CONCORDE MOTORS (INDIA) LTD, MUMBAI V. ACIT (OSD) 2(1), MUMBAI

ITA 234/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2888 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2003-2004
• Appeal Filed On: 07-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GANESH BAREDR
• Assessee Lawyers: FARROKH V IRANIAR
• Keywords: Reopening of assessment; Wrong claim; Difference of opinion; Assessment record; Change of opinion; Reassessment proceedings
• Section: 143(3); 14A; 115JB; 148

Judgement Text

INCOME-TAX APPELLATE TRIBUNAL C BENC H MUMBAI , , BEFORE S/SH.JOGINDER SINGH,JUDICI AL MEMBER & RAJENDRA,ACCOUNTANT MEMBER ./I.T.A./234/MUM/2013 , /ASSESSMENT YEAR: 2003-04 CONCORDE MOTORS (INDIA) LTD. 3 RD FLOOR, NANAVATI MAHALAYA, 16, HOMI MODY STREET, HUTATMA CHOWK MUMBAI-400 001. PAN:AAACM 0154 A VS. THE ACIT, CIRCLE-(OSD)-2(1) AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI GANESH BARE-DR ASSESSEE BY: SHRI FARROKH V.IRANI-AR / DATE OF HEARING: 23.05.2016 / DATE OF PRONOUNCEMENT: 24.06.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DT. 04.10.2012 OF CIT(A)-4,MU MBAI, THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF SERVICING AND MAINTENANCE OF VEHICLES, FILED ITS RETURN OF INCOME 05.01.2006, DECLARING TO TAL INCOME AT NIL .THE ASSESSMENT ORDER U/S.143(3) R.W.S. 147 OF THE ACT, WAS PASSED ON 3.1 2.2008,DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.58,53, 770/-. 2. FIRST GROUND OF APPEAL DEALS WITH VALIDITY OF REAS SESSMENT PROCEEDINGS. WE FIND THAT THE AO HAD REOPENED THE CASE AFTER RECORDING THE REASON S.THE REASONS RECORDED BY HIM READ AS UNDER: (I)DURING THE F.Y.1999-2000 (A.Y. 2000-01) ALL THE SHARES OF THE COMPANY WERE ACQUIRED BY M/S. TELCO LTD. CONSEQUENT TO THIS, THE PERSONS BEN EFICIALLY HOLDING 51% OF THE VOTING POWER HAS CHANGED FROM A.Y.2000-01. THUS, AS PER SE CTION 79 OF THE INCOME TAX ACT, THE LOSSES PERTAINING TO A.Y. 1999-2000 AND EARLIER YEA RS ARE NOT ALLOWED TO BE C/F AND SET OFF. HOWEVER, IN THE ASSESSMENT IT IS SEEN THAT LOSS OF A.Y. 1999-2000 AMOUNTING TO RS.7,81,046/- WAS SET OFF AGAINST THE PROFIT OF CURRENT YEAR. THI S INCORRECT SET OFF LOSSES HAS RESULTED IN EXCESS C/F OF LOSS OF RS.7,81,046/- TO THE SUBSEQUE NT YEARS RESULTING IN ESCAPEMENT OF INCOME. (II)A PERUSAL OF THE RECORD REVEALS THAT THE ASSESS EE HAS NOT CARRIED OUT BUSINESS ACTIVITY THROUGHOUT THE YEAR AND THE PREMISES OWNED BY THE C OMPANY WERE UTILIZED FOR THE BUSINESS OF SERVICING AND MAINTENANCE OF VEHICLES. DURING THE P REVIOUS YEAR RELEVANT OT AY 2003-04, THE ASSESSEE HAD RECEIVED RENTAL INCOME OF RS.81,09,000 /- AND OTHER INCOME OF RS.1,77,468/-. THOUGH THE TOTAL INCOME INCLUDING INCOME FROM HOUSE PROPERTY WAS DETERMINED DURING THE ASSESSMENT AT RS.58,53,770/-, THIS INCOME WAS NOT B ROUGHT TO TAX STATING THAT THE RETURNED INCOME WAS MORE THAN ASSESSED INCOME.HOWEVER, IT IS SEEN THAT WHILE COMPUTING THE TAX RETRUNED INCOME U/S. 115JB WAS TAKEN AND TAX WAS LE VIED THEREON. AS THE RETURNED INCOME UNDER NORMAL PROVISIONS WAS NIL, THE ASSESSED INCOM E OF RS.58,53,770/- SHOULD HAVE BEEN BROUGHT TO TAX. THIS OMISSION BY THE ASSESSING OFFI CER HAS RESULTED IN ESCAPEMENT OF INCOME. 234/M/13-CONCORDE MOTORS(INDIA)LTD . 2 3. THE ASSESSEE OBJECTED TO REOPENING BEFORE THE AO.H OWEVER,HE HELD THAT NOTICE U/S. 148 OF THE ACT WAS ISSUED AS PER THE PROVISIONS OF THE AC T. BEFORE THE FIRST APPELLATE AUTHORITY (FAA), IT WAS CONTENDED THAT ORIGINAL ASSESSMENT WA S MADE U/S.143(3) OF THE ACT,THAT SET OFF OF BROUGHT FORWARD LOSSES HAD ALREADY BEEN ALLOWED, THAT THE INCOME WAS COMPUTED AT NIL AND WAS ASSESSED AT BOOK PROFIT U/S.115JB OF THE ACT,IT WAS MERELY CHANGE OF OPINION.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND ASSE SSMENT ORDER THE FAA HELD THAT IN THE CASE UNDER CONSIDERATION THERE WAS A MISTAKE IN THE ORIGINAL ASSESSMENT ORDER, THAT WRONG CLAIM WAS ALLOWED, THAT RELEVANT DETAILS WERE NOT A VAILABLE DURING THE ORIGINAL ASSESSMENT PROCEEDINGS, THAT THE AO WAS JUSTIFIED IN REOPENING THE ASSESSMENT. 4. DURING THE COURSE OF HEARING BEFORE US,THE AUTHORIS ED REPRESENTATIVE (AR) REFERRED TO THE REASONS RECORDED BY THE AO AND STATED THAT BOTH THE ISSUES MENTIONED IN THE REASONS WERE DEALT WITH EXTENSIVELY BY THE AO WHILE PASSING THE ORIGINAL ORDER,THAT THE ASSESSEE HAD SUPPLIED ALL THE NECESSARY DETAILS AND AO HAD ARRIV ED AT A PARTICULAR CONCLUSION, THAT IN PARA 2 OF THE REASONS THE AO HAD MENTIONED THAT TOTAL INCO ME WAS DETERMINED AT RS.58.53 LAKHS, THAT FINDING GIVEN BY AO WAS FACTUALLY INCORRECT,THAT TH ERE WAS NO ESCAPEMENT OF INCOME FOR THE YEAR UNDER CONSIDERATION, THAT REOPENING WAS BASED ON VERY SAME RECORDS AVAILABLE ON THE FILE OF AO, THAT THERE WAS NO NEW OR FRESH MATERIAL FOR FORMING THE BELIEF OF ESCAPEMENT OF INCOME. HE REFERRED TO THE CASES OF KELVINATOR INDI A LTD.(320ITR561);FORAMER FRANCE(264 ITR566);CORPORATION BANK LTD.(254 ITR 791);ASTERIOI DDS TRADING AND INVESTMENTS P. LTD. (308ITR190); SANGHVI SWISS REFILLS P.LTD.(300ITR276 );BHAVESH DEVELOPERS (329ITR 249); MULTI SCREEN MEDIA PRIVATE LIMITED(324ITR54);SIEMEN S INFORMATION SYSTEMS LTD. (295 ITR 333)AND GODREJ AGROVET LTD(290ITR252).THE DEPARTMEN TAL REPRESENTATIVE (DR)SUPPORTED THE ORDER OF THE AO AND THE FAA. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT IN THE REASONS RECORDED, THE AO HAD MENTIONED THAT PERUSAL OF THE RECORD REVEALED ..THE NOTE CLEARLY SHOWS THAT THE AO HAD RE-APPRAISED THE FACTS AVAILABLE ON RECORD AND NO NEW MATERIAL HAD BEEN CONSIDERED BEFORE ISSUING THE NOT ICE U/S. 148 OF THE ACT.WE FIND THAT VIDE HIS LETTER DATED 24.11.2005,THE ASSESSEE HAD MENTIO NED THAT THE PREMISES OF THE COMPANY WERE TO BE UTILISED FOR UNDERTAKING BUSINESS OF SERVICIN G/MAINTAINING OF VEHICLES, THAT PENDING FINALISATION FEASIBILITY REPORT THE PREMISES WERE L ET OUT TO M/S. TATA MOTORS LTD.FOR THE PURPOSE OF SERVICING/MAINTENANCE OF VEHICLES (PG-42 OF THE PB).VIDE ITS LETTER DATED 28.11. 2005,(PG-46 OF PB),THE ASSESSEE HAD ENCLOSED A COPY OF LEAVE AND LICENSE AGREEMENT, 234/M/13-CONCORDE MOTORS(INDIA)LTD . 3 DT.11.10.2002 ENTERED INTO BETWEEN MINI CAR INDIA L TD. AND TATA MOTORS LTD. IT IS ALSO FOUND THAT WHILE COMPLETING THE ORDER U/S. 143(3) OF THE ACT, THE AMOUNT OF RS.58.53 LAKHS IS NOT APPEARING ANYWHERE.IN SHORT,THE AO HAD REOPENED THE ASSESSMENT WITH REGARD TO ISSUES WHICH ARE ALREADY DEALT WITH DURING THE REGULAR ASSESSMEN T PROCEEDINGS.AFTER THE COMPLETION OF 143(3) PROCEEDINGS,HE FORMED DIFFERENT OPINION ABOU T THE TREATMENT TO BE GIVEN TO THE TWO ITEMS.THUS, IT WAS A PURE CASE OF CHANGE OF OPINION .WE FIND THAT THE FAA HAD MENTIONED THAT THERE WERE MISTAKES IN THE ORIGINAL ASSESSMENT ORDE R.IN OUR OPINION,IF THERE WERE MISTAKES, OTHER REMEDIES WERE AVAILABLE TO THE AO.TO RECTIFY THE MISTAKE, THE ASSESSMENT SHOULD NOT HAVE BEEN REOPENED AS PER THE ESTABLISHED PRINCIPLE S OF TAXATION JURISPRUDENCE-OTHER REMEDIES ARE AVAILABLE.RE-OPENING OF A COMPLETED ASSESSMENT IS A SERIOUS THING AND THE PROVISIONS OF SECTION 147 CAN BE INVOKED IF THE PRECONDITIONS ARE FULFILLED.THE AO CANNOT ISSUE NOTICE OF SECTION 148 OF THE ACT TO REVIEW RE-APPRAISE THE EA RLIER ORDER.AS STATED EARLIER,IN THE CASE UNDER CONSIDERATION,THE AO HAD DELIBERATED UPON BOT H THE ISSUES DURING THE ORIGINAL ASSESSMENT PROCEEDINGS.SO,THERE WAS NO JUSTIFICATIO N IN RE-OPENING THE MATTER.HERE,WE WOULD LIKE TO REFER TO THE CASE OF CENTRAL WAREHOUSING CO RPORATION LTD.(382 ITR 172).IN THAT MATTER THE HONBLE DELHI HIGH COURT HAS DEALT THE SIMILAR ISSUE.FACT OF THE CASE WERE THAT FOR THE AY. 2004-05,THE REOPENING OF ASSESSMENT WAS SOUGHT TO BE MADE ON THE BASIS THAT THE ASSESSEE HAD CLAIMED EXEMPTION IN RESPECT OF ITS DI VIDEND AND THE PROPORTIONATE MANAGEMENT AND ADMINISTRATIVE EXPENSES ATTRIBUTABLE TO THE DIV IDEND INCOME WERE NOT DEDUCTED IN COMPUTING ADMISSIBLE EXEMPTION AND THE SAID MISTAKE HAD RESULTED IN UNDERASSESSMENT OF INCOME AND AS A RESULT THERE WAS A SHORT LEVY OF TA X INCLUDING INTEREST AND THE RE-OPENING WAS PROPOSED IN ACCORDANCE WITH SECTION 14A OF THE ACT. THE FAA AND THE TRIBUNAL HELD THAT THE REASSESSMENT WAS NOT VALID.DISMISSING THE APPEAL FI LED BY THE DEPARTMENT,THE HONBLE HIGH COURT HELD AS UNDER: THE ASSESSMENT OF THE ASSESSEE FOR THE ASSESSMENT Y EAR 2005-06 WAS COMPLETED UNDER SECTION 143(3)OF THE INCOME-TAX ACT, 1961. THE ASSESSING OF FICER SUBSEQUENTLY REOPENED THE ASSESSMENT ON THE GROUND THAT HE HAD INADVERTENTLY FAILED TO NOTICE THAT INCOME OF THE ASSESSEE FROM THE DISPOSAL OF STOCKS IN THE BONDED WAREHOUSE HAD ESCAPED ASSESSMENT. THE TRIBUNAL HELD THAT THE REOPENING OF THE ASSESSMENT WAS INVALID. THE ORIGINAL ASSESSMENT WAS FRAMED UNDER SECTION 143(3) OF THE ACT AND WHILE FR AMING ORIGINAL ASSESSMENT, A SPECIFIC QUERY WAS RAISED BY THE ASSESSING OFFICER AND WAS C LARIFIED BY THE ASSESSEE IN WRITING. IT WAS NOT A CASE WHERE RELEVANT MATERIAL WAS NOT DISCLOSE D BY THE ASSESSEE IN THE FIRST ROUND OF ASSESSMENT. THUS THE REOPENING OF THE ASSESSMENT BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 2005-06 WAS BASED ON A CHANGE OF OPINION, WHIC H WAS IMPERMISSIBLE IN LAW.. THAT IN THE ORIGINAL ASSESSMENT ORDER, THE ASSESSING OFFICE R ELABORATELY DISCUSSED SECTION 14A OF THE ACT AND A QUESTIONNAIRE WAS ALSO ISSUED BY THE ASSE SSING OFFICER SPECIFICALLY RAISING A QUERY WHY THE PROPORTIONATE ADMINISTRATIVE AND MANAGEMENT EXPENSES INCURRED FOR EARNING THE EXEMPTED INCOME SHOULD NOT BE DISALLOWED UNDER SECT ION 14A . THE ASSESSEE HAD REPLIED TO THE QUESTIONNAIRE AND THE REPLY HAD BEEN TAKEN INTO ACCOUNT. THUS THE ASSESSING OFFICER BY 234/M/13-CONCORDE MOTORS(INDIA)LTD . 4 SEEKING TO REOPEN THE ASSESSMENT, WAS REVIEWING HIS EARLIER ORDER. THEREFORE, THE REOPENING OF THE ASSESSMENT WAS NOT VALID. WE WOULD ALSO LIKE TO REFER TO THE MATTER OF TURNER BROADCASTING SYSTEMS ASIA PACIFIC INC. OF THE HONBLE DELHI HIGH COURT (380 ITR 412 ).IN THAT CASE THE ASSESSEE WAS A COMPANY INCORPORATED IN THE U. S. A. AND WAS A TAX RESIDENT OF THE U. S. A. DURING THE RELEVANT FINANCIAL YEARS, IT DERIVED INCOME FROM THE GRANT O F EXCLUSIVE RIGHTS TO TIIPL IN INDIA TO SELL ADVERTISING ON THE PRODUCTS AND TO DISTRIBUTE CERTA IN PRODUCTS. IT FILED ITS RETURNS FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09. THE ASSESSMEN TS WERE MADE AND THE AO IN THE ASSESSMENT ORDERS HAD REFERRED TO THE MUTUAL AGREEM ENT TO AVOID DOUBLE TAXATION UNDER ARTICLE 27 OF DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN I NDIA AND THE U. S. A, FOR THE AY.S. 2001-02 TO 2004-05 AND THE FACT THAT SUBSEQUENTLY F OR THE AY. 2005-06, ASSESSMENT WAS CONCLUDED FOLLOWING THE MUTUAL AGREEMENT PROCEDURE. THE AO IN THE ASSESSMENT ORDER HAD SPECIFICALLY RECORDED THAT SINCE THE FACTS OF THE Y EAR UNDER CONSIDERATION REMAINED THE SAME, FOLLOWING THE AGREEMENT REACHED BY THE RESPECTIVE C OMPETENT AUTHORITIES IN THE EARLIER YEARS, THE TAX WAS COMPUTED AT 10 % ACCORDING TO RESOLUTIO NS PASSED IN THE MUTUAL AGREEMENT PROCEDURE.NOTICES OF REASSESSMENT WERE ISSUED IN RE SPECT OF BOTH THE AY.S.THE ASSESSEE CHALLENGED THE RE-OPENING BY FILING A WRIT PETITION .ALLOWING THE WRIT,THE HONBLE COURT HELD AS FOLLOW: IN CIT V. USHA INTERNATIONAL LTD. [2012] 348 ITR 485, THE FULL BENCH OF THE DELHI HIGH COURT LAID DOWN THE FOLLOWING PROPOSITIONS OF LAW : (I) THE EXPRESSION CHANGE OF OPINION POSTULATES FORMATION OF OPINION AND THEN A CHANGE THEREOF. IN THE CONTEXT OF SECTION 147 OF THE INCOME-TAX ACT, 1961, IT IMPLIES THAT TH E ASSESSING OFFICER SHOULD HAVE FORMED AN OPINION AT THE FIRST INSTANCE, I.E., IN THE PROCEED INGS UNDER SECTION 143(3) AND BY INITIATION OF THE REASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER PROPOSES OR WANTS TO TAKE A DIFFERENT VIEW ; (II) REASSESSMENT PROCEEDINGS WILL BE INVALI D IN CASE THE ASSESSMENT ORDER ITSELF RECORDS THAT THE ISSUE WAS RAISED AND WAS DECIDED IN FAVOUR OF THE ASSESSEE. REASSESSMENT PROCEEDINGS IN THE SAID CASES WILL BE HIT BY THE PR INCIPLE OF CHANGE OF OPINION ; AND (III) REASSESSMENT PROCEEDINGS WILL BE INVALID IN CASE AN ISSUE OR QUERY IS RAISED AND ANSWERED BY THE ASSESSEE IN ORIGINAL ASSESSMENT PROCEEDINGS BUT THEREAFTER THE ASSESSING OFFICER DOES NOT MAKE ANY ADDITION IN THE ASSESSMENT ORDER. IN SUCH SITUATIONS, IT SHOULD BE ACCEPTED THAT THE ISSUE WAS EXAMINED BUT THE ASSESSING OFFICER DID NO T FIND ANY GROUND OR REASON TO MAKE ADDITION OR REJECT THE STAND OF THE ASSESSEE. HE FO RMS AN OPINION. THE REASSESSMENT WILL BE INVALID BECAUSE THE ASSESSING OFFICER HAD FORMED AN OPINION IN THE ORIGINAL ASSESSMENT, WHETHER OR NOT HE HAD RECORDED HIS REASONS IN THE A SSESSMENT ORDER. THAT NO FRESH INFORMATION OR MATERIAL HAD BEEN REFERRED TO IN THE REASONS RECORDED FOR SEEKING TO REOPEN THE ASSESSMENT. THE MATERIAL THAT WAS REFERRED TO W AS THE VERY SAME MATERIAL THAT WAS ALREADY BEFORE THE ASSESSING OFFICER AT THE TIME OF FRAMING OF THE ASSESSMENTS UNDER SECTION 143(3) OF THE ACT AND EVEN THE REASONS RECORDED THA T FROM THE PERUSAL OF THE ASSESSMENT RECORD, IT IS OBSERVED THAT. THIS CLEARLY SHOWED T HAT THE ASSESSING OFFICER HAD SOUGHT TO REAPPRECIATE THE MATERIAL THAT WAS ALREADY THERE AT THE TIME WHEN THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3). IT WAS CLEARLY A CASE OF CHAN GE OF OPINION, WHICH IS CLEARLY NOT PERMISSIBLE. THE NOTICES WERE NOT VALID. 234/M/13-CONCORDE MOTORS(INDIA)LTD . 5 WE FIND THAT NO FRESH MATERIAL OR INFORMATION WAS R EFERRED TO BY THE AO IN THE REASONS RECORDED FOR RE-OPENING THE ASSESSMENT,THAT THE MAT ERIAL REFERRED TO WAS THE SAME,THAT THE REASONS AROSE FROM THE PERUSAL OF THE EXISTING ASSE SSMENT RECORD.CONSIDERING THE PECULIAR FACTS OF THE CASE AND RESPECTFULLY FOLLOWING THE AB OVE JUDGMENTS WE HOLD THAT THE ORDER PASSED BY THE AO FOR RE-OPENING THE ASSESSMENT FOR THE YEAR UNDER APPEAL WAS INVALID. THEREFORE,CONSEQUENTIAL ORDER PASSED HAS TO BE TREA TED AN INVALID ORDER.WE DECIDE THE FIRST GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. 6.AS WE HAVE DECIDED THE JURISDICTIONAL ISSUE IN FA VOUR OF THE ASSESSEE AND HAS HELD THAT THE ORDER PASSED BY THE AO WAS NOT VALID,SO,WE ARE NOT DECIDING THE OTHER GROUNDS. AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS ALL OWED. . ORDER PRONOUNCED I N THE OPEN COURT ON 24 TH JUNE,2016. 24 TH , 2016 SD/- SD/- /JOGINDER SINGH) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 24 .06.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR G BENCH, ITAT, MUMBAI / , , . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.