Income Tax Appellate Tribunal - Delhi
National Textile Corporation Ltd., New ... vs Ito, New Delhi on 6 April, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'E' NEW DELHI
BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND
SHRI B.P. JAIN, ACCOUNTANT MEMBER
ITA No.4053/Del/2014
Assessment year 2001-02
National Textile Vs. ITO, Ward-13(3), New
Corporation Ltd., Delhi.
Scope Complex Core-IV,
7-Institutional Area, Lodhi
Road, New Delhi.
PAN: AAACN 28471
(Appellant) (Respondent)
Revenue by : Shri Ved Jain, Adv.,
Assessee(s) by : Shri Rajesh Kumar, Sr.D.R.
सुनवाई क तारीख/ Date of Hearing : 05/04/2017
घोषणा क तारीख /Date of Pronouncement: 06/04/2017
ORDER
PER B.P. JAIN, ACCOUNTANT MEMBER
This appeal of the assessee arises from the order of learned CIT(A)- XVII, Delhi vide order dated 11.04.2014 for the assessment year 2001-02. The assessee has not pressed grounds no.1 and 2, and therefore, same are dismissed as not pressed.
2. As regards grounds no.3 to 7 which are mainly against the initiation of proceedings u/s.147 r.w.s. 148 of the IT Act which in the grounds of the assessee is bad in law and is liable to be quashed.
ITA No.4053/Del/2014 23. Learned counsel for the assessee, Mr. Ved Jain, Advocate argued and invited our attention at paper book 124 the reasons recorded by the AO which for the sake convenience are reproduced herein:
"Return of Income in this case was filed on 31.10.2001 declaring a loss of Rs.53,73,15,730/-. Return of income was processed u/s.143(1) of the IT Act at returned loss on 22.11.2002.
Perusal of the assessment order revealed that in Auditors reports, the Auditor at point no.5(b) has stated that "Note no.3 and 6(b) of notes on accounts, regarding non provision for Excise Duty liability in the accounts for finished goods in the Factory godown, the Excise Duty liability works out to Rs.10.27 lacs. This has resulted in an under assessment of current liability by Rs.10.27 lacs and under statement of value of finished goods by the same amount. It is also revealed that assessee has debited Rs.1162.99 lakh and Rs.100.50 lacs as interest to financial institutions and banks respectively, as per record and liable to be disallowed as per provisions of section 43B of the IT Act.
I therefore have reasons to believe that on account of failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment for above assessment year, the income chargeable to tax has escaped assessment within the meaning of Section 147 of the Act. Since four years has since expired from the end of the relevant year, and assessment was completed u/s.143(1) of the IT Act, therefore, the statutory approval of the Addl. CIT, Range-13, New Delhi is solicited as per provisions of Section 151(1) of the IT Act."
4. He argued that there was no material, in fact the fresh material brought by the AO on record to establish that the income of the impugned year chargeable to tax has escaped assessment. He further argued that the reasons recorded in fact are tax neutral and there cannot be any reopening of the assessment u/s.147 of the Act. He relied upon the decision of Hon'ble ITAT Mumbai Bench in the case of Givaudan Flavours India (P) Ltd. Vs. DCIT in ITAs No.2672 and 3324/Mum/2009 dated 7th March, 2011 and upon the decision of Hon'ble Delhi High Court in the case of CIT-V vs. Orient Craft Ltd. in ITA No.555/2012 dated 12th December, 2012 in which ITA No.4053/Del/2014 3 the department SLP was dismissed by the Hon'ble Supreme Court by SLP (Civil) No.CC 15859/2013 dated 20th January, 2014.
5. Learned DR, on the other hand, relied upon the orders of both the authorities below.
6. We have heard the rival contentions and perused the case record. On perusal of the reasons recorded at paper book 124, it is evident that there is no material/fresh material brought on record by the AO while recording the reasons. The reasons recorded with respect to the Excise Duty in fact which are tax neutral and reliance has rightly been placed by the learned counsel for the assessee, Mr. Ved Jain, Advocate upon the decision of Hon'ble ITAT Mumbai Bench in the case of Givaudan Flavours India (P) Ltd. Vs. DCIT (supra) and the relevant decision in paragraphs 9 and 10 is reproduced below.
9. Having regard to the rival submissions and having perused the material on record, we see merits in the plea of the assessee. As observed by Hon'ble Supreme Court in the case of CIT vs Kelvinator of India Ltd (320 ITR 561), one has to give a schematic interpretation to the words "reason to believe" failing which, section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of "mere change of opinion", which cannot be per se reason to reopen. A reassessment has to be based on fulfilment of certain pre-condition and if the concept of "change of opinion" is removed, as was contended on behalf of the Department before Hon'ble Supreme Court, in the garb of re-opening the assessment, review would take place which is not permissible under scheme of reassessment under the Income Tax Act. Their Lordships have observed that "One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer" and, therefore, even after 1st April 1989n" Assessing Officer has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment". As regards the question of interest disallowance, all the relevant facts were before the Assessing Officer, specific issued were raised during the original assessment proceedings and the submissions made by the assessee placed on record, and yet the Assessing Officer decided not to make any disallowance. There were no new facts before the ITA No.4053/Del/2014 4 Assessing Officer which could justify the reopening. On these facts, it was nothing more than change of mind by the Assessing Officer, and a reopening of assessment on the basis of change of opinion, in view of Hon'ble Supreme Court's judgment in Kelvinator's case (supra), is not permissible in law. As for the second reason, we have noted that it is tax neutral and, unless the condition of satisfaction about income having escaped assessment is satisfied, there cannot be any reopening of assessment. The finding of income having escaped assessment is a precondition for reopening the assessment." Hon'ble Bombay High Court, in the case of Prashant S. Joshi v. ITO (230 CTR 232) has observed: "The AO must have reasons to believe that such is the case (i.e. any income chargeable to tax has escaped assessment for a particular year) before he proceeds to issue notice under s. 147" and that "the reasons which are recorded by the AO are the only reasons which can be considered when formation. Clearly this condition is not satisfied. In view of these discussions, both the grounds of reopening the assessment are not sustainable in law. We, therefore, quash the reassessment proceedings.
10. As the reassessment proceedings are quashed, the correctness of additions made in the course of reassessment proceedings is entire an academic question. All other grounds of appeal deal with those additions and, therefore, all these grounds of appeal are dismissed as infructuous."
7. Also the reliance has been placed by the learned counsel for the assessee, Shri Ved Jain, Advocate upon the decision of CIT-V vs. Orient Craft Ltd. (supra) rendered by the Hon'ble Delhi High Court and the relevant part is reproduced hereinbelow:
"There was no fresh material which came to the notice of the Assessing Officer after the original return was processed under section 143(1) and having regard to the orders of the Tribunal (supra) and the instruction of the CBDT dated 23rd February, 1998 regarding the treatment to be given to the premium received on transfer of quotas, there was no escapement of income and thus the notice was without jurisdiction."
8. The SLP filed in the said case has been dismissed by the Hon'ble Supreme Court as mentioned hereinabove.
9. In the circumstances and facts of the case, we are of the view that there is no escapement of income and notice issued is without jurisdiction ITA No.4053/Del/2014 5 and the AO does not acquire any jurisdiction to assess or re-assess the issue u/s.147/148 of the Act, and therefore, the assessment/re-assessment so made is directed to be quashed.
10. Since the assessee succeeds on legal issue, therefore issue on merit becomes academic in nature.
11. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on this day 6th April, 2017 Sd/- Sd/-
(I.C. SUDHIR) (B.P. JAIN)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 06/04/2017
Prabhat Kumar Kesarwani, Sr.P.S.
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT(Appeals)
5.DR: ITAT
Asstt. Registrar, ITAT, New Delhi