Ramco Industries Ltd., CHENNAI V. DCIT, Madurai

ITA 1949/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8111 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 09-09-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V VIVEKANANDAN IRS
• Assessee Lawyers: V JAGADISAN
• Keywords: Depreciation; Assessment record
• Section: 14A; 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . , ! ' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A.NOS.1948 & 1949/MDS/2015 ! # $# / ASSESSMENT YEARS : 2010-2011 & 2011-12 M/S. RAMCO INDUSTRIES LTD, 47, P.S.K. NAGAR, RAJAPALAYAM. VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-2, MADURAI. [PAN AAACR 5284J] ( / APPELLANT) ( /RESPONDENT) %& ' ( / APPELLANT BY : SHRI. V. JAGADISAN, C.A. )*%& ' ( /RESPONDENT BY : SHRI. V. VIVEKANANDAN, IRS, CIT ' + / DATE OF HEARING : 03-11-2015 ,-$ ' + / DATE OF PRONOUNCEMENT : 28.01-2016 / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER : THE APPEALS FILED BY THE ASSESSEE ARE AGAINST DIF FERENT ORDERS OF COMMISSIONER OF INCOME TAX -1, MADURAI DA TED 30.03.2015 FOR THE ASSESSMENT YEARS 2010-2011 AND 2011-2012 PA SSED U/S.263 OF THE INCOME TAX ACT, 1961. ITA NOS.1948 & 1949/MDS/2015. :- 2 -: 2. THE ASSESSEE HAS RAISED THE GROUNDS CHALLENGING THE ORDER OF U/SEC.263 OF THE ACT AND ALSO ADDITIONAL GROUNDS. THE ASSESSMENT WAS MADE DENOVA WITHOUT CONSIDERING THE OBJECTIONS RAIS ED BY THE ASSESSEE. THE ISSUE IN THESE TWO APPEALS ARE COMMO N IN NATURE, HENCE THESE APPEALS ARE COMBINED, HEARD TOGETHER, A ND DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3. WE TAKE UP APPEAL OF ASSESSMENT YEAR 2010-2011 FOR ADJUDICATION. THE ASSESSEE IS IN THE BUSINESS OF B UILDING PRODUCTS AND TEXTILES AND RETURN OF INCOME WAS FILED ON 22.09.20 10 DISCLOSING TOTAL INCOME OF :52,41,85,120/- AND WAS PROCESSED U/S.143 (1) OF THE ACT AND DETERMINED TAX DEMAND OF :3,89,36,420/-. SUBSE QUENTLY THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S.143(2) WAS ISSUED. IN COMPLIANCE TO THE NOTICES THE LD. AUTHORISED REPRES ENTATIVE APPEARED FROM TIME TO TIME AND FILED DETAILS AS CALLED FOR. FURTHER MENTIONED THAT DEPRECIATION ON PLANT AND MACHINERY WERE CONSI DERED BASED ON THE INCOME TAX RULES APPLICABLE FOR ASSESSMENT YEAR 2006-2007 AND THERE ARE DIFFERENT ASSET CATEGORIZED UNDER HEAD AI R AND WATER POLLUTION. THE ASSESSEE CLAIMED DEPRECIATION QUART ER WISE, WHEREAS CONSIDERING THE RATES AND ALSO ADDITIONS TO MACHINE RY, THE ASSESSING OFFICER HAS DISALLOWED DEPRECIATION AND RESTRICTED THE CLAIM OF DEPRECATION ON AIR AND WATER POLLUTION CONTROL ENER GY SAVING DEVICES AND RENEWABLE ENERGY DEVICES FOR THE FIRST QUARTER AT 15% AND 7.5% ITA NOS.1948 & 1949/MDS/2015. :- 3 -: FOR THE ADDITIONS IN SECOND QUARTER AND MADE AN AD DITION OF EXCESS CLAIM OF DEPRECIATION OF :45,64,398/-. THE LD. ASS ESSING OFFICER BASED ON FINAL STATEMENT FOUND THAT THE COMPANY IS IN RE CEIPT OF DIVIDEND INCOME OF :12,65,38,451/- AND CLAIMED AS EXEMPTED U/S.10(34) OF THE ACT. THE ASSESSEE COMPANY HAS NOT DISALLOWED ANY EX PENDITURE ON SUCH EXEMPTED INCOME. BASED ON THE SUBMISSIONS OF LD. AUTHORISED REPRESENTATIVE AND RELY ON THE DECISIONS OF CO-ORDI NATE BENCH, THE ASSESSING OFFICER MADE DISALLOWANCE OF 2% OF DIVIDE ND INCOME AT :25,30,769/- AS ADDITION U/SEC.14A OF THE ACT. THE COMPANY RECEIVED INVESTMENT SUBSIDIARY FROM THE GOVERNMENT :5,40,36, 767/- AND CLAIMED AS CAPITAL SUBSIDIARY BASED ON ACCOUNTING S TANDARD AS-12 OF THE ACT. THE SUBSIDIARY WAS RECEIVED FROM STATE GO VERNMENT FOR PROMOTING INDUSTRIAL UNITS WITH NEW INVESTMENTS IN THE INDUSTRIAL SECTOR AND THE SAME WAS CLAIMED AS DEDUCTION. BUT THE ASS ESSING OFFICER ON THE PRESUMPTION BELIEVED SUBSIDIARY AS REVENUE IN N ATURE AND ADDED TO RETUNED INCOME AND ASSESSED TOTAL INCOME AT :58, 53,17,060/- AND RAISED DEMAND. 4. SIMILARLY FOR THE ASSESSMENT YEAR 2011-12 THE ASSES SEE FILED RETURN OF INCOME ON 28.09.2011 WITH TOTAL INCOME OF :54,10,48,490/-. THE ASSESSING OFFICER ISSUED NOTICE AND IN COMPLIAN CE TO THE NOTICES THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND MADE SUBMISSIONS AND FILED DETAILS. TH E ASSESSING OFFICER ITA NOS.1948 & 1949/MDS/2015. :- 4 -: UPON VERIFICATION FOUND THAT DEPRECATION CLAIMED IS IN EXCESS IN CASE OF AIR AND WATER POLLUTION CONTROL EQUIPMENTS AND MADE AN ADDITION OF :52,41,671/- AND SIMILARLY ON ENERGY SAVING DISALLO WED EXCESS DEPRECATION OF :5,66,054/- AS IN EARLIER YEAR. THE LD.ASSESSING OFFICER MADE DISALLOWANCE UNDER 14A BY APPLYING THE CO-ORDI NATE BENCH DECISION DISALLOWED 2% OF DIVIDEND INCOME AS EXPEND ITURE :.6,03,742/- INCURRED ON EXEMPTED INCOME AND ON THE SAME LINES THE LD. ASSESSING OFFICER DISALLOWED CAPITAL SUBSIDIARY RECEIVED FROM STATE GOVERNMENT AND ADDED TO THE RETURNED INCOME AND COMPLETED ASSE SSMENT U/S.143(3) OF THE ACT DATED 27.02.2014 ASSESSING TO TAL INCOME :60,94,29,430/- AND RAISED DEMAND. AGGRIEVED BY TH E ORDER OF THE ASSESSING OFFICER FOR BOTH ASSESSMENT YEARS, THE AS SESSEE FILED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEA LS). WHEN THE MATTERS ARE PENDING THE COMMISSIONER OF INCOME TAX, MADURAI ISSUED NOTICE OF REVISION U/S. 263 OF THE ACT FOR THE ASSE SSMENT YEAR 2010- 2011 DATED 09.03.2015. THE SHOW CAUSE NOTICES WAS ISSUED BASED ON RECORDS WITH THE ASSESSING OFFICER ON THE FOLLOWIN G ISSUES:- ON PERUSAL OF MISCELLANEOUS RECORDS FOR ASSESSMENT YEAR 2010-11 IT IS NOTICE THAT (I) THE ASSESSEE DOES NOT SEEM TO HAVE PAID TO THE DIVIDEND DISTRIBUITON TAX U/S.115 O OF THE I.T. ACT. (II) THE ROC FEES TO THE TUNE OF :7,50,000/- HAS NOT BEEN CAPITALIZED. ITA NOS.1948 & 1949/MDS/2015. :- 5 -: (III) THE DISALLOWANCE U/S.14A OF THE IT ACT HAS NOT BEEN WORKED OUT IN ACCORDANCE WITH RULE 8D OF THE I.T. RULES. (IV) THE CLAIM OF DEDUCTION OF :9,28,96,203/- U/S.80IA HAS NOT BEEN CERTIFIED BY THE ACCOUNTANT IN FORM 10CCB AND FURTHER THE QUANTUM OF DEDUCTION HAS NOT BEEN WORKED OUT IN ACCORDANCE WITH THE PROVISIONS OF SEC.80IA OF THE I.T. ACT. AND SIMILARLY ISSUED NOTICE FOR ASSESSMENT YEAR 201 1-12 ON THE DISALLOWANCE U/SEC 14A OF THE ACT. IN COMPLIANCE TO THE SHOW CAUSE NOTICES, THE ASSESSEE FILED WRITTEN SUBMISSIONS ALO NGWITH EVIDENCES. ON THE FIRST ISSUE OF DIVIDEND DISTRIBUTION TAX U/ S.115 O THE ASSESSEE FILED PROOF OF CHALLANS EVIDENCING PAYMENT OF DIVID END DISTRIBUTION TAX :36,82,098/- ON 14.08.2009. ON THE SECOND ISSUE OF ROC FEES THE ASSESSEE MADE SUBMISSIONS THAT AUTHORIZED CAPITAL OF THE COMPANY WAS INCREASED FROM :5 CRORES TO :20 CRORES AND THE AMOUNT :7,50,000/- WAS PAID AS ROC FEES. THE ASSESSEE COM PANY FILED COPY OF BOARD RESOLUTION, COPY OF FORM FILED WITH ROC AN D COPY OF FEES RECEIPT. THE INCREASE IN AUTHORIZED CAPITAL IS IN RESPECT OF ISSUE OF BONUS SHARES AND RELIED ON THE DECISION OF SUPREME COURT IN THE CASE OF CIT VS. GENERAL INSURANCE CORPORATION LTD. 289 ITR 232 AND OTHER JUDICIAL HIGH COURTS DECISIONS AND THE TREATED AS R EVENUE EXPENDITURE. ON THE CONTENTION OF CAPITALIZATION OF ROC FEES TH E ASSESSEE SUBMITTED THAT COST OF ISSUE OF BONUS SHARE IS NOT OF ANY ENDURING BENEFIT TO THE COMPANY AND THE SAME WAS CLAIMED AS REVENUE ITA NOS.1948 & 1949/MDS/2015. :- 6 -: EXPENDITURE. ON THE ISSUE OF 14A DISALLOWANCE THE ASSESSEE HAS MADE INVESTMENTS IN DOMESTIC COMPANIES AND NO FRESH INVE STMENTS ARE MADE IN THE RELEVANT PREVIOUS YEARS. THE ASSESSEE COMPANY HAS MADE INVESTMENT IN LISTED COMPANIES AND DIVIDEND INCOME IS DIRECTLY CREDITED INTO BANK ACCOUNTS. THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE U/SEC14A OF THE ACT. THE ASSESSEE COMPANY CHALLENGE D THE ADDITION BY WAY OF APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) MADURAI. ON THE ISSUE OF DEDUCTION U/SEC.80IA OF T HE ACT THE ASSESSEE FILED THE AUDIT REPORT AND CERTIFICATE OF CHARTERE D ACCOUNTANT IN FORM 10CCB IN ASSESSMENT PROCEEDINGS AND FURTHER SUBMIT TED THAT RETURN OF INCOME WAS FILED ELECTRONICALLY, AND FULL PARTIC ULARS ARE FURNISHED ALONGWITH WORKING OF CLAIM OF DEDUCTION U/S.80IA OF THE ACT. THE ASSESSEE COMPANY CHALLENGED VALIDITY OF ISSUE OF RE VISION NOTICES THAT COMMISSIONER OF INCOME TAX HAS NO JURISDICTION WHER E THE ORDER OF THE ASSESSING OFFICER IS NOT ERRONEOUS BUT ALSO NO T PREJUDICIAL TO THE INTEREST OF REVENUE AND ASSESSING OFFICER HAS APPL IED HIS MIND AND ACCEPTED DETAILS ON THIS ISSUE AND PRAYED FOR DROPP ING OF PROCEEDINGS U/S.263 ACT. 5. UPON SUBMISSION OF INFORMATION, THE COMMISSIONER O F INCOME TAX WITHOUT VERIFYING THE CORRECTNESS DISTI NGUISHED THE JUDGMENTS SUBMITTED BY THE ASSESSEE AND RELIED ON THE FINDINGS OF MALABAR INDUSTRIAL CEMENT CO. LTD VS. CIT 243 ITR 8 3 (SC) AND VIEWED ITA NOS.1948 & 1949/MDS/2015. :- 7 -: THAT ASSESSMENT WAS ERRONEOUS AND PREJUDICIAL TO TH E INTEREST OF REVENUE AND ISSUED DIRECTIONS TO THE ASSESSING OFFI CER TO ENQUIRE INTO THE FINDINGS REFERRED IN REVISION ORDER AND ANY OTH ER ISSUE AND CANCELLED THE ASSESSMENT ORDER PASSED U/S.143(3) OF THE ACT DATED 01.02.2013 AND DIRECTED THE ASSESSING OFFICER TO RE DO THE ASSESSMENT AFRESH. SIMILARLY FOR THE ASSESSMENT YEAR 2011-2012 ISSUED SHOW CAUSE NOTICES AND CANCELLED ASSESSMENT ORDER U/S.143(3) DATED 27.02.2014. AGAINST THE REVISION ORDER U/SEC.263 OF THE ACT FOR BOTH THE ASSESSMENT YEARS, THE ASSESSEE COMPANY FILED APPEAL S BEFORE THE TRIBUNAL. 6. BEFORE THE TRIBUNAL, THE ASSESSEE HAS RAISED GROUND S ON LACK OF JURISDICTION OF CIT FOR PASSING ORDER U/S.263 O F THE ACT AND ALSO ON THE GROUNDS OF CANCELLING THE ORDER OF THE ASSESSI NG OFFICER AND NO FRESH INQUIRY SHOULD BE DIRECTED. THE ASSESSEE ALSO RAISED ADDITIONAL GROUNDS ON THE ISSUE OF DISALLOWANCE U/S.14A R.W.R ULE 8D AND THE ASSESSEE AS FILED AN APPEAL ON DISALLOWANCE U/SEC.1 4A BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) ON THE SAME SU BJECT MATTER. THE COMMISSIONER OF INCOME TAX CANNOT CANCEL ENTIRE ASSESSMENT, AND REITERATED HIS SUBMISSIONS MADE BEFORE THE LOWE R AUTHORITIES. THE COMMISSIONER OF INCOME TAX HAS NOT GIVEN CLARIFICA TION ON THE ORDER OF THE ASSESSING OFFICER AS ERRONEOUS AND PREJUDICI AL TO THE INTEREST OF THE REVENUE. FURTHER, CANNOT INVOKE FRESH ENQUIRY A ND DIRECT THE ITA NOS.1948 & 1949/MDS/2015. :- 8 -: ASSESSING OFFICER TO DO SO. FOR THE ASSESSMENT YE ARS 2010-2011 AND 2011-12, THE ASSESSEE HAS FILED APPEALS BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) AGAINST ADDITIONS IN ASSESSMEN T ORDER. THE NOTICE OF COMMISSIONER OF INCOME TAX IN THE REVISIO N PROCEEDINGS LACKS JURISDICTION AND THE INFORMATION WAS SUBMITTE D IN THE ASSESSMENT PROCEEDINGS AND ASSESSING OFFICER HAS APPLIED HIS M IND AND AFTER DUE VERIFICATION AND EXAMINATION COMPLETED ASSESSMENT. AGAINST THE ORDER OF ASSESSMENT U/S.143(3) R.W.S. 263 DATED 23.09.201 3, THE ASSESSEE HAS FILED AN APPEALS BEFORE THE COMMISSIONER OF INC OME TAX. THE ONLY ISSUE ARISES THAT THE ORDER OF COMMISSIONER OF INCOME TAX U/S.263 IS WITHOUT JURISDICTION IN TREATING THE AS SESSMENT DENOVA. SINCE THE ISSUE OF SEC.14A IS A SUBJECT MATTER OF A PPEAL BEFORE COMMISSIONER OF INCOME TAX (APPEALS) THE ORDER OF C OMMISSIONER OF INCOME TAX U/SEC 263 HAS TO BE MODIFIED. THE ASSESS EE FILED PAPER BOOK AND ALSO RELIED ON THE DECISIONS ON THE ISSUE OF JURISDICTION AND PRAYED THE TRIBUNAL TO QUASH THE REVISION ORDER. 7. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTAT IVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES AND O BJECTED THAT THE COMMISSIONER OF INCOME TAX NEED NOT GIVE REASONS FO R PASSING THE ORDER AND RELIED ON THE DECISION OF CIT VS. INFOS YS TECHNOLOGIES 341 ITR 293 (KAR) AND 313 ITD 182 (AT) SPECIAL BENCH, C HENNAI. ITA NOS.1948 & 1949/MDS/2015. :- 9 -: 8. WE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES, PERUSED THE MATERIAL ON RECORD AND JUDICIAL DECISIONS CITED . THE LD. AUTHORISED REPRESENTATIVE POINTED OUT THE JURISDICTION ASPECT AND COMMISSIONER OF INCOME TAX HAS NOT PROVED THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. TH E COMMISSIONER OF INCOME TAX HAS POWER TO REVISE AND PASS ORDERS BASE D ON ASSESSMENT RECORD BUT NOT ON ISSUES WHERE THE ASSESSEE IS IN APPEAL ON THE DISALLOWANCE AGAINST ASSESSMENT ORDER BEFORE COMMIS SIONER OF INCOME TAX (APPEALS) AND THE SAME ISSUES CANNOT BE SUBJEC T TO REVISION. THE MAIN REASON FOR INVOKING REVISION U/S.263 OF THE AC T BY THE CIT FOR THE ASSESSMENT YEAR 2010-11 AND 2011-12 THAT THE ASSESS ING OFFICER FAILED TO APPLY PROVISIONS OF SEC.14A OF RULE 8D FOR THE A BOVE ASSESSMENT YEARS. THOUGH RULE 8D CAME INTO EFFECT FROM 24.03. 2008 AND NON APPLICABILITY OF PROVISIONS IS ERRONEOUS AND OMITTE D BY THE ASSESSING OFFICER AND IT IS PREJUDICIAL TO THE INTEREST OF TH E REVENUE AND WE DO NOT FIND ANY MERITS IN THE ARGUMENT OF THE LD. AUTH ORISED REPRESENTATIVE AS ORDER UNDER SEC.263 IS BAD IN LAW . THE ASSESSEE HAS RAISED ADDITIONAL GROUNDS THAT THE MATTER IS A SUBJ ECT MATTER OF APPEAL BEFORE CIT AND THAT THE CIT CANNOT EXERCISE JURISDI CTION U/S.263 OF THE ITA NOS.1948 & 1949/MDS/2015. :- 10 -: ACT. WE ARE OF THE OPINION THAT THE ARGUMENT OF TH E LD. AUTHORISED REPRESENTATIVE IS NOT CORRECT WHERE THE NOTICE U/S. 263 WAS ISSUED WITH REFERENCE TO RULE 8D FURTHER DOCTRINE OF MERGER CAN NOT BE APPLIED ON THIS ISSUE AS THE ISSUE BEFORE CIT IS WITH REGARD T O DISALLOWANCE U/S.14A AND NOT RELATING TO RULE 8D WHICH IS APPLI CABLE FROM 2008- 2009 ONWARDS. FURTHER CIT CAN SUO-MOTU INITIATED P ROCEEDINGS WERE ASSESSING OFFICER TAKES A WRONG DECISION WITHOUT CO NSIDERING THE MATERIAL ON RECORD OR HE TAKES A DECISION WITHOUT M AKING A ENQUIRY INTO MATTERS, WHERE SUCH ENQUIRY PRIME FACIE WARRAN TED. IN THE PRESENT CASE, THE ASSESSING OFFICER HAS TO CONSIDE R THE PROVISIONS APPLICABLE UNDER RULE 8D EFFECTIVE FROM ASSESSMENT YEAR 2008-09. BUT THE ASSESSING OFFICER MADE DISALLOWANCE BY FOLLOWIN G CO-ORDINATE BENCH DECISION FOR EARLIER ASSESSMENT YEAR. IT IS APPARENT FROM FACTS AND CIRCUMSTANCES THE ORDER OF THE ASSESSING OFFICE R IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND ACCORDIN GLY WE UPHOLD THE ORDER OF CIT AND DISMISS THE GROUNDS OF THE ASSESSE E. SINCE, THE CIT HAS NOT GIVEN ANY FINDINGS ON MERITS OF THE ADDITIO N AND HE HAS ONLY REMITTED THE ISSUE TO THE ASSESSING OFFICER TO CON SIDER AFRESH, WE REFRAIN FROM ADJUDICATING THE ISSUE ON ITA NOS.1948 & 1949/MDS/2015. :- 11 -: MERITS OF ADDITIONS PROPOSED BY CIT. 9. IN THE RESULT, THE APPEALS OF THE ASSESSEE IN ITA N OS.1948 & 1949/MDS/2015 ARE DISMISSED. ORDER PRONOUNCED ON 28 TH JANUARY, 2016, AT CHENNAI. SD/- SD/- ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER ( . ) (G. PAVAN KUMAR) /JUDICIAL MEMBER / CHENNAI . / DATED: 28 .01.2016. KV / ' )!+12 32$+ / COPY TO: 1. %& / APPELLANT 3. 4+ () / CIT(A) 5. 278 )!+! / DR 2. )*%& / RESPONDENT 4. 4+ / CIT 6. 89# : / GF