Hyundai Heavy Industries Co. Ltd., Mumbai v. DDIT, Dehradun

ITA 272/DEL/2009 | 2002-2003
Pronouncement Date: 16-12-2011

Appeal Details

RSA Number 27220114 RSA 2009
Assessee PAN AAACH5727Q
Bench Delhi
Appeal Number ITA 272/DEL/2009
Duration Of Justice 2 year(s) 10 month(s) 23 day(s)
Appellant Hyundai Heavy Industries Co. Ltd., Mumbai
Respondent DDIT, Dehradun
Appeal Type Income Tax Appeal
Pronouncement Date 16-12-2011
Appeal Filed By Assessee
Bench Allotted C
Tribunal Order Date 16-12-2011
Date Of Final Hearing 12-12-2011
Next Hearing Date 12-12-2011
Assessment Year 2002-2003
Appeal Filed On 23-01-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `C: NEW DELHI BEFORE SHRI G.D. AGRAWAL VICE PRESIDENT AND SHRI C.L. SETHI JUDICIAL MEMBER I.T. A. NO.30/DEL/2009 ASSESSMENT YEAR: 2002-03 DY. DIRECTOR OF INCOME-TAX M/S. HYUNDAI HEAVY IN DUSTRIES CO. LTD. INTERNATIONAL TAXATION VS. C/O HEMANT ARORA & CO. CA DEHRADUN. TYAGI ROAD DEHRADUN. I.T. A. NO.272/DEL/2009 ASSESSMENT YEAR: 2002-03 M/S. HYUNDAI HEAVY DY. DIRECTOR OF INCOME-TAX INDUSTRIES CO. LTD. VS. INTERNATIONAL TAXATION DEHRADUN. 301 3 RD FLOOR SARJAN PLAZA 100 ANNIE BESANT ROAD WORLI MUMBAI-400 018. PAN: AAACH5727Q (APPELLANTS) (RESPONDENTS) DEPARTMENT BY : SHRI ASHWANI KUMAR MAHAJAN CIT-DR. ASSESSEE BY : SHRI O.P. SAPRA ADVOCATE. O R D E R PER BENCH: THE REVENUE AS WELL THE ASSESSEE ARE IN APPEAL AGAI NST THE ORDER DATED 24.10.2008 PASSED BY THE LEARNED COMMISSIONER OF IN COME-TAX (APPEALS) IN THE MATTER OF AN ASSESSMENT MADE BY THE ASSESSING O FFICER UNDER SEC. 2 143(3)/148 OF THE INCOME-TAX ACT 1961 (THE ACT) FO R THE ASSESSMENT YEAR 2002-03. 2. IN THE REVENUES APPEAL THE REVENUE HAS CHALLEN GED THE LEARNED CIT(A)S ORDER IN ALLOWING THE APPEAL OF THE ASSESS EE ON THE GROUND OF REOPENING OF ASSESSMENT BY HOLDING THAT THE ACTION RESORTED BY THE AO TO REOPEN THE ASSESSMENT ON THE BASIS OF THE AUDIT OBJ ECTION WITHOUT APPLICATION OF HER OWN MIND IS VOID AB INITIO BEIN G INFRACTION OF LAW LAID DOWN BY THE HONBLE APEX COURT. THE RELEVANT GROUN D RAISED BY THE REVENUE IS AS UNDER:- ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE LD. COMMISSIONER OF INCOME TAX (APPEALS)-I DEHRADUN HA S ERRED IN LAW IN ALLOWING THE APPEAL OF THE ASSESSEE ON TH E GROUND OF RE-OPENING OF ASSESSMENT WITHOUT CONSIDERING THE CO NTENTS OF PARA 4(II) OF INSTRUCTION NO.9 OF 2006 ISSUED BY TH E CBDT DESPITE HOLDING THAT THE GROUNDS ON WHICH THE CASE WAS RE- OPENED WERE OTHERWISE STRONG ON MERIT. 3. WE HAVE HEARD BOTH THE PARTIES AND HAVE PERUSED THE MATERIAL ON RECORD. IN THIS CASE THE ORIGINAL ASSESSMENT WAS COMPLETED UNDER SEC.143(3) OF THE ACT ON 30.07.2004. THEREAFTER THE ASSESSIN G OFFICER ISSUED NOTICE UNDER SEC. 148 OF THE ACT ON 28.03.2007 AFTER GETTI NG THE APPROVAL OF THE ADDITIONAL COMMISSIONER OF INCOME-TAX RANGE-I DEH RADUN. REASONS FOR REOPENING THE ASSESSMENT UNDER SEC. 147 OF THE ACT RECORDED BY THE AO ARE AS UNDER:- 3 IN THIS CASE ASSESSMENT WAS COMPLETED AT THE INCOM E OF RS.3 64 07 580/- U/S 143(3) OF I.T. ACT ON 30.7.200 4 AGAINST THE RETURNED LOSS OF RS.2 57 48 30 490/-. THE ASSESSEE COMPANY HAD CLAIMED DEDUCTION OF RS.86 73 69 950/- ON ACCOUNT O F EXPENSES INCURRED ON WHICH TDS HAS BEEN DEDUCTED. THE RAP HA S HOWEVER RAISED OBJECTION THAT THESE DEDUCTIONS NEE D BE ADDED AND TAXED. FURTHER WHILE CALCULATING THE TAX LIABIL ITY ASSESSEE OFFERED TAX @ 15% ON INTEREST RECEIPTS REFUND FROM I.T. DEPARTMENT U/S 244A INTEREST OF RS.26 26 733/- IS LIABLE TO BE TAXED @ 48% THIS INCOME DOES NOT PERTAIN TO THIS BU SINESS INCOME. ALTHOUGH AUDIT OBJECTION HAS NOT BEEN ACCEP TED YET KEEPING IN VIEW THE INSTRUCTION NO. 9 OF 2006 IT IS NECESSARY TO TAKE REMEDIAL MEASURES TO SAFEGUARD THE REVENUE. I HAVE THEREFORE REASON TO BELIEVE THAT INCOME TO THE EXT ENT OF RS.8 67 36 990/- HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147. YOUR KIND APPROVAL SOLICITED TO ISSUE THE NOTICE U/S 148 READ WITH SECTION 151 (2) OF THE INCOME TAX ACT 1961. (NEETA AGGARWAL) DY. COMMISSIONER OF INCOME TAX (OSD) RANGE-1 DEHRADUN 4. IN AN APPEAL AGAINST THE REASSESSMENT ORDER MADE BY THE AO UNDER SEC. 143(3)/148 OF THE ACT VIDE ORDER DATED 31.12.2 007 THE ASSESSEE CHALLENGED THE VALIDITY OF REOPENING OF THE ASSESSM ENT UNDER SEC 147 OF THE ACT BY TAKING THE GROUND THAT THE PROCEEDINGS UNDER SEC. 147 READ WITH SEC. 148 OF THE ACT WERE ILLEGAL BAD IN LAW WITHOUT JU RISDICTION AND VOID AB INITIO AND THEREFORE DESERVE TO BE QUASHED DUE TO VARIOUS REASONS GIVEN IN ITEM (A) TO (G) OF GROUND NO.(I) AND VIDE GROUND NO .(II) TAKEN BEFORE THE LEARNED CIT(A). 4 5. THE AFORESAID GROUND NO.(I) AND (II) HAVE BEEN C ONSIDERED AND DECIDED BY THE LEARNED CIT(A) BY OBSERVING AND HOLD ING AS UNDER:- 8. COMING TO GROUND NOS. (I) AND (II) REPRODUCED O N PAGE 2 AND 3 ANTE THE LD. COUNSELS HAVE AGITATED THE RE-O PENING OF THE CASE BY TAKING RECOURSE TO THE PROVISIONS OF SECTIO N 147 READ WITH SECTION 148 OF THE ACT AND CONTENDED THAT THE RE-OPENING WAS PURELY BASED ON AN AUDIT OBJECTION RAISED BY TH E RECEIPT AUDIT PARTY (RAP) WITHOUT INDEPENDENT APPLICATION OF MIND BY THE LD. AO AND THE ACTION OF THE AO PROVED THAT THE LD. AO HAD NO REASONS TO BELIEVE OF HIS OWN THAT INCOME HAD ESCAPED ASSESSMENT. THE LD. COUNSELS IN THIS REGARD HAVE RE LIED UPON VARIOUS DECISIONS OF HONBLE SUPREME COURT AND PART ICULARLY THE ONE RENDERED IN INDIAN AND EASTERN NEWSPAPER SO CIETY VS. CIT NEW DELHI (1979) 119 ITR 996 (SC)]. THE HONBL E APEX COURT HAS HELD AS UNDER :- WHETHER CONSIDERED ON THE BASIS THAT THE NATURE AND SCOPE OF THE FUNCTIONS OF THE INTERNAL AUDIT ORGANIZATION OF THE INCOME TAX DEPARTMENT ARE CO- EXTENSIVE WITH THAT OF THE RECEIPT AUDIT OR ON THE BASIS OF THE PROVISIONS SPECIFICALLY DETAILING ITS FUNCTIONS IN THE INTERNAL AUDIT MANUAL WE HOLD THAT THE OPINION OF AN INTERNAL AUDIT PARTY OF THE INCOME TAX DEPARTMENT ON A POINT OF LAW CANNOT BE REGARDED AS INFORMATION WITHIN THE MEANING OF S. 147(B) OF I.T. ACT 1961. 9. THE LD. COUNSELS HAVE FURTHER RELIED UPON YET AN OTHER RULING OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. LUCAS TVS LTD. (17 SITC 289) HOLDING THAT THE OPINION OF THE AUDIT PARTY REGARDING APPLICATION OR INTERPRETATION OF LA W DOES NOT AMOUNT TO INFORMATION. THEREFORE RE-ASSESSMENT BAS ED ON SUCH OPINION WAS NOT VALID HELD THE HONBLE APEX COURT. 10. UNFORTUNATELY IN THE CASE OF THE APPELLANT TH E AO IS FOUND TO HAVE COMMUNICATED THE FOLLOWING BASIS ON W HICH SHE RE-OPENED THE CASE U/S 147:- 5 IN THIS CASE ASSESSMENT WAS COMPLETED AT THE INCOME OF RS.3 64 07 580/- U/S 143(3) OF I.T. ACT ON 30.7.2004 AGAINST THE RETURNED LOSS OF RS.2 57 48 30 490/-. THE ASSESSEE COMPANY HAD CLAIMED DEDUCTION OF RS.86 73 69 950/- ON ACCOUNT OF EXPENSES INCURRED ON WHICH TDS HAS BEEN DEDUCTED. THE RAP HAS HOWEVER RAISED OBJECTION THAT THESE DEDUCTIONS NEED BE ADDED AND TAXED. FURTHER WHILE CALCULATING THE TAX LIABILITY ASSESSE E OFFERED TAX @ 15% ON INTEREST RECEIPTS REFUND FROM I.T. DEPARTMENT U/S 244A INTEREST OF RS.26 26 733/- IS LIABLE TO BE TAXED @ 48% THIS INCOME DOES NOT PERTAIN TO THIS BUSINESS INCOME. ALTHOUGH AUDIT OBJECTION HAS NOT BEEN ACCEPTED YET KEEPING IN VIEW THE INSTRUCTION NO. 9 OF 2006 IT IS NECESSARY TO TAKE REMEDIAL MEASURES TO SAFEGUARD THE REVENUE. I HAVE THEREFORE REASON TO BELIEVE THAT INCOME TO THE EXTENT OF RS.8 67 36 990/- HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147. YOUR KIND APPROVAL SOLICITED TO ISSUE THE NOTICE U/S 148 READ WITH SECTION 151 (2) OF THE INCOME TAX ACT 1961. (NEETA AGGARWAL) DY. COMMISSIONER OF INCOME TAX (OSD) RANGE-1 DEHRADUN 11. THE BASIS FOR RE-OPENING AS REPRODUCED ABOVE SQUARELY PROVES THAT THE ASSESSMENT HAD BEEN RE-OPE NED BY THE AO IN DEFIANCE OF THE LAW LAID DOWN BY THE HONBLE APEX COURT IN THE JUDGMENTS QUOTED HEREINBEFORE. THE ACTION RE SORTED TO BY THE AO TO HAVE RE-OPENED THE ASSESSMENT ON THE BASI S OF AN AUDIT OBJECTION WITHOUT APPLICATION OF HER OWN MIN D IS THEREFORE VOID AB INITIO BEING INFRACTION OF THE L AW LAID DOWN BY THE HONBLE APEX COURT. .SUCH A BLATANTLY ILLEGA L RE- ASSESSMENT ORDER HAS NO SCOPE OF APPROVAL IN APPEAL AT ANY APPELLATE FORUM. 6 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUBM ITTED THAT REOPENING OF A CASE BY THE AO ON THE BASIS OF SUBST ANTIAL REASONING POINTED OUT BY THE REVENUE AUDIT IS PERMISSIBLE UNDER LAW A ND THUS IN THE INSTANT CASE THE CASE WAS REOPENED BY THE AO ON THE BASIS OF A SUBSTANTIAL REASONING POINTED OUT BY THE REVENUE AUDIT AND THE REFORE OBJECTION RAISED BY THE ASSESSEE WHILE DISPUTING THE ACTION OF THE A O IN INITIATING REOPENING PROCEEDINGS ON THE BASIS OF REVENUE AUDIT IS NOT J USTIFIED. IN THIS CONNECTION THE LEARNED DR HAS PLACED RELIANCE UPON THE FOLLOWING DECISIONS:- (I) CIT VS. PVS BEEDIES P. LTD. (1999) 237 ITR 13 (SC). (II) A.L.A. FIRM VS. CIT (1991) 189 ITR 285 (SC). (III) SOM DATT BUILDERS (P) LTD. VS. DCIT (2006) 98 ITD 7 8 (CAL.). 7. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTHE R HAND SUBMITTED THAT AN AUDIT OBJECTION ON THE INTERPRETATION OF ANY PRO VISIONS OF LAW AND WITHOUT INDEPENDENT APPLICATION OF MIND BY THE AO COULD NOT JUSTIFY THE REOPENING OF AN ASSESSMENT UNDER SEC. 147 OF THE ACT. IN THI S CONNECTION THE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED UPON VARIOUS DE CISIONS. 8. IN THE CASE OF PVS BEEDIES P. LTD. (SUPRA) IT H AS BEEN HELD THAT REOPENING OF CASE ON THE BASIS OF FACTUAL ERROR POI NTED OUT BY THE INTERNAL AUDIT PARTY IS PERMISSIBLE UNDER LAW. IN THIS CASE A FACTUAL ERROR THAT THE RECOGNITION GRANTED TO A CHARITABLE TRUST FOR THE P URPOSE OF ELIGIBILITY OF 7 DEDUCTION UNDER SEC. 80G OF THE ACT HAD ALREADY EXP IRED ON SEPTEMBER 22 1972 WHICH WAS NOT NOTICED BY THE ITO WHILE ALLOWI NG THE CLAIM OF DEDUCTION UNDER SEC. 80G OF THE ACT AND THIS MISTA KE POINTED OUT BY THE AUDIT PARTY WAS FOUND TO BE JUSTIFIABLE BASIS TO R EOPEN THE CASE UNDER SEC. 147 OF THE ACT. IT IS THUS A CASE WHERE REOPENING OF THE CASE UNDER THEN SECTION 147(B) WAS HELD TO BE JUSTIFIED ON THE BASI S OF FACTUAL INFORMATION GIVEN BY THE INTERNAL AUDIT PARTY. HOWEVER IN THE PRESENT CASE THE REVENUE AUDIT PARTY HAS RAISED CERTAIN OBJECTIONS ABOUT ALL OWABILITY OF CERTAIN DEDUCTIONS AND CHARGING OF TAX AT CERTAIN RATES ON INTEREST RECEIPTS REFUND FROM INCOME-TAX DEPARTMENT WHICH HAS NOT BEEN ACCE PTED BY THE AO HIMSELF. THE PRESENT CASE IS NOT A CASE WHERE ANY FACTUAL ERROR HAS BEEN POINTED OUT BY THE AUDIT PARTY. BUT IT IS A CASE W HERE SOME INTERPRETATION HAS BEEN GIVEN BY THE REVENUE AUDIT PARTY ON ALLOWABILI TY OF CERTAIN DEDUCTIONS AND CHARGING OF TAX AT CERTAIN RATES WHICH WAS DIS PUTABLE AND NOT AGREED TO BY THE AO HIMSELF. THEREFORE THIS DECISION RELIED UPON BY THE LEARNED DR IS OF NO ASSISTANCE TO THE REVENUES CASE. IN THE CASE OF A.L.A. FIRM (SUPRA) THE REOPENING OF ASSESSMENT WAS MADE ON CONSIDERATI ON OF HIGH COURT DECISION WHICH WAS NOT CONSIDERED BY THE AO AT THE TIME OF ORIGINAL ASSESSMENT. THEREFORE THIS DECISION IS ALSO OF NO HELP TO THE ASSESSEE BEING BASED ON DIFFERENT FACTS. SIMILARLY THE DECISION OF ITAT CALCUTTA IN THE 8 CASE OF SOM DATT BUILDERS (P) LTD. (SUPRA) IS OF NO HELP TO THE ASSESSEE INASMUCH AS THIS DECISION HAS BEEN RENDERED IN THE LIGHT OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF P.V.S. BEEDIES P. LTD. (SUPRA) WHICH IS APPLICABLE ONLY TO A CASE WHERE FACTUAL ERROR OR OMISSION HAS BEEN POINTED OUT BY THE REVENUE AUDIT PARTY AND ON THE BASIS OF FACTUAL ERROR THE REOPENING WAS MADE. THE LEARNED COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF IN DIAN & EASTERN NEWSPAPERS SOCIETY VS. CIT (1979) 119 ITR 996 (SC) WHERE THE HONBLE SUPREME COURT HAS HELD THAT OPINION OF INTERNAL AUD IT PARTY OF THE INCOME- TAX DEPARTMENT ON A POINT OF LAW CANNOT BE REGARDED AS INFORMATION WITHIN THE MEANING OF SEC. 147(B) OF THE ACT. FROM THIS D ECISION IT IS THUS CLEAR THAT OPINION OF INTERNAL AUDIT PARTY ON A POINT OF LAW CANNOT BE REGARDED AS INFORMATION FOR THE PURPOSE OF REOPENING THE ASSESS MENT UNDER SEC. 147 OF THE ACT. THUS THIS CASE IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE WHERE THE INTERNAL AUDIT PARTY HAS EXPRESSED ITS OPINION OVER ALLOWABILITY OF CERTAIN DEDUCTIONS AND CHARGING OF TAX AT CERTAIN RATES AS NOTED IN THE REASONS RECORDED ITSELF. 9. SIMILARLY IN THE CASE OF CIT VS. LUCAS TVS LTD. (2001) 249 ITR 306 THE HONBLE SUPREME COURT HAS HELD THAT OPINION OF AUDIT PARTY REGARDING APPLICATION OR INTERPRETATION OF LAW IS NOT AN INFO RMATION FOR THE PURPOSE OF 9 INITIATING PROCEEDINGS UNDER SEC. 147 OF THE ACT AN D REASSESSMENT BASED ON OPINION OF AUDIT PARTY IS NOT VALID. IN THIS CASE THE HONBLE SUPREME COURT HAS RELIED UPON THEIR EARLIER DECISION IN THE CASE OF INDIAN & EASTERN NEWSPAPERS SOCIETY (SUPRA). 10. FURTHER THE AO HAS HIMSELF NOT FORMED AN OPINI ON THAT INCOME HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SEC. 147 O F THE ACT. IN THE REASONS RECORDED BY THE AO IT HAS BEEN STATED BY T HE AO HIMSELF THAT HE IS NOT IN AGREEMENT WITH THE VIEW OF AUDIT PARTY IN RE SPECT OF THE MATTERS POINTED OUT BY THE AUDIT PARTY. THE AO HAS MERELY ISSUED THE NOTICE UNDER SEC. 147 OF THE ACT WITH A VIEW TO TAKE REMEDIAL ME ASURES TO SAFEGUARD THE REVENUE WITHOUT FORMING HIS INDEPENDENT OPINION THA T INCOME HAD ESCAPED ASSESSMENT WITHIN THE MEANING OF SEC. 147 OF THE AC T. IT IS WELL SETTLED THAT FORMATION OF THE REQUIRED OPINION AND THE BELIEF BY THE AO IS A CONDITION PRECEDENT TO EXERCISE JURISDICTION TO INITIATE PROC EEDINGS UNDER SEC. 147 OF THE ACT. THE FULFILLMENT OF THIS CONDITION IS NOT A MERE FORMALITY BUT IT IS MANDATORY. THE FAILURE TO FULFILL THIS CONDITION W OULD VITIATE THE ENTIRE PROCEEDINGS. 11. FOR THE REASONS GIVE ABOVE WE THEREFORE UPHOL D THE ORDER OF THE LEARNED CIT(A) IN HOLDING THAT THE ACTION RESORTED TO BY THE ASSESSING OFFICER IN INITIATING REASSESSMENT PROCEEDINGS ON T HE BASIS OF AN AUDIT 10 OBJECTION WITHOUT APPLICATION OF HER OWN MIND AND WITHOUT HER OWN BELIEF IS VOID AB INITIO AND NOT VALID. THE ORDER OF THE LEARNED CIT(A) IS THUS UPHELD ON THIS ISSUE. 12. SINCE THE REOPENING OF THE ASSESSMENT UNDER SEC . 147 OF THE ACT HAS BEEN FOUND TO BE WITHOUT JURISDICTION BEING VOID A B INITIO THE ASSESSMENT MADE BY THE ASSESSING OFFICER UNDER SEC. 147 OF THE ACT SHALL STAND CANCELLED. 13. IN THE LIGHT OF THE VIEW WE HAVE TAKEN ABOVE HO LDING THE REASSESSMENT MADE BY THE AO AS BEING WITHOUT JURISDICTION AND VO ID AB INITIO THE VARIOUS GROUNDS RAISED BY THE ASSESSEE IN ITS APPEAL ON THE VARIOUS ADDITIONS AND DISALLOWANCES MADE BY THE ASSESSING OFFICER HAVE BE COME REDUNDANT AND NEED NO ADJUDICATION AT THIS STAGE. THEREFORE THE APPEAL FILED BY THE ASSESSEE IS TREATED TO BE DISMISSED AS REDUNDANT AN D INFRUCTUOUS. 14. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED AND THAT OF THE ASSESSEE IS TREATED TO BE INFRUCTUOUS AND REDUN DANT. 15. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N 16 TH DECEMBER 2011. SD/- SD/- (G.D. AGRAWAL) (C.L. SETHI) VICE PRESIDENT JUDICIAL MEMBER DATED: 16 TH DECEMBER 2011 11 ITA NOS.30 & 272/DEL/2009 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT. 2. RESPONDENT. 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR ITAT.