TAMILNADU PETRO PRODUCTS LIMITED, Chennai V. DCIT (LTU), Chennai

ITA 424/CHNY/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1979 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 06-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D ROHINI
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Reopening of assessment; Tangible material
• Section: 143(3); 115JB; 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , , ' # BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.424/CHNY/2018 & '& / ASSESSMENT YEAR : 2005-06 M/S TAMILNADU PETROPRODUCTS LTD., MANALI EXPRESS HIGHWAY, MANALI, CHENNAI - 600 068. PAN : AAACT 1295 M V. THE DEPUTY COMMISSIONER OF INCOME TAX (LTU), CHENNAI - 600 034. ()*/ APPELLANT) (+,)*/ RESPONDENT) )* - . / APPELLANT BY : SH. R. VIJAYARAGHAVAN, ADVOCATE +,)* - . / RESPONDENT BY : MS. D. ROHINI, JCIT / - 0' / DATE OF HEARING : 03.10.2018 12' - 0' / DATE OF PRONOUNCEMENT : 12.11.2018 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -17, CHENN AI, DATED 23.11.2017 AND PERTAINS TO ASSESSMENT YEAR 2005-06. 2. THE FIRST ISSUE ARISES FOR CONSIDERATION IS VALI DITY OF REOPENING OF ASSESSMENT. 2 I.T.A. NO.424/CHNY/18 3. SH. R. VIJAYARAGHAVAN, THE LD.COUNSEL FOR THE AS SESSEE, SUBMITTED THAT THE ASSESSING OFFICER BY ISSUING A N OTICE DATED 17.03.2010 UNDER SECTION 148 OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') REOPENED THE ASSESSMENT. ACCORDING TO T HE LD. COUNSEL, THE ASSESSMENT WAS REOPENED BEYOND THE PERIOD OF FO UR YEARS. IT IS NOT THE CASE OF THE REVENUE, ACCORDING TO THE LD. C OUNSEL, THAT THERE WAS ANY NEGLIGENCE ON THE PART OF THE ASSESSE E IN FURNISHING REQUIRED PARTICULARS AND MATERIAL FACTS FOR COMPLET ING THE ASSESSMENT. ACCORDING TO THE LD. COUNSEL, THIS ISS UE WAS TAKEN AS ADDITIONAL GROUND BEFORE THIS TRIBUNAL. 4. COMING TO THE MERIT OF THE APPEAL, THE LD.COUNSE L FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS REIMBURSED THE EXPENDITURE FOR TRAVELLING AND STAY TO THE TECHNICA L PERSONS FOR PROVIDING UOP CATALYST TECHNOLOGY. ACCORDING TO TH E LD. COUNSEL, THE EXPENDITURE REIMBURSED BY THE ASSESSEE IS NOT S UBJECT TO INCOME-TAX, THEREFORE, THE ASSESSEE IS NOT LIABLE T O DEDUCT TAX UNDER SECTION 195 OF THE ACT. HENCE, ACCORDING TO THE LD . COUNSEL, EVEN ON MERIT, THE ASSESSEE HAS A GOOD CASE. 3 I.T.A. NO.424/CHNY/18 5. ON THE CONTRARY, MS. D. ROHINI, THE LD. DEPARTME NTAL REPRESENTATIVE, SUBMITTED THAT MERELY BECAUSE THE A SSESSING OFFICER COULD HAVE WITH DUE DILIGENCE DISCOVERED TH E FACTS ON THE BASIS OF THE MATERIAL FILED BY THE ASSESSEE, THAT W OULD NOT NECESSARILY AMOUNT TO DISCLOSURE. THEREFORE, ACCOR DING TO THE LD. D.R., THE CIT(APPEALS) HAS RIGHTLY FOUND THAT THE A SSESSMENT WAS VALIDLY REOPENED BY THE ASSESSING OFFICER. 6. COMING TO THE MERIT OF THE APPEAL, THE LD. DEPAR TMENTAL REPRESENTATIVE POINTED OUT THAT THE SO-CALLED TRAVE LLING AND STAY EXPENSES WERE INCURRED IN RESPECT OF TECHNICAL SERV ICES, THEREFORE, ALL THE EXPENDITURES RELATING TO TECHNICAL SERVICES , INCLUDING TRAVEL AND STAY, HAVE TO BE CONSTRUED AS FEE FOR TECHNICAL SERVICES, HENCE, THE ASSESSEE IS LIABLE TO DEDUCT TAX UNDER SECTION 195 OF THE ACT. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESS EE FILED RETURN OF INCOME ON 29.10.2005 DECLARING A LOSS OF 234.76 LAKHS UNDER THE NORMAL PROVISIONS OF INCOME-TAX ACT AND BOOK PR OFIT OF 724.66 LAKHS UNDER SECTION 115JB OF THE ACT. THE ASSESSME NT WAS 4 I.T.A. NO.424/CHNY/18 COMPLETED UNDER SECTION 143(3) OF THE ACT BY AN ORD ER DATED 11.12.2008. SUBSEQUENTLY, THE ASSESSING OFFICER ON THE BASIS OF THE MATERIAL ALREADY AVAILABLE ON RECORD, FOUND THA T THE ASSESSEE HAS NOT DEDUCTED TAX WITH REGARD TO REIMBURSEMENT O F TRAVELLING AND STAY EXPENSES. 8. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 147 OF THE ACT. THE FIRST PROVISO TO SECTION 147 C LEARLY SAYS THAT NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER EXPI RY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY THE REA SON OF FAILURE ON THE PART OF THE ASSESSEE TO FILE THE RETURN OF I NCOME OR TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARILY REQUIRED FOR ASSESSMENT. IN THIS CASE, THE ASSESSEE HAS FILED A LL THE DETAILS AND MATERIAL FACTS REQUIRED FOR COMPLETING THE ASSESSME NT. IT IS NOT THE CASE OF THE REVENUE THAT THERE WAS ANY NEGLIGENCE O N THE PART OF THE ASSESSEE IN FURNISHING REQUIRED PARTICULARS AND MATERIAL FACTS BEFORE THE ASSESSING OFFICER. 9. THE CLAIM OF THE LD. D.R. BEFORE THIS TRIBUNAL I S THAT THE ASSESSING OFFICER COULD HAVE WITH DUE DILIGENCE DIS COVERED THE 5 I.T.A. NO.424/CHNY/18 FACTS FROM THE MATERIAL FILED BY THE ASSESSEE, HOWE VER, THAT WOULD NOT AMOUNT TO DISCLOSURE OF ALL THE MATERIAL FACTS. THIS TRIBUNAL IS UNABLE TO ACCEPT THE CONTENTION OF THE LD. D.R. AS A TAXPAYER, THE ASSESSEE CAN FURNISH ALL THE DETAILS BEFORE THE ASS ESSING OFFICER. IT IS FOR THE ASSESSING OFFICER TO EXAMINE ALL THE FAC TS AND FIND OUT WHETHER THE INCOME WAS RIGHTLY DISCLOSED IN THE RET URN OF INCOME FOR TAXATION. IF FOR ANY REASON, THE ASSESSING OFFICER FINDS THAT THE INCOME WAS NOT DISCLOSED CORRECTLY FOR THE PURPOSE OF TAXATION, IT IS ALWAYS OPEN TO THE ASSESSING OFFICER TO TAKE UP THE MATTER FOR SCRUTINY AND BRING ALL THE INCOME FOR TAXATION SUBJ ECT TO OTHER CONDITIONS AND LIMITATIONS PROVIDED IN INCOME-TAX A CT. 10. IN THIS CASE, IN FACT, THE RETURN WAS TAKEN UP FOR SCRUTINY AND ASSESSMENT ORDER WAS PASSED UNDER SECTION 143(3) ON 11.12.2008. THE MADRAS HIGH COURT IN THE CASE OF TANMAC INDIA V . DCIT IN TAX CASE (APPEAL) NO.1426 OF 2007 DATED 19.12.2016, EXAMINED THE ISSUE OF REOPENING. IN THE CASE BEFORE THE MAD RAS HIGH COURT, THE ASSESSING OFFICER HAS NOT TAKEN UP THE MATTER F OR SCRUTINY. IN FACT, THE RETURN OF INCOME WAS PROCESSED UNDER SECT ION 143(1) OF THE ACT AND INTIMATION WAS ISSUED. THE ASSESSING O FFICER, IN FACT, REOPENED THE ASSESSMENT WITHIN A PERIOD OF FOUR YEA RS. EVEN IN 6 I.T.A. NO.424/CHNY/18 THAT CASE, THE MADRAS HIGH COURT FOUND THAT IN THE ABSENCE OF ANY TANGIBLE MATERIAL, THE ASSESSING OFFICER CANNOT REO PEN THE ASSESSMENT EVEN WITHIN A PERIOD OF SIX MONTHS. THE MADRAS HIGH COURT FOUND THAT PROVISIONS OF SECTION 147 AND 148 OF THE ACT ARE NOT FOR EXTENDING THE LIMITATION FOR MAKING THE ASS ESSMENT. UNLESS THE CONDITIONS FOR REOPENING THE ASSESSMENT WERE SA TISFIED, THE MADRAS HIGH COURT FOUND THAT THE ASSESSMENT CANNOT BE REOPENED. IN THIS CASE, THE ASSESSMENT WAS REOPENED BEYOND TH E PERIOD OF FOUR YEARS. THEREFORE, IT HAS TO BE ESTABLISHED TH AT THERE WAS NEGLIGENCE ON THE PART OF THE ASSESSEE IN FURNISHIN G THE MATERIAL FACTS WHICH ARE REQUIRED FOR COMPLETING THE ASSESSM ENT. THE ASSESSEE HAS FURNISHED ALL THE MATERIAL FACTS BEFOR E THE ASSESSING OFFICER. THE ASSESSING OFFICER ON THE BASIS OF VER Y SAME MATERIAL, FOUND THAT THERE WAS ESCAPEMENT OF INCOME. NO TANG IBLE MATERIAL CAME TO THE POSSESSION OF THE ASSESSING OFFICER, AF TER COMPLETION OF THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT ON 1 1.12.2018. THEREFORE, IT CANNOT BE SAID THAT THERE WAS NEGLIGE NCE ON THE PART OF THE ASSESSEE IN FURNISHING ALL THE MATERIAL FACTS. 11. SINCE THERE WAS NO NEGLIGENCE ON THE PART OF TH E ASSESSEE IN FURNISHING THE MATERIAL FACTS REQUIRED FOR COMPLETI NG THE 7 I.T.A. NO.424/CHNY/18 ASSESSMENT, THIS TRIBUNAL IS OF THE CONSIDERED OPIN ION THAT REOPENING OF ASSESSMENT BY ISSUING NOTICE UNDER SEC TION 148 OF THE ACT AFTER FOUR YEARS IS BAD IN LAW. THEREFORE, THE CONSEQUENTIAL ORDER PASSED BY THE ASSESSING OFFICER CANNOT STAND IN THE EYE OF LAW. MOREOVER, THE VERY OBJECT OF PROVISIONS OF LI MITATION IS TO PROVIDE FINALITY TO THE PROCEEDINGS. THE THREAT OF REOPENING OF THE ASSESSMENT CANNOT BE ALLOWED TO HANG OVER THE HEAD OF THE TAXPAYER FOR AN UNLIMITED PERIOD. THEREFORE, THE P ARLIAMENT IN ITS WISDOM THOUGHT IT FIT THAT THE COMPLETED ASSESSMENT NEED NOT BE REOPENED UNLESS THERE WAS NEGLIGENCE ON THE PART OF THE ASSESSEE. THE MADRAS HIGH COURT ALSO FOUND THAT UNLESS THERE IS TANGIBLE MATERIAL IN THE POSSESSION OF THE ASSESSING OFFICER , THE ASSESSMENT CANNOT BE REOPENED ON THE BASIS OF THE MATERIAL ALR EADY ON RECORD. IN VIEW OF THE ABOVE DISCUSSION, THE ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER AFTER REOPENING IS QUASHED. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 8 I.T.A. NO.424/CHNY/18 ORDER PRONOUNCED IN THE COURT ON 12 TH NOVEMBER, 2018 AT CHENNAI. SD/- SD/- ( ) ( . . . ) (S. JAYARAMAN) (N.R.S. GANESAN) ' / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 12 TH NOVEMBER, 2018. KRI. - +056 76'0 /COPY TO: 1. )*/ APPELLANT 2. +,)*/ RESPONDENT 3. / 80 () /CIT(A)-17, CHENNAI 4. CIT (LTU), CHENNAI 5. 69 +0 /DR 6. :& ; /GF.