Subhash Chander Kathuria, New Delhi V. ACIT, New Delhi

ITA 3084/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4140 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 19-04-2011
• Assessment Year: 2000-2001
• Appeal Filed On: 18-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KISHORE B
• Assessee Lawyers: MANOJ NAGRATH
• Keywords: Business income; Depreciation; Difference of opinion; Assessment record; Reason to believe; Change of opinion
• Section: 143(3); 80HHC; 147; 148; 139

Judgement Text

ITA NO. 3084/DEL/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 3084/DEL/2010 A.Y. : 2000-01 SUBHASH CHANDER KATHURIA, C/O CHARTERED ACCOUNTANT, A-380, DEFENCE COLONY, NEW DELHI 110 024 (PAN/GIR NO. : AAJPK0171B) VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 25(1), NEW DELHI (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : SH. MANOJ NAGRATH, CA DEPARTMENT BY : SH. KISHORE B. (D.R.) ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 26.3.2 010 AND PERTAINS TO ASSESSMENT YEAR 2000-01. 2. THE FIRST ISSUE RAISED IS THAT REOPENING OF THE CASE WAS NOT VALID. 3. IN THIS CASE THE ASSESSEE IS THE PROPRIETOR OF THREE BUSINESS CONCERNS NAMELY, M/S ANITA INTERNATIONAL, M/S ANITA INTERNATIONAL (EXPORT DIVISION) AND M/S KATHURIA STEEL ROLLING MIL LS, M/S ANITA INTERNATIONAL (EXPORT DIVISION) IS EXPORTING GOODS. M/S ANITA INTERNATIONAL IS ENGAGED IN THE BUSINESS OF IMPORT AND RESALE OF TEAK WOOD, PHARMACEUTICALS AND OTHER ITEMS. IN M/S ANITA INTERNATIONAL (EXPORT DIVISION), WHICH WAS ENGAGED IN EXPORT BUSIN ESS, THE ASSESSEE HAD SHOWN PROFIT OF ` 87,78,940/- ON THE TOTAL TURN OVER OF ` 8,25,00,754/-. IN M/S ANITA INTERNATIONAL, THE ASS ESSEE HAD SHOWN LOSS ITA NO. 3084/DEL/2010 2 OF ` 5,76,338/- ON THE TOTAL SALES OF ` 19,46,93,66 8/- AND; IN M/S KATHURIA STEEL ROLLING MILLS, THE ASSESSEE HAD DECLA RED PROFIT OF ` 1,23,740/- ON HIRE CHARGES OF MACHINERY. THE ASSESS EE HAD CLAIMED DEDUCTION U/S 80HHC TO THE TUNE OF ` 71,77,341/- U/ S 80HHC AS PER COMPUTATION FILED WITH THE RETURN OF INCOME. THE C LAIM OF DEDUCTION U/S 80HHC WAS REVISED TO ` 1,40,68,129/- IN A REVIS ED COMPUTATION FILED DURING THE ASSESSMENT PROCEEDINGS. HOWEVER, T HE DEDUCTION U/S 80HHC WAS ALLOWED AT ` 83,26,348/- U/S 143(3) OF TH E ACT, VIDE THE ORDER DATED 31.3.2003. 3.1 SUBSEQUENTLY, THE ASSESSING OFFICER NOTICED TH AT THE ASSESSEE, WHILE CALCULATING THE DEDUCTION U/S 80HHC IN THE OR IGINAL COMPUTATION AS WELL AS THE REVISED COMPUTATION, HAD TAKEN THE TO TAL TURNOVER AT ` 8,25,00,754/- I.E. THE TURNOVER OF ONLY M/S ANITA I NTERNATIONAL (EXPORT DIVISION) INSTEAD OF TAKING THE SUM TOTAL OF TURNOVE R OF ALL THE BUSINESS CONCERNS, NAMELY, M/S ANITA INTERNATIONAL, M/S ANITA INTERNATIONAL (EXPORT DIVISION) AND M/S KATHURIA STEEL ROLLING MILLS . THE DEDUCTION U/S 80HHC BY TAKING THE SUM OF TOTAL OF TURNOVER OF ALL BUSINESS CONCERNS, WORKED OUT TO NIL AS AGAINST ALLOWED DED UCTION OF ` 83,26,348/- U/S 143(3) OF THE ACT. 4. IN THIS BACKGROUND THE ASSESSEES CASE WAS OF RE OPENED AND ASSESSEE WAS DENIED DEDUCTION U/S 80HHC. ASSESSEE PLEADED AGAINST THE REOPENING, BUT THE SAME WAS NOT ACCEPTED BY THE ASSESSING OFFICER. 5. BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) ALSO ASSESSEE APPEALED THAT REOPENING WAS NOT VALID, AS THERE WAS ONLY A CHANGE OF OPINION BY THE ASSESSING OFFICER. LD. COMMISSIONER OF ITA NO. 3084/DEL/2010 3 INCOME TAX (APPEALS) DID NOT AGREE WITH THE CONTENT IONS AND UPHELD THE REOPENING. 6. AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL BEF ORE US. 7. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ASSESSMENT WAS DONE AFTER THE 4 YEARS OF THE COMPLETION OF THE ASSESSMENT YEAR. HE CLAIMED THA T UNDER SUCH CIRCUMSTANCES, PROVISO TO SECTION 147 IS APPLICABLE AS THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL THE RELEVANT MATERIALS. LD. COUNSEL OF THE ASSESSEE ARGUED THAT IT WAS ONLY CHANGE OF OPINION, HENCE, THE REOPENING IS NOT SUSTAINABLE . 7.1 LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAN D RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS. WE CAN GAINFULLY REFER HERE THE PROVISION OF SECTION 147 WHICH READ AS UNDER:- INCOME ESCAPING ASSESSMENT - 147. IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, ASSESS OR REASSE SS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS E SCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENT LY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS T HE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN THI S SECTION AND IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASS ESSMENT YEAR). PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER T HE EXPIRY OF FOUR YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME ITA NO. 3084/DEL/2010 4 CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSE E TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB- SECTION(1) OF SECTION 142 OR SECTION 148 OR TO DISC LOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FO R THAT ASSESSMENT YEAR.' 9. FROM THE ABOVE IT IS CLEAR THAT AFTER THE EXPIRY O F 4 YEARS, REOPENING CAN BE DONE ONLY IF THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASONS OF FAILURE ON THE PAR T OF THE ASSESSEE TO MAKE A RETURN OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THAT ASSESSMENT YEAR. WE FIND THAT A SSESSEE HAS DISCLOSED ALL THE RELEVANT MATERIALS. 10. THE REASONS RECORDED FOR REASSESSMENT CONTAINS FACTS AND FIGURES WHICH WERE TAKEN FROM ASSESSEES ACCOUNT SUBMITTED I N THE ORIGINAL ASSESSMENT. THE REASONS FOR REOPENING IN THIS CA SE READS AS UNDER:- THE ASSESSEE FILED RETURN OF INCOME FOR THE AY 200 0-01 DECLARING AN INCOME OF ` 25,77,060/-. ASSESSMENT IN THE CASE WAS COMPLETED U/S 143(3) ON 31.3.2003 AT AN INCOME OF RS.14,28,050/-. WHILE GOING THROUGH THE ASSESSMENT RECORDS, IT IS NOTICED THAT THE ASSESSEE CARRIED OUT BUSINESS UND ER THE NAMES OF THREE PROPRIETORSHJP CONCERNS, NAMELY M/S, ANITA I NTERNATIONAL, M/S INTERNATIONAL (EXPORT DIVISION) AND M/S KATHURIA S TEEL ROLLING MILLS. IN M/S ANITA INTERNATIONAL, THE ASSESSEE DEC LARED LOSS OF ` 576368/- ON TOTAL TURNOVER OF ` 19,46,93,668/-, IN M/S ANITA INTERNATIONAL (EXPORT DIVISION) WHICH WAS ENGAGED IN EXPORT BUSINESS, THE ASSESSEE DECLARED PROFIT OF ` 87,78,9 40/- ON TOTAL TURNOVER OF ` 825,00,754/- WHICH INCLUDED INTEREST OF RS.32344/- ON FDRS AND IN M/S KATHURIA ROLLING MILLS, THE ASSES SEE DECLARED PROFIT OF ` 123,740/- IN RESPECT OF MACHINERY HIRE C HARGES ITA NO. 3084/DEL/2010 5 RECEIVED BY HIM. THE ASSESSEE CLAIMED DEDUCTION O F ` 71,77,341/- U/S 80HHC AS PER COMPUTATION FILED WITH THE RETURN OF INCOME. THE CLAIM OF DEDUCTION U/S 80HHC WAS REVISED TO ` 140,68,12,9/- IN A REVISED COMPUTATION FILED DURING THE ASSESSMENT PROCEEDINGS AND BASED ON THESE CLAIMS, DE DUCTION U/S 80HHC WAS ALLOWED ` 83,26,348/- WHILE COMPLETIN G THE ASSESSMENT. THE ASSESSEE. WHILE CALCULATING THE DEDUCTION U/S 8 0HHC IN THE ORIGINAL COMPUTATION AS WLEL AS IN THE REVISED COMPUT ATION, HAD TAKEN THE TOTAL TURNOVER AT ` 82500754/- I.E. THE T URNOVER OF M/S ANITA INTERNATIONAL (EXPORT DIVISION) INSTEAD OF TAK ING THE SUM TOTAL OF TURNOVERS OF M/S ANITA INTERNATIONAL AND M /S ANITA INTERNATIONAL (EXPORT DIVISION) AS THE TOTAL TURNOV ER. AS PER CALCULATION MADE BY TAKING THE SUM TOTAL OF TURNOVE R OF M/S ANITA INTERNATIONAL AND M/S ANITA INTERNATIONAL (EXPORT DIV ISION) AS THE TOTAL TURNOVER, THE DEDUCTION U/S 8OHHC WORKS OUT TO NIL AS AGAINST CLAIM DEDUCTION MADE BY THE ASSESSEE AND DEDU CTION OF ` 83,26,348/- ALLOWED WHILE COMPLETING THE ASSESSMENT. IN VIEW OF THESE FACTS, I HAVE REASONS TO BELIEVE T HAT INCOME OF THE ASSESSEE BY WAY OF EXCESS DEDUCTION OF ` 83,2 6,348/- ALLOWED TO THE ASSESSEE U/S 80HHC, HAS ESCAPED ASSE SSMENT TO THAT EXTENT FOR THE A.Y. 2000-01. IT IS, THEREFORE , NECESSARY TO TAKE ACTION U/S 147/148 IN THIS CASE IN THE SAID AS SESSMENT YEAR. 10.1 A READING OF THE ABOVE MAKES IT AMPLY CLEAR T HAT NO FRESH MATERIAL HAS BEEN RELIED UPON IN THIS CASE FOR REOPE NING. THE REOPENING IS BASED UPON THE MATERIALS DISCLOSED BY T HE ASSESSEE AT THE TIME OF THE ORIGINAL RETURN. THE REASONS RECORDED ALSO DO NO CONTAIN ITA NO. 3084/DEL/2010 6 THE ALLEGATION THAT THERE WAS FAILURE ON THE PART O F THE ASSESSEE TO DISCLOSE ALL MATERIAL FACTS. THUS, WE FIND THAT PR OVISO TO SECTION 147 IS CLEARLY APPLICABLE IN THIS CASE. IT CANNOT BE SAI D THAT ASSESSING OFFICER HAS NOT APPLIED IN HIS MIND IN THE ORIGINAL ASSESSME NT. THE ORIGINAL CLAIM OF THE ASSESSEE WAS DEDUCTION OF ` 71,77,341/ - U/S 80HHC. THE CLAIM WAS REVISED DURING THE ASSESSMENT AND CLAIM WAS MADE AT ` 1,40,68,129/-. HOWEVER, THE ASSESSING OFFICER HAD ALLOWED DEDUCTION U/S 80HHC AMOUNTING TO ` 83,26,348/- VIDE ORDER DATE D 31.3.2003. 11. IN THIS REGARD, WE REFER THE DECISION OF THE HO NBLE JURISDICTIONAL HIGH COURT IN THE CASE OF WEL INTERTRADE P. LTD. AN D ANOTHER VS ITO (308 ITR 22). IN THIS CASE IT WAS HELD THAT THE PROVISIO NS OF SECTION 147 OF THE INCOME TAX ACT ARE INVOKED AFTER THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, IN ADDITION T O THE ASSESSING OFFICER HAVING REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, IT MUST ALSO BE ESTABLISHED AS A FACT THAT SUCH ESCAPEMENT OF ASSESSMENT HAS BEEN OCCASIONED B Y EITHER THE ASSESSEE FAILING TO MAKE A RETURN UNDER SECTION 139 , ETC. OR BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THA T ASSESSMENT YEAR. 12. WE FURTHER FIND THAT HONBLE JURISDICTIONAL HIG H COURT IN THE CASE OF HARYANA ACRYLIC MANUFACTURING CO. VS. C.I.T. & AN R. (308 ITR 38) HAS HELD AS UNDER:- ACTION UNDER SECTION 147 OF THE INCOME TAX ACT, 1961, CAN BE TAKEN AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR ONLY IF ANY INCOME CHARGEABLE TO T AX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REAS ON OF THE FAILURE ON THE PART OF THE ASSESSEE (A) TO MAKE A R ETURN UNDER ITA NO. 3084/DEL/2010 7 SECTION 139 OR IN RESPONSE TO A NOTICE UNDER SUB-SE CTION (1) OF SECTION 142 OR SECTION 148, OR (II) TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR TH AT ASSESSMENT YEAR. THE PROVISO TO SECTION 147 CARVED OUT AN EX CEPTION FROM THE MAIN PROVISIONS OF SECTION 147. IF A CASE WERE TO FALL WITHIN THE PROVISO, WHETHER OR NOT IT WAS COVERED UNDER TH E MAIN PROVISIONS OF SECTION 147 WOULD NOT BE MATERIAL. ON CE THE EXCEPTION CARVED OUT BY THE PROVISO CAME INTO PLAY, THE CASE WOULD FALL OUTSIDE THE AMBIT OF SECTION 147. HOWE VER, NO ACTION CAN BE TAKEN UNDER SECTION 147 AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR IF THE CONDITIONS THAT (A) AN ASSESSMENT UNDER SUB-SECTION (3) OF SEC TION 143 OF THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSME NT YEAR, AND (B) UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCA PED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF TH E FAILURE ON THE PART OF THE ASSESSEE : (I) TO MAKE A RETURN UN DER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTIO N (1) OF SECTION 142 OR SECTION 148, OR (II) TO DISCLOSE FULLY AND T RULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSME NT YEAR, ARE SATISFIED. MERELY HAVING REASON TO BELIEVE THAT I NCOME HAD ESCAPED ASSESSMENT IS NOT SUFFICIENT TO REOPEN ASSE SSMENTS BEYOND THE PERIOD OF FOUR YEARS. THE ESCAPEMENT OF INCOME MUST ALSO BE OCCASIONED BY THE FAILURE ON THE PART O F THE ASSESSEE TO DISCLOSE MATERIAL FACTS FULLY AND TRULY. THIS IS A NECESSARY CONDITIONS FOR OVERCOMING THE BAR SET BY T HE PROVISO TO SECTION 147. IF THIS CONDITION IS NOT SATISFIED, THE BAR WOULD OPERATE AND NO ACTION UNDER SECTION 147 COULD BE TA KEN. ITA NO. 3084/DEL/2010 8 13. IN THE BACKGROUND OF THE AFORESAID PRECEDENTS, WE FIND THAT IN THE PRESENT CASE THE REASONS RECORDED THERE IS NO STATE MENT OR EVIDENCE THAT ESCAPEMENT OF INCOME WAS OCCASIONED BY THE FAI LURE ON THE PART OF THE ASSESSEE TO DISCLOSE MATERIAL FACTS FULLY AN D TRULY. IN THE REASONS RECORDED FOR REOPENING OF THE FACTS AND FI GURES WERE TAKEN FROM THE ASSESSEES RETURN OF INCOME SUBMITTED. THE MA TTER OF DEDUCTION U/S 80HHC WAS ALSO SUBJECT MATTER OF ASSESS ING OFFICERS DELIBERATIONS AS ORIGINAL CLAIM OF DEDUCTION OF ` 7 1,77,341/- WAS REVISED BY THE ASSESSEE TO ` 1,40,68,129/-. THE AS SESSING OFFICER HOWEVER, HAS ALLOWED DEDUCTION U/S 80HHC AT ` 83,2 6,348/-. THE TOTAL TURNOVER OF THE ASSESSEES CONCERNS WERE ALREADY DI SCLOSED AND THE SAME WERE IN THE KNOWLEDGE OF THE ASSESSING OFFICER AT THE TIME OF ORIGINAL ASSESSMENT. HENCE, THE PRESENT CASE OF REO PENING CLEARLY FALLS UNDER THE REALM OF CHANGE OF OPINION, WHICH IS NOT P ERMISSIBLE UNDER THE ACT. MOREOVER, AS DISCUSSED EARLIER, THERE W AS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL THE RELEVANT F ACTS FULLY AND TRULY. 14. HENCE, IN THE BACKGROUND OF THE AFORESAID DISCU SSIONS AND PRECEDENTS, WE HOLD THAT REOPENING WAS NOT VALID, AS SUCH WE QUASH THE REASSESSMENT. SINCE THE REASSESSMENT IS BEING QUASHED ON THE JURISDICTION ITSELF, THE GROUNDS ON THE MERIT OF THE CASE ARE NOT DEALT WITH. ITA NO. 3084/DEL/2010 9 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IS ALLOWED. 16. ORDER PRONOUNCED IN THE OPEN COURT ON 29/04/201 1. SD/- SD/- [ [[ [A.D. JAIN A.D. JAIN A.D. JAIN A.D. JAIN] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 29/04/2011 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES