ACIT CIR 15(1), MUMBAI V. SRUSTI DIAM, MUMBAI

ITA 5492/MUM/2009

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8765 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 06-08-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 06-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K KIVED
• Keywords: Tangible material; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI I BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI VIJAY PAL RAO, JM & SHRI N K BILLAIYA, AM ITA NO. 5492/MUM/2009 (ASST YEAR 2004-05) THE ASST COMMR OF INCOME TAX CIR 15(1), MUMBAI VS SRUSTI DIAM 107 THE JEWEL M P MARG OPERA HOUSE MUMBAI 400 004 (APPELLANT) (RESPONDENT) PAN NO. AAWFS3133N ASSESSEE BY SHRI K KIVED REVENUE BY SH SANJIV DUTT DT.OF HEARING 6 TH AUG 2012 DT OF PRONOUNCEMENT 26 TH , SEPT 2012 PER VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 22.7.2009 OF THE COMMISSIONER OF INCOME TAX (APPEALS) FOR THE AS SESSMENT YEAR 2004-05. 2 THE REVENUE HAS RAISED THE ONLY GROUND AS UNDER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAWS, THE LD COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN DELETIN G THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF LABOUR CHARGES AMOUNTING TO ` 2,68,84,116/- AFTER IGNORING THE FACT THAT THE ASSE SSING OFFICER HAS DETERMINED THE AMOUNT OF INFLATION OF LABOUR CHARGE S BACKED BY FACTS. 3 THE REVENUE HAS ALSO RAISED AN ADDITIONAL GROUND AS UNDER: THE LD COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N LAW IN NOT SUSTAINING THE REOPENING THE ASSESSMENT U/S 147 IGNORING THE FA CT THAT THE ASSESSING OFFICER HAS VALIDLY RECORDED REASONS TO BELOW THAT INCOME HAS ESCAPED THE ASSESSMENT FOR ASSESSMENT YEAR 2004-05 ON ACCOUNT OF EXCESSIVE CLAIM OF LABOUR CHARGES PAID AND INTRODUCTION OF CAPITAL AND S UFFICIENCY OF REASON CANNOT BE QUESTIONED. ITA NO.5492/M/2009 SRUSTI DIAM 2 4 WE HAVE HEARD THE LD DR AS WELL AS THE LD AR ON T HE POINT OF ADMISSIBILITY OF ADDITIONAL GROUND. SINCE THE ADDITIONAL GROUND RAIS ED BY THE REVENUE IS NOT A FRESH GROUND; BUT THE SAME HAS BEEN ADJUDICATED BY THE CO MMISSIONER OF INCOME TAX (APPEALS); THEREFORE, NO NEW FACTS ARE REQUIRED TO BE INVESTIGATED FOR ADJUDICATION OF THE ADDITIONAL GROUND AS RAISED BY THE REVENUE. FURTHER, THE ADDITIONAL GROUND IS PURELY LEGAL IN NATURE AND THEREFORE, IN VIEW OF TH E DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF NTPC, REPORTED IN 229 ITR 383( SC) WE ADMIT THE ADDITIONAL GROUND RAISED BY THE REVENUE FOR ADJUDICATION. 5 THE LD DR HAS SUBMITTED THAT THE ASSESSMENT WAS C OMPLETED ON 31.10.2008 U/S 143(3) WHEREBY THE CLAIM OF LABOUR CHARGES WAS ALLOWED BY THE COMMISSIONER OF INCOME TAX(APPEALS) WITHOUT ANY DISCUSSION. SUBS EQUENTLY, FOR THE ASSESSMENT YEAR 2005-06 WHILE PASSING THE ASSESSMENT ORDER U /S 143(3) DT 28.12.2007, THE ASSESSING OFFICER DISALLOWED THE LABOUR CHARGES. O N THE BASIS OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2005-06, THE ASSESSIN G OFFICER HAS REOPENED THE ASSESSMENT BY ISSUING NOTICE U/S 148 ON 7.2.2008. THE LD DR, THUS SUBMITTED THAT THE REOPENING IS WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR; THEREFORE, PROVISO TO SEC. 147 IS NOT APPLICABLE IN THE CASE OF THE AS SESSEE. HE HAS RELIED UPON THE DECISION OF THE HONBLE HIGH COURT IN THE CASE OF M ULTISCREEN MEDIA P LTD VS UNION OF INDIA & ANR., REPORTED IN 324 ITR 54 AND SUBMITTED THAT THE FINDINGS OF THE ASSESSING OFFICER IN THE SUBSEQUENT ASSESSMENT YEAR IS TANGI BLE MATERIAL AND VALID REASON FOR REOPENING OF THE ASSESSMENT OF THE EARLIER YEAR. 5.1 ON THE OTHER HAND, THE LD AR OF THE ASSESSEE HA S SUBMITTED THAT IN THE ORIGINAL ASSESSMENT, THE ASSESSING OFFICER HAS ALLOWED THE C LAIM OF THE ASSESSEE AFTER CONSIDERING THE DETAILS FILED BY THE ASSESSEE; THER EFORE, THE REOPENING IS NOTHING BUT ITA NO.5492/M/2009 SRUSTI DIAM 3 ON THE BASIS OF CHANGE OF OPINION. HE HAS RELIED U PON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF NYK LINE (INDIA) LTD VS DCIT IN WRIT PETITION NO., 159 OF 2012 DATED 10 TH FEB 2012 AND SUBMITTED THAT THE JURISDICTIONAL HIG H COURT , AFTER CONSIDERING THE DECISION IN THE CASE OF MU LTISCREEN MEDIA P LTD (SUPRA) HAS HELD THAT WHEN THE ASSESSING OFFICER SPECIFICALLY D ISCUSSED THE MATTER IN THE COURSE OF ORIGINAL ASSESSMENT AND THE ASSESSEE HAS FULLY D ISCLOSED ALL THE MATERIAL FACTS, THEN MERELY BECAUSE FOR THE SUBSEQUENT YEAR, THE ASSESS ING OFFICER HAS COME TO A DIFFERENT CONCLUSION WOULD NOT JUSTIFY THE REOPENIN G OF THE ASSESSMENT FOR THE ASSESSMENT YEAR 2006-07. HE HAS SUPPORTED THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS) AND SUBMITTED THAT THE REOPENIN G IS NOT JUSTIFIED. 6 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE REASONS FOR REOPENING AS PRODUCED BY T HE COMMISSIONER OF INCOME TAX(APPEALS) IN THE IMPUGNED ORDER ARE AS UNDER: 3.4 WHILE COMPLETING OF THE ASSESSMENT OF THE ASS ESSEE FIRM FOR A.Y. 2005- 06 WHEREIN THE ASSESSING OFFICER DISALLOWED THE LABOU R CHARGES OF ` .4,80,95,723/-- ON THE GROUND THAT THE SAID LABOUR CHARGES COULD NOT REMAIN OUTSTANDING FOR MORE THAN A MONTH, THE ASSESSING OF FICER RECORDED THE REASONS AND RE-OPENED THE ASSESSMENT OF THE ASSESSEE FIRM FOR A.Y. 2004-05. THE SAID REASONS RECORDED BY THE ASSESSING OFFICER O N FEBRUARY, 2008 READ AS UNDER: (1) DURING THE ASSESSMENT PROCEEDINGS U/S. 143(3) F OR AY 2005-06, IT IS FOUND THAT THE ASSESSEE HAD CLAIMED LABOUR CHARGES PA ID AMOUNTING TO ` .4,80,95, 728/- WHICH HAS BEEN PAID IN HIGHER RATE AN D HAS BEEN FOUND AND PROVED TO BE BOGUS. THEREFORE, DISALLOWANCE AMOUNTING TO ` 4,80,95,728/- ON THIS ACCOUNT HAS BEEN MADE BY THE ASSESSING OFFICER. DURING THIS YEAR, THE ASSESSEE HAS CLAIMED LABOUR CHA RGES PAID AMOUNTING TO ` .4,44,0-9,104/- FOR MANUFACTURING & PROCESSING 1,20,547.58 CARAT OF DIAMONDS. IT IS SEEN THAT THE A BOVE MENTIONED PARTIES ARE ALSO AMONG THESE LABOUR PARTIES AND THERE FORE, I HAVE REASON TO BELIEVE THAT INCOME TO THE EXTENT OF ` .2,30,85,067/- HAS ESCAPED FOR A. Y. 2004-05. DURING THE ASSESSMENT U/S. 143(3) FOR AY 2005-06, TH E CAPITAL INTRODUCED BY THE PARTNERS WAS ADDED AS MENTIONED BE LOW SINCE THE PARTNERS COULD NOT ESTABLISH THE SOURCE OF CAPITAL. A. SHRI MANUBHAI G. JIVANI ` 57.00 LAKHS B. SHRI JAGDISH H. JIVANI ` . 70.00 LAKHS ITA NO.5492/M/2009 SRUSTI DIAM 4 DURING THE A. Y. 2005-06, THE TWO PARTNERS COULD NOT ESTABLISH THE SOURCE OF CAPITAL AS MENTIONED ABOVE. THE SAME TWO P ARTNERS HAVE INTRODUCED ` . 19,72,080/- AND ` . 3,50,000/- AND THE SAME IS TO BE DISALLOWED FOR A. Y 2004-05. FOR THE REASONS MENTIONED ABOVE, I HAVE REASONS TO BE LIEVE THAT THE INCOME TO THE EXTENT OF ` 23,22,080/- HAS BEEN ESCAPED FOR ASSESSMENT YEAR 200 4-05 IN THE ABOVE MENTIONED CASE AND THEREFORE, NOTICE U /S 148 IS ISSUED. 6.1 SINCE THE ONLY ISSUE RELEVANT BEFORE US IS REGA RDING THE CLAIM OF LABOUR CHARGES, WHICH WAS ALLOWED BY THE ASSESSING OFFICER WITHOUT ANY DISCUSSION IN THE ASSESSMENT ORDER PASSED U/S 143(3); THEREFORE, THE ONLY REASON FOR REOPENING HAS TO BE CONSIDERED IS LABOUR CHARGES, WHICH WAS DISALLOW ED BY THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT FOR THE ASSESSMENT YEAR 2005-06. 7 AT THE OUTSET, WE NOTE THAT FOR THE ASSESSMENT YE AR 2005-06, THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXCESS AND BOGUS LABOUR CHARGES HAS BEEN DELETED BY THE TRIBUNAL VIDE ORDER DATED 29.7. 2001. WHEN THE VERY BASIS ON WHICH THE ASSESSMENT HAS BEEN REOPENED BY THE ASSES SING OFFICER WAS NOT FOUND AS SUSTAINABLE AND JUSTIFIABLE, THEN THE REOPENING ON THE BASIS OF THAT REASON IN THE SUBSEQUENT YEAR IS ALSO NOT JUSTIFIED. ACCORDINGL Y, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE COMMISSIONER OF INC OME TAX(APPEALS) ON THE ISSUE OF VALIDITY OF REOPENING. 7.1 WE FURTHER NOTE THAT THE ASSESSING OFFICER HAS ISSUED NOTICED U/S 143(1) ON 30.8.2006 ALONG WITH A QUESTIONNAIRE AND ITEM NO. 6 OF THE QUESTIONNAIRE IS THE DETAILS OF LABOUR CHARGES WITH ADDRESSEES. THE ASS ESSEE FILED REPLY TO THE SAID NOTICE VIDE LETTER DATED 13.9.2006 ALONG WITH THE DETAILS OF LABOUR CHARGES, THOUGH THE ADDRESS OF ALL THE PARTIES ARE NOT GIVEN IN THE DET AILS; HOWEVER, THE NAMES AND LABOUR CHARGES DETAILS WERE GIVEN. THEREFORE, WHE N AFTER FILING THE REPLY AND DETAILS ITA NO.5492/M/2009 SRUSTI DIAM 5 BY THE ASSESSEE, THE ASSESSING OFFICER ALLOWED THE CLAIM OF THE ASSESSEE, THEN THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF NYK LINE (INDIA) LTD (SUPRA) IS FULLY APPLICABLE ON THE FACTS OF THE CAS E WHEREIN THE HONBLE HIGH COURT HAS HELD IN PARAA 17 TO 18 AS UNDER: 17 NOW IN THIS BACKGROUND AND CONSIDERING THESE TEST S, THE FACTS THE PRESENT CASE WOULD HAVE TO BE EVALUATED. THE ASSESS EE IN THE PRESENT CASE HAD MADE A DISCLOSURE IN THE NOTES FORMING PART OF TH E ACCOUNTS OF THE NATURE OF PAYMENTS REQUIRED TO BE MADE TO THE FOREIG N PRINCIPAL ON ACCOUNT OF CONTAINER DETENTION CHARGES. A REFERENCE WAS MADE TO THE FACT THAT AS A RESULT OF A CIRCULAR ISSUED BY THE RESERVE BANK OF IN DIA, THE ASSESSEE WAS NOT PERMITTED TO REMIT A CERTAIN PROPORTION EQUIVALENT TO US $ 1.5 FOR EACH CONTAINER. THE STATUTORY AUDITORS HAD ALSO INCLUDED A NOTE IN THE REPORT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSE SSEE ADDRESSED A COMPREHENSIVE LETTER DATED 18 NOVEMBER 2009 MAKING A F ULL DISCLOSURE OF FACTS. NOW IT IS IN THIS BACKGROUND THAT THE ORDER OF ASSESSMENT UNDER SECTION 143(3) MUST BE CONSIDERED. THE ASSESSING OFFICER SPEC IFICALLY DISCUSSED IN THE COURSE OF THE ASSESSMENT ORDER THE MATTERS IN RESPECT OF WHICH HE HAS MADE A DISALLOWANCE EITHER FULLY OR IN PART. SINCE THE ASS ESSING OFFICER DID NOT FIND ANY JUSTIFICATION TO REJECT THE CLAIM OF THE ASSESS EE IN RESPECT OF THE ISSUE OF CONTAINER DETENTION CHARGES, THERE WAS NO SPECIFIC DI SCUSSION IN THE COURSE OF ORDER. IN THIS REGARD THE FOLLOWING OBSERVATIONS OF A D IVISION BENCH OF THIS COURT IN IDEA CELLULAR LTD. V/S DEPUTY COMMISSIONER OF INC OME TAX6 HAVE RELEVANCE: 9. IT WAS ALSO SOUGHT TO BE CONTENDED THAT SINCE T HE ASSESSING OFFICER HAD NOT EXPRESSED ANY OPINION REGARDING THIS MATTER IN HIS ORIGINAL ASSESSMENT ORDER , IT COULD NOT BE SAID THAT THERE WAS ANY CHANGE OF OPINI ON IN THIS CASE. IN OUR VIEW, ONCE ALL THE MATERIAL WAS BEFORE THE ASSESSING OFFICER AND HE CHOSE NOT TO DEAL WITH THE SEVERAL CONTENTIONS RAISED BY THE PETITIONER IN HIS F INAL ASSESSMENT ORDER, IT CANNOT BE SAID THAT HE HAD NOT APPLIED HIS MIND WHEN ALL MATERIAL WAS PLACED BY TH E PETITIONER BEFORE HIM. 18 CONSEQUENTLY AND IN THIS BACKGROUND THE MERE FACT THAT THE ASSESSING OFFICER FOR ASSESSMENT YEAR 2007-08 HAD COME TO A DI FFERENT CONCLUSION WOULD NOT JUSTIFY THE REOPENING OF THE ASSESSMENT FO R ASSESSMENT YEAR 2006-07. IN ORDER TO ESTABLISH THAT THE REOPENING OF THE ASSE SSMENT FOR ASSESSMENT YEAR 2006-07 IS NOT A MERE CHANGE OF OPINION, THE REVENUE MUST DEMONSTRATE BEFORE THE COURT THAT DURING THE COURSE OF THE ASSES SMENT PROCEEDINGS FOR THE SUBSEQUENT YEAR I.E. ASSESSMENT YEAR 2007-08 SOME NEW INFORMATION OR MATERIAL HAD BEEN BROUGHT ON RECORD WHICH WAS NOT AV AILABLE WHEN THE ASSESSMENT ORDER WAS PASSED FOR ASSESSMENT YEAR 2006-07 . THAT INDEED IS NOT THE CASE OF THE REVENUE. ALL MATERIAL WHICH WAS RELEV ANT TO THE DETERMINATION WAS AVAILABLE WHEN THE ASSESSMENT WAS COMPLETED FOR ASSESSMENT YEAR 2006-07. CONSEQUENTLY, THE MERE FORMATION OF ANOTHER VIEW IN THE COURSE OF ASSESSMENT PROCEEDINGS FOR ASSESSMEN T YEAR 2007-08 WOULD ITA NO.5492/M/2009 SRUSTI DIAM 6 NOT JUSTIFY THE REVENUE IN REOPENING THE ASSESSMENT FOR ASSESSMENT YEAR 2006- 07 THOUGH THE REOPENING OF THE ASSESSMENT HAS TAKEN PLACE WITHIN A PERIOD OF FOUR YEARS. THE POWER TO REOPEN ASSESSMENTS IS STRUC TURED BY LAW. THE GUIDING PRINCIPLES WHICH HAVE BEEN LAID DOWN BY THE SUPREME COURT IN KEIVINATOR (SUPRA) MUST BE FULFILLED. IN THE PRESENT CASE THERE WAS NO TANGIBLE MATERIAL, NO NEW INFORMATION AND NO FRESH MATERIAL W HICH CAME BEFORE THE REVENUE IN THE COURSE OF ASSESSMENT FOR ASSESSMENT Y EAR 2007-08 WHICH CAN JUSTIFY THE REOPENING OF THE ASSESSMENT FOR ASSESSMEN T YEAR 2006-07. 8 RESPECTFULLY FOLLOWING THE DECISION OF THE HONBL E HIGH COURT IN THE CASE OF NYK LINE (INDIA) LTD (SUPRA), WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS) ON THIS ISSUE. 9 AS REGARDS THE MERITS OF THE CASE, WHEN THE ADDI TION MADE FOR THE ASSESSMENT YEAR 2005-06 ON THE IDENTICAL ISSUE HAS BEEN DELETED BY THE TRIBUNAL VIDE ORDER DATED 29.7.2011, THEN THE ISSUE IS COVER ED IN FAVOUR OF THE ASSESSEE. THOUGH THE LD DR HAS SUBMITTED THAT FOR THE YEAR UN DER CONSIDERATION, THE ASSESSING OFFICER HAS NOTICED THAT THE LABOUR CHARGES CLAIMED BY THE ASSESSEE ARE RELATED TO THE PARTIES, WHICH ARE COVERED U/S 40A(2)(B) OF I T ACT. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF THE HONBLE SUPR EME COURT AS WELL AS HONBLE JURISDICTIONAL HIGH COURT. IT IS TO BE NOTED THAT NEITHER IN THE REASONS FOR REOPENING NOR IN THE DISALLOWANCE MADE BY THE ASSESSING OFFIC ER THIS WAS TAKEN AS A GROUND EITHER BY THE ASSESSING OFFICER OR BY THE COMMISSIO NER OF INCOME TAX(APPEALS). THEREFORE, AT THIS STAGE, WE DO NOT INCLINE TO ACCE PT THE CONTENTION OF THE LD DR. 10 IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 26 TH , DAY OF SEPT 2012. SD/ SD/- ( N K BILLAIYA ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED:26 TH , SEPT 2012 RAJ* ITA NO.5492/M/2009 SRUSTI DIAM 7 COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI