Smt. Asha Devi Khera, Baroda V. The ACIT.,Circle-4, Baroda

ITA 1031/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76788 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 24-04-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 08-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Keywords: Reopening of assessment; Difference of opinion; Change of opinion; Capital expenditure
• Section: 143(3); 234B; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH BEFORE: SRI D.K TYAGI, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT M EMBER SMT. ASHA DEVI KHERA C/O SAMEER LINKAGES PVT LTD, 623, GIDC ESTATE, MAKARPURA, BARODA, PAN: AGLPK1185K (APPELLANT) VS ACIT, CIRCLE-4, AAYAKAR BHAVAN, RACE COURSE, BARODA (RESPONDENT) ASSESSEE BY: SRI MILIN MEHTA, A.R. REVENUE BY: SRI P.L. KUREEL, SR.D.R. DATE OF HEARING : 24-04-2014 DATE OF PRONOUNCEMENT : 30-05-20 14 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER:- THIS IS THE ASSESSEES APPEAL AGAINST THE ORDER OF LD. CIT(A)-III BARODA DATED 04-11-2010. 2. THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPE AL:- ITA NO. 1031/AHD/2011 ASSESSMENT YEAR 2004-05 I.T.A NO.1031 /AHD/2011 A.Y. 2004-05 PAGE NO SMT. ASHA DEVI KHERA VS. ACIT 2 1. THE LEARNED COMMISSIONER OF INCOME TAX ( APPEALS) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF AO IN REOPEN ING THE ASSESSMENT U/S 147 OF THE ACT., AND COMPLETING THE ASSESSMENT, COM MENCED UNDER INVALID EXERCISE OF POWER U/S 147 DESPITE THE FACT THAT ASSESSMENT U/S 143(3) WAS FRAMED IN THE CASE OF APPELLANT ON 31.03 .2004. 2. THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF AO IN REOPEN ING THE ASSESSMENT BASED ON CHANGE OF OPINION WHICH IS NOT VALID UNDER LAW. 3. THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF AO IN DISALL OWING EXPENDITURE INCURRED ON MOULDS & DIES AMOUNTING TO RS. 1,97,360 /- ON THE GROUND THAT THE SAME ARE CAPITAL EXPENDITURE. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF AO IN CHARGI NG INTEREST U/S 234B OF THE ACT. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF AO IN CHARGI NG INTEREST U/S 234D OF THE ACT. 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF AO IN INITIA TING PENALTY U/S. 271(1)(C) OF INCOME TAX ACT, 1961. 3. GROUND NO. 1 AND 2 RELATE TO REOPENING OF THE AS SESSMENT U/S. 147 OF THE ACT. 4. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FILED RETURN OF INCOME ON 30-09-2004 DECLARING TOTAL INCOME OF RS. 45,35,820/ -. THE CASE WAS SELECTED FOR SCRUTINY AND ALL THE DETAILS CALLED FO R BY THE AO WERE FILED BEFORE HIM. REGULAR BOOKS OF ACCOUNT WERE ALSO PRO DUCED. THE ASSESSMENT WAS COMPLETED U/S. 143(3) AT A TOTAL INC OME OF RS. 47,42,055/- ON 25-09-2006. ON 13-03-2009 NOTICE U/S. 148 WAS S ERVED ON THE ASSESSEE. VIDE LETTER DATED 13-04-2009 ASSESSEE ST ATED THAT THE ORIGINAL I.T.A NO.1031 /AHD/2011 A.Y. 2004-05 PAGE NO SMT. ASHA DEVI KHERA VS. ACIT 3 RETURN FILED ON 30-09-2009 MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE U/S. 148 OF THE ACT. THE ASSESSEE REQUESTED TO FURNISH REASONS FOR REOPENING OF ASSESSMENT AND ALSO OBJECTED TO THE IS SUE OF NOTICE U/S. 148 OF THE ACT. THE REASONS RECORDED FOR REOPENING OF ASSESSMENT WERE GIVEN AND AFTER OBTAINING THE OBJECTIONS ASSESSING OFFICE R PASSED ORDER REJECTING THE OBJECTIONS AND WENT TO PASS AN ORDER U/S. 143(3 ) R.W.S. 147. 5. BEFORE LD. CIT(A) ASSESSEE CHALLENGED THIS REOP ENING ON THE GROUND THAT REOPENING OF ASSESSMENT IS NOT PERMISSI BLE ON ACCOUNT OF CHANGE OF OPINION DESPITE THE FACT THAT REOPENING I S DONE WITHIN THE PERIOD OF 4 YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR . 6. LD. CIT(A) HOWEVER CONFIRMED THE ACTION OF AO 7. BEFORE US LEARNED COUNSEL OF THE ASSESSEE SUBMIT TED THAT ASSESSMENT WAS REOPENED ON ACCOUNT OF FOLLOWING TWO REASONS: (A) AS PER SCHEDULE 2 ON CREDIT PROVISION, THERE I S UNPAID LIABILITY OF SALES TAX OF RS. 6,181/-. NO EVIDENCE TO SHOW T HAT THE SAME HAS BEEN PAID BEFORE FILING THE RETURN OF INCOME U/S. 1 39(1) IS AVAILABLE ON RECORD AS PER THE REASONS RECORDED FOR RE-OPENIN G OF THE ASSESSMENT BY THE AO. (B) THE ASSESSEE HAS DEBITED RS. 2,19,534/- TOWARDS TOOLS AND SPARES WHICH INTER ALIA INCLUDES MOULDS AND DIES OF RS. 1,97,360/-. THIS IS A CAPITAL EXPENDITURE. THE ASSESSEE HERSEL F HAS SHOWN MOULDS AND DIES IN THE FIXED ASSETS AND CLAIMED DEP RECIATION AT THE RATE OF 25%. WHICH WERE NOT VALID FOR REOPENING THE ASSESSMENT. IN RESPECT OF FIRST REASON IN RESPECT OF UNPAID SALES TAX OF RS. 6,181, THE EVIDENCE THAT THE SAME HAS BEEN PAID BEFORE FILING THE RETURN OF INCO ME U/S. 139(1) WAS I.T.A NO.1031 /AHD/2011 A.Y. 2004-05 PAGE NO SMT. ASHA DEVI KHERA VS. ACIT 4 SHOWN TO AO AND NO ADVERSE VIEW WAS TAKEN ON THIS A CCOUNT BY AO. AS FAR AS THE SECOND REASON ABOUT THE DEBIT ENTRY OF R S. 2,19,534/- TOWARDS BILLS AND SPARES IS CONCERNED, IT WAS CONTENDED THA T DURING THE ASSESSMENT PROCEEDINGS AO MADE INQUIRY AND ONLY AFT ER OBTAINING THE REPLY OF THE ASSESSEE, NO ADDITION WAS MADE BY THE AO. THEREFORE, IT WAS A CASE OF MERE CHANGE OF OPINION ON THE PART OF THE AO WHILE INITIATING REOPENING PROCEEDINGS OF ASSESSMENT WHICH IS NOT PE RMISSIBLE IN LAWS. FOR MAKING THIS SUBMISSION, HE TOOK US TO THE RELEV ANT PAGES OF PAPER BOOK TO SHOW THAT INQUIRY IN RESPECT OF EXPENSES OF RS. 2,19,534/- WAS MADE AND ASSESSEE REPLIED TO THIS INQUIRY OF THE AO . LEARNED COUNSEL OF THE ASSESSEE ALSO PLACED RELIANCE ON THE DECISION O F AHMEDABAD TRIBUNAL IN THE CASE OF M/S STARTRONIC INVESTMENT CONSULTANT S PVT. LTD V. ITO VIDE ITA NO. 2196/AHD/2002 DATED 9 TH FEB, 2006 WHEREIN ON SIMILAR FACTS REOPENING OF ASSESSMENT WAS HELD INVALID AND THE OR DER PASSED BY AO WAS QUASHED. HE THEREFORE PRAYED THAT THE ORDER PA SSED BY AO AND SUSTAINED BY LD. CIT(A) MAY KINDLY BE HELD VOID AB INITIO. LD. DR HOWEVER RELIED ON THE ORDERS OF LOWER AUTHORITIES. 8. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD, WE FIND THAT DURING THE ASSESSMENT PROCEEDINGS AO VIDE ITS NOTIC E DATED 18 TH JULY, 2006 RAISED FOLLOWING QUERY AT SERIAL NO. 10 OF THI S NOTICE: 10. YOU HAVE DEBITED IN THE PROFIT AND LOSS ACCOUN T A SUM OF RS. 2,19,534/- TOWARDS TOOLS AND SPARES. PLEASE SHOW C AUSE WHY THE SAID EXPENDITURE SHOULD NOT BE TREATED AS A CAPITAL EXPENDITURE. PLEASE OFFER YOUR COMMENTS. ASSESSEE REPLIED TO THIS QUERY VIDE ITS REPLY DATED 26-08-2004 AS UNDER:- I.T.A NO.1031 /AHD/2011 A.Y. 2004-05 PAGE NO SMT. ASHA DEVI KHERA VS. ACIT 5 11. IN RESPECT TO TOOLS AND SPARES, WE SUBMIT THAT WE ARE INVOLVED IN THE BUSINESS OF HIGHLY MECHANICAL PRODUCT. WE NEED TOOLS AND SPARES FOR THE MANUFACTURING OF PRODUCT. LIFE OF THESE TO OLS ARE VERY SHORT AND THEREFORE THE SAME IS REQUIRED TO BE TREATED AS REV ENUE EXPENSES. IN THIS EXPENSES ASSESSEE HAS PAID RS. 1,97,360/-, THE SE MOULDS ARE PREPARED ACCORDING TO THE ORDER RECEIVED FROM THE C USTOMER. IT IS NOT POSSIBLE TO US THIS MOULD IN OTHER PRODUCTS. FURTH ER, LIFE OF THIS MOULD IS SHORT AND THEREFORE WE SUBMIT THAT THESE ARE REVENU E EXPENSES AND PROPERLY CLAIMED BY US. AFTER SUCH EXAMINATION NO ADDITION WAS MADE THEREBY THESE EXPENSES WERE TREATED AS REVENUE EXPENSES. ON THESE UNDISPU TED FACTS, THE RATIO OF THE DECISION OF THE TRIBUNAL RELIED BY THE ASSESSEE IN THE CASE OF M/S STARTRONIC INVESTMENT CONSULTANTS PVT LTD VS. ITO ( SUPRA) IS SQUARELY APPLICABLE WHEREIN ON SIMILAR FACTS HONBLE TRIBUNA L HAS HELD THAT REOPENING OF THE ASSESSMENT WAS NOT JUSTIFIED AND T HE SAME WAS HELD TO BE INVALID BY OBSERVING AS UNDER: 5. WE HAVE HEARD THE PARTIES AND CONSIDERED THE SUBMISSIONS. IT IS TRUE THAT THE ASSESSMENT HAS BEEN REOPENED WITHIN Y EARS FROM THE END OF THE ASSESSMENT YEAR AND IN VIEW OF THE DECISION OF THE GUJARAT HIGH COURT IN THE CASE OF PRAFFUL CHUNILAL PATEL [236 ITR 832] WHEREIN IT WAS HELD THAT ASSESSMENT CAN BE RE-OPENED EVEN IN CASES WHERE TH ERE HAS BEEN COMPLETE DISCLOSURE OF ALL THE RELEVANT FACTS NECES SARY FOR ASSESSMENT AND THE WORDS ''ESCAPED ASSESSMENT' ARE APT TO COVER TH E CASE OF DISCOVERY OF A MISTAKE IN THE ASSESSMENT CAUSED BY EITHER AN ERR ONEOUS CONSTRUCTION OF THE TRANSACTION OR DUE TO ITS-NON-CONSIDERATION OR CAUSED BY A MISTAKE OF LAW APPLICABLE TO SUCH TRANSFER OR TRANSACTION. BUT IN THE PRESENT, IN OUR OPINION, IS NOT A ONE OF THAT TYPE. HERE , THE ASSESSING OFFICER HAS SPECIFICALLY ASKED FOR THE DETAILS AND THE ASSESSEE HAS SUBMITTED THE DETAILS OF PAYMENTS AND ONLY THEREAFTER THE ASSESSM ENT HAS BEEN COMPLETED. IN THESE CIRCUMSTANCES, TO SAY THAT THE RE WAS NO CONSCIOUS DECISION HAS BEEN TAKEN IN THE ASSESSMENT ORDER MAY NOT BE PROPER. THE CASE, IN OUR OPINION, WOULD FALL WITHIN THE GARB OF ANOTHER DECISION OF GUJARAT HIGH COURT IN THE CASE OF GARDEN SILK (P) L TD VS. DCIT [151 CTR 533] WHEREIN THE COURT QUASHED THE REOPENING WHERE IN THE ORIGINAL ASSESSMENT, THE ASSESSEE'S CLAIM WAS ACCEPTED. IN T HAT CASE, IT SEEMS THAT THE ASSESSING OFFICER HAS ACCEPTED THE CLAIM O F THE ASSESSEE AFTER CONSIDERING THE DECISION RENDERED BY THE GUJARAT HI GH COURT IN ANOTHER CASE AND THEREAFTER THE ASSESSMENT WAS REOPENED A S THE CLAIM WAS NOT I.T.A NO.1031 /AHD/2011 A.Y. 2004-05 PAGE NO SMT. ASHA DEVI KHERA VS. ACIT 6 RIGHTLY ALLOWED. IN VIEW OF THIS FACT, THE CIT(A) C ONCLUDED THAT THE ASSESSING OFFICER CONSCIOUSLY APPLIED HIS MIND IN T HE ORIGINAL ASSESSMENT AND THAT WAS THE REASON FOR QUASHING THE REASSESSME NT. BUT IN THE PRESENT CASE, ACCORDING TO HIM, THE ASSESSEE HAD FU RNISHED INFORMATION ABOUT THE IMPUGNED PAYMENT BEFORE THE ASSESSING OFF ICER (WITHOUT GIVING ANY REASONS REGARDING ITS ALLOWABILITY AS REVENUE E XPENDITURE) AND CONSIDERS THAT AFTER CONSCIOUS APPLICATION OF MIND, THE ASSESSING OFFICER HAS ACCEPTED THE CLAIM. THE COURT IN THE CASE OF G ARDEN SILK MITTS (P) LTD (SUPRA) CLEARLY STATED THAT THAT CONSISTENT VIEW I S THAT EVEN AFTER AMENDMENT OF SEC. 147 MERE CHANGE OF OPINION DOES N OT CONFER JURISDICTION TO THE ITO TO INITIATE PROCEEDINGS FOR REASSESSMENT MERELY BY RESORTING TO EXPLANATION1 ON THE BASIS OF CHANGE OF OPINION. THE ASSESSING OFFICER MADE INQUIRY ABOUT THE CLAIM OF T HE ASSESSEE AND ASKED FOR THE DETAILS, WHICH WERE FURNISHED. THEREF ORE, IN CIRCUMSTANCES, IN OUR OPINION, IT CANNOT .BE STATED THAT IT WAS NO T A CONSCIOUS DECISION OF THE ASSESSING OFFICER TO ALLOW CLAIM OF THE ASSESSI NG OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE. SIMILARLY, THE DELHI HIGH C OURT IN THE CASE OF JINDAL PHOTO FILMS LTD. VS. DCIT [234 ITR 170] HELD THAT W HERE A CLAIM HAS BEEN CONSIDERED IN THE ORIGINAL ASSESSMENT WITHOUT ANY F URTHER MATERIAL ON RECORD, IT CANNOT BE REOPENED AND IT WOULD AMOUNT TO CHANGE OF OPINION, WHICH IS NOT PERMISSIBLE EVEN AFTER THE AMENDMENT A ND THE CASE FALLS WITHIN THE FOUR YEARS TIME LIMIT. WE, THEREFORE, H OLD THAT REOPENING WAS NOT PROPER AND QUASH THE SAME. EVEN OTHERWISE, WE FIND THAT THE EXPENDITURE ON MEMBERSHIP FEES PAID TO VADODARA STOCK EXCHANGE IS COVERED BY THE MADRAS HIGH COURT IN THE CASE OF CIT VS. & VENKATAS UBRAMANIAM [207 CTR (MAD) 88] WHEREIN THE COURT HELD THAT THE PAYME NT OF ADMISSION FEES AS WELL AS CONTRIBUTION TO INFRASTRUCTURE DEVELOPME NT FUND TO ACQUIRE THE MEMBERSHIP OF COIMBATORE STOCK EXCHANGE AND TO CARR Y ON THE BUSINESS AT THE TERMINAL OF THE STOCK EXCHANGE IS REVENUE E XPENDITURE. IN VIEW OF THIS ALSO THE REOPENING DOES NOT SEEM TO BE JUSTIFI ED. WE ACCORDINGLY, HOLD THAT REOPENING OF ASSESSMENT WAS INVALID AND C ANCEL THE ASSESSMENT. IN VIEW OF THE ABOVE, WE HAVE NO HESITATION IN HOLD ING THAT REOPENING OF THE ASSESSMENT IN THIS CASE WAS NOT PROPER AND THE ORDE R PASSED BY AO IS HEREBY QUASHED AS VOID AB-INITIO. GROUND NO. 1 & 2 ARE ALLOWED. 9. IN VIEW OF OUR ABOVE DECISION, OTHER GROUNDS TAK EN BY ASSESSEE DO NOT REQUIRE ANY ADJUDICATION. I.T.A NO.1031 /AHD/2011 A.Y. 2004-05 PAGE NO SMT. ASHA DEVI KHERA VS. ACIT 7 10. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (N.S. SAINI) ( D.K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 30/05/2014 AK / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,