DCIT, New Delhi V. M/s Yamaha Motor India Pvt. Ltd., New Delhi

ITA 64/DEL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3391 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2005-2006
• Appeal Filed On: 04-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Difference of opinion; Tax effect; Change of opinion; Reassessment proceedings
• Section: 143(3); 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER ITA NO.64/DEL/2016 ASSESSMENT YEAR : 2005-06 DCIT, CIRCLE- 27(2), NEW DELHI. VS. YAMAHA MOTOR INDIA PVT. LTD., FIRST FLOOR, THE GREAT EASTERN CENTRE, 70, NEHRU PLACE, BEHIND IFCI TOWER, NEW DELHI. PAN : AAECE1647C (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI AMIT JAIN, SR.DR ASSESSEE BY : SHRI MUKESH SINGHAL SHRI SIDHARATH GODHA, AR DATE OF HEARING : 11-01-2018 DATE OF PRONOUNCEMENT : 23-02-2018 O R D E R PER R. K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 05.10.2015 OF THE CIT(A)- 22, NEW DELHI RELATING TO ASSESSMENT YEAR 2005-06. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE ORDER PASSED BY LD. CIT(A) IS ERRONEOUS AND THE LEARNED CIT(A) H AS ERRED IN HOLDING THAT THERE IS NO NON DISCLOSURE OF MATERIAL FACTS IN THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE ORDER PASSED BY LD. CIT(A) IS ERRONEOUS AND THE LEARNED CIT(A) H AS ERRED IN DECIDING THE MATTER WITHOUT CONSIDERING THE PROVISIONS OF EXPLANATION 1 TO 147 OF THE I.T. ACT, 1961. 3. THE APPELLANT CRAVES, LEAVE FOR RESERVING THE RI GHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEAL AT ANY TIME B EFORE OR DURING THE HEARING OF THIS APPEAL. 2 ITA NO.64/DEL/2016 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF TWO-WH EELERS (MOTOR CYCLES) AND ITS SPARE PARTS. IT FILED ITS RETURN OF INCOME ON 31.10.2005 DECLARING LOSS OF RS.157,58,38,934/- WHICH WAS REVISED ON 22.05.2006 DECLARING A LOSS OF RS.154,17,88,934/-. THE ORIGINAL ASSESSMENT U/S 14 3(3) WAS COMPLETED ON A LOSS OF RS.151,34,36,306/- U/S 143(3) VIDE ORDER DA TED 30.12.2008. SUBSEQUENTLY, THE ASSESSING OFFICER REOPENED THE AS SESSMENT ON 31.03.2010 BY RECORDING FOLLOWING REASONS :- 1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, FO R A.Y. 2006-07 DISCREPANCIES WITH REGARD TO QUANTITY AND MODEL WERE FOUND. AFTE R CONFRONTING THE ASSESSEE, AO HAD REJECTED BOOK RESULTS OF THE ASSESSEE COMPANY H OLDING ITS BOOKS OF ACCOUNTS ARE INCORRECT, INCOMPLETE AND UNRELIABLE AND ASSESSMENT WAS MADE IN THE MANNER PROVIDED IN SECTION 144 OF THE INCOME TAX ACT 1961. AS A RESULT, INCOME TO THE TUNE OF RS.1060848000/- HAS BEEN ADDED TO THE INCOME OF THE ASSESSEE AND TAXED. 2. ALSO THE ASSESSEE COMPANY FAILED TO SUBMIT PROPE R DETAILS WITH REGARD TO ASSETS ON WHICH DEPRECIATION HAD BEEN CLAIMED. AFT ER CONFRONTING THE ASSESSEE, AO HAD DISALLOWED DEPRECIATION TO THE TUNE OF RS.10 CR ORES AND ADDED BACK TO THE INCOME OF THE ASSESSEE. 3. THE ASSESSEE HAS BEEN CLAIMING ROYALTY STATED TO HAVE BEEN PAID TO ITS PARENT COMPANY I.E., YAMAHA MOTOR CO. LTD. JAPAN. AFTER D ISCUSSION, THE ENTIRE ROYALTY TO THE TUNE OF RS.21,65,41,721/- HAS BEEN DISALLOWED A ND ADDED BACK TO THE ASSESSEES INCOME. 4. FURTHER, THE AO HAS MADE AN ADDITION ON ACCOUNT OF VRS TO THE TUNE OF RS.10 CRORE AS ASSESSEE HAS MADE EXCESSIVE CLAIM AND ALSO COULD NOT PROPERLY EXPLAIN IT. 5. THE ASSESSEE COMPANY HAS BEEN CLAIMING CARRY FOR WARD BUSINESS LOSSES AND SET-OFF AGAINST THE INCOME IN EVERY ASSESSMENT YEAR . ON SCRUTINY, LOT OF DISCREPANCIES HAVE BEEN FOUND IN THE CLAIM. THEREFORE, AFTER CON FRONTING THE ASSESSEE CARRY FORWARD BUSINESS LOSSES HAVE NOT BEEN ALLOWED TO BE SET OFF AGAINST THE INCOME OF THE ASSESSEE COMPANY AND ALSO NOT ALLOWED TO BE CARRIED FORWARD IN SUBSEQUENT YEARS. THE ABOVE DISCUSSION ON THE ISSUES HAVE A BEARING ON ALL EARLIER ASSESSMENT YEARS INCLUDING A.Y. 2005-06 AS ISSUES ARE SAME WHI CH NEEDS TO BE ADDRESSED ON THE BASIS OF FINDINGS GIVEN IN THE ASSESSMENT ORDER FOR A.Y. 2006-07. THE ASSESSEE HAS DEBITED 31,77,64,480/- TO THE P&L A/C OF ADVERTISEMENT EXP. OUT OF THIS RS.29.22 CRORES WAS REIMBURSED BY IT TO ITS SHAREHOLDING COMPANY WHICH HAS NOT BEEN CREDITED INTO P&L A/C. THIS HAS RESUL TED IN UNDER ASSESSMENT OF INCOME INVOLVING POTENTIAL TAX EFFECT OF RS.10.69 CRORES. 3 ITA NO.64/DEL/2016 4. THE ASSESSMENT ORDER U/S 143(3) R.W.S. 147 WAS C OMPLETED ON 31.12.2010 DETERMINING THE TOTAL LOSS AT RS.32,03,60,442/-. T HEREAFTER, THE CASE WAS AGAIN REOPENED U/S 147 ON 03.08.2011 BY RECORDING FOLLOWI NG REASONS :- 1. ASSESSEE COMPANY HAD DEBITED TO THE P&L A/C RS. 1,79,44,142/- ON PROCESS DEVELOPMENT & IMPROVEMENT EXPENSES WHICH WAS CAPITA L IN NATURE. 2. AS PER NOTES OF ACCOUNTS THE ASSESSEE HAD DEBITE D RS.31,77,64,480/- TO THE P&L A/C ON ACCOUNT OF ADVERTISEMENT EXPENSES. OUT OF THESE EXPENSES THE ASSESSEE HAD REIMBURSED RS.29.22 CRORES FROM ITS HOLDING COM PANY. HOWEVER, THE AMOUNT SO REIMBURSED WAS NOT CREDIT INTO P&L A/C. 5. THEREAFTER, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S 143(3)/147 DETERMINING THE TOTAL LOSS OF RS.33,07,4 1,928/-. 6. BEFORE THE LD. CIT(A) APART FROM CHALLENGING THE ADDITION ON MERIT, THE ASSESSEE ALSO CHALLENGED VALIDITY OF THE RE-ASSESSM ENT PROCEEDINGS. IT WAS SUBMITTED THAT IT IS A CASE OF MERE CHANGE OF OPINI ON AND THERE HAS BEEN NO NON- DISCLOSURE OF MATERIAL FACTS BEFORE THE ASSESSING O FFICER AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS AND AT THE FIRST ROUND OF RE ASSESSMENT PROCEEDINGS. REFERRING TO THE REASONS RECORDED BY THE ASSESSING OFFICER ON BOTH OCCASIONS, IT WAS ARGUED THAT THE SECOND REASON RECORDED FOR ISSU E OF NOTICE U/S 148 ON 03.08.2011 IS THE SAME AS THE LAST REASON RECORDED FOR ISSUE OF NOTICE U/S 148 ON 31.03.2010. THIS, ACCORDING TO THE ASSESSEE, MEANS THAT THE SAID ISSUE WAS EXAMINED AT THE TIME OF REASSESSMENT PROCEEDINGS IN THE FIRST ROUND AND NO ADDITION WAS MADE AND THEREFORE, ISSUE OF NOTICE U/ S 148 ON THE SAME GROUND THAT TOO BEYOND THE PERIOD OF FOUR YEARS IS NOT SUS TAINABLE. THE SECOND ROUND OF RE-ASSESSMENT PROCEEDINGS IS A CASE OF CHANGE OF OP INION ON THE SET OF FACTS. IT 4 ITA NO.64/DEL/2016 WAS ACCORDINGLY ARGUED THAT THE ISSUE OF NOTICE U/S 148 ON THIS ISSUE CANNOT BE HELD TO BE LEGALLY VALID. 7. SO FAR AS THE FIRST REASON FOR REOPENING OF THE ASSESSMENT VIDE NOTICE DATED 03.11.2011 IS CONCERNED, IT WAS ARGUED THAT T HE DEBIT OF RS.1,79,44,142/- AS PROCESS DEVELOPMENT & IMPROVEMENT EXPENSES, WHIC H WAS TREATED BY THE ASSESSEE AS REVENUE IN NATURE HAS BEEN TREATED BY T HE ASSESSING OFFICER AS CAPITAL IN NATURE, FOR WHICH IT SHOULD HAVE BEEN DI SALLOWED. IT WAS ARGUED THAT IN THE REASONS RECORDED, THE ASSESSING OFFICER HAS NOT MENTIONED AS TO WHICH MATERIAL FACTS NECESSARY FOR THE ASSESSMENT WERE NO T TRULY AND FULLY DISCLOSED BY THE ASSESSEE. IT WAS ARGUED THAT THE SATISFACTION OF NON-DISCLOSURE OF MATERIAL FACTS IS NECESSARY FOR REOPENING OF A COMPLETED ASS ESSMENT U/S 143(3) BEYOND THE PERIOD OF FOUR YEARS IN VIEW OF THE FIRST PROVI SO TO SECTION 147. SINCE THE ASSESSMENT ORDERS WERE PASSED IN THIS CASE EARLIER U/S 143(3) AND U/S 143(3) R.W.S. 147 OF THE I.T. ACT, IT WAS ARGUED THAT ALTH OUGH THE ASSESSEE HAS RAISED THIS LEGAL ISSUE BEFORE THE ASSESSING OFFICER VIDE LETTE R DATED 26.10.2012, THE ASSESSING OFFICER REJECTED THE SAID OBJECTIONS WHIL E APPRAISING THE ISSUE. IT WAS ARGUED THAT THE COST AUDIT REPORT FROM WHICH THE FI GURE OF RS.1,79,44,142/- WAS PICKED UP, WAS VERY MUCH AVAILABLE WITH THE ASS ESSING OFFICER DURING THE ASSESSMENT/REASSESSMENT PROCEEDINGS. IN THE COST A UDIT REPORT, IT IS CLEARLY MENTIONED THAT IT IS FOR THE PERIOD FROM 01.01.2004 TO 31.12.2004. IT WAS ARGUED THAT ON THIS ISSUE THERE IS NO SUPPRESSION OF MATER IAL FACTS BY THE ASSESSEE. REFERRING TO THE REASONS RECORDED BY THE ASSESSING OFFICER, IT WAS SUBMITTED THAT 5 ITA NO.64/DEL/2016 THE ASSESSING OFFICER HAS MENTIONED THAT THE AMOUNT OF RS.1,79,44,142/- HAS BEEN DEBITED IN THE PROFIT & LOSS ACCOUNT. HOWEVER , NEITHER IN THE REASONS RECORDED NOR IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS MENTIONED AS TO IN WHICH SCHEDULE OF THE ANNUAL ACCOUNTS, THIS AMOU NT HAS BEEN DEBITED. IT WAS ARGUED THAT THE ACTUAL AMOUNT THAT HAS BEEN DEBITED IS ONLY RS.61,11,454/- UNDER THE HEAD MISCELLANEOUS EXPENSES. RELYING ON VARIOU S DECISIONS IT WAS ARGUED THAT THE REOPENING OF THE ASSESSMENT U/S 147 BY ISS UE OF NOTICE U/S 147 BY THE ASSESSING OFFICER BEYOND THE PERIOD OF FOUR YEARS I S NOT VALID. 8. BASED ON THE ARGUMENT ADVANCED BY THE ASSESSEE, LD. CIT(A) ANNULLED THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER TR EATING THE REASSESSMENT PROCEEDINGS AS NULL AND VOID. WHILE DOING SO, HE O BSERVED THAT THE FACTS OF THE CASE CLEARLY ESTABLISHED THAT THERE HAS BEEN NO NON -DISCLOSURE OF MATERIAL FACTS IN THE INSTANT CASE. HE HELD THAT THE SECOND REASO N FOR RE-OPENING WAS MENTIONED IN THE REASONS RECORDED IN THE FIRST ROUN D OF REASSESSMENT PROCEEDINGS AS WELL. THEREFORE, TO THAT EXTENT IT IS A CASE OF MERE CHANGE OF OPINION. IN VIEW OF THE ABOVE, HE ALLOWED THE GROU ND RAISED BY THE ASSESSEE CHALLENGING THE VALIDITY OF THE REASSESSMENT PROCEE DINGS AND THE NOTICE U/S 148 ON 03.08.2011 TREATING THE SAME AS VOID AB INITIO . 9. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 10. WE HAVE HEARD THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE PAPER B OOK FILED ON BEHALF OF THE 6 ITA NO.64/DEL/2016 ASSESSEE. WE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASSESSING OFFICER IN THE INSTANT CASE HAS REOPENED THE ASSESSMENT U/S 147 BY ISSUE OF NOTICE U/S 148 ON 31.03.2010. THE REASONS FOR SUCH REOPENING HAS ALREADY BEEN REPRODUCED IN THE PRECEDING PARAGRAPHS AND THE SAME WAS WITHIN FOUR YEARS. HOWEVER, THE SECOND NOTICE U/S 148 DAT ED 03.08.2011 IS BEYOND A PERIOD OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR WHEREIN THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) ON 30.12.2008. A PERUSAL OF THE REASONS RECORDED ON BOTH OCCASIONS SHOW THAT THE ISSUE OF A DVERTISEMENT EXPENSES AMOUNTING TO RS.31,77,64,480/- IS COMMON IN BOTH TH E REASONS. ONCE THE CASE WAS REOPENED ON THIS ISSUE AND ORDER WAS PASSED U/S 143(3)/147, THEREFORE, THE ASSESSMENT CANNOT BE REOPENED ON THE SAME ISSUE WHI CH, IN OUR OPINION, AMOUNTS TO A MERE CHANGE OF OPINION AND, THEREFORE, NOT LEGALLY TENABLE. 11. NOW, COMING TO THE SECOND ISSUE I.E. ISSUE RELA TING TO PROCESS DEVELOPMENT AND IMPROVEMENT EXPENSES OF RS.1,79,44, 142/- WE FIND IT IS THE CASE OF THE ASSESSING OFFICER THAT THE SAME IS CAPI TAL IN NATURE. WE FIND FROM THE DETAILS FURNISHED BY THE ASSESSEE IN THE PAPER BOOK THAT FULL DETAILS WERE GIVEN BY THE ASSESSEE DURING THE COURSE OF ASSESSME NT PROCEEDINGS AND THERE IS NO ALLEGATION BY THE ASSESSING OFFICER THAT THERE I S FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL NECESSARY MATERIAL FACTS F OR COMPLETION OF THE ASSESSMENT. FURTHER, THE REOPENING IS AFTER A PERI OD OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR AND, THEREFORE, THE SAME IS BARRED BY LIMITATION AS PER THE FIRST PROVISO TO SECTION 147 OF THE I.T. ACT. 7 ITA NO.64/DEL/2016 12. SO FAR AS THE GROUND RAISED BY THE REVENUE THAT THE LD. CIT(A) HAS DECIDED THE ISSUE WITHOUT CONSIDERING THE PROVISION S OF EXPLANATION 1 TO SECTION 147 IS CONCERNED, WE ARE OF THE OPINION THE SAME WI LL NOT COME TO THE RESCUE OF THE DEPARTMENT ONCE THE REOPENING IS BARRED BY LIMI TATION AS HELD BY US IN THE PRECEDING PARAGRAPHS. SINCE THE LD. CIT(A) HAS GIV EN JUSTIFIABLE REASONS FOR ANNULLING THE RE-ASSESSMENT PROCEEDINGS ON ACCOUNT OF CHANGE OF OPINION AS WELL AS BARRED BY LIMITATION IN VIEW OF FIRST PROVI SO TO SECTION 147, THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. C IT(A) ON THIS ISSUE. ACCORDINGLY, THE ORDER OF THE LD. CIT(A) IS UPHELD AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 13. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD FEBRUARY, 2018. SD/- SD/- (BEENA A. PILLAI) (R. K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 23-02-2018. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(A) 5) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI