WELSPUN INDIA LTD, MUMBAI V. DCIT 7(3), MUMBAI

ITA 3374/MUM/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93054 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 30-06-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 30-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K SRIVASTAVA
• Assessee Lawyers: F V IRANI SHRI MITESH SHA H
• Keywords: Depreciation
• Section: 143(3); 142(1); 153A; 263; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI . . , , BEFORE SHRI A.D. JAIN , JUDICIAL MEMBER AND SHRI N.K . BILLAIYA, A CCOUNTANT M EMBER / I .T.A. NO S . 3374/MUM/2010 ( / ASSESSMENT YEAR : 200 5 - 0 6 M/S. WELSPUN INDIA LTD. TRADE WORLD B WING, 9 TH FLOOR, KAMALA MILLS COMPOUND, SENAPATI BAPAT MARG, LOWER PAREL, MUMBAI - 400 013 / VS. THE CIT - 7, AAYAKAR BHAVAN, MUMBAI - 400 020 / I .T.A. NO S . 337 5 /MUM/2010 ( / ASSESSMENT YEAR : 2005 - 06 M/S. WELSPUN GUJARAT STAHL ROHREN LTD., TRADE WORLD , KAMALA MILLS COMPOUND,LOWERPAREL, MUMBAI - 400 013 / VS. THE CIT - 7, AAYAKAR BHAVAN, MUMBAI - 400 020 ./ ./ PAN/GIR NO. : AAACW 0744L ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI F.V. IRANI SHRI MITESH SHAH / RESPONDENT BY : SHRI A.K. SRIVASTAVA / DATE OF HEARING : 30 . 0 6 .2015 / DATE OF PRONOUNCEMENT : 03 .0 7 .2015 / O R D E R PER N.K. BILLAIYA, AM: TH ESE TWO APPEALS ARE BY TWO DIFFERENT A SSESSEE PREFERRED AGAINST TWO DIFFERENT ORDERS OF THE LD. CIT - 7, MUMBAI DT. 24.3.2010 AND 30.3.2010 PERTAINING TO ASSESSMENT YEAR 200 5 - 0 6 . BOTH PARTIES AGREED ITA. NO S . 3374 & 3375/M/10 2 THAT THE ISSUES INVOLVED IN THESE TWO APPEALS ARE IDENTICAL AND REQUIRED NO SEPARATE ADJUDICATION, THEREFORE BOTH THESE APPEALS WERE HEARD TOGETHER AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. IT WAS AGREED THAT APPEAL OF THE ASSESSEE IN ITA NO. 3375/M/10 SHALL BE CONSIDERED. 2. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE ASSESSEE IS THAT THE CIT ERRED IN HOLDING THAT THE ASSESSMENT ORDER MADE U/S. 143(3) IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 2.1. THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE CONTENTIOUS ISSUES IN THIS APPEAL RELATE TO (1) PRE - OPERATIVE EXPENSES AND DEPRECIATION ALLOWABLE ON F IXED ASSET (2) PRE - OPERATIVE EXPENSES ALLEGED TO BE CLAIMED BY THE ASSESSEE AND (3) SET OFF OF BROUGHT FORWARD BUSINESS LOSS. 2.2. THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY SUBMITTED THAT THE ISSUES INVOLVED AND CONSIDERED BY THE CIT IN PROCEEDINGS U/ S. 263 OF THE ACT WERE WELL EXAMINED BY THE AO DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS ITSELF THEREFORE THERE IS NO REASON WHY PROCEEDINGS U/S. 263 TO BE UPHELD AS THE ASSESSMENT ORDER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REV ENUE. THE LD. COUNSEL DREW OUR ATTENTION TO THE SHOW CAUSE NOTICE ISSUED BY THE CIT U/S. 263 OF THE ACT. IT IS THE SAY OF THE LD. COUNSEL THAT THE REASONS GIVEN BY THE CIT FOR ISSUING THE NOTICE ARE IN VARIANCE TO THE FINDINGS OF THE CIT GIVEN IN HIS ORD ER. THEREFORE, THE ORDER PASSED BY THE LD. CIT IS NOT AS PER THE PROVISIONS OF THE LAW. IN SUPPORT OF HIS CONTENTION, RELIANCE WAS PLACED ON THE DECISION OF THE TRIBUNAL ALLAHABAD BENCH IN THE CASE OF SHARMA ENGINEERING CO. VS ITO IN ITA NO. 523/ALLD/85 . THE LD. COUNSEL ALSO DREW OUR ATTENTION TO THE NOTICE ISSUED U/S. 142(1) OF THE ACT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS AND POINTED OUT THE RELEVANT QUERIES RAISED BY THE AO AND THE ITA. NO S . 3374 & 3375/M/10 3 REPLY FILED BY THE ASSESSEE IN RESPONSE TO THOSE QUERIES. IT IS THE SAY OF THE LD. COUNSEL THAT WHEN SPECIFIC QUERIES WERE RAISED FOR WHICH REPLIES WERE FILED, THE CIT CANNOT SAY THAT THE ISSUES WERE NEVER EXAMINED BY THE AO THEREBY MAKING THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVE NUE. 2.3. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUBMITTED THAT THE AO HAS ONLY FOLLOWED THE FINDINGS GIVEN IN EARLIER ASSESSMENT ORDERS THEREFORE THERE IS NO APPLICATION OF MIND BY THE OFFICER. ALL THE ADDITIONS /DISALLOWANCES MADE BY THE AO ARE IN LINE WITH THE FINDINGS GIVEN IN EARLIER YEAR S ASSESSMENT ORDERS. THEREFORE, THE ASSESSMENT ORDER IS DEVOID OF APPLICATION OF MIND. IN SUPPORT, THE LD. DR STRONGLY RELIED UPON THE DECISION S OF THE TRIBUNAL MUMBAI BENCH IN THE CASE S OF VIKRANT AUTO SUSPENSION 150 ITD 495, ARVEE INTERNATIONAL VS ACIT101 ITD 495, HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS SHIVANAND ELECTRONICS 209 ITR 63 AND HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS CIT 243 ITR 83. IT IS THE SAY OF THE LD. DR THAT THE AO HAS MADE THE ASSESSMENT BASED ON A STEREO TYPED QUERY LETTER MAKING THE ADDITIONS/DISALLOWANCES ONLY ON THE BASIS OF PREVIOUS ASSESSMENT ORDERS THEREFORE THE ASSESSMENT ORDER IS NOT ONLY ERRONEOUS BUT ALSO PREJUDICI AL TO THE INTEREST OF THE REVENUE AND THE CIT HAS RIGHTLY INVOKED POWERS VESTED UPON HIM BY THE PROVISIONS OF SEC. 263 OF THE ACT. 4. HEARD THE RIVAL PARTIES. WE HAVE CAREFULLY GIVEN A THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE LOWER AUTHORITIES. WE HAVE ALSO CAREFULLY CONSIDERED THE SHOW CAUSE NOTICE ISSUED BY THE CIT U/S. 263 OF THE ACT AND THE QUERY LETTER ISSUED BY THE AO U/S. 142(1) OF THE ACT. WE HAVE ALSO GONE THROUGH THE JUDICIAL DECISIONS RELIED UPON BY BOTH SIDES. ITA. NO S . 3374 & 3375/M/10 4 THE PECULIAR FACT OF THE PRESENT CASE IS THAT NO ASSESSMENT ORDER GIVING EFFECT TO THE DIRECTIONS OF THE CIT U/S. 263 OF THE ACT HAS BEEN MADE. THE ONLY ORDER WHICH HAS BEEN PASSED IS SUBSEQUENT TO THE SEARCH OPERATIONS CARRIED ON U/S. 132 OF THE ACT AND U/S. 153A OF THE ACT. TH E ORIGINAL ASSESSMENT ORDER IS DT. 30.8.2007 . AS PER THE QUERY LETTER OF THE AO VIDE QUERY NO. 30, THE AO HAS SOUGHT DETAILS FROM THE ASSESSEE IN RESPECT OF PRIOR YEAR EXPENSES AND TO EXPLAIN WHETHER DEDUCTION HAS BEEN CLAIMED IN RESPECT OF ANY EXPENSES RE LATING TO PRIOR YEARS AND IF SO BREAK - UP OF THE SAME AND JUSTIFICATION. AN IDENTICAL QUERY WAS RAISED BY CIT VIDE HIS SHOW CAUSE NOTICE DT. 24.10.2008 AT QUERY NO. 10. SINCE THE AO HAS ALREADY VERIFIED THESE EXPENSES, WE DO NOT FIND ANY REASON WHY THE LD . CIT SHOULD ALSO GO INTO THE SAME QUERY BY INVOKING POWERS U/S. 263 OF THE ACT. 4.1. VIDE QUERY NO. 24, THE LD. CIT HAS OBSERVED THAT THE ASSESSEE HAS BEEN ALLOWED SET OFF OF UNABSORBED BUSINESS LOSS AND DEPRECIATION OF RS. 29.60 CRORES. THE SET OFF TO THE LOSS FOR A.Y. 2003 - 04 HAVE BEEN ALLOWED TWICE , WHEREAS THE LD. CIT IN HIS ORDER MADE U/S. 263 ON PAGE - 2 , W HILE COMPUTING THE SET OF F GIVEN BY THE AO HAS SPECIFICALLY MENTIONED THAT THE AO HAS ALLOWED EN HANCED BROUGHT FORWARD LOSSES CONSEQUENT TO CIT (A) S ORDER. SINCE THE AO HAS ALLOWED SET OFF WHICH IS BASED ON THE ORDER OF THE LD. CIT(A), IT CANNOT BE SAID THAT THERE IS NO APPLICATION OF MIND ON THE PART OF THE AO. 4.2. IN SO FAR AS THE CLAIM OF PROFESSIONAL FEES IS CONCERNED, ACCORDING TO THE LD. CIT, THIS AMOUNT IS INADMISSIBLE U/S. 40A(IA) OF THE ACT. WE FIND THAT THIS AMOUNT HAS BEEN CAPITALIZED BY THE ASSESSEE AND HAS NOT ITA. NO S . 3374 & 3375/M/10 5 CLAIMED IT AS EXPENDITURE, THEREFORE, THERE IS NO QUESTION OF ADMISSIBILITY OR OTHERWISE U/S. 40A(IA) OF THE ACT. 4.3. WITH THESE FACTUAL MATRIX, THE FIRST THING WHICH HAS TO BE CONSIDERED IS WHETHER THE LEARNED COMMISSIONER HAS RIGHTLY ASSUMED THE POWER UNDER SECTION 263 OF THE ACT. THE HONBLE SUPREME COURT IN MALABAR INDUSTRIAL CO. LTD. 243 ITR 83 HAS LAID DOWN THE FOLLOWING RATIO: - A BARE READING OF SECTION 263 OF THE INCOME - TAX ACT, 1961, MAKES IT CLEAR THAT THE PREREQUISITE FOR THE EXERCISE OF JURISDICTION BY THE COMMISSIONER SUO MOTU UNDE R IT, IS THAT THE ORDER OF THE INCOME - TAX OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE COMMISSIONER HAS TO BE SATISFIED OF TWIN CONDITIONS, NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS E RRONEOUS ; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT IF THE ORDER OF THE INCOME - TAX OFFICER IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE REVENUE RECOURSE C ANNOT BE HAD TO SECTION 263(1) OF THE ACT. THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPT ION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS 5. NOW, LET US SEE IN THE LIGHT OF THE ABOVE RATIO WHETHER THE ASSESSMENT HAS BEEN MADE ON AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICA TION OF LAW. 5.1. THE CLAIM OF THE DR THAT THE ASSESSMENT ORDER IS DEVOID OF ANY APPLICATION OF MIND ON THE PART OF THE AO CANNOT BE ACCEPTED. SECTION 114(E) OF THE EVIDENCE ACT PROVIDES THAT THERE IS A PRESUMPTION THAT J UDICIAL AND O FFICIAL ACTS HAVE B EEN REGULARLY PERFORMED, THEREFORE, THE ORDER OF THE AO WAS AFTER DUE APPLICATION OF MIND. FOR THIS PROPOSITION, WE DERIVE SUPPORT FROM THE DECISION IN 366 ITR 593. ITA. NO S . 3374 & 3375/M/10 6 6. THE AO HAS TAKEN A VIEW WHICH MAY BE DIFFERENT FROM THE VIEW OF THE LD. COMMISSIONER AND ASSUMING THAT THE VIEW TAKEN BY THE AO IS A LOSS TO THE REVENUE BUT THE HONBLE SUPREME COURT IN MALABAR INDUSTRIAL CO. LTD. (SUPRA) HAS HELD THAT EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE AO CANNOT BE TREATED AS PREJUDICIAL TO THE IN TEREST OF THE REVENUE , FOR E.G. WHEN AN INCOME TAX OFFICER ADOPTED ONE OF 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 LD. COMMISSIONER D OES NOT AGREE, IT CANNOT BE TREATED AS AN ORDER WHICH IS ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE UNLESS THE VIEW TAKEN BY THE INCOME TAX OFFICER IS UNSUSTAINABLE IN LAW. 7. THE DECISIONS RELIED UPON BY THE LD. DR ARE THEREFORE CLEARLY DISTINGU ISHABLE ON THE FACTS OF THE PRESENT CASE. THE BOMBAY HIGH COURT IN CIT VS GABRIAL INDIA LTD., (1993) 203 ITR 108 HAS HELD THAT THE DECISION OF THE INCOME TAX OFFICER COULD NOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER, HE DID NOT MAKE AN ELAB ORATE DISCUSSION IN THAT REGARD. CONSIDERING THE FACTS IN TOTALITY IN THE LIGHT OF THE JUDICIAL DECISIONS DISCUSSED HEREINABOVE, IN OUR UNDERSTANDING OF LAW, THE ASSESSMENT ORDER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. WE, T HEREFORE, SET ASIDE THE IMPUGNED ORDER PASSED BY THE LD. COMMISSIONER U/S. 263 AND RESTORE THAT OF THE ASSESSING OFFICER PASSED U/S. 143(3) OF THE ACT. 8 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ITA NO. 3374/M/2010 9. AS MENTIONED ELSEWHERE, SINCE BOTH SIDES AGREED THAT THE ISSUES INVOLVED IN THIS APPEAL ARE IDENTICAL TO THE ISSUES CONSIDERED BY US IN ITA ITA. NO S . 3374 & 3375/M/10 7 NO. 3375/M/2010 WHEREIN WE HAVE ELABORATELY DISCUSSED THE POWERS OF THE LD. CIT U/S. 263 QUA THE ASSESSMENT ORDER. FOR OUR DETAILED REASONS GIVEN THEREIN, THIS APPEAL BY THE ASSESSEE IS ALLOWED. 10. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. OR DER PRONOUNCED IN THE OPEN COURT ON 3 RD JU LY , 2015 SD/ - SD/ - ( A.D. JAIN ) (N.K. BILLAIYA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 3 RD 00000000000000 JU LY , 2015 . . ./ RJ , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI