ACIT, New Delhi V. M/s. Keane India Ltd., Haryana

ITA 3291/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3998 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 05-05-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 05-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H L DIHANA
• Assessee Lawyers: S D KAPILA; PRAVESH SHARMA S ORDE
• Keywords: Reopening of assessment; Depreciation; Search and seizure; Tangible material; Difference of opinion; Reason to believe; Unabsorbed depreciation; Change of opinion
• Section: 143(3); 147; 54; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D : NEW DELHI DELHI BENCH D : NEW DELHI DELHI BENCH D : NEW DELHI DELHI BENCH D : NEW DELHI BEFORE SHRI R.P.TOLANI, JM AND SHRI B.K.HALDAR, AM BEFORE SHRI R.P.TOLANI, JM AND SHRI B.K.HALDAR, AM BEFORE SHRI R.P.TOLANI, JM AND SHRI B.K.HALDAR, AM BEFORE SHRI R.P.TOLANI, JM AND SHRI B.K.HALDAR, AM ITA NO.3291/DEL/2010 ITA NO.3291/DEL/2010 ITA NO.3291/DEL/2010 ITA NO.3291/DEL/2010 ASSESSMENT YEAR : 2003 ASSESSMENT YEAR : 2003 ASSESSMENT YEAR : 2003 ASSESSMENT YEAR : 2003- -- -04 0404 04 ASSTT.COMMISSIONER OF ASSTT.COMMISSIONER OF ASSTT.COMMISSIONER OF ASSTT.COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -5(1), 5(1), 5(1), 5(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. VS. VS. VS. VS. M/S KEANE INDIA LIMITED M/S KEANE INDIA LIMITED M/S KEANE INDIA LIMITED M/S KEANE INDIA LIMITED, ,, , UNITECH TRADER CENTRE, SECTOR UNITECH TRADER CENTRE, SECTOR UNITECH TRADER CENTRE, SECTOR UNITECH TRADER CENTRE, SECTOR- -- -43, 43, 43, 43, SUSHANT LOK SUSHANT LOK SUSHANT LOK SUSHANT LOK- -- -I, GURGAON, I, GURGAON, I, GURGAON, I, GURGAON, HARYANA HARYANA HARYANA HARYANA 122 001. 122 001. 122 001. 122 001. PAN NO.AABCK7777J. PAN NO.AABCK7777J. PAN NO.AABCK7777J. PAN NO.AABCK7777J. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI H.L.DIHANA, CIT-DR. RESPONDENT BY : SHRI S.D.KAPILA AND SHRI PRAVESH SHARMA, ADVOCATES. ORDE ORDE ORDE ORDER R R R PER R.P.TOLANI, JM : PER R.P.TOLANI, JM : PER R.P.TOLANI, JM : PER R.P.TOLANI, JM : THIS IS REVENUES APPEAL. FOLLOWING GROUNDS ARE RA ISED:- 1. THE ORDER OF THE LD.CIT(A) IS ERRONEOUS AND CON TRARY TO FACTS AND LAW. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD.CIT(A) HAS ERRED IN TREATING THE REOPEN ING OF THE CASE U/S 147/148 AS UNSUSTAINABLE AND ALLOWING THE ASSESSEE TO SET OF THE BROUGHT FORWARD LOSSES BEFOR E ALLOWING THE DEDUCTION U/S 10A OF THE I.T.ACT. 3. THE LD.CIT(A) IGNORED THE FACT THAT EACH YEAR IS UNIQUE IN ITSELF AND STAND TAKEN BY THE REVENUE IN PARTICULAR YEAR IS NOT BINDING FOR EARLIER AND SUBS EQUENT YEARS. 2. LEARNED DR RELIED ON THE ORDER OF THE ASSESSING OFFICER AND CONTENDS THAT THE LEARNED CIT(A) HAS ERRED IN HOLDI NG THAT THE AO HAD NO REASON TO BELIEVE FOR REOPENING THE ASSESSEES A SSESSMENT AND THERE WAS NO TANGIBLE MATERIAL AND THE REASSESSMENT AMOUNTED TO ITA-3291/DEL/2010 2 CHANGE OF OPINION. ON MERITS ALSO, RELIANCE IS PLA CED ON THE AOS ORDER. 3. LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, VEHEMENTLY ARGUES THAT THE ASSESSMENT WAS ORIGINALLY FRAMED U/ S 143(3) ON 27.3.2006 WHEREIN THE ISSUE ABOUT THE ALLOWABILITY OF DEDUCTION U/S 10A OF THE ACT WAS DULY EXAMINED IN DETAIL BY THE A O WHICH IS EVIDENT FROM THE SUBMISSIONS FILED BY THE ASSESSEE DATED 5. 7.2005, 27.1.2006, 16.3.2006 AND 23.2.2006. ON THE BASIS OF THESE STA TEMENTS AND SUBMISSIONS, THE ORDER U/S 143(3) WAS PASSED AFTER APPLYING THE MIND TO THE ISSUE ABOUT ALLOWABILITY OF SECTION 10A. 4. THEREAFTER, THE ISSUE WAS AGAIN CONSIDERED U/S 1 54 AS AO RECTIFIED THE QUANTIFICATION OF DEDUCTION U/S 10A A FTER PROPER EXAMINATION AND BEFORE SETTING OFF OF BROUGHT FORWA RD BUSINESS LOSSES. THEREFORE, THE ISSUE ABOUT THERE BEING NO FRESH MAT ERIAL AND AO HAVING ALREADY EXERCISED HIS MIND TWICE ON THE SUBJECT MAT TER, THE CIT(A) AFTER CONSIDERING THE JUDGMENT OF HON'BLE DELHI HIG H COURT IN THE CASE OF KELVINATOR OF INDIA LTD. 256 ITR 1, CIT VS. EI CHER LTD. 294 ITR 310 AND VARIOUS OTHER JUDGMENTS HELD THAT THE REOPENING OF THE ASSESSMENT WAS BAD IN LAW BY OBSERVING AS UNDER:- HOWEVER, ONE NEEDS TO GIVE A SYSTEMATIC INTERPRETA TION TO THE WORDS REASON TO BELIEVE FAILING WHICH, WE ARE AFRAID, SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE AO T O REOPEN ASSESSMENTS ON THE BASIS OF MERE CHANGE OF OPINION WHICH CANNOT BE PER SE REASON TO REOPEN. WE MUST ALSO KEEP IN MIND THE CONCEPTUAL DIFFERENCE BE TWEEN POWER TO REVIEW AND POWER TO RE-ASSESS. THE AO HAS NO POWER TO REVIEW, HE HAS THE POWER TO RE-ASSESS. BU T REASSESSMENT HAS TO BE BASED ON FULFILLMENT OF CERT AIN PRE- CONDITION AND IF THE CONCEPT CHANGE OF OPINION IS REMOVED, AS CONTENDED ON BEHALF OF THE DEPARTMENT, THEN, IN THE GRAB OF REOPENING THE ASSESSMENT, REVIEW WOU LD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF CHANGE OF OPINION AS AN IN BUILT TEST TO CHECK ABUSE OF POWE R BY THE ITA-3291/DEL/2010 3 AO. HENCE, AFTER 1 ST APRIL 1989, AO HAS POWER TO REOPEN, PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO TH E CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LIVE LINK WITH THE FORMATION TO BELIEF. 2.3 ACCORDINGLY, IN VIEW OF THE ABOVE LEGAL AND FAC TUAL POSITION, I HAVE NO HESITATION IN HOLDING THAT THE REOPENING OF ASSESSMENT IN TERMS OF SECTION 147 OF THE IT ACT 1961 FOR THE ASSESSMENT YEAR 2003-04 IS NOT SUSTAINABLE IN LAW. 5. ON MERITS ALSO, THE ISSUE IS COVERED IN FAVOUR O F THE ASSESSEE AS IN SUBSEQUENT YEARS, AO HIMSELF HAS ALLOWED THE CLA IM U/S 10A ON SIMILAR FOOTING IN AY 2005-06, AND IN AY 2006-07, T HE AO IN THE DRAFT ORDER SUBMITTED TO DRP HAS ALLOWED THE SIMILAR CLAI M. ON MERITS ALSO, IT IS CONTENDED THAT THE FACTS ARE AS UNDER :- EXEMPTION U/S 10A OF THE ACT IS ALWAYS GRANTED WIT H REFERENCE TO AN UNDERTAKING WHICH ENGAGES ITSELF IN THE EXPORT OF ARTICLES, THINGS OR COMPUTER SOFTWARE SUB JECT TO FULFILLMENT OF CERTAIN CONDITIONS AS ENVISAGED UNDE R THE LAW. IT IS ARGUED THAT DEDUCTION U/S 10A OF THE AC T HAS TO BE ALLOWED TO SUCH ELIGIBLE UNITS BEFORE INCLUDING THE INCOME OF SUCH UNITS FOR THE PURPOSES OF COMPUTING THE TOTAL INCOME OF AN ASSESSEE. THE LD.COUNSEL ARGUES THAT THE AO HAS COMMITTED A SERIOUS ERROR OF JUDGMENT IN AS MUCH AS HE HAS FAILED TO DRAW A DISTINCTION BETWEEN A PROFIT OF AN ELIGIBLE UNIT AND THE TOTAL BUSINESS I NCOME OF AN ASSESSEE. ACCORDING TO THE LD.COUNSEL, BEFORE CONS IDERING SET OFF OF BROUGHT FORWARD LOSS AND DEPRECIATION PE RTAINING TO THE ENTIRE BUSINESS OF AN ASSESSEE, IT IS INCUMB ENT UPON THE AO TO FIRST COMPUTE THE PROFITS OF AN ELIGIBLE UNIT AND THEN ALLOW DEDUCTION U/S 10A OF THE IT ACT, 1961 BE FORE TAKING THE SURPLUS PROFITS, IF ANY, OF SUCH ELIGIBL E UNIT TO THE COMPUTATION OF TOTAL BUSINESS PROFITS OF AN ASSESSE E. THE LD.COUNSEL ARGUES THAT AT THE TIME OF ORIGINAL ASSE SSMENT ALL THESE LEGAL PROVISIONS WERE DULY CONSIDERED BY THE AO AND ONLY THEREAFTER THE DEDUCTION U/S 10A OF THE AC T WAS ALLOWED BEFORE SETTING OFF OF BROUGHT FORWARD BUSIN ESS LOSSES AND UNABSORBED DEPRECIATION. ITA-3291/DEL/2010 4 6. LEARNED COUNSEL FOR THE ASSESSEE IN SUPPORT OF H IS PROPOSITION RELIED ON THE JUDGMENTS OF ITAT BANGALORE BENCH IN THE CASES OF GE INDIA EXPORTS (P) LTD. VS. DCIT, YOKOGAWA INDIA LTD . VS. DCIT, AXA BUSINESS SERVICES (P) LTD. VS. ACIT AND ITO VS. ADI TI TECHNOLOGIES (P) LTD. LEARNED COUNSEL THEN RELIES ON ITAT JUDGMENT IN THE CASE OF SCIENTIFIC ATLANTA INDIA TECHNOLOGY (P) LTD. VS. AC IT 129 TTJ (CHENNAI)(SB)273. IN THIS JUDGMENT, THE TRIBUNAL H AS HELD AS UNDER:- 27. HAVING HELD THAT THE DEDUCTION UNDER S. 10A IS NOT AN EXEMPTION BUT ONLY A DEDUCTION UNDER CHAPTER III OF THE IT ACT AND THE PROVISIONS OF S. 80AB OF CHAPTER VI-A W OULD NOT BE APPLICABLE TO SUCH DEDUCTION UNDER S. 10A, AND A LSO THAT THE DEDUCTION UNDER S. 10A IS UNDERTAKING SPECIFIC, WE HAVE TO ANSWER THE QUESTION POSED BEFORE US BY HOLD ING THAT THE BUSINESS LOSSES OF A NON-ELIGIBLE UNIT, WH OSE INCOME IS NOT ELIGIBLE FOR DEDUCTION UNDER S. 10A O F THE ACT, CANNOT BE SET OFF AGAINST THE PROFITS OF THE UNDERT AKING ELIGIBLE FOR DEDUCTION UNDER S. 10A FOR THE PURPOSE OF DETERMINING THE ALLOWABLE DEDUCTION UNDER S. 10A OF THE ACT. OF COURSE, IF THERE ARE MORE THAN ONE UNDERTA KING WHICH ARE ELIGIBLE FOR DEDUCTION UNDER S. 10A AND I F SOME OF THE UNITS HAVE PROFIT AND OTHER UNITS HAVE LOSS, IT WOULD BE AN ENTIRELY DIFFERENT CASE WHICH IS BEFORE US. HEN CE, THE DECISION RENDERED IN THIS APPEAL WOULD NOT BE APPLI CABLE TO SUCH CASES WHERE THERE ARE MORE THAN ONE ELIGIBLE UNDERTAKING CLAIMING DEDUCTION UNDER S. 10A. IN TH IS CASE, THERE IS ONLY ONE ELIGIBLE UNIT CLAIMING DEDUCTION UNDER S. 10A AND HENCE, THE LOSS FROM NON-ELIGIBLE UNIT CANN OT BE SET OFF AGAINST THE PROFITS OF THE ELIGIBLE UNIT WH ILE DETERMINING DEDUCTION UNDER S. 10A. 7. IN VIEW OF THE ABOVE FACTS, IT IS CLEAR THAT ON MERITS ALSO, ASSESSEES CLAIM IS ADMISSIBLE AND ORDER OF THE LEA RNED CIT(A) WAS RELIED. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. AS THE FACTS EMERGE, AO WHILE FRAMING ORIG INAL ASSESSMENT DATED 27.3.2006 HAS CONSIDERED THE ISSUE IN DETAIL OF ELIGIBILITY AND QUANTIFICATION OF DEDUCTION U/S 10A BY VARIOUS SUBM ISSIONS MADE BY ITA-3291/DEL/2010 5 THE ASSESSEE. BESIDES, AO FURTHER DECIDED THE ISSU E ONCE AGAIN BY ORDER U/S 154 DATED 1.5.2006. THERE CANNOT BE ANY DOUBT TO THE EFFECT THAT AO HAS APPLIED HIS MIND TO THE WHOLE ISSUE AND THEREAFTER CAME TO THE CONCLUSION AND ACCORDINGLY, HE FRAMED THE ORIGI NAL ASSESSMENT AS WELL AS SUBSEQUENT 154 ORDER. WE FIND MERIT IN THE ARGUMENTS OF THE LEARNED COUNSEL THAT HON'BLE DELHI HIGH COURT IN TH E CASE OF KELVINATOR OF INDIA LTD. (SUPRA) HAS CATEGORICALLY HELD THAT A N ASSESSMENT CANNOT BE REOPENED MERELY BY CHANGE OF OPINION. CONSEQUEN TLY, THE VIEW ADOPTED BY THE CIT(A) IS IN CONFORMITY WITH THE JUD GMENT OF HON'BLE DELHI HIGH COURT . DEPARTMENT HAS NOT BROUGHT TO O UR NOTICE ANY OTHER TANGIBLE MATERIAL WHICH MAY HAVE BEEN RELIED ON BY THE AO IN FORMING HIS BELIEF ABOUT THE REOPENING. THE CASE CLEARLY A MOUNTS TO CHANGE OF OPINION. IN VIEW THEREOF, WE UPHOLD THE ORDER OF C IT(A) ON THIS ISSUE. 9. ON MERITS ALSO, ITAT IN THE CASE OF SCIENTIFIC A TLANTA INDIA TECHNOLOGY (P) LTD. (SUPRA) HAS CLEARLY HELD THAT D EDUCTION U/S 10A FALLS UNDER CHAPTER III AND NOT CHAPTER VIA. CONSEQUENTL Y, THE PROVISIONS OF SECTION 80AB WILL NOT BE APPLICABLE AND THE DEDUCTI ON IS TO BE CALCULATED ON STAND ALONE BASIS I.E. UNIT-WISE. IN VIEW THEREOF, ON MERITS ALSO, WE SEE NO INFIRMITY IN THE ORDER OF LE ARNED CIT(A), MORE SO WHEN IN THE SUBSEQUENT YEARS, THE ASSESSEES STAND HAS BEEN ACCEPTED BY THE DEPARTMENT ITSELF. IN VIEW THEREOF , WE UPHOLD THE ORDER OF CIT(A). 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 20 TH MAY, 2011. SD/- SD/- (B.K.HALDAR) (B.K.HALDAR) (B.K.HALDAR) (B.K.HALDAR) (R.P.TOLANI) (R.P.TOLANI) (R.P.TOLANI) (R.P.TOLANI) ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER DATED : 20.05.2011. VK. ITA-3291/DEL/2010 6 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR