Assistant Commissioner of Income-tax, V. Indseam Service Ltd., Pune

ITA 1708/PUN/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5852 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-01-2019
• Assessment Year: 2007-2008
• Appeal Filed On: 05-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O A MAO
• Assessee Lawyers: PRAYAG I PATWA
• Keywords: Depreciation; Tangible material; Difference of opinion; Assessment record; Capital receipt; Unabsorbed depreciation; Change of opinion

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.1566/PUN/2016 / ASSESSMENT YEAR : 2007-08 INDREAM SERVICES LIMITED, FLAT NO.6, MADINA APARTMENT, PLOT NO.10, VIMAN NAGAR, PUNE 411 014 PAN : AAACI9584N . /APPELLANT VS. DCIT, CIRCLE-1(2), PUNE . / RESPONDENT . / ITA NO.1708/PUN/2016 / ASSESSMENT YEAR : 2007-08 ACIT, CIRCLE-11, PUNE . /APPELLANT VS. INDREAM SERVICES LIMITED, FLAT NO.6, MADINA APARTMENT, PLOT NO.10, VIMAN NAGAR, PUNE 411 014 PAN : AAACI9584N . / RESPONDENT ASSESSEE BY : SHRI PRAYAG I. PATWA REVENUE BY : SHRI O.A. MAO / DATE OF HEARING : 30.01.2019 / DATE OF PRONOUNCEMENT: 31.01.2019 / ORDER PER D. KARUNAKARA RAO, AM : THESE ARE CROSS APPEALS. ITA NO.1566/PUN/2016 FILED BY T HE ASSESSEE AND ITA NO.1708/2016 FILED BY THE REVENUE ARE AGAINST THE ORDER OF CIT(A)-1, PUNE DATED 18-05-2016 IN RELATION TO T HE ASSESSMENT YEAR 2007-08. THE APPEALS ARE FILED IN CONNECTION WITH RE -ASSESSMENT 2 MADE BY THE AO U/S.143(3) R.W.S.147OF THE ACT. FOR THE SA KE OF CONVENIENCE, THESE APPEALS ARE BEING ADJUDICATED IN THIS C OMPOSITE ORDER. 2. THE GROUNDS RAISED BY THE ASSESSEE AS WELL AS THE RE VENUE IN THE APPEALS ARE EXTRACTED HERE AS UNDER : GROUNDS BY ASSESSEE : 1. THE LD. AO HAS ERRED IN RE-OPENING ASSESSMENT U /S.147 OF THE INCOME TAX ACT, 1961 SINCE NO TANGIBLE MATERIAL WAS AVAILABLE WITH THE LD. AO AS ENVISAGED U/S.147 OF THE INCOME TAX ACT, 1961 & CONDITIONS PRESCRIBED U/S.147 OF THE INCOME TAX ACT, 1961 FOR RE-OPENING ARE NOT SATISFIED. RE-OPENING IS NOTHING BUT ON THE GROUND OF CHANGE OF OPINION. HENCE THE ASSESSMENT MADE U/S.143(3) R.W.S.147 BE T REATED AS NULL & VOID. 2. THE LD. AO HAS ERRED IN TREATING REMISSION OF PR INCIPAL SUM OF LOANS TAKEN FOR PURCHASE OF FIXED ASSETS AND CREDIT ED TO CAPITAL RESERVES AS TAXABLE U/S.28(IV) OF THE INCOME TAX ACT, 1961. THE SAME BEING CAPITAL RECEIPTS IS NOT SUBJECTED TO TAX. IN VIEW OF THIS THE ADDITION ON ACCOUNT OF REMISSION OF PRINCIPAL SUM MADE U/S.28(I V) BE DELETED. 3. YOUR APPELLANT PRAYS LEAVE TO ADD, SUBSTITUTE AM END OR DELETE ANY OF THE GROUNDS OF APPEAL IF OCCASION DEMANDS. ADDITIONAL GROUNDS : 1. THE LD. AO HAS ERRED IN PASSING THE ORDER U/S.143(3 ) R.W.S. 147 OF THE INCOME TAX ACT, 1961 WITHOUT FOLLOWING THE PROCEDUR E OF LAW AS PRONOUNCED BY THE HONBLE APEX COURT IN GKN DRIVE S HAFT CASE 259 ITR 19 (SC). HENCE THE ASSESSMENT ORDER MADE U/S.1 43(3) R.W.S.147 BE TREATED AS NULL AND VOID. 2. THE LD. AO HAS ERRED IN PASSING ORDER U/S.143(3) R. W.S.147 WITHOUT ISSUING NOTICE U/S.143(2). HENCE THE ASSESSMENT MA DE U/S.143(3) R.W.S.147 BE TREATED AS NULL AND VOID AS PRONOUNCED BY HONBLE APEX COURT IN THE CASE OF HOTEL BLUE MOON (2010) 321 ITR 362 (SC). GROUNDS BY REVENUE : 1. THE ORDER OF THE LD. CIT(A) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD. CIT(A) GROSSLY ERRED IN ALLOWING SET OFF OF UNABSORBED DEPRECIATION FOR A.Y. 1998-99 AND 1999-2000. 3. THE LD. CIT(A) ERRED IN HOLDING THAT AMENDED PRO VISIONS OF SECTION 32(1) OF THE I.T. ACT, 1961 ARE APPLICABLE IGNORING THE DECISION OF ITAT, MUMBAI, SPECIAL BENCH IN THE CASE OF TIMES GUARANTE E LTD. VS. DCIT (ITA NO.4917/4918/MUM/2008 WHICH HELD THAT BROUGHT FORWA RD UNABSORBED DEPRECIATION AND CARRY FORWARD OF LOSS CANNOT BE SE T OFF AGAINST INCOME UNDER THE HEAD BUSINESS & PROFESSION FOR MORE THAN EIGHT A.YS. IMMEDIATELY SUCCEEDING THE A.Y. FOR WHICH LOSS WAS F IRST COMPUTED. 3 4. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE LD. CIT(A) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 5. THE APPELLANT CRAVES TO ADD, AMEND, ALTER OR DEL ETE ANY OF THE GROUNDS OF APPEAL DURING THE COURSE OF APPELLATE PR OCEEDINGS BEFORE THE HONBLE TRIBUNAL. 3. BRIEFLY STATED, RELEVANT FACTS ARE THAT, THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF SYNDICATION, ADVISORY SERVICES A ND CONSULTANCY. ASSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME AT NIL. IN THE SCRUTINY ASSESSMENT U/S.143(3), THE AO COMP LETED THE ASSESSMENT ASSESSING TOTAL LOSS AT RS.88,40,149/-. SUBS EQUENTLY, THE AO REOPENED THE ASSESSMENT U/S.143(3) R.W.S.147 OF THE AC T ON THE GROUND THAT THE AMOUNT CREDITED TO CAPITAL RESERVES ON ACCOUNT OF REMISSION OF PRINCIPAL LOAN IS CHARGEABLE TO TAX. EVENTUA LLY, THE AO MADE ADDITION OF RS.10,40,21,000/-. THE CIT(A) UPHELD THE ADD ITION MADE BY THE AO ON THIS COUNT. FURTHER, AO HELD THAT THE DEPRECIATION LOSS CANNOT BE FO RWARDED AND SET OFF BEYOND PERIOD OF 8 YEARS. HOWEVER, THE CIT(A ), RELYING ON THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF GE NERAL MOTORS PVT. LTD. IN SPECIAL CIVIL APPLICATION NO.1773 OF 2012, DATED 23 -08- 2012, GAVE RELIEF TO THE ASSESSEE AND ALLOWED SET OFF OF UNA BSORBED DEPRECIATION. 4. AGGRIEVED WITH ORDER OF CIT(A), THE ASSESSEE AS WELL AS T HE REVENUE ARE IN APPEAL BEFORE THE TRIBUNAL WITH THE GROUNDS EXTRACTED ABOV E. 5. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE ADDITIONAL GROUND NO.2 AND SUBMITTED THAT THE RE- ASSESSMENT PROCEEDINGS NEEDS TO BE TREATED AS INVALID AS THE SAME WAS MADE WITHOUT ISSUING THE NOTICE U/S.143(2) OF THE ACT. SUCH FAILURE DOES NOT 4 CURE THE DEFECT ENTERED IN THE RE-ASSESSMENT PROCEEDIN GS. IN THIS REGARD, LD. COUNSEL RELIED ON FOLLOWING DECISIONS : 1. SHRI AJAY SHANTILAL LALWANI VS. ITO ITA NO.145/P N/2015, DATED 25-11-2016. 2. SAPNA KISHOR MANCHANDA VS. ACIT ITA NO.159/PUN/2015, DATED 19-04-2017. 3. M/S. C.B. CONSTRUCTIONS VS. ACIT ITA NO.512/PUN/2017 , DATED 06-04-2018. 4. PR.CIT VS. SILVER LINE IN ITA NO.578/2015 AND OTHERS , DATED 04-11-2015 HONBLE DELHI HIGH COURT. 5. SHRI SUDHIR MENON VS. ACIT AND VICE VERSE ITA NO.1744/MUM/2016 & ITA NO.1466/MUM/2016, DATED 03-10-2018. 6. LD. DR RELIED ON THE ORDERS OF THE AO/CIT(A). HOWEVER, H E SUBMITTED THE ASSESSMENT RECORDS FOR VERIFICATION IN THE P ROCEEDINGS BEFORE US. 7. ON HEARING BOTH THE SIDES ON THIS LIMITED AND LEGAL ISSUE, WE FIND THE ORDER SHEET OF THE ASSESSMENT RECORD AS WELL AS TH E CONTENTS OF THE ASSESSMENT RECORDS DID NOT CONTAIN ANY WHISPER ABOUT T HE ISSUANCE OF NOTICE U/S.143(2) OF THE ACT. THEREFORE, IT IS INFERRED THAT T HE RE- ASSESSMENT IS MADE WITHOUT COMPLYING THE LEGAL REQUIREMEN T OF ISSUANCE OF SAID STATUTORY NOTICE. 7.1 FURTHER, WE ALSO PERUSED THE LEGAL PROPOSITIONS RELIED U PON BY THE LD. COUNSEL FOR THE ASSESSEE. WE FIND THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. C.B. CONSTRUCTIONS VS. ACIT (SUPRA) HAS HELD AS UNDER : 7........ ............ THUS, THE LEGAL REQUIREMENT OF ISSUANCE OF NOTICE U/S.1 43(2) OF THE ACT BEFORE MAKING ASSESSMENT U/S.147/148 IS MANDATO RY. ADMITTEDLY, THIS REQUIREMENT IS NOT MET BY THE DEPART MENTAL AUTHORITIES. THEREFORE, ON THIS GROUND ALONE, THE RE-AS SESSMENT MADE BY THE AO IN THE PRESENT CASE IS HELD AS VOID AB -INITIO. THUS, 5 WE FIND THE ASSESSEE IS ENTITLED TO RELIEF IN RESPECT O F GROUND NO.1(A) RAISED BY THE ASSESSEE IN THE APPEAL. CONSEQUE NTLY, ADJUDICATION OF OTHER GROUNDS RAISED BY THE ASSESSE E BECOMES AN ACADEMIC EXERCISE. 7.2 WE FIND THE HONBLE DELHI HIGH COURT IN THE CASE OF PR. C IT VS. SILVER LINE (SUPRA) HAS OBSERVED AS UNDER : 23 WITH THE LEGAL POSITION BEING ABUNDANTLY CLEAR THAT A REASSESSMENT ORDER CANNOT BE PASSED WITHOUT COMPLIANC E WITH THE MANDATORY REQUIREMENT OF NOTICE BEING ISSUED BY THE AO TO THE ASSESSEE U/S.143(2) OF THE ACT, THE ITAT WAS IN THE PRE SENT CASE RIGHT IN CONCLUDING THAT THE REASSESSMENT ORDERS IN QUESTION WERE LEGALLY UNSUSTAINABLE. 7.3 IN THE PROCEEDINGS BEFORE US, LD. DR RELIED ON THE J UDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. MADHYA BH ARAT ENERGY CORPORATION, DECIDED ON 11-06-2011 (TS-653-HC-2011 (DEL ). WE FIND THIS ORDER STANDS DECIDED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF PR. CIT VS. SILVER LINE, DECIDED ON 04-11-2015 WHICH IS REN DERED AFTER THE JUDGMENT IN THE CASE OF CIT VS. MADHYA BHARAT ENER GY CORPORATION (SUPRA). IN VIEW OF THE FOREGOING DISCUSSION ON THIS LEGAL ASPECT, TH E ASSESSEE SUCCEEDS ON TECHNICAL GROUNDS. 8. SINCE THE RE-ASSESSMENT IS QUASHED ON LEGAL GROUND, WE FIND ADJUDICATION OF THE GROUNDS RAISED BY THE REVENUE IN ITS APPEAL BECOMES AN ACADEMIC EXERCISE. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED ON TECH NICAL GROUNDS AND THAT OF APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 31 ST DAY OF JANUARY, 2019. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED 31 ST JANUARY, 2019 6 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// SENIOR PRIVA TE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A)-I, PUNE 4. THE PR.CIT-I, PUNE 5. , , A BENCH PUNE; 6. / GUARD FILE. 7 DATE 1. DRAFT DICTATED ON 30-01-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 30-01-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER.