Solaris Chemtech Ltd.,, New Delhi vs Department Of Income Tax

Deputy Commissioner of Vs. M/s Solaris Chemtech Limited, Income Tax, 124, Thapar House, Circle- Circle-9(1), Janpath, Room No.163, C.R. Building, New Delhi. New Delhi. PAN : AAACB8994B. (Appellant) (Respondent)

Appellant by : Shri B.R.R. Kumar, Sr.DR. Respondent by : Shri Suresh Balani, CA.

Date of hearing : 03.03.2015 Date of pronouncement : 10.03.2015

ORDER

PER GEORGE GEORGE K, JM :

This appeal at the instance of the Revenue is directed against the order of learned CIT(A)-XII, New Delhi dated 3rd January, 2013. The relevant assessment year is 2004-05.

2. The solitary issue that is raised is whether the CIT(A) is justified in quashing the assessment proceedings initiated under Section 147 read with Section 148 of the Income-tax Act, 1961.

3. Briefly stated, the facts of the case are as follows. The assessee had filed return of income on 1st November, 2004 declaring nil income. The assessment under Section 143(3) was completed on 15th December, 2006 at `13,08,96,989/- being book profits under Section 115JB of the Act. Later, notice under Section 148 was issued on 31st 2 ITA-2299/Del/2013

March, 2011 and assessment under Section 147 read with Section 143(3) of the Act was completed by order dated 29th December, 2011 wherein Assessing Officer had disallowed expenditure amounting to `40,60,092/- by invoking the provisions of Section 14A of the Act.

4. On appeal to the CIT(A), the CIT(A) quashed the reassessment proceedings and also held that Rule 8D is not applicable for the relevant assessment year viz., 2004-05. The relevant finding of the CIT(A) reads as follows:-

"I have perused the facts stated in the assessment order as well as the facts stated by the assessee in his submissions. The return for assessment year 2004-05, was filed on November 01, 2004 declaring NIL income and the assessment was completed u/s 143(3) of the Act on December 15, 2006.

A notice under section 148 was issued on March 31, 2011. The Assessing Officer has recorded the reason for reopening as under:-

"During the year, the assessee company has received a dividend income of Rs.5,98,32,288/- which was claimed as exempted income. However, while computing the income, the assessee has not allocated any expenditure attributable to earning such exempted income.

In view of above I have a reason to believe that an amount of Rs.40,60,092/- being proportionate management expenses attributable for earning dividend income has escaped assessment within the meaning of Sec. 148 of the I.T. Act".

The reopening is beyond 4 years in this case. Further as per the proviso the Assessing Officer has no where alleged in the reasons stated above that there has been a failure on the part of the assessee to disclose truly fully all material facts necessary for assessment, the assessee cannot be alleged for not disclosing all the fact as it is apparent from the reason above, as the reasons had been taken from the assessee taken from 3 ITA-2299/Del/2013

the return of income itself hence no failure can be attributed to the assessee.

Further Rule 8D for section 14A is applicable AY 2008- 09 only where as this is AY 2004-05. Hence the reopening is bad in law. In view of the above, it is submitted that, proceedings initiated u/s 147 of the Act and completion of assessment u/s 147/143(3) of the Act is illegal and is quashed."

5. The Revenue, being aggrieved, is in appeal before us.

6. The learned DR relied on the assessment order. Learned AR present was duly heard.

7. We have heard rival submissions and perused the material on record. In this case, assessment was reopened beyond four years from the end of the assessment year. The proviso to Section 147 is applicable to the facts of the instant case since prior to issuance of notice under Section 148, scrutiny assessment under Section 143(3) of the Act was completed. Notice under Section 148 was issued recording the following reasons :-

"During the year, the assessee company has received a dividend income of Rs.5,98,32,288/- which was claimed as exempted income. However, while computing the income, the assessee has not allocated any expenditure attributable to earning such exempted income.

In view of above I have a reason to believe that an amount of Rs.40,60,092/- being proportionate management expenses attributable for earning dividend income has escaped assessment within the meaning of Sec. 148 of the I.T. Act".

8. The Assessing Officer has not recorded that income had escaped assessment for the reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment.

4 ITA-2299/Del/2013

Since the assessment has been completed beyond a period of four years and the Assessing Officer having not recorded in the notice under Section 148 that it was for the fault of the assessee in not fully and truly disclosing all material facts that income had escaped assessment, the reassessment completed is bad in law and without jurisdiction in the light of the judgment of the Hon'ble Jurisdictional High Court in the case of Shivalik Bimetal Controls Ltd. Vs. ITO - [2013] 31 Taxmann.com 132 (Delhi), wherein it was held as under:-

"The proviso to section 147 of the said Act imposes an injunction on the revenue authorities prohibiting them from taking any action beyond the said period of four years unless (i) any income chargeable to tax has escaped assessment for such assessment year, (ii) by reason of the failure on the part of the assessee (a) to file a return under section 139 of the said Act or in response to a notice issued under sub-section (1) or section 147 or section 148 of the said Act or (b) to disclose fully or truly all material facts necessary for the assessment for that assessment year.

It is not the case of the revenue that the assessee had failed to file the return under any of the provisions. Therefore, the only way in which the notice under section 148 of the said Act beyond the period of four years, could be justified would be if there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment.

It is not sufficient that the income chargeable to tax has escaped assessment but it must further be shown that this has escaped as a result of failure on the part of assessee to disclose fully and truly all material facts necessary for his assessment.

In the present case, it did not even carry a whisper that there had been a failure on the part of the assessee to fully and truly disclose all material facts necessary for the assessment. Even the order rejecting the objections does not indicate as to what material fact had not been disclosed by the assessee."

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9. The ratio of the above decision of Hon'ble Jurisdictional High Court would be squarely applicable to the facts of the assessee's case, because in the case of the assessee also, proviso to Section 147 is applicable and there is no whisper in the reasons recorded for reopening of assessment that there is any failure on the part of the assessee to disclose fully and truly all material facts. In view of the above, we, respectfully following the decision of Hon'ble Jurisdictional High Court, uphold the order of the CIT(A) and dismiss the appeal filed by the Revenue.

10. In the result, the appeal filed by the Revenue is dismissed.

Decision pronounced in the open Court on 10th March, 2015.

Sd/- Sd/- (G.D. AGRAWAL) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBER MEMBER

VK.

Copy forwarded to: -

1. Appellant : Deputy Commissioner of Income Tax, Circle-

Circle-9(1), Room No.163, C.R. Building, New Delhi.

2. Respondent : M/s Solaris Chemtech Limited, 124, Thapar House, Janpath, New Delhi.

3. CIT

4. CIT(A)

5. DR, ITAT

Assistant Registrar