M/s. Apollo Tyres Ltd, Cochin V. DCIT, Ernakulam

ITA 316/COCH/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1047 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2013
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 17-12-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 10-05-2010
• Court: TRIBUNAL
• Department Lawyers: SUSAN GEORGE; VIJAYAPRABHA JUNIOR
• Assessee Lawyers: V SATHYANARAYANAN
• Keywords: Depreciation; Principle of natural justice; Additional depreciation; Assessment record
• Section: 143(3); 14A; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO. 316/COCH/2010 ASSESSMENT YEAR : 2005-06 M/S. APOLLO TYRES LTD., 6 TH FLOOR, CHERUPUSHPAM BUILDING, SHANMUGHAM ROAD, ERNAKULAM, COCHIN-682 031. [PAN : AAACA6990Q] VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1(1), RANGE-1, ERNAKULAM. (ASSESSEE -APPELLANT) (REVENUE-R ESPONDENT) ASSESSEE BY SHRI V. SATHYANARAYANAN, FCA REVENUE BY SMT. SUSAN GEORGE, SR. D.R & SMT. VIJAYAPRABHA, JUNIOR D.R DATE OF HEARING 17/12/2012 DATE OF PRONOUNCEMENT 08/02/2013 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 15-03-2010 PASSED BY THE LD. CIT, KOCHI DATED 15-03-2010 AND IT RELAT ES TO THE ASSESSMENT YEAR 2005-06. 2. THE ASSESSEE IS CHALLENGING THE VALIDITY OF THE REVISION ORDER PASSED BY THE LD. CIT. 3. THE FACTS RELATING TO THE CASE ARE STATED IN BRI EF. THE ASSESSMENT IN THE HANDS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WA S COMPLETED U/S. 143(3) OF THE ACT ON 31-12-2007. THE ASSESSEE CHALLENGED THE ASSESSM ENT ORDER BEFORE THE LD. CIT(A) AND THE FIRST APPELLATE AUTHORITY ADJUDICATED THE A PPEAL ON 26-03-2008, THE EFFECT OF WHICH WAS GIVEN BY THE ASSESSING OFFICER ON 30-04-2 009. THE ADMINISTRATIVE I.T.A. NO.316/COCH/2010 2 COMMISSIONER EXAMINED ASSESSMENT RECORD AND CAME TO THE CONCLUSION THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO TH E INTERESTS OF THE REVENUE ON THE FOLLOWING ISSUES:- I) IN THE COMPUTATION OF DEPRECIATION ON B UILDING USED FOR RESIDENTIAL PURPOSE, THE SALE VALUE OF OFFICE BUILDING WAS WRONGLY ADJU STED RESULTING IN ALLOWANCE OF EXCESS DEPRECIATION. II) DEPRECIATION AT APPROPRIATE RATE IS BEING CLAI MED AND ALLOWED IN RESPECT OF VEHICLES PURCHASED UNDER DEALER VEHICLE SCHEME ON THE FULL VALUE WITHOUT CONSIDERING THE DEPOSIT AMOUNT. III) DEPRECIATION ON COMPUTER ACCESSORIES HAS BEEN ALLOWED @ 60% AS AGAINST 25% ALLOWABLE. EXCESS DEPRECIATION HAS TO BE WITHD RAWN. IV) THE ASSESSING OFFICER HAS OMITTED TO INCLUDE T HE DEPOSITS COLLECTED FROM THE DEALERS UNDER DEALER NETWORK EXPANSION PROGRAMME (A TW SHOWROOM) AS INCOME OF THE ASSESSEE . V) 1/8 TH PORTION OF CORPORATE OFFICE BUILDING HAS BEEN LET OUT AND THE ASSESSING OFFICER HAS DISALLOWED 1/8 TH DEPRECIATION ON THAT BUILDING U/S. 38(2). HOWEVER , THE ASSESSING OFFICER HAS FAILED TO CONSIDER PROPO RTIONATE DISALLOWANCE ON REPAIRS AND MAINTENANCE EXPENDITURE OF THE BUILDING. VI) THE ASSESSING OFFICER HAS OMITTED TO DISALLOW THE EMPLOYEES AS WELL AS EMPLOYERS CONTRIBUTION TOWARDS PF FOR THE MONTH OF MARCH 2005 WHICH WERE NOT PAID U/S. 36(I)(VA)/43B OF THE ACT. VII) THE ASSESSING OFFICER HAS OMITTED TO INCLUDE THE RECEIPTS AS PER TDS CERTIFICATES FILED. IT WAS ALSO NOT VERIFIED BY T HE ASSESSING OFFICER WHETHER THE ENTIRE MISCELLANEOUS RECEIPTS OF RS. 31,14,449/- A CCOUNTED REPRESENTS RECEIPTS AS PER TDS CERTIFICATES. VIII) THE ASSESSING OFFICER HAS OMITTED TO DISALLO W PROPORTIONATE EXPENDITURE ON EXEMPTED INCOME (DIVIDEND) U/S. 14A OF THE ACT. S IMILARLY, INCOME FROM SALE OF INVESTMENT IS COMPUTED UNDER CAPITAL GAINS AND, TH EREFORE, EXPENSES ATTRIBUTABLE TO ACQUISITION OF THE INVESTMENTS CANNOT BE DEDUCT ED WHILE COMPUTING THE INCOME FROM BUSINESS. IX) ACCORDING TO THE DETAILS OF ADDITIONS TO P&M DURING THE YEAR FURNISHED AS PER ANNEXURE TO THE DEPRECIATION STATEMENT, AN AMOUNT OF RS. 2,00,75,230/- RELATES TO P&M INSTALLED AT THE OFFICE PREMISES, THE VALUE OF WHICH CANNOT BE CONSIDERED FOR ADDITIONAL DEPRECIATION UNDER CLAUSE (B) OF SE COND PROVISO. THE EXCESS ADDITIONAL DEPRECIATION GRANTED U/S. 32(I)(IIA) ON P&M INSTALLED AT OFFICE PREMISES REQUIRES TO BE WITHDRAWN. I.T.A. NO.316/COCH/2010 3 AFTER HEARING THE ASSESSEE, THE LD CIT SET ASIDE TH E ASSESSMENT ORDER, APPARENTLY ON THE ABOVE SAID ISSUES AND DIRECTED THE ASSESSING OF FICER TO RE-DO THE ASSESSMENT. AGGRIEVED BY THE REVISION ORDER PASSED BY LD CIT, T HE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 4. WE FEEL IT PERTINENT TO REFER TO THE DECISION RENDERED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GRASIM INDUSTRIES LTD. V CIT ( 321 ITR 92), WHEREIN THE COURT HAS DISCUSSED ABOUT THE SCOPE OF PROVISIONS OF SECTION 263 AS UNDER: SECTION 263 OF THE INCOME-TAX ACT, 1961 EMPOWERS TH E COMMISSIONER TO CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDINGS UNDER THE ACT AND, IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN, BY THE ASS ESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE, TO PASS AN ORDER UPON HEARING THE ASSESSEE AND AFTER A N ENQUIRY AS IS NECESSARY, ENHANCING OR MODIFYING THE ASSESSMENT OR CANCELING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. THE KE Y WORDS THAT ARE USED BY SECTION 263 ARE THAT THE ORDER MUST BE CONSIDERE D BY THE COMMISSIONER TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THIS PROVISION HAS BEEN INTERPRETED BY THE SUPREME COURT IN SEVERAL JUDGMENTS TO WHICH IT IS NOW NECESSARY TO TURN. IN MALABAR INDUSTRIAL CO. LTD. V. CIT [2000] 243 ITR 83, THE SUPREME COURT HELD THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER AND IT IS ON LY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. THE SUPREME COURT HELD THAT AN INCORRECT ASSUMPTION OF FACT OR AN INCORRECT APP LICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. AN ORDER PASSED IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE OR W ITHOUT APPLICATION OF MIND, WOULD BE AN ORDER FALLING IN THAT CATEGORY . THE EXPRESSION PREJUDICIAL TO THE INTERESTS OF THE REVENUE, THE SUPREME COURT HELD, IT IS OF WIDE IMPORT AND IS NOT CONFINED TO A LOSS OF TAX. W HAT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE IS EXPLAINED IN THE JUDGMEN T OF THE SUPREME COURT (HEAD NOTE) : THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE RE VENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE A SSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER, CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS O F THE REVENUE, FOR EXAMPLE, WHEN AN INCOME-TAX OFFICER ADOPTED ONE O F THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN I.T.A. NO.316/COCH/2010 4 ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF T HE REVENUE UNLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS UNSUSTAINABLE I N LAW. THE PRINCIPLE WHICH HAS BEEN LAID DOWN IN MALABAR I NDUSTRIAL CO. LTD. [2000] 243 ITR 83 (SC) HAS BEEN FOLLOWED AND EXPLAI NED IN A SUBSEQUENT JUDGMENT OF THE SUPREME COURT IN CIT V. MAX INDIA L TD. [2007] 295 ITR 282. THERE MAY NOT BE ANY DISPUTE THAT THE REVISION PROC EEDING SHALL NOT LIE ON THE ISSUES ON WHICH THE ASSESSING OFFICER HAS TAKEN A PLAUSIBLE V IEW AFTER EXAMINING AND APPLYING HIS MIND ON IT. IF THE AO DID NOT MAKE ANY ENQUIRY ON ANY OF THE PERTINENT ISSUE, IT WILL RESULT IN LACK OF APPLICATION OF MIND. THE HONBLE SUPREME COURT HAS HELD IN THE CASE OF MALABAR INDUSTRIAL COMPANY LTD (SUPRA) THAT THE ASS ESSMENT ORDER PASSED WITHOUT APPLICATION OF MIND WILL BE RENDERED ERRONEOUS. 5. THE HONBLE DELHI HIGH COURT IN THE CASE OF TO YOTO MOTOR CORPORATION (306 ITR 49) HAS HELD THAT THE PROCEEDINGS BEFORE THE AO ARE QUA SI JUDICIAL PROCEEDING AND A DECISION TAKEN BY THE AO IN THIS REGARD MUST BE SUP PORTED BY REASONS. ACCORDINGLY, THE DELHI HIGH COURT UPHELD THE REVISION ORDER PASSED B Y LD CIT U/S 263 OF THE ACT. THE SAID ORDER OF THE DELHI HIGH COURT HAS BEEN APPROVE D BY THE HONBLE SUPREME COURT IN THE CASE OF TOYOTO MOTOR CORPORATION (306 ITR 52). 6. THE ISSUES POINTED OUT BY LD CIT WOULD HAVE IM PLICATION ON THE TAX COMPUTATION IN WHICH CASE THE IMPUGNED ASSESSMENT ORDERS PASSED BY THE ASSESSING OFFICER ARE ALSO PREJUDICIAL TO THE INTERESTS OF THE REVENUE. APPAR ENTLY, THE AO DID NOT DISCUSS/CONSIDER VARIOUS ISSUES POINTED OUT BY THE LD CIT IN HIS REV ISION ORDER. HENCE, IN OUR VIEW, THE DECISION TAKEN BY LD CIT IN SETTING ASIDE THE ASSES SMENT ORDER ON THE IMPUGNED ISSUES IS IN ACCORDANCE WITH THE LAW. HOWEVER, WE NOTICE THAT THE LD CIT HAS DIRECTED THE ASSESSING OFFICER TO DO THE ASSESSMENT ON THE LINES DISCUSSED BY HIM. IN OUR VIEW, SUCH A DIRECTION INFRINGES WITH THE POWER ENTRUSTED TO T HE ASSESSING OFFICER BY THE STATUTE. ACCORDINGLY, WE MODIFY THE ORDER OF THE LD CIT AND DIRECT THE ASSESSING OFFICER TO ADJUDICATE THE VARIOUS ISSUES IN ACCORDANCE WITH LA W WITHOUT BEING UNTRAMMELLED BY THE VIEWS EXPRESSED BY LD CIT IN HIS REVISION ORDER REF ERRED ABOVE. I.T.A. NO.316/COCH/2010 5 7. IN THE RESULT, THE APPEAL FILED BY THE ASSES SEE IS PARTLY ALLOWED. PRONOUNCED ACCORDINGLY ON 08-02-2 013 SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 8TH FEBRUARY, 2013 GJ COPY TO: 1. M/S. APOLLO TYRES LTD., 6 TH FLOOR, CHERUPUSHPAM BUILDING, SHANMUGHAM ROAD, ERNAKULAM, COCHIN-682 031. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1( 1), RANGE-1, ERNAKULAM. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-II, KOCH I. 4. THE COMMISSIONER OF INCOME-TAX, KOCHI 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN I.T.A. NO.316/COCH/2010 6