Income Tax Appellate Tribunal - Ahmedabad
Arvind Mills Ltd., ( Now Arvind Ltd., ), ... vs The Dy.Cit, Circle-1(1)(1),, ... on 14 November, 2018
आयकर अपील य अ धकरण, अहमदाबाद यायपीठ 'A' अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR आयकर अपील सं./I.T.A. No. 3206/Ahd/2014 WITH CROSS OBJECTION No. 03/Ahd/2015 ( नधा रण वष / Assessment Year : 2005-06) DCIT बनाम/ M/s. Arvind Mills Ltd.
Circle-1(1)(1), Ahmedabad Vs. Naroda Road, Ahmedabad थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AABCA2398D (Appellant/Respondent) .. (Respondent/Cross Objector) यथ क ओर से/Revenue by : Smt. Aparna M. Agarwal, CIT.D.R. अपीलाथ ओर से /Assessee by : Shri Vartik Chokshi, A.R. सन ु वाई क तार ख / Date of 01/11/2018 Hearing घोषणा क तार ख /Date of 14/11/2018 Pronouncement आदे श/O R D E R PER PRADIP KUMAR KEDIA - AM:
The captioned appeal has been filed at the instance of the Revenue against the order of Commissioner of Income Tax (Appeals)- XVI, Ahmedabad ('CIT(A)' in short) dated 26.09.2014 emanating from the assessment order dated 04.03.2013 passed by the Assessing Officer (AO) under s.143(3) r.w.s. 147 of the Income Tax Act, 1961 (the Act)concerning AY 2005-06.
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2. The assessee has also filed cross objection in the aforesaid Revenue's appeal.
3. In the captioned appeal, The Revenue has raised following grounds of appeal:
"1. The Ld. CIT(A) has erred in law and on fact in quashing the reopening of the assessment u/s147 of the I.T.Act, 1961.
2. The CIT(A) has not appreciated the fact that the AO after verification of the case records noticed that the assessee has debited an amount of Rs.13,00,00,000/- as diminution in the value of investment and the same is due to the decline in the value of investment in two of its overseas subsidiary and the addition has been made after considering various decision of judicial authorities."
4. Briefly stated, the assessee filed its return of income declaring Nil income for the AY 2005-06. The return was subjected to scrutiny assessment and the assessment was completed under s.143(3) of the Act on 31.12.2008 where the income was assessed at Nil as per the normal provisions of the Act, whereas the book profit for the purposes of MAT was simultaneously computed at Rs.67,11,77,484/-. The aforesaid order was further rectified under s.154 of the Act and the book profit for the purposes of MAT was revised at Rs.26,03,13,803/-. Subsequent to the completion of the assessment under s.143(3) of the Act, a notice under s.148 of the Act was issued on 30 t h March, 2012 and the completed assessment under s.143(3) of the Act was thus reopened to include certain income which has allegedly escaped assessment earlier.
5. As per the reasons recorded and the re-assessment order framed consequent thereto, it is observed that the re-assessment was made to include Rs.13,00,00,000/- towards diminution in the value of investment and consequently to increase the assessed book profit to this extent. Statedly, the action under s.147/148 of the Act was I T A N o . 3 2 0 6 / Ah d / 1 4 wi t h C O N o . 3 / Ah d / 2 0 1 5 [ D C I T v s . M / s . A r v i n d M i l l s L t d . ] A. Y . 2 0 0 5 - 0 6 - 3 -
guided by the consideration of the retrospective amendment in the provisions of Section 115JB by Finance Act (No.2), 2009 w.r.e.f. 01/04/2001. It was observed by the AO that the Finance (No.2) Act, 2009 has inserted clause (i) to Explanation - 1 to Section 115JB of the Act w.r.e.f. April 1 s t , 2001 which enjoins that the amounts set aside as provision for diminution in the value of any asset in the statement of profit and loss is required to be excluded for the purposes of determination of 'book profits' for the purposes of Section 115JB of the Act. The amendment is thus made applicable to the AY 2004-05 in consideration also and consequently the book profit is under-assessed in terms of Section 115JB of the Act with respect to diminution in value of investments debited in the profit and loss account of the assessee. The book profit was thus inter alia increased to the extent of Rs.13 Crore and re-determined at Rs.39,03,13,803/- in the proceedings under s.143(3) r.w.s. 147 of the Act.
6. In the first appeal, the CIT(A) reversed the action of the AO and held that proceedings under s.147 of the Act is not sustainable to give effect to the retrospective amendment in the provisions of Section 115JB of the Act.
7. Aggrieved by the relief granted by the CIT(A), the Revenue has preferred the appeal before the Tribunal.
8. While learned DR for the Revenue has relied upon the order of the AO. The learned AR for the assessee, on the other hand, placed reliance on the order of the CIT(A). Alleging wrongful usurpation of the jurisdiction under s.147 of the Act, the learned AR also referred to the cross objection of the assessee and submitted that notwithstanding the conclusion rightly drawn by the CIT(A) towards lack of jurisdiction under s.147 of the Act in favour of the assessee, the CIT(A) also ought to have invalidated the action under s.147 of the I T A N o . 3 2 0 6 / Ah d / 1 4 wi t h C O N o . 3 / Ah d / 2 0 1 5 [ D C I T v s . M / s . A r v i n d M i l l s L t d . ] A. Y . 2 0 0 5 - 0 6 - 4 -
Act on the ground that reopening under s.148 of the Act is not permissible to re-compute the book profit under s.115JB of the Act in the proceedings under s.147 of the Act.
9. We have carefully considered the rival submissions. The maintainability of jurisdiction under s.147 of the Act is central to the controversy in the instant case. The defense paddled on behalf of the assessee for lack of jurisdiction under s.147 of the Act are two folds;
(i) the retrospective amendment in the provisions of the Act does not entitle the AO to reopen a completed assessment in view of the embargo placed in first proviso to Section 147 of the Act & (ii) provisions of Section 147 of the Act cannot be invoked where there is no resultant change in tax liability as the assessee has already paid much higher tax even if the purported escapement as alleged is taken into account for the purposes of determination of book profits.
10. At the outset, we notice that in the instant case, the assessment was earlier framed under s.143(3) of the Act and the notice has been issued under s.147 of the Act proposing re-assessment after the expiry of four years from the end of the AY 2005-06 in question. The first proviso to Section 147 of the Act, in such a situation, imposes additional fetters on the AO in addition to the conditions stipulated in the main provision thereof. The first proviso necessitates that action under s.147 of the Act is permissible in the case of completed assessment under s.143(3) of the Act after the expiry of four years from the end of the relevant assessment year only where any income chargeable to tax has escaped assessment by the reason of failure on the part of the assessee to inter alia disclose fully and truly all material facts necessary for assessment of the relevant assessment year. Thus the prerequisite under first proviso enjoins that unless there is a failure on the part of the assessee to disclose material facts fully and truly, the reopening is not permissible in law. If, in fact, I T A N o . 3 2 0 6 / Ah d / 1 4 wi t h C O N o . 3 / Ah d / 2 0 1 5 [ D C I T v s . M / s . A r v i n d M i l l s L t d . ] A. Y . 2 0 0 5 - 0 6 - 5 -
income was found to be under-assessed but same cannot be ascribed to any failure or omission on the part of the assessee to disclose material facts but owing to a retrospective amendment in legal position subsequent to what prevailed at the time of original assessment, the reopening is not possible. Notice under first proviso to Section 147 of the Act is made relatable to some omissions or defaults of the assessee and cannot be made relatable to merely some action taken a-new on the part of the legislature. No assessee can be imputed with failure to disclose material facts with reference to a law which was non-existent at the time of original assessment. A retrospective amendment in law at a subsequent date cannot be deemed to be any kind of failure on the part of the assessee towards disclosure by any stretch of imagination. Therefore, it is manifest that the stringent conditions of first proviso to Section 147 of the Act are not fulfilled in the instant case.
11. Seen from a different perspective, the expression 'disclose' in first proviso postulates a pre-existing knowledge. A person can possibly disclose something, he is privy to. A retrospective amendment of law cannot be visualized by an assessee which may lead to any kind of failure to disclose. Therefore, the conditions prescribed in the first proviso cannot be said to be fulfilled and thus the action of the AO under s.147 of the Act after the expiry of four years from the end of the assessment year in question is clearly time barred and therefore, vitiated in law.
12. The AO initiated proceedings under s.147 of the Act read with proviso thereof solely on the grounds of retrospective insertion of clause (i) to Explanation 1 to Section 115JB of the Act whereby provisions for diminution in the value of any asset is required to be added to the book profit for the purposes of Section 115JB of the Act. As observed in the preceding paragraphs and as echoed in decision of the Hon'ble Gujarat High Court in the case of Sadbhav Engineering I T A N o . 3 2 0 6 / Ah d / 1 4 wi t h C O N o . 3 / Ah d / 2 0 1 5 [ D C I T v s . M / s . A r v i n d M i l l s L t d . ] A. Y . 2 0 0 5 - 0 6 - 6 -
Ltd. vs. DCIT (2014) 45 taxmann.com 388 (Guj) and Vodafone West Ltd. vs. ACIT (2013) 33 taxmann.com 67 (Guj), retrospective amendment in law does not give rise to any failure to disclose material facts as contemplated in the first proviso.
13. Thus, apparently the order of the CIT(A) in setting aside the re- assessment order based on an invalid notice under s.148 of the Act cannot be faulted in law. Consequently, the appeal of the Revenue is required to be dismissed on this ground alone as done by the CIT(A).
14. So viewed, we do not consider it expedient to delineate alternative objection towards invalidity of assumption of jurisdiction as per the cross objection of the assessee.
15. In the result, appeal of the Revenue is dismissed. The cross objection of the assessee is also dismissed as infructuous.
This Order pronounced in Open Court on 14/11/2018 Sd/- Sd/-
(MAHAVIR PRASAD) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad: Dated 14/11/2018 S. K. SINHA आदे श क त!ल"प अ#े"षत / Copy of Order Forwarded to:- 1. राज व / Revenue 2. आवेदक / Assessee 3. संबं*धत आयकर आयु,त / Concerned CIT 4. आयकर आयु,त- अपील / CIT (A)
5. 0वभागीय 3त3न*ध, आयकर अपील य अ*धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड9 फाइल / Guard file.
By order/आदे श से, True Copy उप/सहायक पंजीकार आयकर अपील य अ*धकरण, अहमदाबाद ।
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