Appeal Details
Counselvise Citation
[2016] 133 COUNSELVISE.COM (IT) 6062 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 10 month(s) 9 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
29-01-2016
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
A
Next Hearing Date
07-01-2016
Assessment Year
2006-2007
Appeal Filed On
20-03-2014
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI P.MADHAVI DEVI, JUDICIAL MEMEBR AND SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.473/HYD/14 : ASSESSMENT YEAR 2006- 07 M/S. VENUS POWER VENTURES (INDIA) LTD. HYDERABAD. ( PAN - AACLT 0907 C) V/S. DY. COMMISSIONER OF INCOME - TAX CIRCLE 3(3), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : S HRI P.MURALI MOHAN RAO RESPONDENT BY : SHRI M.SITARAM DR DATE OF HEARING 07 . 01 .201 6 DATE OF PRONOUNCEMENT 29.01.2016 O R D E R PER B.RAMAKOTAIAH, ACCOUNTANT MEMBER: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) IV, HYDERABAD D ATED 17.1.2014 FOR THE ASSESSMENT YEAR 2006-07. 2. THE MAIN ISSUE INVOLVED IN THIS APPEAL RELATES TO LEGALITY AND VALIDITY OF THE REOPENING OF THE ASSESSMENT UNDER S .147 OF THE INCOME TAX ACT, 1961. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSE E COMPANY, ENGAGED IN THE BUSINESS OF PROVIDING INFORMATION TE CHNOLOGY ENABLED SERVICE AS BPO SERVICE PROVIDER, FILED ITS RETURN O F INCOME FOR THE ASSESSMENT YEAR 2006-07 ON 28.11.2006 DECLARING AN INCOME OF RS.21,48,037. ASSESSMENT WAS ORIGINALLY COMPLETED U NDER S.143(3) OF THE ACT ON 22.12.2008 DETERMINING THE TOTAL INCOME AT R S.23,48,037. ITA NO.473/HYD/2014 M/S.VENUS VENTURES (INDIA) LIMITED, HYDERABAD 2 SUBSEQUENTLY, THE ASSESSMENT WAS REOPENED BY THE AS SESSING OFFICER, VIDE NOTICE UNDER S.148 OF THE ACT, FOR THE FOLLOWING RE ASONS- AS SEEN FROM THE ASST RECORD, IT IS OBSERVED THAT IN THIS CASE THE ASSESSEE WAS A PROVIDER OF IT ENABLED SERVICES AND BPO SERVICES. NO SALE DEEDS OR AGREEMENTS WERE PLACED ON RECORD TO INDICATE T(W)HAT SORT OF RIGHTS THE ASSESSEE C OMPANY HAD PURCHASED AND IN WHAT WAY THOSE WERE USED FOR THE B USINESS. THERE WAS ABSOLUTELY NO EVIDENCE ON RECORD TO INDIC ATE THE NATURE OF THE ASSETS PURCHASED AND ITS RELEVANCE TO THE ASSESSEES BUSINESS. IT WAS ALSO NOTICED THAT THES E RIGHTS WERE PURCHASED/ACQUIRED ONLY DURING THIS YEAR I.E. A.Y. 2006-07 AND THIS INTANGIBLE ASSETS WDV DURING THE LAST A.Y. IE 2005-06 WAS NIL INDICATING THAT THESE RIGHTS WERE NOT REQUIRED FOR THE ASSESSEES BUSINESS LAST YEAR. ALSO THE ASSESSEE CL AIMED FULL DEPRECIATION AT 25% AND THE SAME WAS ALLOWED. IN T HE ABSENCE OF SALE DEEDS/DOCUMENTS THE ACTUAL DATE OF PURCHASE COULD NOT BE ASCERTAINED FOR THE PURPOSE OF ADMITTI NG FULL DEPRECIATION OR DEPRECIATION AT 50% OF THE ELIGIBLE RATE. IN THE LIGHT OF THE ABOVE, THE DEPRECIATION CLAIMED OF RS. 32,85,000 NEEDS TO BE DISALLOWED FOR WANT OF SUBSTANTIATING E VIDENCE. IN VIEW OF THE ABOVE, I HAVE REASON TO BELIEVE TH AT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THE AY 2006-07. AFTER CONSIDERING THE OBJECTIONS OF THE ASSESSEE CO NTAINED IN ITS LETTER DATED 2.12.2012, AND DISPOSING OF THE SAME VIDE LET TER DATED 21.12.2012, SEPARATELY, ASSESSING OFFICER PROCEEDED TO COMPLETE THE RE-ASSESSMENT VIDE ORDER DATED 2.1.2013, PASSED UNDER S.143(3) RE AD WITH S.147 OF THE ACT, ON A TOTAL INCOME OF RS.3,16,31,460 AS AGAINS T THE ORIGINALLY ASSESSED INCOME OF RS.23,48,037, AFTER MAKING FOLLO WING FURTHER ADDITIONS/DISALLOWANCES- DISALLOWANCE OF DEPRECIATION ON ADDITIONS TO FIXED ASSETS & RIGHTS AS DISCUSSED RS. 85,83,585 DISALLOWANCE OF EXPENDITURE U/S. 40(A)(IA) RS. 2,06,89,836 ITA NO.473/HYD/2014 M/S.VENUS VENTURES (INDIA) LIMITED, HYDERABAD 3 4. AGGRIEVED BY THE SAME, ASSESSEE PREFERRED APPE AL BEFORE THE CIT(A). CONTESTING THE REOPENING OF THE ASSESSMENT , IT WAS SUBMITTED THAT IT HAD FILED OBJECTIONS TO THE ISSUE OF NOTIC E UNDER S.148 AND THAT THE ASSESSING OFFICER HAD DISPOSED OF THE ASSESSEES OB JECTIONS WITHOUT PASSING A SPEAKING ORDER IN VIOLATION OF THE DIREC TION OF THE APEX COURT IN THE CASE OF GKN DRIVESHAFTS INDIA LTD. V/S. DCIT(25 9 ITR 19). IT WAS ALSO SUBMITTED THAT THE ASSESSMENT HAD BEEN REOPENED BA SED ON AUDIT OBJECTIONS ON TECHNICALITIES WITHOUT ANY CHANGE IN FACTS OF THE CASE AND THEREFORE THE REOPENING WAS INVALID, IN VIEW OF THE DECISION OF THE APEX COURT IN THE CASE OF INDIAN AND EASTERN NEWSPAPER S OCIETY V/S. CIT (1979) 2 TAXMAN 197 (SC). IT WAS ALSO SUBMITTED THAT THE R EOPENING IS BASED ON MERE CHANGE OF OPINION BASED ON THE VERY SAME SET O F FACTS, WHICH WERE AVAILABLE EVEN EARLIER, AND AS SUCH, ON THAT SCORE ALSO, REOPENING IS BAD IN LAW AND VITIATED. RELIANCE IN THIS BEHALF WAS PLAC ED ON A NUMBER OF DECISIONS. 5. THE CIT(A), AFTER RECORDING THE REASONS FOR RE OPENING AND ALSO THE CONSIDERATION/REJECTION OF SUCH OBJECTIONS BY T HE ASSESSING OFFICER VIDE LETTER DATED 21.12.2012, UPHELD THE ACTION OF THE A SSESSING OFFICER IN REOPENING THE ASSESSMENT. HE NOTED THAT THE DETAIL ED LETTER OF THE ASSESSING OFFICER DATED 21.12.2012, BY NO STRETCH O F IMAGINATION CAN BE TERMED AS A NON-SPEAKING ONE, AS IT HAS EXPLAINED I N GREAT DETAIL THE REASONS WHY THE ASSESSEES OBJECTIONS WERE BEING RE JECTED. HE HAS REFERRED TO THE MEANING OF THE PHRASE CHANGE OF OP INION, AS EXAMINED BY THE APEX COURT IN THE CASE OF KELIVNATOR OF INDIA L TD.(320 ITR 561) AND FURTHER INTERPRETED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V/S. USHA INTERNATIONAL LTD. (348 ITR 485), AND ULTIMATE LY CONCLUDED THAT IN THIS CASE IN THE COURSE OF ORIGINAL ASSESSMENT , NE ITHER THE CLAIM OF THE ASSESSEE FOR DEPRECIATION ON THE FILM RIGHTS NOR THE APPLICABILITY OF PROVISIONS OF S.40(A)(IA) WAS EXAMINED, AND CONSEQU ENTLY IT CANNOT BE SAID THAT THE ASSESSING OFFICER, DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, HAD FORMED ANY OPINION ON THESE ISSUES . CONSEQUENTLY WHEN ITA NO.473/HYD/2014 M/S.VENUS VENTURES (INDIA) LIMITED, HYDERABAD 4 NO OPINION AT ALL WAS FORMED ON THE ISSUES IN QUEST ION, IT CANNOT BE SAID THAT THERE WAS ANY CHANGE OF OPINION, WHICH HAS LE D TO THE REOPENING OF THE ASSESSMENT BY THE ASSESSING OFFICER. HE ALSO REJECTED THE PLEA OF THE ASSESSEE THAT REOPENING OF ASSESSMENT MADE IN THIS CASE BASED ON AN AUDIT OBJECTION IS VITIATED, AFTER REFERRING TO THE DECISION OF THE APEX COURT IN THE CASE OF INDIAN AND EASTERN NEWSPAPER SOCIETY (SUPRA), OBSERVING THAT THE DISTINCTION BETWEEN INFORMATION AND OPINIO N IS SIGNIFICANT AND IN THIS CASE THERE IS NOTHING TO SUGGEST THAT THE RE-A SSESSMENT HAD BEEN DONE ON THE BASIS OF THE OPINION OF THE AUDIT PARTY . 6. THE CIT(A) ACCORDINGLY UPHELD THE LEGALITY AND VALIDITY OF THE REOPENING OF THE ASSESSMENT, AND EVEN ON MERITS, FI NDING NO MERIT IN THE CONTENTIONS OF THE ASSESSEE, UPHELD THE DISALLOWANC E OF DEPRECIATION AS WELL AS THE DISALLOWANCE MADE IN TERMS OF S.40A(IA) OF THE ACT. 7. AGGRIEVED BY THE ABOVE ORDER OF THE CIT(A), AS SESSEE PREFERRED THIS APPEAL BEFORE US . ASSESSEE RAISED THE FOLLOWING GROUNDS- 1. THE LD. CIT(A)-IV, HYDERABAD ERRED BOTH IN LAW AND ON FACTS WHILE DISALLOWING THE APPEAL. 2. THE LD. CIT(A) IV, HYDERABAD ERRED IN UPHOLDING THE REOPENING OF THE ASST U/S. 147 OF IT ACT, 1961 EVEN WHEN THE APPELLANT COMPANY HAS SUBMITTED ALL THE INFORMA TION AND OFFERED EXPLANATIONS DURING THE ASSESSMENT PROCEEDINGS U/S. 143(3) DATED 22.12.08 AND WHERE TH ERE IS NO FRESH MATERIAL AVAILABLE WITH AO. 3. THE CIT(A)-IV, HYDERABAD ERRED IN UPHOLDING THE DISALLOWANCE OF THE ENTIRE CLAIM OF DEPRECIATION OF RS.85,83,585/- ON THE ADDITION TO OF FIXED ASSETS. 4. THE CIT(A) IV, HYDERABAD ERRED BY UPHOLDING TH E DISALLOWANCE OF THE DEPRECIATION ON RIGHTS ON THE G ROUND THAT NO PROOF FOR ANY ADDITION TO FIXED ASSETS HAVE BEEN PROVIDED. ITA NO.473/HYD/2014 M/S.VENUS VENTURES (INDIA) LIMITED, HYDERABAD 5 5. THE CIT(A)-IV, HYDERABAD ERRED BY UPHOLDING THE DISALLOWANCE OF THE EXPENDITURE OF RS.2,L06,89,836/ - U/S. 40(A)(IA) ON WHICH TDS NOT APPLICABLE. 6. THE APPELLANT MAY, ADD OR ALTER OR AMEND OR MODI FY OR SUBSTITUTE OR DELETE AND/OR RESCIND ALL OR ANY OF T HE GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. THE LEARNED COUNSEL FOR THE ASSESSEE, REITERATING T HE CONTENTIONS URGED BEFORE THE LOWER AUTHORITIES, PLACED RELIANCE ON TH E FOLLOWING DECISIONS OF THE TRIBUNAL, DULY PLACING COPIES THEREOF BEFORE U S. (1) S.RANJITHA REDDY V/S. DCIT(35 TAXMANN/COM.415)(HYD) (2) ANDHRA BANK LIMITED V/S. DCIT (ITA NO.1943 TO 1945/HYD/2011) (3) GAYATRI SUGARS LIMITED V/S. ACIT (ITA NO.1728 TO 1731/HYD/2011) (4) BHARATIYA RESERVE BANK NOTE MUDRAN P. LTD. V/S. DCI T (ITA NO.1123/BANG/2010) (5) GMR HOLDINGS P. LTD. V/S. DCIT (ITA NO.1006/BANG/20 10) (6) ADDL. CIT V/S. CREAMLINE DAIRY PRODUCTS LIMITED (IT A NO.1483/HYD/2013) THE LEARNED DEPARTMENTAL REPRESENTATIVE, IN REPLY, HAS ALSO, REITERATED THE STAND OF THE REVENUE, AND ALSO FILED WRITTEN SU BMISSIONS AND ALSO PLACED RELIANCE ON THE FOLLOWING DECISIONS- (A) ACIT V/S. RAJESH JHAVERI STOCK BROKERS (P) LTD.(291 ITR 500)- SC (B) YUVRAJ V/S. UNION OF INDIA AN ANR (315 ITR 84)-BOM. (C) KERALA FINANCE CORPORATION VS. JCIT (308 ITR 434)-K ER. (D) CIT V/S. RINKU CHARKRABORTHY AND ANR.(242 CTR 425) -KAR. (E) CIT V/S. BEST WOOD INDUSTRIES & SAW MILLS( 331 ITR 63)-KER. ITA NO.473/HYD/2014 M/S.VENUS VENTURES (INDIA) LIMITED, HYDERABAD 6 (F) SUMITRA GUPTA NEW DELHI V/S. IT DEPARTMENT (ITA NO.3482/DEL/2010)-ITAT DELHI. (G) EXPORT CREDIT GUARANTEE CORPN. OF INDIA LTD. V/S. A DDL. CIT (350 ITR 651) (H) ACIT CIRCLE 4(2), MUMBAI V/S. RISHTI STOCK AND SHARES (P) LTD. (ITA NO.112/MUM/2012) 8. WE HEARD BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE FIRST INSTANCE, IT MAY NOTED THAT T HOUGH THIS APPEAL WAS ORIGINALLY HEARD ON 12.11.2014, TAKING NOTE OF A NU MBER OF DECISIONS OF THIS TRIBUNAL RELIED UPON BY THE LEARNED COUNSEL FO R THE ASSESSEE WHICH ARE IN ITS FAVOUR, OBSERVING THAT THE ISSUE HAD BEEN DE CIDED BY THE CIT(A) IN THE IMPUGNED ORDER RELYING ON THE DECISION OF THE D ELHI HIGH COURT IN THE CASE OF CIT V/S. USHA INTERNATIONAL LTD. (SUPRA), F OR CONSIDERING THE ARGUMENTS OF THE ASSESSEE ON THE APPLICABILITY OF T HE SAID DECISION OF THE HON'BLE DELHI HIGH COURT, THE APPEAL WAS RELEASED A ND REPOSTED FOR FRESH HEARING, AND IT HAS THEREAFTER COME UP FOR HEARING BEFORE US ON 07.01.2016. WE HAVE ALSO GONE THROUGH WRITTEN SUBMISSIONS FILED BY THE PARTIES, IN THE LIGHT OF A CATENA OF DECISIONS REFERRED TO AND RELIED UPON BY THE PARTIES IN SUPPORT OF THEIR RESPECTIVE CONTE NTIONS, ON THE ISSUE OF REOPENING OF ASSESSMENT. 8.1 IT IS THE CASE OF THE ASSESSEE, RIGHT FR OM THE BEGINNING THAT THE REOPENING OF ASSESSMENT HAS BEEN MADE BASED ON MERE CHANGE OF OPINION, ON THE VERY SAME FACTS WHICH WERE ALREADY AVAILABLE BEFORE THE ASSESSING OFFICER DURING THE ORIGINAL ASSESSMENT PR OCEEDINGS. IT IS ALSO ITS CASE THAT THE REOPENING PROMPTED BY AN AUDIT OBJECT ION CANNOT BE SUSTAINED. THE CONTENTION OF THE REVENUE ON THE OTH ER HAND IS THAT WHEN THE ASSESSING OFFICER HAS NOT FORMED ANY OPINION WH ATSOEVER IN RELATION TO THE ISSUES IN DISPUTE, THERE IS NO QUESTION OF ANY CHANGE OF OPINION, AND THE REOPENING CANNOT BE STATED TO BE BASED ON MERE CHANGE OF OPINION. WE FIND MERIT IN THIS STAND OF THE REVENUE. THE RE ASONS GIVEN BY THE ITA NO.473/HYD/2014 M/S.VENUS VENTURES (INDIA) LIMITED, HYDERABAD 7 ASSESSING OFFICER IN THE NOTICE OF RE-OPENING CLEAR LY INDICATE THAT NO SALE DEEDS OR AGREEMENTS WERE PLACED ON RECORD BY THE AS SESSEE TO INDICATE WHAT SORT OF RIGHTS THE ASSESSEE HAD PURCHASED AND IN WHAT WAY THOSE WERE USED FOR THE BUSINESS. IT WAS ALSO MENTIONED THAT THERE WAS ABSOLUTELY NO EVIDENCE ON RECORD TO INDICATE THE NA TURE OF ASSETS PURCHASED/ACQUIRED DURING THE ASSESSMENT YEAR 2006- 07. IN THE ABSENCE OF SALE DEEDS/OTHER DOCUMENTS AND THE ACTUAL DATES OF PURCHASES, ETC. THERE WAS NO OCCASION FOR THE ASSESSING OFFICER TO CONSIDER THE GENUINENESS OF THE CLAIM FOR DEPRECIATION, MUCH LES S TO EXPRESS ANY OPINION ON THAT ASPECT. MERE ACCEPTANCE/ALLOWANCE OF SUCH CLAIM MADE BY THE ASSESSEE, WITHOUT ANY DISCUSSION, DOES NOT AMOU NT EXPRESSION OF ANY OPINION BY THE ASSESSING OFFICER IN FAVOUR OF THE A SSESSEE, DOES NOT AMOUNT TO ANY OPINION HAVING BEEN FORMED BY THE ASS ESSING OFFICER ON THE CLAIMS MADE BY THE ASSESSEE. IN THIS CONTEXT, IT IS WORTHWHILE TO REFER TO THE INTERPRETATION OF THE EXPRESSION CHANGE OF OPI NION, MADE BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF USHA INTERN ATIONAL LTD. (SUPRA), RELEVANT PORTION OF THE HEAD-NOTE OF THE SAID DECIS ION, AS TAKEN FROM PAGE 486-487, OF THE REPORTS(348 ITR) READS AS FOLLOWS- THE EXPRESSION CHANGE OF OPINION POSTULATES FORM ATION OF OPINION AND THEN A CHANGE THEREOF. IN THE CONTEXT OF ASSESSMENT PROCEEDINGS, IT MEANS FORMATION OF BELI EF BY AN ASSESSING OFFICER RESULTING FROM WHAT THE THINKS ON A PARTICULAR QUESTION. IT IS A RESULT OF UNDERSTANDING, EXPERIEN CE AND REFLECTION. A DISTINCTION MUST BE DRAWN BETWEEN ERR ONEOUS APPLICATION/INTERPRETATION/UNDERSTANDING OF LAW AND CASES WHERE FRESH OR NEW FACTUAL INFORMATION COMES TO THE KNOWLEDGE OF THE ASSESSING OFFICER SUBSEQUENT TO TH E PASSING OF THE ASSESSMENT ORDER. FACTUAL INFORMATION OR MATERIAL WHICH WAS INCORRECT OR WAS NOT AVAILABLE WITH THE ASSESSING OFFICER AT THE TIME OF ORIGINAL ASSESSMEN T WOULD JUSTIFY INITIATION OF RE-ASSESSMENT PROCEEDI NGS. THE EXPRESSION MATERIAL FACTS MEANS THOSE FACTS WHICH IF TAKEN INTO ACCOUNT WOULD HAVE AN ADVERSE EFFECT ON THE ASSESSEE BY A HIGHER ASSESSMENT OR INCOME THAN THE ONE ACTUALLY MADE. THEY SHOULD BE PROXIMATE AND NOT HAVE A REMOTE BEARING ON THE ASSESSMENT. CORRECT MATERIAL FACTS AND BE ASCERTAIN ED ITA NO.473/HYD/2014 M/S.VENUS VENTURES (INDIA) LIMITED, HYDERABAD 8 FROM THE ASSESSMENT RECORDS ALSO AND IT IS NOT NECE SSARY THAT THE SAME COME FROM A THIRD PERSON OR SOURCE, I .E. FROM SOURCE OTHER THAN THE ASSESSMENT RECORDS. HOWEVER, IN SUCH CASES, THE ONUS WILL BE ON THE REV ENUE TO SHOW THAT THE ASSESSEE HAD STATED INCORRECT AND WRO NG MATERIAL FACTS RESULTING IN THE ASSESSING OFFICER P ROCEEDING ON THE BASIS OF FACTS, WHICH ARE INCORRECT AND WRONG. IF A SUBJECT- MATTER, ENTRY OR CLAIM/DEDUCTION IS NOT EXAMINED BY AN ASSESSING OFFICER, IT CANNOT BE PRESUMED THAT HE MU ST HAVE EXAMINED THE CLAIM/DEDUCTION OR THE ENTRY, AND, THE REFORE, IT IS A CASE OF CHANGE OF OPINION. WHEN AT THE FIRST INSTANCE, IN THE ORIGINAL PROCEEDINGS, NO OPINION IS FORMED, THE PRINCIPLE OF CHANGE OF OPINION CANNOT AND DOES NOT APPLY. THER E IS A DIFFERENCE BETWEEN CHANGE OF OPINION AND FAILURE OR OMISSION OF THE ASSESSING OFFICER TO FORM AN OPINION ON A SU BJECT MATTER, ENTRY, CLAIM, DEDUCTION. WHEN THE ASSESSING OFFICER FAILS TO EXAMINE A SUBJECT-MATTER, ENTRY, CLAIM OR DEDUCTION, HE FORMS NO OPINION. IT IS A CASE OF NO OPINION. WH ETHER OR NOT THE AO HAD APPLIED HIS MIND AND EXAMINED THE SUBJEC T-MATTER, CLAIM, ETC. DEPENDS UPON FACTUAL MATRIX OF EACH CAS E. ( EMPHASIS SUPPLIED) 8.2 FACTUAL INFORMATION WHICH IS NECESSARY FOR COM PLETION OF ASSESSMENT IS OBVIOUSLY NOT FILED BY THE ASSESSEE B EFORE THE ASSESSING OFFICER AT THE TIME OF ORIGINAL ASSESSMENT. BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE THE CIT(A) IS WHAT THE ASSESSEE HAS FURNISHED WAS ONLY ACCOUNT COPIES AND PAYMENT DETAILS. IN FACT, THE ASSESSING OFFICER EVEN IN THE RE-ASSESSMENT PROCEEDINGS ASKED THE ASSESSEE FO R FURNISHING THE COMPLETE DETAILS OF PROOF OF PURCHASE, PUT TO USE, ABOUT THE TOTAL OF ADDITIONS TO THE ASSETS CLAIMED. EXCEPT STATING THA T THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF DUBBING FILM EXHIBITION AND DISTRIBUTION, AND HAS USED THE PURCHASER RIGHTS IN THAT BUSINESS, THE ASSESSING OFFICER RECORDS THAT NEITHER THE DETAILS OF THE ASSETS ACQ UIRED WERE PROVIDED NOR PROOF OF PURCHASE OR PROOF OF ASSET BEING PUT TO US E WAS FURNISHED, DESPITE BEING ASKED TO DO SO. THE ASSESSING OFFICER RECORDS IN THE ORDER THAT THE ASSESSEE HAS NOT GIVEN ANY INFORMATION ON THE NUMBE R OF FILM RIGHTS PURCHASED AND HOW THEY HAD BEEN PUT TO USE FOR BUSI NESS PURPOSES. NOT ONLY THE ASSESSING OFFICER, EVEN THE LEARNED CIT(A ) HAS ISSUED LETTER DATED 29.11.2013 INFORMING THAT THE ASSESSING OFFI CER HAD NOTED THAT ITA NO.473/HYD/2014 M/S.VENUS VENTURES (INDIA) LIMITED, HYDERABAD 9 LEDGER ACCOUNT OF FIXED ASSETS HAVE BEEN FILED AND NEITHER THE DETAILS OF ITEMS INCLUDED AS ASSETS WERE PROVIDED NOR PROOF O F PURCHASE OR PROOF OF ASSETS BEING PUT TO USE WAS FURNISHED. THE ASSESSE E WAS SPECIFICALLY REQUESTED TO EXPLAIN WHY THE CLAIM OF DEPRECIATION SHOULD BE ALLOWED IN THE ABSENCE OF ANY INFORMATION OR EVIDENCE ABOUT TH E ASSETS CLAIMED TO HAVE BEEN ACQUIRED AND ABOUT THEY BEING PUT TO USE. ASSESSEE MERELY REITERATED THE SUBMISSIONS MADE EARLIER AND DID NOT FURNISH ANY INFORMATION. BEFORE US ALSO, LEARNED COUNSEL FAIRL Y ADMITTED THAT NO DETAILS WERE FURNISHED IN THE RE-ASSESSMENT PROCEEDINGS EIT HER BEFORE THE ASSESSING OFFICER OR BEFORE THE CIT(A) AND WAS CONT ESTING ON THE ISSUE OF REOPENING OF ASSESSMENT . 8.3 IT IS INTERESTING TO NOTE THAT THE LEARNED CI T(A) HAS RECORDED THE FOLLOWING FACTS IN THE IMPUGNED ORDER- 6.6 I HAVE EXAMINED THE FACTS ON RECORD AND THE S UBMISSIONS OF THE AR. THE APPELLANT HAD FILED A COPY OF THE LEDGER ACCOUNT OF RIGHTS IN ITS BOOKS WHICH READS AS FOLLOWS; DATE PARTICULARS ( RS.) (RS.) 14.05.2005 TO AXIS BANK 65,75,000 12.08.2005 TO AXIS BANK 65,70,000 31.03.2006 BY DEPRECIATION 6,24,150 1,31,40,000 6,24,150 BY CLOSING BALANCE 1,25,15,850 1,31,40,000 1,31,40,000 6.7. THE APPELLANT HAS STEADFASTLY REFUSED TO FURNIS H THE NAMES OF THE FILMS WHOSE RIGHTS HAVE BEEN ACQUIRED AND THE NATUR E OF THOSE RIGHTS. COPIES OF THE CONTRACT/INVOICE THROUGH WHICH THE PU RCHASE WAS MADE HAS NOT BEEN FURNISHED. THE APPELLANT HAS CLAIMED T HAT IT WAS IN THE BUSINESS OF DUBBING THESE FILMS AND EXHIBITING/DIST RIBUTING THEM. NO ITA NO.473/HYD/2014 M/S.VENUS VENTURES (INDIA) LIMITED, HYDERABAD 10 EVIDENCE OR INFORMATION HAS BEEN FURNISHED WHETHER THE FILMS/RIGHTS ON WHICH A SUM OF RS.1,31,40,000 HAD BEEN INCURRED WER E INDEED SUBJECTED TO DUBBING OR ANY OTHER FORM OF USE FOR BUSINESS PU RPOSES. IN THE ABSENCE OF ANY SUCH INFORMATION, IT IS IMPOSSIBLE T O CONCLUDE THAT THE PAYMENT OF RS.1,31,40,000 RESULTED IN THE ACQUISITI ON OF ANY FIXED ASSET, TANGIBLE OR OTHERWISE. IT IS ALSO IMPOSSIBLE TO CON CLUDE THAT THE FIXED ASSET SO ACQUIRED WAS PUT TO USE. BEFORE US ALSO, NO INFORMATION HAS BEEN FURNISHED E ITHER ABOUT THE NATURE OF RIGHTS ACQUIRED OR THE DETAILS OF THE RIGHTS, TO WHOM THE AMOUNTS WERE PAID AND HOW THOSE RIGHT WERE USED IN THE ASSESSEE S BUSINESS. IN FACT, EXCEPT THE LEDGER ACCOUNT COPIES OF THE RIGHTS IN T HE BOOKS, NO OTHER DETAILS ARE PLACED ON RECORD. CONSEQUENTLY, WE ARE OF THE OPINION THAT MATERIAL FACTS NECESSARY TO EXAMINE THE CLAIM WERE NOT PLACED ON RECORD BY THE ASSESSEE EITHER AT THE TIME OF ORIGINAL ASSE SSMENT OR AT THE TIME OF RE-ASSESSMENT. CONSEQUENTLY, IT CANNOT BE STATED T HAT THE ASSESSING OFFICER HAS FORMED AN OPINION ABOUT THE ASSESSEES CLAIM EVEN THOUGH THE CLAIM WAS ALLOWED. IN THE ABSENCE OF CORRECT MATER IAL FACTS BEING PLACED ON RECORD, WE ARE OF THE OPINION THAT THE ASSESSING OFFICER WAS CORRECT IN REOPENING THE ASSESSMENT, PARTICULARLY IN VIEW OF E XPLANATION GIVEN TO S.147. 8.3 EVEN THOUGH THIS APPEAL WAS RELEASED FOR FR ESH HEARING AND THE ARGUMENTS OF THE ASSESSEE ON THE APPLICABILITY OR O THERWISE OF THE ABOVE DECISION OF THE HON'BLE DELHI HIGH COURT, WHICH HAS BEEN RENDERED AFTER ELABORATE CONSIDERATION OF THE VARIOUS CASE LAW ON THE ISSUE IN DISPUTE, AND WHICH HAS BEEN RELIED UPON BY THE CIT(A) IN THE IMPUGNED ORDER, LEARNED COUNSEL FOR THE ASSESSEE, IN THE COURSE OF HEARING BEFORE US, EXCEPT FOR REITERATING THE CONTENTIONS URGED BEFORE THE LOWER AUTHORITIES, COULD NOT EFFECTIVELY POINT OUT HOW THE ABOVE DECIS ION OF THE DELHI HIGH COURT IS DISTINGUISHABLE FROM THE FACTS OF THE PRES ENT CASE AND HENCE NOT APPLICABLE. ADMITTEDLY IN THE FACTS OF THE PRESENT CASE, DURING THE COURSE ITA NO.473/HYD/2014 M/S.VENUS VENTURES (INDIA) LIMITED, HYDERABAD 11 OF ORIGINAL ASSESSMENT, NEITHER THE ALLOWABILITY OF THE CLAIM OF THE ASSESSEES CLAIM FOR DEPRECIATION ON THE FILM RIGH TS, NOR THE APPLICABILITY OF THE PROVISIONS OF S.40A(IA) HAS BEEN SPECIFICALL Y EXAMINED AND FOR THAT MATTER, AS IS EVIDENT FROM THE REASONS FOR REOPENIN G RECORDED BY THE ASSESSING OFFICER, EXTRACTED ABOVE, ASSESSEE HAS NO T FURNISHED COPIES OF SALE DEEDS OR AGREEMENTS SO AS TO REFLECT THE NATUR E OF RIGHTS THAT THE ASSESSEE HAS ACQUIRED OVER THE PROPERTY ON WHICH DE PRECIATION WAS CLAIMED AND HOW SUCH RIGHTS WOULD BE OF ANY USE FOR THE BUSINESS OF THE ASSESSEE. 8.4 THIS ISSUE IS ALSO DISCUSSED BY THE COORDINAT E BENCH OF THIS TRIBUNAL AT MUMBAI IN THE CASE OF ACIT V/S. M/S. NA RAYANDAS SUGNOMAL, MUMBAI (ITA NO.7051.MUM/2007 FOR ASSESSMENT YEAR 20 01-02), WHEREIN ON SIMILAR FACTS, THE COORDINATE BENCH, VIDE ITS OR DER DATED 26.5.2009, HAS HELD AS FOLLOWS- 7. WE HAVE CONSIDERED THE ISSUE. THE LEARNED CIT( A) HAS CONSIDERED THAT THERE WAS A CHANGE OF OPINION B Y THE A.O. AND HE DEEMED TO HAVE FORMED AN OPINION AT THE TIME OF ORIGINAL ASSESSMENT ON ALLOWING 80HHC DEDUCTION ON DEPB. THE RE IS NOTHING ON RECORD TO SUPPORT THE OPINION FORMED BY THE LEARNED CIT(A) ON THIS ISSUE. THE LEARNED COUNSEL DURING TH E PRESENT PROCEEDINGS COULD NOT POINT OUT ANY SHOW CAUSE LETT ER OR CLARIFICATION SOUGHT BY THE A.O. ON THE ISSUE OF DE PB INCOME AND HAS RELIED ON ONLY LEGAL ISSUES BEFORE US. THERE IS NO EVIDENCE THAT THE A.O. HAS AT LEAST SOUGHT CLARIFICATION OR CONSI DERED THE ISSUE OF DEPB AT THE TIME OF ORIGINAL ASSESSMENT. AS SEEN FR OM THE ORDER UNDER SECTION 143(3) PASSED ON 28.02.2003 THE ISSUE WHICH WAS DISCUSSED IN THE ORDER WAS WITH REFERENCE TO MANUFACTURING/PROCESSING OF GOODS AND RECOMPUTATION ON THAT BASIS AND IN THAT RECOMPUTATION IN PAGE 10, 90% OF THE INCENTIVES WERE CONSIDERED IN THE WORKING. EXCEPT THIS MENTION OF THE ITA NO.473/HYD/2014 M/S.VENUS VENTURES (INDIA) LIMITED, HYDERABAD 12 INCENTIVES IN THE WORKING, NOWHERE THERE WAS ANY DI SCUSSION ABOUT THE NATURE OF INCENTIVES OR THE INCENTIVE BEING DPE B INCOME. ONLY THE A.O. CONSIDERED 90% OF THE INCENTIVES AT RS.77, 59,495/- IN THE WORKING OF DEDUCTION UNDER SECTION 80HHC (3) BASED ON THE AUDIT REPORT SUBMITTED BY THE ASSESSEE. IN VIEW OF THIS I T CANNOT BE SAID THAT THE A.O. HAS CONSIDERED THE ISSUE OF DEPB AND HAS DECIDED THE ISSUE AT THE TIME OF COMPLETION OF ORIGINAL ASSESSM ENT. IF THE A.O. MAKES ENQUIRY, ASKS FOR SOME CLARIFICATIONS/DETAILS /WORKING OF CLAIMS OR COMPUTATION ONE CAN CONSIDER THAT THE A.O . MADE AN ENQUIRY AND FORMED AN OPINION TO ACCEPT ASSESSEE'S CONTENTION. IN THIS CASE THERE IS NO EVIDENCE THAT THE A.O. HAD AT LEAST MADE ANY ENQUIRY WITH REFERENCE TO THE NATURE OF INCENTIVES, MORE SO OF DEPB. THE INCOMES AS REFLECTED IN AUDIT REPORT HAVE BEEN CONSIDERED IN THE REVISED WORKING IN THE SAID ORDER. IN VIEW OF T HIS WE ARE NOT PERSUADED BY THE LOGIC OF THE LEARNED CIT(A) THAT ONCE THE ASSESSMENT HAS BEEN COMPLETED BY THE A.O. AND THE C LAIM WAS ALLOWED, HE HAS DEEMED TO HAVE FORMED AN OPINION. I F THAT BEING SO THE PROVISIONS OF EXPLANATION 2(C) BECOMES REDUNDAN T. EXPLANATION 2(C) IS AS UNDER: - 'EXPLANATION 2. FOR THE PURPOSES OF THIS SECTION, . (A) (B) (C) WHERE AN ASSESSMENT HAS BEEN MADE, BUT (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDERASSESSE D ; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW A RATE ; OR (III) SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCESSIVE RELIEF UNDER THIS ACT ; OR (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR AN Y OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED.' 8. THE PROVISIONS OF CLAUSE (C) OF EXPLANATION 2 TO SECTION 147 IS WITH REFERENCE TO WHERE THE ASSESSMENT HAS BEEN MAD E BUT SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCESSIVE RELIE F UNDER THE ACT. ITA NO.473/HYD/2014 M/S.VENUS VENTURES (INDIA) LIMITED, HYDERABAD 13 THIS GIVES SCOPE FOR REASSESSMENT EVEN IN A CASE WH ERE THE ASSESSMENT HAS BEEN MADE. IF THE OPINION OF THE LEA RNED CIT(A) HAS TO BE ACCEPTED THEN NO ASSESSMENT CAN BE REOPENED U NDER THIS CLAUSE BECAUSE IT WILL ALWAYS BECOMES A CHANGE OF O PINION EVEN THOUGH THERE IS NO EVIDENCE ON RECORD THAT THE A.O. HAS FORMED AN OPINION. EVEN IN A CASE WHERE THE ASSESSMENT HAS BE EN COMPLETED UNDER SECTION 143(3), THE ASSESSMENT CAN BE REOPENE D WITHIN FOUR YEARS IF THE CONDITIONS UNDER EXPLANATION 2(C) HAVE BEEN SATISFIED. 8. THE ONLY RESTRICTION IN CASE WHERE ASSESSMENT U NDER SECTION 143(3) HAS BEEN COMPLETED, FOR REOPENING AFTER FOUR YEARS THERE SHOULD BE FAILURE ON THE PART OF ASSESSEE TO DISCLO SE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. EVEN I N THOSE CASES EXPLANATION 1 WAS CONSIDERED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF DR. AMIN'S PATHOLOGY LABORATORY VS. JCI T AND OTHERS 252 ITR 673 WHEREIN THE FOLLOWING HAS BEEN CONSIDERED: - 'AFTER INTRODUCTION OF CHANGES IN SECTION 147 OF TH E INCOME-TAX ACT, 1961, WITH EFFECT FROM APRIL 1, 1989, THE SCOP E OF REASSESSMENT HAS BEEN WIDENED. AFTER THE AMENDMENT, THE ONLY RESTRICTION PUT IN THE SECTION IS 'REASON TO BELIEV E'. THE REASON HAS BEEN A REASON OF A PRUDENT PERSON. THAT REASON SHOU LD BE FAIR AND NOT NECESSARILY DUE TO FAILURE OF THE ASSESSEE TO DISCLOSE FULLY OR PARTIALLY SOME MATERIAL FACTS RELEVANT FOR ASSESSMENT. HOWEVER, WHERE A PERIOD OF FOUR YEARS HAS ELAPSED T HE PROVISO TO SECTION 147 OF THE INCOME-TAX ACT, 1961, COMES INTO THE PICTURE. UNDER THE SAID PROVISO, NO ACTION CAN BE TAKEN AFTE R FOUR YEARS UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASS ESSMENT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE T O DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSME NT. UNDER EXPLANATION 1 TO THE PROVISO, MERE PRODUCTION OF AC COUNT BOOKS FRO WHICH MATERIAL EVIDENCE COULD HAVE BEEN DISCOVE RED BY THE ASSESSING OFFICER WILL NOT NECESSARILY AMOUNT TO DI SCLOSURE WITHIN THE MEANING OF THE PROVISO. THEREFORE, MERE PRODUCT ION OF THE BALANCE-SHEET, PROFIT AND LOSS ACCOUNT OR ACCOUNT B OOKS WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE PROVISO.' 9. EVEN IN A CASE WHERE MERE PRODUCTION OF BALANCE SHEET, P & L ACCOUNT OR ACCOUNT BOOKS WILL NOT NECESSARILY MEAN DISCLOSURE WITHIN THE MEANING OF THE PROVISO AND THE HON'BLE B OMBAY HIGH ITA NO.473/HYD/2014 M/S.VENUS VENTURES (INDIA) LIMITED, HYDERABAD 14 COURT HAS UPHELD THE REOPENING OF THE ASSESSMENT AF TER FOUR YEARS IN THE ABOVE SAID CASE. IN THIS PARTICULAR CASE THE FACTS WERE ENTIRELY IN FAVOUR OF THE REVENUE TO HOLD THAT THE A.O. HAS NOT FORMED ANY OPINION AT THE TIME OF ORIGINAL ASSESSMENT AND EXPL ANATION 2(C) IS CLEARLY APPLICABLE TO THE FACTS OF THE CASE. IN VIE W OF THIS WE ARE NOT IN AGREEMENT WITH THE ORDER OF THE LEARNED CIT(A) T HAT THE A.O. DEEMED TO HAVE FORMED AN OPINION AND IT IS CHANGE O F OPINION. 9. IN THE LIGHT OF THE ABOVE DISCUSSION, RESPECTF ULLY FOLLOWING THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF USH A INTERNATIONAL LTD. (SUPRA), WHICH IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE, WE UPHOLD THE IMPUGNED ORDER OF THE CIT(A) AND REJECT THE GROUNDS OF THE ASSESSEE ON THE ISSUE OF REOPENING OF THE ASSESSMEN T. 10. AS FOR THE OTHER GROUNDS, WHICH RELATE TO THE DISALLOWANCE OF CLAIM FOR DEPRECIATION AS WELL AS DISALLOWANCE IN T ERMS OF S.40A(IA), WE FIND THAT THE ASSESSEE, RIGHT FROM THE BEGINNING LA YING ALL THE EMPHASIS ON THE LEGALITY AND VALIDITY OF THE REOPENING OF THE A SSESSMENT, HAS NOT EFFECTIVELY PRESENTED ITS CASE ON THESE ASPECTS, BY FURNISHING NECESSARY EVIDENCE LIKE RELEVANT SALE DEEDS/AGREEMENTS, TO SU BSTANTIATE THE CLAIM FOR DEPRECIATION AND ON THE APPLICABILITY OF THE PR OVISION OF S.40A(IA) OF THE ACT. IN THIS VIEW OF THE MATTER, IN THE INTEREST O F JUSTICE, WE DEEM IT JUST AND PROPER TO SET ASIDE THE ORDERS OF THE REVENUE A UTHORITIES WITH REGARD TO THESE TWO DISALLOWANCES, AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO RE-CONSIDER T HE SAME, AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. ASSESSEE IS DIRECTED TO SUBSTANTIATE ITS CLAIMS ON THESE TWO ISSUES BY ADDU CING NECESSARY EVIDENCE IN THAT BEHALF. ITA NO.473/HYD/2014 M/S.VENUS VENTURES (INDIA) LIMITED, HYDERABAD 15 11. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALL OWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT ON 29 TH JANUARY, 2016 SD/- SD/- ( P.MADHAVI DEVI) ( B.RAMAKOTAIAH ) JUDICIAL MEMBER ACCOUNTANT MEMBER DT/- 29 TH JANUARY, 2016 COPY FORWARDED TO: 1 . M/S. VENUS POWER VENTURES (INDIA) LTD. C/O. M/S.P.MURALI & CO., CHARTERED ACCOUNTANTS, 6-3-655/2/3, 1ST FLOOR, SOMA JIGUDA, HYDERABAD-82 2. 3. 4. DY. COMMISSIONER OF INCOME-TAX CIRCLE 3(3), HYDERAB AD COMMISSIONER OF INCOME-TAX(APPEALS) IV, HYDERABAD COMMISSIONER OF INCOME-TAX III, HYDERABAD 5 . DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S
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