ACIT, Jaipur V. M/S JAIPUR POLYSPIN LTD., Jaipur

ITA 1052/JPR/2011

• Counselvise Citation: 105223114 RSA 2011
• Duration Of Justice: 2 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 02-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Keywords: Depreciation; Tangible material; Difference of opinion; Change of opinion
• Section: 143(3); 115JB; 32; 147; 148; 2

Judgement Text

IN THE INCOMETAX APPELLATE TRIBUNAL JAIPUR BENCH: JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. MEENA) I.T.A. NO. 1052/JP/2011 ASSTT. YEAR- 2004-05 PAN NO. AAACR 9700 M THE A.C.I.T., M/S JAIPUR POLYSPIN LTD., CIRCLE-3, JAIPUR. VRS. B-22/B-1, SHIV MARG, BANI PARK, JAIPUR. (APPELLANT) (RESPONDENT) DEPARTMENT BY :- SHRI D.C. SHARMA. ASSESSEE BY :- SHRI P.C. PARWAL. DATE OF HEARING : 23/07/2014 DATE OF PRONOUNCEMENT : 08/08/2014 O R D E R PER: T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 13/09/2011 OF THE LEARNED C.I.T.(A)-I, JAIPUR FOR TH E A.Y. 2004-05. THE SOLE GROUND OF APPEAL IS AGAINST HOLDING THE REOPENING O F ASSESSMENT U/S 147 READ WITH SECTION 148 OF THE INCOME TAX ACT, 1961 (HEREINA FTER REFERRED AS THE ACT) IS BAD IN LAW. 2. IN THIS CASE, ORIGINAL ASSESSMENT WAS COMPLETED U /S 143(3) OF THE ACT ON 30/11/2006, LATER ON, IT WAS NOTICED BY THE ASSES SING OFFICER THAT THE ASSESSEE COMPANY HAD DEBITED IN THE PROFIT AND LOSS ACCOUNT, PROVISIONS OF BONUS AND LEAVE ENCASHMENT AMOUNTING TO RS. 30,77,3 61/- AND RS. 3,05,777/- RESPECTIVELY. AS PER THE LEARNED ASSESSING OFFICER, THE BOOK PROFIT FOR THE 2 PURPOSE OF SECTION 115JB OF THE ACT WAS NOT INCREASE D BY THIS AMOUNT AS THE SAME BEING UNASCERTAINED LIABILITIES. FURTHER ON TH E SALES CONSIDERATION OF ASSETS, THE AMOUNT OF DEPRECIATION OF RS. 13,46,091 /- HAD BEEN ALLOWED IN EXCESS. THEREFORE, INCOME OF RS. 33,83,138/- AND RS. 13,46,091/- HAD BEEN ESCAPED ASSESSMENT. THEREFORE, HE REOPENED THE CASE U/S 147 OF THE ACT AFTER RECORDING THE REASONS AND ISSUED NOTICE U/S 148 OF THE ACT. THE APPELLANT ASKED TO GIVE REASONS FOR REOPENING FROM THE LEARNE D ASSESSING OFFICER, WHICH WAS SUPPLIED BY HIM. THE OBJECTIONS WERE DISPOSED OF B Y THE LEARNED ASSESSING OFFICER AND A DETAILED EXPLANATION WAS FIL ED BY THE APPELLANT BEFORE THE ASSESSING OFFICER FOR PROVING THE BONAFIDENESS OF THE INCOME RETURNED FOR THE YEAR UNDER CONSIDERATION. IT WAS CLAIMED BY THE APPELLANT THAT IN THE PRESENT CASE, LIABILITY OF BONUS OF RS. 30,77,361/- IS ASCERTAINED LIABILITY. THE ASSESSEE COMPANY IS STATUTORILY REQUIRED TO MAKE PA YMENT TO BONUS. THE LIABILITY WAS WORKED OUT IN RESPECT OF EACH EMPLOYEE OF THE COMPANY AS PER THE UNDERSTANDING WITH EMPLOYEE AND LIABILITY IS PRO VIDED ON YEAR TO YEAR BASIS. THE LIABILITY SO PROVIDED HAS BEEN PAID IN SU BSEQUENT FINANCIAL YEAR. REGARDING LEAVE ENCASHMENT LIABILITY IT IS SUBMITTE D THAT THE ASSESSEE COMPANY IS A REQUIRED TO MAKE THE PAYMENT OF LEAVE ENCASHMENT AS PER LABOUR LAWS. EACH EMPLOYEE IS GRANTED FIXED NUMBER O F EARNED LEAVE IF ANY EMPLOYEES DOES NOT AVAIL THE EARNED LEAVE THEN HE I S ENTITLED TO ENCASHMENT OF EARNED LEAVE. REGARDING ALLEGED EXCESS ALLOWANCE OF DEPRECIATION AMOUNTING RS. 13,46,091/- DUE TO NON ADJUSTMENT OF SALE CONSIDERATION OF 3 ASSETS, IT IS SUBMITTED THAT IN THE PROFIT AND LOSS ACCOUNT DEPRECIATION AS PER PROVISION OF COMPANIES ACT, 1956 HAS BEEN CHARGED. FOR THE PURPOSE OF BOOK PROFITS U/S 115JB DEPRECIATION AS DEBITED IN PROFIT AND LOSS ACCOUNT IS REQUIRED TO BE CONSIDERED AND NO FURTHER ADJUSTMENT IS REQUI RED TO BE MADE IN RESPECT OF DEPRECIATION AMOUNT CHARGED IN PROFIT AND LOSS A CCOUNT EXCEPT THE AMOUNT OF DEPRECIATION PERTAINING TO REVALUATION RESERVE. THUS, NO ADJUSTMENT IN RESPECT OF DEPRECIATION HAS BEEN MADE BY THE ASSESS EE COMPANY FOR THE PURPOSE OF DETERMINING BOOK PROFIT U/S 115JB. IT WAS UNABLE TO UNDERSTAND HOW YOUR GOOD SELF HAS DETERMINED AMOUNT OF ESCAPED INCOME OF RS. 13,46,091/- IN RESPECT OF THIS ISSUE. IT IS THUS RE QUESTED TO PROVIDE THE WORKING OF SAID AMOUNT, SO THAT DETAILED SUBMISSION/EXPLANA TION MAY BE SUBMITTED TO YOUR GOOD SELF. IT IS FURTHER SUBMITTED THAT FOR TH E PURPOSE OF COMPUTATION OF NORMAL TAXABLE INCOME OF ASSESSEE COMPANY, DEPRECIA TION DEBITED IN PROFIT AND LOSS ACCOUNT HAS BEEN ADDED AND DEPRECIATION CA LCULATED AS PER PROVISION OF SECTION 32 OF THE ACT HAS BEEN CLAIMED. WORKING OF DEPRECIATION AS PER PROVISION OF SECTION 32 OF THE ACT HAS BEEN SUBMITT ED ALONGWITH RETURN OF INCOME, HOWEVER, COPY OF SAID STATEMENT IS AGAIN ENC LOSED FOR YOUR READY REFERENCE. IT IS SUBMITTED THAT DURING THE YEAR UND ER CONSIDERATION, THE ASSESSEE COMPANY HAS SOLD THE FIXED ASSETS TO THE E XTENT OF RS. 12,61,212/-. AS PER PROVISION OF SUB CLAUSE (C) OF SUB-SECTION ( 6) OF SECTION 43 OF THE ACT FOR THE PURPOSE OF CALCULATION OF DEPRECIATION AS P ER PROVISION OF SECTION 32 BLOCK OF ASSETS SHALL BE REDUCED BY THE MONEYS PAYA BLE IN RESPECT OF ANY 4 ASSETS FALLING WITHIN THAT BLOCK, WHICH IS SOLD DURIN G THE FINANCIAL YEAR. ACCORDINGLY, FOR THE PURPOSE OF CALCULATION OF DEPR ECIATION ASSESSEE COMPANY HAS REDUCED THE AMOUNT OF SALE CONSIDERATION OF ASS ETS AMOUNTING TO RS. 12,61,212/- FROM THE BLOCK OF ASSETS AND DEPRECIATI ON HAS BEEN COMPUTED IN RESPECT OF NET WDV OF BLOCK OF ASSETS. THUS, THERE I S NO QUESTION OF EXCESS ALLOWANCE OF DEPRECIATION OR ESCAPEMENT OF INCOME TO THIS EXTENT. THE LEARNED ASSESSING OFFICER CONSIDERED THE ASSESSEES REPLY A ND IT WAS HELD THAT PROVISIONS WERE MADE FOR MEETING OUT UNASCERTAINED L IABILITIES, WHICH REMAINED UNPAID TILL THE DUE DATE OF FILING OF RETU RN. THEREFORE, HE MADE ADJUSTMENT FOR UNASCERTAINED LIABILITIES OF RS. 33, 83,138/- BUT THE SUBMISSIONS OF ASSESSEE FOR DEPRECIATION HAD BEEN FOUND ACCEPTE D TO THE ASSESSING OFFICER. ACCORDINGLY, THE LEARNED ASSESSING OFFICER CALCULAT ED THE BOOK PROFIT U/S 115JB OF THE ACT AT RS. 61,83,481/-. 3. BEING AGGRIEVED BY THE ORDER OF THE LEARNED ASSE SSING OFFICER, THE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A) AN D CHALLENGED THE REOPENING U/S 147 OF THE ACT. WHO HAD DECIDED THIS ISSUE AGAINST THE REVENUE BY OBSERVING AS UNDER:- I HAVE CAREFULLY PERUSED THE ORDER OF THE A.O. AN D THE SUBMISSIONS ALONGWITH PAPER BOOK FILED BY THE AR. IT IS A FACT THAT THE CASE OF THE APPELLANT WAS TAKEN UP FOR SCRUTINY AND AN ORDER U/ S 143(3) WAS PASSED ON 30/11/2006 DETERMINING THE TOTAL INCOME O F THE APPELLANT AT RS. 6,00,074. IT IS ALSO A FACT THAT THE MATERIA L FOR WHICH THE CASE WAS REOPENED U/S 147 HAD DULY BEEN FILED BY THE APP ELLANT ALONGWITH ITS RETURN. 5 IT IS SEEN THAT THE FINDING OF THE APEX COURT IN TH E CASE OF CIT VS. KELVINATOR INDIA LTD. (2010) 320 ITR 561 (S.C.) IS APPLICABLE TO THE FACTS OF THE CASE OF THE APPELLANT. THE APEX CO URT HAS HELD THAT SECTION 147 DOES NOT GIVE ARBITRARY POWERS TO THE A .O. TO REOPEN THE ASSESSMENT ON THE BASIS OF CHANGE OF OPINION. IT HAS ALSO OBSERVED THAT CONCEPTUAL DIFFERENCE BETWEEN THE POW ER TO REVIEW AND POWER TO REASSESS SHOULD ALSO BE KEPT IN MIND. THE A.O. HAS NO POWER TO REVIEW THOUGH HE HAS POWER TO REASSESS. BU T REASSESSMENT HAS TO BE BASED ON FULFILLMENT OF CERT AIN PRECONDITIONS AND IF THE CONCEPT OF CHANGE OF OPINION IS REMOVE D THEN IN THE GARB OF REOPENING THE ASSESSMENT REVIEW WOULD TAKE PLACE. THUS THE A.O. HAS THE POWER TO REOPEN THE PROCEEDINGS PR OVIDED THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. IN THIS PARTICULAR CASE, ALL THE TANGIBLE MATERIAL WAS FILED BY THE APPELLANT ALONGWITH ITS INITIAL RETURN. THIS WA S EXAMINED AND ASSESSED AND ORDER WAS PASSED U/S 143(3) BY THE A.O . SINCE ALL THE TANGIBLE MATERIAL HAD ALREADY BEEN TAKEN INTO ACC OUNT BY THE A.O. IN THE FIRST ASSESSMENT ORDER, AND NO NEW INFORMATI ON WAS AVAILABLE TO THE A.O. TO FROM THE BASIS OF REASON TO BELIVE REGARDING ESCAPEMENT OF INCOME, THE FIRST ASSESSMENT ORDER U/ S 143(3) COULD NOT BE REVIEWED, SUBSEQUENTLY BY REOPENING THE CASE . THEREFORE, REOPENING OF THE CASE U/S 147 BY THE A.O. IS NOT UP HELD AND THE ORDER PASSED U/S 147/143(3) IS HELD TO BE BAD IN LA W. SHE DID NOT DECIDE THE ISSUE ON MERIT. NOW THE REVEN UE IS IN APPEAL BEFORE US. 4. THE LEARNED D.R. SUPPORTED THE ORDER OF THE LEARN ED ASSESSING OFFICER AND ARGUED THAT UNASCERTAINED LIABILITIES WERE CLAIM ED BY THE ASSESSEE, WHICH HAS NOT BEEN ADJUSTED FOR CALCULATING THE BOOK PROF IT U/S 115JB OF THE ACT. 5. AT THE OUTSET, THE LEARNED A.R. FOR THE ASSESSEE SUPPORTED THE ORDER OF THE LEARNED CIT(A). 6 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE LEARNED D.R. H AS NOT CONTROVERTED THE FINDING GIVEN BY THE LEARNED CIT(A). SHE ALSO HELD T HAT IN THIS CASE, THE LEARNED ASSESSING OFFICER HAD REOPENED THE CASE ON THE BASIS OF CHANGE OF OPINION. THE VARIOUS HONBLE HIGH COURTS AS WELL AS T HE HON'BLE SUPREME COURT HAVE NOT ALLOWED ANY REOPENING ON THE BASIS OF CHANGE OF OPINION. ACCORDINGLY, WE DISMISS THE APPEAL OF THE REVENUE. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 08/08/2014. SD/- SD/- (R.P. TOLANI) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR, DATED : 08 TH AUGUST, 2014 * RANJAN COPY FORWARDED TO :- 1. THE ACIT, CIRCLE-2, JAIPUR. 2. M/S JAIPUR POLYSPIN LTD.,, JAIPUR. 3. THE CIT (A) 4. THE CIT 5. THE D/R GUARD FILE (I.T.A. NO. 1052/JP/2011) BY ORDER, AR ITAT JAIPUR.