M/s. ORIENT ASTER COMMUNICATION PVT. LTD., Bhopal V. The ITO 2(1), Bhopal

ITA 531/IND/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5945 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 08-06-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 08-08-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: AJAY K CHHAJED
• Keywords: Business income; Depreciation; Period of limitation; Reason to believe
• Section: 143(3); 32; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE (SINGLE MEMBER CASE) BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER I.T.A.NO. 531/IND/2014 A.Y. : 2004-05 M/S. ORIENT ASTER COMMUNICATION PRIVATE LIMITED, ITO, 2(1), BHOPAL BHOPAL VS. APPELLANT RESPONDENT PAN NO. AAACO2874P A PPELLANT BY : SHRI AJAY K. CHHAJED, ADV. RESPONDENT BY : SHRI R. A. VERMA, DR O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A)-I, BHOPAL, DATED 13.05.2014 FOR THE ASSES SMENT YEAR 2004-05. DATE OF HEARING : 08 .0 6 20 16 DATE OF PRONOUNCEMENT : 08 .0 6 . 201 6 M/S. ORIENT ASTER COMMUNICATION PVT.LTD., BHOPAL VS . ITO, 2(1), BHOPAL I.T.A.NO. 531/IND/2014 A.Y. 2004-05 2 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A PRIVATE LIMITED COMPANY AND FILED ITS RETURN OF INC OME FOR ASSESSMENT YEAR 2004-05 DECLARING NIL INCOME AS PER NORMAL PROVISIONS AND DECLARED BOOK PROFITS UNDER MAT OF R S. 1,83,068/-. THE AO NOTED THAT THE ASSESSEE HAS NOT CARRIED OUT ANY MANUFACTURING ACTIVITY DURING THE YEAR UNDE R CONSIDERATION AND HAD MERELY SOLD RAW MATERIAL AND R EALIZED THE SALE PROCEEDS OF RS. 20,000/- ONLY. BUT THE ASS ESSEE COMPANY HAD CLAIMED DEPRECATION AS PER BOOKS OF RS. 7,96,288/- AND DEPRECIATION AS PER INCOME-TAX ACT O F RS. 10,63,722/- WAS CLAIMED ON PLANT AND MACHINERY, WHIC H WERE NEVER PUT TO USE DURING THE YEAR UNDER CONSIDERATIO N. THE ASSESSING OFFICER HAD REASON TO BELIEVE THAT THE AS SESSEE IS NOT ENTITLED FOR DEPRECIATION ON PLANT AND MACHINERY. T HE ASSESSEE HAS ALSO SHOWN THE INTEREST AND OTHER INCOME, WHICH I S TREATED AS INCOME FROM OTHER SOURCES. THEREFORE, THE SET OF F OF CARRIED FORWARD BUSINESS OF EARLIER YEAR WAS NOT ALLOWED. THE REFORE, THE AO HAS REOPENED THE ASSESSMENT U/S 148 AND THE ASSESSMENT WAS COMPLETED U/S 148 OF THE INCOME-TAX A CT, 1961. M/S. ORIENT ASTER COMMUNICATION PVT.LTD., BHOPAL VS . ITO, 2(1), BHOPAL I.T.A.NO. 531/IND/2014 A.Y. 2004-05 3 3 3. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CI T(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE. 4. IN THE SECOND APPEAL, THE ASSESSEE HAS CHALLENGED THE VALIDITY OF REOPENING OF THE ASSESSMENT U/S 147 AS THE SERVICE OF NOTICE WAS ISSUED AFTER EXPIRY OF TIME LIMIT I.E. 31 ST MARCH, 2011, AND REASONS RECORDED BY THE AO WERE MUCH AFTE R THE ISSUANCE OF NOTICE U/S 148. 5. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS ALSO SUBMITTED THAT NOTICE U/S 148 DATED 30.3.2011 WAS ISSUED, WHICH WAS RECEIVED ON 04.04.2011 FOR REOPENIN G OF ASSESSMENT U/S 147 FOR THE ASSESSMENT YEAR 2004-05 I.E. AT THE FAG END OF THE SIX YEARS FROM THE END OF THE RE LEVANT ASSESSMENT YEAR. IT WAS ALSO SUBMITTED THAT THE NOTI CE WAS NOT ACCOMPANIED WITH THE COPY OF THE REASONS RECORDED FO R RE- OPENING THE ASSESSMENT. THEREFORE, THE NOTICE ISSUE D BY THE AO IS BARRED BY LIMITATION AND THE ORDER PASSED WAS INVALID. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE RELIED UPON THE DECISION OF BALWANT RAI WADHWA VS. ITO, DELHI (TR IBUNAL) AND THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF HARYANA ACRYLIC MFG. CO. VS. CIT, 308 ITR 38. THE L D. M/S. ORIENT ASTER COMMUNICATION PVT.LTD., BHOPAL VS . ITO, 2(1), BHOPAL I.T.A.NO. 531/IND/2014 A.Y. 2004-05 4 4 AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER SUBMITTED THAT APART FROM THE ABOVE, IT IS APPARENT FROM THE ASSESSMENT ORDER THAT THE OBJECTION FILED BY THE ASSESSEE ARE NEITHER DISPOSED OF AT ANY TIME NOR DISPOSED OF ORDERS NOT COMMUNICATED TO THE ASSESSEE. THEREFORE, AS PER THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF ASIAN P AINTS LIMITED VS. DCIT REPORTED IN 296 ITR 90, THE ASSESS MENT ORDER SHOULD BE QUASHED. 6. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED BEFORE ME THAT THE FIRST OBJECTION REGARDING THE ASSESSMENT WAS REOPENED WITHIN 6 YEARS, BUT AS THE ASSESSMENT WAS MADE U/S 143(1) OF THE INCOME-TAX ACT, 1961, THERE WAS NO ASSESSMENT ORDER IN THE EYES OF L AW. THEREFORE, AS PER THE DECISION OF HON'BLE SUPREME C OURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS PVT. LTD, 291 ITR 500 (SC), IT IS NOT AN ASSESSMENT. THEREFORE, T HE AO IS JUSTIFIED IN REOPENING THE ASSESSMENT. THE LD. DEPA RTMENTAL REPRESENTATIVE FURTHER SUBMITTED THAT AS PER THE DE CISION OF HON'BLE SUPREME COURT IN THE CASE OF R.K.UPADHYAYA VS. SHANABHAI P. PATEL, (1987) 166 ITR 163 (S.C.), WHERE IN THE M/S. ORIENT ASTER COMMUNICATION PVT.LTD., BHOPAL VS . ITO, 2(1), BHOPAL I.T.A.NO. 531/IND/2014 A.Y. 2004-05 5 5 HON'BLE SUPREME COURT HAS HELD THAT WHEN THE ISSUE O F NOTICE IS WITHIN THE PERIOD OF LIMITATION AND THE SERVICE O N THE ASSESSEE IS BEYOND THE PERIOD, THE ASSESSMENT IS VA LID. THE LD. DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITTED THAT IN THIS CASE, SIMILAR FACTS ARE THERE. THEREFORE, REOPENING IS VALID ONE. THE LD. DEPARTMENTAL REPRESENTATIVE ALSO DRAWN MY A TTENTION TO THE DECISION OF HON'BLE ORISSA HIGH COURT IN THE CASE OF VISHNU BOREWELL VS. ITO AND ANOTHER, (2002) 257 ITR 512 (ORI), WHEREIN SIMILAR ISSUE HAS BEEN DECIDED AND TH E ASSESSEE CANNOT DEMAND COPY OF THE REASONS ALONGWITH NOTICE. IF THE NOTICE U/S 148 IS ISSUED, IT IS NOT NECESSARY TO GI VE COPY OF THE REASONS RECORDED ALONGWITH THE NOTICE. THEREFORE, TH E ASSESSEES OBJECTION IS NOT MAINTAINABLE AS PER LAW. 7. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PART IES. AS PER THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI (SUPRA), THE HON'BLE SUPREME COURT H AS HELD THAT WHEN THE ASSESSMENT IS MADE U/S 143(1), IT IS N OT THE ASSESSMENT ORDER. THEREFORE, IN THIS CASE, THE RETU RN WAS FILED ON 1.11.2004. THE ASSESSMENT WAS COMPLETED U/S 143(1 ). THEREFORE, THE ASSESSMENT CAN BE REOPENED BEYOND FO UR YEARS M/S. ORIENT ASTER COMMUNICATION PVT.LTD., BHOPAL VS . ITO, 2(1), BHOPAL I.T.A.NO. 531/IND/2014 A.Y. 2004-05 6 6 AND WITHIN SIX MONTHS. I ALSO FIND THAT AS PER THE D ECISION OF HON'BLE SUPREME COURT IN THE CASE OF R.K. UPADHYAYA VS. SHANABHAI P.PATEL (SUPRA), IF THE SERVICE OF NOTIC E IS ISSUED WITHIN TIME AND SERVICE ON THE ASSESSEE IS BEYOND TH E PERIOD, ASSESSMENT ORDER IS VALID. IN THIS CASE, THE PERIOD OF LIMITATION OF REOPENING OF REASSESSMENT U/S 147(B) WAS GOING TO END ON 31.03.1970. ON THAT DATE I.E. 31.03.1970, THE ITO I SSUED NOTICE TO THE ASSESSEE BY REGISTERED POST WHICH WAS R ECEIVED BY THE ASSESSEE ON 04.03.1970. THE HON'BLE SUPREME COU RT HELD THAT THE REQUIREMENT OF ISSUE OF NOTICE IS SATISFIE D WHEN THE NOTICE IS ACTUALLY ISSUED. SERVICE OF THE NOTICE WAS NOT A CONDITION PRECEDENT TO CONFERMENT OF JURISDICTION I N THE ITO TO DEAL WITH THE MATTER. THE HON'BLE SUPREME COURT HAS DECIDED THIS ISSUE AND HELD AS UNDER :- THE SCHEME OF THE INCOME-TAX ACT, 1961, SO FAR AS NOTICE FOR REASSESSMENT IS CONCERNED, IS QUITE DIFFERENT FROM THAT OF THE 1922 ACT. A CLEAR DISTIN CTION HAS BEEN MADE OUT BETWEEN ISSUE OF NOTICE AND SERVICE OF NOTICE UNDER THE 1961 ACT. SECTION 149 OF THE 1961 ACT, WHICH PROVIDES THE PERIOD OF LIMITATI ON, M/S. ORIENT ASTER COMMUNICATION PVT.LTD., BHOPAL VS . ITO, 2(1), BHOPAL I.T.A.NO. 531/IND/2014 A.Y. 2004-05 7 7 CATEGORICALLY PRESCRIBES THAT NO NOTICE UNDER SECTI ON 148 SHALL BE ISSUED AFTER THE PERIOD PRESCRIBED HAS LAPSED. ONCE A NOTICE IS ISSUED WITHIN THE PERIOD O F LIMITATION, JURISDICTION BECOMES VESTED IN THE ITO TO PROCEED TO REASSESS. SECTION 148(1) PROVIDES FOR SERVICE OF NOTICE AS A CONDITION PRECEDENT TO MAKIN G THE ORDER OF ASSESSMENT. SERVICE, UNDER THE NEW ACT , IS NOT A CONDITION PRECEDENT TO CONFERMENT OF JURISDICTION ON THE ITO : IT IS A CONDITION PRECEDE NT ONLY TO THE MAKING OF THE ORDER OF ASSESSMENT. HELD ACCORDINGLY, THAT, WHERE THE ITO ISSUED A NOTICE OF REASSESSMENT U/S 147(B) FOR ASSESSMENT YEAR 1965-66 BY REGISTERED POST ON MARCH 31, 1970, AND THE NOTICE WAS RECEIVED BY THE ASSESSEE ON APRI L 3, 1970, THE NOTICE WAS NOT BARRED BY LIMITATION AN D THE ITO HAD JURISDICTION TO PROCEED TO COMPLETE THE ASSESSMENT. ONCE A NOTICE IS ISSUED WITHIN THE PERIOD OF LIMITATIONS, JURISDICTION BECOMES VESTED IN THE ITO TO PROCEED TO REASSESS. THE MANDATE OF SECTION 148(1) M/S. ORIENT ASTER COMMUNICATION PVT.LTD., BHOPAL VS . ITO, 2(1), BHOPAL I.T.A.NO. 531/IND/2014 A.Y. 2004-05 8 8 IS THAT REASSESSMENT SHALL NOT BE MADE UNTIL THERE HAS BEEN SERVICE. THE REQUIREMENT OF ISSUE OF NOTIC E IS SATISFIED WHEN A NOTICE IS ACTUALLY ISSUED. IN T HE PRESENT CASE, ADMITTEDLY, THE NOTICE WAS ISSUED WITHIN THE PRESCRIBED PERIOD OF LIMITATION AS 31-03 - 1970 WAS THE LAST DAY OF THAT PERIOD. SERVICE UNDER THE 1961 ACT IS NOT A CONDITION PRECEDENT TO CONFERMENT OF JURISDICTION IN THE ITO TO DEAL WITH THE MATTER BUT IT IS A CONDITION PRECEDENT TO MAKING OF THE ORDER OF ASSESSMENT. AS THE ITO IN THE INSTANT CASE HAD ISSUED NOTICE WITHIN LIMITATIONS, THE APPEAL WA S TO BE ALLOWED AND THE ORDER OF THE HIGH COURT WAS VACATED. IN VIEW OF THE ABOVE, THE SUBMISSION OF THE ASSESSE E THAT THE NOTICE U/S 148 ISSUED ON 30.03.2011 WITHIN THE LIMIT ATION PERIOD BUT SERVED ON 04.04.2011 WAS NOT A VALID ORDE R, IS NOT TENABLE AND, THEREFORE, REJECTED. 8. THE SECOND OBJECTION OF THE ASSESSEE REGARDING NOT PROVIDING THE COPY OF THE REASONS THAT HAS ALSO BEE N DECIDED BY THE HON'BLE ORISSA HIGH COURT IN THE CASE OF VI SHNU M/S. ORIENT ASTER COMMUNICATION PVT.LTD., BHOPAL VS . ITO, 2(1), BHOPAL I.T.A.NO. 531/IND/2014 A.Y. 2004-05 9 9 BOREWELL VS. ITO, 257 ITR 512, WHEREIN IT HAS BEEN H ELD AS UNDER :- REASSESSMENT NOTICE REASON TO BELIEVE MEANING OF ASSESSING OFFICER HAS TO RECORD REASONS FOR ISSUIGN NOTICE UNDER SECTION 148 ASSESSEE CANNOT DEMAND C,OPY OF REASONS ALONGWITH NOTICE INCOME-TAX ACT, 1961, SS. 147, 148. 9. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF HO N'BLE SUPREME COURT AND HON'BLE HIGH COURT, I AM OF THE V IEW THAT THE ADMITTED FACTS INVOLVED IN THIS CASE ARE THAT T HE ASSESSEE COMPANY HAD FILED ITS ORIGINAL RETURN OF INCOME FOR ASSESSMENT YEAR 2004-05 ON 01.11.2004 DECLARING NIL INCOME AS PER NORMAL PROVISIONS AFTER SETTING OFF OF BROUGHT FORWA RD BUSINESS LOSSES AND DECLARED BOOK PROFIT UNDER MAT AT RS. 1, 83,068/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. THUS , THERE WAS NO REGULAR ASSESSMENT U/S 143(3) OR REASSESSMENT U/S 147 PASSED EARLIER IN THIS CASE FOR ASSESSMENT YEAR 2004-05 AND, THEREFORE, PROVISIONS OF PROVISO TO SECTION 14 7 WAS NOT APPLICABLE IN THIS CASE. THERE WAS NO CONDITION OF FAILURE ON M/S. ORIENT ASTER COMMUNICATION PVT.LTD., BHOPAL VS . ITO, 2(1), BHOPAL I.T.A.NO. 531/IND/2014 A.Y. 2004-05 10 10 THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRUL Y ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT TO REOPEN THE ASSESS MENT PROCEEDINGS FOR ASSESSMENT YEAR 2004-05 IN THIS CAS E. THE AO AFTER RECORDING REASONS ISSUED NOTICE U/S 148 ON 30 .03.2011 WHICH WAS SERVED ON THE ASSESSEE ON 04.04.2011. THUS THE NOTICE WAS ISSUED BEFORE THE EXPIRY OF SIX YEARS FRO M THE END OF THE RELEVANT ASSESSMENT YEAR AS SPECIFIED U/S 149OF THE ACT. IT IS A TRITE LAW THAT THE LIMITATION PROVIDED U/S 149 RELATES TO ISSUE OF NOTICE U/S 148 AND NOT SERVICE OF NOTIC E ON THE ASSESSEE. THIS ISSUE HAD COME UP FOR CONSIDERATION BEFORE THE HON'BLE DELHI HIGH COURT IN THE CASE OF NEW BANK OF INDIA LI MITED VS. ITO,(1980) 136 ITR 679 (DEL); (1980) 3 TAXMAN 17 (D EL)., WHEREIN FOR THE ASSESSMENT YEAR 1973-74, THE ITO AFT ER RECORDING REASONS FOR REOPENING THE ASSESSMENT, ISS UED NOTICE U/S 148 ON 31.03.1978 BUT SERVED AFTER 31.03.1978. THE ASSESSEE CHALLENGED THE NOTICE IN A WRIT BEFORE THE HON'BLE HIGH COURT. THE HON'BLE HIGH COURT HELD THAT NOTICE IS TO BE ISSUED AS PER SECTION 149 WITHIN THE PRESCRIBED PERI OD OF FOUR YEARS AND NO LIMITATION IS PRESCRIBED FOR THE SERVI CE OF NOTICE. M/S. ORIENT ASTER COMMUNICATION PVT.LTD., BHOPAL VS . ITO, 2(1), BHOPAL I.T.A.NO. 531/IND/2014 A.Y. 2004-05 11 11 THEREFORE, THERE WAS NO ILLEGALITY IN THE ISSUE OF N OTICE U/S 148 ON 31.03.1978 AND ITS SERVICE BEYOND THAT DATE. THE WRIT PETITION WAS, ACCORDINGLY, DISMISSED. IT MAY FURTHER BE NOTED THAT LAW DOES NOT MANDATE A O TO SUO MOTU SUPPLY THE COPY OF REASON TO BELIEVE TO THE ASSESSEE. THE PROPER COURSE OF ACTION IS THAT WHEN A NOTICE U/ S 148 IS ISSUED, THE ASSESSEE FILES A RETURN AND IF HE SO DE SIRES, HE MAY SEEK REASONS FOR ISSUING NOTICE U/S 148 AND THEN TH E AO IS BOUND TO FURNISH REASONS WITHIN A REASONABLE TIME. T HE HON'BLE ORISSA HIGH COURT IN THE CASE OF VISHNU BOR EWELL VS. ITO AND OTHERS, 257 ITR 512, OBSERVED THAT THE PROC EEDINGS IN REASSESSMENT BEGINS ONLY WITH THE ISSUE OF NOTICE U/ S 148. IT IS ONLY AFTER THE SERVICE OF NOTICE THAT THE ASSESS EE BECOMES THE PARTY TO THE PROCEEDINGS. CONSEQUENTLY, THE ASS ESSEE IS NOT ENTITLED TO GET COPY OF REASONS TO BELIEVE AT THE S TAGE OF ISSUANCE OF NOTICE U/S 148. THEREFORE, THE CONTENTI ON OF THE ASSESSEE THAT SINCE REASONS TO BELIEVE WERE FURNISH ED TO THE ASSESSEE AFTER THE EXPIRY OF LIMITATION TIME OF SIX YEAR FORM THE END OF RELEVANT ASSESSMENT YEAR, THE NOTICE U/S 148 WAS INVALID AND IS NOT TENABLE AND, HENCE, REJECTED. M/S. ORIENT ASTER COMMUNICATION PVT.LTD., BHOPAL VS . ITO, 2(1), BHOPAL I.T.A.NO. 531/IND/2014 A.Y. 2004-05 12 12 AS REGARDS MERIT OF REASONS RECORDED, IT MAY BE NOT ED THAT THE AO NOTICED THAT THE ASSESSEE HAD NOT UNDERTAKEN ANY MANUFACTURING ACTIVITY DURING THE YEAR UNDER CONSID ERATION AND, THUS, THE PLANT AND MACHINERY WERE NOT PUT TO U SE FOR THE PURPOSES OF BUSINESS DURING THE YEAR UNDER CONSIDER ATION. HENCE, THE ASSESSEE WAS NOT ENTITLED FOR DEDUCTION O F DEPRECATION U/S 32 OF THE ACT. WHEN THE RETURN FOR ASSESSMENT YEAR 2004-05 WAS PROCESSED U/S 143(1), THE ASSESSEE WAS ALLOWED DEPRECIATION AS CLAIMED AND, THUS, IT WAS A CASE WHERE THE ASSESSEE WAS ALLOWED EXCESSIVE DEPRECIATION DISA LLOWANCE IN THE COMPUTATION OF INCOME AND THE ASSESSEES CAS E WAS CLEARLY COVER4ED UNDER CLAUSE (C) OF EXPLANATION 2 BELOW SECTION 147. FURTHER, THE SUBMISSION OF THE ASSESSEE THAT THERE WAS NO FIGURE OF RS. 13,68,455/- APPEARING IN PROFIT AND L OSS ACCOUNT IS NOT FOUND CORRECT. ON PERUSAL OF PROFIT AND LOSS ACCOUNT, IT IS NOTICED THAT THE ASSESSEE HAD CREDITED INTEREST INCOME OF RS. 7,75,740/- AND OTHER INCOME OF RS. 5,92,715/- AGGRE GATING TO RS. 13,68,455/- WHICH WAS INCOME FROM OTHER SOURCES. SINCE THERE WAS NO BUSINESS INCOME DURING THE YEAR UNDER M/S. ORIENT ASTER COMMUNICATION PVT.LTD., BHOPAL VS . ITO, 2(1), BHOPAL I.T.A.NO. 531/IND/2014 A.Y. 2004-05 13 13 CONSIDERATION, THE BROUGHT FORWARD BUSINESS OF EARLI ER YEARS COULD NOT BE SET OFF AGAINST THE INCOME FROM OTHER SOURCES. FROM THE ABOVE, IT IS EVIDENTLY CLEAR THAT THERE WAS PRIMA FACIE MATERIAL AVAILABLE WITH THE AO TO HAVE REASONS TO BE LIEVE THAT INCOME CHARGEABLE TO TAX FOR ASSESSMENT YEAR 2004-0 5 HAD ESCAPED ASSESSMENT. IN THIS REGARD, REFERENCE CAN BE MADE TO THE DECISI ON OF HON'BLE SUPREME COURT IN THE CASE OF RAYMOND WOOLEN MILLS LIMITED VS. ITO, (1999) 236 ITR 34 ( S.C.), WHEREIN IT WAS OBSERVED THAT DETERMINING WHETHER COMMENCEMENT OF REASSESSMENT PROCEEDING WAS VALID IT HAS ONLY TO BE SEEN WHETHER THERE WAS PRIMA FACIE SOME MATERIAL ON THE BA SIS OF WHICH THE DEPARTMENT COULD REOPEN THE CASE. THE SUFF ICIENCY OR CORRECTNESS OF THE MATERIAL IS NOT A THING TO BE CONSIDERED AT THIS STAGE. THEREFORE, KEEPING IN VIEW THE FACTS AND CIRCUMSTANC ES OF THE CASE AND LEGAL POSITION ON THE ISSUE, I AM OF THE C ONSIDERED VIEW THAT NOTICE ISSUED U/S 148 FOR ASSESSMENT YEAR 2004-05 WAS A VALID NOTICE AND THEREFORE, THE CONSEQUENT REA SSESSMENT M/S. ORIENT ASTER COMMUNICATION PVT.LTD., BHOPAL VS . ITO, 2(1), BHOPAL I.T.A.NO. 531/IND/2014 A.Y. 2004-05 14 14 U/S 147 R.W.S. 143(3) WAS ALSO A VALID ORDER. HENCE, GROUND NOS. 1 TO 3 ARE REJECTED. GROUND NOS. 4 : 10. GROUND NO. 4 RELATES TO DISALLOWANCE OF DEPRECIAT ION OF RS. 10,63,722/- ON PLANT AND MACHINERY CLAIMED I N THE RETURN OF INCOME. 11. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE CLAIMED BEFORE THE AO A ND CIT(A) THAT MACHINERY WAS CONTINUOUSLY USED FOR NUMBER OF Y EARS AND DEPRECIATION HAS BEEN CLAIMED ON THE SAME. THE PLANT AND MACHINERY DURING YEAR UNDER CONSIDERATION WAS NOT DISMANTLED FOR THE PURPOSE OF SALE OR OTHERWISE AND IT WAS READY TO USE AND HE RELIED UPON THE DECISION OF HON 'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. OSWAL AGRO MILLS L IMITED, (2011) 50 DTR 304 (DEL). AS PER THIS JUDGMENT, IF T HE ASSESSEE DOES NOT USE THE ASSETS, BUT IT IS A PART OF BLOCK OF ASSETS, DEPRECIATION HAS TO BE ALLOWED. 12. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CI T(A) HAS CONFIRMED THE DISALLOWANCE. M/S. ORIENT ASTER COMMUNICATION PVT.LTD., BHOPAL VS . ITO, 2(1), BHOPAL I.T.A.NO. 531/IND/2014 A.Y. 2004-05 15 15 13. WE ARE DECIDING THIS GROUND ALONGWITH THE GROUND NO. 5 TO 8. GROUND NOS. 5 TO 8: 14. GROUND NO. 5 TO 8 RELATE TO TREATING THE INCOME OF RS. 13,68,455/- AS INCOME FROM OTHER SOURCES AND NOT AL LOWING SET OFF OF BROUGHT FORWARD LOSSES OF EARLIER YEARS. 15. THE AO HAS TREATED INTEREST INCOME OF RS. 7,75,740/ - AND OTHER INCOME OF RS. 5,92,715/- CREDITED IN PROF IT AND LOSS ACCOUNT AS INCOME FROM OTHER SOURCES AND NOT ALLOWI NG SET OFF OF BROUGHT FORWARD BUSINESS LOSSES OUT OF INCOME FRO M OTHER SOURCES. 16. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CI T(A) HAS DISMISSED THESE GROUNDS. 17. DURING THE COURSE OF HEARING OF THE APPEAL, THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTE D BEFORE ME THAT THE ASSESSEE HAS CLAIMED DEPRECIATION ON PL ANT AND MACHINERY, AIR CONDITIONERS, OTHER EQUIPMENT, FURNI TURE, FIXTURES, VEHICLE, COMPUTER AND GENERATOR. THE AO D ID NOT ALLOW THE DEPRECIATION ON THE GROUND THAT THE ASSESS EE HAS NOT CARRIED OUT ANY MANUFACTURING ACTIVITIES. IT HAS SO LD ONLY RAW M/S. ORIENT ASTER COMMUNICATION PVT.LTD., BHOPAL VS . ITO, 2(1), BHOPAL I.T.A.NO. 531/IND/2014 A.Y. 2004-05 16 16 MATERIALS AND REALIZED THE SALE PROCEEDS. THE ASSES SEE COMPANY HAS CLAIMED DEPRECIATION ON PLANT AND MACHI NERY, WHICH WAS NEVER PUT TO USE DURING THE YEAR UNDER CONSIDERATION. THEREFORE, DEPRECIATION WAS DISALLOWE D. HE RELIED UPON THE DECISION OF CIT VS. OSWAL AGRO MILLS LIMITED, (2011) 50 DTR 304 (DEL) AND SUBMITTED THAT THE CLAI M WAS ON THE BASIS THAT DESPITE CLOSURE OF THE UNITS THERE W AS A PASSIVE USER OF THE ASSETS WHICH WERE PART OF THE BLOCK OF AS SETS DEPRECIATION COULD NOT BE DISALLOWED. ON APPEAL TO T HE HIGH COURT, THE COURT HELD THAT DESPITE NON-USER OF ASSE SSMENT, DEPRECIATION IS ALLOWABLE IF IT IS PART OF BLOCK OF ASSETS. 18. THE AO HAS ALSO NOT ALLOWED THE SET OFF OF BROUGHT FORWARD LOSSES ON THE GROUND THAT THE ASSESSEE DID N OT CARRY OUT THE BUSINESS AND INCOME WHICH HE HAS RECEIVED FR OM M/S. SERTLITE INDUSTRIES LIMITED IS NOT A BUSINESS INCOM E. SIMILARLY, THE AO HAS ALSO DISALLOWED THE INTEREST INCOME AS I NCOME FROM OTHER SOURCES. THE LD. AUTHORIZED REPRESENTATIVE FO R THE ASSESSEE SUBMITTED THAT THIS INCOME IS ANCILLARY AN D INTER- COUPLING CONNECTED TO MAKE BUSINESS FOR CREDIT AND IT IS UNSALEABLE. THEREFORE, THIS INCOME SHOULD BE TREATE D AS M/S. ORIENT ASTER COMMUNICATION PVT.LTD., BHOPAL VS . ITO, 2(1), BHOPAL I.T.A.NO. 531/IND/2014 A.Y. 2004-05 17 17 INCOME FORM BUSINESS AND HE RELIED UPON VARIOUS DEC ISIONS, WHICH ARE REPRODUCED IN HIS PAPER BOOK. SIMILARLY, T HE AO HAS ALSO NOT TREATED RS. 5,92,715/- AS BUSINESS INCOME. 19. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS RELIED UPON VARIOUS DECISIONS, WHICH ARE AS UNDER :- (I) CIT VS. M/S. PREMIER INDUSTRIES (INDIA) LIMITED, 10 ITJ 654 (MP) (II) SIV INDUSTRIES LTD VS. DCIT, 306 ITR 114 (MAD). (III) CIT VS. SWARUP VEGETABLE PRODUCTS INDIA LIMITED, 198 CTR 595 (ALL). (IV) CIT VS. OSWAL WOOLEN MILLS LIMITED, 206 CTR 141 ( P & H). (V) CIT VS. NAHAR EXPORTS LIMITED, 213 CTR 20 (P&H). (VI) CIT VS. SHAHBAD COOP. SUGAR MILLS LIMITED, 56 DTR 414 (P&H). (VII) CIT VS. KRITI RESORTS (P) LIMITED, 60 DTR 138 (HP) M/S. ORIENT ASTER COMMUNICATION PVT.LTD., BHOPAL VS . ITO, 2(1), BHOPAL I.T.A.NO. 531/IND/2014 A.Y. 2004-05 18 18 (VIII) CIT VS. PEPSU ROAD TRANSPORT CORPN. 253 ITR 303 (P&H). (IX) CIT VS. REFRIGERATION AND ALLIED INDUSTRIES LIMITED, 247 ITR 12 (DEL) (X) ANIL BULK CARRIERS (P) LTD VS. CIT, 194 CGTR 226 (ALL). (XI) CIT VS. CHAMUNDESHWARI SUGAR LIMITED, (2009) 309 ITR 320( KAR). (XII) CIT VS. INSILCO LIMITED, (2009) 20 DTR 65 (DEL) (XIII) ACIT VS. CHENNAI PETROLEUM CORPN. LIMITED,(2009) 126 TTJ 865 (CHENNAI). 20. LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 21. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PART IES. I HAVE GONE THROUGH THE ORDER OF AO. THE AO HAS HELD THAT THE ASSESSEE COMPANY HAS NOT CARRIED OUT ANY MANUFACTUR ING ACTIVITIES, BUT HE HAS MERELY SOLD THE RAW MATERIALS AND REALIZED THE SALE PROCEEDS. I HAVE ALSO GONE THROUG H THE ORDER OF AO AND I AM OF THE VIEW THAT THE AO HAS NOT CARRI ED OUT THE M/S. ORIENT ASTER COMMUNICATION PVT.LTD., BHOPAL VS . ITO, 2(1), BHOPAL I.T.A.NO. 531/IND/2014 A.Y. 2004-05 19 19 PROPER INVESTIGATION AS TO WHETHER THE ASSESSEE COMP ANY IS RUNNING THE BUSINESS OR NOT FOR CLAIMING THE DEPREC IATION. THE DEPRECIATION CAN BE CLAIMED ON PASSIVE USER AND IF THE ASSESSEE HAS NOT SOLD OR DISCARDED, DEMOLISHED OR D ESTROYED THE FACTORY, THE ASSESSEE IS ENTITLED FOR DEPRECIAT ION AS THE MACHINE WAS READY TO USE. SIMILARLY, IF THE BUILDING AND MACHINERY IS KEPT READY TO USE, THE DEPRECATION CAN BE ALLOWED. THE DEPRECIATION CAN ALSO BE ALLOWED WHETHE R THE MACHINERY WAS READY OR PRODUCTION. THEREFORE, THE AO HAS NOT CARRIED OUT ANY INVESTIGATION WHETHER THE ASSESSEE F ACTORY WAS ACTUALLY NOT PUT TO USE DURING THE YEAR ON THE GROU ND THAT THE ASSESSEE COULD NOT GET THE BUSINESS OR THE ASSESSEE HAS TRIED TO DEMOLISH OR INTENDED TO STOP THE BUSINESS. MOREO VER, THE ASSESSEE HAS ALSO CLAIMED DEPRECIATION ON AIR CONDI TIONERS, FURNITURE & FIXTURES, COMPUTERS AND GENERATOR, WHETH ER IT IS REQUIRED FOR MAINTAINING THE BUSINESS OR NOT FOR RU NNING THE FACTORY. THAT ASPECT HAS NOT BEEN LOOKED INTO BY TH E AO AND CIT(A). IN RESPECT OF INTEREST INCOME WHETHER THE AS SESSEE KEPT THIS MONEY FOR BUSINESS URGENCY AND SHORT TERM DEPO SITS ARE INTER-LINKED WITH THE BUSINESS OF THE ASSESSEE, WHICH HAS TO BE M/S. ORIENT ASTER COMMUNICATION PVT.LTD., BHOPAL VS . ITO, 2(1), BHOPAL I.T.A.NO. 531/IND/2014 A.Y. 2004-05 20 20 EXAMINED BY THE AO. THEREFORE, I AM OF THE VIEW THAT THE MATTER REQUIRES VERIFICATION AT THE END OF THE AO A ND THE AO IS DIRECTED TO VERIFY THE CLAIM OF THE ASSESSEE IN RES PECT OF DEPRECIATION, INTEREST ON BUSINESS INCOME AND CARRI ED FORWARD LOSSES AFRESH. THEREFORE, THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ACCORDINGLY, ALL THE GROUNDS ARE DISPOSED AS PER OUR ABOVE OBSERVATION. 22. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER HAS BEEN PRONOUNCED IN THE OP EN COURT ON 20 TH JUNE, 2016, SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 20 TH JUNE, 2016. CPU*