M/s Northern Power Distribution Company of Telangana Limited, Hyderabad V. ACIT., Circle-1, Warangal

ITA 1479/HYD/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 98663 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-01-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 15-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KONDA RAMESH
• Assessee Lawyers: M CHANDRAMOULESWARA RAO
• Keywords: Depreciation; Audit objection; Period of limitation; Time period of passing order; Revised return; Unabsorbed depreciation
• Section: 43B; 143(3); 234B; 115JB; 147; 148; 263

Judgement Text

ITA NO.1479 OF 2014 PAGE 1 OF 11 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.1479/HYD/2014 (ASSESSMENT YEAR: 2006-07) M/S. NORTHERN POWER DISTRIBUTION CO. OF TELANGANA LTD, HANAMKONDA PAN: AABCN 2875 L VS. ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 1 WARANGAL (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI M. CHANDRA MOULESWARA RAO FOR REVENUE : SHRI KONDA RAMESH, DR DATE OF HEARING : 23 .09 .2015 DATE OF PRONOUNCEMENT : 13 . 1 1 . 2015 O R D E R PER SMT.P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR A.Y 2006-07. THIS AP PEAL OF THE ASSESSEE IS AGAINST THE ORDER OF THE CIT U/S 26 3 OF THE I.T. ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY, OWNED BY THE GOVT. OF TELANGANA AND ENGAGED IN THE BUSINESS OF DISTRIBUTION OF POWER IN VARIOUS DISTRICTS OF TELAN GANA, FILED ITS RETURN OF INCOME FOR A.Y 2006-07 ON 30.11.2008. THE INCOME DECLARED IN THE ORIGINAL RETURN OF INCOME WAS NIL . SUBSEQUENTLY, ASSESSEE FILED A REVISED RETURN MANUALLY BEFORE THE AO DECLARING ITA NO.1479 OF 2014 PAGE 2 OF 11 NIL INCOME. TAKING THE REVISED RETURN INTO CONSID ERATION, THE AO COMPUTED THE ASSESSEES INCOME UNDER SECTION 115 JB OF THE ACT AS UNDER: COMPUTATION U/S 115JB NET PR OFIT AS PER P&L A/C 6,37,83,228 ADD: CONTIGENCY RESERVE DISALLOWED 4,03,65,681 LESS: WITHDRAWAL FROM RESERVE CREDITED TO P&L A/C 4,80,53,124 ADJUSTED PROFIT UNDER MAT 5,60,95,785 TAX @ 7.5% ON 5,60,95,785 42,07,184 ADD: SURCHARGE 4,20,718 EDUCATION C ESS 92,558 TOTAL TAX 47,20,460 LESS:TAX PAID 45,38,834 TCS 1,62,326 47,01,160 19,300 ADD: SECTION 234B 1,88,818 SECTION 234B 6,369 1,95,187 SECTION 234C 2,30,186 2,30,186 BALANCE PAYABLE 4,44,673 3. SUBSEQUENTLY, A NOTICE U/S 148 OF THE ACT WAS IS SUED TO RE- EXAMINE THE CASE AFTER NOTICING SOME ISSUES THAT MA Y LEAD TO ESCAPEMENT OF INCOME. THE REASONS FOR REOPENING HAS BEEN SUPPLIED TO THE ASSESSEE ON 22.7.15 AT THE REQUEST OF THE ASSESSEE WHICH IS FILED AT PAGE 182 OF THE PAPER BO OK. AS PER THE SAID INFORMATION, THE REASONS FOR REOPENING OF THE ASSESSMENT ARE AS UNDER: ASSESSMENT U/S 143(3) WAS COMPLETED ON 31.12.2008. DURING THE COURSE OF SCRUTINY PROCEEDINGS, THE ASSESSEE SUBMITTED A REVISED RETUR N OF INCOME MANUALLY TO THE AO QUOTING THAT THE ON-LI NE ITA NO.1479 OF 2014 PAGE 3 OF 11 SYSTEM WAS NOT ACCEPTING REVISED E-RETURN. IT IS SE EN FROM THE ORDER U/S 143(3) THAT AN AMOUNT OF RS.8,89,20,424 RELATING TO ENCASHMENT OF EARNED LEAVE WAS DEBITED IN EXCESS IN PROFIT AND LOSS A/C ADMITTED BY THE ASSESSEE AS CLERICAL MISTAKE. THE INCREASE IN PROFIT (RS.8,89,20,424/-) NEEDED TO BE ADDED TO THE NET PROFIT WHILE COMPUTING THE INCOME U/S 115JB. THUS, THE SHORT COMPUTATION TO THE TUNE OF RS.8,89,20,478 NOTICED. HENCE, I HAVE REASONS TO BELIEVE THAT INCOME OF RS.8,89,20,478 CHARGEABLE TO TAX HAS ESCAPED FROM THE ASSESSMENT FOR THE A.Y 2006-07 WITHIN THE MEANING OF SECTION 147 OF THE INCOME TAX ACT, 1961.NECESSARY SANCTION MAY PLEASE BE ACCORDED FOR ISSUE OF NOTICE U/S 148 OF THE INCOME TAX ACT, 1961 FOR A.Y 2006-07. 4. IN RESPONSE TO THE NOTICE U/S 148, ASSESSEE SUBM ITTED THAT THE ORIGINAL RETURN OF INCOME AND THE REVISED RETUR N OF INCOME FILED BY THE ASSESSEE MAY BE TREATED AS RETURNS FIL ED BY THE ASSESSEE IN RESPONSE TO SUCH NOTICE. ASSESSEE ALSO FILED A NOTE OF ITS OBJECTIONS TO THE REOPENING VIDE LETTER DATED 19.08.2013 WHICH IS AT PAGE 142 TO 147 OF THE PAPER BOOK FILED BY THE ASSESSEE BEFORE US. AT PAGE 144, A NOTE ON AUDIT OB JECTION READ AS UNDER: THE ACTUAL EARNED LEAVE ENCASHMENT PAID FOR THE F.Y 2005-06 OUT OF THE PROVISION IS DEDUCTED FROM NET PROFIT IN INCOME STATEMENT AS RS.10,88,60,837 INSTEAD OF RS.1,99,40,413 BY OVERSIGHT WHILE FILING ORIGINAL IT RETURN FOR THE A.Y.2006-07. SINCE IT IS JUST CTERICA1 MISTAKE, THE SAME WAS RECTIFIED IN TH E REVISED IT RETURN FILED BY THE COMPANY FOR THE A.Y.2006-07. WITH THIS EFFECT, THE TAXABLE INCOME IS INCREASED BY RS. 8,89,20,424 OVER THE ORIGINAL ITA NO.1479 OF 2014 PAGE 4 OF 11 RETURN FILED AND ADJUSTED AGAINST THE UNABSORBED DEPRECIATION. HENCE, THE NET TAXABIE INCOME IS NIL. THE EL ENCASHMENT PROVISION IS ARRIVED BASED ON THE ACTUAL EL DAYS CREDIT MULTIPLIED BY THE PAY OF ALL THE EMPLOYEES ON ROLL AS ON 31.3.2005, IT IS ASCERTAINED LIABILITY ON THE COMPANY. SINCE UN- ASCERTAINED LIABILITY PROVISION IS ONLY TO BE ADDED TO THE NET PROFIT TO ARRIVE THE BOOK PROFIT AS PER THE SECTION 115 JB OF I.T.ACT, THE PROVISIONS ULS 115 J B DOES NOT APPLY IN OUR CASE AND ADDITIONAL TAX LIABILITY DOES NOT ARISE ON THE COMPANY. HENCE, THE AUDIT OBJECTION MAY PLEASE BE DROPPED. 5. ASSESSING OFFICER, AFTER CONSIDERING ASSESSEES OBJECTIONS, COMPLETED THE RE-ASSESSMENT BY ACCEPTING THE COMPUT ATION OF INCOME AS DONE IN THE ORIGINAL RETURN OF INCOME U/S 143(3) DATED 30.01.2008. SUBSEQUENTLY, ON PERUSAL OF THE ASSESSM ENT RECORDS U/S 263 OF THE I.T. ACT, THE CIT CAME TO THE CONCLU SION THAT THE AO HAS NOT EXAMINED VARIOUS ISSUES WHILE COMPLETING THE ASSESSMENT U/S 143(3) R.W.S. 148 OF THE ACT. ACCORD INGLY, HE ISSUED A SHOW CAUSE NOTICE DATED 05.12.2013 TO THE ASSESSEE ON THE FOLLOWING GROUNDS: 4.'THE GROUNDS OF PROPOSED REVISION ON THE ABOVE DEFICIENCY IN THE RETURN OF INCOME HAVE BEEN DISCUSSED IN DETAIL IN THE SHOW CAUSE LETTER, WHICH IS AS UNDER: 1. THE AMOUNT OF RS. 8,89,20,424/- RELATING TO THE EXCESS CLAIM OF EARNED LEAVE ENCASHMENT IN P & L ACCOUNT, WHICH WAS ITA NO.1479 OF 2014 PAGE 5 OF 11 DISALLOWED AND ADDED IN THE COMPUTATION OF INCOME BY THE ASSESSEE IN ITS RETURN OF INCOME, WAS NOT ADDED TO THE INCOME COMPUTED UNDER SEC. 115JB OF THE I T ACT WHILE COMPLETING THE ASSESSMENT U/S. 143(3) OR 143(3) R.W.S.147 OF THE ACT. 2. DURING THE YEAR THERE ARE ADDITIONS TO FIXED ASSETS TO THE TUNE OF RS. 2395349944/-. THE AO WOULD HAVE CALLED FOR THE INVOICES SO AS TO VERIFY THE DATE OF PUT TO USE OF THE SAID ASSET TO CALCULATE THE DEPRECIATION. 3. THE AO HAS CALLED FOR THE DETAILS OF THE TRADE CREDITORS. THE AO HAS NOT MADE ANY ATTEMPT TO VERIFY THE GENUINENESS OF THE SUCH BALANCES APPEARING IN THEIR NAMES. 4. SIMILARLY, NO ATTEMPT HAS BEEN MADE BY THE AO TO VERIFY THE GENUINENESS OF THE SUNDRY DEBTORS. 5. NO ATTEMPT HAS BEEN MADE TO EXAMINE THE APPLICABILITY OF SEC, 40(A)(IA) AND 43B WHILE VERIFYING THE VOUCHERS CALLED FOR. 6. NO DETAILS ARE AVAILABLE ON RECORD IN RESPECT OF SQUARED UP LOANS, WHEN THE AO PARTICULARLY CALLED FOR, THE SAME VIDE QUESTIONNAIRE ENTRY NO. 10. 7. IN THE AUDIT REPORT, THE CONTINGENCY RESERVE IS MENTIONED AT RS. 48,65,681/- WHEREAS IN THE REVISED RETURN IT WAS MENTIONED AS 3,55,00,000/-. THE REASONS FOR REVISING THE SAME IS NOT CALLED FOR AND VERIFIED BY THE AO. 8. THE AO SHOULD HAVE OBTAINED THE FULL PARTICULARS OF EL ENCASHMENT (CASEWISE) DURING FINANCIAL YEAR 2005-06 RELEVANT TO THE A.Y 2006-07 AND ALSO THE E.L EXPENDITURE FROM 1.4.2006 TO 30.09.2006 AND THEN HE SHOULD HAVE EXAMINED THE ISSUE. 6. IN RESPONSE TO THE ABOVE NOTICE, THE ASSESSEE FI LED A DETAILED REPLY BEFORE THE CIT, STATING THAT THE ISS UE AT ITEM NO.1 ITA NO.1479 OF 2014 PAGE 6 OF 11 HAS ALREADY BEEN CONSIDERED BY THE AO IN THE RE-ASS ESSMENT PROCEEDINGS U/S 147 OF THE ACT AND THE AO HAVING AD OPTED ONE OF THE POSSIBLE VIEWS, THE ORDER CANNOT BE SAID TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. AS REG ARDS THE OTHER GROUNDS ON WHICH THE REVISION HAS BEEN PROPOSED, IT WAS SUBMITTED THAT THESE ARISES OUT OF THE ASSESSMENT D ONE U/S 143(3) AND THEREFORE, THE REVISION ON THESE GROUNDS AFTER EXPIRY OF THE LIMITATION PERIOD IS NOT SUSTAINABLE. THE CI T, HOWEVER, WAS NOT SATISFIED WITH THE ASSESSEES CONTENTIONS AND H OLDING THAT THE AO FAILED IN HIS BASIC DUTY TO EXAMINE ALL THE ASPE CTS WHILE COMPLETING THE SCRUTINY ASSESSMENT, SET ASIDE THE A SSESSMENT ORDER WITH A DIRECTION TO REDO THE ASSESSMENT DENOV O, IN ACCORDANCE WITH LAW AFTER PROVIDING REASONABLE OPPO RTUNITY OF HEARING TO THE ASSESSEE. AGAINST THIS ORDER OF THE CIT, THE ASSESSEE IS IN APPEAL BEFORE US. 7. THE LEARNED COUNSEL FOR THE ASSESSEE, WHILE REIT ERATING THE SUBMISSIONS MADE BEFORE THE CIT, SUBMITTED THAT THE ASSESSMENT HAS BEEN REOPENED AFTER A PERIOD OF 4 YE ARS FROM THE ORIGINAL ASSESSMENT AND THEREFORE, THE PROVISIONS O F EXPLANATION TO SECTION 147 COMES INTO PLAY. HE SUBMITTED THAT A S PER THE SAID EXPLANATION, THE REOPENING OF THE ASSESSMENT AFTER 4 YEARS OF THE ITA NO.1479 OF 2014 PAGE 7 OF 11 ASSESSMENT COMPLETED U/S 143(3) IS NOT PERMISSIBLE UNTIL THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT DUE T O FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERI AL FACTS NECESSARY FOR THE ASSESSMENT OF THE ASSESSEES INCO ME. HE SUBMITTED THAT THE REOPENING OF THE ASSESSMENT HAS BEEN ON A PARTICULAR GROUND I.E. THE ALLOWABILITY OF THE PROV ISIONS MADE FOR E.L. ENCASHMENT AND IT WAS ONLY AFTER THOROUGH VERI FICATION OF THE ASSESSEES CONTENTION AND ON BEING SATISFIED TH AT THE ASSESSEE HAS DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS THAT THE AO HAS ACCEPTED COMPUTATION OF THE AO MADE U/S 143( 3) OF THE I.T. ACT. THEREFORE, ACCORDING TO HIM, THERE WAS AN APPLICATION OF MIND BY THE AO DURING THE RE-ASSESSMENT PROCEEDINGS AND HENCE IS NOT FURTHER AMENABLE TO THE REVISIONAL JURISDICT ION U/S 263 OF THE I.T. ACT. HE HAS ALSO DRAWN OUR ATTENTION TO TH E DETAILS FILED BEFORE THE AO DURING THE RE-ASSESSMENT PROCEEDINGS. AS REGARDS THE OTHER GROUNDS ON WHICH THE REVISION HAS BEEN MA DE, HE SUBMITTED THAT IT AMOUNTS TO REVISION OF THE ORIGIN AL ASSESSMENT U/S 143(3) AND THE REVISION OF THE SAME AFTER A PER IOD OF SIX YEARS IS NOT SUSTAINABLE. 8. THE LEARNED DR, HOWEVER, SUPPORTED THE ORDER OF THE CIT U/S 263 AND SUBMITTED THAT THE GROUNDS OTHER THAN T HE GROUNDS ITA NO.1479 OF 2014 PAGE 8 OF 11 ON WHICH REASSESSMENT HAS BEEN DONE AND ON WHICH TH E CIT HAS SOUGHT TO MAKE THE REVISION WERE NOT EXAMINED BY TH E AO EVEN DURING THE RE-ASSESSMENT PROCEEDINGS AND THEREFORE, THE REVISION IS JUSTIFIED. 9. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND INITIALLY THAT THE ASSESSMENT WAS C OMPLETED U/S 143(3) OF THE I.T. ACT ON 31.12.2008. DURING THE OR IGINAL ASSESSMENT PROCEEDING ITSELF, THE ASSESSEE HAD FILE D A REVISED RETURN OF INCOME REFLECTING THE EARNED LEAVE ENCASH MENT AND THE SAME WAS CONSIDERED AND ALLOWED BY THE AO. EVEN DURING THE RE-ASSESSMENT PROCEEDINGS THE ASSESSEE HAD FURNISHE D RELEVANT DETAILS BEFORE THE AO AND AFTER CONSIDERING AND BEI NG SATISFIED ABOUT THE ASSESSEES CONTENTION THAT THE E.L ENCASH MENT IS AN ASCERTAINED LIABILITY AND IS THEREFORE ALLOWABLE, T HE AO HAS COMPUTED THE INCOME OF THE ASSESSEE AS DONE IN THE ORIGINAL ASSESSMENT ORDER DATED 31.12.2008. WE FIND THAT THE CIT U/S 263 ALSO HAS AGAIN SOUGHT TO RECONSIDER THIS ISSUE OF E.L ENCASHMENT IN THE P & L A/C FOR COMPUTATION OF INCO ME U/S 115JB OF THE I.T. ACT. WE FIND THAT ON THE ISSUE WH ICH HAS BEEN EXAMINED AND ACCEPTED BY THE AO AFTER VERIFICATION, THE CIT HAS NO JURISDICTION TO REVISE THE SAME U/S 263 OF THE I .T. ACT. FOR THE ITA NO.1479 OF 2014 PAGE 9 OF 11 CIT TO EXERCISE JURISDICTION U/S 263 OF THE ACT, TH E ASSESSMENT ORDER SHOULD BE BOTH ERRONEOUS AND PREJUDICIAL TO T HE INTERESTS OF THE REVENUE. AN ASSESSMENT ORDER IS SAID TO BE ERRO NEOUS ONLY IF THE AO HAS NOT CONSIDERED THE ISSUE AT ALL OR HAS E RRONEOUSLY NOT APPLIED THE CORRECT PROVISIONS/POSITION OF LAW. IN THE CASE BEFORE US, THE AO HAS CONSIDERED THE ASSESSEES EXPLANATIO N AND AFTER BEING SATISFIED HAS ACCEPTED THE CLAIM OF THE ASSES SEE. IN THESE CIRCUMSTANCES, IT CANNOT BE SAID THAT THE ASSESSMEN T ORDER IS ERRONEOUS. THE LONE GROUND OF THE ORDER BEING PREJU DICIAL TO THE INTEREST OF THE REVENUE CANNOT SUSTAIN THE REVISION U/S 263 OF THE I.T. ACT. EVEN ON MERITS WE FIND THAT THE E.L. ENCASHMENT IN P & L A/C IS AN ASCERTAINED LIABILITY AND THEREFOR E, CANNOT BE BROUGHT TO TAX U/S 115JB OF THE ACT. THEREFORE, IT CANNOT BE SAID THAT THE CLAIM WAS ALLOWED ERRONEOUSLY. IN THIS VIE W OF THE MATTER, WE HOLD THAT THE ORDER U/S 263 OF THE I.T. ACT, AS REGARDS THE CLAIM OF E.L. ENCASHMENT IN THE P & L A/C OF TH E ASSESSEE IS NOT SUSTAINABLE. 10. AS REGARDS THE OTHER GROUNDS ON WHICH THE CIT S OUGHT TO REVISE THE ORDER OF THE AO ARE CONCERNED, WE ARE OF THE OPINION THAT ALL THESE ISSUES ARE NOT ARISING OUT OF THE OR DER U/S 143(3) R.W.S. 147 OF THE I.T. ACT. THEREFORE, THE REVISION U/S 263 AS ITA NO.1479 OF 2014 PAGE 10 OF 11 REGARDS THESE ISSUES IS AGAINST THE ORDER U/S 143(3 ) DATED 31.12.2008. SECTION 263 OF THE I.T. ACT PROVIDES TH AT NO ORDER U/S 263 SHALL BE MADE UNDER SUB-SECTION(1) THEREOF, AFTER THE EXPIRY OF TWO YEARS FROM THE END OF THE FINANCIAL Y EAR IN WHICH THE ORDERS SOUGHT TO BE REVISED WAS PASSED. IN THE CASE BEFORE US, THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE A CT WAS ON 31.12.2008, WHEREAS THE NOTICE U/S 263 WAS ISSUED O N 5.12.2013 I.E. BEYOND TWO YEARS FROM THE END OF THE RELEVANT FINANCIAL YEAR IN WHICH THE ASSESSMENT ORDER IS PAS SED. AS HELD BY THE HON'BLEBLE SUPREME COURT IN THE CASE OF CIT VS. ALAGENDRAN FINANCE LTD., 293 ITR 1 (SC) PERIOD OF L IMITATION BEGINS FROM THE ORIGINAL ASSESSMENT AND NOT FROM RE -ASSESSMENT IN WHICH THESE ITEMS WERE NOT DEALT WITH. THEREFORE , AS CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE OTHER GROUNDS ON WHICH THE CIT SOUGHT REVISION ARE OUTSID E THE PURVIEW OF THE CIT U/S 263 AS BARRED BY LIMITATION. THEREFORE, THE REVISION ORDER ON THESE GROUNDS ALSO IS NOT SUS TAINABLE. 11. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS ALLOWED AND THE CIT ORDER U/S 263 IS QUASHED. ITA NO.1479 OF 2014 PAGE 11 OF 11 ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH NOVEMBER, 2015. SD/- SD/- (B. RAMAKOTAIAH) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 13 TH NOVEMBER, 2015. VNODAN/SPS COPY TO: 1. M/S. NORTHERN POWER DISTRIBUTION COMPANY OF TELANGA NA LIMITED, HANMKONDA. C/O. M.CHANDRAMOULESWARA RAO, C A, C-3 SKYLARK APARTMENTS, BASHEERBAGH, HYDERABAD 5000 29 2. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE (1),WARAN GAL 3. CIT-VI, HYDERABAD 4. ADDL.CIT, WARANGAL RANGE, WARANGAL 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE BY ORDER