Itxa/2660/2009 Of The Commissioner Of Income Tax - 19, Mumbai v. Petroleum India International , Mumbai

itxa2660-09+1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.2660 OF 2009ANDINCOME TAX APPEAL NO.2620 OF 2009 The Commissioner of Income Tax-19, Mumbai ..Appellant. V/s. M/s. Petroleum India International, Mumbai ..Respondent. Mr. Suresh Kumar for the appellant. Mr. S.E. Dastur, senior Advocate with Vinay Sheth i/b. Mint & Conferes for the respondent. CORAM : J.P. DEVADHAR AND M.S. SANKLECHA, JJ. DATED : 19TH NOVEMBER, 2012 P.C. :- 1.These two appeals relate to the assessment years 1989-90 and 1998-99 respectively. 2.The basic question raised in these two appeals is, whether the ITAT was justified in holding that the reopening of the assessment beyond four years from the end of the relevant assessment years were bad in law. If the answer to the above question is in the affirmative, the other questions relating to the merits of the case become academic. 3.In the assessment years in question, the assessment orders under 143(3) of the Income Tax Act, 1961 ('the Act' for short) were passed by the assessing officer. However, the assessments for the said assessment years were sought to be reopened by recording the reasons which for the assessment year 1989-90 reads thus:- “ Perusal of the records shows that the assessee has claimed expenses on account of overseas compensation an amount of Rs.38,13,853/- under the head “Seconded Personnel Expenses” paid to certain personnel assigned to it to run its operation outside India. Assessee is a consortium of none oil companies and has paid foreign allowance termed as overseas compensation to employees drawn from such member companies which is no doubt assessable in the hands of the respective personnel under the head “Salary”. Section 40(a)(iii) of the I.T. Act, 1961 provides that any payment which is chargeable under the head “Salary” if it is payable outside and if tax has not been paid thereon nor deducted at source under Chapter XVII-B that amount shall not be deducted in computing the income chargeable under the head “Profits & gains of business or profession”. From the records, it is seen that no such deduction of tax had been made by the assessee responsible for payment of these amounts to the personnel working overseas. Hence, the entire amount of such overseas allowance claimed in its profit and loss account i.e. Rs.38,13,583/- is required to be disallowed and consequent addition made to the taxable income ? 4.Similar reasons were recorded for the assessment year A.Y. 1998-99. The assessee objected to the reopening of the assessment. But the objections were rejected and reassessment orders were passed in both the years in question. 5.On appeal, the CIT(A) has held that the assessee had disclosed all material facts necessary for the assessment and in the absence of any failure on the part of the assessee to furnish all material facts, the reopening of the assessment beyond four years from the end of the relevant assessment year does not appear to be proper. The CIT(A) further held that even on merits making disallowance under Section 40(a)(iii) of the Act was not justified. Being aggrieved by the aforesaid order, the revenue filed appeals but the same were dismissed by the ITAT. Challenging the aforesaid orders of the ITAT, the present appeals are filed by the revenue. 6.From the reasons recorded for reopening the assessment as well as the concurrent finding of fact recorded by the CIT(A) and 5.On appeal, the CIT(A) has held that the assessee had disclosed all material facts necessary for the assessment and in the absence of any failure on the part of the assessee to furnish all material facts, the reopening of the assessment beyond four years from the end of the relevant assessment year does not appear to be proper. The CIT(A) further held that even on merits making disallowance under Section 40(a)(iii) of the Act was not justified. Being aggrieved by the aforesaid order, the revenue filed appeals but the same were dismissed by the ITAT. Challenging the aforesaid orders of the ITAT, the present appeals are filed by the revenue. 6.From the reasons recorded for reopening the assessment as well as the concurrent finding of fact recorded by the CIT(A) and ITAT, it is evident that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. As per the proviso to Section 147 of the Act, assessments beyond four years from the end of the relevant assessment year can be reopened only if there is failure on the part of the assessee to disclose all material facts. Therefore, in the facts of the present case, the decision of the Tribunal in holding that the reopening of the assessement was bad cannot be faulted. 7.Once, it is held that the reopening of the assessment is bad in law, then, in our opinion, the CIT (A) as also the ITAT were not justified in dealing with the merits of the case. 8.Therefore, without going into the merits of the case, we hold that in the absence of any failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment, the Tribunal was justified in holding that the reopening of the assessment was bad in law. 9.Accordingly, both the appeals are dismissed with no order as to costs. (M.S. SANKLECHA, J.) (J.P. DEVADHAR, J.)