The DCIT, Circle-4, Ahmedabad V. Hitachi Home & Life Solutions (India) Ltd., Ahmedabad

ITA 104/AHD/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9443 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 22-12-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 10-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Retrospective amendment; Tangible material; Bad and doubtful debts; Difference of opinion; Provision of bad debts; Change of opinion; Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 234B; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NOS. 3045/AHD/2013 & 104/AHD/2014 (ASSESSMENT YEAR:2006-07) HITACHI HOME & LIFE SOLUTIONS (I) LTD., 9 TH FLOOR, ABHIJIT, MITHAKHALI SIX ROADS, ELLIS BRIDGE, AHMEDABAD 380 006 APPELLANT VS. ACIT, CIRCLE-4, AHMEDABAD RESPON DENT / CROSS APPELLANT PAN: AABCA2392K /BY ASSESSEE : SHRI S. N. SOPARKAR WITH PARI N SHAH, A.R. /BY REVENUE : SHRI JAMES KURIAN, SR. D.R. /DATE OF HEARING : 22.12.2016 /DATE OF PRONOUNCEMENT : 17.01.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THE ASSESSEE AND REVENUE HAVE INITIATED THE INSTANT CROSS APPEALS FOR ASSESSMENT YEAR 2006-07 AGAINST CIT(A)-VIII, AHMEDA BADS ORDER DATED 04.10.2013 PASSED IN APPEAL NO. CIT(A)-VIII/ACIT/CI R.4/161/11-12; IN ITA NOS. 3045/AHD/2013 & 104/AHD/2014 (HITACHI HOME & LIFE SOLUTIONS (I) LTD. VS. ACIT) A.Y. 2006-07 - 2 - PROCEEDINGS U/S. 143(3) R.W.S. 147 OF THE INCOME TA X ACT, 1961; IN SHORT THE ACT. 2. WE COME TO RIVAL PLEADINGS FIRST. THE ASSESSEE S APPEAL ITA NO.3045/AHD/2013 RAISES TWO SUBSTANTIVE GROUNDS. F IRST ONE CHALLENGES VALIDITY OF THE IMPUGNED REOPENING AS UPHELD IN THE LOWER APPELLATE PROCEEDINGS. LATTER SUBSTANTIVE GROUND ASSAILS COR RECTNESS OF THE CIT(A)S ORDER ON MERITS DELETING BOOK PROFITS ADDITION FROM RS.2,68,16,000/- IN THE NATURE OF PROVISION OF DOUBTFUL DEBTS TO RS.1,85,59 ,435/- THEREBY UPHOLDING THE REMAINING COMPONENT OF THE ABOVE PROVISION OF R S.82,57,118/- INVOLVING CORRESPONDING SUMS OF RS.23,35,374/-, RS.3,77,825/- & RS.55,43,919/- AS LOSS ON ASSETS HELD FOR DISPOSAL, DOUBTFUL ADVANCES AND DOUBTFUL BAD DEBTS; RESPECTIVELY. THE REVENUES CROSS APPEAL ITA NO.104/AHD/2014 ON T HE OTHER HAND SEEKS TO REVIVE THE ADDITION AMOUNT OF RS.1,85,59,4 35/- HEREINABOVE PERTAINING TO PROVISION OF OBSOLETE STOCK IN COMPUT ING BOOK PROFITS AS WELL AS SECTION 234B & D INTEREST LEVIES AS MADE BY THE ASS ESSING OFFICER AND DELETED IN THE LOWER APPELLATE PROCEEDINGS. 3. WE COME TO RELEVANT FACTS FIRST. THIS ASSESSEE IS A COMPANY MANUFACTURING/TRADING IN AIR CONDITIONERS. IT FILE D RETURN ON 20.12.2006 STATING TOTAL INCOME OF RS.15,62,01,340/-. IT HOWE VER RETURNED NIL INCOME AFTER ADJUSTING CARRY FORWARD LOSSES. THE ASSESSIN G OFFICER COMPLETED A REGULAR/MAT ASSESSMENT ON 26.02.2010 ASSESSING TOTA L INCOME AS RS.28,02,009/- FOLLOWED BY COMPUTATION OF BOOK PROF IT AMOUNTING TO RS.5,34,29,578/-. ITA NOS. 3045/AHD/2013 & 104/AHD/2014 (HITACHI HOME & LIFE SOLUTIONS (I) LTD. VS. ACIT) A.Y. 2006-07 - 3 - 4. WE PROCEED FURTHER TO NOTICE THAT THE ASSESSING OFFICER THEREAFTER FORMED REASONS TO BELIEVE THAT ASSESSEES TAXABLE I NCOME LIABLE TO BE ASSESSED HAD ESCAPED ASSESSMENT. HE THUS ISSUED SECTION 148 NOTICE DATED 25.08.2010 FOR THE SOLE REASON THAT THE ASSESSEE HAD DEBITED A PROVISION OF RS.2,68,16,000/- IN ITS P&L ACCOUNT WITHOUT MAKING A CORRESPONDING ADDITION THEREOF IN ITS BOOK PROFITS. HE QUOTED SEC TION 115JB(2) EXPLANATION 1(I) AS AMENDED BY THE FINANCE ACT, 2009 WITH RETRO SPECTIVE EFFECT FROM 01.04.2001 PRESCRIBING THAT ANY AMOUNT SET ASIDE AS A PROVISION FOR DIMINUTION IN THE VALUE OF ANY ASSET AND DEBIT TO P &L ACCOUNT LEADS TO INCREASE INPUT PROFIT TO THE EXTENT OF THE VERY FIG URE. 5. THE ASSESSEE FILED ITS REPLY TO THE ABOVE REOPEN ING NOTICE ON 17.09.2010. IT SOUGHT TO TREAT ITS ORIGINAL RETURN AS THE ONE FILED IN FURTHERANCE TO REOPENING NOTICE. IT WOULD THEREAFT ER ASK FOR A COPY OF REOPENING REASONS. THE ASSESSING OFFICER VERY FAIR LY FURNISHED THE SAME. HE THEN COMPLETED THE IMPUGNED RE-ASSESSMENT ON 17.10. 2011 ADDING THE ABOVE SUM OF RS.2,68,16,000/- IN ASSESSEES BOOK PROFITS COMPUTATION. 6. THE ASSESSEE FILED APPEAL INTER ALIA RAISING THR EE FOLDED GROUNDS CHALLENGING VALIDITY OF REOPENING, CORRECTNESS OF T HE ABOVE BOOK PROFITS ADDITION ON MERITS FOLLOWED BY INTEREST LEVIED BY T HE ASSESSING OFFICER U/S.234B AND E OF THE ACT. THE CIT(A)S ORDER UNDE R CHALLENGE DECLINES FIRST OF THE ABOVE ARGUMENT CHALLENGING VALIDITY OF REOPE NING BY OBSERVING THAT ALTHOUGH THE ASSESSING OFFICER HAD DULY CALLED FOR ALL RELEVANT DETAILS PERTAINING TO THE ABOVE MAT COMPUTATION, HE DID NOT CONSIDER IMPLICATION OF ASSESSEES PROVISION OF BAD DEBTS U/S.115JB EXPLANA TION 1(I) OF THE ACT. HE FURTHER OPINES THAT THE ASSESSING OFFICER DID NOT A PPLY HIS MIND NOR RAISED ANY SPECIFIC QUERY AS PER THE ABOVE AMENDED PROVISI ON. HE SEEKS TO VALIDATE THE SAME RATHER BY CONCLUDING THAT THE IMPUGNED RE OPENING IS WELL WITHIN ITA NOS. 3045/AHD/2013 & 104/AHD/2014 (HITACHI HOME & LIFE SOLUTIONS (I) LTD. VS. ACIT) A.Y. 2006-07 - 4 - FOUR YEARS FROM THE END OF THE RELEVANT PREVIOUS YE AR. THIS FOLLOWS CIT(A)S FINDINGS ON REMAINING TWO ISSUES (SUPRA). HE PARTL Y ACCEPTS ASSESSEES CHALLENGE TO THE IMPUGNED ADDITIONS ON MERIT IN RES TRICTING THE ABOVE BOOK PROFITS ADDITION OF RS.2.68CRORES TO RS.82,57,118/- THEREBY DELETING THE ADDITION PERTAINING TO PROVISION OF OBSOLETE STOCK AMOUNTING TO RS.1,85,59,435/-. HE FURTHER AGREES WITH ASSESSEE S PLEA CHALLENGING THE ABOVE INTEREST LEVIES BY OBSERVING THAT THE SAME AR E NOT SUSTAINABLE AS INVOLVING IMPUGNED ASSESSMENT YEAR 2006-07 SOUGHT T O BE COVERED UNDER THE AMENDED PROVISION MADE IN THE FINANCE ACT, 2009 W.E .F. 01.04.2001. THIS LEAVES BOTH PARTIES AGGRIEVED AS INDICATED IN THEIR RESPECTIVE PLEADINGS. WE FIRST COME TO THE LEGAL ISSUE OF VALIDITY OF RE OPENING. 7. THERE IS ADMITTEDLY NO DISPUTE THAT THE CIT(A) H AS BEEN FAIR ENOUGH IN AGREEING TO ASSESSEES PLEA THAT THE ASSESSING OFFI CER HAD IN FACT CALLED FOR ALL RELEVANT DETAIL PERTAINING TO THE IMPUGNED PROVISIO N OF BAD DEBTS WHILST FRAMING REGULAR ASSESSMENT IN ITS CASE ON 26.02.201 0. THE ABOVE RETROSPECTIVE AMENDMENT IN SECTION 115JB EXPLANATIO N 1(I) (SUPRA) HAD COME VERY WELL BY THEN VIDE FINANCE ACT, 2009 W.E.F. 01. 04.2001. IT IS RATHER MANIFEST ENOUGH THAT THE ASSESSING OFFICER COMPUTED ASSESSEES BOOK PROFITS ALONGWITH OTHER DISALLOWANCES / ADDITIONS INCLUDING THE ONE PERTAINING TO OBSOLETE STOCK ADDITION UNDER NORMAL PROVISIONS AS SOUGHT TO BE REVIVED IN REVENUES CROSS APPEAL. IT THUS CANNOT BE SAID THA T THE ASSESSING OFFICER HAD NOT TAKEN A CONSCIOUS DECISION OF NOT MAKING THE IM PUGNED ADDITION. WE NOW COME TO REVENUES ARGUMENT THAT THE ASSESSING O FFICER HAS REOPENED THE ABOVE REGULAR ASSESSMENT AS PER THE ABOVE STATU TORY PROVISION SO AS TO MAKE THE IMPUGNED ADDITION OF PROVISION OF BAD DEBT S. WE ARE NOT IMPRESSED WITH THIS ARGUMENT. IT IS EVIDENTLY NOT THE ASSESS ING OFFICERS CASE THAT HE HAD SOME TANGIBLE MATERIAL APART FROM ASSESSEES DE TAILS ALREADY ON RECORD ITA NOS. 3045/AHD/2013 & 104/AHD/2014 (HITACHI HOME & LIFE SOLUTIONS (I) LTD. VS. ACIT) A.Y. 2006-07 - 5 - FORMING REASONS TO BELIEVE THAT SOME TAXABLE INCOME HAD ESCAPED ASSESSMENT. THE CASE FILE ALSO DOES NOT INDICATE ANY SUCH CIRCU MSTANCE. WE THUS RELY ON HONBLE JURISDICTIONAL HIGH COURT IN GENERAL MOTORS INDIA PVT. LTD. VS. DCIT (2013) 354 ITR 244 (GUJARAT), GUJARAT POWER CORPORA TION LTD. VS. ACIT (2013) 350 ITR 266 AND CIT VS. KELWINATOR OF INDIA LTD. (2010) 320 ITR 561 (SC) TO OBSERVE THAT SUCH A COURSE OF ACTION AM OUNTS TO MERE CHANGE OF OPINION NOT SUSTAINABLE IN THE EYES OF LAW. THEIR LORDSHIPS OF HONBLE JURISDICTIONAL HIGH COURT RATHER FORMULATE THE SECO ND QUESTION IN GENERAL MOTORS DECISION THAT AN ASSESSING AUTHORITY OUGHT N OT TO REOPEN REGULAR ASSESSMENT ON THE GROUND THAT IT HAD NOT APPLIED CO RRECT PROVISION OF LAW IN FINALIZING SCRUTINY ASSESSMENT IN ABSENCE OF TANGIB LE MATERIAL AS THE SAME WOULD AMOUNT TO MERE CHANGE OF OPINION IN SUCH CIRC UMSTANCES. WE FURTHER NOTICE THAT THE REOPENING THEREIN WAS ALSO WITHIN F OUR YEARS FROM THE END OF THE IMPUGNED ASSESSMENT YEAR. WE THUS ACCEPT ASSES SEES FIRST ARGUMENT CHALLENGING VALIDITY OF THE IMPUGNED REOPENING. TH E SAME STANDS QUASHED. 8. LEARNED COUNSELS NEXT ARGUMENT IS THAT THE ASSE SSING OFFICER OUGHT NOT TO HAVE REOPENED THE ABOVE REGULAR ASSESSMENT I N ASSESSEES CASE BY INVOKING SECTION 115JB EXPLANATION 1(I) AS PER HON BLE JURISDICTIONAL HIGH COURTS DECISION IN CIT VS. INDIAN PETRO CHEMICALS CORPORATION LTD. (A.Y.2001-02) TAX APPEAL NO.1775/2008 DECIDED ON 19 .07.2016 FOLLOWING KARNATAKA HIGH COURTS JUDGMENT IN CIT VS. KIRLOSKA R SYSTEMS LTD. (2013) 40 TAXMANN.COM 124 & CIT VS. YOKOGAWA INDIA LTD. (2012 ) 17 TAMANN.COM 15 THAT SUCH AN ADDITION IS NOT TO BE MADE U/S.115JB E XPLANATION (C) OF THE ACT. SHRI KURIAN HOWEVER REFERS TO HONBLE JURISDICTIONA L HIGH COURTS LATTER ORDER DATED 23.08.2016 IN TAX APPEAL NO.749/2012 CIT VS. VODAFONE ESSAR GUJARAT LTD. RECOMMENDING ITS EARLIER DECISION IN I PCL CASE HEREINABOVE TO A LARGER BENCH. WE ARE HOWEVER OF THE OPINION THAT T HE INSTANT ARGUMENT OF BOTH THE PARTIES IS NO MORE REQUIRED TO BE ADJUDICA TED SINCE THE IMPUGNED ITA NOS. 3045/AHD/2013 & 104/AHD/2014 (HITACHI HOME & LIFE SOLUTIONS (I) LTD. VS. ACIT) A.Y. 2006-07 - 6 - REOPENING ITSELF STANDS QUASHED IN THE PRECEDING PA RAGRAPHS ON BASIC TENETS OF THE RELEVANT LAW. THIS ARGUMENT IS ACCORDINGLY REN DERED INFRUCTUOUS. SO IS THE OUTCOME OF ALL OTHER GROUNDS RAISED IN THE INST ANT CROSS APPEAL ON MERITS. 9. THE ASSESSEES APPEAL ITA NO.3045/AHD/2013 IS AC CEPTED. REVENUES CROSS APPEAL ITA NO.104/AHD/2014 IS DISMISSED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 17 TH DAY OF JANUARY, 2017.] SD/- SD/- ( MANISH BORAD ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 17/01/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )* + ,--. . /0 / DR, ITAT, AHMEDABAD 6 + 23 4 5 / GUARD FILE. BY ORDER / . // . /0