M/s EDCO India Private Limited, Hyderabad V. Dy.CIT, Circle-2(2), Hyderabad

ITA 381/HYD/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6230 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 27-10-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 22-03-2013
• Court: TRIBUNAL
• Department Lawyers: G APARNA RAO
• Assessee Lawyers: MURALIMOHANA RAO
• Keywords: Revision of order; Depreciation; Assessment record
• Section: 143(3); 263

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 381/HYD/2013 ASSESSMENT YEAR: 2008-09 M/S EDCO INDIA PVT LTD. HYDERABAD PAN AAACE4487E VS. ACIT, CIRCLE-2(2) HYDERABAD (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MURALI MOHANA RAO REVENUE BY : SMT G. APARNA RAO DATE OF HEARING : 19-01-2017 DATE OF PRONOUNCEMENT : 25-01-2017 ORDER PER P. MADHAVI DEVI, J.M.: IN THIS APPEAL, THE ASSESSEE IS AGGRIEVED BY THE O RDER OF THE CIT, CIRCLE-2(2), HYDERABAD DATED 28-12-2010 , U/S 263 OF THE IT ACT, DIRECTING THE A.O TO CONDUCT A FRESH ENQUIRY WITH REGARD TO THE ASSESSEES CLAIM OF DEPR ECIATION. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY, ENGAGED IN BUSINESS OF EXECUTION OF CIVIL CONTRACTS , FILED ITS E-RETURN ON 02-12-2008 FOR THE A.Y2008-09 ADMITTING INCOME OF RS.4,47,31,250. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE ASSESSEE PRO DUCED VOUCHERS FOR VARIOUS EXPENSES. AFTER PERUSAL AND VERIFICATION OF SAID VOUCHERS, THE A.O DISALLOWED T HE EXPENDITURE TO THE EXTENT OF RS.55,10,035. HE ALSO DISALLOWED CERTAIN OTHER EXPENDITURE ON ACCOUNT OF PURCHASE OF SAND AND METAL AND COMPUTED THE INCOME ACCORDINGLY. 2 ITA NO. 381/HYD/2013 M/S EDCO INDIA PVT., LTD., HYDERABAD. 3. THEREAFTER, THE CIT U/S 263 OF THE ACT, PERUSED THE ASSESSMENT RECORDS AND OBSERVED THAT FOR THE A.Y 20 07-08, THE ASSESSEE HAD WITHDRAWN ITS CLAIM OF DEPRECIATIO N ON PLANT AND MACHINERY, AS THE ASSESSEE WAS UNABLE TO PROVE THE GENUINENESS OF PURCHASE OF PLANT AND MACHINERY FROM M/S AMR POWER LTD. HE ALSO OBSERVED THAT DURING THE ASSESSMENT PROCEEDINGS FOR THE A.Y 2007-08, THE ENQ UIRIES WERE MADE THROUGH AN INSPECTOR WITH RESPECT TO THE PLANT AND MACHINERY FROM M/S AMR POWER LTD, WHICH REVEAL ED THAT THE SAID COMPANY DID NOT EXIST AT THE GIVEN AD DRESS AND THAT IN VIEW OF THESE FINDINGS ALONE, THE ASSES SEE HAD WITHDRAWN THE CLAIM OF DEPRECIATION. THEREFORE, TH E CIT WAS OF THE OPINION OF THAT IF THE GENUINENESS OF PU RCHASE OF PLANT AND MACHINERY COULD NOT BE ESTABLISHED FOR TH E A.Y 2007-08, THEN THEIR EXISTENCE CANNOT BE ACCEPTED F OR THE A.Y 2008-09 ALSO AND BY ALLOWING DEPRECIATION FOR T HE A.Y 2008-09, THE ASSESSMENT ORDER HAS BECOME ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THEREF ORE, HE SET ASIDE THE ASSESSMENT ORDER AND DIRECTED THE A.O TO CONDUCT ENQUIRIES AND RE-DO THE ASSESSMENT, AFTER GIVING TH E ASSESSEE A FAIR OPPORTUNITY OF HEARING. AGAINST TH IS ORDER OF THE CIT, THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LD. COUNSEL FOR THE ASSESSEE, SHRI P. MURALI MOHAN RAO, SUBMITTED THAT THE ASSESSEE HAD PURCHASE D PLANT AND MACHINERY FROM THE M/S AMR POWER LTD IN T HE F.Y 2006-07 RELEVANT TO THE A.Y 2007-08, BUT DUE TO SHIFTING OF THE SAID COMPANYS OFFICE FROM BANGALOR E TO HYDERABAD, THE EXISTENCE OF THE SAID COMPANY AT BAN GALORE COULD NOT BE PROVED, DUE TO WHICH THE ASSESSEE HAD 3 ITA NO. 381/HYD/2013 M/S EDCO INDIA PVT., LTD., HYDERABAD. WITHDRAWN THE CLAIM OF DEPRECIATION FOR THE A.Y 200 7-08. HE HAS DRAWN OUR ATTENTION TO PAGE NO. 68 OF THE PA PER BOOK FILED BY THE ASSESSEE, WHICH IS A NOTE NOT TO THE ASSESSEE AFFIXED BY THE A.O TO THE ASSESSMENT ORDE R, WHEREIN THE A.O HAS OBSERVED AS UNDER: THIS CASE HAS BEEN CONVERTED TO THE SCRUTINY WITH THE PRIOR APPROVAL OF THE CCIT. THE ISSUES DEALT WITH I N THE ASSESSMENT ORDER HAVE BEEN DISCUSSED WITH THE ADDL. CLT, RANGE-2, HYDERABAD ALONG WITH THE ASSESSEE AND THE AUTHORIZED REPRESENTATIVE. ACCORDINGLY THE ASSESSME NT IS FINALIZED. (II) DURING THE YEAR THE ASSESSEE COMPANY RECEIVED FOREIGN EQUITY FROM M/S SAPHIRE VENTURES LTD., MAURITIUS AM OUNTING TO RS.13.03 CRORES TOWARDS SHARE APPLICATION MONEY. FO R THIS THE ASSESSEE FILED A CONFIRMATION LETTER ALONG WITH COP IES OF FIRCS. (III) DURING THE F.Y.2006-07 RELEVANT TO THE A.Y.20 07-08 AND DURING THE F.Y .2007 -08 RELEVANT TO THE A.Y.2008-0 9, THE ASSESSEE COMPANY PURCHASED ASSETS WORTH RS.221.14 L AKHS AND RS.L.83 LAKHS RESPECTIVELY FROM M/S AMR POWER P VT. LTD., BANGALORE. TILE ASSESSEE DURING THE. COURSE OF ASSE SSMENT PROCEEDINGS PRODUCED COPIES OF DEBIT NOTES AND CONF IRMATION LETTER FROM THE SAID COMPANY STATING THAT THE SAID ASSETS WERE SOLD TO THE ASSESSEE COMPANY AND THAT THE SELLER CO MPANY HAVE NOT USED THE ABOVE ASSETS NOR ANY DEPRECIATION CLAI MED BY THEM ON THE SAID ASSETS. AFTER PERUSAL OF THE SAME, THE DEPRECIATION ON THIS ASSET FOR THE A.Y.2008-09 IS ALLOWED. SINCE THE RAP HAS RAISED THIS SPECIFIC POINT DURING THE COURSE OF AUD IT FOR THE A.Y.2007-08, THIS POINT STANDS VERIFIED BEFORE ALLO WING THE SAME FOR THIS A.Y.2008-09. 5. THUS, ACCORDING TO THE LD. COUNSEL, THE A.O HAS VERIFIED THE ASSESSEES CONTENTIONS BEFORE COMPLET ING THE ASSESSMENT ALLOWING THE DEPRECIATION CLAIM OF THE A SSESSEE. THEREFORE, ACCORDING TO HIM, THE REVISION PROCEEDIN GS ARE NOT SUSTAINABLE. IN SUPPORT OF HIS CONTENTIONS HE PLACED RELIANCE UPON THE FOLLOWING DECISIONS. 4 ITA NO. 381/HYD/2013 M/S EDCO INDIA PVT., LTD., HYDERABAD. EDCO INDIA PRIVATE LIMITED A.Y. 2008-09 INDEX FOR CASE LAWS S.NO NAME OF THE ASSESSEE COURT CITATIONS RELEVANT PARA PAGES NO 1 CIT VS MALABAR INDUSTRIAL CO. LTD SUPREME COURT 109 TAXMAN 66(SC) 7 1 TO 5 2 CIT VS DEVELOPMENT CREDIT BANK LTD BOMBAY HIGH COURT 196 TAXMAN 329 (BOMBAY) 7 6 TO 9 3 ITO VS. D.G HOUSING PROJECTS LTD DELHI HIGH COURT 20 TAXMAN 587 (DELHI) 19 10 TO 17 4 CIT VS SPECTRA SHARES & SCRIPS (P.) LTD AP HIGH COURT 36 TAXMAN 348 (ANDHRA PRADESH) 22-63 18 TO 41 6. LD. DR, ON THE OTHER HAND, SUBMITTED THAT THE ASSESSEE ITSELF HAD WITHDRAWN THE CLAIM OF DEPRECIA TION FOR THE A.Y 2007-08 AND THEREFORE THE SAID CLAIM CANNOT BE MADE AND ALLOWED IN THE A.Y 2008-09 AND SUBSEQUENT YEARS AND ALLOWING OF THE CLAIM OF DEPRECIATION FOR THE A.Y 2008-09 HAS RESULTED IN THE ASSESSMENT ORDER BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. THEREFORE, ACCORDING TO THE LD. DR, THE ORDER OF TH E CIT IS SUSTAINABLE AND HAS TO BE UPHELD. 7. HAVING REGARD TO THE RIVAL CONTENTIONS AND MATER IAL ON RECORD, WE FIND FROM THE NOTE NOT TO THE ASSESSEE WHICH IS PLACED AT PAGE NO. 68 OF THE PAPER BOOK, THAT THE A .O HAS ALSO TAKEN NOTE OF THE FACT THAT FOR THE A.Y 2007-0 8, THE ASSESSEE HAS AGREED FOR WITHDRAWAL OF THE CLAIM OF DEPRECIATION, AND THAT THE A.O HAS MADE VERIFICATIO N OF THE ASSESSEES CLAIM BEFORE ALLOWING IT FOR THE A.Y 200 8-09. THEREFORE, THE A.O HAS TAKEN ONE OF THE POSSIBLE VI EWS AND HENCE THE ASSESSMENT ORDER CANNOT BE SAID TO BE 5 ITA NO. 381/HYD/2013 M/S EDCO INDIA PVT., LTD., HYDERABAD. ERRONEOUS. FOR A REVISION ORDER TO BE SUSTAINABLE, THE ASSESSMENT ORDER SHOULD BE BOTH ERRONEOUS AS WELL A S PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN THE CASE BEFORE US, IT IS NOT THE CASE OF REVENUE THAT THE A .O HAS NOT MADE ANY ENQUIRIES BUT IT IS THE CASE OF THE RE VENUE THAT THE A.O HAS NOT MADE ADEQUATE ENQUIRIES BEFORE ACCEPTING THE ASSESSEES CLAIM. 8. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO FILED THE COPIES OF THE TDS CERTIFICATES IN PROOF E XISTENCE OF M/S AMR POWER LTD., AND ALSO SUBMITTED THE A.O HAS ALSO GIVEN CREDIT TO THE TDS MADE BY M/S AMR POWER LTD. IT WAS ALSO SUBMITTED THAT ASSESSEE HAD DONE SUB-CONTR ACT WORK TO THE ABOVE COMPANY AND THE MACHINERY WAS PURCHASED AND DEBITED TO THE RUNNING ACCOUNT OF THE SAID COMPANY. THEREFORE, THE EXISTENCE OF THE SAID COMP ANY IS PROVED. WE ACCEPT THE SAID CONTENTIONS OF THE ASSE SSEE BECAUSE THE A.O FOR THE A.Y 2008-09 HAS HIMSELF STA TED THAT HE VERIFIED THE CONTENTIONS OF THE ASSESSEE BE FORE ALLOWING THE CLAIM OF DEPRECIATION FOR THE RELEVANT ASSESSMENT YEAR. THEREFORE, WE HOLD THAT THE REVIS ION ORDER IS NOT SUSTAINABLE AND THE RELEVANT APPEAL OF THE ASSESSEE IS ALLOWED, AND THE ASSESSMENT ORDER U/S 1 43(3) IS RESTORED. 9. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED PRONOUNCED IN THE OPEN COURT ON 25 TH JANUARY , 2017. SD/- SD/- (B. RAMAKOTAIH) (P. MADHAVI DEVI ) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 25 TH JANUARY, 2017 6 ITA NO. 381/HYD/2013 M/S EDCO INDIA PVT., LTD., HYDERABAD. KRK 1) M/S EDCO INDIA PVT LTD C/O P MURALI & CO. CA 6-3-655/2/3, IST FLOOR, SOMAJIGUDA, HYD-82 2) DCIT, CIR-2(2) 3) CIT -II, HYDERABAD 4) ACIT, RANGE-2, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., H YDERABAD. 6) GUARD FILE