Delhi High Court
Commissioner Of Income Tax vs Feather Foam Enterprises P. Ltd. on 18 April, 2007
Equivalent citations: [2008]296ITR342(DELHI)
Author: V.B. Gupta
Bench: Madan B. Lokur, V.B. Gupta
JUDGMENT V.B. Gupta, J.
1. This appeal under Section 260A of the Income Tax Act, 1961 (in short as 'Act') has been filed by the Revenue against the impugned order dated 13th January, 2006 passed by the Income Tax Appellate Tribunal ( for short as 'Tribunal' ) in ITA No. 224/Del/03 for the Assessment Year 1996-97 whereby the Tribunal has held that no new material has come on record nor any new information has been received by the Assessing Officer and it was only a case of fresh application of mind by the Assessing Officer to the same sets of facts which tantamount to a change of opinion and therefore, it cannot be the basis for re-opening of a completed assessment and the Tribunal also deleted the additions on merits.
2. The brief facts of this case are that the assessed Company is carrying on the business of manufacturing PU foams and its products. The assessed filed its return of income on 30th November, 1996 declaring an income of Rs. 30,93,980/-. However, the assessment was completed under Section 143(3) of the Act, on 31st March, 1999 on a total income of Rs. 44,99,053/- by Joint Commissioner of Income Tax, Special Range, New Delhi.
3. The assessed preferred an appeal against the assessment order before Commissioner of Income Tax (Appeal) who vide order dated 4th August, 1999 set aside the assessment with directions to the Assessing Officer to frame a fresh assessment. In the meanwhile, notice under Section 148 of the Act was issued on 30th March, 2001 requiring the assessed to file return of income. In response to this notice, the assessed filed its return of income on 1st June, 2001 declaring an income of Rs. 30,93,980/-. The Assessing Officer thereafter, issued notices under Section 143(2) and 142(1) of the Act. During the course of re-assessment proceedings, the Assessing Officer required the assessed Company to file a copy of account of M/s. Kirti Associates for the period 1st April, 1995 to 31st March, 1996 as per their books of account.
4. In reply, the assessed stated that the account of M/s. Kirti Associates have been burnt in the fire. It was pointed out that this fact has already been placed before the Assessing Officer during the course of assessment proceedings for the Assessment Year 1997-98. It was also stated that it was not possible for the assessed to produce the bank statement regarding payment made to M/s. Kirti Associates, since the record has been burnt in the fire.
5. The Assessing Officer during the course of assessment proceedings for the Assessment Year 1997-98 called for information under Section 133(6) of the Act from M/s. Kirti Associates P. Ltd. requiring them to furnish a copy of account of the assessed Company for the period 1st April 1995 to 31st March, 1996, to verify the payments made for the construction of factory building at Silvassa.
6. M/s kirti Associates vide their letter dated 29th February, 2000 submitted that the building was under construction during the Financial Year 1st April, 1995 to 31st March, 1996 and they have received payments amounting to Rs. 1,06,25,460/- during the Financial Year from the assessed Company and the same have been duly accounted for in their Profit and Loss Account.
7. The Assessing Officer vide letter dated 16th March, 2000 asked the assessed to explain whether the sum of Rs. 1,06,25,460/- has been accounted for in their books of account and why the excess expenditure should not be added under Section 69C of the Act. The Assessing Officer observed that the assessed did not furnish any explanation in respect of this amount incurred and paid to M/s. Kirti Associates P. Ltd. and further the Assessing Officer observed that the perusal of Balance Sheet for the Assessment Year 1996-97 revealed that the assessed Company had shown capital work in progress for building account at Rs. 39,45,102/- (Silvassa unit). So, according to the Assessing Officer, there was a difference of Rs. 71,80,358/- and as such the assessed Company has not accounted for this amount paid to M/s. Kirti Associates during the period 1st April, 1995 to 31st March, 1996 in its books of accounts. The assessed Company was asked to explain the difference of this amount. The assessed vide letter dated 28th February, 2002 submitted that the Joint Commissioner of Income Tax while completing the assessment for the year 1997-98 had accepted the submission of the assessed Company. The Assessing Officer did not find any merits in the submissions of the assessed and therefore he made an addition of Rs. 71,80,358/- in the re-assessment proceedings.
8. Aggrieved with the order passed by the Assessing Officer, the assessed filed an appeal before the Commissioner of Income Tax (Appeal). The Commissioner of Income Tax (Appeal) after considering the submissions by the assessed as well as the various decisions, reached at the conclusion that the action of the Assessing Officer in initiating proceedings under Section 147/148 of the Act cannot be sustained. On merits also the additions made by the Assessing Officer was deleted.
9. Being dissatisfied with the order of Commissioner of Income Tax (Appeal), the Revenue filed appeal before the Tribunal and vide impugned order, the Tribunal dismissed the appeal of the Revenue.
10. It has been argued by learned Counsel for the Revenue that during the assessment proceedings for the Assessment Year 1997-98, the Assessing Officer had come to know that M/s Kirti Associates who was entrusted with the construction of the factory building has received an amount of Rs. 71,81,358/- in cash and the total work in progress declared by M/s. Kirti Associates was Rs. 11,25,460/- which was not comparable with the amount declared by the assessed and as per copy of account furnished by M/s. Kirti Associates it was evident that the income of the assessed chargeable to tax had escaped assessment and the assessed had not produced the books of accounts or any explanation to establish the fact that the capital work in progress for building account was only Rs. 39,45,102/- whereas the copy of accounts filed by M/s. Kirti Associates, disclosed the work in progress as Rs. 1,11,25,460/-, which remained unsubstantiated.
11. It is well settled that such facts which could have been discovered by the Assessing Officer but were not discovered at the time of original assessment, will not constitute a new information. Where no new material has come on record nor any new information has been received, it would merely be a case of fresh application of mind by the Assessing Officer to the same set of facts and in such a situation, it would be a case of mere change of opinion which does not provide justification of the Assessing Officer to initiate proceedings under Section 147 of the Act.
12. In the light of these principles, it is to be seen as to whether in the present case, any new material had come on record after completion of Assessment proceedings or it is a case of mere change of opinion. It has been held in large number of decisions of the Apex Court as well as of High Courts, that when the primary facts necessary for the assessment are fully and truly disclosed to the Assessing Officer at the time of original assessment proceedings, the Assessing Officer is not entitled to commence proceedings under Section 147 of the Act on a change of opinion.
13. Further, the Assessing Officer has got no power to review his order nor he can do so it under Section 147 of the Act. The Assessing Officer ordering re-assessment cannot sit as a court of appeal over the Assessing Officer making the original assessment and it is not open to the Assessing Officer ordering re-assessment to substitute his own opinion for that of the Assessing Officer, who made the original assessment.
14. The Tribunal in its impugned order has held that:
It is apparent from the record that during the course of original assessment all the relevant facts, statement of account of M/s. Kirti Associates was called for by the Joint Commissioner of Income Tax. The original assessment was completed on 31st March, 1999. It is also apparent from the record that M/s. Kirti Associated had filed their submissions on 22nd March, 1999 and the assessed company had explained the said difference vide its letter dated 26th March, 1999. It is also evident from the record that the additions to the building account were duly examined by the Assessing Officer while framing the original assessment for assessment year 1996-97 as also in assessment year 1997- 98 while completing assessment on 31st March, 2000. In these two years the difference, if any, in the building account was duly considered and no addition was made on this account. In our view, the learned Commissioner of Income Tax (Appeal) was correct in holding that the same statement of account which was already debated and accepted at the time of original assessment for assessment year 1996-97 as also in assessment year 1997-98, is forming the basis for re- opening of the assessment Under Section 147 of the Act. In view of the above discussion, we do not find any infirmity in the findings of Commissioner of Income Tax (Appeal) on this issue. Accordingly, we uphold his view. As regards the merits of the case, we are of the opinion that in the facts and circumstances of the case, the Commissioner of Income Tax (Appeal) was fully justified in deciding the issue on merits in favor of the assessed. We have reproduced the findings of Commissioner of Income Tax (Appeal) in para 6 (supra). We fully agree with his observation that the copy of account submitted by Kirti Associates cannot be relied upon because there is no authentic day to day accounting made by the said concern. The factory building was valued at Rs. 43,07,500/- by the approved valuer in May, 1996. It is also seen that when the factory was destroyed in fire on 12th April, 1998, an independent team of surveyors from New India Assurance Co. assessed the replacement cost as on April, 1998 at Rs. 60,25,390/-. In our view, the Commissioner of Income Tax (Appeal) has rightly held that this replacement cost as in April, 1998 would obviously be much more than the cost of construction in financial year 1996-97 due to the escalation in cost of construction over a period of about 2' years. The learned Commissioner of Income Tax has further rightly observed that the cost of construction, going by the assessment made by New Delhi Assurance Co. Ltd. would be around Rs. 45 lacs, if an appreciation of about 30 to 35% is to be taken into account up to the year 1998. According to Commissioner of Income Tax (Appeal), this estimate is quite close to the cost of construction shown by the assessed in its books of accounts at Rs. 43 lacs and odd. Thus, on merits also, the addition made by the Assessing Officer has rightly been deleted by the Commissioner of Income Tax (Appeal).
15. In view of the concurrent findings of facts given by the two statutory authorities and in view of the fact that there is no basis for re-opening of the assessment under Section 147 of the Act and it is a clear case of merely change of opinion by the Assessing Officer, no substantial question of law arises for our consideration in this appeal.
16. Since there is no merit in the present appeal, as such the same is hereby dismissed.