Ann Kumar, New Delhi V. DCIT, New Delhi

ITA 2756/DEL/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6247 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 10-02-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 07-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEEPAK TIWARI SENIOR
• Assessee Lawyers: ANANYA KAPOOR S
• Keywords: Reopening of assessment; Retrospective amendment; Tangible material; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 234B; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH SMC-2 : NEW DELHI) BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.2756/DEL./2015 (ASSESSMENT YEAR : 2005-06) MRS. ANN KUMAR, VS. DCIT, CIRCLE 22 (1), 19, NIZAMUDDIN EAST, NEW DELHI. GROUND FLOOR, NEW DELHI 110 013. (PAN : AAJPK4680R) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SANAT KAPOOR AND MS. ANANYA KAPOOR, ADVOCATES REVENUE BY : SHRI DEEPAK TIWARI, SENIOR DR DATE OF HEARING : 10.02.2016 DATE OF ORDER : 30.03.2016 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, MRS. ANN KUMAR (HEREINAFTER REFERRED TO AS THE ASSESSEE), BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 23.03.2015 PASSED BY THE COMMI SSIONER OF INCOME-TAX (APPEALS)-13, NEW DELHI QUA THE ASSESSME NT YEAR 2005-06 ON THE GROUNDS INTER ALIA THAT :- 1. THAT THE NOTICE U/S 148 AND THE REASSESSMENT OR DER PASSED BY THE AO ARE ILLEGAL, BAD IN LAW, WITHOUT JURISDIC TION AND TIME BARRED AND SAME IS ILLEGALLY UPHELD BY CIT(A). ITA NO.2756/DEL./2015 2 2. THAT CIT(A) HAS ERRED IN LAW IN NOT APPRECIATING THAT NOTICE UNDER SECTION 148 IS TIME BARRED AND THERE IS NO FA ILURE ON THE PART OF THE APPELLANT TO DISCLOSE FULLY AND TRULY MATERI AL FACTS NECESSARY FOR HIS ASSESSMENT AND HENCE ORDER PASSED IS WITHOU T JURISDICTION AND BAD IN LAW. 3. THAT CIT(A) HAS ERRED IN LAW IN NOT APPRECIATING THAT NOTICE UNDER SECTION 148 IS BASED ON CHANGE OF OPINION AND WITHOUT ANY TANGIBLE MATERIAL AND HENCE ORDER PASSED IS WITHOUT JURISDICTION AND BAD IN LAW. 4. THAT CIT(A) HAS, IN VIEW OF THE FACTS AND CIRCUM STANCES OF THE CASE, ERRED IN LAW AND ON FACTS IN UPHOLDING DI SALLOWANCE THE DEDUCTION OF RS.2,37,194/- U/S 10BA OF THE ACT. 5. THAT CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT DECISION OF THE HON'BLE SUPREME C OURT IS NOT APPLICABLE TO THE PROVISION OF 10BA OF THE ACT. 6. THAT THE OBSERVATIONS OF CIT(A) ARE FACTUALLY IN CORRECT AND HE HAS ERRED IN NOT DELETING THE ADDITION BASED ON SUCH OBSERVATIONS. 7. THAT THE INTEREST U/S 234B HAS BEEN WRONGLY AND ILLEGALLY CHARGED AND IS LIABLE TO BE DELETED AND WRONGLY WOR KED OUT. 8. THAT THE MATERIAL AVAILABLE ON RECORD HAVE NOT B EEN PROPERLY CONSIDERED AND JUDICIALLY INTERPRETED AND THE SAME DO NOT JUSTIFY THE ADDITION MADE. 9. THAT THE ADDITION MADE IS BASED ON MERE SURMISES AND CONJECTURES AND THE SAME CANNOT BE JUSTIFIED BY ANY MATERIAL ON RECORD AND THE SAME ARE HIGHLY EXCESSIVE. 10. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER AND/OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL AT OR BEF ORE THE TIME OF HEARING. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE : ASSES SMENT OF THE ASSESSEE QUA THE ASSESSMENT YEAR 2005-06 WAS COMPLE TED U/S 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER TH E ACT) AT AN INCOME OF RS.8,48,440/-. THE ASSESSEE CLAIMED AN E XEMPTION OF RS.16,74,971/- INCLUSIVE OF DUTY DRAWBACK AMOUNTING TO ITA NO.2756/DEL./2015 3 RS.3,72,186/- UNDER SECTION 10BA OF THE ACT WHICH W AS ALLOWED BY THE ASSESSING OFFICER. SUBSEQUENTLY, THE AO FOUND THAT THE INCOME CHARGEABLE TO TAX AMOUNTING TO RS.3,72,186/- HAS ESCAPED ASSESSMENT AND CONSEQUENTLY, ISSUED THE NOTICE U/S 148 READ WITH SECTION 143 (2) OF THE ACT. SHRI S.C. DANG, CA APP EARED AND FILED REPLY EXPLAINING THAT THE ASSESSEE HAS EXPORTED HAN DMADE ARTISTIC THINGS TO THE TUNE OF RS.25,60,368/- AND JOB WORK A T RS.97,56,374/- AND EARNED DUTY DRAWBACK OF RS.3,72,186/- AND CLAIM ED DEDUCTION U/S 10BA AT RS.16,74,971/- WHICH HAS BEEN ALLOWED A FTER DUE SCRUTINY. FINDING THE EXPLANATION OF THE ASSESSEE NOT TENABLE AND BY RELYING UPON THE JUDGMENT CITED AS LIBERTY INDIA VS. CIT REPORTED IN 317 ITR 218 (SC) DISALLOWED THE DEDUCTI ON OF RS.16,74,971/- EARLIER ALLOWED BY THE AO VIDE ORDER U/S 143(3) OF THE ACT AND THEREBY THE ASSESSED THE TOTAL INCOME O F ASSESSEE AT RS.10,85,634/-. 3. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) WHO HAS DISMISSED THE APPEAL VIDE IMPUGNED ORDER. FEELING AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ITA NO.2756/DEL./2015 4 ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THE LD. AR FOR THE ASSESSEE CHALLENGING THE IMPU GNED ORDER CONTENDED THAT APPARENTLY, THIS IS A CASE OF CHANGE OF OPINION ON THE PART OF THE AO TO INVOKE PROVISIONS U/S 148 OF THE ACT WHICH IS NOT PERMISSIBLE UNDER LAW AND RELIED UPON THE JUDGM ENT CITED AS CIT VS ATUL KUMAR SWAMI, 362 ITR 693 PASSED BY HON' BLE JURISDICTIONAL HIGH COURT AND CIT VS TUPPERWARE IND IA PVT. LTD., I.T.A. NO. 415/2015 (DEL.) ORDER DATED 10.08. 2015 . HOWEVER, ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER PASSED BY THE LD. CIT (A). 6. NOW, ADVERTING TO THE CASE HAD HAND, A BARE PERU SAL OF THE ASSESSMENT ORDER UNDER CHALLENGE GOES TO SHOW THAT THE ASSESSMENT IN THIS CASE HAS BEEN REOPENED TO REVIEW THE APPLIC ABILITY OF SECTION 10BA OF THE ACT UNDER WHICH ASSESSEE HAD CLAIMED EX EMPTION AT THE TIME OF FILING THE ORIGINAL RETURN OF INCOME QU A ASSESSMENT YEAR 2005-06 ON 27.10.2005. HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE CITED AS ATUL KUMAR SWAMI (SUPRA), RELIED UPON BY THE ASSESSEE, DECIDED THE IDENTICAL ISSUE AND THE OPERA TIVE PART OF THE JUDGMENT IS REPRODUCED AS UNDER FOR READY REFERENCE :- 'REASSESSMENT-NOTICE-MUST BE BASED ON TANGIBLE MATERIAL-NOTE FORMING PART OF RETURN MENTIONING AND DESCRIBING THE NATURE OF ITA NO.2756/DEL./2015 5 RECEIPT UNDER A NON- COMPETE AGREEMENT-NOTICE NOT MENTIONING ANY OTHER FRESH MATERIAL WARRANTING REOPENING OF ASSESSMENT-NOTICE NOT VALID-INCOME-TAX ACT, 1961, SS.147, 148. A VALID REOPENING OF ASSESSMENT HAS TO BE BASED ONL Y ON TANGIBLE MATERIAL TO JUSTIFY THE CONCLUSION THAT THERE IS ES CAPEMENT OF INCOME. HELD ACCORDINGLY, DISMISSING THE APPEAL, THAT THE NOTE FORMING PART OF THE RETURN FILED FOR THE ASSESSMENT YEAR 1999-20 00 CLEARLY MENTIONED AND DESCRIBED THE NATURE OF THE RECEIPT U NDER A NON- COMPETE AGREEMENT. THE REASONS FOR THE NOTICE UNDER SECTION 147 OF THE INCOME-TAX ACT, 1961, NOWHERE MENTIONED THAT THE REVENUE CAME UP WITH ANY OTHER FRESH MATERIAL WARRANTING RE OPENING OF ASSESSMENT. THEREFORE, MERE CONCLUSION OF THE PROCE EDINGS UNDER SECTION 143(1) IPSO FACTO DID NOT PERMIT INVOCATION OF POWERS FOR REOPENING THE ASSESSMENT.' 7. IDENTICAL ISSUE HAS BEEN DECIDED BY THE HONBLE JURISDICTIONAL HIGH COURT IN CASE OF MADHUKAR KHOSLA VS. ACIT - 354 ITR 356 WHEREIN THE HONBLE JURISDICTIONAL HIGH COURT HAS ALSO FOLLOWED ITS OWN DECISION RENDERED IN THE CAS E ENTITLED CIT VS. ORIENT CRAFT LTD ., THE OPERATIVE PART OF THE JUDGMENT (SUPRA) IS REPRODUCED AS UNDER :- THE ARGUMENT OF THE REVENUE THAT AN INTIMATION CAN NOT BE EQUATED TO AN ASSESSMENT, RELYING UPON CERTAIN OBSERVATIONS OF THE SUPREME COURT IN RAJESH JHAVERI (SUPRA) WOULD ALSO APPEAR T O BE SELF- DEFEATING, BECAUSE IF AN 'INTIMATION' IS NOT AN 'ASSESSMENT' THEN IT CAN NEVER BE SUBJECTED TO SECT ION 147 PROCEEDINGS, FOR, THAT SECTION COVERS ONLY AN 'ASSE SSMENT' AND WE WONDER IF THE REVENUE WOULD BE PREPARED TO CONCEDE THAT POSITION. IT IS NOBODY'S CASE THAT AN 'INTIMATION' CANNOT BE SUBJECTED TO SECTION 147 PROCEEDINGS; ALL THAT IS CONTENDED BY T HE ASSESSEE, AND QUITE RIGHTLY, IS THAT IF THE REVENUE WANTS TO INVO KE SECTION 147 IT SHOULD PLAY BY THE RULES OF THAT SECTION AND CANNOT BOG DOWN. IN OTHER WORDS, THE EXPRESSION 'REASON TO BELIEVE' CAN NOT HAVE TWO DIFFERENT STANDARDS OR SETS OF MEANING, ONE APPLICA BLE WHERE THE ASSESSMENT WAS EARLIER MADE UNDER SECTION 143(3) AN D ANOTHER APPLICABLE WHERE AN INTIMATION WAS EARLIER ISSUED U NDER SECTION ITA NO.2756/DEL./2015 6 143(1). IT FOLLOWS THAT IT IS OPEN TO THE ASSESSEE TO CONTEND THAT NOTWITHSTANDING THAT THE ARGUMENT OF 'CHANGE OF OPI NION' IS NOT AVAILABLE TO HIM, IT WOULD STILL BE OPEN TO HIM TO CONTEST THE REOPENING ON THE GROUND THAT THERE WAS EITHER NO RE ASON TO BELIEVE OR THAT THE ALLEGED REASON TO BELIEVE IS NOT RELEVA NT FOR THE FORMATION OF THE BELIEF THAT INCOME CHARGEABLE TO T AX HAS ESCAPED ASSESSMENT. IN DOING SO, IT IS FURTHER OPEN TO THE ASSESSEE TO CHALLENGE THE REASONS RECORDED UNDER SECTION 148(2) ON THE GROUND THAT THEY DO NOT MEET THE STANDARDS SET IN THE VARI OUS JUDICIAL PRONOUNCEMENTS.' 8. FOLLOWING THE LAW LAID DOWN BY THE HONBLE JURIS DICTIONAL HIGH COURT IN THE JUDGMENT (SUPRA) DISCUSSED ABOVE, WE ARE OF THE CONSIDERED VIEW THAT ASSUMING OF JURISDICTION BY TH E AO IN THIS CASE IS BAD IN LAW FOR THE REASONS INTER ALIA THAT WHEN THE ASSESSEE HAS SPECIFICALLY CLAIMED EXEMPTION U/S 10BA ON THE SUM OF DUTY DRAWBACK OF RS.3,72,186/- AND THE AO AFTER APPLYING ITS MIND ALLOWED THE SAME, THERE WAS NO TENABLE MATERIAL WIT H THE AO TO REOPEN THE ASSESSMENT; THAT APPLYING THE LAW LAID D OWN BY HONBLE APEX COURT IN JUDGMENT CITED AS LIBERTY INDIA (SUPR A) WITH RETROSPECTIVE EFFECT IS ALSO NOT PERMISSIBLE UNDER LAW. 9. NO DOUBT, HONBLE APEX COURT IN JUDGMENT CITED A S LIBERTY INDIA (SUPRA) HELD THAT INCENTIVE PROFITS ARE NOT P ROFITS DERIVED FROM ELIGIBLE BUSINESS U/S 80IA/80IB, THEY BELONG TO THE CATEGORY OF ANCILLARY PROFITS OF SUCH UNDERTAKING. PROFITS DER IVED BY WAY OF INCENTIVE, SUCH AS, DEPB/DUTY DRAWBACK CANNOT BE CR EDITED AGAINST THE COST OF MANUFACTURE OF GOODS DEBITED IN THE PROFIT AND LOSS ACCOUNT AND THEY DO NOT FALL WITHIN THE EXPRES SION PROFITS ITA NO.2756/DEL./2015 7 DERIVED FROM INDUSTRIAL UNDERTAKING UNDER SECTION 80IB. HOWEVER, JUDGMENT (SUPRA) IS NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE BECAUSE WHEN REOPENING U/ S 147/148 UNDER THE GIVEN CIRCUMSTANCES IS ITSELF NOT PERMISS IBLE, THE AO IS NOT EMPOWERED TO REVIEW THE APPLICABILITY OF SECTIO N 10BA. SO, IN THE GIVEN CIRCUMSTANCES, WE ARE OF THE CONSIDERED V IEW THAT REASSESSMENT IN THIS CASE IS NOT PERMISSIBLE UNDER ANY CIRCUMSTANCES. 10. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE HE REBY ALLOW THE PRESENT APPEAL. ORDER PRONOUNCED IN OPEN COURT ON THIS 30 TH DAY OF MARCH, 2016. SD/- SD/- (R.S. SYAL) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 30 TH DAY OF MARCH, 2016 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-13, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.