Schneider Electric India Pvt. Ltd., Gurgaon V. DCIT, New Delhi

ITA 1585/DEL/2013

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3157 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 25-04-2017
• Assessment Year: 2003-2004
• Appeal Filed On: 18-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAUSHLENDRA TIWARI
• Assessee Lawyers: ASHOK JAIN CA SH ASHU GOEL
• Keywords: Reopening of assessment; Depreciation; Audit objection; Tangible material; Difference of opinion; Tax effect; Change of opinion; Revenue expenditure; Reassessment proceedings; Capital expenditure
• Section: 143(3); 147; 148; 154

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: G , NEW DELHI BEFORE SHRI N .K. SAINI , ACCOUNTANT MEMBER AND SMT. BEENA A PILLAI, JUDICIAL MEMBER ITA NO. 1585 /DEL/201 3 A.Y. 20 03 - 04 SCHNEIDER ELECTRIC INDIA P LTD. 9 TH FLOOR, TOWER CIT(A) BUILDING NO.10 DLF CYBER CITY DLF PHASE II GURGAON 122 002 PAN: AABCS1624G VS . DCIT, CIRCLE 7(1) NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY SH. ASHOK JAIN, CA SH. ASHU GOEL, CA RESPONDENT BY SH. KAUSHLENDRA TIWARI, SR.DR DATE OF HEARING 27 . 1 2.201 7 DATE OF PRONOUNCEMENT 2 7 . 0 2 . 2 0 1 8 ORDER PER BEENA PILLAI, JUDICIAL MEMBER T HE PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST THE ORDER DATED 21/01/13 PASSED BY LD. CIT (A) - 10, NEW DELHI FOR ASSESSMENT YEAR 2003 - 04 ON THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD.CIT(A) HAS ERRED IN CONFIRMING REOPENING OF ASSESSMENT ON THE BASIS OF O BSERVATION OF THE 2 AUDIT PARTY, AFTER EXPIRY OF FOUR YEARS, AS THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) AND THERE IS NO FINDING BY THE AO THAT THERE WAS ANY FAILURE, ON THE PART OF THE APPELLANT, TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESS ARY FOR ITS ASSESSMENT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD.CIT(A) HAS ERRED IN CONFIRMING ADDITION OF RENOVATION EXPENSES ON LEASED PREMISES, AMOUNTING TO RS.60,40,428/ - BY TREATING IT AS CAPITAL EXPENDITURE. MOREOVER, THE DETAILS WERE ON RECORDS, AT THE TIME OF ASSESSMENT U/S 143(3), HENCE THE ADDITION HAS BEEN MADE ON CHANGE OF OPINION. 2. BRIEF FACTS OF THE CASE ARE AS UNDER: T HE ASSESSEE FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 23/11/03 DECLARING TOTAL INCOME OF RS . 2, 09,94/ - . SUBSEQUENTLY THE ASSESSMENT WAS COMPLETED ON 28/11/06 UNDER SECTION 143 (3) OF THE A CT BY MAKING AN ADDITION OF RS.1,78,55,104/ - IN THE HANDS OF ASSESSEE. THEREAFTER LD. AO INITIATED PROCEEDINGS UNDER SECTION 154 OF THE A CT AS ACCORDING TO LD. AO THERE WERE CERTAIN IRREGULAR ALLOWANCES REGARDING DEPRECIATION AND INCORRECT ALLOWANCE OF CAPITAL EXPENDITURE CLAIMED BY ASSESSEE. ASSESSING OFFICER CALLED FOR DETAILED INFORMATION V IDE NOTICE DATED 04/09/2006. AS THE PROCEEDINGS UNDER SECTION 154 OF T HE ACT WERE PENDING, LD. AO ON 05/10/10 ISSUED NOTICE UNDER SECTION 148 OF THE ACT REOPENING THE ASSESSMENT BY RECORDING THE REASONS AS UNDER: PERUSAL OF RECORDS REVEALS THAT ASSESSEE HAS CLAIMED RENOVATION EX PENSES (RENOVATION OF DELHI & MUMBAI OFFICE) AS REVENUE EX PENDITURE BY INCLUDING IT IN REPAIR & MAINTENANCE EXPENSES. WHICH IS NOT ADMISSIBLE U/S 32. THE MISTAKE RESULTED IN UNDERASSESSMENT 3 OF INCOME OF RS.6 040428/ - INVOLVING TAX EFFECT OF RS .3024555/ - INCLUDING INTEREST U/S 234B. SECONDLY, THE C OMPANY HAD CLAIMED DEPRECIA T ION OF RS. 8004712/ - AS PER INCOME TAX (UNDER THE HEAD COMPUTER) IN THE COMPUTATION OF INCOME, HOWEVER, ALLOWABLE DEPRECIATION WORKS OUT TO RS.87830/ - INSTEAD OF RS. 2107 9 2 / - . THUS, AS EXCESS DEPRECIATION OF RS. 122962/ - WAS CLAIMED AND ALLOWED TO ASSESSEE. THE MISTAKE RESULTED IN UNDERASSESSMENT OF INCOME BY RS. 122962/ - INVOLVING TAX EFFECT OF RS. 45188/ - . THEREFORE I HAVE REASONS TO BELIEVE THAT AN AMOUNT OF RS. 6162390/ - HAS ESC APED ASSESSMENT. 2.1. LD. AO COMPLETED THE REASSESSMENT PROCEEDINGS BY MAKING ADDITION IN THE HANDS OF ASSESSEE AS UNDER: SSESSED INCOME U/S 143(3) DT. 28.2.2006 RS.1,78,55,104 ADD: AS CAPITAL EXPENDITURE AS DISCUSSED 60,40,428 EXCESS DEPRECIATION DISALLOWED 1.22.962 TOTAL DISALLOWANCE 61,63,390 61,63,390 ASSESSED INCOME 2,40,18,494 2.2. AGGRIEVED BY THE ORDER OF LD. AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT (A). BEFORE LD. CIT (A) ASSESSEE HAD RAISED OBJECTIONS REGARDING VALIDITY OF REASSESSMENT PROCEEDINGS WHICH WAS DISMISSED BY LD. CIT (A). INSOFAR AS THE MERITS OF THE ADDITIONS WERE CONCERNED, THE LD. CIT (A) AFTER CONSIDERING THE SUBMISSIONS 4 ADVANCED BY ASSESSEE UPHELD THE NATURE OF EXPENDITURE BEING CAPITAL BUT ALLOW ED DEPRECIATION ON SUCH ASSETS. 2.3. AGGRIEVED BY THE ORDER OF LD. CIT (A) ASSESSEE IS IN APPEAL BEFORE US NOW. 3. GR OUND NO. 1 RAISED BY ASSESSEE IS IN RESPECT OF THE LEGAL PLEA RAISED REGARDING THE VALIDITY OF REASSESSMENT PROCEEDING. LD. AR SUBMITTED THAT THE REOPENING OF ASSESSMENT IS AFTER EXPIRY OF 4 YEARS AS THE ORIGINAL ASSESSMENT WAS COMPLETED UNDER SECTION 143 (3). IT WAS SUBMITTED THAT A SSESSING O FFICER HAD NOT SET OUT A CASE OF ASSESSEE WHERE THERE WAS ANY FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT. THE LD. AR DR E W ATTENTION TO THE SUBMISSIONS MADE BY ASSESSEE IN THE RECTIFICATION PROCEEDINGS WHEREIN THE ASSESSING OFFICER HAS INITIATED THE RECTIFICATION OF ASSESSMENT ON THE VERY ISSUE WHICH WAS THE BASIS OF ADDITION AND THE REASSESSMENT PROCEEDINGS. HE SUBMITTED TH AT THE CLAIM OF EXPENDITURE BEING REVENUE IN NATURE WAS SUFFICIENTLY SUBSTANTIATED BY ASSESSEE IN THE RECTIFICATION PROCEEDINGS AS WELL AS THE ORIGINAL ASSESSMENT PROCEEDINGS. HE SUBMITTED THAT ASSESSING OFFICER WAS SATISFIED WITH THE SUBMISSIONS MADE BY ASSESSEE AND THEREFORE NO ADDITIONS WERE MADE IN THE HANDS OF ASSESSEE IN THE RECTIFICATION PROCEEDINGS. LD. AR SUBMITTED THAT IT IS A CHANGE OF OPINION AND THEREFORE THE REOPENING PROCEEDINGS MUST BE QUASHED AND SET - ASIDE AS THE SAME HAS BEEN INITIATED ON THE BASIS OF AN AUDIT OBJECTION WHICH IS VERY MUCH APPARENT FROM THE APPROVAL TAKEN BY LD. AO UNDER SECTION 151 (1) OF THE ACT FOR REOPENING THE CASE. 5 3.1. LD. AR PLACED RELIANCE UPON THE DECISIONS OF C OORDINATE B ENCH IN ASSESSEE S OWN CASE FOR ASSESSMENT YEAR 2002 - 03 WHEREIN THE REOPENING HAS BEEN QUASHED AND SET - ASIDE AS THERE WAS NO FRESH MATERIAL THAT WAS AVAILABLE TO INITIATE THE REASSESSMENT PROCEEDINGS. 3.2. ON THE CONTRARY LD. DR PLACED RELIANCE UPON THE AUTHORITIES BELOW AND SUBMITTED THAT REOPENI NG WAS DONE IN ACCORDANCE WITH LAW ON THE ISSUE OF AUDIT OBJECTIONS. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS ADVANCED BY BOTH THE SIDES IN THE L IGHT OF THE RECORDS PLACED BEFORE US. 4.1. GROUND NO. 1 RAISED BY ASSESSEE CHALLENGING THE VALIDITY OF REOPENING OF ASSESSMENT. IT HAS BEEN SUBMITTED BY LD. AR THAT THERE WAS NO TANGIBLE MATERIAL FOR FORMING REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. FURTHER IT IS OBSERVED THAT THE NOTICE UNDER SECTION 148 HAS BEEN ISSUED ON 08/03/10 WHICH IS MUCH BEYOND 4 YEARS AND THEREFORE IT IS INCUMBENT UPON THE REVENUE AUTHORITIES TO SHOW THAT THERE WAS NO TRUE AND FULL DISCLOSURE OF ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT DURING THE ORIGINAL ASSESSMENT PROCEEDINGS. IN OUR CONSIDERED OPINION 1 ST PROVISO TO SEC TION 147 OF THE ACT WOULD BE SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE AS EVEN IN THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT THERE IS NO MENTION REGARDING ANY FAILURE ON BEHALF OF ASSESSEE DISCLOSING FULL AND TRUE MATERIAL FACTS. 4.2. IN FACT THE REASONS RECORDED REVEALS THAT THE INFORMATION REGARDING THE CLAIM OF RENOVATION EXPENSES BEING REVENUE IN NATURE HAS BEEN REVEALED FROM THE RECORDS ITSELF. FURTHER AFTER THE ORIGINAL 6 ASSESSMENT WAS COMPLETED ASSESSING OFFICER HAS INITIATED RECT IFICATION PROCEEDINGS ON THE SAME ISSUE OF EXCESS CLAIM OF REVENUE EXPENDITURE ON ACCOUNT OF RENOVATION (PLACED AT PAGE 84 - 85 OF PAPER BOOK) . THUS IN OUR CONSIDERED VIEW THERE IS NO FRESH MATERIAL AVAILABLE ON RECORD WITH LD. A O TO INITIATE THE REASSESSMENT PROCEEDINGS. THUS REASONS TO BELIEVE DOES NOT FORM ANY TANGIBLE MATERIAL WHICH LD. AO COME ACROSS AFTER COMPLETION OF ORIGINAL ASSESSMENT. RESPECTFULLY FOLLOWING THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF KELVINATOR INDIA LTD . REPORTED IN 32 0 ITR 561 , WE HOLD THE RE OPENING OF ASSESSMENT TO BE BAD IN LAW , THEREBY QUASHING THE NOTICE ISSUED UNDER SECTION 148 OF THE ACT DATED 08/03/10. 4.3. ACCORDINGLY GROUND NO. 1 RAISED BY ASSESSEE STANDS ALLOWED. 4.4. AS THE LEGAL ISSUE RAISED BY ASSESSEE IN GROUND NO. 1 IS ALLOWED IN FAVOUR OF ASSESSEE AND AGAINST REVENUE, WE ARE NOT INCLINED TO DISCUSS THE OTHER PROPOSITION REGARDING ADDITION ON MERITS RAISED BY ASSESSEE. 4.5. ACCORDINGLY THE GROUNDS OF APPEAL RAISED BY ASSESSEE STANDS ALLOWED. IN THE RE SULT APPEAL FILED BY ASSESSEE STANDS ALLOWED. O R D E R P R O N O U N C E D I N T H E O P E N C O U R T O N 2 7 . 0 2 . 2 0 1 8 . S D / - S D / - ( N.K.SAINI ) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 2 7 T H FEB., 201 8 . MV 7 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER ASST. REGISTRAR ITAT, DELHI BENCHES, NEW DELHI