DCIT, CIR-9(1), KOLKATA, Kolkata V. M/s Lumbini Beverages Pvt. Ltd., Kolkata

ITA 422/KOL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1327 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 11-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C MONDAL J
• Assessee Lawyers: GIRISH SHARMA
• Keywords: Reopening of assessment; Depreciation; Difference of opinion; Change of opinion; Revenue expenditure; Capital expenditure
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA B BENCH, KOLKATA [BEFORE SRI J. SUDHAKAR REDDY, A CCOUNTANT M EMBER & SRI S.S. VISWANETHRA RAVI, JUDICAL MEMBER ] I.T.A. NO. 422 / KOL/201 6 ASSESSMENT YEAR: 2003 - 04 D.C.I.T. CIRCLE - 9(1), KOLKATA. . . ... APPELLANT AYAKAR BHAWAN 5 TH FLOOR ROOM NO. 22 P - 7, CHOWRINGHEE SQUARE KOLKATA 700 069 M/S. LUMBINI BEVERAGES PVT. LTD. .. . .. ..... .. RESPONDENT 41, CHOWRINGHEE SQUARE KOLKATA 700 071 [PAN : AAACL 5205 F ] APPEARANCES BY: SHRI GIRISH SHARMA, FCA , APPEAR ED ON BEHALF OF THE ASSESSEE. SHRI D.C. MONDAL , J CIT , DR APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : JANUARY 11 TH , 201 8 DATE OF PRONOUNCING THE ORDER : MARCH 16 TH , 201 8 O R D E R PER J. SUDHAKAR REDDY : - THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 18 , KOLKATA , (HEREINAFTER THE LD. CIT (A)), PASSED U/S 250 OF THE INCOME TAX ACT, 1961 (THE ACT), DT. 02 / 12 /201 5, ON THE FOLLOWING GROUNDS: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE LD. CIT(A) WAS NOT JUSTIFIED IN QUASHING THE REOPENING PROCEEDINGS U/S.147. 2. BASED ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE LD. CIT( A) WAS NOT JUSTIFIED IN TAKING THE DECISION THAT THE A.O. HAD NOT PROVIDED THE REASONS FOR REOPENING TO THE ASSESSEE WHEN THERE IS NO MATERIAL ON RECORD WHICH CAN SUBSTANTIATE THE FACT THAT THE ASSESSEE HAS SOUGHT FOR THE REASONS OF REOPENING FROM THE A.O. AS WAS STATED IN THE DECISION OF THE APEX COURT IN THE CASE OF 'GKN DRIVESHAFTS (INDIA) LTD. VS. ITO 125 TAXMAN 963'. 3. IN THE INSTANT CASE LD. CIT(A) WAS NOT JUSTIFIED IN TAKING THE DECISION THAT THE REOPENING HAS BEEN DONE ON THE BASIS OF CHANGE OF O PINION WHEN IN THE SIMILAR ISSUE IN THE ASSESSEE'S OWN CASE IN THE SUBSEQUENT YEARS HON'BLE IT AT HAD DECIDED THE ISSUE IN FAVOUR OF THE REVENUE WHICH WAS ACCEPTED BY THE ASSESSEE. THE DECISION OF THE APEX COURT IN THE CASE OF 'ESS ESS KAY ENGINEERING COMP ANY PVT. LTD. VS. CIT, [2001] 247 ITR 818, SC' CLEARLY STATES THE FACT THAT REOPENING OF ASSESSMENT ON THE BASIS OF FINDINGS OF FACTS, MADE ON THE BASIS OF MATERIALS FOUND IN COURSE OF ASSESSMENT OF THE SUBSEQUENT YEAR IS VALID AND SQUARELY APPLICABLE IN T HE INSTANT CASE. 2 I.T.A. NO. 422/KOL/2016 ASSESSMENT YEAR: 2003 - 04 M/S. LUMBINI BEVERAGES PVT. LTD 4. THAT THE APPELLANT RESERVES THE RIGHT TO AMEND, ALTER OR ADD TO ANY GROUND(S) OF APPEAL BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 2. AFTER HEARING RIVAL CONTENTIONS, PERUSING THE PAPERS ON RECORD AND ORDERS OF THE AUTHORITIES B ELOW AS WELL AS THE CASE - LAW CITED, WE HOLD AS FOLLOWS: - 3. IN THIS CASE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 01/12/2003 , DECLARING LOSS OF RS.18,31,717/ - . THIS WAS PROCESSED U/S 143(1) OF THE ACT, ON 12/02/2004. LATER AN ASSESSMENT ORDER U/S 143(3) OF THE ACT WAS PASSED ON 30 TH MARCH, 2006, DETERMINING TOTAL LOSS AT RS.14,05,994/ - . THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. FIRST APPELLATE AUTHORITY. MEANWHILE, THE ASSESSMENTS WERE RE - OPENED U/S 147 BY ISSUING NOTICE U/S 148 OF THE ACT . THE ASSESSING OFFICER AT PAGE 1 OF HIS ORDER HAS BROUGHT OUT THE GROUNDS FOR ISSUE OF NOTICE U/S 148 OF THE ACT, WHICH IS EXTRACTED FOR READY REFERENCE: - 'COMPANY HAD CLAIMED EXPENDITURE OF RS. 50,01,497/- DURING THE PREVIOUS YEAR. ASSESSEE WAS ASKED TO EXPLAIN NATURE OF EXPENDITURE. AS PER EXPLANATION SUBMITTED BY THE ASSESSEE, EXPENSES ARE REVENUE IN NATURE. HOWEVER ON CAREFUL EXAMINATION OF LEDGER COPY SUBMITTED BY THE ASSESSEE OF EXPENSES, FIXED ASSETS AND DEPRECIATION CHART, IT WAS FOUND THAT ASSES SEE WAS CHARGING BREAKAGE RELA TING TO BOTTLES, A 'CAPITL ITEM', IN REVENUE. BREAKAGE IN BOTTLES MAY HAVE AROSE AT THE TIME OF HANDLING OR A T THE TIME OF PURCHASE OF NEW BOTTLES. ASSESSEE SYSTEMATICALLY TRANSFERRED VALUE OF BOTTLES TO LEAKAGE & BREAKAGE LEDGER AND CLAIMED IT AS REVENUE ITEM. TOTAL ITEM TRANSFERRED WAS RS.50,01,497/ - . WHAT IT IMPLIES THAT FOR A SIMILAR EXPENDITURE, PART EXPENSES WERE CLAIMED AS DEPRECIATION AND PART AS LEAKAGE & BREAKAGE. IT WAS WELL SETTLED IN THE CASE OF CIT V . VALLABH GLASS WORKS LTD. [1982J 137 ITR 389 (GUJ.), EXPENDITURE OF IDENTICAL NATURE CANNOT BE REGARDED AS REVENUE EXPENDITURE FOR ONE PURPOSE AND CAPITAL EXPENDITURE FOR ANOTHER. ASSESSEE SHOULD HAD CLAIMED IT EITHER FULLY UNDER DEPRECIATION OR UNDER LEA KAGE & BREAKAGE. MOREOVER, DEPRECIATION @50% HAS BEEN PROVIDED UNDER INCOME - TAX ACT, TO NEGATE THE EFFECT OF HIGH RATE OF BREAKAGE OF BOTTLES. THEREFORE, RS.50,01,497/ - CANNOT BE ALLOWED AS DEDUCTION ON THE GROUND OF CAPITAL NATURE. HENCE DISALLOWED. 4. THE ASSESSEE OBJECTED AS FOLLOWS: - 1) THAT THE COMPANY HAS BEEN FOLLOWING A CONSISTENT BASIS OF DEBITING THE PROFIT & LOSS ACCOUNT WITH AN EXPENSES OF BREAKAGES OF GLASS BOTTLES & PLASTIC CRATES WHICH OCCUR AT THE PRODUCTION & SALE POINT. THE BREAKAGES HAS BEEN CONSIDERED A T A CONSISTENT RATE OF MEAGER 1 % OF UNITS AT EACH POINT FOR GLASS BOTTLES & MEAGER 0.5% OF UNITS FOR PVC CRATES AT EACH POINT. 3 I.T.A. NO. 422/KOL/2016 ASSESSMENT YEAR: 2003 - 04 M/S. LUMBINI BEVERAGES PVT. LTD 2) THAT THE AMOUNT OF EXPENSES OF LEAKAGE & BREAKAGES HAS BEEN WORKED OUT ON THE BASIS OF LOSS WHICH OCC UR IN THE NATURE OF PRODUCTION OF THE FINAL PRODUCTS OF THE COMPANY. 3) THAT THE EXPENSES OF BREAKAGES ARE REVENUE IN NATURE AND CHARGED UNDER LEAKAGE & BREAKAGES. 4) THAT THE METHOD OF CHARGING HAS BEEN CONSISTENT FROM YEAR AFTER YEAR AND HAS BEEN DULY DISCLOSED IN THE NOTES ON ACCOUNTS OF THE COMPANY IN SCHEDULE 17. 5) THAT THE NORMAL THE MATTER WAS THOROUGHLY DISCUSSED DURING SCRUTINY ASSESSMENT CARRIED UNDER SECTION WAS DULY ACCEPTED. THE ONLY DISALLOWANCE ESTIMATE AMOUNT OF RS. 1,00,000/ - 5 . THE ASSESSING OFFICER REJECTED THE CONTENTIONS OF THE ASSESSEE AND MADE A DISALLOWANCE UNDER THE HEAD LEAKAGE & BREAKAGE. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL. THE LD. FIRST APPELLATE AUTHORITY, HELD THAT THE RE - OPENING IS BAD IN LAW, FOR THE FOLLOWING REASONS: - A) THERE IS NO EVIDENCE THAT THE REASONS FOR RE - OPENING WERE PROVIDED TO THE ASSESSEE AND HENCE THE RE - OPENING IS BAD IN LAW. B) THIS ISSUE OF LEAKAGES & BREAKAGES WAS CONSIDERED DURING THE ORIGINAL ASSESSMENT PROCEEDINGS AND AN AM OUNT OF RS.1 LAKH/ - WAS DISALLOWED IN THE ORDER PASSED U/S 143(3) OF THE ACT, ON 30/03/2006. THERE IS NO NEW MATERIAL THAT HAS COME INTO POSSESSION OF THE ASSESSING OFFICER WARRANTING THE RE - OPENING. THE CASE - LAW I.E. CIT VS. VALLABH GLASS WORKS LTD. [1982 ] 137 ITR 389 (GUJ.), RELIED UPON BY THE ASSESSING OFFICER WAS AN OLD CASE - LAW AND WAS IN EXISTENCE WHEN AN ORDER WAS PASSED U/S 143 ON 30/03/2006. HENCE THE RE - OPENING WAS MADE ON A CHANGE OF OPINION. C) THE ASSESSING OFFICER HAS FAILED TO JUSTIFY THE RE - OPENING OF THE ASSESSMENT. 6. WE FIND NO INFIRMITY IN THE ORDER OF THE LD. FIRST APPELLATE AUTHORITY. THIS IS A CLEAR CASE OF CHANGE IN OPINION IN THE ORIGINAL ASSESSMENT PROCEEDINGS. THIS ISSUE WAS CONSIDERED AND A DISALLOWANCE OF RS. 1 LAKH/ - WAS MADE. THE REASONS FOR RE - OPENING ARE BASED ON THIS VERY ISSUE. THIS IS NOTHING BUT A CHANGE OF OPINION. THE ASSESSING OFFICER HAS NOT RIGHT TO REVIEW HIS OWN ORDER. MOREOVER, THE APPEAL AGAINST THE ORIGINAL ASSESSMENT ORDER WAS PENDING BEFORE THE LD. CIT(A). THE RE - OPENING WAS MADE WITHOUT ANY NEW MATERIAL. UNDER THESE CIRCUMSTANCES, WE FOLLOW THE PROPOSITIONS OF LAW LAID DOWN IN THE FOLLOWING CASE - LAW AND UPHOLD THE ORDER OF THE LD. CIT(A) THAT THE RE - OPENING OF ASSESSMENT IS BAD IN LAW. 4 I.T.A. NO. 422/KOL/2016 ASSESSMENT YEAR: 2003 - 04 M/S. LUMBINI BEVERAGES PVT. LTD ASIATIC OXYGEN LTD. V. DEPUTY COMMISSIONER OF INCOME - TAX [ 2015] 60 TAXMANN.COM 265 (CALCUTTA) COMMISSIONER OF INCOME - TAX, DELHI V. KELVINATOR OF INDIA LTD. [2010] 187 TAXMAN 312 (SC) 7. IN VIEW OF THE ABOVE DISCUSSION, WE UPHOLD THE ORDER OF THE LD. FIRST APPELLATE AUTHORITY AND DISMISS THE APPEAL OF THE REVENUE. KOLKATA, THE 16 TH DAY OF MARCH , 201 8 . SD/ - SD/ - [S.S. VISWANETHRA RAVI] [ J. SUDHAKAR REDDY ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 16 . 0 3 .201 8 {SC SPS} C OPY OF THE ORDER FORWARDED TO: 1. D.C.I.T. CIRCLE - 9(1), KOLKATA AYAKAR BHAWAN 5 TH FLOOR ROOM NO. 22 P - 7, CHOWRINGHEE SQUARE KOLKATA 700 069 2. M/S. LUMBINI BEVERAGES PVT. LTD 41, CHOWRINGHEE SQUARE KOLKATA 700 071 3. CIT(A) - 4. CIT - , 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY HEAD OF OFFICE/ D.D.O. ITAT, KOLKATA BENCHES 5 I.T.A. NO. 422/KOL/2016 ASSESSMENT YEAR: 2003 - 04 M/S. LUMBINI BEVERAGES PVT. LTD