GLAXO SMITH KLINE PHARMACEUTICALS LIMITED, MUMBAI V. ACIT -6(3), MUMBAI

ITA 420/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4198 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: G
• Next Hearing Date: 07-04-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 17-01-2014
• Court: TRIBUNAL
• Department Lawyers: AMRITA MISRA
• Assessee Lawyers: VALLABH GOKHALEAR
• Keywords: Rectification of order; Wrong claim; Reassessment proceedings
• Section: 143(3); 148; 154

Judgement Text

INCOME TAX APPELLATE TRIBUNAL,MUMBAI- G,BENCH , , BEFORE S/SHJOGINDER SINGH,JUDICIAL MEMBER & RAJENDRA,ACCOUNTANT MEMBER / ITA NOS./420/MUM/2014 & 3369/MUM/2015 , / AY.2005-06 GLAXO SMITHKLINE PHARMACEUTICALS LIMITED GSK HOUSE, DR. ANNIE BESANT ROAD WORLI,MUMBAI--400 030. PAN:AAACG 4414 B VS. ACIT-6(3), 522, 5 TH FLOOR AAYAKAR BHAVAN, MK ROAD MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT) REVENUE BY: MS. AMRITA MISRA (DR) ASSESSEE BY: S/SHRI NIRAJ SHETH & VALLABH GOKHALE(AR) / DATE OF HEARING: 07.04.2016 / DATE OF PRONOUNCEMENT: 07.04.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA A.M. - CHALLENGING THE ORDERS DT.18.3.2015 & 11.11.13 OF C IT(A)-13 AND CIT(A)-12 RESPECTIVELY, MUMBAI,THE ASSESSEE HAS FILED THE ABOVE MENTIONED APPEALS RAISING VARIOUS GROUNDS.AS BOTH THE APPEALS ARE FOR THE SAME AY.S,SO WE ARE AD JUDICATING THEM BY PASSING A SINGLE ORDER. ITA NO.3369/MUM/2015: 2. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF MANUFAC TURING, TRADING AND DISTRIBUTION OF PHARMACEUTICALS, DRUGS AND CHEMICALS FILED ITS RETU RN OF INCOME ON 31.10.2005,DECLARING TOTAL INCOME OF RS.323.80 CRORES.THE ASSESSING OFFICER(AO ) COMPLETED THE ASSESSMENT U/S. 143(3) OF THE ACT,ON 29.12.2008,DETERMINING THE INCOME OF THE ASSESSEE AT RS.359.62 CRORES.LATER ON ,THE CASE WAS REOPENED BY WAY OF ISSUE OF NOTICE U/ S. 148 OF THE ACT ON 27.3.2012 AFTER RECORDING THE REASONS FOR RE-OPENING.THE AO COMPLET ED THE ASSESSMENT U/S. 143(3) R.W.S. 147 OF THE ACT ON 7.2.2013 COMPUTING THE INCOME AT RS.3 71.08 CRORES. 3. AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE PREFERR ED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA)AND CHALLENGED THE REOPENING. IT WAS STATED THAT REOPENING WAS MADE AFTER FOUR YEARS,THAT THERE WAS NO FAILURE ON PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT.HOWEVER,TH E FAA REFERRED TO THE CASES OF PHOOL CHAND BAJRANG LAL(69 TAXMAN 627); ROSY BLUE(INDIA) LTD.(227 TAXMAN 89); INDIAN HUME PIPE CO. LTD. (204 TAXMAN 347) AND UPHELD THE REOPE NING. 4. BEFORE US, THE AUTHORISED REPRESENTATIVE (AR) STATE D THAT THERE WAS NO FAILURE ON PART OF THE ASSESSEE TO DISCLOSE MATERIAL FACTS, THAT REOPE NING BEYOND FOUR YEARS WAS BAD IN LAW.HE REFERRED TO THE CASES OF HINDUSTAN LEVER LTD. (268 ITR339) AND BHOR INDUSTRIES LTD.(267 ITR161).THE DEPARTMENTAL REPRESENTATIVE (DR) LEFT T HE ISSUE TO THE DISCRETION OF THE BENCH. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.THE UNDISPUTED FACTS OF THE CASE ARE THAT THE CASE WAS RE-OPENED BEYOND A PERIOD OF FOUR YEARS, THAT THE AO WHILE RECORDING THE REASONS HAD NOT MENTIONED THAT THE FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY THE MATERIAL FACTS HAS LED TO ESCAPEMENT OF INCOME.AS PER THE ESTABLISHED LAW THIS 420/14 &3369/15-GLAXO SMITHKLINE 2 BASIC FACT HAS TO BE MENTIONED BY THE AO WHENEVER A N ASSESSMENT IS REOPENED AFTER A PERIOD OF FOUR YEARS. WE WOULD LIKE TO REPRODUCE THE RELEV ANT PORTION OF THE JUDGMNT OF CASE OF TITANOR COMPONENTS LTD. (343ITR183) OF THE HON'BLE BOMBAY HIGH COURT AND SAME READS AS UNDER : HAVING REGARD TO THE PURPOSE OF S. 147, THE POWER C ONFERRED BY S. 147 DOES NOT PROVIDE A FRESH OPPORTUNITY TO THE AO TO CORRECT AN INCORRECT ASSESSMENT MADE EARLIER UNLESS THE MISTAKE IN THE ASSESSMENT SO MADE IS THE RESULT OF A FAILURE OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS NECESSARY FOR ASSESSMEN T. INDEED, WHERE THE ASSESSEE HAS FULLY DISCLOSED ALL THE MATERIAL FACTS, IT IS NOT OPEN FO R THE AO TO REOPEN THE ASSESSMENT ON THE GROUND THAT THERE IS A MISTAKE IN ASSESSMENT. MOREO VER, IT IS NECESSARY FOR THE AO TO FIRST OBSERVE WHETHER THERE IS A FAILURE TO DISCLOSE FULL Y AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT AND HAVING OBSERVED THAT THERE IS SUCH A FAILURE TO PROCEED UNDER S. 147. IT MUST FOLLOW THAT WHERE THE AO DOES NOT RECORD SUCH A FAI LURE HE WOULD NOT BE ENTITLED TO PROCEED UNDER S. 147. THE AO HAS NOT RECORDED THE FAILURE O N THE PART OF THE PETITIONER TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS NECESSARY FOR THE ASST. YR. 1997-98. WHAT IS RECORDED IS THAT THE PETITIONER HAS WRONGLY CLAIMED CERTAIN DEDUCTIO NS WHICH HE WAS NOT ENTITLED TO. THERE IS A WELL KNOWN DIFFERENCE BETWEEN A WRONG CLAIM MADE BY AN ASSESSEE AFTER DISCLOSING ALL THE TRUE AND MATERIAL FACTS AND A WRONG CLAIM MADE BY T HE ASSESSEE BY WITHHOLDING THE MATERIAL FACTS FULLY AND TRULY. IT IS ONLY IN THE LATTER CAS E THAT THE AO WOULD BE ENTITLED TO PROCEED UNDER S. 147. RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT,WE HOLD T HAT THE REOPENING WAS NOT VALID.GROUND NO.1 IS DECIDED IN FAVOUR OF THE ASSESSEE.AS WE HAV E HELD THAT RE-OPENING WAS INVALID SO WE ARE NOT ADJUDICATING THE OTHER GROUNDS OF APPEAL. ITA NO.420/MUM/2014: 6. THE APPEAL IN THIS MATTER IS ARISING OUT OF THE ORD ER PASSED U/S. 154 ON 11.3.2003.THE ASSESSEE HAD FILED A LETTER ON 6.3.2013 AND HAS REQ UESTED THE AO TO RECTIFY CERTAIN MISTAKES APPEARING IN THE ORDER PASSED U/S.143(3) R.W.S. 147 ON 7.2.2013. AGAINST THE RECTIFICATION ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA,WHO DISMISSED THE APPEAL. 7. DURING THE COURSE OF HEARING BEFORE US,THE AR STATE D THAT REOPENING WAS NOT VALID SO THE ORDER PASSED BY THE AO IN PURSUANCE OF THE ORIGINAL ORDER WOULD NOT SURVIVE. 8. WHILE DECIDING THE EARLIER APPEAL,WE HAVE HELD THAT THE REASSESSMENT PROCEEDINGS WERE NOT VALID.THEREFORE THE SUBSEQUENT ORDER PASSED BY THE AO WOULD ALSO BECOME INVALID. THE APPEAL FILED BY THE ASSESSEE IS NOT BEING ADJUDICAT ED,TREATING IT INFRUCTUOUS. AS A RESULT,APPEAL FILED BY THE ASSESSEE IN ITA N O.3369/M/2015 STANDS ALLOWED AND THE APPEAL IN ITA NO.420/MUM/2014 IS TREATED AS INFRUCTUOUS. . 3369/M/2015 420/MUM/2014 ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH ,APRIL, 2016. 07 , 2016 SD/- SD/- /JOGINDER SINGH) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 07.04.2016. JV.SR.PS. 420/14 &3369/15-GLAXO SMITHKLINE 3 / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , A , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.