Atul Limited, Ahmedabad V. The ACIT.,Range-1, Ahmedabad

ITA 2380/AHD/2011

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5853 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 30-06-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 20-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VASUNDHARA UPMANYA
• Keywords: Reopening of assessment; Depreciation
• Section: 143(3); 115JB; 147; 148

Judgement Text

, MH MHMH MH IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD LOZJH IZNHI DQEKJ DSFM;K] YS[KK LNL; ,OA EGKOHN IZL KN] U;KF;D LOZJH IZNHI DQEKJ DSFM;K] YS[KK LNL; ,OA EGKOHN IZL KN] U;KF;D LOZJH IZNHI DQEKJ DSFM;K] YS[KK LNL; ,OA EGKOHN IZL KN] U;KF;D LOZJH IZNHI DQEKJ DSFM;K] YS[KK LNL; ,OA EGKOHN IZL KN] U;KF;D LNL; DS LE{KA LNL; DS LE{KA LNL; DS LE{KA LNL; DS LE{KA BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.2380/AHD/2011 ( / ASSESSMENT YEAR : 2004-05) ATUL LIMITED ASHOKA CHAMBERS, RASALA MARG, ELLISBRIDGE, AHMEDABAD 390 009 / VS. ACIT, RANGE 1, AHMEDABAD. ./ ./ PAN/GIR NO. : AABCA 2390 M ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI S.N. SOPARKAR & PARIN SHAH, A.R. / RESPONDENT BY : SHRI VASUNDHARA UPMANYA, CIT-D.R. / DATE OF HEARING 07/03/2018 !'# / DATE OF PRONOUNCEMENT 23/03/2018 $% / O R D E R PER MAHAVIR PRASAD, JUDICIAL MEMBER : THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-VI, AHMEDABAD, VIDE APPEAL NO.CIT(A)-VI/ACIT(OSD)/R-1/162/10-11 DATED 27/07/20 11 FOR THE ASSESSMENT YEAR (AY) 2004-05. 2. FOLLOWING GROUNDS OF APPEAL HAS TAKEN BY THE ASS ESSEE: 1. THE LD.CIT (APPEALS) ERRED IN LAW AND ON FACTS IN CONFIRMING ACTION OF AO IN REOPENING OF ASSESSMENT U/S.147 OF THE ACT BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR WITHOUT POINTING OUT ANY FAILURE ON THE PART O F THE APPELLANT. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE R EOPENING IS ITA NO.2380/AHD /2011 ATUL LTD. ASHOKA CHAMBERS VS. ACIT ASST.YEAR 2004-05 - 2 - WITHOUT JURISDICTION AND NOT PERMISSIBLE EITHER IN LAW OR ON FACTS WHEN THE APPELLANT HAS DISCLOSED FULLY AND TRULY AL L THE MATERIAL FACTS NECESSARY FOR ASSESSMENT U/S.143(3) OF THE AC T. THE PRESENT PROCEEDINGS, THEREFORE DESERVES TO BE QUASHED. 2. LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRM ING ACTION OF AO IN NOT PERMITTING THE APPELLANT TO REDUCE AMOUNT OF RS.7,48,60,059/- OF WAGES REVISION SETTLEMENT FROM THE PROVISION MADE IN THE EARLIER YEARS FOR THE PURPOSE OF COMPUT ING BOOK PROFITS U/S.115JB OF THE ACT. LD. CIT(A) OUGHT TO H AVE APPRECIATED THE CONTROVERSY INDEPENDENTLY AND DELET ED THE DISALLOWANCE MADE BY AO. 3. LEVY OF INTEREST U/S.234B, 234C & 234D OF THE A CT IS NOT JUSTIFIED. 4. INITIATION OF PENALTY U/S.271(1)(C) OF THE ACT IS NOT JUSTIFIED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY FILED RETURN OF INCOME ON 30/10/2004 DECLARING TOTAL INCO ME AT RS. NIL UNDER THE NORMAL PROVISIONS OF THE ACT. THE RETURN OF INC OME WAS ACCOMPANIED WITH AUDITED BALANCE SHEET, PROFIT & LOSS ACCOUNT A S WELL AS REPORT OF THE AUDITOR ON FORM N0.3CB AND 3CD AND FORM NO.29B. 4. THE CASE WAS SELECTED FOR SCRUTINY BY ISSUING NO TICE U/S.143(2) OF THE ACT ON 28/04/2005. NOTICE U/S.142(1) CUM QUESTI ONNAIRE WAS ISSUED ON 17/08/2006. IN RESPONSE TO THE SAME, SHRI SATYEN DHARIWAL, GM (FINANCE & TAXATION) AND SMT. PURTI VACHHARAJANI, M ANAGER (FINANCE) WITH THE ASSESSEE COMPANY, ATTENDED THE PROCEEDINGS FROM TIME TO TIME AND FURNISHED THE DETAILS AND EXPLANATIONS AS REQUI RED. ITA NO.2380/AHD /2011 ATUL LTD. ASHOKA CHAMBERS VS. ACIT ASST.YEAR 2004-05 - 3 - 5. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUF ACTURING AND SALES OF INTERMEDIATES, DYES, COLOR ETC AND TOTAL INCOME OF ASSESSEE IS COMPUTED BY THE AO AS UNDER: BUSINESS LOSS AS PER ROI ADD: DEPRECIATION DISALLOWED ADD: TR. PRICING ADJUSTMENT REVISED BUSINESS LOSS INCOME FROM HOUSE PROPERTY INCOME FROM OTHER SOURCES GROSS TOTAL INCOME (BUSINESS LOSS) LESS: DEDUCTION U/S.80G DEDUCTION U/S.80IA DEDUCTION U/S.80IB DEDUCTION U/S.80HHC AS GROSS TOTAL INCOME IS NEGATIVE GROSS TOTAL INCOME (BUSINESS LOSS) 35278787 18297193 (81555455) 53575980 1427500 13430259 19972883 NIL (27979475) 1803883 36576 (26139016) 34830642 (26139016) INCOME U/S.115JB (MAT) BUSINESS LOSS AS PER STATEMENT OF INCOME (-)1,40,6 4,789/- ADD: WEALTH TAX PROVISION 5,20,000/- ADD: DISALLOWANCE OF DEDUCTION U/S.80HHC 2,12, 86,243/- BOOK PROFIT RS. 77,41,454/- 7.5% THEREOF 5,80,609 2.5 SURCHARGE 14,515 TOTAL TAX PAYABLE 5,95,124 SINCE THE TOTAL TAX PAYABLE U/S.115JB IS MORE THAN THE TAX PAYABLE UNDER NORMAL PROVISIONS, PROVISIONS OF SECTION 115JB ARE APPLICABLE. ASSESSED ACCORDINGLY U/S.143(3) OF THE I.T ACT 1961 . ISSUED DN AND CHALLAN AFTER CHARGING INTEREST U/S.234B AND 234C A S APPLICABLE. ISSUED ITA NO.2380/AHD /2011 ATUL LTD. ASHOKA CHAMBERS VS. ACIT ASST.YEAR 2004-05 - 4 - NOTICE U/S.274 R.W.S. 271(1)(C) FOR CONCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF THE INCOME. 6. AGAINST THE SAID ORDER APPELLANT PREFERRED FIRST STATUTORY APPEAL BEFORE THE LD. CIT(A) AND APPELLANT HAS ALSO CHALLE NGED THE ACTION OF THE LD. AO IN REOPENING OF THE ASSESSMENT U/S.147 OF TH E ACT. 7. LD. AO HAS ERRED IN LAW AND ON FACTS IN NO ALLOW ING TO REDUCE AN AMOUNT OF RS.7,48,60,059/-, BEING AN AMOUNT WITHDRA WN FROM PROVISION ACCOUNT, FROM THE COMPUTATION TO ARRIVE AT BOOK PRO FIT U/S.115JB OF THE ACT. BUT LD. CIT(A) DISMISSED THE APPEAL OF THE APP ELLANT. 8. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMP UGNED ORDER. LD. DCIT ISSUED A NOTICE U/S.142(1) OF THE INCOME T AX ACT STATING THEREIN THAT REASON OF RE-OPENING OF THE ASSESSMENT WITH FOLLOWING CONTENTS: THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON 30/10/2005 DECLARING TOTAL INCOME OF RS. NIL. THE ASSESSMENT W AS FINALIZED U/S.143(3) ON 14/08/2007 AT RS. NIL. ON VERIFICATIO N OF THE RECORDS. IT IS SEEN THAT THE ASSESSEE HAS REDUCED AMOUNT OF RS.7,4 8,60,059/- OF WAGES REVISION SETTLEMENT AGREEMENT ENTERED AND DEBITED D URING THE YEAR WITHDRAWN FROM PROVISIONS FOR THE PURPOSE OF ARRIVI NG AT BOOK PROFITS. AS PER EXPLANATION TO SUB SECTION (2) OF SEC 115JB THE NET PROFIT SHALL BE REDUCED BY THE AMOUNT WITHDRAWN FROM ANY RESERVE OR PROVISION IF ANY SUCH AMOUNT IS CREDITED TO THE P&L ACCOUNT. IN THE INSTANT CASE, THE AMOUNT OF RS.7,48,60,059/- IS NOT CREDITED TO THE P &L ACCOUNT THEREFORE, IT CANNOT BE REDUCED FROM NET PROFIT FOR THE PURPOSE OF ARRIVING AT THE VALUE OF BOOK PROFIT. IN THE LIGHT OF THE ABOVE FACT, I AM OF THE FIRM BE LIEF THAT THE INCOME TO THE TUNE OF RS.7,48,60,059/- HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE I.T. ACT, 1961. LOOKING AT TH E FACTS, IT IS A FIT CASE OF REOPENING THE ASSESSMENT FOR THE ASSESSMENT YEAR UNDER ITA NO.2380/AHD /2011 ATUL LTD. ASHOKA CHAMBERS VS. ACIT ASST.YEAR 2004-05 - 5 - CONSIDERATION AS PER THE PROVISIONS OF THE SECTION 147 OF THE I.T. ACT, 1961. THEREFORE, A NOTICE U/S.148 OF THE ACT IS BEING ISS UED SEPARATELY. 9. IN THIS CASE APPELLANT CONTENDED THAT AT THE TIM E OF FILING THE RETURN OF INCOME AS WELL AS ORIGINAL ASSESSMENT U/S.143(3) , THE APPELLANT HAD PLACED ON RECORD ANNUAL REPORT, BALANCE SHEET AND P ARTICULARLY AUDIT REPORT U/S.115JB OF THE ACT, WHEREIN THE APPELLANT HAD DECLARED ALL THE BASIC/NECESSARY DETAIL FOR ASSESSMENT AND AS A MATT ER OF FACT, THE LD. AO VERIFIED THE SAME AND COMPLETED ASSESSMENT PROCEEDI NGS ON THE BASIS OF MAT PROVISIONS U/S.115JB OF THE ACT. THEREFORE, AS PER THE PROVISIONS OF SECTION 147 OF THE ACT, ONCE THE ASSESSMENT IS COMP LETED U/S.143(3) OF THE ACT AND THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS FOR ASSESSMENT, NO ASS ESSMENT CAN BE REOPENED BEYOND FOUR YEARS. 10. IT CAN BE SEEN THAT THERE IS NO ALLEGATION BY T HE AO THAT THERE WAS THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY MATERIAL FACTS NECESSARY FOR ASSESSMENT IN THE NOTICE ISSUED U/S.148 OF THE ACT, NO ASSESSMENT CAN BE REOPENED BEYOND PERIOD OF FOUR YE AR. 11. IN SUPPORT OF ITS CONTENTION, THE APPELLANT REL IED UPON THE JURISDICTIONAL GUJARAT HIGH COURT DECISION IN THE C ASE OF SADBHAV ENGINEERING LTD. VS. DCIT BEARING SCA NO.5846 AND 5 847 OF 2010, WHEREIN, IT HAS BEEN HELD THAT IF THERE IS NO FAILU RE ON THE PART OF THE ITA NO.2380/AHD /2011 ATUL LTD. ASHOKA CHAMBERS VS. ACIT ASST.YEAR 2004-05 - 6 - PETITIONER TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS IN THAT CASE REOPENING IS NOT JUSTIFIED. 12. IN THE CASE, IN HAND BEFORE US, WE CAN SEE WAGE REVISION SETTLEMENT ARREARS PROVISION WAS MADE IN THE BOOKS OF ACCOUNTS OF THE COMPANY FOR RS.3,25,63,917/- AND RS.4,22,96,142/- IN F.Y. 2001 -02 AND F.Y. 2002-03 RESPECTIVELY. ALSO WHILE COMPUTING BOOK PROFIT U/S. 115JB THESE AMOUNTS WERE ADDED BACK IN PROFIT AND BOOK PROFIT WAS THUS INCREASED BY ABOVE AMOUNTS IN THOSE YEARS. NOW IN THE F.Y. 2003-04 THE LIABILITY FOR PAYMENT OF WAGE REVISION WAS CRYSTALLIZED AND WITHD RAWN FROM THE PROVISION MADE. THEREFORE THE AMOUNT OF RS.7,48,60, 059/- WAS REDUCED FROM BOOK PROFIT F.Y. 2003-04 SAME IS PART OF PAPER BOOK AT PAGE NOS.4, 10, 14, 17 & 43. 13. ON THE OTHER HAND LD. DR RELIED ON IMPUGNED ORD ER AND LD. AR ALSO CITED AN ORDER OF GUJARAT HIGH COURT IN THE CA SE OF KANAK FABRIC VS. ITO, HEAD NOTE OF THE SAME IS HERE ASUNDER: SECTION 147 OF THE INCOME-TAX ACT, 1961 - INCOME E SCAPING ASSESSMENT - NON-DISCLOSURE OF PRIMARY FACTS (GENERAL PRINCIPL ES) - ASSESSMENT YEAR 1989-90 - ON PERUSAL OF REASONS RECORDED IT SH OWED THAT THERE WAS NOT EVEN A WHISPER TO EFFECT THAT INCOME HAD ESCAPE D ASSESSMENT ON ACCOUNT OF ANY FAILURE ON PART OF ASSESSEE TO DISCL OSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT - EVEN IN AFFIDAVIT-IN-REPLY FILED BY REVENUE, THERE WAS NO ALLEGATION OF ANY SU CH FAILURE ON PART OF ASSESSEE - WHETHER IN ABSENCE OF ANY SATISFACTION R ECORDED BY ASSESSING OFFICER, ASSUMPTION OF JURISDICTION UNDER SECTION 1 47 WAS INVALID AND CONSEQUENTLY, NOTICE ISSUED UNDER SECTION 148 COULD NOT BE SUSTAINED - HELD, YES [PARA 7] [IN FAVOUR OF ASSESSEE] ITA NO.2380/AHD /2011 ATUL LTD. ASHOKA CHAMBERS VS. ACIT ASST.YEAR 2004-05 - 7 - 14. ON THE OTHER HAND LEARNED AR ALSO CITED AN ORDE R IN THE MATTER OF GUJARAT LEASE FINANCING LTD. VS. DCIT, IN THIS CASE IT HAS BEEN HELD: SECTION 115JB, READ WITH SECTION 147, OF THE INCOM E-TAX ACT, 1961 - MINIMUM ALTERNATE TAX [REASSESSMENT] - ASSESSMENT Y EAR 2005-06 - FOR ASSESSMENT YEAR 2005-06, ASSESSING OFFICER AFTER SC RUTINY COMPLETED ASSESSMENT OF ASSESSEE UNDER SECTION 143(3) ON 28-1 1-2007 - SUBSEQUENTLY HE ISSUED ON ASSESSEE A NOTICE UNDER S ECTION 148 ON 10-2- 2013 SEEKING TO REOPEN SAID ASSESSMENT UNDER SECTIO N 147 - HE RECORDED REASONS TO EFFECT THAT BOOK PROFIT OF ASSE SSEE WAS UNDER ASSESSED - IN REASONS RECORDED THERE WAS NO MENTION AT ALL OF ASSESSEE HAVING NOT DISCLOSED FULLY OR TRULY MATERIAL FACTS WHICH WERE NECESSARY FOR PURPOSE OF COMPUTING INCOME -ASSESSING OFFICER ALSO FAILED TO POINT OUT AS TO IN WHAT MANNER THERE HAD BEEN NONDISCLOSU RE ON PART OF ASSESSEE - WHETHER FACTS AND CIRCUMSTANCE OF CASE W OULD SHOW THAT ASSESSEE HAD DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS WHICH WERE NECESSARY FOR DETERMINING TAX LIABILITY AT TIME OF ORIGINAL ASSESSMENT - HELD, YES - WHETHER SINCE NO NEW MATERIAL HAD COME ON RECORD, NOR IT WAS CASE OF ASSESSING OFFICER THAT FACTS REVEALED B EFORE HIM WERE NOT PRIMARY OR MATERIAL FACTS, NOTICE FOR REASSESSMENT LACKED VALIDITY - HELD, YES - WHETHER, THEREFORE, IMPUGNED NOTICE WAS LIABLE TO BE QUASHED TOGETHER WITH SUBSEQUENT PROCEEDINGS - HELD , YES [PARAS 17 AND 18] [IN FAVOUR OF ASSESSEE] 15. RESPECTFULLY FOLLOWING THE ABOVE SAID JUDGMENT OF JURISDICTIONAL HIGH COURT AND FACTS OF MATERIAL BEFORE US, WE HOLD THAT RE-OPENING IS NOT SUSTAINABLE IN LAW. 16. IN OUR CONSIDERED OPINION, ASSESSEE HAD DECLARE D ALL THE DETAILS WHICH WERE ASKED BY THE AO IN HIS NOTICE AND NOTICE U/S.148 WAS BEYOND THE PERIOD OF THE FOUR YEARS. SINCE WE HAVE DECIDED THIS LEGAL GROUND IN FAVOUR OF THE APPELLANT THEREFORE, WE DO NOT WANT T O GO INTO MERIT OF THE CASE. ITA NO.2380/AHD /2011 ATUL LTD. ASHOKA CHAMBERS VS. ACIT ASST.YEAR 2004-05 - 8 - 17. IN THE RESULT, APPEAL FILED BY THE APPELLANT IS ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 23 / 0 3 /201 8 SD/- SD/- IZNHI DQEKJ DSFM;K IZNHI DQEKJ DSFM;K IZNHI DQEKJ DSFM;K IZNHI DQEKJ DSFM;K EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN YKS[KK LN YKS[KK LN YKS[KK LN YKS[KK LNL; L; L; L; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; (PRADIP KUMAR KEDIA) (MAHAVIR PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 23/03/2018 PRITI YADAV, SR.PS !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / CONCERNED CIT 4. ) () / THE CIT(A)-VI, AHMEDABAD. 5. ,-. //'( , '(# , 12$&$ / DR, ITAT, AHMEDABAD 6. .34 5 / GUARD FILE. % & / BY ORDER, , / //TRUE COPY// '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION 20/03/2018(DICTATION-PAD 5 PAG ES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 22/03/2018 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER