DCIT, CHENNAI V. Neyveli lignite corporation ltd., Neyveli

ITA 254/CHNY/2015

• Counselvise Citation: 25421714 RSA 2015
• Duration Of Justice: 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2015
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 08-09-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 29-01-2015
• Court: TRIBUNAL
• Department Lawyers: M N MAURYA
• Assessee Lawyers: VIKRAM VIJAYARAGHAVAN
• Keywords: Depreciation; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 244A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , ! ' , # $% BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ ITA NO. 254/MDS/2015 / ASSESSMENT YEAR : 2008-09 THE DEPUTY COMMISSIONER OF INCOME-TAX, LARGE TAXPAYER UNIT-II, CHENNAI-101. ( /APPELLANT) VS M/S. NEYVELI LIGNITE CORPORATION LTD., BLOCK 7, CORPORATE OFFICE, NEYVELI 607801. PAN AAACN1121C ( /RESPONDENT) / APPELLANT BY : SHRI M.N. MAURYA, CIT / RESPONDENT BY : SHRI VIKRAM VIJAYARAGHAVAN, ADVOCAT E / DATE OF HEARING : 08.09.2015 ! / DATE OF PRONOUNCEMENT : 23.09.2015 & / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DATED 14 .11.2014. - - ITA 254/15 2 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: 2 . THE ID. CIT(A) ERRED IN HOLDING THAT THE ORDER PASSED U/S 143(3) LW . S 147 DATED 30.01.2014 WAS INVALID IN THE EYES OF THE LAW . 2.1 THE ID. CIT(A) ERRED IN HOLDING THAT THE ASSESSMENT WAS REOPENED WAS A 'CHANGE OF OPINION' A S PER THE DECISION OF THE HON'BLE SUPREME COURT IN TH E CASE OF KELVINATOR INDIA LTD. (256 LTR 1). 2.2 THE ID. CIT(A) FAILED TO APPRECIATE THAT THERE WAS NO CHANGE OF OPINION AND THE ASSESSMENT WAS REOPENED T O BRING INTO TAX THE INCOME ESCAPED AS PER THE STAND TAKEN BY THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT ORDER AND THUS THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF KELVINATOR INDIA LTD. (SUPRA) RELIED UP ON BY THE CIT(A) DOES NOT APPLY TO THE FACTS OF THE ASSES SEE'S CASE. 2 . 3 THE ID. CIT(A) FAILED TO APPRECIATE THAT AS PER T HE AMENDED PROVISIONS OF SEC. 147 THE ONLY CONDITION T O REOPEN THE ASSESSMENT IS THAT THE ASSESSING OFFICER SHOULD HAVE REASON TO BELIEVE THAT INCOME CHARGEABL E TO TAX HAS ESCAPED THE ASSESSMENT . THE ABOVE VIEW ARE ALSO EXPRESSED IN THE JUDGMENT REPORTED IN (117 TAX MAN 12) IN THE CASE OF BAWA ABHAI S I NGH. 3. THE ID . CIT(A) ERRED IN NOT DECIDING THE FOLLOWING ISSUES ON MERITS ON THE GROUND THAT PROCEEDINGS U/S 147 WERE INVALID I) DISALLOWANCE OF HIGHER DEPRECIATION CLAIMED ON ' WATER SUPPLY AND DRAINAGE' OF ` 2,08,30,988/-. I I) ROYALTY ALLOCATION TO TPS I EXPANSION WHILE COMPUTING PROFIT ELIGIBLE U/S 80LA OF ` 20,16,00,000/- . III) EXCLUSION OF OTHER INCOME WHILE COMPUTING PROF IT OF - - ITA 254/15 3 TPS I EXPANSION FOR THE PURPOSE OF 80LA DEDUCTION OF ` 1,54,76,660/- . I V) NOT GRANTING INTEREST U/S 244A AND LEVY OF INTER EST U/S 234D. 3.1 THE ID. CIT(A ) OUGHT TO HAVE DISCUSSED THE ISSUES ON MERIT IN VIEW OF THE DE T AILED DISCUSSION IN THE ORDER U/S 143(3) R. W . S 147 OF I . T. ACT, 1961. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMP ANY IS ENGAGED IN THE BUSINESS OF POWER GENERATION AND COA L MINING. IT FILED THE RETURN OF INCOME FOR A.Y. 2008-09 ON 20.0 9.2008 DECLARING TOTAL INCOME OF ` 14,26,99,69,690/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, THE ASSESSMENT WAS COMPLETED U/S.143(3) ON 28.12.2010 DETERMINING THE TOTAL INCOME AT ` 16,02,04,51,970/-. THEREAFTER, THE AO NOTICED THA T THE ASSESSEE HAD CLAIMED EXCESS DEPRECIATION ON WAT ER SUPPLY AND DRAINAGE @ 15% INSTEAD OF 10%. ACCORDING TO TH E AO, SINCE THE INCOME HAS ESCAPED ASSESSMENT FROM THIS P OINT, HE ISSUED NOTICE U/S.148 OF THE ACT ON 28.3.2013. IN RESPONSE TO THE NOTICE, THE ASSESSEE VIDE ITS LETTER DATED 16.4 .2013 STATED THAT RETURN HAS BEEN FILED ON 16.4.2013 AND ASKED F OR REASONS AND THE SAME WERE COMMUNICATED VIDE LETTER DATED 16 .7.2013. A NOTICE U/S. 143(2) WAS ISSUED ON 2.7.2013. AFTER HEARING THE - - ITA 254/15 4 ASSESSEE, THE ASSESSMENT WAS COMPLETED U/S.143(3) R .W.S.147 OF THE ACT ON 31.1.2014 DETERMINING THE TOTAL INCOM E AT ` 14,63,24,62,330/- BY MAKING CERTAIN ADDITIONS. AGG RIEVED BY THIS, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(AP PEALS) CHALLENGING THE REOPENING OF THE ASSESSMENT. 4. ON APPEAL, THE CIT(APPEALS) OBSERVED THAT THE RE OPENING IS BAD IN LAW AND IT IS ONLY A CHANGE OF OPINION AN D THE ORIGINAL ASSESSMENT ORDER PASSED U/S.143(3) OF THE ACT CLEAR LY DEALT WITH THE ISSUES OF RATE OF DEPRECIATION ON WATER SUPPLY & DRAINAGE AND SOME PART OF THE BLOCK OF ASSET VIZ., THE VALUE O F NON- PRODUCTIVE ASSETS TO THE TUNE OF ` 32 . 20 LAKHS WAS RESTRICTED TO DEPRECIATION @ 10% AND AN AMOUNT OF ` 1,61,000 (5% OF ` 32.20 LAKHS) WAS DISALLOWED. THE CIT(APPEALS) OBSERVED THAT THE AO WHO HAS REOPENED THE ASSESSMEN T SUBSEQUENTLY DID NOT AGREE WITH HIS PREDECESSOR HOL DING THAT 10% DEPRECIATION RATE SHOULD HAVE BEEN APPLIED TO THE ENTIRE BLOCK OF 'WATER SUPPLY & DRAINAGE' INSTEAD OF RESTRICTING TO ONLY A SMALL PORTION OF THAT ASSET . ACCORDING TO THE CIT(APPEALS), RESTRICTION OF DEPRECIATION FROM 15% TO 10% ON 'WAT ER SUPPLY & DRAINAGE' WAS A SUBJECT MATTER OF DISCUSSION AND SO ME PART OF IT - - ITA 254/15 5 WAS ALREADY DISALLOWED ON THAT BASIS AMOUNTING TO ` 1,61,000/-. THEREFORE, THE CIT(APPEALS) OBSERVED THAT REOPENING THE ASSESSMENT TO GIVE SIMILAR TREATMENT TO THE WHOLE O F THE ASSET INSTEAD OF . PART OF IT IS CLEARLY A 'CHANGE OF OPINION' WITHIN THE PURVIEW OF THE DECISION OF SUPREME COURT IN THE CAS E OF KELVINATOR INDIA LTD (SUPRA) . THE DECISION OF THE SUPREME COURT IN THE ABOVE CASE HAS RULED AS UNDER (AS PER HEAD N OTE): 'SECTION 147, OF THE INCOME-TAX ACT, 1961 - INCOME ESCAPING ASSESSMENT - POSITION AFTER 1-4 - 1989 - ASSESSMENT YEAR 1987-88 - WHETHER EVEN AFTER AMENDMENT OF SECTION 147 WITH EFFECT FROM 1-4-1989, A MERE CHANGE IN OPINION WOULD NOT CONFER JURISDICTIO N UPON ASSESSING OFFICER TO INITIATE A PROCEEDING UND ER SECTION 147 - HELD YES ' ACCORDINGLY, THE CIT(APPEALS) HELD THAT REOPENING I S INVALID IN THE EYES OF LAW AND QUASHED THE ORDER. AGAINST THI S, THE REVENUE IS IN APPEAL. 5. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD. WE HAVE GONE THROUGH THE PAPER BOOK FIL ED BY THE ASSESSEE. IT IS ON RECORD THAT IN THE ORIGINAL ASS ESSMENT, THE BOOKS OF ACCOUNT OF THE ASSESSEE WAS CALLED FOR VER IFICATION. BY A LETTER DATED 8.9.2010 BY THE AO, THE ASSESSEE WAS ASKED TO - - ITA 254/15 6 EXPLAIN VIDE QUERY NO.18, WHICH IS AS FOLLOWS : 18) EXPLAIN WHY THE DEPRECIATION CLAIMED AT THE RA TE OF 15% ON THE WATER SUPPLY AND DRAINAGE SHOULD NOT BE ALLOWED AT THE RATE OF 10% UNDER THE BLOCK BUILDIN G AS PER THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. MODI INDUSTRIES LIMITED (197 ITR 517 ) AND BASED ON THE SUPREME COURT DECISION IN THE CASE OF CIT V. GWALIOR RAYON SILK MANUFACTURING COMPANY LIMITED (196 ITR 149). TO THAT QUERY, THE ASSESSEE REPLIED AS UNDER : ON VERIFICATION OF ASSET ADDITION IT IS FOUND THAT NON PRODUCTIVE ASSET FOR THE VALUE OF ` 32.20 LAKH (LIST IS ENCLOSED) IS ERRONEOUSLY INCLUDED UNDER WATER SUPPL Y AND ELECTRICAL FITTINGS. SINCE THE VALUE OF SUCH I TEMS ARE VERY LEE WHEN COMPARING THE TOTAL ASSET ADDITION, THE DEPRECIATION CLAIM MAY BE PERMITTED. 5.1 AFTER GOING THROUGH THE ABOVE REPLY, THE AO PAS SED THE ASSESSMENT ORDER U/S.143(3) ON 28.12.2010, WHEREIN HE DISALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING A S FOLLOWS: THE REPLY FURNISHED BY THE ASSESSEE HAS BEEN CAREFULLY CONSIDERED. ACCORDINGLY, THE CLAIM OF EX CESS RATE OF DEPRECIATION ON THE ON-PRODUCTIVE ASSETS TO THE TUNE OF ` 32.20 LAKHS IS BEING RESTRICTED @ 10% INSTEAD OF 15%. ACCORDINGLY, THE EXCESS DEPRECIATI ON CLAIMED BY THE ASSESSEE TO THE TUNE OF ` 1,61,000/- IS BEING DISALLOWED AND ADDED TO THE TOTAL INCOME OF T HE CURRENT YEAR. ADD: ` . 1,61,000/- HENCE, IN OUR OPINION, THERE IS A CHANGE OF OPINION BY THE AO FOR THE PURPOSE OF REOPENING THE ASSESSMENT U/S.147. AS HELD BY THE SUPREME COURT IN THE CASE OF KELVINATOR INDIA L TD. (SUPRA), - - ITA 254/15 7 MERE CHANGE IN OPINION WOULD NOT CONFER JURISDICTIO N UPON THE AO TO INITIATE A PROCEEDING U/S.147 OF THE ACT. TH EREFORE, WE UPHOLD THE ORDER OF THE CIT(APPEALS) ON THIS ISSUE AND QUASH THE ASSESSMENT ORDER PASSED U/S.147 OF THE ACT. SINCE, WE HAVE QUASHED THE ASSESSMENT ORDER PASSED U/S.147 OF THE ACT, WE REFRAIN FROM GOING TO THE OTHER GROUNDS OF APPEAL. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON WEDNESDAY, TH E 23 RD OF SEPT., 2015 AT CHENNAI. SD/- SD/- ( '# $%& ' ) ( ' & ( ) ) *+,-..-/-01234-54-6-37 *+,-234-5889-4 :7 % '; /JUDICIAL MEMBER ';<=>>8?2@-2@A1BC14 '% /CHENNAI, D' /DATED, THE 23 RD SEPT., 2015. MPO* 'E FGHG /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. I*7 /CIT(A) 4. I /CIT 5. GJ$ K /DR 6. $LM /GF.