LARSEN & TOUBRO LTD, MUMBAI V. DCIT CIR 2(2), MUMBAI

ITA 4721/MUM/2013

• Counselvise Citation: 472119914 RSA 2013
• Duration Of Justice: 2 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 04-06-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 18-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S MISRA
• Assessee Lawyers: J D MISTRI
• Keywords: Reason to believe
• Section: 143(3); 147

Judgement Text

1 , ' INCOME TAX APPELLATE TRIBUNAL,MUMBAI - A,BENCH , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & SAN JAY GARG,JUDICIAL MEMBER /. ITA NO.4 72 1/MUM/2013, / ASSESSMENT YEAR - 20 0 2 - 0 3 LARSEN & TOUBRO LIMITED TAXATION DEPARTMENT, L&T HOUSE, N.M. MARG, BALLARD ESTATE MUMBAI - 400 001. PAN:AAACL 0140 P VS DCIT, CIRCLE - 2(2) ROO M NO.577, 5 TH FLOOR AAYAKAR BHAVAN, M.K. MARG MUMBAI - 400 020. ( / ASSESSEE ) ( / RESPONDENT ) /ASSESSEE BY :SHRI J.D. MISTRI / REVENUE BY :SHRI S. MISRA / DATE OF HEARING :1 5 - 09 - 2015 / DATE OF PRONOUNCEMENT : 23 - 09 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLEN GING THE ORDER,DATED 1 4.03.2013 ,OF THE CIT(A) - 5 ,MUMBAI THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ['CIT(A)'] ERRED IN CONFIRMING THE ORDER PASSED UNDER SECTION 143(3) R.W. SECTION 147 OF THE INCOME - TAX ACT, 1961 ['ACT'] AFTER PERIOD OF FO UR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR WITHOUT APPRECIATING THE FACT THAT THERE WAS NO ESCAPEMENT OF INCOME IN THE RETURN FILED BY THE APPELLANT. FURTHER, CIT(A) ERRED IN DISREGARDING THE FACTS THAT ORDER PASSED BY THE ASSESSING OFFICER ['AO' ] IS ULTRA VIRUS TO THE FIRST PROVISO TO SECTION 147 OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE REDUCTION OF CLAIM MADE UNDER SECTION 80LA IN RESPECT OF CAPTIVE POWER PLANTS . 3. THE APPELLANT COMPANY CRAVES LEAVE TO ADD TO, TO AMEND, TO ALTER OR MODIFY ANY OR ALL THE AFORESAID GROUNDS OF APPEAL. BRIEF FACTS: ASSESSEE - COMPANY ENGAGED IN THE BUSINESS OF PROVIDING ENGINEERING AND RELATED SERVICES, FILED ITS RETURN ON 2 8.10.2002,DECLARING INCOME OF RS. 216.90 CRORES. THE ASSESSING OFFICER (AO)COMPLETED THE ASSESSMENT,U/S.143(3)OF THE ACT,ON 30.12.2004 , DETERMINING ITS INCOME AT RS. 336.07CRORES.LATER ON HE PASSED ON AN ORDER U/S/.154 OF THE ACT AND REDUCED THE ASSESSED INCO ME TO RS.251.36 CRORES. ON 26.05.2008,HE ISSUE A NOTICE U/S.148 OF THE NOTICE AS HE WAS OF THE OPINION THAT TAXABLE INCOME HAS ESCAPED ASSESSMENT.HE FINALISED THE RE - ASSESSMENT ON 24.12.2009,U/S.143(3)R.W.S.147 OF THE ACT.T HE REASONS RECORDED FOR RE - OPENING READ AS UNDER: (I) IT WAS SEEN FROM THE RECORDS THAT WHILE COMPUTING THE DEDUCTION U/S 80 - IA, CERTAIN PASS THROUGH COMPONENTS LIKE FUEL ADJUSTMENT CHARGES (FAC), ELECTRICITY DUTY, WHEELING CHARGES, GRID SUPPORT CHARGES ETC. HAVE NOT BEEN CONSIDERED FOR ARRIVING AT THE MARKET VALUE OF THE ELECTRICITY. (II) FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 80 - IA, EXCESS PROFIT FROM THE GENERATION OF ELECTRICITY HAS BEEN SHOWN AS AGAINST '16% RETURN ON INVESTMENT' FIXED BY THE MINISTRY OF POWER. (III) VARIOUS EXPENSES LIKE INTEREST, COMMISSION, BROKERAGE AND CORPORATE OVERHEADS WERE NOT DEBITED TO THE SEPARATE PROFIT & LOSS A/C. FURTHER, SALES AND ADMINISTRATIVE EXPENDITURE IS NOT L&T 4721/13 .A Y.0 2 - 03 2 PROPORTIONATE TO THE EXPENDITURE DEBITED IN CONSOLIDATED P&L A/C TO T HE PROFIT OF 80 - IA UNITS, WHICH HAS RESULTED IN EXCESS DEDUCTION U/S 80 - 1A. (IV) THE ASSESSEE CLAIMED DEDUCTION U/S 80 - IA, 80 - HHB, 80HHBA, 80 - HHC, 80 - HHE ETC. HOWEVER, EXEMPTION CLAIMED U/S 80 - IA WAS NOT REDUCED FROM OTHER CHAPTER VI - A DEDUCTION AS P ER PROVISIONS CONTAINED IN SECTION 80 - IA. V) DEDUCTION U/S.80 - IA WAS WRONGLY CLAIMED IN RESPECT OF WORK ON CONTRACT BASIS FOR VARIOUS GOVT. AGENCIES, WHICH CANNOT BE CONSIDERED AS INFRASTRUCTURE PROVIDER. 2. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM,IT WAS ARGUED THAT ALL THE MATERIAL FACTS RELEVANT TO THE ASSESSMENT WERE DISCLOSED DURING THE ASSESSMENT PROCEEDINGS INCLUDING THE MATTER DEALT WITH IN THE ORDER PASSED U/S.147 OF TH E ACT,THAT THE AO CHANGED HIS OPINION AND ISSUED A NOTICE U/S.148 OF THE ACT .THE FAA DISMISSED THE APPEAL OF THE ASSESSEE AND HELD THAT THE AO HAD NOT APPLIED HIS MIND WHILE MAKING THE ORIGINAL ASSESSMENT,THAT THE QUESTION OF CHANGE IN OPINION DID NOT ARI SE AT ALL,THAT RE - OPENING OF THE ASSESSMENT U/S.148 WAS AS PER LAW. 3 . BEFORE US, THE AUTHORISED REPRESENTATIVE(AR)CONTENDED THAT IN THE SATISFACTION NOTE RECORDED BY THE AO THERE IS NO MENTION OF FAILURE ON PART OF THE ASSESSEE ,THAT IN ABSENCE OF SUCH A S ATISFACTION ASSESSMENT COMPLETED U/S.147 WAS AB INITIO VOID,THAT THE NOTICE WAS ISSUED AFTER FOUR YEARS AND THE PROVISO TO SECTION 147 WAS APPLICABLE,THAT THE ISSUE OF CAPTIVE POWER WAS DISCUSSED BY THE AO IN THE ORIGINAL ORDER,THAT IN THE REASONS RECORDED SAME ISSUE HAD BEEN DISCUSSED.HE REFERRED TO THE CASE OF HINDUSTAN LEVER LTD.( 268ITR332)OF HONBLE BOMBAY HIGH COURT.DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE FAA. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL.WE FIND T HAT THE BASIC QUESTION TO BE DECIDED IS WHETHER THE PRE - REQUISITE FOR RE - OPENING THE MATTER U/S.147 OF THE ACT WERE EXISTING OR NOT.IN THIS CASE RETURN WAS FILED ON 28.10.2002 AND THE NOTICE U/S.148 WAS ISSUE ON26. 05.2008.CLEARLY,THE CASE WAS COVERED BY T HE PROVISIO TO SECTION 147 OF THE ACT AS SAME WAS ISSUED AFTER FOUR YEARS.THE.AO HAS NOWHERE MENTIONED THAT BECAUSE OF THE FAILURE OF THE ASSESSEE TAXABLE INCOME HAD ESCAPED TAXATION.PROVISO TO SECTION 147 CLEARLY STIPULATES THAT FAILURE OF THE ASSESSEE T O DISCLOSE MATERIAL FACTS IS THE ONLY BASIS FOR RE - OPENING THE ASSESSMENT,IF THE NOTICE U/S.148 OF THE ACT IS TO ISSUED AFTER FOUR YEARS.WE FIND THAT WHILE ADJUDICATING THE CASE OF HINDUSTAN LEVER LTD.(SUPRA),THE HONBLE BOMBAY HIGH COURT HAS DELIBERATED U PON AND HAS DECIDED THE ISSUE OF REQUIREMENT OF MENTIONING THE FAILURE OF THE ASSESSEE FOR ISSUING NOTICE U/S.148 IN FOLLOWING MANNER : WHERE AN ASSESSMENT UNDER SUB - SECTION (3) OF SECTION 143 OF THE INCOME - TAX ACT, 1961, HAS BEEN MADE FOR AN ASSESSMENT YE AR, NO ACTION CAN BE TAKEN UNDER SECTION 147 AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESS EE TO DISCLOSE ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. THE REASONS RECORDED FOR ISSUING NOTICE PROVIDE THE LINK BETWEEN CONCLUSION AND EVIDENCE. THE REASONS RECORDED MUST BE BASED ON EVIDENCE. THE ASSESSING OFFICER IN THE EVENT OF CHALLENGE TO THE REASONS, MUST BE ABLE TO JUSTIFY THE SAME BASED ON MATERIAL AVAILABLE ON RECORD. HE MUST DISCLOSE IN THE REASONS AS TO WHICH FACT OR MATERIAL NOT DISCLOSED BY THE ASSESSEE FULLY AND TRULY WAS NECESSARY FOR ASSESSMENT OF THAT ASSES SMENT YEAR, SO AS TO ESTABLISH THE VITAL LINK BETWEEN THE REASONS AND EVIDENCE. THAT VITAL LINK IS THE SAFEGUARD AGAINST ARBITRARY REOPENING OF THE CONCLUDED ASSESSMENT.THE NOTICE WAS CLEARLY BEYOND THE PERIOD OF FOUR YEARS. THE REASONS RECORDED BY THE AS SESSING OFFICER NOWHERE STATED THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT FOR THAT ASSESSMENT YEAR. HENCE, THE ASSESSING OFFICER HAD NO JURISDICTION TO REOPEN THE ASSESSMENT PR OCEEDINGS. THE NOTICE WAS NOT VALID AND WAS LIABLE TO BE QUASHED. L&T 4721/13 .A Y.0 2 - 03 3 IN THE MATTER OF LALITA ASHWIN JAIN(363 ITR 343) ,HONBLE GUJARAT HIGH COURT HAS HELD AS UNDER: THE TWIN CONDITIONS REQUIRED FOR THE SATISFACTION OF THE ASSESSING OFFICER FOR REOPENING AN ASSESSMENT BEYOND THE PERIOD OF FOUR YEARS ARE THAT (I) THERE MUST BE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT ; AND (II) HE ALSO MUST HAVE REASON TO BELIEVE THAT SUCH ESCAPEMENT OF INCOME IS ON ACCOUNT OF OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS FOR ASSESSMENT OF THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. IN THE ABSENCE OF ANY SATISFACTION HAVING BEEN RECORDED BY THE ASSESSING OFFICER AS REQUIRED UNDER THE PROVISO TO SECTION 147 OF THE INCOME - TAX ACT, 1961, THAT THE INCOME HAS ESCAPED ASSESSMENT BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT FOR THE ASSESSMENT YEAR UNDER CONSIDERA TION, THE ASSUMPTION OF JURISDICTION UNDER SECTION 147 OF THE ACT WOULD BE INVALID. RESPECTFULLY,FOLLOWING THE ABOVE DECISION S ,WE REVERSE THE ORDER OF THE FAA,BECAUSE WE FIND THAT IN THE REASONS RECORDED THE AO HAS NOT DEMONSTRATED THE FAILURE OF THE ASS ESSEE IN DISCLOSING THE MATERIAL FACTS THAT RESULTED IN ESCAPEMENT OF INCOME - THERE IS NO PROVERBIAL WHISPER ABOUT THE FAILURE OF THE ASSESSEE. WE HOLD THAT THE ASSESSMENT ORDER , PASSED IN PURSUANCE OF THE 148 NOTICE, WAS NOT A VALID ORDER.EFFECTIVE GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE. AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS ALLOWED . . ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD SEPTEMBER ,2015. 23 , 2015 SD/ - SD/ - ( / SANJAY GARG) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 23 .09.2015 . . . JV. SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BE NCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.