DCIT, New Delhi V. M/s. Bharti Teleconic Ltd., New Delhi

ITA 6502/DEL/2013

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5077 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 11-07-2017
• Assessment Year: 2002-2003
• Appeal Filed On: 05-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Depreciation; Tangible material; Reassessment proceedings
• Section: 32; 147; 148; 2; 143(1)

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D : NEW DELHI BEFORE SHRI AMIT SHUKLA , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 6502/DEL/2013 (ASSESSMENT YEAR: 2002 - 03 ) DCIT, CIRCLE - 2(1), NEW DELHI VS. BHARTI TELECONIC LTD, (NOW BHARTI AIRTEL LTD), NO. 1 ARAVALI CRESCENT, NELSON MANDELA ROAD, VASANT KUNJ, PHASE - II, NEW DELHI PAN: AABCB4331K (APPELLANT) (RESPONDENT) REVENUE BY : SHRI AMIT JAIN, SR. DR ASSESSEE BY: SHRI ANIL BHALLA, CA DATE OF HEARING 24/12/2018 DATE OF PRONOUNCEMENT 0 7 / 02 /201 9 O R D E R PER PRASHANT MAHARISHI, A. M. 1 . THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE LD CIT(A), NEW DELHI DATED 18 - 9 - 2013 FOR ASSESSMENT YEAR 2002 - 0 3, WHEREIN THE SOLITARY GROUND OF APPEAL IS WITH RESPECT TO QUASHING THE PROCEEDINGS U/S 147 OF THE INCOME TAX ACT, 1961 AND ON MERITS DELETING THE ADDITIONS OF RS. 53926125/ - . 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED: - (I) IN HOLDING THAT THE REASSESSMENT PROCEEDINGS U/S 147 AS LEGALLY NOT VALID IGNORING THE LEGAL ASPECT THAT THE ASSESSEES CASE IS COVERED BY THE CLAUSE (B) OF EXPLANATION 2 OF THE SECTION 147 OF THE ACT, 1961 AND THE CASE IS TOTALLY DISTINGUISHABLE FROM THE FACTS OF THE CASES RELIED UPON BY THE ASSESSEE BEFORE THE LD CIT(A). (II) IN DELETING THE ADDITION OF RS. 53926125/ - MA DE ON ACCOUNT OF DISALLOWANCE OF DEPRECATION BECAUSE DEPRECIATION CLAIMED WAS IN EXCESS OF SHARE OF ASSETS HELD BY THE ASSESSEE. DCIT VS. BHARTI TELECONIC LTD ITA NO. 6502/DEL/2013 (ASSESSMENT YEAR: 2002 - 03) PAGE | 2 3 . THE BRIEF FACTS OF THE CASE SHOWS THAT THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING LOSS OF RS. 26,23,90,002/ - ON 29 - 10 - 2 002. SUBSEQUENTLY , THE AO RECORDED THE REASONS AS UNDER : - 2. IT HAS BEEN OBSERVED FROM THE DEPRECIATION CHART ALLOWABLE AS PER IT ACT THAT THE ASSESSEE COMPANY OWNS NETWORK INFRASTRUCTURE JOINTLY WITH A FELLOW SUBSIDIARY UNDER AN AGREEMENT IN THE PROPORT ION OF 54:46 AND HENCE THE DEPRECIATION ALLOWABLE TO THE ASSESSEE COMPANY HAS TO BE DETERMINED ONLY ON THE NETWORK INFRASTRUCTURE CAPITALIZED TO THE ABOVE PROPORTION. SINCE THE DEPRECIATION WAS ALLOWED ON THE TOTAL COST OF THE NETWORK INFRASTRUCTURE, THE A MOUNT OF DEPRECIATION ALLOWED IN EXCESS HAS ESCAPED ASSESSMENT AND, THEREFORE, NOTICE U/S 148 OF THE ACT WAS ISSUED AFTER DULY RECORDING THE REASONS THEREOF U/S 147 OF THE INCOME TAX ACT, 1961 AND AFTER OBTAINING NECESSARY SANCTION U/S 151 OF THE IT ACT. T HE REASONS RECORDED ARE REPRODUCED BELOW: - IN THIS CASE RETURN WAS FILED ON 29.10.2002 DECLARING LOSS AT RS. 26,33,90,002/ - , RETURN WAS PROCESSED U/$ 143(1) ON 31.12.2002 IN A SUMMARY MANNER. PERUSAL OF RECORDS REVEALS THAT THE ASSESSES COMPANY DURING THE YEAR CLAIMED DEPRECIATION OF 2206.55 LACS ON PLANT AND MACHINERY AS PER PROVISIONS OF IT ACT. IT IS FURTHER NOTICED THAT ASSESSEE OWNS NETWORK INFRASTRUCTURE JOINTLY WITH A FELLOW SUBSIDIARY COMPANY IN THE PROPORTION OF 54:46. THE PRORATE COST OF ASSETS I NCLUDED IN WDV OF PLANT AND MACHINERY SHARED JOINTLY IS RS 4993.96 LACS AND RELATED DEPRECIATION THEREOF WORKS OUT TO RS 1248.49 LACS WHICH SHOULD HAVE BEEN DISALLOWED. IN VIEW OF THE ABOVE, I HAVE REASONS TO BELIEVE (HAT INCOME ON ACCOUNT OF ALLOWANCE OF EXCESS DEPREDATION U/S 32 OF THE OF THE IT ACT, 1961 TO THE TIME OF OF RS. 1248.49 LACS CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SEC. 147 OF THE IT ACT, 1961 AND ACCORDINGLY NOTICE U/S 148 OF THE IT ACT 1961 IS TO BE ISSUED. 4 . NOTICE U/S 148 OF THE ACT WAS ISSUED AND THE ASSESSEE SUBMITTED THAT ORIGINAL RETURN WAS FILED U/S 139(1) ON 29 - 10 - 2018 , MAY BE TREATED AS RETURN FILE D IN RESPONSE TO THE NOTICE. LD LD AO THEREAFTER MADE AN ADDITION OF RS. 53926125 / - ON ACCOUNT OF DISALLOW ANCES OF DEPRECIATION VIDE PARAGRAPH NO. 3 TO 4 OF THE ASSESSMENT ORDER AS UNDER: - 3. VIDE ORDER SHEET ENTRY DATED 07 - 09 - 2009 , THE AR OF THE ASSESSEE COMPANY WAS ASKED TO SHOW CAUSE AS TO WHY THE DEPRECIATION ALLOWED ON DCIT VS. BHARTI TELECONIC LTD ITA NO. 6502/DEL/2013 (ASSESSMENT YEAR: 2002 - 03) PAGE | 3 THE ASSETS WHICH WAS NOT CAPITALI ZED IN ITS BOOK OF ACCOUNTS SHOULD NOT BE WITHDRAWN. IN THIS REGARD, VIDE LETTER DATED 23 - 10 - 2009. IT HAS BEEN SUBMITTED THAT THE ASSESSEE COMPANY HAS CAPITALIZED ONLY AN AMOUNT OF RS. 50,86,21,383/ - BEING 54% OF THE TOTAL NETWORK COST OF RS. 94,00,30,383/ - ON PRO RATA BASIS AS AGREED WITH ITS SUBSIDIARY COMPANY, M/S. BHARTI MOBILE LTD (BML) AND CORRESPONDINGLY CLAIMED DEPRECIATION @12.5% (BEING USED FOR LESS THAN 6 MONTHS) ON THE SAME. IN VIEW OF THE ABOVE, IT HAS BEEN SUBMITTED THAT NO DISALLOWANCE ON ACC OUNT OF DEPRECIATION IS CALLED FOR. 4. THE REPLY OF THE ASSESSEE COMPANY HAS BEEN CONSIDERED ON ITS MERITS. ON GOING THROUGH THE BLOCK OF ASSETS AS PER DEPRECIATION CHART, IT IS SEEN THAT, UNDER THE HEAD PLANT AND MACHINERY, TOTAL ADDITION DURING THE YEA R IS MADE TO THE TUNE OF RS.159,22,93,027. THE ASSESSEE COMPANY HAS NOT BEEN ABLE TO SUBSTANTIATE AS TO WHETHER THE TOTAL ADDITION MADE DURING THE YEAR IS INCLUSIVE OF THE ASSET OF RS.50,86,21,383 (BEING 54% OF ASSETS SHARED WITH M/S BHARTI MOBILE LTD.) CA PITALIZED ON PRO - RATA BASIS OR IT IS INCLUSIVE OF TOTAL ADDITION TO ASSET OF RS.94,00,30.383 JOINTLY OWNED WITH M/S BHARTI MOBILE LTD. THOUGH THE ASSESSEE COMPANY COULD FURNISH A LIST OF TOTAL ASSETS ADDED DURING THE YEAR, IT FAILED TO SUBSTANTIATE THE AMO UNT WHICH WAS ACTUALLY CAPITALIZED IN BLOCK OF ASSETS ON ACCOUNT OF NETWORK INFRASTRUCTURE COST JOINTLY OWNED WITH M/S BHARTI MOBILE LTD. WITH MATERIAL EVIDENCES, INSPITE OFF REPEATED OPPORTUNITIES. IN THE ABSENCE OF EVIDENCE, IT CANNOT BE HELD THAT DEPREC IATION WAS CLAIMED ONLY ON THE ASSETS WHICH WAS STATED TO HAVE BEEN CAPITALIZED ON PRO - RATA BASIS. ACCORDINGLY, AN AMOUNT OF RS.5,39,26,125/ - (12.5% OF 43,14,09,000 AS ASSETS USED FOR LESS THAN 180 DAYS IN DEPRECIATION CHART) BEING THE AMOUNT OF DEPRECIATI ON ON THE COST OF ASSET CAPITALIZED OF RS.43,14,09,000 BY M/S BHARTI MOBILE LTD. IS WITHDRAWN AND ACCORDINGLY ADDED TO THE INCOME OF THE ASSESSEE. 5 . CONSEQUENTLY THE ORDER U/S 147 READ WITH SECTION 143 (3) OF THE ACT DATED 7 - 12 - 2009 WAS PASSED, WHEREIN, DEPRECIATION OF RS. 53926125 / - WAS DISALLOWED AND LOSS WAS ASSESSED AT RS. 208463877 / - . 6 . AGGRIEVED THE ASSESSEE PREFERRED THE APPEAL BEFORE THE LD CIT(A) CONTESTING THE REOPENING OF THE ASSESSMENT AS WELL AS DISALLOWANCES OF DEPRECIATION. WITH RESPECT T O THE REOPENING LD CIT(A) HELD THAT LD AO HAS NO INFORMATION AVAILABLE WITH HIM FOR UNDERSTATEMENT OR EXCESSIVE CLAIM OF DEPRECIATION. THEREFORE, HE HELD THAT REOPENING IS NOT PROPER. ON THE ISSUE OF THE MERIT S SHE HELD THAT THE DCIT VS. BHARTI TELECONIC LTD ITA NO. 6502/DEL/2013 (ASSESSMENT YEAR: 2002 - 03) PAGE | 4 ASSESSEE HAD ENTERED INT O AN AGREEMENT WITH BHARTI MOBILE LTD FOR SHARING OF ASSETS AND THE PROPORTIONATE COST OF THE ASSET OWNED BY THE ASSESSEE WAS CAPITALISED IN ITS BOOKS. THE ASSESSEE CLAIM ED DEPRECIATION ONLY OF ITS SHARE OF THE ASSETS . THEREFORE, HE DELETED THE DISALLOWANCES OF DEPRECIATION OF RS. 53926125 / - HOLDING THAT THE CLAIM OF THE ASSESSEE IS CORRECT AS IT IS MADE ON ONLY ITS OWN SHARE OF ASSETS AND NOT ON THE ENTIRE ASSETS HELD BY THE LD AO . 7 . THE AO AGGRIEVED WITH THE ORDER OF THE LD CIT(A) PREFE R RED AN APPEAL BEFORE US. 8 . THE LD SR. DR VEHEMENTLY SUPPORTED THE ORDER OF THE LD AO AND SUBMITTED THAT LD AO HAS CORRECTLY ASSUMED THE JURISDICTION UNDER SECTION 147 OF THE ACT AND THE DIFFERENCES OF THE DEPRECIATION IS ALSO CORRECTLY DISALLOWED . 9 . LD AR SUB MITTED THAT THE REASONS RECORDED BY THE LD AO WERE WITHOUT ANY TANGIBLE MATERIAL AND ON APPRECIATION OF THE SAME SET OF FACTS INCLUDING THE RETURN OF INCOME. HE STATED THAT THERE IS NO ESCAPEMENT OF INCOME. HE FURTHER STATED THAT THE REOPENING IS WITHOUT ANY TANGIBLE MATERIAL. ON THE ISSUE OF DEPRECIATION IT IS SUBMITTED THAT AS PER THE AGREEMENT THE ASSESSEE HAS 54.13% SHARE AND BHARTI MOBILE HAD 45.87% SHARE AND BOTH OF THEM HAS CORRECTLY CLAIMED DEPRECIATION OF ASSETS OWNED BY THEM ONLY . 10 . WE HAVE CAREF ULLY CONSIDERED THE RIVAL CONTENTIONS AND ALSO PERUSED THE ORDERS OF THE LOWER AUTHORITIES. THE LD CIT(A) HAS HELD AS UNDER: - 4. I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND ALSO PERUSED THE REASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER. THE ISSUE UNDER CONSIDERATION IS WHETHER THE ASSESSING OFFICE WAS JUSTIFIED IN INVOKING JURISDICTION U/S 147 OF THE ACT FOR MAKI NG REASSESSMENT OF THE APPELLANT. IT IS NOTICED THAT IN THE FACTS OF THIS CASE, THE APPELLANT HAD FILED THE AUDITED BALANCE SHEET AND TAX AUDIT REPORT ALONG WITH COMPUTATION OF INCOME WHICH CLEARLY MENTIONED THAT THE APPELLANT HAS CLAIMED DEPRECIATION ON I TS SHARE OF ASSETS AND FROM THESE DETAILS THE ASSESSING OFFICER COULD NOT HAVE DRAWN ANY INFERENCE OR TAKEN NOTICE OF THE FACT THAT THE APPELLANT HAD CLAIMED EXCESSIVE DEPRECIATION ALLOWANCE IN ITS RETURN OF INCOME. THE ASSESSING OFFICER ACTION OF INITIA TING JURISDICTION UNDER SECTION 147 OF THE ACT WAS UNCALLED FOR SINCE THE DCIT VS. BHARTI TELECONIC LTD ITA NO. 6502/DEL/2013 (ASSESSMENT YEAR: 2002 - 03) PAGE | 5 ASSESSING OFFICER HAS NO INFORMATION AVAILABLE WITH HIM FROM WHICH IT CAN BE NOTICED THAT THE ASSESSEE HAS EITHER UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE DEDUCTION OR ALLOWAN CE OR RELIEF OF THE RETURN. ACCORDINGLY, GROUND NO. 1 IS ALLOWED. 11 . FROM THE ABOVE FACTS IT IS EVIDENT THAT FOR AY 2002 - 03 THE ASSESSMENT IS REOPENED BY ISSUE OF NOTICE U/S 148 OF THE ACT BEYOND FOUR YEARS FROM THE END OF THE ASSESSMENT YEARS IN WHICH TH E ORIGINAL ASSESSMENT WAS COMPLETED. THE REASONS RECORDED CLEARLY SHOWS THAT THE CLAIM OF THE ASSESSEE OF DEPRECIATION WAS THE REASON FOR REOPENING OF THE ASSESSMENT. IT IS APPRECIATION OF THE SAME EVIDENCES WHICH WERE THERE ALONG WITH THE RETURN OF INCOME . NO NEW TANGIBLE MATERIAL WAS STATED TO HAVE COME INTO THE POSSESSION OF ASSESSING OFFICER. IN ABSENCE OF ANY TANGIBLE MATERIAL FOR REOPENING OF THE ASSESSMENT WE DO NOT FIND ANY REASON TO REVERSE THE DECISION OF THE LD CIT(A) WHEREIN, HE HAS QUASHED THE REOPENING OF ASSESSMENT PROCEEDINGS. IN VIEW OF THIS GROUND NO. 1(I) OF THE APPEAL IS DISMISSED. 12 . THE SECOND GROUND IS RELATING TO THE ADDITION OF RS. 53926125/ - MADE ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION DELETED BY THE LD CIT(A ). THE FACT LEADING TO THE ABOVE DISALLOWANCE STATES THAT ASSESSEE COMPANY HAS CAPITALIZED A SUM OF RS. 508621383/ - BEING 54% OF ASSETS SHARED WITH M/S. BHARTI MOBILE LTD OUT OF TOTAL PROJECT OF RS. 940030383/ - . HOWEVER, THE LD ASSESSING OFFICER VIDE PARA NO. 3 AND 4 OF HIS ORDE R HAS DISALLOWED THE DEPRECIATION HOLDING THAT IT IS NOT SURE THAT ASSESSEE HAS CLAIMED DEPRECIATION ONLY ON THE ASSETS OF ITS SHARE. THE LD CIT(A) DELETED THE ABOVE ADDITION AND THEREFORE, REVENUE IS IN APPEAL. 13 . THE LD DR SUPPORTED THE ORDER OF THE LD AO. 14 . THE LD AR SUPPORTED THE ORDER OF THE LD CIT(A) AND VEHEMENTLY STATED THAT IT HAS NOT CLAIMED DEPRECIATION ON THE ASSETS WHICH WAS OWNED BY THE OTHER OWNER. DCIT VS. BHARTI TELECONIC LTD ITA NO. 6502/DEL/2013 (ASSESSMENT YEAR: 2002 - 03) PAGE | 6 15 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND FIND THAT THE LD CIT(A) HAS GIVEN A CATEGO RICAL FINDING VIDE PARA NO. 5 OF HIS ORDER AS UNDER: - 5. FINDING ON GROUND OF APPEAL NOS. 2 I HAVE CONSIDERED THE SUBMISSION AND THE DOCUMENTS PLACED BEFORE ME BY THE APPELLANT. IT IS OBSERVED THERE FROM THAT THE APPELLANT HAD MENTIONED IN THE AUDITED BALANCE SHEET THAT IT HAS ENTERED INTO AN AGREEMENT WITH BHARTI MOBILE LIMITED FOR SHARING OF AS SETS AND THE PROPORTIONATE COST OF ASSETS OWNED BY THE APPELLANT WAS CAPITALIZED IN ITS BOOKS. THE DEPRECIATION SCHEDULE ATTACHED TO THE AUDITED BALANCE SHEET CLEARLY SHOWN THAT THE APPELLANT HAS CLAIMED DEPRECIATION ONLY ON ITS SHARE OF ASSETS. IT IS OBS ERVED THAT THE SAME HAS BEEN MENTIONED IN THE TAX AUDIT REPORT AND THE APPELLANT HAS CLAIMED DEPRECIATION THEREON ONLY ON ITS SHARE OF NETWORK ASSETS. I HAVE ALSO GONE THROUGH THE AGREEMENT PLACED BEFORE ME ENTERED INTO BETWEEN BHARTI TELESONIC LIMITED AND BHARTI MOBILE LTD DATED 01 JANUARY 2002 WHICH CLEARLY MENTIONS THAT BOTH PARTIES HAD AGREED TO JOINTLY CONSTRUCT AND ESTABLISH THE NETWORK IN RATION OF 54:46. FURTHER, I HAVE OBSERVED THAT THE DETAILS OF THE NETWORK AND OWNERSHIP STRUCTURE ARE GIVEN IN DETAIL AS ANNEXURE TO THIS AGREEMENT. I HAVE ALSO OBSERVED FROM THE COPY OF THE RETURN OF INCOME, AUDITED BALANCE SHEET AND TAX AUDIT REPORT PLACED BEFORE ME FOR BHARTI MOBILE LIMITED THAT BHARTI MOBILE LIMITED HAS CAPITALIZED ITS OWN SHARE OF ASSETS AND HAS CLAIMED THE 46% DEPRECIATION THEREON. FROM THE ABOVE, I AM SATISFIED THAT THE APPELLANT HAS RIGHTLY CLAIMED DEPRECIATION ON ONLY ITS OWN SHARE OF ASSETS AND NOT ON THE ENTIRE ASSETS AS HELD BY THE LD ASSESSING OFFICER. IN VIEW OF THE ABOVE, THE DISA LLOWANCE OF DEPRECIATION OF RS. 5,39,26,125/ - IS DIRECTED TO BE DELETED AND GROUND NO. 2 IS ALLOWED. 16 . FURTHER, IT IS APPARENT THAT OUT OF THE TOTAL COST OF RS. 940030383/ - , 54.13% AMOUNTING TO RS. 508621383/ - BELONGS TO THE ASSESSEE AND 45.87% AMOUNTING T O RS. 431409000/ - BELONG TO BHARTI MOBILE LTD. THE ASSESSEE HAS CLAIMED DEPRECIATION ONLY ON RS. 508621383/ - AS HELD BY THE LD CIT(A) AND NOT ON THE FULL AMOUNT OF RS. 940030383/ - . THE LD DEPARTMENTAL REPRESENTATIVE ALSO COULD NOT SHOW THAT THE ASSESSEE HAS CLAIMED DEPRECIATION ON THE ASSETS BEYOND HIS SHARE OF OWNERSHIP. IN VIEW OF THIS WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD CIT(A) AND DISMISS GROUND NO. 1(II) OF THE APPEAL. DCIT VS. BHARTI TELECONIC LTD ITA NO. 6502/DEL/2013 (ASSESSMENT YEAR: 2002 - 03) PAGE | 7 17 . IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 7 / 02 /2019. - S D / - - S D / - ( AMIT SHUKLA ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 0 7 / 02 /2019 A K KEOT COPY FORWARDED TO 1 . APPLICANT 2 . RESPONDENT 3 . CIT 4 . CIT (A) 5 . DR:ITAT ASS ISTANT REGISTRAR ITAT, NEW DELHI