DCIT, New Delhi V. M/s. FCC RICO Ltd., Gurgaon

ITA 4525/DEL/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 4291 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 30-11-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 30-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL KUMAR SHARMA SENIOR
• Assessee Lawyers: BHAVITA KUMAR
• Keywords: Reopening of assessment; Depreciation; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 32; 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH B BB B : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT G.D. AGRAWAL, VICE PRESIDENT G.D. AGRAWAL, VICE PRESIDENT G.D. AGRAWAL, VICE PRESIDENT AND AND AND AND SHRI SUDHANSHU SRIVASTAVA SHRI SUDHANSHU SRIVASTAVA SHRI SUDHANSHU SRIVASTAVA SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER ITA NO ITA NO ITA NO ITA NO . .. . 4525/DEL/2013 4525/DEL/2013 4525/DEL/2013 4525/DEL/2013 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 2005 2005 2005 2005 - -- - 06 0606 06 DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -11(1), 11(1), 11(1), 11(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. VS. VS. VS. VS. M/S FCC RICO LIMITED, M/S FCC RICO LIMITED, M/S FCC RICO LIMITED, M/S FCC RICO LIMITED, PLOT NO.5, SECTOR PLOT NO.5, SECTOR PLOT NO.5, SECTOR PLOT NO.5, SECTOR- -- -3, 3,3, 3, IMT MANESAR, GURGAON, IMT MANESAR, GURGAON, IMT MANESAR, GURGAON, IMT MANESAR, GURGAON, HARYANA HARYANA HARYANA HARYANA 122 050. 122 050. 122 050. 122 050. PAN : AAACF2663D. PAN : AAACF2663D. PAN : AAACF2663D. PAN : AAACF2663D. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ANIL KUMAR SHARMA, SENIOR DR. RESPONDENT BY : SHRI GAURAV JAIN AND MS. BHAVITA KUMAR, ADVOCATES. DATE OF HEARING : 30.11.2016 30.11.2016 30.11.2016 30.11.2016 DATE OF PRONOUNCEMENT : 13.12.2016 13.12.2016 13.12.2016 13.12.2016 ORDER ORDER ORDER ORDER PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP : :: :- -- - THIS APPEAL BY THE REVENUE FOR THE ASSESSMENT YEAR 2005-06 IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-XIII, NEW DELHI DATED 14 TH MAY, 2013. 2. GROUND NO.1 OF THE ASSESSEES APPEAL READS AS UN DER:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN QUASHING THE ASSESSMENT ORDER P ASSED U/S 147/143(3) OF THE ACT, BY HOLDING THAT REOPENIN G WAS BASED ON CHANGE OF OPINION. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D HAVE PERUSED THE MATERIAL PLACED BEFORE US. THE ASSESSM ENT YEAR UNDER CONSIDERATION IS 2005-06. ADMITTEDLY, ORIGINAL ASS ESSMENT WAS COMPLETED U/S 143(3) AND THE NOTICE U/S 148 WAS ISS UED ON 27 TH MARCH, ITA-4525/DEL/2013 2 2012. THEREFORE, ADMITTEDLY, THE NOTICE U/S 148 WA S ISSUED BEYOND FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. ON THESE FACTS, PROVISO TO SECTION 147 WOULD BE SQUARELY APP LICABLE WHICH READS AS UNDER :- PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR TH E RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM TH E END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PAR T OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) O F SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY A LL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THAT ASSESS MENT YEAR: 4. THUS, AS PER THE ABOVE PROVISO, IF THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3), THE ASSESSMENT CANNOT BE REOP ENED BEYOND THE PERIOD OF FOUR YEARS UNLESS THERE IS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. SI NCE IN THIS CASE, ADMITTEDLY, THE ORIGINAL ASSESSMENT WAS COMPLETED U /S 143(3) AND THE ASSESSMENT WAS SOUGHT TO BE REOPENED BEYOND THE PER IOD OF FOUR YEARS, IT WOULD BE ESSENTIAL TO EXAMINE WHETHER THE RE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRUL Y ALL MATERIAL FACTS. THE COPY OF REASONS RECORDED FOR REOPENING OF ASSES SMENT READS AS UNDER:- FCC RICO LTD. FOR A.Y. 2005-06 REASONS FOR NOTICE U/S 148 OF THE IT ACT, 1961 THE ASSESSMENT U/S 143(3) OF THE IT ACT IN THE ABOV E MENTIONED CASE FOR AY 2005-06 WAS COMPLETED IN DECEMBER, 2008 DETERMINING TOTAL INCOME OF RS.40,36,83,702/-. ON THE PERUSAL OF THE RECORD IT IS REVEALED THAT DURING THE YEAR THE ASSESSEE HAD CLAI MED AN EXPENDITURE OF RS.18013616 ON TECHNICAL, FEE AND RO YALTY (RS.90,60,330/- ON FOREIGN PERSONNEL DEPUTATION CHA RGES TECHNICAL FEE AND RS.89,53,286 ON ROYALTY). ITA-4525/DEL/2013 3 AS PER SECTION 32 OF THE INCOME-TAX ACT, 1961 W.E.F . 01.04.1998 KNOW-HOW, PATENTS, COPYRIGHT, TRADEMARKS , LICENSES, FRANCHISES OR ANY OTHER BUSINESS OR COMME RCIAL RIGHTS OF SIMILAR NATURE ARE INTANGIBLE ASSETS AND DEPRECIATION @ 25 PER CENT IS ALLOWABLE ON THESE IN TANGIBLE ASSETS. THEREFORE, THE EXPENDITURE OF RS.1,80,13,6 16 ON TECHNICAL FEE AND ROYALTY SHOULD BE CAPITALIZED AND DEPRECIATION @ 25 PER CENT SHOULD BE ALLOWED ON THE SE EXPENDITURE. BY DOING SO, THE ASSESSEE HAS NOT DIS CLOSED THE TOTAL INCOME CORRECTLY TO THE EXTENT OF RS.1,35 ,10,212/- (RS.1,80,13,616/- - RS.45,03,404/- (25 PER CENT OF RS.1,80,13,616/-). BASED ON THE ABOVE FACTS, I HAVE REASON TO BELIEVE THAT THE INCOME OF THE ASSESSEE CHARGEABLE TO TAX TO THE EXT ENT OF RS.1,35,10,212/- HAS ESCAPED ASSESSMENT. YOURS FAITHFULLY, SD/- (GARGI SHARMA GOEL) DY. COMMISSIONER OF INCOME-TAX DATED : 25 MAR 2012 CIRCLE 11( 1), NEW DELHI. 5. FROM THE ABOVE, IT IS EVIDENT THAT THE ASSESSING OFFICER HIMSELF HAS MENTIONED ON THE PERUSAL OF THE RECORD IT IS R EVEALED THAT DURING THE YEAR THE ASSESSEE HAD CLAIMED AN EXPENDITURE OF RS.18013616 ON TECHNICAL, FEE AND ROYALTY (RS.90,60,330/- ON FOREI GN PERSONNEL DEPUTATION CHARGES TECHNICAL FEE AND RS.89,53,286 ON ROYALTY). THUS, THE FACT OF DISCLOSING OF ALL RELEVANT FACTS IS ADMITTED IN THE REASONS RECORDED ITSELF. THE ASSESSING OFFICER IS ADMITTING THAT THE DETAILS WERE AVAILABLE ON RECORD AT THE TIME OF ORI GINAL ASSESSMENT. AS PER ASSESSING OFFICER, SUCH EXPENDITURE SHOULD NOT HAVE BEEN ALLOWED AND ONLY 25% OF THE DEPRECIATION THEREON WOULD HAVE BEEN ALLOWED. HOWEVER, IT IS ONLY AN OPINION. THERE IS NO DISPUT E THAT THE RELEVANT FACTS WERE ALREADY DISCLOSED IN THE ORIGINAL ASSESS MENT PROCEEDINGS. THERE IS NO MENTION IN THE REASONS RECORDED THAT TH ERE WAS ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ANY MATERIA L FACTS WHICH HAS RESULTED IN UNDER-ESCAPEMENT OF INCOME. IN VIEW OF THE ABOVE, IN OUR OPINION, THE NECESSARY CONDITION FOR REOPENING OF A SSESSMENT IS NOT FULFILLED AND THE LEARNED CIT(A) WAS JUSTIFIED IN H OLDING THAT THE ITA-4525/DEL/2013 4 REOPENING OF ASSESSMENT WAS BAD IN LAW AND CONSEQUE NTIALLY, IN QUASHING THE ASSESSMENT ORDER. THE SAME IS UPHELD AND GROUND NO.1 OF THE REVENUES APPEAL IS REJECTED. 6. GROUND NO.2 OF THE REVENUES APPEAL IS AGAINST T HE DELETION OF DISALLOWANCE BY THE LEARNED CIT(A). IN OUR OPINION , ONCE THE ASSESSMENT ORDER ITSELF HAS BEEN QUASHED, ANY ADDIT ION MADE IN SUCH ASSESSMENT ORDER DOES NOT SURVIVE AND THEREFORE, GR OUND NO.2 OF THE REVENUES APPEAL DOES NOT REQUIRE ANY ADJUDICATION ON MERITS. THE SAME IS REJECTED BECAUSE ON ACCOUNT OF QUASHING OF THE ASSESSMENT ORDER, NO ADDITION CAN SURVIVE. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 13.12.2016 . SD/- SD/- (SUDHANSHU SRIVASTAV (SUDHANSHU SRIVASTAV (SUDHANSHU SRIVASTAV (SUDHANSHU SRIVASTAV A AA A ) )) ) ( (( ( G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL ) )) ) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VK. COPY FORWARDED TO: - 1. APPELLANT : DEPUTY COMMISSIONER OF INCOME TA X, DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -11(1), NEW DELHI. 11(1), NEW DELHI. 11(1), NEW DELHI. 11(1), NEW DELHI. 2. RESPONDENT : M/S FCC RICO LIMITED, M/S FCC RICO LIMITED, M/S FCC RICO LIMITED, M/S FCC RICO LIMITED, PLOT NO.5, SECTOR PLOT NO.5, SECTOR PLOT NO.5, SECTOR PLOT NO.5, SECTOR- -- -3, IMT MANESAR, GURGAON, 3, IMT MANESAR, GURGAON, 3, IMT MANESAR, GURGAON, 3, IMT MANESAR, GURGAON, HARYANA HARYANA HARYANA HARYANA 122 050. 122 050. 122 050. 122 050. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR