DCIT,Cir.-1(1), Pune V. M/s. Carraro India Ltd., Pune

ITA 870/PUN/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9730 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 10-08-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 17-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK MISHRA
• Keywords: Depreciation; Transfer pricing; International transaction; Difference of opinion; Royalty expenses; Reason to believe; Change of opinion; Revenue expenditure
• Section: 143(3); 92E; 32; 147; 148; 139

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO. 870/PN/2011 (ASSESSMENT YEAR 2002-03) DCIT, CIRCLE-1, PUNE .. APPELLANT VS. M/S. CARRARO INDIA LTD., B 2/2, MIDC RANJANGAON, PUNE 411 210. .. RESPONDENT PAN NO.AAACC 5292M ASSESSEE BY : SRI VED JAIN DEPARTMENT BY : SRI ALOK MISHRA DATE OF HEARING : 10-08-2012 DATE OF PRONOUNCEMENT : 23 -08-2012 ORDER PER R.K. PANDA, AM : THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 28-03- 2011 OF THE CIT(A)-VI, NEW DELHI RELATING TO ASSESS MENT YEAR 2002-03. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE FILED ITS RETURN OF INCOME ON 30-10-2002 DECLARING A LOSS OF RS.10,36,91,583/-. THE CASE WAS SELECTED FOR SCRUTINY AND WAS ASSESSED U/S. 143(3) AT A LOSS OF RS.10,35,91,583/-. SUBSEQUENTLY, THE PERUSAL OF RECORDS REVEALED THAT THE ASSESSEE C OMPANY HAS PAID AN AMOUNT OF RS.4,00,01,469/- TO CARRARO SPA, ITALY AS ROYALTY F OR TECHNICAL KNOW-HOW AND CLAIMED THE SAME AS REVENUE EXPENDITURE. THE ROYAL TY PAID WAS TOWARDS ACQUIRING TECHNICAL KNOWLEDGE WHICH WAS IN THE NATURE OF TECH NICAL KNOW-HOW FEE. THE ASSESSING OFFICER NOTED THAT THE PAYMENT OF TECHNIC AL KNOW-HOW FEE WAS CLEARLY DEALT WITH U/S.35AB OF THE ACT WHICH STATES THAT WH ERE THE ASSESSEE HAS PAID IN ANY PREVIOUS YEAR IN CONSIDERATION FOR ACQUIRING ANY KN OW HOW FOR USE FOR THE PURPOSE OF HIS BUSINESS, 1/6 TH OF THE AMOUNT SO PAID SHALL BE DEDUCTED IN COMPUTI NG THE 2 PROFIT AND GAINS OF THE BUSINESS FOR THE PREVIOUS Y EAR AND THE BALANCE AMOUNT SHALL BE DEDUCTED IN EQUAL INSTALMENTS IN EACH OF THE FIV E IMMEDIATE SUCCEEDING PREVIOUS YEARS. BUT SECTION 35AB IS ONLY APPLICABLE FOR THE PAYMENTS MADE IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON OR BEFORE THE IST APRIL 1998. DEDUCTION UNDER THIS SECTION IS NOT AVAILABLE FROM ASSESSMENT YEAR 1999-2000 ONWARDS AFTER THE INTRODUCTION OF EXPLANATION 3 UND ER SECTION 32 OF THE ACT. AS PER THE EXPL. 3 UNDER SECTION 32, INTANGIBLE ASSETS BEING TECHNICAL KNOW-HOW, PATENTS, COPY RIGHTS ETC. HAVE BEEN INTRODUCED AND DEPRECIATION @ 25% CAN BE CLAIMED ON SUCH INTANGIBLE ASSETS. THUS, THE ASSES SING OFFICER OBSERVED THAT THE AMOUNT PAID BY THE ASSESSEE COMPANY CANNOT BE ALLOW ED IN FULL AND AS PER THE ABOVE MENTIONED SECTION ONLY 25% OF THE AMOUNT PAYA BLE BY THE ASSESSEE COMPANY IS ALLOWABLE AS DEDUCTION. IN VIEW OF THES E FACTS, THE CASE WAS REOPENED U/S.147 AND A NOTICE U/S.148 WAS ISSUED TO THE ASSE SSEE COMPANY ON 17-02-2009. SUBSEQUENTLY, THE AO COMPLETED THE ASSESSMENT ON A TOTAL LOSS OF RS. 9,79,89,267/- BY DISALLOWING AN AMOUNT OF RS. 56,02,316/- (I.E. A FTER ALLOWING 25% DEPRECIATION ON SUM OF RS.74,69,755/-). 3. BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE ORIG INAL ASSESSMENT ORDER WAS MADE U/S.143(3) FOR THE A.Y. 2002-03. IT WAS SUBMI TTED THAT DURING ASSESSMENT PROCEEDINGS DETAILED DISCUSSIONS TOOK PLACE AND THE SUBJECT OF ROYALTY ALSO FINDS A PLACE IN THE BODY OF THE ASSESSMENT ORDER. THE TPO HAS GIVEN A DETAILED TRANSFER PRICING REPORT DISCUSSING FULLY THE TRANSACTION INV OLVING ROYALTY. THE TRANSFER PRICING REPORT PREPARED BY THE TPO WAS AVAILABLE DU RING THE ASSESSMENT PROCEEDINGS WHICH HAS BEEN MENTIONED IN THE BODY OF THE ASSESSMENT ORDER ITSELF. THEREFORE THE AO WHILE PASSING THE ORDER U/S.143(3) HAD APPLIED HIS MIND TO THE QUESTION OF ROYALTY. REFERRING TO VARIOUS DECISION S AS WELL AS THE PROVISIONS OF SECTION 147 IT WAS SUBMITTED THAT THE RE-ASSESSMENT PROCEEDINGS HAVE BEEN TAKEN 3 ONLY DUE TO CHANGE OF OPINION AND THERE WAS NO FAI LURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECE SSARY FOR ASSESSMENT. 4. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE AND THE VARIOUS DECISIONS CITED BEFORE HIM THE LEARNED CIT(A) HELD THAT THE R E-OPENING OF ASSESSMENT IN THIS CASE IS INVALID. WHILE DOING SO, HE OBSERVED THAT THE RELEVANT MATERIAL PERTAINING TO ROYALTY PAYMENT WAS BEFORE THE AO. NO NEW INFORMAT ION HAS COME TO THE NOTICE OF THE AO WHICH COULD LED TO THE FORMATION OF BELIE F THAT THE INCOME HAS ESCAPED ASSESSMENT. HE OBSERVED THAT THE ASSESSMENT HAS BE EN RE-OPENED ON THE BASIS OF SAME MATERIAL WHICH WAS AVAILABLE AT THE TIME OF OR IGINAL ASSESSMENT PROCEEDINGS. TAKING A DIFFERENT VIEW AT A LATER STAGE, ACCORDING TO THE CIT(A) IS MERELY A CASE OF CHANGE OF OPINION. HE OBSERVED THAT THE AO CANNOT PROCEED TO RE-OPEN THE ASSESSMENT MERELY BECAUSE HE HAS A DIFFERENT OPINIO N ON THIS ISSUE. FOR THIS PROPOSITION HE RELIED ON THE DECISION OF HONBLE D ELHI HIGH COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. REPORTED IN 123 TA XMANN 433, THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. KELVIN ATOR OF INDIA LTD. REPORTED IN 187 TAXMANN 312 AND THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF SATNAM OVERSEAS LTD. VS. ACIT REPORTED IN 188 TAXMA NN 172. HE FURTHER OBSERVED THAT THE ASSESSMENT WAS MADE U/S.143(3), T HE CASE HAS BEEN REOPENED AFTER THE EXPIRY OF 4 YEARS FROM THE END OF THE REL EVANT ASSESSMENT YEAR AND THE AO, NOWHERE, HAS ESTABLISHED THAT THE INCOME HAS ES CAPED ASSESSMENT BECAUSE OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. RATHER, THE RE-ASSES SMENT PROCEEDINGS ARE BASED ON THE SAME MATERIAL AVAILABLE ON RECORD. HE ACCORDIN GLY HELD THAT THE RE-OPENING OF THE ASSESSMENT IN THE INSTANT CASE IS INVALID. 4.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 4 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN HOLDING THAT THE PROCEEDINGS INITIATED UNDER S.147 ARE AB INITIO VOID IGNORING THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF BAWA ABH AI SINGH VS. DY. CIT (2001) 168 CTR (DEL) 521; (2002) 253 ITR 83 (DEL) WHICH WAS HE LD THAT WHILE INTERPRETING THE PROVISIONS OF THE AMENDED PROVISIONS UNDER S. 143 W .E.F. IST APRIL, 1999, THE ONLY CONDITION FOR ACTION IS THAT THE AO SHOULD HAVE REA SON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT AND SUCH BELIEF CAN BE REACHED I N ANY MANNER AND IS NOT QUALIFIED BY A MERE CONDITION OF FAITH AND TRUE DISCLOSURE OF MA TERIAL FACT BY THE ASSESSEE AS CONTEMPLATED IN PRE-AMENDED S.147(A) OF THE IT ACT. THE CIT(A) FURTHER ERRED IN NOT TAKING NOTE OF THE OBSERVATIONS OF THE HONBLE DELH I HIGH COURT IN THE SAID CASE THAT THE REASON WHICH MAY WEIGH WITH THE AO MAY COME FROM AN Y SOURCE THAT HE CONSIDERS RELIABLE, FORMATION OF HIS BELIEF IS NOT A JUDICIAL DECISION BUT IS AN ADMINISTRATIVE DECISION. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AN IN LAW, THE CIT(A) ERRED IN HOLDING THAT THE REOPENING OF THE ASSESSMENT UNDER S.147 TO DISALLOW THE ROYALTY PAYMENT WHICH WAS FOUND TO BE CAPITAL IN NATURE, WAS NOT LE GALLY VALID. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AN IN LAW, THE CIT(A) ERRED IN NOT ADJUDICATING THE CASE ON MERIT HOLDING THAT THE RE WAS NO NEED TO PROCEED, AS THE PROCEEDINGS UNDER S.147 HAS BEEN HELD AB INITIO VOI D. 4. FOR THESE AND SUCH OTHER REASONS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL DURING THE COURSE OF APPELLATE PR OCEEDINGS BEFORE THE HONBLE TRIBUNAL. 5. THE LEARNED DR HEAVILY RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF BAWA ABHAI SINGH (SUPRA) WHICH HAS B EEN TAKEN IN THE GROUNDS OF APPEAL. 6. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTHE R HAND WHILE SUPPORTING THE ORDER OF THE CIT(A) SUBMITTED THAT THE ASSESSMENT Y EAR IN QUESTION IS 2002-03 AND THE ORIGINAL ASSESSMENT IN THIS CASE WAS MADE U/S.1 43(3) ON 22-03-2005. THE NOTICE U/S.148 WAS ISSUED ON 17-03-2009. THUS, THE NOTICE HAS BEEN ISSUED BEYOND A PERIOD OF 4 YEARS FROM THE END OF THE RELEVANT AS SESSMENT YEAR. REFERRING TO PROVISO TO SECTION 147 HE SUBMITTED THAT THE PROVIS O IS CLEARLY APPLICABLE TO THE ASSESSEE SINCE THE ASSESSMENT WAS MADE U/S.143(3) A ND NO INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THE IMPUGNED ASSESSM ENT YEAR BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND T RULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. HE SUBMITTED THAT THE ASSESSEE FIL ED OBJECTIONS AGAINST THE ACTION OF THE AO IN RE-OPENING THE ASSESSMENT. HOWEVER, T HE AO FOLLOWING THE DECISION 5 OF THE HONBLE DELHI HIGH COURT IN THE CASE OF BAWA ABHAI SINGH VS. DCIT REPORTED IN 108 CTR 521 AND VARIOUS OTHER DECISIONS REJECTED THE OBJECTIONS RAISED BY THE ASSESSEE. REFERRING TO THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF BAWA ABHAI SINGH (SUPRA) HE SUBMITTED THAT IT WAS A WRIT CASE AND THE NOTICE WAS ISSUED WITHIN A PERIOD OF 4 YEARS. SINC E THE PROVISO TO SECTION 147 WAS NOT CONSIDERED, THEREFORE, THE SAME IS DISTINGUISHA BLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 7. REFERRING TO PAPER BOOK PAGE 18 HE DREW THE ATTE NTION OF THE BENCH TO THE P&L ACCOUNT WHICH SHOWS THE ROYALTY EXPENSES OF RS. 74,69,755/-. REFERRING TO THE TAX AUDIT REPORT GIVING DETAILS OF ROYALTY EXPE NSES PAID TO RELATED PARTIES U/S.40A(2)(B) AND THE TPOS REPORT GIVING DETAILS A ND NATURE OF ROYALTY PAYMENT HE SUBMITTED THAT ALL THESE DETAILS WERE BEFORE THE AO WHILE PASSING THE ORIGINAL ASSESSMENT ORDER. REFERRING TO PAPER BOOK PAGE 78 WHICH CONTAINS A COPY OF THE LETTER DATED 24-09-2004 ADDRESSED TO THE AO ENCLOSI NG THE AGREEMENTS AND RBI APPROVAL AND COPY OF LETTER DATED 06-01-2005 (PAPER BOOK PAGE 80 TO 83) GIVING JUSTIFICATION FOR ROYALTY EXPENSES HE SUBMITTED TH AT THE ASSESSEE HAD GIVEN FULL DETAILS ABOUT THE ROYALTY. REFERRING TO VARIOUS PA GES OF THE PAPER BOOK IN WHICH THE ASSESSEE HAS GIVEN REPLY TO THE AO ON THE ISSUE OF ROYALTY AND REFERRING TO THE COPY OF THE TPOS REPORT HE SUBMITTED THAT THE AO A FTER EXAMINATION OF THE ABOVE HAS PASSED THE ASSESSMENT ORDER U/S.143(3). HE SUB MITTED THAT THE AO HAS COMPLETED THE ASSESSMENT AFTER EXAMINATION OF THE ISSUE AND THEREFORE IT CANNOT BE SAID THAT THE AO DURING THE ORIGINAL ASSESSMENT PRO CEEDINGS DID NOT EXAMINE THIS ISSUE. SINCE THE AO AFTER DUE EXAMINATION OF THE I SSUE HAS ALLOWED THE CLAIM OF ROYALTY AS REVENUE EXPENDITURE, THEREFORE, ISSUE O F NOTICE U/S.147 ON THE SAME ISSUE AMOUNTS TO CHANGE OF OPINION WHICH IS NOT PERMISSIB LE IN LAW AND IN VIEW OF PLETHORA OF DECISIONS FILED IN THE PAPER BOOK. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE CIT(A) BEING IN ACCORDANCE WITH LAW HA S TO BE UPHELD. 6 8. REFERRING TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF HARYANA ACRYLIC MANUFACTURING COMPANY VS. CIT AND A NOTHER REPORTED IN 308 ITR 38 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD THAT WHEN THERE IS NO WHISPER IN THE REASONS SUPPLIED TO ASSESSEE THAT INCOME HAS ESCAPED ASSESSMENT BY REASON OF ASSESSEES FAILURE TO MAKE FULL AND TRUE DISCLOSURE OF ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT, NOT ICE U/S. 148 ISSUED BEYOND 4 YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR WAS BARRED BY LIMITATION UNDER PROVISO TO SECTION 147. IT HAS FURTHER BEEN HELD IN THE SAID DECISION THAT AO WHILE MAKING ASSESSMENT U/S.143(3) HAVING MADE SPECIFIC QUERIES WITH REGARD TO SHARE APPLICATION MONEY IN RESPONSE TO WHICH THE ASSESSEE FURNISHED ALL RELEVANT DOCUMENTS AND AFTER CONSIDERING THIS MATERIAL, AO H AVING COMPLETED THE ASSESSMENT, IT COULD NOT BE SAID THAT INCOME HAS ES CAPED ASSESSMENT ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. ACCORDINGLY IT WAS HELD THAT RE-OPENING OF ASSESSMENT AFTER EXPIRY OF 4 YEARS FROM THE END OF THE RELEVAN T ASSESSMENT YEAR WAS INVALID. HE SUBMITTED THAT THIS DECISION BEING A LATER DECIS ION, MUCH AFTER THE DECISION IN THE CASE OF BAWA ABHAI SINGH (SUPRA), THEREFORE, TH E SAME IS APPLICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE PARTIES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER B OOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECI SIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSMENT YEAR INV OLVED IN THE INSTANT CASE IS 2002- 03 AND THE ORIGINAL ASSESSMENT ORDER U/S.143(3) WA S PASSED ON 22-03-2005. WE FIND THE AO ISSUED NOTICE U/S.148 ON 17-03-2009 ON THE GROUND THAT THE ROYALTY EXPENSES IS CAPITAL IN NATURE AND CANNOT BE ALLOWED AS REVENUE EXPENDITURE. SINCE THE ASSESSEE HAS PAID RS.74,69,755/- TO M/S. CARRAR O SPA, ITALY AS ROYALTY PAYMENT, THEREFORE, THE SAME IS NOT ALLOWABLE AS REVENUE EXP ENDITURE. IT IS THE ALLEGATION OF 7 THE AO THAT BECAUSE OF THE FAILURE ON THE PART OF T HE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT I NCOME HAS ESCAPED ASSESSMENT FOR WHICH HE HAS ISSUED NOTICE U/S.148. WE FIND THE LE ARNED CIT(A) HELD THE REOPENING OF THE ASSESSMENT TO BE INVALID ON THE GR OUND THAT (A) THE ASSESSMENT HAS BEEN REOPENED ON THE BASIS OF SAME MATERIAL WHICH W AS AVAILABLE AT THE TIME OF ORIGINAL PROCEEDINGS AND TAKING A DIFFERENT VIEW AT A LATER STAGE AMOUNTS TO MERE CHANGE OF OPINION AND (B) THE ASSESSMENT WAS MADE U /S.143(3) AND THE CASE HAS BEEN REOPENED AFTER THE EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND THE AO HAS NOWHERE ESTABLISHED THAT INCOME HAS ESCAPED ASSESSMENT BECAUSE OF FAILURE ON THE PART OF THE ASSESSEE TO D ISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. 10. IT IS CASE OF THE REVENUE THAT THE REOPENING OF THE ASSESSMENT IS VALID IN VIEW OF THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF BAWA ABHAI SINGH (SUPRA). IT IS THE CASE OF THE ASSESSEE THAT HE HA S SUPPLIED FULL DETAILS DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS AND BASED ON THE DETAILS FILED BY THE ASSESSEE THE AO HAS PASSED THE ORDER ALLOWING THE C LAIM OF THE ASSESSEE. IN ABSENCE OF ANY NEW FACTS AVAILABLE BEFORE THE AO RE OPENING OF THE ASSESSMENT ON THE SAME SETS OF FACTS AMOUNTS TO CHANGE OF OPINION . FURTHER, SINCE THE ORIGINAL ASSESSMENT WAS FRAMED U/S.143(3) DISCUSSING THOROUG HLY THE ISSUE OF ROYALTY AND THE NOTICE HAS BEEN ISSUED AFTER THE PERIOD OF 4 YE ARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, THE PROVISO TO SECTION 147 IS APPL ICABLE AND THE REOPENING IS INVALID. 11. FROM THE DETAILS FURNISHED BY THE ASSESSEE IN T HE PAPER BOOK WE FIND THE ASSESSEE IN THE P&L ACCOUNT (PAPER BOOK PAGE 18) HA S DISCLOSED ROYALTY EXPENSES OF RS. 74,69,755/-. WE FIND THE AUDITORS IN THE TA X AUDIT REPORT HAS DISCLOSED THE PAYMENTS MADE TO PERSONS SPECIFIED U/S.40A(2)(B) (P APER BOOK PAGE 28 READ WITH 8 PAPER BOOK PAGE 39) GIVING DETAILS OF ROYALTY EXPEN SES PAID TO RELATED PARTIES. WE FIND THE ASSESSEE IN THE TPOS REPORT (PAPER BOOK P AGE 64) HAS GIVEN DETAILS OF NATURE OF ROYALTY PAYMENT. WE FIND THE ASSESSEE VI DE LETTER DATED 24-09-2004 ADDRESSED TO THE ADDITIONAL CIT (TPO) HAD GIVEN THE LETTER OF RBI APPROVING FOR TECHNICAL COLLABORATION AND PAYMENT OF ROYALTY AND THE TECHNICAL ASSISTANCE AGREEMENT. SIMILARLY WE FIND THE ASSESSEE VIDE LET TER DATED 01-06-2005 (PAPER BOOK PAGE 80) ADDRESSED TO THE AO HAD GIVEN DETAILS JUSTIFYING ROYALTY EXPENSES. SIMILARLY THE ASSESSEE HAD GIVEN DETAILS JUSTIFYING THE ROYALTY EXPENSES AS PER PAPER BOOK PAGES 82 AND 83. WE FIND AFTER THOROUGH EXAMINATION OF ALL THE DETAILS FILED BY THE ASSESSEE THE AO COMPLETED THE ASSESSME NT U/S. 143(3) ON 22-03-2005. FURTHER, WE FIND PARA 3 OF THE ORIGINAL ASSESSMENT ORDER READS AS UNDER : THE ASSESSEE COMPANY IS A JOINT VENTURE OF CARRARO SPA OF ITALY (51%) AND ESCORT LTD. OF INDIA (49%). THE ASSESSEE COMPANY I S ENGAGED IN THE BUSINESS OF MANUFACTURING OF TRANSMISSIONS , HYDRAU LIC LIFTS. AXLES AND CLUTCHES FOR AGRICULTURAL TRACTORS. AS THE ASSESSE E COMPANY HAD ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED EN TERPRISES, A REFERENCE U/S.92CA OF THE INCOME TAX ACT, 1961 WAS MADE TO TH E ADDITIONAL COMMISSIONER OF INCOME TAX (TRANSFER PRICING OFFICE R) WITH THE PRIOR APPROVAL OF THE COMMISSIONER OF INCOME TAX, DELHI-I , NEW DELHI ACCORDED VIDE HIS LETTER F.NO. CIT/2004-05/446, DATED 25-06- 2004. THE ADDITIONAL COMMISSIONER OF INCOME TAX, TRANSFER PRICING OFFICE R-1, NEW DELHI VIDE HIS ORDER DATED 18-02-2005 PASSED U/S.93CA(3) OF TH E INCOME TAX ACT, 1961, A COPY OF WHICH HAS BEEN ENDORSED TO THIS OFF ICE, HAS DETERMINED THE ARMS LENGTH PRICE IN RESPECT OF THE INTERNATION AL TRANSACTIONS ENTERED BY THE ASSESSEE WITH ITS ASSOCIATED ENTERPRISES DUR ING THE FINANCIAL YEAR 2001-02 RELEVANT TO ASSESSMENT YEAR 2002-03 AS DECL ARED BY THE ASSESSEE COMPANY. 12. WE FIND THE PROVISIONS OF SECTION 147 READ AS U NDER : [ INCOME ESCAPING ASSESSMENT] 147. IF THE [ASSESSING] OFFICER [HAS REASON TO BELIEVE] THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153 , ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN THIS SECTIO N AND IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR) : 9 PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE T O MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) O F SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR HIS ASSESSMENT, FOR THAT ASSESSMENT YEAR: [PROVIDED FURTHER THAT NOTHING CONTAINED IN THE FIRST PROVISO SHALL APPLY IN A CASE WHERE ANY INCOME IN RELATION TO ANY ASSET (INCLUDING FINA NCIAL INTEREST IN ANY ENTITY) LOCATED OUTSIDE INDIA, CHARGEABLE TO TAX, HAS ESCAPED ASSES SMENT FOR ANY ASSESSMENT YEAR: ] [ PROVIDED [ALSO] THAT THE ASSESSING OFFICER MAY ASSESS OR REASSESS S UCH INCOME, OTHER THAN THE INCOME INVOLVING MATTERS WHICH ARE THE SUB JECT MATTERS OF ANY APPEAL, REFERENCE OR REVISION, WHICH IS CHARGEABLE TO TAX AND HAS ESC APED ASSESSMENT.] EXPLANATION 1.PRODUCTION BEFORE THE ASSESSING OFFI CER OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD WITH DU E DILIGENCE HAVE BEEN DISCOVERED BY THE ASSESSING OFFICER WILL NOT NECESSARILY AMOUNT T O DISCLOSURE WITHIN THE MEANING OF THE FOREGOING PROVISO. EXPLANATION 2.FOR THE PURPOSES OF THIS SECTION, TH E FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED AS SESSMENT, NAMELY : (A) WHERE NO RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR THE TOTAL INCOME OF ANY OTHER PERSON IN R ESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT DURING THE PREVIOUS YEAR EXCEEDED TH E MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME-TAX ; (B) WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED BY THE ASSESSING OFFICE R THAT THE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION , ALLOWANCE OR RELIEF IN THE RETURN ; [ (BA) WHERE THE ASSESSEE HAS FAILED TO FURNISH A REP ORT IN RESPECT OF ANY INTERNATIONAL TRANSACTION WHICH HE WAS SO REQUIRED UNDER SECTION 92E ; ] (C) WHERE AN ASSESSMENT HAS BEEN MADE, BUT (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDERASSESSED ; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW A RAT E ; OR (III) SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCE SSIVE RELIEF UNDER THIS ACT ; OR (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR AN Y OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED;] [ (D) WHERE A PERSON IS FOUND TO HAVE ANY ASSET (INCL UDING FINANCIAL INTEREST IN ANY ENTITY) LOCATED OUTSIDE INDIA. ] [EXPLANATION 3.FOR THE PURPOSE OF ASSESSMENT OR RE ASSESSMENT UNDER THIS SECTION, THE ASSESSING OFFICER MAY ASSESS OR REASSESS THE INCOME IN RESPECT OF ANY ISSUE, WHICH HAS ESCAPED ASSESSMENT, AND SUCH ISSUE COMES TO HIS NOT ICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, NOTWITHSTANDING THA T THE REASONS FOR SUCH ISSUE HAVE NOT BEEN INCLUDED IN THE REASONS RECORDED UNDER SUB-SEC TION (2) OF SECTION 148 .] [ EXPLANATION 4.FOR THE REMOVAL OF DOUBTS, IT IS HER EBY CLARIFIED THAT THE PROVISIONS OF THIS SECTION, AS AMENDED BY THE FINANCE ACT, 2012, SHALL ALSO BE APPLICABLE FOR ANY ASSESSMENT YEAR BEGINNING ON OR BEFORE THE 1ST DAY OF APRIL, 2012. ] 10 FROM THE ABOVE IT IS CLEAR THAT WHERE AN ASSESSMENT HAS BEEN MADE U/S.143(3) NO ACTION SHALL BE TAKEN U/S.147 AFTER THE EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DI SCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR COMPLETION OF THE ASSESSMENT. SINCE IN THE INSTANT CASE THE ASSESSEE HAS SUPPLIED FULL DETAILS DURING THE COURS E OF ORIGINAL ASSESSMENT PROCEEDINGS AND SINCE THE NOTICE HAS BEEN ISSUED AF TER EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, THEREFORE, PRO VISO TO SECTION 147, IN OUR OPINION, IS CLEARLY APPLICABLE TO THE ASSESSEE. TH EREFORE, THE REOPENING PROCEEDING INITIATED BY THE AO IN OUR OPINION IS INVALID. 13. SO FAR AS THE DECISION RELIED ON BY THE REVENUE IN THE CASE OF BAWA ABHAI SINGH (SUPRA) WE FIND THE SAME IS DISTINGUISHABLE A ND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE SINCE THE SAME WAS UNDER A WRIT PE TITION AND THE ISSUE OF REOPENING OF THE ASSESSMENT AFTER A PERIOD OF 4 YEARS IN A SC RUTINY ASSESSMENT CASE WAS NOT THERE. IN OUR OPINION THE LATER DECISION OF THE HO NBLE DELHI HIGH COURT IN THE CASE OF HARYANA ACRYLIC MANUFACTURING COMPANY (SUPRA) IS APPLICABLE. IT HAS BEEN HELD IN THE SAID DECISION THAT THE AO WHILE MAKING ASSESSMENT U/S.143(3) HAVING MADE SPECIFIC QUERIES WITH REGARD TO SHARE APPLICAT ION MONEY, IN RESPONSE TO WHICH THE ASSESSEE FURNISHED ALL RELEVANT DOCUMENTS AND A FTER CONSIDERING THIS MATERIAL AO HAVING COMPLETED THE ASSESSMENT, IT COULD NOT BE SAID THAT INCOME HAS ESCAPED ASSESSMENT ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. ACCORDINGLY IT WAS HELD THAT RE- OPENING OF ASSESSMENT AFTER EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR WAS INVALID. 14. IN THIS VIEW OF THE MATTER AND IN VIEW OF THE D ETAILED DISCUSSION BY THE CIT(A) ON THIS ISSUE WE FIND NO INFIRMITY IN THE O RDER OF THE CIT(A) HOLDING THE 11 RE-ASSESSMENT PROCEEDINGS AS INVALID. ACCORDINGLY THE SAME IS UPHELD. THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 15. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 23 RD DAY OF AUGUST 2012 SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: THE 23RD AUGUST 2012 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-VI, NEW DELHI 4. THE D.R, B PUNE BENCH 5. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE