ACIT, Coimbatore V. Joonktollee Tea & Industries Ltd., Coimbatore

ITA 1795/CHNY/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5381 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 15-01-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 27-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN
• Assessee Lawyers: D ANAND
• Keywords: Depreciation; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI [BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMB ER AND SHRI S. S. GODARA, JUDICIAL MEMBER] I.T.A.NO.1795/MDS/2013 ASSESSMENT YEAR : 2004-05 THE ASSTT. COMMISSIONER OF INCOME-TAX COMPANY CIRCLE I(1) COIMBATORE VS M/S JOONKTOLLEE TEA & INDUSTRIES LTD [FORMERLY KNOWN AS ABHYUDAYA AGROTECH LTD.) COWCOODY CHAMBERS 234-A, RACE COURSE ROAD COIMBATORE - 641018 [PAN AAACC 7319 P] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI N. MADHAVAN, JCIT RESPONDENT BY : SHRI D. ANAND, ADVOCATE DATE OF HEARING : 15-01-2014 DATE OF PRONOUNCEMENT : 20-01-2014 O R D E R PER S.S.GODARA, JUDICIAL MEMBER THIS APPEAL FILED BY THE REVENUE FOR ASSESSMENT Y EAR 2004- 05, IS DIRECTED AGAINST THE ORDER OF THE COMMISSION ER OF INCOME-TAX (APPEALS)-I COIMBATORE, DATED 10.7.2013, PASSED IN APPEAL NO.411/ 11-12, IN PROCEEDINGS UNDER SECTION 143(3) R.W.S 14 7 OF THE INCOME- TAX ACT, 1961 (IN SHORT THE ACT). I.T.A.NO.1795/13 :- 2 -: 2. IN THE COURSE OF HEARING, THE REVENUE VEHEMENTLY AR GUES THAT THE CIT(A) HAS ERRED IN HOLDING THE IMPUGNED R EOPENING AS BAD IN THE EYES OF LAW BEING MERE CHANGE OF OPINION. IT I S SUBMITTED ON BEHALF OF THE REVENUE THAT ONCE IN THE COURSE OF FI NALIZING REGULAR ASSESSMENT, THERE HAD BEEN FAILURE ON THE ASSESSEE S PART TO DISCLOSE TRULY ALL PARTICULARS IN THE SHAPE OF LEGAL AND PRO FESSIONAL EXPENSES, THE ASSESSING OFFICER HAD RIGHTLY REOPENED THE ASSESSME NT. THEREAFTER, THE REVENUE REITERATES THE GROUNDS AND PRAYS FOR AC CEPTANCE OF ITS APPEAL. 3. THE ASSESSEE SUPPORTS THE ORDER OF THE CIT(A) HOLD ING THE REOPENING UNSUSTAINABLE IN THE EYES OF LAW AND PRAY S FOR AFFIRMING THE SAME. 4. THE ASSESSEE IS A DOMESTIC COMPANY. IT IS ENGA GED IN THE BUSINESS OF INVESTMENT, FINANCING AND ACQUISITION O F PROPERTIES. ON 6.10.2004, IT HAD FILED RETURN DISCLOSING INCOME OF ` 13,42,309/-. INITIALLY, THE SAME WAS SUMMARILY PROCESSED. THE REAFTER, THE ASSESSING OFFICER FRAMED REGULAR ASSESSMENT ADMIT TING THE AFORESAID INCOME VIDE ORDER DATED 11.8.2006. I.T.A.NO.1795/13 :- 3 -: 5. IN THE ENCLOSURES FILED WITH THE RETURN, THE ASSES SEE HAD DECLARED INTEREST INCOME OF ` 58,91,001/- FROM BUSINESS ALONGWITH CORRESPONDING EXPENSES OF ` 29,33,621/-. IT HAD ALSO CLAIMED LEGAL AND PROFESSIONAL EXPENSES OF ` 11,27,000/-. AFTER FINALIZATION OF ASSESSMENT, THE ASSESSING OFFICER FORMED AN OPINION THAT ASSESSEES INCOME FROM INTEREST DESERVED TO BE TREATED AS THAT FROM OTHER SOURCES. QUA EXPENSES, HE WAS OF THE VIEW THAT SI NCE THE SAME HAD BEEN INCURRED ON LOANS BORROWED FOR ACQUISITION ACT IVITY IN COCHIN MALABAR ESTATES AND INDUSTRIES LTD. AND THE LEGAL E XPENSES HAD BEEN INCURRED AS PRE-OPERATIVE EXPENDITURE, THE SAME H AD TO BE DISALLOWED. SO, THE ASSESSING OFFICER ISSUED REOPENING NOTICE U/S 148 DATED 28.3.2011 TO THE ASSESSEE. 6. IN REPLY, THE ASSESSEE JUSTIFIED THE REGULAR ASS ESSMENT ALREADY FRAMED. WE NOTICE FROM THE RE-ASSESSMENT O RDER DATED 30.12.2011 THAT THE ASSESSING OFFICER UPHELD ASSESS EES CLAIM SO FAR AS THE NATURE OF INTEREST INCOME AND THE CORRESPONDING EXPENDITURE IS CONCERNED. AT THE SAME TIME, COMING TO THE LEGAL A ND PROFESSIONAL EXPENSES, HE HELD THAT THEY HAD BEEN INCURRED FOR I NCREASE IN SHARE CAPITAL OF THE COMPANY AND HENCE, NOT ALLOWABLE. I N THIS MANNER, THE I.T.A.NO.1795/13 :- 4 -: ASSESSING OFFICER MADE ADDITION OF ` 11,27,000/- IN THE ASSESSEES INCOME ALREADY COMPUTED ON 11.8.2006. 7. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL. THE CIT (A) HAS ACCEPTED ITS ARGUMENTS CHALLENGING VALIDITY OF THE REOPENING IN QUESTION BY HOLDING IT AS MERE CHANGE OF OPINION AS FOLLOWS: 6. I HAVE GONE THROUGH THE SUBMISSIONS MADE BY THE APPELLANT AND ALSO THE ORDER OF THE ASSESSING OFFICER. IT IS A FA CT THAT THE ASSESSMENT WAS COMPLETED ORIGINALLY ON 11.08.2006 ACCEPTING TH E RETURNED INCOME. IN THE ASSESSMENT ORDER PASSED ON 30.12.201 1, THE ASSESSING OFFICER STATED THAT HE HAD REASON TO BELI EVE THAT INCOME ASSESSABLE TO TAX HAD ESCAPED ASSESSMENT IN VIEW OF THE ASSESSEE OFFERING INTEREST INCOME UNDER BUSINESS INSTEAD OF OFFERING IT UNDER INCOME FROM OTHER SOURCES, AND ALSO THE COMPANY CLA IMED EXPENSES WHICH ARE OF PRE-OPERATIVE IN NATURE. THEREFORE, NO TICE U/S 148 DATED 28.3.2011 WAS ISSUED AND SERVED ON THE ASSESSEE. T HE ASSESSING OFFICER ALSO DEALT WITH THE OBJECTIONS RAISED BY TH E APPELLANT AFTER ISSUE OF NOTICE U/S 148. THE ASSESSING OFFICER WAS RELYING ON THE PROVISIONS OF SECTION 147 PARTICULARLY EXPLANATION 2(C)(IV). THIS DEALS WITH EXCESSIVE LOSS OF DEPRECIATION ALLOWANCE OR AN Y OTHER ALLOWANCE. THIS DOES NOT SPEAK OF EXCESSIVE EXPENSES CLAIMED B Y THE ASSESSEE OR INCOME OFFERED UNDER WRONG HEAD OF INCOME. IT HA S TO BE STATED HERE THAT THE ORIGINAL ASSESSMENT BY THE ASSESSING OFFICER WAS COMPLETED AFTER EXAMINATION OF ALL THE DETAILS. 7. AS SEEN FROM THE ORIGINAL ASSESSMENT ORDER, DA TED 11TH AUGUST, 2006, THE ASSESSING OFFICER STATED CLEARLY THAT BOO KS OF ACCOUNT, BILLS, VOUCHERS AND OTHER RELEVANT DETAILS WERE CALLED FOR . THE ASSESSEE ALSO SUBMITTED THAT DURING THE COURSE OF ORIGINAL A SSESSMENT, THE THEN ASSESSING OFFICER WAS GIVEN THE DETAILS OF LEGAL EX PENSES OF RS.11,27,100/- PAID TO VARIOUS LEGAL PROFESSIONS. T HE ASSESSING OFFICER HAS SCRUTINIZED THE DETAILS PRODUCED AND AC CEPTED THE INCOME RETURNED. HENCE, IT CANNOT BE A CASE WHERE EXPENSES AND THE DETAILS WERE NOT EXAMINED BY THE ASSESSING OFFICER IN THE O RIGINAL ASSESSMENT. IN THE ORDER PASSED ON 30 TH DECEMBER, 2011, THE ASSESSING OFFICER HAS ADDED THE LEGAL AND PROFESSIO NAL EXPENSES TAKING THEM AS PRE-OPERATIVE EXPENSES. AN EXAMINATI ON OF THE EXPENSES CLEARLY SHOWS THAT THESE EXPENSES WERE INC URRED IN THE I.T.A.NO.1795/13 :- 5 -: REGULAR COURSE OF LEGAL CONSULTATIONS AND FOR THE S ERVICES RENDERED BY LEGAL EXPERTS FOR THEIR ADVICE BEFORE THE COMPANY L AW BOARD. THE ASSESSING OFFICER IN HIS ORDER STATES IT APPEARS THAT THE EXPENSES HAVE BEEN INCURRED FOR INCREASE IN SHARE CAPITAL OF THE COMPANY AND HENCE THE SAME IS NOT AN ALLOWABLE EXPE NDITURE'. THE ASSESSING OFFICER IS NOT CERTAIN THAT THE EXPENDITU RE WAS INCURRED FOR INCREASE IN SHARE CAPITAL. IT IS NOT KNOWN HOW THE ASSESSING OFFICER ARRIVED AT THIS CONCLUSION WITHOUT VERIFYING THE DE TAILS AND ONLY STATED THAT 'APPEARS'. I DO NOT AGREE WITH THE ASSESSING O FFICER REGARDING THE LEGAL EXPENDITURE. 8. AN EXAMINATION OF THE DETAILS CLEARLY SHOWS THAT THIS EXPENDITURE WAS INCURRED IN THE REGULAR COURSE OF BUSINESS. THI S CLEARLY SHOWS THAT THE ASSESSING OFFICER HAS ONLY CHANGED HIS OP INION WITHOUT ANY BASIS. IT CANNOT BE SAID THAT THE INCOME CHARGEABL E TO TAX HAS ESCAPED ASSESSMENT BY REASON OF OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE AND TRULY ALL MATERIAL FAC TS. THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS KELVIN ATOR OF INDIA LTD - 320 ITR 561 (SC) HELD THAT THE ASSESSING OFFICER HA S POWER TO REOPEN, PROVIDED THERE IS TANGIBLE MATERIA L TO COME TO CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. MERE CHANGE OF OPINION CANNOT BE A BASIS FOR REOPEN ING OF ASSESSMENT. FURTHER THE HON'BLE HIGH COURT OF DELHI (FULL BENCH) IN THE CASE OF CIT VS USHA INTERNATIONAL LIMITED (25 T AXMAN.COM 200) HELD THAT THE REASSESSMENT PROCEEDINGS WILL BE INVA LID IN CASE AN ISSUE OR QUERY IS RAISED AND ANSWERED BY ASSESSEE I N ORIGINAL ASSESSMENT PROCEEDINGS BUT THEREAFTER THE ASSESSING OFFICER DOES NOT MAKE ANY ADDITION IN THE ASSESSMENT ORDER. TAKI NG ALL THESE FACTS INTO CONSIDERATION AND RELYING ON THE DECISIONS SUB MITTED BY THE APPELLANT, THE REVISED ASSESSMENT HAS TO BE TREATED AS NULL AND VOID. THESE GROUNDS OF APPEAL ARE ALLOWED. THIS LEAVES THE REVENUE AGGRIEVED. 8. WE HAVE HEARD BOTH PARTIES AND GONE THROUGH THE CAS E FILE. IT IS EVIDENT TO US THAT IN THE IMPUGNED FINDINGS, THE CIT(A) SPECIFICALLY HOLDS THAT WHILST FRAMING OF REGULAR ASSESSMENT, ASSESSEE HAD DULY FILED ALL DETAILS AND PARTICULARS IN SUPPORT OF THE LEGAL AND PROFESSIONAL I.T.A.NO.1795/13 :- 6 -: EXPENSES INCURRED AND THE ASSESSING OFFICER HAD EXA MINED THE SAME. ON THE BASIS OF THIS FACTUAL POSITION, HE HOLDS THA T THE REOPENING IN QUESTION IS MERE CHANGE OF OPINION. WE MAKE IT CLE AR THAT NO PAPER BOOK HAS BEEN FILED BY THE REVENUE CONTROVERTING TH E AFORESAID FINDING OF FACT. SIMILARLY, THERE IS ONE THING MORE WHICH WE TAKE NOTICE OF. THE IMPUGNED ASSESSMENT YEAR IS 2004-05. THE REOPE NING NOTICE IN THE PRESENT CASE HAS BEEN ISSUED ON 28.3.2011. IN OTHER WORDS, IT IS BEYOND A PERIOD OF FOUR YEARS FROM THE END OF RELE VANT ASSESSMENT YEAR I.E ON 31.3.2005. A PERUSAL OF THE FIRST PROV ISO TO SECTION 148 OF THE ACT MAKES IT CLEAR THAT IN CASE THE REOPENING IS MADE BEYOND FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, IT CAN BE ONLY RESORTED TO IN CASE OF FAILURE ON ASSESSEES PART IN DISCLOSING FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. UNDISPUTEDLY, THIS FAILURE IS NOWHERE PINPOINTED IN THE ASSESSMENT ORD ER. IN THESE CIRCUMSTANCES, WE OBSERVE THAT NOT ONLY THE IMPUGNE D REOPENING IS MERE CHANGE OF OPINION ON THE PART OF THE ASSESSING OFFICER QUA LEGAL AND PROFESSIONAL EXPENSES, BUT ALSO IT IS HIT BY FI RST PROVISO TO SECTION 148 AS THERE IS NO FAILURE ON THE ASSESSEES PART IN DISCLOSING TRULY AND FULLY ALL NECESSARY PARTICULARS. HENCE, ON BOTH TH ESE COUNTS, WE HOLD THE REOPENING AS NOT SUSTAINABLE IN THE EYES OF LAW . THE REVENUES I.T.A.NO.1795/13 :- 7 -: ARGUMENTS ACCORDINGLY FAIL AND THE IMPUGNED FINDING S OF THE CIT(A) ARE CONFIRMED. 9. THE REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED ON MONDAY, THE 20 TH OF JANUARY, 2014, AT CHENNAI. SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (S. S. GODARA) JUDICIAL MEMBER DATED: 20 TH JANUARY, 2014 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR