RAMA PULP & PAPER LTD, MUMBAI V. ACIT 1(3)(1), MUMBAI

ITA 3742/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1518 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 23-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D G PANSARI
• Assessee Lawyers: N R AGRAWAL
• Keywords: Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 143(3); 115JB; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.4906/M/2017 ASSESSMENT YEAR: 2009-10 DCIT-1(3)(1), MUMBAI VS. M/S. RAMA PULP AND PAPER LTD. 1, CHATEAU WINDSOR, 86, VEER NARIMAN ROAD, CHURCHGATE, MUMBAI 400 020 PAN: AAACR7243K (APPELLANT) (R ESPONDENT) ITA NO.3742/M/2017 ASSESSMENT YEAR: 2009-10 M/S. RAMA PULP AND PAPER LTD. 1, CHATEAU WINDSOR, 86, VEER NARIMAN ROAD, CHURCHGATE, MUMBAI 400 020 PAN: AAACR7243K VS. DCIT-1(3)(1), MUMBAI (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI N.R. AGRAWAL, A.R. REVENUE BY : SHRI D.G. PANSARI, D.R. DATE OF HEARING : 07.03.2019 DATE OF PRONOUNCEMENT : 14.03.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE ABOVE TITLED CROSS APPEALS ONE BY THE ASSESSEE AND THE OTHER BY THE REVENUE HAVE BEEN PREFERRED AGAINST TH E ORDER DATED 27.04.2017 OF THE COMMISSIONER OF INCOME TAX (APPEALS) ITA NO.4906/M/2017 & ITA NO.3742/M/2017 M/S. RAMA PULP AND PAPER LTD. 2 [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEAR 2009-10. 2. IN THE ASSESSEES APPEAL, THE ASSESSEE HAS CHALL ENGED THE REASSESSMENT PROCEEDINGS UNDER SECTION 147 READ WIT H SECTION 148 OF THE ACT ON THE CHANGE OF OPINION AS THE ISSU E WHICH WAS SOUGHT TO BE RAISED IN THE ASSESSMENT PROCEEDINGS H AS ALREADY BEEN CONSIDERED AND DECIDED BY THE AO IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE ORDER OF LD. CIT(A) IN A.Y. 2007-0 8 AND ALSO THAT THE CASE OF THE ASSESSEE HAS BEEN RE-OPENED AFTER E LAPSE OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR WITHOUT SATISFYING THE CONDITIONS PROVIDED IN THE 1 ST PROVISO TO SECTION 147 OF THE ACT THAT THE ASSESSMENT CAN BE RE-OPENED ONLY IF THE INCOME HAS ESCAPED THE ASSESSMENT DUE TO THE FAILUR E OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MATERI ALS FACTS NECESSARY FOR THE ASSESSMENT OF THAT YEAR. IN THE R EVENUES APPEAL THE DEPARTMENT HAS CHALLENGED THE DELETION O F DISALLOWANCE OF DEDUCTION OF PROFIT EARNED DURING T HE PERIOD DURING WHICH THE ASSESSEE WAS SICK RELEVANT TO A.Y. 2004-05, 2005-06 & 2006-07. 3. WE WOULD LIKE TO DECIDE THE LEGAL ISSUE FIRST AN D THEREFORE, ITA NO.3742/M/2017 IS BEING TAKEN UP FOR ADJUDICATI ON IN THE FOLLOWING PARAS. 4. THE FACTS IN BRIEF ARE THAT THE ORIGINAL RETURN WAS FILED ON 01.09.2009 DECLARING NIL INCOME AFTER ADJUSTING BRO UGHT FORWARD LOSSES FROM THE EARLIER YEARS TO THE EXTENT AND THE RS.1,80,42,821/-. THE CASE OF THE ASSESSEE WAS SEL ECTED UNDER SCRUTINY AND ASSESSMENT WAS FRAMED UNDER SECTION 14 3(3) OF THE ITA NO.4906/M/2017 & ITA NO.3742/M/2017 M/S. RAMA PULP AND PAPER LTD. 3 ACT VIDE ORDER DATED 19.12.2011 WHEREIN THE AO EXAM INED THE ISSUE OF APPLICABILITY OF EXPLANATION 1 CLAUSE (VI I) TO SUB SECTION (2) OF SECTION 115JB OF THE ACT BY OBSERVING AS UND ER: 6. SINCE, THE ASSESSEE COMPANY IS SICK INDUSTRY AN D REGISTERED IN BIFR, THE PROVISONS OF SECTION 115JB OF THE ACT IS NOT APPLIC ABLE TO THE ASSESSEE COMPANY AS PER EXPLANATION 1 CLAUSE (VII) TO SUB SECTION (2) O F SECTION 115JB OF THE ACT, 1961. IT IS PERTINENT TO NOTE THAT THE INCOME WAS PROCESSED UNDER SECTION 115JB FOR A.Y. 2007-08 BY THE AO AND THE LD. CIT(A) HAS ALLOWED TH E APPEAL IN FAVOUR OF THE ASSESSEE AND NO FURTHER APPEAL WAS FILED AGAINST TH E DECISION OF CIT(A). 5. THEREAFTER, THE CASE OF THE ASSESSEE WAS REOPENE D BY RECORDING THE FOLLOWING REASONS: IN THE INSTANT CASE, THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT DETERMINING TOTAL INCOME AT RS. NIL UNDER THE NORMA L AND SPECIAL PROVISIONS VIDE AN ORDER PASSED ON 19.12.2011. 2 IN THE INSTANT CASE THE ASSESSEE HAS CLAI MED A DEDUCTION WHILE CALCULATING THE BOOK PROFITS U/S 115 JB OF THE ACT, U/S 115JB (2) E XPLANATION 1 (VII) OF THE ACT OF RS. 21,552,590/-. THUS, ALTHOUGH THERE WAS POSITIVE INC OME U/S115JB OF THE ACT, THE ASSESSEE REDUCED FROM IT THE BROUGHT FORWARD PROFIT S OF EARLIER YEARS. THE ASSESSEE BECAME SICK DURING THE AY 2001-02 AND ITS NET WORTH TURNED POSITIVE FIRST TIME DURING AY 2004-05. AS THE ASSESSEE'S NET WORTH BECA ME POSITIVE IN AY 2004-05, THE ASSESSEE WAS NOT ENTITLED TO THE SICK COMPANY PROVI SIONS IN AY 2009-10. THE DEDUCTION OF PROFIT EARNED DURING THE SICK PERIOD W AS NOT ALLOWABLE AS DEDUCTION IN RELEVANT ASSESSMENT YEAR BECAUSE THE RELEVANT YEAR IN WHICH THE ASSESSEE'S NET WORTH EXCEEDED THE CUMULATIVE LOSSES WAS THE ASSESS MENT YEAR 2004-05 AND NOT THE RELEVANT ASSESSMENT YEAR. THE BOOK PROFIT OF TH E ASSESSEE WAS TO BE COMPUTED WITH REFERENCE TO EACH ASSESSMENT YEAR AND THE PROV ISIONS OF SECTION 115JB(2) EXPLANATION 1 (VII) COULD NOT BE APPLIED FOR ASSESS MENT YEAR 2009-10 AFTER THE ASSESSEE WENT OUT OF THE SICKNESS. THE BOOK PROFIT EARNED BY THE ASSESSEE DURING THE PERIOD OF SICKNESS HAD NO RELEVANCE TO THE ASSE SSMENT YEAR 2009-10 SO AS TO DETERMINE THE DEDUCTION UNDER SECTION 115JB(2) EXPL ANATION 1 (VII). THE YEAR OF ASSESSMENT AND THE YEAR OF SICKNESS ARE TO BE ONE A ND SAME. AS PER THE PROVISIONS OF SECTION 115JB(2) EXPLANATION 1 (VII) WHITE COMPU TING THE BOOK PROFIT IN ANY ASSESSMENT YEAR DURING THE PERIOD OF SICKNESS, IF T HERE IS ANY BOOK PROFIT IN THAT ASSESSMENT YEAR THAT BOOK PROFIT INTER ALIA HAS TO BE DEDUCTED FROM THE NET PROFIT SHOWN IN THE PROFIT AND LOSS ACCOUNT OF THE ASSESSE E. IT WAS VERY MUCH CLEAR THAT THE PERIOD HAS BEEN PRESCRIBED IN THE ACT ITSELF AN D THAT PERIOD IS THE TIME FRAME OF THE PREVIOUS YEAR IN WHICH THE COMPANY HAS BECOME A SICK INDUSTRIAL UNDERTAKING TO THE END OF THE ASSESSMENT YEAR IN WHICH THE COMPANY RECOVERS FROM SICKNESS OR IN OTHER WORDS, THE NET WORTH OF SUCH COMPANY BECOMES EQUAL TO OR EXCEEDS THE ACCUMULATED LOSSES. THIS IS AN UNAMBIGUOUS AND CLEA R TIME FRAME DURING WHICH WHATEVER PROFITS EARNED BY THE COMPANY SHALL BE DED UCTED, IF AT ALL THERE IS ANY PROFIT DURING SOME PERIOD OR SOME MONTHS OR DUE TO SOME OTHER UNITS OF THE SAME COMPANY, THEN FOR CALCULATION OF BOOK PROFITS UNDER SECTION 115JB, SUCH PROFITS OF THE SICK PERIOD OF SUCH UNIT AND SUCH MONTHS OR YEA R SHALL BE DEDUCTED. ITA NO.4906/M/2017 & ITA NO.3742/M/2017 M/S. RAMA PULP AND PAPER LTD. 4 3. FURTHER, SUCH INCOME WHICH WAS CHARGEABLE TO INC OME TAX HAS ESCAPED ASSESSMENT FOR AY 2009-10 BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR ASSESSMENT. HENCE I AM SATISFIED THAT INCOME CHARGEABLE TO TAX 'S ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION U/S.147 OF THE I T ACT, 1961. THEREFORE, IT IS PROPOSED THAT NOTICE U/S.148 MAY BE ISSUED. THE ASSESSEE THEREAFTER FILED OBJECTION DATED 08.0 5.2016 OBJECTING TO THE REASSESSMENT PROCEEDINGS ON THE GR OUND THAT AO HAS SPECIFICALLY DECIDED THE ISSUE AFTER EXAMINI NG THE SAME IN DEPTH AND IN DETAIL AND THEREFORE ANY ATTEMPT TO REOPEN THE ASSESSMENT ON RE-APPRECIATION OF THE SAME FACTS FO RMING PART OF THE REASON WOULD AMOUNT TO CHANGE OF OPINION WHICH IS NOT PERMISSIBLE UNDER THE ACT. IT WAS ALSO CONTENDED BY THE ASSESSEE THAT THE RE-OPENING IS BAD AS THERE IS NO FAILURE I N THE PART OF THE ASSESSEE TO DISCLOSE MATERIALS FACTS IN THE RETURN OF INCOME OR DURING THE ASSESSMENT PROCEEDINGS AND THEREFORE TH E 1 ST PROVISO TO SECTION 147 IS NOT APPLICABLE. THEREAFTER, THE O BJECTIONS FILED BY THE ASSESSEE WERE DISPOSED OF BY THE AO ON PAGE NO.5 OF THE ASSESSMENT ORDER AND REJECTED THE SAME BY NOTING RE - ASSESSMENT IS NOT BASED UPON THE CHANGE OF OPINION AND AT THE TIME OF ISSUING NOTICE UNDER SECTION 148 THERE HAS TO BE SUSPICION THAT INCOME HAS ESCAPED ASSESSMENT AND TH US AO IS NOT REQUIRED TO PROVE THAT INCOME IS REALLY ESCAPED . ON THE ISSUE OF NON APPLICATION OF 1ST PROVISO TO SECTION 147 O F THE ACT, THE AO CAME TO THE CONCLUSION THAT INCOME HAS ESCAPED A SSESSMENT AND THUS ALL THE CONDITIONS WERE FULFILLED AND THE RE-OPENING IS VALID. 6. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) ALS O DISMISSED THE APPEAL OF THE ASSESSEE ON THE LEGAL ISSUE WHILE THE RELIEF WAS ALLOWED ON MERIT BY OBSERVING AND HOLDING AS UNDER: ITA NO.4906/M/2017 & ITA NO.3742/M/2017 M/S. RAMA PULP AND PAPER LTD. 5 6.2. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND FACTS OF THE CASE. AS REGARD THE REOPENING OF THE ASSESSMENT AFTER 4 YEAR S IS CONCERNED, THE APPELLANT HAS NOT GIVEN ANY DETAILS AS TO WHEN THE FOUR YEAR HAD EXPIRED AND AS TO HOW THE NOTICE WAS ISSUED AFTER 4 YEARS. THE ASSESSMENT WAS REOPENED WITH THE PRIOR APPROVAL OF THE PR.CIT-1, MUMBAI AND WHO HAS CONSID ERED THE LIMITATION OF THE CASE AND GIVEN APPROVAL FOR REOPENING AFTER ENSURING THE CORRECT PROPOSITION OF LAW. THEREFORE, I DID NOT FIND ANY REASON TO INTERFERE O N THIS ASPECT. 6.3 AS REGARD THE REOPENING OF THE CASE IS CONCERNED, T HE ASSESSING OFFICER HAS RECORDED THE REASONS WHICH WERE PROVIDED TO THE APP ELLANT. AFTER CONSIDERING HIS REPLY, HE PROCEEDED TO FRAME THE ASSESSMENT ORDER U /S 143(3) R.W.S. 147 OF THE IT ACT, 1961. SINCE THE ASSESSING OFFICER HAS DULY FOL LOWED THE DUE PROCE SS AND INVOKED THE PROVISION OF SECTION 147, I DID NOT FIN D ANY REASON TO INTERFERE IN THE FINDINGS OF THE AO AND HENCE, GROUND NO.1 IS DISMIS SED. 7. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT IN THIS CASE THE ISSUE OF A PPLICABILITY OF PROVISIONS OF SECTION 115JB SUB SECTION (2) CLAUSE (VII) EXPLANATION 1 WAS EXAMINED BY THE AO IN THE ORIGINA L ASSESSMENT ORDER AS IS CLEAR FROM THE PARAGRAPH 6 O F THE SAID ORDER REPRODUCED ABOVE. IN THE PRESENT CASE, WHILE RECORDING THE REASON, THE AO HAS RELIED ON THE SAME INFORMATION/DOCUMENTS WHICH WERE AVAILABLE AND EXAM INED IN THE ORIGINAL ASSESSMENT PROCEEDINGS BY HIM. WE NOTE THAT IN THE ORIGINAL ASSESSMENT THE AO AFTER EXAMINING THE SAM E ALLOWED THE RELIEF TO THE ASSESSEE BY FOLLOWING THE ORDER O F LD. CIT(A) IN A.Y. 2007-08. THUS, IT IS CLEAR FROM THE FACTS BEF ORE US THAT THERE IS NO MATERIAL BEFORE THE AO TO FORM REASONS TO BELIEVE THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT BUT A O HAS RELIED ON THE INFORMATION WHICH WAS EXAMINED BY THE AO IN THE ORIGINAL ASSESSMENT PROCEEDINGS OR RECORDED REASONS UPON RE- APPRECIATION OF SAME RECORDS. MOREOVER THE ASSESSEE S CASE IS RE- OPENED AFTER THE ELAPSE OF FOUR YEAR FROM THE END O F RELEVANT ASSESSMENT YEAR DESPITE THE FACT THAT THERE IS NO F AILURE ON THE PART OF THE ASSESSEE TO DISCLOSE MATERIALS FACTS. T HE LD DR ARGUED THAT IT IS QUITE CLEAR THAT DURING THE YEAR THE ASSESSEE ITA NO.4906/M/2017 & ITA NO.3742/M/2017 M/S. RAMA PULP AND PAPER LTD. 6 HAS COME INTO PROFITS AND THEREFORE THE CLAIM OF TH E ASSESSEE IS WRONG. WE DO NOT FIND ANY LEGAL FORCE IN THE ARGUME NTS OF THE LD DR AS AFTER EXAMINATION OF RECORDS BEFORE US AND AS POINTED OUT BY THE LD AR THAT THERE IS STILL NEGATIVE WORTH OR ACCUMULATED LOSS IN THE ASSESSEE COMPANY. THUS THIS IS A CLEAR CUT CASE OF REVIEW BY THE AO OF HIS OWN ORDER WHICH IS NOT PERM ISSIBLE UNDER THE ACT. THE CASE OF THE ASSESSEE IS SQUAREL Y COVERED BY THE RATIO LAID DOWN BY THE HONBLE APEX COURT IN TH E CASE OF CIT V/S. KELVINATOR OF INDIA LIMITED (2010) 320 ITR 561 (SC) WHEREIN IT HAS BEEN HELD THAT THE ASSESSMENT CAN NOT BE REO PENED ON RE- EXAMINATION OF SAME SET OF FACTS WHICH WERE AVAILAB LE BEFORE THE AO IN THE ORIGINAL ASSESSMENT PROCEEDINGS. EVEN ON THE CONDITION AS ENVISAGED BY THE 1 ST PROVISO TO SECTION 148 ARE NOT FULFILLED AND ON THAT COUNT THE RE-OPENING IS BAD. ACCORDINGLY, WE HOLD THAT THE RE-ASSESSMENT PROCEEDINGS BY THE AO ARE BAD IN LAW AND SO IS THE CONSEQUENTIAL ORDER AND ARE QU ASHED . 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. 9. SINCE WE HAVE ALREADY ALLOWED THE APPEAL OF THE ASSESSEE ON TECHNICAL ISSUE BY HOLDING THAT REASSESSMENT PRO CEEDINGS ARE BAD IN LAW, THEREFORE, THE APPEAL OF THE REVENUE IS RENDERED INFRUCTUOUS AND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.03.2019. SD/- SD/- ( RAM LAL NEGI) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 14.03.2019. * KISHORE, SR. P.S. ITA NO.4906/M/2017 & ITA NO.3742/M/2017 M/S. RAMA PULP AND PAPER LTD. 7 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASS TT. REGISTRAR, ITAT, MUMBAI.