Shri Balaji Communications, CHENNAI V. ACIT Non Corporate Circle 20(1), CHENNAI

CO 9/CHNY/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 3318 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 11-11-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 20-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AV R SREENIVASAN
• Assessee Lawyers: D PALANIVEL
• Keywords: Reopening of assessment; Depreciation; Period of limitation; Cost of acquisition; Difference of opinion; Condonation of delay; Revised return; Reason to believe; Change of opinion; Revenue expenditure; Reassessment proceedings; Capital expenditure; TDS; Set aside
• Section: 143(3); 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.2073/CHNY/2018 [ [ / ASSESSMENT YEAR : 2008-09 ASSISTANT COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE-20(1), CHENNAI 600 034 VS. M/S. SHRI BALAJI COMMUNICATIONS, NO.3/6, MGR SALAI VIJAYARAGHAVAPURAM, CHENNAI 600 093. [PAN : ABIFS 0605 A] ( / APPELLANT) ( / RESPONDENT) & C.O. NO.9/CHNY/2019 ./ ITA NO.2073/CHNY/2018 [ [ / ASSESSMENT YEAR : 2008-2009 M/S. SHRI BALAJI COMMUNICATIONS NO.3/6, M.G.R. SALAI, VIJAYARAGHAVAPURAM CHENNAI 600 093. PAN : [ABIFS 0605 A] V. ASSISTANT COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE 20(1) AAYAKAR BHAVAN 121, M. G. ROAD, CHENNAI 600 034 ( / APPELLANT) ( / RESPONDENT) /REVENUE BY : SHRI A.V.R. SREENIVASAN, JCIT /ASSESSEE BY : SHRI PHILIP GEORGE AND SHRI D. PALANIVEL, ADVOCATES / DATE OF HEARING : 14.08.2019 / DATE OF PRONOUNCEMENT : 11.11.2019 2 I.T.A. NO. 2073/CHNY/2018 C.O. NO.9/CHNY/2019 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE REVENUE FILED THIS APPEAL N I.T.A. NO.2073/CHNY/2018 AGAINST THE ORDER THE COMMISSIONER OF INCOME TAX (APPEALS)-14, CHENNAI IN ITA NO.376/CIT(A)-14/2016-17; DATED 27.03.2018 AND ON WHICH THE ASSESSEE FILED THE C.O. NO.09/CHNY/20119. 2. M/S. SHRI BALAJI COMMUNICATION, THE ASSESSEE IS A FIRM DOING BUSINESS OF BUYING AND SELLING FILM SATELLITE COPY RIGHTS FROM 2006 ONWARDS. ITS ASSESSMENT FOR THE ASSESSMENT YEAR 2008-09 WAS COMPLETED U/S.143(3) ON 28.12.2010. SUBSEQUENTLY, THE ASSESSING OFFICER REOPENED THE ASSESSMENT U/S.147 BY ISSUING NOTICE U/S.148 OF THE ACT AND COMPLETED THE REASSESSMENT U/S.143(3) R.W.S147 ON 30.03.2016 TREATING THE FILM RIGHTS PURCHASED BY THE ASSESSEE AS AN ASSET, INTANGIBLE ONE, AND ACCORDINGLY ADDED THE PURCHASE PRICE OF THE FILM RIGHTS TO THE RETURNED INCOME BUT ALLOWED DEPRECIATION AT THE RATE OF 25% OF THE PURCHASE VALUE. 3. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) CHALLENGING THE VALIDITY OF THE REOPENING OF THE ASSESSMENT AS WELL AS ON MERITS. THE LEARNED CIT(A) 3 I.T.A. NO. 2073/CHNY/2018 C.O. NO.9/CHNY/2019 UPHELD THE VALIDITY OF THE REOPENED ASSESSMENT BUT ALLOWED THE APPEAL ON MERIT. AGGRIEVED AGAINST THAT ORDER, THE REVENUE FILED THE ABOVE AND THE ASSESSEE FILED THE CROSS-OBJECTION. THE RESPECTIVE GROUNDS ARE EXTRACTED AS UNDER: GROUNDS RAISED BY THE REVENUE : 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION MADE TOWARDS CAPITALIZING THE FILM RIGHTS PURCHASED TO THE TUNE OF RS.25,71,19,000/-. 2.2. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT FILM RIGHTS BY VIRTUE OF THEIR CHARACTER HAS AN ENDURING BENEFIT TO THE ASSESSEES BUSINESS AND IS CAPITAL EXPENDITURE. 2.3. THE LEARNED CIT(A) FAILED TO NOTE THAT AFTER THE LEGISLATURE SPECIFICALLY INTRODUCED SEC.32(1)(II) CONFERRING DEPRECIATION ON INTANGIBLE ASSETS, FILM SATELLITE RIGHT WHICH FALLS WITHIN THE GROUP OF INTANGIBLE ASSETS AND IT IS ONLY CAPITAL IN NATURE. 2.4. HAVING REGARD TO THE SUPREME COURTS DECISION IN THE CASE OF ASSAM BENGAL CEMENT (27 ITR 34) THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ACTION OF THE ASSESSING OFFICER. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. OBJECTIONS OF THE ASSESSEE RAISED IN THE CO : 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN AS MUCH AS IT IS AGAINST THE CROSS OBJECTOR IS OPPOSED TO LAW AND CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. REOPENING OF ASSESSMENT U/S.147: 2.1. THE COMMISSIONER OF INCOME TAX (APPEALS) GROSSLY ERRED IN UPHOLDING THE REOPENING OF ASSESSMENT U/S.147. 2.2. REOPENING BEYOND 4 YEARS BARRED BY LIMITATION: 2.2.1. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT SINCE THE REOPENING IS BEYOND THE PERIOD OF 4 YEARS FROM THE END OF THE ASSESSMENT YEAR, THE SAME IS BARRED BY LIMITATION. 2.2.2. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT SINCE THE PERIOD OF LIMITATION AVAILABLE FOR REOPENING OF ASSESSMENT IS FOUR YEARS AS PRESCRIBED IN PROVISO TO SECTION147, THE IMPUGNED NOTICED ISSUED AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR IS ILLEGAL AND WITHOUT JURISDICTION AND BARRED BY LIMITATION. 2.2.3. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT FOR ASSUMING JURISDICTION U/S.147 BEYOND 4 YEARS ON THE GROUND OF ESCAPED ASSESSMENT, THE ASSESSING OFFICER 4 I.T.A. NO. 2073/CHNY/2018 C.O. NO.9/CHNY/2019 HAS TO ADDUCE OR ALLEGE ANY FAILURE ON THE PART OF THE ASSESSEE TO MAKE FULL AND TRUE DISCLOSURE OF THE FACTS AND MATERIALS. 2.2.4. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE CROSS OBJECTOR HAD FAILED AND FURNISHED FULL AND COMPLETE DISCLOSURE OF FACTS AND MATERIALS IN ITS ORIGINAL ASSESSMENT PROCEEDINGS AS IS EVIDENT FROM ASSESSMENT ORDER U/S.143(3). 2.2.5. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE ASSESSING OFFICER COULD EXERCISE A JURISDICTION U/S.147 AFTER FOUR YEARS ONLY ON THE GROUND OF ANY ESCAPEMENT BY REASON OF FAILURE ON THE PART OF THE ASSESSEE EITHER TO FILE A RETURN OR TO DISCLOSE TRULY AND FULLY THE MATERIAL FACTS NECESSARY FOR ASSESSMENT. 2.2.6. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE THEREFORE APPRECIATED THAT THE ISSUANCE OF NOTICE U/S.148 ITSELF IS BARRED BY LIMITATION AND ILLEGAL AND THE SUBSEQUENT REASSESSMENT PROCEEDINGS ARE VOID AB INITIO. 2.3. JURISDICTION REOPENING IS INVALID WHEN THERE IS NO FAILURE ON THE PART OF ASSESSEE TO DISCLOSE ANY MATERIAL FACTS: 2.3.1. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE ASSESSING OFFICER ERRED IN EXERCISING JURISDICTION U/S.147 USING THE SAME MATERIALS MADE AVAILABLE BEFORE HIM DURING THE COURSE OF SCRUTINY ASSESSMENT U/S.143(3) OF THE INCOME TAX ACT, 1961. 2.3.2. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT FIRST PROVISO TO SECTION 147 BARS THE REOPENING THE ASSESSMENT IN THE CIRCUMSTANCES OF THE CROSS OBJECTORS CASE. 2.3.3. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE CROSS OBJECTOR HAD DISCLOSED THE ENTIRE DETAILS PERTAINING TO PURCHASE AND SALE OF FILM SATELLITE RIGHTS IN THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS U/S.143(3) AND THIS AMOUNTS TO FULL AND TRUE DISCLOSURE OF ALL MATERIALS FACTS NECESSARY FOR THE ASSESSMENT. 2.3.4. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE THEREFORE HELD THAT THE ASSESSING OFFICER HAS NO REASON TO BELIEVE THAT THE INCOME HAD ESCAPED ASSESSMENT TO EXERCISE HIS JURISDICTION U/S.147. 2.4. CHANGE OF OPINION: 2.4.1. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THERE ARE NO FRESH MATERIALS AVAILABLE WITH THE ASSESSING OFFICER TO EXERCISE JURISDICTION U/S.147 AND REOPENING MERELY ON A CHANGE OF OPINION, IS AGAINST TH3E MANDATE OF THE PROVISIONS OF INCOME TAX ACT, 1961. 2.4.2. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE PREDECESSOR ASSESSING OFFICER HAD CATEGORICALLY APPLIED HIS MIND AND FORMED AN OPINION THAT THE EXPENDITURE WAS NOT CAPITAL IN NATURE AND DISALLOWED THE SAME U/S.40(A)(IA). 2.4.3. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE GENUINENESS AND NATURE OF THE EXPENDITURE WAS NOT DOUBTED BY THE PREDECESSOR ASSESSING OFFICER, BUT THE 5 I.T.A. NO. 2073/CHNY/2018 C.O. NO.9/CHNY/2019 SAME WAS DISALLOWED ONLY FOR WANT OF DEDUCTION OF TAX AT SOURCE BY APPLYING PROVISIONS OF SECTION 40(A)(IA). 2.4.4. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE ASSESSING OFFICER MUST NECESSARILY RECORD NOT ONLY HIS REASON TO BELIEVE BUT ALSO THE DEFAULT OR FAILURE OF ASSESSEE TO DISCLOSE THE MATERIAL FACTS FULLY AND TRULY. 2.4.5. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THERE IS NO CASE FOR REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT THAT TOO WHEN THERE IS NO DEFAULT OR FAILURE OF ASSESSEE TO DISCLOSE THE MATERIAL FACTS FULLY AND TRULY NECESSARY FOR ASSESSMENT. 2.4.6. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT SINCE NO NEW MATERIAL HAD COME TO THE POSSESSION OF THE ASSESSING OFFICER TO HAVE REASON TO BELIEVE AND THE REOPENING BEING BASED ONLY ON THE MATERIALS ALREADY AVAILABLE ON RECORD AMOUNTS TO MERE CHANGE OF OPINION. 2.4.7. THE COMMISSIONER OF INCOME TAX (APPEALS) THEREFORE OUGHT TO HAVE HELD THAT THE REOPENING OF ASSESSMENT BY THE ASSESSING OFFICER IS BAD, ILLEGAL AND INVALID TOTO AS THE SAME IS BASED ON MERE CHANGE OF OPINION AND NOT ON REASON TO BELIEVE. 2.5. DOCTRINE OF MERGER: 2.5.1. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT SINCE THE ORIGINAL ASSESSMENT U/S.143(3) HAD MERGED WITH THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), DOCTRINE OF MERGER APPLIES IN THIS CASE. 2.5.2. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE REOPENING OF ASSESSMENT U/S. 147 WAS NOT VALID WHEN THE ORDER OF ORIGINAL ASSESSMENT STOOD MERGED WITH ORDER OF CIT(A) AND HAD NO INDEPENDENT EXISTENCE OF ITS OWN AND THE ASSESSMENT COULD NOT HAVE BEEN REOPENED IN RESPECT OF THE SAME ITEMS. 2.6. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE IN THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, ANNULLED THE REASSESSMENT ORDER IN TOTO. 3. THE CROSS OBJECTOR CONTESTS ALL THE FINDINGS OF FACT AND LAW AND ALL PRESUMPTIONS MADE AGAINST THE CROSS OBJECTOR BY THE COMMISSIONER OF INCOME TAX (APPEALS) 4. THE CROSS OBJECTOR CRAVES LEAVE TO FILE ADDITIONAL GROUNDS OF CROSS OBJECTOR AT OR BEFORE THE TIME OF HEARING. 4. THE CROSS-OBJECTION WAS FILED AFTER A DELAY OF 116 DAYS. THE ASSESSEE FILED THE AFFIDAVIT FOR CONDONATION OF DELAY IN FILING THE CROSS OBJECTION PLEADING, INTER ALIA, THAT ON RECEIPT OF THE DEPARTMENTS FORM NO.36 AND GROUNDS OF APPEAL, THE PARTNERS LEFT IMMEDIATELY TO HIS 6 I.T.A. NO. 2073/CHNY/2018 C.O. NO.9/CHNY/2019 HOMETOWN, DUE TO THE FAMILY HEALTH AND FINANCIAL PROBLEMS FACED AND HAD MISSED TO SEND THE SAME TO THE COUNSEL BY OVERSIGHT. ONLY ON 16.02.2019 WHEN THE COUNSEL ENQUIRED ABOUT THE APPEAL, THE PARTNER REALIZED THAT THE APPEAL PAPERS WERE NOT FORWARDED. HOWEVER, SINCE THE PARTNER WAS UNWELL, HE WAS NOT ABLE TO FORWARD THE SAME IMMEDIATELY TO THE COUNSEL AND THEREFORE THE APPEAL PAPERS WERE HANDED OVER TO THE COUNSEL ON 19.02.2019. THEREAFTER, THE COUNSEL PREPARED THE CROSS OBJECTION AND FILED THE SAME, DUE TO WHICH THE DELAY OF 116 DAYS OCCURRED WHICH WAS NOT DELIBERATE AND NEITHER WILLFUL NOR WANTON. THEREFORE, IT WAS PRAYED THAT THE DELAY OF 116 DAYS MAY BE CONDONED AND THE CROSS OBJECTION BE ADMITTED AND DUE JUSTICE IS RENDERED. 5. WE HEARD THE RIVAL SUBMISSIONS AND CONDONE THE DELAY IN FILING THE CROSS OBJECTION IN THE INTERESTS OF JUSTICE. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE PRESENTED THE CASE ON THE LINES OF GROUNDS OF APPEAL. PER CONTRA, THE AUTHORIZED REPRESENTATIVE OBJECTED THE REOPENING ON THE GROUNDS OF CROSS OBJECTION, EXTRACTED, SUPRA. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE RELEVANT MATERIALS. IN THIS CASE, THE ORIGINAL ASSESSMENT WAS COMPLETED 7 I.T.A. NO. 2073/CHNY/2018 C.O. NO.9/CHNY/2019 U/S. 143(3) ON 28.02.2010 FOR THE ASSESSMENT YEAR 2008-09 ON 31.03.2015. THEREAFTER, THE ASSESSING OFFICER INVOKED THE JURISDICTION U/S.147 AND ISSUED NOTICE U/S.148 ON 31.03.2015, I.E. AFTER FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. IN SUCH CASE, THE ASSESSING OFFICER IS BOUND TO RECORD THE REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT FOR THAT ASSESSMENT YEAR. 7.1 IN ORDER TO CONSIDER THE SAME, THE RELEVANT PORTION OF THE ASSESSMENT ORDER IS EXTRACTED AS UNDE R: 2. DURING THE ASSESSMENT PROCEEDINGS, IT WAS FOUND THAT THE ASSESSEE HAD DEBITED A SUM OF RS.25,71,19,000/- TOWARDS PURCHASE OF SATELLITE RIGHTS OF FILMS AND PROGRAMMES. THE RIGHTS WERE BOUGHT FROM VARIOUS PARTIES WITH DIFFERENT PURCHASE COSTS. ON EXAMINATION OF THE PURCHASE AGREEMENTS, IT WAS OBSERVED THAT THESE WERE ASSIGNMENTS AGREEMENTS AND OF PURCHASE AGREEMENTS. THE RIGHTS WERE ASSIGNED FOR A PERIOD OF 20 TO 25 YEARS AND IT WAS NOT A PERMANENT SALE OF SATELLITE RIGHTS OR COPYRIGHTS OF THE PROGRAMMES. THE ASSESSING OFFICER FURTHER FOUND THAT THE PARTIES TO WHOM THE ASSIGNMENT OF THE RIGHTS WAS GIVEN BY THE ASSESSEE HAD MADE TDS ON THE PAYMENTS MADE TO THE ASSESSEE U/S.194J. THE CIT(A) DELETED THE ADDITIONS MADE U/S.40(A)(IA) OF RS.2,71,19,000/-. HOWEVER, ON APPEAL BY REVENUE, THE INCOME TAX APPELLATE TRIBUNAL RESTORED THE ADDITION MADE U/S.40(A)(IA). 3. IT WAS NOTICED THAT IN ASSESSMENT: (A) THE REVISED INCOME AS PER REVISED RETURN OF RS.1,27,12,850/- WAS NOT ADDED TO THE TOTAL INCOME. WHILE COMPLETING THE ORIGINAL ASSESSMENT. (B) THE FILM RIGHTS PURCHASES TO THE TUNE OF RS.25,71,19,000/- WAS TO BE TREATED AS INTANGIBLE ASSETS INSTEAD OF CLAIMING AS REVENUE EXPENDITURE BY THE ASSESSEE. 7.2 FROM THE ABOVE, IT IS CLEAR THAT THE ASSESSING OFFICER HAS NOT RECORDED ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT FOR THAT ASSESSMENT 8 I.T.A. NO. 2073/CHNY/2018 C.O. NO.9/CHNY/2019 YEAR. THEREFORE, THE ASSESSEE CLEARLY MAKES OUT THE CASE. SINCE THE ESSENTIAL CONDITION FOR REOPENING THE ASSESSMENT U/S.147 IS ABSENT, THE REASSESSMENT MADE U/S.147 W.R.S143(3) DATED 30.03.2016 IS NOT VALID AND HENCE THE RE-ASSESSMENT ORDER IS QUASHED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. SINCE WE HAVE QUASHED THE REASSESSMENT ORDER PASSED U/S.143(3) R.W.S147, THE APPEAL FILED BY THE REVENUE HAS BECOME INFRUCTUOUS AND HENCE DISMISSED. 8. IN THE RESULT, CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. CONSEQUENTLY, THE REVENUES APPEAL IS DISMISSED AS INFRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH NOVEMBER, 2019 AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( . ) (S. JAYARAMAN) / ACCOUNTANT MEMBER /CHENNAI, /DATED, THE 11 TH NOVEMBER, 2019. IA. SR. PS /COPY TO: 1. /APPELLANT 4. /CIT, 2. /RESPONDENT 5. /DR 3. ( ) /CIT(A) 6. /GF