DRM ENTERPRISES, MUMBAI V. ITO 12(10(2), MUMBAI

ITA 4321/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62429 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 10-05-2012
• Assessment Year: 2000-2001
• Appeal Filed On: 26-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR
• Assessee Lawyers: S S PHADKAR
• Keywords: Reopening of assessment; Unexplained expenditure; Depreciation; Audit objection; Cost of acquisition; Difference of opinion; Reason to believe; Change of opinion; Revenue expenditure; Capital expenditure
• Section: 69C; 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI VIJAY PAL RAO (JUDICIAL MEMBER) AND SHRI N.K. BILLAIYA (ACCOUNTANT MEMBER ) ITA NOS. 4321 TO 4323/MUM/2010 ASSESSMENT YEARS-2000-01 TO 2002-03 M/S. DRM ENTERPRISES, SHROFF BHAVAN, P.DMELLO ROAD, MUMBAI-400020 PAN-AABFD 9887H VS. THE ITO-12(1)(2), AAYAKAR BHAVAN, MUMBAI-400 020 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI S.S. PHADKAR RESPONDENT BY: SHRI C.G.K. NAIR DATE OF HEARING :10.05.2012 DATE OF PRONOUNCEMENT: O R D E R PER N.K. BILLAIYA (AM): THESE THREE APPEALS ARE FILED BY THE ASSESSEE AGAI NST THE THREE DIFFERENT ORDERS OF LD. CIT(A) DT. 30.3.2010 FOR AS SESSMENT YEARS 2000-01 TO 02-03. IN ALL THESE APPEALS, ASSESSEE HAS TAKEN CO MMON GROUNDS EXCEPT AMOUNT OF DISALLOWANCE OF EXPENSES VARIES. FOR THE SAKE OF CONVENIENCE, WE REPRODUCE GROUNDS OF APPEAL TAKEN BY ASSESSEE FOR A SSESSMENT YEAR 2000-01 WHICH ARE AS UNDER: 2. THE GROUNDS RAISED BY THE ASSESSEE READ AS FOLLO WS. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN REOPENING THE ASSESSME NT U/S. 147 ON THE BASIS OF AUDIT QUERY IGNORING THE FACT THE AO IN THE ORIGINAL ASSESSMENT ORDER HAD ALLOWED THE CLAIM OF REPAIRS, TOOLS AND PARTS FULLY AND THUS THE REOPENING OF THE ASSES SMENT U/S. 147 IS BAD IN LAW. ITA NO. 4321 TO 4323/M/10 2 2. ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DISALLOWING THE REPAIR , TOLLS & PARTS EXPENSES OF RS. 18,31,290/- AS CAPITAL EXPENDITURE ON THE GROUND THAT THE PURCHASE COSTS OF CRANES WAS SHOWN AT RS. 25,000/- EACH ONLY. 3. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE F OR THE YEAR UNDER CONSIDERATION FILED ITS RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 5,98,181/- ON 30.10.2000. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRANSPORT CONTRACTORS, CRANE OPERATORS, CARNE HIRIN G, FORKLIFT HIRING AND TRAILERS HIRING. THE ASSESSEE FOLLOWS THE METHOD OF CASH SYSTEM OF ACCOUNTING. THE ORIGINAL ASSESSMENT WAS COMPLETED ON A TOTAL INCOME OF RS. 28,05,930/-. THE MAIN ADDITION TO THE TOTAL INCOME WAS ON ACCOUNT OF UNEXPLAINED EXPENDITURE U/S. 69C OF RS. 21,60,000/- . THE MATTER WENT UP TO THE LEVEL OF ITAT. THE ITAT VIDE ITS ORDER DT. 6.1 2.2006 RESTORED THE MATTER OF ADDITION OF RS. 21,60,000/- TO THE FILE OF AO. 4. IN THE MEANTIME, THE ASSESSING OFFICER ON RECEIVI NG CERTAIN AUDIT OBJECTIONS PROPOSED TO REOPEN THE ASSESSMENT U/S. 148 OF THE ACT AND AFTER RECEIVING THE APPROVAL FROM THE CIT-12 MUMBAI ASSES SMENTS WERE REOPENED. HOWEVER, SINCE ITAT RESTORED THE ADDITIONS MADE U/S . 69C OF THE ACT FOR RE- VERIFICATION, THE AO MERGED THE REOPENING WITH THE DIRECTIONS OF THE ITAT. ACCORDINGLY, NOTICE U/S. 148 OF THE ACT WAS ISSUED AND SERVED UPON THE ASSESSEE. IN RESPONSE TO WHICH THE ASSESSEE FILED RETURN OF INCOME ON 29.11.2006 DECLARING THE SAME INCOME AS WAS DECLARE D IN THE ORIGINAL RETURN. AT THE REASSESSMENT STAGE, THE ASSESSEE OBJECTED TO THE REOPENING ON THE GROUND THAT ALL THE POINTS RAISED BY THE AUDIT PART Y WERE CONSIDERED AT THE FIRST ASSESSMENT STAGE ITSELF. THE ASSESSEE CONTEND ED THAT IT HAS FILED DETAILED EXPLANATION IN RELATION TO THE EXPENDITURE AND ALSO FURNISHED PARTY- WISE DETAILS AND THE AO AFTER EXAMINING THE RECORDS AND THE DOCUMENTS FILED BY THE ASSESSEE, ALLOWED THE EXPENSES AS REVENUE AN D MERELY BECAUSE THE AUDIT PARTY HAS RAISED OBJECTIONS IN RELATION TO TH E ALLOWABILITY OF THE EXPENDITURE, THE ASSESSMENT CANNOT BE REOPENED MERE LY ON THE BASIS OF CHANGE OF OPINION. THE AO REJECTED THE SUBMISSIONS OF THE ASSESSEE AND ITA NO. 4321 TO 4323/M/10 3 AFTER VERIFYING THE ISSUE OF UNEXPLAINED EXPENDITUR E U/S. 69C, AS PER TRIBUNALS DIRECTION, COMPLETED THE ASSESSMENT BY D ISALLOWING THE CLAIM OF REPAIRS AND SPARE PARTS EXPENSES AS CAPITAL EXPENDI TURE AT RS. 20,63,210/-. THE ASSESSEE CHALLENGED THE REOPENING BEFORE THE LD . CIT(A). 5. BEFORE THE LD. CIT(A), THE ASSESSEE REITERATED T HAT THE REOPENING OF ASSESSMENT ONLY ON THE BASIS OF AUDIT OBJECTIONS CA NNOT BE A VALID GROUND AND IN ALTERNATIVE AND WITHOUT PREJUDICE TO THE ABO VE, THE ASSESSEE ALSO QUESTIONED THE DISALLOWANCE OF REPAIR EXPENSES AS C APITAL EXPENDITURE. THE LD. CIT(A) DISMISSED THE APPEAL ON BOTH THE GROUNDS . 6. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. THE LD. COUNSEL APPEARING FOR THE ASSESSEE REITERATED THAT THE REOPENING OF A SSESSMENT ON THE BASIS OF AUDIT QUERY IS BAD IN LAW. WE FIND FROM THE RECORD S THAT THIS BENCH ON 25.8.2011 HAD ASKED THE LD. DR TO FURNISH COPIES OF REASONS RECORDED FOR REOPENING THE ASSESSMENT. AT THE TIME OF HEARING, THE LD. DR THOUGH SHOWED HIS INABILITY TO SUBMIT COPIES OF REASONS RE CORDED. HOWEVER, FURNISHED COPY OF THE LETTER WRITTEN BY AO TO THE C OMMISSIONER FOR SEEKING PERMISSION FOR REOPENING THE ASSESSMENT. IN THE SA ID LETTER, THE NOTINGS OF THE SENIOR AUDIT OFFICER ARE MENTIONED. WE FIND TH AT AUDIT PARTY HAS QUESTIONED THE ALLOWANCE OF DEPRECIATION AND ALLOWA NCE OF REPAIRS ON SPARE PARTS AS REVENUE EXPENDITURE. THE AUDIT OBJECTION IN RELATION TO THE EXCESS ALLOWANCE OF DEPRECIATION HAS BEEN REJECTED BY THE AO. THE AO HAS REOPENED THE ASSESSMENT ONLY ON THE OBJECTIONS RAIS ED FOR THE ALLOWANCE OF EXPENSES AS REVENUE EXPENDITURE WHICH ACCORDING TO THE AUDIT PARTY OUGHT TO HAVE BEEN TREATED AS CAPITAL EXPENDITURE. THE LD. DR SUPPORTED THE ASSESSMENT ORDER AND ARGUED THAT THE ASSESSEE HAS C LAIMED EXPENSES WHICH OUGHT TO HAVE BEEN TREATED AS CAPITAL EXPENDITURE. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES. WE FIND FORCE IN THE CONTENTION OF LD . AR THAT THE AO HAS SIMPLY FOLLOWED THE OBJECTIONS RAISED BY AUDIT PARTY. THE AO HAS INITIALLY GIVEN HIS ITA NO. 4321 TO 4323/M/10 4 OWN REASON IN THE BODY OF ASSESSMENT ORDER. ON THE CONTRARY, THE AO IN THE ASSESSMENT HAS MENTIONED THAT THE ASSESSMENT WAS RE OPENED WITH THE PRIOR APPROVAL OF LD. CIT(A) ON THE OBJECTIONS RAISED BY THE AUDIT. WE FIND THAT THE ASSESSMENT MADE U/S. 143(3) R.W.S. 147 IS DEVOI D OF ANY APPLICATION OF MIND ON THE PART OF AO. WE THEREFORE REVERSE THE F INDING OF LD. CIT(A) AND HOLD THAT AO HAS NO REASON TO BELIEVE THAT INCOME H AS ESCAPED ASSESSMENT OR THE ASSESSEE HAS FILED INACCURATE PARTICULARS OF INCOME AS NO NEW FACTS ARE BROUGHT ON RECORD. ALL THE EXPENSES CLAIMED BY THE ASSESSEE HAVE BEEN VERIFIED IN DETAIL IN THE ORIGINAL ASSESSMENT THERE FORE THE REOPENING OF ASSESSMENT TO DISALLOW THE SAME MERELY ON THE BASIS OF AUDIT REPORT IS NOT JUSTIFIABLE. THEREFORE, GROUND NO. 1 IS ALLOWED. 8. SINCE WE HAVE HELD THAT REOPENING IS BAD IN LAW, WE DO NOT DEEM IT FIT TO DECIDE GROUND NO. 2 9. IN THE RESULT, ALL THE THREE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON THIS 16 TH DAY OF MAY, 2012 SD/- SD/- (VIJAY PAL RAO) (N.K. BILLAIYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 16 TH MAY, 2012 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR D BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI