ACIT, New Delhi V. M/s Keane India Ltd., Gurgaon

ITA 5678/DEL/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69185 (ITAT-DELHI)
• Duration Of Justice: 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 30-07-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 08-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH
• Assessee Lawyers: S D KAPILA; CHARU KAPOOR
• Keywords: Reopening of assessment; Depreciation; Additional evidence; Tangible material; Wrong claim; Difference of opinion; Reason to believe; Unabsorbed depreciation; Change of opinion; Revenue expenditure; Reassessment proceedings
• Section: 143(3); 115JB; 147; 148; 54; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI SHAMIM YAHYA ITA NO. 5678/DEL/2012 ASSTT. YR: 2004-05 ACIT, CIR. 5(1), VS. M/S KEANE INDIA LTD. NEW DELHI. UNITECH TRADERS CENTRE, SECTOR-43, SUSHANT LOK-1, GURGAON, HARYANA. PAN/ GIR NO. AABCK 7777 J AND C.O. NO. 481/DEL/2012 ( IN ITA NO. 5678/DEL/2012 ) ASSTT. YR: 2004-05 M/S KEANE INDIA LTD. VS. ACIT, CIR. 5(1),UNITECH TRADERS CENTRE, SECTOR-43, NEW DELHI. SUSHANT LOK-1, GURGAON, HARYANA. ( APPELLANT ) ( RESPONDENT ) DEPARTMENT BY : SHRI SATPAL SINGH SR. DR ASSESSEE BY : SHRI S.D. KAPILA & CHARU KAPOOR ADV . O R D E R PER R.P. TOLANI, J.M : THIS IS REVENUES APPEAL AND ASSESSEES CROSS OBJEC TIONS AGAINST CIT(A)S ORDER DATED 2-8-2012 RELATING TO A.Y. 2004 -05. RESPECTIVE GROUNDS RAISED ARE AS UNDER: REVENUES APPEAL (ITA NO. 5678/DEL/2012) : 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN ALLOWING DEDUC TION U/S 10A AGGREGATING TO RS. 12,28,14,579/- FROM THE PROF ITS OF ITA 5678 & CO 481/DEL/2012 ACIT VS. KEANE INDIA LTD. 2 THE BUSINESS BEFORE SETTING OFF UNABSORBED BUSINESS LOSS OF RS. 3,38,00,740/- AND UNABSORBED DEPRECIATION OF RS . 3,62,91,752/- RELATABLE TO NON-ELIGIBLE UNITS. 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADJUSTMENT MADE IN ARRIVING BOOK PROFIT U/S 115 JB OF THE IT ACT ON ACCOUNT OF INCOME OF WHICH U/S 10A IS APPLIC ABLE AT RS. 5,96,73,066/- AFTER SETTING OFF OF BUSINESS ALL OWS AND UNABSORBED DEPRECIATION. 3. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN ALLOWING EXCES S DEPRECIATION OF RS. 1,49,36,923/- CLAIMED ON ACCOUN T OF REVISING THE ESTIMATED LIFE OF ASSETS, WHILE COMPUT ING THE BOOK PROFITS OF THE ASSESSEE U/S 115 JB OF THE IT A CT DESPITE THE FACT THAT EXPLANATION (IIA) OF THE SAID SECTION SPECIFICALLY EXCLUDES THE DEPRECIATION ON ACCOUNT OF REVALUATION OF ASSETS. 4. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN ACCEPTING THE ADDITIONAL EVIDENCE WITHOUT ANY VERIFICATION AT ANY LEVEL, THE PROVISION FOR GRATUITY AND LEAVE ENCASHMENT AS ASCE RTAINED LIABILITY FOR THE PURPOSE OF SECTION 115JB ONLY ON THE BASIS OF REVISED ACTUAL VALUATION CERTIFICATE DATED 11/06 /2004. ASSESSEES CROSS-OBJECTIONS : THAT ON THE FACTS OF THE CASE, THE LD. CIT(A) ERR ED IN HOLDING THAT THE NOTICE U/S 148 ISSUED BY THE ASSESSING OFF ICER WAS WITHIN JURISDICTION AND THEREFORE THE REASSESSMENT PROCEEDINGS WERE VALID. 2. LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT THE I SSUE ABOUT VALIDITY OF REOPENING OF ASSESSMENT IS COVERED IN ASSESSEES FA VOUR BY ITATS ORDER, ITA 5678 & CO 481/DEL/2012 ACIT VS. KEANE INDIA LTD. 3 WHICH IS FURTHER CONFIRMED BY THE HONBLE HIGH COUR TS JUDGMENT FOR IMMEDIATELY PRECEDING YEAR I.E. A.Y. 2003-04 ON THE SAME ISSUE. 3. FOR A.Y. 2003-04 THE ASSESSEE CHALLENGED 148 PRO CEEDINGS ON THE SAME REASONS AS IN A.Y. 2004-05 BEFORE CIT(A) WHO A LLOWED THE APPEAL HOLDING THAT REOPENING OF ASSESSMENT WAS BAD IN LAW . AGGRIEVED, REVENUE CHALLENGED THE CIT(A)S ORDER BEFORE THE ITAT, WHIC H AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE VIDE ORDER DATE D 20-5-2011 IN ITA NO. 3291/DEL/2010, CONFIRMED CIT(A)S ORDER AS UNDER. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL ON RECORD. AS THE FACTS EMERGE, AO WHILE F RAMING ORIGINAL ASSESSMENT DATED 27-3-2006 HAS CONSIDERED THE ISSUE IN DETAIL OF ELIGIBILITY AND QUANTIFICATION OF DEDU CTION U/S 10A BY VARIOUS SUBMISSIONS MADE BY THE ASSESSEE. BESIDE S, AO FURTHER DECIDES THE ISSUE ONCE AGAIN BY ORDER U/S 1 54 DATED 1-5- 2006. THERE CANNOT BE ANY DOUBT TO THE EFFECT THAT AO HAS APPLIED HIS MIND TO THE WHOLE ISSUE AND THEREAFTER CAME TO THE CONCLUSIO0N AND ACCORDINGLY, HE FRAMED THE ORIGINAL ASSESSMENT AS WELL AS SUBSEQUENT 154 ORDER. WE FIND MERIT IN THE ARGUMENTS OF THE LEARNED COUNSEL THAT HONBLE D ELHI HIGH COURT IN THE CASE OF KELVINATOR OF INDIA LTD. (SUPR A) HAS CATEGORICALLY HELD THAT AN ASSESSMENT CANNOT BE REO PENED MERELY BY CHANGE OF OPINION. CONSEQUENTLY, THE VIEW ADOPTED BY THE CIT(A) IS IN CONFORMITY WITH THE JUDGMENT OF HONBLE DELHI HIGH COURT. DEPARTMENT AHS N NOT BROUGHT TO O UR NOTICE ANY OTHER TANGIBLE MATERIAL WHICH MAY HAVE BEEN REL IED ON BY THE AO IN FRAMING HIS BELIEF ABOUT THE REOPENING. T HE CASE CLEARLY AMOUNTS TO CHANGE OF OPINION. IN VIEW THERE OF, WE UPHOLD THE ORDER OF CIT(A) ON THIS ISSUE. ITA 5678 & CO 481/DEL/2012 ACIT VS. KEANE INDIA LTD. 4 4. STILL AGGRIEVED, REVENUE PREFERRED APPEAL BEFORE THE HONBLE DELHI HIGH COURT, WHICH VIDE ORDER DATED 20-4-2012, UPHEL D THE TRIBUNALS ORDER BY FOLLOWING OBSERVATIONS: 4. LEARNED COUNSEL FOR THE APPELLANT SUBMITTED THA T THE LEGAL ISSUE ON MERIT HAS NOT BEEN SPECIFICALLY ANSW ERED OR DEBATED UPON IN THE ORIGINAL ASSESSMENT ORDER. IN T HIS CASE QUERIES AND QUESTIONS REGARDING COMPUTATION OF DEDU CTION UNDER SECTION 10A WERE RAISED BY THE ASSESSING OFFI CER AND WERE ANSWERED BY THE ASSESSEE AT THE TIME OF ORIGI NAL ASSESSMENT. FAILURE OR MERE ABSENCE OF FINDING OR A VERMENT IN THE ASSESSMENT ORDER IS NOT MATERIAL. THE ASSESSMEN T ORDER IS AUTHORED BY THE ASSESSING OFFICER. THE ASSESSEE CAN NOT COMPEL AND PREVAIL UPON THE ASSESSING OFFICER TO WRITE THE ORDER IN A PARTICULAR MANNER. IN CIT VS. EICHER LTD. (2007) 29 4 ITR 310 (DEL), IT WAS HELD AS UNDER: 16. APPLYING THE PRINCIPLES LAID DOWN BY THE FULL BENCH OF THIS COURT AS WELL AS THE OBSERVATIONS OF THE PUNJAB AND HARYANA HIGH COURT, WE FIND THAT IF THE ENTIRE MATERIAL HAD BEEN PLACED BY THE ASSESSEE BEFORE THE AO AT THE TIME WHEN THE ORIGINAL ASSESSMENT WAS MADE AND THE ASSESSING OFFICER APPLIED HIS MIND TO THAT MATERIAL AND ACCEPTED THE VIEW CANVASSED BY THE ASSESSEE, THEN MERELY BECAUSE HE DID NOT EXPRESS THIS IN THE ASSESSMENT ORDER, THAT BY ITSELF WOULD NOT GIVE HIM A GROUND TO CONCLUDE THAT INCOME HAS ESCAPED ASSESSMENT AND, THEREFORE THE ASSESSMENT NEEDED TO BE REOPENED. ON THE OTHER HAND, IF THE ASSESSING OFFICER DID NOT APPLY HIS MIND AND COMMITTED A LAPSE, THERE IS NO REASON WHY THE ASSESSEE SHOULD BE MADE TO SUFFER THE CONSEQUENCES OF THAT LAPSE. 17. IN SO FAR AS THE PRESENT APPEAL IS CONCERNED, WE FIND THAT THE ASSESSEE HAD PLACED ALL THE MATERIAL BEFORE THE ASSESSING OFFICER AND WHERE THERE WAS A DOUBT, EVEN THAT WAS CLARIFIED BY THE ASSESSEE IN ITS LETTER DATED 8 TH NOVEMBER, 1995.IF ITA 5678 & CO 481/DEL/2012 ACIT VS. KEANE INDIA LTD. 5 THE ASSESSING OFFICER WHILE PASSING THE ORIGINAL ASSESSMENT ORDER, CHOSE NOT TO GIVE ANY FINDING IN THIS REGARD, THAT CANNOT GIVE HIM OR HIS SUCCESSOR IN OFFICE A REASON TO REOPEN THE ASSESSMENT OF THE ASSESSED OR TO CONTEND THAT BECAUSE THE FACTS WERE NOT CONSIDERED IN THE ASSESSMENT ORDER, A FULL AND TRUE DISCLOSURE WAS NOT MADE. SINCE THE FACTS WERE BEFORE THE ASSESSING OFFICER AT THE TIME OF FRAMING THE ORIGINAL ASSESSMENT, AND LATER A DIFFERENT VIEW WAS TAKEN BY HIM OR HIS SUCCESSOR ON THE SAME FACTS, IT CLEARLY AMOUNTS TO A CHANGE OF OPINION. THIS CANNOT FORM THE BASIS FOR PERMITTING THE ASSESSING OFFICER OR THE SUCCESSOR TO REOPEN THE ASSESSMENT OF THE ASSESSEE. 5. IN VIEW OF AFORESAID POSITION, WE DISMISS THE AP PEAL ON THE GROUND THAT IT IS A CLEAR CASE OF CHANGE OF OPI NION. WE NOTE THAT WE ARE NOT EXAMINING THE QUESTION OF COMPUTATI ON OF DEDUCTION UNDER SECTION 10A OF THE ACT ON MERITS IN THIS APPEAL. 5. LD. COUNSEL FURTHER CONTENDS THAT IN THIS YEAR R ATHER THE REOPENING IS FURTHER HAMPERED BY LIMITATION IN AS MUCH AS THE 14 8 NOTICE OUGHT TO HAVE BEEN ISSUED WITHIN 4 YEARS FROM THE END OF THE ASSE SSMENT YEAR I.E. ON OR BEFORE 31-3-2009, WHEREAS IN THIS CASE THE 148 NOTI CE HAS BEEN ISSUED ON 28- 4-2011. THE REASONS RECORDED BY ASSESSING OFFICER F OR REOPENING OF THE ASSESSMENT ARE AS UNDER: RETURN OF INCOME WAS FILED ON 01/11/2004 DECLARING NIL INCOME AND ASSESSMENT WAS COMPLETED U/S 143(3) ON 28/12/2006 AT BOOK PROFIT OF RS. 3,43,92,839/- AND NORMAL INCOME OF RS. 29,62,940/-. IN THE RETURN OF INCOME ASSESSEE CLAIMED AND WAS AL LOWED DEDUCTION U/S 10A OF RS. 12,28,14,579/- BEFORE SETT ING OFF UNABSORBED DEPRECIATION AND BUSINESS LOSS OF RS. ITA 5678 & CO 481/DEL/2012 ACIT VS. KEANE INDIA LTD. 6 6,27,61,064/- PERTAINING TO THE ASSESSMENT YEAR 200 1-02. THUS, DEDUCTION OF ONLY RS. 5,96,73,066/- WAS ALLOW ABLE TO THE ASSESSEE U/S 10A BUT ASSESSEE MADE THE WRONG CLAIM. THE MISTAKE RESULTED IN EXCESS ALLOWANCE AND CARRIED FO RWARD OF LOSS OF RS. 6,27,61,064/- IN THE YEAR UNDER CONSIDE RATION. FURTHER, AS PER NOTES TO ACCOUNTS, THE ASSESSEE CLA IMED AND WAS ALLOWED RS. 1,49,36,923/- AS A RESULT OF REVISI NG THE ESTIMATED LIFE OF ASSETS. THIS BEING AN INADMISSIBL E EXPENDITURE SHOULD NOT HAVE BEEN CLAIMED AND ALLOWE D. THE MISTAKE RESULTED IN UNDER ASSESSMENT OF INCOME OF R S. 1,49,36,923/- UNDER NORMAL PROVISIONS OF THE ACT. F URTHER MORE WHILE COMPUTING BOOK PROFIT, PROVISIONS FOR DO UBTFUL DEBTS, GRATUITY AND LEASE ENCASHMENT OF RS. 3,10,95 ,439/- BEING A UNCERTAINED LIABILITY SHOULD HAVE BEEN ADDE D TO THE BOOK PROFIT BY THE ASSESSEE. THEREFORE, I HAVE REASON TO BELIEVE THAT INCOME OF ASSESSEE TO THE EXTENT OF RS. 6,27,61,064/- AND RS. 1,49,36,923 /- UNDER NORMAL PROVISIONS OF THE ACT AND RS. 3,10,95,439/- UNDER THE PROVISION OF BOOK PROFIT U/S 115JB HAS ESCAPED ASS ESSMENT AND WHICH REQUIRES INITIATION OF PROCEEDINGS U/S 1 47 AND ACCORDINGLY NOTICE U/S 148 IS HEREBY ISSUED. 6. A PERUSAL OF THE REASONS RECORDED WILL REVEAL T HAT THEY ARE SAME AS A.Y. 2003-04 AND THE ASSESSING OFFICER HAS REFERRE D ONLY TO THE NOTES TO ACCOUNT, ASSESSEES STATEMENT AND HAVE USED THE WOR DS SHOULD NOT HAVE BEEN CLAIMED AND THERE IS A MISTAKE. THUS, THE REA SONS BY PLAIN READING ITSELF REVEAL THAT THEY ARE RESULT OF MERE CHANGE O F OPINION AND THERE IS NO WHISPER ABOUT ANY NON-DISCLOSURE ON THE PART OF THE ASSESSEE VIS A VIS MATERIAL FACTS DURING THE COURSE OF ORIGINAL ASSESS MENT PROCEEDINGS.. 7. THE HONBLE DELHI HIGH COURT IN THE CASE OF RUR AL ELECTRIFICATION CORPORATION LTD. VS. CIT & ANR. (2013) 88 DTR (DEL) 163 HAS HELD AS UNDER: ITA 5678 & CO 481/DEL/2012 ACIT VS. KEANE INDIA LTD. 7 5. AS REGARDS THE PLEA TAKEN BY MR. SYALI THAT THER E IS NO ALLEGATION WITH REGARD TO THE FAILURE ON THE PART OF THE PETITIONER TO FULLY AND TRULY LOSE ALL THE MATE RIAL FACTS NECESSARY FOR THE PETITIONER'S ASSESSMENT, FI ND THAT THIS ASPECT IS CLEARLY COVERED IN FAVOUR OF THE PET ITIONER BY VIRTUE OF OUR DECISION IN HW1JANA ACRYLIC (SUPRA). IN THAT CASE, WE HAD OBSERVED AS UNDER: 29. IN THE REASONS SUPPLIED TO THE PETITIONER. THERE IS NO WHISPER, WHAT TO SPEAK OF ANY ALLEGATION. THAT THE PETITIONER HAD FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT AND THAT BECAUSE OF THIS FAILURE THERE HAS BEEN AN ESCAPEMENT OF INCOME CHARGEABLE TO TAX. MERELY HAVING A REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT, IS NOT SUFFICIENT TO REOPEN ASSESSMENTS BEYOND THE FOUR YEAR PERIOD INDICATED ABOVE. THE ESCAPEMENT OF INCOME FROM ASSESSMENT MUST ALSO BE OCCASIONED BY THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE MATERIAL FACTS, FULLY AND TRULY. THIS IS A NECESSARY CONDITION FOR OVERCOMING THE BAR SET UP BY THE PROVISO TO S. 147. IF THIS CONDITION IS NOT SATISFIED, THE BAR WOULD OPERATE AND NO ACTION UNDER S. 147 COULD BE . TAKEN. WE HAVE ALREADY MENTIONED ABOVE THAT THE REASONS SUPPLIED TO THE PETITIONER DOES NOT CONTAIN ANY SUCH ALLEGATION. CONSEQUENTLY, ONE OF THE CONDITIONS PRECEDENT FOR REMOVING THE BAR AGAINST TAKING ACTION AFTER THE SAID FOUR YEAR PERIOD REMAINS UNFULFILLED. IN OUR RECENT DECISION IN WEL INTERTRADE (P) LTD. (SUPRA) WE HAD AGREED WITH THE VIEW TAKEN BY THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF DULI CHAND SINGHANIA (SUPRA) THAT. IN THE ABSENCE OF AN ALLEGATION IN THE REASONS RECORDED THAT THE ESCAPEMENT OF INCOME HAD OCCURRED BY REASON OF FAILURE ON THE PART OF ITA 5678 & CO 481/DEL/2012 ACIT VS. KEANE INDIA LTD. 8 THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. ANY ACTION TAKEN BY THE AO UNDER S. 147 BEYOND THE FOUR YEAR PERIOD WOULD BE WHOLLY WITHOUT JURISDICTION. REITERATING OUR VIEWPOINT. WE HOLD THAT THE NOTICE DT. 29TH MARCH. 2004 UNDER S. 148 BASED ON THE RECORDED REASONS AS SUPPLIED TO THE PETITIONER AS WELL AS THE CONSEQUENT ORDER DT. 2ND MARCH. 2005 ARE WITHOUT JURISDICTION AS NO ACTION UNDER S. 147 COULD BE TAKEN BEYOND THE FOUR YEAR PERIOD IN THE CIRCUMSTANCES NARRATED ABOVE.' 6. IN THE PRESENT CASE ALSO. THERE IS NO WHISPER IN THE PURPORTED REASONS OF THE PETITIONER HAVING FAILED T O DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS NEC ESSARY FOR ITS ASSESSMENT. THEREFORE. THE NECESSARY INGRED IENTS OF THE PROVISIONS OF S. 147 ARE NOT SATISFIED. IN V IEW THEREOF. THE REVENUE CANNOT ALSO RAISE THE GROUND W ITH REGARD TO THE EXPENSES BEING OF A 'CAPITAL' NATURE. WHEREAS THE PETITIONER HAD CLAIMED IT AS 'REVENUE EXPENDITURE' . 7. THEREFORE. IN WHICHEVER WAY WE LOOK AT THIS CASE . WE FIND THAT THE INITIATION OF REOPENING OF THE ASSESS MENT PERTAINING TO THE ASST. YR. 2004-05 DID NOT HAVE TH E BACKING OF LAW. CONSEQUENTLY, THE IMPUGNED NOTICE UNDER S. 148 AND ALL PROCEEDINGS PURSUANT THERETO, INCLUDING THE ASSESSMENT ORDER PASSED PURSUANT THER ETO ARE LIABLE TO BE SET ASIDE. IT IS ORDERED ACCORDING LY. THE WRIT PETITION IS ALLOWED. THERE SHALL BE NO ORDER A S TO COSTS. 8. IT IS PLEADED THAT 148 NOTICE ON THE SAME FACTS HAVING BEEN QUASHED BY HONBLE DELHI HIGH COURT IN ASSESSEE OWN CASE IN A .Y. 2003-04, THE SAME IS TO BE APPLIED FOR THIS YEAR ALSO IN ASSESSEES C ASE. 9. LD. DR SUPPORTS THE ORDER OF ASSESSING OFFICER. ITA 5678 & CO 481/DEL/2012 ACIT VS. KEANE INDIA LTD. 9 10. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE MA TERIAL AVAILABLE ON RECORD. THE CONTENTS OF THE NOTICE, FACTS AND CIRCU MSTANCES FOR A.Y. 2003-04 AND 2004-05 ARE SAME. RESPECTFULLY FOLLOWING THE HO NBLE DELHI HIGH COURTS JUDGMENT IN ASSESSEES OWN CASE FOR A.Y. 20 03-04 WE HOLD THAT THE PROCEEDINGS ARE BAD IN LAW. THE REASSESSMENT FOR A. Y. 2004-05 IS QUASHED. SINCE THE REASSESSMENT IS QUASHED, THEREFORE, REVEN UES APPEAL AND ASSESSEES CROSS-OBJECTIONS BECOME INFRUCTUOUS AND HENCE DISMISSED ACCORDINGLY. 11. IN THE RESULT, REVENUES APPEAL AND ASSESSEES CROSS OBJECTIONS STAND DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 08-08-2013. SD/- SD/- ( SHAMIM YAHYA ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 8 TH AUGUST 2013. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR