ACE IMPEX, V. ASST CIT CIR 12(1),

MA 39/MUM/2015

• Counselvise Citation: [2015] 124 COUNSELVISE.COM (IT) 3511 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 16-09-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 16-02-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: ISHWAR RATHI
• Keywords: Reopening of assessment; Audit objection; Tangible material; Tax effect
• Section: 80HHC; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER MA NO.39/M/2015 (ARISING OUT OF ITA NO.2329/M/2015) ASSESSMENT YEAR: 2004-05 M/S. ACE IMPEX, 105, NEW TEJPAL INDL. PREMISES, ANDHERI KURLA ROAD, SAKINAKA, ANDHERI (E), MUMBAI 400 072 PAN: AAFGA 0317A VS. THE ASST. COMM. OF INCOME TAX, CIRCLE 12(1), AAYAKAR BHAVAN, MUMBAI - 400020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI ISHWAR RATHI, A.R. REVENUE BY : SHRI MANOJ KUMAR, D.R. DATE OF HEARING : 21.08.2015 DATE OF PRONOUNCEMENT : 16.09.2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT MISCELLANEOUS APPLICATION HAS BEEN MOV ED BY THE ASSESSEE PLEADING THAT A MISTAKE APPARENT ON RECORD HAS OCCU RRED IN THE ORDER DATED 23.01.2015 OF THIS TRIBUNAL PASSED IN ITA NO.2329/M /2011. IT HAS BEEN PLEADED THAT THE ASSESSEE HAD AGITATED THE REOPENIN G OF THE ASSESSMENT UNDER SECTION 147 OF THE ACT. DURING THE COURSE OF HEARI NG THE ASSESSEE HAD TAKEN TWO ADDITIONAL GROUNDS OF APPEAL WHICH READ AS UNDE R: 1. THAT THE ASSESS I NG OFFICE R HAS ERRED I N RE-OPEN I NG OF A SSE SSM E NT UNDE R SECT I ON 147 OF THE INCOME TAX ACT ON THE BASIS OF OBJECT IONS RA I SED BY THE AUD I T PARTY, WHEREAS TH E SA M E AUDIT OBJECTIONS HAVE NOT BEEN ACCEPTED BY THE ASS ESS IN G OF FICER UNDER SUCH FACTS AND CIRCUMSTANCE OF THE CASE TH E R E- OPENING OF ASSESSMENT U/S 147 I S BAD IN L AW A ND VOID AB- INITIO. MA NO.39/M/2015 (ARISING OUT OF ITA NO.2329/M/2015) M/S. ACE IMPEX 2 2. WITHOUT PREJUDICE TO T HE A BOVE, AS PER THE FACTS A ND CIRCUM S T A N C E OF THE CASE AND TH E PROVISIONS O F L A W N O T A NGIBL E MATER I A L WAS AVA IL AB L E WITH T H E ASSE S S ING OFFIC E R TO FO R M A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT IN TERMS OF S E CT I ON 147 BY GRANT I NG EXCESS DEDUCTION U/S 80 HHC AND / OR 80 IB AND HENCE THE RE - OPEN I NG OF A S S ESSM E NT IS BAD IN LAW AND VO I D AB- I NITIO . 2. IT HAS BEEN SUBMITTED THAT DURING THE COURSE OF HEARING OF THE APPEAL ON MERITS, THE ARGUMENTS WERE ADVANCED ON THE ADDITION AL GROUND OF APPEAL ALSO. HOWEVER, THE TRIBUNAL WHILE DECIDING THE APPEAL ON MERITS HAS FAILED TO CONSIDER THE ADDITIONAL GROUNDS OF APPEAL AND THE A RGUMENTS THEREOF ADVANCED BY THE LD. A.R. OF THE ASSESSEE IN THAT RESPECT. I T HAS THEREFORE BEEN CONTENDED THAT NON CONSIDERATION OF THE ABOVE STATED GROUNDS OF APPEAL HAS CAUSED PREJUDICE TO THE ASSESSEE AND HENCE, A MISTAKE APPA RENT ON RECORD HAS OCCURRED WHICH IS REQUIRED TO BE RECTIFIED. 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE ALS O GONE THROUGH THE ORDER DATED 23.01.2015 PASSED IN ITA NO.2329/M/2011 AND ALSO THROUGH THE RELEVANT RECORD RELIED UPON BY THE ASSESSEE. IT IS TRUE THAT THE ASSESSEE HAD AGITATED THE REOPENING OF THE ASSESSMENT IN HIS UND ER SECTION 147 OF THE ACT. THE ASSESSEE IN THE ORIGINAL GROUNDS NO.1 & 2 OF TH E APPEAL HAS TAKEN THE VERY ISSUE OF REOPENING OF THE ASSESSMENT UNDER SECTION 147 OF THE ACT WHICH HAS BEEN THOROUGHLY DISCUSSED IN OUR ORDER DATED 23.01. 2015. A CATEGORICAL FINDING HAS BEEN GIVEN THAT AS PER THE PROVISIONS O F SECTION 80HHC, THE TURNOVER OF 80 IB AND NON 80 IB UNITS IS TO BE TAKE N TOGETHER BUT THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) HAD FAI LED TO INCLUDE THE TOTAL TURNOVER OF 80 IB UNIT INTO TOTAL TURNOVER OF BUSIN ESS OF THE ASSESSEE AND HENCE THE INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT. THE REOPENING OF THE ASSESSMENT ON THIS GROUND WAS VALID AS THE AO HAD V ALID REASONS TO BELIEVE THAT THE INCOME OF THE ASSESSEE HAD ESCAPED ASSESSM ENT. HOWEVER, THE REOPENING IN RELATION TO SECTION ISSUE OF DEPB RECE IPTS WHETHER ELIGIBLE FOR MA NO.39/M/2015 (ARISING OUT OF ITA NO.2329/M/2015) M/S. ACE IMPEX 3 DEDUCTION UNDER 80 IB WAS HELD TO BE NOT VALID BECA USE THE VIEW TAKEN BY THE AO AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS W AS ONE OF THE POSSIBLE VIEWS AND THE SAME WAS SUBSEQUENTLY HELD TO BE CORR ECT VIEW ALSO. NOW IN THE LIGHT OF ABOVE FINDINGS, WE HAVE TO SEE WHETHER DIS CUSSION OF THE ARGUMENTS/GROUNDS RAISED BY THE ASSESSEE DURING THE COURSE OF HEARING HAD RESULTED INTO AN ERROR APPARENT ON RECORD OR NOT. THE ASSESSEE IN THE ADDITIONAL GROUNDS OF APPEAL HA S PLEADED THAT THE REOPENING WAS DONE ON THE BASIS OF AUDIT OBJECTIONS WHICH THE AO HAD NOT ACCEPTED BUT LATER ON HE REOPENED THE ASSESSMENT; A ND THAT NO TANGIBLE MATERIAL WAS AVAILABLE WITH THE AO TO FORM A BELIEF THAT INC OME HAD ESCAPED ASSESSMENT BY GRANTING EXCESS DEDUCTION UNDER SECTION 80HHC/ 8 0 IB OF THE ACT. 4. WE HAVE CONSIDERED THE ARGUMENTS ADVANCED BY THE LD. A.R. THE LD. A.R. HAS BROUGHT OUR ATTENTION TO PAGE 32 TO 36 OF THE PAPER BOOK FILE. PAGE 32 IS THE COPY OF THE LETTER DATED 16.01.08 OF THE SEN IOR AUDIT OFFICER WHEREIN HE HAS POINTED OUT THAT THE PROFITS CONSIDERED FOR DED UCTION UNDER SECTION 80 IB WAS INCLUSIVE OF DEPB WHICH WAS NOT DERIVED FROM TH E UNDERTAKING AND HENCE WAS NOT ELIGIBLE UNDER SECTION 80 IB. FURTHER, AT PAGE 33 IS THE ANOTHER COPY OF THE LETTER OF THE SENIOR AUDIT OFFICER DATED 16.01. 08 WHEREIN HE HAS POINTED OUT THAT WHILE COMPUTING THE DEDUCTION UNDER SECTION 80 HHC, THE AO HAD FAILED TO INCLUDE THE TOTAL TURNOVER OF 80 IB UNIT AND THAT T HE ADOPTION OF THE INCORRECT TOTAL TURNOVER HAS RESULTED IN UNDERASSESSMENT OF I NCOME. THE LETTER DATED 16.01.08 IS THE DOCUMENT UPON WHICH THE LD. A.R. HA S RELIED UPON TO CONTEND THAT THE AO HAD FORMED HIS BELIEF OF ESCAPEMENT OF INCOME ON THE BASIS OF AUDIT PARTY OBJECTION. FURTHER, AT PAGE 36 IS THE LETTER DATED 23.01.2008 OF THE AO ADDRESSED TO THE SENIOR AUDIT OFFICER POINTING O UT THAT THE ENTIRE TURNOVER OF DAMAN UNIT (80 IB UNIT) WAS EXPORT TURNOVER AND IT HAS BEEN POINTED OUT THAT MA NO.39/M/2015 (ARISING OUT OF ITA NO.2329/M/2015) M/S. ACE IMPEX 4 THE ADDITION OF THE SAID TURNOVER IN THE TOTAL TURN OVER WILL ALSO REQUIRE ADDITION OF THE EXPORT TURNOVER IN THE NUMERATOR FOR THE PUR POSE OF CALCULATING THE PERCENTAGE. THE AO, THROUGH THIS LETTER, HAS MEANT TO SAY THAT EVEN THE COMPUTATION IS MADE AS PER THE PRESCRIBED FORMULA F OR DEDUCTION UNDER SECTION 80HHC, THE TAX EFFECT WOULD BE NEUTRAL. HOWEVER, I N THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT DATED 24.03.09, ONE OF THE REASONS IS THAT THE AO, WHILE CALCULATING DEDUCTION UNDER SECTION 80HHC, HA D NOT INCLUDED THE TOTAL TURNOVER OF THE 80 IB UNIT. NOW THE CONTENTION OF THE LD. A.R., WHILE RELYING UPON THE VARIOUS CASE LAWS, HAS BEEN THAT THE AO HA D FORMED HIS BELIEF ON THE BASIS OF AUDIT OBJECTION REPORT WHICH HE HIMSELF HA S NOT ACCEPTED AS IS REVEALED FROM HIS LETTER DATED 23.01.2008 ADDRESSED TO THE S ENIOR AUDIT OFFICER. FOR A VALID REOPENING OF ASSESSMENT AS DISCUSSED IN OUR O RDER ON MERITS, THE AO MUST HAVE VALID REASONS TO BELIEVE THAT THE INCOME HAS E SCAPED ASSESSMENT. WE HAVE ALREADY DISCUSSED IN OUR ORDER DATED 23.01.201 5 THAT AS PER THE PROVISIONS OF THE RELEVANT SECTION, THE TURNOVER OF THE 80 IB UNIT INTO THE TOTAL TURNOVER OF THE BUSINESS WAS REQUIRED TO BE INCLUDED. SINCE TH E AO HAD NOT INCLUDED THE SAME, HENCE THE INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT. THE REASON RECORDED BY THE AO IN THIS RESPECT HAS ALSO BEEN HE LD TO BE A VALID REASON. MERELY BECAUSE THE INFORMATION HAS COME INTO THE KN OWLEDGE OF THE AO ON THE BASIS OF AUDIT REPORT, BUT IF THE SAME IS CORRECT, LEGALLY VALID AND WHICH SHOWS THAT THE VIEW TAKEN BY THE AO IN THE ASSESSMENT PRO CEEDINGS WAS NOT THE LEGALLY CORRECT VIEW, THEN, CERTAINLY IT IS OPEN TO THE AO TO APPLY HIS MIND. THOUGH, IN THIS CASE THE AO INITIALLY HAD NOT ACCEP TED THE OBJECTION OF THE AUDIT PARTY AS IS REVEALED FROM HIS LETTER DATED 23.01.20 08, HOWEVER, HE LATER ON REALIZED THAT HIS VIEW WAS NOT CORRECT. THEREAFTER , HE REOPENED THE ASSESSMENT VIDE REASONS RECORDED FOR REOPENING DATED 24.03.09. IT IS A CASE WHERE THE VIEW TAKEN BY THE AO DURING ASSESSMENT PROCEEDINGS OR THE VIEW TAKEN BY THE AO WHILE GIVING REPLY TO THE AUDIT OFFICER WAS NOT A LEGALLY CORRECT VIEW AND MA NO.39/M/2015 (ARISING OUT OF ITA NO.2329/M/2015) M/S. ACE IMPEX 5 HENCE WAS NOT A POSSIBLE VIEW ALSO. EVEN IF THE EX PORT TURNOVER IS TO BE INCLUDED IN THE NUMERATOR WHILE CALCULATING THE DED UCTION UNDER SECTION 80HHC, EVEN THEN AS PER THE FORMULA PRESCRIBED, IT WILL RESULT INTO LESSER DEDUCTION UNDER SECTION 80HHC IN COMPARISON TO THAT IT WAS ALLOWED TO THE ASSESSEE DURING THE ORIGINAL ASSESSMENT PROCEEDINGS . THE VIEW TAKEN BY THE AO, DURING THE ORIGINAL ASSESSMENT PROCEEDINGS, WAS NEITHER LEGALLY CORRECT VIEW NOR ONE OF THE LEGALLY POSSIBLE VIEWS. 5. WE HAVE ALREADY GIVEN A FINDING IN OUR ORDER DAT ED 23.01.2015 THAT THE TURNOVER OF THE 80 IB UNIT WAS REQUIRED TO BE INCLU DED WHILE CALCULATING THE DEDUCTION UNDER SECTION 80HHC. HENCE, UNDER SUCH C IRCUMSTANCES, EVEN NON DISCUSSION OF THE ABOVE STATED ADDITIONAL GROUNDS T AKEN BY THE ASSESSEE DURING HIS SUBMISSIONS BEFORE THE TRIBUNAL HAS NOT RESULTE D INTO ANY MISTAKE, DEFECT OR ERROR IN OUR ORDER DATED 23.01.2015. MERELY RECALL ING THE ORDER AT THIS STAGE DUE TO NON DISCUSSION OF AN ARGUMENT OF THE LD. A.R . IN THIS RESPECT WILL NOT BE PROPER COURSE WHEN IT IS APPARENT ON THE RECORD THA T THE ABOVE GROUNDS OF THE LD. A.R. HAVE NO FORCE AND THE ISSUE HAS ALREADY BE EN CONSIDERED AND DECIDED IN THE IMPUGNED ORDER DATED 23.01.2015. THE HONBL E JURISDICTIONAL BOMBAY HIGH COURT IN THE CASE OF CIT VS. RAMESH ELECTRIC AND TRADING COMPANY (1993) 203 ITR 497 (BOM.) HAS HELD AS UNDER: IN OUR VIEW, THE POWER OF RECTIFICATION UNDER SECTION 254(2) OF THE INCOME-TAX ACT CAN BE EXERCISED ONLY WHEN THE MISTAKE WHICH IS SOU GHT TO BE RECTIFIED AS AN OBVIOUS AND PATENT MISTAKE WHICH IS APPARENT FROM T HE RECORD, AND NOT A MISTAKE WHICH REQUIRES TO BE ESTABLISHED BY ARGUMENTS AND A LONG DRAWN PROCESS OF REASONING ON POINTS ON WHICH THERE MAY CONCEIVABLY BE TWO OPINIONS, AS HAS BEEN SHOWN IN THE PRESENT CASE. FAILURE BY THE TRIBUNAL TO CONSIDER AN ARGUMENT ADVANCED BY EITHER PARTY FOR ARRIVING AT A CONCLUSI ON IS NOT AN ERROR APPARENT ON THE RECORD, ALTHOUGH IT MAY BE AN ERROR OF JUDGMENT. 6. HENCE, IN THE LIGHT OF THE ABOVE DECISION OF THE HONBLE JURISDICTIONAL BOMBAY HIGH COURT, WE HAVE NO HESITATION TO HOLD TH AT EVEN NON DISCUSSION OF THE ADDITIONAL GROUNDS STATED BY THE ASSESSEE IN HI S APPLICATION HAVE NOT MA NO.39/M/2015 (ARISING OUT OF ITA NO.2329/M/2015) M/S. ACE IMPEX 6 RESULTED ANY ERROR IN THE IMPUGNED ORDER DATED 23.0 1.2015. IN VIEW OF OUR ABOVE DISCUSSION, WE DO NOT FIND ANY MERIT IN THE A PPLICATION OF THE ASSESSEE AND THE SAME IS ACCORDINGLY DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 16.09.2015. SD/- SD/- (R.C. SHARMA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 16.09.2015. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.