M/s. Shineup Fibre Ltd.(now known as Ambica Capital Ventures Ltd.), Kolkata V. DCIT, Central Circle - XIX, Kolkata, Kolkata

ITA 1891/KOL/2010

• Counselvise Citation: 189123514 RSA 2010
• Duration Of Justice: 3 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2014
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2003-2004
• Appeal Filed On: 08-10-2010
• Court: TRIBUNAL
• Assessee Lawyers: SOUMITRA CHOUDHURY LD AR
• Keywords: Depreciation; Difference of opinion; Change of opinion
• Section: 148; 143(3)

Judgement Text

, C INCOME TAX APPELLATE TRIBUNAL, BENCH- C KOLKATA ( ) BEFORE . , ! SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER '#$ /AND 1 & ' , ! SHRI GEORGE MATHAN, JUDICIAL MEMBER $( / ITA NOS.1891 TO 1893/KOL/2010 A.YS. 2003-04 TO 2005-06 M/S. SHINEUP FIBRE LTD PAN: AAECS 2882B - #' - - VERSUS - . D.C.I.T, CENTRAL CIRCLE- XIX, KOLKATA ( &* / APPELLANT ) ( +,&* / RESPONDENT ) &* .' / FOR THE APPELLANT / SHRI . SOUMITRA CHOUDHURY, ADVOCATE, LD.AR +,&* .' / FOR THE RESPONDENT: SMT. SUCHETA CHATTOPADHYAY, LD.JCIT/SR.DR /'#0 1 2 /DATE OF HEARING : 29-01-2014 34 1 2 /DATE OF PRONOUNCEMENT:31-01-2014 5 / ORDER 1 &' , ! SHRI GEORGE MATHAN, JUDICIAL MEMBER: THESE ARE THREE APPEALS FILED BY THE ASSESSEE AGAIN ST THE ORDERS OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS), CENTR AL-II, KOLKATA IN APPEAL NO.. 183/CC-XIX/CIT(A)-C-II/KOL/08-09 DATED 07.06.2010, IN APPEAL NO.. 181/CC- XIX/CIT(A)-C-II/KOL/08-09 DATED 07.06.2010 AND IN APPEAL NO.. 182/CC-XIX/CIT(A)- C-II/KOL/08-09 DATED 07.06.2010 FOR THE ASSESSMENT YEARS 2003-04, 2004-05 AND 2005-06 RESPECTIVELY. 2. SHRI SOUMITRA CHOUDHURY, ADVOCATE, LEARNED AR REPRESENTED ON BEHALF OF THE ASSESSEE AND. SMT. SUCHETA CHATTOPADHYAY, LEAR NED JCIT/DR REPRESENTED ON BEHALF OF THE REVENUE AND 3. IN THE ASSESSEES APPEAL IN ITA NO.1891/KOL/2010 FOR A.Y 2003-04, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- ITA NOS.1891 TO 1893/KOL/10- M/S. SHINEUP FIBRE LTD 2 I) FOR THAT ON THE FACTS OF THE CASE, LD.CIT(A) HA S ACTED ARBITRARILY IN CONFIRMING THE AOS FINDINGS AS TO I NITIATION OF PROCEEDINGS U/S. 147/148 OF THE I.T ACT 1961. 2) FOR ALL THE MATERIAL FACTS WERE DISCLOSED IN THE AUDIT NOTE AND ACCOUNTS, BALANCE SHEET AND TAX AUDIT REPORT FILED ALONG WITH THE RETURN OF INCOME SO, IT DOES NOT CALL FOR INVOCATIO N OF SEC. 147/148 FOR REOPENING THE ASSESSMENT BY FORMING A FRESH OP INION FOR THE FIRST TIME ON CERTAIN DISCOVERY FROM ACCOUNTS OR OTHERWIS E, BUT ALL THE FACTS WERE ORIGINALLY FILED WITH THE RETURN, SO IT WAS A CASE OF CHANGE OF OPINION FOR WHICH INITIATION OF PROCEEDINGS U/S. 147/148 IS AB-INITIO- VOID AND ILLEGAL. 3) FOR THAT THE APPELLANT HAVE PRODUCED BOOKS AND EVIDENCES FROM WHICH MATERIAL FACTS COULD NOT BE DISCOVERED, IT IS UNDER NO OBLIGATION TO INFORM THE AO ABOUT POSSIBLE INFERENC E THAT MIGHT BE RAISED AGAINST THE APPELLANT. IT WAS FOR THE OFFICE R TO RAISE SUCH AN INFERENCE IN ABSENCE WHEREOF THE PROCEEDING CANNOT BE INITIATED U/S. 147/148 OF THE I.T ACT. 4) FOR THAT THE DECISION RELIED BY THE LOWER AUTHOR ITIES DOES NOT SQUARELY APPLY TO THE FACT OF THE PRESENT CASE AND THE NUMBER OF DECISIONS RELIED ON BY THE APPELLANT HAVE NOT BEEN CONSIDERED IN ITS TRUE PERSPECTIVE WHICH HAS RESULTED TO ARRIVE AT A ARBITRARY CONCLUSION IN CONFIRMING INITIATION OF PROCEEDING U /S. 147/148 OF THE I.T ACT, THUS THE ACTION OF THE CIT IN CONFIRMING T HE AOS FINDING IS COMPLETELY ERRONEOUS, PERVERSE, MALAFIDE AND ILLEGA L. 5) FOR THAT THE PLANT & MACHINERY WERE UNDER TRIAL RUN AND WAS READY FOR USE, BUT TEMPORARY SUSPENSION OF THE WOR K DUE TO LABOUR UNREST IN THE MILL, AND IT DOES NOT GIVE THE LONG H AND TO THE AO TO REOPEN TO ASSESSMENT U/S. 147/148 OF THE I.T ACT, T HEREFORE, THE DISALLOWANCE OF THE DEPRECIATION RS.11,13,235/- MAD E IN ORIGINAL ASSESSMENT CANNOT BE A GROUND TO TAKE ACTION U/S. 1 47/148 OF THE I.T ACT. 6) FOR THAT A NUMBER OF DECISIONS RELIED ON BY THE LD.CIT(A) DOES NOT SQUARELY APPLICABLE TO THE FACT OF THE PRESENT CASE AND FOLLOWING THE DECISION OF THE FULL BENCH OF THE HIGH COURT AS WELL SUPREME COURT, THE REASSESSMENT ORDER SHOULD HAVE BEEN STRU CK DOWN AS IT IS ERRONEOUS AND PERVERSE. 7) FOR THAT THE APPELLANT RESERVES THE RIGHT TO ADD UCE ANY FURTHER GROUND OR GROUNDS, IF NECESSARY, AT OR BEFORE THE H EARING OF THE APPEAL. 4. IN THE ASSESSEES APPEAL IN ITA NO.1892/KOL/2010 FOR A.Y 2004-05, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- I) FOR THAT ON THE FACTS OF THE CASE, LD.CIT(A) HA S ACTED ARBITRARILY IN CONFIRMING THE AOS FINDINGS AS TO I NITIATION OF PROCEEDINGS U/S. 147/148 OF THE I.T ACT 1961. ITA NOS.1891 TO 1893/KOL/10- M/S. SHINEUP FIBRE LTD 3 2) FOR ALL THE MATERIAL FACTS WERE DISCLOSED IN THE AUDIT NOTE AND ACCOUNTS, BALANCE SHEET AND TAX AUDIT REPORT FILED ALONG WITH THE RETURN OF INCOME SO, IT DOES NOT CALL FOR INVOCATIO N OF SEC. 147/148 FOR REOPENING THE ASSESSMENT BY FORMING A FRESH OP INION FOR THE FIRST TIME ON CERTAIN DISCOVERY FROM ACCOUNTS OR OTHERWIS E, BUT ALL THE FACTS WERE ORIGINALLY FILED WITH THE RETURN, SO IT WAS A CASE OF CHANGE OF OPINION FOR WHICH INITIATION OF PROCEEDINGS U/S. 147/148 IS AB-INITIO- VOID AND ILLEGAL. 3) FOR THAT THE APPELLANT HAVE PRODUCED BOOKS AND EVIDENCES FROM WHICH MATERIAL FACTS COULD NOT BE DISCOVERED, IT IS UNDER NO OBLIGATION TO INFORM THE AO ABOUT POSSIBLE INFERENC E THAT MIGHT BE RAISED AGAINST THE APPELLANT. IT WAS FOR THE OFFICE R TO RAISE SUCH AN INFERENCE IN ABSENCE WHEREOF THE PROCEEDING CANNOT BE INITIATED U/S. 147/148 OF THE I.T ACT. 4) FOR THAT THE DECISION RELIED BY THE LOWER AUTHOR ITIES DOES NOT SQUARELY APPLY TO THE FACT OF THE PRESENT CASE AND THE NUMBER OF DECISIONS RELIED ON BY THE APPELLANT HAVE NOT BEEN CONSIDERED IN ITS TRUE PERSPECTIVE WHICH HAS RESULTED TO ARRIVE AT A ARBITRARY CONCLUSION IN CONFIRMING INITIATION OF PROCEEDING U /S. 147/148 OF THE I.T ACT, THUS THE ACTION OF THE CIT IN CONFIRMING T HE AOS FINDING IS COMPLETELY ERRONEOUS, PERVERSE, MALAFIDE AND ILLEGA L. 5) FOR THAT THE PLANT & MACHINERY WERE UNDER TRIAL RUN AND WAS READY FOR USE, BUT TEMPORARY SUSPENSION OF THE WOR K DUE TO LABOUR UNREST IN THE MILL, AND IT DOES NOT GIVE THE LONG H AND TO THE AO TO REOPEN TO ASSESSMENT U/S. 147/148 OF THE I.T ACT, T HEREFORE, THE DISALLOWANCE OF THE DEPRECIATION RS.8,43,226/-- MAD E IN ORIGINAL ASSESSMENT CANNOT BE A GROUND TO TAKE ACTION U/S. 1 47/148 OF THE I.T ACT. 6) FOR THAT A NUMBER OF DECISIONS RELIED ON BY THE LD.CIT(A) DOES NOT SQUARELY APPLICABLE TO THE FACT OF THE PRESENT CASE AND FOLLOWING THE DECISION OF THE FULL BENCH OF THE HIGH COURT AS WELL SUPREME COURT, THE REASSESSMENT ORDER SHOULD HAVE BEEN STRU CK DOWN AS IT IS ERRONEOUS AND PERVERSE. 7) FOR THAT THE APPELLANT RESERVES THE RIGHT TO ADD UCE ANY FURTHER GROUND OR GROUNDS, IF NECESSARY, AT OR BEFORE THE H EARING OF THE APPEAL. 5 IN THE ASSESSEES APPEAL IN ITA NO.1893/KOL/2010 FOR A.Y 2005-06, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- I) FOR THAT ON THE FACTS OF THE CASE, LD.CIT(A) HA S ACTED ARBITRARILY IN CONFIRMING THE AOS FINDINGS AS TO I NITIATION OF PROCEEDINGS U/S. 147/148 OF THE I.T ACT 1961. 2) FOR ALL THE MATERIAL FACTS WERE DISCLOSED IN THE AUDIT NOTE AND ACCOUNTS, BALANCE SHEET AND TAX AUDIT REPORT FILED ALONG WITH THE RETURN OF INCOME SO, IT DOES NOT CALL FOR INVOCATIO N OF SEC. 147/148 ITA NOS.1891 TO 1893/KOL/10- M/S. SHINEUP FIBRE LTD 4 FOR REOPENING THE ASSESSMENT BY FORMING A FRESH OP INION FOR THE FIRST TIME ON CERTAIN DISCOVERY FROM ACCOUNTS OR OTHERWIS E, BUT ALL THE FACTS WERE ORIGINALLY FILED WITH THE RETURN, SO IT WAS A CASE OF CHANGE OF OPINION FOR WHICH INITIATION OF PROCEEDINGS U/S. 147/148 IS AB-INITIO- VOID AND ILLEGAL. 3) FOR THAT THE APPELLANT HAVE PRODUCED BOOKS AND EVIDENCES FROM WHICH MATERIAL FACTS COULD NOT BE DISCOVERED, IT IS UNDER NO OBLIGATION TO INFORM THE AO ABOUT POSSIBLE INFERENC E THAT MIGHT BE RAISED AGAINST THE APPELLANT. IT WAS FOR THE OFFICE R TO RAISE SUCH AN INFERENCE IN ABSENCE WHEREOF THE PROCEEDING CANNOT BE INITIATED U/S. 147/148 OF THE I.T ACT. 4) FOR THAT THE DECISION RELIED BY THE LOWER AUTHOR ITIES DOES NOT SQUARELY APPLY TO THE FACT OF THE PRESENT CASE AND THE NUMBER OF DECISIONS RELIED ON BY THE APPELLANT HAVE NOT BEEN CONSIDERED IN ITS TRUE PERSPECTIVE WHICH HAS RESULTED TO ARRIVE AT A ARBITRARY CONCLUSION IN CONFIRMING INITIATION OF PROCEEDING U /S. 147/148 OF THE I.T ACT, THUS THE ACTION OF THE CIT IN CONFIRMING T HE AOS FINDING IS COMPLETELY ERRONEOUS, PERVERSE, MALAFIDE AND ILLEGA L. 5) FOR THAT THE PLANT & MACHINERY WERE UNDER TRIAL RUN AND WAS READY FOR USE, BUT TEMPORARY SUSPENSION OF THE WOR K DUE TO LABOUR UNREST IN THE MILL, AND IT DOES NOT GIVE THE LONG H AND TO THE AO TO REOPEN TO ASSESSMENT U/S. 147/148 OF THE I.T ACT, T HEREFORE, THE DISALLOWANCE OF THE DEPRECIATION RS.6,32,419/- MADE IN ORIGINAL ASSESSMENT CANNOT BE A GROUND TO TAKE ACTION U/S. 1 47/148 OF THE I.T ACT. 6) FOR THAT A NUMBER OF DECISIONS RELIED ON BY THE LD.CIT(A) DOES NOT SQUARELY APPLICABLE TO THE FACT OF THE PRESENT CASE AND FOLLOWING THE DECISION OF THE FULL BENCH OF THE HIGH COURT AS WELL SUPREME COURT, THE REASSESSMENT ORDER SHOULD HAVE BEEN STRU CK DOWN AS IT IS ERRONEOUS AND PERVERSE. 7) FOR THAT THE APPELLANT RESERVES THE RIGHT TO ADD UCE ANY FURTHER GROUND OR GROUNDS, IF NECESSARY, AT OR BEFORE THE H EARING OF THE APPEAL. 6. IT WAS SUBMITTED BY THE LEARNED AR FOR THE ASSE SSEE THAT THE ASSESSEE IS A COMPANY, WHO IS DOING THE BUSINESS OF MANUFACTURING OF COTTON YARN. IT WAS THE SUBMISSION THAT THE ASSESSEE COMPANY HAD ENGAGED I N THE BUSINESS OF MANUFACTURE FROM 1990. IT WAS THE FURTHER SUBMISSION THAT DUE TO CERTAIN LABOUR PROBLEMS THE WORK AT THE ASSESSEES MILL HAD BEEN SUSPENDED FRO M MARCH 2002 TILL JUNE 2006. IT WAS THE SUBMISSION THAT THE ORIGINAL ASSESSMENTS H AD BEEN COMPLETED U/S. 143(3) OF THE I.T ACT 1961, WHEREIN THE ASSESSEE HAD BEEN GRA NTED THE DEPRECIATION ON ITS PLANT ITA NOS.1891 TO 1893/KOL/10- M/S. SHINEUP FIBRE LTD 5 & MACHINERY. IT WAS THE SUBMISSION THAT THE ORIGI NAL ASSESSMENTS FOR THE ASSESSMENT YEARS 2003-04, 2004-05 AND 2005-06 HAD B EEN DONE ON 23-03-2006, 26-12-2008 AND 23-04-2007 RESPECTIVELY. IT WAS THE SUBMISSION THAT THE NOTICES U/S. 148 OF THE ACT FOR THE ASSESSMENT YEARS 2003-04, 2 004-05 AND 2005-06 HAD BEEN ISSUED ON 19-03-2008, 21-07-2008 AND 21-07-2008 FOR THE PURPOSE OF DENYING THE ASSESSEES CLAIM OF DEPRECIATION ON PLANT AND MACHI NERY. IT WAS THE SUBMISSION THAT FOR THE PURPOSE OF RE-OPENING OF ASSESSMENTS THE RE ASONS RECORDED BY THE AO WERE THAT THE ASSESSEE COMPANYS MILL WAS UNDER SUSPENSI ON OF WORKS SINCE 12-03-2002 AND CONSEQUENTLY, HE HAD DENIED THE CLAIM OF DEPREC IATION. IT WAS THE SUBMISSION THAT AT THE OUTSET THE RE-OPENING ITSELF WAS INVALID I N SO FAR AS WHEN THE NOTICE U/S. 148 OF THE ACT HAD BEEN ISSUED, THE RETURN FOR THE ASSESSM ENT YEAR 2006-07 WAS VERY MUCH AVAILABLE BEFORE THE AO AND THE MANUFACTURING HAD BEEN RESTARTED. IT WAS ALSO THE SUBMISSION THAT IN THE ORIGINAL ASSESSMENTS, WHICH HAD BEEN COMPLETED U/S. 143(3) OF THE ACT, THE CLAIM OF DEPRECIATION HAD BEEN EXAMIN ED BY THE AO AND HE ALLOWED THE SAME. IT WAS THE FURTHER SUBMISSION THAT IN THE D IRECTORS REPORT FOR ALL THE THREE ASSESSMENT YEARS, IT HAD ALSO BEEN MENTIONED THAT T HERE WAS ONLY TEMPORARY SUSPENSION OF WORK. IT WAS THE SUBMISSION THAT FUR THER THE ASSESSEE BEING A COMPANY MANUFACTURING PROCESS CAN NOT BE BROUGHT TO HOLD WITHOUT COMPLYING WITH VARIOUS LEGAL REQUIREMENTS. IT WAS THE SUBMISSION THAT THE TEMPORARY SUSPENSION OF THE MANUFACTURING PROCESS DID NOT MAKE THAT THE ASS ESSEE INELIGIBLE FOR THE CLAIM OF DEPRECIATION. IT WAS THE SUBMISSION THAT THE LD.CI T(A) DID NOT CONSIDER THE FACT THAT THE ASSETS UNDER QUESTION WERE PART OF THE BLOCK OF THE ASSETS, WHICH HAD BEEN GRANTED DEPRECIATION IN THE EARLIER YEARS. ONCE, S UCH BLOCK IS GRANTED DEPRECIATION, THEN SUCH DEPRECIATION IS TO CONTINUE AND NO PAR T OF THE BLOCK CAN BE DENIED DEPRECIATION. THE MACHINERY TOGETHER FORMS PART O F THE BLOCK OF THE ASSETS. IT WAS THE SUBMISSION THAT ONCE THE MACHINERY FALLS INTO BLOCK OF ASSETS, IT IS NOT PERMISSIBLE FOR REMOVING ANY PART OF THE BLOCK. IF AND WHEN THE RE IS ANY SALE OR LIQUIDATION OF ANY MACHINERY, THE RECOVERIES ON SUCH SALE/LIQUIDATION GO TO REDUCE THE COST/WDV OF THAT BLOCK. IT WAS THE SUBMISSION THAT THE ASSESSEE MAY BE GRANTED THE CLAIM OF DEPRECIATION AS CLAIMED. ITA NOS.1891 TO 1893/KOL/10- M/S. SHINEUP FIBRE LTD 6 7. THE LEARNED JCIT/DR HAS VEHEMENTLY SUPPORTED THE ORDERS OF THE AO AND THE LD.CIT(A). 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS IT IS NOTICED THAT THE ASSESSEE HAS A GOOD CASE ON MERITS, WE ARE NOT GOING INTO THE IS SUE OF RE-OPENING AS RAISED BY THE ASSESEE. THE CONCEPT OF TEMPORARY SUSPENSION OF MAN UFACTURING PROCESS DOES NOT IN ANY WAY AFFECT THE CLAIM OF DEPRECIATION IN SO FAR AS ONCE IT IS ACCEPTED THAT PARTICULAR PLANT AND MACHINERY HAS BEEN PUT TO USE BY THE ASSESSEE AND S UCH PLANT AND MACHINERY IS OWNED BY THE ASSESSEE, THEN THE VALUE OF THAT PLANT AND MACH INERY ADDS TO THE BLOCK OF ASSETS UNDER THE HEAD PLANT & MACHINERY. ONCE THE SAID BLOCK O F ASSETS/PLANT & MACHINERY IS GRANTED DEPRECIATION, THEN SUCH DEPRECIATION ON THE PLANT & MACHINERY BECOMES CONTINUOUS ALLOWANCE UNTIL AND UNLESS THE BUSINESS ITSELF IS D ISCONTINUED. IN THE ASSESSEES CASE, THERE IS NO DISCONTINUANCE OF BUSINESS. IN THE BUSINESS , TEMPORARY STOPPAGE OF MANUFACTURING PROCESS WOULD NOT DISENTITLE FROM THE ASSESSEES C LAIM OF DEPRECIATION IN RESPECT OF THE SAID BLOCK OF ASSETS. ADMITTEDLY, IT IS NOTICED THAT IN THESE THREE ASSESSMENT YEARS I.E A.YS. 2003- 04, 2004-05 & 2005-06, WHICH ARE UNDER APPEAL THAT THERE HAS BEEN TEMPORARY SUSPENSION OF THE MANUFACTURING ACTIVITIES. IN FACT, FOR THE ASSESSMENT YEAR 2006-07 ONWARDS THE DEPRECIATION HAS ALSO BEEN GRANTED TO THE ASSESSEE ON THE WDV BEING WRITTEN DOWN BY CONSIDERING THE DEPRECIATION FOR THESE ASSESSMENT Y EARS ALSO. THE RETURNS FOR THE SUBSEQUENT YEARS WERE VERY MUCH AVAILABLE TO THE A O, WHEN THE ASSESSMENTS FOR THE RELEVANT THREE ASSESSMENT YEARS 2003-04, 2004-05 A ND 2005-06 I.E UNDER APPEAL WERE UNDER PROCESS. THE REVENUE WAS CLEARLY WELL AWARE T HAT THERE WAS NO DISCONTINUANCE OF ASSESSEES BUSINESS. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED TO CLAIM OF DEPRECIATION FOR ALL THE THREE ASSESSME NT YEARS UNDER APPEAL.. 9. IN THE RESULT, ALL THE ASSESSEES APPEALS IN IT A NOS. 1891, 1892 & 1893/KOL/2010 FOR THE ASSESSMENT YEARS 2003-04, 2004-05 & 2005-06 ST AND ALLOWED AS STATED ABOVE. 5 / 6 /' 7 8 THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT 31- 01-2014 SD/- SD/- ( . , ! ) ABRAHAMP.GEORGE,ACCOUNTANTMEMBER ( 1 & ' , ! ) GEORGE MATHAN, JUDICIAL MEMBER ( (( ( 2 2 2 2 ) )) ) DATE 31/01/2014 ITA NOS.1891 TO 1893/KOL/10- M/S. SHINEUP FIBRE LTD 7 ** PRADIP SPS 5 1 +..9 :94; / COPY OF THE ORDER FORWARDED TO: 1. . &* / THE APPELLANT : M/S. SHINEUP FIBRE LTD 6 LITTLE RUSSEL ST. KOL-71.. 2 +,&* / THE RESPONDENT- DCIT, CENT. CIR-XIX, 18 RABIND RA SARANI, KOL-1 3 4. . .5' / THE CIT, .5' ( )/ THE CIT(A) 5 . #<.7 +.' / DR, KOLKATA BENCH 6 . GUARD FILE . ,9 +./ TRUE COPY, 5'// BY ORDER, $ /ASSTT REGISTRAR