DCIT RG 8(2), MUMBAI V. MONSANTO INDIA LTD, MUMBAI

ITA 7718/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8775 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2002-2003
• Appeal Filed On: 10-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reason to believe
• Section: 143(3); 80IB; 148; 2

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B MUMBAI . , BEFORE SHRI D. MANMOHAN, VICE PRESIDENT / AND !'# , !$ %& SHRI RAJENDRA, ACCOUNTANT MEMBER I.TA. NO. 7718/MUM/2010 ASSESSMENT YEAR 2002-03 D.C.I.T. 8(2), MUMBAI R. NO. 216-A, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. VS. M/S. MONSANTO INDIA LTD., AHURA CENTRE, 5 TH FLOOR, 96, MAHAKALI CAVES ROAD, ANDHERI (EAST) MUMBAI-400 093 PAN: AAACM 2875 L ( '( / APPELLANT ) ( )*'( / RESPONDENT ) REVENUE BY : SHRI MOHIT JAIN ASSESSEE BY : SHRI KIRIT KAMDAR + ,$ / DATE OF HEARING : 11-09-2012 -. + ,$ / DATE OF PRONOUNCEMENT : 18-09-2012 %!/ / O R D E R PER RAJENDRA, A.M. THE APPELLANT HAS FILED THIS APPEAL AGAINST THE ORD ER DT. 17 TH AUGUST, 2010 OF THE CIT(A)-17, MUMBAI ON THE FOLLOWING GROUNDS: 1 )ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN HOLDING THE REASSESSMENT U/S. 143(3) R.W.S. 147 OF THE I.T. ACT WAS NOT VALID WITHOUT APPRECIATION THE FACT THAT THE A.O. HAD RIGHTLY REO PENED THE ASSESSMENT AS THE ASSESSEES CASE CLEARLY FALLS IN CLAUSE (C) OF EXPL ANATION 2 OF SEC. 147 OF THE IT. ACT, 1961. 2)ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN NOT APPRECIATING THAT THE A.O. DISALLOWED THE DEDUC TION U/S. 801B OF RS. 21,87,288/- RELATED TO SCRAP SALES AS THE SAID RECEIPT WAS NOT DERIVED FROM THE INDUSTRIAL I.TA. NO. 7718/MUM/2010 M/S. MONSANTO INDIA LTD. 2 UNDERTAKING AND HENCE NOT ELIGIBLE FOR DEDUCTION U/ S. 801B OF THE ACT, IN VIEW OF APEX COURTS DECISION IN THE CASE OF LIBERTY INDIA LTD [ 317 ITR 218(SC)], 3)ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT(A) ERRED IN DELETING INTEREST LEVIED U/S. 234D OF THE ACT AM OUNTING TO RS 2,70,977/- BY RELYING ON THE SPECIAL BENCH DECISION OF THE HONBLE DELHI ITAT IN THE CASE OF EKTA PROMOTERS LTD [305 ITR 1], WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. ASSESSEE-COMPANY, ENGAGED IN THE BUSINESS OF MANUFA CTURING & TRADING IN AGRICULTURAL CHEMICALS AND SEEDS, FILED ITS RETURN OF INCOME ON 31-10-2002 DECLARING INCOME OF RS.5.52 CRORES. ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE INCOME TAX ACT, 1961 (ACT) BY THE ASSESSING OFFICER (AO) VIDE HIS ORDER DT. 29-03-2005 ASSESSING THE TOTAL INCOME AT RS. 25.47 CRORES AFTE R ALLOWING DEDUCTION OF RS. 1.45 CRORES U/S. 80 IB OF THE ACT. 3. ASSESSMENT WAS RE-OPENED U/S. 147 OF THE ACT AND AF TER RECORDING REASONS A NOTICE U/S. 148 WAS ISSUED ON 26-03-2009. ASSESSEE-COMPAN Y SUBMITTED A LETTER DT. 13-04- 2009 ALONG WITH A COPY OF ORIGINAL RETURN OF INCOME SUBMITTED ON 30-10-2002 AND STATED THAT THE SAID RETURN OF INCOME MIGHT BE TREA TED AS RETURN OF INCOME FILED IN RESPONSE TO NOTICE ISSUED U/S. 148 OF THE ACT. ON ASSESSEES REQUEST, A COPY OF THE REASONS RECORDED FOR RE-OPENING THE ASSESSMENT WAS SUPPLIED BY THE AO. DURING RE-ASSESSMENT PROCEEDINGS, THE ASSESSEE-COMPANY RAI SED OBJECTION TO THE RE-OPENING OF ASSESSMENT. AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE-COMPANY, AO HELD THAT THE CLAIM OF DEDUCTION U/S. 80 IB ON THE SALE OF SCRAP WAS NOT AS PER THE PROVISIONS OF LAW, THAT THERE WAS NO DIRECT NEXUS B ETWEEN THE BUSINESS ACTIVITIES AND SALE OF SCRAP. AO ADMITTED THAT THE ISSUE OF ELIGI BILITY OF DEDUCTION U/S. 80 IB OF THE ACT ON SALE OF SCRAP WAS DECIDED IN FAVOUR OF THE A SSESSEE BY THE TRIBUNAL IN THE APPEAL FILED FOR THE ASSESSMENT YEAR 2004-05.BUT AC CORDING TO THE AO, EVERY ASSESSMENT YEAR WAS A SEPARATE UNIT OF TAXATION AND RESJUDICATA DID NOT APPLY TO INCOME TAX PROCEEDINGS. HE FINALLY HELD THAT EVEN IF REVENUE DID NOT CHALLENGE THE DECISION OF THE TRIBUNAL IN EARLIER YEARS, IT DID N OT PRECLUDE IT FROM BEING SO IN A LATER YEAR, THAT EVEN IF THE ASSESSEE HAD BEEN ALLOWED TH E BENEFIT OF CREDIT SALES IN EARLIER YEARS, IT DID NOT PREVENT THE AO TO CONTEST THE CLA IM AND DENY THE SAME ON THE BASIS OF FACTS AND CIRCUMSTANCES OF THE CASE IN A LATER YEAR . SUBJECT TO THE ABOVE REMARKS, DEDUCTION OF RS. 21.87 LAKHS ALLOWED ON THE SCRAP S ALES U/S. 80 IB OF THE ACT WAS WITHDRAWN BY THE AO. 3.1. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY (FAA). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER, FAA HELD THAT THE NOTICE U/S. 148 HAD BEEN ISSUED AFTER THE EXPIR Y OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, THAT WHERE THERE WAS FULL AND TRUE DISCLOSURE OF FACTS BY THE APPELLANT AND NON-APPLICATION OF MIND BY THE AO. I T WAS FURTHER HELD BY THE FAA THAT EVEN ON MERITS MATTER HAD TO BE DECIDED IN FAVOUR O F THE ASSESSEE. HE REFERRED TO THE ITAT FOR THE ASSESSMENT YEAR 2004-05 WHERE IT HAD B EEN HELD THAT SCRAP SALES CONSTITUTED INCOME ELIGIBLE FOR DEDUCTION U/S. 80 I B. HE ALLOWED THE APPEAL FILED BY THE ASSESSEE WITH A DIRECTION TO THE AO TO RE-COMPU TE DEDUCTION U/S. 80 IB INCLUDING SCRAP SALES. FAA RELIED UPON THE DECISION OF JURIS DICTIONAL HIGH COURT IN THE CASE OF 3I INFOTECH LTD., (41 DTR 377)AND HINDUSTAN PETROLE UM CORPORATION LTD. (42 DTR 262). I.TA. NO. 7718/MUM/2010 M/S. MONSANTO INDIA LTD. 3 4. BEFORE US, DEPARTMENTAL REPRESENTATIVE (DR) SUBMITT ED THAT RE-OPENING WAS AS PER THE PROVISIONS OF THE ACT, THAT AO HAD NOT FORMED A NY OPINION WHEN HE PASSED THE ORIGINAL ORDER, THAT SALE OF SCRAP WAS NOT ELIGIBLE DEDUCTION U/S. 80 IB. AUTHORISED REPRESENTATIVE (AR) SUBMITTED THAT THE TAX REPORT S UBMITTED ALONG WITH THE ORIGINAL RETURN WAS THE BASIS FOR RE-OPENING THE ASSESSMENT, ASSESSMENT WAS RE-OPENED AFTER FOUR YEARS, THAT ASSESSEE HAD DISCLOSED ALL THE REL EVANT FACTS WITH REGARD TO THE SALE OF SCRAP HAD FILED THE ORIGINAL RETURN, FAA HAD DECIDE D THE APPEAL NOT ONLY ON THE QUESTION OF VALIDITY BUT ALSO ON THE MERITS. HE FU RTHER SUBMITTED THAT ISSUE OF SCRAP SALE AND AVAILABILITY OF DEDUCTION U/S. 80 IB WAS D ECIDED IN FAVOUR OF THE ASSESSEE BY THE B BENCH OF TRIBUNAL VIDE ITS ORDER DT. 24-03- 2009 (ITA NO. 6093/MUM/07 A.Y. 2004-05). HE RELIED UPON THE CASES OF HINDUSTAN LE VER (268 ITR 332); DESAI BROTHERS LTD., (272ITR 335); SITA WORLD TRAVELS (INDIA) LTD. , (274 ITR 186); KELVINATOR OF INDIA LTD., (256 ITR 1). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE THE MATERIAL PUT BEFORE US. FROM THE FILE, FOLLOWING UN-DISPUTED FACTS ARE IMMERGING : I. ORIGINAL RETURN WAS FILED ON- 31-10-2002 II. ORDER U/S.143(3) WAS PASSED BY THE AO ON- 29-03-2005 III. NOTICE U/S.148 OF THE ACT WAS ISSUED ON- 26-03-2009 IV. RE-ASSESSMENT WAS COMPLETED ON- 11-12-2009 AS THE MATTER WAS RE-OPENED AFTER END O F THE FOUR YEARS OF RELEVANT ASSESSMENT YEAR, IT WAS NECESSARY FOR THE AO TO MENTION THE FA ILURE OF THE ASSESSEE-COMPANY, THAT RESULTED ESCAPEMENT OF INCOME. WE HAVE PERUSED TH E REASONS RECORDED FOR RE- OPENING AND WE FIND THAT THERE IS NO MENTION OF FAI LURE OF THE ASSESSEE. WE WOULD LIKE TO RE-PRODUCE THE RELEVANT PORTION OF THE REASONS R ECORDED BY THE AO: ON PERUSAL OF CASE RECORDS, IT IS NOTICED THAT THE ASSESSEES CLAIM OF RS. 14504489/- U/S. 80IB(4) IN RESPECT OF ITS UNIT AT SILVASA WAS ALLOWED IN THE SCRUTINY ASSESSMENT COMPLETED ON 29-03-2005. IT IS NOTICED FROM ANNEXU RE N1 CLAUSE 26 OF TAX AUDIT REPORT IN FORM NO. 3CD THAT THE PROFIT CONSIDERED F OR 80IB INCLUDES SCRAP SALE OF RS. 21,87,288/-. SINCE THE INCOME FROM SCRAP SALES IS NOT DERIVED FROM THE UNDERTAKING, IT DOES NOT QUALIFY FOR DEDUCTION U/S. 80IB. THE DISA LLOWANCE OF SUCH INCOME BY THE ASSESSING OFFICER IN THE SCRUTINY ASSESSMENT OF THE ASSESSEE FOR THE A.Y. 2004-05 WAS ALSO UPHELD BY THE CIT(APPEALS). THUS THE DEDUCTIO N U/S. 80IB HAS BEEN ALLOWED IN EXCESS ON THE INCOME OF SCRAP SALE, WHICH IS NOT AL LOWABLE TO THE ASSESSEE. I HAVE REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO THE TAX, TO THE EXTENT OF EXCESS DEDUCTION ALLOWED U/S. 80IB OF RS. 2187288/- HAS ES CAPED ASSESSMENT AND HENCE, IN MY OPINION, IT IS A FIT CASE FOR INITIATING PROCEED INGS U/S. 147 OF THE IT ACT, 1961 6. FROM THE ABOVE, IT IS CLEAR THAT THERE WAS NO FAILU RE ON THE PART OF THE ASSESSEE- COMPANY TO DISCLOSE FULLY AND TRULY MATERIAL FACTS NECESSARY FOR ASSESSMENT. AO HAS NOT MENTIONED AS HOW THE INFORMATION SUPPLIED BY TH E ASSESSEE WAS FACTUALLY INCORRECT. SECONDLY, THE ISSUE OF SALE OF SCRAP HA D BEEN DECIDED, AS ADMITTED BY THE AO, IN FAVOUR OF THE ASSESSEE-COMPANY, BY THE TRIBU NAL, FOR THE ASSESSMENT YEAR 2004-05. WE ARE AWARE THAT RES JUDICATA IS NOT APP LICABLE IN INCOME-TAX PROCEEDINGS, BUT THEN AO HAS TO BRING ON RECORD THOSE FACTS FOR WHICH HE WANTS TO DEVIATE FROM THE EARLIER ORDERS. WE FIND THAT AO HAS JUST MENTIONED THE PRINCIPLE OF RE-OPENING, BUT HE HAS NOWHERE MENTIONED THOSE FACTS WHICH COULD PROVE THAT PRINCIPLES OF REOPENING I.TA. NO. 7718/MUM/2010 M/S. MONSANTO INDIA LTD. 4 WERE APPLICABLE TO THE CASE UNDER CONSIDERATION. A O HAS ADMITTED THAT DEPARTMENT DID NOT PREFER AN APPEAL AGAINST THE ORDER OF THE TRIBU NAL DECIDED IN FAVOUR OF THE ASSESSEE-COMPANY. IN THESE CIRCUMSTANCES WE ARE OF THE OPINION, THAT RE-OPENING OF ASSESSMENT AFTER A PERIOD OF FOUR YEARS SHOULD BE B ASED ON SOME RELIABLE PIECE OF INFORMATION AND EVIDENCES. BUT, IN THE PRESENT CAS E SUCH RELIABLE INFORMATION IS MISSING. WE FIND THAT FAA HAS ALLOWED THE APPEAL O F THE ASSESSEE-COMPANY NOT ONLY ON MERITS, BUT HE HAS ALSO CONSIDERED THE LEGAL PRO VISIONS IN THIS REGARD. WE ARE OF THE CONSIDERED OPINION THAT ORDER OF THE FAA DOES NOT S UFFER FROM ANY LEGAL INFIRMITY. CASES RELIED UPON BY THE FAA AND THE AR ALSO SUPPOR T OUR VIEWS. UPHOLDING THE ORDER OF THE FAA, WE REJECT THE GR OUND NOS. 1 TO 3 FILED BY THE AO. APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH SEPTEMBER, 2012. SD/- SD/- ( . / D. MANMOHAN) ( !'# / RAJENDRA) / VICE PRESIDENT !$ %& / ACCOUNTANT MEMBER MUMBAI, 0% DATE: 18 TH SEPTEMBER, 2012 TNMM %!/ %!/ %!/ %!/ + ++ + ),1 ),1 ),1 ),1 2!1., 2!1., 2!1., 2!1., / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR B BENC H, ITAT, MUMBAI 6. GUARD FILE *1, ), //TRUE COPY// %!/ %!/ %!/ %!/ / BY ORDER, / DY./ASSTT. REGISTRAR , / ITAT, MUMBAI