DCIT 2(3), MUMBAI V. WIMCO LTD, MUMBAI

ITA 8319/MUM/2010

• Counselvise Citation: 831919914 RSA 2010
• Duration Of Justice: 3 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 22-09-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 01-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SACHCHIDANAND DUBEY
• Assessee Lawyers: K K VED
• Keywords: Reopening of assessment; Retrospective amendment; Reassessment proceedings
• Section: 148; 115JB

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNALG BENCH, MUMB AI BEFORE SHRI D.MANMOHAN, VP AND SHRI D. KARUNAKARA R AO, AM ITA NO. 8319/MUM/2010 ASSESSMENT YEAR-2003-04 DCIT - 2(3), ROOM.NO.555, AAYAKAR BHAVAN, MUMBAI-400020 / VS. M/S WIMCO LTD. INDIAN MERCANTILE CHAMBER, R.K. MARG, BALLARD ESTATE, MUMBAI-400001 ./ PAN :AAACW0616M ( /REVENUE ) .. ( / RESPONDENT ) / REVENUE BY : SHRI SACHCHIDANAND DUBEY / ASSESSEE BY : SHRI K.K.VED / DATE OF HEARING : 22/09/2014 / DATE OF PRONOUNCEMENT : 22/09/2014 / ORDER PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF THE CIT(A)-6, MUMBAI DATED 03/09/2010 FOR THE ASSESSMEN T YEAR 2003- 2004. IN THE GROUNDS, THE REVENUE CONTESTS THE FIND ING OF THE CIT(A) IN MATTERS OF THE VALIDITY OF REOPENING OF THE ASSE SSMENT. 2. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE TH AT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF SAFETY MATCHES, PACKING MACHINES AND PROCESSED FOODS. ASSESSEE FILED ITS RE TURN OF INCOME DECLARING THE TOTAL INCOME OF ` . NIL AND ASSESSMENT WAS COMPLETED ON 27/02/2006. SUBSEQUENTLY, NOTICE U/S 148 WAS ISS UED ON 27/03/2008 AND REASSESSMENT WAS COMPLETED U/S 143(3 ) R.W.S 147 OF THE ACT DETERMINING THE TOTAL INCOME OF ` .3,95,33,303/- . IN THE REASONS RECORDED BY THE AO, IT WAS MENTIONED THAT A SSESSEE FAILED TO ADD BACK U/S 115JB OF THE ACT AN AMOUNT OF ` .703.46 LAKHS ON 2 ITA NO.8319/MUM/2010. ACCOUNT OF PROVISION FOR DIMINUTION IN THE VALUE O F INVESTMENT, BEING AN UNASCERTAINED LIABILITY. 3. DURING THE FIRST APPELLATE PROCEEDINGS, ON THE I SSUE OF REOPENING OF ASSESSMENT, ASSESSEE SUBMITTED THAT TH E CLAIM OF THE ASSESSEE WAS ALLOWED IN ORIGINAL ASSESSMENT AND THI S DECISION OF THE AO IS SUPPORTED BY VARIOUS JUDICIAL PRONOUNCEMENTS I.E HCL COMNET SYSTEMS SERVICES 292 ITR 299 (DEL), EICHER LTD. 289 ITR 270, ECHJAY FORGING P. LTD. 251 ITR 15(BOM), USHA MARTIN INDUSTI RES LTD. 104 ITD 249 (SB), NW EXPORTS LTD. (ITA NO.3777/M/1992 ( BOM) ETC. FURTHER, ASSESSEE RELIED HEAVILY ON THE JURISDICTION AL HIGH COURTS JUDGMENT IN THE CASE OF RELLIS INDIA LTD. 323 ITR 5 4 AND MENTIONED THAT FACTS OF THIS JUDGMENT ARE SIMILAR AND THEREFO RE, REOPENING OF THE ASSESSEE SHOULD BE HELD INVALID. THE VIEW OF THE A O IN THE ORIGINAL ASSESSMENT IS BACKED BY THE JUDGMENT OF THE JURISDI CTIONAL AND OTHER HIGH COURTS AT THE RELEVANT POINT OF TIME I.E. ANTE RIOR TO THE DATE OF ISSUE OF NOTICE U/S 148 OF THE ACT. IN SUCH CIRCUM STANCES, THERE WAS NO WARRANT FOR REOPENING OF THE ASSESSMENT BASED ON THE RETROSPECTIVE AMENDMENT TO SECTION 115JB OF THE ACT . THE CIT(A) CONSIDERED THE SAME AND UPHELD THE INVALIDITY OF TH E REASSESSMENT PROCEEDINGS. 4. AGGRIEVED WITH THE ABOVE CONCLUSION OF THE CIT(A ), THE REVENUE FILED THE PRESENT APPEAL. IN THE APPEAL, REVENUE QU ESTIONED THE CONCLUSIONS DRAWN BY THE CIT(A) AND REASONED THAT R EOPENING OF THE ASSESSMENT BASED ON THE AMENDED PROVISIONS OF SECT ION 115JB OF THE ACT RETROSPECTIVELY BROUGHT INTO BY THE FINANCE (NO.2) ACT, 2009 SHOULD BE UPHELD AND PRAY FOR REVERSAL OF THE DECIS ION OF THE CIT(A). 5. PER CONTRA, LD. COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE DETAILED ORDER OF THE CIT(A) AND READ OUT TH E CONCLUSION DRAWN 3 ITA NO.8319/MUM/2010. BY HIM IN VIDE PARA 4.5 OF THE IMPUGNED ORDER. ON THE ISSUE OF VALIDITY OF THE NOTICE, LD. COUNSEL ARGUED THAT AO S DECISION NOT TO ADD BACK THE SAID PROVISION HAS THE SUPPORT OF VARI OUS BINDING JUDGMENTS. THEREFORE, THE ASSESSMENT, WHICH WAS CO NCLUDED BASED ON THE BINDING JUDGMENTS, NEED NOT BE REOPENED BASE D MERELY ON RETROSPECTIVE AMENDMENT TO SECTION 115JB OF THE ACT . LD. COUNSEL INFORMED US THAT A SIMILAR ISSUE WAS ADJUDICATED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF RALLIS INDIA LTD. 323 ITR 54 (BOM) OF IS RELEVANT FOR THE PROPOSITION THAT RETROSPECT IVE AMENDMENT COULD NOT HAVE BEEN THE SOLE GROUND FOR T HE ASSESSING OFFICER FOR REOPENING AN ASSESSMENT WHICH WAS COMPL ETED IN ACCORDANCE WITH LAW AVAILABLE AT THAT TIME. THE HON BLE JURISDICTIONAL HIGH COURT HELD THAT THERE IS NO WARRANT FOR REOPEN ING THE ASSESSMENT IN EXISTENCE OF THE POWER CONFERRED U/S 147 OF THE ACT. 6. WE HEARD BOTH THE PARTIES AND PERUSED THE JUDGME NT IN THE CASE OF RELLIS INDIA LTD. (SUPRA) AS WELL AS THE CO NCLUSION DRAWN BY THE CIT(A) IN PARA 4.5. THE SAID PARAGRAPH IS REPR ODUCED AS UNDER FOR THE SAKE OF COMPLETENESS OF THE ORDER. I HAVE CONSIDERED THE FACTS OF THE ISSUE AND THE S UBMISSIONS MADE BY THE AR AND FIND MERIT IN THEM. THE FACTS OF THE PRESENT C ASE ARE ON ALL FOURS WITH THE FACTS OF THE CASE OF RELLIS INDIA LTD. (WP NO. 2514 OF 2009) QUOTED ABOVE. IN THE PRESENT CASE ALSO, ON THE DATE OF THE REOPENING OF ASSESSMENT, THE LAW AS DECLARED BY THE SUPREME COURT IN HCL CASE WOULD APP LY. HENCE, IN VIEW OF PREPONDERANT LEGAL DECISIONS HOLDING GROUND IN FAVO UR OF THE APPELLANT, THE AO COULD NOT HAVE REOPENED THE CASE ON THE GROUNDS ON WHICH HE REOPENED THE SAME. IT IS AN ADMITTED POSITION THAT THE LAW LAID DOWN BY THE SUPREME COURT IS DECLARATORY OF THE POSITION AS IT ALWAYS S TOOD. HENCE, AS ON THE DATE OF REOPENING, THE PROVISION FOR DIMINUTION IN THE V ALUE OF INVESTMENT COULD NOT BE STATED TO BE AS UNASCERTAINED LIABILITY TO E NABLE THE AO TO ADD BACK THE SAME U/S 115JB OF THE ACT. HENCE THE REOPENING IS HELD TO BE NOT IN ORDER. THIS GROUND OF THE APPELLANT IS ALLOWED. 7. ADDING BACK A PROVISION, AN UNASCERTAINED LIABIL ITY U/S 115JB OF THE ACT, IS THE ISSUE ON MERITS. THE SAME NEEDS TO BE ADDED IN THE 4 ITA NO.8319/MUM/2010. COMPUTATION AS PER THE AMENDED PROVISION OF CLAUSE (I) OF THE EXPLANATION-1 TO SECTION 115JB OF THE ACT. IT IS A N UNDISPUTED FACT THAT THE ASSESSMENT WAS ORIGINALLY COMPUTED ON 27/0 2/2006 ALLOWING THE SAID CLAIM OF THE ASSESSEE. THERE IS NO DISPUTE ON THE FACT THAT THE SAID CLAUSE (I) IS BROUGHT IN TO STAT UTE BY THE FINANCE ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 01/04/2001 . THUS, AT THE TIME OF MAKING OF THE ASSESSMENT ORIGINALLY, SAID C LAUSE (I) WAS NOT IN EXISTENCE. FURTHER, IT IS A FACT THAT AT THE TIME OF MAKING ORIGINAL ASSESSMENT, THERE ARE LARGE NUMBERS OF JUDICIAL PRO NOUNCEMENTS IN FAVOUR OF THE ASSESSEE. THEREFORE, THE ORIGINAL AS SESSMENT OF AO IS LEGALLY VALID CONSIDERING CONTEMPORANEOUS INTERPRET ATION OF THIS LAW AT THAT TIME. THUS, THE AO HAS TAKEN ONE PROBABLE INTERPRETATION OF THE LAW. IN SUCH CIRCUMSTANCES, IN OUR VIEW, THE J UDGMENT IN THE CASE OF RELLIS INDIA LTD.(SUPRA) HAS DIRECT APPLICA TION TO THE FACTS OF THE PRESENT CASE. CONSIDERING THE ABOVE, IN OUR O PINION CONCLUSION DRAWN BY THE CIT(A) RELYING ON THE BINDING JUDGMENT IN THE CASE OF RELLIS INDIA LTD.(SUPRA) AS WELL AS HCL CASE IS FAI R AND REASONABLE AND THE ORDER OF THE CIT(A) DOES NOT CALL FOR INTER FERENCE. CONSIDERING OUR DECISION IN FAVOUR OF THE ASSESSEE ON THE LEGAL ISSUE IN OUR OPINION, ADJUDICATING THE ISSUE ON MERIT BECOMES AN ACADEMIC EXERCISE. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 22/09/2014 !' # $% &! ' 22/09/2014 ( ) SD/- SD/- D.MANMOHAN D.KARUNAKARA RAO (VICE PRESIDENT) (ACCOUNTANT MEMBER) MUMBAI , DATED: 22/09/2014 F{X~{T? P.S. 5 ITA NO.8319/MUM/2010. !'*+,-, / COPY OF THE ORDER FORWARDED TO : (1) *./0 / THE ASSESSEE; (2) / THE REVENUE; (3) 123 / THE CIT(A); (4) 1 / THE CIT, MUMBAI CITY CONCERNED; (5) , 4(**5.6 5. 6$ 7 / THE DR, ITAT, MUMBAI; (6) (8/9 / GUARD FILE. ,* / TRUE COPY !' / BY ORDER : / ; / (DY./ASSTT. REGISTRAR) 5. 6$ 7 / ITAT, MUMBAI,