Mfar Hotels Ltd, Cochin V. ACIT, Ernakulam

ITA 339/COCH/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58267 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 14-02-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 25-05-2010
• Court: TRIBUNAL
• Keywords: Depreciation; Principle of natural justice; Additional depreciation; Reassessment proceedings
• Section: 147; 148; 263; 154

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. 339/COCH/2010 ASSESSMENT YEAR: 2002-03 MFAR HOTELS LTD., N.H. 47 BYE PASS, KUNDANNOOR JUNCTION, MARADU, KOCHI-682 304 PAN: AABCM 9267F] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1(3), ERNAKULAM. (ASSESSEE-APPELLANT) (REVENUE- RESPONDENT) ASSESSEE BY SHRI P.BALAKRISHNAN, ADV. REVENUE BY SMT. VIJAYAPRABHA, JR. DR DATE OF HEARING 14/02/2012 DATE OF PRONOUNCEMENT 17/02/2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 29-03-2010 PASSED BY LD CIT, KOCHI U/S 263 OF THE ACT AND IT RELATES TO THE ASSESSMENT YEAR 2002-03. THE ASSESSEE IS CHALLENGING THE VALIDITY OF INITIATION OF REVISION PROCEEDINGS. 2. THE FIRST CONTENTION OF THE ASSESSEE IS THAT THE IMPUGNED ORDER IS BARRED BY LIMITATION. ACCORDING TO THE ASSESSEE, THE LD CIT HAS INITIATED REVISION PROCEEDINGS IN RESPECT OF REASSESSMENT ORDER PASSED U/S 147 OF THE ACT. THE CONTENTION OF THE ASSESSEE IS THAT, FOR THE PURPOSE OF CALCULATING THE TIME LIMIT , THE DATE OF ORIGINAL ASSESSMENT ORDER SHOULD ONLY BE CONSIDERED. THE ASSESSEE PLACED REL IANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. ALAGENDRAN FIN ANCE LTD (293 ITR 1). WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE ASSESSE E AND WE DO NOT FIND MERIT IN THEM. IN THE CASE OF ALAGENDRA FINANCE LTD, SUPRA, THE HONB LE SUPREME COURT HELD THAT THE PERIOD I.T.A. NO. 339/COCH/2010 2 OF LIMITATION BEGINS FROM THE ORIGINAL ASSESSMENT I N RESPECT OF MATTERS WHICH ARE NOT DISTURBED IN THE REASSESSMENT PROCEEDINGS. HOWEVER , IN THE INSTANT CASE, WE NOTICE THAT THE LD CIT HAS SOUGHT TO REVISE THE MATTERS WHICH A RE CONSIDERED IN THE REASSESSMENT ORDER ONLY. HENCE, AS PER THE PROVISIONS OF SEC. 2 63(2), THE IMPUGNED REVISION ORDER HAS BEEN PASSED WITHIN THE TIME LIMIT PRESCRIBED THEREI N. ACCORDINGLY, WE DISMISS THIS GROUND OF THE ASSESSEE. 3. THE FACTS RELATING TO THE ISSUE ON MERITS AR E DISCUSSED IN BRIEF. THE ASSESSMENT OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WAS O RIGINALLY COMPLETED ON 30-3-2005. SUBSEQUENTLY, IT WAS NOTICED THAT THE ASSESSEE HAS BEEN ALLOWED DEPRECIATION ON ELECTRICAL FITTINGS @ 25% AS AGAINST THE PRESCRIBED RATE OF 15 %. HENCE THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATION WAS RE-OPENED BY THE AO U/S 147 OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDING, THE ASSESSEE POINTED OUT THA T IT WAS ALLOWED DEPRECIATION ERRONEOUSLY AT THE RATE OF 5% ON BUILDING AND 10% O N FURNITURE, WHERE AS IT IS ELIGIBLE FOR THE RATE OF 10% AND 15% RESPECTIVELY. THE AO ACCEP TED THE SUBMISSION OF THE ASSESSEE AND ALLOWED THE DEPRECIATION AT THE CORRECT RATES. THE LD ADMINISTRATIVE COMMISSIONER TOOK THE VIEW THAT THE ISSUE OF ALLOWING DEPRECIATI ON ON BUILDING AND FURNITURE IS A CONCLUDED MATTER AND SUCH CONCLUDER MATTER COULD NO T BE AGITATED IN THE REASSESSMENT PROCEEDING. FOR THIS PROPOSITION, HE TOOK SUPPORT OF THE HONBLE SUPREME COURT DECISION IN THE CASE OF SUN ENGINEERING (198 ITR 297). ACCOR DINGLY, HE PROPOSED TO REVISE THE ASSESSMENT ORDER U/S 263 OF THE ACT. AFTER HEARING THE ASSESSEE, THE LD CIT SET ASIDE THE ASSESSMENT ORDER WITH A DIRECTION TO THE AO TO RE-D O THE ASSESSMENT IN THE LIGHT OF DISCUSSIONS MADE IN HIS REVISION ORDER. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LD A.R SUBMITTED THAT THE ASSESSMENT ORD ER IS NOT PREJUDICIAL TO THE INTEREST OF REVENUE, AS THERE WAS NO REDUCTION IN THE TOTAL INC OME DETERMINED IN THE RE-ASSESSMENT PROCEEDING. HE FURTHER SUBMITTED THAT THE DEPRECIA TION IS ALLOWABLE WHETHER OR NOT THE ASSESSEE HAS CLAIMED DEPRECIATION OR NOT IN VIEW OF THE INSERTION OF EXPLANATION 5 IN SEC.32(1)(II) OF THE ACT. IN THE INSTANT CASE, THE ASSESSMENT WAS RE-OPENED ONLY TO DETERMINE THE CORRECT AMOUNT OF DEPRECIATION IN RES PECT OF ELECTRICAL FITTINGS AND WHILE I.T.A. NO. 339/COCH/2010 3 DOING SO, THE AO HAS ONLY CORRECTED THE OTHER MISTA KES MADE IN THE COMPUTATION OF DEPRECIATION IN RESPECT OF OTHER ASSETS. HE FURTHE R SUBMITTED THAT THE FACTS PREVAILING IN THE CASE OF SUN ENGINEERING, SUPRA ARE TOTALLY DIFF ERENT AND HENCE THE SAID RATIO COULD NOT BE APPLIED IN THE INSTANT CASE. 5. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE CORRECTION OF DEPRECIATION ON BUILDING AND FURNITURE COULD NOT HAVE BEEN DONE IN REASSESSMENT PROCEEDING, AS THE ASSESSMENT WAS NOT RE-OPENED FOR THE SAID PURPOSE. SHE SUBMITTED THAT THERE IS NO SCOPE FOR DISTURBANCE OF CONCLUDED MATTERS IN THE REASSES SMENT PROCEEDINGS. THE CORRECTION, IF ANY, SHOULD HAVE BEEN DONE IN RECTIFICATION PROCEED ING U/S 154 OF THE ACT. ACCORDINGLY, SHE SUBMITTED THAT THE ADMINISTRATIVE COMMISSIONER WAS RIGHT IN REVISING THE IMPUGNED ASSESSMENT ORDER. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. THE SCOPE OF REVISION PROCEEDINGS INITIATED UNDER SECTION 263 OF THE ACT WAS CONSIDERED BY HON'BLE BOMBAY HIGH COURT, IN THE CASE OF GRASIM INDUSTRIES LTD. V CIT (321 ITR 92) BY TAKING INTO ACCOUNT THE LAW LAID DOWN BY THE HON'BLE SUPREME COURT. THE RE LEVANT OBSERVATIONS ARE EXTRACTED BELOW: 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 CANCELLING 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 WITHOUT APP LICATION 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 W IDE IMPORT AND IS NOT I.T.A. NO. 339/COCH/2010 4 CONFINED TO A LOSS OF TAX. WHAT IS PREJUDICIAL TO T HE INTEREST OF THE REVENUE IS EXPLAINED IN THE JUDGMENT OF THE SUPREME COURT (HEA DNOTE) : 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 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 COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF T HE REVENUE UNLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS UNSUSTAINABLE IN 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. 7. IN THE INSTANT CASE, THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE ASSESSMENT ORDER SOUGHT TO BE REVISED WAS THE ASSESSMENT ORDER PASSED U/S 147 OF THE ACT. THE SCOPE OF REASSESSMENT IS WELL SETTLED BY THE HONBLE SUPR EME COURT IN THE CASE OF SUN ENGINEERING WORKS, SUPRA. THE HONBLE SUPREME COUR T HAS SPECIFICALLY HELD IN THAT CASE AS UNDER:- SINCE THE PROCEEDINGS U/S 147 OF THE ACT ARE FOR T HE BENEFIT OF THE REVENUE AND NOT AN ASSESSEE AND ARE AIMED AT GARNERING THE ESCAPED INCOME OF AN ASSESSEE, THE SAME CANNOT BE ALLOWED TO BE CONVERTE D AS REVISIONAL OR REVIEW PROCEEDINGS AT THE INSTANCE OF THE ASSESSE E, THEREBY MAKING THE MACHINERY UNWORKABLE. AS A RESULT OF THE AFORESAID DISCUSSION, WE FIND TH AT, IN PROCEEDINGS UNDER SECTION 147 OF THE ACT, THE INCOME TAX OFFICER MAY BRING TO CHARGE ITEMS OF INCOME WHICH HAD ESCAPED ASSESSMENT OTHER THAN OR I N ADDITION TO THAT ITEM OR ITEMS WHICH HAVE LED TO THE ISSUANCE OF THE NOTI CE UNDER SECTION 148 AND WHERE REASSESSMENT IS MADE UNDER SECTION 147IN RESP ECT OF INCOME WHICH HAS ESCAPED TAX, THE INCOME TAX OFFICERS JURISDICTION IS CONFINED TO ONLY SUCH INCOME WHICH HAS ESCAPED TAX OR HAS BEEN UNDER ASSE SSED AND DOES NOT EXTEND TO REVISING, REOPENING OR RECONSIDERING THE WHOLE ASSESSMENT OR PERMITTING THE ASSESSEE TO REAGITATE QUESTIONS WHIC H HAD BEEN DECIDED IN THE ORIGINAL ASSESSMENT PROCEEDINGS. I.T.A. NO. 339/COCH/2010 5 IN THE INSTANT CASE, THE REASSESSMENT NOTICE WAS IS SUED ONLY FOR THE PURPOSE OF REVISING THE DEPRECIATION THAT WAS ORIGINALLY ALLOWED IN EXCESS FOR THE ELECTRICAL FITTINGS. IN ADDITION TO DISALLOWING THE EXCESS DEPRECIATION ON THE ELECT RICAL FITTINGS, THE AO, ON THE REQUEST OF THE ASSESSEE, HAS ALLOWED ADDITIONAL AMOUNT OF DEPR ECIATION ON BUILDING AND FURNITURE. THE SAID ACTION OF THE AO IN THE REASSESSMENT PROCE EDING GOES AGAINST THE HONBLE SUPREME COURTS DECISION CITED ABOVE AND RENDERS TH E RE-ASSESSMENT ORDER ERRONEOUS. 8. THE LD. A.R SUBMITTED THAT THERE IS NO REDUC TION IN THE TOTAL INCOME AND HENCE THE ASSESSMENT ORDER CANNOT BE CONSIDERED AS PREJUDICIA L TO THE INTERESTS OF REVENUE. WE DO NOT FIND MERIT IN THE SAID CONTENTIONS. THE LD CIT (A) HAS POINTED OUT THAT THE AO HAS DISALLOWED DEPRECIATION ONLY TO THE EXTENT OF RS.14 ,49,581/- AS AGAINST THE EXCESS DEPRECIATION OF RS.47,11,158/- ALLOWED ON ELECTRICA L FITTINGS. THE DIFFERENCE BETWEEN THE TWO FIGURES PERTAIN TO THE ADDITIONAL DEPRECIATION ALLOWED ON BUILDING AND FURNITURE. HENCE, IN OUR VIEW, THE SAID ADJUSTMENT OF DEPRECIA TION RESULTS IN LOSS OF REVENUE. 9. IN VIEW OF THE FOREGOING DISCUSSIONS, WE DO NOT FIND ANY INFIRMITY IN THE REVISION ORDER PASSED BY LD ADMINISTRATIVE COMMISSIONER. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE I S DISMISSED. PRONOUNCED ACCORDINGLY ON 17-02-2012 SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 17 TH FEBRUARY, 2012 GJ COPY TO: I.T.A. NO. 339/COCH/2010 6 1. MFAR HOTELS LTD. N.H. 47 BYE PASS, KUNDANNOOR JU NCTION, MARADU, KOCHI-682 304. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -1(3), ERNAKULAM. 3. THE COMMISSIONER OF INCOME-TAX, KOCHI. 4.. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 5.. GUARD FILE . BY ORDER (ASSISTANT REGISTRAR) ITAT, COCHIN BENCH