POWER PACK CONDUCTORS, MUMBAI V. ITO WD 17(3)(3), MUMBAI

ITA 7900/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8333 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2000-2001
• Appeal Filed On: 16-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reason to believe; Reassessment proceedings
• Section: 143(3); 234B; 148

Judgement Text

I.T.A NOS.7900 & 7901/ MUM/2010 POWER PACK CONDUCTORS 1 IN THE INCOME TAX APPELLATE TRIBUNAL, SMC BENCH, MUMBAI. BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER I.T.A NOS.7900 & 7901/ MUM/2010 ASSESSMENT YEARS: 2000-01 & 2001-02 POWER PACK CONDUCTORS .. APPELLANT SHOP NO.5, ESSA MANSION, 26, BYCULLA STATION ROAD, BYCULLA, MUMBAI-11 PA NO.AAAFP 8311 K VS INCOME TAX OFFICER, WD 17(3)(3) ,. RESPONDEN T MUMBAI. APPEARANCES: DR. P. DANIEL, FOR THE APPELLANT SATVEER SINGH, FOR THE RESPONDENT O R D E R 1. BY WAY OF THESE APPEALS, THE ASSESSEE HAS CALLED I NTO QUESTION CORRECTNESS OF CIT(A)S SEPARATE ORDERS DATED 30.8. 2010, IN THE MATT ER OF ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEARS 2000-2001 AND 2001-02, RESPECTIVELY. SINCE COMMON GROUNDS RAISE D IN BOTH THE APPEALS, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE GRIEVANCE COMMON TO BOTH THE APPEALS ARE AS FOL LOWS: 1. THE LD CIT (A) ERRED IN CONFIRMING THE ORDER PA SSED BY THE AO U/S.147 OF THE I.T.ACT, 1961. 2. THE LD CIT (A) IN ESTIMATING THE INCOME AT ` .3,30,560 AND THE CIT (A) ERRED IN ACCEPTING THE METHOD ADOPTED BY THE AO. 3. THE LD CIT (A) ERRED IN CONFIRMING THE ACTION OF THE AO IN ARRIVING AT THE INCOME THROUGH CONSUMPTION OF ELECTRICITY METHOD WH ICH IS NOT A RECOGNIZED METHOD FOR ARRIVING AT THE INCOME. I.T.A NOS.7900 & 7901/ MUM/2010 POWER PACK CONDUCTORS 2 4. THE LD CIT (A) ERRED IN ESTIMATING THE PRODUCTIO N @ 2 KG PER UNIT OF ELECTRICITY CONSUMPTION AND FIXING THE PRICE AT ` .30 PER KG AND ESTIMATING THE NET PROFIT @ 2 % WHICH ARE ALL ON THE HIGHER SIDE. 5. THE LD CIT (A) ERRED IN DISMISSING THE GROUNDS O F APPEAL REGARDING CHARGING INTEREST U/S.234A, 234B & 234C OF THE I.T.ACT., 196 1 3. TO ADJUDICATE ON THESE APPEALS, ONLY A FEW MATER IAL FACTS NEED TO BE TAKEN NOTE OF. THE ASSESSEE IS ENGAGED IN BUSINESS OF MANUFACTURIN G STEEL WOOL. ON THE BASIS OF INFORMATION RECEIVED FROM THE DIRECTOR, VIGILANCE ( INCOME TAX) INFORMING THE ASSESSING OFFICER ABOUT THEFT OF ELECTRICITY BY THE ASSESSEE AND SOME OTHER PERSONS, THE ASSESSMENTS WERE REOPENED BY THE ASSESSING OFFICER. WHILE THE EVIDENCE OF SUCH INFORMATION IS NOT PLACED ON RECORD, AS PER THE INFORMATION OBTAINED B Y THE ASSESSEE UNDER RIGHT TO INFORMATION ACT, ACCORDING TO MSEB, THERE WAS NO CA SE OF THEFT OF ELECTRICITY BY THE ASSESSEE DURING THE PERIOD 1.4.1997 TO 31.3.2001. WHILE REOPENING THE ASSESSMENTS, THE AO WAS OF THE VIEW THAT THE LOGICAL INFERENCE ABOUT THE THEFT OF ELECTRICITY BY THE ASSESSEE IS THAT BY DOING SO, THE ASSESSEE HAS UNDERSTATED T HE PRODUCTION AND SALES COMMENSURATE WITH THE THEFT OF THE ENERGY. IT WAS OBSERVED BY TH E AO THAT IN VIEW OF THESE FACTS THERE IS A REASON TO BELIEVE THAT THE INCOME CHARGEABLE T O TAX HAS ESCAPED ASSESSMENT AND AS SUCH THE CASE IS BEING COMPLETED UNDER SECTION 143( 3) R.W.S. 147 OF THE I.T.ACT, 1961 IN ORDER TO BRING THE ESCAPED INCOME TO TAX. INTERES TINGLY, HOWEVER, WHEN THE ASSESSMENT WAS FRAMED, IT WAS ON THE BASIS OF ESTIMATION OF IN COME, AND IN THE PROCESS OF SO ESTIMATING THE INCOME, PRODUCTION WAS ESTIMATED ON THE BASIS OF POWER CONSUMPTION AS PER BILLS RAISED BY MAHARASHTRA STATE ELECTRICITY B OARD. IN OTHER WORDS, THE INCOME WAS NOT ESTIMATED ON THE BASIS OF ALLEGED POWER THEFT B UT ON THE BASIS OF CONSUMPTION OF POWER AS PER MSEB RECORDS. IT IS THUS CLEAR THAT E VEN AS THE GROUND OF REOPENING WAS UNDERSTATEMENT OF PRODUCTION ON ACCOUNT OF THEFT OF POWER, THE ASSESSMENT ACTUALLY FRAMED WAS ON THE BASIS OF ESTIMATE OF PRODUCTION I N THE LIGHT OF POWER CONSUMPTION ACCORDING TO THE MSEB BILLING. THE VERY REASON FOR WHICH THE ASSESSMENT WAS REOPENED DID NOT ACTUALLY BEING A ROLE IN ESTIMATING THE INC OME AS FINALLY ASSESSED. 4. THE SHORT QUESTION WHICH REALLY IS REQUIRED TO BE A DJUDICATED ON THE ABOVE FACTS IS THAT WHEN AN ASSESSMENT IS REOPENED ON A PARTIC ULAR GROUND BUT DURING THE COURSE OF ASSESSMENT BEING FINALIZED, NO ADDITION IS MADE IN RESPECT OF THE GROUND ON WHICH ASSESSMENT IS REOPENED, CAN OTHER ADDITIONS BE MADE IN THE COURSE OF SUCH ASSESSMENT PROCEEDINGS. THIS QUESTION IS IN ADDITION TO TH E FUNDAMENTAL ISSUE AS TO I.T.A NOS.7900 & 7901/ MUM/2010 POWER PACK CONDUCTORS 3 WHETHER THERE WAS ANY MATERIAL ON RECORD TO INDICATE THAT THE ASSESSEE HAD ACTUALLY COMMITTED THEFT OF ELECTRICITY. 5. I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE M ATERIAL ON RECORD AND DULY CONSIDERED THE FACTUAL MATRIX OF THE CASE. 6. I HAVE NOTED THAT THE FUNDAMENTAL BASIS FOR REOPEN ING THE ASSESSMENT WAS ALLEGED THEFT OF ELECTRICITY BUT THEN AS PER INFORMA TION PRODUCED BEFORE ME BY THE ASSESSEE, THERE WAS NO CASE OF THEFT OF ELECTRICITY AGAIN ST THE ASSESSEE. THE INFORMATION HAS BEEN OBTAINED BY THE ASSESSEE UNDER RTI AND THERE IS NO MATERIAL BEFORE ME TO CONTROVERT THE INFORMATION SO OBTAINED BY THE ASSESSEE. IT WOULD, THEREFORE, APPEAR THAT THE VERY FOUNDATION OF THE I MPUGNED REASSESSMENT PROCEEDINGS IS DEVOID OF LEGALLY SUSTAINABLE MERITS. TH AT APART, WHILE THE ASSESSMENT IS REOPENED ON THE GROUND THAT THERE WAS THEFT OF ELECTRICITY AND THUS PRODUCTION WAS UNDERSTATED, IN THE ASSESSMENT PROCEEDING S, NO ADDITION HAS BEEN MADE ON THIS ACCOUNT. AS A MATTER OF FACT, THE BASIS O F ESTIMATION AS ADOPTED IN THE ASSESSMENT PROCEEDINGS IS THE CONSUMPTION OF POWER AS PER R ECORDS MAINTAINED BY MSEB. THE BASE FIGURE THEREFORE FOR ESTIMATING THE PR ODUCTION IS THE ELECTRICITY PURCHASED BY THE ASSESSEE FROM MSEB AND NOT THE ELECTRIC ITY SAID TO HAVE BEEN STOLEN BY THE ASSESSEE FROM MESB. IT IS WELL SETTLED LAW THAT WHEN ADDITIONS ARE NOT MADE IN RESPECT OF THE GROUND FOR WHICH REASSESSMENT IS RESORTED TO, NO OTHER ADDITIONS CAN BE MADE IN THE COURSE OF SUCH REASSESSMENT P ROCEEDINGS. IF NEEDED, AUTHORITY CONTAINS IN CIT VS. ATALAS CYCLES, 180 ITR 31 9(P&H). THE SAME VIEW IS NOW ACCEPTED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. JET AIRWAYS, 195 TAXMAN 117 , WHEREIN, THEIR LORDSHIPS HAVE OBSERVE D THAT IF AFTER ISSUING A NOTICE UNDER SECTION 148, THE AO ACCEPTS CONTENTION OF THE ASSESSEE AND HOLDS THAT INCOME, FOR WHICH HE HAD INITIALLY FORMED A REASON T O BELIEVE THAT IT HAD ESCAPED ASSESSMENT, HAS, AS A MATTER OF FACT, NOT ESCAPED ASSESSMENT, IT IS NOT OPEN TO HIM TO INDEPENDENTLY ASSESSEE SOME OTHER INCOME. IF THE AO IN TENDS TO DO SO, ACCORDING TO THEIR LORDSHIPS, A FRESH NOTICE UNDER SECTION 148 WOUL D BE NECESSARY , LEGALITY OF WHICH WOULD BE TESTED IN EVENT OF A CHALLENGE BY ASSESSE E. IN VIEW OF THESE OBSERVATIONS OF THE HONBLE JURISDICTIONAL HIGH COURT IT FOLLOWS THAT WHEN THE VERY I.T.A NOS.7900 & 7901/ MUM/2010 POWER PACK CONDUCTORS 4 GROUND ON WHICH THE REOPENING IS RESORTED TO IS ABANDO NED DURING THE COURSE OF ASSESSMENT PROCEEDINGS; IT CANNOT CLEARLY BE OPEN TO THE AO TO RESORT TO OTHER ADDITIONS. IN VIEW OF THESE DISCUSSIONS, IN MY CONSIDERED VIEW THE IMPUGNED REASSESSMENT ORDER IS DEVOID OF ANY LEGALLY SUSTAINABLE M ERITS. I, ACCORDINGLY, UPHOLD THE GRIEVANCE OF THE ASSESSEE AND DIRECT THE AO TO DELETE THE IMPUGNED ADDITIONS MADE IN THE COURSE OF REASSESSMENT PROCEEDINGS. 7. IN VIEW OF THE FACT THAT I HAVE DECIDED THE ASSESSME NT ON THE BASIS OF ABOVE LEGAL GROUNDS, IT IS NOT NECESSARY TO ADJUDICATE OTHER GROUNDS RAISED BY THE ASSESSEE. THESE GRIEVANCES, UNDER THE PRESENT SET OF FACTS, ARE AC ADEMIC AND DO NOT CALL FOR ANY ADJUDICATION. 8. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 3 RD MARCH, 2011 SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI, DATED 3 RD MARCH, 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),29, MUMBAI 4. COMMISSIONER OF INCOME TAX, 17 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH SMC, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI I.T.A NOS.7900 & 7901/ MUM/2010 POWER PACK CONDUCTORS 5 I.T.A NOS.7900 & 7901/ MUM/2010 POWER PACK CONDUCTORS 6