DCIT, New Delhi V. M/s. MACL Securities & Finance Ltd., New Delhi

ITA 2186/DEL/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65773 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 06-11-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 07-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEEPAK SEHGAL
• Keywords: Tangible material; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 142(1)

Judgement Text

I.T.A. NO. 2186/DEL/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 2186/DEL/2010 A.Y. : 2002-03 DCIT, CIR. 6(1), ROOM NO. 413, C.R. BLDG., NEW DELHI VS. M/S MACL SECURITIES & FINANCE LTD., 18, COMMUNITY CENTRE, NEW FRIENDS COLONY, NEW DELHI 110 025 (PAN/GIR NO. : AAACM 4967D) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSESSEE BY : SH. K. SAMPATH, ADV. DEPARTMENT BY : SH. DEEPAK SEHGAL, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-IX, NEW DEL HI DATED 15.3.2010 PERTAINING TO ASSESSMENT YEAR 2002-03. 2. THE GROUNDS RAISED READ AS UNDER:- 1. THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A) IS ERRONEOUS AND CONTRARY TO FACTS AND LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (A) HAS I.T.A. NO. 2186/DEL/2010 2 ERRED IN QUASHING THE PROCEEDING U/S. 147/148 OF T HE I.T. ACT. 2.1 THE LD. COMMISSIONER OF INCOME TAX (A) IGNORED THE FACT THAT THE CASE OF THE ASSESSEE WAS REOPENED U/S . 147/148 OF THE I.T. ACT AFTER FOLLOWING PROCEDURE L AID DOWN BY LAW. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN DELETING THE ADDITION OF ` 21,27,158/-0 MAD E BY THE ASSESSING OFFICER BEING THE LEASE EQUALIZAT ION WITHOUT GOING INTO THE MERIT OF THE CASE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN DELETING THE ADDITION OF ` 26,00,000/- MADE BY THE ASSESSING OFFICER BEING THE DEBT/ SHARE APPLICATION MONEY WRITTEN OFF WITHOUT GOING INTO T HE MERIT OF THE CASE. 5. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, OR AMEND ANY GROUNDS OF APPEAL RAISED ABOVE AT THE TIME OF THE HEARING. 3. IN THIS CASE THE RETURN OF INCOME FOR THE ASSE SSMENT YEAR 2002- 03 WAS FILED BY THE ASSESSEE ON 31.10.2002 DECLARIN G AN INCOME OF ` 33,10,539/-. THE RETURN WAS PROCESSED U/S. 143(1) OF THE I.T. ACT ON 28.2.2003 AND THEREAFTER WAS TAKEN UP FOR SCRUTINY. THE ASSESSMENT WAS COMPLETED U/S. 143(3) ON 21.12.2004 AT ASSESSED INCOME OF ` 33,10,539/-. I.T.A. NO. 2186/DEL/2010 3 ASSESSING OFFICER OBSERVED THAT ON PERUSAL OF THE FILE IT HAS BEEN NOTICED THAT AN AMOUNT OF ` 21,27,158/- HAS BEEN RED UCED BY THE ASSESSEE COMPANY FROM TOTAL LEASE RENTAL CHARGES OF ` 1,19,05,538/- AND NET LEASE RENTAL CHARGES OF ` 97,78,380/- HAS BEEN SHOWN AS ITS INCOME APART FROM OTHER RECEIPTS SHOWN AS INCOME. A SSESSING OFFICER FURTHER NOTED THAT AS THE TOTAL RECEIPTS OF ` 1,19 ,05,538/-, REPRESENT LEASE RENTAL CHARGES (BY WHATEVER NAME CALLED), THE ASSESSEE COMPANY SHOULD HAVE SHOWN TOTAL RECEIPTS AS ITS INCO ME. BY NOT DOING SO, THE ASSESSEE HAS REDUCED ITS TAXABLE INCOME TO T HE EXTENT OF ` 21,27,158/-. ASSESSING OFFICER THEREFORE WAS SATI SFIED THAT INCOME TO THE EXTENT OF ` 21,27,158/- OF THE ASSESSEE COMPANY WAS UNDER ASSESSED AND HAS ESCAPED ASSESSMENT. IN VIEW OF THIS, THE ASSESSING OFFICER HAD REASON S TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. A NOTICE U/S. 148 WAS ISSUED TO THE COMPANY ON 2.11.2006. 3.1 THE ASSESSING OFFICER ASKED THE ASSESSEE TO SU BMIT A DETAILED NOTE ON THE ACCOUNTING PROCEDURE OF LEASE RENTALS BEING FOLLOWED BY THE ASSESSEE COMPANY AND TO THE REASONS FOR THE ALL OWANCE OF LEASE EQUALIZATION CHARGE. NOT SATISFIED WITH THE REPLY OF THE ASSESSEE THE ASSESSING OFFICER HELD THAT LEASE RENTAL INCOME A ND ALREADY ACCRUED TO THE ASSESSEE AND THE SAME COULD NOT BE SHIFTED TO ANOTHER YEAR BY WAY OF APPROPRIATION TOWARDS LEASE EQUALIZATION. DRAWING UPON THE EXAMPLE OF ACCOUNTING PRACTICES OF ANOTHER COMPANY IN THE BUSINESS OF LEASING CARS, M/S MARUTI COUNTRYWIDE AUTO FINANCIAL S ERVICES PVT. LTD., THE ASSESSING OFFICER HELD THAT THE ACCOUNTING PR ACTICES OF THE ASSESSEE DEFY LOGIC AND ARE NOT IN CONFORMITY OF THE ACCOUNTING PRINCIPLES. ASSESSING OFFICER PROCEEDED TO DISA LLOW LEASE RENTAL I.T.A. NO. 2186/DEL/2010 4 EQUALIZATION CHARGES AMOUNTING TO ` 21,27,158/- AN D THE SAME WAS ADDED TO THE INCOME OF THE ASSESSEE. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (A) NOTED THAT IN SUBSTANCE THE ASSESSEE HAS CHALLENGED THE INITIATION OF PROCEEDINGS U/S. 147 ON THE GROUND THAT THE SAME ARE BASED ON A CHANGE IN OPINION AS MATTER RELATING TO LEASE EQUALI ZATION CHARGES HAS BEEN GONE INTO IN THE COURSE OF THE ORIGINAL ASSES SMENT PROCEEDINGS. HENCE, THE ASSESSEE ARGUED THAT THE REOPENING IS N OT BASED ON ANY INFORMATION THAT COULD FORM THE BASIS FOR REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. LD. COMMISSIONER OF INCOM E TAX (A) FURTHER OBSERVED THAT FROM THE PERUSAL OF THE ASSESS MENT RECORD IT IS SEEN THAT THE ASSESSEE WAS ASKED TO FURNISH VARIOUS DETAILS PARTY-WISE BREAKUP OF LEASE RENTALS AMONG OTHER INFORMATION SO UGHT THROUGH A QUESTIONNAIRE DATED NIL ISSUED ALONGWITH NOTICE U/S . 142(1) DATED 08.6.2004. THE DETAILS OF PARTY-WISE LEASE RENTA L WERE FILED ALONGWITH THE REPLY OF THE ASSESSEE DATED 15.7.2004. SUBSE QUENTLY, VIDE ORDER DATED 15.7.2004, THE ASSESSING OFFICER WAS ASKED T O FILE LEDGER ACCOUNT IN ITS BOOKS IN RESPECT OF LEASE ADJUSTMENT ACCOUNT. THIS INFORMATION WAS FILED BY THE ASSESSEE ALONGWITH A L ETTER DATED 20.7.2004. FROM THIS LD. COMMISSIONER OF INCOME TAX ( A) CONCLUDED THAT IT IS APPARENT THAT THE MATTER OF LEASE EQUALIZ ATION CHARGES WAS CONSIDERED DURING THE COURSE OF REGULAR ASSESSMEN T PROCEEDINGS U/S. 143(3). HENCE, LD. COMMISSIONER OF INCOME TAX (A) OPINED THAT IT CAN BE DEDUCED THAT THE ACTION UNDER SECTION 147 IS BAS ED ON A CHANGE OF OPINION. IN THIS REGARD, LD. COMMISSIONER OF INC OME TAX (A) FURTHER REFERRED THE DECISIONS OF THE C.I.T. VS. KELVINATOR INDIA LTD. 256 ITR 1, FULL BENCH OF DELHI HIGH COURT AND THE DECISION OF T HE HONBLE APEX COURT IN THE SAME CASE 320 ITR 561. I.T.A. NO. 2186/DEL/2010 5 5. LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAN D SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT LD. COMMISSIONER OF INCOME TAX (A) HAS GIVEN A CLEAR FINDING THAT THE ASSESSEE WAS ASKED TO FURN ISH THE VARIOUS DETAILS, PARTY-WISE BREAK-UP OF LEASE RENTALS AMONG OTHER INFORMATION SOUGHT THROUGH A QUESTIONNAIRE DATED NIL ISSUED A LONGWITH NOTICE U/S. 142(1) DATED 08.6.2004. ASSESSEE DULY SUPPLIED THE PARTY-WISE LEASE RENTAL VIDE REPLY DATED 15.7.2004. SUBSEQUENTLY, VIDE ORDER DATED 15.7.2004, THE ASSESSING OFFICER WAS ASKED TO FILE LEDGER ACCOUNT IN ITS BOOKS IN RESPECT OF LEASE ADJUSTMENT ACCOUNT. THIS INFORMATION WAS FILED BY THE ASSESSEE ALONGWITH A LETTER DATED 20.7 .2004. THUS, WE ARE IN AGREEMENT WITH THE LD. COMMISSIONER OF INCOME TAX (A) THAT THE MATTER OF LEASE EQUALIZATION CHARGES WAS CONSIDERED BY THE ASSESSING OFFICER. DURING THE COURSE OF REGULAR ASSESSMENT P ROCEEDINGS U/S. 143(3). HENCE, IT IS CLEAR THAT ACTION UNDER SECT ION 147 IS BASED ON A CHANGE OF OPINION. 6.1 WE FIND THAT FULL BENCH OF THE HONBLE JURISDIC TIONAL HIGH COURT IN THE CASE OF C.I.T. VS. KELVINATOR INDIA LTD. 256 I TR 1, HAS HELD THAT MERE CHANGE OF OPINION WOULD NOT CONFER JURISDICTIO N UPON THE ASSESSING OFFICER TO REOPEN PROCEEDINGS WITHOUT A NYTHING FURTHER. IT WAS HELD THAT IF THE ASSESSING OFFICER IS ALLOWED TO DO SO, THE SAME WOULD AMOUNT TO GIVING A PREMIUM TO AN AUTHORITY EXE RCISING QUASI JUDICIAL FUNCTION TO TAKE BENEFIT OF ITS WRONG. HE NCE, IT IS CLEAR THAT SECTION 147 OF THE ACT DOES NOT POSTULATE CONFERME NT OF POWER UPON THE ASSESSING OFFICER TO INITIATE REASSESSMENT PRO CEEDINGS UPON A MERE CHANGE OF OPINION. THE ABOVE SAID DECISION W AS DULY AFFIRMED I.T.A. NO. 2186/DEL/2010 6 BY THE HONBLE APEX COURT IN THE CASE OF C.I.T. VS . KELVINATOR OF INDIA LTD.. IN THIS CASE THE HONBLE APEX COURT HAS HELD THAT AFTER 1 ST APRIL, 1989 ASSESSING OFFICER HAS POWER TO REOPEN THE ASS ESSMENT U/S. 147 PROVIDED THAT ASSESSING OFFICER HAS REASON TO BEL IEVE THAT INCOME HAS ESCAPED ASSESSMENT AND THERE IS TANGIBLE MATERIAL T O COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME; MERE CHANGE OF OPINION MAY NOT PER SE TO BE A REASON FOR REOPENING. 7. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS A ND PRECEDENTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A). ACCORDINGLY, WE UPHOLD THE SAME. 8. SINCE WE HAVE HELD THE REOPENING OF THIS CASE AS INVALID THE ISSUES ON MERITS IN THE APPEAL ARE NOT BEING ADJUDIC ATED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09/11/2012. SD/- SD/- [RAJPAL YADAV] [RAJPAL YADAV] [RAJPAL YADAV] [RAJPAL YADAV] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 09/11/2012 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES I.T.A. NO. 2186/DEL/2010 7