ACIT, Coimbatore V. M/s. G V D Textiles Private Limited, Coimbatore

ITA 2078/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0718 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 26-02-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 19-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GURU BASHYAM JT
• Assessee Lawyers: K RAGHU
• Keywords: Depreciation; Reason to believe
• Section: 32; 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER] I.T.A.NO.2078/MDS/2012 ASSESSMENT YEAR : 2004-05 THE ASSTT. COMMISSIONER OF INCOME-TAX COMPANY CIRCLE I(1) COIMBATORE VS M/S G.V.D TEXTILES PVT. LTD 13/14 AVINASHI ROAD CIVIL AERODROME POST COIMBATORE - 14 [PAN ABCG 2441 H] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI GURU BASHYAM, JT. CIT RESPONDENT BY : SHRI K. RAGHU, CA DATE OF HEARING : 26-02-2013 DATE OF PRONOUNCEMENT : 01-03-2013 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVEN UE AGAINST THE ORDER OF THE CIT(A)-I, COIMBATORE, DATED 12.09.2012. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INC OME-TAX (APPEALS) IS AGAINST FACTS AND CIRCUMSTANCES OF THE CASE. I.T.A.NO.2078/12 :- 2 -: 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) HAS ERRED IN NOT CONSIDERING THE FACT THAT NO DISCUSSIO N WAS MADE UPON THIS ISSUE IN THE ASSESSMENT ORDER AND NO DETA ILS WERE CALLED FOR BY THE ASSESSING OFFICER OR FILED BY THE ASSESSEE ON THE ISSUE OF CLAIM OF DEPRECIATION UNDER THE WDV OR STR AIGHT LINE METHOD AND NO FINDING EITHER POSITIVE OR NEGATIVE W AS ARRIVED AT DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDING S. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT REASSESSMENT IS PERMISSIBLE E VEN IF THE INFORMATION IS OBTAINED AFTER PROPER INVESTIGATION FROM THE MATERIALS AVAILABLE ON RECORD OR FROM ANY ENQUIRY O R RESEARCH IN TO THE FACTS OR LAW. INFORMATION NEED NOT BE FROM EXTERNAL SOURCE. 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) FAILED TO OBSERVE THAT THE ASSESSEE COULD NOT TAKE SHELTER UNDER THE PLEA THAT THE RETURN DID NOT REQUIRE A PARTICULAR FACT TO HE SET OUT AND, THEREFORE, THE FAILURE TO DISCLOSE THE FACTS WOULD PROVIDE IMMUNITY TO THE ASSESSEE FROM ANY NOTICE BEING ISSUED UNDER SECTION 148 AFTER A PERIOD OF FOUR YEARS. 5. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) ERRED IN DIRECTING HIGHER RATE OF DEPRECIATION ON WIND MILLS AS PER RULE 5(1 A) OF THE INCOME-TAX RULES' 6. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE OBSERVED THAT MERE FI LING OF RETURN WITHIN THE DUE DATE SPECIFIED U/S. 139(1) OF THE ACT WOULD NOT AMOUNT T O EXERCISING OPTION FOR CLAIMING DEPRECIATION AT A HIGHER RATE. 7. THE DECISION IN THE CASE OF M/S . K.K.S.K.. LEATHER PROCESSORS (P) LTD.. , REPORTED IN 126 ITD 215 RELIED UPON BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS NOT BEEN A CCEPTED BY THE DEPARTMENT AND TAX CASE APPEAL HAS BEEN FILE D. 8. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, THE ORDER OF THE LEARNED ERR (APPEALS) MAY BE CANCELLED AND THAT OF THE ASSESSING OFFICER RESTORE D. 3. GROUND NOS. 1 & 8 ARE GENERAL IN NATURE AND H ENCE, REQUIRES NO SPECIFIC ADJUDICATION BY US. I.T.A.NO.2078/12 :- 3 -: 4. GROUND NOS. 2 TO 4 OF THE APPEAL ARE DIRECTED AGAIN ST THE ORDER OF THE CIT(A) IN QUASHING THE PROCEEDINGS U/ S 147 ON THE GROUND THAT NOTICE U/S 148 DATED 31.12.2011 WAS IN VALID. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER ISSUED NOTICE U/S 148 OF THE ACT ON 31.12.2011 BY RECORDING THE FOLLOWING REASONS: THE ASSESSING OFFICER HAD REASON TO BELIEVE THAT I NCOME ASSESSABLE TO TAX HAD ESCAPED ASSESSMENT IN VIEW OF THE AS CLAIMING DEPRECIATION ON WDV METHOD INSTEAD OF STRA IGHT LINE METHOD AS MANDATED IN SECTION 32(1) EXPLANATION 2 R EAD WITH RULE 5(1A) WITHOUT FILING THE OPTION AS REQUIRED. THEREFORE, NOTICE U/S 148 DATED 31.3.2011 WAS ISSUED AND SERV ED ON THE ASSESSEE. 6. THE CIT(A) OBSERVED THAT THE NOTICE WAS ISSUED BEYO ND THE PERIOD OF FOUR YEARS FROM THE RELEVANT ASSESSMENT Y EAR 2004-05. HE OBSERVED THAT THE NOTICE DOES NOT STATE THAT THE ES CAPEMENT OF INCOME CHARGEABLE TO TAX WAS BY RESULT OF THE FAILURE ON T HE PART OF THE ASSESSEE TO MAKE A RETURN U/S 139 OR IN RESPONSE T O A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR 148 OR TO D ISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSME NT FOR THAT ASSESSMENT YEAR AS REQUIRED UNDER THE PROVISO TO SECTION 147 OF THE ACT. IN THESE CIRCUMSTANCES, THE PROCEEDINGS U/S 147 READ WITH R EFERENCE TO NOTICE I.T.A.NO.2078/12 :- 4 -: U/S 148 DATED 31.12.2011 WAS CLEARLY INVALID AND DE SERVES TO BE QUASHED. 7. THE DR VERY FAIRLY CONCEDED BEFORE US THAT THE REVE NUE HAS NO CASE ON THESE GROUNDS OF APPEAL. 8. IN VIEW OF THE ABOVE SUBMISSION OF THE DR, WE DISMI SS THESE GROUNDS OF APPEAL OF THE REVENUE. 9. GROUND NOS. 5 TO 7 OF THE APPEAL ARE DIRECTED AGAIN ST THE ORDER OF THE CIT(A) IN DIRECTING THE ASSESSING OFFI CER TO ALLOW HIGHER RATE OF DEPRECIATION ON WINDMILLS UNDER RULE 5(1A) OF THE INCOME TAX RULES WHEN THE ASSESSEE HAD NOT EXERCISED THE OPTI ON OF HIGHER RATE OF DEPRECIATION WITHIN THE DUE DATES SPECIFIED U/S 139(1) OF THE ACT BUT HAD CLAIMED THE HIGHER RATE OF DEPRECIATION IN THE RETURN OF INCOME FILED BY THE ASSESSEE. 10. THE DR SUBMITTED THAT THE CIT(A) HAS FOLLOWED THE DECISION OF THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF K.K.S.K. LEATHER PROCESSORS (P) LTD VS ITO, 126 ITD 215. HENCE, HE SUBMITTED THAT HE WAS RELYING ON THE GROUNDS OF APPEAL RAISED BY THE REVENUE IN THE PRESENT APPEAL. I.T.A.NO.2078/12 :- 5 -: 11. ON THE OTHER HAND, THE A.R OF THE ASSESSEE SUPPORT ED THE ORDER OF THE CIT(A). 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAIL ABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSEE CLAIMED DEPRECIATIO N ON WINDMILLS @ 80% AND THE AMOUNT OF DEPRECIATION CLAIMED WAS OF 80% I.E @ 40% AS THE WINDMILLS WERE USED FOR LESS THAN 180 DA YS DURING THE YEAR BY THE ASSESSEE. THE ASSESSING OFFICER OBSERVING THAT SINCE THE ASSESSEE HAD NOT EXERCISED THE OPTION OF CLAIMING H IGHER RATE OF DEPRECIATION BEFORE THE DUE DATE OF FILING OF RETUR N OF INCOME U/S 139(1) OF THE ACT, DISALLOWED THE CLAIM FOR HIGHER RATE OF DEPRECIATION TO THE ASSESSEE. 13. ON APPEAL, THE CIT(A) ALLOWED THE CLAIM OF HIGHER RATE OF DEPRECIATION TO THE ASSESSEE BY FOLLOWING THE DECI SION OF THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF K.K.S.K. LEATH ER PROCESSORS (P) LTD. VS ITO (SUPRA). THUS, HE GRANTED DEPRECIATION ON WINDMILLS AMOUNTING TO ` 41,56,190/-/- TO THE ASSESSEE. 14. WE FIND THAT THE TRIBUNAL IN THE CASE OF K.K.S.K.LE ATHER PROCESSORS (P) LTD. (SUPRA) HAS HELD AS UNDER: I.T.A.NO.2078/12 :- 6 -: AS PER CLAUSE (I) OF SUB-SECTION (1) OF SECTION 32, THE DEPRECIATION ON THE ASSETS OF AN UNDERTAKING ENGAGE D IN GENERATION OR GENERATION AND DISTRIBUTION OF POWER IS AT A PERCENTAGE AS PRESCRIBED AS PER RATES ON THE ACTUAL COST THEREOF. THUS, CLAUSE (I) OF SUB-SECTION (1) OF SECTION 32 PROVIDES THE DEPRECIATION AT A PRESCRIBED RATE ON THE ASSETS OF SPECIFIED UNDERTAKING ON THE ACTUAL COST INSTEAD OF WRITTEN D OWN VALUE. THE EXPLANATION 5 TO SUB-SECTION (1) OF SECTION 32 MAKES IT CLEAR THAT THE PROVISIONS OF SUB-SECTION (1) OF SECTION 32 SHALL APPLY WHETHER OR NOT THE ASSESSEE HAS CLAIMED THE DEDUCTION IN RESPECT OF DEPRECIATION IN COMPUTING HIS TOTAL INCOME. FROM THE PROVISIONS OF SUB-SECTION (1) OF SECTION 32 ALONG WITH THE EXPLANATION 5, IT IS CLEAR THAT TITHE ASSESSING OFFICER IS DUTY- BOUND AND UNDER OBLIGATION TO ALLOW THE DEDUCTION OF DEPRECIATION AS PER THE PROVISIONS OF SUB-SECTION (1) OF SECTION 32.' SINCE TWO RATES OF DEPRECIATION ARE PRESCRIBED AS PER APPENDIX - I AS WELL AS APPENDIX LA TO RULE 5 OF 1962 RULES IN RESPECT OF ASSETS OF THE UNDERTAKING ENGAGED FOR GENERATION AND DISTR IBUTION OF POWER, THUS, TO MAKE IT CLEAR AND TO FACILITATE THE ASSESSING OFFICER HAS TO SEE WHICH OF THE RATES PROVIDED UND ER TWO DIFFERENT APPENDICES OF DEPRECIATION SHALL BE ALLOW ED, SECOND PROVISO TO RULE 5(1A) REQUIRES THE ASSESSEE TO EXER CISE ITS OPTION THAT DEPRECIATION BE ALLOWED AS PER APPENDIX I TH OUGH THE PROVISO STIPULATES THAT IF SUCH OPTION IS EXERCISED BEFORE THE DUE DATE OF [FURNISHING THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139, IT CAN BE SAID THAT THE SECOND PROVISO TO RULE 5(1A) IS ONLY TO FACILITATE THE ASSESSING OFFICER IN DISC HARGING ITS OBLIGATION AS PER THE EXPLANATION 5 TO SUB-SECTION (1) OF SECTION 32 SO THAT THE DEPRECIATION SHALL BE ALLOWED AS PER THE O PTION OF THE ASSESSEE AND NOT ON THE DISCRETION OF THE ASSES SING OFFICER. THE ASSESSING OFFICER IS OTHERWISE UNDER OBLIGATION TO ALLOW THE DEPRECIATION BUT BECAUSE THE DEPRECIATION IS SPECIFIED UNDER TWO DIFFERENT APPENDICES I AND IA, THE CHOICE IS GIVEN TO THE ASSESSEE IN RESPECT OF THE ASSETS SPECIFIED UNDER C LAUSE (I) OF SUB-SECTION (1) OF SECTION 32. THEREFORE, THE PROVISIONS CONTAINED IN THE RULES CANNOT OVERRIDE THE PROVISIONS CONTAINED IN THE STATUTE AND THE REQUIREMENT OF OPTION UNDER PROVISO TO RULE 5(1 A) CANNOT BE HELD IN THE NATURE THAT THE FAILURE OF TH E SAME WOULD BE SO FATAL THAT THE VERY OBJECT OF THE PROVISION FOR PROVIDING HIGHER RATE OF DEPRECIATION IS DEFEATED. WHEN THERE IS NO SPECIFIC FORM OR METHOD PRESCRIBED FOR EXERCISING THE SAID OPTION, T HEN THE CLAIM MADE IN THE RETURN OF INCOME AS WELL AS REFLECTED F ROM THE BOOKS OF ACCOUNT AND AUDIT REPORT FILED ALONG WITH RETURN OF INCOME IS MORE THAN THE EXERCISE OF THE OPTION AS REQUIRED UNDER S ECOND PROVISO TO RULE 5(1A). [PARA 7] I.T.A.NO.2078/12 :- 7 -: THEREFORE, EVEN IF OPTION IS NOT EXERCISED WITHIN T HE STIPULATED TIME AS PER SECOND PROVISO TO RULE 5(1A), THE SAME CANNOT HAVE A SERIOUS CONSEQUENCE OF TOTAL DENIAL OF THE CLAIM OF THE ASSESSEE. THERE IS NO DOUBT THAT WHEN THERE IS NO PRESCRIBED PROCEDURE OR MODE OF EXERCISING OPTION PRESCRIBED IN THE RULES, THEN THE OPTION EXERCISED BY THE ASSESSEE BY WAY OF MAKING A CLAIM IN THE RETURN OF INCOME ALONG WITH THE AUDIT REPORT IS DEF INITELY MORE THAN THE REQUIREMENT OF THE SECOND PROVISO. EVEN OT HERWISE THE QUESTION OF EXERCISING THE OPTION IN THE RETURN OF INCOME WAS NOT SERIOUSLY AGITATED BY THE REVENUE. AS PER THE ORDER OF THE LOWER AUTHORITIES, THE DEPRECIATION CLAIMED HAD BEEN REJE CTED ON THE GROUND THAT OPTION HAD NOT BEEN EXERCISED BEFORE TH E DUE DATE. THEREFORE, THE SECOND-QUESTION WHETHER THE FILING O F THE RETURN ON DUE DATE WAS EXERCISING OF OPTION BEFORE DUE DAT E OR NOT, WAS OF IMPORTANCE. THE REQUIREMENT OF SECOND PROVISO TO RULE 5(1 A) IS SATISFIED IF THE OPTION IS EXERCISED BEFORE THE EXP IRY OF DUE DATE OF FILING OF RETURN OF INCOME UNDER SECTION 139(1). THE MEANING OF THE TERM 'BEFORE DUE DATE' SHALL BE UNDERSTOOD A S IT IS UNDER- STOOD BY A MAN OF ORDINARY PRUDENCE. BEFORE DUE DAT E. SIMPLY REFERS AND MEANS THAT NOT AFTER THE EXPIRY OF DUE D ATE. IF THE REQUISITE ACT IS DONE BEFORE THE LAST DAY EXPIRES, THEN IT WILL BE SIMPLY SAID THAT 'BEFORE DUE DATE: WHEN THE TIME OF FILING THE RETURN IS AVAILABLE TO THE ASSESSEE TILL THE LAST M OMENT OF THE DUE DATE, THEN THE WHOLE OF THAT DAY IS AVAILABLE TO TH E ASSESSEE AND DUE DATE EXPIRES ONLY WHEN THE LAST DAY IS EXPIRED. AS SUCH THE OPTION EXERCISED ON THE DUE DATE IS NOTHING BUT BEF ORE THE DUE DATE AS THE SAME IS NOT AFTER THE DUE DATE. THEREFO RE, IT CAN BE SAID THAT THE OPTION EXERCISED BY THE ASSESSEE ON DUE DA TE BY WAY OF MAKING CLAIMS OF DEPRECIATION IN THE RETURN OF INCO ME ALONG WITH AUDIT REPORT AND BOOKS OF ACCOUNT WHEREIN THE ASSESSEE HAS ADOPTED THE RATE AS CLAIMED IS WITHIN TIME-LIMIT PR ESCRIBED UNDER SECOND PROVISO TO RULE 5(1 A). THE LIMIT PROVIDED UNDER THE SECOND PROVISO TO RULE 5(1A) IS ONLY TO FACILITATE THE ASSESSING OFFICER IN DISCHARGING ITS OBLIGATIONS AND DUTIES A S PER THE PROVISIONS OF SUB-SECTION (1) OF SECTION 32. THEREFORE, THE SAID REQUIREMENT CANNOT BE CONSIDERED AS MANDATORY. MORE OVER, THE ASSESSING OFFICER CANNOT ACT ON THE OPTION EXERCI SED BEFORE THE RETURN IS FILED AND, THEREFORE, NO FRUITFUL PURPOS E OR OBJECT CAN BE ACHIEVED BY MANDATING EXERCISE OF OPTION PRIOR TO F ILING OF RETURN ON DUE DATE. [PARA 8 ] IN VIEW OF THE ABOVE, IT WAS TO BE HELD THAT THE ASSES SEE HAD SATISFIED THE REQUIREMENT OF SECOND PROVISO TO RULE 5(1A) AND, THEREFORE, IT WAS ENTITLED TO DEPRECIATION ON WINDM ILLS AS PER APPENDIX T. [PARA 12] I.T.A.NO.2078/12 :- 8 -: 15. NO SPECIFIC MISTAKE IN THE ORDER OF THE CIT(A) COUL D BE POINTED OUT BY THE DR. NO MATERIAL WAS BROUGHT ON RECORD BY THE DR TO SHOW THAT THE ORDER OF THE TRIBUNAL WHICH WAS RE LIED ON BY THE CIT(A) TO ALLOW THE APPEAL OF THE ASSESSEE WAS VAR IED IN APPEAL BY ANY HIGHER FORUM. IN THE ABOVE FACTS AND CIRCUMSTA NCES OF THE CASE, WE DO NOT FIND ANY GOOD AND JUSTIFIABLE REASON TO I NTERFERE WITH THE ORDER OF THE CIT(A) WHICH IS CONFIRMED AND THE GROU NDS OF APPEAL OF THE REVENUE ARE DISMISSED. 16. IN THE RESULT, THE APPEAL OF THE REVENU E IS DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 01 ST OF MARCH, 2013, AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 01 ST MARCH, 2013 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR