M/S KALANI INDUSTRIES LTD., V. THE DCIT 1 (1),

ITA 514/IND/2006

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9534 (ITAT-INDORE)
• Duration Of Justice: 4 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 29-11-2010
• Assessment Year: 2000-2001
• Appeal Filed On: 12-07-2006
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K K SINGH
• Keywords: Reopening of assessment; Depreciation; Audit objection; Reassessment proceedings
• Section: 143(3); 147; 148; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C.SHARMA, A CCOUNTANT MEMBER PAN NO. : AAACK7074P I.T.A.NO. 514 /IND/20 06 A.Y. : 2000 - 01 M/S. KALANI INDUSTRIES, DY. CIT, INDORE. VS 1(1), INDORE. ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI MANJEET SACHDEVA, ADV. RESPONDENT BY : SHRI K.K. SINGH, CIT DR O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 15.5.2006 FOR THE ASSESSMENT YEAR 200 0 - 01 IN THE MATTER OF ORDER PASSED U/S 143(3) /148 OF THE INCOME - TAX ACT, 1961. 2. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS ENGAGED IN POWER GENERATION/DISTRIBUTION AND ALSO LEASING HIRE PURCHASE BUSINESS. AS THE ASSES SEE WAS MAINLY ENGAGED IN POWER - : 2 : - 2 GENERATION THROUGH WIND FARM , IT CLAIMED 100 % OF THIS INCOME AS ALLOWABLE DEDUCTION U/S 80IA OF THE INCOME - TAX ACT, 1961. A FTER PROCESSING THE RETURN, THE AO FOUND THAT THE ASSESSEE HAS CLAIMED DEPRECIATION IN THE COMPUTATI ON OF INCOME AT RS. 1.97 CRORES AS AGAINST DEPRECIATION OF RS. 1.24 CRORES. ACCORDINGLY, THE ASSESSMENT WAS REOPENED U/S 1 47 . IT WAS ALSO SEEN THAT THE ASSESSEE WAS IN RECEIPT OF INTEREST INCOME OF RS.2.02 LAKHS, WHICH WAS ALSO INCLUDED BY IT IN THE CLAIM OF DEDUCTION U/S 80IA. PLEA OF THE ASSESSEE WAS THAT THIS INCOME WAS DIRECTLY DERIVED FROM POWER GENERATION, THEREFORE, ELIGIBLE FOR CLAIM OF DEDUCTION U/S 80IA. IN THE RESULT, THE AO FOUND THAT THE ASSESSEE HAS CLAIMED EXCESS ALLOWANCE OF DEDUCTION U/S 8 0IA TO THE TUNE OF RS. 75.23 LAKHS. IN THE COURSE OF RE - ASSESSMENT PROCEEDINGS, THE AO HAS CORRECTLY COMPUTED DEDUCTION ELIGIBLE TO THE ASSESSEE U/S 80IA AGAINST WHICH THE ASSESSEE FILED APPEAL BEFORE THE CIT(A), WHO HAS CONFIRMED THE ADDITION AFTER HAVING THE FOLLOWING OBSERVATIONS WITH REGARD TO INITIATION OF PROCEEDINGS U/S 148 DURING PENDENCY OF RECTIFICATION PROCEEDINGS U/S 154 OF INCOME - TAX ACT, 1961. : - - : 3 : - 3 2.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT BUT DO NOT FIND FORCE IN THE SAME. THE A O ISSUED NOTICE U/S 148 OF THE ACT BECAUSE HE BELIEVED THAT CERTAIN INCOME HAD ESCAPED ASSESSMENT. THIS NOTICE WAS ISSUED AS THAT INCOME COULD NOT HAVE BEEN BROUGHT TO TAX UNDER THE PROVISIONS OF SECTION 154. AS REGARDS THE APPELLANT S CONTENTION THAT NOTI CE U/S 148 WAS ISSUED IN PURSUANCE OF SOME AUDIT OBJECTION, WHICH WAS NOT PERMISSIBLE AS PER ABOVE RULING OF HON'BLE SUPREME COURT CANNOT BE ACCEPTED AS THERE IS NO MENTION OF THIS FACT IN THE ASSESSMENT ORDER AND THE APPELLANT HAS BROUGHT NO MATERIAL ON R ECORD TO PROVE ITS CONTENTION. OTHERWISE ALSO, THE APPELLANT DOES NOT APPEAR TO HAVE CHALLENGED THE ISSUANCE OF NOTICE U/S 148 DURING THE REASSESSMENT PROCEEDINGS. UNDER THE CIRCUMSTANCES, THIS GROUND OF APPEAL IS DISMISSED. 3. AGGRIEVED BY THE ABOVE ORDER, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. THE MAIN CONTENTION OF THE LD. AUTHORIZED REPRESENTATIVE WAS THAT WHEN THE AO FOUND MISTAKE REGARDING - : 4 : - 4 COMPUTATION OF DEDUCTION U/S 80IA, HE HAS STARTED PROCEEDINGS U/S 154 AND BEFORE FINALIZING THE SAME, HE HAS ISSUED NOTICE U/S 147 FOR REOPENING THE SAME ASSESSMENT , WHICH HE CANNOT DO . FOR THIS PURPOSE, HE PLACED RELIANCE ON THE DECISION OF I.T.A.T., DELHI BENCH REPORTED AT 23 DTR 29, WHEREIN IT WAS HELD THAT WHERE ASSESSMENT PROCEEDINGS HAD NOT COME TO AN END, IN RESPECT OF INI TIA TION OF PROCEEDINGS U/S 154, NO REASSESSMENT PROCEEDINGS COULD BE INITIATED U/S 154. MEANING THEREBY, THE RECTIFICATION PROCEEDINGS IS PENDING U/S 154, IT WAS NOT OPEN TO THE AO TO INITIATE REASSESSMENT PROCEEDINGS ALMOST ON THE SAME BA SIS. RELIANCE WAS ALSO PLACED ON THE DECISION OF MUMBAI BENCH IN THE CASE OF JETHALAL K.MORBIA VS. ACIT, 109 TTJ (MUM) 1, WHEREIN IT WAS HELD THAT INITIATION OF REASSESSMENT PROCEEDINGS DURING THE PENDENCY OF RECTIFICATION OF PROCEEDINGS ON THE SAME ISSUE IS INVALID. IT WAS FURTHER HELD THAT PENDING RECTIFICATION U/S 154, IT COULD NOT BE SAID THAT THE ASSESSMENT WAS CONCLUDED AND UNLESS THE ASSESSMENT IS COMPLETED, THERE CANNOT BE A QUESTION OF INCOME ESCAPING ASSESSMENT. IT WAS FURTHER CONTENDED BY THE LD. AUTHORIZED REPRESENTATIVE THAT THE - : 5 : - 5 ASSESSMENT NOTICE WERE ISSUED U/S 143(2) AND QUERIES WERE RAISED UNDER 142 (1) OF THE INCOME - TAX ACT, 1961, AND AFTER MAKING THE DUE COMPLIANCE AND FURNISHING THE REQUIRED INFORMATION AND DOCUMENTS THE ASSESSMENT WAS COMP LETED ON 28.3.2003 AT INCOME OF RS. 37,27,040/ - BY MAKING THE ADDITION OF RS. 495432/ - ON ACCOUNT OF DEFERMENT OF SALES TAX LIABILITY AND RS. 90000/ - AND RS. 60000/ - ON ACCOUNT OF INCOME FROM HOUSE PROPERTY FROM RAJEJA CENTRE AND LOTUS COURT PROPERTIES RES PECTIVELY , WHICH WERE CONTESTED AND RELIEF WAS ALLOWED BY THE HON'BLE I.T.A.T. 4. THAT LONG AFTER THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE INCOME - TAX ACT, 1961, THE LEARNED AO ISSUED A NOTICE U /S 154 DATED 24.2.2005 PROPOSING TO RECTIFY THE ASSESSMENT ORDER PASSED ON 28.3.2003 ON THE GROUND THAT (I) A PERUSAL OF THE CASE RECORDS REVEALED THAT THE ASSESSEE CONSIDERED DEPRECIATION OF RS. 12459798/ - WHILE WORKING OUT PROFITS FOR POWER GENERATION BUT WHILE WORKING OUT TOTAL INCOME OF THE ASSESSEE FROM ALL SOU RCES OF THE BUSINESS THE ASSESSEE CLAIMED DEPRECIATION OF - : 6 : - 6 RS. 19781122/ - ON ASSETS OF POWER GENERATIONS UNITS INCLUDED IN TOTAL DEPRECIATION OF RS. 26812924/ - . (II) IT WAS FURTHER SEEN THAT INTEREST RECEIPTS OF RS. 202408/ - WAS ALSO INCLUDED WHILE WORKING OUT T HE PROFITS OF THE POWER GENERATION UNIT. AS THIS WAS NOT DERIVED FROM POWER GENERATION, THIS WAS ALSO REQUIRED TO BE REDUCED FROM THE POWER GENERATION PROFIT ELIGIBLE FOR DEDUCTION U/S 80IA OF THE INCOME - TAX ACT, 1961,. THIS MISTAKE RESULTED IN INCREASE AL LOWANCE OF DEDUCTION OF RS. 7523732/ - U/S 80IA. 5. THE ASSESSEE COMPANY IN RESPONSE TO THE LETTER PROPOSING TO RECTIFY THE ORDER U/S 154 OF THE INCOME - TAX ACT, 1961, STRONGLY OBJECTED TO THE PROPOSED RECTIFICATION VIDE LETTER DATED 3.3.20054 FILED ON 4.3.200 5. THEREAFTER WITHOUT RESPONDING TO THE OBJECTIONS RAISED, THE LD. AO ISSUED NOTICE U/S 148 DATED 23.3.2005 OF THE INCOME - TAX ACT, 1961. - : 7 : - 7 6. THAT THE ASSESSEE COMPANY FILED THE LETTER DATED 13.10.2003 REGARDING THE AUDIT OBJECTIONS RAISED FOR THE DEDUCTION U/S 80IA, COPY OF THE LETTER IS ENCLOSED HEREWITH. ALSO THE LETTER DATED 21.10.2003 WAS FILED REGARDING THE AUDIT OBJECTION FOR THE EXCESS TAX CREDIT U/S 115JAA, COPY OF THE LETTER FILED IN ENCLOSED HE REWITH. HOWEVER, ADDITION IN RESPECT OF DEPRECATION CLAIME D WAS MADE BY THE ASSESSING OFFICER IN ASSESSMENT PROCEEDINGS, WHICH WAS DELETED BY THE LD. CIT(A) AND APPROVED BY THE HON'BLE I.T.A.T. 7. THAT THOUGH THE ISSUE RELATED TO PROVISION OF SECTION 115JB, THE I.T.A.T. IN PARA 4 HAS HELD ON CONSIDERATION OF RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE MATTER. LD. DR MERELY RELIED UPON ORDER OF THE AO AND HAS NOT POINTED OUT ANY INFIRMITY IN THE IMPUGNED ORDER. THE ASSESSEE EXPLAINED THE REASONS FOR CHANGE OF METHOD OF COMPUTING TH E DEPRECIATION WHICH IS APPROVED BY THE GENERAL BODY MEETING AS WELL AS WAS IN ACCORDANCE WITH THE GUIDELINES ISSUED BY INSTITUTE OF CHARTERED ACCOUNTANTS. THE ASSESSEE ALSO EXPLAINED THAT THE METHOD WAS ALSO APPROVED UNDER THE IT RULES AND THE ACCOUNTS OF THE ASSESSEE - : 8 : - 8 WERE MAINTAINED AS PER SCHEDULE VI OF THE COMPANIES ACT AND WERE CERTIFIED BY THE STATUTORY AUDITORS. IN THIS VIEW OF THE MATTER, ADDITIONS MADE BY THE ASSESSING OFFICER IS NOT SUSTAINABLE IN LAW. 8. THAT FOR THE ASSESSMENT YEAR 2001 - 02 ALSO THE AUDIT OBJECTION WAS RAISED WITH REGARD TO DEPRECIATION AND LETTER FILED DATED 13.1.2003 TOGETHER WITH THE LETTER FILED FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. COPY OF THE LETTER DATED 13.10.2003 FILED IS ENCLOSED HEREWITH. 9. ON THE OTHER HAND, THE L D. CIT DR PLACED ON RECORD COPY OF THE ORDER SHEET OF THE AO, WHEREIN THE PROCEEDINGS INITIATED U/S 154 WAS DROPPED AND WHICH HAS BEEN COUNTER - SIGNED BY LD. CIT DR OF THE ASSESSEE. IN VIEW OF THIS FACTUAL POSITION, THE LD. AUTHORIZED REPRESENTATIVE CONTEND ED THAT PROCEEDINGS U/S 1 47 WAS ALREADY DROPPED, THEREAFTER ONLY PROCEEDINGS U/S 14 7 WAS INITIATED, THEREFORE, THERE IS NO REASON TO HOLD THAT BEFORE INITIATION OF 148 PROCEEDINGS, THE PROCEEDINGS ALREADY INITIATED U/S 154 WAS PENDING BEFORE THE AO. THE LD . AUTHORIZED REPRESENTATIVE ALSO RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE P.V.S. - : 9 : - 9 B EEDIES PRIVATE LIMITED, 237 ITR 13, IN SUPPORT OF THE PROPOSITION THAT INFORMATION GIVEN BY THE AUDIT PARTY CAN BE TREATED AS INFORMATION WITHIN THE M EANING OF SECTION 147(B) FOR THE PURPOSE OF REOPENING THE ASSESSMENT. THE LD. CIT DR FURTHER CONTENDED THAT PROCEEDINGS U/S 154 IS A SEPARATE PROCEEDINGS AND EVEN WITHOUT DROPPING THE SAME, ACTION CAN BE INITIATED FOR REOPENING OF ASSESSMENT, WHICH IS A QU ITE SEPARATE PROCEEDINGS. FOR THIS PURPOSE, RELIANCE WAS ALSO PLACED ON THE DECISION OF BOMBAY TRIBUNAL IN THE CASE OF ADITYA NARULA, 68 ITD 61. 10. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. FIRST, WE DEAL WITH THE GROUND RAISED BY THE ASSESSEE WITH REGARD TO INITIATION OF REASSESSMENT PROCEEDINGS DURING THE PENDENCY OF THE RECTIFICATION PROCEEDINGS. THE CONTENTION OF THE LD. AUTHORIZED REPRESENTATIVE TO THE EFFECT THAT PROCEEDINGS INITIATED U/S 154 WA S PENDING, THEREFORE, THE AO WAS NOT JUSTIFIED IN INITIATING SIMULTANEOUS PROCEEDINGS U/S 147 . AS PER THE NOTE SHEET PRODUCED BEFORE US, WE FOUND THAT THE LD. AO HAS FIRST DROPPED THE PROCEEDINGS INITIATED U/S 154, WHICH - : 10 : - 10 HAS BEEN COUNTER - SIGNED BY THE LD. AUTHORIZED REPRESENTATIVE. THUS, IT CANNOT BE SAID THAT REASSESSMENT PROCEEDINGS WAS INITIATED D URING PENDENCY OF 154 PROCEEDINGS. FURTHERMORE, IT IS UNNECESSARY FOR THE AO TO EXHAUST THE OTHER REMEDIES AVAILABLE UNDER THE ACT BEFORE TAKING RECOURSE OF SEC TION 147. ONCE THE AO FOUND THAT THERE IS AN ESCAPEMENT OF INCOME WITHIN THE MEANING OF SECTION 147, HE CAN INITIATE REASSESSMENT PROCEEDINGS U/S 147. THUS, MERELY BECAUSE PROCEEDINGS U/S 154 WAS PENDING, WHICH IS JUST TO RECTIFY A MISTAKE APPARENT FROM TH E RECORD, CANNOT STAND IN THE WAY OF RE - ASSESSMENT PROCEEDINGS INITIATED BY THE ASSESSING OFFICER. OUR THIS VIEW FINDS SUPPORT FROM THE DECISION OF I.T.A.T., HYDERABAD BENCH IN THE CASE OF RAMA BOILED MODERN RICE MILL, 97 ITD 379. 11. SO FAR AS THE MERIT OF THE ADDITION MADE BY THE ASSESSING OFFICER WITH REGARD TO ASSESSEE S CLAIM FOR HIGHER DEPRECIATION IS CONCERNED, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LOWER AUTHORITIES I N SO FAR AS WHILE WORKING OUT PROFIT FROM POWER GENERATION BUSINE SS, THE ASSESSEE HAS COMPUTED DEPRECIATION AT RS. 1.24 CRORES, BUT - : 11 : - 11 WHILE WORKING TOTAL INCOME OF THE ASSESSEE FROM ALL SOURCES OF BUSINESS, IT CLAIMED DEPRECIATION OF RS. 1.97 CRORES ON THE ASSETS OF POWER GENERATION UNIT INCLUDED IN TOTAL DEPRECIATION OF RS.2.68 CRORES , AS SUCH THERE WAS EXCESS CLAIM OF DEDUCTION ON ACCOUNT OF DEPRECIATION AMOUNTING TO RS. 73,21,324/ - . 12. THE ASSESSEE HAS ALSO INCLUDED INTEREST RECEIPT OF RS.2.02 LAKHS WHILE WORKING OUT PROFIT OF POWER GENERATION UNIT. SINCE THIS INCOME WAS N OT DIRECTLY DERIVED FORM THE POWER GENERATION, IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF STERLING FOOD S, 237 ITR 579 AND P A NDIAN CHEMICALS, 262 ITR 278, THE AMOUNT OF INTEREST INCOME IS NOT ELIGIBLE FOR CLAIM OF DEDUCTION U/S 80IA. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 28 TH FEBRUARY, 2011. SD/ - SD/ - (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 28 TH FEBRUARY, 2011 . CPU* 282