Appeal Details
Counselvise Citation
[2015] 121 COUNSELVISE.COM (IT) 1876 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 year(s) 5 month(s) 2 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
18-11-2015
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
B
Next Hearing Date
13-10-2015
Assessment Year
2004-2005
Appeal Filed On
15-06-2011
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SH. A.T.VARKEY, JM AND SH. PRASHANT MAHARISHI, AM ITA NO. 3218/DEL/2011 A.Y. 2004-05 E.I. DUPONT PRIVATE LTD. 7 TH FLOOR, TOWER-C, DLF CYBER GREENS,SECTOR-25-A PHASE-III GURGAON VS ACIT CIRCLE-11(1) NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AAACE2462M ITA NO. 2351/DEL/2011 A.Y. 2004-05 DCIT CIRCLE 11(1), ROOM NO. 312, C.R.BUILDING NEW DELHI VS E.I. DUPONT PRIVATE LTD. 7 TH FLOOR, TOWER-C, DLF CYBER GREENS,SECTOR-25-A PHASE-III GURGAON (APPELLANT) (RESPONDENT) PAN NO. AAACE2462M APPELLANT BY : SH. DEEPAK CHOPRA, AMIT SHRIVASTAVA, ADV. RESPONDENT BY : SH. HEM ANT GUPTA, SR. DR DATE OF HEARING : 15.10.2015 DATE OF PRONOUNCEME NT : 18.11.2015 ORDER PER PRASHANT MAHARISHI, AM: 01. PARTIES HAVE PREFERRED CAPTIONED CROSS APPEALS AGAI NST THE ORDER DATED 09.02.2011 OF CIT (A) -V, NEW DELHI FOR AY 2004-05. 02. FIRST TAKING UP APPEAL OF THE ASSESSEE, ASSESSEE HA S RAISED FOLLOWING GROUNDS OF APPEAL -: BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, DUPONT INDIA RESPECTFULLY CRAVES LEAVE TO PREFER AN APPEAL AGAINST THE ORDER PASSED BY THE LEARNED ITA NO. 32 18/DEL/2011 CO. NO. 2357/DEL/2011 E.I.DUPONT P. LTD. 2 COMMISSIONER OF INCOME TAX (APPEAL)-V, NEW DELHI(LD.CIT(A)) DATED FEBRUARY 09, 2011 UNDER SECTION 250(6) OF INCOME TAX ACT, 1961 (ACT), ON THE FOLLOWING GROUNDS : 1. WRONGFUL DENIAL OF ADVANCES WRITTEN OFF 1.1 THAT THE CIT (A) ERRED ON FACTS AND IN LAW IN HOLDING THAT THE APPELLANT FAILED TO PROVIDE EVIDEN CE TO SHOW THAT AMOUNTS WERE ALREADY OFFERED TO TAX IN TH E EARLIER YEARS. 1.2 THAT THE LD. CIT (A) HAS ERRED IN LAW AND FACTS IN IGNORING THE FACT THAT THE LD. AO ADDED BACK THE SAID AMOUNT TREATING IT AS CAPITAL IN NATURE. 2.WRONGFUL ADDITION ON ACCOUNT OF DEPRECIATION 2.1. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER BY ALLOWING DEPRECI ATION @ 15% INSTEAD OF 25% ON CABLES LAID DOWN FOR RUNNIN G OF MACHINERY. 2.2 THAT LD. CIT(A), ADMITTING THAT THE CABLES WE RE LAID DOWN IN FACTORY, HAS FAILED TO DRAW DISTINCTION BET WEEN ELECTRICAL INSTALLATION AND ELECTRICAL FITTINGS. 3. RE-OPENING OF ASSESSMENT 3.1 THAT THE CIT(A) ERRED ON FACTS AND IN LAW I N CONFIRMING THE ACTION OF ASSESSING OFFICER IN INITI ATING THE RE-ASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT ON THE BASIS OF MERE CHANGE OF OPINION WITHOUT ANY NEW MATERIAL FACT OR INFORMATION COMING TO THE POSSESSION OF THE ASSESSING OFFICER SUBSEQUENTLY AN D THE REASSESSMENT ORDER WAS, THEREFORE, WITHOUT JURISDIC TION AND BAD IN LAW. 3.2 THAT THE LD. CIT(A) HAS ERRED ON FACTS AND IN L AW IN MENTIONING THAT THERE IS NO DISCUSSION OF ANY OF TH E ISSUES IN ORIGINAL ASSESSMENT. 03. WE FIRST TAKE UP GROUND NO. 3 OF THE APPEAL OF THE ASSESSEE WHERE REOPENING OF ASSESSMENT HAS BEEN CHALLENGED ALLEGI NG THAT SAME IS ON THE BASIS OF MERE CHANGE OF OPINION WITHOUT ANY NEW MAT ERIAL FACT OR INFORMATION COMING INTO THE POSSESSION OF AO. 04. THE ASSESSEE A PRIVATE LIMITED COMPANY FILED ITS R ETURN OF INCOME ON 27.10.2004 DECLARING TOTAL INCOME OF RS. 67,41,72,1 30/-. ASSESSMENT U/S 143(3) WAS COMPLETED ON 26.12.2006 COMPUTING INCOME U/S 115JB AT RS. 73,36,65,315/-. SUBSEQUENT TO THAT, A NOTICE U/S 14 8 WAS ISSUED ON 06.03.2009 IN RESPONSE TO THAT ASSESSEE SUBMITTED L ETTER DATED 09.04.2009 STATING THAT RETURN OF INCOME FILED EARLIER MAY BE TREATED AS RETURN FILED U/S 148 OF THE ACT. FOR ISSUE OF NOTICE U/S 147 THE AO RECORDED REASONS AS UNDER :- ITA NO. 32 18/DEL/2011 CO. NO. 2357/DEL/2011 E.I.DUPONT P. LTD. 3 REASONS FOR NOTICE U/S 148 OF THE IT ACT, 1961 ON VERIFICATION OF THE CASE RECORDS, IT HA S BEEN OBSERVED THAT THE ASSESSEE HAS MADE AND ALLOWED TH E FOLLOWING CLAIMS/DEDUCTIONS: I. THE ASSESSEE HAS DEDUCTED AN AMOUNT OF RS. 8,12,28,282/- ON ACCOUNT OF PROVISIONS FOR SECTION 40(A)(I) OF THE I.T.ACT DISALLOWED IN LAST YEAR, NO W ALLOWABLE ON PAYMENT BASIS BUT AS PER COMPUTATION O F LAST YEAR, THE AMOUNT ADDED BACK IS RS. 6,17,56,500 /-. II. ADVANCES WRITTEN OFF TO THE EXTENT OF RS. 56,48,790 /- HAS NOT BEEN ADDED BACK ALTHOUGH IT IS CAPITAL IN NATUR E. III. ROYALTY CHARGES OF RS. 1,03,15,600/- DEBITED TO PRO FIT & LOSS A/C. SHOULD HAVE BEEN DISALLOWED TO THE EXTENT OF 25% IN VIEW OF SUPREME COURT DECISION IN THE CASE O F SOUTHERN SWITCHGEAR LTD. 232 ITR 359. IV. INTEREST U/S 234B OF THE I.T.ACT HAS BEEN CHARGES S HORT TO THE EXTENT OF RS. 6,48,377/-. V. DEPRECIATION ON COMPUTER HAS BEEN ALLOWED @ 60% INSTEAD OF 25% AND ON ELECTRIC INSTALLATIONS @ 25% INSTEAD OF 15%. 05. VIDE LETTER DATED 9 TH APRIL, 2009 ASSESSEE SUBMITTED OBJECTION AGAINST T HE NOTICE U/S 148 THAT NO NEW MATERIAL HAS COME INTO P OSSESSION OF THE ASSESSEE AND AS ALL THE RELEVANT DETAILS ARE ALREAD Y AVAILABLE ON RECORD THE PROCEEDINGS U/S 148 IS INVALID AS IT BASED ON MERE CHANGE OF OPINION. 06. BEFORE US LD. AR OF THE ASSESSEE SUBMITTED THAT THE REASONS RECORDED BY THE ASSESSING OFFICER ARE ON FIVE COUNTS AND EACH OF TH E ISSUE HAS BEEN EXAMINED BY THE ASSESSEE DURING THE COURSE OF ASSES SMENT PROCEEDINGS FOR THIS. HE SUBMITTED THAT NOTICE DATED 18.08.2000 COV ERS POINT NO. 6,8,15 AND 24 RELEVANT DETAILS ASK FOR IN ORIGINAL ASSESSMENT. HE ALSO DREW OUR ATTENTION THAT VIDE LETTER DATED SEPTEMBER 06, 2006 ASSESSEE HAS SUBMITTED REPLIES OF THOSE NOTICES GIVING COMPLETE DETAILS. THEREFORE HE SUBMITTED THAT WHILE FRAMING ORIGINAL ASSESSMENT U/S 143(3) D ATED 26 TH DECEMBER, 2006, AO HAS APPLIED HIS MIND ON THE DETAIL SUBMITT ED AND HAS FORMED AN OPINION ABOUT THOSE ITEMS. HE SUBMITTED THAT IN ORI GINAL ASSESSMENT PROCEEDINGS, NO ADDITIONS HAVE BEEN MADE REGARDING THESE ITEMS. FURTHER, HE SUBMITTED THAT THERE IS NO MATERIAL COMING INTO POSSESSION OF THE ITA NO. 32 18/DEL/2011 CO. NO. 2357/DEL/2011 E.I.DUPONT P. LTD. 4 ASSESSING OFFICER AFTER COMPLETION OF ASSESSMENT PR OCEEDINGS ON WHICH REOPENING CAN BE BASED UPON. THEREFORE, HE SUBMITT ED THAT REOPENING PROCEEDINGS ARE INITIATED ON MERE CHANGE OF OPINION FOR THIS HE RELIED ON SEVERAL DECISIONS OF HONBLE DELHI HIGH COURT AND P RIMARILY ON DECISION OF HONBLE SUPREME COURT IN CASE OF CIT VS. KELVINATOR OF INDIA LTD. 320 ITR 561. HE FURTHER SUBMITTED THAT AS NO NEW MATERIAL C AME INTO THE POSSESSION OF ASSESSING OFFICER, REOPENING IS BASED ON MATERIA L ALREADY ON RECORD, IT IS NOT PERMITTED. HE RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN CASE OF MADHUKAR KHOSLA V. ACIT 367 ITR 165 AND CIT V. ORIENT CRAFT LTD. 354 ITR 536. HE FURTHER SUBMITTED THAT REOPENING HA S BEEN DONE AT THE BEHEST OF AUDIT PARTY AND THEREFORE IT IS INVALID. FOR THIS PROPOSITION HE RELIED ON THE ORDERS OF HONBLE GUJARAT HIGH COURT IN CASE OF RAAJRATNA METAL INDUSTRIES LTD. V. ACIT AND VODAFONE WEST LTD . V. ACIT, THEREFORE, HE SUBMITTED THAT 148 PROCEEDINGS ARE NOT VALIDLY I NITIATED AND ON THIS COUNT ITSELF THE APPEAL OF THE ASSESSEE SHOULD SUCC EED. 07. LD. DR RELIED ON THE ORDER OF AO AS WELL AS THE CIT (A) AND SUBMITTED THAT ON GOING THROUGH THE ORDERS OF LOWER AUTHORITIES IT IS APPARENT THAT REOPENING PROCEEDINGS HAS NOT BEEN CHALLENGED. HE S UBMITTED THAT REOPENING HAS BEEN VALIDLY DONE BY AO AND NO INFIRM ITY CAN BE FOUND THEREIN. HE FURTHER RELIED ON THE DECISION OF HONO URABLE GUJARAT HIGH COURT IN GRUH FINANCE LIMITED V JCIT 123 TAXMAN 196 AN D OF HONOURABLE DELHI HIGH COURT IN CASE OF M/S EMA INDIA LIMITED V ACIT THAT REOPENING IS NOT DONE ON MERE CHANGE OF OPINION. 08. WE HAVE CAREFULLY EXAMINED RIVAL ARGUMENTS AND THE MATERIAL ON RECORD. WE ARE OF THE OPINION THAT THOUGH ASSESSEE HAS NOT CHA LLENGED 148 PROCEEDINGS BEFORE AO AND CIT (A), ASSESSEE IS WELL WITHIN HIS RIGHTS TO CHALLENGE IT NOW BEFORE US AS IT IS A LEGAL ISSUE. THE THREE FO LD ARGUMENTS ADVANCED BY AR IS THAT (A) REOPENING HAS BEEN DONE ON THE BASIS OF AUDIT OBJEC TION. (B) THERE IS NO NEW MATERIAL COMING IN TO POSSESSION OF AO AFTER ORIGINAL ASSESSMENT FOR REOPENING IT. ITA NO. 32 18/DEL/2011 CO. NO. 2357/DEL/2011 E.I.DUPONT P. LTD. 5 (C) THERE IS A CHANGE OF OPINION AS IN THE ORIGINAL ASS ESSMENT PROCEEDINGS AO HAS EXAMINED THE DETAILS, DID NOT MA KE ANY ADJUSTMENTS ON THAT ACCOUNT, AND SUBSEQUENTLY REOPE NED ASSESSMENT ON SAME ISSUES. ALL THREE PROPOSITION RAISED BY THE AR OF THE ASSES SEE ARE EXAMINED INDEPENDENTLY AS UNDER:- 09. LD. AR OF THE APPELLANT HAS CONTENDED BEFORE US THA T REOPENING HAS BEEN DONE AT THE BEHEST OF THE AUDIT PARTY. FOR THIS HE RELIED ON DECISION OF (A) HONORABLE SUPREME COURT IN INDIAN AND EASTERN NE WSPAPER SOCIETY V CIT 1119 ITR 996 AND (B) HONOURABLE DELHI HIGH COURT IN TRANSWORLD INTERN ATIONAL INC. V JCIT 273 ITR 242 AND XEROX MODI CORP LTD V DCIT 350 ITR 308 AND (C) HONOURABLE GUJARAT HIGH COURT IN RAJRATNA METAL IN DUSTRIES LIMITED V ACIT AND VODAFONE WEST LTD V ACIT 37 TAXMANN.COM 158 WHERE AUDIT OBJECTION IS CONTESTED BUT CASE IS REOPENED. HOWEVER, AR OF THE ASSESSEE COULD NOT PRODUCE ANY E VIDENCE BEFORE US THAT THE REOPENING HAS BEEN INITIATED AT THE BEHEST OF A UDIT PARTY. THEREFORE, IN ABSENCE OF ANY EVIDENCE WE ARE AFRAID WE CANNOT APP RECIATE THIS PROPOSITION AND HENCE, REJECT IT. 10. SECOND PROPOSITION RAISED BY THE AR IS THAT THERE I S NO NEW MATERIAL COMING IN TO THE POSSESSION OF AO AFTER COMPLETING ASSESSMENT BASED ON WHICH REOPENING PROCEEDINGS ARE INITIATED. FOR THIS , WE HAVE PERUSED THE REASONS RECORDED BY AO FOR REOPENING OF ASSESSMENT, WHICH IS PLACED AT PAGE NO 10 OF THE PAPER BOOK SUBMITTED BY ASSESSEE. AT THE BEGINNING OF THE REASONS, AO HAS MENTIONED THAT INFORMATION GATH ERED BY HIM IS ON VERIFICATION OF CASE RECORDS . ON FURTHER READING, WE COULD NOT FIND THAT THERE IS ANY NEW MATERIAL BASED ON WHICH AO WAS OF THE VIEW THAT THERE IS AN ESCAPEMENT OF INCOME. ON READING OF ASSESSMENT ORDER, ALSO WE DID NOT FIND THAT THERE IS ANY NEW MATERIAL AVAILABLE WITH AO AT THE TIME OF ITA NO. 32 18/DEL/2011 CO. NO. 2357/DEL/2011 E.I.DUPONT P. LTD. 6 RECORDING OF REASONS AS ALL THE ADDITIONS HAVE BEEN MADE ON THE SAME MATERIAL AVAILABLE BEFORE AO AT THE TIME OF ORIGINA L ASSESSMENT. LD. DR ALSO COULD NOT POINT OUT BEFORE US ANY NEW MATERIAL COMING IN TO THE POSSESSION OF AO BEFORE RECORDING REASONS FOR REO PENING. HONORABLE DELHI HIGH COURT IN CASE OF MADHUKAR KHOSLA V ACIT 367 IT R 165 HAS QUASHED WHERE AO INITIATED REOPENING PROCEEDINGS ON APPRECI ATION OF THE SAME FACTS ALREADY ON RECORD. HONOURABLE HIGH COURT AFTE R CONSIDERING DECISION OF HONOURABLE SUPREME COURT IN CIT V KELVINATOR OF INDIA LIMITED 320 ITR 561 AND HONOURABLE DELHI HIGH COURT IN CASE OF C ASE OF CIT V ORIENT CRAFT LIMITED 354 ITR 356, DESPITE ABSENCE OF AN Y EXPLANATION BY THE ASSESSEE REGARDING INCREASE IN CAPITAL ACCOUNT OF T HE ASSESSEE IN ORIGINAL ASSESSMENT PROCEEDINGS, QUASHED REASSESSMENT NOTICE U/S 148. HONOURABLE HIGH COURT HELD THAT 9. IN THIS CASE, THE REASONS PROVIDED UNDER SECTION 1 48 ARE THAT IN 'ABSENCE OF THE SOURCE OF THE ADDITION WITH DOCUMENTARY EVIDENCE ON RECORDS, THE SAME IS REQUIRED TO BE BROUGHT ON TAX NET AS PER PROVISIONS OF SECTION 68 OF THE INCOME TAX ACT, 1961 AS THE ASSESSEE HAD OFFERED NO EXPLANATION ABOUT THE NATURE AND SOURCE OF THE SAID ADDITIONS' AND THUS, MUST BE TREATED AS INCOME WHICH ESCAPED ASSESSMENT. NO DETAILS ARE PRO VIDED AS TO WHAT SUCH INFORMATION IS WHICH EXCITED THE AO'S NOTICE AND ATTENTION. THE REASONS MUST INDICATE SPECIFICALLY WHAT SUCH OBJECTIVE AND NEW MATERIAL FACTS ARE, ON THE BASIS OF WHICH A REOPENING IS INITIATED UNDER SECTION 148. THIS REASSESSMENT IS CLEARLY NOT ON THE BASIS OF NE W (OR 'TANGIBLE') INFORMATION OR FACTS THAT WHICH THE REVENUE CAME BY. IT IS IN EFFECT A RE-APP RECIATION OR REVIEW OF THE FACTS THAT WERE PROVIDED ALONG WITH THE ORIGINAL RETURN FILED BY TH E ASSESSEE. THE SUPREME COURT IN KELVINATOR OF INDIA LTD. (SUPRA) FROWNED AGAINST SUCH EXERCISE OF POWER: 'HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETAT ION TO THE WORDS 'REASON TO BELIEVE' FAILING WHICH, WE ARE AFRAID, SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO RE-OPEN ASSESSMENTS ON THE BASIS OF 'MERE CHANGE OF OPINION', WHICH CANNOT BE PER SE REASON TO RE-OPEN. WE MUST ALSO KEEP IN MIND THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REVIEW AND P OWER TO RE-ASSESS. THE ASSESSING OFFICER HAS NO POWER TO REVIEW; HE HAS TH E POWER TO RE-ASSESS. BUT RE- ASSESSMENT HAS TO BE BASED ON FULFILLMENT OF CERTAI N PRE-CONDITION AND IF THE CONCEPT OF 'CHANGE OF OPINION' IS REMOVED, AS CONTE NDED ON BEHALF OF THE DEPARTMENT, THEN, IN THE GARB OF RE-OPENING THE ASS ESSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF 'CHANGE OF OPI NION' AS AN IN-BUILT TEST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFICER. HENC E, AFTER 1 ST APRIL, 1989, ASSESSING OFFICER HAS POWER TO RE-OPEN, PROVIDED TH ERE IS 'TANGIBLE MATERIAL' TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF. ' 10. THIS COURT RECOLLECTS THAT EVEN IN CASE OF AN ASSE SSMENT COMPLETED UNDER SECTION 143 (1), THE REQUIREMENT OF RECORDING 'REASONS TO BELIEVE' A RE MANDATORY - AS THE TEXT OF SECTION 147 INDICATES. REJECTING AN ARGUMENT BY THE REVENUE TO THE CONTRARY, THIS COURT IN ORIENT CRAFT LTD.'S CASE (SUPRA) HELD THAT: ITA NO. 32 18/DEL/2011 CO. NO. 2357/DEL/2011 E.I.DUPONT P. LTD. 7 'THE ASSUMPTION OF THE REVENUE THAT SOMEHOW THE WOR DS 'REASON TO BELIEVE' HAVE TO BE UNDERSTOOD IN A LIBERAL MANNER WHERE THE FINALITY O F AN INTIMATION UNDER SECTION 143(1) IS SOUGHT TO BE DISTURBED IS ERRONEOUS AND MISCONCEIVE D. AS POINTED OUT EARLIER, THERE IS NO WARRANT FOR SUCH AN ASSUMPTION BECAUSE OF THE LANGU AGE EMPLOYED IN SECTION 147; IT MAKES NO DISTINCTION BETWEEN AN ORDER PASSED UNDER SECTION 1 43(3) AND THE INTIMATION ISSUED UNDER SECTION 143(1). THEREFORE IT IS NOT PERMISSIBLE TO ADOPT DIFFERENT STANDARDS WHILE INTERPRETING THE WORDS 'REASON TO BELIEVE' VIS--VIS SECTION 143(1) AND SECTION 143(3). WE ARE UNABLE TO APPRECIATE WHAT PERMITS THE REVENUE TO ASSUME THAT SOMEHOW THE SAME RIGOROUS STANDARDS WHICH ARE APPLICABLE IN THE INTERPRETATION OF THE E XPRESSION WHEN IT IS APPLIED TO THE REOPENING OF AN ASSESSMENT EARLIER MADE UNDER SECTION 143(3) CANNOT APPLY WHERE ONLY AN INTIMATION WAS ISSUED EARLIER UNDER SECTION 143(1). IT WOULD IN EF FECT PLACE AN ASSESSEE IN WHOSE CASE THE RETURN WAS PROCESSED UNDER SECTION 143(1) IN A MORE VULNERABLE POSITION THAN AN ASSESSEE IN WHOSE CASE THERE WAS A FULL-FLEDGED SCRUTINY ASSESS MENT MADE UNDER SECTION 143(3). WHETHER THE RETURN IS PUT TO SCRUTINY OR IS ACCEPTED WITHOU T DEMUR IS NOT A MATTER WHICH IS WITHIN THE CONTROL OF ASSESSEE; HE HAS NO CHOICE IN THE MATTER . THE OTHER CONSEQUENCE, WHICH IS SOMEWHAT GRAVER, WOULD BE THAT THE ENTIRE RIGOROUS PROCEDURE INVOLVED IN REOPENING AN ASSESSMENT AND THE BURDEN OF PROVING VALID REASONS TO BELIEVE COUL D BE CIRCUMVENTED BY FIRST ACCEPTING THE RETURN UNDER SECTION 143(1) AND THEREAFTER ISSUE NO TICES TO REOPEN THE ASSESSMENT. AN INTERPRETATION WHICH MAKES A DISTINCTION BETWEEN TH E MEANING AND CONTENT OF THE EXPRESSION 'REASON TO BELIEVE' IN CASES WHERE ASSESSMENTS WERE FRAMED EARLIER UNDER SECTION 143(3) AND CASES WHERE MERE INTIMATIONS WERE ISSUED EARLIER UN DER SECTION 143(1)MAY WELL LEAD TO SUCH AN UNINTENDED MISCHIEF. IT WOULD BE DISCRIMINATORY TOO . AN INTERPRETATION THAT LEADS TO ABSURD RESULTS OR MISCHIEF IS TO BE ESCHEWED. 13. CERTAIN OBSERVATIONS MADE IN THE DECISION OF RA JESH JHAVERI (SUPRA) ARE SOUGHT TO BE RELIED UPON BY THE REVENUE TO POINT OUT THE DIFFERENCE BET WEEN AN 'ASSESSMENT' AND AN 'INTIMATION'. THE CONTEXT IN WHICH THOSE OBSERVATIONS WERE MADE H AS TO BE KEPT IN MIND. THEY WERE MADE TO POINT OUT THAT WHERE AN 'INTIMATION' IS ISSUED UNDE R SECTION 143(1) THERE IS NO OPPORTUNITY TO THE ASSESSING AUTHORITY TO FORM AN OPINION AND THEREFOR E WHEN ITS FINALITY IS SOUGHT TO BE DISTURBED BY ISSUING A NOTICE UNDER SECTION 148, THE PROCEEDI NGS CANNOT BE CHALLENGED ON THE GROUND OF 'CHANGE OF OPINION'. IT WAS NOT OPINED BY THE SUPRE ME COURT THAT THE STRICT REQUIREMENTS OF SECTION 147 CAN BE COMPROMISED. ON THE CONTRARY, FR OM THE OBSERVATIONS (QUOTED BY US EARLIER) IT WOULD APPEAR CLEAR THAT THE COURT REITERATED THA T 'SO LONG AS THE INGREDIENTS OF SECTION 147 ARE FULFILLED' AN INTIMATION ISSUED UNDER SECTION 143(1 ) CAN BE SUBJECTED TO PROCEEDINGS FOR REOPENING. THE COURT ALSO EMPHASISED THAT THE ONLY REQUIREMENT FOR DISTURBING THE FINALITY OF AN INTIMATION IS THAT THE ASSESSING OFFICER SHOULD HAV E 'REASON TO BELIEVE' THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IN OUR OPINION, THE SAID EXPRESSION SHOULD APPLY TO AN INTIMATION IN THE SAME MANNER AND SUBJECT TO THE SAME INTERPRE TATION AS IT WOULD HAVE APPLIED TO AN ASSESSMENT MADE UNDER SECTION 143(3). THE ARGUMENT OF THE REVENUE THAT AN INTIMATION CANNOT BE EQUATED TO AN ASSESSMENT, RELYING UPON CERTAIN O BSERVATIONS OF THE SUPREME COURT IN RAJESH JHAVERI (SUPRA) WOULD ALSO APPEAR TO BE SELF-DEFEAT ING, BECAUSE IF AN 'INTIMATION' IS NOT AN 'ASSESSMENT' THEN IT CAN NEVER BE SUBJECTED TO SECT ION 147 PROCEEDINGS, FOR, THAT SECTION COVERS ONLY AN 'ASSESSMENT' AND WE WONDER IF THE REVENUE W OULD 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 CAN NOT BOG DOWN. IN OTHER WORDS, THE EXPRESSION 'REASON TO BELIEVE' CANNOT HAVE TWO DIFFERENT STAND ARDS OR SETS 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 BEL IEVE IS NOT RELEVANT FOR THE FORMATION OF THE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED AS SESSMENT. IN DOING SO, IT IS FURTHER OPEN TO THE ASSESSEE TO CHALLENGE THE REASONS RECORDED UNDE R SECTION 148(2) ON THE GROUND THAT THEY DO NOT MEET THE STANDARDS SET IN THE VARIOUS JUDICIAL PRONOUNCEMENTS.' ITA NO. 32 18/DEL/2011 CO. NO. 2357/DEL/2011 E.I.DUPONT P. LTD. 8 11. THE FOUNDATION OF THE AO'S JURISDICTION AND THE RA ISON D'ETRE OF A REASSESSMENT NOTICE ARE THE 'REASONS TO BELIEVE'. NOW THIS SHOULD HAVE A RE LATION OR A LINK WITH AN OBJECTIVE FACT, IN THE FORM OF INFORMATION OR FACTS EXTERNAL TO THE MATERI ALS ON THE RECORD. SUCH EXTERNAL FACTS OR MATERIAL CONSTITUTE THE DRIVER, OR THE KEY WHICH EN ABLES THE AUTHORITY TO LEGITIMATELY RE-OPEN THE COMPLETED ASSESSMENT. IN ABSENCE OF THIS OBJECTIVE 'TRIGGER', THE AO DOES NOT POSSESS JURISDICTION TO REOPEN THE ASSESSMENT. IT IS AT THE NEXT STAGE THAT THE QUESTION, WHETHER THE RE- OPENING OF ASSESSMENT AMOUNTS TO 'REVIEW' OR 'CHANG E OF OPINION' ARISES. IN OTHER WORDS, IF THERE ARE NO 'REASONS TO BELIEVE' BASED ON NEW, 'TA NGIBLE MATERIALS', THEN THE REOPENING AMOUNTS TO AN IMPERMISSIBLE REVIEW. HERE, THERE IS NOTHING TO SHOW WHAT TRIGGERED THE ISSUANCE OF NOTICE OF REASSESSMENT - NO INFORMATION OR NEW F ACTS WHICH LED THE AO TO BELIEVE THAT FULL DISCLOSURE HAD NOT BEEN MADE. THE IMPUGNED NOTICE, THE AO'S ORDER REJECTING THE OBJECTIONS, AND THE ARGUMENTS OF THE REVENUE NOWHERE INDICATE H OW THE AO WAS IMPELLED TO SEEK RE- OPENING OF THE ASSESSEE'S CASE, AS DISTINGUISHED FR OM THE SEVERAL OTHER COMPLETED ASSESSMENTS. 11. IN THE CASE OF THE ASSESSEE DURING ASSESSMENT PROCE EDINGS, AO ASKED THE PERTINENT DETAILS AND ASSESSEE FURNISHED THEM, AO E XAMINED THEM, AND NO ADDITIONS HAVE BEEN MADE, EVEN THEN ON THE SAME ISS UES REASSESSMENT IS INITIATED WITHOUT ANY NEW, TANGIBLE MATERIAL COMING IN TO THE POSSESSION OF AO. 12. RELIANCE PLACED BY LD. DR ON GRUH FINANCE LTD. V. JT. CIT [2000] 243 ITR 4821 , A JUDGMENT OF THE GUJARAT HIGH COURT, IS MISPLACED AND DISTINGUISHABLE. THE SAID CASE IS PRIOR TO THE DECI SION OF DELHI HIGH COURT AND THE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA LTD. (SUPRA). THE GUJARAT HIGH COURT HAS RECORDED A SPECIFIC FINDING THAT AT THE TIME OF THE ORIGINAL ASSESSMENT, THERE WAS NO CONSCIOUS CONSIDE RATION OF MATERIAL AND A MISTAKE WAS MADE. IT HAS BEEN OBSERVED THAT CONSCIO US APPLICATION OF MIND TO THE MATERIAL AND THE ISSUE IN QUESTION IS REQUIR ED. CHANGE OF OPINION NECESSARILY MEANS EXAMINATION ON AN EARLIER OCCASIO N. IN THE PRESENT CASE BEFORE US, THERE IS A SPECIFIC APPLICATION OF MIND. 13. THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF HO NOURABLE DELHI HIGH COURT IN MADHUKAR KHOLSA V CIT ( SUPRA) WE ARE O F THE OPINION THAT IMPUGNED REASSESSMENT PROCEEDINGS INITIATED ARE SUSTAINABLE, THEREFORE SAME IS QUASHED. 14. ALTERNATIVELY, ALSO ON THE GROUND OF CHANGE OF OPIN ION ASSESSEES APPEAL DESERVES TO SUCCEED BECAUSE IN THE ORIGINAL ASSESSM ENT PROCEEDINGS VIDE NOTICE DATED 18/08/2008 AO HAS ASKED FOR ALL THE DE TAILS RECORDED IN REASON. ASSESSEE SUBMITTED COMPLIANCE LETTER DATED 06/09/20 06 FURNISHING THESE ITA NO. 32 18/DEL/2011 CO. NO. 2357/DEL/2011 E.I.DUPONT P. LTD. 9 DETAILS AND AO PERUSED THEM AND DID NOT TAKE ANY AD VERSE COGNIZANCE IN ORIGINAL ASSESSMENT. SR NO PARTICULAR REASONS OF REOPENING DETAILS ASKED FOR BY AO DETAILS OF REPLY FILED BY ASSESSEE 1 DISALLOWANCE PROPOSED ON ACCOUNT OF U/S 40A (I) PARA NO 24 OF THE NOTICE DATED 18/8/2006 AO HAS ASKED FOR THE DETAILS OF COMPLIANCE WITH SECTION 40A WITH RESPECT TO EXPENDITURE IN FOREIGN CURRENCY PARA NO 15 OF LETTER DATED 06/09/2006 WHERE IN REPLY TO PARA NO 24 OF NOTICE IS SUBMITTED ALONG WITH AN ANNEXURE 15. ANNEXURE 7 OF THAT SUBMISSION ALSO GIVENS THE DETAILS OF ROYALTY PAYMENTS MADE BY THE ASSESSEE VIDE LETTER OF RBI DATED 9/11/2002. IN THE COMPUTATION OF TOTAL INCOME SUBMITTED BY THE ASSESSEE THE AMOUNT OF DISALLOWANCE U/S 40A (I) IS GIVEN AS WELL AS DEDUCTION OF THE EXPENDITURE ON PAYMENT OF TDS BASIS IS ALSO DISCLOSED. 2 ADVANCES WRITTEN OFF PARA NO 15 OF THE NOTICE DATED 18/8/2008 DETAILS AE AVAILABLE AT SCHEDULE XVIII OF THE BALANCE SHEET 3 ROYALTY CHARGES PARA NO 8 OF THE NOTICE DT. 18/8/2008 PARA NO 7 OF THE REPLY DATED 06/9/2006 4 DEPRECIATION ON COMPUTERS ALLOWED @ 60 % INSTEAD OF 25 % AND ON ELECTRIC INSTALLATION @ 25 % INSTEAD OF 15 % POINT NO 6 OF NOTICE DATED 18/8/2008 REPLY OF ASSESSE DATED 06/9/2006 AT PARA NO 6 4 INTEREST U/S 234B IS SHORT CHARGED THIS IS THE C HARGE TO BE MADE BY AO WHILE FRAMING ASSESSMENT ORDER AND INTEREST SHORT CHARGED DOES NOT RELATE TO INCOME 15. BASED ON ABOVE CHART IT IS APPARENT THAT THERE IS C OMPLETE INFORMATION ASKED BY THE AO, ASSESSEE REPLIED, AND NO ADVERSE VIEW WA S TAKEN. ON THE SAME ISSUES NOW, REASSESSMENT NOTICE IS ISSUED. HONOURAB LE DELHI HIGH COURT IN CIT V USHA INTERNATIONAL LIMITED 348 ITR 485 HAS LA ID DOWN THE FOLLOWING PROPOSITIONS OF LAW: ITA NO. 32 18/DEL/2011 CO. NO. 2357/DEL/2011 E.I.DUPONT P. LTD. 10 (I) THE EXPRESSION 'CHANGE OF OPINION' POSTULATES FORMA TION OF OPINION AND THEN A CHANGE THEREOF. IN THE CONTEXT OF SECTION 14 7, IT IMPLIES THAT THE ASSESSING OFFICER SHOULD HAVE FORMED AN OPINION AT THE FIRST INSTANCE, I.E., IN THE PROCEEDINGS UNDER SECTION 143(3) AND NOW BY INI TIATION OF THE REASSESSMENT PROCEEDING, THE ASSESSING OFFICER PROPOSES OR WANTS TO TAKE A DIFFERENT VIEW. (II) REASSESSMENT PROCEEDINGS WILL BE INVALID IN CASE TH E ASSESSMENT ORDER ITSELF RECORDS THAT THE ISSUE WAS RAISED AND IS DECIDED IN FAVOUR OF TH E ASSESSEE. REASSESSMENT PROCEEDINGS IN THE SAID CASE S WILL BE HIT BY PRINCIPLE OF 'CHANGE OF OPINION'. (III) REASSESSMENT PROCEEDINGS WILL BE INVALID IN CASE AN ISSUE OR QUERY IS RAISED AND ANSWERED B Y THE ASSESSEE IN ORIGINAL ASSESSMENT PROCEEDINGS BUT THEREAFTER THE ASSESSING OFFICER DOES NOT MAKE ANY ADDITION IN THE ASSESSMENT ORDER. IN SUCH SITUATIONS, IT SHOULD BE ACCEPTED THAT THE ISSUE WAS EXAMINED BUT THE ASSESSING OFFICER DID NOT FIND ANY GROU ND OR REASON TO MAKE ADDITION OR REJECT THE STAND OF THE ASSESSEE. HE FORMS AN OPINION. THE REASSESSMENT WILL BE INVALID BECAUSE T HE ASSESSING OFFICER, HAD FORMED AN OPINION IN THE ORIGINAL ASSE SSMENT, WHETHER OR NOT HE HAD RECORDED HIS REASONS IN THE ASSESSMENT O RDER. 16. IN THIS CASE, AN ISSUE OR QUERY IS RAISED AND ANSWE RED BY THE ASSESSEE IN ORIGINAL ASSESSMENT PROCEEDINGS BUT THEREAFTER THE ASSESSING OFFICER DID NOT MAKE ANY ADDITION IN THE ASSESSMENT ORDER. RESPECTF ULLY FOLLOWING HONOURABLE DELHI HIGH COURT IN CIT V USHA INTERNATI ONAL (FB) (SUPRA) IN SUCH SITUATIONS, IT SHOULD BE ACCEPTED THAT THE ISS UE WAS EXAMINED BUT THE ASSESSING OFFICER, DID NOT FIND ANY GROUND OR REASO N TO MAKE ADDITION OR REJECT THE STAND OF THE ASSESSEE. HE FORMS AN OPINI ON. THE REASSESSMENT WILL BE INVALID BECAUSE THE ASSESSING OFFICER, HAD FORME D AN OPINION IN THE ORIGINAL ASSESSMENT, WHETHER OR NOT HE HAD RECORDED HIS REASONS IN THE ASSESSMENT ORDER. THEREFORE WE DO NOT HAVE ANY HESI TATION TO HOLD THAT THE REOPENING IN THIS CASE IS INITIATED SOLELY ON THE BASIS OF CHANGE OF OPINION WHICH CANNOT BE SUSTAINED. 17. IN VIEW OF THIS GROUND NO 3 OF THE APPEAL IS ALLOWE D. 18. AS WE HAVE HELD THAT REOPENING IS NOT SUSTAINABLE , WE DO NOT ADJUDICATE OTHER GROUNDS OF THE APPEAL OF THE ASSESSEE AS THEY BECOME INFRUCTUOUS. 19. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO 2351/DEL/2011 (APPEAL OF REVENUE) ITA NO. 32 18/DEL/2011 CO. NO. 2357/DEL/2011 E.I.DUPONT P. LTD. 11 20. NOW WE TAKE UP APPEAL OF THE REVENUE WHERE IN REVEN UE HAS CHALLENGED THE ADDITION OF RS 25,78,900/- DELETED BY CIT (A) ON AC COUNT OF ROYALTY. 21. IN VIEW OF OUR DECISION IN APPEAL OF ASSESSEE IN ITA NO 2357/DEL/2011 WHEREIN ALLOWING GROUND NUMBER THREE OF THAT APPEAL WE HAVE HELD THAT REOPENING PROCEEDINGS INITIATED ARE NOT SUSTAINABLE IN ABSENCE OF ANY NEW TANGIBLE MATERIAL AND EVEN OTHERWISE IS BASED ON ME RE CHANGE OF OPINION. THIS APPEAL OF REVENUE HAS EMERGED FROM THE SAME RE OPENING PROCEEDINGS, AND HENCE CONSEQUENTLY WE DISMISS THE APPEAL OF REVENUE. 22. IN THE RESULT, WE ALLOW APPEAL NO ITA NO 3218 /DEL/ 2011 PREFERRED BY ASSESSEE AND DISMISS APPEAL NO. 2351/DEL/2011 PRE FERRED BY REVENUE. (ORDER PRONOUNCED IN THE COURT ON 18 /11/2015) SD/- SD/- (A.T.VARKEY) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTA NT MEMBER DATED: 18 /11/2015 *B. RUKHAIYAR* COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(APPEALS) 5.DR: ITAT ASSISTANT REGISTRAR ITA NO. 32 18/DEL/2011 CO. NO. 2357/DEL/2011 E.I.DUPONT P. LTD. 12 DATE INITIAL 1. DRAFT DICTATED ON 08/11/2015 2. DRAFT PLACED BEFORE AUTHOR 10/11/2015 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 5. APPROVED DRAFT COMES TO THE SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 7. FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.
