DCIT 9(2), MUMBAI V. KISMET EXPORTS AND INVESTMENT P.LTD, MUMBAI

ITA 5947/MUM/2012

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0583 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2004-2005
• Appeal Filed On: 28-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K S RAJENDRA KUMAR
• Keywords: Tangible material; Difference of opinion; Revised return; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE HONBLE SH. R. C. SHARMA, A M & HONBLE SH. SANDEEP GOSAIN, JM ./ I.T.A. NO . 5947 /MUM/201 2 ( / ASSESSMENT YEAR: 2004 - 05 ) DCIT - 9 (2) R. NO. 218, 2ND FLOOR, AAYKAR BHAVAN , M. K. ROAD, MUMBAI - 400020 / VS. M/S KISMAT EXPORTS AND INVESTMENT PVT. LTD. 601/603, KISMET NORT AVENUE, SANTACRUZ (W), MUMBAI - 4000 54 ./ ./ PAN NO. AA CCK2895C ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI K. S. RAJENDRA KUMAR , DR / RESPONDENTBY : SHRI PRAKASH JOTWANI , AR / DATE OF HEARING : 31 .08 .2018 / DATE OF PRONOUNCEMENT : 30.11.2018 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE P RESENT APPE AL FILED BY THE REVENUE IS AGAINST THE ORDER OF LD. CIT (APPEAL) 19, MUMBAI DATED 02.07.12 F OR AY 20 04 - 05 ON THE GROUNDS MENTIONED HEREIN BELOW: - 2 I.T.A. NO. 5947 /MUM/201 2 M/S KISMAT EXPORTS AND INVESTMENT PVT. LTD. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, WHETHER THE LD. CIT(A) IS RIGHT IN QUASHING THE RE - ASSESSMENT PROCEEDINGS U/S. 148 OF THE ACT, WITHOUT CONSIDERING THAT THE PROCEEDINGS U/S. 148 WERE INITIATED IN ACCORDANCE WITH THE PROVISIONS OF THE IT. ACT,1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, WHETHER THE LD. CIT(A) IS RIGHT DELETING THE ACTION OF THE THE ASSESSING OFFICER IN DISALLOWING THE CARRY FORWARD OF IOSS OF RS. 3,78,1587 - ON ACCOUNT SALE OF UNITS BY APPLYING THE PROVISION OF SEC. 94(7) OF THE IT. ACT AS INFRUCTUOUS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, WHETHER THE LD. CIT(A) IS RIGHT IN HOLDING THAT THE ACTION OF THE AO OF TAKING THE CAPITAL GAIN OF RS. 17,59,74,8207 - EARNED ON ACCOUNT OF SALE OF SHARES OF KANBAY INTERNATIONAL INC. USA, UNDER THE HEAD 'BUSINES S INCOME ' AS AGAINST' LONG TERM CAPITAL GAIN ' AS INFRUCTUOUS. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3 I.T.A. NO. 5947 /MUM/201 2 M/S KISMAT EXPORTS AND INVESTMENT PVT. LTD. 5. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GRO UNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2 . THE BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF INCOME FOR THE YEAR UND ER CONSIDERATION WAS FILED ON 01.11.04 DECLARING TOTAL INCOME OF RS 17,33,34,891 AND THE ASSESSMENT WAS COMPLETED ON 15.12.06 U/S 143(3) OF THE I.T. ACT, ASSESSING THE TOTAL INCOME AT RS. 17,49,49,760/ - , THEREBY MAKING ADDITIONS. SUBSEQUENTLY THE CASE WAS REOPENED BY ISSUING NOTICE U/S 148 OF THE I.T. ACT ON 28.03.11 AND AFTER SERVING STATUTORY NOTICES AND PROVIDING OPPORTUNITY OF H EARING, ASSESSMENT ORDER U/S 143(3) OF THE I.T. ACT WAS PASSED THEREBY MAKING ADDITION/DISALLOWANCE UNDER DIFFERENT HEADS. AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE CASE OF BOTH THE PAR TIES, PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. NOW BEFORE US, THE REVENUE HAS PREFERRED THE PRESENT APPEAL BY RAISING THE ABOVE GROUNDS. 4 I.T.A. NO. 5947 /MUM/201 2 M/S KISMAT EXPORTS AND INVESTMENT PVT. LTD. GROUND NO. 1 3 . THIS GROUND RAISED BY THE REVENUE RELATES TO CHALLENGING THE ORDER OF LD. CIT (A) IN QUASHING THE RE - ASSESSMENT PROCEEDINGS U/S. 148 OF THE ACT, WITHOUT CONSIDERING THAT THE PROCEEDINGS U/S. 148 WERE INITIATED IN ACCORDANCE WITH THE PROVISIONS OF THE IT. ACT,1961. 4 . WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES AND WE HAVE ALSO PERUSE D THE MATERIAL PLACED ON RECORD, JUDGMENT CITED BY THE PARTIES AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE THE ORDERS PASSED BY LD. CIT(A). THE LD. CIT(A) HAS DEALT WITH THE ABOVE GROUNDS RA ISED BY THE ASSESEE IN PARA NO.3.1 TO 3.3 OF ITS ORDER. THE OPERATIVE PORTION IS CO NTAINED IN PARA NO. 3.3 OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: - 3.3 I HAVE CAREFULLY PERUSED THE FACTS OF THE CASE, THE ORIGINAL ASSESSMENT ORDER U/S. 143(3) R.W.S.147, THE GROUNDS OF APPEAL, THE STATEMENT OF FACTS AND THE SUBMISSION OF THE APPELLANT. THIS IS A CASE OF REOPENING 5 I.T.A. NO. 5947 /MUM/201 2 M/S KISMAT EXPORTS AND INVESTMENT PVT. LTD. ASSESSMENT U/S. 147 BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR, I.E., 31.03.2005. THE ORIGINAL ASSESSMENT U/S. 143(3) FOR ASSESSMENT YEAR 2004 - 05 WAS DULY COMPLETED ON 15.12,2006. SUBSEQUENTLY, THE CASE WAS REOPENED BY ISSUE OF NOTICE U/S.148 DTD.28.03.2011 WHICH WA S DULY SERVED UPON THE ASSESSEE. THE AO IN ITS ORDER U/S. 143(3) R.W.S.147 HAS NOT BROUGHT OUT ON RECORD WHAT WAS THE MATERIAL WHICH THE ASSESSEE HAD NOT DISCLOSED AT THE TIME OF ORIGINAL FILING OF RETURN AND THE ORIGINAL ASSESSMENT U/S. 143(3). FOR THE PU RPOSE OF ASSUMING JURISDICTION U/S.148 OF THE I. T ACT, THE AO IS REQUIRED TO RE/CORD REASON FOR DOING SO AS LAID DOWN UNDER SUB SECTION 2 OF SECTION 148. THE REASON SHOULD SET OUT THE REASON FOR FORMATION OF BELIEF OF THE AO THAT INCOME HAS ESCAPED THE ASS ESSMENT AND IN CASE WHERE THE REOPENING OF THE ASSESSMENT IS AFTER EXPIRY OF A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT A.Y. AS IN THIS CASE THE BELIEF SHOULD BE THAT BY REASON OF OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY A ND TRULY THE MATERIAL FACTS INCOME HAS ESCAPED ASSESSMENT IN A PARTICULAR YEAR. UNLESS THE REASON CLEARLY DEMONSTRATE THE TWIN BELIEF, I.E, THE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT AND THE BELIEF THAT SUCH ESCAPEMENT IS BY REASON OF FAILURE 6 I.T.A. NO. 5947 /MUM/201 2 M/S KISMAT EXPORTS AND INVESTMENT PVT. LTD. ON THE PAR T OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY THE MATERIAL FACTS THE RE - OPENING IS NOT VALID. THE REASON TO BELIEVE WOULD BE CAUSE OR JUSTIFICATION OF THE ASSESSING OFFICER TO BELIEF THAT THE INCOME HAS ESCAPED ASSESSMENT AND NOT THAT THE AO SHOULD HAVE FI NALLY ASCERTAINED THE FACTS BY LEGAL EVIDENCE OR REACHED A CONCLUSION AS THIS IS DETERMINED AND DECIDED IN THE ASSESSMENT ORDER WHICH IS THE FINAL STAGE BEFORE THE AO. THE DUTY OF THE ASSESSEE IS NOT MERELY TO DISCLOSE ALL MATERIAL FACTS BUT TO DISCLOSE TH EM FULLY AND TRULY. THE TERM TRULY PRIMA FACIA INDICATE THAT THE FULL DISCLOSURE IS NOT SUFFICIENT AND THAT THE ASSESSEE MUST ALSO DISCLOSE THE MATERIAL TRULY. THE ARNBIT OF THE EXPRESSION FULIY AND TRULY IS WIDER THAN THE TERM FULLY. THE QUESTION TO BE AN SWERED HERE IS WHETHER THE APPELLANT MAKE FULL AND TRUE DISCLOSURE OR NOT. IF THIS QUESTION IS ANSWERED, THEN THE VALIDITY OF REOPENING OBJECTED TO BY THE APPELLANT CAN BE DECIDED. THE AO IN ITS ASSESSMENT ORDER HAS NOT DEMONSTRATED A SHRED OF EVIDENCE WHI CH SHOWS THAT ASSESSEE HAS NOT DISCLOSED THE MATERIAL FULLY AND TRULY. IN FACT THE SUBMISSION OF THE ASSESSEE CLEARLY SHOWS AND THE ORIGINAL ASSESSMENT ORDER ALSO REFLECTS THAT THE ASSESSEE'S CONTENTION OF SALE OF SHARES REPRESENTS LONG 7 I.T.A. NO. 5947 /MUM/201 2 M/S KISMAT EXPORTS AND INVESTMENT PVT. LTD. TERM CAPITAL GAIN I S BORN OUT OF THE FACT THAT THE MATTER IS DISCUSSED IN THE ASSESSMENT ORDER. THE ASSESSEE AT THE TIME OF FILING ORIGINAL RETURN HAD FILED AIL THE DETAILS WHICH HE FILED AT THE TIME OF REVISED RETURN. IN THE PRESENT CASE, THE AO HAS NOT BROUGHT OUT ANYTHING ON RECORD THAT THERE WAS FAILURE TO DISCLOSE ANY PRIMARY FACTS BY THE ASSESSEE. THE AO HAS NOT PRODUCED ANY EVIDENCE TO SHOW THAT THERE WAS A TANGIBLE MATERIAL AVAILABLE WITH THE AO TO FORM A BELIEF THAT TAXABLE INCOME HAS ESCAPED ASSESSMENT. THE BOMBAY H IGH COURT IN THE CASE OF NYK LINE (INDIA) LTD., VS. DCIT, 20 TAXMANN 663 (BOM), HAS ANSWERED THE FOLLOWING QUESTION IN AFFIRMATIVE, I.E, IN FAVOUR OF ASSESSEE : 'WHETHER FOR REOPENING ASSESSMENT BEYOND A PERIOD OF 4 YEARS TEST IS NOT MERELY WHETHER THERE H AS BEEN AN ESCAPEMENT OF INCOME, BUT WHETHER THERE HAS BEEN A FAILURE ON PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NEED FOR ASSESSEE.' THE ABOVE POSITION OF LAW WAS ACCEPTED BY THE CENTRAL BOARD OF DIRECT TAXES IN ITS CIRCULAR NO.549 (182 ITR ST.L, 29) DATED OCTOBER 31,1989, WHICH EXPLAINED THE AMENDMENTS IN SECTION 147 MADE BY THE DIRECT TAX LAWS (AMENDMENT) ACT 1989, 8 I.T.A. NO. 5947 /MUM/201 2 M/S KISMAT EXPORTS AND INVESTMENT PVT. LTD. IN CIT V. KELVINATOR (256 ITR 1), A FULL BENCH OF THE DELHI HIGH COURT EXAMINED THE LEGAL IMPACT OF THIS CIRCULAR AND AFTER EXHAUSTIVELY EXAMINING THE CASE LAW HELD THAT EVEN AFTER THE AMENDMENT (I) THE ASSESSING OFFICER MUST HAVE 'REASON TO BELIEVE' HAT INCOME HAS ESCAPED ASSESSMENT, (II) A MERE CHANGE OF OPINION OES NOT JUSTIFY A REASSESSMENT, AND (III) THE ASSESSING OF FICER DOES OT HAVE THE POWER TO REVIEW ON THE SAME SET OF FACTS AND LAW. THE BOMBAY (IPCA LABORATORIES V. GAJANAND 251 ITR 416), ALLAHABAD (FORAMER V CIT 247 ITR 436) AND GUJARAT OGARDEN SILK V, DCIT 237 ITR 668) HIGH COURTS HAVE ALSO TAKEN THE / VIEW THAT A MERE CHANGE OF OPINION DOES NOT JUSTIFY THE INITIATION OF, REASSESSMENT PROCEEDINGS UNDER THE AMENDED LAW. THE PROVISO TO THE AMENDED SECTION 147 PROVIDES THAT NO ACTION CAN BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS THE ESCAPEMENT IS BY REASON OF THE FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT.' IN VIEW OF THE BIDING DECISION OF HON'BLE SUPREME COURT IN THE CASE OF KELVINATOR AND HON'BLE BOMBAY HIGH COURT IN THE CASE OF IPCA LABORATORIES AND NYK 9 I.T.A. NO. 5947 /MUM/201 2 M/S KISMAT EXPORTS AND INVESTMENT PVT. LTD. LINES LTD AND IN VIEW OF AFORESAID REASONS THE GROUND NO.L OF THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE, JUDGMENTS RELIED UPON BY THE PARTIES AND ORDERS PASSED BY THE REVENUE AUTHORITIES, WE FIND FROM THE RECORD THAT IN THE PRESENT CASE THE REOPENING OF THE ASSESSMENT U/S. 147 WAS INITIATED BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR, I.E., 31.03.2005. AS PER THE FACTS, THE ORIGINAL ASSESSMENT U/S. 143(3) FOR ASSESSMENT YEAR 2004 - 05 WAS DULY COMPLETED ON 15.12,2006. SUBSEQUENTLY, THE CASE WAS REOPENED BY ISSUE OF NOTICE U/S. 148 DTD.28.03.2011. THE AO IN ITS ORDER U/S. 143(3) R.W.S.147 HAD NOT BROUGHT OUT ON RECORD ANY MATERIAL WHICH THE ASSESSEE HAD NOT DISCLOSED AT THE TIME OF ORIGINAL FILING OF RETURN AND THE ORIGINAL ASSESSMENT U/S. 143(3). AS PER THE MANDATE OF LAW, AO IS TO RECORD REASONS FOR FORMATION OF BELIEF THAT INCOME HAS ESCAPED ASSESSMENT FOR THE PURPOSE OF ASSUMING JURISDICTION U/S.148 OF THE I.T ACT AND IF THE REOPENING OF THE ASSESSMENT IS AFTER EXPIRY OF A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT A.Y. , THEN IN THAT EVENTUALITY THE BELIEF SHOULD BE 10 I.T.A. NO. 5947 /MUM/201 2 M/S KISMAT EXPORTS AND INVESTMENT PVT. LTD. THAT BY REASON OF OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY THE MATERIAL FACTS FOR ESCAPING THE INCOME FROM ASSESSMENT IN THE PARTICULAR YEAR. THE AO IN ITS ASSESSMENT ORDER HAS NOT DEMONSTRATED BY WAY OF ANY EVIDENCE WHICH COULD SHOW THAT THE ASSESSEE HAD NOT DISCLOSED THE MATERIAL FULLY AND TRULY . IT IS BORNE OUT FROM THE RECORDS THAT THE ASSESSEES CONTENTION OF SALE OF SHARES REPRESENTS LONG TERM CAPIT AL GAIN IS DISCUSSED IN THE ASSESSMENT ORDER, WHICH SHOWS THAT THE ASSESSEE AT THE TIME OF FILING ORIGINAL RETURN HAD FILED ALL THE DETAILS WHICH HE FILED AT THE TIME OF REVISED RETURN. THE AO HAS NOT BROUGHT OUT ANYTHING ON RECORD THAT THERE WAS FAILURE T O DISCLOSE ANY PRIMARY FACTS BY THE ASSESSEE. THE AO HAD NOT PRODUCED ANY EVIDENCE TO SHOW THAT THERE WAS ANY TANGIBLE MATERIAL AVAILABLE WITH THE AO TO FORM A BELIEF THAT TAXABLE INCOME HAS ESCAPED ASSESSMENT. N O NEW FACTS O R CONTRARY JUDGMENTS HAVE B EEN BROUGHT ON RECORD I N ORDER TO CONTROVERT OR REBUT THE FINDINGS SO RECORDED BY LD. CIT(A). THEREFORE, THERE ARE NO REASON S FOR US TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS SO RECORDED BY THE LD.CIT(A). 11 I.T.A. NO. 5947 /MUM/201 2 M/S KISMAT EXPORTS AND INVESTMENT PVT. LTD. HENCE , WE ARE OF THE CONSIDERED VIEW THAT THE FIND INGS SO RECORDED BY THE LD. CIT (A) ARE JUDICIOUS AND ARE WE LL REASONED. RESULTANTLY, THIS GROUND RAISED BY THE REVENUE STANDS DISMISSED . GROUND NO. 2 & 3 5 . SINCE WE HAVE ALREADY DISMISSED THE GROUND NO.1 ON MERITS, THEREFORE THESE GROUNDS BECOMES INFRUCTUOUS. 6 . IN THE NET RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED WITH NO ORDER AS TO COST. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH NOV , 2018 . SD/ - SD/ - ( R. C. SHARMA ) (SANDEEP GOSAIN) / A COUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 30 . 11 .201 8 SR.PS . DHANANJAY 12 I.T.A. NO. 5947 /MUM/201 2 M/S KISMAT EXPORTS AND INVESTMENT PVT. LTD. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI