TECH PACIFIC INDIA LTD ( NOW KNOWN AS INGRAM MICRO INDIA LTD), MUMBAI V. DCIT (OSD-II) CEN RG 7, MUMBAI

ITA 2337/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2626 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 07-01-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 25-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAILASH GAIKWADDR
• Assessee Lawyers: J D MISTRI
• Keywords: Depreciation; Bad and doubtful debts
• Section: 143(3); 153A

Judgement Text

1 , INCOME-TAX APPELLATE TRIBUNAL -EBENCH MUMBAI , . . , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND C. N. PRASAD,JUDICIAL MEMBER ./ITA/2337, 2338 & 2339/MUM/2013, /ASSESSMENT YEAR: 2002-03,2003-04 AND 2004-05 M/S. TECH PACIFIC (INDIA) LTD. (NOW KNOWN AS INGRAM MICRO IDIA LTD.) 5 TH FLOOR, BLOCK-B, GODREJ IT PARK, 02, GODREJ BUSINESS DISTRICT PIROJSHAHNAGAR, VIKHROLI (W) MUMBAI-400 079 PAN:AABCT 1296 R VS. DCIT-(OSD-II) CENTRAL RANGE-7, AAYAKAR BHAVAN MUMBAI-20. ( /APPELLANT ) ( / RESPONDENT) REVENUE BY: SHRI KAILASH GAIKWAD-DR ASSESSEE BY: SHRI J.D. MISTRI / DATE OF HEARING: 14.07.2016 / DATE OF PRONOUNCEMENT: 14.07.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDERS,DTD 22.1.13 OF CIT(A)-40 MU MBAI THE ASSESSEE HAS FILED THE APPEALS FOR THE ABOVE MENTIONED AY.S .ASSESSEE-COMPANY IS E NGAGED IN THE BUSINESS OF COMPUTER SOFTWARE AND AUTOMATION. THE EFFECTIVE GOA FOR AL L THE AY.S IS IDENTICAL I.E. LEVY OF PENALTY U/S. 271(1)(C ) OF THE ACT. FOR THE SAKE OF CONVENI ENCE,WE ARE ADJUDICATING ALL THE APPEALS BY A SINGLE ORDER. ITA/2337/M/2013-AY 2002-03: 2. AN ACTION U/S. 132/133A WAS CARRIED OUT ON 6.9.2007 IN THE BUSINESS PREMISES OF THE ASSESSEE-GROUP. DURING THE SEARCH AND SURVEY PROCEE DINGS CERTAIN DOCUMENTS WERE IMPOUNDED/SEIZED.A NOTCE U/S. 153A WAS ISSUED TO TH E ASSESSEE ON 23.8.2008.IN RESPONSE TO THE NOTICE A RETURN OF INCOME WAS FILED ON 24.8.200 8, DECLARING TOTAL INCOME OF RS.35.23 CRORES. THE ASSESSING OFFICER(AO)COMPLETED THE ASSE SSMENT ,U/S.153A R.W.S 143(3) OF THE ACT,ON 31.12.2009,DETERMINING THE INCOME OF THE ASS ESSEE AT RS.35.78 CRORES. THE AO ALSO INITIATED PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT. 3. DURING THE ASSESSMENT PROCEEDINGS,THE AO NOTICED TH AT THE ASSESSEE HAD CLAIMED AND DEPRECIATION OF RS.35,39,132/- (@25%) ON GOODWILL,T HAT THE ASSESSEE HAD CLAIMED THAT 2337, 2338 & 39/MUM/2013-TECHPACIFIC 2 GOODWILL WAS AN INTANGIBLE ASSET AND THAT THE SAME WAS ACQUIRED FROM ORIGINAL OWNER OF BUSINESS WHICH CARRIED THE BRAND NAME OF THE PRODUC T,THAT GOODWILL HAD BEEN ACQUIRED AS PER PART OF THE PURCHASE CONSIDERATION IN TERMS OF THE BUSINESS TRANSFER AGREEMENT DT.2.5.2000 FROM TECH PACIFIC TECHNOLOGY INDIA LTD. HOWEVER, TH E AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND DISALLOWED THE CLAIM. IN THE MEANW HILE THE ASSESSEE CHALLENGED THE ADDITIONS MADE BY THE AO BEFORE THE FIRST APPELLATE AUHTORITY (FAA).UPHOLDING THE ORDER OF THE AO,HE HELD THAT THERE WAS NO PROVISION IN THE ACT F OR ALLOWING DEPRECIATION ON GOODWILL.THE AO ALSO INITIATED THE PENALTY PROCEEDINGS. VIDE HIS NOTICE,DT.23.3.12,THE AO ASKED THE ASSESSEE TO MAKE SUBMISSIONS AGAINST THE PROPOSED P ENALTY. AS PER THE AO THE ASSESSEE DID NOT FILE ANY REPLY. VIDE HIS ORDER DT.16.3.12 HE HE LD THAT ASSESSEE HAD CONCEALED THE PARTICULARS OF INCOME AND HAD FURNISHED INACCURATE PARTICULARS BY CLAIMING DEPRECIATION ON GOODWILL. HE LEVIED A PENALTY OF RS.2,63,470/- AS P ER THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT.AGGRIEVED BY THE PENALTY ORDER OF THE AO,TH E ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA,WHO CONFIRMED THE ORDER OF THE AO. 4 .DURING THE COURSE OF HEARING BEFORE US, THE AUTHOR ISED REPRESENTATIVE(AR)STATED THAT QUANTUM ADDITIONS MADE/UPHELD BY THE AO/FAA WERE CH ALLENGED BY THE ASSESSEE BEFORE THE TRIBUNAL,THAT THE ITAT HAD ALLOWED THE APPEAL OF TH E ASSESSEE AND THAT HAD REVERSED THE ORDER OF THE FAA.(ITA2383-2385/ MUM/ 2011-AY2002-03 TO 20 04-05,DT.16.7.15). THE DEPARTMENTAL REPRESENTATIVE(DR)LEFT THE ISSUE T O THE DISCRETION OF THE BENCH. WE FIND THAT THE DISALLOWANCE MADE BY THE AO WITH R EGARD TO DEPRECIATION ON GOODWILL, WAS DELETED BY THE ITAT,WHILE DECIDING THE QUANTUM APPE AL(SUPRA).WE WOULD LIKE TO REPRODUCE THE RELEVANT PORTION OF THE ORDER AND SAME READS AS UNDER :- 4.1.THE ASSESSMENT FOR A.Y 2002-03 WAS COMPLETED BY DISALLOWING BAD DEBTS CLAIMED RS. 8,76.448/-, DEPRECIATION ON GOODWILL RS. 35,39,132/-, DEPRECIAT ION ON COMMERCIAL VEHICLES-RS. 5,33,790/- AND STAFF/ OTHER WELFARE EXPENSES AT RS. 3,05,508/-. A SSESSMENT FOR A.Y 2003-04 WAS COMPLETED BY MAKING DISALLOWANCES ON SIMILAR HEADS THOUGH WITH DIFFEREN T QUANTUM AND THE SAME IS DONE IN A.Y. 2004-05. 5.AGGRIEVED BY THE ASSESSMENTS, THE ASSESSEE CARRIE D THE MATTER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 6.BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE STATE D THAT THE ADDITIONS/DISALLOWANCES WHICH WAS NOT MADE IN THE NORMAL/REGULAR ASSESSMENT AND IN RESPEC T WHEREOF NO INCRIMINATING MATERIAL WAS FOUND DURING THE SEARCH CANNOT NOW BE MADE FOR THE FIRST TIME IN THE ASSESSMENT MADE U/S. 153A OF THE ACT, SINCE IT WOULD CONFER UPON THE AO THE POWER TO REVI EW OR REVISE HIS OWN ORDER. IT IS THE SAY OF THE L D. COUNSEL THAT THIS PROPOSITION HAS BEEN CONFIRMED BY THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CONTINENTAL WAREHOUSING CORPORATION AND ALL CARGO GLOBAL LOGISTICS LTD (SUPRA). 7.WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AU THORITIES BELOW. WE HAVE ALSO GONE THROUGH THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT ( SUPRA). IT IS AN UNDISPUTED FACT THAT THERE WAS NO INCRIMINATING MATERIAL FOUND DURING THE SEARCH FOR MAKING THE IMPUGNED DISALLOWANCES/ADDITIONS. THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA) SQUARELY APPLY ON THE FACTS OF THE CASE WHEREIN THE HONBLE HIGH COURT HAS HELD AS UN DER: 2337, 2338 & 39/MUM/2013-TECHPACIFIC 3 HELD, DISMISSING THE APPEALS, (I) THAT THE NOTICE U /S. 153A WAS FOUNDED ON SEARCH. IF THERE WAS NO INCRIMINATING MATERIAL FOUND DURING THE SEAR CH THEN THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE POWER U/S. 153A BEING NOT EXPECTED TO BE E XERCISED ROUTINELY, SHOULD BE EXERCISED IF THE SEARCH REVEALED ANY INCRIMINATING MATERIAL. IF THAT WAS NOT FOUND THEN IN RELATION TO THE SECOND PHASE OF THREE YEARS, THERE WAS NO WARRANT F OR MAKING AN ORDER WITHIN THE MEANING OF THIS PROVISIONS. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND QUASH THE IMPUGNED ASSE SSMENT ORDERS 8.SINCE WE HAVE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE ON THE POINT OF JURISDICTION, WE DO NOT FIND IT NECESSARY TO DECIDE THE OTHER GROUNDS OF APPEAL WHICH BECOME OTIOSE. IN OUR OPINION,PENALTY ORDER WOULD NOT SURVIVE,ONCE THE ADDITION MADE BY THE ASSESSEE HAS BEEN DELETED IN THE QUANTUM APPEAL.EFFECTIVE GROUND OF APPEAL, FILED BY THE ASSESSEE,STANDS DECIDED IN ITS FAVOUR. ITA NO.2338 & 39/M/13-AY.S 2003-04 & 04-05: AS THE FACTS FOR ABOVE MENTIONED TWO AY.S.ARE IDENT ICAL TO THE FACTS OF EARLIER YEAR-EXCEPT FOR THE AMOUNTS INVOLVED-SO,FOLLOWING OUR ORDER FOR THE EARLIER YEAR WE DECIDE THE EFFECTIVE GROUNDS OF APPEAL FOR BOTH THE AY.S IN FAVOUR OF T HE ASSESSEE. AS A RESULT, APPEALS FILED BY THE ASSESSEE STAND AL LOWED FOR ALL THE THREE YEARS. . ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH ,JULY,2016. 14 , 2016 SD/- SD/- ( . . / C.N. PRASAD ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED :14.07.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR K BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.