DCIT, New Delhi V. M/s. Boutique India Overseas Private Ltd., New Delhi

ITA 4372/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4047 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-03-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 28-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUSHA KHURANA
• Assessee Lawyers: SAN T KAPOOR
• Keywords: Reopening of assessment; Residential status; Difference of opinion; Assessment record; Change of opinion
• Section: 143(3); 80HHC; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A DELHI) BEFORE SHRI G.E. VEERABHADRAPPA, HONBLE VICE PRESIDENT AND SHRI A.D. JAIN, JUDICIAL MEMBER ITA NO. 4372(DEL)2010 ASSESSMENT YEAR: 2002-03 DY.COMMISSIONER OF INCOME TAX, M/S. BOUTIQUE IND IA OVERSEAS PVT.LTD., CIRCLE 3(1), NEW DELHI. V. PADMA P ALACE, NEHRU PLACE, N. DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: MS. ANUSHA KHURANA, SR. DR RESPONDENT BY: SHRI SAN T KAPOOR, ADVOCATE ORDER PER A.D. JAIN, J.M. THIS IS DEPARTMENTS APPEAL FOR ASSESSMENT YEAR 20 02-03, TAKING THE FOLLOWING GROUND:- 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW I N ANNULLING THE ORDER U/S 143(3)/147 OF THE I.T. ACT WHILE HOLDING INVALID THE REOPENING U/S 147, IGNORING THAT ALSO IN VIEW OF VA RIOUS JUDICIAL PRONOUNCEMENTS EVEN WHEN THE ASSESSEE HAS FILED CER TAIN DETAILS AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS, THE SA ME DO NOT DEBAR THE AO TO ISSUE NOTICE U/S 148 IF THERE EXIST REASO NS FOR REOPENING OF ASSESSMENT. RELIANCE IS PLACED ON THE FOLLOWING D ECISIONS: I) PHOOLCHAND BAJRANG LAL V. CIT [1993] 203 ITR 456(SC ); II) RAM PRASAD V. ITO [1995] 82 TAXMAN 199(ALL.); III) CONSOLIDATED PHOTO & FINVEST LIMITED V. ACIT [2006] 281 ITR 394(DEL); IV) KLM ROYAL DUTCH AIRLINES V. ADIT [2007] 292 ITR 49( DEL); ITA 4372(DEL)2010 2 V) ACIT V. RAJESH JHAVERI STOCK BROKERS PVT. LTD. [200 7] 161 TAXMAN 316(SC); VI) PRAFUL CHUNILAL PATEL V. MAKWANA ACIT [1999] 263 IT R 832. 2. THE FACTS ARE THAT IN THE RETURN FILED, THE ASSE SSEE CLAIMED AN INCOME OF ` 10,41,000/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE I.T. ACT. LATER, THE CASE WAS SELECTED FOR SCRUTINY. ASSES SMENT ORDER U/S 143(3) OF THE ACT WAS PASSED ON 30.11.2004, AT AN ASSESSED IN COME OF ` 11,84,340/-. THE ASSESSEE HAD SHOWED LOSS OF ` 9,55,174/- AS ADJUSTED PROFIT IN BUSINESS. THE COMPLETED ASSESSMENT WAS REOPENED BY ISSUING A NOTICE U/S 148 OF THE ACT ON 30.3.2009, SINCE ACCORDING TO THE AO, DEDUCT ION U/S 80 HHC IS NOT ALLOWABLE IN LOSS CASES AND THE MISTAKE RESULTED IN INCORRECT ALLOWANCE OF DEDUCTION U/S 80 HHC OF THE ACT, AMOUNTING TO ` 23,33,114/-. VIDE REASSESSMENT ORDER DATED 8.12.2009, DEDUCTION OF ` 23,33,114/- CLAIMED BY THE ASSESSEE U/S 80 HHC OF THE ACT WAS WITHDRAWN. 3. BY VIRTUE OF THE IMPUGNED ORDER, THE LD. CIT(A) HELD THE REOPENING OF THE COMPLETED ASSESSMENT U/S 147 OF THE ACT TO BE V OID AB INITIO. 4. AGGRIEVED, THE DEPARTMENT IS IN APPEAL. 5. CHALLENGING THE IMPUGNED ORDER, THE LD. DR HAS C ONTENDED THAT WHILE WRONGLY HOLDING THE REOPENING OF THE COMPLETED ASSE SSMENT TO BE INVALID, THE LD. CIT(A) IGNORED THE SETTLED POSITION THAT EV EN WHEN THE ASSESSEE HAS ITA 4372(DEL)2010 3 FILED CERTAIN DETAILS AT THE TIME OF THE ORIGINAL A SSESSMENT PROCEEDINGS, THE AO HAS NOT DEBARRED FROM ISSUING THE NOTICE U/S 148 OF THE ACT, IF THEY EXIST WITH REASON FOR REOPENING OF THE ASSESSMENT. 6. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. 7. THE FOLLOWING ARE THE REASONS RECORDED FOR REOPE NING THE COMPLETED ASSESSMENT. A COPY THEREOF HAS BEEN PLACED AT PAG ES 46&47 OF THE ASSESSEES PAPER BOOK:- THE RETURN OF INCOME WAS FILED ON 31.10.02 AT AN I NCOME OF ` 10,41,000/- AND PROCESSED U/S 143(1) ON 28.02.03. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND ORDER U/S 143(3) WAS PASSED ON 30.11.04 AT ASSESSED INCOME OF ` 11,84,340/-. UNDER SECTION 80 HHC OF THE ACT, AN ASSESSEE BEING AN INDIA COMPANY OR OTHER ASSESSEE, RESIDENT OF INDIA, ENGAG ED IN THE BUSINESS OF EXPORT IS ENTITLED TO A DEDUCTION EQUAL TO THE P ROFITS DERIVED FROM THE EXPORT OF GOODS OR MERCHANDISE IF THE SALE PROC EEDS ARE RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE. FURTHER, IT WAS JUDICIALLY HELD BY THE HONBLE SUPREME COURT IN THE CASE OF M/S. IPCA LABORATORIES VIDE NO. 266 ITR 521 (SC) DATED 11.03.04 THAT THE P ROVISO TO SECTION 80 HHC(3) WHICH ENHANCES THE DEDUCTION U/S 80 HHC C ALCULATED AS PER SECTION 80 HHC(3)(A) OR (B) OR (C) COMES INTO P LAY ONLY WHEN THERE IS PROFIT FROM THE BUSINESS OF EXPORTS. HON BLE ITAT HAS ALSO ACCEPTED THAT DEDUCTION U/S 80 HHC CANNOT BE ALLOWE D AN INCENTIVE ONLY. THE PERUSAL OF ASSESSMENT RECORDS FOR THE ASSESSMEN T YEAR 02-03 REVEALS THAT THE ASSESSEE IS SHOWING LOSS OF ` 9,55,174/- AS ADJUSTED PROFIT OF THE BUSINESS. AS PER SUPREME COURT JUDG MENT CITED ABOVE DEDUCTION U/S 80 HHC OF ` 23,33,114/- CANNOT BE ALLOWED TO THE ITA 4372(DEL)2010 4 ASSESSEE BECAUSE THERE IS LOSS FROM THE BUSINESS TO THE ASSESSEE. THE MISTAKE RESULTED IN INCORRECT ALLOWABLE OF DEDUCTIO N U/S 80 HHC OF ` 23,33,114/-. IN VIEW OF ABOVE FACTS OF THE CASE, I HAVE REASONS TO BELIEVE THAT THE INCOME TO THE TUNE OF ` 23,33,114/- HAS ESCAPED ASSESSMENT BECAUSE OF FAILURE ON PART OF ASSESSEE TO DISCLOSE FULLY AN D TRULY MATERIAL FACTS NECESSARY FOR ASSTT. AND HENCE NOTICE U/S 148 IS HE REBY ISSUED FOR REOPENING U/S 147 OF THE I.T. ACT. 8. A PERUSAL OF THE ABOVE REASONS RECORDED TO REOPE N THE COMPLETED ASSESSMENT OF THE ASSESSEE SHOWS THAT THE COMPLETED ASSESSMENT WAS PROPOSED TO BE REOPENED FOR THE REASON THAT AS PER THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF M/S. IPCA LAB ORATORIES, 266 ITR 521(SC), DEDUCTION U/S 80 HHC OF THE ACT, AMOUNTING TO ` 23,33,114/- COULD NOT BE ALLOWED TO THE ASSESSEE, SINCE THERE WAS A L OSS FROM THE BUSINESS TO THE ASSESSEE; AND THAT THE MISTAKE HAD RESULTED IN INCORRECT ALLOWANCE OF DEDUCTION OF ` 23,33,114/-, U/S 80 HHC OF THE ACT. 9. IT IS SEEN THAT THE ORIGINAL ASSESSMENT OF THE A SSESSEE WAS COMPLETED U/S 143(3) OF THE ACT, VIDE ORDER DATED 30.11.2004, AT AN ASSESSED INCOME OF ` 11,84,340/-. THE CLAIM U/S 80 HHC OF THE ACT HAD BEEN INQUIRED INTO IN THE ORIGINAL ASSESSMENT PROCEEDINGS AND IT WAS ONLY THEREAFTER THAT THE CLAIM OF THE ASSESSEE IN THIS REGARD HAD BEEN ALLOWED. NOTICE U/S 148 OF THE ACT WAS ISSUED TO THE ASSESSEE ON 30.3.09, A COPY THE REOF HAS BEEN APPENDED AT PAGES 44 TO 45 OF THE ASSESSEES PAPER BOOK. THIS NOTICE WAS ISSUED AFTER A ITA 4372(DEL)2010 5 GAP OF MORE THAN 4 YEARS FROM THE END OF THE RELEVA NT ASSESSMENT YEAR, I.E., ASSESSMENT YEAR 2002-03. THE ASSESSEES CASE, THE REFORE, STANDS COVERED BY THE FIRST PROVISO TO SECTION 147 OF THE ACT. AS P ER THE SAID PROVISO, WHERE AN ASSESSMENT IS FRAMED U/S 143(3) OF THE ACT, NO REOP ENING OF THE ASSESSMENT SHALL BE MADE U/S 147 OF THE ACT AFTER 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEARS, UNLESS INCOME HAS ESCAPED ASSESSM ENT DUE TO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULL Y ALL MATERIAL FACTS NECESSARY FOR COMPUTATION OF ASSESSEES INCOME. HEREIN, UNDI SPUTEDLY, THE ASSESSEE HAD FILED THE COMPUTATION OF INCOME, CALCULATION OF DEDUCTION U/S 80HHC OF THE ACT, AND TAX AUDIT REPORT, ALONG WITH THE RETUR N OF INCOME. THE SAME HAD ALSO BEEN SUBMITTED TO THE AO DURING THE ASSESS MENT PROCEEDINGS. THE ASSESSEE HAD SUBMITTED ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR ASSESSMENT YEAR 2002-03, BEFORE THE AO. NO ADVERS E REMARK WAS MADE BY THE AO AGAINST THE ASSESSEE ON THE ISSUE OF DEDUCTI ON U/S 80 HHC OF THE ACT. THAT BEING SO, OBVIOUSLY, THE REOPENING OF THE COMP LETED ASSESSMENT IS A MERE CHANGE OF OPINION, AS HELD IN CIT V. KELVINAT OR INDIA 320 ITR 561(SC). AS RECORDED IN THE REASONS FOR REOPENING THEMSELVES, THE COMPLETED ASSESSMENT WAS REOPENED ON ACCOUNT OF THE MISTAKE DETECTED IN THE ALLOWANCE OF DEDUCTION U/S 80HHC OF THE ACT. THE REVISED COMPUTATION FILED BY THE ASSESSEE U/S 80HHC OF THE ACT HAD BEEN ACCEPTED BY THE AO AND ITA 4372(DEL)2010 6 IT WAS ON SUCH ACCEPTANCE THAT THE CLAIM OF ` 23,33,114/- WAS ALLOWED. AS OBSERVED BY THE LD. CIT(A) THEREAFTER, NO INFORMATI ON HAD COME TO THE NOTICE OF THE AO SO AS TO LEAD TO THE FORMATION OF BELIEF THAT THE INCOME HAD ESCAPED ASSESSMENT DUE TO THE FAILURE ON THE PART O F THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR IT S ASSESSMENT. THE REOPENING HAD BEEN DONE ON THE BASIS OF THE VERY SA ME RECORDS AS WERE AVAILABLE AT THE TIME OF THE ORIGINAL ASSESSMENT PR OCEEDINGS. 10. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY ERROR IN THE ACTION OF THE LD. CIT(A) IN HOLDING THE REOPENING OF THE COMPLETED AS SESSMENT OF THE ASSESSEE TO BE VOID AB INITIO. THE CIT(A)S ORDER IS ACCOR DINGLY UPHELD. 11. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 06.05.2011. SD/- SD/- (G.E. VEERABHADRAPPA) (A.D. JAIN) VICE PRESIDENT JUDICIAL MEMBER DATED: 06..05.2011 *RM COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) ITA 4372(DEL)2010 7 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR