Income Tax Appellate Tribunal - Mumbai
Marvel Fragrances P.Ltd, Mumbai vs Assessee on 19 September, 2013
आयकर अपील य अ धकरण,
धकरण, मब
ंु ई,
ई, "बी"" यायपीठ मब
ंु ई म।
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, MUMBAI
BEFORE SRI H.L. KARWA, PRESIDENT, AND SHRI N.K.BILLAIYA, AM
आयकर अपील सं./I.T.A. No.
1914/Mum/2012
( नधारण वष / Assessment Year : 2004-05)
Mrvel Fragrances Pvt. बनाम/
बनाम The Asst. Comm. Of
Ltd. Vs. Income-tax,
711, Raheja Centre, Range-10(3),
Nariman Point, Aaykar Bhavan,
Mumbai-400021 M.K.Road,
New Marine Lines,
Mumbai-400020
थायी ले खा सं . / PAN :AACCM0455G
(अपीलाथ /Appellant) .. ( यथ / Respondent)
अपीलाथ क ओर से/ Appellant by : Shri Dr.K.Shivaram & Rahul
K. Makani
यथ क ओर से / Respondent by : Shri Surendra Kumar
सन
ु वाई क तार ख /Date of Hearing : 19-09-2013
घोषणा क तार ख /Date of Pron ouncement : 19 -09-2013
आदे श / O RDER
PER N.K. BILLAIYA, AM:
This appeal by the assessee is preferred against the order of the CIT(A)-22, Mumbai, dated 18/01/2012, pertaining to A.Y.2004-05.
2. The assessee has raised two substantive grounds of appeal. With ground no. 1, the assessee has challenged the validity of the reassessment after the expiry of the four years from the end of the relevant assessment year. It is the claim of the assessee that it has disclosed fully and truly all 2 ITA No.1914/Mum/2012 Ms Marvel Fragrances Pvt. Ltd.
material facts necessary for the relevant assessment year . In this case the original assessment was completed on 31/08/2006 u/s 143(3) of the Act. Subsequently the case was reopened u/s 147 after recording the following reasons for reopening the assessment:-
"In the instant case, order u/s 143(3) of the Act was passed on 31.08.2006 assessing total income at Rs.72,46,940/-. Subsequently, it has come to the notice that the assessee has claimed excessive deduction u/s10B of the Act by including the income of Rs.86,265 on account of bad debts realized, which is not foreign exchange realized for the exports for the year under consideration. Further it is also noticed that the assessee has claimed deduction u/s 10B of the Act without netting off the exports proceeds realized by the amount of Rs.20,42,763/- on account of expenditure incurred in foreign currency.
Therefore, I have reason to believe that the income has escaped assessment within the meaning of the provisions of section 147 of the Act, to the extent of excess deduction claimed by and allowed to the assessee in respect of the income on account of bad debts realized and foreign currency expenditure incurred, by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment.
Notice u/s 148 of the Act is, therefore, issued."
3. Accordingly notice u/s 148 of the Act was issued; the assessee has challenged the validity of this notice. A perusal of the relevant documents brought on record before us show that the assessment has been reopened only on the basis of audit objection which is exhibited at page 24 of the paper book. A perusal of the said audit report shows that the following objection has been raised:-
"Return of income filed by the assessee-company on 30.10.2004 for A.Y.2004-05 was assessed u/s143(3) of I.T. Act, 1961 vide order dated 31.08.2006.
It is seen from the record that assessee has claimer and allowed deduction u/s 10B for Rs.40858752. Since under the scope of exemption section 10B provides 100% exemption for export income & not any other income. However in the above said deduction income for 86265 is included towards bad debt realized. Further the export receipt declared for Rs.14,68,70,068/-. However it seen from notes to A/C Schedule C that item no. 6(iii) that the assessee has incurred an expenditure in foreign currency for Rs.20,42,763/- towards travelling and exhibition expenses. To the net export receipt is required to be considered as Rs.14,48,27,305/-, the deduction u/s 10B is recomputed as given below:-3 ITA No.1914/Mum/2012
Ms Marvel Fragrances Pvt. Ltd.
Total profit of Business 4,08,58,752/-
Less Bad debt realized 86,265/-
4,07,72,487/-
Deduction u/s 10B = 407772487 x 144827305
146870068
= 4,02,05,397/-
Excess deduction u/s 10 B = 653355/-
This has resulted in Excess allowances of deduction u/s 10B for Rs.653355 with consequent short levy of tax of Rs.234390/-".
4. A perusal of the reasons recorded vis- a- vis audit objection , in our humble opinion reasons recorded must ensure application of mind by the AO. The Hon'ble Delhi High Court in the case of Transworld International Inc. v/s JCIT 273 ITR 242 has held that "The primary function of audit in relation to assessment and refund is the consideration whether the internal procedures are adequate and sufficient. It is not intended that the purpose of audit to go any further. Whether it is the internal audit party of the Income-tax department or in audit party of the CAG, they perform essentially administrative or executive functions and cannot be attributed the power of judicial supervision over the quashing judicial acts of the Income-tax authority".
A perusal of the original assessment order shows that the AO was well aware of the fact that the assessee has claimed its business to be eligible under provisions of section 10B of the Act as 100 per cent EOU. Therefore, revisiting the claim of the assessee by issuing notice u/s 148 based on the audit objection is not in line with the ratio laid down by the Hon'ble Delhi High Court (supra).
4 ITA No.1914/Mum/2012Ms Marvel Fragrances Pvt. Ltd.
5. Respectfully following the ratio laid down by the Hon'ble Delhi High Court order passed u/s 143(3() r.w.s. section 148 of the Act is quashed. Ground no. 1 is accordingly allowed.
6. As we have already quashed the assessment order, we do not find it necessary to decide the issue on merits.
7. In the result appeal of the assessee is allowed Order pronounced in the open court on 19/09/2013 आदे श क घोषणा खुले यायालय म दनांक 19/09/2013, को क गई ।
Sd/- Sd/-
(H.L.KARWA) (N.K.BILLAIYA)
HON'BLE PRESIDENT ACCOUNTANT MEMBER
मंब
ु ई Mumbai;
दनांक /Dated : 19th September, 2013.
Shekhar. P.S.
आदे श क त ल प अ े षत/Copy
षत of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आयु (अपील) / The CIT- , Mumbai.
4. आयकर आयु / CIT(A)- , Mumbai
5. वभागीय त न ध, आयकर अपील य अ धकरण, मब
ुं ई / DR, ITAT, Mumbai
6. गाड फाईल / Guard file.
ार/ BY ORDER,
आदे शानुसार
स या पत त //True Copy//
उप/सहायक
उप सहायक पंजीकार (Dy./Asstt. Registrar)
आयकर अपील य अ धकरण,
धकरण मुंबई / ITAT, Mumbai