Appeal details
Counselvise Citation
[2019] 118 COUNSELVISE.COM (IT) 4190 (ITAT-BANGALORE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
8 month(s) 13 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
15-02-2019
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
C
Assessment Year
2004-2005
Appeal Filed On
01-06-2018
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER A ND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO . 19 16 /BANG/201 8 ASSESSMENT YEAR : 20 04 - 05 M/S. IBM INDIA PRIVATE LIMITED, NO. 12, SUBRAMANYA ARCADE, BANNERGHATTA MAIN ROAD, BANGALORE 560 029. PAN: AAACI4403L VS. THE JOINT COMMISSIONER OF INCOME-TAX, LARGE TAXPAYERS UNIT (LTU), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI AJAY ROTTI, CA RESPONDENT BY : SHRI SMARAK SWAIN, JCIT (DR) DATE OF HEARING : 11 .0 2 .2019 DATE OF PRONOUNCEMENT : 15 . 0 2 .201 9 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AND THE SAME I S DIRECTED AGAINST THE ORDER OF LD. CIT (A)-12, BANGALORE DATED 31.03.2018 FOR ASSE SSMENT YEAR 2004-05. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. THE GROUNDS STATED HEREUNDER ARE INDEPENDENT OF AND WITHOUT PREJUDICE TO ONE ANOTHER. THE APPELLANT SUBMITS AS UNDER: 1. ORDER BAD IN LAW 1.1 AT THE OUTSET, IBM INDIA PRIVATE LIMITED (HEREI NAFTER REFERRED TO AS 'THE APPELLANT' OR 'THE COMPANY') PRAYS THAT THE ORDER DATED MARCH 31, 2018 PASSED BY THE LEARNED COMMISSIONER OF INCO ME-TAX (APPEALS) - 12, BANGALORE [CIT(A)'], UPHOLDING THE ORDER PASSED UNDER SECTION 147 READ WITH SECTION 143(3) OF THE I NCOME-TAX ACT, 1961 (`THE ACT'). BE STRUCK DOWN AS INVALID, AS THE ORDER IS BAD IN LAW AND ON FACTS. 2. LACK OF JURISDICTION TO INITIATE ACTION UNDER SE CTION 147 OF THE ACT 2.1. THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE VALIDITY OF THE REASSESSMENT PROCEEDINGS AND FAILED TO APPRECIATE T HAT THE ITA NO. 1916/BANG/2018 PAGE 2 OF 6 PROCEEDINGS INITIATED UNDER SECTION 147 OF THE ACT ARE INVALID, UNLAWFUL AND GROSSLY WITHOUT JURISDICTION, AS PRE-C ONDITIONS PRESCRIBED IN LAW WERE NOT SATISFIED. 2.2. THE LEARNED CIT(A) HAS ERRED IN LAW, IN UPHOLD ING THE INITIATION OF THE REASSESSMENT PROCEEDINGS BY THE LEARNED AO B Y DISREGARDING THE SETTLED POSITIONS OF LAW. 2.3. THE LEARNED CIT(A) HAS ERRED IN NOT APPRECIATI NG THAT THE LEARNED AO HAS FAILED TO SUBSTANTIATE THE TEST OF 'REASON T O BELIEVE' WHICH IS SINE QUA NOT I FOR INITIATING THE REASSESSMENT PROC EEDINGS. 2.4. THE LEARNED CIT(A) HAS ERRED IN CONCLUDING THA T THERE WAS NEW TANGIBLE MATERIAL NOTICED AND THAT THERE WAS NO CHA NGE IN OPINION BY THE LEARNED AO. 2.5. THE LEARNED CIT(A) HAS ERRED IN IN IGNORING TH E CORRECT AND RELEVANT FACTS ON RECORD AND CONCLUDING THAT THE AP PELLANT FAILED TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS. 3. DISALLOWANCE OF WRITE BACK OF PROVISION FOR PROP ERTY REGISTRATION CHARGES 3.1. THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE ACTION OF THE LEARNED AO IN DISALLOWING THE DEDUCTION CLAIMED FOR WRITE BACK OF PROVISION FOR PROPERTY REGISTRATION CHARGES AMOUNTI NG TO INR 96,00,000 DURING THE SAID ASSESSMENT YEAR. 3.2. THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE REASONING PROVIDED BY THE LEARNED AO THAT THE APPELLANT IN NO T ELIGIBLE FOR DEDUCTION CLAIMED AS THE AMOUNT PERTAINS TO PROVISI ON REVERSED AND NO ACTUAL PAYMENT IS MADE. IN DOING SO, THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT THE SAID DISALLOWANCE/ ADDITION LEADS TO DOUBLE TAXATION SINCE THE PROVISION FOR PROPERTY REGISTRAT ION CHARGES HAS ALREADY BEEN CHARGED TO TAX IN THE EARLIER ASSESSME NT YEARS AND THE SAID PROVISION WAS REVERSED/ CREDITED TO P&L ACCOUN T DURING THE AY 2004-05. 4. LEVY OF INTEREST UNDER SECTION 234B 4.1. THE LEARNED CIT(A) HAS ERRED IN NOT ADJUDICATI NG ON THE GROUND RAISED BY THE APPELLANT THAT THE LEARNED AO HAS WRO NGLY COMPUTED INTEREST UNDER SECTION 234B(1) OF THE ACT ON TOTAL INCOME DETERMINED ON THE REASSESSMENT ORDER AS AGAINST THE TAX DETERM INED IN THE REGULAR ASSESSMENT. 4.2. THE LEARNED CIT(A) HAS ERRED IN NOT ADJUDICATI NG ON THE GROUND RAISED BY THE APPELLANT THAT THE LEARNED AO HAS WRO NGLY COMPUTED INTEREST WITHOUT CONSIDERING THE FOREIGN TAX CREDIT CLAIMED BY THE APPELLANT, THEREBY LEVYING EXCESS INTEREST UNDER SE CTION 234B OF THE ACT. ITA NO. 1916/BANG/2018 PAGE 3 OF 6 4.3. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FAC TS, BY DIRECTING THE LEARNED AO TO VERIFY THE FOREIGN TAX CREDIT CLAIMED BY THE APPELLANT TO COMPUTE INTEREST UNDER SECTION 234B, WITHOUT APPREC IATING THE FACT THAT THE LEARNED AO HAS ALREADY GRANTED FOREIGN TAX CREDIT AND IT IS ONLY THE COMPUTATION OF INTEREST UNDER SECTION 234B WHICH IS ERRONEOUS AS STATED IN THE ABOVE GROUNDS. THE APPELLANT CRAVES LEAVE TO ADD TO, DELETE, AMEND OR MODIFY ANY OR ALL OF THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEF ORE OR DURING THE HEARING OF THE APPEAL. 3. THE LD. AR OF ASSESSEE SUBMITTED THAT GROUND NO. 1 IS GENERAL AND GROUND NO. 2 IS REGARDING VALIDITY OF REASSESSMENT PROCEED INGS. GROUND NO. 3 IS REGARDING MERIT OF THE DISALLOWANCE MADE BY THE AO OF RS. 96 LAKHS. GROUND NO. 4 IS REGARDING LEVY OF INTEREST U/S. 234 B. HE SUBMITTED THAT GROUND NO. 1 IS GENERAL AND GROUND NO. 4 IS CONSEQU ENTIAL AND ACCORDINGLY, WE HOLD THAT NO ADJUDICATION IS CALLED FOR REGARDIN G THESE TWO GROUNDS. 4. GROUND NO. 2 REGARDING VALIDITY OF REASSESSMENT, IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT REASONS FOR REOPENING RECORDED BY THE AO ARE REPRODUCED BY THE AO ON PAGE NO. 2 OF THE ASSESSMENT ORDER. H E POINTED OUT THAT AS PER THE REASONS RECORDED BY THE AO AND REPRODUCED B Y HIM ON PAGE NO. 2 OF THE ASSESSMENT ORDER, IT IS NOTED BY THE AO THAT AN AMOUNT OF RS. 96 LAKHS BEING PROPERTY REGISTRATION CHARGES WAS CLA IMED AS DEDUCTION ON PAYMENT BASIS AND THIS IS THE OBJECTION OF THE AO T HAT THE AMOUNT SPENT ON PROPERTY REGISTRATION CHARGES IS AN EXPENDITURE IN CONNECTION WITH ACQUISITION OF AN IMMOVABLE PROPERTY AND THEREFORE, CAPITAL EXPENDITURE AND HENCE, NOT ALLOWABLE EVEN U/S. 43B OF IT ACT. HE S UBMITTED THAT BECAUSE OF THESE FACTS, THE REOPENING IS NOT VALID. THE LD. D R OF REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THIS ISSUE REGARDING REOPENING OF ASSESSMENT WAS DECIDED BY CIT (A) AS PER PARAS 3 .2 TO 3.5 OF HIS ORDER AND THESE PARAS ARE REPRODUCED HEREINBELOW FOR READ Y REFERENCE. 3.2 FINDINGS I HAVE GIVEN MY CAREFUL CONSIDERATION TO THE ARGUME NTS OF THE APPELLANT AND THE CONTENTIONS OF THE AO. IT IS SEEN FROM RECORD THAT THE ASSESSEE COMPANY HAD FILED ITS ORIGINAL RETURN ON 0 1.11.2004 AND A REVISED RETURN WAS FILED ON 26.10.2005. ORDER U/S 1 43(3) WAS PASSED ON 29.12.2006. NOTICE UNDER SECTION 148 WAS ISSUED ON 18.02.2011 BROADLY FOR THE REASON THAT THE CLAIM FOR ALLOWABIL ITY OF REGISTRATION ITA NO. 1916/BANG/2018 PAGE 4 OF 6 CHARGES (RS 96,00,000/-) 'ON PAYMENT BASIS' IS INCO RRECT AS THIS AMOUNT IS ONLY A REVERSAL OF THE PROVISION (DETAILE D REASONS ARE CAPTURED AT PAGE 2 OF THE ASSESSMENT ORDER). 3.3 THE REOPENING OF THE ASSESSMENT IN THIS CASE U/ S 148 HAS BEEN DONE BEYOND A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE JURISDICTIONAL REQUIREMENT THA T MUST BE FULFILLED IN SUCH A CASE IS THAT THERE MUST BE A FAILURE ON T HE PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL MATERIAL F ACTS NECESSARY FOR ASSESSMENT FOR THAT ASSESSMENT YEAR. IT IS ALSO TRI TE LAW THAT AN ASSESSMENT CANNOT BE REOPENED ON THE BASIS OF A MER E CHANGE OF OPINION. THERE MUST BE TANGIBLE MATERIAL BEFORE THE ASSESSING OFFICER BEFORE HE CAN REOPEN AN ASSESSMENT. BEYOND THE PERI OD OF FOUR YEARS, IT MUST ALSO BE DEMONSTRATED THAT THERE WAS A FAILU RE ON THE PART OF THE ASSESSEE TO MAKE A TRUE AND FULL DISCLOSURE OF MATE RIAL FACTS NECESSARY FOR THE ASSESSMENT. 3.4 AS MENTIONED IN THE ORDER DATED 23.09.2013 DISP OSING OF OBJECTIONS, (REFERRED TO IN THE ORDER UNDER CONSIDE RATION AT PAGE 4), THERE WAS MATERIAL WHICH HAS COME ON THE RECORD FOR ASSESSMENT YEAR 2002-03 THAT A PROVISION WAS CREATED IN AY 2002-03 FOR THIS AMOUNT OF RS 96,00,000/-. THOUGH IN THE YEAR UNDER CONSIDE RATION, IT WAS SHOWN AS A REVERSAL OF PROVISION, THE TAR QUALIFIED THIS EXPENSE U/S 43B. IN THAT REGARD, THE DISCLOSURE WAS NOT FULL AN D TRUE, FURTHER, THIS ISSUE WAS NEVER EXAMINED DURING THE COURSE OF THE O RIGINAL ASSESSMENT. THEREFORE, IT IS INCORRECT TO SAY THERE IS ANY CHANGE OF OPINION. 3.5 CONSIDERING THE ABOVE, THE ACTION OF THE AO TO REOPEN THE ASSESSMENT IS UPHELD. THIS GROUND IS THEREFORE DISM ISSED. 6. FROM THE ABOVE PARAS REPRODUCED FROM THE ORDER O F CIT (A), IT IS SEEN THAT AS PER TAX AUDIT REPORT, IT WAS STATED THAT THIS CL AIM IS U/S. 43B AND THIS IS ACCEPTED FACTUAL POSITION THAT NO PAYMENT WAS MADE IN THE PRESENT YEAR AND THEREFORE, DEDUCTION U/S. 43B IS NOT ALLOWABLE IN THE PRESENT YEAR U/S. 43B. AS PER THE RELEVANT PORTION OF TAX AUDIT REPO RT ON PAGES 90 AND 91 OF PAPER BOOK, IT IS SEEN THAT IT HAS BEEN SHOWN THAT PROPERTY REGISTRATION FEES WAS PAID OUT OF OPENING BALANCE OF RS. 96 LAKHS WHI CH HAS BEEN PAID DURING THE PRESENT YEAR AND REGARDING DATE OF REMIT TANCE, IT IS SAID THAT NOTE NO. 3 IS RELEVANT AND NOTE NO. 3 SAYS THAT PAID / A DJUSTED DURING THE YEAR AND WHEN THIS IS ADMITTED POSITION OF FACT THAT PAYMENT WAS NOT MADE IN THE PRESENT YEAR AND THERE IS NO EVIDENCE TO CLAIM IN T HE TAX AUDIT REPORT, IN OUR CONSIDERED OPINION, THE REOPENING IS VALID BECAUSE AT THE STAGE OF REOPENING, ONLY A PRIMA FACIE CASE HAS TO BE MADE O UT BY THE AO THAT SOME ITA NO. 1916/BANG/2018 PAGE 5 OF 6 INCOME HAS ESCAPED ASSESSMENT AND THE AO HAS DONE S O IN THE PRESENT CASE. IN THIS VIEW OF THE MATTER, WE UPHOLD THE RE OPENING. GROUND NO. 2 IS REJECTED. 7. REGARDING GROUND NO. 3 IN RESPECT OF MERIT OF TH E DISALLOWANCE MADE BY THE AO AND CONFIRMED BY CIT (A), IT WAS SUBMITTED BY LD . AR OF ASSESSEE THAT IN THE PRESENT YEAR, THERE IS NO CLAIM OF EXPENSES BY WAY OF DEBIT TO P&L ACCOUNT. HE POINTED OUT THAT AS PER PAGE NOS. 178 AND 179 OF PAPER BOOK, PROVISION WAS CREATED IN ASSESSMENT YEAR 2002-2003 & 2003 04 OF RS. 24 LAKHS AND RS. 72 LAKHS TOTAL OF RS. 96 LAKHS BY WAY OF DEBIT TO RENT ACCOUNT AND CREDIT TO PROVISION ACCOUNT AND DISALLO WANCE WAS MADE IN THE RELEVANT YEAR U/S. 43B. THEREAFTER HE DRAWN OUR AT TENTION TO PAGES 182 AND 183 OF THE PAPER BOOK AND HE POINTED OUT THAT SUCH PROVISION IS REVERSED IN THE PRESENT YEAR BY WAY OF DEBIT TO PROVISION ACCOU NT AND CREDIT TO RENT ACCOUNT. HE SUBMITTED THAT SINCE THE PROVISION MAD E IN THE EARLIER YEAR IS ALREADY DISALLOWED IN THE EARLIER YEAR AND IN THE P RESENT YEAR, THERE IS REVERSAL OF SUCH PROVISION WHICH IS ALREADY DISALLO WED IN THE YEAR OF PROVISION, AMOUNT CREDITED TO THE RENT ACCOUNT IN T HE PRESENT YEAR CANNOT BE BROUGHT TO TAX IN THE PRESENT YEAR AND THEREFORE, D ISALLOWANCE MADE BY THE AO IS NOT SUSTAINABLE. THE LD. DR OF REVENUE SUPPO RTED THE ORDERS OF AUTHORITIES BELOW. HE ALSO SUBMITTED THAT EVEN IF THIS CLAIM OF THE ASSESSEE IS ACCEPTED THEN FOR FACTUAL VERIFICATION, THE MATT ER SHOULD BE RESTORED BACK TO THE FILE OF AO. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT THE DISALLOWANCE WAS MADE BY THE AO AND CONFIRMED BY CIT(A) ON THIS BASIS THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S. 43B BUT THE CLA IM IS NOT SUPPORTED BY ANY PROOF OF PAYMENT IN THE PRESENT YEAR. IN VIEW OF THE ARGUMENTS MADE BY LD. AR OF ASSESSEE AND IN VIEW OF THE RELEVANT P ORTION OF THE PAPER BOOK I.E. PAGES 178, 179, 182 AND 183, THE CLAIM OF THE ASSESSEE IS NOT THIS THAT ANY PAYMENT WAS MADE IN THE PRESENT YEAR IN RESPECT OF ANY EXPENDITURE OF EARLIER YEAR FOR WHICH DEDUCTION IS CLAIMED U/S. 43 B OF IT ACT. THE CLAIM OF THE ASSESSEE IS THIS THAT IN EARLIER YEAR, CERTAIN PROVISIONS WAS MADE AND THE SAME WAS DISALLOWED IN THE RESPECTIVE YEAR U/S. 43B AND IN THE PRESENT YEAR, SUCH PROVISION IS REVERSED BY DEBIT TO PROVIS ION ACCOUNT AND CREDIT TO ITA NO. 1916/BANG/2018 PAGE 6 OF 6 RENT ACCOUNT. THIS IS THE CLAIM OF THE ASSESSEE TH AT SUCH CREDIT TO RENT ACCOUNT IN THE PRESENT YEAR BY WAY OF REVERSAL OF T HE EARLIER PROVISION HAVING BEEN ALREADY DISALLOWED IN THE RESPECTIVE YEAR, CAN NOT BE TAXED IN THE PRESENT YEAR. IF THE FACTS STATED BY LD. AR OF ASS ESSEE ARE CORRECT THEN THE CLAIM OF ASSESSEE IS ACCEPTABLE. BUT SINCE THIS FA CTUAL ASPECT HAS NEVER BEEN EXAMINED BY AO OR CIT (A), WE FEEL IT PROPER T O RESTORE THE MATTER BACK TO THE FILE OF AO FOR FACTUAL VERIFICATION OF THIS ASPECT OF THE MATTER. ACCORDINGLY WE SET ASIDE THE ORDER OF CIT (A) AND R ESTORE THE MATTER BACK TO THE FILE OF AO FOR FRESH DECISION AFTER EXAMINING T HE FACTUAL ASPECT OF THE MATTER. WE DIRECT THE AO THAT HE SHOULD EXAMINE TH E FACTUAL ASPECT AND IF THIS IS FOUND THAT THIS AMOUNT OF RS. 96 LAKHS IS C REDITED IN THE RENT ACCOUNT IN THE PRESENT YEAR ON ACCOUNT OF REVERSAL OF PROVI SION WHICH WAS MADE IN EARLIER YEAR AND THE SAID PROVISION IN EARLIER YEAR WAS ALREADY DISALLOWED IN THE RESPECTIVE YEAR, THEN REVERSAL OF SUCH PROVISIO N CANNOT BE BROUGHT TO TAX IN THE YEAR OF REVERSAL SINCE IT HAS ALREADY BEEN B ROUGHT TO TAX IN THE EARLIER YEAR BEING THE YEAR OF PROVISION. HENCE IF THE ASS ESSEE CAN ESTABLISH THESE FACTUAL ASPECTS, THEN NO DISALLOWANCE IS CALLED FOR IN THE PRESENT YEAR. GROUND NO. 3 IS ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (PAVAN KUMAR GADALE) (ARUN KUMAR GARODI A) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 15 TH FEBRUARY, 2019. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.
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