M/s Devi Seafoods Limited, Visakhapatnam V. The ACIT, Circle-3(1), Visakhapatnam

ITA 389/VIZ/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 2687 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 19-10-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 20-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T L PETER
• Keywords: Retrospective amendment; Reason to believe; Reassessment proceedings
• Section: 143(3); 80HHC; 147; 148

Judgement Text

ITA NO.389 OF 09 DEVI SEA FOODS LIMITED PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.389/VIZAG/2009 ASSESSMENT YEAR: 2001-02 DEVI SEA FOODS LTD, VISAKHAPATNAM VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-3(1) VISAKHAPATNAM (APPELLANT) PAN NO: AABCD 0248 B (RESPONDENT) APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI T.L. PETER, (DR) ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 22-6- 2009 PASSED BY THE LD CIT (A) VISAKHAPATNAM AND IT RELATES TO THE ASSESSMENT YEAR 2001-02. 2. IN THE ORIGINAL GROUNDS OF APPEAL, THE ASSESSEE I S CHALLENGING THE ORDER OF THE LD CIT (A) IN CONFIRMING THE ASSESSMEN T OF PROFITS ON SALE OF DEPB LICENSES DURING THE YEAR UNDER CONSIDERATION I N VIEW OF THE RETROSPECTIVE AMENDMENT MADE BY TAXATION LAWS (AMEN DMENT) ACT 2005. HOWEVER, THE ASSESSEE HAS MOVED THE PETITION FOR AD MISSION OF FOLLOWING ADDITIONAL GROUND: IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE NOT ICE U/S 148 ISSUED BY THE ASSESSING OFFICE IS CONTRARY TO THE P ROVISIONS OF INCOME TAX ACT, 1961 AND HENCE THE SAID NOTICE IS LI ABLE TO BE QUASHED AS ILLEGAL AND VOID AD INITIO AND CONSEQUEN TLY THE ENTIRE REASSESSMENT PROCEEDINGS ARE LIABLE TO BE CANCELLED AS ILLEGAL. 3. THE ASSESSEE HAS STATED THAT THE ASSESSMENT COMP LETED U/S 143(3) WAS REOPENED AFTER EXPIRY OF 4 YEARS FROM THE END OF THE ASSESSMENT YEAR MERELY ON ACCOUNT OF SUBSEQUENT AMENDMENT MADE TO T HE INCOME TAX ACT. ITA NO.389 OF 09 DEVI SEA FOODS LIMITED PAGE 2 OF 5 IT WAS FURTHER STATED THAT THERE WAS NO FAILURE ON T HE PART OF THE ASSESSEE IN DISCLOSING FULLY AND TRULY ALL MATERIAL FACTS NE CESSARY FOR THE ASSESSMENT. ACCORDINGLY IT WAS CONTENDED THAT THE NOTICE ISSUED U/S 148 IS INVALID. 4. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE RECORD. THE REASONS FOR REOPENING THE ASSESSMENT ARE EXTRACTED IN THE ASSESSMENT ORDER AND THE SAME IS REPRODUCED BELOW: 1. IN THIS CASE, WHILE ALLOWING DEDUCTION U/S 80HH C(3), THE NET LOSS RESULTING FROM DIFFERENT EXPORT INCENTIVES HAS TO BE AGGREGATED WITH EXPORT INCENTIVE INCOME AS HELD IN THE CASE OF IPCA LABORATORIES VS. DCIT (266 ITR 251). 2. FURTHER THE DEDUCTION U/S 80HHC(3) WAS ALLOWED O N DEPB LICENSES AMOUNTING TO RS.4,54,52,621/-. AS PER TAXATION LAWS (SECOND) AMENDMENT ACT, 2005 WITH EFF ECT FROM 01.04.1998, THE EXPORTER WHOSE EXPORT TURNOVER IS MORE THAN 10 CRORES HAS TO PROVE ALONG WITH SUFFICI ENT EVIDENCE THAT HE SATISFY THE TWO CONDITIONS THAT IT HAD AN OPTION BEFORE IT TO CHOOSE ONE OF THE DUTY DRAW BAC K ON DEPB/DFRC AND CHOSE ONE OF THEM AND THE RATE OF DRA W BACK CREDIT WAS HIGHER THAN RATE OF CREDIT ALLOWABL E UNDER DEPB/DFRC FOR THE YEAR. NO SUCH EVIDENCE WAS FILED BY THE ASSESSEE ALONG WITH THE RETURN OF INCOME FOR A.Y 20 01-02. IN VIEW OF THE RETROSPECTIVE AMENDMENT INTRODUCED BY THE FINANCE ACT, 2005, I HAVE REASON TO BELIEF THAT AN AMOUNT OF RS.4,54,52,621/- BEING DEDUCTION ALLOWED U/S 80H HC HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF PROVISIONS OF SECTION 147 OF THE I.T. ACT, 1961. 5. WITH RESPECT OF THE POINT NO.1, THE ASSESSEE HAS ACCEPTED BEFORE THE AO FOR THE AGGREGATION OF LOSSES WITH EXPORT IN COME AS HELD IN THE CASE OF IPCA LABORATORIES. THE ASSESSEE CHALLENGED THE ME RITS OF ADDITION BEFORE THE LD CIT (A) BUT COULD NOT SUCCEED. HENCE THE ASS ESSEE HAS FILED THIS APPEAL BEFORE US AND ALSO RAISED THE LEGAL GROUNDS CITED ABOVE. SINCE ADDITIONAL GROUND URGED FOR THE FIRST TIME BEFORE U S IS A LEGAL GROUND AND FURTHER SINCE ALL THE MATERIAL FACTS RELATING TO TH IS GROUND ARE ALREADY ON RECORD, WE ADMIT THE SAME AND PROCEED TO ADJUDICATE THE SAME INITIALLY. ITA NO.389 OF 09 DEVI SEA FOODS LIMITED PAGE 3 OF 5 6. THE LD AUTHORISED REPRESENTATIVE SUBMITTED THAT THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO FURNISH THE REQUIRED DETAILS AND HENCE RE- OPENING OF THE IMPUGNED ASSESSMENT AFTER FOUR YEARS AFTER THE CLOSURE OF THE RELEVANT ASSESSMENT YEAR IS NOT IN ACCORDANCE W ITH THE LAW. IN THIS REGARD, HE BROUGHT TO OUR NOTICE THE DECISION OF TH IS BENCH DATED 22-1- 2010 IN THE CASE OF M/S B.M. EXPORTS IN ITA NO.362/ VIZAG/2008 WHEREIN AN IDENTICAL ISSUE WAS CONSIDERED AND DECIDED IN FAVOU R OF THE ASSESSEE. BESIDES THE ABOVE THE LD AR PLACED RELIANCE ON THE FOLLOWING CASE LAW ALSO. I) SADBHAV ENGINEERING LTD. VS. DCIT (GUJ) SPECIAL CIV IL APPLICATION NO.5846, 5847 OF 2010. II) RALLIS INDIA LIMITED VS. ASSTT. CIT (BOM) WP NO.2514 OF 2009 III) THIAGARAJAR MILLS (P) LTD., VS. DCIT (2009) 317 ITR 66 7. ON THE OTHER HAND THE LD DR SUBMITTED THAT THE A SSESSEE HAS FAILED TO FURNISH THE DETAILS OF CHOICE OF SCHEMES AS PRES CRIBED IN THE PROVISO TO SEC. 80HHC AND TO THE EXTENT THERE IS A FAILURE ON THE PART OF THE ASSESSEE AND ACCORDINGLY CONTENDED THAT THE REOPENING OF THE ASSESSMENT IS VALID. THE LD DR ALSO PLACED RELIANCE ON THE DECISION OF T HE HONBLE SUPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS (P) LTD., (291 ITR 500 (SC). 8. IN OUR VIEW, THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS IS NOT APPLICABLE T O THE FACTS OF THE PRESENT CASE. FURTHER, AS SUBMITTED BY THE LEARNED. A.R, T HE AO HAS NOT POINTED OUT ANY FAILURE ON THE PART OF THE ASSESSEE TO FURN ISH THE REQUIRED DETAILS. THIS BENCH OF THE TRIBUNAL HAS CONSIDERED AN IDENTI CAL ISSUE IN THE CASE OF M/S. B.M EXPORTS CITED (SUPRA). WE EXTRACT BELOW T HE OPERATIVE PORTIONS OF THE SAID ORDER: 6. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A C AREFUL PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES, WE FIND THAT THE ASSESSMENT WAS ADMITTEDLY REOPENED AFTER 4 YEARS FR OM THE END OF THE RELEVANT ASSESSMENT YEAR WITHOUT BRINGING AN YTHING ON RECORD THAT INCOME HAS ESCAPED ASSESSMENT ON ACCOUN T OF ITA NO.389 OF 09 DEVI SEA FOODS LIMITED PAGE 4 OF 5 FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT FOR THA T ASSESSMENT YEAR. FROM A CAREFUL PERUSAL OF ASSESSMENT ORDER IT APPEARS THAT THE ASSESSMENT WAS REOPENED ON THE BASIS OF THE AME NDMENT BROUGHT IN SECTION 80HHC OF THE I.T. ACT. THOUGH THE AMENDMENT WAS WITH RETROSPECTIVE EFFECT BUT ON THE BASIS OF IT ONLY THOSE ASSESSMENT CAN BE REOPENED WHICH ARE PER MISSIBLE UNDER THE LAW AND NOT OTHERWISE. IN THE INSTANT CASE , THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE I.T. ACT AND THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT BY IS SUING A NOTICE U/S 148 AFTER A LAPSE OF A PERIOD OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR WITHOUT BRINGING AN YTHING ON RECORD THAT INCOME HAS ESCAPED THE ASSESSMENT BY RE ASON OF THE FAILURE ON THE PART OF THE ASSESSEES TO DISCLOS E FULLY AND TRULY ALL MATERIALS FOR HIS ASSESSMENT. THIS ISSUE HAS BEEN REPEATEDLY EXAMINED BY THE VARIOUS HIGH COURTS AND ALL OF THEM HAVE CATEGORICALLY HELD THAT NOTICE AFTER EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR ISSUED WITH OUT SUGGESTING ANY FAILURE OR OMISSION ON THE PART OF T HE ASSESSEE TO MAKE FULL AND TRUE DISCLOSURE COULD NOT BE SUSTA INED AND DESERVES TO BE QUASHED IN THE CASE OF MCDERMOTT INTE RNATIONAL INC. VS. ACIT & ANOTHER 259 ITR 138 (UTTARANCHAL) T HEIR LORDSHIP OF THIS UTTARANCHAL HIGH COURT HAVE HELD T HAT NOTICE U/S 148 ISSUED BEYOND THE PERIOD OF 4 YEARS NOT EVE N REMOTELY SUGGESTING ANY FAILURE OR OMISSION ON THE PART OF T HE ASSESSEE TO MAKE FULL AND TRUE DISCLOSURE COULD NOT BE SUSTA INED. 7. IN THE CASE OF BANG SECURITIES PVT. LTD. VS. ACI T AND OTHERS 314 ITR 256 (BOM) THEIR LORDSHIP OF THE BOMBAY HIGH COURT HAVE HELD THAT U/S 147 OF THE INCOME TAX ACT ASSESS MENT FINALIZED U/S 143 (3) CAN BE REOPENED AFTER THE EXP IRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR ONLY I F THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MAT ERIAL FACTS RELEVANT FOR THAT ASSESSMENT YEAR. SINCE THERE WAS NO MATERIAL TO HOLD THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAP ED ASSESSMENT, THE REOPENING OF THE ASSESSMENT AFTER E XPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR COULD NOT BE SUSTAINED. ACCORDINGLY, THE NOTICE U/S 148 WAS Q UASHED. SIMILAR VIEW WAS TAKEN BY THE GUJARAT HIGH COURT IN THE CASE OF MANJUSHA ESTATE PVT. LTD., VS. ITO 314 ITR 263 (GUJ .) IN WHICH THE LORDSHIP HAVE HELD THAT THE REASONS RECORDED DI D NOT INDICATE THAT THE ASSESSING OFFICER WAS IN POSSESSI ON OF ANY MATERIAL WHICH WOULD PERMIT HIM TO HOLD A BELIEF SO AS TO FORM AN OPINION OR HAVE REASON TO BELIEVE THAT ANY INCOM E HAD ESCAPED ASSESSMENT BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY ITA NO.389 OF 09 DEVI SEA FOODS LIMITED PAGE 5 OF 5 FOR HIS ASSESSMENT, THUS THE NOTICE ISSUED U/S 148 IS LIABLE TO BE QUASHED. 9. CONSISTENT WITH THE VIEW TAKEN IN THE ABOVE CITE D CASE WE HOLD THAT THE REOPENING OF THE ASSESSMENT IS NOT VALID AND HE NCE THE NOTICE ISSUED UNDER SECTION 148 OF THE ACT AND THE CONSEQUENT AME NDMENT ARE LIABLE TO BE QUASHED AND WE ORDER ACCORDINGLY. 10. SINCE WE HAVE DECIDED THE LEGAL ISSUE IN FAVOUR OF THE ASSESSEE, WE DO NOT FIND IT NECESSARY TO ADJUDICATE THE ISSUE BA SED ON MERITS. 11. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED. PRONOUNCED IN THE OPEN COURT ON 18 TH NOVEMBER, 2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE: 18-11-2010 COPY TO 1 2 3 4 5 6 M/S DEVI SEA FOODS LIMITED, NO.9-14-18/1 CBM COMPOU ND, VISAKHAPATNAM 530003 THE ACIT CIRCLE-3(1) RANGE-3, VISAKHAPATNAM THE CIT (A)-1, VISAKHAPATNAM THE CIT-1 VISAKHAPATNAM THE DEPARTMENTAL REPRESENTATIVE, ITAT VISAKHAPATNAM GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM