आयकर अपील य अ धकरण, मुंबई यायपीठ ^^bZ** मुंबई IN THE INCOME TAX APPELLATE TRIBUNAL
"E" BENCH, MUMBAI
ी बी. रामकोट य, लेखा सद य, एवं ी अ मत शु ला, या यक सद य के सम
BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER
आयकर अपील सं. / ITA No. 1468/Mum./2012
( नधारण वष / Assessment Year : 2003-04)
Asst. Commissioner of Income Tax .................... अपीलाथ / Circle- 21 (3)
C-11 Bulding, 5th Floor,
Pratyaksh Kar Bhavan, BKC,
Bandra (E), Mumbai - 400 051.
M/s Tulip Exim ................... यथ / 2/210, Mittal Industrial Estate Respondent Andheri Kurla Road, Sakinaka
Andheri (East), Mumbai - 400 059.
थायी लेखा सं./ Permanent Account Number - AACFT2284P
राज व क ओर से/ Revenue by : Mr. Rajarshi Dwivedy नधा रती क ओर से / Assessee by : Mr. I. P. Rathi
ु वाई क तार ख / आदे श घोषणा क तार ख / Date of Hearing - 11.03.2013 Date of Order - 22.03.2013
आदे श / ORDER
अ मत शु ला, या यक सद य के वारा /
PER AMIT SHUKLA, J.M.
This appeal has been preferred by the revenue, against order dated 05.12.2011, passed by the CIT (Appeals)-32, Mumbai, for the quantum of ITA No. 1468/Mum./2012
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assessment passed under Section 143(3) read with Section 147 of the Income Tax Act, 1961 (for short "the Act") for the assessment year 2003-04 mainly on following grounds of appeal :-
"On the facts and circumstances of the case and in law, the Ld CIT(A) has erred in quashing the assessment proceedings reopened under Section 147 of the Income Tax Act, 1961".
On the facts and circumstances of the case and in law, the "CIT(A) has failed to appreciate that the case was squarely covered by the decision of the Delhi High Court in the case of Bawa Abhai Singh v/s DCIT (201) 117 TAXMAN 12 to the effect that the power to reopen assessment is much wider under the amended provisions of section 147 of the Income Tax Act, 1961, w.e.f. 01.04.1989."
"The appellant prays that the order of Ld. CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored."
2. From the grounds of appeal raised above it is evident that the revenue has only challenged the quashing of the assessment order passed under 143(3) read with Section 147 and not on merits, even though the CIT(A) has decided the issue on merits in favour of the assessee.
3. Brief facts of the case, appopos the validity of the proceedings under Section 147, are that the assessee has filed its return of income on 01.12.2003, declaring total income at ` 17,36,587/-. Thereafter, the assessment was completed under scrutiny proceedings under Section 143(3) and income was determined at ` 21,18,730/-, after allowing the deduction under Section 80HHC at ` 8,92,659/-, vide order dated 28.02.2006. Later on rectification proceedings under Section 154, was also carried out vide order dated 13.03.2006, wherein the total income was determined at ` 17,43,950/-, after allowing the deduction under Section 80HHC at ITA No. 1468/Mum./2012
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` 12,67,441/- by considering the export incentives at ` 98,12,527/-, as against ` 88,31,275/- adopted in the assessment order, passed under Section 143(3). After determining the income and the computation of deduction under Section 80HHC in the aforesaid manner, reassessment proceedings were initiated under Section 147, to reopen the case by issuance of notice under Section 148 dated 29.03.2010. Such a notice has been issued and served much after expiry of four years from the end of the relevant assessment year.
4. For reopening the case under Section 147, following "reasons" were recorded by the Assessing Officer on 17.03.2010 :-
The assessee has filed return of income on 01.12.2003 declaring the total income at ` 17,36,587/- after claiming the deduction u/s 80HHC at ` 12,74,801/-. Later on 28.02.2006, assessment u/s 143(3) was completed in this case determining the total income at ` 21,18,730/, after allowing the deduction 80HHC amount to ` 8,92,659/-. Further, the case was rectified u/s 154 on 13.03.2006, rectifying the total income at ` 17,43,950/-, after enhancing u/s 80HHC at ` 12,67,441/-.
As per the provisions of section 80HHC(3) of the I T Act, 1961, as amended by Taxation Laws (Amendments) Act, 2005 the income received as per section 28(iiic) and 28(iiid) of the Act are eligible for deduction u/s 80HHC. The income described u/s 28(iiic) is any duty of Custom's or Excise repaid or repayable as drawback to any person against exports under the Custom and Central Excise Duty Drawback Rule, 1971.
On verification of the scrutiny assessment records it is revealed that in the assessment order dated 28.02.2006 read with section 154 dated 13.03.2006, a deduction u/s 80HHC amounting to ` 12,67,441/- was allowed to the assessee. It is seen from the working of the deduction that the adjusted profit or manufacturing exports was (-) 49,60,849 and therefore the deduction mainly related to export incentives vis. DEPB and Deemed Credit of Excise. As per para 3 of ITA No. 1468/Mum./2012
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Notification no. 6/2002, CE(NT) dated 01.03.2002, General Exemption no. 63, issued by the Government of India, deemed Excise Credit, is not covered under the Customs and Central Excise Duties (Drawback) Rules, 1955 or Rule 18 of the Central Excise Rules 2002. Thus, the income of deemed credit of excise is not covered u/s 28(iiic) of the I T Act and therefore not eligible for computing deduction u/s 80HHC. If the income of ` 34,42,984/- is excluded for computation, the assessee's eligible profit works out of a negative figure and, therefore, not entitled to any deduction u/s 80HHC. The incorrect allowance has resulted in underassessment of ` 12,67,441/-.
In view of the above, I have reason to believe that the assessee has been granted excess allowance of deduction of ` 12,67,441/-, in this case for A.Y. 2003-04, which was charged to be taxed. I am satisfied that this is a fit case to be re-opened u/s 147 under explanation 2 sub clause C, of the I.T. Act, 1961. As the assessment involved in this case is A.Y. 2003-04 and the quantum is more than ` 1 lac, the approval of Ld Commissioner of Income Tax is solicited for the issuance of notice 148 in this case, if approved
A.C.I.T. Cir. 21(3), Mumbai.
5. In compliance of notice under Section 148, objections were raised by the assessee that initiation of proceedings under Section 148 has wrongly been initiated, as all the material facts and information have been disclosed and were available on record and reopening after the expiry of four years from the end of the relevant assessment year cannot be done in view of the proviso to Section 147. The relevant objections of the assessee, as have been incorporated in para 6 of the assessment order is reproduced herein below :-
"as per proviso to section 147 if original assessment has been completed u/s 143(3) the same cannot be reopened after the expiry of four years of the end of the relevant assessment years, unless any ITA No. 1468/Mum./2012
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income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return or to disclosed fully and truly all material facts necessary for his assessment.
As per the facts of the case the Return of Income for aforesaid Asst. year was filed u/s 139(1) in time, with the balance sheet, profit and loss account, from 10CCAC, working of deduction u/s 80HHC and other relevant documents. The working of the deduction u/s 80HHC and form 10CCAC were filed with the return of and explained at the time of original assessment proceedings. After verification of the return, documents, submissions made and the books of accounts the original assessment was completed u/s 143(3) on 28.02.2006.
The proceedings initiated u/s 147 is not valid as it is time barred by limitation. As per the provisions of section 147 read with first proviso the assessing officer is not empowered to issue notice u/s 148 under the situation as explained above. The assessment was reopened and notice u/s 148 dated 29.03.2010 issued after four years from the end of the relevant assessment year. And there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment which have resulted into the under assessment of income.
Under these circumstances where :
a) more that four year has passed from the relevant assessment year and
b) where the original assessment was completed u/s 143(3), and
c) any income chargeable to tax has escaped assessment not for any failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment or failure to file the return of income.
The action of reopening the assessment u/s 147 of the Income Tax Act is illegal, bad in law and void ab initio.
ITA No. 1468/Mum./2012
M/s Tulip Exim
Your assessee's case falls squarely with the first proviso to section 147 and the proceedings are barred by limitation. Hence the reassessment proceedings initiated u/s 147 and assessment completed u/s 143(3) rws 147 under the given circumstances should be held to be illegal, bad in law and void ab-initio.
In view of the aforesaid facts of the case, before proceedings into the re-assessment proceeding you are requested to pleas consider this submission against the re-opening of assessment."
6. The Assessing Officer rejected the assessee's objection on the ground that notice under Section 148 has been served upon the assessee, within the time limit prescribed, and all the condition prescribed in proviso to Section 147, Section 148(1), 148(2), 149(1)(b) and proviso to Section 151(1) of the Act are fulfilled. Thereafter he proceeded to disallow the deduction under Section 80HHC to the extent of ` 12,67,441/-, as per his findings given in para 8 and 9 of the assessment order.
7. Before the CIT(A), the assessee reiterated its objections regarding the validity of the reopening under Section 147 and submitted that the assessee has disclosed all the material facts in return of income under Section 139 (1), which was duly accompanied by balance sheet, profit and loss account, form 10CCAC, wherein working of deduction under Section 80HHC and other relevant documents were furnished. It was after the verification of the documents, accompanying the return and submissions made before the Assessing Officer and perusal of books of accounts, that the assessment was completed under Section 143(3) and deduction under Section 80HHC was re-computed by the Assessing Officer with reference to the DEPB and deemed excise credit. Further the said deduction was increased by the Assessing Officer in rectification order under Section 154. Thus, there was no failure on the part of the assessee to disclose any material fact. The reliance was also placed on series of jurisdictional High Court decisions which has been listed at page 4 of the appellate order.
ITA No. 1468/Mum./2012
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8. The learned CIT(A) completely agreed with the contention of the assessee and quashed the assessment order on the ground that initiation of proceedings under Section 147 is not valid, firstly, on account of 'change of opinion' and secondly, there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment and therefore, reopening of assessment cannot be done beyond the period of four years in this case. The relevant finding of the CIT(A) as given at para 3.3 to 3.4 of the appellate order is reproduced herein below :-
3.3 I have considered the above arguments of the Ld AR and perused the original assessment order u/s 143(3) as well as the order passed u/s 147. It is noted that though the assessee had specifically raised the issue of invalidity of notice u/s 148 after expiry of 4 years on grounds that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The AO has just not dealt this objection of assessee in the assessment order passed u/s 147. he has not at all mentioned whether there was any failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment or not. I have gone through the reasons recorded by the AO wherein also there is no allegation of any failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. In fact in para 9 of the assessment order u/s 147, the AO has himself mentioned that in response to rectification application of assessee, the correct figure of DEPB and Excise credit were adopted at ` 98,12,527/- as against the figures of ` 88,31,275/- and accordingly the deduction u/s 80HHC was increased by increasing the export profits by 90% of the export incentives of ` 98,12,527/- which resulted in computation of deduction at ` 12,67,441/-. So once the facts and figures were actively considered during original and in rectification proceedings, it is clear that the necessary facts and figures of export incentives in the form of DEPB and excise credit were on records of AO and duly considered by the AO and hence there was no failure also on the part ITA No. 1468/Mum./2012
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of the assessee to disclose fully and truly all material acts necessary for his assessment.
In Hindustan Lever Ltd 268 ITR 332 (bom) the court observed that it is needless to mention that the reasons are required to be read as they were recorded by the A O. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the AO to disclose or open his mind through reasons recorded by him. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. Reasons recorded must disclose his mind, should be self explanatory and should not keep the assessee guessing for reasons. He must disclose in reasons as to which material fact was not disclosed by the assessee fully and truly so as to established a vital link between reasons and evidence. The decisions in case of Anil Radhakrishna Wani 323 ITR 546 (Bom.), Idea cellular Ltd 301 ITR 407 (Bom.), Jasmine commercial Ltd 138 taxman 275 (Raj), also squarely support the contention that the re-opening after 4 years, without any failure on the part of assessee to disclose truly and fully the material facts necessary for assessment, is not a valid reopening. Moreover, the return was accompanied with audited accounts and the report in form 10CCAC which was before the AO while passing assessment order u/s 143(3) and nothing has been shown to suggest that the AO did not apply mind in the original proceedings. Further no new material on record has been brought by subsequent AO to suggest that the income had escaped assessment due to non consideration or absence of such material in original assessment proceedings. The reasons recorded by the AO therefore suggest that it was a mere change in opinion of the AO when he reviewed the assessment order in interpreting that the Excise duty credit would not constitute a receipt u/s 28(iiic). The apex court in case of Kelvinator of India 320 ITR 561 (SC) has also held that the reopening on mere change of opinion is not valid. Hence the reopening of asstt is also not valid on the ground that it amounts to mere change of opinion.
3.4 In view of the above factual position and the decision of the jurisdictional high court, the reopening of assessment after 4 years ITA No. 1468/Mum./2012
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without pointing failure on part of the assessee is, not a valid reopening as per law and hence the assessment framed in pursuance to an invalid proceedings initiated u/s 174 are quashed.
9. Besides quashing the assessment on legal grounds, he has dealt the issue on merits also and held that the view taken by the Assessing Officer that deemed excise credit is not part of export profits is not tenable. His finding has been recorded in para 4.2 of his order, which has not been challenged by the department. This inter alia can also mean that the grounds challenged before us purely on legal issues, has become purely academic as the department has not challenged the deletion of addition on merits. However, we still feel that it would be appropriate to deal with the issues and grounds raised by the department before us.
10. The learned Departmental Representative relying upon the findings of the Assessing Officer, submitted that the Assessing Officer has wrongly allowed the deduction under Section 80HHC based on the figures given by the assessee, which was noticed by the Assessing Officer subsequently. Therefore, reopening under Section 147 has been validly done by him. Excess deduction or wrong claim can empower the Assessing Officer to reopen the case under Section 147 and he referred to the various observations made by the Assessing Officer in the reasons recorded and also the findings given in the assessment order.
11. On the other hand, learned counsel reiterated the same submissions which were raised before the CIT(A) and relied upon the ultimate findings of the CIT(A). He also referred to the various decisions as have been considered by the learned CIT(A). As regards applicability of decision of Hon'ble Delhi High Court in the case of Bawa Abhai Singh v/s DCIT (2001) 117 Taxman 12, as taken by the department in grounds of appeal, he submitted that the said judgement will not be applicable as in that case the ITA No. 1468/Mum./2012
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notice was issued within three years and therefore, the decision did not pertain to proviso to Section 147.
12. We have heard the rival contentions, perused the relevant materials on record and the findings of the Assessing Officer as well as the CIT(A). In this case the assessee has filed all the necessary details and material facts in the form of Audit Report in the return of income, with regard to the claim of deduction under Section 80HHC and also the computation of taxable income. Such a return of income has been subjected to scrutiny by the Assessing Officer under Section 143(3) and the claim of deduction under Section 80HHC was specifically examined by the Assessing Officer as the same was reduced in the assessment order. Later on such a deduction was again examined in rectification proceedings under Section 154 and assessee's claim for deduction was enhanced. Thereafter, the assessee's assessment so completed in aforesaid manner, has been sought to be reopened much after the expiry of four years from the end of the relevant assessment year, to disturb the claim of deduction under Section 80HHC.
13. Proviso to Section 147 puts an embargo on reopening the assessment completed under Section 143(3) or under Section 147, after the expiry of four year from the end of the assessment year, unless twin conditions are fulfilled, firstly, an income chargeable to tax has escaped assessment by reason of failure on the part of the assessee to make return under Section 139 or in response to notice under Section 142(1) or under Section 148 and secondly, there is failure on part of the assessee to disclose fully and truly all material facts necessary for the assessment. In the present case it is an undisputed fact that assessee has filed its return of income under Section 139(1) on 01.12.2003, therefore, the first condition does not fulfill in the assessee's case. The second condition, whether there was any failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment or not, can be examine from the perusal of the 'reasons recorded'. From the plain reading of the same it would be seen that ITA No. 1468/Mum./2012
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nowhere, the Assessing Officer has held or ascribed any failure on the part of the assessee to disclose all the necessary material facts. From the 'reasons recorded', it is gathered that the Assessing Officer is withdrawing the deduction under Section 80HHC which was earlier allowed by the Assessing Officer. For acquiring a jurisdiction under Section 147, specifically in the cases where assessment has been completed under Section 143(3) and such an assessment is sought to be reopened beyond the period of four years from the end of the relevant assessment year, the Assessing Officer has to categorically spell out the failure on the part of the assessee that he did not disclose fully and truly all material facts. This has to be specifically put in words in the 'reasons recorded', which herein this case has not been done. The tenor of 'reasons recorded' indicates that the earlier Assessing Officer was not correct in allowing the deduction under Section 80HHC. This is not permissible under proviso to Section 147, which clearly lays down the limitation as discussed above for initiating such an action for reopening the assessment after certain period. The duty of the assessee is limited to make full and true disclosure of all material facts necessary for his assessment. He is not required to inform the Assessing Officer as to what legal inference should be drawn from the facts disclosed by him. Once all the primary facts are disclosed before the Assessing Officer, it is for him to determine actual taxable income and compute the deduction which is allowable to the assessee.
14. Thus, in this case, the Assessing Officer has failed to record that there was any failure on the part of the assessee to disclose fully and truly all material facts and therefore such "reasons" do not clothe him with the jurisdiction to reopen the completed assessment under Section 143(3), beyond the period of four years in view of the proviso to Section 147. The findings recorded by the CIT(A) and the decisions relied upon by the assessee, are fully applicable on the facts of the assessee's case and accordingly, the reasoning and the findings given by the CIT(A) are upheld. Thus, we hold that the CIT(A) is justified in quashing the assessment order ITA No. 1468/Mum./2012
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dated 08.12.2010 passed under Section 143(3) read with Section 147. As regards the decision of Delhi High Court in the case of Bawa Abhai Singh V/s DCIT, it has been admitted by both the parties that the same is not applicable because, in that case, the case was reopened within the period of three years and it was not a case under proviso to Section 147. Accordingly, the said judgement relied upon by the department is wholly misplaced. Thus, the grounds raised by the department is dismissed.
15. In the result, appeal of the department, is dismissed.
Order pronounced in the open Court on 22nd March , 2013.
Sd/- Sd/- बी. रामकोट य अ मत शु ला लेखा सद य या यक सद य B. RAMAKOTAIAH AMIT SHUKLA ACCOUNTANT MEMBER JUDICIAL MEMBER
मुंबई MUMBAI, दनांक DATED: 22.03.2013
आदे श क त ल प अ े षत / Copy of the order forwarded to:
(1) नधा रती / The Assessee;
(2) राज व / The Revenue;
(3) आयकर आयु त(अपील) / The CIT(A);
(4) आयकर आयु त / The CIT, Mumbai City concerned; (5) वभागीय त न ध, आयकर अपील य अ धकरण, मंब ु ई / The DR, ITAT, Mumbai;
(6) गाड फाईल / Guard file.
स या पत त / True Copy
आदे शानुसार / By Order
Sr. P S
उप / सहायक पंजीकार / (Dy./Asstt. Registrar)
आयकर अपील य अ धकरण, मुंबई / ITAT, Mumbai