ACIT, New Delhi V. M/s Amserve Consultants Ltd., New Delhi

ITA 3962/DEL/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7510 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 06-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C S AGGARWAL
• Keywords: Competent authority; Reason to believe; Reassessment proceedings
• Section: 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE SH. N. K. BILLAIYA, ACCOUNTANT MEMBER AND SH. LALIET KUMAR, JUDICIAL MEMBER ITA NO.3962/DEL/2016 ASSESSMENT YEAR: 2007-08 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 2 (2), NEW DELHI VS M/S. AMSERVE CONSULTANTS LTD., FIRST FLOOR, ELEGANCE TOWER, PLOT NO.8, NON- HIERARCHICAL COMMERCIAL CENTRE, JASOLA, NEW DELHI-110025 PAN NO.AAECA8626K (APPELLANT) (RESPONDENT) APPELLANT BY MS. RINKU SINGH, SR. DR RESPONDENT BY SH. C. S. AGGARWAL, SR. ADVOCATE SH. R. P. MALL, ADVOCATE SH. SHAILESH GUPTA, CA DATE OF HEARING: 25/07/2019 DATE OF PRONOUNCEMENT: 26/07/2019 ORDER PER N. K. BILLAIYA, AM: THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF THE CIT(A)-I, NEW DELHI DATED 08.04.2016 PERTAINING TO A.Y. 2007-08. 2 2. THE GRIEVANCE OF THE REVENUE READ AS UNDER :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CI T(A) HAS ERRED IN LAW QUASHING PROCEEDINGS U/S 147 AND THE CONSEQUENT ASSESSMENT THEREOF. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CI T(A) HAS ERRED IN LAW IN NOT DECIDING THE ISSUE OF ADDITI ON OF RS.1,75,66,745/- EXPENSES U/S. 40A(2) (A) OF THE IN COME TAX ACT, 1961 ON MERIT. 3. BRIEFLY STATED THAT THE FACTS OF THE CASE ARE TH AT THE RETURN OF INCOME FILED ON 31.10.2007 DECLARING TOTAL INCOME O F RS.8,31,39,315/- WAS PROCESSED U/S. 143 (1) ON 06.0 3.2009. 4. SUBSEQUENTLY REASSESSMENT PROCEEDINGS WERE INITI ATED AFTER RECORDING OF THE FOLLOWING REASONS :- TH E ASSESSEE HAD PAID DATA PROCESSING CHARGES TO IT'S JOINT HOLDING COMPANY AMWAY INDIA WHICH IS A WHOLLY OWNED SUBSIDI ARY OF THE AMERICAN COGLOMERATE AMWAY. DISALLOWANCE OF RS. 14,38,57,868/ U/S 40A(2) WAS MA DE TO THE ASSESSEE'S INCOME DURING A. Y. 2009-10. THE ADDITION WAS CONFIRMED BY THE LD. CIT(A). SINCE THE ISSUE MAY HAVE IMPLICATIONS IN OTHER YEARS, THE LD. CIT(A) HA S DIRECTED TO TAKE NECESSARY ACTION ON THE ISSUE IN THE PRECEDING YEAR S. SINCE, THE ASSESSEE FAILED TO DISCLOSE FULLY AND TR ULY ALL MATERIAL FACTS NECESSARY DURING THE ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2007-08, AN INCOME OF MORE THAN RS. ONE LAKH CHARGE ABLE TO TAX MAY HAVE ESCAPED ASSESSMENT FOR THE ASSESSMENT YEAR 2007-08. ' 3 5. APPROVAL WAS TAKEN FROM THE COMPETENT AUTHORITY AS PER THE RELEVANT PROVISIONS OF THE ACT AND NOTICE U/S. 148 WAS ISSUED AND SERVED UPON THE ASSESSEE. IN RESPONSE TO THE NOTIC E, THE ASSESSEE COMPANY STATED THAT THE RETURN OF INCOME FIELD U/S. 139 (1) OF THE ACT MAY BE TREATED AS RETURN FILED IN PURSUANCE OF NOTICE U/S.148 OF THE ACT. 6. THEREAFTER NOTICE U/S.143 (2) AND U/S.142 (1) AL ONGWITH QUESTIONNAIRE WERE ALSO ISSUED AND SERVED ON THE AS SESSEE. 7. THE BONE OF CONTENTION WAS THE EXPENDITURE INCUR RED BY THE ASSESSEE TOWARDS DATA PROCESSING CHARGES PAID TO M/ S. AMWAY INDIA ENTERPRISES. THE ASSESSMENT WAS COMPLETED BY DISALLOWANCE OF EXCESSIVE UNREASONABLE EXPENDITURE AS UNDER :- 4 8. ACCORDINGLY THE ADDITION OF RS.1,75,66,745/- WAS MADE BY THE ASSESSING OFFICER AND THE TOTAL INCOME WAS ASSE SSED AT RS.1,00,706,060/-. 9. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A ) AND CHALLENGED THE VALIDITY OF THE NOTICE U/S. 148 OF T HE ACT AND THE CONSEQUENT ORDER FRAMED U/S.147 R.W.S. 143 (3) OF T HE ACT. 10. BEFORE THE CIT(A) THE ASSESSEE STRONGLY CONTEND ED THAT THEIR EXIST NO REASON TO BELIEVE THAT ANY INCOME CHARGEAB LE TO TAX AS ESCAPED ASSESSMENT IN THE ASSESSMENT YEAR. IT WAS BROUGHT TO THE NOTICE OF THE CIT(A) THAT THE PRE-REQUISITE CON DITION FOR INITIATION OF REASSESSMENT PROCEEDINGS HAS NOT BEEN FULFILLED AS THE ASSESSEE HAD MADE ADEQUATE DISCLOSURE OF FACTS IN THE RETURN OF INCOME FILED. IT WAS ALSO BROUGHT TO THE NOTICE OF THE CIT(A) THAT THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT O N THE GROUND THAT CIT(A) HAS DIRECTED TO TAKE NECESSARY ACTION O N THE ISSUE OF DISALLOWANCE OF DATA PROCESSING CHARGES TO M/S. AMW AY INDIA LIMITED U/S. 40A (2) (B) OF THE ACT IN THE ORDER FO R A. Y.2009-10. IT WAS STRONGLY CONTENDED THAT REOPENING HAS BEEN D ONE ON THE BASIS OF DIRECTION OF CIT(A). 11. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS OF THE CIT(A) FOUND THAT THERE IS NO SUCH DIRECTION ISSUED IN THE ORDER OF THE CIT(A) FOR A. Y. 2009-10, THEREFORE, FORMATION OF B ELIEVE BY THE ASSESSING OFFICER IS BASED ON WRONG PRESUMPTIONS AN D THERE IS NO MATERIAL FACT AVAILABLE ON THE RECORD. THE CIT(A) WAS CONVINCED 5 THAT REOPENING OF THE ASSESSMENT WAS ILLEGAL AND SA ME WAS WITHOUT APPLICATION OF MIND BY THE ASSESSING OFFICE R AND ACCORDINGLY QUASHED THE ASSESSMENT. 12. THE DR STRONGLY CONTENDED THAT SINCE THE ORIGIN AL ASSESSMENT WAS FRAMED U/S. 143 (1) OF THE ACT AND S INCE THERE WAS NO SCRUTINY OF THE ASSESSMENT, THEREFORE, FOR M AKING THE IMPUGNED ADDITIONS/ DISALLOWANCES REOPENING IS JUST IFIED. 13. PER CONTRA THE COUNSEL FOR THE ASSESSEE REITERA TED WHAT HAS BEEN STATED BEFORE THE CIT(A) AND IN SUPPORT OF HIS CONTENTION RELIANCE WAS PLACED IN THE CASE OF M/S. SILVER OAK LABORATORIES PRIVATE LIMITED AND ANOTHER IN WP (C) 17719-20/2006 JUDGMENT OF HONBLE HIGH COURT OF DELHI DATED 18.12.2008. 14. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW. THE REASONS FOR REOPENING THE ASSESSMENT AR E MENTIONED ELSEWHERE. WE ARE OF THE CONSIDERED VIEW THAT THE R EASONS RECORDED FOR REOPENING THE ASSESSMENT ARE DEVOID OF ANY APPLICATION OF MIND BECAUSE THE ASSESSING OFFICER H AS MENTIONED THAT SINCE THE ASSESSEE FAILED TO DISCLOSE FULLY A ND TRULY ALL MATERIAL FACTS NECESSARY DURING THE ASSESSMENT PROC EEDINGS FOR A. Y. 2007-08. WE FAIL TO UNDERSTAND WHEN THE RETU RN WAS PROCESSED U/S.143 (1) OF THE ACT HOW CAN THE ASSESS ING OFFICER SAY THAT THE ASSESSEE FAILED TO DISCLOSE DURING THE ASSESSMENT PROCEEDINGS. 6 15. WE FURTHER FIND THAT THE BASIS FOR REOPENING TH E ASSESSMENT IS THE DISALLOWANCE MADE U/S.40A(2)(B) OF THE ACT I N RESPECT OF DATA PROCESSING CHARGES PAID TO AMWAY IN SUBSEQUENT YEARS. 16. DOCUMENTS ON RECORD SHOW THAT THE DISALLOWANCE MADE IN A.Y. 2009-10 WERE DELETED BY THE TRIBUNAL AND THE R EVENUE HAS NOT PREFERRED ANY APPEAL AGAINST THE ORDER OF THE T RIBUNAL AND THE ISSUE HAS ATTAINED FINALITY. WE ALSO FIND THAT SIMI LAR DISALLOWANCES WERE MADE IN A.Y.2010-11 AND A.Y.2011-12 AND SUCH DISALLOWANCES WERE DELETED BY THE TRIBUNAL VIDE ORD ER FOR THE RESPECTIVE ASSESSMENT YEARS. 17. WHEN THE VERY BASIS FOR REOPENING THE ASSESSMEN T HAS BEEN REMOVED THE ASSESSMENT PROCEEDINGS DOES NOT SURVIVE ANY MORE. FOR THIS PROPOSITION, WE DRAW SUPPORT FROM THE JUDG MENT OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF M/S. SIL VER OAK LABORATORIES (SURPA). THE RELEVANT FINDINGS OF THE HONBLE HIGH COURT READ :- 3. WE HAVE HEARD THE COUNSEL FOR THE PARTIES. IT IS AP PARENT THAT THE REASONS RECORDED DO NOT CONTAIN ANY SPECIFI C ALLEGATION WITH REGARD TO THE YEAR IN QUESTION, I.E., THE ASSES SMENT YEAR 1999-2000. THE SOLE AND ENTIRE BASIS OF RE-OPENING T HE ASSESSMENT IS THE ADDITIONS MADE IN RESPECT OF THE ASSESSMENT YEARS 1998-99 AND 2001-02. THERE IS NO OTHER REASON GIVEN BY THE ASSESSING OFFICER FOR RE-OPENING THE ASSESSMENT . SINCE THE TRIBUNAL HAS ALREADY DELETED THE ADDITIONS IN RESPECT OF THE ASSESSMENT YEARS 1998-99 AND 2001-02, THE VERY BASIS FOR 7 CONTINUING ANY FURTHER WITH THE REASSESSMENT PROCEE DINGS DOES NOT SURVIVE ANY MORE. WE HAVE ALSO INDICATED ABOVE T HAT THERE IS NO SPECIFIC ALLEGATION WITH REGARD TO THE ASSESSM ENT YEAR 1999-2000 REGARDING SUPPRESSION OF SALE FIGURES. 18. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF THE DECISION OF THE HONBLE DELHI HIGH COURT (SUPRA) WE DO NOT F IND ANY ERROR OR INFIRMITY IN THE ORDER OF THE CIT(A) IN SO FAR A S QUASHING OF ASSESSMENT ORDER IS CONCERNED. SINCE THE ASSESSMEN T ORDER HAS BEEN QUASHED THE CIT(A) DID NOT FIND IT NECESSARY T O DWELL INTO THE MERITS OF THE CASE AND WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). THE APPEAL FILED BY THE RE VENUE IS ACCORDINGLY DISMISSED. 19. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ACCORDINGLY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26.07.2019. SD/- SD/- (LALIET KUMAR) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNT ANT MEMBER *NEHA* DATE:-26 .07.2019 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGI STRAR ITAT NEW DELHI 8 DATE OF DICTATION 25.07.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 26.07.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER 26.07.2019 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS 26.07.2019 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 26.07.2019 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS 26.07.2019 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 26.07.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 26.0 7.2019 DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGIST RAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER