M/S HEALTH AND GLOW RETAILING PRIVATE LIMITED, BANGALORE V. ACIT CORPORATE CIRCLE 2(2), CHENNAI

ITA 1784/CHNY/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4343 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 24-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R CLEMENT RAMESH KUMAR
• Keywords: Reopening of assessment; Depreciation; Bad and doubtful debts; Difference of opinion; Reason to believe; Unabsorbed depreciation; Change of opinion; Reassessment proceedings
• Section: 147; 148; 143(3); 115JB

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . , BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A. NO. 1784/CHNY/2018 / ASSESSMENT YEAR: 2010-11 M/S. HEALTH AND GLOW RETAILING PRIVATE LIMITED, NO. 32/5, 2 ND FLOOR, GANAPA TOWERS, NGR LAYOUT, ROOPENA AGRAHARA, BOMMANAHALLI, HOSUR MAIN ROAD, BANGALORE 560068. [PAN:AAACR4742B] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2(2), CHENNAI. ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : NONE / RESPONDENT BY : SHRI R. CLEMENT RAMESH KUMAR, ADDL. CIT / DATE OF HEARING : 07.02.2019 /DATE OF PRONOUNCEMENT : 14.02.2019 / O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 13, CHENNAI, DATED 06.03.2018 RELEVANT TO THE ASSESSMENT YEAR 2010-11. BESIDES CHALLENGING REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE INCOME TAX ACT, 1961 [ACT IN SHORT], THE ASSESSEE ALSO AGITATED AGAINST I.T.A. NO. 1784/CHNY/18 2 CONFIRMATION OF ADDITION MADE TOWARDS PROVISION FOR DOUBTFUL DEBTS AS WELL AS CONFIRMATION OF DISALLOWANCE OF UNABSORBED DEPRECIATION. 2. IN THE GROUNDS OF APPEAL, THE FIRST SOLITARY GROUND RAISED BY THE ASSESSEE IS WITH REGARD TO REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT. WE FIND THAT THE ASSESSEE HAS NOT CHALLENGED THE ABOVE ISSUE BEFORE THE LD. CIT(A) DURING APPELLATE PROCEEDINGS. BEING A LEGAL ISSUE EVEN THOUGH RAISED FOR THE FIRST TIME BEFORE THE TRIBUNAL, WE HAVE DECIDED TO ADJUDICATE THE ISSUE ON MERITS BY CONSIDERING THE MATERIALS AVAILABLE ON RECORD AND HEARING TO THE LD. DR SINCE NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE SERVICE OF NOTICE OF HEARING [RPAD ON RECORD]. 3. THE LD. DR HAS SUBMITTED THAT BY RECODING THE REASONS FOR REOPENING OF ASSESSMENT, THE ASSESSING OFFICER SERVED THE NOTICE UNDER SECTION 148 OF THE ACT AGAINST WHICH THERE WAS NO REPLY RECEIVED FROM THE ASSESSEE. SUBSEQUENTLY, A LETTER WAS ISSUED UNDER SECTION 129 OF THE ACT. THEREAFTER, THE AR OF THE ASSESSEE APPEARED AND FURNISHED THE DETAILS CALLED FOR. IT WAS THE SUBMISSION OF THE LD. DR THAT AFTER FOLLOWING DUE PROCEDURES, THE ASSESSMENT WAS REOPENED SINCE THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND PLEADED FOR SUSTAINING THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT BY I.T.A. NO. 1784/CHNY/18 3 PLACING RELIANCE ON THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF KALYANJI MAVJI & CO. V. CIT [1976] 102 ITR 287 (SC) . 4. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. DR, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THIS CASE, ADMITTEDLY, THE ASSESSEE HAS FURNISH TRUE AND COMPLETE PARTICULARS OF INCOME DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, AND AFTER VERIFICATION OF DETAILS FURNISHED BY THE ASSESSEE, THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT. SUBSEQUENTLY, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS NOT ADDED BACK .88,95,764/- DEBITED IN THE PROFIT AND LOSS ACCOUNT TOWARDS PROVISION FOR DOUBTFUL DEBTS AND ADVANCES. PROVISION IS NOT AN ALLOWABLE EXPENDITURE. IN ADDITION TO THAT, THE ASSESSEE HAS CLAIMED DEDUCTION OF .1,14,96,325/- AS UNABSORBED DEPRECIATION LOSS OF ASSESSMENT YEARS 1999-2000 TO 2001-02. AS PER THE DECISION OF THE ITAT MUMBAI SPECIAL BENCH IN THE CASE OF DCIT V. TIMES GUARANTY IN I.T.A. NOS. 4917 & 4918/MUM/2008 DATED 30.06.2010, THE UNABSORBED DEPRECIATION OF ASSESSMENT YEARS 1997-98 TO 2001-02 IS NOT ELIGIBLE FOR RELIEF GRANTED BY AMENDMENT TO SECTION 32(2) IN ASSESSMENT YEAR 2002-03. THEREFORE, THE ASSESSING OFFICER NOTICED THAT AN INCOME AMOUNTING TO .2,03,92,089/- HAS ESCAPED ASSESSMENT IN THE ASSESSMENT YEAR 2010- 11. ACCORDINGLY, BY RECORDING THE REASONS FOR ESCAPEMENT OF INCOME UNDER SECTION 147 OF THE ACT, THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 148 I.T.A. NO. 1784/CHNY/18 4 OF THE ACT FOR REOPENING OF ASSESSMENT WITHIN THE TIME PRESCRIBED IN THE INCOME TAX ACT. 4.1 IN THE CASE OF KALYANJI MAVJI & CO. V. CIT [1976] 102 ITR 287 (SC), AFTER EXHAUSTIVELY EXAMINING THE ISSUE, THE HONBLE SUPREME COURT, RENDERED ITS JUDGMENT IN THE CONTEXT OF SECTION 34(1)(B) OF THE 1922 ACT, WHICH IS PARI MATERIA WITH THE EXTANT PROVISION (SECTION 147) ARE AS UNDER: SECTION 34(1)(B) WOULD APPLY TO THE FOLLOWING CATEGORIES OF CASES: (1) WHERE THE INFORMATION IS AS TO THE TRUE AND CORRECT STATE OF THE LAW DERIVED FROM RELEVANT JUDICIAL DECISIONS; (2) WHERE IN THE ORIGINAL ASSESSMENT THE INCOME LIABLE TO TAX HAS ESCAPED ASSESSMENT DUE TO OVERSIGHT, INADVERTENCE OR A MISTAKE COMMITTED BY THE INCOME TAX OFFICER; (3) WHERE THE INFORMATION IS DERIVED FROM AN EXTERNAL SOURCE OF ANY KIND: SUCH EXTERNAL SOURCE WOULD INCLUDE DISCOVERY OF NEW AND IMPORTANT MATTERS OR KNOWLEDGE OF FRESH FACTS WHICH WERE NOT PRESENT AT THE TIME OF ORIGINAL ASSESSMENT; AND (4) WHERE THE INFORMATION MAY BE OBTAINED EVEN FROM THE RECORD OF THE ORIGINAL ASSESSMENT FROM AN INVESTIGATION OF THE MATERIALS ON THE RECORD OR THE FACTS DISCLOSED THEREBY OR FROM OTHER ENQUIRY OR RESEARCH INTO FACTS OR LAW. WHERE, HOWEVER, THE INCOME TAX OFFICER GETS NO SUBSEQUENT INFORMATION, BUT MERELY PROCEEDS TO REOPEN THE ORIGINAL ASSESSMENT WITHOUT ANY FRESH FACTS OR MATERIALS OR WITHOUT ANY ENQUIRY INTO THE MATERIALS WHICH FORM PART OF THE ORIGINAL ASSESSMENT, SECTION 34(1)(B) WOULD HAVE NO APPLICATION. 4.2 SUBSEQUENTLY, DOUBTS WERE EXPRESSED WITH REGARD TO PROPOSITION (2) AFORE-STATED BY THE HONBLE COURT BY ITS LARGER BENCH IN INDIAN & EASTERN NEWSPAPER SOCIETY V. CIT [1979] 119 ITR 996 (SC) IN-AS-MUCH AS THE SAME ALSO ALLOWED REASSESSMENT IN CASE OF CHANGE OF OPINION, WHICH, CLEARLY, I.T.A. NO. 1784/CHNY/18 5 COULD NOT BE AS THE ASSESSING OFFICER HAS NO POWER TO REVIEW HIS ORDER. THE APEX COURT, PER ITS LARGER BENCH DECISION IN A.L.A. FIRM V. CIT [1991] 189 ITR 285 (SC), AGAIN REVIEWED THE MATTER AND CLARIFIED THAT THE PROPOSITION (2) IN KALYANJI MAVJI & COS CASE (SUPRA) WAS INDEED WIDELY EXPRESSED, AS IT WOULD ALSO INCLUDE CASES IN WHICH THE INCOME TAX OFFICER, HAVING CONSIDERED ALL THE FACTS AND LAW, ARRIVED AT A PARTICULAR CONCLUSION, YET INITIATES PROCEEDINGS ON A REAPPRAISAL OF THE SAME MATERIAL WHICH HAD BEEN CONSIDERED EARLIER AND IN LIGHT OF THE SAME LEGAL ASPECTS TO WHICH HIS ATTENTION HAD BEEN DRAWN EARLIER, AND COMES TO A CONCLUSION THAT AN ITEM OF INCOME, WHICH HE HAD CONSCIOUSLY LEFT OUT FROM THE EARLIER ASSESSMENT SHOULD HAVE BEEN BROUGHT TO TAX. IN OTHER WORDS, THE PROPOSITION (2) IS TO BE READ WITH CAVEAT THAT IT DOES NOT ALLOW A CHANGE OF OPINION, I.E., A REAPPRAISAL OF THE SAME MATERIAL/ASPECT OF THE MATTER IN THE ABSENCE OF A CHANGE IN LAW (PG. 298). IN THE PRESENT CASE, WE FIND THAT ADMITTEDLY, THERE HAS BEEN A FAILURE ON THE PART OF THE ASSESSING OFFICER TO CONSIDER THE COMPUTATION OF INCOME FILED BY THE ASSESSEE DURING THE COURSE OF ORIGINAL ASSESSMENT. BUT, THE SAME CANNOT, BY ITSELF, STOP HIM FROM CONSIDERING THE SAME TO FORM A REASON TO BELIEVE AN ESCAPEMENT OF INCOME. REFERENCE IN THIS CONTEXT IS ALSO DRAWN TO EXPLANATION 1 TO SECTION 147 OF THE ACT, WHICH CLARIFIES THAT PRODUCTION BEFORE THE ASSESSING OFFICER OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD WITH DUE DILIGENCE HAVE BEEN DISCOVERED I.T.A. NO. 1784/CHNY/18 6 BY HIM WILL NOT AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE PROVISION. WE CLARIFY THAT THIS AS, WITHOUT DOUBT, THE PROVISION FOR DOUBTFUL DEBTS AND ADVANCES HAVE NOT BEEN ADDED BACK IN THE PROFIT AND LOSS ACCOUNT AS WELL AS CLAIM OF UNABSORBED DEPRECIATION LOSS, WHICH ARE NOT ELIGIBLE, SOUGHT TO BE BROUGHT TO TAX IN THE REASSESSMENT PROCEEDINGS, WAS AVAILABLE WITH THE ASSESSING OFFICER AT THE TIME OF THE ORIGINAL ASSESSMENT, THOUGH HAS NOT BEEN CONSIDERED BY HIM, AT LEAST IN ITS RELEVANT PART. THE ISSUE OF CONSIDERATION OF AN ASPECT OF THE MATTER AND FORMATION OF OPINION IN ITS RESPECT, IT MAY BE APPRECIATED, IS ESSENTIALLY A MATTER OF FACT, THE LAW ONLY BARRING A CHANGE OF OPINION. WHERE, THEREFORE, THERE IS A LIVE AND CLEAR NEXUS BETWEEN THE SAID INFORMATION AND THE REASONS TO BELIEVE ESCAPEMENT OF INCOME, FORMED ON THAT BASIS, THE ASSUMPTION OF JURISDICTION TO REASSESS CANNOT BE CALLED INTO QUESTION AS WAS SOUGHT TO BE CANVASSED BEFORE US. THUS, WE HOLD THAT THE ENTIRE REASSESSMENT IN THIS CASE IS VALID AND THEREFORE, THE REOPENING OF ASSESSMENT IS UPHELD. THUS, THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. 5. WITH REGARD TO THE GROUND RELATING TO ALLOWABILITY OF PROVISION FOR DOUBTFUL DEBTS, THE ASSESSEE HAS CLAIMED PROVISIONS FOR DOUBTFUL DEBTS AND THE SAME IS DISALLOWED AND ADDED BACK BY THE ASSESSEE ITSELF IN COMPUTING THE BOOK PROFIT UNDER SECTION 115JB OF THE ACT. AT THE SAME TIME, THE SAME IS REQUIRED TO BE ADDED IN COMPUTING TOTAL INCOME UNDER I.T.A. NO. 1784/CHNY/18 7 THE NORMAL PROVISIONS OF THE ACT. HAVING THE ASSESSEE NOT DONE SO, THE ASSESSING OFFICER HAS DISALLOWED THE PROVISIONS FOR DOUBTFUL DEBTS AND ADVANCES TO THE TUNE OF .88,95,764/-, WHICH WAS RIGHTLY CONFIRMED BY THE LD. CIT(A). WE FIND NO REASON TO INTERFERE WITH THE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE. THUS, THE GROUND RAISED BY THE ASSESSEE STANDS DISMISSED. 6. WITH REGARD TO THE GROUND RELATING TO DISALLOWANCE OF UNABSORBED DEPRECIATION, THE ASSESSEE HAS CLAIMED OF DEPRECIATION OF .1,14,96,325/- AS UNABSORBED DEPRECIATION LOSS OF THE ASSESSMENT YEAR 1999-2000 TO 2001-02. HOWEVER, THE ASSESSING OFFICER OBSERVED THAT THE CLAIM OF UNABSORBED DEPRECIATION LOSS OF THE ASSESSMENT YEAR 1999-2000 TO 2001- 02 WAS NOT ACCEPTABLE IN VIEW OF THE DECISION OF THE MUMBAI SPECIAL BENCH IN THE CASE OF DCIT V. TIMES GUARANTY (SUPRA), THE SAME WAS DISALLOWED. SINCE THE CLAIM OF UNABSORBED DEPRECIATION LOSS OF THE ASSESSMENT YEAR 1999-2000 TO 2001-02 IS NOT ELIGIBLE FOR RELIEF GRANTED BY AMENDMENT TO SECTION 32(2) IN THE ASSESSMENT YEAR 2002-03, THE LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. THE ASSESSEE HAS NOT PLACED RELIANCE OF ANY HIGHER COURTS DECISION AGAINST THE DECISION OF MUMBAI SPECIAL BENCH ORDER IN THE CASE OF DCIT V. TIMES GUARANTY (SUPRA), WHICH WAS FOLLOWED BY THE AUTHORITIES BELOW. I.T.A. NO. 1784/CHNY/18 8 ACCORDINGLY, WE SUSTAIN THE DISALLOWANCE CONFIRMED BY THE LD. CIT(A). THUS, THE GROUND RAISED BY THE ASSESSEE STANDS DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON THE 14 TH FEBRUARY, 2019 IN CHENNAI. SD/- SD/- (INTURI RAMA RAO) ACCOUNTANT MEMBER (DUVVURU RL REDDY) JUDICIAL MEMBER CHENNAI, DATED, 14.02.2019 VM/- /COPY TO: 1. / APPELLANT, 2. / RESPONDENT, 3. ( ) /CIT(A), 4. /CIT, 5. /DR & 6. /GF.