JVD FUEL SYSTEMS P.LTD, MUMBAI V. ITO 9(2)(1), MUMBAI

ITA 7078/MUM/2013

• Counselvise Citation: 707819914 RSA 2013
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 14-04-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 04-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B P K
• Keywords: Reopening of assessment; Tangible material; Reason to believe
• Section: 43B; 143(3); 115JB; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'SMC' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT ITA NO.7078/MUM/2013 (ASSESSMENT YEAR: 2008-09) M/S. JVD FUEL SYSTEMS P. LTD. INCOME TAX OFFICER - 9(2)(1) 19/B. TOWER B VICEROY PARK THAKUR VILLAGE, KANDIVALI (E) MUMBAI VS. AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 PAN AABCJ5289L APPELLANT RESPONDENT APPELLANT BY: SHRI HARIOM TULSYAN RESPONDENT BY: SHRI B.P.K. PANDA DATE OF HEARING: 20.05.2014 DATE OF PRONOUNCEMENT: 04.06.2014 O R D E R PER D. MANMOHAN, V.P. THIS APPEAL BY THE ASSESSEE COMPANY IS DIRECTED AGA INST THE ORDER DATED 05.09.2013 PASSED BY THE CIT(A)-20, MUMBAI AN D IT PERTAINS TO A.Y. 2008-09. 2. ASSESSMENT MADE UNDER SECTION 147 R.W.S. 143(3) OF THE ACT AND CONSEQUENT DETERMINATION OF INCOME AT ` 3,06,159/- IS THE SUBJECT MATTER OF DISPUTE BEFORE THIS BENCH. 3. THE LEARNED COUNSEL FOR THE ASSESSEE CHALLENGED THE VALIDITY OF REOPENING OF ASSESSMENT. IN THIS REGARD HE SUBMITTE D THAT THE RETURN OF INCOME WAS FILED ON 29.09.2008 DECLARING LOSS OF ` 11,01,077/- WHICH WAS ORIGINALLY PROCESSED UNDER SECTION 143(1) OF THE AC T BUT LATER ON TAKEN UP FOR SCRUTINY WHEREIN A QUESTIONNAIRE WAS ISSUED CALLING UPON THE ASSESSEE TO FURNISH DETAILS JUSTIFYING THE LOSS DECLARED IN THE RETURN. VIDE LETTER DATED 24.06.2010 THE ASSESSEE WAS CALLED UPON TO FURNISH COPY OF THE AUDITED BALANCE SHEET, P & L ACCOUNT ALONGWITH ANNEXURES AN D COMPARATIVE FIGURES OF EARLIER YEARS AND ALSO TO FILE COPY OF THE REPOR T UNDER SECTION 44AB, IF APPLICABLE. THE ASSESSEE WAS ALSO CALLED UPON TO FU RNISH A DETAILED NOTE ON ITA NO.7078/MUM/2013 2 THE NATURE OF BUSINESS ACTIVITIES CARRIED ON IN THE PREVIOUS YEAR. IN RESPONSE THERETO, VIDE LETTER DATED 06.07.2010, ASSESSEE FUR NISHED COPIES OF THE AUDITED BALANCE SHEET, P&L ACCOUNT ALONGWITH RELEVA NT ANNEXURES AND COMPARATIVE FIGURES OF EARLIER YEARS. THOUGH THE BO OKS WERE AUDITED UNDER COMPANIES ACT IT APPEARS THAT IT WAS NOT SUBJECTED TO TAX AUDIT. IN THIS REGARD THE ASSESSEE SUBMITTED THAT HE WAS NOT LIABL E TO TAX AUDIT UNDER SECTION 44AB FOR THE FINANCIAL YEAR 2007-08 AS THE GROSS INCOME WAS BELOW ` 40 LAKHS. IT WAS FURTHER SUBMITTED THAT THE MAIN BU SINESS ACTIVITY OF THE COMPANY IS THAT OF DEALING IN CNG AND LPG KITS FOR THREE WHEELER AND FOUR WHEELER VEHICLES. WITH REGARD TO COMPUTATION UNDER SECTION 115JB IT WAS STATED THAT THERE WAS BOOK LOSS DURING THE RELEVANT FINANCIAL YEAR AND HENCE COMPUTATION UNDER SECTION 115JB IS NOT APPLICABLE. BASED ON THE ABOVE DETAILS THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT BY ADMITTING THE RETURNED INCOME. 4. SUBSEQUENT THERETO THE AO SOUGHT TO REOPEN THE ASSE SSMENT ON THE GROUND THAT AS PER SECTION 44AF OF THE ACT THE ASSE SSEE IS SUPPOSED TO DECLARE PROFIT OF ` 79,679/- BEING 5% OF THE TOTAL TRADING TURNOVER WHE REAS THE ASSESSEE DECLARED LOSS, WHICH IS CONTRARY TO TH E LAW AND, THEREFORE, ISSUED A NOTICE ON 15.05.2012 AND DESPITE THE OBJEC TIONS RAISED BY THE ASSESSEE WITH REGARD TO REOPENING OF ASSESSMENT THE AO PROCEEDED TO COMPLETE THE ASSESSMENT BY REJECTING THE LOSS DECLA RED BY THE ASSESSEE AND ESTIMATED THE INCOME. HE HAS ALSO MADE CERTAIN DISA LLOWANCES UNDER SECTION 43B OF THE ACT. ASSESSEE CHALLENGED THE ORDER OF TH E AO BEFORE THE CIT(A) ON THE PRELIMINARY ISSUE, I.E. VALIDITY OF REOPENING O F ASSESSMENT BUT THE PLEA OF THE ASSESSEE WAS REJECTED BY THE LEARNED CIT(A) AND THUS A SECOND APPEAL WAS PREFERRED BEFORE THE TRIBUNAL. 5. THE LEARNED D.R. SUBMITTED THAT THE ASSESSMENT WAS REOPENED WITHIN FOUR YEARS SINCE THE ASSESSEE OUGHT TO HAVE DECLARE D MINIMUM PROFIT OF 5% UNDER SECTION 44AF OF THE ACT AND NON-DECLARATION O F SUCH PROFIT WOULD AMOUNT ESCAPEMENT OF INCOME. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE FURNISHED DETAILS OF THE LOSS; IN FACT THE BOOKS WE RE AUDITED UNDER ITA NO.7078/MUM/2013 3 COMPANIES ACT THOUGH TAX AUDIT REPORT WAS NOT OBTAI NED AND BASED ON THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE THE BOO K RESULTS WERE ACCEPTED BY THE AO EVEN IN 143(3) PROCEEDINGS AND THUS ISSUA NCE OF NOTICE FOR REOPENING OF THE ASSESSMENT WOULD AMOUNT TO REVIEW OF THE ASSESSMENT ORDER, WHICH IS NOT PERMISSIBLE IN THE LIGHT OF THE HON'BLE JURISDICTIONAL HIGH COURT JUDGEMENT, IN THE CASE OF CIT VS. ICICI BANK 349 ITR 482 AND ALSO THE LATEST DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF ARONI COMMERCIAL LTD. (WP NO. 137 OF 2014 DATED 11.02.201 4). HE ADVERTED THE ATTENTION OF THE BENCH TO THE DECISION OF THE HON'B LE BOMBAY HIGH COURT IN THE CASE OF ICICI BANK WHEREIN THE COURT OBSERVED T HAT THE SINE QUA NON FOR ISSUE OF A NOTICE FOR REOPENING OF ASSESSMENT, EVEN WITHIN A PERIOD OF LESS THAN FOUR YEARS, IS REASON TO BELIEVE THAT INCOME H AS ESCAPED ASSESSMENT AND SUCH BELIEF SHOULD BE BASED ON TANGIBLE MATERIA L AS OTHERWISE THE EXERCISE OF POWER TO REOPEN WOULD AMOUNT TO REVIEW OF ASSESSMENT ORDER, WHICH IS NOT PERMISSIBLE. THE COURT FURTHER OBSERVE D THAT AN ORDER PURPORTEDLY PASSED WITHOUT APPLICATION OF MIND SHOU LD NOT BE PERMITTED TO BE REOPENED AND IF SUCH AN ORDER CONFERS JURISDICTI ON UPON THE AO TO REOPEN THE PROCEEDINGS, WITHOUT ANYTHING FURTHER, THE SAME WOULD AMOUNT TO GIVING A PREMIUM TO AN AUTHORITY EXERCISING QUASI-JUDICIAL FUNCTION TO TAKE BENEFIT OF ITS OWN WRONG. HE THUS STRONGLY SUBMITTED THAT R EOPENING OF ASSESSMENT IS BAD IN LAW SINCE THERE IS NO FRESH MATERIAL THAT HAS COME TO THE NOTICE OF THE AO AND IN FACT THERE IS NO TANGIBLE MATERIAL FO R REOPENING OF ASSESSMENT. 7. ON THE OTHER HAND, THE LEARNED D.R. SUBMITTED THAT THE APEX COURT, IN THE CASE OF PHOOL CHAND BAJRANG LAL VS. ITO 203 ITR 456, OBSERVED THAT IF ANY INFORMATION COMES TO THE NOTICE OF THE AO SUBSE QUENTLY HE IS ENTITLED TO REOPEN THE ASSESSMENT WITHIN FOUR YEARS. 8. JOINING THE ISSUE, THE LEARNED COUNSEL FOR THE ASSE SSEE SUBMITTED, BY ADVERTING THE ATTENTION OF THE BENCH TO PARA 27 OF THE SAID ORDER, THAT REOPENING IS PERMISSIBLE WHEN SOME INFORMATION HAS COME TO TH E NOTICE OF THE AO SUBSEQUENT TO THE COMPLETION OF ASSESSMENT AND WHER E SUCH INFORMATION WAS NOT PREVIOUSLY DISCLOSED, WHEREAS IN THE INSTANT CA SE THE FACTS WERE ALREADY ON RECORD AND THE TURNOVER BEING LESS THAN ` 40 LAKHS THERE IS NO NECESSITY FOR THE ASSESSEE TO OBTAIN TAX AUDIT REPORT AND ALL THESE F ACTS WERE ALREADY IN THE ITA NO.7078/MUM/2013 4 KNOWLEDGE OF THE AO WHILE MAKING THE ASSESSMENT UND ER SECTION 143(3) OF THE ACT AND IF AT ALL THERE IS NON APPLICATION OF MIND ON THE PART OF THE AO ON THE EARLIER OCCASION THE ASSESSEE SHOULD NOT BE MADE TO SUFFER IN THE FORM OF INITIATION OF PROCEEDINGS UNDER SECTION 148 AS SUCH AN EXERCISE WOULD AMOUNT TO GIVING A PREMIUM TO AN AUTHORITY EXERCISING QUASI-J UDICIAL FUNCTIONS, TO TAKE BENEFIT OF ITS OWN WRONG. HE THUS STRONGLY REITERAT ED THE SUBMISSIONS IN THE LIGHT OF THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT. 9. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS A ND PERUSED THE RECORD. ADMITTEDLY, DURING THE COURSE OF 143(3) PRO CEEDINGS THE AO CALLED FOR RELEVANT DETAILS BY ISSUING A QUESTIONNAIRE AND THE ASSESSEE FURNISHED ALL THE REQUIRED DETAILS AND UPON PERUSING THE DETAILS THE AO HAVING COMPLETED THE ASSESSMENT, IN THE ABSENCE OF ANY FRESH TANGIBL E MATERIAL, IN THE LIGHT OF THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COU RT CITED SUPRA, THE AO MAY NOT BE JUSTIFIED IN REOPENING THE ASSESSMENT EV EN WITHIN THE PERIOD OF FOUR YEARS. BY RESPECTFULLY FOLLOWING THE AFORECITE D JUDGEMENTS, I AM OF THE VIEW THAT REOPENING OF ASSESSMENT IS BAD IN LAW AND HOLD ACCORDINGLY. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE COM PANY IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH JUNE, 2014. SD/- (D. MANMOHAN) VICE PRESIDENT MUMBAI, DATED: 4 TH JUNE, 2014 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 20, MUMBAI 4. THE CIT 9, MUMBAI CITY 5. THE DR, SMC BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.