Gujarat Energy Transmission Corpn.Ltd., Baroda V. The Dy.CIT, Circle-1(1), Baroda

ITA 3440/AHD/2015

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9177 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 24-09-2019
• Assessment Year: 2008-2009
• Appeal Filed On: 10-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SHARMA
• Keywords: Reopening of assessment; Deemed to accrue or arise in india; Reassessment proceedings; Set aside
• Section: 143(3); 115JB; 148

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO. 3440/AHD/2015 ( ASSESSMENT YEAR : 2008-09) GUJARAT ENERGY TRANSMISSION CORPN. LTD. SARDAR PATEL VIDYUT BHAVAN, RACE COURSE CIRCLE, BARODA - 390007 / VS. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1(1), BARODA - 390007 ./ ./ PAN/GIR NO. : AABCG4029R ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI MANISH J. SHAH, A.R. / RESPONDENT BY : SHRI O. P. SHARMA, CIT. D.R. DATE OF HEARING 24/09/2019 !'# / DATE OF PRONOUNCEMENT 04/10/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1, VADODARA (CIT(A) IN SHORT), DATED 22.09.2015 ARISI NG IN THE ASSESSMENT ORDER DATED 22.01.2013 PASSED BY THE ASSESSING OFFI CER (AO) UNDER S. ITA NO. 3440/AHD/15 [GUJARAT ENERGY TRANSMISSION CORPN. LTD.] A.Y. 2008-09 - 2 - 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING AY 2008-09. 2. THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF PRIOR PERIOD EXPENSES OF RS.8,36,34,000/- IN THE CAPTIONED APPEA L ARISING FROM RE- ASSESSMENT ORDER FRAMED UNDER S.147 OF THE ACT. 3. THE ASSESSEE HAS ALSO MOVED AN APPLICATION FOR ADMISSION OF ADDITIONAL GROUND OF APPEAL VIDE ITS APPLICATION DA TED 29.07.2019 WHEREBY IT SEEKS TO CHALLENGE THE ORDER OF THE REVENUE AUTH ORITIES ON A PURPORTED LEGAL GROUND TOWARDS VALIDITY OF REOPENING NOTICE I SSUED UNDER S.148(2) OF THE ACT AS WELL AS RE-ASSESSMENT PROCEEDINGS CARRIE D OUT UNDER S.147 OF THE ACT IN THE ABSENCE OF ANY ESCAPEMENT OF INCOME. WE FIND THAT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE GOES TO TH E ROOT OF THE MATTER AS IT SEEKS TO QUESTION THE VALIDITY OF THE PROCEEDINGS I TSELF FOR WHICH RELEVANT FACTS ARE ALSO FOUND ON THE RECORD ITSELF. THUS, T HE LEAVE OF THE TRIBUNAL TO ADMIT THE ADDITIONAL GROUND FOR ADJUDICATION IN TER MS OF RULE 11 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963 DESERVE S TO BE GRANTED. THE ADDITIONAL GROUND THUS STANDS ADMITTED. 4. AS NOTED EARLIER, THE ADDITIONAL GROUND SEEKS TO CHALLENGE THE VALIDITY OF RE-ASSESSMENT NOTICE ITSELF AS WELL AS THE RE-ASSESSMENT PROCEEDINGS AND THUS SEEKS TO CHALLENGE THE JURISDI CTIONAL ASPECT AND HENCE, GOES TO THE ROOT OF THE MATTER. THEREFORE, THE ADD ITIONAL GROUND RAISED BY THE ASSESSEE REQUIRES TO BE ADJUDICATED THRESHOLD B EFORE THE PROCEEDINGS TO DEAL WITH THE MAIN APPEAL. THE ADDITIONAL GROUND R AISED BY THE ASSESSEE IS REPRODUCED HEREUNDER FOR READY REFERENCE: 1. THE NOTICE OF REOPENING U/S.147 R.W.S. 148 IS B AD IN LAW AS IT IS WITHOUT JURISDICTION. THE REASSESSMENT PROCEEDINGS IS ALSO BAD IN LAW AS THERE IS NO ESCAPEMENT OF INCOME. 5. AT THE BEGINNING OF THE HEARING, THE LEARNED COU NSEL FOR THE ASSESSEE POINTED OUT THAT EFFICACY OF ORDER PASSED UNDER S.1 47 OF THE ACT IS IN ITA NO. 3440/AHD/15 [GUJARAT ENERGY TRANSMISSION CORPN. LTD.] A.Y. 2008-09 - 3 - QUESTION IN THE INSTANT CASE. THE LEARNED AR REFER RED TO THE ASSESSMENT ORDER ORIGINALLY PASSED UNDER S.143(3) OF THE ACT D ATED 30.12.2010 POINTED OUT THAT TOTAL INCOME ASSESSED UNDER NORMAL PROVISI ONS STANDS AT RS.NIL WHEREAS DEEMED INCOME COMPUTED UNDER THE SHELTER OF SAID PROVISIONS OF SECTION 115JB OF THE ACT STANDS AT RS.113.10 CRORES . IT WAS SUBMITTED THAT AFTER PASSING THE AFORESAID ASSESSMENT ORDER UNDER S.143(3) OF THE ACT, A NOTICE UNDER S.148(2) OF THE ACT WAS ISSUED ON 27.0 3.2012 FOR AY 2008-09 IN QUESTION. AS A CONSEQUENCE OF THE AFORESAID RE- ASSESSMENT NOTICE, A RE- ASSESSMENT ORDER UNDER S.143(3) R.W.S. 147 OF THE A CT DATED 22.01.2013 WAS PASSED. ADVERTING TO THE ISSUE, THE LEARNED AR ADV ERTED TO THE COMPUTATIONAL PART OF THE RE-ASSESSMENT ORDER AND P OINTED OUT THAT DESPITE DISALLOWANCE OF PRIOR PERIOD EXPENSES OF RS.8.36 CR ORE, THE ASSESSED TOTAL INCOME CONTINUE TO STAND AT RS.NIL WHEREAS DEEMED I NCOME UNDER S.115JB OF THE ACT STANDS AT RS.113.09 CRORES. IT WAS SUBM ITTED THAT IN THE BACKGROUND OF THESE FACTS, WHERE THE TAX LIABILITY UNDER S.115JB OF THE ACT OVERRIDES THE LIABILITY UNDER NORMAL PROVISIONS, NO ESCAPEMENT CAN BE ENVISAGED. IT WAS THUS CONTENDED THAT RE-ASSESSMEN T NOTICE IS WITHOUT AUTHORITY OF LAW AND RE-ASSESSMENT ORDER IS BAD IN LAW IN VIEW OF THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF INDIA GELATINE AND CHEMICALS LTD. VS. ACIT (2014) 364 ITR 649 (GUJ ) WHICH PRINCIPLES HAVE BEEN FOLLOWED IN MOTTO TILES (P.) LTD. VS. ACIT (2016) 386 ITR 280 (GUJ). IT WAS POINTED OUT IN CONCLUSION THAT EVEN IF ENTIR E AMOUNT OF DISALLOWANCES MADE BY THE AO ON ACCOUNT OF PRIOR PE RIOD EXPENSES IS SUSTAINED, THERE WOULD BE NO ADDITION TO THE TAX LI ABILITY OF THE ASSESSEE AND THE ASSESSEE WOULD STILL BE GOVERNED BY THE PROVISI ONS OF SECTION 115JB OF THE ACT AND ASSESSED ON THE SAME BOOK PROFIT. IT W AS THUS SUBMITTED THAT IN THE ABSENCE OF ANY ADDITIONAL TAX LIABILITY, IT CAN NOT BE SAID THAT THERE WAS SUFFICIENT MATERIAL BEFORE THE AO TO FORM THE BELIE F THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE LEARNED COUNSEL THUS SUBMITTED THAT THE RE-ASSESSMENT NOTICE IS THUS WITHOUT SANCTION OF LA W AND DESERVES TO BE QUASHED. THE RE-ASSESSMENT ORDER HAS A CONSEQUENCE OF SUCH NOTICE WAS ALSO URGED TO BE DECLARED NULL AND VOID. ITA NO. 3440/AHD/15 [GUJARAT ENERGY TRANSMISSION CORPN. LTD.] A.Y. 2008-09 - 4 - 6. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ACTIONS TAKEN BY THE AO UNDER S.147/148 OF THE ACT. IN FURTHERANCE, THE LEARNED DR FOR THE REVENUE REFERRED TO THE SCHEME PROVIDED UNDER S.147 OF THE ACT AND SUBMITTED THAT IN VIEW OF EXPLANATION 2(C) BELOW SE CTION 147 OF THE ACT, A COMPLETED ASSESSMENT CAN BE REOPENED EVEN WHERE EXC ESSIVE LOSS OR EXCESSIVE ALLOWANCE HAS BEEN CLAIMED OR WHERE INCOM E CHARGEABLE TO TAX HAS BEEN UNDER-ASSESSED DE HORS THE ULTIMATE ASSESSED INCOME. IT WAS SUBMITTED THAT AS PER CATEGORICAL LEGISLATIVE INTEN T, REOPENING OF ASSESSMENT IS NOT DEPENDENT UPON THE ULTIMATE TAX LIABILITY BU T IS DEPENDENT UPON ESCAPEMENT OF CHARGEABLE INCOME FROM TAXATION. THE LEARNED DR SUBMITTED THAT THE ASSESSEE HAS CLAIMED PRIOR PERIOD EXPENSES WHICH IS NOT ELIGIBLE UNDER S.37(1) OF THE ACT OR OTHER PROVISIONS OF THE ACT. THE ASSESSEE HAS THUS CLAIMED EXTRA EXPENDITURE AND CONSEQUENTLY, UN DERSTATED THE ASSESSED INCOME. IN THIS SCENARIO, THE CASE OF THE ASSESSEE CLEARLY FALLS WITHIN THE SWEEP OF EXPLANATION 2 BELOW SECTION 147 OF THE ACT WHICH ENVISAGES ESCAPEMENT OF INCOME IN THE CIRCUMSTANCES SPECIFIED THEREIN. THE LEARNED DR FOR THE REVENUE THUS CONTENDED THAT THE EXPRESS PROVISIONS OF STATUTE REQUIRES TO BE ACCORDED PRIMACY AND NO OTHER INTERP RETATION IN DEVIATION THEREOF IS CALLED FOR. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE LIMITED CONTROVERSY RAISED BY WAY OF ADDITIONAL GROUND WHER EBY THE TRIBUNAL HAS BEEN CALLED UPON TO ADJUDICATE AS TO WHETHER RE-OPE NING UNDER S.147/148 OF THE ACT IN MAINTAINABLE WHERE TAX LIABILITY AS PER BOOK PROFITS COMPUTED UNDER S.115JB OF THE ACT IS NOT DISTURBED AND ALSO EXCEEDS THE TOTAL INCOME DETERMINED AS PER NORMAL PROVISIONS. WE FIND THAT T HE ISSUE IS NO LONGER RES INTEGRA IN VIEW OF THE JUDGMENT RENDERED BY JURISDICTIONAL HIGH COURT. THE HONBLE GUJARAT HIGH COURT IN INDIA GELATINE AND CHEMICALS LTD. (SUPRA) HAS OBSERVED THAT IN THE ABSENCE OF ANY ADDITION T O THE TAX LIABILITY OF THE ASSESSEE COMPUTED UNDER S.115JB OF THE ACT ( WHICH EXCEEDS THE TAX LIABILITY UNDER NORMAL PROVISIONS), THE JURISDICTIO N OF THE AO IS OUSTED EVEN IF THE PROPOSED DISALLOWANCE OF EXPENDITURE BY THE AO UNDER NORMAL PROVISIONS IS SUSTAINED. THE VIEW EXPRESSED IN INDIA GELATINE AND ITA NO. 3440/AHD/15 [GUJARAT ENERGY TRANSMISSION CORPN. LTD.] A.Y. 2008-09 - 5 - CHEMICALS LTD. (SUPRA) WAS ADOPTED BY THE HONBLE GUJARAT HIGH COURT MOTTO TILES (P.) LTD. VS. ACIT (2016) 386 ITR 280 ( GUJ). 8. THE RELEVANT OPERATIVE PARA IN LATER DECISION OF HO NBLE GUJARAT IN MOTTO TILES (P.) LTD. (SUPRA) IS REPRODUCED HEREUNDER: 11. INSOFAR AS THE SECOND CONTENTION RAISED ON BEH ALF OF THE PETITIONER IS CONCERNED, THE CONTROVERSY STANDS SQU ARELY CONCLUDED BY THE DECISION OF THIS COURT IN THE CASE OF INDIA GEL ATINE AND CHEMICALS LTD. (SUPRA) WHEREIN, THE COURT IN A CASE WHERE THE ASSESSEE HAD DECLARED A LOSS OF RS.1.44 CRORES UNDER THE NORMAL COMPUTATION AND THE ASSESSMENT WAS FRAMED ON BOOK PROFIT OF RS.2.89, HA D HELD THAT EVEN IF THE EXPENDITURE OF RS.116.86 LAKHS IS DISALLOWED, T HERE WOULD BE NO RESULTANT CHANGE IN THE PETITIONER'S TAX LIABILITY SINCE THE PETITIONER HAD ALREADY PAID MUCH HIGHER TAX AND HAD ALLOWED THE PE TITION. IT APPEARS THAT THE REVENUE HAS ACCEPTED THE SAID DECISION AND HAS NOT CHALLENGED THE SAME BEFORE THE HIGHER FORUM. THE LEARNED COUNS EL FOR THE RESPONDENT HAS URGED THAT THE DECISION REQUIRES REC ONSIDERATION. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, AS WELL AS THE FACT THAT THE REVENUE HAS ACCEPTED THE SAID DECISIO N, THE COURT DOES NOT FIND ANY REASON TO REFER THE MATTER FOR CONSIDERATI ON TO A LARGER BENCH. 12. IN THE LIGHT OF THE DECISION OF THIS COURT IN T HE CASE OF INDIA GELATINE AND CHEMICALS LTD. (SUPRA) HAVING REGARD T O THE FACT THAT EVEN IF THE ENTIRE AMOUNT WHICH IS PROPOSED TO BE ADDED BY THE ASSESSING OFFICER IS SUSTAINED, THERE WOULD BE NO ADDITION TO THE TAX LIABILITY OF THE PETITIONER AND THE PETITIONER WOULD STILL BE GO VERNED BY THE PROVISIONS OF SECTION 115JB OF THE ACT AND ASSESSED ON THE SAME BOOK PROFIT, IT CANNOT BE SAID THAT THERE WAS SUFFICIENT MATERIAL BEFORE THE ASSESSING OFFICER TO FORM THE BELIEF THAT INCOME CH ARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE IMPUGNED NOTICE ISSUED UNDE R SECTION 148 OF THE ACT, THEREFORE, CANNOT BE SUSTAINED. 13. FOR THE FOREGOING REASONS, THE PETITION SUCCEED S AND IS, ACCORDINGLY, ALLOWED. THE IMPUGNED NOTICE DATED 02. 03.2015 ISSUED BY THE RESPONDENT UNDER SECTION 148 OF THE INCOME TAX ACT, 1961 IS HEREBY QUASHED AND SET ASIDE. RULE IS MADE ABSOLUTE, ACCOR DINGLY, WITH NO ORDER AS TO COSTS. 9. IN VIEW OF THE UNEQUIVOCAL AND CLINCHING OBSERVA TIONS MADE BY THE JURISDICTIONAL HIGH COURT, WE ARE NOT IN A POSITION TO TAKE ANY INDULGENCE AT THE PLEA OF THE DEPARTMENT FOR MAINTAINABILITY O F RE-ASSESSMENT NOTICE AND RE-ASSESSMENT ORDER HAVING REGARD TO LEGISLATIV E FIAT BY WAY OF EXPLANATION 2 TO SECTION 147 OF THE ACT REFERRED TO AND RELIED UPON. ITA NO. 3440/AHD/15 [GUJARAT ENERGY TRANSMISSION CORPN. LTD.] A.Y. 2008-09 - 6 - NEEDLESS TO SAY, ARTICLE 141 OF THE CONSTITUTION EM BODIES THE RULE OF PRECEDENT. ALL THE SUBORDINATE COURTS ARE BOUND BY JUDGMENT OF THE HIGH COURTS. THUS, GOVERNED BY THE DECISION OF THE HON BLE GUJARAT HIGH COURT AS NOTED ABOVE, WE FIND MERIT IN THE PLEA RAISED BY THE ASSESSEE BY WAY OF ITS ADDITIONAL GROUNDS OF APPEAL. THE RE-ASSESSMEN T NOTICE IS ACCORDINGLY QUASHED AND RE-ASSESSMENT ORDER IS DECLARED NULL AN D VOID. 10. AS THE ASSESSEE HAS SUCCEEDED ON ADDITIONAL GRO UND OF LEGAL NATURE ITSELF, WE DO NOT SEEK TO DELINEATE ON THE MERITS O F THE DISALLOWANCE OF PRIOR PERIOD EXPENSES, NOR THE SAME HAS BEEN ADDRES SED IN THE COURSE OF HEARING BY EITHER SIDES. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE ALLOWED. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 04/10/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 04/10/201 9