DCIT CIR 2(2), MUMBAI V. PUDMJEE AGRO INDUSTRIES LTD, MUMBAI

ITA 3353/MUM/2010

• Counselvise Citation: 335319914 RSA 2010
• Duration Of Justice: 1 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 11-08-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 29-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Keywords: Revised return; Reason to believe
• Section: 143(3); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, MUMBAI BEFORE SHRI R.V. EASWAR, PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 3353/MUM/2010 (ASSESSMENT YEAR: 2001-02) DCIT, CIRCLE - 2(22) M/S. PUDUMJEE INDUSTRIES LTD. ROOM NO. 545, 5TH FLOOR 60, V.B. GANDHI MARG AAYAKAR BHAVAN, M.K. ROAD VS. FORT, MUMBAI 400023 MUMBAI 400020 PAN - AAACP 0478 B APPELLANT RESPONDENT APPELLANT BY: SHRI S.K. SINGH RESPONDENT BY: SHRI VIJAY MEHTA DATE OF HEARING: 11.08.2011 DATE OF PRONOUNCEMENT: 24.08.2011 O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF THE CIT(A) V, MUMBAI DATED 19.02.2009. 2. REVENUE HAS RAISED THE FOLLOWING GROUNDS: - 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN HOLDING THAT THE REOPENING OF T HE ASSESSMENT WAS INVALID AS THERE WAS NO FAILURE ON T HE PART OF THE ASSESSEE TO DISCLOSE ALL MATERIAL FACTS FULLY A ND TRULY WITHOUT APPRECIATING THE FACT THAT PLACING CERTAIN MATERIAL ON R4ECORD FROM WHICH FACTS RELATING TO INCOME ESCAPIN G ASSESSMENT COULD HAVE BEEN FOUND, DOES NOT TANTAMOU NT TO FULL AND TRUE DISCLOSURE ON THE PART OF THE ASSESSEE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN HOLDING THAT THE ADDITIONAL LIA BILITY DUE TO EXCHANGE RATE FLUCTUATION IS NOT NOTIONAL OR CONTIN GENT WITHOUT APPRECIATING THE FACT THAT FOR CLAIMING SUCH LOSS, IT HAD TO BE CLAIMED BY FILING RETURN OF INCOME AS HELD BY THE H ON'BLE SUPREME COURT IN THE CASE OF GOETZE(I) LTD. 28 ITR 323. 3. THE ISSUES IN THE ABOVE GROUNDS ARE WITH REFERENCE TO THE PROCEEDINGS INITIATED UNDER SECTION 147 IN ASSESSEE CASE HAVING COMPLETED THE ITA NO. 3353/MUM/2010 M/S. PUDUMJEE INDUSTRIES LTD.. 2 ASSESSMENT UNDER SECTION 143(3) ORIGINALLY. IN THE COURSE OF REGULAR ASSESSMENT UNDER SECTION 143(3) ASSESSEES CLAIM OF EXCHANGE RATE LOSS ON ACCOUNT OF TRADING ASSETS WAS MADE BEFORE THE A.O. AND WAS DISCUSSED IN THE ORDER DATED 21.03.2002. THE A.O. DETERMINED THE LOSS AT ` 37,16,959/- AFTER ACCEPTING ASSESSEES CLAIM OF LOSS ON EXCHANG E FLUCTUATIONS. SUBSEQUENTLY, VIDE NOTICE DATED 24.03.2008 THE ASSE SSMENT WAS REOPENED BY RECORDING THE FOLLOWING REASONS: - THE LOSS ON ACCOUNT OF FOREX FLUCTUATION AMOUNTING TO RS.29,92,500/- IS A NOTIONAL LIABILITY DUE TO TRANSLATION OF LOAN AMOUNT IN ACCOUNTS AND THEREFORE THE SAME WAS WRONGLY ALLOWED AS AGAIN ST THE LOSS INCURRED OF RS.7,24,459/-. FURTHER, SECTION 43A WAS NOT APPLICABLE FOR BORROWING FOR OTHER THAN ASSET PURCHASED. IN VI EW OF THE ABOVE, THERE IS REASON TO BELIEVE THAT INCOME OF RS.22,68, 041/- HAS ESCAPED ASSESSMENT FOR AY 2001-02 AND THE SAME IS REQUIRED TO BE BROUGHT TO TAX. 4. THE ISSUE WAS CONTESTED REGARDING JURISDICTION TO R EOPEN U/S 147 AS THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THAT ASSESSMENT YEAR. AS THE REOPENING WAS DONE AFTER SIX YEARS FROM THE END OF RELEVANT ASSES SMENT YEAR, FIRST PROVISO TO SECTION 147 WILL APPLY. THE A.O. REJECTED THE C LAIM STATING THAT ASSESSEE HAS NOT DISCLOSED THESE FACTS IN THE RETURN OF INCO ME FILED AND CLAIMED BY FILING ADDITIONAL CLAIM IN THE COURSE OF ASSESSMEN T PROCEEDINGS WITHOUT FILING REVISED RETURN AND ON MERITS THE LOSS DUE TO FOREIGN EXCHANGE FLUCTUATIONS OF ` 29,92,500/- WAS ALLOWED AS AGAINST ACTUALLY INCURRE D AMOUNT OF ` 7,24,459/- AND PROVISIONS OF SECTION 43A WERE NOT A PPLICABLE TO THE FACTS OF THE CASE. FOR THESE REASONS THE A.O. D ISALLOWED THE DIFFERENCE BETWEEN THE ABOVE TWO AMOUNTS IN THE REASSESSMENT O RDER DATED 18.12.2008. WHEN THE MATTER WAS CONTESTED BEFORE TH E CIT(A), THE CIT(A) UPHELD THE CONTENTIONS OF THE ASSESSEE BY GIVING TH E FOLLOWING FINDINGS: - 5. I FIND SUFFICIENT MERITS IN THE CONTENTIONS OF THE APPELLANT. PERUSAL OF THE ORIGINAL ASSESSMENT ORDER CLEARLY RE VEALS THAT THE CLAIM MADE BY THE APPELLANT HAS BEEN ALLOWED AFTER DUE CONSIDERATION OF THE FACTS AND THERE I EVIDENTLY A CONSCIOUS APPLICATION OF MIND. NO NEW FACTS HAVE COME TO THE KNOWLEDGE OF THE AO FOR REOPENING. MOREOVER, IN THE LIGHT OF THE PRO VISO TO SECTION, THERE IS APPARENTLY NO FAILURE ON THE PART OF THE A PPELLANT TO DISCLOSE ALL MATERIAL FACTS FULLY AND TRULY. MOREOVER, MY LE ARNED PREDECESSOR ITA NO. 3353/MUM/2010 M/S. PUDUMJEE INDUSTRIES LTD.. 3 IN APPEAL FOR AY 1999-00 HAS HELD SIMILAR REOPENING TO BE INVALID ON THE SAME SET OF FACTS AND THE CIRCUMSTANCES. ACCORD INGLY, THE REOPENING IS TREATED AS INVALID. THE GROUND IN THIS GROUND IS ALLOWED. 5. EVEN ON MERITS, CIT(A) WAS OF THE OPINION THAT REL IEF WAS ALLOWED TO THE ASSESSEE AFTER FULLY EXAMINING THE ISSUE THAT T HE VALUATION OF OUTSTANDING LIABILITY AT THE PREVAILING RATE WAS AN ASCERTAINED AND DEFINITE LIABILITY AND FOLLOWING THE DECISION IN THE CASE OF CIT VS. WOODWARD GOVERNOR INDIA P. LTD. 312 ITR 254 (SC) THE AMOUNT WAS CORRE CTLY ALLOWED IN THE ORIGINAL ASSESSMENT PROCEEDINGS AND ON SIMILAR FACT S THE HON'BLE ITAT IN A.Y. 1998-99 UPHELD THE CONTENTIONS. THE REVENUE IS AGGRIEVED ONLY ON THE ISSUE OF REOPENING, WITHOUT CONTESTING THE ISSUE OF LIABILITY ALLOWED ON MERITS. 6. THE LEARNED D.R. RELIED ON THE ORDER OF THE A.O. WH EREAS THE LEARNED COUNSEL REITERATED THE FACTS AND PLACED ON RECORD A PAPER BOOK CONTAINING ORDERS PASSED UNDER SECTION 143(3), REASONS FOR REO PENING AS INDICATED AND ORDERS OF THE CIT(A) IN A.Y. 1998-99 AND 1999-2000 AND ORDERS OF THE ITAT FOR THE ABOVE RESPECTIVE ASSESSMENT YEARS. IT WAS F URTHER SUBMITTED THAT ON SIMILAR FACTS THE CIT(A) GAVE RELIEF ON BOTH LEGAL ISSUE OF REOPENING THE ASSESSMENT AND ON MERITS ALSO AND REVENUE DID NOT C ONTEST THE ISSUE OF REOPENING IN EARLIER YEAR BUT RAISED THE GROUND ONL Y ON MERITS AND REVENUE APPEAL WAS DISMISSED. IT WAS HIS SUBMISSION THAT RE VENUE IS CONTESTING THIS YEAR THE REOPENING ONLY AND NOT ON MERITS, THE REAS ONS OF WHICH ARE NOT ASCERTAINABLE FROM THE RECORD. 7. WE HAVE CONSIDERED THE ISSUE. THERE IS NO DOUBT THA T THE A.O. REOPENED THE ASSESSMENT BY RECORDING REASONS AFTER COMPLETION OF THE ASSESSMENT UNDER SECTION 143(3). THE REOPENING WAS DONE AFTER FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. AS AN ASSESSMENT U/S 143(3) WAS COMPLETED EARLIER, FIRST PROVISO TO SECTION 147 WAS APPLICABLE TO THE FACTS OF THIS CASE. AS SEEN FROM THE REASONS, THERE IS NO RECORDING OF THE FACT THAT THERE IS A FAILURE ON THE PART OF THE ASSESSEE IN D ISCLOSING FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. IT MAY BE TRUE THAT ASSESSEE HAD NOT ORIGINALLY CLAIMED A HIGHER LIABILITY OF FO REIGN EXCHANGE FLUCTUATIONS ITA NO. 3353/MUM/2010 M/S. PUDUMJEE INDUSTRIES LTD.. 4 AT THE TIME OF FILING THE RETURN BUT MADE THE CLAIM IN THE ASSESSMENT PROCEDURE ITSELF, WHICH THE A.O. ELABORATELY DISCUS SED AND ALLOWED. THE A.O. HAS DISCUSSED THE FACTS VIDE PARA 6 IN PAGE 2 OF TH E ASSESSMENT ORDER DATED 24.03.2003 AND THE CLAIM OF EXCHANGE RATE DIFFERENC E REGARDING ECB LOAN AMOUNTING TO US $30,00,000 TAKEN DURING THE FINANCI AL YEAR 1997-98 WAS EXAMINED DURING THE ASSESSMENT PROCEEDINGS AND GAVE A FINDING THAT ASSESSEES CLAIM WAS ACCEPTABLE, AS SIMILAR CLAIM M ADE IN A.Y. 1990-2000 WAS ALSO ACCEPTED BY THE A.O. ACCORDINGLY HE COMPUT ED THE LOSS ALLOWING THE CLAIM OF LOSS. SINCE ALL THE FACTS WERE PLACED BEFORE THE A.O. AND AS THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE IN MAKIN G FULL DISCLOSURE OF THE CLAIM, IT CANNOT BE STATED THAT THERE IS FAILURE ON THE PART OF THE ASSESSEE SO AS TO ATTRACT PROVISIONS FOR INITIATION OF PROCEEDI NGS UNDER SECTION 147. NOWHERE THE A.O. HAS STATED WHILE RECORDING THE REA SONS THAT THERE IS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND T RULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. HAVING REGARD TO THE PURP OSE OF THE SECTION, WE ARE OF THE OPINION THAT THE POWER CONFERRED BY SECT ION 147 DOES NOT PROVIDE A FRESH OPPORTUNITY TO THE A.O. TO REOPEN AFTER COM PLETING THE ASSESSMENT UNDER SECTION 143(3) AFTER EXPIRY OF FOUR YEARS FRO M THE END OF THE RELEVANT ASSESSMENT YEAR. THE HONBLE JURISDICTIONAL HIGH CO URT IN THE CASE OF HINDUSTAN LEVER LTD. VS. ACIT 268 ITR 332 HELD THAT THE REASON THAT THERE WAS A FAILURE TO DISCLOSE FULLY AND TRULY ALL MATER IAL FACTS MUST BE READ AS RECORDED BY THE A.O. AND IT IS NOT PERMISSIBLE TO D ELETE OR ADD TO THOSE REASONS. SIMILARLY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF TITANOR COMPONENTS LTD. IN WRIT PETITION OF 71 OF 2 005 DATED 9 TH JUNE 2011 UPHELD THE CONTENTIONS, ON SIMILAR FACTS, THAT THER E WAS NO FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSING FULLY AND TRULY THE MATERIAL FACTS NECESSARY FOR ASSESSMENT. CONSIDERING THE PURPOSE AND INTENT OF THE PROVISIONS, WE ARE OF THE OPINION THAT REOPENING AFTER FOUR YEARS AFTE R COMPLETION OF ASSESSMENT UNDER SECTION 143(3) WAS NOT PERMISSIBLE UNLESS THE RE IS FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIA L FACTS AND AO CLEARLY RECORDS SUCH FAILURE IN THE REASONS SO RECORDED. RE SPECTFULLY FOLLOWING THE PRINCIPLES ESTABLISHED ON THIS ISSUE, WE UPHOLD THE ORDER OF THE CIT(A) AND REJECT THE CONTENTIONS OF THE REVENUE. ITA NO. 3353/MUM/2010 M/S. PUDUMJEE INDUSTRIES LTD.. 5 8. WE ARE ALSO SURPRISED TO NOTE THAT REVENUE IS NOT C ONTESTING THE ISSUE ON MERITS. WHAT PURPOSE WOULD IT SERVE IF THE ISSUE IS CONTESTED ONLY ON LEGAL PRINCIPLES OF JURISDICTION FOR REOPENING WHEN THE A SSESSEE CLAIM OF LOSS WAS ALLOWABLE ON MERITS. THE CIT(A)S ORDER IS CORRECT BOTH ON FACTS AND ON LAW AND REVENUE SHOULD HAVE ACCEPTED THE ORDER WHEN IT HAS ACCEPTED THE ISSUE ON MERITS. WE ARE UNABLE TO UNDERSTAND THE PURPOSE BEHIND PREFERRING A SECOND APPEAL, PUTTING ASSESSEE TO INCONVENIENCE AN D CLOGGING UP THE APPELLATE PROCEDURE WITH UNNECESSARY APPEALS. EVEN IF THIS APPEAL WAS ALLOWED FOR ANY REASON, NO PURPOSE WOULD BE SERVED TO REVENUE AS THE ISSUE WAS NOT CONTESTED ON MERITS AND ASSESSEES LOSS CLA IM WAS TO BE ALLOWED. THERE IS ALSO INCONSISTENT STAND OF REVENUE IN RAIS ING GROUNDS. IN EARLIER YEAR APPEAL WAS RAISED ON MERITS ACCEPTING ORDER OF CIT(A) ON JURISDICTION TO REOPEN WHEREAS IN THIS YEAR THE JURISDICTION ISSUE WAS CONTESTED WHILE ACCEPTING THE ORDER ON MERITS OF CLAIM. WE ADVISE R EVENUE TO BE CAUTIOUS IN PREFERRING APPEALS IN THIS MANNER WHICH DO NOT SERV E ANY PURPOSE. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH AUGUST 2011. SD/- SD/- (R.V. EASWAR) (B. RAMAKOTAIAH) PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED: 24 TH AUGUST 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) V, MUMBAI 4. THE CIT II, MUMBAI CITY 5. THE DR, C BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.