DCIT, New Delhi V. M/s Solaris Chemtech Ltd., New Delhi

ITA 2299/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87000 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 03-03-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 18-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B R R KUMAR
• Assessee Lawyers: SURESH BALANI
• Keywords: Reopening of assessment; Reason to believe; Reassessment proceedings
• Section: 143(3); 14A; 115JB; 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G : NEW DELHI DELHI BENCH G : NEW DELHI DELHI BENCH G : NEW DELHI DELHI BENCH G : NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI GEORGE GEORGE K, JUDICIAL MEMBER SHRI GEORGE GEORGE K, JUDICIAL MEMBER SHRI GEORGE GEORGE K, JUDICIAL MEMBER SHRI GEORGE GEORGE K, JUDICIAL MEMBER ITA NO.2299/DEL/2013 ITA NO.2299/DEL/2013 ITA NO.2299/DEL/2013 ITA NO.2299/DEL/2013 ASSESSMENT YEAR : 2004 ASSESSMENT YEAR : 2004 ASSESSMENT YEAR : 2004 ASSESSMENT YEAR : 2004- -- -05 0505 05 DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -9(1), 9(1), 9(1), 9(1), ROOM ROOM ROOM ROOM NO.163, C.R. BUILDING, NO.163, C.R. BUILDING, NO.163, C.R. BUILDING, NO.163, C.R. BUILDING, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. VS. VS. VS. VS. M/S SOLARIS CHEMTECH LIMITED, M/S SOLARIS CHEMTECH LIMITED, M/S SOLARIS CHEMTECH LIMITED, M/S SOLARIS CHEMTECH LIMITED, 124, THAPAR HOUSE, 124, THAPAR HOUSE, 124, THAPAR HOUSE, 124, THAPAR HOUSE, JANPATH, JANPATH, JANPATH, JANPATH, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. PAN : AAACB8994B. PAN : AAACB8994B. PAN : AAACB8994B. PAN : AAACB8994B. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B.R.R. KUMAR, SR.DR. RESPONDENT BY : SHRI SURESH BALANI, CA. DATE OF HEARING : 03.03.2015 03.03.2015 03.03.2015 03.03.2015 DATE OF PRONOUNCEMENT : 10.03.2015 10.03.2015 10.03.2015 10.03.2015 ORDER ORDER ORDER ORDER PER GEORGE GEORGE K, JM : PER GEORGE GEORGE K, JM : PER GEORGE GEORGE K, JM : PER GEORGE GEORGE K, JM : THIS APPEAL AT THE INSTANCE OF THE REVENUE IS DIRE CTED AGAINST THE ORDER OF LEARNED CIT(A)-XII, NEW DELHI DATED 3 RD JANUARY, 2013. THE RELEVANT ASSESSMENT YEAR IS 2004-05. 2. THE SOLITARY ISSUE THAT IS RAISED IS WHETHER THE CIT(A) IS JUSTIFIED IN QUASHING THE ASSESSMENT PROCEEDINGS INITIATED UN DER SECTION 147 READ WITH SECTION 148 OF THE INCOME-TAX ACT, 1961. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE AS FOL LOWS. THE ASSESSEE HAD FILED RETURN OF INCOME ON 1 ST NOVEMBER, 2004 DECLARING NIL INCOME. THE ASSESSMENT UNDER SECTION 143(3) WAS COMPLETED O N 15 TH DECEMBER, 2006 AT `13,08,96,989/- BEING BOOK PROFIT S UNDER SECTION 115JB OF THE ACT. LATER, NOTICE UNDER SECTION 148 WAS ISSUED ON 31 ST ITA-2299/DEL/2013 2 MARCH, 2011 AND ASSESSMENT UNDER SECTION 147 READ W ITH SECTION 143(3) OF THE ACT WAS COMPLETED BY ORDER DATED 29 TH DECEMBER, 2011 WHEREIN ASSESSING OFFICER HAD DISALLOWED EXPENDITUR E AMOUNTING TO `40,60,092/- BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT. 4. ON APPEAL TO THE CIT(A), THE CIT(A) QUASHED THE REASSESSMENT PROCEEDINGS AND ALSO HELD THAT RULE 8D IS NOT APPLI CABLE FOR THE RELEVANT ASSESSMENT YEAR VIZ., 2004-05. THE RELEVA NT FINDING OF THE CIT(A) READS AS FOLLOWS:- I HAVE PERUSED THE FACTS STATED IN THE ASSESSMENT ORDER AS WELL AS THE FACTS STATED BY THE ASSESSEE I N HIS SUBMISSIONS. THE RETURN FOR ASSESSMENT YEAR 2004-0 5, WAS FILED ON NOVEMBER 01, 2004 DECLARING NIL INCOME AND THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON DECEMBER 15, 2006. A NOTICE UNDER SECTION 148 WAS ISSUED ON MARCH 31, 2011. THE ASSESSING OFFICER HAS RECORDED THE REASO N FOR REOPENING AS UNDER:- DURING THE YEAR, THE ASSESSEE COMPANY HAS RECEIVED A DIVIDEND INCOME OF RS.5,98,32,288/- WHICH WAS CLAIM ED AS EXEMPTED INCOME. HOWEVER, WHILE COMPUTING THE INCOME, THE ASSESSEE HAS NOT ALLOCATED ANY EXPENDIT URE ATTRIBUTABLE TO EARNING SUCH EXEMPTED INCOME. IN VIEW OF ABOVE I HAVE A REASON TO BELIEVE THAT AN AMOUNT OF RS.40,60,092/- BEING PROPORTIONATE MANAGEMENT EXPENSES ATTRIBUTABLE FOR EARNING DIVIDEND INCOME HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SEC. 148 OF THE I.T. ACT. THE REOPENING IS BEYOND 4 YEARS IN THIS CASE. FURT HER AS PER THE PROVISO THE ASSESSING OFFICER HAS NO WHE RE ALLEGED IN THE REASONS STATED ABOVE THAT THERE HAS BEEN A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE T RULY FULLY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT, THE ASSESSEE CANNOT BE ALLEGED FOR NOT DISCLOSING ALL T HE FACT AS IT IS APPARENT FROM THE REASON ABOVE, AS TH E REASONS HAD BEEN TAKEN FROM THE ASSESSEE TAKEN FROM ITA-2299/DEL/2013 3 THE RETURN OF INCOME ITSELF HENCE NO FAILURE CAN BE ATTRIBUTED TO THE ASSESSEE. FURTHER RULE 8D FOR SECTION 14A IS APPLICABLE AY 20 08- 09 ONLY WHERE AS THIS IS AY 2004-05. HENCE THE REOPENING IS BAD IN LAW. IN VIEW OF THE ABOVE, IT IS SUBMITTED THAT, PROCEEDINGS INITIATED U/S 147 OF TH E ACT AND COMPLETION OF ASSESSMENT U/S 147/143(3) OF THE ACT IS ILLEGAL AND IS QUASHED. 5. THE REVENUE, BEING AGGRIEVED, IS IN APPEAL BEFOR E US. 6. THE LEARNED DR RELIED ON THE ASSESSMENT ORDER. LEARNED AR PRESENT WAS DULY HEARD. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, ASSESSMENT WAS REOPENED BEYO ND FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. THE PROVISO TO SEC TION 147 IS APPLICABLE TO THE FACTS OF THE INSTANT CASE SINCE P RIOR TO ISSUANCE OF NOTICE UNDER SECTION 148, SCRUTINY ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMPLETED. NOTICE UNDER SECTION 148 WA S ISSUED RECORDING THE FOLLOWING REASONS :- DURING THE YEAR, THE ASSESSEE COMPANY HAS RECEIVED A DIVIDEND INCOME OF RS.5,98,32,288/- WHICH WAS CLAIM ED AS EXEMPTED INCOME. HOWEVER, WHILE COMPUTING THE INCOME, THE ASSESSEE HAS NOT ALLOCATED ANY EXPENDIT URE ATTRIBUTABLE TO EARNING SUCH EXEMPTED INCOME. IN VIEW OF ABOVE I HAVE A REASON TO BELIEVE THAT AN AMOUNT OF RS.40,60,092/- BEING PROPORTIONATE MANAGEMENT EXPENSES ATTRIBUTABLE FOR EARNING DIVIDEND INCOME HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SEC. 148 OF THE I.T. ACT. 8. THE ASSESSING OFFICER HAS NOT RECORDED THAT INCO ME HAD ESCAPED ASSESSMENT FOR THE REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR THE ASSESSMENT. ITA-2299/DEL/2013 4 SINCE THE ASSESSMENT HAS BEEN COMPLETED BEYOND A PE RIOD OF FOUR YEARS AND THE ASSESSING OFFICER HAVING NOT RECORDED IN THE NOTICE UNDER SECTION 148 THAT IT WAS FOR THE FAULT OF THE ASSESSEE IN NOT FULLY AND TRULY DISCLOSING ALL MATERIAL FACTS THAT INCOME HAD ESCAPED ASSESSMENT, THE REASSESSMENT COMPLETED IS BAD IN LA W AND WITHOUT JURISDICTION IN THE LIGHT OF THE JUDGMENT OF THE HO N'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SHIVALIK BIMETAL CONTROLS LTD. VS. ITO [2013] 31 TAXMANN.COM 132 (DELHI), WHEREIN IT WAS HELD AS UNDER:- THE PROVISO TO SECTION 147 OF THE SAID ACT IMPOSES AN INJUNCTION ON THE REVENUE AUTHORITIES PROHIBITING T HEM FROM TAKING ANY ACTION BEYOND THE SAID PERIOD OF FO UR YEARS UNLESS (I) ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR, (II) B Y REASON OF THE FAILURE ON THE PART OF THE ASSESSEE ( A) TO FILE A RETURN UNDER SECTION 139 OF THE SAID ACT OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) O R SECTION 147 OR SECTION 148 OF THE SAID ACT OR (B) T O DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS NECESSAR Y FOR THE ASSESSMENT FOR THAT ASSESSMENT YEAR. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAD FAILED TO FILE THE RETURN UNDER ANY OF THE PROVISIO NS. THEREFORE, THE ONLY WAY IN WHICH THE NOTICE UNDER SECTION 148 OF THE SAID ACT BEYOND THE PERIOD OF FO UR YEARS, COULD BE JUSTIFIED WOULD BE IF THERE WAS FAI LURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRUL Y ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. IT IS NOT SUFFICIENT THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BUT IT MUST FURTHER BE SHOWN THA T THIS HAS ESCAPED AS A RESULT OF FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR HIS ASSESSMENT. IN THE PRESENT CASE, IT DID NOT EVEN CARRY A WHISPE R THAT THERE HAD BEEN A FAILURE ON THE PART OF THE ASSESSE E TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS NECESSA RY FOR THE ASSESSMENT. EVEN THE ORDER REJECTING THE OBJECTIONS DOES NOT INDICATE AS TO WHAT MATERIAL FA CT HAD NOT BEEN DISCLOSED BY THE ASSESSEE. ITA-2299/DEL/2013 5 9. THE RATIO OF THE ABOVE DECISION OF HON'BLE JURIS DICTIONAL HIGH COURT WOULD BE SQUARELY APPLICABLE TO THE FACTS OF THE ASSESSEES CASE, BECAUSE IN THE CASE OF THE ASSESSEE ALSO, PROVISO T O SECTION 147 IS APPLICABLE AND THERE IS NO WHISPER IN THE REASONS R ECORDED FOR REOPENING OF ASSESSMENT THAT THERE IS ANY FAILURE O N THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS. IN VIEW OF THE ABOVE, WE, RESPECTFULLY FOLLOWING THE DECISION OF H ON'BLE JURISDICTIONAL HIGH COURT, UPHOLD THE ORDER OF THE CIT(A) AND DISM ISS THE APPEAL FILED BY THE REVENUE. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 10 TH MARCH, 2015. SD/- SD/- (G.D. AGRAWAL) (G.D. AGRAWAL) (G.D. AGRAWAL) (G.D. AGRAWAL) (GEORGE GEORGE K) (GEORGE GEORGE K) (GEORGE GEORGE K) (GEORGE GEORGE K) VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT JUDICIAL MEMB JUDICIAL MEMB JUDICIAL MEMB JUDICIAL MEMB ER ERER ER VK. COPY FORWARDED TO: - 1. APPELLANT : DEPUTY COMMISSIONER OF INCOME TA X, DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -9(1), ROOM NO.163, C.R. BUILDING, 9(1), ROOM NO.163, C.R. BUILDING, 9(1), ROOM NO.163, C.R. BUILDING, 9(1), ROOM NO.163, C.R. BUILDING, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. 2. RESPONDENT : M/S SOLARIS CHEMTECH LIMITED, M/S SOLARIS CHEMTECH LIMITED, M/S SOLARIS CHEMTECH LIMITED, M/S SOLARIS CHEMTECH LIMITED, 124, THAPAR HOUSE, JANPATH, NEW DELHI. 124, THAPAR HOUSE, JANPATH, NEW DELHI. 124, THAPAR HOUSE, JANPATH, NEW DELHI. 124, THAPAR HOUSE, JANPATH, NEW DELHI. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR