DCIT, CHENNAI V. M/s. Schwing Stetter India P. Ltd., Kancheepuram

ITA 24/CHNY/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51712 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 26-07-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 10-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SANTHANAM; PKF SRIDHAR
• Keywords: Reopening of assessment; Difference of opinion; Change of opinion
• Section: 43B; 143(3); 148; 12; 2; 11

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI A BENCH, CHENNAI. BEFORE SHRI.U.B.S. BEDI, J.M. & SHRI. N.S. SAINI, A .M. I.T.A. NOS. 24 AND 25/MDS/2011 ASSESSMENT YEAR: 2001-02 AND 2003-04 THE DEPUTY COMMISSIONER OF INCOME TAX, LARGE TAXPAYER UNIT, CHENNAI 600 101. VS. M/S. SCHWING STETTER INDIA P. LTD., PLOT NO. F 71, SIPCOT INDL. PARK, IRRUNGATTUKOTTAI, SRIPERUMBUDUR, KANCHEEPURAM DISTRICT PIN 602105. [PAN:AADCS5069D] (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SHAJI P. JACOB, SR. DR ASSESSEE BY : M/S. PKF SRIDHAR & SANTHANAM, CA ORDER PER U.B.S. BEDI, J.M. THESE TWO APPEALS OF THE REVENUE ARE DIRECTED AGAIN ST THE ORDER PASSED BY THE LD. CIT(A) LTU, CHENNAI BOTH DATED 16.09.2010 R ELEVANT TO THE ASSESSMENT YEARS 2001-02 AND 2003-04 RESPECTIVELY. 2. BOTH THE APPEALS WERE HEARD TOGETHER AND PERTAI NS TO SAME ASSESSEE, THEREFORE BEING DISPOSED OF BY THIS SINGLE ORDER FO R THE SAKE OF CONVENIENCE. 3. IN ITA NO. 24/MDS/2011 FOR THE ASSESSMENT YEAR 2001-02, THE CHALLENGE IS WITH REGARD TO ACTION OF THE LD. CIT(A) IN HOLDING THAT REOPENING OF THE ASSESSMENT WAS NOT VALID. 4. FACTS INDICATE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF CONCRETE MIXTURES, CONCRETE PUMPS, CONCRETE MIXI NG PLANTS COMPONENTS AND SOFTWARE DEVELOPMENT. IT FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2001-02 ON 29.10.2001 ADMITTING A TOTAL INCOME OF ` .1,36,15,445/-. THE RETURN WAS PROCESSED I II I.T.A. NO .T.A. NO .T.A. NO .T.A. NOS SS S. .. .24 & 25 24 & 25 24 & 25 24 & 25/MDS/1 /MDS/1 /MDS/1 /MDS/11 11 1 2 UNDER SECTION 143(1) ON 02.01.2003 AND SUBSEQUENTLY ASSESSMENT UNDER SECTION 143(3) WAS MADE ON 31.03.2004 DETERMINING TOTAL INC OME AT ` .1,40,40,250/-. SINCE THE INCOME HAD ESCAPED ASSESSMENT, A NOTICE UNDER S ECTION 148 WAS ISSUED ON 28.03.2008. AFTER HEARING THE ASSESSEE, THE AO MADE ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 OF THE ACT ON 30.12.2009 DETERMIN ING THE TOTAL INCOME AT ` .1,63,00,520/-. 5. THE ASSESSEE TOOK UP THE MATTER IN APPEAL AND C HALLENGED THE REOPENING OF ASSESSMENT AS WELL AS ADDITION ON MERITS AND WITH R EGARD TO VALIDITY OF JURISDICTION UNDER SECTION 147, THE ASSESSING OFFICER STATED THA T SINCE THE INCOME HAS ESCAPED ASSESSMENT, A NOTICE UNDER SECTION 148 WAS ISSUED O N 28.03.2008. IN RESPONSE TO WHICH, THE ASSESSEE FILED A LETTER DATED 16.04.2008 REQUESTING THE ASSESSING OFFICER TO TREAT THE ORIGINAL RETURN FILED IN RESPO NSE TO NOTICE ISSUED UNDER SECTION 148. THEREAFTER, NOTICE UNDER SECTION 143(2) WAS IS SUED ON 23.05.2008. THE CASE WAS HEARD WHEN THE LD. AR OF THE ASSESSEE COULD PRO DUCE THE DETAILS CALLED FOR AND BASED ON THE DETAILS FILED, THE ASSESSMENT WAS COMPLETED. 6. IN APPEAL PROCEEDINGS, THE ASSESSEE FILED FOLLO WING WRITTEN SUBMISSIONS: A. THE ASSESSMENT WAS REOPENED AFTER A LAPSE OF F OUR YEARS FROM THE END OF THE ASSESSMENT YEAR VIDE NOTICE U/S 148 OF T HE ACT, DATED 28 TH MARCH, 2008. THE APPELLANT HUMBLY SUBMITS THAT THE INITIAL ASSESSMENT BY THE LEARNED AO WAS COMPLETED AFTER OBTAINING ALL DETAIL S REQUIRED FOR THE PURPOSE OF ASSESSMENT. HENCE, THE ASSESSMENT CANNOT BE REOPENED. B. IN THIS REGARD, THE APPELLANT RELATES TO THE DE CISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. CHOLAMANDALAM INVE STMENT AND FINANCE COMPANY LIMITED 209 ITR 110 AND CASE OF CIT V. TAMI L NADU TRANSPORT DEVELOPMENT FINANCE CORPORATION LIMITED 306 ITR 136 . C. THE ASSESSMENT HAVING BEEN COMPLETED UNDER SCRU TINY U/S 143(3), ANY FURTHER REOPENING WOULD AMOUNT TO ONLY A CHANGE OF OPINION. I II I.T.A. NO .T.A. NO .T.A. NO .T.A. NOS SS S. .. .24 & 25 24 & 25 24 & 25 24 & 25/MDS/1 /MDS/1 /MDS/1 /MDS/11 11 1 3 D. DETAILS WITH RESPECT TO MODVAT WORKING WAS SPEC IFICALLY GIVEN IN ANNEXURE 1(A) TO THE TAX AUDIT REPORT, WHICH IS INT ENDED EXCLUSIVELY FOR THE PURPOSE OF SCRUTINY AND ASSESSMENT PROCEEDINGS. E. THE SUPREME COURT OF INDIA IN THE CASE OF CIT V . KELVINATOR OF INDIA LTD. CIVIL-2010-TIOL-06-SC-IT-LB HELD THAT IT WAS N OT OPEN TO THE ASSESSING OFFICER TO REVIEW HIS OWN DECISION AS LEARNED ASSES SING OFFICER HAS NOT DEMONSTRATED ANY FRESH MATERIAL THAT HAS BEEN RECEI VED AFTER COMPLETION OF ASSESSMENT. IT IS SUBMITTED THAT THE ABOVE RE-OPENING OF ASSESS MENT BE HELD TO BE WITHOUT JURISDICTION. 7. THE LD. CIT(A), WHILE CONSIDERING AND ACCEPTING THE PLEA OF THE ASSESSEE HAS CONCLUDED TO HOLD THAT REOPENING IS NOT VALID. 8. AGAINST SUCH ACTION OF THE LD. CIT(A), THE DEPA RTMENT HAS COME UP IN APPEAL AND CHALLENGED THE ACTION OF THE LD. CIT(A) IN HOLD ING THAT REOPENING IS NOT VALID. 9. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASS ESSEE SUBMITTED THAT REOPENING IN THIS CASE HAS BEEN DONE BEYOND 4 YEARS OF THE END OF THE ASSESSMENT YEAR WHEN THE ASSESSMENT YEAR INVOLVED I S 2001-02 AND ORIGINAL ASSESSMENT UNDER SECTION 143(3) WAS MADE ON 31.03.2 004 ON THE BASIS OF RETURN FILED BY THE ASSESSEE ON 29.10.2001 WITHOUT PLACING ANY ADDITIONAL MATERIAL OR EVIDENCE ON RECORD. SO, THIS IS A CASE OF CHANGE OF OPINION AND THE LD. CIT(A), WHILE CONSIDERING THIS ASPECT IN THE LIGHT OF VARIO US CASE LAW CITED BY THE ASSESSEE AND INCORPORATED BY THE LD. CIT(A) IN PARA 4.2 OF H IS ORDER HAS RIGHTLY CONCLUDED TO HOLD THAT THE REOPENING IS NOT VALID. SO, MAINLY RE LYING UPON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. CHO LAMANDALAM INVESTMENT AND FINANCE COMPANY LIMITED 309 ITR 110 AND OTHER DECIS IONS AS CITED BEFORE THE LD. CIT(A) AND APPLIED BY HIM, THE ACTION OF THE LD. CI T(A) IS JUSTIFIED AND NEEDS NO INTERFERENCE. IT WAS, THUS PLEADED THAT SINCE THE I SSUE IS BEING COVERED BY THE I II I.T.A. NO .T.A. NO .T.A. NO .T.A. NOS SS S. .. .24 & 25 24 & 25 24 & 25 24 & 25/MDS/1 /MDS/1 /MDS/1 /MDS/11 11 1 4 DECISION OF HONBLE JURISDICTIONAL HIGH COURT, THE APPEAL OF THE DEPARTMENT SHOULD BE DISMISSED. 10. THE LD. DR HAS RELIED UPON THE GROUNDS AS RAIS ED IN THE MEMORANDUM OF APPEAL AND PLEADED FOR REVERSAL OF THE ORDER OF THE LD. CIT(A). 11. WE HAVE HEARD BOTH THE SIDES AND CONSIDERED TH E MATERIAL ON RECORD AND FIND THAT THE RETURN OF INCOME FOR THE YEAR UNDER C ONSIDERATION WAS FILED ON 29.10.2001, WHICH WAS FIRST PROCESSED UNDER SECTION 143(1) ON 02.01.2003 AND SUBSEQUENTLY ASSESSMENT WAS FRAMED UNDER SECTION 14 3(3) ON 31.03.2004, WHEREAS, NOTICE UNDER SECTION 148 WAS ISSUED ON 28. 03.2008, WHICH PERIOD IS BEYOND FOUR YEARS FROM THE END OF ASSESSMENT YEAR A ND NO FRESH MATERIAL OR EVIDENCE IS FOUND TO HAVE COME IN THE POSSESSION OF THE ASSESSING OFFICER WHEN REOPENING WAS DONE TO DISALLOW THE EXCESS CLAIM MAD E BY THE ASSESSEE IN RESPECT OF MODVAT CREDIT AND THE ASSESSEE HAS STATED THAT T HE DETAILS OF MODVAT CREDIT ARE GIVEN IN ANNEXURE 1(A) OF THE TAX AUDIT REPORT. FURTHER, THE ASSESSEE ITSELF IS STATED TO HAVE DISALLOWED THE AMOUNT IN COMPUTING T HE TOTAL INCOME FOR THE YEAR AND FURTHER DISALLOWANCE OF THE SAME AMOUNT, AMOUNT ED TO DUPLICATION OF THE DISALLOWANCE AND OTHERWISE, ALL THE DETAILS REQUIRE D FOR THE ASSESSMENT WERE AVAILABLE ON RECORD AT THE TIME OF PASSING OF THE O RIGINAL ORDER UNDER SECTION 143(3), WHEN DETAILS OF MODVAT WORKING FOR THE PURP OSE OF SECTION 145A WAS PROVIDED BY THE ASSESSEE IN ANNEXURE 1(A) AT POINT NO. 12(B) OF THE RETURN OF INCOME. SO, THE REASSESSMENT PROCEEDING INITIATED I N THE ABSENCE OF ANY FRESH MATERIAL OR EVIDENCE COMING INTO THE POSSESSION OF THE ASSESSING OFFICER HAS RIGHTLY BEEN HELD TO BE MERE CHANGE OF OPINION ON T HE SAME MATERIAL ALREADY ON I II I.T.A. NO .T.A. NO .T.A. NO .T.A. NOS SS S. .. .24 & 25 24 & 25 24 & 25 24 & 25/MDS/1 /MDS/1 /MDS/1 /MDS/11 11 1 5 RECORD AS HELD BY THE HONBLE JURISDICTIONAL HIGH C OURT IN THE CASE OF CIT V. CHOLAMANDALAM INVESTMENT AND FINANCE COMPANY LIMITE D (SUPRA). THEREFORE, IN VIEW OF THE FACTS, CIRCUMSTANCES AND MATERIAL ON RE CORD, WE HOLD THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND THE LD. CIT(A) HAS EXACTLY DID THE SAME THING TO TREAT THE REASSESSMENT TO BE NOT VALI D IN LAW. THEREFORE, WHILE, UPHOLDING THE ORDER OF THE LD. CIT(A), WE DISMISS T HE APPEAL OF THE REVENUE BEING DEVOID OF ANY MERITS. 12. AS REGARDS ITA NO.25/MDS/2011 FOR THE ASSESSME NT YEAR 2003-04 IS CONCERNED, THE DEPARTMENT HAS RAISED FOLLOWING EFFE CTIVE GROUNDS FROM 2.1 TO 2.3 AS UNDER: 2.1 THE LD. CIT(A) HAS ERRED IN ALLOWING THE SUM O F ` .14,21,526/- BEING EXCISE ON WARRANTY AND REPLACEMENTS OUT OF THE DISA LLOWANCE OF ` .40,59,366/-. 2.2 THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT T HE DUTY ELEMENT IN THE WARRANTY AND REPLACEMENT ITEMS CAN BE ALLOWED ONLY SUBJECT TO THE ASSESSEE FULFILLING THE CONDITIONS LAID OUT IN SECT ION 43B OF THE IT ACT. 2.3 HAVING REGARD TO THE DECISION OF THE HONBLE HI GH COURT OF KERALA IN THE CASE OF CIT VS. KERALA SOLVENT EXTRACTION LTD. (306 ITR 54) THE CIT(A) OUGHT TO HAVE SUSTAINED THE DISALLOWANCE TO THE EXT ENT OF ` .14,21,526/-. 13. FACTS IN BRIEF INDICATE THAT THE SCRUTINY ASSE SSMENT OF THE ASSESSEE WAS MADE UNDER SECTION 143(3) ON 24.03.2006 DETERMINING TOTAL INCOME AT ` .2,55,92,113/- AND SINCE INCOME HAD ESCAPED ASSESSM ENT, A NOTICE UNDER SECTION 148 WAS ISSUED ON 28.03.2008. IN RESPONSE TO WHICH, THE ASSESSEE HAS FILED LETTER DATED 16.04.2008 REQUESTING TO TREAT THE REVISED RE TURN FILED ON 04.01.2005 AS RETURN FILED IN RESPONSE TO NOTICE UNDER SECTION 14 8. THE ASSESSEE ASKED FOR REASONS FOR REOPENING, WHICH WERE DULY COMMUNICATED TO THE ASSESSEE AND AFTER I II I.T.A. NO .T.A. NO .T.A. NO .T.A. NOS SS S. .. .24 & 25 24 & 25 24 & 25 24 & 25/MDS/1 /MDS/1 /MDS/1 /MDS/11 11 1 6 DUE NOTICE UNDER SECTION 143(2), ORDER UNDER SECTIO N 143(3) R.W.S. 147 WAS PASSED ON 30.12.2008 DETERMINING THE TOTAL INCOME AT ` .2,96,20,792/- WHEN THE ASSESSING OFFICER MADE DISALLOWANCE OF ` .40,59,366/- BEING EXCESS EXCISE DUTY CLAIM. 14. THE ASSESSEE TOOK UP THE MATTER IN APPEAL AND SUBMITTED BEFORE THE FIRST APPELLATE AUTHORITY THAT THIS AMOUNT OF ` .40,59,336/- COMPRISES OF ` .26,37,840/- AS EXCISE DUTY ON CLOSING FINISHED STOCK AND ` .14,21,526/- AS EXCISE DUTY ON WARRANTY AND REPLACEMENTS AND THE LD. CIT(A) DELETED BOTH TH E ADDITION AS PER PARA 4.2 OF HIS ORDER AND WITH REGARD TO SECOND ITEM OF ADDITIO N, THE LD. CIT(A) HAS HELD AS UNDER: ..AS REGARDS THE REMAINING AMOUNT OF ` .14,21,526/-, BEING EXCISE DUTY ON WARRANTY AND REPLACEMENTS. I AGREE W ITH THE CONTENTION OF THE LD. AR THAT IT IS A COST TO THE COMPANY SINCE IT CA NNOT BE RECOVERED FROM THE CUSTOMERS BUT IS PAYABLE BY THE APPELLANT. THE APPE LLANT IS ALSO NOT ELIGIBLE TO AVAIL INPUT CREDIT ON SUCH EXCISE PAYMENT. IN VI EW OF THE ABOVE FACTS, THE ADDITION MADE BY THE AO IS DELETED. THIS GROUND IS ACCORDINGLY ALLOWED. 15. AGAINST SUCH ORDER OF THE LD. CIT(A), THE DEPAR TMENT HAS COME UP IN APPEAL AND RAISED THE GROUNDS AS INCORPORATED IN THE EARLI ER PART OF THE ORDER. IT WAS SUBMITTED BY THE LD. DR THAT SINCE THE WARRANTY AND REPLACEMENTS ITEMS CAN BE ALLOWED ONLY TO THE ASSESSEE ON FULFILLING THE COND ITIONS LAID OUT UNDER SECTION 43B OF THE ACT AND THIS ASPECT HAS NEITHER BEEN SEEN NO R VERIFIED EITHER BY THE ASSESSING OFFICER OR THE LD. CIT(A). THEREFORE, IN THE INTEREST OF THE JUSTICE, THE ORDER IN RELATION TO DELETION OF THIS ADDITION MAY BE SET ASIDE AND MATTER MAY BE RESTORED BACK ON THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO VERIFY THIS ASPECT AND PASS FRESH ORDER AND TO THIS PLEA OF THE LD. DR, THE LD. AR COULD NOT CONTROVERT, BUT RELIED UPON THE ORDER OF THE LD. CI T(A) IN THIS REGARD TO PLEAD FOR CONFIRMATION OF THE IMPUGNED ORDER. I II I.T.A. NO .T.A. NO .T.A. NO .T.A. NOS SS S. .. .24 & 25 24 & 25 24 & 25 24 & 25/MDS/1 /MDS/1 /MDS/1 /MDS/11 11 1 7 16. WE HAVE HEARD BOTH THE SIDES, CONSIDERED THE M ATERIAL ON RECORD AND FIND THAT IN ORDER TO ALLOW THE SUM OF ` .14,21,526/-, AS CLAIM OF EXCISE DUTY ON WARRANTY AND REPLACEMENTS, IT CAN BE ALLOWED ONLY SUBJECT TO FULFILLING THE CONDITIONS AS LAID DOWN UNDER SECTION 43B AND THIS ASPECT HAS NOT BEEN CONSIDERED BY THE LD. CIT(A). THEREFORE, IN THE INTEREST OF THE JUSTICE AND TO HA VE FAIR PLAY IN THE MATTER, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ASPECT AN D RESTORE THE MATTER BACK ON THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO CONSIDER THE ISSUE AFRESH IN TERMS OF CONDITIONS AS LAID DOWN UNDER SECTION 43B AND PA SS FRESH ORDER AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. WE HOLD AND DIRECT ACC ORDINGLY. 17. AS A RESULT, APPEAL FOR THE ASSESSMENT 2001-02 IN ITA NO. 24/MDS/2011 IS DISMISSED AND APPEAL IN ITA NO. 25/MDS/2011 FOR THE ASSESSMENT YEAR 2003-04 IS ACCEPTED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON 12.08.2011. SD/- SD/- (N.S. SAINI) ACCOUNTANT MEMBER (U.B.S. BEDI) JUDICIAL MEMBER CHENNAI, DATED, THE 12.08.2011 VM/- TO:THE ASSESSEE//A.O./CIT(A)/CIT/D.R.