Income Tax Appellate Tribunal - Mumbai
Aarti Industries Ltd, Mumbai vs Assessee on 11 December, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "A", MUMBAI
BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND
SHRI SANJAY GARG, JUDICIAL MEMBER
ITA No.7230/M/2010
Assessment Year: 2002-03
M/s. Aarti Industries Limited, Commissioner of Income Tax
71, 2nd Floor, Udyog Kshetra, (Appeals),
Mulund Goregaon Link Road, Vs. Range - 22,
Off LBS Road, Mulund (West), Aayakar Bhavan,
Mumbai - 400 080. Mumbai
PAN: AABCA2787L
(Appellant) (Respondent)
Assessee by : Shri Vijay Mehta, A.R.
Revenue by : Shri Asghar Zain VP, D.R.
Date of Hearing : 09.10.2014
Date of Pronouncement : 11.12.2014
ORDER
Per Sanjay Garg, Judicial Member:
The present appeal has been preferred by the assessee against the order dated 28.07.10 of the Commissioner of Income Tax (Appeals) [(hereinafter referred to as CIT(A)] relevant to assessment year 2002-03.
2. The assessee has taken the following grounds of appeal:
"1. Re: Reassessment u/s. 147 carried out without jurisdiction:
1.1 On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) [hereinafter referred to as 'the learned CITA)'] erred upholding the reassessment carried out by the Assessing Officer u/s 147.
1.2 The learned CIT(A) ought to have appreciated that the reassessment was based on a mere change of opinion on issues which had already been considered in the assessment order framed u/s 143(3).ITA No.7230/M/2010
2 M/s. Aarti Industries Limited 1.3 The learned CITA) ought to have appreciated that there was no failure on the part of the Assessee to disclose fully and truly all material facts for completion of assessment and hence the assessment cannot be reopened after period of 4 years.
2. Re: Addition of provision for doubtful debts written back Rs. 2,86,39,808/-:
2.1 On the facts and in the circumstances of the case and in law, the learned CITA) erred in upholding the contention of the Assessing Officer in confirming addition of the reversal of the provision for doubtful debt amounting to Rs. 2,86,39,808/- without considering the fact that no deduction was given in the earlier years in which provision was done.
3. Re: Withdrawal of MAT credit of the amalgamating company M/s Alchemie Organics Limited:
3.1 On the facts and in the circumstances of the case and in law, the learned CITA) erred in upholding the contention of the Assessing Officer in withdrawing set off of MAT credit of amalgamating company M/s Alchemie Organics Limited claimed by the Appellant (amalgamated company).
4. The Appellant craves leave to add to, alter, amend or delete any ground of appeal. For Aarti Industries Limited"
Ground No.1:
3. Vide ground No.1, the assessee has agitated the reopening of the assessment proceedings under section 147 of the Income Tax Act (hereinafter referred to as the Act) pleading that the reopening was based on mere change of opinion. The issue under consideration had already been considered by the Assessing Officer (hereinafter referred to as the AO) while framing original assessment under section 143(3) of the Act. The assessment was reopened after the period of four years whereas there was no failure on the part of the assessee to disclose fully and truly all material facts during the original assessment proceedings. Hence the reopening of assessment was bad in law in view of the provisions of section 147 of the Act.
4. The brief facts of the case are that the assessee had filed its return of income on 31.10.02 declaring total income of Rs.5,69,11,090/-. The ITA No.7230/M/2010 3 M/s. Aarti Industries Limited assessment proceedings were completed under section 143(3) of the Act on 04.03.05 determining the total income at Rs.11,03,79,400/-. Thereafter the concerned AO noted that while completing the assessment under section 143(3) of the Act, the MAT credit amounting to Rs.41,91,115/- and also the provision for doubtful debts written back amounting to Rs.2,86,39,808/- had been wrongly allowed to the assessee. The AO recorded his reasons for reopening the assessment. Thereafter, the case was reopened by way of issuance of notice under section 148 of the Act and the assessment had been completed under section 143(3) read with section 147 of the Act determining the total income at Rs.13,90,19,210/-. The assessee preferred appeal before the Ld. CIT(A) against the reopened assessment proceedings.
5. Before the Ld. CIT(A), it was contended that the notice under section 148 was issued to the assessee beyond the period of four years and there was no failure on the part of the assessee to fully and truly disclosed material facts necessary for the assessment of income and as such the assessment was bad in law. The Ld. CIT(A), however, did not agree with the contention raised by the assessee. The Ld. CIT(A) observed that the concerned AO during the original assessment proceedings had not applied his mind to the issues under consideration. He therefore rejected the contention of the assessee on this issue. The assessee has thus raised this issue in appeal before us.
6. We have considered the rival submissions and have also gone through the records. As per the provisions of section 147 of the Act, the AO is authorized to reopen the assessment proceedings, if he has reason to believe that any income chargeable to tax has escaped assessment. The courts of law have time and again held that such a reason to believe that the income of the assessee has escaped assessment should be based on some material which comes to the knowledge of the AO. The assessment cannot be reopened under ITA No.7230/M/2010 4 M/s. Aarti Industries Limited section 147 of the Act merely on the basis of change of opinion of the AO on any issue. As per the 1st proviso to section 147 of the Act, the assessment once completed under section 143(3) cannot be reopened under section 147 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 because of any failure on the part of the assessee to disclose fully and truly all the material facts necessary for the completion of assessment. The said 1st proviso to section 147 for the sake of convenience is reproduced as under:
"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 he 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 such 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."
7. Now coming to the facts of this case, the assessment year under consideration i.e. A.Y. 2002-03 in respect of which the period of four years has expired on 31.03.07. However, the alleged notice under section 148 had been issued to the assessee on 18.03.09 i.e. beyond the period of four years. Though the assessee has denied the receipt or service of any such notice, yet the fact remains that the notice alleged to be issued was dated 18.03.09. The Ld. counsel for the assessee has drawn our attention to the original assessment order dated 04.03.05 wherein at paragraph 2 of the assessment order, the AO has referred to the letter dated 25.10.04 filed by the assessee before the AO. He has further drawn our attention to page 7 paragraph 8.1 of the original assessment order where a reference has been made by the AO as to the letter dated 24.11.04 submitted by the assessee explaining the genuineness of his claim regarding the deductions claimed. The Ld. counsel for the assessee thereafter has invited our attention to letter ITA No.7230/M/2010 5 M/s. Aarti Industries Limited dated 25.10.04 vide which the assessee had submitted his submissions regarding the various issues in respect of which the explanation was sought by the AO from the assessee during the assessment proceedings. At sl.no.4 of the said letter, there is a mention of 'breakup of provision for doubtful debts claimed as not taxable'. Further, a perusal of letter dated 24.11.04 reveals that the assessee had submitted a note on MAT credit of amalgamating Alchemie Organic Ltd. A perusal of the above documents reveals beyond doubt that the necessary details were sought from the assessee by the concerned AO during the original assessment proceedings regarding the issues upon which the additions have been made during the reassessment proceedings under section 147 of the Act. Even a perusal of the note forming part of computation of total income for assessment year 2002-03 reveals that all the necessary details regarding the claim of deductions made by the assessee were fully disclosed by the assessee. Hence, it is not a case where there was any failure on the part of the assessee to disclose fully and truly all material facts for completion of original assessment proceedings. No new information had come into the knowledge of the AO which made him to believe that the income of the assessee had escaped assessment. Even a perusal of the assessment order passed under section 147 reveals that the AO had made his opinion regarding the escapement of income from the notes forming part of computation of total income which were submitted during the original assessment proceedings. The reopening of assessment in this case is therefore hit by the first proviso to section 147. Since the time limit as per the proviso to section 147 has already been lapsed at the time of reopening of the assessment proceedings, hence under such circumstances the reopening in this case, in the absence of any evidence of failure on the part of the assessee to disclose fully and truly all material facts, is held to be bad ITA No.7230/M/2010 6 M/s. Aarti Industries Limited in law and the same is thereby quashed.
8. Since in view of our observations made above, we have quashed the reassessment proceedings under section 147 of the Act, therefore, the consequential additions pursuant to reopening of the assessment will not survive and hence the same are accordingly ordered to be deleted.
9. In the result, the appeal of the assessee is hereby allowed.
Order pronounced in the open court on 11.12.2014.
Sd/- Sd/-
(D. Karunakara Rao) (Sanjay Garg)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 11.12.2014.
* Kishore, Sr. P.S.
Copy to: The Appellant
The Respondent
The CIT, Concerned, Mumbai
The CIT (A) Concerned, Mumbai
The DR Concerned Bench
//True Copy// [
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.