ACIT 16(3), MUMBAI V. DR . BHALCHANDRA LABORATORY, MUMBAI

ITA 4799/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 3163 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 21-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M RAJAN SR
• Keywords: Tangible material; Difference of opinion; Valuation report; Change of opinion; Reassessment proceedings
• Section: 147

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI B BENCH , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & SAKTIJIT DEY ,JUDICIAL MEMBER /. ITA NO. 4799 /MUM/2013 , / ASSESSMENT YEAR - 200 5 - 06 ASTT. CIT - 16(3) MATRU MANDIR, 2 ND FLOOR ROOM NO.206, TARDEO ROAD MUMBAI - 400 007. VS M/S. DR. BHALCHANDRA LABORATORY 215, RAJA RAM MOHAN ROY ROAD GIRGAUM MUMBAI - 400 004. PAN:AAEFD 2538E ( / APPELLANT ) ( / RESPONDENT ) /ASSESSEE BY : SHRI VIJAY MEHTA / RE VENUE BY : SHRI M. RAJAN, SR.AR / DATE OF HEARING : 30 - 09 - 2015 / DATE OF PRONOUNCEMENT : 30 - 09 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 12.03.2015 OF CIT(A) - 27,MUMBAI,THE ASSESSING OFFICER(AO)HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT REOPENING OF THE ASSESSMENT WAS BAD IN LAW IGNORING THE FACTS NOTED BY AO IN PARA 4 TO 4.2 OF THE ASSESSMENT. . 2 WHETHER ON THE FACTS AND CIRCUMSTA NCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING THE EXPENDITURE OF RS. 95 LAKHS U/S 48 OF THE I.T.ACT,1961 HOLDING THAT IT WAS NOT A SELF CREATED ENCUMBRANCE. 3 . WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAVING REJECTED THE VALUATION REPORT / RAT FURNISHED BY THE ASSESEE AND FOLLOWED THE COMPARABLE SALE INSTANCES IN REPORT OF D VO OUGHT TO HAVE ALSO ADOPTED THE VALUE OF PROPERTY AS ON 1.4.1981 . 4 . THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD ANEW GROUND WHICH MAY BE NECESSARY. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED . ASSESSEE - FIRM,ENGAGE IN THE BUSINESS OF MANUFACTURING OF PHARMACEUTICA L,BIOLIGICAL AND CHEMICAL PRODUCTS,FILED ITS RETURN OF INCOME ON 30.08.2005,ADMITTING TAXABLE INCOME OF RS. 5.56CRORES.THE AO COMPLETED THE ASSESSMENT ON 31.12.2007,U/S.143(3) OF THE ACT,DETERMINING INCOME OF THE ASSESSEE AT RS.2,83,81,808/ - .ON 29.03.2011 A NOTICE U/S.148 OF THE ACT WAS ISSUED TO THE ASSESSEE.THE REASONS RECORDED BY THE AO FOR RE - OPENING THE ASSESSMENT READ AS UNDER: THE APPELLANT HAS PAID AN AMOUNT OF R . S 95 LAKHS TO M/S. VIDEOCON PROPERTIES LTD FOR BETTERMENT OF TITLE OF THE PROPERT Y SOLD BY THE APPELLANT FOR AY 2005 - 06. IT IS SEEN THAT APPELLANT HAS ENTERED INTO AN AGREEMENT WITH M/S. VIDEOCON PROPERTIES LTD VIDE AGREEMENT DATED 13.05.1994 TO SELL A PORTION OF LAND AND HAS ACCEPTED EARNEST MONEY OF RS. 38 LAKHS. AS THE APPELLA NT COULD NOT FULFILL CERTAIN CONTRACTUAL OBLIGATIONS HENCE A COURT CASE ENSUED, WHICH ITA/ 4799/13 BHALCHANDRA - 05 - 06 2 RESULTED IN CONSENT TERMS FILED BEFORE HON'BLE HIGH COURT OF BOMBAY, WHEREBY APPELLANT PAID RS. 95 LAKHS TO M/S. VIDEOCON PROPERTIES LIMITED. IN THIS REGARD IT IS PE RTINENT TO MENTION THAT THIS ENCUMBRANCE WAS SELF CREATED SECTION 48 DOES NOT ALLOW THE SAME FOR THE PURPOSE OF CALCULATING THE CAPITAL GAINS. IN VIEW OF THE ABOVE, I HAVE REASONS TO BELIEVE THAT INCOME CHARGEABLE TO TAX OF 95 LAKHS HAS ESCAPED ASS ESSMENT.' THE AO FINALISED THE ASSESSMENT ON 27.12.2011,U/S.143(3)R.W.S.147 OF THE ACT,AT RS.7.42 CRORES. 2. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM IT WAS CONTENDED THAT TH ERE WAS NO FAILURE ON PART OF THE ASSESSEE TO DISCLOSE THE FACTS,THAT ALL THE DOCUMENTS WERE MADE AVAILABLE TO HIM,THAT NO FRESH TANGIBLE MATERIAL CAME IN TO POSSESSION OF THE AO AFTER CONCLUDING THE PROCEEDINGS U/S.143(3)OF THE ACT,THAT THAT THERE WAS NO ALLEGATION OF FAILURE TO DISCLOSE IN THE REASONS RECORDED BY THE AO, THAT THE REASSESSMENT WAS NOT VALID. BESIDES THE JURISDICTIONAL ISSUE THE ASSESSEE MADE SUBMISSION ON THE MERITS OF THE CASE. AFTER CONSIDERING THE ORIGINAL AND RE - OPENED ASSESSMENT ORDER S AND THE SUBMISSIONS OF THE ASSESSEE, THE FAA HELD THAT THE ASSESSEE HAD PLACED REQUIRED MATERIAL BEFORE THE AO,THAT THE AO HAD AFTER CONSIDERING THE AVAILABLE MATERIAL HAD ALLOWED THE CLAIM MADE BY THE ASSESSEE, THAT HE HAD APPLIED HIS MIND,THAT THERE WA S NO FAILURE ON PART OF THE ASSESSEE TO DISCLOSE ALL THE TRUE AND MATERIAL FACTS RELEVANT FOR COMPLETING THE ASSESSMENT,THAT DURING THE REASSESSMENT PROCEEDINGS THE AO HAD NOT CALLED FOR ANY FURTHER DETAILS NOR BROUGHT ANY NEW MATERIAL ON RECORD,THAT THERE WAS MERE CHANGE OF OPINION ON PART OF THE AO,THAT PROCEEDINGS U/S,147COULD NOT BE INITIATED ON CHANGE OF OPINION WITHOUT ESTABLISHING THE FAILURE OF THE ASSESSEE,THAT THE ISSUE WAS EXAMINED IN DETAIL AT THE TIME OF ORIGINAL ASSESSMENT,THAT REOPENING WAS B AD IN LAW.HE DISCUSSED THE MERITS OF THE CASES AND DECIDED THE APPEAL IN FAVOUR OF THE ASSESSEE. 3. BEFORE US,DEPARTMENTAL REPRESENTATIVE(DR)SUPPORTED THE ORDER OF THE AO.THE AUTHORISED REPRESENTATIVE(AR)CONTENDED THAT THE NOTICE U/S.148 WAS ISSUED AFTER F OUR YEARS, THAT THE AO HAD MENTIONED AS TO HOW THE FAILURE OF THE ASSESSEE WAS RESPONSIBLE FOR ESCAPEMENT OF INCOME,THAT THE ASSESSEE HAD DISCLOSED ALL THE NECESSARY FACTS IN THE RETURN OF INCOME.HE RELIED UPON THE CASES OF HINDUSTAN LEVER LTD. (268 ITR 3 32) ; GERMAN REMEDIES LTD.(287 ITR 494);NATIONAL STOCK EXCHANGE OF INDIA LTD.(ITA/4854/MUM/2004 - AY.1996 - 97 DTD.30. 06.2015). 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ASSESSMENT WAS REOPENED AFTER A PERIOD O F FOUR YEARS, THAT THE AO HAD NOT MENTIONED AS TO HOW FAILURE OF THE ASSESSEE HAD RESULTED IN THE ESCAPEMENT OF INCOME. WE ARE OF THE OPINION THAT IF THE AO WANTS TO INVOKE THE PROVISIONS OF S.147 AFTER A PERIOD OF FOUR YEARS,HE HAS TO COMPULSORILY ELABORA TE THAT THERE WAS FAILURE OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY THE RELEVANT FACTS TO DECIDE THE TAXABILITY OF THAT PARTICULAR YEAR. THE COURTS ARE OF THE VIEW THAT NOT ONLY THE FACT OF FAILURE OF THE ASSESSEE HAS TO BE MENTIONED IT HAS TO BE EXPLAIN ED AS TO HOW ASSESSEE HAD FAILED AND HIS FAILURE ENDED IN UNDER ASSESSMENT/ESCAPEMENT OF INCOME. HERE,WE WOULD LIKE TO REPRODUCE THE RELEVANT PORTION OF JUDGMENT OF HINDUSTAN LEVER LTD. (SUPRA)AND IT READS AS UNDER: WHERE AN ASSESSMENT UNDER SUB - SECTION (3) OF SECTION 143 OF THE INCOME - TAX ACT, 1961, HAS BEEN MADE FOR AN ASSESSMENT YEAR, 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 ASSE SSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE ITA/ 4799/13 BHALCHANDRA - 05 - 06 3 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 EVIDE NCE. 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 DI SCLOSED BY THE ASSESSEE FULLY AND TRULY WAS NECESSARY FOR ASSESSMENT OF THAT ASSESSMENT 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 REASONS RECORDED BY THE ASSESSING OFFICER CANNOT BE SUPPLEMENTED BY FILING AN AFFIDAVIT OR MAKING AN ORAL SUBMISSION. SIMILARLY,IN THE CASE OF GERMAN REMEDIES LTD.(SUPRA)THE HONBLE BOMBAY HIGH COURT HAS HELD AS FOLLOW: THAT FAILURE ON THE PART OF THE AS SESSEE TO DISCLOSE FULL AND TRUE MATERIAL HAD NOT BEEN ALLEGED. IN THE CIRCUMSTANCES, THE NOTICE HAVING BEEN ISSUED BEYOND FOUR YEARS FROM THE LAST DATE OF THE RELEVANT ASSESSMENT YEAR WITHOUT ALLEGING ANY FAILURE TO DISCLOSE FULL AND TRUE MATERIAL FACTS W AS LIABLE TO BE SET ASIDE. WHILE GRANTING APPROVAL TO THE NOTICE IT WAS OBLIGATORY ON THE PART OF THE COMMISSIONER TO VERIFY WHETHER THERE WAS ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULL AND TRUE RELEVANT FACTS IN THE RETURN OF INCOME FILED FO R THE ASSESSMENT OF INCOME OF THAT ASSESSMENT YEAR. IT WAS ALSO OBLIGATORY ON THE PART OF THE COMMISSIONER TO CONSIDER WHETHER OR NOT POWER TO REOPEN WAS BEING INVOKED WITHIN A PERIOD OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR TO WHICH THE PROCEEDIN GS RELATED. NONE OF THESE ASPECTS HAD BEEN CONSIDERED BY HIM. THE NOTICES AND CONSEQUENTLY THE ORDER JUSTIFYING REASONS RECORDED WERE UNSUSTAINABLE. RESPECTFULLY, FOLLOWING THE ABOVE TWO DECISIONS OF THE JURISDICTIONAL HIGH COURT,WE DECIDE THE EFFECTIVE GR OUND OF APPEAL AGAINST THE AO AND HOLD THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY INFIRMITY. AS A RESULT,APPEAL FILED BY AO STANDS DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH ,SEPTEMBER,2015. 30 . . , 2015 SD/ - SD/ - ( / SAKTIJIT DEY ) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MU MBAI, /DATE: 30 .09. 2015 . . . JV . SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / ITA/ 4799/13 BHALCHANDRA - 05 - 06 4 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGIS TRAR , / ITAT, MUMBAI.