The ACIT, Circle-4, Baroda V. M/s. Shakun Polymers Ltd., Baroda

ITA 756/AHD/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1393 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 06-06-2016
• Assessment Year: 2002-2003
• Appeal Filed On: 14-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Business income; Rectification of order; Tangible material; Bad and doubtful debts; Revised return; Reason to believe
• Section: 147; 148; 154

Judgement Text

, SMC IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA NO.756/AHD/2013 / ASSTT. YEAR: 2002-2003 ACIT, CIR.4 BARODA. VS M/S.SHAKUN POLYMERS LTD. 501, IVORY TERRACE R.C.DUTT ROAD BARODA 390 005. PAN : AACCS 5500 Q ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SHRI KAMLESH MAKWANA, SR.DR / DATE OF HEARING : 06/06/2016 / DATE OF PRONOUNCEMENT: 06/06/2016 $%/ O R D E R THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAIN ST THE ORDER OF THE LD.CIT(A)-III, BARODA DATED 17.12.2012 PASSED I N THE ASSTT.YEAR 2002-03. 2. SOLITARY GRIEVANCE OF THE REVENUE IS THAT THE LD .CIT(A) HAS ERRED IN QUASHING THE REASSESSMENT ORDER ON THE GROUND TH AT REOPENING OF THE ASSESSMENT IS NOT IN ACCORDANCE WITH THE LAW. 3. IN RESPONSE TO THE NOTICE OF HEARING, AN ADJOURN MENT APPLICATION WAS FILED ON BEHALF OF THE ASSESSEE BY SHRI BHAVIN MARFATIA, CHARTERED ACCOUNTANT. HOWEVER, AFTER GOING THROUGH THE IMPUG NED ORDER, WITH THE ASSISTANCE OF THE LD.DR, I DO NOT DEEM IT NECES SARY TO GRANT ANY ADJOURNMENT TO THE ASSESSEE, THEREFORE, THE ADJOURN MENT APPLICATION REJECTED, AND THE APPEAL IS HEARD EX PARTE . ITA NO.756/AHD/2013 2 4. A PERUSAL OF THE RECORD WOULD INDICATE THAT THE AO HAS ISSUED NOTICE UNDER SECTION 147 OF THE INCOME TAX AFTER RE CORDING THE FOLLOWING REASONS: 4. VIDE THE FIRST GROUND OF APPEAL THE APPELLANT H AS CHALLENGED THE ACTION OF THE AO IN REOPENING THE ASSESSMENT BY INVOKING PROVISIONS OF SECTION 147 OF THE I.T. ACT, 1961. IN THIS CASE ASSESSEE HAS FILED ITS ORIGINAL RETU RN OF INCOME ON 30.07.2002 DECLARING RETURNED INCOME AT RS. 23,63,583 AND CLAIMED REFUND OF RS. 11,52,252. THE S AME WAS PROCESSED U/S. 143(1) ON 31.03.2003 AND A REFUND OF RS. 11,22,493 INCLUDING INTEREST OF RS.77,733 WAS GRANT ED TO THE ASSESSES. 2. THE ASSESSES VIDE HIS APPLICATIONS U/S 154 DATED 17.04.2003 HAS BROUGHT TO THE NOTICE OF ASSESSING O FFICER THAT CREDIT OF TD5 OF RS, 1,07,492 ISSUED BY HINDUSTAN C ABLES LIMITED DATED 21.02.2002 HAS NOT BEEN GIVEN. THERE AFTER AS SESSEE COMPANY FILED ITS REVISED RETURN DECLARING LOSS OF (-) 74,78,980 FOR AY 2002-03 ON 31.03.2004 CLAIMING REFUND OF RS, 16, 59,357, THE SAME WAS HOWEVER, TREATED AS DEFECTIVE AND TREATED AS FIFED VIDE THIS LETTER NO. BRD/ITO 4(3)/SPL/03-04 DATED 31.03. 2004, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CLT(A)- III BARODA AGAINST NOT GIVING CREDIT OF TDS OF RS. 1,07,492 FO R A Y 1999- 2000, LD. CIT (A)-III, BARODA VIDE HER ORDER IN CAB /III/2 16/04-05 DATED 10.03.2005 (ZEROX COPY PLACED ON RECORD) HAS DIRECTED TO ALLOW THE TDS CREDIT FOR RS. 1,07,492 IN AY 2002-03 , IF THE INCOME HAS BEEN OFFERED FOR TAX IN ANY OF YEAR I.E. 1999-2 000, 2000-01. 3. I HAVE CONSIDERED THE APPLICATION FILED BY THE A SSESSEE. THE ASSESSEE IS IN RECEIPT OF INTEREST INCOME OF RS.3,9 9,318 (DAMAN DIVISION) IN AY 1999-2000, RS. 1,14,649 (DAMAN DIVI SION) IN AY 2000-01. ASSESSEE HAS ATTACHED COPY OF PROFIT AND L OSS ACCOUNT FOR THE YEAR ENDED ON 31.03.1999 AND 31.03.2000 RES PECTIVELY ALONG WITH COPY OF INTEREST INCOME ACCOUNT AND COMP UTATION OF INCOME AND ACKNOWLEDGEMENT FOR THE A Y 1999-2000 AN D AY 2000-01. THE ASSESS HAS ATTACHED THE TDS CERTIFICAT E FOR RS. 1,07,492 ALONG WITH ORIGINAL RETURN OF INCOME FOR A SST YEAR 2002- 03. 4. AS PER THE DIRECTION OF THE CIT(A)-III, BARODA, THE BALANCE OF TDS CREDIT OF RS. 1,07,492 WAS ALLOWED IN THE ASST YEAR 2002-03 AND THE REVISED RETURN OF INCOME FILED ON 31.03.200 4 BY THE ASSESSEE FOR ASST YEAR 2002-03 WAS TREATED AS VALID VIDE ITA NO.756/AHD/2013 3 RECTIFICATION ORDER U/S 154 DATED 20.07.2006 AND TD S CREDIT OF RS.2,31,457 WAS ALLOWED. REDUCING REFUND ALREADY GR ANTED WHILE PROCESSING ORIGINAL RETURN U/S 143(1) DATED 27.02.2 003 OF RS. 10,44,760 AND INTEREST OF RS. 77,733. 5. IT IS PERTINENT TO NOTE HERE THAT IN ORIGINAL RE TURN OF INCOME, THE ASSESSEE HAS SHOWN INCOME OF RS. NIL AFTER CLAI MING DEDUCTION UNDER CHAPTER VI-A OF BUSINESS INCOME OF RS. 23,63, 583 AND IN REVISED RETURN LOSS OF (-) 74,78,980 WITHOUT CLAIMI NG ANY DEDUCTION UNDER CHAPTER VI-A. AS THE REVISED RETURN OF INCOME FILED IS REGULARIZED AND HUGE DIFFERENCE OF 98,42,5 63 EXISTS (BEING LOSS OF (-) 74,78,980 AND BUSINESS INCOME OF RS. NI L AFTER CLAIMING BUSINESS INCOME RS. 23,63,583) BETWEEN THE TWO AND TO VERIFY THE CLAIM OF REFUND OF RS. 11,22,493 GRANTED IN ORI GINAL RETURN OF INCOME AND A REFUND OF RS. 1,39,263 IN REVISED RETU RN (BOTH INCLUSIVE OF INTEREST) INVOLVING THE RETURN OF INCO ME SHOWN IN DIFFERENT ASST YEARS, IT IS NECESSARY TO VERIFY AND ASSESS THE INCOME OF THE ASST YEAR 2002-03. THEREFORE, I HAVE REASON TO BELIEVE THAT INCOME/LOSS OF (-) 74,78,980 AND INCOM E OF RS. NIL AFTER BUSINESS INCOME 23,63,583 CHARGEABLE TO TAX H AS ESCAPED ASSESSMENT, NOTICE U/S 148 DATED 13.10.2006 OF THE ACT ISSUED ACCORDINGLY.' 5. THE LD.FIRST APPELLATE AUTHORITY AFTER PERUSAL O F THE ABOVE REASONS OBSERVED THAT THE AO FAILED TO MAKE OUT ANY CASE FO R ESCAPEMENT OF INCOME. HE SOUGHT TO REOPEN THE ASSESSMENT MERELY FOR RE-VERIFICATION OF CERTAIN DOCUMENTS, WHICH IS NOT CONTEMPLATED IN THE ACT. THE FINDING RECORDED BY THE LD.CIT(A) IS WORTH NOTE. IT READS AS UNDER: 4.2 I HAVE PERUSED THE FACTS OF THE CASE AS ALSO T HE OBSERVATION OF THE AO AND THE SUBMISSION MADE BY THE ID. COUNSE L, FROM THE REASONS RECORDED FOR REOPENING OF ASSESSMENT, AS RE PRODUCED ABOVE, IT CAN BE SEEN THAT THE AO HAS REOPENED THE ASSESSMENT IN ORDER TO ASSESS AND VERIFY THE INCOME OF THE ASSESS MENT YEAR 2002-03, AS PER HIM SUCH VERIFICATION IS NECESSITAT ED ON ACCOUNT OF HUGE DIFFERENCE OF RS. 98,42,563/- BETWEEN THE I NCOME SHOWN IN THE ORIGINAL RETURN AND THAT SHOWN IN THE REVISE D RETURN. ALSO HE HAS STATED THAT THE CLAIM OF REFUND GRANTED IN ORIG INAL RETURN AND THE REVISED RETURN NEEDS TO BE VERIFIED. THUS, THE ASSESSMENT HAS BEEN REOPENED ONLY FOR VERIFICATION AND THE AO HAS NOT RECORDED ANY REASON FOR REACHING THE CONCLUSION THAT INCOME/ LOSS OF (-) 74,78,980 AND INCOME OF RS. NIL AFTER BUSINESS INCO ME 23,63,583 CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. ITA NO.756/AHD/2013 4 4.2.1 RECENTLY HON.BLE GUJARAT HIGH COURT IN ITS DE CISION IN THE CASE OF INDUCTOTHERM (INDIA) PVT. LTD. IN SPECIAL C IVIL APPLICATION NO. 858 OF 2006 HAS HELD AS FOLLOWS: - '16. IT WOULD, THUS, EMERGE THAT EVEN IN CASE OF RE OPENING OF AN ASSESSMENT WHICH WAS PREVIOUSLY ACCEPTED UNDER SECT ION 143(1) OF THE ACT WITHOUT SCRUTINY, THE ASSESSING OFFICER WOULD HAVE POWER TO REOPEN THE ASSESSMENT, PROVIDED HE HAD SOM E TANGIBLE MATERIAL ON THE BASIS OF WHICH HE COULD FORM A REAS ON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMEN T. HOWEVER, AS HELD BY THE APEX COURT IN THE CASE OF ASSISTANT COMMISSIONER OF INCOME TAX V. RAJESH JHAVERI STOCK BROKERS P. LT D., (SUPRA) AND SEVERAL OTHER DECISIONS, SUCH REASON TO BELIEVE NEED NOT NECESSARILY BE A FIRM FINAL DECISION OF THE ASSESSI NG OFFICER. 17. IF WE ACCEPT SUCH PROPOSITION, THE PETITIONER'S APPREHENSION THAT THE ASSESSING OFFICER WOULD ARBITRARILY EXERCI SE POWERS UNDER SECTION 147 OF THE ACT TO CIRCUMVENT THE SCRUTINY P ROCEEDINGS WHICH COULD NOT BE FRAMED IN VIEW OF NOTICE UNDER S ECTION 143(2) HAVING BECOME TIME BARRED, WOULD BE TAKEN CARE OF. TO REITERATE, EVEN FOR REOPENING OF AN ASSESSMENT WHICH WAS ACCEP TED PREVIOUSLY UNDER SECTION 143(1) OF THE ACT WITHOUT SCRUTINY, THE ASSESSING OFFICER SHOULD HAVE REASON TO BELIEVE THA T INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. 18. REVERTING TO THE FACTS OF THE PRESENT CASE, WE NOTICE THAT IN TWO OUT OF FOUR REASONS RECORDED BY THE ASSESSING O FFICER FOR REOPENING THE ASSESSMENT, HE STATED THAT HE NEEDS T O VERIFY THE CLAIMS. IN THE SECOND GROUND, HE HAD RECORDED THAT ADMISSIBILITY OF THE BAD DEBTS WRITTEN OFF REQUIRED TO BE VERIFIE D. IN THE FOURTH GROUND ALSO, HE HAD RECORDED THAT ADMISSIBILITY OF ROYALTY CLAIM WAS REQUIRED TO BE VERIFIED. WE ARE IN AGREEMENT WI TH THE CONTENTION OF THE COUNSEL FOR THE PETITIONER THAT F OR MERE VERIFICATION OF THE CLAIM, POWER FOR REOPENING OF A SSESSMENT COULD NOT BE EXERCISED. THE ASSESSING OFFICER IN GUISE OF POWER TO REOPEN AN ASSESSMENT, CANNOT SEEK TO UNDERTAKE A FI SHING OR ROVING INQUIRY AND SEEK TO VERIFY THE CLAIMS AS IF IT WERE A SCRUTINY ASSESSMENT.' 4.3 THUS, AS PER THE RATIO LAID DOWN BY THIS DECISI ON OF THE JURISDICTIONAL HIGH COURT AS ALSO THE OTHER DECISIO NS RELIED UPON BY THE APPELLANT, THE IN THE REOPENING IN THE PRESENT CASE FOR THE PURPOSES OF VERIFICATION AND ASSESSMENT IS NOT VALI D. HENCE, THE REASSESSMENT PROCEEDING IS QUASHED AND THE FIRST GR OUND OF APPEAL IS ALLOWED. ITA NO.756/AHD/2013 5 5. SINCE THE REOPENING OF THE ASSESSMENT HAS BEEN HELD TO BE INVALID IN THIS CASE, HENCE, THE OTHER GROUND OF AP PEAL REGARDING MERIT OF THE ADDITIONS/DISALLOWANCES MADE IN THE RE ASSESSMENT ORDER ARE NOT ADJUDICATED. 6. AFTER GOING THROUGH THE FINDING RECORDED IN THE ORDER OF THE LD.CIT(A), I DO NOT FIND ANY MERIT IN THE PRESENT A PPEAL, BECAUSE, THE LD.CIT(A) HAS PLACED RELIANCE UPON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN HOLDING THAT NOTICE UN DER SECTION 148 WAS NOT ISSUED BY THE AO AFTER LYING HIS HAND ON ANY IN FORMATION WHICH ENABLE HIM TO FORM A BELIEF THAT THE INCOME HAS ESC APED ASSESSMENT. THE LD.AO MERELY SOUGHT TO REOPEN THE ASSESSMENT FO R VERIFICATION OF THE DETAILS, WHICH IS NOT CONTEMPLATED UNDER SECTIO N 147 OF THE ACT. AGAIN, I DO NOT FIND ANY DISPARITY OF FACTS BETWEEN THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT EXTRACTED BY THE LD.CIT(A) IN THE ORDER (EXTRACTED SUPRA) VIS--VIS REASONS RECORDED IN THE CASE OF THE ASSESSEE. THEREFORE, THE APPEAL OF THE REVENUE IS DISMISSED. 7. IN RESULT, THE APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE COURT ON 6 TH JUNE, 2016 AT AHMEDABAD. SD/- (RAJPAL YADAV) JUDICIAL MEMBER