For invoking proviso of section 147 after period , there must be failure on the part of the assessee either under section 139 or in response to a notice under section 147/148

IN THE INCOME TAX APPELLATE TRIBUNAL

(DELHI BENCH `F’: NEW DELHI)

BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND

SHRI A.N. PAHUJA, ACCOUNTANT MEMBER

ITA No.3128/Del./2010

(Assessment Year: 2001-02)

DCIT, Circle 13(1),

New Delhi

(Appellant)

Vs.

M/s Orient Clothing Co. Pvt. Ltd.,

1E/15, Jhandewalan Ext.,

New Delhi.

(PAN/GIR No.AAACO1779K)

(Respondent)

And

C.O. No.252/Del./2010

(In I.T.A. No.3128/Del./2010)

(Assessment Year: 2001-02)

M/s Orient Clothing Co. Pvt. Ltd.,

New Delhi.

(Appellant)

Vs.

DCIT, Circle 13(1),

New Delhi.

 (Respondent)

Assessee by: Sh. M.P. Rastogi, Adv. & Sh. P.N. Shastry, CA

Revenue by: Dr. B.R.R. Kumar, Sr.DR

ORDER

PER U.B.S. BEDI, J.M

This appeal of the department and C.O. of the assessee is directed against the order of the CIT (A)-XVIII, New Delhi dated 22.03.2010, relevant to assessment year 2001-02.

2. In the appeal of the Revenue, following grounds have been raised:

“1. That on the facts and circumstances of the case and in law the CIT(A) erred in directing the Assessing Officer to allow deduction of Rs.6,33,028/- u/s 80HHC of the I.T. Act, 1961 in respect of profit on sale of DEPB.

2. That on the facts and circumstances of the case as well as in law, the CIT(A) erred in not appreciating that as the assessee was having export turnover exceeding Rs.10 crores, therefore, it was not eligible for deduction u/s 80HHC on 90% of DEPB profits within the meaning of 3^rd proviso appended to section 80HHC(3) of the I.T. Act, 1961 (inserted by Taxation laws (Amendment ) Act, 2005 w.e.f. 01.04.1998).

3. That on the facts and circumstances of the case and in law, the CIT(A) has erred in not appreciating the fact that as the assessee has not incurred any cost for DEPB entitlement, therefore the total receipt on account of DEPB is the profit on the assessee."

2. In the C.O. of the assessee, following grounds have been raised:

“1. That the assumption of jurisdiction u/s 147/148 of the I.T. Act, 1961 is bad in law and consequently the reassessment framed in furtherance of such invalid jurisdiction is not sustainable in law.

2. That there was no failure on the part of the assessee to disclose fully and truly all material facts necessary at the time of original assessment and consequently the assumption of jurisdiction by the Assessing Officer after four years is bad in law and the reassessment so framed in furtherance of such invalid jurisdiction is bad in law.”

3. At he very outset, Ld.Counsel for the assessee submitted that since in C.O. of the assessee, the issue with regard to assumption of jurisdiction to initiate re-assessment proceedings has been raised, therefore, it would be appropriate to hear and decide the C.O. of the assessee first, rather than hearing, considering and deciding the appeal of the Revenue and to this move of the Ld.Counsel for the assessee, Ld.DR did not object. So, we take up C.O. of the assessee first.

4. The facts indicate that original assessment was completed on 29.03.2004 and it was reopened by recording reasons on 26.03.2008. As per assessee, there was no failure to disclose all material facts and since reopening was done on the basis of retrospective amendment made in law, so it cannot be said that there had been any failure to disclose all material facts. Therefore, relying upon the cases reported in CIT vs. Navnitalal Sakarlal, 125 I.T.R. 67 (Guj.), (1) Simplex Concrete Piles (India) Ltd. (2) Geo Miller And Co. Ltd. vs. DCIT & Others, 262 I.T.R. 605 (Cal.), CIT vs. SIL Investments Ltd., 339 I.T.R. 166(Del.), it was pleaded for quashment of initiation of re-assessment as Assessing Officer could not assume jurisdiction and moreover mechanical approval has been given, therefore, relying upon the judgment reported in United Electrical Co. P. Ltd. vs. CIT And Others, 258 I.T.R. 317 at 322(Del.), Chhugamal Rajpal vs. S.P. Chaliha and Others, 79 I.T.R. 603 and Duli Chand Singhania vs. ACIT, 269 I.T.R. 192, Wel Intertrade P. Ltd. and Another vs. ITO, 308 I.T.R. 22, it was pleaded for quashment of the order of re-assessment on this score alone.

5. Ld.DR submitted that sufficiency of reasons could not be challenged while relying upon Raymond Woollen Mills Co., it was pleaded that since case has been rightly reopened and CIT has approved the proposal for reopening keeping in view the reasons given by the Assessing Officer. It was pleaded for setting aside the order of the CIT(A) and restoring that of the Assessing Officer.

6. Ld.AR of the assessee in order to counter the submissions of the Ld.DR has pleaded that issue on merits is also in favour of the assessee as held by the Hon’ble Supreme Court in the case of Topman Exports. Therefore, neither addition was called for nor re-assessment was justified.

7. We have heard both the sides, considered the material on record as well as precedents relied upon by rival sides and find that assessment of the assessee for the year under consideration was reopened after 4 years from the end of the assessment year on the ground that an amendment to section 80HHC of the I.T. Act, 1961 has been made by Taxation Laws (Amendment) Act, 2005 with retrospective effect from April 1, 1998. The conditions were not there in section 80HHC at the time when assessee filed the returns or even the original assessment was made. The Hon’ble Delhi High Court in the case of CIT vs. SIL Investment Ltd. (supra) under similar facts and circumstances has opined as under:

“We have heard the counsel for the Revenue and have also examined the orders passed by the authorities below. It is clear that for invoking the proviso to section 147 beyond the period of four years, there must be failure on the part of the assessee to either make a return under section 139 or in response to a notice under section 147/148 or to disclose fully and truly all material facts necessary for the assessment for that assessment year. In so far as the filing of the return is concerned, that is not in dispute and, therefore, the focus is entirely on whether the assessee had failed to disclose fully and truly all material facts necessary for the assessment. The Tribunal, on an examination of the material on record, concluded that all the relevant facts were available on record and that it could not be said that at the time when the assessee filed the return, he had failed to disclose fully and truly all material facts necessary for the assessment because the amendment which was introduced retrospectively was not there at all. The Tribunal also observed, and, in our view rightly so, that the law cannot contemplate the performance of an impossible act. It was not expected of the assessee to foresee or forecast a future amendment which was to be brought into effect retrospectively. Therefore, the Tribunal has rightly concluded that the proviso to section 147 could not be invoked merely because there was an amendment in the future which was introduced retrospectively and covered the period in question. The Tribunal has correctly appreciated the law and applied the same to the undisputed facts. We see no reason to interfere with the impugned order as no substantial question of law arises for our consideration. However, we make it clear that we have only examined the jurisdictional issue qua validity of the section 147 proceedings and have not examined the merits of the matter. The appeals are dismissed.”

Since the facts in the case in hand and that decided by the Hon’ble Delhi High Court are similar when issue involved is identical, therefore, following the ratio of the above noted conclusion as drawn by the jurisdictional High Court, we hold that initiation of reassessment proceedings in this case is bad in law. While accepting the C.O. of the assessee, we quash the re-assessment order passed in this case. Since re-assessment is being quashed, therefore, appeal of the Revenue needs not be adjudicated on merits, being academic, hence dismissed.

8. As a result, the C.O. of the assessee gets accepted whereas the appeal filed by the department is dismissed.

Order pronounced in open court on 01.08.2012.

                                                       Sd/-                            Sd/-

                                            (A.N. PAHUJA)         (U.B.S. BEDI)

                              ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: 01.08. 2012

SKB

Copy of the order forwarded to:-

1. Appellant

2. Respondent

3. CIT

4. CIT (A)-XVIII, New Delhi.

5. CIT (ITAT)

Deputy Registrar, ITAT