Deputy Commissioner of Income tax, Pune V. M/s. Husco Hydraulics Pvt.Ltd, Pune

ITA 506/PUN/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1589 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-07-2019
• Assessment Year: 2006-2007
• Appeal Filed On: 01-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S B PRASAD
• Keywords: Reopening of assessment; Transfer pricing; International transaction; Tangible material; Difference of opinion; Change of opinion
• Section: 147; 148; 139; 143(3); 92E

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 506 /PUN/201 7 / ASSESSMENT YEAR : 20 0 8 - 09 DY. COMMISSIONER OF INCOME TAX, CIRCLE 9, PUNE ....... / APPELLANT / V/S. M/S. HUSCO HYDRAULICS PVT. LTD., A - 4, TALEGAON INDUSTRIAL AREA, NAVLAKH UMBRE, P.O. - TALEGAON DABHADE, PUNE 410507 PAN : AABCH6810K / RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK REVENUE BY : SHRI S.B. PRASAD / DATE OF HEARING : 05 - 0 7 - 2019 / DATE OF PRONOUNCEMENT : 03 - 0 9 - 2019 / ORDER PER VIKAS AWASTHY, JM : TH IS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 6 , PUNE DATED 30 - 11 - 2016 FOR THE ASSESSMENT YEAR 2008 - 09. 2 ITA NO .506/PUN/2017, A.Y. 2008 - 09 2. THE REVENUE IN APPEAL HAS ASSAILED THE FINDINGS OF COMMISSIONER O F INCOME TAX (APPEALS) BY RAISING FOLLOWING GROUNDS : I ). WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD . CIT(A) WAS JUSTIFIED IN ALLOWING CARRY FORWARD OF LOSS OF RS.12,61,94,699/ - WHEN THE ORIGINAL RETURN FILED BY THE ASSESSEE CANN OT BE CONSIDERED AS VALID RETURN AS THE ASSESSEE FILED ITS RETURN WITHOUT ENCLOSING AUDIT REPORT IN FORM NO. 3CEB AND FAILED TO SUBMIT THE AUDIT REPORT REQUIRED U/S. 92E OF THE ACT ALONG WITH THE RETURN OF INCOME. II) WHETHER ON THE FACTS AND CIRCUM STANCES OF THE CASE AND IN LAW, THE LD . CIT(A) WAS JUSTIFIED IN NOT CONSIDERING THE SECTION 92E & SECTION 139(9) (E) OF THE IT ACT 1961 & IT RULE FORM 3CEB IN PARTICULAR RELATING TO INTERNATIONAL TRANSACTIONS AND SPECIFIED DOMESTIC TRANSACTION WHERE IT IS CLEARLY MENTIONED IN ACTION POINT NO. 3 THAT FORM 3EB MUST BE FURNISHED ON OR BEFORE THE DUE DATE APPLICABLE TO SUCH PERSON FOR FILING ITS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR . III) THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY O F TH E ABOVE GROUNDS OF APPEAL. 3. THE ASSESSEE HAS SUPPORTED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) BY WAY OF APPLICATION UNDER RULE 27 OF THE INCOME TAX APPELLATE TRIBUNAL RULES, 1963. THE SAME ARE UNDER : 1] THE RESPONDENT COMPANY SUBMITS THAT THE REOPENING U/S. 148 IS BAD IN LAW SINCE IT IS BASED ON CHANGE OF OPINION AND ACCORDINGLY, THE REASST. O RDER PASSED U/S. 147 IS NOT JUSTIFIED IN LAW. 2] THE RESPONDENT COMPANY SUBMITS THAT THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE REOPENING WAS NOT BASED ON ANY NEW TANGIBLE MATERIAL AND THEREFORE, THE REOPENING U/S. 148 IS INVALID IN LAW AND ACCORDINGLY, THE REASST. O RDER PASSED U/S. 147 BE DECLARED NULL AND VOID. 4. SHRI S.B. PRASAD REPRESENTING THE DEPARTME NT VEHEMENTLY DEFENDING THE ACTION OF ASSESSING OFFICER IN REOPENING THE ASSESSMENT SUBMITTED THAT UNDISPUTEDLY, THE ASSESSEE HAS NOT FILED AUDIT REPORT IN FORM NO. 3CEB ALONG WITH THE RETURN OF INCOME. THE REPORT IN FORM NO. 3CEB IS 3 ITA NO .506/PUN/2017, A.Y. 2008 - 09 MANDATORY UNDER THE P ROVISIONS OF SECTION 92E OF THE ACT WHERE THE ASSESSEE HAS ENTERED INTO INTERNATIONAL TRANSACTIONS IN THE IMMEDIATELY PRECEDING ASSESSMENT YEARS. THE LD. DR POINTED THAT AS PER THE PROVISIONS OF SECTION 139(9 ) EXPLANATION (E ) OF THE ACT , THE RETURN OF INC OME NOT ACCOMPANIED WITH THE COPIES OF AUDIT REPORT WOULD RENDER THE RETURN DEFECTIVE. IF THE ASSESSEE FAILS TO REMOVE THE DEFECT THE RETURN WOULD BECOME INVALID. IN THE PRESENT CASE, THE ASSESSEE HAS NOT FILED MANDATORY AUDIT REPORT IN FORM NO. 3CEB WIT HIN THE SPECIFIED TIME. HENCE, THE RETURN OF INCOME HAS BECOME INVALID. THE LD. DR PRAYED FOR REVERSING THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN ALLOWING RELIEF TO THE ASSESSEE ON MERITS AND HOLDING THE RETURN OF INCOME AS VALID. 5. ON THE OTHER HAND SHRI NIKHIL PATHAK APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL HAS ENTERED INTO INTERNATIONAL TRANSACTIONS. THUS, THE PROVISIONS OF SECTION 92CA OF THE ACT W ERE ATTRACTED. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 30 - 09 - 2018 DECLARING LOSS OF RS.12,61,94,699/ - . THE ASSESSMENT ORDER U/S. 143(3) R.W.S. 14 4C(1) WAS PASSED ON 07 - 12 - 2011. THEREAFTER, THE ASSESSING OFFICER REOPEN ED THE ASSESSMENT ON THE GROUND THAT THE ASSESSEE HAS NOT FILED AUDIT REPORT IN THE FORM NO. 3CEB AS MANDATED UNDER THE PROVISIONS OF SECTION 92E OF THE ACT. IN THE ABSENCE OF AUDIT REPORT THE RETURN IS DEFECTIVE. SINCE, THE ASSESSEE HAS FAILED TO RECTIF Y THE DEFECT WITHIN THE TIME LIMIT PRESCRIBED , THE RETURN CANNOT BE CONSTRUED AS VALID RETURN. THE ASSESSING OFFICER THUS, ISSUED NOTICE U/S. 148 TO THE ASSESSEE ON 28 - 03 - 2013. 4 ITA NO .506/PUN/2017, A.Y. 2008 - 09 5.1 THE LD. AR SUBMITTED THAT THE REASONS FOR REOPENING DOES NOT CONSTITUTE VALID REASONS FOR INVOKING THE PROVISIONS OF SECTION 147 R.W.S. 148 OF THE ACT. THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE HAD FILED A UDIT R EPORT AS MANDATED IN FORM NO. 3CB ALONG WITH THE RETURN OF INCOME. ADMITTEDLY, THE ASSESSEE FAILED TO FILE R EPORT FROM CHARTERED ACCOUNTANT IN FORM 3CEB AS REQUIRED UNDER THE PROVISIONS OF SECTION 92E OF THE ACT. THE A UDIT R EPORT AS REQUIRED TO FILE U/S. 139(9) AND THE R EPORT FROM CHARTERED ACCOUNTANT ARE TO DIFFERENT REPORTS. THE REPORT IN FORM NO. 3CEB IS NO T A AUDIT REPORT AS REFERRED TO IN THE PROVISIONS OF SECTION 139(9) OF THE ACT. 5.2 THE LD. AR FURTHER SUBMITTED THAT AS PER THE PROVISIONS OF SUB - SECTION (9) OF SECTION 139 , BEFORE DECLARING ANY RETURN AS INVALID THE ASSESSING OFFICER IS UNDER OBLIGATI ON TO ISSUE NOTICE TO THE ASSESSEE TO RECTIFY THE DEFECT WITHIN A PERIOD OF 15 DAYS FROM THE DATE OF SUCH INTIMATION. HOWEVER, IN THE PRESENT CASE, NO SUCH NOTICE WAS ISSUED TO THE ASSESSEE BY ASSESSING OFFICER FOR REMOVING THE DEFECTS. ON THE CONTRARY T HE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS U/S. 271BA FOR NONE FILING OF REPORT IN FORM NO. 3CEB. THE ASSESSING OFFICER VIDE ORDER DATED 25 - 04 - 2011 LEVIED PENALTY OF RS.1 LAKH U/S. 271BA OF THE ACT. THE LD. AR FURTHER CONTENDED THAT AT THE TIME O F FRAMING ASSESSMENT IT WAS VERY MUCH IN THE KNOWLEDGE OF THE ASSESSING OFFICER THAT THE ASSESSEE HAS FAILED TO FILE REPORT IN FORM 3CEB , DESPITE THAT THE ASSESSING OFFICER PROCEEDED WITH THE ASSESSMENT AND PASSED THE ASSESSMENT ORDER ON 07 - 12 - 2011. THERE WAS NO FRESH TANGIBLE MATERIAL THAT HAD COME TO THE NOTICE OF ASSESSING OFFICER FOR REOPENING THE ASSESSMENT. THUS, REOPENING IS A RESULT OF CHANGE OF 5 ITA NO .506/PUN/2017, A.Y. 2008 - 09 OPINION WHICH IS NOT PERMISSIBLE IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENTS. 5.3 AGGRIEVED AG AINST THE REASSESSMENT ORDER DATED 11 - 03 - 2014 THE ASSESSEE FILED APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) CHALLENGING REOPENING OF ASSESSMENT AS WELL AS ADDITION ON MERIT. THE FIRST APPELLATE AUTHORITY REJECTED ASSESSEES GROUND CHALLENGING REOPENING OF ASSESSMENT, HOWEVER, RELIEF WAS GRANTED TO THE ASSESSEE ON ACCOUNT OF CARRIED FORWARD OF LOSSES. THE LD. AR FURTHER POINTED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS HELD THAT RETURN OF INCOME FILED WITHOUT FORM NO. 3CEB CANNOT BE HEL D AS DEFECTIVE. 6. W E HAVE HEARD THE SUBMISSIONS MADE BY REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. THE REVENUE IN APPEAL HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN HOLDING THAT THE RETURN FILED BY THE ASSESSEE WITHOUT REPORT OF ACCOUNTANT IN PRESCRIBED FORM NO. 3CEB AS REQUIRED U/S. 92E OF THE ACT IS VALID. THE LD. DR TO SUPPORT OF HIS CONTENTIONS HAS RELIED ON THE PROVISIONS OF SECTION 139(9) EXPLANATION (E) OF THE ACT. 7. B EFORE PROCEEDINGS FURTHER ON THIS ISSUE IT WOULD BE RELEVANT TO REFER TO THE PROVISIONS OF SUB - SECTION (9) OF SECTION 139 : (9) WHERE THE [ASSESSING] OFFICER CONSIDERS THAT THE RETURN OF INCOME FURNISHED BY THE ASSESSEE IS DEFECTIVE, HE MAY INTIMATE THE DEFECT TO THE ASSESSEE AND GIVE HIM AN OPPORTUNITY TO RECTIFY THE DEFECT WITHIN A PERIOD OF FIFTEEN DAYS FROM THE DATE OF SUCH INTIMATION OR WITHIN SUCH FURTHER PERIOD WHICH, ON AN APPLICATION MADE IN THIS BEHALF, THE 82[ASSESSING] OFFICER MAY, IN HIS DISCRETION, ALLOW; AND IF THE DEFECT IS NOT RECTIFIED WITHIN THE SAID PERIOD OF FIFTEEN DAYS OR, AS THE CASE MAY BE, THE FURTHER PERIOD SO ALLOWED, THEN, NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, THE RETURN SHALL BE TREATED AS AN INVALID RETURN AND THE PROVISIONS OF THIS ACT SHALL APPLY AS IF THE ASSESSEE HAD FAILED TO FURNISH THE RETURN : 6 ITA NO .506/PUN/2017, A.Y. 2008 - 09 PROVIDED THAT WHERE THE ASSESSEE RECTIFIES THE DEFECT AFTER THE EXPIRY OF THE SAID PERIOD OF FIFTEEN DAYS OR THE FURTHER PERIOD ALLOWED, BUT BEFORE THE ASSESSMENT IS MADE, THE [ASSESSING] OFFICER MAY CONDONE THE DELAY AND TREAT THE RETURN AS A VALID RETURN. A BARE PERUSAL OF PROVISIONS OF SUB - SECTION (9) REVEAL THAT WHERE THE RETURN OF INCOME FURNISHED BY THE ASSESSEE IS DEFECTIVE , FOR WHATEVER REASONS, THE ASSESSING OFFICER SHALL INTIMATE THE DEFECT TO ASSESSEE AND GIVE HIM AN OPPORTUNITY TO RECTIFY THE DEFECT WITHIN A PERIOD OF 15 DAYS FROM THE DATE OF SUCH INTIMATION. IN CASE, THE DEFECT IS NOT RECTIF IED WITHIN THE AFORESAID PER IOD OR THE EXTENDED PERIOD ALLOWED BY THE ASSESSING OFFICER , THE RETURN OF INCOME WOULD BECOME INVALID. THUS, BEFORE THE RETURN IS HELD TO BE INVALID BY VIRTUE OF ANY DEFECT, IT IS INCUMBENT UPON THE ASSESSING OFFICER TO GIVE AN OPPORTUNITY TO THE ASSESSE E TO RECTIFY THE DEFECT WITHIN A SPECIFIED TIME. 8. IN THE INSTANT CASE, NO MATERIAL HAS BEEN PLACED ON RECORD BY THE DEPARTMENT TO SHOW THAT AFTER HAVING COMING TO KNOW ABOUT THE ALLEGED DEFECT OF ABSENCE OF AUDIT REPORT WITH RETURN OF INCOME , THE ASSESS ING OFFICER HAS GIVEN ANY NOTICE/INTIMATION TO THE ASSESSEE FOR REMOVING THE DEFECT. THE LD. AR HAS POINTED THAT THE ACCOUNTS OF THE ASSESSEE ARE SUBJECT TO AUDIT AND THE ASSESSEE HAD FILED RETURN OF INCOME ALONG WITH THE AUDIT REPORT IN PRESCRIBED FORM N O. 3CB. ADMITTEDLY, THE ONLY ERROR COMMITTED BY THE ASSESSEE IS THAT REPORT FROM THE ACCOUNTANT IN FORM NO. 3CEB AS REQUIRED U/S. 92E HAS NOT BEEN FILED. IN OUR CONSIDERED OPINION, THE REPORT IN FORM NO. 3CEB IS NOT THE AUDIT REPORT AS ENVISAGED IN EXPLA NATION : CLAUSE (E) OF SUB - SECTION (9) OF SECTION 139 OF THE ACT. THE ASSESSEE HAS FILED AUDIT REPORT IN FORM 3CB. 7 ITA NO .506/PUN/2017, A.Y. 2008 - 09 DE HORS THE NATURE OF AUDIT REPORT FILED BY THE ASSESSEE, A FTER EXAMINING THE DOCUMENTS FILED ALONG WITH THE RETURN OF INCOME, THE ASSESSING OFFICER WAS DUTY BOUND TO INTIMATE THE DEFECT , IF ANY IN RETURN. IN THE ABSENCE OF ANY INTIMATION TO THE ASSESSEE REGARDING DEFECT IN THE RETURN OF INCOME , T HE ASSESSING OFFICER CANNOT DECLARE THE RETU RN INVALID. WE DO NOT FIND ANY MERIT IN THE GROUNDS RAISED BY THE REVENUE. THE SAME ARE DISMISSED , ACCORDINGLY . 9. THE ASSESSEE HAS FILED AN APPLICATION UNDER RULE 27 ASSAILING THE ACTION OF COMMISSIONER OF INCOME TAX (APPEALS) IN UPHOLDING VALIDITY O F REOPENING U/S. 148 OF THE AC T . 10. A PERUSAL OF REASONS RECORDED FOR REOPENING REVEAL THAT THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 148 AS THE ASSESSEE HAS NOT FILED REQUISITE REPORT IN FORM N O . 3CEB ALONG WITH THE RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR . IN THE ABSENCE OF SUCH REPORT, THE RETURN WAS HELD AS INVALID. THE ASSESSING OFFICER WAS OF THE VIEW THAT ASSESSMENT HAS BEEN MADE ON INVALID RETURN. 11. THE FACT THAT THE ASSESSEE HAS NOT FILED REPORT FROM ACCOUNTANT IN FORM NO. 3CEB WAS IN THE KNOWLEDGE OF ASSESSING OFFICER EVEN AT THE TIME OF MAKING ORIGINAL ASSESSMENT. THIS FACT IS VERY MUCH EVIDENT AS THE ASSESSING OFFICER PASSED ORDER LEVYING PENALTY U/S. 271BA OF THE ACT FOR NON - FILING OF REPORT FROM THE ACCOUNTANT AS REQUIRED U/S. 92E ON 25 - 04 - 2011. THE ASSESSMENT ORDER U/S. 143(3) IS SUBSEQUENT TO THE ORDER LEVYING PENALTY U/S. 271BA. THUS, NO NEW INCRIMINATING MATERIAL HAS COME TO THE KNOWLEDGE OF ASSESSING OFFICER FOR REOPENING THE ASSESSMENT. 8 ITA NO .506/PUN/2017, A.Y. 2008 - 09 IT IS A CLEAR CASE OF CHANGE OF OPINION. THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF COMMISSIONER OF INCOME TAX VS. KELVINATOR OF INDIA LTD. REPORTED AS 320 ITR 561 HAS HELD THAT INVOKING THE PROVISIONS OF SECTION 148 R.W.S. 147 BY ASSESSING OFFICER ON CHANGE OF OPINION IS NOT PERMISSIBLE. THUS, WE FIND MERIT IN THE GROUNDS RAISED BY THE ASSESSEE BY WAY OF APPLICATION UNDER RULE 27. THE ASSESSEE SUCCEEDS ON THE GROUNDS RAISED THEREIN. 12. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED AND THE APPLICATION O F ASSESSEE UNDER RULE 27 IS ALLOWED. ORDER PRONOUNCED ON TUESDAY, THE 03 RD DAY OF SEPTEMBER, 2019. SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 03 RD SEPTEMBER, 2019 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 6 , PUNE 4. THE PR. COMMISSIONER OF INCOME TAX - 5 , PUNE 5. , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. // // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE