DCIT, CHENNAI V. Harvey Health Care Ltd., CHENNAI

ITA 984/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4490 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 15-04-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: D ANAND
• Keywords: Reopening of assessment; Search and seizure; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 148

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I T.A. NO. 984 /MDS/201 6 / ASSESSMENT YEAR :20 07 - 08 THE DEPUTY COMMISSIONER OF INCOME TAX, C ENTRAL CIRCLE 1( 2 ) , NUNGAMBAKKAM HIGH ROAD, CHENNAI 600 034. VS. M/S. HARVEY HEALTH CARE LTD., OLD NO. 32, NEW NO. 1 2, CONRAN SMITH ROAD, GOPALAPURAM, CHENNAI 8 6 . [PAN: AA A C H9512R ] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI SHIVA SRINIVAS , J CIT / RESPONDENT BY : SHRI D . ANAND , A DVOCATE / DATE OF HEARING : 27 . 0 2 .201 7 / DATE OF P RONOUNCEMENT : 16 . 0 5 .201 7 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF IN COME TAX (APPEALS) 1 8 , C HENNAI DATED 2 0 . 0 1 .201 6 RELEVANT TO THE ASSESSMENT YEAR 20 07 - 08 RAISING TWO EFFECT GROUNDS, VIZ., (I) CANCELLING THE REASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT , 1961 [ ACT IN SHORT] AS WELL AS D ELETING THE ADDITION MADE UNDER SECTION 40(A)(IA) OF THE ACT . I.T.A. NO . 984 /M/ 16 2 3. BRIEF FACTS OF THE CASE ARE THAT T HE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 3 1 . 0 7 .20 07 ADMITTING NIL RETURNED INCOME . THE RETURN FILED BY THE ASSESSEE WAS SELECTED FOR SCRUTINY AND AS SESSMENT U NDER SECTION 143(3) OF THE ACT WAS COMPLETED ON 3 1 . 1 2 .20 09 BY ASSESSING TOTAL INCOME OF THE ASSESSEE AT .72,10,854/ - . THEREAFTER, THE ASSESSING OFFICER WAS OF THE OPINION THAT THE INCOME HAD ESCAPED ASSESSMENT, NOTICE UNDER SECTION 148 OF THE AC T WAS ISSUED AND AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 OF THE ACT WAS COMPLETED BY MAKING ADDITIONS UNDER SECTION 40(A)(IA) OF THE ACT. 4. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD . CIT(A) AND CHALLENGED REOPENING OF ASSESSMENT AS WELL AS ADDITIONS MADE UNDER SECTION 40(A)(IA) OF THE ACT. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) ALLOWED THE APPEAL FILED BY THE ASSESSEE. 5. ON BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. WITH REGARD TO THE REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT, THE LD. DR HAS SUBMITTED THAT THE FORM 3CD WAS NOT AVAILABLE ON RECORD. IN THE ABSENCE OF FORM 3CD REPORT, COMPLIANCE OF CHAPTER XVII - B, ADMISSIBILI TY OF EXPENDITURE COULD NOT BE VERIFIED AND AS SUCH, BASED ON THE FRESH INFORMATION AVAILABLE IN FORM 3CD FIELD DURING THE COURSE OF REASSESSMENT, THE ASSESSING OFFICER HAS VALIDLY REOPENED THE ASSESSMENT UNDER SECTION 147 OF THE ACT AND PLEADED THAT THE O RDER OF THE LD. CIT(A) ON I.T.A. NO . 984 /M/ 16 3 THIS ISSUE SHOULD BE SET ASIDE. WITH REGARD TO THE ADDITIONS UNDER SECTION 40(A)(IA) OF THE ACT, THE CASE LAW RELIED ON BY THE LD. CIT(A) IN THE CASE OF MER I LYN SHIPPING AND TRANSPORT V. ADDL. CIT 16 ITR (TRIB) 1 SB (VIZAG) IS UND ER APPEAL BEFORE THE HON BLE HIGH COURT OF ANDHRA PRADESH IN ITTA NO. 384/2012, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITIONS MADE BY THE ASSESSING OFFICER, WHICH SHALL BE SUSTAINED. 6. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE HAS STRONG LY SUPPORTED THE ORDER PASSED BY THE LD. CIT(A) AND RELIED ON THE DECISION IN THE CASE OF CIT V. ORIENT CRAFT LTD. 354 ITR 536 (DELHI) . FURTHER BY RELYING ON THE DECISION IN THE CASE OF S. RANJITH REDDY V. DCIT 144 ITD 461, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT EVEN WHILE REOPENING A CASE WHERE ONLY INTIMATION UNDER SECTION 143(1) OF THE ACT WAS ISSUED, IT IS ESSENTIAL THAT THE ASSESSING OFFICER SHOULD HAVE TANGIBLE MATERIAL BEFORE HIM JUSTIFYING HIS REASON TO BELIEVE THAT INCOME HAD ESCAPED A SSESSMENT. SINCE ALL THE MATERIALS HAVE BEEN FURNISHED ALONG WITH RETURN OF INCOME AND IN THE ABSENCE OF ANY FRESH MATERIAL WHICH CAME TO THE NOTICE OF THE ASSESSING OFFICER AFTER THE ORIGINAL ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT, THE A SSESSING OFFICER CANNOT REOPEN THE ASSESSMENT AND THUS PLEADED THAT THE REASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT SHOULD BE QUASHED. I.T.A. NO . 984 /M/ 16 4 7. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE OR DERS OF AUTHORITIES BELOW. THE REVENUE HAS NOT FILED COPY OF THE ORDER OF THE ASSESSMENT PASSED UNDER SECTION 143(3) OF THE ACT DATED 31.12.2009 . IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE ACT DATED 30.03.2012, VIDE LETTER DATED 25.04.2012, THE ASSESSE E HAS STATED THAT THE RETURN FILED ORIGINALLY ON 15.11.2007 MAY BE TREATED AS THE ONE IN RESPONSE TO THE NOTICE UNDER SECTION 148 OF THE ACT. IT IS EVIDENT FROM THE ASSESSMENT ORDER DATED 28.03.2013 THAT IN THE SCHEDULES TO ACCOUNTS FILED BY THE ASSESSEE A LONG WITH COPY OF RETURN, THE ASSESSEE HAS THE DETAILS OF PROFESSIONAL FEES PAYMENT OF .92,35,000/ - IN SCHEDULE 15 UNDER THE HEAD HOSPITALIZATION EXPENSES. SIMILARLY IN SCHEDULE 17, UNDER THE HEAD ADMINISTRATION AND OTHER EXPENSES, THE ASSESSEE HAS SHOWN AN AMOUNT OF .81,71,000/ - TOWARDS RENT PAID INCLUDING HOSTEL RENT. THE ABOVE EXPENSES CLAIMED IN THE RETURN OF INCOME HAVE NOT BEEN CONSIDERED BY THE ASSESSING OFFICER AT THE TIME OF CONCLUDING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT. THEREFORE, TH E ASSESSING OFFICER HAS REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND ACCORDINGLY, BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT, THE ASSESSMENT WAS REOPENED AND COMPLETED THE ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 OF THE ACT AND MADE ADDITIONS, WHICH ARE NOT CONSIDERED DURING THE COURSE OF ASSESSMENT UNDER SECTION 143(3) OF THE ACT. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE HAS SUBMITTED AS UNDER: I.T.A. NO . 984 /M/ 16 5 'THE APPELLANT IS ASSESSED TO TAX IN THE STATUS OF LIMITE D COMPANY DERIVING INCOME FROM HEALTHCARE ACTIVITIES BY ESTABLISHING A HOSPITAL FOR HEART AND CARDIAC OPERATIONS. DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2007 - 08 THE APPELLANT FILED ITS RETURN ADMITTING AN NIL. THE ASSESSMENT WAS ORIGINALLY CO MPLETED U/S 143(3) OF THE INCOME TAX ACT, 1961 DETERMINING THE TOTAL INCOME AT RS.1,39,50,1401 - WHICH WAS REOPENED VIDE NOTICE ISSUED U/S 148 AND WAS SUBSEQUENTLY COMPLETED U/S 143(3) OF THE I.T ACT, 1961 READ WITH SECTION 147 OF THE INCOME TAX ACT, 1961 D ETERMINING THE TOTAL INCOME AT RS.2,20,16,848/ - . WHILE DOING SO, THE LEARNED ASSESSING OFFICER HAD MADE ADDED A SUM OF RS.80,22,591/ - BY WAY OF RENT ON ACCOUNT OF NON DEDUCTION OF TAX AT SOURCE, WHICH IS OBJECTED TO ON THE FOLLOWING WRITTEN SUBMISSIONS.... 1. REOPENING OF ASSESSMENT U/S 147: THE APPELLANT SUBMITS THAT THE APPELLANT COMPANY HAD DULY FILED ITS RETURN AND THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3 ) OF THE INCOME TAX ACT, 1961 BY AN ORDER DATED 29.12.2009 WHEREIN A SUM OF RS. 45 LAKHS WAS DISALLOWED TOWARDS RENT ON THE GROUND THAT NO TAX WAS DEDUCTED AT SOURCE. DURING THE COURSE OF THE HEARING IN THE ORIGINAL ASSESSMENT ALL DETAILS CALLED FOR ON THIS ISSUE WAS FILED AND HAS BEEN TAKEN INTO ACCOUNT BEFORE DISALLOWING THIS SUM OF RS. 45 L AKHS IN THE ORIGINAL ASSESSMENT AND HENCE REOPENING OF ASSESSMENT ON THIS VERY ISSUE ESPECIALLY WHEN THERE HAS BEEN HAS BEEN A DISALLOWANCE ON THIS POINT IS NOT VALID. IT IS SUBMITTED THAT THE APPELLANT HAD BROUGHT OUT ENTIRE FACTS DURING THE COURSE OF THE ORIGINAL ASSESSMENT AND IN THE ABSENCE OF THAT THERE WAS NO FRESH MATERIAL WHICH CAME TO THE NOTICE OF THE ASSESSING OFFICER AFTER THE ORIGINAL ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) THERE WAS NO ESCAPEMENT OF INCOME AND THUS THE NOTICE IS WITHOUT JURISDICTION. REFERENCE IS MADE TO THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD 320 ITR 561, WHEREIN IT OBSERVED AS UNDER: 'HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS 'REASON TO BELIEVE' FAILING WHICH, WE ARE AFRAID, SECTION 147 WOULD GIVE ARBITRARY 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 KEEP IN MIND THE CONCEPTUAL DIFFERENCE BETWEEN POW ER TO REVIEW AND POWER TO REASSESS. THE ASSESSING OFFICER HAS NO POWER TO REVIEW; HE HAS THE POWER TO REASSESS. BUT REASSESSMENT HAS TO BE BASED ON FULFILLMENT OF CERTAIN PRECONDITIONS AND IF THE CONCEPT OF 'CHANGE OF OPINION' IS REMOVED, AS CONTENDED ON B EHALF OF THE DEPARTMENT, THEN, IN THE GARB OF REOPENING THE ASSESSMENT, I.T.A. NO . 984 /M/ 16 6 REVIEW 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.' IT WAS ALSO OBSERVED THAT AFTER 1.4. 1989 THE ASSESSING OFFICER HAS POWER TO REOPEN PROVIDED THERE IS 'TANGIBLE MATERIAL' TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME. THIS JUDGMENT HAS LAID EMPHASIS ON TWO MORE ASPECTS: THAT THERE CAN BE NO REVIEW OF AN ASSESSMENT IN THE GUIS E OF REOPENING AND THAT A BARE REVIEW WITHOUT ANY TANGIBLE MATERIAL WOULD AMOUNT TO ABUSE OF THE POWER. SECTION 147 PROVIDES AS UNDER: ' IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, HE MAY SUBJ ECT TO THE PROVISIONS OF SECTION 148 TO 153, ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT . FROM THE HIGHLIGHTED PORTIONS OF THE EXTRACT OF THE SECTION, IT IS SEEN THAT THE PREREQUISITE FOR ACTI ON U/S 148 THAT THE ASSESSING OFFICER SHOULD HAVE A REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. THE REASONS RECORDED BY THE ASSESSING OFFICER IN THE PRESENT CASE DO CONFIRM OUR APPREHENSION. IT REFLECTS AN ARBITRARY EXERCISE OF THE POWER CONFERRE D UNDER SECTION 147. - THIS IS NOTHING BUT A REVIEW OF THE EARLIER PROCEEDINGS AND AN ABUSE OF POWER BY THE ASSESSING OFFICER, BOTH STRONGLY DEPRECATED BY THE SUPREME COURT IN CIT VS. KELVINATOR (SUPRA). CIT V. CHOLAMANDALAM INVESTMENT AND FINANCE COMPANY REPORTED IN 309 ITR 110 & MADRAS HIGH COURT DECISION IN THE CASE OF CIT VS. M/S. SCHWING STETTER INDIA P. LTD. AFTER CONSIDERING THE ABOVE SUBMISSIONS OF THE ASSESSEE AND MATERIALS AVAILABLE ON RECORD, THE LD. CIT(A) HAS OBSERVED THAT THE ASSESSING OFFIC ER WAS IN POSSESSION OF ALL THE MATERIALS, BASED ON WHICH HE REOPENED THE ASSESSMENT EVEN AT THE TIME OF MAKING THE ORIGINAL ASSESSMENT ITSELF UNDER SECTION 143(3) OF THE ACT AS EARLY AS ON 31.12.2009 AND THEREFORE, HE HELD THAT THE ASSESSEE CANNOT BE SAID THAT IT HAD FURNISHED INACCURATE PARTICULARS I.T.A. NO . 984 /M/ 16 7 OR CONCEALED ITS INCOME. THE LD. CIT(A) HAS FURTHER OBSERVED THAT THE ASSESSING OFFICER HAD ACTED ONLY ON CHANGE OF OPINION AND NO FRESH OR EXTRA FACTS HAVE EMANATED. IN VIEW OF THE ABOVE, THE LD. CIT(A) HAS HE LD THAT THE REASSESSMENT PROCEEDINGS ARE BAD IN LAW. BEFORE US, THE LD. DR COULD NOT CONTROVERT THE ABOVE FINDINGS OF THE LD. CIT(A). EVEN WHILE REOPENING A CASE WHERE ONLY INTIMATION UNDER SECTION 143(1) OF THE ACT WAS ISSUED, IT IS ESSENTIAL THAT THE ASSESSING OFFICER SHOULD HAVE TANGIBLE MATERIAL BEFORE HIM JUSTIFYING HIS REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT AS HELD BY THE HYDERABAD BENCHES OF THE TRIBUNAL IN THE CASE OF S. RANJITH REDDY V. DCIT (SUPRA) AND SIMILAR DECISION WAS ALSO RENDER IN THE CASE OF CIT V. ORIENT CRAFT LTD. (SUPRA) BY THE HON BLE DELHI HIGH COURT. FURTHER, IN THE CASE OF CIT V. ARVIND REMEDIES LTD. 378 ITR 547 (MAD), THE HON BLE JURISDICTIONAL HIGH COURT HAS HELD THAT IF THE ASSESSING OFFICER HAS NOT CONSIDERED THE CLAIM OF DEDUCTION AT THE TIME OF PASSING ORDER UNDER SECTION 143(3) OF THE ACT, THE ASSESSEE COULD NOT BE FASTENED WITH ANY LIABILITY A ND EXPLANATION 1 TO SECTION 147 OF THE ACT DOES NOT GET ATTRACTED. IN VIEW OF THE ABOVE JUDICIAL PRECEDENCE, WE ARE OF THE CONSIDERED OPINION THAT THE REASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT DATED 28.03.2013 CANNOT BE SUSTAINED AND CONFIRM THE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE. I.T.A. NO . 984 /M/ 16 8 8. ONCE THE REASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT HAS BEEN HELD AS INVALID AND BAD IN LAW, THERE IS NO NECESSITY TO ADJUDICATE OTHER ADDITIONS MADE IN REASSESSM ENT ORDER ON MERITS. 9 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THE 16 TH MAY , 201 7 AT CHENNAI. SD/ - SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 16 . 0 5 .201 7 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.