DCIT, New Delhi V. M/s. SPA Enterprises Ltd., New Delhi

ITA 496/DEL/2010

• Counselvise Citation: 49620114 RSA 2010
• Duration Of Justice: 3 year(s) 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 22-07-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 03-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMESH CHANDRA
• Keywords: Reopening of assessment; Question of law; Tangible material; Difference of opinion; Accommodation entries; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH G GG G : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND SHRI SHRI SHRI SHRI I.C.SUDHIR I.C.SUDHIR I.C.SUDHIR I.C.SUDHIR, ,, , JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ITA NO. ITA NO. ITA NO. ITA NO.496/DEL/2010 496/DEL/2010 496/DEL/2010 496/DEL/2010 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2006 2006 2006 2006- -- -07 0707 07 DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CENTRAL CIRCLE CENTRAL CIRCLE CENTRAL CIRCLE CENTRAL CIRCLE- -- -9, 9,9, 9, NEW DEL NEW DEL NEW DEL NEW DELHI. HI.HI. HI. VS. VS. VS. VS. M/S SPA ENTERPRISES LIMITED, M/S SPA ENTERPRISES LIMITED, M/S SPA ENTERPRISES LIMITED, M/S SPA ENTERPRISES LIMITED, 303, D 303, D 303, D 303, D- -- -2, SOUTHERN PARK, 2, SOUTHERN PARK, 2, SOUTHERN PARK, 2, SOUTHERN PARK, DISTRICT CENTRE SAKET, DISTRICT CENTRE SAKET, DISTRICT CENTRE SAKET, DISTRICT CENTRE SAKET, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 020. 110 020. 110 020. 110 020. PAN : PAN : PAN : PAN : AACCS0628R. AACCS0628R. AACCS0628R. AACCS0628R. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAMESH CHANDRA, CIT-DR. RESPONDENT BY : SHRI AJAY WADHWA, ADVOCATE. ORDER ORDER ORDER ORDER PER G. PER G. PER G. PER G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VP VPVP VP : : : : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-II, DELHI DATED 23 RD NOVEMBER, 2009 FOR THE AY 2006-07. 2. THE GROUNDS RAISED BY THE REVENUE READ AS UNDER: - 1.(A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN ANNULLING THE RE-ASSESSM ENT PROCEEDINGS U/S 147 ON THE BASIS OF CHANGE OF OPINI ON BY THE AO ON THE ISSUE OF ALLOWABILITY OF SPONSORSHIP EXPENSES EVEN WHEN THE AO DID NOT COMMENT UPON THI S ISSUE EITHER IN THE ORIGINAL ORDER U/S 143(3) OR IN THE OFFICE NOTE APPENDED THERETO, THE ASSESSEES CLAIM OF SPONSORSHIP EXPENSES HAVING BEING A REASONS FOR R E- OPENING OF THE ORIGINAL ASSESSMENT. 1(B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD.CIT(A) HAS ERRED IN ANNULLING THE RE-ASSESSM ENT PROCEEDINGS U/S 147 WITHOUT GOING IN TO THE MERITS OF THE ADDITIONS INCLUDING THE ADDITION OF RS.2.0 CRORE ON ACCOUNT OF ACCOMMODATION ENTRIES OF RS.2.00 CRORE TAKEN BY THE ASSESSEE FROM M/S B.T.TECHNET LTD., ADMITTEDLY AN E NTRY PROVIDER. ITA-496/DEL/2010 2 3. THE FACTS OF THE CASE ARE THAT THE ORIGINAL ASSE SSMENT UNDER SECTION 143(3) WAS COMPLETED ON 30 TH DECEMBER, 2005 AT THE INCOME OF ` 3,58,02,994/-. THEREAFTER, THE ASSESSING OFFICER I SSUED NOTICE UNDER SECTION 148 ON 24.07.2007 AND REASSESSMENT WA S COMPLETED ON 24.12.2008 AT THE TOTAL INCOME OF ` 5,84,46,500/-. THE LEARNED CIT(A) CANCELLED THE REOPENING WITH THE FOLLOWING FINDING: - 4.9 BASED ON THE ABOVE DISCUSSIONS AND DECISIONS, I AGREE WITH THE CONTENTION OF THE APPELLANT RAISED T HROUGH THESE FOUR GROUNDS THAT IN THE INSTANT CASE ALSO WH ERE REOPENING OF THE ASSESSMENT HAS BEEN DONE PURELY BA SED ON THE CHANGE OF OPINION AND THEREFORE REASSESSMENT PROCEEDINGS HAVE TO BE HELD TO BE INVALID. THE FIR ST FOUR GROUNDS ARE, THEREFORE, DECIDED IN FAVOUR OF THE AP PELLANT. 4. THE REVENUE, AGGRIEVED WITH THE ORDER OF LEARNED CIT(A), IS IN APPEAL BEFORE US. 5. AT THE TIME OF HEARING BEFORE US, IT WAS POINTED OUT BY THE ASSESSEES COUNSEL THAT THE ASSESSMENT HAS BEEN REO PENED ONLY ON THE GROUND THAT THE SPONSORSHIP EXPENSES INCURRED B Y THE ASSESSEE WERE NOT FOR REGULAR RUNNING OF THE BUSINESS AND SH OULD HAVE BEEN CAPITALIZED. THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS UNDER SECTION 143(3), THE ASSESSING OFFICER HAS RAISED TH E QUERY WITH REGARD TO SPONSORSHIP EXPENSES AND THE ASSESSEE HAS FURNIS HED THE REPLY DATED 6.10.2005. THUS, THE ASSESSMENT HAS BEEN REO PENED MERELY ON CHANGE OF OPINION. APART FROM RELYING UPON VARIOUS DECISIONS REFERRED TO IN THE ORDER OF LEARNED CIT(A), HE FURTHER RELIE D UPON THE RECENT DECISION OF HON'BLE JURISDICTIONAL HIGH COURT DATED 12 TH DECEMBER, 2012 IN THE CASE OF CIT VS. ORIENT CRAFT LIMITED IN ITA NO.555/2012. 6. LEARNED DR, ON THE OTHER HAND, RELIED UPON THE O RDER OF THE ASSESSING OFFICER. ITA-496/DEL/2010 3 7. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL PLACED BEFORE US. THE COPY OF REASONS RECORDED FOR ISSUE OF NOTICE UNDER SECTION 148 IS PLACED AT PAGE 29 OF THE ASSESSEES PAPER BOOK, THE RELEVANT PORTION OF WHICH READS AS UNDER:- ASSESSMENT IN THIS CASE WAS COMPLETED U/S 143(3) A T AN INCOME OF RS.35802994/- WHICH WAS SUBSEQUENTLY RECT IFIED AT RS.35602994/-. LATER ON IT WAS NOTICED THAT SPONSORSHIP EXPENSES AMOUNTING TO RS.3554382/- ALLOWED TO THE ASSESSEE W ERE ON ACCOUNT OF PAYMENTS MADE BY THE ASSESSEE ON BEHA LF OF ITS CANDIDATES SEND ABROAD FOR HIGHER STUDIES. AS THE EXPENDITURE INCURRED WAS NOT FOR REGULAR RUNNING OF THE BUSINESS AND HAS ENDURING BENEFITS ON THE BUSINESS OF THE ASSESSEE THE SAME SHOULD HAVE BEEN CAPITALIZED AND ADDED BACK TO THE INCOME OF THE ASSESSEE. I HAVE THEREFORE, REASON TO BELIEVE THAT AN AMOUNT OF RS.3554382/- HAS ESCAPED ASSESSMENT WITHIN THE MEAN ING OF SECTION 147(B) OF THE IT ACT, 1961. 8. HOWEVER, WE FIND THAT DURING THE COURSE OF ASSES SMENT PROCEEDINGS, THE ASSESSING OFFICER HAD RAISED A QUE RY IN THIS REGARD AND THE ASSESSEE HAD FURNISHED THE REPLY THERETO ON 6.10.2005. THEREFORE, THE ASPECT OF THE SPONSORSHIP EXPENSES W AS DULY EXAMINED IN ORIGINAL ASSESSMENT PROCEEDINGS. EVEN FROM THE REASONS RECORDED FOR REOPENING OF ASSESSMENT, IT IS EVIDENT THAT THE ASSESSING OFFICER NOTICED ABOUT THE SPONSORSHIP EXPENSES FROM THE MAT ERIAL ALREADY ON RECORD TAKEN DURING THE ORIGINAL ASSESSMENT PROCEED INGS. THEREFORE, CLEARLY, THE REOPENING OF ASSESSMENT IS ON THE BASI S OF CHANGE OF OPINION BY THE ASSESSING OFFICER. WE FIND THAT IN A RECENT DECISION, HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF OR IENT CRAFT LIMITED (SUPRA) HELD AS UNDER:- 14. IN THE PRESENT CASE THE REASONS DISCLOSE THAT THE ASSESSING OFFICER REACHED THE BELIEF THAT THERE WAS ESCAPEMENT OF INCOME ON GOING THROUGH THE RETURN O F INCOME FILED BY THE ASSESSEE AFTER HE ACCEPTED THE RETURN ITA-496/DEL/2010 4 UNDER SECTION 143(1) WITHOUT SCRUTINY, AND NOTHING MORE. THIS IS NOTHING BUT A REVIEW OF THE EARLIER PROCEED INGS AND AN ABUSE OF POWER BY THE ASSESSING OFFICER, BOTH ST RONGLY DEPRECATED BY THE SUPREME COURT IN CIT VS. KELVINAT OR (SUPRA). THE REASONS RECORDED BY THE ASSESSING OFF ICER IN THE PRESENT CASE DO CONFIRM OUR APPREHENSION ABOUT THE HARM THAT A LESS STRICT INTERPRETATION OF THE WORDS REASON TO BELIEVE VIS-A-VIS AN INTIMATION ISSUED UNDER SE CTION 143(1) CAN CAUSE TO THE TAX REGIME. THERE IS NO WH ISPER IN THE REASONS RECORDED, OF ANY TANGIBLE MATERIAL WHIC H CAME TO THE POSSESSION OF THE ASSESSING OFFICER SUBSEQUE NT TO THE ISSUE OF THE INTIMATION. IT REFLECTS AN ARBITR ARY EXERCISE OF THE POWER CONFERRED UNDER SECTION 147. 15. FOR THE ABOVE REASONS, WE ANSWER THE SUBSTANTIA L QUESTION OF LAW FRAMED BY US IN THE AFFIRMATIVE, IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE APPEAL O F THE REVENUE IS ACCORDINGLY DISMISSED. THERE SHALL BE N O ORDER AS TO COSTS. 9. THUS, HON'BLE JURISDICTIONAL HIGH COURT HAS HELD THAT EVEN IF THERE IS NO REGULAR ASSESSMENT, THE REVIEW OF THE EARLIER PROCEEDINGS IS NOT POSSIBLE. THE CASE OF THE PRESENT ASSESSEE IS MUCH BETTER BECAUSE IN ITS CASE, ORIGINAL ASSESSMENT WAS COMPLETED UNDER S ECTION 143(3) AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER EXAMINED THE ASPECT OF SPONSORSHIP EXPENDITURE. IN VIEW OF THE ABOVE, WE ARE OF THE OPINION THAT THE ABOVE DECISION OF HO N'BLE JURISDICTIONAL HIGH COURT WOULD BE SQUARELY APPLICABLE TO THE CASE OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD THE ORDE R OF LEARNED CIT(A) AND DISMISS THE APPEAL FILED BY THE REVENUE. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 2 ND AUGUST, 2013. SD/- SD/- ( (( (I.C.SUDHIR I.C.SUDHIR I.C.SUDHIR I.C.SUDHIR) )) ) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 02.08.2013 VK. ITA-496/DEL/2010 5 COPY FORWARDED TO: - 1. APPELLANT : DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE CENTRAL CIRCLE CENTRAL CIRCLE CENTRAL CIRCLE- -- -9, NEW DELHI. 9, NEW DELHI. 9, NEW DELHI. 9, NEW DELHI. 2. RESPONDENT : M/S SPA ENTERPRISES LIMITED, M/S SPA ENTERPRISES LIMITED, M/S SPA ENTERPRISES LIMITED, M/S SPA ENTERPRISES LIMITED, 303, D 303, D 303, D 303, D- -- -2, SOUTHERN PARK, 2, SOUTHERN PARK, 2, SOUTHERN PARK, 2, SOUTHERN PARK, DISTRICT CENTRE SAKET, NEW DELHI DISTRICT CENTRE SAKET, NEW DELHI DISTRICT CENTRE SAKET, NEW DELHI DISTRICT CENTRE SAKET, NEW DELHI 110 020. 110 020. 110 020. 110 020. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR