MANSHA BUILDERS AND CONTRACTORS PVT. LTD., FARIDABAD V. DCIT, CIRCLE- I, FARIDABAD

ITA 4025/DEL/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2778 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 19-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHIVRAJ SINGH
• Assessee Lawyers: ASHWANI TANEJA
• Keywords: Depreciation; Search and seizure; Opportunity of being heard; Wrong claim; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 32; 147; 148

Judgement Text

1 ITA NO. 4025/DEL/2017 IN THE INCOME TAX APPELLA TE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI N. K. SAINI, ACCOUNTANT ME MBER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A .NO. 4025/DEL/2 017 (A.Y 2011-12) MANSHA BUILDERS AND CONTRACTORS PVT. LTD. RRA TAX INDIA, D-28, SOUTH EXTENSION, PART-1 (NEW DELHI) FARIDABAD (APPELLANT) VS DCIT CIRCLE-1 FARIDABAD (RESPONDENT) APPELLANT BY SH. ASHWANI TANEJA, ADV RESPONDENT BY SH. SHIV RAJ SINGH, SR. DR ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 25/05/2017 PASSED BY CIT(A)-FARIDABAD FOR ASSESSMEN T YEAR 2011-12. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1) THAT HAVING REGARD TO THE FACT AND CIRCUMSTANCES OF THE CASE, LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN CONFIR MING THE ACTION OF LD. AO IN FRAMING THE IMPUGNED REASSESSME NT ORDER AS THE ASSESSMENT ORDER WAS PASSED WITHOUT COMPLYIN G WITH THE MANDATORY CONDITIONS OF SECTION 147 TO 151 OF T HE INCOME TAX ACT, 1961 AND WITHOUT RECORDING VALID REASONS A S PER LAW AND WITHOUT OBTAINING VALID APPROVAL AS PER LAW AND IN ANY CASE REOPENING OF THE ASSESSMENT AND FRAMING OF THE DATE OF HEARING 20.11.2017 DATE OF PRONOUNCEMENT 28.12.2017 2 ITA NO. 4025/DEL/2017 REASSESSMENT ORDER WAS CONTRARY TO LAW. 2) THAT IN ANY VIEW OF THE MATTER AND IN ANY CASE, AC TION OF LD.CIT(A) IN CONFIRMING THE ACTION OF LD. AO IN REO PENING OF THE IMPUGNED ASSESSMENT U/S 143(3)/L47 IS BAD IN LAW AN D AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 3) THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRM ING THE ACTION OF THE LD. A.O. IN MAKING AN ADDITION OF RS. 9,26,861/- ON ACCOUNT OF ASSESSEE BEING ENTITLED TO 15% OF THE DEPRECATION ON COMMERCIAL VEHICLES, INSTEAD OF 30% AS PER INCOM E TAX ACT, 1961, WITHOUT CONSIDERING THE MATERIAL PLACED ON RE CORD AND BY RECORDING INCORRECT FACTS AND FINDINGS. 4) THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, AC TION OF LD. CLF(A) IN CONFIRMING THE ADDITION OF RS.9,26,861/- IS BAD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF CASE. 5) THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRM ING THE ACTION OF LD. A.O. IN PASSING THE IMPUGNED ORDER WI THOUT GIVING ADEQUATE OPPORTUNITY OF BEING HEARD. 3. THE ASSESSEE IS IN THE BUSINESS OF ROAD CONSTRUC TION. THE ORIGINAL RETURN FOR ASSESSMENT YEAR 2011-12 WAS FILED BY THE ASSESS EE ON 30/9/2011 DECLARING INCOME OF RS.60,44,820/-. THE ASSESSMENT U/S 143(3) WAS COMPLETED ON 25/3/2014 AT AN INCOME OF RS.63,80,220 /-. THEREAFTER THE CASE OF THE ASSESSEE WAS SELECTED IN REASSESSMENT PROCEE DING WHICH WAS COMPLETED U/S 147/143(3) ON 27/10/2016 AND ASSESSED AT A TOTA L INCOME OF RS.73, 07,081/-. 4. THE ASSESSEE FILED THE APPEAL AGAINST THE SAID A SSESSMENT ORDER BEFORE THE CIT(A). THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE. 3 ITA NO. 4025/DEL/2017 5. THE LD. AR SUBMITTED THAT ACCORDING TO THE REASO NS RECORDED BY THE ASSESSING OFFICER, ASSESSEE'S COMPANY CLAIMED DEPRE CIATION AS COMMERCIAL VEHICLES @ 30%, WHEREAS THESE VEHICLES WERE BEING P UT TO USE FOR ITS OWN BUSINESS AND THEREFORE, THE DEPRECATION ALLOWABLE S HOULD BE 15%. ACCORDINGLY, ASSESSING OFFICER FORMED THE REASON TO BELIEVE THAT EXCESSIVE DEPRECIATION OF 15% WAS ALLOWED. AS PER THE COPY OF REASONS RECORDE D, THE ASSESSEE COMPANY CLAIMED DEPRECIATION OF RS. 18,53,722/- ON COMMERCI AL VEHICLE @30% OF WRITTEN DOWN VALUE BUT IS ENTITLED TO CLAIM DEPRECIATION @ 15% FOR THE REASON THAT THE COMPANY IS NOT USING THE SAID COMMERCIAL VEHICLE FO R RUNNING ON HIRE. THE LD. AR SUBMITTED THAT THE ASSESSEE IS IN THE BUSINESS O F ROAD CONSTRUCTION. THE COMMERCIAL VEHICLES OWNED AND USED BY IT TO BE DEPL OYED FOR CONSTRUCTION CONTRACTS INCLUDE DAMPERS, ROAD ROLLERS, HIVA TRUCK S, ALL USED FOR ROAD CONSTRUCTION. THESE ASSETS WERE REGISTERED AS TRAN SPORT VEHICLES UNDER THE MOTOR VEHICLE ACT. FUNCTIONALLY, THE ASSETS WERE USED FOR TRANSPORTATION OF EARTH AND CONSTRUCTION ONE PLACE TO ANOTHER AND ALS O TO LEVEL AND SHAPE THE LAND WHERE ROAD CONSTRUCTION ACTIVITY IS UNDERTAKEN . THUS, AS THE ASSETS WERE USED FOR HEAVY CONSTRUCTION ACTIVITY AND TRANSPORTA TION OF MATERIAL FROM ONE PLACE TO ANOTHER, THESE COMMERCIAL VEHICLES ARE ROA D TRANSPORT VEHICLES RIGHTLY ENTITLED TO DEPRECIATION AT RATE OF 30%. THE LD. AR FURTHER SUBMITS THAT THE ORIGINAL ASSESSMENT WAS MADE IN THIS CASE UNDER SEC TION 143(3) AND THERE WAS NO FRESH MATERIAL COMING INTO POSSESSION OF THE A.O . WHICH IS EVIDENT FROM THE PLAIN READING OF THE REASON RECORDED, WHICH DOES NO T REFER ANYTHING NEW COMING INTO POSSESSION OF THE A.O. AFTER THE ASSESS MENT ORDER WAS PASSED. THE LD. AR RELIED UPON THE CASE LAWS OF PR. CIT VS. TUP PERWARE INDIA(P) LTD. IN ITA 4 ITA NO. 4025/DEL/2017 415/2015, DATE OF ORDER 10/8/2015 (DELHI HIGH COURT ) AND CIT VS. GOETZE (INDIA) LTD. [(2010) 321 ITR 431(DEL)] DATED 20.01. 2010. THE RELEVANT PORTION OF GOETZE (INDIA ) PVT. LTD. IS REPRODUCED HEREIN B ELOW: ' 11. 'HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPR ETATION TO THE WORDS 'REASON TO BELIEVE' FAILING WHICH, WE ARE AFRAID SE CTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO RE-OPEN ASSESSME NTS ON THE BASIS OF 'MERE CHANGE OF OPINION', WHICH CANNOT BE PER SE REASON TO RE- OPEN. WE MUST ALSO KEEP IN MIND THE CONCEPTUAL DIFF ERENCE BETWEEN POWER TO REVIEW AND POWER TO RE-ASSESS. THE ASSESSI NG OFFICER HAS NO POWER TO REVIEW; HE HAS THE POWER TO RE-ASSESS. BU T RE-ASSESSMENT HAS TO BE BASED ON FULFILLMENT OF CERTAIN PRE-CONDITION AND IF THE CONCEPT OF CHANGE OF OPINION IS REMOVED, AS CONTENDED ON BEH ALF OF THE DEPARTMENT, THEN, IN THE GARB OF RE-OPENING THE ASS ESSMENTS, REVIEW WOULD TAKE PLACE. ONCE MUST TREAT THE CONCEPT OF CHANGE OF OPINION AS AN IN-BUILT TEST TO CHECK ABUSE OF POWER BY THE ASS ESSING OFFICER. 6. THE LD. DR RELIED UPON THE ORDERS OF THE ASSESSI NG OFFICER AND CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. FOR RE-OPENING THE REASONS RECORDED ARE AS FOLLOWS:- REASONS FOR INITIATING PROCEEDINGS U/S 147 OF THE INCOME TAX ACT, 1961 REGULAR ASSESSMENT IN THIS CASE WAS COMPLETED U/S 1 43(3) OF THE INCOME TAX ACT, 1961 ON 25.03.2014 AT AN INCOME OF RS.63,80,220/- BY MAKING CERTAIN ADDITIONS. 2. SUBSEQUENTLY, IT HAS COME INTO NOTICE THAT THE ASSE SSES COMPANY HAS CLAIMED DEPRECIATION OF RS. 18,53,722/- ON COMMERCI AL VEHICLES @ 30% ON WRITTEN DOWN VALUE OF RS. 84,60,468/- DURING THE YE AR UNDER CONSIDERATION. SINCE THE VEHICLES WERE BEING PUT TO USE FOR ITS OW N BUSINESS OF THE ASSESSEE COMPANY AND NOT RUNNING THEM ON HIRE. IT IS PERTINE NT TO MENTION HERE THAT 5 ITA NO. 4025/DEL/2017 UNDER THE PROVISION OF. SECTION 32 OF THE INCOME TA X ACT, THE DEPRECIATION ON THE ASSET WHET)FT IS USED FOR ITS OWN BUSINESS AND NOT RUNNING THEM ON HIRE BY THE ASSESSEE, IS ALLOWABLE @ 15% OF THE WDV INST EAD OF 30% FROM THE YEAR 2006-07 AND ONWARD. THUS THE ASSESSEE HAS MADE WRONG CLAIM OF DEDUCTION AMOUNTING TO RS. 18,53,722/- ON ACCOUNT O F DEPRECIATION. 3.. IN VIEW OF THE ABOVE FACTS, I HAVE REASONS TO B ELIEVE THAT DUE TO FAILURE/OMISSION ON THE PART OF THE ASSESSEE TO DIS CLOSE FULLY AND TRULY MATERIAL FACTS, AN INCOME OF RS. 18,53,7222/- AND A NY OTHER INCOME WHICH SUBSEQUENTLY COMES TO NOTICE HAS ESCAPED ASSESSMENT FOR THE ASSESSMENT YEAR 2011-12. ACCORDINGLY, NOTICE U/S 148 IS BEING ISSUED FOR THE ASSESSMENT YEAR 2011-12. ISSUE NOTICE U/S 148 FOR THE ASSESSMENT YEAR 2011-1 2. (BHOPAL SINGH, IRS) DEPUTY COMMISSIONER OF I NCOME TAX, CIRCLE- 1, FARIDABAD THE CIT(A) HAS MENTIONED THE OBJECTION OF THE ASSES SEE AGAINST RE- OPENING U/S 147 BUT HAS NOT CONSIDERED THE HON'BLE SUPREME COURTS DECISION IN CASE OF GKN DRIVESHAFTS (INDIA) LTD. VS . ITO & ORS. AND WHILE CONSIDERING ALSO MERELY SAYING THAT AT THE LAST DAT E OF THE ASSESSMENT ORDER, THE ASSESSEE FILED OBJECTION. THIS CANNOT BE THE METHOD OF SIMPLICITOR DISMISSAL OF OBJECTION FILED BY THE REVENUE AUTHORI TIES. THE CIT(A) FAILED TO TAKE COGNIZANCE THAT NO REASON WAS ASSIGNED BY THE ASSESSING OFFICER OR ANY FRESH MATERIAL WAS TAKEN INTO ACCOUNT BY THE AS SESSING OFFICER FOR RE- OPENING THE ASSESSMENT U/S 147. THEREFORE, THE ORDE R OF THE CIT(A) IS SET ASIDE. 6 ITA NO. 4025/DEL/2017 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28TH DECEMB ER, 2017 . SD/- SD/- (N. K. SAINI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 28/12/2017 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 20/11/2017 PS 2. DRAFT PLACED BEFORE AUTHOR 21/11/2017 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2017 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 28.12.2017 PS/PS 7 ITA NO. 4025/DEL/2017 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 2 8 .12.2017 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.