Income Tax Appellate Tribunal - Delhi
Intertek Testing Services India Pvt. ... vs Department Of Income Tax on 8 March, 2011
1 ITA No. 3212/Del/2011
Asstt.Year: 2002-03
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `C' NEW DELHI
BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT
AND
SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER
I.T.A.No.3212/Del/2011
Assessment Year : 2002-03
DCIT, vs Intertek Testing Services India Pvt. Ltd.,
Circle-11(1), Godrej Industries Complex,
Room NO. 312, Pirojshanagar, Eastern Express Highway,
C.R. Buidling, Vikhroli (E) Mumbai-110079
New Delhi. (PAN: AAACI6890F)
(Appellant) (Respondent)
Appellant by: S/Shri Pradeep Dinodia, R.K. Kapoor
Respondent by : Shri Satpal Singh, Sr.DR
ORDER
PER CHANDRA MOHAN GARG, JUDICIAL MEMBER
This appeal has been preferred by the Revenue against the order of Commissioner of Income Tax(A)-21, Mumbai dated 08.03.2011 in Appeal No. C.I.T.(A)-X/IT/342/2008-09 & C.I.T.(A)21/IT/262/2009-10 for AY 2002-03.
2. The sole ground raised by the revenue reads as under:-
"On the facts and in the circumstances of the case, the ld. CIT(A) has erred in holding the reopening of assessment as bad in law and consequently the assessment order based on such reopening was also held to be bad in law."2 ITA No. 3212/Del/2011 Asstt.Year: 2002-03
3. Briefly stated the facts giving rise to this appeal are that the assessment u/s 143(3) of the Income Tax Act, 1961 was completed vide order dated 15.3.2005 determining total income of the assessee at Rs.17,27,03,290. Subsequently, the assessment was reopened u/s 147 of the Act by issuing notice u/s 148 of the Act dated 28.3.2008. The Assessing Officer provided reasons recorded to the assessee vide letter dated 12.09.2008. During the reassessment proceedings, the Assessing Officer asked for details and explanation in respect of certain items and issues. The Assessing Officer made disallowance and additions pertaining to inspection agency cost and accreditation charges u/s 40(a)(i)(a) of the Act, testing and coordination expenses, marketing coordination expenses and disproportionate service fee.
4. Being aggrieved by the above reassessment order, the assessee preferred an appeal before the Commissioner of Income Tax(A) which was allowed by holding that the reopening of assessment and the reassessment order based on such reopening was bad in law and reopening based on change of opinion was not permissible under the Act in law. The Commissioner of Income Tax(A) set aside/quashed the order of reopening of assessment without going into the merits of the case. Now, the aggrieved 3 ITA No. 3212/Del/2011 Asstt.Year: 2002-03 revenue is before this Tribunal with the sole ground as mentioned hereinabove.
5. We have heard rival arguments of both the parties and carefully perused the record. Ld. AR submitted that the assessee filed a return on 30.10.2002 and assessment u/s 143(3) of the Act was completed on 15.03.2005. The AR further submitted that reassessment notice was issued on 28.03.2008 and four years' limitation as stipulated u/s 149(1)(a) of the Act has elapsed on 31.03.2007 pertaining to the relevant assessment year of this case i.e. 2002-03.
6. Replying to the above, ld. DR fairly accepted that the reassessment notice was issued on 28.03.2008 and time limitation of four years expired on 31.03.2007.
7. In view of above set of facts and circumstances, we hold that the reopening of assessment u/s 147 and 148 of the Act is not permissible beyond four years of limitation as per provisions of the Act.
8. From the impugned order, we observe that the Commissioner of Income Tax(A) in para 2.3 has held that the reopening of completed assessment on the issue of testing and coordination charges and third party inspection charges and accreditation charges was only on change of opinion on these issues by the subsequent Assessing Officer because these issues 4 ITA No. 3212/Del/2011 Asstt.Year: 2002-03 were already examined and looked into by the Assessing Officer who completed the original assessment u/s 143(3) of the Act and, therefore, the belief formed by subsequent Assessing Officer on these two issues was nothing but mere change of opinion. The relevant para no. 2.3 of Commissioner of Income Tax(A) in the impugned order is being reproduced below for the sake of clarity in our findings:-
"2.3 I have considered the facts of the case. As per facts discussed above, the already completed assessment was reopened u / s. 147/ 148 of the Act on the basis of only two issues i.e. "testing and coordination charges" and "third party inspection charges & accreditation charges"
which were paid to parties outside India.
As per provisions of sec. 147, a completed assessment can be reopened if the A.O. has reason to believe that any income chargeable to tax has escaped assessment. Thus for reopening the assessment the A.O. should have some reason, such reason should be bonafide and sufficient to make a belief and the reasons should be based on some information/material available with the A.O. Such information/material proposed to be utilized by the A.O. for reopening the assessment may have from outside parties/sources or the same may already be available in the assessment records. Thus, on the basis of information/material already available in the record or received from other parties/sources, the A.O. can form an opinion that income chargeable to tax had escaped assessment. The only condition is that this information/material could not have been examined/looked into by the A.O. during the original assessment proceedings. If, during original assessment proceedings, the A.O. had examined/looked into such information/material, any attempt to reopen the completed assessment on that basis will amount to change of opinion 5 ITA No. 3212/Del/2011 Asstt.Year: 2002-03 which is not permissible under the Act. There are number of decisions including the Hon'ble Supreme Court decision in the case of Kelvinator of India Ltd. (Supra) that reopening of assessment on the basis of change of opinion is not permissible under the Act and is bad in law. The Hon'ble Supreme Court also held that the reopening on the basis of change of opinion even within four years from the end of the relevant assessment year is also not permissible under the law.
During appellate proceedings, the appellant has filed a copy of questionnaire dtd.27.10.2004 issued by A.O. i.e. Addl. CIT Range 10(2), Mumbai. This questionnaire was issued during original assessment proceedings. Vide point no.9 and 10, the following information was asked for by A.O. from the appellant:- .
"9. Under the head 'operating cost', please provide details of payments made for testing and coordination charges above RS.1 lakhs and third party inspection agency cost plus accreditation charges above Rs. 5 lakhs. Brief note on the exact nature of the services may also be provided. Comparative statements for the earlier years may also be provided.
10. Also provide the details of expenses incurred on:-
(i) --- (ii) --- (vi) Marketing expenses (x) -----"
Thus the appellant's claim appears to be correct that during original assessment proceedings the A.O. asked for the details of these two expenses for which all details were provided during assessment proceedings. It is worth to mention here that the A.O. did not make any addition/disallowance on these two issues in the original assessment order u/ s. 143(3) of the Act. Thus, the appellant's claim is correct that during original assessment proceedings, the A.O. formed an opinion 6 ITA No. 3212/Del/2011 Asstt.Year: 2002-03 regarding the correctness of appellant's claim on these two issues and subsequent reopening of completed assessment on the basis of these two issues clearly amounts to change of opinion. Since the original assessment order u/s: 143(3) of the Act is not subject matter of present appeal, therefore, in the appellate proceedings, it cannot be argued that the A.O. incorrectly accepted appellant's claim on these two issues or did not examine the aspect of withholding of tax thereon during original assessment proceedings. Therefore, it cannot be said that the A.O. committed some mistake during original assessment proceedings. Without prejudice to this argument, for the sake of discussion even if it is argued that during original assessment proceedings, the A.O. committed some mistake on these issues, such mistake was required to be taken care of by initiating proceedings u/s. 263 of the Act and not u/s. 147 of the Act.
In view of the above discussion, it is held that the reopening of the completed assessment on the issues of "testing and coordination charges" and "third party inspection charges & accreditation charges" was only a change of opinion on these issues by the subsequent A.O. These two issues were already examined and looked into by the A.O. who completed the original assessment order u/s. 143(3) of the Act and therefore, the belief formed by subsequent A.O. on these two issues was nothing but mere change of opinion. As discussed above and in view of the number of decisions on these issues including the decision of Supreme Court in the case of Kelvinator of India Ltd., the reopening on the basis of change of opinion is not permissible under the Act and Law. In the facts and circumstances, it is held that the reopening was not in accordance with the provisions of sec. 147 of the Act and law on this issue. The reopening is therefore, held to be bad in law and is therefore set aside. Consequently, the assessment order based on such improper/invalid assumption of jurisdiction u/s. 147 was also bad in law." 7 ITA No. 3212/Del/2011 Asstt.Year: 2002-03
9. On the basis of discussion made hereinabove, we are of the firm opinion that the Commissioner of Income Tax(A) rightly held that as per decision of Hon'ble Supreme Court in the case of Kelvinator of India Ltd. 256 ITR 0001(Del) and (2010) 34 DTR (SC) 49, the reopening on the basis of change of opinion is not permissible under the Act and law. In the present case from page no. 126 to 135 of the Paper Book, we clearly observe that "issues of testing and coordination charges" and "third party inspection charges and accreditation charges" were considered by the Assessing Officer during the original assessment proceedings and the assessee submitted detailed explanation on 30.11.2004 in this regard before the Assessing Officer. The relevant explanation of the assessee before the Assessing Officer during the original assessment proceedings is available on Paper Book page no. 135 to 137. Thus, we clearly observe that the Assessing Officer considered and adjudicated both the issues during the original assessment proceedings and reopening of assessment on same issues certainly amounts to change of opinion which is not permissible as per provisions of the Act and law. Accordingly, we hold that the CIT(A) rightly decided the issue in favour of the assessee by holding that the reopening of assessment was mere change of opinion which is not permissible under law. We also hold that the notice of reassessment u/s 148 of the Act issued on 8 ITA No. 3212/Del/2011 Asstt.Year: 2002-03 28.03.2008 was issued after the four year limitation time as stipulated in section 149(1)(a) of the Act. Therefore, notice of reopening of assessment u/s 148 of the Act was also not sustainable and without jurisdiction.
10. In the light of above observations and findings, we are of the considered opinion that we are unable to see any infirmity, ambiguity or any other valid reason to interfere in the findings of the Commissioner of Income Tax(A) in the impugned order. Hence, sole ground of the revenue being devoid of merits is dismissed.
11. In the result, the appeal of the revenue is dismissed.
Order pronounced in the open court on 07.03.2014.
Sd/- Sd/-
(G.D. AGRAWAL) (CHANDRA MOHAN GARG)
VICE PRESIDENT JUDICIAL MEMBER
DT. 7th MARCH 2014
'GS'
Copy forwarded to:-
1. Appellant
2. Respondent
3. CIT(A)
4. CIT 5. DR By order
Asstt. Registrar