UB Engineering Ltd., Pune V. Deputy Commissioner of Income-tax,

ITA 128/PUN/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7162 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 1999-2000
• Appeal Filed On: 29-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Assessee Lawyers: SANJAY R PARIKH
• Keywords: Reopening of assessment; Depreciation; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 142(1); 147; 148; 139

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.P. TOLANI, JM AND SHRI ANIL CHATURVEDI, AM / ITA NO.128/PUN/2015 / ASSESSMENT YEAR : 1999-2000 UB ENGINEERING LIMITED, SAHYADRI SADAN, TILAK ROAD, PUNE 411030. PAN : AAACU1363K . / APPELLANT V/S THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 7, ROOM NO.302, PRAPTIKAR SADAN, ERANDAWANE, KARVE ROAD, PUNE - 411004 . / RESPONDENT / APPELLANT BY : SHRI SANJAY R. PARIKH / RESPONDENT BY : SHRI HITENDRA NINAWE / ORDER PER ANIL CHATURVEDI, AM : THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A) III, PUNE DT.03.11.2014 FOR THE ASSESSMENT YEAR 1999-2000. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER :- / DATE OF HEARING : 19.12.2016 / DATE OF PRONOUNCEMENT: 09.02.2017 2 ITA NO.128/PUN/2015 AY.NO.1999-2000 2.1 ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE BUSINESS OF MANUFACTURING OF HYBRID INTEGRATED CIRCUITS. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 1999-2000 DECLA RING TOTAL INCOME AT RS.5,21,95,630/-. THE ASSESSMENT WAS ORIGINALLY FRAMED U/S 143(3) ON 27.03.2002 AND THE TOTAL INC OME WAS DETERMINED AT RS.5,71,81,800/-. THEREAFTER, THE CASE W AS RE-OPENED U/S 147 ON 06.07.2006 AND NOTICE U/S 148 WAS ISSUED ON 09.03.2006. IN RESPONSE TO NOTICE U/S 148, ASS ESSEE FILED THE RETURN OF INCOME ON 13.04.2006 DECLARING TOTAL IN COME AT RS.5,21,95,629/-. THEREAFTER THE ASSESSMENT WAS FRAMED U/S 143(3) R.W.S. 147 AND THE TOTAL INCOME WAS DETERMINED AT RS.5,94,82,146. AGGRIEVED BY THE ORDER OF THE AO, ASSESSE E CARRIED THE MATTER BEFORE LD. CIT(A), WHO VIDE ORDER DT. 03.11.2014 DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD. CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE U S AND HAS RAISED THE FOLLOWING GROUNDS : A) RE-OPENING OF ASSESSEEMENT 1) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) III, PUNE [CIT(A)] ERRED ON FACTS AND IN LAW IN UPHOLDIN G THE REOPENING OF ASSESSMENT AND THE CONSEQUENTIAL ORDER U/S. 143(3) R.W.S. 147 PASSED BY THE ADDITIONAL COMMISSI ONER OF INCOME TAX, RANGE 7, PUNE (AO) BY HOLDING THAT : A) THE APPELLANT HAD NOT FULLY AND TRULY DISCLOSED ALL MATERIAL FACTS IN THE RETURN OF INCOME; AND B) THE AO HAVING NOT DISCUSSED THE ISSUE DURING THE ORIGINAL ASSESSMENT PROCEEDINGS, THERE COULD BE NO CHANGE OF OPINION. 2) THE LEARNED CIT(A) ERRED IN HOLDING THAT THE NO COG NIZANCE CAN BE TAKEN OF THE APPELLANTS LETTER DATED 25.03. 2002 AS NEITHER THE SAID LETTER IS AVAILABLE IN THE ASSESSM ENT FOLDER NOR THE COPY BEARS ANY ACKNOWLEDGMENT OF REC EIPT BY THE AO. 3) THE APPELLANT PRAYS THAT YOUR HONOURS HOLD THAT THE REOPENING OF ASSESSMENT IS BAD IN LAW AND THE 3 ITA NO.128/PUN/2015 AY.NO.1999-2000 CONSEQUENTIAL ORDER U/S 143(3) R.W.S. 147 ASSESSING THE INCOME OF THE APPELLANT AT RS.5,94,82,146/- MAY BE ANNULLED. B) DISALLOWANCE OF DEPRECIATION RS.23,00,346/- 4) THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OF DEPRECIATION AS MADE BY THE AO OF RS.23,00,346/- BY HOLDING THAT THE PRINCIPAL AMOUNT OF LOANS WAIVED AMOUNTING TO RS. 92,01,385/- WOULD GO TO REDUCE THE WRITTEN DOWN VALUE OF ASSETS AND THE APP ELLANT WAS ENTITLED TO DEPRECIATION ON THE REDUCED WRITTEN DOWN VALUE. 5) THE APPELLANT PRAYS THAT YOUR HONOUR HOLD THAT P RINCIPAL AMOUNT OF LOAN WAIVED OF RS.92,01,385/- COULD NOT B E REDUCED FROM THE WRITTEN DOWN VALUE OF ASSETS AND H ENCE THE DISALLOWANCE OF DEPRECIATION OF RS.23,00,346/- AS MADE BY THE AO AND AS CONFIRMED BY THE CIT(A) MAY B E DELETED. 6) WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CI T(A) ERRED IN NOT APPRECIATING THAT THE APPELLANT HAD NOT CLAIM ED ANY DEPRECIATION ON THE ASSET PURCHASED FROM LOAN TAKEN FROM ITC CLASSIC FINANCE LTD. AND HENCE THE QUESTION OF ANY DISALLOWANCE OF DEPRECIATION ON THE PRINCIPAL AMOUN T WAIVED BY ITC CLASSIC FINANCE LTD. DID NOT ARISE. H ENCE, THE DISALLOWANCE OF DEPRECIATION OR RS. 23.00.346/- ON THIS ACCOUNT NEEDS TO BE DELETED. C) GENERAL 7) THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PREJUDIC E TO ONE ANOTHER AND THE APPELLANT CRAVES LEAVE TO ADD, ALTE R. AMEND, DELETE OR MODIFY ANY OF THE ABOVE GROUNDS OF APPEAL. 3. BEFORE US, AT THE OUTSET, LD. A.R. SUBMITTED THAT THOUG H THE ASSESSEE HAS RAISED VARIOUS GROUNDS BUT THE SOLE CONTROVERSY IS WITH RESPECT TO RE-OPENING OF THE ASSESSMENT AND THE CONSEQUENTIAL ORDER PASSED U/S 143(3) R.W.S. 147. BEFORE US, LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD. CIT(A ) AND FURTHER SUBMITTED THAT THE GROUND FOR RE-OPENING OF ASSESSMENT IS COMPLETELY MISCONCEIVED AND BASELESS. HE SUBMITTED THAT IN THE PRESENT CASE, ASSESSEE HAD FILED TH E RETURN OF INCOME FOR A.Y. 1999-2000 ON 30.12.1999 AND THEREAFTER THE 4 ITA NO.128/PUN/2015 AY.NO.1999-2000 ASSESSMENT WAS FRAMED U/S 143(3) ON 27.03.2002. HE SUBMITTED THAT NOTICE U/S 148 WAS ISSUED ON 09.03.2006 W HICH IS BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF RELEVA NT ASSESSMENT YEAR. HE SUBMITTED THAT FOR RE-OPENING THE ASSESSMENT BEYOND THE PERIOD OF FOUR YEARS, THE ESCAPE MENT OF INCOME MUST BE OCCASIONED BY A FAILURE ON THE PART OF A SSESSEE TO MAKE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR T HE ASSESSMENT. IN THE PRESENT CASE, FROM THE COPY OF REAS ONS FOR ISSUING NOTICE U/S 148, WHICH IS PLACED ON PAGE 88 OF THE PAPER BOOK, HE POINTED THAT THE RE-OPENING WAS FOR TWO REASON S. FIRST BEING THAT OF THE EXTRAORDINARY INCOME OF RS.2,03,70,703/ -, ASSESSEE HAD NOT OFFERED RS.92,01,385/- TO TAX AND THE S ECOND REASON WAS THAT IN TERMS OF FORECLOSURE SETTLEMENT THE AMOUNT THAT WAS WRITTEN BACK WAS NOT OFFERED TO TAX. ACCORDING TO AO THE WRITE BACK IN TERMS OF FORECLOSURE SETTLEMENT FALLS UNDE R PURVIEW OF EXPLN.10 TO SEC 43(1) OF THE ACT AND ACCORDINGLY THE COST OF MACHINERIES WAS REQUIRED TO BE REDUCED FOR THE P URPOSE OF CALCULATING DEPRECIATION. ON THE AFORESAID REASONS FOR REOPENING, LD.AR SUBMITTED THAT THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL MATER IAL FACTS NECESSARY FOR ASSESSMENT AND THAT ALL THE DETAILS WERE ALSO EXAMINED BY AO DURING THE COURSE OF ASSESSMENT PROCEED INGS. HE FURTHER SUBMITTED THAT IN THE REASONS RECORDED FOR R EOPENING, THE AO HIMSELF HAS STATED THAT IT IS ON PERUSAL OF THE PRO FIT AND LOSS ACCOUNT FILED BY THE ASSESSEE. HE THEREFORE SUBMITT ED THAT THERE WAS NO SUPPRESSION ON THE PART OF ASSESSEE IN NO T DISCLOSING TRUE AND CORRECT FACTS NECESSARY FOR THE PURP OSE OF 5 ITA NO.128/PUN/2015 AY.NO.1999-2000 ASSESSMENT. HE, THEREFORE, SUBMITTED THAT IT IS NOT OPEN TO AO TO RE-OPEN THE ASSESSMENT BY TAKING A DIFFERENT VIEW ON THE SAME MATERIAL AVAILABLE WITH HIM AND THEREFORE, THE RE-ASSESSMEN T PROCEEDINGS ON THE BASIS OF REASONS RECORDED IS ABSOLUTE LY ILLEGAL AND WITHOUT JURISDICTION AND MORE SO WHEN THE CONDITIO NS STIPULATED FOR INITIATION OF RE-ASSESSMENT PROCEEDINGS BEYO ND THE PERIOD OF 4 YEARS WERE NOT SATISFIED. HE ALSO RELIED ON VAR IOUS DECISIONS OF HIGH COURT INCLUDING THE DECISION IN THE CASE OF BOMBAY STOCK EXCHANGE LTD VS. DDIT REPORTED IN (2012) 7 4 DTR 300 (BOM). HE, THEREFORE, SUBMITTED THAT THE RE-ASSESSMEN T ORDER BE QUASHED. LD.DR ON THE OTHER HAND SUPPORTED THE ORDER OF AO & CIT(A). 4. WE HAVE HEARD THE RIVAL SUBMISSIONS & PERUSED THE MATERIAL ON RECORD. IN THE PRESENT CASE IT IS AN UNDISPU TED FACT THAT FOR AY 1999 2000, ASSESSEE FILED ITS RETURN OF INCOM E ON 30.12.1999. THE ASSESSMENT WAS FRAMED U/S 143(3) ON 27.03.2002. IN THE PRESENT CASE 4 YEARS FROM THE END O F RELEVANT ASSESSMENT YEAR ENDS ON 31.03.2004. THE NOTICE U/S 148 WAS ISSUED ON 09.03.2006. THUS, IN THE PRESENT CASE, THE RE- OPENING OF THE ASSESSMENT FOR A.Y. 1999 2000 AND INITIAT ION OF RE-ASSESSMENT PROCEEDINGS FOR A.Y. 1999 2000 IN EXERCIS E OF THE POWERS U/S 147 R.W.S. 148 OF THE ACT IS BEYOND 4 YEA RS FROM THE ASSESSMENT YEAR AND THEREFORE THE CASE OF ASSESSE E IS COVERED BY FIRST PROVISO TO SECTION 147. TO CONFER JURISD ICTION ON THE AO TO ISSUE NOTICE OF RE-OPENING OF ASSESSMENT BEYON D A PERIOD OF 4 YEARS U/S 148, TWO CONDITIONS ARE REQUIRED TO BE 6 ITA NO.128/PUN/2015 AY.NO.1999-2000 SIMULTANEOUSLY SATISFIED: (I) THE AO MUST HAVE REASON TO BE LIEVE THAT INCOME, PROFITS OR GAINS CHARGEABLE TO TAX HAVE BEEN UNDER ASSESSED; AND (II) HE MUST ALSO HAVE REASON TO BELIEVE THAT SUCH UNDER ASSESSMENT HAS OCCURRED BY THE REASON OF EITHER OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN OF HIS INCOME OR OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR TH E ASSESSMENT FOR THAT YEAR. BOTH THESE CONDITIONS ARE CO NDITIONS PRECEDENT TO BE SATISFIED BEFORE THE AO COULD HAVE JURISD ICTION TO ISSUE NOTICE FOR ASSESSMENT OR RE-ASSESSMENT BEYOND A PERIOD OF 4 YEARS. IF ALL THE MATERIAL FACTS ARE FURNISHED BY THE ASS ESSEE AND THERE REMAINS NO OMISSION OR FAILURE ON THE PART OF T HE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS NECE SSARY FOR THE ASSESSMENT, INITIATION OF RE-ASSESSMENT PROCEEDINGS BEYOND THE PERIOD OF 4 YEARS IS NOT PERMISSIBLE AND SHALL BE WITHOUT JURISDICTION. ON PERUSING THE REASONS RECORDED FOR RE- OPENING, WHICH IS PLACED AT PAGE 88 OF THE PAPER BOOK, IT IS SEEN THAT THE REASONS GIVEN BY THE AO FOR REOPENING ARE BAS ED ON THE BASIS OF PERUSAL OF THE PROFIT AND LOSS ACCOUNT WHICH WAS FURNISHED BY ASSESSEE AND WAS AVAILABLE BEFORE AO AT THE TIME OF SCRUTINY PROCEEDINGS. IT CAN THUS BE CONCLUDED THAT TH E REASONS FOR REOPENING OF THE ASSESSMENT AS MENTIONED IN THE LETT ER COMMUNICATED ON 26.04.2006 IS NOTHING BUT A CHANGE OF OPIN ION OF THE AO AND THAT TOO WITHOUT ANY NEW MATERIAL, WHICH IS NOT PERMISSIBLE. CONSIDERING THE AFORESAID FACTS AND CIRCUMSTANCE S OF THE CASE, IT CANNOT BE SAID THAT ASSESSEE DID NOT DISC LOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT AND 7 ITA NO.128/PUN/2015 AY.NO.1999-2000 THEREFORE THE INCOME CHARGEABLE TO TAX HAS ESCAPED DUE TO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. UNDER SUCH CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE CONDITION PRECEDENT FOR INVOKING POWERS U/S 147 OF THE AC T TO INITIATE REASSEMENT PROCEEDINGS BEYOND THE PERIOD OF 4 YE ARS ARE NOT SATISFIED. FOR ARRIVING AT THE AFORESAID CONCLUSION, WE A LSO DRAW SUPPORT FROM THE DECISION OF HONBLE GUJARATH HIGH C OURT IN THE CASE OF NIKO RESOURCES LTD VS. ADIT REPORTED INT O (2014) 51 TAXMAN.COM 568 (GUJ) WHEREIN THE HONBLE HIGH COURT IN PARAGRAPHS 16, 17 AND 27 OBSERVED AS UNDER : 16. THE ASSESSING OFFICER I S AUTHORIZED TO MAKE REASSESSMENT IN THE EVENT OF HIS HAVING REASONABLE BELIEF THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR. AS PER THE 1ST PROVISO TO SECTION 147 OF THE ACT, ASSESSMENT CAN B E REOPENED UNDER SECTION 147 OF THE ACT AFTER EXPIRY OF 4 YEARS ONLY IF (1) THE ASSESSEE FAILED TO MAKE A RET URN UNDER SECTION 139 OF THE ACT OR IN RESPONSE TO NOTI CE ISSUED UNDER SECTION 142(1) OR UNDER SECTION 148 OF THE ACT, HE FAILED TO DISCLOSE TRULY AND FULLY ALL M ATERIA L FACTS NECESSARY FOR THE ASSESSMENT. ONCE ALL PRIMARY FACTS ARE BEFORE THE AS SESS I N G AUTHORITY, NO FURTHER ASSISTANCE IS REQU IRED BY WAY OF DISCLOSURE. ALL INFERENCES O F FACTS AND LEGAL INFERENCE NEED TO BE DRAWN BY T HE ASSESSING OFFICER. IT IS NOT FOR ANYONE T O GUIDE THE ASSESSING OFFICER IN RESPECT OF INFERENCE 'FACTUAL OR LEGAL', WHICH REQU IRES TO BE DRAWN BY HIM ALONE. 17. ONCE THE CASE OF THE ASSESSEE IS COVERED BY THE 1 ST PROVISO TO SECTION 147 OF THE ACT, THE REASSESSMENT PROCEEDINGS BEYOND THE PERIOD OF 4 YEARS FROM THE E ND OF THE RELEVANT ASSESSMENT YEAR WO ULD BE WITHOUT ANY JURISDICTION AND BAD IN LA W , IF ALL MATERIAL FACTS ARE FURNISHED AND THERE REMAINED NO OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULL Y ALL MATERIAL FACTS. THIS COURT, AFTER EXTENSI V ELY DISCUSSING LAW ON THE ISSUE IN CASE OF GUJARAT LEASE FINANCING LTD. (SUPRA), HAS HELD THUS: '10. IT CAN BE CLEARLY NOTED FROM THE REASONS RECOR DED THAT THERE IS NO MENTION AT ALL OF THE ASSESSEE HAVING N OT DISCLOSED FULLY OR TRULY MATERIAL FACTS WHICH WERE NECESSARY FOR THE PURPOSE OF COMPUTING THE INCOME O F THE ASSESSEE. ASSUMING THAT IN THE NOTICE FOR REOPENING . SUCH 8 ITA NO.128/PUN/2015 AY.NO.1999-2000 WORDINGS ARE NOT SPECIFICALLY MENTIONED AND THEY CA N BE SUPPLEMENTED EITHER WHILE REJECTING THE OBJECTIONS OR BY WAY OF AFFIDAVIT OF THE ASSESSING OFFICER, THEN ALS O, THE REVENUE H A S FAILED TO POINT OUT AS TO IN WHAT MANNER THERE HAS BEEN NON-DISCLOSURE ON THE PA RT OF THE ASSESSEE.' 27 . FROM THE RATIO THAT CAN BE CULLED OUT FROM A LL THE SE DECISIONS, IT IS AMPLY CLEAR THAT THE ASS ESSING OFFICER, WHO IS AUTHORIZED TO ISSUE N OTICE UNDER SECTION 148 OF THE ACT FOR REASSESSMENT. ON HIS HAVING A REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, CAN ASSESS OR REASSESS SUCH INCOME AND ALSO ANY SUCH OTHER INCOME CHARGEABLE TO TAX, WHICH HAS ESCAPED THE ASSESSMENT. HOWEVER, NO SUCH ACTION IS PERMISSIBLE AFTER LAPSE OF 4 YEARS FROM T HE END OF THE RELEVANT ASSESSMENT YEAR UNLESS INCOME CHARGEAB LE TO TAX HAS ESCAPED ASSESSMENT ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS NECESSARY FOR THE PURPOSE OF SUCH ASSESSMENT. THE ONUS IS ON THE ASSESSEE TO REVEAL THE PRIMARY FACTS AND TO DRAW THE INFERENTIAL FACTS WOULD BE THE RESPONSIBIL ITY OF THE ASSESSING OFFICER. ONCE HAVING REVEALED FROM TH E RECORD THAT THE ASSESSEE DISCLOSED FULL AND COMPLET E FACTS AND ON SCRUTINY, AT THE TIME OF ORIGINAL ASSESSMENT ALL THESE DETAILS ARE EXAMINED, NO CHANGE OF OPINION IS PERMISSIBLE MERELY BECAUSE THERE WAS SOME ERROR EAR LIER ON THE PART OF THE ASSESSING OFFICER HIMSELF OR BEC AUSE HE CHOOSE NOT TO OPINE ON THE ISSUE OR EVEN WHEN HE CH ANGES HIS MIND AND INTERPRETS THE MATERIAL OR LAW OTHERWI SE THAN WHAT WAS DONE BY HIM. 5. CONSIDERING THE TOTALITY OF THE AFORESAID FACTS AND RELY ING ON THE DECISION OF HONBLE HIGH COURT CITED HEREINABOVE, WE ARE OF THE VIEW THAT IN THE PRESENT CASE THE REASSESSMENT PROCEEDINGS INITIATED BEYOND A PERIOD OF FOUR YEARS IS NOT PERMISSIBLE AND THEREFORE IT IS QUASHED AND SET ASIDE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THE 9 TH DAY OF FEBRUARY, 2017. SD/- SD/- ( R.P. TOTLANI ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER 9 ITA NO.128/PUN/2015 AY.NO.1999-2000 PUNE; ! DATED : 9 TH DAY OF FEBRUARY, 2017. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3 . 4. 5 6. COMMISSIONER OF INCOME TAX-(APPEALS) III, PUNE COMMISSIONER OF INCOME TAX-II, PUNE #$% &&'(, * '( ) / DR, ITAT, B PUNE; %+, - / GUARD FILE / BY ORDER, // . // TRUE COPY // ///// / 0123 / ASSISTANT REGISTRAR, * '( , / ITAT, PUNE.