Twenty First Century Management Services Ltd., CHENNAI V. ACIT, CHENNAI

ITA 1470/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7636 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 23-01-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 24-05-2016
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: R VISWANATHAN
• Keywords: Depreciation; Transfer pricing; International transaction; Reason to believe; Unabsorbed depreciation
• Section: 92E; 148; 139

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: CHENNAI . . . , ! '#.. $ %!& , ( )* BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER ! ./ ITA NO.1470/MDS/2016 + ,+ /ASSESSMENT YEAR: 2005-06 M/S.TWENTY FIRST CENTURY MANAGEMENT SERVICES LTD., G3, NO.67, ELDAMS ROAD, CHENNAI-600 018. VS. THE ASST. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-3(1), CHENNAI-600 006. [PAN: AAACT 2397 L ] ( -. /APPELLANT) ( /0-. /RESPONDENT) -. 1 2 / APPELLANT BY : MR.R.VISWANATHAN, CA /0-. 1 2 /RESPONDENT BY : MR.SUPRIYO PAL, JCIT $ 1 3( /DATE OF HEARING : 23.01.2017 45, 1 3( /DATE OF PRONOUNCEMENT : 09.03.2017 / O R D E R PER D.S.SUNDER SINGH , ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER DATED 17.03.2016 OF COMMISSIONER OF INCOME TAX (APPEALS)- 11, CHENNAI, IN ITA NO.646/2013-14/CIT(A)-11 FOR THE AY 2005-06 AND RAI SED THE FOLLOWING GROUNDS: ITA NO.1470/MDS/2016 :- 2 -: 1. THE ORDER DATED 17.03.2016 OF THE LEARNED CIT(A)-11 , CHENNAI IN ITA NO.ITA NO.646/2013-14/CIT(A)-11 FOR THE ASSESSMENT YEAR IS CONTRARY TO FACTS, OPPOSED TO LAW AND UNTENABLE. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN REJECTING THE GROUND RELATED TO JURISDICTION ON RE-OPENING U/S.147 OF TH E INCOME TAX ACT. 2.1 THE LD CIT(A) FAILED TO APPRECIATE THAT THE APPELLA NT WAS SUBJECTED TO SECTION NOTICE U/S.148 OF THE ACT. 2.2 THE LD CIT(A) OUGHT TO HAVE CONSIDERED THE CASE LAW S RELIED BY THE APPELLANT IN THE PROCEEDINGS. 2.3 THE LD CIT(A) FURTHER ERRED IN NOT DISCUSSING THE C ASE LAWS RELIED BY THE APPELLANT. 2.4 THE LD CIT(A) GROSSLY ERRED IN RELYING CASE LAWS WH ICH ARE DISTINGUISHABLE ON FACTS OF THE APPELLANT. 2.5 THE LD CIT(A) GROSSLY ERRED IN NOT APPRECIATING THA T THE APPELLANT WAS SUBJECTED TO REGULAR ASSESSMENT AND RE-ASSESSMENT AND FURTHER RE ASSESSMENT. FOR THESE AND OTHER GROUNDS THAT MAY BE PERMITTED T O BE ADDUCED BEFORE OR DURING THE COURSE OF HEARING, THE APPELLANT PRAYS THAT THE APP EAL BE ALLOWED AND THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN SO FAR AS R EJECTING THE APPEAL ON THE ISSUE OF RE- OPENING U/S.147 BE DELETED. 2.0 ALL THE GROUNDS OF THE APPEAL ARE RELATED TO THE I SSUE OF NOTICE U/S.147 OF INCOME TAX ACT. THE ASSESSE FILED RETUR N OF INCOME ON 31.03.2006 DECLARING TOTAL INCOME OF RS.361.33 LAKH S AND THE ASSESSMENT WAS COMPLETED U/S.143(3) BY AN ORDER DATED 27.12.20 07. LATER ON, THE ASSESSMENT WAS RE-OPENED U/S.147 TO DETERMINE THE T OTAL INCOME U/S.115JB OF INCOME TAX ACT AND COMPLETED THE REASS ESSMENT U/S.143(3) R.W.S.147 AND DETERMINED THE TOTAL INCOME U/S.115JB AT RS.3,48,77,000/-. AGAIN THE AO HAS ISSUED NOTICE U/S.147 ON 29.03.201 2 AND COMPLETED THE ASSESSMENT BY AN ORDER U/S.143(3) R.W.S.147 ON TOTA L INCOME U/S.115JB AT RS.6,26,78,000/-. AS PER EXPLANATION-1 (III) OF SE C.115JB UNABSORBED DEPRECIATION OR THE AMOUNT OF BROUGHT FORWARD LOSS WHICHEVER IS LESS IS ALLOWED TO BE ADJUSTED. IN THE RE-ASSESSMENT (THIRD ROUND) MADE U/S.143(3) ON 28.03.2013, THE AO MADE THE ADJUSTME NT RELATING TO ITA NO.1470/MDS/2016 :- 3 -: BROUGHT FORWARD LOSSES OF EARLIER YEARS AND DETERMI NED THE TOTAL INCOME U/S.115JB AT RS.6,26,78,000/-. 3.0 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSE WENT ON APPEAL BEFORE THE LD.CIT(A) AND CHALLENGED THE VALIDITY OF RE-OPENING OF ASSESSMENT. THE LD.CIT(A) CONFIRMED THE RE-OPENING OF ASSESSMENT AND ALLOWED THE ASSESSEES APPEAL PARTLY. AGAINST THE ORDER OF THE LD.CIT(A), THE ASSESSE IS ON APPEAL BEFORE US AND ARGUED THAT THE ASSESSMENT WAS RE-OPENED BEYOND FOUR YEARS FROM THE END OF THE REL EVANT ASSESSMENT YEARS AND THE REASONS RECORDED FOR RE-OPENING OF AS SESSMENT WAS THE COMPUTATION OF BOOK PROFITS U/S.115JB WHICH WAS EXA MINED IN THE ORIGINAL ASSESSMENT ORDER DATED 27.12.2007 AS WELL AS IN TH E SUBSEQUENT ASSESSMENT ORDER. IN FACT, IN 2 ND ROUND, THE ASSESSMENT WAS RE-OPENED BY ISSUE OF NOTICE U/S.147 FOR THE PURPOSE OF EXAMI NING THE CORRECTNESS OF COMPUTATION OF BOOK PROFITS U/S.115JB OF INCOME TAX ACT AND ACCORDINGLY COMPLETED THE ASSESSMENT U/S.143(3) R.W.S.147 ON 31 .12.2010 AFTER CONSIDERING ALL THE MATERIALS AVAILABLE WITH THE A. O. AGAIN RE-OPENING OF ASSESSMENT ON THE SAME ISSUE IS NOTHING BUT DIFFERE NCE OF OPINION AND IS NOT PERMISSIBLE IN LAW SINCE NO FRESH MATERIAL IS A VAILABLE WITH THE A.O. ON THE OTHER HAND, LD.DR RELIED ON THE LOWER AUTHOR ITIES ORDERS. 4.0 WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MAT ERIAL PLACED ON RECORD. ITA NO.1470/MDS/2016 :- 4 -: THE ASSESSEE HAS FILED THE RETURN OF INCOME WHICH WAS SCRUTINIZED U/S.143(3) AND PASSED AN ORDER U/S.143(3) ON 27.12. 2007. SUBSEQUENTLY, FOR VERIFICATION OF COMPUTATION OF BO OK PROFITS U/S.115JB, THE AO RE-OPENED THE ASSESSMENT BY ISSUE OF NOTICE U/S.147 AND COMPLETED THE REASSESSMENT U/S.143(3) R.W.S.147 ON 13.12.2010. IN THE THIRD ROUND, THE AO RE-OPENED THE ASSESSMENT BY ISS UE OF NOTICE U/S.147 ON 29.03.2012 RECORDING FOLLOWING REASONS: IN THE CASE OF THE ASSESSEE M/S.TWENTY FIRST CENTU RY MANAGEMENT SERVICES LIMITED, DURING THE ASST. YEAR 2005-06, IT IS SEEN FROM THE RECORDS THAT THE ASSESSEE, WHILE COMPUTING THE BOOK PROFIT U/S.115JB, THE ADJUSTMENT S ON ACCOUNT OF EXPLANATION (I)(III,) TO THAT SECTION I.E. THE AMOUNT OF LOSS BROUGHT FORWAR D OR UNABSORBED DEPRECIATION WHICHEVER IS LESS AS PER BOOKS OF ACCOUNT, HAS CLAIMED EXCESS RELIEF RESULTING IN UNDER ASSESSMENT OF INCOME. 5.0 IN THE INSTANT CASE, THE ASSESSMENT WAS RELATED TO THE AY 2005-06 AND THE ASSESSMENT WAS RE-OPENED BEYOND FOUR YEARS. FOR RE-OPENING THE ASSESSMENT BEYOND FOUR YEARS, THERE SHOULD BE FAILU RE ON THE PART OF THE ASSESSEE AS PER SEC.147 OF IT ACT AND WE EXTRACT TH E RELEVANT PROVISIONS OF IT ACT AS UNDER: 30 [ INCOME ESCAPING ASSESSMENT. 31 147. IF THE 32 [ASSESSING] OFFICER 33 [HAS REASON TO BELIEVE 34 ] THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT 34 FOR ANY ASSESSMENT YEAR, HE 34 MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153 , ASSESS OR REASSESS 34 SUCH 34 INCOME 34 AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSME NT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS 34 UNDER THIS SECTION, OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANC E, AS THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN THIS SECTIO N AND IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR) : PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR 35 , UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASS ESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE 35 ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) O F SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS 35 NECESSARY FOR HIS ASSESSMENT, FOR THAT ASSESSMENT YEAR: ITA NO.1470/MDS/2016 :- 5 -: 36 [ PROVIDED FURTHER THAT NOTHING CONTAINED IN THE FIRST PROVISO SHALL APPLY IN A CASE WHERE ANY INCOME IN RELATION TO ANY ASSET (INCLUDING FINA NCIAL INTEREST IN ANY ENTITY) LOCATED OUTSIDE INDIA, CHARGEABLE TO TAX, HAS ESCAPED ASSES SMENT FOR ANY ASSESSMENT YEAR:] 37 [ PROVIDED 38 [ ALSO ] THAT THE ASSESSING OFFICER MAY ASSESS OR REASSESS SUCH INCOME, OTHER THAN THE INCOME INVOLVING MATTERS WHICH ARE THE SUB JECT MATTERS OF ANY APPEAL, REFERENCE OR REVISION, WHICH IS CHARGEABLE TO TAX AND HAS ESC APED ASSESSMENT.] EXPLANATION 1.PRODUCTION 39 BEFORE THE ASSESSING OFFICER OF ACCOUNT BOOKS OR OT HER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD WITH DU E DILIGENCE HAVE BEEN DISCOVERED BY THE ASSESSING OFFICER WILL NOT NECESSARILY 39 AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE FOREGOING PROVISO. EXPLANATION 2.FOR THE PURPOSES OF THIS SECTION, TH E FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED AS SESSMENT, NAMELY : (A) WHERE NO RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR THE TOTAL INCOME OF ANY OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT DURING THE PREVIOUS YEAR EXCEEDED THE MAXIMUM AMOUN T WHICH IS NOT CHARGEABLE TO INCOME-TAX ; (B) WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION , ALLOWANCE OR RELIEF IN THE RETURN ; 40 [(BA) WHERE THE ASSESSEE HAS FAILED TO FURNISH A REPORT I N RESPECT OF ANY INTERNATIONAL TRANSACTION WHICH HE WAS SO REQUIRED UNDER SECTION 92E ;] (C) WHERE AN ASSESSMENT HAS BEEN MADE, BUT (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDERASSESSED ; O R (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW A RATE 41 ; OR (III) SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCESSIVE RELIEF UNDER THIS ACT ; OR (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR ANY OTH ER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED;] 41A [(CA) WHERE A RETURN OF INCOME HAS NOT BEEN FURNISHED BY THE ASSESSEE OR A RETURN OF INCOME HAS BEEN FURNISHED BY HIM AND ON THE BASIS OF INFOR MATION OR DOCUMENT RECEIVED FROM THE PRESCRIBED INCOME-TAX AUTHORITY, UNDER SUB-SECT ION (2) OF SECTION 133C , IT IS NOTICED BY THE ASSESSING OFFICER THAT THE INCOME OF THE ASSE SSEE EXCEEDS THE MAXIMUM AMOUNT NOT CHARGEABLE TO TAX, OR AS THE CASE MAY BE, THE A SSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN;] 42 [(D) WHERE A PERSON IS FOUND TO HAVE ANY ASSET (INCLUDIN G FINANCIAL INTEREST IN ANY ENTITY) LOCATED OUTSIDE INDIA.] 43 [EXPLANATION 3.FOR THE PURPOSE OF ASSESSMENT OR RE ASSESSMENT 41 UNDER THIS SECTION, THE ASSESSING OFFICER MAY ASSESS OR REASSESS THE INCOME IN RESPECT OF ANY ISSUE, WHICH HAS ESCAPED ASSESSMENT, AND SUCH ISSUE COMES TO HIS NOT ICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, NOTWITHSTANDING THA T THE REASONS FOR SUCH ISSUE HAVE NOT BEEN INCLUDED IN THE REASONS RECORDED UNDER SUB-SEC TION (2) OF SECTION 148 .] ITA NO.1470/MDS/2016 :- 6 -: 44 [EXPLANATION 4.FOR THE REMOVAL OF DOUBTS, IT IS HE REBY CLARIFIED THAT THE PROVISIONS OF THIS SECTION, AS AMENDED BY THE FINANCE ACT, 2012, SHALL ALSO BE APPLICABLE FOR ANY ASSESSMENT YEAR BEGINNING ON OR BEFORE THE 1ST DAY OF APRIL, 2012.] 6.0 FROM THE ABOVE, IT IS CLEAR THAT THE REASONS RECOR DED FOR RE-OPENING OF THE ASSESSMENT WAS ALREADY EXAMINED BY THE AO IN THE ASSESSMENT MADE U/S.143(3) R.W.S.147 OF INCOME TAX ACT ON 30.1 2.2010 AND THE LD.AR SUBMITTED THAT NO FRESH MATERIAL IS AVAILABLE TO THE AO TO RE-OPEN THE ASSESSMENT. THE REVENUE COULD NOT ESTABLISH TH AT THE INCOME HAS ESCAPED ASSESSMENT DUE TO THE FAILURE ON THE PART O F THE ASSESSE. THEREFORE, WE HOLD THAT THE NOTICE ISSUED U/S.148 L ACKS JURISDICTION AND THE SAME IS QUASHED. 7.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH MARCH, 2017, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( '# . . $ %!& ) (D.S.SUNDER SINGH) ( /ACCOUNTANT MEMBER /CHENNAI, 6! /DATED: 9 TH MARCH, 2017. TLN 1 /3%7 87,3 /COPY TO: 1. -. /APPELLANT 4. $ 93 /CIT 2. /0-. /RESPONDENT 5. 7 : /3 /DR 3. $ 93 ( ) /CIT(A) 6. #+ = /GF