CARTINI INDIA LTD ( FORMERLY GODREJ GE-APPLIANCES LTD), MUMBAI v. ACIT 10(2), MUMBAI

ITA 1604/MUM/2010 | 2001-2002
Pronouncement Date: 16-03-2011 | Result: Allowed

Appeal Details

RSA Number 160419914 RSA 2010
Bench Mumbai
Appeal Number ITA 1604/MUM/2010
Duration Of Justice 1 year(s) 15 day(s)
Appellant CARTINI INDIA LTD ( FORMERLY GODREJ GE-APPLIANCES LTD), MUMBAI
Respondent ACIT 10(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 16-03-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 16-03-2011
Date Of Final Hearing 09-03-2011
Next Hearing Date 09-03-2011
Assessment Year 2001-2002
Appeal Filed On 02-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI RAJENDRA SIN GH (A.M) ITA NO.1604/MUM/2010(A.Y. 2001-02) CARTINI INDIA LTD. (FORMERLY GODREJ GE APPLIANCES LTD. ) C/O.KALYANIWALLA & MISTRY ARMY & NAVY BLDG. 3 RD FLOOR 148 MAHATMA GANDHI ROAD FORT MUMBAI -01. PANAAACG 0555D (APPELLANT) VS. THE ACIT 10(2) AAYKAR BHAVAN MK ROAD MUMBAI 20. (RESPONDENT) APPELLANT BY : S/SHRI M.M.GOLVAL/ZAMEER MEH TA RESPONDENT BY : SHRI SHRAVAN KUMAR ORDER PER N.V.VASUDEVAN J.M THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 18/1/2010 OF CIT(A)-21 MUMBAI RELATING TO ASSESSMENT YEAR 20 01-02. IN GROUND NO.1 TO 7 THE ASSESSEE HAS CHALLENGED THE VALIDITY OF IN ITIATION OF REASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE INCOME TAX ACT 1961 (THE ACT). ONE OF THE GROUND OF CHALLENGE TO THE VALIDITY OF NOTICE U NDER SECTION 147 IS THAT THE NOTICE U/S.147 IF THE ACT HAS BEEN ISSUED BY THE AO MERELY ON CHANGE OF OPINION. WE SHALL FIRST TAKE UP THIS GROUND CHALLE NGE TO THE VALIDITY OF NOTICE UNDER SECTION 147 OF THE ACT FOR CONSIDERATION. 2. THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF APPLIANCES. FOR A.Y 2001-02 THE ASS ESSEE FILED THE RETURN OF INCOME ON 30/10/2001 DECLARING A LOSS OF RS.115 95 22 634/-. THE COMPUTATION OF TOTAL INCOME FILED BY THE ASSESSEE I S AT PAGE NO.1 TO 4 OF THE ITA NO.1604/MUM/2010(A.Y. 2001-02) 2 ASSESSEES PAPER BOOK. IN NOTE NO.9 TO THE COMPUTA TION OF TOTAL INCOME THE ASSESSEE HAS MENTIONED AS FOLLOWS: 9. THE CAPITAL INVESTMENT SUBSIDY RECEIVABLE FROM PUNJAB SMALL INDUSTRIES & EXPORT CORPN. LTD. CREDITED TO CAPITAL SUBSIDY RESERVE RS.3 000 000 IS NOT CONSIDERED IN THE ABOVE COMPUTA TION AS THE SAME IS A CAPITAL RECEIPT. 3. IN THE COURSE OF ASSESSMENT PROCEEDINGS UNDER SE CTION 143(3) OF THE ACT THE AO ISSUED A LETTER DATED 31/12/2003 WHICH R EADS AS FOLLOWS: SUB: ASSESSMENT PROCEEDINGS IN YOUR CASE FOR ASST T.YEAR 2001-02. SIR ON EXAMINATION OF YOUR COMPANYS BALANCE SHEET IT IS SEEN THAT YOU HAVE CREDITED AN AMOUNT OF RS. 30 LACS TO RESER VE & SURPLUS ACCOUNT BEING THE SUBSIDY RECEIVED FROM PUNJAB SMA LL INDUSTRIES & EXPORT CORPORATION FOR STARTING AN INDUSTRIAL UNIT IN PUNJAB STATE AT MOHALI. PLEASE EXPLAIN AS TO WHY THE SAID RECEIPT OF RS.30 LACS SHOULD NOT BE CONSIDERED TO BE A REVENUE RECEIPT GIVEN TO YOU BY THE PUNJAB SMALL INDUSTRIES & EXPORT CORPORATION FOR ASSISTING YOU IN CARRYING OUT BUSINESS OPERATIONS IN THE LIGHT OF THE DECISIO N IN THE CASE OF SAHNEY STEEL & PRESS WORKS LTD.(228 ITR 253). YOU ARE REQUESTED TO SUBMIT YOUR EXPLANATION IN THIS REGARD WITHIN 7 DAY S FROM THE RECEIPT OF THIS LETTER. 4. IN REPLY TO THE SAID NOTICE THE ASSESSEE BY IT S LETTER DATED 16/1/2004 SUBMITTED THAT THE SUBSIDY RECEIVED BY THE ASSESSEE UNDER THE GOVERNMENT OF PUNJAB PACKAGE INCENTIVE 1992 SCHEME WAS TO ATTR ACT ENTREPRENEURS TO SET UP INDUSTRIAL UNITS IN THE STATE OF PUNJAB FOR CREATING EMPLOYMENT OPPORTUNITIES AND TO OFFSET LOCATIONAL DISADVANTAGE OF THE STATE. SINCE THE AFORESAID SUM WAS SANCTIONED FOR CAPITAL INVESTMENT FOR STARTING A NEW UNIT IT HAS BEEN TREATED AS A CAPITAL RECEIPT BY THE ASS ESSEE. THE ASSESSEE FURNISHED ALONG WITH ITS REPLY A COPY OF THE SUBSID Y SCHEME IN QUESTION AND FURTHER EXPLAINED AS TO HOW THE SUBSIDY IN QUESTION HAS TO BE TREATED AS CAPITAL SUBSIDY IN THE LIGHT OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SAHANI STEEL AND PRESS WORKS LTD. (SUPR A). THE AO THEREAFTER ITA NO.1604/MUM/2010(A.Y. 2001-02) 3 PASSED AN ORDER UNDER SECTION 143(3) OF THE ACT DAT ED 30/1/2004 IN WHICH HE DID NOT BRING TO TAX THE SUBSIDY RECEIVED BY THE ASSESSEE FROM PUNJAB SMALL INDUSTRIAL AND EXPORT CORPORATION LTD.(PSIEC) . 5. THE AO THEREAFTER ON 9/3/2006 ISSUED A NOTICE UN DER SECTION 148 OF THE ACT FOR MAKING AN ASSESSMENT OF INCOME THAT HAS ESCAPED ASSESSMENT UNDER SECTION 147 OF THE ACT. THE REASONS RECORDED BY THE AO FOR ISSUE OF NOTICE UNDER SECTION 148 IS AS FOLLOWS: REASONS FOR RE-OPENING OF ASSESSMENT M/S. GODRE J APPLIANCES LTD. ASSESSMENT YEAR 2001 -02. IT IS SEEN FROM THE RECORDS THAT AN AMOUNT OF RS.30 LACS BEING THE SUBSIDY RECEIVED FROM PUNJAB SMALL INDUSTRIES & EXP ORT CORPN. LTD. HAS NOT BEEN CONSIDERED AS A REVENUE RECEIPT IN THE LIGHT OF THE DECISION OF THE SUPREME COURT IN THE CASE OF SAHNEY STEEL & PRESS WORKS LTD. REPORTED IN 228 ITR 253. IN VIEW OF THE ABOVE I HAVE THEREFORE REASON TO B ELIEVE THAT INCOME CHARGEABLE TO TAX FOR A.Y 2001-02 HAS ESCAPED ASSE SSMENT FOR FAILURE ON THE PART OF THE ASSESSEE COMPANY TO DISCLOSE FUL LY AND TRULY ALL THE MATERIAL FACTS REQUIRING FOR ASSESSMENT FOR A.Y 200 1-02. (B.D.MITRA) ACIT 10(2) MUMBAI. 6. THEREAFTER THE AO COMPLETED THE REASSESSMENT BR INGING TO TAX THE AFORESAID SUM RECEIVED BY THE ASSESSEE FROM PSIEC T REATING THE SAME AS REVENUE RECEIPT. 7. BEFORE CIT(A) THE ASSESSEE CHALLENGED THE VALIDI TY OF INITIATION OF PROCEEDINGS UNDER SECTION 147 OF THE ACT ON THE GRO UND THAT THE SAME HAS ITA NO.1604/MUM/2010(A.Y. 2001-02) 4 BEEN DONE PURELY ON A CHANGE OF OPINION. ON THIS S UBMISSION THE CIT(A) HELD AS FOLLOWS: THE APPELLANT ALSO ARGUED THAT THE AO ISSUED NOTIC E U/S. 148 BASED ON CHANGE OF OPINION. IT IS TRUE THAT DURING THE A SSESSMENT PROCEEDINGS THE AO ASKED A SPECIFIC QUERY ON THIS I SSUE BY CITING THE DECISION OF SUPREME COURT IN THE CASE OF SAHNEY STE EL & PRESS WORKS LTD. BUT ULTIMATELY DID NOT MAKE ANY ADDITION. HOW EVER IT APPEARS THAT THE AO MISINTERPRETED /MISUNDERSTOOD THE DECIS ION OF HONBLE SUPREME COURT IN CASE OF SAHNEY STEEL DURING ORIGIN AL ASSESSMENT PROCEEDINGS AND DID NOT MAKE ANY ADDITION. THUS BY MISINTERPRETING / MISUNDERSTANDING OF THE DECISION BY THE A.O THE I NCOME CHARGEABLE TO TAX ESCAPED ASSESSMENT. SUCH ESCAPEMENT OF INCO ME RESULTED IN UNDER ASSESSMENT OF INCOME. FOR SUCH TYPE OF UNDER ASSESSMENT THE NOTICE CAN BE ISSUED AS PER SUB-CLAUSE (I) OF CLAUS E (C) OF EXPLANATION 2 TO SECTION 147 OF THE ACT. THUS THE AO WAS JUS TIFIED IN ISSUING NOTICE U/S. 147 OF THE ACT. 8. BEFORE US LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSMENT HAS BEEN REOPENED PURELY ON A CHANGE OF OPINION. I N THIS REGARD LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT WHILE COMPLETING THE ORIGINAL ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) OF THE ACT THE AO RAISED SPECIFIC QUERY AS TO WHY THE SUBSIDY RECEIVED BY THE ASSESSEE SHOULD NOT BE TREATED AS A REVENUE RECEIPT AND CHARGED TO TAX. THE ASSESSEE G AVE REPLY TO THE SAME AND THE AO DID NOT MAKE ANY ADDITION WHILE COMPLETING T HE ASSESSMENT TREATING THE AFORESAID SUM AS CAPITAL RECEIPT. HE DREW OUR ATTENTION TO THE REASONS RECORDED BY THE AO BEFORE ISSUING NOTICE UNDER SECT ION 148 OF THE ACT WHEREBY IT IS CLEAR THAT NO NEW MATERIAL HAS BEEN C OME TO THE POSSESSION OF THE AO AND HE MERELY ISSUED A NOTICE BY FORMING A D IFFERENT OPINION ON THE ISSUE. HE DREW OUR ATTENTION TO THE DECISION OF HO NBLE DELHI HIGH COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD 256 I TR 1.(FB)(DEL) WHEREIN THE HONBLE DELHI HIGH COURT HAS TAKEN A VIEW THAT REAS SESSMENT PROCEEDINGS CANNOT BE INITIATED MERELY ON THE BASIS OF CHANGE O F AN OPINION. THIS DECISION OF THE HONBLE DELHI HIGH COURT HAS SINCE BEEN CONFIRMED BY THE ITA NO.1604/MUM/2010(A.Y. 2001-02) 5 HONBLE SUPREME COURT IN CIT VS. KELVINATOR OF INDI A LTD. 320 ITR 561(SC). WITH REGARD TO THE OBSERVATION OF THE CIT(A) THAT W HILE COMPLETING THE ORIGINAL ASSESSMENT THE AO MISINTERPRET AND MISUNDE RSTOOD THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE SAHENY STEEL (SUPRA) THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN SUCH CIRCUMSTANC ES THE AO CANNOT RESORT TO REASSESSMENT PROCEEDINGS UNDER SECTION 147 OF TH E ACT WITHOUT ANY CONCRETE OR TANGIBLE MATERIAL. WITH REGARD TO THE STAND OF THE REVENUE THAT THE ORDER OF ASSESSMENT UNDER SECTION 143(3) OF THE ACT PASSED BY THE AO DOES NOT MAKE ANY SPECIFIC REFERENCE TO THE ISSUE THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT WHEN AN ASSESSMENT IS COMP LETED UNDER SECTION 143(3) OF THE ACT IT IS PRESUMED THAT THE AO HAS AP PLIED HIS MIND TO THE ISSUE AND FACT THAT THERE IS NO DISCUSSION IN THE O RDER OF ASSESSMENT WILL NOT EMPOWER THE AO TO RESORT TO PROCEEDINGS UNDER SECTI ON 147 OF THE ACT. IN THIS REGARD THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF KELVINATOR OF INDIA LTD. (SUPRA) AND THE DECISION IN ASSESSEES OWN CASE BY THE HONBLE BOMBAY HIGH COURT NAMELY CARTINI INDIA LTD. VS. ACIT 314 ITR 275(BOM ) WHEREIN HONBLE BOMBAY HIGH COURT ON A SIMILAR STAND TAKEN BY THE R EVENUE WAS PLEASED TO HOLD THAT THE AO IS DEEMED TO HAVE APPLIED HIS MIND TO THE ISSUE. 9. THE LD. D.R ON THE OTHERHAND RELIED ON THE ORDE R OF THE CIT(A). 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN O UR VIEW THE REASSESSMENT PROCEEDINGS ARE LIABLE TO BE QUASHED F OR THE REASON THAT THE PROCEEDINGS UNDER SECTION 147 HAVE BEEN INITIATED M ERELY ON CHANGE OF OPINION. WE HAVE ALREADY SEEN THAT WHILE COMPLETIN G THE ORIGINAL ASSESSMENT THE AO HAD DULY MADE ENQUIRIES WITH REGA RD TO THE SUBSIDY RECEIVED BY THE ASSESSEE AND WHILE COMPLETING THE A SSESSMENT UNDER SECTION ITA NO.1604/MUM/2010(A.Y. 2001-02) 6 143(3) OF THE ACT DID NOT TREAT THE SAME AS REVENUE RECEIPT CHARGEABLE TO TAX. A PERUSAL OF THE REASONS RECORDED BY THE AO FOR INI TIATING REASSESSMENT PROCEEDINGS CLEARLY SHOWS THAT ON THE VERY SAME MAT ERIAL WHICH WAS AVAILABLE WHILE COMPLETING THE ASSESSMENT UNDER SEC TION 143(3) OF THE ACT HE HAD ON A MERE CHANGE OF OPINION ISSUED NOTICE FOR R EASSESSMENT. IT IS NOT PERMISSIBLE FOR THE AO TO RESORT TO PROCEEDINGS UND ER SECTION 147 MERELY ON CHANGE OF OPINION. THE HONBLE SUPREME COURT IN TH E CASE OF CIT VS. KELVINATOR OF INDIA LTD. (SUPRA) HAS HELD AS FOLLO WS: THE CONCEPT OF CHANGE OF OPINION ON THE PART OF THE ASSESSING OFFICER TO REOPEN AN ASSESSMENT DOES NOT STAND OBLITERATED AFTER THE SUBSTITUTION OF SECTION 147 OF THE INCOME TAX ACT 1961 BY THE DIRECT TAX LAWS (AMENDMENT) ACTS 1987 AND 1989. AFTER TH E AMENDMENT THE ASSESSING OFFICER HAS TO HAVE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT BUT THIS DOES NOT IMPLY THAT TH E ASSESSING OFFICER 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 POWER. HENCE AFTER APRIL 1 1989 THE ASS ESSING OFFICER HAS POWER TO REOPEN AN ASSESSMENT PROVIDED THERE IS T ANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASON MUST HAVE A LINK WITH THE FORMA TION OF THE BELIEF. 11. MERELY BECAUSE WHILE COMPLETING ORIGINAL ASSESS MENT THE AO HAS NOT DISCUSSED THE ISSUE DOES NOT MEAN THAT HE HAS NOT E XPRESSED ANY OPINION. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD.(SUPRA) ON THIS ISSUE HAS HELD AS FOLLOWS: WE ALSO CANNOT ACCEPT THE SUBMISSION OF MR. JOLLY TO THE EFFECT THAT ONLY BECAUSE IN THE ASSESSMENT ORDER DETAILED REAS ONS HAVE NOT BEEN RECORDED AN ANALYSIS OF THE MATERIAL ON THE RECORD BY ITSELF MAY JUSTIFY THE ASSESSING OFFICER TO INITIATE A PROCEEDING UNDE R SECTION 147 OF THE ACT. THE SAID SUBMISSION IS FALLACIOUS. AN ORDER O F ASSESSMENT CAN BE PASSED EITHER IN TERMS OF SUB SECTION (1) OF SECTIO N 143 OR SUB-SECTION (3) OF SECTION 143. WHEN REGULAR ORDER OF ASSESSME NT IS PASSED IN TERMS OF THE SAID SUB-SECTION (3) OF SECTION 143 A PRESUMPTION CAN BE RAISED THAT SUCH AN ORDER HAS BEEN PASSED ON APPLIC ATION OF MIND. IT IS WELL KNOW THAT A PRESUMPTION CAN ALSO BE RAISED TO THE EFFECT THAT IN ITA NO.1604/MUM/2010(A.Y. 2001-02) 7 TERMS OF CLAUSE (E) OF SECTION 114 OF THE INDIAN EV IDENCE ACT JUDICIAL AND OFFICIAL ACTS HAVE BEEN REGULARLY PERFORMED. I F IT BE HELD THAN ORDER WHICH HAS BEEN PASSED PURPORTEDLY WITHOUT APP LICATION OF MIND WOULD ITSELF CONFER JURISDICTION UPON THE ASSESSING OFFICER TO REOPEN THE PROCEEDING WITHOUT ANYTHING FURTHER THE SAME W OULD AMOUNT TO GIVING A PREMIUM TO AN AUTHORITY EXERCISING QUASI-J UDICIAL FUNCTION TO TAKE BENEFIT OF ITS OWN WRONG. 12. THE HONBLE DELHI HIGH COURT IN THE CASE OF CI T VS. EICHER LTD. 294 ITR 310(DEL) HAS HELD AS FOLLOWS: IF THE ENTIRE MATERIAL HAD BEEN PLACED BY THE ASS ESSEE BEFORE THE ASSESSING OFFICER AT THE TIME WHEN THE ORIGINAL AS SESSMENT WAS MADE AND THE ASSESSING OFFICER APPLIED HIS MIND TO THA T MATERIAL AND ACCEPTED THE VIEW CANVASSED BY THE ASSESSEE THEN M ERELY BECAUSE HE DID NOT EXPRESS THIS IN THE ASSESSMENT ORDER THAT B Y ITSELF WOULD NOT GIVE HIM A GROUND TO CONCLUDE THAT INCOME HAS ESCAP ED ASSESSMENT AND THEREFORE THE ASSESSMENT NEEDED TO BE REOPENE D. AN ASSESSEE HAS NO CONTROL OVER THE WAY AN ASSESSME NT ORDER IS DRAFTED . GENERALLY ISSUES WHICH ARE ACCEPTED BY T HE ASSESSING OFFICER DO NOT FIND MENTION IN THE ASSESSMENT ORDER AND ONL Y SUCH POINTS ARE TAKEN NOTE OF ON WHICH THE ASSESSEES EXPLANATIONS ARE REJECTED AND ADDITIONS/DISALLOWANCES ARE MADE. 13. WE ARE OF THE VIEW THAT THE REASSESSMENT PROCEE DINGS UNDER SECTION 147 HAS NOT BEEN VALIDLY INITIATED BECAUSE THE SAME WERE INITIATED MERELY ON A CHANGE OF OPINION WITHOUT ANY FRESH MATERIAL COMI NG INTO THE POSSESSION OF THE AO. WE THEREFORE HOLD THAT THE REASSESSMENT PROCEEDINGS ARE INVALID AND CONSEQUENTLY THE ORDER OF REASSESSMENT IS ANNUL LED. IN VIEW OF THE AFORESAID DECISION WE HAVE NOT TAKEN UP THE OTHER I SSUE RAISED BY THE ASSESSEE IN ITS APPEAL. ITA NO.1604/MUM/2010(A.Y. 2001-02) 8 14. IN THE RESULT THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 16 TH DAY OF MARCH 2011. SD/- SD/- (RAJENDRA SINGH) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED. 16 TH MARCH.2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3 . THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RC BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR I TAT MUMBAI BENCHES MUMBAI. VM. ITA NO.1604/MUM/2010(A.Y. 2001-02) 9 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 9/3/2011 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 10/3/2011 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER