M/s. NATINAL ORGANIC CHEMICAL INDUSTRIES, MUMBAI v. DCIT CIR. 7(1), MUMBAI

ITA 3455/MUM/2005 | 1999-2000
Pronouncement Date: 03-11-2014 | Result: Allowed

Appeal Details

RSA Number 345519914 RSA 2005
Assessee PAN AAACN4412E
Bench Mumbai
Appeal Number ITA 3455/MUM/2005
Duration Of Justice 9 year(s) 5 month(s) 25 day(s)
Appellant M/s. NATINAL ORGANIC CHEMICAL INDUSTRIES, MUMBAI
Respondent DCIT CIR. 7(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 03-11-2014
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted F
Tribunal Order Date 03-11-2014
Date Of Final Hearing 21-08-2013
Next Hearing Date 21-08-2013
Assessment Year 1999-2000
Appeal Filed On 09-05-2005
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH MUMBAI BEFORE HONBLE S/SHRI H.L. KARWA PRESIDENT AND B. R.BASKARAN (AM) . . . . ./I.T.A. NO.3455/MUM/2005 ( / ASSESSMENT YEAR :1999-2000) NATIONAL ORGANIC CHEMICAL INDUSTRIES LIMITED. MAFATLAL HOUSE 3 RD FLOOR BACKBAY RECLAMATION MUMBAI-400020 / VS. DY.COMMISSIONER OF INCOME TAX CIRCLE 7(1) AYAKAR BHAVAN M.K.ROAD MUMBAI-400020 ( / APPELLANT) .. ( !' / RESPONDENT) ./ $% ./ PAN/GIRNO.:AAACN4412E & / APPELLANT BY : SHRI DINES VYAS !' ' & /RESPONDENT BY : SHRI RAJESH RAJAN PRASAD ( ) ' * + / DATE OF HEARING : 25.8.2014 - ' * + /DATE OF PRONOUNCEMENT : 03.11.2014. / O R D E R PER B.R.BASKARAN ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER DATED 1.2.2005 PASSED BY THE LD.CIT(A)-19 MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 1999-2000. 2. THE GROUNDS URGED BY ASSESSEE ARE RELATED TO THE FOLLOWING ISSUES : A) VALIDITY OF RE-OPENING OF ASSESSMENT U/S 147 OF THE INCOME TAX ACT 1961 (THE ACT); B) DISALLOWANCE OF CLAIM OF INTEREST PAID UNDER INC OME TAX ACT RS.3.87 CRORES; AND C) VALIDITY OF CHARGING OF INTEREST U/SS 201(1A) 234C AND 244A OF THE ACT. ITA NO.3455/M/2005 2 3. THE FACTS RELATING TO THE CASE ARE STATED IN BRI EF. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION D ECLARING A LOSS OF RS.39 88 73 782/- UNDER THE NORMAL PROVISIONS OF TH E INCOME TAX ACT 1961( THE ACT) AND INCOME OF RS.3 28 44 770/- UNDER THE PROV ISIONS OF SECTION 115JA OF THE ACT. ALONG WITH THE RETURN OF INCOME THE AS SESSEE ATTACHED A SHEET CONTAINING NOTES FORMING PART OF RETURN OF INCOME AND THE PARA 11 OF THE SAID NOTES READ AS UNDER:- 'DURING THE YEAR THE COMPANY HAS ACCOUNTED A SUM OF RS.13 26 01 510.00 AS INCOME BEING INTEREST RECEIV ED FROM THE I.T. DEPT. THE DEPARTMENT HAS CLAIMED DURING THE YEAR A SUM OF RS.3 87 76 670.00 AS INTEREST PAYABLE BY THE ASSESS EE. THE AMOUNT OF INTEREST PAID RS.3 87 76 670.00 HAS BEEN DEDUCTE D AND ONLY THE BALANCE AMOUNT OF RS 9 38 24 849.00 HAS BEEN OFFERE D FOR TAX IN THE COMPUTATION OF INCOME. RELIANCE IS PLACED ON THE DE CISION OF HONBLE BOMBAY TRIBUNAL IN THE CASE OF CYNAMID INDIA LIMITE D FOR THIS CLAIM. SUITABLE ADJUSTMENT HAS BEEN MADE IN THE COMPUTATI ON OF INCOME.' THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 27.3.2002 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.11 51 48 375 /- UNDER THE NORMAL PROVISIONS OF ACT. IT APPEARS THAT THE AO DID NOT CONSIDER THE ABOVE SAID NOTES ATTACHED BY THE ASSESSEE ALONG WITH THE RETURN OF I NCOME. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) CHALLENGI NG THE ORDER OR AO. CONSEQUENT TO THE ORDER PASSED BY THE LD. CIT(A) DA TED 3.7.2003 THE LOSS UNDER NORMAL PROVISIONS OF ACT WAS FIXED AT RS.43 10 19 702/- AND THE INCOME U/S 115JA OF THE ACT WAS ACCEPTED AT RS.3 28 44 770/-. 4. IN THE MEAN TIME THE AO REOPENED THE ASSESSMENT BY ISSUING NOTICE DATED 15.1.2003 U/S 148 OF THE ACT BY STATING THAT HE HAS REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. ACCORDING TO THE ASSESSEE THE AUDIT PARTY HAS EXAM INED THE ASSESSMENT RECORD AND HAS EXPRESSED THE VIEW THAT THE INTEREST LEVIED BY THE DEPARTMENT UNDER VARIOUS PROVISIONS OF I.T ACT ARE NOT ALLOWABLE AS DEDUCTION U/S 37 OF THE ACT. ACCORDINGLY THE AO HAS REOPENED THE ASSESSMENT. I N RESPONSE TO THE NOTICE ISSUED U/S 148 OF THE ACT THE ASSESSEE FILED RETU RN OF INCOME UNDER PROTEST ON 24.2.2003 DECLARING LOSS OF RS.39 40 09 761/- UN DER THE NORMAL PROVISIONS OF ACT AND INCOME OF RS.3 28 44 770/- U/S 115JA OF TH E ACT. THE ASSESSEE AGAIN ATTACHED A SHEET CONTAINING NOTES FORMING PART OF T HE RETURN AND PARAGRAPH ITA NO.3455/M/2005 3 NO.10 THEREOF READ AS UNDER I.E. THE VERY SAME NO TE THAT WAS ATTACHED ALONG WITH THE ORIGINAL RETURN OF INCOME: 'DURING THE YEAR THE COMPANY HAS ACCOUNTED A SUM OF RS.13 26 01 510.00 AS INCOME BEING INTEREST RECEIV ED FROM THE I.T. DEPT. THE DEPARTMENT HAS CLAIMED DURING THE YEAR A SUM OF RS.3 87 76 670.00 AS INTEREST PAYABLE BY THE ASSESS EE. THE AMOUNT OF INTEREST PAID RS.3 87 76 670.00 HAS BEEN DEDUCTE D AND ONLY THE BALANCE AMOUNT OF RS 9 38 24 849.00 HAS BEEN OFFERE D FOR TAX IN THE COMPUTATION OF INCOME. RELIANCE IS PLACED ON THE DE CISION OF HONBLE BOMBAY TRIBUNAL IN THE CASE OF CYNAMID INDIA LIMITE D FOR THIS CLAIM. SUITABLE ADJUSTMENT HAS BEEN MADE IN THE COMPUTATIO N OF INCOME.' THE AO HAS REOPENED THE ASSESSMENT TO DISALLOW THE INTEREST AMOUNT OF RS.3.87 CRORES WHICH WAS PAID TO THE INCOME TAX DEPARTMENT CLAIMED BY THE ASSESSEE AS DEDUCTION. THE FACTS RELATING TO THE SAME ARE D ISCUSSED IN BRIEF. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS RECEIVED INTEREST INCOME FROM THE DEPARTMENT ON THE REFUNDS DUE TO IT FOR EARLIER ASS ESSMENT YEARS TO THE TUNE OF RS.13.26 CRORES. DURING THIS YEAR THE ASSESSEE WA S ALSO LIABLE TO PAY INTEREST UNDER VARIOUS PROVISIONS OF THE ACT TO THE TUNE OF RS.3.87 CRORES. UNDER NORMAL COURSE THE INTEREST INCOME OF RS.13.26 CRORES SHAL L BE OFFERED TO TAX AND THE INTEREST PAYMENT OF RS.3.87 CRORES SHALL NOT BE CLA IMED AS DEDUCTION. SINCE THE INTEREST PAYMENT WAS MADE TO THE INCOME TAX DEPARTM ENT AND INTEREST INCOME WAS RECEIVED FROM THE INCOME TAX DEPARTMENT THE AS SESSEE NETTED THE INTEREST PAYMENT AGAINST THE INTEREST RECEIPT AND ACCORDINGL Y OFFERED NET INTEREST ONLY AS INCOME IN THE RETURN OF INCOME AND FOR THIS PURPOSE IT DREW SUPPORT FROM THE TRIBUNAL DECISION RENDERED IN THE CASE OF CYNAMID I NDIA (SUPRA). HOWEVER THE AO HAS OBSERVED THAT THE THE INTEREST EXPENDITURE OF RS.3.87 CRORES CLAIMED BY THE ASSESSEE CANNOT BE ALLOWED AS DEDUCTION UNDER T HE PROVISIONS OF INCOME TAX ACT IN VIEW OF THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF BHARAT COMMERCE INDUSTRIES LTD (230 ITR 733). H E FURTHER OBSERVED THAT THE DECISION OF THE TRIBUNAL IN THE CASE OF CYNAMID IND IA LTD (I.T.A.NO.4561/BOM/1982) WAS RENDERED PRIOR TO THE DECISION OF THE HONBLE SUPREME COURT REFERRED ABOVE. ACCORDINGLY THE AO DISALLOWED THE CLAIM OF INTEREST EXPENDITURE OF RS.3.87 CRORES IN THE REOPE NED ASSESSMENT. ITA NO.3455/M/2005 4 5. THE LD A.R PLEADED FOR ANNULLING THE IMPUGNED AS SESSMENT ORDER ON TECHNICAL GROUND VIZ. NON-FURNISHING OF REASONS F OR RE-OPENING OF ASSESSMENT PRIOR TO THE COMPLETION OF THE ASSESSMENT. THE LD A.R SUBMITTED THAT THE ASSESSEE SOUGHT FROM THE ASSESSING OFFICER THE REAS ONS FOR RE-OPENING OF ASSESSMENT VIDE ITS LETTER DATED 24-02-2003 BUT T HE ASSESSING OFFICER HAS FAILED TO FURNISH THE SAME TO THE ASSESSEE BEFORE THE DATE OF COMPLETION OF THE ASSESSMENT. WHEN IT WAS POINTED OUT THAT THE REASO NS FOR REOPENING HAS BEEN EXTRACTED BY THE AO IN THE ASSESSMENT ORDER THE LD A.R SUBMITTED THAT THE SAME CANNOT BE CONSIDERED AS COMPLIANCE WITH THE DE CISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF G.K.N. DRIVE SHAFTS (I NDIA) LTD (259 ITR 19) READ WITH THE DECISION RENDERED BY HONBLE JURISDICTION AL HIGH COURT IN THE CASE OF CIT VS. VIDESH SANCHAR NIGAM LTD (2012)(340 ITR 66)(BOM ). THE LD A.R SUBMITTED THAT THE ASSESSING OFFICER SHOULD COMPLETE THE REAS SESSMENT ONLY AFTER FURNISHING THE REASONS FOR REOPENING OF ASSESSMENT AND AFTER A DDRESSING THE OBJECTIONS TO THE REOPENING OF ASSESSMENT IF OBJECTIONS WERE FIL ED BY THE ASSESSEE. THE LD A.R SUBMITTED THAT THE JURISDICTIONAL HIGH HAS REND ERED THE ABOVE SAID DECISION BY FOLLOWING ITS OWN DECISION RENDERED IN THE CASE OF CIT VS. FOMENTO RESORTS AND HOTELS LTD (INCOME TAX APPEAL NO.71 OF 2006 DAT ED NOVEMBER 27 2006). HE FURTHER SUBMITTED THAT THE SPECIAL LEAVE PETITIO N FILED BY THE REVENUE AGAINST THE DECISION RENDERED BY THE JURISDICTIONAL HIGH CO URT IN THE CAE OF FOMENTO RESORTS AND HOTELS LTD (SUPRA) HAS BEEN DISMISSED B Y THE HONBLE SUPREME COURT VIDE ORDER DATED JULY 16 2007. IN SUM AND SUBSTANCE THE CASE OF THE LD A.R IS THAT THE IMPUGNED ASSESSMENT ORDER IS NOT VA LID SINCE THE ASSESSING OFFICER HAS FAILED TO FURNISH THE REASONS FOR RE-OP ENING OF ASSESSMENT TO THE ASSESSEE PRIOR TO THE COMPLETION OF THE ASSESSMENT. IT IS PERTINENT TO NOTE THAT THE AO HAS EXTRACTED THE REASONS FOR REOPENING OF A SSESSMENT IN THE ASSESSMENT ORDER AS UNDER: 'THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME FO R THE ABOVE ASSESSMENT YEAR ON 30.12.99 DECLARING LOSS OF RS.39 88 73 7821/-. THE ASSESSMENT U/S 143(3) WAS COMPLETED ON 27.03.2 ON A TOTAL INCOME OF RS.11 51 48 375/-. ON VERIFICATION OF RECORDS IT I S SEEN THAT THE ASSESSEE HAD ACCOUNTED A SUM OF RS. 13 26 61 520/- AS INTEREST INCOME RECEIVED FROM DEPARTMENT. THE DEPARTMENT HAS ALSO C HARGED INTEREST AMOUNTING TO RS.3 87 76 670/-. THE ASSESSE E COMPANY HAS DEDUCTED THIS AMOUNT WHILE COMPUTING ITS INCOME. TH E INTEREST LEVIED BY THE DEPARTMENT UNDER VARIOUS PROVISIONS OF ACT IS N OT AN ALLOWABLE ITA NO.3455/M/2005 5 EXPENDITURE U/S 37. THUS I HAVE REASON TO BELIEVE T HAT INCOME TO THE EXTENT OF RS.3 87 76 760/- HAS ESCAPED ASSESSMENT A S UNDER THE PROVISIONS OF EXPLANATION 2 CLAUSE (C)(I) TO SEC. 147 AN ASSESSMENT HAS BEEN MADE BUT THE INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSED. THEREFORE REASSESSMENT PROCEEDINGS ARE INITIATED A ND NOTICE U/S 148 IS ISSUED.' HOWEVER ACCORDING TO LD A.R THE SAME WAS NOT IN A CCORDANCE WITH THE PROCEDURE PRESCRIBED BY THE HONBLE SUPREME COURT I N THE CASE OF G.K.N. DRIVE SHAFTS (INDIA) LTD (SUPRA) READ WITH THE DECISIONS OF HONBLE BOMBAY HIGH COURT REFERRED SUPRA. 6. THE LD D.R SUBMITTED THAT THE ASSESSING OFFI CER HAS REOPENED THE ASSESSMENT WITHIN FOUR YEARS FROM THE END OF THE AS SESSMENT YEAR UNDER CONSIDERATION AND HENCE THE CLAIM OF DISCLOSURE MAD E IN THE NOTES ATTACHED WITH THE RETURN OF INCOME ABOUT THE CLAIM OF INTEREST PA ID TO THE DEPARTMENT SHALL NOT HAVE ANY SIGNIFICANCE. FURTHER THE QUESTION OF CHA NGE OF OPINION ALSO DOES NOT ARISE SINCE THE AO HAS NOT EXPRESSED ANY OPINION I N THE ORIGINAL ASSESSMENT PROCEEDINGS ABOUT THE MERITS OF DEDUCTION REFERRED ABOVE. HE FURTHER SUBMITTED THAT IT IS A SETTLED POSITION THAT THE AUDIT INFOR MATION CAN BE A SOURCE FOR THE AO TO FORM REASONABLE BELIEF ABOUT THE ESCAPEMENT O F INCOME. 7. THE LD D.R SUBMITTED THAT THE CLAIM FOR DEDUC TION OF INTEREST PAID TO THE INCOME TAX DEPARTMENT IS NOT ALLOWABLE AS DEDUCTION AND THE SAME HAS BEEN MADE CLEAR BY THE HONBLE SUPREME COURT IN ITS DECI SION RENDERED IN THE CASE OF BHARAT COMMERCE AND INDUSTRIES LTD (SUPRA) WHEREIN THE HONBLE APEX COURT HAS HELD AS UNDER:- WHEN INTEREST IS PAID FOR COMMITTING A DEFAULT IN RESPECT OF STATUTORY LIABILITY TO PAY ADVANCE TAX THE AMOUNT PAID AND T HE EXPENDITURE INCURRED IN THAT CONNECTION IS IN NO WAY CONNECTED WITH PRES ERVING OR PROMOTING THE BUSINESS OF THE ASSESSEE. THIS IS NOT EXPENDIT URE WHICH IS INCURRED AND WHICH HAS BEEN TAKEN INTO ACCOUNT BEFORE THE PR OFITS OF THE BUSINESS ARE CALCULATED. THE LIABILITY IN THE CASE OF PAYME NT OF INCOME TAX AND INTEREST FOR DELAYED PAYMENT OF INCOME TAX OR ADVAN CE TAX ARISING ON THE COMPUTATION OF THE PROFITS AND GAINS OF BUSINESS. THE TAX IS PAYABLE ON THE ASSESSEES INCOME AFTER THE INCOME IS DETERMINE D. THIS CANNOT THEREFORE BE CONSIDERED AS AN EXPENDITURE FOR THE PURPOSE OF EARNING ANY INCOME OR PROFITS. ITA NO.3455/M/2005 6 THE LD D.R SUBMITTED THAT THE ASSESSEE HAD PLACED R ELIANCE TO PUT FORTH ITS CLAIM ON THE DECISION RENDERED BY THE TRIBUNAL IN THE CAS E OF CYNAMID INDIA LTD (SUPRA) BUT THE SAID DECISION WAS RENDERED PRIOR TO THE D ECISION OF HONBLE SUPREME COURT REFERRED ABOVE. HE FURTHER SUBMITTED THAT THE DECISION OF THE APEX COURT IS THE LAW OF LAND AND HENCE THE ASSESSE E COULD NOT HAVE PLACED RELIANCE ON THE TRIBUNAL DECISION ON THIS ISSUE. 8. THE LD D.R FURTHER SUBMITTED THAT THE ASSESS ING OFFICER HAS EXTRACTED THE REASONS FOR REOPENING OF ASSESSMENT IN THE IMPUGNED ASSESSMENT ORDER. HE FURTHER SUBMITTED THAT EVENTHOUGH THE REASONS WERE NOT FURNISHED TO THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING S YET THE ASSESSEE WAS AWARE OF THE REASONS FOR REOPENING SINCE IT HAD MA DE A PATENTLY WRONG CLAIM ON THE BASIS OF DECISION OF TRIBUNAL REFERRED ABOVE. HE SUBMITTED THAT THE HONBLE APEX COURT DOES NOT ENACT ANY LAW BUT ONLY INTERPR ETS THE LAW MEANING THEREBY THE DECISION OF HONBLE SUPREME COURT IS APPLICBLE TO THE YEAR UNDER CONSIDERATION EVEN THOUGH IT WAS RENDERED SUBSEQUE NTLY. ACCORDINGLY HE SUBMITTED THAT THE ASSESSING OFFICER WAS JUSTIFIED IN FORMING BELIEF THAT THE CLAIM FOR DEDUCTION OF INTEREST PAID UNDER THE INCOME TAX ACT IS NOT ALLOWABLE AS DEDUCTION. 9. THE LD D.R FURTHER SUBMITTED THAT THERE WAS N O VIOLATION OF PRINCIPLES OF NATURAL JUSTICE ALSO IN NON-FURNISHING OF REASONS SINCE THE AO CANNOT COMPLETE THE ASSESSMENT WITHOUT SEEKING EXPLANATIONS FROM TH E ASSESSEE ON THE ISSUES IN RESPECT OF WHICH THE ASSESSMENT WAS RE-OPENED. THE AO WAS DUTY BOUND TO SEEK EXPLANATIONS FROM THE ASSESSEE DURING THE COUR SE OF ASSESSMENT PROCEEDINGS AND UPON ADDRESSING ALL THE EXPLANATION S/OBJECTIONS OF THE ASSESSEE WITH REGARD TO THE PROPOSED ADDITIONS/DISALLOWANCES ONLY THE AO COULD COMPLETE THE ASSESSMENT. THE LD D.R SUBMITTED THAT IN THE INSTANT CASE ALSO THE ASSESSING OFFICER HAS SOUGHT EXPLANATIONS FROM THE ASSESSEE BEFORE DISALLOWING THE CLAIM FOR DEDUCTION OF INTEREST PAID UNDER THE ACT AND AFTER DULY ADDRESSING THE SAME ONLY THE AO HAS DISALLOWED THE ABOVE SAID CLAIM BY FOLLOWING THE DECISION OF HONBLE SUPREME COURT RENDERED IN THE C ASE OF BHARAT COMMERCE AND INDUSTRIES (REFERRED SUPRA). HENCE IT CANNOT BE S AID THAT THE ASSESSING OFFICER ITA NO.3455/M/2005 7 HAS VIOLATED THE PRINCIPLES OF NATURAL JUSTICE DUE TO NON-FURNISHING OF REASONS FOR REOPENING BEFORE THE COMPLETION OF THE ASSESSMENT. IN FACT THE ASSESSEE HAS BEEN MADE KNOWN THE REASONS DURING THE COURSE OF AS SESSMENT PROCEEDINGS. ACCORDINGLY HE SUBMITTED THAT THE ASSESSEE CANNOT BE CONSIDERED TO BE PREJUDICED ON THIS COUNT WARRANTING THE QUASHING OF ASSESSMENT ORDER UNDER THE PECULIAR FACTS PREVAILING IN THE INSTANT CASE. 10. THE LD D.R SUBMITTED THAT THE HONBLE SUP REME COURT IN ITS DECISION RENDERED IN THE CASE OF GKN DRIVE SHAFTS (INDIA) LT D (SUPRA) HAS PRESCRIBED THE PROCEDURES TO BE FOLLOWED BY THE AO AS WELL AS THE ASSESSEE WHEN A NOTICE U/S 148 IS ISSUED IN THE FOLLOWING WORDS:- HOWEVER WE CLARIFY THAT WHEN A NOTICE UNDER SECTI ON 148 OF THE INCOME- TAX ACT IS ISSUED THE PROPER COURSE OF ACTION FOR THE NOTICEE IS TO FILE A RETURN AND IF HE SO DESIRES TO SEEK REASONS FOR IS SUING NOTICES. THE ASSESSING OFFICER IS BOUND TO FURNISH REASONS WITHI N A REASONABLE TIME. ON RECEIPT OF REASONS THE NOTICEE IS ENTITLED TO F ILE OBJECTIONS TO ISSUANCE OF NOTICE AND THE ASSESSING OFFICER IS BOUND TO DIS POSE OF THE SAME BY PASSING A SPEAKING ORDER. IN THE INSTANT CASE AS T HE REASONS HAVE BEEN DISCLOSED IN THESE PROCEEDINGS THE ASSESSING OFFIC ER HAS TO DISPOSE OF THE OBJECTIONS IF FILED BY PASSING A SPEAKING ORDER BEFORE PROCEEDING WITH THE ASSESSMENT IN RESPECT OF THE ABOVESAID FIVE ASS ESSMENT YEARS. IN SO FAR AS THE APPEALS FILED AGAINST THE ORDER OF ASSESSMENT BEFORE THE COMMISSIONER (APPEALS) WE DIRECT THE APPELLATE AUT HORITY TO DISPOSE OF THE SAME EXPEDITIOUSLY. THE LD D.R SUBMITTED THAT THE ASSESSEE IN THE CASE OF GKN DRIVE SHAFTS (INDIA) LTD (SUPRA) HAD RECEIVED NOTICES FOR REOPENING OF A SSESSMENTS OF SEVEN ASSESSMENT YEARS VIZ. 1992-93 TO 1998-99. THE ASSESSEE CHALLENGE D THE VALIDITY OF ISSUING NOTICES U/S 148 OF THE ACT FOR ALL THE SEVEN YEARS BY FILING WRIT PEITIONS BEFORE THE HONBLE DELHI HIGH COURT BUT T HE HIGH COURT DISMISSED THE WRIT PETITIONS BY HOLDING THAT THE PETITIONER THERE IN WAS NOT JUSTIFIED IN INVOKING THE EXTRAORDINARY JURISDICTION OF THE COURT AT THAT STAGE AS IT WAS PREMATURE. THE ASSESSEE CHALLENGED THE SAID ORDER BEFORE THE HONB LE SUPREME COURT. IT IS PERTINENT TO NOTE THAT DURING THE PENDENCY OF THE A PPEALS THE ASSESSING OFFICER HAD COMPLETED THE ASSESSMENTS REL ATING TO THE ASSESSMENT YEARS 1995-96 AND 1996-97 AGAINST WHICH APPEALS WERE ITA NO.3455/M/2005 8 PREFERRED BEFORE LD CIT(A) AND WERE PENDING. THE ASSESSMENTS OF THE REMAINING FIVE YEARS WERE PENDING TO BE COMPLETED. THE REVENUE HAD FURNISHED THE COPIES OF REOPENING OF ASSESSMENTS BEFORE THE H ONBLE COURT. UNDER THESE SET OF FACTS THE HONBLE APEX COURT CONFIRMED THE ORDER PASSED BY THE HONBLE DELHI HIGH COURT BY MAKING THE OBSERVATIONS EXTRACT ED ABOVE. THE LD D.R SUBMITTED THAT THE HONBLE SUPREME COURT HAS GIVEN AN OPPORTUNITY TO THE ASSESSEE TO FILE OBJECTIONS AND ACCORDINGLY DIRECTE D THE ASSESSING OFFICER TO DISPOSE OF THE OBJECTIONS IF FILED BY PASSING A S PEAKING ORDER. HOWEVER THE SAID DIRECTION WAS GIVEN BY THE HONBLE APEX COURT ONLY IN RESPECT OF FIVE ASSESSMENT YEARS WHICH WERE PENDING TO BE COMPLETED . HOWEVER IN RESPECT OF TWO ASSESSMENT YEARS VIZ. AY 1995-96 AND 1996- 97 THE ASSESSMENT OF WHICH HAD ALREADY BEEN COMPLETED AND APPEALS WER E PENDING BEFORE THE FIRST APPELLATE AUTHORITY THE HONBLE APEX COU RT HAS ONLY DIRECTED THE LD CIT(A) TO DISPOSE OF THE APPEALS EXPEDITIOUS LY. THE LD D.R SUBMITTED THAT THE ASSESSING OFFICER HAD NOT SUPPLI ED THE REASONS FOR REOPENING OF ASSESSMENT OF THE AY 1995-96 AND 1996- 97 BEFORE THE COMPLETION OF THE ASSESSMENTS OF THE ABOVE SAID TWO YEARS YET THE HONBLE SUPREME COURT DID NOT QUASH THE ASSESSMENT ORDERS OF THE ABOVE SAID TWO ASSESSMENT YEARS. THE LD D.R SUBMITTED THAT IN THE INSTANT CASE THE ASSESSING OFFICER HAS EXTRACTED T HE REASONS FOR RE-OPENING IN THE ASSESSMENT ORDER ITSELF AND HENCE THE PRESENT CASE STANDS IN A BETTER FOOTING. 11. ACCORDINGLY THE LD D.R SUBMITTED THAT THE HONBLE SUPREME COURT HAS NO WHERE STATED THAT THE ASSESSMENTS ARE LIABLE TO BE QUASHED FOR NON-FURNISHING OF REASONS FOR REOPENING BEFORE THE COMPLETION OF THE ASSESSMENT. IN RESPECT OF THE REMAINING FIVE ASSESSMENT YEARS ALSO THE REASO NS WERE NOT DIRECTLY FURNISHED TO THE ASSESSEE BUT THEY WERE FURNISHED ONLY DURING THE COURSE OF PROCEEDINGS BEFORE THE HIGH COURT/SUPREME COURT AN D THE HONBLE SUPREME COURT HAS TAKEN THE SAME AS PROPER FURNISHING OF RE ASONS TO THE ASSESSEE AND ACCORDINGLY DIRECTED THE ASSESSEE TO FILE OBJECTION S IF IT SO DESIRES. ITA NO.3455/M/2005 9 12. ACCORDINGLY THE LD D.R SUBMITTED THAT THE N ON-FURNISHING OF REASONS FOR REOPENING SHALL NOT RENDER THE ASSESSMENT ORDER AS INVALID IN VIEW OF THE DECISION RENDERED BY THE HONBLE SUPREME COURT IN T HE CASE OF GKN DRIVE SHAFTS (INDIA) LTD (SUPRA). HE FURTHER SUBMITTED THE DECI SION OF HONBLE SUPREME COURT SHALL PREVAIL OVER THE DECISION RENDERED BY HONBLE HIGH COURTS AND ACCORDINGLY PLEADED THAT THE TRIBUNAL SHOULD FOLLOW THE DECISIO N OF HONBLE SUPREME COURT. 13. THE LD D.R FURTHER SUBMITTED THAT THE ABOVE SAID PROCEDURES VIZ. FURNISHING OF REASONS FILING OF OBJECTIONS DISPOS ING OF OBJECTIONS BY A SPEAKING ORDER HAVE BEEN PRESCRIBED BY THE HONBLE SUPREME C OURT AND THE NON- COMPLIANCE OF THE SAME CAN ONLY BE CONSIDERED AS PR OCEDURAL LAPSE WHICH CAN BE CURED. THE LD D.R FURTHER SUBMITTED THAT THE DE CISION RENDERED BY A COURT WILL HAVE TO BE UNDERSTOOD IN THE CONTEXT IN WHICH IT HAS BEEN RENDERED. IT CANNOT BE READ LIKE A STATUTE. A DECISION MUST BE READ IN THE CONTEXT IN WHICH IT APPEARS TO HAVE BEEN STATED. SUCH A DECISION CANNO T BE READ IN THE MANNER AS TO NULLIFY THE EXPRESS PROVISIONS OF AN ENACTMENT. ACCORDINGLY THE LD D.R SUBMITTED THAT THE ORDER OF THE HONBLE SUPREME COU RT IN THE CASE OF GKN DRIVESHAFTS INDIA LTD (SUPRA) WAS MADE BY WAY OF CL ARIFICATION IN ORDER TO MAKE WAY FOR THE STAUTORY AUTHORITIES TO DEAL WITH THE A DJUDICATION COVERING ASSESSMENTS WITH THE OBJECTIVE OF PROVIDING AN ELEM ENT OF FAIRNESS IN THE PROCESS OF ADJUDICATION AND CREATE AN ATMOSPHERE OF TRANSPE RANCY A MECHANISM WHICH WAS NOT FOUND IN THE STATUTE. THE SAID PROCEDURE W AS EVOLVED BY ASKING THE ASSESSING OFFICER TO PASS A REASONED ORDER. THE LD D.R ACCORDINGLY SUBMITTED THAT THE DECISION OF THE HONBLE SUPREME COURT HAS TO BE CONSIDERED AS PART OF PROCEDURAL LAW AND HENCE NON-COMPLIANCE OF THE SAME WILL NOT NULLIFY THE REASSESSMENT PROCEEDINGS WHICH WERE OTHERWISE VALI DLY INITIATED BY THE ASSESSING OFFICER. 14. THE LD D.R SUBMITTED THAT THE DISALLOWANCE O F INTEREST CLAIM MADE BY THE ASSESSING OFFICER IS LIABLE TO BE CONFIRMED SINCE THE INTEREST PAID TO THE DEPARTMENT UNDER THE PROVISIONS OF THE ACT CANNOT B E CONSIDERED AS AN EXPENDITURE INCURRED FOR EARNING ANY INCOME OR PROF ITS. HENCE IT CAN ONLY BE SAID ITA NO.3455/M/2005 10 THAT THE ASSESSEE IS CHALLENGING THE SAID DISALLOWA NCE ON TECHNICAL GROUNDS ONLY TO WITHHOLD THE PAYMENT OF TAX WHICH THE STATE IS OTHERWISE LEGALLY ENTITLED TO. 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE RECORD. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE ASSESSING OFFICER DID NOT FURNISH THE REASONS FOR REOPENING OF ASSESSMENT TO THE ASSESSEE BEFORE THE COMPLETION OF THE ASSESSMENT. HOWEVER IT IS ALSO A FACT THAT TH E ASSESSING OFFICER HAS EXTRACTED THE REASONS FOR REOPENING IN THE ASSESSME NT ORDER. FROM THE IMPUGNED REASSESSMENT ORDER WE NOTICE THE DISALLOW ANCE OF RS.3 87 76 670/- MADE RELATES TO THE INTEREST PAID U/S 234A AND 234B OF THE ACT. IN VIEW OF THE DECISION OF HONBLE SUPREME COURT RENDERED IN THE C ASE OF BHARAT COMMERCE AND INDUSTRIES LTD (SUPRA) THE ABOVE SAID PAYMENT OF I NTEREST CANNOT BE ALLOWED AS DEDUCTION. HENCE APPARENTLY THE ASSESSEE MAY NOT BE HAVING A CASE ON MERITS. HENCE THE ASSESSEE IS STRONGLY PLACING RELIANCE ON THE TECHNICAL GROUND OF NON- FURNISHING OF REASONS BY PLACING RELIANCE ON THE DE CISION OF HONBLE JURISDICTIONAL BOMBAY HIGH COURT RENDERED IN THE CASE OF VIDESH S ANCHAR NIGAM LTD (SUPRA) WHEREIN THE HONBLE JURISDICTIONAL HIGH COURT HAS D ECIDED AN IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE BY RENDERING FOLLOWING JUDGM ENT:- 1. WHETHER THE TRIBUNAL WAS JUSTIFIED IN CANCELLI NG THE REOPENING OF THE ASSESSMENT IS THE QUESTION RAISED IN THIS APPEAL. 2. THE FINDINGS OF FACT RECORDED BY THE INCOME TAX APPELLATE TRIBUNAL IS THAT IN THE PRESENT CASE THE REASONS RECORDED FOR R EOPENING OF THE ASSESSMENT THOUGH REPEATEDLY ASKED BY THE ASSESSEE WERE FURNISHED ONLY AFTER COMPLETION OF THE ASSESSMENT. THE TRIBUNAL F OLLOWING THE JUDGMENT OF THIS COURT IN THE CASE OF CIT VS. FOMENTO RESORT S AND HOTELS LTD INCOME TAX APPEAL NO.71 OF 2006 DECIDED ON NOVEMBER 27 2006 HAS HELD THAT THOUGH THE REOPENING OF THE ASSESSMENT IS WITHIN THREE YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR SINCE THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT WERE NOT FURNISHED TO THE ASSESSEE TILL THE COMPLETION OF ASSESSMENT THE REASSESSMENT ORDE R CANNOT BE UPHELD. MOREOVER SPECIAL LEAVE PETITION FILED BY THE REVEN UE AGAINST THE DECISION OF THIS COURT IN THE CASE OF CIT VS. FOMENTO RESORT S AND HOTELS LTD HAS BEEN DISMISSED BY THE APEX COURT VIDE ORDER DATED JULY 16 2007. IN THIS VIEW OF THE MATTER THE PRESENT APPEA L IS ALSO DISMISSED WITH NO ORDER AS TO COSTS. ITA NO.3455/M/2005 11 THOUGH THE ARGUMENTS ADVANCED BY THE LD D.R WERE AT TRACTIVE AND THERE MAY BE MERITS THEREIN. HOWEVER IN VIEW OF THE DECISIO N OF HONBLE JURISDICTIONAL BOMBAY HIGH COURT REFERRED ABOVE WHICH IS BINDING ON US WE HOLD THAT THE IMPUGNED ASSESSMENT ORDER CANNOT BE UPHELD SINCE T HE ASSESSING OFFICER HAS FAILED TO FURNISH THE REASONS FOR REOPENING TO THE ASSESSEE BEFORE THE COMPLETION OF THE ASSESSMENT. ACCORDINGLY WE SET ASIDE THE O RDERS OF BOTH TAX AUTHORITIES. 16. SINCE WE HAVE SET ASIDE THE ORDERS OF THE TA X AUTHORITIES WHILE DECIDING THE ABOVE SAID PRELIMINARY ISSUE REFERRED ABOVE WE DO NOT FIND IT NECESSARY TO ADJUDICATE THE OTHER ISSUES URGED BEFORE US. FURTH ER NO ARGUMENT WAS ALSO ADVANCED ON OTHER GROUNDS. 17. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 3 RD NOV 2014 . - ( . /0 1 2 3 RD NOV 2014 - ' 3) 4 SD SD ( . . / H.L. KARWA) ( . . / B.R. BASKARAN ) / PRESIDENT / ACCOUNTANT MEMBER / ( ) MUMBAI: 3 RD NOV 2014. . . ./ SRL SR. PS ! ' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT. 3. ( 9* ( ) / THE CIT(A)- CONCERNED 4. ( 9* / CIT CONCERNED 5. 6. :; 3 !*< + < / ( ) / DR ITAT MUMBAI CONCERNED 3 = ) / GUARD FILE. TRUE COPY > ( / BY ORDER ? $ (ASSTT. REGISTRAR) + < / ( ) /ITAT MUMBAI