Biomed Hitech Industries Limited, CHENNAI V. ACIT Corporate Circle 1(2), CHENNAI

ITA 1039/CHNY/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2540 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 27-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R ANITHAJCITD R
• Assessee Lawyers: M SANJEEV ADITHYA
• Keywords: Reopening of assessment; Business income; Depreciation; Revised return; Unabsorbed depreciation
• Section: 143(3); 115JB; 37(1); 43; 148; 54; 154

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . , , BEFORE SHRI DUVVURU RL REDDY, JUDICIAL MEMBER & SHRI S.JAYARAMAN, ACCOUNTANT MEMBER I.T.A NO.1039/CHNY/2018 ASSESSMENT YEAR : 2007-08 M/S.BIOMED HITECH INDUSTRIES LTD ., 475,OLD MAHABALIPURAM ROAD, SHOLINGANALLUR, CHENNAI 600 119. VS. ASSISTANT COMMISS IONER OF INCOME TAX, CORPORATE CIRCLE 1(2), CHENNAI. 600 034. [ PAN AAACB 1953 G ] ( !' / APPELLANT) ( #$!' /RESPONDENT) / APPELLANT BY : MR. M.SANJEEV ADITHYA , C.A /RESPONDENT BY : MS.R.ANITHA,JCIT,D.R ! / DATE OF HEARING : 28 - 01 - 20 20 '#$% ! / DATE OF PRONOUNCEMENT : 17 - 03 - 20 20 %& / O R D E R PER S.JAYARAMAN, ACCOUNTANT MEMBER THE ASSESSEE FILED THIS APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-5, CHENNAI IN ITA NO.45/CIT(A)-5/2013-14, DATED 31.01.2018 FOR THE AS SESSMENT YEAR 2007-08. 2. THE ASSESSEE, M/S.BIOMED HITECH INDUSTRIES LTD., ITA NO.1039/CHNY/2018 :- 2 -: IS ENGAGED IN THE MANUFACTURE OF MEDICAL CONSUMABLE S, FILED ITS RETURN OF INCOME ON 16.10.2007 FOR ASSESSMENT YEAR 2007-08 ADMITTING NIL INCOME AFTER SET OFF OF BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION. SUBSEQUENTLY, A REVISED RETURN WAS FI LED ON 10.09.2008. THE ORIGINAL ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 08.09.2011. SUBSEQUENTLY, THE A.O. REOPENED THE ASSESSMENT BY ISSUE OF A NOTICE UNDER SECTION.148 DATED 19.03. 2012 AND REASSESSED THE INCOME UNDER SECTION 143(3) R.W.S. 1 47 OF THE ACT ON 18.03.2013 DETERMINING THE ASSESSED TOTAL INCOME AT 17,06,62,317/- BY MAKING ADDITIONS TOWARDS DISALLOWANCE UNDER SECT ION 37(1) OF THE ACT AT 2,40,13,212/- AND WAIVER OF PRINCIPAL COMPONENT UND ER ONE TIME SETTLEMENT SCHEME (O.T.S) AT .7,74,73,061/-. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). THE LE ARNED CIT(A) DISMISSED THE APPEAL. AGAINST THE ORDERS OF THE LEA RNED CIT(A), THE ASSESSEE FILED THIS APPEAL. 3. THE LD. A.R. SUBMITTED THAT THE LD CIT(A) FAILE D TO APPRECIATE THE FOLLOWING FACTS AND CIRCUMSTANCES: I) WHEN ASSESSEES APPEAL AGAINST THE ORIGINAL ORDE R PASSED UNDER SECTION 143(3) OF THE ACT WAS PENDING BEFORE THE LE ARNED CIT(A), THE A.O. SENT A PROPOSAL TO ENHANCE THE INCOME BY ADDING PRINCIPAL COMPONENT OF LOAN WAIVER OBTAINED BY THE ASSESSEE UNDER ONE-TIME SETTLEMENT. THIS ISSUE WAS CONSIDER ED BY LEARNED ITA NO.1039/CHNY/2018 :- 3 -: CIT(A) AND PLACING RELIANCE ON THE DECISION OF HON BLE BOMBAY HIGH COURT IN THE CASE OF MAHINDRA & MAHINDRA LTD. VS. C.I.T REPORTED IN 281 ITR 501(BOM.), LEARNED CIT(A) HELD THAT THE AMOUNT OF REMISSION OF THE PRINCIPAL AMOUNT DUE TO O.T.S CANNOT BE CHARGED TO TAX AND ACCORDINGLY, HE DID NOT ACCEP T THE PROPOSAL FOR ENHANCEMENT OF THE INCOME IN THE ORDER IN I.T.A . NO. NO.548/09-10/A.III DATED 08.09.2011. AGGRIEVED AGAI NST THE ORDER OF LEARNED CIT(A), THE REVENUE PREFERRED AN A PPEAL BEFORE THE TRIBUNAL. THE D BENCH OF THIS TRIBUNAL, IN IT S ORDER NO.2001/MDS./2011 DATED 22,11,2012, INTER ALIA DISM ISSED THE REVENUES APPEAL ON THIS ISSUE. THEREFORE, THE A.O. HAD NO JURISDICTION TO REOPEN THE ASSESSMENT. FURTHER, IT WAS NOT OPEN FOR THE ASSESSING AUTHORITY TO RESORT TO THE ADDITION O N THE SAME ISSUE, AGAIN IN A DIFFERENT PROCEEDINGS UNDER SECTI ON 147 OF THE ACT, WHICH WAS EARLIER MADE UNDER SECTION.143(3) OF THE ACT, BUT DELETED BY THE CIT(A) AND CONFIRMED BY THE INCOME T AX APPELLATE TRIBUNAL (ITAT). 3.1 THE LD. A.R. FURTHER SUBMITTED THAT THE COMMIS SIONER ALSO FAILED TO APPRECIATE THE FACT THAT THE DEPARTMENT IS IN AP PEAL AGAINST THE ORDER OF ITAT BEFORE HONBLE JURISDICTIONAL HIGH CO URT AND HENCE THE A.O. HAD NO JURISDICTION TO CONSIDER THE SAME ISSUE IN RE-OPENED ASSESSMENT PROCEEDINGS. THEREFORE, THE LD. A.R. SU BMITTED THAT THE ITA NO.1039/CHNY/2018 :- 4 -: REOPENING MADE BY THE A.O. IS NOT VALID UNDER THE L AW AND HENCE, HE PLEADED THAT ASSESSMENT PROCEEDINGS SHOULD BE QUASH ED. 4. FURTHER, LD. A.R. SUBMITTED THAT THE ASSESSEE C OMPANY WAS ESTABLISHED FOR MANUFACTURE OF SURGICAL CONSUMABLE. DUE TO HIGH COST OF PRODUCTION, THE ASSESSEE COULD NOT SUSTAIN ITS P RODUCTION ACTIVITY DURING THE RELEVANT YEAR. THE PRODUCTION FACILITY W AS NOT OPERATED OTHER THAN FOR MAINTENANCE. THE LD. A.R. FURTHER SU BMITTED THAT IN ORDER TO ENABLE THE COMPANY TO MAINTAIN AND UPKEEP ITS OWN MACHINERIES, EXPENDITURE HAS TO BE INCURRED ON LABO UR, MAINTENANCE CONSUMABLES POWER ETC., TO KEEP THE INFRASTRUCTURE. IN FACT, THE INTEREST INCOME EARNED IS ON ACCOUNT OF DEPOSITS MA DE CONSEQUENT TO BUSINESS ACTIVITY AS THE COMPANY WAS REQUIRED TO MA KE DEPOSITS WITH BANKS AS MANDATED BY CUSTOMS AND EXCISE DEPARTMENTS AND THE INCOME EARNED OUT OF THAT IS ASSESSABLE AS BUSINESS INCOME ONLY. THE ASSESSEE HAS CARRIED OUT VARIOUS ACTIVITIES WHICH A SSESSEE REQUIRED TO UPKEEP THE BUSINESS INFRASTRUCTURE AND MAINTAIN THE BUSINESS SUSTAINABILITY EVEN IF NOT IN THE RELEVANT YEAR BUT IN THE FUTURE YEARS. THEREFORE, THE INTEREST AND FINANCE CHARGES INCURRE D BY THE ASSESSEE SHOULD BE ALLOWED UNDER THE HEAD BUSINESS. 4.1 THE LD. A.R. FURTHER SUBMITTED THAT THE INTER EST AND FINANCE CHARGES DISALLOWED BY THE A.O IS NOT CORREC T FOR THE REASON THAT THESE INTEREST AND FINANCE CHARGES HAVE ALREADY BEE N PAID AND ITA NO.1039/CHNY/2018 :- 5 -: THEREAFTER THE ONLY ONE TIME SETTLEMENT WAS GRANTED BY THE BANK. THEREFORE, ON MERITS ALSO, THE ADDITION MADE BY THE A.O. AND SUSTAINED BY THE LEARNED CIT(A) IS REQUIRED TO BE DELETED 5. PER CONTRA, LD. D.R. SUBMITTED THAT THE ASSESSM ENT WAS REOPENED WITHIN FOUR YEARS FROM THE END OF THE RELE VANT ASSESSMENT YEAR FOR DISALLOWING CERTAIN EXPENDITURE AS THE ASS ESSEE HAD NOT CARRIED ANY BUSINESS ACTIVITY DURING THE ABOVE YEAR . THEREFORE, THE LD. D.R SUBMITTED THAT THE REOPENING IS VALIDLY MADE AN D HENCE, HE VEHEMENTLY SUPPORTED THE ORDERS OF THE LOWER AUTHOR ITIES. 5.1 THE LD. A.R. SUBMITTED THAT THE ORIGINAL ASSES SMENT UNDER SECTION 143 WAS COMPLETED ON 24.12.2009. IN THE ASS ESSMENT ORDER, THE FACT RELATING TO NON-CARRYING OF BUSINESS ACTIV ITY HAS BEEN DULY CONSIDERED AND THE FACT THAT IN THAT RELEVANT PREVI OUS YEAR, THE ASSESSEE HAD ONLY INCOME UNDER SECTION 41(1), WHICH WAS SUBSTANTIAL ALSO DULY RECKONED. SUBSEQUENTLY, THE ASSESSEE FILE D A PETITION UNDER SECTION 154 OF THE ACT REQUIRING THE A.O. TO ADJUST THE CARRY FORWARD LOSSES ON 28.01.2010. THIS WAS PROCESSED ON 15.03. 2010 AND SUBSEQUENTLY FURTHER REVISED ON 28.04.2010. SUBSEQ UENTLY, A NOTICE UNDER SECTION.154 WAS ISSUED FOR RECTIFYING CERTAIN MISTAKES IN THE ORDER. IN RESPONSE TO THE NOTICE, THE ASSESSEE FIL ED VARIOUS DETAILS VIDE ITS LETTER DATED 18.03.2011. AFTER CONSIDERING THE REPRESENTATIONS SUBMITTED BY THE ASSESSEE, AN ORDER UNDER SECTION.1 54 WAS PASSED ITA NO.1039/CHNY/2018 :- 6 -: DISALLOWING CERTAIN EXPENDITURE AND ADJUSTMENTS OF CARRY FORWARD WAS MADE WHICH RESULTED IN INCOME BEING ASSESSED UNDER SECTION 115JB ONLY. AGAINST THAT ORDER, THE ASSESSEE FILED AN APP EAL BEFORE THE LEARNED CIT(A). THE LEARNED CIT(A) DISMISSED THE AP PEAL IN I.T.A. NO. NO.350/13-14 DATED 31.01.2014. AGGRIEVED AGAINST TH AT ORDER, REVENUE FILED APPEAL BEFORE THE TRIBUNAL. THE TRIBU NAL VIDE ORDER DATED 25.05.2016 IN I.T.A. NO. NO.1155/MDS/2014 DIS MISSED THE APPEAL OF REVENUE. THEREFORE,, THE LD. A.R. SUBMITT ED THAT THE REOPENING OF ASSESSMENT IS NOT VALID AND HENCE THE RE-ASSESSMENT PROCEEDINGS BE QUASHED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE CHALLENGED THE R EOPENING FOR THE REASON THAT THE REOPENING OF ASSESSMENT WAS MADE TO CONSIDER WAIVER OF PRINCIPAL COMPONENT UNDER O.T.S SCHEME WHICH WAS ALREADY CONSIDERED BY THE APPEAL ORDER PASSED BY THE LEARNE D CIT(A) AGAINST THE ORIGINAL ASSESSMENT ORDER AND ALLOWED IN ASSE SSEES FAVOUR. THEREFORE, THE REOPENING WAS NOT VALID. HOWEVER, IT IS CLEAR FROM THE ASSESSMENT ORDER THAT THE ASSESSMENT WAS REOPENED B Y ISSUE OF NOTICE UNDER SECTION 148 ON 19.03.2012 TO DISALLOW THE EXP ENDITURE OF .3,83,62,305/- AS THE ASSESSEE HAD NOT CARRIED ON A NY BUSINESS ACTIVITY DURING THE YEAR. THE CLAIM OF EXPENDITURE, THEREFORE, WAS NOT IN RELATION TO THE INCOME OFFERED. HOWEVER, IN THE RE-ASSESSMENT MADE ITA NO.1039/CHNY/2018 :- 7 -: UNDER SECTION 143(3) R.W.S.147 DATED 18.03.2013, TH E A.O., INTER ALIA MADE DISALLOWANCE OF .2,23,92,916/- TOWARDS INTEREST AND FINANCE CHARGES AND WAIVER OF PRINCIPAL COMPONENT UNDER O.T .S SCHEME AT .7,74,73,061/-. 6.1 THUS, IT IS CLEAR THAT THE REASON FOR REOPENING THE ASSESSMENT WAS FOR ASSESSING THE EXPENDITURE CLAIMED AT 3,83,62,305/- AND NOT TO CONSIDER THE WAIVER OF PRINCIPAL COMPONENT UNDER O.T.S SCHEME. SINCE NOTICE UNDER SECTION 147 WAS ISSUED WITHIN FO UR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, IN THE ABSENCE OF ANY MATERIAL/EVIDENCE FROM THE ASSESSEES SIDE THAT THE ISSUES ON WHICH REOPENING WAS MADE WAS ALREADY EXAMINED AND CONSIDE RED BY THE A.O., IT IS NOT POSSIBLE TO HOLD THAT RE-OPENING OF THE ASSESSMENT WAS INVALID. THEREFORE, CORRESPONDING GROUNDS OF ASSESS EE FAIL. HOWEVER, THERE IS MERIT IN THE ASSESSEES PLEA THAT IN THE R E-ASSESSMENT MADE THE A.O. SHOULD NOT HAVE MADE ADDITION TOWARDS WAIV ER OF PRINCIPAL COMPONENT UNDER O.T.S SCHEME, WHICH WAS ORIGINALLY PROPOSED BY THE A.O FOR AN ENHANCEMENT BEFORE THE LEARNED CIT(A) AG AINST THE ORIGINAL ASSESSMENT ORDER, WHICH WAS DULY CONSIDERED BY THE LEARNED CIT(A) AND REJECTED IT IN HIS ORDER, WHICH WAS ULTIMATELY SUSTAINED BY THE ITAT. THEREFORE,, THE A.O. SHOULD NOT HAVE ONCE AG AIN ADDED SUCH SUM IN THIS RE-ASSESSMENT ORDER. HENCE, THE A.O. IS DIRECTED TO DELETE THAT ADDITION. ITA NO.1039/CHNY/2018 :- 8 -: 6.2 WITH REGARD TO ASSESSEES PLEA THAT THE EXPEND ITURE DISALLOWED IN RESPECT OF INTEREST AND FINANCE CHARGES PAID IS ALL OWABLE UNDER SECTION.43B OF THE ACT ETC., IT IS CLEAR FROM THE A PPELLATE AUTHORITIES ORDER THAT THE ASSESSEE PLEADED THAT IT HAS CARRIED ON VARIOUS ACTIVITIES, WHICH REQUIRED TO UPKEEP THE BUSINESS I NFRASTRUCTURE AND TO MAINTAIN BUSINESS SUSTAINABILITY ETC. THE ASSESSEE HAS ALSO PLEADED THAT IT HAD PAID THE INTEREST AND FINANCE CHARGES, THEREAFTER ONLY IT GOT THE ONE TIME SETTLEMENT, PART OF WHICH WAS ALREADY ASSESSED. THEREFORE, INTEREST AND FINANCE CHARGES ACTUALLY PA ID BY THE ASSESSEE SHOULD BE ALLOWED UNDER SECTION 43B. ON THIS ISSUE, IT APPEARS THAT THE FACTS AND ASSOCIATED CIRCUMSTANCES HAVE NOT BEEN PR OPERLY EXAMINED BY THE LOWER AUTHORITIES. THEREFORE, WE DEEM IT FIT TO REMIT THIS ISSUE BACK TO THE FILE OF A.O. FOR A FRESH EXAMINATION, TO VERIFY AS TO WHETHER THE ASSESSEE CONTINUED ITS BUSINESS OR NOT DURING T HE PERIOD RELEVANT TO ASSESSMENT YEAR, WHY AND HOW THE ASSESSEE HAS IN CURRED THE IMPUGNED INTEREST AND FINANCE CHARGES WHETHER SUCH EXPENDITURE WAS CONNECTED TO ITS BUSINESS OR OTHER SOURCES OF INCOM E, WHETHER IF THE INTEREST AND FINANCE CHARGES WERE PAID DURING THE Y EAR, WHETHER IT IS ALLOWABLE UNDER SECTIONS 28 TO 43 OF THE ACT OR UND ER THE HEAD OTHER SOURCES ETC., AND THEN DECIDE THE ISSUES IN ACCORD ANCE WITH LAW. THE ASSESSEE SHALL PLACE RELEVANT MATERIALS IN SUPPORT OF ITS CONTENTIONS BEFORE THE A.O. AND COMPLY WITH THE REQUIREMENTS OF THE A.O. IN ITA NO.1039/CHNY/2018 :- 9 -: ACCORDANCE WITH LAW. THE A.O. IS ALSO FREE TO CONDU CT APPROPRIATE ENQUIRY AS DEEMED FIT. THE A.O. AFTER AFFORDING EF FECTIVE OPPORTUNITY TO THE ASSESSEE SHALL DECIDE THE MATTER ON MERITS. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 17 TH MARCH, 2020 AT CHENNAI. SD/- SD/- ( . ) (DUVVURU RL REDDY) ' %( /JUDICIAL MEMBER ( ) (S. JAYARAMAN) /ACCOUNTANT MEMBER & / CHENNAI ' / DATED: 17 TH MARCH,2020. K S SUNDARAM ( ) *+ , +$ / COPY TO: 1 . / APPELLANT 4. ( ( - / CIT 2. / RESPONDENT 5. +./ 01 / DR 3. ( ( - () / CIT(A) 6. /45 6 / GF