DYSTAR INDIA P.LTD, NAVI MUMBAI v. ITO WD 8(1)(3), MUMBAI

ITA 6492/MUM/2009 | 2003-2004
Pronouncement Date: 30-11-2011 | Result: Allowed

Appeal Details

RSA Number 649219914 RSA 2009
Assessee PAN AABCD0295N
Bench Mumbai
Appeal Number ITA 6492/MUM/2009
Duration Of Justice 1 year(s) 11 month(s) 12 day(s)
Appellant DYSTAR INDIA P.LTD, NAVI MUMBAI
Respondent ITO WD 8(1)(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-11-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 30-11-2011
Date Of Final Hearing 23-11-2011
Next Hearing Date 23-11-2011
Assessment Year 2003-2004
Appeal Filed On 18-12-2009
Judgment Text
1 ITA 6492/ M/2009 M/S DYSTAR INDIA P. LTD.. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D BEFORE SHRI R.K. PANDA A.M. AND SHRI VIJAY PAL RAO J.M. ITA NO. 6492/MUM/2009 ASSESSMENT YEAR 2003-04 M/S DYSTAR INDIA PVT. LTD. PLOT NO. R-855 TTC INDUSTRIAL AREA RABALE GHANSOLI NAVI MUMBAI 400 701. PAN AABCD0295N VS. INCOME TAX OFFICER WARD 8(1)(3) AAYAKAR BHAWAN MUMBAI. APPELLANT RESPONDENT APPELLANT BY SHRI BHARAT DAMODAR SHRI PRAVIN SABBARWAL RESPONDENT BY SHRI SHANTAN BOSE DATE OF HEARING 23.11.2011 DATE OF PRONOUNCEMENT 30.11.2011 ORDER PER R.K. PANDA A.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DT. 12.10.2009 OF THE CIT(A)- 16 MUMBAI RELATING TO A.Y . 2003-04. 2. IN GROUND OF APPEAL NO. 1 THE ASSESSEE HAS CHALL ENGED THE ORDER OF THE LD. CIT(A) IN CONFIRMING THE RE-ASSESSMENT PROCEEDINGS INITIATED BY THE A.O. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING IN TEXTILE DYES. IT FI LED ITS RETURN OF INCOME DISCLOSING TOTAL INCOME AT RS. 85 282 890/-. THE A .O. COMPLETED THE ASSESSMENT VIDE ORDER PASSED U/S 143(3) ON 28.12.20 05 DETERMINING THE TOTAL INCOME AT RS. 8 59 86 020/-. SUBSEQUENTLY THE A.O . REOPENED THE ASSESSMENT 2 ITA 6492/ M/2009 M/S DYSTAR INDIA P. LTD.. BY ISSUING NOTICE U/S 148 DTD. 26.3.2008. THE REASO NS FOR SUCH RE-OPENING PLACED BY THE ASSESSEE AT PAGE 32 OF THE PAPER BOOK READS AS UNDER:- RETURN OF INCOME FOR A.Y.2003-04 WAS FILED BY THE ASSESSEE ON 20.11.2003 DECLARING TOTAL INCOME OF RS.8 52 52 890/-. ASSESSM ENT U/S. 143(3) OF THE I.T. ACT WAS COMPLETED ON 28.12.2005 DETERMINING THE TOTAL I NCOME AT RS.8 59 86 020/-. (1) IT IS SEEN FROM THE RECORDS THAT DURING THE PRE VIOUS YEAR RELEVANT TO A.Y.2003- 04 THE ASSESSEE HAD PURCHASED SOFTWARE OF RS.10 57 357/- WHICH WAS CLAIMED AS REVENUE EXPENDITURE AND DEBITED TO THE PROFIT & LOSS ACCOUNT. AS PER INCOME TAX RULES SOFTWARE IS CLASSIFIED AS CAPITAL ASSETS AND ADMISSIBLE DEPRECIATION IS 30%. BY CLAIMING SOFTWARE EXPENSES AS REVENUE EXP ENDITURE THE ASSESSMENT HAS ESCAPED THE INCOME TO THE TUNE OF RS.4 22 943/- (AFTER CONSIDERING DEPRECIATION @ 6O%) (2) IT IS SEEN FROM THE ATTACHMENT 6B TO THE TAX AUDIT REPORT THAT CUSTOMS DUTY FOR THE YEAR AND PAID BEFORE THE FILING OF THE RETURN WAS RS.95 11 279. THE DETAILS OF THE ABOVE AMOUNT FURNISHED BY THE ASSESS EE REVEALED THE FOLLOWING : PROVISION FOR CUSTOMS DUTY PAYABLE ON GOODS : 95 1 1 279 AND DEBITED ADVANCE PAYMENT OF CUSTOMS DUTY ON GOODS : 16 27 8 14 RECEIVED IN P.Y. 03-04 I.E. A.Y. 04-05 NET CUSTOMS DUTY : 78 83 465 IT COULD BE SEEN FROM THE ABOVE THAT THE ASSESSEE H AD DEBITED AN AMOUNT OF RS.95 11 279/- ON ACCOUNT OF CUSTOMS DUTY WHICH INCLUDE CUSTOMS DUTY OF S.16 27 814/- PERTAINING TO THE GOODS RECEIVED IN A .Y. 2004-05 I.E. IN THE SUBSEQUENT YEAR. THIS ACTION OF THE ASSESSEE IS NOT CORRECT AS THE CUSTOM DUTY OF RS.16 27 814/- WAS ADVANCE CUSTOMS DUTY PAID IN RES PECT OF THE GOODS RECEIVED IN THE SUBSEQUENT YEAR AND SHOULD HAVE BEEN CLAIMED IN THE SUBSEQUENT YEAR ONLY. THEREFORE THERE IS AN EXCESS DEBIT OF CUSTOM S DUTY OF RS.16 27 814/- WHICH HAS ESCAPED ASSESSMENT. THEREFORE I HAVE REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX OF RS.20 50 757/- HAS ESCAPED ASSESSMENT WITHIN THE ME ANING OF PROVISION OF SECTION 147(C). ISSUE NOTICE U/S. 148 OF THE I.T. A CT. \ 3.1 THE ASSESSEE REQUESTED THE A.O. TO DROP THE 148 PROCEEDINGS IN THE LIGHT OF THE DECISIONS IN THE CASE OF CIT V. KELVINATOR O F INDIA LTD. REPORTED IN 256 ITR 1 (DEL) AND IN THE CASE OF APPOLLO HOSPITAL ENT ERPRISES LTD. V. CIT REPORTED IN 297 ITR 0025. HOWEVER THE A.O. REJECTED THE CO NTENTION OF THE ASSESSEE ON 3 ITA 6492/ M/2009 M/S DYSTAR INDIA P. LTD.. THE GROUND THAT THERE IS UNDER ASSESSMENT OF INCOME ON ACCOUNT OF TREATMENT OF PURCHASE OF SOFTWARE AS REVENUE EXPENDITURE AND PAYMENT OF CUSTOM DUTY. IN APPEAL THE LD. CIT(A) FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ACIT V. RAJESH JHAVERI STOCK BROKERS P. LTD . (SC) REPORTED IN 291 ITR 501 UPHELD THE RE-ASSESSMENT PROCEEDINGS INITIATED BY THE A.O. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A) THE ASSESSEE IS IN APP EAL BEFORE US. 4. THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENT ION OF THE BENCH TO PAGE 21 OF THE PAPER BOOK WHEREIN THE ASSESSEE HAS GIVEN DETAILS OF S.B. A/C ASST. CUSTOMS DUTY. IT WAS ALSO MENTIONED THEREIN THAT I T IS A PROVISION ACCOUNT FOR CUSTOM DUTY PAYABLE OF GOODS IN TRANSIT. REFERRING TO PAGE 22 OF THE PAPER BOOK HE SUBMITTED THAT THE ASSESSEE VIDE LETTER DT D. 20.12.2005 ADDRESSED TO THE A.O. AT CLAUSE 3 OF THE LETTER HAS GIVEN THE DE TAILS OF TECHNICAL SERVICES AND PATTERNS AND LICENCES. HE SUBMITTED THAT THERE WAS NO TANGIBLE MATERIAL AVAILABLE BEFORE THE A.O. TO COME TO THE CONCLUSION THAT INCOME HAS ESCAPED THE ASSESSMENT. ALL THE DETAILS WERE VERY MUCH AVA ILABLE BEFORE THE A.O. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDING S. REFERRING TO THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF BALKRISHNA HIRALAL WANI V. ITO & OTHERS REPORTED IN [2010] 321 ITR 519 (BOM) HE SUBMITTED THAT WHEN THERE WAS NO TANGIBLE MATERIAL BEFORE THE A.O. TO CONCLUDE THAT INCOME HAS ESCAPED ASSESSMENT THE A.O. CANNOT REOPEN THE ASSESSMENT U/S 147 OF THE ACT. REFERRING TO THE DECISION OF HONBLE SUPR EME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. REPORTED IN [2010] 320 ITR 561 (SC) HE SUBMITTED THAT THERE MUST BE TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT. HE SUBMITTED THAT THE ASSESSEE HAD GIVEN SUFFICIENT DETAILS TO CLAIM THE SOFTWARE EXPE NSES AS REVENUE EXPENSES. SIMILARLY THE ASSESSEE HAS PAID RS. 1627814/- AS C USTOM DUTY ON THE GOODS IN TRANSIT. THE SAME AMOUNT WAS ALSO ADDED FOR THE PU RPOSE OF CLOSING STOCK. SINCE THE GOODS WERE ALREADY ACCOUNTED FOR IN A.Y. 2003-04 THE SAME CANNOT BE TREATED AS CUSTOM DUTY PAID IN ADVANCE AND THERE WAS NO QUESTION OF 4 ITA 6492/ M/2009 M/S DYSTAR INDIA P. LTD.. CONSIDERING THE SAME IN THE SUBSEQUENT YEAR AS THE SAME HAS ALREADY BEEN ACCOUNTED FOR IN A.Y. 2003-04. HE ACCORDINGLY SUBM ITTED THAT THE RE- ASSESSMENT PROCEEDINGS INITIATED BY THE A.O. AND LD . CIT(A) HAS TO BE QUASHED. 5. THE LD. D.R. ON THE OTHER HAND SUPPORTED THE O RDER OF THE LD. CIT(A). 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES PURSUED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS THE ASSESSEE VIDE LETTER DTD. 7 TH OCTOBER 2005 ADDRESSED TO THE A.O. (PAPER BOOK PAGE 21) HAS FILED DETAILS OF S.B. A/C ASSTT. CUST OMS DUTY. IT WAS STATED THEREIN THAT IT IS A PROVISION ACCOUNT FOR CUSTOM D UTY PAYABLE OF GOODS IN TRANSIT. SIMILARLY THE ASSESSEE VIDE LETTER DTD. 2 0.12.2005 ADDRESSED TO THE A.O. (PAPER BOOK PAGE 22) AT CLAUSE 3 HAD GIVEN DET AILS OF TECHNICAL SERVICE AND PATTERNS AND LICENCES. WE FIND BASED ON THE VARIOU S DETAILS GIVEN BY THE ASSESSEE THE A.O. COMPLETED THE ASSESSMENT U/S 143( 3) ON 20.12.2005. WE FIND THE A.O. ISSUED NOTICE U/S 148 ON 26.3.2008 ON THE GROUND THAT THERE IS UNDER ASSESSMENT OF INCOME ON ACCOUNT OF CLAIM OF S OFTWARE EXPENSES AS REVENUE EXPENDITURE AND CUSTOM DUTY OF RS. 16 27 81 4/- BEING ADVANCE CUSTOM DUTY PAID IN RESPECT OF GOODS RECEIVED IN TH E SUBSEQUENT YEAR. WE FIND THE REASONS FOR RE-OPENING THE ASSESSMENT WAS ON TH E BASIS OF THE DETAILS ALREADY AVAILABLE IN THE RECORDS OF THE DEPARTMENT. THERE IS NO OTHER TANGIBLE MATERIAL AVAILABLE BEFORE THE A.O. TO COME TO THE C ONCLUSION THAT INCOME HAS ESCAPED THE ASSESSMENT DUE TO FAILURE ON THE PART O F THE ASSESEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR TH E COMPLETION OF ASSESSMENT. 6.1 WE FIND THE HONBLE SUPREME COURT IN THE CASE O F KELVINATOR OF INDIA LTD. (SUPRA) HAS HELD THAT THE A.O. HAD POWER TO REOPEN THE ASSESSMENT PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSIO N THAT THERE WAS ESCAPEMENT 5 ITA 6492/ M/2009 M/S DYSTAR INDIA P. LTD.. OF INCOME FROM ASSESSMENT. THE RELEVANT PORTION OF THE HONBLE APEX COURT READS AS UNDER:- .POST-APRIL 1 1989 POWER TO REOPEN IS MUCH WIDE R. HOWEVER ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS REASON TO BELIEVE FAILING WHICH WE ARE AFRAID SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO REOPEN ASSESSMEN TS ON THE BASIS OF MERE CHANGE OF OPINION WHICH CANNOT BE PER SE RE ASON TO REOPEN. WE MUST ALSO KEEP IN MIND THE CONCEPTUAL DIFFERENCE BE TWEEN POWER TO REVIEW AND POWER TO REASSESS. BUT REASSESSMENT HAS TO BE BASED ON FULFILLMENT OF CERTAIN PRE-CONDITIONS AND IF THE CO NCEPT OF CHANGE OF OPINION IS REMOVED AS CONTENDED ON BEHALF OF THE DEPARTMENT THEN IN THE GARB OF REOPENING THE ASSESSMENT REVIEW WOU LD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF CHANGE OF OPINION A S AN IN-BUILT TEST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFICER. HENC E AFTER APRIL 1 1989 THE ASSESSING OFFICER HAS POWER TO REOPEN PR OVIDED THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LIN K WITH THE FORMATION OF THE BELIEF. 6.2 SIMILARLY THE HONBLE JURISDICTIONAL HIGH COUR T IN THE CASE OF BALKRISHNA HIRALAL WANI (SUPRA) FOLLOWING THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA LTD. (SUPRA) HAS HELD T HAT THE A.O. MUST HAVE TANGIBLE MATERIAL ON THE BASIS OF WHICH HE COULD HAVE A REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. SINCE IN THE INSTAN T CASE THE A.O. IN OUR OPINION HAS NO TANGIBLE MATERIAL ON THE BASIS OF WHICH HE COULD HAVE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT THER EFORE FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF KE LVINATOR OF INDIA LTD. (SUPRA) AND THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF BALKRISHNA HIRALAL WANI (SUPRA) THE REASSESSMENT PR OCEEDINGS INITIATED BY THE A.O. HAS TO BE QUASHED. ACCORDINGLY WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 7. SINCE THE ASSESSEE SUCCEEDS ON THE ISSUE OF REAS SESSMENT THE OTHER GROUNDS BECOME ACADEMIC IN NATURE AND THEREFORE ARE NOT ADJUDICATED. 6 ITA 6492/ M/2009 M/S DYSTAR INDIA P. LTD.. 8. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED ON 30.11.2011. SD/- SD/- (VIJAY PAL RAO) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED 30.11.2011. RK COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 16 MUMBAI 4. THE CIT VIII MUMBAI 5. THE DR BENCH D 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI