DCIT 5(1), MUMBAI v. ESSAR SHIPPING LTD, MUMBAI

ITA 56/MUM/2010 | 2000-2001
Pronouncement Date: 25-03-2011 | Result: Dismissed

Appeal Details

RSA Number 5619914 RSA 2010
Assessee PAN AAACE8391D
Bench Mumbai
Appeal Number ITA 56/MUM/2010
Duration Of Justice 1 year(s) 2 month(s) 21 day(s)
Appellant DCIT 5(1), MUMBAI
Respondent ESSAR SHIPPING LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 25-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 25-03-2011
Date Of Final Hearing 08-03-2011
Next Hearing Date 08-03-2011
Assessment Year 2000-2001
Appeal Filed On 04-01-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI BEFORE SHRI R.S.SYAL ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO JUDICIAL MEMBER ITA NO. 56/MUM/2010 (ASSESSMENT YEARS: 2000-01) DCIT 5(1) R NO.568/525 AAYAKAR BHAVAN M K ROAD MUMBAI-400020 . APPELLANT VS ESSAR SHIPPING LTD. ESSAR HOUSE 11 K K MARG MAHALAXMI MUMBAI-400034 .RESPONDENT PAN: AAACE8391D APPELLANT BY : SHRI SURENDRA KUMAR RESPONDENT BY : SHRI VIJAY MEH TA. O R D E R PER VIJAY PAL RAO THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 20.10.2009 OF CIT(A) FOR THE ASSESSMENT YEA R 2000- 01. 2. ONLY ISSUE RAISED IN THIS APPEAL IS WHETHER IN T HE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) IS JU STIFIED IN NOT UPHOLDING THE REOPENING OF ASSESSMENT YEAR U/S 147 DISREGARDING THE FACT THAT THERE WAS ESCAPEMENT OF INCOME WITHIN THE MEANING OF SECTION 147 AND PROPER REASON S WERE ITA NO. 56/MUM/2010 (ASSESSMENT YEARS: 2000-01) 2 RECORDED BY THE AO AFTER APPROVAL OF CIT FOR REOP ENING OF ASSESSMENT. 3. BRIEF FACTS LEADING TO THE ISSUE ARE THAT THE A SSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF SHIPPING. THE ASSESSEE FILED ITS RETURN OF INCOME ON 30.11.2000. THE ORDER OF ASSESSMENT WAS PASSED U/S 143(3). THE AO WAS OF THE VIEW THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSE SSMENT AND HENCE HE ISSUED NOTICE U/S 148. ACCORDING TO T HE AO THE ASSESSEE HAS TRANSFERRED RESERVE U/S 33AC AMOUNTIN G TO RS.60 CRORES AND DEBENTURE REDEMPTION RESERVE OF R S.27.75 CRORES DIRECTLY TO GENERAL RESERVE ACCOUNT INSTEAD OF ROUTING IT THROUGH PROFIT AND LOSS ACCOUNT. THE AO HAS RECORD ED THE REASONS FOR ISSUING THE NOTICE U/S 148 AS UNDER : IT IS FOUND FROM THE RECORD PARTICULARLY THE NOTE 14 OF THE SCHEDULE 15-B OF THE AUDIT REPORT THAT DEBENTU RE REDEMPTION RESERVE AND SHIP ACQUISITION RESERVE MADE IN EARLIER YEARS WERE NOT LONGER REQUIRED AMOUNTING TO RS.27.75 CRORES AND RS.60 CRORES RESPECTIVELY WHICH HAVE BEEN DIRECTLY TRANSFERRED FROM THE RESPECTIVE RESERVE TO GENERAL RESERVE WHEREAS SIMILAR RESERVES IN EARLIER YEARS NO LONGER REQUIRED WERE CREDITED TO P AND LOSS ACCOUNT. AS PER PROVISIONS OF SECTION 33AC(2) OF THE IT ACT THE AMOUNT CREDITED TO RESERVE CAN BE UTILIZED A) FOR ACQUIRING A NEW SHIP FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE; B) UNTIL THE ACQUISITION OF NEW SHIP FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE BY WAY OF ITA NO. 56/MUM/2010 (ASSESSMENT YEARS: 2000-01) 3 DIVIDEND OR PROFITS OR FOR REMITTANCES OUTSIDE INDI A PROFIT OR FOR THE CREATION OF NAY ASSETS OUTSIDE IN DIA. ALL THE ASSESSEE COMPANY HAS TRANSFERRED THE RESERV E CREATED TO RESERVE ACCOUNT BEING NO LONGER REQUIRED THE AMOUNT WAS REQUIRED TO BE TAXED AS INCOME IN TERMS OF PROVISIONS OF SECTION 33AC(3) OF THE IT A CT THUS IT RESULTED IN UNDER ASSESSMENT OF RS.60 CROR ES WITH CONSEQUENT SHORT LEVY OF TAX AND INTEREST. YOU ARE REQUIRED TO EXPLAIN AS TO WHY THE TRANSFERR ED RESERVE AMOUNT SHOULD NOT BE TAXED UNDER THE SAID PROVISIONS OF IT ACT 1961 4. DURING THE RE-ASSESSMENT PROCEEDINGS THE ASSESS EE OBJECTED THE REOPENING OF THE ASSESSMENT AND THE N OTICE U/S 148 ISSUED AFTER EXPIRY OF FOUR YEARS. THUS THE A SSESSEE QUESTION THE VALIDITY OF THE REOPENING. THE ASSESS ING OFFICER DID NOT ACCEPT THE CONTENTION AND FRAMED THE RE-AS SESSMENT VIDE ORDER DATED 31.12.2007. 5. ON APPEAL THE CIT(A) HAS HELD THAT THE REASSE SSMENT IS NOT VALID. 6. BEFORE US THE LEARNED DR HAS SUBMITTED THE FA CTS AND RELIED UPON THE ORDER OF THE AO. 7. ON THE OTHER HAND THE LEARNED AR HAS SUBMITTED THAT IN THE REASONS RECORDED THE AO HAS NOT MENTIONED T HAT THE ASSESSEE HAS FAILED TO DISCLOSE FULLY AND TRULY ALL THE NECESSARY FACTS REQUIRED FOR ASSESSMENT. SINCE REASSESSMENT IS AFTER FOUR YEARS THEREFORE IN TH E ABSENCE OF ITA NO. 56/MUM/2010 (ASSESSMENT YEARS: 2000-01) 4 FAILURE ON THE PART OF THE ASSESSEE THE RE-ASSESSME NT IS BAD IN LAW. HE HAS RELIED UPON THE FOLLOWING DECISIONS : 1. HINDUSTAN LEVER LTD V. R B WADKAR(NO.1)- 268 ITR 332(BOM) 2. GERMAN HINDUSTAN LEVER LTD V. R B WADKAR(NO.1)- 268 ITR 332(BOM)REMEDIES LTD V/S DCIT -10 6 TAXMAN 435 (GUJ) 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND RE LEVANT RECORD. UNDOUBTEDLY THE REOPENING IS BEYOND FOUR YE ARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR THEREFORE THE CASE FALLS UNDER THE FIRST PROVISO TO THE SECTION 147 O F THE IT ACT. THE FIRST PROVISION TO SECTION 147 PROVIDES THE CON DITION FOR REOPENING OF THE ASSESSMENT THAT UNLESS THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT DUE TO FA ILURE ON THE PART OF THE ASSESSEE TO MAKE DISCLOSER FULLY AN D TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. THE CIT(A) RECORDED HIS FINDINGS IN PARAGRAPH 2.5 AS UNDER : 2.5 I FIND THAT THE AO HAS NOT RECORDED ANY SUCH FINDING IN THE REASONS RECORDED FOR ISSUE OF NOTICE . THIS IS ONE OF HE ESSENTIAL REQUIREMENT WHICH HAS TO BE SATISFIED IN THE PRESENT CASE. FURTHER I FIND T HAT ASSESSEE HAS MADE ALL THE NECESSARY DISCLOSURES BY WAY OF NOTE TO THE BALANCE SHEET AND ALSO IN THE ITA NO. 56/MUM/2010 (ASSESSMENT YEARS: 2000-01) 5 WRITTEN SUBMISSION DATED 20.2.2003. EVEN IF THE APPELLANT HAS TRANSFERRED THE AMOUNTS OF SHIP ACQUISITION RESERVE DIRECTLY TO GENERAL RESERVE ACC OUNT WITHOUT ROUTING IT THROUGH THE PROFIT AND LOSS ACCO UNT NO NOTICE CAN BE ISSUED U/S 148 UNLESS BY SUCH AC T APPELLANT HAS VIOLATED ANY OTHER PROVISIONS OF IT ACT. I FIND THAT WHEN THE ASSESSEE CREATED SHIP ACQUISIT ION RESERVES NO DEDUCTION WAS ALLOWED TO THE APPELLANT U/S 33AC OF THE IT ACT. SIMILAR IS THE CASE WITH RESPECT TO DEBENTURE REDEMPTION RESERVES. THE AO HAS ALSO NOT MADE ANY ADDITION IN THE CURRENT ASSESSMENT ORDER ON THESE TWO ISSUES. IN VIEW OF TH E FACTS IT IS HELD THAT NOT ONLY THERE ARE NO REASON S THAT THE AO TO FORM THE BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT THERE IS NO REASON TO FORM THE BELIEF THAT THERE WAS ANY FAILURE ON THE PART OF THE APPELLANT TO DISCLOSE FU LLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSME NT. THEREFORE THE REOPENING OF ASSESSMENT PROCEEDING S IS NOT UPHELD. THESE GROUNDS OF APPEAL ARE ALLOWED . 9. BEFORE US NOTHING HAS BEEN BROUGHT TO CONTROVER T THE FINDINGS OF THE CIT(A) ON THIS FACT THAT THE AO H AS NOT RECORDED IN THE REASONS THAT THE ASSESSEE HAS FAILE D TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECES SARY FOR ASSESSMENT. IN VIEW OF THE DECISION OF THE JURISD ICTIONAL HIGH COURT IN THE CASE OF HINDUSTAN LEVER LTD V. R B WA DKAR(NO.1) (SUPRA) AND THE DECISION OF HON. GUJARAT HIGH COURT IN THE CASE OF. GERMAN REMEDIES LTD V/S DCIT (SUPRA) WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF T HE CIT(A) QUA THIS ISSUE. 10. IN THE RESULT THE APPEAL OF THE REVENUE IS DIS MISSED. PRONOUNCED IN THE OPEN COURT ON 25 TH MARCH 2011 ITA NO. 56/MUM/2010 (ASSESSMENT YEARS: 2000-01) 6 SD SD (R.S.SYAL) (VIJ AY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ON THIS 25 TH DAY OF MARCH 2011 SRL:22311 COPY TO: 1. APPLICANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR ITAT MUMBAI