M/s. Wheels India Ltd., CHENNAI v. DCIT, CHENNAI

ITA 4/CHNY/2012 | 2002-2003
Pronouncement Date: 27-07-2012 | Result: Dismissed

Appeal Details

RSA Number 421714 RSA 2012
Assessee PAN AAACW0315K
Bench Chennai
Appeal Number ITA 4/CHNY/2012
Duration Of Justice 6 month(s) 24 day(s)
Appellant M/s. Wheels India Ltd., CHENNAI
Respondent DCIT, CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 27-07-2012
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 27-07-2012
Date Of Final Hearing 25-06-2012
Next Hearing Date 25-06-2012
Assessment Year 2002-2003
Appeal Filed On 03-01-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH CHENNAI BEFORE SHRI N. S. SAINI ACCOUNTANT MEMBER AND SHRI V. DURGA RAO JUDICIAL MEMBER .. ITA NOS.04 AND 05/MDS/2012 ASSESSMENT YEARS: 2002-03 & 2003-04 M/S. WHEELS INDIA LTD. PADI CHENNAI-600 050. (PAN : AAACW0315K) V. THE DY. COMMISSIONER OF INCOME-TAX LARGE TAXPAYER UNIT CHENNAI. (APPELLANT) (RESPONDENT) A N D ITA NO. 163/MDS/2012 ASSESSMENT YEAR : 2003-04 THE DY. COMMISSIONER OF V. M/S. WHE ELS INDIA LTD. INCOME-TAX N O. 21 PATULLOS ROAD LARGE TAXPAYER UNIT CHENN AI-600 002. CHENNAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SAROJ KUMAR PARIDA ADVOCATE DEPARTMENT BY : SHRI SHAJI P. JACOB ADDL. CIT DATE OF HEARING : 25.06.2012 DATE OF PRONOUNCEMENT : 27.07.2012 ITA.04 05 & 163/MDS2012 2 O R D E R PER V. DURGA RAO JUDICIAL MEMBER : ITA NOS. 04 & 05/MDS/2012 ARE APPEALS FILED BY THE ASSESSEE AND ITA NO. 163/MDS/2012 IS AN APPEAL FILE D BY THE REVENUE . THESE APPEALS BY THE ASSESSEE AND THE REVENUE RELATE TO THE ASSESSMENT YEARS 2002-03 AND 2003-04 AND ARE AGAINST THE ORDERS PASSED BY THE CIT(A) LARGE TAX PAYER UNIT CHENNAI DATED 24-11-2011. SINCE COMMON ISSUES ARE I NVOLVED IN THESE APPEALS THEY ARE CONSOLIDATED AND DISPOSE D BY THIS COMMON ORDER. ITA NO. 04/MDS/2012: 2. THE FIRST GROUND RAISED BY THE ASSESSEE IN T HIS APPEAL IS GENERAL IN NATURE AND NEEDS NO ADJUDICATION. GROUN DS 2 AND 2.1 RELATE TO THE DISALLOWANCE OF INTEREST UNDER SE CTION 244A OF THE INCOME-TAX ACT 1961. WE FIND THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF JURISDICTIO NAL HIGH COURT IN THE ASSESSEES OWN CASE IN TAX CASE (APPEA L) NOS. 76 AND 77 OF 2008 DATED 27-04-2011. WHEREIN THE HONB LE HIGH COURT HAS DECIDED THE ISSUE AGAINST THE ASSESSEE HO LDING THAT WHERE REFUND IS GRANTED WITHOUT ANY DELAY THE QUES TION OF ITA.04 05 & 163/MDS2012 3 GRANTING INTEREST ON INTEREST WILL NOT ARISE.. RES PECTFULLY FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH C OURT WE DISMISS THE GROUND RAISED BY THE ASSESSEE WITH REGA RD TO THE DISALLOWANCE OF INTEREST UNDER SECTION 244A OF THE INCOME TAX ACT 1961. 3. GROUNDS 3 AND 3.1 RAISED BY THE ASSESSEE RELATE TO THE LEVY OF INTEREST UNDER SECTION 234D OF THE ACT. THE HONBLE JURISDICTIONAL HIGH COURT OF MADRAS HAS DECIDED THE ISSUE IN THE CASE OF CIT V. INDIAN OVERSEAS BANK LTD IN TC(A) NO. 534 OF 2008 DATED 30-09-2011 AGAINST THE ASSESSEE WHEREIN THE HONBLE HIGH COURT HAS HELD THAT IF THE REGULAR ASS ESSMENT IS MADE AFTER 01-06-2003 INTEREST U/S 234D BECOMES AP PLICABLE. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE HIGH COURT WE DISMISS THE GROUNDS RAISED BY THE ASSESSEE IN RE SPECT OF LEVY OF INTEREST UNDER SECTION 234D OF THE ACT. ITA NO. 163/MDS/2012: 4. THE ONLY GROUND RAISED BY THE REVENUE RELATES T O THE DELETION OF THE DISALLOWANCE U/S 40(A)(I) OF THE IN COME TAX ACT 1961 MADE BY THE ASSESSING OFFICER IN RESPECT OF THE PAYMENT OF EXPORT SALES COMMISSION AND SERVICE CHAR GES MADE TO NON-RESIDENTS WITHOUT DEDUCTION OF TAX AT SOURCE . ITA.04 05 & 163/MDS2012 4 5. THE BRIEF FACTS ARE THAT THE AO MADE A DISALLOWA NCE UNDER SECTION 40(A)(I) IN RESPECT OF EXPORT SALES C OMMISSION OF RS 117.50 LAKHS AND MARKETING SERVICE CHARGES OF RS . 6.66 LAKHS ON THE GROUND THAT THE PERSONS TO WHOM THESE PAYMENTS WERE MADE WERE NON-RESIDENTS RENDERING MANAGERIAL SERVICES AND THEREFORE THE ASSESSEE OUGH T TO HAVE DEDUCTED TAX AT SOURCE IN RESPECT OF THE PAYMENTS M ADE TO THEM. 6. ON BEING AGGRIEVED THE ASSESSEE CARRIED THE MAT TER BEFORE THE CIT(A). THE LEARNED CIT(A) DEALT WITH TH E ISSUE IN DETAIL AND HAS HELD AS UNDER: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE LD. AR. I HAVE ALSO PERUSED COPIES OF THE AGREEMENTS AND THE CASE LAWS RELIED ON BY THE AO AND THE AR. I FIND FROM THE FACTS OF THE CASE THAT THE APPELLANT HAD PAID SALE COMMISSIONS AND MARKETING SERVICES TO NON- RESIDENT AGENTS OUTSIDE INDIA FOR THEIR SERVICES RENDERED OUTSIDE INDIA BY WAY OF CANVASSING SALES ORDERS. NONE OF THE ENTITIES TO WHOM PAYMENT HAS BEEN MADE BY THE APPELLANT HAVE A PERMANENT ESTABLISHMENT (PE) IN INDIA. AS PER THE RELEVANT ARTICLES OF THE DTA AGREEMENT (DTAA) ENTERED INTO BY INDIA WITH THE RESPECTIVE ITA.04 05 & 163/MDS2012 5 COUNTRIES THE INCOME EARNED IS TAXABLE ONLY IN THOSE COUNTRIES. FROM THE ABOVE IT IS THEREFORE CLEAR THATU9 NO PART OF THE SAID AMOUNT IS TAXABLE IN INDIA THE HONBLE SUPREME COURT IN THE CASE OF G.E. TECHNOLOGY CENTRE (P) LTD. V. CIT (327 ITR 456) HAD HELD THAT THE SCHEME OF SUBSECTIONS (1) (2) & (3) OF SECTION 195 AND SECTION 197 LEAVES NO DOUBT THAT THE EXPRESSION ANY OTHER SUM CHARGEABLE UNDER THE PROVISIONS OF THE ACT WOULD MEAN SUM ON WHICH INCOME TAX IS LEVIABLE. THE CONSIDERATION WOULD BE WHETHER THE PAYMENT OF THE SUM TO NON-RESIDENT IS CHARGEABLE TO TAX UNDER THE PROVISIONS OF THE ACT OR NOT. IN VIEW OF THE CLEAR FINDING OF THE SUPREME COURT AND THE JURISDICTIONAL ITAT AND SINCE THE AMOUNT PAID BY THE APPELLANT IS NOT CHARGEABLE TO TAX IN INDIA THE QUESTION OF DEDUCTING TAX AT SOURCE ON THE SAID PAYMENT DOES NOT ARISE. FURTHER THE HONBLE CHENNAI ITAT IN APPELLANTS OWN CASE FOR THE ASSESSMENT YEAR 2005-06 IN ITA NO. 250/MDS/2010 DATED 16-12-2010 HAS ALLOWED SIMILAR CLAIM OF THE APPELLANT. IN VIEW OF THE ABOVE FACTS AND RESPECTFULLY FOLLOWING THESE DECISIONS THE DISALLOWANCE MADE BY THE AO IN THIS REGARD IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. ITA.04 05 & 163/MDS2012 6 7. ON BEING AGGRIEVED THE REVENUE HAS FILED THE PR ESENT APPEAL. THE LEARNED DR HAS RELIED UPON THE DECISIO N OF THE AUTHORITY FOR ADVANCED RULING IN THE CASE OF SKF BO ILERS AND DRIERS PVT. LTD. IN RE REPORTED IN 343 ITR 385. 8. WE HAVE HEARD BOTH THE SIDES PERUSED THE RECORD S AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF G.E. TECHNOLOGY CENTRE P) LTD. (327 ITR 456) AS ALSO TH E DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASST. YEAR 2005-06 IN ITA NO. 250/MDS/2010 DATED 16-12-2010 W E FIND NO INFIRMITY IN THE ORDER PASSED BY THE CIT(A). AC CORDINGLY WE CONFIRM THE ORDER OF THE LEARNED CIT(A) AND DISMISS THE GROUND RAISED IN THIS APPEAL BY THE REVENUE. ITA NO. 05/MDS/2012: 9. THE FIRST GROUND IS GENERAL IN NATURE AND NEEDS NO ADJUDICATION. GROUND NOS. 2 AND 2.1 RELATE TO THE CONFIRMATION MADE BY THE CIT(A) IN RESPECT OF THE REOPENING OF T HE ASSESSMENT. 10. BRIEF FACTS ARE THAT THE ASSESSEE FILED ITS RETU RN OF INCOME FOR THE ASSESSMENT YEAR 2003-04 ON 28-11-2003 DECL ARING A TOTAL INCOME OF ` 12 36 34 880/-. THE RETURN WAS INITIALLY ITA.04 05 & 163/MDS2012 7 PROCESSED U/S 143(1) OF THE ACT AND SUBSEQUENTLY TH E ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 3 1-01- 2006 DETERMINING THE TOTAL INCOME OF ` 12 81 65 989/-. SUBSEQUENTLY THE AO HAD ISSUED A NOTICE U/S 148 ON THE GROUND THAT THERE IS AN ESCAPEMENT OF INCOME FROM ASSESSMENT FOR THE FOLLOWING REASONS : 1. IT IS OBSERVED THAT WHILE COMPUTING THE DEDUCTION U/S 80HHC A SUM OF ` `` ` 75 40 031 WAS INTER ALIA ADDED TO THE TOTAL TURNOVER TOWARDS SUB-CONTRACTOR RECEIPTS. HOWEVER 90% OF THE SAME WAS NOT REDUCED FROM THE PROFITS OF THE BUSINESS WHILE COMPUTING THE SAID DEDUCTION. RELIANCE IS PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF K.N. RAVINDRANATHAN NAIR VS. CIT (295 ITR 228). HENCE EXCESS DEDUCTION HAS BEEN ALLOWED U/S 80HHC OF THE INCOME TAX ACT AND THUS THE INCOME HAS ESCAPED THE ASSESSMENT. ALSO THE ASSESSEE HAS NOT PROVED WHETHER IT HAS BEEN COMPLIED WITH THE AMENDED PROVISIONS OF SECTION 80HHC OF THE INCOME TAX ACT FOR CLAIMING THE DEDUCTION ON THE EXPORT BENEFITS RECEIVED AS PER THE TAXATION LAW AMENDMENT 2005 AGAINST THE PROVISIONS OF SECTION 80HHC OF THE ACT. ITA.04 05 & 163/MDS2012 8 2. FURTHER AS PER CIRCULAR NO. 7/2009 OF THE CBDT THE EARLIER CIRCULARS THAT HAS BEEN ISSUED WITH REFERENCE TO THE PROVISIONS OF SECTION 195 VIZ. CIRCULAR NO. 23 DTD. 23.7.1969 CIRCULAR NO. 163 DTD. 29.5.1975 & CIRCULAR NO. 786 DTD. 7.2.2000 HAS BEEN WITHDRAWN BY THE CBDT. FURTHER IT HAS BEEN ALSO OBSERVED FROM THE FINANCE BILL 2010-11 THAT THE PROVISIONS OF SECTION 9 OF THE INCOME TAX ACT HAS BEEN AMENDED RETROSPECTIVELY FROM 1.6.1976 IN RELATION TO THE A.Y. 1977-78 AND SUBSEQUENT YEARS THAT THE EXPENDITURE INCURRED OUTSIDE INDIA ALSO DEEMED TO ACCRUE OR ARISE IN INDIA IN RESPECT OF THE SERVICES RENDERED. BASED ON THE ABOVE CIRCULAR OF CBDT NO. 7/2009 AND FINANCE BILL 2010-11 THAT WHATEVER THE EXPENDITURE INCURRED BY THE ASSESSEE IN FOREIGN CURRENCY FOR THE PURPOSE OF UTILIZATION OF SERVICES EVEN THOUGH THE SERVICES RENDERED OUTSIDE INDIA IS TAXABLE. THEREFORE SINCE THE ASSESSEE HAS INCURRED EXPENDITURE IN FOREIGN CURRENCY TO THE TUNE OF ` `` ` 321.13 LAKHS FOR THE A.Y. 2003-04; THE ABOVE ITA.04 05 & 163/MDS2012 9 EXPENDITURE WILL BE ALLOWED AS PER THE 195 OF THE INCOME TAX ACT. SINCE THE ASSESSEE HAS NOT PROVIDED NECESSARY FACTS ON THE SAME THE SAME HAS TO BE DISALLOWED AS PER THE PROVISIONS OF SECTION 40(A)(I) OF THE ACT. BASED ON THE ABOVE FACTS IT IS CLEAR THAT ASSESSEE HAS NOT DISCLOSED ALL THE MATERIAL FACTS FULLY AND TRULY BEFORE THE TAX AUTHORITIES FOR THE PURPOSE OF ASSESSMENT FOR THE AY 2003-04. HENCE I HAVE THE REASON TO BELIEVE THAT: THE INCOME ESCAPED THE ASSESSMENT FOR THE CURRENT YEAR WITHIN THE MEANING OF PROVISIONS OF SECTION 147 OF THE INCOME TAX ACT. (EMPHASIS SUP PLIED BY US) 11. IN RESPONSE TO THE NOTICE ISSUED BY THE AO THE ASSESSEE HAD FILED ITS LETTER ON 16-03-2010 REQUESTING THAT THE RETURN FILED ORIGINALLY MAY BE TREATED AS THE RETURN FILED IN RESPONSE TO THE NOTICE U/S 148 OF THE ACT. SUBSEQUENTLY A NOT ICE U/S 143(2) WAS ISSUED ON 9.6.2010 AND ON BEHALF OF THE ASSESSEE THE ASSESSEES REPRESENTATIVE APPEARED BEFORE THE A O. DURING THE COURSE OF THE REASSESSMENT PROCEEDINGS THE ASS ESSEE HAS ITA.04 05 & 163/MDS2012 10 SUBMITTED A DETAILED LETTER DATED 19-08-2010 STATIN G THAT THE ASSESSMENT HAS BEEN REOPENED AFTER THE EXPIRY OF FO UR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. SINC E THE ASSESSMENT WAS REOPENED WITHOUT RECEIPT OF FRESH EV IDENCE OR TO PROVE THE FAILURE ON THE PART OF THE ASSESSEE TO PRODUCE ALL THE MATERIAL FACTS FULLY AND TRULY THE REOPENING O F THE ASSESSMENT IS BAD IN LAW AND WITHOUT JURISDICTION. THE AO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE H AS OBSERVED THAT THE ASSESSEE HAS FAILED TO BRING ALL THE FACTS TO THE NOTICE OF THE AO THOUGH THE SAME HAVE BEEN MENT IONED IN THE ANNUAL REPORT AND THE NOTE GIVEN IN THE ANNUAL REPORT CANNOT BE TAKEN AS FULL AND TRUE DISCLOSURE AND HE HELD THAT THE ISSUE OF NOTICE U/S 148 WAS VALID. 12. AGGRIEVED THE ASSESSEE CARRIED THE MATTER BEFOR E THE CIT(A). IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT THE ASSESSEE HAS DISCLOSED FULLY AND TRULY ALL THE MATE RIAL FACTS NECESSARY FOR ASSESSMENT AS REQUIRED IN THE SECOND PROVISO TO SECTION 147 AND THE AO HAS NOT POINTED OUT WHAT MAT ERIAL AND PRIMARY FACTS THAT THE ASSESSEE FAILED TO DISCLOSE AND THE ACTION OF THE AO IN REOPENING THE ASSESSMENT AFTER 4 YEARS SHOULD BE HELD TO BE BAD IN LAW. AFTER CONSIDERING THE ITA.04 05 & 163/MDS2012 11 SUBMISSIONS OF THE ASSESSEE THE LEARNED CIT(A) HAS OBSERVED THAT THE ASSESSMENT WAS RE-OPENED ON TWO GROUNDS T HAT IN THE ASSESSMENT TO EXCLUDE SUB CONTRACT RECEIPT FROM PROFITS OF THE BUSINESS UNDER CLAUSE (BAA) IN EXPLANATION TO S EC. 80HHC AND TO DISALLOW AMOUNTS OF EXPORT COMMISSION PAYMEN TS U/S 40(A)(I). IT IS SEEN FROM THE MATERIAL AVAILABLE ON RECORD THAT THESE ISSUES WERE NOT EXAMINED DURING THE ORIGINAL ASSESSMENT PROCEEDINGS. NEITHER THE DETAI LS WERE CALLED FOR BY THE AO NOR WERE THEY SUBMITTED B Y THE ASSESSEE. THOUGH DEDUCTION U/S 80HHC HAD BEEN CONSIDERED BUT IT HAS NOT BEEN EXAMINED FROM THE ANGLE FROM WHICH THE REOPENING HAS BEEN INITIATED. FURTHER PAYMENT OF EXPORT COMMISSION AND ITS ALLOWABILITY U/S 40(A)(I) HAVE NOT BEEN EXAMINED. THEREFORE THE DISCLOSURE WILL NOT AMOUNT TO DISCLO SURE WITHIN THE MEANING OF THE PROVISO TO SECTION 147. THE LEARNED CIT(A) ACCORDINGLY CONFIRMED THE VIEW TAKEN BY THE AO. 13. ON BEING AGGRIEVED THE ASSESSEE CARRIED THE MA TTER BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE A SSESSEE HAS SUBMITTED THAT ALL THE DETAILS IN RESPECT OF SUB CO NTRACT ITA.04 05 & 163/MDS2012 12 CHARGES COMMISSION PAID TO FOREIGN AGENCIES WERE S UBMITTED BEFORE THE AO. THERE IS NO FAILURE ON THE PART OF THE ASSESSEE FOR NON-DISCLOSURE OF THE TRUE AND NECESSARY FACTS TO COMPLETE THE ASSESSMENT. THE LEARNED COUNSEL FOR THE ASSESS EE HAS REFERRED TO PAPER BOOK PAGE NO. 8 WHICH A LETTER D ATED 23-01- 2006 AND POINTED OUT THAT ALL THE DETAILS IN RESPEC T OF WHICH REOPENING WAS MADE WERE SUBMITTED BEFORE THE AO. HE RELIED ON THE DECISIONS OF THE TRIBUNAL IN THE ASSE SSEES OWN CASE IN ITA NO.13/MDS/2010 FOR THE ASSESSMENT YEAR 2001-02 DATED 24-10-2010 THE DECISION OF THE HONBLE SUPRE ME COURT IN THE CASE OF CIT V. KELVINATOR OF INDIA LTD. (32 0 ITR 561) (SC) AND THE DECISION OF THE JURISDICTIONAL HIGH CO URT IN THE CASE OF ACIT V. M/S. SRI MOOKAMBIGAI SPINNING MILLS LTD. IN TC(A) NO. 2611 OF 2006 DATED 27-11-2006 AND SUBMITT ED THAT IN VIEW OF THE ABOVE CASE LAWS RELIED ON BY HIM TH E RE- OPENING OF THE ASSESSMENT AFTER FOUR YEARS IS BAD I N LAW. 14. ON THE OTHER HAND THE LEARNED DR STRONGLY SUPP ORTED THAT THE AO HAS RIGHTLY REOPENED THE ASSESSMENT BY ISSUING A NOTICE UNDER SEC. 148 OF THE ACT AND SUBMITTED THAT THE ASSESSEE HAS NOT DISCLOSED FULLY AND TRULY ALL THE MATERIAL FACTS RELEVANT FOR THE COMPLETION OF THE ASSESSMENT. HE HAS ITA.04 05 & 163/MDS2012 13 SPECIFICALLY REFERRED TO THE ANNEXURE TO THE ANNUAL REPORT COLUMN NO.5 WHERE THE TOTAL PROFITS OF THE BUSINESS OF THE ASSESSEE HAS BEEN SHOWN AT RS 10 06 18 961/-. AS P ER THE PROFIT & LOSS ACCOUNT AS ON 31-03-2003 THE NET PROF IT FOR THE YEAR WAS ` 1 756.29 LAKHS AND THE NET PROFIT WAS RS 1 170.29 LAKHS. HE FURTHER SUBMITTED THAT HOW THE ASSESSEE COULD GIVE A FIGURE OF ` 10 06 18 961/- IS NOT KNOWN AND THEREFORE THE DISCLOSURE MADE BY THE ASSESSEE IS NOT TRUE DISCLOS URE AND ACCORDINGLY THE NOTICE ISSUED BY THE AO U/S 148 OF THE ACT IS VALID. HE FURTHER SUBMITTED THAT THE CASE LAWS REL IED ON BY THE ASSESSEE HAVE NO APPLICATION TO THE FACTS OF THE PR ESENT CASE AND THEREFORE THOSE CASE LAWS HAVE NO SUPPORT TO TH E ASSESSEES CASE. 15. WE HAVE HEARD BOTH THE SIDES PERUSED THE RECOR DS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSM ENT YEAR 2003-04 ON 28-11-2003 DECLARING A TOTAL INCOME OF ` 12 36 34.880/-. THE RETURN WAS PROCESSED U/S 143(1 ) OF THE ACT INITIALLY AND THE ASSESSMENT WAS COMPLETED UNDE R SECTION 143(3) OF THE ACT. SUBSEQUENTLY THE ASSESSMENT WA S REOPEND ON TWO COUNTS BY ISSUE OF A NOTICE DATED 09-03-2010 U/S. 148 ITA.04 05 & 163/MDS2012 14 ON THE GROUND THAT WHILE COMPUTING THE DEDUCTION U/ S. 80HHC OF THE ACT A SUM OF ` 75 40 031/- WAS ADDED TO THE TOTAL TURNOVER TOWARDS SUB-CONTRACTOR RECEIPTS. HOWEVER 90% OF THE SAME WAS NOT REDUCED FROM THE PROFITS OF THE BU SINESS WHILE COMPUTING THE SAID DEDUCTION. THE SECOND REA SON FOR RE-OPENING OF THE ASSESSEE IS THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IN FOREIGN CURRENCY FOR THE PURPOSE OF UTILIZATION OF SERVICES OUTSIDE INDIA ALSO DEEMED TO ACCRUE OR ARISE IN INDIA IN RESPECT OF THE SERVICES RENDERED. THE CAS E OF THE REVENUE IS THAT THE ASSESSEE HAS NOT DISCLOSED ALL THE MATERIAL FACTS FULLY AND TRULY BEFORE THE AO. THEREFORE TH E ASSESSMENT WAS RE-OPENED. BEFORE THE AO THE ASSESSEE HAS SUBM ITTED THAT ALL THE DETAILS NECESSARY TO COMPLETE THE ASSE SSMENT WERE SUBMITTED DURING THE COURSE OF PROCEEDINGS UNDER SE CTION 143(3). THEREFORE THE ISSUANCE OF NOTICE U/S. 148 OF THE ACT AFTER FOUR YEARS IS NOT VALID. HOWEVER THE AO DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE AND UPHELD THE REOP ENING. WE FIND THAT IN THE ORIGINAL ASSESSMENT PROCEEDINGS U/S 143(3) REGARDING SUB-CONTRACT CHARGES THE ASSESSEE COMPANY SUBMITTED THAT CHARGES REPRESENTED JOB CONTRACT BE LONGING TO THIRD PARTY. THE ASSESSEE HAD ONLY COLLECTED THE ITA.04 05 & 163/MDS2012 15 SUBCONTRACTING CHARGES AND THE SAME COULD NOT BE CO NSIDERED AS FORMING PART OF TURNOVER AND THE ABOVE INCOME SH OULD BE TREATED AS BUSINESS INCOME ONLY. SUBSEQUENTLY BY A LETTER DATED 23-01-2006 IT WAS SUBMITTED BEFORE THE AO WIT H REGARD TO THE SAME RECEIPTS THAT SUB-CONTRACT CHARGES ARE CHARGES RECEIVED BY US FOR SUB CONTRACT WORK LIKE PAINTING CARRIED OUT BY US FOR OTHER COMPANIES. THE CHARGES ARE FIXED A FTER TAKING INTO ACCOUNT COST OF MATERIAL AND LABOUR AND OUR MA RGIN. WE FIND THAT DURING THE COURSE OF ASSESSMENT PROCEEDIN GS EARLIER THE ASSESSEE HAS SUBMITTED THAT THE SUB-CONTRACT CH ARGES CANNOT BE CONSIDERED AS FORMING PART OF THE TOTAL T URNOVER. SUBSEQUENTLY THE ASSESSEE HAS SUBMITTED THAT THE CHARGES ARE FIXED AFTER TAKING INTO ACCOUNT COST OF MATERIA L AND LABOUR AND OUR MARGIN. COMPARING THESE TWO STATEMENTS O NE WHICH IS MADE EARLIER AND SUBSEQUENTLY IT IS NOT CLEAR WH AT THE ASSESSEE WANTED TO SUBMIT BEFORE THE AO AND EVEN DU RING THE COURSE OF HEARING BEFORE US THE ASSESSEE HAS NOT EX PLAINED AS TO WHAT IS THE SIGNIFICANCE OF THE SUBMISSIONS IN T HE LETTER DATED 23-01-2006. HOWEVER THE AO WHILE PASSING THE ASSESSMENT ORDER U/S 143(3) HAS OBSERVED THAT SUB-C ONTRACT ITA.04 05 & 163/MDS2012 16 CHARGES AND WEIGHMENT CHARGES ARE TO BE EXCLUDED FR OM THE TOTAL TURNOVER. 16. INSOFAR AS SALES COMMISSION PAID IN FOREIGN C URRENCY IS CONCERNED THERE IS NO DISCUSSION IN THE ASSESSMENT ORDER PASSED BY THE AO U/S 143(3) OF THE ACT. FROM THE A SSESSMENT ORDER U/S 143(3) IT CAN BE SEEN THAT THE ASSESSEE H AS GIVEN THE FIGURES WITH REGARD TO EXCISE DUTY SALES TAX SUBCONTRACTOR RECEIPTS WEIGHMENT CHARGES ETC. SO FAR AS THE SA LES COMMISSION IS CONCERNED NO FIGURE WAS GIVEN BEFORE THE AO. ON 23-01-2006 THE ASSESSEE FILED A LETTER STATING A T PARA 10 THEREOF THAT COMMISSION PAID IN FOREIGN CURRENCY R EPRESENT SALES COMMISSION PAID TO NON-RESIDENT AGENTS FOR PR OCURING ORDERS ABROAD AND HENCE NO TAX IS DEDUCTIBLE ON THE IR PAYMENTS SINCE INCOME DOES NOT ACCRUE AND ARISE IN INDIA. PLEASE REFER TO CIRCULAR NO. 23 DATED 23-7-1969 ENC LOSED. THE ASSESSMENT WAS COMPLETED ON 31-01-2006. THE ABOVE NOTE WAS SUBMITTED JUST BEFORE COMPLETING THE ASSESSMENT ORDER U/S 143(3). WHEN WE SPECIFICALLY POINTED OUT TO TH E COUNSEL WHY THE ASSESSEE HAS NOT SUBMITTED THE DETAILS IN R ESPECT OF THE SALES COMMISSION BEFORE THE AO DURING THE COURS E OF ASSESSMENT PROCEEDINGS THE LEARNED COUNSEL FOR THE ASSESSEE ITA.04 05 & 163/MDS2012 17 SIMPLY SUBMITTED THAT DETAILS WERE FILED BEFORE THE AO. IT IS ALSO NOT CLEAR FROM THE PAPER BOOK SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT WHEN THE SCRUTINY ASS ESSMENT WAS INITIATED BY THE AO WHY THIS WAS NOT BROUGHT T O THE NOTICE OF THE AO. NO REPLY WAS GIVEN BY THE ASSESS EE. THE ASSESSMENT ORDER IS SILENT IN THIS RESPECT. WE ARE THEREFORE OF THE OPINION THAT THE SALES COMMISSION PAID BY THE A SSESSEE WAS NOT BROUGHT TO THE NOTICE OF THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ONLY JUST ABOUT TO COMPL ETE THE ASSESSMENT A PAPER WAS FILED BEFORE THE AO WITHOUT GIVING ANY REASON WHY IT WAS NOT FILED DURING THE COURSE OF TH E ASSESSMENT PROCEEDINGS. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE WE FIND THAT THE ASSESSE E HAS NOT DISCLOSED THE FACTS AND THE RELEVANT MATERIALS FULL Y AND TRULY TO COMPLETE THE ASSESSMENT. THEREFORE IN OUR OPINION THE AO HAS RIGHTLY ISSUED THE NOTICE U/S 148 OF THE ACT AN D PASSED THE ASSESSMENT AS PER LAW. 17. APART FROM THE ABOVE AS POINTED OUT BY THE LE ARNED DR AS PER THE AUDIT REPORT (ANNEXURE-A) THE TOTAL BUSI NESS PROFIT OF THE ASSESSEE IS ` 10 06 18 961/-. AS PER THE PROFIT & LOSS ACCOUNT THE NET PROFIT IS ` 1756.29 LAKHS AND PROFIT AFTER THE ITA.04 05 & 163/MDS2012 18 TAX FOR THE YEAR WAS ` 1 170.29 LAKHS. WHEN WE BROUGHT THE ANOMALY TO THE NOTICE OF THE LEARNED COUNSEL AS TO WHAT IS EXACTLY THE PROFIT OF THE ASSESSEE FOR THE YEAR UND ER CONSIDERATION HE WAS NOT ABLE TO EXPLAIN BEFORE US . WE ARE THEREFORE OF THE OPINION THAT THE DISCLOSURE MADE B Y THE ASSESSEE BEFORE THE AO IS NOT A TRUE AND FULL DISCL OSURE NECESSARY TO COMPLETE THE ASSESSMENT. IT IS THE BO UNDEN DUTY OF THE ASSESSEE TO SUBMIT ALL THE DETAILS NECESSARY TO COMPLETE THE ASSESSMENT WITHOUT ANY AMBIGUITY. THEREFORE TH E REOPENING OF THE ASSESSMENT IS VALID EVEN AFTER FOU R YEARS AS PER THE PROVISO TO SECTION 147 OF THE ACT. 18. INSOFAR AS THE CASE LAW RELIED ON BY THE LEARNE D COUNSEL FOR THE ASSESSEE IS CONCERNED IN THE CASE OF CIT V. KELVINATOR OF INDIA LTD. (SUPRA) THE HONBLE SUPREME COURT HA S CONSIDERED THE ISSUE WITH REGARD TO CHANGE OF OPINI ON. IN THE PRESENT CASE THERE IS NO CHANGE OF OPINION BECAUSE THE ASSESSEE HAS NOT SUBMITTED ALL THE DETAILS TO COMPL ETE THE ASSESSMENT AND THEREFORE IT CANNOT BE SAID THAT THE RE WAS A CHANGE OF OPINION. THUS THIS DECISION HAS NO APPLI CATION TO THE FACTS OF THE PRESENT CASE. ITA.04 05 & 163/MDS2012 19 19. IN THE DECISION OF THE JURISDICTIONAL HIGH COUR T IN THE CASE OF M/S. SRI MOOKAMBIGAI SPINNING MILLS LTD. (S UPRA) THE ASSESSEE HAS DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. THEREFORE THE HONBL E JURISDICTIONAL HIGH COURT HAS HELD THAT AS PER THE PROVISO TO SEC. 147 OF THE ACT THE AO DOES NOT HAVE THE POWER TO RE- OPEN THE ASSESSMENT AFTER THE LAPSE OF FOUR YEARS F ROM THE END OF THE RELEVANT ASSESSMENT YEAR IN THE ABSENCE OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRULY AND F ULLY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. IN TH E PRESENT CASE THE ASSESSEE HAS NOT DISCLOSED FULLY AND TRULY ALL THE NECESSARY FACTS. THEREFORE THIS DECISION HAS NO AP PLICATION TO THE FACTS OF THE PRESENT CASE. 20. INSOFAR AS THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO. 13/MDS/2010 DATED 24-06-2010 FO R THE ASSESSMENT YEAR 2001-02 IS CONCERNED THE TRIBUNAL HAS OBSERVED THAT ORIGINALLY THE ASSESSMENT FOR ASSESSMENT YEAR 2001-02 WAS COMPLETED U/S 143(3) ON 31.3.2004. THE NOTICE FOR REOPENING THE ASSESSMENT WAS ISSUED U/S 148 ON 28.3.2008 WHICH IS BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. ITA.04 05 & 163/MDS2012 20 REOPENING OF THE ASSESSMENT BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR IS FOUND TO BE WITHOUT JURISDICTION AND BAD IN LAW IN VIEW OF THE FOLLOWING DECISIONS : CIT VS. PREMIER MILLS 296 ITR 157 (MAD) CIT VS. ELGI FINANCE 286 ITR 674 (MAD) MERCURY TRAVELS LTD. VS. CIT 258 ITR 533 (CAL) CIT V. INDIAN OVERSEAS BANK LTD. 252 ITR 640 (MAD) CIT VS. SIVA TRADERS 255 ITR 77 (KER) CIT VS. FENNER INDIA LTD. 241 ITR 672 (MAD) CIT VS. FROAMER FRANCE 264 ITR 566 (SC) CIT VS. TN TRANSPORT DEVELOP. FINANCE CORPN. LTD. 306 ITR 136 (MAD) RESPECTFULLY FOLLOWING THE ABOVE DECISIONS WE QUASH THE RE-ASSESSMENT AND ALLOW THE ASSESSEES APPEAL AND AS A SEQUENCE DISMISS THE REVENUES APPEAL. IN THE ABOVE CASE THE TRIBUNAL HAS NOT DISCUSSED AN YTHING WITH REGARD TO THE DISCLOSURE MADE BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS UNDER SECTION 143(3). IT IS PERTINENT TO NOTE THAT WHETHER THE ASSESSEE HAS FULLY AND TRU LY DISCLOSED ALL THE MATERIAL FACTS NECESSARY TO COMPLETE THE AS SESSMENT BEFORE THE AO OR NOT HAS TO BE EXAMINED. IF THE AS SESSEE FAILED TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT THE AO HAS JURISDICTION U/S. 14 7 PROVISO TO ITA.04 05 & 163/MDS2012 21 REOPEN THE ASSESSMENT EVEN AFTER 4 YEARS ALSO. THE TRIBUNAL WHILE CONSIDERING THE ISSUE HAS NOT DISCUSSED ANY F ACTS RELATING TO THE RE-OPENING. WE THEREFORE HOLD THAT THE ISSUE OF RE- OPENING HAS TO BE DECIDED ON THE FACTS AND CIRCUMST ANCES OF EACH CASE. THEREFORE IN OUR CONSIDERED OPINION IT I S NOT A BINDING PRECEDENT AND AS SUCH THERE IS NO APPLICATI ON TO THE FACTS OF THE PRESENT CASE. IN VIEW OF THE ABOVE W E DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE CIT(A) UPH OLDING THE REOPENING OF THE ASSESSMENT ORDER PASSED BY THE AO. IN THE CIRCUMSTANCES THIS GROUND RAISED IN THE ASSESSEES APPEAL IS DISMISSED. 21. GROUND NO.3 RAISED BY THE ASSESSEE IN THI S APPEAL RELATES TO THE EXCLUSION OF THE SUB-CONTRACT CHARGE S WHILE COMPUTING THE DEDUCTION UNDER SECTION 80HHC OF THE ACT. THE AO HAS EXCLUDED THE SUB-CONTRACT CHARGES FOR THE PU RPOSE OF COMPUTATION UNDER SECTION 80HHC BASED ON THE JUDGME NT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. K. RAVINDRANATHAN NAIR (295 ITR 228). BEFORE THE CIT(A ) THE ASSESSEE SUBMITTED THAT THE SUB-CONTRACT CHARGES RE CEIVED BY ITA.04 05 & 163/MDS2012 22 THE ASSESSEE ARE AN INCOME AKIN TO RENT ETC. ENUMER ATED IN CLAUSE (BAA) IN THE EXPLANATION TO SECTION 80HHC AN D THE SAME WAS NOT SUBJECT MATTER BEFORE THE APEX COURT I N THE CASE OF K. RAVINDRANATHAN NAIR (SUPRA). IT WAS CON TENDED THAT THE SAME CANNOT BE HELD AS AN AUTHORITY TO DISALLOW THE CLAIM OF DEDUCTION UNDER SECTION 80HHC OF THE ACT. THE L EARNED CIT(A) CONFIRMED THE ORDER OF THE AO ON THE GROUND THAT THE AO BY FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT HAS EXCLUDED THE SUB-CONTRACT CHARGES FROM THE COMPUTAT ION OF SEC. 80HHC. 22. ON BEING AGGRIEVED THE ASSESSEE CARRIED THE MA TTER BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE A SSESSEE SUBMITTED THAT THE DECISION IN THE CASE OF K. RAVIN DRANATHAN NAIR (SUPRA) FOLLOWED BY BOTH THE AUTHORITIES BELOW HAS NO APPLICATION TO THE FACTS OF THE PRESENT CASE. ON T HE OTHER HAND THE LEARNED DR SUBMITTED THAT THE LEARNED CIT (A) HAS NOT DISCUSSED THE FACTS. THEREFORE HE SUGGESTED T HAT THE ISSUE MAY BE REMITTED BACK TO THE FILE OF THE CIT(A ). 23. WE HAVE HEARD BOTH THE SIDES PERUSED THE RECOR DS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ISSUE RAISED BY THE ASSESSEE IN THIS GROUND OF APPEAL IS THAT THE SUB- ITA.04 05 & 163/MDS2012 23 CONTRACT RECEIVED BY THE ASSESSEE SHOULD BE EXCLUDE D FROM THE COMPUTATION OF THE DEDUCTION U/S 80HHC OR NOT. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SUB-CON TRACT CHARGES RECEIVED BY THE ASSESSEE WERE INCOME AKIN T O RENT. HOWEVER THE CIT(A) CONFIRMED THE ORDER OF THE AO W HEREIN THE AO HAS FOLLOWED THE DECISION OF THE HONBLE SUP REME COURT IN THE CASE OF K. RAVINDRANATHAN NAIR (SUPRA). WE THEREFORE IN THE INTEREST OF JUSTICE SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND REMIT THE MATTER BACK TO HIS FILE WITH THE DIRE CTION TO EXAMINE WHETHER THE SUB CONTRACT CHARGES RECEIVED B Y THE WERE AKIN TO RENT OR NOT AND TO DECIDE THE ISSUE DE NOVO IN ACCORDANCE WITH LAW AFTER GIVING OPPORTUNITY TO THE ASSESSEE. 24. THE NEXT GROUND RAISED IN THIS APPEAL RELATES TO THE LEVY OF INTEREST U/S. 234D OF THE ACT. THE LEARNED COUN SEL FOR THE ASSESSEE FAIRLY SUBMITTED THAT THIS ISSUE IS COVERE D AGAINST THE ASSESSEE BY THE DECISION OF THE OF THE HONBLE JURI SDICTIONAL HIGH COURT IN THE CASE OF CIT V. INDIAN OVERSEAS BAN K IN TC(A) NO. 534 OF 2008 DATED 30-09-2011. THE LEARNED CIT( A) FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONA L HIGH COURT DISMISSED THE GROUND RAISED BY THE ASSESSEE. WE FI ND NO ITA.04 05 & 163/MDS2012 24 INFIRMITY IN THE ORDER PASSED BY THE LEARNED CIT(A) . THEREFORE THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS DIS MISSED. 25. IN THE CIRCUMSTANCES THE APPEAL OF THE ASSESS EE IN ITA NO. 5/MDS/2012 IS PARTLY ALLOWED FOR STATISTICAL PU RPOSES. 26. IN THE RESULT THE APPEAL OF THE ASSESSEE IN IT A NO. 4/MDS/2012 IS DISMISSED AND THE APPEAL OF THE ASSES SEE IN ITA NO. 5/MDS/2012 IS PARTLY ALLOWED FOR STATISTICAL PU RPOSES. THE REVENUES APPEAL IN ITA NO. 163/MDS/2012 IS DISMISS ED. ORDER WAS PRONOUNCED ON FRIDAY THE 27 TH OF JULY 2012 AT CHENAI. SD/- SD/- (N.S. SAINI) ( V.DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI DATED THE 27 TH JULY 2012. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE