The ADIT.,(Intl.Taxn.), Ahmedabad v. The Niko Resources Ltd.,, Baroda

ITA 2717/AHD/2008 | 2002-2003
Pronouncement Date: 26-03-2010 | Result: Dismissed

Appeal Details

RSA Number 271720514 RSA 2008
Assessee PAN AAACN7060L
Bench Ahmedabad
Appeal Number ITA 2717/AHD/2008
Duration Of Justice 1 year(s) 7 month(s) 24 day(s)
Appellant The ADIT.,(Intl.Taxn.), Ahmedabad
Respondent The Niko Resources Ltd.,, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 26-03-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 26-03-2010
Date Of Final Hearing 16-03-2010
Next Hearing Date 16-03-2010
Assessment Year 2002-2003
Appeal Filed On 01-08-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI T.K.SHARMA JUDICIAL MEMBER AND SHRI N.S.SAINI ACCOUNTANT MEMBER DATE OF HEARING : 16/03/2010 DRAFTED ON: 1 7/03/2010 ITA NO.2717/AHD/2008 ASSESSMENT YEAR : 2002-03 THE ADIT (INTERNATIONAL TAXATION) AHMEDABAD VS. NIKO RESOURCES LIMITED 4 TH FLOOR LANDMARK RACE COURSE CIRCLE BARODA PAN/GIR NO. : AAACN 7060 L (APPELLANT) .. (RESPONDENT) AND CO NO.235/AHD/2008 (ARISING OUT OF ITA NO.2717/AHD/2008) ASSESSMENT YEAR 2002-03 NIKO RESOURCES LTD. THE ADIT (INTL.TAXN.) BARODA VS. AHMED ABAD (CROSS OBJECTOR) (RESPONDENT) REVENUE BY : SHRI JAGDEO CIT ASSESSEE BY: S/SHRI PERCY P.PARDIWALLA/TANVISH BHATT/VISPI T.PATEL O R D E R PER SHRI T.K.SHARMA JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE ARE AGAINST THE ORDER DATED 15/05/2008 OF THE LEARN ED CIT(APPEALS)- XXI AHMEDABAD FOR ASSESSMENT YEAR 2002-03. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S A COMPANY ENGAGED IN THE BUSINESS OF EXPLORATION AND PRODUCTION OF N ATURAL GAS AND OIL. FOR ITA NO.2717/AHD/2008 (BY REVENUE) AND CO NO.235/AHD/2008 (BY ASSESSEE) ADIT (INTL.TAXN.) AHD VS. NIKO RESOURCES LTD. ASST.YEAR 2002-03 - 2 - THE ASSESSMENT YEAR UNDER APPEAL IT HAS FILED THE RETURN OF INCOME ON 31/02/2002 DECLARING TOTAL INCOME OF RS.63 14 97 01 0/-. THE ASSESSING OFFICER FRAMED THE ASSESSMENT U/S.143(3) OF THE I.T . ACT 1961 ON 28/02/2005 WHEREIN HE ALLOWED THE DEDUCTION AMOUNT ING TO RS.4 06 04 390/- U/S.44C OF THE I.T. ACT 1961 IN R ESPECT OF HEAD OFFICE EXPENSES AT 5% OF ADJUSTED INCOME OF INCOME RS.81 2 0 87 795/-. SUBSEQUENTLY THE ASSESSING OFFICER REOPENED THE AS SESSMENT BY ISSUING NOTICE U/S.148 ON 26/03/2006. THE REASONS RECORDED BEFORE ISSUING NOTICE U/S.148 OF THE I.T. ACT 1961 ARE AS UNDER:- 1. THE RETURN OF INCOME FOR A.Y. 2000-01 WAS FILE D ON 31/10/2000 DECLARING TOTAL INCOME AT RS.63 14 97 01 0/-. SUBSEQUENTLY THE ASSESSMENT WAS FINALIZED U/S.143( 3) OF THE IT ACT 1961 ON 28/02/2005 DETERMINING TOTAL INCOME AT RS.77 14 83 380/-. WHILE FINALIZING THE ASSESSMEN T U/S.143(3) OF THE ACT THE DEDUCTION U/S.44C WAS COMPUTED AND ALL OWED TO THE ASSESSEE AMOUNTING TO RS.4 06 04 390/- AS AGAINST RS.3 32 36 685/- CLAIMED BY THE ASSESSEE IN THE RET URN OF ITS INCOME. SUBSEQUENTLY IT WAS NOTICED THAT THE ASSESSEE CLAI MED DEDUCTION U/S.44C AMOUNTING TO RS.3 32 36 685/- AND THE SAID CLAIM WAS APPROVED BY THE ADDL. COMMISSIONER OF INCOME-TAX (T RANSFER PRICING-II) MUMBAI VIDE HIS ORDER DATED 26/03/2004 U/S.92CA OF THE ACT. THEREFORE THE DEDUCTION U/S.44C OF RS. 4 96 04 390/- WHICH WAS ALLOWED TO THE ASSESSEE WHILE FINALIZING THE ASSESSMENT RESULTED IN EXCESS ALLOWANCE OF DEDUCTION U/S.44C. IN VIEW OF THE ABOVE FACTS I HAVE REASON TO BELIEV E THAT THE INCOME CHARGEABLE TO TAX AMOUNTING TO RS.73 67 705/- (4 06 04 390/- - 3 32 36 685/-) HAS ESCAPED THE ASSESSMENT WITHIN TH E MEANING OF SECTION 147 OF THE INCOME-TAX ACT 1961. ITA NO.2717/AHD/2008 (BY REVENUE) AND CO NO.235/AHD/2008 (BY ASSESSEE) ADIT (INTL.TAXN.) AHD VS. NIKO RESOURCES LTD. ASST.YEAR 2002-03 - 3 - 2.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS T HE ASSESSEE OBJECTED TO RE-OPENING OF THE ASSESSMENT. HOWEVER THE ASSESSING OFFICER WITHOUT COMMENTING ON THE OBJECTION OF THE ASSESSEE REGARDING REOPENING OF ASSESSMENT RE-COMPUTED THE INCOME WHE REIN HE RE-WORKED OUT THE DEDUCTION ALLOWABLE U/S.44C OF THE I.T. ACT 1961 AT RS.3 32 36 685/- AS AGAINST ORIGINALLY U/S.143(3) O F THE I.T. ACT 1961 AT RS.4 06 04 390/-. AGAINST THE ORDER PASSED U/S.14 3(3) OF THE I.T. ACT 1961 R.W.S.147 OF THE I.T. ACT 1961 DATED 10/12/20 07 THE ASSESSEE FILED AN APPEAL BEFORE THE LEARNED CIT(APPEALS) ON THE FO LLOWING GROUNDS:- 1. THE APPELLANT OBJECTS TO THE ORDER DATED DECE MBER 12 2007 PASSED UNDER SECTION 143(3) READ WITH SECTION 147 O F THE INCOME- TAX ACT 1961 (THE ACT) BY THE ADDITIONAL DIRECTO R OF INCOME-TAX (INTERNATIONAL TAXATION) AHMEDABAD (AO') FOR THE AFORESAID ASSESSMENT YEAR ON THE FOLLOWING AMONG OTHER GROUND S: 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED AO LEGALLY ERRED IN RE-OPENING THE ASSESSMENT UNDER SE CTION 147 OF THE ACT. THE LEARNED AO ERRED BY NOT APPRECIATING TH E FACT THAT THE APPELLANT HAD DISCLOSED ALL MATERIAL ACTS IN RELATI ON TO DEDUCTION CLAIMED UNDER SECTION 44C IN THE RETURN OF INCOME AS WELL AS DURING THE ASSESSMENT PROCEEDINGS. THE REOPENING OF THE ASSESSMENT ON THE SAME SET OF FACTS AMOUNTS TO CHAN GE OF OPINION. IN THIS CONNECTION RELIANCE MAY BE PLACED ON THE F OLLOWING DECISIONS: FORAMER FRANCE (247 ITR 436 AND 264 ITR 586) (SC) GARDEN SILK MILLS LTD. (222 ITR 68) (GUJARAT) SGS INDIA P.LTD. (292 ITR 93) (BOM.) IT IS PRAYED THAT THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT BE QUASHED. ITA NO.2717/AHD/2008 (BY REVENUE) AND CO NO.235/AHD/2008 (BY ASSESSEE) ADIT (INTL.TAXN.) AHD VS. NIKO RESOURCES LTD. ASST.YEAR 2002-03 - 4 - 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED AO ERRED IN RESTRICTING THE HEAD OFFICE EX PENSES UNDER SECTION 44C OF THE ACT TO RS.33 236 685. HE ERRED BY NOT APPRECIATING THAT THE TRANSFER PRICING OFFICER (TP O) HAS DETERMINED RS.6.13 CRORES AS ARMS LENGTH PRICE3 O F THE HEAD OFFICE EXPENSES ATTRIBUTABLE TO INDIAN OPERATIONS. THERE FORE ANY AMOUNT CLAIMED/ALLOWED WHICH IS LESS THAN OR EQUAL TO RS.6 .13 CRORES WOULD MET THE ARMS LENGTH STANDARD AS DETERMINED BY THE TPO. IT IS PRAYED THAT THE LEARNED AO BE DIRECTED TO AL LOW THE HEAD OFFICE EXPENSES AS PER SECTION 44C OF THE ACT I.E.5% OF TH E ADJUSTED TOTAL INCOME. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LEARNED AO ERRED IN LEVYING INTEREST UNDER SECTION 234A 2 34B 234C AND 234D OF THE ACT. THE APPELLANT CRAVES LEAVE TO ADD ALTER AMEND OR WITHDRAW ALL OR ANY OF THE GROUNDS OF APPEAL HEREIN AND TO SUBMIT S UCH STATEMENTS DOCUMENTS AND PAPERS AS MAY BE CONSIDER ED NECESSARY EITHER AT OR BEFORE THE APPEAL HEARING. 2.2. DURING THE COURSE OF HEARING BEFORE THE LEARN ED CIT(APPEALS) IT WAS CONTENDED THAT MERE CHANGE OF OPINION CANNOT BE THE BASIS FOR RE- OPENING THE ASSESSMENT. IN SUPPORT OF THIS RELIA NCE WAS PLACED ON THE FOLLOWING DECISIONS:- SL.NO(S) DECISION IN THE CASE OF REPORTED IN 1. CIT VS. KELVINATOR OF INDIA LTD. 256 ITR 1 (DEL) (FB) 2. CIT VS. EICHER 163 TAXMAN 259 (DEL) 3. CIT VS. FORAMER FRANCE 264 ITR 566 (SC) 4. CIT VS. BHANJI LAVJI 79 ITR 582 (SC) 5. IPCA LABORATORIES LTD. VS. DCIT 251 ITR 416 (BOM) 6. BIRLA VXL LTD. VS. CIT 217 ITR 1 (GUJ.) ITA NO.2717/AHD/2008 (BY REVENUE) AND CO NO.235/AHD/2008 (BY ASSESSEE) ADIT (INTL.TAXN.) AHD VS. NIKO RESOURCES LTD. ASST.YEAR 2002-03 - 5 - 2.3. FURTHER IT WAS SUBMITTED THAT TPO MADE DETAIL ED SCRUTINY OF THE INTERNATIONAL TRANSACTION WITH HEAD OFFICE OF THE A SSESSEE. ON SAME SET OF FACTS THE ASSESSING OFFICER RE-OPENED THE ASSESSME NT. THE ASSESSEE HAD DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESS ARY FOR ASSESSMENT. TO SUM UP THE ASSESSEE CONTENDED THAT THE PROVISIONS OF SECTION 147 DO NOT HAVE ANY APPLICATION TO ITS CASE AND THEREFORE TH E ACTION OF THE ASSESSING OFFICER WAS ERRONEOUS ON POINT OF LAW CONTRARY TO THE FACTS OF THE CASE AND WITHOUT OR IN EXCESS OF HIS JURISDICTION. THE ASSESSEE DISCLOSED ALL THE FACTS TRULY AND FULLY. THERE IS NO OMISSION O N THE PART OF THE ASSESSEE AS REGARDS THE DISCLOSURE OF FACTS. THE ASSESSING OFFICER HAS HIMSELF COMPUTED THE DEDUCTION U/S.44C OF RS.4 06 04 390/- WHILE COMPUTING TAXABLE INCOME IN THE ASSESSMENT ORDER AT RS.77 14 83 380/-. THE ASSESSING OFFICER WAS HAVING THE ORDER BY TPO WITH HIM WHICH CLEARLY STATED THAT THE ARMS LENGTH PRICE IS RS.6.13 CRORE S. IN ACCORDANCE WITH THE PROVISIONS OF SECTION 44C OF THE ACT AND AFTER APPLYING HIS MIND THE ASSESSING OFFICER ALLOWED A DEDUCTION OF RS.40 604 390 WHICH IS 5% OF ADJUSTED TOTAL INCOME THEN. ACCORDINGLY THE ASSES SEE ARGUED THAT AS HELD BY THE VARIOUS COURTS THE ASSESSING OFFICER IS NOT ENTITLED TO CHANGE HIS OPINION ON THE SAME SET OF FACTS THAT WERE BEFORE H IM WHILE PASSING THE ORIGINAL ASSESSMENT ORDER. 2.4. ON MERITS BEFORE THE LEARNED CIT(APPEALS) IT WAS CONTENDED THAT AS PER SECTION 44C OF THE I.T. ACT 1961 THE HEAD OFFICE EXPENDITURE IN THE CASE OF NON-RESIDENT IS ALLOWED TO THE EXTENT O F LOWER OF THE FOLLOWING TWO AMOUNTS:- ITA NO.2717/AHD/2008 (BY REVENUE) AND CO NO.235/AHD/2008 (BY ASSESSEE) ADIT (INTL.TAXN.) AHD VS. NIKO RESOURCES LTD. ASST.YEAR 2002-03 - 6 - (A) AN AMOUNT EQUAL TO 5% OF THE ADJUSTED TOTAL IN COME (I.E. INCOME COMPUTED ACCORDING TO THE PROVISIONS OF THE IT ACT BEFORE AVAILING CERTAIN DEDUCTIONS UNDER THE SAID A CT.) (B) SO MUCH OF THE EXPENDITURE IN THE NATURE OF HEA D OFFICE EXPENSES INCURRED BY THE ASSESSEE AS IS ATTRIBUTABL E TO THE BUSINESS OR PROFESSION OF THE ASSESSEE IN INDIA. 2.5. IT WAS ALSO SUBMITTED THAT IN THE RETURN OF IN COME THE ASSESSEE CLAIMED HEAD OFFICE EXPENSES U/S.44C OF THE I.T. AC T 1961 (BASED ON THE 5% OF THE ADJUSTED TOTAL INCOME) RS.3 32 36 685/- WHEREAS THE AMOUNT OF HEAD OFFICE EXPENSES ATTRIBUTABLE TO THE ASSESSEE I N INDIA IS RS.6.13 CRORES. THE TPO HAD DETERMINED RS.6.13 CRORES ALP OF THE HEAD OFFICE EXPENSES ATTRIBUTABLE TO INDIAN OPERATION. IN VIEW OF THIS THE ASSESSING OFFICER CORRECTLY COMPUTED THE DEDUCTION U/S.44C AT RS.4 06 04 390/- AND ALLOWED IN THE ORIGINAL ASSESSMENT ORDER. 3. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E IN THE IMPUGNED ORDER THE LEARNED CIT(APPEALS) UPHELD THE ACTION O F THE ASSESSING OFFICER REGARDING RE-OPENING OF THE ASSESSMENT U/S. 148 OF THE I.T. ACT 1961 BY GIVING A DETAILED REASON AS CONTAINED IN PA GE NO.9 OF HIS ORDER WHICH READS AS UNDER:- I HAVE GONE THROUGH THE ORDER PASSED BY THE ASSESS ING OFFICER AND SUBMISSIONS MADE BY THE COUNSEL OF THE APPELLAN T ALONGWITH VARIOUS CASE LAWS RELIED UPON BY THE APPELLANT IN S UPPORT OF HIS ARGUMENTS. THE ASSESSING OFFICER IS FULLY WITHIN H IS POWERS TO REOPEN THE CASE OF THE APPELLANT BECAUSE THE ASSESS ING OFFICER IN THE ORDER HAS ALLOWED DEDUCTION U/S.44C OF THE INCO ME-TAX ACT HIGHER THAN WHAT WAS CLAIMED BY THE APPELLANT. IN VIEW OF THE HIGHER DEDUCTION ALLOWED BY THE ASSESSING OFFICER A S AGAINST THE ITA NO.2717/AHD/2008 (BY REVENUE) AND CO NO.235/AHD/2008 (BY ASSESSEE) ADIT (INTL.TAXN.) AHD VS. NIKO RESOURCES LTD. ASST.YEAR 2002-03 - 7 - CLAIM OF THE APPELLANT THE ASSESSING OFFICER IS FU LLY JUSTIFIED IN REOPENING THE ASSESSMENT AND ISSUING NOTICE U/S.148 OF THE INCOME- TAX ACT. HON'BLE SUPREME COURT HAS HELD IN RAYMON D WOOLLEN MILLS LTD. VS. ITO (1999) 236 ITR 34 (SC) & GREEN A RTS (P) LTD. VS. ITO (2005) 257 ITR 639 (DELHI) THAT IN DETERM INING WHETHER COMMENCEMENT OF RE-ASSESSMENT PROCEEDINGS IS VALID THE COURT HAS ONLY TO SEE WHETHER THERE IS PRIMA FACIE SOME M ATERIAL ON THE BASIS OF WHICH THE DEPARTMENT OPENED THE CASE. TH E SUFFICIENCY OR CORRECTNESS OF THE MATERIAL IS NOT A THING TO BE CO NSIDERED AT THIS STAGE. THE ASSESSEE CANNOT CHALLENGE SUFFICIENCY O F BELIEF ITO VS. LAKHMANI MEWAL DAS (1976) 103 ITR 437 (SC). WH AT IS THE ULTIMATE RESULT OF ENQUIRY IS NOT MATERIAL FOR DECI DING THE JURISDICTION OF THE ASSESSING OFFICER TO REOPEN ASS ESSMENT EVEN IF IT IS FOUND ULTIMATELY THAT THERE HAS BEEN NO ESCAP EMENT OF INCOME MAHASUKHRAM MADAN LAL VS. CIT (1955) 28 ITR 299 ( PAT.). AFTER THE AMENDMENT IN THE SECTION THE ASSESSING O FFICER HAS BEEN GRANTED VIDE POWERS FOR REOPENING THE COMPLETED ASS ESSMENT AND IN THE INSTANT CASE THE CIRCUMSTANCES ARE QUITE EVI DENT ON ACCOUNT OF WHICH THE ASSESSING OFFICER HAS RESORTED TO SECT ION 147 OF THE INCOME3-TAX ACT. THEREFORE THE OBJECTION OF THE A PPELLANT IS REJECTED AND REOPENING BY THE ASSESSING OFFICER IS HELD TO BE IN ORDER. 3.1. ON MERITS THE LEARNED CIT(APPEALS) DELETED TH E ADDITION FOR THE DETAILED REASON GIVEN IN HIS FINDINGS AT PAGE NO.1 1 ARE IN THE FOLLOWING TERMS:- I HAVE CAREFULLY GONE THROUGH THE ORDER DATED 28/0 2/2005 PASSED BY THE ACIT CIRCLE-6 BARODA AND THE SUBMISSIONS M ADE BY THE ASSESSING OFFICER AND I AM OF THE OPINION THAT DEDU CTION U/S.44C IS DEPENDENT ON ADJUSTED TOTAL INCOME. IN THE ORDER D ATED 28/02/2005 PASSED U/S.143(3) THE ADJUSTED TOTAL IN COME WAS ARRIVED AT RS.81.21 CRORES AND THE CLAIM OF THE APP ELLANT WAS RESTRICTED TO 5% OF THE SAME COMPUTED AT RS.4.06 C RORES AS AGAINST THE CLAIM OF THE APPELLANT AT RS.3.32 CRORE S. THE DEDUCTION CLAIMED BY THE APPELLANT AT RS.3.32 CRORES WAS 5% O F ADJUSTED ITA NO.2717/AHD/2008 (BY REVENUE) AND CO NO.235/AHD/2008 (BY ASSESSEE) ADIT (INTL.TAXN.) AHD VS. NIKO RESOURCES LTD. ASST.YEAR 2002-03 - 8 - TOTAL INCOME ARRIVED AT BY THE APPELLANT WHICH WAS OF RS.66.47 CRORES. THE ORDER OF THE TRANSFER PRICING OFFICER (TPO) MUMBAI HAS ALSO CATEGORICALLY STATED THAT CONSIDERING THE PROVISIONS OF SECTION 44C OF THE INCOME-TAX ACT ANY DOWNWARD REV ISION OF THE ARMS LENGTH PRICE FROM RS.6.13 CR4ORES UPTO RS.3.3 2 CRORES WILL NOT HAVE ANY IMPACT ON THE TAX PAYABLE BY THE ASSES SEE COMPANY AS THE DEDUCTION U/S.44C HAS ALREADY BEEN RESTRICTE D TO RS.3.32 CRORES. THE TPO HAS ALSO ACCEPTED THE ARMS LENGT H PRICE AS COMPUTED BY THE ASSESSEE VIDE PARA 9 OF HER ORDER. IT BECOMES QUITE CLER THAT DEDUCTION U/S.44C IS DEPENDANT UPON THE ADJUSTED TOTAL INCOME. AS THE ADJUSTED TOTAL INCOME INCREA SES OR DECREASES THE DEDUCTION U/S.44C ALSO ACCORDINGLY GOES UP OR C OMES DOWN. THEREFORE THE DEDUCTION AS ALLOWED BY THE ASSESSIN G OFFICER IN HIS ORDER DATED 28/02/2005 IS AS PER THE PROVISIONS OF SECTION 44C AND ADDITION MADE OF RS.73 67 705/- MADE BY THE ASSESSI NG OFFICER VIDE HIS ORDER DATED 10/12/2007 IS DIRECTED TO BE D ELETED. 4. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(APPEAL S) REVENUE IS IN APPEAL BEFORE US BY WAY OF FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A)-XXI AHMEDABAD ERRED IN LAW IN ALLOW ING THE CLAIM OF THE ASSESSEE U/S.44C OF THE I.T. ACT A ND DELETING THE ADDITION OF RS.73 67 705/-. 2. THE LD. LEARNED CIT(A)-XXI AHMEDABAD ERRED IN N OT CONSIDERING THE FACT THAT TPO HAS NOT DISTURBED THE ARMS LENGTH PRICE AS DETERMINED BY THE ASSESSEE KEEPING IN MIND THAT ASSESSEE HAS CLAIMED ONLY RS.3 32 36 685/- IN THE RETURN OF INCOME. 5. THE ONLY GROUND RAISED BY THE ASSESSEE IN ITS C ROSS OBJECTION READS AS UNDER: ITA NO.2717/AHD/2008 (BY REVENUE) AND CO NO.235/AHD/2008 (BY ASSESSEE) ADIT (INTL.TAXN.) AHD VS. NIKO RESOURCES LTD. ASST.YEAR 2002-03 - 9 - THE LEARNED CIT(APPEALS)ERRED IN CONFIRMING THE A CTION OF THE LEARNED ASSESSING OFFICER IN REOPENING THE ASSE SSMENT UNDER SECTION 147 OF THE INCOME TAX ACT. 6. AT THE TIME OF HEARING SHRI JAGDEO-CIT LEARNED DEPARTMENTAL REPRESENTATIVE APPEARED FOR THE REVENUE AND CONTEND ED THAT IN THE IMPUGNED ORDER THE LEARNED CIT(APPEALS) UPHELD TH E ACTION OF THE ASSESSING OFFICER REGARDING RE-OPENING THE ASSESSME NT BY ISSUING NOTICE U/S.148 OF THE I.T. ACT 1961. FURTHER THE LEARNE D CIT(APPEALS) FAILED TO APPRECIATE THAT IN THE RETURN OF INCOME THE ASS ESSEE CLAIMED DEDUCTION U/S.44C AMOUNTING TO RS.3 32 36 685/- AND THE SAID CLAIM WAS APPROVED BY THE ADDL.CIT (TPO)II MUMBAI. IN PARAGRAPH NO .7 OF ORDER U/S.92CA DATED MARCH 26 2004 IT IS CLEARLY MENTIO NED THAT SINCE THE ASSESSEES CLAIM U/S.44C IS ALREADY RESTRICTED TO R S.3.32 CRORES ANY DOWNWARD REVISION TO ALP FROM RS.6.13 CRORES UPTO R S.3.32 CORES WILL NOT HAVE ANY IMPACT ON THE TAX PAYABLE BY THE ASSES SEE-COMPANY. HENCE THE ARMS LENGTH PRICE DETERMINED BY THE TPO IN HIS ORDER IS RS.3.32 CRORES. THE TPO IN HIS ORDER DID NOT DISTURB THE A RMS LENGTH PRICE DETERMINED BY THE ASSESSEE KEEPING IN MIND THAT AS SESSEE HAS CLAIMED ONLY RS.3 32 36 685/- IN THE RETURN OF INCOME. IN VIEW OF THIS THE ASSESSING OFFICER IN THE RE-ASSESSMENT PROCEEDINGS JUSTIFIED IN RESTRICTING THE DEDUCTION U/S.44C OF THE I.T. ACT 1961 TO RS.3 32 36 685/- AS CLAIMED BY THE ASSESSEE IN THE RETURN OF INCOME . 7. ON THE OTHER HAND SHRI PERCY P.PARDIWALLA LD. COUNSEL FOR THE ASSESSEE FILED A PAPER-BOOK CONTAINING 61 PAGES WHI CH INTER ALIA INCLUDED RETURN OF INCOME FILED FOR THE ASSESSMENT YEAR 2002 -03 WHEREIN THE ITA NO.2717/AHD/2008 (BY REVENUE) AND CO NO.235/AHD/2008 (BY ASSESSEE) ADIT (INTL.TAXN.) AHD VS. NIKO RESOURCES LTD. ASST.YEAR 2002-03 - 10 - ASSESSEE CLAIMED HEAD OFFICE EXPENDITURE U/S.44C OF THE I.T. ACT 1961 LIMITING TO 5% OF ADJUSTED TOTAL INCOME. IN THE A SSESSMENT FRAMED U/S.143(3) OF THE I.T. ACT 1961 THE ASSESSING OFF ICER RE-WORKED OUT THE ADJUSTED TOTAL INCOME AND DEDUCTION U/S.44C OF THE I.T. ACT 1961 AT RS.4 06 04 390/-. THE LD. COUNSEL FOR THE ASSESSEE ALSO REFERRED TO THE ORDER PASSED U/S.93CA(3) FOR ASSESSMENT YEAR 2002-0 3 AS WELL AS NOTICE ISSUED U/S.148 AND CONTENDED THAT IT MAY BE HELD TH AT ASSESSMENT IS RE-OPENED MERELY ON CHANGE OF OPINION THEREFORE T HE SAME BE QUASHED. IN SUPPORT OF THIS THE LD. COUNSEL FOR THE ASSESSE E RELIED ON THE VARIOUS DECISIONS INCLUDING THE RECENT JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. (2010) 320 ITR 561 (SC). THE LD. COUNSEL FOR THE ASSESSEE FURTHER POINTED OUT TH AT THE HON'BLE SUPREME COURT IN THE JUDGMENT OF KELVINATOR OF INDIA LTD.(S UPRA) AFTER OBSERVING THE CHANGES AND AMENDMENTS BROUGHT ABOUT IN SECTION 147 FROM TIME TO TIME HELD AS UNDER (PAGE 564): 'HOWEVER ONE NEEDS TO GIVE A SCHEMATIC INTERPRETAT ION TO THE WORDS 'REASON TO BELIEVE' FAILING WHICH WE ARE AFRAID S ECTION 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 DI FFERENCE BETWEEN POWER TO REVIEW AND POWER TO REASSESS. THE ASSESSIN G OFFICER HAS NO POWER TO REVIEW; HE HAS THE POWER TO REASSESS. BUT REASSESSMENT HAS TO BE BASED ON FULFILMENT OF CERTAIN PRE-CONDITION AND IF THE CONCEPT OF 'CHANGE OF OPINION' IS REMOVED AS CONTENDED ON BEHALF OF T HE DEPARTMENT THEN IN THE GARB OF REOPENING THE ASSESSMENT REVIEW WOULD TAKE PLACE. ONE MUST ITA NO.2717/AHD/2008 (BY REVENUE) AND CO NO.235/AHD/2008 (BY ASSESSEE) ADIT (INTL.TAXN.) AHD VS. NIKO RESOURCES LTD. ASST.YEAR 2002-03 - 11 - TREAT THE CONCEPT OF 'CHANGE OF OPINION' AS AN IN-B UILT TEST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFICER.' 7.1. ON MERIT THE LD. COUNSELS FOR THE ASSESSEE SU BMITTED THAT IN THE IMPUGNED ORDER THE LEARNED CIT(APPEALS) HAS GIVEN COGENT REASON FOR DELETING THE ADDITION OF RS.73 67 705/- THEREFORE THE SAME BE UPHELD. 8. AFTER HEARING BOTH THE SIDES WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND PERUSED THE MAT ERIAL PLACED BEFORE US. IT IS PERTINENT TO NOTE THAT IN THE ASSESSMENT FRAM ED U/S.143(3) OF THE I.T. ACT 1961 DATED 28/02/2005 THE ASSESSING OFFICER C OMPUTED THE ADJUSTED INCOME AT RS.81 20 87 765/-. ON THIS ADJUSTED INCO ME HE COMPUTED THE DEDUCTION U/S.44C IN RESPECT OF HEAD OFFICE EXPENS ES AT THE RATE OF 5% OF ADJUSTED INCOME OF INCOME RS.81 20 87 795/- AND ALLOWED RS.4 06 04 390/- AS AGAINST RS.3 32 36 685/- CLAIME D BY THE ASSESSEE IN THE RETURN OF INCOME. IN THE IMPUGED ORDER THE LE ARNED CIT(APPEALS) THOUGH UPHELD THE ACTION OF THE ASSESSING OFFICER F OR RE-OPENING THE ASSESSMENT U/S.148 OF THE I.T. ACT 1961 BUT DELETE D THE ADDITION AS PER HIS FINDINGS CONTAINED IN PAGE NO.11 OF HIS ORDER W HICH READ AS UNDER:- I HAVE CAREFULLY GONE THROUGH THE ORDER DATED 28/0 2/2005 PASSED BY THE ACIT CIRCLE-6 BARODA AND THE SUBMISSIONS M ADE BY THE ASSESSING OFFICER AND I AM OF THE OPINION THAT DEDU CTION U/S.44C IS DEPENDENT ON ADJUSTED TOTAL INCOME. IN THE ORDER D ATED 28/02/2005 PASSED U/S.143(3) THE ADJUSTED TOTAL IN COME WAS ARRIVED AT RS.81.21 CRORES AND THE CLAIM OF THE APP ELLANT WAS RESTRICTED TO 5% OF THE SAME COMPUTED AT RS.4.06 C RORES AS AGAINST THE CLAIM OF THE APPELLANT AT RS.3.32 CRORE S. THE DEDUCTION CLAIMED BY THE APPELLANT AT RS.3.32 CRORES WAS 5% O F ADJUSTED TOTAL INCOME ARRIVED AT BY THE APPELLANT WHICH WAS OF RS.66.47 ITA NO.2717/AHD/2008 (BY REVENUE) AND CO NO.235/AHD/2008 (BY ASSESSEE) ADIT (INTL.TAXN.) AHD VS. NIKO RESOURCES LTD. ASST.YEAR 2002-03 - 12 - CRORES. THE ORDER OF THE TRANSFER PRICING OFFICER (TPO) MUMBAI HAS ALSO CATEGORICALLY STATED THAT CONSIDERING THE PROVISIONS OF SECTION 44C OF THE INCOME-TAX ACT ANY DOWNWARD REV ISION OF THE ARMS LENGTH PRICE FROM RS.6.13 CR4ORES UPTO RS.3.3 2 CRORES WILL NOT HAVE ANY IMPACT ON THE TAX PAYABLE BY THE ASSES SEE COMPANY AS THE DEDUCTION U/S.44C HAS ALREADY BEEN RESTRICTE D TO RS.3.32 CRORES. THE TPO HAS ALSO ACCEPTED THE ARMS LENGT H PRICE AS COMPUTED BY THE ASSESSEE VIDE PARA 9 OF HER ORDER. IT BECOMES QUITE CLEAR THAT DEDUCTION U/S.44C IS DEPENDANT UPO N THE ADJUSTED TOTAL INCOME. AS THE ADJUSTED TOTAL INCOME INCREA SES OR DECREASES THE DEDUCTION U/S.44C ALSO ACCORDINGLY GOES UP OR C OMES DOWN. THEREFORE THE DEDUCTION AS ALLOWED BY THE ASSESSIN G OFFICER IN HIS ORDER DATED 28/02/2005 IS AS PER THE PROVISIONS OF SECTION 44C AND ADDITION MADE OF RS.73 67 705/- MADE BY THE ASSESSI NG OFFICER VIDE HIS ORDER DATED 10/12/2007 IS DIRECTED TO BE D ELETED. 9. IT IS PERTINENT TO NOTE THAT IN THE NOTE NO.4 A PPENDED WITH THE RETURN OF INCOME THE ASSESSEE HAS STATED THE AMOUN T OF HEAD OFFICE EXPENDITURE WITHIN THE MEANING OF SECTION 44C OF TH E I.T. ACT 1961 INCURRED BY THE COMPANY DURING THE SUBJECT YEAR AND AS IS ATTRIBUTABLE TO INDIAN OPERATIONS AS IS RS.6 13 00 000/-. TOWARDS THIS END A COPY OF CERTIFICATE ISSUED BY INDEPENDENT ACCOUNTANTS KPMG LLP CANADA WAS ENCLOSED WITH THE RETURN OF INCOME. HOWEVER AS PE R PROVISIONS CONTAINED IN SECTION 44C THE ASSESSEE RESTRICTED T HE OFFICE EXPENDITURE LIMITED TO 5% OF ADJUSTED TOTAL INCOME. THE ASSESS ING OFFICER FRAMED THE ASSESSMENT U/S143(3) OF THE I.T. ACT 1961 ON 2 8/02/2005 WHEREIN HE COMPUTED THE DEDUCTION U/S.44C OF THE I.T. ACT 196 1 AT RS.4 06 04 390/- AS UNDER:- LESS : DEDUCTION U/S.44C HEAD OFFICE EXPENSES @ 5% OF ADJUSTED INCOME OF INCOME RS.81 20 87 795 : RS.4 06 04 390 ITA NO.2717/AHD/2008 (BY REVENUE) AND CO NO.235/AHD/2008 (BY ASSESSEE) ADIT (INTL.TAXN.) AHD VS. NIKO RESOURCES LTD. ASST.YEAR 2002-03 - 13 - 9.1. THE AFORESAID ASSESSMENT HAD SUBSEQUENTLY BEEN RE-OPENED U/S.147 OF THE I.T. ACT 1961 BY ISSUING NOTICE U/S.148 OF THE I.T. ACT 1961 DATED 26/03/2006. THE SAID NOTICE WAS ISSUED BY ACIT CIRCLE-6 BARODA AFTER RECORDING THE FOLLOWING REASONS:- 1. THE RETURN OF INCOME WAS FILED DECLARING TOTAL INC OME AT RS.63 14 97 010. SUBSEQUENTLY THE ASSESSMENT WAS FINALIZED U/S.143(3) OF THE IT ACT 1961 ON 28.2.2005 DETERMI NING TOTAL INCOME AT RS.77 14 83 380. WHILE FINALIZING THE A SSESSMENT U/S.143(3) OF THE ACT THE DEDUCTION U/S.44C WAS CO MPUTED AND ALLOWED TO THE ASSESSEE AMOUNTING TO RS.4 06 04 398 0 AS AGAINST RS.3 32 36 685 CLAIMED BY THE ASSESSEE IN T HE RETURN OF ITS INCOME. SUBSEQUENTLY IT WAS NOTICED THAT THE ASSESSEE CLAI MED DEDUCTION U/S.44C AMOUNTING TO RS.3 32 36 685 AND T HE SAID CLAIM WAS APPROVED BY THE ADDL. COMMISSIONER OF INC OME-TAX (TRANSFER PRICING-II) MUMBAI VIDE HIS ORDER DATED 26.3.2004 U/S.92CA OF THE ACT. THEREFORE THE DEDUCTION U/S. 44C OF RS.4 06 04 390 WHICH WAS ALLOWED TO THE ASSESSEE W HILE FINALIZING THE ASSESSMENT RESULTED IN EXCESS ALLOW ANCE OF DEDUCTION U/S.44C. IN VIEW OF THE ABOVE FACTS I HAVE REASON TO BELIEV E THAT THE INCOME CHARGEABLE TO TAX AMOUNTING TO RS.73 67 705 (RS.4 06 04 390 RS.3 32 36 685) HAS ESCAPED THE A SSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE INCOME-TAX ACT 1961. 9.2. IT IS AN ADMITTED POSITION THAT THE RE-OPENIN G IS DONE WITHIN FOUR YEARS FROM THE END OF THE RELEVANT PREVIOUS YEAR AN D ALL THE MATERIAL FACTS NECESSARY FOR ASSESSMENT WERE DISCLOSED. THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT ORDER U/S.143(3) OF THE I.T. ACT 1961 APPLIED ITA NO.2717/AHD/2008 (BY REVENUE) AND CO NO.235/AHD/2008 (BY ASSESSEE) ADIT (INTL.TAXN.) AHD VS. NIKO RESOURCES LTD. ASST.YEAR 2002-03 - 14 - HIS MIND WHICH EVIDENT FROM THE FACT THAT HE RE-COM PUTED THE DEDUCTION ALLOWABLE U/S.44C OF THE I.T. ACT 1961. THEREFORE THE PRESENT CASE IS ONE OF A MERE CHANGE OF OPINION WHICH IS NOT PERMIS SIBLE AS OBSERVED BY THE HON'BLE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA LTD.(SUPRA). THE RATIO OF THAT DECISION IS SQUARELY APPLICABLE T O THE FACTS OF ASSESSEES CASE. HENCE KEEPING IN VIEW THE OBSERVATION OF THE HON'BLE SUPREME COURT IN MIND THE ONLY INESCAPABLE CONCLUSION IS T HAT SECTION 147/148 PROCEEDINGS ARE WITHOUT JURISDICTION. WE THEREFO RE QUASH THE ASSESSMENT FRAMED U/S.147 R.W.S. 148 OF THE I.T. AC T 1961 ON 10/12/2007. 10. IN THE RESULT CROSS OBJECTION FILED BY THE ASS ESSEE IS ALLOWED. 11. IN VIEW OF OUR ABOVE DECISION IN ASSESSEES CRO SS OBJECTION(SUPRA) THE APPEAL OF THE REVENUE IS RENDERED INFRUCTUOUS A ND IS HEREBY DISMISSED. 12. RESULTANTLY THE APPEAL OF THE REVENUE IS DISMI SSED AND CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 26 /03 /2010. SD/- SD/- ( N.S. SAINI ) ( T.K.SHARMA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 26/ 03 /2010 T.C. NAIR ITA NO.2717/AHD/2008 (BY REVENUE) AND CO NO.235/AHD/2008 (BY ASSESSEE) ADIT (INTL.TAXN.) AHD VS. NIKO RESOURCES LTD. ASST.YEAR 2002-03 - 15 - COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED. 4. THE LD. CIT(APPEALS)-XXI AHMEDABAD 5. THE DR AHMEDABAD BENCH.6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD