Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI PARTHA SARATHI CHAUDHURY, JM
आदेश / ORDER
PER PARTHA SARATHI CHAUDHURY, JM :
This appeal preferred by the assessee emanates from the directions of the Ld. Dispute Resolution Panel (DRP) dated 12.09.2017 for the assessment year 2010-11 as per the grounds of appeal on record.
2 ITA No. 3086/PUN/2017 A.Y.2010-11
The assessee has preferred grounds on merit as well as legal grounds in the form of additional grounds filed before us.
At the very outset, the Ld. Counsel for the assessee submitted that he would argue the legal ground raised first. That such permission is granted and we would adjudicate the following legal grounds raised by the assessee herein:
“a) Reopening of the assessment under provisions of section 143(3) r.w.s.147 of the Income Tax Act, 1961 is bad in law. b) The assessment order passed under section 143(3) r.w.s.147 of the Act is not in keeping with the provisions of law and need to be set aside. c) The appellant craves leave to add, amend or alter any of the grounds of appeal.”
Referring to the reasons for reopening of the assessment u/s.147/148 of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟), the Ld. Counsel submitted that it is nothing but “change of opinion” by the Assessing Officer for which reopening is not permissible within the realm of the Act. That for ready reference, the reasons recorded by the Assessing Officer is reproduced herein below as part of this order:
“REASON RECORDED FOR ISSUE OF NOTICE U/S.148 During the course of assessment for A.Y 2011-12, TPO, Pune's order u/s.92CA(3) of the Act dated 29/01/2015 in the case of Endress + Hauser (I) Pvt. Ltd. received on 05/02/2015. The DCIT TP-1(1), Pune has made adjustment of Rs.1,97,13,935/- towards Trademark Licence Fees paid to AE on the arm's length price declared by the assessee. Further, stated that in the previous year, the TPO did not examine the issue of payment of trademark licenses fees. The tPO has requested [0 examine the same in the previous year and take necessary action. In view of the above, on verification of the records for A.Y 2010- 11, it is seen that assessee has paid Rs.1,24,51,713/- towards
3 ITA No. 3086/PUN/2017 A.Y.2010-11
Trademark Licence Fees to the AE, which is not allowable expenditure considering the arm's length price. Therefore, I have reason to believe that there is escapement of income to the extent of Rs.1,24,51,713/- within the meaning of provisions of section 147 of the Act. Issue notice u/s.147 of I.T. Act, for A.Y. 2010-11. Sd/- (Anand Bhaskar) Dy. Commissioner of Wealth Tax, Circle-1, Aurangabad.
26.02.2015 Notice u/s.148 issued and served on the assessee. Sd/- DCIT, C-1, A’bad”
That referring to the reasons recorded for issuance of notice u/s.148 of the Act by the Assessing Officer, the Ld. Counsel submitted that it was with regard to payment of trademark licenses fees to the AE. This issue has already been examined in detailed by the TPO/Assessing Officer in respect of the assessee, under the nomenclature of royalty payments.
2.1 The Ld. Counsel for the assessee invited our attention to Page 55 of the paper book wherein notice has been issued by the TPO/Assessing Officer u/s.92D(3) of the Act asking the assessee to furnish specific informations. There is a detailed questionnaire requiring the assessee to furnish specific information on the payment of royalty. Thereafter, at Page 61 of the Paper book, the assessee has filed detailed reply to the TPO/Assessing Officer with regard to specific queries raised by the Officer with regard to payment of royalty. That at Page 64 of the Paper book, the entire write up is there with the heading “Note on payment of Trademark fees” which was also placed before the Department. Similarly, other details were also placed by the assessee regarding computation of Trademark fees, note regarding benefit
4 ITA No. 3086/PUN/2017 A.Y.2010-11
enjoyed by payment of Trademark fees, software excess charges. These are enclosed at Pages 65 to 72 in the Paper book filed before us.
2.2 That even in the TPO‟s order which is annexed at Page 171 to 175 of the Paper book, at Page 172, Para 2, it is stated that the assessee was requested to furnish details. The Ld. Counsel further made a statement at Bar that the reasons recorded refers to payment of Trademark licenses fees to AE which is nothing but payment of royalty. This was clarified since the notice u/s.147/148 of the Act refers to the payment of Trademark licenses fees whereas, the questionnaire issued to the assessee by the TPO/Assessing Officer as well as reply given by the assessee refers to details of payment of royalty. Therefore, it was submitted by the Ld. Counsel for the assessee that these issues were already examined by the TPO/Assessing Officer at the time of framing original assessment order. Therefore, on the same reasons as recorded herein on the issues which have already been examined at the time of framing original assessment again, reopening u/s.147/148 of the Act amounts to only “change of opinion” by the Assessing Officer which is arbitrary, bad in law and void ab initio.
Per contra, the Ld. DR submitted that only the documents were called for but they were not examined and therefore, question of “change of opinion” does not arise. It was contended by the Ld. DR that simply the documents which were called for, the assessee responded by submitting those documents.
We have perused the case records and heard the rival contentions. The facts demonstrate that these legal grounds were even raised before the DRP.
5 ITA No. 3086/PUN/2017 A.Y.2010-11
The DRP after analyzing the issue and as per the reasons provided in their findings has held at Para 8.6.3 that the assessee stated that detailed submission were made on the issue of payment of Trademark fees and thus, the reopening was bad in law. In determining whether commencement of reassessment proceedings was valid, it has only to be seen whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage and hence, the objection was rejected by the DRP.
We have also perused the relevant documents filed before us in the Paper book. We are of the considered view that the detailed enquiry through questionnaire has been conducted by the TPO/Assessing Officer for which the assessee has also responded positively by furnishing all the details of payment of Trademark fees/royalty to the Department. That on perusal of these aforesaid documents annexed in the paper book, it absolutely clear that the issue for which reopening of the assessment was done was already examined by the TPO/Assessing Officer at the time of framing original assessment order. We find there were no prima facie material for reopening of such assessment apart from those which were already in possession of the Revenue and also were examined by them in detail at the time of framing original assessment. The DRP has observed that “correctness of the material is not a thing to be considered at this stage”. This observation is not appropriate since as Quasi Judicial Authority, first and foremost reason for reopening of the assessment, there should be some additional material and evidences which were not there with the Revenue at the time of framing original assessment which had come to their notice at a later stage for which there is a reason to believe that income has escaped assessment. Herein the present
6 ITA No. 3086/PUN/2017 A.Y.2010-11
case where already for the reasons which were recorded for reopening of the assessment, those issues were already examined by the TPO/Assessing Officer at the time of original assessment, the DRP has completely overlooked this aspect.
Coming to the arguments of the Ld. DR that only documents were called for at the time of original assessment by the Assessing Officer and it cannot be stated that the opinion has been formed at that time so as to amount to a change of opinion now at the time of reopening proceeding, in the case of CIT Vs. Kelvinator India Ltd.(320 ITR 561) the Supreme Court observed as under (page 564) : "However, one needs to give a schematic interpretation to the words 'reason to believe' failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of 'mere change of opinion', which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfillment of certain preconditions and if the concept of 'change of opinion' is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of 'change of opinion' as an in- built test to check abuse of power by the Assessing Officer."
We have already examined that in the reasons recorded, the Assessing Officer is not sure with his stand and he has not demonstrated in his order the “reason to believe”. The issue therein already stands examined at the time of framing original assessment order.
7 ITA No. 3086/PUN/2017 A.Y.2010-11
In the case of Manjusha Estate (P) Ltd. Vs. CIT reported in 226 CTR 283, the Hon‟ble Gujarat High Court has held that in the absence of any failure on the part of the assesse or any fresh material on record, the reopening of assessment was based on change of opinion and therefore, same cannot be sustainable. Further, in the case of Justi Rama Rao Vs. ITO, reported as 130 TTJ 66 (hyd.), it was held that reasons must disclose prima facie the facts which would justify the issuance of notice. AO must apply his mind to the facts of the case before issuing notice, in the absence of which the reassessment will not be valid.
In view of the matter, we hold the reopening of the assessment proceedings and thereafter, the passing of the reassessment order as arbitrary, bad in law and therefore, void-ab-initio. We order accordingly.
Since legal grounds has been decided in favour of the assessee, grounds on merit become infructuous. Therefore, even without going into the merits of the case on the legal ground itself, the assessee succeeds.
In the result, appeal of the assessee is allowed.
Order pronounced on 12th day of September, 2019.
Sd/- Sd/- D. KARUNAKARA RAO PARTHA SARATHI CHAUDHURY ACCOUNTANT MEMBER JUDICIAL MEMBER ऩुणे / Pune; ददनाांक / Dated : 12th September, 2019. SB
8 ITA No. 3086/PUN/2017 A.Y.2010-11
आदेश की प्रनिलऱपप अग्रेपषि / Copy of the Order forwarded to : अऩीऱाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. 3. The CIT(Appeals)-13, Pune. 4. The Pr. CIT-5, Pune. , आयकर अऩीऱीय अधधकरण, “ए” बेंच, 5. ववभागीय प्रतततनधध ऩुणे / DR, ITAT, “A” Bench, Pune. गार्ड फ़ाइऱ / Guard File. 6.
// True Copy // आदेशानुसार / BY ORDER,
तनजी सधचव / Private Secretary आयकर अऩीऱीय अधधकरण, ऩुणे / ITAT, Pune.
9 ITA No. 3086/PUN/2017 A.Y.2010-11
Date 1 Draft dictated on 11.09.2019 Sr.PS/PS 2 Draft placed before author 11.09.2019 Sr.PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr.PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order