DCIT, New Delhi V. M/s. I-Process Services India Pvt. Ltd., New Delhi

ITA 6472/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97597 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 18-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 03-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Depreciation; Principle of natural justice; Tangible material; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SHRI N.K. SAINI: ACCOUNTANT MEMBER AND SHRI C.M. GARG : JUDICIAL MEMBER ITA NO. 6472 /DEL/2013 ASSTT. YRS: 2007-08 DCIT, CIRCLE 11(1), VS. M/S I-PROCESS SERVICES IND IA PVT. LTD., NEW DELHI. 3E/5, JHANDEWALAN EXTENSION, NEW DELHI. PAN: AABCI 3838 C ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI ATIQ AHMAD SR. DR RESPONDENT BY : SHRI KVSR KRISHNA CA DATE OF HEARING : 18/08/2015. DATE OF ORDER : 28/10/2015. O R D E R PER N.K. SAINI, A.M. : THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE ORD ER DATED 6-9-2013 OF LD. CIT(APPEALS)-XV, NEW DELHI. FOLLOWING GROUND S HAVE BEEN RAISED IN THIS APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE CIT(A) HAS ERRED IN HOLDING THE REOPENING OF AS SESSMENT U/S 148 OF THE ACT AS BAD. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 1,36,39,449/- MADE U/S 40(A) OF THE ACT.. 2 6472/DEL/2013 DCIT VS. I-PROCESS SERVICES INDIA PVT. LTD. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 54,74,0991- MADE BY RESTRICTING DEPRECIATION ON COMPUTERS @15% INSTEAD OF 60% AS CLAIMED BY THE ASSESSEE. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE O F RS. 60,78,443/- MADE OUT OF TRAVELLING EXPENSES. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARIN G. 2. VIDE GROUND NO. 1, GRIEVANCE OF THE DEPARTMENT RELATES TO REOPENING OF THE ASSESSMENT U/S 148 OF THE INCOME-TAX ACT, 19 61 (HEREINAFTER REFERRED TO AS THE ACT), WHICH WAS HELD TO BE BAD BY THE L D. CIT(A). 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS MENT IN THIS CASE WAS COMPLETED U/S 143(3) OF THE ACT ON 24-12-2009 AT TO TAL INCOME OF RS. NIL. THEREAFTER, THE AO ISSUED NOTICE U/S 148 OF THE ACT ON 27-3-2012. THE ASSESSMENT WAS FRAMED AT AN INCOME OF RS. 2,81,92,0 00/- U/S 143(3) READ WITH SECTION 147 OF THE ACT. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND CHALLENGED THE REOPENING OF ASSESSMENT U/S 148 OF THE ACT. IT WAS SUBMITTED THAT ON RECEIPT OF NOTICE U/S 148 OF THE ACT, THE ASSESSEE SOUGHT COPY OF THE REASONS RECORDED BY THE AO FOR REOPENING OF THE ASS ESSMENT. THE AO SERVED THE COPY OF REASONS RECORDED ON 24-5-2012 AND THE A SSESSEE VIDE LETTER DATED 11-06-2012 RAISED OBJECTIONS AGAINST THE REOPENIN G. HOWEVER, THE AO HAD 3 6472/DEL/2013 DCIT VS. I-PROCESS SERVICES INDIA PVT. LTD. NOT MENTIONED IN THE ORDER, WHETHER SUCH OBJECTIONS WERE EVER DISPOSED OFF OR NOT AND THAT THE AO, WHILE PASSING THE QUASHI JU DICIAL ORDER, HELD THAT CONTENTION OF THE ASSESSEE WAS CONSIDERED BUT NOT A CCEPTED. IT WAS FURTHER STATED THAT THE REASSESSMENT PROCEEDINGS WERE INITI ATED WITHOUT APPLICATION OF MIND BUT ON ASSUMPTION AND PRESUMPTION AND THAT THERE WAS NO FRESH TANGIBLE MATERIAL, WHICH MAY HAVE COME TO THE KNOWL EDGE OF THE AO SUBSEQUENT TO THE ORDER PASSED U/S 143(3) OF THE AC T. ACCORDINGLY, IT WAS SUBMITTED THAT THE ASSESSMENT ORDER WAS IN VIOLATIO N OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFT S (INDIA) LTD. VS. ITO (2003) 259 ITR 19. IT WAS ALSO STATED THAT GROUND S, ON WHICH ADDITIONS WERE MADE, WERE ALSO EXAMINED BY THE AO AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS AND THE COMPLETE DETAILS OF THE EXPENSE S WERE FILED BY THE ASSESSEE VIDE LETTER DATED 17-11-2009, PURSUANT TO THE QUESTIONNAIRE DATED 6- 7-2008. THEREFORE, THE REOPENING OF THE ASSESSMENT WAS CLEARLY IN THE NATURE OF CHANGE IN OPINION. RELIANCE WAS PLACED ON THE FO LLOWING CASE LAWS: - CIT VS. USHA INTERNATIONAL LTD. [2012] 348 ITR 485 (DEL.)(FB); - CIT VS. EICHER LTD. [2012] 344 ITR 37 (DEL)(HC) - CIT VS. AMITABH BACHCHAN [2012] 349 ITR 76 (BOM)(HC ) - CIT VS. KELVINATOR OF INDIA LTD. [2010] 320 ITR 561 (SC). 5. LD. CIT(A) REPRODUCED THE ASSESSMENT ORDER VERB ATIM, IN PARA 6 OF THE IMPUGNED ORDER. FOR THE SAKE OF BREVITY, THE SA ME IS NOT REPRODUCED 4 6472/DEL/2013 DCIT VS. I-PROCESS SERVICES INDIA PVT. LTD. HEREIN. THE LD. CIT(A) OBSERVED THAT THERE WAS NO TANGIBLE MATERIAL WITH THE AO, ON THE BASIS OF WHICH PROCEEDINGS U/S 147 O F THE ACT WERE INITIATED. HE FURTHER OBSERVED THAT PRESENT CASE WAS SUBJECTED TO SCRUTINY U/S 143(3) OF THE ACT AND THE AO HAD THE OCCASION TO EXAMINE THE CLAIMS OF THE ASSESSEE. THEREFORE, IT CANNOT BE HELD THAT THE INCOME HAD ES CAPED THE ASSESSMENT. ACCORDING TO LD. CIT(A), THE AO DID NOT GATHER ANY ADDITIONAL MATERIAL SUBSEQUENTLY. THEREFORE, IT WAS CLEARLY A CHANGE IN OPINION ON THE PART OF THE AO AND SUCH REOPENING WAS NOT SUSTAINABLE. LD. CIT(A) HELD THAT THE REASSESSMENT PROCEEDINGS AND THE ORDER OF REASSESS MENT WAS BAD IN LAW AND, ACCORDINGLY, QUASHED THE SAME, BY OBSERVING AS UNDER: 7. THE MANNER IN WHICH THE AO HAS PASSED THE IMPUG NED ORDER IS CONDEMNABLE. THE TOTAL SIZE OF THE CHARGIN G PARAGRAPHS OF THE IMPUGNED ORDER IS LESS THAN 100 W ORDS, WHICH INCLUDES APPELLANT'S EXPLANATION AND THE AO'S ONE SENTENCE REBUTTAL, WHICH IS NON-SPEAKING AS THE AO HAD NOT ADDRESSED THE GROUNDS ON WHICH OBJECTIONS WERE RAIS ED BY THE APPELLANT. I FIND THAT THE AO HAS GIVEN THE VERDICT IN ONE SENTENCE IN WHICH A CIRCUITOUS ARGUMENT THAT THE 'C ONTENTION OF THE ASSESSEE IS CONSIDERED BUT NOT ACCEPTABLE BECAU SE THE ABOVE MENTIONED EXCESS, BENEFITS CLAIMED BY THE ASSESSEE ARE TO BE DISALLOWED AS PER THE I.T. ACT' WAS GIVEN NO DISCUS SION ABOUT THE ARGUMENTS OF THE APPELLANT, THE FACTS OF THE CA SE AS EMANATING FROM THE ASSESSMENT AND ANY JUDICIAL PRONOUNCEMENTS IN SUPPORT HAVE BEEN CITED BY THE LD . AO. UNDER THE CIRCUMSTANCES, THE IMPUGNED ORDER IS QUAS HED. 5 6472/DEL/2013 DCIT VS. I-PROCESS SERVICES INDIA PVT. LTD. 7.2 KEEPING IN VIEW THE ABOVE, IT IS HELD' THAT THE INITIATION OF THE IMPUGNED PROCEEDINGS UNDER SECTION 147 WAS BAD IN LAW AS THE REASONS RECORDED WERE WITHOUT APPLICATION OF MI ND AND THERE WERE FACTUAL INCONSISTENCY WHILE RECORDING RE ASONS PER SE. FURTHER, KEEPING IN VIEW THE DECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS USHA INTERNATIONAL LTD. (SUPRA) , THE REASSESSMENT PROCEEDINGS ARE HELD AS A 'CHANGE OF O PINION' AND CLEARLY FOR THE PURPOSE OF 'REVIEW' OF THE ORIGINAL ASSESSMENT ORDER, WHICH WAS PASSED AFTER DUE CONSIDERATION BY THE LD. AO ON EACH GROUND. THE INITIATION OF THE REASSESSMENT PROCEEDINGS IN RESPECT OF THE ALLEGED UNDERSTATEMENT OF TAXABLE AMOUNTS OF FRINGE BENEFIT BY ISSUE OF NOTICE UNDER SECTION 147 , IS BAD IN LAW AND UNSUSTAINABLE AS THERE ARE SPECIFIC PROVISIONS FOR REOPENING THE ASSESSMENT ON ACCOUNT OF ESCAPEMENT O F FRINGE BENEFITS. 7.3 IT IS ALSO OBSERVED THAT IN THE LIGHT OF THE DE CISION OF THE HON'BLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFT S (INDIA) LTD. VS. INCOME TAX OFFICER(2003) 259 ITR 19/(2002) 125 TAXMAN 963 (SC), THE LD. AO HAS NOT DISPOSED OFF TH E OBJECTIONS RAISED BY THE APPELLANT WHILE PASSING TH E IMPUGNED ORDER. IN FACT THE LD. AO DID NOT SPEND ANY RESOURC ES ON DISCUSSING THE ARGUMENTS RAISED BY THE APPELLANT WH ILE MAKING THE DISALLOWANCE. CLEARLY, THE IMPUGNED ORDER SHOWS GRAVE LEGAL INFIRMITY ON THE 'PART OF THE AO OF HAVING FO LLOWED PRESCRIBED JUDICIAL PROCEDURE AND NOT FOLLOWING THE SUPREME COURT'S DECISION IN THE CASE OF CIT VS. GKN DRIVESH AFT. SINCE THE AO HAS NOT RENDERED NATURAL JUSTICE, THE IMPUGN ED ORDER IS NOT SUSTAINABLE. 7.4 WHILE HOLDING THAT THE ALLEGED EXCESS FRINGE BE NEFIT CLAIMED BY THE ASSESSEE WAS TO BE DISALLOWED, THE LD. AO HA S NOT BROUGHT OUT THE FACTS NOR DISCUSSED THE LEGAL ISSUE OR EXAMINED THE CONTENTION OF THE APPELLANT, WHICH WAS MADE AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS IN THE FORM OF A CH ART WHICH 6 6472/DEL/2013 DCIT VS. I-PROCESS SERVICES INDIA PVT. LTD. SHOWS THAT THE APPELLANT HAD OFFERED FOR FBT VARIOU S COMPONENTS OF EXPENSES EMBEDDED IN THE 'TRAVELLING EXPENSES'. ACCORDINGLY, THE DECISION OF THE AO IS CERTAINLY AR BITRARY AND UNSUSTAINABLE. KEEPING IN VIEW THE ABOVE, THE REASS ESSMENT PROCEEDINGS AND THE ORDER OF ASSESSMENT ARE HELD AS BAD IN LAW AND QUASHED AS SUCH. 6. NOW, THE DEPARTMENT IS IN APPEAL. 7. LD. DR STRONGLY SUPPORTED THE ORDER OF AO AND FU RTHER SUBMITTED THAT SINCE THE INCOME OF THE ASSESSEE HAD ESCAPED ASSESS MENT, THE AO WAS FULLY JUSTIFIED IN ISSUING NOTICE U/S 148 OF THE ACT AND THE LD. CIT(A) WAS NOT JUSTIFIED IN QUASHING THE REASSESSMENT FRAMED BY TH E AO. 8. IN HIS RIVAL SUBMISSIONS, LD. COUNSEL FOR THE AS SESSEE STRONGLY SUPPORTED THE ORDER OF THE LD. CIT(A) AND REITERATE D THE SUBMISSIONS MADE BEFORE HIM. IT WAS FURTHER SUBMITTED THAT ALL THE I SSUES WERE BEFORE THE AO DURING THE COURSE OF ORIGINAL PROCEEDINGS AND HE AP PLIED HIS MIND WHILE FRAMING THE ORIGINAL ASSESSMENT. THEREFORE, THE REO PENING WAS MERELY FOR REVIEW OF THE SAME ISSUES, WHICH WOULD TANTAMOUNT T O CHANGE OF OPINION. IT WAS FURTHER STATED THAT THE ASSESSEE RAISED OBJECTI ONS FOR REOPENING, WHICH HAD NOT BEEN DISPOSED OFF BY THE AO WHILE PASSING T HE REASSESSMENT ORDER. THEREFORE, THE LD. CIT(A) WAS FULLY JUSTIFIED IN QU ASHING THE REASSESSMENT ORDER. RELIANCE WAS PLACED ON THE JUDGMENT OF HONB LE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD. VS. ITO ( SUPRA) AND THE JUDGMENT 7 6472/DEL/2013 DCIT VS. I-PROCESS SERVICES INDIA PVT. LTD. OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. USHA INTERNATIONAL LTD. 348 ITR 485 (DEL.). 9. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE IT IS AN ADMITTED FACT THAT ORIGINAL ASSESSMENT WAS FRAMED B Y THE AO U/S 143(3), VIDE ORDER DATED 24-12-2009. THEREAFTER, THE AO ISS UED NOTICE U/S 148 OF THE ACT ON 27-3-2012 AND THE ASSESSEE RAISED OBJECTIONS AGAINST THE REOPENING VIDE LETTER DATED 11-5-2012, WHICH HAD NOT BEEN DIS POSED OFF BY THE AO, WHO MERELY STATED THAT THE CONTENTION OF THE ASSESS EE WAS CONSIDERED BUT NOT ACCEPTABLE, BECAUSE THE EXCESS BENEFITS CLAIMED BY THE ASSESSEE, WERE TO BE DISALLOWABLE AS PER THE ACT. IT IS CLEAR FROM THE A BOVE OBSERVATIONS OF THE AO THAT THE OBJECTIONS RAISED BY THE ASSESSEE WERE NOT DISPOSED OFF BY HIM. 10. ON A SIMILAR ISSUE THE HONBLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD. VS. ITO (SUPRA), HELD AS U NDER: WE SEE NO JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER UNDER CHALLENGE. HOWEVER, WE CLARIFY THAT WHEN A NOTICE U NDER SECTION 148 OF THE INCOME-TAX ACT IS ISSUED, THE PR OPER COURSE OF ACTION FOR THE NOTICEE IS TO FILE A RETURN AND I F HE SO DESIRES, TO SEEK REASONS FOR ISSUING NOTICES. THE ASSESSING OFFICER IS BOUND TO FURNISH REASONS WITHIN A REASONABLE TIME. ON RECEIPT OF REASONS, THE NOTICEE IS ENTITLED TO FILE OBJECTI ONS TO ISSUANCE OF NOTICE AND THE ASSESSING OFFICER IS BOUND TO DIS POSE OFF THE SAME BY PASSING A SPEAKING ORDER. IN THE INSTANT CA SE, AS THE REASONS HAVE BEEN DISCLOSED IN THESE PROCEEDING, TH E ASSESSING 8 6472/DEL/2013 DCIT VS. I-PROCESS SERVICES INDIA PVT. LTD. OFFICER HAS TO DISPOSE OF THE OBJECTIONS, IF FILED, BY PASSING A SPEAKING ORDER, BEFORE PROCEEDING WITH THE ASSESSM ENT IN RESPECT OF THE ABOVE SAID FIVE ASSESSMENT YEARS. 11. IN THE PRESENT CASE ALSO THE REASSESSMENT ORDER DATED 28-1-2013 WAS PASSED BY THE AO WITHOUT DEALING WITH THE OBJECTION S OF THE ASSESSEE FILED ON 11-6-2012. THEREFORE, THE REASSESSMENT ORDER DAT ED 28-1-2013 WAS BAD IN LAW AND RIGHTLY QUASHED BY THE LD. CIT(A). WE DO NO T SEE ANY INFIRMITY IN THE IMPUGNED ORDER. ACCORDINGLY, WE DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. 12. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISM ISSED. ORDER PRONOUNCED IN OPEN COURT ON 28/10/2015. SD/- SD/- (C.M. GARG) (N.K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 28/10/2015. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. 9 6472/DEL/2013 DCIT VS. I-PROCESS SERVICES INDIA PVT. LTD. -+ DATE INITIAL 1. DRAFT DICTATED ON 26-10.2015 PS 2. DRAFT PLACED BEFORE AUTHOR 27.10.2015 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/ AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.