DCIT, CHENNAI V. Century Floor Mills Ltd., CHENNAI

ITA 1650/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96241 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2015
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 13-10-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 17-07-2015
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: S NAGARAJAN
• Keywords: Reopening of assessment; Depreciation; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI , . ! '# , $ %& ' [ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER ] ./ I.T.A.NO.1650/MDS/2015 & C.O.NO.90/MDS/2015 / ASSESSMENT YEAR : 2006-07 THE DY. COMMISSIONER OF INCOME-TAX CORPORATE CIRCLE 1(2) CHENNAI VS. M/S CENTURY FLOO R M ILLS LTD INDIAN CHAMBER BUILDING, 1 ST FLOOR ESPLANDE, CHENNAI 600 108 [PAN AAACC 1223 C ] ( () / APPELLANT) ( RESPONDENT / CROSS OBJECTOR ) DEPARTMENT BY : SHRI A.V. SREEKANTH, JCIT ASSESSEE BY : SHRI S. NAGARAJAN, CA / DATE OF HEARING : 13 - 10 - 2015 / DATE OF PRONOUNCEMENT : 16 - 10 - 2015 * / O R D E R PER BENCH THIS APPEAL BY THE REVENUE AND CROSS OBJECTION B Y THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE CO MMISSIONER OF INCOME-TAX (APPEALS)-I, CHENNAI, DATED 23.3.2015, F OR ASSESSMENT YEAR 2006-07. ITA NO.1650/15 CO NO.90/15 :- 2 -: 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS EN GAGED IN THE BUSINESS OF WHEAT FLOUR MILLING AND WINDMILL PO WER GENERATION. THE ASSESSEE FILED THE RETURN OF INCOME FOR THE A.Y 200 6-07 ON 25.11.2006 ADMITTING A TOTAL INCOME OF ` 82,23,304/-. PROCESSING U/S 143(1) WAS COMPLETED ON 25.12.2007. DURING THE YEAR, ASSESSEE HAD CLAIMED DEDUCTION U/S 80LA(4) OF ` 18,08,000/- FROM BUSINESS OF POWER GENERATION FROM NEPC WINDMILL. THE ASSESSEE ALSO O WNED FOUR OTHER WINDMILLS. THE ASSESSING OFFICER HAS TAKEN THE PRO FIT & LOSSES OF ALL THE WINDMILLS BY TREATING ALL THE WINDMILLS AS A SINGLE UNDERTAKING FOR CLAIMING DEDUCTION U/S 80LA AND HAS STATED THAT AS THERE WILL NOT BE ANY SURPLUS PROFIT TO CLAIM DEDUCTION U/S 80IA(4), THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 80LA CANNOT BE ALLOWED AND HENCE, THERE WAS A REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT. ACCORDINGLY, THE ASSESSING OFFICER REOPENED THE EA RLIER ASSESSMENT CONCLUDED U/S 143(3) ON 17.12.2008 BY ISSUE OF NOTI CE U/S 148 DATED 25.3.2013. IN RESPONSE TO THIS, THE ASSESSEE HAS F ILED LETTER DATED 4.4.2012 REQUESTING TO TREAT THE RETURN FILED ON 25 .11.2006 AS THE RETURN FILED IN RESPONSE TO NOTICE U/S 148. THE REA SON FOR REOPENING WAS COMMUNICATED VIDE LETTER DATED 5.4.2013 TO THE ASSESSEE AND NOTICE U/S 143(2) DATED 12.4.2013 WAS ALSO ISSUED. AFTER HEARING THE ASSESSEE, THE ASSESSING OFFICER COMPLETED THE ASSE SSMENT U/S 143(3) R.W.S. 147 ON 20.2.2014 DETERMINING TO THE TOTAL IN COME AT ` ITA NO.1650/15 CO NO.90/15 :- 3 -: 1,39,94,490/- BY DISALLOWING THE DEDUCTION U/S 80LA OF `1 8,08,000/- CLAIMED BY THE ASSESSEE . 3. REGARDING THE FIRST ISSUE PERTAINING TO VALIDITY O F JURISDICTION FOR REOPENING OF ASSESSMENT U/S 147, THE ASSESSING OFFICER OBSERVED THAT DURING THE YEAR, THE ASSESSEE HAD CLA IMED DEDUCTION U/S 80LA FOR A SUM OF RS.18,08,000/-. THE ASSESSEE HAD A TOTAL OF 7 WINDMILLS BEING NEPC, VISTAS, NEGMICON, ENERCON, VE STAS (500 KWS), VESTAS (225 KWS) , VESTAS (1650 KWS). OUT OF THESE, THE WINDMILL NEPC MAKE WAS CAPITALIZED IN THE FINANCIAL YEAR 1994-95. SINCE THIS WINDMILL HAS COMMENCED IN THE FINANCIAL YEAR 1994-95 THE PER IOD OF TEN CONSECUTIVE YEARS EXPIRED IN THE FY 2003-04. THE REFORE, THE ASSESSING OFFICER HAS HELD THAT THE ASSESSEE IS NOT ELIGIBLE FOR CLAIM OF DEDUCTION U/S 80IA DURING THE PRESENT ASSESSMENT YE AR. THE ASSESSEE HAS PRIMARILY OBJECTED TO THE PROPOSAL OF REOPENING OF THE ASSESSMENT VIDE LETTER DATED 5.9.2013 BEFORE THE ASSESSING OFF ICER. IT STATED THAT THE ENTIRE DETAILS RELATING TO THE COMPUTATION OF T HE DEDUCTION U/S 80LA IN RESPECT OF THE INCOME FROM WINDMILLS HAS BEEN FI LED WITH THE ASSESSING OFFICER DURING THE COURSE OF ORIGINAL AS SESSMENT PROCEEDINGS U/S 143(3) AND THOUGH THERE IS NO DISCU SSION IN THE ASSESSMENT ORDER, THE SAID DETAILS MUST BE DEEMED T O HAVE BEEN DULY CONSIDERED BY THE ASSESSING OFFICER WHILE COMPETIN G THE ASSESSMENT U/S 143(3) ESPECIALLY IN VIEW OF THE FACT THAT THE DEDUCTION CLAIM IS ITA NO.1650/15 CO NO.90/15 :- 4 -: SUPPORTED BY THE AUDITOR'S CERTIFICATE AS REQUIRED U/S 80IA(7). THEREFORE, THE PROPOSAL TO REOPEN THE ASSESSMENT IS BASED ON MERE CHANGE OF OPINION. THE ASSESSEE HAS STATED THAT TH ERE HAS BEEN NO FAILURE ON ITS PART AND THE NOTICE WAS ISSUED AFTER A PERIOD OF 4 YEARS. THE ASSESSING OFFICER REJECTED THE OBJECTIONS OF T HE ASSESSEE VIDE ORDER PASSED ON 4.2.2014. THE ASSESSEE HAS ALSO STA TED BEFORE THE ASSESSING OFFICER THAT THE ENHANCEMENT PROPOSAL FO R RS.18,08,000 FOR AY.2006-07 BEFORE THE CIT(A) DURING THE APPELLATE P ROCEEDINGS, ON THE ORDER PASSED BY THE ASSESSING OFFICER U/S 143( 3) WAS REJECTED BY THE CIT(A)(C)-II, CHENNAI VIDE COMMON ORDER DATED I TA NO.364 TO 367/13-14 DATED 31.10.2013 FOR AYS 2006-07 TO 2009- 10 BY RELYING ON THE DECISION OF THE ITAT, CHENNAI IN THE CASE OF SU PER SPINNING MILLS LTD (ITA NO. 1672/MDS/08). THE ASSESSING OFFICER R EJECTED THE ASSESSEES CONTENTION STATING THAT THE DEPARTMENT HAS PREFERRED FURTHER APPEAL AGAINST THE SAID DECISION AS WELL AS AGAINST THE DECISION OF THE CIT (A) IN ASSESSEE'S OWN CASE FOR AY 2006-0 7 (ON THE PROPOSAL FOR ENHANCEMENT OF ASSESSMENT). FURTHER, IT IS STAT ED BY THE ASSESSING OFFICER THAT THE PROCEEDINGS UNDER REASSESSMENT AN D THAT OF THE APPEAL PROCEEDINGS AGAINST THE ORDER UNDER SECTION 143(3) ARE PARALLEL PROCEEDINGS AND THEY DO NOT MERGE. HENCE, THE CLAIM OF THE ASSESSEE WAS NOT ENTERTAINED. AGGRIEVED, THE ASSESSEE PREFE RRED APPEAL BEFORE THE CIT(A). ITA NO.1650/15 CO NO.90/15 :- 5 -: 4. REGARDING MERIT OF THE ADDITION, THE CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS FOLLOWS: 5 . 2 . 3 AS SEEN FROM THE FACTS OF THE CASE, THE AO HAS DEN IED THE BENEFIT OF 80LA BY TREATING ALL THE WINDMILLS T OGETHER AND THERE WAS NET LOSS FROM T HE WINDMILL ACTIVITY ALL PUT TOGETHER. THE DETAILS OF NET LOSS WORKED OUT BY THE APPELLANT ARE AS UNDER PARTICULARS DATE OF CAPITALIZATION PROFIT/LOSS FO R A.Y NEPC 27 - 03 - 1995 18,08,372 VISTAS 15-02-2002 (38 , 53,063) NEG MICON 05 - 03 - 2004 (1 , 73,37,806) ENERCON 30-09-2004 (4,03,24,963) VISTAS 31-03-2006 (13,583) NET LOSS (5,97,21,043) AS THE NET RESULT FROM ALL THE W I NDMILLS PUT TOGETHER IS RS.5 . 97 CRORES LOSS IN AY.06-07 THE ASSESSING OFFICER H AS DENIED THE BENEFIT FOR THE YEAR. ON THE OTHER HAND, THE LD.AR HAS SUBMITTED THAT IT WAS CLAIMING DEDUCTION FROM EACH WINDMILL TREATING EACH WINDMILL AS A SEPARATE BUSIN ESS ACTIVITY. I AM OF THE CONSIDERED OPINION THAT EACH WINDMILL HAS TO BE TREATED AS A SEPARATE UNIT THIS IS WHY TH E PROVISIONS SPEAK OF TEN CONSECUTIVE YEARS OUT OF 15 YEARS FROM START OF THE UNDERTAKING. IF, ON THE OTHER HAN D, ASSESSEE STARTS ONE UNIT WITH ONE WINDMILL AND KEEP S ON ADDING ONE EACH AT EVERY 10 TH YEAR THEN IT WILL BECOME AN UNENDING PROCESS AND THE TIME LIMIT OF 10 YEARS OUT OF 15 YEARS CANNOT BE IMPLEMENTED . FURTHER, THE APPELLANT HAS CLAIMED LOSSES FROM NEPC WINDMILL AGAINST INCOM E FROM OTHER BUSINESS TILL THE ENTIRE LOSSES ARE SET OFF AGAINST OTHER INCOME AND ENTIRE POSITIVE INCOME FROM THE SAID WIN DMILL WAS O F FERED FOR TAXATION FROM 5 TH YEAR TO 11 T H Y EAR , BY TREATING THAT UNIT 'AS THE ONLY SOURCES OF I NCOME' AS PER 80IA(5) . IN VIEW OF THE ABO VE D ISCUSSIO N, TH E CLAIM OF THE APPELLA NT IS A L LOWED FOR ITA NO.1650/15 CO NO.90/15 :- 6 -: THE PRESENT ASSESSMENT YEAR . TH IS DECIS IO N AL SO MER GES WITH THE DECIS I O N OF M Y L D . PREDECESSO R CIT(A)(C)-II, CHENNAI VIDE HIS OR DE R IN ITA NO .364 TO 367/13-14 DATED 3 1 . 1 0 . 2013 FOR AYS 06-07 TO 09-10 WHO HAS GIVEN R ELIEF T O THE APPELLANT FOR THE PRESENT ASSESSMENT YEAR ON THE OR DE R PASSED BY THE A O U/S 1 4 3(3) . 5. AGAINST THE DELETION OF ADDITION, THE REVENUE IS IN APPEAL BEFORE US. IN THE CROSS OBJECTION, THE ASSESSEE H AS CHALLENGED THE REOPENING OF ASSESSMENT. 6. AS THE ISSUE REGARDING REOPENING OF ASSESSMENT GOES TO THE ROOT OF THE MATTER, FIRST WE TAKE UP THE CROSS OBJE CTION BY THE ASSESSEE. 7. THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT AG AINST THE ASSESSMENT ORDER U/S 143(3) OF THE ACT DATED 17.12 .2008, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE ADDL. CIT SOUGHT ENHANCEMENT OF ASSESSMENT VIDE H IS REQUEST DATED 10.8.2011 WHICH READS AS FOLLOWS: KINDLY REFER TO THE ABOVE. 2. A LETTER OF THE ASSISTANT COMMISSIONER OF INCOME -TAX, COMPANY CIRCLE I(3), CHENNAI IN NO. CO.CIR-I(3)/2011-12 DATED 03.08.2011 IN THE CASE OF M/S CENTURY FLOUR MILLS LTD, CH ENNAI PAN AAACC 1223 CAPITAL FOR THE ASSESSMENT YEARS 2006-07 AND 2007-08 IS FORWARDED HEREWITH FOR COMMISSIONERS KIN D CONSIDERATION. 3. IN THE ABOVE MENTIONED CASE, THE ASSESSMENTS U/ S 143(3) WERE COMPLETED ON 17.12.2008 AND 22.10.2009 FOR ASSESSMENT ITA NO.1650/15 CO NO.90/15 :- 7 -: YEARS 2006-07 AND 2007-08 RESPECTIVELY. THE ASSESSEE HAD FILED APPEAL AGAINST THE ORDERS BEFORE THE CIT(A)-I II. 4. THE AO HAS STATED THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80IA(4) OF ` 18,08,000/- FROM BUSINESS OF OWNING AND OPERATING WINDMILLS. THE ASSESSEE HAS PURCHASED NEW WINDMILLS COSTING ` 2.65 CRORES DURING THE YEAR CLAIMING DEPRECIATION THEREON @ 50% AMOUNTING TO ` 1.32 CRORES. HOWEVER, THIS ASSET HAS BEEN EXCLUDED FROM THE EARLI ER BLOCK OF ASSETS OF WINDMILLS AND SHOWN SEPARATELY. THE A .O HAS CONTENDED THAT IF THE PROFITS OF WINDMILLS UNDERTAK ING IS CONSIDERED AFTER ALLOWING DEPRECIATION ON NEW WINDM ILLS PURCHASED DURING THE YEAR AS PROVIDED U/S 80IA(5), TH EN THERE WILL BE NO SURPLUS AS PROFITS IN THIS UNDERTA KING AND THEREFORE, THE CLAIM OF DEDUCTION U/S 80IA IS INCOR RECT. HE HAS REQUESTED THAT THE CIT(A) MAY KINDLY CONSIDER T HE ISSUE AND ENHANCE THE TAXABLE INCOME BY SUCH VALUE EQUIVAL ENT TO THE QUANTUM OF INCORRECT CLAIM OF DEDUCTION U/S 80IA WHILE ADJUDICATING THE APPEAL. ON THE SIMILAR GROUND, HE HAS REQUESTED THAT THE CLAIM OF DEDUCTION U/S 80IA OF ` 28,64,224/- IN A.Y 2007-08 MAY ALSO BE DISALLOWED. 5. IN VIEW OF THE SUBMISSIONS OF THE ASSESSING OFFI CER, IT IS REQUESTED THAT THE TAXABLE INCOME MAY KINDLY BE CONS IDERED FOR ENHANCEMENT BY DISALLOWANCE OF DEDUCTION U/S 80I A ON PROFITS FROM WINDMILLS APPLYING PROVISIONS OF SEC. 80IA(5) AT THE TIME OF DISPOSING THE APPEALS OF THE ASSESSEE REFERRED ABOVE. 8. THIS REQUEST OF ADDL. CIT WAS DECLINED BY THE CIT(A ) IN HIS APPELLATE ORDER DATED 31.10.2013 BY OBSERVING AS UN DER: PROPOSAL FOR ENHANCEMENT: 10. AS IN THE ASSESSMENT YEAR 2006-07, AS DISCUSSED IN PARA 7 ABOVE IN ITA NO.366/13-14, THE THEN AO VIDE LETTER DATED 03-08-2011, ENDORSED BY THE THEN ADDITIONAL CIT VIDE LETTER DATED 10 TH AUGUST 2011, REQUESTED THE THEN CIT(A)-ILL THAT THE TAXABLE INCOME OF THE APPELLANT BE CONSIDERED FOR ITA NO.1650/15 CO NO.90/15 :- 8 -: ENHANCEMENT BY MAKING DISALLOWANCE OF DEDUCTION UNDER SECTION 80IA PROFITS FROM WINDMILL APPLYING THE PROVISIONS OF SECTION 80IA(5) FOR THE ASSESSMEN T YEAR 2007-08 ALSO. THE RELEVANT EXTRACT OF THE LETTER AO HAS ALREADY BEEN REPRODUCED IN PARA 7 ABOVE. WHILE ADJUDICATING THIS ISSUE IN ITA NO. 366/13-14 I HAVE ALREADY HELD THAT I DID NOT FIND THE PROPOSAL OF ENHANCEMENT BY THE AO TO BE ACCEPTABLE IN VIEW OF THE FACT THAT THE ISSUE RAISED BY THE AO IS SQUA RELY COVERED IN FAVOUR OF THE APPELLANT BY THE JURISDICTI ONAL ITAT BENCH IN THE CASE OF SUPER SPINNING MILLS LTD. (SUPRA). FOR THE DETAILED REASONS DISCUSSED IN PARA 7.2 ABOVE, IN THE PRESENT ASSESSMENT YEAR ALSO THE PROPOSAL OF THE AO TO ENHANCE THE INCOME OF THE APPELLANT ON THIS COUNT IS NOT ACCEPTED. 9. ON REJECTION OF THE ENHANCEMENT BY THE CIT(A) ON TH E ABOVE ISSUE, THE ASSESSING OFFICER RECORDED THE SAME AS R EASON FOR REOPENING OF ASSESSMENT WHICH WAS FURNISHED TO THE ASSESSEE VIDE LETTER DATED 5.4.2013. THE CONTENTION OF THE LD. AR BEFORE US I S THAT WHAT CANNOT BE DONE DIRECTLY, THE SAME THING CANNOT BE DONE IND IRECTLY ALSO. 10. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT THE RE OPENING IS AN INDEPENDENT ISSUE AND IT CANNOT BE COMPARED W ITH ENHANCEMENT OF INCOME BY THE CIT(A). 11. WE HEARD BOTH PARTIES AND PERUSED THE MATERIAL ON R ECORD. IN THIS CASE, ORIGINAL ASSESSMENT U/S 143(3) OF TH E ACT WAS COMPLETED ON 17.12.2008. NOTICE U/S 148 WAS ISSUED TO THE ASSESSEE ON ITA NO.1650/15 CO NO.90/15 :- 9 -: 25.3.2013, ADMITTEDLY AFTER FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR 2006-07. IT IS TO BE NOTED THAT AT THE TIME OF ORIGINAL ASSESSMENT U/S 143(3), THE ASSESSING OFFICER HAS N OT CONSIDERED THE ISSUE RAISED IN THE REOPENING OF ASSESSMENT. HOWEV ER, WHEN THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) AGAINST T HE 143(3) ORDER, THE ASSESSING OFFICER HAD SUBMITTED A PROPOSAL TO T HE ADDL. CIT FOR ENHANCEMENT OF INCOME BY DISALLOWING THE RELIEF ALL OWED U/S 80IA OF THE ACT TREATING THE WINDMILL AS A SEPARATE UNDERTA KING. ACCORDING TO THE ASSESSING OFFICER, ALL THE WINDMILLS ARE TO BE TREATED AS A SINGLE UNDERTAKING AND THEREFORE, THE ASSESSEE WOULD NOT B E ENTITLED TO THE RELIEF ALLOWED IN THE ASSESSMENT PASSED U/S 143(3) OF THE ACT. THE CIT(A) REJECTED THE CLAIM OF THE ASSESSING OFFICER AND OBSERVED THAT EACH WINDMILL IS TO BE CONSIDERED INDEPENDENT AND S EPARATE AND AS A CONSEQUENCE DEDUCTION U/S 80IA TO BE COMPUTED. AS SUCH, THE ISSUE IN DISPUTE TRAVELLED UPTO THE TRIBUNAL ALSO AT THE INSTANCE OF THE DEPARTMENT. THE TRIBUNAL VIDE ORDER IN I.T.A.NOS. 715 TO 718/MDS/2014, DATED 21.11.2014 AGREED WITH THE VIEW OF THE CIT(A) AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. BEING SO, IN OUR OPINION, THE ISSUE IS ALREADY SETTLED IN FAVOUR OF THE ASSESSEE AND THE ASSESSING OFFICER PRECLUDED BY TAKING THE SAME ISSU E FOR REOPENING OF ASSESSMENT AFTER FOUR YEARS FROM THE END OF THE REL EVANT ASSESSMENT YEAR BY REOPENING THE CONCLUDED ISSUE. ACCORDINGLY , WE ARE INCLINED TO ITA NO.1650/15 CO NO.90/15 :- 10 -: DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSE RVING THAT REOPENING IS BAD IN LAW. SINCE WE HAVE ANNULLED THE RE-ASSES SMENT, THE GROUNDS RAISED BY THE REVENUE IN ITS APPEAL HAVE BECOME INF RUCTUOUS AND HENCE, DISMISSED. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED AND THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH OCTOBER, 2015, AT CHENNAI. SD/- SD/- ( . ! '# ) ( V. DURGA RAO ) $ / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER / CHENNAI / DATED: 16 TH OCTOBER, 2015 RD ' #$ %$ / COPY TO: 1 . &' / APPELLANT 4. ( / CIT 2. ')&' / RESPONDENT 5. $*+ ' , / DR 3. ( () / CIT(A) 6. +/ 0 / GF