M/s ACIT, Circle-2(1), Guntur v. M/s Anjaneya Aqua, Ongole

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO.363/VIZAG/2008 ASSESSMENT YEAR : 2000-01 DCIT CIRCLE-2(1) GUNTUR M/S. ANJANEYA AQUA ONGOLE (APPELLANT) VS. (RESPONDENT) PAN NO.AAGFA 2630L ITA NO.377/VIZAG/2009 ASSESSMENT YEAR : 2001-02 ACIT CIRCLE-2(1) GUNTUR M/S. ANJANEYA AQUA ONGOLE (APPELLANT) VS. (RESPONDENT) CO NO.28/VIZAG/2008 ASSESSMENT YEAR : 2000-01 M/S. ANJANEYA AQUA ONGOLE DCIT CIRCLE-2(1) GUNTUR (APPELLANT) VS. (RESPONDENT) APPELLANT BY: SHRI SUBRATA SARKAR DR RESPONDENT BY: SHRI K.S.L.G. SHARMA CA ORDER PER SHRI S.K. YADAV JUDICIAL MEMBER:- THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF THE CIT(A) INTER-ALIA ON FOLLOWING GROUNDS: 1) THE LD. CIT(A) GUNTUR ERRED BOTH IN LAW AND ON FAC TS. 2) THE LD. CIT(A) ERRED IN HOLDING THAT THE ISSUE OF N OTICE U/S 148 ON 9.3.2006 WAS INVALID AND THE REASSESSMENT PROCEEDIN GS WERE INVALIDATED. 3) THE LD. CIT(A) ERRED IN NOT CONSIDERING THE ISSUES ON MERITS. 4) THE LD. CIT(A) OUGHT TO HAVE UPHELD THE REASSESSMEN T IN VIEW OF THE SUPREME COURTS DECISION IN THE CASE OF IPCA LA BORATORY VS. DCIT (2004) (266 ITR 521) (SC) 5) THE LD. CIT(A) OUGHT TO HAVE HELD THAT THE CONDITIO N PRECEDENT FOR INVOCATION OF THE POWERS U/S 147 R.W.S. 148 AND 149 ARE FULFILLED IN 2 THE ASSESSEES CASE WHEREIN THE REASSESSMENT PROCEE DINGS ARE INITIATED IN VIEW OF SUBSEQUENT SUPREME COURTS DEC ISION. 6) ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF H EARING. 2. THE ASSESSEE HAS PREFERRED THE CROSS OBJECTION I N SUPPORT OF THE ORDER OF THE CIT(A). SINCE APPEAL AND THE CROSS OBJECTIO NS WERE HEARD TOGETHER THEY ARE BEING DISPOSED OFF THROUGH THIS CONSOLIDAT ED ORDER FOR THE SAKE OF CONVENIENCE. 3. DURING THE COURSE OF HEARING THE LD. COUNSEL FO R THE ASSESSEES HAS CHALLENGED THE VALIDITY OF THE RE-OPENING OF THE AS SESSMENT AT THE THRESHOLD WITH THE SUBMISSIONS THAT THE RE-ASSESSMENT WAS RE- OPENED AFTER THE EXPIRY OF THE 4 YEARS FROM THE END OF THE ASSESSMENT YEAR WITHOUT BRINGING ANYTHING ON RECORD THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PAR T OF THE ASSESSEE TO DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS NECESSAR Y FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. IT WAS FURTHER CONTENDED THAT IN A CASE WHERE THE ORIGINAL ASSESSMENT IS COMPLETED U/S 143(3) OF THE ACT NO AC TION CAN BE TAKEN U/S 147 AFTER THE EXPIRY OF THE 4 YEARS FROM THE END OF THE ASSESSMENT YEAR UNLESS THE INCOME HAS ESCAPED ASSESSMENT OWING TO T HE FAILURE OR THE OMISSION ON THE PART OF THE ASSESSEE TO DISCLOSE FU LLY AND TRULY ALL MATERIALS NECESSARY FOR THE ASSESSMENT. IN THE INSTANT CASE THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) AND AS SUCH NO ACTION CAN BE TAKEN U/S 147 AFTER 31.3.2005 BUT THE NOTICE U/S 147 WAS ISSUED ON 29.3 .2007. IN THE REASONS RECORDED BY THE A.O. FOR ISSUING NOTICE U/S 148 TH ERE IS NO INDICATION MUCH LESS AN ALLEGATION THAT INCOME CHARGEABLE TO TAX HA S ESCAPED ASSESSMENT OWING TO THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS AT THE TIME OF THE ORIGINAL ASSESSME NT. IN SUPPORT OF HIS CONTENTION THAT IT IS FOR THE ASSESSING OFFICER TO ESTABLISH AS A FACT THAT ESCAPEMENT WAS ON ACCOUNT OF THE ASSESSEES FAILURE TO DISCLOSE THE MATERIAL FACTS NECESSARY FOR ASSESSMENT. THE LD. COUNSEL FO R THE ASSESSEE HAS INVITED OUR ATTENTION TO THE JUDGEMENT OF DELHI HIGH COURT IN THE CASE OF WEL INTERTRADE PVT. LTD. AND ANOTHER VS. ITO 308 ITR 22 AND JUDGEMENT OF THE MADRAS HIGH COURT IN THE CASE OF CIT VS. ELGI FINAN CE LTD. (286-ITR-674) AND CIT VS. ELGI ULTRA INDUSTRIES LTD. (296-ITR-573) IN SUPPORT OF HIS CONTENTIONS. 3 4. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTEND ED THAT IT IS OBVIOUS FROM THE REASONS RECORDED BY THE A.O. FOR ASSUMING JURISDICTION U/S 147 THAT TWO ESSENTIAL REQUIREMENTS WERE NOT COMPLIED WITH A S SUCH THE ASSUMPTION OF JURISDICTION U/S 147 IN THIS CASE IS THEREFORE ILLE GAL AND ISSUE OF NOTICE U/S 148 IS BAD IN LAW. THE RE-ASSESSMENT IN PURSUANCE THER E OF IS ALSO VOID. THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO PLACED A RELIANCE UPON THE FOLLOWING JUDGEMENT IN SUPPORT OF ABOVE CONTENTIONS: 1) MANJUSHA ESTATE PVT. LTD. VS. ITO (314-ITR-263) 2) BANG SECURITIES PVT. LTD. VS. ACIT AND ANOTHER (314 -IT-256) 3) MODI SPINNING AND WEAVING MILLS VS. ITO (101-ITR-63 7) 4) ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. CIT(22 4-ITR-560) 5) S. SREE RAMA CHANDRA MURTHY & ANOTHER VS. DCIT AND ANOTHER (243-ITR-427) (AP) 6) MMTC LTD. VS. DCIT (309-ITR-361) (AT) 5. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTEND ED THAT THE ASSESSEE HAS SCRUPULOUSLY COMPLIED WITH THE REQUIREMENTS OF LAW AND FURNISHED ALL THE INFORMATION THAT HE WAS OBLIGED TO DO. NOTHING WAS WITH HELD FROM THE DEPARTMENT AND THIS IS FORTIFIED BY THE FACT THAT A .O. IN HIS REASONS RECORDED FOR RE-OPENING COULD NOT POINT OUT THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ANY PARTICULAR INFORMATION OR MATERIAL. FROM READING OF THE REASONS RECORDED IT BECOMES CLEAR THAT ASSESSM ENT WAS RE-OPENED IN VIEW OF THE RETROSPECTIVE AMENDMENT OF PROVISIONS O F SECTION 80HHC BY TAXATION LAW AMENDMENT 2005 W.E.F. 1.4.1998. ON T HE BASIS OF THE AMENDMENT ONLY THOSE ASSESSMENTS CAN BE RE-OPENED WHICH IS PERMISSIBLE UNDER THE LAW AND NOT OTHERWISE. THE LD. COUNSEL F OR THE ASSESSEE HAS ALSO PLACED HIS SUBMISSIONS WITH REGARD TO THE CLAIM ON MERIT ALSO. THE LD. D.R. SIMPLY PLACED THE RELIANCE UPON THE ORDER OF THE A. O. 6. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A CA REFUL PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES WE FIND THAT THE A SSESSMENT WAS ADMITTEDLY RE-OPENED AFTER 4 YEARS FROM THE END OF THE RELEVAN T ASSESSMENT YEAR WITHOUT BRINGING ANYTHING ON RECORD THAT INCOME HAS ESCAPED ASSESSMENT ON ACCOUNT 4 OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT FOR THAT ASSESSM ENT YEAR. FROM A CAREFUL PERUSAL OF ASSESSMENT ORDER IT APPEARS THAT THE ASS ESSMENT WAS RE-OPENED ON THE BASIS OF THE AMENDMENT BROUGHT IN SECTION 80 HHC OF THE I.T. ACT. THOUGH THE AMENDMENT WAS WITH RETROSPECTIVE EFFECT BUT ON THE BASIS OF IT ONLY THOSE ASSESSMENT CAN BE RE-OPENED WHICH ARE PE RMISSIBLE UNDER THE LAW AND NOT OTHERWISE. IN THE INSTANT CASE THE ASSESS MENT WAS COMPLETED U/S 143(3) OF THE I.T. ACT AND THE ASSESSING OFFICER HA S RE-OPENED THE ASSESSMENT BY ISSUING A NOTICE U/S 148 AFTER A LAPSE OF A PERI OD OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR WITHOUT BRINGING AN YTHING ON RECORD THAT INCOME HAS ESCAPED THE ASSESSMENT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEES TO DISCLOSE FULLY AND TRULY ALL MATER IALS FOR HIS ASSESSMENT. THIS ISSUE HAS BEEN REPEATEDLY EXAMINED BY THE VARIOUS H IGH COURTS AND ALL OF THEM HAVE CATEGORICALLY HELD THAT NOTICE AFTER EXPI RY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR ISSUED WITHOUT SUG GESTING ANY FAILURE OR OMISSION ON THE PART OF THE ASSESSEE TO MAKE FULL A ND TRUE DISCLOSURE COULD NOT BE SUSTAINED AND DESERVES TO BE QUASHED. IN TH E CASE OF MCDERMOTT INTERNATIONAL INC. VS. ACIT & ANOTHER 259 ITR 138 ( UTTARANCHAL) THEIR LORDSHIP OF THIS UTTARANCHAL HIGH COURT HAVE HELD T HAT NOTICE U/S 148 ISSUED BEYOND THE PERIOD OF 4 YEARS NOT EVEN REMOTELY SUGG ESTING ANY FAILURE OR OMISSION ON THE PART OF THE ASSESSEE TO MAKE FULL A ND TRUE DISCLOSURE COULD NOT BE SUSTAINED. 7. IN THE CASE OF BANG SECURITIES PVT. LTD. VS. ACI T AND OTHERS 314 ITR 256 (BOM) THEIR LORDSHIP OF THE BOMBAY HIGH COURT H AVE HELD THAT U/S 147 OF THE INCOME TAX ACT ASSESSMENT FINALIZED U/S 143(3) CAN BE RE-OPENED AFTER THE EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT ON ACCOUNT OF FAILURE ON THE PAR T OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELEVAN T FOR THAT ASSESSMENT YEAR. SINCE THERE WAS NO MATERIAL TO HOLD THAT ANY INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT THE RE-OPENING OF THE ASSESSMEN T AFTER EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR COULD NOT BE SUSTAINED. ACCORDINGLY THE NOTICE U/S 148 WAS QUASHED. SIMIL AR VIEW WAS TAKEN BY THE 5 GUJARAT HIGH COURT IN THE CASE OF MANJUSHA ESTATE P VT. LTD. VS. ITO 314 ITR 263 (GUJ.) IN WHICH THE LORDSHIP HAVE HELD THAT THE REASONS RECORDED DID NOT INDICATE THAT ASSESSING OFFICER WAS IN POSSESSION O F ANY MATERIAL WHICH WOULD PERMIT HIM TO HOLD A BELIEF SO AS TO FORM AN OPINIO N OR HAVE REASON TO BELIEVE THAT ANY INCOME HAD ESCAPED ASSESSMENT BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERI AL FACTS NECESSARY FOR HIS ASSESSMENT THUS THE NOTICE ISSUED U/S 148 IS LIABL E TO BE QUASHED. 8. WE HAVE ALSO CAREFULLY EXAMINED THE ORDER OF THE CIT(A) AND WE FIND THAT CIT(A) HAS ALSO PLACED A RELIANCE UPON VARIOUS JUDGEMENTS WHILE QUASHING THE NOTICE ISSUED U/S 148 OF THE ACT. SIN CE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN THE LIGHT O F AFORESAID LEGAL PROPOSITIONS WE UPHOLD THE SAME. SINCE THE APPEALS OF THE REVEN UE ARE DISMISSED THE C.O. OF THE ASSESSEE BECOMES INFRUCTUOUS AND WE DIS MISS THE SAME. 9. IN THE RESULT THE APPEALS OF THE REVENUE AND TH E C.O. OF THE ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 22.01.2010 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM DATED 22 ND JANUARY 2010 COPY TO 1 THE DCIT CIRCLE-2(1) 4 TH FLOOR RAJKAMAL COMPLEX LAKSHMIPURAM MAIN ROAD GUNTUR 2 M/S. ANJANEYA AQUA D.NO.37-1-406(25) 2 ND LINE BHAGYA NAGAR ONGOLE. 3 THE CIT GUNTUR 4 THE CIT(A) GUNTUR 5 THE DR ITAT VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM