M/s. Citicorp Maruti Finance Ltd., New Delhi V. DCIT, New Delhi

ITA 2076/DEL/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69468 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 09-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIDDI SRIVASTAVA
• Assessee Lawyers: C S AGGARWAL
• Keywords: Tangible material; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI R. S. SYAL, ACCOUNTANT MEMBER AND SHRI RAJPAL YADAV, JUDICIAL MEMBER I.T.A .NO.-2076/DEL/2013 (ASSESSMENT YEAR-2003-04) CITICORP MARUTI FINANCE LTD. VS. DY. CIT (NOW MERGED WITH CITICORP FINANCE (I)LTD.) CIRCLE -3(1) 5 LOCAL SHOPPING CENTRE, NEW DELHI. PUSHP VIHAR, NEW DELHI.-110062 PAN: AAACC5029L (APPELLANT) (RESPONDENT) ASSESSEE BY:-SH. C. S. AGGARWAL, SR. ADV. & SH. RAVI PRATAP MALL, ADV. REVENUE BY:-MS. NIDDI SRIVASTAVA, SR. DR ORDER PER R. S. SYAL, AM. THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSED BY THE CIT (A) ON 28.01.2013 IN RELATION TO THE ASSESS MENT YEAR 2003-04. 2 2. THE FIRST ISSUE IS AGAINST THE SUSTENANCE OF INI TIATION OF REASSESSMENT PROCEEDINGS U/S 147. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN ON 2.12 .2003. THE SAID RETURN WAS PROCESSED U/S 143(1) ON 15.3.2004. THERE AFTER, SCRUTINY ASSESSMENT WAS MADE U/S 143(3) ON 28.3.200 6. ACTION U/S 147 WAS TAKEN BY THE AO BY ISSUING NOTICE U/S 1 48 DATED 26.8.2010. THE ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 147 ON 7.12.2010 BY MAKING ADDITION OF RS.55660971/- TO WARDS `DISALLOWANCE ON ACCOUNT OF RECOVERY MADE OUT OF AM OUNT SHOWN WRITTEN OFF IN EARLIER YEAR BUT NOT CREDITED TO P&L ACCOUNT. THE ASSESSEE CHALLENGED THE INITIATION OF REASSESSMENT PROCEEDING BEFORE THE LD. CIT (A) BUT WITHOUT SUCCESS. NOW THE ASSESSEE IS BEFORE US CHALLENGING THE INITIATION REASSESSMENT P ROCEEDING AS WELL AS THE MAKING OF ADDITION ON MERITS. 3 3. FIRSTLY, WE ARE ESPOUSING THE CHALLENGE TO THE I NITIATION OF REASSESSMENT PROCEEDINGS. FROM THE FACTS RECORDED A BOVE, IT IS APPARENT THAT THE ORIGINAL ASSESSMENT IN THIS CASE WAS COMPLETED U/S 143(3) ON 28.3.2006. REASSESSMENT WAS INITIATED BY WAY OF NOTICE U/S 148 DT. 26.8.2010 GIVING THE FOLLOWING REASONS: - REASONS FOR REOPENING THE CASE U/S 148 IN THE CASE OF M/S CITICORP MARUTI FINANCE LTD. FOR THE AY 2003-04 THE RETURN IN THIS CASE FOR THE AY 2003-04 WAS FILE D ON 02.12.2003 DECLARING AN INCOME OF RS.62317930/- WHI CH WAS PROCESSED U/S 143(1) OF THE IT ACT, 1961 ON 15.03.2 004. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSTT. WAS C OMPLETED U/S 143(3) OF THE ACT ON 28.03.2006 AT AN INCOME OF RS. 77954410/-. THE PERUSAL OF ASSTT. RECORDS FOR THE AY 2003-04 R EVEALS THAT AS PER CLAUSE 20 OF FORM 3CD REPORT, AN AMOUNT OF RS.55660971/- IS CHARGEABLE TO TAX U/S 41 OF THE IT ACT IN RESPECT OF AMOUNT COVERED AGAINST RECOVERABLE WRITT EN OFF WHICH WAS TO BE DEEMED AS INCOME OF THE ASSESSEE AND TAXE D ACCORDINGLY BUT NEITHER THE ASSESSEE CREDITED THIS AMOUNT IN THE 4 P/L ACCOUNT NOR THE AO ADDED BACK THE AMOUNT AT THE TIME OF ASSTT. SECTION 41 OF THE IT ACT 1961 IS REPRODUCED HERE AS UNDER:- THAT WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MAD E IN THE ASSTT. FOR ANY YEAR IN RESPECT OF EXPENDITURE B Y THE ASSESSEE AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR, HE HAS O BTAINED, WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF SUCH EXPENDITURE THEN THE AMOUNT OBTA INED BY THE ASSESSEE SHALL BE DEEMED TO BE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND CHARGEABLE INCOME TAX AS THE INCOME OF THAT YEAR. IN VIEW OF ABOVE FACTS OF THE CASE, I HAVE REASONS TO BELIEVE THAT THE INCOME TO THE TUNE OF RS.55660971/- HAS ESCAPED ASSESSMENT OWING TO THE FAILURE ON PART OF ASSESSEE TO DISCLOS E FULLY AND TRULY MATERIAL FACTS NECESSARY FOR ASSTT. AND HENCE NOTICE U/S 148 IS HEREBY ISSUED FOR REOPENING ASSTT. U/S 147 OF TH E IT ACT FOR THE AY 2003-04. 5 4. FROM THE REPRODUCTION OF THE ABOVE REASON S IT IS CLEAR THAT THE REASSESSMENT WAS INITIATED FOR THE REASON THAT CLAUSE 20 OF FORM 3CD REPORT SUBMITTED BY THE AUDITOR INDICATED THAT A SUM OF RS.5.56 CRORE WAS CHARGEABLE TO TAX U/S 41(1) OF TH E ACT IN RESPECT OF AMOUNT RECOVERED AGAINST RECOVERABLE WRITTEN OFF . IT CAN BE SEEN FROM THE REASONS THAT THIS FACT ABOUT THE RECO VERY AGAINST RECOVERABLE WRITTEN OFF EMANATED FROM THE AUDIT REP ORT FURNISHED BY THE ASSESSEE IN FORM NO. 3CD ALONG WITH THE RETU RN OF INCOME. WE HAVE GONE THROUGH THE AUDIT REPORT, A C OPY OF WHICH HAS BEEN PLACED ON PAGE 29 ONWARDS OF THE PAPER B OOK. CLAUSE 20 OF THE AUDIT REPORT IN FORM 3CD TALKS OFF : `ANY AMOUNT OF PROFIT CHARGEABLE TO TAX U/S 41 AND COMPUTATION THE REOF. AGAINST THIS COLUMN, THE AUDITOR HAS MENTIONED : REFER TO ANNEXURE 5. A COPY OF SAID ANNEXURE 5 IS AVAILABLE ON PAGE 47 OF THE PAPER BOOK WHICH READS AS UNDER: 6 SL. NO. DESCRIPTION AMOUNT 1.AMOUNT RECOVERED AGAINST RECOVERABLE WRITTEN OFF (REFER NOTE 1 AND 2) 55,660971 2.LIABILITIES NO LONGER REQUIRED WRITTEN BACK (REFE R NOTE 1) 9,282,805 NOTES: 1) THE ABOVE AMOUNTS HAVE BEEN CREDITED TO THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31MARCH 2003. 2) REPRESENTS AMOUNTS RECEIVED AGAINST THE RECOVERABLE S WRITTEN OFF, BOTH DURING THE YEAR AND IN EARLIER YEARS, THE BREA KUP OF WHICH IS NOT ASCERTAINABLE 5. FROM THE ABOVE ANNEXURE IT IS MANIFEST TH AT A SUM OF RS.5.56 CRORE HAS BEEN CLASSIFIED AS THE `AMOUNT RE COVERED AGAINST RECOVERABLE WRITTEN OFF. THEN THERE IS RE FERENCE TO TWO NOTES. FIRST NOTE MENTIONS THAT THE AMOUNT OF RS. 5.56 CRORE WAS ` CREDITED TO THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDING 31 ST MARCH 2003 I.E. THE CURRENT YEAR. THE SECOND NOTE EL ABORATES FURTHER THAT THE SAID AMOUNT REPRESENTS AMOUNTS REC EIVED AGAINST RECOVERABLES WRITTEN OFF, BOTH DURING THE YEAR AND IN EARLIER YEARS, THE BREAKUP OF WHICH IS NOT ASCERTAINABLE. 7 6. IT IS NO DOUBT TRUE THAT THE SAID SUM OF R S.5.56 CRORE HAS NOT BEEN SEPARATELY CREDITED TO THE P&L A/C, A COPY OF WHICH IS AVAILABLE ON PAGE 9 OF THE PAPER BOOK. HOWEVER, IT IS PERTINENT TO NOTE THAT SCHEDULE NO. 12 TO THE P&L A/C IS THAT OF `ADMINISTRATIVE AND OTHER EXPENSES. A COPY OF THE SCHEDULE IS AVAILABLE ON PAGE 14 OF THE PAPER BOOK, FROM WHICH IT CAN BE SEEN THAT THE ASSESSEE HAS DEBITED A SUM OF RS.5835 8418/- UNDER THE HEAD `NON PERFORMING ASSETS WRITTEN OFF (NET). THE DETAIL OF RS.5.83 CRORE, BEING NET OF NON-PERFORMING ASSET S IS AVAILABLE ON PAGES 253 TO 255 OF THE PAPER BOOK. FROM SUCH BR ANCH-WISE DETAILS, IT CAN BE OBSERVED THAT THESE ARE BALANCE S ON `NET BASIS WITH THE OVERALL DEBIT OF RS.5.83 CRORE. WHEN WE READ NOTE NOS. 1 & 2 IN ANNEXURE 5 TO TAX AUDIT REPORT, IT BECOMES APPARENT THAT A SUM OF RS.5.56 CRORE REPRESENTS RECOVERIES MADE A GAINST RECOVERABLE WRITTEN OFF WHICH HAS BEEN SHOWN IN THE P & L A/C BY 8 WAY OF ADJUSTMENT AGAINST THE EXCESS DEBITS THEREBY RESULTING IN THE OVERALL NET DEBIT AT RS.5.83 CRORE. THE ABOVE P OSITION EMERGES FROM THE RELEVANT MATERIAL WHICH WAS ALREADY AVAILA BLE ON RECORD IN THE SHAPE OF AUDIT REPORT AND FINANCIAL STATEMEN TS OF THE ASSESSEE. 7. FIRST PROVISO OF SECTION 147 PROVIDES THAT : ` WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 . HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTI ON SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR Y EARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INC OME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH A SSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE AS SESSEE . TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NE CESSARY FOR ASSESSMENT, FOR THAT ASSESSMENT YEAR. A BARE PERUSAL OF THIS PROVISION INDICATES THAT NO ACTION CAN BE TAKEN U/S 147 AFTER THE 9 EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR WHERE ORIGINAL ASSESSMENT WAS MADE U/S 143(3) UNLES S THERE IS A SOME FAILURE ON THE PART OF THE ASSESSEE TO DISCLOS E FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. THE HONBLE DELHI HIGH COURT IN NTPC LTD. VS. DCIT 2013 84 CCH 133 DEL- HC HAS HELD THAT ISSUE OF NOTICE U/S 148 FOR REOPENIN G OF ASSESSMENT BEYOND FOUR YEARS FROM THE END OF THE RE LEVANT ASSESSMENT YEAR IS NOT JUSTIFIED IN CASES WHERE THE ASSESSEE HAS MADE TRUE AND FULL DISCLOSURE OF ALL PARTICULARS NE CESSARY FOR ITS ASSESSMENT. SIMILAR VIEW HAS BEEN TAKEN BY THE HON BLE BOMBAY HIGH COURT IN VOLTAS LTD. VS. ACIT 2012 349 ITR 656 (BOM) . THERE ARE ENUMERABLE CASES LAYING DOWN SIMILAR PROP OSITION. 8. ADVERTING TO THE FACTS OF THE INSTANT CASE IT IS OBSERVED THAT ORIGINAL ASSESSMENT IN THIS CASE WAS COMPLETED U/S 143(3) ON 28.3.2006. A PERIOD OF FOUR YEARS FROM THE END OF T HE RELEVANT 10 ASSESSMENT YEAR COMPLETED ON 31.3.2008. THE AO ISSU ED NOTICE DATED 26.8.2010 U/S 148 OF THE ACT. THESE FACTS IND ICATE THAT THE INITIATION WAS DONE AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT AY. THE REASSESSMENT IN THE PRESENT CA SE COULD HAVE BEEN INITIATED ONLY ON SOME FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. 9. WHEN WE CONSIDER THE FACTS OF THE CASE, I T TRANSPIRES THAT THE AUDITOR MENTIONED THAT THE ASSESSEE MADE RECOVE RIES AGAINST RECOVERABLE WRITTEN OFF TO THE TUNE OF RS.5.56 CROR E, WHICH WAS CREDITED TO THE PROFIT AND LOSS ACCOUNT. IN OTHER WORDS, THERE WAS A MENTION OF THE AMOUNT ` CREDITED TO THE PROFIT AND LOSS ACCOUNT. THE POSITION WOULD HAVE BEEN DIFFERENT IF THE AUDIT OR HAD REPORTED THAT THE ASSESSEE MADE RECOVERIES BUT DID ` NOT CREDIT IT TO ITS P&L ACCOUNT. IN THAT CASE, THE REASSESSMENT WOULD HAVE BEEN VALIDLY 11 INITIATED BY BRINGING THE CASE WITH IN THE AMBIT OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRUL Y ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. BUT WHEN THE AUDITO R IS REPORTING THAT THE AMOUNT OF RECOVERIES HAS BEEN CREDITED TO THE P&L ACCOUNT, IT SHOWS THAT THE SAID AMOUNT HAD FOUND IT S WAY INTO THE TAXABILITY NET. IT IS NOT THE CASE OF THE AO THAT THE ASSESSEE CREDITED THIS AMOUNT TO ITS P&L ACCOUNT BUT REDUCED IT FROM THE TOTAL INCOME IN THE COMPUTATION. IT HAS BEEN NOTICE D SUPRA THAT THE AMOUNT WAS NOT SPECIFICALLY CREDITED TO THE P&L ACCOUNT BUT WAS REDUCED FROM THE DEBIT AND THE NET EXCESS WAS D EBITED. THERE WAS APPROPRIATE, FULL AND TRUE DISCLOSURE OF ALL TH E RELEVANT ASPECTS ON THIS POINT. THE VERY FACT THAT THE ASSESSMENT HA S BEEN REOPENED ON THE BASIS OF AUDIT REPORT ALREADY AVAILABLE ON R ECORD MAKING SUCH OBSERVATIONS, APTLY DEMONSTRATES THAT THERE W AS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND T RULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. THIS MATERIAL C ONDITION IS 12 LACKING IN THE EXTANT CASE. IN VIEW OF THE FOREGOI NG, WE ARE OF THE CONSIDERED OPINION THAT SINCE THERE WAS NO FAIL URE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS IN RELATION TO THE AMOUNT RECOVERED AGAINST RECOVERABL E WRITTEN OFF TO THE TUNE OF RS.5.56 CRORE, WHICH FORMED THE BED ROCK FOR THE INITIATION OF PRESENT REASSESSMENT PROCEEDINGS, THE REASSESSMENT COULD NOT HAVE BEEN VENTURED. WE THEREFORE, STRIK E DOWN SUCH INITIATION OF REASSESSMENT AND THE PRESENT PROCEEDI NGS FLOWING THERE FROM. 10. THERE IS ANOTHER DIMENSION TO THIS CASE. IT IS NOTICED THAT THE SOLITARY BASIS FOR THE INITIATION OF REASSESSME NT IS THE AUDIT REPORT FURNISHED BY THE ASSESSEE ALONG WITH THE RET URN OF INCOME INDICATING THAT THE AMOUNT REPRESENTING RECOVERIES WAS CREDITED TO THE P&L ACCOUNT. SUCH AUDIT REPORT WAS AVAILABLE W ITH THE AO AT THE TIME OF FRAMING ASSESSMENT. IN FACT, THE AO DID ASK ABOUT THE DETAILS OF THE SUCH AMOUNT DEBITED TO THE P&L A CCOUNT, WHICH 13 AMOUNT IS ` NET OF THE RECOVERIES. WHEN SUCH DETAILS WERE FURNISHED AND NO ADDITION WAS MADE, IT HAS TO BE PR ESUMED THAT THE AO GOT CONVINCED WITH SUCH DETAILS. THERE IS NO FRESH MATERIAL COMING INTO THE POSSESSION OF THE AO WHICH PROMPTED HIM TO ISSUE NOTICE U/S 148. IT WAS, IN FACT, CONSI DERATION OF THE SAME MATERIAL ALREADY ON THE RECORD OF THE AO, WHIC H LED TO THE INITIATION OF REASSESSMENT. IN OTHER WORDS, IT IS A CASE OF CHANGE OF OPINION. ONCE HE ACCEPTED THE POSITION DECLARED IN THE ORIGINAL ASSESSMENT, WE FAIL TO COMPREHEND AS TO HOW THE AO COULD HAVE INITIATED REASSESSMENT ON THE BASIS OF THE VERY SAM E MATERIAL. IT IS TRITE THAT IN THE ABSENCE OF ANY TANGIBLE MATERIAL THROWING LIGHT ON THE ESCAPEMENT OF INCOME, COMING INTO THE POSSESSIO N OF THE AO AFTER THE COMPLETION OF ASSESSMENT, THERE IS NO SCO PE FOR GOING AHEAD WITH THE REASSESSMENT IN THE CIRCUMSTANCES AS ARE OBTAINING BEFORE US. THIS HAS BEEN CATEGORICALLY RULED BY NON E OTHER THAN THE HONBLE SUPREME COURT OF INDIA IN CIT VS. KELVINATOR OF 14 INDIA LTD. (2010) 320 ITR 561 (SC) . AS THE PRESENT CASE IS A GLARING EXAMPLE OF CHANGE OF OPINION, WE HOLD THAT THE REASSESSMENT CANNOT BE SUSTAINED ON THIS SCORE AS W ELL. THIS IS ANOTHER REASON FOR COMING TO THE CONCLUSION THAT TH E REASSESSMENT WAS INVALIDLY INITIATED. WE, THEREFORE, ALLOW THIS GROUND OF APPEAL. 11. IN VIEW OF OUR DECISION ON THE ISSUE OF INI TIATION OF REASSESSMENT PROCEEDINGS, THERE IS NO NEED TO ADJUD ICATE THE MERITS OF THE ADDITION. 12. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 06/11/2013. SD/- SD/- ( RAJPAL YADAV ) (R. S. SYAL) JUDICIAL MEMBER ACCOUNTANT ME MBER DATED: 06/11/2013 *AK VERMA* 15 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTR DATE INITIAL 1. DRAFT DICTATED ON 31-10-2013 PS 2. DRAFT PLACED BEFORE AUTHOR 1-11-2013 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 12/11/13 P S/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 12/11/13 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. *