Deputy Commissioner of Income-tax, V. Weikfield Products Co. (I) Pvt. Ltd., Pune

ITA 942/PUN/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7484 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 17-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK AGGARWAL
• Assessee Lawyers: R G NAHAR
• Keywords: Business expenditure; Audit objection; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 37(1); 148; 37; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 942 /P U N/201 5 / ASSESSMENT YEAR : 20 07 - 08 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 12, PUNE . / APPELLANT VS. WEIKFIELD PRODUCTS CO. (I) PVT. LTD., D BLOCK, 9 TH FLOOR, WEIKFIELD IT CITI INFOPARK, NAGAR ROAD, PUNE 411014 . / RESPONDENT PAN: AAACW1865A / APPELLANT BY : SHRI VIVEK AGGARWAL / RESPONDENT BY : SHRI R.G. NAHAR / DATE OF HEARING : 0 9 .0 8 . 2017 / DATE OF PRONOUNCEMENT: 31 . 0 8 .201 7 / ORDER PER SUSHMA CHOWLA, J M : TH E APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF CIT (A) - 5 , PUNE , DATED 17 .0 3 .201 5 RELATING TO ASSESSMENT YEAR 20 07 - 08 AGAINST ORDER PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. ON THE FACTS AND CIRCUMSTANCE OF THE CASE, THE LD. CIT(A) ERRED IN HOLDING THAT THE NOTICE U/S. 148 ISSUED BY THE ASSESSING OFFICER WAS BAD IN L AW. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. C I T(A) ERRED IN HOLDING THAT THE NOTICE ISSUED UNDER SECTION 148 BY THE ASSESSING ITA NO. 942 /P U N/20 1 5 WEIKFIELD PRODUCTS CO. (I) PVT. LTD. 2 OFFICER WAS ON ACCOUNT OF A CHANGE OF OPINION AND FAILED TO APPRECIATE THAT THE NOTICE WAS ISSUED ON THE BASIS OF A N INDEPENDENT OPINION OF ESCAPEMENT OF INCOME CHARGEABLE TO TAX. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN HOLDING THAT THE ISSUES DECIDED BY THE ASSESSING OFFICER IN THE REASSESSMENT PROCEEDINGS WERE UNDER APPEAL BEFORE THE HO N'BLE ITAT. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ID. CIT(A) ERRED IN DELETING THE DISALLOWANCE U/S. 37 OF THE IT ACT AND OUGHT TO HAVE CONFIRMED THE DISALLOWANCE TO THE EXTENT OF RS.56,14,521/ - AS THE SAME IS NOT EXPENDED WHOLLY AND EXCLUSI VELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE AND THE SAME IS ON ACCOUNT OF ADMINISTRATIVE EXPENSES IN RESPECT OF THE REAL ESTATE AND INVESTMENT BUSINESS OF THE AOP WHEREIN THE ASSESSEE IS A MEMBER . 5. THE ORDER OF THE L D. C I T(A) BE VACATED ON THES E ISSUES AND THAT OF AO BE RESTORED. 3. THE PRESENT APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) IN HOLDING THAT THE NOTICE ISSUED UNDER SECTION 148 OF THE ACT WAS BAD IN LAW. THE REVENUE IS ALSO IN APPEAL AGAINST THE ORDER OF CIT(A) IN DEL ETING DISALLOWANCES MADE UNDER SECTION 37(1) OF THE ACT. FIRST OF ALL, WITHOUT GOING INTO MERITS OF THE CASE, WE TAKE UP JURISDICTIONAL ISSUE RAISED IN THE PRESENT APPEAL I.E. EXERCISE OF POWER BY THE ASSESSING OFFICER UNDER SECTION 147 OF THE ACT. 4. BR IEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE HAD FILED THE RETURN OF INCOME CLAIMING DEDUCTION UNDER SECTION 80IC OF THE ACT. THE ORIGINAL ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 17.12.2009, WHEREIN THE CLAIM OF DEDUCTION UNDER SECTIO N 80IC OF THE ACT WAS RESTRICTED. THE AUDIT PARTY VIDE ITS REPORT DATED 07.06.2010 RAISED TWO ISSUES I.E. THE ASSESSEE HAD FAILED TO ENCLOSE THE AUDIT REPORT FOR CLAIMING THE DEDUCTION UNDER SECTION 80IC OF THE ACT ALONG WITH RETURN OF INCOME AND NON - BUSI NESS EXPENDITURE OF RS.56.14 LAKHS WAS TO BE DISALLOWED UNDER SECTION 37(1) OF THE ACT. THEREAFTER, THE COMMISSIONER EXERCISED THE JURISDICTION UNDER S ECTION 263 OF THE ACT AND ISSUED NOTICE TO THE ASSESSEE ON 09.07.2010. THE ASSESSEE FILED THE REPLY ON 30.07.2010. THEREAFTER, THE COMMISSIONER PASSED AN ORDER UNDER SECTION 263 OF THE ACT ON 27.01.2012 AND SET ASIDE BOTH THE ISSUES TO THE ITA NO. 942 /P U N/20 1 5 WEIKFIELD PRODUCTS CO. (I) PVT. LTD. 3 FILE OF ASSESSING OFFICER. THEREAFTER, THE ASSESSING OFFICER ON 30.03.2012 ISSUE D NOTICE UNDER SECTION 147 OF THE ACT RECORDING REASONS FOR REOPENING THE ASSESSMENT ON BOTH THE ISSUES I.E. NON - FILING THE REQUISITE CERTIFICATE ALONG WITH RETURN OF INCOME FOR CLAIMING THE DEDUCTION UNDER SECTION 80IC OF THE ACT AND ALSO NON - ALLOWANCE OF NON - BUSINESS EXPENDITURE OF RS.56.14 LAKHS UNDER SECTION 37(1) OF THE ACT. 5. THE PLEA OF THE ASSESSEE BEFORE US IS THAT WITHOUT TAKING COGNIZANCE OF PROCEEDINGS COMPLETED UNDER SECTION 263 OF THE ACT, WHEREIN THE ISSUES WERE SET ASIDE TO THE FILE OF ASSESSING OFFICER, NO ORDER WAS PASSED UNDER SECTION 143(3) R.W.S. 263 OF THE ACT. HOWEVER, THE ASSESSMENT ORDER WAS PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT, WHICH WAS BEYOND THE POWERS OF ASSESSING OFFICER IN THE GIVEN FACTS AND CIRCUMSTANCES. 6. THE LEARNED DEPARTMENTAL REPRESE NTATIVE FOR THE REVENUE PLACING RELIANCE ON THE ORDERS OF AUTHORITIES BELOW COULD NOT CONTROVERT THE SERIES OF EVENTS IN THE CASE OF ASSESSEE. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE IS AGGRIEVED BY THE EXERCISE OF JUR ISDICTION BY THE ASSESSING OFFICER UNDER SECTION 147 OF THE ACT. THE ASSESSEE HAD FURNISHED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.83,70,023/ - ON 11.09.2007 . THE BOOK PROFIT WAS SHOWN AT RS.2.99 CRORES AND THE TAXES WERE PAID AS PER BOOK PROFI TS. THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMPLETED ON 17.12.2009 AND THE ISSUE OF CLAIM OF EXCLUSION OF SHARE OF PROFIT OF AOP AMOUNTING TO RS.31.49 CRORES FROM THE BOOK PROFITS WAS NOT ACCEPTED BY THE ASSESSING OFFICER. AS A RESULT OF WHIC H, THE BOOK PROFITS WERE DETERMINED AT RS.35.05 CRORES. THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A), WHO DISMISSED THE CLAIM OF ITA NO. 942 /P U N/20 1 5 WEIKFIELD PRODUCTS CO. (I) PVT. LTD. 4 ASSESSEE AND THEREAFTER, AN APPEAL WAS FILED BEFORE THE TRIBUNAL. IT MAY BE POINTED OUT HEREIN ITSELF THAT THE TRIBUNAL IN ASSESSEES OWN CASE IN CROSS APPEALS IN ITA NO.1416/PUN/2011 AND 1452/PUN/2011, RELATING TO ASSESSMENT YEAR 2007 - 08 , ITA NO.2365/PUN/2012, RELATING TO ASSESSMENT YEAR 2009 - 10 AND ITA NO.528/PUN/2015, RELATING TO ASSESSMENT YEAR 2010 - 11 , VIDE ORDER DATED 30 .06.2017 HAS ALLOWED THE CLAIM OF ASSESSEE IN THIS REGARD. WITHOUT GOING INTO MERITS OF THE SAME, THE LIST OF EVENTS IN THE CASE OF ASSESSEE WERE THAT THE AUDIT OBJECTIONS WERE RAISED BY THE AUDIT PARTY VIDE LETTER DATED 07.06.2010 WHICH WERE AGAINST THE CLAIM OF DEDUCTION MADE UNDER SECTION 80IC OF THE ACT, THAT THE ASSESSEE HAD NOT FURNISHED THE REQUISITE AUDITORS REPORT ALONG WITH RETURN OF INCOME BUT HAD FILED THE SAME DURING ASSESSMENT PROCEEDINGS. THE NEXT OBJECTION RAISED BY THE AUDIT PARTY WAS TH E ALLOWABILITY OF CERTAIN EXPENDITURE UNDER SECTION 37(1) OF THE ACT. CONSEQUENT THERETO, THE COMMISSIONER OF INCOME TAX - IV, PUNE ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE UNDER SECTION 263 OF THE ACT ON 09.07.2010 RAISING BOTH THE ISSUES AS POINTED OUT BY THE AUDIT PARTY. THE ASSESSEE FILED A REPLY BEFORE THE COMMISSIONER ON 30.07.2010. THE COMMISSIONER VIDE ORDER DATED 27.01.2012, VIDE PARA 11 HELD AS UNDER: - 11. I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE ASSESSEE IN THE LIGHT OF THE FACTS OF TH E CASE AND I AM NOT INCLINED TO ACCEPT THE CONTENTION OF THE ASSESSEE THAT THE PROVISIONS OF SECTION 263 ARE NOT ATTRACTED IN ITS CASE. IT IS CLEARLY BORNE OUT OF THE RECORDS THAT THE ASSESSING OFFICER HAS NOT CONDUCTED ANY INQUIRY IN RESPECT OF THE ISSUE S MENTIONED HEREINABOVE. THE FAILURE ON THE PART OF THE ASSESSING OFFICER IN DEALING WITH THE AFORESAID ISSUES BY MAKING NECESSARY INQUIRIES HAS RESULTED IN FRAMING OF AN ASSESSMENT ORDER , WHICH IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. I, THEREFORE, BY INVOKING THE PROVISIONS OF SECTION 263 OF THE I.T. ACT, SET ASIDE THE ORDER UNDER SECTION 143(3) DATED 17.12.2009, TO BE PASSED AFRESH. 8. THE COMMISSIONER THUS, BY EXERCISING HIS POWERS UNDER SECTION 263 OF THE ACT SET ASID E THE ORDER PASSED UNDER SECTION 143(3) OF THE ACT DATED 17.12.2009 TO BE PASSED AFRESH. CONSEQUENT THERETO, THE ASSESSING OFFICER HAS TO PASS AN ORDER GIVING EFFECT TO THE REVISIONAL JURISDICTION EXERCISED BY THE COMMISSIONER UNDER SECTION 263 OF THE ACT . HOWEVER, NO SUCH ORDER HAS BEEN ITA NO. 942 /P U N/20 1 5 WEIKFIELD PRODUCTS CO. (I) PVT. LTD. 5 PASSED BY THE ASSESSING OFFICER. ON THE OTHER HAND, THE ASSESSING OFFICER ISSUES NOTICE UNDER SECTION 148 OF THE ACT ON 30.03.2012 , WITHOUT TAKING ANY COGNIZANCE OF ORDER PASSED UNDER SECTION 263 OF THE ACT AND RECORDS R EASONS FOR REOPENING THE ASSESSMENT ON THE SAME ISSUE AS BEFORE THE COMMISSIONER UNDER SECTION 263 OF THE ACT. THEREAFTER, THE ORDER WAS PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT ON 28.03.2013. WE HOLD THAT THE SAID ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS INVALID IN LAW AS THE ASSESSING OFFICER HAD NO POWER TO EXERCISE HIS JURISDICTION UNDER SECTION 147 OF THE ACT AND THEREAFTER COMPLETE THE ASSESSMENT, WHERE THE COMMISSIONER HAD ALREADY PASSED THE ORDER UNDER SECTION 263 OF THE ACT AN D SET ASIDE THE ISSUE S BACK TO THE FILE OF ASSESSING OFFICER WHICH WAS PENDING AND NO COGNIZANCE OF THE SAME WAS TAKEN. DURING THE COURSE OF HEARING, IT WAS PUT TO THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE AS TO WHETHER ANY EFFECT OF THE ORD ER PASSED UNDER SECTION 263 OF THE ACT HAS BEEN GIVEN TILL DATE AND THE REPLY OF THE SAME WAS IN NEGATIVE AND T HE TIME LIMIT TO COMPLETE THE CONSEQUENT PROCEEDINGS, IN VIEW OF THE DIRECTIONS OF THE COMMISSIONER UNDER SECTION 263 OF THE ACT HAVE LAPSED. 9. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF ADOR TECHNOPACK LTD. DR. ZAKIR HUSSAIN, DY.CIT REPORTED IN 271 ITR 50 (BOM) HAD HELD THAT ONCE THE ISSUE IS SUBJECT MATTER OF REVISION UNDER SECTION 263 OF THE ACT, THEN DURING PENDENCY OF SUCH REVISIONARY PR OCEEDINGS, ISSUANCE OF NOTICE OF RE - ASSESSMENT PROCEEDINGS, HAS TO BE CONSIDERED AS BAD IN LAW. THE RELEVANT OBSERVATIONS OF THE HONBLE HIGH COURT IN THE WRIT PETITION FILED BY THE ASSESSEE READS AS UNDER: - 'THE WORDS 'REASON TO BELIEVE' CONVEY HONEST RA TIONAL BELIEF OF A REASONABLE MAN BASED ON COGENT REASONS ENTERTAINED IN GOOD FAITH. THE QUESTION THAT ARISES WOULD BE WHETHER THIS CONCEPT CAN BE INVOKED IN A CASE WHERE CONCLUSIVE AND FINAL FINDINGS ARE RECORDED BY THE HIGHER COURT OR TRIBUNAL OR FORUM C ONCLUSIVELY HOLDING HAPPENING OF A PARTICULAR EVENT. OBVIOUSLY, THE ITA NO. 942 /P U N/20 1 5 WEIKFIELD PRODUCTS CO. (I) PVT. LTD. 6 ANSWER HAS TO BE IN THE NEGATIVE. S IMILARLY, IN THE INS TANT CASE, WHEN THE COMMISSIONER VIDE HIS ORDER PASSED UNDER SECTION 263, HAD SET ASIDE THE ORIGINAL ASSESSMENT AND HAD DIRECTED THE ASSESSING OFFICER TO REFRAME THE ASSESSMENT ON THE ISSUE OF ALLOWANCE OF DEPRECIAT ION, AFTER EXAMINING ALL THE FACTS OF THE CASE AND AFTER PROVIDING OPPORTUNITY OF HEARING TO THE ASSESSEE, IT COULD NOT BE SAID THAT THE INCOME HAD ESCAPED ASSESSMENT. WHEN THE RE ASSESSMENT PROCEEDINGS, PURSUANT TO THE ORDER OF THE COMMISSIONER, WERE PENDING AND THE ASSESSING OFFICER WAS ENTITLED TO EXAMINE ALL THE ASPECTS OF THE MATTER ON THE ISSUE OF ALLOWANCE OF DEPRECIAT I ON, THE QUESTION OF INCOME ESCAPING ASSESSMENT DID NOT ARISE AND, CONSEQUENTLY, THE QUESTION OF REOPENING THE ASSESSMENT ON THE GR OUND THAT THE ASSESSING OFFICER HAD REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT DID NOT ARISE AT ALL. 10. ACCORDINGLY, WE UPHOLD THE ORDER OF CI T(A) IN THIS REGARD, IN TURN, RELYING ON THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF ADOR TECHNOPACK LTD. DR. ZAKIR HUSSAIN, DY.CIT (SUPRA) . THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE THUS, DISMISSED. 11 . IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 31 ST DAY OF AUGUST , 201 7 . SD/ - SD/ - (ANIL CHATURVEDI ) (SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 31 ST AUGUST , 201 7 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - 5 , PUNE ; 4. / THE PR. CIT - 4 , PUNE ; 5. , , / DR B , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE