Sri Venkateswara Swamy Lorry Service, Nalgonda, Secunderabad V. ITO, Suryapet, Suryapet

ITA 216/HYD/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6677 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 05-04-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 05-03-2015
• Court: TRIBUNAL
• Department Lawyers: M SITARAM
• Assessee Lawyers: Y V BHANU NARAYAN RAO
• Keywords: Depreciation; Business expenditure; Tangible material; Difference of opinion; Assessment record; Reason to believe; Change of opinion
• Section: 143(3); 147; 148; 144; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH ES A , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 2 1 6 /H YD /201 5 ASSESSMENT YEAR: 20 0 6 - 07 M/S. SRI VENKATESWARA SWAMY LORRY SERVICE , KODAD, NALGONDAD DISTRICT [PAN: AA YFS4647P ] VS THE INCOME TAX OFFICER , SURYAPET (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI Y.V. BHANU NARAYAN RAO , AR FOR REVENUE : SHRI M. SITARAM , DR DATE OF HEARING : 0 5 - 0 4 - 201 6 DATE OF PRONOUNCEMENT : 13 - 0 4 - 201 6 O R D E R PER B. RAMAKOTAIAH, A.M. : TH I S IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX ( APPEALS ) - 3 , HYDERABAD DATED 31 - 1 2 - 201 4 . THE ISSUE IS WITH REFERENCE TO REOPENING OF THE ASSESSMENT U/S. 147 OF THE INCOME TAX ACT [ACT] AND COMPLETION OF ASSESSMENT EX - PARTE U/S. 144 , DISALLOWING CERTAIN LOSSES CLAIMED BY ASSESSEE . 2. ASSESSEE IS A LORRY TRANSPORT CONTRACTOR AND HAS FILED RETURN OF INCOME ADMITTING LOSS OF RS. 4,51,250/ - . ASSESSMENT I.T.A. NO. 216 / HYD / 20 1 5 M/S. SRI VENKATESWARA SWAMY LORRY SERVICE : - 2 - : U/S. 143(3) WAS ORIGINALLY MADE ON 24 - 12 - 2008 AND AFTER DISALLOWING CERTAIN EXPENDITURE, THE TOTAL INCOME WAS DETERMINED AT NIL. THE ASSESSING OFFICER (AO) AFTER THE END OF FOUR YEARS FROM THE ASSESSMENT YEAR , HAS RECORDED THE SATISFACTION FOR REOPENING THE ASSESSMENT AS UNDER: ON VERIFICATION OF RECORD IT IS NOTICED THAT: THE ASSESSEE FIRM HAS CLAIMED LOSS ON SALE OF VEHICLE AMOUNTING TO RS. 1,49,99,273/ - AND DEBITED TO P&L A/C. THERE WAS NO BALANCE IN THE BLOCK ASSETS ARE TREATED AS SHORT TERM CAPITAL GAIN/LOSS U/S. 50(2) OF IT ACT, HENCE THE ENTIRE AMOUNT NEEDS TO BE TREATED AS SHORT TERM CAPITAL LOSS AND DISALLOWED AS BUSINESS EXPENDITURE AND ADDED BACK. IN VIEW OF THE ABOVE, I HAVE REASON TO BELIEVE THAT THE INCOME CHA RGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SEC. 147 OF THE INCOME TACT ACT, 1961. CONSEQUENTLY, A NOTICE U/S. 148 WAS ISSUED. THERE WAS A NOTING THAT SINCE THE FIRM WAS DISCONTINUED ITS BUSINESS AND NOT FUNCTIONING AT PRESENT, THE NOTIC E WAS SERVED BY AFFIXTURE ON 30 - 03 - 2012. L ATER ON A NOTICE U/S. 143(2) WAS ALSO ISSUED ON 13 - 08 - 2012 AND AS THERE IS NO RESPONSE FROM ASSESSEE, THE ORDER U/S. 144 WAS PASSED DISALLOWING THE LOSS OF SALE OF VEHICLES HOLDING IT TO BE SHORT TERM CAP ITAL LOSS, THEREBY DETERMINED TO TAL INCOME AT RS. 1,49,99,270/ - . ASSESSEE CARRIED THE MATTER TO THE CIT(A) TO CONTEND THAT THE CLAIM OF LOSS OF VEHICLES IS A BUSINESS LOSS AS THE ASSETS OF ASSESSEE WERE SEIZED BY THE FINANCIE RS DUE TO FINANCIAL PROBLEMS, T HEREFORE, THE SAME CANNOT BE CONSIDERED AS SHORT TERM CAPITAL LOSS. IT WAS ALSO FURTHER CONTENDED THAT THE TERMINAL ALLOWANCE HAS TO BE ALLOWED AS A BUSINESS DEDUCTION AND RELIED ON VARIOUS CASE LAW. APART FROM THE MERITS, ASSESSEE ALSO CONTENDED THAT R EOPENING OF ASSESSMENT WAS BAD IN LAW AS ASSESSMENT WAS ORIGINALLY COMPLETED U/S. 143(3) AND THERE IS NO FAILURE ON THE PART OF ASSESSEE SO AS TO REOPEN THE ASSESSMENT. I.T.A. NO. 216 / HYD / 20 1 5 M/S. SRI VENKATESWARA SWAMY LORRY SERVICE : - 3 - : 3. LD. CIT(A) HOWEVER, DID NOT AGREE ON BOTH THE CONTENTIONS AND DIS MISSED ASS ESSEES CONTENTIONS ON REOPENING STATING AS UNDER: 4.5 THESE TWO DECISIONS, BOTH REFERRING TO AND INTERPRETING THE DECISION OF THE SUPREME COURT IN THE CASE OF KELVINATOR, LAY DOWN TWO SIGNIFICANT RATIOS: FIRSTLY, THAT IF THE ASSESSING OFFICER DID NOT EXAMINE THE CLAIM OF THE ASSESSEE DURING THE ORIGINAL ASSESSMENT PROCEEDINGS, HE CANNOT BE SAID TO HAVE FORMED ANY OPINION AND HE WOULD BE JUSTIFIED IN RE O PENING THE ASSESSMENT. SECONDLY, THE TANGIBLE MATERIAL FORMING THE BASIS OF THE REASON TO BELIEVE THA T INCOME HAS ESCAPED ASSESSMENT NEED NOT BE NEW; THEY MAY BE PART OF THE ORIGINAL RECORD. BOTH THESE PRINCIPLES APPLY TO THE FACTS IN THE APPELLANT'S CASE. FI RSTLY, THE ASSESSING OFFICER HAD NEITHER RAISED ANY QUERY RELATING TO THE LOSS O N SALE OF VEHICLES . SECONDLY, THOUGH THE INFORMATION ON THE BASIS OF W HICH THE REASSESSMENT WAS MADE WAS PART OF THE ORIGINAL ASSESSMENT RECORDS, HAVING BEEN FILED ALONG WITH THE RETURN, THERE W AS NO BAR TO ITS ACCEPTABILITY AS THE BASIS FOR THE REASON TO BELIEVE. 4.6 IN VIEW OF THE ABOVE, I FIND NO INFIRMITY IN THE NOTICE U/S 148 AND THE VALIDITY OF THE ORDER U/S 147 IS UPHELD. THE APPEAL IS DISMISSED ON THIS I S SUE . 4 . BEFORE US, ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THE ORDERS PASSED BY THE LEARNED COMMISS IONER OF INCOME - TAX (APPEALS) - III, HYDERABAD IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED THE FACT THAT NOTICE U/S 148 OF THE IT ACT, 1961 WAS NOT PROPERLY SER VED ON THE ASSESSEE AS THE NOTICE U/S 148 WAS STATED TO BE DONE BY THE A O BY WAY OF AFFIX TURE. IN THE CONTEXT, IT IS PERTINENT TO NOTE THAT THE ASSESSEE HAD DISCONTINUED BUSINESS AND WAS NOT AVAILABLE AT THE ADDRESS AT WHICH THE NOTICE U/S 148 WAS PURPORT ED TO HAVE BEEN SERVED BY WAY OF AFFIXTURE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE LEARNED ASSESSING OFFICER OUGHT NOT HAVE ISSUED NOTICE U/S 148 I.T.A. NO. 216 / HYD / 20 1 5 M/S. SRI VENKATESWARA SWAMY LORRY SERVICE : - 4 - : OF THE IT ACT, 1961 AND COMP LETE THE ASSESSMENT U/S 144 RWS 147 FOR THE AY 2006 - 07 AS THE ASSESSMENT OF THE ASSESSEE FIRM FOR THE AY 2006 - 07 WAS ALREADY COMPLETED U / S 143(3) ON 24 - 12 - 2008 AFTER DETAILED VERIFICATION AND THE LEARNED AO WAS NOT IN THE POSSESSION OF ANY FURTHER/ADDITION AL INFORMATION NOR THERE WAS ANY ESCAPEMENT OF INCOME AND THE THE LEARNED ASSESSING OFFICER ISSUED NOTICE U/S 148 MERELY ON A CHANGE OF OPINION AND NOT ON THE BASIS OF ANY CONCRETE INFORMATION RECEIVED BY HIM SUBSEQUENT TO THE COMPLETION OF ASSESSMENT U/S 143(3). 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) OUGHT TO HAVE TREATED THE LOSS OF RS. 1,49,99,273/ - ARISING ON SEIZURE OF TRANSPORT VEHICLES BY FINANCIAL INSTITUTIONS AS LOSS UNDER THE HEAD 'INCOME FROM PROFIT AND GAINS FROM BUSINESS OR PROFESSION' AS SUCH LOSS HAD ARISEN IN THE NORMAL COURSE OF BUSINESS CARRIED ON BY THE APPELLANT AND THAT THE ASSETS SEIZED BY THE FINANCIAL INSTITUTIONS WERE BUSINESS ASSETS. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE L EARNED CIT (A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE SCOPE OF A DEEMING PROVISION AND THE FICTION CREATED BY THE PROVISIONS OF A DEEMING PROVISION CANNOT BE EXTENDED BEYOND THE OBJECT FOR WHICH IT IS ENACTED . 5 . IN THE COURSE OF HEARING, WE HAVE ASKED THE LD. DR TO PLACE ON RECORD THE SATISFACTION RECORDED AT THE TIME OF REOPENING . E VEN T HOUGH, THERE IS NO DATE WHEN THE PROCEEDINGS WERE INITIATED IN THE ORDER SHEET, A S CAN BE SEEN FROM THE ORDER SHEET OF REVENUE PLACED ON RECORD , AS WELL AS FIND INGS OF THE CIT(A) , THE SERVICE OF THE NOTICE WAS BY WAY OF AFFIXTURE ON 30 - 03 - 2012. I T CAN BE SAFELY CONCLUDED THAT ASSESSMENT WAS REOPENED AFTER FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. THE PROVISIONS OF SECTION 147 ARE AS UNDER: 147. IF THE [A SSESSING] OFFICER [HAS REASON TO BELIEVE] THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECT IONS 148 TO 153 , ASSESS OR I.T.A. NO. 216 / HYD / 20 1 5 M/S. SRI VENKATESWARA SWAMY LORRY SERVICE : - 5 - : REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS 91 UNDER THIS SECTION, OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTE R IN THIS SECTION AND IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR) : PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB - SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTIO N SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAK E A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB - SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THAT ASSESSMENT YEAR: PROVIDED FURTH ER XXXXXXXXXXXXXXXXXX 5 .1. THUS, AS CAN BE SEEN FROM THE FIRST PROVISO EXTRACTED ABOVE, AN ASSESSMENT COMPLETED UNDER 143(3) CAN BE REOPENED AFTER FOUR YEARS FROM THE END OF ASSESSMENT YEAR ONLY WHEN THERE IS FAILURE ON THE PART OF ASSESSEE TO DISCLOSE F ULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. AS SEEN FROM THE SATISFACTION NOTE RECORDED BY THE AO , THE SAME INDICATES THAT ON VERIFICATION OF RECORD, IT IS NOTICED TH AT. WHICH CONFIRMS THAT THE E NTIRE INFORMATION HAS BEEN FURNISHED BY ASSESSEE AND WA S AVAILABLE ON RECORD. CONSEQUENTLY, AS PER THE FIRST PROVISO TO SECTION 147, WHERE AN ASSESSMENT UNDER SUB - SECTION 3 OF SECTION 143 HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE AO COULD HAVE REOPENED THE ASSESSMENT ON OR BEFORE 31 - 03 - 2011 FOR THE AY. 2006 - 07. SINCE THE NOTICE U/S. 148 WAS ISSUED AND SERVED BY WAY OF AFFIXTURE O N 30 - 12 - 2012, THE INITIATION OF PROCEEDINGS ITSELF IS BARRED BY LAW. CONSEQUENTLY, WE I.T.A. NO. 216 / HYD / 20 1 5 M/S. SRI VENKATESWARA SWAMY LORRY SERVICE : - 6 - : HOLD THAT THE PROCEEDINGS U/S. 147 ARE AB INITIO VOID. IN VIEW OF THIS, WE HAVE NO HESITATION IN SETTING ASIDE THE PROCEEDINGS AND RESTORE IN THE ORIGINAL ASSESSMENT OR DER U/S. 143(3). THE GROUNDS OF ASSESSEE ARE ACCORDINGLY ALLOWED. 6 . IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH APRIL, 2016 SD/ - SD/ - (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 13 TH APRIL , 2016 TNMM COPY TO : 1. M/S. SRI VENKATESWARA SWAMY LORRY SERVICE, D. NO. 4 - 112/A, MAIN ROAD, KODAD, NALGONDA DISTRICT. C/O. Y.V. BHANU NARAYAN RAO, CHARTERED ACCOUNTANT, 10 - 2 - 195, OPP: DECCAN CLUB, EAST MARREDPALLY, SECUN DERABAD. 2 . THE INCOME TAX OFFICER, SURYAPET . 3 . CIT(APPEALS) - 3 , HYDERABAD. 4. CIT - 3 , HYDERABAD. 5 . D.R. ITAT, HYDERABAD. 6 . GUARD FILE.