M/s. Bell Granito Ceramics Ltd., Baroda V. The Dy.CIT.,Circle-1(1), Baroda

ITA 1695/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1562 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 16-03-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 01-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRADEEPKR MAJUMDA R
• Keywords: Business income; Depreciation; Audit objection; Tangible material; Bad and doubtful debts; Difference of opinion; Reason to believe; Unabsorbed depreciation; Change of opinion; Reassessment proceedings
• Section: 43B; 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: S H RI ANIL CHATURVEDI , ACCOUNTANT MEMBER AND SHR I S. S. GODARA , JUDICIAL MEMBER BELL GRANITO CERAMICS LTD, VILLAGE - GAVASAD, TAL. PADRA, DIST: BARODA - 391430 PAN: AAACB9401D (APPELLANT) VS THE DCIT, CIRCLE - 1(1), BARODA (RESPONDENT) REVENUE BY : MR. PRADEEP KR. MAJUMDAR , SR. D . R. ASSESSEE BY: MS. URVASHI SHODHAN , A.R. DATE OF HEARING : 16 - 03 - 2 016 DATE OF PRONOUNCEMENT : 30 - 05 - 2 016 / ORDER P ER : S. S. GODARA , JUDICIAL MEMBER : - THIS AS SESSEE S APPEAL FOR A.Y. 2006 - 07 , AR I SES FROM ORDER OF THE CIT(A) - I, BARODA DATED 21 - 05 - 2012 IN APPEAL NO. CAB - I/221/11 - 12 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 1695 / A HD/20 12 A SSESSMENT YEAR 200 6 - 07 I.T.A NO. 1695 /AHD/20 12 A.Y. 2006 - 07 PAGE NO BELL GRANITO CERAMICS LTD VS. DCIT 2 2. THE ASSESSEE RAISES FOLLOWING SUBSTANTIVE GROUNDS: - 1] THE LD. CIT(A) HAS GRAVIOUSLY ERRED ON FACTS AND IN LAW IN DISMISSING THE GROUND NO.L AGITATING THE REASSESSMENT ORDER PASSED U/S. 147 OF THE IT. ACT AS BAD IN LAW AND VOID ABINITIO. 1.1] EQUALLY THE ID. CIT(A) WAS COMPLETELY I N ERROR ON FACTS AND IN LAW IN HOLDING CONTRARY TO THE CONTENTION AND SUBMISSION OF THE APPELLANT THAT THE REOPENING OF THE COMPLETED ASSESSMENT WAS BAD IN LAW ON ACCOUNT OF CHANGE OF OPINION AND ON THE BASIS OF AUDIT OBJECTION. 1.2] THE ID. CIT(A) C OMPLETELY FAILED TO APPRECIATE THE FACTS AS EXPLAINED THAT THE ID. AO LACKED THE JURISDICTION IN ABSENCE OF HIS OWN SATISFACTION BASED ON HIS OWN REASON TO BELIEVE THAT THERE WAS AN ESCAPEMENT OF INCOME WITHIN THE PROVISIONS OF SEC.147 OF THE IT. ACT. 1.3 ] IN VIEW OF FACTS AND CIRCUMSTANCES AND SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES, THE ID. CIT(A) OUGHT TO HAVE HELD THAT THE ASSESSMENT ORDER PASSED U/S. 147 WAS BAD IN LAW IN VIEW OF THE FACTS AND ALL THE DECISIONS RELIED UPON BY THE APPELLANT INSTEAD OF THE INAPPLICABLE DECISION RELIED UPON BY HIM. 1.4) UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER OF THE ID. CIT(A) ON THIS GROUND MAY KINDLY BE SET ASIDE AND THE APPEAL OF THE APPELLANT KINDLY BE ALLOWED. 2) THE ID. CIT (A) HAS FURTHER ERRED ON FACTS AND IN LAW FOR THE ALTERNATE GROUND RAISED WITHOUT PREJUDICE ON MERITS FOR HOLDING THAT OUT OF THE SUM OF RS. 157.07 LAKHS, AN AMOUNT OF RS.38.53 LAKHS IS TO BE ASSESSED AS BUSINESS INCOME AND BALANCE AS INCOME FROM OTHER SOU RCES. 2.1] IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES, THE ID. CIT(A) OUGHT TO HAVE ACCEPTED AND HELD THAT THE ENTIRE AMOUNT OF RS.157.07 LAKHS WAS RIGHTLY SHOWN AND ASSESSED AS BUSINESS INCOM E IN THE COMPLETED ASSESSMENT ORDER INSTEAD OF HOLDING ONLY RS.38.53 LAKHS I.T.A NO. 1695 /AHD/20 12 A.Y. 2006 - 07 PAGE NO BELL GRANITO CERAMICS LTD VS. DCIT 3 IS ASSESSABLE AS BUSINESS INCOME AND BALANCE AS INCOME FROM OTHER SOURCES. 2.2] UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER OF THE ID. CIT(A) ON THIS GROUND MAY K INDLY BE SET ASIDE AND THE APPEAL OF THE APPELLANT KINDLY BE ALLOWED . 3] THE ID. CIT(A) HAS FURTHER ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS.11,80,184/ - WITHOUT ALLOWING IT TO BE SET OFF AGAINST PRIOR PERIOD EXPS. 3.1] THE I D. CIT(A) IN VIEW OF THE FACTS AND CIRCUMSTANCES AND SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES, OUGHT TO HAVE ACCEPTED THAT THE IMPUGNED ADDITION MADE OF RS.11,80,184/ - BY THE ID. AO WITHOUT APPRECIATING FACTS ON RECORDS IS UNCALLED FOR AND DESERVES TO BE DELETED. 3.2] UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER OF THE ID. CIT(A) ON THIS GROUND MAY KINDLY BE SET ASIDE AND THE APPEAL OF THE APPELLANT KINDLY BE ALLOWED. 4] THE ID. CIT(A) HAS FURTHER ERRED IN NOT ALLOWING WITHO UT PREJUDICE, SET OFF OF UNABSORBED DEPRECIATION AGAINST INCOME FROM OTHER SOURCES. 3. THE ASSESSEE COMPANY MANUFACTURES CERAMIC TILES. IT FILED RETURN ON 16 - 12 - 2006 STATING LOSS OF RS. 39,92,991/ - . THE SAME WAS PROCESSED. THE ASSESSING OFFICER TOOK UP SCRUTINY. HE COMPLETED A REGULAR ASSESSMENT ON 30 - 12 - 2008 INTER ALIA DISALLOWING/ADDING FALL IN GP, BAD DEBTS, REPAIRS AND MAINTENANCE, UNSECURED LOANS, SACRIFICE FEE PAID TO IDBI, INCREASE IN SHARE CAPITAL, SECTION 43B DEDUCTION AND DIRECTORS REMUNE RATION OF RS. 12,93,12,000/ - , RS. 3,11,000/ - RS. 17,90,595/ - , RS. 2,49,77,000/ - , RS. 1,01,04,000/ - , RS. 3,62,27,000/ - , RS. 4,80,25,630/ - AND RS. 9,04,808/ - ; RESPECTIVELY. HE ACCORDINGLY I.T.A NO. 1695 /AHD/20 12 A.Y. 2006 - 07 PAGE NO BELL GRANITO CERAMICS LTD VS. DCIT 4 ARRIVED AT NET POSITIVE INCOME OF RS. 25,16,52,030/ - INCLUDING THE LO SS ALREADY RETURNED. THE SAME WOULD BE SET OFF AGAINST BROUGHT FORWARD LOSSES OF RS. 24,76,59,042/ - LEAVING BEHIND A NET FIGURE OF NIL INCOME ONLY. THE ASSESSEE APPEARS TO HAVE FILED SECTION 264 REVISION PETITION. 4. THE ASSESSING OFFICER THEREAFTER FO RMED REASONS TO BELIEVE THAT ASSESSEE S TAXABLE INCOME HAD ESCAPED ASSESSMENT DUE TO ITS FAILURE IN DEDUCTING TDS INTER ALIA ON RENT, AUDITORS REMUNERATION AND INT EREST SUMS PAID AGGREGATING TO R S. 4,17,36,000/ - . HE FRAMED REASSESSMENT ON 24 - 12 - 2009 DISAL LOWING A GROSS FIGURE OF RS. 3,13,90,679/ - BY INVOKING SECTION 40(A)(IA) OF TH E ACT. THE ASSESSEE S TAXABLE INCOME STOOD COMPUTED AS RS. 27,90,49,721/ - AGAINST SET OFF AGAINST EVEN AMOUNT OF BROUGHT FORWARD DEPRECIATION AND LOSS LEAVING BEHIND NIL INCOME. THIS FOLLOWED CIT S ORDER DATED 5 - 03 - 2010 IN SECTION 264 PROCEEDINGS GRANTING RELIEF ON THE ISSUES OF GP, BAD DEBTS, REPAIRING AND MAINTENANCE, SACRIFICE FEE, INCREASE IN SHARE CAPITAL , SECTION 43B DEDUCTION AN D DIRECTOR S REMUNERATIONS (SU PRA). THE ASS ESSING OFFICER PASSED A CONSEQUENTIAL ORDER DATED 21 - 03 - 2011 RE - COMPUTING ASSESSEE S INCOME TO RS. 2,73,97,688/ - . 5. THIS CASE FILE REVEALS THAT THE ASSESSING OFFICER AGAIN FORMED AN OPINION ON REASONS TO BELIEVE THAT ASSESSEE S TAXABLE INCOME LIABLE TO B E ASSESSED HAD ESCAPED ASSESSMENT. HE ISSUED SECTION 148 NOTICE DATED 15 - 03 - 2011. THE ASSESSEE FILED RETURN ON 20 - 04 - I.T.A NO. 1695 /AHD/20 12 A.Y. 2006 - 07 PAGE NO BELL GRANITO CERAMICS LTD VS. DCIT 5 2011 AND SOUGHT FOR REOPENING REASONS . THE ASSESSING OFFICER FURNISHED THE SAME ON 11 - 10 - 2011 READING AS UNDER: - THE REASONS FOR REOP ENING WERE AS UNDER: IN THIS CASE THE ASSESSMENT U/S. 143(3) OF THE ACT WAS COMPLETED ON 30. 12.2008 RESULTED INTO A TOTAL INCOME OF RS. 24,76,59,042/ - . P/L A/C WAS CHARGED WITH AN AMOUNT OF RS. 8,18,923/ - BEING NET OF PRIOR PERIOD EXPENSE S , INSTEAD OF R S. 19,99,107/ - . THE TOTAL UNDERASSESSMENT WORKED OUT TO RS. 11,80,184/ - . FURTHER IT WAS OBSERVED THAT THE ASSESSEE WAS NOT ENTITLED TO OBTAIN THE SET OFF OF BUSINESS LOSS AGAINST INTEREST INCOME TAXABLE UNDER THE HE A D AS INCOME FROM OTHER SOURCES AS THE P/L A/C OF ASSESSEE WAS CHARGED WITH AMOUNT OF RS. 157.07 LACS OF INTEREST AND OTHER. THE ASSESSEE WAS NOT ENTITLED TO SE T OFF EARLIER YEAR S BUSINESS LOSS AGAINST INCOME F R O M OTHER SOURCES. IN VIEW OF THE ABOVE, I HAVE REASON TO BELIEVE THAT THE INCOM E HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE I.T. ACT, 1961. 6. THE ASSESSEE FILED ITS OBJECTION PETITION DATED 20 - 10 - 2011 AGAINST THE IMPUGNED REOPENING INTER ALIA PLEAD ING THE SAME TO BE NOT BASED ON ANY FRESH TANGIBLE MATERIAL AND AMOUNTING TO CHANGE OF OPINION ALREADY FORMED. THE ASSESSING OFFICER REJECTED THE SAME IN HIS SEPARATE ORDER DATED 31 - 10 - 2011. HE THEREAFTER FRAMED THE IMPUGNED REASSESSMENT ON 11 - 11 - 2011 TR EATING ASSESSEE S INCOME OF RS. 157.07 LACS AS THE ONE FROM OTH ER SOURCES NOT ENTITLED TO BE SET OFF AGAINST BROUGHT FORWARD LOSSES AND ALSO DISALLOWED ITS PRIOR PERIOD EXPENDITURE OF RS. 11,80,184/ - . I.T.A NO. 1695 /AHD/20 12 A.Y. 2006 - 07 PAGE NO BELL GRANITO CERAMICS LTD VS. DCIT 6 7. THE ASSESSEE PREFERRED AN APPEAL RAISING FOUR SUBSTANTIVE GROUNDS. FIRST ONE CHALLENGES VALIDITY OF REOPENING. S ECOND ONE SOUGHT TO TREAT ITS INCOME OF RS. 157.07 LACS UNDER THE HEAD BUSINESS INCOME INSTEAD OF OTHER SOURCES. ITS THIRD CONTENTION WAS FOR SETTING OFF THE SAME AGAINST BROUGHT FORWARD LOSSES/DEPRECIATION. FOURTH AND LAST ARGUMENT ASSAILED CORRECTNESS OF PRIOR PERIOD EXPENDITURE DISALLOWANCE. THE CIT(A) HAS PARTLY A CCEPTED SECOND AND THIRD SUBSTANTIVE GROUND IN ACCEPTING RS. 38.53 LACS OUT OF RS. 157.07 LACS TO BE TREATED AS BUSINESS INCOME THEREBY DIRECTING THE ASSESSING OFFICER TO GRANT THE ASSESSEE DEPRECIATION RELIEF AS PER SPECIAL BENCH DECISION IN DCIT VS. TIMES GUARANTEE LTD. (2010) 131 TTJ 257 (MUM) PROPOUNDING A SET OF F PRINCIPLES ON THE ISSUE. HE HAS REJECTED AS S ESSEE S ALL OTHER CONTENTIONS. 8. LEARNED AUTHORIZED REPRESENTATIVE TAKES US T O ASSESSING OFFICER S ORDER IN REASSESSMENT FRAMED ON 11 - 11 - 2012 IN QUESTION . ITS LAST PAGE CONTAINS R EMARKS RAP REQUESTED TO SETTLE THE OBJECTIONS . SHE CITES CASE LAW OF RA A J RATNA METAL INDUSTRIES VS. ACIT SPECIAL CIVIL APPLICATION NO. 7140/2014 DECID ED ON 30 - 07 - 2014 HOLDING AS UNDER: - 8. SHRI. VARUN K. PATEL, LEARNED ADVOCATE HAS APPEARED ON BEHALF OF THE RESPONDENT - REVENUE. TO SATISFY OURSELVES, WHETHER THE REASSESSMENT PROCEEDINGS HAVE BEEN INITIATED AT THE INSTANCE OF THE AUDIT PARTY AND SOLELY ON THE GROUND OF AUDIT OBJECTIONS, WE CALLED UPON SHRI PATEL, LEARNED ADVOCATE APPEARING ON BEHALF OF THE RESPONDENT - REVENUE, TO PROVIDE THE ORIGINAL FILE FROM THE AO A ND SHRI PATEL HAS PRODUCED THE RELEVANT FILES FROM THE OFFICE OF THE AO. ON A PERUSAL OF THE FILES, THE NOTING MADE THEREIN AND THE RELEVANT DOCUMENTS, IT APPEARS THAT THE ASSESSMENT IS SOUGHT TO BE REOPENED I.T.A NO. 1695 /AHD/20 12 A.Y. 2006 - 07 PAGE NO BELL GRANITO CERAMICS LTD VS. DCIT 7 AT THE INSTANCE OF THE AUDIT PARTY, SOLELY ON TH E GROUND OF AUDIT OBJECTIONS. IT IS ALSO FOUND THAT, AS SUCH, THE AO TRIED TO SUSTAIN HI S ORIGINAL ASSESSMENT ORDER AND SUBMITT ED TO THE AUDIT PARTY TO DROP THE AUDIT OBJECTIONS. SUCH BEING THE POSITION, THE MATTER REQUIRES TO BE RE - CONSIDERED. THIS COUR T HAS OBSERVED AND HELD AS UNDER AT PARA - 8 8. THE ISS UE INVOLVED IN THE PRESENT SP ECIA L CIVIL APPLICATIONS I S SQUARELY CO VERED BY THE DECISION OF T HE DIVISION BENCH OF THIS COURT IN THE CASE OF SHILP GR AVURES LTD. ( SUPRA) AND IN TH E CASE OF VODAFONE WEST LTD. (SU PRA) BY WHICH A VIEW IS TAKEN THAT IF THE REASSESSMENT PROCEEDINGS ARE INITIA TED MERELY AND SOLELY AT THE INSTANCE OF THE AUDIT PARTY AND WHEN THE ASSESSING OFFICER TRIED TO JUSTIFY THE ASSESSMENT ORDERS AND REQUESTED THE AUDIT PARTY TO DROP THE OBJECTIONS AND THERE WAS NO INDEPENDENT APPLICATION OF MIND BY THE ASSESSING OFFICER WI TH RESPECT TO SUBJECTIVE SATISFACTION FOR INITIATION OF THE REASSESSMENT PROCEEDINGS, THE IMPUGNED REASSESSMENT PROCEEDINGS CANNOT BE SUSTAINED AND THE SAME DESERVES TO BE QUASHED AND SET ASIDE.' 9. IN VIEW OF THE ABOVE AND FOR THE REASONS STATED HE REIN, ABOVE, PRESENT PETITION SUCCEEDS ON THE AFORESAID GROUND ALONE, I.E. THE ASSESSMENT WAS REOPENED SOLELY ON THE GROUND OF AUDIT OBJECTIONS RAISED BY THE AUDIT PARTY. CONSEQUENTLY, THE IMPUGNED REASSESSMENT PROCEEDINGS ARE HEREBY QUASHED AND SET ASIDE. FURTHER, IT IS MADE CLEAR THAT WE HAVE EXPRESSED NO OPINION WITH RESPECT TO THE GROUNDS OF OBJECTIONS RAISED AND THE IMPUGNED REASSESSMENT PROCEEDINGS QUASHED AND SET ASIDE SOLELY ON THE AFORESAI D ONE GROUND ONLY. RULE IS MADE ABSOLUTE. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THER E SHALL BE NO ORDER AS TO COSTS. 9. THE ASSESSEE S SECOND ARGUMENT IS THAT IT HAD PLACED ON RECORD ALL NECESSARY DETAILS BY WAY OF REPLIES TO ASSESSING OFFICER S QUERIES AT PAGES NOS . 26 AND 30 OF THE PAPER BOOK DURING THE COURSE OF SCRUTINY . IT REFERS TO PAGE 26 PARA 2 COMPRISING OF PRIOR PERIOD EXPENDITURE DETAILS. ITS CASE IS THAT THE ASSESSING OFFICER ACCEPTED I.T.A NO. 1695 /AHD/20 12 A.Y. 2006 - 07 PAGE NO BELL GRANITO CERAMICS LTD VS. DCIT 8 THE SAME AND ALSO INCLUDED THE IMPUGNED INCOME OF RS. 157.08 LACS AS ELIGIBLE FOR SET OFF. THE ASSESSEE ACCO RDINGLY CONTENDS THAT IT S A CASE OF MERE CHANGE OF OPINION NOT PERMISSIBLE FOR THE PURPOSE OF IMPUGNED REOPENING AS PER CASE LAW M/S. GANESH HOUSING CORPORATION VS. DCIT (2013) 350 ITR 131 (GUJ) AND M/S ADANI EXPORTS VS. DCIT (1999) 240 ITR 224 (GUJ). 1 0 . THE REVENUE STRONGLY SUPPORTS CIT(A) S ORDER REJECTING ASSESSEE S CONTENTIONS AGAINST THE IMPUGNED REOPENING. 11 . WE HAVE HEARD BOTH THE SIDES. RELEVANT FACTS NARRATED ARE NOT REPEATED FOR THE SAKE OF BREVITY. SUFFICE TO SAY, THE ASSESSEE S FIRST ARGUMENT SEEKS TO QUASH THE IMPUGNED REOPENING BY QUOTING HIS REQUEST TO REVENUE AUDIT PARTY HEREINABOVE. HE HIMSELF MAKES IT CLEAR IN THE END OF THE REASSESSMENT THAT THE IMPUGNED REOPENING/ REASSESSMENT HAS BEEN COMPLETED IN VIEW OF THE AUDIT OBJECTION . WE OBSERVE IN THESE PECULIAR FACTS AND CIRCUMSTANCES THAT THIS REOPENING IS NOT BASED ON A JUDICIOUS A PPROACH FORMED ON REASONS TO BELIEVE THAT THERE HAS BEEN ESCAPEMENT OF ASSESSEE S TAXABLE INCOME FROM BEING ASSESSED BUT MERELY SEEKS TO SATISFY THE REVE NUE AUDITOR PARTY S OBJECTIONS. HON BLE JURISDICTIONAL HIGH COURT IN RAAJRATNA CASE (SUPRA) QUASHES A SIMILAR REOPENING INSTANCE BY OBSERVING THAT THE SAME DOES NOT AMOUNT TO AN ASSESSING OFFICER S SATISFACTION AS PER PROVISIONS OF THE ACT . THE REVENUE FAILS TO DISTINGUISH ITS OPERATION IN THE INSTANT FACTS AND LAW. WE ACCORDINGLY ACCEPT ASSESSEE S FIRST LEGAL ARGUMENT CHALLENGING VALIDITY OF I.T.A NO. 1695 /AHD/20 12 A.Y. 2006 - 07 PAGE NO BELL GRANITO CERAMICS LTD VS. DCIT 9 REOPENING. WE HOLD THE PRESENT CASE TO BE THE ONE CONTAINING ASSESSING OFFICER S FAILURE IN RECORDING DUE INDEPENDENT SATISFACTION BY REITERATING THAT TRIGGERING POINT OF A REOPENING IS A JUDICIOUS BELIEF BASED ON REASONS FORMED IN VIEW OF TANGIBLE MATERIAL POINTING OUT ESCAPEMENT OF TAXABLE INCOME. WE ACCORDINGLY QUASH THE IM PUGNED REOPENING ON THIS SCORE ALONE. THE ASSESSEE S OTHER GROUNDS/ ARGUMENTS ON CHANGE OF OPINION AND MERITS ARE RENDERED INFRUCTUOUS. 12. THIS ASSESSEE S APPEAL IS ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 30 - 05 - 201 6 SD/ - SD/ - ( ANIL CHATURVEDI ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 30 /05 /2016 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,