ACIT, CHENNAI V. M/s. Tamilnadu Petroproducts Ltd., CHENNAI

ITA 458/CHNY/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57990 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 16-02-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 12-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: OMKARESHWAR CHIDRA
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Reopening of assessment; Business income; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 45(5); 80HHC; 14A; 147; 148; 139

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI C BENCH, CHENNAI. BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER & SHRI GEORGE MATHAN, JUDICIAL MEMBER I.T.A. NO. 373/MDS/2011 AND I.T.A. NO. 458/MDS/2010 ASSESSMENT YEARS: 2002-03 AND 2003-04 THE DY./ASSISTANT COMMISSIONER OF INCOME TAX, LARGE TAXPAYER UNIT, CHENNAI 600 101. VS. M/S. TAMILNADU PETROPRODUCTS LTD., 9, MANALI EXPRESS ROAD, MANALI, CHENNAI 600 068. [PAN: AAACT1295M] (APPELLANT) (RESPONDENT) REVENUE BY : SHRI OMKARESHWAR CHIDRA, CIT ASSESSEE BY : SHRI R. VIJAYARAGHAVAN, ADVOCATE DATE OF HEARING : 1 6 . 0 2 .201 2 DATE OF PRONOUNCEMENT : 24.02.2012 ORDER PER N.S. SAINI, ACCOUNTANT MEMBER THESE TWO APPEALS ARE FILED BY THE REVENUE AGAINST SEPARATE ORDERS OF THE LD. CIT(A) LTU, CHENNAI DATED 23.11.2010 AND 11.01.2010 PASSED IN ITA NO.30/09-10/LTU(A) IN ASSESSMENT YEAR 2002-03 A ND ITA NO. 65/08/09/LTU IN ASSESSMENT YEAR 2003-04 RESPECTIVEL Y. SHRI OMKARESHWAR CHIDRA, CIT REPRESENTED ON BEHALF OF THE REVENUE AN D SHRI R. VIJAYARAGHAVAN, ADVOCATE REPRESENTED ON BEHALF OF T HE ASSESSEE. 2. BOTH THE APPEALS ARE PERTAINING TO SAME ASSESSE E, HEARD TOGETHER, AND ARE BEING DISPOSED OF BY THIS SINGLE ORDER FOR THE SAKE OF CONVENIENCE. 3. THE LD. DR ARGUED THAT IN I.T.A. NO. 373/MDS/20 11, THE SOLE GRIEVANCE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.373 373373 373/ // /M/ M/M/ M/11 1111 11 & & & & I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 2 OF THE REVENUE IS THAT THE LD. CIT(A) ERRED IN HOLD ING THAT THE REOPENING OF THE ASSESSMENT MADE BY THE ASSESSING OFFICER WAS IN VALID IN VIEW OF THE FACTS THAT PROVISIONS OF EXPLANATION 1 TO SECTION 1 47 CLARIFIES THAT PRODUCTION BEFORE THE ASSESSING OFFICER OF ACCOUNT BOOKS OR OT HER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD WITH DUE DILIGENCE HAVE BEE N DISCOVERED BY THE ASSESSING OFFICER WILL NOT AMOUNT TO DISCLOSURE WIT HIN THE MEANING OF THE PROVISO. THE LD. DR RELIED ON THE ORDER OF THE ASSE SSING OFFICER. 4. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE R ELIED ON THE ORDER OF THE LD. CIT(A) AND SUBMITTED THAT THE ASSESSMENT HA S BEEN REOPENED AFTER FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR AND THE ASSESSING OFFICER HAS NOT RECORDED IN THE REASONS FOR REOPENING THAT THE INCOME HAD ESCAPED ASSESSMENT DUE TO FILING OF INACCURATE PARTICULARS OF THE INCOME BY THE ASSESSEE. THEREFORE, THE REOPENING OF ASSESSMENT WA S NOT VALID IN VIEW OF THE PROVISO 1 TO SECTION 147 OF THE ACT. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE LD. AR OF THE ASSESSEE HAS PLACED REASONS FOR REOPENING OF ASSESSMENT AT P AGE 17 AND 18 OF THE PAPER BOOKS, WHICH READS AS UNDER: REASONS FOR BELIEF THAT INCOME HAS ESCAPED ASSESSM ENT: 1. THE ASSESSEE HAD MISCELLANEOUS INCOME OF ` .72,61.000/- AND CLAIMED DEDUCTION U/S. 80HHC WITHOUT REDUCING 90% OF THE SA ME FROM THE BUSINESS PROFIT. FURTHER, THE ASSESSEE HAD FAILS TO DISCLOSE FULLY AND TRULY THE MATERIAL FACTS WITH REFERENCE TO THE SOURCE OF THE ABOVE INC OME AND ALSO FAILS TO DISCLOSE ITS NEXUS WITH THE BUSINESS INCOME. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.373 373373 373/ // /M/ M/M/ M/11 1111 11 & & & & I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 3 FURTHER, THE ABOVE INCOME CANNOT BE ALLOWED FULLY A S INCOME DERIVED FROM THE BUSINESS ACTIVITY OF THE ASSESSEE FOR THE PURPOSE OF ALLOWABILITY OF DEDUCTION U/S.80HHC BASED ON THE DECISION BASED OF THE HONORABLE SUPREME COURT IN THE CASE OF CIT VS K. RAVINDRANATHAN NAIR (295 ITR 208). HENCE, THE DEDUCTION U/S.80HHC HAS BEEN CLAIMED IN EXCESS. 2. THE ASSESSEE HAD GROSS INTEREST RECEIPTS OF' ` .572.82 LAKHS AND CLAIMED DEDUCTION U/S. 80HHC ON 90% OF THE ABOVE RECEIPTS B Y CLAIMING THE SAME AS BUSINESS INCOME. THE ASSESSEE HAD FAILS TO DISCLOSE FULLY AND TRULY THE MATERIAL FACTS WITH REFERENCE TO THE SOURCE OF THE ABOVE INTEREST INCOME AND ALSO FAILS TO DISCLOSE ITS NEXUS WITH THE BUSINESS INCOME. FURTHER, THE ABOVE INTEREST INCOME CANNOT BE ALLOWE D AS BUSINESS INCOME FOR THE PURPOSE OF ALLOWABILITY OF DEDUCTION U/S.80HHC BASED ON THE DECISION OF THE SUPREME COURT IN THE CASE OF TUTICO RIN ALAKALI CHEMICALS AND FERTILIZERS LTD. VS. CIT ( 227 ITR 172.) AND ALSO BASED ON THE FOLLOWING DECISIONS OF VARIOU S COURTS, SOUTH INDIA SHIPPING C ORPORATION LTD. V SC1T(240 ITR 24) (MAD) CIT VS PANDIAN CHEMICALS LTD. (233 ITR 497)(MAD). IN THE CASE OF SOUTH INDIA SHIPPING CORPORATION LTD . REFERRED TO ABOVE, THE JURISDICTIONAL HIGH COURT IMPLIEDLY HELD THAT THE RATIO OF THE DECISION IN TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. VS CIT (227 ITR 172) (SC) EQUALLY APPLIES TO AN ONGOING BUSINESS. THE RATIOS OF THE DECISIONS OF THE SUPREME COURT IN CASES OF (A) CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. VS CIT ( 113 ITR 84) AND (B) CIT VS STERLING FOODS (237 ITR 579) ARE APPLICABLE TO T HIS ISSUE AS WELL. THE INTEREST RECEIPTS OF THE ASSESSEE CANNOT BE TREATED AS INCOME DERIVED FROM THE ASSESSEE'S UNDERTAKING. THE SOURCE OF THE INTEREST CANNOT BE SAID TO BE INDUSTRIAL UNDERTAKING OF THE ASSESSEE. THE SOURCE OF THE INTEREST CAN IN THE CIRCUMSTANCES ONLY BE THE BANK DEPOSITS MADE BY THE ASSESSEE. THERE MUST BE, FOR THE APPLICATION OF THE WORDS 'DERIVED FROM, A DIRECT NEXUS BETWEEN THE PROFITS AND GAINS AND THE INDUSTRIAL UNDERTAKING. T HEREFORE, THE INTEREST RECEIPTS OF THE ASSESSEE CANNOT CONSTITUTE A PROFIT AND GAIN DERIVED FROM THE ASSESSEE'S UNDERTAKING. FURTHER, IT IS ESSENTIAL TO NOTE THAT THE HONBLE K ERALA HIGH COURT HAS HELD IN THE FOLLOWING CASES HELD THAT EVEN THOUGH T HE INTEREST RECEIVED OUT OF FIXED DEPOSITS/DEPOSITS FOR THE PURPOSE OF AVAILING CREDIT FACILITIES FROM THE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.373 373373 373/ // /M/ M/M/ M/11 1111 11 & & & & I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 4 BANK DOES NOT HAVE AN IMMEDIATE NEXUS WITH THE EXPO RT BUSINESS AND THEREFORE, HAS TO BE NECESSARILY BE TREATED AS INC OME FROM OTHER SOURCES AND NOT AS BUSINESS INCOME. (A) SOUTHERN CASHEW EXPORTS VS. DCIT (130 TAXMAN 20 3) (B) K. RAVINDRANATHAN NAIR VS. CIT (262 ITR 669) (C) URBAN STAINS LAWS CO. VS. CIT (263 ITR 10) THE HONBLE SUPREME COURT HAS AFFIRMED THE ABOVE VI EW OF HONBLE KERALA HIGH COURT ALSO. HENCE, IT IS CLEAR THAT, BANK INTEREST CANNOT BE TR EATED AS PROFITS AND GAINS DERIVED FROM THE ASSESSEE'S BUSINESS ACTIVITY WITHIN THE MEANING OF SEC.80HHC OF THE IT ACT. HENCE, THE DEDUCTION U/S.8 0HHC HAS BEEN CLAIMED IN EXCESS. 3. THE ASSESSEE HAD REDUCED AN AMOUNT OF ` .2651.65 LAKHS AS DISCOUNT FROM THE TOTAL TURNOVER FOR THE PURPOSE OF COMPUTAT ION OF DEDUCTION U/S. 80 HHC. THE SAME CANNOT BE ALLOWED AS PER THE EXPLANAT ION (BA) 9F THE PROVISIONS OF SECTION 80HHC. HENCE, THE DEDUCTION U /S.80HHC HAS BEEN CLAIMED IN EXCESS. 4. FURTHER, IT HAS BEEN OBSERVED THAT THE ASSESSEE HAS EARNED EXEMPTED INCOME BY WAY OF DIVIDEND TO THE EXTEND OF ` .63.75 LAKHS DURING THE YEAR BUT THE ASSESSEE HAS OMITTED TO DISALLOW THE CORRESPOND ING EXPENDITURE FOR EARNING OF THE SAME AS PER THE PROVISIONS OF SECTIO N 14A OF THE INCOME TAX ACT. FURTHER, AS PER THE AMENDMENT TO THE PROVISION OF S ECTION 14A OF THE INCOME TAX ACT WITH REFERENCE TO THE RULE 8D OF THE INCOME TAX, THE EXPENDITURE ON THE DIVIDEND EARNED MUST BE DISALLOW ED/ADDED TO THE TOTAL INCOME OF THE CURRENT YEAR AS THE EXPENDITURE FOR E ARNING OF THE SAME. RELIANCE ALSO PLACED ON THE DECISION OF THE HONORAB LE MUMBAI TRIBUNAL SPECIAL BENCH IN THE CASE OF M/S. DAGA CAPITAL MANA GEMENT PRIVATE LTD FOR THE AY 2001-02 IN ITA NO:8057/MUM/2003 DATED 20.10. 2008, WHERE IN, IT HAS BEEN HELD THE PROVISIONS OF SECTION 14A (2) & ( 3) SHALL BE APPLICABLE RETROSPECTIVELY FROM 01.04.1962. THUS, IT IS CLEAR THAT THE ASSESSEE HAS NOT PRODUCE D THE MATERIAL FACTS FULLY AND TRULY BEFORE THE ASSESSING OFFICER. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.373 373373 373/ // /M/ M/M/ M/11 1111 11 & & & & I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 5 HENCE, I HAVE THE REASON TO BELIEVE THAT THE INCOME HAS ESCAPED THE ASSESSMENT WITH IN THE MEANING OF THE PROVISIONS OF SECTION 147 OF THE INCOME TAX ACT. SD/- (S.SENTHIL KUMARAN) ASST. COMMISSIONER OF INCOME TAX, LARGE TAXPAYER UNIT, CHENNAI. 6. WE FIND THAT THE LD. CIT(A) IN RESPECT OF THE A BOVE RECORDED REASONS HELD AS UNDER: 4.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BY THE ID. AR. I HAVE ALSO GONE THROUGH THE DE CISIONS RELIED ON BY THE AO AND AR. THE ID. AR SUBMITTED THAT REOPENING WAS BEYOND FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND AS THE ASSESSMENT U/S 143(3) HAD BEEN COMPLETED FOR THE SU BJECT ASSESSMENT YEAR, REOPENING IS INVALID IN LAW UNDER PROVISO TO S. 147 INASMUCH AS ALL THE PARTICULARS REQUIRED FOR THE ISSUE HAS ALRE ADY BEEN FILED BEFORE THE AO. THE ID. AR SPECIFICALLY POINTED OUT THAT TH E AO, WHILE COMPLETING THE ASSESSMENT U/S 143(3) ON 18.03.2005, HAS ALREADY GONE INTO THE WORKING OF 80HHC AND HAS APPLIED HIS MIND AND REWORKED THE DEDUCTION U/S 80HHC. THE INTEREST RECEIPTS HAS ALSO BEEN A SUBJECT MATTER OF APPEAL BEFORE CIT(A) AND RELIEF WAS GIVEN IN THIS RESPECT IN THE ORDER IN ITA NO.245/2005-06 DATED 13.12.2005. H E FURTHER STATED THAT THE AO HAS NOT MENTIONED AT ANY POINT OF TIME THE OMISSION BY THE ASSESSEE TO FILE ANY PARTICULARS WHICH HAS RESULTED IN THE AO REOPENING THE ASSESSMENT. THE ID. AR HAS ALSO RELIED ON THE M ADRAS HIGH COURT IN THE CASE OF CIT V. A.V. THOMAS EXPORTS LTD, 296 ITR 603, WHEREIN IT HAS BEEN HELD THAT THE AO HAS TO GIVE CATEGORICAL F INDING THAT INCOME HAS ESCAPED ASSESSMENT BY REASON OF FAILURE ON THE PART OF THE ASSESSEE. AT THE TIME OF REGULAR ASSESSMENT, THE ASSESSEE HAD FURNISHED FULL PARTICULARS ABOUT THE CLAIM FOR DEDUCTION U/S 80HHC AND DETAILS OF DIVIDEND INCOME U/S 14A. THAT BEING SO, IT CANNOT B E SAID THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO FURNISH FULL AND COMPLETE PARTICULARS DURING THE ORIGINAL ASSESSMENT PROCEEDI NGS. THERE IS ALSO NO MENTION IN THE REOPENED ASSESSMENT AS TO WHAT TH E ASSESSEE DID NOT FURNISH, WHICH HAS RESULTED IN REOPENING. IN THE CI RCUMSTANCES, THE REOPENING OF THE ASSESSMENT FOR EXCESS CLAIM OF DED UCTION U/S 80HHC AND DISALLOWING THE EXPENDITURE U/S 14A BY APPLYING RULE 8D IS MERELY ON THE BASIS OF CHANGE OF OPINION ON THE PART OF TH E AO. AS HELD BY THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT V. MOO KAMBIKAI SPINNING MILLS T.C (APPEAL) NO.2611/06 DATED 27.11. 2006 (MAD) AND I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.373 373373 373/ // /M/ M/M/ M/11 1111 11 & & & & I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 6 CIT V. CHOLAMANDALAM INVESTMENTS AND FINANCE COMPAN Y LTD, 309 ITR 110, THE AO CANNOT REOPEN THE ASSESSMENT BEYOND FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR IF THE ASSESSEE HAD FILED ALL THE PARTICULARS NECESSARY FOR MAKING THE ASSESSMENT. TH E OTHER DECISIONS CITED BY THE ASSESSEE ALSO SUPPORT THIS VIEW. THE H ON'BLE SUPREME COURT IN THE CASE OF KELVINATOR INDIA LTD, 320 ITR 561 (SC) HELD THAT THERE SHOULD BE TANGIBLE MATERIAL TO COME TO THE CO NCLUSION THAT THERE WAS ESCAPEMENT OF INCOME. REASONS MUST HAVE LINK WI TH THE FORMATION OF BELIEF. I FIND THAT THE REOPENING WAS BASED ON T HE SAME SET OF FACTS WHICH WERE AVAILABLE DURING THE ORIGINAL ASSESSMENT . IN THE CIRCUMSTANCES, RESPECTFULLY FOLLOWING THE DECISIONS OF THE JURISDICTIONAL HIGH COURT AND APEX COURT (SUPRA), I HOLD THAT REOP ENING OF ASSESSMENT BEYOND FOUR YEARS ON THE SAME SET OF FAC TS WAS ONLY ON THE BASIS OF CHANGE OF OPINION AND NOT ON ACCOUNT OF FA ILURE ON THE PART OF THE ASSESSEE TO FURNISH ANY PARTICULARS. HENCE, THE GROUND IS ALLOWED. 7. WE FIND THAT IT IS NOT IN DISPUTE THAT THE ORIG INAL ASSESSMENT IN THE INSTANT CASE WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 18.03.2005. HOWEVER, IT IS OBVIOUS THAT NOTICE UNDER SECTION 14 8 WAS ISSUED ON 12.03.2009 FOR THE ASSESSMENT YEAR 2002-03 IS AFTER MORE THAN FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. PROVI SO TO SECTION 147 READS AS UNDER: PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE R ELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THI S SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TA X HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REAS ON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETUR N UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FU LLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR TH AT ASSESSMENT YEAR: 8. WE FIND THAT IN THE INSTANT CASE THERE IS NO FA ILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN OF INCOME, WHICH IS EVIDE NCED BY THE FACTS THAT I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.373 373373 373/ // /M/ M/M/ M/11 1111 11 & & & & I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 7 THE ORIGINAL ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT. FURTHER, UNDER THE LAW, THE ASSESSEE IS OBLIGED TO FURNISH PRIMARY FACTS ON THE BASIS OF WHICH INCOME OF THE ASSESSEE CAN BE CO MPUTED. IT IS NOT THE DUTY OF THE ASSESSEE TO ALSO ADVICE THE ASSESSING O FFICER AS TO WHAT INFERENCE THE ASSESSING OFFICER SHOULD DRAW FROM TH E PRIMARY FACTS FURNISHED BY THE ASSESSEE FOR COMPUTING THE INCOME OF THE ASS ESSEE IN ACCORDANCE WITH THE LAW. IN THE INSTANT CASE, WE FIND NO MATER IAL HAS BEEN BROUGHT IN RECORDED REASONS BY THE ASSESSING OFFICER TO SHOW T HAT ANY PRIMARY MATERIAL FACT WAS NOT DISCLOSED FULLY AND TRULY BY THE ASSES SEE DURING THE COURSE OF ASSESSMENT. THE FINDINGS OF THE LD. CIT(A) THAT REA SSESSMENT PROCEEDINGS HAS BEEN INITIATED ONLY ON THE BASIS OF THE SAME FA CTS, WHICH WERE FURNISHED BY THE ASSESSEE AND AVAILABLE BEFORE THE ASSESSING OFFICER AT THE TIME OF COMPLETING THE ASSESSMENT COULD NOT BE SHOWN AS ERR ONEOUS BY THE REVENUE. THE RELIANCE PLACED BY THE LD. DR ON EXPLA NATION 1 OF SECTION 147 IS CLEARLY MISPLACED AND NOT APPLICABLE ON THE FACT S OF THE INSTANT CASE. NO MATERIAL HAS BEEN BROUGHT IN THE RECORDED REASONS B Y THE ASSESSING OFFICER TO SHOW THAT ANY NEW INFORMATION OR MATERIAL CAME T O HIS POSSESSION ON THE BASIS OF WHICH REASSESSMENT PROCEEDINGS INITIATED I N THE INSTANT CASE, WHICH WAS NOT BEFORE THE ASSESSING OFFICER AT THE TIME OF COMPLETION OF ORIGINAL ASSESSMENT. WE, THEREFORE, FULLY AGREE WITH THE LD. CIT(A) THAT IN THE INSTANT CASE REASSESSMENT PROCEEDINGS IS INITIATED MERELY O N THE BASIS OF CHANGE OF OPINION, WHICH IS NOT PERMISSIBLE UNDER LAW ON THE FACTS OF THE CASE. WE, I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.373 373373 373/ // /M/ M/M/ M/11 1111 11 & & & & I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 8 THEREFORE, DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). IT IS CONFIRMED AND THE GROUNDS OF APPEAL O F THE REVENUE ARE DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. 10. WITH REGARD TO I.T.A. NO. 458/MDS/2010, THE LD . DR SUBMITTED THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER TOWARDS REFUND OF EXCISE DUTY OF ` .1,92,04,127/-. HE ARGUED THAT AS THE SINGLE JUDGE OF HONBLE MADRAS HIGH COURT HAS PASSE D ORDER ON 10.06.2002 DIRECTING THE EXCISE DEPARTMENT TO REFUND THE AMOUN T AFTER OBTAINING BANK GUARANTEE AS SECURITY, THE SAME WAS RIGHTLY TREATED AS INCOME OF THE ASSESSEE IN THE ASSESSMENT YEAR 2003-04. HE SUBMITT ED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE MATTER WAS TA KEN UP BY THE LARGER BENCH, WHICH WAS DELIVERED ON 07.11.2007, WHEN THE ISSUE WAS FINALLY SETTLED IN FAVOUR OF THE ASSESSEE IN THE PREVIOUS Y EAR 2007-08 RELEVANT TO THE ASSESSMENT YEAR 2008-09 AND DELETED THE ADDITION MA DE BY THE ASSESSING OFFICER. HE RELIED ON THE DECISION OF THE HONBLE S UPREME COURT IN THE CASE OF CIT V. GHANSHYAM (HUF) [2009] 315 ITR 1(SC), WHE REIN IT WAS HELD THAT THE AMOUNT OF ENHANCEMENT IN COMPENSATION IS DEEMED TO BE THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR IN WHICH IT IS RE CEIVED EVEN IF RECEIVED UNDER ORDERS OF COURT PENDING DECISION AND THE ASSE SSEE HAS TO OFFER SECURITY. 8. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE S UPPORTED THE ORDER OF I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.373 373373 373/ // /M/ M/M/ M/11 1111 11 & & & & I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 9 THE LD. CIT(A) AND RELIED ON THE ORDER OF THE HONB LE SUPREME COURT IN THE CASE OF UNION OF INDIA AND ANOTHER V. J.K. SYNTHETI CS LTD. 199 ITR 14(SC), WHEREIN IT WAS HELD THAT SINCE THE LIABILITY TO TAX UNDER SECTION 41 WOULD DEPEND ON THE OUTCOME OF THE APPEAL, THERE WOULD BE NO PREJUDICE ON THE PART OF DEPARTMENT IF THE ASSESSMENT IS MODIFIED TH EREAFTER. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN T HE INSTANT CASE, THE ASSESSEE CLAIMED REFUND OF EXCISE DUTY OF ` .1,92,04,127/- AND THE CLAIM OF THE ASSESSEE WAS ACCEPTED BY THE SINGLE MEMBER BENC H OF THE HONBLE HIGH COURT VIDE ITS ORDER DATED 20.11.2001 PASSED I N ASSESSMENT YEAR 2002-03. HOWEVER, THE EXCISE DEPARTMENT HAD NOT ACC EPTED THE SAID DECISION AND FILED AN APPEAL THERE AGAINST BEFORE T HE DIVISION BENCH OF THE HONBLE HIGH COURT. THE DIVISION BENCH VIDE ITS INT ERIM ORDER DATED 10.06.2002 ALLOWED THE ASSESSEE TO RECEIVE REFUND O F ` .1,92,04,127/- FROM THE EXCISE DEPARTMENT BY FURNISHING A BANK GUARANTE E AND SUBJECT TO FINAL OUTCOME OF THE APPEAL. THE DIVISION BENCH OF THE HO NBLE HIGH COURT VIDE ITS ORDER DATED 07.11.2007 FINALLY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE I.E. RELEVANT TO THE ASSESSMENT YEAR 2008-09. THE A SSESSEE DISCLOSED THE INCOME OF ` .1,92,04,127/- IN THE RETURN OF INCOME FILED FOR AS SESSMENT YEAR 2008-09 AND PAID TAX THEREON. ACCORDING TO THE ASSE SSING OFFICER ON THE ABOVE FACTS, THE SAID INCOME IS ASSESSABLE IN THE A SSESSMENT YEAR 2003-04 ONLY AND HE REOPENED THE ASSESSMENT OF THE ASSESSME NT ORDER 2003-04 AND I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.373 373373 373/ // /M/ M/M/ M/11 1111 11 & & & & I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 10 BROUGHT THAT AMOUNT TO TAX IN THAT ASSESSMENT YEAR. 10. ON APPEAL AGAINST THE ABOVE ORDER OF THE ASSES SING OFFICER, THE LD. CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER: 5. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE A ND THE SUBMISSIONS OF THE LEARNED AR. IT IS CLEAR FROM THE FACTS OF TH E CASE THAT THE APPELLANT HAS MADE A CLAIM OF REFUND OF ` . 1.92 CRORES FROM THE EXCISE DEPARTMENT FROM THE YEAR 1995 EVEN THOUGH SUBSEQUENTLY IT HAS WRITT EN OFF THE SAME IN THE YEAR 19992000. THE APPELLANT CLAIMED THE ABOVE SUM FROM THE EXCISE DEPARTMENT AFTER THE DECISION HAS BEEN RENDERED IN FAVOUR OF THE APPELLANT BY THE HON'BLE SINGLE JUDGE IN THE ORDER DATED 20.1 1.2001. THE MATTER WAS TAKEN UP BY THE LARGER BENCH WHICH DELIVERED THE FI NAL VERDICT ON 07112007. SINCE THE CASE WAS FINALLY SETTLED IN F AVOUR OF THE APPELLANT IN THE PREVIOUS YEAR 200708 RELEVANT TO A.Y. 200809, THE APPELLANT OFFERED THE SAME AS INCOME IN A.Y. 200809. THE ASSESSING OFFIC ER, HOWEVER, TREATED IT AS INCOME OF A.Y. 200304 BECAUSE IN THE EARLIER OR DER DATED 10062002, THE HON'BLE MADRAS HIGH COURT DIRECTED THE EXCISE DEPAR TMENT TO REFUND THE AMOUNT AFTER OBTAINING BANK GUARANTEE AS SECURITY. AFTER CONSIDERING THE SEQUENCE OF EVENTS AND THE PRECEDENTS I AGREE WITH THE CONTENTION OF THE APPELLANT. I FIND THAT THE GUJARAT HIGH COURT (SUPR A) HAS CLEARLY STATED THAT REMISSION OF LIABILITY TAKES PLACE ONLY WHEN THE FI NAL ORDER IS PASSED, WHICH I S ALSO SUPPORTED BY THE SUPREME COURT IN UNION OF INDIA VS. J.K. SYNTHETICS LIMITED (SUPRA). I FURTHER AGREE THAT THE RELIANCE MADE BY THE AO TO THE KERALA HIGH COURT DECISION IN CIT V. SOUTHERN CABLE S AND ENGINEERING WORKS [289 ITR 167] IS WITH REGARD TO ACCRUAL OF LI ABILITY WHICH IS NOT APPLICABLE TO THE FACTS OF THE CASE WHEREIN CESSATI ON OF LIABILITY HAS TO BE PROVED FOR ASSESSMENT U/S 41(1). THE HON'BLE SUPREM E COURT IN UOI V. J.K. SYNTHETICS LTD. [199 ITR 14 (SC)] DEALT WITH A SIMI LAR ISSUE WHERE THE QUESTION WAS WHETHER THE ASSESSEE'S LIABILITY TO EX CISE DUTY IN CERTAIN MATTERS HAD CEASED JUSTIFYING ACTION U/S. 41(1) OF THE IT A CT. THE HON'BLE COURT HELD AS UNDER: 'IT IS OBVIOUS THAT THE LIABILITY TO TAX U/S. 41 OF THE ACT WILL DEPEND ON THE OUTCOME OF THE APPEAL BEFORE THIS COU RT. IT IS ALSO STATED THAT, AS REGARDS ANOTHER PART OF THE LIABILI TY, THE ISSUE IS PENDING BEFORE THE TRIBUNAL. IT WOULD THEREFORE, AP PEAR THAT NO CESSATION OF LIABILITY CAN BE POSTULATED UNTIL THE TRIBUNAL HAS DECIDED THE MATTER. THERE IS NO PREJUDICE TO THE DE PARTMENT IF THE ASSESSMENT IS MODIFIED DEPENDING UPON THE OUTCO ME OF THE DECISION OF THIS COURT AS WELL AS THE FINAL OUTCOME OF THE PROCEEDINGS WHICH ARE NOW PENDING BEFORE THE TRIBUN AL.' I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.373 373373 373/ // /M/ M/M/ M/11 1111 11 & & & & I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 11 THE GUJARAT HIGH COURT IN MEGHDOOT LAMINANT PVT. LT D V. RAJIV SINHA [238 ITR 918 (GUJ)] HAS HELD THAT REMISSION OF LIABILITY TAKES PLACE WHEN DISPUTE AS TO LIABILITY IS ULTIMATELY SETTLED. WHEN REFUND OF EXCISE DUTY IS RECEIVED BY ASSESSEE BUT APPEALS AGAINST REFUND ORDER IS PENDIN G IN SUPREME COURT, THERE CAN BE NO REMISSION OF LIABILITY U/S. 41(1) I N THE YEAR OF RECEIPT OF REFUND AS THERE WAS NO FINAL ORDER. THE ULTIMATE CE SSATION OF THE LIABILITY IS ON THE FINAL DECISION WHICH CULMINATES THE DISPUTE BETWEEN THE REVENUE AND THE ASSESSEE AND NOT AT THE INTERMEDIARY STAGE NOT WITHSTANDING THAT A REFUND OF AMOUNT HAS BECOME DUE AS A RESULT OF PREVAILING ORDER AT THAT STAGE AND THE SAME HAS IN FACT BEEN ACTUALLY RECEIVED BY THE ASSESSEE. IN THE PRESENT CASE, THE JUDGEMENT OF THE HIGH COURT OF A SINGLE J UDGE HAS NOT BEEN ACCEPTED BY THE EXCISE DEPARTMENT AND AN APPEAL HAS BEEN FILED WITH THE LARGER BENCH. ONLY WHEN THE LARGER BENCH DELIVERED THE FINAL ORDER ON 07.11.2007 CONFIRMING THE SINGLE JUDGE ORDER; THE C ESSATION OF LIABILITY TOOK PLACE. THE LIABILITY ACCORDINGLY CEASED IN A.Y. 200 8-09. THE APPELLANT HAS OFFERED THE SAME IN A.Y. 200809. IN VIEW OF THE AB OVE FACTS OF THE CASE AND LEGAL PRECEDENTS, I DIRECT THAT THE ABOVE ADDITION BE DELETED FOR THE ASSESSMENT YEAR 20032004. THE GROUND OF APPEAL IS ACCORDINGLY ALLOWED. 11. BEFORE US, THE LD. DR SUPPORTED THE ORDER OF T HE ASSESSING OFFICER AND CONTENDED THAT THE ISSUE IS COVERED IN FAVOUR OF TH E REVENUE BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. GHANSHYAM (HUF) [2009] 315 ITR 1(SC). 12. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT(A) AND CONTENDED THAT IN VIEW OF THE VA RIOUS DECISIONS QUOTED IN THE ORDER OF THE LD. CIT(A), THE ISSUE IS CORRECTLY DECIDED BY THE LD. CIT(A) IN FAVOUR OF THE ASSESSEE. 13. WE FIND THAT THE FACTS IN THE INSTANT CASE ARE NOT IN DISPUTE AND THE ONLY ISSUE, WHICH IS REQUIRED TO BE ADJUDICATED BY US IS WHETHER REFUND OF EXCISE CLAIM IS TO BE ASSESSED IN THE ASSESSMENT YE AR 2003-04 WHEN THE SAME WAS ALLOWED TO BE RECEIVED BY THE ASSESSEE ON THE BASIS OF FURNISHING I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.373 373373 373/ // /M/ M/M/ M/11 1111 11 & & & & I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 12 OF BANK GUARANTEE IN PURSUANT TO THE INTERIM ORDER OF THE DIVISION BENCH OF THE HONBLE HIGH COURT OR IN THE ASSESSMENT YEAR 20 08-09 WHEN THE FINAL CESSATION OF THE LIABILITY TOOK PLACE IN PURSUANT T O THE FINAL ORDER OF THE DIVISION BENCH OF THE HONBLE HIGH COURT. 14. WE FIND THAT IN THE CASE OF CIT V. GHANSHYAM ( HUF) (SUPRA), THE ISSUE WAS REGARDING ADDITIONAL COMPENSATION ON COMPULSORY ACQUISITION OF LAND BEFORE THE HONBLE SUPREME COURT. THE HONBLE SUPRE ME COURT OBSERVED WITH A VIEW OF THE SPECIFIC PROVISIONS CONTAINED IN SECTION 45(5) AND ENHANCED COMPENSATION IS ASSESSABLE IN THE YEAR OF ACTUAL RECEIPT OF THE AMOUNT BY THE ASSESSEE NOTWITHSTANDING THE APPEAL I S PENDING BEFORE ANY TRIBUNAL OR COURT. THE HONBLE SUPREME COURT ALSO O BSERVED IN THE AFORESAID DECISION THAT SECTION 155(16) OF THE ACT SPECIFICALLY PROVIDES FOR A SITUATION WHERE ENHANCED COMPENSATION AMOUNT IS DEC IDED AGAINST THE ASSESSEE BY THE APPELLATE TRIBUNAL OR COURT. IN VIE W OF THE ABOVE SPECIFIC PROVISIONS OF SECTION 45(5) READ WITH SECTION 155(1 6), THE ISSUE WAS DECIDED BY THE HONBLE SUPREME COURT IN FAVOUR OF THE REVEN UE. 15. HOWEVER, IN THE INSTANT CASE, THE ISSUE IS GOV ERNED BY PROVISIONS OF SECTION 41(1) OF THE ACT. WE DO NOT FIND ANY PROVIS ION SIMILAR TO SECTION 45(5)(C) IN SECTION 41(1) OF THE ACT. RATHER SECTIO N 41(1) SPECIFICALLY DEEMS THE AMOUNT IN QUESTION AS INCOME OF THE PREVIOUS YE AR IN WHICH THE ASSESSEE RECEIVES ANY BENEFIT IN RESPECT OF A TRADI NG LIABILITY OF AN EARLIER YEAR BY WAY OF REMISSION OR CESSATION. IN OTHER WOR DS, THE AMOUNT IS I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.373 373373 373/ // /M/ M/M/ M/11 1111 11 & & & & I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 I.T.A. NO. 458/M/10 13 DEEMED AS INCOME OF THE PREVIOUS YEAR IN WHICH REMI SSION OR CESSATION ACTUALLY TAKES PLACE. THE LD. DR ALSO COULD NOT POI NT ANY PROVISION CONTAINED IN THE INCOME TAX ACT SIMILAR TO SECTION 155(16) OF THE ACT IN RESPECT OF AN AMOUNT ASSESSED UNDER SECTION 41(1) OF THE ACT. THU S, ON CONSIDERATION OF THE SCHEME OF THE INCOME TAX ACT, WE FIND THAT THE PREVIOUS YEAR OF TAXABILITY OF AN AMOUNT UNDER SECTION 41(2) IS NOT SIMILAR TO AN AMOUNT ASSESSABLE UNDER SECTION 41(1) OF THE ACT. WE, THER EFORE, ARE OF THE CONSIDERED OPINION THAT THE DECISION RELIED UPON BY THE LD. DR IS CLEARLY DISTINGUISHABLE ON THE FACTS AND ARE NOT APPLICABLE TO THE FACTS OF THE INSTANT CASE. WE FIND THAT THE DECISION OF THE LD. CIT(A) F INDS SUPPORT FROM THE VARIOUS DECISIONS CITED IN THE ORDER OF THE LD. CIT (A). WE, THEREFORE, DO NOT FIND ANY ERROR IN THE ORDER OF THE LD. CIT(A), WHIC H IS CONFIRMED AND THE GROUNDS OF APPEAL OF THE REVENUE ARE DISMISSED. 16. NO OTHER POINT HAS BEEN URGED BY THE REVENUE E XCEPT THE ABOVE POINT. 17. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.02.2012. SD/ - SD/ - (GEORGE MATHAN) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMB ER CHENNAI, DATED, THE 24.02.2012 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.