SRF Ltd., Gurgaon V. ACIT, New Delhi

ITA 4651/DEL/2010

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5396 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 12-06-2017
• Assessment Year: 2003-2004
• Appeal Filed On: 22-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAUSHLENDRA TIWARI
• Assessee Lawyers: SATYEA SETHI
• Keywords: Audit objection; Tangible material; Difference of opinion; Change of opinion; Capital expenditure
• Section: 143(3); 142(1); 115JB; 147; 148

Judgement Text

1 ITA NO. 4651/DEL/2010 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI MS SUCHITRA KAMBLE, JU DICIAL MEMBER AND SH. PRASHANT MAHARISHI, ACCO UNTANT MEMBER ITA NO. 4651/DEL/201 0 ( A.Y 2003-04) SRF LTD. BLOCK-C, SECTOR-45 GURGAON AACS0206P (APPELLANT) VS ACIT CIRCLE-9(1) C. R. BUILDING NEW DELHI (RESPONDENT) APPELLANT BY SH. SATYEA SETHI & A. T. PANDA, ADV RESPONDENT BY SH. KAUSHLENDRA TIWARI, SR. DR ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 25/08/2010 PASSED BY CIT(A)-XII, NEW DELHI. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. THAT THE ASSESSMENT U/S 147 IS BAD IN LAW AS WELL A S ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THAT THE LEARNED AO W AS JUSTIFIED IN INITIATING THE PROCEEDINGS U/S 147 OF THE I.T. ACT WHICH IS WH OLLY WITHOUT ANY/IN EXCESS OF JURISDICTION. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT THE REOPENING OF THE DATE OF HEARING 05.03.2018 DATE OF PRONOUNCEMENT 03.04.2018 2 ITA NO. 4651/DEL/2010 ASSESSMENT PROCEEDINGS IS A MERE CHANGE OF OPINION FOR REVIEWING AND/OR RECONSIDERING THE DECISION AND/OR ORDER OF PREDECES SOR AND IS BAD IN LAW. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE ORDER OF THE LEARNED AO IN W ITHDRAWING DEDUCTION OF RS.2,30,75,650/-, IN RESPECT OF AMOUNT PAID TO VARI OUS BANKS TOWARDS ADVISORY FEES, PROCESSING, UPFRONT FEES AND OTHER C HARGES, RIGHTLY ALLOWED IN THE ORIGINAL ASSESSMENT. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF TH E CASE, THE LEARNED CIT(A) (A) HAS ERRED IN UPHOLDING THE ORDER OF THE LEARNED AO IN WITHDRAWING DEDUCTION OF RS.1,90,00,000/- PAID TO ICICI BANK TO WARDS ADVISORY FEES . 6. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE ORDER OF THE LEAR NED AO IN HOLDING THE AMOUNT OF RS 2,30,75,650/- PAID TOWARDS ADVISORY FE ES & PROCESSING, UPFRONT FEES AND OTHER CHARGES AS CAPITAL EXPENDITU RE GIVING ENDURING BENEFITS TO THE APPELLANT. 7. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN RESTORING THE MATTER TO THE LEA RNED AO TO EXAMINE WHETHER THE EXPENSES AMOUNTING TO RS 40,75,650/- PAID TO VA RIOUS BANKS FOR WORKING CAPITAL REQUIREMENTS , HAS BEEN USED TO PURCHASE CA PITAL ASSETS. 8. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) HAS ERRED IN UPHOLDING THE ORDER OF THE LEARNED AO IN W ITHDRAWING DEDUCTION OF RS.2,80,46,251/-, IN RESPECT OF AMOUNT PAID TO ICIC I BANK TOWARDS PREPAYMENT FEES, RIGHTLY ALLOWED IN THE ORIGINAL AS SESSMENT. 9. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE ORDER OF THE LEAR NED AO IN HOLDING THE AMOUNT OF RS 2, 80, 46,251/- PAID TOWARDS PREPAYMEN T FEES PAID TO ICICI BANK AS CAPITAL EXPENDITURE GIVING ENDURING BENEFIT S TO THE APPELLANT. THAT THE APPELLANT COMPANY CRAVES LEAVE TO ADD, TO ALTER, AMEND AND/OR WITHDRAW ALL OR ANY OF THE AFORESAID GROUNDS AT OR BEFORE THE HEARING OF THE APPEAL. 3. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF NYLON TYRE CORD FABRIC/NYLON INDUSTRIAL YARN/FANRIC, FLUROCHEMICALS AND CHLOREMETHANES. ASSESSMENT IN THIS CASE WAS COMPLETED U/S 143(3) ON 28/03/2006 AT AN INCOME OF RS.61,02,68,408/- UNDER NORMAL PROVISION OF THE ACT AND THE TAXABLE INCOME WAS TAKEN UP NIL AFTER ADJUSTING B/F LOSSES OF RS. 61,02,68,408/-. SINCE, THE TAX PAYABLE UNDER SECTIO N 115JB OF THE ACT WAS HIGHER THAN THE TAX PAYABLE ON NORMAL INCOME, TAXAB LE INCOME WAS TAKEN AT 3 ITA NO. 4651/DEL/2010 RS. 62,82,65,111/- BEING BOOK PROFITS U/S 115JB OF THE ACT. THE NORMAL INCOME WAS FURTHER REDUCED TO RS. 59,70,20,699/- AN D THE INCOME U/S 115JB WAS REDUCED TO RS. 40,67,73,076/- VIDE ORDER U/S 25 0/143(3) DATED 13/02/2007. 4. SUBSEQUENTLY PROCEEDINGS U/S 147 WERE INITI ATED AFTER RECORDING PROPER REASONS AND OBTAINING NECESSARY APPROVAL OF THE THE N CIT-III, DELHI. NOTICE U/S 148 WAS ISSUED ON 25.03. 2008. IN RESPONSE THE ASSE SSEE FILED A LETTER ON 18.06.2008 BUT DID NOT MAKE PROPER 'COMPLIANCE OF-T HE NOTICE ISSUED U/S 148. THE ASSESSEE DEMANDED THE COPY OF REASONS. A NOTICE U/S 142(1) ALONG WITH A LETTER WAS SENT TO THE ASSESSEE ON 10/09/2009 REMIN DING TO MAKE COMPLIANCE OF THE NOTICE U/S 148 BY FILING RETURN OF INCOME AS DESIRED IN THE SAID NOTICE. THE ASSESSEE WAS ALSO ASKED TO PRODUCE A DOCUMENTAR Y' EVIDENCE IF ANY COMPLIANCE OF THE NOTICE U/S 148 HAD BEEN MADE. IN RESPECT OF DEMAND OF COPY OF REASONS THE ASSESSEE WAS INTIMATED THAT FIRST HE SHOULD MAKE COMPLIANCE OF THE NOTICE U/S 148. IN RESPONSE AUTHORISED REPRESEN TATIVE OF THE ASSESSEE COMPANY APPEARED ON 21.10.2009 AND FILED A LETTER I NTIMATING THAT THE RETURN OF INCOME FILED ON 31.03.2005 MAY BE TREATED AS RET URN IN RESPONSE TO THE NOTICE U/S 148. HE ALSO REQUESTED TO SUPPLY COPY OF REASONS WHICH WERE SUPPLIED TO HIM ON THE SAME DATE. THE ASSESSING OFF ICER COMPLETED THE ASSESSMENT ON 23.12.2009 BY MAKING ADDITION OF RS. 2,30,75,650/- PAID TOWARDS ADVISORY FEES FOR RESCHEDULING OF LOANS, PR OCESSING FEE AND OTHER CHANGES WHICH IS DESCRIBED BY THE ASSESSING OFFICER AS ARE IN THE NATURE OF CAPITAL EXPENDITURE. THE ASSESSING OFFICER FURTHER MADE ADDITION OF RS.2,80,46,251/- TOWARDS PRE-PAYMENT FEES PAID TO I CICI BANK LTD. AND HELD THE SAME AS CAPITAL EXPENDITURE. THE ASSESSING OFFI CER FURTHER MADE ADDITION OF RS. 5,04,01,000/- BEING DIMINUTION IN VALUE OF INVESTMENT WHILE COMPUTING THE BOOK PROFIT. 5. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE FILED APPEAL BEFORE THE CIT (A). THE CIT (A) PARTLY ALLO WED THE APPEAL OF THE ASSESSEE. 4 ITA NO. 4651/DEL/2010 6. THE LD. AR SUBMITTED THAT THE ASSESSMENT U/S 147 IS BAD IN LAW AS THE INITIATION OF THE PROCEEDINGS U/S 147 OF THE I.T. A CT WAS WITHOUT ANY JURISDICTION. THE REOPENING OF THE ASSESSMENT PROCE EDINGS IS A MERE CHANGE OF OPINION FOR REVIEWING AND RECONSIDERING THE DECISIO N AND IS BAD IN LAW. THE ASSESSING OFFICER WAS NOT CORRECT IN WITHDRAWING DE DUCTION OF RS.2,30,75,650/- IN RESPECT OF AMOUNT PAID TO VARIOUS BANKS TOWARDS ADVISORY FEES, PROCESSING, UPFRONT FEES AND OTHER CHARGES, RIGHTLY ALLOWED IN THE ORIGINAL ASSESSMENT. THE ASSESSING OFFICER WAS INCORRECT IN WITHDRAWING DEDU CTION OF RS.1,90,00,000/- PAID TO ICICI BANK TOWARDS ADVISORY FEES. THE ASSES SING OFFICER WAS NOT CORRECT IN TREATING THE ADVISORY FEES AS PRE-PAYMENT FEES. THE ASSESSING OFFICER WAS INCORRECT IN HOLDING THE AMOUNT OF RS 2,30,75,650/- PAID TOWARDS ADVISORY FEES & PROCESSING, UPFRONT FEES AND OTHER CHARGES AS CAP ITAL EXPENDITURE GIVING ENDURING BENEFITS TO THE ASSESSEE. THE ASSESSING OF FICER WAS NOT RIGHT IN WITHDRAWING DEDUCTION OF RS.2,80,46,251/-, IN RESPE CT OF AMOUNT PAID TO ICICI BANK TOWARDS PREPAYMENT FEES, RIGHTLY ALLOWED IN TH E ORIGINAL ASSESSMENT. THE ASSESSING OFFICER WAS NOT RIGHT IN HOLDING THAT THE AMOUNT OF RS 2, 80, 46,251/- PAID TOWARDS PRE-PAYMENT FEES PAID TO ICIC I BANK AS CAPITAL EXPENDITURE GIVING ENDURING BENEFITS TO THE APPELLA NT. THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING AN ADDITION OF RS 5,04, 01,000 ON ACCOUNT OF PROVISION IN DIMINUTION OF THE VALUE OF INVESTMENTS , WHILE COMPUTING THE BOOK PROFITS U/S 115JB OF THE INCOME TAX ACT. THE ASSESS ING OFFICER FAILED TO APPRECIATE THAT THE PROVISION FOR DIMINUTION IN THE VALUE OF INVESTMENTS DEBITED TO THE PROFIT AND LOSS ACCOUNT IS THE ACTUAL LOSS I N THE VALUE OF INVESTMENTS THOUGH SHOWN UNDER THE HEAD PROVISION. THE LD. AR FURTHER SUBMITTED THAT THE ISSUES RAISED IN THE REOPENING WAS ALREADY EXAMINED IN THE AUDIT OBJECTIONS AND VIDE LETTER DATED 14.05.2008, THE ASSESSING OFF ICER HAS SUBMITTED THAT THE AUDIT OBSERVATION BE TREATED AS SETTLED. 5 ITA NO. 4651/DEL/2010 7. THE LD. DR RELIED UPON THE ORDER OF THE ASSESSIN G OFFICER AND CIT(A). THE LD. DR RELIED UPON THE DECISION OF THE HONBLE SUPR EME COURT IN CASE OF CIT VS. PVS BEEDIS PVT. LTD 237 ITR 13 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. IT IS PERTINENT TO NOTE THAT THE ISSUES RA ISED IN THE REOPENING WAS ALREADY EXAMINED IN THE AUDIT OBJECTIONS AND VIDE L ETTER DATED 14.05.2008, THE ASSESSING OFFICER SUBMITTED THAT THE AUDIT OBSERVAT ION BE TREATED AS SETTLED. THEREAFTER ON THE SAME ISSUES, THE REASONS FOR RE-O PENING WERE RECORDED ON 23.05.2008. THUS, THE REOPENING ITSELF IS NOT ON AN Y TANGIBLE MATERIAL. THE ENTIRE RECORD WAS EXAMINED DURING THE REGULAR ASSES SMENT AND THE CIT(A) HAS NOT PROPERLY EXAMINED THIS ASPECT. THUS THE FINDING OF THE CIT(A) REGARDING RE- OPENING U/S 147 IS NOT CORRECT. THE LD. DR RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF CIT VS. PVS BEEDIS PVT. LTD 237 ITR 13 WHEREIN IT IS HELD THAT RE-OPENING OF CASE U/S 147 (B) ON BASIS OF FACTUAL INFORMATION GIVEN BY INTERNAL AUDIT PARTY WAS VALID IN LAW. IT IS PERTINENT TO NOTE THAT THE HONBLE SUPREME COURT RATIO IS NOT AP PLICABLE IN THE PRESENT CASE AS IN THE PRESENT CASE AUDIT OBJECTION WAS FINALLY SETTLED BY THE ASSESSING OFFICER ON THE ISSUE WHERE THE ASSESSEE WAS ASKED Q UESTIONNAIRE UNDER REGULAR ASSESSMENT. THE FACTUAL ASPECT OF THE HONBLE SUPR EME COURT DECISION IS TOTALLY DIFFERENT FROM THIS PARTICULAR CASE. THE A UDIT OBJECTION RAISED BY THE ASSESSING OFFICER WAS DEALT BY THE ASSESSING OFFICE R BY GIVING THE FINDING THAT THE ISSUE IS SETTLED, IT WILL NO MORE REMAIN AS AUD IT OBJECTION. IN THIS PARTICULAR CASE DESPITE SETTLING AUDIT OBJECTION THE ASSESSING OFFICER AGAIN BY GIVING REASONS ON THE SAME ISSUE IN A DIFFERENT MANNER AMO UNTS TO CHANGE OF OPINION. THEREFORE, THE CIT(A) IS NOT CORRECT IN HOLDING THA T THE RE-OPENING IS JUSTIFIED. SINCE THE RE-OPENING ITSELF IS BAD, WE ARE NOT DECI DING THE ISSUES CONTESTED BEFORE US ON MERIT. THUS, THE APPEAL OF THE ASSESSE E IS ALLOWED. 6 ITA NO. 4651/DEL/2010 9. IN RESULT, APPEAL OF THE ASSESSEE IS ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 03RD APRIL, 2018 . SD/- SD/- (PRASHANT MAHARISHI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 03/04/2018 R.N* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 7 ITA NO. 4651/DEL/2010 DATE 1. DRAFT DICTATED ON 06/03/2018 PS 2. DRAFT PLACED BEFORE AUTHOR 07/03/2018 PS 3. DRAFT PROPOSED & PLAC ED BEFORE THE SECOND MEMBER .201 8 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 3.04.2018 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 3 .0 4 .2018 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.