESSMENT YEAR IS NOT FULFILLED, THEREFORE THE NOTICE U/S 148 CANNOT BE HELD TO BE VALID AS THEY WERE ISSUED AFTER THE EXPIRY OF FOUR YEARS FROM THE LAST DATE OF THE CONCERNED ASSESSMENT YEAR AND THERE WAS AN ASSESSMENT UNDER SECTION 143(3) IN RESPECT OF THE ASSESSEE. FURTHER RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CARTINI INDIA LTD. -VS.- ACIT (2007) 291 ITR 355 (B ORN.) WHEREIN THE HON'BLE BOMBAY HIGH COURT HAS HELD THAT ASSESSEE HAVING DISCLOSED ALL THE MATERIAL FACTS RELATING TO THE ISSUES WHICH FORMED THE REASONS TO BELIEVE THAT THE INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT, REOPENING OF THE ASSESSMENT BEYOND FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR WAS NOT SUSTAINABLE. RELIANCE WAS ALSO PLACED ON THE DECISION IN THE CASE OF 3I INFOTECH -VS.- ACIT (2010) 329 ITR 257{B OM.)WHEREIN THE HON'BLE BOMBAY HIGH COURT HAS HELD AS UNDER: '6.THE PROVISO HOWEVER STIPULATES THAT WHERE AN ASS ESSMENT HAS BEEN CARRIED OUT U/S 143(3), ACTION AFTER THE EXPIRY OF FOUR YEARS F ROM THE END OF THE RELEVANT ASSESSMENT YEAR WOULD STAND BARRED UNLESS INCOME CH ARGEABLE TO TAX HAS ESCAPED ASSESSMENT INTER ALIA BY THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSE SSMENT FOR THAT ASSESSMENT YEAR. HENCE, WHERE A REOPENING OF ASSESSMENT TAKES PLACE BEYOND A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, THE TEST WHICH THE STATUTE REQUIRES TO BE APPLIED IS BASED ON THE NATURE OF TH E DISCLOSURE THAT IS MADE BY THE ASSESSEE. IF THE ASSESSEE HAS MADE A FULL AND TRUE DISCLOSURE OF ALL THE MATERIAL FACTS FOR HIS ASSESSMENT, THE ACTION OF REOPENING T HE ASSESSMENT WOULD STAND BARRED. CONTRARIWISE, WHERE THERE IS A FAILURE ON T HE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR THE ASSESSMENT, THE REOPENING OF THE ASSESSMENT WOULD STAND VALIDATED E VEN IF IT TAKES PLACE BEYOND THE EXPIRY OF A PERIOD OF FOUR YEARS. ' 11. THE CIT(A) ON THE ABOVE SUBMISSIONS MERELY OBS ERVED IN PARA-7 OF THE ORDER ARE AS FOLLOWS :- 9 ITA NO.1921/KOL/2013 EPCOS INDIA PVT.LTD. A.YR.1998-99 9 DURING THE APPELLATE PROCEEDING THE A.R. HAS TAKEN FOUR ADDITIONAL ROUNDS. APPEAL ON ADDITIONAL GROUNDS 1 AND 2 ARE AGAINST THE REOPE NING OF THE CASE U/S. 147 OF THE I.T. ACT, 1961 AFTER A PERIOD OF FOUR YEARS. I HAV E CONSIDERED THE SUBMISSION OF THE ASSESSEE. AS PER THE PROVISIONS OF SEC. 149(LB) OF THE I.T. ACT, 1961 REOPENING IN THIS CASE IS POSSIBLE EVEN AFTER THE LAPS OF FOUR Y EARS BUT BEFORE THE END OF SIX YEARS. ACCORDINGLY, ASSESSEE'S APPEAL ON ADDITIONAL GROUND S NO. 1 AND 2 ARE DISMISSED. 12. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE. THE LD. DR PLACED RELIANCE ON THE DECISION OF HONBLE SUPRE ME COURT IN THE CASE OF CIT, DELHI VS. ANSAL HOUSING & CONSTRUCTION LTD. [2014] 51 TAX MANN.COM 376 (SC) AND PHOOL CHAND BAJRANG LAL [1993] 69 TAXMAN 627 (SC). 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN THE PRESENT CASE, THE FACTS ON RECORD AND REASONS RECORDED CLEARLY SHOW THAT ALL FACTS WE RE AVAILABLE BEFORE THE AO WHEN HE COMPLETED THE ORIGINAL ASSESSMENT PROCEEDINGS U/S. 143(3) OF THE ACT. FROM A PERUSAL OF THE REASONS RECORDED BY THE AO BEFORE ISSUING NOTIC E U/S. 148 OF THE ACT, IT IS CLEAR THAT THE AO HAS NOT, IN THE REASONS RECORDED, MADE AN AL LEGATION THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASON OF THE ASSESSE ES FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE RELEVANT ASSESSMENT YEAR. IT IS NOT IN DISPUTE THAT FOR A.Y. 1998-99, AN ASSESSMENT U/S . 143(3) OF THE ACT HAD ALREADY BEEN MADE IN THE CASE OF THE ASSESSEE BY AN ORDER OF ASS ESSMENT DATED 6.2.2001. ADMITTEDLY NOTICE U/S. 148 OF THE ACT WAS ISSUED ON 30.6.2004 WHICH IS BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR (1998-99). THE PROVISO TO SECTION 147 WAS THEREFORE CLEARLY ATTRACTED. IT IS CLEAR F ROM THE DECISIONS OF THE HONBLE BOMBAY HIGH COURT AS WELL AS THE HONBLE CALCUTTA H IGH COURT, REFERRED TO BY THE LD. COUNSEL FOR THE ASSESSEE BEFORE US, THAT THERE SHOU LD BE ESCAPEMENT OF INCOME CHARGEABLE TO TAX WAS BY REASON OF THE FAILURE ON T HE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HI S ASSESSMENT FOR THAT ASSESSMENT YEAR. SUCH AN ALLEGATION IS ADMITTEDLY ABSENT IN THE REAS ONS RECORDED AND ON FACTS THERE HAS IN FACT BEEN NO SUCH FAILURE ON THE PART OF THE ASSESS EE, SO AS TO ATTRACT THE PROVISO TO SEC.147 OF THE ACT. THE LAW IS WELL SETTLED THAT VALIDITY OF INITIATION OF REASSESSMENT 10 ITA NO.1921/KOL/2013 EPCOS INDIA PVT.LTD. A.YR.1998-99 10 PROCEEDINGS HAVE TO BE JUDGED ON THE BASIS OF REASO NS RECORDED BY THE AO AND IT IS NOT POSSIBLE TO SUBSTITUTE, DELETE OR ADD ANYTHING TO S UCH REASONS RECORDED BY THE AO. IT IS ALSO NOT POSSIBLE TO DRAW ANY INFERENCE BASED ON TH E REASONS NOT RECORDED. IN THE LIGHT OF THE LAW AS LAID DOWN IN THE AFORESAID DECISIONS, WE ARE OF THE VIEW THAT INITIATION OF REASSESSMENT PROCEEDINGS BY THE AO IN THE PRESENT C ASE IS NOT IN ACCORDANCE WITH THE LAW. THE ORDER OF REASSESSMENT IS THEREFORE LIABLE TO BE ANNULLED AND THE SAME IS HEREBY ANNULLED. EXPLANATION 1 TO SEC.147 OF THE ACT READ S AS FOLLOWS: EXPLANATION 1. PRODUCTION BEFORE THE ASSESSING OF FICER OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD W ITH DUE DILIGENCE HAVE BEEN DISCOVERED BY THE ASSESSING OFFICER WILL NOT NECESS ARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE FOREGOING PROVISO. WE ARE OF THE VIEW THAT EXPLANATION-1 ONLY LAYS DOW N THAT PRODUCTION BEFORE THE AO OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD WITH DUE DILIGENCE HAVE BEEN DISCOVERED BY THE AO WILL NOT NECESSARILY AMOUNT TO DISCLOSURE. THE EXPRESSION WILL NOT NECESSARILY IN EXPLANATION 1 WILL ONLY MEAN THAT FACTS AND CIRCUMSTANCES OF EACH CASE WILL HAVE TO BE SEEN AS TO WHETHER PRODUCTION OF BOOKS OF ACCOUNT AND OTHER EVIDENCE BEFORE THE AO WILL AMOUN T TO FULL AND TRUE DISCLOSURE OF MATERIAL FACTS. IN THE PRESENT CASE, AS WE HAVE AL READY SEEN, EVIDENCE WAS PRODUCED BEFORE THE AO IN THE COURSE OF THE ORIGINAL ASSESSM ENT PROCEEDINGS U/S.143(3) OF THE ACT AND THE SAME WAS PERUSED BY THE AO AND HE HAD NOT C HOSEN TO DRAW ANY CONCLUSION THAT THE AMOUNT CLAIMED AS DEDUCTION BY THE ASSESSEE WAS IN FACT IN THE NATURE OF PROVISION FOR DOUBTFUL DEBTS. IN THE GIVEN CIRCUMSTANCES, WE ARE OF THE VIEW THAT EXPLANATION 1 CANNOT ALSO BE RESORTED TO BY THE REVENUE. EXPLANA TION-1 TO SEC.147 CANNOT BE READ IN A MANNER SO AS TO OVERRIDE PROVISO TO SEC.147 OF THE ACT. WE ARE, THEREFORE, OF THE VIEW THAT IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CA SE, INITIATION OF REASSESSMENT PROCEEDINGS U/S 147 OF THE ACT IS HELD TO BE ILLEGA L AND CONSEQUENTLY, ORDER PASSED U/S. 147 OF THE ACT IS CANCELLED ON THIS GROUND. IN VIE W OF THE CONCLUSION THAT THE INITIATION OF REASSESSMENT PROCEEDINGS IS INVALID WE ARE OF TH E VIEW THAT THE OTHERS ISSUES RAISED BY 11 ITA NO.1921/KOL/2013 EPCOS INDIA PVT.LTD. A.YR.1998-99 11 THE ASSESSEE IN THE GROUNDS OF APPEAL DO NOT REQUIR E ANY CONSIDERATION. ACCORDINGLY THE APPEAL OF THE ASSESSEE IS ALLOWED. 14. IN THE RESULT THE APPEAL OF THE ASSESEE IS ALL OWED. ORDER PRONOUNCED IN THE COURT ON 20.07.2016. SD/- SD/- [WASEEM AHMED] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIA L MEMBER DATED : 20.07.2016. [RG PS] COPY OF THE ORDER FORWARDED TO: 1. EPCOS INDIA PVT. LTD.,KULIA KANCHRAPARA ROAD, KA LYANI, KALYANI-741251. 2. A.C.I.T., CIRCLE-11, KOLKATA 3. CIT-(A)-XII, KOLKATA 4. C.I.T.-IV, KOLKATA. 5.CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSTT.REGISTRAR, ITAT, KOLKATA BENCHES 12 ITA NO.1921/KOL/2013 EPCOS INDIA PVT.LTD. A.YR.1998-99 12
