Transworld Garnet India Private Limited, CHENNAI V. ACIT, CHENNAI

ITA 1424/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86369 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 03-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 22-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR BHUSARI
• Assessee Lawyers: R SIVARAMAN
• Keywords: Depreciation; Tangible material; Revenue expenditure; Capital expenditure
• Section: 143(3); 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , ! # $ , % & BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO. 1424/MDS/2014 ( / ASSESSMENT YEAR: 2009-10) M/S.TRANSWORLD GARNET INDIA PVT .LTD. 34, NEW NO.46, MGR ROAD KALAKSHETRA COLONY, BESANT NAGAR, CHENNAI-90. VS ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-III(2), CHENNAI-34. PAN:AAACT3408N ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. R.SIVARAMAN, ADVOCATE /RESPONDENT BY : DR. BHUSARI, CIT DR /DATE OF HEARING : 3 RD MARCH, 2015 /DATE OF PRONOUNCEMENT : 20 TH MARCH, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX-III, CHENNAI DATED 24.3.2014 FOR THE ASSESSMENT YEAR 2009-10 PASSED UN DER SECTION 263 OF THE ACT. 2. THOUGH ASSESSEE HAS RAISED SEVERAL GROUNDS, THE EFFECTIVE GROUNDS TO BE ADJUDICATED ARE AS UNDER:- 1. THE CIT HAS FAILED TO CONSIDER THE FACT THAT THE ISSUES RELATING TO DEPRECIATION ON FORKLIFT, JCBS, TIPPERS AND FREEHOLD AND LEASEHOLD LAND HAVE BEEN DULY DISCUSSED AND PARTICULARS HAVE 2 ITA NO.1424/MDS/2014 BEEN SUBMITTED DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS VIDE LETTER DATED 15.12.2011. THE ASSESSMENT UNDER SECTION 143(3) WAS COMPLETED AFTER SCRUTINIZING THE CLAIM OF DEPRECIATION ON JCB, FORKLIFT AND FREEHOLD AND LEASEHOLD LAND. 2. THE CIT HAS ERRED AND DEVIATED FROM THE LAW BY ASSUMING THE FACTS STATED IN THE ASSESSMENT ORDER AS INCORRECT AND HENCE HE HAS NOT SATISFIED THE REQUIREMENTS BY INVOKING SECTION 263 I.E. THE ORDER PASSED U/S.143(3) IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 3. BRIEF FACTS ARE THAT ASSESSEE FILED RETURN OF IN COME FOR THE ASSESSMENT YEAR 2009-10 ON 29.09.2009 DECLARED NIL INCOME. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 30.12.2011 DETERMINING THE INC OME OF THE ASSESSEE AT ` 11,72,14,752/-. SUBSEQUENTLY, THE COMMISSIONER OF INCOME TAX ISSUED NOTICE UNDER SECT ION 263 OF THE ACT PROPOSING TO REVISE THE ASSESSMENT S TATING THAT THE ASSESSMENT ORDER PASSED UNDER SECTION 143( 3) ON 30.12.2011 IS ERRONEOUS AND PREJUDICIAL TO THE INTE REST OF THE REVENUE AS THE ASSESSING OFFICER ALLOWED DEPRECIATI ON ON FORKLIFT, JCPS, TIPPERS, FREEHOLD LAND AND LEASEHOL D LAND. THE ASSESSEE FILED REPLY DATED 15.11.2013 TO THE SHOW C AUSE NOTICE ISSUED BY THE COMMISSIONER OF INCOME TAX UN DER 3 ITA NO.1424/MDS/2014 SECTION 263 STATING THAT THE ORDER PASSED BY THE A SSESSING OFFICER IS NOT ERRONEOUS OR PREJUDICIAL TO THE INTE REST OF THE REVENUE. THE DEPRECIATIONS WERE RIGHTLY CLAIMED ON FORKLIFT, JCPS, TIPPERS, FREEHOLD LAND AND LEASEHOLD LAND A ND IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER IN FACT CALLED FOR DETAILS IN RESPECT OF THESE ISSUES BY LETTER DATED 30.11.2011 AND ALL THE INFORMATION WERE FURNI SHED BEFORE THE ASSESSING OFFICER JUSTIFYING THE CLAIM MADE BY THE ASSESSEE. THEREFORE, ASSESSEE STATED THAT THE ORDE R PASSED BY THE ASSESSING OFFICER IS NEITHER ERRONEOUS NOR P REJUDICIAL INTEREST OF THE REVENUE AS THE ASSESSING OFFICER ON EXAMINING THE DETAILS FURNISHED BY THE ASSESSEE ALL OWED THE CLAIMS OF THE ASSESSEE. HOWEVER, COMMISSIONER OF I NCOME TAX PASSED ORDER UNDER SECTION 263 OF THE ACT DIREC TING THE ASSESSING OFFICER TO COMPLETE A FRESH ASSESSMENT A ND LOOK INTO THE ISSUES OF DEPRECIATION ON FORKLIFT, JCPS, TIPPERS FREEHOLD LAND AND LEASEHOLD LAND. THE ASSESSEE IS I N APPEAL BEFORE US. 4. COUNSEL FOR THE ASSESSEE SUBMITS THAT COMMISSIO NER OF INCOME TAX IS NOT JUSTIFIED IN INVOKING PROVISI ONS OF SECTION 4 ITA NO.1424/MDS/2014 263 OF THE ACT AS ALL THE DETAILS RELATING TO THE C LAIM OF DEPRECIATION ON FORKLIFT, JCPS, TIPPERS FREEHOLD L AND AND LEASEHOLD LAND WERE FURNISHED BY THE ASSESSEE BY LETTER DATED 15.12.2011 IN THE COURSE OF ASSESSMENT PROCEE DINGS ON SPECIFIC QUERIES RAISED BY THE ASSESSING OFFICER IN HIS LETTER DATED 30.11.2011. COUNSEL SUBMITS THAT ASSE SSING OFFICER ON EXAMINING THE DETAILS FURNISHED BY THE A SSESSEE FORMED AN OPINION AND ALLOWED THE CLAIM OF THE ASSE SSEE. COUNSEL FOR THE ASSESSEE SUBMITS THAT COMMISSIONER OF INCOME TAX HELD THAT THERE IS LACK OF ENQUIRY BY T HE ASSESSING OFFICER IN ALLOWING DEPRECIATION ON FORKL IFT, JCPS, TIPPERS FREEHOLD LAND AND LEASEHOLD LAND. COUNSEL FOR THE ASSESSEE, PLACING RELIANCE ON THE ORDER OF THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. SUNBEAM AUTO LTD. (332 ITR 167), SUBMITS THAT WHEN THE ASSESSEE FURNISHED ALL THE DETAILS CALLED FOR BY THE ASSESSING OFFICER AND IF THERE IS INADEQUATE ENQUIRY BY THE ASSESSING OFFICER, THOUGH THE COMMISSIONER OF INCOME TAX HAS A DIFFERENT OPINION IN THE MATTER IS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT. COUNSEL FOR THE ASSESSEE ALSO PLACES R ELIANCE ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CA SE OF CIT 5 ITA NO.1424/MDS/2014 VS. DEVELOPMENT CREDIT BANK LTD. (323 ITR 206) AND SUBMITS THAT WHEN THE MATERIALS CALLED FOR BY THE ASSESSING OFFICER WERE PLACED BEFORE HIM EVEN THOUGH THERE IS LACK OF PROPER ENQUIRY, THE COMMISSIONER OF INCOME TAX HAS NO JURI SDICTION UNDER SECTION 263 OF THE ACT TO REVISE THE ORDER. 5. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDER OF THE COMMISSIONER OF INCOME TAX IN DIRECTIN G THE ASSESSING OFFICER TO LOOK INTO THE ISSUES OF ALLOWA NCE OF DEPRECATION AFRESH IN ACCORDANCE WITH LAW. 6. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND THE DECISIONS RELIED ON. IN THIS CASE, THE AS SESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS IS SUED LETTER DATED 30.11.2011 CALLING FOR INFORMATION / D ETAILS FROM THE ASSESSEE JUSTIFYING ITS CLAIM OF DEPRECIATION O N COMMERCIAL VEHICLES AND DEPRECIATION CLAIMED ON FRE EHOLD LAND. THE ASSESSEE FURNISHED ITS REPLY ON 15.12.201 1 JUSTIFYING ITS CLAIM FOR DEPRECIATION. THE ASSESSI NG OFFICER COMPLETED ASSESSMENT ON 30.12.2011 ALLOWING CLAIMS OF THE ASSESSEE. THE COMMISSIONER OF INCOME TAX PASSED OR DER 6 ITA NO.1424/MDS/2014 UNDER SECTION 263 OF THE ACT DIRECTING THE ASSESSIN G OFFICER TO LOOK INTO THE ISSUES AFRESH IN ACCORDANCE WITH L AW AS ACCORDING TO HIM THERE IS LACK OF ENQUIRY AND THERE FORE ORDER PASSED UNDER SECTION 143(3) OF THE ACT ON 30.12.20 11 IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. 7. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SUNBEAM AUTO LTD. (SUPRA) HELD AS UNDER:- THE SUBMISSION OF THE COUNSEL FOR THE REVENUE WAS THAT WHILE PASSING THE ASSESSMENT ORDER THE ASSESSING OFFICER DID NOT CONSIDER THE ASPECT SPECIFICALLY WH ETHER THE EXPENDITURE IN QUESTION WAS REVENUE OR CAPITAL EXPENDITURE. THIS ARGUMENT PREDICATES ON THE ASSESSMENT ORDER, WHICH APPARENTLY DOES NOT GIVE ANY REASONS WHILE ALLOWING THE ENTIRE EXPENDITURE AS REVENUE EXPENDITURE. HOWEVER, THAT BY ITSELF WOULD NOT BE INDICATIVE OF THE FACT THAT THE AO HAD NOT APPLIED HIS MIND ON THE ISSUE. THE AO IN THE ASSESSING ORDER IS NOT REQUIRED TO GIVE DETA ILED REASON IN RESPECT OF EACH AND EVERY ITEM OF DEDUCTION, ETC. THEREFORE, ONE HAS TO SEE FROM THE RECORD AS TO WHETHER THERE WAS APPLICATION OF MIND BEFORE ALLOWING THE EXPENDITURE IN QUESTION AS REVENUE EXPENDITURE. THE COUNSEL FOR THE ASSESSEE IS RIGHT IN HIS SUBMISSION THAT ONE HAS TO KEEP IN MIND THE. DISTINCTION BETWEEN 'LACK OF INQUIRY' AND 'INADEQUATE INQUIRY'. IF THERE WAS ANY INQUIRY, EVEN INADEQUATE THAT WOULD NOT BY ITSELF GIVE OCCASION TO THE CIT TO PASS ORDERS UNDER S. 263, MERELY BECAUSE HE HAS DIFFERENT OPINION IN THE MATTER. IT IS ONLY IN CASES OF 'LACK OF INQU IRY' THAT SUCH A COURSE OF ACTION WOULD BE OPEN. THE AO HAD CALLED FOR EXPLANATION ON THIS VERY ITEM FRO M THE ASSESSEE AND THE ASSESSEE HAD FURNISHED HIS EXPLANATION VIDE LETTER DT. 26TH SEPT., 2002. THIS FACT IS EVEN TAKEN NOTE OF BY THE CIT HIMSELF IN PARA 3 OF HIS ORDER. THIS CLEARLY SHOWS THAT THE AO HAD UNDERTAKEN THE EXERCISE OF EXAMINING AS 7 ITA NO.1424/MDS/2014 TO WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE IN THE REPLACEMENT OF DYES ARID TOOLS IS TO BE . TR EATED AS REVENUE EXPENDITURE OR NOT. IT APPEARS THAT SINC E THE AO WAS SATISFIED-WITH THE AFORESAID EXPLANATION, HE ACCEPTED THE SAME. THE CIT IN HIS IMPUGNED ORDER EVEN ACCEPTS THIS. THUS, EVEN THE CIT CONCEDED THE. POSITION THAT THE AO MADE THE INQUIRIES, ELICITED REPLIES AND THEREAFTER- PASSED THE ASSESSMENT ORDER. THE GRIEVANCE OF THE CIT WAS THAT THE AO SHOULD HAVE MADE FURTHER INQUIRIES RATHER THAN ACCEPTING THE EXPLANATION. THEREFORE, IT CANNOT BE SAID THAT IT IS A CASE OF ' LACK OF INQUIRY'.-CIT VS. GABRIAL INDIA LTD. (1993) 114 CTR (BOM) 81 (1993) 203 ITR 108 (BOM) RELIED ON. 8. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. DEVELOPMENT BANK LTD. (SUPRA) HELD AS UNDER:- A READING ,OF THE ORDER PASSED BY THE CIT WOULD SHOW THAT THE PRINCIPAL OBJECTION WHICH THE REVISIO NAL AUTHORITY EXPRESSED AGAINST THE ORDER OF THE AO WAS AN ALLEGED FAILURE OF THE AO TO EXAMINE; FIRSTLY WH ETHER THE CAPITAL GAIN OF RS. 1.26 CRORES HAS BEEN EARNED BY THE ASSESSEE ON TRANSACTIONS RELATING TO INVESTMENT S 'HELD TO MATURITY', AND SECONDLY WHETHER THE DEPRECIATION OF RS. 622.39 LAKHS WAS CLAIMED ON INVESTMENTS WHICH WERE HELD AS STOCK-IN-TRADE. NOW FROM THE , MATERIAL ON RECORD BEFORE THE COURT IT I S EVIDENT THAT THE ASSESSEE, IN RESPONSE TO A SPECIFI C QUERY ' OF THE AO DT. 20TH SEPT., 2004 SUPPLIED DE TAILS OF THE LONG-TERM INVESTMENTS HELD FOR A PERIOD IN EXCESS OF ONE YEAR WHICH THE ASSESSEE TREATED AS INVESTMENTS HELD TO MATURITY. THE PROFIT ON THESE INVESTMENTS WAS COMPUTED AT RS. 1.26 CRORES. IN SO FAR AS THE ASPECT OF DEPRECIATION OF RS. 622.39 LAKHS ON INVESTMENTS HELD AS STOCK-IN-TRADE WAS CONCERNED, THE ASSESSEE HAD SIMILARLY SUPPLIED TO THE A'O DETAILS OF THE CURRENT INVESTMENTS IN RESPO NSE TO THE QUERY OF THE AO. IN ADDITION, IT WOULD ALSO HAVE TO BE NOTED THAT, IN PURSUANCE OF, THE ORDER PASSED BY THE CIT UNDER S. 263, AN ASSESSMENT ORDER CAME TO B E PASSED ON 28TH DEC., 2007. DURING THE COURSE OF THE ASSESSMENT ORDER, THE AO NOTED THAT THE ASSESSEE HAS EXPLAINED DEPRECIATION CLAIMED AGAINST THE INVESTMENTS HELD AND CLASSIFIED AS STOCK-IN-TRADE. THE EXPLANATION OF THE ASSESSEE IN THIS CONNECTION WAS 8 ITA NO.1424/MDS/2014 ACCEPTED AND THE AO CAME TO THE CONCLUSION THAT DEPRECIATION OF RS. 622.39 LAKHS HAS BEEN. CLAIMED TOWARDS INVESTMENTS HELD AND CLASSIFIED AS STOCK-IN - TRADE. IN THE ABSENCE OF ANY TANGIBLE MATERIAL TO T HE CONTRARY, THE CIT COULD NOT HAVE TREATED THIS FINDI NG TO BE ERRONEOUS-OR 'TO BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE OBSERVATION OF THE CIT THAT THE AO HAD ARRIVED AT HIS. FINDING WITHOUT CONDUCTING AN ENQUI RY WAS ERRONEOUS, SINCE AN ENQUIRY WAS SPECIFICALLY HE LD WITH REFERENCE TO WHICH A DISCLOSURE OF DETAILS WAS CALLED FOR BY THE AO AND MADE BY THE ASSESSEE. IN THESE CIRCUMSTANCES, THE TRIBUNAL WAS JUSTIFIED IN COMING TO THE CONCLUSION THAT RECOURSE TO THE POWERS UNDER S. 263 WAS NOT WARRANTED IN THE FACTS AND CIRCUMSTANCES OF THE CASE. .: IN CONCLUSION, THE HONBLE HIGH COURT HELD THAT SIN CE AN ENQUIRY WAS SPECIFICALLY HELD WITH REFERENCE TO WHI CH A DISCLOSURE OF DETAILS WAS CALLED FOR BY THE ASSESSI NG OFFICER AND MADE BY THE ASSESSEE, THE OBSERVATION OF THE COMMISSIONER OF INCOME TAX THAT ASSESSING OFFICER HAD ARRIVED AT HIS FINDING WITHOUT CONDUCTING ENQUIRY W AS ERRONEOUS AND THEREFORE COMMISSIONER OF INCOME TAX WRONGLY EXERCISED POWERS UNDER SECTION 263 OF THE A CT. 9. IN THIS CASE ALSO, THE DETAILS CALLED FOR BY THE ASSESSING OFFICER WERE FURNISHED BY THE ASSESSEE AND SUCH DET AILS WERE ACCEPTED BY THE ASSESSING OFFICER AND IN SUCH CIRCUMSTANCES, IT CANNOT BE SAID THAT THERE IS A LA CK OF 9 ITA NO.1424/MDS/2014 ENQUIRY. THERE WAS AN ENQUIRY, THOUGH IT IS INADEQU ATE AND IN SUCH CIRCUMSTANCES, IN VIEW OF THE ABOVE DECISIONS, THE COMMISSIONER OF INCOME TAX LACKS JURISDICTION UNDER SECTION 263 OF THE ACT TO REVISE THE ASSESSMENT ORDER. THU S, RESPECTFULLY FOLLOWING THE SAID DECISIONS, WE SET A SIDE THE IMPUGNED ORDER OF THE COMMISSIONER OF INCOME TAX A ND ALLOW THE APPEAL OF THE ASSESSEE. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH MARCH, 2015 AT CHENNAI. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDRA PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED 20 TH MARCH, 2015 SOMU 12 32 /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .