DCIT, Circle - 8, Kolkata, Kolkata v. M/s. Auckland International Ltd., Kolkata

ITA 952/KOL/2011 | 2002-2003
Pronouncement Date: 18-11-2011

Appeal Details

RSA Number 95223514 RSA 2011
Assessee PAN AACCA1986A
Bench Kolkata
Appeal Number ITA 952/KOL/2011
Duration Of Justice 4 month(s) 19 day(s)
Appellant DCIT, Circle - 8, Kolkata, Kolkata
Respondent M/s. Auckland International Ltd., Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 18-11-2011
Appeal Filed By Department
Bench Allotted A
Tribunal Order Date 18-11-2011
Assessment Year 2002-2003
Appeal Filed On 29-06-2011
Judgment Text
1 A IN THE INCOME TAX APPELLATE TRIBUNAL BENCH- A KOL KATA [ . .. . ! ! ! !. .. . '# ] BEFORE SRI N.VIJAYAKUMARAN JUDICIAL MEMBER & SRI C.D. RAO AC COUNTANT MEMBER $ $ $ $ / ITA NO. 952 (KOL) OF 2011 %& '( / ASSESSMENT YEAR 2002-03 DY.COMMISSIONER OF INCOME-TAX CIRCLE-8 KOLKATA. AUCKLAND INTERNATIONAL LTD. KOLKATA. (PAN-AACCA1986A ) (+ / APPELLANT ) - - - VERSUS - (/0+ / RESPONDENT ) + 1 2 '/ FOR THE APPELLANT: / SRI S.K. ROY /0+ 1 2 ' / FOR THE RESPONDENT: / SRI SOUMITRA CHOUDHURY 3 1 !# / DATE OF HEARING : 08/11/2011 4' 1 !# / DATE OF PRONOUNCEMENT : 18 /11/2011 '5 / ORDER ( . .. . ! ! ! !. .. . ) '# (C.D. RAO) ACCOUNTANT MEMBER : THE DEPARTMENT HAS FILED THIS APPEAL AGAINST THE ORDER DATED 07.02.2011 OF LD. C.I.T.(A)-VIII KOLKATA PERTAINING TO ASSESSMENT YE AR 2002-03. THE GROUNDS RAISED IN THIS APPEAL BY THE DEPARTMENT READ AS UNDER :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN QUASHING THE PROCEEDINGS REOPENED U/S. 148 OF TH E INCOME TAX ACT. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF PRIOR PERIOD ELECTR ICITY CHARGES AMOUNTING TO RS.91 22 652/-. 2. IN REGARD TO THE FIRST GROUND ON REOPENING OF ASSESSMENT THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE-COMPANY FILED ITS RETUR N FOR THE ASSESSMENT YEAR UNDER CONSIDERATION SHOWING TOTAL LOSS OF RS.2 21 230/-. THE RETURN WAS PROCESSED U/S. 143(1) ON 19/02/2003 AND THEREAFTER ASSESSMENT WAS COMPLET ED U/S. 143(3) OF THE ACT ON 30/12/2009 ON THE RETURNED INCOME. SUBSEQUENTLY T HE A.O. OBSERVED THAT AS PER ORDER OF HONBLE CALCUTTA HIGH COURT DATED 14/05/2002 CE SC WOULD REALIZE THE ARREARS OF 2 THE ELECTRICITY CHARGES FOR THE YEARS 2000-01 & 200 1-02 FROM THE CUSTOMERS SPREADING OVER THREE YEARS RAISED DUE TO THE REVISION OF ITS TARIFF RATES. CESC THUS CHARGED THE TARIFF AMOUNTING TO RS.91 22 652/- FOR A.Y. 2001-02 AND RS .85 17 893/- FOR A.Y. 2002-03 TOTALLING TO RS.1 76 40 545/- TO BE PAID BY THE AS SESSEE-COMPANY IN MONTHLY INSTALMENTS @ RS.2 45 007.57 FROM JUNE 2002 ONWARDS. THE A.O. OBSERVED THAT THE ASSESSEE HAD CLAIMED LOSS DURING THE ASSESSMENT YEAR UNDER CONSI DERATION AFTER CLAIMING DEDUCTION OF THE SAID ARREAR OF ELECTRICITY CHARGES WITHOUT MAKI NG ANY ACTUAL PAYMENT. ACCORDING TO THE A.O. THE ENTIRE DEDUCTION WAS ALLOWED IN ASSES SMENT U/S. 143(3) OF THE ACT WHICH OTHERWISE SHOULD HAVE BEEN CLAIMED ONLY TO THE EXTE NT OF RS.85 17 893/- BEING LEGAL LIABILITY FOR THE PREVIOUS YEAR RELEVANT TO ASSESSM ENT YEAR UNDER CONSIDERATION AND THE PRIOR PERIOD LIABILITY OF RS.91 22 652/- FOR A.Y. 2 001-02 SHOULD HAVE BEEN DISALLOWED WHICH SHOULD HAVE BEEN CLAIMED IN THE SUCCEEDING TH REE/SIX YEARS ONLY ON THE ACTUAL PAYMENT BASIS. ACCORDING TO HIM THEREFORE THERE W AS UNDER ASSESSMENT BY RS.91 22 652/- WHICH WAS THE BASIS TO ISSUE NOTICE U/S. 148 OF THE ACT ON 30/3/2009 WITH A VIEW TO INITIATE PROCEEDING U/S. 147 OF THE ACT. IN COMPLIANCE THE ASSESSEE VIDE COMMUNICATION DATED 02/4/2009 REQUESTED THE A.O. TO TREAT THE ORIGINAL RETURN FILED ON 30/10/2002 AS THE RETURN FILED IN RESPONSE TO NOTIC E U/S. 148 OF THE ACT. FURTHER THE ASSESSEE IN RESPONSE TO NOTICE U/S. 142(1) OF THE A CT FILED AN EXPLANATION OBJECTING THE INITIATION OF PROCEEDING U/S. 148 OF THE ACT WHEREI N IT WAS STATED THAT THIS MATTER HAS ALREADY BEEN CONSIDERED WHILE COMPLETING THE ASSESS MENT U/S. 143(3) OF THE ACT ON 10/3/2006 AND THEREFORE THE INITIATION OF PROCEED INGS U/S. 148 OF THE ACT ON THE SAME POINT ON THE BASIS OF AUDIT OBJECTION AND THAT TOO AFTER FOUR YEARS WAS COMPLETELY ILLEGAL AND LIABLE TO BE DROPPED. SUCH OBJECTION OF THE ASS ESSEE WAS REJECTED BY THE A.O. ON THE GROUND THAT THE ASSESSEE WAS WELL AWARE OF THE HIGH COURTS ORDER DATED 14/5/2002 BEFORE FINALIZING THE ACCOUNTS ON 19/8/2002. ACCORD ING TO HIM THEREFORE THE ASSESSEE WILLFULLY APPROPRIATED IN THE P/L APPROPRIATION A/C . THE ARREAR LIABILITY OF RS.91 22 652/- FOR CLAIMING DEDUCTION IN THE ASSESS MENT YEAR UNDER APPEAL. THE A.O. THEREFORE DISALLOWED THE SUM OF RS. 91 22 652/- AN D ADDED BACK THE SAME TO THE INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR UNDER CONSI DERATION TO RAISE THE TOTAL INCOME AT RS.89 01 420/- AS AGAINST LOSS DECLARED BY THE ASSE SSEE OF RS.2 21 230/-. 3 3. THE ASSESSEE CAME IN APPEAL BEFORE THE LD. C.I. T.(A) AND CHALLENGED THE REOPENING OF ASSESSMENT U/S. 148 AND PASSING CONSEQ UENTIAL ORDER U/S. 147/143(3) OF THE ACT. IT WAS SUBMITTED BEFORE THE LD. C.I.T.(A) THAT THE ASSESSEE IN COURSE OF ASSESSMENT PROCEEDING U/S. 143(3) OF THE ACT FILED DETAILED RE PLY ON 20/2/2006 ALONG WITH COPIES OF BOARD RESOLUTION DATED 12/7/2002 AND CORRESPONDENCE OF CESC IN THE MONTH OF JUNE 2002. IT WAS SUBMITTED THAT THE BILL WAS RAISED BY CESC ON THE BASIS OF HONBLE CALCUTTA HIGH COURT JUDGMENT DATED 14/5/2002. THAT THE ASSESSEE-COMPANY PASSED BOARD RESOLUTION ON 12/7/2002 AND THE BALANCE SHEET FOR THE ASSESSMENT YEAR UNDER CONSIDERATION WAS FINALIZED ON 19/8/2002 INCORPORAT ING THEREIN LIABILITY OF RS.1.76 CRORE PERTAINING TO A.YS 2001-02 & 2002-03 FOLLOWING THE ACCOUNTING STANDARD 5. IT WAS SUBMITTED THAT ALL THE PAPERS WERE WITH THE A.O. IN THE ORIGINAL ASSESSMENT PROCEEDING. IT WAS THEREFORE SUBMITTED THAT ON THE SAME SET O F FACTS THE A.O. REOPENED THE ASSESSMENT AFTER THE LAPSE OF FOUR YEARS WHICH WAS ARBITRARY UNJUSTIFIED AND ILLEGAL. IN SUPPORT OF THE SUBMISSIONS THE ASSESSEE RELIED ON THE FOLLOWING DECISIONS :- CIT VS. KELVINATOR OF INDIA LTD. [320 ITR 561 (SC )] CARTSNI INDIA LTD. VS. ADDL.CIT [324 ITR 275 (BOM )] SUPREME TREVES P. LTD. VS. DCIT [323 ITR 323 (BO M)] ICICI PREDENTIAL LIFE INSURANCE VS. CIT [325 ITR 471 (BOM)] CIT VS. PRADESHIYA INDUSTRIAL & INV. CORPN [(2010 ) 186 TAXMAN 131 (ALL)] INDUCTO ISPAT ALLOYS LTD. VS. ACIT [320 ITR 458 (GUJ)] THE LD. C.I.T.(A) QUASHED THE REOPENING OF ASSESSME NT BY HOLDING AS UNDER :- I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER MA DE U/S. 143(3) I.T. ACT AND THE REOPENING ORDER U/S. 143(3)/148 OF THE I.T. ACT AND I HAVE PERUSED THE LETTER DATED 20.02.2006 FILED BEFORE THE A.O. ALONG WITH BOARD R ESOLUTION AND THE ELECTRICITY BILL OF CESC THEREFORE RESPECTFULLY FOLLOWING THE JUDG MENT OF HONBLE SUPREME COURT IN THE CASE OF C.I.T. VS. KELVINATOR OF INDIA LTD. AND THE DECISION OF VARIOUS HIGH COURTS AND FROM THE FACTS OF THE CASE IT IS VERY CL EAR THAT THE SAME POINT REGARDING PRIOR PERIOD EXPENDITURE HAS BEEN ALREADY CONSIDERE D BY THE A.O. IN THE ORIGINAL ASSESSMENT ORDER AND HAS BEEN DULY ALLOWED THEREFO RE THE REOPENING U/S. 148 BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR ON THE SAME SET OF FACTS IS NOT SUSTAINABLE THEREFORE TH E SAID REOPENING IS QUASHED AND ACCORDINGLY THESE GROUNDS OF APPEAL ARE ALLOWED. 4 4. AT THE TIME OF HEARING BEFORE US THE LD. DEPAR TMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE A.O. WHEREAS THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE LD. C.I.T.(A). THE LEARNED COUNSEL REITERAT ED THE ARGUMENTS MADE BEFORE THE LD. C.I.T.(A) AND FILED THE COPIES OF THE FOLLOWING DOC UMENTS IN THE PAPER BOOK :- 1. ASSESSMENT ORDER DATED 10/3/2006 U/S. 143(3 ) FOR A.Y. 2002-03. 2. REPLY DATED 20/2/2006 IN RESPONSE TO NOTICE U/S. 142(1) WITH DETAILS OF REVISION OF CESC TARIFF RATES BILLS AND ARREARS OF FUEL CHA RGES. 3. REASONS RECORDED DATED 6/11/2009 BY THE A.O . 4. AUDITED BALANCE & P/L ACCOUNT AS ON 31/3/20 02. 5. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. WE HAVE ALSO CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHO RITIES BELOW. THERE IS NO DISPUTE TO THE FACT THAT THE A.O. REOPENED THE ASSESSMENT AFTE R THE END OF FOUR YEARS FROM THE ASSESSMENT YEAR UNDER CONSIDERATION ON THE GROUND T HAT THE ASSESSEE HAD CLAIMED LOSS DURING THE ASSESSMENT YEAR UNDER CONSIDERATION AFTE R DEDUCTING THE ENTIRE ARREAR OF ELECTRICITY CHARGES OF RS.1 76 40 540/- I.E. RS.91 22 652/- FOR A.Y. 2001-02 AND RS.85 17 893/- FOR A.Y. 2002-03 WITHOUT MAKING ACTU AL PAYMENT WHICH SHOULD HAVE BEEN ALLOWED IN THE YEAR UNDER CONSIDERATION ONLY T O THE EXTENT OF RS.85 17 893/-. THE A.O. THEREFORE ADDED BACK THE SUM OF RS.91 22 652 /- TO THE TOTAL INCOME OF THE ASSESSEE AS PRIOR PERIOD EXPENSES IN THE ASSESSMENT FRAMED U/S. 147/143(3) OF THE ACT. THERE IS A WELL KNOWN DIFFERENCE BETWEEN A WRONG CL AIM MADE BY AN ASSESSEE AFTER DISCLOSING ALL THE TRUE AND MATERIAL FACTS AND A WR ONG CLAIM MADE BY THE ASSESSEE BY WITHHOLDING THE MATERIAL FACTS . IT IS ONLY IN THE LATTER CASE THAT THE A.O. IS ENT ITLED TO PROCEED U/S. 147 OF THE ACT. THE POWER CONFERRED BY SEC. 147 OF THE ACT DOES NOT PROVIDE A FRESH OPPORTUNITY TO THE A.O. TO CORRECT AN INCORRECT ASSESSMENT MADE EARLIER UNLESS THE MISTAKE IN THE ASSESSMENT SO MADE IS THE RESULT OF A FAILURE OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS NECESSA RY FOR ASSESSMENT. FURTHER IT IS NECESSARY FOR THE A.O. TO FIRST STATE THAT THERE IS A FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. IF HE DOES NOT RECORD SUCH A FAILUR E HE WOULD NOT BE ENTITLED TO PROCEED U/S 147 . IN THIS CONTEXT WE OBSERVE THAT THERE WAS NO ALLEGA TION IN THE REASONS RECORDED THAT THERE WAS ANY FAILURE ON THE PART OF THE ASSES SEE TO DISCLOSE FULLY AND TRULY ALL 5 MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. THE LD . DEPARTMENTAL REPRESENTATIVE ALSO COULD NOT CONTROVERT DURING COURSE OF HEARING THE F INDING OF THE LD. C.I.T.(A) QUASHING THE REASSESSMENT. IT WAS IN THIS VIEW THAT THE HON BLE SUPREME COURT FOLLOWING THE RATIONALE OF THE DECISION IN CIT V. MAX INDIA LTD. [2007] 295 ITR 282 (SC) HAS HELD IN THE CASE OF CIT V. KELVINATOR OF INDIA LTD. (SUPRA) THAT MERE CHANGE OF OPINION CANNOT JUSTIFY REOPENING OF THE ASSESSMENT WHICH IS AS UN DER :- THE CONCEPT OF 'CHANGE OF OPINION' ON THE PART OF T HE 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 (AMEND MENT) ACTS 1987 AND 1989. AFTER THE AMENDMENT THE ASSESSING OFFICER HAS TO H AVE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT BUT THIS DOES NOT IM PLY THAT THE ASSESSING 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 CHE CK THE ABUSE OF POWER. HENCE AFTER APRIL 1 1989 THE ASSESSING OFFICER HAS POWE R TO REOPEN AN ASSESSMENT PROVIDED THERE IS 'TANGIBLE MATERIAL' TO COME TO TH E CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASON MUST H AVE A LINK WITH THE FORMATION OF THE BELIEF . ON THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE I N OUR CONSIDERED OPINION THERE WAS CHANGE IN OPINION IN ISSUING NOTICE U/S. 148 OF THE ACT AND FRAMING THE ASSESSMENT U/S. 147/143(3) OF THE ACT. IN VIEW OF THE ABOVE RESPEC TFULLY FOLLOWING THE AFORESAID DECISION OF HONBLE SUPREME COURT WE UPHOLD THE OR DER OF THE LD. C.I.T.(A) ON THIS ISSUE AND GROUND NO.1 OF THE REVENUES APPEAL IS DI SMISSED. 6. THE DEPARTMENT VIDE GROUND NO.2 ALSO AGITATED T HE ACTION OF THE LD. C.I.T.(A) IN DELETING THE DISALLOWANCE OF PRIOR PERIOD ELECTRICI TY CHARGES MADE IN THE REASSESSMENT AMOUNTING TO RS.91 22 652/-. THE FACTS IN REGARD TO THIS ISSUE HAVE BEEN STATED ABOVE. THE LD. C.I.T.(A) DELETED THE ADDITION BY OBSERVING AS UNDER :- I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER AN D THE SUBMISSION OF THE A/R. IT IS AMPLY CLEAR THAT THE DEMAND HAS BEEN SERVED UPON THE ASSESSEE BY THE CESC ON THE BASIS OF HONBLE CALCUTTA HIGH COURT ORDER BEFO RE THE FINALIZATION OF THE ACCOUNT DATED 19.08.2002 AS THE BOOKS WERE OPEN AND THE RES OLUTION HAD AUTHORIZED THE COMPANY TO MAKE THE ENTRY DURING THAT RELEVANT YEAR AND FOLLOWING THE JUDGMENT C.I.T. V. SMITHKLINE BEECHAM LTD. THE SAID ADDITION OF RS.91 22 652 IS DELETED. ACCORDINGLY THESE GROUNDS OF APPEAL ARE ALLOWED. 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD.C.I.T.(A) ON THIS ISSUE. FURTHE R THE LD. DEPARTMENTAL REPRESENTATIVE 6 DURING COURSE OF HEARING BEFORE US COULD NOT CONTRO VERT THE FINDING OF THE LD. C.I.T.(A). IN THIS VIEW OF THE MATTER WE UPHOLD THE ORDER OF THE LD. C.I.T.(A) IN DELETING THE ADDITION OF RS.91 22 652/- MADE ON ACCOUNT OF PRIOR PERIOD EXPENSES. TH3 GROUND OF THE DEPARTMENT RAISED IN THIS REGARD IS ALSO DISMIS SED. 8. IN THE RESULT THE APPEAL OF THE DEPARTMENT IS DISMISSED. SD/- SD/- ( ) ( . .. . ! ! ! !. .. . ) '# (N.VIJAYAKUMARAN) JUDICIAL MEMBER (C.D. RAO) ACCOUNTANT MEMBER ( (( (!# !# !# !#) )) ) DATE: 18 -11-2011 '5 1 /%% 6''7- COPY OF THE ORDER FORWARDED TO : 1. + / THE APPELLANT : D.C.I.T. CIRCLE-8 KOLKATA. 2 /0+ / THE RESPONDENT : AUCKLAND INTERNATIONAL LTD. 6 MI DDLETON ST. KOL-700071 3. %5 () : THE CIT(A)-VIII KOLKATA. 4. %5/ THE CIT KOL- 5 . ;%< /% / DR ITAT KOLKATA BENCHES KOLKATA 6 . GUARD FILE . 0 /%/ TRUE COPY '5/ BY ORDER (DKP) ASSTT. REGISTRAR .