TWIN HILLS PAINTS P.LTD, MUMBAI V. ITO 5(3)(3), MUMBAI

ITA 6228/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 101006 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2006-2007
• Appeal Filed On: 25-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DHIRENDRA M SHAH
• Keywords: Depreciation; Difference of opinion; Unabsorbed depreciation; Change of opinion; Reassessment proceedings
• Section: 143(3); 142(1); 115JB; 147; 148; 139

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI N.K . BILLAIYA, ACCOUNTANT MEMBER AND RAM L AL NEGI, JUDICIAL MEMBER / I .T.A. NO. 6228/MUM/2013 ( / ASSESSMENT YEAR : 2006 - 07 M/S. TWIN HILL PAINTS PVT. LTD., 25, BHAV ESHWAR DARSHAN, 31/D, CHARMICAL ROAD, CUMBALA HILL, MUMBAI - 400 026 / VS. THE ITO 5(3)(3), AAYAKAR BHAVAN, MUMBAI - 400 020 ./ ./ PAN/GIR NO. : AAACT 0219K ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI DHIRENDRA M. SHAH / RESPONDENT BY: SHRI AJAY MODI / DATE OF HEARING : 10 .0 9 .2015 / DATE OF PRONOUNCEMENT : 10 .0 9 .2015 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST THE ORDER OF THE LD. CIT(A) - 9 , MUMBAI D ATED 23.8.2013 PERTAINING TO ASSESSMENT YEAR 200 6 - 0 7 . 2. THE ASSESSEE HAS RAISED 2 SUBSTANTIVE GROUNDS OF APPEAL. BY GROUND NO. 1 THE ASSESSEE HAS CHALLENGED THE JURISDICTION OF THE AO FOR ISSUING NOTICE U/S. 148 OF THE ACT. IT IS THE CLAIM OF THE ASSESSEE THAT THE SAID NOTICE IS BAD IN LAW AND DESE RVES TO BE CANCELLED. ITA. NO. 6228/M/2013 2 2.1. THE ORIGINAL RETURN OF INCOME WAS FILED ON 16.11.2006 DECLARING TOTAL INCOME OF RS. 3,26,052/ - . THE SAID RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT WAS MADE U/S. 143(3) OF THE ACT BY ORDER DATED 10.12.2008 WHEREIN THE TOTAL ASSESSED INCOME UNDER NORMAL PROVISIONS OF THE ACT WAS DETERMINED AT RS. 3,26,052/ - AND U/S. 115JB AT RS. 23,62,044/ - . SUBSEQUENTLY, THE AO FOUND THAT THE BROUGHT FORWARD LOSSES PERTAINING TO ASSESSMENT YEARS 2004 - 05 AND 2005 - 06 WHICH WA S SET OFF BY THE ASSESSEE AGAINST THE IN C OM E FOR A.Y. 2006 - 07. THE AO FURTHER FOUND THAT THE SHARE CAPITAL OF THE COMPANY WAS INCREASED FROM RS. 10 LAKHS TO RS.20 LAKHS AND THERE WAS A CHANGE IN THE SHARE HOLDING PATTERN, THEREFORE THE SET OFF OF LOSS COU LD NOT BE CLAIMED BY THE ASSESSEE AS PER SEC. 79 OF THE ACT. 2.2. IN VIEW OF THESE OBSERVATIONS THE COMPLETED ASSESSMENT WAS REOPENED BY ISSUING OF NOTICE U/S. 148 OF THE ACT. IN RESPONSE TO THE NOTICE, THE ASSESSEE REQUESTED THE AO TO TREAT THE ORIGIN AL RETURN OF INCOME AS HAVING BEEN FILED IN RESPONSE TO THE NOTICE U/S. 148 OF THE ACT. 2.3. REASONS FOR REOPENING THE ASSESSMENT WERE SUPPLIED TO THE ASSESSEE. THE ASSESSEE STRONGLY OBJECTED CLAIMING THAT THE REASSESSMENT PROCEEDINGS ARE BARRED BY LIM ITATION. THE ASSESSEE FURTHER CLAIMED THAT THE REOPENING IS BAD IN LAW INASMUCH AS THE REASONS GIVEN FOR THE REOPENING OF THE ASSESSMENT IS NOTHING BUT A CHANGE OF OPINION. THE OBJECTIONS RAISED BY THE ASSESSEE WERE DISPOSED OF BY A SPEAKING ORDER DATE D 2.11.2012. THE CLAIM OF THE ASSESSEE WAS DISMISSED AND THE REASSESSMENT WAS COMPLETED BY ITA. NO. 6228/M/2013 3 DENYING THE CLAIM OF SET OFF OF BROUGHT FORWARD BUSINESS LOSS AND DEPRECIATION. 3. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) BUT W ITHOUT ANY SUCCESS. 4. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY SUBMITTED THAT THE REOPENING OF THE ASSESSMENT IS AFTER 4 YEARS OF THE COMPLETED ASSESSMENT. THE LD. COUNSEL FURTHER STATED THAT THE REASONS RECORDED BY THE AO FOR REOPENING O F THE ASSESSMENT CLEARLY SHOW THAT IT IS NOTHING BUT A CHANGE OF OPINION BECAUSE ALL THE MATERIAL FACTS WERE AVAILABLE BEFORE THE AO WHEN HE MADE THE ORIGINAL ASSESSMENT U/S. 143(3) OF THE A CT. THE LD. COUNSEL TOOK US TO THE VARIOUS EXHIBITS OF THE PAPER BOOK TO SUBSTANTIATE HIS CLAIM THAT ALL THE FACTS WERE AVAILABLE. 5. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE FINDINGS OF THE AO. IT IS THE SAY OF THE LD. DR THAT RELEVANT DETAILS WERE NOT CONSIDERED BY THE AO AT THE TIME O F ORIGINAL ASSESSMENT AND THEREFORE THE PROVISIONS OF SEC. 79 WERE CLEARLY OVERLOOKED BY THE AO, THEREFORE THERE IS NO ERROR IN THE FINDINGS OF THE LD. CIT(A) 6. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALS O GIVEN A THOROUGH CONSIDERATION TO THE DOCUMENTARY EVIDENCE S BROUGHT ON RECORD IN THE FORM OF A PAPER BOOK. THE RELEVANT PORTION OF THE REASONS RECORDED FOR THE REOPENING OF THE ASSESSMENT AS EXHIBITED AT PAGE - 81, 82 OF THE PAPER BOOK WHICH READ AS UNDER : ITA. NO. 6228/M/2013 4 WHILE DETERMINING THE INCOME AS ABOVE, AN AMOUNT OF RS. 12,39,022/ - & RS. 3,86,327/ - BEING BROUGHT FORWARD BUSINESS LOSS & UNABSORBED DEPRECIATION FOR A.Y. 2004 - 05 & 2005 - 06 RESPECTIVELY WAS ALLOWED TO BE ADJUSTED AGAINST THE INCOME FOR A.Y. 2006 - 07. HOWEVER, IT IS SEEN FROM THE RECORD THAT THE SHARE CAPITAL OF THE COMPANY WAS INCREASED FROM RS. 10 LAKHS TO RS. 20 LAKHS DURING A.Y. 2006 - 07. THEREFORE, ON THE LAST DAY OF THE PREVIOUS YEAR RELEVANT TO A.Y. 2006 - 07, THE SHARES OF THE COMPANY CARRYING NOT LESS THAN 51 PERCENT OF THE VOTING POWER WERE NOT BEING BENEFICIALLY HELD BY THE PERSONS WHO HELD IT ON THE LAST DAY OF THE YEAR OR YEARS IN WHICH THE LOSS WAS INCURRED. IN VIEW OF THE ABOVE, THE SET OFF OF BROUGHT FORWARD LOSSES OF RS. 10,58,014/ - OUT OF RS. 12,39,022/ - AND RS. 2,50,288/ - OUT OF RS. 3,86,327/ - FOR A.Y. 2004 - 05 & A.Y 2005 - 06 RESPECTIVELY WAS NOT ALLOWABLE AS PER SEC. 79 OF THE I.T. ACT, 1961. 6.1. THERE IS NO DISPUTE THAT THE REOPENING IS MADE AFTER 4 YEARS. THEREFORE, THE FIRST PROVISO TO SEC. 147 OF THE ACT IS CLEARLY APPLICABLE. THE SAID PROVISO READS AS UNDER: PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB - SECTION (3) OF SECTION 143 OR THIS SE CTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YE AR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB - SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. 6.2. A PERUSAL OF THE AFORESAID PROVISO BRING FOLLOWING INTO CONSIDERATION: I) THERE SHOULD BE A FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN U/S. 139 OR PURSUANT TO NOTICE U/S. 142(1) OR SEC. 148 OF THE ACT. ITA. NO. 6228/M/2013 5 II) THERE SHOULD BE A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. 6.3. IN THE LIGHT OF THE AFOREMENTIONED PROVISION, LET US NOW SEE WHETHER THE ASSESSEE FULFILLS THE CRI TERIA OR NOT? IN SO FAR AS THE FILING OF THE RETURN OF INCOME IS CONCERNED, THERE IS NO DISPUTE THE RETURN WAS FILED U/S. 139(1) OF THE ACT WHICH WAS ASSESSED BY THE AO U/S. 143(3) OF THE ACT BY ORDER DATED 10.12.2008. 6.4. NOW LET US SEE WHETHER THERE IS ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. 6.5. A PERUSAL OF THE RETURN OF INCOME IN PARTICULAR EXHIBIT - 5 SHOWS THAT THE DETAILS OF SHARE HOLDERS PAN WAS GIVEN BY THE ASSESSEE U NDER THE HEAD OTHER INFORMATION. UNDER THE HEAD OTHER INFORMATION AT EXHIBIT PAGE - 7 , DETAILS OF EQUITY SHARES ARE PROVIDED AND AT PAGE - 16, STATEMENT OF SET OFF OF UNABSORBED LOSSES AND ALLOWANCES BROUGHT FORWARD FROM EARLIER YEARS IS GIVEN. ONCE AGAI N ALL THESE DETAILS ARE MENTIONED IN THE EXHIBIT AT PAGE - 26, 27 AND 29 OF THE PAPER BOOK . AT PAGE - 65 IS THE QUESTIONNAIRE ISSUED BY THE AO AND AT ITEM NO. 2, THE ASSESSEE WAS SPECIFICALLY ASKED TO FURNISH THE DETAILS OF SHARE HOLDING PATTERN. THE ASSESSE E FILED THE REQUISITE DETAILS AS PER EXHIBIT - 66. THE MOST RELEVANT DETAIL FILED BY THE ASSESSEE CAN BE FOUND AT PAGE - 67 OF THE PAPER BOOK WHICH READ AS UNDER: DETAILS OF SHARE HOLDING PATTERN 31.3.2006 31.3.2005 NAME OF THE PAN NO. NO. OF AMOUNT NO. OF AMOUNT ITA. NO. 6228/M/2013 6 SHARE HOLDER SHARES SHARES MR. SUDHIR R. SHAH AADPS 7580A 3000 3,00,000 3000 3,00,000 MRS. MINAXI S. SHAH AAOOS 3596N 4000 4,00,000 4000 4,00,000 MR. RAVI S. SHAH AAKPS 3818C 2300 2,30,000 2300 2,30,000 MR. SUDHIR R. SHAH HUF 700 70,000 700 70,000 SMT. KALPANA D. MEHTA AANPM 5857C 10000 10,00,00 ----- ----- 20000 20,00,000 10000 10,00,000 6.6. A FURTHER NOTICE WAS ISSUED BY THE AO AND ONCE AGAIN THE DETAILS IN RELATION TO THE SHAREHOLDERS WERE CALLED FOR. THE SAID NOTICE AT PAGE - 69 OF THE PAPER BOOK WHICH WAS DULY COMPLIED BY THE ASSESSEE AS PER ITS REPLY ON PAGE - 72 OF THE PAPER BOOK. 6.7. AS MENTIONED ELSEWHERE PERTAINING TO DETAILS IN RELATION TO THE CHANGE IN SHAREHOLDING PATTERN WAS SPECIFICALLY EXPLAINED AS MENTIONED AT P ARA 6.5 OF THE ORDER . THUS, THE VERY MATERIAL FACT WAS AVAILABLE AT THE TIME OF THE ORIGINAL ASSESSMENT PROCEEDINGS. THEREFORE, THE SECOND CONDITION IS ALSO FULFILLED BY THE ASSESSEE AS IT HAS MADE AVAILABLE THE MATERIAL FACTS NECESSARY FOR MAKING THE ASSESSMENT. 6.8. THE HO NBLE HIGH COURT OF BOMBAY IN THE CASE OF PLUS PAPER FOOD PAC LTD. VS ITO & ANOTHER 374 ITR 485 HAVE OBSERVED AS UNDER: HAVING REGARD TO THE PURPOSE OF THE SEC (I.E. 147), WE ARE OF THE VIEW THAT THE POWER CONFERRED BY SEC. 147 DOES NOT PROVIDE A FRESH O PPORTUNITY TO THE ASSESSING OFFICER TO CORRECT AN INCORRECT ASSESSMENT MADE EARLIER UNLESS THE MISTAKE IN THE ASSESSMENT SO MADE IS THE RESULT OF THE FAILURE OF THE ASSESSEE TO FULLY AND TRUST DISCLOSE ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. INDEED, WHERE THE ASSESSEE HAS FULLY DISCLOSED ALL THE MATERIAL FACTS, IT IS NOT OPEN FOR THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT ON THE GROUND THAT THERE IS A MISTAKE IN ASSESSMENT. ITA. NO. 6228/M/2013 7 6.9. A SIMILAR VIEW WAS EXPRESSED BY THE HONBLE HIGH COURT OF BOMBAY IN T HE CASE OF CIT VS JET SPEED AUDIO PVT. LTD. IN 372 ITR 762 WHEREIN ONCE AGAINST THE HONBLE HIGH COURT HAS MENTIONED THAT THE POWER OF REOPEN IS NOT A POWER TO REVIEW AN ASSESSMENT ORDER . 6.10. THE HONBLE HIGH COURT FURTHER OBSERVED THAT AT THE TI ME OF PASSING THE ASSESSMENT ORDER, IT IS EXPECTED OF THE ASSESSING OFFICER THAT HE WILL APPLY HIS MIND AND PASS AN ORDER. IN OUR OPINION AN ERROR DISCOVERED ON A RECONSIDERATION OF THE SAME MATERIAL (AND NO MORE) DOES NOT GIVE HIM THAT POWER. 7. CONSI DERING ALL THE FACTS MENTIONED HEREINABOVE IN TOTALITY, IN THE LIGHT OF THE REASONS FOR REOPENING OF THE ASSESSMENT, IN OUR CONSIDERED OPINION, THERE IS NO REFERENCE TO ANY FAILURE ON THE PART OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. THERE IS NOT EVEN A WHISPER OF FAILURE BY THE ASSESSEE TO DISCLOSE MATERIAL FACTS . THEREFORE, THERE IS NO VALID GROUND FOR REOPENING THE ASSESSMENT. WE, ACCORDINGLY , SET ASIDE THE NOTICE ISSUED U/S. 148 OF THE ACT AND ALSO THE IMPUGNED ASSESSMENT ORDER. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON 10 TH SEPTEMBER , 2015 SD/ - SD/ - ( RAM L AL NEGI ) (N.K. BILLAIYA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 10 TH SEPTEMBER , 2015 . . ./ RJ , SR. PS ITA. NO. 6228/M/2013 8 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI