M/s Transpek Industry Ltd, Baroda V. The Income tax Officer,Ward-4, Baroda

ITA 3042/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80245 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2014
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 04-08-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 05-12-2011
• Court: TRIBUNAL
• Department Lawyers: ROOP CHAND
• Keywords: Retrospective amendment; Tangible material; Difference of opinion; Change of opinion
• Section: 143(3); 14A; 148

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , , , , 0 00 0 0 00 0 ' ' ' ' , , , , #$ #$ #$ #$ # % # % # % # % BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER ITA NO. 3042/AHD/2011 (ASSESSMENT YEAR 2006-07) TRANSPEK INDUSTRY LIMITED BARODA. PAN: AAACT8639B VS THE INCOME TAX OFFICER WARD-4, BARODA. &'/ APPELLANT )*&' / RESPONDENT ITA NO. 3009/AHD/2011 (ASSESSMENT YEAR 2006-07) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-4, BARODA. VS TRANSPEK INDUSTRY LIMITED BARODA. PAN: AAACT8639B &'/ APPELLANT )*&' / RESPONDENT REVENUE BY : SHRI ROOPCHAND, SR. DR ASSESSEE(S) BY : SHRI SANJAY R. SHAH, AR + , $/ // / DATE OF HEARING : 04/08/2014 -./ , $ / DATE OF PRONOUNCEMENT: 08/08/2014 #0 #0 #0 #0/ // / O R D E R PER SHRI N.S. SAINI, ACCOUNTANT MEMBER: THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE A ND THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)III, BARODA DATED 07.09.2011. ITA NOS. 3042 & 3009/AHD/11 TRANSPEK INDUSTRY LTD., BARODA. AY 2006-07 - 2 - 2. GROUND NO. 1 OF THE APPEAL TAKEN BY THE ASSESSE E READS AS UNDER: THE LEARNED CIT(A) HAS ERRED IN CONFORMING THE INVO CATION OF PROVISIONS OF SECTION 148 OF THE ACT BY AO. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE NOTICE D ATED 15.03.2010 ISSUED U/S 148 OF THE ACT AND THE CONSEQUENT ORDER PASSED U/S. 143(3) R.W.S. 147 OF THE ACT, BE HELD TO BE BAD IN LAW AND VOID AB-INITIO. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD . IN THE INSTANT CASE, THE ASSESSEE FILED ITS ORIGINAL RETURN OF INCOME ON 30. 12.2006 WHEREIN IT CLAIMED EXPENSES DISALLOWED U/S. 14A AT RS NIL. THE ORIGIN AL ASSESSMENT WAS COMPLETED AFTER SCRUTINY U/S. 143(3) AND WHEREIN TH E ASSESSING OFFICER FOR THE REASONS MENTIONED IN THAT ORDER ESTIMATED THE A MOUNT DISALLOWABLE U/S. 14A AT RS 1,54,559/-. THE ASSESSMENT WAS REOPENED ON 15.03.2010 BY THE ISSUE OF NOTICE U/S. 148 FOR THE FOLLOWING REASONS: IN THE INSTANT CASE, IT WAS NOTED THAT IN THE ASSE SSMENT, THE ASSESSING OFFICER HAD MADE THE DISALLOWANCE OF RS 1 ,54,559/- ON SUBJECTIVE MANNER U/S. 14A. IN VIEW OF THE DECISIO N OF THE HON. ITAT, SPECIAL BENCH, MUMBAI IN THE CASE OF DAGA CAPITAL M ANAGEMENT PVT. LTD., THE ASSESSING OFFICER HAS NO DISCRETION IN QU ANTIFYING THE DISALLOWANCE U/S. 14A, THE SAME HAS TO BE MANDATORI LY MADE AS PER RULE 8D. THE HON. ITAT HAS ALSO HELD THAT THOUGH R ULE 8D WAS INSERTED WITH EFFECT FROM 24.03.2008, IT WOULD HAVE RETROSPECTIVE EFFECT. THEREAFTER, THE ASSESSMENT U/S. 147 OF THE ACT WAS COMPLETED ON 15.12.2010 WHEREIN THE ASSESSING OFFICER DISALLOWED RS 30,91,180/- U/S. 14A OF THE ACT. THE ASSESSEE CHALLENGED THE VALIDI TY OF REOPENING OF THE ASSESSMENT ON THE ABOVE STATED GROUND UNSUCCESSFULL Y BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). 4. BEFORE US, THE ARGUMENT OF THE AUTHORIZED REPRE SENTATIVE OF THE ASSESSEE WAS THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & ITA NOS. 3042 & 3009/AHD/11 TRANSPEK INDUSTRY LTD., BARODA. AY 2006-07 - 3 - BOYCE MFG. CO. LTD. VS. DCIT (2010) 328 ITR 81 (BOM ) HAS OVERRULED THE DECISION OF THE MUMBAI SPECIAL BENCH OF THE TRIBUNA L IN THE CASE OF DAGA CAPITAL MANAGEMENT PRIVATE LIMITED (2009) 312 ITR A T1 AND CATEGORICALLY HELD THAT THE PROVISIONS OF SECTION 14A(2) READ WIT H RULE 8D ARE PROSPECTIVE AND APPLICABLE FOR THE ASSESSMENT YEAR 2008-09 AND SUBSEQUENT YEARS AND NOT IN RESPECT OF EARLIER YEARS. THEREFORE, THE RE ASONS RECORDED BEING NOT VALID, THE REOPENING WAS BAD IN LAW. 5. THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE C ONTENDED THAT THE REOPENING BEING BASED ON CHANGE OF OPINION ONLY BY THE SUCCEEDING ASSESSING OFFICER, THE SAME WAS BAD IN LAW. FOR TH E ABOVE SUBMISSION, HE RELIED ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF RECKITT BENCKISER HEALTHCARE INDIA LTD. VS. ACIT(OC D), CIRCLE-5 (2013) 35 TAXMANN.COM 539. 6. ON THE OTHER HAND, THE DEPARTMENTAL REPRESENTAT IVE RELIED UPON THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S). 7. WE FIND THAT IT IS NOT IN DISPUTE THAT THE ISSU E OF DISALLOWANCE U/S. 14A WAS DULY CONSIDERED BY THE ASSESSING OFFIC ER IN THE ORIGINAL ASSESSMENT AND THAT THE ASSESSING OFFICER FORMED A VIEW AFTER CONSIDERATION THAT THE AMOUNT SO DISALLOWABLE U/S. 14A IS TO BE T AKEN AT RS 1,54,559/-. THEREAFTER, ON THE VERY SAME MATERIALS, THE ASSESSM ENT WAS REOPENED ON THE GROUND THAT DISALLOWANCE U/S. 14A OUGHT TO HAVE BEEN OF A LARGER AMOUNT THAN THE ONE DISALLOWED BY THE ASSESSING OFF ICER IN THE ORIGINAL ASSESSMENT. 8. WE FIND THAT THE DECISION OF THE MUMBAI SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF DAGA CAPITAL MANAGEMENT PRI VATE LIMITED (SUPRA) WAS RENDERED ON 20.10.2008 WHEREAS THE ORIGINAL ASS ESSMENT IN THE INSTANT CASE U/S. 143(3) WAS MADE ON 30.12.2008. THEREFORE , THE SAID DECISION ITA NOS. 3042 & 3009/AHD/11 TRANSPEK INDUSTRY LTD., BARODA. AY 2006-07 - 4 - CANNOT BE HELD AS TANGIBLE MATERIAL WHICH CAME INTO EXISTENCE AFTER COMPLETION OF ORIGINAL ASSESSMENT U/S. 143(3) OF TH E ACT. WE FIND THAT THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. KELVIN ATOR OF INDIA LIMITED (2010) 320 ITR 561 (SC) HAS APPROVED THE FULL BENCH DECISION OF THE HONBLE DELHI HIGH COURT REPORTED IN 256 ITR 1 (DEL) WHEREI N IT WAS HELD THAT POWER TO REVIEW CANNOT BE INVOKED IN THE GARB OF REASSESS MENT. IT WAS HELD IN THE ABOVE CASE BY THE HONBLE SUPREME COURT AS UNDER: THE ASSESSING OFFICER HAS NO POWER TO REVIEW; HE HAS POWER TO REASSESS BUT REASSESSMENT HAS TO BE BASED ON FULFIL MENT OF CERTAIN PRE-CONDITIONS AND IF THE CONCEPT OF CHAN GE OF OPINION IS REMOVED, AS CONTENDED ON BEHALF OF DEPARTMENT TH EN, IN THE GARB OF REOPENING THE ASSESSMENT, THE REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF CHANGE OF OPINION AS AN IN-BUILT TEST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFIC ER. 9. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ORIENT CRAFT LTD. (2013) 354 ITR 536 (DEL) HAS HELD AS UNDER: THERE WAS NOTHING IN THE REASONS RECORDED TO SHOW THAT ANY TANGIBLE MATERIAL HAD COME INTO THE POSSESSION OF T HE ASSESSING OFFICER SUBSEQUENT TO THE ISSUE OF THE INTIMATION. THE NOTICE REFLECTED AN ARBITRARY EXERCISE OF THE POWER CONFER RED UNDER SECTION 147. 10. FURTHER, THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF RECKITT BENCKISER HEALTHCARE INDIA LTD. (SUPRA) HAS HELD AS UNDER: 14. FROM THE ABOVE SEQUENCE OF EVENTS, IT CLEARLY EMERGES THAT THE QUESTION OF DISALLOWANCE OF EXPENDITURE OR PART THEREOF UNDER SECTION 14A OF THE ACT FOR EARNING EXEMPT INC OME WAS VERY MUCH ALIVE BEFORE THE ASSESSING OFFICER DURING THE ORIGINAL ASSESSMENT PROCEEDINGS. IN FACT, SUCH QUESTION WAS EXAMINED FROM VARIOUS ANGLES. THE PETITIONER CONTENDED THAT NO DISALLOWANCE WAS CALLED FOR. THE PETITIONER THROUGH SERIES OF LETTERS ASSERTED ITS STAND. IN FACT, IN ONE SUCH LE TTER DATED MARCH ITA NOS. 3042 & 3009/AHD/11 TRANSPEK INDUSTRY LTD., BARODA. AY 2006-07 - 5 - 16, 2009, THE PETITIONER POINTEDLY ADDRESSED THE IS SUE OF DISALLOWANCE UNDER RULE 8D. IN THE PRESENT CASE, WE ARE NOT JUDGING THE VALIDITY OF THE PETITIONER'S CONTENTION . WHAT IS IMPORTANT FOR OUR PURPOSE IS THAT THE ENTIRE ISSUE WAS SCRUTINIZED BY THE ASSESSING OFFICER DURING THE ORIGINAL ASSESS MENT PROCEEDINGS. IT IS ONLY UPON CONSIDERATION OF THE S AID ASPECT, HE HAS MADE DISALLOWANCE TO THE LIMITED EXTENT OF RS.2 ,11,316/-. 15. IN OUR OPINION, EVEN WITHIN A PERIOD OF FOUR YE ARS SUCH ASSESSMENT CANNOT BE REOPENED. ANY PERMISSION TO TH E ASSESSING OFFICER TO DO SO WOULD AMOUNT TO PERMITTI NG CHANGE OF OPINION. IF THE DEPARTMENT WAS OF THE OPINION THAT THE DISALLOWANCE WAS NOT FITTING THE LEGAL POSITION, OT HER REMEDY WAS AVAILABLE. SURELY, TO CORRECT THE ASSESSMENT ORDER PASSED AFTER A DETAILED EXAMINATION BY THE ASSESSING OFFICER, THE SUCCEEDING ASSESSING OFFICER CANNOT RESORT TO THE PROCEEDINGS OF REOPENING. THIS IS PRECISELY WHAT HAS BEEN DONE IN THE PRESENT CASE. UNDER THE CIRCUMSTANCES, THE IMPUGNED NOTICE DATED MARCH 22, 2012 IS QUASHED. WE FIND THAT THE ABOVE DECISION OF THE HONBLE JURI SDICTIONAL HIGH COURT IS SQUARELY APPLICABLE TO THE FACTS OF THE INSTANT CAS E. WE THEREFORE FOLLOWING THE ABOVE DECISION OF THE HONBLE JURISDICTIONAL HI GH COURT FIND THAT IN THE INSTANT CASE THE REMEDY FOR MISTAKES OF THE ASSESSI NG OFFICER, IF ANY, MAY BE AVAILABLE UNDER OTHER PROVISIONS OF THE ACT, BUT CE RTAINLY REVIEW OF THE VERY SAME MATERIAL BY THE SUCCEEDING ASSESSING OFFICER T O TAKE A DIFFERENT VIEW IS NOT AVAILABLE WITH THE ASSESSING OFFICER IN THE GAR B OF REASSESSMENT. WE, THEREFORE, ARE OF THE OPINION THAT THE REOPENING OF THE REASSESSMENT IN THE INSTANT CASE IS UNSUSTAINABLE AND BAD IN LAW. WE, THEREFORE, CANCEL THE IMPUGNED ORDER OF REASSESSMENT DATED 15.12.2010. T HUS, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 11. IN VIEW OF OUR ABOVE DECISION IN RESPECT OF GR OUND NO. 1 OF THE APPEAL OF THE ASSESSEE, THE OTHER GROUNDS OF THE AP PEAL OF THE ASSESSEE AND THE APPEAL OF THE REVENUE HAVE BECOME INFRUCTUOUS A ND ACADEMIC IN NATURE WHICH REQUIRES NO ADJUDICATION BY US. THEREFORE, T HE SAME ARE DISMISSED. ITA NOS. 3042 & 3009/AHD/11 TRANSPEK INDUSTRY LTD., BARODA. AY 2006-07 - 6 - 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED AND THAT OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 8 TH OF AUGUST, 2014 AT AHMEDABAD. SD/- SD/- (MUKUL KR. SHRAWAT) JUDICIAL MEMBER ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 08/08/2014 GHANSHYAM MAURYA, SR. P.S. TRUE COPY #0 , )1 2#1/ #0 , )1 2#1/ #0 , )1 2#1/ #0 , )1 2#1// COPY OF THE ORDER FORWARDED TO : 1. &' / THE APPELLANT 2. )*&' / THE RESPONDENT. 3. 3 / CONCERNED CIT 4. 3() / THE CIT(A)-III, AHMEDABAD 5. 167 ) , , / DR, ITAT, AHMEDABAD 6. 78 9+ / GUARD FILE. #0 #0 #0 #0 / BY ORDER, : :: :/ // / ; ; ; ; ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD