M/s. Mechelonic Welders Private Limited, Bengaluru V. Deputy Commissioner of Income-tax, Circle-12(1), Bengaluru

ITA 441/BANG/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8911 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-06-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 14-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K N DHANDA
• Assessee Lawyers: S V RAVISHANKAR
• Keywords: Reopening of assessment; Depreciation; Assessment record; Reassessment proceedings; Set aside
• Section: 143(3); 142(1); 143(1); 250; 148; 54

Judgement Text

1 ITA NO.441/BANG/2018 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES B BENCH: BANGALORE BEFORE SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA. NO. 441 /BANG/2018 (ASSESSMENT YEAR: 201 1 - 12 ) M/S. MECHELONIC WELDERS PVT. LTD., A - 24, HMT INDL. ESTATE, JALAHALLI, BANGALORE - 560 031 PAN: AAACM3665L VS. DY. COMMISSIONER OF INCOME TAX , CIRCLE 12(1), BANGALORE. (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI S.V. RAVISHANKAR, ADVOCATE. REVENUE BY: SHRI K.N. DHANDAPANI, JCIT (D.R) DATE OF HEARING : 10.06 .2019 DATE OF PRONOUNCEMENT : 1 0 .0 7 .2019 O R D E R PER SHRI PAVAN KUMAR GADALE, JM : THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 4, BANGALORE UNDER SECTION 143(3) R.W.S. 1 4 7 AND 250 OF THE INCOME TAX ACT, 1961. 2 ITA NO.441/BANG/2018 2. THE ASSESSEE HAS RAISED GROUNDS OF APPEAL ON THE VAL IDITY OF ISSUE OF NOTICE UNDER SECTION 148 AND THE ASSESSMENT PROCEEDINGS AND DISALLOWANCE OF EXEMPTION UNDER SECTION 54G OF THE ACT. 3. THE B RIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN BUSINESS OF MANUFACTURING WELDING MACHINES FOR AUTOMOBILE INDUSTRIES HAVING FACTORIES IN MUMBAI AND FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011 - 12 ON 28.09.2011 WITH TOTAL INCOME OF RS.16,17,620 AND THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1) OF THE ACT WHEREAS THE ASSESSING OFFICER ON PERUSAL OF THE ASSESSMENT RECORD FOR THE ASSESSMENT YEAR 2008 - 09 FOUND THAT THE COMPANY HAS SOLD LEASEHOLD RIGHTS IN LAND ALONG WITH THE FACTORY BUILDING IN JANUARY, 2008 AND FURTHER SOLD PLANT AND MACHINERY OVER A PERIOD OF TIME AND REMAINING WAS TRANSPORTED TO BANGA L ORE. THE ASSESSEE HAS DEPOSITED THE C APITAL G AINS OF RS.2.45 CRORES APPROXIMATELY ON SALE OF FACTORY AT MUMBAI IN CAPITAL GAINS ACCOUNT SCHEME AND CLA IMED EXEMPTION UNDER SECTION 54G OF THE ACT. THE ASSESSING OFFICER FOUND THA T THE ASSESSEE HAS NOT COMPLIED WITH THE REQUISITE CONDITIONS UNDER SECTION 54G OF THE ACT AND FURTHER EFFORTS MADE FOR SHIFTING OF PLANT AND MACHINERY TO THE SITE BUT COULD NOT ESTABLISH WITH ANY EVIDENCE. BUT NEW SITES WERE ACQUIRED BY THE ASSESSEE. THE ASSESSING OFFICER IS OF THE OPINION THAT NO B USINESS ACTIVITY HAS BEEN INITIATED IN THE NEW SITES AND COMPANY COULD NOT 3 ITA NO.441/BANG/2018 UTILIZED THE CAPITAL GAINS DEPOSITED UNDER SECTION 54 G OF THE ACT THEREFORE LONG TERM CAPITAL GAINS (LTCG) ARE TAXABLE AND ISSUED NOTICE UNDER SECTION 148 OF THE ACT ON 2.9.2013. THE ASSESSEE FILED A LETTER DT.6.2.2014 TO TREAT THE RETURN OF INCOME FILED ON 4.10.2013 IN COMPLIANCE OF THE NOTICE UNDER SECTION148 OF THE ACT. THE LEARNED AUTHORISED REPRESENTATIVE FILED LETTER FOR FU RNISHING THE REASONS FOR REOPENING ON 24.2.2014 AND SUBSEQUENTLY ASSESSING OFFICER ISSUED NOTICES UNDER SECTION 143(2) AND 142(1) OF THE ACT . THE ASSESSEE ALSO MADE SUBMISSIONS VIDE LETTER DT.13.3.2014. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SEC. 54G OF THE ACT AND HAS NOT SET UP THE INDUSTRIAL UNIT ON THE NEW SITES. THEREFORE THE AMOUNTS WERE NOT UTILIZED FOR THE PURPOSE OF SETTING UP OF THE INDUSTRIAL UNIT, RS.2,39,00,000 WAS BROUGHT TO TAX IN CUR RENT ASSESSMENT YEAR. SIMILARLY, THE ASSESSEE HAS CLAIMED DEPRECIATION ON PLANT & MACHINERY BUT ASSESSING OFFICER DISALLOWED THE CLAIMS AND ASSESSED TOTAL INCOME OF RS.2 , 55,17,621 AND PASS ORDER UNDER SECTION 143(3) R.W.S. 147 OF THE ACT DT.26.06.2014. AGGRIEVED BY THE ORDER, THE ASSESSEE FILED AN APPEAL WITH THE CIT(APPEALS) WHEREAS ON THE DISPUTED ISSUE OF DISALLOWANCE DUE TO NON - COMPLIANCE OF PROVISIONS OF SECTION 54 G. THE LEARNED CIT(APPEALS) HAS CONFIRMED THE ADDITION AND UPHELD THE VALIDITY OF REASSESSMENT PROCEEDINGS UNDER 4 ITA NO.441/BANG/2018 SECTION 14 7 AND PARTLY ALLOWED THE ASSESSEE'S APPEAL. AGGRIEVED BY THE ASSESSEE, FILED APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME O F HEARING, T HE LEARNED AUTHORISED REPRESENTATIVE HAS RESTRICTED HIS ARGUMENTS TO THE EXTENT OF VALIDITY OF REASSESSMENT PROCEEDINGS AND NOTICE ISSUED UNDER SECTION 148 OF THE ACT. THE LEARNED AUTHORISED REPRESENTATIVE REFERRED TO THE PARA 5.4.2 OF THE CIT (APPEALS) ORDER AND OBSERVATIONS ON THE R EASSESSMENT PROCEEDINGS. THE LEARNED AUTHORISED REPRESENTATIVE EMPHASIZED ON THE GROUND NO.6 OF THE APPEAL WHICH ARE AS UNDER : - THE CONTENTION OF THE LEARNED AUTHORISED REPRESENTATIVE THAT THE ASSESSING OFFICER HAS NOT PASSED SPEAKING ORDER AGAINST THE OBJECTIONS IN REASSESSMENT PROCEEDINGS AND PRAYED FOR ALLOWING THE ASSESSEE'S APPEAL AND RELIED ON JUDICIAL DECISIONS . CONTRA, THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF LEARNED CIT (APPEALS) . 5. WE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE SOLE DISPUTED ISSUE ENVISAGED BY THE LEARNED AUTHORISED REPRESENTATIVE IN RESPECT 5 ITA NO.441/BANG/2018 OF VALIDITY OF REASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT AND FURTHER EMP HASIZED THAT THE ASSESSING OFFICER HAS NOT PASSED A SPEAKING ORDER ON THE OBJECTIONS FILED BY THE ASS ESSEE VIDE LETTER DT.13.03.2014. THE LEARNED AUTHORISED REPRESENTATIVES CONTENTION S ARE THAT SINCE THERE IS NO DISPOSAL OF OBJECTIONS FILED BY THE AS SESSEE AGAINST THE REASONS PROVIDED BY THE ASSESSING OFFICER ON ISSUE OF NOTICE UNDER SECTION 148 OF THE ACT, THE ASSESSMENT HAS TO BE ANNULLED . W HEREAS THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT IT IS A TECHNICAL MISTAKE AND CAN BE RECTIFIAB LE /CURABLE AND RELIED ON THE DECISION OF HON'BLE HIGH COURT OF MADRAS REPORTED IN 93 TAXMAN.COM 371 HOME FINDERS HOUSING LTD. VS. ITO. WE FIND ON P ERUSAL OF THE ASSESSMENT ORDER THAT THE ASSESSEE WAS PROVIDED WITH REASONS FOR REOPENING OF ASSESSMENT ON 24.02.2014 . THE LEARNED AUTHORISED REPRESENTATIVE REFERRED TO THE SUBMISSIONS IN THE PAPER BOOK AT PAGES 34 TO 47 WHERE THE OBJECTIONS WERE FILED ON 13.3.2014 WITH THE DCIT, CIRCLE 12(1), BANGALORE SUPPORTED WITH JUDICIAL DECISION. T H E LEARNED AUTHORISED REPRESENTATIVE DEMONSTRATED AND READ OVER THE OBJECTIONS FILED BY THE ASSESSEE AND EMPHSISED THAT THE ASSESSING OFFICER HAS PASSED ORDER WITHOUT DISPOSING THE OBJECTIONS OF THE ASSESSEE WHICH IS IN VIOLATION OF PROVISIONS OF LAW. WE , ON PERUSAL OF THE FACTS AND MATERIAL SUBMITTED BY THE LEARNED AUTHORISED REPRESENTATIVE F O U N D THAT THE ASSESSING OFFICER HAS NOT DIS POSED OF THE OBJECTIONS 6 ITA NO.441/BANG/2018 RAISED BY THE ASSESSEE WHICH CANNOT BE DISPUTED . WE F I N D THE HON'BLE SUPREME COURT IN THE CA SE OF HOME FINDERS HOUSING LTD. VS. ITO 94 TAXMAN.COM 84 (SC) WHILE DISMISSING THE SLP FILED BY THE ASSESSEE HAS OBSERVED IN THE HEAD NOTE AS UNDER : - WE FOUND THA T THE ASSESSING OFFICER HAS NOT DISPOSED OFF THE OBJECTIONS AS CONTESTED BY THE LEARNED AUTHORISED REPRESENTATIVE AND LEARNED CIT(APPEALS) HAS NOT GIVEN ANY FINDINGS ON THIS ISSUE IN THE ORDER . WE SUPPORT OUR VIEW RELYING ON THE DECISION OF HON'BLE SUPREME COURT AND ARE OF THE SUBSTANTIVE OPINION THAT SUCH V IOLA TION IS O NLY PROCEDURAL IRREGULARIT Y AND CURABLE. ACCORDINGLY, WE SET ASIDE THE ORDER OF CIT (APPEALS) AND RESTORE THE ENTIRE DISPUTED ISSUE TO THE FILE OF THE ASSESSING OFFICER TO DISPOSE OFF THE OBJECTIONS FILED BY THE ASSESSEE WITH SPEAKING ORDER AND ADJUDICATE AFRESH AND THE ASSESSEE SHOULD BE PROVIDED ADEQUATE 7 ITA NO.441/BANG/2018 OPPORTUNITY OF HEARING AND CO - OPERATE IN SUBMITTING THE INFORMATION AND ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE FOR STATISTICAL PURPOSES. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 1 0 T H JULY, 2019. S D / - S D / - (A.K. GARODIA) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 1 0 .07. 201 9. *REDDY GP COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT (A) 4. PR. CIT 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL BANGALORE