M/s. Sri Venkatalakshmi Spinners (P) Ltd., Udamalpet V. ACIT, Coimbatore

ITA 337/CHNY/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4656 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 13-06-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 19-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR
• Assessee Lawyers: T BANUSEKAR
• Keywords: Recovery proceedings; Depreciation; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Revenue expenditure; Reassessment proceedings; Capital expenditure
• Section: 143(3); 142(1); 115JB; 147; 148; 37

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI D BENCH, CHENNAI. BEFORE SHRI U.B.S. BEDI, J.M. & SHRI N.S. SAINI, A. M. I.T.A. NO. 337/MDS/2010 ASSESSMENT YEAR: 2004-05 SRI VENKATALAKSHMI SPINNERS (P) LTD., ANTHIYUR, PULANKINAR, UDUMALPET - 22. [PAN:AACCS7183F] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, SALARY CIRCLE I, COIMBATORE. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI T. BANUSEKAR REVENUE BY : SHRI K.E.B. RENGARAJAN, JR. STANDING COUNSEL ORDER PER U.B.S. BEDI, J.M. THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER PASSED BY THE LD. CIT(A) II, COIMBATORE DATED 14.12.2009 RELEVANT TO THE ASSESSMENT YEAR 2004- 05, WHEREBY THE ASSESSEE CHALLENGED THE ORDER OF TH E LD. CIT(A) MAINLY ON THE GROUND THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT THE ORDER OF THE ASSESSING OFFICER IS WITHOUT JURISDICTION, OPPOSED TO THE PRI NCIPLES OF EQUITY, JUSTICE AND FAIR PLAY AND THAT APART, THE LD. CIT(A) HAS FAILED TO A PPRECIATE THAT THE EXPENDITURE INCURRED TOWARDS MODERNIZATION AND REPLACEMENT IS A LLOWABLE AS DEDUCTION UNDER SECTION 37 TO THE EXTENT THE EXPENDITURE HAS NOT RE SULTED IN INCREASE IN THE PRODUCTION CAPACITY AND IF EXPENDITURE IS TO BE TRE ATED AS CAPITAL EXPENDITURE, DEPRECIATION IS REQUIRED TO BE ALLOWED FOR THIS ASS ESSMENT YEAR AND THE SUBSEQUENT ASSESSMENT YEARS. 2. THE ASSESSEE FILED AN APPLICATION DATED 27.05.2 010 RAISING TWO ADDITIONAL GROUNDS WITH THE PRAYER FOR PERMISSION TO FILE ADDI TIONAL GROUNDS OF APPEAL AND AT ITA ITAITA ITA NO. NO. NO. NO.337 337337 337/MDS/ /MDS/ /MDS/ /MDS/1 11 10 00 0 2 THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESS EE SUBMITTED THAT THE GROUND BEING RAISED AS ADDITIONAL GROUNDS ARE LEGAL GROUND S RELATABLE TO CHALLENGE REGARDING REOPENING OF THE ASSESSEE BEING BAD IN LA W AND BY RELYING UPON VARIOUS DECISIONS INCLUDING DECISION OF NATIONAL TH ERMAL POWER CO. LTD. V. CIT 229 ITR 383 (SC), IT WAS PLEADED FOR ADMISSION OF A DDITIONAL GROUNDS. WHEREAS, SUCH PLEA OF THE ASSESSEE WAS CONTESTED BY THE LD. DR, WHO PLEADED THAT THE ASSESSEE DID NOT AGITATE THIS POINT EITHER BEFORE T HE ASSESSING OFFICER OR BEFORE THE LD. CIT(A) AND IN THE GROUNDS RAISED BEFORE THE TRIBUNAL ALSO, THE ASSESSEE HAS NOT RAISED SUCH GROUND AND NO COGENT REASON HAS BEEN GIVEN FOR NOT RAISING THIS GROUNDS EARLIER. THEREFORE, THE PRAYER OF THE ASSESSEE SHOULD NOT BE ACCEPTED. 3. WE HAVE HEARD BOTH THE SIDES, CONSIDERED THE MA TERIAL ON RECORD AND FIND IT AS A MATTER OF FACT THAT THE ASSESSEE DID NOT RA ISE ANY OBJECTION WITH REGARD TO REOPENING OF THE ASSESSMENT EITHER BEFORE THE ASSES SING OFFICER NOR TAKEN ANY GROUND IN THIS REGARD BEFORE THE LD. CIT(A) DURING FIRST APPEAL PROCEEDINGS AND BEFORE US ALSO, THE ASSESSEE HAS RAISED NO SUCH GRO UND IN THE MEMORANDUM OF 2 ND APPEAL AND THIS ISSUE WAS RAISED AS ADDITIONAL GR OUNDS BEFORE US FOR THE FIRST TIME AND ASSESSEE COULD NOT GIVE ANY COGENT REASONS FOR NOT RAISING THIS ISSUE BEFORE THE LOWER AUTHORITIES. BUT, SINCE THE CHALLE NGE REGARDING REOPENING OF THE ASSESSMENT IS LEGAL ISSUE, THEREFORE, IN OUR CONSID ERED VIEW, IT WOULD MEET THE ENDS OF JUSTICE IF SUCH REQUEST FOR ADMISSION OF AD DITIONAL GROUND IS ALLOWED AND THESE GROUNDS ARE ADMITTED FOR HEARING, AS SUCH, WH ILE ACCEPTING THE APPLICATION OF THE ASSESSEE, WE ADMIT SUCH LEGAL GROUNDS FOR AD JUDICATION. ITA ITAITA ITA NO. NO. NO. NO.337 337337 337/MDS/ /MDS/ /MDS/ /MDS/1 11 10 00 0 3 4. THE ASSESSEE COUNSEL, AT THE THRESHOLD OF THE A RGUMENT SUBMITTED THAT IN THIS CASE RETURN OF INCOME WAS PROCESSED UNDER SECT ION 143(1) AND THERE WAS NO ASSESSMENT HAVING BEEN FRAMED OR MADE UNDER SECTION 143(3), AND MOREOVER AT THAT TIME, THE ISSUE IN RELATION TO EXPENDITURE INC URRED TOWARDS MODERNIZATION AND REPLACEMENT OF MACHINERY WAS A REVENUE EXPENDITURE AND NOT CAPITAL EXPENDITURE, WHICH WAS NOT DISTURBED WHILE PROCESSI NG THE RETURN AND LATER ON, INITIATION OF REOPENING OF THE ASSESSMENT BY INVOK ING THE PROVISIONS AS CONTAINED UNDER SECTION 147 WAS NEITHER PROPER NOR JUSTIFIED BECAUSE NO FRESH EVIDENCE OR MATERIAL CAME BEFORE THE ASSESSING OFFICER IN AS MU CH AS, ALL THE MATERIAL AND DETAILS, ON THE ISSUE ON WHICH REOPENING WAS DONE, WERE ALREADY THERE WITH THE ASSESSING OFFICER HAVING BEEN FILED ALONG WITH RETU RN, SO THIS IS MERE A CHANGE OF OPINION ON THE BASIS OF WHICH, REOPENING COULD NOT BE DONE . RELIANCE IN THIS REGARD WAS PLACED ON CIT V. KALVINATOR OF INDIA LTD . [2002] 256 ITR 1 (DEL)(FB), CIT V. KELVINATOR OF INDIA LTD. [2010] 320 ITR 561 (SC), ACIT V. MEENAKSHI NARAYANAN INVESTMENTS PVT. LTD. IN ITA NO. 1507/MDS /2002, CIT V. MEENAKSHI NARAYANAN INVESTMENTS PVT. LTD. 2007-TIOL-78-HC-MAD -IT, ACIT V. PRABHU SPG. MILLS (P) LTD. [2008] 2 DTR 77 (CHENNAI), UNIO N OF INDIA AND OTHERS V. KAMALAKSHI FINANCE CORPORATION LTD. 55 ELT 433 (SC) , ACIT V BENGAL TIGER LINE (INDIA) PVT. LTD. IN ITA NO. 2517/MDS/2006, ACIT V. SRI VIGNESH YARNS PVT. LTD. IN ITA NO. 2232/MDS/2008, CIT V. HINDUSTAN TEXTILES [2 010] 36 DTR (SC) 131, CIT V. SUGAVANEESHWARA SPG MILLS LTD. [2009] 227 CTR (S C) 439, AND CIT V. BHOJARAJ TEXTILE MILLS LTD. 2010-TIOL-22-SC-IT-LB. FURTHER RELIANCE WAS PLACED ON PRASHANT S JOSHI & OTHERS V. ITO & OTHERS 2010-T IOL-146-HC-MUM-IT, IN THE CASE OF CIT V. SRI KARTHIKEYA SPINNING & WEAVIN G MILLS LTD. 265 ITR 285 ITA ITAITA ITA NO. NO. NO. NO.337 337337 337/MDS/ /MDS/ /MDS/ /MDS/1 11 10 00 0 4 (MAD) AND ITAT DECISION IN ITA NOS. 1427 TO 1429/MD S/2002 DATED 28.02.2003, IT WAS PLEADED FOR HOLDING THE INITIATION OF REASSE SSMENT PROCEEDINGS BY RESORTING TO PROVISIONS OF SECTION 147 TO BE BAD IN LAW. IT W AS ALSO SUBMITTED THAT WHILE MAKING REFERENCE TO NOTICE UNDER SECTION 148 TO PLE AD THAT FIRSTLY, THE ASSESSING OFFICER HAS NOT RECORDED ITS BELIEF THAT INCOME HAS ESCAPED ASSESSMENT AND SECONDLY, ALL MATERIAL FACTS AND DETAILS WERE ALREA DY FILED WITH THE ASSESSING OFFICER ALONG WITH THE RETURN OF INCOME, SO ALREADY COMPLETED PROCEEDINGS SHOULD NOT BE REOPENED. IT WAS THUS, PLEADED FOR QUASHING THE ORDER OF THE ASSESSING OFFICER FOR INITIATING THE REASSESSMENT PROCEEDINGS . 5. THE LD. DR STRONGLY OPPOSED THE MOVE OF THE ASS ESSEES COUNSEL AND PLEADED THAT THE YEAR INVOLVED IS 2004-05 AND REASS ESSMENT PROCEEDINGS HAVE BEEN INITIATED VIDE NOTICE DATED 21.02.2008 SERVED ON THE ASSESSEE ON 29.02.2008, WHICH PERIOD IS WITHIN 4 YEARS FROM THE END OF THE ASSESSMENT YEAR INVOLVED AND SINCE PROCESSING U/S 143(1) CANNOT BE TREATED AS ASSESSMENT, THEREFORE, THE PLEA OF THE ASSESSEE THAT IT IS CHAN GE OF OPINION IS NOT SUSTAINABLE AT ALL BECAUSE, THERE WAS NO ASSESSMENT UNDER SECTI ON 143(3) HAVING BEEN MADE BY THE ASSESSING OFFICER IN THIS CASE BEFORE I NITIATING ACTION U/S 147. SO, HOW COULD HE FRAME THE OPINION, WHICH COULD BE SAID TO BE CHANGE OF OPINION WHEN ASSESSMENT WAS REOPENED BY INITIATING PROCEEDI NGS UNDER SECTION 147 AND HE PLACED RELIANCE ON THE HONBLE SUPREME COURTS D ECISION IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS (P) LTD. 291 ITR 5 00 (SC) AND FURTHER SUBMITTED THAT SUCH DECISION IS BEING FOLLOWED BY T HE HONBLE MADRAS HIGH COURT AND OTHER BENCHES OF THE TRIBUNAL IN CHENNAI. THERE FORE, THE PLEA OF THE ITA ITAITA ITA NO. NO. NO. NO.337 337337 337/MDS/ /MDS/ /MDS/ /MDS/1 11 10 00 0 5 ASSESSEE IN THIS CASE IS NOT LEGALLY CORRECT, WHICH SHOULD BE DISMISSED AND INITIATION OF THE ASSESSMENT MAY BE HELD TO BE VALI D. 6. THE LD. COUNSEL FOR THE ASSESSEE, IN ORDER TO C OUNTER THE SUBMISSION OF THE LD. DR, HAS SUBMITTED THAT IN THIS CASE, THE RA TIO OF THE DECISION IN THE CASE OF ACIT V. RAJESH JHAVERI STOCK BROKERS (P) LTD. (SUPR A) IS NOT APPLICABLE AND MOREOVER THERE IS A HONBLE BOMBAY HIGH COURTS DEC ISION AND CHENNAI TRIBUNAL DECISIONS WHICH ARE IN SUPPORT OF THE PLEA OF THE A SSESSEE, THEREFORE, IT WAS PLEADED FOR QUASHMENT OF THE ORDER OF THE ASSESSMEN T. 7. WE HAVE HEARD BOTH THE SIDES, CONSIDERED THE MA TERIAL ON RECORD AND RELEVANT PROVISIONS OF LAW AS WELL AS PRECEDENTS RE LIED UPON BY RIVAL SIDES. IT IS UNDISPUTED FACT THAT NOTICE UNDER SECTION 148 WAS I SSUED TO THE ASSESSEE ON 21.02.2008 AND SERVED UPON THE ASSESSEE ON 29.02.20 08 AND AT THE SECOND PAGE OF THE SAID NOTICE FOLLOWING STIPULATION IS TH ERE: REASONS: DEDUCTION OF RS.47,32,587/- CLAIMED ON AC COUNT OF REPLACEMENTS OF COSTS OF MACHINERY IS TO BE DISALLO WED AS THE SAME IS NOT AN ELIGIBLE DEDUCTION. 7.1 IT IS ALSO AN UNDISPUTED FACT THAT RETURN IN TH IS CASE HAS BEEN PROCESSED BY THE ASSESSING OFFICER UNDER SECTION 143(1) ON 06.07 .2005, WHEN THE SAME CAME TO BE FILED ON 01.11.2004, ADMITTING LOSS OF RS.17, 38,842/- UNDER NORMAL PROVISIONS OF ACT AND BOOK PROFIT OF RS.21,10,469/- UNDER SECTION 115JB OF THE ACT. 7.2 IT IS FOUND FROM THE RECORD THAT AFTER PROCESSI NG OF THE RETURN NO ASSESSMENT ORDER U/S 143(3) WAS EVER PASSED TILL N OTICE UNDER SECTION 148 WAS ISSUED/SERVED UPON THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. IT IS ALSO NOT IN THE DISPUTE THAT THE A.O. RECORDED REASONS BEFOR E ISSUING THE NOTICE U/S148. ITA ITAITA ITA NO. NO. NO. NO.337 337337 337/MDS/ /MDS/ /MDS/ /MDS/1 11 10 00 0 6 THE HONBLE SUPREME COURT, WHILE INTERPRETING THE P ROVISIONS OF SECTION 147 IN FORCE WITH EFFECT FROM APRIL 1, 1989, HAS OPINED IN THE CASE OF RAJESH JHAVERI STOCK BROKERS P. LTD.(SUPRA) THAT PRESENT SECTION 1 47 CONFERS JURISDICTION ON FORMATION OF BELIEF WITHIN SUBJECTIVE SATISFACTION OF THE ASSESSING OFFICER WHERE ONLY RETURN HAS BEEN PROCESSED UNDER SECTION 143(1) AND RELEVANT PORTION OF THE JUDGMENT READS AS UNDER: THE SCOPE AND EFFECT OF SECTION 147 AS SUBSTITUTED WITH EFFECT FROM APRIL1, 1989 AS ALSO SECTIONS 148 AND 152 ARE SUBSTANTIALLY DIFFERENT FROM THE PROVISIONS AS THEY STOOD PRIOR T O SUCH SUBSTITUTION. UNDER THE OLD PROVISIONS OF SECTION 147, SEPARATE C LAUSE (A) AND (B) LAID DOWN THE CIRCUMSTANCES UNDER WHICH INCOME ESCA PING ASSESSMENT FOR THE PAST ASSESSMENT YEARS COULD BE A SSESSED OR REASSESSED. TO CONFER JURISDICTION UNDER SECTION 14 7(A) TWO CONDITIONS WERE REQUIRED TO BE SATISFIED: FIRSTLY T HE ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME, PROFITS OR GAINS CHARGEABLE TO INCOME TAX HAVE ESCAPED ASSESSMENT, AND SECONDLY HE MUST ALSO HAVE REASON TO BELIEVE THAT SUCH ESCAPEMENT HAS OCC URRED BY REASON OF EITHER OMISSION OR FAILURE ON THE PART OF THE AS SESSEE TO DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT OF THAT YEAR. BOTH THESE CONDITIONS WERE CONDITIONS PRECEDE NT TO BE SATISFIED BEFORE THE ASSESSING OFFICER COULD HAVE JURISDICTIO N TO ISSUE NOTICE UNDER SECTION 148 READ WITH SECTION 147(A). BUT UND ER THE SUBSTITUTED SECTION 147 EXISTENCE OF ONLY THE FIRST CONDITION SUFFICES. IN OTHER WORDS IF THE ASSESSING OFFICER FOR WHATEVE R REASON HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMEN T IT CONFERS JURISDICTION TO REOPEN THE ASSESSMENT. IT IS, HOWEV ER, TO BE NOTED THAT BOTH THE CONDITIONS MUST BE FULFILLED IF THE CASE F AILS WITHIN THE AMBIT OF THE PROVISO TO SECTION 147. THE CASE AT HAND IS COVERED BY THE MAIN PROVISION AND NOT THE PROVISO. SO LONG AS THE INGREDIENTS OF SECTION 147 ARE FULFI LLED, THE ASSESSING OFFICER IS FREE TO INITIATE PROCEEDING UN DER SECTION 147 AND FAILURE TO TAKE STEPS UNDER SECTION 143(3) WILL NOT RENDER THE ASSESSING OFFICER POWERLESS TO INITIATE REASSESSMEN T PROCEEDINGS EVEN WHEN INTIMATION UNDER SECTION 143(1) HAD BEEN ISSUED. THE INEVITABLE CONCLUSION IS THAT THE HIGH COURT HA S WRONGLY APPLIED ADANIS CASE [1999] 240 ITR 224 (GUJ) WHICH HAS NO ITA ITAITA ITA NO. NO. NO. NO.337 337337 337/MDS/ /MDS/ /MDS/ /MDS/1 11 10 00 0 7 APPLICATION TO THE CASE ON THE FACTS IN VIEW OF THE CONCEPTUAL DIFFERENCE BETWEEN SECTION 143(1) AND SECTION 143(3 ) OF THE ACT. 7.3 IN THE CASE OF CIT V. RAVINDRAN PRABHAKAR REPOR TED IN (2010) 326 ITR 363(MAD) DECIDED ON 11-01-2010, WHILE FOLLOWING HON BLE SUPREME COURT DECISION IN THE CASE OF ACIT V. RAJESH JHAVERI STOC K BROKERS P. LTD. (SUPRA) HAS TAKEN SIMILAR VIEW AND HEAD NOTES ARE AS UNDER: REASSESSMENT ORIGINAL RETURN ACCEPTED UNDER SEC TION 143(1) CONSIDERATION OF MATERIAL FILED IN RESPONSE TO NOTI CES UNDER SECTIONS 143(2) AND 142(1) IN REASSESSMENT PROCEEDINGS NOT A CASE OF CHANGE OF OPINION REASSESSMENT PROCEEDINGS CANNOT BE SET AS IDE INCOME-TAX ACT, 1961, SS. 142, 143, 147, 148. . IN THE ABSENCE OF ANY ENTITLEMENT FOR THE ASSE SSING OFFICER TO FORM ANY OPINION AT THE STAGE WHEN THE PROCEEDINGS WERE PEND ING UNDER SECTION 143(1), THE TRIBUNAL IS NOT RIGHT IN HOLDING THAT THERE WAS A C HANGE OF OPINION. TO SUPPORT THE ABOVE, WE MAY REFER TO THE FOLLOWING FINDING OF THE APEX COURT IN ASST. CIT V. RAJESH JHAVERI STOCK BROKERS P. LTD. REPORTED IN [2 007] 291 ITR 500 (SC)(PAGE 509): IN THE SCHEME OF THINGS, AS NOTED ABOVE, THE INTI MATION UNDER SECTION 143(1)(A) CANNOT BE TREATED TO BE AN ORDER OF ASSESSMENT. THE DISTINCTION IS ALSO WELL BROUGHT OUT BY THE STATUTO RY PROVISIONS AS THEY STOOD AT DIFFERENT POINTS OF TIME. UNDER SECTION 14 3(1)(A), AS IT STOOD PRIOR TO APRIL 1, 1989, THE ASSESSING OFFICER HAD TO PASS AN ASSESSMENT ORDER IF HE DECIDED TO ACCEPT THE RETURN, BUT UNDER THE AMEN DED PROVISION, THE REQUIREMENT OF PASSING OF AN ASSESSMENT ORDER HAS B EEN DISPENSED WITH AND INSTEAD AN INTIMATION IS REQUIRED TO BE SENT. V ARIOUS CIRCULARS SENT BY THE CENTRAL BOARD OF DIRECT TAXES SPELL OUT THE INT ENT OF THE LEGISLATURE, I.E., TO MINIMIZE THE DEPARTMENTAL WORK TO SCRUTIN IZE EACH AND EVERY RETURN AND TO CONCENTRATE ON SELECTIVE SCRUTINY OF RETURNS, THESE ASPECTS WERE HIGHLIGHTED BY ONE OF US (D.K. JAIN J.) IN APO GEE INTERNATIONAL LTD. UNION OF INDIA [1996] 220 ITR 248 (DELHI)). IT MAY BE NOTED ABOVE THAT UNDER THE FIRST PROVISO TO THE NEWLY SUBSTITUTED SE CTION 143(1), WITH EFFECT FROM JUNE 1, 1999, EXCEPT AS PROVIDED IN THE PROVIS ION ITSELF, THE ACKNOWLEDGEMENT OF THE RETURN SHALL BE DEEMED TO BE AN INTIMATION UNDER SECTION 143(1) WHERE (A) EITHER NO SUM IS PAYABLE B Y THE ASSESSEE, OR (B) NO REFUND IS DUE TO HIM. IT IS SIGNIFICANT THAT THE ACKNOWLEDGEMENT IS NOT DONE BY ANY ASSESSING OFFICER, BUT MOSTLY BY MINIST ERIAL STAFF. CAN IT BE SAID THAT ANY ASSESSMENT IS DONE BY THEM? THE REP LY IS AN EMPHATIC NO. THE INTIMATION UNDER SECTION 143(1)(A) WAS DEEMED T O BE A NOTICE OF DEMAND UNDER SECTION 156, FOR THE APPARENT PURPOSE OF MAKING MACHINERY PROVISIONS RELATING TO RECOVERY OF TAX APPLICABLE. BY SUCH APPLICATION ONLY RECOVERY INDICATED TO BE PAYABLE IN THE INTIMATION BECAME PERMISSIBLE. AND NOTHING MORE CAN BE INFERRED FROM THE DEEMING P ROVISION. THEREFORE, ITA ITAITA ITA NO. NO. NO. NO.337 337337 337/MDS/ /MDS/ /MDS/ /MDS/1 11 10 00 0 8 THERE BEING NO ASSESSMENT UNDER SECTION 143(1)(A), THE QUESTION OF CHANGE OF OPINION, AS CONTENDED, DOES NOT ARISE. IN VIEW OF THE ABOVE, THE ORDERS OF THE TRIBUNAL SE TTING ASIDE THE ORDERS OF REASSESSMENT PASSED BY THE ASSESSING OFFICER ONLY O N THE GROUND THAT THERE WAS A CHANGE OF OPINION CANNOT BE SUSTAINED. ACCORDINGLY, THE ORDERS QUESTIONED IN ALL THESE APPEALS ARE SET ASIDE. AS THERE WAS NO CONSID ERATION ON THE MERITS AND AS ALREADY POINTED OUT, ALL THE APPEALS ARE DISPOSED O F ONLY ON THE GROUND OF CHANGE OF OPINION, WE WILL HAVE TO NECESSARILY REMIT THE M ATTER TO THE TRIBUNAL FOR FRESH CONSIDERATION ON THE MERITS OF THE CASE AND WITHOUT REFERENCE TO THE ISSUE OF CHANGE OF OPINION. ACCORDINGLY, ALL THE APPEALS ARE ALLOWED, THE SUBSTANTIAL QUESTIONS OF LAW ARE ANSWERED IN FAVOUR OF THE REVE NUE AND AGAINST THE ASSESSEE. NO COSTS. 7.4 THE ITAT CHENNAI B BENCH SPECIAL BENCH IN T HE CASE OF ACIT/DCIT V. MAHINDRA HOLIDAYS AND RESORTS (INDIA) LTD. & OTHERS [2010] 3 ITR (TRIB) 600 (CHENNAI)[SB] HAS HELD AS UNDER: HELD, (I) THAT SINCE ADMITTEDLY THE ASSESSMENTS FO R THE ASSESSMENT YEARS 1999-2000 TO 2001-02 WERE COMPLETED UNDER SECTION 1 43(1) IT COULD NOT BE SAID THAT A DEFINITE OPINION HAD BEEN EXPRESSED BY THE A SSESSING OFFICER. AS A MATTER OF FACT, CONSIDERING THE WIDE SCOPE GIVEN IN EXPLANATI ON 2 TO SECTION 147, THE ASSESSING OFFICER COULD BE SAID TO BE OF THE VIEW T HAT INCOME CHARGEABLE TO TAX HAD BEEN UNDER-ASSESSED. THE TANGIBLE MATERIAL AVAI LABLE WITH THE ASSESSING OFFICER WAS THAT THE ASSESSEE HAD RECEIVED CERTAIN SUBSCRIPTION FROM CUSTOMERS ONLY A PORTION OF WHICH HAD BEEN DECLARED AS INCOME . THEREFORE, IT COULD BE SAID THAT THE ASSESSING OFFICER HAD REASON TO BELIEVE AB OUT THE ESCAPEMENT OF INCOME. THE FACT THAT THE MATERIAL WAS AVAILABLE IN AN EARL IER ASSESSMENT YEAR 1997-98, ON THE BASIS OF WHICH A VIEW HAD BEEN TAKEN, WAS NOT R ELEVANT FOR THE YEARS IN QUESTION. THEREFORE, THE REOPENING OF THE ASSESSMEN TS FOR THE ASSESSMENT YEARS 1999-2000 TO 2001-02 WAS VALID. 7.5 SIMILARLY IN THE CASE OF WCI (MADRAS) (P) LTD. V. ACIT (2010) 324ITR181 (MAD) IT IS HELD AS UNDER ASSESSMENT INTIMATION UNDER SECTION 143(1) CA NNOT BE TREATED AS ASSESSMENT ORDER INCOME-TAX ACT, 1961, S. 143( 1). REASSESSMENT NON-DISCLOSURE OF MATERIAL FACTS FINDING THAT INCOME ESCAPED ASSESSMENT PLEA OF LIMITATION OF F OUR YEARS TO BE REJECTED INCOME-TAX ACT, 1961. 7.6 THEREFORE, IN VIEW OF THE RATIO OF AFORESAID DECISIONS, OF THE HONBLE APEX AND THAT OF JURISDICTIONAL HIGH COURT AS WELL AS OF CHENNAI SPECIAL BENCH, AND IN ITA ITAITA ITA NO. NO. NO. NO.337 337337 337/MDS/ /MDS/ /MDS/ /MDS/1 11 10 00 0 9 VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, IT CAN BE HELD THAT IN THE ABSENCE OF ASSESSMENT HAVING BEEN MADE IN THIS CASE EARLIER, THE ASSESSING OFFICER CAME TO SUBJECTIVE SATISFACTION, AS INDICA TED IN THE REASONS RECORDED FOLLOWED BY NOTICE UNDER SECTION 148,SO, THE CONTEN TION OF THE ASSESSEE ABOUT ASSESSING OFFICER HAVING NO JURISDICTION TO CONSIDE R THE MATTER OR TO INITIATE REASSESSMENT PROCEEDINGS, ONCE THE PROCEEDINGS ARE CONCLUDED, IS NOT VALID. AS LAID DOWN BY THE HONBLE SUPREME COURT, THE CONDITI ON PRECEDENT IS THAT THE ASSESSING OFFICER HAS TO COME TO THE CONCLUSION THA T TAXABLE AMOUNT HAS ESCAPED ASSESSMENT. IN OTHER WORDS, IF THE ASSESSIN G OFFICER HAS REASONS TO BELIEVE THAT CERTAIN INCOME ASSESSABLE TO TAX HAS E SCAPED ASSESSMENT, IT CONFERS JURISDICTION TO INITIATE THE ASSESSMENT PRO CEEDINGS AND SINCE THE CASE OF THE ASSESSEE DOES NOT FALL WITHIN THE AMBIT OF PROV ISO TO SECTION 147, THEREFORE, IT CANNOT BE SAID THAT THE CONTENTION OF THE LD. COUNS EL FOR THE ASSESSEE THAT THE ASSESSING OFFICER HAS NO JURISDICTION TO REOPEN THE ASSESSMENT IS JUSTIFIED OR PROPER. AS THE ASSESSEE HAS CLAIMED CERTAIN EXPENDITURE AS A REVENUE DEDUCTION ON ACCOUNT OF REPLACEMENTS OF COSTS OF MACHINERY, W HICH IS NOT ELIGIBLE DEDUCTION UNDER RELEVANT PROVISIONS, THEREFORE, THE ASSESSING OFFICER HAS RIGHTLY PROCEEDED TO REOPEN THE ASSESSMENT AND HIS ACTION BEING LEGAL LY AND FACTUALLY CORRECT IS LIABLE TO BE UPHELD. 7.7 SO FAR AS THE DECISION IN THE CASE OF CIT V. ( 1) KELVINATOR OF INDIA LTD. & (2) EICHER LTD. [2010] 320 ITR 561 (SC), HEAVILY RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE, IS CONCERNED, IT IS FOUND THAT IT REL ATES TO TWO APPEALS BEFORE THE HONBLE SUPREME COURT AND THE FIRST CASE IS THAT OF CIT V. KELVINATOR OF INDIA LTD. (C.A NOS. 2009-2011 OF 2003), WHICH HAS ARISEN FROM THE FULL BENCH JUDGMENT OF ITA ITAITA ITA NO. NO. NO. NO.337 337337 337/MDS/ /MDS/ /MDS/ /MDS/1 11 10 00 0 10 HONBLE DELHI HIGH COURT AS REPORTED IN 256 ITR 1 ( DELHI [FB] AND IF THAT JUDGMENT IS LOOKED INTO, IT MAKES IT CLEAR THAT WHE N A REGULAR ORDER OF ASSESSMENT IS PASSED IN TERMS OF THE SUB-SECTION (3) OF SECTIO N 143 A PRESUMPTION CAN BE RAISED THAT SUCH AN ORDER HAS BEEN PASSED ON APPLIC ATION OF MIND AND THE ASSESSMENT YEAR INVOLVED IN THAT CASE IS 1987-88 AN D ORDER OF ASSESSMENT UNDER SECTION 143(3) CAME TO BE PASSED ON 12.11.1989 AND SUBSEQUENTLY NOTICE UNDER SECTION 148 CAME TO BE ISSUED. WHEREAS, IN THE SECO ND CASE IS THAT OF CIT V. EICHER LTD. THE CIVIL APPEAL NOS. 2520 OF 2008 TOO, WHICH IS FROM THE JUDGMENT AND ORDER DATED 22.05.2007 OF THE DELHI HIGH COURT IN I.T.A. NO. 309 OF 2006 AS REPORTED IN CIT V. EICHER LTD. [2007] 294 ITR 310 ( DELHI) WHERE ASSESSMENT YEAR INVOLVED WAS 1993-94, ASSESSMENT WAS EARLIER COMPLE TED UNDER SECTION 143(3) AND SUBSEQUENTLY NOTICE UNDER SECTION 148 CAME TO B E ISSUED. SO, THE DECISION OF HONBLE SUPREME COURT IS DISTINGUISHABLE ON FACT S AND MATERIAL AS CONSIDERED AND DECIDED IN AS MUCH AS THESE CASES DO NOT INVOLV E REASSESSMENT AFTER PROCESSING IS DONE UNDER SECTION 143(1), WHICH IS H ELD TO BE NOT ASSESSMENT AS PER HONBLE SUPREME COURTS DECISION IN THE CASE OF RAJESH JHAVERI STOCK BROKERS P. LTD. (SUPRA). SO THIS DECISION AND OTHER RELATED DECISION, WHICH FOLLOWED THIS DECISION HAS NO APPLICATION IN THIS C ASE. 7.8. THEREFORE, KEEPING IN VIEW OF FACTS, CIRCUMSTA NCES AND MATERIAL ON RECORD IN THE LIGHT OF PRECEDENTS RELIED UPON AND RATIO OF DECISION DISCUSSED ABOVE, IT IS HELD THAT THE ASSESSING OFFICER COULD VALIDLY INITI ATE REASSESSMENT PROCEEDINGS BY INVOKING PROVISIONS OF SECTION 147. THE VIEW TAK EN HEREIN IS FORTIFIED BY THE LATEST JURISDICTIONAL HIGH COURT DECISION IN THE CA SE OF M/S. KONE ELEVATOR INDIA PVT. LTD. V. ITO IN TC(A) NO. 41 OF 2008 DATED 08.0 3.2011, IN WHICH, WHILE ITA ITAITA ITA NO. NO. NO. NO.337 337337 337/MDS/ /MDS/ /MDS/ /MDS/1 11 10 00 0 11 FOLLOWING THE HONBLE SUPREME COURTS DECISION IN T HE CASE OF RAJESH JHAVERI STOCK BROKERS P. LTD. (SUPRA), IT HAS BEEN CLEARLY HELD THAT REASSESSMENT COULD BE INITIATED, WHERE RETURN HAS BEEN PROCESSED UNDER SECTION 143(1) AND THE ASSESSING OFFICER HAS REASONS TO BELIEVE THAT INCOM E HAS ESCAPED ASSESSMENT. 7.9 SINCE IT IS A FIT CASE WHERE REASSESSMENT PRO CEEDINGS COULD BE VALIDLY INITIATED, SO, THE ACTION OF ASSESSING OFFICER IN I NITIATING SUCH PROCEEDINGS AND MAKING ASSESSMENT U/S 143(3) READ WITH SEC 147 IS F OUND AND HELD TO BE PROPER AND JUSTIFIED. AS SUCH, THE PLEA OF THE ASSESSEE I N THIS REGARD AS RAISED IN THE ADDITIONAL GROUNDS, WHICH IS FOUND TO BE UNTENABLE, IS REJECTED AND ADDITIONAL GROUNDS ARE THUS DISMISSED. 8. SO FAR AS THE CASE ON MERIT IS CONCERNED, THE L D. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IN RELATION TO REPLACEMENT OF MACHINERY IS SQUARELY COVERED AS HAS BEEN DEALT WITH BY THE HONBLE SUPRE ME COURT IN VARIOUS DECISION AND LATEST DECISION ON THIS POINT COMES FR OM THE DECISION OF HONBLE SUPREME COURT BY THREE JUDGES BENCH IN THE CASE OF CIT V. M/S. NARASIMHA MILLS LTD. IN C.A. NO. 4893 OF 2010 DATED 05.07.201 0 IN WHICH THE EARLIER DECISIONS IN THE CASE OF CIT V. SARAVANA SPINNING M ILLS (P) LTD. [2007] 211 CTR (SC) 281 AND CIT VS. RAMARAJU SURGICAL COTTON MILLS 294 ITR 328, HAVE BEEN FOLLOWED, WHEREIN DIRECTION HAS BEEN GIVEN THAT MAT TER SHOULD GO BACK TO THE LD. CIT(A) FOR CONSIDERING AVAILABILITY OF DEDUCTION UN DER SECTION 37(1), THUS, IT WAS PLEADED THAT THE MATTER SHOULD GO BACK TO THE LD. C IT(A) IN CASE APPEAL OF THE ASSESSEE ON LEGAL GROUND IS NOT TO BE ACCEPTED WITH THE DIRECTION TO FOLLOW THE HONBLE SUPREME COURTS DECISIONS TAKEN IN THIS REG ARD AND TO THIS MOVE OF THE LD. COUNSEL FOR THE ASSESSEE, THE LD. DR DID NOT OB JECT AND RATHER CONCEDED THAT ITA ITAITA ITA NO. NO. NO. NO.337 337337 337/MDS/ /MDS/ /MDS/ /MDS/1 11 10 00 0 12 THE MATTER CAN GO BACK TO THE FILE OF THE LD. CIT(A ) FOR RE-CONSIDERATION AS PER THE DIRECTIONS OF THE HONBLE SUPREME COURT. 9. CONSIDERING THE ENTIRETY OF FACTS, CIRCUMSTANCES AND MATERIAL ON RECORD ON MERITS OF ADDITION MADE BY THE ASSESSING OFFICER AN D CONFIRMED BY THE LD. CIT(A), WE FIND THAT THE HONBLE SUPREME COURT IN THE CASE OF CIT V. M/S. NARASIMHA MILLS LTD. (SUPRA) HAS PASSED FOLLOWING JUDGMENT AS UNDER: THE APPEAL ABOVE-MENTIONED BEING CALLED ON FOR HEA RING BEFORE THIS COURT ON THE 5 TH DAY OF JULY, 2010, UPON PERUSING THE RECORD AND HE ARING COUNSEL FOR THE PARTIES HEREIN, THIS COURT DOTH, IN TER-ALIA, PASS THE FOLLOWING ORDER: THIS MATTER IS SQUARELY COVERED BY THE JUDGMENTS O F THIS COURT IN THE CASES OF COMMISSIONER OF INCOME TAX VS. SARAVAN A SPINNING MILLS PRIVATE LIMITED, REPORTED IN [2007] 293 I.T.R. 201 AND COMMISSIONER OF INCOME TAX VS. RAMARAJU SURGICAL COTTON MILLS REPOR TED IN [2007]294 ITR 328. ACCORDINGLY, THE CIVIL APPEAL FILED BY THE DEPARTM ENT IS DISPOSED OF IN TERMS OF THE JUDGEMENTS OF THIS COURT IN SARAVAN A SPINNING MILLS PRIVATE LIMITED [SUPRA] AND RAMARAJU SURGICAL COTTO N MILLS [SUPRA] WITH NO ORDER AS TO COSTS. AND THIS COURT DOTH FURTHER ORDER THAT THIS ORDER B E PUNCTUALLY OBSERVED AND CARRIED INTO EXECUTION BY ALL CONCERNE D. 9.1 IN THE CASE OF CIT V. RAMARAJU SURGICAL COTTON MILLS (SUPRA), THE HEAD- NOTES, ETC. ARE AS UNDER: CAPITAL OR REVENUE EXPENDITURE REPLACEMENT OF A SSETS WITHOUT INCREASE IN PRODUCTION CAPACITY WHETHER AMOUNTS T O REVENUE EXPENDITURE ABSENCE OF DETAILS OLD MACHINE REPL ACED BY NEW MACHINE WHETHER CONSTITUTES ADVANTAGE OF AN ENDURING NATU RE SUPREME COURT MATTERS REMANDED TO COMMISSIONER (APPEALS) INCOME -TAX ACT, 1961, S. 37. FROM THE DECISION OF THE HIGH COURT IN CIT V. JANA KIRAM MILLS LTD. [2005] 275 ITR 403 APPEALS WERE TAKEN TO THE SUPREM E COURT AND IT WAS CONTENDED BY THE ASSESSEE THAT REPLACEMENT OF ASSET S WITHOUT INCREASING THE PRODUCTION CAPACITY WOULD AMOUNT TO REVENUE EXPENDI TURE AND BY THE DEPARTMENT THAT EXPENDITURE FOR REPLACING AN OLD MACHINE BY A NEW MACHINE CONSTITUTED AN ADVANTAGE OF AN ENDURING NATURE AND WOULD BE CAPITA L IN NATURE. WITHOUT EXPRESSING ANY OPINION ON THE MERITS, THE SUPREME C OURT REMANDED THE MATTERS TO ITA ITAITA ITA NO. NO. NO. NO.337 337337 337/MDS/ /MDS/ /MDS/ /MDS/1 11 10 00 0 13 THE COMMISSIONER (APPEALS) TO DECIDE THEM UNINFLUEN CED BY THE DECISION OF THE MADRAS HIGH COURT. DECISION OF THE MADRAS HIGH COURT IN CIT V. JANAKI RAM MILLS LTD. [2005] 275 ITR 403 SET ASIDE AND MATTER REMANDED. 10. FOLLOWING THE ABOVE FINDING IN THE AUTHORITATI VE DECISIONS OF THE HONBLE SUPREME COURT, WE SET ASIDE THE ORDER OF THE LD. CI T(A) AND RESTORE THE MATTER BACK ON HIS FILE WITH THE DIRECTION TO RE-DECIDE TH E ISSUE ON MERITS RAISED IN THE ORIGINAL GROUNDS AFRESH AFTER GIVING DUE OPPORTUNIT Y TO THE ASSESSEE AS WELL AS TO THE ASSESSING OFFICER IN THE LIGHT OF HONBLE SUPRE ME COURTS DECISION. WE HOLD AND DIRECT ACCORDINGLY. 11. AS A RESULT, APPEAL OF THE ASSESSEE GETS PARTL Y ACCEPTED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 22.07.2011. SD/- SD/- (N.S. SAINI) ACCOUNTANT MEMBER (U.B.S. BEDI) JUDICIAL MEMBER VM/- DATED : 22.07.2011. COPY TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.