India Pistons Ltd., CHENNAI V. DCIT, CHENNAI

ITA 496/CHNY/2014

• Counselvise Citation: 49621714 RSA 2014
• Duration Of Justice: 1 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 27-10-2015
• Assessment Year: 1997-1998
• Appeal Filed On: 26-02-2014
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Reopening of assessment; Business income; Difference of opinion; Change of opinion

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , ! ' ! # . $% , & '( BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ ITA NO. 496/MDS/2014 / ASSESSMENT YEAR : 1997-98 M/S. INDIA PISTONS LTD., HUZUR GARDENS, SEMBIUM, CHENNAI 600 011. PAN AAECI1439E APPELLANT) V. THE DEPUTY COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE-II(3), CHENNAI. RESPONDENT) / APPELLANT BY : SHRI R. VIJAYARAGHAVAN, ADVOCATE / RESPONDENT BY : SHRI P. RADHAKRISHNAN, JCIT ! / DATE OF HEARING : 27.10.2015 '# ! / DATE OF PRONOUNCEMENT: 06.11.2015 ) / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) FOR THE ASSESSMENT - - ITA 496/14 2 YEAR 1997-98. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILE D ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 1997-98 ON 28.11. 1997, ADMITTING AN INCOME OF ` 12,52,65,750/-. THE ASSESSMENT WAS MADE U/S.143(3) ON 2.3.2000 DETERMINING THE INCOME AT ` 14,31,70,390/-. SUBSEQUENTLY, THE ASSESSMENT WAS R EOPENED U/S.147 OF THE ACT BY ISSUING A NOTICE U/S.148 OF T HE ACT ON 15.3.2004 AND ASSESSMENT U/S.143(3) R.W. SEC.147 WA S MADE ON 9.3.2005 DETERMINING THE INCOME AT ` 13,55,82,595/-. AGGRIEVED BY THIS, THE ASSESSEE WENT IN APPEAL BEFORE THE COM MISSIONER OF INCOME-TAX(APPEALS). 3. ON APPEAL, THE COMMISSIONER OF INCOME-TAX(APPEAL S) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICE R. AGAINST THIS, THE ASSESSEE CARRIED THE MATTER TO THE TRIBUN AL. 4. ON EARLIER OCCASION, BEFORE THE TRIBUNAL, THE AS SESSEE HAS MOVED PETITION FOR ADMISSION OF ADDITIONAL GROU ND WITH REGARD TO THE VALIDITY OF REOPENING U/S.148 BEYOND 4 YEARS. THE TRIBUNAL VIDE ITS ORDER IN ITA NO.2837/MDS/2007 DAT ED 17.4.2009 SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES. IN VIEW OF THE ABOVE DIRECTIONS OF THIS TRIBUNAL, THE ASSESSING OF FICER - - ITA 496/14 3 COMPLETED THE ASSESSMENT U/S.143(3) R.W.SEC.254 OF THE ACT ON 24.12.2010 ASSESSING THE INCOME T ` 13,55,82,595/- BY MAKING (I) DISALLOWANCE CONTRIBUTION TO WELFARE FUNDS, (II ) DISALLOWANCE OF ROYALTY U/S.40(A)(I) AND (III) RE-WORKING THE DEDUC TION U/S.80HHC OF THE ACT. AGAINST THIS ORDER, THE ASSESSEE WENT IN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX(APPEALS), WHO CONFIRMED THE FINDING OF THE ASSESSING OFFICER REGA RDING REOPENING AS WELL AS THE ABOVE ADDITIONS. AGGRIEVE D, THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LD. AR SUBMITTED THAT IN THIS CASE, THE ASS ESSMENT WAS REOPENED BEYOND 4 YEARS FROM THE END OF RELEVAN T ASSESSMENT YEAR THOUGH THE ORIGINAL ASSESSMENT WAS COMPLETED U/S.143(3) AND THERE IS NO FAILURE ON THE PART OF T HE ASSESSEE TO DISCLOSE ALL MATERIAL FACTS FULLY AND TRULY FOR THE PURPOSE OF ASSESSMENT. FURTHER, IT WAS SUBMITTED THAT THERE I S NO FINDING IN THE REOPENING ASSESSMENT THAT THE ASSESSEE HAS FAIL ED TO DISCLOSE ALL MATERIAL FACTS FULLY AND TRULY NECESSA RY FOR THE PURPOSE OF ASSESSMENT. ACCORDING TO HIM, REASSESSM ENT IS BARRED BY LIMITATION. FURTHER, IT WAS SUBMITTED TH AT THE ASSESSING OFFICER DISCUSSED THE ISSUE OF ALLOWABILITY OF ROYA LTY PAYMENT - - ITA 496/14 4 WHILE FRAMING THE ASSESSMENT U/S.143(3) OF THE ACT. HE DREW OUR ATTENTION TO PARAGRAPH 4 OF THE ASSESSMENT ORDE R PASSED U/S.143(3) DATED 2.3.2000. TO BUTTRESS THE ARGUMEN T, THE LD. AR SUBMITTED THAT THE ISSUE OF DEDUCTION U/S.80HHC WAS ALSO DISCUSSED BY THE ASSESSING OFFICER IN PARAGRAPH 9 AT PAGE 5 OF THE SAID ASSESSMENT ORDER. FURTHER, IT WAS SUBMIT TED THAT THE ISSUE RELATING TO DISALLOWANCE OF CONTRIBUTION TOWA RDS WELFARE FUND, WAS CONSIDERED IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1977-78 IN TC NOS.314 & 315 OF 1984 DATED 11.02.1997 AND THIS ISSUE WAS DECIDED BY THE JURISD ICTIONAL HIGH COURT IN FAVOUR OF THE ASSESSEE BY OBSERVING THAT T HIS EXPENDITURE IS AN ADMISSIBLE DEDUCTION WHILE COMPUT ING THE BUSINESS INCOME OF THE ASSESSEE. THEREFORE, HE SUB MITTED THAT THERE IS NO REASON TO REOPEN THE ASSESSMENT. THE OTHER TWO ISSUES IN DISPUTE, WERE ALSO CONSIDERED BY THE ASSE SSING OFFICER WHILE COMPLETED THE ASSESSMENT U/S.143(3) ORIGINALL Y. 6. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT WHE RE THERE IS AN ASSESSABLE INCOME FOR ANY OF THE ASSESSMENT Y EARS AND THE SAME WAS NOT BROUGHT TO TAX, IT CONSTITUTES A R EASON FOR RE- OPENING THE RETURN U/S.147 OF THE ACT. THE LD. DR FURTHER - - ITA 496/14 5 SUBMITTED THAT WHAT CONSTITUTES THE ESCAPEMENT OF I NCOME HAS ALSO BEEN PROVIDED IN THE PROVISIONS OF SEC.147 OF THE ACT. ACCORDING TO HIM, AS PER THESE PROVISIONS, THE ESCA PEMENT OF INCOME MEANS, I) UNDERSTATEMENT OF INCOME OR CLAIM OF EXCESSIVE L OSS, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN (WHERE THE RETURN OF INCOME HAS NOT BEEN SUBJECTED TO SCRUTINY ASSESS MENT U/S.143(3); OR II) UNDERASSESSMENT OF TAXABLE INCOME, OR ASSESSING THE INCOME AT TOO LOW A RATE, OR GRANTING OF EXCESSIVE RELIEF, OR GRANTING/COMPUTATION OF EXCESSIVE LOSS OR DEPRECIAT ION ALLOWANCE OR ANY OTHER ALLOWANCE, IF THE RETURN WAS ALREADY SUBJECTED TO SCRUTINY ASSESSMENT U/S.143(3). 6.1 THE LD. DR FURTHER SUBMITTED THAT IN THE INSTANT CASE, THE ASSESSEE HAS DEBITED CERTAIN AMOUNTS, BY WAY OF ROYALTY PAYMENTS, IN ITS P&L ACCOUNT AND CLAIMED THE SAME AS ALLOWABLE EXPENSES. HOWEVER THE ASSESSEE HAS NOT DEDUCTED AND OR REMITTED ANY TDS ON THE SAID PAYMENTS. THEREFORE, THE LD. DR SUBMITT ED THAT THE SAID CLAIM OF EXPENSES CLAIMED BY WAY OF ROYALTY PAYMENTS, ARE NOT ALLOWABLE DEDUCTIONS IN V IEW OF THE PROVISIONS OF SEC.40(A) (IA) OF THE ACT. NEI THER THE ASSESSEE DISALLOWED THE SAID EXPENSES WHILE COMPUTING THE TAXABLE INCOME, WHILE FILING THE RETU RN OF - - ITA 496/14 6 INCOME, NOR THE ASSESSING OFFICER DISALLOWED THE SAME WHILE COMPLETING THE ASSESSMENT U/S.143(3) OR U/S.143(3) R.W.S.147 OF THE ACT. FURTHER, THE LD. D R SUBMITTED THAT THE ASSESSEE FAILED TO EXCLUDE 90% O F THE NON-BUSINESS INCOME WHILE COMPUTING THE DEDUCTION U/S.80HHC OF THE ACT. THUS, THERE IS AN UNDERASSESSMENT OF TAXABLE INCOMES ON ACCOUNT OF EXCESS ALLOWANCE OF EXPENSES, WITHIN THE MEANING OF SEC.147 OF THE ACT. ACCORDING TO HIM, THIS IS SUFFI CIENT REASON FOR RE-OPENING THE ASSESSMENT U/S.147 OF THE ACT. THEREFORE, THE LD. DR SUBMITTED THAT AFTER RECORDING THESE REASONS, THE ASSESSING OFFICER RE- OPENED THE ASSESSMENT U/S.147 OF THE ACT, BY ISSUIN G NOTICE U/S.148 OF THE ACT. 6 .2 THUS, ACCORDING TO THE LD. DR, THE ISSUE OF NON-DEDUCTION OF TDS ON ROYALTY PAYMENTS AND ITS DISALLOWABILITY U/S.40(A)(IA) OF THE ACT AND ALSO THE ISSUE OF EXCLUSION OF 90% OF THE OTHER NON-BUSINESS INCOM E FROM THE ELIGIBLE PROFITS FOR THE PURPOSE OF DEDUCTION U/S.80HHC WERE NEVER CONSIDERED BY THE ASSESSING - - ITA 496/14 7 OFFICER AT THE TIME OF ORIGINAL ASSESSMENT U/S.143(3). HENCE, HE SUBMITTED THAT THE QUESTION OF 'CHANGE OF OPINION' DOESN'T APPLY TO THE FACTS OF THE PRESENT SITUATION. 6.3 FURTHER, THE LD. DR SUBMITTED THAT WHEN THERE IS NO DISCUSSION ON THE ISSUE IN THE ASSESSMENT ORDER AND NO DETAILS WERE CALLED FOR BY THE ASSESSING OFFICER OR FILED BY THE ASSESSEE ON THE ISSUE, NO FINDING EITH ER POSITIVE OR NEGATIVE WAS ARRIVED AT DURING THE COUR SE OF THE ORIGINAL ASSESSMENT PROCEEDINGS, THERE IS NO QUESTION OF CHANGE OF OPINION. TO SUPPORT HIS ARGUMENT HE RELIED ON THE FOLLOWING JUDGMENTS: (I) A.L.A. FIRM VS CIT (102 ITR 622)(MAD), (II) ESS KAY ENGINEERING CO (P) LTD. V. CIT(247 ITR 818)(SC) (III) REVATHY C.P. EQUIPMENTS LTD. VS DCLT & ORS (2 41 ITR 856) (MAD) (IV) EMA INDIA LTD. VS ACIT (30 DTR 82) (ALL) 6.4 ACCORDING TO THE LD. DR, CHANGE OF OPINION COMES TO RESCUE OF ASSESSEE ONLY WHEN ASSESSING - - ITA 496/14 8 OFFICER HAS TAKEN ONE OF PERMISSIBLE VIEWS AT THE T IME OF ORIGINAL PROCEEDINGS. A WRONG APPLICATION OF LAW CANNOT BE HELD AS PERMISSIBLE VIEW AND THAT CAN ALW AYS BE CHANGED FOR APPRECIATING LAW, AS HELD BY KOLKATA BENCH OF ITAT IN THE CASE OF SORN DUTT BUILDERS (P) LTD. VS. DCIT 98 ITD 78 (KOL). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. ADMITTEDLY, IN THIS CASE, THE ORIGINAL ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT VIDE ORDER DATED 2.3.2000 AND THE AO CONSIDERED THE ISSU E RELATING TO ROYALTY PAYMENT U/S.40(A)(I) AND HE ALS O APPLIED HIS MIND WITH REFERENCE TO DEDUCTION U/S.80 HHC OF THE ACT, FOR WHICH REASONS WERE RECORDED FOR REO PENING THE ASSESSMENT. FURTHER, NOTICE U/S.148 WAS ISSUED ON 15.3.2004 FOR THE ASSESSMENT YEAR 1997-98 (31.3.199 8). ADMITTEDLY, NOTICE U/S.148 WAS ISSUED BEYOND 4 YEAR S FROM THE END OF THE RELEVANT ASSESSMENT YEAR FOR TH E PURPOSE OF CONSIDERING DISALLOWANCE OF ROYALTY PAYM ENT AND RECOMPUTATION U/S.80HHC. THE AO HAVING APPLIED HIS MIND WHILE FRAMING THE ASSESSMENT U/S.143(3) OF THE - - ITA 496/14 9 ACT CONSIDERED THE ISSUES MENTIONED ABOVE. 8. REOPENING IS PERMITTED ONLY IF THE AO HAS THE SATISFACTION THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN U/S.139 OR IN RESP ONSE TO A NOTICE ISSUED UNDER SEC.142(1) OR SEC.148 OR T O DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR THE PURPOSE OF ASSESSMENT, AS HELD BY THE MADRAS HIGH COURT IN THE CASE OF CIT V. ECO MEDIA (P) LTD. (81 CCH 85). FURTHER, THERE WAS NO FINDING BY THE AO TO RE CORD ANYWHERE HIS SATISFACTION TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. NOTICE U/S.148 OF THE ACT WAS ISSUED BEYOND THE PERIOD OF 4 YEQRS FROM THE END OF THE RELEVANT ASSESSMENT YEAR IS WHOLLY UNSUSTAINABLE AS HELD BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. SCHWING STETTER INDIA P . LTD. (93 CCH 112). THE SAME VIEW WAS FORTIFIED BY THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF CIT V. - - ITA 496/14 10 KELVINATOR OF INDIA LTD. (320 ITR 561). BEING SO, WHEN THE AO FRAMED THE ORIGINAL ASSESSMENT U/S.143(3) OF THE ACT AFTER CONSIDERING THE MATERIALS ON RECORD AND W HEN THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR AS SESSMENT IN ALL THE ISSUES RAISED BY THE AO FOR THE PURPOSE OF REOPENING OF ASSESSMENT, NOTICE U/S.148 OF THE ACT ALONG WITH CONSEQUENTIAL PROCEEDINGS ARE TO BE QUASHED. ACCORDINGLY, WE QUASH THE REASSESSMENT. SINCE, WE HAVE QUASHED REASSESSMENT ITSELF, WE REFRAIN FROM G OING TO THE OTHER GROUNDS ON MERIT. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 6 TH OF NOV., 2015 AT CHENNAI. SD/- SD/- ( $ % . & '( ) ( ) * + , ) DUVVURU RL REDDY - ./012304556037- 8 9: /JUDICIAL MEMBER ! 9:;<<5=1>01>?@AB@3 )8 /CHENNAI, C9 /DATED, THE 6 TH NOV., 2015. MPO* - - ITA 496/14 11 9D EFGF /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H- /CIT(A) 4. H /CIT 5. FIJ K /DR 6. J(L /GF.