DCIT, New Delhi V. M/s. India Tourism Development Corpn. Ltd., New Delhi

ITA 1264/DEL/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3977 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 11-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 11-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RIS GILL
• Keywords: Tangible material; Bad and doubtful debts; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 143(3); 115JB; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER & SHRI K.D. RANJAN, ACCOUNTANT MEMBER ITA NO. 1264/DEL/2011 ASSESSMENT YEAR: 2004-05 DCIT, VS. INDIA TOURISM DEVELOPMENT CORPN. LTD., CIRCLE 11(1), CORE-8, 6 TH FLOOR, SCOPE COMPLEX, ROOM NO. 312, LODHI ROAD, INSTITUTIONAL AREA, C.R. BLDG., NEW DELHI. NEW DELHI. AAAC10825J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.I.S. GILL, CIT(DR) RESPONDENT BY : NONE ORDER PER I.P. BANSAL, J.M. THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DI RECTED AGAINST ORDER PASSED BY LD. CIT(A) DATED 10.12.2010 FOR A.Y. 2004 -05. GROUNDS OF APPEAL READ AS UNDER: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DECLARING THE INITIATION OF LEG AL PROCEEDING AS VOID. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 98,55,000 /- ON ACCOUNT OF REPAIR AND MAINTENANCE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 1,14,54,3 02/- ON ACCOUNT OF LEAVE ENCASHMENT. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. ITA NO. 1264/D/2011 2 2. THE ASSESSEE IS A GOVERNMENT OF INDIA UNDERTAKIN G. IT WAS EARLIER ASSESSED VIDE ASSESSMENT ORDER DATED 29.12. 2006 U/S 143(3) OF THE ACT, WHEREIN AGAINST THE NIL INCOME THE ASSESSE E WAS ASSESSED AS PER PROVISIONS OF SEC. 115JB AT THE BOOK PROFIT OF RS. 8,21,67,594/- AND COPY OF SUCH ORDER IS PLACED ON RECORD. 3. SUBSEQUENTLY REASSESSMENT PROCEEDINGS WERE INITI ATED VIDE NOTICE U/S 148 ISSUED ON 6.3.2009 AND VIDE LETTER D ATED 16.4.2009 THE ASSESSEE SUBMITTED THAT RETURNED FILED EARLIER MAY BE TREATED AS RETURN IN RESPONSE TO NOTICE U/S 148. IN THE REASSESSMENT OR DER THE AO MADE TWO ADDITIONS ONE REGARDING REPAIR AND MAINTENANCE EXPE NSES AMOUNTING TO RS. 98,55,000/-. ANOTHER RS. 1,14,54,302/- ON ACCOU NT OF LEAVE ENCASHMENT AND IN THIS MANNER INCOME HAS BEEN REASS ESSED AT A SUM OF RS. 3,51,06,724/-. 4. BEFORE CIT(A), THE VALIDITY OF REASSESSMENT PROC EEDING AS WELL AS ADDITIONS MADE ON MERITS WERE CONTESTED. FOR CONTE STING THE VALIDITY OF REASSESSMENT PROCEEDINGS, INTER-ALIA IT WAS SUBMITT ED THAT INITIALLY THE ASSESSMENT WAS COMPLETED U/S 143(3) VIDE ORDER DATE D 29.12.2006. IN THE ORIGINAL ASSESSMENT THERE IS NO CASE OF ANY CHA RGEABLE INCOME UNDER NORMAL PROVISIONS AND TAX LIABILITY WAS WORKE D OUT U/S 115JB. IT WAS FURTHER CONTENDED THAT THE ORIGINAL ORDER U/S 1 15JB WAS SUBJECT MATTER OF APPEAL BEFORE CIT(A) AND ISSUE RELATING T O COMPUTATION OF TAX LIABILITY U/S 115JB WAS CONSIDERED AND ADJUDICATED. FROM THE IMPUGNED ITA NO. 1264/D/2011 3 ASSESSMENT ORDER LD. CIT(A) HAS NOTICED THAT AO HAD INITIATED REASSESSMENT PROCEEDING FOR THE PURPOSE OF COMPUTAT ION OF TAX LIABILITY U/S 115JB IN RESPECT OF (1) CLAIM OF REPAIR AND MA INTENANCE AND (2) IN RESPECT OF CLAIM OF LEAVE ENCASHMENT. IT IS ALSO O BSERVED BY LD. CIT(A) THAT IT IS NOT THE CASE OF AO THAT THERE WAS ANY OM ISSION ON THE PART OF ASSESSEE IN DECLARING CORRECT INCOME ON THE BASIS O F AUDITED ACCOUNT OR ANY FRESH MATERIAL HAS COME TO THE NOTICE OF AO AFT ER COMPLETION OF ASSESSMENT. IT IS FURTHER OBSERVED BY HIM THAT BOT H THESE ISSUES WERE PART OF RECORD AT THE TIME OF ORIGINAL ASSESSMENT A ND, THEREFORE, IT IS TO BE PRESUMED THAT AO HAD TAKEN INTO CONSIDERATION THESE ISSUES FOR WORKING OUT THE LIABILITY OF TAX U/S 115JB AS AO HAS SPECIF ICALLY DISALLOWED PROVISIONS FOR GRATUITY AND PROVISIONS FOR DOUBTFUL DEBTS WHILE COMPUTING INCOME U/S 115JB. IT IS FURTHER OBSERVED BY HIM TH AT EVEN OTHERWISE, BOTH THESE ISSUES ARE NOT RELEVANT FOR THE PURPOSE OF ADJUSTMENT U/S 115JB. THE CLAIM REGARDING REPAIR AND MAINTENANCE WAS SUPPORTED BY AUDITED ACCOUNTS AND SUCH CLAIM COULD HAVE NO RELEV ANCE, FOR THE PURPOSE OF COMPUTATION OF INCOME U/S 115JB READ WIT H EXPLANATION 1. SIMILARLY THE ISSUE OF LEAVE ENCASHMENT IS ALSO IN THE NATURE OF ASCERTAIN LIABILITY AND, THEREFORE, THAT ITEM ALSO IS NOT COV ERED UNDER EXPLANATION FOR THE PURPOSE OF ADJUSTMENT U/S 115JB. THE CLAIM OF THE ASSESSEE REGARDING LEAVE ENCASHMENT IS SUPPORTED BY THE DECI SION OF HONBLE SUPREME COURT IN THE CASE OF BHARAT EARTH MOVERS LT D. 245 ITR 428 (SC). ITA NO. 1264/D/2011 4 5. IT IS FURTHER OBSERVED BY LD. CIT(A) THAT THE CO MPUTATION OF BOOK PROFIT U/S 115JB IS COVERED BY DECISION OF SUPREME COURT IN THE CASE OF CIT VS. APOLLO TYRES LTD. 255 ITR 708. THE AO DID NOT RECORD A SPECIFIC FINDING AS TO HOW AND IN WHAT MANNER THOSE ADJUSTME NTS WERE REQUIRED TO BE MADE FOR THE PURPOSE OF COMPUTING LIABILITY U /S 115JB. THE INITIATION OF REASSESSMENT PROCEEDING AND COMPUTATI ON OF INCOME IS ON MECHANICAL BASIS WITHOUT APPLICATION OF MIND OR PRO PER APPRECIATION OF FACTS AND LEGAL PROVISIONS. HE FURTHER OBSERVED TH AT ACCORDING TO DECISION OF HONBLE SUPREME COURT IN THE CASE OF CI T VS. KELVINATOR OF INDIA LTD. 320 ITR 561, IT IS NOT OPEN TO INITIATE PROCEEDINGS U/S 148 ON THE BASIS OF CHANGE OF OPINION AND FOR ASSUMING JUR ISDICTION U/S 148, THERE HAS TO BE A TANGIBLE MATERIAL SO AS TO COME T O CONCLUSION THAT INCOME HAS ESCAPED ASSESSMENT AND IN THIS MANNER LD . CIT(A) HAS HELD THAT THERE IS NO LEGAL BASE FOR INITIATION OF PROCE EDING U/S 148 AND FOR COMPUTATION OF TAX LIABILITY U/S 115JB IN RESPECT O F BOTH THESE ITEMS AND, THEREFORE, HE HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE AS HE HAS DISMISSED THE GROUND OF THE ASSESSEE REGARDING INVA LIDITY OF REASSESSMENT PROCEEDING ON ACCOUNT OF NON-SERVICE O F NOTICES U/S 143(2) AND 142(1). THE REVENUE IS AGGRIEVED WITH S UCH FINDINGS OF LD. CIT(A) AND HENCE HAS FILED THE AFOREMENTIONED APPEA L. 6. NOTICE OF HEARING WAS SENT TO ASSESSEE. HOWEVER , NONE WAS PRESENT ON BEHALF OF ASSESSEE ON THE FIXED DATE OF HEARING. THEREFORE, WE PROCEED TO DECIDE THE PRESENT APPEAL EX-PARTE QU A THE ASSESSEE AFTER HEARING LD. DR. ITA NO. 1264/D/2011 5 7. LD. DR AFTER NARRATING THE FACTS RELYING UPON TH E ASSESSMENT ORDER AND PLEADED THAT LD.CIT(A) HAS ERRED IN ALLOW ING THE APPEAL OF THE ASSESSEE BY STRUCKING DOWN THE VALIDITY OF REASSESS MENT PROCEEDINGS AS WELL AS DELETING THE ADDITION ON MERITS. 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF LD. DR. WE HAVE ALSO CAREFULLY GONE THROUGH THE ORIGINAL ASSES SMENT ORDER, THE IMPUGNED ASSESSMENT ORDER AS WELL AS ORDER PASSED B Y CIT(A). IT IS NOTED THAT ASSESSEE IS A GOVERNMENT OF INDIA UNDERT AKING AND ITS ACCOUNTS ARE SUBJECT TO AUDIT BY THE GOVERNMENT OF INDIA AS WELL AS BY CAG. THE ORIGINAL ASSESSMENT HAS BEEN FRAMED VIDE ORDER DATED 29.12.2006 PASSED U/S 143(3) OF THE ACT. THE ORDER HAS BEEN PASSED IN DETAIL AND UNDER THE NORMAL COMPUTATION OF INCOME T HE ASSESSEES INCOME HAS BEEN ASSESSED AS NIL. HOWEVER, THE INCO ME OF THE ASSESSEE ON THE BASIS OF PROVISIONS OF SEC. 115JB I S ASSESSED AT RS. 8,21,67,594/-, WHEREIN THE AO HAS ADDED THREE ITEMS TO THE NET PROFIT AS PER PROFIT AND LOSS ACCOUNT: - (I) PROVISION FOR CONTINGENCY (OTHERS RS. 6,190/-) (II) PROVISION FOR DOUBTFUL DEBTS AND ADVANCES RS. 1,59,52,192/- (III) PROVISION FOR GRATUITY RS. 3,75,89,588/-. IT HAS BEEN RECORDED IN THE ORDER OF CIT(A) THAT AS PER SUBMISSIONS OF THE ASSESSEE REASONS WERE NOT PROVIDED TO IT AND RE FERENCE CAN BE MADE TO PAGE 7 OF THE APPELLATE ORDER. THEN REFERE NCE IS MADE TO THE IMPUGNED ASSESSMENT ORDER AND IT WAS MENTIONED THAT THE DISPUTE WAS ITA NO. 1264/D/2011 6 RELATING TO TWO ADJUSTMENTS ONE REGARDING REPAIR AN D MAINTENANCE AND OTHER REGARDING LEAVE ENCASHMENT. IT IS ALSO MENTI ONED THAT THERE WAS NO TAX LIABILITY OF THE ASSESSEE UNDER THE NORMAL P ROVISIONS OF THE ACT AS THE INCOME WAS DETERMINED ONLY U/S 115JB. REFERENCE IS MADE TO THE ORDER OF CIT(A) AGAINST ORIGINAL ASSESSMENT ACCORDI NG TO WHICH INCOME OF THE ASSESSEE U/S 115JB IS DETERMINED AT RS. 1,37 ,97,422/-. AGAIN AO INITIATED REASSESSMENT PROCEEDING AND HAS MADE TWO AFOREMENTIONED ADJUSTMENTS FOR THE PURPOSE OF COMPUTING TAX LIABIL ITY U/S 115JB. IT WAS SUBMITTED THAT BOTH THESE CLAIMS WERE ON THE BASIS OF AUDITED ACCOUNTS AS PER SCHEDULE VI OF THE COMPANYS ACT. THE AUDIT ED ACCOUNTS WERE ALSO APPROVED BY COMPTROLLER & AUDITOR GENERAL AND, THEREFORE, THERE COULD NOT BE ANY MISTAKE IN THE COMPUTATION OF INCO ME UNDER THE LAW. REFERENCE WAS MADE TO THE DECISION OF HONBLE SUPRE ME COURT IN THE CASE OF CIT VS. APOLLO TYRES LTD. (SUPRA), WHEREIN IT WAS HELD THAT NO ADJUSTMENT COULD BE MADE WHILE COMPUTING BOOK PROFI T U/S 115JB UNLESS IT IS AUTHORIZED BY THE STATUTE AND NET PROFIT IN T HE PROFIT AND LOSS ACCOUNT PREPARED AS PER PARTS 2 & 3 OF SCHEDULE VI SHOULD O NLY HAVE BEEN TAKEN INTO CONSIDERATION. IT WAS SUBMITTED THAT IN ANY C ASE BOTH THE ISSUES WERE CONSIDERED IN THE ASSESSMENT ORDER PASSED U/S 143(3) AND THEY WERE ACCEPTED ON MERITS. THUS, IT WAS PLEADED THAT THERE WAS NO OCCASION OF EXERCISING JURISDICTION U/S 147. IT WA S ALSO SUBMITTED THAT ON MERITS ALSO THESE ADDITIONS ARE NOT SUSTAINABLE AS REPAIR AND MAINTENANCE OF THE BUILDING AND FURNITURE AND FIXTU RE IS PART OF THE ACTIVITY OF BUSINESS OF HOTEL AND DEDUCTION IS PERMISSIBLE U /S 30 OF THE ACT. SIMILARLY LEAVE ENCASHMENT ALSO COULD NOT BE ADDED AS UNASCERTAINED ITA NO. 1264/D/2011 7 LIABILITY. AS THE SAME IS ACTUAL AND ASCERTAIN LIA BILITY AND REFERENCE WAS MADE TO THE DECISION OF HONBLE SUPREME COURT IN TH E CASE OF BHARAT EARTH MOVERS (SUPRA). THE VALIDITY OF REASSESSMENT PROCEEDINGS WERE ALSO CHALLENGED ON THE BASIS OF CHANGE OF OPINION A ND REFERENCE WAS MADE TO THE DECISION OF HONBLE SUPREME COURT IN TH E CASE OF CIT VS. KELVINATOR OF INDIA LTD. IF ALL THESE SUBMISSIONS OF THE ASSESSEE ARE CONSIDERED AND APPRECIATED THEN THE INEVITABLE CONC LUSION WILL BE THAT REASSESSMENT PROCEEDINGS ARE NOT BASED ON ANY COGEN T MATERIAL. IT ALSO CANNOT BE SAID THAT ASSESSEE HAD NOT DISCLOSED MATERIAL FACTS REGARDING COMPUTATION OF ITS INCOME AS THE ASSESSEE IS A GOVERNMENT OF INDIA UNDERTAKING AND ITS ACCOUNTS ARE SUBJECT TO S TATUTORY AUDIT AS WELL AS AUDIT BY THE COMPTROLLER & AUDITOR GENERAL OF IN DIA. NO NEW MATERIAL COULD HAVE COME TO THE NOTICE OF AO TO FORM AN OPIN ION OR BELIEF THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT DUE T O AFOREMENTIONED TWO ITEMS NAMELY UPON CLAIM OF REPAI R AND MAINTENANCE AND ON CLAIM OF LEAVE ENCASHMENT. THE ASSESSEE BE ING GOVERNMENT OF INDIA UNDERTAKING HAS CLAIMED THE PERMISSIBLE DEDUC TIONS. THE REPAIR AND MAINTENANCE EXPENSES ARE CLAIMED ON THE BUILDIN GS, FURNITURE AND PLANT ETC. RELATING TO HOTELS WHICH IS PERMISSIBLE AS CURRENT REPAIR U/S 30 OF THE ACT. SIMILARLY NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT THE CLAIM OF THE ASSESSEE REGA RDING LEAVE ENCASHMENT WAS IN ANY MANNER AS AN UNASCERTAINED LI ABILITY. THEREFORE, ADDITIONS ON MERITS ALSO COULD NOT BE MADE AND THE REASSESSMENT IS TO BE HELD TO BE BASED MERELY ON CHANGE OF OPINION. F OR THESE REASONS, WE ARE OF THE OPINION THAT LD. CIT(A) HAS COMMITTED NO INFIRMITY IN ITA NO. 1264/D/2011 8 HOLDING THAT REASSESSMENT PROCEEDINGS WERE NOT VALI DLY INITIATED AND ADDITIONS MADE BY THE AO WERE NOT CALLED FOR. FIND ING NO FORCE IN DEPARTMENTAL APPEAL, WE DISMISS THE SAME. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 13.5.2011 SD/- SD/- (K.D. RANJAN) (I.P. BANSAL) ACCOUNTANT MEMBER JUDI CIAL MEMBER DATED: 13.5.11 *KAVITA CHOPRA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR