The DCIT, Circle-1, Rajahmundry V. M/s Tadepallegudem Cold Storage Pvt Ltd, Tadepallegudem

ITA 523/VIZ/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7049 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 29-01-2010
• Assessment Year: 1997-1998
• Appeal Filed On: 20-10-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBRATA SARKAR
• Assessee Lawyers: S RAMA RAO
• Keywords: Unexplained investment; Depreciation; Period of limitation; Time period of passing order; Reassessment proceedings
• Section: 150(1); 148; 54; 144; 154

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH: VISAKHAPATNAM BEFORE: SRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SRI B.R. BASKARAN, ACCOUNTANT MEMBER I.T.A. NO.523/VIZAG/2008 ASSESSMENT YEAR : 1997-98 DCIT, CIRCLE-1, RAJAHMUNDRY VS. TADEPALLEGUDEM COLD STORAGES (P) LTD., TADEPALLEGUDEM (APPELLANT) (RESPONDENT) PAN NO.: AACCT 0971 A APPELLANT BY : SHRI SUBRATA SARKAR, CIT (DR) RESPONDENT BY : SHRI S. RAMA RAO, ADVOCATE O R D E R PER B..R. BASKARAN, ACCOUNTANT MEMBER : 1. THE APPEAL OF THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 4.7.2008 PASSED BY LD CIT(A), RAJAHMUNDRY AND IT RELATES TO THE ASSESSMENT YEAR 1997- 98. THE APPEAL OF THE REVENUE IS TIME BARRED BY 34 DAYS. THE ASSESSING OFFICER, IN HIS AFFIDAVIT HAS EXPLAINED THAT THE DE LAY HAS BEEN CAUSED DUE TO THE DELAY IN GETTING THE AUTHORIZATION FROM THE CONCERN ED CIT. HAVING REGARD TO THE SUBMISSIONS, WE CONDONE THE DELAY AND ADMIT THE APP EAL. 2. THE EFFECTIVE GROUNDS OF APPEAL FILED BY THE REVENUE READ AS UNDER: 2. THE LEARNED CIT (A) ERRED IN HOLDING THAT THE A SSESSING OFFICER IS GROSSLY WRONG IN RELYING ON EXPLANATION-2 TO SUB -SECTION 153(3)(II) OF THE ACT FOR THE SIMPLE REASON THAT TH E LEGAL FICTION CONTEMPLATED THERE UNDER WOULD BECOME OPERATIONAL O NLY IF THERE EXISTS ANY FINDING OR DIRECTION IN THE ORDER OF THE APPELLATE AUTHORITY.. 3. THE LEARNED CIT (A) ERRED IN RELYING UPON THE DE CISION OF THE INCOME-TAX APPELLATE TRIBUNAL, FOR THE ASSESSMENT Y EAR 1998-99, THAT THE APPLICATION MADE BY THE ASSESSEE BEFORE TH E ASSESSING OFFICER FOR THE RELIEF IN QUESTION, IS UNSUSTAINABL E IN LAW AND HENCE IT DESERVES TO BE REJECTED. 2 4. THE LEARNED CIT (A) INSTEAD OF EXAMINING ISSUES PROPERLY, RELIED ON HIS PREDECESSORS ORDER 3. THE FACTS OF THE CASE ARE STATED IN BRIEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF RUNNING COLD STORAGE PLANT. IT FILED I TS RETURN OF INCOME FOR THE ASSESSMENT YEAR 1997-98 ON 28.10.1999 RETURNING A L OSS OF RS.11,61,830/-. FOR THE IMMEDIATELY SUCCEEDING ASSESSMENT YEAR 1998-99, THE ASSESSEE FILED ITS RETURN OF INCOME ON 25.11.1998 RETURNING A NET LOSS OF RS.19.60 LAKHS. THE ASSESSMENT FOR THE ASSESSMENT YEAR 1998-99 WAS TAKE N UP FOR SCRUTINY. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE AO RE FERRED THE MATTER OF VALUATION OF COLD STORAGE PLANT TO THE DEPARTMENTAL VALUATION OFFICER (DVO) WHO DETERMINED THE COST AT RS.162.98 LAKHS. THE AO, AF TER CONSIDERING THE OBJECTIONS, DETERMINED THE COST OF CONSTRUCTION AT RS.139.57 LAKHS. THE COST OF CONSTRUCTION DISCLOSED BY THE ASSESSEE (BEFORE DEPR ECIATION) AS ON 31.3.1998 STOOD AT RS.48,64,955/-. THUS THE ASSESSING OFFICE R TREATED THE DIFFERENCE AMOUNT OF RS.90,92,185/- AS UNEXPLAINED INVESTMENT IN THE CONSTRUCTION OF COLD STORAGE PLANT AND ASSESSED THE SAME IN THE ASSESSME NT YEAR 1998-99. THE ASSESSEE PREFERRED APPEAL BEFORE LD CIT(A) BELATEDL Y AND HENCE THE SAID APPEAL WAS DISMISSED BY THE LD CIT(A) AS TIME BARRED. HEN CE, SEEKING ALTERNATIVE REMEDY, THE ASSESSEE FILED A RECTIFICATION PETITION U/S 154 OF THE ACT ON 30.8.2004 BEFORE THE AO SEEKING RECTIFICATION OF THE ASSESSME NT ON THE GROUND THAT THE ENTIRE DIFFERENTIAL COST SHOULD NOT HAVE BEEN ASSES SED FULLY IN THE ASSESSMENT YEAR 1998-99 SINCE (A) THE CONSTRUCTION OF THE COLD STORAGE PLANT HAD ALREADY BEEN COMPLETED IN THE FINANCIAL YEAR 1996-97 RELEVANT TO THE ASSES SMENT YEAR 1997-98 ITSELF. (B) IT HAD STARTED THE COMMERCIAL OPERAT ION OF THE COLD STORAGE PLANT IN THE FINANCIAL YEAR 1996-97 ITSELF AND ACCORDINGLY THE R ETURN OF INCOME FOR ASSESSMENT YEAR 1997-98 WAS FILED. (C) IT CLAIMED DEPRECIATION ON THE COST OF THE COLD STORAGE PLANT ONLY BECAUSE THE CONSTRUCTION WAS COMPLETED IN THAT YEAR ITSELF. HOWEVER THE AO REJECTED THE APPLICATION FILED U/S 1 54 ON THE GROUND THAT THE SAID PETITION DOES NOT FALL WITHIN THE AMBIT OF THE PROV ISIONS OF SECTION 154 OF THE ACT. THE APPEAL FILED BY THE ASSESSEE AGAINST THE REJECT ION OF THE PETITION CITED ABOVE 3 WAS DISMISSED BY THE LD CIT(A) BY HOLDING THAT SINC E THE CONSTRUCTION CONTINUED BEYOND THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1997-98 AND FURTHER A SUM OF RS.7,11,373/- WAS INCURRED DURING THE YEAR E NDED 31.3.1998, THE AO WAS VERY MUCH CORRECT IN ADDING THE ENTIRE DIFFERENTIAL VALUE IN THE FINAL YEAR OF CONSTRUCTION AND THERE BEING NO MISTAKE APPARENT FR OM RECORD, THE AO HAD RIGHTLY REJECTED THE PETITION OF THE ASSESSED FILED U/S 154 OF THE ACT. IN THE SECOND APPEAL PREFERRED BEFORE THE ITAT, THE TRIBUNAL DIRE CTED THE AO TO CONSIDER THE RECTIFICATION PETITION OF THE ASSESSEE FOR EXCLUDIN G THE INVESTMENT NOT RELATABLE TO THE ASSESSMENT YEAR 1998-99. ACCORDINGLY THE AO EXC LUDED A SUM OF RS.83,56,433/- IN THE ASSESSMENT YEAR 1998-99 WHILE GIVING EFFECT TO THE ORDER OF THE TRIBUNAL. 4. CONSTRUING THE DECISION OF ITAT FOR THE ASSE SSMENT YEAR 1998-99 AS A FINDING TO THE EFFECT THAT ASSESSMENT OF THE PROP ORTIONATE UNEXPLAINED INVESTMENT RELATABLE TO THE ASSESSMENT YEAR 1997-98 IS EXIGIBLE, THE AO REOPENED THE ASSESSMENT FOR THE ASSESSMENT YEAR 199 7-98 BY INVOKING THE PROVISIONS OF SECTION 150(1) R.W.S. 153(3)(II) OF T HE ACT AND ISSUED NOTICE U/S 148. IN THE ABSENCE OF COMPLIANCE FROM THE ASSESSEE TO T HE SUCCESSIVE NOTICES, THE AO RESORTED TO THE BEST JUDGMENT ASSESSMENT U/S 144 OF THE ACT AND ACCORDINGLY ASSESSED THE PROPORTIONATE AMOUNT OF UNEXPLAINED IN VESTMENT OF RS.83.56,433/- IN THE ASSESSMENT YEAR 1997-98. AGGRIEVED, THE ASS ESSEE CARRIED THE MATTER IN APPEAL BEFORE LD CIT(A). THE LD CIT(A) ANNULLED T HE ASSESSMENT BY HOLDING THAT THE AO DID NOT HAVE POWER TO ASSUME JURISDICTI ON FOR REOPENING OF THE ASSESSMENT FOR THE ASSESSMENT YEAR 1997-98 AND HENC E THE ASSESSMENT COMPLETED BY HIM IS INVALID AND VOID AB INITIO. TH E REASONING OF THE LD CIT(A) IS SUMMARIZED BELOW: (A) AS PER THE PROVISIONS OF SECTION 150(1), THE TIME LIMITS PRESCRIBED U/S 149 OF THE ACT SHALL NOT APPLY WHERE REASSESSMENT PROCEEDINGS ARE INITIATED BY A NOTICE TO GIVE EFFEC T TO ANY FINDING OR DIRECTION . (B) HOWEVER, AS PER THE PROVISIONS OF SECTION 150 (2), THE PERIOD OF LIMITATION AS LAID DOWN IN SECTION 149 SHALL COME I NTO PLAY, IF THE ACTION FOR ASSESSMENT ETC. CANNOT BE INITIATED FOR AN ASSESSMENT YEAR ON ACCOUNT OF ANY ACTION HAVING GOT TIME BARRE D AS ON THE 4 DATE OF ORDER WHICH IS THE SUBJECT MATTER OF APPEAL ETC. THAT WOULD PREVENT THE AO FROM PROCEEDING U/S 148 OF THE ACT. IT WOULD MEAN THAT AN APPELLATE OR REVISIONAL AUTHORITY OR COURT CANNOT GIVE A DIRECTION FOR ASSESSMENT OR REASSESSMENT OR RECOMPU TATION WHICH GOES TO THE EXTENT OF CONFERRING JURISDICTION UPON THE ASSESSING OFFICER IF HIS JURISDICTION HAD CEASED DUE TO THE B AR OF LIMITATION PRESCRIBED U/S 149 OF THE ACT. (C) THE MAXIMUM LIMITATION PERIOD FOR THE ASSESSME NT YEAR 1997- 98 WAS 31.3.2004. HOWEVER THE NOTICE U/S 148 WAS I SSUED MUCH LATER, THAT TOO ONLY AFTER THE RECEIPT OF THE ORDER DATED 31.7.2006 OF THE ITAT FOR THE ASSESSMENT YEAR 1998-99. HENCE TH E ACTION OF THE AO IN INITIATING REASSESSMENT PROCEEDINGS FOR T HE ASSESSMENT YEAR 1997-98 BY ISSUE OF NOTICE U/S 148 WAS PATENTL Y ILLEGAL AND CLEARLY WITHOUT ANY JURISDICTION. HENCE THE LD CIT(A) DID NOT GO INTO THE ISSUES VIZ. , WHETHER THERE EXISTED ANY FINDING OR DIRECTION IN THE ORDER OF ITAT AND W HETHER THE LEGAL FICTION CREATED UNDER EXPLANATION 2 TO SECTION 153(3)(II) OF THE AC T COULD BE INVOKED. 5. AGGRIEVED BY THE ORDER OF THE LD CIT(A), THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US RAISING THE GROUNDS OF APPEAL MENT IONED IN PARA 2 SUPRA. ON A CAREFULLY PERUSAL OF THE GROUNDS OF APPEAL, IT CAN BE NOTICED THAT THE REVENUE HAS NOT CHALLENGED THE DECISION OF THE LD CIT(A) IN HOL DING THAT THE INITIATION OF REASSESSMENT PROCEEDINGS IS TIME BARRED. IN ANY C ASE, ON A CAREFUL PERUSAL OF THE ORDER DATED 31.7.2006 PASSED BY THE ITAT IN THE HANDS OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1998-99, WE NOTICE THE FOLLOWIN G:- (A) THE APPEAL BEFORE THE ITAT WAS EMANATED FROM THE REJECTION OF THE PETITION FILED U/S 154 OF THE ACT. THE PLEA OF THE ASSESSEE IN THE RECTIFICATION PETITION WAS THAT THE ENTIRE DIFFEREN CE IN THE COST OF CONSTRUCTION WAS NOT ASSESSABLE IN THE ASSESSMENT Y EAR 1998-99. (B) THE TRIBUNAL, IN PARA 7 OF ITS ORDER, HAS OBS ERVED AS UNDER: BUT THE ASSESSING OFFICER TREATED THE WHOLE AMOUNT OF SUCH DIFFERENCE AS UNEXPLAINED INVESTMENT IN CONSTRUCTION OF THE EN TIRE BUILDING IN FINANCIAL YEAR 1997-98 RELEVANT TO THE ASST. YEAR 9 8-99 ALONE. HE HAS THUS COMMITTED A MISTAKE OF LAW, WHICH WAS RECTIFIA BLE U/S 154 OF THE ACT ACCORDINGLY THE ITAT HAS DIRECTED THE AO TO CARRY O UT THE NECESSARY RECTIFICATION SO THAT NO ADDITION AS UNEXPLAINED INVESTMENT IS MA DE IN THE ASST. YEAR 98-99 IN 5 RESPECT OF CONSTRUCTION OF BUILDING CARRIED OUT IN FINANCIAL YEAR 96-97 RELEVANT TO THE ASST. YEAR 1997-98. ON A CAREFUL CONSIDERATIO N OF THE WHOLE ISSUE, WE ARE OF THE OPINION THAT THE DECISION OF THE TRIBUNAL DOES NOT RESULT IN ANY FRESH FINDING NOR IT IS A FRESH DIRECTION, THE TRIBUNAL HAS ONLY ALLOWED THE PRAYER MADE BY THE ASSESSEE IN ITS PETITION FILED U/S 154 OF THE ACT. IN VIEW OF THE FOREGOING DISCUSSIONS, WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED ACCORDINGLY ON 05-03-2010 SD/- SD/- (SUNIL KUMAR YADAV) (B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE : 5 TH MARCH, 2010 A COPY OF THIS ORDER IS FORWARDED TO : 01 THE DCIT, CIRCLE-1, RAJAHMUNDRY 02 M/S TADEPALLIGUDEM COLD STORAGES PVT. LTD., MUTY ALAMBAPURAM, TADEPALLIGUDEM, WEST GODAVARI DISTT. 03 THE CIT (A), RAJAHMUNDRY, 04 THE CIT, RAJAHMUNDRY 05 THE DR, ITAT, VISAKHAPAATNAM 06 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY ITAT, VISAKHAPATNAM BENCH