SALASAR BALAJI SHIP BREAKERS P.LTD, MUMBAI V. ITO 7(2)(2), MUMBAI

ITA 3802/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93210 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 13-07-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 29-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAVEEN GUPTA D R
• Keywords: Depreciation; Principle of natural justice; Reason to believe; Revenue expenditure; Reassessment proceedings
• Section: 143(3); 148; 37

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI A.D. JAIN, JM AND SHRI N.K. BILLAIYA, A M .. , . . , ./ I.T.A. NO. 3802 /MUM/2012 ( / ASSESSMENT YEAR : 2004-05 SALASAR BALAJI SHIP BREAKERS O, LTD., 34, QUAY STRET, BEW DARUKHANA, MUMBAI 400 010. / VS. INCOME TAX OFFICER - WARD 7(2)(2), AAYAKAR BHAVAN, MARINE LINES, MUMBAI 400 020. ./ PAN : AAECS 5872M ( ! / APPELLANT ) .. ( '# ! / RESPONDENT ) A PPELLANT BY SHRI C.V. JAIN R E SPONDENT BY : SHRI NAVEEN GUPTA (D.R.) $ % & ' ( ) / DATE OF HEARING : 15-07-2015 *+,- ' ( ) / DATE OF PRONOUNCEMENT : 15-07-2015 [ . / O R D E R PER A.D. JAIN, J.M . : .. , THIS IS ASSESSEES APPEAL FOR A.Y. 2004-05, RAISING THE FOLLOWING EFFECTIVE GROUNDS:- 1. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE & IN LAW THE LEARNED CIT (A) HAS ERRED IN UPHOLDING THE IMPUGNED ASSESSMENT ORDER PASSED BY THE LEARNED ASSESSING OFFICER (LD. A 0) U/S 143(3) R.W. S.147 WITHOUT JURISDICTION IN LAW AS: - A. THE LD. A. O. HAD FAILED TO APPRECIATE THE FACT THAT THE DEPRECIATION ON PREMIUM PAID FOR LICENCE TO USE THE PLOT WAS INI TIALLY CLAIMED IN THE ASSESSMENT YEAR 2001-02 AND THE SAME WAS ALLOWED TH ERE, HENCE THERE WAS NO SCOPE FOR RE-CONSIDERING THE ISSUE IN THE YE AR UNDER APPEAL. ITA 3802/M/12 2 B. THERE WAS NO REASON TO BELIEVE THAT THE INCOME H AD ESCAPED ASSESSMENT. C. THE LD A.0 HAD NOT FOLLOWED THE PROCEDURE OF REO PENING AS EXPLAINED BY HON'BLE SUPREME COURT IN CASE OF GKN D RIVESHAFTS (INDIA) LTD. AND OTHER PRONOUNCEMENTS. D. THE IMPUGNED ASSESSMENT ORDER IS THEREFORE, ILLE GAL, INVALID, VOID AB- INITIO & WITHOUT JURISDICTION IN LAW. 2. WITHOUT PREJUDICE TO ABOVE THE LD. CLT (A) HAS E RRED IN UPHOLDING THE DECISION OF THE LD. A 0 OF DISALLOWING DEPRECIATION ON LICENSE PREMIUM PAID BY THE APPELLANT FOR USE OF SHIP BREAKING PLOT ALREADY ALLOWED TO THE APPELLANT IN EARLIER YEARS. 3. ALTERNATIVELY THE LD. CLT (A) HAS ALSO FAILED TO CONSIDER THAT THE PAYMENT MADE IN RESPECT OF OBTAINING LICENSE TO USE THE PLO T FOR SHIP BREAKING PURPOSES SHALL BE CONSIDERED TO BE REVENUE EXPENDITURE AND T HE WHOLE AMOUNT SHALL BE ALLOWED U/S. 37 IN VIEW OF THE RULING OF BOMBAY HIG H COURT IN CASE OF NAGARSETH SHIP BREAKERS AND LOSS ARISING THEREON SH ALL BE ADJUSTED IN THE YEAR UNDER APPEAL. 2. AS PER GROUND NOS. 1(C), THE REOPENING IS BAD IN LAW INASMUCH AS THE REASON RECORDED FOR SUCH REOPENING WERE NEVER PROVI DED BY THE A.O. TO THE ASSESSEE, DESPITE SPECIFIC REQUEST IN THIS REGARD. THIS OBJECTION WAS RAISED BY THE ASSESSEE BEFORE THE LD. CIT(A), AND THE LD. CIT (A) WHO PROVIDED THE REASONS RECORDED FOR THE REOPENING, AS NOTED IN PARA 2.2 OF THE IMPUGNED ORDER. THE OBJECTION RAISED BY THE ASSESSEE AGAINST THE REASON S WERE REJECTED BY THE LD. CIT(A). NOW THE ASSESSEE CONTENDS THAT THIS COURSE OF ACTION IS NOT IN ACCORDANCE WITH LAW INASMUCH AS THE MANDATE OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS (INDI A LTD. VS. ITO, 259 ITR 19 (SC) CITED BY THE ASSESSEE HAS NOT BEEN COMPLIED WITH AND, THEREFORE, THE ASSESSMENT ORDER PASSED IN THE REASSESSMENT PROCEED INGS IS INVALID, RENDERING THE IMPUGNED ORDER INVALID TOO.. 3. THE LD. D.R., ON THE HAND, HAS PLACED RELIANCE O N THE IMPUGNED ORDER. 4. IN THIS REGARD, WE FIND THAT IN THE CASE OF ALL ANA COLD STORAGE LTD. VS. ITO AND OTHERS, 287 ITR 01 (BOM), IT HAS BEEN HELD THAT THE LAW LAID DOWN ITA 3802/M/12 3 BY THE SUPREME COURT IN GKN DRIVESHAFTS (INDIA) LT D. (SUPRA) IS THAT WHEN A NOTICE U/S 148 OF THE INCOME TAX ACT, 1961, IS ISSU ED, THE NOTICEE IS EXPECTED TO FILE A RETURN AND IF HE SO DESIRES, HE MAY SEEK THE REASONS FOR ISSUING THE NOTICE, WHEREON, THE A.O. IS BOUND TO FURNISH THE R EASONS WITHIN A REASONABLE TIME; THAT ON THE RECEIPT OF THE REASONS, THE NOTIC EE IS ENTITLED TO FILE OBJECTIONS AND THE A.O. IS BOUND TO DISPOSE OF THEM BY PASSING A SPEAKING ORDER. IN THE PRESENT CASE, WE FIND THAT THE OBJECT IONS RAISED BY THE ASSESSEE AGAINST THE REASONS RECORDED FOR REOPENING THE COMP LETED ASSESSMENT HAVE BEEN DEALT WITH ONLY AT THE FIRST APPELLATE STAGE B Y THE LD. CIT(A), POST THE COMPLETION OF THE REASSESSMENT PROCEEDINGS CULMINAT ING IN THE ORDER DTD. 24.12.2009, THEREBY DEFEATING THE VERY PURPOSE OF T HE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF GKN DRIVESHAF TS (INDIA) LTD. (SUPRA), AS REFERRED TO IN ALLANA COLD STORAGE LTD. (SUPRA ). THIS IS SO, SINCE THE DECISION ON THE OBJECTIONS AGAINST THE REASONS RECO RDED BY THE A.O. FOR REOPENING THE COMPLETED ASSESSMENT HAS TO COME BEFO RE ANY ORDER IS PASSED ON THE MERITS OF THE REASSESSMENT. DECIDING THE OBJ ECTIONS, TAKEN BY THE ASSESSEE AGAINST THE REASONS RECORDED FOR THE REOPE NING AT THE FIRST APPELLATE STAGE IS, IN OUR CONSIDERED OPINION, NOT AT ALL WHA T IS ENVISAGED IN THE PRINCIPLES OF NATURAL JUSTICE, WHEREBY, THE ASSESSE E NEEDS MUST BE ACCORDED DUE OPPORTUNITY OF HEARING IN THE MATTER OF INITIAT ING OF REOPENING PROCEEDINGS IN A COMPLETED ASSESSMENT. THEREFORE, THE ACTION O F THE LD. CIT(A) IN REJECTING THE OBJECTIONS RAISED BY THE ASSESSEE AGAINST THE R EASONS RECORDED FOR REOPENING THE COMPLETED ASSESSMENT FOR THE YEAR UND ER CONSIDERATION IS CANCELLED. THESE OBJECTIONS ARE REMITTED TO THE FIL E OF THE A.O., TO BE FIRST DECIDED BY HIM AND FROM THAT STAGE, TO PROCEED WITH THE REASSESSMENT PROCEEDINGS, IN ACCORDANCE WITH LAW. THE ASSESSEE S HALL BE GIVEN ADEQUATE OPPORTUNITY OF HEARING AND THE ASSESSEE SHALL CO-OP ERATE IN THE REMAND PROCEEDINGS. ITA 3802/M/12 4 5. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS T REATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JULY, 2015 . ' *+,- $ /0 1 2 15-07-2015 + ' 3& SD/- (N.K. BILLAIYA) (A.D. JAIN ) ACCOUNTANT MEMBER /J UDICIAL MEMBER / $ & MUMBAI ; 1 DATED 22-07-2015 [ %.../ R.K. R.K. R.K. R.K. , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '# ! / THE RESPONDENT. 3. $ E( () / THE CIT(A)- 32, MUMBAI 4. $ E( / CIT- CITY-= 21, MUMBAI 5. H%I 3 '(JK , ) JK- , / $ & / DR, ITAT, MUMBAI G BENCH 6. 3 L M & / GUARD FILE. ! ( / BY ORDER, # H( '( //TRUE COPY// )/(* + ( DY./ASSTT. REGISTRAR) , / $ & / ITAT, MUMBAI