CENTURY TEXTILES AND INDUSTRIES LTD, MUMBAI V. DCIT CIR 6(2), MUMBAI

ITA 3449/MUM/2009

• Counselvise Citation: 344919914 RSA 2009
• Duration Of Justice: 1 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 02-02-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 27-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJIT KUMAR SINHA PER R K
• Assessee Lawyers: F Y IRANIYOGESH THARP R TOPRAI
• Keywords: Reopening of assessment; Revision of order; Depreciation; Opportunity of being heard; Earning of tax free income; Period of limitation; Bad and doubtful debts; Time period of passing order; Reassessment proceedings
• Section: 143(3); 14A; 115JB; 147; 148; 263; 10

Judgement Text

1 ITA NO.3449/MUM/2009 IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI MUMBAI MUMBAI MUMBAI C CC C BENCH BENCH BENCH BENCH MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI BEFORE SHRI R K PANDA, AM BEFORE SHRI R K PANDA, AM BEFORE SHRI R K PANDA, AM BEFORE SHRI R K PANDA, AM & SHRI VIJAY PAL RAO, JM & SHRI VIJAY PAL RAO, JM & SHRI VIJAY PAL RAO, JM & SHRI VIJAY PAL RAO, JM ITA NO. ITA NO. ITA NO. ITA NO. 3449/MUM/2009 3449/MUM/2009 3449/MUM/2009 3449/MUM/2009 (ASST YEAR (ASST YEAR (ASST YEAR (ASST YEAR 2001 2001 2001 2001- -- -02 0202 02) )) ) CENTURY TEXTILES & INDUSTRIES LTD CENTURY BHAVAN DR A B ROAD, WORLI MUMBAI VS THE DY COMMR OF INCOME TAX CIR 6(2), MUMBAI ( (( ( APPELLANT APPELLANT APPELLANT APPELLANT ) )) ) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO. PAN NO. PAN NO. PAN NO.AAACC2659Q AAACC2659Q AAACC2659Q AAACC2659Q ASS ESSEE BY S/SHRI F Y IRANI/YOGESH THAR/P R TOPRAI REVENUE BY SHRI AJIT KUMAR SINHA /CIT-DR PER R K PANDA, AM PER R K PANDA, AM PER R K PANDA, AM PER R K PANDA, AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 30.3.2009 PASSED BY THE CIT-VI, MUMBAI UNDER SECTIO N 263 OF THE ACT FOR THE ASSESSMENT YEAR 2001-02. 2 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ORIGINA L ASSESSMENT IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2001-02 WAS COMPLE TED BY THE ACIT, CIRCLE 6(2), MUMBAI , U/S 143(3) OF THE I T ACT ON 22.3.20 04 DETERMINING THE BOOK PROFIT U/S 115JB OF THE I T ACT AT RS.55,45,06,947/-. THER EAFTER, THE CASE WAS REOPENED U/S 147 OF THE I T ACT ON THE GROUND THAT BOOK PROF IT U/S 115JB OF THE I T ACT HAD BEEN UNDER ASSESSED. SUBSEQUENTLY, ORDER U/S143(3)/ 147 WAS PASSED BY THE ACIT, CIRCLE 6(2) MUMBAI ON 29.11.2006. ON GOING T HROUGH THE SAID ORDER DATED 29.11.2006, IT WAS NOTICED BY THE LD CIT THAT WHIL E COMPLETING THE REASSESSMENT, THE ASSESSING OFFICER HAS FAILED TO M AKE NECESSARY DISALLOWANCE IN TERMS OF CLAUSE (F) OF EXPLANATION (1) TO SECTIO N 115JB OF THE ACT IN RESPECT OF 2 ITA NO.3449/MUM/2009 DIVIDEND INCOME CLAIMED EXEMPT U/S 10 OF THE I T AC T, WHICH RESULTED IN UNDER ASSESSMENT OF BOOK PROFIT U/S 115JB OF THE I T ACT. THEREFORE, THE CIT WAS OF THE OPINION THAT THE ORDER PASSED BY THE ASSESSING OFFI CER U/S 143(3)/147 ON 29.11.2006 WAS ERRONEOUS IN SO FAR AS IT IS PREJUD ICIAL TO THE INTEREST OF THE REVENUE. ACCORDINGLY, PROCEEDINGS U/S 263 WERE INI TIATED BY THE CIT. 2.1 IN RESPONSE TO THE NOTICE ISSUED U/S 263, IT WA S SUBMITTED THAT WHILE COMPLETING THE ASSESSMENT U/S 143(3)/147 ON 29.11.2 006, THE ASSESSING OFFICER HAD MADE TWO ADDITIONS VIZ RS. 6.87 CRORES IN RESPE CT OF ARREARS OF DEPRECIATION AND RS. 1.35 CRORES IN RESPECT OF REVALUATION RESER VE FOR THE PURPOSE OF COMPUTING BOOK PROFIT U/S 115JB OF THE ACT. BOTH T HESE ADDITIONS WERE SUBSEQUENTLY KNOCKED DOWN BY THE CIT(A). IT WAS SUB MITTED THAT IN VIEW OF THE CIT(A)S ORDER AND THE SUPREME COURTS DECISION IN THE CASE OF CIT VS APOLLO TYRES LTD REPORTED IN 255 ITR 273, THERE WAS NO CAS E FOR DISALLOWANCE IN TERMS OF CLAUSE (F) OF EXPLANATION (1) TO SECTION 115JB OF T HE ACT IN RESPECT OF DIVIDEND INCOME CLAIMED EXEMPT U/S 10 OF THE I T ACT FOR THE PURPOSE OF COMPUTATION OF BOOK PROFIT U/S 115JB OF THE I T ACT. ACCORDINGLY, IT WAS SUBMITTED THAT SINCE THERE WAS NO ERROR IN THE ASSESSMENT ORDER PASSED B Y THE ASSESSING OFFICER; THEREFORE, THE CIT WAS NOT JUSTIFIED IN INITIATING PROCEEDINGS U/S 263. 2.2 HOWEVER, THE CIT WAS NOT CONVINCED WITH THE VAR IOUS EXPLANATIONS GIVEN BY THE ASSESSEE. HE NOTED THAT THE ISSUES DEALT IN BY THE CIT(A) WERE ALTOGETHER DIFFERENT. HE WAS OF THE OPINION THAT THE DECISIO N OF THE HONBLE SUPREME COURT IN THE CASE OF APOLLO TYRES LTD (SUPRA) HAS NO REL EVANCE TO THE ISSUE RAISED IN THE NOTICE U/S 263. IT WAS OBSERVED BY THE CIT THAT THE ISSUE RAISED IN THE NOTICE U/S 3 ITA NO.3449/MUM/2009 263 RELATES TO FAILURE ON THE PART OF THE ASSESSIN G OFFICER TO MAKE DISALLOWANCE IN TERMS OF CLAUSE (F) OF EXPLANATION (1) TO SECTI ON 115JB OF THE ACT IN RESPECT OF DIVIDEND INCOME CLAIMED EXEMPT U/S 10 OF THE I T A CT. SINCE THE ASSESSING OFFICER HAS FAILED TO MAKE NECESSARY ADDITION TO T HE BOOK PROFIT U/S 115JB IN TERMS OF CLAUSE (F) OF EXPLANATION (1) TO SEC. 115J B OF THE I T ACT, THEREFORE, THE ASSESSMENT ORDER PASSED BY HIM U/S 143(3)/147 OF TH E I T ACT ON 29.11.2006 WAS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF REVENUE. ACCORDINGLY, HE SET ASIDE THE ASSESSMENT ORDER AND DIRECTED THE ASS ESSING OFFICER TO PASS FRESH ASSESSMENT ORDER COMPUTING BOOK PROFIT U/S 115JB OF THE ACT AFTER MAKING NECESSARY ADJUSTMENT TO THE BOOK PROFIT IN TERMS OF CLAUSE (F) OF EXPLANATION (1) TO SECTION 115JB OF THE ACT AND AFTER GIVING REASON ABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 3 AGGRIEVED WITH SUCH ORDER OF THE CIT, THE ASSESSE E IS IN APPEAL HERE BEFORE US WITH THE FOLLOWING GROUNDS; 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT-VI, ERRED IN INVOKING PROVISIONS OF SEC 263 OF THE I T ACT AND DIRECTING REVISION OF THE ASSESSMENT ORDER DATED 29 .11.2006 PASSED U/S 143(3) R.W.S 147 OF THE ACT BY THE ACIT CIR 6(2 ), ON THE ALLEGED GROUND THAT THE ASSESSMENT ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE APPELLANT PRAYS THAT ORDER PASSED U/S 263 OF T HE ACT TO BE STRUCK DOWN AS NULL AND VOID-AB-INITIO. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT ERRED IN INVOKING PROVISIONS OF SECTION 263 OF THE ACT AND DIRECTING THE REVISION OF ASSESSMENT ORDER DATED NOV 29, 2006 PAS SED U/S 143(3) R.W.S147 OF THE ACT WITHOUT APPRECIATING THE FACT T HAT THE CIT(A)/VI HAS DELETED ALL THE ADDITIONS/DELETIONS/ADJUSTMENTS MAD E BY THE A?O IN T HE SAID ORDER AND THUS, THE ORDER OF THE CIT(A) GOT MERGED WITH ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/ S 143(3) R.W.S 147. THE APPELLANT PRAYS THAT ORDER PASSED U/S 263 OF TH E ACT TO BE STRUCK DOWN AS NULL AND VOID-AB-INITIO. 4 ITA NO.3449/MUM/2009 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT ERRED IN DIRECTING THE ASSESSING OFFICER TO COMPUTE BOOK PROFIT U/S 115JB OF THE ACT AFTER MAKING NECESSARY ADJUSTMENT TO THE BOOK PROFIT IN TERMS OF CLAUSE (F) OF EXPLANATION (1) TO SEC.11 5JB OF THE ACT. THE APPELLANT PRAYS THAT IT B HELD THAT ON THE FAC TS AND CIRCUMSTANCES, INVOKING SECTION 263 FOR DIRECTING S UCH DISALLOWANCE IS NOT IN ACCORDANCE WITH LAW AND THAT NO ADDITION TO THE BOOK PROFIT U/S 115JB IN TERMS OF CLAUSE (F) OF EXPLANATION (1) TO SEC. 115JB OF THE ACT IS CALLED FOR THE ASSESSEE HAS ALSO TAKEN ADDITIONAL GROUND WHICH READS AS UNDER: THE ORDER DATED 30.3.2009 PASSED BY THE CIT U/S 26 3 OF THE I T ACT IS BEYOND THE LIMITATION PERIOD AS THE ISSUE ON WHI CH REVISION HAS BEEN MADE BY HIM IS ON AN ITEM WHICH WAS NOT SUBJEC T MATTER OF REASSESSMENT PROCEEDINGS AND THEREFORE, PERIOD OF L IMITATION BEGINS FROM ORIGINAL ASSESSMENT MADE ON 22.3.2004. 4 THE LD COUNSEL FOR THE ASSESSEE, AT THE TIME OF H EARING, SUBMITTED THAT THE ABOVE ADDITIONAL GROUND RELATING TO LIMITATION PERI OD IS FILED IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CIT VS ALAGENDRAN FINANCE LTD REPORTED IN 293 ITR 1(SC). HE SUBMITTED THAT T HE ADDITIONAL GROUND RELATING TO LIMITATION GOES TO THE ROOT OF THE MATTER AND TH E SAME DOES NOT REQUIRE ANY FRESH INVESTIGATION OF THE FACTS. REFERRING TO VAR IOUS DECISIONS, HE SUBMITTED THAT THE ADDITIONAL GROUND SHOULD BE ACCEPTED FOR ADJUDI CATION. 4.1 THE LD COUNSEL FOR THE ASSESSEE, AT THE OUTSET DREW THE ATTENTION OF THE BENCH TO THE CHART GIVING THE CHRONOLOGY OF EVENTS WHICH IS AS UNDER: 5 ITA NO.3449/MUM/2009 S.NO DATED EVENT 1 22.3.2004 ORIGINAL ORDER ASSED BY THE ASSESSING O FFICER U/S 143(3) OF THE I T ACT ASSESSING TOTAL INCOME U/S 115JB AT RS. 55, 45,06,947/- (ADJUSTMENT MADE FOR PROVISION FOR DOUBTFUL DEBTS ) 2 30.3.2005 ORDER PASSED BY THE CIT(A) IN APPEAL FILED AGAINST ORIGINAL ORDER OF ASSESSMENT (ADDITION MADE FOR PROVISION FO R DOUBTFUL DEBTS WHILE COMPUTING BOOK PROFITS U/S 115JB UPHELD BY CIT(A). 3 9.6.2005 NOTICE U/S 148 ISSUED FOR REOPENING OF ASSESSMENT 4 9.6.2005 REASONS RECORDED FOR REOPENING STATED TH AT FOLLOWING TWO ADJUSTMENTS ARE REQUIRED TO BE MADE WHILE COMPUTING BOOK PROFIT U/S 115JB: I)ARREARS OF DEPRECATION DEBITED TO P&L ARE REQUIRE D TO B ADDED TO BOOK PROFIT; II)REVALUATION RESERVE CREDITED TO P&L ACCOUNT SHOU LD NOT BE REDUCED WHILE COMPUTING BOOK PROFITS 5 29.11.2006 ASST ORDER PASSED U/S 143(3) R.W.S 147 INCREASING BOOK PROFITS IN RESPECT OF AFORESAID TWO ADJUSTMENTS. 6 66 6 31.3.2006 31.3.2006 31.3.2006 31.3.2006 EXPIRY OF LIMITED U/S 263(2) IF LIMI EXPIRY OF LIMITED U/S 263(2) IF LIMI EXPIRY OF LIMITED U/S 263(2) IF LIMI EXPIRY OF LIMITED U/S 263(2) IF LIMITED RECKONED FR OM SL NO.1 I.E. TED RECKONED FROM SL NO.1 I.E. TED RECKONED FROM SL NO.1 I.E. TED RECKONED FROM SL NO.1 I.E. THE ORIGINAL ASSESSMENT ORDER. THE ORIGINAL ASSESSMENT ORDER. THE ORIGINAL ASSESSMENT ORDER. THE ORIGINAL ASSESSMENT ORDER. 7 17.1.2008 ORDER PASSED BY CIT(A) GIVING RELIEF T O THE ASSESSEE IN RESPECT OF AFORESAID TWO ADJUSTMENTS MADE BY THE AO IN HIS ORDER PASSED U/S 143(3) R.W.S 147 8 25.3.2009 NOTICE U/S 263 ISSUED BY CIT STATING TH AT BOOK PROFIT COMPUTED BY THE AO U/S 155JB IN HIS ORDER PASSED ON 29.11.20 06 IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E AS NO DISALLOWANCE OF EXPENDITURE IN RESPECT OF EXEMPT IN COME IS MADE BY THE AO UNDER CLAUSE (F) TO EXPLANATION 9 30.3.2009 ORDER PASSED BY CIT HOLDING THAT ORDER PASSED BY THE ASSESSING OFFICER ON 29.11.2006 IS ERRONEOUS AND PR EJUDICIAL TO THE INTEREST OF REVENUE AS NO DISALLOWANCE OF EX PENDITURE IN RESPECT OF EXEMPT INCOME IS MADE BY THE AO UNDER CL AUSE (F) TO EXPLANATION 10 1010 10 31.3.2009 31.3.2009 31.3.2009 31.3.2009 EXPIRY OF LIMITED U/S 263(2) IF LIMITED RECKONED F ROM SL NO.5 I.E. EXPIRY OF LIMITED U/S 263(2) IF LIMITED RECKONED FR OM SL NO.5 I.E. EXPIRY OF LIMITED U/S 263(2) IF LIMITED RECKONED FR OM SL NO.5 I.E. EXPIRY OF LIMITED U/S 263(2) IF LIMITED RECKONED FR OM SL NO.5 I.E. THE ASSESSMENT ORDER. THE ASSESSMENT ORDER. THE ASSESSMENT ORDER. THE ASSESSMENT ORDER. 11 19..2009 FINANCE ACT NO.II GOT THE ASSENT FROM THE PRESIDENT 4.2 ARGUING THE ADDITIONAL GROUND FIRST THE LD COUN SEL FOR THE ASSESSEE REFERRING TO THE DECISION OF THE HONBLE SUPREME CO URT IN THE CASE OF ALAGENDRA FINANCE LTD (SUPRA) SUBMITTED THAT IN A CASE OF REA SSESSMENT OF ITEMS OTHER THAN ITEM SOUGHT TO BE REVISED BY THE CIT, THE PERIOD OF LIMITATION COMMENCES FROM THE DATE OF ORIGINAL ASSESSMENT ORDER. SINCE IN TH E INSTANT CASE THE REASSESSMENT WAS MADE ON 29.11.2006 ON THE ISSUES O F ARREARS OF DEPRECATION DEBITED TO THE P&L ACCOUNT AND REVALUATION OF RESER VE 6 ITA NO.3449/MUM/2009 CREDITED TO THE P&L ACCOUNT FOR THE PURPOSE OF CALC ULATION OF PROFIT U/S 115JB AND SINCE THE ORDER SOUGHT TO BE REVISED U/S 263 RELATE S TO ADDITION OF DIVIDEND INCOME CLAIMED EXEMPT U/S 10 FOR THE PURPOSE OF COM PUTATION OF BOOK PROFIT U/S 115JB, THEREFORE, THE ORDER SOUGHT TO BE REVISED IS THE ORDER PASSED U/S 143(3) ON 22.3.2004. THEREFORE, THE ORDER PASSED U/S 263 O N 30.3.2009 IS BARRED BY LIMITATION. 4.3 IN HIS ALTERNATE CONTENTION, HE SUBMITTED THAT THE ORIGINAL ASSESSMENT ORDER AND THE REASSESSMENT ORDER ARE MERGED WITH THE ORDER OF THE CIT(A) DATED 17.1.2008 AND 13.3.2005 AND THEREFORE, THE OR DER PASSED U/S 263 FOR SEEKING TO REVISE THE REASSESSMENT ORDER DATED 29.1 1.2006 IS VOID AND BAD IN LAW. 4.4 THE LD COUNSEL FOR THE ASSESSEE, REFERRING TO P AGES 1 TO 19 OF THE PAPER BOOK, DREW THE ATTENTION OF THE BENCH TO CLAUSE 3 2 AT PAGE 41 OF THE ASSESSMENT ORDER WHERE THE ASSESSING OFFICER HAD D ISCUSSED THE CLAIM OF INTEREST U/S 36(1)(II) OF THE ACT ATTRIBUTABLE TO I NVESTMENT MADE BY THE ASSESSEE COMPANY. 4.5 REFERRING TO PAGE 43 OF THE ASSESSMENT ORDER, H E INVITED THE ATTENTION OF THE BENCH TO THE QUERY RAISED BY THE ASSESSING OFFI CER AS TO WHY PART OF THE CLAIM AS AFORESAID SHOULD NOT BE DISALLOWED ON THE GROUND THAT THE RELEVANT BORROWINGS ARE ATTRIBUTABLE TO THE INVESTMENTS MADE IN SHARES AND ON THE GROUND THAT DIVIDEND ON SHARES IS AN EXEMPT INCOME AND THAT THE EXPENDITURE IN RELATION TO SUCH EXEMPT INCOME IS NOT ALLOWABLE AS A DEDUCTION UNDER THE PROVISIONS OF SEC. 14A W.E.F.1.4.1962. 7 ITA NO.3449/MUM/2009 4.6 REFERRING TO PAGE 48 OF THE ASSESSMENT ORDER, H E FURTHER INVITED THE ATTENTION OF THE BENCH REGARDING THE FINDINGS OF TH E ASSESSING OFFICER WHERE HE HAS MENTIONED THE APPLICABILITY OF SEC. 14A TO THE FACTS OF THE CASE. 4.7 REFERRING TO PAGE 52 OF THE ASSESSMENT ORDER, H E DREW THE ATTENTION OF THE BENCH THAT THE ASSESSING OFFICER HAS DISCUSSED THE COMPUTATION U/S 115JB. 4.8 REFERRING TO PAGES 59 TO 61 OF THE ASSESSMENT O RDER, THE LD COUNSEL FOR THE ASSESSEE, DREW THE ATTENTION OF THE BENCH TO THE FI NAL COMPUTATION MADE BY THE ASSESSING OFFICER DETERMINING THE BOOK PROFIT U/S 1 15JB. REFERRING TO THE SAID COMPUTATION, HE SUBMITTED THAT THE ASSESSING OFFICE R HAS MADE ADDITION ON ACCOUNT OF AMOUNT REFERRED TO CLAUSE (F) OF EXPLANA TION (1) TO SUB.SEC (2) OF SECTION 115JB. 4.9 REFERRING TO THE COPY OF THE ORDER OF THE CIT(A ) AGAINST THE ORDER PASSED BY THE ASSESSING OFFICER, HE DREW THE ATTENTION OF THE BENCH TO PARA 17.6 AT PAGE 23 OF THE ORDER AND SUBMITTED THAT THE ISSUE RELAT ING TO DISALLOWANCE OF INTEREST U/S 36(1)(II) WAS DECIDED BY THE CIT(A) WHEREIN HE HAS GIVEN PART RELIEF TO THE ASSESSEE. 4.10 REFERRING TO PAGE 91 OF THE PAPER BOOK, THE LD COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE NOTICE DATED 9.6.2005 ISSUED U/S 148. REFERRING TO THE REASONS FOR REOPENING OF THE ASSES SMENT AT PAGE 92, HE SUBMITTED THAT THE REASONS FOR REOPENING OF THE ASS ESSMENT U/S 147 OF THE ACT WAS ON ACCOUNT OF COMPUTATION OF BOOK PROFIT U/S 11 5JB DUE TO REDUCTION OF ARREARS OF DEPRECIATION AMOUNTING TO RS. 6,86,82,98 6/- AND REVALUATION RESERVES OF RS.1,35,09,886/-. 8 ITA NO.3449/MUM/2009 4.11 REFERRING TO THE ORDER PASSED U/S 143(3)/147, A COPY OF WHICH IS PLACED AT PAGES 93 TO 100 OF THE PAPER BOOK, HE SUBMITTED THA T THE ASSESSING OFFICER HAS CALCULATED THE REVISED BOOK PROFIT AT RS. 63,66,99, 819/- AS AGAINST RS. 55,45,06,447/- DETERMINED BY HIM IN THE ORDER DATED 22.3.2004. 4.12 REFERRING TO THE DECISION OF THE HONBLE BOMBA Y HIGH COURT IN THE CASE OF ASHOK BUILDCON LTD VS ACIT & ANOTHER REPORTED IN 32 5 ITR 574 (BOM) AND THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CIT VS ALAGENDRAN FINANCE LTD REPORTED IN 293 ITR 1(SC), HE SUBMITTED THAT IN THE CASE OF REVISION OF THE ASSESSMENT OF ITEMS OTHER THAN THE ITEMS SOUGHT BY THE CIT, THE PERIOD OF LIMITATION BEGINS FROM THE ORIGINAL ASSESSMENT AND NOT FROM REASSESSMENT IN WHICH THE ITEMS WAS NOT DEALT WITH. THE DOCTRINE OF MERGER DOES NOT APPLY TO SUCH ORDER. 5 IN HIS OTHER ALTERNATE CONTENTION, HE SUBMITTED T HAT BOTH THE ORIGINAL ORDER AND THE REASSESSMENT ORDER ARE BEYOND THE REACH OF THE CIT SINCE BOTH THE ORDERS WERE MERGED WITH THE ORDER OF THE CIT(A) DAT ED 30.3.2005 AND 17,.1.2008. FOR THIS PROPOSITION, HE RELIED ON THE FOLLOWING DECISIONS: I) MARICO INDUSTRIES LTD VS ACIT 115 TTJ 497 (MUM ) II_ SMT SUJATA GROVER VS DCIT 74 TTJ 347 (DEL) III)SONAL GARMENTS VS JCIT 95 ITD 363 (MUM) 5.1 HE SUBMITTED THAT THE ORDER PASSED BY THE LD CIT U/S 263 IS BASED ON PRESUMPTION AND ASSUMPTION THAT THERE IS EXPENDI TURE RELATABLE TO EXEMPT INCOME. THE CIT, WITHOUT ARRIVING AT THE CONCLUSIO N THAT THERE WAS IN FACT EXPENDITURE RELATABLE TO EXEMPT INCOME COULD NOT HA VE DIRECTED THE ASSESSING OFFICER TO MAKE ADDITION IN TERMS OF CLAUSE (F) OF EXPLANATION (1) TO SEC. 115JB OF 9 ITA NO.3449/MUM/2009 THE ACT. FOR THIS PROPOSITION, HE RELIED ON THE DE CISION OF THE DELHI BENCH OF THE TRIBUNAL (THIRD MEMBER) IN THE CASE OF WIMCO SEEDL INGS LTD VS DCIT REPORTED IN 107 ITD 267 AT PAGE 268. (DELH) (TM). 5.2 REFERRING TO THE DECISIONS, REPORTED IN 104 ITR 490; 192 ITR 547; 207 ITR 108 & 236 ITR 156 HE SUBMITTED THAT THE TRIBUNAL CANNOT SUPPORT THE ORDER OF THE CIT ON ANY OTHER GROUND 5.3 REFERRING TO THE DECISIONS OF THE HONBLE SUPR EME COURT IN THE CASE OF MALABAR INDUSTRIAL COMPANY VS CIT REPORTED IN 243 I TR 83 (SC) AND CIT VS MAX INDIA REPORTED IN 295 ITR 288 , HE SUBMITTED THAT WHEN THE ASSESSING OFFICER ADOPTS ONE OF THE TWO COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW, WITH WHICH THE CIT DOES NOT AGREE, IT CAN NOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE AO IS UNSUSTAINABLE IN LAW. HE ACCORD INGLY SUBMITTED THAT THE ORDER OF THE CIT PASSED U/S 263 SHOULD BE QUASHED. 5.4 THE LD DR, ON THE OTHER HAND, SUBMITTED THAT JU RISDICTIONAL ISSUE WAS NEVER BEFORE THE CIT. WHILE SUPPORTING THE ORDER OF THE C IT, THE LD DR SUBMITTED THAT THE CIT HAS NOT AT ALL PASSED THE ORDER BASED ON P RESUMPTION AND SURMISES AND IN FACT HE HAS QUANTIFIED THE AMOUNT OF DISALLOWANC E U/S 14A ATTRIBUTABLE TO SUCH EXEMPTED DIVIDEND INCOME. HE SUBMITTED THAT THE DE CISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG P LT D VS ACIT REPORTED IN 328 ITR 81 IS BINDING ON THE ASSESSEE AS WELL AS THE REVEN UE AND THE DECISION OF THE THIRD MEMBER IN THE CASE OF WIMCO SEEDLINGS LTD (SU PRA) IS NOT APPLICABLE. 10 ITA NO.3449/MUM/2009 6 THE LD COUNSEL FOR THE ASSESSEE, IN HIS REJOINDER SUBMITTED THAT THE ASSESSEE CAN ALWAYS RAISE A LEGAL ISSUE AT ANY POIN T OF TIME IN THE SHAPE OF ADDITIONAL GROUNDS IN VIEW OF THE DECISION OF THE H ONBLE SUPREME COURT IN THE CASE OF NTPC REPORTED IN 229 ITR 383. HE ALSO RELIE D ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF JUTE CORPORATI ON OF INDIA REPORTED IN 263 ITR 245. 6.1 AFTER HEARING BOTH THE SIDES AND IN VIEW OF TH E DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF NTPC LTD REPORTED IN 2 29 ITR 383 AND IN THE CASE OF JUTE CORPORATION OF INDIA LTD REPORTED IN 187 IT R 688, THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ADMITTED FOR ADJUDICATION . 7 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE PARTIES, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS D ECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE, IN THE INSTANT CASE HAS FILED THE RETURN OF INCOME ON 30.10.2001 DECLARING TOTAL INCO ME OF RS. 47,71,76,553/- U/S 115JB OF THE ACT SINCE AS PER THE COMPUTATION OF IN COME UNDER OTHER PROVISIONS OF INCOME TAX ACT, THERE WAS A GROSS LOSS OF RS.12, 83,58,029/-.THERE IS ALSO NO DISPUTE TO THE FACT THAT THE ASSESSING OFFICER COMP LETED THE ASSESSMENT U/S 143(3) ON 22.3.2004 DETERMINING THE TOTAL INCOME U/ S 115JB AT RS. 55,45,06,947/- AFTER MAKING ADJUSTMENTS FOR PROVISI ONS OF DOUBTFUL DEBTS. THERE IS ALSO NO DISPUTE TO THE FACT THAT THE CIT(A) VIDE ORDER DATED 30.3.2009 HAS UPHELD THE ADDITION MADE ON ACCOUNT OF PROVISIONS FOR DOUBTFUL DEBTS FOR THE PURPOSE OF COMPUTATION OF THE BOOK PROFIT U/S 115JB . THERE IS ALSO NO DISPUTE TO 11 ITA NO.3449/MUM/2009 THE FACT THAT THE ASSESSING OFFICER ISSUED NOTICE U /S 148 ON 9.6.2005 FOR REOPENING OF THE ASSESSMENT ON THE GROUND THAT THE FOLLOWING TWO ADJUSTMENTS ARE REQUIRED TO BE MADE WHILE COMPUTING THE BOOK PR OFIT U/S 115JB: I)ARREARS OF DEPRECATION DEBITED TO P&L ARE REQUIRE D TO B ADDED TO BOOK PROFIT; II) REVALUATION RESERVE CREDITED TO P&L ACCOUNT SHO ULD NOT BE REDUCED WHILE COMPUTING BOOK PROFITS 7.1 WE FIND THE ASSESSMENT ORDER WAS PASSED U/S 143 (3)/147 INCREASING THE BOOK PROFITS IN RESPECT OF THE AFORESAID TWO ADJUST MENTS ON 29.11.2006. WE FIND THE CIT(A) VIDE ORDER DATED 17.1.2008 GAVE RELIE F TO THE ASSESSEE IN RESPECT OF THE AFORESAID TWO ADJUSTMENTS MADE BY THE ASSESSING OFFICER U/ 143(3)/147. NOW, THE CIT ISSUED NOTICE U/S 263 ON THE GROUND T HAT THE BOOK PROFIT COMPUTED BY THE ASSESSING OFFICER U/S 115JB IN HIS ORDER DT 29.11.2006 IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AS NO DISALL OWANCE OF EXPENDITURE IN RESPECT OF EXEMPT INCOME HAS BEEN MADE BY THE ASSES SING OFFICER UNDER CLAUSE (F) OF EXPLANATION (1) TO SEC. 15JB. ACCORDINGLY I N THE ORDER PASSED U/S 263 ON 30.3.2009, THE CIT HELD THAT THE ORDER PASSED BY TH E ASSESSING OFFICER ON 29.11.2006 IS ERRONEOUS IN SO FAR AS IT IS PREJUDIC IAL TO THE INTEREST OF REVENUE AS NO DISALLOWANCE OF EXPENDITURE IN RESPECT OF EXEMPT INCOME IS MADE BY THE ASSESSING OFFICER UNDER CLAUSE (F) OF EXPLANTING (1 ) TO SEC. 115JB OF THE ACT. IN OUR OPINION, THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ALEGENDRAN FINANCE LTD (SUPRA) AND THE DECISION OF THE JURISDICTIONAL HIGH COURT IN TH E CASE OF ASHOK BUILDCON LTD (SUPRA). 7.2 WE FIND. IN THE CASE ALAGENDRAN FINANCE LTD (SU PRA) THE ASSESSMENT FOR THE AYS 1994-95, 1995-96 AND 1996-97 WERE COMPLETED IN 1997 AND 1998. IN 12 ITA NO.3449/MUM/2009 THE ORDERS OF ASSESSMENT, THE ASSESSEES CLAIM RELA TING TO LEASE EQUALISATION FUND WAS ACCEPTED. THEREAFTER, ORDERS OF REASSESSM ENT WERE INITIATED IN RESPECT OF THREE OTHER ITEMS BUT NOT THE ITEM RELATING TO LEASE EQUALISATION FUND AND REASSESSMENT WERE MADE. THEREAFTER, THE COMMISSIONE R BY AN ORDER DATED 29.3.2004, INITIATED REVISION PROCEEDINGS ONLY IN R ELATION TO THE ITEM LEASE EQUALISATION FUND. THE TRIBUNAL HELD THAT THE REV ISION PROCEEDINGS WERE BARRED BY LIMITATION AS THEY WERE INITIATED MORE THAN FOUR YEARS AFTER THE ORIGINAL ASSESSMENT, WHICH WAS UPHELD BY THE HONBLE HIGH CO URT. ON FURTHER APPEAL, THE HONBLE SUPREME COURT HAS HELD AS UNDER: ( SHORT NOTE) AFFIRMING THE DECISION OF THE HIGH COURT, THAT THE COMMISSIONER HAD SOUGHT TO REVISE ONLY THAT PART OF THE ORDER OF ASSESSMENT WHICH RELATED TO LEASE EQUALISATION FUND; BUT THE P ROCEEDINGS FOR REASSESSMENT HAD NOTHING TO DO WITH THAT ITEM O F INCOME. THE DOCTRINE OF MERGER DID NOT APPLY IN A CASE OF T HIS NATURE; THE PERIOD OF LIMITATION COMMENCED FROM THE DATES O F THE ORIGINAL ASSESSMENTS AND NOT FROM THE REASSESSMENTS SINCE THE LATTER HAD NOT HAD ANYTHING TO DO WITH THE LEASE EQ UALISATION FUND. THIS WAS NOT A CASE WHERE THE SUBJECT-MATTER OF REASSESSMENT AND THE SUBJECT MATTER OF THE ASSESSME NT WERE THE SAME. {CIT VS SHRI ARBUDA MILLS LTD 231 ITR 50 (SC) RELIE D ON CWT VS A KTHANGA PILLAI 252 ITR 260 (MAD) APPROVED. } THERE MAY NOT BE ANY DOUBT OR DISPUTE THAT ONCE AN ORDER OF ASSESSMENT IS REOPENED, THE PREVIOUS UNDER ASSESSME NT WILL BE HELD TO BE SET ASIDE AND THE WHOLE PROCEEDINGS WOUL D START AFRESH, BUT THAT WOULD NOT MEAN THAT EVEN WHEN THE SUBJECT MATTER OR REASS3SSMENT IS DISTINCT AND DIFFERENT, T HE ENTIRE PROCEEDINGS WOULD BE DEEMED TO HAVE BEEN REOPENED. EXPLANATION (C) APPENDED TO SUB-SECT (1) OF SEC 263 OF THE I T ACT, 1961 WHICH DEALS WITH THE POWER OF THE COMMISS IONER IN REVISION, IS CLEAR AND UNAMBIGUOUS, AS IN TERMS THE REOF THE DOCTRINE OF MERGER APPLIES ONLY IN RESPECT OF SUCH ITEMS WHICH WERE THE SUBJECT MATTER OF APPEAL AND NOT IN RESPEC T OF THOSE WERE NOT. DECISION OF THE MADRAS HIGH COURT AFFIRMED. 13 ITA NO.3449/MUM/2009 7.3 WE FIND, THE HONLBLE JURISDICTIONAL HIGH COUR T IN THE CASE OF ASHOK BUILDCON LTD (SUPRA) FOLLOWING THE DECISION OF THE HONLBLE SUPREME COURT IN THE CASE OF ALAGENDRAN FINANCE LTD (SUPRA) HELD THAT W HERE AN ASSESSMENT HAS BEEN REOPENED U/S 147 OF THE I T ACT, 1961 IN RELATION T O A PARTICULAR GROUND OR IN RELATION TO CERTAIN SPECIFIED GROUNDS AND, SUBSEQUE NT TO THE PASSING OF THE ORDER OF REASSESSMENT, JURISDICTION U/S 263 IS SOUGHT TO BE EXERCISED WITH REFERENCE TO ISSUES WHICH DID NOT FORM THE SUBJECT OF THE REOPEN ING OF THE ASSESSMENT OR THE ORDER OF REASSESSMENT, THE PERIOD OF LIMITATION PR OVIDED FOR IN SUB-SEC. (2) OF SEC. 263 WOULD COMMENCE FROM THE DATE OF THE ORDER OF ASSESSMENT AND NOT FROM THE DATE ON WHICH THE ORDER REOPENING THE REAS SESSMENT HAD BEEN PASSED. IN RESPECT OF ISSUES WHICH DID NOT FORM THE SUBJECT MATTER OF THE REASSESSMENT PROCEEDINGS U/S 143(3) R.W.S 147 LIMITATION WOULD C OMMENCE WITH REFERENCE TO THE ORIGINAL ORDER OF ASSESSMENT. 7.4 SINCE IN THE INSTANT CASE, THE ORIGINAL ORDER W AS PASSED ON 22.3.2004 U/S 143(3) OF THE I T ACT AND SINCE THE REASSESSMENT N OTICE WAS ISSUED FOR THE PURPOSE OF ADDING THE ARREARS OF DEPRECIATION DEBIT ED TO P&L ACCOUNT AND THE REVALUATION RESERVES CREDITED TO P&L ACCOUNT TO B E REDUCED WHILE COMPUTING BOOK PROFIT AND SINCE THE ORDER OF THE CIT RELATES TO NON DISALLOWANCE OF EXPENDITURE IN RESPECT OF EXEMPT INCOME UNDER CLAUS E (F) TO EXPLANATION(1) OF SEC 115JB; THEREFORE, IN VIEW OF THE DECISIONS CIT ED ABOVE, THE PERIOD OF LIMITATION PROVIDED FOR IN 263(2) WOULD COMMENCE FR OM THE DATE OF ORIGINAL ASSESSMENT WHICH, IN THE INSTANT CASE IS 22.3.2004. SINCE THE ORDER OF THE CIT U/S 263 IS DATED 30.3.2009, THEREFORE, THE SAME IS BARRED BY LIMITATION. SINCE THE ASSESSEE SUCCEEDS ON THE ADDITIONAL GROUND THE OTHE R GROUNDS BEING ACADEMIC IN NATURE ARE NOT BEING ADJUDICATED. 14 ITA NO.3449/MUM/2009 8 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED ORDER PRONOUNCED ON THE 6 TH DAY OF APRIL 2011. SD/- SD/- ( (( ( VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO ) )) ) JUDICIAL MEMBER ( (( ( R K PANDA R K PANDA R K PANDA R K PANDA ) )) ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED: 6 TH , APRIL 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI