The Deputy Commissioner of Income tax, Phagwara V. M/s. Upkar International, Phagwara

ITA 234/ASR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5736 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2001-2002
• Appeal Filed On: 18-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRIK CHAND
• Assessee Lawyers: J S BHASIN
• Keywords: Tangible material; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 143(3); 80HHC; 80IB; 147; 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.L. KARWA, VICE PRESIDENT AND SH. MEHAR SINGH, ACCOUNTANT MEMBER I.T.A. NOS.234 & 235(ASR)/2010 ASSESSMENT YEARS:2001-02 & 2002-03 PAN :AAAFU2099R THE DY. COMMR. OF INCOME-TAX, VS. M/S. UPKAR INTERN ATIONAL, PHAGWARA CIRCLE, PHAGWARA. BASANT NAGAR, PHAGWARA . (APPELLANT) (RESPONDENT) DEPARTMENT BY: SH. AMRIK CHAND, DR ASSESSEE BY: SH. J.S. BHASIN, ADV ORDER PER MEHAR SINGH, AM, THESE TWO APPEALS FILED BY THE REVENUE ARE DIRECTE D AGAINST THE DIFFERENT ORDERS OF CIT(A), JALANDHAR, EACH DATED 2 5.02.2010, PASSED UNDER SECTION 250(6) OF THE INCOME-TAX ACT, 1961 ( HEREIN AFTER REFERRED TO IN SHORT THE ACT) FOR THE ASSESSMENT YEARS 2001-02 & 2002- 03. BOTH THESE APPEALS WERE HEARD TOGETHER, AS THE FACTS ARE COMMON, AND A RE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. IN ITA NO. 234(ASR)/2010, THE REVENUE RAISED FOL LOWING GROUNDS OF APPEAL : 1. THAT THE LD. CIT(A), HAS ERRED IN CANCELING THE ASSESSMENT ORDER HOLDING THAT THE A.O. HAS WRONGLY ASSUMED JUR ISDICTION UNDER SECTION 147 OF THE ACT. 1A. WHILE DOING SO THE LD. CIT(A) HAS NOT APPRECIAT ED THE FACT THAT THE ASSESSEE HAS NOT DISCLOSED TRULY AND FULLY ALL FACTS OF THE CASE. THE ASSESSEE HAS CLAIMED DEDUCTION U/S 81B AT BRANCH 2 OFFICE AT RAJKOT AMOUNTING TO RS.21,48,370/-, WHERE NO MANUFACTURING ACTIVITY WERE CARRIED OUT AND NO BOOK S OF ACCOUNTS OF BRANCH OFFICE WERE PRODUCED. 2. IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THAT OF THE A.O. RESTORED. 3. THE APPELLANT REQUESTS FOR LEAVE TO ADD OR AMEND OR ALTER THE GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DI SPOSED OF. 3. IN ITA NO. 235(ASR)/2010, THE REVENUE RAISED FOL LOWING GROUNDS OF APPEAL : 1. THAT THE LD. CIT(A), HAS ERRED IN CANCELING THE ASSESSMENT ORDER HOLDING THAT THE A.O. HAS WRONGLY ASSUMED JUR ISDICTION UNDER SECTION 147 OF THE ACT. 1A. WHILE DOING SO THE LD. CIT(A) HAS NOT APPRECIAT ED THE FACT THAT THE ASSESSEE HAS NOT DISCLOSED TRULY AND FULLY ALL FACTS OF THE CASE. THE ASSESSEE HAS CLAIMED DEDUCTION U/S 81B AT BRANCH OFFICE AT RAJKOT AMOUNTING TO RS.25,27,111/-, WHERE NO MANUFACTURING ACTIVITY WERE CARRIED OUT AND NO BOOK S OF ACCOUNTS OF BRANCH OFFICE WERE PRODUCED. 2. IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THAT OF THE A.O. RESTORED. 3. THE APPELLANT REQUESTS FOR LEAVE TO ADD OR AMEND OR ALTER THE GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DI SPOSED OF. 4. IN BOTH THESE APPEALS, THE ONLY COMMON ISSUE RAI SED BY REVENUE IS THAT THE LD. CIT(A), ERRED IN CANCELING THE ASSESSM ENT ORDER, HOLDING THAT THE A.O. HAS WRONGLY ASSUMED JURISDICTION UNDER SECTION 147 OF THE INCOME-TAX ACT, 1961. BRIEFLY STATED, THE FACTS OF THE CASE AR E THAT THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS FRAMED ON 30.12.2003. , AFTER ALLOWING DEDUCTION OF RS.85,34,789/- U/S 80HHC WHILE NO DEDU CTION U/S 80IB WAS ALLOWED TO THE ASSESSEE IN VIEW OF THE PROVISIONS OF SECTION 80IB(13) READ WITH SECTION 80IA() AS WELL AS THE FACT THAT THE M ACHINERY OF THE ASSESSEE WAS FOUND TO HAVE BEEN USED PREVIOUSLY FOR SOME OTH ER PURPOSES. HOWEVER, 3 ON APPEAL, THE LD. CIT(A), JALANDHAR, HELD VIDE ORD ER DATED 08.07.2004 THAT DEDUCTION UNDER SECTION 80IB IS ADMISSIBLE TO THE A SSESSEE. CONSEQUENTLY, THE INCOME OF THE ASSESSEE WAS RECOMPUTED AT NIL A FTER ALLOWING DEDUCTION OF RS.21,84,220/- U/S 80IB VIDE ORDER DATED 11.10.2 004. A PERUSAL OF THE RETURN FILED BY THE ASSESSEE REVEALED THAT THE ASSE SSEE HAD CLAIMED DEDUCTION U/S 80IB IN RESPECT OF EXCHANGE FLUCTUATION OF RS.1 2,46,048/-, EXPORT INCENTIVES OF RS.34,96,296/- CREDITED TO THE TRADIN G P & L ACCOUNT. THE ASSESSEE CLAIMED DEDUCTION U/S 80IB IN RESPECT OF P ROFIT OF BRANCH OFFICE AT RAJKOT AMOUNTING TO RS.47,74,358/- ALSO. FURTHER, O N PERUSAL OF THE TRADING, P & L ACCOUNT AND BALANCE SHEET OF THE BRANCH OFFIC E REVEALS THAT IT IS NOT AN INDUSTRIAL UNDERTAKING SINCE NO MANUFACTURING AC TIVITIES ARE CARRIED OUT FROM THE BRANCH OFFICE. THUS, THE PROFIT OF BRANCH OFFICE IS NOT ELIGIBLE FOR DEDUCTION U/S 80IB SINCE THEY ARE NOT DERIVED FROM INDUSTRIAL UNDERTAKING. 4.1. ACCORDINGLY, NOTICE U/S 148 OF THE ACT WAS ISSUED T O THE ASSESSEE WHICH WAS SERVED ON 20.03.2008 TO THE ASSESSEE. THE ASSESSEE VIDE LETTER DATED 10.04.2008 INFORMED THAT RETURN OF INCOME FIL ED ON 31.10.2001 AT AN INCOME OF RS.21,84,377/- AND LATER ON REVISED ON 24 .06.2002 DECLARING NIL INCOME MAY BE TREATED IN COMPLIANCE TO THIS NOTICE . REASONS RECORDED UNDER SECTION 147 OF THE ACT WERE SUPPLIED TO THE ASSESSE E ON 01.05.2008. THE ASSESSEE VIDE LETTER DATED 21.08.2008 RAISED LEGAL OBJECTIONS TO THE OPENING OF THE CASE WHICH WERE MET BY PASSING A SPEAKING OR DER ON 30.09.2008 . THE A.O. COMPLETED THE ASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT. 5. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL AG AINST THE ASSESSMENT ORDER, WHERE THE ACTION OF THE A.O. FOR INITIATING PROCEEDINGS UNDER SECTION 147 WAS CHALLENGED BEFORE THE CIT(A). THE LD. CIT(A ), QUASHED THE REASSESSMENT PROCEEDINGS, IN QUESTION. 4 NOW, AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), TH E REVENUE IS IN APPEAL BEFORE THIS BENCH. 6. THE LD. DR RELIED ON THE ORDER OF THE ASSESSIN G OFFICER AND SUBMITTED THAT THE AO WAS JUSTIFIED IN INITIATING P ROCEEDINGS U/S 147 OF THE ACT. 7. THE LD. COUNSEL FOR THE ASSESSEE, SH. J.S. BHASI N, VEHEMENTLY RELIED ON THE ORDER OF THE CIT(A) AND REITERATED THE SUBMI SSIONS MADE BEFORE HIM. 8. WE HAVE HEARD BOTH THE PARTIES AND GIVEN OUR THO UGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS, EXAMINED THE FACTS OF THE CASE, EVIDENCE AND MATERIAL PLACED ON RECORD AND ALSO GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. A CAREFUL PERUSAL OF THE IMPUGNED APPELLATE ORDER DATED 25.02.2010, CLEARLY REVEALS THAT THE LD. CIT(A), HAS CONSIDERED AND ADJUDICATED THE ISSUE, IN QUESTION, IN GREATER DETAIL, AFTER APPRECIATION OF THE EVIDENCES AND MATERIAL ON RECORD, AS ALSO THE LEGAL AND FACTUAL POSITION OF THE CASE. NEEDLESS TO SAY THAT THE IMPUGNED APPELLATE ORDER IS WELL REASONED AND BASED ON THE COGENT AND CREDIBLE MATERIAL AND FACTS OF THE CASE. HOWEVE R, IT WOULD PERTINENT TO REPRODUCE THE RELEVANT PART OF THE DECISION OF THE CIT(A), FOR THE PURPOSE OF PROPER APPRECIATION OF THE SAME: 2.5 I HAVE CONSIDERED THIS AFORESAID ISSUE IN DETA IL IN THE CASE OF THE APPELLANT FOR THE ASSESSMENT YEAR 2002-03 IN APPEAL NO.545/08- 09/CIT(A)/JAL BY ORDER OF EVEN DATE. I HAVE GONE TH ROUGH THE RELEVANT DECISIONS RELIED UPON BY THE APPELLANT AND BY THE A O IN THAT ORDER AND HAVE HELD THAT, IN THE LIGHT OF THE DECISION OF HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF DULI CHAND SINGHANIA (SUP RA), UNLESS THE AO SHOWED THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO MAKE FULL AND TRUE DISCLOSURE OF MATERIAL FACTS IN THE O RIGINAL ASSESSMENT PROCEEDINGS, THE AO COULD NOT ASSUME JURISDICTION U/S 147 OF THE I.T.ACT, IF ASSESSMENT U/S 143(3) OF U/S 147 HAD BE EN DONE EARLIER AND 5 NOTICE U/S 148 WAS ISSUED FOUR YEARS AFTER THE END OF RELEVANT ASSESSMENT YEAR. I HAVE ALSO HELD THAT THE AO COULD NOT ISSUE NOTICE U/S 148 ON A MERE CHANGE OF OPINION ON THE SAME FAC TS. 2.6. THE REASONS RECORDED BY THE AO SHOW THAT ALL T HE RELEVANT FACTS WERE BEFORE THE AO IN THE ORIGINAL ASSESSMENT PROCE EDINGS. WHILE THE SUBSEQUENT DECISION IN THE CASE OF LIBERTY INDIA (S UPRA) DID GIVE THE AO A REASON TO BELIEF THAT INCOME HAD ESCAPED ASS ESSMENT, SINCE THE AO HAS NOT SHOWN THAT THE ASSESSEE DID NOT DISCLOSE THE PARTICULARS OF THE RELEVANT EXPORT INCENTIVES OR THE INTEREST INCO ME, THE CONDITIONS OF THE FIRST PROVISO TO SECTION 147 ARE NOT SATISFIED. HENCE, WHILE THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF LIBERTY INDIA (SUPRA) GIVE JURISDICTION IN THE MAIN PROVISION OF SECTION 147 AND ALSO U/S 154, SINCE THERE IS NO FAILURE ON THE PART OF THE APPELLANT IN MAKING A FULL AND TRUE DISCLOSURE IN R ESPECT OF THESE RECEIPTS, THE JURISDICTION IS NOT OBTAINED. AS REGA RDS THE DEDUCTION U/S 80IB IN RESPECT OF RAJKOT OFFICE OF THE APPELLANT, IT IS SEEN THAT THIS WAS THE FIRST YEAR OF CLAIM OF DEDUCTION U/S 80IB B Y THE ASSESSEE. THE AO EXAMINED THIS CLAIM AND MENTIONED SPECIFICALLY I N THE ASSESSMENT ORDER THAT THE ASSESSEE WAS ENTITLED TO DEDUCTION U /S 80IB. THE RELEVANT PARTICULARS OF THE BRANCH OFFICE WERE FILE D WITH THE RETURN OF INCOME OF THE ASSESSEE AND WERE BEFORE THE AO IN TH E ORIGINAL ASSESSMENT PROCEEDINGS. HENCE, THE AOS CONTENTION IN THE REASONS RECORDED THAT NO MANUFACTURING ACTIVITIES WERE BEIN G CARRIED ON AT THE RAJKOT BRANCH OFFICE, WITHOUT ANY FURTHER INFORMATI ON HAVING COME TO THE AO ON THIS ISSUE AFTER THE ORIGINAL ASSESSMENT ORDER, CAN ONLY AMOUNT TO A CHANGE OF OPINION. A MERE CHANGE OF OPI NION ON THE SAME FACTS CANNOT GIVE THE AO JURISDICTION U/S 147 OF TH E ACT. THIS WAS HELD BY THE HONBLE DELHI HIGH COURT, IN THE CASE OF CIT VS. KELVINATOR (INDIA) 256 ITR1 (DEL). THIS DECISION OF HONBLE DE LHI HIGH COURT HAD BEEN UPHELD BY HONBLE SUPREME COURT IN THE REC ENT DECISION IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. IN CI VIL APPEAL NOS. 2009 TO 2011 OF 2003 DATED 18.1.2010. THE HONBLE A PEX COURT HAVE HELD IN THIS DECISION THAT THE CONCEPT OF CHANGE O F OPINION MUST BE TREATED AS AN INBUILT TEXT TO CHECK ABUSE POWER BY THE AO. IT WAS HELD THAT AFTER IST APRIL, 1989 THE AO HAS POWER TO REOP EN PROVIDED THERE WAS TANGIBLE MATERIAL TO COME TO THE CONCLUSION TH AT THERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT. IN THE PRESEN T CASE AS FAR THE INCOME OF RAJKOT UNIT IS CONCERNED, SINCE NO NEW IN FORMATION HAS COME TO THE AO OTHER THAN THAT AVAILABLE DURING TH E ORIGINAL 6 ASSESSMENT PROCEEDINGS, THE BELIEF ARRIVED AT BY TH E AO IN THE REASONS RECORDED CAN ONLY BE SEEN AS CHANGE OF OPINION ON T HE SAME SET OF FACTS. 2.7. BASED ON MY DISCUSSION ON THESE ISSUES IN MY A PPELLATE ORDER IN THE APPELLANTS CASE FOR ASSESSMENT YEAR 2003-04 (S UPRA) AND RELYING ON THE SAME, I HOLD THAT SINCE THE AO HAS NOT SHOWN THAT THERE WAS FAILURE ON THE PART OF THE APPELLANT TO MAKE FULL A ND TRUE DISCLOSURE IN RESPECT OF EXPORT INCENTIVES AND INTEREST ON FDR, T HE CONDITIONS OF THE FIRST PROVISO TO SECTION 147 ARE NOT SATISFIED IN R ESPECT OF THESE REASONS. IN RESPECT OF THE ALLEGATION REGARDING NO MANUFACTURING ACTIVITY AT THE RAJKOT BRANCH OFFICE, I HOLD THAT T HE REASONS RECORDED ARE ONLY A CHANGE OF OPINION ON THE SAME SET OF FAC TS. HENCE, I HOLD THAT THE NOTICE U/S 147 ISSUED BY THE AO IN THIS CA SE IS BAD IN LAW. CONSEQUENTLY, THE IMPUGNED ASSESSMENT ORDER IS ALSO HELD TO BE PASSED WITHOUT JURISDICTION AND IS, THEREFORE, CANC ELLED. GROUND NOS. 1 AND 3 OF APPEAL ARE ALLOWED. 8.1. IN VIEW OF THE ABOVE DISCUSSIONS, WE DO NOT FI ND ANY INFIRMITY IN THE FINDINGS OF THE CIT(A), AS THE SAME ARE BASED ON P ROPER APPRECIATION OF THE LEGAL AND FACTUAL POSITION OF THE CASE. ACCORDINGLY , BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. 9. IN THE RESULT, BOTH THE APPEALS FILED BY THE RE VENUE ARE DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 16T H JUNE, 2011. SD/- SD/- (H.L. KARWA) (MEHAR SINGH) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 16TH JUNE, 2011 /SKR/ COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE: M/S. UPKAR INTERNATIONAL, PHAGWARA. 2. THE DY. CIT, PHAGWARA. 3. THE CIT(A), JALANDHAR. 4. THE CIT, JALANDHAR. 7 5. THE SR DR, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH : AMRITSAR.