Samantaraj Films Pvt. Ltd, Cuttack V. ACIT, Cuttack

ITA 383/CTK/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4406 (ITAT-CUTTACK)
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 12-05-2011
• Assessment Year: misc
• Appeal Filed On: 29-10-2010
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Depreciation; Reason to believe; Unabsorbed depreciation; Reassessment proceedings
• Section: 143(1)

Judgement Text

IN THE INCME TAX APPELLATE TRIBUNAL, CUTTACK BENCH , CUTTACK BEFORE : HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER, AND HONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER. ITA NO. 383,384,385,386,387,388,389 & 390/CTK/2010 AND STAY PETITIONS NO.35 AND 36/CTK /2010 ( AYS 1987 - 88, 1988 - 89,1989 - 90, 1990 - 91, 1991 - 92, 1992 - 93, 1993 - 04 AND 1994 - 95 SAMANTARAY FILMS P VT. LTD., RAJABAGICHA, CUTTACK PAN: AAHCS 0496 C VERSUS ASST. COMMISSIONER OF INCOME - TAX, CUTTACK RANGE 2 , CUTTACK. (APPELLANT) (RESPONDENT) FOR TH E APPELLANT: SHRI J.B.SAHOO, AR FOR THE RESPONDENT SHRI S.C.MOHANTY, DR ORDER PER BENCH : THIS BUNCH OF APPEALS AND THE STAY PETITIONS FOR THE ASSESSMENT YEAR 1993 - 94 AND 1994 - 95 ARE BEING TAKEN UP TOGETHER ON THE BASIS OF TRIBUNAL HAVING ADJUDICATED TH E ISSUE FOR THE IMPUGNED AYS IN ITA NO.477 TO 484/CTK/2003 VIDE ITS ORDER 9.7.2004 WHEN THE ISSUE RELATING TO THE VALIDITY OF RE - ASSESSMENT UNDER THE PROVISIONS OF SECTIONS 147/148 WAS TO BE CONSIDERED BY THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS ) AF RESH . BY WAY OF A COMMON ORDER OF THE LEARNED CIT(A) DT.24.8.2010 ON THE DIRECTION OF THE TRIBUNAL, THE LEARNED CIT(A) CONCLUDED THAT THE ASSESSING OFFICER HAD RIGHTLY REOPENED THE ASSESSMENT FOR THE AYS 1987 - 88 TO 1994 - 95. 2. THE LEARNED COUNSEL FOR THE ASSESSEE INITIATING HIS ARGUMENTS GAVE THE BRIEF FACTS RELATING TO THE ISSUE IN DISPUTE BY SUBMITTING THAT THE ASSESSEE IN THE PRESENT CASE RUNS TWO CINEMA HALLS NAMELY GRAND CINEMA AND NISHAMANI CINEMA FOR EXHIBITION OF FILMS. THE ASSESSEE FOR THE ASSESSM ENT YEAR 1987 - 1988 W AS ASS ESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT . THE ASSESSING AUTHORITY SUBSEQUENTLY REOPENED ASSESSMENT FOR THE AFORESAID PERIOD UNDER SECTION 144/148 OF THE I.T.ACT. ACCORDING TO THE A SSESSING AUTHORITY, THE ASSESSEE HAD REVAL UED THE BUILDING AND MACHINERIES OF GRAND C IN EMA AS A ITA NO S . 383,384,385,386, 3 87,388,389 AND 390/CTK/2010 AND STAY PETITIONS NO.35 AND 36/CTK/2010 2 RESULT OF WHICH THE VALUE OF THE ASSETS WAS ENHANCED BY AN AMOUNT O F RS. 33 LAKHS. THE ASSESSEE HAS CLAIMED DEPRECIATION ON THE ENHANCED VAL UE OF ASSETS AN D WRITTEN DOWN VALUE AFTER DEPRECIATION ON THE ENHANCED VALUE OF ASSETS WAS BROUGHT FORWARD TO THE ASSESSMENT YEAR 19 87 - 88 AND DEPRECIATION WAS CLAIMED ON THE SAME. THE ASSESSEE KEPT ON CLAIMING THE DEPRECATION IN THE ABOVE MANNER IN THE SUBSEQUENT ASSESSMENT Y EARS ON DOWN VALUE OF ASSETS WHICH HAD BEE N REVALUED. ACC ORD INGLY, THE ASSESSING A UTHORITY HELD THAT AS THERE WERE NO PROVISIONS ON THE BASIS OF REVALUATION OF ASSETS, CLAIM OF HIGHER DEPRECIATION RESULTS IN UNDERSTATEMENT OF INCOME. THE ASSESSING AUTHORITY ACCORDINGLY REASSESSED THE ASSESSEE UNDE R SECTION 148/144 OF THE 1.T. ACT BY PREPARING A STATEMENT SHOWING CORRECT ACCOUNT OF DEPRECIATION ALLOWABLE ON THE BASIS OF ORIGINAL WRITTEN DOWN VALUE AND ACCORDINGLY COMPLETED THE ASSESSMENT ON THE BASIS OF SUCH DEPRECIATION CHART IN RESPECT OF GRAND CI NEMA. THE APPELLANT PREFERRED APPEAL BEFORE THE COMMISSIONER OF INCOME - TAX (APPEALS) BHUBANESWAR IN ITA NOS. 0126/99 - 00 TO 133/99 - 00 AND THE FIRST APPELLATE AUTHORITY VIDE ORDER DATED 3.3.2003 WHILE CONFIRMING THE ASSESSMENT DISMISSED THE APPEAL. THE ASSE SSEE BEING AGGRIEVED BY THE ORDER PASSED THE F IRST APPELLATE AUTHORITY PREFERRED FURTHER APPEAL BEFORE THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK. THE LEARNED ITAT VIDE ORDER DATE 9.7.2004 PASSED IN APPEAL BEARING ITA NO. 477 - 484(CTK)/03 DI SPOSED OF THE APPEALS DIRECTING THE CIT [A] TO DECIDE THE ISSUE REGARDIN G THE REOPENING OF ASSESSMENT AFTER GRANTING OPPORTUNITY OF HEARING TO THE ASSESSEE . THE CIT [A] BY ORDER DATED 24 .8.2010 CONFIRMED REOPENING OF ASSESSMENT FOR THE ASSESSMENT YEARS 19 87 - 88 TO 1994 - 95. IN SUPPORT OF HIS CONTENTION THE LEARNED COUNSEL FOR THE ASSESSEE FILED A PAPER BOOK WHICH INCLUDES INTER ALIA ORDER OF THE ITAT, SMC BENCH, CUTTACK DT.9.7.2004 ALONG WITH THE FINANCIAL STATEMENT FOR THE ASSESSMENT YEAR 1986 - 87 AND THE AC KNOWLEDGEMENT OF HAVING FILED THE RETURNS INDICATING THAT THE CREATION OF CAPITAL RESERVE BY REVALUING THE ASSETS HAVE BEEN MADE KNOWN TO THE DEPARTMENT BY WAY OF REGULAR RETURNS. BUT THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE REASON ACCORDE D BY THE LEARNED CIT(A) OF ITA NO S . 383,384,385,386, 3 87,388,389 AND 390/CTK/2010 AND STAY PETITIONS NO.35 AND 36/CTK/2010 3 THE RETURNS HAVING BEEN DISPOSED OF UNDER THE PROVISIONS OF SECTION 144, 143(1) AND 143(1)(A) THEREFORE BEARS NO RELEVANCE TO THE FACT THAT THE DEPARTMENT WAS UNAWARE OF HAVING A REASON TO BELIEVE THAT THE DEPRECIATION AS HAVE BE EN CLAIMED ON REVALUED AMOUNT DULY AUDITED SUPPORT ED BY WAY OF AUDIT REPORT WAS NOT AVAILABLE TO THE DEPARTMENT. FOR THAT PROPOSITION HE HAS ALSO ENCLOSED A COPY OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 1986 - 87 WHICH INTER ALIA INDICATED THAT THE EN HANCED VALUE HAD BEEN SUBJECTED TO ASSESSMENT AND IT INDICATE S IN CLAIMING THE LOSS WHICH THE ASSESSING OFFICER HAS ACKNOWLEDGED TO BE CARRIED FORWARD AS UNABSORBED DEPRECIATION. HE PRAYED THAT THE CLAIM OF DEPRECIATION IS PART AND PARCEL OF A LEGITIMATE R IGHT OF AN ASSESSEE THEREFORE CANNOT BE SUBJECTED TO REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT AS HAS BEEN ALSO ADJUDICATED UPON BY VARIOUS APPELLATE AUTHORITIES. HE POINTED OUT THAT THE REVALUATION OF THE ASSETS TOOK PLACE ON WHICH VALUE THE DE PRECIATION WAS CLAIMED CANNOT BE A VALID REASON FOR INITIATING REASSESSMENT PROCEEDING. 3. THE LEARNED DR OPPOSED THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE INDICATING THAT THE TRIBUNAL HAD GIVEN A FINDING TO THE AGITATED GROUND RELATING TO VA LIDITY OF INITIATION OF PROCEEDINGS U/S.147 TO THE LEARNED CIT(A) WHO GAVE A CLEAR - CUT FINDING THAT THE ASSESSEE HAD NOT BEEN SUBJECTED TO SCRUTINY INSOFAR AS HAVING REVALUED THE ASSETS THE ASSESSEE HAD NOT INDICATED A CLAIM OF HIGHER DEPRECIATION IN ANY M ANNER WHATSOEVER IN THE SAID RETURNS. CLAIMING OF HIGHER DEPRECIATION WAS NOT ON THE BASIS OF COST TO THE ASSESSEE BUT ON ITS OWN WHICH INCREASED THE CAPITAL RESERVE WAS SUBJECTED TO TAX AS PER THE PROVISIONS OF THE I.T.ACT. THE ASSESSEE HAD BEEN HITHERTO FILING THE LOSS RETURN AND APPARENTLY NOT PAYING ANY TAX WAS TO INDICATE THE USE OF ALL THE ASSETS ON WHICH HIGHER DEPRECIATION HAD BEEN CLAIMED WAS THE BASIS FOR REAS ON TO BELIEVE THAT INCOME HAD ES CAPED ASSESSMENT. THE LEARNED CIT(A) THEREFORE, RIGHTLY C ONSIDERED THAT THE EXCESS DEPRECIATION CLAIMED ON THE ENHANCED VALUE WAS NOT ELIGIBLE FOR CARRYING FORWARD AS UNABSORBED DEPRECIATION WAS SOUGHT TO BE CLAIMED AS AVAILABLE TO THE ASSESSING OFFICER IN POINTING TO THE ORDER ITA NO S . 383,384,385,386, 3 87,388,389 AND 390/CTK/2010 AND STAY PETITIONS NO.35 AND 36/CTK/2010 4 U/S.143(3) FOR THE ASSESSMENT YEA R 1986 - 87. THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH THAT THE INDICATION OF CLAIMING HIGHER DEPRECIATION ON REVALUED ASSETS WAS ALSO REGULARLY FURNISHED IN ACCORDANCE WITH THE PROVISIONS OF THE I.T.ACT AND THE COMPANIES ACT WHICH REQUIRED VERIFICATION ON THE BASIS OF REASSESSMENT PROCEEDINGS. HE FULLY SUPPORTED THE ORDER OF THE LEARNED CIT(A) FOR HIS PART OF SUBMISSIONS. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON OUR CAREFUL CONSIDERATION OF THE FACTS, WE ARE INCLINED TO UPHOLD THE ORDER OF THE LEARNED CIT(A) ON ALL FOURS. THE LEARNED CIT(A) AFTER HEARING ARGUMENTS OF THE LEARNED COUNSEL FOR THE ASSESSEE APPELLANT BEFORE HIM INDICATED THAT CLAIMING OF DEPRECIATION IN THE IMPUGNED ASSESSMENT YEAR IS A MATTER OF RIGHT WAS LIMITED TO THE ASSESSEES OWN METHOD OF ACCOUNTING ON THE REVALUED ASSETS WHEN THEY SOUGHT TO CREATE A RESERVE WHICH HAS NOT BEEN SUBJECTED TO ANY SCRUTINY. THE TRIBUNAL IN THEIR ORDER RESTORED THE ISSUE TO THE FILE OF THE CIT(A) WAS NEVER CONFRO NTED ON THE MERITS OF THE ISSUE WHICH THE ASSESSEE IN HIS WISDOM HAS NOT AGITATED AT ALL. THEREFORE, THE LEARNED CIT(A) WAS CONSTRAINED TO INDICATE ON THE BASIS OF MERIT ALREADY AVAILABLE AS FOUND BY THE ASSESSING OFFICER FOR THE IMPUGNED ASSESSMENT YEAR THAT THE CLAIM OF DEPRECIATION WAS NOT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32. THE ASSESSING OFFICER, THEREFORE, WAS WITHIN HIS JURISDICTION TO INITIATE REASSESSMENT PROCEEDINGS FOR THE IMPUGNED ASSESSMENT YEAR WHEN THE MERITS WERE NOT AGITATED EI THER BEFORE THE CIT(A) OR BEFORE THE TRIBUNAL. BEFORE US, THE LEARNED COUNSEL HAS NOT BEEN ABLE TO ESTABLISH THE FACTS TO BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME - TAX ACT, WHETHER HAVE BEEN RENDERED IN ACCORDANCE WITH THE SAID PROCEDUR E. WE UPHOLD THE ORDER OF THE LEARNED CIT(A) WHO HAS VALIDATED THE REASSESSMENT PROCEEDINGS FOR THE IMPUGNED AYS. THE APPEALS FILED BY THE ASSESSEE ARE THEREFORE DISMISSED. CONSEQUENT THERETO, THE STAY PETITION FILED BY THE ASSESSEE ALSO STANDS DISMISSED. ITA NO S . 383,384,385,386, 3 87,388,389 AND 390/CTK/2010 AND STAY PETITIONS NO.35 AND 36/CTK/2010 5 5. IN THE RESULT, ALL THE APPEALS AND SO ALSO THE STAY PETITIONS FILED BY THE ASSESSEE ARE DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON DT. 13 TH MAY, 2011 S D/ - S D/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER. (K.K.GUPTA) ACCOUNTANT MEMBER. DATE: 13 TH MAY, 2011 (H.K.PADHEE) SENIOR PRIVAT E SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: SAMANTARAY FILMS PVT. LTD., RAJABAGICHA, CUTTACK. 2. THE RESPONDENT: ASST. COMMISSIONER OF INCOME - TAX, CUTTACK RANGE 2, CUTTACK. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CU TTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.