DCIT, Circle - 8, Kolkata, Kolkata V. M/s. Usha Martin Finance Limited, Kolkata

ITA 395/KOL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91925 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 1999-2000
• Appeal Filed On: 12-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NILAY BARON SOM
• Assessee Lawyers: NIMISH KUMAR; AMIT PATNI
• Keywords: Retrospective amendment; Tangible material; Reassessment proceedings
• Section: 143(3); 115JB; 147; 148; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOLKATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI B. P. JAIN, AM ] I.T.A NO. 395 /KOL/201 2 ASSESSMENT YEAR : 1999 - 0 0 DCIT, CIRCLE - 8, KOLKATA VS. M/S USHA MARTIN FINANCE LIMITED. 24, R.N. MUKHERJEE ROAD, KOL - 01 (PAN: AA D C S 7574 F ) ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 23 .0 4 .2015 DATE OF PRONOUNCEMENT: 13. 0 5 . 2015 FOR THE APPELLANT: SHRI NILAY BARON SOM, JCIT FOR THE RESPONDENT: S HRI AMIT PATNI, AR & SHRI NIMISH KUMAR, AR ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY REVENU E IS ARISING OUT OF ORDER OF CIT(A) - V I II , KOLKATA IN APPEAL NO. 3 9 3 / CIT(A) - V II I / KOL /09 - 10 DATED 28 . 0 1 .20 1 0 . ASSESSMENT WAS FRAMED BY D CIT, CIRCLE - 8 , KOLKATA U/S. 254/251/ 147/ 143(3) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) FOR ASSESSMENT YEAR 1999 - 0 0 VIDE HIS ORDER DATED 31 .12.200 9 . 2. THE SOLE ISSUE IN THIS APPEAL OF REVENU E IS AGAINST THE ORDER OF CIT(A) IN QUASHING THE REASSESSMENT PROCEEDINGS. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.1: - 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE REASSESSMENT PROCEEDINGS ARE NOT IN ACCORDANCE WITH TH E PROVISION OF LAW WHEREAS IT WAS CLEARLY AS PER LAW AND THE AO HAS FOLLOWED AND OBSERVED ALL THE DIRECTIONS GIVEN BY APPELLATE AUTHORITIES. 3. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS A DOMESTIC COMPANY ENGAGE D IN THE BUSINESS OF PROVIDING FINANCIAL S ERVICES SUCH AS HIRE PURCHASE AND LEASING OF MACHINERY AND VEHICLES, BILL DISCOUNTING AND ACCEPTED FIXED DEPOSIT FROM THE PUBLIC. THE ASSESSEE FILED RETURNED INCOME FOR THE RELEVANT AY 1999 - 00 ON 31 - 12 - 1999. THE ASSESSING OFFICER INITIATED REASSESSMENT PRO CEEDINGS BY ISSUING NOTICE U/S 148 OF THE ACT DATED 25 - 02 - 2004. THE AO COMPLETED THE REASSESSMENT PROCEEDINGS U/S 147 R.W.S. 143(3) VIDE 2 ITA NO. 395 /K/201 2 M/S USHA MARTIN FINANCE LTD. AY 1999 - 0 0 ORDER DATED 10 - 09 - 2004 AND THIS MATTER WAS CARRIED IN APPEAL BEFORE CIT(A) AND APPEAL WAS ALLOWED IN FAVOUR OF ASSESSEE . AGAINST THE ORDER OF APPELLATE STATE IN FIRST ROUND, DEPARTMENT PREFERRED APPEAL BEFORE TRIBUNAL AND TRIBUNAL DISMISSED THE APPEAL OF REVENUE BUT ALLOWED THE CROSS OBJECTION FILED BY ASSESSEE WITH A DIRECTION TO PROVIDE REASONS AND PASS A SPEAKING ORDER ON THE OBJECTIONS IN RESPECT OF ISSUANCE OF NOTICE U/S 148 R.W.S. 147 OF THE ACT I N VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF G.K.N. DRIVESHAFTS (INDIA) LTD. V. IT O (2003) 259 ITR 19 , 20 (SC) . I N TERMS OF ABOVE DIRECTION OF THE TRIBUNAL , THE AO PROVIDED COPIES OF REASON RECORDED THEREIN AND MAINLY THE REASONS RECORDED WEE ON THE FOLLOWING THREE POINTS: - (I) LEASE EQUALISATION CHARGES (II)PROVISION FOR NON PERFORMING ASSETS (NPA) (III) PROVISION FOR DIMINUTION IN THE VALUE OF INVESTMEN T THE ASSESSEE FILED OBJECTION ON INITIATION OF REASSESSMENT PROCEEDINGS BEFORE THE AO AND AO VIDE LETTER DATED 02 - 12 - 2009 DISPOSED O F F THE OBJECTION S OF THE ASSESSEE. THE AO RELIED ON THE RETROSPECTIVE AMENDMENT MADE BY FINANCE (NO.2) ACT IN SECTION 115JA OF THE ACT IN RESPECT OF PROVISION FOR NON PERFORMING ASSETS (NPA) AND PROVISION FOR DIMINUTION IN THE VALUE OF INVESTMENT. HOWEVER, THE AO HAS NOT ACCEPTED THE CONTENTION OF THE ASSESSEE AND ASSESSEE TAKEN THE MATTER IN APPEAL BEFORE CIT(A) WHO QUASHED T HE REASSESSMENT PROCEEDINGS AND THE RELEVANT PARE OF THE FINDINGS OF CIT(A) READS AS UNDER: - NOW, THE FIRST ISSUE TO BE DECIDE D IN THIS APPEAL IS THE LEGALITY OF ISSUE OF NOTICE UNDER SECTION 148 OF THE IT ACT. IN THE FIRST PLACE, THE ASSESSING OFFICER HA D INITIATED PROCEEDINGS UNDER SEC. 154 OF THE ACT ON THE VERY ISSUES REGARDING COMPUTING THE BOOK PROFIT ADDING BACK THE I. LEASE EQUALISATION CHARGES II. PROVISION FOR NON PERFORMING ASSETS (NPA), III. PROVISION FOR DIMINUTION IN THE VALUE OF INVESTMENT. THE MATTER WENT UPTO THE INCOME - TAX APPELLATE TRIBUNAL AT THE INSTANCE OF THE DEPARTMENT, AND THE ISSUE STANDS DECIDED IN FAVOUR OF THE APPELLANT. THIS BEING SO, THERE - ASSESSMENT PROCEEDINGS COULD NOT BE SAID TO BE INITIATED ON ANY OTHER ISSUE THAN THOSE COVERED BY THE SEC. 154 PROCEEDINGS, AND THOSE ISSUED STOOD EXAMINED BY THE APPELLATE AUTHORITIES AS WELL. SECONDLY, IT IS APPARENTLY CLEAR FROM THE FACTS OF THE CASE AS BROUGHT OUT BY THE ASSESSING OFFICER THAT THOUGH THE ASSESSMENT WAS REOPENED BEFORE THE AMENDMENT IN SEC. 115JA OF THE ACT WITH RETROSPECTIVE EFFECT FROM 1.4.2001. THERE, THE FACTS OF THE CASE ARE SQUARELY COVERED BY THE DECISION OF IOT INFRASTRUCTURE & ENERGY SERVICES LTD. VS. ASSISTANT COMMISSIONER OF INCOME - TAX & ANOTHER 332 ITR 587 (BOM) CITED SU P RA. IN THIS REPORTED CASE, THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF 3 ITA NO. 395 /K/201 2 M/S USHA MARTIN FINANCE LTD. AY 1999 - 0 0 CIT VS. MAX INDIA LTD. (2007) 213 CTR (SC) 266 AND RALLIES INDIA LTD VS. ASSTT. CIT (2010) 37 DTR (BOM) 143 HAVE BEEN RELIED ON. FURTHER THE CASES OF CHAINRUP SAMPATRAM VS. CIT (1953) 24 ITR 481 (SC) AND CIT VS. BRITISH PAINTS INDIA LTD. (1991) 91 CTR 108; (1991 188 ITR 44 (SC) HAVE BEEN REFERRED TO. IN CIT V. KELVINATOR OF INDIA L T D. (12010) 228 CTR (SC) 485; (210) 320 ITR 561 (SC), THE RATIO LAID DOWN BY THE HON'BLE SUPREME CO URT IS THAT REOPENING OF THE ASSESSMENT IS NOT FOUNDED ON TANGIBLE MATERIAL AND THAT THE AO HAS ACTED OUTSIDE THE FOLD OF HIS JURISDICTION. IN CIT VS. SUN ENGINEERING WORKS (P) LTD., TC 51R 314, THE HON'BLE SUPREME COURT HAS HELD THAT WHERE AN APPEAL HA S BEEN FILED AGAINST INTIMATION, MATTER CONCLUDED THEREIN CANNOT BE RE - EXAMINED IN RE - ASSESSMENT PROCEEDINGS. THEREFORE, FOLLOWING THE JUDGMENTS DELIVERED BY THE HON'BLE SUPREME COURT AND THAT DECIDED BY THE HON'BLE BOMBAY HIGH COURT IN IDENTICAL MATTERS, I HOLD THAT THE RE - ASSESSMENT PROCEEDINGS ARE AB INITO NOT IN ACCORDANCE WITH THE PROVISIONS OF LAW. THE SAME IS HEREBY CANCELLED. 4 . WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND FROM THE FACTS OF THE CASE THAT THE REOPENING U/S. 147 OF THE ACT IS MADE ON THE THREE COUNTS I.E. LEASE EQUALISATION CHARGES, PROVISION FOR NON - PERFORMING ASSETS AND PROVISION FOR DIMINUTION IN THE VALUE OF INVESTMENTS. THE ASSESSEE CONTENDED THAT ON THE ITEM OF LEASE EQU ALISATION CHARGES THE TRIBUNAL HAS DECIDED THE MATTER IN FAVOUR OF THE ASSESSEE IN ASSESSMENT YEAR 1997 - 98 IN ITA NO. 1291/K/2001 VIDE DATED 16.05.2008 IN ASSESSEE S OWN CASE. SECONDLY, THE REOPENING IS ON THE BASIS OF RETROSPECTIVE AMENDMENT MADE BY FINA NCE NO. 2 ACT, 2009 IN SECTION 115JA OF THE ACT IN RESPECT TO PROPOSED ADDITIONS ON ACCOUNT OF PROVISIONS FOR NON - PERFORMING ASSETS AND PROVISIONS FOR DIMINUTION IN THE VALUE OF INVESTMENTS. THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST REVE NUE IN VIEW OF THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF IOT INFRASTRUCTURE & ENERGY SERVICES LTD. VS. ACIT (2011) 332 ITR 587(BOM), WHEREIN IT IS OBSERVED THAT THE REASSESSMENT BASED ON RETROSPECTIVE AMENDMENT IS BAD IN LAW AND FOR THIS HON 'BLE HIGH COURT OBSERVED AS UNDER: 11. IN THE PRESENT CASE, IT WOULD ALSO BE NECESSARY TO NOTE THAT THE REASONS OF THE ASSESSING OFFICER WERE RECORDED BEFORE THE PROVISIONS OF SECTION 115JB WERE AMENDED BY FINANCE ACT NO.2 OF 2009 THOUGH WITH EFFECT FROM 2001. AS A RESULT OF THE AMENDMENT, CLAUSE (I) HAS BEEN INSERTED IN EXPLANATION (1) TO THE SECTION WHICH DEFINES THE MEANING OF THE EXPRESSION 'BOOK PROFITS'. BY THE AMENDMENT, THE AMOUNT OR AMOUNTS SET ASIDE AS PROVISION FOR DIMINUTION IN THE VALUE OF THE ASSETS IS TO BE ADDED TO THE NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR, PREPARED UNDER SUB - SECTION (2). WHEN THE REASONS WERE RECORDED BY THE ASSESSING OFFICER, THIS PROVISION WAS NOT ON THE STATUTE BOOK AND HENCE, COULD NOT HAVE BEEN REFERRED TO AND, AS A MATTER OF FACT, HAS NOT BEEN REFERRED TO IN SUPPORT OF THE NOTICE OF FOR REOPENING THE ASSESSMENT. THOUGH THE JUDGMENT OF THE SUPREME COURT IN CIT VS. MAX INDIA LIMITED, (2007) 295 ITR 282; (2008) 166 TAXMAN 188, AROSE IN THE CONTEXT OF SECTION 263, THE PRINCIPLE THAT EMERGES IS THAT THE VALIDITY OF A NOTICE OF THE ASSESSING OFFICER SEEKING TO REOPEN AN ASSESSMENT WOULD HAVE TO 4 ITA NO. 395 /K/201 2 M/S USHA MARTIN FINANCE LTD. AY 1999 - 0 0 BE DETERMINED ON THE LAW AS IT PREVA ILED ON THE DATE OF THE NOTICE REOPENING OF THE ASSESSMENT AND HAS TO BE ASSESSED WITH REFERENCE TO THE REASONS RECORDED BY THE ASSESSING OFFICER THIS POSITION HAS ALSO BEEN LAID DOWN IN THE JUDGMENT OF THIS COURT IN RALLIES INDIA LIMITED VS. ASSISTANT COM MISSIONER OF INCOME TAX. (2010) 323 ITR 54 (SUPREME COURT). IN VIEW OF THE ABOVE JUDGMENT OF HON'BLE BOMBAY HIGH COURT, IN THE PRESENT CASE ALSO THE NOTICE U/S. 148 OF THE ACT WAS ISSUED PRIOR TO THE AMENDMENT AND ONCE THIS IS THE POSITION, THE ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE. THE REASSESSMENT U/S. 147 OF THE ACT HAS RIGHTLY BEEN QUASHED BY CIT(A) AND WE CONFIRM THE SAME. THIS ISSUE OF REVENUE S APPEAL IS DISMISSED. 5 . IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. 6 . ORDER IS PRONOUNCED IN THE OPEN COURT ON 13 - 05 - 2015 . SD/ - SD/ - (B. P. JAIN) (MAHAVIR SINGH) ACCOUNTANT MEMBER J UDICIAL MEMBER DATED : 13 TH MAY , 201 5 *DKP/ P.S COPY OF THE ORDER FORWARDED TO: 1 . A PPELLANT DCIT, CIRCLE - 8, AAYAKAR BHAWAN, 5 TH FLOOR, P - 7, CHOWRINGHEE SQ., KOLKATA - 69 . 2 RESPONDENT M/S USHA MARTIN FINANCE LTD., 24, R.N. MUKHERJEE ROAD, KOLKATA - 700 0 01 3 . THE CIT (A), KOLKATA 4. 5. CIT KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .