RENFRO INDIA (P) LTD, MUMBAI V. ASST CIT 10(3), MUMBAI

ITA 6202/MUM/2011

• Counselvise Citation: 620219914 RSA 2011
• Duration Of Justice: 2 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 13-05-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 08-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: OM PRAKASH MEENA
• Keywords: Reopening of assessment; Transfer pricing; Opportunity of being heard; Reason to believe
• Section: 143(3); 10B; 147; 148

Judgement Text

D IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI .. , # %, & # ' BEFORE SHRI P.M. JAGTAP, AM AND SHRI SANJAY GARG, J M ./ I.T.A. NO.6202 /MUM/2011 ( &% % / ASSESSMENT YEAR : 2003-2004 M/S RENFRO INDIA (P) LTD., 609, MAHALAXMI CHAMBERS, 33, BHULABHAI DESAI ROAD, MAHALAXMI, MUMBAI 400 026. / VS. ASSISTANT COMMISSIONER OF INCOME TAX 10(3), MUMBAI. ./ PAN : AAACK2518C ( / APPELLANT ) .. ( / RESPONDENT ) A PPELLANT BY SHRI NARESH JAIN R E SPONDENT BY : SHRI OM PRAKASH MEENA / DATE OF HEARING : 13-05-2014 / DATE OF PRONOUNCEMENT : 06#06#2014 [ / O R D E R PER P.M. JAGTAP, A.M . : .. , THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. CIT(A) -22, MUMBAI DATED 24-6-2011. 2. THE RELEVANT FACTS OF THE CASE GIVING RISE TO T HIS APPEAL ARE THAT THE ASSESSEE COMPANY, WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURERS AND EXPORTERS OF GARMENTS, FILED ITS RETURN OF INCOME F OR THE YEAR UNDER CONSIDERATION ORIGINALLY ON 1-12-2003 DECLARING NI L INCOME. IN THE ASSESSMENT ORIGINALLY COMPLETED U/S 143(3) OF THE A CT VIDE AN ORDER DATED 20-3-2006, THE TOTAL INCOME OF THE ASSESSEE WAS COM PUTED BY THE A.O. AT NIL ITA 6202/M/11 2 AS DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME . SUBSEQUENTLY THE ASSESSMENT, HOWEVER, WAS REOPENED BY THE A.O. U/S 1 47 OF THE ACT AND A NOTICE U/S 148 OF THE ACT WAS ISSUED BY HIM ON 22-3 -2010 AFTER RECORDING THE FOLLOWING REASONS:- THE ASSESSEE COMPANY HAS FILED ITS RETURN OF INCOM E FOR A.Y.2003-04 ON 01- 12-2003, DECLARING TOTAL INCOME AT RS. NIL, AFTER C LAIMING SET OFF OF INCOME OF RS.10,42,845/-, U/S.72 AGAINST THE BROUGHT FORWARD LOSSES. THE ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT ON 20-03-2006, ACCEPTING THE INCOME DECLARED BY THE ASSESSEE. IT APPEARS FROM RECORDS THAT THE ASSESSEE HAS PAID COMMISSION AGGREGATING RS.4528537/- TO TWO ASSOCIATED ENTERPRISES VIS. M/S . INTERSOCKS SCC., ITALY (RS.4220704) AND MRS. DENIS HWVSRITS (RS.323820) LE SS EXCHANGE FLUCTUATION (RS.15989) AND DEBITED THE SUM TO THE PROFIT AND LO SS ACCOUNT UNDER THE HEAD MARKETING & EXPORT EXPENSES. HOWEVER THE ASSESSEE FAILED TO DEDUCT THE TDS WHILE MAKING SUCH COMMISSION PAYMENT. THE DEDUCTION CLAIMED BY THE ASSESSEE ARE NOT ALLOWABLE U/S.40A(IA) OF THE ACT W HICH WAS WRONGLY ALLOWED IN THE ASSESSMENT AND, THEREFORE, REQUIRED TO BE ADDED BACK TO THE TOTAL INCOME. THIS, HAS RESULTED INTO UNDER ASSESSMENT OF INCOME. IT APPEARS FROM RECORDS THAT THE ASSESSEE HAS CLAIM ED AND ALLOWED IN THE ASSESSMENT, A DEDUCTION OF RS.10615617/- U/S. 10B B EING 90% OF THE EXPORT PROFIT OF RS.11795130/-. AS PER ANNEXURE A TO FROM 56G, THE TOTAL TURNOVER AND EXPORT TURNOVER HAS BEEN WORKED OUT AS RS.18,17 ,13,375/- AND RS.18,06,90,421/- RESPECTIVELY. IN SCH.15 TO THE PR OFIT AND LOSS ACCOUNT THE ASSESSEE HAS SHOWN EXPORT, FREIGHT CHARGES OF RS.34 ,22,951/-; HOWEVER THESE WERE NOT DEDUCTED FROM THE EXPORT TURNOVER. IT IS A LSO NOTICED THAT THE ASSESSEE HAS SET OFF THE BALANCE INCOME OF RS.10,42 ,845/- AGAINST THE LOSSES INCURRED BY THE ASSESSEE IN THE A.Y.1998-99, WHICH WERE CARRIED FORWARD. THIS IS ALSO NOT PERMISSIBLE U/S.10B OF THE ACT. SINCE T HE ASSESSEE HAS WRONGLY CLAIMED DEDUCTION ON ACCOUNT OF 10B AND SET OFF LOS S, WHICH HAS BEEN ALLOWED IN THE ORDER PASSED U/S.143(3) OF THE ACT, THEREFOR E THE INCOME OF THE ASSESSEE HAS BEEN UNDER ASSESSED TO THE TUNE OF RS.27,11,736 /-. FROM THE ABOVE FACTS, THE ASSESSMENT IN THE CASE OF THE ASSESSEE HAS ESCAPED ASSESSMENT TO THE TUNE OF RS.72,40,273/- CONSEQUENT SHORT LEVY OF TAX OF RS.36,51,948/- (2284165+1367783) INCLUDING INTEREST U/S.234B OF THE ACT. I HAVE THEREFORE, REASON TO BELIEVE THAT THE FAILUR E ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECE SSARY FOR THE ASSESSMENT, WITHIN THE MEANING OF THE PROVISIONS OF SEC.147 ALO NG WITH EXPLANATIONS 1&2(C) TO SECTION 147 OF THE I.T. ACT, INCOME TO BE TUNE OF RS.72,04,273/- HAS ESCAPED ASSESSMENT. THIS IS THEREFORE, A FIT CASE F OR ISSUE OF NOTICE U/S.148 OF THE I.T. ACT 1961. ITA 6202/M/11 3 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, OBJ ECTIONS WERE RAISED BY THE ASSESSE CHALLENGING THE REOPENING OF THE ASSESS MENT MADE BY THE A.O. THE A.O., HOWEVER, DID NOT FIND MERIT IN THE SAID O BJECTIONS AND OVERRULING THE SAME VIDE AN ORDER PASSED ON 26-10-2010, HE PROCEED ED TO COMPLETE THE ASSESSMENT U/S 143(3) R.W.S. 147 OF THE ACT VIDE AN ORDER DATED 23-11-2010 COMPUTING THE TOTAL INCOME OF THE ASSESSEE AT RS. 1 8,55,144/- AFTER MAKING ADDITION, INTER ALIA, ON ACCOUNT OF DISALLOWANCE U/ S 40(A)(IA) OF THE ACT AMOUNTING TO RS. 45,28,537/-. 4. AGAINST THE ORDER PASSED BY THE A.O. U/S 143(3) R.W.S. 147 OF THE ACT, APPEAL WAS PREFERRED BY THE ASSESSEE COMPANY BEFORE THE LD. CIT(A) CHALLENGING THE VALIDITY OF THE SAID ASSESSMENT MAD E BY THE A.O. AS WELL AS DISPUTING THE ADDITIONS MADE THEREIN ON MERIT. AFTE R CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AND MATERIAL AVAIL ABLE ON RECORD, THE LD. CIT(A) DID NOT FIND MERIT IN THE PRELIMINARY ISSUE RAISED BY THE ASSESSEE CHALLENGING THE VALIDITY OF THE ASSESSMENT MADE BY THE A.O. U/S 143(3) R.W.S. 147 OF THE ACT AND REJECTING THE CONTENTION RAISED BY THE ASSESSEE ON THIS ISSUE, HE UPHELD THE VALIDITY OF THE SAID ASSESSMEN T. HE ALSO CONFIRMED SUBSTANTIALLY THE ADDITIONS MADE BY THE A.O. IN THE SAID ASSESSMENT AFTER GIVING PART RELIEF TO THE ASSESSEE ON THE ISSUE REL ATING TO COMPUTATION OF DEDUCTION ALLOWABLE TO THE ASSESSEE U/S 10B OF THE ACT. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN CONFIRMING THE REOPENING ORDER U/S 147, CO MPLETELY IGNORING THE FACT THAT REOPENING CANNOT BE MADE BEYOND FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR, WHEN THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) ERRED IN NOT ADJUDICATING THE FACT THAT YOUR APPELL ANTS CASE IS SQUARELY COVERED BY THE PROVISO TO SECTION 147 AND HENCE EXT ENDED PERIOD OF SIX YEARS WILL NOT BE APPLICABLE IN YOUR APPELLANTS CAS E. ITA 6202/M/11 4 3. ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LEAR NED CIT (A) ERRED IN CONFIRMING THE REASSESSMENT ORDER DISALLOW ING COMMISSION OF RS. 45,28,537/- PAID TO NONRESIDENT FOR PROCURING EXPORT ORDERS ON ACCOUNT OF NON DEDUCTION OF TDS ON SUCH COMMISSION. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DISMISSING THE ALTERNATE GROUND RAISED BY YOUR APPELLANT THAT BALANCE 10% OF THE ADJUSTED PROFIT EARNED BY EOU NO T ALLOWED U/S 10B SHOULD BE ELIGIBLE FOR DEDUCTION U/S 80 HHC. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS REGARDS T HE PRELIMINARY ISSUE RAISED IN GROUND NO. 1 & 2 RELATING TO THE VALIDITY OF REO PENING OF ASSESSMENT, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE VAL IDITY OF REOPENING WAS CHALLENGED BY THE ASSESSEE BEFORE THE LD. CIT(A), I NTER ALIA, ON THE GROUND THAT IN THE ABSENCE OF ANY FAILURE OF THE ASSESSEE POINT ED OUT BY THE A.O. IN THE REASONS RECORDED TO DISCLOSE FULLY AND TRULY ANY MA TERIAL FACTS NECESSARY FOR THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATION, TH E REOPENING OF THE ASSESSMENT ORIGINALLY COMPLETED U/S 143(3) OF THE A CT AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR WAS BAD IN LAW AS PER THE FIRST PROVISO TO SECTION 147 OF THE ACT. IN THIS R EGARD, HE HAS INVITED OUR ATTENTION TO THE COPY OF WRITTEN SUBMISSION DTD. 28 -3-2011 FILED BEFORE THE LD. CIT(A) PLACED AT PAGE 1 TO 13 OF THE PAPER BOOK AND SPECIFICALLY POINTED OUT THE SUBMISSIONS MADE ON THIS ASPECT OF THE MATTER A T PAGE 5 TO 8 OF THE PAPER BOOK. HE HAS CONTENDED THAT A SPECIFIC ARGUMENT WA S RAISED ON BEHALF OF THE ASSESSEE BY SUBMITTING THAT THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FO R THE ASSESSMENT WAS NOT POINTED OUT BY THE A.O. IN THE REASONS RECORDED WHI CH WAS NECESSARY TO VALIDLY REOPEN THE ASSESSMENT ORIGINALLY COMPLETED U/S 143(3) OF THE ACT AFTER THE EXPIRY OF A PERIOD OF FOUR YEARS FROM THE END O F THE RELEVANT ASSESSMENT YEAR. HE HAS SUBMITTED THAT RELIANCE WAS ALSO PLAC ED ON BEHALF OF THE ASSESSEE ON THE DECISION OF HONBLE BOMBAY HIGH COU RT IN THE CASE OF ITA 6202/M/11 5 BHAVESH DEVELOPERS, 229 CTR 160 (BOM) WHEREIN IT W AS HELD THAT THE REASONS RECORDED BY THE A.O. SHOULD CONTAIN A FINDI NG TO THE EFFECT THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLO SE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE RELEVANT ASSESSMENT YEAR AN D THIS IS THE CONDITION PRECEDENT TO VALID EXERCISE THE POWER TO REOPEN THE ASSESSMENT ORIGINALLY COMPLETED U/S 143(3) OF THE ACT AFTER THE EXPIRY OF A PERIOD OF FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR. HE HAS POINTED OUT THAT RELIANCE WAS ALSO PLACED BY THE ASSESSEE IN THE CASE OF ANIL RAD HAKRISHNAN WANI, 323 ITR 564 (BOM) WHEREIN IT WAS HELD THAT IN THE ABSENCE O F ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY THE MATERI AL FACTS POINTED OUT BY THE A.O. IN THE REASONS RECORDED, JURISDICTION TO REOPE N THE ASSESSMENT ORIGINALLY COMPLETED U/S 143(3) OF THE ACT AFTER EXPIRY OF A P ERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR WAS NOT VALIDLY EXERCISED SINCE THE CONDITION PRECEDENT FOR REOPENING OF ASSESSMENT BEY OND FOUR YEARS HAD NOT BEEN FULFILLED. THE LD. COUNSEL FOR THE ASSESSEE HA S CONTENDED THAT THE LD. CIT(A), HOWEVER, HAS NOT GIVEN ANY FINDING ON THIS ASPECT OF THE MATTER RAISED SPECIFICALLY BY THE ASSESSEE RELYING, INTER ALIA, O N THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT WHILE CHALLENGING THE REO PENING OF ASSESSMENT BEYOND A PERIOD OF FOUR YEARS AND THIS POSITION CLE ARLY EVIDENT FROM THE IMPUGNED ORDER OF THE LD. CIT(A) HAS NOT BEEN DISPU TED EVEN BY THE LD. D.R. HE, HOWEVER, HAS CONTENDED THAT THIS MATTER MAY BE SENT BACK TO THE LD. CIT(A) FOR DECIDING THIS ISSUE AFRESH IN THE LIGHT OF THE SUBMISSIONS MADE BY THE ASSESSEE AND THE JUDICIAL PRONOUNCEMENTS CITED IN SUPPORT. SINCE THE LD. COUNSEL FOR THE ASSESSEE HAS NO OBJECTION IN THIS R EGARD, WE REMIT THIS MATTER TO THE LD. CIT(A) FOR DECIDING THE PRELIMINARY ISS UED RAISED BY THE ASSESSEE CHALLENGING THE VALIDITY OF REOPENING OF ASSESSMENT ORIGINALLY MADE U/S 143(3) OF THE ACT BEYOND A PERIOD OF FOUR YEARS FROM THE E ND OF THE RELEVANT ASSESSMENT YEAR IN ACCORDANCE WITH THE PROVISIONS O F SECTION 147 READ WITH FIRST PROVISO THERETO AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD. ITA 6202/M/11 6 GROUND NO. 1 & 2 OF THE ASSESSEES APPEAL ARE ACCOR DINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 6. AS THE PRELIMINARY ISSUE INVOLVED IN THE CASE OF THE ASSESSEE RELATING TO VALIDITY OF REOPENING OF ASSESSMENT HAS BEEN RESTOR ED BY US TO THE FILE OF THE LD. CIT(A) FOR DECIDING THE SAME AFRESH, WE DO NOT CONSIDER IT EXPEDIENT TO ADJUDICATE UPON THE ISSUE RAISED IN GROUND NO. 3 & 4 RELATING TO THE ADDITIONS MADE IN THE SAID ASSESSMENT ON MERIT. THESE ISSUES ARE, HOWEVER, KEPT OPEN WITH THE LIBERTY TO THE ASSESSEE TO RAISE THE SAME AGAIN BEFORE THE TRIBUNAL IF THE PRELIMINARY ISSUE IS DECIDED BY THE LD. CIT(A) AGAINST THE ASSESSEE IN THE SET ASIDE PROCEEDING. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH JUNE, 2014 . . / 0 06#06#2014 SD/- SD/- (SANJAY GARG) (P.M. JAGTAP ) .3 JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; 0 DATED 06#06#2014 [ ITA 6202/M/11 7 .3../ RK , SR. PS , -&./ 0/ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 5 () / THE CIT(A)22 MUMBAI. 4. 5 / CIT 10, MUMBAI 5. 8 33: , : , / DR, ITAT, MUMBAI D BENCH 6. = / GUARD FILE. / BY ORDER, 8 3 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI