Asianet satellite communications Ltd, Trivandrum V. CIT, Trivandrum

ITA 347/COCH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69057 (ITAT-COCHIN)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2013
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 10-09-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 29-05-2013
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: PANKAJAKSHAN C GOVIND
• Keywords: Depreciation; Principle of natural justice; Assessment record
• Section: 43B; 143(3); 142(1); 194C

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. 347/COCH/2013 ASSESSMENT YEAR : 2008-09 ASIANET SATELLITE COMMUNICATIONS LTD., 3 RD FLOOR, KARIMPANAL ARCADE, EAST FORT, THIRUVANANTHAPURAM-23 [PAN: AAECA 5548E] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1(1), THIRUVANANTHAPURAM. (ASSESSEE -APPELLANT) (REVENUE-RESPONDEN T) ASSESSEE BY SHRI PANKAJAKSHAN C. GOVIND, CA REVENUE BY SMT. S. VIJAYAPRABHA, JR. DR DATE OF HEARING 10/09/2013 DATE OF PRONOUNCEMENT 13/11/2013 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE REVISION ORDER DATED 22-03- 2013 PASSED BY THE LD. CIT, THIRUVANANTHAPURAM U/S. 263 OF THE ACT AND IT RELATES TO THE ASSESSMENT YEAR 2008-09. 2. THE ASSESSMENT IN THE HANDS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WAS PASSED BY THE ASSESSING OFFICER U/S. 143(3) OF THE ACT ON 29-12-2010. ON VERIFICATION OF THE ASSESSMENT RECORD, THE LD. CIT NOTICED THE FOLLOWING ERRORS: (I) THE ASSESSEE HAS PAID POLE RENTALS TO KSEB AMOUN TING TO RS. 19,21,916/- WITHOUT DEDUCTING TAX AT SOURCE AS REQUIRED U/S. 19 4I OF THE ACT, WARRANTING DISALLOWANCE U/S. 40(A)(IA) OF THE ACT. (II) THE ASSESSEE HAS CLAIMED DEPRECIATION ON SET TOP BOXES AND MODEM AT HIGHER RATE OF 60% WHICH IS APPLICABLE TO COMPUTERS WHEREAS THE APPLICABLE RATE OF DEPRECIATION ON THE ABOVE SAID ASSETS IS ONLY 15 %. I.T.A. NO.347/COCH/2013 2 (III) THE ASSESSEE HAS ALSO CLAIMED DEPRECIATION O N GOODWILL WHICH IS NOT AN SPECIFIC INTANGIBLE ASSET INCLUDED U/S. 31(1)(II) OF THE ACT. THE LD. CIT NOTICED THAT THE ASSESSING OFFICER DID NOT EXAMINE THESE THREE ISSUES WHILE COMPLETING THE ASSESSMENT. ACCORDINGLY, THE LD. CIT INITIATED REVISION PROCEEDINGS U/S. 263 OF THE ACT. BEFORE THE LD. CIT, THE ASSESSEE S UBMITTED THAT THERE IS NO LIABILITY TO DEDUCT TAX AT SOURCE ON POLE RENTALS, IN VIEW OF TH E DECISION RENDERED BY THE TRIBUNAL IN THE ASSESSEES OWN CASE IN I.T.A. NOS. 786 TO 796/C OCH/2004 FOR THE ASSESSMENT YEARS 1993-94 TO 2002-03. HOWEVER, THE LD. CIT NOTICED TH AT THE TRIBUNAL HAS RENDERED ITS DECISION IN THE CONTEXT OF DEDUCTION OF TAX AT SOUR CE U/S. 194C OF THE ACT, WHEREAS THE ISSUE UNDER CONSIDERATION IS WITH REGARD TO DEDUCTI ON OF TAX AT SOURCE U/S. 194I OF THE ACT. WITH REGARD TO THE DEPRECIATION CLAIMED ON SE T TOP BOXES, THE ASSESSEE RELIED ON THE DECISION OF THE SPECIAL BENCH OF ITAT, MUMBAI I N THE CASE OF DATACRAFT INDIA LTD. (I.T.A. NOS. 7462 & 754/MUM/2007). THE LD. CIT HEL D THAT THE SAID DECISION IS NOT APPLICABLE TO SET TOP BOXES AND MODEM AS THESE DEVI CES DID NOT SUPPORT COMPUTER IN THE RECEIPT OF INPUT AND OUTFLOW OF OUTPUT TO AND F ROM COMPUTER. WITH REGARD TO THE CLAIM OF DEPRECIATION ON GOODWILL, THE LD. CIT EXPR ESSED THE VIEW THAT THE SAME CANNOT BE EQUATED WITH THE COMMERCIAL RIGHTS SPECIFIED U/S . 32(1)(II) OF THE ACT. FURTHER, HE TOOK THE VIEW THAT THE VALUE OF GOODWILL ONLY APPRE CIATES BUT DO NOT DEPRECIATE. HENCE, THE LD. CIT REJECTED ALL THE OBJECTIONS RAISED BY T HE ASSESSEE, SET ASIDE THE ASSESSMENT ORDER AND DIRECTED THE ASSESSING OFFICER TO MAKE NE CESSARY DISALLOWANCE U/S. 40(A)(IA) OF THE ACT, LIMIT DEPRECIATION ON SET TOP BOXES AND MODEM, AND DISALLOW DEPRECIATION ON GOODWILL. AGGRIEVED, THE ASSESSEE HAS FILED THIS A PPEAL BEFORE US. 3. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAS PASSED THE IMPUGNED ASSESSMENT ORDER BY EXAMINING V ARIOUS ITEMS AND MADE DISALLOWANCE TO THE TUNE OF RS. 52,34,321/- AGAINST WHICH THE ASSESSEE HAS FILED THE APPEAL BEFORE THE LD. CIT(A) AND THE SAME IS PENDI NG BEFORE HIM. IN THE MEANTIME, THE LD. CIT HAS INITIATED REVISION PROCEEDINGS IN R ESPECT OF THREE ISSUES REFERRED ABOVE. BY PLACING RELIANCE ON THE DECISION OF HONBLE SUPR EME COURT IN THE CASE OF MALABAR INDUSTRIAL COMPANY LTD. VS. CIT (243 ITR 83), THE L D. COUNSEL SUBMITTED THAT THE PROVISIONS OF SEC. 263 CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF ERROR I.T.A. NO.347/COCH/2013 3 COMMITTED BY THE ASSESSING OFFICER. HE FURTHER SUB MITTED THAT THE ASSESSING OFFICER HAS RAISED SPECIFIC QUERIES WITH REGARD TO TAX DEDUCTIO N AT SOURCE ON POLE RENTALS PAID TO KSEB, DEPRECIATION ON ASSETS, VIDE HIS LETTER DATED 28-06-2010 AND 24-11-2010 AND THE ASSESSEE HAS FILED DETAILED REPLIES VIDE ITS LETTER S DATED 30-07-2010, 06-12-2010, 21-12- 2010 AND 24-12-2010. ACCORDINGLY, THE LD. AR SUBM ITTED THAT IT IS NOT A CASE OF NON APPLICATION OF MIND ON THE PART OF THE ASSESSING OF FICER BUT ONLY A CASE OF SUBSTITUTION OF THE OPINION OF THE CIT WITH THAT OF THE ASSESSIN G OFFICER, WHICH IS SPECIFICALLY PROHIBITED IN 263 PROCEEDINGS. THE LD. COUNSEL, BY PLACING RELIANCE ON THE DECISION RENDERED BY THE HONBLE DELHI HIGH COURT IN THE CAS E OF CIT VS. ASHISH RAJPAL (2009) 320 ITR 674: CIT VS. VIKASH PLYMERS (2010) 194 TAXM AN 57, (DELHI) SUBMITTED THAT, MERELY BECAUSE THE ASSESSMENT ORDER DID NOT REFER T O THE QUERIES RAISED DURING THE COURSE OF SCRUTINY AND THE RESPONSE OF THE ASSESSEE THERETO, IT COULD NOT BE SAID THAT THERE WAS NO ENQUIRY AND THAT THE ASSESSMENT ORDER WAS THEREFORE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE L D. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED HIS ARGUMENTS ON MERITS OF THE THREE ISSU ES REFERRED SUPRA BY PLACING RELIANCE ON CASE LAWS ALSO. 4. ON THE CONTRARY, THE LD. DR SUBMITTED THAT THE A SSESSMENT ORDER IS SILENT ON THE THREE ISSUES WHICH WERE POINTED OUT BY THE LD. CIT. ACCORDINGLY THE LD. D.R SUBMITTED THAT IT IS NOT CLEAR, WHETHER THE ASSESSING OFFICER HAS ACTUALLY APPLIED HIS MIND ON THESE THREE ISSUES. ACCORDINGLY, THE LD. DR SUBMITTED TH AT THE LACK OF NON APPLICATION OF MIND ON THE PART OF THE ASSESSING OFFICER ON THE THREE I SSUES POINTED OUT BY THE LD. CIT WOULD RENDER THE ASSESSMENT ORDER ERRONEOUS AND PRE JUDICIAL TO THE INTERESTS OF THE REVENUE AND HENCE, THE INITIATION OF REVISION PROCE EDINGS U/S. 263 OF THE ACT IS VERY MUCH JUSTIFIED. 5. WE HAVE HEARD THE RIVAL CONTENTIONS. ADMITTE DLY, THE ASSESSING OFFICER DID NOT DISCUSS ANYTHING IN THE ASSESSMENT ORDER ABOUT THE THREE ISSUES THAT WERE POINTED OUT BY LD CIT IN THE IMPUGNED REVISION ORDER. BEFORE U S, THE LD A.R CLAIMED THAT THE AO DID RAISE QUERIES IN RESPECT OF THE THREE ISSUES DU RING THE COURSE OF ASSESSMENT PROCEEDINGS. HOWEVER, WE NOTICE THAT THE LETTER DA TED 28.6.2010 (PAGE 21A OF PAPER I.T.A. NO.347/COCH/2013 4 BOOK) RELATE TO THE INTIMATION OF CHANGE OF INCUMBE NT OF OFFICE AND ISSUE OF NOTICE U/S 142(1) OF THE ACT. THE INFORMATION CALLED IN THE N OTICE U/S 142(1) (PAGE 21B AND 21C OF PAPER BOOK) DO NOT INCLUDE THE THREE ISSUES UNDER C ONSIDERATION. IN PAGE 21 OF THE PAPER, THE ASSESSEE HAS FURNISHED COPY OF LETTER DA TED 24.11.2010 ISSUED BY THE ASSESSING OFFICER CALLING FOR VARIOUS DETAILS, BUT THE SAID LETTER ALSO DO NOT INCLUDE THE THREE ISSUES POINTED OUT BY LD CIT. IN THE LETTER DATED 24.11.2010, THE AO HAS CALLED FOR DETAILS OF DELAYED PAYMENTS U/S 43B AND 36(1)(V A), TO WHICH THE ASSESSEE, VIDE ITS LETTER DATED 30-07-2010, HAS REPLIED THAT THE DETAI LS/PARTICULARS CALLED FOR BY THE AO WITH REGARD TO SEC. 43B AND 40A(IA) HAVE BEEN FURNI SHED IN THE ANNEXURE TO FORM 3CD. THUS, THE ASSESSEE HAS MADE A REFERENCE TO SEC. 40( A)(IA) IN ITS LETTER, EVEN IF THERE WAS NO QUERY FROM THE AO. FURTHER, IT IS NOT THE C ASE OF THE ASSESSEE THAT HE HAS DEDUCTED THE TAX AT SOURCE FROM POLE RENTALS PAID T O KSEB. IT IS ALSO NOT KNOWN WHETHER THE TAX AUDITOR HAS REPORTED ABOUT THE SAID FAILURE IN THE TAX AUDIT REPORT. IN THE LETTER DATED 21.12.2010, IN PARA 6, THE ASSESSE E IS SIMPLY MENTIONING THAT IT HAS CLAIMED DEPRECIATION ON THE ADDITIONS TO FIXED ASSE TS AT THE RATES AS PER INCOME TAX RULES. THE RELEVANT QUERY WAS WITH REGARD TO THE D EPRECIATION CLAIMED ON FINANCE LEASE AND HIRE PURCHASE. IN THE LETTER DATED 24.12.2010, THE ASSESSEE IS REFERRING TO THE ORDER PASSED BY THE TRIBUNAL WITH REGARD TO POLE RE NTAL CHARGES U/S 194C OF THE ACT. HENCE, WE NOTICE THAT THE QUERIES RAISED BY THE AO RELATE TO SOME OTHER ITEMS AND WITH REGARD TO THE THREE ISSUES POINTED OUT BY LD CIT. HENCE, WE ARE UNABLE TO APPRECIATE AS TO HOW THE ASSESSEE IS CONTENDING THAT THE ASSES SING OFFICER HAS ACTUALLY CALLED FOR THE DETAILS IN RESPECT OF THE THREE ISSUES POINTED OUT BY LD CIT. 6. AT THIS JUNCTURE, WE FEEL IT PERTINENT TO R EFER TO THE DECISION RENDERED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GRASIM IND USTRIES LTD. V CIT (321 ITR 92), WHEREIN THE COURT HAS DISCUSSED ABOUT THE SCOPE OF PROVISIONS OF SECTION 263 AS UNDER: 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 CANCELING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. THE KE Y WORDS THAT ARE USED I.T.A. NO.347/COCH/2013 5 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 W ITHOUT APPLICATION 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 WIDE IMPORT AND IS NOT CONFINED TO A LOSS OF TAX. W HAT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE IS EXPLAINED IN THE JUDGMEN T OF THE SUPREME COURT (HEAD NOTE) : 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 O F 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 I N 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. THERE MAY NOT BE ANY DISPUTE THAT THE REVISION PROC EEDING SHALL NOT LIE ON THE ISSUES ON WHICH THE ASSESSING OFFICER HAS TAKEN A PLAUSIBLE V IEW AFTER EXAMINING AND APPLYING HIS MIND ON IT. IF THE AO DID NOT MAKE ANY ENQUIRY ON ANY OF THE PERTINENT ISSUE, IT WILL RESULT IN LACK OF APPLICATION OF MIND. IN THE INST ANT CASE, WE HAVE NOTICED THAT THE ASSESSING OFFICER HAS NOT CALLED FOR EXPLANATION FR OM THE ASSESSEE WITH REGARD TO THE THREE ISSUES POINTED OUT BY LD CIT AND HENCE THE QU ESTION OF APPLICATION OF MIND BY THE ASSESSING OFFICER DOES NOT ARISE AT ALL. I.T.A. NO.347/COCH/2013 6 7. THE HONBLE DELHI HIGH COURT, IN THE CASE OF TOYOTO MOTOR CORPORATION (306 ITR 49), HAS HELD THAT THE PROCEEDINGS BEFORE THE AO AR E QUASI JUDICIAL PROCEEDINGS AND A DECISION TAKEN BY THE AO IN THIS REGARD MUST BE SUP PORTED BY REASONS. IN THE CASE BEFORE THE DELHI HIGH COURT, THE ASSESSING OFFICER PASSED A CRYPTIC ORDER DROPPING THE PENALTY PROCEEDINGS WITHOUT GIVING ANY REASON AND H ENCE THE SAID ORDER WAS REVISED BY THE LD CIT U/S 263 OF THE ACT. THE ASSESSEE CHALLE NGED THE REVISION ORDER BEFORE THE TRIBUNAL AND COULD SUCCEED. THE DEPARTMENT CARRIED THE MATTER IN APPEAL BEFORE THE HONBLE DELHI HIGH COURT, WHICH UPHELD THE REVISION ORDER PASSED BY LD CIT U/S 263 OF THE ACT FOR THE REASONS STATED ABOVE. THE SAID ORD ER OF THE DELHI HIGH COURT HAS BEEN APPROVED BY THE HONBLE SUPREME COURT IN THE CASE O F TOYOTO MOTOR CORPORATION (306 ITR 52) WITH THE OBSERVATION THAT THE ASSESSING OFF ICER SHOULD PASS A REASONED ORDER. THESE DECISIONS CLEARLY BRING OUT THAT THE ASSESSME NT ORDER SHOULD BE PASSED WITH OR SHOULD CONTAIN PROPER REASONS ON VARIOUS ISSUES. 8. IN THE INSTANT CASE, THE ASSESSING OFFICER HA S FAILED TO EXAMINE THE ISSUE RELATING TO THREE ISSUES POINTED OUT BY LD CIT AND HENCE, IN OU R VIEW ALSO, THE ASSESSMENT ORDER IS RENDERED ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 9. IN VIEW OF THE FOREGOING DISCUSSIONS, IN OUR VIEW, THE LD CIT WAS JUSTIFIED IN PASSING THE IMPUGNED REVISION ORDER BY INVOKING THE PROVISIONS OF SEC. 263 OF THE ACT. HOWEVER, WE NOTICE THAT THE LD CIT HAS DIRECTED THE AO TO MAKE THE ADDITIONS RELATING TO THE THREE ISSUES UNDER CONSIDERATION. THE LD A. R SUBMITTED THAT ALL THE THREE ISSUES REQUIRE FRESH EXAMINATION AT THE END OF THE AO BY C ONSIDERING THE RELEVANT FACTS AND ALSO THE LATEST JUDICIAL PRONOUNCEMENTS. ACCORDINGL Y HE PRAYED THAT THE ORDER OF LD CIT MAY BE MODIFIED. WE FIND FORCE IN THE SAID PLEA OF LD A.R. IN OUR VIEW ALSO, ALL THE THREE ISSUES POINTED OUT BY LD CIT NEED TO BE EXAMI NED AT THE END OF THE ASSESSING OFFICER. ACCORDINGLY, WE MODIFY THE ORDER OF LD CI T AND RESTORE ALL THE THREE ISSUES TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTIO N TO EXAMINE THEM AFRESH, WITHOUT BEING INFLUENCED BY THE OBSERVATIONS MADE BY LD CIT, BY D ULY CONSIDERING THE INFORMATION AND EXPLANATIONS THAT MAY BE FURNISHED BY THE ASSES SEE AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH LAW. I.T.A. NO.347/COCH/2013 7 10. IN THE RESULT, THE APPEAL FILED BY THE ASSES SEE IS PARTLY ALLOWED. PRONOUNCED ACCORDINGLY ON 13-11 -2013. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 13TH NOVEMBER, 2013 GJ COPY TO: 1. ASIANET SATELLITE COMMUNICATIONS LTD., 3 RD FLOOR, KARIMPANAL ARCADE, EAST FORT, THIRUVANANTHAPURAM-23 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -1(1), THIRUVANANTHAPURAM. 3 THE COMMISSIONER OF INCOME-TAX, THIRUVANANTHAPURA M. 4. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 5. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN