DCIT, Uttrakhand V. M/s. Himalayan Products & Industries Corporation Pvt. Ltd, Uttrakhand

ITA 2985/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3786 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 21-06-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 26-06-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTY
• Assessee Lawyers: R K SEHGAL
• Keywords: Capital asset; Depreciation; Principle of natural justice; Difference of opinion; Change of opinion; Reassessment proceedings; Capital Gains
• Section: 143(3); 260A; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI K.G. BANSAL ITA NO. 2985/DEL/09 A.Y. 2001-02 DCIT, HALDWANI VS. M/S HIMALAYAN PRODUCTS & INDU STRIES, CORPORATION PVT. LTD., HALDWANI. PAN/ GIR NO. AAACH6886N C.O. NO. 299/DEL/09 (IN ITA NO. 299/DEL/09) A.Y. 2001-02 M/S HIMALAYAN PRODUCTS & INDUSTRIES, VS. DCIT, HAL DWANI CORPORATION PVT. LTD., HALDWANI. ( APPELLANT ) ( RESPONDENT ) DEPARTMENT BY : SMT. MONA MOHANTY SR. DR ASSESSEE BY : SHRI R.K. SEHGAL FCA O R D E R PER R.P. TOLANI , J.M : THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJE CTIONS FILED BY THE ASSESSEE ARISE OUT OF THE ORDER OF THE LEARNED CIT( APPEALS) DATED 22-1-2009 RELATING TO ASSESSMENT YEAR 2001-02. 2. THE ASSESSEES CROSS-OBJECTION IS TO BE TAKEN F IRST. THE SOLE EFFECTIVE ISSUE RAISED IS ABOUT VALIDITY OF REOPENING OF ASSE SSMENT, WHICH READS AS UNDER: THE LEARNED ASSESSING OFFICER AHS ERRED IN LAW AND ON FACTS IN ASSUMING THE JURISDICTION U/S 147/148 AS THE PROVISO TO SECT ION 147 CASTS EXEMPLARY BURDEN FOR SATISFACTION THAT THE ASSESSMENT ESCAPED DUE TO FAILURE ON THE PART OF THE ASSESSEE CAN BE REOPENED AFTER 4 YEARS IF THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) OR 147. THE PRO CEEDINGS THUS 2985/DEL/09 HIMALAYAN PRODUCTS & INDUSTRIES 2 INITIATED WERE BARRED BY LIMITATION AND ARE UNLAWFU L AGAINST THE SPIRIT OF LAW AND NATURAL JUSTICE AS THE ASSESSEE HAS DISCLOS ED ALL THE PRIMARY FACTS BEFORE THE ASSESSING OFFICER AND NONE OF THE FACTS DISCLOSED OR INFORMATION FURNISHED IS OR WAS ERRONEOUS AND THERE FORE A MERE CHANGE OF OPINION WOULD NOT CONFER JURISDICTION UPON THE ASSE SSING OFFICER TO INITIATE THE PROCEEDINGS U/S 147. THUS THE ASSESSME NT MADE ILLEGALLY IS LIABLE TO BE QUASHED DE NOVO. 3. REVENUE HAS RAISED FOLLOWING GROUND: LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CA SE IN ALLOWING THE LONG TERM CAPITAL LOSS ON SALE OF FOREIGN CAR WITHOUT AP PRECIATING THE FACT THAT SALE OF A CAR CAN NEVER PRODUCE CAPITAL GAIN AS IT IS A DEPRECIABLE ASSET HENCE CAPITAL LOSS ON SALE OF A CAR CANNOT BE ALLO WED AND THAT TOO WITHOUT APPLICATION OF INDEXATION IS NOT ACCEPTABLE. MOREOV ER IN CASE OF FOREIGN CAR DEPRECIATION WHICH IS ALSO TERMED AS CAPITAL LO SS IS NOT ALLOWABLE U/S 32(1) HENCE THERE IS NO QUESTION OF LONG TERM CAPI TAL LOSS ON SALE OF A FOREIGN CAR. 4. BOTH THE PARTIES AGREED THAT ASSESSEES CROSS-OB JECTION, GOING TO THE ROOT OF THE MATTER, SHOULD BE ADDRESSED FIRST. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THAT THE ORIGINAL ASSESSMENT WAS FRAMED U/S 143(3) VIDE ORDER DATED 17-9-2003, MAKING CERTAIN ADDITIONS. AG GRIEVED, THE ASSESSEE PREFERRED FIRST APPEAL AND THE ADDITIONS WERE DELET ED. THEN THE REVENUE WENT IN SECOND APPEAL BEFORE THE ITAT, WHICH CONFIR MED THE CIT(A)S ORDER. THE DEPARTMENT CHALLENGED THE TRIBUNALS ORD ER U/S 260A AND IN THE PROCESS OF FILING THE APPEAL, THE AO CAME TO THE RE ALIZATION THAT LONG-TERM CAPITAL LOSS ON SALE OF FOREIGN CAR WAS WRONGLY CA RRIED FORWARD IN SUBSEQUENT YEARS. THE AO ACCORDINGLY REASSESSED THE ASSESSEE U/S 143(3)/148 OF THE I.T. ACT. AGGRIEVED, THE ASSESSEE PREFERRED FIRST APPEAL. THE CIT(A) UPHELD THE REOPENING. HOWEVER, ON MERITS DELETED THE ADDITION. BOTH THE PARTIES ARE AGGRIEVED ON THE RESPECTIVE GR OUNDS MENTIONED ABOVE. 2985/DEL/09 HIMALAYAN PRODUCTS & INDUSTRIES 3 5. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE OUT SET CONTENDS THAT THE AO DID NOT COME IN POSSESSION OF ANY NEW OR ADDITIO NAL MATERIAL OR INFORMATION FOR REASSESSMENT. BESIDES, THE CIT(A) C OULD HAVE ENHANCED THE ASSESSMENT IN THIS BEHALF WHILE DECIDING THE APPEAL . THE ASSESSEE FURNISHED ALL THE RELEVANT MATERIAL PARTICULARS DURING THE CO URSE OF ORIGINAL ASSESSMENT. IN THE COMPUTATION ITSELF THE ASSESSEE HAS CLEARLY MENTIONED THAT THE IMPUGNED CAR IS IMPORTED TOYTA CAR ON WHICH DEPRECI ATION WAS NOT CLAIMED IN TERMS OF SECTION 32(1) AS NOT ELIGIBLE TO CLAIM DEPRECIATION THEREON. IN COMPUTATION OF SAID INCOME, ASSESSEE FURNISHED WORK ING OF CAPITAL GAINS WITH RELEVANT FACTS AND FIGURES. IN THE DEPRECIATIO N CHART ATTACHED, THE TOYTA CAR HAS BEEN SHOWN AS NON-DEPRECIABLE ASSET AND CAR RIED OVER ACCORDINGLY. THE LEARNED COUNSEL CONTENDS THAT WITH ALL THIS INF ORMATION ON RECORD OF ORIGINAL ASSESSMENT, THE AOS ACTION AMOUNTS TO CHA NGE OF OPINION, WHICH COULD NOT BE VALID BASIS FOR REOPENING THE ASSESSME NT. IT WAS CONTENDED THAT NON-DEPRECIABLE IMPORTED CAR IS A CAPITAL ASSET OR NOT, BECOMES A DEBATABLE ISSUE AND CANNOT BE A BASIS FOR REOPENING THE ASSE SSMENT ONLY BECAUSE THE AO FOUND THE OTHER OPINION TO BE MORE WISE, THEREFO RE, THE REOPENING IS BAD IN LAW. BESIDES, THERE WAS NO ISSUE WHAT-SO-EVER AB OUT THE SANTRO CAR. APART FROM THE CHANGE OF OPINION, THERE IS NO ESCAPEMENT OF TAX INASMUCH AS THE ASSESSEE HAS NOT SET OFF THE IMPUGNED LONG-TERM CAP ITAL LOSS AGAINST ANY INCOME, THE SAME HAS BEEN CARRIED OVER TO NEXT YEA R. LEARNED CIT(A) HAS UPHELD THE REOPENING PROCEEDINGS MERELY BY OBSERVIN G THAT BECAUSE REASONS ARE RECORDED AND COMMUNICATED, THE SAME IS UPHELD, WITHOUT ADVERTING TO THE MATERIAL ISSUE ABOUT CHANGE OF OPINION AND THER EBY NO NEW INFORMATION IN POSSESSION OF AO. 2985/DEL/09 HIMALAYAN PRODUCTS & INDUSTRIES 4 6. LEARNED DR, ON THE OTHER HAND, SUPPORTED THE OR DER OF CIT(A). 7. WE HAVE CAREFULLY CONSIDERED THE ENTIRE MATERIAL ON RECORD AND THE RIVAL SUBMISSIONS. FACTS HAVE BEEN NARRATED IN DETA IL ABOVE. IN OUR VIEW THE ASSESSEE HAS SHOWN THE WORKING OF LOSS OF LONG TERM CAPITAL GAIN IN ITS COMPUTATION OF INCOME AND RELEVANT DETAILS WERE ALS O FILED ALONG WITH THE RETURN, DISCLOSING ALL THE FACTS REGARDING THE SALE OF IMPUGNED IMPORTED CAR AND ITS BEING A NON-DEPRECIABLE ASSET. THE AO ACCEP TED THE SAME U/S 143(3). NO NEW MATERIAL OR INFORMATION HAS COME IN THE PO SSESSION OF THE AO. IT IS ONLY DURING THE COURSE OF APPEAL PROCEEDINGS BEFORE THE HIGH COURT U/S 260A OF THE ACT THAT THE AO REALIZED THAT THE ASSES SEES CLAIM OF CARRY FORWARD OF LONG TERM CAPITAL LOSS SHOULD NOT HAVE BEEN ALLOWED. ON THIS BASIS THE ASSESSMENT WAS REOPENED ALONG WITH SOME NON-EXISTENT ISSUE OF SANTRO CAR. IN OUR VIEW THE AOS ACTION AMOUNTS TO CHANGE OF OPINION. IMPORTED CAR ON WHICH UNDISPUTEDLY NO DEPRECIATION WAS CLAIMED, THERE CAN BE A DEBATE ABOUT ITS BEING LONG TERM CAPITAL ASSE T OR BUSINESS ASSET, THEREFORE, TREATMENT OF LONG TERM CAPITAL GAIN LOSS BECOMES A DEBATABLE PROPOSITION. THE AO, WHILE FRAMING ORIGINAL ASSESSM ENT U/S 143(3), SEEMS TO HAVE CHOSEN ONE OF THE OPINION. THE SUBSEQUENT EXE RCISE UNDERTAKEN CLEARLY BECOMES A CHANGE OF OPINION, WHICH, IN OUR VIEW CAN NOT BE THE BASIS FOR REOPENING OF THE ASSESSMENT, AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF KELVINATOR INDIA LTD. 187 TAXMAN 312. IN VI EW THEREOF, WE ALLOW THE GROUND RAISED IN ASSESSEES CROSS OBJECTION IN THIS BEHALF AND HOLD THAT THE IMPUGNED REASSESSMENT PROCEEDINGS ARE BAD IN LA W AND ARE ACCORDINGLY QUASHED. 8. SINCE THE REASSESSMENT PROCEEDINGS ARE QUASHED, THE REVENUES APPEAL BECOMES INFRUCTUOUS AND IS DISMISSED ACCORDI NGLY. 2985/DEL/09 HIMALAYAN PRODUCTS & INDUSTRIES 5 9. IN THE RESULT, REVENUES APPEAL IS DISMISSED AND THE ASSESSEES CROSS OBJECTION IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 21-6-2010. SD/- SD/- (K.G. BANSAL ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 21-6-2010. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR 2985/DEL/09 HIMALAYAN PRODUCTS & INDUSTRIES 6