DCIT, New Delhi V. M/s. Global One India Pvt. Ltd., Gurgaon

ITA 2088/DEL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7006 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 15-09-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 07-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRIT LAL
• Assessee Lawyers: RAVI SHARMA CAS; GEETIKA GUPTA
• Keywords: Reopening of assessment; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 148; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 2088/DEL/2014 A.Y. : 2005-06 DCIT, CIRCLE 12(1), NEW DELHI VS. M/S GLOBAL ONE INDIA PVT. LTD., 7 TH FLOOR, TOWER-C, DLF INFINITY TOWER, PHASE-II, SECTOR 25-A, GURGAON (AABCG2558B) (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. AMRIT LAL, SR. DR ASSESSEE BY : MS. GEETIKA GUPTA & SH. RAVI SHARMA, CAS DATE OF HEARING : 15-09-2016 DATE OF ORDER : 03-10-2016 ORDER PER H.S. SIDHU : JM THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE IMPUGNED ORDER DATED 20/12/2013 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XV, NEW DELHI ON THE FOLLOWING GROUNDS:- ITA NO. 2088/DEL/2014 2 1. WHETHER LD. CIT(A) WAS CORRECT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN DELETING THE ADDITION OF RS. 1,00,10,209/- MADE BY AO ON ACCOUNT OF DISALLOWANCE OF NETWORK AND OTHER EQUIPMENT COST? 2. WHETHER LD. CIT(A) WAS CORRECT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN QUASHING THE PROCEEDINGS INITIATED U/S. 148 OF THE ACT IN THIS CAS E? 3. THE APPELLANT CRAVES LEAVE, TO ADD, ALTER OR AMEND A NY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF THE HEARING. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 27.10.2005 DECLARING LOSS OF RS. 36,03,300/-. LA TER ON, A REVISED COMPUTATION WAS FILED ON 10.10.2008 SHOWING LOSS OF RS. 7,23,56,799/-, WHICH WAS ON THE GROUND THAT THE A SSESSEE COULD NOT FINALISE ACCOUNTS AS ON THE DATE OF FILING THE ORI GINAL RETURN. THE CASE WAS PICKED UP FOR SCRUTINY UNDER SECTION 143(3) AND AN ORDER UNDER SECTION 143(3) WAS PASSED ON 30.12.2008, IN WHICH AS AGAINST THE LOSS OF RS. 7,23,56,799/- THE TOTAL INCOM E WAS ASSESSED AT RS. 7,86,86,783/-. THE MAIN GROUND OF DISALLOWAN CE IN THE ORIGINAL ASSESSMENT ORDER WAS DISALLOWANCE OF CIRC UIT EXPENSES OF RS. 14,18,24,935/-. THE ADDITIONS MADE WERE DELETED BY THE EARLIER LD. CIT(A) VIDE HIS ORDER DATED 2.6.2010 WHICH WAS A LSO UPHELD BY ITA NO. 2088/DEL/2014 3 THE ITAT. THEREAFTER, THE AO ISSUED NOTICE U/S. 148 ON 20.3.2012 AND ASSESSMENT WAS REOPENED BY RECORDING THE FOLLOWIN G REASONS. IN THIS CASE ASSESSMENT UNDER SECTION 143(3) FOR THE ASSESSMENT YEAR 2005-06 WAS COMPLETED DETERMINING AN INCOME OF RS. 78,68,673/- AS AGAINST THE WRITTEN (SHOULD BE RETURNED) LOSS OF RS. 36,03,300/-. ON EXAMINATION OF THE FILE AND DOCUMENTS PLACED ON THE RECORD IT IS SEEN THAT ASSESSEE HAS DEBITED A SUM OF RS. 100,10,209/- FOR NETWORK OTHER EQUIPMENT COSTS IN THE PROVISIONAL INCOME AND EXPENDITURE ACCOUNT. SINCE THE SAID EXPENDITURE IS CAPITAL IN NATURE, IT IS NOT ALLOWABL E AS REVENUE UNDER THE PROVISIONS OF SECTION 37 OF THE INCOME TAX ACT. THEREFORE, I HAVE REASON TO BELIEVE THAT INCOME OF RS. 1,00,10,209/- HAD ESCAPED ASSESSMENT UNDER THE MEANING OF SECTION 147. NOTICE UNDER SECTION 148 IS REQUIRED TO BE ISSUED IN THIS CASE. 2.1 IN RESPONSE TO THE AFORESAID NOTICE, ASSESSEE VIDE LETTER DATED 15.5.2012 HAS SUBMITTED HIS REPLY, WHICH WAS NOT ACC EPTED BY THE AO AND ACCORDINGLY, THE AO TREATED THE ADDITION OF ITA NO. 2088/DEL/2014 4 RS. 1,00,10,209/- VIDE HIS ORDER DATED 29.8.2012 PAS SED U/S. 143(3)/147 OF THE I.T. ACT, 1961. 3. AGGRIEVED WITH THE AFORESAID ORDER, ASSESSEE PREFE RRED AN APPEAL BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER DATED 20.12.2013 HAS DELETED THE ADDITION AND QUASHED THE R EASSESSMENT THEREBY ALLOWING THE APPEAL OF THE ASSESSEE. 4. NOW THE REVENUE IS AGGRIEVED AGAINST THE IMPUGNED ORDER AND FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING LD. DR RELIED UPON THE ORDER OF THE AO AND REITERATED THE CONTENTIONS RAISED BY THE REVENUE IN THE GROUNDS AND REQUESTED THAT APPEAL OF THE REVENUE MAY BE ALLOW ED. 6. ON THE CONTRARY, LD. COUNSEL OF THE ASSESSEE HAS RELIED UPON THE ORDER OF THE LD. CIT(A) AND STATED THAT LD. CIT(A) HAS PASSED A WELL REASONED ORDER WHICH DOES NOT NEED ANY INTERFER ENCE ON OUR PART, HENCE, THE SAME MAY BE UPHELD AND ACCORDINGLY, THE APPEAL OF THE REVENUE MAY BE DISMISSED. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECO RDS, ESPECIALLY THE IMPUGNED ORDER PASSED BY THE LD. CIT( A). WE FIND THAT LD. FIRST APPELLATE AUTHORITY HAS ELABORATELY DISC USSED THE ISSUE IN DISPUTE BY CONSIDERING THE SUBMISSIONS OF THE ASS ESSEE AND ITA NO. 2088/DEL/2014 5 ADJUDICATED THE ISSUE VIDE PARA NO. 5.2 TO 5.3 AT PAG ES 10 TO 11 OF THE IMPUGNED ORDER. THE SAID RELEVANT PARAS ARE REP RODUCED AS UNDER:- 5.2 I FIND THAT WHILE RECORDING THE REASONS FOR INITI ATING PROCEEDINGS UNDER SECTION 147, THE AO HAS TAKEN THE AMOUNT OF RETURNED INCOME AT RS. 78,68,673/- AND AMOUNT OF ASSESSED LOSS AT RS. 36,03,300/-. BOTH THESE FIGURES ARE FACTUALLY INCORRECT, AS THE LD. AO IN THE ORIGINAL ASSESSMENT UNDER SECTION 143(3) HAD ASSESSED THE INCOME AT RS. 7,86,86,783/-. FURTHER, THE APPELLA NT HAD, DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, REVISED THE COMPUTATION OF INCOME AS THE ORIGINAL COMPUTATION WAS BASED ON PROVISIONAL FINANC IAL ACCOUNT AND ACCORDINGLY, CLAIMED THE LOSS OF RS.' 7,23,56,799. THE LD. AO IN THE ORIGINAL ASSESSMENT PROCEEDINGS TOOK, COGNIZANCE OF THE FINANCIAL ACCOUN TS AND MADE AN ADDITION OF RS.15,1O,43,582 OF THE THE AFORESAID REVISED COMPUTATION OF INCOME IN WHICH LOSS OF RS.7,23,56,799 WAS CLAIMED AND BASED ON THIS, THE INCOME UNDER SECTION 143(3), WAS ASSESSED AT RS.7,86,86,783. I ALSO FIND THAT THE MAIN OBSERVATI ON OF THE AO THAT THE APPELLANT HAD CLAIMED 'NETWORK AND ITA NO. 2088/DEL/2014 6 OTHER EQUIPMENTS COST' AS 'CIRCUIT EXPENSES, WHICH W ERE CLUBBED UNDER THE, HEAD REVENUE EXPENSES, IS ALSO FACTUALLY INCORRECT. SUCH MISTAKES POSSIBLY OCCURRED AS THE AO DID NOT BOTHER TO GO THROUGH THE REVISED COMPUTATION OF INCOME, WHICH WAS PLACED BEFORE THE A O IN THE ORIGINAL ASSESSMENT PROCEEDINGS AND WHICH WAS ACCEPTED BY HIM WHILE PASSING ORDER UNDER SECTION 143(3), IN VIEW OF THE ABOVE, IT IS EVIDENT THAT THE MAIN GROUNDS ON WHICH THE REASSESSMENT PROCEEDINGS WERE INITIATED WERE FACTUALLY INCORRECT OBSERVATION OF THE LD. AO. MOREOVER, THE ASSESSMENT WAS REOPENED AFTER FOUR YEARS AND IN WHICH ALREADY AN ORDER UNDER SECTION 143(3) WAS PASSED, THEREFORE, THE REOPENING OF ASSESSMENT COULD HAVE BEEN JUSTIFIED ONLY WHERE IT WAS PROVED THAT THE APPELLANT HAD FAILED TO MAKE FULL AN D TRUE DISCLOSURE' OF MATERIAL FACTS. FURTHER, I FIND THA T THE LD. AO HIMSELF HAS, WHILE RECORDING THE REASONS MENTIONED THAT THE OBSERVATION THAT THE APPELLANT HAD CLAIMED 'NETWORK AND OTHER EQUIPMENT COST' AS REVENUE EXPENSES, WAS BASED ON EXAMINATION OF 'FILE AND DOCUMENTS PLACED ON RECORD'. SINCE THERE WAS NO INDEPENDENT SOURCE OF SUCH INFORMATION AND THE AO ONLY ITA NO. 2088/DEL/2014 7 RE-EXAMINED THE FILE AND DOCUMENTS, WHICH WAS ALREA DY SUBJECT MATTER OF SCRUTINY UNDER SECTION 143(3), IT IS EVIDENT THAT THE ACTION OF THE AO WAS CLEARLY IN THE NATURE CHANGE OF OPINION', ON WHICH REASSESSMENT CANNOT BE SUSTAINED AS WAS HELD BY THE HON'BLE HIGH COURT IN. THE CASE OF (IT VS. USHA INTERNATIONAL LTD. (ITA. NO.2026/2010) (20L2). MOREOVER, THE AO HAS ALLEGED THAT SUCH 'NETWORK AND OTHER EQUIPMENT COST' WAS BOOKED UNDER THE HEAD 'CIRCUIT EXPENSES'. FURTHER, IN THE OR IGINAL ASSESSMENT PROCEEDINGS UNDER SECTION 143(3), DISALLOWANCE WAS PRIMARILY MADE IN RESPECT OF SUCH 'CIRCUIT EXPENSES' ONLY. AFTER THE ASSESSMENT UNDER SECTION 143(3), THE MATTER TRAVELLED UPTO THE ITAT, WHIC H GAVE RELIEF TO THE APPELLANT. THE CIT(A) HAD ALSO DEL ETED THE ADDITION MADE BY THE AO, WHICH WAS UNDER SECTION 40(A)(IA). THE CIT(A) HAS ALL THE POWERS OF AN INCO ME TAX AUTHORITY AND EVEN WHILE ALLOWING ORIGINAL DISALLOWAN CE UNDER SECTION 40(A)(IA), THE CIT(A) WAS FULLY EMPOWE RED TO DETERMINE SUCH EXPENSES AS CAPITAL IN NATURE AND WOULD HAVE DISALLOWED IT ACCORDINGLY. HOWEVER, NO S UCH FINDING WAS GIVEN BY THE CIT(A). MOREOVER, THE FINDIN G OF ITA NO. 2088/DEL/2014 8 THE AO WHILE RECORDING THE REASONS, WAS BASED ON FACTUALLY INCORRECT FACTS. 5.3 KEEPING IN VIEW THE ABOVE, THE RE-ASSESSMENT ORDE R PASSED BY THE AO IS BAD IN LAW, WITHOUT JURISDICTION, AND IS REQUIRED TO BE QUASHED. ON THE MERIT OF THE CASE AS WELL, NO, ADDITION IS CALLED FOR. 7.1 AFTER GOING THROUGH THE FINDINGS OF THE LD. CIT(A ), AS AFORESAID, WE ARE OF THE CONSIDERED VIEW THAT AO WHILE RECORDING THE REASONS FOR INITIATING PROCEEDINGS UNDER SECTION 1 47, HAS TAKEN THE AMOUNT OF RETURNED INCOME AT RS. 78,68,673/- AND A MOUNT OF ASSESSED LOSS AT RS. 36,03,300/-. BOTH THESE FIGURES ARE FACTUALLY INCORRECT, AS THE AO IN THE ORIGINAL ASSESSMENT UNDE R SECTION 143(3) HAD ASSESSED THE INCOME AT RS. 7,86,86,783/-. FURTHER , THE ASSESSEE HAD, DURING THE COURSE OF ORIGINAL ASSESSME NT PROCEEDINGS, REVISED THE COMPUTATION OF INCOME AS THE ORIGINAL COMP UTATION WAS BASED ON PROVISIONAL FINANCIAL ACCOUNT AND ACCORDING LY, CLAIMED THE LOSS OF RS.7,23,56,799. THE AO IN THE ORIGINAL ASSE SSMENT PROCEEDINGS TOOK, COGNIZANCE OF THE FINANCIAL ACCOUN TS AND MADE AN ADDITION OF RS.15,10,43,582 OF THE AFORESAID REVISE D COMPUTATION OF INCOME IN WHICH LOSS OF RS.7,23,56,799 WAS CLAIMED AND BASED ON THIS, THE INCOME UNDER SECTION 143(3), WAS ASSESSED AT ITA NO. 2088/DEL/2014 9 RS.7,86,86,783. WE ALSO FIND THAT THE MAIN OBSERVATION OF THE AO THAT THE ASSESSEE HAD CLAIMED 'NETWORK AND OTHER EQUI PMENTS COST' AS 'CIRCUIT EXPENSES, WHICH WERE CLUBBED UNDER THE, H EAD REVENUE EXPENSES, IS ALSO FACTUALLY INCORRECT. SUCH MISTAKES POSSIBLY OCCURRED AS THE AO DID NOT BOTHER TO GO THROUGH THE R EVISED COMPUTATION OF INCOME, WHICH WAS PLACED BEFORE THE A O IN THE ORIGINAL ASSESSMENT PROCEEDINGS AND WHICH WAS ACCEPTE D BY HIM WHILE PASSING ORDER UNDER SECTION 143(3). IN VIEW OF THE ABOVE, IT IS EVIDENT THAT THE MAIN GROUNDS ON WHICH THE REASSESSME NT PROCEEDINGS WERE INITIATED WERE FACTUALLY INCORRECT OBSERVATION OF THE AO. MOREOVER, THE ASSESSMENT WAS REOPENED AFTER FOUR YEARS AND IN WHICH ALREADY AN ORDER UNDER SECTION 143(3) WAS PASSED, THEREFORE, THE REOPENING OF ASSESSMENT COULD HAVE BE EN JUSTIFIED ONLY WHERE IT WAS PROVED THAT THE ASSESSEE HAD FAILED TO MAKE FULL AND TRUE DISCLOSURE' OF MATERIAL FACTS. FURTHER, I FI ND THAT THE AO HIMSELF HAS, WHILE RECORDING THE REASONS MENTIONED THAT THE OBSERVATION THAT THE ASSESSEE HAD CLAIMED 'NETWORK AN D OTHER EQUIPMENT COST' AS REVENUE EXPENSES, WAS BASED ON EXA MINATION OF FILE AND DOCUMENTS PLACED ON RECORD. SINCE THERE WAS NO INDEPENDENT SOURCE OF SUCH INFORMATION AND THE AO ON LY RE- EXAMINED THE FILE AND DOCUMENTS, WHICH WAS ALREADY S UBJECT MATTER OF SCRUTINY UNDER SECTION 143(3), IT IS EVIDENT THAT THE ACTION OF THE ITA NO. 2088/DEL/2014 10 AO WAS CLEARLY IN THE NATURE CHANGE OF OPINION', ON WHICH REASSESSMENT CANNOT BE SUSTAINED AS WAS HELD BY THE H ON'BLE HIGH COURT IN THE CASE OF (ITO VS. USHA INTERNATIONAL LTD. (I TA. NO.2026/2010) (20L2). MOREOVER, THE AO HAS ALLEGED THAT SUCH 'NETWORK AND OTHER EQUIPMENT COST' WAS BOOKED UNDER THE HEAD 'CIRCUIT EXPENSES'. FURTHER, IN THE ORIGINAL ASSESSME NT PROCEEDINGS UNDER SECTION 143(3), DISALLOWANCE WAS PRIMARILY MA DE IN RESPECT OF SUCH 'CIRCUIT EXPENSES' ONLY. AFTER THE ASSESSMENT UNDE R SECTION 143(3), THE MATTER TRAVELLED UPTO THE ITAT, WHICH GAVE R ELIEF TO THE ASSESSEE. THE CIT(A) HAD ALSO DELETED THE ADDITION MA DE BY THE AO, WHICH WAS UNDER SECTION 40(A)(IA). THE CIT(A) HAS AL L THE POWERS OF AN INCOME TAX AUTHORITY AND EVEN WHILE ALLOWING ORIG INAL DISALLOWANCE UNDER SECTION 40(A)(IA), THE CIT(A) WAS FULLY EMPOWERED TO DETERMINE SUCH EXPENSES AS CAPITAL IN N ATURE AND WOULD HAVE DISALLOWED IT ACCORDINGLY. HOWEVER, NO S UCH FINDING WAS GIVEN BY THE CIT(A). MOREOVER, THE FINDING OF THE AO WHILE RECORDING THE REASONS, WAS BASED ON FACTUALLY INCORRECT FACTS. IN VIEW OF THE ABOVE, LD. CIT(A) HAS RIGHTLY HELD THAT RE-ASSESSMENT ORDER PASSED BY THE AO IS BAD IN LAW, WITHOUT JURISDICTION, AND IS REQUIRED TO BE QUASHED. ON THE MERIT OF THE CASE AS WELL, NO, ADDI TION IS CALLED FOR. 7.2 IN THE BACKGROUND OF THE ABOVE FACTS AND CIRCUMSTA NCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT(A) HAS PASSED ITA NO. 2088/DEL/2014 11 A WELL REASONED ORDER WHICH DOES NOT NEED ANY INTER FERENCE ON OUR PART, HENCE, WE UPHOLD THE SAME AND REJECT THE GROUND S RAISED BY THE REVENUE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/10/2016. SD/- SD/- [L.P. SAHU] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 03/10/2016 SRBHATNAG AR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES