Income Tax Appellate Tribunal - Chennai
Sella Synergy (India) Ltd. vs Assistant Commissioner Of Income Tax on 14 September, 2007
Equivalent citations: [2008]304ITR366(CHENNAI), (2008)117TTJ(CHENNAI)110
ORDER
Shamim Yahya, A.M.
1. This appeal by the assessee is directed against the order of CIT(A)-V dt. 17th March, 2005 and pertains to asst. yr. 2000-01.
2. The first issue raised is that CIT(A) erred in upholding the reopening of assessment under Section 148.
2.1 We have heard both the counsels and perused the relevant records. We find that the initial assessment in this case was processing under Section 143(1) of the IT Act. We find that the Hon'ble apex Court-in the case of Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P) Ltd. has held that intimation under Section 143(1)(a) cannot be treated as assessment order and in this view of the matter, we do not find any justification in the ground raised by the assessee. Hence the same is dismissed.
3. The next issue raised is that the CIT(A) is not justified in opining that the benefit of reopening is only to favour the Revenue and cannot be used to favour the assessee, disregarding the express provision of Section 152(2) of the IT Act.
3.1 We have heard both the counsels and perused the relevant records. As regards the proposition that reopening is only to favour Revenue and cannot be used to favour the assessee, we find that the learned CIT(A) has taken a correct view of the matter drawing support from Hon'ble apex Court decision in the case of CIT v. Sun Engineering Works (P) Ltd. . As regards the reference to provisions of Section 152(2), we do not find any rationale as to how reference to this Section can change the substance of the proposition as upheld by the Hon'ble apex Court. Hence, this issue raised is also dismissed.
4. The next issue raised pertains to travelling by the AO beyond the reasons for issue of notice for reassessment.
4.1 We have heard both the counsel and perused the relevant records. We find that it is now settled that when an order of assessment is reopened, the previous under-assessment is held to be set aside and the whole proceedings would start fresh. This view is supported by the Hon'ble apex Court in the case of Hind Wire Industries Ltd. v. CIT wherein following has been observed on p. 642 as under:
The decision was endorsed in Dy. Commr. of Commercial Taxes v. H.R. Sri Ramulu when this Court observed there as follows:
The reason for that is that once an assessment is reopened, the initial order for assessment ceases to be operative. The effect of reopening the assessment is to vacate or set aside the initial order for assessment and to substitute in its place the order made on reassessment. The initial order for reassessment cannot be said to survive, even partially, although the justification for reassessment arises because of turnover escaping assessment in a limited field or only with respect to a part of the matter covered by the initial assessment order. The result of reopening the assessment is that a fresh order for reassessment would have to be made including for those matters in respect of which there is no allegation of the turnover escaping assessment'.
4.2 In view of the aforesaid discussion and citation, in our opinion, the learned CIT(A) was well within his jurisdiction to give the aforesaid directions. Accordingly, we dismiss this ground raised by the assessee.
5. Another issue raised by the assessee by means of additional grounds: read as under:
The learned CIT(A) erred in sustaining the reopening of the assessment under Section 147/148 disregarding the fact that the revised assessment pursuant to reopening is illegal on account of the AO proceeding with the reassessment on the basis of a non est original return, disregarding the revised return filed pursuant to the reopening of assessment.
The learned CIT(A) is not justified in denying the benefit of Section 10A, on the only ground that it is claimed in a revised return, which return is held to be for the benefit of the Revenue, ignoring the express provisions of Section 152(2) of the Act.
5.1 The substance of this issue raised is that in original return the assessee had claimed adjustment of brought forward losses/depreciation and returned nil income. When the assessment was reopened, the assessee filed a revised return in which it claimed exemption under Section 10A. In this regard it is the contention of the assessee that AO has proceeded with the reassessment on the original return filed and has not taken into account the revised return filed in which relief under Section 10A was clearly claimed.
5.2 In this connection the learned CIT(A) had sought AO's report on this aspect which has been reproduced in the CIT(A)'s order as under:
It is seen that the assessee had not made specific claim of exemption under Section 10A in the original return of income. There is a mention in the covering letter signed by the chartered accountant, Shri V. Jagadisan that the company was a 100 per cent Export Oriented Unit (EOU) exporting computer software and hence no part of its income was taxable. Audit report in Form No. 56F required to be furnished along with the return of income as per Section 10A was also not filed. Subsequently, the assessee had filed the return of income in response to the notice under Section 148 on 17th June, 2002 wherein for the first time, the assessee had made claim for exemption under Section 10A and also furnished the audit report in Form No. 56F (dt. 14th June, 2003). It appears from the records that, this return had not been noticed during the course of assessment proceedings, due to clerical error of classification of it as a revised return. Therefore, the AO did not have an occasion to examine the claim of the assessee under Section 10A. However, the CIT(A)'s attention may be drawn to CIT v. Sun Engineering Works (P) Ltd. that no fresh exemption can be claimed during the course of proceedings under Section 148.
5.3 Before the learned CIT(A) the assessee submitted that under Section 10A(7) of the Act, the assessee has the option to claim exemption for five consecutive years out of eight year block period and in such a case, it needs to inform the AO that it does not want to be covered under that provision in writing. In the instant case, as the assessee has not informed the same to the AO earlier, it has claimed exemption under Section 10A of the Act in the return filed in response to notice under Section 148 of the Act and the same was in order.
5.4 Upon consideration of assessee's submissions the learned CIT(A) held that assessee's claim for exemption under Section 10A of the Act in the revised return was not valid and maintainable as in the return filed originally on 30th Nov., 2000, in the covering letter, the assessee has only stated that it is a 100 per cent EOU, exporting computer software and no part of its income was taxable. In the statement of income, however, the assessee has computed the income from 'business' which is also the 'gross total income' at Rs. 29,23,409 and set off the brought forward unabsorbed depreciation for the asst. yr. 1999-2000 of Rs. 23,30,907 and brought forward unabsorbed depreciation for the asst. yrs. 1997-98 and 1998-99 to the extent of Rs. 5,92,502 and computed the total income' at nil. Accordingly, though the assessee has claimed 100 per cent EOU, it has exercised its option of not claiming exemption under Section 10A of the Act by setting off of 'brought forward business losses' and 'depreciation' against the 'business income' of the previous year and there was no mention of the claim of exemption under Section 10A of the Act nor any audit report in Form No. 56F was filed in the original return. Hence, the learned CIT(A) concluded that by not claiming exemption under Section 10A of the Act the assessee has exercised his option under Section 10A of the Act that it may not be applied for that assessment year. Therefore the assessee cannot now turn around and claim that it has not exercised its option of not claiming exemption under Section 10A of the Act in the original return filed on 30th Nov., 2000.
5.5 The learned CIT(A) further referred to Hon'ble apex Court observation in CIT v. Sun Engineering Works (P) Ltd. cited supra and held that the assessee's contention that it is entitled for exemption under Section 10A of the Act based on the claim made for the first time in the return filed in response to notice under Section 148 of the Act was without merit and was not valid or maintainable. He also held that as the reassessment proceedings were for the benefit of Revenue, the assessee could not make a fresh claim which was not made earlier in the original return. Hence, the issue of exemption under Section 10A has become final in the original assessment itself as the assessee has not made any such claim. Thus, no such claim could be made during the reassessment made under Section 143(3) r/w Section 147 of the Act.
5.6 We have heard both the counsels and perused the relevant records. Before us the learned Counsel of the assessee repeated the contentions raised before the learned CIT(A) that the reassessment by the AO without considering the revised return was invalid and further that assessee has not exercised any option in writing regarding the claim of Section 10A and that the covering letter in the original return had specified that the assessee is 100 per cent Export Oriented Unit (EOU).
5.7 Upon a careful consideration of the issue we find that the first ground of the assessee in this regard is that Section 10A benefit has been claimed by the assessee inasmuch as in the covering letter of the return the claim has been made. Upon a careful consideration we do not find any merit in this contention. As held by the Hon'ble apex Court in the case of Goetze (India) Ltd. v. CIT that relief cannot be claimed after filing the return otherwise than by a revised return. Hence, the AO need not take any legal cognizance of the covering letter of the chartered accountant of the assessee in processing the claim as per return of income. Moreover, the assessee cannot blow hot and cold together. While claiming adjustment of depreciation in the body of return, it cannot simultaneously leave the door open for claiming Section 10A benefit by mentioning that the assessee is 100 per cent EOU in the letter covering the return. There was no need/occasion for the AO to take cognizance or infer that the assessee might have Section 10A relief also in mind. By specifically claiming adjustment of unabsorbed depreciation/losses against current year's income and not claiming Section 10A relief, the assessee cannot claim that it has not exercised its option in this regard.
5.8 Though it has been admitted by the AO that the revised return by the assessee was not examined due to clerical error etc. In the remand report the AO referred to the Hon'ble apex Court decision in the Sun Engineering Works (P) Ltd. case cited supra and opined that no fresh exemption can be claimed during the course of proceedings under Section 148. We find that the revised return and the matters pertaining thereto has been duly dealt with by the learned CIT(A) in the appellate order. We find that as held by the Hon'ble apex Court in the case of Kapurchand Shrimal v. CIT , the appellate authority has the jurisdiction as well as duty to correct all errors in the proceedings under appeal and issue appropriate directions, where necessary. We find that by calling for a remand report on this aspect and taking into account the assessee's submissions extensively in this regard, the learned CIT(A) has properly dealt with this matter. It is trite that powers of the learned CIT(A) are coterminous with that of AO. The CIT(A) by asking the report from AO and dealing with the matter in the appellate order has taken a proper course of action. It is also well settled on the anvil of Hon'ble apex Court decision in Sun Engineering Works case cited supra that no fresh exemption/benefit can be claimed by the assessee in the course of reassessment proceedings.
5.9 We further find that it is the grievance of the assessee that the learned CIT(A) has ignored the provisions of Section 152(2) of the IT Act. We find that Section 152(2) reads as under:
Where an assessment is reopened under Section 147, the assessee may, if he has not impugned any part of the original assessment order for that year either under Sections 246 to 248 or under Section 264, claim that the proceedings under Section 147 shall be dropped on his showing that he had been assessed on an amount or to a sum not lower than what he would be rightly liable for even if the income alleged to have escaped assessment had been taken into account, or the assessment or computation had been properly made:
Provided that in so doing he shall not be entitled to reopen matters concluded by an order under Sections 154, 155, 260, 262 or 263.
5.10 In this case we observe that in the grounds of appeal before the learned CIT(A), the assessee had agitated against the additions made by the AO and by means of another ground has claimed that AO has erred in determining the total income of the assessee at Rs. 32,26,145 ignoring the provisions of Section 10A under which no income is chargeable to tax. The assessee has raised a specific ground claiming exemption under Section 10A and learned CIT(A) has dealt with the issue by adjudicating that assessee cannot be said to have claimed deduction under Section 10A. Now, by means of additional grounds raised the assessee is pleading that assessment proceedings be dropped in view of the provisions contained in the said Section .
5.11 Since the learned CIT(A) has granted relief on all the additions made by the AO, it cannot be said that there should be an implicit invocation of Section 152(2). It is coincidence that the learned CIT(A) has granted relief on the additions made to the income but this cannot ipso facto automatically call for invocation of Section 152(2). Hence, in our opinion, there is no merit in the additional grounds raised by the assessee. Even for argument sake, if it is taken that on the ken of Section 152(2), the reassessment proceedings be dropped, the assessee's position remains the same. On the anvil of Sun Engineering case cited supra, the revised return filed in pursuance of reassessment proceedings cannot be taken to fructify assessee's claim under Section 10A. Further, as we have already held in paras above, the covering letter of the return in the circumstances of this case can by no means be taken as claim by the assessee to avail Section 10A benefit. Hence, the additional grounds raised are dismissed.
6. In the result, this appeal by the assessee is dismissed.