M/s. Navayuga Spatial Technologies Private Limited, Hyderabad V. DCIT, Hyderabad

ITA 1557/HYD/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53845 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 04-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 10-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V SRINIVAS; T DIWAKAR PRASAD
• Assessee Lawyers: V RAGHAVENDRA RAO
• Keywords: Depreciation; Search and seizure; Validity of assessment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A ', HYDERABAD BEFORE SHRI H.S. SIDHU, JUDICIAL MEMEBR AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.1557/HYD/2010 : ASSESSMENT YEAR 2005-06 M/S. NAVAYUGA SPATIAL TECHNOLOGIES PVT. LTD., HYDERABAD ( PAN - AACCN 1375 L) V/S. DY. COMMISSIONER OF INCOME-TAX CIRCLE 16(1), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V.RAGHAVENDRA RAO RESPONDENT BY : S/SHRI V.SRINIVAS & T.DIWAKAR PRASAD DATE OF HEARING 1.12.2011 DATE OF PRONOUNCEMENT 26.12.2011 O R D E R PER BENCH: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER S OF THE CIT(A) V, HYDERABAD DATED 17.9.2010 FOR THE ASSESSMENT Y EAR 2005-06. 2. EFFECTIVE GROUNDS OF THE ASSESSEE IN THIS APPEAL REA D AS FOLLOWS- 1. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) (CIT(A) HAS ERRED ON FACTS AND IN LAW WHILE PASSING THE APP ELLATE ORDER. 2.(A) THE PROCEEDINGS U/S. 148 WERE INVALID BECAUSE THEY WERE INITIATED WITHIN ONE YEAR OF THE FILING THE RETURN OF INCOME ON 29.10.2006. NO ESCAPEMENT OF INCOME CAN BE LEGALLY INFERRED WHILE THERE WAS TIME AVAILABLE FOR ISSUING A NOTICE U/S. 143(2) UP TO A PERIOD OF 12 MONTHS COMMENCING FROM THE MON TH I.E. OCTOBER, 2007. IN WHICH THE RETURN WAS FILED. ITA NO.1557/HYD/2010 M/S. NAVYUGA SPATIAL TECHNOLOGIES P. LT D., HYD 2 (B) THE LEARNED CIT(A) ERRED IN LAW IN HOLDING TH AT THE ASSESSMENT PROCEEDINGS AND THE ASSESSMENT ORDER WERE VALID EV EN THOUGH THE NOTICE U/S. 143(2) WAS SERVED ON THE ASSESSEE O N 159- 2008 WHEREAS THE RETURN WAS FILED ON 12-7-2007. TH E NOTICE UNDER S.143(2) WAS SERVED MORE THAN 12 MONTHS AFTER THE MONTH OF FILING OF THE RETURN. THE ASSESSMENT PROC EEDINGS AND THE ASSESSMENT ORDER FLOWING FROM IT ARE BOTH INVA LID. WITHOUT PREJUDICE TO THE ABOVE GROUNDS 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN HOLDING THAT THE BUSINESS WAS NOT SET UP. 4. THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT ANY OTHER INCOME NOT SPECIFIED IN THE REASONS RECORDED U/S. 1438(2) CAN BE BROUGHT TOT AX IN THE REASSESSM ENT PROCEEDINGS. THE EXPLANATION 3 U/S. 147 WAS NOT EXISTING AT THE TIME OF ASSESSMENT ON 24.11.2008. 5. THE LEARNED CIT(A) IS NOT JUSTIFIED IN HOLDING T HAT THE EXPENDITURE OTHER THAN THE DEPRECIATION INCURRED S UCH AS TOWARDS SALARIES, TRAVELLING AND OFFICE MAINTENANCE ARE PRELIMINARY IN NATURE. HE FAILED TO NOTICE THAT SU CH EXPENDITURE IS NECESSARY FOR THE VERY EXISTENCE OF THE COMPANY. . 3. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. 4. GROUND NO.1 IS GENERAL AND NEEDS NO SEPARATE ADJ UDICATION. AT THE TIME OF HEARING, LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRESS FOR GROUND NO.2(A), WHICH IS ACCORDINGLY REJECTED. ` 5. AS FOR GROUND NO.2(B), WE FIND THAT THE PLEA WIT H REGARD TO BELATED THE SERVICE OF NOTICE UNDER S.143(2), VIZ. MOR E THAN 12 MONTHS AFTER THE MONTH OF FILING OF THE RETURN, WAS NOT RAI SED BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS, AND SUCH A PLE A IS RAISED FOR THE FIRST TIME IN THE APPELLATE PROCEEDINGS, THAT TOO BEF ORE THIS TRIBUNAL. IN VIEW OF THE PROVISIONS OF S.292BB, MISTAKE ON ACCOUNT O F BELATED SERVICE OF ITA NO.1557/HYD/2010 M/S. NAVYUGA SPATIAL TECHNOLOGIES P. LT D., HYD 3 NOTICE IS A CURABLE MISTAKE. SINCE THE ASSESSEE HAS NOT RAI SED SUCH A PLEA BEFORE THE ASSESSING OFFICER, AND FULLY PARTICIPATED IN THE ASSESSMENT PROCEEDINGS, THE SO-CALLED MISTAKE IN SERVING THE NOTICE UNDER S.143(2) OF THE ACT, STOOD CURED, ON ACCOUNT OF THE ASSESSEES ACTION IN IGNORING THE SAME AND PARTICIPATING IN THE PROCEEDINGS BEFORE THE A SSESSING OFFICER. LEARNED COUNSEL FOR THE ASSESSEE HAS CONTENDED BEFORE US T HAT THE RECENTLY INSERTED PROVISION OF S.292BB, EFFECTIVE FROM 1 ST APRIL, 2008, IS APPLICABLE ONLY FROM THE ASSESSMENT YEAR 2008-09 ONLY, AND SINCE T HE PRESENT APPEAL RELATES TO ASSESSMENT YEAR 2005-06, THE SAVING PROVISION OF THAT SECTION DOES NOT COME TO THE RESCUE OF THE DEPARTMENT. WE ARE AFRAID, SUCH A PLEA CANNOT BE ACCEPTED, FOR THE REASON THAT THE PROVISION OF S.292BB IS ONLY A PROCEDURAL ONE, AND AS SUCH, IT APPLIES TO ALL THE PENDI NG PROCEEDINGS, IRRESPECTIVE OF THE ASSESSMENT YEARS, TO WHICH THEY RELATE, AS HELD BY THE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF OM SONS INT ERNATIONAL V/S. CIT(2011) 60 DTR (P&H) 393, WHEREIN IT WAS HELD- .THE PROVISION HAS BEEN MADE EFFECTIVE FROM 1 ST APRIL, 2008 AND THEREFORE, SHALL APPLY TO ALL PENDING PROCEEDINGS. THE CBDT ISSUED CIRCULAR NO.1 OF 2009 DT 27 TH MARCH, 2009 ((2009) 222 CTR (ST) 69); (2009)310 ITR (ST) 42) GIVING EXPLANATORY NOTES ON THE PROVISIONS RELATING TO DIRECT TAXES CONTAINED IN FINANCE ACT, 2008. CLAUSE 42.7 (AT P.86 OF THE REPORT) IS RELEVANT WHICH RELATES T O APPLICABILITY OF THIS PROVISION AND READS THUS- : 42.7 APPLICABILITY: THIS AMENDMENT HAS BEEN MADE A PPLICABLE W.E.F. 1 ST APRIL, 2008. THIS MEANS THAT THE PROVISION OF NEW S.292BB SHALL APPLY TO ALL PROCEEDINGS WHICH ARE PE NDING ON1ST APRIL, 2008. .. WE ARE ALSO SUPPORTED IN THIS BEHALF BY THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN KUBER TOBACCO PRODUCTS (P) LTD. V/S DY. CIT(117 ITD 273), WHEREIN IT WAS HELD THAT BY INSERTION OF S.292BB, RI GHT OF THE ASSESSEE TO CHALLENGE THE VALIDITY OF ASSESSMENT OR REASSESSMENT PROCEE DINGS DURING THE COURSE OF APPELLATE PROCEEDINGS HAS BEEN TAKEN AWAY BY THE STATUTE ITA NO.1557/HYD/2010 M/S. NAVYUGA SPATIAL TECHNOLOGIES P. LT D., HYD 4 W.E.F. 1.4.2008. IN THIS VIEW OF THE MATTER, WE FIN D NO MERIT IN GROUND NO.2(B) OF THE ASSESSEE, WHICH IS ACCORDINGLY REJECTED. 6. THE NEXT ISSUE INVOLVED IN THE PRESENT APPEAL RELA TES TO NON- ALLOWANCE OF DEPRECIATION. ON CAREFUL CONSIDERATION OF RIVAL SUBMISSION ON THIS ISSUE IN THE LIGHT OF THE ORDERS OF THE LOWER AUT HORITIES, WE FIND THAT THE BUSINESS OF THE ASSESSEE WAS NOT YET SET UP BY THE END OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. T HIS IS THE FACTUAL FINDING GIVEN BY THE CIT(A), AGAINST WHICH NO CONTRAR Y EVIDENCE IS PRODUCED BEFORE US. THAT BEING SO, WE FIND NO INFIRMITY IN TH E ACTION OF THE LOWER AUTHORITIES IN REJECTING THE CLAIM OF THE ASSESSEE FOR DE PRECIATION. 7. THE NEXT ISSUE COVERED BY GROUND NO.4 IS WITH REGAR D TO ASSESSMENT OF OTHER ITEMS OF INCOME, WHICH HAVE NOT BEEN ST ATED TO HAVE ESCAPED ASSESSMENT IN THE NOTICE SENT BY THE ASSESSING OFFICER F OR REOPENING THE ASSESSMENT UNDER S.147 OF THE ACT. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON THIS ISSUE . IT IS THE CONTENTION OF THE ASSESSEE THAT THE ASSESSING OFFICER HAS REOP ENED THE ASSESSMENT ONLY TO CONSIDER THE DISALLOWANCE OF DEPRECIATION , AND AS SUCH THE ASSESSING OFFICER CANNOT GO INTO OTHER ISSUES AND MAKE ADDITIONS/DISALLOWANCES IN RELATION TO THE SAME. WE FI ND NO MERIT IN THIS CONTENTION OF THE ASSESSEE, IN VIEW OF PROVISO TO EXPLANA TION 3 TO S.147. THE SAID PROVISION INSERTED BY THE FINANCE (NO.2) ACT, 2 009, WITH EFFECT FROM 1.4.1989, READS AS FOLLOWS- EXPLANATION 3- FOR THE PURPOSE FO ASSESSMENT OR RE ASSESSMENT UNDER THIS SECTION, THE ASSESSING OFFICER MAY ASSES S OR REASSESS THE INCOME IN RESPECT OF ANY ISSUE, WHICH HAS ESCAPED A SSESSMENT , AND SUCH ISSUE COMES TO HIS NOTICE 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 RE CORDED UNDER SUB-SECTION (2) OF SECTION 148. ITA NO.1557/HYD/2010 M/S. NAVYUGA SPATIAL TECHNOLOGIES P. LT D., HYD 5 IN VIEW OF THE ABOVE CATEGORICAL PROVISION IN THE STATU TE BOOK, WE FIND NO INFIRMITY IN THE ACTION OF THE LOWER AUTHORITIES IN B RINGING TO TAX NOT ONLY IN RESPECT OF THE ITEMS COVERED BY THE REASONS RECORDED UNDER SUB-SECTION (2), BUT ALSO OTHER ITEMS WHICH CAME TO THE NOTICE OF THE ASSESSI NG OFFICER IN THE COURSE OF RE-ASSESSMENT PROCEEDINGS. EVEN THOUGH THE LE ARNED COUNSEL FOR THE ASSESSEE PLEADED THAT THE SAID EXPLANATION, BEING NO T ON THE STATUTE BOOK AS ON THE DATE OF IMPUGNED ASSESSMENT, IS NOT APPLI CABLE TO THE PRESENT CASE, WE FIND NO FORCE IN THE SAID ARGUMENT, SIN CE IT IS A PROCEDURAL ONE AND IT IS APPLICABLE TO ALL PENDING PROCEEDINGS, IT IS APPLICABLE EVEN TO THE PRESENT CASE OF THE ASSESSEE. 9. THE NEXT ISSUE COVERED BY GROUND NO.5 OF THIS APPEA L RELATES TO THE MERITS OF THE ADDITIONS/DISALLOWANCES MADE IN THE R E-ASSESSMENT, WHICH HAVE BEEN SUSTAINED BY THE CIT(A). IT IS THE CONTENTI ON OF THE ASSESSEE THAT THE EXPENDITURE OTHER THAN DEPRECIATION INCURRED , SUCH AS SALARIES, TRAVELLING AND OFFICE MAINTENANCE ARE PRELIMINARY IN NATURE AND THEY ARE ESSENTIAL FOR THE VERY EXISTENCE OF THE ASSESSEE COMPANY. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. WE FIND THAT THE CI T(A), AFTER TAKING NOTE OF THE CASE-LAW ON THE POINT, VIZ. OF THE BOMBAY HIGH CO URT IN DINESH KUMAR GULABCHAND AGRAWAL V/S. CIT(267 ITR 768); AND POHOOM AL BROS V/S. CIT(34 ITR 64); OF THE ALLAHABAD HIGH COURT IN SHERWANI BR OS V/S. CIT(23 ITR 51), HELD THE VIEW THAT THE EXPENDITURE TO BE ALLOWABLE SHOULD HAVE BEEN INCURRED FOR THE BUSINESS BEING CARRIED ON, AND SINCE, I N THE INSTANT CASE, THE ASSESSEE WAS YET TO COMMENCE THE BUSINESS, THE EXPENDITU RE CLAIMED IS NOT ALLOWABLE. HE HOWEVER, DIRECTED THE ASSESSING OFFICER TO CONSIDER THE AMORTIZATION OF THE EXPENSES CLAIMED UNDER S.35B OF TH E ACT, BY BEING ITA NO.1557/HYD/2010 M/S. NAVYUGA SPATIAL TECHNOLOGIES P. LT D., HYD 6 TREATED AS PRELIMINARY EXPENSES. WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) IN THIS BEHALF. WE ACCORDINGLY UPHOLD THE ORDER OF THE CIT(A) AND REJECT THE GROUND OF THE ASSESSEE ON THIS ISSUE. 11. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 20 TH DECEMBER, 2011 SD/- SD/- (H.S.SIDHU) (CHANDRA POOJARI) JUDICIAL MEMBER. ACCOUNTANT MEMBER DT/- 26 TH DECEMBER, 2011 COPY FORWARDED TO: 1. M/S. NAVAYUGA SPATIAL TECHNOLOGIES PVT. LTD., 1259 LAKSHMI TOWERS, ROAD NO.36, JUBILEE HILLS, HYDERAB AD 2. DY. COMMISSIONER OF INCOME-TAX CIRCLE 16(1), HYDERA BAD 3. COMMISSIONER OF INCOME-TAX(APPEALS) V HYDERABAD 4. COMMISSIONER OF INCOME TAX IV, HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S.