Atul Limited, Ahmedabad V. The Dy.CIT.,Range-1, Ahmedabad

ITA 1766/AHD/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7897 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 11-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Tangible material; Difference of opinion; Assessment record; Change of opinion; Capital expenditure
• Section: 143(3); 148; 37

Judgement Text

ITA NO. 1766/AHD/2014 ATUL LIMITED VS. DCIT ASSESSMENT YEAR: 2007-08 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND MAHAVIR PRASAD JM] ITA NO. 1766/AHD/2014 ASSESSMENT YEAR: 2007-08 ATUL LIMITED ..................APPELLANT 3 RD FLOOR, ASHOKA CHAMBERS, RASALA MARG, ELLISBRIDGE, AHMEDABAD-380009 [PAN : AABCA 2390 M] VS. DY. COMMISSIONER OF INCOME-TAX ...........................RESPONDENT RANGE-1, AHMEDABAD APPEARANCES BY: SN SOPARKAR & PARIN SHAH FOR THE APPELLANT KEYUR PATEL FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 13.04.2018 DATE OF PRONOUNCING THE ORDER : 11.07.2018 O R D E R PER PRAMOD KUMAR, AM: 1. BY WAY OF THIS APPEAL, THE ASSESSEE-APPELLANT HA S CHALLENGED CORRECTNESS OF THE ORDER DATED 25 TH MARCH, 2014 PASSED BY THE BY THE CIT(A)-6, AHMEDAB AD, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) R.W.S. 14 7 OF THE INCOME-TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2007-08. 2. GRIEVANCES RAISED BY THE ASSESSEE ARE AS FOLLOWS :- 1. LD. CIT(A) ERRED IN LAW AND ON FACTS IN DISMISS ING THE GROUND CHALLENGING REASSESSMENT ORDER PASSED BY AO MERELY ON CHANGE OF OPINION SUBSEQUENT TO ORIGINAL ASSESSMENT FRAMED U/S 143(3) OF THE ACT AFTER DETAILED SCRUTINY CONSIDERING REPLIES OF THE APPELLANT TO THE QUERIES . UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE REASSESSMENT ORDER IS VOI D AB INITIO AND AGAINST THE SANCTIONS OF LAW. LD. CIT(A) OUGHT TO HAVE QUA SHED ORDER PASSED ON ACCOUNT OF CHANGE OF OPINION NOT PERMISSIBLE UNDER LAW. IT BE SO HELD NOW. 2. LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMI NG VALIDITY OF PROCEEDINGS ON THE GROUND THAT AS THE QUERY AS WELL AS REPLY OF TH E APPELLANT TO THE QUERY BEING CRYPTIC; APPARENTLY NO DETAILED INQUIRY OR SU BMISSIONS WERE MADE ON THE ISSUE. LD. CIT(A) THUS ERRED IN CONCLUDING THAT REO PENING WITHIN FOUR YEARS ON CHANGE OF OPINION WAS PERMISSIBLE BY NOT APPRECIATI NG THAT MERELY BECAUSE THERE IS NO DETAILED DISCUSSION IN THE ASSESSMENT O RDER IT CANNOT BE HELD THAT ITA NO. 1766/AHD/2014 ATUL LIMITED VS. DCIT ASSESSMENT YEAR: 2007-08 PAGE 2 OF 5 NO OPINION WAS FORMED AS HELD IN JURISDICTIONAL HIG H COURT JUDGMENTS RELIED UPON BY THE APPELLANT. 3. LD. CIT(A) ERRED IN LAW AND ON FACTS ON MERITS A LSO IN CONFIRMING ACTION OF AO DISALLOWING DEDUCTION OF LOSS OF RS.2,22,01,000/ - ON SALE OF STORES TREATING THEM TO BE CAPITAL IN NATURE. LD. CIT(A) FAILED TO APPRECIATE THAT STORE MATERIAL OF SMALL PARTS USED FOR REPLACEMENT & REPAIRS OF MA CHINERY WAS CONSISTENTLY CLAIMED AS MANUFACTURING EXPENSES. LD. CIT(A) OUGHT TO HAVE ALLOWED DEDUCTION OF LOSS CLAIMED ON SALE OF PARTS BECOMING OBSOLETE & UNUSABLE BY DELETING DISALLOWANCE MADE BY AO. IT BE SO HELD NOW . 4. LEVY OF INTEREST U/S 234B, 234C & 234D OF THE AC T IS NOT JUSTIFIED. 5. INITIATION OF PENALTY U/S 271(1)(C) OF THE ACT I S NOT JUSTIFIED. 3. TO ADJUDICATE ON THIS APPEAL, A FEW MATERIAL FAC TS NEED TO BE TAKEN NOTE OF. IT IS A CASE OF REOPENED ASSESSMENT. THE REASONS RECO RDED FOR THE REOPENING THE ASSESSMENT ARE AS FOLLOWS:- THE ASSESSEE COMPANY ENGAGED IN MFG. PHARMACEUTICA LS, FERTILIZERS, CHEMICALS AND PAINTS ETC, FILED ITS RETURN OF INCOM E FOR AY 2007-08 DECLARING TOTAL INCOME NIL (UNDER NORMAL PROVISION) AND RS.23 ,36,35,281/- (UNDER MAT) ON 27.10.2007. WHICH WAS ASSESSED U/S 143(3) R.W.S . 144 (C) OF THE I.T. ACT, 1961 DECLARING TOTAL INCOME OF RS.23,22,62,069/-. ( UNDER NORMAL PROVISIONS) OR RS.23,80,65,281/- (UNDER MAT PROVISIONS) ON 23.0 2.2011. AS PER SECTION 37 OF THE IT ACT, 1961, ANY EXPENDIT URE (NET BEING EXPENDITURE OF THE NATURE DESCRIBED IN SECTIONS 30 TO 36) AND N ET BEING IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPENSES OF THE ASS ESSEE, PAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. IT IS SEEN THAT THE P&L A/C. FOR PERIOD 2006-07 REL EVANT TO AY 2007-08 REVEALED THAT THE ASSESSEE COMPANY DEBATED RS.222.0 1 LAKHS AS LOSS ON SALE OF STORES (AS PER SCH. 15 OTHER EXPENDITURE ). THEREFORE, THIS IS A CAPITAL NATURE EXPENDITURE REQUIRES TO BE DISALLOWE D OR ADDED BACK TO INCOME AS PER SECTION 37 OF I.T. ACT. THEREFORE, THE UNDERSIGNED HAS REASONS TO BELIEF TH AT THE INCOME CHARGEABLE TO TAX FOR THE YEAR UNDER CONSIDERATION HAS ESCAPED ASSESSMENT AS PER THE PROVISIONS OF SECTION 147 OF THE IT ACT. THEREFORE , A NOTICE U/S 148 OF THE IT ACT IS BEING ISSUED FOR REASSESSMENT U/S 147 OF THE IT ACT. AHMEDABAD DATED : 05.03.2012. 4. WHEN THE ASSESSING OFFICER PROPOSED TO REOPEN TH E ASSESSMENT, FOR THE REASONS AS SET OUT ABOVE, THE ASSESSEE HAS RAISED I TS OBJECTIONS TO THE SAME. IT WAS, INTER ALIA, SUBMITTED THAT IT IS MERELY A CASE OF CHANGE OF OPI NION ON THE BASIS OF WHICH THE ASSESSMENT IS BEING SOUGHT TO BE REOPENED . THE ASSESSING OFFICER, HOWEVER, REJECTED THIS OBJECTION AND OBSERVED THAT IT CAN BE EASILY INFERRED, THAT THE ISSUE OF ALLOWABILITY OF LOSS ON SALE OF STORES, WA S NOT AT ALL ADJUDICATED BY AO, WITH ITA NO. 1766/AHD/2014 ATUL LIMITED VS. DCIT ASSESSMENT YEAR: 2007-08 PAGE 3 OF 5 REFERENCE TO ITS NATURE BEING REVENUE OR CAPITAL. THE ASSESSING OFFICER WAS OF THE VIEW THAT SINCE THE ISSUE, WHETHER THE LOSS ON SALE OF STORE S, WAS REVENUE OR CAPITAL IN NATURE, HAS NEVER BEEN CONSCIOUSLY CONSIDERED BY THE ASSESSING OFFICER, HE DID NOT FORM ANY OPINION ON THE ISSUE WHILE FRAMING THE ORIGINAL ASSESSMENT. THE ASSESSING OFFICER ALSO REFERRED TO THE HONBLE JURI SDICTIONAL HIGH COURTS JUDGMENT IN THE CASE OF PRAFUL CHUNILAL PATEL VS. M.J. MAKWANA/ ASSISTANT COMMISSIONER OF INCOME-TAX IN SPECIAL CIVIL APPLICATION NOS. 4201 & 4203 OF 1996 - JUDGEMENT DATED 19.02.1988 - REPORTED IN [1999] 236 ITR 832 (GUJ.) AND CONTENDED THAT SINCE THE REASSESSMENT NOTICE WAS ISSUED WITHIN FOUR YEARS FR OM THE END OF THE ASSESSMENT YEAR, THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE SAID JUDICIAL PRECEDENT. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEA L BEFORE THE LEARNED CIT(A) ON THIS ISSUE BUT WITHOUT ANY SUCCESS. THE ASSESSEE I S NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 5. WE FIND THAT THE ISSUE IS NOW COVERED, IN FAVOUR OF THE ASSESSEE, BY THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF GUJARAT POWER CORPN. LTD. VS. ACIT, [2013] 350 ITR 266 (GUJ.), WHEREIN T HEIR LORDSHIPS HAVE HELD THAT MERELY BECAUSE THE ASSESSING OFFICER DOES NOT SET O UT THE DETAILED REASONS FOR NOT MAKING A DISALLOWANCE, IT CANNOT BE INFERRED THAT T HE ASSESSING OFFICER HAS NOT FORMED AN OPINION ON THE ISSUE. SO FAR AS THE FORM ATION OF OPINION IS CONCERNED, ALL THAT IS NECESSARY IS THE MATTER SHOULD HAVE BEEN EX AMINED BY THE ASSESSING OFFICER. THEIR LORDSHIPS HAVE, IN THIS CASE, INTER ALIA, OBSERVED THAT IN A SITUATION WHERE THE ASSESSING OFFICER DURING SCRUTINY ASSESSMENT, NOTIC ES A CLAIM OF EXEMPTION, DEDUCTION OR SUCH LIKE MADE BY THE ASSESSEE, HAVING SOME PRIMA FACIE DOUBT RAISES QUERIES, ASKING THE ASSESSEE TO SATISFY HIM WITH RE SPECT TO SUCH A CLAIM AND THEREAFTER, DOES NOT MAKE ANY ADDITION IN THE FINAL ORDER OF ASSESSMENT, HE CAN BE STATED TO HAVE FORMED AN OPINION WHETHER OR NOT IN THE FINAL ORDER HE GIVES HIS REASONS FOR NOT MAKING THE ADDITION. THE RATIO OF AFORESAID JUDGEMENT HAS BEEN BEAUTIFULLY SUMMARIZED IN THE ITRS HEAD-NOTE AS FO LLOWS:- HELD, ALLOWING THE PETITION, THAT IN THE REASONS W HICH THE ASSESSING OFFICER HAD RECORDED FOR REOPENING THE ASSESSMENT, HE HAD B ASED HIS CASE ON WRONG EXEMPTION OF INTEREST FROM BONDS CLAIMED UNDER SECT ION 10(23C). IN THE ORIGINAL ASSESSMENT, THE ASSESSING OFFICER HAD EXAM INED SUCH CLAIMS IN DETAIL AND ANY REOPENING OF THE ASSESSMENT OF THE S AME CLAIMS ON THE BASIS OF THE SAME MATERIAL, AMOUNTED TO A MERE CHANGE OF OPINION. THE FACT THAT THE ASSESSING OFFICER DID NOT RECORD REASONS FOR MAKING NO DISALLOWANCE ON SUCH CLAIM OF EXEMPTION, WOULD BE OF NO CONSEQUENCE. WHEN IN AN ASSESSMENT FRAMED BY THE ASSESSING OFFIC ER, IF A CERTAIN CLAIM OF THE ASSESSES IS NOT EXAMINED, NO QUERIES ARE RAISED OR ANSWERS ELICITED, IT CANNOT BE STATED THAT MERELY BECAUSE THE ASSESSING OFFICER DID NOT REJECT SUCH A CLAIM IN THE FINAL ORDER OF ASSESSMENT, HE S HOULD BE DEEMED TO HAVE EXPRESSED AN OPINION WITH RESPECT TO SUCH A CLAIM A ND ANY REOPENING OF AN ASSESSMENT OF THIS NATURE EVEN WITHIN A PERIOD OF F OUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR WOULD AMOUNT TO CHANGE OF OPINION. IN ANY SUCH CASE, AS LONG AS THERE IS SOME TANGIBLE MATERIAL ON THE BASIS OF WHICH THE ASSESSING OFFICER CAN FORM A BELIEF THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, IT WOULD BE PERMISSIBLE TO REOP EN THE ASSESSMENT IN EXERCISE OF THE POWERS UNDER SECTION 147, PARTICULA RLY AFTER THE AMENDMENTS MADE WITH EFFECT FROM APRIL 1, 1989. SUCH TANGIBLE MATERIAL NEED NOT BE ALIEN ITA NO. 1766/AHD/2014 ATUL LIMITED VS. DCIT ASSESSMENT YEAR: 2007-08 PAGE 4 OF 5 TO THE RECORD. REOPENING OF AN ASSESSMENT WITHIN A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AFTER APRIL 1,1989, COULD BE MADE AS LONG AS IT IS NOT BASED ON MERE CHANGE OF OPINION. MERELY BECAUSE A CERTAIN MATERIAL WHICH IS OTHERWISE TANGIBLE AND ENABLES TH E ASSESSING OFFICER TO FORM A BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, FORMED PART OF THE ORIGINAL ASSESSMENT RECORD, THAT PER SE WOUL D NOT BAR THE ASSESSING OFFICER FROM REOPENING THE ASSESSMENT ON THE BASIS OF SUCH MATERIAL. THE EXPRESSION 'TANGIBLE MATERIAL' DOES NOT MEAN MATERI AL ALIEN TO THE ORIGINAL RECORD. THE WORDS 'ESCAPED ASSESSMENT' WHERE THE RE TURN IS FILED, ARE APT TO COVER THE CASE OF A DISCOVERY OF A MISTAKE IN THE A SSESSMENT CAUSED BY EITHER AN ERRONEOUS CONSTRUCTION OF THE TRANSACTION OR DUE TO ITS NON-CONSIDERATION, OR, CAUSED BY A MISTAKE OF LAW APPLICABLE TO SUCH T RANSFER OR TRANSACTION EVEN WHERE THERE HAS BEEN A COMPLETE DISCLOSURE OF ALL R ELEVANT FACTS UPON WHICH A CORRECT ASSESSMENT COULD HAVE BEEN BASED. 6. HAVING NOTICED THE FACT THAT THE ASSESSING OFFIC ER HAD RAISED SPECIFIC QUESTIONS VIDE REQUISITE NOTICE DATED 15.10.2010 WI TH RESPECT TO ALLOWABILITY ON LOSS ON SALE OF STORES AND THAT THE ASSESSEE HAD EXPLAI NED THE SAME WITHOUT ANY FOLLOW-UP QUESTION BY THE ASSESSING OFFICER IN THIS REGARD, IN OUR CONSIDERED VIEW, THE ASSESSING OFFICER HAD INDEED FORMED AN OPINION ABOUT THE DEDUCTABILITY OF LOSS ON SALE OF STORES. IT IS ALSO NOT IN DISPUTE THAT NO NEW MATERIAL HAS COME TO THE LIGHT ON ACCOUNT OF WHICH THE PRESENT ASSESSMENT PROCEEDI NGS WERE REOPENED. ON THESE FACTS, IN OUR CONSIDERED VIEW, THE REOPENING WAS CL EARLY ON ACCOUNT OF CHANGE OF OPINION BY THE ASSESSING OFFICER SOMETHING WHICH IS IMPERMISSIBLE UNDER THE SCHEME OF THE ACT AND IN THE LIGHT OF BINDING JUDIC IAL PRECEDENT. IN THE LIGHT OF THESE DISCUSSIONS AND RESPECTFULLY FOLLOWING THE ESTEEMED VIEWS OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GUJARAT POWER CORPN. LTD. (SUPRA), WE UPHOLD THE GRIEVANCES OF THE ASSESSEE AND QUASH THE IMPUGNED R EASSESSMENT PROCEEDINGS. 7. IN THE RESULT, APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT TODAY ON THE 11 TH JULY, 2018. SD/- SD/- MAHAVIR PRASAD PRAMO D KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, THE 11 TH DAY OF JULY, 2018 **BT COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD ITA NO. 1766/AHD/2014 ATUL LIMITED VS. DCIT ASSESSMENT YEAR: 2007-08 PAGE 5 OF 5 1. DATE OF DICTATION: .......3 PAGES DICTATION PAD ATTACHED.. 10.07.2018.... 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: .. 10.07.2018..... 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR . P.S./P.S.: 11.07.2018....... 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: .. .. 11.07.2018.... 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK : . 11.07.2018. 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK : . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER : . 8. DATE OF DESPATCH OF THE ORDER: ......