M/s. Shree Ram Piston & Rings Ltd., New Delhi V. DCIT, New Delhi

CO 386/DEL/2012

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1198 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 29 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 03-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 19-08-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 05-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S R DINODIA
• Keywords: Reopening of assessment; Depreciation; Tangible material; Difference of opinion; Change of opinion; Revenue expenditure; Reassessment proceedings; Capital expenditure
• Section: 143(3); 147; 148

Judgement Text

ITA NO. 422/DEL/2012 & CO NO. 386/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G , NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER I.T.A. NO. 422 /DEL/201 2 A.Y. : 200 3 - 0 4 DCIT, CIRCLE 8(1), ROOM NO. 163, CR BUILDING, NEW DELHI VS. SHREE RAM PISTON & RINGS LTD., 23, KASTURBA GANDHI MARG, NEW DELHI 110 001 (PAN: AAACS0229G) (APPELLANT) (RESPONDENT) AND CROSS OBJECTION NO. 386/DEL/2012 (IN ITA NO. 422 /DEL/201 2 A.Y. : 200 3 - 0 4 SHREE RAM PISTON & RINGS LTD., 23, KASTURBA GANDHI MARG, NEW DELHI 110 001 (PAN: AAACS0229G) VS. DCIT, CIRCLE 8(1), ROOM NO. 163, CR BUILDING, NEW DELHI (APPELLANT) (RESPONDENT) DEPARTMENT BY : S HRI SUJIT KUMAR, SR. DR ASSESSEE BY : SH. S.R. DINODIA, CA DATE OF HEARING : 1 9 - 0 8 - 201 5 DATE OF ORDER : 03 - 0 9 - 201 5 ORDER PER H.S. SIDHU : J M THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE EMANATE OUT OF THE ORD ER DATED 09 . 1 1 .201 1 PASSED BY THE LD. CIT(A) - XI, NEW DELHI RELEVANT TO ASSESSMENT YEAR 200 3 - 0 4 . ITA NO. 422/DEL/2012 & CO NO. 386/DEL/2012 2 2. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THE REVENUE S APPEAL: - 1. WHETHER THE LD. CIT(A) ERRED IN LAW AND ON FACTS OF THE CASE IN ALLOWING THE DEPRECIATION ON NETWORKING PROJECT @80% AGA INST @25% ALLOWED BY THE AO. 2. WHETHER LD. CIT(A) ERRED IN LAW AND ON FACTS OF THE CASE IN HOLDING THAT THE EXPENDITURE INCURRED BY THE ASSESEE ON TOTAL PRODUCTIVITY MAINTENANCE PROGRAMMED AND ISO 9001 CERTIFICATION IS REVENUE EXPENDITURE. 3. THE APPELL ANT CRAVES TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN ITS CROSS OBJECTION: - 1. THAT THE CLT(A) H A D GROSSLY ERRED IN LOW AND ON TH E FACTS AND IN THE CIRCUMSTANCES OF THE APPELLATE CASE IN CONFIRMING THE ACTION OF THE A.O. IN RE - OPENING THE ASSESSMENT U/S 147/148 OF THE INCOME TAX ACT. 2. THAT THE CLT(A) HAS GROSSLY ERRED IN LOW IN HOLDING THAT THE RE OPEN ING BY THE AO U/S 147 WAS JUS TIFIED AND THAT THE A.O. H A D APPLIED HIS MIND. 3. THAT THE CLT(A) OUGHT TO H A VE HELD THAT THERE WAS NO FAILURE ON THE PORT OF THE APPELLATE IN FURNISHING THE FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR THE COMPUTATION OF THE INCOME ITA NO. 422/DEL/2012 & CO NO. 386/DEL/2012 3 AND THAT PROV ISO U/S/ 147 A RE APPLICABLE AND REOPENING IS BAD IN L A W. 4. THAT THE CLT(A) F A ILED TO APPRECIATE THAT THE RE - OPENING OF ASSESSMENT H A D BEEN DONE ONLY TO RE - EXAMINE CERTAIN ISSUES WHICH WERE ORIGINALLY EX AMINED UNDER THE SCRUTINY ASSESSMENT PROCEEDING AND THE S A ME IS BAD IN L A W AND IS NOT PERMISSIBLE IN L A W. 5. THAT THE AFORESAID GROUNDS OF CROSS OBJECTIONS ORE WITHOUT PREJUDICE TO ONE AND ANOTHER AND APPELLANT CRAVES LEAVE TO ODD, AMEND, ALTER OR CHANGE THESE GROUNDS AT THE TIME OF HEARING. 4. THE BRIEF FACTS OF THE CASE ARE THAT A NOTICE U/S. 148 OF THE INCOME TAX ACT, 1961 WAS ISSUED TO SHRIRAM PISTONS & RINGS LTD. ON 10.3.2010 AFTER RECORDING REASONS FOR ISSUE OF NOTICE, AS REQUIRED BY SECTION 148(2) OF THE INCOME TAX ACT. THE NECESSARY AP PROVAL AS REQUIRED BY SECTION 151 OF THE I.T. ACT WAS OBTAINED BEFORE ISSUE OF THE NOTICE. THE ASSESSEE FILED A LETTER DATED 29.7.2010 STATING THAT THE ORIGINAL RETURN OF INCOME FILED WITH THE OFFICE OF ACIT, CIRCLE8(1), DELHI ON 28.11.2003 AT THE T OTAL INCOME OF RS. 23,70,77,407/ - BE TREATED AS RETURN FILED IN COMPLIANCE WITH NOTICE ISSUED U/S. 148 OF THE ACT. 4.1 THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING VARIOUS AUTOMOBILE COMPONENTS LIKE PISTON, PISTON RINGS, ENGINE VALUES ETC. AT ITS FACTORY LOCATED AT GHAZIABD. THE REASONS RECORDED FOR REOPENING THE CASE IS REPRODUCED HEREUNDER: - ITA NO. 422/DEL/2012 & CO NO. 386/DEL/2012 4 THE ASSESSMENT WAS COMPLETED U/S 143(3) ON 23.01.2006 AT A TOTAL INCOME OF RS. 27,42,30,520/ - . SUBSEQUENTLY IT HAS COME TO THE NOTICE THA T THE ASSESSEE HAS THE FOLLOWING EXPENSES: 1) THE ASSESSEE HAS CLAIMED RS. 92,26,993/ - ON ACCOUNT OF SCIENTIFIC RES EARCH AND DEVELOPMENT AS REVENUE IN NATURE. THIS EXPENSE BEING OF CAPITAL NATURE, THE ASSESSEE OUGHT TO HAVE TREATED IT AS CAPITAL EXPENDITU RE. 2) THE DEPRECIATION AT THE RATE OF 80% IS CLAIMED ON NETWORKING P ROJECT EXPENSES AMOUNTING TO RS. 1,23,66,127/ - . THE RATE ALLOWABLE IS 25% AS THE ASSETS FALL IN THE PLANT AND MACHINERY BLOCK. THEREFORE AN EXCESS CLAIM OF RS. 61,25,299/ - AS DEPRECIATI ON WAS CLAIMED BY THE ASSESSEE. 3. THE ASSESSEE HAS ALSO CLAIMED RS. 57,57,625/ - ON ACCOUNT OF TPM EXPENSES / ISO 9000 EXPENSES AS REVENUE N NATURE. THE TPM EXPENDITURE PERTAINS TO EXPENDITURE INCURRED IN INCREASING THE PRODUCTIVITY OF WORKMEN. THIS EXP ENSE ALSO OF CAPITAL NATURE, THE ASSESSEE OUGHT TO HAVE TREATED AS CAPITAL EXPENDITURE. THE ESCAPEMENT OF INCOME HAS BEEN CLEARLY ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE TO TRULY AND FULLY DISCLOSE ALL THE MATERIAL FACT NECESSARY FOR ASSESSMENT . THUS IT IS A FIT CASE FOR INITIATION OF PROCEEDINGS U/S. 148 OF THE I.T. ACT, 1961. 4.2 THE CASE WAS FINALIZED U/S. 147/143(3) OF THE INCOME TAX ACT, 1961 AT AN INCOME OF RS. 29,84,16,101/ - AND VARIOUS ADDITIONS WERE MADE AGAINST THE ASSESSEE VIDE AS SESSMENT ORDER 1.11.2010. ITA NO. 422/DEL/2012 & CO NO. 386/DEL/2012 5 5. AGGRIEVED WITH THE SAME, ASSESSEE FILED THE APPEAL BEFORE THE LD. CIT(A) WHO VIDE IMPUGNED ORDER DATED 9.11.2011 ALLOWED THE APPEAL THE ASSESSEES. 6. NOW BOTH THE REVENUE & ASSESSEE ARE IN APPEAL/CROSS OBJECTION BEFORE T HE TRIBUNAL . 7. AT THE TIME OF HEARING LD. DR RELIED UPON THE ORDER PASSED BY THE AO U/S. 147/143(3) OF THE I.T. ACT AND THE CONTENTION RAISED BY THE REVENUE IN THE GROUNDS OF APPEAL. 8. LD. COUNSEL OF THE ASSESSEE CONTROVERTED THE ARGUMENTS ADVANCED BY THE LD. DR AND RELIED UPON THE ORDER PASSED BY THE LD. CIT(A) AND REITERATED THE CONTENTION RAISED IN THE CROSS OBJECTION THAT LD. CIT(A) HAS WRONGLY UPHOLDING THE ACTION OF THE AO REGARDING REOPENING OF ASSESSMENT U/S. 147/148 OF THE INCOME TAX ACT, 1961. IN SUPPORT OF ITS CONTENTION, THE ASSESSEE FILED THE SYNOPSIS WHICH READ AS UNDER: - 1. THE ASSESSEE HAS FILED CROSS OBJECTION AGAINST THE ORDER OF THE CIT(A) UPHOLDING THE ACTION OF THE AO REGARDING REOPENING OF ASSESSMENT U/S. 147/148 OF THE I NCOME TAX ACT, 1961. 2. IT WAS SUBMITTED BEFORE THE CIT(A) THAT REOPENING HAD BEEN DONE MERELY ON CHANGE OF OPINION IN AS MUCH AS THAT IN THE ORIGINAL ASSESSMENT MADE U/S. 143(3) OF THE INCOME TAX ACT, THE AO HAD APPARENTLY APPLIED HIS MIND AND HAD RAI SED QUERIES WITH REGARD TO THE ITEMS WHICH HAVE BEEN IDENTIFIED BY THE AO IN HIS NOTICE U/S. 147/148 OF THE INCOME TAX ACT. ITA NO. 422/DEL/2012 & CO NO. 386/DEL/2012 6 3. IT WAS SPECIFICALLY POINTED OUT THAT WITH REGARD TO THE EXPENDITURE ON TOTAL PRODUCTIVITY MAINTENANCE / ISO 9001, THE ASSESSEE VIDE ITS LETTER DATED 21 ST NOVEMBER, 2005 HAD EXPLAINED THE NATURE OF THESE EXPENSES IN RESPONSE TO THE QUERY BY THE AO. 4 . SIMILARLY IT HAD BEEN POINTED OUT BY THE ASSESSEE IN THE SAME LETTER THAT THE AO HAS REQUIRED TO EXPLAIN AS TO HOW THE DEPRECIATION ON POLLUTION CONTROL EQUIPMENT, IS ALLOWABLE @ 100%. THIS CLEARLY SHOWS THAT THE AO HAS APPLIED HIS MIND - AND HAS CARRIED OUT A DETAILED SCRUTINY WITH REGARD TO THE DEPRECIATION CHART ON EACH ITEM. IT WAS FURTHER SUBMITTED THAT IN ANY CASE DEPRECIATION CHA RT IS A PART OF TAX AUDIT REPORT AND DEPRECIATION CLAIMED AS PER THE INCOME TAX RULES IS REQUIRED TO BE ATTACHED WITH THE TAX AUDIT REPORT, WHICH HAD BEEN DULY ATTACHED AND WAS AVAILABLE WITH THE AO AT THE TIME OF ORIGINAL ASSESSMENT. NO NEW FACTS HAD COME TO THE KNOWLEDGE OF THE AO WHICH COULD GIVE HIM A BELIEF THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147/148 OF THE INCOME TAX ACT. 5, THE LEARNED CIT(A) HAS RELIED UPON THE JUDGEMENT OF HON'BLE SUPREME COURT I N THE CASE OF RAJESH JHAVERI STOCK BROKERS (P) LTD. 291 ITR 500 (S C ) TO UPHOLD THE ACTION OF THE AO. IT IS RESPECTFULLY SUBMITTED THAT JUDGEMENT ITA NO. 422/DEL/2012 & CO NO. 386/DEL/2012 7 OF HON'BLE SUPREME COURT WAS IN DIFFERENT CONTEXT OF REOPENING WHEN ORIGINAL ASSESSMENT W AS NOT U/S 143(3) OF T HE INCOME TAX ACT. THE FACTS OF THAT JUDGEMENT ARE DISTINGUISHABLE FROM FACTS OF ASSESSEE IN APPEAL. 6. THEREFORE THE CROSS OBJECTIONS RAISED BY THE ASSESSEE NEEDS TO BE ALLOWED AND IT IS PRAYED THAT IT MAY BE HELD THAT THE REOPENING OF THE CASE WHICH WAS ORIGINALLY ASSESSED UNDER SCRUTINY VIS 143(3) IS NOTHING BUT A CHANGE OF OPINION ON THE SAME SET OF FACTS AND THE ISSUES HAVE BEEN EXAMINED IN THE ORIGINAL ASSESSMENT. 7. THEREFORE REOPENING OF ASSESSMENT BEYOND 4 YEARS WAS ILLEGAL IN VIEW OF THE FOLLOWI NG JUDGEMENTS: - KELVINATOR OF INDIA VS. CIT 256 ITR 1 (DELHI FULL BENCH) DULY APPROVED BY THE HON BLE SUPREME COURT AS REPORTED IN 320 ITR 561. - USHA INTERNATIONAL LTD. (DELHI HIGH COURT FULL BENCH) AS REPORTED IN 348 ITR 485 . 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RELEVANT RECORDS, ESPECIALLY THE ORDERS PASSED BY THE REVENUE AUTHORITIES , WRITTEN SYNOPSIS FILED BY THE ASSESSEE. FOR THE SAKE OF CONVENIENCE, FIRST WE WOULD LIKE TO DECIDE THE LEGAL ISSUE CHALLENGING THE REOPENING PROCEEDINGS RAISED IN THE CROSS OBJECTION FILED BY THE ASSESSEE. ITA NO. 422/DEL/2012 & CO NO. 386/DEL/2012 8 9.1 WE HAVE GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AS WELL AS THE CASE LAWS CITED BY THE LD. COUNSEL OF THE ASSESSEE BEFORE THE REVENUE AUTHORITIES AS WELL AS BEFORE US. WE ARE OF THE VIEW THAT REOPENING HAD BEEN DONE MERELY ON CHANGE OF OPINION IN AS MUCH AS THAT IN THE ORIGINAL ASSESSMENT MADE U/S. 143(3) OF THE I.T. ACT, THE AO HAD APPARENTLY APPLIED HIS MIND AND HAD RAISED QUERIES WITH REGARD TO THE ITEMS WHICH HAVE BEEN I DENTIFIED BY THE AO IN THIS NOTICE U/S. 147/148 OF THE INCOME TAX ACT. WE ALSO FIND THAT AO HAS NO FRESH MATERIAL TO FORM HIS OPINION REGARDING ESCAPEMENT OF ASSESSMENT AND HE HAS ALSO NOT FOUND ANY TANGIBLE MATERIAL TO RECORD THE REASONS FOR REOPENIN G OF THE ASSESSMENT OF THE ASSESSEE. IT IS MERELY A CHANGE OF OPINION WHICH IS NOT PERMISSIBLE UNDER THE LAW AS WELL AS ACCORDING TO THE VARIOUS DECISIONS RENDERED BY THE HON BLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. KELVINATOR OF INDIA LIMITED IN APPEAL NOS. 2009 - 2011 OF 2003 REPORTED IN 320 ITR 561 AND USHA INTERNATIONAL LTD. [2012] 348 ITR 485 THE REASSESSMENT IS INVALID ON THE PART OF THE AO AND ALSO ON CONFIRMING THE SAME ON THE PART OF THE LD. CIT(A). BY THESE JUDGMENTS THE REOPENIN G OF ASSESSMENT BEYOND 4 YEARS WAS ALSO ILLEGAL. WE ALSO FIND CONSIDERABLE COGENCY IN THE CONTENTION RAISED BY ASSESSEE S COUNSEL THAT THE JUDGMENT OF THE HON BLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS (P) LTD. 291 ITR 500 (SC) WHICH THE AO AS WELL AS LD. CIT(A) HAS RELIED UPON IS DISTINGUISHABLE TO THE FACTS OF THE PRESENT CASE, AS IT WAS IN DIFFERENT CONTEXT OF RE OPENING WHEN ORIGINAL ASSESSMENT WAS NOT U/S. 143(3) OF THE I.T. ACT. 9. 2 IN VIEW OF THE AFORESAID FACTS AND CIRCUMSTANCES, AS EXPLAINED ABOVE, WE ARE OF THE VIEW THAT BOTH THE AUTHORITIES BELOW HAVE GONE WRONG IN DECIDING THE REOPENING AS VALID. HOWEVE R, IN VIEW OF THE AFORESAID DISCUSSIONS AND THE PRECEDENTS RELIED UPON , AS AFORESAID ITA NO. 422/DEL/2012 & CO NO. 386/DEL/2012 9 IT IS ESTABLISHED THAT THAT IN THE PRESENT CASE THE ISSUE REOPENING OF ASSESSMENT IS INCORRECT AND INVALID. THEREFORE, WE QUASH THE ORDERS OF THE AUTHORITIES BELOW ON T HIS LEGAL ISSUE IS DECIDE THE SAME IN FAVOR OF THE ASSESSEE AND AGAINST THE REVENUE BY ALLOWING THE CROSS OBJECTION FILED BY THE ASSESSEE. 9. 3 SINCE WE HAVE ALREADY QUASHED THE REASSESSMENT PROCEEDINGS AS AFORESAID, RAISED IN THE CROSS OBJECTION, IN OUR CONSIDERED OPINON, THERE IS NO NEED TO ADJUDICATE THE ISSUES ON MERITS , HENCE, THE REVENUE S APPEAL HAS BECOME INFRUCTUOUS AND THE SAME IS DISMISSED AS SUCH. 10 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE STAND ALLOWED. ORDER PRONOUNCED IN THE O PEN C OURT ON 03 / 9 /20 1 5 . SD/ - SD/ - [ O.P. KANT ] [ H.S. SIDHU ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 03 / 9 /201 5 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES