M/s. Mahanagar Telephone Nigam Ltd., New Delhi V. DCIT (LTU), New Delhi

ITA 3023/DEL/2016

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 0304 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2006-2007
• Appeal Filed On: 27-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSHMA SINGH
• Assessee Lawyers: VED JAIN ADV SH AASHISH GOEL
• Keywords: Difference of opinion; Revised return; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 43B; 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F: NEW DELHI (THROUGH VIDEO CONFERENCING) BEFORE, SHRI G. S. PANNU, VICE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER I.T.A NO.3023/DEL/2016 (ASSESSMENT YEAR 2006-07) M/S MAHANAGAR TELEPHONE NIGAM LTD., 5 TH FLOOR, 9CGO COMPLEX, LODHI ROAD, NEW DELHI. PAN-AAACM 0828R VS. DY. CIT, LARGE TAXPAYER UNIT, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY SH. VED JAIN, ADV. SH. AASHISH GOEL, ADV. RESPONDENT BY MS. SUSHMA SINGH, CIT-DR DATE OF HEARING 22.12.2020 DATE OF PRONOUNCEMENT 29.12.2020 ORDER PER SUDHANSHU SRIVASTAVA, JM: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST OR DER DATED 19.04.2016 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-22, NEW DELHI {CIT(A)} FOR ASSESSMENT YEAR 2006-07. 2 ITA NO.3023/ DEL/2016 M/S MAHANAGAR TELEPHONE NIGAM LTD. VS. DCIT 2.0 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE HAD FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME AT RS. 5,12,96,04,406/-. THE CASE WAS SELECTED FOR SCRUTINY AND, THEREAFTER, THE INCOME WAS ASSESSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (H EREINAFTER CALLED THE ACT) AT AN INCOME OF RS.17,25,09,62,611/- VI DE ORDER DATED 30.12.2009. THEREAFTER, A NOTICE U/S 148 OF THE ACT WAS ISSUED ON 28.03.2013 TO TAX THE INCOME OF RS.15,41,18,249/- I N RESPECT OF HOUSE PROPERTY TAX WHICH HAD ALLEGEDLY ESCAPED ASSES SMENT. IN RESPONSE TO NOTICE U/S 148 OF THE ACT, THE ASSESSEE STATED THAT THE RETURN FILED BY IT EARLIER MAY BE TREATED AS RETURN ED FILED IN RESPONSE TO NOTICE ISSUED U/S 148/-. THE ASSESSEE ALSO ASKED FOR A COPY OF REASONS WHICH WAS DULY SUPPLIED TO THE ASSESSEE. THE REASONS FOR REOPENING WERE AS UNDER: DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE WHILE COMPUTING THE TAXABLE INCOME, CLAIMED AND WAS ALLOW ED DEDUCTION OF AN AMOUNT OF RS.15,41,18,249/- PERTAIN ING TO PROPERTY TAX RELATING TO RECTIFICATION ENTRY OF ASS ESSMENT YEAR 2005-06. SINCE THE SAID AMOUNT PERTAINED TO ASSESSM ENT YEAR 2005-06, THE SAME SHOULD NOT HAVE BEEN CLAIMED IN THE COMPUTATION FOR THE ASSESSMENT YEAR 2006-07. 3 ITA NO.3023/ DEL/2016 M/S MAHANAGAR TELEPHONE NIGAM LTD. VS. DCIT I HAVE, THEREFORE, REASON TO BELIEVE THAT BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL MATERIA L FACTS TRULY AND FULLY, THE INCOME ON ACCOUNT OF THE FOLLOWING H AS ESCAPED ASSESSMENT. IN VIEW OF ABOVE FACTS, ACTION U/S 147 IS INITIATED TO ASSESS THE INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT. 2.1 THE ASSESSEE FILED OBJECTIONS BEFORE THE ASSES SING OFFICER (AO) AGAINST THE REOPENING. HOWEVER, THE OBJECTIONS WERE NOT ACCEPTED BY THE ASSESSING OFFICER AND THE ASSESSING OFFICER PROCEEDED TO MAKE AN ADDITION OF RS.15,41,18,249/- BY MAKING THE ADDITION OF THE IMPUGNED AMOUNT AND COMPLETED THE A SSESSMENT U/S 143(3) READ WITH SECTION 147 OF THE ACT AT AN IN COME OF RS.7,04,29,97,580/-. 2.2 AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BE FORE THE LD. CIT (A) WHICH WAS DISMISSED. 2.3 NOW, THE ASSESSEE HAS APPROACHED THIS TRIBUNAL AND HAS CHALLENGED THE ASSESSMENT BOTH ON THE LEGAL QUESTIO N OF VALIDITY OF REASSESSMENT PROCEEDINGS AS WELL AS ON THE MERITS O F THE 4 ITA NO.3023/ DEL/2016 M/S MAHANAGAR TELEPHONE NIGAM LTD. VS. DCIT DISALLOWANCE. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS REGARD: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX AP PEALS [CIT (A)] IS BAD BOTH IN THE EYES OF LAW AND ON FAC TS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) HAS ERRED IN IGNORING THE CONTENTION OF THE APPELLANT THAT REOPENING OF THE ASSESSMENT IS BARRED BY LIMITATION IN VIEW OF THE PROVISO TO SECTION 147 OF THE ACT. 3. (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN CON FIRMING THE ORDER PASSED UNDER SECTION 147 READ WITH SECTION 14 8 OF THE ACT, IGNORING THE FACT THAT THE SAME WAS BAD IN THE EYES OF LAW, AS THE CONDITIONS AND PROCEDURES PRESCRIBED UNDER T HE STATUTE HAVE NOT BEEN SATISFIED AND COMPLIED WITH. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE ORDER P ASSED BY AO AS THE REASSESSMENT PROCEEDINGS INITIATED BY THE LE ARNED AO ARE BAD IN THE EYES OF LAW, AS THE REASONS RECORDED FOR THE ISSUE OF NOTICE UNDER SECTION 148 ARE BAD IN THE EYE OF L AW AND ARE CONTRARY TO THE FACTS. 5 ITA NO.3023/ DEL/2016 M/S MAHANAGAR TELEPHONE NIGAM LTD. VS. DCIT 4. (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE REASSESSMENT PROCEEDINGS INITIATED BY THE AO AND UP HELD BY THE LEARNED CIT (A) ARE BAD IN THE EYES OF LAW, AS THE REASONS RECORDED FOR THE ISSUE OF NOTICE UNDER SECTION 148 ARE BASED MERELY ON ACCOUNT OF CHANGE OF OPINION. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) HAS ERRED IN LAW AND ON FACTS IN UP HOLDING THE REASSESSMENT PROCEEDINGS, DESPITE THE FACT THAT THE RE HAS BEEN NO OMISSION ON THE PART OF THE ASSESSEE IN DISCLOSI NG FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSME NT. 5. (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.15,41,18,249/- MADE BY THE AO ON ACCOUNT OF DISA LLOWANCE OF PROPERTY TAX. (II) THAT THE LEARNED CIT (A) HAS ERRED IN SUSTA INING THE ADDITION MADE BY THE AO DESPITE THE FACT THAT THE S AID LIABILITY HAS BEEN GENERATED DURING THE YEAR UNDER CONSIDERAT ION AND THE DEDUCTION HAS BEEN CLAIMED BY THE ASSESSEE IN T ERMS OF THE PROVISIONS OF SECTION 43B OF THE ACT. 6. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEN D OR ALTER ANY OF THE GROUNDS OF APPEAL. 6 ITA NO.3023/ DEL/2016 M/S MAHANAGAR TELEPHONE NIGAM LTD. VS. DCIT 3.0 THE LD. AUTHORIZED REPRESENTATIVE (AR) ARGUED THAT THE REOPENING WAS BAD IN LAW FOR THE REASON THAT THERE WAS NO SUPPRESSION OF ANY MATERIAL FACT BY THE ASSESSEE DU RING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS AND THE INFORMAT ION ON THE BASIS OF WHICH THE REOPENING PROCEEDINGS WERE INITIATED WA S ALREADY BEFORE THE ASSESSING OFFICER IN THE ORIGINAL ASSESS MENT PROCEEDINGS. IT WAS SUBMITTED THAT IT WAS MERELY A CHANGE OF OPINI ON AND, THEREFORE, IT WAS BAD IN LAW. THE LD. AUTHORIZED REPR ESENTATIVE RELIED ON NUMEROUS JUDICIAL PRECEDENTS IN SUPPORT O F HIS CONTENTION THAT THE REOPENING ITSELF WAS INVALID VOID AB INITIO . 3.1 ON THE MERITS OF THE CASE, THE LD. AUTH ORIZED REPRESENTATIVE (AR) SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE, WHILE COMPUTING THE TAX ABLE INCOME, HAD CLAIMED AND WAS ALLOWED DEDUCTION OF AN AMOUNT O F RS. 15,41,18,249/- PERTAINING TO PROPERTY TAX RELATING TO RECTIFICATION ENTRY OF ASSESSMENT YEAR 2005-06. SINCE THE SAID AM OUNT PERTAINED TO ASSESSMENT YEAR 2005-06, THE SAME HAD NO BEARING ON THE TAXABLE INCOME OF ASSESSMENT YEAR 2006-07. HE DREW O UR ATTENTION TO THE FOLLOWING CHARTS: 7 ITA NO.3023/ DEL/2016 M/S MAHANAGAR TELEPHONE NIGAM LTD. VS. DCIT ANNEXURE OF TAX AUDIT REPORT FOR ASSESSMENT YEAR 20 05-06 AT PAPER BOOK PG.244: LIABILITY AMOUNT INCURRED DURING F.Y.2004-05 AMOUNT PAID TILL DATE OF FILING OF RETURN AMOUNT UNPAID DUE DATE OF FILING OF RETURN PROPERTY TAX MUMBAI MS UNIT 15,41,18,249/ - - 15,41,18,249 REMARKS DISALLOWED AS PER SECTION 43B IN COMPUTATION OF INCOME OF ASSESSMENT YEAR 2005-06 (PB PG.205) ANNEXURE OF TAX AUDIT REPORT FOR A.Y.2005-06 AT PAP ER BOOK PG.41: LIABILITY AMOUNT INCURRED DURING F.Y.2005-06 AMOUNT PAID TILL DATE OF FILING OF RETURN AMOUNT UNPAID DUE DATE OF FILING OF RETURN PROPERTY TAX MUMBAI MS UNIT - 15,41,18,249/ - - REMARKS DISALLOWED AS PER SECTION 43B IN COMPUTATION OF INCOME OF ASSESSMENT YEAR 2005-06 (PB PG.205) 8 ITA NO.3023/ DEL/2016 M/S MAHANAGAR TELEPHONE NIGAM LTD. VS. DCIT 3.2 THE LD. AR SUBMITTED THAT THE AMOU NT OF RS.15,41,18,249/- IN RESPECT OF PROPERTY HAD BEEN D ISALLOWED BY THE ASSESSEE IN ASSESSMENT YEAR 2005-06 U/S 43B. HO WEVER, IN ASSESSMENT YEAR 2006-07, THE TAX AUDITOR REALIZED T HAT IT WAS A MISTAKE AS IT HAD BEEN WRONGLY SHOWN AS LIABILITY WHER EAS THERE WAS NO LIABILITY FOR ASSESSMENT YEAR 2005-06. THEREF ORE, THE TAX AUDITOR HAS RECTIFIED THIS MISTAKE BY WRITING BACK T HIS AMOUNT IN THE YEAR UNDER CONSIDERATION. IT WAS SUBMITTED THAT IT DID NOT AFFECT ANY TAX LIABILITY OF THE ASSESSEE AS SAME AMOUNT HA D BEEN DISALLOWED IN ONE YEAR AND HAD BEEN ALLOWED IN THE PRESENT ASSESSMENT YEAR FOR RECTIFICATION PURPOSE. THE LD. AR SUBMITTED THAT THE AO REOPENED THE CASE MERELY ON THE GROUND THAT IN THE COMPUTATION OF INCOME, THE ASSESSEE HAD CLAIMED DED UCTION OF AN AMOUNT OF RS.15,41,18,249/- PERTAINING TO PROPERTY TAX RELATING TO RECTIFICATION ENTRY OF ASSESSMENT YEAR 2005-06 WITHO UT APPRECIATING THE FACT THAT THE ASSESSEE HAD NOT INCURRED ANY LI ABILITY FOR PROPERTY TAX I.E. NEITHER IN ASSESSMENT YEAR 2005-0 6 AND NOR IN ASSESSMENT YEAR 2006-07. IT WAS SUBMITTED THAT THE A O HAD 9 ITA NO.3023/ DEL/2016 M/S MAHANAGAR TELEPHONE NIGAM LTD. VS. DCIT MISUNDERSTOOD THE FACT THAT THE ASSESSEE HAD CLAIME D A DEDUCTION BUT IT WAS ONLY A RECTIFICATION ENTRY PASSED FOR WRIT ING BACK THAT AMOUNT IN ASSESSMENT YEAR 2005-06. RELIANCE WAS PLA CED ON THE CASE OF ACIT V. JOHNSON MATTHEY INDIA PVT. LTD. IN ITA NO.4397/DEL/2011 DATED 03.07.2013 WHEREIN IT HAS BEE N HELD THAT REVERSAL OF PROVISION DURING THE YEAR CANNOT BE ADD ED TO INCOME IF SUCH PROVISION HAS BEEN ADDED BACK IN COMPUTATION O F INCOME IN THE YEAR IN WHICH IT WAS CREATED. 4.0 PER CONTRA, THE LD. SR. DEPARTMENTAL REPRE SENTATIVE (DR) SUBMITTED THAT THE REOPENING WAS PERFECTLY VALI D AND BASED ON THE RECORD BEFORE THE ASSESSING OFFICER AND THAT TH ERE WAS A FAILURE ON THE PART OF THE ASSESSEE TRULY AND FULLY DISCLOS E ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT OF INCOME AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS. ON MERITS OF THE ADDITION, THE LD. SR. DR PLACED RELIANCE ON THE CATEGORICAL FINDING RECORDED BY THE LD. CIT (A) IN PARA-6 OF THE IMPUGNED ORDER. IT WAS SUBMITTE D THAT THE ADDITION HAD BEEN CORRECTLY MADE. 10 ITA NO.3023/ DEL/2016 M/S MAHANAGAR TELEPHONE NIGAM LTD. VS. DCIT 5.0 WE HAVE HEARD RIVAL SUBMISSIONS AND HAVE AL SO PERUSED THE MATERIAL ON RECORD. AT THIS JUNCTURE, W E ARE NOT INCLINED TO GO INTO THE LEGAL QUESTION OF THE VALID ITY OF REASSESSMENT PROCEEDINGS. HOWEVER, ON MERITS OF THE ADDITION, IT IS SEEN THAT FACTS SURROUNDING THE CONTROVERSY ARE THAT THE AMOU NT OF RS.15,41,18,249/- IN RESPECT OF PROPERTY TAX WAS DIS ALLOWED BY THE ASSESSEE FOR ASSESSMENT YEAR 2005-06 IN TERMS OF P ROVISIONS OF SECTION 43B OF THE ACT IN THE COMPUTATION OF INCOME FOR THAT ASSESSMENT YEAR. HOWEVER, IN THE ASSESSMENT YEAR UN DER CONSIDERATION I.E. ASSESSMENT YEAR 2006-07 IT WAS RE ALIZED BY THE AUDITOR THAT A MISTAKE HAD BEEN COMMITTED AND THAT THIS AMOUNT HAS BEEN WRONGLY SHOWN AS A LIABILITY WHEREAS NO SUCH LIABILITY EXISTED FOR ASSESSMENT YEAR 2005-06. THE AUDITOR RE CTIFIED THIS MISTAKE BY WRITING BACK THIS AMOUNT IN ASSESSMENT YE AR 2006-07. THE ASSESSING OFFICER, NOT ONLY INITIATED THE REASS ESSMENT PROCEEDINGS, BUT ALSO MADE AN ADDITION OF THIS AMOU NT UNDER THE NOTION THAT ASSESSEE HAD CLAIMED A DEDUCTION IN THI S YEAR ALTHOUGH, THIS WAS NOT ANY DEDUCTION BUT ONLY A RECT IFICATION ENTRY FOR WRITING BACK THE IMPUGNED AMOUNT WHICH PERTAINED TO 11 ITA NO.3023/ DEL/2016 M/S MAHANAGAR TELEPHONE NIGAM LTD. VS. DCIT ASSESSMENT YEAR 2005-06. THUS, APPARENTLY THIS RECT IFICATION WAS TAX NEUTRAL AND NO ADDITION/DISALLOWANCE WAS WARRANTED FOR THE REASON THAT THIS AMOUNT WAS NEVER CLAIMED OR ALLOWE D AS A DEDUCTION IN THE EARLIER YEAR. WHEN THE ASSESSEES APPEAL CAME UP BEFORE THE LD. CIT (A), HE DISMISSED THE ASSESSEES APPEAL ON AN ALTOGETHER MIS-APPRECIATION OF THE FACTS OF THE CAS E AS WELL AS LAW. HE WENT ON TO OBSERVE THAT IF A LIABILITY WAS WRONGLY PROVIDED IN A PARTICULAR ASSESSMENT YEAR, THE ASSESSEE SHOULD HAV E FILED REVISED RETURN FOR THAT YEAR. THE LD. CIT (A) ALSO OBSERVED THAT THE ASSESSEE DID NOT SUBSTANTIATE THE WORKING OF THIS AMOUNT OF RS.15,41,18,249/-. IN OUR CONSIDERED OPINION, THE L D. CIT (A) HAS ENTIRELY MISDIRECTED HIMSELF BY MAKING OBSERVATIONS WHICH WERE ENTIRELY OUT OF CONTEXT AND LEADING TO AN INCORRECT CONCLUSION BEING GUIDED BY ENTIRELY IRRELEVANT LOGIC. THEREFORE, WHIL E SETTING ASIDE THE ORDER OF THE LD. CIT (A) ON THE ISSUE, WE HOLD THAT THE IMPUGNED ADDITION WAS UNWARRANTED IN AS MUCH AS THE RECTIFICAT ION ENTRY MADE BY THE ASSESSEE IN ASSESSMENT YEAR 2006-07 WAS TAX NEUTRAL. WE DIRECT THE DELETION OF THIS ADDITION. 12 ITA NO.3023/ DEL/2016 M/S MAHANAGAR TELEPHONE NIGAM LTD. VS. DCIT 6.0 IN THE FINAL RESULT, THE APPEAL OF THE ASSES SEE STANDS ALLOWED. ORDER PRONOUNCED ON 29 TH DECEMBER, 2020. SD/- SD/- (G.S.PANNU) (SUDHANSHU SRIVASTAVA) VICE PRESIDENT JUDICIAL MEMBER DATED: 29/12/2020 PK/PS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI