ACIT, New Delhi V. M/s. Jindal Pipes Ltd., New Delhi

ITA 4034/DEL/2011

• Counselvise Citation: 403420114 RSA 2011
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 02-07-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 05-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Assessee Lawyers: RANO JAIN CA HEARING ON
• Keywords: Tax effect
• Section: 143(3); 14A; 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE VICE-PRESIDENT AN D SHRI I.C.SUDHIR, JUDICIAL MEMBER I.T.A. NO. 4034/DEL/2011 ASSESSMENT YEAR: 2003-04 ACIT CIRCLE- 4 (1), M/S JINDAL PIPES LTD. NEW DELHI VS. 1/23B, 1 ST FLOOR,ASAF ALI ROAD, NEW DELHI. PAN: AAACJ2055K (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI R.S.NEGI, SR. DR. RESPONDENT BY: SHRI VED JAIN & RANO JAIN, CA HEARING ON : 2/07/2012 ORDER PRONOUNCED ON THE DATE: .. ORDER PER I.C.SUDHIR, JM: THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDER ON THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LEARNED CIT (A) IS ERRONEOUS & CONTRARY TO FACTS AND LAW. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT (APPEALS) HAS ERRED IN QUASHING THE RE- ASSESSMENT ORDER. 2.1 THE LD. CIT (A) HAS ERRED AND IGNORED THAT NOTICE U /S 148 WAS ISSUED AFTER COMPLYING WITH ALL THE PROCEDU RAL REQUIREMENTS. ITA NO. 4034/DEL/2011 2 2.2 THE LD. CIT (A) HAS ERRED IN IGNORING THAT THE ASSE SSEE WAS SUPPOSED TO MAKE DISALLOWANCE U/S 14A IN RESPEC T OF DIVIDEND INCOME AMOUNTING TO RS.1,02,63,046/- CLAIM ED EXEMPT BY IT WHICH IT HAD NOT DONE. 2. WE HAVE HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY THE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW AND THE MATERIAL AVAILABLE ON RECORD. THE FACTS IN BRIEF ARE THAT THE ASSESSEE A PUBLIC LTD. COMPANY, WAS ENGAGED IN THE BUSINESS OF MANUFACTURING OF SEAMLES S ERW PIPES AND TUBES. DURING THE YEAR THE ASSESSEE FILED ITS RETUR N OF INCOME ON 31 ST OCT. 2003 DECLARING A TOTAL INCOME OF RS.8,15,75,075/-. THE CASE WAS LATER ON SELECTED FOR SCRUTINY ASSESSMENT U/S 143 (3) OF THE ACT. THE ASSESSMENT U/S 143(3) WAS FRAMED ON 18.2.2005 DETERMINING THE INCO ME OF THE ASSESSEE AT RS.8,15,79,950/-. THEREAFTER ON 8.12.2009 NOTICE U/ S 148 OF THE ACT PROPOSING TO REASSESS THE INCOME FOR THE YEAR AND A SKING THE ASSESSEE TO FILE ITS RETURN OF INCOME FOR THE YEAR WAS ISSUED AND SE RVED UPON THE ASSESSEE ON 10.12.2009. IN RESPONSE THE ASSESSEE VIDE A LETTER DATED 29.12.2009 REQUESTED THE AO TO TREAT THE ORIGINAL RETURN FILED BY THE AS SESSEE AS RETURN FILED PURSUANT TO NOTICE U/S 148 OF THE ACT. THE REASSESS MENT ORDER WAS FRAMED ON 23.12.2010 DETERMINING THE TOTAL INCOME AT RS.9,14, 95,875/- AFTER MAKING DISALLOWANCES OF (A) RS.48,81,648/- U/S 14A OF THE ACT AND (B) RS.50,34,277/- ON ACCOUNT OF BANK GUARANTEE. THE A GGRIEVED ASSESSEE WENT ITA NO. 4034/DEL/2011 3 IN FIRST APPEAL QUESTIONING THE VALIDITY OF THE REA SSESSMENT ORDER AND THE ADDITIONS MADE THEREIN. THE ASSESSEE CONTENDED THAT AS PER PROVISO TO SECTION 147 OF THE ACT, NO ACTION SHALL BE TAKEN UN DER THIS SECTION AFTER THE EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSE SSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSE E TO MAKE A RETURN U/S 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATE RIAL FACTS NECESSARY FOR ITS ASSESSMENT FOR THAT ASSESSMENT YEAR. SEVERAL DECISI ONS WERE CITED IN SUPPORT. ON MERITS IT WAS CONTENDED THAT THE AO HAS DISALLOW ED AN AMOUNT OF RS.48,81,648/- BY INVOKING THE PROVISIONS OF RULE 8 D WHICH CAME INTO FORCE W.E.F. 24.3.2008 I.E. APPLYING THE RULE WHICH WAS N OT APPLICABLE FOR THE YEAR UNDER CONSIDERATION. IT WAS CONTENDED FURTHER THAT THE AO HAS TRAVELED BEYOND THE SCOPE OF REASONS RECORDED WHILE DISALLOW ING AN AMOUNT OF RS. 50,34,277/- CLAIMED BY THE ASSESSEE AS EXPENDITURE ON BANK GUARANTEE INVOKED BY ONE OF ITS PARTNERS. THE LD. CIT (A) AFT ER DISCUSSING THE CASE OF THE ASSESSEE HAS HELD THAT THE ASSESSMENT ORDER IS WITHOUT THE AUTHORITY OF LAW. HE HAS ACCORDINGLY QUASHED THE SAME. THE REVEN UE HAS QUESTIONED THIS ACTION OF THE FIRST APPELLATE AUTHORITY BEFORE THE TRIBUNAL. ITA NO. 4034/DEL/2011 4 3. IN SUPPORT OF THE GROUNDS THE LD. DR HAS BASICALLY PLACED RELIANCE ON THE ASSESSMENT PASSED U/S 147 READ WITH 143(3) OF T HE ACT. HE SUBMITTED THAT THE ONUS WAS UPON THE ASSESSEE TO MAKE DISALLOWANCE ITSELF U/S 14 A OF THE ACT TO WHICH IT HAS FAILED TO, HENCE THERE WAS FAIL URE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL MATERIAL FACTS NECESSARY F OR THE ASSESSMENT FULLY AND TRULY. 4. THE LD. AR ON THE OTHER HAND TRIED TO JUSTIFY THE F IRST APPELLATE ORDER. THE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTH ORITIES BELOW AND THE DECISIONS CITED BEFORE THE LD. CIT (A). BESIDES, H E ALSO PLACED RELIANCE ON THE FOLLOWING DECISIONS TO SUPPORT HIS CONTENTION T HAT IN THE ABSENCE OF AN ALLEGATION IN THE REASON RECORDED THAT THIS ESCAPEM ENT IN INCOME HAD OCCURRED BY REASON OF FAILURE ON THE PART OF THE AS SESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSME NT, THE ASSESSMENT CANNOT BE REOPENED AFTER A PERIOD OF 4 YEARS: I) CIT VS. XEROX MODI CORP LTD. ITA NO. 1247/2007 DATED 14 TH SEPTEMBER, 2010 II) HINDUSTAN LEVER LTD. VS. R.B. WADEKAR 268 SUDHIR GENSETS LTD. VS. ITO, W.P. (C) NO. 7789/2010 DATED 31 ST MAY, 2011 III) WELL INTER TRADE PVT. LTD. VS. ITO, W.P. ( C ) NO. 7722 OF 2007 DATED 11 TH AUGUST, 2008, 308 ITR 22 (DEL) IV) DULI CHAND SINGHANIA VS. ASSISTANT COMMISSIONER OF INCOME TAX 269 ITR 192 ITA NO. 4034/DEL/2011 5 V) JSRS UDYOG LTD. VS. ITO, W.P. ( C ) NO. 8688/2008 313 ITR 321 (DEL) VI) ITR 332 (BOM) VII) MAHAVIR SPINNING MILLS LTD. VS. CIT 270 ITR 290 VIII) KAIRA DISTRICT COOPERATIVE MILK PRODUCTS UNION LTD. 216 ITR 371 (GUJARAT HIGH COURT) 5. CONSIDERING THE ABOVE SUBMISSIONS WE NOTE THAT THER E IS NO DISPUTE THAT IN THE PRESENT CASE PROVISIONS U/S 147 HAS BEE N INVOKED BY THE AO AFTER EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSE SSMENT YEAR. THUS THE ISSUE RAISED IS AS TO WHETHER THE ASSESSEE HAD MADE A FULL AND TRUE DISCLOSER OF ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THE CONTENTION OF THE ASSESSEE ALSO REMAINED THAT THERE IS NO WHISPER OF ALLEGATION THAT THE ESCAPEMENT IN INCOME HAD OCCURRED BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DI SCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT, IN THE REASONS RECORDED BY THE AO FOR THE INITIATION OF REASSESSMENT. IN SUPPORT T HE AR HAS PLACED RELIANCE ON THE ABOVE CITED DECISIONS. THE LD. DR HAS CONTEN DED THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT, HENCE PROVISO TO SECT ION 147 OF THE ACT IS NOT AVAILABLE TO HOLD THE REASSESSMENT AS INVALID. IN I TS RECENT DECISION THE HONBLE JURISDICTIONAL HIGH COURT OF DELHI IN THE C ASE OF SUDHIR GENSETS LTD. VS. ITO (SUPRA) RELIED UPON BY THE LD. AR HAS BEEN PLEASED TO HOLD THAT IN THE REASONS SUPPLIED TO THE PETITIONER THER E IS NO WHISPER THAT THE ITA NO. 4034/DEL/2011 6 PETITIONER HAD FAILED TO DISCLOSE FULLY AND TRULY A LL NECESSARY FACTS NECESSARY FOR ASSESSMENT AND THAT BECAUSE OF THIS FAILURE THE RE HAS BEEN AN ESCAPEMENT OF INCOME CHARGEABLE TO TAX, THUS MERELY HAVING A R EASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT IS NOT SUFFICIENT TO REOPEN ASSESSMENT BEYOND THE 4 YEARS PERIOD. IN THE CASE OF WEL INTER TRADE P. LTD. VS. ITO (SUPRA) RELIED UPON BY THE LD. AR THE HONBLE JURIS DICTIONAL HIGH COURT OF DELHI HAS BEEN PLEASED TO HOLD THAT IN THE ABSENCE OF AN ALLEGATION IN THE REASONS RECORDED THAT THE ESCAPEMENT IN INCOME HAD OCCURRED BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, THE ASSESSMENT CANNOT BE REOPENED AFTER A PERIOD OF 4 YEARS. SIMILAR VIEW HAS BEEN EXPRESSED BY THE HONBLE HIGH COURT IN THE OTHER DECISIONS CITED HEREIN ABOVE BY THE LD. AR. KEEPING IN VIEW THESE DECISIONS OF HONBLE JURISDICTIONAL HIGH COURT WHICH HAS GOT BINDING EFFECT ON THE TRIBUNAL, WE HAVE TO EXAMINE THE REASONS RECORDED BY THE AO IN THE PRESENT CASE FOR PROPER INVOCATION OF PROVISIONS U/S 147. THE REASONS RECORDED AT IN THE PRESENT CASE FOR INITIAT ION OF REOPENING MADE AVAILABLE AS PAGE NO. 5 OF THE PAPER BOOK IS BEING REPRODUCED HEREUNDER FOR THE READY REFERENCE: I) ON EXAMINATION OF RECORDS IT IS REVEALED THAT ASSESSMENT OF THE ASSESSEE COMPANY WAS COMPLETED AFTER SCRUTINY DETERMINING AN INCOME OF RS.8,15,79,950/- AFTER ALLOWING EXEMPTION OF DIVIDE ND ITA NO. 4034/DEL/2011 7 INCOME OF RS.1,02,63,046/-. WHILE FRAMING ASSESSMEN T PROPORTIONATE ADMINISTRATIVE EXPENSES OF RS.2,89,808/- ATTRIBUTABLE TO DIVIDEND INCOME NEEDE D TO BE DISALLOWED. THE OMISSION RESULTED IN UNDER ASSESSMENT OF INCOME OF RS.2,89,808/- INVOLVING TAX EFFECT OF RS.1,06,505/-. II) IN VIEW OF THE ABOVE, I HAVE REASONS TO BELIEVE THA T THE INCOME OF RS.2,89,808/- CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147/148. 6. WE THUS FIND THAT ADMITTEDLY IN THE REASONS RECORDE D BY THE AO FOR INVOCATION OF THE PROVISIONS U/S 147 FOR INITIATION OF REOPENING PROCEEDINGS IN THE PRESENT CASE, DOES NOT HAVE ALLEGATION THAT THE ESCAPEMENT IN INCOME HAD OCCURRED BY REASON OF FAILURE ON THE PART OF TH E ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSE SSMENT TO JUSTIFY ACTION OF THE AO FOR REOPENING THE ASSESSMENT AFTER A PERIOD OF 4 YEARS WITHIN THE MEANING OF PROVISO TO SECTION 147 OF THE ACT. THUS ON THE BASIS OF RATIO LAID DOWN IN THE ABOVE DISCUSSED DECISIONS OF THE HONBL E JURISDICTIONAL HIGH COURT ALONE IT IS HELD THAT THE REASONS RECORDED BY THE AO IN THE PRESENT CASE FOR INITIATION OF REOPENING WAS NOT SUFFICIENT TO J USTIFY HIS ACTION AS PER PROVISO TO SECTION 147 OF THE ACT AND THUS IT WAS I NVALID. BESIDES, THE FINDING OF THE LD. CIT (A) HAS NOT BEEN REBUTTED BY THE REVENUE BEFORE THE TRIBUNAL THAT UNDOUBTEDLY THE REASONS HAVE BEEN RE CORDED ON THE BASIS OF PERUSAL OF THE PROFIT AND LOSS ACCOUNT WHICH WAS EN CLOSED ALONG WITH THE SAID RETURN OF INCOME. THUS, ADMITTEDLY IT IS A CASE WHE RE NO FRESH MATERIAL HAS ITA NO. 4034/DEL/2011 8 COME IN THE POSSESSION OF THE AO BEFORE RECORDING T HE REASONS. NOTING THESE MATERIAL FACTS THE LD. CIT (A) IN OUR VIEW HA S RIGHTLY HELD THAT THE REASSESSMENT ORDER IN QUESTION IS WITHOUT THE AUTHO RITY OF LAW AND THUS HE HAS RIGHTLY QUASHED THE SAME. THE FIRST APPELLATE O RDER IN THIS REGARD IS WELL SUPPORTED BY THE DECISIONS OF THE HONBLE JURISDICT IONAL HIGH COURT AS DISCUSSED ABOVE. IN THESE CIRCUMSTANCES WE ARE NOT INCLINED TO INTERFERE WITH THE FIRST APPELLATE ORDER ON THE ISSUE OF VALIDITY OF REASSESSMENT FOR MAKING DISALLOWANCE U/S 14A IN RESPECT OF DIVIDEND INCOME. THE SAME IS UPHELD. THE GROUNDS ARE ACCORDINGLY REJECTED. 7. CONSEQUENTLY APPEAL IS DISMISSED. 8. ORDER PRONOUNCED IN THE OPEN COURT ON THE DAY OF 07 /09/2012. SD/- SD/- G.D.AGRAWAL ) (I.C.SUDH IR) VICE-PRESIDENT JUDICIAL MEMBER DATED: 07 /09/2012 *AK VERMA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR