M/s. Nandan Exim Limited, Ahmedabad v. Dy.Commissioner Of Income Tax, Circle-3(1)(1),, Ahmedabad

ITA 2232/AHD/2017 | 2008-2009
Pronouncement Date: 19-11-2019 | Result: Allowed

Appeal Details

RSA Number 223220514 RSA 2017
Assessee PAN AAACN5327L
Bench Ahmedabad
Appeal Number ITA 2232/AHD/2017
Duration Of Justice 2 year(s) 1 month(s) 13 day(s)
Appellant M/s. Nandan Exim Limited, Ahmedabad
Respondent Dy.Commissioner Of Income Tax, Circle-3(1)(1),, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 19-11-2019
Appeal Filed By Assessee
Tags 2232
Order Result Allowed
Bench Allotted B
Tribunal Order Date 19-11-2019
Assessment Year 2008-2009
Appeal Filed On 06-10-2017
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD BEFORE SHRI WASEEM AHMED ACCOUNTANT MEMBER & MS. MADHUMITA ROY JUDICIAL MEMBER ITA NO. 2232/AHD/2017 (ASSESSMENT YEAR : 2008-09) NANDAM EXIM LIMITED SURVEY NO.198 203/2 SAIJPUR GOPALPUR PIRANA ROAD PIPLAJ AHMEDABAD 382 405. VS. DCIT CIRCLE 3(1)(1) AHMEDABAD. [PAN NO. AAACN 5327 L] ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI S. N. SOPARKAR & URVASHI SODHAN A.R. RESPONDENT BY : SHRI MUDIT NAGPAL SR. D.R. DATE OF HEARING 1 8 / 1 0/2019 DATE OF PRONOUNCEMENT 19/ 11 /2019 O R D E R PER MS. MADHUMITA ROY - JM: THE INSTANT APPEAL FILED BY THE ASSESSEE IS DIRECTE D AGAINST THE ORDER DATED 07.10.2016 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 9 AHMEDABAD ARISING OUT OF THE ORDER DATED 30.06.2015 PASSED BY THE LEARNED DCIT CIRCLE-3(1)(1) AHMEDABAD UNDER SECTION 143(3) R.W.S. 147 OF THE IN COME TAX ACT 1961 (HEREINAFTER REFERRED AS TO THE ACT) FOR THE ASSESSMENT YEAR 2 008-09. 2. THE ASSESSEE HEREIN HAS CHALLENGED INTER ALIA TH E REASSESSMENT PROCEEDING INITIATED U/S 147 OF THE ACT AND THE RESULTANT EFFECT THEREOF . - 2 - ITA NO.2232/AHD/2017 NANDAN EXIM LTD. VS. DCIT ASST.YEAR 2008-09 3. THE BRIEF FACTS LEADING TO THIS CASE IS THIS THA T THE ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURING OF DENIM BOTTOM WEIGHT COTTON GA RMENTS YARN AND TRADING OF FABRICS FILED ITS ORIGINAL RETURN OF INCOME ON 22.10.2008 D ECLARING INCOME AT RS.4 12 18 090/- FOR A.Y. 2008-09 WHICH WAS FINALIZED ON 29.03.2010 BY T HE ASSESSING OFFICER BY ASSESSING INCOME AT RS.4 43 25 750/-. SUBSEQUENTLY NOTICE U/ S 148 DATED 22.08.2014 WAS ISSUED WHEREBY AND WHEREUNDER THE CASE OF THE ASSESSEE WAS REOPENED FOR A.Y. 2008-09. IN RESPONSE TO THE NOTICE DATED 22.08.2014 THE ASSESS EE ON 24.09.2014 SUBMITTED THAT THE RETURN FILED ON 31.10.2008 BE TREATED AS RETURN FIL ED IN COMPLIANCE TO NOTICE U/S 148 OF THE ACT. SUBSEQUENTLY THE ASSESSEE WAS PROVIDED WITH A COPY OF REASON RECORDED FOR SUCH REOPENING BY AND UNDER A LETTER DATED 01.06.2005. F INALLY THE ASSESSEES INCOME WAS REASSESSED AT RS.4 62 18 100/- ON 30.06.2015 BY THE DCIT CIRCLE 3(1)(1) AHMEDABAD U/S 143(3) R.W.S 147 OF THE ACT WHICH WAS IN TURN CONFIRMED BY THE LEARNED CIT(A) HENCE THE APPEAL BEFORE US. 4. AT THE TIME OF HEARING OF THE INSTANT APPEAL TH E LEARNED COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE VALIDITY AND/ OR THE MAINTAINABILITY OF THE INITIATION OF PROCEEDINGS U/S 147 OF THE ACT AND ISSUANCE OF N OTICE DATED 22.08.2014 U/S 148 OF THE ACT SUFFERS BY LIMITATION. SINCE THE ISSUANCE NOTIC E U/S 148 IS BEYOND THE PERIOD OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR FOR WHICH THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT THE NOTICE WAS BAD IN LAW ILLEGAL AND BARRED BY LIMITATION AND THEREFORE THE ENTIRE REASSESSMENT P ROCEEDINGS DESERVES TO BE QUASHED. FURTHER THAT IT IS A SETTLED PRINCIPLE OF LAW THAT NO ACTION SHALL BE TAKEN U/S 147 OF THE ACT AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELE VANT ASSESSMENT YEAR UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH A SSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETUR N OF INCOME U/S 139 OF THE ACT OR TO DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS NECESSAR Y FOR HIS ASSESSMENT. NO SUCH FAILURE ON - 3 - ITA NO.2232/AHD/2017 NANDAN EXIM LTD. VS. DCIT ASST.YEAR 2008-09 THE PART OF THE ASSESSEE EITHER IN COMPLIANCE OF PR OVISIONS OF SECTION 139 142(1) OR IN DISCLOSING TRULY AND FULLY ALL MATERIAL FACTS NECES SARY FOR THE SUCH ASSESSMENT FOR A.Y. 2008-09 REFLECTED IN THE REASONS RECORDED BY THE AS SESSING OFFICER WHILE REOPENING THE ASSESSMENT WHICH WOULD SUGGEST ESCAPEMENT OF INCOME AND THUS ISSUANCE OF SUCH NOTICE IS BAD AND ILLEGAL IN THE EYES OF LAW. IN THIS RESP ECT LEARNED SENIOR COUNSEL RELIED UPON THE JUDGMENT PASSED BY THE HONBLE JURISDICTIONAL H IGH COURT IN THE CASE OF KANAK FABRICS-VS-ITO REPORTED IN [2014] 49 TAXMANN.COM 10 8 (GUJARAT). ON THE OTHER HAND LEARNED DR RELIED UPON THE ORDER PASSED BY THE AUTH ORITIES BELOW U/S 143(3) R.W.S 147 OF THE ACT. 5. HEARD THE RESPECTIVE PARTIES PERUSED THE RELEVA NT MATERIALS AVAILABLE ON RECORD. IT APPEARS FROM THE RECORDS THAT THE RETURN OF INCOME WAS FILED ORIGINALLY U/S 139(1) OF THE ACT ON 31.10.2008 FOR A.Y. 2008-09 SHOWING NET TAXA BLE PROFIT OF RS.4 12 18 090/-. SUCH ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 29.03.2010 AND THE TOTAL INCOME WAS COMPUTED AT RS.4 43 25 750/-. THE LEARNE D AO MADE THE FOLLOWING ADDITION: I. ON ACCOUNT OF UNDER VALUATION RS.10 88 079/- II. ON ACCOUNT OF DISALLOWANCE OF INTEREST U/S 14A OF THE ACT RS.13 11 030/- III. ON ACCOUNT OF DEPRECIATION ON MOTOR CAR RS. 6 19 251/- IV. INSURANCE RS. 89 300/- THE RETURNED INCOME RS. 4 12 18 090/- TOTAL RS.31 07 660/- IT IS RELEVANT TO MENTION THAT THE SAID ADDITION WA S DELETED BY THE LEARNED CIT(A) IN APPEAL EXCEPT ADDITION OF RS.10 88 079/- IN RESP ECT OF UNDER VALUATION OF CLOSING STOCK AND ADDITION OF RS.89 300/- ON ACCOUNT OF INSURANCE ON NEW MOTOR CAR. - 4 - ITA NO.2232/AHD/2017 NANDAN EXIM LTD. VS. DCIT ASST.YEAR 2008-09 WE HAVE ALSO GONE THROUGH THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT DATED 22.08.2014 AVAILABLE AT PAGE 84 OF THE PAPER BOOK WHICH IS AS FOLLOWS: AS PER THE SECTION 43A OF THE INCOME TAX ACT 196 1 GAIN OR LOSS DUE TO EXCHANGE RATE FLUCTUATION ON REPAYMENT OF BORROWED CAPITAL OR INTEREST DURING ANY PREVIOUS YEAR AFTER ACQUISITION OF SUCH ASSET SHALL BE REDUCED FROM THE COST OF THE ASSET ACQUIRED WITH SUCH BORROWED CAPITAL. IT WAS OBSERVED FROM THE PROFIT AND LOSS ACCOUNT TH AT FOREIGN EXCHANGE RATE DIFFERENCE OF RS.44 18 355/- (NET) WAS DEBITED TO T HE PROFIT AND LOSS ACCOUNT UNDER MANUFACTURING AND OPERATING EXPENSES. AS PER THE BR EAK UP OF THIS EXPENSE ASSESSEE HAD INCURRED EXPENSE OF RS.45 12 971/- ON FOREIGN EXCHANGE FLUCTUATION (FEF) ON FIXED ASSET AT SR. NO.5 OF THE NOTES FORMI NG PART OF THE ACCOUNTS IT WAS DISCLOSED THE FEF UP TO THE DATE ON WHICH THE ASSET S WERE READY WAS CHARGED TO PROFIT AND LOSS ACCOUNT. IN VIEW OF THE PROVISIONS OF SECTION 43A OF THE ACT COST OF THE ASSET REQUIRED TO BE INCREASED TO THE EXTENT OF LOSS IN FEF WHICH WAS NOT DONE RESULTING IN UNDERASSESSMENT OF INCOME OF RS.38 36 025/- AFTER PROVIDING FOR DEPRECIATION OF RS.6 76 946/- @ 15% ON EXPENSE OF R S.45 12 971/- REQUIRED TO BE ADDED TO THE COST OF ASSET. INCIDENTALLY DURING TH E PREVIOUS YEAR 2006-07 RELEVANT TO A.Y. 2007-08 THE FEF GAIN OF RS.50 34 115/- WAS REDUCED FROM THE COST OF ASSET AND NOT CREDITED TO THE PROFIT AND LOSS ACCOU NT. IN LIGHT OF THE FACTS RECORDED ABOVE THERE IS REAS ON TO BELIEVE THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT FOR A.Y. 200 8-09. ISSUE NOTICE U/S 148 OF THE I.T. ACT IN REPLY THE ASSESSEE SUBMITTED AN OBJECTION AGAIN ST THE SAID REOPENING OF ASSESSMENT ON 16.06.2014 BEFORE THE LEARNED AO WHIC H IS AVAILABLE AT PAGE 85 TO 96 OF THE PAPER BOOK BEFORE US. ADMITTEDLY THE END OF THE RELEVANT ASSESSMENT YEAR IS AS ON 31.03.2009 AND THE ASSESSMENT WAS COMPLETED U/S 143(3) ON 29.03.2010. ACCORDING TO THE PROVISION OF SECTION 147 OF THE ACT THE REOPENING NOTICE COULD HAVE BEEN ISSUED WITHIN THE PERIOD OF 4 YEARS FROM THE END OF THE A.Y. I.E. BY 31.03.2009. FURTHER THAT THE PROVISO OF SECTION 147 - 5 - ITA NO.2232/AHD/2017 NANDAN EXIM LTD. VS. DCIT ASST.YEAR 2008-09 PROVIDES THAT WHERE AN ASSESSMENT U/S 143(3) HAS BE EN MADE FOR THE RELEVANT ASSESSMENT YEAR NO ACTION SHALL BE TAKEN UNDER SECTION 147 AF TER THE EXPIRY OF 4 YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR UNLESS ANY INCOME CHAR GEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE O N THE PART OF THE ASSESSEE TO MAKE A RETURN OF INCOME U/S 139 HAVING NOT BEEN DISCLOSED FULLY AND TRULY ALL MATERIALS FACTS NECESSARY FOR HIS ASSESSMENT. SINCE REOPENING IS RE QUIRED TO BE DONE WITHIN 4 YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR THE LAST DAY A VAILABLE FOR INITIATION OF SUCH REASSESSMENT PROCEEDING WAS ON 31.03.2013 WHEREAS I T IS ADMITTED POSITION THAT THE LEARNED AO HAS ISSUED A NOTICE U/S 148 ON 28.08.201 4. APART FROM THAT AS IT APPEARS FROM THE RECORDS THAT THE DETAILS FROM FOREIGN EXCHANGE FLUCTUATION WAS SUBMITTED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING BY THE ASSESSEE BY AND UNDER A LETTER DATED 19.03.2010 AND FURTHER THAT SERIAL NO.5 OF TH E NOTES FORMING PART OF ACCOUNTS STATES THE FACT THAT FOREIGN EXCHANGE FLUCTUATION PERTAINI NG THE FIXED ASSET HAS BEEN CHARGED TO PROFIT AND LOSS ACCOUNT; THE SAME WAS ALSO AVAILABL E IN AUDIT REPORT OF THE COMPANY SUBMITTED AT THE TIME OF ORIGINAL ASSESSMENT PROCEE DING U/S 143(3) OF THE ACT. THE RELEVANT PORTION AS AVAILABLE IN THE PAPER BOOK BEF ORE US IS AS FOLLOWS: 5. FOREIGN EXCHANGE FLUCTUATION LOSS OF RS.45 12 9 71/- IN RESPECT OF FIXED ASSETS PERTAINING TO THE YEAR UP TO THE DATE ON WH ICH THE ASSETS ARE READY FOR ITS INTENDED USE HAVE BEEN DEBITED TO PROFIT AND LOSS A CCOUNT (PREVIOUS YEAR GAIN OF RS.5 0 34 115/- REDUCED FROM THE COST OF FIXED ASSE TS.) FOREIGN EXCHANGE GAIN OF RS.12 73 861/- (PREVIOUS YEAR RS.2 776 975/-) IN RE SPECT OF EXPORTS INCLUDED IN SALES AND OPERATING INCOME. FOREIGN EXCHANGE LOSS A MOUNTING TO RS.1 179 245/- (PREVIOUS YEAR GAIN RS.7 91 269/-) IN RESPECT OF VA RIOUS ITEMS IS DEBITED TO PROFIT AND LOSS ACCOUNT. IT ALSO APPEARS FROM RECORDS THAT DURING THE COURS E OF ASSESSMENT PROCEEDING U/S 143(3) OF THE ACT THE ASSESSEE COMPANY HAS SUBMITT ED TAX AND AUDIT REPORT AND ALSO THE BOOKS OF ACCOUNTS WHICH WAS VERIFIED BY THE LEARNED AO. THUS THE NECESSARY MATERIALS - 6 - ITA NO.2232/AHD/2017 NANDAN EXIM LTD. VS. DCIT ASST.YEAR 2008-09 WHICH WERE CALLED FOR DULY SUBMITTED BY THE ASSESSE E BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDING. TAKIN G INTO CONSIDERATION THE ENTIRE ASPECT OF THE MATTER IT CAN BE OBSERVED THAT NO FAILURE O N THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIALS FACTS NECESSARY FOR T HE ASSESSMENT WAS FOUND SO AS TO SUGGEST ESCAPEMENT OF INCOME AND THEREFORE ISSUANCE OF NOTI CE U/S 148 OF THE ACT IS BAD IN LAW; IT IS NOTHING BUT THE CHANGE OF OPINION. IT IS RELEVAN T TO MENTION HERE THAT THE STATUTORY AUDIT ACCOUNTS UNDER THE COMPANIES ACT AS WELL AS TAX AU DIT REPORT IN FORM 3CA & 3CD WERE ALSO MADE AVAILABLE TO THE LEARNED AO. UPON CO NSIDERING THOSE ASPECT THE ADDITION OF RS.31 07 660/- WAS MADE FINALIZING THE ORIGINAL ASSESSMENT ON 29.03.2010 U/S 143(3) OF THE ACT. IT IS THE PRIMARY DUTY OF THE ASSESSEE TO DISCLOSE NECESSARY DETAILS OF BASIC MATERIAL FOR ASSESSMENT AND ONCE THE SAME IS FURNIS HED IT IS THE PREROGATIVE TO THE ASSESSING OFFICER AS TO WHY INFERENCE IS REQUIRED T O DRAW FROM THE DETAILS PROVIDED BY THE ASSESSEE. IT IS NOT THE DUTY OF THE ASSESSEE TO LEAD THE ASSESSING OFFICER TO ANY PARTICULAR INFERENCE OR FACT OR ON LAW ON THE BASIS OF SUCH PRIMARY DISCLOSURE. 6. WE HAVE FURTHER CAREFULLY CONSIDERED THE JUDGMEN T RELIED UPON BY THE LEARNED ADVOCATE PASSED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF KANAK FABRICS WHEREIN UPON PERUSAL OF REASONS RECORDED IT SHOWED THAT THE RE WAS NOT EVEN A WHISPER TO EFFECT THAT INCOME HAS ESCAPED ASSESSMENT ON ACCOUNT OF AN Y FAILURE ON PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR ITS ASSESSMENT. EVEN IN AFFIDAVIT- IN-REPLY FILED BY THE REVENUE THERE WAS NO ALLEGAT ION OF ANY SUCH FAILURE ON THE PART OF THE ASSESSEE. THUS IT WAS HELD THAT IN THE ABSENCE OF SATISFACTION RECORDED BY THE LEARNED AO ASSUMPTION OF JURISDICTION U/S 147 WAS INVALID AND CONSEQUENTLY NOTICE ISSUED U/S 148 COULD NOT BE SUSTAINED. WE THUS GIVE A FINDING FIRSTLY THAT THE NOTICE U/S 148 OF THE ACT ISSUED ON 22.08.2014 I.E. AFTER THE EXPIRY OF T HE PERIOD OF 4 YEARS FROM THE END OF THE A.Y. 2008-09. THE LAST DAY AVAILABLE FOR INITIATION OF RE-ASSESSMENT PROCEEDING WAS ON - 7 - ITA NO.2232/AHD/2017 NANDAN EXIM LTD. VS. DCIT ASST.YEAR 2008-09 31.03.2013. THUS WE FIND THAT ASSESSMENT CAN ONLY B E REOPENED BEYOND THE PERIOD OF 4 YEARS IF AND ONLY IF AN INCOME CHARGEABLE TO TAX AS ESCAPED ASSESSMENT BY REASON OF FAILURE ON THE PART OF THE ASSESSEE. I. TO MAKE A RETURN U/S 139 OR IN RESPONSE TO NOTICE U NDER SUB SECTION 1 OF SECTION 142 OR SECTION 148 OR II. TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECE SSARY FOR HIS ASSESSMENT FOR ASSESSMENT YEAR. IT IS AN ADMITTED POSITION THAT THE INSTANT CASE IN HAND THE FIRST SITUATION DOES NOT ARISE. FURTHER THAT CONSEQUENTLY THERE IS NOTHING IN THE R EASON FOR RECORDING REASSESSMENT INDICATING THAT THERE IS ANY FAILURE OF THE ASSESSE E TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT FOR THE ASSESSME NT YEAR UNDER CONSIDERATION THUS WE FIND THAT IN THE AFORESAID PREMISES THE ASSUMPTION OF JURISDICTION U/S 147 OF THE ACT BY ISSUING NOTICE U/S 148 OF THE ACT IS WITHOUT JURISD ICTION PARTICULARLY WHEN THE ASSESSING OFFICER FAILED TO RECORD HIS SATISFACTION THAT THE INCOME HAS ESCAPED ASSESSMENT BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT. WE THUS FIND ASSUMPTION OF JUR ISDICTION U/S 147 IS INVALID BAD IN LAW AND THUS THE SAME IS HEREBY QUASHED. THUS ASSESSEE S APPEAL IS THEREFORE ALLOWED. 6. IN THE RESULT ASSESSEES APPEAL IS ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 19/11/2019 SD/- SD/- ( WASEEM AHMED ) ( MS. MADHUMITA ROY ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 19/11/2019 TANMAY SR.PS - 8 - ITA NO.2232/AHD/2017 NANDAN EXIM LTD. VS. DCIT ASST.YEAR 2008-09 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-9 AHMEDABAD. 5. ! ' #$%% / DR ITAT AHMEDABAD 6. &' () / GUARD FILE. / BY ORDER //TRUE COPY// / ( DY./ASSTT.REGISTRAR) ! #$ / ITAT AHMEDABAD 1. DATE OF DICTATION 11.07.2019 (DICTATION PAGES 8) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 18.07.2019 3. OTHER MEMBER. 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S .. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK19.11 .2019 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER