GENERAL EXPORTS, MUMBAI V. ACIT CIR 20(1), MUMBAI

ITA 6613/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0944 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2001-2002
• Appeal Filed On: 29-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: OMPRAKASH KANT
• Assessee Lawyers: I P RATHI
• Keywords: Reopening of assessment; Invalid notice; Retrospective amendment; Difference of opinion; Change of opinion; Reassessment proceedings; Set aside
• Section: 143(3); 80HHC; 264; 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI PRAMOD KUMAR (AM) AND SMT. ASHA VIJAYA RAGHAVAN (JM) ITA NO.6613/MUM/2009 ASSESSMENT YEAR-2001-02 GENERAL EXPORTS, 104, MEGNUM OPUS, NEAR NANA MANI PARK, SEVEN BUNGALOW, ANDHERI(W), MUMBAI-400 058 PAN - AAAFG 5437D VS. THE ACIT, CIR 20(1), PIRAMAL CHAMBERS, LOWER PAREL, MUMBAI-400 012 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI I.P. RATHI RESPONDENT BY: SHRI OMPRAKASH KANT O R D E R PER SMT. ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DT. 9.10.2009 PASSED BY THE LD. CIT(A)-31, MUMBAI F OR THE ASSESSMENT YEAR 2001-02. 2. THE ASSESSEE HAD DECLARED TOTAL INCOME OF RS. 49 ,61,470/- AFTER CLAIMING DEDUCTION U/S. 80HHC OF RS. 2,08,74,883/-. SUBSEQUENTLY, THE CASE WAS REOPENED U/S. 147 OF THE I.T. ACT AND NOT ICE DT. 21.3.2007 WAS ISSUED U/S. 148 OF THE ACT. IN RESPONSE TO THE NOT ICE, THE ASSESSEE FIRM BY LETTER DT. 15.5.2007 STATED THAT THE ORIGINAL RE TURN FILED U/S. 139 OF THE I.T. ACT ON 21.10.2001 MAY BE TREATED AS RETURNED F ILED IN COMPLIANCE TO NOTICE U/S. 148. 3. THE ASSESSEE CHALLENGED THE REOPENING OF THE ASS ESSMENT U/S. 147 OF THE I.T. ACT BEFORE THE LD. CIT(A). BEFORE TH E LD. CIT(A) THE AR OF THE ASSESSEE CONTENDED THAT THE NOTICE U/S. 148 OF THE ACT WAS ISSUED AFTER THE EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, ITA NO.6613/M/09 2 THEREFORE AS PER THE PROVISO TO SEC. 147 OF THE ACT , THE SAID NOTICE ISSUED IS INVALID, SINCE THERE IS NO FAILURE ON THE PART O F THE APPELLANT TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FO R ASSESSMENT. THE AR FURTHER CONTENDED THAT THE RETURN IS FILED IN TIME AND THE ASSESSMENT ALREADY COMPLETED U/S. 143(3) AS ON 5.1.2004 DURING WHICH ALL NECESSARY DETAILS REQUIRED WERE FURNISHED BEFORE THE AO. IT WAS ALSO ARGUED THAT THE AO HAS NOT POINTED OUT ANY FAILURE ON THE PART OF THE APPELLANT TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR ASSESSMENT. THE AR FURTHER ARGUED THAT THE NOTICE ISSUED U/S. 147 R .W.S. 147 OF THE ACT BEING A MERE CHANGE OF OPINION IS AN INVALID NOTICE , WHICH IS BAD IN LAW, AND ACCORDINGLY THE REASSESSMENT MADE SHOULD BE SET ASIDE. HE MADE A DETAILED WRITTEN SUBMISSIONS IN THIS REGARD AS PER HIS LETTER DT. 14.5.2008, THE GIST IS AS UNDER: (A) NOTICE U/S. 148 IS ISSUED AFTER THE EXPIRY OF 4 YEA RS FROM THE RELEVANT ASSESSMENT YEAR. (B) ORIGINAL ASSESSMENT WAS COMPLETED U/S. 143(3) O F THE ACT AS ON 5.1.2004 AND (C) THERE IS NO FAILURE ON THE PART OF THE APPELLAN T TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THIS ASS ESSMENT ORDER TO FILE THE RETURN OF INCOME ON TIME. 4. THE AR ALSO RELIED ON THE SUPREME COURT DECISION IN THE CASE OF ITO VS LAKHMANI MEWAL DAS 103 ITR 437 AND SHEO NATH SINGH VS AAC 82 ITR 147. 5. THE LD. CIT(A) HELD AS FOLLOWS: A PERUSAL TO THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT REPRODUCED AND FACTS AVAILABLE IN THE CA SE OF APPELLANT, TO MY CONSIDERED OPINION THE APPELLANT HAS NOT DISC LOSED FULLY AND TRULY ALL MATERIAL FACTS RELATING TO THE DEPB BENEF ITS CREDITED TO ITS P&L ACCOUNT. AS PER AMENDED PROVISIONS OF SEC. 80H HC AND SEC. 28(IIID) VIDE TAXATION LAW (AMENDED)ACT, 2005, MADE APPLICABLE RETROSPECTIVELY W.E.F. 1.4.1998, IT IS SPECIFICALLY PROVIDED THAT THE ITA NO.6613/M/09 3 ONLY PROFIT ON TRANSFER OF DEPB SHALL BE INCLUDED T O THE PROFIT OF THE BUSINESS OF THE APPELLANT. ON THE OTHER HAND, AS PE R THE FACTS MENTIONED ABOVE, THE APPELLANT HAS CREDITED THE ENT IRE DEPB INCOME TO ITS P&L ACCOUNT, NO SEPARATE DETAILS OF DEPB CRE DIT AND PROFIT ON SALE OF DEPB CREDIT IS FURNISHED BY THE APPELLANT, EITHER IN HIS RETURN OF INCOME OR DURING THE COURSE OF ORIGINAL A SSESSMENT PROCEEDINGS. THEREFORE, TO THIS EXTENT, I FIND THA T THE APPELLANT HAS NOT DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS RE LATING TO THE ASSESSMENT OF DEPB CREDITS AND THE PROFIT ARISING O UT OF TRANSFER OF DEPB CREDITS AS REQUIRED U/S. 28(IIID) OF THE ACT F OR THE RELEVANT ASSESSMENT YEAR. NEVERTHELESS, IT MAY FURTHER BE N OTED THAT THE AMENDMENT MADE IN THE ACT, IN THIS REGARD VIDE TAXA TION LAWS (AMENDMENT), ACT 2005, IS MADE EFFECTIVE RETROSPECT IVELY FROM 1.4.1998. THEREFORE, RESPECTFULLY FOLLOWING THE RA TIO DECIDED BY THE HONBLE SUPREME COURT AS RELIED ON BY THE AR AS DIS CUSSED ABOVE, SINCE THE APPELLANT HAS NOT DISCLOSED FULLY AND TRU LY ALL MATERIAL FACTS, I FIND THAT THE AO IS QUITE REASONABLE AND F ULLY JUSTIFIED FOR REOPENING THE SAID ASSESSMENT BY ISSUE OF NOTICE U/ S. 148 OF THE ACT. THE APPELLANT IS NOT ELIGIBLE FOR DEDUCTION U NDER SECTION 80HHC ON PROFIT ON SALE OF DEPB CREDITS SINCE IT IS NOT SATISFYING THE THIRD PROVISO TO SEC. 80HHC OF THE ACT. THEREFORE , IN VIEW OF THE ABOVE, THE TECHNICAL GROUNDS RAISED BY THE APPELLAN T ARE HELD TO BE NOT SUSTAINABLE AND ACCORDINGLY DISMISSED. 6. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE U S AND RAISED THE FOLLOWING GROUND: THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE RE OPENING OF ASSESSMENT U/S. 147 AFTER THE END OF FOUR YEARS FRO M THE RELEVANT ASSESSMENT YEAR, THOUGH THE ORIGINAL ASSES SMENT WAS COMPLETED U/S. 143(3) AND THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL MATERIAL FACTS . 7. THE LD. COUNSEL FOR THE ASSESSEE SHRI I.P. RATH I RELIED ON THE DECISION OF THE ITAT C BENCH IN ITA NO. 4374/M/07 . ON SIMILAR FACTS IT HAS BEEN HELD AS FOLLOWS: WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS CAN BE SEEN FROM THE RELEVANT PORTION OF THE LEARNED CIT(A)'S IMPUGNED O RDER, WHICH IS REPRODUCED ABOVE, THE REASSESSMENT MADE BY THE A.O. WAS HELD TO BE INVALID BY HIM ON THE GROUND THAT THE INITIATION OF THE SAID REASSESSMENT PROCEEDINGS ITSELF WAS BAD IN LAW. ACC ORDING TO HIM THE ITA NO.6613/M/09 4 REOPENING OF THE ASSESSMENT MADE BY THE A.O. WAS FI RSTLY BASED ON CHANGE OF OPINION AND CONSEQUENTLY THERE WAS NO FAI LURE POINTED OUT BY THE A.O. IN THE REASONS RECORDED ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS REQUIRED FOR THE PURPOSE ASSESSMENT. AS REGARDS THE FIRST BASIS GIVEN BY THE LEARNED CIT (A) FOR HOLDING THE INITIATION OF REASSESSMENT PROCEEDINGS AS BAD IN LA W BEING CHANGE OF OPINION ON THE PART OF THE A.O., WE FIND IT DIFFICU LT TO AGREE WITH THIS BASIS GIVEN BY THE LEARNED CIT(A). IN OUR OPINION, THE REOPENING OF THE ASSESSMENT ORIGINALLY MADE UNDER SECTION 143(3) WAS BASED ON THE AMENDMENT MADE BY THE TAXATION LAWS (AMENDMENT) ACT , 2005 TO THE RELEVANT PROVISIONS WITH RETROSPECTIVE EFFECT FROM 01.04.1998 AND AS THE SAID AMENDMENT WAS APPLICABLE TO THE YEAR UNDER CON SIDERATION, I.E. 1998-99 AND THE SAME WERE NOT IN THE STATUTE WHEN T HE ASSESSMENT UNDER SECTION 143(3) WAS ORIGINALLY CAME TO BE MADE BY THE A.O. IN MARCH 2001, IT CANNOT BE SAID THAT REOPENING WAS MA DE BY THE A.O. MAINLY ON THE BASIS OF CHANGE OF OPINION. THERE WAS A CHANGE IN THE LAW APPLICABLE IN THE CASE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AND SINCE THE SAID CHANGE BROUGHT ABO UT WITH RETROSPECTIVE EFFECT WAS MADE ONLY AFTER THE COMPLE TION OF THE ASSESSMENT ORIGINALLY UNDER SECTION 143(3), WE ARE OF THE VIEW THAT THE LEARNED CIT(A) WAS NOT CORRECT IN HOLDING THAT IT W AS A CASE OF CHANGE OF OPINION ON THE PART OF THE A.O. AS REGARDS THE OTHER BASIS GIVEN BY THE LEARNED CIT (A) FOR HOLDING THE INITIATION OF REASSESSMENT PROCEEDINGS TO BE BA D IN LAW, I.E. ABSENCE OF ANY FAILURE ON THE PART OF THE ASSESSEE HAVING N OT BEEN POINTED OUT BY THE A.O. IN THE REASONS RECORDED TO DISCLOSE FUL LY AND TRULY ANY MATERIAL FACT, WE, HOWEVER, FULLY AGREE WITH THE LE ARNED CIT(A) THAT THIS REQUISITE CONDITION FOR REOPENING THE ASSESSMENT OR IGINALLY MADE UNDER SECTION 143(3) AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR WAS NOT SATISFIED IN THE PRESENT CA SE. AS PER THE PROVISO TO SECTION 147, THE A.O. IS NOT AUTHORISED TO TAKE ANY ACTION UNDER SECTION 147 AFTER THE EXPIRY OF FOUR YEARS FR OM THE END OF THE RELEVANT ASSESSMENT YEAR IN A CASE WHERE THE ORIGIN ALLY ASSESSMENT HAS BEEN MADE UNDER SECTION 143(3), UNLESS ANY INCO ME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASONS OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR ASSESSMENT. AS HELD BY THE HON'BLE GUJARAT HIGH COU RT IN THE CASE OF KAIRA DISTRICT CO-OPERATIVE MILK PRODUCERS' UNION L TD. VS. CIT 216 ITR 371, THE SATISFACTION OF THE A.O. AS TO THE ESCAPEM ENT OF INCOME OWING TO THE FAILURE ON THE PART OF THE ASSESSEE TO DISCL OSE THE MATERIAL FACTS NECESSARY FOR THE ASSESSMENT SHOULD FIND MENTION IN THE REASONS RECORDED FOR INITIATING THE REASSESSMENT PROCEEDING S AND IF THERE IS NO SUCH MENTION, THE ISSUE OF NOTICE UNDER SECTION 148 WOULD BE INVALID. A ITA NO.6613/M/09 5 SIMILAR ISSUE ALSO CAME UP FOR CONSIDERATION BEFORE THE HON'BLE PANTA HIGH COURT IN THE CASE OF DHANRAJ & CO. VS. CIT 132 CTR 323 WHEREIN IT WAS HELD THAT THERE BEING NO ALLEGATION WHATSOEVER EITHER IN THE SHOW CAUSE NOTICE OR IN THE REASONS RECORDED THAT THERE WAS ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRUL Y ALL MATERIAL FACTS, INITIATION OF REASSESSMENT PROCEEDINGS WOULD BE INV ALID. IN THE CASE OF CIT VS. FORAMER FRANCE, INITIATION OF REASSESSMENT PROCEEDINGS WAS HELD TO BE BAD IN LAW BY THE HON'BLE ALLAHABAD HIGH COURT IN 247 ITR 436 ON THE GROUND THAT ADMITTEDLY THERE WAS NO FAIL URE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERI AL FACTS NECESSARY FOR ASSESSMENT AND THE SAID DECISION OF THE HON'BLE ALL AHABAD HIGH COURT WAS AFFIRMED BY THE HON'BLE SUPREME COURT IN THEIR JUDGEMENT REPORTED IN 264 ITR 566. IN THE PRESENT CASE, A PERUSAL OF THE REASONS RECOR DED BY THE A.O. SHOWS THAT THERE IS NOTHING TO INDICATE THAT THE AL LEGED ESCAPEMENT OF INCOME WAS OWING TO THE FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSING THE MATERIAL FACTS FULLY AND TRULY NECES SARY FOR THE ASSESSMENT AND THIS BEING SO AS WELL AS KEEPING IN VIEW THE LEGAL DECISION EMANATING FROM THE JUDICIAL PRONOUNCEMENT DISCUSSED ABOVE, WE UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(A) HOLDING THAT INITIATION OF REASSESSMENT PROCEEDINGS BY A.O. ITSE LF WAS INVALID AND THE REASSESSMENT COMPLETED IN PURSUANCE OF SUCH INV ALID INITIATION WAS BAD IN LAW. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. 8. IN OUR OPINION THE PROVISO APPENDED WITH SEC. 14 7 PUT AN EMBARGO ON THE POWERS OF AO FOR REOPENING OF AN ASSESSMENT WHERE THE ORIGINAL ASSESSMENT WAS MADE U/S. 143(3) AND 4 YEARS HAVE EX PIRED FROM THE END OF THE RELEVANT ASSESSMENT YEAR. HE CAN REOPEN THE ASSESSMENT ONLY IF ASSESSEE FAILED TO DISCLOSE FULLY AND TRULY ALL MAT ERIAL FACTS NECESSARY FOR ITS ASSESSMENT. THE LD. DEPARTMENTAL REPRESENTATIV E COULD NOT POINT OUT ANY CIRCUMSTANCE WHICH CAN PERSUADE US TO SAY T HAT ASSESSEE HAS FAILED TO DISCLOSE A PARTICULAR FACT. IT HAS MADE COMPUTATION OF DEDUCTION ADMISSIBLE U/S. 80HHC, FILED REQUISITE AUDIT REPORT IN SUPPORT OF THE CLAIM AND THAT HAS BEEN EXAMINED U/S. 143(3). THE AO WANTED TO REOPEN THE ASSESSMENT ON THE BASIS OF A CIRCULAR WH ICH WAS ISSUED SUBSEQUENT TO THE ASSESSMENT ORDER. HOWEVER THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRU LY ALL MATERIAL FACTS AND ITA NO.6613/M/09 6 HENCE WE HOLD THAT THE REOPENING OF ASSESSMENT U/S. 147 R.W.S. 148 AFTER FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR , WHERE THE ORIGINAL ASSESSMENT WAS COMPLETED U/S. 143(3) IS INVALID. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 30 TH DAY OF JULY, 2010 SD/- SD/- (PRAMOD KUMAR ) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 30 TH JULY, 2010 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR G BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NO.6613/M/09 7 DATE INITIALS 1 DRAFT DICTATED ON: 21.7.2010 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 23 . 7 .2010 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/ PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: _________ ______ 9. DATE OF DISPATCH OF ORDER: _________ ______