Sujana Metal Products Limited, Hyderabad V. ACIT, Hyderabad

ITA 1069/HYD/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3363 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 31-03-2011
• Assessment Year: 1998-1999
• Appeal Filed On: 09-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T VENKAT REDDY
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Depreciation; Search and seizure; Difference of opinion; Non compliance; Block assessment; Unabsorbed depreciation; Change of opinion
• Section: 143(3); 142(1); 147; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.1068 & 1069/HYD/2010 ASSESSMENT YEAR 1997-98 & M/S SUJANA METAL PRODUCTS LTD.,HYDERABAD. ( PAN AACCS 8614 H) VS THE ACIT, CENTRAL CIRCLE 5, HYDERABAD APPELLANT RESPONDENT APPELLANT BY : SHRI P. MURALI MOHAN RAO RESPONDENT BY : SHRI T. VENKAT REDDY ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THESE TWO APPEALS PREFERRED BY THE ASSESSEE IS DI RECTED AGAINST THE DIFFERENT ORDERS PASSED BY THE CIT(A) IV, HYDERABA D DATED 30.6.2010 AND PERTAINS TO THE ASSESSMENT YEAR 1997-98 & 1998-99. THE GROUNDS RAISED BY THE ASSESSEE HEREIN ARE COMMON IN NATURE, THEY ARE CLUBBED, HEARD AND DISPOSED OFF VIDE THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS IN I TS APPEAL: 1. THE CIT(A) ERRED WHILE CONFIRMING THE ASSESSMENT O RDER PASSED BY THE ACIT, HYDERABAD IN RESPECT OF THE ASSESSEE SUJA NA METAL PRODUCTS LTD. FOR THE ASSESSMENT YEAR 1997-98 WHERE IN THE TOTAL INCOME OF THE ASSESSEE HAS BEEN ASSESSED AMOUNTING TO RS.1,25,77,089/- AGAINST THE INCOME RETURNED BY THE ASSESSEE AMOUNTING TO RS.NIL & RS.2,22,01,742/- AS AGAINST T HE RETURN INCOME OF RS.78,25,463/- FOR THE ASSESSMENT YEAR 1998-99. 2. SUJANA METAL PRODUCTS LTD., IS ENGAGED IN THE BUSIN ESS OF STEELS AND METALS. FOR THE ASSESSMENT YEAR 1997-98 THE ASSESS EE HAS FILED ITS RETURN OF INCOME ON 18.4.2001 DECLARING A TOTAL INC OME OF RS.NIL. 3. THE ACIT HAS ERRED WHILE DISALLOWING AN AMOUNT OF R S.1,02,99,659/- TREATED AS UNDISCLOSED INCOME WHICH IS NOT CORRECT, NOT JUSTIFIED AND BAD IN LAW. 4. THE ACIT HAS ERRED WHILE DISALLOWING AN AMOUNT OF E XPENDITURE AT RS.3,75,000/- AND RS.23 LAKHS FOR THE ASSESSM ENT YEAR 1997-98 AND 1998-99 RESPECTIVELY WHICH IS NOT CORRECT NOT J USTIFIED AND BAD IN LAW 5. AS PER SECTION 143(3) OF THE ACT, ALREADY ASSESSMEN T ORDER HAS BEEN PASSED HENCE THE CHANGE OF OPINION CANNOT BE MADE A ND ASSESSMENT ORDER CANNOT BE REOPEN FURTHER U/S 147 IS NOT CORRE CT. 6. THE ASSESSEE CLAIM OF DEPRECIATION AS DISCLOSED IN DETAIL IN THE BLOCK ASSESSMENT ORDER WAS DISALLOWED FOR AN AMOUNT OF RS .1,24,60,975/- FOR THE ASSESSMENT YEAR 1997-98 WITHOUT CONSIDERI NG THE EXPLANATION OFFERED BY THE ASSESSEE WHICH IS NOT CO RRECT. 7. THE ASSESSEE HAS ALREADY SUBMITTED THE COMPLETE DET AILS OF THE EXPENDITURE AS SPECIFIED ABOVE, WHICH HAS NOT BEEN CONSIDERED AND THE ADDITION OF RS.2,31,35,634/- FOR THE ASSESSMENT YEAR 1997-98 HAS BEEN MADE WHICH IS NOT CORRECT, NOT JUSTIFIED. 3. FOR THE SAKE OF CONVENIENCE, WE CONSIDER THE B RIEF FACTS OF THE CASE AS STATED BY THE ASSESSEE RELATING TO THE ASS ESSMENT YEAR 1997-98. THE ASSESSEE COMPANY HAS FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 1997-98 INITIALLY ON 18.4.2001, DECLARING INCO ME AT NIL, AFTER CLAIMING SET OFF OF UNABSORBED DEPRECIATION OF RS.1 ,02,99,658/-. THE SAID RETURN, HOWEVER, WAS FILED AFTER A SEARCH AND SEIZURE ACTION WAS CONDUCTED IN THE CASE OF THE ASSESSEE ON 28.2.2000. SUBSEQUENTLY, A NOTICE U/S 148 WAS ISSUED ON 10.9.2001 AND THE ASSE SSMENT U/S 143(3) R.W.S. 147 WAS COMPLETED ON 28.3.2002. 3.1. DURING THE ASSESSMENT PROCEEDINGS, IT WAS SE EN THAT THE ASSESSEE HAD DECLARED NET PROFIT IN ITS RETURN AT R S.87,94,578/- AS AGAINST THE NET PROFIT OF RS.7,65,52,895/- SHOWN IN THE PROFIT AND LOSS ACCOUNT FILED BEFORE THE ROC. ON BEING REQUIRED TO EXPLAIN, THE ASSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER THAT THERE W AS A MISTAKE IN TAKING THE DEPRECIATION AS PER THE IT ACT. A LETTER DATED 28.3.2002, WORKING OUT THE CORRECT TAXABLE INCOME AT RS.1,02,99,658/- WAS ALSO FURNISHED. 3.2. MEANWHILE, IN CONSEQUENCE OF THE SEARCH AND SEIZURE OPERATION, BLOCK ASSESSMENT PROCEEDINGS U/S 158BC F OR THE BLOCK PERIOD 199-91 TO 1999-2000 AND FROM 1.4.1999 TO 28.2.2000 WERE ALSO SIMULTANEOUSLY TAKEN UP. THE BLOCK ASSESSMENT WAS COMPLETED ALONG WITH THE REGULAR ASSESSMENT ON 28.3.2002 ITSELF. I N THE BLOCK ASSESSMENT HOWEVER, THE INCOME OF THE ASSESSEE FOR THE ASSESSM ENT YEAR 1997-98, WORKED OUT AT RS.2,31,35,634/- WAS CONSIDERED AS UN DISCLOSED INCOME AS THE ASSESSEE HAD NOT FILED ITS RETURN OF INCOME BEFORE THE SEARCH. THE ASSESSEES CLAIM OF DEPRECIATION ON NON EXISTING AS SETS AS DISCUSSED IN DETAIL IN THE BLOCK ASSESSMENT ORDER WAS ALSO DISAL LOWED. THE UNDISCLOSED INCOME FOR THE ASSESSMENT YEAR 1997-98 HAD BEEN COMPUTED AS UNDER: A) DEPRECIATION ON NON EXISTING ASSETS RS.1,24,60,97 5 B) INCOME TREATED AS UNDISCLOSED RS.1,02,99,659 C) BOGUS EXPENDITURE RS. 3,75,000 -------------------- TOTAL RS.2,31,35,634 ============ 3.3. SINCE THE INCOME FOR THE ASSESSMENT YEAR 199 7-98 WAS CONSIDERED AS UNDISCLOSED IN THE BLOCK ASSESSMENT, THE TOTAL INCOME AS COMPUTED IN THE REGULAR SCRUTINY U/S 143(3) R.W.S. 147 WAS TAKEN AT NIL DULY MENTIONING THIS FACT IN THE ASSESSMENT ORDER. 3.4. SUBSEQUENTLY, ON APPEALS BY THE ASSESSEE, TH E HONBLE TRIBUNAL VIDE THEIR ORDER DATED 29.3.2006, HELD THAT THE INC OME COMPUTED FOR ASSESSMENT YEARS 1997-98, 1998-99 AND 1999-2000 CAN NOT BE TERMED AS UNDISCLOSED INCOME AS DEFINED IN THE CHAPTER XVI-B AND THEREFORE DELETED THE ADDITION FROM THE BLOCK ASSESSMENT. THEY FURTH ER OBSERVED THAT IF LAW PERMITS, THE ASSESSING OFFICER MAY CONSIDER ALL THE SE INCOMES IN THE REGULAR ASSESSMENTS. 3.5. IN VIEW OF THE SAID FINDINGS OF THE HONBLE ITAT, THE ASSESSING OFFICER ISSUED A NOTICE U/S 148 ON 9.7.2007, TO GIV E EFFECT TO THE FINDINGS AND DIRECTIONS IN THE SAID ORDER OF THE TRIBUNAL IN ITA(SS) NO.17/H/2003 DT. 29.3.2006 IN RESPECT OF THE BLOCK ASSESSMENT. 3.6. IN RESPONSE TO THE SAID NOTICE, HOWEVER, THE ASSESSEE DID NOT FILE ANY RETURN OF INCOME. EVEN IN RESPONSE TO THE NOTI CE U/S 142(1) ISSUED LATER, THE LEARNED AUTHORIZED REPRESENTATIVE OF THE ASSESSEE ONLY SUBMITTED A COPY OF THE AUDIT REPORT U/S 44 AB FOR THE RELEVA NT ASSESSMENT YEAR. THE ASSESSING OFFICER THEREFORE, ISSUED A LETTER DATED 8.12.2008, PROPOSING TO INVOKE THE PROVISIONS OF SECTION 144 OF THE ACT, IN VIEW OF THE ASSESSEES NON COMPLIANCE WITH THE NOTICE U/S 142(1). ON THE DATE OF HEARING FIXED THEREIN, HOWEVER, THE ASSESSEE ONLY FILED A LETTER CONTENDIN G THAT THE ASSESSMENT COULD NOT HAVE BEEN REOPENED, AS IT WAS BARRED BY L IMITATION. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE SAID CONTENTIO N, OPINING THAT IN TERMS OF THE PROVISIONS OF SECTION 150 OF THE ACT, A NOTICE U/S 148 CAN BE ISSUED AT ANY TIME FOR THE PURPOSE OF MAKING ANY ASSESSMENT T O GIVE EFFECT TO ANY FINDING OR DIRECTION IN ANY ORDER PASSED BY ANY AUT HORITY IN ANY PROCEEDINGS UNDER THE IT ACT. 3.7. ACCORDING TO ASSESSING ISSUE OF NOTICE U/S 148 WAS A VALID ONE, AND HE ASSESSED THE INCOME OF RS.2,31,35,634/-, COM PUTED IN THE ORDER DATED 28.3.2002, AS THE INCOME COMPUTED IN COMPLIAN CE TO THE DIRECTIONS OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 1997-98. SIMI LARLY, HE COMPLETED THE ASSESSMENT YEAR 1998-99 AT RS.2,22,01,742/-. 4. ON APPEAL, THE CIT(A) CONFIRMED THE ORDE R OF THE ASSESSING OFFICER PLACING RELIANCE ON THE ORDER OF THIS TRIBU NAL DELHI BENCH IN THE CASE OF HANEMP PROPERTIES (P) LTS. VS. DCIT (101 ITD 90) WHEREIN IT HAS HELD THAT IF AN ADDITION WAS MADE IN THE BLOCK ASSESSMENT AND A SIMILAR ADDITION WAS NOT MADE IN THE REGULAR ASSESSMENT BY THE ASSESSING OFFICER, AND THE ITAT DELETED THE ADDITION THE BLOCK ASSESSMENT, HOLDING THAT THE ASSESSING OFFICER IS FREE TO TAKE RECOURSE IN REGULAR ASSESSMENT, NO TIME LIMIT WILL APPLY FOR REOPENING OF THE REGULAR ASSESSMENT. BESIDES, HE R ELIED ON THE JUDGEMENT IN THE CASE OF AJAY VERMA VS. CIT (304 ITR 30) (ALLAHA BAD HC) WHEREIN IT WAS HELD THAT A REASSESSMENT CAN BE VALIDLY INITIATED D URING THE PENDENCY OF AN APPEAL BEFORE THE HIGH COURT. AGAINST THE ABOVE OR DERS OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE LEARNED COUNSEL FOR THE A SSESSEE RELIED ON THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF OM TEXTILES LTD. AND UNION OF INDIA & OTHERS (204 ITR 508) AND CIT V S. GREEN HOLDINGS CORPORATION (314 ITR 81). WE HAVE CAREFULLY GONE T HROUGH THE ORDER OF THE TRIBUNAL DATED 29.3.2006 FOR THE BLOCK PERIOD COVER ING FROM 1991 TO 1999 TO 2000 AND 1-4-99 TO 28.2.2000. IN THE SAID ORDER, T HE IMPUGNED ADDITION MADE IN THE BLOCK ASSESSMENT WAS DELETED AND THE TR IBUNAL THEREAFTER HELD THAT IF LAW PERMITS, THE ASSESSING OFFICER MAY CO NSIDER ALL THESE INCOME IN THE REGULAR ASSESSMENTS . THIS OBSERVATION OF T HE TRIBUNAL IS THE REASON FOR REOPENING OF THE ASSESSMENTS FOR THE ASSESSMENT YEARS 1997-98 AND 1998-99. IN OUR OPINION, THE PROVISIONS OF SECTION 150 WERE NOT COME TO THE RESCUE OF THE REVENUE. U/S 150 NOTWITHSTANDING ANY THING CONTAINED IN THE SECTION 149, THE NOTICE U/S 148 MAY BE ISSUED AT AN Y TIME FOR THE PURPOSE OF MAKING AN ASSESSMENT OR REASSESSMENT OR RE-COMPUTAT ION IN CONSEQUENCE OF OR TO GIVE EFFECT TO GIVING ANY FINDINGS OR DIRE CTION CONTAINING ORDER PASSED BY ANY AUTHORITY IN ANY PROCEEDINGS UNDER THE ACT B Y WAY OF AN APPEAL, REFERENCE OR REVISION. THUS, SECTION 150 WILL COME INTO PLAY ONLY TO CARRY OUT THE DIRECTIONS OR FINDINGS BY THE APPELLATE AUTHORI TY. FOR THE MEANING OF FINDING THE DIRECTION WE HAVE TO REFER TO THE PROV ISIONS OF SECTION 153. THE FINDINGS AND DIRECTIONS GIVEN BY THE APPELLATE AUTH ORITY MUST BE AN EXPRESS DIRECTION NECESSARY FOR THE DISPOSAL OF THE CASE BE FORE THE AUTHORITY. IT MUST ALSO BE THE DIRECTION WITH THE AUTHORITY OR COURT I S EMPOWERED TO GIVE WHILE DECIDING THE CASE BEFORE IT. THE EXPRESSIONS FIN DING AND DIRECTION IN SECTION 153(3) (II) MUST BE ACCORDINGLY CONFINED. A DIRECTION BY A STATUTORY AUTHORITY IS IN THE NATURE OF AN ORDER REQUIRING PO SITIVE COMPLIANCE. WHEN IT IS LEFT TO THE OPTION AND DISCRETION OF THE ITO WHETHER OR NOT TO TAKE ACTION, IT CANNOT BE DESCRIBED AS A DIRECTION. A MERE OBSE RVATION BY THE APPELLATE AUTHORITY, IN THIS CASE ITAT THAT IF LAW PERMITS THE ASSESSING OFFICER MAY CONSIDER ALL THESE INCOMES IN THE REGULAR ASSESSMEN TS CANNOT BE CONSTRUED AS A FINDINGS OR DIRECTION U/S 153(3) (II) OF THE A CT. THIS IS A MERE OBSERVATION BY THE TRIBUNAL THAT THE ASSESSING OFFI CER IS FREE TO TAKE ACTION TO ASSESS THE DELETED INCOME IN THE BLOCK ASSESSMENT I N THE REGULAR ASSESSMENT AND CANNOT BE DESCRIBED AS A DIRECTION. WE PLACE RELIANCE IN THE JUDGEMENT OF THE HONBLE SC IN THE CASE OF RAJENDER VS. CIT 120 ITR 14 (SC) WHEREIN IT WAS HELD THAT: WHEN IT IS LEFT TO THE OPTION AND DISCRETION OF TH E ITO WHETHER OR NOT TO TAKE ACTION, IT CANNOT BE DESCRIBED AS A DIR ECTION. A MERE OBSERVATION BY THE AAC AND THAT THE ITO IS FREE TO TAKE ACTION TO ASSESS THE EXCESS IN THE HANDS OF THE CO-OWNERS CAN NOT BE DESCRIBED AS A DIRECTION. A DIRECTION OR FINDING AS CONTEMPLATED BY SECTI ON 153(3)(II) MUST BE A FINDING NECESSARY FOR DISPOSAL OF A PARTICULAR CASE, THAT IS TO SAY, IN RESPECT OF A PARTICULAR ASSESSEE AND IN REL EVANCE TO A PARTICULAR ASSESSMENT YEAR. TO BE A DIRECTION AS CONTEMPLATED BY SECTION 153(3)(II), IT MUST BE AN EXPRESS DIRECTION NECESSARY FOR DISPOSAL OF THE CASE BEFORE THE AUTHORITY OR THE CO URT (CIT VS. FORAMER FRANCE (2003) 129 TAXMAN 72 (SC). 6. IN VIEW OF THE ABOVE DISCUSSIONS, WE QUASH TH E ASSESSMENT ORDERS OF BOTH THE YEARS AND THE APPEALS OF THE ASS ESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT O N: 21.4. 2011 SD/- SD/- G.C. GUPTA CHANDRA POOJA RI VICE PRESIDENT ACCOUNTANT MEMBE R DATED THE 21 ST APRIL, 2011 COPY FORWARDED TO: 1. SHRI P. MURALI & CO, COMPANIES ACT, 1956 (1 OF 195 6), 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD 2. C/O M/S SUJANA METAL PRODUCTS LTD., NAGARJUNA HILLS , HYDERABAD 3. THE ACIT, CENTRAL CIRCLE 5, HYDERABAD 4. THE CIT(A) IV, HYDERABAD 5. THE CIT, HYDERABAD 6. THE DR, ITAT, HYDERABAD NP