Indo Doha Chemicals & Pharmaceuticals Ltd., CHENNAI V. ACIT, CHENNAI

ITA 202/CHNY/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86278 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 24-12-2014
• Assessment Year: 1999-2000
• Appeal Filed On: 09-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMASAMY K SENIOR
• Assessee Lawyers: G SEETHARAMAN; G NARAYANASAMY
• Keywords: Reopening of assessment; Depreciation; Difference of opinion; Change of opinion
• Section: 143(3); 147; 148; 6

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , ! # $ , % & BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO. 202/MDS/2011 ( / ASSESSMENT YEAR: 1999-2000) INDO DOHA CHEMICALS & PHARMACEUTICALS LTD. 283, TTK ROAD, CHENNAI-600 018. VS ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-II(2), CHENNAI-600 034. PAN: AAACI8003N ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. G.NARAYANASAMY, C.A. & MR. G.SEETHARAMAN, C.A. /RESPONDENT BY : MR. RAMASAMY.K , SENIOR STANDING COUNSEL /DATE OF HEARING : 24 TH DECEMBER, 2014 /DATE OF PRONOUNCEMENT : 30 TH JANUARY, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II, CHENNA I DATED 12.11.2010 FOR THE ASSESSMENT YEAR 1999-2000 ARISIN G OUT OF THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) RE AD WITH SECTION 147 OF THE ACT. THOUGH THE ASSESSEE HAS RAI SED SEVEN GROUNDS IN ITS APPEAL, THE MAIN GROUNDS ARE O NLY TWO. THE FIRST GROUND IS CHALLENGING THE REOPENING OF AS SESSMENT 2 ITA NO.202/MDS/2011 UNDER SECTION 147 AND THE SECOND GROUND IS CHALLENG ING DISALLOWANCE OF EXPENDITURE TO THE TUNE OF ` 14,10,282/- 2. BRIEF FACTS ARE THAT ASSESSMENT FOR THE ASSESSME NT YEAR 1999-2000 WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 27.2.2004 DETERMINING INCOME OF THE ASSESSEE AT ` 57,24,850/- . A NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED ON 17.3.2006 AND REASSESSMENT WAS COMPLETED UNDER SECTION 143(3) READ WITH SECTION 147 ON 18.12.2006 DETERMINING THE INCOME OF THE ASSESSEE AT ` 71,35,130/-. WHILE COMPLETING THE REASSESSMENT, THE ASSESSING OF FICER DISALLOWED EXPENDITURE OF ` 14,10,282/- CLAIMED BY THE ASSESSEE STATING THAT ITEMS OF EXPENDITURE INCURRED BY THE ASSESSEE ARE NOT RELATED TO THE LEASE INCOME RECEI VED BY THE ASSESSEE, THEREFORE IT CANNOT BE SAID TO HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING I NCOME. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) SUSTAINED THE REOPENING OF ASSESSMENT HOLDING THAT IT IS NOT A MERE CHANGE OF OPINION AND THE ASSESSEE HAS NOT SH OWN MATERIAL FACTS BEFORE THE ASSESSING OFFICER. HE ALS O SUSTAINED THE DISALLOWANCE OF EXPENDITURE OBSERVING THAT LEA SE DEED 3 ITA NO.202/MDS/2011 DOES NOT CONTAIN ANY CLAUSE MAKING IT OBLIGATORY FO R THE ASSESSEE TO SPEND OR REIMBURSE SPIC PHARMACEUTICALS LTD. FOR THE COST OF SPARES, CONSUMABLES, MINOR REPAIRS ETC. ON THE MACHINERY/FACTORY LEASED OUT BY THE ASSESSEE TO SPIC PHARMA LTD. 3. LEARNED COUNSEL FOR THE ASSESSEE, AT THE OUTSET, SUBMITS THAT REASSESSMENT MADE BY THE ASSESSING OFF ICER IS BARRED BY LIMITATION IN VIEW OF THE PROVISO TO SECT ION 147 OF THE ACT, AS IT WAS REOPENED BEYOND FOUR YEARS. LEAR NED COUNSEL SUBMITS THAT THERE HAS BEEN NO OMISSION OR FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSING FULLY AND T RULY THE MATERIAL FACTS NECESSARY FOR ASSESSMENT. COUNSEL SU BMITS THAT ASSESSING OFFICER HAS NEVER GIVEN ANY REASON FOR REOPENING. THERE WAS NO ALLEGATION THAT THERE IS FA ILURE ON THE PART OF THE ASSESSEE IN FURNISHING DETAILS NECESSAR Y FOR COMPLETION OF ASSESSMENT. THEREFORE, REASSESSMENT M ADE BEYOND FOUR YEARS IS BAD IN LAW. LEARNED COUNSEL FO R THE ASSESSEE SUBMITS THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER IN FACT CALLED F OR DETAILS ON 21.11.2003 FOR CONVERSION AND SERVICE CHARGES, RECO NCILIATION 4 ITA NO.202/MDS/2011 OF SPIC AMOUNT, REPAIRS & MAINTENANCE, DETAILS FOR OTHER EXPENSES ETC. AND THE ASSESSEE FURNISHED ALL THE DE TAILS CALLED FOR BY THE ASSESSING OFFICER AND ON EXAMINI NG ALL THESE DETAILS THE ASSESSING OFFICER COMPLETED THE ASSESSMENT. THEREFORE, HE SUBMITS THAT ALL THE REQU IRED DETAILS WERE FURNISHED IN THE COURSE OF ASSESSMENT PROCEEDINGS AND THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE IN PROVIDING MATERIALS NECESSARY FOR COMPL ETION OF ASSESSMENT. THEREFORE, LEARNED COUNSEL SUBMITS THAT REOPENING IS ONLY A MERE CHANGE OF OPINION AND THE REOPENING WAS MADE BASED ON THE MATERIALS ALREADY O N RECORD AND IT IS A MERE CHANGE OF OPINION AND IS B AD IN LAW IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT I N THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. (320 ITR 561) 4. LEARNED SENIOR STANDING COUNSEL FOR THE REVENUE SUBMITS THAT IT IS NOT A MERE CHANGE OF OPINION. TH E ASSESSEE NEVER FILED THE REQUIRED DETAILS FOR COMPLETION OF ASSESSMENT IN RESPECT OF CLAIMING EXPENDITURE AGAINST INCOME A SSESSED, THEREFORE HE PLEADS FOR SUSTAINING THE ORDERS OF TH E LOWER AUTHORITIES. THE BENCH DIRECTED THE SENIOR STANDIN G COUNSEL 5 ITA NO.202/MDS/2011 TO FURNISH REASONS FOR REOPENING WHICH WERE NOT FUR NISHED TO THE ASSESSEE AT ANY STAGE. ON THE DIRECTIONS OF THE BENCH, A COPY OF THE REASONS FOR REOPENING OF ASSESSMENT WER E PLACED ON RECORD BEFORE US. 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND MATERIALS ON RECORD. IN THIS CASE, ORIGINAL ASS ESSMENT WAS COMPLETED ON 27.2.2004 ACCEPTING THE INCOME OF ` 57,24,850/- RETURNED BY THE ASSESSEE. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT NOTICED THA T AN AMOUNT OF ` 90,00,000/- WAS CREDITED TO PROFIT AND LOSS ACCOUNT OF THE ASSESSEE IN RESPECT OF CONVERSION & SERVICE CHARGES . HE ALSO NOTICED THAT ASSESSEE HAS DEBITED CERTAIN EXPENDITURE TO THE PROFIT AND LOSS ACCOUNT. IT APPE ARS THAT ASSESSING OFFICER HAS CALLED FOR DETAILS FROM THE A SSESSEE IN RESPECT OF CONVERSION AND SERVICE CHARGES RECEIVED, RECONCILIATION OF SPIC AMOUNT, REPAIRS & MAINTENANC E, DETAILS FOR OTHER EXPENSES, DETAILS OF LOANS AND ADVANCES O N 21.11.2003. THE ASSESSEE FURNISHED DETAILS CALLED F OR AND THE ASSESSING OFFICER COMPLETED THE ASSESSMENT ACCEPTIN G THE INCOME RETURNED BY THE ASSESSEE. A NOTICE UNDER SE CTION 148 WAS ISSUED ON 17.3.2006 AND THE REASSESSMENT WA S 6 ITA NO.202/MDS/2011 COMPLETED UNDER SECTION 143(3) READ WITH SECTION 1 47 ON 18.12.2006. IN VIEW OF THE PROVISO TO SECTION 147 O F THE ACT, AN ASSESSMENT WHICH IS ALREADY COMPLETED UNDER SECT ION 143(3) CANNOT BE REOPENED BEYOND FOUR YEARS FROM T HE END OF THE RELEVANT ASSESSMENT YEAR. IN THIS CASE, THE ASSESSMENT YEAR IS 1999-2000, THEREFORE ASSESSMENT CANNOT BE REOPENED BEYOND 31 ST MARCH, 2004 UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF FAILURE ON THE PART OF THE ASSESSEE OR TO DISCLOSE FULLY AND TRULY ALL MATERI AL FACTS NECESSARY FOR ASSESSMENT. IN THIS CASE ASSESSMENT W AS REOPENED BEYOND FOUR YEARS, THEREFORE PROVISO TO S ECTION 147 APPLIES. WE HAVE ALSO PERUSED REASONS FURNISHE D BY THE LEARNED SENIOR STANDING COUNSEL FOR REOPENING OF ASSESSMENT. THE ONLY REASON GIVEN FOR REOPENING OF ASSESSMENT IS THAT ASSESSEE CLAIMED EXPENDITURE TO THE TUNE OF ` 14,10,282/- AGAINST LEASE RENTAL INCOME FROM SPIC AS CONVERSION & SERVICE CHARGES. ACCORDING TO THE REA SONS FURNISHED ONLY DEPRECIATION AGAINST LEASE RENTAL IN COME CAN BE ALLOWED AND EXPENDITURE IS TO BE DISALLOWED. IN THE REASONS RECORDED, THERE IS NOTHING MENTIONED ABOUT 7 ITA NO.202/MDS/2011 FURNISHING OF INACCURATE PARTICULARS BY THE ASSESSE E . THOUGH IN THE REASONS COMMISSIONERS APPROVAL IS SOLICITED TO REOPEN THE ASSESSMENT AS FOUR YEARS HAS ELAPSED FROM THE END OF THE ASSESSMENT YEAR 1999-2000, WE FIND THAT THE ASS ESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS CAL LED FOR DETAILS AND ASSESSEE FURNISHED THE DETAILS AND ON C ONSIDERING THE DETAILS ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT. IN SUCH CIRCUMSTANCES, WE DO NOT FIND ANY FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSING FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR COMPLETION OF ASSESSME NT. THE PROVISO TO SECTION 147 SQUARELY APPLIES IN THIS CA SE. THE ASSESSMENT WAS REOPENED BASED ON A MERE CHANGE OF OPINION WHICH IS NOT PERMISSIBLE UNDER LAW, IN VIE W OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF KE LVINATOR OF INDIA LTD. AND IN THE CASE OF CIT VS. FORAMER FR ANCE (264 ITR 566) . IN SUCH CIRCUMSTANCES, WE HOLD THAT REOP ENING OF ASSESSMENT IS BAD IN LAW. THEREFORE, WE QUASH THE REASSESSMENT ORDER PASSED UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT. SINCE WE HELD THAT REOPENIN G OF ASSESSMENT IS BAD IN LAW, GOING INTO MERITS OF THE CASE 8 ITA NO.202/MDS/2011 BECOMES ONLY ACADEMIC AND THEREFORE THE SAME NEED N OT BE ADJUDICATED. 6. THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, THE 30 TH DAY OF JANUARY, 2015 AT CHENNAI. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDRA PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED 30 TH JANUARY, 2015 SOMU 12 32 /COPY TO: 1. APPELLANT C/O. S.VENKATRAM & CO., 218, TTK ROAD , CHENNAI-600 018. 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .