DCIT CENT. CIR. -32, MUMBAI V. M/s. ASIAN PAINTS LTD., MUMBAI

ITA 6553/MUM/2006

• Counselvise Citation: 655319914 RSA 2006
• Duration Of Justice: 5 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 15-03-2012
• Assessment Year: 1996-1997
• Appeal Filed On: 05-12-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBACHAN RAM
• Assessee Lawyers: H N SHAH
• Keywords: Reopening of assessment; Depreciation; Business expenditure; Period of limitation; Additional evidence; Difference of opinion; Assessment record; Block assessment; Revised return; Reason to believe; Change of opinion; Revenue expenditure; Reassessment proceedings; Capital expenditure
• Section: 143(3); 150(1); 147; 148; 132

Judgement Text

ITA NOS.6553 AND OTHERS (9 APPEALS) ASIAN PAINTS LTD MUMBAI PAGE 1 OF 19 IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH, MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NOS. 6226 & 6222 TO 6225/MUM/2006 (ASSESSMENT YEARS: 1997-98 TO 2001-02) ASIAN PAINTS LTD VS DCIT CENTRAL CIRCLE-32 6A SHANTINAGAR, ROOM NO.4, GROUND FLOOR SANTACRUZ (E) AAYAKAR BHAVAN MUMBAI 400 055 MUMBAI 400020 PAN AAACA 3622 K APPELLANT RESPONDENT ITA NOS. 6553 TO 6556/MUM/2006 (ASSESSMENT YEARS: 1996-97 TO 1999- 2000) DCIT CENTRAL CIRCLE-32 VS ASIAN PAINTS LTD ROOM NO.4, GROUND FLOOR 6A SHANTINAGAR, AAYAKAR BHAVAN SANTACRUZ (E) MUMBAI 400020 MUMBAI 400 055 ACIT CENTRAL CIRCLE-32 APPELLANT RESPONDENT ASSESSEE BY: MR. H.N. SHAH REVENUE BY: MR. SUBACHAN RAM, CIT DR DATE OF HEARING: 15/03/2012 DATE OF PRONOUNCEMENT: 22/03/2012 O R D E R PER BENCH: THESE ARE GROUP OF APPEALS FILED BY ASSESSEE COMPAN Y AND REVENUE FOR THE ASSESSMENT YEARS 1996-97 TO 2001-02 . IN AY 1996- 97, THERE IS NO ASSESSEE APPEAL, BUT ONLY REVENUE A PPEAL ON THE ISSUE OF TIME LIMIT FOR REOPENING THE ASSESSMENT UN DER SECTION 147. IN AY 1997-98 TO 1999-2000, THE CROSS APPEALS ARE F ILED BY ASSESSEE COMPANY AND REVENUE WITH REFERENCE TO THE REOPENING OF ASSESSMENT AND SOME OF THE ISSUES ON MERITS. IN AY 2000-01 AND 2001-02, THE ASSESSEE IS ONLY CONTESTING THE ISSUE OF REOPENING OF THE ASSESSMENT AND ADDITIONS CONFIRMED BY CIT(A). S INCE COMMON ITA NOS.6553 AND OTHERS (9 APPEALS) ASIAN PAINTS LTD MUMBAI PAGE 2 OF 19 ISSUES ARE INVOLVED IN ALL THESE APPEALS, THEY WERE HEARD TOGETHER AND DECIDED BY THIS COMMON ORDER. 2. WE HAVE HEARD THE LEARNED COUNSEL FOR THE ASSESSEE AND LEARNED CIT (DR) WHO MADE ELABORATE SUBMISSIONS. 3. THE ASSESSEE IS A PUBLIC LIMITED COMPANY AND A LEAD ING MANUFACTURE OF PAINTS. IN MARCH, 2002 THERE WERE SE ARCH OPERATIONS ON THE ASSESSEE AND AN ORDER UNDER THE B LOCK ASSESSMENT HAD BEEN PASSED ON CERTAIN ISSUES. IN AP PEAL ON THE BLOCK ASSESSMENT, THE CIT (A) DELETED ALL THE ADDIT IONS HOLDING THAT THESE WERE THE ISSUES WHICH WERE CONSIDERED IN REGU LAR ASSESSMENT AND HENCE, THEY CANNOT BE CONSIDERED IN BLOCK ASSES SMENT. ON THE ISSUE OF ASSESSEES CLAIM OF SOFTWARE EXPENDITURE A S REVENUE EXPENDITURE, THE CIT (A) IN AY 2000-01 IN REGULAR A SSESSMENT PROCEEDINGS, PASSED AN ORDER CONFIRMING THE AO STAN D. THEREFORE, ON THE BASIS OF THAT ORDER, THE REVENUE REOPENED AL L THE ASSESSMENTS INVOLVED IN THE BLOCK. MAIN ISSUE WAS R ELATED TO EXPENDITURE ON SOFTWARE, CONSIDERED AS CAPITAL INST EAD OF REVENUE IN ALL THE ASSESSMENT YEARS AND CONSEQUENT TO THAT RAT E OF DEPRECIATION THEREOF, WHETHER IT WAS 25% OR 60%. THE OTHER ISSUE WHICH WAS ALSO CONSIDERED IN RE-OPENED ASSESSMENTS IN SOME YEARS W AS WITH REFERENCE TO THE EXPENDITURE ON REVAMPING PTHALIC P LANT, AGAIN WHETHER EXPENDITURE IS CAPITAL OR REVENUE. IN REVEN UE APPEALS IN AY 1997-98, AY 1998-99 AND AY 1999-2000, THERE IS AN I SSUE OF DISALLOWANCE OF EXPENDITURE FOR EARNING TAX FREE IN COME U/S 14A. 4. AS EXPLAINED BY THE LEARNED COUNSEL AND AS SEEN FRO M THE RECORD, MOST OF THE ISSUES WHICH ARE AGITATED IN TH IS APPEAL ARE ORIGINALLY CONSIDERED IN THE REGULAR ASSESSMENTS ON WHICH THERE ARE ORDERS OF THE ITAT. HOWEVER, THE ASSESSING OFFICER CONSEQUENT TO THE DELETION OF CERTAIN ADDITIONS IN THE BLOCK ASSESSME NT BY THE CIT (A), ISSUED NOTICES UNDER SECTION 148 AND REOPENED THE A SSESSMENTS UNDER SECTION 147. 5. IT WAS THE CONTENTION OF THE ASSESSEE THAT THESE WE RE ISSUES WHICH WERE ALREADY SUBJECT MATTER OF SCRUTINY ASSES SMENTS ITA NOS.6553 AND OTHERS (9 APPEALS) ASIAN PAINTS LTD MUMBAI PAGE 3 OF 19 ORIGINALLY AND ISSUES ARE PENDING IN APPEAL AT VARI OUS FORUMS, HENCE THEY CANNOT BE CONSIDERED AFRESH IN THE GUISE OF RE ASSESSMENT. IT WAS ALSO CONTENDED THAT TIME LIMITS FOR REOPENING T HE ASSESSMENT HAVE ALREADY BEEN EXPIRED AND THE ASSESSMENTS CANNO T BE REOPENED EVEN ON CHANGE OF OPINION AND THERE BEING NO FRESH OR ADDITIONAL EVIDENCE. THE REVENUE SOUGHT TO JUSTIFY THE REOPENI NG ON THE REASON THAT THE LEARNED CIT (A) IN AY 2000-01 HAS AFFIRMED THE REVENUE STAND AND HAS, THEREFORE, GIVEN A FINDING THAT THE EXPENDITURE IS TO BE TREATED AS CAPITAL. THEREFORE, IT CAN TAKE SHELT ER UNDER SECTION 150 AND 153. THESE ISSUES ARE CONSIDERED YEAR WISE. ITA NO.6553/MUM/2006 ASSESSMENT YEAR 1996-97 : 6. IN THIS ASSESSMENT YEAR, THE ASSESSEE COMPANY FILED RETURN OF INCOME ON 27.11.1996 DECLARING TOTAL INCOME OF ` .15,14,30,190/-. IT ALSO FILED A REVISED RETURN ON 17.03.1997 DECLARING A TOTAL INCOME OF ` .56,26,83,140/-. THE ASSESSMENT UNDER SECTION 143(3 ) WAS MADE ON 29.01.1999 DETERMINING THE TOTAL INCOME AT ` .59,74,23,110/-. THE MATTERS WERE AGITATED UPTO THE ITAT AND THE ITA T VIDE ITA NO.907/MUM/2000 DATED 12.08.2005 HAS CONSIDERED THE APPEAL. 7. ASSESSING OFFICER ON THE REASON THAT THE CIT (A) H AS GIVEN FINDINGS IN AY 2000-01, REOPENED THE ASSESSMENT BY ISSUING A NOTICE ON 21.04.2005 INVOKING THE PROVISIONS OF SEC TION 153(3)(II) EXPLANATION 2. THE ASSESSEE OBJECTED THAT THE NOTIC E UNDER SECTION 148 WAS ISSUED BEYOND THE PERIOD OF 6 YEARS AND WAS NOT PERMISSIBLE UNDER SECTION 149(1)(B) AND THEREFORE, THE SAME WAS INVALID AND WITHOUT JURISDICTION. THE ASSESSING OFF ICER, HOWEVER, DID NOT ACCEPT THE ABOVE SUBMISSIONS AND PROCEEDED TO T REAT THE SOFTWARE EXPENSES OF ` .17,04,000/- AS CAPITAL EXPENDITURE AND ALSO DISALLOWED AN AMOUNT OF 10% OUT OF THE EXPENSES TOW ARDS EARNING TAX FREE INCOME AT ` .6,04,890/- AND AN AMOUNT OF ` .1,36,517/- TOWARDS ROYALTY FROM FOREIGN COMPANIES. THE ASSESSE E CHALLENGED THE SAME BEFORE THE CIT (A) AND AFTER CONSIDERING T HE SUBMISSIONS OF THE ASSESSEE, THE CIT (A) HELD THAT THE ASSESSING O FFICER HAS NO ITA NOS.6553 AND OTHERS (9 APPEALS) ASIAN PAINTS LTD MUMBAI PAGE 4 OF 19 JURISDICTION TO ISSUE NOTICE UNDER SECTION 147 AS T HE PROVISIONS OF SECTION 150(2) ARE APPLICABLE WHICH LIMITS THE JURI SDICTION ON THE EXTENDED TIME AVAILABLE UNDER SECTION 150(1). THE O RDER OF THE CIT (A) IS AS UNDER: 2.7 APPLYING THE ABOVE PRINCIPLES, IT IS SEEN THAT IN THE PRESENT CASE, THE CIT (A) WHILE DISPOSING THE APPEA L OF THE APPELLANT AGAINST THE ORDER OF THE BLOCK ASSESS MENT PASSED UNDER SECTION 158BC OF THE INCOME TAX ACT, V IDE ORDER DATED 26.12.2003 HELD THAT THE ISSUE WHETHER THE EXPENSES OF THE APPELLANT ON THE SOFTWARE ARE CAPIT AL EXPENSES OR REVENUE EXPENSES CANNOT BE CONSIDERED I N THE BLOCK ASSESSMENT PROCEEDING AND THE SAME CAN BE CONSIDERED ONLY IN THE REGULAR ASSESSMENT PROCEEDIN GS. THUS, THERE IS FINDING OF THE CIT (A) IN THE BLOCK ORDER THAT THE ADDITION MADE IN THE BLOCK ASSESSMENT CANN OT BE MADE IN THE BLOCK ORDER AND THE ADDITION ON THE ISSUE CAN BE MADE IN THE REGULAR ASSESSMENT PROCEEDINGS ONLY. IT WAS, THEREFORE, ABSOLUTELY NECESSARY FOR T HE CIT (A) TO DECIDE THE MATTER ONE WAY OR OTHER. IT CANNO T DECIDE THE APPEAL WITHOUT DECIDING AS TO WHETHER TH E EXPENSES OF THE APPELLANT ON THE SOFTWARE CAN BE CONSIDERED FOR DISALLOWANCE IN THE PROCEEDING FOR T HE BLOCK ASSESSMENT OR IN THE REGULAR ASSESSMENT PROCEEDING. THE CIT (A) COULD NOT HAVE DISPOSED OF THE APPEAL BY MERELY DECIDING THE ISSUE AGAINST THE ASSESSEE. THE FINDING IS IRRETRIEVABLY LINKED UP WI TH THE ISSUE IN APPEAL. IT IS, THEREFORE, EVIDENT THAT WHA T THE CIT (A) HAS DECIDED IS A NECESSARY FINDING FOR THE PURP OSE OF EFFECTIVE DISPOSAL OF THE APPEAL BEFORE IT. THE CAS E OF THE APPELLANT, THEREFORE, COMES WITHIN THE PURVIEW OF S ECTION 150(1) OF THE INCOME TAX ACT. 2.8. HOWEVER THE EXTENDED TIME AVAILABLE UNDER SECT ION 150(1) OF THE INCOME TAX ACT IS SUBJECT TO THE LIMI TATION IMPOSED BY THE PROVISION OF SUB-SECTION 2 OF SECTIO N 150. SECTION 150(1) SUB-SECTION 92) OF SECTION 150 READS AS FOLLOWS: 150(2): THE PROVISION OF SUB-S (1) SHALL NOT APPLY IN CASE WHERE ANY SUCH ASSESSMENT, REASSESSMENT OF RE-COMPUTATION AS IS REFERRED TO IN THAT SUB-SECTION RELATES TO AN ASSESSMENT YEAR IN RESPECT OF WHICH AS ASSESSMENT, RE- ASSESSMENT OR RE-COMPUTATION COULD NOT HAVE BEEN MADE AT THE TIME THE ORDER WHICH WAS THE SUBJECT-MATTER OF THE APPEAL, REFERENCE OR REVISION, AS THE CASE MAY BE, WAS MADE BY REASON OF ANY OTHER PROVISION LIMITING THE TIME WITHIN WHICH ANY ACTION FOR ASSESSMENT, RE- ASSESSMENT OR RE-COMPUTATION MAY BE TAKEN. ITA NOS.6553 AND OTHERS (9 APPEALS) ASIAN PAINTS LTD MUMBAI PAGE 5 OF 19 IN THE PRESENT CASE THE ORDER OF ASSESSMENT FOR THE BLOCK PERIOD WAS PASSED ON 28/11/2003. ON THAT DATE, THE NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT CANN OT BE ISSUED TO THE APPELLANT AS THE PERIOD OF SIX YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR HAS ALREADY EXPIRED. THE NOTICE UNDER SECTION 148 FOR THE ASSES SMENT YEAR 1996-97 CAN BE ISSUED LATEST BY 31/3/2003. THE ORDER FOR THE BLOCK ASSESSMENT WAS PASSED ON 28/11/2003. THEREFORE, THE ASSESSING OFFICER IS NOT COMPETENT TO ISSUE NOTICE UNDER SECTION 148 FOR THI S ASSESSMENT YEAR ON THE DATE OF PASSING THE ORDER OF ASSESSMENT FOR THE BLOCK PERIOD. I, THEREFORE, HOLD THAT THOUGH SECTION 150(1) APPLIES TO THIS CASE, THE ENL ARGED PERIOD OF LIMITATION IS RESTRICTED BY THE PROVISION OF SUB- SECTION (2) OF SECTION 150 AND ON THIS SCORE; THE ASSESSMENT NOW MADE CANNOT STAND. ACCORDINGLY IT IS HELD THAT THE RE-ASSESSMENT MADE IN THIS CASE CANNO T STAND AND THE SAME IS, THEREFORE, QUASHED. IN THE V IEW THIS VIEW TAKEN IT IS NOT NECESSARY TO PRONOUNCE UP ON OTHER CONTENTION AND ON THE OTHER GROUNDS OF APPEAL . THEY ARE LEFT OPEN. 8. THE LEARNED CIT (DR) SUBMITTED THAT THE CIT (A) ERR ED IN STATING THAT THE TIME LIMIT WAS NOT AVAILABLE, WHER EAS EXPLANATION-2 TO SECTION 153 IS APPLICABLE. THE LEARNED COUNSEL, HOWEVER, SUBMITTED THAT THERE IS NO FINDING IN ANY YEAR WITH REFERENCE TO THE TREATMENT TO BE GIVEN FOR SOFTWARE EXPENDITURE IN T HIS YEAR AND FURTHER AS PER EXPLANATION-2, THERE SHOULD BE A FIN DING THAT INCOME WHICH EXCLUDED IN AN ASSESSMENT YEAR HAS TO BE CONS IDERED AS INCOME OF OTHER YEAR AND THERE IS NO SUCH FINDING S O AS TO INVOKE EXPLANATION-2 TO SECTION 153. SINCE NOTICE UNDER S ECTION 148 WAS ISSUED BEYOND THE TIME LIMIT AND SINCE THE ASSESSIN G OFFICER DOES NOT HAVE ANY JURISDICTION TO REOPEN, THE ORDER OF T HE CIT(A) IS TO BE UPHELD. 9. WE HAVE CONSIDERED THE ISSUE. EVEN THOUGH THE LEARN ED CIT (A) HELD THAT THERE IS A FINDING BY THE CIT (A) IN 2000-01, THE ISSUE OF WHICH WILL BE DEALT WITH AT A LATER PART OF THE ORDER, SUFFICE TO SAY THAT THE EXPLANATION-2 TO SECTION 153 CANNOT BE INV OKED ON THE GIVEN FACTS. THE EXPLANATION-2 OF SECTION 153 IS AS UNDER: SECTION153: EXPLANATION 2.WHERE, BY AN ORDER [REFERRED TO IN C LAUSE (II) OF SUB-SECTION (3)], ANY INCOME IS EXCLUDED FROM TH E TOTAL ITA NOS.6553 AND OTHERS (9 APPEALS) ASIAN PAINTS LTD MUMBAI PAGE 6 OF 19 INCOME OF THE ASSESSEE FOR AN ASSESSMENT YEAR, THEN , AN ASSESSMENT OF SUCH INCOME FOR ANOTHER ASSESSMENT YE AR SHALL, FOR THE PURPOSES OF SECTION 150 AND THIS SEC TION, BE DEEMED TO BE ONE MADE IN CONSEQUENCE OF OR TO GIVE EFFECT TO ANY FINDING OR DIRECTION CONTAINED IN THE SAID ORDE R. AS PER THE ABOVE THERE SHOULD BE A FINDING OR DIREC TION THAT INCOME HAS TO BE EXCLUDED WHICH CAN BE TAXED IN ANOTHER YE AR. EVEN THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER WH ICH EXTRACTED THE ORDER OF THE CIT (A) GIVEN IN THE BLOCK ASSESSM ENT DATED 26.12.2003 DOES NOT INDICATE THAT THERE IS ANY FIND ING. IT MENTIONS AS UNDER: IT IS SEEN FROM THE RECORDS THAT CERTAIN ISSUES IN VOLVED AND CONSIDERED AS UNDISCLOSED INCOME IN A BLOCK ASSESSMENT MADE UNDER SECTION 158BC WERE ALSO CONSIDERED FOR ADDITION IN THE REGULAR ASSESSMENT F OR AY 2000-01 ON PROTECTIVE BASIS AND THE SAID ADDITIONS WERE CONFIRMED IN APPEAL VIDE ORDER NO. CIT (A)/CENTRAL/ VIII/DCC32/IT/29/2004-05, DATED 26.12.2003 FOR ASSESSMENT YEAR 2000-01. HOWEVER, FOR THE PREVIOUS YEAR 1995-96 RELEVANT TO ASSESSMENT YEAR 1996-97, CERTAIN ISSUES INVOLVED IN THE BLOCK ASSESSMENT WER E NOT CONSIDERED IN THE REGULAR ASSESSMENT UNDER SECTION 143 PASSED ON 29.1.1999 . 10. THUS, AS SEEN FROM THE ABOVE NOTING OF THE ASSESSIN G OFFICER THERE ARE NO FINDINGS BY THE CIT(A) WITH REFERENCE TO THESE ISSUES AT ALL AND ALSO THERE IS NO FINDING THAT INCOME WHICH IS TO BE EXCLUDED IN 2000-01 ARE TO BE INCLUDED IN AY 1996-97 SO AS T O INVOKE THE EXPLANATION-2 TO SECTION 153. CONSEQUENTLY, THE ARG UMENT THAT THE PROVISIONS OF SEC 153 ARE APPLICABLE CAN NOT BE ACC EPTED ON THESE FACTS. THE ORDER OF THE CIT (A) ON THIS ISSUE IS TO BE UPHELD. THE REVENUE GROUND CONTESTING THE SAID ORDER OF THE CIT (A) ON THIS ISSUE OF REOPENING UNDER SECTION 147, THUS FALLS. E VEN ON MERITS, SINCE THE ISSUES WERE ALREADY CONSIDERED IN REGULAR ASSESSMENTS AND HAS BEEN ADJUDICATED BY THE ITAT, THERE IS NO N EED FOR REOPENING THE ASSESSMENT AT ALL. REVENUE APPEAL IS THUS DISMISSED. ITA NOS.6553 AND OTHERS (9 APPEALS) ASIAN PAINTS LTD MUMBAI PAGE 7 OF 19 ITA NOS. 6226 & 6554/M/06 ASSESSMENT YEARS 1997- 98 ITA NOS. 6222 & 6555/ M/06 ASSESSMENT YEARS 1998-99 & ITA NOS. 6223 & 6556 /M/06 ASSESSMENT YEARS 1999- 00 : 11. IN THESE THREE ASSESSMENT YEARS THE ASSES SEE FILED RETURNS OF INCOME ORIGINALLY WHICH WAS SUBJECT MATTER OF SC RUTINY AND ALSO FURTHER APPEALS BEFORE THE CIT (A) AND THE ITAT. AS STATED EARLIER, CONSEQUENT TO THE SEARCH ACTION CONDUCTED ON ASSESS EE IN MARCH, 2002, THE BLOCK ASSESSMENT UNDER SECTION 158BC OF T HE ACT WAS COMPLETED FOR THE BLOCK PERIOD 1.4.1995 TO 21.3.200 2. THIS BLOCK ASSESSMENT WAS COMPLETED ON 28.11.2003 AND THE ISSU ES WHICH ARE CONSIDERED IN THE BLOCK ASSESSMENT WERE NOT UPHELD ON THE REASON THAT THE ISSUES RAISED BY THE ASSESSING OFFICER IN THE BLOCK ASSESSMENT WERE BASED ON TRANSACTIONS WHICH, BY NO STRETCH OF IMAGINATION COULD BE SAID TO BE UNDISCLOSED TRANSAC TIONS FALLING UNDER SECTION 158BC. ONE OF THE ISSUES FOR CONSIDER ATION IN THE BLOCK ASSESSMENT WAS WHETHER THE SOFTWARE EXPENDITU RE INCURRED BY THE ASSESSEE WAS CAPITAL IN NATURE OR NOT. THE A SSESSING OFFICER, CONSEQUENT TO THE FINDINGS BY THE CIT (A) IN REGULA R ASSESSMENT FOR AY 2000-01, REOPENED THE ASSESSMENT UNDER SECTION 1 47 INVOKING EXPLANATION 2 OF SECTION 153. IT IS AN ADMITTED FAC T THAT THE NOTICE UNDER SECTION 147 FOR THE AY 1997-98 WAS ISSUED BEY OND SIX YEARS AND FOR 1998-99 AND 1999-2000, WERE ISSUED BEYOND F OUR YEARS, BUT WITHIN 6 YEARS. HOWEVER, IN ALL THREE ASSESSMEN T YEARS, THE REASONING RECORDED WAS SAME AND THE SUPPORT WAS DRA WN FROM THE SO CALLED FINDINGS BY THE CIT (A) IN AY 2000-01 WIT H REFERENCE TO THE ADDITIONS MADE IN THAT YEAR ON PROTECTIVE BASIS. IT WAS STATED BY ASSESSING OFFICER WHILE RECORDING THE SATISFACTION IN ALL THE THREE YEARS AS CAN BE SEEN FROM THE ASSESSMENT ORDER. FOR EXAMPLE, THE EXTRACT FROM ORDER IN AY 1997-98 IS AS UNDER: LD.CIT(A) IN HIS APPEAL ORDER HAD RELIED UPON CERT AIN CASE LAWS AND GAVE CLEAR FINDINGS THAT A) IN VIEW OF THE FOREGOINGS IT IS HELD THAT THE I SSUES RAISED BY THE ASSESSING OFFICER ARE BASED ON TRANSA CTION WHICH BY NO STRETCH OF IMAGINATION COULD BE SAID TO BE ITA NOS.6553 AND OTHERS (9 APPEALS) ASIAN PAINTS LTD MUMBAI PAGE 8 OF 19 UNDISCLOSED TRANSACTIONS FALLING UNDER SECTION 158B C OF THE ACT. B) IN GROUNDS OF APPEAL NO.2,3,5 AND 6, THE APPELL ANT COMPANY HAS CHALLENGED ON MERITS, THE ADDITION MADE TO ITS TOTAL INCOME OF EXPENSES INCURRED ON SOFTWARE, UPGRADATION OF PTHALIC PLANT, ALLOCATION OF EXPENS ES FOR TAX FREE DIVIDEND AND INTEREST AND EXPENSES FOR MAK ING EXISTING COMPUTER SYSTEM Y2K COMPLAINT. C) AS STATED ABOVE THESE ISSUES HAVE BEEN CONSIDER ED IN THE REGULAR ASSESSMENT AND DO NOT FALL IN THE PU RVIEW OF BLOCK ASSESSMENT. THE ISSUES HAVE BEEN CONSIDERE D ON MERITS BY ME IN MY APPELLATE ORDER OF EVEN DATE PASSED IN THE CASE OF APPELLANT COMPANY FOR ASSESSM ENT YEAR 2000-01 WHICH MAY BE REFERRED IN THIS REGARD. IT IS SEEN FROM THE RECORDS THAT CERTAIN ISSUES INV OLVED AND CONSIDERED AS UNDISCLOSED INCOME IN BLOCK ASSESSMENT MADE UNDER SECTION 158BC WERE ALSO CONSIDERED FOR ADDITION IN THE REGULAR ASSESSMENT F OR ASSESSMENT YEAR 2000-01 ON PROTECTIVE BASIS AND T HE SAID ADDITIONS WERE CONFIRMED IN APPEAL VIDE ORDER NO. CIT (A)CENTRAL/VIII/DCCC/32/T/29/2003-04 DATED 26/12/2003 FOR ASSESSMENT YEAR 2000-01. HOWEVER, FO R THE PREVIOUS YEAR 1996-97 RELEVANT TO ASSESSMENT YE AR 1997-98, CERTAIN ISSUES INVOLVED IN BLOCK ASSESSMEN T WERE NOT CONSIDERED IN THE REGULAR ASSESSMENT UNDER SECTION 143(3) PASSED ON 15/03/2000. THESE ARE AS FOLLOWS:- I) EXPENSES ON SOFTWARE OF ` .69,63,000/- CLAIMED BY THE ASSESSEE IN THE RETURN AS REVENUE EXPENDITURE ARE TO BE CONSIDERED AS CAPITAL EXPENDITURE AND DEPRECIATION THEREON ALLOWABLE @ 25% TREATING THE SAME AS AN INTANGIBLE ASSET (259 ITR 30) IN THE CASE OF ARAVALI CONSTRUCTION CO. (P) LTD. II) DIVIDEND INCOME OF ` .32,65,330/- AND INTEREST ON TAX FREE BONDS OF ` .47,24,589/- WERE CLAIMED AS DEDUCTION IN THE COMPUTATION OF INCOME. HOWEVER, THE EXPENSES RELATED TO SUCH EXEMPTED INCOME @ 10% WERE NOT CONSIDERED FOR DISALLOWANCE. III) FURTHER DEDUCTION UNDER SECTION 80-O WAS ALLOWED WITHOUT CONSIDERING THE REASONABLE EXPENSES @ 10% OF THE GROSS REMITTANCE AS IN THE SUBSEQUENT YEARS AND CONFIRMED IN APPEAL FOR ASSESSMENT YEAR 2000-01. ACCORDINGLY MY PREDECESSOR ASSESSING OFFICER INVOKE D THE PROVISIONS OF SECTION 153(3)(II), EXPLANATION 2 FOR RE- OPENING THE ASSESSMENT OF ASSESSEE FOR ASSESSMENT YEAR 1996-97 UNDER SECTION 148 OF THE INCOME TAX AC T, 1961, AS THERE WAS REASON TO BELIEVE THAT THE INCOM E ITA NOS.6553 AND OTHERS (9 APPEALS) ASIAN PAINTS LTD MUMBAI PAGE 9 OF 19 CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT FOR AY 199 7- 98. AFTER OBTAINING THE APPROVAL OF CIT AS PER PROV ISIONS OF SECTION 151(1) OF THE I.T. ACT, THE CASE WAS REO PENED AND NOTICE UNDER SECTION 148 DATED 21/04/2005 WAS ISSUED AND SERVED UPON THE ASSESSEE ON 25.04.2005. 12. SIMILAR NOTING WAS MADE IN THE OTHER ASSE SSMENT YEARS ALSO. THE ASSESSEE OBJECTED TO THE REOPENING ON THE REASO N THAT THESE ISSUES WERE ALREADY CONSIDERED AND AGITATED BEFORE VARIOUS AUTHORITIES IN THE REGULAR ASSESSMENT AND THUS THER E IS NO NEED TO REOPEN THE ASSESSMENT ON THESE ISSUES AND FURTHER T HE ASSESSMENT HAVE BEEN COMPLETED UNDER SECTION 143(3), THERE IS NO REASON TO REOPEN THE ASSESSMENT AT ALL AS THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO FURNISH EVIDENCE OR DISCLOSE MATERIAL A S REQUIRED UNDER SECTION 147 AND FURTHER THERE IS NO FINDING / DIREC TION BY THE CIT (A) IN AY 2000-01 SO AS TO INVOKE EXPLANATION 2 OF SEC TION 153. THE ASSESSING OFFICER HOWEVER DID NOT ACCEPT AND TREATE D THE SOFTWARE CAPITALIZATION EXPENSES AS CAPITAL IN NATURE AND AL LOWED DEPRECIATION AT 25%. ONE MORE ISSUE WHICH WAS CONSI DERED BY THE ASSESSING OFFICER IS REGARDING DISALLOWANCE OF EXPE NDITURE FOR EARNING TAX FREE INCOME AND PTHALIC PLANT REVAMPING EXPENDITURE. THE CIT (A) WHILE UPHOLDING THE TREATMENT GIVEN TO SOFTWARE EXPENSES, THE OTHER TWO ADDITIONS HAVE BEEN DELETED . THE REVENUE IS CONTESTING THE DISALLOWANCE OF EXPENDITURE FOR EARN ING TAX FREE INCOME AND PTHALIC PLANT REVAMPING EXPENSES IN THEI R APPEALS. 13. AS SEEN FROM THE ORDERS OF THE CIT (A) AND THE ITAT, THE SO CALLED TAX FREE INCOME BY THE ASSESSING OFFICER IN THE AY 1997-98 WAS TAXABLE IN THAT YEAR AND THEREFORE, THERE IS NO REASON TO DISALLOW ANY EXPENDITURE, THE REASON ON WHICH THE C IT (A) DELETED. IN OTHER YEARS AY 1998-99 AND 1999-2000, THE DISALL OWANCE WAS ORIGINALLY CONSIDERED IN THE REGULAR ASSESSMENT AND THEREFORE, THE ASSESSING OFFICER CANNOT RE-ADJUDICATE THE ISSUE AS THE SAME WERE SUBJECT MATTER OF APPEAL IN ORIGINAL ASSESSMENT AND THE ITAT DECIDED IN FAVOUR OF THE ASSESSEE BY DELETING THE S AID EXPENDITURE IN APPEALS ON REGULAR ASSESSMENTS. WITH REFERENCE TO T HE EXPENDITURE ON PTHALIC PLANT ALSO IN AY 1997-98 THE ITAT ALLOWE D THE ASSESSEES ITA NOS.6553 AND OTHERS (9 APPEALS) ASIAN PAINTS LTD MUMBAI PAGE 10 OF 19 CLAIM BY DISMISSING THE REVENUE APPEAL, SO THE ISSU E NO LONGER SURVIVES. SIMILAR WAS THE CASE WITH THE PTHALIC REV AMPING EXPENSES IN 1999-2000 WHICH WAS RESTORED TO THE FILE OF THE ASSESSING OFFICER BY THE ITAT AND IN THE CONSEQUENTIAL PROCEEDINGS, T HE ASSESSEE GOT RELIEF FROM THE CIT (A) VIDE HIS ORDER DATED 30.11. 2010. IT SEEMS THE REVENUE ACCEPTED THE SAME. THUS IN ALL THREE REVENU E APPEALS, SINCE ORIGINALLY THESE ISSUES WERE ADJUDICATED AND DECIDED, THERE IS NO NEED TO TAKE UP MATTER AFRESH. THE CIT(A) GAVE R ELIEF ON THE SAME REASON THAT THE MATTERS WERE ADJUDICATED IN THE ORI GINAL PROCEEDINGS. THEREFORE, THE REVENUE APPEALS HAVE NO MERIT. THESE ARE ACCORDINGLY DISMISSED. 14. COMING TO THE ISSUE AGITATED BY THE ASSE SSEE REGARDING THE TREATMENT GIVEN TO SOFTWARE EXPENSES AS CAPITAL IN NATURE, THERE IS NO DISPUTE WITH REFERENCE TO THE FACT THAT THIS ISS UE WAS ORIGINALLY ADJUDICATED IN THE REGULAR ASSESSMENT AND THE MATTE RS HAVE REACHED UPTO THE ITAT. CONSEQUENT TO THE ORDERS OF THE ITAT, THE MATTER WAS RE-EXAMINED BY THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT PROCEEDINGS AND THE MATTERS HAVE GONE TO THE CIT (A) AGAIN WHO ACCEPTED ASSESSEES CONTENTION VIDE HIS ORDERS FOR AY 1999-2000 (SUPRA). SINCE THE REVENUE HAS NOT COME I N APPEAL, ISSUE OF SOFTWARE EXPENSES BEING REVENUE EXPENDITUR E HAS BECOME FINAL. IN EARLIER YEARS ALSO, THE ASSESSEE CLAIMED EXPENDITURE AND ASSESSING OFFICER ALLOWED THE SAME AS IT WAS COVERE D U/S35AB. CONSIDERING THESE FACTS, WE DO NOT SEE ANY REASON F OR THE ASSESSING OFFICER TO ADJUDICATE THAT THE SOFTWARE EXPENSES CL AIM AS OF CAPITAL IN NATURE AND TO ADJUDICATE FURTHER ABOUT THE RATE OF DEPRECIATION. ADMITTEDLY ON MERITS, THE ISSUE IS IN FAVOUR OF ASS ESSEE IN ALL ASSESSMENT YEARS. 15. COMING TO THE ISSUE OF JURISDICTION FOR RE OPENING , THERE IS NO DOUBT THAT ORIGINAL ASSESSMENTS HAVE BEEN COMPLETED IN THE NORMAL COURSE AND MANY OF THESE ISSUES WERE CONSIDERED AND ADJUDICATED IN THOSE PROCEEDINGS. EVEN THE SEARCH PROCEEDINGS C ONDUCTED DID NOT GET ANY MATERIAL TO CONSIDER UNDISCLOSED INCOME . THE CIT (A) IN THE APPEAL FOR THE BLOCK ASSESSMENT HAS GIVEN A FIN DING THAT THE ITA NOS.6553 AND OTHERS (9 APPEALS) ASIAN PAINTS LTD MUMBAI PAGE 11 OF 19 ISSUES WERE CONSIDERED IN REGULAR ASSESSMENT AND DO ES NOT SURVIVE IN BLOCK ASSESSMENT. HIS FINDINGS ON THE ISSUE WERE GIVEN IN THE APPELLATE ORDER DATED 26.12.2003, WHEREIN HE HAS CO NSIDERED THE STATEMENT RECORDED FROM THE DIRECTOR VIDE QUESTION NO.9 AND THE ANSWER GIVEN THEREIN AND SUBSEQUENT AFFIDAVIT FILED BY THE ASSESSEE CHAIRMAN AND OTHER SUBMISSIONS TO COME TO THE CONCL USION THAT THE ISSUES RAISED BY THE ASSESSING OFFICER ARE BASED ON TRANSACTIONS WHICH BY NO STRETCH OF IMAGINATIONS COULD BE SAID T O BE UNDISCLOSED TRANSACTIONS FALLING UNDER SECTION 158BC. EVEN THE STATEMENT GIVEN BY THE CHAIRMAN IN THE COURSE OF SEARCH UNDER SECTI ON 132 RELIED ON BY REVENUE TO ASSESS IN BLOCK ASSESSMENT IS AS UNDE R: QUESTION NO.9: ANS. AT THE OUTSET BEFORE GIVING MY OPINION ABOUT THE ISSUES RAISED BY YOU, I WOULD LIKE TO STATE THAT THE COMPA NY HAD ACCOUNTED FOR EACH AND EVERY ENTRY IN ITS REGULAR B OOKS AND RETURNS OF INCOME. THERE HAS BEEN NO CONCEALMENT, M ALAFIDE INTENTIONS, DELIBERATE DESIGN OR CONSCIOUS ATTEMPTS , WHATSOEVER ON THE PART OF THE COMPANY. YOU WILL AGREE THAT THE POINTS COVERED UNDER 4 STATED ISSUES ARE NOTHING BUT A MER E DIFFERENCE OF OPINION ON THE INTERPRETATION OF THE STATUTORY/ACCOUNTING TERMS . THUS, AS CAN BE SEEN FROM THE ABOVE, THE ISSUE OF R EVAMPING EXPENSES OF PTHALIC PLANT, EXPENDITURE OF REVAMPING COMPUTER SYSTEMS ETC., RAISED IN QUESTION NO.9 ARE NOTHING BUT DIFFERENCE OF OPINION BETWEEN REVENUE AND ASSESSEE AS TO THE NATU RE OF EXPENDITURE. ORIGINALLY THESE EXPENDITURES WERE ALL OWED AS REVENUE EXPENDITURE IN THE ASSESSMENTS AND THEREFORE, REOPE NING OF THE ASSESSMENTS ON THE BASIS OF THE SO CALLED SEARCH/FI NDINGS BY THE CIT (A) BEYOND THE STATUTORY PERIOD PERMITTED UNDER THE ACT CANNOT BE UPHELD. THE LEARNED CIT (A) WHILE UPHOLDING THE REOPENING HAS HELD THAT THERE ARE FINDINGS IN AY 2000-01 AND ACCO RDINGLY THE EXTENDED TIME LIMIT UNDER SECTION 153 ARE APPLICABL E AND THEREFORE, THE ASSESSMENTS THOUGH REOPENED BEYOND THE PERIOD P ROVIDED ITA NOS.6553 AND OTHERS (9 APPEALS) ASIAN PAINTS LTD MUMBAI PAGE 12 OF 19 UNDER PROVISIONS OF SECTION 149, THESE WERE VALID B ECAUSE THE ASSESSING OFFICER HAD TIME LIMIT TO ISSUE NOTICE UN DER SECTION 150(2) R.W.S. 153 EXPLANATION-2. AS HELD EARLIER, THERE IS NO FINDING BY THE CIT (A) IN AY 2000-01. CONSEQUENTLY EXPLANATION-2 T O SECTION 153 DOES NOT APPLY TO THE FACTS OF THE CASE. SINCE NO N EW MATERIAL HAS COME ON RECORD, NOR THERE IS ANY FAILURE ON THE PAR T OF THE ASSESSEE IN DISCLOSING THE MATERIAL OR INFORMATION AT THE TI ME OF THE ORIGINAL ASSESSMENT AND HAVING BEEN COMPLETED ASSESSMENT UND ER SECTION 143(3) ORIGINALLY RAISING THE ISSUES, WE HOLD THAT THE PRESENT PROCEEDINGS INITIATED UNDER SECTION 147 ARE BEYOND THE TIME LIMIT PRESCRIBED AND ALSO BEYOND THE JURISDICTION TO REOP EN THE ASSESSMENTS. THE ASSESSEES GROUNDS ARE ALLOWED. AS STATED EARLIER, THE ISSUES ON MERIT DOES NOT SURVIVE. THEREFORE, GR OUNDS RAISED BY THE ASSESSEE ARE CONSIDERED ALLOWED. IN THE RESULT, THREE APPEALS OF THE ASSESSEE IN THESE ASSESSMENT YEARS ARE ALLOWED. ITA NOS.6224 & 6225/MUM/2006: A YS 2000-01 AND 2001 -02 16. IN THESE YEARS, THERE ARE ONLY ASSESSEE S APPEALS ON THE ISSUE THAT THE REASSESSMENT HAS BEEN DONE ON THE RE ASON OF ESCAPEMENT OF INCOME WHEREAS ASSESSEE CONTENDS THAT THERE IS ONLY ON A CHANGE OF OPINION. AS SEEN FROM THE RECORD IN THESE TWO ASSESSMENT YEARS, THE ASSESSMENTS HAVE BEEN ORIGINA LLY COMPLETED, TREATING THE SOFTWARE EXPENDITURE CLAIMED BY THE AS SESSEE AS CAPITAL IN NATURE. EVEN THOUGH SIMILAR DISALLOWANCES WERE A LSO MADE IN THE BLOCK ASSESSMENT, IT WAS CONSIDERED PROTECTIVELY IN THE REGULAR ASSESSMENT. THE ISSUE FOR WHICH REOPENING THE ASSES SMENT WAS MADE WAS ON THE REASON THAT WHILE COMPLETING THE RE GULAR ASSESSMENT, THE ASSESSING OFFICER INSTEAD OF ALLOWI NG DEPRECIATION AT 25%, WRONGLY ALLOWED DEPRECIATION AT 60%. THE LE ARNED CIT (A) UPHELD THE REOPENING ON THE FOLLOWING REASON COMMON LY GIVEN FOR BOTH THE YEARS: 1.10. ON GOING THROUGH THE SUBMISSIONS OF THE APPE LLANT AND APPENDIX-I OF INCOME TAX RULES CONTAINING RATES OF DEPRECIATION THAT IS ALLOWABLE ON DIFFERENT ASSETS, IT IS ITA NOS.6553 AND OTHERS (9 APPEALS) ASIAN PAINTS LTD MUMBAI PAGE 13 OF 19 NOTICED THAT THE CORRECT RATE OF DEPRECIATION ON SO FTWARE IS 25% AND NOT 60% AS ALLOWED BY THE ASSESSING OFFI CER IN THE APPEAL EFFECT ORDER. THE RIGHT TO USE SOFTWA RE IS ONLY A LICENSE TO USE THE SOFTWARE AND, THEREFORE, IT IS AN INTANGIBLE ASSET. SUCH TYPE OF ASSET IS COVERED UND ER PART-B OF OLD APPENDIX-L WHICH IS APPLICABLE UPTO A.Y.2002-03 INCLUDING THE PRESENT A.Y. UPTO A.Y.00 2- 03, ONLY COMPUTERS WERE ELIGIBLE FOR DEPRECIATION @ 60%. THIS IS IN VIEW OF HEM-I I1(2B) OF PART-A OF THE AB OVE REFERRED APPENDIX. THE CLAIM OF THE APPELLANT THAT SOFTWARE SHOULD BE TREATED AS INTEGRAL PART OF THE COMPUTER IS NOT ACCEPTABLE IN VIEW OF THE FACT THAT SOFTWARE IS AN INTANGIBLE RIGHT AND FOR THIS RIGHT, SEPARATE RATE OF DEPRECIATION HAS BEEN PRESCRIBED I N THE INCOME-TAX RULES. IT IS ONLY W.E.F. A.Y.2003-04 THA T SOFTWARE HAS BEEN MADE PART OF COMPUTERS. NOW, AS P ER ITEM NO.III (5) OF PART-A OF NEW APPENDIX, SOFTWARE IS TO BE TREATED AS PART OF THE COMPUTERS. THEREFORE, SOF TWARE WILL BE ENTITLED TO DEPRECIATION @ 60% ONLY W.E.F A.Y.2003-04. THERE WERE REASONS WITH THE ASSESSING OFFICER TO ISSUE NOTICE U/S.148 OF THE INCOME- TAX ACT, 1- 961. THE SUFFICIENCY AND ACCURACY OF THE REASONS IS NOT TO BE EXAMINED AT THE TIME OF ISSUE OF NOTICE AS LO NG AS THE ASSESSING OFFICER HAS ISSUED NOTICE UNDER SECTI ON 148 ON THE HONEST BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE NOTICE OF ASSESSING OFFICER IS NOT BASED ON CHANGE OF OPINION BECAUSE THOUGH THE ASSESSING OFFICER HAS ALLOWED DEPRECIATION TO APPE1 LANT IN THE APPEAL EFFECT ORDER, BUT SCRUTINY OF THE ORD ER REVEALS THAT ASSESSING OFFICER HAS NOT APPLIED HIS MIND AS TO AT WHAT RATE DEPRECIATION SHOULD BE ALLOWED T O THE APPELLANT. WHILE IN THE APPEAL EFFECT ORDER, THE AS SESSING OFFICER HAS ALLOWED DEPRECIATION @ 60% ON SOFTWARE, WHEREAS IN THE ASSESSMENT ORDER FIR THE BLOCK PERIO D, DEPRECIATION @ 25% WAS ALLOWED. THUS, THERE IS TOTA L LACK OF APPLICATION OF MIND ON BEHALF OF THE ASSESS ING OFFICER TO THE ISSUE OF ALLOWANCE OF DEPRECIATION. THUS, IT CANNOT BE SAID THAT BY ISSUING NOTICE U/S.148 ON TH IS ISSUE. THE ASSESSING OFFICER HAS CHANGED HIS OPINIO N. THE ISSUE IS COVERED BY THE DECISION OF THE DELHI H IGH COURT IN THE CASE OF CONSOLIDATED PHOTO & FINVEST LIMITED 281 ITR, 394. IN THIS CASE, THE HONBLE HIG H COURT HAS HELD THAT THERE IS NO PRESUMPTION THAT AL L POSSIBLE ANGLES WERE CONSIDERED IN THE ORIGINAL ASSESSMENT PROCEEDINGS AND REASSESSMENT BASED ON TH E MATERIAL ON RECORD IS NOT A CASE OF CHANGE OF OPINI ON. THEREFORE, NOTICE U/S. 148 IS VALID AND THERE WERE REASONS WITH THE ASSESSING OFFICER TO FORM THE OPIN ION THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT SINCE THE APPELLANT HAS BEEN ALLOWED ITA NOS.6553 AND OTHERS (9 APPEALS) ASIAN PAINTS LTD MUMBAI PAGE 14 OF 19 EXCESSIVE DEPRECIATION. THESE GROUNDS OF APPEAL OF THE APPELLANT ARE NOT ALLOWED. 17. THE LEARNED COUNSEL CONTESTED THE ABOVE ISSU E AND SUBMITTED THAT THESE ISSUES WERE ALREADY ADJUDICATED IN THE O RIGINAL ASSESSMENT AND THE ISSUE OF SOFTWARE EXPENDITURE BE ING REVENUE OR CAPITAL EXPENDITURE WAS RESTORED TO THE FILE OF THE ASSESSING OFFICER BY THE ITAT IN ITA NO.5603/M/2005 AND ITA NO.313/M/ 2004 VIDE THE ORDERS DATED 9.1.2009 AND CONSEQUENT TO THAT TH E ASSESSING OFFICER HELD THE SOFTWARE EXPENDITURE AS CAPITAL IN NATURE, WHEREAS THE CIT (A) IN HIS ORDER DATED 30.11.2010 IN AY 200 0-01 HELD THE EXPENDITURE AS REVENUE IN NATURE AND THE REVENUE HA D NOT COME IN APPEAL. THEREFORE, THE QUESTION OF RATE OF DEPRECIA TION DOES NOT ARISE AS THE ENTIRE EXPENDITURE WAS ALLOWED AS REVENUE. THEREFORE, THERE IS NO ISSUE ON MERITS. EVEN THOUGH HE OBJECTED TO T HE REOPENING OF ASSESSMENT ON VARIOUS PROVISIONS OF LAW/ PROPOSITIO NS ON CASE LAW, SINCE THE EXPENDITURE WAS ALLOWED AS REVENUE EXPEND ITURE IN AY 2000-01, ON WHICH THE REVENUE HAS NOT FURTHER CONTE STED THE ISSUE, RATE OF DEPRECIATION DOES NOT ARISE. THEREFORE, THE ASSESSEE APPEAL IN AY 2000-01 IS ALLOWED. SIMILARLY SINCE THE ISSUE WA S ALREADY RESTORED TO THE FILE OF THE ASSESSING OFFICER IN 20 00-01, TO EXAMINE WHETHER THE EXPENDITURE IS CAPITAL OR REVENUE IN NA TURE, WE ARE OF THE OPINION THAT THE ISSUE RAISED IN RE-ASSESSMENT CANNOT BE ACCEPTED AS VALID REASON FOR THE REOPENING OF THE A SSESSMENT. THEREFORE, WE UPHOLD THE ASSESSEES CONTENTIONS AND ALLOW THE APPEAL. 18. BEFORE CONSIDERING THE ABOVE ISSUES, THE PRINCIPLES LAID DOWN BY THE HON'BLE BOMBAY HIGH COURT IN LOTUS INVE STMENTS LTD V. ACIT, 288 ITR 459 (BOM.) ON THE ISSUE OF LIMITAT ION WAS KEPT IN MIND. THE HON'BLE BOMBAY HIGH COURT HAS HELD AS UND ER: THE POWER CONFERRED UPON THE ASSESSING OFFICER TO I SSUE NOTICE UNDER SECTION 148 OF THE INCOME-TAX ACT, 196 1, FOR REOPENING THE ASSESSMENTS IN CASES WHERE INCOME HAS ESCAPED ASSESSMENT, IS SUBJECT TO THE TIME-LIMIT PRESCRIBED UNDER SECTION 149 OF THE ACT. SECTION 14 9 OF THE ACT (AS SUBSTITUTED BY THE FINANCE ACT, 2001) ITA NOS.6553 AND OTHERS (9 APPEALS) ASIAN PAINTS LTD MUMBAI PAGE 15 OF 19 PROVIDES THAT NO NOTICE UNDER SECTION 148 SHALL BE ISSUED AFTER THE EXPIRY OF SIX YEARS FROM THE END OF THE R ELEVANT ASSESSMENT YEARS IN CASES WHERE THE INCOME CHARGEAB LE TO TAX WHICH HAS ESCAPED ASSESSMENT AMOUNTS TO OR I S LIKELY TO AMOUNT TO RS. 1 LAKH OR MORE. UNDER SECTI ON 150 OF THE ACT, IRRESPECTIVE OF THE LIMITATION PRESCRIB ED UNDER SECTION 149, REASSESSMENT PROCEEDINGS CAN BE INITIA TED AT ANY TIME IF THE INITIATION OF REASSESSMENT IS IN CONSEQUENCE OF, OR TO GIVE EFFECT TO, ANY FINDING O R DIRECTION CONTAINED IN ANY ORDER PASSED BY ANY AUTH ORITY UNDER THE ACT BY WAY OF APPEAL, REFERENCE OR REVISI ON OR BY A COURT IN ANY PROCEEDINGS UNDER ANY OTHER LAW. WHILE CONSTRUING SIMILAR PROVISIONS CONTAINED IN TH E 1922 ACT, THE SUPREME COURT IN THE CASE OF ITO V. MURLIDHAR BHAGWAN DAS [1964152 ITR 335 HELD THAT TH E WORD FINDING CAN BE ONLY THAT WHICH IS NECESSARY FOR THE DISPOSAL OF AN APPEAL IN RESPECT OF AN ASSESSME NT OF A PARTICULAR YEAR. THE SUPREME COURT FURTHER HELD T HAT THE APPELLATE AUTHORITY MAY INCIDENTALLY FIND THAT THE INCOME BELONGS TO ANOTHER YEAR, BUT THAT IS NOT A F INDING NECESSARY FOR THE DISPOSAL OF AN APPEAL IN RESPECT OF THE ASSESSMENT YEAR IN QUESTION. SIMILARLY, THE EXPRESS ION DIRECTION HAS BEEN CONSTRUED BY THE SUPREME COURT TO MEAN A DIRECTION WHICH THE APPELLATE OR REVISIONAL AUTHORITY AS THE CASE MAY BE, IS EMPOWERED TO GIVE UNDER THE SECTIONS MENTIONED THEREIN. APART FROM TH IS, SECTION 150(1) PROVIDES THAT THE POWER TO ISSUE NOT ICE UNDER SECTION 148 IN CONSEQUENCE OF, OR GIVING EFFE CT TO ANY FINDING OR DIRECTION OF THE APPELLATE/ REVISION AL AUTHORITY OR THE COURT IS SUBJECT TO THE PROVISION CONTAINED IN SECTION 150(2) OF THE ACT. SECTION 150 (2) PROVIDES THAT DIRECTIONS UNDER SECTION 150(1) OF TH E ACT CANNOT BE GIVEN BY THE APPELLATE/REVISIONAL AUTHORI TY OR COURT IF ON THE DATE ON WHICH THE ORDER IMPUGNED IN THE APPEAL WAS PASSED, THE REASSESSMENT PROCEEDINGS HAD BECOME TIME-BARRED. THE ASSESSEE WAS AN INVESTMENT COMPANY. IT FILED IT S RETURN FOR THE ASSESSMENT YEAR 1989-90 WHEREIN IT CLAIMED DEPRECIATION. THIS WAS ALLOWED. DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR 1995-96, THE ASSESS EE HAD OBTAINED A SHORT TERM LOAN OF RS. 5 CRORES FROM THE VYSYA BANK LTD. IT WAS THE CASE OF THE ASSESSEE THA T THE LOAN SANCTION LETTER AND OTHER TERMS AND CONDITIONS RELATING TO THE GRANT OF RS.5 CRORES LOAN AS WELL A S THE FULL PARTICULARS RELATING TO THE INTEREST PAID TO T HE BANK DURING THE YEARS UNDER CONSIDERATION WERE FURNISHED DURING THE ASSESSMENT PROCEEDINGS. THIS WAS ALLOWED . SIMILAR ASSESSMENT ORDERS UNDER SECTION 143(3) OF T HE ACT WERE PASSED FOR THE ASSESSMENT YEARS 1996-97 TO 1999-2000 BY ALLOWING INTEREST PAID BY THE ASSESSEE TO ITA NOS.6553 AND OTHERS (9 APPEALS) ASIAN PAINTS LTD MUMBAI PAGE 16 OF 19 THE BANKS AS ALLOWABLE BUSINESS EXPENDITURE. IN SEPTEMBER, 1998, THE ASSESSEES PREMISES WERE SEARCHED AND IN MARCH, 1999, A NOTICE UNDER SECTION 158BC WAS SERVED FOR THE BLOCK PERIOD FROM APRIL 1, 1988, TO SEPTEMBER 30, 1998. THE ASSESSEE FILED A N IL RETURN. IN THE BLOCK ASSESSMENT ORDER IT WAS HELD T HAT THE JOAN OF RS. 5 CRORES OBTAINED BY THE ASSESSEE I N SEPTEMBER, 1994, FROM THE VYSYA BANK LTD. HAD BEEN USED FOR NON-BUSINESS PURPOSES TO THE EXTENT OF RS4 .55 CRORES AND, THEREFORE, INTEREST OF ` 2,39,65,498 PAID TO THE BANK DURING THE BLOCK PERIOD ON THE SAID LOAN O F RS. 5 CRORES WAS NOT ALLOWABLE AS DEDUCTION. IT WAS FU RTHER HELD THAT DURING THE COURSE OF SEARCH AND POST SEAR CH ENQUIRIES, CERTAIN ASSETS WHICH WERE REFLECTED IN T HE BOOKS WERE NOT FOUND AT THE PREMISES OF THE ASSESSE E AND, THEREFORE, THE DEPRECIATION ALLOWED THEREON AMOUNTING TO ` 10,66,429 WAS NOT ALLOWABLE. ACCORDINGLY, BY DISALLOWING THE BANK INTEREST AND DEPRECIATION, THE UNDISCLOSED INCOME OF THE ASSESSE E FOR THE BLOCK PERIOD WAS COMPUTED AT ` 2,50,31,927. ON APPEAL THE COMMISSIONER (APPEALS) HELD THAT THE UNDISCLOSED INCOME COMPUTED IN THE BLOCK ASSESSMENT ORDER BY MAKING DISALLOWANCES OF BANK INTEREST AND DEPRECIATION COULD NOT BE SUSTAINED. THE COMMISSION ER (APPEALS) HOWEVER OBSERVED THAT THE ASSESSING OFFIC ER WAS FREE TO LOOK INTO AND CONSIDER THE SAID DISALLOWANCES UNDER SECTION 148 IN THE RELEVANT ASSESSMENT YEARS IN TERMS OF SECTION 150(1) READ WI TH EXPLANATION 2 TO SECTION 153. THE ASSESSING OFFICER THEREUPON ISSUED NOTICES ALL DATED MARCH 30, 2006, UNDER SECTION 148 TO REOPEN THE ASSESSMENTS FOR THE ASSESSMENT YEARS 1989-90 TO 1999-2000. ON A WRIT PETITION AGAINST THE NOTICES: HELD, THAT THE ASSESSMENTS FOR THE-ASSESSMENT YEARS 1989-90 TO 1999-2000 WERE SOUGHT TO BE REOPENED BY ISSUING NOTICES ON MARCH 30, 2006, WHICH WAS BEYOND SIX YEARS (EXCEPT FOR THE ASSESSMENT YEAR 1999-2000 ) FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THUS, THE NOTICES ISSUED FOR ALL THE ASSESSMENT YEARS (EXCEPT FOR THE ASSESSMENT YEAR 1999-2000) WERE BEYOND THE PERIOD OF LIMITATION PRESCRIBED UNDER SECTION 149 O F THE ACT AND HENCE THEY WERE TIME BARRED. THE COMMISSION ER (APPEALS) HAD GIVEN A CLEAR FINDING THAT THERE WAS NO EVIDENCE OR MATERIAL ON RECORD TO SUSTAIN THE ADDIT IONS AND, HENCE, THE COMMISSIONER (APPEALS) COULD NOT HA VE GIVEN DIRECTIONS TO THE INCOME-TAX OFFICER TO INITI ATE REASSESSMENT PROCEEDINGS. HENCE THE EXTENDED PERIOD OF LIMITATION CONTAINED IN SECTION 150 OF THE ACT WAS NOT AVAILABLE TO THE REVENUE. MOREOVER ON THE DATE OF PASSING OF THE BLOCK ASSESSMENT ORDER ON SEPTEMBER 29, ITA NOS.6553 AND OTHERS (9 APPEALS) ASIAN PAINTS LTD MUMBAI PAGE 17 OF 19 2000, THE ASSESSMENTS FOR MOST OF THE ASSESSMENT YE ARS HAD BECOME TIME-BARRED AND, THEREFORE, EVEN IF THE COMMISSIONER (APPEALS) WERE TO GIVE ANY DIRECTIONS, THEY WOULD BE HIT BY SECTION 150(2). ONCE IT WAS HELD T HAT NO DIRECTIONS HAD BEEN GIVEN BY THE COMMISSIONER (APPEALS) FOR REOPENING THE ASSESSMENTS, THE BENEFI T OF SECTION 150 WAS NOT AVAILABLE TO THE REVENUE AND TH E IMPUGNED NOTICES WHICH WERE TIME-BARRED UNDER SECTI ON 149 OF THE ACT WERE LIABLE TO BE QUASHED. THOUGH TH E NOTICE ISSUED UNDER SECTION 148 OF THE ACT FOR ASSESSMENT YEAR 1999-2000 FELL WITHIN SIX YEARS FRO M THE END OF THE ASSESSMENT, IN VIEW OF THE FACT THAT THE ASSESSING OFFICER HAD NOT OBTAINED APPROVAL OF THE CHIEF COMMISSIONER/ COMMISSIONER BEFORE ISSUING THE NOTIC ES AS CONTEMPLATED UNDER SECTION 151 OF THE ACT, NOTIC E FOR THE ASSESSMENT YEAR 1999-2000 WAS ALSO TIME-BARRED. THE REOPENING OF ASSESSMENTS FOR THE ASSESSMENT YEA RS 1989-90 TO 1999-2000 WERE LIABLE TO BE QUASHED. 19. IN ASSESSEES OWN CASE FOR AY 2003-04 WHEN T HE ASSESSMENT WAS SOUGHT TO BE REOPENED, THE MATTER WAS CONTESTED BY WAY OF WRIT PETITION BEFORE THE HON'BLE HIGH COURT IN W.P. NO.1 351 OF 2008, WHICH WAS DECIDED BY THE JUDGMENT DATED 10.7.2008. THE HON'BLE HIGH COURT HELD AS UNDER: WE HAVE HEARD THE LEARNED COUNSEL APPEARING FOR BO TH SIDES. WE HAVE ALSO GONE THROUGH THE JUDGMENTS ON WHICH RELIANCE WAS PLACED BY THE LEARNED COUNSEL APPEARING FOR BOTH SIDES. IN THE ORDER REJECTING THE OBJECTION RILED BY THE P ETITIONER TO THE NOTICE UNDER SECTION 148, RESPONDENT NO. 1 H AS OBSERVED VERIFICATION OF ASSESSMENT RECORD REVEALS THAT THE SAID DETAILS WERE CALLED FOR BUT INADVERTENTLY THE SAME WERE NOT TAKEN INTO ACCOUNT WHILE FRAMING THE ASSESSMENT AND, THEREFORE, IT CANNOT BE SAID THAT T HERE IS A CHANGE OF OPINION. ACCORDING TO RESPONDENT NO. 1 , THUS, THE RELEVANT MATERIAL WAS AVAILABLE ON RECORD, BUT HE FAILED TO APPLY HIS MIND TO THAT MATERIAL IN MAKING THE ASSESSMENT ORDER. THE QUESTION IS, CAN RESPONDENT N O. 1 TAKE RECOURSE TO THE PROVISION OF SECTION 147 FOR H IS OWN FAILURE TO APPLY HIS MIND TO THE MATERIAL WHICH, AC CORDING TO HIM, IS RELEVANT AND WHICH WAS AVAILABLE ON RECO RD. WE FIND THAT THIS SITUATION HAS BEEN CONSIDERED BY THE FULL BENCH OF THE DELHI HIGH COURT IN ITS JUDGMENT IN THE CASE OF CIT V. KELVINATOR OF INDIA LTD. [2002] 256 ITR 1 AND THE FULL BENCH HAS OBSERVED THUS: ITA NOS.6553 AND OTHERS (9 APPEALS) ASIAN PAINTS LTD MUMBAI PAGE 18 OF 19 THE SAID SUBMISSION IS FALLACIOUS. AN ORDER OF ASSESSMENT CAN BE PASSED EITHER IN TERMS OF SUB- SECTION (1) OF SECTION 143 OR SUB-SECTION (3) OF SE CTION 143. WHEN A REGULAR ORDER OF ASSESSMENT IS PASSED I N TERMS OF THE SAID SUB-SECTION (3) OF SECTI9N 143 A PRESUMPTION CAN BE RAISED THAT SUCH AN ORDER HAS BEEN PASSED ON APPLICATION OF MIND. IT IS WELL KNOW N THAT A PRESUMPTION CAN ALSO BE RAISED TO THE EFFECT THAT IN TERMS OF CLAUSE (E) OF SECTION 114 OF THE I NDIAN EVIDENCE ACT JUDICIAL AND OFFICIAL ACTS HAVE BEEN REGULARLY PERFORMED. IF IT BE HELD THAT AN ORDER WH ICH HAS BEEN PASSED PURPORTEDLY WITHOUT APPLICATION OF MIND WOULD ITSELF CONFER JURISDICTION UPON THE ASSESSING OFFICER TO REOPEN THE PROCEEDING WITHOUT ANYTHING FURTHER, THE SAME WOULD AMOUNT TO GIVING A PREMIUM TO AN AUTHORITY EXERCISING QUASI-JUDICIAL FUNCTION TO TAKE BENEFIT OF ITS OWN WRONG. IT IS CLEAR FROM THE OBSERVATIONS MADE ABOVE THAT T HE FULL BENCH OF THE DELHI HIGH COURT HAS TAKEN A VIEW THAT IN A SITUATION WHERE ACCORDING TO THE ASSESSING OFFICER HE FAILED TO APPLY HIS MIND TO THE RELEVANT MATERIAL I N MAKING THE ASSESSMENT ORDER, HE CANNOT TAKE ADVANTA GE OF HIS OWN WRONG AND REOPEN THE ASSESSMENT BY TAKIN G RECOURSE TO THE PROVISIONS OF SECTION 147. WE FIND, OURSELF, IN RESPECTFUL AGREEMENT WITH THE VIEW TAKEN BY THE FULL BENCH OF THE DELHI HIGH COURT. IT IS FURTHER TO BE SEEN THAT THE LEGISLATURE HAS N OT CONFERRED POWER ON THE ASSESSING OFFICER TO REVIEW ITS OWN ORDER. THEREFORE, THE POWER UNDER SECTION 147 CANNOT BE USED TO REVIEW THE ORDER. IN THE PRESENT CASE, THOUGH THE ASSESSING OFFICER HAS USED THE PHRASE REASON TO BELIEVE, ADMITTEDLY BETWEEN THE DATE OF THE ORDER OF ASSESSMENT SOUGHT TO BE REOPENED AND THE D ATE OF FORMATION OF OPINION BY THE ASSESSING OFFICER, N OTHING NEW HAS HAPPENED, THEREFORE, NO NEW MATERIAL HAS CO ME ON RECORD, NO NEW INFORMATION HAS BEEN RECEIVED, IT IS MERELY A FRESH APPLICATION OF MIND BY THE SAME ASSE SSING OFFICER TO THE SAME SET OF FACTS AND THE REASON THA T HAS BEEN GIVEN IS THAT THE SOME MATERIAL WHICH WAS AVAI LABLE ON RECORD WHILE ASSESSMENT ORDER WAS MADE WAS INADVERTENTLY EXCLUDED FROM CONSIDERATION. THIS WIL L, IN OUR OPINION, AMOUNT TO OPENING OF THE ASSESSMENT ME RELY BECAUSE THERE IS CHANGE OF OPINION. THE FULL BENCH OF THE DELHI HIGH COURT IN ITS JUDGMENT IN THE CASE OF KEL VINATOR [2002] 256 ITR 1 REFERRED TO ABOVE, HAS TAKEN A CLE AR VIEW THAT REOPENING OF ASSESSMENT UNDER SECTION 147 MERELY BECAUSE THERE IS A CHANGE OF OPINION CANNOT BE ALLOWED. IN OUR OPINION, THEREFORE, IN THE PRESENT CASE ITA NOS.6553 AND OTHERS (9 APPEALS) ASIAN PAINTS LTD MUMBAI PAGE 19 OF 19 ALSO, IT WAS NOT PERMISSIBLE FOR RESPONDENT NO. 1 T O ISSUE NOTICE UNDER SECTION 148. 20. KEEPING IN VIEW THE PRINCIPLES ESTABLISHED BY T HE HON'BLE BOMBAY HIGH COURT IN ABOVE CASES, WE HOLD THAT ASSE SSING OFFICER HAS NO JURISDICTION TO REOPEN THE ASSESSMENTS ON TH E REASONS STATED WHILE ISSUING NOTICES U/S 148 IN THESE IMPUGNED ASS ESSMENT YEARS. THE APPEALS ARE ACCORDINGLY DECIDED. 21. IN THE RESULT, THE ASSESSEE APPEALS ARE ALL OWED AND THE REVENUE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND MARCH, 2012. SD/- SD/- ( R.S.PADVEKAR) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 22 ND MARCH, 2012. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI