DCIT, Hyderabad V. M/s Suryalakshmi Cotton Mills Ltd., Secunderabad

ITA 879/HYD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59212 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 25-05-2011
• Assessment Year: 1999-2000
• Appeal Filed On: 11-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K MYTHILI RANI
• Assessee Lawyers: SIVA KUMAR
• Keywords: Reopening of assessment; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Revenue expenditure
• Section: 43B; 143(3); 80HHC; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, AM & SMT. ASHA VIJAYARAGHAVAN, JM ITA NO. 879 & 880/HYD/2010 ASSESSMENT YEARS 1999-2000 & 2000-01 THE DCIT, CIRCLE 3(2), RANGE -3, HYDERABAD VS M/S SURYA JYOTHI SPINNING MILLS LTD., SECUNDERABAD. (PAN AAQDCS0822L) APPELLANT RESPONDENT APPELLANT BY : SMT. K. MYTHILI RANI RESPONDENT BY : SHRI SIVAKUMAR DATE OF HEARING : 11.1.2012 DATE OF PRONOUNCEMENT : ORDER PER ASHA VIJAYARAGHAVAN, JM . THESE TWO APPEALS PREFERRED BY THE REVENUE ARE DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A), TI RUPATHI, DATED 3.3.2010 AND THEY PERTAIN TO THE ASSESSMENT YEARS 1999-2000 & 2000-2001. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A PUBLIC LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACT URE AND SALE OF COTTON/BLENDED YARD. FOR THE ASSESSMEN T YEAR 1999-2000, THE ASSESSEE FILED ITS RETURN OF INCOME ON 31.12.1999 DECLARING LOSS OF RS.13,75,18,621/-. TH E ASSESSMENT WAS COMPLETED ON 22.3.2002 U/S 143(3) DETERMINING LOSS AT RS.13,43,57,496/-. SUBSEQUENTL Y, ITA 879 & 880/H/2010 SURYA JYOTHI SPINNING MILLS, S BAD. 2 NOTICE DATED 27.3.2006 WAS ISSUED U/S 148 OF THE AC T STATING THAT THE INCOME CHARGEABLE TO TAX FOR THE ASSESSMENT YEAR 1999-2000 HAS ESCAPED THE ASSESSMEN T WITHIN THE MEANING OF THE SECTION 147 OF THE ACT. IN RESPONSE, THE ASSESSEE FILED A LETTER REQUESTING TH AT THE RETURN OF INCOME FILED ON 31.12.1999 MAY BE TAKEN A S RETURN FILED IN RESPONSE TO THE NOTICE ISSUED U/S 1 48 OF THE ACT. 3. ON FURTHER APPEAL BEFORE THE CIT(A), IT WAS ARG UED THAT THE REOPENING OF THE ASSESSMENT WAS ONLY DUE T O CHANGE OF OPINION AS NO INFORMATION HAD COME INTO T HE POSSESSION OF THE ASSESSING OFFICER AFTER THE ORIGI NAL ASSESSMENT WAS COMPLETED. FURTHER, IT WAS SUBSTAN TIATED THAT THE REOPENING U/S 147 IS BAD IN LAW AS THE OR IGINAL ASSESSMENT WAS COMPLETED U/S 143(3) AS PER PROVISO -1 U/S 147 AND THE ASSESSMENT CANNOT BE REOPENED BEYOND 31.3.2004. 3.1. THE LEARNED COUNSEL RELIED ON THE DECISION ON THE FOLLOWING CASES: 1. CIT VS. FORAMER FRANCE (264 ITR 566) (SC) 2. MAHALAKSHMI MOTORS LTD. VS. DCIT (265 ITR 553) (AP) 4. THE CIT(A) HELD AS FOLLOWS: SINCE THE ORIGINAL ASSESSMENT IS ALREADY CONSIDERE D U/S 143(3) AND ALL THE FACTS RELATING TO THE ADDITI ONS WHICH HAVE BEEN CARRIED OUT IN THE REOPENED ASSESSMENT, WERE ALREADY PLACED BEFORE THE ASSESSIN G ITA 879 & 880/H/2010 SURYA JYOTHI SPINNING MILLS, S BAD. 3 OFFICER AND NO ADDITIONS HAVE BEEN CARRIED OUT IN T HE ORIGINAL ASSESSMENT. HENCE, THE REOPENING OF THE ASSESSMENT U/S 147 BEYOND 31.3.2004 IS HELD BAD IN LAW. BESIDES, THE MATERIAL FOR THE ADDITIONS CARRI ED OUT HAS ALREADY BEEN PLACED BEFORE AND CONSIDERED BY TH E ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT. HENC E, IT IS ONLY A CHANGE OF OPINION. THUS THE REOPENING IS HELD TO BE NULL AND VOID AND THE ASSESSMENT IS ANNULLED. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVE NUE IS IN APPEAL BEFORE US AND SUBMITTED THAT THE CIT(A) O UGHT TO HAVE UPHELD ACTION OF THE ASSESSING OFFICER IN REOP ENING THE ASSESSMENT. 6. THE DR RELIED ON THE ORDER OF THE ASSESSING OFF ICER. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE POINTED OUT THAT IN THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT U/S 147, THE REOPENING WAS BECAUSE THE ASSESSEE COMPANY MADE TOTAL REPLACEMENT OF ASSEMBL Y AND RINGS TO RING FRAMES INCURRING A TOTAL EXPENDITU RE OF RS.75,09,801/-. THE ASSESSEE TREATED THIS AS DEFER RED REVENUE EXPENDITURE AND WRITTEN OFF ONLY 1/10 TH OF IT IN THE BOOKS, WHEREAS FOR INCOME TAX PURPOSE, THE ENTIRE EXPENDITURE IS CLAIMED AS DEDUCTION. THE ASSESSEE CANNOT FOLLOW ONE METHOD FOR ITS BOOKS AND OTHER FOR INCOM E TAX PURPOSE. 8. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI SIVAK UMAR ARGUED THAT A NOTE ON DEFERRED REVENUE EXPENDITURE HAD BEEN PLACED BEFORE THE ASSESSING OFFICER DURING THE ITA 879 & 880/H/2010 SURYA JYOTHI SPINNING MILLS, S BAD. 4 ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT AND TH E ASSESSING OFFICER HAD APPLIED HIS MIND ON THE SAME. THE OTHER REASON FOR REOPENING OF ASSESSMENT U/S 147 OF THE ACT AS POINTED OUT BY THE DR WAS THAT WHILE COMPUTING T HE TAXABLE INCOME, AN AMOUNT WAS ADDED U/S 43B WHICH INCLUDES AN AMOUNT OF RS.8,16,541/- TOWARDS EXCISE DUTY. AS PER NOTE NO.16, SCHEDULE 24 OF THE NOTES AND BOO KS OF ACCOUNTS, THE ASSESSEE DID NOT ACCOUNT FOR THE EXCI SE DUTY OF RS.1,17,82,670/- PAYABLE ON CLOSING STOCK OF FIN ISHED GOODS FOR THE PURPOSE OF INVENTORY VALUATION WHICH WAS TO BE ACCOUNTED FOR U/S 145A AND THE AMOUNT REMAINED UNPAID BEFORE FILING OF THE RETURN WAS NOT OFFERED U/S 43B. 9. THE COUNSEL REPLIED THAT AT PAGE 8 OF THE PAPER BOOK PERTAINING TO ITEM 16 SCHEDULE 24 IT WAS EMPHASISED AS FOLLOWS: EXCISE DUTY OF RS.1,17,82,670/- (PREVIOUS YEAR RS.24,36,688/- ) RELATING TO THE STOCKS OF FINISHED GOODS HAS NOT BEEN PROVIDED IN THE BOOKS OF ACCOUNT S AND HENCE NOT CONSIDERED FOR THE PURPOSE OF INVENTO RY VALUATION, BECAUSE THE EXCISE DUTY IS PAID ONLY AS AND WHEN THE GOODS ARE CLEARED FROM THE FACTORY. HOWEVER, THIS DOES NOT HAVE ANY EFFECT ON THE LOSS OF THE YEAR 10. WE HAVE HEARD BOTH THE PARTIES. WE ARE OF THE OPINION THAT ALL THE MATERIALS WERE PLACED BEFORE T HE ASSESSING OFFICER WHO HAD THOROUGHLY EXAMINED AND P ASSED AN ORDER U/S 143(3) AND THE REOPENING OF ASSESSMENT U/S 147 HAS BEEN DONE MERELY ON A CHANGE OF OPINION. T HE SC ITA 879 & 880/H/2010 SURYA JYOTHI SPINNING MILLS, S BAD. 5 AFFIRMED DECISION AT 320 ITR 561 (SC) IN THE CASE OF KELVINATOR WHEREIN IT HAS BEEN HELD AS FOLLOWS: THE CONCEPT OF CHANGE OF OPINION ON THE PART OF TH E AO TO REOPEN AN ASSESSMENT DOES NOT STAND OBLITERATED AFTER THE SUBSTITUTION OF THE SECTION 147 OF THE IT ACT, 1961, BY THE DIRECT TAX LAWS (AMENDMENT) ACTS, 1987 AND 1989. AFTER THE AMENDMENT, THE AO HAS TO HAVE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, BUT THIS DOES NOT IMPLY THAT THE AO CAN REOPEN AN ASSESSMENT ON MERE CHANGE OF OPINION. THE CONCEPT OF CHANGE OF OPINION MUST BE TREATED AS AN IN BUILT TEST TO CHECK THE ABUSE OF P OWER. HENCE AFTER APRIL, 1 1989, THE AO HAS POWER TO REOP EN AN ASSESSMENT PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASON MUST HAVE A LINK WITH THE FORMATION OF THE BELIEF. 11. RESPECTFULLY FOLLOWING THE RATIO AS LAID DOWN BY THE DECISION OF THE HONBLE APEX COURT WE DISMISS THE REVENUE APPEAL IN ITA NO.879/HYD/2010. 12. NOW WE WILL TAKE UP THE APPEAL IN ITA NO.880/H/2010, FOR THE ASSESSMENT YEAR 2000-01. 13. IN THIS CASE THE AR APPEARED IN RESPONSE TO TH E NOTICES AND FILED AN ADDITIONAL GROUND OF APPEAL QU ESTIONING THE REOPENING OF THE ASSESSMENT FOR THE SECOND TIME SINCE ITA 879 & 880/H/2010 SURYA JYOTHI SPINNING MILLS, S BAD. 6 THE SAME ISSUE HAD ALREADY BEEN CONSIDERED U/S 147 IN THE FINANCIAL YEAR 2002-03. 14. HE SUBMITTED THAT THE DCIT CIRCLE 3(1), HYDER ABAD HAS ISSUED A NOTICE U/S 148 DATED 18.2.2002 AND CAL LED FOR DETAILS IN RESPECT OF EXCISE DUTY PAYABLE ON CLOSIN G STOCK, REPLACEMENT OF WORN OUT PARTS OF MACHINERY CLAIMED AS REVENUE EXPENDITURE AND CLAIM U/S 80HHC WHILE COMPUTING THE PROFITS. THE ASSESSEE HAS FURNISHED ALL THE INFORMATION AS REQUIRED BY THE THEN ASSESSING OFFIC ER AND NOTHING HAS BEEN HEARD FROM THE ASSESSING OFFICER THEREAFTER. HE SUBMITTED THAT THE ASSESSEE HAS REC EIVED ANOTHER NOTICE U/S 148 DATED 27.3.2006 AND AN ASSES SMENT WAS MADE BY MAKING THE ADDITIONS OR DISALLOWANCE ON EXCISE DUTY PAYABLE ON CLOSING STOCK, REPLACEMENT O F OLD AND WORN OUT PARTS OF MACHINERY AND RESTRICTING THE CLAIM U/S 80HHC OF THE ACT. THE AR HAS SUBMITTED THAT TH E NOTICE U/S 148 DATED 27.3.2006 IS ILLEGAL AND BAD I N LAW FOR THE REASON THAT A NOTICE WAS ALREADY ISSUED U/S 148 DATED 18.2.2002 WHICH MUST HAVE BEEN EITHER ACCEPTED OR PROCEEDINGS MUST HAVE BEEN DROPPED AFTER CONSIDERIN G ALL THE INFORMATION FILED BY THE ASSESSEE. THUS, HE PL ACED THAT ISSUING ONCE AGAINST NOTICE DATED 27.3.2006 FOR WHI CH NOTICE IS ALREADY ISSUED ON 18.2.2002 IS NOT JUSTIF IED, PROPER, CORRECT AND ILLEGAL. 15. THE CIT(A) REMANDED THE MATTER TO THE ASSESSIN G OFFICER FOR HIS COMMENTS. IN HIS REMAND REPORT, TH E ASSESSING OFFICER STATED THAT THE PROCEEDINGS INITI ATED U/S 147 VIDE NOTICE LETTER DATED 18.2.2002 HAD BEEN DRO PPED BY THE THEN ASSESSING OFFICER. THIS HAS BEEN VERIFIED FROM THE ITA 879 & 880/H/2010 SURYA JYOTHI SPINNING MILLS, S BAD. 7 ORDER SHEET NOTINGS AND THE REASONS RECORDED ON 27. 3.2003. AND AFTER THAT A FRESH PROCEEDINGS U/S 147 WERE INI TIATED ON 24.3.2006. THE ASSESSING OFFICER ALSO DEFENDED THA T ORDER U/S 147 WAS NOT TIME BARRED BY LIMITATION. 16. THE AR RELIED ON THE FOLLOWING CASES: 1. KLM ROYAL DUTCH AIRLINES VS. ACIT (292 ITR 49) (DEL.) 2. TRUSTEES OF H.E.S. THE NIZAMS SUPPLEMENTAL FAMILY TRUST (242 ITR 381) (SC) 17. ON APPEAL BEFORE THE CIT(A), THE AR SUBMITTED THAT THE REASSESSMENT IS NULL AND VOID. 18. THE ASSESSEE ALSO RELIED ON THE FOLLOWING CASE S: 1. NATIONAL THERMAL POWER CORPORATION LTD. VS. CIT ( 229 ITR 383) (SC) 2. CIT VS. DS SCREENS PVT. LTD. (248 ITR 633) BOM. HC) 19. THE CIT(A) HAS HELD AS FOLLOWS: IT IS ACCEPTED BY THE ASSESSING OFFICER THAT A NO TICE U/S 148 HAS BEEN ISSUED IN FEB. 2002 AND THE PROCEE DINGS WERE DROPPED IN MARCH 2003 AFTER CONSIDERING ALL TH E EXPLANATIONS AND MATERIALS FURNISHED BY THE ASSESSE E. HENCE, ISSUING A NOTICE U/S 148 ONCE AGAINST ON THE SAME FACTS AMOUNTS TO CHANGE OF OPINION ONLY. THUS, THE ASSESSING OFFICER IS NOT RIGHT TO ISSUE THE SECOND NOTICE U/S 148 ON THE SAME SET OF FACTS. THE ASSESSING OFFICE R WAS ALSO ITA 879 & 880/H/2010 SURYA JYOTHI SPINNING MILLS, S BAD. 8 BOUND BY LIMITATION AS LAID DOWN U/S 147 AND 151 OF THE ACT. IN THIS GIVEN CASE, THE TIME LIMITATION HAS BEEN CL EARLY VIOLATED AND HENCE THE ISSUING OF NOTICE IN MARCH 2 006 IS CLEARLY BEYOND THE TIME LIMIT PRESCRIBED UNDER THE ACT. IN THIS COUNT ALSO THE NOTICE IS BAD IN LAW. THUS IT IS HE LD THAT THE REOPENING OF THE ASSESSMENT IS BAD IN LAW AND THUS THE REASSESSMENT IS ANNULLED. 20. WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A ). THE ASSESSING OFFICER HAVING ACCEPTED THAT A NOTICE HAS BEEN ISSUED IN FEBRUARY, 2002 AND PROCEEDINGS WERE DROPP ED IN MARCH, 2002 CANNOT ONCE AGAIN ISSUE A NOTICE U/S 1 48 ON THE SAME SET OF FACTS. THIS WILL ONLY AMOUNT TO ME RE CHANGE OF OPINION AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LIMITED (320 ITR 561 ) (SC) AND THEREFORE THE REASSESSMENT IS BAD IN LAW. 21. IN THE RESULT, BOTH THE APPEALS FILED BY THE R EVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON: 25.1.2012 SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 25 TH 2012 COPY FORWARDED TO: 1. THE DCIT, CIRCLE 3(2), ROOM NO.723, HYDERABAD. 2. M/S SURYALAKSHMI SPINNING MILLS LTD., 7 TH FLOOR, SURYA TOWERS, 105, SARDAR PATEL ROAD, SECUNDERABAD. 3. CIT(A) THIRUPATHI 4. THE CIT, HYDERABAD 5. THE DR, ITAT, HYDERABAD NP/