Income Tax Appellate Tribunal - Cochin
Dy. Cit, Cir. vs Smt. R. Sunanda Bai on 18 July, 2005
Equivalent citations: [2006]6SOT613(COCH)
ORDER
R.S. Padvekar, JM.
These two appeals are filed by the revenue, directed against the order of the CIT(Appeals)-II, Kochi dated 5-3-2003, for the assessment years 1992-93 and 1993-94. The Cross objections are filed by the assessee. As the facts and issues involved in all these matters are common, the appeals as well as the cross-objections were heard together and are dispose of by this common order for the sake of convenience and brevity.
2. The revenue has urged as many as six grounds in each appeal. But in both the appeals, the following two issues are involved for our adjudication :
"(i) Whether the CIT(Appeals) erred in cancelling the reassessments framed against the assessee for the assessment years 1992-93 and 1993-94, holding that there was no omission or failure on the part of the assessee to disclose fully all material facts necessary for making the assessments, and hence reopening of the assessment under section 147 beyond the period of four years is not in order, and
(ii) whether the Commissioner (Appeals) erred in admitting fresh claim of the assessee for deduction under section 80HHA without allowing a reasonable opportunity of being heard to the assessing officer."
3. Brief facts pertaining to the issue before us are as under: One late Sri M.V. Ramachandra Bhat was a sea food exporter. The original assessments for the assessment years 1992-93 and 1993-94 of late Ramachandra Bhat were completed under section 143(3) on 29-11-1994 and 25-11-1994, respectively. In the original assessments the assessee had been granted deductions under sections 80HH and 80-I as under :
Asstt. Year 1992-93 1993-94 Deduction u/s 80HH 18,64,480 9,19,837 Deduction u/s 80-1 18,64,484 9,99,837 Deduction u/s 80HHC 23,49,697
4. The assessing officer noticed that as per section 80HH(9A) if the deduction in relation to the profits and gains of the small scale industrial undertaking, to which section 80HHA is applicable, has been claimed and allowed under the said section in the assessment, then deduction under section 80HH should not be allowed for the same or for any other assessment year. The assessing officer further noticed that the assessee had been already allowed deduction under section 80HHA for the assessment years 1989-90 to 1991-92 preceding the assessment year 1992-93. Therefore, the assessing officer proceeded to withdraw the deduction granted to the assessee under sections 80HH and 80-I for both the assessment years in question. The assessing officer noted the fact that M/s. Paragon Sea Food was a firm in which the assessee had 60% share of profit. The said firm was in existence right from the assessment year 1977-78. The assessing officer was of the opinion that during the previous year relevant to the assessment year 1987-88 the assessee tookover the business of the firm is its proprietary business by name M/s. Paragon Industries. Thus, the assets of the erstwhile firm, M/s, Paragon Sea Foods taken over by the assessee consisted of land, building, cold storage, plant and machinery, furniture, freezer, etc. The assessing officer found that during the previous year relevant to the assessment year 1988-89 certain investments were made by the assessee to the plant and machinery of M/s. Paragon Industries. Hence the assessing officer came to the conclusion that the assessee had taken over the on-going concern, namely Paragon Sea Foods, by only changing the name as M/s. Paragon Industries. The assessing officer further concluded that the initial assessment year in this case was assessment year 1977-78 and hence the deduction under section 80HHC was admissible only for the ten assessment years beginning with the assessment year relevant to the financial year in which, the industrial undertaking begins manufacture or production of articles. Hence the assessing officer was of the opinion that the assessee was not entitled to claim deduction beyond the assessment year 1986-87.
5. On the basis of the said facts, as per the assessing officer the assessee had made a wrong claim and he did not disclose the material facts for correct computation of his income and accordingly, the assessing officer initiated reassessment proceedings by issuing notice under section 148 to the assessee. The assessing officer completed the reassessment by withdrawing the deductions under sections 80HH and 80-I of the Act allowed in the original assessments for both the assessment years framed under section 143(3) of the Act. Being aggrieved by the order of the assessing officer, the assessee filed appeals to the CIT(Appeals). Before the CIT(Appeals), the assessee raised objections against the impugned order of the assessing officer both on procedural as well as on substantive grounds. It was the case of the assessee before the Commissioner (Appeals) that the reopening of the assessment under section 147 on the facts of the case by the assessing officer was without any jurisdiction for both the assessment years as the reassessments were initiated beyond the period of four years from the end of the relevant assessment years. The assessee also challenged the assessment orders on merit also on the ground that the assessee had started the business of processing of fish by making huge investments the financial year relevant to the assessment year 1988-89 and hence, after considering the totality of the facts the assessee was granted deduction under sections 80HHA and 80-I for the assessment years 1989-90 to 1991-92. The assessee's further contention was that for the assessment year 1992-93 the assessee had claimed deduction under sections 80HHA and 80-I and for the assessment year 1993-94 the assessee had claimed deduction under sections 80HH and 80-I. The assessee contended that there was a typing mistake in respect of the claim under section 80HHA as it was wrongly typed as 80HH. He further contended that quantum of eligible deduction under sections 80HH and 80-I and the conditions for allowability under sections 80HH and 80HHA are the same. Hence, there was no escapement of income by any wrong claim. It was further contended by the assessee that if relief under section 80HH was not granted, then relief under section 80HHA has to be granted.
6. The CIT(Appeals) decided the appeal of the assessee on the issue of jurisdiction for reopening the assessment of the assessec, which were completed under section 143(3). The Commissioner (Appeals) made the following observations :
"5. First I shall deal with the objections of the appellant on the procedural aspects of the reassessments, It is seen that for the assessment years 199293 and 1993-94 the original assessment had been completed under section 143(3) on 29-11-1994. In the course of these assessments the assessing officer has called for the particulars regarding the claims or deductions under sections 80HH and 80-I. As per the letter dated 28-9-1994 the appellant had furnished the particulars with regard to the claims of deductions under sections 80HH and 80-I. It was stated in that letter that in the initial assessment year 1988-89 certain new plants and machinery worth Rs. 16,33,791 had been acquired and installed as against the value of old plant and machinery of Rs. 1,60,751. The particulars of additons made to the plant and machinery had also been filed. Similar details had also been, filed by the appellant for the assessment year 1989-90 in response to the letter dated 13-3-1991 issued by the assessing officer for the assessment year 1989-90 and the appellant had been granted deduction from assessment year 1989-90 onwards. The only difference is that for the assessment years up to and including the assessment year 199 1 -92 the appellant had been granted deductions under sections 80HHA and 80-I while for the assessment years 1992-93 and 1993-94 the appellant had been granted deductions under sections 80HH and 80-I. I have noted that for the assessment year 1992-93 the appellant had claimed deductions under sections 80HHA and 80-I while for the assessment year 1993-94 the appellant has by mistake made the claim under sections 80HH and 80-I. Since the quantum of deductions undersections 80HH and 80HHA is the same, there was no escapement of income when the claim wa s wrongly typed as 80HH in the assessment year 1993-94. The Assessing Officer had completed the assessments under section 143(3) on 29-11-1994 for both the assessment years 1992-93 and 1993-94 after calling for the clari fications. The fact that the appellant had been granted deduction under section 80HHA for the assessment years up to assessment year 1991-92 is clear from the records. Therefore, there was no failure on the part of the appellant to disclose fully and truly material particulars necessary for the assessment for assessment years 1992-93 and 1993-94. Therefore, the reopening of the assessments beyond the period of 4 years as per the notice under section 148 dated 16-10-2000 for both the assessment years is not in order. Hence, the reassessments for both the assessment years viz_ 1992-93 and 1993-94 are cancelled."
The CIT (Appeals), thus cancelled the reassessments for both the years.
7. The assessee has filed a paper book which has been taken on record and copy of the same is also furnished to the DR. The paper book contain 1(1) the following documents:
Sl. No. Date Particulars
1.
19-3-2002 Reply filed by the assessee to DCIT, Cir, 10), Ekm. in respect of reassessment proceedings for assessment years 1992-93 and 1993-94.
Sl. No. Date Particulars
2. 23-3-1991 Copy of reply filed on behalf of late Ramachandra Bhat to the ACIT, Cir. 1, Mattancherry.
3. 21-11-1994 Letter filed by the Assessee, L/R of Ramachandra Bhat to the Dy. CIT, Asst. Spl. Range-1.
4. 29-11-1994 Copy of assessment order for 1992-93.
8. We have heard the Id. DR for the revenue and ffie Id. AR for the assessee. The Id. DR vehemently submitted that the CIT'(A) has seriously erred in cancelling the assessments on erroneous interpretation of section 147. He further vehemently submitted that on the facts (if the case, the assessee was duty bound to give the correct material and facts to the assessing officer, but in this case there is a serious failure an the part of the assessee to furnish true and correct material facts in respect of the deductions claimed under sections 80HHA and 80-1. Hence, he submitted that the order of the Commissioner (Appeals) may be set aside and that of the assessing officer be restored. The Id. AR reiterated his arguments which were made before the Commissioner (Appeals). He has also taken us through the paper book, more particularly pages I to 4, ie., reply filed by the assessee to the DCIT dated 19-3-2002. He also further relied on the decision of the Apex court in the case of Calcutta Discount Co. Ltd. v. Income Tax Officer (1961) 41 ITR 191 and the judgment of the jurisdictional High Court In- the case of Dy. CIT v. Pala Marketing Co-op. Society Ltd. (2000) 243 ITR 499 (Ker.). He further submitted that for the assessment years 1992-93 and 1993-94 notices under section 148 dated 16-10-2000 were issued to the assessee for reopening the assessments. He further submitted that in view of the bar as per proviso to section 147 of the Income Tax Act, at the most, the reassessment proceedings could have been initiated against the assessee for the assessment year 1992-93 on or before 31-3-1997 and for the assessment year 1993-94 on or before 31-3-1998. He further vehemently submitted that there was no failure on the part of the assessee for disclosing any material facts because the assessing officer himself has considered all the material facts which were placed before him for claiming deduction under sections 80HHA and 80-I for the assessment years 1992-93 and 1993-94. He further submitted that there was a typing mistake as far as assessment year 1993-94 is concerned, in that instead of section 80HHA, due to oversight the same was typed as section 80HH. Hence, he submitted that the assessing officer had no jurisdiction to reopen the assessments.
9. We have heard the rival submissions of the parties. On the facts of the present case, we have to examine the provisions of section 147. It is undisputed proposition of law that the provisions of section 147 of the Act are machinery provisions. Section 147 of the Income Tax Act is as under:
'147. If the assessing officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowances, as the case may be, for the assessment year concerned (hereinafter in this section and in sections 148 to 153 referred to as the relevant assessment year) :
Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of, four years from the end of the relevant assessment year, unless any 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 under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year.
Explanation I - Production before the assessing officer of account books or other evidence from which material evidence could, with due diligence, have been discovered by the assessing officer will not necessarily amount to disclosure within the meaning of the foregoing proviso."
Explanation 2 to section 147 is not relevant in the present case. Hence, not reproduced.
10. The proviso to section 147 is applicable only in cases where the assessments are made under section 143(3) or section 147. Bar of limitation for initiating reassessment proceedings after four years from the end of the relevant assessment year is applicable on the following conditions If there is,
(i) no failure on the part of the assessee to make a return under section 139, or
(ii) no failure to file a return in response to notice issued under subsection (1) of section 142, or section 148, or
(iii) no failure to disclose fully and truly all material facts necessary for his assessment for that assessment year.
11. In the present case, we are concerned with the last part of the proviso, i.e., to disclose fully and truly all material facts, etc. Explanation I to section 147 make it clear that merely because the assessee has produced books of account or other evidence before the assessing officer and as a prudent man with due diligence he could have discovered the material evidence will not necessarily amount to disclosure within the meaning of the foregoing proviso, ie., last part of the proviso.
12. We have carefully considered the facts as per record before us and the principles laid down in the precedents cited by the parties. We have also carefully perused the order of the Commissioner (Appeals) and we are of the considered opinion that the Commissioner (Appeals) has rightly held that initiation of the reassessment proceedings by the assessing officer for the assessment years 1992-93 and 1993-94 was beyond the period of limitation as per proviso to section 147. There is no substance in the submission of the Id. DR that there was failure on the part of the assessee to disclose correctly and truly material facts because as far as both the deductions are concerned, the assessee has put forth each and every fact, which were scrutinized by the assessing officer at the time of the original ass ' essments framed under section 143(3). Hence, we find no infirmity in the order of the CIT(Appeals) and no interference is called for. Hence, we uphold and confirm the order of the Commissioner (Appeals). As far as the other issue is concerned, the Commissioner (Appeals) has cancelled the assessments of the assessee on the issue of legality of the initiation of reassessment proceedings and as we are confirming the order of the Commissioner (Appeals), the other issue raised by the revenue does not survive.
13. In the result, the appeals filed by the revenue are dismissed. Order accordingly.
14. CO Nos. 20 & 21/Coch./2003. The assessee has filed the two Cross-objections, raising as many as six grounds. The Id. AR submitted that he is not pressing the cross-objections in case the order of the CIT(Appeals) is confirmed on the issue of jurisdiction. As the order of the Commissioner (Appeals) is confirmed on the issue of jurisdiction, the cross-objections are dismissed as not pressed.