Both The Assessment Years Were Earlier Before v. With The Aforestated Questions Of Law

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON TUESDAY, THE 20TH DAY OF FEBRUARY 2018 / 1ST PHALGUNA, 1939 ITA.No. 12 of 2009 AGAINST THE ORDER IN ITA 705/2007 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 11.09.2008 APPELLANT(S)/APPELLANT IN ITA: M/S.BABY MARINE EXPORTS, KALUVILA, THANGASSERY P.O., KOLLAM, REPRESENTED BY ITS, MANAGING PARTNER, MR.K.C.BABU. BY ADVS.SRI.ANIL D. NAIR SMT.NIVEDITA A.KAMATH SRI.J.R.PREM NAVAZ RESPONDENT(S)/RESPONDENT IN ITA:: ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, KOLLAM. R BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 20-02-2018,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA NO.12/2009 APPENDIX APPELLANTS ANNEXURES: ANNEXURE A: TRUE COPY OF THE ASSESSMENT ORDER FOR 1987-88 ISSUED BY THE ASSISTANT COMMISSIONER DEPARTMENT TO THE APPELLANT DT 08.01.2008 ANNEXURE B: TRUE COPY OF THE ORDER ISSUED BY THE COMMISSIONER OF INCOME TAX (APPEALS) TO THE APPELLANT DT 09.05.2007ANNEXURE C: TRUE COPY OF THE TRIBUNAL ORDER DT 29.08.2008 ISSUED TO THE APPELLANT RESPONDENTS ANNEXURES: NIL TRUE COPY P.A TO JUDGE jma K. Vinod Chandran & Ashok Menon, JJ - - - - - - - - - - - - -- - - - - - - - - - - - - - - - ITA Nos. 12 of 2009 & 30 of 2009 - - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 20[th] day of February, 2018 J U D G M E N T K. Vinod Chandran, J The above appeals are concerned with the assessment years 1987-88 and 1988-89. The issue is onlywith respect to the re-opening of assessment and whetherthe appellate order issued in the earlier year wouldconstitute information under Section 147 of the Income TaxAct. The questions of law are re-framed as follows: (i)Ought not the Tribunal have held that the re-opening ofassessment under Section 147 of the Income Tax Act, 1961is a mere change of opinion ? and; (ii) Ought not the Tribunal have held that the appellateorder relied on by the Assessing Officer to carry out there-opening would not constitute an information ascontemplated under Section 147 of the Income Tax Act? 2. Both the assessment years were earlier before this Court in ITR Nos.107 to 110 of 1999. The twoquestions urged before this Court were as to theentitlement of the deduction under Section 80 HHC and thesustainability of the re-opening carried out under Section147. A Division Bench of this Court by judgment dated18.01.2007 found, on the question of entitlement underSection 80 HHC, that the same can be availed of only ifthere is a certificate produced from the export house as hasbeen held by the Hon'ble Supreme Court in Sea PearlIndustries v. C.I.T. (SC) (247 ITR 578). The secondquestion was directed to be re-considered by theCommissioner of Appeals. On re-consideration, theCommissioner of Appeals found that the appellate order asrelied on by the Assessing Officer constituted informationand that re-assessment is permissible under Section 147.The assessee appealed to the Tribunal which confirmed theorder of re-assessment. The assessee is before this Court ITA.Nos.12/2009 & 30/2009 with the aforestated questions of law. ITA.Nos.12/2009 & 30/2009 with the aforestated questions of law. 3. For both the assessment years 1987-88 and1988-89, the original assessment was completed on02.03.1990. The deduction claimed under Section 80 HHCwas allowed despite there being no certificate producedfrom the export house/trading house. The said allowancewas contrary to the CBDT's Circular No. 466 dated14.08.1986. After completion of assessment, the AssessingOfficer was served with an appellate order of theCommissioner of Income Tax (Appeals) for the assessmentyears 1985-86 and 1986-87, wherein dis-allowance ofdeduction under Section 80 HHC, in the absence ofproduction of certificate of export house, in contravention ofthe mandate as prescribed by the Circular, was affirmed.The said order in appeal was received by the AssessingOfficer on 09.03.1990. The said appellate order in theearlier assessment years, was taken as an information ascontemplated under Section 147 to proceed with the ITA.Nos.12/2009 & 30/2009 re-opening. 4. The learned Counsel for the assessee relied on a decision of the Full Bench of the Delhi High Court in[2002] 256 ITR 1 (Delhi) (Commissioner of Income-taxv. Kelvinator of India Ltd.), which has been affirmed bythe Hon'ble Supreme Court in [2010] 320 ITR 561 (SC)(Commissioner of Income-tax v. Kelvinator of IndiaLtd.). The dismissal of appeal to the Supreme Court, by therevenue, was in a Civil Appeal in which event, thejudgment of the Delhi High Court would stand merged withthat of the Hon'ble Supreme Court. Reliance is also placedon another decision of the Delhi High Court in [2002]253ITR 83 (Delhi) (Bawa Abhai Singh v. DeputyCommissioner of Income-tax) which was relied on by theFull Bench in the earlier cited decision. 5. The learned Standing Counsel for theGovernment of India (Taxes) relies on the decisions of theHon'ble Supreme Court in Commissioner of Income-tax, ITA.Nos.12/2009 & 30/2009 : 5 : U.P v. Gurbux Rai Harbux Rai [1972] 83 ITR 86 and[1967] 64 ITR 218,United Mercantile Co.Ltd v.Commissioner of Income-tax, Kerala, [1979] 116 ITR158 (Commissioner of Income-tax, Kerala v. KeralaState Industrial Development Corporation Limited).6. The questions to be answered are whether theAssessing Officer had initiated proceedings under Section147 merely on a change of opinion and whether theappellate order could be taken as an information ascontemplated under Section 147. Kelvinator of IndiaLtd. (Supra) as decided by the Full Bench of Delhi HighCourt and affirmed by the Hon'ble Supreme Court setaside the re-assessment made under Section 147 on theground of a mere change of opinion. Therein, onre-assessment, the expenses incurred on the maintenanceof guest houses were disallowed and added to the totalincome. There were other grounds alleged for re-openingof assessment, but the dis-allowance was confined to that of ITA.Nos.12/2009 & 30/2009 expenses incurred on maintenance of guest houses. TheAssessing Officer purportedly relied on the order of theCommissioner of Appeals for the assessment years 1986-87.The assessment year which was considered by the DelhiHigh Court was 1987-88. The Court found that theappellate order relied on in the final re-assessment orderwas passed on 27.07.1990, while the re-opening was on20.04.1990. Hence the appellate order was not theinformation on which the reopening was initiated. In thatcase, the re-opening was found to have been attempted onthe basis of a tax audit report which was available in thefiles of the Income-tax officer at the time of originalassessment itself. Hence the reopening was a mere changeof opinion was the finding. It was held by the Delhi HighCourt in Paragraph 22 that “...It is one thing to say that theAssessing Officer had received information from an auditreport which was not before the ITO, but it is another thingto say that such information can be derived by the material ITA.Nos.12/2009 & 30/2009 ITA.Nos.12/2009 & 30/2009 which had been supplied by the assessee himself”(sic).When the audit report was already available with the ITOwhen the original assessment was completed, the samecannot be relied upon to make a re-assessment; since thenthe reopening would be vitiated for reason of it being amere change of opinion. 7. Apposite would be reference to Gurbux Rai Hurbux Rai (Supra) wherein on the strength of anappellate order, proceedings were taken under Section 10Aof the Act for assessment of excess profits tax liability by are-opening carried out under Section 15 of the Act as itexisted then. Section 15 of the Act, as it existed thenprovided, if in consequence of definite information, whichhas come into possessions of the Excess Profits Tax Officer,he discovers that profits on any chargeable accountingperiod have escaped assessment, etc. he may at any timeserve a notice containing all or any of the requirementswhich may be included in a notice under Section 13 and ITA.Nos.12/2009 & 30/2009 may proceed to assess or reassess the amount of such profits liable to excess profit tax. On the specific defenseraised as to no definite information having come intopossession of the Tax Officer, from which it could bededuced that profit of the relevant chargeable accountingperiod had escaped assessment; the Hon'ble Supreme Courtsaid so: “We are unable to agree. The Appellate Assistant Commissioner had made an order onOctober, 10, 1947, in the proceedings relatingto the assessment of income-tax of theassessee that there had been only a partialpartition in respect of the movable property(business) of Gurbuxrai. That was certainlyon information which came into the possessionof the Excess Profits Tax Officer not because ofany change of opinion by himself but becauseof the decision of the Appellate Assistant ITA.Nos.12/2009 & 30/2009 Commissioner in the income-tax proceedings. This Court has consistently held that theIncome-tax Officer would have jurisdiction toinitiate proceedings under Section 34(1)(b) ofthe Income-tax Act, 1922, which is in parimateria with section 15 of the Act if he actedon information received from the decision ofthe superior authorities or the Court even inthe assessment proceedings (RS BansilalAbirachand Firm v. Commissioner of Income-tax and Assistant Controller of Estate Duty,Hyderabad v. Nawab Sir Osman Ali KhanBahadur, Hyderabad.” 8. In Kerala State Industrial Development Corporation Limited, a deduction was allowed by theIncome-tax officer in a particular year and the same wasdis-allowed in a subsequent year by another officer. On anappeal filed by the assessee for the subsequent year the ITA.Nos.12/2009 & 30/2009 appellate authority confirmed the dis-allowance made bythe ITO. On the basis of the appellate order of thesubsequent year, the assessment by which deduction wasallowed, was reopened, which was upheld by the DivisionBench of this Court. 9. In the context of the declaration made by theHon'ble Supreme Court and this Court it cannot be saidthat the re-assessment was merely based on a change ofopinion. The appellate authority had for the other yearsaffirmed the findings of the Assessing Officer that adeduction under Section 80 HHC could be claimedsuccessfully only if there were produced certificate of theexport house. Admittedly, no certificates were produced bythe assessee and inadvertently the Assessing Officer hadallowed the deduction for the two years which are beforeus. On receipt of information by way of the appellate order,the Assessing Officer realised the escapement ofassessment in the assessment years 1987-88 and 1988-89. ITA.Nos.12/2009 & 30/2009 The appellate order has already been held to be comingwithin the ambit of information as contemplated underSection 147. Hence there could be no vitiating factor foundin the re-assessment having been carried out. ITA.Nos.12/2009 & 30/2009 The appellate order has already been held to be comingwithin the ambit of information as contemplated underSection 147. Hence there could be no vitiating factor foundin the re-assessment having been carried out. We answer the questions of law in favour of therevenue and against the assessee and reject the appealswithout any order as to costs. Sd/- K. Vinod Chandran, Judge jma Sd/- Ashok Menon, Judge