The DCIT, Circle-1(1), Baroda V. M/s. Gujarat State Fertilisers & Chemicals Ltd., Baroda

ITA 3114/AHD/2011

• Counselvise Citation: 311420514 RSA 2011
• Duration Of Justice: 3 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-04-2015
• Assessment Year: 1995-1996
• Appeal Filed On: 08-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: Y G SHAH
• Keywords: Capital asset; Depreciation; Reason to believe; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

ITA NO.3114/AHD/2011 ASSESSMENT YEAR: 1995-96 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND S.S. GODARA JM] ITA NO.3114/AHD/2011 ASSESSMENT YEAR: 1995-96 DY. COMMISSIONER OF INCOME TAX ............... APPELLANT CIRCLE 1(1), BARODA VS. GUJARAT STATE FERTILIZERS & CHEMICALS LTD., ..... ............RESPONDENT FERTILIZER NAGAR 391 750 DISTT. BARODA [PAN: AAACG 7996 C] APPEARANCES BY: SUBHASH BAINS ALONG WITH DINESH SINGH, FOR THE APPELLANT Y.G. SHAH, FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : APRIL 28, 2015 DATE OF PRONOUNCING THE ORDER : APRIL 30, 2015 O R D E R PER PRAMOD KUMAR AM: BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS CH ALLENGED CORRECTNESS OF THE ORDER DATED 29 TH SEPTEMBER, 2011, PASSED THE LD. CIT(A) IN THE MATT ER OF ASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 1 47 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT), FOR THE ASSESSMENT YEAR 1994-95, ON THE FOLLOWING GROUNDS :- 1(A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(APPALS) ERRED IN QUASHING THE ORDER U/S. 14 3(3) READ WITH SECTION 147 TREATING THE SAME AS BAD-IN-LAW ON THE GROUND DUE TO THE ASSESSMENT BEING REOPENED BEYOND PERIOD OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR IN QUESTION AND WITHOU T SATISFYING ITA NO.3114/AHD/2011 ASSESSMENT YEAR: 1995-96 PAGE 2 OF 6 CONDITIONS AS PER PROVISO TO SECTION 147 OF THE ACT , AND THEREBY ALLOWED RELIEF OF THE FOLLOWING ADDITIONS: (I) THE ENTIRE SALES CONSIDERATION RECEIVED IN EXCESS O F WDV AMOUNTING TO RS.411.20 LACS TAXED AS SHORT TERM CAP ITAL GAIN U/S. 50 OF THE INCOME TAX ACT AS AGAINST THE SHORT TERM CAPITAL GAIN OFFERED AT RS.146.30 LACS BY THE ASSESSEE. 1(B) THE LD. CIT(A) ERRED IN NOT DECIDING THE APPEA L ON THE ABOVE ISSUE ON MERITS AND NOT APPRECIATING THE FACT THAT PROCEEDINGS UNDER SECTION 148 WERE INITIATED WITHIN THE STATUTORY TIM E LIMIT OF 7 YEARS AS PER THE PROVISIONS OF SECTION 149(1)(B) OF THE ACT AND AFTER TAKING APPROVAL OF THE APPROPRIATE AUTHORITY AS THE INCOME ESCAPED IN THIS CASE WAS MORE THAN RS.50 THOUSAND 2. TO ADJUDICATE ON THIS APPEAL, ONLY A FEW MATERIA L FACTS NEED TO BE TAKEN NOTE OF. IT IS A CASE OF REOPENED ASSESSMENT AND T HERE IS NO DISPUTE THAT REASSESSMENT PROCEEDINGS WERE INITIATED BEYOND THE EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR CONCERNED. THE REAS ONS RECORDED BY THE ASSESSING OFFICER ON 22 ND JANUARY, 1998, FOR REOPENING THE ASSESSMENT, WERE AS FOLLOWS :- ON EXAMINATION OF RECORDS, IN THIS CASE RETURN OF INCOME FOR AY 1995- 96 WAS FILED DECLARING LOSS AT RS.490026322/-. THE ASSESSMENT U/S. 143(3) HAS BEEN FINALISED ON 11.03.98 DETERMINING T OTAL LOSS AT RS.434622149/-. ON VERIFICATION OF THE CASE RECORD PERTAINING TO TH E ASSESSMENT YEAR 95-96, IT IS NOTICED THAT ASSESSEE HAS NOT DISCLOSE D THE INCOME TRULY ON THE FOLLOWING ISSUES WHICH HAS ESCAPED ASSESSMENT:- (I) THE EXCISE DUTY PAYABLE TO THE EXTENT OF RS.131 2 LACS ON FINISHED GOODS WAS NOT INCLUDED IN THE VALUE OF CLOSING STOC K. THE EXCISE DUTY IS LIVEABLE ONCE THE GOODS ARE MANUFACTURED. ONLY THE INCIDENCE OF PAYMENT IS PASSED ON AT THE TIME F CLEARANCE. THE EXCISE DUTY PAYABLE SHOULD HAVE BEEN DEBITED IN P&L A/C ON ACCRUAL BASI S. AS EXCISE DUTY IS DEDUCTIBLE ON ACTUAL PAYMENT BASIS THE SAID AMOU NT NOT PAID TO GOVERNMENT ACCOUNT SHOULD HAVE BEEN ADDED BACK TO A RRIVE AT THE TOTAL INCOME OF THE ASSESSEE. OMISSION TO DO SO HA S RESULTED IN UNDER ASSESSMENT OF INCOME OF RS.1312.00 LACS. (II) THE SALE PROCEEDS REALISED ON SALE OF PLANT AN D MACHINERY BELONGING TO POLYMER UNIT WAS ADJUSTED AGAINST BLOC K OF ASSETS OF FERTILISER UNIT OF THE ASSESSEE. THE TOTAL WRITTEN DOWN VALUE OF PLANT ITA NO.3114/AHD/2011 ASSESSMENT YEAR: 1995-96 PAGE 3 OF 6 AND MACHINERY OF POLYMER UNIT WAS WORKED OUT AT RS. 170.02 LACS AND SALE REALISATION OF PLANT AND MACHINERY SOLD WAS RS .585.20 LACS. THE EXCESS OF RS.411.20 LACS WAS REQUIRED TO BE TREATED AS SHORT TERM CAPITAL GAIN U/S 50 OF THE I.T. ACT, 1961. FAILURE TO DO SO HAS RESULTED IN THE ESCAPEMENT OF INCOME OF THE SAID AMOUNT. (III) THE ASSESSEE HAS WRITTEN OFF AN AMOUNT OF RS. 38.98 LACS TOWARDS THE COST OF OBSOLETE SPARES AND THE SAME IS NOT FOU ND IN ORDER ON FOLLOWING GROUNDS. IF THE SPARE IS THE PART OF CAPITAL ASSETS THEN IT SHOULD BE ADJUSTED AGAINST THE WDV OF BLOCK OF ASSETS. IF THE SPARE IS TREATED AS REVENUE EXPENSES THEN NO WRITE OFF CAN BE ALLOWED IN SUBSEQUENT YEARS AS THIS HAS BEEN CHARGE D TO PROFIT & LOSS ACCOUNT IN THE YEAR OF PURCHASE WHICH RESULTED IN E SCAPEMENT OF INCOME TO THE TUNE OF RS.38.93 LACS. (IV) THE DEPRECIATION OF RS.385.52 LACS HAS BEEN GR ANTED ON THE JETTY AT SIKKA AND BUILDING AT BOMBAY THOUGH THE ABSOLUTE OWNERSHIP OF THE PROPERTY HAS NOT BEEN TRANSFERRED TO THE ASSESSEE A ND LEGAL FORMALITIES FOR TRANSFER OF OWNERSHIP IS IN PROGRESS AND HENCE DEPRECIATION HAS BEEN ERRONEOUSLY GRANTED. IN VIEW OF THE ABOVE AND AS PER THE ISSUES DISCUSSE D IN THE PARA (I) (II) (III) & (IV) I HAVE REASON TO BELIEVE THAT THE INCO ME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THE AY 95-96 OF THE AMOU NTS MENTIONED IN THE ABOVE PARAS BECAUSE OF THE OMISSION ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR THE ASSESSMENT AND HENCE THE NEED FOR THE REOPENING OF THE ASSESSM ENT FOR AY 95-96. 3. ON THESE FACTS, THE CIT(A) QUASHED THE REASSESSM ENT PROCEEDINGS ON THE GROUND THAT EVEN THOUGH REASSESSMENT HAS BEEN INITI ATED BEYOND FOUR YEARS AND, AS SUCH, FIRST PROVISO TO SECTION 147 IS APPLI CABLE ON THE FACTS OF THIS CASE, THERE IS NOT EVEN AN ALLEGATION OF ANY FAILURE ON T HE PART OF THE ASSESSEE. WHILE, HOLDING SO, THE LEARNED CIT(A) HAS OBSERVED AS FOLL OWS:- ITA NO.3114/AHD/2011 ASSESSMENT YEAR: 1995-96 PAGE 4 OF 6 THEREFORE, APPELLANTS CASE COULD HAVE BEEN REOPEN ED U/S 147 ONLY IF THERE WAS FAILURE ON APPELLANTS PART TO DI SCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. AO HAS NOT MENTIONED EITHER IN THE REASONS R ECORDED OR IN THE ASSESSMENT ORDER AS TO HOW THIS MANDATORY CONDITION IN LAW WAS SATISFIED IN APPELLANTS CASE. HONBLE GUJARAT HIG H COURT IN THE CASE OF SAYAJI INDUSTRIES LTD. [2011] 13 TAXMANN.COM 218 (G UJARAT) HELD THAT NO SATISFACTION HAVING BEEN RECORDED BY AO AS REGAR DS FAILURE ON PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIA L FACTS, ASSUMPTION OF JURISDICTION UNDER SECTION 147 WAS WITHOUT JURISDIC TION. FURTHER, ITAT, AHMEDABAD IN APPELLANTS CASE IN ITA NO.4237/AHD/20 03 THROUGH ORDER DT. 20.08.2010 HELD THAT PROVISO BELOW SECTIO N 147 WOULD COME INTO OPERATION ONLY WHEN AO POINTED OUT AS TO WHAT WAS NOT DISCLOSED BY THE ASSESSEE IN THE ORIGINAL ASSESSMENT, ONCE A CHARGE OF FAILURE IS IMPUTED ON THE ASSESSEE. ITAT IN APPELLANTS CASE HELD AS UNDER :- IN OUR CONSIDERED VIEW, THE ROLE OF EXAPLANATINO- 1 TO SEC.147 AS RELIED BY THE LD. CIT(A) OR BY LD. D.R. WOULD CO ME INTO OPERATION ONLY WHEN AO HAS POINTED OUT AS TO WHAT HAS NOT BEE N DISCLOSED BY THE ASSESSEE IN THE ORIGINAL ASSESSMENT. ONCE A CHARGE OF FAILURE IS IMPUTED ON THE ASSESSEE THEN ASSESSEE HAS TO SHOW T HAT SUCH FACTS WERE ALREADY DISCLOSED. ONCE AN EXPLANATION IS RENDERED BY THE ASSESSEE THAT CERTAIN FACTS AS ALLEGED BY THE AO ARE ALREADY DISCLOSED THEN EXPLANATIN-1 WOULD COME TO THE RESCUE OF THE AO AND IN THAT EVENT MERELY PRODUCTION OF BOOKS OF ACCOUNT AS RELEVANT E VIDENCE BEFORE THE AO WOULD NOT TANTAMOUNT TO DISCLOSURE WITHIN THE ME ANING OF PROVISO TO SECTION 147. HERE THE AO HAS NOT DISCHARGED THE PRIMARY ONUS LYING O HIM FOR REOPENING THE ASSESSMENT AS HE HAS NOT MA DE ANY ALLEGATION ABOUT THE FAILURE OF THE ASSESSEE TO DISCLOSE ANY P ARTICULAR MATERIAL NECESSARY FOR THE ASSESSMENT. THUS, WE HOLD THAT R EOPENING OF THE ASSESSMENT WAS NOT JUSTIFIED WITHIN THE MEANING OF PROVISO TO SECTION 147. WE ALLOW THE APPEAL OF THE ASSESSEE. IN THE PRESENT MATTER, AO HAS NOWHERE SPECIFIED AS TO HOW THERE WAS FAILURE ON APPELLANTS PART TO DISCLOSE MATERIAL FA CTS NECESSARY FOR ASSESSMENT. THE MATER IS THEREFORE COVERED BY GUJA RAT HIGH COURT AS WELL AS ITATS DECISION AS ABOVE. EVEN OTHERWISE, IN THE REASONS RECORDED, AO HAS REFERRED TO INFORMATION DISCLOSED IN THE ORIGINAL RETURN OF INCOME AND/OR THE ORIGINAL ASSESSMENT PRO CEEDINGS ONLY. 4. THE ASSESSING OFFICER IS AGGRIEVED BY THE RELIEF SO GRANTED BY THE CIT(A) AND IS IN APPEAL BEFORE US. ITA NO.3114/AHD/2011 ASSESSMENT YEAR: 1995-96 PAGE 5 OF 6 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF T HE APPLICABLE LEGAL POSITION. 6. WE FIND THAT WHILE THE IMPUGNED REASSESSMENT HAS BEEN QUASHED ON THE SHORT GROUND THAT, AS PER REASONS RECORDED, THERE I S NOT EVEN AN ALLEGATION OF FAILURE ON THE PART OF THE ASSESSEE WHICH HAS RESUL TED IN ESCAPEMENT, EVEN IF ANY, OF INCOME LIABLE TO BE TAXED, EVEN THOUGH THE ASSES SMENT WAS ADMITTEDLY REOPENED BEYOND FOUR YEARS FROM THE END OF THE RELE VANT ASSESSMENT YEAR. THE ASSESSEE HAS CHALLENGED THE CORRECTNESS OF CIT(A)S SO QUASHING THE REASSESSMENT PROCEEDINGS BUT NEITHER HE HAS CALLED INTO QUESTION APPLICATION OF FIRST PROVISO TO SECTION 147 TO THE FACTS OF THIS C ASE NOR HAS HE APPOINTED OUT ANY FAILURE ON THE PART OF THE ASSESSEE. THE GROUNDS R AISED BEFORE US REFER TO CERTAIN OTHER THINGS BUT NOT THE CORE ISSUE ON THE BASIS OF WHICH IMPUGNED RELIEF WAS GRANTED BY THE CIT(A). WHEN WE POINTED THIS OUT TO THE LEARNED DEPARTMENTAL REPRESENTATIVE, HE SUBMITTED THAT ALL THE RELEVANT FACTS WERE NOT DISCLOSED BY THE ASSESSEE. IT WAS ALSO SUBMITTED THAT WE CAN ON LY EXAMINE EXISTENCE OF MATERIAL, RATHER THAN ADEQUACY OF MATERIAL, FOR COM ING TO THE CONCLUSION THAT INCOME HAS ESCAPED ASSESSMENT. RELIANCE WAS PLACED ON THE JUDICIAL PRECEDENTS ON THE CASES OF RAKESH AGARWAL VS. ACIT, 225 ITR 49 6 AND S. NARAYANAPPA & OTHERS VS. CIT, 63 ITR 219. WE, HOWEVER, SEE NO LE GALLY SUSTAINABLE MERITS IN THIS DEFENCE BY THE LEARNED DEPARTMENTAL REPRESENTA TIVE. WHILE EXAMINING CORRECTNESS OF THE REASONS RECORDED FOR REOPENING O F ASSESSMENT, IT IS NOT OPEN TO US TO GO TO ANYTHING BEYOND THE REASONS ACTUALLY RECORDED FOR REOPENING THE ASSESSMENT. AS HELD BY HONBLE BOMBAY HIGH COURT I N THE CASE OF HINDUSTAN LEVER LIMITED VS. R B WADKAR (268 ITR 332), ...... ... THE REASONS ARE REQUIRED TO BE READ AS THEY WERE RECORDED BY THE ASSESSING OFFI CER. NO SUBSTITUTION OR DELETION IS PERMISSIBLE. NO ADDITIONS CAN BE MADE TO THOSE REASONS. NO INFERENCE CAN BE ALLOWED TO BE DRAWN ON THE BASIS O F REASONS NOT RECORDED. IT IS FOR THE ASSESSING OFFICER TO DISCLOSE AND OPEN HIS MIND THROUGH THE REASONS RECORDED BY HIM. SUCH BEING THE LEGAL POSITION AN D IN VIEW OF UNDISPUTED FACT THAT THE ASSESSING OFFICER HAS NOT POINTED OUT TO A NY FAILURE OR LAPSES ON THE PART ITA NO.3114/AHD/2011 ASSESSMENT YEAR: 1995-96 PAGE 6 OF 6 OF THE ASSESSEE, THE CONCLUSIONS ARRIVED AT BY THE LEARNED CIT(A) CANNOT BE FAULTED. WE APPROVE THE SAME AND DECLINE TO INTERF ERE IN THE MATTER. 7. IN THE RESULT, THE APPEAL IS DISMISSED. PRONOUN CED IN THE OPEN COURT TODAY ON THE 30 TH DAY OF APRIL, 2015. SD/- SD/- S. S. GODARA PRAMOD KUM AR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, THE 30 TH DAY OF APRIL, 2015 COPIES TO: (1) THE APPELLANT (2) THE RESPOND ENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT/DEPUTY REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD