DCIT, New Delhi V. M/s Intertek Testing Services India Pvt. Ltd., Mumbai

ITA 3212/DEL/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74289 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 07-11-2013
• Assessment Year: 2002-2003
• Appeal Filed On: 14-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P RADEEP DINODIA R K KAPOOR
• Assessee Lawyers: SATPAL SINGH
• Keywords: Reopening of assessment; Difference of opinion; Assessment record; Change of opinion; Reassessment proceedings
• Section: 143(3); 147; 148; 263

Judgement Text

ITA NO. 3212/DEL/2011 ASSTT.YEAR: 2002-03 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `C NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.NO.3212/DEL/2011 ASSESSMENT YEAR : 2002-03 DCIT, VS INTERTEK TESTING SERVICES INDIA PVT . LTD., CIRCLE-11(1), GODREJ INDUSTRIES COMPLEX, ROOM NO. 312, PIROJSHANAGAR, EASTER N EXPRESS HIGHWAY, C.R. BUIDLING, VIKHROLI (E) MUMBA I-110079 NEW DELHI. (PAN: AAACI6890F ) (APPELLANT) (RESPONDENT) APPELLANT BY: S/SHRI PRA DEEP DINODIA, R.K. KAPOOR RESPONDENT BY : SHRI SATPAL SINGH, SR.DR O R D E R PER CHANDRA MOHAN GARG, JUDICIAL MEMBER THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAI NST THE ORDER OF COMMISSIONER OF INCOME TAX(A)-21, MUMBAI DATED 08.0 3.2011 IN APPEAL NO. C.I.T.(A)-X/IT/342/2008-09 & C.I.T.(A)21/IT/262 /2009-10 FOR AY 2002-03. 2. THE SOLE GROUND RAISED BY THE REVENUE READS AS U NDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN HOLDING THE REOPENING OF ASSESS MENT AS BAD IN LAW AND CONSEQUENTLY THE ASSESSMENT ORDER BASED ON SUCH REOPENING WAS ALSO HELD TO BE BAD IN LAW. ITA NO. 3212/DEL/2011 ASSTT.YEAR: 2002-03 2 3. BRIEFLY STATED THE FACTS GIVING RISE TO THIS APP EAL ARE THAT THE ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1961 W AS COMPLETED VIDE ORDER DATED 15.3.2005 DETERMINING TOTAL INCOME OF T HE ASSESSEE AT RS.17,27,03,290. SUBSEQUENTLY, THE ASSESSMENT WAS REOPENED U/S 147 OF THE ACT BY ISSUING NOTICE U/S 148 OF THE ACT DATED 28.3 .2008. THE ASSESSING OFFICER PROVIDED REASONS RECORDED TO THE ASSESSEE V IDE LETTER DATED 12.09.2008. DURING THE REASSESSMENT PROCEEDINGS, T HE ASSESSING OFFICER ASKED FOR DETAILS AND EXPLANATION IN RESPECT OF CER TAIN ITEMS AND ISSUES. THE ASSESSING OFFICER MADE DISALLOWANCE AND ADDITIONS P ERTAINING TO INSPECTION AGENCY COST AND ACCREDITATION CHARGES U/S 40(A)(I)( A) OF THE ACT, TESTING AND COORDINATION EXPENSES, MARKETING COORDINATION EXPEN SES AND DISPROPORTIONATE SERVICE FEE. 4. BEING AGGRIEVED BY THE ABOVE REASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCO ME TAX(A) WHICH WAS ALLOWED BY HOLDING THAT THE REOPENING OF ASSESSMENT AND THE REASSESSMENT ORDER BASED ON SUCH REOPENING WAS BAD IN LAW AND RE OPENING BASED ON CHANGE OF OPINION WAS NOT PERMISSIBLE UNDER THE ACT IN LAW. THE COMMISSIONER OF INCOME TAX(A) SET ASIDE/QUASHED THE ORDER OF REOPENING OF ASSESSMENT WITHOUT GOING INTO THE MERITS OF THE CAS E. NOW, THE AGGRIEVED ITA NO. 3212/DEL/2011 ASSTT.YEAR: 2002-03 3 REVENUE IS BEFORE THIS TRIBUNAL WITH THE SOLE GROUN D AS MENTIONED HEREINABOVE. 5. WE HAVE HEARD RIVAL ARGUMENTS OF BOTH THE PARTIE S AND CAREFULLY PERUSED THE RECORD. LD. AR SUBMITTED THAT THE ASSE SSEE FILED A RETURN ON 30.10.2002 AND ASSESSMENT U/S 143(3) OF THE ACT WAS COMPLETED ON 15.03.2005. THE AR FURTHER SUBMITTED THAT REASSESS MENT NOTICE WAS ISSUED ON 28.03.2008 AND FOUR YEARS LIMITATION AS STIPULA TED U/S 149(1)(A) OF THE ACT HAS ELAPSED ON 31.03.2007 PERTAINING TO THE REL EVANT ASSESSMENT YEAR OF THIS CASE I.E. 2002-03. 6. REPLYING TO THE ABOVE, LD. DR FAIRLY ACCEPTED TH AT THE REASSESSMENT NOTICE WAS ISSUED ON 28.03.2008 AND TIME LIMITATION OF FOUR YEARS EXPIRED ON 31.03.2007. 7. IN VIEW OF ABOVE SET OF FACTS AND CIRCUMSTANCES, WE HOLD THAT THE REOPENING OF ASSESSMENT U/S 147 AND 148 OF THE ACT IS NOT PERMISSIBLE BEYOND FOUR YEARS OF LIMITATION AS PER PROVISIONS O F THE ACT. 8. FROM THE IMPUGNED ORDER, WE OBSERVE THAT THE COM MISSIONER OF INCOME TAX(A) IN PARA 2.3 HAS HELD THAT THE REOPENI NG OF COMPLETED ASSESSMENT ON THE ISSUE OF TESTING AND COORDINATION CHARGES AND THIRD PARTY INSPECTION CHARGES AND ACCREDITATION CHARGES WAS ON LY ON CHANGE OF OPINION ON THESE ISSUES BY THE SUBSEQUENT ASSESSING OFFICER BECAUSE THESE ISSUES ITA NO. 3212/DEL/2011 ASSTT.YEAR: 2002-03 4 WERE ALREADY EXAMINED AND LOOKED INTO BY THE ASSESS ING OFFICER WHO COMPLETED THE ORIGINAL ASSESSMENT U/S 143(3) OF THE ACT AND, THEREFORE, THE BELIEF FORMED BY SUBSEQUENT ASSESSING OFFICER ON TH ESE TWO ISSUES WAS NOTHING BUT MERE CHANGE OF OPINION. THE RELEVANT P ARA NO. 2.3 OF COMMISSIONER OF INCOME TAX(A) IN THE IMPUGNED ORDER IS BEING REPRODUCED BELOW FOR THE SAKE OF CLARITY IN OUR FINDINGS:- 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE. AS P ER FACTS DISCUSSED ABOVE, THE ALREADY COMPLETED ASSESS MENT WAS REOPENED U / S. 147/ 148 OF THE ACT ON THE BASI S OF ONLY TWO ISSUES I.E. TESTING AND COORDINATION CHARGES' AND THIRD PARTY INSPECTION CHARGES & ACCREDITATION CHA RGES' WHICH WERE PAID TO PARTIES OUTSIDE INDIA. AS PER PROVISIONS OF SEC. 147, A COMPLETED ASSESSMENT CAN BE REOPENED IF THE A.O. HAS REASON T O BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAP ED ASSESSMENT. THUS FOR REOPENING THE ASSESSMENT THE A .O. SHOULD HAVE SOME REASON, SUCH REASON SHOULD BE BONA FIDE AND SUFFICIENT TO MAKE A BELIEF AND THE REASONS SHO ULD BE BASED ON SOME INFORMATION/MATERIAL AVAILABLE WITH T HE A.O. SUCH INFORMATION/MATERIAL PROPOSED TO BE UTILI ZED BY THE A.O. FOR REOPENING THE ASSESSMENT MAY HAVE FROM OUTSIDE PARTIES/SOURCES OR THE SAME MAY ALREADY BE AVAILABLE IN THE ASSESSMENT RECORDS. THUS, ON THE B ASIS OF INFORMATION/MATERIAL ALREADY AVAILABLE IN THE RECOR D OR RECEIVED FROM OTHER PARTIES/SOURCES, THE A.O. CAN F ORM AN OPINION THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. THE ONLY CONDITION IS THAT THIS INFORMATION/MATERIAL COULD NOT HAVE BEEN EXAMINED/L OOKED INTO BY THE A.O. DURING THE ORIGINAL ASSESSMENT PROCEEDINGS. IF, DURING ORIGINAL ASSESSMENT PROCEED INGS, THE A.O. HAD EXAMINED/LOOKED INTO SUCH INFORMATION/MATERIAL, ANY ATTEMPT TO REOPEN THE COM PLETED ASSESSMENT ON THAT BASIS WILL AMOUNT TO CHANGE OF O PINION ITA NO. 3212/DEL/2011 ASSTT.YEAR: 2002-03 5 WHICH IS NOT PERMISSIBLE UNDER THE ACT. THERE ARE N UMBER OF DECISIONS INCLUDING THE HON'BLE SUPREME COURT DE CISION IN THE CASE OF KELVINATOR OF INDIA LTD. (SUPRA) THA T REOPENING OF ASSESSMENT ON THE BASIS OF CHANGE OF O PINION IS NOT PERMISSIBLE UNDER THE ACT AND IS BAD IN LAW. THE HON'BLE SUPREME COURT ALSO HELD THAT THE REOPENING ON THE BASIS OF CHANGE OF OPINION EVEN WITHIN FOUR YEARS F ROM THE END OF THE RELEVANT ASSESSMENT YEAR IS ALSO NOT PER MISSIBLE UNDER THE LAW. DURING APPELLATE PROCEEDINGS, THE APPELLANT HAS FILED A COPY OF QUESTIONNAIRE DTD.27.10.2004 ISSUED BY A.O. I.E. ADDL. CIT RANGE 10(2), MUMBAI. THIS QUESTIONNA IRE WAS ISSUED DURING ORIGINAL ASSESSMENT PROCEEDINGS. VIDE POINT NO.9 AND 10, THE FOLLOWING INFORMATION WAS AS KED FOR BY A.O. FROM THE APPELLANT:- . '9. UNDER THE HEAD 'OPERATING COST', PLEASE PROVIDE DETAILS OF PAYMENTS MADE FOR TESTING AND COORDINATI ON CHARGES ABOVE RS.1 LAKHS AND THIRD PARTY INSPECTION AGENCY COST PLUS ACCREDITATION CHARGES ABOVE RS. 5 LAKHS. BRIEF NOTE ON THE EXACT NATURE OF THE SERVICES MAY ALSO BE PROVIDED. COMPARATIVE STATEMENTS FOR THE EARLIER YE ARS MAY ALSO BE PROVIDED. 10. ALSO PROVIDE THE DETAILS OF EXPENSES INCURRED O N:- (I) --- (II) --- (VI) MARKETING EXPENSES (X) ----- THUS THE APPELLANT'S CLAIM APPEARS TO BE CORRECT TH AT DURING ORIGINAL ASSESSMENT PROCEEDINGS THE A.O. ASK ED FOR THE DETAILS OF THESE TWO EXPENSES FOR WHICH ALL DET AILS WERE PROVIDED DURING ASSESSMENT PROCEEDINGS. IT IS WORTH TO MENTION HERE THAT THE A.O. DID NOT MAKE ANY ADDITION/DISALLOWANCE ON THESE TWO ISSUES IN THE OR IGINAL ASSESSMENT ORDER U/ S. 143(3) OF THE ACT. THUS, THE APPELLANT'S CLAIM IS CORRECT THAT DURING ORIGINAL ASSESSMENT PROCEEDINGS, THE A.O. FORMED AN OPINION ITA NO. 3212/DEL/2011 ASSTT.YEAR: 2002-03 6 REGARDING THE CORRECTNESS OF APPELLANT'S CLAIM ON T HESE TWO ISSUES AND SUBSEQUENT REOPENING OF COMPLETED ASSESS MENT ON THE BASIS OF THESE TWO ISSUES CLEARLY AMOUNTS TO CHANGE OF OPINION. SINCE THE ORIGINAL ASSESSMENT ORDER U/S : 143(3) OF THE ACT IS NOT SUBJECT MATTER OF PRESENT APPEAL, THEREFORE, IN THE APPELLATE PROCEEDINGS, IT CANNOT BE ARGUED THAT THE A.O. INCORRECTLY ACCEPTED APPELLANT 'S CLAIM ON THESE TWO ISSUES OR DID NOT EXAMINE THE ASPECT O F WITHHOLDING OF TAX THEREON DURING ORIGINAL ASSESSME NT PROCEEDINGS. THEREFORE, IT CANNOT BE SAID THAT THE A.O. COMMITTED SOME MISTAKE DURING ORIGINAL ASSESSMENT PROCEEDINGS. WITHOUT PREJUDICE TO THIS ARGUMENT, FO R THE SAKE OF DISCUSSION EVEN IF IT IS ARGUED THAT DURING ORIGINAL ASSESSMENT PROCEEDINGS, THE A.O. COMMITTED SOME MIS TAKE ON THESE ISSUES, SUCH MISTAKE WAS REQUIRED TO BE TA KEN CARE OF BY INITIATING PROCEEDINGS U/S. 263 OF THE ACT AN D NOT U/S. 147 OF THE ACT. IN VIEW OF THE ABOVE DISCUSSION, IT IS HELD THAT TH E REOPENING OF THE COMPLETED ASSESSMENT ON THE ISSUES OF 'TESTING AND COORDINATION CHARGES' AND THIRD PARTY INSPECTION CHARGES & ACCREDITATION CHARGES' WAS ONL Y A CHANGE OF OPINION ON THESE ISSUES BY THE SUBSEQUENT A.O. THESE TWO ISSUES WERE ALREADY EXAMINED AND LOOKED I NTO BY THE A.O. WHO COMPLETED THE ORIGINAL ASSESSMENT O RDER U/S. 143(3) OF THE ACT AND THEREFORE, THE BELIEF FO RMED BY SUBSEQUENT A.O. ON THESE TWO ISSUES WAS NOTHING BUT MERE CHANGE OF OPINION. AS DISCUSSED ABOVE AND IN VIEW O F THE NUMBER OF DECISIONS ON THESE ISSUES INCLUDING THE D ECISION OF SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA LTD., THE REOPENING ON THE BASIS OF CHANGE OF OPINION IS NOT PERMISSIBLE UNDER THE ACT AND LAW. IN THE FACTS AN D CIRCUMSTANCES, IT IS HELD THAT THE REOPENING WAS NO T IN ACCORDANCE WITH THE PROVISIONS OF SEC. 147 OF THE A CT AND LAW ON THIS ISSUE. THE REOPENING IS THEREFORE, HELD TO BE BAD IN LAW AND IS THEREFORE SET ASIDE. CONSEQUENTLY , THE ASSESSMENT ORDER BASED ON SUCH IMPROPER/INVALID ASSUMPTION OF JURISDICTION U/S. 147 WAS ALSO BAD IN LAW. ITA NO. 3212/DEL/2011 ASSTT.YEAR: 2002-03 7 9. ON THE BASIS OF DISCUSSION MADE HEREINABOVE, WE ARE OF THE FIRM OPINION THAT THE COMMISSIONER OF INCOME TAX(A) RIGH TLY HELD THAT AS PER DECISION OF HONBLE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA LTD. 256 ITR 0001(DEL) AND (2010) 34 DTR (SC) 49 , THE REOPENING ON THE BASIS OF CHANGE OF OPINION IS NOT PERMISSIBLE UNDER THE ACT AND LAW. IN THE PRESENT CASE FROM PAGE NO. 126 TO 135 OF THE PAPER BOOK, WE CLEARLY OBSERVE THAT ISSUES OF TESTING AND COORDINATION CHARGES A ND THIRD PARTY INSPECTION CHARGES AND ACCREDITATION CHARGES WERE CONSIDERED BY THE ASSESSING OFFICER DURING THE ORIGINAL ASSESSMENT PROCEEDINGS AND THE ASSESSEE SUBMITTED DETAILED EXPLANATION ON 30.11.2004 IN THIS REGARD B EFORE THE ASSESSING OFFICER. THE RELEVANT EXPLANATION OF THE ASSESSEE BEFORE THE ASSESSING OFFICER DURING THE ORIGINAL ASSESSMENT PROCEEDINGS IS AVAILABLE ON PAPER BOOK PAGE NO. 135 TO 137. THUS, WE CLEARLY OBSERVE THAT THE ASSESSING OFFICER CONSIDERED AND ADJUDICATED BOTH THE ISSUES DURING THE ORIGINAL ASSESSMENT PROCEEDINGS AND REOPENING OF ASSESSMENT ON SAME ISSUES CERTAINLY AMOUNTS TO CHANGE OF OPINION WHICH IS NOT PERMISSIBLE AS PER PROVISIONS OF THE ACT AND LAW. ACCORDINGLY, WE HOL D THAT THE CIT(A) RIGHTLY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLD ING THAT THE REOPENING OF ASSESSMENT WAS MERE CHANGE OF OPINION WHICH IS NOT PERMISSIBLE UNDER LAW. WE ALSO HOLD THAT THE NOTICE OF REASSESSMENT U/S 14 8 OF THE ACT ISSUED ON ITA NO. 3212/DEL/2011 ASSTT.YEAR: 2002-03 8 28.03.2008 WAS ISSUED AFTER THE FOUR YEAR LIMITATIO N TIME AS STIPULATED IN SECTION 149(1)(A) OF THE ACT. THEREFORE, NOTICE OF REOPENING OF ASSESSMENT U/S 148 OF THE ACT WAS ALSO NOT SUSTAINABLE AND WIT HOUT JURISDICTION. 10. IN THE LIGHT OF ABOVE OBSERVATIONS AND FINDINGS , WE ARE OF THE CONSIDERED OPINION THAT WE ARE UNABLE TO SEE ANY IN FIRMITY, AMBIGUITY OR ANY OTHER VALID REASON TO INTERFERE IN THE FINDINGS OF THE COMMISSIONER OF INCOME TAX(A) IN THE IMPUGNED ORDER. HENCE, SOLE GROUND O F THE REVENUE BEING DEVOID OF MERITS IS DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07.03.2014. SD/- SD/- (G.D. AGRAWAL) (CHANDRA MOHAN GARG) VICE PRESIDENT JUDICIAL MEMBER DT. 7 TH MARCH 2014 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR