M/s. National Textile Corporation Ltd., New Delhi V. ITO, New Delhi

ITA 4053/DEL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3382 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 05-04-2017
• Assessment Year: 2001-2002
• Appeal Filed On: 17-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 43B; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI B.P. JAIN, ACCOUNTANT MEMBER ITA NO.4053/DEL/2014 ASSESSMENT YEAR 2001-02 NATIONAL TEXTILE CORPORATION LTD., SCOPE COMPLEX CORE-IV, 7-INSTITUTIONAL AREA, LODHI ROAD, NEW DELHI. PAN: AAACN 28471 VS. ITO, WARD-13(3), NEW DELHI. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI VED JAIN, ADV., ASSESSEE(S) BY : SHRI RAJESH KUMAR, SR.D.R. / DATE OF HEARING : 05/04/2017 / DATE OF PRONOUNCEMENT: 06/04/2017 ORDER PER B.P. JAIN, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER O F LEARNED CIT(A)- XVII, DELHI VIDE ORDER DATED 11.04.2014 FOR THE ASS ESSMENT YEAR 2001-02. THE ASSESSEE HAS NOT PRESSED GROUNDS NO.1 AND 2, AN D THEREFORE, SAME ARE DISMISSED AS NOT PRESSED. 2. AS REGARDS GROUNDS NO.3 TO 7 WHICH ARE MAINLY AG AINST THE INITIATION OF PROCEEDINGS U/S.147 R.W.S. 148 OF THE IT ACT WHICH IN THE GROUNDS OF THE ASSESSEE IS BAD IN LAW AND IS LIABLE TO BE QUASHED. ITA NO.4053/DEL/2014 2 3. LEARNED COUNSEL FOR THE ASSESSEE, MR. VED JAIN, ADVOCATE ARGUED AND INVITED OUR ATTENTION AT PAPER BOOK 124 THE REASONS RECORDED BY THE AO WHICH FOR THE SAKE CONVENIENCE ARE REPRODUCED HEREI N: RETURN OF INCOME IN THIS CASE WAS FILED ON 31.10.2 001 DECLARING A LOSS OF RS.53,73,15,730/-. RETURN OF INCOME WAS PROCESSED U /S.143(1) OF THE IT ACT AT RETURNED LOSS ON 22.11.2002. PERUSAL OF THE ASSESSMENT ORDER REVEALED THAT IN AU DITORS REPORTS, THE AUDITOR AT POINT NO.5(B) HAS STATED THAT NOTE NO.3 AND 6(B) OF NOTES ON ACCOUNTS, REGARDING NON PROVISION FOR EXCISE DUTY L IABILITY IN THE ACCOUNTS FOR FINISHED GOODS IN THE FACTORY GODOWN, THE EXCIS E DUTY LIABILITY WORKS OUT TO RS.10.27 LACS. THIS HAS RESULTED IN AN UNDER ASS ESSMENT OF CURRENT LIABILITY BY RS.10.27 LACS AND UNDER STATEMENT OF VALUE OF FI NISHED GOODS BY THE SAME AMOUNT. IT IS ALSO REVEALED THAT ASSESSEE HAS DEBIT ED RS.1162.99 LAKH AND RS.100.50 LACS AS INTEREST TO FINANCIAL INSTITUTION S AND BANKS RESPECTIVELY, AS PER RECORD AND LIABLE TO BE DISALLOWED AS PER PROVI SIONS OF SECTION 43B OF THE IT ACT. I THEREFORE HAVE REASONS TO BELIEVE THAT ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL MATERI AL FACTS NECESSARY FOR ASSESSMENT FOR ABOVE ASSESSMENT YEAR, THE INCOME CH ARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 14 7 OF THE ACT. SINCE FOUR YEARS HAS SINCE EXPIRED FROM THE END OF THE RELEVANT YEAR, AND ASSESSMENT WAS COMPLETED U/S.143(1) OF THE IT ACT, THEREFORE, THE STATUTORY APPROVAL OF THE ADDL. CIT, RANGE-13, NEW DELHI IS S OLICITED AS PER PROVISIONS OF SECTION 151(1) OF THE IT ACT. 4. HE ARGUED THAT THERE WAS NO MATERIAL, IN FACT TH E FRESH MATERIAL BROUGHT BY THE AO ON RECORD TO ESTABLISH THAT THE I NCOME OF THE IMPUGNED YEAR CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. HE F URTHER ARGUED THAT THE REASONS RECORDED IN FACT ARE TAX NEUTRAL AND THERE CANNOT BE ANY REOPENING OF THE ASSESSMENT U/S.147 OF THE ACT. HE RELIED UPON T HE DECISION OF HONBLE ITAT MUMBAI BENCH IN THE CASE OF GIVAUDAN FLAVOURS INDIA (P) LTD. VS. DCIT IN ITAS NO.2672 AND 3324/MUM/2009 DATED 7 TH MARCH, 2011 AND UPON THE DECISION OF HONBLE DELHI HIGH COURT IN TH E CASE OF CIT-V VS. ORIENT CRAFT LTD. IN ITA NO.555/2012 DATED 12 TH DECEMBER, 2012 IN WHICH ITA NO.4053/DEL/2014 3 THE DEPARTMENT SLP WAS DISMISSED BY THE HONBLE SUP REME COURT BY SLP (CIVIL) NO.CC 15859/2013 DATED 20 TH JANUARY, 2014. 5. LEARNED DR, ON THE OTHER HAND, RELIED UPON THE O RDERS OF BOTH THE AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE CASE RECORD. ON PERUSAL OF THE REASONS RECORDED AT PAPER BOOK 124, IT IS EVIDENT THAT THERE IS NO MATERIAL/FRESH MATERIAL BROUGHT ON RECORD BY THE AO WHILE RECORDING THE REASONS. THE REASONS RECORDED WITH RESPECT TO THE E XCISE DUTY IN FACT WHICH ARE TAX NEUTRAL AND RELIANCE HAS RIGHTLY BEEN PLACE D BY THE LEARNED COUNSEL FOR THE ASSESSEE, MR. VED JAIN, ADVOCATE UPON THE D ECISION OF HONBLE ITAT MUMBAI BENCH IN THE CASE OF GIVAUDAN FLAVOURS INDIA (P) LTD. VS. DCIT (SUPRA) AND THE RELEVANT DECISION IN PARAGRAPHS 9 A ND 10 IS REPRODUCED BELOW. 9. HAVING REGARD TO THE RIVAL SUBMISSIONS AND HAVIN G PERUSED THE MATERIAL ON RECORD, WE SEE MERITS IN THE PLEA OF THE ASSESSEE. AS OBSERVED BY HON'BLE SUPREME COURT IN THE CASE OF CIT VS KELVINATOR OF INDIA LTD (320 ITR 561), ONE HAS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS 'REASON TO BE LIEVE' FAILING WHICH, SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICE R TO RE-OPEN ASSESSMENTS ON THE BASIS OF 'MERE CHANGE OF OPINION', WHICH CANNOT BE PER SE REASON TO REOPEN. A REASSESSMENT HAS TO BE BASED ON FULFILMENT OF CERTA IN PRE-CONDITION AND IF THE CONCEPT OF 'CHANGE OF OPINION' IS REMOVED, AS WAS C ONTENDED ON BEHALF OF THE DEPARTMENT BEFORE HON'BLE SUPREME COURT, IN THE GAR B OF RE-OPENING THE ASSESSMENT, REVIEW WOULD TAKE PLACE WHICH IS NOT PE RMISSIBLE UNDER SCHEME OF REASSESSMENT UNDER THE INCOME TAX ACT. THEIR LORDSH IPS HAVE OBSERVED THAT 'ONE MUST TREAT THE CONCEPT OF 'CHANGE OF OPINION' AS AN IN-BUILT TEST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFICER' AND, THEREFORE, EVE N AFTER 1 ST APRIL 1989N' ASSESSING OFFICER HAS POWER TO REOPEN, PROVIDED THERE IS 'TAN GIBLE MATERIAL' TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT'. AS REGARDS THE QUESTION OF INTEREST DISALLOWANCE, ALL THE RELEVANT FACTS WERE BEFORE THE ASSESSING OFFICER, SPECIFIC ISSUED WERE RAISED DURING THE ORI GINAL ASSESSMENT PROCEEDINGS AND THE SUBMISSIONS MADE BY THE ASSESSEE PLACED ON RECO RD, AND YET THE ASSESSING OFFICER DECIDED NOT TO MAKE ANY DISALLOWANCE. THERE WERE NO NEW FACTS BEFORE THE ITA NO.4053/DEL/2014 4 ASSESSING OFFICER WHICH COULD JUSTIFY THE REOPENING . ON THESE FACTS, IT WAS NOTHING MORE THAN CHANGE OF MIND BY THE ASSESSING OFFICER, AND A REOPENING OF ASSESSMENT ON THE BASIS OF CHANGE OF OPINION, IN VIEW OF HON'B LE SUPREME COURT'S JUDGMENT IN KELVINATOR'S CASE (SUPRA), IS NOT PERMISSIBLE IN LA W. AS FOR THE SECOND REASON, WE HAVE NOTED THAT IT IS TAX NEUTRAL AND, UNLESS THE C ONDITION OF SATISFACTION ABOUT INCOME HAVING ESCAPED ASSESSMENT IS SATISFIED, THER E CANNOT BE ANY REOPENING OF ASSESSMENT. THE FINDING OF INCOME HAVING ESCAPED AS SESSMENT IS A PRECONDITION FOR REOPENING THE ASSESSMENT.' HON'BLE BOMBAY HIGH COUR T, IN THE CASE OF PRASHANT S. JOSHI V. ITO (230 CTR 232) HAS OBSERVED: 'THE AO MU ST HAVE REASONS TO BELIEVE THAT SUCH IS THE CASE (I.E. ANY INCOME CHARGEABLE T O TAX HAS ESCAPED ASSESSMENT FOR A PARTICULAR YEAR) BEFORE HE PROCEEDS TO ISSUE NOTICE UNDER S. 147' AND THAT 'THE REASONS WHICH ARE RECORDED BY THE AO ARE THE ONLY R EASONS WHICH CAN BE CONSIDERED WHEN FORMATION. CLEARLY THIS CONDITION IS NOT SATIS FIED. IN VIEW OF THESE DISCUSSIONS, BOTH THE GROUNDS OF REOPENING THE ASSESSMENT ARE NO T SUSTAINABLE IN LAW. WE, THEREFORE, QUASH THE REASSESSMENT PROCEEDINGS. 10. AS THE REASSESSMENT PROCEEDINGS ARE QUASHED, TH E CORRECTNESS OF ADDITIONS MADE IN THE COURSE OF REASSESSMENT PROCEEDINGS IS ENTIRE AN ACADEMIC QUESTION. ALL OTHER GROUNDS OF APPEAL DEAL WITH THOSE ADDITIONS AND, TH EREFORE, ALL THESE GROUNDS OF APPEAL ARE DISMISSED AS INFRUCTUOUS. 7. ALSO THE RELIANCE HAS BEEN PLACED BY THE LEARNED COUNSEL FOR THE ASSESSEE, SHRI VED JAIN, ADVOCATE UPON THE DECISION OF CIT-V VS. ORIENT CRAFT LTD. (SUPRA) RENDERED BY THE HONBLE DELHI HI GH COURT AND THE RELEVANT PART IS REPRODUCED HEREINBELOW: THERE WAS NO FRESH MATERIAL WHICH CAME TO THE NOTI CE OF THE ASSESSING OFFICER AFTER THE ORIGINAL RETURN WAS PROCESSED UND ER SECTION 143(1) AND HAVING REGARD TO THE ORDERS OF THE TRIBUNAL (SUPRA) AND THE INSTRUCTION OF THE CBDT DATED 23 RD FEBRUARY, 1998 REGARDING THE TREATMENT TO BE GIVEN TO THE PREMIUM RECEIVED ON TRANSFER OF QUOTAS, THERE W AS NO ESCAPEMENT OF INCOME AND THUS THE NOTICE WAS WITHOUT JURISDICTION . 8. THE SLP FILED IN THE SAID CASE HAS BEEN DISMISSE D BY THE HONBLE SUPREME COURT AS MENTIONED HEREINABOVE. 9. IN THE CIRCUMSTANCES AND FACTS OF THE CASE, WE A RE OF THE VIEW THAT THERE IS NO ESCAPEMENT OF INCOME AND NOTICE ISSUED IS WITHOUT JURISDICTION ITA NO.4053/DEL/2014 5 AND THE AO DOES NOT ACQUIRE ANY JURISDICTION TO ASS ESS OR RE-ASSESS THE ISSUE U/S.147/148 OF THE ACT, AND THEREFORE, THE ASSESSME NT/RE-ASSESSMENT SO MADE IS DIRECTED TO BE QUASHED. 10. SINCE THE ASSESSEE SUCCEEDS ON LEGAL ISSUE, TH EREFORE ISSUE ON MERIT BECOMES ACADEMIC IN NATURE. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY 6 TH APRIL, 2017 SD/- SD/- (I.C. SUDHIR) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 06/04/2017 PRABHAT KUMAR KESARWANI, SR.P.S. COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(APPEALS) 5.DR: ITAT ASSTT. REGISTRAR, ITAT, NEW DELHI