Southern Cashew Exporters, Kollam V. DCIT, Kollam

ITA 529/COCH/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58287 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2002-2003
• Appeal Filed On: 27-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAYAPRABHA
• Assessee Lawyers: IYPE MATHEW
• Section: 143(3); 142(1); 80HHC; 148; 139

Judgement Text

1 ITA NO.529/COCH/2010 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKARA N(AM) I.T.A NO. 529/COCH/2010 (ASSESSMENT YEAR 2002-03) M/S SOUTHERN CASHEW EXPORTERS VS DY.CIT, CIR.1 CHANDANATHOPE, KOLLAM KOLLAM PAN : AAEFM2115N (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI IYPE MATHEW RESPONDENT BY : SMT. VIJAYAPRABHA DATE OF HEARING : 29-02-2012 DATE OF PRONOUNCEMENT : 02-03-2012 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, TRIVANDRUM FO R THE ASSESSMENT YEAR 2002-03. 2. SHRI IYPE MATHEW, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE AS SESSEE FILED RETURN OF INCOME ON 27-08-2002 DISCLOSING TOTAL INCOME AT RS.14,04,537 . THE ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 147 AFTER REOPENING THE ASSESSMENT U/S 147 ON 14- 09-2007 DETERMINING THE TOTAL INCOME AT RS.22,78,880 . AFTER EXPIRY OF FOUR YEARS, THE ASSESSING OFFICER REOPENED THE ASSESSMENT FOR T HE SECOND TIME ON THE BASIS 2 ITA NO.529/COCH/2010 OF THE JUDGMENT OF THE APEX COURT IN THE CASE OF RA VEENDRANATHAN NAIR VS COMMISSIONER OF INCOME-TAX 295 ITR 228 (SC). REFERR ING TO THE REASONS RECORDED BY THE ASSESSING OFFICER, THE LD.REPRESENTATIVE SUB MITTED THAT THERE IS NO NEGLIGENCE ON THE PART OF THE ASSESSEE IN DISCLOSIN G THE MATERIAL FOR COMPLETING THE ASSESSMENT. ACCORDING TO THE LD.REPRESENTATIVE , WHEN THE ASSESSEE HAS DISCLOSED ALL THE PARTICULARS FOR COMPLETING THE AS SESSMENT, THE ASSESSMENT CANNOT BE REOPENED ON THE GROUND THAT THE INCOME HA S ESCAPED ASSESSMENT AFTER EXPIRY OF FOUR YEARS. REFERRING TO THE REASO NS RECORDED BY THE ASSESSING OFFICER, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUB MITTED THAT THE ASSESSING OFFICER HAS NOT WHISPERED ANYTHING ABOUT THE NEGLIGENCE ON THE PART OF THE ASSESSEE IN DISCLOSING THE MATERIAL NEEDED FOR THE ASSESSMENT. ONCE THE ASSESSEE DISCLOSED ALL THE MATERIALS WHICH ARE NECESSARY FOR COMPLETIN G THE ASSESSMENT, IT CANNOT BE REOPENED AFTER EXPIRY OF FOUR YEARS. THE LD.REPRES ENTATIVE PLACED HIS RELIANCE ON THE DECISION OF THIS BENCH OF THE TRIBUNAL IN ASSIS T.COMMISSIONER OF INCOME-TAX VS ANU CASHEWS ITA NO. 242/COCH/2009 & CO NO.24/COCH/2 009 ORDER DATED 20/01/2012 AND THE JUDGMENT OF THE BOMBAY HIGH COUR T IN HINDUSTAN LEVER LTD VS R.B. WADKAR (2004) 268 ITR 332 (BOM). 3. ON THE CONTRARY, SMT. VIJAYAPRABHA, THE LD.DR SU BMITTED THAT NO DOUBT THE ASSESSMENT WAS REOPENED AFTER EXPIRY OF FOUR YEARS. HOWEVER, IN VIEW OF EXPLANATION 1 TO SECTION 147 MERE PRODUCTION OF BOO KS OF ACCOUNT BEFORE THE ASSESSING OFFICER FROM WHICH THE MATERIAL EVIDENCE COULD HAVE BEEN DISCOVERED BY THE ASSESSING OFFICER WOULD NOT NECESSARILY AMOU NT TO DISCLOSURE WITHIN THE MEANING OF SECTION 147 OF THE ACT. THEREFORE, MERE LY BECAUSE THE ASSESSEE PRODUCED SOME BOOKS OF ACCOUNT / DOCUMENT BEFORE TH E ASSESSING OFFICER, THAT WOULD NOT AMOUNT TO FULL DISCLOSURE. 3 ITA NO.529/COCH/2010 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE RETURN OF INC OME FOR THE YEAR UNDER CONSIDERATION WAS FILED ON 27-08-2002. AN ASSESSMENT U/S 143(3) R.W.S. 147 OF THE ACT AFTER REOPENING THE ASSESSMENT WAS ALSO COM PLETED ON 14-09-2007 DETERMINING THE TOTAL INCOME AT RS.22,78,880. SUBS EQUENTLY, THE APEX COURT IN THE CASE OF RAVEENDRANATHAN NAIR VS COMMISSIONER OF INCOME-TAX 295 ITR 228 (SC) FOUND THAT THE PROCESSING CHARGES ARE INDEPEND ENT INCOME LIKE RENT, COMMISSION, BROKERAGE, ETC. AND THEREFORE, 90% OF TH E PROCESSING CHARGES HAVE TO BE REDUCED FROM THE GROSS TOTAL INCOME TO ARRIVE AT THE BUSINESS PROFIT. IN ORDER TO COMPLY WITH THE VIEW TAKEN BY THE SUPREME C OURT IN THE CASE OF RAVEENDRANATHAN NAIR VS COMMISSIONER OF INCOME-TAX ( SUPRA), THE ASSESSING OFFICER REOPENED THE ASSESSMENT FOR THE SECOND TIME U/S 147 OF THE ACT BY ISSUING NOTICE U/S 148 OF THE ACT. 5. WE HAVE CAREFULLY GONE THROUGH THE PROVISO TO SE CTION 147 OF THE INCOME- TAX ACT. PROVISO TO SECTION 147 CLEARLY SAYS THAT WHERE AN ASSESSMENT WAS COMPLETED U/S 143(3) OR U/S 147 FOR THE RELEVANT AS SESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER EXPIRY OF FOUR YEA RS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS THE INCOME CHARGEABLE TO TAX ARE ESCAPED ASSESSMENT DUE TO FAILURE OF THE ASSESSEE TO FILE A RETURN U/S 139 OR IN RESPONSE TO NOTICE ISSUED U/S 142(1) OR 148 OR HAS NOT DISCLOSED FULLY OR TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. THE FOUR YEARS PERIOD F ROM THE END OF THE RELEVANT ASSESSMENT YEAR EXPIRED ON 31-03-2007. ADMITTEDLY, T HE NOTICE U/S 148 FOR REOPENING THE ASSESSMENT FOR THE SECOND TIME WAS IS SUED ON 04-03-2009. THEREFORE, THE NOTICE ISSUED FOR REOPENING THE ASSE SSMENT FOR THE SECOND TIME WAS ISSUED AFTER THE EXPIRY OF FOUR YEARS. NOW, TH E QUESTION ARISES FOR CONSIDERATION IS WHETHER THERE WAS ANY NEGLIGENCE O N THE PART OF THE ASSESSEE IN 4 ITA NO.529/COCH/2010 DISCLOSING ALL THE MATERIALS FOR COMPLETION OF THE ASSESSMENT. THE ASSESSEE HAS PRODUCED COPY OF THE REASONS RECORDED BY THE ASSESS ING OFFICER FOR REOPENING THE ASSESSMENT. THE COMMISSIONER OF INCOME-TAX(A) HAS ALSO REPRODUCED THE SAID REASONS IN THE IMPUGNED ORDER. FOR THE PURPOSE OF C ONVENIENCE, WE ARE REPRODUCING THE REASONS RECORDED BY THE ASSESSING O FFICER WHILE ISSUING NOTICE U/S 148 OF THE INCOME-TAX ACT: AS PER THE LATEST SUPREME COURTS DECISION REPORT ED IN SRI K. RAVEENDRANATHAN NAIR (295 ITR 228) GROSS PROCESSING CHARGES RECEIVED HAS TO BE INCLUDED IN THE TOTAL TURNOVER F OR THE PURPOSE OF DEDUCTION U/S 80HHC AND 90% OF THE SAME IS TO BE DE DUCTED FROM THE BUSINESS PROFITS FOR THE COMPUTATION OF DEDUCTI ON U/S 80HHC. EXCESS DEDUCTION CLAIMED ON ACCOUNT OF THE ABOVE IS RS.1131027/-. ALSO THE ASSESSEE HAS CLAIMED A SUM OF RS.67156/- AS LOSS ON OUTSIDE PROCESSING WITHOUT FURNISHING ANY SUPPORTIN G DOCUMENTARY EVIDENCE. THE SAME IS THEREFORE INADMISSIBLE. A BARE READING OF THE REASONS RECORDED BY THE ASSES SING OFFICER CLEARLY SHOWS THAT ON ACCOUNT OF THE JUDGMENT OF THE APEX COURT IN K RA VEENDRANATHAN NAIR (SUPRA) GROSS PROCESSING CHARGES HAVE BEEN INCLUDED IN THE TOTAL TURNOVER FOR THE PURPOSE OF DEDUCTION U/S 80HHC. THE ASSESSING OFFI CER DOES NOT SAY THAT THERE WAS ANY NEGLIGENCE ON THE PART OF THE ASSESSEE IN D ISCLOSING THE MATERIAL FACTS BEFORE THE ASSESSING OFFICER. THE LD.DR CONTENDS T HAT MERE PRODUCTION OF BOOKS OF ACCOUNT WOULD NOT AMOUNT TO PRODUCING ALL THE MA TERIAL FACT RELEVANT FOR COMPLETION OF THE ASSESSMENT IN VIEW OF EXPLANATION 1 TO SECTION 147. THE DEPARTMENT COULD NOT POINT OUT ANY SPECIFIC DOCUMEN T OR MATERIAL THAT WAS REQUIRED FOR COMPLETING THE ASSESSMENT WHICH THE AS SESSEE FAILED TO FILE BEFORE THE ASSESSING OFFICER. A GENERALIZED ALLEGATION TH AT MERE PRODUCTION OF BOOKS OF ACCOUNT DOES NOT AMOUNT TO PRODUCING ALL THE MATERI AL FACTS RELEVANT FOR THE ASSESSMENT CANNOT BE A REASON FOR REOPENING THE ASS ESSMENT AFTER EXPIRY OF FOUR 5 ITA NO.529/COCH/2010 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. IT IS FOR THE ASSESSING OFFICER TO POINT OUT WHICH WERE THE DOCUMENTS / MATERIAL FA CTS THAT WERE NOT FURNISHED BY THE ASSESSEE SO AS TO COME TO A CONCLUSION THAT THE ASSESSEE HAS FAILED TO FURNISH ALL THE MATERIAL FACTS RELEVANT FOR ASSESSM ENT AND THUS INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IN THE ABSENCE OF A NY SUCH ALLEGATION THAT THE ASSESSEE FAILED TO PRODUCE NECESSARY MATERIAL BEFOR E THE ASSESSING OFFICER, THIS TRIBUNAL IS OF THE OPINION THAT THE ASSESSMENT CANN OT BE REOPENED AFTER FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. 6. WE HAVE ALSO CAREFULLY GONE THROUGH THE ORDER OF THIS TRIBUNAL IN THE CASE OF ANU CASHEWS (SUPRA). IN THE CASE OF ANU CASHEWS (SUPRA) A SIMILAR CONTENTION WAS RAISED BY THE LD.DR. THIS TRIBUNAL FOUND THAT THE DETAILS REGARDING PROCESSING CHARGES ARE AVAILABLE ON RECORD. THE ASSESSING OFF ICER COULD VERY WELL ASCERTAIN THE GROSS PROCESSING CHARGES FROM THE MATERIAL AVAI LABLE ON RECORD. IN THE CASE OF ANU CASHEWS (SUPRA) ALSO THE ASSESSMENT PROCEEDINGS WERE REOPENED ON THE BASIS OF JUDGMENT OF THE APEX COURT IN K RAVEENDRANA THAN NAIR (SUPRA). AFTER CONSIDERING ITS EARLIER DECISION IN THE CASE OF DY. CIT VS M/S KERALA NUT FOOD CO IN ITA NO.97 TO 99/COCH/2010 DATED 24-08-2011 THIS TRIBU NAL FOUND THAT THERE WAS NO NEGLIGENCE ON THE PART OF THE ASSESSEE IN DISCLO SING THE DETAILS FOR COMPLETING THE ASSESSMENT. WHEN THE MATERIAL FOR COMPUTING TH E BUSINESS PROFIT AND PROCESSING CHARGES ARE AVAILABLE ON RECORD, THE DEP ARTMENT CANNOT TAKE SHELTER UNDER EXPLANATION 1 TO SECTION 147 AFTER EXPIRY OF FOUR YEARS. IN VIEW OF PROVISO TO SECTION 147, THE ASSESSING OFFICER HAS TO NECESS ARILY ESTABLISH THAT THERE WAS NEGLIGENCE ON THE PART OF THE ASSESSEE IN DISCLOSIN G THE MATERIAL NECESSARY FOR COMPLETION OF ASSESSMENT. IN THE ABSENCE OF ANY MA TERIAL TO SHOW THAT THERE WAS ANY NEGLIGENCE ON THE PART OF THE ASSESSEE IN DISCL OSING THE MATERIAL FACT NECESSARY FOR COMPLETION OF ASSESSMENT, THE ASSESSI NG OFFICER CANNOT REOPEN THE 6 ITA NO.529/COCH/2010 ASSESSMENT AFTER EXPIRY OF FOUR YEARS. THEREFORE, RELYING ON THE DECISION OF THIS TRIBUNAL IN THE CASE OF ANU CASHEWS (SUPRA) AND FOR THE REASONS STATED THEREIN, THIS TRIBUNAL HOLD THAT REOPENING THE ASSESSMENT AF TER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR IS INVALID. THE RE-ASSESSMENT PROCEEDINGS, CONSEQUENT TO THE REOPENING OF THE ASS ESSMENT HAS NO INDEPENDENT LEG TO STAND. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE. 7. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 02 ND DAY OF MARCH, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 02 ND MARCH, 2012 PK/- COPY TO: 1. M/S SOUTHERN CASHEW EXPORTERS, CHANDANATHOPE, KOLLAM 2. DY.CIT, CIR.1, KOLLAM 3. THE COMMISSIONER OF INCOME-TAX(A)-I, TRIVANDRUM 4. THE C.I.T., TRIVANDRUM 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH