The ACIT, Circle-1(2),, Baroda v. FAG BEARINGS INDIA LIMITED, Baroda

ITA 455/AHD/2008 | 1999-2000
Pronouncement Date: 31-01-2011 | Result: Dismissed

Appeal Details

RSA Number 45520514 RSA 2008
Assessee PAN AAACF3357Q
Bench Ahmedabad
Appeal Number ITA 455/AHD/2008
Duration Of Justice 2 year(s) 11 month(s) 22 day(s)
Appellant The ACIT, Circle-1(2),, Baroda
Respondent FAG BEARINGS INDIA LIMITED, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 31-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 31-01-2011
Date Of Final Hearing 24-01-2011
Next Hearing Date 24-01-2011
Assessment Year 1999-2000
Appeal Filed On 08-02-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH D DD D BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI BHAVNESH BHAVNESH BHAVNESH BHAVNESH SAINI SAINI SAINI SAINI JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER AND AND AND AND SHRI N.S.SAINI SHRI N.S.SAINI SHRI N.S.SAINI SHRI N.S.SAINI ACCOUNTANT ACCOUNTANT ACCOUNTANT ACCOUNTANT MEMBER MEMBER MEMBER MEMBER DATE OF HEARING 2411.: DRAFTED ON:2 5.1.11 I TA NO. 455 /AHD/ 2008 ASSESSMENT YEAR :1999-00 THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-1(2) AAYAKAR BHAVAN NR. RACE COURSE CIRCLE BARODA. VS. M/S. FAG BEARINGS INDIA LTD. POST OFFICE MANEJA BARODA. PAN/GIR NO. : AAACF 3357Q (A PPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI G.S. SOURYAWANSI SR.D.R. RESPONDENT BY: SHRI MILIN MEHTA. O R D E R O R D E R O R D E R O R D E R PER N.S.SAINI ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-I BARODA DAT ED 11-10-2007 FOR ASSESSMENT YEAR 1999-00 ON THE FOLLOWING GROUNDS:- 1(A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN QUASHING THE ASSESSMENT MADE UNDER SECTION 143(3) R.W.S. 147 ON 27-11-2006 MAKING ADDITION OF `.1 59 34 531/- ON ACCOUNT OF DISALLOWA BLE EXPENSES WITHOUT APPRECIATING THAT THE PROVISIONS OF SECTION 147 R.W . EXPLANATION 2(C)(I) AS AMENDED W.E.F. 01-04-1989 NO MORE REQUIRE INFORMA TION OR NEW MATERIAL BUT ONLY REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT IRRESPECTIVE OF THE SOURCE AND THE BASIS OF THE SAM E WHICH MAY INCLUDE REAPPRAISAL OF THE SAME. (B) THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) ERRED IN DECIDING THE MATTER WITHOUT CONSIDERING THE BINDING DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF PRAFUL CHU NILAL PATEL & VASANT CHUNILAL PATEL VS. ACIT 236 ITR 832 (GUJ.) LAYING D OWN: MERELY BECAUSE DURING THE ASSESSMENT PROCEEDINGS THE RELEVANT MATE RIAL WAS ON RECORD OR COULD HAVE BEEN WITH DUE DILIGENCE DISCERNED BY THE ASSESSING OFFICER - 2 - FOR THE PURPOSE OF ASSESSING A PARTICULAR ITEM OF I NCOME CHARGEABLE TO TAX IT CANNOT BE INFERRED THAT THE ASSESSING OFFIC ER MUST NECESSARILY HAVE DELIBERATED OVER IT AND TAKEN IT OUT WHILE ASC ERTAINING THE TAXABLE INCOME OR THAT HE HAD FORMED ANY OPINION IN RESPECT THEREOF.. IN OUR VIEW THE WORDS ESCAPED ASSESSMENT WHERE THE RETU RN IS FILED ARE APT TO COVER THE CASE OF DISCOVERY OF A MISTAKE IN THE ASSESSMENT CAUSED BY EITHER AN ERRONEOUS CONSTRUCTION OF THE TRANSACTION OR DUE TO ITS NON- CONSIDERATION OR CAUSED BY A MISTAKE OF LAW APPLI CABLE TO SUCH TRANSFER OR TRANSACTION. (PP. 839-40 OF 236 ITR) THUS REND ERING THE CONSIDERATION OF CHANGE OF OPINION AS IRRELEVANT. 2. THE APPELLANT CRAVES LEAVE TO ADD TO AMEND OR A LTER THE ABOVE GROUNDS AS MAY BE DEEMED NECESSARY. 2. THE FACTS OF THE CASE ARE THAT THE RETURN OF INC OME WAS FILED ON 30-12-99 WHICH WAS PROCESSED UNDER SECTION 143(1)(A) ON 15-2 -2002 RESULTING IN A REFUND. THEREAFTER ASSESSMENT UNDER SECTION 143(3) WAS MADE ON 28-3-2002. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) A LLOWED RELIEF ON ISSUES REGARDING REDUCTION OF PREPAID RENT INTEREST AND C OMMITMENT CHARGES EXCISE DUTY ON FINISHED GOODS DEBENTURE ISSUE EXPENSES D ISALLOWANCE UNDER SECTION 43B AND DEPRECIATION ON LOANS INDICATION CHARGES AN D DEBENTURE ISSUE EXPENSES. SUBSEQUENTLY THE CIT-I BARODA PASSED OR DER UNDER SECTION 263 OF THE ACT FOR BRINGING THE EXCISE DUTY REFUND TO TAX WHICH WAS CLAIMED BY THE ASSESSEE AS NOT TAXABLE. ACCORDINGLY ORDER UNDER S ECTION 143(3) R.W.S. 263 WAS MADE ON 3-3-2004. THEREAFTER THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 148 ON 24-3-2006 WITH THE APPROVAL OF THE C IT-I BARODA. THE ASSESSEE SUBMITTED THAT THE NOTICE UNDER SECTION 148 HAS BE EN ISSUED WITHOUT ANY AUTHORITY GRANTED UNDER SECTION 147 AND IS BEYOND T HE POWERS VESTED UNDER SECTION 147 FOR REOPENING THE ASSESSMENT WHERE THE ASSESSMENT IS COMPLETED UNDER SECTION 143(3) OF THE I. T. ACT. HE FURTHER S UBMITTED THAT IF THE REASONS HAVE BEEN RECORDED FOR REOPENING THE ASSESSMENT A COPY OF THE SAME MAY PLEASE BE GIVEN. ASSESSEE WOULD LIKE TO SUBMIT THAT IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD. V. ITO 259 ITR 19 THE HO NBLE SUPREME COURT HAS HELD THAT AFTER FILING OF RETURN IS BOUND TO FURNISH REA SONS WITHIN A REASONABLE TIME OF FILING OF RETURN IN PURSUANCE OF NOTICE UNDER SECTI ON 148. THE REASONS WERE ISSUED BY THE ASSESSING OFFICER VIDE LETTER DATED 1 7-8-2006 SERVED ON THE ASSESSEE. THE OBJECTIONS RAISED BY THE ASSESSEE WER E REJECTED THROUGH A SPEAKING ORDER DATED 6-10-2006 IN WHICH THE ASSESSI NG OFFICER BY RELYING UPON THE DECISION IN THE CASE OF NAVABGUNJ SUGAR MILLS C O. LTD. VS. CIT 123 ITR 287 - 3 - (DEL) OBSERVED INTER ALIA THAT THERE SHOULD BE S OMETHING POSITIVE TO SHOW THAT THERE WAS IN FACT SUCH FORMATION OF OPINION AT THE ORIGINAL ASSESSMENT STAGE. IF INITIALLY NO OPINION WAS FOUND THE QUES TION OF CHANGE THEREIN COULD NOT BE SAID TO TAKE PLACE. THE CASE OF THE ASSESSEE IS SQUARELY COVERED AS NOTHING EMERGES FROM THE RECORDS IN REGARD TO THE F ORMATION OF AN OPINION AT THE STAGE OF ORIGINAL ASSESSMENT. THE ASSESSING OF FICER ALSO OBSERVED THAT EVERY DISCLOSURE COULD NOT BE TREATED A TRUE AND FU LL DISCLOSURE. ASSESSEE RELIED UPON A LARGE NUMBER OF DECISIONS AND HELD THAT THE ASSESSEE HAD NOT MADE FULL AND TRUE DISCLOSURE. THUS HE PROCEEDED TO COMPLETE THE ASSESSMENT. 3. IT WAS SUBMITTED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THAT THE NOTICE UNDER SECTION148 DATED 24 -3-2006 WAS ISSUED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF ASSESSMENT 1999-2000 I.E. 31-3-2004 WHILE THE ASSESSMENT HAD ALREADY BEEN COMPLETED UND ER SECTION. 143(3) ON 28- 3-2002. IT HAS BEEN ARGUED THAT THEREFORE THERE I S NECESSITY FOR COMPLYING WITH THE PROVISIONS OF SECTION 147 WHICH IS THAT TH E ESCAPEMENT OF INCOME SHOULD HAVE HAPPENED DUE TO THE FAILURE ON THE PART OF THE APPELLANT TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR TH E PURPOSE OF MAKING ASSESSMENT. HOWEVER IT HAS BEEN ARGUED WITH REFERE NCE TO THE NOTICE UNDER SECTION 148 THAT THE ASSESSING OFFICER HAS NOWHERE RECORDED HIS SATISFACTION IN THE NOTICE THAT INCOME HAD ESCAPED ASSESSMENT DUE T O THE FAILURE ON THE PART OF THE ASSESSEE. IT HAS BEEN FURTHER ARGUED THAT TH E ASSESSING OFFICER HAS ACTED ON THE SAME MATERIAL WHICH WAS AVAILABLE IN THE RET URN OF INCOME AND AT THE TIME OF ORIGINAL ASSESSMENT. THIS POINT HAS BEEN EL ABORATED BY THE ASSESSEE WITH REFERENCE TO PARA (XII) OF THE ORIGINAL NOTICE ISSUED AT THE TIME OF ORIGINAL ASSESSMENT UNDER SECTION 143(3) AND THE REPLY FURNI SHED BY THE ASSESSEE IN RESPONSE TO THE SAME ON THE ISSUE OF SAP R-3. SIMIL ARLY THE ISSUE OF EXPENSES RELATING TO THE EOU AND THE DTA UNITS HAS BEEN EXPL AINED SHOWING ALL THE RELEVANT DETAILS HAD BEEN FULLY FURNISHED AND THE I SSUE HAD BEEN CONSIDERED IN GREAT DETAILED AT THE TIME OF ORIGINAL ASSESSMENT. FROM THIS IT HAS ARGUED THAT IT IS A CASE OF CHANGE OF OPINION. THE ASSESSEE REL IED ON THE DECISION OF ITAT AHMEDABAD IN THE CASE OF STARTRONIC INVESTMENT CONS ULTANTS PVT. LTD. IN ITA NO.2196/A/2002 WHERE IT WAS HELD THAT THE RE-ASSESS MENT COULD NOT BE MADE IF THERE WAS A CHANGE OF OPINION. IT HAS BEEN EMPHASIZ ED THAT THE SAID DECISION WAS GIVEN DESPITE THE FACT THAT THE ASSESSMENT IN T HAT CASE HAD BEEN REOPENED - 4 - WITHIN A PERIOD OF FOUR YEARS AND THAT THE ITAT FOL LOWED THE GUJARAT HIGH COURT DECISION IN THE CASE OF GARDEN SILK MILLS P. LTD. V S. DCIT 237 ITR 668 WHICH HAD BEEN RENDERED AFTER THE DECISION IN THE CASE OF PRA FUL CHUNILAL PATEL VS. ACIT 236 ITR 832. THE APPELLANT HAS ARGUED THAT THEREFO RE ITS CASE IS AT A BETTER FOOTING SINCE IT WAS REOPENED AFTER FOUR YEARS. THE ASSESSEE RELIED UPON LARGE NUMBER OF DECISIONS INCLUDING INTER ALIA THE FOLL OWING: (I) SIMPLEX CONCRETE PILES (INDIA) LTD. VS. DCIT & OTHER 183 CTR-47 (CAL.) (II) MARUDHAR HOTELS P. LTD. VS. DCIT 181 CTR 253 ( RAJ.) (III) TANTIA CONSTRUCTION CO. LTD. VS. DCIT 257 ITR 84 (CAL.). 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE QUASHED THE RE-ASSESSME NT PROCEEDINGS VIDE HIS FINDINGS IN PARA-5 AND 6 OF THE ORDER WHICH ARE REP RODUCED HEREUNDER:- 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT IS NOT DISPUTED THAT THE ASSESSMENT UNDER SECTION 143(3) HAD BEEN MADE IN TH IS CASE ON28-3- 2002 BEFORE THE ISSUE OF NOTICE UNDER SECTION 148 A ND THAT THE SAID NOTICE UNDER SECTION 148 HAS BEEN ISSUED AFTER THE EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. UNDER THE CIRCUMSTANCES IT REQUIRES TO BE SEEN IF INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY BECAUSE IT IS NOT A CASE WHERE THE RETURN HAD NOT BEEN FURNISHED BY THE ASSESSEE UNDER SECTION 139 OR IN RESPONSE TO A NOTICE UNDER SECTIO N 142(1) OF THE ACT. THE ASSESSING OFFICER WAS OF THE VIEW THAT EVERY DI SCLOSURE WAS NOT AND COULD NOT BE TREATED TO BE A TRUE AND FULL DISCLOSU RE AND THAT ANY DISCLOSURE MUST NOT ONLY BE FULL BUT ALSO TRUE. IT WAS IMPUTED BY THE ASSESSING OFFICER THAT THE DISCLOSURE MADE BY THE A SSESSEE WAS NOT TRUE AND FULL AND THEREFORE JUSTIFIED THE REOPENING OF THE ASSESSMENT. THE ASSESSING OFFICER ALSO REJECTED THE APPELLANTS OBJ ECTION TO THE REOPENING ON THE GROUND THAT IT WAS A CASE OF CHANG E OF OPINION BY HOLDING THAT ORIGINALLY WAS FORMED BY THE ASSESSING OFFICER ON THE QUESTION OF ALLOCATION OF EXPENSES IN THE RATIO OF THEIR TURNOVER BETWEEN THE EOU AND THE DTA UNIT SO THAT THE QUESTION OF CH ANGE OF OPINION DID NOT ARISE. THE APPELLANT HAS FURNISHED COPY OF ITS LETTER DATE D 4-10-2006 ADDRESSED TO THE ASSESSING OFFICER IN WHICH IT HAS DRAWN HIS ATTENTION TO THE PARA (XIX) OF ANNEXURE TO THE NOTICE UNDER SECT ION 142(1) DATED 25-1- 2002 WHEREIN THE ASSESSING OFFICER HAD OBSERVED TH E PROFIT FROM THE EOU WAS CLAIMED AT `.1.62 CRORE. IN THIS CONNECTION YOU ARE REQUESTED TO FILE THE COMPLETE WORKING OF PROFIT ARRIVED AT AFTE R TAKING INTO ACCOUNT THE EXPENSES WHICH WERE COMMON TO THE ENTIRE BUSINESS O F THE ASSESSEE AS A WHOLE. LOSS OF `.2.14 CRORES AS DEPRECIATION LOSS HAS ALSO BEEN CLAIMED. THE EXPLANATION OF THIS LOSS AND ITS ADJUSTMENT AGA INST INCOME CLAIMED FROM EXISTING UNIT MAY ALSO BE FURNISHED. THE PROFI T AND LOSS ACCOUNT OF - 5 - EOU BUSINESS NEEDS TO BE FILED IN SUPPORT OF YOUR C LAIM. SIMILARLY IN PARA (XXI) HE HAD OBSERVED DETAILS OF PAYMENTS FOR SAP DEVELOPMENT OF ADDITIONAL PROGRAMMES AND SPECIFY THE AMOUNT OF TDS DEDUCTED ON THE SAME. AT PARA (XII) HE HAD OBSERVED THE COMPUTATI ON OF INCOME FILED BY THE ASSESSEE REVEALED THAT THE ASSESSEE CLAIMED TECHNICAL SERVICES FEE IN RESPECT OF DEVELOPMENT OF ADDITIONAL PROGRAM ME / SOFTWARE AS REVENUE EXPENDITURE WHICH IS NOT ALLOWABLE AS PER T HE PROVISIONS OF THE I.T. ACT. YOUR EXPLANATION MAY BE FURNISHED ON THIS ISSUE. I HAVE SEEN THE COPY OF THE SAID NOTICE AND THE REPLIES FURNISH ED BY THE APPELLANT. IT IS OBSERVED WITH REFERENCE TO THE REPLY FURNISHED B Y THE APPELLANT THAT THE APPELLANT HAD FURNISHED COMPLETE DETAILS. IT IS FURTHER OBSERVED FROM ABOVE THAT THE ASSESSING OFFICER HAD APPLIED HIS MI ND TO THE QUESTION OF ALLOCATION OF EXPENSES BY THE APPELLANT AND HAD ACC EPTED THE SAME AND THEREFORE THE OBSERVATION OF THE ASSESSING OFFICER IN THE IMPUGNED ORDER THAT ORIGINALLY NO OPINION WAS FORMED BY THE ASSESS ING OFFICER ON THE QUESTION OF ALLOCATION OF EXPENSES IS NOT CORRECT. IT IS PERTINENT TO NOTE THAT AFTER 143(3) ASSESSMENT THE CIT HAD ALSO PASS ED ORDER UNDER SECTION 263 AND ORDER UNDER SECTION 143(3) READ WIT H 263 HAD ALSO BEEN PASSED. UNDER THE CIRCUMSTANCES IT IS OBSERVED THA T ONE OF THE CONDITIONS CONTAINED IN SECTION147 FOR ISSUANCE OF NOTICE UNDER SECTION 148 IS NOT SATISFIED SINCE THE APPELLANT IS FOUND T O HAVE DISCLOSED ALL MATERIAL FACTS FULLY AND TRULY AT THE TIME OF ORI GINAL ASSESSMENT. UNDER THE CIRCUMSTANCES IT IS HELD THAT THE ASSESSMENT C OMPLETED UNDER SECTION. 143(3) WAS NOT VALIDLY REOPENED UNDER SECT ION 148 R.W.S. 147 AND THEREFORE THE REOPENING OF ASSESSMENT IS QUAS HED. IT IS FURTHER OBSERVED THAT IN THE APPELLANTS OWN FOR ASSESSMENT YEAR 2001-02 THE ASSESSMENT COMPLETED UNDER SECTION 143(3) HAD BEEN REOPENED PRACTICALLY ON THE SAME GROUNDS AS DONE IN THE INSTANT CASE AND THE FACTS WERE ALSO COMPARABLE. THE APPEAL IN T HAT CASE HAD COME UP BEFORE ME. IN THAT CASE IN APPEAL NO.CAB/I-327/0 6-07 DATED 25-9- 2007 I HAVE ALLOWED THE APPELLANTS APPEAL AND QUAS HED THE RE- ASSESSMENT PROCEEDINGS. FOLLOWING MY ORDER DATED 25 -9-2007 THE REOPENING OF THE ASSESSMENT ALREADY COMPLETED UNDER SECTION 143(3)IS HELD TO BE BAD IN LAW AND IS THEREFORE QUASHED. IN VIEW OF THE FACT THAT THE REOPENING HAS BEEN QUA SHED THE OTHER GROUNDS ARE NOT GONE INTO ON MERITS. 6. IN THE END APPEAL IS ALLOWED. 5. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND REFERRED TO PAPER BOOK PAGE- 52 WHICH ARE THE REASONS FOR REOPENING THE ASSESSMENT SUPPLIED TO TH E ASSESSEE AND SUBMITTED THAT THE LEARNED ASSESSING OFFICER DID NOT RECORD I N THE REASONS THAT THERE WAS ANY FAILURE ON THE PART OF THE ASSESSEE NOT TO DISC LOSE THE RELEVANT FACTS AND MATERIAL FOR THE PURPOSE OF COMPUTATION OF THE INCO ME. HE HAS ALSO REFERRED TO PAPER BOOK PAGE-74 WHICH IS BEING LETTER OF THE LEA RNED ASSESSING OFFICER DATED 25-1-2002 RAISING SPECIFIC QUERY ON THE MATTE R IN ISSUE ON WHICH RE- - 6 - ASSESSMENT PROCEEDINGS HAVE BEEN INITIATED. HE ALSO REFERRED TO PAPER BOOK PAGE-77 WHICH IS THE SPECIFIC REPLY OF THE ASSESSEE TO THE QUERY RAISED BY THE LEARNED ASSESSING OFFICER ON THE MATTER IN ISSUE. H E HAS ALSO REFERRED TO PAPER BOOK PAGES-83 & 84 WHICH ARE ALSO THE REPLIED OF TH E ASSESSEE BEFORE THE LEARNED ASSESSING OFFICER AT THE ORIGINAL ASSESSMEN T PROCEEDINGS. HE HAS REFERRED TO PAPER BOOK PAGE-93 WHICH IS THE ORIGINA L ASSESSMENT ORDER DATED 28-3-2002 IN WHICH THE LEARNED ASSESSING OFFICER HA S NOT POINTED OUT IF THERE WAS ANY FAILURE ON THE PART OF THE ASSESSEE TO DISC LOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THA T ASSESSMENT YEAR. HE HAS ALSO REFERRED TO PAPER BOOK PAGE-117 WHICH IS AGAIN REPLY DATED 20-3-2002 OF THE ASSESSEE AND SUPPORTED BY FURTHER INFORMATION P APER BOOK PAGES 125 TO 130 WHICH ARE THE DETAILS ON THE MATTER IN ISSUE. H E HAS SUBMITTED THAT THE LEARNED ASSESSING OFFICER HAS ALREADY CONSIDERED TH E DETAILS OF THE EXPENSES AND ALLOCATION OF THE EXPENSES. THEREFORE THERE WA S NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL NECESS ARY FACTS. HE HAS THEREFORE SUBMITTED THAT LEARNED COMMISSIONER OF INCOME TAX ( APPEALS) HAS RIGHTLY QUASHED THE RE-ASSESSMENT PROCEEDINGS. 6. HE HAS RELIED UPON THE DECISION OF THE SUPREME C OURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. (2010) 320 ITR-561 (S C) WHEREIN IT WAS HELD AS UNDER:- THE CONCEPT OF CHANGE OF OPINION ON THE PART OF THE ASSESSING OFFICER TO REOPEN AN ASSESSMENT DOES NOT STAND OBLITERATED AFTER THE SUBSTITUTION OF SECTION 147 OF THE INCOME TAX ACT 1961 BY THE DIRECT TAX LAWS (AMENDMENT) ACTS 1987 AND 1989. AFTER THE AMENDMENT THE ASSESSING OFFICER HAS TO HAVE REASON TO BELIEVE THA T INCOME HAS ESCAPED ASSESSMENT BUT THIS DOES NOT IMPLY THAT THE ASSESS ING OFFICER CAN REOPEN AN ASSESSMENT ON MERE CHANGE OF OPINION. THE CONCEPT OF CHANGE OF OPINION MUST BE TREATED AS AN IN-BUILT TEST TO CHECK THE ABUSE OF POWER. HENCE AFTER APRIL 1 1989 THE ASSE SSING OFFICER HAS POWER TO REOPEN AN ASSESSMENT PROVIDED THERE IS T ANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASON MUST HAVE A LINK WITH THE FORMAT ION OF THE BELIEF. 7. ON THE ABOVE LEARNED DEPARTMENTAL REPRESENTATIV E RELIED UPON THE ORDER OF THE LEARNED ASSESSING OFFICER AND ALSO REL IED UPON DECISION OF THE GUJARAT HIGH COURT IN THE CASE OF PRAFUL CHUNILAL P ATEL AND VASANT CHUNILAL PATEL (SUPRA) REFERRED TO IN THE GROUND OF APPEAL. - 7 - 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MAT ERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THAT ORIGINAL ASS ESSMENT ORDER PASSED ON 28-3- 2002 FOR THE ASSESSMENT YEAR UNDER APPEAL I.E. ASSE SSMENT YEAR 1999- 2000.THE LEARNED ASSESSING OFFICER RECORDED REASONS FOR REOPENING OF THE ASSESSMENT COPY OF WHICH IS FILED AT PAGE-52 OF THE PAPER BOOK WITH REGARD TO THE COMPUTATION OF THE BENEFIT UNDER SECTION 10B OF THE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE HAS BEEN ABLE TO DEMONSTRA TE THROUGH THE MATERIAL CONTAINED IN THE PAPER BOOK THAT THE ASSESSING OFFI CER RAISED QUERIES ON THE MATTER ON WHICH RE-ASSESSMENT PROCEEDINGS WERE INIT IATED AT THE ORIGINAL ASSESSMENT STAGE AND THE ASSESSEE FURNISHED COMPLET E DETAILS AND REPLIES TO THE SATISFACTION OF THE LEARNED ASSESSING OFFICER. THE LEARNED ASSESSING OFFICER RECORDED THE REASONS UNDER SECTION 148 OF THE ACT O N 24-3-2006.THE PROVISO TO SECTION 147 OF THE ACT PROVIDES THAT: PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTIO N (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSE SSMENT YEAR NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLES S ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH A SSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE T O MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTIOIN142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THIS ASSESSMENT FOR THAT ASSESSMENT YEAR: 9. THUS IT IS CLEAR THAT THERE WAS NO FAILURE ON T HE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB- SECTION(1) OF SECTION 142 OR UNDER SECTION 148 TO D ISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THA T ASSESSMENT YEAR. 10. THE LEARNED AUTHORISED REPRESENTATIVE OF THE AS SESSEE ALSO RELIED ON THE FOLLOWING DECISIONS:- (1) SHREE THARAD JAIN YUVAK MANDAL AND ANOTHER VS. I.T.O. (2000) 242 ITR 612 WHEREIN IT IS HELD AS UNDER :- HELD ALLOWING THE PETITION THAT THE LETTER DATE D MARCH 28 1990 WRITTEN BY INCOME TAX OFFICER TO THE COMMISSIONER O F INCOME TAX CLEARLY STATED THAT PRIMARY AND MATERIAL FACTS REGA RDING TRANSFER OF FUNDS DURING THE COURSE OF THE ASSESSMENT YEAR 1985 -86. EXEMPTION WAS CLAIMED ON THAT BASIS AND EXEMPTION H AD BEEN GRANTED WITH REFERENCE TO SECTION12 READ WITH SECTI ON 2(24)(IIA).THUS IT WAS CLEARLY A CASE WHERE ON THE PRIMARY FACTS HAVING BEEN DISCLOSED THE ASSESSING OFFICER FAILED TO DRAW THE - 8 - LEGAL INFERENCE NECESSARY FOR THE PURPOSE OF APPLYI NG THE LAW. THEREFORE THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS WHICH W ERE NECESSARY FOR ASSESSMENT AND THE ASSESSING OFFICER COULD NOT ASSU ME JURISDICTION TO INITIATE PROCEEDINGS FOR ASSESSMENT /REASSESSMENT OF INCOME FOR ANY ASSESSMENT YEAR BEYOND A PERIOD OF F OUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR 1985-8 6. (2) IN THE CASE OF COCA COLA EXPORT CORPORATION VS . INCOME TAX OFFICER AND ANOTHER (1998) 231 ITR-200 (SC) HAS HELD AS UND ER:- HELD ALLOWING THE APPEALS THAT THE TWO LETTERS IN QUESTION WERE ISSUED UNDER THE PROVISIONS OF THE FOREIGN EXC HANGE REGULATION ACT AND DEALT WITH REMITTANCE OF FOREIGN EXCHANGE OUTSIDE INDIA. ANY CONTRAVENTION OF THESE LETTERS W OULD ENTAIL PROSECUTION UNDER SECTION 56 OF THE FOREIGN EXCHANG E REGULATION ACT 1973 AND UNDER SECTION 23 OF THE FOREIGN EXCH ANGE REGULATION ACT 1947. THE EMBARGO SO PLACED BY THES E TWO LETTERS ON THE FOREIGN REMITTANCE TO BE MADE ABROAD BY THE APPELLANT HAD NOTHING TO DO WITH THE AMOUNT OF DISALLOWANCES UNDE R THE INCOME- TAX ACT. IF ANY REMITTANCE OF FOREIGN EXCHANGE HAD BEEN MADE IN EXCESS OF THE PRESCRIBED LIMIT FROM JANUARY 1 1969 IT WAS FOR THE RESERVE BANK OR THE CENTRAL GOVERNMENT TO TAKE ACTI ON OR TO GRANT PERMISSION AS MAY BE PROVIDED UNDER THE FOREIGN EXC HANGE REGULATION ACT 1973. THAT HOWEVER COULD NOT BE A GROUND FOR THE INCOME TAX OFFICER TO ASSUME JURISDICTION TO START REASSESSMENT PROCEEDINGS EITHER UNDER SECTION 147(A) OR SECTION 147(B) OF THE ACT ON THE GROUND THAT IT WOULD BE INCONSEQUENCE O F INFORMATION IN HIS POSSESSION IN THE SHAPE OF THESE TWO LETTERS . BOTH THE ACTS THE INCOME TAX ACT AND THE FOREIGN EXCHANGE REGULAT ION ACT OPERATE IN DIFFERENT FIELDS. THE TWO LETTERS WERE W HOLLY IRRELEVANT AND COULD NOT BE TREATED AS INFORMATION TO THE INCO ME TAX OFFICER TO INITIATE REASSESSMENT PROCEEDINGS. THEREFORE TH ERE WAS INHERENT LACK OF JURISDICTION IN THE INCOME TAX OFF ICER TO ISSUE NOTICES UNDER SECTION 148 OF THE ACT ON THE BASIS O F ANY INCOME OF THE APPELLANT ESCAPING ASSESSMENT EITHER UNDER CLAU SE (A) OR CLAUSE (B) OF SECTION 147 OF THE ACT. ALL THE NOTIC ES UNDER SECTION 148 OF THE ACT WERE LIABLE TO BE QUASHED. (3) HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX V. STEEL TUBES OF INDIA LTD. (2010) 326 ITR-46 HAS HELD AS UNDER:- HELD DISMISSING THE APPEALS THAT THE ASSESSEE H AD SUBMITTED REVISED RETURNS WHICH WERE DULY CONSIDERE D AND DISCUSSED BY THE ASSESSING OFFICER WHILE PASSING TH E ORDERS OF ASSESSMENT. IN THE REVISED RETURNS THE ASSESSEE HA D DISCLOSED THE ENTIRE FACTS AND THEREFORE THE COMMISSIONER (APPEA LS) AS WELL AS THE TRIBUNAL HAD RIGHTLY REACHED THE CONCLUSION THA T IT WAS NOT A CASE WHERE THE ASSESSEE HAD FAILED TO DISCLOSE FULL Y AND TRULY ALL - 9 - MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT. THE RE ASSESSMENT PROCEEDINGS WERE NOT VALID. (4) THE HONBLE BOMBAY HIGH COURT IN THE CASE OF MU LTISCREEN MEDIA P. LTD. V. UNION OF INDIA AND ANOTHER(NO.1.) (2010) 32 4 ITR 48 (BOM.) HAS HELD AS UNDER: HELD ALLOWING THE PETITION THAT THE NOTICE DID N OT STATE THAT THERE HAD BEEN ANY FAILURE TO DISCLOSE MATERIAL FACTS AT THE TIME OF THE ORIGINAL ASSESSMENT. THE GROUND FURNISHED IN THE NO TICE FOR REASSESSMENT WOULD INDICATE THAT ACCORDING TO THE A SSISTANT COMMISSIONER OF INCOME-TAX ALLOCATION OF EXPENSES AS BETWEEN THE PETITIONER AND THE FOREIGN PRINCIPAL OUGHT TO H AVE BEEN ORIGINALLY CONSIDERED BY THE ASSESSING OFFICER WHEN THE ORDER OF ASSESSMENT WAS PASSED UNDER SECTION 143(3). THAT HO WEVER WOULD NOT GIVE A VALID REASON TO REOPEN THE ASSESSMENT BE YOND A PERIOD OF FOUR YEARS. THE NOTICE WAS NOT VALID AND WAS LIA BLE TO BE QUASHED. (5) THE HONBLE DELHI HIGH COURT IN THE CASE OF HAR YANA ACRYLIC MANUFACTURING CO. VS. COMMISSIONER OF INCOME TAX (2 009) 308 ITR- 38(DELHI) HAS HELD AS UNDER:- HELD ALLOWING THE PETITION (I) THAT THE REASONS RECORDED DID NOT INDICATE THE FAILURE ON THE PART OF THE PETITIONER TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSE SSMENT FOR THE ASSESSMENT YEAR 1998-99. WHILE IN THE REASONS SUPPL IED TO THE PETITIONER THERE WAS NO MENTION OF THE ALLEGATION T HAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS IN THE REASONS SHOWN IN THE SAID FO RM TO THE COUNTER-AFFIDAVIT THERE WAS A SPECIFIC ALLEGATION T 5HAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS RELATING TO ACCOMMODATION ENTRIES RA ISED FROM ONE OF THE COMPANIES TO THE EXTENT OF `. 5 LAKHS. THUS ONE OF THE CONDITIONS PRECEDENT FOR REMOVING THE BAR AGAINST T AKING ACTION AFTER THE SAID FOUR YEAR PERIOD REMAINED UNFULFILLE D. CONSEQUENTLY THE NOTICE UNDER SECTION 148 BASED ON THE RECORDED REASONS SUPPLIED TO THE PETITIONER AS WELL AS THE CONSEQUEN T ORDER WERE WITHOUT JURISDICTION AS NO ACTION UNDER SECTION 147 COULD BE TAKEN BEYOND THE FOUR YEAR PERIOD. (II) THAT ON THE FACTS THE REASONS WHICH WERE SUPPL IED TO THE PETITIONER WERE DIFFERENT FROM THE REASONS PURPORTE DLY RECORDED IN THE FORM ATTACHED TO THE COUNTER-AFFIDAVIT. THE PET ITIONER TOOK THE SPECIFIC PLEA THAT IN THE ABSENCE OF ANY ALLEGATION THAT THE PETITIONER HAD FAILED TO DISCLOSE FULLY AND TRULY A LL MATERIAL FACTS NECESSARY FOR ASSESSMENT THE ASSESSING OFFICER HAD NO JURISDICTION TO ISSUE THE NOTICE UNDER SECTION 148 AND INITIATE ACTION UNDER SECTION 147 AFTER FOUR YEARS FROM THE END OF THE RE LEVANT ASSESSMENT YEAR. IF THE AUTHORITIES HAD RECORDED TH E REASONS NOTED - 10 - IN THE SAID FORM TO BE THE ACTUAL REASONS IT WOULD HAVE BEEN VERY EASY FOR THE ASSESSING OFFICER TO HAVE COUNTERED TH IS OBJECTION BY SIMPLY REFERRING TO THE REASONS NOTED IN THE FORM A ND SAYING THAT THE ALLEGATION OF FAILURE TO DISCLOSE WAS VERY MUCH THERE. EVEN ASSUMING THAT THE ACTUAL REASONS WERE THOSE AS NOTE D IN THE SAID FORM IT WAS OBVIOUS THAT THE REASONS WERE NEVER CO MMUNICATED TO THE PETITIONER AND IT WAS ONLY FOR THE FIRST TIME I N THE COURSE OF THE WRIT PETITION THAT THOSE REASONS HAD SURFACED. THER EFORE THE NOTICE UNDER SECTION 148 AS WELL AS ALL THE PROCEEDINGS SU BSEQUENT THERETO WERE LIABLE TO BE QUASHED. 11. CONSIDERING THE FACTS OF THE CASE AND IN THE LI GHT OF THE ABOVE DECISIONS WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LE ARNED COMMISSIONER OF INCOME TAX (APPEALS) IN QUASHING THE REASSESSMENT P ROCEEDINGS. THE DECISIONS CITED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE WO ULD NOT SUPPORT THE CASE OF THE REVENUE. ACCORDINGLY WE DO NOT FIND ANY MERI T IN THE DEPARTMENTAL APPEAL THE SAME IS ACCORDINGLY DISMISSED. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON THIS 31 ST DAY OF JANUARY 2011. SD/- SD/- (BHAVNESH SAINI) ( N.S. SA INI ) JUDICIAL MEMBER ACCOUNT ANT MEMBER DATED: AHMEDABAD 31 ST DAY OF JANUARY 2011. COMPILED AND COMPARED BY: PATKI COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. T HE LD. CIT(APPEALS)-I BARODA. 5. THE DR AHMEDABAD BENCH 6. THE GUAR D FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD DATE INITIALS 1. DRAFT DICTATED ON 25-1-2011 -------------- ----- 2. DRAFT PLACED BEFORE AUTHORITY 27-1-2011 ----- -------------- 3. DRAFT PROPOSED & PLACED 27-1-2011 ----------- -------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED 31-1-2011 ---------- --------- JM/AM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S 31-1-2011 -------- ------------ 6. KEPT FOR PRONOUNCEMENT ON 31-1-2011 --------- ----------- 7. FILE SENT TO THE BENCH CLERK 31-1-2011 ------ -------------- 8. DATE ON WHICH FILE GOES TO THEAR---------------- -------------------- 9. DATE OF DISPATCH OF ORDER ---------------- --- ------------------