DCIT RG 1(2), MUMBAI V. MAHARASHTRA STATE ELECTRICITY BOARD, MUMBAI

ITA 1568/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84638 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 26-11-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 25-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA YADAV
• Assessee Lawyers: K K VED; N A PARADE
• Keywords: Reopening of assessment; Capital asset; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Revenue expenditure
• Section: 143(3); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI D. KARUNAKAR RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO. 1568/MUM/2013 ASSESSMENT YEAR: 2005-06 DCIT - 1 (2) R.N. 535-A, 5 TH FLOOR AAYAKAR BHAVAN MK ROAD, MUMBAI 400 020 VS. M/S. MAHARASHTRA STATE ELECTRICITY BOARD 6 TH FLOOR, PRAKASH GANGA, PLOT NO. C-19 E- BLOCK, BANDR KURLA COMPLES MUMBAI 400 051 PAN:AAACM 7507 P (APPELLANT) (RESPON DENT) ASSESSEE BY : SHRI K.K. VED & N.A. PARADE REVENUE BY : SHRI AKHILENDRA YADAV DATE OF HEARING : 26 . 11 . 2014 DATE OF ORDER : 19.12.2014 O R D E R PER AMIT SHUKLA, JM: THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AG AINST ORDER DATED 31.10.2012, PASSED BY THE LD.CIT-7, MUM BAI, FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) FOR THE A.Y . 2005-06, MAINLY ON THE FOLLOWING GROUND:- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) ERRED IN STATING THAT REOPEN ING OF ASSESSMENT ITSELF IS NOT JUSTIFIED TAKING NOTE OF T HE APEX COURTS DECISION IN THE CASE OF CIT VS. KELVINATOR OF INDIA LIMITED? ITA NO. 5358/MUM/2013 M/S. METTLER-TOLEDO INDIA PVT. LTD. ASSESSMENT YEAR: 2006-07 2 THE LD. CIT(A) FURTHER ERRED IN HOLDING THAT REOPEN ING OF ASSESSMENT DONE BY THE ASSESSING OFFICER IS INCORRE CT AND UNJUSTIFIED. ACCORDINGLY, THE REASSESSMENT ORDER PA SSED BY THE ASSESSING OFFICER IS ANNULLED.? 2. IN THIS CASE THE ASSESSEE HAS FILED RETURN OF I NCOME U/S 139(1) SHOWING LOSSES AT RS.1,66,08,88,334/- ON 28.10.2005 . SUCH A RETURN OF INCOME WAS SUBJECT TO SCRUTINY AND ASSESSMENT WAS A COMPLETED VIDE ORDER DATED 03.12.2007 U/S 143(3) ON TOTAL INCOME O F RS.9,25,43,74,150/- THIS YEAR WAS FURTHER RECTIFIED U/S 154 AT RS. NIL. THEREAFTER THE ASSESSEES CASE HAS BEEN REOPENED U/ S 147 ON THE FOLLOWING REASONS:- ASSESSMENT U/ S 143(3) WAS COMPLETED ON 31/ 12/2007 ASSESSING THE TOTAL INCOME AT RS. NIL. IT IS SEEN FROM THE FI NAL ACCOUNTS OF THE PREVIOUS YEAR RELEVANT TO A. Y.2005-06, THAT TH EASS7SSEE UNDER THE HEAD 'SUNDRY EXPENSES' HAD CLAIMED AN AMO UNT OF RS.1,07,15,744/- ON ACCOUNT OF 'INTANGIBLE ASSET IN TEREST CHARGES WRITTEN OFF FOR HVDC PROJECT WRITTEN OFF SINCE INTA NGIBLE ASSET IS A CAPITAL ASSET, INTEREST ON INTANGIBLE ASSET IS ALSO CAPITAL IN NATURE AND REQUIRED TO BE CAPITALIZED AND CANNOT BE CLAIME D AS REVENUE EXPENDITURE. OMISSION ON THE PART OF THE ASSESSEE T O CAPITALIZE SUCH EXPENDITURE HAS RESULTED IN UNDER ASSESSMENT O F INCOME TO THE TUNE OF RS.1,07,15,744/-. 3. BEFORE THE ASSESSING OFFICER, THE ASSESSEE OBJEC TED TO SUCH A REOPENING WHICH HAS BEEN REJECTED BY THE AO. HE THU S MADE AN ADDITION OF RS.1,07,15,744/- AFTER OBSERVING AND HOLDING AS UNDER:- THE ABOVE EXPLANATION OF THE ASSESSEE IS NOT FOUND TO BE SATISFACTORY FOR SAID EXPENSES CONSIST OF INTANGIBL E ASSETS INTEREST CHARGES WRITTEN OFF FOR HVDC PROJECT WRITTEN OFF. A S IT IS EVIDENT THAT THE INTANGIBLE ASSET IS CAPITAL ASSET HENCE, I NTEREST ON INTANGIBLE ASSETS ALSO BECOMES CAPITAL IN NATURE AN D IT IS REQUIRED TO BE CAPITALIZED. ASSESSEE HAS FAILED TO CAPITALIZ E THE SAID EXPENDITURE IN THE ORIGINAL ASSESSMENT PROCEEDINGS. IN THE ORIGINAL PROCEEDINGS ALSO, THIS ISSUE WAS OVERLOOKE D WHICH RESULTED INTO ESCAPEMENT OF INCOME TO THAT EXTENT. THE ASSESSEE HAS CLAIMED IT AS A REVENUE EXPENDITURE WHICH CANNO T BE ALLOWED ITA NO. 5358/MUM/2013 M/S. METTLER-TOLEDO INDIA PVT. LTD. ASSESSMENT YEAR: 2006-07 3 FOR THE REASON MENTIONED ABOVE. ACCORDINGLY, THE AM OUNT OF RS. 1,07,15,744/- CLAIMED AS A REVENUE EXPENDITURE IS D ISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE COMP ANY. 4. BEFORE THE LD.CIT(A), THE ASSESSEE CHALLENGED T HE VALIDITY OF THE REOPENING ON THE GROUND THAT THIS CHANGE OF OPINION AND NO NEW MATERIAL HAS CAME TO THE NOTICE OF THE AO FOR ENTER TAINING REASON TO BELIEVE ANY INCOME CHARGEABLE TO TAX HAS ESCAPE AS SESSMENT. RELIANCE WAS PLACED ON VARIOUS DECISIONS WHICH HAVE BEEN COR PORATE BY THE LD.CIT(A) ALONG WITH THE SUBMISSIONS OF THE ASSESSE E FROM PAGES 2 TO 5 OF THE APPELLATE ORDER. 5. THE LD.CIT(A) QUASH THE PROCEEDINGS U/S 147 AFTE R OBSERVING AND HOLDING AS UNDER:- I HAVE CONSIDERED THE A.O.S ORDER AS WELL AS THE A PPELLANT'S SUBMISSION. HAVING CONSIDERED BOTH, I FIND THAT THE APPELLANT'S CASE WAS REOPENED U/S 147 R.W.S. 143(3) OF THE ACT. I HAVE ALSO TAKEN NOTE OF THE APPELLANT'S SUBMISSION AND ALSO T AKEN NOTE OF THE A.O.S REASONS RECORDED IN PARA-3 OF THE ASSESSM ENT ORDER. THE PERUSAL OF THE REASONS RECORDED BY THE A.O. CLE ARLY DENOTES THAT THE REOPENING WAS DONE BASED ON APPELLANT'S RE CORD, WHICH WAS FILED BEFORE A.O. DURING ORIGINAL ASSESSMENT PR OCEEDINGS. IT IS NOWHERE THE CASE THAT THE APPELLANT HAS NOT DISC LOSED ANY PARTICULARS OR HAS FILED-ANY INACCURATE PARTICULAR OF ITS , INCOME. THE REASONS RECORDED IS MERELY FORMING A DIFFERENT OPINION, LOOKING TO DETAIL AND RECORDS FILED BY THE APPELLAN T WITH THE RETURN OF INCOME. FURTHER THE CASE LAWS RELIED UPON BY THE APPELLANT IN THE CASE OF CIT VS. SHRI AMITABH BACHCHAN IN ITA NO .4646 OF 2010, WHICH ALSO SUPPORT THE CONTENTION OF THE MIS MSEB-05-06 APPELLANT, AS I FIND THAT THE JURISDICTIONAL BOMBAY HIGH COURT HAS CLEARLY HELD THAT WHEN THERE IS NO NEW MATERIAL WHI CH HAS COME TO THE NOTICE OF THE ASSESSING OFFICE/THERE CANNOT BE ANY BASIS FOR THE ASSESSING OFFICER TO FORM A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. HENCE IN MY CONSIDERED VIEW THE REOPENI NG OF ASSESSMENT ITSELF IS NOT JUSTIFIED TAKING NOTE OF T HE APEX COURT DECISION IN THE CASE OF CIT V S. KELVINATOR OF INDI A LTD (320 ITR 561) (SC). THUS, THE REOPENING OF ASSESSMENT DONE B Y THE A.O. IS INCORRECT AND UNJUSTIFIED. ACCORDINGLY THE RE-ASSES SMENT ORDER PASSED BY THE A.O. IS ANNULLED. ITA NO. 5358/MUM/2013 M/S. METTLER-TOLEDO INDIA PVT. LTD. ASSESSMENT YEAR: 2006-07 4 6. BEFORE US, THE LD. DR SUBMITTED THAT THERE WAS A N OMISSION ON THE PART OF THE ASSESSEE TO CAPITALIZE THE EXPENDITURE WHICH HAS RESULTED IN TO UNDER ASSESSMENT. ONCE IT WAS NOTICED BY THE AO, REOPENING OF THE ASSESSMENT HAS BEEN INITIATED. SUCH A REOPENING WAS LEGALLY CORRECT. THE LD.CIT(A) HAS NOT EXAMINED THIS ISSUE ON MERITS AND THEREFORE OR LD.CIT(A) CANNOT BE SUSTAINED. 7. BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT TH ERE IS NO NEW MATERIAL ON RECORD COMING TO THE KNOWLEDGE OF THE A O FOR REOPENING THE CASE U/S 147 FROM THE PERUSAL OF THE REASONS RECORD ED, IT CAN BE SEEN THAT THE AO HAS NOTED FROM THE ACCOUNTS SUBMITTED D URING THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS HENCE IT AMOUNT S TO CHANGE OF OPINION. WE ARE THUS STRONGLY RELIED UPON SUBMISSIO N MADE BEFORE THE LD.CIT(A) AND ALSO THE FINDING OF THE LD.CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS ALSO PERUSIN G THE MATERIAL THE RELEVANT ON RECORD. THE ASSESSEES CASE HAS BEEN CO MPLETED U/S 143(3) VIDE ORDER 31.12.2007. SUCH AN ASSESSMENT HAS BEEN SOUGHT TO BE REOPENED WITHOUT ANY NEW MATERIAL COMING ON RECORD HAVING LIVE LINK NEXUS WITH THE INCOME CHARGEABLE TO TAX HAVING ESCA PE ASSESSMENT. FROM THE PERUSAL OF THE REASONS RECORDED FROM THE I T CAN BE SEEN THAT THE AO IS NOTING THE FACTS FROM THE ACCOUNTS OF THE ASSESSEE THAT AMOUNT DEBITED UNDER THE HEAD SUNDRY EXPENSES ON AC COUNT OF INTANGIBLE ASSETS INTEREST CHARGES RETURN OFF FOR H VDC PROJECT. HE HELD SUCH AN EXPENDITURE HAS TO BE TREATED AS CAPITAL EX PENDITURE. SUCH A REASONS DEFINITELY AMOUNT TO CHANGE OF OPINION AS THE FINAL ACCOUNT WAS VERY MUCH AVAILABLE AND EXAMINED BY THE AO AT T HE TIME OF THE ITA NO. 5358/MUM/2013 M/S. METTLER-TOLEDO INDIA PVT. LTD. ASSESSMENT YEAR: 2006-07 5 PASSING OF THE ORIGINAL ASSESSMENT PROCEEDINGS. IT HAS A TRIBE LAW THAT U/S 147 AND THE ASSESSING OFFICER HAS NO POWER TO R EVIEW COMPLETED ASSESSMENT MERELY ON THE GROUND THAT ITS DIFFERENCE OF OPINION CAN BE FORMED. WITHOUT THERE BEING ANY TANGIBLE MATERIAL S UCH A COMPLETED ASSESSMENT CANNOT BE REOPENED. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. (2010) 320 ITR 561 HAS CATEGORICALLY HELD THAT MERELY ON THE CHANGE OF OPINION, THE AS SESSMENT COMPLETED CANNOT BE REOPENED THUS THE FINDING OF THE LD.CIT(A ) HAS NOTED ABOVE HAS BASED ON SETTLED LEGAL PROPOSITION AND ACCORDIN GLY THE SAME IS CONFIRMED. THUS GROUNDS RAISED BY THE REVENUE IS DI SMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 TH DAY OF DECEMBER, 2014. SD/- SD/- (D.KARUNAKAR RAO) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 19.12.2014 *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR B BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.