ITO, Chengalput V. Murugan Arul Enterprises, CHENNAI

ITA 2631/CHNY/2014

• Counselvise Citation: 263121714 RSA 2014
• Duration Of Justice: 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-02-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 20-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: DR C P RAMASWAMI
• Keywords: Tangible material; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI .. , , ! '# BEFORE SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ./ ITA NO. 2631/MDS/2014 / ASSESSMENT YEAR : 2007-08 THE INCOME-TAX OFFICER, BUSIN ESS WARD-IV(2), CHENNAI-34. APPELLANT) V. M/S. MURUGAN ARUL ENTERPRISES, NO.14, RAGHURAMAN STREET, ARUMBAKKAM, CHENNAI -106. PAN AAGFM7953C RESPONDENT) / APPELLANT BY : SHRI P. RADHAKRISHNAN, JCIT / RESPONDENT BY : DR. C.P.RAMASWAMI, ADVOCATE ! / DATE OF HEARING : 03.02.2015 '# ! / DATE OF PRONOUNCEMENT: 10.04.2015 $ / O R D E R PER VIKAS AWASTHY, JUDICIAL MEMBER THE APPEAL HAS BEEN FILED BY THE REVENUE A GAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS )-V, CHENNAI DATED 08.07.2014 FOR THE ASSESSMENT YEAR 20 07-08. - - ITA 2631/ 14 2 THE ONLY ISSUE RAISED BY THE REVENUE IN THIS APPEAL IS ANNULLING OF REASSESSMENT PROCEEDINGS BY THE COMMISSIONER OF INCOME- TAX(APPEALS). 2. THIS IS SECOND ROUND OF LITIGATION BEFORE THE TR IBUNAL IN THE CASE OF THE ASSESSEE. EARLIER, THE REVENUE HAD FIL ED THE APPEAL BEFORE THE TRIBUNAL AND THE ASSESSEE HAD FILED CROS S-OBJECTION AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS). THE ASSESSMENT ORDER WAS PASSED UNDER SECTION 143(3 ) READ WITH SEC.147 OF THE INCOME-TAX ACT, 1961 (HEREINAFT ER REFERRED TO AS THE ACT). THE ASSESSEE DID NOT RAISE THE ISSU E OF REOPENING EITHER BEFORE THE ASSESSING OFFICER OR BEFORE THE C OMMISSIONER OF INCOME-TAX(APPEALS). THE ISSUE WAS FIRST TIME RAISED BEFORE THE TRIBUNAL. THE CO-ORDINATE BENCH OF THE TRIBUNA L SET ASIDE THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS ) AND REMITTED THE MATTER BACK TO THE COMMISSIONER OF INC OME- TAX(APPEALS) TO DECIDE THE ISSUE OF REOPENING AS PE R THE RATIO LAID DOWN BY THE HONBLE DELHI HIGH COURT IN THE C ASE OF CIT V. ORIENT CRAFT LTD., REPORTED AS 354 ITR 536 AND THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ACIT V. RA JESH JHAVERI STOCK BROKERS PVT. LTD., REPORTED AS 291 IT R 500 AND THE - - ITA 2631/ 14 3 DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CA SE OF CIT V. IDEA; GARDEN COMPLEX P. LTD., REPORTED AS 340 ITR 6 09. CONSEQUENT TO THE DIRECTIONS OF THE TRIBUNAL, THE C OMMISSIONER OF INCOME-TAX(APPEALS) PASSED THE ORDER, IMPUGNED I N THE PRESENT APPEAL. 3. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 DECLARING INCOME OF ` 99,233/-. THE RETURN OF THE ASSESSEE WAS PROCESSED U/S.143(1) OF THE ACT. SUBSEQUENTLY, NOTICE U/S.148 WAS ISSUED TO VERIFY A S TO WHETHER TAX DEDUCTION AT SOURCE WAS MADE FOR JOB WORK CHARG ES AS REQUIRED U/S.40(A)(IA) OF THE ACT. THE ASSESSING O FFICER VIDE ORDER DATED 28.12.2011, MADE ADDITIONS ON THE FOLLO WING ITEMS: (I) SUPPRESSION OF LABOUR CHARGES RECEIPTS ` 14,94,026/- (II) EXCESS EXPENSES CLAIMED (EXPENSES ADDED BACK) LOOSE TOOLS AND CONSUMABLE ` 5,00,000 JOB WORK CHARGES PAID ` 2,00,000 FREIGHT CHARGE PAID ` 2,00,000 MAINTENANCE AND SERVICE CHARGES ` 5,00,000 WATER AND OIL EXPENSES ` 1,00,000 WITH THE ABOVE ADDITIONS, GROSS PROFIT WAS RE-WOR KED. - - ITA 2631/ 14 4 AGGRIEVED BY THE ASSESSMENT ORDER DATED 28.12.201 1 PASSED U/S. 143(3) READ WITH SEC.147, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX(APPEAL S). THE COMMISSIONER OF INCOME-TAX(APPEALS) HELD THAT REOPE NING IS BAD IN LAW AND VOID AB INITIO. AGGRIEVED BY THE FINDIN G OF THE COMMISSIONER OF INCOME-TAX(APPEALS), THE REVENUE HA S COME IN APPEAL BEFORE THE TRIBUNAL. 4. SHRI P. RADHAKRISHNAN, REPRESENTING THE DEPARTME NT, VEHEMENTLY SUPPORTED THE FINDINGS OF THE ASSESSING OFFICER AND REITERATED THE GROUNDS RAISED IN THE APPEAL. 5. ON THE OTHER HAND, DR. C.P.RAMASWAMI, APPEARING ON BEHALF OF THE ASSESSEE, SUBMITTED THAT REASSESSMENT PROCEEDINGS WERE INITIATED ONLY FOR VERIFICATION PU RPOSE. THE ASSESSING OFFICER HAD NO ADDITIONAL MATERIAL TO FOR M AN OPINION THAT THE INCOME CHARGEABLE TO TAX HAD ESCAPED ASSES SMENT. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE REASON FOR WHICH REASSESSMENT PROCEEDINGS WERE INIT IATED, NO ADDITION WAS MADE THEREON. IN SUPPORT OF HIS SUBMI SSION, THE LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE JUD GMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF ORIENT CRAF T LTD.(SUPRA). - - ITA 2631/ 14 5 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT REOPENING PROCEEDINGS WERE INITIATED TO VERIFY WHETHER THE TAX AT SOURCE WAS MADE FOR JOB WORK CHARGES AS REQU IRED U/S. 40(A)(IA) OF THE ACT? IN THE PRESENT CASE, NO ADDI TION WAS MADE IN RESPECT OF THE REASONS GIVEN FOR INITIATING REAS SESSMENT PROCEEDINGS. IT IS A WELL SETTLED LAW THAT DURING THE ASSESSME NT PROCEEDINGS, THE ASSESSING OFFICER HAS POWER TO ASS ESS OTHER INCOMES AS WELL THAT HAVE ESCAPED ASSESSMENT AND NOT REFERRED TO IN THE NOTICE FOR REASSESSMENT. BUT TH E ASSESSING OFFICER CANNOT MAKE ADDITIONS ON THE OTHER INCOMES ALONE, IF NO ADDITION IS MADE FOR WHICH REASSESSMENT PROCEEDINGS WERE INITIATED. THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS. JET AIRWAYS (I) LTD. REPORTED AS 331 ITR 236 HAS EL ABORATELY EXPLAINED THE PROVISIONS OF THE ACT, IN THIS REGARD . THE JUDGMENT RENDERED IN THE CASE OF JET AIRWAYS (I) LTD.(SUPRA) HAS BEEN SUBSEQUENTLY FOLLOWED BY THE HONBLE DELHI HIGH COU RT IN THE - - ITA 2631/ 14 6 CASE OF RANBAXY LABORATORIES LTD. V. CIT, REPORTED AS 60 DTR 77. 7. THE COMMISSIONER OF INCOME-TAX(APPEALS) WHILE ACCEPTING THE CONTENTIONS OF THE ASSESSEE FOR ANNU LLING THE REOPENING PROCEEDINGS HAS GIVEN THE FINDINGS AS UND ER : IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HA S NOT EXTRACTED THE REASONS FOR REOPENING THE ASSESSMENT. HOWEVER, THE ASSESSING OFFICER HAS REOPENING BY ISSUING A NOTICE U/S.148 WITHIN 4 YEAR S FROM THE DATE OF FILING OF RETURN AFTER THE SAME WA S BEING PROCESSED U/S.143(1) OF THE IT ACT. THE ONLY REASON FOR REOPENING THE ASSESSMENT FOR THE ASSESSING OFFICER APPEARED TO VERIFY WHETHER THE TDS WAS MADE FOR THE JOB WORKS DONE AS REQUIRED U/S.40(A)(IA). WHEREAS THE APPELLANT HAS RECEIVED JOB WORK IN THE FORM OF LABOUR CHARGES AS PER THE BOOKS OF ACCOUNTS TO THE EXTENT OF RS.1,00,13,313/- . THE QUESTION OF DEDUCTING TDS ON THE LABOUR CHARGES RECEIVED BY THE APPELLANT DOES NOT ARISE AS NO PAYMENT HAS BEEN MADE ON ANY CONTRACTUAL OBLIGATION TO ANY OUTSIDE PARTIES AND ULTIMATELY TH E ASSESSING OFFICER HAS NOT MADE ANY ADDITION ON THIS GROUND WHICH WAS THE MAIN REASON FOR REOPENING THE ASSESSMENT PROCEEDINGS REOPENING U/S.148. THE AR OF THE APPELLANT IN HIS SUBMISSIONS HAS VEHEMENTLY OBJECTED THAT THE ASSUMPTION OF JURISDICTION IN THE CASE OF THE APPELLANT IS ABSOLU TELY UNWARRANTED, BAD IN LAW AND VOID AB INITIO. SINCE NO ADDITION WAS MADE BY THE ASSESSING OFFICER IN HIS REASSESSMENT PROCEEDINGS ON THE REASON OF NON- DEDUCTION OF TAX AT SOURCE ON THE JOB CHARGES, BECAUSE THE APPELLANT ONLY RECEIVED JOB WORK CHARGES AND THERE WAS NO LIABILITY ON THE PART OF T HE APPELLANT TO DEDUCT TAX AT SOURCE. I AM IN - - ITA 2631/ 14 7 AGREEMENT WITH THE ARGUMENTS PUT FORWARD BY THE AR OF THE APPELLANT THAT IN THE ABSENCE OF ANY NEW MATERIAL THE ASSESSING OFFICER IS NOT EMPOWERED TO REOPENING THE ASSESSMENT. ONCE THERE WAS NO FRESH TANGIBLE MATERIAL WITH THE ASSESSING OFFICER TO ESTABLISH THAT THE APPELLANT CAN BE SAID TO HAVE FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FAC TS, THE ASSESSING OFFICER IS NOT EMPOWERED TO REOPEN THE ASSESSMENT IRRESPECTIVE OF WHETHER IT IS MADE U/S.143(1) OR 143(3). THE ORDER OF REASSESSMENT WAS NOT VALID. THE SAME VIEW WAS HELD BY THE HONBLE JURISDICTIONAL MADRAS HIGH COURT IN THE CAS E OF BAPALAN AND CO. EXPORTS VS JCIT (OSD) (2007) 289 ITR 37. FURTHER SECTION 147 DOES NOT POSTULATE CONFERMENT OF POWER UPON THE ASSESSING OFFICER TO INITIATE REASSESSMENT PROCEEDINGS UPON A MERE CHANGE OF OPINION. THIS VIEW WAS TAKEN BY THE FULL BENCH OF THE HONBLE DELHI HIGH COURT IN THE CASE O F KELVINATOR OF INDIA LTD VS. CIT (2002) 256 ITR 1(DEL). THE ABOVE RATIO LAID DOWN BY THE DELHI HIG H COURT WAS FURTHER UPHELD BY THE HONBLE SUPREME COURT IN THE SAME CASE AS REPORTED IN 320 ITR 561, HOLDING THAT THE ASSESSING OFFICER HAS NO POWERS OF REVIEW AND THAT ASSESSMENT CANNOT BE REOPENED ON MERE CHANGE OF OPINION WITHOUT ANY FRESH TANGIBLE MATERIAL ON RECORD. SIMILARLY, THE HONBLE DELHI H IGH COURT HELD IN THE CASE OF ORIENT CRAFT LTD, (2013) 354 ITR 536 WHEREIN IT WAS HELD THAT THE REASONS DISCLOSED THAT THE ASSESSING OFFICER REACHED THE BELIEF THAT THERE WAS ESCAPEMENT OF INCOME ON GOING THROUGH THE RETURN OF INCOME FILED BY THE ASSESSEE AFTER HE ACCEPTED THE RETURN U/S 143(1) WITHOUT SCRUTINY, AND NOTHING MORE. THIS WAS NOTHING BUT REVIEW OF THE EARLIER PROCEEDINGS AND ABUSE OF POWER BY THE ASSESSING OFFICER. SINCE THERE WAS NOTHING IN THE REASONS RECORDED TO SHOW THAT ANY TANGIBLE MATERIAL HAD COME TO THE POSSESSION OF ASSESSING OFFICER SUBSEQUENT TO THE ISSUE OF INTIMATION, THE NOTICE REFLECTED AN ARBITR ARY EXERCISE OF THE POWER CONFERRED U/S.147. THE RATIO - - ITA 2631/ 14 8 HELD BY THE HONBLE DELHI HIGH COURT IN THE CASE IS SQUARELY APPLICABLE TO THE FACTS OF THE APPELLANT CASE UNDER CONSIDERATION. WE ARE OF THE VIEW THAT THE FIRST APPELLATE AUTHORI TY HAS GIVEN REASONED FINDINGS IN ALLOWING THE APPEAL OF THE ASS ESSEE. WE CONCUR WITH THE SAME. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE AND THE SAME IS DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 10 TH OF APRIL, 2015 AT CHENNAI. SD/- SD/- ( $%%$& ) ( ' &( )%*%)+,-+.+/( 01-+,23+,456( ! 7&2889:/4+/4;<=><. ? 7& /JUDICIAL MEMBER @? /CHENNAI, A7 /DATED, THE 10 TH APRIL, 2015. MPO/KRI. 7B C'D' /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. E( /CIT(A) 4. E /CIT 5. 'FG H /DR 6. GIJ /GF.