M/s. Angre Port Private Ltd., Ratnagiri V. Principal Commissioner of Income-tax : 2,

ITA 1025/PUN/2016

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4880 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 12-10-2020
• Assessment Year: 2011-2012
• Appeal Filed On: 16-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KK MISHRA
• Keywords: Capital asset; Revenue expenditure; Capital expenditure
• Section: 143(3); 13; 37; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE (THROUGH VIRTUAL COURT) BEFORE SHRI INTURI RAMA RAO, AM AND SHRI S. S. VISWANETHRA RAVI, JM . / ITA NO.1025/PUN/2016 / ASSESSMENT YEAR : 2011-12 M/S. ANGRE PORT PRIVATE LTD., SANDE LAVGAN, PO- JAIGAD, TAL: RATNAGIRI, RATNAGIRI-415614. PAN : AABCJ5401A ....... / APPELLANT / V/S. PR. CIT-2, KOLHAPUR. / RESPONDENT ASSESSEE BY : SHRI MIHIR NANIWADEKAR REVENUE BY : SHRI K. K. MISHRA / DATE OF HEARING : 12.10.2020 / DATE OF PRONOUNCEMENT : 13.10.2020 / ORDER PER INTURI RAMA RAO, AM: THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF LD. PR. CIT-2, KOLHAPUR DATED 18.03.2016 FOR THE ASSESSMENT YEAR 2011-12. 2. THE APPELLANT RAISED THE FOLLOWING GROUNDS :- 1) THE LEARNED PCIT ERRED IN INVOKING JURISDICTION U/S. 263 OF THE INCOME TAX ACT, 1961 WHEN THE ASSESSMENT WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 2) THE LEARNED PCIT OUGHT TO HAVE APPRECIATED THAT THE AO HAD MADE APPROPRIATE ENQUIRIES PRIOR TO FINALIZING THE ASSESSMENT, AND THAT JURISDICTION U/S. 263 CANNOT BE INVOKED ONCE THE AO HAS TAKEN ONE OF THE COURSES PERMISSIBLE IN LAW, MERELY BECAUSE THE PCIT HOLDS A DIFFERENCE OPINION. 3) THE LEARNED PCIT FAILED TO NOTE THAT NO CAPITAL ASSET IS PURCHASED OR CAPITAL EXPENDITURE INCURRED BY THE APPELLANT. 4) THE LEARNED PCIT HAS FAILED TO NOTE THAT THE SAID EXPENDITURE IS A REVENUE EXPENDITURE RELATED TO THE PORT BUSINESS OF THE APPELLANT AND IT IS RIGHTLY CLAIMED AS DEDUCTION U/S. 37 OF THE ACT. 2 ITA NO.1025/PUN/2016 5) THE LEARNED PCIT HAS ERRED IN SETTING ASIDE THE ORDER U/S. 143(3) FOR MAKING A FRESH DE-NOVO ASSESSMENT WHEN THE FACTS OF THE CASE ARE CLEAR AND THE CASE IS LIABLE TO BE QUASHED. 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER :- THE APPELLANT IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956. IT IS ENGAGED IN THE BUSINESS OF PORT AND ALLIED ACTIVITIES AT JAIGAD, MAHARASHTRA. IT IS A JOINT VENTURE ON BOOST BASIS BETWEEN THE ASSESSEES HOLDING COMPANY AND THE GOVERNMENT OF MAHARASHTRA. THE APPELLANT HAD FILED THE RETURN OF INCOME THROUGH ELECTRONIC MODE ON 28.09.2011 DISCLOSING A LOSS OF RS.2,44,01,285/-. AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS TAKEN FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, RATNAGIRI CIRCLE, RATNAGIRI AT A LOSS OF RS.2,26,51,285/- VIDE ORDER DATED 26.03.2014 PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). WHILE DOING SO, THE ASSESSING OFFICER MADE ADDITION OF RS.17,50,000/- IN THE HANDS OF THE ASSESSEE. 4. SUBSEQUENTLY, THE COMMISSIONER OF INCOME TAX-2, KOLHAPUR ISSUED SHOW-CAUSE NOTICE DATED 09.12.2014 U/S 263 OF THE ACT CALLING UPON THE APPELLANT TO SHOW-CAUSE AS TO WHY THE ASSESSMENT ORDER SHOULD NOT BE SET- ASIDE AS THE ASSESSING OFFICER HAD FAILED TO EXAMINE THE ISSUE OF ALLOWABILITY OF LEGAL AND PROFESSIONAL EXPENSES OF RS.10 LAKHS INCURRED TOWARDS DRAFTING OF AGREEMENT IN CONNECTION WITH THE IMG FOR THE PROCUREMENT OF NEW SHIP LIFT SYSTEM. IN RESPONSE TO THE SAID SHOW-CAUSE NOTICE, THE APPELLANT VIDE HIS LETTER DATED FEBRUARY 8, 2015 SUBMITTED THAT THE VERY INITIATION OF PROCEEDINGS U/S 263 OF THE ACT IS BAD IN LAW AS THE ENTIRE ISSUE OF ALLOWABILITY OF LEGAL AND PROFESSIONAL EXPENSES OF RS.10 LAKHS WAS CONSIDERED BY THE ASSESSING OFFICER AND ASSESSING OFFICER TOOK ONLY POSSIBLE VIEW DURING THE COURSE OF ASSESSMENT PROCEEDINGS PLACING RELIANCE ON THE DECISION OF THE 3 ITA NO.1025/PUN/2016 HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GABRIEL INDIA LTD., 203 ITR 108 AND THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SUNBEAM AUTO LTD., 332 ITR 167. 5. UPON DUE CONSIDERATION OF THE EXPLANATION FILED BY THE APPELLANT, THE PR. COMMISSIONER OF INCOME TAX-2, KOLHAPUR HAD COME TO THE CONCLUSION THAT THE ASSESSMENT HAD BEEN COMPLETED WITHOUT PROPER ENQUIRIES AS REGARDS TO THE ALLOWABILITY OF THE LEGAL AND PROFESSIONAL CHARGES OF RS.10 LAKHS. ACCORDINGLY, HE CONCLUDED THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE THEREFORE SET-ASIDE THE ASSESSMENT FOR DE-NOVO EXAMINATION OF THE ISSUE TO THE ASSESSING OFFICER VIDE ORDER DATED 18.03.2016 PASSED U/S 263 OF THE ACT. 6. BEING AGGRIEVED BY THE ABOVE ORDER OF THE PR. CIT, THE APPELLANT IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. 7. BEFORE US, THE LD. AR SUBMITTED THAT DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAD CALLED FOR THE DETAILS OF THE LEGAL AND PROFESSIONAL CHARGES INCURRED VIDE ASSESSING OFFICERS LETTER DATED 08.11.2013 WHICH IS PLACED AT PAGE NO.4 AND 5 OF THE PAPER BOOK AND ASSESSEE FILED DETAILED EXPLANATION VIDE ITS LETTER DATED 26.02.2014 WHEREIN VIDE PARA 6 OF THE SAID LETTER PLACED AT PAGE NO.8 TO 12 OF THE PAPER BOOK, THE LEGAL AND PROFESSIONAL EXPENSES OF RS.10 LAKHS WAS DULY EXPLAINED TO THE ASSESSING OFFICER. IT WAS SUBMITTED THAT THE ASSESSMENT HAD BEEN COMPLETED AFTER DUE APPLICATION OF MIND BY THE ASSESSING OFFICER ON THE DETAILS FILED BY THE ASSESSEE. THUS, IT WAS SUBMITTED THAT IT WAS NOT A CASE OF NO ENQUIRY BY THE ASSESSING OFFICER ON THE ISSUE SOUGHT TO BE REVISED BY THE PR. CIT. ON THE MERITS OF THE ISSUE, HE SUBMITTED THAT THE ISSUE WAS COVERED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PR.CIT VS. AKER POWERGAS PVT. LTD. 4 ITA NO.1025/PUN/2016 VIDE INCOME TAX APPEAL (IT) NO.1276 OF 2017 DATED 20.01.2020, WHEREIN, THE HONBLE JURISDICTIONAL HIGH COURT AFTER PLACING RELIANCE ON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. BUSH BOAKE ALLEN INDIA LTD., 135 ITR 306 HELD THAT MERELY BECAUSE THE LEGAL EXPENSES WERE INCURRED IN CONNECTION WITH THE CAPITAL ASSET, THE LEGAL EXPENSES WILL NOT BE CAPITAL EXPENDITURE. HE ALSO PLACED RELIANCE ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. GERA DEVELOPMENTS PVT. LTD., 387 ITR 691 IN SUPPORT OF THE PROPOSITION THAT WHEN THE ISSUE WAS SQUARELY COVERED BY THE HONBLE JURISDICTIONAL HIGH COURT THE SAME CANNOT BE THE SUBJECT MATTER OF REVISION. HE FINALLY CONTENDED THAT THE LD. PR.CIT WAS NOT JUSTIFIED IN SETTING ASIDE THE WHOLE OF THE ASSESSMENT ORDER PLACING RELIANCE ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF ADDL. CIT VS. J. K. DCOSTA, 133 ITR 7. 8. ON THE OTHER HAND, LD. CIT-DR VEHEMENTLY SUPPORTED THE ORDER OF THE LD. PR. CIT AND SUBMITTED THAT THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF AKER POWERGAS PVT. LTD. (SUPRA) WAS NOT AVAILABLE AT THE TIME OF ASSESSMENT. HE FURTHER SUBMITTED THAT THE DECISION OF HONBLE APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT, 243 ITR 83 HAS NO APPLICATION TO THE FACTS OF THE PRESENT CASE. HE FURTHER SUBMITTED THAT THERE WAS CHANGE OF INCUMBENT AND SUBSEQUENT INCUMBENT HAD NOT CALLED FOR ANY DETAILS. THUS, IT WAS SUBMITTED THAT IT CANNOT BE SAID THAT THE ASSESSMENT ORDER WAS PASSED WITH DUE APPLICATION OF MIND BY THE ASSESSING OFFICER. FINALLY, HE SUBMITTED THAT HE HAS NO SERIOUS OBJECTION TO SET-ASIDE THE ASSESSMENT TO ASSESSING OFFICER ON THE ISSUE OF ALLOWABILITY OF THE LEGAL AND PROFESSIONAL CHARGES OF RS.10 LAKHS. 5 ITA NO.1025/PUN/2016 9. IN THE REJOINDER, THE LD. AR SUBMITTED THAT DECISION OF HIGH COURT, THOUGH RENDERED SUBSEQUENTLY TO COMPLETION OF ASSESSMENT, IT RELATES TO SPEAK THE DATE OF ASSESSMENT. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ONLY ISSUE THAT COMES UP FOR CONSIDERATION BEFORE US IS WHETHER OR NOT THE PR. CIT WERE JUSTIFIED IN EXERCISING THE POWER OF REVISION OF THE ASSESSMENT ORDER ON THE ISSUE OF ALLOWABILITY OF LEGAL AND PROFESSIONAL CHARGES OF RS.10 LAKHS INCURRED IN CONNECTION WITH THE ACQUISITIONS OF NEW SHIP LIFT SYSTEM. FROM THE PERUSAL OF PARA 6 AT PAGE NO.10 OF THE PAPER BOOK, IT IS CRYSTAL CLEAR THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAD CALLED FOR THE DETAILS REGARDING THE TRUE NATURE OF LEGAL AND PROFESSIONAL EXPENSES OF RS.10 LAKHS AND THE SAME WAS EXPLAINED BY THE ASSESSEE ON BEING SATISFIED THE ASSESSING OFFICER HAD CHOSEN NOT TO MAKE ANY ADDITION. THE FACT THAT THE ASSESSMENT ORDER DOES NOT DISCUSS ABOUT THIS ITEM OF THE EXPENDITURE DOES NOT MEAN THAT THE ASSESSING OFFICER HAD NOT EXAMINED THE ISSUE. IN THE CIRCUMSTANCES, IT CANNOT BE SAID THAT THERE WAS NO ENQUIRY BY THE ASSESSING OFFICER ON THIS ISSUE OF ALLOWABILITY OF LEGAL AND PROFESSIONAL CHARGES OF RS.10 LAKHS. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF AKER POWERGAS PVT. LTD. (SUPRA) CLEARLY HELD THAT EVEN THOUGH THE LEGAL EXPENSES ARE INCURRED IN CONNECTION WITH THE CAPITAL ASSET, THE SAME ARE ALLOWABLE AS REVENUE EXPENDITURE AFTER REFERRING TO THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF BUSH BOAKE ALLEN INDIA LTD. (SUPRA) WHEREIN THE HONBLE MADRAS HIGH COURT FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF INDIA CEMENTS LTD. VS. CIT, 60 ITR 52 HELD THAT MERELY BECAUSE THE EXPENDITURE WAS INCURRED IN CONNECTION WITH THE CAPITAL ASSETS, THE SAME CANNOT BE TREATED AS CAPITAL IN NATURE. IT IS SETTLED PRINCIPLE OF LAW THAT ONCE THE HIGH COURT LAYS DOWN PARTICULAR THE PROPOSITION OF LAW, THE SAME IS DEEMED TO BE IN EXISTENCE FROM THE INCEPTION. FACT WOULD CLEARLY 6 ITA NO.1025/PUN/2016 SUGGEST THAT THERE WAS NO MATERIAL ON RECORD TO HOLD THAT THE LEGAL AND PROFESSIONAL EXPENSES OF RS.10 LAKHS ARE NOT ALLOWABLE AS REVENUE EXPENDITURE. THEREFORE, THE LAW ENUNCIATED BY THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. (SUPRA) IS CLEARLY APPLICABLE TO THE FACTS OF THE CASE AND THE ASSESSING OFFICER ONLY TOOK ONE OF THE POSSIBLE VIEWS AND, THEREFORE, THE PR. CIT WAS NOT JUSTIFIED IN EXERCISING THE POWER OF REVISION. ACCORDINGLY, WE QUASH THE ORDER PASSED BY THE PR. CIT U/S 263 OF THE ACT. 11. SINCE WE QUASHED THE VERY ORDER PASSED BY THE PR. CIT U/S 263 OF THE ACT, THE OTHER GROUND OF APPEAL I.E. WHETHER THE PR. CIT WAS JUSTIFIED IN REMANDING THE WHOLE ASSESSMENT, BECOME INFRUCTUOUS AND ACADEMIC. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 13 TH DAY OF OCTOBER, 2020. SD/- SD/- (S. S. VISWANETHRA RAVI) (INTURI RAMA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; / DATED : 13 TH OCTOBER, 2020. SUJEET / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE PR. CIT-2, KOLHAPUR. 4 . , , , / DR, ITAT, A BENCH, PUNE. 5. / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.