Appeal Details
Counselvise Citation
78224514 RSA 2012
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 7 month(s) 27 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
13-12-2013
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Next Hearing Date
05-12-2013
Assessment Year
2004-2005
Appeal Filed On
16-04-2012
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 782/PN/2012 (ASSTT.YEAR : 2004-05) KALYANI FORGE LTD., SHANGRILA GARDENS, C-WING, IST FLOOR, OPP : BUND GARDEN, PUNE 411001 .. APPELLANT PAN NO.AAACK7311H VS. ITO, RANGE-11(2), PUNE .. RESPONDENT APPELLANT BY : SHRI NANIWADEKAR RESPONDENT BY : SHRI P.L. PATHADE DATE OF HEARING : 05-12-2013 DATE OF PRONOUNCEMENT : 13-12-2013 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 24-10-2011 OF THE CIT(A)-I, PUNE RELATING TO ASSESS MENT YEAR 2004-05. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF FORGING S, FINANCE, LEASING AND DEALING IN SECURITIES. IT FILED ITS RETURN OF INCO ME ON 31-10-2004 DECLARING TOTAL INCOME OF RS.12,92,22,250/-. ASSESSMENT U/S. 143(3) OF THE I.T. WAS COMPLETED ON 04-12-2006 DETERMINING THE INCOME AT R S.14,50,79,740/- AFTER ALLOWING DEDUCTION U/S.80HHC AND 80IB AT RS.3 5,11,742/- AND RS.1,33,41,819/- RESPECTIVELY. SUBSEQUENTLY, AS A RESULT OF AUDIT QUERY, THE ASSESSING OFFICER NOTED THAT INCOME CHARGEABLE TO T AX HAS ESCAPED ASSESSMENT SINCE EXCESSIVE DEDUCTION OF RS.43,42,17 5/- HAS BEEN CLAIMED 2 AND ALLOWED TO THE ASSESSEE FOR THE YEAR UNDER CONS IDERATION. THE ASSESSING OFFICER, THEREFORE, ISSUED NOTICE U/S.148 ON 05-04-2010 WHICH WAS SERVED ON THE ASSESSEE ON 09-04-2010. THE ASSE SSING OFFICER, THEREAFTER, COMPLETED THE ASSESSMENT DETERMINING TH E INCOME AT RS.14.70,28,402/- WITHDRAWING THE EXCESS DEDUCTION OF RS.43,32,175/- ALLOWED EARLIER U/S.80IB AND 80HHC. 3. THE ASSESSEE CHALLENGED THE VALIDITY OF THE RE-O PENING BEFORE CIT(A) ON THE GROUND THAT THE ASSESSMENT MADE U/S.147 R.W. S. 143(3) IS TIME BARRED AND VOID AB-INITIO. VARIOUS DECISIONS WERE ALSO BR OUGHT TO THE NOTICE OF THE CIT(A). HOWEVER, THE LD.CIT(A) WAS NOT SATISFIED W ITH THE ARGUMENTS ADVANCED BEFORE HIM AND UPHELD THE ACTION OF THE AS SESSING OFFICER BY HOLDING AS UNDER : 3.3. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE AND THE LAW. THE ASSESSMENT ORDER SAYS THAT THE RETURN WAS ORIGINALLY FILE D ON 31.10.2004 DECLARING A TOTAL INCOME OF RS.12,92,22,250 AND THE ASSESSMENT WAS ORIGINALLY COMPLETED U/S.143(3) ON 4.12.2006 DETERM INING THE TOTAL INCOME AT RS.14,50,79,740 AFTER ALLOWING DEDUCTION U/S.80HH C OF RS.35,11,742 AND U/S. 80IB OF RS.1,33,41,819. THE ASSESSMENT ORDER FURTH ER SHOWS THAT THE FIRST ROUND OF APPEAL WITH CIT(A) WAS OVER AND APPEAL EFFECT HAS ALREADY BEEN GIVEN. HOWEVER, THE AUDIT FOUND A MISTAKE IN T HE COMPUTATION OF DEDUCTION ALLOWED U/S.80IB. IT WAS POINTED OUT THA T THE DEPRECIATION HAS BEEN ARTIFICIALLY REDUCED IN THE CASE OF UNITS ELIGIB LE FOR 80IB TO ENHANCE THE DEDUCTION U/S 80IB. THE ASSESSING OFFICER EXAMINED THE ISSUE AND FOUND THAT THE TOTAL DEPRECIATION AS PER THE COMPANIES ACT CLAIMED BY THE APPELLANT IS OF RS.4,55,19,485. OUT OF THIS 59.63% I.E . RS.2,71,44,545 WAS ALLOCATED TO NON- 80IB UNITS AND 40.37% I.E. RS.1,83, 74,940 WAS ALLOCATED TO 80IB UNITS, IN THE ANNUAL REPORT. AS AGAINST THIS, IN THE COMPUTATION SHOWN IN THE COMPUTATION OF INCOME UNDER THE INCOME TAX A CT, THE TOTAL DEPRECIATION FOUND TO BE ALLOCATED WAS OF RS.4,69,04, 949. OUT OF THIS DEPRECIATION WAS CLAIMED AND ALLOWED IN THE ORIGINAL ASSESSMENT AT RS.4,29,50,464 FOR NON-80IB UNITS AND RS.39,54,483 FOR 80IB UNITS. THE ASSESSING OFFICER, ON THE STRENGTH OF THE PROPOSITION THA T THE PERCENTAGE OF ALLOCATION SHOULD REMAIN THE SAME WHETHER THE DEPRECI ATION IS COMPUTED UNDER THE COMPANIES ACT OR UNDER THE IT. ACT, FOUND THAT THE DEPRECIATION HELD TO BE ALLOCABLE UNDER THE IT. RULES TO NON-80IB UNITS IS EXCESS BY RS.1,49,81,043 AND THE SAME IS SHORT BY THE SAME AMOUNT IN RESPECT OF 80IB UNITS. THEREFORE, THE ASSESSING OFFICER CAME TO THE CONC LUSION THAT THE DEDUCTION OF 80IB BEING 30% OF THE PROFIT OF THE EL IGIBLE UNIT WAS EXCESS. IT IS NOTED THAT THE APPELLANT HAS RAISED GROUND NO. 1 ON T HIS ISSUE WHEREIN IT HAS BEEN CLAIMED THAT THE ASSESSING OFFICER HAS ERRED IN FAC TS AND LAW IN MAKING AN ASSESSMENT U/S.147 AFTER FOUR YEARS OF THE END OF THE RELEVANT ASSESSMENT YEAR AND IN VIEW OF THE SAME, PROVISO TO SEC. 1 47 IS APPLICABLE 3 AND AS PER THE SAME THE ACTION U/S. 147 CANNOT BE HEL D TO BE VALID UNLESS IT IS FOUND THAT THE MATERIAL FACTS RELATING TO THE ALLO CATION OF DEPRECIATION WAS NOT DISCLOSED AT THE TIME OF THE ORIGINAL ASSESSMENT. IT IS FURTHER SEEN THAT THE APPELLANT HAS CLAIMED THAT THE ALLOCATION OF DEP RECIATION, WHICH HAS BEEN MADE THE BASIS FOR INVOKING SEC. 147 WAS AVAILABLE WIT H THE ASSESSING OFFICER AND THE SAME WAS ALLOWED AFTER CONSIDERING THE SAME U/S.143(3). THEREFORE, AS PER THE AUTHORISED REPRESENTATIVE NO MAT ERIAL RELEVANT FOR THIS ALLOCATION HAS REMAINED TO BE PLACED ON RECORD A ND THEREFORE, AFTER FOUR YEARS OF END OF THE ASSESSMENT YEAR, REOPENING IS NOT LE GALLY POSSIBLE. THE APPELLANT HAS ALSO RELIED ON NUMEROUS JUDGMENTS QUOTED SUPRA. THERE CANNOT BE ANY DISPUTE SO FAR AS THE LEGAL POSITION IS C ONCERNED. HOWEVER, IT IS IMPORTANT TO CONSIDER AND SEE, WHETHER THE FACTS OF THE CASE SUPPORT THE LEGAL CONTENTION RAISED BY THE APPELLANT OR NOT. THE APPELLANT HAS CONTENDED THAT ALL THE MATERIAL FACTS WERE AVAILABLE BEFORE TH E ASSESSING OFFICER AND THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLO SE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR DEDUCTIONS U/S.80IB/80HHC A ND THEREFORE, THE ASSESSMENT CANNOT BE REOPENED U/S.147 FOUR YEARS OF END O F THE ASSESSMENT YEAR. ON PERUSAL OF THE MATERIALS PLACED ON RECORDS BY THE APPELLANT IN THE FORM OF ANNUAL REPORT, AUDITORS' REPORT IN FORM NO. 10CCB ETC., IT IS NOTED THAT THE ANNUAL REPORT DEALS WITH DEPRECIATION AS PER COMPANIES ACT WHICH IS ON THE STRAIGHT LINE METHOD. IN FORM 10CCB, WHICH HAS BEEN FILED FOR CLAIMING DEDUCTION U/S.80IB, IT IS NOTED THAT THE DE PRECIATION AS PER BOOKS HAS BEEN ADDED FIRST TO THE PROFIT SHOWN IN THE P&L AC COUNT AND IN THE COLUMN SHOWN 'BASIS' IT HAS BEEN STATED AS PER WORKING. A FTER MAKING OTHER ADJUSTMENT THE DEPRECIATION AS PER INCOME TAX HAS BEEN DEBITED FOR 80IB AND NON-80LB UNITS AND THERE IS NO MENTION IN THE 'BA SIS' COLUMN. NO CHART RELATING TO THE WORKING OF DEPRECIATION IS ENCLOSED A S PART OF 10CCB REPORT AND THEREFORE, IT IS DIFFICULT TO ACCEPT THAT THE WO RKING OF ALLOCATION OF DEPRECIATION AS PER COMPANIES ACT AND AS PER IT. ACT T O 80IB UNITS AND NON- 80IB UNITS WAS PLACED BEFORE THE ASSESSING OFFICER. THER EFORE, ONLY BECAUSE A COMPUTATION WAS MADE AND ALLOWED, IT CANNOT BE SAID THAT ALL THE MATERIAL FACTS WERE MADE AVAILABLE BEFORE THE ASSESSING OFFICER AND THE ACTION U/S.147 IS ON CHANGE OF OPINION. THEREFORE, GROUND N O. 1 IS TREATED AS DISMISSED. 4. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSE SSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. THE ASSESSMENT MADE U/S.147 READ WITH SECTION 143(3) IS BAD IN LAW. THE LD. ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN M AKING AN ASSESSMENT U/S.147 IN PURSUANCE OF A NOTICE ISSUED BEYOND THE PERI OD OF 4 YEARS WHEN ORIGINAL ASSESSMENT WAS COMPLETED U/S.143(3) AND ALL THE MATERIAL FACTS RELEGATING TO REASONS FOR REOPENING THE ASSESSMENT WERE FULLY AND TIMELY DISCLOSED AND WELL ON RECORD WITH THE ASSESSING OFFICER. THE NOTICE IS FOR REOPENING IS THUS TIME BARRED AND THE CONSEQUENT ASSESSMEN T IS VOID AB- INITIO. THE ENTIRE ASSESSMENT IS BASED ON A MERE CHANGE OF OPINIO N BY THE ASSESSING OFFICER AND THEREFORE IS INVALID. 2. THE LD.CIT(A) ERRED ON FACTS AND IN LAW TO RECHEC K THE COMPUTATION MADE BY THE ASSESSEE IN RESPECT OF DEPRECIATION ALLOCATI ON FOR 80IB UNITS AND NON 80IB UNITS. 4 5. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY OPPOSE D THE ORDER OF THE CIT(A). HE SUBMITTED THAT THIS IS THE LAST YEAR OF CLAIM OF DEDUCTION U/S.80IB AND THE METHOD FOLLOWED BY THE ASSESSEE CO NSISTENTLY IN THE LAST 9 YEARS HAS BEEN FOLLOWED DURING THIS YEAR. ON THE B ASIS OF THE VARIOUS DETAILS FURNISHED BEFORE THE ASSESSING OFFICER DURING ORIGI NAL ASSESSMENT THE CLAIM OF DEDUCTION U/S.80IB WAS ALLOWED. HOWEVER, ON THE BASIS OF A QUERY RAISED BY THE AUDIT PARTY THE ASSESSING OFFICER CHA NGED HIS OPINION AND ISSUED NOTICE U/S.148. HE SUBMITTED THAT THE NOTIC E ISSUED U/S.148 IS DATED 05-04-2010 AND THE ASSESSMENT YEAR INVOLVED IN THE INSTANT CASE IS 2004-05, THEREFORE, THE NOTICE ISSUED IS BEYOND THE PERIOD O F 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. 5.1 REFERRING TO PAPER BOOK PAGE 24 HE DREW THE ATT ENTION OF THE BENCH TO THE REASONS RECORDED FOR SUCH RE-OPENING. REFER RING TO THE SAME HE SUBMITTED THAT THERE IS NO ALLEGATION BY THE ASSESS ING OFFICER THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR COMPLETION OF THE ASSESSMENT. REFERRING TO THE COPY OF THE AUDITED PUBLISHED ACCOUNTS (WHICH IS FILED ALON G WITH THE PAPER BOOK) HE DREW THE ATTENTION OF THE BENCH TO PAGE 40 OF TH E PUBLISHED ACCOUNTS. 5.2 REFERRING TO PARA 2D OF THE STATEMENT OF SIGNI FICANT ACCOUNTING POLICIES HE DREW THE ATTENTION OF THE BENCH TO THE FOLLOWING : D. DEPRECIATION ON ASSETS (OTHER THAN FREEHOLD LAND) : I. THE COMPANY PROVIDES DEPRECIATION ON ALL ITS ASSETS ON THE STRAIGHT LINE METHOD IN ACCORDANCE WITH THE PROVI SIONS OF SECTION 205(2)(B) OF THE COMPANIES ACT, 1956; II. DEPRECIATION ON ALL ASSETS ACQUIRED UPTO 31 ST OCTOBER, 1987 IS BEING PROVIDED AT THE RATES OF DEPRECIATION PREVALEN T AT THE TIME OF ACQUISITION OF THE ASSET, PURSUANT TO CIRCULAR 1/1/86 C LB 5 NO.14(50)84 CL-VI DATED 21 ST MAY, 1986 ISSUED BY THE DEPARTMENT OF COMPANY AFFAIRS; III. DEPRECIATION ON ADDITION TO FIXED ASSETS FROM IST APRIL, 1990 ONWARDS IS CHARGED AT THE RATES SPECIFIED IN AND IN ACC ORDANCE WITH, SCHEDULE XIV OF THE COMPANIES ACT, 1956; IV. DEPRECIATION ON ASSETS SOLD, DISCARDED AND SCRAPPED I S BEING PROVIDED AT THEIR RATES ON PRO-RATA BASIS UP TO THE DA TE ON WHICH SUCH ASSETS ARE SOLD, DISCARDED AND SCRAPPED. 5.3 HE SUBMITTED THAT THE ASSESSEE IS CONSISTENTLY FOLLOWING THE METHOD OF DEPRECIATION MENTIONED AS ABOVE. REFERRING TO P AGE 7 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO FORM 10CCB. REFERRING TO CLAUSE 18(C) OF THE PAPER BOOK HE DREW THE ATTENTION OF THE BENCH TO THE GROSS VALUE OF MACHINERY DISCLO SED AT RS.20,39,83,819/- AND THE WDV AS ON 31-03-2004 AT RS.1,88,26,949/-. REFERRING TO PAGE 12 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE CERTIFICATE GIVEN BY THE AUDITOR CERTI FYING THE ALLOCATION OF EXPENSES AND COMPUTATION OF 80IB DEDUCTION. REFERR ING TO PAGES 1 TO 5 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE DRE W THE ATTENTION OF THE BENCH TO THE ORIGINAL ASSESSMENT ORDER PASSED U/S.1 43(3) WHEREIN THE DEDUCTION U/S.80IB AT RS.1,33,41,819/- HAS BEEN ALL OWED. HE SUBMITTED THAT NO TANGIBLE MATERIAL HAS COME TO THE NOTICE OF THE DEPARTMENT NOR THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR COMPLETION OF THE ASSESSMENT. 5.4 REFERRING TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF M/S. LALITHA CHEM INDUSTRIES PVT. LTD. IN W .P.NO.2741/2013 ORDER DATED 27-11-2013 THE LD. COUNSEL FOR THE ASSESSEE D REW THE ATTENTION OF THE BENCH TO THE OPERATIVE PORTION OF THE SAID ORDER AN D SUBMITTED THAT UNDER IDENTICAL FACTS AND CIRCUMSTANCES THE REASSESSMENT PROCEEDINGS INITIATED WERE QUASHED. HE SUBMITTED THAT SINCE IN THE INSTA NT CASE THE ASSESSMENT 6 HAS BEEN RE-OPENED BEYOND THE PERIOD OF 4 YEARS FRO M THE END OF THE RELEVANT ASSESSMENT YEAR AND THERE WAS NO FAILURE O N THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECE SSARY FOR COMPLETION OF THE ASSESSMENT, THEREFORE, THE ISSUE OF NOTICE U/S.148 HAS TO BE TREATED AS BAD IN LAW. 5.5 IN HIS ALTERNATE CONTENTION THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO THE DECISIONS OF THE HONBLE BOMBAY HIGH COURT I N THE CASE OF PURITY TECHTEXTILE PVT. LTD. VS. ACIT AND ANOTHER REPORTED IN 325 ITR 459 AND IN THE CASE OF IL & FS INVESTMENT MANAGERS LTD. VS. IT O & OTHERS REPORTED IN 298 ITR 32 SUBMITTED THAT AUDIT OBJECTION CANNOT BE A GROUND FOR RE- OPENING OF THE ASSESSMENT. HE ACCORDINGLY SUBMITTE D THAT THE RE- ASSESSMENT PROCEEDINGS INITIATED BY THE ASSESSING O FFICER AND UPHELD BY THE CIT(A) SHOULD BE QUASHED. 6. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSMENT IN THE INSTANT CASE WAS COMPLETED U/S.143(3) ON 04- 12-2006 AND THE ASSESSMENT YEAR INVOLVED IS A.Y. 2004-05. THERE IS ALSO NO DISPUTE TO THE FACT THAT THE NOTICE U/S.148 IS DATED 05-04-2010. THUS, THE NOTICE U/S.148 HAS BEEN ISSUED AFTER A PERIOD OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. ON PERUSAL OF THE REASONS RECORDE D BY THE ASSESSING 7 OFFICER FOR ISSUE OF NOTICE U/S.148 WE FIND THE SAI D NOTICE NOWHERE STATES THERE WAS ANY FAILURE ON THE PART OF THE ASSESSEE T O DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR COMPLETION OF THE ASSESSMENT. FURTHER, THE RE-OPENING HAS BEEN MADE ON THE BASIS OF AUDIT QUER Y. 7.1 WE FIND THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF M/S. LALITHA CHEM INDUSTRIES PVT. LTD. (SUPRA) WHILE DECIDING AN IDENTICAL ISSUE HAS HELD AS UNDER : 11. IT IS A SETTLED POSITION IN LAW THAT UNDER THE AC T, THE ASSESSING OFFICER HAS POWER TO RE-ASSESS BUT HAS NO POWER TO REVIEW AN ASSESSME NT AS SETTLED BY THE APEX COURT IN THE MATTER OF CIT VS. KELVINATO R INDIA 320 ITR 561. THE POWER OF RE-ASSESSMENT COULD ONLY BE EXERCISED IF C ERTAIN PRE- CONDITIONS ARE SATISFIED. THE PRIMARY CONDITIONS BEING THAT THE ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME CHARG EABLE TO TAX HAS ESCAPED ASSESSMENT. THIS REASON TO BELIEVE MUST BE BASED UP ON SOME TANGIBLE MATERIAL, I.E. IT CANNOT BE MERE IPSI DIXIT OF THE ASSESSING OFFICER. A DIFFERENT VIEW ON TANGIBLE MATERIAL AVAILABLE EARLI ER WOULD BE A CHANGE OF OPINION AND NOT AMOUNT TO REASON TO BELIEVE THAT INC OME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. BESIDES, ONE MORE ADDITIONAL REQUI REMENT TO BE SATISFIED WHERE ASSESSMENT SOUGHT TO BE RE-OPENED IS BEYOND THE PERIOD OF 4 YEARS FROM THE END OF THE RELEVANT YEARS, IS THAT THER E MUST BE A FAILURE ON THE PART OF THE ASSESSEE TO TRULY AND FULLY DISCLOSE ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. FURTHER, THE OBLIGATION OF AN ASSESSEE IS ONLY TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FO R ASSESSMENT. IT IS NOT THE JOB OF THE ASSESSEE TO DISCLOSE THE LEGAL INFERENCES T O BE DRAWN FROM THOSE FACTS AS HELD BY THE APEX COURT IN CIT VS. CALCUT TA DISCOUNT COMPANY 41 ITR 191. AT THE STAGE OF ISSUING OF A NOTICE TO R EOPEN THE ONLY QUESTION TO BE CONSIDERED IS WHETHER THERE IS RELEVANT MATERIAL TO FORM THE REASONABLE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT AND NOT WHETHER THE MATERIAL IS SUFFICIENT TO PROVE BEYOND DOUBT THAT INCOME HAS IN FACT ESCAPED ASSESSMENT. 12. WE SHALL NOW CONSIDER THE RIVAL SUBMISSIONS KEEPING I N MIND THE SETTLED LEGAL POSITION AS MENTIONED HEREINABOVE. THE A DMITTED/UNDISPUTED POSITION BETWEEN THE PARTIES IS : (A) THE ASSESSMENT SOUGHT TO BE RE-OPENED BY THE IMPUGNED NO TICE DATED 28 MARCH 2013 IS BEYOND A PERIOD OF 4 YEARS FROM THE EN D OF THE RELEVANT ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2006-07; (B) DURING THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS THE PETITIONER HAD CLAIMED BENEFIT OF DEDUCTION UNDER SECTION 80IB OF THE ACT IN RESPECT OF ITS SILVASA UNIT. THIS CLAIM FOR DEDUCTION UNDER SECTION 80IB OF THE ACT HAD BEEN EXAMINED AND REDUCED FROM RS.31. 99 LAKHS TO RS.27.67 LAKHS; 8 (C) THE PETITIONER HAD IN ITS ACCOUNTS VIZ. PROFIT AND LO SS ACCOUNTS ALLOCATED VARIOUS COMMON EXPENSES BETWEEN THE NON 80IB UNIT AND 80IB UNIT AND THIS WAS A VITAL INGREDIENT IN DETERMIN ING THE DEDUCTION AVAILABLE UNDER SECTION 80IB OF THE ACT T O THE SILVASA UNIT; AND (D) ACCORDING TO THE REVENUE INCOME CHARGEABLE TO TAX H AS ESCAPED ASSESSMENT IN VIEW OF EXCESSIVE RELIEF HAVING BEEN GRANTE D IN RESPECT OF DEDUCTION UNDER SECTION 80IB OF THE ACT (AS NOTED IN THE IMPUGNED ORDER 1 AUGUST 2013) 13. AS THE ASSESSMENT SOUGHT TO BE REOPENED IS BEYOND THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, I.E. 2006-07, TWO CONDITIONS PRECEDENT HAVE TO BE SATISFIED. FIRSTLY, TH E ASSESSING OFFICER ISSUING THE NOTICE FOR REASSESSMENT MUST HAVE REASON TO BEL IEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT ON THE BASIS OF T ANGIBLE MATERIAL AND SECONDLY THERE MUST BE A FAILURE TO DISCLOSE TRULY AND FULLY ALL FACTS NECESSARY FOR ASSESSMENT WHEN THE ORIGINAL ASSESSMENT PROCEED INGS TOOK PLACE. 14. SO FAR AS THE FIRST PRECONDITION FOR REOPENING IS CONCERNED, WE FIND THAT REASONS AS DISCLOSED RELY UPON THE SAME TANGIBLE MAT ERIAL WHICH WAS AND/OR OUGHT TO HAVE BEEN A SUBJECT MATTER OF EXAMIN ATION BEFORE DETERMINING THE DEDUCTION AVAILABLE UNDER SECTION 8 0IB OF THE ACT AND PASSING THE ASSESSMENT ORDER. THE MATERIAL WHICH FORMS TH E BASIS OF REASON TO BELIEVE IS THE ALLOCATION OF EXPENDITURE BETWEEN THE TWO UNITS LEADING TO HIGHER DEDUCTION UNDER SECTION 80IB OF THE ACT IN R ESPECT OF THE PETITIONERS SILVASA UNIT. WE FIND THAT DURING THE ASSESSMENT PROCEE DINGS THE ASSESSING OFFICER HAS EXAMINED THE CLAIM FOR DEDUCTION UNDER S ECTION 80IB OF THE ACT AND FOR THAT PURPOSE HAD CALLED UPON THE PETITIONER TO FILE DETAILS OF EXPENSES CLAIMED IN ITS PROFIT AND LOSS ACCOUNT. THIS AL LOCATION OF EXPENDITURE BETWEEN THE TWO UNITS WAS VERY MUCH PRESEN T BEFORE THE ASSESSING OFFICER WHILE CONSIDERING THE CLAIM FOR DEDUCT ION UNDER SECTION 80IB OF THE ACT WITH REGARD TO SILVASA UNIT. THE ASSE SSING OFFICER AT THAT POINT OF TIME APPEARS TO HAVE BEEN SATISFIED THAT THE ALLOCATION OF EXPENDITURE MADE BY THE PETITIONER BETWEEN THE TWO UNITS AND DID NOT REDUCE THE CLAIM BY INCREASING THE EXPENDITURE ATTRI BUTABLE TO SILVASSA UNIT. THE CONTENTION OF THE REVENUE THAT THIS ASPECT OF TH E MATTER HAS NOT IN TERMS BEEN DEALT WITH AND/OR EXAMINED IN THE ASSESSMENT ORDE R IS NOT ACCEPTABLE. WE FIND THAT WHILE CONSIDERING THE CLAIM OF THE QUAN TUM OF DEDUCTION AVAILABLE UNDER SECTION 80IB OF THE ACT THE PASSING ON THE EXPENDITURE TO THE OTHER UNIT WHILE ALLOCATING COMMON EXPENDITURE IS TO O OBVIOUS AN ASPECT TO HAVE NOT BEEN EXAMINED BY THE ASSESSING OFFICER PARTICU LARLY WHEN HE IS CONSIDERING THE QUANTUM OF DEDUCTION AVAILABLE UNDER SECTION 80IB TO ONE OF THE UNITS, I.E. SILVASA UNIT. THEREFORE ONE MUST N ECESSARILY PROCEED ON THE BASIS THAT WHILE EXAMINING THE QUANTUM OF DEDUCTION T O BE ALLOWED UNDER SECTION 80IB OF THE ACT (WHICH ADMITTEDLY THE ASSESSMEN T ORDER DOES CONSIDER) THE ISSUE OF ALLOCATION OF EXPENDITURE FOR T HAT PURPOSES WOULD NECESSARILY HAVE BEEN EXAMINED. THEREFORE THERE IS NO TANGIBLE MATERIAL TO LEAD TO A REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSE SSMENT BUT ONLY CHANGE OF OPINION ON THE PART OF THE ASSESSING OFFICER ON THE MATERIAL AVAILABLE, THUS CANNOT BE A SUBJECT MATTER OF REASSESSMEN T. 15. SO FAR AS THE SECOND PRECONDITION FOR REOPENING O F ASSESSMENT BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR IS CONCERNED VIZ., FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIALS FACTS NECESSARY FOR ASSESSMENT IS CONCERNED THERE IS NO DISPUTE TH AT THE PETITIONER HAD IN ITS ACCOUNTS VIZ., PROFIT AND LOSS AC COUNTS ALLOCATED VARIOUS 9 COMMON EXPENSES BETWEEN THE NON 80IB UNIT AND 80IB UN IT. THIS WAS ALSO SUBJECT TO EXAMINATION IN DETERMINING THE DEDUCTION AVAILABLE UNDER SECTION 80IB OF THE ACT TO THE SILVASA UNIT. HOWEVER THE OB JECTION OF MR. TEJVEER SINGH ON BEHALF OF THE REVENUE IS THAT TO QUALIFY AS FULL AND TRUE DISCLOSURE THE PETITIONER WAS OBLIGED TO DISCLOSE/POINT OUT TO TH E ASSESSING OFFICER THAT THE COMMON EXPENSES ALLOCATED BY THEM BETWEEN THE SI LVASA UNIT AND THE TARAPUR UNIT CAN ALSO BE DIFFERENTLY ALLOCATED. WE FIND THIS RATHER STRANGE AS THERE IS NO DISPUTE THAT THESE EXPENSES AS ALLOCATED HAD BEEN DISCLOSED. HOWEVER THE REASONS ALLEGE THAT THE EXPENSES HAD TO BE ALLOCATED IN A DIFFERENT RATIO. THE ALTERNATIVE METHODS/MANNER OF ALLOCATION OF EXPENSES IS NOT FOR THE ASSESSEE TO DISCLOSE. THIS IS BEYOND THE REALM OF DISCLOSURE OF MATERIAL FACTS NECESSARY FOR ASSESSMENT BY THE ASSESSEE. THE REFORE WE FIND THAT THERE HAS BEEN DISCLOSURE OF MATERIAL FACTS TRULY AND FULLY FOR THE PURPOSES OF ASSESSMENT ON THE PART OF THE PETITIONER. 16. THE RELIANCE BY THE REVENUE UPON THE DECISION OF DELHI HIGH COURT IN HONDA SIEL POWER PRODUCTS LTD. (SUPRA) IS MISPLACED. IN THE ABOVE CASE THE REVENUE SOUGHT TO REOPEN AN ASSESSMENT BEYOND THE END O F FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR 2000-2001 ON TH E GROUND OF FAILURE TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS DURING THE ORIGINAL ASSESSMENT PROCEEDINGS. IN ITS RETURN OF INCOME AS ORIGINALLY F ILED NO DETAILS WITH REGARD TO PROPORTIONATE EXPENSES RELATABLE TO TAX FR EE AND OTHER INCOME WERE FURNISHED AND DEDUCTION OF ALL EXPENSES RELATABLE TO TAX FREE AND OTHER INCOME WERE FURNISHED AND DEDUCTION OF ALL EXPENSES FR OM TAXABLE INCOME WAS CLAIMED. THE CASE OF THE PETITIONER THEREIN WAS T HAT THERE WAS NO OBLIGATION WHEN THE RETURN WAS FILED IN 2000 TO DISCL OSE THE PROPORTIONATE EXPENSES RELATING TO TAX FREE INCOME AS SECTION 14-A OF THE ACT WAS BROUGHT ON THE STATUTE ON 1 APRIL 2001 W.E.F. 1962. THUS DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS WHICH CULMINATED WITH AN ASSESSMENT O RDER ON 30 NOVEMBER 2003, THE PETITIONER THEREIN WAS REQUIRED T O DISCLOSED THE FACTS DURING THE ASSESSMENT PROCEEDINGS. THUS THE COURT HELD THERE WAS A FAILURE TO DISCLOSE MATERIAL FACTS TRULY AND FULLY LEADING TO THE COURT NOT INTERFERING WITH THE NOTICE FOR REOPENING UNDER SECTION 148 OF T HE ACT EVEN WHEN THE SAME WAS BEYOND A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. BESIDES UNLIKE IN THE CASE OF HONDA SIEL POWER PRODUCTS LTD. (SUPRA) WHERE NO DISCLOSURE OF EXPENSES INCURRED IN RESPECT OF TAX FREE INCOME WAS AT ALL MADE, IN THIS CASE THE PETITIONER HA D DISCLOSED THE ALLOCATION OF EXPENDITURE BETWEEN THE NON 80IB UNIT AND 80IB UNIT IN ITS PROFIT AND LOSS ACCOUNTS AND WOULD OBVIOUSLY BEEN SUBJ ECT OF SCRUTINY WHILE CONSIDERING THE CLAIM FOR DEDUCTION UNDER SECTION 80 IB OF THE ACT. 17. THUS WE ARE OF THE VIEW THAT THE PETITIONER HAD DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. EVEN I F IT IS ASSUMED THAT THE EXPENSES WERE NOT ALLOCATED APPROPRIATELY BETWEEN THE TARAPUR UNIT (NON 80IB UNIT) AND SILVASA UNIT (80IB UNIT) AS CONTE NDED BY THE REVENUE, YET THE SAME WAS ACCEPTED BY HIM WHILE CONSIDERING THE DEDUCTION UNDER SECTION 80IB OF THE ACT. TO PERMIT THE PRESENT PROC EEDINGS FOR REASSESSMENT WOULD BE TO PERMIT THE REOPENING PROCEEDIN GS ON ACCOUNT OF CHANGE OF OPINION. IF RE-ASSESSMENT IS ALLOWED, ON THE BASIS OF SAID CHANGE OF OPINION, IT WOULD AMOUNT TO REVIEW WHICH IS NOT P ERMISSIBLE UNDER THE LAW. 18. IN VIEW OF THE ABOVE WE ARE OF THE VIEW THAT TH E NOTICE DATED 28 MARCH 2013 UNDER SECTION 148 OF THE ACT, SEEKING TO RE-OPEN THE ASSESSMENT FOR THE ASSESSMENT YEAR 2006-07 AS WELL AS THE ORDER DATE D 1 AUGUST 2013 REJECTING THE PETITIONERS OBJECTIONS TO THE RE-OPENI NG OF THE ASSESSMENT ARE BAD IN LAW. THEREFORE, THE IMPUGNED ORDER DATED 28 TH MARCH 2013 AND ORDER DATED 1 AUGUST 2013 ARE QUASHED AND SET ASIDE. 10 19. PETITION ALLOWED. RULE MADE ABSOLUTE IN THE ABO VE TERMS WITH NO ORDER AS TO COSTS. 7.2 SINCE FACTS IN THE INSTANT CASE ARE IDENTICAL T O THE CASE DECIDED BY THE HONBLE JURISDICTIONAL HIGH COURT CITED ABOVE, THER EFORE, WE HOLD THAT THE RE-ASSESSMENT PROCEEDINGS INITIATED AFTER A PERIOD OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR IN ABSENCE OF ANY ALLE GATION BY THE REVENUE FOR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR COMPLETION OF THE ASSESSMENT CO MPLETED U/S.143(3) ARE BAD IN LAW. WE ACCORDINGLY QUASH THE RE-ASSESSMENT PROCEEDINGS INITIATED BY THE ASSESSING OFFICER AND UPHELD BY THE CIT(A). THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 13-12-2013. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMB ER PUNE, DATED : 13 TH DECEMBER, 2013 SATISH COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A)-I, PUNE 4. THE CIT-I, PUNE 5. D.R. A BENCH, PUNE 6. GUARD FILE //TRUE COPY// BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE
Other Referred Cases
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1:1 Consultation on Business Valuations
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1:1 Consultation on Legal Requirements
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1:1 Consultation on Startup Compliance
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CRM Implementation Plan
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Startup Dissolution Resolution
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