LMJ Logistics Ltd, Kolkata V. D.C.I.T Cir - 2,kolkata, Kolkata

ITA 844/KOL/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9164 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 02-11-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 17-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARTI DEBNATH; SHITAL KHEMKA AR RESPON
• Assessee Lawyers: T VARKEY JUDIC IA L M EMBER
• Keywords: Search and seizure; Audit objection; Question of law; Difference of opinion; Assessment record; Reason to believe; Change of opinion
• Section: 143(3); 142(1); 147; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI ABY.T VARKEY, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 844 / KOL / 2013 ASSESSMENT YEAR :2003-04 LMJ LOGISTICS LTD., 30, J.L. NEHRU ROAD, KOLKATA-16 [ PAN NO.AABCP 8494 K ] V/S . DCIT, CIRCLE-2, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, 7 TH FLOOR, KOLKATA-700 069 /APPELLANT .. / RESPONDENT /BY APPELLANT ARTI DEBNATH, AR & SHITAL KHEMKA, AR /BY RESPONDENT SHRI SALLONG YADEN, ADDL. CIT-SR-DR /DATE OF HEARING 12-01-2017 /DATE OF PRONOUNCEMENT 15-03-2017 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-I, KOLKATA DAT ED 30.01.2013. ASSESSMENT WAS FRAMED BY DCIT, KOLKATA U/S 143(3)/1 47 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VI DE HIS ORDER DATED 24.12.2008 FOR ASSESSMENT YEAR 2003-04. ARTI DEBNATH AND SHITAL KHEMKA, LD. AUTHORIZED REPR ESENTATIVES APPEARED ON BEHALF OF ASSESSEE AND SHRI SALLONG YADEN, LD. AUTH ORIZED REPRESENTATIVE REPRESENTED ON BEHALF OF REVENUE. 2. AT THE OUTSET IT WAS OBSERVED THAT THE ASSESSEE HAS RAISED ADDITIONAL GROUND OF APPEAL CHALLENGING THE REASSESSMENT PROCE EDINGS U/S 147 OF THE ACT. BEFORE US, THE LD. AR FOR THE ASSESSEE SUBMITT ED THAT THE ISSUE RAISED IN ITA NO.844/KOL/2013 A.Y. 2003-04 LMJ LOGISTICS LTD. VS. DCIT CR-2, KOL. PAGE 2 ADDITIONAL GROUND IS LEGAL IN NATURE AND THE SAME I S ARISING FROM THE ASSESSMENT PROCEEDINGS U/S 147 OF THE ACT. THE TRIB UNAL WAS NOT PREVENTED FROM CONSIDERING SUCH QUESTION OF LAW. THE LD. AR F OR THE ASSESSEE REFERRED TO THE JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. V. CIT [1998] 229 ITR 383 (SC) IN THIS REGARD. 3. THE LD DR, ON THE OTHER HAND RAISED NO OBJECTION ON THE ISSUE OF ADMISSIBILITY OF ADDITIONAL GROUND. AS REGARDS THE ADMISSIBILITY OF THE ADDITIONAL GROUND RAISED BEFORE US WE FIND THAT THE ISSUE RAIS ED BEFORE US IS A LEGAL ISSUE WHICH CAN BE ADJUDICATED ON THE BASIS OF MATERIAL O N RECORD. WE, THEREFORE ADMIT THE SAME FOR ADJUDICATION. 4. WE FIRST DECIDED TO ADJUDICATE THE ISSUE RAISED IN THE ADDITIONAL GROUND OF APPEAL BY THE ASSESSEE WHEREIN THE VALIDITY OF R EASSESSMENT PROCEEDINGS U/S 147 OF THE ACT WAS CHALLENGED. FOR THIS, THE AS SESSEE HAS RAISED THE FOLLOWING ADDITIONAL GROUND OF APPEAL:- THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW, THE REOPENING BASED ON FACTS WHICH WERE SPECIFICALLY EN QUIRED BY THE ASSESSING OFFICER AT THE TIME OF SCRUTINY PROCEEDIN GS, IS RE-APPRECIATION OF MATERIAL ON RECORD & MERE CHANGE OF OPINION WHIC H IS IMPERMISSIBLE IN LAW AND IS LIABLE TO BE QUASHED. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE AND I N LAW, THE REOPENING SOLELY BASED ON AUDIT OBJECTION WITHOUT ANY INDEPEN DENT APPLICATION OF MIND BY THE ASSESSING OFFICER IS BAD IN LAW AND IS LIABLE TO BE QUASHED. 4.1 AT THE OUTSET THE LEARNED AR FOR THE ASSESSEE D REW OUR ATTENTION ON THE REASONS RECORDED BY THE REVENUE FOR THE REOPENING O F THE CASE U/S 147 OF THE ACT WHICH READS AS UNDER :- ON EXAMINATION OF ASSESSMENT RECORDS IT IS FOUND TH AT AN AMOUNT OF RS.2,41,70,911/- WAS CREDITED TO P & L A/C FOR THE YEAR 2002-03 AS SERVICE CHARGES RECEIVED FROM FOUR DOMESTIC COMPANIES. THIS AMOUNT INCLUDED A SUM OF RS.1,71,70,486/- FROM TATA CHEMICALS LTD., AS SE RVICE CHARGES FOR CARRYING AND FORWARDING AND PACKING OF SALT AT CALCUTTA AND BANGALORE. BUT FROM THE DETAILS OF PAYMENT MADE TO YOUR COMPANY BY TATA CHE MICALS LTD. THE DOCUMENT REVEALS THAT AN AMOUNT OF RS.1,96,20,499/- WAS CREDITED IN YOUR ACCOUNT FOR SERVICE CHARGES AND RENT PAYMENTS. AS T HE COMPANY HAD BEEN ITA NO.844/KOL/2013 A.Y. 2003-04 LMJ LOGISTICS LTD. VS. DCIT CR-2, KOL. PAGE 3 FOLLOWING MERCANTILE SYSTEM OF ACCOUNTS, WHOLE AMOU NT OF RS.1,96,20,499/- INSTEAD OF RS.1,71,70,486/- WAS REQUIRED TO BE ACCO UNTED FOR. OMISSION TO DO SO, RESULTED IN UNDER-ASSESSMENT OF INCOME BY RS.24 ,50,013/- (RS.1,96,20,499/- RS.1,71,70,486). IN SUCH CIRCUMSTANCES, I HAVE A REASON TO BELIEVE T HAT A SUM OF RS.24,50,013/- HAS ESCAPED THE ASSESSMENT AND THERE IS SUFFICIENT REASON TO REOPEN THE CASE UNDER SECTION 147 OF THE IT ACT. THE LD. AR BEFORE US FURTHER SUBMITTED THAT THE ABO VE MENTIONED ISSUE OF SERVICE CHARGES RECEIVED FROM TATA CHEMICALS LTD WA S ALREADY EXAMINED BY THE ASSESSING OFFICER DURING THE SCRUTINY ASSESSMEN T PROCEEDINGS. THE ASSESSING OFFICER WAS AWARE OF THE SERVICE CHARGES BOOKED BY THE APPELLANT (ASSESSEE) ON ACCOUNT OF SERVICES RENDERED BY TATA CHEMICALS LTD. THIS IS CLEAR FROM THE FACT THAT DURING THE COURSE OF SCRUT INY ASSESSMENT, VIDE NOTICE U/S 142(1) DATED 10.06.2005, THE ASSESSING OFFICER HAD ASKED THE DETAILS OF THE SERVICE CHARGES RECEIVED FROM THE VARIOUS PARTI ES FROM THE APPELLANT (ASSESSEE). THE ASSESSING OFFICER ALSO WROTE A LETT ER TO TATA CHEMICALS LTD. ON 15.12.2003 ASKING FOR THE DETAILS OF TAX DEDUCTED A T SOURCE ON PAYMENT MADE TO THE APPELLANT (ASSESSEE). TATA CHEMICALS HAD REP LIED TO THE ASSESSING OFFICER VIDE LETTER DATED 23.12.2003 WHICH WAS IN P OSSESSION OF THE ASSESSING OFFICER AT THE TIME OF PASSING ORIGINAL ORDER U/S 1 43(3). THIS IS A SETTLED LAW THAT WHEN ANY ISSUE IS EXAMIN ED IN DETAIL DURING SCRUTINY PROCEEDINGS U/S 143(3) BY THE ASSESSING OFFICER, IT AMOUNTS TO FORMING AN OPINION ON THE SUBJECT MATTER, DESPITE THE FACT THA T NO ADDITION HAS BEEN MADE ON THIS ACCOUNT BY THE AO. SUBSEQUENT REOPENING ON THE SAME MATERIAL WHICH WAS ALREADY AVAILABLE ON RECORD AND ALSO EXAMINED B Y THE AO WOULD TANTAMOUNT TO CHANGE OF OPINION WHICH IS NOT PERMIS SIBLE AND THUS ORDER PASSED U/ S 147 IS VOID AND LIABLE TO BE QUASHED. WITHOUT PREJUDICE TO THE ABOVE, THE REOPENING WAS M ADE SOLELY ON THE BASIS OF THE AUDIT OBJECTION WITHOUT ANY INDEPENDENT APPLICA TION OF MIND BY THE ASSESSING OFFICER. ON THIS ACCOUNT ALSO THE ASSESSM ENT ORDER IS LIABLE TO BE QUASHED. ITA NO.844/KOL/2013 A.Y. 2003-04 LMJ LOGISTICS LTD. VS. DCIT CR-2, KOL. PAGE 4 THE LD. AR FURTHER SUBMITTED THAT THE ISSUE OF SERV ICE CHARGES RECEIVED FROM TATA CHEMICALS LTD WAS ALREADY EXAMINED BY THE AO D URING THE SCRUTINY ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT AS EVI DENT FROM THE QUESTION NO. 5 OF THE NOTICE ISSUED UNDER SECTION 142(1) OF THE ACT VIDE DATED 10 TH JUNE 2005. THE ASSESSEE IN RESPONSE TO THE NOTICE HAS MA DE A REPLY VIDE LETTER DATED 29 TH AUGUST 2005. THE RELEVANT EXTRACT OF THE NOTICE IS SUED TO THE ASSESSEE UNDER SECTION 142(1) OF THE ACT AND THE RE PLY MADE THERE TO BY THE ASSESSEE WERE SUBMITTED BY THE ASSESSEE AT THE TIME OF HEARING WHICH ARE PLACED ON RECORD. IN ADDITION TO ABOVE, THE LD AR FURTHER SUBMITTED T HAT A LETTER WAS ALSO WRITTEN BY THE AO TO TATA CHEMICALS LTD ON THE CAPTIONED SU BJECT. IN COMPLIANCE THERE TO TATA CHEMICALS LIMITED SUBMITTED VARIOUS D ETAILS TO THE AO WHICH ARE PLACED ON PAGES 88 TO 90 OF THE PAPER BOOK. THE LD AR ALSO SUBMITTED THAT THE REASSESSMENT WAS OPENED ON THE BASIS OF MATERIA LS WHICH WERE ALREADY AVAILABLE ON RECORD AND THE SAME WERE EXAMINED BY T HE AO AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS U/S 143(3) OF THE A CT. THE ACT OF THE ASSESSING OFFICER FOR REOPENING THE CASE IS BASED O N THE CHANGE OF OPINION WHICH IS NOT PERMISSIBLE IN THE EYES OF LAW. AT THE END, THE LD THE AR PRAYED TO THE BENCH TO QUASH THE ORDER PASSED U/S 147 OF THE ACT. ON THE OTHER HAND THE LD DR VEHEMENTLY SUPPORTED TH E ORDER OF AUTHORITIES BELOW. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE RECORDS. WE FIND THAT IN THIS CASE ORIGINAL ASSESSMENT WAS M ADE U/S 143(3) OF THE ACT. DURING THE ORIGINAL ASSESSMENT PROCEEDINGS U/S 143( 3) OF THE ACT, CERTAIN DETAILS WERE CALLED FOR BY ISSUING NOTICE U/S 142(1 ) OF THE ACT. THE RELEVANT QUESTION NUMBER 5 OF THE NOTICE READS AS UNDER : 5. ON GOING THROUGH P & L A/C, IT IS SEEN THAT YOU HAVE RECEIVED RS.2,41,70,911/- AS SERVICE CHARGES. KINDLY STATE I S IT GROSS OR NET? IF IT IS NOT FILE DETAILS OF VARIOUS EXPENDITURE WHICH IS DEBITE D TO ARRIVE AT NET FIGURE. ITA NO.844/KOL/2013 A.Y. 2003-04 LMJ LOGISTICS LTD. VS. DCIT CR-2, KOL. PAGE 5 THE ASSESSEE IN RESPONSE TO THE NOTICE AS DISCUSSED ABOVE HAS REPLIED VIDE LETTER DATED 29.08.2005 OF WHICH THE COVERING LETTE R IS PLACED ON RECORD. BESIDES THE ABOVE WE ALSO FIND THAT THE AO HAS ALSO CONFIRMED THE SERVICE CHARGES PAID TO THE ASSESSEE FROM TATA CHEMICALS LI MITED. THE REPLY FROM TATA CHEMICALS LTD IS PLACED ON PAGES 88 TO 90 OF T HE PAPER BOOK. FROM THE ABOVE, WE NOTE THAT THE AO HAS DULY CONSID ERED THE PAYMENT MADE BY TATA CHEMICALS LTD. TO THE ASSESSEE. ACCORDINGLY THE AO WAS ALSO AWARE TDS DETAILS FROM THE TATA CHEMICAL LTD. HENCE IT CA NNOT BE SAID THAT THE AO WAS NOT AWARE OF THE NATURE OF PAYMENTS MADE TO THE ASSESSEE BY THE SAID PARTY. AO HAS ALSO CONSIDERED AND CHOSEN NOT TO MAK E ANY ADDITION ON ACCOUNT OF UNDER STATEMENT OF INCOME IN THE NAME OF THE SAID PARTY. THUS THE AO AFTER CONSCIOUS APPLICATION OF MIND HAS CHOSEN N OT TO MAKE ANY ADDITION. HENCE IT IS CLEAR THAT THE AO HAS APPLIED HIS MIND REGARDING THE NATURE OF PAYMENT AND CORRESPONDING DETAILS OF THE TDS DEDUCT ED BY THE SAID PARTY. 5.1 NOW IN THIS BACKGROUND WE NOTE THAT WHILE REOPE NING OF THE ASSESSMENT ON THE SAME GROUND OF SERVICES CHARGES INCOME TO AS SESSEE FROM TATA CHEMICALS LTD. AO HAS NOTED THAT ASSESSEE IS IN REC EIPT OF INCOME FOR RS.1,96,20,499/- INSTEAD OF RS.1,17,70,486/-. THUS, THERE IS UNDERASSESSMENT OF INCOME FOR RS.24,50,013/- (1,96,20,499.00 1,17 ,70,486.00). THE AO WAS OF THE OPINION THAT THE ASSESSEE WAS REQUIRED TO MA KE DISCLOSURE OF INCOME FROM THE SAID PARTY FOR RS.1,96,20,499/- WHICH THE ASSESSEE HAS NOT DONE. THUS, WE NOTE THAT NO NEW FACT HAS COME TO THE NOTI CE OF AO FOR REOPENING THE ISSUE OF PAYMENT RECEIVED FROM THE PARTY. THE NATUR E OF PAYMENTS RECEIVED, AMOUNT OF TDS DEDUCTED, CONFIRMATIONS FROM THE PART Y WERE ALL AVAILABLE WITH THE AO IN THE ORIGINAL ASSESSMENT U/S 143(3) OF THE ACT. AO CONSCIOUSLY MADE A DECISION NOT TO MAKE ANY DISALLOWANCE IN THIS REG ARD. HENCE, ON THE SAME ISSUE WHEN THE REOPENING IS DONE AND THE AO CHANGES HIS OPINION AND COMES TO THE DECISION THAT THE ASSESSEE SHOULD HAVE BEEN SHOWN MORE AMOUNT OF INCOME, IT IS CLEARLY A CHANGE OF OPINION. IT IS A FRESH APPLICATION OF MIND ON THE SAME SET OF FACTS. THIS, IN OUR CONSIDERED OPINION, IS NOT PERMISSIBLE AS HELD ITA NO.844/KOL/2013 A.Y. 2003-04 LMJ LOGISTICS LTD. VS. DCIT CR-2, KOL. PAGE 6 BY THE HON'BLE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA LTD . REPORTED IN 320 ITR 561 (SC). THE RELEVANT EXTRACT OF THE JU DGMENT IS EXTRACTED BELOW:- ' THEREFORE, POST - 1ST APRIL 1989, POWER TO REOPEN I S MUCH WIDER. HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WOR DS 'REASON TO BELIEVE' FAILING WHICH, WE ARE AFRAID, SECTION 147 WOULD GIVE ARBITR ARY POWERS TO THE ASSESSING OFFICER TO REOPEN ASSESSMENTS ON THE BASIS OF 'MERE CHANGE OF OPINION', WHICH CANNOT BE PER SE REASON TO REOPEN. WE MUST ALSO KEE P IN MIND THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REVIEW AND POWER TO REA SSESS. THE ASSESSING OFFICER HAS NO POWER TO REVIEW; HE HAS THE POWER TO REASSESS. BUT REASSESSMENT HAS TO BE BASED ON FULFILLMENT OF CERTAIN PRECONDIT IONS AND IF THE CONCEPT OF 'CHANGE OF OPINION' IS REMOVED, AS CONTENDED ON BEH ALF OF THE DEPARTMENT, THEN, IN THE GARB OF REOPENING THE ASSESSMENT, REVI EW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF ' CHANGE OF OPINION ' AS AN IN-BUILT TEST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFICER.' THUS, THE DECISIONS REFERRED TO THE ABOVE SUPPORTS THE CASE OF THE ASSESSEE. IF THE AO HAS CONSIDERED THE PAYMENT AND NATURE OF THE PAYMENT RECEIVED FROM TATA CHEMICALS AND CORRESPONDING TDS AND CHOSE N NOT TO MAKE ANY DISALLOWANCE, REOPENING AND ADDITION ON THIS ACCOUN T IS MERELY A CHANGE OF OPINION AND IS NOT PERMISSIBLE. MOREOVER, IF IT IS CONSIDERED THAT WHEN THE DETAILS WERE AVAILABLE AND AO CHOSE NOT TO MAKE ANY DISALLOWANCES, THEN REMEDY LIES WITH THE COMMISSIONER OF INCOME TAX U/S 263 OF THE ACT. THIS CANNOT BE MADE A SUBJECT-MATTER OF REOPENING U/S 14 7 OF THE ACT AND FRESH APPLICATION OF MIND BY ANOTHER ASSESSING OFFICER. I N THESE CIRCUMSTANCES WE HOLD THAT REOPENING IN THIS CASE IS BAD IN LAW. SIN CE WE HAVE QUASHED THE ORDER OF ASSESSMENT DATED FOR THE YEAR UNDER CONSID ERATION AS BEING INVALID AND UNSUSTAINABLE IN LAW, WE THEREFORE, DO NOT PROP OSE TO GO INTO THE MERITS OF THE ISSUES RAISED IN THIS APPEAL. IN THE RESULT APP EAL OF THE ASSESSEE IS ALLOWED ON LEGAL GROUND. 6. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 15/ 03/2017 SD/- SD/- (ABY. T. VARKEY) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP !- 15 / 03 /201 7 ITA NO.844/KOL/2013 A.Y. 2003-04 LMJ LOGISTICS LTD. VS. DCIT CR-2, KOL. PAGE 7 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-LMJ LOGISTICS LTD., 30, J.L. NEHRU ROAD, KOLKATA-16 2. /RESPONDENT-DCIT, CIRCLE-2, AAYAKAR BHAWAN, P-7, CH OWRINGHEE SQUARE, 7 TH FLOOR, KOLKATA-700 069 3. ) *+ , , - / CONCERNED CIT KOLKATA 4. , , -- / CIT (A) KOLKATA 5. 012 33*+, , *+ , / DR, ITAT, KOLKATA 6. 267 89 / GUARD FILE. BY ORDER/ , , /TRUE COPY/ / , *+ ,