DCIT, New Delhi V. M/s. Bax Global India (P) Ltd., New Delhi

ITA 3368/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53485 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 24-10-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 09-07-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: GEETMALA MOHNANCY
• Assessee Lawyers: J S KOCHHAR; U DAI BIR SINGH KOCHHAR
• Keywords: Reopening of assessment; Transfer pricing; Opportunity of being heard; Audit objection; International transaction; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings; Set aside
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH A DELHI ] BEFORE SHRI U. B. S. BEDI, JM & SHRI K. D. RANJAN, AM I. T. APPEAL NO. 3368 (DEL) OF 2010 ASSESSMENT YEAR : 2004-05. DY. COMMISSIONER OF INCOME-TAX, M/S. BAX GLOBAL INDIA PVT. LTD., C I R C L E : 2 (1), VS. [NOW KNOWN AS SCHENKER INDIA PVT. LTD.] N E W D E L H I. 9394, KAPASHERA, N E W D E L H I 110 037. P A N / G I R NO. AAA CB 0697 B. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI J. S. KOCHHAR, C. A.; & SHRI U DAI BIR SINGH KOCHHAR, C. A.; DEPARTMENT BY : MS. GEETMALA MOHNANCY [CIT ] D. R.; O R D E R. PER K. D. RANJAN, AM : THIS APPEAL BY THE REVENUE FOR ASSESSMENT YEAR 2004 -05 ARISES OUT OF THE ORDER OF THE LD. CIT (APPEALS)V, NEW DELHI. 2. THE GROUNDS OF APPEAL RAISED ARE REPRODUCED AS U NDER :- 1. THE LD. CIT (APPEALS) HAS ERRED IN LAW AND ON FACTS IN RENDERING THE ASSESSMENT ORDER PASSED UNDER SECTION 147 / 143(3) DATED 15/12/2009 AS NULL AND VOID, IGNORING THE PROVISIONS OF CLAUSE (C) OF EXPL ANATION 2 TO SECTION 147 OF THE I. T. ACT WHICH ARE CLEARLY APPLICABLE TO THIS CASE ; 2. THE LD. CIT (APPEALS) HAS ERRED IN LAW AN D ON FACTS IN DELETING ADDITION OF RS.89,54,000/- ON ACCOUNT OF MANAGEMENT FEE RECEIVA BLE, IGNORING THAT IN THE 2 I. T. APPEAL NO. 3368 (DEL) OF 2010 NOTES TO ACCOUNT OF THE ASSESSEE IT IS CLEARLY MENT IONED THAT MANAGEMENT FEE OF RS.89,54,000/- WAS RECEIVABLE AS ON 31/03/2004 AND WAS NOT INCLUDED IN THE INCOME; 3. THE LD. CIT (APPEALS) HAS ERRED IN LAW AN D ON FACTS IN DELETING ADDITION OF RS.80,39,000/- ON ACCOUNT OF CESSATION OF LIABIL ITY UNDER SECTION 41(1) OF THE ACT, IGNORING THAT IN RE-ASSESSMENT PROCEEDI NGS ASSESSEE COULD NOT SUBMIT ANY EVIDENCES FOR THE UNCLAIMED LIABILITIES AND THAT THESE LIABILITIES ACTUALLY EXISTED; 4. THE LD. CIT (APPEALS) HAS ERRED IN LAW AN D ON FACTS IN DELETING ADDITION OF RS.1,63,34,000/- ON ACCOUNT OF UNASCERTAINED LIA BILITY, IGNORING THAT NO EVIDENCES, BILLS / RE-CONCILIATION WAS SUBMITTED DU RING THE COURSE OF REASSESSMENT PROCEEDINGS IN RESPECT TO UNASCERTAINED LIABILITY. 3. THE FIRST ISSUE FOR CONSIDERATION RELATES TO REO PENING OF ASSESSMENT UNDER SECTION 147 OF THE INCOME TAX ACT, 1961. THE FACTS OF THE CASE ST ATED IN BRIEF ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 31 ST OCTOBER, 2004 DECLARING INCOME OF RS.7,91,28,050/- . THE ASSESSING OFFICER COMPLETED THE ASSESSMENT UNDER SECTION 143(3) AFTER VERIFICATION / SCRUTINY OF INTERNATIONAL TRANSACTIONS. SINCE NO ADVERSE INFERENCE WAS DRAWN IN RESPECT OF THE ARMS LENGTH PRICE OF INTERNATIONAL TRANSACTIONS THE ASSESSING OFFICER CO MPLETED ASSESSMENT AT THE RETURNED INCOME. SUBSEQUENTLY THE ASSESSING OFFICER OBSERVED THAT (I ) MANAGEMENT FEE OF RS.89,54,000/- RECEIVABLE AS ON 31 ST MARCH, 2004 WAS NOT INCLUDED IN THE INCOME/OPERATI ONS; (II) AN AMOUNT OF RS.80,39,000/- ON ACCOUNT OF AWAITED CLAIMS FROM OV ERSEAS COMPANIES HAS BEEN DEBITED TO PROFIT AND LOSS ACCOUNT; & (III) THE ASSESSEE HAD DEBITED RS.1,63,34,000/- FOR CLAIMS AWAITED TO THE PROFIT AND LOSS ACCOUNT. THE ASSESSING OFFICER RE- OPENED ASSESSMENT UNDER SECTION 147. THE ASSESSING OFFICER COMPLETED ASSESSMENT UNDER SECTIO N 147 / 143(3) MAKING ADDITIONS ON ACCOUNT OF MANAGEMENT FEES, UNCLAIMED LIABILITY AND UNASCER TAINED EXPENDITURE. 4. ON APPEAL THE ASSESSEE RAISED ADDITIONAL GROUND, WHICH WAS ADMITTED BY THE LD. CIT (APPEALS). IN THE ADDITIONAL GROUND THE ASSESSEE C HALLENGED THE REOPENING OF ASSESSMENT. IT WAS SUBMITTED BY THE ASSESSEE THAT THE FACTS AND FIGURE S ON THE BASIS OF WHICH THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT WERE CLEARLY MENTIONED IN THE NOTES TO THE FINAL ACCOUNTS AND IN AUDITORS REPORT ENCLOSED WITH THE BALANCE SHEET. T HESE FACTS WERE AVAILABLE WITH THE ASSESSING 3 I. T. APPEAL NO. 3368 (DEL) OF 2010 OFFICER FROM DAY ONE. NOTHING TANGIBLE MATERIAL WA S AVAILABLE IN THE HANDS OF THE ASSESSING OFFICER FOR REOPENING OF THE CASE. THE FACTS WERE SAME AT THE TIME OF EARLIER ASSESSMENT MADE UNDER SECTION 143(3) OF THE ACT. IT WAS THEREFORE, ARGUED THAT IT WAS SIMPLY A CASE OF CHANGE OF OPINION AND THE ASSESSING OFFICER HAD NOT APPLIED H IS MIND BEFORE OPENING THE ASSESSMENT ON THE BASIS OF AUDIT OBJECTIONS RAISED BY THE AUDIT PARTY . THE ASSESSEE RELIED ON SEVERAL DECISIONS INCLUDING THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF DUNCAN SERVICES LTD. VS. ITO 198 ITR 264 (DEL.) AND TRANSWORLD INTERNATIONAL INC . VS. CIT 142 TAXMAN 35 FOR THE PROPOSITION THAT THE AUDIT PARTYS VIEW REGARDING I NTERPRETATION OF LEGAL POSITION WOULD NOT CONSTITUTE A REASON OF ISSUE OF NOTICE. FOR CHANGE OF OPINION, THE ASSESSEE RELIEF ON SEVERAL DECISIONS INCLUDING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. 320 ITR 561 (SC). THE LD. CIT (APPEALS ) AFTER CONSIDERING THE SUBMISSIONS MADE HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED A T ALL IN REOPENING THE ASSESSMENT FOR ASSESSMENT YEAR 2004-05 AND, THEREFORE, ASSESSMENT MADE ON 15/ 12/2009 WAS BAD IN LAW. 5. BEFORE US THE LD. SR. DR SUBMITTED THAT IT IS CA SE WHERE REASSESSMENT PROCEEDINGS HAVE BEEN INITIATED WITHIN THE PERIOD OF FOUR YEARS. FR OM THE REASONS RECORDED IT IS CLEAR THAT ASSESSMENT WAS NOT REOPENED ON THE BASIS OF AUDIT R EPORT AS NO REFERENCE TO THE AUDIT REPORT HAS BEEN MADE BY THE ASSESSING OFFICER WHILE RECORDING THE REASONS. THE AO HAD APPLIED MIND WHILE RECORDING THE REASONS U/S 148 OF THE ACT. THE LD. SR. DR FURTHER SUBMITTED THAT THE ISSUES ON THE BASIS OF WHICH ASSESSMENT WAS REOPENED, WERE NOT IN FOCUS AT THE TIME OF ORIGINAL ASSESSMENT. THE ASSESSEE HAD NOT INCLUDED IN MANAGEMENT FEE AGG REGATING TO RS.89,54,000/- IN THE INCOME. THE ASSESSEE HAS DEBITED UN-ASCERTAINABLE LIABILITY OF RS.1,63,44,000/- IN THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE HAD ALSO DEBITED RS.80,39,00 0/- ON ACCOUNT OF CLAIMS FROM OVERSEAS COMPANIES TO PROFIT AND LOSS ACCOUNT WHICH IS NOT A LLOWABLE AS DEDUCTION. THE ASSESSING OFFICER HAD NOT DISCUSSED ANYTHING ABOUT ABOVE MENTIONED AM OUNTS IN THE ORIGINAL ASSESSMENT ORDER. THEREFORE, NO OPINION WAS FORMED BY THE AO WHILE CO MPLETING ORIGINAL ASSESSMENT. THEREFORE, IT IS NOT A CASE OF CHANGE OF OPINION. THE LD. CIT (A) HAS DECLARED THE ASSESSMENT BAD IN LAW WITHOUT RECORDING ANY REASONS FOR DOING SO. THEREF ORE, REOPENING OF ASSESSMENT CANNOT BE HELD BAD IN LAW. HE PLACED RELIANCE ON THE DECISION IN THE CASE OF HONDA SEIL POWER PRODUCTS LTD V DY CIT 197 TAXMAN 415(DEL). HE ALSO PLACED RELIA NCE ON THE DECISION OF HONBLE HIMACHAL 4 I. T. APPEAL NO. 3368 (DEL) OF 2010 PRADESH HIGH COURT IN THE CASE OF ANKITA DEPOSITS & ADVANCES P. LTD. VS. CIT 235 CTR 73 (HP) FOR THE PROPOSITION THAT WHERE AO HAVING GIVEN NO REASONED FINDING ON THE RETURN FILED BY THE ASSESSEE AND LATER ON DISCOVERED THAT THE ASSES SEE WAS EVADING TAX BY DECLARING ON INCOME OF SHARES AS LONG TERM CAPITAL GAINS WHILE IT HAD BEEN SHOWING THE INVESTMENT IN THESE SHARES AS TRADING INVESTMENT AND NOT LONG TERM INVESTMENT, TH E AO HAD REASON TO BELIEVE THAT THE ASSESSEE WAS CAUSING LOSS TO THE REVENUE AND WAS JUSTIFIED I N REOPENING THE ASSESSMENT. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE REFERRING TO QUEST IONNAIRE AT PAGE NOS. 16 AND 17 SUBMITTED THAT ASSESSMENT WAS COMPLETED AFTER ISSUE OF QUESTIONNAI RE AND AFTER OBTAINING THE INFORMATION. THEREFORE, IT IS INCORRECT ON THE PART OF THE REVEN UE TO ARGUE THAT ISSUES ON THE BASIS OF WHICH ASSESSMENT WAS REOPENED WERE NOT DISCUSSED. HE FUR THER SUBMITTED THAT TAX AUDIT REPORT WAS AVAILABLE ON RECORD. WHEN THE ASSESSMENT IS MADE A FTER GOING THROUGH THE DOCUMENTS AVAILABLE ON RECORD, THE LEGAL PRESUMPTION IS THAT THE ASSESS ING OFFICER HAD GONE THROUGH THE DETAILS AND PASSED THE ORDER U/S 143(3) AFTER APPLICATION OF MI ND. THEREFORE, THE MATERIAL WAS AVAILABLE AT THE TIME OF ORIGINAL ASSESSMENT AND HENCE IT WOULD AMOUNT TO CHANGE OF OPINION. HE PLACED RELIANCE ON THE FOLLOWING DECISIONS:- 1. CIT VS. KELVINATOR OF INDIA LTD. 256 ITR 1 [APPR OVED BY HONBLE SUPREME COURT IN 320 ITR 521; 2. SATNAM OVERSEAS LTD. VS. ADDL. CIT 329 ITR 237 ( DEL.); 3. CIT VS. FEATHER FOAM ENTERPRISES P. LTD. 296 ITR 342 (DEL). 4. JAI HOTEL CO. LTD. VS. ADIT 184 TAXMAN PAGE 1 ( DEL.); & 5. DCIT VS. MANAK SHEO CO. PVT. LTD. [ITA. NO. 402 2 (DEL) OF 2009 FOR ASSESSMENT YEAR 2002-03 ITAT, DELHI BENCH E]. 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE ORIGINAL ASSESSMENT PASSED ON 22/12/2006 IT IS SEEN THAT THE ASSESSING OFFICER HAD EXAMINED THE ONLY ISSUE RELATING TO TRANSFER PRICING AND AFT ER EXAMINATION HE HAS ACCEPTED THE RETURNED INCOME. WE HAVE GONE THROUGH THE QUESTIONNAIRE DATE D 22/08/2006 AT THE TIME OF ORIGINAL 5 I. T. APPEAL NO. 3368 (DEL) OF 2010 ASSESSMENT. THE ASSESSING OFFICER HAS NOT RAISED A NY QUERY IN RESPECT OF THESE THREE ITEMS, WHICH FORMED PART OF TAX AUDIT REPORT FILED ALONG WITH TH E RETURN OF INCOME. THERE IS NO DOUBT ABOUT THE FACT THAT THE REVENUE AUDIT HAS RAISED CERTAIN OBJE CTIONS IN RESPECT OF INCORRECT ALLOWANCE OF INADMISSIBLE EXPENSES, BUT THE ASSESSING OFFICER WH ILE RECORDING REASONS HAS NOT REFERRED TO THE OBJECTIONS RAISED BY THE REVENUE AUDIT. THE LD. CI T (APPEALS) WHILE ADJUDICATING THE ADDITIONAL GROUND OF APPEAL HAS ANNULLED THE ASSESSMENT BY OBS ERVING AS UNDER:- IN THE LIGHT OF ABOVE FACTS AND VARIOUS COURT DE CISIONS, IT IS APPROPRIATE TO SAY THAT THE AO IS NOT JUSTIFIED AT ALL IN REOPENIN G THE ASSESSMENT FOR ASSESSMENT YEAR 2004-05 AND THE ASSESSMENT ORDER DATED 15/12/2 009 PASSED UNDER SECTION 143(3) MAY BE CONSIDERED AS NULL AND VOID AS THE RE OPENING OF ASSESSMENT WAS ERRONEOUS AND BAD IN LAW. 7. FROM THE ABOVE DECISION OF THE LD. CIT (APPEALS) IT IS CLEAR THAT THE LD. CIT (A) HAS NOT PASSED SPEAKING ORDER CONSIDERING THE FACTS OF THE CASE. HE HAS ANNULLED THE ASSESSMENT WITHOUT EXAMINING THE FACTS OF THE CASE PARTICULARLY WHEN T HE ISSUE ON THE BASIS OF WHICH ASSESSMENT WAS REOPENED WAS NOT DISCUSSED IN THE ORIGINAL ASSESSME NT ORDER NOR ANY CLARIFICATION WAS SOUGHT BY THE ASSESSING OFFICER. SINCE THE LD. CIT (A) HAS N OT PASSED A SPEAKING ORDER, WE FEEL IT PROPER TO SET ASIDE THE MATTER TO THE FILE OF THE LD. CIT (A) WITH THE DIRECTIONS TO PASS A SPEAKING ORDER ON ASSUMPTION OF JURISDICTION UNDER SECTION 147 OF THE ACT. 8. AFTER ANNULMENT OF ASSESSMENT THE LD. CIT (APPEA LS) HAS ALSO DISPOSED OF THE APPEAL ON MERITS. SINCE WE HAVE SET ASIDE THE ISSUE TO THE F ILE OF THE LD. CIT (APPEALS) TO DECIDE THE ISSUE OF ASSUMPTION OF JURISDICTION UNDER SECTION 147 OF THE ACT BY PASSING A SPEAKING ORDER, THE OTHER GROUNDS ON MERITS BECOME INFRUCTUOUS. THE LD. CIT (APPEALS) IS DIRECTED THAT ON RE-EXAMINATION OF THE MATTER, IF HE COMES TO THE CONCLUSION THAT T HE REOPENING OF ASSESSMENT WAS BAD IN LAW, THERE WOULD NOT BE ANY NECESSITY TO DECIDE THE APPE AL ON MERITS. IN CASE REOPENING OF ASSESSMENT IS FOUND JUSTIFIED, THE LD. CIT (APPEALS) WOULD ADJ UDICATE THE OTHER GROUNDS ON MERIT, AFTER AFFORDING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. WE ORDER ACCORDINGLY. 6 I. T. APPEAL NO. 3368 (DEL) OF 2010 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S ALLOWED, FOR STATISTICAL PURPOSES, IN THE TERMS INDICATED ABOVE. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 16 TH DECEMBER, 2011. SD/- S D/- [ U. B. S. BEDI ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 16 TH DECEMBER, 2011. *MEHTA * COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT.