2020 (4) TMI 782 - AT - Income Tax

Reopening of assessment u/s 147 - validity of reasons to believe - payment of Excise Duty on deemed export sales - HELD THAT - CIT(A) correctly relied on the Hon ble Bombay High Court s judgement in the case of Cartini India Ltd. 2009 (3) TMI 28 - BOMBAY HIGH COURT where it is held that the audit note/observation cannot constitute the opinion of the Assessing Officer when it comes to the applicability of the provisions of section 148 of the Act qua the reason to belief . The CIT(A), as per discussion given in para 5 onwards quashed the validity of the reassessment proceedings and allowed the appeal of the assessee. Addition u/s 43B - Cenvat Credit and excise duty payment - HELD THAT - The principle of consistency demands no addition is warranted on this issue of applicability of the provisions of section 43B of the Act in respect of the ED receivable from the DGFT . Whatever receivable from the DGFT, the amount is actually to be paid at the time of the purchases/imports. The appellant has only utilized the Cenvat credit for the payment of Excise duty and such the proposed action to disallow by applying the provisions of Section 43B is erroneous and the same is therefore directed to be deleted. - Decided against revenue.

Issues Involved:
1. Validity of reopening of assessment under Section 147 of the Income Tax Act.
2. Applicability of Section 43B for disallowance of ?1,45,78,655/-.
3. Appeal dismissal due to low tax effect for A.Y. 2012-13.

Issue-wise Detailed Analysis:

1. Validity of Reopening of Assessment under Section 147:
The Revenue challenged the CIT(A)'s decision on the reopening of the assessment. The CIT(A) held that the reopening was not in accordance with Section 147 of the Income Tax Act. The reasons recorded for the reopening were based solely on an audit objection without any new tangible material. The CIT(A) relied on the Bombay High Court's judgment in the case of Cartini India Ltd. vs. Addl. CIT & Anr., where it was held that reopening based on the same material constitutes a change of opinion, which is not permissible under Section 147. The Tribunal upheld the CIT(A)'s decision, stating that the reopening was invalid as it was based on the same information already available during the original assessment.

2. Applicability of Section 43B for Disallowance of ?1,45,78,655/-:
The Revenue contended that the CIT(A) erred in deleting the addition made by the Assessing Officer under Section 43B. The Assessing Officer had disallowed ?1,45,78,655/- on the grounds that the excise duty was not actually paid but was accounted for using CENVAT credit. The CIT(A) found that the assessee had utilized CENVAT credit for payment of excise duty and had claimed reimbursement from DGFT. The CIT(A) noted that similar issues in earlier years had been resolved without disallowance under Section 43B. The Tribunal agreed with the CIT(A), emphasizing the principle of consistency and noting that the excise duty receivable from DGFT did not fall within the scope of Section 43B.

3. Appeal Dismissal Due to Low Tax Effect for A.Y. 2012-13:
For the assessment year 2012-13, the Revenue's appeal was dismissed on the grounds of low tax effect. The tax effect involved was less than ?50 lakhs, as per the CBDT Circular No.17/2019, which enhanced the monetary limit for filing appeals before the Tribunal. The Tribunal dismissed the appeal without delving into the merits, allowing the Revenue the liberty to approach the Tribunal if exceptions prescribed in the Circular applied.

Conclusion:
The Tribunal dismissed both appeals by the Revenue. For A.Y. 2009-10, the reopening of assessment was deemed invalid, and the disallowance under Section 43B was not warranted. For A.Y. 2012-13, the appeal was dismissed due to low tax effect, adhering to the CBDT Circular guidelines. The Tribunal's decision was pronounced on February 20, 2020.

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