ACIT 1(1), MUMBAI V. CANNON INDUSTRIES LTD, MUMBAI

ITA 5517/MUM/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3935 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 11-03-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 26-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rectification of order
• Section: 148; 154

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL C BENC H MUMBAI , , BEFORE S/SHJOGINDER SINGH,JUDICIAL MEMBER & R AJENDRA,ACCOUNTANT MEMBER ./I.T.A./5517/MUM/2011, /ASSESSMENT YEAR: 2002-03 ACIT, CIRCLE-1(1), ROOM NO.579 AAYAKAR BHAVAN, MUMBAI-400020. VS. M/S. CANNON INDUSTRIES LTD. 109, CHURCHGATE CHAMBERS 5 NEW MARINE LINES,MUMBAI-400 020. PAN:AAACC 2189 D ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI LOVE KUMAR-DR ASSESSEE BY: NONE / DATE OF HEARING: 10.05.2016 / DATE OF PRONOUNCEMENT: 10.05.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - BRIEF FACTS : CHALLENGING THE ORDER,DATED 31.3.12 OF CIT(A)-I,MUM BAI THE ASSESSING OFFICER (A.O.)HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY ,ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF CLOTH,FILED ITS RETURN OF I NCOME 22.10.2002,DECLARING TOTAL INCOME AT RS.NIL.THE ASSESSMENT ORDER U/S.143 (3) OF THE ACT, WAS PASSED ON 28.3.2005 DETERMINING THE TOTAL INCOME OF THE ASSES SEE AT RS.2.80 CRORES.IN THE ORIGINAL ASSESSMENT ORDER DEDUCTION U/S.80HHC WAS N OT ALLOWED THOUGH A CLAIM UNDER THE SAID SECTION AMOUNTING TO RS.70.44 LAKHS WAS MADE.AFTERWARDS, AN ORDER U/S.154 OF THE ACT,DT.27.4.2006,WAS PASSED AN D DEDUCTION OF RS.48.91 LAKHS WAS ALLOWED U/S.80HHC OF THE ACT. SUBSEQUENTLY,A NOTICE U/S.148 WAS ISSUED TO THE ASS ESSEE,AS THE AO WAS OF THE OPINION THAT THE ASSESSEE WAS ENTITLED TO DEDUCTION OF RS.7.65 LAKHS ONLY.HE HELD THAT THE EXCESS DEDUCTION OF RS.41.25 LAKHS WA S ALLOWED,THAT THE ESCAPEMENT OF INCOME WAS BECAUSE OF THE FAILURE ON PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS NEC ESSARY FOR ASSESSMENT.THE AO 5517/MUM/2011CANNON INDUSTRIES 2 COMPLETED THE ASSESSMENT U/S.143(3) R.W.S. 147 OF T HE ACT ON 29.12.2009 DETER - MINING THE INCOME OF THE ASSESSEE AT RS.3.22 CRORES . 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).BEFORE HIM,ISSUE OF THE VALIDITY OF NOTICE ISSUED U/S.148 WAS QUESTIONED AND IT WAS STATED THA T THERE WAS NO FAILURE ON PART OF THE ASSESSEE TO DISCLOSE THE FACTS FULLY AND TR ULY.THE ASSESSEE ALSO AGITATED THE ISSUE OF DISALLOWANCE OF DEDUCTION U/S. 80HHC,A MOUNTING TO RS.48.91 LAKHS.HE CALLED FOR A REMAND REPORT FROM AO. AFTER CONSIDERING THE MATTER AVAILABLE ON RECORD,HE HELD THAT NOTICE U/S.148 WAS ISSUED ON 23.3.2009 I.E., AFTER COMPLETION OF 4 YEA RS OF THE END OF THE RELEVANT AY.,THAT THE ISSUE TO BE DECIDED WAS AS TO WHETHER THERE WAS ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE MATERIAL FACTS NE CESSARY FOR THE ASSESSMENT, THAT THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 22.1 2.02, AFTER CLAIMING DEDUCTION, U/S.80HHC OF RS.70.44 LAKHS, THAT THE WORKING OF DE DUCTION CLAIMED WAS GIVEN WITH THE RETURN OF INCOME,THAT IT SHOWED THE AMOUNT OF RECEIPT OF DUTY DRAWBACK AND DEPB,THAT THE AO HAD NOT ALLOWED ANY DEDUCTION IN THE ORIGINAL ORDER, THAT SUBSEQUENTLY,WHILE PASSING THE RECTIFICATION ORDER U/S. 154 OF THE ACT,HE ALLOWED DEDUCTION OF RS.48,91,467/- U/S. 80HHC,THAT HE HAD DISALLOWED THE BALANCE CLAIM OF RS.21.52 LAKHS ON ACCOUNT OF DEPB, THAT AL L THOSE FACTS PROVE THAT THE ASSESSEE HAD MADE A FULL AND COMPLETE DISCLOSURE O F DUTY DRAWBACK OF RS.1.23 CRORES,THAT THE REASONS RECORDED BY THE AO FOR REOP ENING OF THE ASSESSMENT WAS ON ACCOUNT OF INTERPRETATION OF THE PROVISO TO SECT ION 80HHC(3) R.W.S. 28(III)(C) OF THE ACT.HE REFERRED TO CIRCULAR NO.5/2006 DT.15. 5.2006 ISSUED BY THE CBDT WHEREIN THE ISSUE OF DUTY DRAWBACK UNDER CUSTOMS AN D CENTRAL EXCISE DUTIES DRAWBACK RULES,1995 HAD BEEN EXPLAINED.THE FAA REFE RRED TO THE CASE OF KELVINATOR OF INDIA LTD. OF THE HONBLE APEX COURT( 320ITR561)AND HELD THAT REASSESSMENT HAD TO BE BASED ON FULFILLMENT OF CERT AIN CONDITIONS, THAT THE AO HAD NO POWER TO REVIEW,THAT HE HAD THE POWER TO REA SSESS ONLY, THAT IN THE CASE UNDER CONSIDERATION CBDT CIRCULAR OF MAY 2006 WAS V ERY MUCH AVAILABLE TO 5517/MUM/2011CANNON INDUSTRIES 3 THE AO AT THE TIME OF RECORDING HIS REASONS ON 23.3 .2009, THAT THE BOARD HAD CLARIFIED THE ISSUE,THAT THE AO WAS NOT CORRECT IN SAYING THAT FULL AND TRUE DISCLOSURE WAS NOT MADE BY THE ASSESSEE IN ITS RET URN OF INCOME, THAT THERE WAS NO FAILURE ON PART OF THE ASSESSEE. HE REFERRED TO THE CASE OF ICICI BANK LTD. (268ITR203) OF THE HON'BLE BOMBAY HIGH COURT AND TH E ORDERS OF THE GUJARAT FLOUROCHEMICALS LTD.(6SOT64),AHMEDNAGAR FORGINGS LT D.(107TTJ129)AND CHANDAN METAL PRODUCTS (P)LTD.(76TTJ201).FINALLY, H E HELD THAT THE AOS ACTION OF REOPENING OF THE ASSESSMENT U/S.147 OF TH E ACT WAS NOT JUSTIFIED. ANNULLING THE ASSESSMENT ORDER, HE ALLOWED THE APPE AL. 4. BEFORE US, THE DEPARTMENTAL REPRESENTATIVE (DR) STA TED THAT MATTER COULD BE DECIDED ON MERITS.NONE APPEARED FOR THE ASSESSEE, A S STATED EARLIER. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ASSESSMENT WAS REOPENED AFTER A PERIO D OF 4 YEARS, THAT THE PROVISO TO SECTION 147 WERE APPLICABLE,THAT THE AO HAD FAIL ED TO PROVE THAT THE ASSESSEE HAD NOT DISCLOSED THE MATERIAL FACTS FULLY AND TRUL Y.SECONDLY,EVEN ON MERITS THE ACTION TAKEN BY THE AO BY ISSUING NOTICE U/S. 148 W AS NOT JUSTIFIABLE.THE FAA HAS GIVEN A FINDING OF FACT THAT THE ISSUE WAS COVE RED IN FAVOUR OF THE ASSESSEE IN THE LIGHT OF THE BOARD CIRCULAR OF MAY, 2006.THU S, THE REOPENING WAS NOT VALID ON BOTH THE COUNTS I.E. JURISDICTION AND MERI TS.IN OUR OPINION THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL I NFIRMITY.SO,CONFIRMING HIS ORDER,WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAI NST THE AO. AS A RESULT, APPEAL FILED BY THE AO STANDS DISMISSE D. . ORDER PRONOUNCED IN THE OPEN CO URT ON 10 TH ,MAY,2016. 10 , 2016 SD/- SD/- /JOGINDER SINGH) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED :10.05.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 5517/MUM/2011CANNON INDUSTRIES 4 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR G BENCH, ITAT, MUMBAI / , , . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.