The ACIT, Circle-5, Ahmedabad V. M/s. Rasna Pvt. Ltd., Ahmedabad

ITA 574/AHD/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2080 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-05-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 04-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PF JAIN
• Keywords: Depreciation; Reassessment proceedings
• Section: 143(3); 14A; 147; 148

Judgement Text

ITA NO.574 AND 575/AHD/2013 ASSESSMENT YEAR:2005-06 AND 2006-07 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH, AHMEDABAD [CORAM : SHRI PRAMOD KUMAR A.M. AND SHRI KUL BHARAT J.M.] ITA NO. 574 AND 575/AHD / 2013 ASSESSMENT YEAR: 2005-06 AND 2006-07 ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 5, AHMEDABAD ..APPELLANT VS. RASNA PRIVATE LIMITED ..RESPONDENT RASNA HOUSE, OPP SEARS TOWER GULBAI TEKRA, PACHWANTI AHMADABAD [PAN : AABCR5577P] APPEARANCES: Y P VERMA, FOR THE APPELLANT P F JAIN, FOR THE RESPONDENT DATE OF HEARING : MAY 01, 2013 DATE OF PRONOUNCEMENT OF THIS ORDER : MAY 10, 2013 O R D E R PER PRAMOD KUMAR : 1. THESE TWO APPEALS PERTAIN TO THE SAME ASSESSEE A ND WERE HEARD TOGETHER. AS A MATTER OF CONVENIENCE, THEREFORE, BO TH THE APPEALS ARE BEING DISPOSED BY WAY OF A CONSOLIDATED ORDER. 2. WE WILL FIRST TAKE UP ITA NO. 574/AHD/13, I.E. REVENUE APPEAL FOR THE ASSESSMENT YEAR 2005-06. BY WAY OF THIS APPE AL, THE ASSESSING OFFICER HAS CHALLENGED CORRECTNESS OF ORDER DATED 2 0 TH DECEMBER 2012, PASSED BY THE LEARNED COMMISSIONER (APPEALS), IN TH E MATTER OF ITA NO.574 AND 575/AHD/2013 ASSESSMENT YEAR:2005-06 AND 2006-07 PAGE 2 OF 7 ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX A CT, 1961, FOR THE ASSESSMENT YEAR 2005-06 . 3. GRIEVANCE RAISED BY THE ASSESSING OFFICER, IN TH IS APPEAL, IS AS FOLLOWS:- THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FAC TS IN DELETING THE ADDITION OF RS 16,57,516 (17,07,516 - 50,000) MADE BY THE A.O. AS PER THE PROVISIONS OF RULE 8 D R.W.S. 14A OF THE INCOME TAX ACT, 1961 . 4. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE I SSUE IS CONCLUDED IN FAVOUR OF THE ASSESSEE INASMUCH AS, AS HELD BY HON'BLE BOM BAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG CO LTD VS DCIT (328 ITR 81), R ULE 8 D IS NOT RETROSPECTIVE IN NATURE AND WOULD ONLY APPLY FROM THE ASSESSMENT YEAR 2008-09 ONWARDS. THAT IS PRECISELY WHAT THE LEARNED COMMISSIONER (APPEALS ) HAS HELD, AND, THEREBY, REJECTED ASSESSING OFFICER'S RELIANCE ON RULE 8 D I N COMPUTING DISALLOWANCE UNDER SECTION 14 A. WE, THEREFORE, SEE NO NEED TO DIS TURB THE WELL REASONED FINDINGS OF THE CIT(A). WE CONFIRM THE SAME AND DEC LINE TO INTERFERE IN THE MATTER. 5. THE APPEAL FOR THE ASSESSMENT YEAR 2005-06 I S, THEREFORE, DISMISSED. 6. IN ITA NO. 575/AHD/2013, I.E. REVENUE'S APPEA L FOR THE ASSESSMENT Y YEAR 2006-07, THE GRIEVANCE RAISED BY THE ASSESSING OFFIC ER IS AS FOLLOWS: THAT THE LEARNED CIT(A) HAS ERRED IN LAW, AND ON FA CTS, IN DELETING THE ADDITION OF RS 48,44,971 ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION ON 'NON COMPETE TERRITORY RIGHTS'. 7. BRIEFLY STATED, THE RELEVANT MATERIAL FACTS ARE L IKE THIS. THE ASSESSEE HAS CLAIMED DEPRECIATION OF RS 48,44,971, ON NON- COMPETE RIGHTS TREATED BY THE ASSESSEE AS INTANGIBLE ASSETS IN THE DEPRECIATION SCHEDULE. THI S CLAIM WAS MADE FOR THE FIRST ITA NO.574 AND 575/AHD/2013 ASSESSMENT YEAR:2005-06 AND 2006-07 PAGE 3 OF 7 TIME IN THE ASSESSMENT YEAR 2002-03, AND TO EXAMINE VERACITY OF THIS CLAIM, FOR WHICH NO DETAILS WERE ALLEGED TO HAVE BEEN FURNISHE D BY THE ASSESSEE, THE ASSESSMENT WAS REOPENED UNDER SECTION 147 OF THE AC T. THIS REASSESSMENT PROCEEDING, AS ALSO ISSUE ON WHICH THE REASSESSMENT WAS INITIATED, WAS CHALLENGED BEFORE HON'BLE GUJARAT HIGH COURT. HON'B LE HIGH COURT ADMITTED THE ASSESSEE'S APPLICATION, AND GRANTED INTERIM RELIEF B Y WAY OF STAYING IMPLEMENTATION OF OPERATION OF REASSESSMENT NOTICE AND STAYING FURTHER PROCEEDINGS FOR THE ASSESSMENT YEAR 2002-03. IN THE MEANTIME, IN THE ASSESSMENTS FOR THE ASSESSMENT YEARS 2003-04, 2004-05, 2005-06 AN D 2006-07 ALSO, THE DEPRECIATION ON NON COMPETE RIGHTS WAS DISALLOWED. NO INDEPENDENT REASONS, HOWEVER, WERE GIVEN FOR THE SAID DISALLOWANCE. IT WA S SIMPLY STATED IN THE ASSESSMENT ORDERS THAT 'SINCE THE DEPARTMENT HAS NO T YET ACCEPTED THE ASSESSEE'S CLAIM FOR DEPRECIATION, THE SAME IS BEING DISALLOWED ...' AND THAT....'HOWEVER, CONSEQUENTIAL EFFECT WOULD BE GIVEN ON THE ISSUE, IF REQUIRED, AS PER THE DECISION OF HON'BLE GUJARAT HIGH COURT'. WHEN THE MATTER TRA VELLED IN APPEAL BEFORE THE COMMISSIONER (APPEALS] FOR THE ASSESSMENT YEAR 2003 -04 AND 2004-05, THE COMMISSIONER (APPEALS] HELD THAT AS THE MATTER IS SUB JUDICE BEFORE HON'BLE GUJARAT HIGH COURT AND THE OUTCOME OF LITIGATION IS AWAITED, 'THIS ISSUE IS TO BE DECIDED BY THE AO IN THE LIGHT OF FINAL DECISION OF HON'BLE HIGH COURT ' AND 'HENCE, THIS GROUND OF APPEAL IS ALLOWED SUBJECT TO FINAL OUTCOME OF HON'BLE GUJARAT HIGH COURT' THE ASSESSING OFFICER DID NOT PREFER ANY APPEAL, BEF ORE THE TRIBUNAL, AGAINST THIS DECISION OF THE CIT(A). HOWEV ER, AGAINST THE SAME DIRECTIONS FOR THE ASSESSMENT YEAR 2005-06, THE ASS ESSING OFFICER DID FILE AN APPEAL BEFORE THIS TRIBUNAL. HOWEVER, REJECTING THIS APPEAL AT THE THRESHOLD, A COORDINATE BENCH OF THIS TRIBUNAL, VIDE ORDER DATED 9 TH JULY 2010, OBSERVED AS FOLLOWS: WE FIND THAT ON THE SAME ISSUE ON THE IDENTICAL FACTS THE LEARNED CIT(A) HAD GIVEN THE SAME FINDING AS QUOTED ABOVE IN THE ASSESSMENT YEAR 2003- ITA NO.574 AND 575/AHD/2013 ASSESSMENT YEAR:2005-06 AND 2006-07 PAGE 4 OF 7 04 AND 2004-05. THE REVENUE, IN THOSE YEARS, ACCEPTED THE FINDINGS OF THE LEARNED CIT(A) AND HAD NOT FILED APPEAL BEFORE THE TRIBUNAL AGAINST THE FINDINGS OF THE LEARNED CIT(A). LEARNED DR COUL D NOT POINT OUT ANY DISTINGUISHING FEATURES IN THE ABOVE YEARS UNDER AP PEAL. THEREFORE, WE DONOT FIND ANY GOOD REASONS TO INTERFERE WITH THE O RDER OF THE LEARNED CIT(A), WHICH IS CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 8. IT WAS IN THIS BACKDROP, AND FOR THE SAME REASONS , THE ASSESSEE'S CLAIM FOR DEPRECIATION OF RS 48,44,971, ON NON-COMPETE TERRITOR Y RIGHTS, WAS DECLINED BY THE ASSESSING OFFICER. WHILE DOING SO, THE ASSESSING OFFICER OBSERVED THAT, 'CONSIDERING THE FACTS OF THE CASE AND DISCUSSION MADE IN THIS BEHALF IN THE ASSESSMENT ORDERS FOR AYS 2003-04, 2004-05 AND 2005-06, THE CLAIM IS DISALLOWED FOR THE ASSESSMENT YEAR 2006-07 ALSO' AND THAT 'HOW EVER, CONSEQUENTIAL EFFECT WOULD BE GIVEN ON THE ISSUE, IF REQUIRED, AS PER THE DECISION OF HON'BLE GUJARAT HIGH COURT'. WHEN THE MATTER TRAVELLED BEFORE THE C IT(A), THE SAME DIRECTIONS WERE REPEATED BUT THEN ONCE AGAIN CAME UP BEFORE A COORDINATE BENCH OF THIS TRIBUNAL, AND THE COORDINATE BENCH, IN DEVIATION FROM THE PAST STAND, HELD THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN DECIDING TH E MATTER ON THE BASIS OF AN ORDER WHICH IS YET TO BE PRONOUNCED, AND REMITTED THE MATTER BACK TO THE FILE OF THE CIT(A). IN THE MEANTIME, HON'BL E GUJARAT HIGH COURT HAD DELIVERED JUDGMENT FOR THE ASSESSMENT YEAR 2002-03 AND QUASHE D THE REASSESSMENT PROCEEDINGS UNDER SECTION 147 ON THE GROUND OF JURI SDICTION. THERE WAS THUS NO ADJUDICATION ON MERITS. HOWEVER, THE CIT(A) DELETED THE IMPUGNED DISALLOWANCE OF DEPRECIATION BY OBSERVING AS FOLLOWS: .....THE NOTICE UNDER SECTION 148 DATED 30 TH MARCH 2004 FOR THE AY 2002-03 HAS BEEN QUASHED BY HON'BLE HIGH COURT. ACCORDINGLY , THE DISALLOWANCE OF DEPRECIATION ON NON COMPETE TERRITO RY RIGHTS IN AY 2002-03 BECOMES UNTENABLE. SINCE THE DISALLOWANCE O F DEPRECIATION IN THE AY 2003-04, 2004-05, 2005-06 AND 2006-07 WAS MA DE ON THE BASIS OF DISALLOWANCE OF DEPRECIATION IN THE AY 2002-03. ACC ORDINGLY, THESE ITA NO.574 AND 575/AHD/2013 ASSESSMENT YEAR:2005-06 AND 2006-07 PAGE 5 OF 7 DISALLOWANCES HAVE ALSO BECOME UNTENABLE AS THE VER Y BASIS OF DISALLOWANCE HAS BEEN QUASHED BY THE HON'BLE HIGH C OURT. IN VIEW OF THE ABOVE FACTS, I HOLD THAT THE DISALLOWANCE OF DE PRECIATION ONNON COMPETE TERRITORY RIGHTS OF RS 48,44,971 IS UNTENAB LE AND THE AO IS DIRECTED TO DELETE THE SAME. ...... 9. AGGRIEVED BY THE RELIEF SO GRANTED BY THE LEARNED CIT(A), THE ASSESSING OFFICER IS IN APPEAL BEFORE US. 10. HAVING NOTED THAT IN ALL THE PRECEDING ASSESSME NT YEARS, LEARNED CIT(A) HAD DELETED THE DISALLOWANCE OF DEPRECIATION ON NON -COMPETE TERRITORY RIGHTS SUBJECT TO THE RIDER THAT 'HOWEVER, CONSEQUENTIAL EF FECT WOULD BE GIVEN ON THE ISSUE, IF REQUIRED, AS PER THE DECISION OF HON'BLE GU JARAT HIGH COURT', HAVING NOTED THAT NO CONSEQUENTIAL EFFECT IS REQUIRED TO B E GIVEN TO THE RELIEF SO GRANTED TO THE ASSESSEE AS THERE ARE NO ADVERSE COMMENTS ON THE MERITS OF THE CLAIM, AND FOR THE SAKE OF CONSISTENCY, WE CONFIRM THE STAND TA KEN BY THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. IT IS ALSO IMPORTANT TO BEAR IN MIND THE FACT THAT THE NET IMPACT OF THIS DECISION HAVING BEEN ACCEPTED IS THA T NO REASSESSMENT OR RE- COMPUTATION CAN BE DONE AT THIS STAGE, SINCE SUCH AN ACTION WILL BE TIME BARRED NOW AND THE PROVISIONS OF SECTION 153(3], WHICH REST RICT THIS LIMITATION ON TIME BARRING TO GIVE EFFECT TO FINDING OR DIRECTIONS OF HON'BLE HIGH COURT'S ORDER, WILL NOT COME TO THE RESCUE TO THE ASSESSEE IN THIS CASE SINCE THERE IS NO SUCH 'FINDING OR DIRECTION' ON MERITS, WHICH CAN BE GIVEN EFFECT, I N TERMS OF HON'BLE SUPREME COURT'S JUDGMENT IN THE CASE OF RAJINDER NATH VS CI T[ 120 ITR 14). THE RELAXATION UNDER SECTION 153(3), AS HELD BY HON'BLE SUPREME COU RT IN THIS CASE, COMES TO THE RESCUE OF THE REVENUE ONLY IN RESPECT OF SUCH FINDI NGS OR DIRECTIONS AS ARE NECESSARY FOR DISPOSAL OF THE MATTER. THE MATTER HA VING BEEN DECIDED ON THE GROUND OF JURISDICTION ALONE, THERE WAS NO NEED TO D EAL WITH THE MERITS OF THE CASE, AND, AS SUCH, FOLLOWING HON'BLE SUPREME COURT'S JUDGMENT IN THE CASE OF ITA NO.574 AND 575/AHD/2013 ASSESSMENT YEAR:2005-06 AND 2006-07 PAGE 6 OF 7 RAJINDER NATH, THE INHERENTLY LIMITED SCOPE OF SECTI ON 153(3) DOES NOT HELP THE ASSESSING OFFICER. THE DISALLOWANCE OF DEPRECIATION THUS SEEMS TO HAVE REACHED FINALITY.THE LAW IS FAIRLV WELL SETTLED THAT ONCE A SSESSING OFFICER ACCEPTS A PARTICULAR POSITION BY NOT CHALLENGING THE SAME IN FURTHER APPEAL, IT CANNOT BE OPEN TO HIM TO DISTURB THE POSITION HAVING SO REACH ED FINALITY, BY APPEAL IN ANOTHER YEAR. NO DOUBT THERE IS NO RES JUDICATA IN INCOME TAX PROCEEDINGS BUT PRINCIPLES OF CONSISTENCY DO PLAY AN IMPORTANT ROLE IN ALL WALKS OF LIFE AS MUCH AS IN THE INCOME TAX PROCEEDINGS. AS OBSERVED BY HON'B LE SUPREME COURT, IN THE CASE OF PARASHURAM POTTERY WORKS LTD VS ITO [ 106 ITR 1), '......WE HAVE TO BEAR IN MIND THAT THE POLICY OF LAW IS THAT' THERE MUST BE A POINT OF FINALITY IN ALL LEGAL PROCEEDINGS, THAT STALE ISSUES SHOULD NOT BE REACTIV ATED BEYOND A PARTICULAR STAGE AND THAT LAPSE OF TIME MUST INDUCE REPOSE IN AND SE T AT REST JUDICIAL AND QUASI- JUDICIAL CONTROVERSIES AS IT MUST IN OTHER SPHERES OF HUMAN ACTIVITY...'. IN ANY CASE, THERE IS NOT EVEN A WHISPER OF THE REASON FOR COMING TO THE CONCLUSION, ON MERITS, AS TO WHY THE DEPRECIATION ON THE INTANGIBLE ASSETS IN QUESTION HAS BEEN DECLINED. WE HAVE NO OCCASION TO DEAL WITH THE MERI TS, AND THE CASE OF THE ASSESSING OFFICER SIMPLY HINGED ON THE OUTCOME OF H ON'BLE HIGH COURT'S DECISION FOR THE ASSESSMENT YEAR 2002-03 BUT THEN T HIS JUDGMENT IS, AS EVIDENT FROM OUR PERUSAL OF THE SAME, IS NOT ON MERITS AT AL L. IN THREE SUBSEQUENT ASSESSMENT YEARS ALSO, THIS DISALLOWANCE IS DELETED BY THE CIT(A), ACTION CONFIRMED BY A COORDINATE BENCH OF THE TRIBUNAL IN ONE OF THE ASSESSMENT YEARS, AND REVENUE IS NOT IN FURTHER APPEAL, THE CASE OF TH E REVENUE CANNOT BE SALVAGED FOR THOSE YEARS AT THIS STAGE. LEARNED DEPARTMENTAL REPRESENTATIVE HAS NOT BROUGHT ON RECORD ANY MATERIAL ON RECORD TO JUSTIFY THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. WHEN ASKED TO ADDRESS THE MATTER ON MERITS, HE SUBMITTED THAT THE ISSUE CAN BE RESTORED TO THE FILE OF THE ASSESS ING OFFICER SO THAT MERITS CAN BE EXAMINED. WE DONOT THINK THAT COURSE OF ACTION IS P ERMISSIBLE TO US NOW THAT THE ITA NO.574 AND 575/AHD/2013 ASSESSMENT YEAR:2005-06 AND 2006-07 PAGE 7 OF 7 DELETION OF SIMILAR DISALLOWANCE, IN THE COURSE OF R EGULAR SCRUTINY ASSESSMENT PROCEEDINGS, HAS BEEN ACCEPTED BY THE ASSESSING OFFI CER FOR THREE IMMEDIATELY PRECEDING ASSESSMENT YEARS. THAT WILL BE UNSET TLING THE ACCEPTED AND SETTLED POSITION FOR OTHER ASSESSMENT YEARS, AND CONTRARY TO THE DECISION OF THE COORDINATE BENCH IN THE IMMEDIATELY PRECEDING ASSES SMENT YEAR. HOWEVER, AS WE HAVE REACHED THIS DECISION ON SOMEWHAT PECULIAR FAC TS OF THIS CASE, IN WHICH AN INACTION OF THE REVENUE AUTHORITIES HAS PREJUDICED THEIR INTERESTS MORE THAN ANYTHING ELSE, PRESENT DECISION CANNOT BE AN AUTHORI TY ON THE BROAD LEGAL ISSUES INVOLVED AND MUST REMAIN CONFINED TO THE FACTS OF T HIS CASE. IN VIEW OF THESE DISCUSSIONS, SUBJECT TO THE OBSERVATIONS MADE ABOVE, AND BEARING IN MIND ENTIRETY OF THE CASE, WE APPROVE THE CONCLUSION ARRI VED AT BY THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 11. IN THE RESULT, THE APPEAL FOR THE ASSESSMENT YEA R 2006-07 (I.E. 575/AHD/2013) IS ALSO DISMISSED. TO SUM UP, BOTH THE APPEALS ARE DISM ISSED IT WAS SO PRONOUNCED IN THE OPEN COURT IMMEDIATELY UPON CONCLUSION OF HE ARING. SD/- SD/- (KUL BHARAT ) (PRAMOD KUMAR) JUDICIAL MEMBER ACCOU NTANT MEMBER AHMEDABAD:_TH DAY OF MAY 2013. TRUE COPY COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER , AHMEDABAD 4. DEPARTMENTAL REPRESENTATIVE, BENCH, AHMEDABA D 5. GUARD FILE BY ORDER ETC. ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD