DCIT, New Delhi V. M/s. Samcor Glass Ltd., New Delhi

ITA 4135/DEL/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86797 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 12-02-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 07-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B R R KUMAR
• Assessee Lawyers: D C GARG
• Keywords: Reopening of assessment; Depreciation; Tangible material; Difference of opinion; Assessment record; Reason to believe; Change of opinion; Reassessment proceedings; Capital expenditure
• Section: 143(3); 147; 148; 154

Judgement Text

ITA NO S . 4134&4135/ DEL/ 2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G , NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI J.S. REDDY, ACCOUNTANT MEMBER I.T.A.NO. 4134 /DEL/201 0 A.Y. : 200 2 - 0 3 DCIT, CIRCLE 7(1), NEW DELHI ROOM NO. 312, 3 RD FLOOR, CR BUILDING, IP ESTATE, NEW DELHI VS. M/S SAMTEL COLOR LIMITED, 6 TH FLOOR, TDI CENTRE, DISTT. CENTRE, JASOLA, NEW DELHI (PAN: AAACS6589D) (APPELLANT) (RESPONDENT) AND I.T.A.NO. 4135 /DEL/201 0 A.Y. : 200 2 - 0 3 DCIT, CIRCLE 7(1), NEW DELHI ROOM NO. 312, 3 RD FLOOR, CR BUILDING, IP ESTATE, NEW DELHI VS. M/S SAMCOR GLASS LTD., 6 TH FLOOR, TDI CENTRE, DISTT. CENTRE, JASOLA, NEW DELHI (PAN: AAACS6589D) (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. BRR KUMAR, SR. DR ASSESSEE BY : SH. D.C. GARG, CA DATE OF HEARING : 12 - 0 2 - 201 5 DATE OF ORDER : 1 7 - 0 2 - 201 5 ORDER PER H.S. SIDHU : J M THE SE APPEALS HAVE BEEN FILED BY THE REVENUE AGAINST THE IMPUGNED ORDER S BOTH DATED 02 / 06 /20 1 0 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - X , NEW DELHI . SINCE THE LEGAL ISSUE IS COMMON AND IDENTICAL, THEREFORE, WE ARE DISPOSING OF ITA NO S . 4134&4135/ DEL/ 2010 2 THESE APPEALS BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE, BY DEALING WITH ITA NO. 4135/DEL/2010 (A.Y. 2002 - 03). 2. THE GROUNDS RAISED IN ITA NO. 4134/DEL/2010 READ AS UNDER: - (I) LD. CIT(A) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IN HOLDING THAT THE REOPENING OF THE ASSESSMENT U/S. 147 OF THE I.T. ACT WAS INCORRECT AND INVALID WHILE THE AO REOPENED THE CASE AFTER DUE APPLICATION OF MIND AND FOLLOWING THE DUE PROCEDURE OR REOPENING THE CASE. (II) THE APPELLANT CRAVES TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 3. T HE GROUNDS RAISED IN ITA NO. 4134/DEL/2010 READ AS UNDER: - (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW LD. CIT(A) ERRED IN HOLDING THAT REOPENING OF THE ASSESSMENT U/S. 147 WAS INCORRECT AND INVALID, WHILE THE AO REOPENED THE CASE BY RECORDI NG VALID REASONS AND FOLLOWING DUE PROCEDURE. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 13,03,988/ - BEING INTEREST INCOME ACCRUED ON FIXED DEPOSITS. (III) ON THE FACTS AND CIRCUMSTANCE S OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN NOT ADJUDICATING ISSUE OF ADDITION OF RS. 40,24,338/ - BEING EXPENDITURE ON CAPITAL SPARES CONSUMED BEING CAPITAL IN NATURE, ON MERITS. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A LIMITED COMPA NY ENGAGED IN THE BUSINESS OF MANUFACTURING OF GLASS SHELLS, ITA NO S . 4134&4135/ DEL/ 2010 3 PANELS AND FUNNELS FOR BLACK & WHITE AND COLOR PICTURE TUBES AND TRADING. THE ORIGINAL ASSESSMENT IN THIS CASE WAS COMPLETED UNDER SECTION 143(3) OF INCOME - TAX ACT VIDE ORDER DATED 28.03.2005 AT NIL INCOME AFTER ADJUSTMENT OF DEPRECIATION FOR CURRENT YEAR AT RS.23,77,27,956/ - . BALANCE DEPRECIATION REMAINED UNABSORBED AMOUNTING TO RS.5,68,51,301/ - WAS ALLOWED TO CARRY FORWARD FOR SUBSEQUENT YEAR. SUBSEQUENTLY VIDE ORDER DATED 18.08.2008 U/S 154 OF INCOME - TAX ACT, DEPRECIATION ALLOWABLE WAS CALCULATED AT RS. 23,94,35,051/ - . AFTER ADJUSTMENT OF DEPRECIATION OF CURRENT YEAR BALANCE DEPRECIATION OF RS.5,51,44,206 / - WAS ALLOWED TO CARRY FORWARD FOR SUBSEQUENT YEAR. THE ASSESSING OFFICER PERUSED THE ASSES SMENT RECORD AND OBSERVED THAT THE ASSESSEE COMPANY HAS CLAIMED EXCESS AMOUNT UNDER THE FOLLOWING HEADS: - 1. AS PER SCHEDULE - 9, PAGE - 16 OF THE AUDIT REPORT, THE ASSESSEE HAS SHOWN INTEREST ON FIXED DEPOSITS FOR RS. 13,03,988/ - HAS NOT BEEN SHOWN AS INC OME AS PER SCHEDULE - 14 OF THE AUDITED ACCOUNT. INCOME OF AN AMOUNT OF RS 13,03,988/ - HAS ESCAPED ASSESSMENT ON ACCOUNT OF INTEREST ACCRUED ON FIXED DEPOSIT, WHICH SHOULD BE TAKEN AS INCOME. 2. THE ASSESSEE HAD PAID TECHNICAL ASSISTANCE FEE FOR RS.26,94,3 33/ - . THOUGH TECHNICAL IN FORMATION ACQUIRED BY THE ASSESSEE WAS TO HAVE CONTR IBUTED TO BENEFIT OF ENDURING NATURE END THEREFORE, REQUIRED TO HAVE BEEN TREATED AS CAPITAL EXPENDITURE. INCOME OF AN AMOUNT OF RS.26,94,333/ - HAS ESCAPED ASSESSMENT AS THAT A MOUNT HAS BEEN PAID AS TECHNICAL ASSISTANCE FEE. SINCE THE ASSESSEE IS DERIVING A BENEFIT OF ENDURING NATURE AND THEREFORE, SHOULD BE TREATED AS CAPITAL EXPENDITURE. ITA NO S . 4134&4135/ DEL/ 2010 4 3. THE ASSESSEE HAS CLAIMED EXPENDITURE FOR RS.40,24,338/ - ON CAPITAL SPARES CONSUMED ( VIDE ASSESSMENT ORDER CALCULATION SHEET) IS OF CAPITAL NATURE, WHICH SHOULD HAVE BEEN DISALLOWED. THIS MISTAKE RESULTED UNDER - ASSESSMENT OF INCOME BY RS. 40,24,338/ - . AN INCOME OF AMOUNT OF RS . 40,24,338/ - HAS ESCAPED ASSESSMENT AS THE EXPENDITURE INCURRED ON CAPITAL SPARES CONSUMED IS OF CAPITAL NATURE RATHER TH A N REVENUE. 4.1 IN VIEW OF THE ABOVE, THE AO HAVE REASON TO BELIEVE THAT THE TAXABLE INCOME TO THE TUNE OF RS. 80,22,659/ - HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE I.T. ACT, 1961. AFTER RECORDING THE REASONS TO BELIEVE IN WRITING AND AFTER APPROVAL FROM THE LD. CIT(A), DELHI - III, NEW DE LHI U/S. 151(1) OF THE I.T. ACT, THE THEN AO ISSUED NOTICE U/S. 148 OF THE I.T. ACT, 1961 ON 25.3.2009. THE REASONS RECORDED WERE PROVIDED TO THE ASSESSEE VIDE LETTER DATED 17.8.2008. IN RESPONSE TO THE SAME, THE ASSESSEE PROVIDED LETTER DATED 4.9.2009, A S SUBMITTED THAT NO INCOME HAS ESCAPED ASSESSMENT AND THEREFORE, THE ASSESSEE REQUESTED TO DROP THE REASSESSMENT PROCEEDINGS. THE OBJECTIONS OF THE ASSESSEE WAS ALSO CONSIDERED AND REJECTED BY THE AO, VIDE ORDER DATED 7.10.2009 BEFORE ISSUING THE NOTICE U /S. 148 OF THE I.T. ACT AND CASE OF THE ASSESSEE WAS FIXED FOR HEARING ON 16.10.2009. ON 16.10.2009 VARIOUS AUTHORISED REPRESENTATIVE OF THE ASSESSEE APPEARED. AFTER CONSIDERING ALL THE DOCUMENTARY EVIDENCE AND THE SUBMISSION OF THE ASSESSSEE. AO COMPLE TED THE ASSESSMENT U/S. 147/143(3) OF THE I.T. ACT VIDE ORDER DATED 29.10.2009. 5. AGGRIEVED WITH THE SAME, ASSESSEE FILED THE APPEAL BEFORE THE LD. CIT(A) BY RAISING VARIOUS GROUNDS INCLUDING CHALLENGING THE REOPENING OF THE ASSESSMENT U/S. 147 OF THE ACT, WHO VIDE IMPUGNED ITA NO S . 4134&4135/ DEL/ 2010 5 ORDERS BOTH DATED 2.6.2010 ALLOWED THE APPEALS OF BOTH THE ASS ESSEES ON LEGAL ISSUE AS WELL AS ON MERITS. 6. NOW THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 7. AT THE TIME OF HEARING LD. DR RELIED UPON THE ORDER PASSED BY THE AO U/S. 147/143(3) OF THE I.T. ACT AND THE CONTENTION RAISED BY THE REVENUE IN THE GR OUNDS OF APPEAL. LD. DR FILED A SMALL PAPER BOOK CONTAINING PAGES 1 TO 59 IN WHICH HE HAS ATTACHED THE VARIOUS DOCUMENTARY EVIDENCE S RELATING TO THE ASSESSMENT RECORD AS WELL AS THE RECORD OF THE LD. FIRST APPELLATE AUTHORITY. 8. LD. COUNSEL OF THE ASS ESSEE CONTROVERTED THE ARGUMENTS ADVANCED BY THE LD. DR AND RELIED UPON THE ORDER PASSED BY THE LD. CIT(A). 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RELEVANT RECORDS, ESPECIALLY THE ORDERS PASSED BY THE REVENUE AUTHORITIES ALONGWITH THE PAPER BO OK FILED BY THE LD. DR. WE ARE OF THE VIEW THAT IT IS AN ADMITTED CASE THAT ASSESSEE IS A LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF GLASS SHELLS, PANELS AND FUNNELS FOR BLACK & WHITE AND COLOR PICTURE TUBES AND TRADING. THE ORIGINAL ASS ESSMENT IN THIS CASE WAS COMPLETED UNDER SECTION 143(3) OF INCOME - TAX ACT VIDE ORDER DATED 28.03.2005 AT NIL INCOME AFTER ADJUSTMENT OF DEPRECIATION FOR CURRENT YEAR AT RS.23,77,27,956/ - . BALANCE DEPRECIATION REMAINED UNABSORBED AMOUNTING TO RS.5,68,51,301 / - WAS ALLOWED TO CARRY FORWARD FOR SUBSEQUENT YEAR. SUBSEQUENTLY VIDE ORDER DATED 18.08.2008 U/S 154 OF INCOME - TAX ACT, DEPRECIATION ALLOWABLE WAS CALCULATED AT RS. 23,94,35,051/ - . AFTER ADJUSTMENT OF DEPRECIATION OF CURRENT YEAR BALANCE DEPRECIATION OF R S.5,51,44,206 / - WAS ALLOWED TO CARRY FORWARD FOR SUBSEQUENT YEAR. AO PERUSED THE ORIGINAL ASSESSMENT ITA NO S . 4134&4135/ DEL/ 2010 6 AND OBSERVED THAT THE ASSESSEE COMPANY HAS CLAIMED EXCESS AMOUNT UNDER THE FOLLOWING HEADS: - 1. AS PER SCHEDULE - 9, PAGE - 16 OF THE AUDIT REPORT, THE A SSESSEE HAS SHOWN INTEREST ON FIXED DEPOSITS FOR RS. 13,03,988/ - HAS NOT BEEN SHOWN AS INCOME AS PER SCHEDULE - 14 OF THE AUDITED ACCOUNT. INCOME OF AN AMOUNT OF RS 13,03,988/ - HAS ESCAPED ASSESSMENT ON ACCOUNT OF INTEREST ACCRUED ON FIXED DEPOSIT, WHICH SHO ULD BE TAKEN AS INCOME. 2. THE ASSESSEE HAD PAID TECHNICAL ASSISTANCE FEE FOR RS.26,94,333/ - . THOUGH TECHNICAL IN FORMATION ACQUIRED BY THE ASSESSEE WAS TO HAVE CONTR IBUTED TO BENEFIT OF ENDURING NATURE END THEREFORE, REQUIRED TO HAVE BEEN TREATED AS C APITAL EXPENDITURE. INCOME OF AN AMOUNT OF RS.26,94,333/ - HAS ESCAPED ASSESSMENT AS THAT AMOUNT HAS BEEN PAID AS TECHNICAL ASSISTANCE FEE. SINCE THE ASSESSEE IS DERIVING A BENEFIT OF ENDURING NATURE AND THEREFORE, SHOULD BE TREATED AS CAPITAL EXPENDITURE. 3. THE ASSESSEE HAS CLAIMED EXPENDITURE FOR RS.40,24,338/ - ON CAPITAL SPARES CONSUMED (VIDE ASSESSMENT ORDER CALCULATION SHEET) IS OF CAPITAL NATURE, WHICH SHOULD HAVE BEEN DISALLOWED. THIS MISTAKE RESULTED UNDER - ASSESSMENT OF INCOME BY RS. 40,24,338/ - . AN INCOME OF AMOUNT OF RS . 40,24,338/ - HAS ESCAPED ASSESSMENT AS THE EXPENDITURE INCURRED ON CAPITAL SPARES CONSUMED IS OF CAPITAL NATURE RATHER TH A N REVENUE. ITA NO S . 4134&4135/ DEL/ 2010 7 9 . 1 KEEPING IN VIEW OF THE AFORESAID REASONS, THE AO HAVE REASON TO BELIEVE THAT THE TAXABLE INCOME TO THE TUNE OF RS. 80,22,659/ - HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE I.T. ACT, 1961 AND HE RECORDED THE REASONS TO BELIEVE WHICH WAS SUPPLIED TO THE ASSESSEE. IN RESPONSE TO THE SAME, ASSESSEE FILED OBJECTION, WHICH WAS C ONSIDERED AND REJECTED VIDE ORDER DATED 7.10.2009. THEREAFTER, AO ISSUED NOTICE U/S. 148 OF THE I.T. ACT ON 25.3.2009. IN RESPONSE TO THE SAME, AUTHORISED REPRESENTATIVE OF THE ASSESSEE APPEARED AND AFTER HEARING HIM, THE AO COMPLETED THE ASSESSMENT O N 29.10.2009 U/S. 143(3) BY MAKING THE VARIOUS ADDITIONS. 9. 2 AS PER THE IMPUGNED ORDER, LD. CIT(A) HAS STATED THAT THE ASSESSEE VIDE HIS LETTER DATED 4.9.2009 RAISED CERTAIN OBJECTIONS AGAINST REOPENING OF THE ASSESSMENT WHICH WAS DISPOSED OF BY THE A O ON 7.10.2009, WHICH LD. CIT(A) HAS REPRODUCED AT PAGES 3 AND 4 OF THE IMPUGNED ORDER. THE ASSESSEE HAS MADE ADDITIONAL GROUNDS INCLUDING THE LEGAL GROUND BEFORE THE LD. CIT(A), WHICH THE LD. CIT(A) HAS MENTIONED AT PAGES NO. 5 AND 6 OF THE IMPUGNED ORDER. 9.3 LD. CIT(A) HAS DEALT WITH THE GROUND IN WHICH THE ASSESSEE HAS CHALLENGED THE REOPENING OF THE ASSESSMENT BY SUBMITTING THAT THE AO HAS REOPENED THE ASSESSMENT MERELY ON THE BASIS OF THE CHANGE OF OPINION AS THERE WAS NO TANGIBLE MATERIAL AVA ILABLE TO HAVE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. IN SUPPORT OF HIS CONTENTION, THE ASSESSEE CITED THE DECISION S OF THE HON BLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. KELVINATOR OF INDIA LIMITED IN APPEAL NOS. 2009 - 2011 OF 20 03 AND IN THE CASE OF CIT VS. FORAMER FRANCE (264 ITR 566) AND THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SITA WORLD TRAVELS (INDIA) LTD. VS. CIT (274 ITR 186). ITA NO S . 4134&4135/ DEL/ 2010 8 9.4 WE HAVE GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE PRESEN T CASE AS WELL AS THE CASE LAW S CITED BY THE LD. COUN S EL OF THE ASSESSEE BEFORE THE REVENUE AUTHORITIES AS WELL AS BEFORE US. WE ARE OF THE VIEW THAT THE AO HAS NO FRESH MATERIAL TO FORM HIS OPINION REGARDING ESCAPEMENT OF ASSESSMENT AND HE HAS ALSO NO T FOUND ANY TANGIBLE MATERIAL TO RECORD THE REASONS FOR REOPENING OF THE ASSESSMENT OF THE ASSESSEE. IT IS MERELY A CHANGE OF OPINION WHICH IS NOT PERMISSIBLE UNDER THE LAW AS WELL AS ACCORDING TO THE VARIOUS DECISIONS RENDERED BY THE HON BLE SUPREME C OURT OF INDIA IN THE CASE OF CIT VS. KELVINATOR OF INDIA LIMITED IN APPEAL NOS. 2009 - 2011 OF 2003 AND IN THE CASE OF CIT VS. FORAMER FRANCE (264 ITR 566) AND THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SITA WORLD TRAVELS (INDIA) LT D. VS. CIT (274 ITR 186). 9. 5 IN VIEW OF THE AFORESAID FACTS AND CIRCUMSTANCES, AS EXPLAINED ABOVE, WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS PASSED A WELL REASONED ORDER IN THE CASE OF BOTH THE AFORESAID ASSESSES ON THE BASIS OF THE MATERIAL AVAIL ABLE BEFORE HIM AS WELL AS ON THE BASIS OF THE DECISIONS OF THE HON BLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. KELVINATOR OF INDIA LIMITED IN APPEAL NOS. 2009 - 2011 OF 2003 AND IN THE CASE OF CIT VS. FORAMER FRANCE (264 ITR 566) AND THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SITA WORLD TRAVELS (INDIA) LTD. VS. CIT (274 ITR 186) AND RIGHTLY HELD THAT THE ISSUE REOPENING OF ASSESSMENT IS INCORRECT AND INVALID. THEREFORE, NO INTERFERENCE IS CALLED FOR IN THE WELL REASONED ORDE R PASSED BY THE LD. CIT(A), HENCE, WE UPHOLD THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) BY DISMISSING THE APPEAL S FILED BY THE REVENUE . 9. 6 SINCE LD. CIT(A) IN THE CASE OF BOTH THE ASSESSEESS HAS RIGHTLY HELD THAT THE REOPENING OF ASSESSMENT WAS INCORR ECT AND INVALID, ITA NO S . 4134&4135/ DEL/ 2010 9 THEREFORE, IN OUR CONSIDERED OPINION, THERE IS NO NEED TO ADJUDICATE THE ISSUES ON MERITS. 10 . IN THE RESULT, BOTH THE APPEAL S OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE O PEN C OURT ON 1 7 / 0 2 /20 1 5 . SD / - S D / - [ J.S. REDDY] [ H.S. SIDHU ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 1 7 / 0 2 /201 5 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES ITA NO S . 4134&4135/ DEL/ 2010 10