ACIT, Circle1(2), Hyderabad V. M/s. Creamline Dairy Products Ltd., Hyderabad

ITA 1483/HYD/2013

• Counselvise Citation: 148322514 RSA 2013
• Duration Of Justice: 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 08-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Keywords: Reopening of assessment; Invalid notice; Depreciation; Audit objection; Retrospective amendment; Difference of opinion; Assessment record; Revised return; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 147; 148; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO.1483/HYD/2013 ASSESSMENT YEAR 2007-2008 ACIT, CIRCLE 1(2) HYDERABAD. VS. M/S. CREAMLINE DAIRY PRODUCTS LTD., HYDERABAD PAN AABCC-6780-D (APPELLANT) (RESPONDENT) FOR REVENUE MR. P. SOMASEKHAR REDDY FOR ASSESSEE -NONE- DATE OF HEARING 25.06.2014 DATE OF PRONOUNCEMENT 31.07.2014 ORDER PER B. RAMAKOTAIAH, A.M. THIS REVENUE APPEAL IS AGAINST THE ORDERS OF LD. CIT(A)-II, HYDERABAD DATED 27.08.2013 ON THE ISSUE OF ALLOWING DEPRECIATION OF WIND MILLS AT 80% ON WDV METHOD CON TESTING THAT ASSESSEE HAS NOT EXERCISED THE OPTION FOR CLAI MING HIGHER DEPRECIATION UNDER RULE 5(1A). REVENUE IS ALSO CONT ESTING THE OPINION OF THE CIT(A) IN HOLDING THAT REOPENING OF ASSESSMENT UNDER SECTION 147 WAS BAD IN LAW. 2. BRIEFLY STATED, ASSESSEE IS ENGAGED IN THE BUSI NESS OF PROCURING/MANUFACTURING/ TRADING OF MILK AND MIL K PRODUCTS. IT IS ALSO ENGAGED IN THE ACTIVITY OF POW ER GENERATION THROUGH WIND MILLS. THE ORIGINAL RETURN OF INCOME W AS FILED ON 31.10.2007 AND REVISED RETURN OF INCOME WAS FILED O N 01.11.2007. CONSEQUENT TO MERGER OF ITS SISTER CONC ERN M/S. CREAMLINE NUTRIENTS LTD., SECOND REVISED RETURN WAS FILED ON 2 ITA.NO.1483/HYD/2013 M/S. CREAMLINE DAIRY PRODUCTS LTD., HYDERABAD 18.09.2008 INCREASING THE TOTAL INCOME. THERE WAS A REGULAR SCRUTINY ASSESSMENT COMPLETED ON 29.12.2009 ACCEPTI NG THE INCOME RETURNED IN WHICH DEPRECIATION CLAIMED WAS A LLOWED. CONSEQUENT TO REVENUE AUDIT PARTY OBJECTION THAT AS SESSEE HAS NOT EXERCISED THE OPTION FOR CLAIMING DEPRECIATION ON WDV METHOD, THERE SEEMS TO BE LOT OF CORRESPONDENCE BET WEEN THE A.O./CIT WITH THE REVENUE AUDIT AND ULTIMATELY PROC EEDINGS INITIATED UNDER SECTION 263 WERE ALSO DROPPED. HOWE VER, A.O. ULTIMATELY RESORTED TO REOPENING UNDER SECTION 147 AND A NOTICE WAS ISSUED UNDER SECTION 148 ON 29.03.2012 I .E., WITHIN 4 YEARS FROM THE END OF THE ASSESSMENT YEAR SEEKING ASSESSEES OBJECTIONS AND A.O. DISALLOWED THE DEPRECIATION CLA IMED AT 80%. 3. ON APPEAL BEFORE THE LD. CIT(A), LD. CIT(A) EXTRACTED THE ENTIRE SEQUENCE OF EVENTS AND THE CORRESPONDENCE WITH VARIOUS AUTHORITIES AND DECIDED TWO ISSUES IN FAVOUR OF ASSESSEE. WITH RESPECT TO THE I SSUE OF REOPENING OF ASSESSMENT UNDER SECTION 147, THE FIND INGS OF THE LD. CIT(A) IN PARA-7 IS AS UNDER : 7. REGARDING THE 3 RD AND 4TH GROUNDS OF APPEAL, WHERE THERE WAS A CHANGE OF OPINION ON THE PART OF THE ASSESSING OFFICER, IT IS EVIDENT FROM THE RECOR D THAT THE DEPRECIATION SCHEDULE BOTH AS PER THE COMPANIES ACT AND AS PER THE INCOME-TAX ACT ARE VERY MUCH AVAILABLE ON ASSESSMENT RECORD AND THE DEPRECIATION WAS CLAIMED AT 80% FOR THE PURPOSE OF INCOME-TAX ON WDV. THE ASSESSING OFFICER HAD CALLED FOR THE DETAILS OF INVOICES FOR ALL THE ADDI TIONS MADE TO WIND MILLS IN A.Y. 2005-06 AND ALSO HAD ASKED FOR COPY OF CERTIFICATE OF CLAIMING OF WINDMI LL ISSUED BY THE TAMIL NADU ELECTRICITY BOARD. ON EXAMINATION OF ALL THESE BILLS/VOUCHERS/INVOICES TH E DEPRECIATION WAS ALLOWED AT 80% IN THE ORIGINAL ASSESSMENT ORDER U/S. 143(3). HAVING EXAMINED THE ISSUE, HAVING COME TO THE CONCLUSION ON ALLOWABILIT Y 3 ITA.NO.1483/HYD/2013 M/S. CREAMLINE DAIRY PRODUCTS LTD., HYDERABAD OF DEPRECIATION ON WINDMILLS AT 80%, ISSUING A NOTI CE U/S. 147 ON THE SAME ISSUE AMOUNTS TO CHANGE OF OPINION AND SUCH NOTICE ISSUED BY THE AO IS NOT A VALID NOTICE AND SUCH ASSESSMENT BASED ON THE INVALID NOTICE IS NOT A VALID ASSESSMENT AS HELD BY THE APEX COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. (2010) 320 ITR 561 . 7.1. FROM THE COMPLETE SET OF FACTS ENUMERATED AT PARAGRAPH 4 ABOVE, IT IS EVIDENT THAT THE ASSESSING OFFICER REOPENED THE ASSESSMENT ONLY DUE TO AUDIT OBJECTION RAISED BY THE RAP. IT IS VER Y CLEAR THAT THE ASSESSING OFFICER WAS NOT IN AGREEMENT WITH THE OBJECTION RAISED BY THE RECEIPT AUDIT PARTY. THE FUNDAMENTAL REQUIREMENT OF ISSUING A NOTICE U/S. 147 IS THAT THE ASSESSING OFFICER SHOULD HAVE REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THIS PRIMARY REQUIREMENT IS NOT SATISFIED IN THE INSTANT CASE. THE ASSESSING OFFICER HAD NO REASON TO BELIEV E THAT INCOME HAD ESCAPED ASSESSMENT. ON CONTRARY HE HAD FIRM BELIEF THAT DEPRECIATION WAS CORRECTLY ALLOWED AT 80%. EXACTLY SIMILAR ISSUE WAS DEALT IN BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF ADANI EXPORTS VS. DCIT (1999) 240 ITR 224 (GUJ.L WHEREIN IT WAS HELD THAT THE ULTIMATE ACTION U/S.14 7 MUST DEPEND DIRECTLY AND SOLELY ON THE FORMATION OF BELIEF BY THE ASSESSING OFFICER ON HIS OWN EVEN WHERE SUCH INFORMATION IS PASSED ON TO HIM BY AUDIT. EVEN IN CASES WHERE AUDIT HAS RAISED OBJECTION IF THE ASSESSING OFFICER AGREES WITH THAT OBJECTION THEN ONLY HIS ACTION U/S. 147 IS VALID. I N THE INSTANT CASE THE ASSESSING OFFICER NEVER HELD BELIEF THAT THERE WAS ESCAPEMENT OF INCOME. IN SUCH CIRCUMSTANCES, THE REASSESSMENT PROCEEDINGS ARE HELD INVALID. 3.1. ON THE ISSUE OF MERITS OF DISALLOWANCE OF DEPRECIATION, LD. CIT(A) HELD AS UNDER: 8. REGARDING GROUNDS NO.5, 6 AND 7, THE FACTS ARE ALREADY DISCUSSED AT PARA 4. JUDICIAL PRECEDENTS ARE DISCUSSED BELOW. IN EXACTLY IDENTICA L SET OF FACTS AND CIRCUMSTANCES IN THE FOLLOWING JUDICIAL PRECEDENTS, THE DEPRECIATION IS HELD TO BE 4 ITA.NO.1483/HYD/2013 M/S. CREAMLINE DAIRY PRODUCTS LTD., HYDERABAD ALLOWABLE AT 80%. (I) CIT VS. JINDAL STEEL & POWER LTD. (2009) 180 TAXMANN 543 (PUNJ. & HAR]. IN THIS CASE THE ASSESSEE HAD CLAIMED DEPRECIATION ON ASSETS USED FOR POWER GENERATION OF THE BASIS OF WDV IN PLACE OF STRAIGHT LINE METHOD. THE ASSESSING OFFICER DISALLOWED THE CLAIM ON THE GROUND THAT IT HAD NOT OPTED FOR THE SAME AS PER RULE 5 (LA). THE HON'BLE HIGH COURT HELD THAT THE CLAIM OF DEPRECIATION BEFORE THE DUE DATE OF FILING OF RETURN U/S.139(1) SHALL BE CONSIDERED AS PROPER COMPLIANCE OF REQUIREMENTS TO SECOND PROVISO TO RULE 5(LA). (II) K.K.S.K. LEATHER PROCESSORS (P) LTD. VS. ITO (2010) 126 ITD 215 (CHEN.) WHEREIN IT WAS HELD THAT THE CLAIM MADE IN RETURN OF INCOME AS WELL AS REFLECTED IN BOOKS OF ACCOUNTS, AUDIT REPORT FILED ALONG WITH RETURN WAS MORE THAN EXERCISE OF OPTION UNDER SECOND PROVISO TO RULE 5( LA) IN THE ABSENCE OF ANY PRESCRIBED FORM FOR EXERCISING OPTION. (III) K. RAVI VS. ACIT (2010) 2 ITR (TRIB) 752 (CHEN.) WHEREIN IT WAS HELD THAT WHEN THERE IS NO SPECIFIC FORM OR METHOD PRESCRIBED FOR EXERCISING T HE SAID OPTION AS PER THE SECOND PROVISO TO RULE 5 (LA ), THEN THE CLAIM MADE IN THE RETURN OF INCOME AS WELL AS REFLECTED FROM THE BOOKS OF ACCOUNT AND AUDIT REPORT IS MORE THAN SUFFICIENT FOR EXERCISING THE OPTION AS REQUIRED UNDER THE SECOND PROVISO TO RUL E 5(LA). 9. IN VIEW OF THE JUDICIAL PRECEDENTS, IN ABSENCE OF THE PRESCRIBED FORM TO CLAIM DEPRECIATIO N AT 80% SUCH CLAIM MADE IN THE RETURN OF INCOME, IN THE BOOKS OF ACCOUNTS, IN AUDIT REPORT HAS TO BE CONSID ERED AS SUFFICIENT COMPLIANCE TO RULE 5(LA). CULMINATING AL L THE DISCUSSION, THE IMPORTANT POINT TO BE MENTIONED HER E IS, AS PER RULE 5(LA) OPTION IS TO BE EXERCISED BETWEEN DEPRECIATION SPECIFIED IN APPENDIX-LA AND APPENDIX- F. ON CLOSE SCRUTINY OF APPENDIX-LA IT IS APPARENT THAT WINDMILLS ARE NOT INCLUDED IN THE CLASS OF ASSETS MENTIONED THEREIN. WHEREAS, IN APPENDIX-L WINDMILLS ARE MENTIONED AT PART-A, ILL, 8. IT IS ALSO TO BE MENTI ONED THAT 5 ITA.NO.1483/HYD/2013 M/S. CREAMLINE DAIRY PRODUCTS LTD., HYDERABAD APPENDIX-LA IS APPLICABLE WITH RETROSPECTIVE EFFECT FROM 02.04.1997 WHEREAS APPENDIX-L IS APPLICABLE W.E.F. A.Y. 2006-07. SINCE, WINDMILLS ARE LISTED ONLY IN APPEND IX-1, IT IS NOT CLEAR, WHERE IS THE SCOPE FOR EXERCISING THE OPTION BETWEEN APPENDIX-L & APPENDIX-LA. IN ANY CASE GOING BY THE MERITS OF THE CASE, BASED ON THE JUDICIAL PRECE DENTS, THE ISSUE HAS TO BE DECIDED IN FAVOUR THE APPELLANT , BOTH ON MERITS OF THE CASE, AS WELL AS ON TECHNICAL GROU NDS THE APPEAL IS ALLOWED. 4. REVENUE IS IN APPEAL AND CONTESTING BOTH THE ISSUES. WHEN THE CASE WAS POSTED FOR HEARING, NONE APPEARED ON BEHALF OF THE ASSESSEE. THE NOTICE ISSUED WAS AL SO RETURNED UN-SERVED. THERFORE, AFTER HEARING THE LEARNED D.R. THE ISSUE IS DECIDED ON MERITS EX-PARTE RESPONDENT-ASSESSEE. 5. AFTER PERUSING THE FACTS AS DETAILED IN ORDER O F THE LD. CIT(A) AND THE PRINCIPLES GOVERNING ISSUE OF RE OPENING THE ASSESSMENT AND ALLOWANCE OF DEPRECIATION AT 80% ON THE WIND MILLS AND THE PROVISIONS OF LAW, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE DETAILED ORDER OF THE LD. CIT(A) ON THESE TWO ISSUES. REVENUE HAS NO BASIS EITHER FOR REOPENING T HE ASSESSMENT OR FOR DISALLOWING THE CLAIM OF DEPRECIA TION ALLOWED IN ORIGINAL ASSESSMENT, WHICH WAS IN FACT CLAIMED I N EARLIER YEARS ALSO. IN VIEW OF THIS, WE DO NOT FIND ANY MER IT IN THE REVENUE GROUNDS. THEREFORE, THEY ARE DISMISSED. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.07.2014. SD/- SD/- (SAKTIJIT DEY) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 31 ST JULY, 2014 VBP/- 6 ITA.NO.1483/HYD/2013 M/S. CREAMLINE DAIRY PRODUCTS LTD., HYDERABAD COPY TO 1. ACIT, CIRCLE 1(2), 4 TH FLOOR, AAYAKAR BHAVAN, HYDERABAD. 2. M/S. CREAMLINE DAIRY PRODUCTS LTD., 1-11-252/11/ 1, MOTILAL NAGAR, BEGUMPET, HYDERABAD. 3. CIT(A)-II, HYDERABAD 4. CIT-I, HYDERABAD 7. D.R. A BENCH, ITAT, HYDERABAD.