Income Tax Appellate Tribunal - Mumbai
Otis Elevator Company (India) Ltd. vs Deputy Commissioner Of Income Tax on 30 January, 2006
Equivalent citations: (2007)112TTJ(MUM)50
ORDER
Salil Kapoor, J.M.
1. This appeal filed by the assessee is directed against the order of CIT(A)-XX, Mumbai, dt. 26th March, 1998 for asst. yr. 1989-90. The proceedings arise out of the assessment completed under Section 143(3) r/w Section 147 of the IT Act.
2. Brief facts, as stated and as borne from the records are that the regular assessment in this case was completed under Section 143(3) vide order dt. 25th March, 1992 at total income of Rs. 12,08,97,410. Thereafter notice under Section 148 was issued on 21st July, 1994 on the ground that the assessee company has not credited excise duty billed to the customers amounting to Rs. 24,30,861 to the P&L a/c.
3. The assessee has taken following additional grounds :
1. On the facts and in circumstances of the case the learned AO has legally erred in assuming jurisdiction under Section 147 on 21st July, 1994 which is beyond the limitation provided under the proviso to Section 147, there being no concealment of furnishing inaccurate particulars of income which is a condition precedent of assuming jurisdiction beyond a period of four years from the end of the assessment year.
2. On the facts and in the circumstances of the case the learned AO has legally erred in assuming jurisdiction under Section 147 based on pure change of opinion on issues duly considered in the original assessment.
4. The assessee has challenged the legality of the notice issued under Section 148 on 21st July, 1994 on the ground that it was beyond the limitation period provided under proviso to Section 147 as there being no concealment or furnishing inaccurate particulars of income.
5. The learned Counsel for the assessee Smt. F. Andhyrujina stated that the said ground raised is purely legal ground which arises from the facts which are on record of the assessment proceedings and same should be admitted. He relied on the decision of Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT and in the case of Jute Corporation of India Ltd. v. CIT and Anr. .
6. The learned Counsel for the assessee further stated that the excise duty billed to the customers was shown as current liability in Sch. 12 of the balance sheet. The policy of the assessee is to debit amounts of excise duty to the P&L a/c of the previous year and credit the P&L a/c with the amounts of
(a) excise duty collected from the customers on contracts completed during the year, and
(b) excise duty that is attributable to the contracts that are incomplete as at the end of the previous year.
Thus the amounts of excise duty debited and credited shall be equal, resulting in no loss no profit. He stated that all these facts were clearly put before the AO when he completed the regular assessment under Section 143(3). As per the proviso to Section 147 no action can be taken under said section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable under the Act has escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. According to him, since all the material facts were fully and truly disclosed by the assessee, as such the period of limitation to issue notice under Section 148 expired on 31st March, 1994 and the notice issued on 21st July, 1994 was beyond limitation.
7. The learned Departmental Representative Shri Vijay Shankar has strongly objected to the admission of the said additional ground. He stated that the assessee did not challenge the reopening of assessment on the issue of limitation before the AO or CIT(A) and as such he should not be allowed to challenge the same at this stage. He further stated that the CIT(A) has adjudicated against the assessee on the issue of change of opinion with regard to reopening of assessment.
8. Shri Vijay Shankar, learned Departmental Representative further stated that as per Expln. 1 of Section 147, mere production of books of account or other evidence before the AO would not necessarily amount to true and full disclosure. In view of this Explanation, the reliance of the assessee on the fact that Sch. 12 of the balance sheet was before the AO does not hold any ground. He also stated that such additional ground should have been filed within reasonable time before the Tribunal as the appeal was filed in 1998 and the additional ground has now been raised in the year 2005.
9. We have heard both the parties in detail. We are of the view that the ground raised by the assessee with regard to assumption of jurisdiction under Section 147 by way of issuing notice on 21st July, 1994 being beyond limitation, is a purely legal ground. The mere fact that the notice under Section 148 was not challenged on this issue, before the AO or the CIT(A) does not bar the assessee from raising this legal ground before the Tribunal. The CIT(A) had adjudicated with regard to reopening of the assessment on the basis of change of opinion and the question of limitation was not there before the learned CIT(A).
10. We are of the opinion that the Expln. 1 of Section 147 cannot be used by the AO in order to assume jurisdiction. The said Explanation cannot act like a sword in. the hands of the AO. Moreover Expln. 1 to Section 147 deals with production of account books or other material before the AO. For the sake of convenience the Expln. 1 is reproduced as under:
Explanation 1- Production before the AO of account books or other evidence from which material evidence could with due diligence have been discovered by the AO will not necessarily amount to disclosure within the meaning of the foregoing proviso.
In our view the word "production" used in the above Explanation shall not cover trading account, P&L a/c and balance sheet, as the assessee was obliged to file these papers along with the return of income. The Revenue cannot take shelter of this Explanation, if some information is disclosed by the assessee in its trading account, P&L a/c and balance sheet, which have been filed along with the return. Production of books of account or other evidence, cannot be held to include the documents which an assessee is obliged to file along with the return as per the statutory provisions of law. Section 139(9) provides that the return shall be treated as defective until it is accompanied by audit report as referred to in Section 44AB. The trading, P&L a/c and balance sheet are Annexures to the audit report prepared by the auditor.
11. The Expln. 1 of Section 147 is incorporated in order to clarify that the proviso to said Section 147 shall not be applicable merely because the books of account or other evidence were produced during the course of assessment and the AO could have with due diligence discovered the material evidence. This Explanation refer to the books of account or other evidence produced during the course of assessment proceedings. Meaning thereby that the assessee cannot take shelter that he had produced books of account and other evidence during the course of assessment proceedings and the AO should have discovered the material evidence. However, this Explanation cannot be applicable to the documents which the assessee was obliged and had filed along with the return. Such documents cannot be considered "as produced" for the purpose of Expln. 1 of Section 147. It is not the case of the Revenue that the excise duty billed to the customers was not shown in the balance sheet, which was filed along with the return.
12. In order to assume jurisdiction to issue notice under Section 148 beyond four years from the end of the assessment year, there must be failure on the part of the assessee to discharge (sic-disclose) fully and truly all the necessary facts necessary for his assessment. The copy of the reasons recorded as supplied by the Departmental Representative is reproduced as under:
In this case, the assessment for the asst. yr. 1989-90 has been completed under Section 143(3) on 25th March, 1992 determining total income at Rs. 12,08,97,410. On perusal of the records, it is noticed that the assessee company has not credited the excise duty billed to the customers amounting to Rs. 24,30,861 to the P&L a/c. Normally this amount should have been credited to the sales and this would have been included in the P&L a/c. It is further seen that the assessee company has credited to the liabilities account this amount and accordingly not offered the same for taxation.
In view of the above, I am satisfied that the income chargeable to tax amounting to Rs. 24,30,861 has escaped assessment due to the omission and failure on the part of the assessee to disclose all material facts in the return of income within the meaning of Section 147 of the IT Act.
13. No doubt, that the AO has made an allegation while recording the reasons that the income has escaped assessment due to the omission and failure on the part of the assessee to disclose all material facts in the return of income within the meaning of Section 147 but it has to be seen whether the said allegation is correct or not. The issue of limitation being a legal issue could be raised before the Tribunal as additional ground, as such the ground No. 8 as raised by the assessee is admitted. However, we are of the view that the matter has to be restored back to the file of the learned CIT(A) to adjudicate on the issue whether there was any failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment or not and whether the notice issued under Section 148 dt. 21st April, 1994 was within the time limitation as provided in the proviso of Section 147 or not. As such the said ground is allowed for statistical purposes.
14. Other grounds taken by the assessee are with regard to the merits of the case. Since the basic issue with regard to legality of the assessment is restored back to the file of the learned CIT(A) for fresh adjudication, all other grounds are also restored back to the file of learned CIT(A) for fresh adjudication after deciding the legal -issue.
15. In the result, the appeal of the assessee is allowed for statistical purposes. This order is pronounced at the time of hearing.