Jalan Chemical Industries P. Ltd., Kolkata V. ITO-Ward-11(2), Kolkata, Kolkata

ITA 814/KOL/2012

• Counselvise Citation: 81423514 RSA 2012
• Duration Of Justice: 3 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 02-01-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 21-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S M SURANA; SUNIL SURANA
• Keywords: Reopening of assessment; Audit objection; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 147; 148; 133(6)

Judgement Text

I.T.A. NO . 814 / KOL ./20 1 2 ASSESSMENT YEAR: 20 0 5 - 20 06 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA B BENCH, KOLKATA BEFORE SHRI S.V. MEHROTRA , ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH , JUDICIAL MEMBER I.T.A. NO. 814 / KOL / 20 1 2 ASSESSMENT YEAR : 20 0 5 - 20 06 JALAN CHEMICAL INDUSTRIES (P) LIMITED, .. . .. ..... ... . . APPELLANT GROUND FLOOR, ABHINANDAN, 27A/B, RYOD STREET, KOLKATA - 700 016 [PAN: AA ACJ 8304 M ] - VS. - INCOME T AX OFFICER,.............................. , ................... . RESPONDE NT WARD - 11 ( 2 ), KOLKATA , P - 7, CHOWRINGHEE SQUARE, 6 TH FLOOR, KOLK ATA - 700 069 APPEARANCES BY: S HRI S.M. SURANA, ADVOCATE AND SHRI SUNIL SURANA, FCA , FOR THE ASSESSEE SHRI S.M. SARBARAZUT TAUHEED , SR. D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : AUGUST 1 3 , 2 01 5 DATE OF PRONOUNCING THE ORDER : AUGUST 14 , 201 5 O R D E R PER S.V. MEHROTRA : TH IS A PPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) - XII , KOLKATA D ATED 23 . 0 4 .20 1 2 FOR THE ASSESSMENT YEAR 20 0 5 - 06 . 2. BRIEF FACTS OF THE CASE ARE THAT THE AS SESESE - COMPANY HAD FILED ITS RETURN OF INCOME SHOWING TOTAL INCOME OF RS.1,74,630/ - , WHICH WAS ASSESSED AT RS.6,18,250/ - UNDER SECTION 143(3). THEREAFTER, THE ASSESSING OFFICER ISSUED NOTICE DATED 17.03.2010 UNDER SECTION 148 AFTER RECORDING THE FOLLOWING REASONS: - IN THE INSTANT CASE, A SUM OF RS.50,00,000/ - ADVANCED BY M/S. ASSAM CO. LTD., AND WRITTEN OFF SUBSEQUENTLY, SHOULD BE CONSIDERED AS INCOME FOR THE ASSESSEE. THE ASSESSEE CONSIDERED THE AMOUNT AS SUNDRY CREDITORS (TRADING LIABILITY). BUT THE AS SAM CO. LTD. HAD WRITTEN OFF THE I.T.A. NO . 814 / KOL ./20 1 2 ASSESSMENT YEAR: 20 0 5 - 20 06 PAGE 2 OF 5 RECOVERABLE AMOUNT IN THEIR BALANCE SHEET AS PER COMPANIES ACT. HENCE, THIS CASE IS APPLICABLE FOR THE PROVISION OF SECTION 41(1). THEREFORE, I HAVE REASON TO BELIEVE THAT RS.50 LAKHS IS ESCAPED ASSESSMENT SINCE RS.50 LAKHS IS CHARGEABLE TO INCOME TAX AS ASSESSEE S TAXABLE INCOME . 3. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3)/ 147 AFTER MAKING THE ADDITION OF RS.50,00,000/ - . INITIATION OF REASSESSMENT PROCEEDINGS WAS ASSAILED BEFORE THE LD. CIT(APPEALS), WHO CONFIRM ED THE ASSESSING OFFICER S ACTION OBSERVING AT PAGES 8 - 9 IN PARA 4 AS UNDER: - 4. THE GROUND NO. 1 IS RELATED TO REOPENING OF THE ASSESSMENT UNDER SECTION 143(3)/147 OF THE I.T. ACT, 1961 ON THE BASIS OF AUDIT OBJECTION WITHOUT APPLYING OF MIND BY THE AO. I HAVE GONE THROUGH THE FINDINGS GIVEN BY THE AO AND SUBMISSION FILED BY THE AR. THE MAIN OBJECTION OF THE AR IS THAT ASSESSMENT WAS REOPENED U/S 147 OF THE I.T. ACT, 1961 BECAUSE OF AN AUDIT OBJECTION. IN ORDER TO STRENGTHEN SUBMISSION, THE AR HAS RELIED ON VARIOUS JUDGMENTS GIVEN BY DIFFERENT COURTS. I HAVE GONE THROUGH THE AR S SUBMISSION AND DIFFERENT CASE LAWS GIVEN BY HIM. NO CASE LAW AND NO JUDGMENT GIVEN BY THE AR SAYS THAT REOPENING OF ASSESSMENT U/S 147 OF THE I.T. ACT, 1961 IS INVALID BECAUSE OF AN AUDIT OBJECTION. IN FACT, IN PRACTICE THE AUDIT PARTY RAISES OBJECTIONS IN MANY CASES. BUT OBJECTIONS RAISED BY AUDIT PARTY AS A MATTER OF PRACTICE, ARE NOT ACCEPTED IN ALL CASES. IN MANY CASES, THE AUDIT PARTIES ARE INFORMED/REPLIED IN WRITING THAT THE IR OBJECTIONS RAISED ARE NOT VALID, HENCE, UNACCEPTABLE. IN THE PRESENT CASE, THE AUDIT PARTY POINTED OUT THAT INCOME TO THE TUNE OF RS.50,00,000/ - HAS ESCAPED ASSESSMENT. THE AO AFTER RECEIVING THE AUDIT OBJECTION HAS GONE THROUGH THE WHOLE FILE AND SATIS FIED HIMSELF THAT GENUINELY INCOME TO THE TUNE OF RS.50 LAKHS HAS ESCAPED ASSESSMENT. HENCE, IT IS NOT A CASE OF THE CHANGE OF OPINION BECAUSE OF THE AUDIT OBJECTION ONLY RATHER IT IS A CASE WHERE THE AO IS FULLY SATISFIED THAT AN INCOME HAS ESCAPED ASSESS MENT, ONLY AFTER RECORDING HIS SATISFACTION, NOTICE U/S 148 HAS BEEN ISSUED IN THIS CASE. THEREFORE, AR S CONTENTION THAT REOPENING OF ASSESSMENT U/S 147 OF THE I.T. ACT, 1961 BECAUSE OF AUDIT OBJECTION, IS NOT VALID. HENCE, ASSESSEE S APPEAL IN GROUND NO 1 IS DISMISSED . 4. BEING AGGRIEVED WITH THE ORDER OF LD. CIT(APPEALS), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL: - I.T.A. NO . 814 / KOL ./20 1 2 ASSESSMENT YEAR: 20 0 5 - 20 06 PAGE 3 OF 5 1. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER O F INCOME TAX (APPEALS) ERRED IN LAW AND IN FACT IN D ISMISSING THE GROUND RAISED BY THE APPELLANT THAT THE REOPENING OF ASSESSMENT U J S. 147 OF I . T . ACT 1961 ON THE BASIS OF AUDIT OBJECTION IS BAD IN LAW. 2. FOR THAT THE LEARNED COMMISSIONER OF INCOME TA X (APPEAL) SHOULD HAVE HELD THAT THE INFORMATION ABOUT ASSAM CO. LTD. WAS AVAILABLE WITH THE ASSESSING OFFICER AT THE ORIGINAL ASSESSMENT AND CONSIDERED BY HIM DURING THE ORIGINAL ASSESSMENT PROCEEDINGS AND AS SUCH IT CANNOT BE USED FOR REOPENING THE ASSES SMENT U / S.147 OF I . T . ACT, 1961 EVEN THOUGH IT WAS POINTED OUT BY THE AUDIT PARTY AND CONSEQUENTLY THE REOPENING OF ASSESSMENT ON THIS INFORMATION IS NOTHING BUT CHANGE OF OPINION AND THEREFORE THE REOPENING OF ASSESSMENT UJS.147 IS BAD IN LAW AND VOID - AB - INITIO. 3. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) ERRED IN CONFIRMING THE ADDITION OF RS. 50 , 00 , 000 / - MADE BY THE ASSESSING OFFICER REPRESENTING ADVANCE RECEIVED IN THE PAST BY TREATING AS INCOME DUE TO ALLEGED CESSATION OF LIABILITY U / S. 41 (1) OF I . T . ACT, 1961. 4. FOR THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) SHOULD HAVE HELD THAT THE ADVANCE OF RS.50 LACS WAS NOT A TRADING LIABILITY NOR WAS EVER CLAIMED AND ALLOWED AS EX PENDITURE IN ANY OF THE EARLIER YEARS NOR THERE WAS CESSATION OF LIABILITY AND AS SUCH THE SAME CANNOT BE TREATED AS INCOME U / S. 41 (1) OF I . T . ACT, 1961. 5. FOR THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) SHOULD HAVE CONSIDERED THE GROUND FOR C HARGING OF INTEREST U / S.234 B AND 234D AND SHOULD HAVE HELD THAT INTEREST U /S . 234 B BEING WRONGLY CHARGED SHOULD HAVE BEEN DELETED . 5. LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY SUBMITTED THAT THE REOPENING HAS BEEN MADE SOLELY ON THE BASIS OF CHANGE OF OPIN ION. IN THIS REGARD, HE REFERRED TO PAGE 3 OF PAPER BOOK AND POINTED OUT THAT IN THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS VIDE ORDER - SHEET DATED 22.05.2007 NOTICE UNDER SECTION 133(6) WAS, INTER ALIA, ISSUED TO M/S. ASSAM CO. LIMITED IN WHOSE ACCOUNT THE CREDIT BALANCE OF RS.50,00,000/ - WAS LYING. HE FURTHER REFERRED TO PAGE 1 OF THE PAPER BOOK, WHEREIN THE REPLY RECEIVED FROM M/S. ASSAM CO. LIMITED DATED 09.07.2007 IS CONTAINED, WHICH IS RE - PRODUCED HEREUNDER: - 3 & 5. REGARDING AMOUNT OUTSTANDING AS ON 31.03.2005, PLEASE NOTE THAT A SUM OF RS.50 LACS WAS GIVEN TO M/S. JALAN I.T.A. NO . 814 / KOL ./20 1 2 ASSESSMENT YEAR: 20 0 5 - 20 06 PAGE 4 OF 5 CHEMICAL INDUSTRIES PVT. LTD. VIDE CHEQUE NO. 009161 DATED 09.01.95 DURING FINANCIAL YEAR 1994 - 95 TOWARDS AN ADVANCE. THE SAID ADVANCE AMOUNT OF RS.50 LACS WAS NOT RETURNED BACK T O US BY M/S. JALAN CHEMICAL INDUSTRIES PVT. LTD. TILL 31.03.2005. SINCE, THE SAID AMOUNT WAS CATEGORIZED AS NON PERFORMING ASSETS, IT WAS WRITTEN OFF IN OUR BOOKS OF ACCOUNTS DURING FINANCIAL YEAR 1996 - 97. HENCE, THERE HAS BEEN NO OUTSTANDING IN THE NAME O F M/S. JALAN CHEMICAL INDUSTRIES PVT. LTD. AS ON 01.04.2004 AND 31.03.2005. THE AMOUNT PAID TO JALAN INDUSTRIES PVT. LTD. DURING 1994 - 95 AS AN ADVANCE AND WRITTEN OFF BY US DURING 1997 - 98 IN OUR BOOKS OF ACCOUNT REMAINED RECOVERABLE FROM M/S. JALAN CHEMICA L INDUSTRIES PVT. LTD. AS ON 01.04.2004 ALSO AS ON 31.03.2005. OUR PAN IS AAACT 7590B AND WE ARE ASSESSED BY ACIT, CIRCLE - 2, DIBRUGARH, ASSAM . LD. COUNSEL FURTHER REFERRED TO REPLY FILED BEFORE THE ASSESSING OFFICER DATED 25.07.2007 IN WHICH THE ASSESSEE HAS CLEARLY STATED REGARDING THE FACTS RELATING TO ADVANCE OF RS.50,00,000/ - FROM M/S. ASSAM COMPANY LIMITED. THE CONTENTION OF THE ASSESSEE WAS THAT NO DEDUCTION WAS CLAIMED FROM INCOME IN ANY OF THE EARLIER YEARS AND NO TRADING LIABILITY WAS THERE AND T HE AMOUNT WAS ONLY IN THE NATURE OF ADVANCE. LD. COUNSEL RELIED ON THE ORDER DATED 19 TH JUNE, 2014 OF ITAT, CHANDIGARH BENCH IN THE CASE OF DCIT & ANR. VS. - VIKAS SHARMA REPORTED IN (2014) 165 TTJ (CHD.)(UO) 1. 6. LD. D.R. FOR THE REVENUE RELIED ON THE O RDER OF LD. CIT(APPEALS). 7 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIAL AVAILABLE ON RECORD. FROM THE FACTS NARRATED BY THE LD. COUNSEL FOR THE ASSESSEE , NOTED ABOVE, WHICH HAVE NOT BEEN CONTROVERTED BY THE LD. D.R. , I T IS NOTI CED THAT THE ASSESSING OFFICER DID NOT INVOKE THE PROVISION OF SECTION 41(1) IN THE ORIGINAL ASSESSMENT PROCEEDINGS AFTER BEING FULLY SATISFIED WITH THE REPLY FILED BY THE ASSEESSEE. THEREFORE, ON THE BASIS OF SAME FACTS , WITHOUT HAVING ANY FRESH TANGIBLE MATERIAL , SOLELY ON THE BASIS OF AUDIT OBJECTION, THE INVOCATION OF PROVISION OF SECTION 147 WAS NOT JUSTIFIED AND WAS SOLELY ON THE BASIS OF CHANGE OF OPINION. WE MAY OBSERVE THAT HON BLE ITAT, CHANDIGARH BENCH VIDE ORDER DATED I.T.A. NO . 814 / KOL ./20 1 2 ASSESSMENT YEAR: 20 0 5 - 20 06 PAGE 5 OF 5 19.06.2014 IN THE CASE OF D CIT & ANR. VS. - VIKAS SHARMA REPORTED IN (2014) 165 TTJ (CHD.)(UO) 1 HEL D AS UNDER: - REASONS RECORDED ARE BASED ON SAME FACTS/INFORMATION AS WAS AVAILABLE ON RECORD, WHEN THE ORIGINAL ASSESSMENT PROCEEDINGS WERE CONDUCTED, THAT TOO AFTER ENQUIRY, SINCE COMPLETE FACTS WERE AVAILABLE WITH THE DEPARTMENT AND NO NEW FACTS CAME INTO EXISTENCE, REOPENING OF ASSESSMENT ON IDENTICAL FACTS IS CLEARLY A CASE OF CHANGE OF OPINION AND NOT SUSTAINABLE . BY CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF TH E CASE, WE SET ASIDE THE ORDER OF LD. CIT(APPEALS) AND ALLOW THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE. 8 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH AUGUST , 201 5 . SD/ - SD/ - MAHAVIR SINGH S.V. MEHROTRA ( JUDICIAL MEMBER) ( ACCOUNTANT MEMBER) KOLKATA, THE 14 TH D AY OF AUGUST , 201 5 COPIES TO : (1) JALAN CHEMICAL INDUSTRIES (P) LIMITED, GROUND FLOOR, ABHINANDAN, 27A/B, RYOD STREET, KOLKATA - 700 016 (2) INCOME TAX OFFICER, WARD - 11(2), KOLKATA, P - 7, CHOWRINGHEE SQUARE, 6 TH FLOOR, KOLKATA - 700 069 (3) COMMISSIONER OF INCOME - TAX (APPEALS) - XII , KOLKATA (4) COMMISSIONER OF INCOME TAX - , KOLKATA ( 5 ) THE DEPARTMENTAL REPRESENTATIVE ( 6 ) GUARD FILE BY ORDER A SSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA B ENCHES, KOLKATA LAHA/S R. P.S .