NCL Energy Ltd. (Presently NCL Industries Ltd), Hyd, Hyderabad V. ACIT, Central Circle-6, Hyd, Hyderabad

ITA 1225/HYD/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2473 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 08-05-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 19-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L R AMJI RAO
• Assessee Lawyers: S RAMA RAO
• Keywords: Business income; Search and seizure; Difference of opinion; Change of opinion
• Section: 143(3); 153A; 147; 148; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 1225/HYD/2016 ASSESSMENT YEAR: 2005-06 NCL INDUSTRIES LIMITED, (FORMERLY NCL ENERGY LIMITED) HYDERABAD [PAN: AABCN1984G] VS DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-6, HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI S. RAMA RAO, AR FOR REVENUE : SHRI L. RAMJI RAO, DR DATE OF HEARING : 18-10-2017 DATE OF PRONOUNCEMENT : 27-10-2017 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)-4, HYDERABAD, DATED 24-06-2016 DECIDED EX-PARTE DISMISSING THE ASSESSEES CONTENTIONS. 2. BRIEFLY STATED, ASSESSEE IS A COMPANY IN WHICH PUB LIC ARE SUBSTANTIALLY INTERESTED AND IS ENGAGED IN THE MANUFAC TURE OF CEMENT BONDED PARTICLE BOARDS BESIDES GENERATION OF PO WER. THERE WERE SEARCH AND SEIZURE OPERATIONS AND PROCEEDINGS U /S. 153A OF THE INCOME TAX ACT [ACT] WERE INITIATED IN ASSESSEES CA SE. AN ORDER U/S. 143(3) R.W.S. 153A WAS PASSED ON 20-12-2006 DE TERMINING THE LOSS AT RS. 1,92,07,230/-. THAT ASSESSMENT WAS REOPEN ED UNDER I.T.A. NO. 1225/HYD/2016 :- 2 - : SECTION 147 BY THE AO. ASSESSING OFFICER (AO) RECORD ED THE SATISFACTION THAT DURING VERIFICATION OF RECORDS IT WA S FOUND THAT ACCORDING TO THE DIRECTORS REPORT, THE COMPANY HAS SOLD POWER TO THE TUNE OF RS. 4.74 CRORES BUT ADMITTED ONLY RS. 4.15 C RORES AS SALES IN THE P&L A/C. HE ALSO FOUND THAT ASSESSEE H AS EARNED INCOME FROM SALE OF POWER FROM THE TRIAL RUN OF TUNG A BHADRA DAM PROJECT WHICH WAS SET-OFF AGAINST THE PRE-COMMENCEMENT EXPENDITURE. AO WAS OF THE OPINION THAT THIS ACCOUNTI NG TREATMENT IS NOT LEGALLY CORRECT AND SALES INCOME HAS ESCAPED A SSESSMENT WITHIN THE MEANING OF SECTION 147. ACCORDINGLY, A NO TICE U/S. 148 WAS ISSUED TO ASSESSEE ON 20-03-2012 AFTER FOLLOWING THE DUE PROCEDURE. 2.1. ASSESSEE HAS OBJECTED TO THE RE-OPENING OF ASSES SMENT STATING THAT THERE IS NO FAILURE ON THE PART OF ASSESSEE AND ISSUANCE OF NOTICE AFTER FOUR YEARS FROM THE END OF THE ASSESS MENT YEAR, WHERE ASSESSMENT U/S. 143(3) WAS COMPLETED WITHOUT SA TISFYING THE CONDITIONS IS NOT VALID. AO, HOWEVER, DID NOT CONS IDER THE OBJECTIONS AND COMPLETED THE ASSESSMENT MAKING THE ADDI TION OF RS. 62,85,138/-. BEFORE THE LD.CIT(A), ASSESSEE HAS RAISED GROUNDS THAT ISSUANCE OF NOTICE IS NOT CORRECT AND THERE IS NO FRESH INFORMATION AVAILABLE ON RECORD FOR INITIATION OF PROC EEDINGS. ASSESSEE ALSO CONTESTED THE ISSUE ON MERITS. LD.CIT(A ), HOWEVER, ISSUED NOTICE OF HEARING ON 23-02-2016 AND 20-06-201 6 AND AS NONE APPEARED IN RESPONSE TO THE NOTICES, DISPOSED OF THE APPEAL EXPARTE , DISMISSING THE SAME HOLDING THAT NO INTERFERENCE IS NECESSARY. I.T.A. NO. 1225/HYD/2016 :- 3 - : 3. IT WAS THE CONTENTION OF THE LD. COUNSEL THAT THE NOTI CE WAS ISSUED AFTER FOUR YEARS AND THERE IS NO FAILURE ON TH E PART OF ASSESSEE FOR MAKING FULL AND TRUE DISCLOSURE OF THE F ACTS AT THE TIME OF COMPLETION OF ASSESSMENT. 4. LD.DR, HOWEVER, SUBMITTED THAT THERE WAS ESCAPEMENT OF INCOME AND AO HAS PROPERLY RECORDED THE REASONS FOR REOPENING. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE INFORMATION AVAILABLE ON RECORD. AS SEEN FROM THE AS SESSMENT ORDER ITSELF, AO GIVES A FINDING THAT ON VERIFICATION OF RECORD AND HE RELIES ON THE DIRECTORS REPORT TO FIND OUT THAT THERE W AS A TRIAL RUN AND ASSESSEE HAS RECEIVED AMOUNTS DURING THE TRIAL RUN. THEREFORE, IT IS TO BE CONSIDERED THAT THERE IS NO FAILU RE ON THE PART OF ASSESSEE TO DISCLOSE THE INFORMATION, AS THE ENTIRE INFORMATION WAS AVAILABLE WITH THE AO AT THE TIME OF COMPLETION OF AS SESSMENT U/S. 143(3) R.W.S. 153A ON 20-12-2006. IT IS TO BE N OTED THAT THIS IS A SEARCH AND SEIZURE CASE AND BOOKS OF ACCOUNT WE RE IMPOUNDED BY THE DEPARTMENT. ASSESSMENT WAS COMPLETED AFTER ISSU ANCE OF NOTICE U/S. 153A AND WITH APPROVAL OF SUPERVISORY OF FICER. THEREFORE, IT CANNOT BE STATED THAT THERE IS FAILURE ON TH E PART OF ASSESSEE IN MAKING FULL AND TRUE DISCLOSURE OF THE PA RTICULARS. THERE MAY BE DIFFERENCE OF OPINION WHETHER THE INCOM E DURING THE TRIAL RUN PERIOD CAN BE ASSESSED AS BUSINESS INCOME OR CAN BE SET- OFF TOWARDS PRE-COMMENCEMENT EXPENDITURE. THIS ISSUE BEING LEGAL, AO HAVING ACCEPTED THAT ASSESSEE HAS NOT COMMENCED BUSI NESS AND ALLOWED SET-OFF OF THE RECEIPTS DURING TRIAL RUN A ND ALLOWED OTHER LOSSES. SUBSEQUENTLY, AO FORMING DIFFERENT OPIN ION WILL COME WITHIN THE PURVIEW OF CHANGE OF OPINION. THERE IS NO FRESH I.T.A. NO. 1225/HYD/2016 :- 4 - : INFORMATION ON RECORD AND AS SEEN FROM THE DATE OF IS SUANCE OF NOTICE U/S. 148, IT WAS ISSUED ON 20-03-2012 WHICH I S AFTER FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. SINCE AN AS SESSMENT U/S. 143(3) RWS 153A WAS ORIGINALLY COMPLETED, PROV ISO TO SECTION 147 WHICH MANDATES THAT THERE SHOULD BE FAILURE ON THE PART OF ASSESSEE IS APPLICABLE. AS THERE IS NO FAILURE ON THE PART OF ASSESSEE AND AO HAS REOPENED ASSESSMENT ON CHANGE OF OPINION, THE SAME CANNOT BE UPHELD. THE CIT(A) SHOULD HAVE SEEN THE GR OUNDS OF APPEAL AND FACTS ON RECORD BEFORE DISMISSAL OF APPEA L FOR NON- APPEARANCE. SINCE ALL FACTS ARE AVAILABLE ON RECORD, NO USEFUL PURPOSE WOULD BE SERVED, IF THE ORDER OF THE CIT(A) I S SET ASIDE AND RESTORED FOR FRESH CONSIDERATION. THEREFORE, ACCEPTING THE ASSESSEES CONTENTIONS, WE ARE OF THE OPINION THAT REOPENING IS BA D IN LAW AND ACCORDINGLY, THE ORDERS OF THE AO AND CIT(A) ARE SET A SIDE. THE ORIGINAL ASSESSMENT ORDER IS RESTORED HEREWITH. 6. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH OCTOBER, 2017 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEM BER HYDERABAD, DATED 27 TH OCTOBER, 2017 TNMM I.T.A. NO. 1225/HYD/2016 :- 5 - : COPY TO : 1. NCL INDUSTRIES LIMITED, (FORMERLY NCL ENERGY LIM ITED), C/O. SRI S. RAMA RAO, ADVOCATE, FLAT NO. 102, SHRIY AS ELEGANCE, 3-6-643, STREET NO. 9, HIMAYAT NAGAR, HYDERABAD. 2. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCL E-6, HYDERABAD. 3. CIT (APPEALS)-4, HYDERABAD. 4. PR.CIT-4, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.