NATIONAL AVIATION CO OF INDIA LTD ( AIR INDIA LTD), MUMBAI V. DCIT 5(2), MUMBAI

ITA 2185/MUM/2012

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8076 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 19-02-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 02-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVJIT SINGH ARNEJA
• Assessee Lawyers: D J SHUKLA
• Keywords: Difference of opinion; Change of opinion; Revenue expenditure; Reassessment proceedings; Capital expenditure
• Section: 143(3); 5(2); 148; 154; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 2185 /MUM/ 2012 ASSESSMENT YEAR: 2005 - 06 M/S NATIONAL AVIATION CO. OF INDIA LTD. (M/S AIR INDIA LTD.) OLD AIRPORT, KALINA SANTCRUZ (E) MUMBAI - 400029. VS. DCIT - 5(2) MUMBAI PAN NO. AACCN6194P APPELLANT RESPONDENT ASSESSEE BY : MR. D.J. SHUKLA , AR REVENUE BY : MR. RAVJIT SINGH ARNEJA , CIT DR DATE OF HEARING : 19/09/2017 DATE OF PRONOUNCEMENT : 15/12/2017 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2005 - 06 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 9, MUMBAI AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING ACTION OF THE ASSESSING OFFICER (AO ) OF REOPENING THE ASSESSMENT M/S NATIONAL AVIATION CO. LTD. ITA NO. 2185/MUM/2012 2 COMPLETED U/S 143(3) ON A MERE CHANGE OF OPINION AND THOUGH NO FRESH INFORMATION/MATERIAL WAS RECEIVED BY THE AO AFTER COMPLETION OF THE ORIGINAL ASSESSMENT U/S 143 (3) VIDE ASSESSMENT ORDER DATED 26.12.2007. 2. THE LD. CIT(A) OUGHT TO HAVE HELD THAT THE IMPUGNED RE - ASSESSMENT ORDER U/S 143(3) R.W.S. 147 OF THE I.T. ACT 1961 PASSED IN CONTRAVENTION OF THE PROVISIONS OF LAW WAS AB INITIO BAD IN LAW AND NULL AND VOID. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING DISALLOWANCE MADE BY THE AO OF RS.15 CRORES ADVANCED TO VAYUDOOT LTD. BY THE APPELLANT. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE - COMPANY FILED ITS RETURN OF INCOME FOR THE AY 2005 - 06 ON 29.10.2004 DECLARING NIL INCOME. THE AO MADE AN ASSESSMENT U/S 143(3) ON 26.12.2007 COMPUTING THE TOTAL TAXABLE INCOME AT RS.44,33,44,230/ - , WHICH WAS THEN REVISED TO RS.18,19,68,764/ - VIDE ORDER U/S 154 DATED 31.03.2008. SUBSEQUENTLY, THE AO OBSERVED THAT THE ASSESSEE HAD DEBITED RS.15 CRORES TO THE PROFIT AND LOSS ACCOUNT ON ACCOUNT OF WRITE OFF OF LOAN TO INDIAN AIRLINES LTD. (ERSTWHILE VAYUDOOT LTD) UNDER THE HEAD EXTRAORDINARY ITEM. S INCE WRITING OFF OF LOAN IS NOT IN THE NATURE OF REVENUE EXPENDITURE, THE SAME RESULTED IN UNDER - ASSESSMENT OF INCOME TO THE EXTENT OF RS.15 CRORES. ACCORDINGLY, THE AO ISSUED NOTICE U/S 148 ON 29.03.2010 . IN THE REASSESSMENT MADE U/S 143(3) R.W.S. 147 DA TED 16.12.2010, THE AO MADE AN ADDITION OF RS.15 CRORES AS DISALLOWANCE ON ACCOUNT OF WRITE OFF OF LOANS TO M/S INDIAN AIRLINES LTD. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED A N APPEAL BEFORE THE LD. CIT(A), OBJECTING TO THE NOTICE ISSUED U/ S 148 FOR M/S NATIONAL AVIATION CO. LTD. ITA NO. 2185/MUM/2012 3 REOPENING THE ASSESSMENT DATED 26.12.2007 COMPLETED U/S 143(3). ON MERIT ALSO, THE ASSESSEE FILED A GROUND OF APPEAL BEFORE THE LD. CIT(A) THAT THE AO ERRED IN DENYING THE DEDUCTION OF RS.15 CRORES WHICH WAS WRITTEN OFF AS OLD LOAN GRANTED TO VAY UDOOT LTD. THE LD. CIT(A) DISMISSED THE APPEAL FILED BY THE ASSESSEE ON THE GROUND THAT THE AO HAS ACTED IN A BONAFIDE MANNER AND WITHIN THE LEGAL FRAMEWORK WHILE ISSUING THE NOTICE U/S 148 WITHIN FOUR YEARS FROM THE RELEVANT ASSESSMENT YEAR 2005 - 06. THE LD. CIT(A) ALSO HELD THAT THE BOOKS OF ACCOUNTS AND AUDITORS REPORT ESTABLISH THAT THE LOAN WAS IN THE NATURE OF CAPITAL ADVANCES. THEREFORE, THE WRITING OFF THE SAME ALSO WILL BE IN THE NATURE OF CAPITAL EXPENDITURE ONLY. ON THE ABOVE REASON, THE LD. CI T(A) CONFIRMED THE DISALLOWANCE OF RS.15 CRORES MADE BY THE AO IN THE REASSESSMENT. 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT THE AO HAS MADE THE REASSESSMENT ON THE BASIS OF A MERE CHANGE OF OPINION AND THEREFORE, THE REASSESSMENT IS NOT VALID. RELIANCE IS PLACED BY HIM ON THE DECISION IN THE CASE OF ASIAN PAINTS LTD. VS. DCIT (2009) 308 ITR 195 (BOM), ASTEROIDS TRADING AND INVESTMENT PVT. LTD. VS. DCIT (2009) 308 ITR 190 (BOM), INDIAN AND EASTERN NEWSPAPER SOCIETY VS. CIT (1979) 119 ITR 996 (SC). 6. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). HE ALSO RELIES ON T HE ORDER OF THE ITAT F BENCH, MUMBAI IN THE CASE OF THE ASSESSEE FOR THE A.Y. 2001 - 02 & 2002 - 03. M/S NATIONAL AVIATION CO. LTD. ITA NO. 2185/MUM/2012 4 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE FIND THAT IN THE REASSESSMENT ORDER DATED 16.12.2010 COMPLETED U/S 14 3(3) R.W.S. 147, THE AO HAS MENTIONED AT PARA 2 THAT THE ASSESSEE HAD DEBITED RS.15 CRORES TO THE PROFIT AND LOSS ACCOUNT ON ACCOUNT OF WRITE OFF OF LOAN TO INDIAN AIRLINES LTD. (ERSTWHILE VAYUDOOT LTD.) UNDER THE HEAD EXTRAORDINARY ITEM . SINCE WRITING O FF OF THE ABOVE LOAN WAS NOT IN THE NATURE OF REVENUE EXPENDITURE, THE AO REOPENED THE ASSESSMENT ORIGINALLY MADE U/S 143(3) BY ISSUING NOTICE U/S 148 ON 29.03.2010. IN THE ORDER OF THE TRIBUNAL FOR THE AY 2001 - 02 & 2002 - 03, THE ORIGINAL ASSESSMENT WAS MADE U/S 143(1). HERE THE ORIGINAL ASSESSMENT HAS BEEN MADE U/S 143(3). THEREFORE, THE INSTANT CASE IS DISTINGUISHABLE FROM THE SAID ORDER RELIED ON BY THE LD. DR. IN THE CASE OF CIT VS. KELVINATOR INDIA LTD . (2010) 187 TAXMAN 312 (SC), IT HAS BEEN HELD T HAT EVEN AFTER 01.04.1999, CONCEPT OF CHANGE OF OPINION CANNOT BE REMOVED. IT HAS BEEN HELD THEREIN: ONE MUST ALSO KEEP IN MIND THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REVIEW AND POWER TO REASSESS. THE ASSESSING OFFICER HAS NO POWER TO REVIEW; HE HA S THE POWER TO REASSESS, BUT THE REASSESSMENT HAS TO BE BASED ON FULFILLMENT ON CERTAIN PRECONDITIONS AND IF THE CONCEPT OF CHANGE OF OPINION IS REMOVED AS CONTENDED ON BEHALF OF THE DEPARTMENT, THEN IN THE GARB OF REOPENING ASSESSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF CHANGE OF OPINION AS AN IN - BUILT TEST TO CHECK THE ABUSE OF POWER BY THE ASSESSING OFFICER . M/S NATIONAL AVIATION CO. LTD. ITA NO. 2185/MUM/2012 5 MERE CHANGE OF OPINION CANNOT FORM THE BASIS WHEN THE PRIMARY FACTS NECESSARY FOR ASSESSMENT ARE FULLY AND TRULY DISCL OSED, THE ITO WILL NOT BE ENTITLED ON CHANGE OF OPINION TO COMMENCE PROCEEDINGS FOR REASSESSMENT. SIMILARLY, IF HE HAS RAISED A WRONG LEGAL INFERENCE FROM THE FACTS DISCLOSED, HE WILL NOT, ON THAT ACCOUNT, BE COMPETENT TO COMMENCE REASSESSMENT PROCEEDINGS AS HELD IN CIT VS. BHANJI LAVJI [1971] 79 ITR 582 (SC). HAVING SECOND THOUGHTS ON THE SAME MATERIAL, AND OMISSION TO DRAW THE CORRECT LEGAL PRESUMPTION DURING ORIGINAL ASSESSMENT DO NOT WARRANT THE INITIATION OF A PROCESSING UNDER SECTION 147 AS HELD IN ITO VS. NAWAB MIR BARKAT ALI KHAN BAHADUR [1974] 97 ITR 239 (SC) . 7.1 THE FACT REMAINS THAT THE ASSESSEE HA S DEBITED RS.15 CRORES TO THE PROFIT AND LOSS ACCOUNT ON ACCOUNT OF WRITE OFF OF LOAN TO INDIA AIRLINES LTD. (ERSTWHILE VAYUDOOT LTD.) UNDER THE HEAD EXTRAORDINARY ITEM. THE AO HAS TO DECIDE WHETHER SUCH WRITING OFF OF LOAN IS IN THE NATURE OF REVENUE EXPENDITURE OR CAPITAL EXPENDITURE. IN THE ASSESSMENT MADE U/S 143(3) ON 26.12.2007 THE AO THOUGHT THAT IT IS A REVENUE EXPENDITURE. THEN HE ISSUED NOT ICE U/S 148 TREATING IT AS CAPITAL EXPENDITURE. THUS THERE IS A CHANGE OF OPINION BY THE AO. AS IT IS A SIMPLE CASE OF CHANGE OF OPINION BY THE AO , WE FOLLOW THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN KELVINATOR INDIA LTD, BHANJI LAVJI AND NAWAB MIR BARKAT ALI KHAN BAHADUR AND HOLD THE NOTICE U/S 148 ISSUED BY THE AO AS INVALID. M/S NATIONAL AVIATION CO. LTD. ITA NO. 2185/MUM/2012 6 8. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15/12/2017. SD/ - SD/ - ( MAHAVIR SINGH ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 15/12/2017 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI