DCIT, New Delhi V. M/s. R.C. Sood & Company Ltd, New Delhi

ITA 4083/DEL/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69463 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 21-10-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 08-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VEENA JOSHI
• Keywords: Reopening of assessment; Search and seizure; Revised return; Reassessment proceedings
• Section: 143(3); 244A; 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DELHI) BEFORE SHRI G. D. AGGARWAL, HONBLE VICE PRESIDENT AND SHRI U. B. S. BEDI, JUDICIAL MEMBER ITA NO. 4083 / DEL/ 2011 (ASSESSMENT YEAR 2003-04) DCIT, CENTRAL CIRCLE 6, VS. M/S. R. C. SOOD & CO. P. LTD., NEW DELHI S-1, AMERICAN PLAZA, INTERNATIONAL TRADE TOWER, NEHRU PLACE, NEW DELHI-19 PAN : AAACR1540F (APPELLANTS) (RESPONDENTS) DEPARTMENT BY: SMT. VEENA JOSHI, CIT, DR ASSESSEE BY : SHRI PRADEEP DINODIA, AR ORDER PER U B S BEDI, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY LD. CIT(A) I, NEW DELHI DATED 08.07.2011 RELEVANT TO AS SESSMENT YEAR 2003-04 WHEREBY DEPARTMENT HAS RAISED TWO EFFECTIVE GROUNDS NO.2 & 3, WHICH READ AS UNDER: 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE ACTIO N OF THE A.O. IN INITIATING REASSESSMENT PROCEEDING 147 OF THE I. T. ACT, 1961, IS UNJUST, ARBITRARY AND UNLAWFUL AND CONSEQUENTLY DECIDING TH E ISSUE IN FAVOUR OF THE ASSESSEE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING HT ADDITION O F RS.,2,87,27,105/- MADE BY THE A.O. ON ACCOUNT OF PROVISION FOR UNFIN ISHED WORK. I.T.A. NOS.4083 /DEL/2011 2 2. AS REGARDS THE FIRST ISSUE, THE FACTS INDICATED IN PARA 3.1 OF THE ORDER OF LD. CIT(A) ARE AS UNDER: DURING THE ASSESSMENT PROCEEDINGS, IT CAME TO THE NOTICE THAT HE ASSESSEE HAS MADE PROVISION FOR UNFINISHED WORK AMO UNTING TO RS.2,84,356,379/- & AS PER NOTES OF ACCOUNTS ATTA CHED TO THE AUDITOR REPORTS AND THIS PROVISION HAD BEEN MADE ON ESTIMATED BASIS. THE PROVISIONS OF I.T. ACT PROVIDES IN THIS REGARD THAT A PROVISION MADE ON THE ACCOUNTS FOR AN ACCRUED OR KNOWN LIABIL ITY IS AN ADMISSIBLE DEDUCTION, WHILE OTHER PROVISION MADE ON ESTIMATE BASIS DO NOT QUALIFY FOR DEDUCTIONS. THEREFORE, THE SAID PROVISIONS FOR UNFINISHED WORK ON ESTIMATE BASIS SHOULD HAVE BEEN ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. IN VIEW OF THESE FAC TS IT WAS FOUND THAT INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSED. IN ACCORDANCE WITH EXPLANATION 2(C) TO SECOND PROVISO TO SEC. 147 WHEREIN IT HAS BEEN CLEARLY STATED THAT IN A CASE WHERE AN ASSESSM ENT HAS BEEN MADE BUT INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSE D THE ASSESSMENT, AS IN THE CASE OF THE ASSESSEE, SHALL ALSO BE DEEME D TO BE A CASE WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. A CCORDINGLY, THE RE-ASSESSMENT PROCEEDINGS U/S 147 IN THE CASE OF TH E ASSESSEE FOR ASSESSMENT YEAR 2003-04 WAS INITIATED. 3. THE ASSESSEE TOOK UP THE MATTER IN APPEAL AND BE FORE THE FIRST APPELLATE AUTHORITY; THE ASSESSEE STATED THAT THE ASSESSEE CO MPANY HAS BEEN FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. IT HAS ALSO BEEN MENTIONED IN SCHEDULE (19) ATTACHED TO AND FORMING PART OF THE BALANCE SH EET FOR THE YEAR UNDER CONSIDERATION, WHILE SPECIFYING ACCOUNTING POLICY I N POINT NO.A.1 THAT; IN RESPECT OF LAND AND REAL ESTATE DEVELOPMENT ACTI VITIES OF THE COMPANY, A PROJECT OR ITS PART IS TREATED AS COMPLE TE AS ON THE DATE ON WHICH THE FLATS/SHOPS/PLOTS ARE OFFERED FOR POSSESS ION. THE COST INCURRED TILL SUCH DATE AS ALSO THE COSTS TO BE INC URRED THEREAFTER FOR COMPLETION OF THE PROJECT, ON ITS PART, IN TERMS OF THE REQUIREMENT OF GOVT. AUTHORITIES AND HE TERMS OF OFFER MADE TO THE PROSPECTIVE OWNERS FORM PART OF THE PROJECT COST WHICH HAS BEEN TAKEN ON THE BASIS OF EVALUATION MADE BY TECHNICAL EXPERTS. THE COMPANY HAS ALSO MENTIONED IN THE SAME SCHEDUL E UNDER THE HEADING NOTES TO ACCOUNTS VIDE PAR NO. B 9 THAT THERE ARE CERTAIN I.T.A. NOS.4083 /DEL/2011 3 EXPENSES TO BE INCURRED ON UNFINISHED WORK TO COMPL ETE PROJECTS AMOUNTING TO RS.2,88,53,538.69 AS ON 31.03.2003. T HIS AMOUNT IS PART OF THE PROVISIONS SHOWN IN THE BALANCE SHEET. THE ASSESSMENT U/S 143(3) WAS COMPLETED BY THE A.O . AFTER EXAMINING ALL THESE INFORMATION IN THIS REGARD. TH ESE EXPENSES WERE CLAIMED BY THE ASSESSEE COMPANY IN PURSUANT TO RECO GNIZED ACCOUNTING STANDARDS (AS-7)) ISSUED BY INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA BEING CONSISTENTLY FOLLOWED WH ILE PREPARING THE ACCOUNTS AND DULY ACCEPTED BY THE REVENUE AUTHORITI ES. DURING THE ASSESSMENT PROCEEDINGS U/S 153A / 143(3 ) OF I. T. ACT, 1961, THE A.O. ISSUED THE QUESTIONNAIRE DATED 19/08/2008 AND ASKED VARIOUS DETAILS TO SUBMIT. 4. LD. CIT(A) WHILE CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN PARA 3.3 OF HIS ORDER, HAS CONCLUDED TO DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE AS PER PARA 3.4 AND THESE PARAS ARE REPRODUCED AS U NDER: 3.3 THE SUBMISSION GIVEN BY THE ASSESSEE HAS BEEN PERUSED AND IT IS SEEN THAT THE REASSESSMENT HAS BEEN FRAMED AFTER TH E PERIOD OF MORE THAN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR TO WHICH THE CASE PERTAINS. IN SUCH A SITUATION THE A.O. HAS TO ESTA BLISH THAT THE OMISSION AND THE FAILURE HAS BEEN ON THE PART OF TH E ASSESSEE. NO SUCH FINDING HAS BEEN GIVEN BY THE A.O. IN FACT, THE AS SESSEE HAS DISCLOSED THE ENTIRE DETAILS IN THE DOCUMENTS FILED ALONG WIT H THE RETURNED OF INCOME. IN SUCH A SITUATION THERE HAS BEEN O FAILU RE ON THE PART OF THE ASSESSEE TO DISCLOSE THE NECESSARY DETAILS. THE FO LLOWING CASES WHICH ARE CITED BELOW GO TO SHOW THAT WHERE THE ASSESSEE HAS BEEN MADE A FULL AND TRUE DISCLOSURE OF FACTS THE CASE CANNOT B E REOPENED AFTER THE PERIOD OF FOUR YEARS:- I) IT HAS BEEN HELD THAT IN THE CASE OF 3I INFOTECH LTD. VS ASSTT. CIT (2010) 192 TAXMAN 137 / 235 CTR 240 (BOM.) WHERE, ON CONSIDERATION OF MATERIAL ON RECORD, ONE VIEW IS CONCLUSIVELY TAKEN BY A.O., IT WOULD NOT BE OPEN TO HIM TO REOPEN ASSESSMENT BASED ON VERY SAME MATERIAL TAKING ANOTH ER VIEW AND IN SUCH A CASE IT COULD NOT BE HELD THAT ASSESSEE FAIL ED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS SO AS TO JUSTIFY REOPE NING OF ASSESSMENT AFTER EXPIRY OF FOUR YEARS FROM RELEVANT ASSESSMENT YEAR (ASSESSMENT YEAR 2002-03). I.T.A. NOS.4083 /DEL/2011 4 II) IN THE CASE OF MIHIR TEXTILES LTD. VS JT. CIT 2 010 TAX LR 417 (GUJ.) THE COURT HAS OBSERVED THAT; WHERE ADMITTEDLY AUDITED BOOKS OF ACCOUNT LIKE PROF IT AND LOSS ACCOUNT, COMPLETED U/S 143(3), IT COULD NOT BE HELD THAT THERE WAS NON-DISCLOSURE OF PRIMARY FACTS SO AS TO JUSTIFY RE ASSESSMENT AFTER EXPIRY OF FOUR YEARS FROM RELEVANT ASSESSMENT YEAR. III) SIMILARLY IN THE CASE OF BHAVESH DEVELOPERS VS A.O. (2010) 188 TAXMAN 123 / 229 CTR 160 (BOM.) IT WAS HELD: WHERE EX FACIE, REASONS FOR REOPENING ASSESSMENT W HICH HAD BEEN DISCLOSED TO ASSESSEE SHOWED THAT INFERENCE THAT IN COME HAD ESCAPED ASSESSMENT WAS BASED ON DISCLOSURE MADE BY ASSESSEE ITSELF, IT COULD NOT BE SAID THAT THERE WAS FAILURE ON PART OF ASSES SEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSE SSMENT SO AS TO JUSTIFY REOPENING OF ASSESSMENT AFTER EXPIRY OF FOUR YEAS F ROM RELEVANT ASSESSMENT YEAR (ASSESSMENT YEAR 2002-03). IV) IT HAS ALSO BEEN HELD THAT IN THE CASE OF ARTHU R ANDERSON & CO. VS. ACIT (2010) 190 TAXMAN 279 / 231 CTR 422 / 324 ITR 240 (BOM.) THAT: WHERE IN NOTES TO COMPUTATION OF INCOME, IT WAS DI SCLOSED THAT INTEREST INCOME REPRESENTED DIFFERENCE BETWEEN INTE REST RECEIVED U/S 244 A AND INTEREST PAID U/S 220 AND DURING ASSESSME NT PROCEEDINGS, A.O. RAIDED QUERY REGARDING SAID INCOME AND, AFTER CONSIDERING ASSESSEES REPLY, PASSED AN ASSESSMENT ORDER, REOPE NING OF ASSESSMENT ON THE GROUND THAT ENTIRE INTEREST RECEI VED U/S 244A WAS REQUIRED TO BE OFFERED FOR TAXATION FOUR YEARS AFTE R EXPIRY OF RELEVANT ASSESSMENT YEAR WAS NOT JUSTIFIED (2003-04). V) IN THE CASE OF CIT VS. STEEL TUBES OF INDIA LTD. (2010) 326 ITR 46 (MP) THE COURT OBSERVED THAT: WHERE ASSESSEE HAD FILED REVISED RETURN BEFORE ASS ESSMENT PROCEEDING REDUCING LOSS, IT COULD NOT BE SAID THAT THERE WAS NON- DISCLOSURE OF MATERIAL FACTS SO AS TO JUSTIFY REASS ESSMENT AFTER EXPIRY OF FOUR YEARS FORM RELEVANT ASSESSMENT YEAR (ASSESS MENT YEARS 1997- 98, 1998-99). VI) SIMILAR VIEW HAS BEEN EXPRESSED BY THE HIGH COU RT IN THE FOLLOWING DECISIONS: I. INDUCTO ISPAT ALLOYS LTD. VS ACIT (OSD) (2010) 3 20 ITR 458 (GUJ.). II. CIT VS GOETZE (INDIA) LTD. (2010) 321 ITR 431 / 229 CTR 167 (DELHI). I.T.A. NOS.4083 /DEL/2011 5 3.4 IN THIS CASE, THE ASSESSEE HAD DISCLOSED HT DET AILS OF PROVISION MADE BY ITS. THEREFORE, RELYING ON THE ABOVE DECIS IONS AND FACTS OF THE CASE THE FIRST GROUND IS DECIDED IN FAVOUR OF T HE ASSESSEE. 5. AGGRIEVED BY THIS ORDER OF LD. CIT(A), THE DEPAR TMENT HAS COME UP IN APPEAL AND WHILE RELYING UPON THE PLEAS RAISED I N THE GROUNDS OF APPEAL; IT WAS PLEADED FOR SETTING ASIDE THE ORDER OF LD. CIT( A) AND RESTORING THAT OF THE A.O. ON THIS ISSUE. IT WAS FURTHER SUBMITTED T HAT REOPENING OF ASSESSMENT WAS INITIATED AS THERE WAS UNDER ASSESSMENT TO THE EXTENT OF RS.2,87,27,105/- CLAIMED BY THE ASSESSEE ON ACCOUNT OF PROVISIONS F OR UNFINISHED WORK AND REASSESSMENT PROCEEDINGS HAVE BEEN INITIATED WITHIN 6 YEAS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, THEREFORE, IT IS JUST IFIED. IT WAS ALSO SUBMITTED THAT IT IS A CLEAR CASE OF UNDER ASSESSMENT TO THE EXTENT OF THE AMOUNT MENTIONED ABOVE. THEREFORE, REASSESSMENT PROCEEDIN G WAS RIGHTLY INITIATED BY THE A.O. AND ACCORDINGLY REASSESSMENT HAS JUSTIF IABLY BEEN FRAMED AND LD. CIT(A) WAS NOT JUSTIFIED IN DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE WHEN IN THE COURSE OF REASSESSMENT, THE A.O. HAS AU THORITY TO INITIATE REASSESSMENT PROCEEDINGS WHICH HAVE BEEN CORRECTLY INITIATED AND REASSESSMENT HAS BEEN FRAMED. THEREFORE, THE ORDER OF LD. CIT(A) BEING NOT LEGALLY CORRECT, DESERVE TO BE REVERED AND THAT OF THE A.O. REQUIRES TO BE RESTORED. IT WAS PLEADED FOR RESTORATION OF THE OR DER OF A.O. WITH RESPECT TO THIS ISSUE. 6. LD. COUNSEL FOR THE ASSESSEE STRONGLY OBJECTED T O THE PLEA RAISED BY LD. D.R. AND FURTHER SUBMITTED THAT HE ORIGINAL ASSESSM ENT IN THIS CASE HAS BEEN FRAMED U/S 143(3) WHEN THERE WAS SPECIFIC QUERY WIT H REGARD TO THE ISSUE RAISED IN THE REASSESSMENT PROCEEDINGS AS QUESTIONN AIRE DATED 29.09.2005 WAS ISSUED, WHICH WAS REPLIED TO BY THE ASSESSEE ON 16.11.2005 ALONG WITH DETAILS OF THE RELATED PROVISIONS AND THE A.O. PASS ED THE ORDER ON 21.02.2006 I.T.A. NOS.4083 /DEL/2011 6 U/S 143(3) OF THE ACT AND SINCE THE REASONS RECORDE D FOR REOPENING OF THE ASSESSMENT, THE A.O. DID NOT COMPLY WITH THE REQUIR EMENT THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO FULLY AND TR ULY DISCLOSE ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT FOR THAT YEAR, WHICH M AKES TO INITIATE THE REASSESSMENT PROCEEDINGS TO BE BAD IN LAW. SO, RE LYING UPON VARIOUS CASE LAW AS SUBMITTED BEFORE LD. CIT(A), FURTHER RELIANC E WAS PLACED ON THE FOLLOWING CASE LAW:- I) CIT VS LIVING MEDIA INDIA LD. 2013 TIOL 413 H.C . DEL-IT II) NORTHERN EXIM (P) LTD. VS DCIT, (2013) 357 ITR (DEL.) 586 III) NEWSOFT COP (I) PVT. LTD. DCIT (2013) 357 ITR (DEL .) 510 IV) SELECT VOCATIONS (P) LTD. 2013-TIOL-619-H.C.-DEL-IT V) BHARAT SAMACHAR NIGAM LTD. (2013) 355 ITR 188 (DEL. ) 6.1 IT WAS THUS PLEADED THAT LD. CIT(A) HAS TAKEN C ORRECT VIEW OF THE MATTER WHILE CONSIDERING RELEVANT PROVISIONS OF LAW AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THEREFORE, IT WAS FURTHER SUBMITTED THAT THE ORDER OF LD. CIT(A) BEING LEGALLY AND FACTUALLY CORRECT, NEE DS FURTHER CONFIRMATION WHICH SHOULD BE CONFIRMED. 7. WE HAVE HEARD BOTH THE SIDES, CONSIDERED THE MAT ERIAL ON RECORD AS WELL AS THE PRECEDENTS RELIED UPON BY LD. CIT(A) AN D FURTHER CITATIONS RELIED UPON BY THE LD. A.R. OF THE ASSESSEE AND FIND THAT LD. CIT(A) HAS PASSED WELL REASONED AND ELABORATE ORDER DISCUSSING EACH A ND EVERY ASPECT OF THE MATTER IN DETAIL. SINCE, THERE IS NO MENTION ABOUT ASSESSEES HAVING FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR THE ASSESSMENT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, AS PROVIDED IN FIRST PROVISO TO SECTION 147, THEREFORE, IN OUR CONSIDERED VIEW, REOPENING O F THE ASSESSMENT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE IS NOT J USTIFIED AND LD. CIT(A)S ACTION IN DECIDING THE ISSUE IN FAVOUR OF THE ASSES SEE IS PROPER AND LEGALLY CORRECT. AS SUCH, WHILE CONCURRING WITH THE FINDIN GS OF LD. CIT(A) ON THIS I.T.A. NOS.4083 /DEL/2011 7 ISSUE OF INITIATION OF REASSESSMENT PROCEEDINGS, WE UPHOLD HIS ORDER AND DISMISS THE APPEAL OF THE REVENUE ON THIS ISSUE. 7.1 SINCE WE ARE UPHOLDING THE ORDER OF LD. CIT(A) ON THE POINT OF INITIATION OF REASSESSMENT PROCEEDING BY CONCURRING WITH THE FINDING THAT SUCH INITIATION CANNOT BE HELD TO BE PROPER AND JUS TIFIED, THEREFORE, WE DO NOT THINK IT APPROPRIATE TO DEAL WITH THE SECOND ISSUE RAISED IN THE APPEAL OF THE REVENUE. 8. AS A RESULT, APPEAL OF THE REVENUE IS DISMISSED. 9. ORDER PRONOUNCED IN THE OPEN COURT ON 25.10.2013 . SD./- SD./- (G. D. AGARWAL) (U.B.S.BEDI) VICE PRESIDENT JUDICIAL MEMBER DATE: 25 TH OCT., 2013. SP. COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A)-XXV, NEW DELHI AR, ITAT, 5. CIT(ITAT), NEW DELHI NEW DELHI