DCIT CIR 2(2)(1), MUMBAI V. JAMES MACKINTOSH & CO. P.LTD, MUMBAI

ITA 5636/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8605 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2005-2006
• Appeal Filed On: 15-12-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T K KHAN
• Assessee Lawyers: SANJAY KABRA
• 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 J BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI RAMIT KOCHAR , ACCOUNTANT MEMBER ITA NO .5 636 /MUM. /2015 ( ASSESSMENT YEAR : 20 05 06 ) DY. COMMISSIONER OF INCOME TAX CIRCLE 2(2), MUMBAI . APPELLANT V/S M/S. JAMES MACKINTOSH & CO. PVT. LTD. 3 RD FLOOR, DARASBSHAW HOUSE BALLARD ESTATE, MUMBAI 400 001 PAN AAAC10988P . RESPONDENT ASSESSE E BY : SANJAY KABRA REVENUE BY : SHRI T.K. KHAN DATE OF HEARING 24.10.2017 DATE OF ORDER 09.11.2017 O R D E R PER SAKTIJIT DEY, J.M. AFORESAID APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 14 TH SEPT E MBER 2015, PASSED BY THE LEARNED COMMISSIONER (APPEALS) 5 , MUMBAI, FOR THE ASSESSMENT YEAR 2005 06. 2 . BRIEF FACTS ARE, THE ASSESSEE A RESIDENT COMPANY IS ENGAGED IN THE BUSINESS OF SHIPPING AGENTS. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE HAD ORIGINALLY FILED ITS RETURN OF INCOME ON 28 TH OCT 2005, DECLARING TOTAL INCOME OF ` 37,76,040. THE RETUR N OF 2 M/S. JAMES MACKINTOSH & CO. PVT. LTD. INCOME FILED BY THE ASSESSEE WAS SELECTED FOR SCRUTINY AND THE ASSESSING OFFICER COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 30 TH NOVEMBER 2007, DETERMINING THE INCOME AT ` 80,54,516, AFTER MAKING NUMBER OF DISALLOWANCE S . SUBSEQUENTLY, THE ASSESSING OFFICER HAVING REASON TO BELIEVE THAT THE COMMISSION PAID TO DIRECTORS WERE EXCESSIVE , THEREBY , RESULTING IN ESCAPEMENT OF INCOME RE OPENED THE ASSESSMENT UNDER SECTION 147 OF THE ACT AND ISSUED NOTICE UNDER SECTION 148 ON 29 TH MARCH 2012. AFTER COMPLYING TO THE NOTICE ISSUED UNDER SECTION 148 OF THE ACT, THE ASSESSEE REQUESTED FOR COMMUNICATION OF REASONS FOR RE OPENING AND THEREAFTER , AS IT APPEARS , ALSO OBJECTED TO THE RE OPENING OF ASSESSMENT . HOWEVER, THE ASSESSING OFFICER ULTIMATELY COMPLETED THE ASSESSMENT UNDER SECTION 143(3) / 147 OF THE ACT BY DISALLOWING BONUS AND COMMISSION PAID OF ` 1.50 CRORE TO DIRECTORS BY INVOKING PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BY FILING THE APPEAL BEFORE THE LEARNED COMMISSIONER (APPEALS), INTER ALIA, CHALLENGING THE VALIDITY OF RE OPENING OF ASSESSMENT U NDER SECTION 147 OF THE ACT. 3 . THE LEARNED COMMISSIONER (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE CONTEXT OF FACTS AND MATERIAL ON RECORD FOUND THAT THE ASSESSING OFFICER HAS RE OPENED THE ASSESSMENT UNDER SECTION 147 OF THE ACT ON THE BASIS OF INFORMATION CONTAINED IN 3 M/S. JAMES MACKINTOSH & CO. PVT. LTD. AUDIT REPORT FILED BY THE ASSESSEE IN FORM NO.3CD WHICH WAS FILED BY THE ASSESSEE ALONG WITH THE ORIGINAL RETURN OF INCOME AND WAS AVAILABLE WITH THE ASSESSING OFFICER DURING THE ORIGINAL ASSESSMENT PROCEEDINGS UNDER S ECTION 143(3) OF THE ACT. HE, THEREFORE, HELD THAT RE OPENING OF ASSESSMENT WAS NOT ON THE BASIS OF ANY TANGIBLE MATERIAL BUT ON A MERE CHANGE OF OPINION. FURTHER, THE LEARNED COMMISSIONER (APPEALS) FOUND THAT RE OPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT WAS MADE BY THE ASSESSING OFFICER ON 29 TH MARCH 2012, WHICH IS AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR IN DISPUTE. THEREFORE, AS PER THE PROVISIONS OF SECTION 147 OF THE ACT, SUCH RE OPENING CAN BE MADE ONLY IN CASE OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL NECESSARY FACTS NECESSARY FOR THE ASSESSMENT. THE LEARNED COMMISSIONER (APPEALS) HELD , SINCE , THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR ASSESSMENT , THE ASSESSING OFFICER COULD NOT HAVE RE OPENED THE ASSESSMENT AFTER EXPIRY OF FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR. ACCORDINGLY, HE HELD THE RE OPENING OF ASSESSMENT UNDER SECTION 147 AS VOID. BEING AGGRIEVED O F THE AFORESAID DECISION OF THE LEARNED COMMISSIONER (APPEALS), REVENUE IS IN APPEAL BEFORE US. 4 . THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED, THE ASSESSING OFFICER AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS HAS 4 M/S. JAMES MACKINTOSH & CO. PVT. LTD. COMPLETELY OVERLOOKED THE REASONABL ENESS OF BONUS AND COMMISSION PAID TO THE DIRECTORS KEEPING IN VIEW THE PROVISIONS OF SECTION 40(A)(2)(B) OF THE ACT. THEREFORE, IT CANNOT BE SAID THAT IN THE ORIGINAL ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS FORMED ANY OPINION ON THE ISSUE SO AS TO CONSTITUTE CHANGE OF OPINION IN THE RE ASSESSMENT PROCEEDINGS. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED, THE BELIEF OF THE ASSESSING OFFICER THAT INCOME HAS ESCAPED ASSESSMENT IS MATERIAL AND NOT SUFFICIENCY OF THE REASONS FOR FORMING THE BELIEF. H E SUBMITTED, THERE IS NO REQUIREMENT OF LAW THAT IN THE REASONS FAILURE OF THE ASSESSEE SHOULD BE EXPRESSLY STATED. THUS, IT WAS SUBMITTED, RE OPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT WAS VALID. 5 . LEARNED AUTHORISED REPRESENTATIVE STRONGLY RELIED UPON THE FINDING OF THE FIRST APPELLATE AUTHORITY. 6 . WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. UNDISPUTEDLY, IN CASE OF ASSESSEE, ASSESSMENT WAS ORIGINALLY COMPLETED UNDER SECTION 143(3) OF THE ACT ON 30 TH NOVEMBER 2007. A PERUSAL OF THE ORIGINAL ASSESSMENT ORDER , A COPY OF WHICH IS PLACED IN PAGE 3 OF THE PAPER BOOK , WOULD REVEAL THAT THE ASSESSING OFFICER HAS PASSED A DETAILED ORDER AFTER VERIFYING ALL FACTS AND MATERIALS BROUGHT ON RECORD AND IN THE P ROCESS HAS MADE A 5 M/S. JAMES MACKINTOSH & CO. PVT. LTD. NUMBER OF DISALLOWANCE S . THUS, IT IS NOT A CASE WHERE THE ASSESSING OFFICER HAS PASSED A CRYPTIC ASSESSMENT ORDER ACCEPTING THE RETURNED INCOME. FURTHER, FROM THE REASONS RECORDED WHICH IS REPRODUCED IN THE IMPUGNED ASSESSMENT ORDER, IT I S EVIDENT THAT THE ASSESSING OFFICER ON VERIFYING THE AUDIT REPORT IN FORM NO.3CD WAS OF THE VIEW THAT THE BO N US / COMMISSION PAID OF ` 1.90 CRORE TO THE DIRECTORS IS EXCESSIVE, HENCE, THE ENTIRE AMOUNT IS NOT ALLOWABLE. THUS, AS COULD BE SEEN FROM THE REA SONS RECORDED, THE RE OPENING OF ASSESSMENT WAS SIMPLY ON THE BASIS OF AUDIT REPORT IN FORM NO.3CD FILED BY THE ASSESSEE ALONG WITH THE RETURN OF INCOME AND WAS AVAILAB LE BEFORE THE ASSESSING OFFICER A T THE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS UNDER SECTI ON 143(3) OF THE ACT. THUS, IT IS VERY MUCH CLEAR THAT AFTER COMPLETION OF ORIGINAL ASSESSMENT PROCEEDINGS, NO FRESH AND TANGIBLE MATERIAL HAS COME TO THE POSSESSION OF THE ASSESSING OFFICER REVEALING ESCAPEMENT OF INCOME . R ATHER , THE ASSESSING OFFICER ON A REVIEW OF MATERIALS AVAILABLE BEFORE THE ASSESSING OFFICER IN THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS HAS FORMED A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT ON ACCOUNT OF EXCESSIVE BONUS AND COMMISSION PAID TO THE DIRECTORS. IN OUR VIEW, FORMATION OF BELIEF ON THE BASIS OF MATERIALS ALREADY AVAILABLE BEFORE THE ASSESSING OFFICER AND EXAMINED BY HIM IN THE ORIGINAL ASSESSMENT PROCEEDINGS , AMOUNTS TO CHANGE OF OPINION, HENCE, IMPERMISSIBLE. MOREOVER, IT IS A FACT ON RECORD THAT THE 6 M/S. JAMES MACKINTOSH & CO. PVT. LTD. ASSESSING OFFICER I NITIATED ACTION UNDER SECTION 147 OF THE ACT ON 29 TH MARCH 2012, WHICH IS AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR I.E., 2005 06. 7 . IN FACT, THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 147 OF THE ACT ON 29 TH MARCH 2012 WHICH IS ALMOST AT THE FAG END OF SIX YEARS FROM THE ASSESSMENT YEAR 2005 06, WHEN THE RE OPENING UNDER SECTION 147 EVEN UNDER NORMAL CIRCUMSTANCES, WOULD HAVE BECOME BARRED BY LIMITATION. AS COULD BE SEEN, IN CASE OF ASSESSEE, ASSESSMENT WAS O RIGINALLY MADE UNDER SECTION 143(3) OF THE ACT, THEREFORE, RE OPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT, IS SUBJECT TO THE CONDITIONS IMPOSED UNDER THE PROVISO , TO SECTION 147 OF THE ACT. AS PER THE SAID PROVISO , IN A CASE WHERE ORIGINALLY ASSESSME NT WAS COMPLETED EITHER UNDER SECTION 143(3) OR UNDER SECTION 147, NO PROCEEDING UNDER SECTION 147 OF THE ACT CAN BE INITIATED AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR , UNLESS , THERE IS FAILURE ON THE PART OF THE ASSESSEE TO D ISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. THE REASONS FOR RE OPENING RECORDED BY THE ASSESSING OFFICER WOULD MAKE IT CLEAR THAT ON REVIEW OF MATERIAL ALREADY AVAILABLE ON RECORD AND , MORE PARTICULARLY FORM NO.3CD FILED BY THE ASSESSEE ALONG WITH THE RETURN OF INCOME , THE ASSESSING OFFICER HAS FORMED BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. NEITHER THERE IS ANY ALLEGATION BY THE 7 M/S. JAMES MACKINTOSH & CO. PVT. LTD. ASSESSING OFFICER IN THE REASONS RECORDED N OR EVEN IN THE IMPUGNED ASSESSM ENT ORDER THAT THERE WAS ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELATING TO ITS ASSESSMENT . T HE FACTUAL MATRIX OF THE CASE IN ANY MANNER ALSO DO NOT ESTABLISH SUCH FAILURE ON THE PART O F THE ASSESSEE. ON THE CONTRARY, THE FACTS ON RECORD REVEAL THAT THE ASSESSEE HAS MADE FULL DISCLOSURE OF ALL FACTS AND MATERIALS RELATING TO ITS ASSESSMENT AND RELYING UPON THE VERY SAME FACTS AND MATERIALS THE ASSESSING OFFICER HAS RE OPENED THE ASSESSMEN T. THAT BEING THE CASE, THE CONDITION IMPOSED UNDER THE PROVISO TO SECTION 147 OF THE ACT IS NOT SATISFIED. TH EREFORE, THE FIRST APPELLATE AUTHORITY WAS JUSTIFIED IN HOLDING THE RE ASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT TO BE ILLEGAL AND VOID. ACCORDINGLY, W E UPHOLD THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) BY DISMISSING THE GROUNDS RAISED. 8 . IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09.11.2017 SD/ - RAMIT KOCHAR ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 09.11.2017 8 M/S. JAMES MACKINTOSH & CO. PVT. LTD. COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (DY./ASSTT. REGISTRAR) ITAT, MUMBAI