ACIT, CHENNAI v. M/s. Digital Network (India) Pvt. Ltd., CHENNAI

ITA 1697/CHNY/2010 | 2000-2001
Pronouncement Date: 19-07-2011 | Result: Dismissed

Appeal Details

RSA Number 169721714 RSA 2010
Assessee PAN AABCD3747M
Bench Chennai
Appeal Number ITA 1697/CHNY/2010
Duration Of Justice 9 month(s) 8 day(s)
Appellant ACIT, CHENNAI
Respondent M/s. Digital Network (India) Pvt. Ltd., CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 19-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 19-07-2011
Date Of Final Hearing 29-06-2011
Next Hearing Date 29-06-2011
Assessment Year 2000-2001
Appeal Filed On 11-10-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH B : CHENNAI [BEFORE DR. O.K. NARAYANAN VICE-PRESIDENT AND SHRI HARI OM MARATHA JUDICIAL MEMBER] I.T.A NO. 1697/MDS/2010 ASSESSMENT YEAR : 2000-01 THE ACIT COMPANY CIRCLE I(4) CHENNAI VS M/S DIGITAL NETWORK(INDIA) PVT. LTD (NOW KNOWN AS M/S DIGITAL HOLDINGS (P) LTD.) 3(E54) 19 TH CROSS STREET BESANT NAGAR CHENNAI 90 [PAN AABCD3747M ] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.B.SEKARAN CIT/DR RESPONDENT BY : SMT. T.C.A.SANGEETHA ADVOCATE O R D E R PER HARI OM MARATHA JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2000-01 IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) DATED 2.7.2010. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT F OR THE YEAR UNDER CONSIDERATION THE ASSESSEE-COMPANY FILED ITS RETURN OF INCOME ON 30.11.2000 DECLARING TOTAL INCOME OF ` 4 64 90 073/- AFTER SETTING OFF OF LOSS FROM BUSINESS TO THE TUNE OF ` 5 24 285/-. THE RETURN WAS PROCESSED U/S 143(1) BY ACCEPTING THE RETURNED INCO ME ON 28.3.2002 ITA 1697/10 :- 2 -: RESULTING INTO THE REFUND OF ` 1 52 342/-. SUBSEQUENTLY THE ASSESSING OFFICER ISSUED NOTICE U/S 154 OF THE ACT TO THE ASS ESSEE TO RECTIFY THE COMPUTATION PART OF THE INTIMATION STATING THAT WHI LE CALCULATING THE ADJUSTED TOTAL INCOME U/S 80G THE LONG TERM CAPITA L GAIN (LTCG) OF ` 4 56 17 074/- WAS TO BE DEDUCTED FROM GROSS TOTAL I NCOME AS PER THE PROVISIONS OF SECTION 112(2) OF THE ACT. THE ASSES SEE OBJECTED TO THIS NOTICE ON THE REASONING THAT THE MATTER WAS DEBATAB LE ONE SO THE ASSESSING OFFICER DROPPED PROCEEDINGS U/S 154 OF TH E ACT. HOWEVER HE INITIATED RE-ASSESSMENT PROCEEDINGS U/S 147 AFTE R RECORDING THE REASONS FOR REOPENING U/S 148 OF THE ACT. THE REAS ONS WERE THE SAME AS WERE TAKEN DURING THE PROCEEDINGS U/S 154 THAT D EDUCTION U/S 80G HAS BEEN INCORRECTLY COMPUTED. THE RE-ASSESSMENT W AS COMPLETED IN WHICH VARIOUS ADDITIONS WERE MADE APART FROM ARISIN G OUT OF COMPUTATION OF DEDUCTION U/S 80G. THE ASSESSEE CHA LLENGED THIS ACTION OF THE ASSESSING OFFICER ON LEGAL AS WELL AS MERITORIOUS GROUNDS. THE LD. CIT(A) HAS ACCEPTED THE LEGAL ISSUE RAISED AGAINST THE VALIDITY OF RE-ASSESSMENT PROCEEDINGS INITIATED U/S 147 BY I SSUING NOTICE U/S 148 ON THE GROUND THAT IN THE GIVEN FACTUAL MATRIX OF THIS CASE THE ASSESSING OFFICER HAS INITIATED THE PROCEEDINGS WHI CH AMOUNTS TO SHEER CHANGE OF OPINION WHICH IS NOW NOT PERMITTED AS PER LAW. THE REVENUE IS AGGRIEVED AND HAS RAISED THE FOLLOWING G ROUNDS: ITA 1697/10 :- 3 -: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS CONTRARY TO THE LAW AND FACTS OF TH E CASE. 2. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN HOLDING THAT THE REASSESSMENT PROCEEDI NGS ARE INVALID. 2.1 THE LEARNED CIT(A) HAS NOT APPRECIATED TH E RATIO OF DECISION IN THE CASE OF CIT V. P.V.S.BEEDIES (SC) 237 ITR 12 WHEREIN IT IS HELD THAT REOPENING OF ASSESS MENT BASED ON FACTUAL ERRORS POINTED OUT BY THE AUDIT IS PERMISSIBLE IN LAW. IT IS ALSO HELD BY THE HON'BLE HIGH COURT OF ALLAHABAD IN THE CASE OF NASRAT CHEMICAL WORKS PVT. LTD. V CIT (265 ITR 401) THAT WHEN CERTA IN FACTS WHICH ARE NOT IN THE KNOWLEDGE OF THE INCOMET AX OFFICER ARE POINTED OUT BY THE AUDIT PARTY THE SAM E WOULD CONSTITUTE INFORMATION. 2.2 IT IS SUBMITTED THAT THE OBSERVATI ON/OBJECTION OF THE AUDIT PARTY CAN BE REGARDED AS 'INFORMATION' FOR THE PURP OSE OF REOPENING OF ASSESSMENT U/S.147 OF THE ACT. AS L ONG AS AUDIT DOES NOT INTERPRET THE LAW BUT ONLY DRAWS THE ATTENTION OF THE ASSESSING OFFICER TO THE EXISTENCE OF LAW AS HELD IN CIT V. FIRST LEASING COMPANY OF INDIA LT D. (241 ITR 246) RE-OPENING IS VALID EVEN THOUGH IT I S BASED ON AUDIT OBJECTION ONLY. 2.3 IT IS SUBMITTED THAT IN THE PRESENT CASE TH E AUDIT HAS MERELY POINTED OUT THE FACT WHICH HAD BEEN OVERLOOK ED BY THE INCOME-TAX OFFICER NAMELY APPLICABILITY OF S ECTION 112(2) AND AS CAN BE SEEN FROM THE AUDIT OBJECTION IT IS ONLY A STATEMENT OF FACT THAT 80G DEDUCTION HAS NOT BEEN CORRECTLY CALCULATED. 2.4 HAVING REGARD TO THE FOLLOWING CASE LAWS WHI CH DEALS WITH THE ISSUE OF PERMISSIBILITY OF REOPENING ON TH E BASIS OF INFORMATION FROM AUDIT THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. (I) MA CHIDAMBARAM V. CIT(MADRAS) 216 ITR 175 (II)TUBE SUPPLIERS LTD. V. CIT (MADRAS) 216 ITR 59 6 ITA 1697/10 :- 4 -: 2.5 IT IS SUBMITTED THAT THE DECISION OF THE CAL CUTTA HIGH COURT IN THE CASE OF BERGER PAINTS INDIA LTD. V. AC IT & OTHERS 322 ITR 369 (CAL.) RELIED ON BY THE LEARNED CIT(A) IS DISTINGUISHABLE TO THE CIRCUMSTANCES AND FACTS O F THIS CASE. THE LEARNED CIT(A) HAD FAILED TO APPRECIATE T HE FACT THE ASSESSEE HAS OBJECTED TO THE PROCEEDINGS UJS.15 4 AND HAD CLAIMED THAT THE ISSUE BEING DEBATABLE IN N ATURE CANNOT BE DONE U/S.154. THE ASSESSING OFFICER HAS DROPPED PROCEEDINGS U/S.154 WHILE SIMULTANEOUSLY INITIATED PROCEEDINGS U/S.147 TO AVOID PARALLEL PROCEEDINGS. THUS THE CIRCUMSTANCES OF THE CASE DI FFER TO THE DECISION OF CALCUTTA HIGH COURT. 2.6 IT IS SUBMITTED THAT AS NO PROCEEDINGS U/S.143 (3) WAS DONE IN THIS CASE EARLIER THE JUDGEMENT OF THE APE X COURT IN THE CASE OF M/S.RAJESH JHAVERI STOCK BROKE RS PVT. LTD. 291 ITR 500 (SC) SQUARELY APPLY TO THE FA CTS OF THE CASE. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING IT IS PRAYED THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) BE SET ASIDE A ND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. THE CASE AS PUT FORTH BY THE LD. CIT/DR SHRI P. B.SEKARAN IS THAT IN VIEW OF THE LATEST LEGAL POSITION INCLUDING THE DECISION OF HON'BLE SUPREME COURT RENDERED IN THE CASE OF RAJESH JHAVE RI STOCK BROKERS PVT. LTD 291 ITR 500 THE REOPENING AFTER INTIMATI ON U/S 143(1) IS JUSTIFIED. ON THE OTHER HAND SMT. T.C.A. SANGEE THA ADVOCATE HAS PLACED HEAVY RELIANCE ON THE FINDING OF THE LD. CIT (A) AND HAS FURTHER SUBMITTED THAT THIS IS NOT A SIMPLE CASE OF PROCESS ING OF RETURN OF INCOME U/S 143(1) BECAUSE THE ASSESSING OFFICER HAD VENTURED TO TAKE ACTION U/S 154 OF THE ACT WHICH WAS SUBSEQUENTLY DR OPPED AFTER CONSIDERING THE OBJECTIONS OF THE ASSESSEE. MOREOV ER IT WAS ARGUED ITA 1697/10 :- 5 -: BY HER THAT AS PER THE RTI INFORMATION WHICH THE A SSESSEE SOUGHT IT WAS REVEALED THAT THE AUDIT PARTY HAD RAISED AN OBJ ECTION REGARDING COMPUTATION OF DEDUCTION U/S 80G OF THE ACT TO WHIC H THE ASSESSING OFFICER HAD REPLIED THAT HIS ACTION WAS CORRECT. B UT STILL UNDER THE PRESSURE OF THE REPOT THE ASSESSING OFFICER HAS UN DERTAKEN BOTH THESE PROCEEDINGS I.E ONE U/S 154 AND THE OTHER U/S 147 R .W. S 148 OF THE ACT ONE AFTER THE ANOTHER. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS IN THE LIGHT OF THE MATERIAL AVAILABLE ON RECORD. IN FACT A PIQUANT S ITUATION HAS ARISEN IN THIS CASE. HAD IT BEEN A SIMPLE CASE OF PROCESSING U/S 143(1) AND THE ASSESSING OFFICER WOULD HAVE FORMED HIS OWN OPINION THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT DUE TO ALL OWANCE OF DEDUCTION U/S 80G OF THE ACT IT WOULD BE A CLEAR C ASE OF RE- ASSESSMENT U/S 147 R.W.S 148. BUT IN THIS CASE RETURN OF INCOME WAS PROCESSED U/S 143(1) AFTER A LAPSE OF TWO YEARS AND THEREAFTER BASED ON THE BORROWED OPINION OF THE AUDIT PARTY UNDENIABLY THE ASSESSING OFFICER HAD JUSTIFIED ALLOWANCE OF 80G DE DUCTION EVINCED FROM INTER-SE COMMUNICATION BETWEEN THE ASSESSING OFFICER AND THE AUDIT PARTY. THE ASSESSING OFFICER AFTER INITIALLY DEFENDING HIS ACTION BUCKLED UNDER THE PRESSURE OF THE OPINION OF A TH IRD PARTY AND CHOSE TO TAKE ACTION U/S 147 OF THE ACT AND THAT TOO AFT ER DROPPING ITA 1697/10 :- 6 -: PROCEEDINGS U/S 154 WHICH WERE INITIATED FOR THE SA ME REASONING. THE LD. CIT(A) HAS TAKEN A VIEW IN THESE CIRCUMSTANCES THAT THE ASSESSING OFFICER HAS DEFINITELY APPLIED HIS MIND ON THIS ISS UE WHICH HAS BEEN MADE A GROUND FOR FORMING HIS OPINION FOR THE REASO N FOR REOPENING. IT IS TRITE THAT EVEN AFTER AMENDMENT TO SECTION 14 7 WITH EFFECT FROM 1.4.1989 THE RE-ASSESSMENT PROCEEDINGS ESSENTIALLY BASED ON CHANGE OF OPINION ARE NOT PERMISSIBLE. IN THAT VIEW OF TH E MATTER THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RAJESH JHAV ERI STOCKER BROKERS PVT. LTD (SUPRA) WOULD RATHER HELP THE CASE OF THE ASSESSEE. THE HON'BLE SUPREME COURT IN THAT CASE HAS NOT PERM ITTED RE- ASSESSMENT MERELY ON THE BASIS OF CHANGE OF OPINIO N BY THE ASSESSING OFFICER. IT IS TRUE THAT EVEN AFTER PROCESSING OF THE RETURN U/S 143(1) THE ASSESSING OFFICER IS REQUIRED TO RECORD REASONS FOR TAKING ACTION U/S 147 OF THE ACT. THE SAME AND SIMILAR CONDITIONS AP PLY TO THESE REASONS WHICH APPLY IN CASE WHEN REOPENING IS DONE AFTER MAKING SCRUTINY ASSESSMENT U/S 143(3) OF THE ACT. WE CA N SAFELY CONCLUDE IN THIS CASE THAT THE ASSESSING OFFICER HAS NOT FORM ED HIS OWN OPINION FOR TAKING RE-ASSESSMENT PROCEEDINGS WHICH IS SINE QUA NON FOR TAKING ACTION U/S 147 OF THE ACT AND HAS NOT RECORDED HIS OWN SATISFACTION OF ESCAPEMENT OF INCOME. BUT HE HAS SIMPLY ACTED ON B ORROWED OPINION OF AUDIT PARTY. THUS RE-ASSESSMENT CANNOT SURVI VE IN THE EYES OF THE LAW. THE ASSESSING OFFICER IS BOUND TO FORM HIS O WN OPINION ITA 1697/10 :- 7 -: REGARDING ESCAPEMENT OF INCOME WHICH IS TOTALLY EXT INCT IN THIS CASE. THE FACTUM REGARDING REPORT OF THE AUDIT PARTY THE REPLY OF THE ASSESSING OFFICER TO THE AUDIT PARTY AND OTHER ALLI ED FACTS WHICH WE HAVE DISCUSSED ABOVE HAVE NOT BEEN DISPUTED BY THE REVENUE. WE ARE IN AGREEMENT WITH THE LD. CIT(A)S VIEW AND AP ART FROM OTHER REASONS MENTIONED BY THE LD. CIT(A) WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER HAS NOT FORMED HIS OWN OPINION FOR TAKING ACTION U/S 148 BY RECORDING HIS REASONS. HENCE T HE ASSESSING OFFICER LACKS JURISDICTION IN THIS CASE. ACCORDINGLY WE CANNOT ALLOW THIS APPEAL OF THE REVENUE AND DISMISS THE SAME. 5. IN THE RESULT THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 9.7.2011. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 19 TH JULY 2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR