The ACIT, Central Circle-1(1), Ahmedabad V. Meghmani Organics Ltd., Ahmedabad

ITA 3081/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73011 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 18-02-2014
• Assessment Year: 1999-2000
• Appeal Filed On: 18-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Keywords: Reopening of assessment; Retrospective amendment
• Section: 80HHC; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER ITA NO.3081/AHD/2010 A.Y. 1999-00 THE ACIT CENTRAL CIRCLE 1(1) AHMEDABAD. V/S. MEGHMANI ORGANICS LTD., PLOT NO.183-184, PHASE-II, GIDC, INDUSTRIAL ESTATE, VATVA, AHMEDABAD. PAN: AABCM 0644E (APPELLANT) (RESPONDENT) REVENUE BY : SHRI O.P. BATHEJA, SR.D.R. ASSESSEE(S) BY : SHRI S.N. SOPARKAR WITH URVASHI SHODHAN / DATE OF HEARING : 18/02/2014 / DATE OF PRONOUNCEMENT: 21/02/2014 / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, J.M. THIS IS AN APPEAL FILED BY THE REVENUE ARISING FROM THE ORDER OF LEARNED CIT(A)-III AHMEDABAD, DATED 05.08.2010 A ND THE GROUNDS RAISED ARE REPRODUCED BELOW: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CANCELING THE RE- OPENING OF ASSESSMENT. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHELD REOPENING OF ASSESSMENT AND OUGHT TO HAVE UPHELD THE ADDITION OF RS.1,48,48,595/- MADE ON ACCOUNT OF DISALLOWANCE OF EXCESS CLAIM OF DEDUCTION U/S.80HHC, IN VIEW OF THE AMENDMENT TO SECTION 80HH C OF THE ACT W.E.F. 01/04/1998. 2. APROPOS TO GROUND NO.1, ORIGINALLY AN ASSESSMENT U/S.143(3) WAS COMPLETED ON 28 TH OF MARCH, 2002 DETERMINING THE TOTAL ITA NO.3081/AHD/2010 ACIT VS. MEGHMANI ORGANICS LTD. A.Y. 1999- 00 - 2 - INCOME AT RS.4,36,90,220/-. THE ASSESSEE HAD CLAIME D DEDUCTION U/S.80HHC OF RS.8,48,13,643/- WHICH WAS RESTRICTED TO RS.1,92,55,779/-. IT WAS NOTED BY THE REVENUE DEPAR TMENT THAT THE FOLLOWING EXPORT INCENTIVES WERE INCLUDED IN THE O THER INCOME OF THE ASSESSEE. 1. DUTY DRAW BACK RS.13,39,086/- 2. PREMIUM ON SALE OF IMPORT LICENSES RS. 5,81,399 /- 3. DEPB BENEFIT RS.5,17,63,437/- TOTAL RS.5,36,83,922/- 2.1 THE OBJECTION OF THE AO WHILE RE-OPENING THE AS SESSMENT WAS THAT A DEDUCTION WAS ALLOWED IN RESPECT OF THE ABOVE EXPORT INCENTIVE BY THE AO IN THE SAID ORIGINAL ASSESSMENT ORDER BY ISSUING A NOTICE U/S.148. THE CASE WAS REOPENED AND THEREUPON AN EXCESS DEDUCTION U/S.80HHC; PERTAINED TO EXPORT INC ENTIVES WAS DISALLOWED AMOUNTING TO RS.1,48,48,595/- VIDE AN AS SESSMENT ORDER PASSED U/S.143(3) R.W.S. 147 OF THE IT ACT DA TED 01.12.2006. THE REOPENING WAS CHALLENGED. 3. IT WAS ARGUED BEFORE LEARNED CIT(A) THAT THE ORI GINAL ASSESSMENT WAS COMPLETED U/S.143(3) ON 28.03.2002, HOWEVER, THE SAME WAS REOPENED VIDE A NOTICE U/S.148 ISSUED ON 3 0 TH OF MARCH, 2006 WHICH WAS BEYOND FOUR YEARS BECAUSE THE ASSESS MENT YEAR INVOLVED WAS A.Y.1999-00. IN SUPPORT OF THIS ARGUME NT A DECISION OF HONBLE GUJARAT HIGH COURT PRONOUNCED IN THE CAS E OF SADBHAV ENGINEERING LTD., 333 ITR 483 (GUJ) HAS BEEN CITED. LEARNED CIT(A) HAS FOLLOWED THE CITED CASE LAW AND CANCELLE D THE REOPENED ASSESSMENT IN THE FOLLOWING MANNER: ITA NO.3081/AHD/2010 ACIT VS. MEGHMANI ORGANICS LTD. A.Y. 1999- 00 - 3 - IN THE PRESENT CASE, THE SITUATION AT SR.NO.L DOES NOT ARISE AS THE APPELLANT HAS FILED ITS RETURN OF INCOME U/S. 139(1 ) BEFORE DUE DATE. IN RESPECT OF THE SECOND SITUATION, I.E. TO DISCLOSE F ULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT, IT CAN NOT BE SAID THAT THE APPELLANT HAS NOT DISCLOSED FULLY AND TRULY ALL MAT ERIAL FACTS NECESSARY FOR ITS ASSESSMENT. THIS ISSUE HAS BEEN DISCUSSED B Y THE HON'BLE HIGH COURT OF GUJARAT RECENTLY IN THE CASE OF SADBHAV EN GINEERING LTD VS. DCIT(GUJ.) ON 2 ND AUGUST, 2010. THE HEADNOTE OF THE ABOVE DECISION AS APPEARING IN ITAT ONLINE, ARE REPRODUCED AS UNDE R: 'SADBHAV ENGINEERING VS. DCIT (GUIARAT HIGH COURT) MONDAY, AUGUST 2ND, 2010 . REOPENING BEYOND FOUR YEARS FROM THE OPENING OF RETROSPECTIVE AMENDMENT NOT JUSTIFIED IF ASSESSEE HAS NOT FAILED TO DISCLOSE MATERIAL FAC TS, IN RESPECT OF AY 2003-04, THE ASSESSEE CLAIMED DEDU CTION U/S 80IA (4) WHICH WAS PARTLY ALLOWED BY THE AO VIDE ASSESSMENT ORDER PASSED U/S 143(3). SUBSEQUENTLY, A RETROSPECTIVE AMENDMENT WAS MADE TO. S. 80IA BY THE FINANCE (NO.2) ACT, 2009 W.E.F 1.4.2000 TO PROVIDE THAT S. 80LA DEDUCTION WOULD NOT BE ADMISSIBLE TO AN ASSESS EE WHO CARRIES ON BUSINESS WHICH IS IN THE NATURE OF WORKS CONTRAC T. AFTER THE EXPIRY OF 4 YEARS FROM THE END OF THE ASSESSMENT YEAR, THE AO REOPENED THE ASSESSMENT U/S 147 TO DENY THE DEDUCTION U/S 80LA I N VIEW OF THE RETROSPECTIVE AMENDMENT. THE ASSESSEE CHALLENGED TH E REOPENING BY A WRIT PETITION. THE DEPARTMENT ARGUED THAT THE BY VIRTUE OF THE RETROSPECTIVE AMENDMENT, IT HAD TO BE DEEMED THAT T HE ASSESSEE HAD SUBMITTED UNTRUE FACTS AT THE RELEVANT TIME AND THAT S.147 WAS ATTRACTED. HELD ALLOWING THE PETITION: UNDER THE FIRST PROVISO TO S. 147 WHERE AN ASSESSME NT HAS BEEN MADE U/S 143(3), THE ASSESSMENT CANNOT BE REOPENED AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS IF INCOME HAS ESCAPED ASSESSMENT BY REASON OF FAILURE ON THE PART OF THE ASSESSES TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECE SSARY FOR HIS ASSESSMENT. IN THE PRESENT CASE, THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO MAKE A FULL AND TRUE DISCLOSURE OF THE MATERIAL FACTS. THE ARGUMENT THAT IN VIEW OF THE RETROSPECTIVE AMENDMENT OF SECTION 80IB, IT IS DEEMED THAT THE PETITIONER HAS FAILED T O DISCLOSE THE CORRECT FACTS IS NOT ACCEPTABLE. THE QUESTION WHETHER THERE IS A FAILURE TO DISCLOSE ALL MATERIAL FACTS IS A MATTER OF FACT AND THERE CAN BE NO DEEMED FAILURE AS CONTENDED BY THE DEPARTMENT. CONSEQUENTLY, IN TH E ABSENCE OF ANY FAILURE ON THE PART OF THE ASSESSEE TO MAKE A FULL & TRUE DISCLOSURE OF MATERIAL FACTS, THE INITIATION OF PRO CEEDINGS U/S 147 WAS INITIATED AND COULD NOT BE SUSTAINED, ; NOTE: A SIMILAR VIEW HAS BEEN TAKEN IN DENISH INDUSTRIES 271ITR 340 (GUJ). A CHALLENGE TO THE VALIDITY OF THE RETROSPEC TIVE AMENDMENT TO S. 80IA (4) IS PENDING. SEE ALSO RALLIS INDIA VS. ACIT (BOM) WHERE IT WAS ITA NO.3081/AHD/2010 ACIT VS. MEGHMANI ORGANICS LTD. A.Y. 1999- 00 - 4 - HELD THAT A RETROSPECTIVE AMENDMENT EFFECTED AFTER THE ISSUE OF THE S. 148 NOTICE CANNOT BE RELIED UPON TO SUPPORT THE REO PENING.' 7. SINCE THE CASE OF THE APPELLANT IS SQUARELY COVE RED BY THE DECISION OF JURISDICTIONAL HIGH COURT, RESPECTFULLY FOLLOWIN G THAT DECISION, THE REOPENING OF THE ASSESSMENT IS HEREBY CANCELLED. ON THIS GROUND ALONE, THE APPEAL OF THE APPELLANT IS ALLOWED. 4. HEARD BOTH THE SIDE. NOW BEFORE US AN ANOTHER DE CISION OF HONBLE GUJARAT HIGH COURT PRONOUNCED IN THE CASE O F DISHMAN PHARMACEUTICALS & CHEMICALS LTD., 210 TAXMANN.COM 149 HAS BEEN CITED, RELEVANT PORTION IS QUOTED BELOW: 8. THE PRESENT CASE WOULD BE DIRECTLY COVERED BY T HE DECISION OF THIS COURT IN THE CASE OF DENISH INDUSTRIES LTD.(SU PRA). AS RIGHTLY CONTENDED BY THE LEARNED COUNSEL FOR THE PETITIONER , AT THE RELEVANT TIME WHEN THE PETITION FILED ITS RETURN OF INCOME F OR THE ASSESSMENT YEAR 2000-01, IT COULD NOT HAVE ASSUMED THAT SECTIO N 80HHC WAS GOING TO BE AMENDED IN THE YEAR 2005 AND FILE ITS R ETURN ACCORDINGLY. UNDER THE CIRCUMSTANCES, THE CONTENTION PUT FORTH O N BEHALF OF THE RESPONDENT THAT THE PETITIONER BY NOT FILING ITS RE TURN IN TERMS OF THE AMENDED PROVISIONS OF SECTION 80HHC OF THE ACT HAD FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS DESERVES TO BE S TATED ONLY TO BE REJECTED. WHEN THE AMENDED PROVISIONS OF SECTION 80 HHC OF THE ACT WERE NOT IN EXISTENCE AT THE RELEVANT TIME WHEN THE RETURN CAME TO BE FILED, NO SUCH FAILURE CAN BE ATTRIBUTED TO THE ASS ESSEE. 9. IN THE AFORESAID PREMISES, IT IS APPARENT THAT T HE BASIC REQUIREMENT FOR REOPENING THE ASSESSMENT AFTER THE EXPIRY OF THE PERIOD OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR, NAMELY, THAT THERE IS ESCAPEMENT OF INCOME CHARGEABLE TO TAX BY REASON OF FAILURE ON THE PART OF THE PETITIONER TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS IS NOT SATISFIED, THEREBY RENDERING THE IMPUG NED NOTICE UNDER SECTION 148 OF THE ACT, UNSUSTAINABLE. 5. IN THE LIGHT OF THE ABOVE DECISIONS OF THE JURIS DICTIONAL HIGH COURT, ONCE THE ADMITTED FACTUAL POSITION WAS THAT FOR A.Y. 1999- 00 THE RETURN ORIGINALLY WAS FILED ON 30.12.1999 WH EREIN THE CLAIM OF DEDUCTION U/S. 80HHC WAS MADE THEN PURSUANT THER EUPON ASSESSMENT WAS MADE U/S.143(3) VIDE ORDER DATED 28. 03.2002 IN WHICH 80HHC CLAIM WAS SCRUTINIZED AND DISALLOWANCE WAS MADE, ITA NO.3081/AHD/2010 ACIT VS. MEGHMANI ORGANICS LTD. A.Y. 1999- 00 - 5 - HENCE, WE HEREBY UPHOLD THE VIEW TAKEN BY LEARNED C IT(A) AND DISMISS THIS GROUND OF THE REVENUE. 6. APROPOS TO GROUND NO.2, SINCE THE ASSESSMENT IN QUESTION ITSELF HAS BEEN ANNULLED, THEREFORE, THE GROUND NO. 2 DOES NOT SURVIVE, RESULTANTLY DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. SD/- SD/- (N.S. SAINI) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUD ICIAL MEMBER AHMEDABAD; DATED 21/02/2014 PRABHAT KR. KESARWANI, SR. P.S. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD