The ITO, Ward-4(3), Ahmedabad V. M/s. H.K. Finechem Ltd., Ahmedabad

ITA 2558/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6436 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-06-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 07-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAKASH DUBEY
• Keywords: Business income; Depreciation; Reason to believe; Unabsorbed depreciation
• Section: 143(3); 80HHC; 147; 148; 90; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, A BENCH (BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND D.K. TYAGI, JUDICIAL MEMBER) ITA NO.2488/AHD/2009 [ASSTT. YEAR : 2001-2002] H.K. FINECHEM LTD. 201, ANIKET, C.G. ROAD NAVRANGPURA AHMEDABAD 380 009. PAN : AAACH 5113 Q VS. ITO, WARD-4(3) AHMEDABAD. ITA NO.2558 /AHD/2009 WITH CO NO.213/AHD/2009 [ASSTT. YEAR : 2001-2002] ITO, WARD-4(3) AHMEDABAD. VS. H.K. FINECHEM LTD. 201, ANIKET, C.G. ROAD NAVRANGPURA AHMEDABAD 380 009. PAN : AAACH 5113 Q (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SANJAY R. SHAH REVENUE BY : SHRI PRAKASH DUBEY O R D E R PER G.D. AGARWAL, VICE-PRESIDENT : THESE ARE CROSS-APPEALS AND CO BY THE ASSESSEE AGAINST ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-VIII, AHMEDABAD DATED 16.05.20 09 FOR A.Y.2001- 2002. 2. AT THE TIME OF HEARING BEFORE US, IT WAS STATED BY THE LEARNED COUNSEL THAT IN THE CO THE ASSESSEE HAS CHALLENGED THE VALIDITY OF REOPENING OF THE ASSESSMENT UNDER SECTION 147 OF TH E INCOME TAX ACT, ITA NO.2488 AND 2558 /AHD/2009 WITH CO NO.213/AHD/2009 -2- 1961. HE THEREFORE STATED THAT FIRST CO SHOULD BE ADJUDICATED FIRST. THE LEARNED DR HAS NO OBJECTION TO THIS SUBMISSION OF T HE LEARNED COUNSEL. 3. IN THE CO THE ASSESSEE HAS RAISED FOLLOWING GROU NDS: THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN UPHOLDI NG THE ASSESSMENT UNDER SECTION 147 OF THE ACT. IT IS SUB MITTED THAT THE LEARNED AO HAD WRONGLY ASSUMED JURISDICTION U/S.147 OF THE ACT AND ALSO THE PROCEDURE LAID DOWN BY THE HONBLE SUP REME COURT IN THE CSE OF GKN DRIVE SHAFT LTD., 259 ITR 90 WERE AL SO NOT FOLLOWED. 4. AT THE TIME OF HEARING BEFORE US, IT IS SUBMITTE D BY THE LEARNED COUNSEL THAT THE ASSESSMENT YEAR UNDER CONSIDERATIO N IS A.Y.2001-2002. NOTICE UNDER SECTION 148 WAS ISSUED ON 26-3-2007 WH ICH IS OBVIOUSLY AFTER FOUR YEARS FROM THE END OF THE RELEVANT ASSES SMENT YEAR. THE ORIGINAL ASSESSMENT WAS COMPLETED UNDER SECTION 143 (3) OF THE ACT. THEREFORE, AS PER THE PROVISO TO SECTION 147, THE ASSESSMENT CANNOT BE REOPENED UNLESS THE ESCAPEMENT OF INCOME WAS DUE TO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS. THE REASONS RECORDED BY THE AO FOR THE REOPENING WAS PL ACED AT PAGE NO.47 OF THE ASSESSEES PAPER BOOK AND FROM THAT REASONS, IT IS EVIDENT THAT THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCL OSURE FULLY AND TRULY ALL THE MATERIAL FACTS. HE THEREFORE SUBMITTED THAT RE OPENING OF THE ASSESSMENT WAS NOT VALID. IN SUPPORT OF THIS CONTE NTION, HE RELIED UPON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF SADBHAV ENG. LTD., VS. DCIT IN SPL. CA NO.5846, 584 7 OF 2010 DATED 20-7-2010. ITA NO.2488 AND 2558 /AHD/2009 WITH CO NO.213/AHD/2009 -3- 5. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDER OF THE AUTHORITIES BELOW AND HE HAS STATED THAT THE ASSESS EE WRONGLY CLAIMED THE DEDUCTION UNDER SECTION 80HHC BECAUSE AFTER THE CLA IM OF SET OFF OF LOSS AND UNABSORBED DEPRECIATION, THERE WAS NIL INCOME. SO THE QUESTION OF GETTING ANY DEDUCTION UNDER SECTION 80HHC DID NOT A RISE. HE THEREFORE SUBMITTED THAT THE ASSESSEE FAILED TO DISCLOSURE CO RRECT FACTS RELATING TO THE DEDUCTION UNDER SECTION 80HHC. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL PLACED BEFORE US. SECTION 147 AND THE PROVISO THERETO READ AS UNDER: 147. INCOME ESCAPING ASSESSMENT.--IF THE ASSESSING 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 REASSE SS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH H AS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENT LY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, OR RE COMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANC E, AS THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTE R IN THIS SECTION AND IN SECTIONS 148 TO 153 REFERRED TO AS T HE 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, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER T HE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PAR T OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE T O A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECT ION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. ITA NO.2488 AND 2558 /AHD/2009 WITH CO NO.213/AHD/2009 -4- AS PER THE PROVISO, IT IS EVIDENT THAT WHERE THE OR IGINAL ASSESSMENT WAS COMPLETED UNDER SECTION 143(3), NO ACTION UNDER SEC TION 147 CAN BE TAKEN AFTER FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS THE ESCAPEMENT OF INCOME WAS BY REASONS OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSURE ALL MATERIAL FACTS. IN THIS CASE, ADMITTEDLY, THE ASSESSMENT WAS REOPENED AFTER FOUR YEARS FROM THE E ND OF THE RELEVANT ASSESSMENT YEAR AND THE ORIGINAL ASSESSMENT WAS COM PLETED UNDER SECTION 143(3). THEREFORE, THE ASSESSMENT CAN BE REOPENED ONLY IF THERE ARE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSURE F ULLY AND TRULY ALL MATERIAL FACTS. AS PER THE AO, THE CASE WAS REOPENED WITH T HE FOLLOWING REASONS: 2. IN YOUR CASE, THE ASSESSMENT FOR AY 2001-02 HAS BEEN REOPENED WITH REASONS RECORDED THAT THE DEDUCTION U /S.80HHC CLAIM BEFORE SET OFF LOSSES/UNABSORBED DEPRECIATION . AFT4R SET OFF LOSSES/UNABSORBED DEPRECIATION AGAINST THE CURRENT INCOME THERE SHALL NOT BE ANY INCOME I.E., THE GROSS TOTAL INCOM E SHALL BE NIL AND THE YOU WILL NOT GET ANY DEDUCTION U/S.80HHC. T HE CARRY FORWARD LOSSES AND UNABSORBED DEPRECIATION TO BE CA RRIED FORWARD NEXT YEAR SHALL ALSO REDUCED BY AMOUNT OF RS.198759 83/-. ACCORDINGLY, THE AMOUNT OF DEDUCTION U/S./80HHC FRO M MAT INCOME WHICH ALSO REQUIRES BEING WITHDRAWN. FROM THE REASONS RECORDED, IT IS EVIDENT THAT AS PE R THE AO, THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80HHC WRONGLY, WHIC H WAS CLAIMED BEFORE SET OFF OF LOSS/UNABSORBED DEPRECIATION. CO PY OF THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) IS ALSO PLACED AT PAGE NO.55 OF THE ASSESSEES PAPER BOOK AND WE FIND THAT THE AO IN TH E ORIGINAL ORDER PASSED UNDER SECTION 143(3) ON 26-3-2003 DID NOT AL LOW ANY DEDUCTION UNDER SECTION 80HHC WHICH WOULD BE FOUND FROM THE C OMPUTATION OF TOTAL INCOME WHICH IS AS UNDER: ITA NO.2488 AND 2558 /AHD/2009 WITH CO NO.213/AHD/2009 -5- BUSINESS INCOME AS PER STATEMENT OF INCOME RS.3,20, 43,616/- LESS: UNABSORBED LOSSES A.Y.1998-99 RS.77,25,713/- A.Y.1997-98 RS.2,43,17,903/- RS.3,20,43,616/- RS.NIL LESS: DEDUCTION U/S.80HHC (CLAIMED) RS.1,85,03,088/- (AS PER WORKING ABOVE) RS.1,72,13,816/- ALLOWED TO THE EXTENT INCOME AVAILABLE RS.NIL TOTAL INCOME RS.NIL AS PER THE WORKING AS DISCUSSED IN PARAS NO.6 ABOVE THE CARRY FORWARD LOSS ALLOWED IS AS FOLLOWS: CLAIMED (RS.) ALLOWED (RS.) UNABSORBED DEP. A.Y.1997-98 2,66,94,169 81,91,081 UNABSORBED DEP. A.Y.1998-99 3,10,00,197 3,10,00,197 UNABSORBED DEP. A.Y.1999-2000 3,65,444 3,65,444 5,80,59,810 3,95,56,722 WORKING AS PER MAT PROFIT AS PER P& LO A/C. RS.20,816,315/- LESS: DED.U/S.80HHC AS DISCUSSED ABOVE RS.NIL BOOK PROFIT RS.20,816,315/- FROM THE ABOVE, IT IS EVIDENT THAT THE DEDUCTION UN DER SECTION 80HHC WAS NOT ALLOWED EITHER IN THE COMPUTATION OF NORMAL INCOME OR IN THE COMPUTATION OF BOOK PROFIT. MOREOVER, ALL THE FIGU RES OF UNABSORBED DEPRECIATION AS WELL AS UNABSORBED BUSINESS LOSS, I S ALREADY ON THE RECORD OF THE DEPARTMENT, AND THEREFORE, IT CANNOT BE SAID THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSURE FULLY AND TRULY ALL THE MATERIAL FACTS. IN THE REASONS RECORDED, THE AO HAS NOT POI NTED OUT ANY MATERIAL FACT WHICH WAS NOT DISCLOSED BY THE ASSESSEE. AS P ER THE REASONS RECORDED THE ASSESSEE HAS WRONGLY CLAIMED DEDUCTION UNDER SE CTION 80HHC BUT IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) NO DE DUCTION UNDER ITA NO.2488 AND 2558 /AHD/2009 WITH CO NO.213/AHD/2009 -6- SECTION 80HHC WAS ALLOWED. THEREFORE, THERE CANNOT BE SAID TO BE ANY ESCAPEMENT OF INCOME IN THE ORIGINAL ASSESSMENT. I N VIEW OF THE ABOVE, WE ARE OF THE OPINION THAT REOPENING OF THE ASSESSM ENT WAS NOT IN ACCORDANCE WITH LAW. THE SAME IS QUASHED. WHEN TH E REOPENING OF THE ASSESSMENT IS QUASHED, THE RE-ASSESSMENT ORDER DATE D 24-12-2007 PASSED IN PURSUANCE TO REOPENING OF THE ASSESSMENT IS ALSO QUASHED. ITA NO.2488 AND 2558/AHD/2009 7. THESE CROSS APPEALS HAVE ORIGINATED FROM THE ASS ESSMENT ORDER DATED 24-12-2007 PASSED UNDER SECTION 143(3) R.W.S. SECTION 147. WHILE ADJUDICATING THE ASSESSEES CO, WE HAVE ALREADY QUA SHED THE IMPUGNED ASSESSMENT ORDER. SINCE, THE ASSESSMENT ORDER ITSE LF HAS BEEN QUASHED, THE APPEAL WHICH ORIGINATED FROM THE SAID ASSESSMEN T DOES NOT SURVIVE. THEY ARE ALSO DISMISSED BEING INFRUCTOUS. 8. IN THE RESULT, ASSESSEES CO IS ALLOWED WHILE AP PEALS FILED BY THE ASSESSEE AND THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 17 TH JUNE, 2011 SD/- SD/- (D.K. TYAGI) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 17-06-2011 C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT.