Indian Metals and Ferro Alloys Ltd, Bhubaneswar V. Addl. CIT, Bhubaneswar

ITA 520/CTK/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77526 (ITAT-CUTTACK)
• Duration Of Justice: 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 19-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K AJAY KUMAR
• Keywords: Depreciation; Reason to believe; Reassessment proceedings
• Section: 43B; 143(3); 194C; 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH, CUTTACK . . , . . , BEFORE SHRI P.K.BANSAL , AM & SHRI D.T.GARASIA , JM ./ ITA NO. 520 / C TK /20 1 3 ( / ASSESSMENT YEAR : 20 0 7 - 0 8 ) INDIAN METALS AND FERRO ALLOYS LTD, IMFA BUILDING, MOMIKHAL, RASULGARH, BHUBANESWAR - 751 010 VS. ADCIT, RANGE - 2, BHUBANESWAR ./ ./ PAN/GIR NO. : A AACI 4818 F ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI SACHIT JOLLY /REVENUE BY : SHRI K.AJAY KUMAR / DATE OF HEARING : 30 TH APRIL , 201 4 / DATE OF PRONOUNCEMENT : 02/05 /2014 / O R D E R PER BENCH : TH IS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) DATED 26 - 6 - 2013 BY TAKING FOLLOWING EFFECTIVE GROUNDS OF APPEAL : - THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSI ONER OF INCOME TAX (APPEALS) ['CIT(A)*] ERRED IN NOT ADJUDICATING THE APPEAL FILED BY THE APPELLANT AND DISMISSING THE SAME AS INFRUCTUOUS ON THE GROUND THAT SINCE THE ORIGINAL ASSESSMENT FRAMED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 ('THE ACT') HAS BEEN REOPENED UNDER SECTION 147/148 OF THE ACT. THE APPELLANT COULD CHALLENGE THE ADDITIONS/DISALLOWANCES MADE IN THE ORIGINAL ASSESSMENT BEFORE THE C I T(A) IN THE APPEAL AGAINST THE REASSESSMENT ORDER. 2 ITA NO. 520/CTK /201 3 1.1 THAT IN HOLDING AS AFORESAID, THE C I T(A) ERRED IN NOT APPRECIATING THAT AN APPEAL LIES TO THE C I T(A) UNDER SECTION 246A OF THE ACT ONLY IN RESPECT OF ISSUES ARISING FROM THE ORDER IN CHALLENGE AND, THEREFORE, ONLY THOSE ISSUES CAN BE AGITATED IN AN APPEAL FILED AGAINST AN ORDER PASSED UNDER SECTION 147/14 8 OF THE ACT. WHICH FORM PART OF SUCH REASSESSMENT ORDER. 1.2 THAT IN HOLDING AS AFORESAID, THE C I T(A) FURTHER ERRED IN NOT APPRECIATING THAT A REASSESSMENT ORDER PASSED UNDER SECTION 147/148 PRESENTS A SEPARATE 'CAUSE OF ACTION' DIFFERENT AND DISTINCT FROM TH E ORDER PASSED UNDER SECTION 143(3) OF THE ACT AND, THEREFORE, ADDITIONS/DISALLOWANCES MADE IN THE ORIGINAL ASSESSMENT ORDER UNDER SECTION 143(3) CANNOT BE IMPUGNED IN AN APPEAL AGAINST REASSESSMENT ORDER PASSED UNDER SECTION 147/148 OF THE ACT. WITHOUT PR EJUDICE, THAT THE C I T(A) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER ('AO') IN DISALLOWING DEDUCTION OF RS.9,10.34,665/ - BY INVOKING SECTION 43B OF THE ACT, WITHOUT APPRECIATING THAT THE SAID SUM REPRESENTED DEPOSIT OF ELECT RICITY DUTY IN A DESIGNATED NON - LIEN BANK ACCOUNT AS PER THE DIRECTIONS OF THE HON'BLE ODISHA HIGH COURT. 2.1 THAT IN HOLDING AS AFORESAID, THE CIT(A) ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE LIABILITY HAVING CRYSTALLIZED AND DISCHARGED BY TH E APPELLANT, SECTION 43B OF THE ACT COULD NOT HAVE BEEN INVOKED. 3. WITHOUT PREJUDICE, THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN DISALLOWING DEDUCTION OF RS.7,77,82,376/ - BY INVOKING 40(A)(IA) OF ACT FOR ALLEGED VIOLATION OF THE PROVISIONS OF SECTION 194C, WITHOUT APPRECIATING THAT THE SAID PAYMENTS WERE TOWARDS TRANSMISSION CHARGES PAID TO GRIDCO, ON WHICH NO TAX WAS DEDUCTIBLE UNDER SECTION 194C OF THE ACT. 4. WITHOUT PREJUDICE, THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN DISALLOWING DEDUCTION OF RS. 19,80,334/ - , INCURRED ON ACCOUNT OF EXPORT PROMOTION (FOREIGN TRAVEL OF DIRECTORS), ON AN ADHOC BASIS WITHOUT ASSIGNING ANY REASONS THEREFOR. 5. WITHOUT PREJUDICE, THAT THE C I T(A) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN DISALLOWING DEDUCTION OF RS.4,51,976/ - , INCURRED TOWARDS FOREIGN TRAVEL OF CONSULTANTS, ON AN ADHOC BASIS WITHOUT ASSIGNING ANY REASONS THEREFOR. 3 ITA NO. 520/CTK /201 3 6. WITHOUT PREJUDICE, THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN DISALLOWING DEDUCTION OF RS.8,00,579/ - , INCURRED TOWARDS TRAVEL COST OF BANKERS, RETAINERS, AUDITORS, GUESTS, ETC., ON AN ADHOC BASIS WITHOUT ASSIGNING ANY REASONS THEREFOR. 7. WITHOUT PREJUDICE, THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN DISALLOWING DEDUCTION FOR ENTERTAINMENT EXPENSES OF RS.L 1,12,200/ - , ON AN ADHOC BASIS WITHOUT ASSIGNING ANY REASONS THEREFOR. 8. WITHOUT PREJUDICE, THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN DISALLOWING DEDUCTION OF RS.L 4,56,623/ - INCURRED UNDER THE HEAD 'MISCELLANEOUS', ON AN ADHOC BASIS WITHOUT ASSIGNING ANY REASONS THEREFOR. 9. WITHOUT PREJUDICE, THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN DISALLOWING DEDUCTION OF RS.97,285/ - BEING PETTY BALANCES WRITTEN OFF, WITHOUT ASSIGNING ANY REASONS THEREFOR. 10. WITHOUT PREJUDICE, THAT THE C I T(A) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN DISALLOWING DEDUCTION OF RS.L3.59,500/ - ALLEGED TO BE 'PRIOR PERIOD EXPENSES', WITHOUT APPRECIATING THAT THE SAID EXPENSES HAD CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION. 11. WITHOUT PREJUDICE, THAT THE C I T(A) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN DISALLOWING DEDUCTI ON OF RS. 1,60,00,000/ - ON ADHOC BASIS, WITHOUT APPRECIATING THAT THE SAID SUM WAS REMUNERATION PAID TO DIRECTORS AS PER THE CONDITIONS PRESCRIBED UNDER SECTION 309/310 OF THE COMPANIES ACT AND DULY APPROVED BY THE SHAREHOLDERS. 12. WITHOUT PREJUDICE, THAT THE C I T(A) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN DISALLOWING DEDUCTION OF RS.3,59,48,117/ - INVOKING THE PROVISIONS OF SECTION 40(A)(I) OF THE ACT FOR ALLEGED VIOLATION OF SECTION 195 OF THE ACT, WITHOUT APPRECIATING THAT THE SAID PAY MENTS WERE NOT CHARGEABLE TO TAX IN INDIA. 12.1 THAT IN HOLDING AS AFORESAID, C I T(A) ERRED IN CONFIRMING THE ASSUMPTION MADE BY THE AO THAT ALL PAYMENTS TO NON - RESIDENT ARE SUBJECT TO WITHHOLDING TAXES UNDER SECTION 195 OF THE ACT AND, WHICH IS IN COMPLETE DISREGARD OF THE DECISION OF SUPREME COURT IN THE CASE OF GE INDIA TECHNOLOGY CENTRE (P) LTD. V. C1T: 327 I TR 456 . 2 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSMENT FOR THE AFORESAID ASSESSMENT YEAR WAS COMPLETED U/S. 143(3) ON 31 - 3 - 2009 AFTER MAKING 4 ITA NO. 520/CTK /201 3 S EVERAL DISALLOWANCES/ADDITIONS AGAINST WHICH THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). IN THE MEANTIME, THE AO INITIATED PROCEEDING U/S. 147 ISSUING THE NOTICE U/S. 148(2) OF THE IMPUGNED ASSESSMENT YEAR. THE APPEAL FIXED FOR HEARING BEFORE HIM. IT IS N OTED THAT THE ASSESSMENT WAS REOPENED U/S. 147 DUE TO CERTAIN REASONS. THE CIT(A), THEREFORE, DID NOT DECIDE THE VARIOUS GROUNDS TAKEN BY THE ASSESSEE BEFORE HIM BUT TOOK THE VIEW THAT ONCE THE ASSESSMENT IS REOPEN ED U/S. 147, THE ENTIRE ASSESSMENT BECOMES O PEN DE NOVO AND, THEREFORE, HE TOOK THE VIEW THAT APPEAL FILED BY THE ASSESSEE HAS BECOME INFRUCTUOUS AND DISMISSED THE SAME AS INFRUCTUOUS. 3 . WE HEARD RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW . LEARNED AR BEFORE US CONTENDED THAT ONCE THE PROCEEDINGS U/S. 147 ARE INITIATED THE ENTIRE ASSESSMENT DO NOT GET WAIVED OFF. THE ASSESSMENT IS REOPENED ONLY IN RESPECT OF THE ESCAPED INCOME. WE AGREE WITH THE CONTENTION OF THE LEARNED AR. T HE PROVISI ON OF SECTION 147, IN OUR OPINION, IS EXPLICITLY CLEAR. THIS SECTION MANDATES THAT THE AO, IF HAS THE REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX AS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, THE AO MAY SUBJECT TO THE PROVISION OF SECTION 148 TO 153 , ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS 5 ITA NO. 520/CTK /201 3 SECTION, OR RECOMPUTED THE LOSS OR THE DEPRECIATION ALLOWA NCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED. THIS SECTION NOWHERE STATES THAT THE ORI GINAL ASSESSMENT WILL GET ABATE . T HE REASSESSMENT WILL BE IN RESPECT OF ESCAPED INCOME. SIMILA R VIEW HAS BEEN TAKEN BY THE HON BLE SU PREME COURT IN THE CASE OF CIT VS. SUN ENGINEERING WORKS PVT. LTD., (1992) 198 ITR 297 (SC) , IN WHICH THE HON BLE SUPREME COURT TOOK THE VIEW THAT WHEN REASSESSMENT IS MADE U/S. 147 IN RESPECT OF INCOME WHICH HAS ESCAPED TAX, THE INCOME TAX OFFICERS JURISD ICTION IS CONFINED ONLY TO SUCH INCOME WHICH HAS ESCAPED TAX OR HAS BEEN UN DER - ASSESSED AND DOES NOT EXTEND TO REVISING, REOPENING OR RECONSIDERING THE WHOLE ASSESSMENT FOR PERMITTING THE ASSESSEE TO AGITATE THE QUESTION WHICH HAS BEEN DECIDED IN THE ORIGINAL ASSESSMENT. IT IS ONLY THE ASSESSMENT WHICH IS SET ASIDE AND NOT THE ENTIRE ASSESSMENT WHEN THE REASSESSMENT PROCEEDINGS ARE INITIATED. IN VIEW OF THE CLEAR CUT MANDATE OF THE HON BLE APEX COURT, WE DO NOT AGREE WITH THE FINDINGS OF THE CIT(A) THAT ONCE AC TION U/S. 147 IS TAKEN, THE ENTIRE ASSESSMENT BECOMES OPEN DE NOVO . WE, THEREFORE, SET ASIDE THE SAID FINDING AND IN OUR OPINION, THE ASSESSMENT FRAMED BY THE AO U/S. 143(3), VER Y MUCH REMAINS IN EXISTENCE. WE, THEREFORE , DIRECT THE CIT(A) TO DECIDE THE G ROUNDS OF APPEAL TAKEN BY THE ASSESSEE ON MERIT AFTER GIVING PROPER AND SUFFICIENT OPPORTUNITY TO THE ASSESSEE. THE LEARNED AR, BEFORE US , 6 ITA NO. 520/CTK /201 3 WAS FAIR ENOUGH TO CONCEDE THAT ALL THE GROUNDS OF APPEAL I.E. FROM GROUNDS NO. 2 TO 12 WERE TAKEN BY HIM BEFORE THE C IT(A) AND THE CIT(A) HAS NOT GIVEN ANY FINDING ON MERIT. ACCORDINGLY, WE RESTORE ALL THESE GROUNDS TO THE FILE OF THE CIT(A) AND DIRECT HIM TO DECIDE THESE GROUNDS ON MERIT AFTER GIVING PROPER AND SUFFICIENT OPPORTUNITY TO THE ASSESSEE. THE ASSESSEE IS ALS O DIRECTED TO COOPERATE THE CIT(A) AND PRODUCE THE NECESSARY EVIDENCE INCLUDING THE CASE LAWS , ON WHICH HE MAY RELY BEFORE THE CIT(A) . 4 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 02/05 / 201 4 . 02/05 /2014 SD/ - SD/ - ( . . ) ( D.T.G ARASIA ) ( . . ) ( P.K.BANSAL ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER CUTTACK ; DATED 02/05 /2014 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) , BHUBANESWAR 4. / CIT , BHUBANESWAR 5. , , / DR, ITAT, CUTTACK 6. / GUARD FILE. 7 ITA NO. 520/CTK /201 3 / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT , CUTTACK //TRUE COPY//