M/s. Caterpillar India Pvt. Ltd., CHENNAI V. ACIT, Puducherry

ITA 2029/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7379 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 04-07-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Keywords: Additional evidence; Question of law; Difference of opinion; Change of opinion
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 201; 22

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: CHENNAI . . . , !'. . # $ % , ' () BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NOS.2029 TO 2031/MDS/2016 * +* /ASSESSMENT YEAR: 2008-09 TO 2010-11 M/S.CATERPILLAR INDIA PRIVATE LTD., (IN THE CASE OF ERSTWHILE F G WILSON GENERATORS INDIA PRIVATE LTD., SINCE MERGED) 7 TH FLOOR, INTERNATIONAL TECH PARK-CHENNAI, TARAMANI ROAD, TARAMANI, CHENNAI-600 113. VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1, PUDUCHERRY. [PAN: AABCC 4615 K ] ( ,- /APPELLANT) ( ./,- /RESPONDENT) ,- 0 1 / APPELLANT BY : MR.SHARATH RAO,CA ./,- 0 1 /RESPONDENT BY : MR.SHIVA SRINIVAS, JCIT # 0 2' /DATE OF HEARING : 25.01.2017 34+ 0 2' /DATE OF PRONOUNCEMENT : 22.03.2017 / O R D E R PER D.S.SUNDER SINGH , ACCOUNTANT MEMBER : THESE APPEALS ARE FILED BY THE ASSESSEE AGAINST TH E ORDERS DATED 13.04.2016 OF COMMISSIONER OF INCOME TAX (APPEALS), PUDUCHERRY, IN ITA NOS.06 & 07 [2014-15 & 531 (2013-14)]/CIT(A)-PDY FO R THE AYS 2008-09 TO 2010-11 DECIDED IN COMMON ORDER. FACTS OF THE C ASE FOR THE AY 2008- ITA NOS.2029 TO 2031/MDS/2016 :- 2 -: 09 AND 2009-10 ARE THE SAME AND FOR THE AY 2010-11 THE FACTS ARE SIMILAR. THEREFORE, THE APPEALS ARE DECIDED IN COM MON ORDER FOR THE SAKE OF CONVENIENCE. 2.0 THE ASSESSEE FILED THE RETURNS OF INCOME FOR THE A YS 2008-09 & 2009-10 IN THE NAME OF M/S.F G WILSON GENERATORS IN DIA PVT. LTD., AND THE ASSESSING OFFICER (IN SHORT AO) PASSED THE ASSESS MENT ORDERS U/S.143(3) OF INCOME TAX ACT (IN SHORT THE ACT) ON 30.12.201 0 FOR THE AY 2008-09 AND ON 28.10.2011 IN THE CASE OF AY 2009-10. BOTH THE ASSESSMENTS ARE RE-OPENED U/S.147 AND THE REVISED THE ASSESSMENTS U /S.143(3) R.W.S.147 WERE PASSED ON 22.01.2014 IN THE SAME NAME OF THE C OMPANY. BOTH THE ASSESSMENTS WERE RE-OPENED TO DISALLOW THE PROVISIO NS MADE FOR WARRANTY. DURING THE ASSESSMENT PROCEEDINGS, THE A O FOUND THAT THE ASSESSEE MADE PROVISIONS FOR WARRANTY AND THE SAME WAS NOT DISALLOWED IN COMPUTATION OF INCOME. SINCE, THE PROVISIONS AR E CONTINGENT IN THE NATURE, THE AO RE-OPENED THE ASSESSMENT MADE U/S.14 3(3) FOR THE AY 2008-09 AND 2009-10 AND THE RE-ASSESSMENT ORDERS WE RE PASSED. FOR THE AY 2008-09, THE AO MADE ADDITION OF RS.81,24,477/- AND FOR THE AY 2009-10 THE ADDITION WAS RS.80,97,222/-. 3.0 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE WEN T ON APPEAL BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEA LS) (HEREINAFTER REFERRED TO AS LD.CIT(A)) AND THE LD.CIT(A) CONFI RMED THE ADDITION MADE ITA NOS.2029 TO 2031/MDS/2016 :- 3 -: BY THE AO. AGAINST THE ORDER OF THE LD.CIT(A), THE ASSESSEE FILED APPEAL BEFORE US. 4.0 THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEA L CHALLENGING THE ORDER OF THE LD.CIT(A) FOR THE AYS 2008-09 AND 2009 -10: 1. THE LEARNED ASSISTANT COMMISSIONER OF INCOME-TAX, C IRCLE-1, PUDUCHERRY (AO) HAS ERRED IN LAW AND ON FACTS IN RE-OPENING THE ASS ESSMENT PROCEEDINGS UNDER SECTION 147 OF THE INCOME-TAX ACT, 1961 (THE ACT) ON AN ENTITY THAT HAS CEASED TO EXIST CONSEQUENT TO MERGER EVEN AFTER THE APPELL ANT MAKING FULL DISCLOSURE OF THE FACTS BEFORE THE AO. 2. THE LEARNED AO HAS ERRED IN LAW AND ON FACTS IN PAS SING AN ORDER UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT ON AN ENTIT Y THAT CEASED TO EXIST BECAUSE THE LEARNED AO DID NOT HAVE JURISDICTION ON A NON-E XISTENT ENTITY. 3. THE LEARNED AO HAS ERRED IN LAW AND ON FACTS IN RE- OPENING THE ASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT MERELY BAS ED ON CHANGE OF OPINION. 4. THE LEARNED AO HAS ERRED IN LAW AND ON FACTS IN INI TIATING THE RE-ASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT DESPITE TH E APPELLANT MAKING A TRUE AND FULL DISCLOSURE OF THE CLAIM OF DEDUCTION OF WARRAN TY IN THE PROFIT AND LOSS ACCOUNT OF THE FINANCIAL STATEMENT AND THE NOTES TO ACCOUNTS T HERETO WHICH WERE ALREADY AVAILABLE WITH THE LEARNED AO. 5. THE LEARNED AO HAS ERRED IN LAW AND ON FACTS IN INI TIATING THE RE-ASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT DESPITE NO NEW MATERIAL BEING UNEARTHED AND BY MERELY OBSERVING THAT A CLAIM OF DEDUCTION H AD BEEN MADE IN RELATION TO PROVISION FOR WARRANTY. 6. THE LEARNED AO HAS ERRED IN LAW AND ON FACTS AND MIS -INTERPRETED THE DECISION OF THE SUPREME COURT IN CASE OF ROTORK CONTROLS PRIVAT E LIMITED VS CIT (314 ITR 62) TO DENY THE CLAIM OF DEDUCTION IN RESPECT OF PROVIS ION FOR WARRANTY (DESPITE THE SUPREME COURT DECISION BEING IN FAVOUR OF THE APPEL LANT). 7. THE LEARNED CIT(A)/AO HAVE ERRED IN LAW AND ON FACTS IN DISALLOWING THE PROVISION FOR WARRANTY AMOUNTING TO RS 8,124,477/- DESPITE TH E APPELLANT HAVING CREATED THE PROVISION ON A SCIENTIFIC AND REASONABLE BASIS WHIC H IS ALSO SIMILAR TO INDUSTRY PRACTICES. 8. THE LEARNED CIT(A)/AO HAVE ERRED IN LAW AND ON FACTS IN NOT CONSIDERING THE DECISION OF THE JURISDICTIONAL MADRAS HIGH COURT IN THE CASE OF CIT VS.HINDUSTAN POWERPLUS LIMITED (ITA NOS.1392 AND 1393 OF 2007) W HICH SQUARELY APPLIES TO THE FACTS OF THE APPELLANT. 9. THE LEARNED CIT(A)/AO HAVE ERRED IN LAW AND ON FACTS IN DISALLOWING THE PROVISION FOR WARRANTY AMOUNTING TO RS 8,124,477/- AND ALLOWI NG A DEDUCTION TO THE EXTENT OF ACTUAL UTILIZATION OF RS.4,124,477/- DESPITE THE AP PELLANT FOLLOWING A MERCANTILE BASIS OF ACCOUNTING AND NOT CASH BASIS OF ACCOUNTIN G. 10. THE LEARNED AO HAS ERRED IN LAW AND ON FACTS IN SETT ING-OFF LOSSES AGAINST THE DISALLOWANCE OF DEDUCTION IN RELATION TO PROVISION FOR WARRANTY, DESPITE THE DEDUCTION BEING RIGHTFULLY CLAIMED BY THE APPELLANT . ITA NOS.2029 TO 2031/MDS/2016 :- 4 -: 11. THE LEARNED AO HAS ERRED IN LAW AND ON FACTS IN INIT IATING PENALTY PROCEEDINGS AGAINST THE APPELLANT. 5.0 GROUNDS OF THE APPEAL RAISED BY THE ASSESSEE FOR B OTH THE ASSESSMENT YEARS 2008-09 & 2009-10 ARE COMMON. 6.0 GROUND NOS.1-5 ARE RELATED TO THE RE-OPENING OF AS SESSMENT. THESE GROUNDS OF APPEAL ARE NOT RAISED BY THE ASSE SSEE BEFORE THE LD.CIT(A). AS STATED EARLIER, THE ASSESSEE FILED R ETURN OF INCOME IN THE NAME OF ERSTWHILE COMPANY, M/S.F G WILSON GENERATOR S INDIA PVT. LTD. WHICH WAS SUBSEQUENTLY MERGED WITH M/S.CATER PILLER INDIA PVT. LTD. THE LD.AR ARGUED THAT AS ON THE DATE OF ASSESSMENT ORDE R, THERE WAS NO COMPANY IN EXISTENCE IN THE NAME M/S.F G WILSON GEN ERATOR INDIA PVT. LTD. SINCE THE COMPANY WAS NOT IN EXISTENCE AT THE TIME OF PASSING THE ORDER, ACCORDING TO THE LD.AR, THE ASSESSMENT ORDER PASSED IN THE NAME OF ERSTWHILE M/S.F G GENERATORS INDIA PVT. LTD. IS NOT VALID AND THE NOTICE ISSUED U/S.147 IN THE NAME OF NON-EXISTING COMPANY AND CONSEQUENT ASSESSMENT MADE U/S 143(3) R.W.S.147 REQUIRED TO BE QUASHED. THE LD.AR RELIED ON THE DECISION OF HONBLE APEX COURT IN NTP C V. CIT, 229 ITR 383 (SC) IN SUPPORT OF GROUNDS OF RE-OPENING WHICH WERE NOT RAISED BEFORE THE LD.CIT(A). ON THE OTHER HAND, THE LD.DR ARGUED T HAT THE ASSESSEE HAS FILED RETURN OF INCOME IN THE NAME OF ERSTWHILE COM PANY WITH OLD PAN AND THE APPELLANT ALSO FILED THE GROUNDS OF APPEAL, STA TEMENT OF FACTS, IN THE NAME OF M/S.F G WILSON GENERATOR INDIA PVT. LTD. T HEREFORE, MERELY BECAUSE OF THE AO HAS ISSUED NOTICE U/S.147 IN THE NAME OF ERSTWHILE ITA NOS.2029 TO 2031/MDS/2016 :- 5 -: COMPANY, THE SAME CANNOT BE HELD AS INVALID. APART FROM THE ABOVE, ON CAREFUL READING OF THE RE-ASSESSMENT ORDER PASSED U /S.143(3) R.W.S.147 CLEARLY SHOWS THAT THE AO HAS NO KNOWLEDGE OF MERGE R OF THE M/S.F G WILSON GENERATOR INDIA PVT. LTD., WITH M/S.CATERPIL LAR INDIA PVT. LTD., HENCE THE LD.DR ARGUED THAT THE NOTICE ISSUED U/S.1 47 AND THE SUBSEQUENT ASSESSMENTS ARE VALID WHICH NEED NOT BE INTERFERED WITH. 7.0 WE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. M/S.F G WILSON GENERATOR INDIA PVT. LTD., FILED TH E RETURN OF INCOME FOR THE AY 2008-09 & 2009-10 AND SUBSEQUENTLY MERGE D WITH M/S.CATERPILLAR INDIA PVT. LTD. ACCORDING TO THE LD .AR, IT HAS SUBMITTED NECESSARY INFORMATION TO THE AO AND THE AO WAS MADE AWARE OF THE FACT REGARDING THE MERGER OF THE COMPANY WITH M/S.CATERP ILLAR INDIA PVT. LTD. HOWEVER, ON CAREFUL PERUSAL OF THE REVISED ASSESSME NT ORDER, IT DID NOT INDICATE ANY KNOWLEDGE OF THE AO REGARDING THE MERG ER OF THE COMPANY. THESE GROUNDS ARE FIRST TIME RAISED BEFORE THE TRIB UNAL BUT NOT ASSAILED BEFORE THE LD.CIT(A) AND THE LOWER AUTHORITIES HAD NO OCCASION TO EXAMINE THE FACTUAL AND LEGAL ASPECTS OF THESE GROUNDS. T HE LD.AR RELIED ON THE APEX COURTS DECISION IN THE CASE OF THE NTPC V. CI T 229 ITR 383 (SC) WHEREIN THE APEX COURT HELD THAT - THE VIEW THAT THE TRIBUNAL IS CONFINED ONLY TO ISSU ES ARISING OUT OF THE APPEAL BEFORE THE COMMISSIONER (APPEALS) TAKES TOO NARROW A VIEW OF T HE POWERS OF THE TRIBUNAL. UNDOUBTEDLY, THE TRIBUNAL WILL HAVE THE DISCRETION TO ALLOW OR NOT ALLOW A NEW GROUND TO BE RAISED. BUT WHERE THE TRIBUNAL IS ONLY REQUIRED TO CONSIDER A QUESTION OF LAW ARISING FROM THE FACTS WHICH ARE ON RECORD IN THE ASSESSMENT PRO CEEDINGS THERE IS NO REASON WHY SUCH A QUESTION SHOULD NOT BE ALLOWED TO BE RAISED WHEN IT IS NECESSARY TO CONSIDER THAT QUESTION IN ORDER TO CORRECTLY ASSESS THE TAX LIABILITY OF A N ASSESSEE. ITA NOS.2029 TO 2031/MDS/2016 :- 6 -: THE GROUNDS RAISED BY THE LD.AR BEFORE US WITH REG ARD TO MAKING ASSESSMENT IN THE NAME OF NON-EXISTING COMPANY AND THE RE-OPENING ISSUE INVOLVE QUESTION OF LAW WHICH GOES TO THE ROO T OF THE ASSESSMENT. THEREFORE, IN THE INTEREST OF JUSTICE WE ADMIT THE GROUNDS RELATING TO RE- OPENING OF ASSESSMENT. THESE GROUNDS REQUIRED TO B E EXAMINED WITH RELEVANT FACTS OF SUBMISSION OF INFORMATION BEFORE THE AO REGARDING THE MERGER OF THE COMPANY WITH M/S.CATERPILLAR INDIA LT D., BEFORE ISSUANCE OF NOTICE U/S.148 OR DURING THE ASSESSMENT PROCEEDINGS . THEREFORE, WE REMIT THE MATTER BACK TO THE FILE OF THE LD.CIT(A) TO EXAMINE THE VALIDITY OF THE RE-OPENING OF THE ASSESSMENT AND ADJUDICATE THE SAME ON MERITS. THE LD.CIT(A) IS DIRECTED TO GIVE OPPORTUNITY TO BO TH AO AND TO THE ASSESSEE TO SUBMIT NECESSARY EVIDENCE AND EXPLANATI ON TO SUPPORT THEIR VIEWS. AS A RESULT, GROUND NOS.1 TO 5 ARE ALLOWED FOR STATISTICAL PURPOSES. 8.0 GROUND NO. 6 TO 10 RELATED TO THE MERITS OF DISAL LOWANCE ON PROVISION FOR WARRANTY. THE ASSESSEE ALSO FILED PETITION FOR ADMISSION OF ADDITIONAL EVIDENCE REGARDING PROVISIONS FOR WARRAN TY EXPENSES. THE ASSESSEE EXPLAINED THE REASONS FOR NON-SUBMISSION O F THE DETAILS BEFORE THE AO & LD.CIT(A). 9.0 WE HEARD BOTH THE PARTIES AND ADMIT THE ADDITIONAL EVIDENCE IN THE INTEREST OF JUSTICE. THE ISSUE RELATING TO THE CLAI M OF WARRANTY EXPENSES DEPEND ON THE VALIDITY OF THE RE-OPENING OF ASSESSM ENT, SINCE THE ITA NOS.2029 TO 2031/MDS/2016 :- 7 -: ASSESSEE RAISED THE ISSUE RELATING TO ISSUE OF NOTI CE U/S 148 IN THE NAME OF NON EXISTING COMPANY WHICH REQUIRED TO BE ADDRESSED FIRST AND THEN THE MERITS OF THE CASE. THEREFORE, WE REMIT THE ISSUE R ELATING TO THE MERITS OF THE DISALLOWANCE ALSO BACK TO THE FILE OF THE LD.CI T(A) TO CONSIDER THE ADDITIONAL EVIDENCE AND ALLOWABILITY OF THE EXPENDI TURE ON THE FACTS OF THE CASE IN THE LIGHT OF THE ABOVE DISCUSSION MADE IN T HIS ORDER AND DECIDE THE ISSUE AFRESH ON MERITS. 10.0 AS A RESULT, BOTH THE APPEALS FOR THE A.YS 200 8-09 AND 2009-10 ARE SET-A-SIDE AND REMITTED BACK TO THE FILE OF THE LD.CIT(A) FOR RE- CONSIDERATION ON MERITS AND ALLOWED FOR STATISTICAL PURPOSES. 11.0 ITA NO.2031/MDS/2016 FOR THE AY 2010-11 : THE ASSESSEE FILED RETURN OF INCOME FOR THE AY 201 0-11 IN THE NAME OF M/S.F G WILSON GENERATOR INDIA PVT. LTD., ON 13. 10.2010 ADMITTING NIL INCOME. THE AO PASSED THE ORDERS U/S.143(3) BY AN ORDER DATED 12.03.2013 ON TOTAL INCOME OF RS.5,03,84,817/- UNDE R NORMAL PROVISIONS OF THE INCOME TAX ACT AND ALLOWED SET OFF OF BROUGH T FORWARD LOSSES WHICH RESULTED IN NIL INCOME. THE PROFIT U/S.115JB WERE ASSESSED AT RS.3,48,44,952/- FOR THE PURPOSE OF MAT IN THE ASSE SSMENT MADE U/S.143(3), AND THE AO DISALLOWED THE PROVISIONS F OR WARRANTY AMOUNTING TO RS.53,98,744/-. THE ASSESSEE WENT ON APPEAL BEF ORE THE LD.CIT(A) AND THE LD.CIT(A) CONFIRMED THE ADDITION MADE BY THE AO . ITA NOS.2029 TO 2031/MDS/2016 :- 8 -: 12.0 AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE ASSE SSEE FILED APPEAL BEFORE THIS TRIBUNAL CHALLENGING ON EIGHT GROUNDS: 13.0 GROUND NOS.1 & 2 ARE RELATED TO THE PASSING ASSESS MENT U/S.143(3) IN THE NAME OF M/S.F G WILSON GENERATOR INDIA PVT. LTD. DURING THE APPEAL, THE ASSESSEE ARGUED THAT THE COMPANY, M/S.F G WILSON GENERATOR INDIA PVT. LTD WAS MERGED WITH M/S.CATERPILLAR INDI A PVT. LTD. AND THE ASSESSMENT PASSED U/S.143(3) AND THE NOTICE ISSUED U/S.143(2) IN THE NAME OF ERSTWHILE COMPANY, M/S.F G WILSON GENERATOR INDIA PVT. LTD IS INVALID AND THE SUBSEQUENT ASSESSMENT IS BAD IN LAW AND REQUIRED TO BE QUASHED. 14.0 ON IDENTICAL FACTS FOR THE AY 2008-09 AND 2009-10, THE ISSUE OF NOTICE U/S.148 AND SUBSEQUENT ASSESSMENT MADE U/S 1 43(3) R.W.S.147 WERE REMITTED BACK TO THE FILE OF THE LD.CIT(A) TO RE-ADJUDICATE THE ISSUE AFRESH ON MERITS AS PER THE DISCUSSION MADE IN THE EARLIER PARAGRAPHS OF THIS ORDER. IN THE INSTANT ASSESSMENT YEAR THE ASSE SSMENT WAS PASSED U/S14(3) ON THE SAME FACTS. THEREFORE, THE APPEAL F OR THE AY 2010-11 IS ALSO REQUIRE VERIFICATION FACTS REGARDING THE SUBMI SSION OF INFORMATION WITH REGARD TO MERGER OF THE COMPANY BEFORE THE AO. THER EFORE WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSMENT UNDER CONSID ERATION ALSO SHOULD BE REMITTED BACK TO THE FILE OF THE LD.CIT(A) AND F OR RE-ADJUDICATION. ACCORDINGLY, WE SET-A-SIDE THE ORDER OF THE LD.CIT( A) AND REMIT THE MATTER BACK TO THE FILE OF THE LD.CIT(A) FOR FRESH CONSIDE RATION. ITA NOS.2029 TO 2031/MDS/2016 :- 9 -: 15.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND MARCH, 2017, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( !' . . # $ % ) (D.S.SUNDER SINGH) ' /ACCOUNTANT MEMBER /CHENNAI, 5 /DATED: 22 ND MARCH, 2017. TLN 0 .2$6 76+2 /COPY TO: 1. ,- /APPELLANT 4. # 82 /CIT 2. ./,- /RESPONDENT 5. 69 .2 /DR 3. # 82 ( ) /CIT(A) 6. '* < /GF