M/s. Kataria Enterprise, Bhavnagar V. The Income tax Officer,Ward-2(4), Bhavnagar

ITA 1685/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94362 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 19-08-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 22-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VILAS SHINDE
• Assessee Lawyers: P B PARMAR
• Keywords: Reopening of assessment; Business income; Depreciation; Difference of opinion; Assessment record; Reason to believe; Unabsorbed depreciation; Change of opinion
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD BEFORE S/SHRI G. D. AGARWAL, VP AND S. S. GODARA, JM ITA NO. 1685 /AHD/2011 ASST. YEAR 200 6 - 0 7 M/S. KATARIA ENTERPRISE, C/O MADHAV MEDICAL STORES, DOCTOR HOUSE, KALANALA, BHAVNAGAR VS ITO, WARD 2(4), BHAVNAGAR. (APPELLANT) (RESPONDENT) PA NO. A AHFK2110N APPELLANT BY SHRI P. B. PARMAR, A.R. RESPONDENT BY SHRI VILAS SHINDE , SR. D . R . DATE OF HEARING: 19. 8 .2015 DATE OF PRONOUNCEMENT : 26/8/15 O R D E R PER S.S. GODARA, JUDICIAL MEMBER T HIS ASSESSEES APPEAL FOR ASSESSMENT YEAR A.Y. 200 6 - 0 7 ARISE S FROM ORDER DATED 2 1 - 0 3 - 2011 PASSED BY THE CIT(A) - XX , AHMEDABAD IN APPEAL NO.CIT(A) - XX/ 4 8 2 / 1 0 - 1 1 , IN PROCEEDINGS UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961, IN SHORT THE ACT. 2. THE ASSESSEES PLEADING RAISE TWO FOLDED GROUNDS. THE FIRST ONE CHALLENGES THE CIT(A)S ACTION IN UPHOLDING VALIDITY OF THE IMPUGNED RE - OPENING TAKEN RECOURSE TO BY THE ASSESSING OFFICER. THE LATTER GROUND ASSAILS CORRECTNESS OF THE ASSESSING OFFICERS ITA NO. 1685 /AHD/2011 ASST. YEAR_ 2006 - 0 7 2 ACTION AFFIRMED BY THE CIT(A) IN RESTRICTING DEPRECIATION RATE @15% INSTEAD OF 20% ON DUMPER VEHICLE THEREBY RESULTING IN THE IMPUGNED DISALLOWANCE ON MERITS OF RS.14,81,512/ - . 3. BOTH PARTIES STATE VERY FAIRLY THAT THE ASSESSEES FORMER GROUND CHALLENG ING LEGALITY OF REOPENING GOES TO THE VERY ROOT OF THE MATTER. WE TAKE UP THIS LEGAL PLEA FIRST FOR ADJUDICATION. 4. THE ASSESSEE FIRM UNDERTAKES CIVIL CONTRACT S . IT FILED ITS RETURN OF INCOME ON 31.12.2006 ACKNOWLEDGING NIL INCOME. THE ASSESSING OFF ICER COMPLETED A REGULAR ASSESSMENT ON 26.12.2008 ADDING DISALLOWANCE OF DEPRECIATION TO THE TUNE OF RS.50,300/ - AND REDUCED THE BROAD FORWARD LOSSES AND UNABSORBED DEPRECIATION RESULTING IN NET TAXABLE INCOME. THEREAFTER, HE ISSUED REOPENING NOTICE UNDER SECTION 148 DATED 31.12.2009 FORMING REASONS TO BELIEVE THAT ASSESSEES INCOME LIABLE TO BE ASSESSED HAD ESCAPED ASSESSMENT. THE ASSESSEE SOUGHT FOR REASONS THEREOF . THE SAME READ AS UNDER: SUB: PROVIDING OF REASONS RECORDED U/S.148 OF THE I.T. ACT. 1961 FOR 2006 - 07 - REGARDING. REF: YOUR LETTER DTD.22.01.2010. PLEASE REFER TO THE ABOVE, 2. THE REASONS RECORDED ON 30.12.2009 IS AS UNDER: AS PER SECTION 32(1), DEDUCTION FROM BUSINESS INCOME FOR DEPRECIATION ON ASSETS USED FOR THE PURPOSE OF BUSINES S SHALL BE ALLOWED AT PRESCRIBED RATE ON WRITTEN DOWN VALUE THEREOF. IT WAS OBSERVED FROM ASSESSMENT RECORDS OF THE ASSESSEE THAT THE ASSESSEE HAD CLAIMED DEPRECIATION ON 'DUMPERS' @20% DURING THE PREVIOUS YEAR. THE WRITTEN DOWN VALUE OF DUMPERS WAS RS.29 630228/ - AS ON 1/04/2005. AS THE BUSINESS OF THE ASSESSEE DURING THE PREVIOUS YEAR ITA NO. 1685 /AHD/2011 ASST. YEAR_ 2006 - 0 7 3 WAS 'CIVIL CONTRACT'. THE ASSETS DUMPER' WOULD FALL UNDER PLANT AND MACHINERY FOR WHICH ALLOWABLE RATE OF DEPRECIATION FOR A.Y. 2006 - 07 WAS 15%. THE SCRUTINY ASSESSMENT WAS COMPLETED 26/12/2008 WITHOUT CONSIDERATION OF THE ABOVE FACT. AS THE DEPRECIATION ON DUMPERS WAS CLAIMED AND ALLOWED @ OF 20% INSTEAD OF 15%, IT HAD RESULTED INTO UNDER ASSESSMENT OF RS.1356669/ - (5% OF 29630228/ - LESS RS.124842 BEING UNABSORBED DEPRECIA TION OF EARLIER YEARS). IN VIEW OF THE ABOVE, I HAVE TO REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND THE CASE IS FIT FOR ISSUE OF NOTICE U/S.148 OF THE I. T. ACT. 3. THE ASSESSEE FILED ITS OBJECTION S TO THE ABOVE STATED REO PENING NOTICE BY TURNING IT AS A CHANGE OF OPINION AS UNDER: WE ARE IN RECEIPT OF THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT FOR ASSESSMENT YEAR 2006 - 07 UNDER THE COVER OF YOUR LETTER UNDER REFERENCE. ON GOING THROUGH THE CONTENTS OF THE RECOR DED REASONS FOR REOPENING OF THE ASSESSMENT U/S. 147 OF THE ACT, IT TRANSPIRES THAT THE ASSESSING OFFICER HAS OBSERVED THAT 'THE BUSINESS OF THE ASSESSEE DURING THE PREVIOUS YEAR WAS CIVIL CONTRACT' HENCE THE ASSETS 'DUMPER' WOULD FALL UNDER PLANT AND MAC HINERY FOR WHICH ALLOWABLE RATE OF DEPRECIATION FOR A.Y.2006 - 07 WAS 15% AS AGAINST THE DEPRECIATION ON DUMPERS CLAIMED AND ALLOWED @20% WHICH HAS RESULTED INTO UNDER ASSESSMENT.' IN THIS REGARD, WE WOULD LIKE TO STATE THAT THE OBSERVATION MADE BY THE ASSES SING OFFICER IS NOT CORRECT AND WE STRONGLY OBJECT TO THE PROPOSED ACTION INITIATED U/S. 147 OF THE ACT SINCE THE ASSETS 'DUMPER' FALLS WITHIN THE ITEM III[2] OF APPENDIX - I OF TABLE OF RATES AT WHICH DEPRECIATION IS ADMISSIBLE AND AS SUCH WE ARE ENTITLED T O CLAIM DEPRECIATION @30% AS AGAINST WHICH WE HAVE CLAIMED DEPRECIATION @20% WHICH IS BELOW THE RATE OF ADMISSIBLE RATE. APART FROM THE FACTS MENTIONED IN THE PRECEDING PARAGRAPHS, WE FILE OUR PRELIMINARY OBJECTIONS AGAINST THE REOPENING OF ASSESSMENT FOR ASSESSMENT YEAR 2006 - 07 WHICH IS MENTIONED AND DISCUSSED IN THE ENSUING PARAGRAPHS. IN THIS REGARD, IT IS TO BE STATED THAT THE ASSESSMENT FOR THE ASSESSMENT YEAR 2006 - 07 HAS BEEN COMPLETED U/S. 143[3] OF THE ACT ON 26/12/2008 BY THE ASSESSING OFFICER AF TER MAKING THOROUGH, PROPER AND MINUTE SCRUTINY AND VERIFICATION OF BOOKS OF ACCOUNT, DOCUMENTS, DETAILS, INFORMATION, ETC. ITA NO. 1685 /AHD/2011 ASST. YEAR_ 2006 - 0 7 4 SUBMITTED BEFORE HIM AND ALSO TAKING INTO THE CONSIDERATION OF DISCUSSION HAD WITH THE ASSESSING OFFICER DURING THE COURSE OF ASSESS MENT PROCEEDINGS FROM TIME TO TIME WHICH INCLUDES THAT THE ASSESSING OFFICER HAS ALREADY CONSIDERED THE ISSUE OF ALLOWABLE RATE OF DEPRECIATION ON DUMPERS CLAIMED BY US DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND HE WAS SATISFIED HIMSELF THAT THERE WAS NO POINT TO DRAW ANY ADVERSE INFERENCE ON THE POINT OF RATE OF DEPRECIATION CLAIMED ON DUMPERS. HENCE, THE ASSESSING OFFICER HAS, AFTER HIS SATISFACTION, MADE THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2006 - 07 ALLOWING THE CLAIM OF DEPRECIATION @20% MADE ON DUMPERS. HOWEVER, WITHOUT PREJUDICE TO THE FACTS MENTIONED IN PRECEDING PARAGRAPH, WE WOULD LIKE TO STATE THE BRIEF FACTS OF THE CASE THAT THE ASSESSEE HAD UNDERTAKEN SUB - CONTRACT FROM M/S. KMC CONSTRUCTION LIMITED, ALLAHABAD WHO HAD BEEN AWARDED A PROJE CT OF CONSTRUCTION BY UTTAR PRADESH GOVERNMENT. THE NATURE OF WORK TO BE CARRIED OUT BY THE ASSESSEE WAS TO DO THE EARTH WORK FOR WHICH POND ASH AND SOIL WERE USED. FOR CARRYING OUT THE EARTH WORK, ASSESSEE WAS LIFTING THE POND ASH AVAILABLE AROUND 120 - 125 KILOMETERS FROM PROJECT WORK AND SOIL WAS LIFTED FROM THE NEARBY FARMS WHICH WERE IN RADIUS OF 8 - 10 KILOMETERS FROM THE PROJECT WORK. SINCE THE CONTRACT WORK UNDERTAKEN BY THE ASSESSEE WAS LONG LASTING AND MAIN WORK WAS TO LIFT POND ASH AND SOIL FROM FAR DISTANCES, THE ASSESSEE PURCHASED THE VEHICLES AT ITS OWN IN U.P. FOR SMOOTH AND SPEEDY WORK AND CLAIMED DEPRECIATION @20% IN THE RETURN OF INCOME FOR ASSESSMENT YEAR 2006 - 07 KEEPING IN VIEW BOARD'S CIRCULAR NO.652 DATED 14/06/1993 WHICH HAS BEEN FOLLOWED BY THE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF CIT V/S. S. C. THAKUR & BROS/. 221 CTR 779 WHERE IN THE HON'BLE HIGH COURT HAS HELD THAT IN VIEW OF CIRCULAR NO.652 DATED 14 TH JUNE, 1993 AND THE FINDING OF THE CIT(A) THAT THE ASSESSEE, A CIVIL CONTRACTOR , WAS REQUIRED TO TRANSPORT EARTH FROM ONE PLACE TO ANOTHER AND ITS BUSINESS RECEIPTS INCLUDED CHARGES OF TRANSPORTATION GOODS, IS ENTITLED TO DEPRECIATION ON TRUCKS/DUMPERS AT HIGHER RATE. FURTHER, THE DUMPERS HAVE BEEN SHOWN AS ASSETS IN THE BALANCE SHEE T. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER WAS SATISFIED HIMSELF AND ALLOWED THE CLAIM OF DEPRECIATION ON DUMPERS. FURTHER, THE ASSESSEE HAS SHOWN THE RECEIPTS FROM CONTRACTOR VIZ. M/S. KMC CONSTRUCTION LIMITED FOR THE WORK D ONE WAS INCLUSIVE OF TRANSPORTATION CHARGES. HENCE THE FACTS AND CIRCUMSTANCES OF THE CASE CITED SUPRA ARE IDENTICAL AND SQUARELY APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT AND AS SUCH THE APPELLANT IS ENTITLED TO CLAIM DEPRECIA TION @20% WHICH IS LESS THAN THE ALLOWABLE RATE OF DEPRECIATION ON DUMPERS. WE WOULD LIKE TO DRAW YOUR KIND ATTENTION TO THE FOLLOWING JUDICIAL PRONOUNCEMENTS: [1] CIT VS. HINDUSTAN MARBLES LTD. 219 ITR 655. ITA NO. 1685 /AHD/2011 ASST. YEAR_ 2006 - 0 7 5 [2] KAIRA DISTRIC T CO - OP. MILK PRODUCERS UNION LTD. VS. ACIT, 220 ITR 194. [3] GERMEN REMEDIES LTD. VS. DCIT 287 ITR 494. [4] PARSHURAM POTTERY WORKS CO. LTD. VS. ITO 106 ITR 1. WE REQUEST YOUR GOOD SELF TO CONSIDER THE OBJECTIONS RAISED IN THE PRECEDING PARAGRA PHS BEFORE PROCEEDING FOR MA KIND OF ASSESSMENT IN THE CASE BY DISPOSING OFF THE OBJECTION BY PASSING SPEAKING ORDER. WE RELY ON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF GKN DRIVE SHAFTS (INDIA) LTD. VS. ITO REPORTED AT 179 CTR 11. 4. WE FIND FROM THE CASE RECORD THAT THE ASSESSING OFFICER DID NOT DECIDE THE ABOVE STATED OBJECTIONS AND FRAMED REASSESSMENT IN ORDER DATED 13.12.2010 RESTRICTING DEPRECIATION CLAIM ON DUMPER VEHICLE IN QUESTION FROM 20% TO 15% ONLY THEREBY RESULTING IN CONSEQUENTI AL DISALLOWANCE/ADDITION @ 5% ON WDV THEREOF AMOUNTING TO RS.14,81,512/ - . 5. THE ASSESSEE PREFERRED APPEAL INTER ALIA CHALLENGING VALIDITY OF REOPENING AS WELL AS CORRECTNESS OF THE ABOVE STATED ADDITION ON MERITS. THE CIT(A) HAS REJECTED BOTH OF ITS C ONTENTIONS IN THE ORDER UNDER CHALLENGE. 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE CASE FILE. THE ASSESSEES FIRST AND FOREMOST LEGAL ARGUMENT IS THAT THE ASSESSING AUTHORITY DID NOT DISPOSE OF ITS ABOVE STATED OBJECTIONS TO THE IMPUGNED REO PENING BEFORE FINALIZING REASSESSMENT HEREINABOVE. IT QUOTS CASE LAW OF G K & DRYSOFTS INDIA LTD. VS. ITO 179 CTR 11 (SC), GENERAL MOTORS INDIA PVT. LTD. VS. DCIT [2012] 354 ITR 244 (GUJARAT) AND M/S. DARSAN ASSOCIATES VS. ACIT ITA NO. 1221/AHD/2011 DECID ED ON 10.04.2015 SUPPORTING THE VALIDITY. THE ITA NO. 1685 /AHD/2011 ASST. YEAR_ 2006 - 0 7 6 REVENUE STRONGLY SUPPORTS THE IMPUGNED REOPENING ACTION. HOWEVER, IT FAILS TO REBUT THE FACTUAL POSITION THAT THE ASSESSING OFFICER HAS NOT DECIDED ASSESSEES ABOVE STATED OBJECTION. WE ARE OF THE VIEW IN TH IS BACKDROP OF FACTS THAT SUCH A COURSE OF ACTION IS MANDATORY ON AN ASSESSING OFFICERS PART BEFORE FRAMING REASSESSMENT. WE QUOTE HONBLE APEX COURT DECISION HEREINABOVE IN SUPPORT. THE QUESTION THAT ARISES NOW IS AS TO WHETHER THE SAME IS A CURABLE DE FECT OR NOT. THE HONBLE JURISDICTIONAL HIGH COURT IN ABOVE STATED CASE HAS QUASHED A SIMILAR REASSESSMENT IN THE VERY FITNESS OF CIRCUMSTANCES WHEREIN THE CONCERNED ASSESSEES OBJECTIONS HAVE NOT BEEN DECIDED. A COORDINATE BENCH OF THE TRIBUNAL HAS FOLL OWED THE SAME FOR QUASHING AN IDENTICAL REASSESSMENT. WE QUOTE ALL THESE JUDICIAL PRECEDENTS AND HOLD THAT ONCE THE ASSESSING OFFICER IN THE INSTANCE CASE HAS NOT DECIDED/DISPOSED OF ASSESSEES OBJECTIONS TO THE REOPENING, THE SAME IS LIABLE TO BE QUASHED . THE ASSESSEES LEGAL PLEA ACCORDINGLY SUCCEEDS. ITS SECOND GROUND O N MERITS HAS BEEN RENDERED INFRU CTUOUS. 7 . THIS ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26/8/15 SD/ - SD/ - ( G. D. AGARWAL ) VICE PRESIDE NT ( S. S. GODARA ) JUDICIAL M EMBER TRUE COPY S K SINHA COPY OF THE ORDER FORWARDED TO: ITA NO. 1685 /AHD/2011 ASST. YEAR_ 2006 - 0 7 7 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD