D.C.I.T Cir - 7,kolkata., Kolkata V. M/s BCH Electric Ltd( Formerly M/S Bhartia Industries Limited), Kolkata

ITA 634/KOL/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4528 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 12-07-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 22-03-2013
• Court: TRIBUNAL
• Department Lawyers: RAJAT KUMAR KUREEL
• Assessee Lawyers: S JHAJHARIA; SUROY SEN A
• Keywords: Reopening of assessment; Depreciation; Tangible material; Difference of opinion; Validity of assessment; Reason to believe; Unabsorbed depreciation; Change of opinion
• Section: 143(3); 147; 148

Judgement Text

I.T.A. NO. 634/KOL./2013 ASSESSMENT YEAR: 2004-2005 & C.O. NO. 56/KOL/2013 (IN ITA NO. 634/KOL/2013) ASSESSMENT YEAR: 2004-2005 PAGE 1 OF 12 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISHWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 634 /KOL/ 2013 ASSESSMENT YEAR: 2004-2005 DEPUTY COMMISSIONER OF INCOME TAX,................. ..................APPELLANT CIRCLE-7, KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 -VS.- M/S. B.C.H. ELECTRIC LIMITED,...................... ............................RESPONDENT (FORMERLY M/S. BHARTIA INDUSTRIES LIMITED), BLOCK 1E, 1 ST FLOOR, 216, A.J.C. BOSE ROAD, KOLKATA-700 017 [PAN: AABCB 2076 M] & C.O. NO. 56/KOL/2013 (ARISING OUT OF ITA NO. 634/KOL/2013) ASSESSMENT YEAR : 2004-2005 M/S. B.C.H. ELECTRIC LIMITED,...................... ............................CROSS OBJECTOR (FORMERLY M/S. BHARTIA INDUSTRIES LIMITED), BLOCK 1E, 1 ST FLOOR, 216, A.J.C. BOSE ROAD, KOLKATA-700 017 [PAN: AABCB 2076 M] -VS.- DEPUTY COMMISSIONER OF INCOME TAX,................. ..................RESPONDENT CIRCLE-7, KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 APPEARANCES BY: SHRI RAJAT KUMAR KUREEL JCIT, D.R., FOR THE DEPARTMENT SHRI S. JHAJHARIA, A.R. AND SHRI SUROY SEN, A.R., F OR THE ASSESSEE DATE OF CONCLUDING THE HEARING : JULY 12, 2016 DATE OF PRONOUNCING THE ORDER : SEPTEMBER 7 TH , 2016 O R D E R I.T.A. NO. 634/KOL./2013 ASSESSMENT YEAR: 2004-2005 & C.O. NO. 56/KOL/2013 (IN ITA NO. 634/KOL/2013) ASSESSMENT YEAR: 2004-2005 PAGE 2 OF 12 PER SHRI P.M. JAGTAP, A.M .: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-VIII, KOLKATA DATED 04.12.2012 FOR THE ASSESSMENT YEAR 2004-05 AND THE SAME IS BEING D ISPOSED OF ALONG WITH THE CROSS OBJECTION FILED BY THE ASSESSEE BEIN G C.O. NO. 56/KOL/2013. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND MARKETING OF CONT ROL GEARS, MOTOR CONTROL CENTRES, CONTROL PANELS AND ENCLOSURES, ETC . THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 28.10.2004 DECLARING TOTAL INCOME OF RS.2,03,14,010/-. IN THE ASSESSMENT ORIGINALLY COMPLETED UNDER SECTION 143(3) VIDE AN ORDER DATED 28.12.2006 , THE TOTAL INCOME OF THE ASSESSEE WAS DETERMINED BY THE ASSESSING OFFICE R AT RS.2,12,08,683/-. SUBSEQUENTLY ON SCRUTINY OF RECORDS, IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE DEDUCTION CLAIMED BY THE ASSESSEE ON ACCOUNT OF PROVISION FOR WARRANTY EXPENSES WAS WRONGLY ALLOWED AS PROVISION WAS NOT AN ALLOWABLE EXPENDITURE. HE WAS ALSO OF THE VI EW THAT THE CLAIM OF THE ASSESSEE FOR THE LOSS OF RS.78,83,300/- PERTAIN ING TO M/S. BHARTIA INTERNATIONAL LIMITED, WHICH WAS AMALGAMATED WITH T HE ASSESSEE- COMPANY, WAS ALLOWED TO BE WRONGLY SET OFF FOR THE YEAR UNDER CONSIDERATION AS THE SAID AMALGAMATING COMPANY WAS NOT ENGAGED IN THE MANUFACTURING BUSINESS FOR THREE YEARS OR MORE AND THE REQUISITE CERTIFICATE IN FORM NO. 62 AS PROVIDED IN RULE 9C W AS ALSO NOT FURNISHED BY THE ASSESSEE. ACCORDING TO THE ASSESSING OFFICER , THERE WAS THUS ESCAPEMENT OF INCOME OF THE ASSESSEE FROM THE ASSES SMENT AND A NOTICE UNDER SECTION 148 WAS ISSUED BY HIM IN THE MONTH OF MARCH, 2011 REOPENING THE ASSESSMENT AFTER RECORDING THE REASON S. IN COMPLIANCE TO THE SAID NOTICE, THE RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 21.04.2011 DECLARING THE SAME INCOME OF RS.2,03,14, 010/- AS DECLARED IN THE RETURN ORIGINALLY FILED ON 28.10.2004. IN THE A SSESSMENT COMPLETED I.T.A. NO. 634/KOL./2013 ASSESSMENT YEAR: 2004-2005 & C.O. NO. 56/KOL/2013 (IN ITA NO. 634/KOL/2013) ASSESSMENT YEAR: 2004-2005 PAGE 3 OF 12 UNDER SECTION 143(3)/147 VIDE AN ORDER DATED 29.12. 2011, THE TOTAL INCOME OF THE ASSESSEE WAS DETERMINED BY THE ASSESS ING OFFICER AT RS.3,08,58,683/- AFTER DISALLOWING THE CLAIM OF THE ASSESSEE FOR PROVISION TOWARDS WARRANTY EXPENSES AMOUNTING TO RS.17,66,700 /- AND SET OFF OF BROUGHT FORWARD LOSS OF AMALGAMATING COMPANY AMOUNT ING TO RS.78,83,300/-. 3. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R UNDER SECTION 143(3)/147, AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(APPEALS) CHALLENGING THE VALIDITY OF THE SAID A SSESSMENT AS WELL AS DISPUTING BOTH THE ADDITIONS MADE THEREIN BY THE AS SESSING OFFICER. AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AN D PERUSING THE RELEVANT MATERIAL ON RECORD, THE LD. CIT(APPEALS) D ID NOT FIND MERIT IN THE SUBMISSION MADE BY THE ASSESSEE CHALLENGING THE VAL IDITY OF THE ASSESSMENT MADE BY THE ASSESSING OFFICER UNDER SECT ION 143(3)/147 AND REJECTING THE SAME, HE UPHELD THE VALIDITY OF THE S AID ASSESSMENT FOR THE FOLLOWING REASONS GIVEN IN HIS IMPUGNED ORDER:- (I) AFTER CAREFUL EXAMINATION OF THE ORIGINAL ASSESSMENT, IT IS NOTICED THAT THE AO HAD NOT EXAMI NED THE MATTER AND DEALT WITH THE ISSUES UNDER CONSIDERATION, SO THERE IS NO QUESTION OF CHANGE OF OPINION. (II) ON PERUSAL AND EXAMINATION OF THE REASONS RECO RDED BY THE AO, IT IS OBSERVED THAT THERE IS PRIMA FACIE MATERIAL AND REASONS TO REOPEN THE CASE. HENCE, THE REOPENING OF THE CASE BY THE AO IS HELD VALID AND T HUS THE OTHER ISSUES ARE BEING DECIDED ON MERITS HEREUN DER. 4. THE LD. CIT(APPEALS), HOWEVER, FIND MERIT IN THE SUBMISSIONS MADE BY THE ASSESSEE CHALLENGING BOTH THE ADDITIONS MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT COMPLETED UNDER SECTION 1 43(3)/147 ON ACCOUNT OF DISALLOWANCE OF ASSESSEES CLAIM FOR PROVISION T OWARDS WARRANTY EXPENSES AND SET OFF OF BROUGHT FORWARD LOSSES OF A MALGAMATING COMPANY I.T.A. NO. 634/KOL./2013 ASSESSMENT YEAR: 2004-2005 & C.O. NO. 56/KOL/2013 (IN ITA NO. 634/KOL/2013) ASSESSMENT YEAR: 2004-2005 PAGE 4 OF 12 AND THE SAID ADDITIONS ACCORDINGLY WERE DELETED BY HIM. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE REVENUE HAS PREF ERRED THIS APPEAL BEFORE THE TRIBUNAL, WHILE THE ASSESSEE HAS FILED I TS CROSS OBJECTION ON THE FOLLOWING GROUNDS:- GROUNDS OF REVENUES APPEAL: (I) THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS IN FACTS IN HOLDING THAT THE ENTIRE PROVISION OF WARRANTY EXPEN SES AMOUNTING TO RS.17,66,700/- AS AN ALLOWABLE EXPENSE S AND DELETING THE ENTIRE ADDITION. WHEREAS ONLY THE PART OF SUCH PROVISION WHICH GOT CRYSTALLIZED DURIN G THE RELEVANT PREVIOUS YEAR, I.E. THE AMOUNT OF ACTU AL PAYMENT MADE DURING THE YEAR UNDER THE SAID HEAD ONLY SHOULD BE ALLOWED AND THE CLOSING PROVISION AS ON 31.03.2004 SHOULD BE ADDED BACK TO THE TOTAL INCOME FOR THE FY 2003-04 (AY 2004-05), AS ANY SORT OF PROVISION IS NOT ALLOWABLE AS EXPENSES, IF IT IS NO T CRYSTALLIZED. (II) THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS IN FACTS IN ALLOWING THE SET OFF OF BROUGHT FORWARD BUSINESS LO SS AND UNABSORBED DEPRECIATION AMOUNTING TO RS.78,83,000/-. GROUNDS OF CROSS OBJECTION BY THE ASSESSEE 1. THAT ON THE FACTS AND ON THE CIRCUMSTANCES OF TH E CASE THE LEARNED CIT(A) HAD ERRED IN NOT APPRECIATING AND DE CIDING THAT THE ENTIRE PROCEEDINGS INITIATED UNDER SECTION 147/ 148 OF THE ACT WAS BAD IN LAW, ILLEGAL, UNJUSTIFIED AND ABINIT IO VOID AND THE ENTIRE ASSESSMENT FRAMED UNDER SECTION 143(3)/1 47 OF THE ACT, WAS SUBJECTED TO BE CANCELLED / QUASHED / SET ASIDE. 2. THAT ON THE FACTS AND ON THE CIRCUMSTANCES OF TH E CASE THE LEARNED CIT(A) HAD ERRED IN NOT APPRECIATING AND DE CIDING THAT PROCEEDINGS UNDER SECTION 147 HAVING BEEN INITIATED ON THE BASIS OF THE SAME EXISTING MATERIALS AVAILABLE DURI NG THE FRAMING OF THE ORIGINAL ASSESSMENT UNDER SECTION 14 3(3), AND THE AO HAVING NOT DISPOSED OFF THE OBJECTIONS RAISE D BY THE APPELLANT, THE ENTIRE PROCEEDINGS INITIATED UNDER S ECTION 147/148 OF THE ACT WAS BAD IN LAW, ILLEGAL, UNJUSTI FIED AND AB INITIO VOID AND THE ENTIRE ASSESSMENT FRAMED UNDER SECTION I.T.A. NO. 634/KOL./2013 ASSESSMENT YEAR: 2004-2005 & C.O. NO. 56/KOL/2013 (IN ITA NO. 634/KOL/2013) ASSESSMENT YEAR: 2004-2005 PAGE 5 OF 12 143(3)/147 OF THE ACT, WAS SUBJECTED TO BE CANCELLE D/ QUASHED/ SET ASIDE. 5. AS THE CROSS OBJECTION FILED BY THE ASSESSEE RAI SES A PRELIMINARY ISSUE CHALLENGING THE VALIDITY OF THE ASSESSMENT MA DE BY THE ASSESSING OFFICER UNDER SECTION 143(3)/147, WE CONSIDER IT AP PROPRIATE TO DISPOSE OF THE SAME FIRST. 6. APROPOS THIS ISSUE RAISED IN THE CROSS OBJECTION OF THE ASSESSEE CHALLENGING THE VALIDITY OF ASSESSMENT MADE BY THE ASSESSING OFFICER UNDER SECTION 143(3) READ WITH SECTION 147, THE LD. COUNSEL FOR THE ASSESSEE INVITED OUR ATTENTION TO THE COPY OF REASO NS RECORDED BY THE ASSESSING OFFICER AS PLACED AT PAGE NO. 31 OF THE P APER BOOK AND POINTED OUT THAT THE ASSESSMENT ORIGINALLY COMPLETED BY THE ASSESSING OFFICER UNDER SECTION 143(3) WAS REOPENED BY THE ASSESSING OFFICER ON THE BASIS OF THE SAME RECORDS AS WERE AVAILABLE WHILE COMPLET ING THE ASSESSMENT ORIGINALLY UNDER SECTION 143(3) OF THE ACT. HE CONT ENDED THAT NO NEW FACT OR NEW MATERIAL HAD COME TO THE POSSESSION OF THE A SSESSING OFFICER AFTER COMPLETING THE ASSESSMENT ORIGINALLY UNDER SECTION 143(3), WHICH FORMED THE BASIS OF REOPENING AND THUS THE REOPENING OF AS SESSMENT BY THE ASSESSING OFFICER WAS CLEARLY BASED ON A MERE CHANG E OF OPINION. AS REGARDS THE OBSERVATION MADE BY THE LD. CIT(APPEALS ) IN HIS IMPUGNED ORDER WHILE UPHOLDING THE VALIDITY OF REOPENING THA T THE RELEVANT ISSUES RAISED BY THE ASSESSING OFFICER IN THE REASONS RECO RDED WERE NOT EXAMINED BY THE ASSESSING OFFICER IN THE ORIGINAL A SSESSMENT, THE LD. COUNSEL FOR THE ASSESSEE INVITED OUR ATTENTION TO T HE LETTER DATED 17.11.2006 SUBMITTED BY THE ASSESSEE BEFORE THE ASS ESSING OFFICER DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, WHER EBY THE COPIES OF AUDITED ACCOUNTS OF THE AMALGAMATING COMPANY FOR TH E RELEVANT THREE YEARS WERE FILED AS PER THE REQUIREMENT OF THE ASSE SSING OFFICER. HE ALSO SUBMITTED THAT THE REGULAR BOOKS OF ACCOUNT MAINTAI NED BY THE ASSESSEE I.T.A. NO. 634/KOL./2013 ASSESSMENT YEAR: 2004-2005 & C.O. NO. 56/KOL/2013 (IN ITA NO. 634/KOL/2013) ASSESSMENT YEAR: 2004-2005 PAGE 6 OF 12 WERE PRODUCED FOR THE VERIFICATION OF THE ASSESSING OFFICER DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS ALONG WIT H OTHER SUPPORTING DOCUMENTS AND IT, THEREFORE, CANNOT BE SAID THAT TH E ISSUES RAISED BY THE ASSESSING OFFICER WHILE REOPENING THE ASSESSMENT HA D NOT BEEN EXAMINED DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDING S. HE CONTENDED THAT THE REOPENING OF ASSESSMENT BY THE ASSESSING OFFICE R THUS WAS BASED ON A MERE CHANGE OF OPINION, WHICH IS NOT PERMISSIBLE IN LAW AS HELD, INTER ALIA, BY THE HONBLE SUPREME COURT IN THE CASE OF C IT VS.- KELVINATOR OF INDIA LIMITED REPORTED IN 320 ITR 561 AND BY THE HO NBLE CALCUTTA HIGH COURT IN THE CASE OF DEBASHIS MOULIK VS.- ACIT REP ORTED IN 370 ITR 660. HE ALSO CONTENDED THAT THE ASSESSMENT ORIGINALLY CO MPLETED UNDER SECTION 143(3) FOR THE YEAR UNDER CONSIDERATION WAS REOPENED BY THE ASSESSING OFFICER AFTER THE EXPIRY OF FOUR YEARS FR OM THE END OF THE ASSESSMENT YEAR AND AS PER THE FIRST PROVISO TO SEC TION 147, IT WAS INCUMBENT UPON THE ASSESSING OFFICER TO POINT OUT S PECIFICALLY IN THE REASONS RECORDED THAT THE INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HI S ASSESSMENT. IN THIS REGARD, HE AGAIN INVITED OUR ATTENTION TO THE REASO NS RECORDED BY THE ASSESSING OFFICER TO POINT OUT THAT NO SUCH FAILURE ON THE PART OF THE ASSESSEE WAS POINTED OUT BY THE ASSESSING OFFICER. RELYING, INTER ALIA, ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN T HE CASE OF GENERAL MOTORS INDIA PVT. LIMITED VS.- DCIT REPORTED IN 46 TAXMANN.COM 399 AND THAT OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF TITANOR COMPONENTS LIMITED VS.- ACIT REPORTED IN 20 TAXMAN N.COM 805 (BOM.), HE CONTENDED THAT THE REOPENING OF ASSESSMENT AFTER THE EXPIRY OF FOUR YEARS WITHOUT POINTING OUT SUCH FAILURE WAS BAD IN LAW AND THE ASSESSMENT COMPLETED IN PURSUANCE THEREOF IS LIABLE TO BE CANCELLED. 7. THE LD. D.R., ON THE OTHER HAND, STRONGLY RELIED ON THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) IN SUPPORT OF THE REV ENUES CASE ON THIS I.T.A. NO. 634/KOL./2013 ASSESSMENT YEAR: 2004-2005 & C.O. NO. 56/KOL/2013 (IN ITA NO. 634/KOL/2013) ASSESSMENT YEAR: 2004-2005 PAGE 7 OF 12 ISSUE AND SUBMITTED THAT THE ISSUES RAISED BY THE A SSESSING OFFICER IN THE REASONS RECORDED FOR REOPENING THE ASSESSMENT HAVIN G NOT BEEN EXAMINED IN THE ORIGINAL PROCEEDINGS UNDER SECTION 143(3), I T CANNOT BE SAID THAT THE REOPENING WAS BASED ON A MERE CHANGE OF OPINION . AS REGARDS THE OTHER CONTENTION OF THE LD. COUNSEL FOR THE ASSESSE E THAT THERE WAS NO FAILURE POINTED OUT BY THE ASSESSING OFFICER ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR ASSESSMENT, HE CONTENDED THAT THE REASONS RECORDED BY THE ASSESSIN G OFFICER AS A WHOLE ARE REQUIRED TO BE TAKEN INTO CONSIDERATION TO ASCE RTAIN AND UNDERSTAND SUCH FAILURE. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IN ORDER TO APPRECIATE THE CONTENTION RAISED BY THE LD. COUNSEL FOR THE ASSESS EE IN SUPPORT OF THE ASSESSEES CASE ON THE PRELIMINARY ISSUE RAISED IN THIS CASE REGARDING THE VALIDITY OF REOPENING OF ASSESSMENT, IT IS RELEVANT TO REFER TO THE REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPENING THE ASSESSMENT, WHICH ARE AS UNDER:- THE RETURN OF INCOME DECLARING A TOTAL INCOME OF RS.2,03,14,010/- WAS FILED ON 28/10/2004. THE ASSES SMENT U/S. 143(3) OF THE I.T. ACT WAS COMPLETED ON 28/12/ 2006 AT A TOTAL INCOME OF RS.2,12,08,683/-. ON SCRUTINY OF RE CORDS, IT APPEARS THAT THE ASSESSEE DEBITED THE PROFIT & LOSS ACCOUNT BY A SUM OF RS.45,89,826/- TOWARDS 'WARRANTY EXPENSES' AND THE SAME WAS ALLOWED AT THE TIME OF ASSESSMENT. IN THE NOTES TO THE PROFIT & LOSS ACCOUNT, IT WAS MENTIONED THAT IT WAS A PROVISION - 'PROVISION FOR WARRANT COST IS MADE AS A PERCENTAGE OF SALES AND IS BASED ON PAST EXPERIENCE / TECHNICAL ESTIMATES'. SINCE PROVISION IS NOT AN ALL OWABLE EXPENDITURE, THE AMOUNT WAS REQUIRED TO ADDED BACK IN COMPUTATION OF INCOME. OMISSION IN THIS REGARD RESU LTED IN UNDER ASSESSMENT OF INCOME OF RS.45,89,836/-. M/S. BHARTLA INTERNATIONAL LIMITED WAS AMALGAMATED WITH M/S. BHARTIYA INDUSTRIES LTD. W.E.F. MAY, 11, 2004. THE LOSS OF RS.78,63,300/- PERTAINING TO M/S. BHARTIA INTERN ATIONAL LTD. WAS ADJUSTED WITH THE INCOME OF M/S. BHARTIA INDUST RIES LTD. DURING THE F.Y. 2003-04 RELEVANT TO A.Y. 2004-05 AN D THE SET OFF I.T.A. NO. 634/KOL./2013 ASSESSMENT YEAR: 2004-2005 & C.O. NO. 56/KOL/2013 (IN ITA NO. 634/KOL/2013) ASSESSMENT YEAR: 2004-2005 PAGE 8 OF 12 OF THE LOSS WAS' ALLOWED AT THE TIME OF ASSESSMENT MADE U/S.143(3). THE SET OFF OF LOSS PERTAINING TO AMALG AMATING COMPANY IS GOVERNED BY SEC. 72A OF LT. ACT READ WIT H I.T. RULE 9C. THE SEC. 72A INTER ALIA PROVIDED THAT THE AMALG AMATING COMPANY SHOULD HAVE BEEN ENGAGED IN THE BUSINESS FO R THREE OR MORE YEARS. TAX AUDIT REPORT FOR 2003-04, CERTIFIED THAT THE AMALGAMATING COMPANY WAS ENGAGED IN THE BUSINESS OF MANUFACTURING OF STEEL ENCLOSURE, BHARTIA BOXES AND PANNELS. IT WAS ALSO REVEALED THAT THE AMALGAMATING COMPANY M/S . BHARTIA INTERNATIONAL LIMITED WAS ENGAGED IN TRADIN G ACTIVITY ONLY DURING A.Y. 2001-02 & 2002-03 AND THERE WAS NO MANUFACTURING ACTIVITY DURING THESE YEARS. ACCORDIN GLY, THE ASSESSEE COMPANY WAS NOT ENTITLED TO SET OFF THE LO SS OF RS.78,83,300/- PERTAINING TO THE AMALGAMATING COMPA NY FOR THE A.YS.2001-02, 2002-03 & 2003-04. FURTHER, THE A SSESSEE DID NOT FURNISH THE REQUISITE CERTIFICATE IN FORM 62 AS PROVIDED IN RULE 9C. THE OMISSION IN ALLOWING SET OFF OF LOSS R ESULTED IN UNDER ASSESSMENT OF RS.78,83,300/-. 9. IT IS MANIFEST FROM THE REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPENING THE ASSESSMENT THAT THE ASSESSMENT OR IGINALLY COMPLETED UNDER SECTION 143(3) WAS REOPENED BY THE ASSESSING OFFICER ON THE BASIS OF SAME RECORDS AS WAS AVAILABLE BEFORE HIM WHILE C OMPLETING THE ORIGINAL ASSESSMENT UNDER SECTION 143(3) AND THERE WAS NO NE W MATERIAL THAT HAD COME TO HIS POSSESSION ON THE BASIS OF WHICH THE AS SESSMENT WAS REOPENED BY HIM. THE LD. CIT(APPEALS) IN HIS IMPUGN ED ORDER AND THE LD. D.R. AT THE TIME OF HEARING BEFORE US HAVE NOT DISP UTED THIS POSITION. THEY, HOWEVER, HAVE TAKEN A STAND THAT THE ISSUES R AISED IN THE REASONS RECORDED BY THE ASSESSING OFFICER WHILE REOPENING T HE ASSESSMENT WERE NOT EXAMINED DURING THE COURSE OF ORIGINAL ASSESSME NT PROCEEDINGS AND, THEREFORE, THERE WAS NO QUESTION OF EXPRESSION OF A NY OPINION ON THE SAME AND THE QUESTION OF CHANGE OF OPINION WOULD NOT ARI SE. HOWEVER, AS POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE, TH E RELEVANT DETAILS RELATING TO THE AMALGAMATING COMPANY WERE FURNISHED BY THE ASSESSEE DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDING S UNDER LETTER DATED 17.11.2006 AS PER THE REQUIREMENT OF THE ASSESSING OFFICER AND THE FACT THAT THESE RELEVANT DETAILS WERE SPECIFICALLY CALLE D BY THE ASSESSING OFFICER IS SUFFICIENT TO SHOW THAT THE ISSUE RELATI NG TO THE ASSESSEES CLAIM I.T.A. NO. 634/KOL./2013 ASSESSMENT YEAR: 2004-2005 & C.O. NO. 56/KOL/2013 (IN ITA NO. 634/KOL/2013) ASSESSMENT YEAR: 2004-2005 PAGE 9 OF 12 FOR SET OFF OF BROUGHT FORWARD LOSSES OF THE AMALGA MATING COMPANY WAS CONSIDERED AND EXAMINED BY THE ASSESSING OFFICER DU RING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS. MOREOVER, AS SUBMI TTED BY THE LD. COUNSEL FOR THE ASSESSEE, BOOKS OF ACCOUNT REGULARL Y MAINTAINED BY THE ASSESSEE ALONG WITH THE SUPPORTING DOCUMENTS WERE P RODUCED FOR VERIFICATION OF THE ASSESSING OFFICER DURING THE CO URSE OF ORIGINAL ASSESSMENT PROCEEDINGS AND IT, THEREFORE, CANNOT BE SAID THAT THE RELEVANT ISSUES RELATING TO ASSESSEES CLAIM FOR DEDUCTION O N ACCOUNT OF PROVISION TOWARDS WARRANTY AND SET OFF OF BROUGHT FORWARD LOS SES OF AMALGAMATING COMPANY WERE NOT EXAMINED BY THE ASSESSING OFFICER. 10. IN THE CASE OF CIT VS.- KELVINATOR OF INDIA LI MITED (SUPRA), CITED BY THE LD. COUNSEL FOR THE ASSESSEE, IT WAS HELD BY TH E HONBLE SUPREME COURT THAT AFTER THE AMENDMENT MADE IN SECTION 147 W.E.F. 1.4.1989, THE ASSESSING OFFICER HAS TO HAVE REASON TO BELIEVE THA T INCOME HAS ESCAPED ASSESSMENT BUT THIS DOES NOT IMPLY THAT THE ASSESSI NG OFFICER CAN REOPEN AN ASSESSMENT ON A MERE CHANGE OF OPINION. IT WAS H ELD THAT THE CONCEPT OF CHANGE OF OPINION MUST BE TREATED AS AN IN-BUI LT TEST TO CHECK THE ABUSE OF POWER AND HENCE THE ASSESSING OFFICER EVEN AFTER THE AMENDMENTS MADE IN THE RELEVANT PROVISIONS FROM APR IL 1, 1989 HAS THE POWER TO REOPEN AN ASSESSMENT PROVIDED THERE IS TAN GIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME FROM THE ASSESSMENT. 11. IN THE CASE OF DEBASHIS MOULIK VS.- ACIT (SUPR A), ALL INFORMATION, DOCUMENTS AND OTHER RECORDS RELATING TO THE ASSESSE E FOR THE RELEVANT ASSESSMENT YEAR WERE PLACED BEFORE THE ASSESSING OF FICER DURING THE ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) AND THE ASSESSMENT COMPLETED UNDER SECTION 143(3) WAS SOUGHT TO BE REO PENED BY THE ASSESSING OFFICER ON THE BASIS OF NEW FACTS NOTICED FROM THE SAME RECORD AND IN THESE FACTS AND CIRCUMSTANCES OF THAT CASE, IT WAS HELD BY THE I.T.A. NO. 634/KOL./2013 ASSESSMENT YEAR: 2004-2005 & C.O. NO. 56/KOL/2013 (IN ITA NO. 634/KOL/2013) ASSESSMENT YEAR: 2004-2005 PAGE 10 OF 12 HONBLE CALCUTTA HIGH COURT THAT THE ASSESSMENT WAS REOPENED BY THE ASSESSING OFFICER MERELY ON THE BASIS OF MERE CHANG E OF OPINION, WHICH IS NOT PERMISSIBLE IN LAW. AS ALREADY NOTED, THERE WAS NO NEW TANGIBLE MATERIAL THAT HAD COME TO THE POSSESSION OF THE ASS ESSING OFFICER AND SINCE THE ASSESSMENT ORIGINALLY COMPLETED UNDER SEC TION 143(3) WAS REOPENED BY HIM ON THE BASIS OF SAME MATERIAL, WHIC H WAS AVAILABLE AT THE TIME OF COMPLETION OF ORIGINAL ASSESSMENT UNDER SEC TION 143(3), WE ARE OF THE VIEW THAT REOPENING OF ASSESSMENT MADE BY THE A SSESSING OFFICER MERELY ON THE BASIS OF CHANGE OF OPINION WAS BAD IN LAW AND THE ASSESSMENT COMPLETED BY HIM UNDER SECTION 143(3)/14 7 IN PURSUANCE THEREOF IS INVALID. 12. AS REGARDS THE OTHER CONTENTION RAISED BY THE L D. COUNSEL FOR THE ASSESSEE WHILE CHALLENGING THE VALIDITY OF REOPENIN G OF ASSESSMENT, IT IS OBSERVED THAT THE FIRST PROVISO TO SECTION 147 IS VERY CLEAR IN THIS REGARD THAT WHERE AN ASSESSMENT UNDER SECTION 143(3) HAS B EEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN BY THE ASSESSING OFFICER UNDER SECTION 147 AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS ANY INCOME CHAR GEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR, INTER ALIA, BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSM ENT YEAR. IN THE PRESENT CASE, NOTICE UNDER SECTION 148 WAS ISSUED I N THE MONTH OF MARCH, 2011, I.E. AFTER THE EXPIRY OF A PERIOD OF FOUR YEA RS FROM THE END OF THE ASSESSMENT YEAR UNDER CONSIDERATION, I.E. A.Y. 2004 -05. A PERUSAL OF THE REASONS RECORDED BY THE ASSESSING OFFICER, HOWEVER, SHOWS THAT NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND T RULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT HAS BEEN POINTED OUT BY TH E ASSESSING OFFICER, WHICH RESULTED IN ESCAPEMENT OF ANY INCOME OF THE A SSESSEE CHARGEABLE TO TAX FROM ASSESSMENT AS CONTEMPLATED IN THE FIRST PR OVISO TO SECTION 147. IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD. (SUPR A) CITED BY THE LD. I.T.A. NO. 634/KOL./2013 ASSESSMENT YEAR: 2004-2005 & C.O. NO. 56/KOL/2013 (IN ITA NO. 634/KOL/2013) ASSESSMENT YEAR: 2004-2005 PAGE 11 OF 12 COUNSEL FOR THE ASSESSEE, THERE WAS NOT EVEN A WHIS PER IN THE REASONS RECORDED BY THE ASSESSING OFFICER TO THE EFFECT THA T INCOME HAD ESCAPED ASSESSMENT ON ACCOUNT OF ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR HIS ASSESSMENT AND KEEPING IN VIEW THIS POSITION CLEARLY EVIDENT F ROM THE REASONS RECORDED BY THE ASSESSING OFFICER, WHICH IS SIMILAR TO THE PRESENT CASE, IT WAS HELD BY THE HONBLE GUJARAT HIGH COURT THAT THE REQUIREMENT OF THE PROVISO TO SECTION 147 WAS NOT SATISFIED AND THE NO TICE ISSUED BY THE ASSESSING OFFICER UNDER SECTION 148 REOPENING THE A SSESSMENT WAS LIABLE TO BE QUASHED. 13. IN THE CASE OF TITANOR COMPONENTS LIMITED (SUPR A), THE ASSESSING OFFICER HAD NOT RECORDED THE FAILURE ON THE PART OF THE ASSESESE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HI S ASSESSMENT FOR THE RELEVANT YEAR AND, THEREFORE, THE NOTICE ISSUED BY HIM UNDER SECTION 148 REOPENING THE ASSESSMENT WAS QUASHED BY THE HONBLE BOMBAY HIGH COURT HOLDING THAT THE SAME WAS NOT SUSTAINABLE IN LAW. 14. KEEPING IN VIEW THE RATIO LAID DOWN IN THE ABOV E JUDICIAL PRONOUNCEMENTS, WE HOLD THAT THE REOPENING OF ASSES SMENT ORIGINALLY COMPLETED UNDER SECTION 143(3) BY THE ASSESSING OFF ICER AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR U NDER CONSIDERATION WITHOUT POINTING OUT SPECIFICALLY IN THE REASONS RE CORDED THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT IS BAD IN LAW AND THE ASSESSMENT COMPLETED UNDER SECTION 143(3)/147 IN PURSUANCE THEREOF IS LIABLE T O BE CANCELLED ON THIS GROUND ALSO. WE ACCORDINGLY CANCEL THE ASSESSMENT M ADE BY THE ASSESSING OFFICER UNDER SECTION 143(3)/147 HOLDING THE SAME A S BAD IN LAW AND ALLOW THE CROSS OBJECTION FILED BY THE ASSESSEE. I.T.A. NO. 634/KOL./2013 ASSESSMENT YEAR: 2004-2005 & C.O. NO. 56/KOL/2013 (IN ITA NO. 634/KOL/2013) ASSESSMENT YEAR: 2004-2005 PAGE 12 OF 12 15. KEEPING IN VIEW THE DECISION RENDERED ABOVE ON THE PRELIMINARY ISSUE RAISED IN THE CROSS OBJECTION FILED BY THE AS SESSEE CANCELLING THE ASSESSMENT MADE BY THE ASSESSING OFFICER UNDER SECT ION 143(3)/147 HOLDING THE SAME TO BE INVALID, BOTH THE ISSUES RAI SED IN THE APPEAL OF THE REVENUE RELATING TO THE DELETION BY THE LD. CIT(APP EALS) OF THE ADDITIONS MADE BY THE ASSESSING OFFICER IN THE SAID ASSESSMEN T HAVE BECOME INFRUCTUOUS. WE, THEREFORE, DO NOT CONSIDER IT NECE SSARY OR EXPEDIENT TO ADJUDICATE UPON THE SAME. 16. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED, WHILE THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON SEPTEMBER 7 TH , 2016. SD/- SD/- (S.S. VISHWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT ME MBER KOLKATA, THE 7 TH DAY OF SEPTEMBER, 2016 ORDER PRONOUNCED BY SD/- SD/- (J.M.) (A.M.) S.S.V.R. W.A. COPIES TO : (1) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-7, KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 (2) M/S. B.C.H. ELECTRIC LIMITED, (FORMERLY M/S. BHARTIA INDUSTRIES LIMITED), BLOCK 1E, 1 ST FLOOR, 216, A.J.C. BOSE ROAD, KOLKATA-700 017 (3) COMMISSIONER OF INCOME TAX (APPEALS)-VIII, KO LKATA; (4) COMMISSIONER OF INCOME TAX- , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.