CENTURY TEXTILES AND INDUSTRIES LTD, MUMBAI V. DCIT 62), MUMBAI

ITA 2180/MUM/2013

• Counselvise Citation: 218019914 RSA 2013
• Duration Of Justice: 1 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2002-2003
• Appeal Filed On: 19-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PITAMBAR DAS
• Keywords: Wrong claim; Difference of opinion; Reason to believe; Change of opinion
• Section: 147; 148; 139; 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI . , , , BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUD ICIAL MEMBER . / ITA NO. 2180 /MUM./ 2013 ( / ASSESSMENT YEAR : 2 0 0 2 03 ) CENTURY TEXTILES AND INDUSTRIES LTD. CENTURY BHAVAN DR. ANNIE BESANT ROAD WORLI, MUMBAI 400 030 .. / APPELLANT V/S DY . COMMISSIONER OF INCOME TAX 6(2) MUMBAI .... / RESPONDENT ./ PERMANENT ACCOUNT NUMBER AAACC2659Q / ASSESSEE BY : MR. PANKAJ R. TOPRANI A/W MS. KRUPA TOPRANI / REVEN UE BY : MR. PITAMBAR DAS / DATE OF HEARING 16 .06.2014 / DATE OF ORDE R 25.06.2014 / ORDER , / PER AMIT SHUKLA , J.M. THE PRESENT APPEAL HA S BEEN PREFERRED BY THE ASSESSEE , CHALLENGING THE IMPUGNED ORDER DATED 12 TH AUGUST 2005 , PASSED BY THE LEARNED COMMISSIONER (APPEALS) V I , MUMBAI , FOR THE QUANTUM OF ASSESSMENT P ASSED UNDER SECTION 143(3) R/W SECTION 147 OF THE INCOME CENTURY TEXTILES AND INDUSTRIES LTD. 2 TAX ACT, 1961 (FOR SHORT 'THE ACT' ) FOR THE ASSESSMENT YEAR 20 02 03 , ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN UPHOLDING THE ACTION OF THE DCIT IN RE OPENING THE ASSESSMENT UNDER SECTION 147. 2. ON THE FACTS AND IN THE CIRCUMSTAN CES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER AND DIRECTING HIM TO VERIFY AND MAKE AN ADDITION TO THE PROFIT U/S 145A . 2 . FACTS IN BRIEF : THE ASSESSEE IS A PUBLIC LIMITED COMPANY ENGAGED IN THE MANUFA CTURING OF TEXTILE, CEMENT, CHEMICALS, POWER GENERATION, ETC. FOR THE ASSESSMENT YEAR 2002 03, THE COMPANY HAS FILED ITS RETURN OF INCOME ON 29 TH OCTOBER 2002, DECLARING NIL INCOME UNDER THE NORMAL PROVISIONS AND UNDER THE PROVISIONS OF SECTION 115JB, BO OK PROFIT WAS SHOWN AT ` 9,61,51,041. THE SAID RETURN OF INCOME WAS SELECTED FOR SCRUTINY AND ORDER UNDER SECTION 143(3) WAS PASSED VIDE ORDER DATED 30 TH MARCH 2005, ON A BOOK PROFIT OF ` 27,99,56,779, UNDER SECTION 115JB. APART FROM THAT, THE ASSESSING OF FICER HAD MADE SEVERAL ADDITIONS UNDER THE NORMAL PROVISIONS OF THE ACT AND HAS DISCUSSED THE VARIOUS ISSUES IN THE ORDER RUNNING INTO 83 PAGES. THEREAFTER, ON EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, THE SAID ASSESSMENT HAS BEEN SOUGHT TO BE RE OPENED VIDE NOTICE DATED 31 ST MARCH 2009, ISSUED UNDER SECTION 148 ON THE FOLLOWING REASONS RECORDED : CENTURY TEXTILES AND INDUSTRIES LTD. 3 ON PERUSAL OF THE TAX AUDIT REPORT, IT IS SEEN THAT AS PER CLAUSE 12(B), STATEMENT NO.3, ON THE ISSUE OF DEVIATION IN PROFIT AS PER TH E PROVISIONS OF SECTION 145A, THERE IS A REDUCTION NIN THE PROFIT OF THE COMPANY BY ` 78,34,362. HENCE, GOING BY THE AUDIT REPORT, THE PROFIT OF THE ASSESSEE COMPANY SHOULD HAVE BEEN REDUCED BY ` 78,34,362. HOWEVER, IN THE STATEMENT OF COMPUTATION OF INCOM E FILED ALONG WITH THE RETURN OF INCOME, THE ASSESSEE HAS, INSTEAD OF REDUCING, ADDED BACK THE AMOUNT OF ` 28,09,709, TO THE TOTAL INCOME WITH THE FOLLOWING COMMENTS: 16. DEVIATION U/S 145A OF THE I.T. ACT, (TAX AUDIT REPORT U/S 44AB FOR THIS YEAR CLAUS E 12(B) PAGE NO.10 DECREASE IN PROFIT OF ` 78,34,362 NET DECREASE IN PROFIT ` 50,24,643 CONSIDERED IN LAST YEARS INCOME TAX RETURN FOR ACCOUNTING YEAR 2000 2001) 2,809,719 FURTHER AS PER NOTE 30, OF THE LETTER DT. 28.10.2002 FILED ALONG WITH THE RETUR N OF INCOME, THE ASSESSEE STATED THAT THE PROFIT FOR THE YEAR HAS BEEN INCREASED BY AN AMOUNT OF ` 28,08,709/ FILED ALONG WITH THE RETURN OF INCOME THE ASSESSEE STATED THAT THE PROFIT FOR THE YEAR HAS BEEN INCREASED BY AN AMOUNT OF ` 28,08,709 BUT PRAYED THAT IN VIEW OF THE ORDER OF THE ITAT, BOMBAY IN THE CASE OF S.H. KELKAR & CO. LTD. V/S DCIT (APPEAL NO.9508 OF 1991), THE PROFIT SHOULD NOT BE INCREASED BY ` 28,09,719. IN THE COMPUTATION OF INCOME TOO, FILED ALONG WITH THE RETURN OF INCOME THE ASS INCREA SED THE TOTAL INCOME BY THE SAME AMOUNT. HOWEVER, WHILE PASSING THE ORDER U/S 143(3) THE ASSESSING OFFICER VIDE PARA 32 OF THE ORDER, INSTEAD OF SUSTAINING THE INCREASE IN PROFIT OF ` 28,09,719 OFFERED BY THE ASSESSEE IN THE COMPUTATION OF INCOME, REDUCED THE PROFIT BY ` 78,34,362 AS PER THE TAX AUDIT REPORT U/S 44AB. HENCE, THERE HAS BEEN UNDERASSESSMENT OF ` 1,06,44,081 INVOLVING NATIONAL TAX OF ` 37,99,937. HENCE, I HAVE REASON TO BELIEVE THAT INCOME TO THE TUNE OF ` 1,06,44,081 HAS ESCAPED ASSESSMENT A ND IT IS A FIT CASE FOR RE OPENING THE ASSESSMENT U/S 147 OF THE I.T. ACT. AS PER THE PROVISIONS OF SECTION 151 OF THE I.T.ACT, THE APPROVAL OF THE COMMISSIONER OF INCOME TAX 6 HAS BEEN OBTAINED VIDE HIS NOTICE IN THE PRESCRIBED PROFORMA DT. 30.03.2009 IS SUUE NOTICE U/S 148 ACCORDINGLY. 3 . THE ASSESSEE, IN RESPONSE TO THE NOTICE, FILED DETAIL OBJECTION BEFORE THE ASSESSING OFFICER , NOT ONLY ON THE ISSUE OF VALIDITY OF THE RE CENTURY TEXTILES AND INDUSTRIES LTD. 4 OPENING OF THE ASSESSMENTS BUT ALSO ON MERITS. HOWEVER, THE ASSESSING OFFICER REJEC TED THE ASSESSEES CONTENTION AND COMPLETED THE ASSESSMENT AFTER MAKING ADDITION OF ` 1,06,44,081, AFTER OBSERVING AND HOLDING AS UNDER: 2.1 THE ASSESSEES ABOVE CONTENTION IS NOT ACCEPTABLE. IN THE STATEMENT OF COMPUTATION OF INCOME FILED ALONG WITH TH E RETURN OF INCOME THE ASSESSEE ITSELF HAS ADDED BACK THE AMOUNT OF ` 28,09,719 TO THE TOTAL INCOME WITH THE FOLLOWING REMARKS: 16. DEVIATION U/S 145A OF THE I.T.ACT, (TAX AUDIT REPORT U/S 44AB FOR THIS YEAR CLAUSE 12(B) PAGE NO.10 DECREASE IN PROFIT OF ` 78,34,362 NET DECREASE IN PROFIT ` 50,24,643 CONSIDERED IN LAST YEARS INCOME TAX RETURN OF ACCOUNTING YEAR 2000 2001). 22. SINCE WHILE PASSING THE ORDER U/S 143(3) THE ASSESSING OFFICER VIDE PARA 32 OF THE ORDER, INSTEAD OF SUSTAINING THE INCREASE IN PROFIT TO 28,09,719 OFFERED BY THE ASSESSEE IN THE COMPUTATION OF INCOME, REDUCED THE PROFIT BY ` 78,34,362 AS PER THE TAX AUDIT REPORT U/S 44AB, THERE HAS BEEN UNDERASSESSMENT OF ` 1,06,44,081. THE ASSESSMENT IS THEREFORE, COMPLETED BY INCREASING THE ASS ESSED INCOME VIDE ORDER UNDER SECTION 143(3) DT. 30.03.2005 BY ` 1,06,44,081. 4 . BEFORE THE LEARNED COMMISSIONER (APPEALS), THE ASSESSEE AGAIN OBJECTED TO THE VALIDITY OF RE OPENING UNDER SECTION 147, ON VARIOUS GROUNDS, FIRSTLY, THAT RE OPENING CANNOT BE M ADE AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR IN THIS CASE , AS THE ASSESSMENT WAS MADE UNDER SECTION 143(3) , AS THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS AND SECONDLY, T HE NOTICE UNDER SECTION 148, HAS BEEN ISSUED ON THE BASIS OF MATERIAL ALREADY ON RECORD I.E., FORM 3CD AND COMPUTATION CENTURY TEXTILES AND INDUSTRIES LTD. 5 OF TOTAL INCOME WHICH HAS ALREADY BEEN SCRUTINISED BY THE ASSESSING OFFICER DURING THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS AND, THEREFORE, THE RE OPENING IS BASED UPON CHANGE OF OPINION . THESE DETAIL OBJECTIONS HAVE BEEN INCORPORATED FROM PAGE 5 TO 7 OF THE APPELLATE ORDER. BESIDES THIS, SUBMISSIONS WERE ALSO MADE ON THE MERITS OF THE ADDITION. 5 . THE LEARNED COMMISSIONER (APPEAL S) TOO REJECTED THE ASSESSEES CONTENTION ON THE LEGAL ISSUE OF VALIDITY OF RE OPENING UNDER SECTION 147., ON THE GROUND THAT THE ASSESSING OFFICER NOTICED THAT THE DEDUCTION HAD WRONGLY BEEN GRANTED TO THE ASSESSEE DUE TO THE CLAIM MADE BY THE ASSESSEE IN THE AUDIT REPORT. THUS, THIS ITSELF CONSTITUTES A VALID GROUND AND THAT THERE IS PRIMA FACIE MATERIAL FOR ENTERTAINING THE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT . HE REFERRED TO THE PROVISIONS OF EXPLANATION 2, BELOW SECTION 147 , AND ALSO VARIOUS DECIS IONS WHICH HAVE BEEN DEALT BY HIM FROM PAGES 7 TO 13 OF THE ORDER. FURTHER, HE HAS HELD THAT IF THE RE OPENING IS MADE BEYOND THE PERIOD OF FOUR YEARS, THE STATUT E PROVIDES FOR SANCTION OF HIGHER AUTHORITIES LIKE COMMISSIONER OF INCOME TAX AND, THEREFORE, ONCE THE APPROVAL HAS BEEN GRANTED BY A SUPERIOR AUTHORIT Y , THE RE OPENING CANNOT BE HELD TO BE INVALID. 6 . BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ALL THE PARTICULARS NECESSARY FOR THE ASSESSMENT WAS DULY DISCLOSED IN THE CENTURY TEXTILES AND INDUSTRIES LTD. 6 TAX AUDIT RE PORT, AUDITED FINANCIAL STATEMENTS AND THE STATEMENT OF INCOME FILED ALONG WITH THE RETURN OF INCOME. NOT ONLY THIS, THE ASSESSING OFFICER, AFTER A DETAIL SCRUTINY OF THE RECORDS, HAS COMPLETED THE ASSESSMENT UNDER SECTION 143(3), IN A DETAIL MANNER. THUS, THERE CANNOT BE ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS , WHICH IS A CONDITION PRECEDENT FOR RE OPENING THE ASSESSMENT IN SUCH CASES . THAT APART, ON A PERUSAL OF THE REASONS RECORDED, IT CAN BE SEEN THAT THE A SSESSING OFFICER HIMSELF HAS STATED THAT THE INFORMATION IS FROM THE TAX AUDIT REPORT ONLY , THEN WHERE IS THE MATERIAL COMING INTO POSSESSION OF THE ASSESSING OFFICER . HE HAS ALSO FURTHER NOTED THAT THE ASSESSING OFFICER, WHILE PASSING THE ORDER UNDER SECT ION 143(2), VIDE PARA 32, HAS DISCUSSED ISSUE RAISED IN THE REASONS RECORDED AND HAS EXAMINED THE CLAIM AND ALSO REDUCED THE PROFIT . THUS, IT CANNOT BE HELD THAT BASED ON THE REASONS RECORDED , THE RE OPENING CAN BE DONE IN THIS CASE AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. IN SUPPORT OF HIS CONTENTION, HE HAS STRONGLY RELIED UPON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN HINDUSTAN LEVER LIMITED V/S ACIT, [2004] 268 ITR 332 (BOM.). HE FURTHER SUBMITTED T HAT THE RE OPENING IN THIS CASE IS ALSO ON ACCOUNT OF CHANGE OF OPINION WHICH IS NOT PERMISSIBLE IN LAW IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN CIT V/S KELVINATOR OF INDIA LTD. [ 2010 ] 320 ITR 561 (SC). CENTURY TEXTILES AND INDUSTRIES LTD. 7 7 . THE LEARNED DEPARTMENTAL REPRESENT ATIVE, ON THE OTHER HAND, RELIED UPON THE REASONING GIVEN BY THE LEARNED COMMISSIONER (APPEALS) FOR JUSTIFYING THE RE OPENING OF THE CASE UNDER SECTION 147. HE SUBMITTED THAT THE ASSESSEE HAD MADE A WRONG CLAIM IN THE COMPUTATION OF INCOME WHICH HAS BEEN W RONGLY ALLOWED BY THE ASSESSING OFFICER AND THIS AMOUNTS TO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. 8 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS, PERUSED THE RELEVANT FINDINGS OF THE AUTHORITIES BELOW AND THE MATERIAL AVAILABLE ON RECORD. IN THIS CASE, THE ASSESSMENT HAS BEEN COMPLETED UNDER SECTION 143(3), VIDE ORDER DATED 30 TH MARCH 2005, AFTER DETAIL SCRUTINY AND EXAMINATION OF RECORDS, WHICH IS EVIDENT FROM THE FACT THAT THE ASSESSING OFFICER HAD MADE A DDITION S ON VARIOUS COUNTS AND DISCUSSED THE ENTIRE ASSESSMENT IN 83 PAGES. NOT ONLY THIS, THE ISSUE ON WHICH THE REASONS HAVE BEEN RECORDED ( FOR RE OPENING THE CASE BEYOND THE PERIOD OF FOUR YEARS ) , HAS ALSO BEEN DISCUSSED BY THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT ORDER VIDE PARA 32 OF THE ORDER, WHEREIN HE HAS DISCUSSED THE IMPACT OF MODVAT CREDIT ON ACCOUNT OF DEVIATION UNDER SECTION 145A. HE HAS ALSO TAKEN NOTE OF ASSESSEES OBJECTION OF THE ADJUSTMENT MADE UNDER SECTION 1 4 5A, IN VIEW OF THE T AX AUDIT BY REDUCING THE VALUATI O N OF COST . IN SUPPORT, THE ASSESSEE HAD ALSO RELIED UPON THE DECISION OF THE TRIBUNAL, MUMBAI BENCH, IN CASE OF SHRI S.H. CENTURY TEXTILES AND INDUSTRIES LTD. 8 KELKAR & CO. LTD. V/S DCIT. THE ASSESSING OFFICER HAD REJECTED THE ASSESSEES CONTENTION AND HAS MADE THE ADDITION OF ` 78,34,362. THEREAFTER, SUCH AN ASSESSMENT HAS BEEN S OUGHT TO BE RE OPENED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, WHICH IS CLEARLY HIT BY THE FIRST PROVISO TO SECTION 147. ON A PERUSAL OF THE REASONS RECORDED , IT IS SEEN THAT NOWHERE THE ASSESSING OFFICER HAS ASCRIBED ANY FAILURE ON THE PART OF THE ASSESSEE T O DISCLOS E TRULY AND FULLY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. THIS IS A CONDITION PRECEDENT FOR ACQUIRING JURISDICTION UNDER SECTI ON 147 , IN THE CASE WHERE ASSESSMENTS HAVE BEEN COMPLETED UNDER SECTION 143(3) . 9 . IT IS NOW AMPLY SETTLED LAW THAT WHERE THE ASSESSMENT HAS BEEN MADE UNDER SECTION 143(3) OR UNDER SECTION 147, THEN NO ACTION CAN BE TAKEN FOR RE OPENING THE CASE UNDER SECTI ON 147, AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. T HE ONLY EXCEPTION CARVED OUT FROM SUCH A LIMITATION IS THAT , INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY THE REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO F URNISH THE RETURN UNDER SECTION 139 OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. THE REASONS RECORDED SHOULD CLEARLY SPELL OUT WHAT IS THE FAILURE ON THE PART OF THE ASSESSEE AND IT S HOULD PROVIDE DIRECT LINK WITH THE MATERIAL BROUGHT ON RECORD AND THE INCOME WHICH HAS ESCAPED ASSESSMENT ON THE REASON OF FAILURE ON THE PART OF CENTURY TEXTILES AND INDUSTRIES LTD. 9 THE ASSESSEE. THE LIMITATION PROVIDED UNDER THE FIRST PROVISO TO SECTION 147, IS ABSOLUTE AND THERE IS NO ESCA PEMENT OF LIMITATION OF FOUR YEARS UNLESS THE CASE FALLS WITHIN THE SAVING CLAUSE AS PROVIDED THEREIN. THE RE OPENING CANNOT BE JUSTIFIED ON THE GROUND THAT NOTICE UNDER SECTION 148, HAS BEEN APPROVED BY A HIGHER AUTHORITY , AS HELD BY THE LEARNED COMMISSIO NER (APPEALS) . THE JURISDICTION CAN BE ACQUIRED UNDER THE PROVISION OF THE STATUTE AND NOT BY SANCTION OF ANY SUPERIOR AUTHORITY. AS STATED ABOVE, IN THE REASONS RECORDED , NEITHER THERE IS ANY WHISPER ABOUT THE FAILURE ON THE PART OF THE ASSESSEE NOR THE RE IS ANY MATERIAL TO SHOW ON RECORD THAT THERE HAS BEEN ANY FAILURE ON THE PART OF THE ASSESSEE. THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN HINDUSTAN LEVER LTD. (SUPRA), AS RELIED UPON BY THE LEARNED COUNSEL IS SQUARELY APPLICABLE NOT ONLY O N THE FACTS OF THE CASE BUT ALSO IN LAW. THUS, WE DO NOT AGREE WITH THE REASONING AND THE CONCLUSION DRAWN BY THE LEARNED COMMISSIONER (APPEALS) TO UPHOLD THE VALIDITY OF RE OPENING UNDER SECTION 147, AND ACCORDINGLY, THE SAME IS SET ASIDE AND THE IMPUGNE D PROCEEDINGS UNDER SECTION 148, IS HEREBY HELD AS NULL AND VOID , AS THE NOTICE , BASED ON THE REASONS RECORDED , IS NOT VALID. THUS, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 10 . SINCE WE HAVE ALREADY HELD THAT THE RE OPENING UNDER SECTION 147, IS INVALID, THEREFORE, DISCUSSION ON MERIT BECOMES PURELY ACADEMIC AND, THEREFORE, THEY ARE NOT BEING ADJUDICATED UPON. CENTURY TEXTILES AND INDUSTRIES LTD. 10 11 . 11 . IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. 25 TH JUNE 2014 ORDER PRONOUNCED IN THE OPEN COURT O N 25 TH JUNE 2014 SD/ - . D. KARUNAKA RA RAO ACCOUNTANT MEMBER SD/ - AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED : 25 TH JUNE 2014 / COPY OF THE ORDER FORWARDED TO : ( 1 ) / THE ASSESSEE ; ( 2 ) / THE REVENUE; ( 3 ) ( ) / THE CIT(A ) ; ( 4 ) / THE CIT, MUMBAI CITY CONCERNED ; ( 5 ) , , / THE DR, ITAT, MUMBAI ; ( 6 ) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT , MUMBAI