DCIT, Central Circle - XXI, Kolkata, Kolkata V. M/s. Sona Vets Pvt. Ltd., Kolkata

ITA 778/KOL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54722 (ITAT-KOLKATA)
• Duration Of Justice: 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2002-2003
• Appeal Filed On: 20-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D J MEHTA
• Assessee Lawyers: A K TULSIYAN
• Keywords: Rectification of order; Audit objection; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 115JB; 80IB; 147; 148

Judgement Text

, , , , , ,, , IN THE INCOME-TAX APPELLATE TRIBUNAL, C BENCH: K OLKATA [ . . , ! ! ! ! , ] [BEFORE SHRI S.V. MEHROTRA, AM & SHRI MAHAVIR SINGH , JM ' ' ' ' / I.T.A NO. 778/KOL/2011 !#$ %& !#$ %& !#$ %& !#$ %& / ASSESSMENT YEAR: 2002-03 DY. COMMISSIONER OF INCOME TAX -V- M/S. SONA VETS PVT. LIMITED CENTRAL CIRCLE-XXI, KOLKATA. KOLKATA. [PAN: AAECS 0908 G] [ '( '( '( '( /APPELLANT ] ]] ] [ *+'( *+'( *+'( *+'(/ // / RESPONDENT ] ] ] ] '( '( '( '( / FOR THE APPELLANT: SHRI D. J. MEHTA *+'( *+'( *+'( *+'( / FOR THE RESPONDENT: SHRI A. K. TULSIYAN -#. / 0 -#. / 0 -#. / 0 -#. / 0 /DATE OF HEARING: 20.12.2011 1% / 0 1% / 0 1% / 0 1% / 0 /DATE OF PRONOUNCEMENT: 20.12.2011 2 /ORDER ! ! ! ! , ,, , PER MAHAVIR SINGH, J. M. THIS APPEAL BY REVENUE IS EMANATING OUT OF ORDER OF CIT(A), KOLKATA, IN APPEAL NO75/CC- XXI/CIT(A)C-II/10-11 DATED 28.02.2011. ASSESSMENT W AS FRAMED BY ACIT,CC-XXI, KOLKATA U/S. 143(3) OF THE INCOME-TAX 1961 [HEREINAFTER REFERRED TO AS THE ACT] VIDE ORDER DATED 23-3-2005 FOR THE ASSESSMENT YEAR 2002-03. REASSESSMENT WAS FRAME D BY DCIT, CENTRAL CIRCLE, XXI, KOLKATA U/S.147 R.W.S 143(3) OF THE ACT VIDE ORDER DATED 31 -12-2009 FOR THE ASSESSMENT YEAR 2002-03 AFTER ISSUANCE OF NOTICE U/S.148 OF THE ACT DATED 23-10-2 008. 2. THE ONLY ISSUE IN THIS APPEAL OF THE REVENUE IS AGAINST THE ORDER OF CIT(A) IN ANNULLING THE REASSESSMENT MADE UNDER SECTION 143(3) READ WITH SE CTION 147 OF THE ACT AFTER ISSUING NOTICE UNDER SECTION 148 OF THE ACT AFTER EXPIRY OF 4 YEARS AS O RIGINAL ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT. FOR THIS REVENUE HAS RAISED FOLL OWING GROUNDS:- I) THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS IN ANNULLING THE RE-ASSESSMENT MADE U/S.143(3)/ 147 BY HOLDING THAT THE NOTICE DATED 23.10.2008 U/S 148 OF THE ACT WAS BARRED BY LIMITATION OF TIME WITHOUT CONSIDERING THAT THE SAID NOTICE WA S ISSUED WITHIN SIX YEARS OF EXPIRY OF THE ASSESSMENT YEAR, AFTER OBTAI NING APPROVAL OF THE [ITA NO. 778/KOL/2011 ] 2 COMMISSIONER OF INCOME TAX ABOUT THE SATISFACTION O F THE REASON RECORDED BY THE AO AND HENCE, THE NOTICE WAS NOT BA RRED BY LIMITATION. II) THAT IN FACT AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN HOLDING THAT THERE WAS NO FAILURE TO DISCL OSE THE MATERIAL FACTS WITHOUT CONSIDERING THAT THE ASSESSEE DID NOT DISCL OSE OR FURNISH COMPLETE AND CORRECT INFORMATION AND DETAILS THAT I T WAS REQUIRED AND WAS AN OBLIGATION TO DISCLOSE, FOR WHICH THE CASE C AN BE RE-OPENED U/S 147 OF THE ACT, AS HELD BY THE HONBLE DELHI HIGH C OURT IN THE CASE OF HONDA SEIL POWER PRODUCT LTD. VS. DCIT VIDE ORDER D ATED 14.02.2011. III) THAT THE PRESENT APPEAL IS BEING FILED FOR THE REASON THAT REVENUE AUDIT OBJECTION WAS ACCEPTED BY THE DEPARTMENT AND FALLS UNDER THE EXCEPTIONAL CATEGORY OF THE BOARDS INSTRUCTION NO. 3/2011 DATED 09.02.2011, THEREFORE ISSUE SHOULD BE CONTESTED ON MERITS OF THE CASE. 3. WE HAVE HEARD RIVAL CONTENTION AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BRIEF FACTS ARE THAT THE ASSESSEE FILED ITS RETURN OF INC OME FOR ASSESSMENT YEAR 2002-03 ON 31-10-2002 AND ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACTON 2 3-3-2005. SUBSEQUENTLY, FOR CARRYING OUT RECTIFICATION IN THE ASSESSMENT ORDER NOTICE U/S.15 4 OF THE ACT WAS ISSUED AND RECTIFICATION ORDER WAS PASSED ON 26-10-2006 COMPUTING BOOK PROFIT AT RS.97 ,50,476/- AS AGAINST ASSESSED U/S. 143(3) OF THE ACT AT RS.67,50,476/-. THE CIT(A) DELETED THE ADDIT ION OF RS.30 LAKHS AND TRIBUNAL UPHELD THE SAME. SUBSEQUENTLY, NOTICE U/S.148 OF THE ACT DATED 23-10 -2008 WAS ISSUED AND THE ASSESSING OFFICER IN THE REASSESSMENT PROCEEDINGS WANT TO WITHDRAW DEDUC TION ALREADY ALLOWED U/S.80IB OF THE ACT BY RECORDING FOLLOWING REASONS:- THE ASSESSEE COMPANY HAD SUBMITTED ITS RETURN OF I NCOME SHOWING TOTAL INCOME OF RS. NIL AND THE SAME WAS ASSESSED AT A TO TAL INCOME OF RS.12,540/- AFTER ALLOWING DEDUCTION OF RS.94,85,835/- U/S. 80IB OF T HE I.T ACT. HOWEVER, TAX WAS LEVIED ON BOOK PROFIT OF RS.67,50,476/- U/S. 115JB OF THE I.T. ACT. THE ASSESSEE COMPANY IS A SMALL SCALE INDUSTRIAL U NDERTAKING SITUATED IN THE NOTIFIED BACKWARD DISTRICT AND WAS ENGAGED IN THE B USINESS OF PRODUCTION OF POULTRY AND CATTLE FEEDS IN MASH FORM AS WELL AS IN PALLE TIZED FORM. THE ONLY PROCESSING INVOLVED THERE WAS GRINDING. BECAUSE OF SUCH PRODU CTION, THE ASSESSEE HAD BEEN ALLOWED DEDUCTION OF RS.94,85,835/- U/S.80IB OF THE ACT WHICH WAS IRREGULAR BECAUSE THE ASSESSEE DID NOT PRODUCE OR MANUFACTURE AND PAR TICLE OR THING AS JUDICIALLY HELD BY SEVERAL COURTS. THIS EXCESSIVE DEDUCTION OF RS.94,85,835/- U/S.80IB OF THE ACT RESULTED IN UNDERASSESSMENT OF THE SIMILAR AMOUNT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR ITS ASSESSMENT. I, THEREFORE, HAVE REASONS TO BELIEVE THAT THERE IS ESCAPEMENT OF INCOME TO THE TUNE OF RS.94,85,835/-. THE ASSESSING OFFICER FRAMED REASSESSMENT AND DISAL LOWED DEDUCTION U/S.80IB OF THE ACT VIDE HIS [ITA NO. 778/KOL/2011 ] 3 ORDER DATED 31-12-2009. THE CIT(A) ALLOWED THE CLAI M OF THE ASSESSEE BY GIVING FOLLOWING FINDINGS IN PARA 4 OF HIS APPELLATE ORDER:- 4. I HAVE GONE THROUGH THE REASONS OF REOPENING, REASSESSMENT ORDER, ASSESSMENT ORDER AND SUBMISSIONS OF APPELLANT. IT A PPEARS FROM THE REASONS OF REOPENING THAT ASSESSING OFFICER REOPENED THE ASSES SMENT BECAUSE HE BELIEVED THAT THE INDUSTRIAL ACTIVITY OF APPELLANT INVOLVED ONLY GRINDING WHICH CANNOT RESULT IN PRODUCTION OR MANUFACTURE OF ANY ARTICLE OR THING AS JUDICIALLY HELD BY SEVERAL COURTS. ASSESSING OFFICER DID NOT REFER TO ANY PARTICULAR DECISION OF COURT IN HIS REASONS FOR REOPENING. THE QUESTION OF PRODU CTION OR MANUFACTURE OF A NEW ARTICLE OR THING IS A MIXED QUESTION OF FACT AN D LAW AND THEREFORE APPLICATION OF SOME UNSPECIFIED CASE LAW WITHOUT DRAWING PARALL EL IN RESPECT OF INDUSTRIAL ACTIVITY INVOLVED IN THAT PARTICULAR CASE AND IN CA SE OF APPELLANT MAY INDICATE ONLY A DIFFERENT OPINION OF THE ASSESSING OFFICER W HILE REOPENING THE ASSESSMENT. HOWEVER, EVEN IF IT IS ASSUMED THAT THERE EXISTED S OME COURT DECISIONS WHICH ASSESSING OFFICER BELIEVED THAT THEY APPLY IN CASE OF APPELLANT, STILL SUCH COURT DECISIONS MAY BE REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT IN CASE OF APPELLANT BUT THE APPLICATION OF DECISIONS OF COURTS FOUR YEARS AFTER THE END OF ASSESSMENT YEAR DOES NOT AUTHORIZE THE ASSES SING OFFICER TO REOPEN AN ASSESSMENT BECAUSE FAILURE ON PART OF ASSESSING OFF ICER TO APPLY SUCH DECISIONS WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YE AR IS IN NO MANNER ANY FAILURE ON PART OF APPELLANT TO DISCLOSE FULL AND T RUE MATERIAL FACTS. APPELLANT EXPLAINED THAT THE INDUSTRIAL ACTIVITY OF APPELLANT ACTUALLY INVOLVES, CLEANING OF RAW MATERIAL, GRINDING THOUGH POWER MOTORS, SIEVING , COMPUTER CONTROLLED MIXING OF VITAMINS, SEPARATE PROCESS OF PREPARING V ITAMINS, PRESSURE CONTROLLED STEAM COOKING OF MIXED MATERIAL, GELATINIZATION OF STARCH AND REMOVAL OF BACTERIA FROM COOKED MATERIAL, POWER CONTROLLED SIZ ING OF PELLETS FROM CONDITIONED MATERIAL, COOLING, CRUMBLING OF PELLETS THROUGH ROLLERS WITH DIFFERENT SIZE, MECHANIZED SIEVING OF PELLETS AND THEN PACKIN G ETC. HOWEVER, THE INDUSTRIAL ACTIVITY OF THE ELIGIBLE UNIT OF APPELLANT WAS CONS IDERED AS ONLY GRINDING BY THE ASSESSING OFFICER FOR REOPENING AND THIS CONSIDERAT ION OF ASSESSING OFFICER DOES NOT APPEAR TO BE A FACT CONCEALED BY THE APPELLANT BUT IT APPEARS TO BE AN INTERPRETATION OF THE ACTIVITIES OF APPELLANT BY TH E ASSESSING OFFICER ON HIS OWN. THE REASONS OF REOPENING DO NOT INDICATE THAT APPEL LANT HAD NOT DISCLOSED ANY FACT ABOUT THE CLAIM OF DEDUCTION U/S 801B EITHER I N THE RETURN OF INCOME DURING REGULAR ASSESSMENT PROCEEDINGS WHICH THE ASSESSING OFFICER DISCOVERED LATER. IN CASE OF ANIL KUMAR BHANDARI VS. JOINT CIT (2007) 29 4 ITR 222 (CAL) THE FACTS WERE SIMILAR EXCEPT THAT THE DEDUCTION WAS CLAIMED BY THE ASSESSEE U/S. 8OHHC OF THE I.T. ACT AND IN PRESENT CASE DEDUCTION HAS B EEN CLAIMED U/S. 801B OF THE I.T. ACT. IN THE CASE CITED ABOVE, HBLE CALCUTTA H IGH COURT HELD THAT PROCEEDINGS U/S 147 NOT HAVING BEEN INITIATED WITHI N FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR WERE BARRED BY LIMITAT ION. HBLE CALCUTTA HIGH COURT FURTHER HELD THAT THE ASSESSMENT WAS REOPENED UPON CHANGE OF OPINION ON THE SAME FACTS. THEREFORE, RELYING OF THE JUDGMENT OF HBLE CALCUTTA HIGH COURT ON SIMILAR FACTS, I HOLD THAT THE NOTICE DATED 23.1 0.2008 U/S. 148 ISSUED ON THE BASIS OF PRIMARY FACTS ALREADY DISCLOSED BY THE APP ELLANT, IS BARRED BY LIMITATION OF TIME. THE REASSESSMENT MADE ON SUCH INVALID NOT ICE IS THEREFORE ANNULLED. [ITA NO. 778/KOL/2011 ] 4 4. WE FIND FROM THE ABOVE THAT NOTICE U/S. 148 OF THE ACT WAS ISSUED ON 23.10.2008, WHICH MEANS THAT PROCEEDINGS FOR REASSESSMENT WERE INITIA TED AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. WE ALSO FIND THAT ALL MAT ERIAL FACTS WERE AVAILABLE BEFORE ASSESSING OFFICER AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDI NG AND THERE WAS NO FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR ITS ASSESSMENT FOR ASSESSMENT YEAR 2002-03. IT IS FURTHER CAME TO OUR NOTICE THAT NEITHER NEW MATERIAL FACT HAS COME ON RECORD NOR SUCH CHANGE HAS COME IN LAW FROM THE DATE OF ASSESS MENT TILL THE RECORDING OF REASONS FOR ISSUANCE OF NOTICE U/S 148 OF THE ACT. IN VIEW OF THE ABOVE FACTS, WE ARE OF THE VIEW THAT PROCEEDING UNDER SECTION 147 OF THE ACT WAS INITIATED BY MERE FRESH APPLICATION OF MIND ON AN ISSUE WHICH WAS ALREADY CONSIDERED IN ORIGINAL ASSESSMENT ORDER AND THAT THERE WAS NO FAILURE ON THE PART OF ASSESSEE TO DISCLOSE MATERIAL FACTS REQUIRED FOR ASSESSMENT. WE ARE OF THE VIEW THAT IF THE INITIATION OF REASSESSMENT PROCEEDINGS TAKE PLACE AFTER THE EXPIR Y OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEARS, IN VIEW OF PROVISO TO SECTION 147 OF THE ACT NO ACTION CAN BE TAKEN UNDER SECTION 147 OF THE ACT UNLESS SUCH INCOME HAS ESCAPED ASSES SMENT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR ASSESSMENT. DECISIONS RELIED ON BY CIT(A) AS WELL AS THE DECISION IN THE CASE OF J INDAL PHOTO FILMS LTD. [234 ITR 170], WHEREIN HONBLE DELHI HIGH COURT HAS HELD THAT MERE CHANGE OF OPINION DOES NOT PROVIDE JURISDICTION TO ASSESSING OFFICER TO INITIATE PROCEEDING UNDER SECT ION 147 OF THE ACT, CIT(A) HAS RIGHTLY QUASHED THE REASSESSMENT PROCEEDINGS. HENCE, WE CONFIRM THE SAME. 5. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. 2 - 2 - 2 - 2 - 3 -# 4 5 3 -# 4 5 3 -# 4 5 3 -# 4 5 ORDER PRONOUNCED IN OPEN COURT ON 20.12.2011. SD/- SD/- [ . . , ] [ ! ! ! ! , ] [ S. V. MEHROTRA] [ M AHAVIR SINGH ] ACCOUNTANT MEMBER JUDICIAL M EMBER DATED : 20 TH DECEMBER, 2011. [ITA NO. 778/KOL/2011 ] 5 COPY FORWARDED TO THE - 1. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-XXI, 18, RABINDRA SARANI, PODDAR COURT, 8 TH FLOOR, KOLKATA. 2. M/S. SONA VETS PVT. LTD., 46-C, CHOWRINGHEE ROAD, KOLKATA-700 071. 3. CIT(A)- (4) CIT- 4. D.R., I.T.A.T., KOLKATA. [TRUE COPY] BY ORDER ASSISTANT REGISTRAR (KKC) I.T.A.T., KOLKATA.