Ann Kumar, New Delhi V. DCIT, New Delhi

ITA 2757/DEL/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7125 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 28-06-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 07-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A SREENIVASA RAO
• Keywords: Reopening of assessment; Invalid notice; Retrospective amendment; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 234B; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SM C - 1 , NEW DELHI BEFORE SH. N. K. SAINI, A CCOUNTANT M EMBER ITA NO. 2757/DEL/2015 : ASSTT. YEAR : 2007 - 08 MRS. ANN KUMAR, 19, NIZAMUDDIN EAST, GROUND FLOOR NEW DELHI - 110013 VS DCIT, CENTRAL CIRCLE - 22(1), NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. A AJPK4680R ASSESSEE BY : MS. ANANYA KAPOOR, ADV. REVENUE BY : SH. A. SREENIVASA RAO , SR. DR DATE OF HEARING : 28 .06 .201 6 DATE OF PRONOUNCEME NT : 06 .07 .201 6 ORDER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 23.05.2015 OF LD. CIT(A) - XIII , NEW DELHI . 3. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. THAT THE NOTICE U/S 148 AND REASSESSMENT ORDER PAS SED BY THE AO IS ILLEGAL, BAD IN LAW, WITHOUT JURISDICTION AND TIME BARRED AND SAME IS ILLEGALLY UPHELD BY CIT(A). 2. 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 MAT ERIAL AND HENCE ORDER PASSED IS WITHOUT JURISDICTION AND BAD IN LAW. ITA NO . 2757 /DEL /201 5 ANN KUMAR 2 3. THAT CIT(A) HAS, IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, ERRED IN LAW AND ON FACTS IN UPHOLDING DISALLOWANCE THE DEDUCTION OF RS.1,38,596/ - U/S 10BA OF THE ACT. 4. THAT C IT(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT DECISION OF THE HON'BLE SUPREME COURT IS NOT APPLICABLE TO THE PROVISION OF SECTION 10BA OF THE ACT. 5. THAT THE OBSERVATIONS OF CIT(A) ARE FACTUALLY INCORRECT AND HE HAS ERRED IN NOT DELETING THE ADDITION BASED ON SUCH OBSERVATIONS. 6. THAT THE INTEREST U/S 234B HAS BEEN WRONGLY AND ILLEGALLY CHARGED AND IS LIABLE TO BE DELETED. 7. THAT THE MATERIAL AVAILABLE ON RECORD HAVE NOT BEEN PROPERLY CONSIDERED AND JUDICIALLY INTERPRETED AND THE SAME DO NOT JUSTIFY THE ADDITION MADE. 8. THAT THE ADDITION MADE IS BASED ON MERE SURMISES AND CONJUNCTURES AND THE SAME CANNOT BE JUSTIFIED BY ANY MATERIAL ON RECORD AND THE SAME ARE HIGHLY EXCESSIVE. 9. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER AND/O R DELETE ANY OF THE ABOVE GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING. 4 . THE GRIEVANCE OF THE ASSESSEE IN THIS APPEAL RELATES TO THE SUSTENANCE OF DISALLOWANCE OF DEDUCTION AMOUNTING TO RS.1,38,596/ - U/S 10BA OF THE INCOME TAX ACT, 1961 (HEREINAFT ER REFERRED TO AS THE ACT) . ITA NO . 2757 /DEL /201 5 ANN KUMAR 3 5 . DURING THE COURSE OF HEARING THE LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET STATED THAT AN IDENTICAL ISSUE HAVING SIMILAR FACTS HAD ALREADY BEEN ADJUDICATED BY THE ITAT DELHI BENCH, NEW DELHI IN ASSESSEE S OWN CASE IN IT A NO. 2756/DEL/2015 FOR THE ASSESSMENT YEAR 2005 - 06 VIDE ORDER DATED 30.03.2016 (COPY OF THE SAID ORDER WAS FURNISHED WHICH IS PLACED ON RECORD). 6 . IN HIS RIVAL SUBMISSIONS THE LD. DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND REITERATED THE OBS ERVATIONS MADE BY THE LD. CIT(A) IN PARA 4.3 OF THE IMPUGNED ORDER WHICH READ AS UNDER: 4.3 THE REASON GIVEN BY AO AND THE SUBMISSION OF THE APPELLANT ARE CONSIDERED. AS SUBMITTED, THE DEDUCTION CLAIMED WAS ACCEPTED UNDER THE SCRUTINY ASSESSMENT AND CANN OT BE CONSIDERED FOR ESCAPEMENT OF INCOME FOR REASSESSMENT. IT IS ALSO AN ESTABLISHED LAW THAT ASSESSMENT CANNOT BE REOPENED ON THE BASIS OF RETROSPECTIVE AMENDMENT. HOWEVER, IN THIS CASE, THE REASSESSMENT IS DONE ON THE BASIS OF REVISED COMPUTATION OF DED UCTION SUBMITTED BY THE APPELLANT DURING THE COURSE OF REASSESSMENT PROCEEDING. IN BOTH THE COMPUTATION GIVEN DURING THE ORIGINAL SCRUTINY ASSESSMENT AND THE REASSESSMENT AS GIVEN BY THE APPELLANT, THE DUTY DRAWBACK WAS NOT INCLUDED. THUS, THE DIFFERENCE I N DEDUCTION CLAIMED WAS ALREADY KNOWN TO THE APPELLANT WHO SHOULD HAVE BROUGHT OUT THE FACT DURING THE ORIGINAL ASSESSMENT. THUS, THE FACT THAT THERE WAS ESCAPEMENT OF INCOME IS CORRECT WHICH WAS RECTIFIED UNDER REASSESSMENT PROCEEDINGS. THE APPELLANT CLAI MED EXCESS DEDUCTION IN THE ORIGINAL RETURN OF INCOME AND THE REVENUE LOSS IS COVERED UNDER REASSESSMENT PROCEEDINGS. MOREOVER, ITA NO . 2757 /DEL /201 5 ANN KUMAR 4 THE CASE WAS REOPENED BY THE AO OBSERVING THAT THE DUTY DRAWBACK RECEIVED WAS IN INDIAN CURRENCY NOT A PART OF FOREIGN EXCHANGE RECEIPT, HENCE, NOT INCLUDABLE UNDER DEDUCTION TO BE COMPUTED U/S 10BA. THE JUDICIAL INTERPRETATIONS ARE ONLY STRENGTHENING THE BASIS OF REOPENING OF THE CASE. SINCE, THE ADDITION MADE IS AS PER THE COMPUTATION PROVIDED BY THE APPELLANT DURING - THE REASSESS MENT PROCEEDING, THE ASSESSMENT U/S 148 IS FOUND TO BE VALID AND THE ADDITIONS MADE ARE CONFIRMED, ACCORDINGLY, THE GROUNDS OF APPEAL ARE DISMISSED. 7 . I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE ASSESSMENT ORDER DATED 28.03.2 013 AND THE IMPUGNED ORDER PASSED BY THE LD. CIT(A). IT IS NOTICED THAT AN IDENTICAL ISSUE HAVING SIMILAR FACTS WAS A SUBJECT MATTER OF ADJUDICATION IN ASSESSEE S OWN CASE IN ITA NO. 2756/DEL/2015 FOR THE ASSESSMENT YEAR 2005 - 06 WHEREIN VIDE ORDER DATED 30 .03.2016, THE MATTER HAS BEEN DECIDED IN ASSESSEE S FAVOUR AND THE RELEVANT FINDINGS HAS BEEN GIVEN IN PARAS 4 TO 10 OF THE SAID ORDER WHICH READ AS UNDER: 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS RELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN THE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THE LD. AR FOR THE ASSESSEE CHALLENGING THE IMPUGNED ORDER CONTENDED THAT APPARENTLY, THIS IS A CASE OF CHANGE OF OPINIO N 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 JUDGMENT CITED AS CIT VS ATUL KUMAR SWAMI, 362 ITR 693 PASSED BY HON'BLE JURISDICTIONAL HIGH COURT AND CIT VS ITA NO . 2757 /DEL /201 5 ANN KUMAR 5 TUPPERWARE INDIA 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 PERUSAL OF THE ASSESSMENT ORDER UNDER CHALLENGE GOES TO SHOW THAT THE A SSESSMENT IN THIS CASE HAS BEEN REOPENED TO REVIEW THE APPLICABILITY OF SECTION 10BA OF THE ACT UNDER WHICH ASSESSEE HAD CLAIMED EXEMPTION AT THE TIME OF FILING THE ORIGINAL RETURN OF INCOME QUA 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 OPERATIVE PART OF THE JUDGMENT IS REPRODUCED AS UNDER FOR READY REFERENCE : - 'REASSESSMENT - NOTICE - MUST BE BASED ON TANGIBLE MATERI AL - NOTE FORMING PART OF RETURN MENTIONING AND DESCRIBING THE NATURE OF 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 RE OPENING OF ASSESSMENT HAS TO BE BASED ONLY ON TANGIBLE MATERIAL TO JUSTIFY THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME. HELD ACCORDINGLY, DISMISSING THE APPEAL, THAT THE NOTE FORMING PART OF THE RETURN FILED FOR THE ASSESSMENT YEAR 1999 - 2000 CLEARL Y MENTIONED AND DESCRIBED THE NATURE OF THE RECEIPT UNDER A NONCOMPETE 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 REOPENING OF ASS ESSMENT. ITA NO . 2757 /DEL /201 5 ANN KUMAR 6 THEREFORE, MERE CONCLUSION OF THE PROCEEDINGS UNDER SECTION 143(1) IPSO FACTO DID NOT PERMIT INVOCATION OF POWERS FOR REOPENING THE ASSESSMENT.' 7. IDENTICAL ISSUE HAS BEEN DECIDED BY THE HON BLE JURISDICTIONAL HIGH COURT IN CASE OF MADHUKAR KHO SLA VS. ACIT - 354 ITR 356 WHEREIN THE HON BLE JURISDICTIONAL HIGH COURT HAS ALSO FOLLOWED ITS OWN DECISION RENDERED IN THE CASE 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 CANNOT BE EQUATED TO AN ASSESSMENT, RELYING UPON CERTAIN OBSERVATIONS OF THE SUPREME COURT IN RAJESH JHAVERI (SUPRA) WOULD ALSO APPEAR TO BE SELFDEFEATING, BECAUSE IF AN 'INTIMATION' IS NOT AN 'ASSESSMENT' THEN IT CAN NEVER BE S UBJECTED TO SECTION 147 PROCEEDINGS, FOR, THAT SECTION COVERS ONLY AN 'ASSESSMENT' 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 THE ASSESSEE, AND QUITE RIGHTLY, IS THAT IF THE REVENUE WANTS TO INVOKE SECTION 147 IT SHOULD PLAY BY THE RULES OF THAT SECTION AND CANNOT BOG DOWN. IN OTHER WORDS, THE EXPRESSION 'REASON TO BELIEVE' CANNOT HAVE TWO DIFFERENT STANDARDS OR SET S OF MEANING, ONE APPLICABLE WHERE THE ASSESSMENT WAS EARLIER MADE UNDER SECTION 143(3) AND ANOTHER APPLICABLE WHERE AN INTIMATION WAS EARLIER ISSUED UNDER SECTION 143(1). IT FOLLOWS THAT IT IS OPEN TO THE ASSESSEE TO CONTEND THAT NOTWITHSTANDING THAT THE ARGUMENT OF 'CHANGE OF OPINION' IS NOT AVAILABLE TO HIM, IT WOULD STILL BE OPEN TO HIM TO CONTEST THE REOPENING ON THE GROUND THAT THERE WAS EITHER NO REASON TO BELIEVE OR THAT THE ALLEGED REASON TO BELIEVE IS NOT RELEVANT FOR THE FORMATION OF THE BELIEF T HAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IN DOING SO, IT IS ITA NO . 2757 /DEL /201 5 ANN KUMAR 7 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 VARIOUS JUDICIAL PRONOUNCEMENTS.' 8. FOLLOWING THE LAW LAID DOWN BY THE HON BLE JURISDICTIONAL HIGH COURT IN THE JUDGMENT (SUPRA) DISCUSSED ABOVE, WE ARE OF THE CONSIDERED VIEW THAT ASSUMING OF JURISDICTION BY THE 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 WITH THE AO TO REOPEN THE ASSESSMENT; THAT APPLYING THE LAW LAID DOWN BY HON BLE AP EX COURT IN JUDGMENT CITED AS LIBERTY INDIA (SUPRA) WITH RETROSPECTIVE EFFECT IS ALSO NOT PERMISSIBLE UNDER LAW. 9. NO DOUBT, HON BLE APEX COURT IN JUDGMENT CITED AS LIBERTY INDIA (SUPRA) HELD THAT INCENTIVE PROFITS ARE NOT PROFITS DERIVED FROM ELIGIBLE BUSINESS U/S 80IA/80IB, THEY BELONG TO THE CATEGORY OF ANCILLARY PROFITS OF SUCH UNDERTAKING. PROFITS DERIVED BY WAY OF INCENTIVE, SUCH AS, DEPB/DUTY DRAWBACK CANNOT BE CREDITED AGAINST THE COST OF MANUFACTURE OF GOODS DEBITED IN THE PROFIT AND LOSS ACCOUN T AND THEY DO NOT FALL WITHIN THE EXPRESSION PROFITS 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 CIRCUMS TANCES IS ITSELF NOT PERMISSIBLE, THE AO IS NOT EMPOWERED TO REVIEW THE APPLICABILITY OF SECTION 10BA. SO, IN THE GIVEN CIRCUMSTANCES, WE ARE OF THE CONSIDERED VIEW THAT REASSESSMENT IN THIS CASE IS NOT PERMISSIBLE UNDER ANY CIRCUMSTANCES. ITA NO . 2757 /DEL /201 5 ANN KUMAR 8 10. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE HEREBY ALLOW THE PRESENT APPEAL. 8 . SINCE THE FACTS OF THE PRESENT CASE ARE IDENTICAL TO THE FACTS INVOLVED IN THE ASSESSMENT YEAR 2005 - 06 IN ITA NO. 2756/DEL/2015 IN ASSESSEE S OWN CASE. SO, RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER DATED 30.03.2016 IN ITA NO. 2756/DEL/2015 FOR THE ASSESSMENT YEAR 2005 - 06 IN ASSESSEE S OWN CASE, THE IMPUGNED DISALLOWANCE MADE BY THE AO AND SUSTAINED BY THE LD. CIT(A) IS DELETED. IT IS ALSO RELEVANT TO POINT OUT THAT NO OTHE R DECISION WAS CITED BY EITHER OF THE PARTIES. 9 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . (O RD ER PRO NO UNCED IN THE COURT ON 06/07 /2016 ) SD/ - (N. K. SAINI) ACCOUNTANT MEMBER DAT ED: 06/07 /2016 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR