JOHNSON & JOHNSON LTD, MUMBAI V. ADDL CIT LARGE TAXPAYER UNIT, MUMBAI

ITA 4912/MUM/2013

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9149 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Assessment Year: 2004-2005
• Appeal Filed On: 27-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Depreciation; Difference of opinion; Competent authority; Reason to believe; Change of opinion; Reassessment proceedings; TDS; Set aside
• Section: 143(3); 142(1); 234B; 274; 264; 48; 13; 147; 148; 139

Judgement Text

, , $ ,% & IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH K, MUMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER . 4912 / /201 3 (. . 2004-05 ) ITA NO. 4912/MUM/2013 (A.Y.2004-05) JOHNSON & JOHNSON PRIVATE LIMITED (EARLIER KNOWN AS JOHNSON & JOHNSON LIMITED) 501, ARENA SPACE, OFF JVLR, BEHIND MAJAS BUS DEPOT, JOGESHWARI (EAST) MUMBAI 400 060 PAN: AAACJ0866E ...... . / APPELLANT VS. ADDITIONAL COMMISSIONER OF INCOME TAX, LARGE TAXPAYER UNIT, 29 TH FLOOR, CENTRE NO.1, WORLD TRADE CENTRE, CUFFE PARADE, MUMBAI 400 005 ..... /0/ RESPONDENT .1/ APPELLANT BY : SHRI RAJAN VORA /01/ RESPONDENT BY : SHRI AKHTAR H. ANSARI 20 / DATE OF HEARING : 29/07/2020 34 20 / DATE OF PRONOUNCEMENT : 10/08/ 2020 / ORDER PER VIKAS AWASTHY, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) -24, MUMBAI (I N SHORT THE CIT (A)) DATED 05/03/2013 FOR THE ASSESSMENT YEAR 2004-05. 2 ITA NO.4912/MUM/2013 (A.Y.2004-05) 2. THE ASSESSEE IN APPEAL HAS ASSAILED REOPENING OF ASSESSMENT, AS WELL AS ADDITIONS/DISALLOWANCES ON MERITS. THE ASSESSEE IN APPEAL HAS RAISED 14 GROUNDS. - GROUNDS OF APPEAL NO.1 TO 5 ARE AGAINST REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE INCOME TAX ACT 1961 (HEREI N AFTER REFERRED TO AS THE ACT); - GROUNDS OF APPEAL NO.6 TO 12 ARE AGAINST DISALLOW ANCE OF ALLEGED EXCESS PROVISION OF ROYALTY; AND - GROUNDS OF APPEAL NO.13 & 14 ARE AGAINST CHARGING OF INTEREST UNDER SECTION 234B OF THE ACT. 3. SHRI RAJAN VORA, APPEARING ON BEHALF OF THE ASSE SSEE MADE THREE FOLD SUBMISSIONS ASSAILING REOPENING UNDER SECTION 147 O F THE ACT. THE FIRST PLANK OF HIS ARGUMENT IS AGAINST INITIATION OF 2 ND REOPENING PROCEEDINGS DURING THE SUBSISTENCE OF FIRST REASSESSMENT PROCEEDINGS. THE LD. AR CONTENDED THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 01/11/2004. THE ASSESSMENT U/S. 143(3) WAS COMPLETED ON 28/11/2006. THE FIRST NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED TO THE ASSESSEE ON 02/07/2008. THE ASSES SEE FILED REPLY TO THE SAID NOTICE ON 23/07/2008 AND FILED RETURN ON 30/07/2008 . NO ACTION WAS TAKEN BY THE ASSESSING OFFICER ON THE REPLY AND THE RETURN F ILED IN RESPONSE TO THE NOTICE. LATER ON, AFTER A GAP OF ALMOST THREE YEARS , SECOND NOTICE UNDER SECTION 148 WAS ISSUED TO THE ASSESSEE ON 29/03/2011. THE L D. AR ASSERTED THAT WHERE THE PROCEEDINGS FROM FIRST NOTICE ISSUED FOR REOPEN ING ASSESSMENT ARE STILL PENDING, SECOND NOTICE ISSUED U/S 147/148 OF THE AC T FOR REOPENING IS BAD IN LAW. TO SUPPORT HIS CONTENTIONS THE LD. AR PLACED R ELIANCE ON THE FOLLOWING DECISIONS: 3 ITA NO.4912/MUM/2013 (A.Y.2004-05) (1) A.S.S.P. & CO. VS. CIT 172 ITR 274 (MAD) (2) CIT VS. P. KRISHNANKUTTY MENON, 181 ITR 237 (K ER) 3.1. THE SECOND PLANK OF ARGUMENT AGAINST REOPENING OF ASSESSMENT BY THE LD. AR OF THE ASSESSE IS, THAT THE SECOND NOTICE FO R REOPENING WAS ISSUED BEYOND THE PERIOD OF FOUR YEARS. THE ASSESSEE COMPL IED WITH THE SECOND NOTICE. THE ASSESSEE VIDE LETTER DATED 19/04/2011 R EQUESTED TO PROVIDE REASONS FOR REOPENING. THE LD. AUTHORIZED REPRESENT ATIVE OF THE ASSESSEE POINTED THAT A PERUSAL OF REASONS RECORDED FOR SECO ND REOPENING DATED 18/3/2011 (AT PAGE 331 OF PAPER BOOK) WOULD SHOW TH AT THE REOPENING IS NOT ON ACCOUNT OF ANY FAILURE ON THE PART OF THE ASSESS EE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. IT IS MERE CHANGE OF OPINION. WHERE ASSESSMENT HAS BEEN REOPENED BEYOND 4 YEARS I T IS MANDATORY THAT ONE OF THE CONDITIONS SET OUT IN PROVISO TO SECTION 147 ARE SATISFIED. TO SUPPORT HIS CONTENTIONS THE LD. AR PLACED RELIANCE ON THE FOLLO WING DECISIONS: (1) TAO PUBLISHING (P) LTD. VS. DY. CIT, 370 ITR 1 35 (BOM.) (2) HINDUSTAN LEVER LTD. VS. R.B. WADKAR, 268 ITR 332 (BOM.) (3) AKSHAR ANSHUL CONSTRUCTION LLP VS. ASSTT. CIT, 264 TAXMAN 65 (BOM.) (4) PARASHURAM POTTERY WORKS CO. LTD. VS. ITO, 10 6 ITR 1(SC) 3.2. THE THIRD ARGUMENT OF LD. AUTHORIZED REPRESENT ATIVE OF THE ASSESSE AGAINST REOPENING IS THAT THE ASSESSING OFFICER WHI LE TAKING PERMISSION FROM THE CIT FOR ISSUING NOTICE UNDER SECTION 148 OF THE ACT HAS EXPRESSED HIS OPINION THAT THE CASE IS TIME BARRED AND HENCE, CAN NOT BE REOPENED AGAIN. HOWEVER, THE CIT IN A MECHANICAL MANNER VIDE COMMUN ICATION DATED 25/03/2011 ACCORDED SANCTION FOR REOPENING THE ASSE SSMENT UNDER SECTION 147 OF THE ACT. THE CIT HAS GIVEN NO REASON WHATSOE VER OVERRULING THE 4 ITA NO.4912/MUM/2013 (A.Y.2004-05) COMMENTS OF ASSESSING OFFICER AGAINST REOPENING OF ASSESSMENT. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE MANNER IN WHICH REASSESSMENT HAS BEEN SANCTIONED BY CIT CLEARLY IND ICATE THAT IT IS WITHOUT JUDICIOUS APPLICATION OF MIND AND IN CONTRAVENTION TO THE PROVISO TO SECTION 147 OF THE ACT. TO BUTTRESS HIS CONTENTIONS, THE LD . AR PLACED RELIANCE ON THE FOLLOWING DECISIONS:- (1) GERMAN REMEDIES LTD. VS. DCIT, 287 ITR 494 (B OM.) (2) MY CAR (PUNE) (PVT.) LTD. VS. ITO, 263 TAXMAN 6 26 (BOM.) (3) SESA STERLITE LTD. VS. ACIT, 417 ITR 334 (BOM.) 3.3. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSES SEE POINTED THAT ASSESSMENT FOR ASSESSMENT YEAR 2004-05 HAS BEEN REO PENED FOR THE REASON THAT EXCESS PROVISION FOR ROYALTY HAS BEEN CREATED IN THE BOOKS OF ACCOUNTS FOR FINANCIAL YEAR 2003-04. THE LD. AUTHORIZED REPRESEN TATIVE OF THE ASSESSEE REFERRED TO DETAILS OF ROYALTY PAYMENT MADE DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR 1999-2000 TO ASSESSMENT YEAR 2005-0 6 (AT PAGE 374 OF PAPER BOOK). THE LD. AUTHORIZED REPRESENTATIVE OF THE ASS ESSEE SUBMITTED THAT A PERUSAL OF THE CHART WOULD SHOW THAT IN ASSESSMENT YEAR 2001-02 AND 2003-04 THERE WAS SHORT PROVISION FOR ROYALTY. ADDITIONAL PROVISION WAS MADE TO COVER SHORT PROVISION IN THE SUBSEQUENT ASSESSMENT YEARS. THE EXCESS PROVISION FOR ROYALTY MADE IN ASSESSMENT YEAR 2004-05 WAS REVERSE D IN ASSESSMENT YEARS 2005-06 AND 2007-08. THE LD. AUTHORIZED REPRESENTAT IVE OF THE ASSESSEE SUBMITTED THAT BY THE TIME SECOND NOTICE FOR REOPEN ING WAS ISSUED TO THE ASSESSE, ASSESSMENT FOR ASSESSMENT YEARS 2005-06 AN D 2007-08 WERE ALREADY COMPLETED. THUS, EXCESS PROVISION MADE DURING 2004 -05 WAS TAX NEUTRAL. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE POINT ED THAT THE ROYALTY WAS PAID 5 ITA NO.4912/MUM/2013 (A.Y.2004-05) IN ACCORDANCE WITH AGREEMENT DATED 14/3/2002 (RELEV ANT EXTRACT AT PAGES 375 TO 377 OF THE PAPER BOOK). 4. PER CONTRA, SHRI AKHTAR H. ANSARI, REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE IMPUGNED ORDER AND THE ACTI ON OF ASSESSING OFFICER IN REOPENING ASSESSMENT. THE LD. DEPARTMENTAL REPR ESENTATIVE SUBMITTED THAT THE ASSESSEE HAD MADE EXCESS PROVISION FOR ROYALTY AS AGAINST ACTUAL PAYMENT OF ROYALTY, THEREFORE, THE ASSESSING OFFICER WAS JU STIFIED IN REOPENING THE ASSESSMENT. THE LD. DEPARTMENTAL REPRESENTATIVE DEF ENDING REOPENING OF ASSESSMENT CONTENDED THAT THE ASSESSING OFFICER HAD TAKEN DUE APPROVAL FROM THE COMPETENT AUTHORITY BEFORE ISSUING NOTICE UNDER SECTION 148 OF THE ACT. THUS, THERE IS NO PROCEDURAL VIOLATION IN ISSUING N OTICE UNDER SECTION 148 OF THE ACT TO THE ASSESSEE. THE LD. DEPARTMENTAL REPRESEN TATIVE POINTED THAT THE OBJECTIONS FILED BY THE ASSESSEE AGAINST REASONS RE CORDED FOR REOPENING WERE DISPOSED OF BY THE ASSESSING OFFICER BY PASSING A S EPARATE SPEAKING ORDER. THE ASSESSEE HAS NOT CHALLENGED THE SAME. THUS, THE GRO UNDS RAISED BY THE ASSESSEE CHALLENGING REOPENING OF ASSESSMENT ARE LI ABLE TO BE DISMISSED. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY RIVAL SIDE S ON THE ISSUE OF REOPENING. THE LD. AUTHORIZED REPRESENTATIVE OF TH E ASSESSEE AT THIS STAGE HAS CONFINED HIS ARGUMENTS ONLY ON THE LEGAL ISSUE CHAL LENGING VALIDITY OF REOPENING OF ASSESSMENT. TO ADJUDICATE THE LEGAL ISSUE ASSAIL ING VALIDITY OF REOPENING OF ASSESSMENT IT WOULD BE IMPERATIVE TO FIRST EXAMINE FACTS IN THE CASE. THE CHRONOLOGY OF EVENTS VITAL TO DECIDE VALIDITY OF RE OPENING ARE TABULATED HEREIN UNDER:- 6 ITA NO.4912/MUM/2013 (A.Y.2004-05) 01/11/2004 RETURN OF INCOME FOR A.Y. 2004-05 FILED BY THE ASSESSE. 28/11/2006 ASSESSMENT U/S. 143(3) OF THE ACT COMPLE TED FOR A.Y.2004-05. 02/07/2008 FIRST NOTICE U/S.148 OF THE ACT ISSUED T O THE ASSESSE. 23/07/2008 ASSESSEES REPLY TO THE NOTICE U/S 148 O F THE ACT. 30/07/2008 RETURN FILED IN RESPONSE TO NOTICE U/S.1 48 OF THE ACT 18/03/2011 REASONS RECORDED FOR REOPENING ASSESSMEN T 2 ND TIME 29/03/2011 SECOND NOTICE ISSUED U/S 148 OF THE ACT 03/08/2011 ORDER PASSED BY THE ASSESSING OFFICER DI SPOSING OF THE OBJECTIONS AGAINST SECOND REASSESSMENT PROCEEDINGS. 10/10/2011 ASSESSMENT ORDER PASSED U/S.143(3) R.W.S . 147 OF THE ACT 6. THE SEQUENCE OF EVENTS HAVE NOT BEEN DISPUTED BY THE DEPARTMENT. FROM PERUSAL OF ABOVE CHART, IT EMERGES THAT AFTER ISSUANCE OF FIRST NOTICE UNDER SECTION 148 OF THE ACT ON 2/07/2008, NO ACTIO N WHATSOEVER WAS TAKEN BY THE ASSESSING OFFICER TO COMPLETE THE REASSESSMENT PROCEEDINGS. THE DEPARTMENT WENT INTO SLUMBER FOR ALMOST THREE YEARS AND, THEREAFTER, REINITIATED REASSESSMENT PROCEEDINGS IN MARCH, 2011 BY ISSUING SECOND NOTICE U/S 148 ON 29/3/2011. ISSUANCE OF SECOND NOTICE UND ER SECTION 148 OF THE ACT WITHOUT COMPLETING PENDING ASSESSMENT PROCEEDINGS U /S. 147 OF THE ACT IS ILLEGAL. THE HON'BLE KERALA HIGH COURT IN THE CASE OF CIT VS. P. KRISHNANKUTTY MENON (SUPRA) HAS HELD THAT THE INCOME TAX OFFICER IS NOT AUTHORISED TO INITIATE SUCCESSIVE REASSESSMENT PROCEEDINGS WHEN A SSESSMENT PROCEEDINGS ARE ALREADY PENDING. THE RELEVANT EXTRACT OF THE JU DGMENT ON THIS ISSUE IS REPRODUCED HEREIN BELOW:- 4. HAVING HEARD THE RIVAL CONTENTIONS, WE ARE OF THE VIEW THAT THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE REASSESSMENTS ARE ILL EGAL AND UNSUSTAINABLE. IT IS COMMON GROUND THAT THE ITO ISSUED NOTICES UNDER SECTION 14 7(B) TO AMBIKA R. MENON, DEVAKI THAMPURAN AND ECHUKUTTY MENON ON 31-3-1975. THE NOT ICE WAS SERVED ON 11-4- 7 ITA NO.4912/MUM/2013 (A.Y.2004-05) 1975. UNDER SECTION 153(2)(B)(II ) OF THE ACT THE A SSESSMENTS, BASED ON THIS NOTICE, SHOULD HAVE BEEN COMPLETED ON OR BEFORE 11-4-1976. IT WAS NOT SO DONE. WHAT MORE THE ASSESSMENT WAS KEPT PENDING. NO FINAL ORDERS WE RE PASSED. APART FROM THE FACT THAT THE ASSESSMENTS, HAVING BEEN MADE AFTER 11-4-1 976, ARE BARRED, A FURTHER NOTICE WAS SENT TO ALL THE LEGAL HEIRS UNDER SECTION 147(A ) ON 21-12-1978. ON THE DAY WHEN SUCH A NOTICE SENT UNDER SECTION 147(A), REASSESSME NT PROCEEDINGS INITIATED UNDER SECTION 147(B) WERE PENDING. THE SECOND NOTICE ISSU ED UNDER SECTION 147(A), DATED 21-12-1978, IS INCOMPETENT AND UNAUTHORISED. THE IT O IS NOT AUTHORISED TO INITIATE SUCCESSIVE REASSESSMENT PROCEEDINGS WHEN ASSESSMENT PROCEEDINGS ARE ALREADY PENDING. WE ARE FORTIFIED IN THIS VIEW BY THE DECISION IN C OMMERCIAL ART PRESS V. CIT [1978] 115 ITR 876 (ALL.). ON THIS SHORT GROUND, THE ASSESSMENTS ARE BARRED AND UNSUSTAINABLE. SIMILAR VIEW HAS BEEN EXPRESSED BY THE HONBLE MADR AS HIGH COURT IN THE CASE OF A.S.S.P. & CO. VS. CIT (SUPRA). THE HONBLE HIGH COURT HELD: 2. . IN FACT, IT IS A SETTLED LEGAL PR INCIPLE THAT ONCE REASSESSMENT PROCEEDINGS ARE INITIATED BY THE ISSUE OF A NOTICE UNDER SECTION 148, THE ORIGINAL PROCEEDINGS ARE SET AT LARGE AND THE FINALITY ATTAC HED TO THE REASSESSMENT ORDER NO LONGER EXISTS AND THE WHOLE ASSESSMENT PROCEEDINGS ARE OPEN FOR A FURTHER CONSIDERATION. IT IS TRUE THAT IT IS NOT NECESSARY TO REVISE THE ORDER IN PURSUANCE OF THAT NOTICE ULTIMATELY AND THE PROCEEDINGS MAY BE D ROPPED. BUT THAT MAKES NO DIFFERENCE TO THE LEGAL PRINCIPLE THAT WHEN THE WHO LE MATTER IS SET AT LARGE, THE ORIGINAL ASSESSMENT CEASES TO BE FINAL AND NO REASS ESSMENT IS POSSIBLE THEREFORE WITHOUT A FRESH ORDER MADE IN PURSUANCE OF THE FIRS T NOTICE ISSUED UNDER SECTION 148. THERE COULD ALSO BE NO DISPUTE THAT AFTER THE REASS ESSMENT ORDER IS MADE IN PURSUANCE OF THE FIRST NOTICE ISSUED UNDER SECTION 148, IF THE ITO HAS ANY REASON TO BELIEVE THAT THERE IS ANY ESCAPEMENT OF THE INCOME WHICH WILL BE COVERED UNDER SECTION 147 OF THE ACT, HE CAN ISSUE FRESH PROCEEDI NGS WITH REFERENCE TO THE REASSESSMENT ORDER ALREADY MADE IN PURSUANCE OF THE NOTICE UNDER SECTION 148 AND IN THAT WAY HE CAN MAKE ANY NUMBER OF TIMES REVISED OR DER BUT THAT CANNOT AFFECT THE POSITION THAT WHEN A RETURN HAS BEEN MADE IN PURSUANCE OF THE NOT ICE UNDER SECTION 148, TILL THAT RETURN IS DISPOSED OF BY ANY ASSESSM ENT ORDER OR REASSESSMENT ORDER, NO FURTHER NOTICE CAN BE ISSUED UNDER SECTION 148. 7. THUS, FROM THE READING OF ABOVE TWO DECISIONS RE NDERED BY HONBLE HIGH COURTS, IT IS EXPLICITLY CLEAR THAT WHERE SECOND NO TICE UNDER SECTION 148 OF THE ACT IS ISSUED DURING THE SUBSISTENCE OF EARLIER REA SSESSMENT PROCEEDINGS, THE SUBSEQUENT REOPENING IS INVALID. IN THE PRESENT CAS E, REASSESSMENT PROCEEDINGS INITIATED IN PURSUANCE TO NOTICE ISSUED UNDER SECTION 148 OF THE ACT ON 02/07/2008 WERE STILL ALIVE. THE ASSESSING O FFICER ISSUED SECOND NOTICE 8 ITA NO.4912/MUM/2013 (A.Y.2004-05) UNDER SECTION 148 OF THE ACT ON 29/03/2011. THE SEC OND NOTICE WAS EVIDENTLY NOT IN CONSONANCE WITH THE LAW SET OUT BY THE HONB LE HIGH COURTS. THUS, THE SECOND NOTICE ISSUED U/S 148 OF THE ACT ON 29/3/201 1 IS BAD IN LAW AND THE SUBSEQUENT PROCEEDINGS ARISING THEREFROM ARE VITIAT ED. 8. WE FURTHER OBSERVE THAT SECOND REASSESSMENT PROC EEDINGS WERE INITIATED AFTER THE EXPIRY OF FOUR YEARS FROM THE E ND OF THE RELEVANT ASSESSMENT YEAR. THE SECOND NOTICE U/S 148 OF THE ACT WAS ISSU ED ON 29/3/2011. PROVISO TO SECTION 147 MANDATES THAT REASSESSMENT PROCEEDINGS CAN BE INITIATED AFTER THE EXPIRY OF FOUR YEARS ONLY IF ONE OF THE FOLLOWING C ONDITIONS ARE SATISFIED: (1) THE ASSESSEE HAS FAILED TO FILE RETURN OF INCOM E U/S. 139 OF THE ACT; OR (2) THE ASSESSEE HAS FAILED TO RESPOND TO NOTICE IS SUED U/S. 142(1) OR SECTION 148 OF THE ACT; OR (3) THE ASSESSEE HAS FAILED TO DISCLOSE FULLY AND T RULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. 9. THE ASSESSE HAS UNDISPUTEDLY FILED RETURN OF INC OME U/S 139 OF THE ACT AND HAS ALSO RESPONDED TO NOTICE ISSUED UNDER SECTI ON 148, THEREFORE, THE FIRST TWO CONDITIONS DOES NOT GET ATTRACTED IN THE PRESEN T CASE. AS REGARDS CONDITION NO. (3), THE REASONS RECORDED FOR REOPENING DOES NO T INDICATE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT IN THE IMP UGNED ASSESSMENT YEAR BY REASON OF FAILURE ON THE PART OF ASSESSEE TO DISCLO SE FULLY AND TRULY ALL THE MATERIAL FACTS, NECESSARY FOR THE ASSESSMENT. THE H ONBLE BOMBAY HIGH COURT IN THE CASE OF HINDUSTAN LEVER LTD. (SUPRA) HAS HEL D: 18. READING OF PROVISO TO SECTION 147 MAKES IT CLEAR T HAT IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHAR GEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SU BSEQUENTLY IN THE COURSE OF THE 9 ITA NO.4912/MUM/2013 (A.Y.2004-05) PROCEEDING UNDER SECTION 147, OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE FOR THE CON CERNED ASSESSMENT YEAR. HOWEVER, WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 HAS BEEN MADE FOR RELEVANT ASSESSMENT YEAR, NO ACTION CAN BE TAKEN UNDER SECTION 147 AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASONS OF THE FAILURE ON THE PART OF THE ASSESS EE TO DISCLOSE ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YE AR . [EMPHASIS SUPPLIED] 19. IN THE CASE IN HAND IT IS NOT IN DISPUTE THAT THE ASSESSMENT YEAR INVOLVED IS 1996- 97. THE LAST DATE OF THE SAID ASSESSMENT YEAR WAS 3 1ST MARCH, 1997 AND FROM THAT DATE IF FOUR YEARS ARE COUNTED, THE PERIOD OF FOUR YEARS EXPIRED ON 1ST MARCH, 2001. THE NOTICE ISSUED IS DATED 5TH NOVEMBER, 2002 AND R ECEIVED BY THE ASSESSEE ON 7TH NOVEMBER, 2002. UNDER THESE CIRCUMSTANCES, THE NOTI CE IS CLEARLY BEYOND THE PERIOD OF FOUR YEARS. 20. THE REASONS RECORDED BY THE ASSESSING OFFICER NOWHE RE STATE THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT OF THAT ASSESSMENT YEA R. IT IS NEEDLESS TO MENTION THAT THE REASONS ARE REQUIRED TO BE READ AS THEY WE RE RECORDED BY THE ASSESSING OFFICER. NO SUBSTITUTION OR DELETION IS PERMISSIBLE . NO ADDITIONS CAN BE MADE TO THOSE REASONS. NO INFERENCE CAN BE ALLOWED TO BE DR AWN BASED ON REASONS NOT RECORDED. IT IS FOR THE ASSESSING OFFICER TO DISCLO SE AND OPEN HIS MIND THROUGH REASONS RECORDED BY HIM. HE HAS TO SPEAK THROUGH HI S REASONS. IT IS FOR THE ASSESSING OFFICER TO REACH TO THE CONCLUSION AS TO WHETHER THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE CONCERNED ASSESSMENT YEAR. IT IS FOR THE ASSESSING OFFICER TO FORM HIS OPINION. IT IS FOR HIM TO PUT HIS OPINION ON RE CORD IN BLACK AND WHITE. THE REASONS RECORDED SHOULD BE CLEAR AND UNAMBIGUOUS AND SHOULD NOT SUFFER FROM ANY VAGUENESS. THE REASONS RECORDED MUST DISCLOSE HIS M IND. REASONS ARE THE MANIFESTATION OF MIND OF THE ASSESSING OFFICER. THE REASONS RECORDED SHOULD BE SELF- EXPLANATORY AND SHOULD NOT KEEP THE ASSESSEE GUESSI NG FOR THE REASONS. REASONS PROVIDE LINK BETWEEN CONCLUSION AND EVIDENCE. THE R EASONS 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 AVAILABL E ON RECORD. HE MUST DISCLOSE IN THE REASONS AS TO WHICH FACT OR MATERIAL WAS NOT DI SCLOSED BY THE ASSESSEE FULLY AND TRULY NECESSARY FOR ASSESSMENT OF THAT ASSESSMENT Y EAR, SO AS TO ESTABLISH VITAL LINK BETWEEN THE REASONS AND EVIDENCE. THAT VITAL LINK I S THE SAFEGUARD AGAINST ARBITRARY REOPENING OF THE CONCLUDED ASSESSMENT. THE REASONS RECORDED BY THE ASSESSING OFFICER CANNOT BE SUPPLEMENTED BY FILING AFFIDAVIT OR MAKING ORAL SUBMISSION, OTHERWISE, THE REASONS WHICH WERE LACKING IN THE MA TERIAL PARTICULARS WOULD GET SUPPLEMENTED, BY THE TIME THE MATTER REACHES TO THE COURT, ON THE STRENGTH OF AFFIDAVIT OR ORAL SUBMISSIONS ADVANCED. [EMPHASIZED BY US] 10 ITA NO.4912/MUM/2013 (A.Y.2004-05) SIMILAR, VIEWS HAVE BEEN REITERATED BY THE HONBLE JURISDICTIONAL HIGH COURT IN TAO PUBLISHING (P) LTD. (SUPRA) & AKSHAR ANSHUL CON STRUCTION LLP (SUPRA). 10. IN THE PRESENT CASE, READING OF THE REASONS FOR REOPENING DOES NOT SUGGEST THAT THE REOPENING OF ASSESSMENT BEYOND FOU R YEARS IS A RESULT OF FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY A ND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. THE PRESENT CASE DOES NOT FALL WITHIN ANY OF THE CONDITIONS SET OUT IN PROVISO TO SECTION 147 OF THE ACT FOR INITIATING REASSESSMENT PROCEEDINGS. ERGO, THE REASSESSMENT IS LIABLE TO BE QUASHED ON THIS GROUND AS WELL. 11. THE THIRD ARGUMENT AGAINST VALIDITY OF REOPENIN G PROCEEDINGS IS THAT THE APPROVAL FOR ISSUE OF SECOND NOTICE UNDER SECTION 1 48 OF THE ACT WAS GIVEN BY THE COMMISSIONER OF INCOME TAX (CIT) IN A MECHANICA L MANNER WITHOUT PROPER APPLICATION OF MIND. THE LD. AUTHORIZED REPRESENTAT IVE OF THE ASSESSE HAS DRAWN OUR ATTENTION TO THE COMMUNICATION DATED 18/0 3/2011 (AT PAGE 327- 328 OF THE PAPER BOOK) ADDRESSED BY THE ASSESSING O FFICER TO THE CIT. THE ASSESSING OFFICER HAS CLEARLY BROUGHT THE FACT TO T HE NOTICE OF CIT THAT THE REASSESSMENT PROCEEDINGS ARE TIME BARRED ON 31/03/2 009 ITSELF AND HENCE, REASSESSMENT ORDER UNDER SECTION 143(3) R.W.S. 147 WAS NOT PASSED WITHIN TIME BARRING LIMIT, THE CASE CANNOT BE OPENED AGAIN. FOR THE SAKE OF READY REFERENCE RELEVANT EXTRACT OF THE AFORESAID COMMUNICATION IS REPRODUCED HEREIN BELOW:- TO THE COMMISSIONER OF INCOME TAX LTU, MUMBAI (THROUGH PROPER CHANNEL) SUB: REOPENING-IN THE CASE OF M/S. JOHNSON & JOHNSO N LTD- A.Y. 2004-05-REG. ******* 11 ITA NO.4912/MUM/2013 (A.Y.2004-05) PLEASE REFER TO THE ABOVE. 2. THIS CASE HAD BEEN RECEIVED ON TRANSFER FROM DCI T-5(2), MUMBAI DATED 06/05/2010. AS PER TRANSFER MEMO, DCIT-52(2), MUMB AI INTIMATED THAT THE CASE FOR A.Y.2004-05 WAS REOPENED U/S.148 DATED 02/07/2008 A ND SERVED UPON ASSESSEE WHO ASKED FOR REASON OF REOPENING VIDE LETTER DATED 23/ 07/2008. HOWEVER, NO FURTHER ACTION IS SEEN ON RECORDS AFTER THAT AND EVEN LETTE R DATED 16/04/2010 OF DCIT-5(2), MUMBAI TO CIT-5, MUMBAI BRINGS OUT THIS FACT. THE REASON FOR REOPENING WAS THAT ITO(TDS)-INTERNAT IONAL TAXATION -3, MUMBAI HAD WRITTEN DATED 06/05/2008 TO ACIT-5(2), MUMBAI THAT ASSESSEE HAD MADE EXCESS PROVISION FOR ROYALTY OF RS.2,85,66,130/- IN ITS BO OKS WHICH WAS MORE THAN THE ACTUAL ROYALTY PAID U/S.195 DURING A.Y. 2004-05. NOW, CASE HAD BEEN TIME BARRED ON 31/03/2009 ITSELF U/S 148, LONG BEFORE CASE WAS TRANSFERRED TO LTU-MUMBAI. EVEN LATER ON THE OFFIC E OF DCIT-5(2), DID NOT TAKE ANY FURTHER ACTION TILL CASE TRANSFER TO LTU ON 06/05/2 010. 3. IN MY OPINION, SINCE CASE HAD BEEN REOPENED U/S 148 BUT ORDER U/S 143(3) R.W.S. 147 WAS NOT PASSED WITHIN TIME BARRING LIMIT , THE CASE CANNOT BE REOPENED AGAIN. HOWEVER, IF IT IS DIRECTED THAT ACTION U/S 148 BE T AKEN, THE APPROVAL MAY NOW BE GIVEN U/S 151. THE PERFORMA IS ENCLOSED SEPARATELY . PLEASE NOTE THAT LAST DATE FOR ISSUE OF SECTION 148 NOTICE IS 31/03/2011 . THE CIT VIDE COMMUNICATION DATED 25/03/2011 ACCORDE D PERMISSION TO THE ASSESSING OFFICER TO REOPEN ASSESSMENT UNDER SECTIO N 147 OF THE ACT IGNORING COMMENTS OF THE ASSESSING OFFICER AND THE REASONS R ECORDED FOR REOPENING. 12. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GE RMAN REMEDIES LTD. VS. DCIT (SUPRA) HAS HELD THAT WHILE GRANTING APPROVAL TO REOPEN ASSESSMENT IT IS OBLIGATORY ON THE PART OF COMMISSIONER TO VERIFY WH ETHER THERE WAS ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULL AND TR UE RELEVANT FACTS IN THE RETURN OF INCOME, WHERE THE ASSESSMENT IS REOPENED BEYOND A PERIOD OF FOUR YEARS. THE HONBLE HIGH COURT OBSERVED: 24. IT IS NOT IN DISPUTE THAT THE ASSESSING OFFICER O N 15-9-2003 HAD HIMSELF CARRIED FILE TO THE COMMISSIONER OF INCOME-TAX AND ON THE V ERY SAME DAY, RATHER SAME 12 ITA NO.4912/MUM/2013 (A.Y.2004-05) MOMENT IN THE PRESENCE OF THE ASSESSING OFFICER, TH E COMMISSIONER OF INCOME-TAX GRANTED APPROVAL. AS A MATTER OF FACT, WHILE GRANTI NG APPROVAL IT WAS OBLIGATORY ON HIS PART TO VERIFY WHETHER THERE WAS ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULL AND TRUE RELEVANT FACTS IN THE RETURN OF INCOM E FILED FOR 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 IS BEING IN VOKED WITHIN A PERIOD OF 4 YEARS FROM THE END OF THE ASSESSMENT YEAR TO WHICH THEY R ELATE. NONE OF THESE ASPECTS HAVE BEEN CONSIDERED BY HIM WHICH IS SUFFICIENT TO JUSTI FY THE CONTENTION RAISED BY THE PETITIONER THAT THE APPROVAL GRANTED SUFFERS FROM N ON-APPLICATION OF MIND. IN THE ABOVE VIEW OF THE MATTER, THE IMPUGNED NOTICES AND CONSEQUENTLY THE ORDER JUSTIFYING REASONS RECORDED ARE UNSUSTAINABLE. THE SAME ARE LIABLE TO BE QUASHED AND SET ASIDE. THE HON'BLE BOMBAY HIGH COURT IN ANOTHER JUDGMENT R ENDERED IN THE CASE OF MY CAR (PUNE) (P.) LTD. VS. ITO (SUPRA) REITERATED THAT WHERE SANCTION HAS BEEN GRANTED BY THE COMMISSIONER WITHOUT APPLICATION OF MIND, THE NOTICE ISSUED UNDER SECTION 148 OF THE ACT IS BAD IN LAW. THE HON BLE HIGH COURT HELD: 8. IT IS A SETTLED POSITION IN LAW THAT GRANT OF THE SANCTION BY THE COMMISSIONER OF INCOME TAX UNDER SECTION 151 OF THE ACT, IS NOT A MECHANICAL ACT ON HIS PART BUT IT REQUIRES DUE APPLICATION OF MIND TO THE REASONS RECORDED BEFORE GRANTING THE SANCTION. THIS HAS BEEN SO PROVIDED AS TO SAFEGUARD AGAINST ISSUE OF REOPENING NOTICE (WHICH SEEK TO DISTURB THE SETTLED POSITION) TO ENSURE THAT ASSESSEE IS NOT TROUBLED WITH REOPENING ISSUES WITHOUT SATIS FACTORY REASONS. THEREFORE, IT MUST PASS MUSTER OF THE SUPERIOR OFFICER IN THE CONTEXT OF SECTIONS 147 AND 148 OF THE ACT, BEFORE IT IS ISSUED TO THE PARTY. 13. IN THE PRESENT CASE, WE OBSERVE THAT THE CIT HA S GRANTED PERMISSION TO THE ASSESSING OFFICER FOR INITIATING REASSESSMENT P ROCEEDINGS WITHOUT PROPERLY EXAMINING REASONS FOR REOPENING. THE REASSESSMENT P ROCEEDINGS WERE INITIATED BEYOND PERIOD OF FOUR YEARS AND NOWHERE IN THE REAS ONS IT HAS BEEN BROUGHT OUT THAT THE ASSESSEE HAS FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. THE CIT HAS NOT RECOR DED HIS SATISFACTION ON THE REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPE NING. FURTHER, THE ASSESSING OFFICER HAD BROUGHT THE FACT TO THE NOTICE OF CIT T HAT EARLIER NOTICE WAS ISSUED UNDER SECTION 148 OF THE ACT ON 02/07/2008, HOWEVER , NO ASSESSMENT ORDER 13 ITA NO.4912/MUM/2013 (A.Y.2004-05) UNDER SECTION 143(3) R.W.S. 147 OF THE ACT WAS PASS ED WITHIN TIME BARRING LIMIT, HENCE, THE CASE CANNOT BE REOPENED AGAIN. THE CIT W ITHOUT COMMENTING ON THE OBSERVATIONS MADE BY THE ASSESSING OFFICER, APP ROVED PERMISSION FOR REOPENING THE ASSESSMENT. EVIDENTLY, THE PERMISSION WAS GRANTED IN A MECHANICAL MANNER WITHOUT APPLICATION OF MIND. THU S, IN THE FACTS OF THE CASE AND IN THE LIGHT OF LAW LAID DOWN BY THE HONBLE JU RISDICTIONAL HIGH COURT, NOTICE DATED 29/3/2011 U/S 148 OF THE ACT IS HELD I NVALID, REASSESSMENT PROCEEDINGS ARISING THEREFROM ARE VITIATED AND HENC E, LIABLE TO BE QUASHED. 14. THE IMPUGNED REASSESSMENT PROCEEDINGS SUFFER FR OM MULTIPLE INCORRIGIBLE LEGAL DEFECTS AND HENCE, ARE UNSUSTAINABLE. THE NOT ICE DATED 29/3/2011 ISSUED U/S 148 OF THE ACT IS ITSELF INVALID. FOR THE DETAI LED REASONS RECORDED ABOVE, WE QUASH REASSESSMENT PROCEEDINGS. THE GROUND NO.1 TO 5 OF THE APPEAL ARE THUS, ALLOWED. 15. SINCE, THE ASSESSE SUCCEEDS ON THE LEGAL GROUND S, THE OTHER GROUNDS RAISED ON MERITS OF ADDITIONS/DISALLOWANCES HAVE BE COME ACADEMIC AND HENCE, ARE NOT TAKEN UP FOR ADJUDICATION. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED IN THE TERMS AFORESAID. ORDER PRONOUNCED ON MONDAY THE 10TH DAY OF AUGUST , 2020. SD/- SD/- (MANOJ KUMAR AGGARWAL) (VIKAS AWAS THY) % / ACCOUNTANT MEMBER / JUDICIAL MEMBER / MUMBAI, 6!/ DATED: 10 /08/2020 VM , SR. PS (O/S) 14 ITA NO.4912/MUM/2013 (A.Y.2004-05) COPY OF THE ORDER FORWARDED TO : 1. . / THE APPELLANT , 2. /0 / THE RESPONDENT. 3. 70 ( )/ THE CIT(A)- 4. 70 CIT 5. 89 /0! , . . . , / DR, ITAT, MUMBAI 6. 9:; <= / GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI