Appeal details
Counselvise Citation
[2014] 140 COUNSELVISE.COM (IT) 79876 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 5 month(s) 27 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
06-06-2014
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Next Hearing Date
21-03-2014
Assessment Year
2003-2004
Appeal Filed On
10-12-2012
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE: SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO S. 2434 & 2435 / P N/ 20 12 ASSESSMENT YEAR S : 200 3 - 04 & 2005 - 06 PRECISION CAMSH AFTS LIMITED, (FORMERLY KNOWN AS CLANCY PRECISION COMPONENTS PRIVATE LIMITED), E - 102/103, MIDC, AKKALKOT, ROAD, SOLAPUR VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 1, SOLAPUR (APPELLANT) (RESPONDENT) PAN NO. AABCC1368H A SSESSEE BY: SHRI N IKHIL PATHAK/SHRI ADITYA DA S TA N E R EVENUE BY: SMT. M.S. VERMA DATE OF HEARING : 21 - 0 3 - 2014 DATE OF PRONOUNCEMENT : 06 - 0 6 - 2014 ORDER PER R.S . PADVEKAR , JM : - THESE TWO APPEALS BY THE ASSESSEE ARE FILED FOR THE A.YS. 2003 - 04 AND 2005 - 06 , CHALL ENGING THE RESPECTIVE IMPUGNED ORDERS PASSED U/S. 143(3) R.W.S. 147 , A S PER THE DIRECTION S OF THE DISPUTE RESOLUTION PANEL (DRP) - II, MUMBAI PASSED U/S. 144C(5) OF THE INCOME - TAX ACT. 2. WE FIRST TAKE THE ASSESSEES APPEAL FOR THE A.Y. 2003 - 04 BEING ITA NO . 2434/PN/2012. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS IN THE APPEAL: 1. THE LEARNED AO HAS ERRED IN LAW BY REOPENING THE ASSESSMENT PROCEEDINGS BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT. 2. THE LEARNED AO HAS ERRED IN RE - COMPUTING THE DEDUCTION UNDE R SECTION 10B OF THE ACT AFTER SETTING - OFF THE BROUGHT FORWARD BUSINESS LOSS THEREBY AFFECTING THE DEDUCTION UNDER SECTION 10B AND CARRIED 2 ITA NO S . 2434 & 2435/PN/2012, PRECISION CAMSHAFTS LIMI TED, SOLAPUR FORWARD LOSSES. WHILE DOING SO, THE LEARNED AO HAS ERRED BY NOT FOLLOWING THE LAW LAID DOWN BY THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF ACIT VS. YOKOGAWA INDIA LTD & OTHERS (21 TAXMANN.COM 154) AND 3. THE LEARNED JOINT COMMISSIONER OF INCOME - TAX, TRANSFER PRICING OFFICER - II, PUNE ('TPO') HAS ERRED IN LAW AND ON FACTS BY REJECTING LOSS MAKING COMPARABLE COMPANIES AND CONSIDERING ONLY HIGH / SUPERNORMAL PROFIT MAKING COMPANIES AS COMPARABLES FOR ARRIVING AT THE ARMS LENGTH PRICE. 4. THE APPELLANT SHOULD BE GRANTED WORKING CAPITAL ADJUSTMENT WITH RESPECT TO COMPARABLES COMPANIES. 5. EACH ONE OF THE ABOVE GROUNDS OF APPEAL IS WITHOUT PREJUDICE TO THE OTHER. 3. THE ASSESSEE HAS CHALLENGED THE NOTICE ISSUED BY THE ASSESSING OFFICER U/S. 148 OF THE ACT BY TAKING THE PLEA THAT THE RE - OPENING OF THE ASSESSMENT FOR THE A.Y. 2003 - 04 IS BAD IN LAW. THE FACTS WHICH ARE REVEALED FROM THE RECORD AS UNDER. THE ASSESSEE COMPANY IS A 100% EXPORT ORIENTED UNIT (EOU) ENGAGED IN THE MANUFACTURING OF CAMSHAFT CASTINGS, WHICH IS REQUIRED FOR THE AUTOMOBILE ENGINES. THE ASSESSEE FILED THE RETURN OF INCOME U/S. 139(1) OF THE ACT FOR THE A.Y. 20 03 - 04 CLAIMING THE EXEMPTION/DEDUCTION U/S. 10B OF THE INCOME - TAX ACT TO THE EXTENT OF RS.50,19,404/ - . THE ASSESSEES CASE WAS SELECTED FOR THE SCRUTINY AND ASSESSMENT HAS BEEN COMPLETED U/S. 143(3) OF THE INCOME - TAX ACT VIDE ASSESSMENT ORDER DATED 22 - 11 - 2005. THE ASSESSEE HAS ALSO SHOWN THE BOOK PROFIT AS PER THE PROVISION OF THE SEC. 115JB OF THE ACT AT RS.21,86,671/ - . AFTER EXAMINING THE CLAIM OF THE ASSESSEE U/S. 10B , THE ASSESSING OFFICER COMPLETED THE ASSESSMENT BY ALLOWING THE ASSESSEES CLAIM AT RS.47,48,339/ - . AS PER THE WORKING GIVEN ON PAGE NO. 5 OF THE ORIGINAL ASSESSMENT ORDER I.E. ORDER U/S. 143(3) , THERE IS UNABSORBED BUSINESS LOSS OF RS.65,33,600/ - PERTAINING TO THE EARLIER YEAR WHICH IS BROUGHT FORWARD AND THE UNABSORBED DEPRECIATION TO THE EXTENT OF 3 ITA NO S . 2434 & 2435/PN/2012, PRECISION CAMSHAFTS LIMI TED, SOLAPUR RS.2,43,95,572/ - WHICH ARE ALLOWED TO BE CARRIED FORWARD IN THE SAME ASSESSMENT ORDER. FOR THE PURPOSE OF WORKING OUT OF THE CLAIM OF THE ASSESSEE U/S. 10B , THE ASSESSING OFFICER DID THE EXERCISE BY RE - CASTING THE PROFIT AT RS.52,75,932/ - AN D ALLOWED THE DEDUCTION TO THE EXTENT OF 90% OF THE SAID PROFIT U/S. 10B. SUBSEQUENTLY THE ASSESSING OFFICER INITIATED THE PROCEEDINGS U/S. 147 OF THE ACT AND ISSUED NOTICE TO THE ASSESSEE U/S. 148 OF THE ACT DATED 09 - 03 - 2010 , REQUIRING THE ASSESSEE TO FI LE THE RETURN OF INCOME WITHIN 30 DAYS FROM THE DATE OF SERVICE OF THE SAID NOTICE. THE ASSESSING OFFICER FURNISHED THE REASONS TO THE ASSESSEE FOR ISSUING THE NOTICE U/S. 147 OF THE ACT DATED 07 - 01 - 2010 WHICH ARE AS UNDER: 2. ON GOING THROUGH THE REASON S RECORDED BY THE AO, IT IS SEEN THAT THE ASSESSMENT FOR A. Y. 2003 - 04 WAS COMPLETED U/S. 143(3) ON 22/11/2009. THE ASSESSEE COMPANY HAS SHOWN NET PROFIT OF RS.6,36,343/ - AFTER MAKING ADJUSTMENT FOR DISALLOWABLE AND ALLOWABLE ITEMS AND THIS PROFIT WAS ARRI VED AT AFTER CLAIMING DEDUCTION U/S. 10B AT RS.50,19,404/ - . THE B/F LOSSES ARE SET OFF FROM THE PROFIT SO ARRIVED. HOWEVER, IN VIEW OF AMENDMENT W.E.F. A. Y. 2001 - 02, THE DEDUCTION U/S. 10B HAS TO BE ALLOWED AFTER COMPUTING TOTAL INCOME OF THE ASSESSEE. I N SHORT, THE CORRECT TOTAL INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION IS TO BE DETERMINED NITER GIVING EFFECT TO B/F DEPRECIATION AND UNABSORBED LOSSES OF EARLIER YEARS. 3. WHILE COMPLETING THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATION, DEDU CTION U/S. 10B WAS ALLOWED AT RS.47,48,399/ - BEFORE SETTING OFF OF B/F LOSSES WHICH HAS RESULTED IN EXCESS C/F OF UNABSORBED LOSS. IN VIEW OF THIS, THE AO HAS REASON TO BELIEVE THAT THERE IS AN .ESCAPEMENT OF INCOME TO THE EXTENT OF RS.47,48,399/ - ON ACCOU NT OF C /F UNABSORBED LOSSES OF EARLIER YEARS WITHIN THE MEANING OF SECTION 147 OF ACT. 4. THE ASSESSEE RESISTED THE ACTION OF THE ASSESSING OFFICER FOR ISSUING THE NOTICE U/S. 148 OF THE ACT BY TAKING THE PLEA THAT THE RE - ASSESSMENT PROCEEDINGS IS INITI ATED AFTER 4 YEARS FROM THE END OF THE A.Y. 2003 - 04 4 ITA NO S . 2434 & 2435/PN/2012, PRECISION CAMSHAFTS LIMI TED, SOLAPUR AND AS THE ASSESSEE S REGULARLY ASSESSMENT HAS BEEN COMPLETED U/S. 143(3) OF THE ACT , T HERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ANY MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. THE ASS ESSEE ALSO RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR (INDIA) LTD. 187 TAXMAN 312 (SC). THE ASSESSEE ALSO PLEADED THAT THE RE - OPENING IS BASED MERELY ON THE CHA N GE OF THE OPINION AS THE CLAIM OF THE ASSESSEE U/S. 10B HAS BEEN EXAMINED BY THE ASSESSING OFFICER IN DETAIL WHILE PASSING REGULAR ASSESSMENT ORDER U/S. 143(3). THE ASSESSEE ALSO FILED THE OBJECTIONS BEFORE THE DRP - II, MUMBAI BUT WITHOUT FAIL. DRP DISPOSED OF THE OBJECTION OF THE ASSESSEE ON THE ISSUE OF VALIDITY OF THE NOTICE U/S. 148 BY REJECTING THE SAME . ON THE BASIS OF THE DIRECTIONS OF THE DRP - II, MUMBAI , THE ASSESSING OFFICER COMPLETED THE ASSESSMENT OF THE ASSESSEE U/S. 143(3) R.W.S. 147 OF THE ACT . I N ADDITION TO EXAMINE THE CLAIM OF THE ASSESS EE U/S. 10B , T HE ASSESSING OFFICER ALSO MADE CERTAIN ADDITIONS IN RESPECT OF THE TRANSFER PRICING. WHILE COMPLETING THE ASSESSMENT , THE ASSESSING OFFICER SET OFF THE BROUGHT FORWARD BUSINESS LOSS FOR THE A.Y. 2001 - 02 TO THE EXTENT OF RS. 71,39,824/ - AND BR OUGHT FORWARD UNABSORBED DEPRECIATION TO THE EXTENT OF RS.1,34,26,923/ - AND DETERMINED TOTAL INCOME AT RS. NIL. THE ASSESSING OFFICER ALSO DISALLOWED THE CLAIM OF EXEMPTION TO THE ASSESSEE U/S. 10B OF THE ACT. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LD. COUNSEL SUBMITS THAT IN THE ORIGINAL ASSESSMENT FRAMED U/S. 143(3) OF THE ACT FOR THE A.Y. 2003 - 04 , THE ASSESSING OFFICER HAS EXAMINED THE CLAIM OF EXEMPTION/DEDUCTION U/S. 10B OF THE ACT. HE SUBMITS THAT THE NOTICE WAS ISSUED ONLY ON THE REASON THAT THE ASSESSING OFFICER FAIL TO SET OFF BROUGHT FORWARD BUSINESS LOSS AND BROUGHT FORWARD UNABSORBED DEPRECIATION PERTAINING TO THE A.Y. 2001 - 02. HE ARGUES THAT ONCE THE ASSESSMENT IS COMPLETED U/S. 143(3) OF THE ACT THEN THE ASSESSEE GETS THE PROTECTI ON OF THE PROVISO TO SEC. 147 AND UNLESS THE 5 ITA NO S . 2434 & 2435/PN/2012, PRECISION CAMSHAFTS LIMI TED, SOLAPUR ASSESSING OFFICER DEMONSTRATE THAT THERE IS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL THE MATERIAL FACTS NECESSARY FOR THE ASSESSMENT , THEN ONLY THE ASSESSING OFFICER HAS JURISDICTION TO ISSUE THE NO TICE U/S. 148 OF THE ACT. HE ARGUES THAT THERE IS NO EVEN A WHISPER IN THE REASONS RECORDED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS FAILED TO DISCLOSE ANY MATERIAL FACT FOR COMPLETION OF THE ASSESSMENT. HE REFERRED TO THE ASSESSMENT ORDER PASSED U /S. 143(3) OF THE ACT, COPY PLACED AT PAGE NOS. 16 TO 21 OF THE COMPILATION AND POINTED OUT THAT THE ASSESSING OFFICER HAS ONLY DISCUSSED THE ISSUE IN RESPECT OF THE COMPUTATION OF EXEMPTION U/S. 10B OF THE ACT. THE ASSESSING OFFICER HAS APPLIED HIS FULL MIND. HE ALSO REFERRED TO THE BOTTOM OF THE ASSESSMENT ORDER PASSED U/S. 143(3) OF THE ACT AND SUBMITS THAT THE ASSESSING OFFICER HAS CONSIDERED THAT THERE WAS A BROUGHT FORWARD BUSINESS LOSS AS WELL AS UNABSORBED DEPRECIATION AND BY THE SPECIFIC ORDER HE ALLOWED THE SAME TO BE CARRY FORWARD. HE ARGUES THAT SEC. 147 OF THE ACT HAS UNDERGONE JUDICIAL INTERPRETATION IN THE PLETHORA OF THE DECISIONS AND LAW IS WELL SETTLED THAT UNLESS THERE MUST BE SPECIFIC CHARGE AGAINST THE ASSESSEE THAT THERE IS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY MATERIAL FACTS NECESSARY FOR THE ASSESSMENT IN CASE WHERE THE ASSESSMENT HAS BEEN COMPLETED U/S. 143(3) OF THE ACT AND NOTICE U/S. 148 OF THE ACT IS ISSUED AFTER THE PERIOD OF 4 YEARS FROM THE END OF THE ASSESSMENT YEAR. THE LD. COUNSEL PLACED HIS RELIANCE ON THE FOLLOWING PRECEDENTS: I. TITANOR COMPONENTS LTD. VS. ACIT, 343 ITR 183 (BOM) II. BHAVESH DEVELOPERS VS. ASSESSING OFFICER 188 TAXMAN 123 (BOM) I II . LOK HOUSING AND CONSTRUCTION LTD. VS. DCI T 246 CTR 213 (BOM) I V. INDIAN OIL CORPORATION VS. DCIT 327 ITR 272 (BOM) V. ALFA LAVAL (INDIA) LTD. VS. DCIT ITA NO. 1499/PN/2012 ORDER DATED 16 - 12 - 2013. 6 ITA NO S . 2434 & 2435/PN/2012, PRECISION CAMSHAFTS LIMI TED, SOLAPUR 6. SO FAR AS THE ISSUE ON THE MERIT IS CONCERNED THE LD. COUNSEL SUBMITS THAT ON MERIT ITSELF THE ISS UE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. BLACK & VEATCH CONSULTING (P) LTD. 48 ITR 72 (BOM). HE SUBMITS THAT THE DECISION IN THE CASE OF BLACK & VEATCH CONSULTING (P) LTD. (SUPRA) HAS RENDERED IN THE CONTEXT OF SEC. 10A OF THE ACT BUT AS THE PROVISIONS OF SEC. 10B ARE PARI MATERIA THE PRINCIPLES LAID DOWN IN THE DECISIONS ARE EQUALLY APPLICABLE TO THE DEDUCTION CLAIMED U/S. 10B. PER CONTRA, THE LD. DR SUPPORTED THE ORDER OF THE AUT HORITIES BELOW. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. THE FACTS PERTAINING TO THE CONTROVERSY ARE ALREADY NARRATED IN DETAIL. THE ASSESSEE HAS FILED THE COPY OF THE REASONS RECORDED BY THE ASSESSING OFFICER AT P AGE NO. 24 OF THE COMPILATION FOR THE A.Y. 2003 - 04 WHICH ARE ALREADY REPRODUCED HERE - IN - ABOVE. IN THIS CASE THERE IS NO DISPUTE THAT THE ORIGINAL ASSESSMENT OF THE ASSESSEE HAS BEEN COMPLETED U/S. 143(3) OF THE ACT AND THE ASSESSING OFFICER ISSUED THE NOT ICE U/S. 148 OF THE ACT ON 09 - 03 - 2010 WHICH IS ADMITTEDLY BEYOND THE PERIOD OF 4 YEARS FROM THE END OF THE RESPECTIVE ASSESSMENT YEAR. THE RELEVANT PART OF THE SEC. 147 AND PROVISO AS APPLICABLE TO THE A.Y. 2003 - 04 IS AS UNDER: SEC. 147 : I F THE ASSESSIN G OFFICER [HAS REASON TO BELIEVE] THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153 , ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF TH E PROCEEDINGS UNDER THIS SECTION, OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED HEREAFTER IN THIS SECTION AND IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR : PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB - SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, 7 ITA NO S . 2434 & 2435/PN/2012, PRECISION CAMSHAFTS LIMI TED, SOLAPUR NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSM ENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER S ECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB - SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THAT ASSESSMENT YEAR: PROVISO 8. ON PERUSAL OF THE REASONS RECORDED BY THE ASSESSING OFFICER BEFORE ISSUING THE NOTICE U/S. 14 8, IT IS SEE N THAT ONLY APPREHENSION OF THE ASSESSING OFFICER IS THAT THE DEDUCTION U/S. 1 0B WAS NOT PROPERLY COMPUTED BY THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT ORDER AS BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION WAS NOT SET OFF. THERE IS NO SPECIFI C CHARGE IN THE REASONS THAT THERE IS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR THE COMPLETION OF THE ASSESSMENT . ON EXAMINING THE ORIGINAL ASSESSMENT ORDER PASSED U/S. 143(3) , WITH NO STRETCH O F IMAGINATION IT CAN BE SAID THAT THE FACTS WERE NOT AVAILABLE ON RECORD. AS PER THE COMPUTATION MADE IN THE ORIGINAL ASSESSMENT ORDER , THE ASSESSING OFFICER HAS ALLOWED TO CARRY FORWARD UNABSORBED BUSINESS LOSS AND UNABSORBED DEPRECIATION TO THE SUBSEQUE NT YEARS. IT IS ALSO SEEN THAT THE ASSESSING OFFICER HAS RE - CAST ED THE ELIGIBLE PROFIT AND ACCORDINGLY, ALLOWED THE DEDUCTION TO THE ASSESSEE. PROVISO TO SEC. 147 GIVES PROTECTION TO THE ASSESSE IN THE CASE WHERE THE REGULAR ASSESSMENT HAS BEEN MADE U/S. 143(3) OF THE ACT AND 4 YEARS HAVE PASSED AND THE ASSESSING OFFICER INITIATE S THE PROCEEDINGS U/S. 147 AND ISSUE S THE NOTICE U/S. 148. IN SUCH A SITUATION THERE IS FITTER ON THE POWER OF THE ASSESSING OFFICER TO PROCEED U/S. 147 UNLESS THE CONDITIONS MEN TIONED IN PROVISO TO SEC. 147 ARE COMPLIED WITH. 8 ITA NO S . 2434 & 2435/PN/2012, PRECISION CAMSHAFTS LIMI TED, SOLAPUR 9. THE DECISION OF THE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF TITANOR COMPONENTS LTD. (SUPRA) HAS BEEN CONSIDERED BY THE ITAT, A BENCH, PUNE IN THE CASE OF ALFA LAVAL (INDIA) LTD. (SUPRA) AND THE REL EVANT PART OF THE DISCUSSION IS AS UNDER: 6. NOW, THE FIRST POINT MADE BY THE ASSESSEE IS THAT THE ASSESSMENT HAS BEEN REOPENED AFTER A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND THE ORIGINAL ASSESSMENT WAS MADE U/S 143(3) OF TH E ACT AND THEREFORE, THE PRESCRIPTION OF THE FIRST PROVISO TO SECTION 147 OF THE ACT APPLIES. IT IS SOUGHT TO BE MADE OUT THAT IN TERMS OF THE FIRST PROVISO TO SECTION 147 OF THE ACT, THE ASSESSING OFFICER IS REQUIRED TO MAKE OUT A CASE IN THE REASONS REC ORDED AS TO WHETHER THERE IS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. IT IS POINTED OUT THAT THE ASSESSING OFFICER COULD HAVE PROCEEDED TO REOPEN THE ASSESSMENT ONLY AFTER RECORDING THE AFORESAID AND FOR HIS FAILURE TO DO SO, THE INITIATION OF PROCEEDINGS U/S 147 OF THE ACT ARE RENDERED NUGATORY. IN SUPPORT OF THE AFORESAID PROPOSITION, RELIANCE HAS BEEN PLACED ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF TITANOR COMP ONENTS LTD. VS. ACIT, (2012) 343 ITR 183 (BOM). 7. IN THE ABOVE CONTEXT, WE HAVE PERUSED THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF TITANOR COMPONENTS LTD. (SUPRA). IN THE CASE BEFORE THE HONBLE HIGH COURT, NOTICE WAS ISSUED U/S 148 O F THE ACT FOR REOPENING AN ASSESSMENT BEYOND THE PERIOD OF FOUR YEARS AND THE INCOME OF THE ASSESSEE WAS ORIGINALLY ASSESSED BY WAY OF AN ORDER U/S 143(3) OF THE ACT. CONSIDERING A SIMILAR ARGUMENT AS IS BEING MADE BEFORE US, THE HONBLE HIGH COURT HELD A S UNDER : - HAVING REGARD TO THE PURPOSE OF THE SECTION, WE ARE OF THE VIEW THAT THE POWER CONFERRED BY S. 147 DOES NOT PROVIDE A FRESH OPPORTUNITY TO THE AO TO CORRECT AN INCORRECT ASSESSMENT MADE EARLIER UNLESS THE MISTAKE IN THE ASSESSMENT SO MADE IS T HE RESULT OF A FAILURE OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. INDEED, WHERE THE ASSESSEE HAS FULLY DISCLOSED 9 ITA NO S . 2434 & 2435/PN/2012, PRECISION CAMSHAFTS LIMI TED, SOLAPUR ALL THE MATERIAL FACTS, IT IS NOT OPEN FOR THE AO TO REOPEN THE ASSESSMENT ON THE GROUND THAT TH ERE IS A MISTAKE IN ASSESSMENT. MOREOVER, IT IS NECESSARY FOR THE AO TO FIRST OBSERVE WHETHER THERE IS A FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT AND HAVING OBSERVED THAT THERE IS SUCH A FAILURE TO PROCEED UNDER S. 1 47. IT MUST FOLLOW THAT WHERE THE AO DOES NOT RECORD SUCH A FAILURE HE WOULD NOT BE ENTITLED TO PROCEED UNDER S. 147. AS OBSERVED EARLIER, THE AO HAS NOT RECORDED THE FAILURE ON THE PART OF THE PETITIONER TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS NE CESSARY FOR THE ASST. YR. 1997 - 98. WHAT IS RECORDED IS THAT THE PETITIONER HAS WRONGLY CLAIMED CERTAIN DEDUCTIONS WHICH HE WAS NOT ENTITLED TO. THERE IS A WELL KNOWN DIFFERENCE BETWEEN A WRONG CLAIM MADE BY AN ASSESSEE AFTER DISCLOSING ALL THE TRUE AND M ATERIAL FACTS AND A WRONG CLAIM MADE BY THE ASSESSEE BY WITHHOLDING THE MATERIAL FACTS FULLY AND TRULY. IT IS ONLY IN THE LATTER CASE THAT THE AO WOULD BE ENTITLED TO PROCEED UNDER S. 147. WE ARE SUPPORTED IN THIS VIEW BY A DECISION OF A DIVISION BENCH O F THIS COURT IN HINDUSTAN LEVER LTD. VS. R.B. WADKAR, ASSTT. CIT (2004) 190 CTR (BOM) 166 : (2004) 268 ITR 332 (BOM) WHERE IN A SIMILAR CASE THE DIVISION BENCH HELD THAT REASON THAT THERE WAS A FAILURE TO DISCLOSE FULLY AND TRULY THAT ALL MATERIAL FACTS MU ST BE READ AS RECORDED BY THE AO AND IT WOULD NOT BE PERMISSIBLE TO DELETE OR ADD TO THOSE REASONS AND THAT THE AO MUST BE ABLE TO JUSTIFY THE SAME BASED ON MATERIAL RECORD. THE DIVISION BENCH OBSERVED AS FOLLOWS : HE MUST DISCLOSE IN THE REASONS AS TO W HICH FACT OR MATERIAL WAS NOT DISCLOSED BY THE ASSESSEE FULLY AND TRULY NECESSARY FOR ASSESSMENT OF THAT ASSESSMENT YEAR, SO AS TO ESTABLISH THE VITAL LINK BETWEEN THE REASONS AND EVIDENCE. 5. WE FIND IN THE CIRCUMSTANCES THAT THE IMPUGNED NOTICE IS NOT S USTAINABLE AND IS LIABLE TO BE QUASHED AND SET ASIDE. ACCORDINGLY, THE WRIT PETITION IS ALLOWED IN TERMS OF PRAYER CLS. (A) AND (C). 8. OSTENSIBLY, THE HONBLE HIGH COURT OBSERVED THAT THE ASSESSING OFFICER DID NOT RECORD THAT THERE WAS FAILURE ON THE P ART OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS NECESSARY 10 ITA NO S . 2434 & 2435/PN/2012, PRECISION CAMSHAFTS LIMI TED, SOLAPUR FOR THE ASSESSMENT. WHAT WAS RECORDED IN THE CASE BEFORE THE HONBLE HIGH COURT WAS THAT THE PETITIONER HAD WRONGLY CLAIMED CERTAIN DEDUCTION WHICH HE WAS NOT ENTITLED TO. UNDER THESE CIRCUMSTANCES, THE HONBLE HIGH COURT HELD THAT THE NOTICE U/S 148 OF THE ACT WAS NOT SUSTAINABLE BECAUSE IN THE REASONS RECORDED THERE WAS NO RECORDING BY THE ASSESSING OFFICER TO THE EFFECT THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO D ISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. APPLYING THE AFORESAID PARITY OF REASONING TO THE PRESENT CASE, WE FIND THAT THE REASONS RECORDED, WHICH WE HAVE REPRODUCED IN THE EARLIER PARAGRAPHS, DO NOT CONTAIN ANY AVERMENT BY THE ASSESSING OFFICER THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE ALL MATERIALS FACTS NECESSARY FOR THE ASSESSMENT, MORE PARTICULARLY, WITH REGARD TO THE EXCESS DEDUCTION U/S 80HHC AMOUNTING TO RS.11,32,850/ - . WHAT IS ONLY RECORDED IS THAT ON THE VERIFICATION OF RECORDS IT IS SEEN THAT INCOME BY WAY OF IMPACT ON FINANCIAL ACTIVITY AMOUNTING TO RS.98,43,701/ - IS LIABLE TO BE EXCLUDED FROM THE PROFIT ELIGIBLE FOR DEDUCTION U/S 80HHC OF THE ACT AND FOR THE SAID REASON, T HE ASSESSING OFFICER FORMED A BELIEF THAT THERE WAS AN ESCAPEMENT OF INCOME WITHIN THE MEANING OF SECTION 80HHC OF THE ACT QUA EXCESS DEDUCTION U/S 80HHC OF THE ACT OF RS.11,32,850/ - . IN OUR CONSIDERED OPINION, THE ABSENCE OF ANY AVERMENT IN THE REASONS R ECORDED, AS REQUIRED BY THE FIRST PROVISO TO SECTION 147 OF THE ACT TO THE EFFECT THAT THERE IS FAILURE ON THE PART OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT, RENDERS THE INITIATION OF PROCEEDINGS SUSCEPTIB LE TO A LEGAL INFIRMITY, AS EXPLAINED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF TITANOR COMPONENTS LTD. (SUPRA). THUS, ON THIS ASPECT ITSELF, WE ARE INCLINED TO HOLD THAT INITIATION OF PROCEEDINGS U/S 147 OF THE ACT IN THE PRESENT CASE ARE B AD IN LAW AND CONSEQUENTIAL ASSESSMENT IS LIABLE TO BE ANNULLED. 10. IN THE CASE OF BHAVESH DEVELOPERS (SUPRA) THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF DEVELOPING AND CONSTRUCTING BUILDINGS. THE ASSESSEE WAS ALLOWED DEDUCTION U/S. 80IB(10) IN TH E ASSESSMENT COMPLETED U/S. 143(3) FOR THE RELEVANT ASSESSMENT YEAR. AFTER THE EXPIRY OF FOUR YEARS FROM THE RELEVANT ASSESSMENT YEAR, THE ASSESSING OFFICER ISSUED NOTICE U/S. 148 ON THE GROUND THAT DEDUCTION U/S. 80IB HAD BEEN 11 ITA NO S . 2434 & 2435/PN/2012, PRECISION CAMSHAFTS LIMI TED, SOLAPUR ALLOWED ON CERTAIN INCOMES WHICH DID NOT QUALIFY FOR DEDUCTION AND HENCE, THERE WAS A ESCAPEMENT OF THE INCOME. THE HON'BLE JURISDICTIONAL HIGH COURT QUASH ED THE NOTICE ISSUED BY THE ASSESSING OFFICER U/S. 148 AND HELD THA T THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLO SE FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. THERE IS PLETHORA OF DECISIONS ON THE INTERPRETATION OF PROVISO TO SEC. 147 . A S PER THE FACTS ON RECORD AND AFTER ANXIOUSLY EXAMIN ING THE REASONS RECORDED BY THE ASSESSING OFFICER FO R ISSUING THE NOTICE U/S. 148 OF THE ACT , WE A RE OF THE CONSIDERED OPINION THAT AS THERE IS NO SPECIFIC CHARGE THAT THE ASSESSEE HAS FAILED TO DISCLOSE ALL THE MATERIAL FACTS FOR COMPLETION OF HIS ASSESSMENT , THE NOTICE ISSUED U/S. 148 IS BAD IN LAW. WE, ACCORDINGLY, CANCEL THE SAME AND ALSO CANCEL THE ASSESSMENT ORDER FOR THE A.Y. 2003 - 04 AND ALLOW THE GROUND NO. 1. THE ASSESSEE HAS TAKEN THE GROUNDS ON MERIT BUT AS THE ASSESSEE HAS SUCCEEDED ON THE LEGAL GROUND, WE DO NOT CONSIDER IT NECESSARY TO FURTHE R PROCEED TO EXAMINE THE ISSUE ON MERIT ARISING FROM GROUNDS TAKEN BY THE ASSESSEE. 11. NOW, WE TAKE UP THE ASSESSEES APPEAL FOR THE A.Y. 2005 - 06 BEING ITA NO. 2435/PN/2012. THE ASSESSEE FILED THE REGULAR RETURN OF INCOME ON 26 - 10 - 2005 , DECLARING TOTAL INCOME AT RS. NIL UNDER THE NORMAL PROVISION OF THE ACT. HOWEVER, THE ASSESSEE DECLARED THE INCOME U/S. 115JB AT RS.14,04,489/ - . THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT HAS BEEN COMPLETED U/S. 143(3) OF THE INCOME - TAX ACT. SUBSEQUEN TLY , THE ASSESSING OFFICER ISSUED THE NOTICE U/S. 148 OF THE ACT DATED 18 - 06 - 2010 REQUIRING THE ASSESSEE TO FILE THE RETURN OF INCOME. THE REASONS RECORDED BY THE ASSESSING OFFICER FOR ISSUING THE NOTICE ARE AS U NDER: REASONS FOR RE - OPENING THE ASSESSMEN T U/S. 147 OF THE I.T. ACT, 1961 IN THIS CASE, ASSESSEE HAD CLAIMED EXEMPTION OF RS.83,77,094/ - U/S. 10B OF THE I.T. ACT, 1961 AND THE SAME WAS 12 ITA NO S . 2434 & 2435/PN/2012, PRECISION CAMSHAFTS LIMI TED, SOLAPUR ALLOWED BY THE A.O. U/S. 143(3) PASSED ON 20/12/2007 FOR A.Y. 2005 - 06. IT WAS FURTHER SEEN THAT ASSESSEE WAS HA VING DEPRECIATION LOSS OF RS.2,67,85,710/ - AND BUSINESS LOSS OF RS.65,03,481/ - OF EARLIER YEARS TO BE ADJUSTED. HOWEVER, ASSESSEE HAS CLAIMED EXEMPTION U/S. 10B BEFORE SETTING OFF DEPRECIATION ALLOWANCES AND BUSINESS LOSS. 02. AS PER SECTION 32(2), WHERE IN THE ASSESSMENT OF THE ASSESSEE, FULL EFFECT CANNOT BE GIVEN TO ANY ALLOWANCE U/S.32(L) IN ANY PREVIOUS YEAR OWING TO THERE BEING NO PROFIT OR GAINS CHARGEABLE FOR THE PREVIOUS YEAR OR OWING TO THE PROFIT OR GAINS CHARGEABLE BEING LESS THAN THE ALLOWANC E, THEN SUBJECT TO THE PROVISIONS OF SECTION 72(2) AND SECTION 73(3), THE ALLOWANCE OR THE PART OF THE ALLOWANCE TO WHICH EFFECT HAS NOT BEEN GIVEN AS THE CASE MAY BE, SHALL BE ADDED TO THE AMOUNT OF THE ALLOWANCE FOR DEPRECIATION FOR THE FOLLOWING PREVIOU S YEAR AND DEEMED TO BE THE PART OF THAT ALLOWANCE. 03. IN VIEW OF THE ABOVE DISCUSSION THAT A.O. HAS FAILED TO FOLLOW THE PROVISIONS - OF SECTION 32(2) WHICH HAS RESULTED IN EXCESS DEDUCTION U/S. 10B OF RS.83,77,094/ - AND ALSO FAILED TO COMPLY WITH THE PROV ISIONS OF SECTION 72(2) AND 73(3) AND SET OFF OF LOSS OF RS.23,54,391/ - . THIS CAN BE EXPLAINED AS UNDER: - NET PROFIT AS PER P&L A/C. RS.1,50,22,212/ - ADD: DISALLOWABLE ITEMS, AS PER LIST RS.1,23,10,591/ - LESS: ALLOWABLE RS.1,66,01,318/ - INCOM E RS.1,07,31,485/ - SET OFF OF DEPRECIATION RS.1,07,31,485/ - GROSS TOTAL INCOME RS. NIL 04. THE COMPUTATION AS SHOWN ABOVE CLEARLY SHOWS THAT THE INCOME OF RS.1,07,31,485/ - HAS ESCAPED ASSESSMENT BY WAY OF A.O'S ACTION OF WRONGLY ACCEPTING ASSES SEE'S CLAIM OF EXCESS DEDUCTION OF RS.83,77,094/ - U/S. 10B AND ALLOWING THE SET OFF OF LOSS OF RS.23,54,391/ - . 05. ISSUE NOTICE U/S. 148 ACCORDINGLY. SOLAPUR DATE: 18/06/2010 DCIT, CIR. 1, SOLAPUR 13 ITA NO S . 2434 & 2435/PN/2012, PRECISION CAMSHAFTS LIMI TED, SOLAPUR 12. SUBSEQUENTLY, THE ASSESSMENT HAS BEEN COMPLETED U/S. 143(3) R.W.S. 147 OF THE ACT AS PER THE DIRECTION S ISSUED BY THE DRP U/S. 144C(5) OF THE ACT. THE REASONS GIVEN BY THE ASSESSING OFFICER FOR THE A.Y. 2005 - 06 FOR ISSUING THE NOTICE U/S. 148 ARE IDENTICAL AS IN THE A.Y. 2003 - 04. WE HAVE EXAMINED THE REAS ONS RECORDED BY THE ASSESSING OFFICER FOR A.Y. 2005 - 06 FOR ISSUING NOTICE U/S. 148 OF THE ACT . THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS NOT SET OFF THE UNABSORBED DEPRECIATION BEFORE ALLOWING THE DEDUCTION TO THE ASSESSEE U/S. 10B AND THAT RESULTED IN EXCESS DEDUCTION TO ASSESSEE TO THE EXTENT OF RS.83,77,094/ - . T HE ORIGINAL ASSESSMENT HAS BEEN COMPLETED U/S. 143 (3) VIDE ORDER DATED 28 - 12 - 2007 AND THE NOTICE HAS BEEN ISSUED ON 18 - 06 - 2010. IN THIS CASE ALSO THE ASSESSING OFFICER HAS ISSUED THE NOTICE U/S. 148 AFTER THE EXPIRY OF THE FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR 2005 - 06 AND HENCE, THE ASSESSEE IS PROTECTED BY PROVISO TO SEC. 147 OF THE ACT AS THERE IS NO SPECIFIC CHARGE AGAINST THE ASSESSEE IN THE REASONS RECORDED BY THE AS SESSING OFFICER THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL THE MATERIAL FACTS. IT IS PERTINENT TO NOTE HERE THAT AS PER THE COMPUTATION STATEMENT FILED BY THE ASSESSEE (COPY PLACED AT PAGE NOS. 4 AND 5 OF THE P.B. ) , I T IS SEEN THAT THE ASSESSEE HAS SHOWN THE BROUGHT FORWARD BUSINESS LOSS AS WELL AS DEPRECIATION AND THE BUSINESS LOSS SET OFF DURING THE YEAR. IN OUR CONSIDERED OPINION AS PER THE RECORD PRODUCED BEFORE US , THERE WAS NO FAILURE ON THE PART OF THE ASSE SSEE TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS FOR COMPUTATION OF THE DEDUCTION U/S. 10B OF THE ACT. WE HAVE ALREADY DECIDED THE IDENTICAL ISSUE IN THE ASSESSEES APPEAL FOR THE A.Y. 2003 - 04 AND HAVE CANCELLED THE ASSESSMENT. W E, THEREFORE, FOLL OWING OUR REASONS IN A.Y. 2003 - 04 FOR CANCELLING THE NOTICE U/S. 148, IN THE A.Y. 2005 - 06 ALSO , W E CANCEL THE NOTICE ISSUED BY THE ASSESSING OFFICER U/S. 148 OF THE ACT AND ALSO CANCEL THE ASSESSMENT 14 ITA NO S . 2434 & 2435/PN/2012, PRECISION CAMSHAFTS LIMI TED, SOLAPUR ORDER PASSED BY THE ASSESSING OFFICER IN CON SEQUENCE OF THE NOTICE U/S. 148 OF THE ACT. 13. THE ASSESSEE HAS ALSO TAKEN THE GROUNDS ON MERIT AS THE ASSESSING OFFICER HAS MADE CERTAIN ADDITIONS WHILE COMPLETING THE ASSESSMENT U/S. 143(3) R.W.S. 147 OF THE ACT. AS THE ASSESSEE HAS SUCCEEDED ON THE LEGAL GROUND , WE DO NOT CONSIDER IT NECESSARY TO PROCEED TO ADJUDICATE THE GROUNDS ON MERIT TAKEN BY THE ASSESSEE. 14. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 06 - 0 6 - 2014 PRONOUNCED IN THE OPEN COURT ON - 05 - 2014 SD/ - SD/ - ( R . K . PAN DA ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE , DATED : 06 TH JUNE, 20 1 4 COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE DRP - II, MUMBAI 4 THE DR, ITAT , A BENCH, PUNE. 5 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE
