PPN Power Generating Company Ltd., CHENNAI V. ACIT Central Circle 1(1), CHENNAI

CO 123/CHNY/2018

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5682 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 7 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 29-11-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 22-10-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S BHARATH
• Assessee Lawyers: G BASKAR
• Keywords: Difference of opinion; Change of opinion; Set aside
• Section: 143(3); 115JB; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , , $ BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER /. I.T.A. NO. 2129/CHNY/2018 & CO. NO: 123/CHNY/2018 / ASSESSMENT YEAR : 2005-06 ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(1), CHENNAI 34. VS. M/S. PPN POWER GENERATING COMPANY LTD., II FLOOR, JHAVER PLAZA, I-A, NUNGAMBAKKAM, HIGH ROAD, CHENNAI 600 034. [PAN: AABCP 8131D] ( / APPELLANT) ( %&' /RESPONDENT & CROSS OBJECTOR) REVENUE BY : SHRI. S. BHARATH, CIT ASSESSEE BY : SHRI. G. BASKAR, ADVOCATE . /DATE OF HEARING : 29.11.2018 . /DATE OF PRONOUNCEMENT : 29.11.2018 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER : THE REVENUE FILED THIS APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-19, CHENNAI IN ITA NO. 69/17-18 DATED 24.04.2018 FOR ASSESSMENT YEAR 2005-06. :-2-: ITA NO. 2129/CHNY/2018 CO NO. 12/CHNY/2018 2. M/S. PPN POWER GENERATING COMPANY PVT. LTD., THE ASSESSEE, IS ENGAGED IN GENERATION OF ELECTRICITY, LOCATED AT NA GAPATTINAM DISTRICT. THE ASSESSEES ORIGINAL ASSESSMENT WAS COMPLETED U/ S. 143(3) DATED 29.12.2008. THIS ASSESSMENT WAS REOPENED AND THE R EASSESSMENT WAS COMPLETED ON 16.12.2011 U/S. 143(3) R.W. 147. AGAI NST THAT ORDER, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A), INTER A LIA, CHALLENGING THE VALIDITY OF REOPENING THE ASSESSMENT U/S. 147. THE CIT(A) DISMISSED THE APPEAL HOLDING THAT THE ESSENTIAL CRITERIA, FOR REO PENING AN ALREADY COMPLETED ASSESSMENT AFTER FOUR YEARS, I.E., THE FA ILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE FACTS NECESSARY FOR ASSESSMENT BEING ABSENT, THE REASSESSMENT MADE IS NOT LEGALLY CORRECT. WHEN REASSESSMENT ITSELF HAS NO LEGS TO STAND, THE OTHER GROUNDS RAISED BY THE ASSESSEE HAVE BECOME INFRUCTUOUS AND HENCE DISMISSE D THE APPEAL. 3. AGGRIEVED, THE REVENUE FILED THIS APPEAL WITH TH E FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS ERRONEOUS ON FACTS OF THE CASE AND IN LAW. 2. THE LD. CIT(A) ERRED IN HOLDING THAT THE REOPENI NG OF THE ASSESSMENT IS NOT LEGALLY CORRECT AND THEREBY DELET ING THE ADDITION OF THE RS.67,24,00,000/- MADE WHILE COMPUTING BOOK PRO FIT U/S 115JB OF THE IT ACT BY THE ASSESSING OFFICER ON ACCOUNT OF P ROVISIONS MADE TOWARDS OTHER OPERATIONAL EXPENSES IN THE ASSESSM ENT FOR AY 2005- 06 PASSED U/S 143(3) R.W.S. 147 OF THE INCOME TAX A CT, 1961, IN THE ASSESSEES CASE. 2.1 THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT T HERE IS NO PRESUMPTION ANYWHERE IN THE PROVISIONS OF THE ACT T O THE EFFECT THAT :-3-: ITA NO. 2129/CHNY/2018 CO NO. 12/CHNY/2018 JUST BECAUSE THE P & L ACCOUNT WAS PREPARED BY THE ASSESSEE AND CERTIFIED BY THE STATUTORY AUDITORS, THE ASSESSING OFFICER HAS TO ACCEPT THE P&L ACCOUNT WITHOUT VERIFYING THE CONTENTS OF T HE ACCOUNT FROM THE ANGLES OF THE INCOME TAX ACT AND INCOME TAX RUL ES. 2.2 THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT P ROVISIONS ARE TOWARDS UNASCERTAINED LIABILITIES AND FURTHER THE A SSESSEE COMPANY ITSELF IN ITS NOTES ON ACCOUNTS HAD CLEARLY STATED THAT THE PROVISIONS IS MADE TOWARDS ANTICIPATED CONTRACT LOSSES AND THE PR OVISION IS MADE ON A CONSERVATIVE BASIS AND AS SUCH IT IS CLEAR THAT T HE PROVISION IS ONLY CONTINGENT IN NATURE AND NOT AN ASCERTAINED LIABILI TY AND WARRANTS ADDITION TO THE BOOK PROFIT RETURNED AS PER THE PRO VISION OF SECTION 1153B (2). 2.3 THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT T HERE IS NO CHANGE OF OPINION INVOLVED, THERE IS A CLEAR ESCAPEMENT OF INCOME AND AS SUCH ACTION OF THE AO IN REOPENING THE ASSESSMENT IS LEG ALLY CORRECT. 3. FOR THESE GROUNDS AND ANY OTHER GROUND INCLUDING AMENDMENT OF GROUNDS THAT MAY BE RAISED DURING THE COURSE OF THE APPEAL PROCEEDINGS, THE ORDER OF LEARNED CIT(APPEALS) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. AND THE ASSESSEE FILED A CROSS OBJECTION WITH THE F OLLOWING GROUNDS: 1.1 THE ORDER OF THE COMMISSIONER OF INCOME TAX (A PPEALS) CANCELLING THE REASSESSMENT IS JUST, FAIR AND PASSE D AFTER PROPER APPRECIATION OF FACTS AND LAW. 1.2 THE COMMISSIONER OF INCOME TAX (APPEALS) HAS RI GHTLY ALLOWED THE APPEAL SINCE THE RE-OPENING OF THE ASSESSMENT U/S. 148 WAS BEYOND FOUR YEARS AND HENCE BARRED BY LIMITATION PRESCRIBE D UNDER THE INCOME TAX ACT. 1.3 THE COMMISSIONER OF INCOME TAX (APPEALS) WAS RI GHT IN HOLDING THAT THE ADDITION MADE IN THE RE-ASSESSMENT WAS BAS ED MERELY ON A CHANGE OF OPINION OF THE ASSESSING OFFICER. 1.4 THE COMMISSIONER OF INCOME TAX (APPEALS) RIGHTL Y OBSERVED & RELIED ON THE DECISIONS OF THE SUPREME COURT AND OT HER HIGH COURTS. :-4-: ITA NO. 2129/CHNY/2018 CO NO. 12/CHNY/2018 2.1 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE ALSO DELETED THE ADDITION MADE TO THE BOOK PROFITS BASED ON THE DETAILED SUBMISSIONS MADE BEFORE HIM. 2.2 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE HELD THAT THE ADDITION OF RS. 67,24,00,000/- BEING THE P ROVISION FOR OTHER OPERATION EXPENSES COULD NOT BE ADDED TO THE BOOK PROFITS COMPUTATION U/S 115JB, SINCE THE SAME IS NOT A CONT INGENT LIABILITY AS ASSUMED BY THE ASSESSING OFFICER. 4. THE LD. DR CANVASSED THE CASE ON THE LINES OF GR OUNDS OF APPEAL FILED BY THE REVENUE. PER CONTRA, THE LD. AR CANVA SSED ON THE LINES OF CO, SUPRA, AND INVITED OUR ATTENTION TO THE ASSESSI NG OFFICERS LETTER DATED 01.06.2010. THE RELEVANT PORTION IS EXTRACTED AS U NDER: THE REASON FOR REOPENING THE ASSESSMENT FOR THE AS ST. YEAR 2005-06 IS GIVEN AS UNDER: FROM THE NOTES FORMING PART OF THE ACCOUNTS IN ITEM 6.2, IT IS SEEN OTHER OPERATIONAL EXPENSES INCLUDE PROVISION FOR A NTICIPATED CONTRACT LOSSES OF RS. 67,24,00,000/- ON A CONSERVATIVE BASI S IN THE NORMAL COURSE OF BUSINESS. THE LOSSES WERE STATED TO BE I N RESPECT OF PROVISION FOR ADDITIONAL FUEL, PROVISION FOR FIXED TRANSMISSION CHARGES, PROVISION FOR INTEREST RECEIVABLE, SUNDRY DEBTORS E TC. DURING THE ASSESSMENT, THE THEN ASSESSING OFFICER HAD NOT ADDE D BACK THE ABOVE AMOUNT ON THE PLEA THAT IT IS ASCERTAINED LIABILITI ES. AS PER THE BOOK PROFIT THE PROVISION WAS MADE TOWARDS ANTICIPATED C ONTRACT LOSSES AND THE PROVISIONS ARE ONLY CONTINGENT IN NATURE AND NO T AN ASCERTAINED LIABILITY. IN VIEW OF THE ABOVE, FOR THE BOOK PROFI T THE AMOUNT OF RS. 67,24,00,000/- WAS NOT ADDED BACK, WHICH ESCAPED FR OM ASSESSMENT. AND SUBMITTED THAT THE AO HAS NOT RECORDED ANY FAIL URE FROM THE PART OF THE ASSESSEE AND HENCE THE REASSESSMENT HAS BEEN PR OPERLY QUASHED AND PLEADED TO SUSTAIN THE SAME. :-5-: ITA NO. 2129/CHNY/2018 CO NO. 12/CHNY/2018 5. WE HEARD THE RIVAL SUBMISSIONS. FROM THE ABOVE, IT IS CLEAR THAT THE ASSESSMENT WAS REOPENED AFTER FOUR YEARS FROM T HE END OF THE RELEVANT ASSESSMENT YEAR. HOWEVER, FROM THE ABOVE EXTRACTED PORTION, THE AO HAS NOT RECORDED A CLEAR FINDING AS TO WHAT WAS THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS SO THAT A REASSESSMENT IS WARRANTED. HENCE, AS HELD BY THE LD. CIT(A), THE VERY ESSENTIAL CRITERIA FOR REOPENING THE ASSESSMENT IS ABSENT. THEREFORE, THE CONCLUSION DRAWN BY THE LD. CIT(A) DOES NOT REQUIRE ANY INTERFERENCE. THE REVENUES APPEAL IS DISMISSED, CONSEQUENTIALLY, THE CO IS DISMISSED. 6. IN THE RESULT, THE REVENUES APPEAL AND THE ASSE SSEES CO ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH NOVEMBER, 2018 AT CHENNAI. SD/- ( ) (GEORGE MATHAN) ! /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) ! /ACCOUNTANT MEMBER /CHENNAI, 3 /DATED: 29 TH NOVEMBER, 2018 JPV .%5676 /COPY TO: 1. '/ APPELLANT 2. %&' /RESPONDENT 3. 9 ) (/CIT(A) 4. 9 /CIT 5. 6% /DR 6. /GF