The ACIT, Circle-2(1),, Guntur v. Sri Polisetty Somasundaram., Guntur

ITA 519/VIZ/2008 | 2000-2001
Pronouncement Date: 22-01-2010 | Result: Dismissed

Appeal Details

RSA Number 51925314 RSA 2008
Assessee PAN AACFP7251J
Bench Visakhapatnam
Appeal Number ITA 519/VIZ/2008
Duration Of Justice 1 year(s) 3 month(s) 9 day(s)
Appellant The ACIT, Circle-2(1),, Guntur
Respondent Sri Polisetty Somasundaram., Guntur
Appeal Type Income Tax Appeal
Pronouncement Date 22-01-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 22-01-2010
Assessment Year 2000-2001
Appeal Filed On 13-10-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO.519&520/VIZAG/2008 ASSESSMENT YEAR S : 2000 - 01 & 2001 - 02 ACIT CIRCLE 2(1) GUNTUR VS. POLISETTY SOMASUNDARAM GUNTUR (APPELLANT) (RESPONDENT) PAN NO.AACFP 7251J APPELLANT BY: SHRI U.L.N. SUDHAKAR ADVOCATE RESPONDENT BY: SHRI SUBRATA SARKAR DR ORDER PER SHRI B.R. BASKARAN ACCOUNTANT MEMBER:- THESE TWO APPEALS FILED AT THE INSTANCE OF THE REV ENUE ARE DIRECTED AGAINST THE ORDER DATED 24.7.2008 PASSED BY LD. CIT (A) GUNTUR AND THEY RELATE TO THE ASSESSMENT YEAR 2000-01 AND 2001-02. 2. THE RE-OPENING OF ASSESSMENT OF THESE TWO YE ARS U/S 148 HAVING BEEN HELD TO BE INVALID BY LD. CIT(A) THE REVENUE IS IN APPEAL BEFORE US. THOUGH THE REVENUE HAS RAISED OTHER GROUNDS RELATING TO TH E ELIGIBILITY OF DEDUCTION OF DEPB LICENCE U/S 80HHC OF THE ACT SINCE THE LD CIT (A) HAS ADJUDICATED THE ISSUE RELATING TO THE RE-OPENING OF THE ASSESSMENT WE RESTRICT OUR SELF TO THE ISSUE OF RE-OPENING ONLY. 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN B RIEF. THE ASSESSMENT OF THESE TWO ASSESSMENT YEARS WERE RE-OPENED BY ISSUE OF NOTICE U/S 148 OF THE ACT AFTER THE EXPIRY OF 4 YEARS FROM END OF THE REL EVANT ASSESSMENT YEARS FOR THE REASON THAT THE ASSESSEE WAS NOT ENTITLED TO CL AIM DEDUCTION U/S 80 HHC ON DEPB LICENCE CONSEQUENT TO THE RETROSPECTIVE AM ENDMENT MADE BY FINANCE ACT 2005 IN SECTION 80HHC OF THE ACT. THE ASSESSEE QUESTIONED THE VALIDITY OF RE-OPENING OF ASSESSMENT BEFORE LD. CIT (A) WHO ALLOWED THE APPEALS OF THE ASSESSEE BY HOLDING THAT THE ISSUE O F NOTICES U/S 148 ARE INVALID AND CONSEQUENTLY THE RE-ASSESSMENT PROCEEDI NGS WERE ALSO 2 INVALIDATED. AGGRIEVED BY THE ORDER OF THE LD. CIT (A) THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE RECORD. LD. D.R. INVITED OUR ATTENTION TO SECTION 151(1) OF THE ACT TO DRIVE THE POINT THAT THE NOTICE U/S 148 HAS BEEN ISSUED AFTER OBTAINING DUE PERMISSION FROM THE COMMISSIONER OF INCOME TAX AND HENCE BOTH THE ASSESS MENTS SHOULD BE HELD TO BE VALID. ON THE CONTRARY LD. A.R. SUBMITTED T HAT SECTION 151 SPEAKS ABOUT THE SANCTION FOR ISSUE OF NOTICE AND THE SAID SECTION CANNOT VALIDATE AN OTHERWISE INVALID NOTICE. ACCORDING TO THE LD. A.R . THE PROVISO TO SECTION 147 IS VERY MUCH APPLICABLE TO THE FACTS OF THE CASE A CCORDING TO WHICH WHERE AN ASSESSMENT HAS BEEN MADE U/S 143(3) OF THE ACT SUB SEQUENT RE-OPENING OF ASSESSMENT U/S 147 AFTER EXPIRY OF 4 YEARS FROM TH E END OF THE RELEVANT ASSESSMENT YEAR CAN BE MADE ONLY IF ANY INCOME CHA RGEABLE TO TAX HAS ESCAPED BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSE SSMENT. ACCORDING TO THE LD. A.R. THERE IS NO SUCH FAILURE ON THE PART OF T HE ASSESSEE AND HENCE THE RE-OPENING IS BAD IN LAW. 4.1 IT IS PERTINENT TO EXTRACT THE OBSERVATIONS OF L D. CIT(A) HEREUNDER: IN THIS CASE THE NOTICE U/S 148 WAS ISSUED TO RE STRICT THE 80HHC DEDUCTION IN VIEW OF THE RETROSPECTIVE AMENDM ENT CARRIED OUT IN SECS. 80HHC(3) AND 28 (IIIA). THE APPELLANT WHILE WORKING OUT AND CLAIMING THE DEDUCTION IN ITS ORIGINAL RETU RN WOULD NOT BE AWARE OF THE PROSPECTIVE CHANGE IN THE LAW. THEREF ORE THE APPELLANT CANNOT BE ACCUSED OF FAILING TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. T HE BOMBAY HIGH COURT IN SESA GOA LTD. VS. JCIT AND OTHERS (294 ITR 101) HELD THAT REASSESSMENT IN THE LIGHT OF SUBSEQUENT JUDICIAL DE CISION COULD NOT BE HELD AS A CASE OF NON-DISCLOSURE OF ALL MATERIAL FACTS BUT MERELY BASED ON CHANGE OF OPINION DUE TO A SUBSEQUENT DECI SION. THE NOTICE WAS THEREFORE HELD TO BE INVALID AND THE REA SSESSMENT PROCEEDINGS WERE INVALIDATED. THE CHENNAI ITAT IN LAKSHMI VILAS BANK LTD. VS. DCIT AND ANOTHER (292 ITR {AT} 243) H ELD IN A CASE WHERE A NOTICE WAS ISSUED AFTER THE END OF FOUR YEA RS THAT THE CONDITION PRECEDENT FOR SUCH A NOTICE TO BE VALID W AS THE FAILURE ON THE PART OF THE ASSESSEE TO FULLY AND TRULY DISCLOS E ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. IN THAT CASE THE ASSESSM ENT WAS RE- OPENED TO DISALLOW INTEREST ON PURCHASE OF SECURITI ES BASED ON A SUBSEQUENT SUPREME COURT DECISION THAT SUCH INTERES T WAS NOT DEDUCTIBLE. THE CHENNAI ITAT HELD THAT IT WAS NOT IN DISPUTE THAT THE ASSESSEE HAS FURNISHED THE ENTIRE PARTICULARS W ITH REGARD TO PAYMENT OF INTEREST ON PURCHASE OF SECURITIES. THE REASSESSMENT PROCEEDINGS WERE THEREFORE HELD TO BE INVALID. IN A NOTHER CASE OF 3 CHENNAI ITAT (283 ITR (AT) 13 CHENNAI) THE TRIBUNAL HAD HELD THAT WHERE AN ASSESSEE FOLLOWS THE LAW PREVAILING AT THE TIME OF FILING THE RETURN A SUBSEQUENT CHANGE IN LAW DOES NOT AUTH ORISE THE REASSESSMENT NOTICE BEYOND THE FOUR YEARS TIME LIMI T. ALTHOUGH IN THESE CASES THE VARIOUS COURTS AND APPELLATE AUTHO RITIES HAVE CONSIDERED THE TENABILITY OF INITIATING REASSESSMEN T PROCEEDINGS CONSEQUENT UPON SUBSEQUENT COURT DECISIONS THE LOG IC IS EQUALLY APPLICABLE WITH RESPECT TO AN AMENDMENT THAT IS BRO UGHT IN TO THE ACT AFTER THE FILING OF THE RETURN BY AN ASSESSEE B UT WITH RETROSPECTIVE EFFECT. IN SUCH A SITUATION THE APP ELLANT CANNOT BE ACCUSED OF FAILING TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS. WHEN THIS CONDITION IS NOT SATISFIED THE DEPARTMEN T IS PRECLUDED FROM INITIATING ACTION UNDER SECTION 147 BEYOND A P ERIOD OF FOUR YEARS WHERE THE ORIGINAL ASSESSMENT HAS BEEN COMPL ETED U/S 143(3) OF THE ACT. THE DECISION OF THE GUJARAT HIGH COURT IN THE CASE OF DENISH INDUSTRIES VS. ITO (271 ITR 340) IS DIRECTLY ON THE POINT INVOLVED IN THIS CASE. IN THIS CASE THE GUJARAT HIGH COURT HE LD THAT FOR THE PURPOSE OF DECIDING THE QUESTION UNDER SECTION 147 AS TO WHETHER THE ASSESSEE HAD DISCLOSED FULLY AND TRULY ALL MATE RIAL FACTS NECESSARY FOR THE RELEVANT ASSESSMENT YEAR THE LAW APPLICABLE WOULD BE THE LAW AS IT STOOD ON THE DATE OF FILING OF THE RETURN. IN THAT CASE THE INCOME-TAX OFFICER HAD ISSUED NOTI CE UNDER SECTION 148 OF THE INCOME-TAX ACT 1961 READ WITH S ECTION 147 PROPOSING TO REOPEN THE ASSESSMENT OF THE PETITIONE R FOR THE ASSESSMENT YEAR 1983-84 ON THE GROUND THAT ON ACCOU NT OF THE INSERTION OF EXPLANATION 8 TO SECTION 43(1) AS INTR ODUCED BY THE FINANCE ACT 1986 WITH RETROSPECTIVE EFFECT FROM A PRIL 1 1974 THE PETITIONER WAS NOT ENTITLED TO CAPITALISE THE INTER EST PAID AFTER THE DATE ON WHICH MACHINERY WAS INSTALLED AND FIRST PUT TO USE AND TO DEPRECIATION AND INVESTMENT ALLOWANCE THEREON AND T HEREFORE THE PETITIONER HAD FAILED TO DISCLOSE FULLY AND TRULY A LL MATERIAL FACTS. ON A WRIT PETITION IT WAS HELD THAT THE PETITION WAS A LLOWABLE AND THAT IF THE PROCEEDINGS WERE PENDING ON APRIL 1 1986 WHEN THE STATUTORY AMENDMENT WAS MADE WHETHER ASSESSMENT PROCEEDINGS OR PROCEEDINGS BY WAY OF APPEAL OR REVISION OR REFEREN CE EXPLANATION 8 TO SECTION 43(1) WOULD HAVE OPERATED. BUT IN THE CASE OF THE PETITIONER EXPLANATION 8 TO SECTION 43(1) HAD NO A PPLICATION BECAUSE IT WAS OBVIOUS THAT WHEN THE ASSESSEE HAD F ILED ITS RETURN IN 1983 IT COULD NOT HAVE ASSUMED THAT SUCH A LEGI SLATIVE AMENDMENT WAS GOING TO BE MADE IN THE YEAR 1986 WI TH RETROSPECTIVE EFFECT FROM THE YEAR 1974. HENCE IT COULD NOT BE SAID THAT IN THE YEAR 1983 WHEN THE ASSESSEE FILED THE RETURN CLAIMING DEPRECIATION AND INVESTMENT ALLOWANCE ON T HE CAPITALIZATION OF INTEREST PAID AFTER THE DATE ON W HICH THE MACHINERY WAS FIRST INSTALLED AND PUT TO USE THE PETITIONER HAD FAILED TO DISCLOSE ALL MATERIAL FACTS. THUS THE CONDITION P RECEDENT FOR INVOCATION OF THE POWERS UNDER SECTION 147 READ WIT H SECTIONS 148 4 AND 149 WAS NOT FULFILLED. THE NOTICE WAS THEREFOR E WITHOUT ANY AUTHORITY OF LAW AND WAS QUASHED AND SET ASIDE. 5. THE LD. D.R. PLACED RELIANCE ON THE DECISION DA TED 31.8.2009 PASSED BY THIS BENCH IN THE CASE OF SUNDARAM AGRO ENTERPRI SES IN ITA 521/VIZAG/2008 AND SUBMITTED THAT THE ISSUE SHOULD BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER IN THE LIGHT OF SPECIAL BENCH DECISION IN THE CASE OF TOPMAN EXPORTS & OTHERS (318 ITR {AT} 87). WE HAVE CAREFULLY PERUSED THE SAID ORDER AND NOTICE THAT IT IS AN EX-PARTE ORDER AND HENCE THE BENCH DID NOT HAVE THE BENEFIT OF ASSISTANCE FROM THE COUNSEL OF THE ASSESSEE. ON THE OTHER HAND LD. A.R. PLACED RELIANCE ON THE DECISIO N DATED 2.9.2009 PASSED BY THIS BENCH IN THE CASE OF RAHAMAN KHAN TOBACCO E NTERPRISES IN ITA NO.175/VIZAG/2008 WHEREIN IDENTICAL ISSUES WERE CO NSIDERED BY THIS BENCH AND THEY WERE DECIDED IN FAVOUR OF THE ASSESSEE. IT IS PERTINENT TO NOTE THAT IN THE PRESENT CASES THERE WAS NO MATERIAL WITH TH E REVENUE TO SHOW THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DI SCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. FROM THE ORDER OF LD CIT(A) WE NOTICE THAT THE LD. CIT(A) HAS ANALYSED THE ISSU E IN THE PROPER PERSPECTIVE AFTER TAKING INTO ACCOUNT THE APPLICABL E CASE LAW AND HENCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A ). 6. IN THE RESULT BOTH THE APPEALS FILED BY THE REVE NUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 22-01-2010. SD/- SD/- (SUNIL KUMAR YADAV) (BR BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER VG/SPS VISAKHAPATNAM DATED 22 ND JANUARY 2010 COPY TO 1 THE ACIT CIRCLE-2(1) 4 TH FLOOR RAJKAMAL COMPLEX MAIN ROAD GUNTUR 2 M/S. POLISETTY SOMASUNDARAM D.NO.8-24-31 MANGAL AGIRI ROAD GUNTUR 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