Mahanagar Telephone Nigam Ltd., New Delhi V. DCIT (LTU), New Delhi

ITA 3404/DEL/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4259 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 22-05-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 29-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHEFALI SWAROOP
• Assessee Lawyers: RANO JAIN ADV SH ASHISH CHADHA
• Keywords: Tangible material; Bad and doubtful debts; Difference of opinion; Reason to believe; Change of opinion
• Section: 43B; 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER & SHRI K.N. CHARY, JUDICIAL MEMBER ITA NO.-3404/DEL/2013 ( ASSESSMENT YEAR: 2005-06) MAHANAGAR TELEPHONE NIGAM LTD. 5 TH FLOOR, MAHANAGAR DOORSANCHAR BHAWAN, 9, CGO COMPLEX, LODHI ROAD, NEW DELHI. AAACM0828R VS DCIT (LTU) NEW DELHI. ASSESSEE BY MS. RANO JAIN, ADV. SH. ASHISH CHADHA, CA REVENUE BY MS. SHEFALI SWAROOP, CIT DR ORDER PER SHRI K.N. CHARY, JUDICIAL MEMBER ASSESSEE PREFERS THIS APPEAL CHALLENGING THE ORDER DATED 01.03.2013 IN APPEAL NO. 27/10-11/CIT (A)-LTU PASSE D BY THE COMMISSIONER OF INCOME TAX (APPEALS)-LTU, NEW DELHI (HEREINAFTER FOR SHORT CALLED AS THE LD. CIT (A)), WHERE UNDER THE LD. CIT (A) DISMISSED THE APPEAL IN RESPECT OF BOTH THE TECHNIC AL GROUNDS AND ON MERITS. DATE OF HEARING 14.09.2017 DATE OF PRONOUNCEMENT 26.09.2017 2 ITA NO. 3404/DEL/2013 2. BRIEFLY STATED FACTS ARE THAT THE ORIGINAL RETUR N OF INCOME OF THE ASSESSEE WAS COMPLETED U/S 143(3) OF THE INCOME TAX ACT (HEREINAFTER FOR SHORT CALLED AS THE ACT) BY ORDE R DATED 08.03.2006 AT A TOTAL INCOME OF RS. 834,33,29,518/- AND BOOK P ROFITS AT RS. 13,91,17,07,421/-. THEREAFTER THE CASE WAS REOPENE D VIDE NOTICE U/S 148 DATED 26.02.2010 IN RESPECT OF TWO GROUNDS NAMELY PROVISION OF DOUBTFUL DEBTS TO BE DISALLOWED BEING UNASCERTAINED LIABILITY AND DISALLOWANCE OF SET OFF OF PRIOR PERI OD INCOME AGAINST PRIOR PERIOD EXPENDITURE. HOWEVER, DURING THE COUR SE OF ASSESSMENT THE ISSUE RELATING TO THE DOUBTFUL DEBTS TO BE DISALLOWED WAS DROPPED BUT THE AO MADE AN ADDITION OF RS. 49,50,000/- BY DISALLOWING SET OFF OF PRIOR PERIOD INCOME AGAINST PRIOR PERIOD EXPENDITURE. AO CHALLENGED THE SAME C ONTENDING THAT THE REOPENING OF THE MATTER WITHOUT ANY FRESH TANGI BLE MATERIAL OR INFORMATION COMING TO THE POSSESSION OF THE AO IS B AD AND ITS NOTHING BUT MERE CHANGE OF OPINION WHICH IS IMPERMI SSIBLE UNDER LAW. SECONDLY, ASSESSEE CONTENDED THAT THE ASSESSE E HAS BEEN MAKING PROVISION ON ACCRUAL BASIS IN RESPECT OF RAT ES AND TAXES EVERY YEAR AND IN TERMS OF SECTION 43B OF THE ACT T HE RATES AND TAXES TO THE EXTENT NOT ACTUALLY PAID OR ADDED BACK IN EVERY YEAR IN 3 ITA NO. 3404/DEL/2013 THE COMPUTATION OF INCOME, AND MERE WRITING BACK OF THE SAID AMOUNT CANNOT BE CONSIDERED AS INCOME SINCE NO DEDU CTION OF THE SAME HAS BEEN CLAIMED WHEN THE PROVISION WAS MADE. HOWEVER, LD. CIT (A) TURNED DOWN BOTH THE CONTENTIONS OF THE ASSESSEE. HENCE, THE ASSESSEE IS IN APPEAL CHALLENGING THE SA ME. 3. IT IS THE CONTENTION OF THE LD. AR THAT A PERUSA L OF THE REASONS RECORDED SHOW THAT THE AO DID NOT HAVE ANY FRESH TA NGIBLE MATERIAL OR INFORMATION AND ONLY REOPENED THE CASE ON THE BASIS OF THE RECORD THAT WAS ALREADY AVAILABLE BEFORE HIM WH ILE CONCLUDING THE ASSESSMENT U/S 143(3) OF THE ACT AND AS A MATTE R OF FACT THE COMPUTATION OF INCOME SHOWING THE SUO MOTTO ADDITION BACK OF THE AMOUNT RELATING TO THE PRIOR PERIOD EXPENSES, PROFI T AND LOSS ACCOUNT SHOWING THE PRIOR PERIOD ADJUSTMENT, SCHEDU LE S SHOWING THE ADJUSTMENT OF THE ACCOUNT OF RATES AND TAXES RELATING TO THE PRIOR PERIOD WERE ALREADY AVAILABLE BEFORE T HE AO AND BASING ON THIS RECORD ALONE AND WITHOUT ANY FRESH TANGIBLE MATERIAL OR INFORMATION THE AO REOPENED THE MATTER. SHE FURTHE R SUBMITTED THAT MERELY BECAUSE THE AO DOES NOT PUT ANY SPECIFI C QUERY IN RESPECT OF PRIOR PERIOD EXPENDITURE ADJUSTMENT WITH REFERENCE TO 4 ITA NO. 3404/DEL/2013 SCHEDULE S, THE SAME CANNOT BE WORKED OUT AGAINST THE ASSESSEE TO REOPENED THE CONCLUDED ASSESSMENT. RELIANCE IS PLACED ON THE DECISIONS REPORTED IN CIT VS. KELVINATOR OF INDIA L IMITED (2010) 320 ITR 561 (SC), CIT VS. ORIENT CRAFT LTD. (2013) 354 ITR 536, LE PASSAGE TO INDIA TOURS & TRAVELS PVT. LTD. VS. ACIT (DEL.) (HC), UTTARANCHAL JAL VIDYUT NIGAM LTD. VS. ACIT (2016) 4 7 ITR 198 AND ACIT VS. RESPONSIBLE BUILDERS PVT. LTD. (DEL.), FOR THE PRINCIPLE THAT THE AO HAS NO POWER TO REOPEN THE ASSESSMENT WHEN O NCE THE ASSESSEE DISCLOSES FULLY AND TRULY ALL MATERIAL FAC TS, AND NO FRESH TANGIBLE MATERIAL OR INFORMATION CAME INTO HIS POSS ESSION CONSEQUENT TO WHICH THE AO HAD REASON TO BELIEVE TH AT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. 4. HERE IN THIS MATTER PAGE NOS. 2, 47, 59 AND 169 OF THE PAPER BOOK CONTAINING THE COMPUTATION OF INCOME SHOWING T HE ADJUSTMENT OF THE PRIOR PERIOD EXPENSES, PROFIT AND LOSS ACCOUNT REFLECTING THE SAME AND 59 WHERE SCHEDULE S IS IN CORPORATED RELATING TO THE PRIOR PERIOD ADJUSTMENTS WERE VERY MUCH BEFORE THE ASSESSING OFFICER WHEN HE CONCLUDED THE ASSESSMENT U/S 143(3) OF THE ACT. VIDE ITEM NO. 6 UNDER THE CAPTION ADDED B ACK AT PAGE 28 5 ITA NO. 3404/DEL/2013 OF THE ASSESSMENT ORDER DATED 08.03.2006 PASSED U/S 143(3) OF THE ACT FOR THE AY 2005-06 THE ASSESSING OFFICER AD DED BACK A SUM OF RS. 2,44,63,711/-. THIS CLEARLY SHOWS THAT THE ASSESSING OFFICER DEALT WITH THIS ASPECT WHILE CONSIDERING THE MATTER U/S 143(3) OF THE ACT. FURTHER IN VIEW OF THE DECISIONS REPORTED IN M/S MAZAGAON DOCK LTD. VS. ITO (MUM.) IN ITA NO. 5034/M UM/2011, DCIT VS. AIRPORTS AUTHORITY OF INDIA (DEL.) IN ITA NO. 3841/DEL/2011 DATED 16.03.2012 AND ITA NO. 3074/DEL /2010 FOR AY 2006-07 DATED 12.10.2012 & ITA NO. 1807/DEL/2012 FOR AY 2008-09 DATED 22.06.2012, THE TAX AUTHORITIES ARE N OT JUSTIFIED IN DISALLOWING THE ENTIRE AMOUNT OF PRIOR PERIOD EXPEN SES WHILE ASSESSING THE ENTIRE AMOUNT OF PRIOR PERIOD INCOME, WITHOUT BRINGING SUPPORT OF ANY OF THE PROVISIONS OF THE AC T AND THE ASSESS THE PRIOR PERIOD INCOME BY DISALLOWING THE PRIOR PE RIOD EXPENSES IS BAD UNDER LAW. 5. VIEWING FROM ANY ANGLE, WE ARE OF THE CONSIDERED OPINION THAT THE AO IS NOT JUSTIFIED IN REOPENING THE MATTER WIT HOUT BRINGING ON RECORD, ANY FRESH TANGIBLE MATERIAL OR INFORMATION MORE PARTICULARLY WHEN THIS ASPECT WAS CONSIDERED BY HIM AT THE TIME OF 6 ITA NO. 3404/DEL/2013 ASSESSMENT U/S 143(3) OF THE ACT. EVEN ON MERITS A LSO, DISALLOWANCE OF THE PRIOR PERIOD EXPENSES IS BAD WH EN THE PRIOR PERIOD INCOME WAS ASSESSED TO TAX AND NO DEDUCTION WAS CLAIMED OR ALLOWED AT THE TIME WHEN THE PROVISION WAS MADE. WITH THIS VIEW OF THE MATTER, WE DELETE THE ADDITION OF RS. 4 9.50 LACS. GROUNDS OF APPEAL ARE ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 26.09.2017 SD/- SD/- (N.K. SAINI) (K.N. CHARY) ACCOUNTANT MEMBER JUDICIAL MEMB ER DATED: 26.09.2017 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI 7 ITA NO. 3404/DEL/2013 DRAFT DICTATED ON 19.09.2017 DRAFT PLACED BEFORE AUTHOR 21.09.2017 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. APPROVED DRAFT COMES TO THE SR.PS/PS 26.09.2017 KEPT FOR PRONOUNCEMENT ON 26.09.2017 FILE SENT TO THE BENCH CLERK 26.09.2017 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.