DCIT, Coimbatore V. Chroma Print, Coimbatore

ITA 320/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96246 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2015
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 13-10-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 05-02-2015
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: R KUMAR
• Keywords: Reopening of assessment; Capital asset; Depreciation; Difference of opinion; Change of opinion; Reassessment proceedings; Capital expenditure
• Section: 143(3); 32; 148; 154

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI , . ! '# , $ %& ' [ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER ] ./ I.T.A.NO.320/MDS/2015 / ASSESSMENT YEAR : 2005-06 THE DY. COMMISSIONER OF INCOME-TAX CORPORATE CIRCLE-1 COIMBATORE VS. M/S CHROMA PRINT NO.9/66, GANESH NAGAR G.N. MILLS POST COIMBATORE 641 029 [PAN AAEFC 1527 C ] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : SHRI A.V SREEKANTH, JCIT /RESPONDENT BY : SHRI R. KUMAR, ADVOCATE / DATE OF HEARING : 13 - 10 - 2015 / DATE OF PRONOUNCEMENT : 16 - 10 - 2015 , / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, COIMBAT ORE, DATED 14.11.2014 FOR THE ASSESSMENT YEAR 2005-06. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 2. THE LD . CIT(A) - I, COIMBATOR E FAI LED TO CONSIDER THE DECISION OF THE JURISDICTIONAL HIGH COURT IN TH E CASE OF CLT VS. SAKTHI FINANC E LTD C ITED IN [2003] 130 TAXMAN 304 WHER E IT W AS HELD THAT SINCE THE ASSESSEE HAD NOT ESTABLISHED ANY NEW ITA NO.320/15 :- 2 -: INDUSTRIAL U N I T NOR HAD IT EXPANDED EXISTING INDUSTRIAL UNDERTAKING BUT HAD INCREASED SHARE CAPIT A L S UBSEQUENT TO ESTABLISHMENT OF BUSINESS , IT WAS NOT ENTITLED TO B ENEF IT OF S ECTION 35D. 3. THE LEARNED COMMISSIONER OF IN COM E TA X ( APPEALS)-I , COIMBATORE , F AILED TO CONSIDER THE DECISION OF THE , HON' BLE ITA T, KOLKATA IN THE CASE OF SOM DUTT BUILDER S (P) LTD., VS. D C I T RE PORTED IN 98 ITD 78. THIS VIEW WA S EXPRESSED B Y THE HON ' BLE ITAT , KO LKATTA ON THE BASIS OF THE DECISION OF THE HON'BLE SUP R EME COURT IN THE CASE OF M A L A BAR INDUSTRIAL CO . LTD VS . CIT CITED IN 243 ITR 83 . 4. THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS)-I, COIMBATORE, FAILED TO CONSIDER THE DECISION IN THE CA SE OF EX PORT C REDIT GUARANTEE CORPORATION OF INDIA LIMITED VS. ADDL . CIT(H C) BO MBAY [ 2 013] 30 TAXMANN . COM 211 IT WAS HELD THAT REASSESSMENT IS PER MISSI BL E EVE N IN THE ABSENCE OF ASSESSEE'S FAILURE TO DISCLOSE MATERIAL FACTS. 3. THE FACTS OF THE CASE ARE THAT ORIGINALLY THE ASSE SSEE HAD FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSI DERATION DECLARING TOTAL INCOME OF ` 90,99,303/-. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ON 21.08.2007. SUBSEQUENTLY, THE CAS E WAS REOPENED AND A NOTICE UNDER SECTION 148 WAS ISSUED ON 4.3.20 10 AND RESPOND TO THE NOTICE ASSESSEE HAD FILED RETURN OF INCOME ON 2 8 TH MAY, 2010. THEREAFTER ASSESSING OFFICER HAD ISSUED NOTICE UNDE R SECTION 143(2) TO THE ASSESSEE. DURING THE COURSE OF THE REASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS OBSERVED THAT IT IS SEEN FROM THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDING 31.3.2005, THE ASSESSEE HAD DEBITED AN ITA NO.320/15 :- 3 -: AMOUNT OF ` 24,04,453/- BEING SOFTWARE EXPENSES. THE ASSESSEE HAD PURCHASED A SOFTWARE VIZ. LIC PRINECT SIGNA STATIO N 74FROM HIEDLBERG, GERMANY VIDE INVOICE NO.1803015627 DATED 15 TH DECEMBER, 2004 THROUGH ORDER NO.1073009. FROM THE ABOVE DETA ILS, THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HA S PURCHASED A NEW SOFTWARE AND IT DOES NOT COME UNDER UPGRADATION OR FOR RENEWAL OF THE EXISTING SOFTWARE. AS PER THE PROVISIONS OF SECTION 32 OF THE ACT, COMPUTER INCLUDES SOFTWARE PURCHASED AND IS ELIGIBL E FOR DEPRECIATION @ 60%. AS PER SECTION 32(1)(II), THE ASSESSEE OWNS LICENCE TO UTILIZE THE SOFTWARE FOR THE PURPOSE OF BUSINESS. MANUFACTU RING CONCERN I.E. HEIDELBERG, GERMANY HOLDS PATENT BUT THE RIGHT OF P OSSESSION AND USAGE WAS TRANSFERRED TO ASSESSEE BY HEIDELBERG, GE RMANY THROUGH THE FORM OF LICENCE WHICH IS AN ASSET. MOREOVER, T HE CORE SOFTWARE DESIGN IS SAME TO BE UTILIZED FOR SEVERAL YEARS. TH E ORIGINAL SOFTWARE ITSELF IS A CAPITAL ASSET AND THE EXPENSES INCURRED WERE CAPITAL EXPENDITURE. SINCE THE PURCHASE OF SOFTWARE MADE FR OM HEIDELBERG, GERMANY IS NEW SOFTWARE, IT CANNOT BE ALLOWED AS R EVENUE EXPENDITURE. ACCORDINGLY, THE ASSESSING OFFICER HA S MADE ADDITION. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE CI T(A). BEFORE THE CIT(A), THE CONTENTION OF THE ASSESSEE WAS THAT THE REOPENING WAS BEYOND FOUR YEARS AND THE ORIGINAL ASSESSMENT WAS C OMPLETED UNDER SECTION 143(3) BY CONSIDERING THE SAME MATERIAL AND THEREFORE, IT ITA NO.320/15 :- 4 -: AMOUNTS TO CHANGE OF OPINION AND THEREFORE, REOPENI NG WAS BAD IN LAW. THE CIT(A) AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE OBSERVED THAT THE ASSESSEE NOWHERE OBJECTED TO ISSU E NOTICE UNDER SECTION 148 NOR QUESTIONED THE SAME BEFORE ASSESSIN G OFFICER. THE ONLY OBJECTION OF THE ASSESSEE BEFORE THE ASSESSING OFFICER WAS TO PASS A SPEAKING ORDER. THE CIT(A) FURTHER OBSERVED THAT ONLY DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THAT TOO IN THE M ONTH OF DECEMBER, A LETTER DATED 27 TH DECEMBER, 2010 WAS FILED BEFORE THE ASSESSING OFFICER WHERE IT IS STATED THAT PROPOSED REASSESSME NT UNDER SECTION 148 IS NOT LEGALLY CORRECT. THE CIT(A) WITH THAT O BSERVATION WITHOUT DECIDING LEGAL ISSUE BEFORE HIM PROCEEDED TO DECIDE THE MATTER ON MERITS AND CONFIRMED THE ADDITION MADE BY THE ASSES SING OFFICER. ON BEING AGGRIEVED, ASSESSEE CARRIED THE MATTER IN SEC OND APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING, COUNSEL FOR THE ASSESSEE SU BMITTED THAT REOPENING WAS BAD IN LAW AS IT WAS DONE BEYOND FOUR YEARS AND IN THE ORIGINAL ASSESSMENT PROCEEDINGS UNDER SECTION 1 43(3) THE SAME MATERIAL WAS CONSIDERED AND THUS IT AMOUNTS TO CHAN GE OF OPINION. HE RELIED ON THE DECISION OF A THIRD MEMBER IN THE CAS E OF ACIT VS. ROLTA INDIA LTD., REPORTED IN (2011) 132 ITD 98(MUM)(TM). ITA NO.320/15 :- 5 -: 5. ON APPEAL, THE TRIBUNAL VIDE ORDER DATED 27.6.2012 IN I.T.A.NO.3266/MDS/2012, REMITTED THE ISSUE BACK TO THE FILE OF THE CIT(A) WITH FOLLOWING OBSERVATION: 5. WE HAVE HEARD BOTH PARTIES AND PERUSED THE REC ORDS. THE ISSUE BEFORE US FOR CONSIDERATION IS WHETHER TH E REASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER BY ISSUING NOTICE UNDER SECTION 148 IS VALID OR NOT? IN THIS CONTEXT, THE OBSERVATION OF THE CIT(A) VIDE PARA 5 OF HIS ORDER IS REPRODUCED AS UNDER:- 5. I HAVE GONE THROUGH THE INFORMATION FURNISHED B Y THE APPELLANT AND ALSO THE ORDER OF THE ASSESSING OFFIC ER. AS SEEN FROM DETAILS, IN THE LETTER FILED ON 27.12.2010 IN O NE PARA, THE APPELLANT SUBMITTED A CASE LAW ALA FIRM V S. CIT 189 ITR 285, WHERE THE SUPREME COURT HELD THAT REASSESSMENT CANNOT BE BASED ON BARE OR MERE CHANGE OF OPINION. THE APPELLANT NOWHERE OBJECTED TO THE ISSU E OF NOTICE U/S.148 NOR QUESTIONED THE SAME. EVEN DURING T HE COURSE OF INITIATION OF PROCEEDINGS U/S.148, THE APPE LLANT HAS NOT RAISED ANY OBJECTION BEFORE THE ASSESSING O FFICER TO PASS A SPEAKING ORDER. IT WAS ONLY DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, THAT TOO IN THE MONTH OF DECEMBER, A LETTER DATED 27.12.2010 WAS FILED BEFORE THE ASSESSING OFFICER WHERE IT STATED THAT THE PROPOSED REASSESSMENT U/S.148 IS NOT LEGALLY CORRECT. 6. FROM THE ABOVE ORDER, WE FIND THAT THE CIT(A) WIT HOUT DECIDING THE ISSUE IN ITS RIGHT PERSPECTIVE BY SIMP LY SAYING THAT OBJECTION OF THE ASSESSEE WAS RAISED BEFORE T HE ASSESSING OFFICER ONLY BY LETTER DATED 27.12.2010 WHICH IS NOT VALID IN LAW. IN OUR OPINION, CIT(A) HAS NOT CO NSIDERED THE ISSUE PROPERLY. WE THEREFORE, SET ASIDE THE IMPUGNE D ORDER AND REMIT THE MATTER BACK TO THE CIT(A) TO DECIDE T HE MATTER AFRESH BY CONSIDERING THE CASE LAWS RELIED ON BY THE ASSESSEE AND AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. ITA NO.320/15 :- 6 -: 6. AGAINST THE ABOVE ORDER OF THE TRIBUNAL, THE ASSES SEE FILED M.P.NO.98/MDS/2012 STATING THAT IN APPEAL BEFORE TH E TRIBUNAL, THE ASSESSEE HAD RAISED 8 GROUNDS. THE TRIBUNAL HAS CON SIDERED FIRST 4 GROUNDS RELATING TO THE ISSUE OF RE-OPENING. THE RE MAINING FOUR GROUNDS ON MERITS WERE NOT ADJUDICATED BY THE TRIBU NAL. THE TRIBUNAL VIDE ORDER DATED 24.08.2012 ALLOWED THE MI SCELLANEOUS APPLICATION OF THE ASSESSEE AND RECALLED THE APPEAL FOR DECIDING THE GROUNDS WHICH WERE NOT ADJUDICATED AT THE TIME OF P ASSING OF EARLIER ORDER. THE RELEVANT EXTRACT OF THE ORDER OF THE TRIBUNAL IN MISCELLANEOUS APPLICATION IS AS UNDER:- WE HAVE HEARD BOTH THE SIDES., PERUSED THE RECORDS AND GONE THROUGH THE ORDER PASSED BY THE TRIBUNAL. WE F IND THAT THE TRIBUNAL WHILE PASSING THE ORDER DATED 27.06.201 2 HAS CONSIDERED ONLY THE ISSUE REGARDING RE-OPENING OF THE ASSESSMENT AND INADVERTENTLY THE GROUNDS RAISED I. E GROUNDS 5 TO 8 WERE NOT CONSIDERED. IN THE CIRCUMSTANCES; IN OUR OPINION, THE ORDER OF THE TRIBUNAL HAS TO BE RE CALLED. WE THEREFORE RECALL OUR ORDER DATED 27.06.2012 AND DIRECT THE REGISTRY TO POST THIS APPEAL FOR HEARING ON REGULAR COURSE, AFTER DUE PROCESS. ORDERED ACCORDIN GLY . ' 7. ONCE AGAIN, THE CASE WAS FIXED FOR HEARING AND V IDE ORDER DATED 14.7.2014, THE TRIBUNAL HAS OBSERVED AS FOLLO WS: 6. IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT C ASE, WE ARE OF THE CONSIDERED OPINION THAT IN ORDER TO MAIN TAIN CONSISTENCY IN THE DECISION MAKING PROCESS AND TO A VOID CONFLICTING ORDERS, THE ENTIRE APPEAL SHOULD GO BAC K TO THE COMMISSIONER OF INCOME TAX (APPEALS). AS BOTH THE I SSUES IN APPEAL HAVE OVERLAPPING EFFECT, THEY CANNOT BE DECI DED ITA NO.320/15 :- 7 -: INDEPENDENTLY BY TWO DIFFERENT AUTHORITIES. WE, TH EREFORE, SET ASIDE THE IMPUGNED ORDER DATED 13.12.2011 AND REMI T THE FILE BACK TO THE COMMISSIONER OF INCOME-TAX (APPEALS ) TO PASS ORDER ON THE ISSUE OF RE-OPENING OF ASSESSMENT, AS WELL AS ON MERITS, AFTER AFFORDING OPPORTUNITY OF HEARING TO T HE ASSESSEE. THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER CONSIDERING THE FACTS OF THE CASE AND PLEADINGS SHA LL PASS ORDERS, IN ACCORDANCE WITH LAW. 8. IN THE SECOND ROUND, THE CIT(A), VIDE ORDER DATED 14.11.2014 DECIDED THE ISSUE RELATING TO THE REOPEN ING OF ASSESSMENT IN FAVOUR OF THE ASSESSEE BY OBSERVING THAT THE AS SESSING OFFICER WHILE FRAMING THE ASSESSMENT U/S 143(3) DATED 21.8.2007 EXAMINED THE ISSUE RELATING TO SOFTWARE EXPENDITURE AND HE ALLOW ED THE CLAIM OF THE ASSESSEE AND NOT MADE ANY ADDITION ON THIS COUNT. HENCE, RELOOKING OF SAME ISSUE WHILE REOPENING OF ASSESSMENT U/S 14 7, THERE IS A CHANGE OF OPINION. ACCORDINGLY, FOLLOWING THE JUDG MENT OF THE DELHI HIGH COURT (FULL BNECH) IN CIT VS USHA INTERNATIONA L LTD [2012] 210 TAXMAN 188, THE CIT(A) ALLOWED THE GROUND RELATING TO THE REOPENING OF ASSESSMENT. AGAINST THIS, THE REVENUE IS IN APP EAL BEFORE US. 9. WE HAVE HEARD BOTH PARTIES AND PERUSED THE MATERIAL O RECORD. IT WAS BROUGHT TO OUR NOTICE THAT THE ASSE SSING OFFICER HAS TAKEN THE SAME ISSUE IN PROCEEDINGS U/S 154 OF THE ACT AND THE SAME WAS SUBJECT MATTER OF APPEAL BEFORE THE CIT(A). TH E CIT(A), VIDE ORDER DATED 17.12.2009, OBSERVED THAT THERE IS NO M ISTAKE APPARENT ON ITA NO.320/15 :- 8 -: RECORD TO RECTIFY THE SAME, AS SUCH, THE RECTIFICAT ION PROCEEDING U/S 154 IS INVALID. AFTER THIS CIT(A)S ORDER, THE ASS ESSING OFFICER ISSUED NOTICE U/S 148 DATED 4.3.2010 TO CONSIDER THE SAME ISSUE FOR RE- ASSESSMENT. THE SECOND NOTICE U/S 148 OF THE ACT W AS ISSUED SQUARELY ON THE BASIS OF NOTICE U/S 154 OF THE ACT. BEING SO, IN OUR OPINION, AS HELD BY THE SUPREME COURT IN THE CASE OF ADDL. CIT VS SHREYAS GRAMIN BANK [2012] 25 TAXMANN.COM 282, REOPENING IS INVALI D. MORE SO, IN THIS CASE, IT IS A CHANGE OF OPINION AS THE ASSESSI NG OFFICER MADE ENQUIRY AT THE TIME OF FRAMING ORIGINAL ASSESSMENT ON 21.8.2007 AND HE SOUGHT VARIOUS CLARIFICATIONS ON SOFTWARE EXPENS ES, FOR WHICH THE ASSESSEE REPLIED VIDE ITS LETTER DATED 18.7.2007 AN D AFTER SATISFYING ABOUT THE REVENUE NATURE OF THE EXPENDITURE, HE ALL OWED THE DEDUCTION TOWARDS SOFTWARE EXPENSES. BEING SO, AS HELD BY TH E DELHI HIGH COURT IN THE CASE OF USHA INTERNATIONAL LTD (SUPRA), WE A RE OF THE OPINION THAT REOPENING OF ASSESSMENT IS BAD IN LAW. ACCORD INGLY, WE ANNUL THE REOPENING OF ASSESSMENT. SINCE WE HAVE ANNULLED TH E RE-ASSESSMENT ORDER ITSELF, THERE IS NO QUESTION OF GOING INTO TH E MERITS OF THE ADDITION TOWARDS SOFTWARE EXPENSES WHICH IS ONLY AC ADEMIC. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. ITA NO.320/15 :- 9 -: ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH OCTOBER, 2015, AT CHENNAI. SD/- SD/- ( . ! '# ) ( V. DURGA RAO ) $ / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER !' / CHENNAI #$ / DATED: 16 TH OCTOBER, 2015 RD $%&& '(&)( / COPY TO: & 1 . / APPELLANT 3. & *&+, / CIT(A) 5. (-.& / / DR 2. / RESPONDENT 4. & * / CIT 6. .0&1 / GF