JEHANGIR GULLABBHAI & BILIMORIA & DARUWALLA, MUMBAI V. ITO WD 11(2)(2), MUMBAI

ITA 4289/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1958 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 27-04-2010
• Assessment Year: misc
• Appeal Filed On: 15-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L K AGARWAL
• Keywords: Reopening of assessment; Reason to believe; Reassessment proceedings
• Section: 147

Judgement Text

ITA NO. 4289 /MUM/09 ASSESSMENT YEAR 2002-03 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI J BENCH, MUMBAI BEFORE SHRI N V VASUDEVAN AND SHRI PRAMOD KUMAR ITA NO. 4289/MUM/09 ASSESSMENT YEAR 2002-03 JEHANGIR GULLABHAI & BILIOMORIA & DARUWALA . APPELLANT 1 ST FLOOR, RAJABAHADUR MANSION 20, AMBALAL DOSHI MARG, HAMAM STREET MUMBAI 400 023 PAN : AAAFJ3445L VS. INCOME TAX OFFICER WARD 11(2)(2), MUMBAI 400 020 ... RESPONDENT APPELLANT BY : SHRI FIROZ ANDHYARUJINA RESPONDENT BY : SHRI L K AGARWAL O R D E R PER PRAMOD KUMAR: 1. IN THIS APPEAL, AGAINST CIT(A)S ORDER DATED 24 TH MARCH 2009 FOR THE ASSESSMENT YEAR 2002-03, THE ONLY GRIEVANCE RAISED BY THE ASSESSEE IS THAT THE CIT(A) ERRED IN UPHOLDING THE VALIDITY OF REASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE INCOME TAX ACT , 1961. 2. TO DECIDE THIS ISSUE, ONLY A FEW MATERIAL FACTS NEED TO BE TAKEN NOTE ITA NO. 4289 /MUM/09 ASSESSMENT YEAR 2002-03 PAGE 2 OF 6 OF. THE ASSESSEE IS A FIRM OF SOLICITORS AND ADVOCA TES ENGAGED IN THE PRACTICE AS REGISTRATION, PATENT AND TRADE MARK ATT ORNEYS. THE ACTIVITIES OF THE FIRM INCLUDE THE WORK TO REGISTER PATENTS, D ESIGNS, TRADE MARK AND COPYRIGHT WORK IN INDIA, FOR THEIR CLIENTS IN INDIA AND ABROAD, AS ALSO TO REGISTER SUCH INTELLECTUAL PROPERTY RIGHTS, FOR THE IR INDIAN AND FOREIGN CLIENTS, ABROAD. THE ASSESSEE THUS ALSO WORKS FOR THEIR FOREIGN CLIENTELE AND ASSISTS THEM IN DEFENDING AND ENFORCING THEIR I NTELLECTUAL PROPERTY RIGHTS IN INDIA AND ABROAD. THE ASSESSEE CLAIMED A DEDUCTION UNDER SECTION 80 O IN RESPECT OF AMOUNT RECEIVED IN CON VERTIBLE FOREIGN EXCHANGE FROM THE FOREIGN CLIENTS. THE ASSESSEE DUL Y FURNISHED A NOTE, IN SUPPORT OF THIS CLAIM, ALONGWITH THE INCOME TAX RET URN. THE RETURN SO FILED BY THE ASSESSEE WAS ACCEPTED UNDER SECTION 143(1)(A ). SIMILAR CLAIM OF DEDUCTION UNDER SECTION 80 O WAS ALLOWED ALL A LONG IN THE ASSESSMENT YEARS PRIOR TO 1998-99. THERE IS ALSO NO DISPUTE ABOUT THE BASIC POSITION THAT IT WAS A CASE OF INITIATING THE REASSESSMENT P ROCEEDINGS BEYOND FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, AND AS SUCH COVERED BY FIRST PROVISO TO SECTION 147. ON THESE FACTS, T HE ASSESSING OFFICER REOPENED THE ASSESSMENT ON THE GROUND THAT THE DEDU CTION UNDER SECTION 80 O, IN THE LIGHT OF AMENDMENTS MADE IN THE SAID SECTION W.E.F. 1 ST APRIL 1998, IS NO LONGER ADMISSIBLE. THE ASSESSEE PROTES TED AGAINST THE REOPENING AND SUBMITTED THAT SINCE THE REASSESSMENT IS INITIATED BEYOND FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS IT IS ESTABLISHED THAT THERE IS A FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSING ITA NO. 4289 /MUM/09 ASSESSMENT YEAR 2002-03 PAGE 3 OF 6 FULLY AND TRULY ALL PARTICULARS, THE REASSESSMENT C ANNOT BE DONE. IT WAS ALSO SUBMITTED THAT THERE HAS BEEN NO SUCH FAILURE ON THE PART OF THE ASSESSEE. THE ASSESSING OFFICER BRUSHED ASIDE THE S UBMISSION OF THE ASSESSEE AND OBSERVED THAT THE SETTLED POSITION OF LAW IS THAT A SHAM TRANSACTION HAS NO PROTECTION UNDER THE LAW AND T HAT IT IS TRUE THAT WHERE FULL DISCLOSURE HAS BEEN MADE, JURISDICTION F OR REASSESSMENT CANNOT BE INVOKED BUT ALL THE SAME THE ASSESSEE C ANNOT GET AWAY WITH A SHAM TRANSACTION WHERE THE DISCLOSURE OF MATERIALS WHICH CANNOT BE REGARDED AS FACTS. HE REFERRED TO THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF PHOOL CHAND BAJRANG LAL VS ITO (203 ITR 356) AND REFERRED TO THEIR LORDSHIPS OBSERVATION THAT ONE OF THE PURPOSES OF SECTION 147 IS TO ENSURE THAT A PARTY CANNOT GET AW AY BY WILLFULLY MAKING A FALSE STATEMENT AT THE TIME OF ORIGINAL ASSESSMEN T, AND WHEN FALSITY COMES TO NOTICE, TO TURN AROUND AND SAY YOU ACCEPT ED MY LIE, NOW YOUR HANDS ARE TIED AND YOU CAN DO NOTHING; IT WOULD BE A TRAVESTY OF JUSTICE TO ALLOW THE ASSESSEE THAT LATITUDE. HE DID NOT H OWEVER POINT OUT WHAT WAS THE SHAM TRANSACTION OR HOW THE NECESSARY DISCL OSURE WAS WANTING. AGGRIEVED BY THE ASSESSING OFFICER JUSTIFYING THE R EASSESSMENT, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. LEARNED CIT(A) REFERRED TO, AND EXTENSIVELY REPRODU CED FROM, THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF C IT VS RAJESH JHAVERI STOCK BROKERS PVT LTD (291 ITR 500) AND CONCLUDED T HAT SINCE IT WAS ONLY A CASE OF PROCESSING OF RETURN UNDER SECTION 143(1) (A) AND SINCE THE ITA NO. 4289 /MUM/09 ASSESSMENT YEAR 2002-03 PAGE 4 OF 6 ASSESSEE WAS PRIMA FACIE FOUND TO BE NEITHER THE OW NER OF TRADEMARK, DESIGN OR PATENT, NOR HAD HE INVENTED THE SAME, TH E ASSESSING OFFICER WAS WELL WITHIN HIS POWERS TO INVOKE SECTION 147. THE ASSESSEE IS NOT SATISFIED WITH THE STAND SO TAKEN BY THE CIT(A) AND IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED THE FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 4. AS LEARNED COUNSEL FOR THE ASSESSEE RIGHTLY POIN TS OUT, THE LEARNED CIT(A) CLEARLY ERRED IN APPLYING THE RATIO OF RAJES H JHAVERIS CASE (SUPRA) ON THE FACTS OF THIS CASE, AS THAT WAS A CASE IN WH ICH HONBLE SUPREME COURT WERE DEALING WITH A SITUATION IN MAIN PROVISI ON, I.E. REOPENING WITHIN FOUR YEARS FROM THE END OF THE RELEVANT ASSE SSMENT YEAR, AND NOT THE PROVISO, I.E. CASES OF REOPENING BEYOND THE PER IOD OF FOUR YEARS FROM THE END OF THE RELEVANT PREVIOUS YEAR. AS A MATTER OF FACT, IN THAT JUDGMENT ITSELF, THEIR LORDSHIPS HAVE NOTED THAT WH ILE IN THE CASES COVERED BY THE MAIN PROVISION, IT IS SUFFICIENT THA T THE ASSESSING OFFICER, FOR WHATEVER REASON, HAS REASON TO BELIEVE THAT INC OME HAS ESCAPED ASSESSMENT, IN A CASE COVERED BY THE PROVISO, IT I S NECESSARY THAT BOTH THE CONDITIONS MUST BE FULFILLED I.E. THE ASSESSIN G OFFICER SHOULD HAVE REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSME NT AND THERE IS OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ITA NO. 4289 /MUM/09 ASSESSMENT YEAR 2002-03 PAGE 5 OF 6 ALL THE MATERIAL FACTS NECESSARY FOR ASSESSMENT OF THAT YEAR. IT IS NOT EVEN THE CASE OF THE ASSESSING OFFICER, AND RIGHTLY SO, THAT THERE HAS BEEN ANY LAPSE ON THE PART OF THE ASSESSEE IN DISCLOSING FUL LY AND TRULY ALL THE MATERIAL FACTS. UNDER THESE CIRCUMSTANCES, THE CON DITIONS PRECEDENT FOR REOPENING OF ASSESSMENT BEYOND THE FOUR YEAR FROM T HE END OF THE RELEVANT ASSESSMENT YEAR ARE CLEARLY NOT SATISFIED. WE, THEREFORE, QUASH THE IMPUGNED REVISION PROCEEDINGS. THE ORDERS OF TH E AUTHORITIES BELOW ARE, ACCORDINGLY, VACATED. 5. IN THE RESULT, THE APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT TODAY ON 30 TH TH DAY OF APRIL, 2010 SD/- SD/- ( N V VASUDEVAN) (PRAMOD KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; 30 TH DAY OF APRIL, 2010. COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT , MUMBAI 4. THE COMMISSIONER (APPEALS) , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE - BENCH, MUMB AI 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, MUMBAI ITA NO. 4289 /MUM/09 ASSESSMENT YEAR 2002-03 PAGE 6 OF 6 DATE INITIAL 1. DRAFT DICTATED ON 27.4.2010 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 27.4.2010 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 27.4.2010 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 27.4.2010 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 27.4.2010 SR.PS/PS 6. DATE OF PRONOUNCEMENT 30.4.2010 SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER