ITO, CHENNAI V. Alchemy Biotech Pvt Ltd., CHENNAI

ITA 1165/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4663 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2017
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 06-04-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 28-04-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: N DEVANATHAN
• Keywords: Depreciation; Rectification of order

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . , ! ' . #$ , % & BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A.NO.1165/MDS/2016 ( / ASSESSMENT YEAR: 2007-08) & CO NO.86/MDS/2016 THE INCOME TAX OFFICER, CORPORATE WARD - 1(1), CHENNAI 34. VS M/S. ALCHEMY BIOTECH PVT. LTD., 3-15-4, ARIHANT MAJESTIC TOWERS, KOYAMBEDU, CHENNAI 600 107. PAN:AADCR0301B ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI A.V. SREEKANTH, JCIT /RESPONDENT BY : SHRI N. DEVANATHAN, ADVOCATE /DATE OF HEARING : 06.04.2017 ! /DATE OF PRONOUNCEMENT : 01.05.2017 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS)-1, CHENNAI DATED 23.02.2016 IN ITA NO.307/14-15 (NEW N O. ITA238/CIT(A)-1/2014-15) PASSED U/S.250(6) R.W.S.14 3 & 154 OF THE ACT. 2 ITA NO.1165/MDS/2016 & CO NO. 86/MDS/2016 2. THE REVENUE HAS RAISED SEVERAL GROUNDS IN ITS AP PEAL AND THEY ARE REPRODUCED HEREIN BELOW FOR REFERENCE: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO L AW, FACTS AND CIRCUMSTANCES OF THE CASE. 2.1 THE LEARNED CIT(A) HAS ERRED IN NOT ACKNOWLEDGI NG THAT THE REVENUE HAS NOT TAKEN ANY NEW STAND, BUT HAS MERELY REITERATED THE STAND TAKEN BY THE ASSESSEE HIMSELF IN THE PREC EDING ASSESSMENT YEAR. THEREFORE, THIS IS INDEED A MISTAK E APPARENT FROM RECORD WHICH IS SOUGHT TO BE RECTIFIED. 2.2 THE LEARNED CIT(A) ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE WITHOUT TAKING INTO ACCOUNT THE REVISION O RDER PASSED FOR THE SIMILAR REASON FOR A.Y.2006-07 WHICH WAS NO T APPEALED AGAINST. 2.3 THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED TH E FACT THAT SINCE THE ASSESSEE HAS NOT GONE ON APPEAL ON THE SI MILAR ISSUE IN THE PRECEDING YEAR, IT GOES AGAINST THE STAND TAKEN BY THE ASSESSEE ALREADY. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEAR NED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER REST ORED. 3. THE ASSESSEE HAS ALSO FILED CROSS OBJECTION WHIC H IS REPRODUCED HEREIN BELOW FOR REFERENCE: 1. THE APPEAL FILED BY THE APPELLANT IS DEFECTIVE W HEN IT HAD NOT ENCLOSED THE GROUNDS OF APPEAL RELATING TO THE RESP ONDENT AND HENCE THE SAME IS LIABLE TO BE DISMISSED IN LIMINI, WITHOUT PREJUDICE, 2. THE RESPONDENT, SUBMITS THAT THE APPEAL FILED BY THE REVENUE IS NOT MAINTAINABLE SINCE THE APPEAL HAS BEEN FILED ME CHANICALLY 3 ITA NO.1165/MDS/2016 & CO NO. 86/MDS/2016 WITHOUT APPLICATION OF MIND AND JUDICIAL DISCRETION HAS NOT BEEN EXERCISED JUDICIALLY AND JUDICIOUSLY, FURTHER THE R EVENUE OUGHT TO HAVE FOLLOWED IN THIS REGARD THE BINDING DECISION O F THE IT AT IN THE CASE OF SRI VARADARAJA TEXTILES REPORTED IN 119 ITD 469 (MAD) WHICH TELLINGLY POINTED OUT AS UNDER:- 'SECTION 253(2) OF THE ACT PROVIDES THAT THE COMMIS SIONER MAY, IF HE OBJECTS TO ANY ORDER PASSED BY THE COMMISSIONER (APPEALS), DIRECT THE ITO TO FILE AN APPEAL TO THE TRIBUNAL AG AINST THE ORDER. BUT, THIS DOES NOT MEAN THAT EVERY ORDER OF THE COM MISSIONER (APPEALS) WHICH INTERFERES WITH THE ASSESSMENT MADE BY THE ITO CAN BE OBJECTED TO. THE OBJECTION MUST BE REASONABL E AND RATIONAL AND CANNOT BE MADE WITHOUT REGARD TO THE CORRECTNES S OF THE ORDER APPEALED AGAINST. THIS POWER ITSELF IS A DISCRETION ARY POWER AND IS COUPLED WITH THE DUTY TO ACT FAIRLY. THE EXERCISE O F THIS POWER IS ALSO A MATTER OF REVIEW BY THE TRIBUNAL BECAUSE AN ADMINISTRATIVE TRIBUNAL IS DUTY BOUND TO DETERMINE WHETHER THE POW ER OF THE COMMISSIONER HAS BEEN EXERCISED IN A MANNER THAT CO MPLIES WITH CERTAIN IMPLIED LEGAL REQUIREMENTS. DE SMITH'S JUDI CIAL REVIEW OF ADMINISTRATIVE ACTION AT PAGE 323 STATES THAT IN SO ME CONTEXT IT MAY BE CONFINED TO THE QUESTION WHETHER THE COMPETE NT AUTHORITY HAS KEPT WITHIN THE FOUR CORNERS OF THE ACT AND WHE THER IT HAS ACTED IN GOOD FAITH, BUT USUALLY THEY WILL PURSUE T HEIR INQUIRY FURTHER AND WILL CONSIDER WHETHER THE REPOSITORY OF A DISCRETION ALTHOUGH ACTING IN GOOD FAITH HAS ABUSED ITS POWER BY EXERCISING IT FOR AN INADMISSIBLE PURPOSE OR ON IRRELEVANT GROUND S OR WITHOUT REGARD TO RELEVANT CONSIDERATIONS OR WITH GROSS UNR EASONABLENESS. WE FIND THE FOLLOWING STATEMENT OF LAW ON THIS POIN T: 'THE EMPHASIS THAT THE COURTS HAVE RECENTLY PLACED ON AN IMPLIED DUTY TO EXERCISE DISCRETIONARY POWERS FAIRLY MUST N ORMALLY BE UNDERSTOOD TO MEAN A DUTY TO ADOPT A FAIR PROCEDURE (P. 346) 3. THE APPELLANT HAS MECHANICALLY FILED THE APPEAL SINCE THE APPEAL IS BARRED BY LIMITATION AND THE ORDER OF THE CIT (A) BOTH ON MERITS AND ON LIMITATION IS UNIMPEACHABLE AND FI LING OF APPEAL IS BORDERING ON HARASSMENT AND ABUSE OF PROCESS OF COURT BY THE APPELLANT. 4 ITA NO.1165/MDS/2016 & CO NO. 86/MDS/2016 4. THE RESPONDENT ON THE FACTS AND CIRCUMSTANCES I S ENTITLED TO EXEMPLARY COST AND THE SAME BE ORDERED. 5. THE RESPONDENT CRAVES LEAVE TO FILE ADDITIONAL GROUNDS. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PRIVATE LIMITED COMPANY CARRYING ON MULTI-DISCIPLIN ARY RESEARCH AND DEVELOPMENT IN BIOTECHNOLOGY, NEW CHEMICAL ENTI TIES, NOVEL DRUG DELIVERY SYSTEM AND OTHER ALLIED AREAS FOR INV ENTION OF NEW TECHNOLOGY, CONCEPTS AND PRODUCTS, MANUFACTURING AN D PRODUCTION OF ACID FREE CLEANINGS FORMULATION AND L ONG LASTING SURFACE SPECIALTY COATING. THE ASSESSEE FILED ITS R ETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 ON 31.12.2007. THE RETURN OF INCOME WAS PROCESSED U/S.143(1) OF THE ACT ON 06.11 .2008. SUBSEQUENTLY NOTICE U/S.154 OF THE ACT WAS ISSUED A ND ORDER U/S.154 OF THE ACT WAS PASSED ON 28.01.2014, WHEREI N THE LD.AO DISALLOWED DEPRECIATION ON SELF-GENERATED AS SETS OF RS.1,94,91,446/- AND THEREBY DETERMINED THE TOTAL I NCOME OF THE ASSESSEE AT RS.1,76,16,560/-. 5. ON APPEAL, THE LD.CIT(A) HELD THAT THE ORDER PAS SED BY THE LD.AO U/S.154 OF THE ACT IS TIME BARRED AND ALSO DE CIDED THE 5 ITA NO.1165/MDS/2016 & CO NO. 86/MDS/2016 ISSUE ON MERITS IN FAVOUR OF THE ASSESSEE. THE REL EVANT PORTION OF THE ORDER IS EXTRACTED HEREIN BELOW FOR REFERENC E: PARA 10 TO 15: ISSUE NO.1: THE IMPUGNED ORDER IS B ARRED BY LIMITATION. 10. THE PROVISIONS AS CONTAINED IN S.154 PROVIDE TH AT THE AO HAS POWER TO PASS RECTIFICATION ORDERS BEING ONLY. MIST AKE APPARENT FROM RECORD. IT CAN BE MADE SUO MOTO OR ON AN APPLI CATION BY PARTIES CONCERNED AFTER GIVING AN OPPORTUNITY TO TH E ASSESSEE, IF IN CASE THE RECTIFICATION OR THE AMENDMENT RESULTS IN ENHANCING THE ASSESSMENT OR REDUCING THE REFUND OR INCREASING THE LIABILITY OF THE ASSESSEE. SUCH RECTIFICATION HAS TO BE CARRI ED OUT WITHIN A TIME LIMIT OF 4 YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER SOUGH TO BE AMENDED WAS PASSED. THE AO HA S TO PASS ORDER WITHIN SIX MONTHS FROM THE END OF THE MONTH I N WHICH THE APPLICATION FOR RECTIFICATION IS RECEIVED BY HIM. 11. IN THIS CASE THE ORDER SOUGHT TO BE AMENDED IS THE ORDER U/S 143(1) WHICH WAS PASSED ON 6.11.2008 (F. Y. 2008-09 ). THE ORDER RECTIFYING THE SAME WAS THEREFORE REQUIRED TO BE PASSED BY 31ST MARCH, 2013 BEING 4 YEARS FROM THE END OF FINA NCIAL YEAR IN WHICH THE ORDER SOUGHT TO BE AMENDED WAS PASSED. AS AGAINST THE SAME, THE ORDER WAS PASSED BY THE AO ON 28.1.2014, CLEARLY BEYOND TIME PRESCRIBED U/S 154. HOWEVER, THE AO HAS NOT EITHER CONTROVERTED OR CONFIRMED THE SAME IN THE REPORT DA TED 27.11.2015. ISSUE NO.2: THERE IS NO MISTAKE APPARENT FROM THE R ECORD. 12. IN ORDER TO EXAMINE AS TO WHETHER THERE WAS MIS TAKE APPARENT FROM RECORD IT WILL SERVE USEFUL PURPOSE T O REFER TO THE REASONS RECORDED BY THE AO FOR PROCEEDINGS U/S 154 WHICH ARE EXTRACTED IN PARA 4 ABOVE AS ALSO THE ORDER PASSED BY THE AO U/S 154 ON 28.1.2014. THEREIN IT HAS BEEN OBSERVED BY T HE AO THAT IN THE ASSESSMENT COMPLETED U/S 143(1) ON 6.11.2008 IT WAS FOUND 6 ITA NO.1165/MDS/2016 & CO NO. 86/MDS/2016 THAT DEPRECIATION ON PLANT AND MACHINERY, PRODUCT P ATENTS, TRADE MARKS, DESIGN AND R& 0 CHARGES WERE CLAIMED WHICH W ERE ALLOWED. AN INFERENCE IS FURTHER DRAWN THAT R&D CHA RGES AND SELF-GENERATED ASSETS WILL HAVE NIL AS WDV. SIMILAR LY, THERE WAS AN OPINION WITH REGARD TO PLANT & MACHINERY WHICH W ERE TRANSFERRED FROM THE PROPRIETORSHIP TO THE COMPANY. THE PROVISIONS OF S.43(1) AND EXPLANATION 6(B) U/S 43(6 ) HAVE BEEN REFERRED TO. SUCH DISCUSSION ITSELF IS A POINTER TO THE FACT THAT A VIEW ON INTERPRETATION OF LAW HAD TO BE TAKEN WITH REGARD TO VARIOUS CLAIMS MADE BY THE APPELLANT AND EXAMINING THE SAME IN THE LIGHT OF EXISTING PROVISIONS. IN OTHER WORDS, T HE RESULTANT DECISION WOULD REQUIRE CALLING FOR DETAILS ARID PRO CESSING THE SAME TO ARRIVE AT A CONCLUSION. 13. AS TO WHETHER SUCH AN EXERCISE WOULD BE COVERED UNDER THE EXISTING PROVISIONS OF S.154 HAS BEEN ANSWERED BY T HE HON'BLE SUPREME COURT IN THE CASE OF T.S. BALARAM, ITO VS. VOLKART BROTHERS & OTHERS (SC) 82 ITR 50. THE HON'BLE SUPRE ME COURT HELD THAT A MISTAKE APPARENT ON THE RECORD MUST BE AN OBVIOUS AND PATENT MISTAKE AND NOT SOMETHING WHICH CAN BE E STABLISHED BY A LONG DRAWN PROCESS OF REASONING ON POINTS ON W HICH THERE MAY CONCEIVABLY BE TWO OPINIONS. IN SATYANARAYAN LAXMINARAYAN HEGDE V. MALLIKALJUN BHAVANAPPA TIRUMA LE [19601 1 SCR 890, THE COURT WHILE SPELLING OUT THE SCOPE OF THE POWER OF A HIGH COURT UNDER ARTICLE 226 OF THE CONS TITUTION RULED THAT AN ERROR WHICH HAS TO BE ESTABLISHED BY A LONG DRAWN PROCESS OF REASONING ON POINTS WHERE THERE MAY CONC EIVABLY BE TWO OPINIONS CANNOT BE SAID TO BE AN ERROR APPARENT ON THE FACE OF THE RECORD. A DECISION ON A DEBATABLE POINT OF L AW IS NOT A MISTAKE APPARENT FROM THE RECORD; REFERENCE IS INVI TED TO THE RATIO IN SIDHRAMAPPA ANDANNAPPA MANVI V. COMMISSION ER OF INCOME-TAX [1952121 ITR 333 (BOM.). 14. IN VIEW OF THE ABOVE, I AM OF THE CONSIDERED VI EW THAT THE MATTER UNDER CONSIDERATION OF THE AO WAS BEYOND THE SCOPE OF S.154 AND AS SUCH, THE ORDER OF THE AO FOR SUCH REA SONS CANNOT 7 ITA NO.1165/MDS/2016 & CO NO. 86/MDS/2016 BE UPHELD AS BEING PERMISSIBLE WITHIN THE SCOPE OF THIS PROVISION. THIS GROUND OF APPEAL IS ALLOWED, ISSUE NO.3: ON MERITS, THE ASSESSEE IS ELIGIBLE FOR DEPRECIATION: 15. THIS ISSUE IN ANY CASE FOR REASONS DISCUSSED IN THE FOREGOING AS ALSO SUBMISSIONS MADE BY THE APPELLANT AND OBSER VATION MADE BY THE AO, CANNOT BE A MATTER WHICH CAN BE CONSIDER ED U/S 154. 6. BEFORE US THE LD.AR SUBMITTED THAT THE ORDER PAS SED BY THE LD.AO U/S.154 OF THE ACT, IS TIME BARRED BECAUS E IT IS PASSED BEYOND THE PERIOD OF 4 YEARS FROM THE END OF THE FI NANCIAL YEAR IN WHICH ORDER U/S.154 WAS PASSED. THE LD.DR COULD NO T CONTROVERT TO THE SUBMISSION OF THE LD.AR. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FACTS OF THE CASE, IT IS APPARENT THAT THE ASSESSMENT ORDER WAS PASSED U/ S.143(1) OF THE ACT ON 06.11.2008. THEREFORE, THE ORDER U/S.15 4 OF THE ACT HAS TO BE PASSED WITHIN 4 YEARS FROM THE END OF THE FINANCIAL YEAR 2008-09, I.E., BEFORE 31.03.2013. SINCE IN THE CAS E OF THE ASSESSEE THE ASSESSMENT ORDER U/S.154 OF THE ACT WA S PASSED ON 28.01.2014 WHICH IS WELL BEYOND 4 YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ASSESSMENT ORDER WAS PA SSED VIZ., 2008-09, THE ORDER PASSED BY THE LD.A.O IS TIME BAR RED AND 8 ITA NO.1165/MDS/2016 & CO NO. 86/MDS/2016 THEREFORE REQUIRES TO BE QUASHED. ACCORDINGLY, WE HEREBY QUASH THE ASSESSMENT ORDER PASSED BY THE LD.AO DATED 28.0 1.2014. SINCE WE HAVE QUASHED THE ASSESSMENT ORDER BY HOLDI NG IT TO BE TIME BARRED, IT IS NOT NECESSARY FOR US TO ADJUDICA TE THE MERIT OF THE CASE AS IT WOULD BE ONLY ACADEMIC. CONSEQUENTL Y THE CO OF THE ASSESSEE HAS ALSO BECOME INFRUCTUOUS AND THEREF ORE DISMISSED. 8. IN THE RESULT THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON THE 01 ST MAY, 2017. SD/- SD/- ( ! ' . #$ ) ( . ) ( DUVVURU RL REDDY ) ( A. MOHAN ALANKAMONY ) ' #$ /JUDICIAL MEMBER #$ / ACCOUNTANT MEMBER %' /CHENNAI, &# /DATED 01 ST MAY, 2017 JR # () *) /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. - ( )/CIT(A) 4. - /CIT 5. )./ 0 /DR 6. /1 /GF