NAHEED JAVEED MERCHANT, MUMBAI V. ACIT 12(1), MUMBAI

ITA 3592/MUM/2010

• Counselvise Citation: 359219914 RSA 2010
• Duration Of Justice: 1 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 18-10-2011
• Assessment Year: 2000-2001
• Appeal Filed On: 06-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P C MAURYA
• Assessee Lawyers: REEPAL G TRALSHAWALA
• Keywords: Reopening of assessment; Reason to believe; Reassessment proceedings
• Section: 143(3); 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI B.R. MITTAL (JUDICIAL MEMBER) AND SHRI R.K. PANDA (ACCOUNTANT MEMBER) ITA NO. 3592/MUM/2010 ASSESSMENT YEAR- 2000-01 MRS. NAHEED JAVEED MERCHANT, OFFICE NO. 42, 1 ST FLOOR, MOHATTA MARKET, PALTON ROAD, MUMBAI-400 001 PAN-AEGPM 9007D VS. THE ACIT-12(1), MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI REEPAL G. TRALSHAWALA RESPONDENT BY: SHRI P.C. MAURYA DATE OF HEARING :18.10.2011 DATE OF PRONOUNCEMENT: O R D E R PER B.R. MITTAL, JM : THE ASSESSEE HAS FILED THIS APPEAL FOR ASSESSMENT Y EAR 2000-01 AGAINST ORDER OF LD. CIT(A) DT.18.01.2010. 2. ONE OF THE GROUNDS TAKEN BY ASSESSEE IS AGAINST DISPUTING THE REOPENING OF ASSESSMENT U/S. 147 OF THE ACT. 3. THE RELEVANT FACTS GIVING RISE TO THIS APPEAL AR E THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF EXPORT GARMENTS AND ALLI ED MERCHANDISE. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, ASSESSEE FILED RETURN OF INCOME ON 30.10.2000 DECLARING TOTAL INCOME OF RS. 10,62,856/ - ALONGWITH AUDIT REPORT U/S. 44AB OF THE ACT. COPIES OF BALANCE SHEET AND PROFIT AND LOSS ACCOUNT ALONGWITH ANNEXURE WERE ALSO FILED. THE ASSESSEE C LAIMED DEDUCTION U/S. 80HHC OF THE ACT. A COPY OF COMPUTING CLAIMING DED UCTION U/S. 80HHC IS PLACED AT PAGE 3 OF THE PAPER BOOK. IT IS OBSERVED THAT AO COMPLETED ITA NO. 3592/M/10 2 ASSESSMENT U/S. 143(3) OF THE ACT ON 10.2.2002 AND ALLOWED DEDUCTION U/S. 80HHC OF THE ACT AT RS. 41,40,590/-. 4. SUBSEQUENTLY, AO INITIATED REASSESSMENT PROCEEDI NGS BY ISSUE OF NOTICE U/S. 148 OF THE ACT DT. 14.3.2007, COPY OF THE SAME IS PLACED AT PAGES 29-30 OF PAPER BOOK. THE AO ALSO RECORDED REASONS TO INI TIATE REASSESSMENT PROCEEDINGS AND COPY OF WHICH IS PLACED AT PAGE-33 OF PAPER BOOK. IN THE REASONS RECORDED, AO STATED THAT ASSESSEE CLAIMED D EDUCTION U/S. 80HHC OF THE ACT AND IT WAS WRONGLY ALLOWED ON EXPORT PROCEE DS TO THE EXTENT OF RS. 17,39,793/- BECAUSE PAYMENT OF WHICH WAS NOT REALIZ ED WITHIN TIME ALLOWED. IT IS ALSO STATED IN THE REASONS RECORDED THAT HE HA S REASON TO BELIEVE THAT ASSESSEES INCOME FOR ASSESSMENT YEAR 2000-01 IS CH ARGEABLE TO TAX HAS BEEN UNDER ASSESSED WHICH IS MORE THAN RS. ONE LAKH. IT IS STATED THAT ASSESSMENT HAS BEEN REOPENED WITH PRIOR APPROVAL OF CIT- CENTR AL-1 DT.14.3.2001. ACCORDINGLY, AO MADE ASSESSMENT U/S. 143(3) R.W.S. 147 OF THE ACT VIDE ORDER DT. 17.2.2007. AGGRIEVED, ASSESSEE FILED APPEAL BEF ORE FIRST APPELLATE AUTHORITY DISPUTING ACTION OF AO TO INITIATE REASSE SSMENT PROCEEDINGS BUT LD. CIT(A) CONFIRMED THE ACTION OF AO. HENCE, ASSESSEE IS IN FURTHER APPEAL BEFORE TRIBUNAL. 5. AT THE TIME OF HEARING, LD. AR CONTENDED THAT AS SESSEE WHILE FILING RETURN FURNISHED ALL RELEVANT FACTS IN RESPECT OF C LAIMING DEDUCTION U/S. 80HHC OF THE ACT. HE REFERRED PAGES 1-2 OF PAPER BOOK WH ICH IS COPY OF FORM NO. 10CCAC THAT IS REPORT U/S. 80HHC OF THE I.T. ACT AND SUBMITTED THAT ASSESSEE APPLIED FOR EXTENSION OF TIME FOR REPATRIATION OF F OREIGN EXCHANGE IN RESPECT OF EXPORT PROCEEDS AND ALSO STATED THAT EXPORT PROC EEDS WERE REALIZED ON 19.10.2000 I.E. BEFORE FILING THE RETURN AND APPROV AL FROM RBI WAS AWAITED. THE LD. AR SUBMITTED THAT ASSESSEE ALSO STATED IN T HE SAID REPORT THAT DEDUCTION U/S. 80HHC HAD BEEN COMPUTED EVEN IN RESP ECT OF FOREIGN EXCHANGE SALE PROCEEDS OF THE EXPORT YET TO BE REAL IZED. THE LD. AR REFERRED TO PAGE-3 OF PAPER BOOK AND SUBMITTED THAT IN THE S AID COMPUTATION OF CLAIMING DEDUCTION U/S. 80HHC OF THE ACT, ASSESSEE GAVE A NOTE AND WE CONSIDER IT PRUDENT TO REPRODUCE THE SAME WHICH IS AS UNDER: ITA NO. 3592/M/10 3 NOTE: THE ASSESSEE HAD APPLIED TO RBI FOR THE EXTENS ION OF 1 WEEK FOR REPATRIATION OF FOREIGN EXCHANGE AMOUNTING TO RS. 1 7,39,793/- VIDE APPLICATION FILED ON 23.10.2000. HOWEVER, THE ASSESSEE HAS REALIZED RS. 18,53,641/- ON 13 TH OCT. 2000 & RS. 45,026/- ON 19 TH OCT. OF 2000, BEFORE FILING THE RETURN. THE APPROVAL FROM RBI IS AWAITED. DEDUCTION U/S. 80HHC IS COMPUTED AS IF FOREIGN EXC HANGE REALIZED WITHIN STIPULATED PERIOD, FOR WHICH THE AP PROVAL IS AWAITED. 6. THE LD. AR SUBMITTED THAT ASSESSEE DISCLOSED ALL RELEVANT FACTS NECESSARY FOR ASSESSMENT TO ALLOW DEDUCTION U/S. 80 HHC OF THE ACT WHILE COMPLETING THE ASSESSMENT U/S 143(3) OF THE ACT. THEREFORE, ACTION OF AO TO INITIATE REASSESSMENT PROCEEDINGS AFTER EXPIRY OF 4 YEARS FROM THE END OF ASSESSMENT YEAR UNDER CONSIDERATION IS BARRED BY LI MITATION AS PER PROVISO TO SEC. 147 OF THE ACT. THE LD. AR SUBMITTED THAT ACT ION OF AO TO INITIATE REASSESSMENT PROCEEDINGS IS NOT VALID AND THEREFORE ASSESSMENT SHOULD BE QUASHED. 7. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATI VE SUPPORTED THE ACTION OF AO. HE SUBMITTED THAT EVEN IF ASSESSEE F URNISHED REQUIRED DETAILS AT THE TIME OF MAKING ORIGINAL ASSESSMENT, AO COULD IN ITIATE RE-ASSESSMENT PROCEEDINGS IF INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND TO SUBSTANTIATE HIS SUBMISSION, PLACED RELIANCE ON THE DECISION IN THE CASE OF DALMIA PVT. LTD. VS CIT (2011-TIOL-628-HC-DEL-IT (H C). 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSION OF L D. REPRESENTATIVES OF THE PARTIES AND RELEVANT FACTS PLACED ON RECORD. W E HAVE ALSO GONE THROUGH CASES CITED BEFORE US BY LD. REPRESENTATIVES. THER E IS NO DISPUTE TO THE FACT THAT ASSESSEE FILED RETURN OF INCOME ALONGWITH AUDI T REPORT. THE ASSESSEE ALSO FILED REPORT IN FORM NO. 10CCAC CLAIMING DEDUC TION U/S. 80HHC OF THE ACT. WE OBSERVE THAT IN THE SAID REPORT, ASSESSEE GAVE A NOTE WHICH READS AS UNDER: ITA NO. 3592/M/10 4 HOWEVER, THE ASSESSEE HAS REALIZED RS. 18,53,641/- ON 13 TH OCTOBER 2000 RS. 45026 ON 19 TH OCTOBER 2000, BEFORE FILING THE RETURN. THE APPROVAL FROM RBI IS AWAITED. DEDUCTION U/S. 80HHC IS COMPUTED AS IF FOREIGN EXCH ANGE RELEASED WITHIN STIPULATED PERIOD, FOR WHICH APPROV AL IS AWAITED. WE ALSO OBSERVE THAT IN THE COMPUTATION OF DEDUCTI ON CLAIMED U/S. 80HHC OF THE ACT, WHICH IS ALSO STATED TO BE FILED ALONGWITH RETURN OF INCOME, COPY PLACED AT PAGE-3 OF THE PAPER BOOK GAVE A NOTE WHICH READS AS UNDER: NOTE: THE ASSESSEE HAD APPLIED TO RBI FOR THE EXTEN SION OF 1 WEEK FOR REPATRIATION OF FOREIGN EXCHANGE AMOUNTING TO RS. 17,39,793/- VIDE APPLICATION FILED ON 23.10.2000. HOWEVER, THE ASSESSEE HAS REALIZED RS. 18,53,641/- ON 13 TH OCT. 2000 & RS. 45,026/- ON 19 TH OCT. OF 2000, BEFORE FILING THE RETURN. THE APPROVAL FROM RBI IS AWAITED. DEDUCTION U/S. 80HHC IS COMPUTED AS IF FOREIGN EXC HANGE REALIZED WITHIN STIPULATED PERIOD, FOR WHICH THE AP PROVAL IS AWAITED. 9. THEREFORE, IT IS EVIDENT THAT ASSESSEE DISCLOSED AT THE TIME OF FILING OF RETURN THAT EXPORT SALE PROCEEDS OF RS. 17,39,793/- WAS NOT REALIZED THOUGH DEDUCTION IS CLAIMED THEREON AND THE ASSESSEE HAD A LREADY FILED APPLICATION FOR EXTENSION OF TIME FOR RBI AND THE APPROVAL FROM RBI WAS AWAITED. WE OBSERVE THAT ASSESSEE DISCLOSED RELEVANT FACTS ALON GWITH RETURN IN RESPECT OF CLAIMING DEDUCTION U/S. 80HHC OF THE ACT. WE ALSO OBSERVE THAT IN THE REASONS RECORDED BY AO, COPY PLACED AT PAGE 33 OF T HE PAPER BOOK, AO HAS STATED THAT INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSED AND HENCE REASSESSMENT PROCEEDINGS ARE INITIATED. IT IS NOT T HE CASE OF AO THAT ASSESSEE HAS FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT. IN THIS RESPECT, IT IS RELEVANT TO STA TE THAT PROVISO TO SEC. 147 OF INCOME TAX ACT PROVIDES THAT WHERE AN ASSESSMENT UND ER SUB-SEC (3) OF SEC. 143 HAS BEEN MADE, NO ACTION SHALL BE TAKEN U/S. 1 47 OF THE ACT TO INITIATE REASSESSMENT PROCEEDINGS AFTER THE EXPIRY OF 4 YEAR S FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEA BLE TO TAX HAS ESCAPED ITA NO. 3592/M/10 5 ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON FOR T HE FAILURE ON THE PART OF THE ASSESSEE (A) TO MAKE A RETURN U/S. 139 OR (B) IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SEC. (1) OF SEC. 142 OR SEC. 148 O R (C) TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSME NT, FOR THAT ASSESSMENT YEAR. 10. IN THE CASE BEFORE US, THE FIRST TWO CONDITIONS ARE ADMITTEDLY NOT APPLICABLE TO THE ASSESSEE. HOWEVER, IN RESPECT OF THIRD CONDITION, WE OBSERVE FROM THE REASONS RECORDED BY THE AO THAT NO WHERE IT HAS BEEN STATED BY THE AO THAT THERE IS ANY FAILURE ON T HE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR ASSESSMENT BY THE ASSESSEE. IN THE CASE BEFORE US, AS MENTIONED HEREI NABOVE, THE AO INITIATED REASSESSMENT PROCEEDS ONLY THE GROUND THAT LATE REA LIZED OF SALE PROCEEDS OUGHT TO HAVE BEEN DISALLOWED WHILE COMPUTING DEDUC TION U/S. 80HHC OF THE ACT. THE REASSESSMENT PROCEEDING HAS ALSO BEEN INI TIATED BY ISSUING NOTICE U/S. 148 OF THE ACT AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. 11. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED V IEW THAT THE ACTION OF THE ASSESSING OFFICER TO INITIATE REASSESSMENT PROC EEDINGS TO REASSESS THE INCOME BY DISALLOWING A PART OF SALE PROCEEDS IS NO T VALID IN LAW. THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF INDIA STEAM SHIP CO. LTD. VS JCIT 275 ITR 155 HAS HELD THAT IT IS BASIC CONDITION TO BE STATE D BY THE AO IN THE REASONS RECORDED THAT ALLEGED ESCAPEMENT OF INCOME WAS ON A CCOUNT OF THE OMISSION OR FAILURE TO DISCLOSE THE MATERIAL FACTS BY THE AS SESSEE AND IF THE SAME DID NOT EXIST, THE PROCEEDINGS INITIATED ARE WHOLLY WIT HOUT JURISDICTION IN CASE THE SAME ARE INITIATED AFTER THE EXPIRY OF 4 YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR. IT IS RELEVANT TO STATE THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF HINDUSTAN LEVER LTD. (SUPRA) HELD TH AT THE REASONS RECORDED MUST BE BASED ON EVIDENCE. THE AO IN THE EVENT OF CHALLENGE TO THE REASONS, MUST BE ABLE TO JUSTIFY THE SAME BASED ON MATERIAL AVAILABLE ON RECORD. HE MUST DISCLOSE IN THE REASONS AS TO WHICH FACT OR MA TERIAL NOT DISCLOSED BY THE ASSESSEE FULLY AND TRULY WHICH WAS NECESSARY FOR AS SESSMENT OF THAT ASSESSMENT YEAR, SO AS TO ESTABLISH THE VITAL LINK BETWEEN THE REASONS AND ITA NO. 3592/M/10 6 EVIDENCES, WHEN THE REASSESSMENT PROCEEDINGS IS INI TIATED AFTER THE EXPIRY OF 4 YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR AN D THE ORIGINAL ASSESSMENT HAS BEEN MADE U/S. 143(3) OF THE ACT. IT WAS HELD B Y THEIR LORDSHIPS IN ABOVE CASE THAT VITAL LINK IS THE SAFEGUARD AGAINST ARBITRARY REOPENING OF THE CONCLUDED ASSESSMENT. THE REASONS RECORDED BY THE AO CANNOT BE SUPPLEMENTED BY FILING AN AFFIDAVIT OR MAKING AN OR AL SUBMISSION. SINCE IN THE ABOVE CASE, THE NOTICE U/S. 148 WAS ISSUED BEYOND T HE PERIOD OF 4 YEARS, IT WAS HELD THAT THE NOTICE WAS NOT VALID AS THE AO NO WHERE STATED THAT THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCL OSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT FOR THAT AS SESSMENT YEAR. HENCE THE ASSESSMENT WAS QUASHED. 12. WE ARE OF THE CONSIDERED VIEW THAT THE ABOVE DE CISION OF THE HONBLE JURISDICTIONAL HIGH COURT AND THE DECISION OF THE H ONBLE CALCUTTA HIGH COURT IN THE CASE OF INDIA STEAM SHIP CO. LTD (SUPRA) CLE ARLY APPLICABLE TO THE FACTS OF THE CASE BEFORE US AS NOTHING NEW HAS BEEN BROUG HT ON RECORD BY THE AO FOR REOPENING THE ASSESSMENT WHICH WERE MADE U/S. 1 43(3) OF THE ACT AND THERE IS NO AVERMENT IN THE REASONS RECORDED BY THE AO THAT THE ASSESSEE FAILED TO DISCLOSE ALL MATERIAL FACTS WHOLLY AND TR ULY NECESSARY FOR COMPLETING THE ASSESSMENT OF THE ASSESSMENT YEAR UNDER CONSID ERATION AT THE TIME OF MAKING ORIGINAL ASSESSMENT. 13. IN THE CASE OF DALMIA PVT. LTD. VS CIT (SUPRA), RELIED UPON BY LD. DR, WE OBSERVE THAT THEIR LORDSHIPS HAS CONFIRMED THE A CTION OF AO FOR INITIATING REASSESSMENT PROCEEDINGS AFTER THE EXPIRY OF 4 YEAR S ON THE GROUND THAT AO AT THE TIME OF MAKING ORIGINAL ASSESSMENT CALLED UP ON ASSESSEE TO FURNISH NAMES AND ADDRESSES OF THE SUNDRY CREDITORS BUT IT WAS FOUND THAT THERE WAS NOTHING ON RECORD THAT ASSESSEE FURNISHED THOSE DET AILS IN RESPECT OF PARTIES. THEREFORE, IT WAS HELD THAT THERE WAS NO DISCLOSURE AND DETAILS WERE NOT FURNISHED FULLY AND TRULY. IN SUCH CIRCUMSTANCES, I T WAS HELD THAT THERE WAS NO FULL AND TRUE DISCLOSURE BY ASSESSEE AND CONFIRM ED THE INITIATION OF REASSESSMENT PROCEEDINGS. HOWEVER, IN THE CASE BEF ORE US, IT IS NOT THE CONTENTION OF DEPARTMENT THAT ASSESSEE FAILED TO FU RNISH TRULY AND FULLY ALL ITA NO. 3592/M/10 7 MATERIAL FACTS IN RESPECT OF CLAIMING DEDUCTION U/S . 80HHC ALONGWITH RETURN. ON THE OTHER HAND, WE OBSERVE THAT ASSESSEE DISCLOS ED ALL RELEVANT FACTS THAT IT HAD NOT RECEIVED SALE PROCEEDS OF RS. 17,39,793/ - AND ASSESSEE HAD FILED APPLICATION FOR EXTENSION OF ONE WEEK TIME BEFORE R BI AND APPROVAL FROM RBI IS AWAITED. IT IS ALSO STATED IN THE SAID NOTE FIL ED ALONGWITH RETURN, SALE PROCEEDS HAVE BEEN RECEIVED BEFORE FILING OF RETURN BY ASSESSEE. HENCE, WE HOLD THAT ASSESSEE DISCLOSED ALL RELEVANT FACTS ALO NGWITH RETURN. 14. IN VIEW OF ABOVE, WE HOLD THAT ACTION OF AO TO I NITIATE REASSESSMENT PROCEEDING U/S. 148 OF THE ACT IS BARRED BY LIMITAT ION AS THE ORIGINAL ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT. TH EREFORE, GROUND NO. 1 OF THE APPEAL TAKEN BY ASSESSEE IS ALLOWED BY QUASHING ASSESSMENT ORDER PASSED U/S. 143(3) R.W.S 147 OF THE ACT. SINCE WE HAVE QUASHED ASSESSMENT ORDER, THERE IS NO NEED TO CONSIDER OTHER GROUNDS T AKEN BY ASSESSEE. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED ON THIS 21 ST DAY OF OCTOBER, 2011 SD/- SD/- ( R.K. PANDA) (B.R. MITTAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 21 ST OCTOBER, 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR B BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NO. 3592/M/10 8 DATE INITIALS 1. DRAFT DICTATED ON: 18.10.2011 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 19.10.2011 SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: SR. PS/PS 6. ORDER PRONOUNCED ON: SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: SR. PS/PS 9. DATE ON WHICH FILE GOES TO AR 10. DATE OF DISPATCH OF ORDER: