APAR CHEMATEK LUBRICANTS LIMITED (NOW MERGED WITH APAR INDUSTRIES LIMITED), MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX 14(1)(1), MUMBAI

ITA 257/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5403 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 10-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATISH CHANDRA RAJORE LD
• Assessee Lawyers: MALAV P SHETHLD
• Keywords: Additional evidence; Reason to believe; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . . , , BEFORE HONBLE SHRI C.N. PRASAD, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.257/MUM/2018 ( / ASSESSMENT YEAR: 2009-10) APAR CHEMATECK LUBRICANTS L TD. (NOW MERGED WITH APAR INDUSTRIES LTD) APAR HOUSE, CORPORATE PARK, BUILDING NO.5, SION TROMBAY ROAD, CHEMBUR, MUMBAI-400071 / VS. DCIT - C I RCLE 14(1) ROOM NO.460, AAYKAR BHAVAN, M.K. ROAD MUMBAI 400 020 ./ ./PAN/GIR NO. AAFCA-9468-A ( /APPELLANT ) : ( ! / RESPONDENT ) ASSESSEE BY : SHRI MALAV P. SHETH-LD. AR REVENUE BY : SHRI SATISH CHANDRA RAJORE - LD. DR # $% / DATE OF HEARING : 02/05/2019 # $% / DATE OF PRONOUNCEMENT : 16/05/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2009- 10 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME- TAX (APPEALS)- 22, MUMBAI [CIT(A)], APPEAL NO. CIT(A)22/IT/518/2015-16 D ATED 17/10/2017 ON FOLLOWING GROUNDS OF APPEAL: - 2 1.0 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING INITIATION OF REOPENING PROCEEDINGS UNDER SECTION 148 AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR WITHOUT APPRECIATING THAT REOPENING OF AN ASSESSMENT ALREAD Y COMPLETED U/S 143(3) CANNOT BE MADE WITHOUT ANY ADDITIONAL EVIDENCE LEAD ING TO 'REASON TO BELIEVE' THAT THE INCOME HAS ESCAPED THE ASSESSMENT. THUS RE OPENING BEING BAD IN LAW, THE ASSESSMENT DONE U/S 147 NEEDS TO BE CANCELLED A ND ORIGINAL ASSESSMENT U/S 143(3) NEEDS TO BE RESTORED. 2.0 WITHOUT PREJUDICE TO THE ABOVE AND WITHOUT ADMI TTING, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED C IT(A) ERRED IN NOT APPRECIATING THAT PURCHASE OF GOLD EXPENSE OF RS 72 ,43,375/- NEEDS TO BE ACCRUED AS EXPENSE IN FY 2008-09 SINCE THE RELATED SALES ON WHICH THE DEALERS ARE ELIGIBLE TO GOLD UNDER LOYALTY SCHEMES TOOK PLA CE IN FY 2008-09. ACCORDINGLY, THE LEARNED CIT(A) ERRED IN NOT ALLOWI NG THE SAID EXPENSE IN AY 2009-10. THUS, THE DISALLOWANCE OF THE SAID EXPENSE IN AY 2009-10 BEING BAD- IN-LAW MUST BE DELETED. 3.0 WITHOUT PREJUDICE TO THE ABOVE AND WITHOUT ADMI TTING, ON FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE LEARNED CI T(A) ERRED IN NOT APPRECIATING THAT EVEN IF THE EXPENSE OF RS 72,43,3 75/- IS CONSIDERED AS PERTAINING TO FY 2009-10 INSTEAD OF FY 2008-09, THE N ALSO THERE WILL BE NO INCOME ESCAPEMENT TO TAX IN FY 2008-09 LE AY 2009-1 0 AS IT WILL ONLY RESULT INTO REDUCTION OF BUSINESS LOSS CARRIED FORWARD FROM AY 2009-10 TO AY 2010- 11 AND CORRESPONDING CONTRA INCREASE IN EXPENSES IN AY 201 0-11. THUS, THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT IN THE ABSENC E OF ANY INCOME ESCAPEMENT TO TAX, REOPENING PROCEEDINGS-INITIATED U/S 147 IS BAD-IN-LAW. 4,0 WITHOUT PREJUDICE TO THE ABOVE AND WITHOUT ADMI TTING, ON FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE LEARNED CI T(A) ERRED IN NOT DIRECTING THE LEARNED AO TO ALLOW THE SAID EXPENSE OF RS 72,4 3,375/- IN AY 2010-11 IF NOT ALLOWABLE IN AY 2009-10. THE NAME OF ERSTWHILE ASSESSEE APAR CHEMATEK LUBRICANTS LIMITED HAS BEEN CHANGED TO APAR LUBRICANTS LIMITED VIDE CERTIFICATE OF INCORPORATION PURSUANT TO CHANGE OF NAME ISSUED BY REGISTRAR OF COMPANIES, MUMBAI ON 05/09/2014. THE AFORESAID CHAN GE HAS ALREADY BEEN REFLECTED IN FORM 36. FINDING THE SAME IN ORDER, WE PROCEED TO ADJUDICATE THE APPEAL AS ARGUED BEFORE U S. 2.1 FACTS IN BRIEF ARE THAT THE ASSESSEE BEING RESIDENT CORPORATE ENTITY STATED TO BE ENGAGED IN MARKETING OF LUBRICANTS / OILS WAS ASSESSED U/S 143(3) R.W.S 147 ON 30/11/2015, WHEREI N THE LOSS OF THE ASSESSEE WAS DETERMINED AT RS.555.62 LACS AFTER SOL E DISALLOWANCE 3 OF EXPENSE FOR RS.72.43 LACS AS AGAINST RETURNED LO SS OF RS.626.36 LACS FILED BY THE ASSESSEE ON 30/09/2009. THE RETUR NED LOSS WAS LATER ON REVISED TO RS.628.05 LACS WHICH WAS ACCEPT ED IN SCRUTINY ASSESSMENT U/S 143(3) ON 16/12/2011. 2.2 THE REASSESSMENT PROCEEDINGS WERE INITIATED IN VIEW OF THE FACT THAT, UPON PERUSAL OF DETAILS OF EXPENDITURE, IT TR ANSPIRED THAT THE ASSESSEE HAD PURCHASED GOLD COINS FROM TRIBHUVANDAS ZAVERI WORTH RS.116.07 LACS BUT SOME OF THE PURCHASES AMOUNTING TO RS.72.43 LACS WERE NOT RELEVANT TO AY 2009-10 AND THEREFORE THE EXPENDITURE WAS TO BE DISALLOWED AND ADDED BACK TO THE INCOME O F THE ASSESSEE. ACCORDINGLY, NOTICE U/S 148 DATED 16/03/2015 WAS IS SUED TO THE ASSESSEE. IN RESPONSE, THE ASSESSEE OFFERED THE REV ISED RETURN OF INCOME AS FILED AND DEMANDED REASONS FOR REOPENING, WHICH WERE DULY SUPPLIED. THE SAME WAS FOLLOWED BY STATUTORY N OTICES U/S 143(2) & 142(1). 2.3 THE ASSESSEE, IN SUPPORT OF EXPENDITURE, SUBMIT TED THAT DURING THE YEAR THE ASSESSEE HAD GIVEN GOLD COIN SCHEME ON SALE TO ITS DEALERS/ CUSTOMERS. THE DEALERS / CUSTOMERS WHO WOU LD ACHIEVE THE TARGET WOULD BE ELIGIBLE FOR THE SCHEME AFTER VERIF ICATION OF SALES MADE BY THEM. SINCE THE EXPENDITURE PERTAINED TO AC COUNTING YEAR ENDING 31/03/2009, THE PROVISION OF THE SAME WAS MA DE IN THE BOOKS OF ACCOUNTS AND CLAIMED AS DEDUCTION NOTWITHSTANDIN G THE FACT THAT ACTUAL PURCHASE OF GOLD COINS WAS MADE IN SUBSEQUEN T YEAR. 2.4 HOWEVER, THE SAME COULD NOT FIND FAVOR WITH LD. AO WHO NOTED THAT THE ACTUAL PURCHASE OF GOLD COINS AMOUNTING TO RS.72.43 LACS WAS MADE IN SUBSEQUENT YEAR AND THEREFORE, THE SAME WAS NOT AN 4 ALLOWABLE EXPENDITURE IN THE IMPUGNED AY. ACCORDING LY, THE SAME WAS DISALLOWED AND LOSS WAS REDUCED TO THAT EXTENT. 3. AGGRIEVED, THE ASSESSEE AGITATED THE SAME, ALTHO UGH WITHOUT ANY SUCCESS, BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 17/10/2017 ON LEGAL GROUNDS AS WELL AS ON MERITS. T HE LD. FIRST APPELLATE AUTHORITY WHILE JUSTIFYING THE REOPENING, CONFIRMED THE STAND OF LD. AO IN DISALLOWING THE EXPENDITURE IN VIEW OF THE FACT THAT THE ASSESSEE DID NOT DISCHARGE ONUS OF PROVING THAT THE PURCHASE OF GOLD COINS IN SUBSEQUENT YEARS RELATED TO FY 2008-09. AG GRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [ AR], SHRI MALAV P.SHETH, ON THE STRENGTH OF DOCUMENTS PLACED IN THE PAPER- BOOK, CONTESTED THE REASSESSMENT PROCEEDINGS ON LEGAL GRO UNDS AND QUANTUM ADDITIONS ON MERITS. PER CONTRA, LD. DR SUB MITTED THAT THE DEDUCTION OF PURCHASES MADE IN SUBSEQUENT YEARS COU LD NOT BE ALLOWED IN THE IMPUGNED AY. 5.1 WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS A ND PERUSED RELEVANT MATERIAL ON RECORD INCLUDING DOCUMENTS PLA CED IN THE PAPER- BOOK. 5.2 SO FAR AS THE LEGAL GROUNDS ARE CONCERNED, WE F IND THAT THE ASSESSEE WAS ORIGINALLY ASSESSED U/S 143(3) AND THE REOPENING HAS BEEN SOUGHT BY THE REVENUE BEYOND A PERIOD OF 4 YEA RS FROM THE END OF RELEVANT AY I.E. AY 2009-10. THEREFORE, BESIDES FULFILMENT OF PRIMARY CONDITION VIZ. LD. AO HAD REASONS TO BELIEV E THAT CERTAIN INCOMES ESCAPED ASSESSMENT IN THE HANDS OF THE ASSE SSEE, THE ONUS WAS ON REVENUE TO ESTABLISH THAT SUCH ESCAPEMENT WA S OWING TO 5 FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE MAT ERIAL FACTS NECESSARY FOR ASSESSMENT BEFORE INITIATING REASSESS MENT PROCEEDINGS FOR THE IMPUGNED AY. 5.3 UPON PERUSAL OF REPLY FILED BY THE ASSESSEE VID E REPLY DATED 05/12/2011 DURING THE COURSE OF ASSESSMENT PROCEEDI NGS U/S 143(3), IT TRANSPIRES THAT THE DETAILS OF AMOUNT PAID UNDER LOYALTY SCHEME ALONG WITH COPIES OF PURCHASE BILLS OF GOLD COINS W ERE SUBMITTED BY THE ASSESSEE. THE COMPLETE DETAILS OF BILL WISE PUR CHASE OF GOLD COINS, DATE OF PURCHASE, AMOUNT ETC. WAS PLACED ON RECORD WHICH IS EVIDENT FROM PAGE NOS. 11 & 20 OF THE PAPER-BOOK. IT WAS SPECIFICALLY SUBMITTED THAT THE GOLD COINS WERE DISTRIBUTED TO T HE DEALERS AND CUSTOMERS. THE LD. AO, AFTER CONSIDERING ALL THESE DETAILS, FRAMED ASSESSMENT U/S 143(3) ACCEPTING THE ASSESSEES CLAI M. NOTHING ON RECORD SUGGEST THAT THE ASSESSEE FAILED TO SUBMIT A NY DETAILS / DOCUMENTS AS CALLED FOR BY LD. AO, IN THIS REGARD. 5.4 PROCEEDING FURTHER, WE FIND THAT NO NEW TANGIBL E MATERIAL / INFORMATION HAS COME UNTO THE POSSESSION OF LD. AO SUBSEQUENT TO COMPLETION OF QUANTUM ASSESSMENT WHICH SUGGEST POSS IBLE ESCAPEMENT OF INCOME IN THE HANDS OF THE ASSESSEE. THE ONLY MATERIAL TO TRIGGER THE REASSESSMENT PROCEEDINGS IS THE INFORMATION / DETAILS AS ALREADY AVAILABLE ON RECORD WHILE FRAMIN G ASSESSMENT U/S 143(3). IT IS SETTLED LEGAL PROPOSITION THAT LD. AO HAS THE POWER TO REASSESS BUT NO POWER TO REVIEW AND REVIEW IN THE G ARB OF REASSESSMENT IS NOT PERMISSIBLE IN LAW. THE LD. AO COULD NOT BE GRANTED SECOND CHANCE TO HAVE A RELOOK AT THE MATTE R WITHOUT THERE BEING ANY COGENT MATERIAL ON RECORD WHICH COMES TO HIS POSSESSION 6 SUBSEQUENTLY SO AS TO JUSTIFY REOPENING. OUR VIEW G ETS SUPPORTS FROM THE FOLLOWING BINDING JUDICIAL PRECEDENTS AS RELIED UPON BY LD. AR: - (I) PARASHURAM POTTERY WORKS CO. LTD. VS. ITO [HON BLE SUPREME COURT 106 ITR 1] (II) ACIT VS. ICICI SECURITIES LTD. [24 TAXMANN.COM 310 HONBLE SUPREME COURT 22/08/2012] (III) CIT VS. CORPORATION BANK LTD. [122 TAXMAN 826 HONBLE SUPREME COURT 03/02/1999] (IV) RAJBHUSHAN OMPRAKASH DIXIT VS. DCIT [WP NO. 35 46 OF 2018 HONBLE BOMBAY HIGH COURT 05/04/2019] (V) IPCA LABORATORIES LTD. VS. DCIT [124 TAXMAN 556 HONBLE BOMBAY HIGH COURT 02/07/2001] (VI) BHOR INDUSTRIES LTD. VS. ACIT [267 ITR 161 HON BLE BOMBAY HIGH COURT 26/02/2003] 5.5 ON THE STRENGTH OF ABOVE FACTS, WE ARE OF THE C ONSIDERED OPINION THAT REASSESSMENT PROCEEDINGS STOOD VITIATED FOR WA NT OF FULFILLMENT OF PRIMARY CONDITIONS TO INITIATE REASSESSMENT PROCEED INGS AS ENVISAGED BY SECTION 147. WE ORDER SO. 6. SO FAR AS THE MERITS OF THE CASE ARE CONCERNED, THE UNCONTROVERTED FACT THAT EMERGES IS THAT THE ASSESS EE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AS EVIDENT FROM THE NOTES TO THE FINANCIAL STATEMENTS. THE ASSESSEE WAS TO DISTRIBUT E THESE GOLD COINS UNDER A SCHEME TO DEALERS / CUSTOMERS ON SALES TARG ET ACHIEVED BY THEM DURING THE PERIOD AUGUST, 2008 TO DECEMBER, 20 08 AS EVIDENT FROM BROCHURE OF THE SCHEME PLACED ON RECORD. THERE FORE, THE LIABILITY WOULD HAVE ACCRUED TO THE ASSESSEE DURING IMPUGNED AY ONLY. THIS IS FURTHER STRENGTHENED BY THE FACT THAT THE FULL P AYMENT OF THE GOLD COINS WAS MADE BY THE ASSESSEE DURING IMPUGNED AY I TSELF. IN VIEW OF THE STATED FACT THERE COULD BE NO OCCASION TO DI SALLOW THE SAME DURING IMPUGNED AY. WE ORDER SO. 7. RESULTANTLY, THE APPEAL STANDS ALLOWED IN TERMS OF OUR ABOVE ORDER. 7 ORDER PRONOUNCED IN THE OPEN COURT ON 16/05/2019. SD/- SD/- (C.N. PRASAD) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 16/05/2019 SR.PS, JAISY VARGHESE / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. ! , ! , / DR, ITAT, MUMBAI 6. #$% / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.