,
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES `B' MUMBAI
[^ . ,
BEFORE SHRI D. MANMOHAN, VICE PRESIDENT
/AND
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SHRI RAJENDRA, ACCOUNTANT MEMBER
I.TA. No. 7718/Mum/2010
Assessment Year 2002-03
D.C.I.T. 8(2), Mumbai M/s. Monsanto India Ltd.,
R. No. 216-A, Ahura Centre,
Aayakar Bhavan, 5th Floor,
M.K. Road, Vs. 96, Mahakali Caves Road,
Mumbai 400 020. Andheri (East)
Mumbai-400 093
PAN: AAACM 2875 L
( /Appellant) ( / Respondent)
Revenue by : Shri Mohit Jain
Assessee by : Shri Kirit Kamdar
/ Date of Hearing : 11-09-2012
/ Date of Pronouncement : 18-09-2012
/ O R D E R
PER RAJENDRA, A.M.
The appellant has filed this appeal against the Order dt. 17th August, 2010 of
the CIT(A)-17, Mumbai on the following Grounds:
1)"On the facts and in the circumstances of the case and in law, the Ld CIT (A) erred
in holding the reassessment u/s. 143(3) r.w.s. 147 of the I.T. Act was not valid without
appreciation the fact that the A.O. had rightly reopened the assessment as the
assessee's case clearly falls in clause (c) of Explanation 2 of Sec. 147 of the IT. Act,
1961".
2)"On the facts and in the circumstances of the case and in law, the CIT(A) erred in
not appreciating that the A.O. disallowed the deduction u/s. 801B of Rs. 21,87,288/-
related to scrap sales as the said receipt was not derived from the industrial
2 I.TA. No. 7718/Mum/2010
M/s. Monsanto India Ltd.
undertaking and hence not eligible for deduction u/s. 801B of the Act, in view of Apex
Court's decision in the case of Liberty India Ltd [317 ITR 218(SC)]",
3)"On the facts and in the circumstances of the case and in law, the Ld CIT(A) erred
in deleting interest levied u/s. 234D of the Act amounting to Rs 2,70,977/- by relying
on the special Bench decision of the Hon'ble Delhi ITAT in the case of Ekta
Promoters Ltd [305 ITR 1], without appreciating the facts of the case".
2. Assessee-company, engaged in the business of manufacturing & trading in
Agricultural Chemicals and Seeds, filed its Return of Income on 31-10-2002 declaring
income of Rs.5.52 Crores. Assessment was completed u/s. 143(3) of the Income Tax
Act, 1961 (Act) by the Assessing Officer (AO) vide his order dt. 29-03-2005
assessing the total income at Rs. 25.47 Crores after allowing deduction of Rs. 1.45
Crores u/s. 80 IB of the Act.
3. Assessment was re-opened u/s. 147 of the Act and after recording reasons a notice
u/s. 148 was issued on 26-03-2009. Assessee-company submitted a letter dt. 13-04-
2009 along with a copy of original return of income submitted on 30-10-2002 and
stated that the said return of income might be treated as return of income filed in
response to notice issued u/s. 148 of the Act. On assessee's request, a copy of the
reasons recorded for re-opening the assessment was supplied by the AO. During
re-assessment proceedings, the assessee-company raised objection to the re-opening
of assessment. After considering the submissions of the assessee-company, AO held
that the claim of deduction u/s. 80 IB on the sale of scrap was not as per the
provisions of law, that there was no direct nexus between the business activities and
sale of scrap. AO admitted that the issue of eligibility of deduction u/s. 80 IB of the
Act on sale of scrap was decided in favour of the assessee by the Tribunal in the
appeal filed for the Assessment Year 2004-05.But according to the AO, every
Assessment Year was a separate unit of taxation and resjudicata did not apply to
Income Tax proceedings. He finally held that even if revenue did not challenge the
decision of the Tribunal in earlier years, it did not preclude it from being so in a later
year, that even if the assessee had been allowed the benefit of credit sales in earlier
years, it did not prevent the AO to contest the claim and deny the same on the basis of
facts and circumstances of the case in a later year. Subject to the above remarks,
deduction of Rs. 21.87 Lakhs allowed on the scrap sales u/s. 80 IB of the Act was
withdrawn by the AO.
3.1. Assessee preferred an appeal before the First Appellate Authority (FAA). After
considering the submissions of the assessee and the Assessment Order, FAA held that
the notice u/s. 148 had been issued after the expiry of four years from the end of the
relevant Assessment Year, that where there was full and true disclosure of facts by the
appellant and non-application of mind by the AO. It was further held by the FAA that
even on merits matter had to be decided in favour of the assessee. He referred to the
ITAT for the Assessment Year 2004-05 where it had been held that scrap sales
constituted income eligible for deduction u/s. 80 IB. He allowed the appeal filed by
the assessee with a direction to the AO to re-compute deduction u/s. 80 IB including
scrap sales. FAA relied upon the decision of jurisdictional High Court in the case of
3i Infotech Ltd., (41 DTR 377)and Hindustan Petroleum Corporation Ltd. (42 DTR
262).
3 I.TA. No. 7718/Mum/2010
M/s. Monsanto India Ltd.
4. Before us, Departmental Representative (DR) submitted that re-opening was as per
the provisions of the Act, that AO had not formed any opinion when he passed the
original order, that sale of scrap was not eligible deduction u/s. 80 IB. Authorised
Representative (AR) submitted that the tax report submitted along with the original
return was the basis for re-opening the assessment, assessment was re-opened after
four years, that assessee had disclosed all the relevant facts with regard to the sale of
scrap had filed the original return, FAA had decided the appeal not only on the
question of validity but also on the merits. He further submitted that issue of scrap
sale and availability of deduction u/s. 80 IB was decided in favour of the assessee by
the `B' Bench of Tribunal vide its order dt. 24-03-2009 (ITA No. 6093/Mum/07 A.Y.
2004-05). He relied upon the cases of Hindustan lever (268 ITR 332); Desai Brothers
Ltd., (272ITR 335); Sita World Travels (India) Ltd., (274 ITR 186); Kelvinator of
India Ltd., (256 ITR 1).
5. We have heard the rival submissions and peruse the material put before us. From
the file, following un-disputed facts are immerging:
i. Original Return was filed on- 31-10-2002
ii. Order u/s.143(3) was passed by the AO on- 29-03-2005
iii. Notice u/s.148 of the Act was issued on- 26-03-2009
iv. Re-assessment was completed on- 11-12-2009
As the matter was re-opened after end of the four years of relevant Assessment
Year, it was necessary for the AO to mention the failure of the assessee-company, that
resulted escapement of income. We have perused the reasons recorded for re-
opening and we find that there is no mention of failure of the assessee. We would like
to re-produce the relevant portion of the reasons recorded by the AO:
"On perusal of case records, it is noticed that the assessee's claim of Rs. 14504489/-
u/s. 80IB(4) in respect of its unit at Silvasa was allowed in the scrutiny assessment
completed on 29-03-2005. It is noticed from Annexure `N1' clause 26 of Tax Audit
Report in form No. 3CD that the profit considered for 80IB includes scrap sale of Rs.
21,87,288/-. Since the income from scrap sales is not derived from the undertaking, it
does not qualify for deduction u/s. 80IB. the disallowance of such income by the
assessing officer in the scrutiny assessment of the assessee for the A.Y. 2004-05 was
also upheld by the CIT(Appeals). Thus the deduction u/s. 80IB has been allowed in
excess on the income of Scrap sale, which is not allowable to the assessee. I have
reason to believe that the income chargeable to the tax, to the extent of excess
deduction allowed u/s. 80IB of Rs. 2187288/- has escaped assessment and hence, in
my opinion, it is a fit case for initiating proceedings u/s. 147 of the IT Act, 1961"
6. From the above, it is clear that there was no failure on the part of the assessee-
company to disclose fully and truly material facts necessary for assessment. AO has
not mentioned as how the information supplied by the assessee was factually
incorrect. Secondly, the issue of sale of scrap had been decided, as admitted by the
AO, in favour of the assessee-company, by the Tribunal, for the Assessment Year
2004-05. We are aware that res judicata is not applicable in Income-tax proceedings,
but then AO has to bring on record those facts for which he wants to deviate from the
earlier orders. We find that AO has just mentioned the principle of re-opening, but he
has nowhere mentioned those facts which could prove that principles of reopening
4 I.TA. No. 7718/Mum/2010
M/s. Monsanto India Ltd.
were applicable to the case under consideration. AO has admitted that department did
not prefer an appeal against the order of the Tribunal decided in favour of the
assessee-company. In these circumstances we are of the opinion, that re-opening of
assessment after a period of four years should be based on some reliable piece of
information and evidences. But, in the present case such reliable information is
missing. We find that FAA has allowed the appeal of the assessee-company not only
on merits, but he has also considered the legal provisions in this regard. We are of the
considered opinion that order of the FAA does not suffer from any legal infirmity.
Cases relied upon by the FAA and the AR also support our views.
Upholding the order of the FAA, we reject the Ground Nos. 1 to 3 filed by the AO.
Appeal filed by the Revenue stands dismissed.
Order pronounced in the open court on 18th September, 2012.
Sd/- Sd/-
(. / D. MANMOHAN) (] / RAJENDRA)
/VICE PRESIDENT / ACCOUNTANT MEMBER
Mumbai,
Date: 18th September, 2012
TNMM
/Copy of the Order forwarded to :
1. Appellant
2. Respondent
3. The concerned CIT (A)
4. The concerned CIT
5. DR "B" Bench, ITAT, Mumbai
6. Guard File
//True Copy//
/ BY ORDER,
/ Dy./Asstt. Registrar
, / ITAT, Mumbai
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