DCIT, CHENNAI V. Doosan Power Systems India Private Limited, CHENNAI

ITA 663/CHNY/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5936 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-06-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 18-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Tangible material

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: CHENNAI , ! . , ' BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER , AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.663/MDS/2016 /ASSESSMENT YEAR: 2004-05 THE DY. COMMISSIONER OF INCOME- TAX, CORPORATE CIRCLE-1(1), CHENNAI-600 034. VS. M/S.DOOSAN POWER SYSTEMS- INDIA PVT. LTD., (FORMERLY DOOSAN BABCOCK ENERGY INDIA PVT. LTD.), ASIA TOWER, NO.186-187, POONAMALLE HIGH ROAD, KILPAUK, CHENNAI-600 010. [PAN: AAACM 4878 K ] ( & /APPELLANT) ( '(& /RESPONDENT) CROSS-OBJECTION NO.80/MDS/2016 /ASSESSMENT YEAR: 2004-05 M/S.DOOSAN POWER SYSTEMS- INDIA PVT. LTD., (FORMERLY DOOSAN BABCOCK ENERGY INDIA PVT. LTD.), ASIA TOWER, NO.186-187, POONAMALLE HIGH ROAD, KILPAUK, CHENNAI-600 010. VS. THE DY. COMMISSIONER OF- INCOME TAX, CORPORATE CIRCLE-1(1), CHENNAI-600 034. [PAN: AAACM 4878 K] ( & /APPELLANT) ( '(& /RESPONDENT) DEPARTMENT BY : MR.ARV SREENIVASAN, JCIT ASSESSEE BY : MR.RAVI SHARMA, CA * /DATE OF HEARING : 24.10.2017 * /DATE OF PRONOUNCEMENT : 24.10.2017 ITA NO.663/MDS/2016 & CO NO.80/MDS/2016 :- 2 -: / O R D E R PER GEORGE MATHAN , JUDICIAL MEMBER : ITA NO.663/MDS/2016 IS AN APPEAL FILED BY THE REVE NUE AND CO NO.80/MDS/2016 IS A CROSS-OBJECTION FILED BY THE A SSESSEE IN REVENUES APPEAL NO.663/MDS/2016 AGAINST THE ORDER OF THE COM MISSIONER OF INCOME TAX (APPEALS)-1, CHENNAI, IN ITA NO.902/11-1 2/A-III (NEW ITA74/CIT(A)-1/2011-12 DATED 08.12.2015 FOR THE AY 2004-05. 2. MR.ARV SREENIVASAN, JCIT CIT REPRESENTED ON BEHA LF OF THE REVENUE AND MR.RAVI SHARMA, CA, REPRESENTED ON BEHALF OF TH E ASSESSEE. 3. IT WAS SUBMITTED BY THE LD.AR THAT IN THE CROSS- OBJECTION, THE ASSESSEE HAS CHALLENGED THE RE-OPENING OF ASSESSMEN T. AS THE CROSS- OBJECTION GOES TO THE ROOT OF THE ASSESSMENT, THE C ROSS-OBJECTION IS ADJUDICATED FIRST. IT WAS SUBMITTED BY THE LD.AR T HAT THE ASSESSEE HAD FILED ITS RETURN OF INCOME ORIGINALLY ON 31.10.2004 AND THE ASSESSMENT CAME TO BE COMPLETED U/S.143(3) ON 08.12.2006. IT WAS A SUBMISSION THAT SUBSEQUENTLY NOTICE U/S.148 CAME TO BE ISSUED ON 28.03.2011 AND THE ASSESSMENT CAME TO BE COMPLETED ON 28.12.2011. THE LD.AR DREW OUR ATTENTION TO PAGE NO.19 OF THE PAPER BOOK WHICH IS A COPY OF THE NOTICE ISSUED U/S.148. THE REASONS RECORDED AT PAG E NO.20, WHEREIN THE REASONS ARE MENTIONED AS FOLLOWS: ITA NO.663/MDS/2016 & CO NO.80/MDS/2016 :- 3 -: GOVERNMENT OF INDIA OFFICE OF THE ASSISTANT COMMISSIONER OF INCOME TAX COMPANY CIRCLE-I(4), 121, MAHATMA GANDHI ROAD, AAYAKAR BHAVAN, NEW BLOCK VI FLOOR, CHENNAI-34 PAN NO.AAACM 4878 K DT: 24.05.2011 TO M/S.DOOSAN POWER SYSTEMS INDIA P LTD., (FORMERLY KNOWN AS DOOSAN BABCOCK ENERGY INDIA P. L TD.), 5 TH FLOOR, GEE GEE UNIVERSAL, 2 MC NICHOLS ROAD, CHETPET, CHENNAI-31. SIRS, SUB: REASONS FOR RE-OPENING THE CASE U/S.1486 AY 2004-05 REG. REF: 1. THIS OFFICE NOTICE DATED 28.03.2011. 2. YOUR LETTER DATED 11.05.2011 **** PLEASE REFER TO THE ABOVE. THE REASONS FOR RE-OPENING YOUR CASE FOR THE Y 200 4-05 IS COMMUNICATED AS UNDER: THE ASSESSEE HAS CLAIMED RS.92,00,000/- TOWARDS L OSS PROVISION (CONTRACT EXPENSES). PROVISION TOWARDS AN UNASCERTAINED LIABIL ITY IS NOT ALLOWABLE UNDER THE ACT AND THEREFORE IT HAS TO BE DISALLOWED. IN THE P&L ACCOUNT, THE ASSESSEE HAS CREDITED RS.7 3,82,11S/- AS SEEN FROM SCH. 10 OTHER INCOME, UNDER THE HEAD LIABILITIES NO LONGE R REQUIRED WRITTEN BACK. HOWEVER, IN THE INCOME COMPUTATION STATEMENT, INSTEAD OF DEDUCT ING ONLY THIS AMOUNT, THE ASSESSEE HAS DEDUCTED AN AMOUNT OF RS.3,05,12,806/- AS PROVI SIONS WRITTEN BACK. THUS, THERE IS AN EXCESS DEDUCTION BY THE ASESSEE TOWARDS PROVISION W RITTEN BACK VIZ., 2,31,30,691/. YOURS FAITHFULLY, SD/- (R.MUKUNDAN) ASST. COMMISSIONER OF INCOME TAX COMPANY CIRCLE-1(4), CHENNAI-34 4. THE LD.AR FURTHER DREW OUR ATTENTION TO PAGE NO. 21 OF THE PAPER BOOK WHICH IS A COPY OF THE LETTER FROM THE ASSESSE E TO THE DCIT, COMPANY CIRCLE-6(1), NEW DELHI DATED 09.11.2006 WHE REIN AT PAGE NO.22 IN PARA NO.3 & 4 AS EXTRACTED BELOW: 3. MOVEMENT OF PROVISION FOR LIQUIDATED DAMAGES: S. NO. PARTICULARS AMOUNT REMARKS 1 OPENING BALANCE AS ON 01.04.2003 6,09,01,428 REFER SCHEDULE 8 OF THE FINANCIALS 2 PROVISION MADE DURING THE YEAR - - 3 PROVISION REVERSED DURING THE YEAR 2,51,30,222 PROVISION FOR LD FOR GODAVARI PROJECT A MOUNTING TO RS.1,66,00,000 AND FOR TALCHER 123 PROJECT AMOUNTING TO RS.85,30,222 ADJUSTED. 4 CLOSING BALANCE AS ON 31.03.2004 3,57,71,206 REFER SCHEDULE 8 OF THE FINANCIALS ITA NO.663/MDS/2016 & CO NO.80/MDS/2016 :- 4 -: THE PROVISION FOR LIQUIDATED DAMAGES, ADJUSTED DURI NG THE YEAR, WAS CREATED DURING THE FY 2002-03 AND THE SAME WAS ADDED BACK WHILE COMPUTING THE TAXABALE INCOME FOR AY 2003- 04 (REFER COPY OF TAX COMPUTATION FOR AY 2003-04 AT TACHED AS ANNEXURE-4 FOR YOUR REFERENCE), SINCE THEPROVISION FOR LIQUIDATED DAMAG ES, WHEN CREATED WAS NOT ALLOWED AS DEDUCTION WHILE COMPUTING TAXABLE INCOME, THE SAME HAS BEEN CLAIMED AS DEDUCTION ON REVERSAL. 4. NOTE ON LOSS PROVISION OF RS.92,00,000/-: DURING FY 1999-2000, THE ASSESSEE WAS AWARDED CONTR ACT FOR ENGINEERING SUPPLY, ERECTION, TESTING & COMMISSIONING OF STEAM GENERATOR AND AUXI LIARIES ON A TOTAL TURNKEY BASIS BY BSES LTD., FOR ITS CUSTOMER THE GODAVARI SUGARS. L ATER ON THE BSES LTD., WAS ACQUIRED BY RELIANCE ENERGY LTD. (REL). 5. THE ISSUES WHICH HAVE BEEN RAISED IN THE REASONS RECORDED IN THE OPENING HAD ALREADY BEEN CONSIDERED IN THE COURSE O F THE ORIGINAL ASSESSMENT. IT WAS A SUBMISSION THAT IN VIEW OF TH E DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA REPORTED 320 ITR 561 (SC), THE RE-OPENING HAVING BEEN DONE BEYOND FO UR YEARS AND THE ISSUE ON WHICH THE RE-OPENING WAS PROPOSED HAD ALRE ADY BEEN CONSIDERED IN THE REGULAR ASSESSMENT, RE-OPENING WAS BAD IN LA W. IT WAS A SUBMISSION THAT THERE WAS NO TANGIBLE MATERIAL AVAI LABLE WITH THE AO TO COME TO THE CONCLUSION THAT THERE WAS AN ESCAPEMENT OF INCOME FROM ASSESSMENT. IT WAS A SUBMISSION THAT THE RE-OPENING WAS LIABLE TO BE QUASHED. 6. IN REPLY, THE LD.DR VEHEMENTLY SUPPORTED THE ORD ER OF THE AO ON THE ISSUE OF RE-OPENING. THE LD.DR DREW OUR ATTENT ION TO PARA NO.5 OF THE ORDER OF THE LD.CIT(A) TO SUPPORT THE ISSUE OF RE-O PENING. IT WAS A SUBMISSION THAT THE EXPLANATION TO SEC.147 CAME TO THE RESCUE OF THE REVENUE AND ASSESSMENT MADE ON INCOME WHICH IS UNDE R-ASSESSED OR ASSESSED AT TOO LOW RATE OF TAX OR WHERE EXCESS REL IEF GIVEN OR WHERE ITA NO.663/MDS/2016 & CO NO.80/MDS/2016 :- 5 -: EXCESSIVE LOSS OR DEPRECIATION ALLOWED WOULD BE SUC H CASES WHERE INCOME CHARGEABLE TO TAX WOULD BE DEEMED TO HAVE ESCAPED A SSESSMENT. IT WAS A SUBMISSION THAT THE RE-OPENING WAS LIABLE TO BE U PHELD. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. ADMIT TEDLY, THIS IS A CASE WHERE THE RE-OPENING HAS BEEN DONE BEYOND FOUR YEAR S FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE FIRST PROVISO CL EARLY SPECIFIES THAT FOR THE PURPOSE OF RE-OPENING IN SUCH CASES, THERE MUST BE A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT YEAR. IN THE PRESENT CA SE, A PERUSAL OF THE REASONS RECORDED SHOWN THAT THERE IS NO SUCH FINDIN GS BY THE AO THAT THERE HAS BEEN A FAILURE ON THE PART OF THE ASSESSE E TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSME NT FOR THE RELEVANT ASSESSMENT YEAR. FURTHER ON PERUSAL OF THE REASONS RECORDED SHOWS THAT NO FRESH MATERIAL HAS COME TO THE POSSESSION OF THE AO FOR THE PURPOSE OF RE-OPENING, MUCH LESS ANY TANGIBLE MATERIAL IS BEIN G REFERRED TO. THE REASONS RECORDED CLEARLY SHOWS THAT IT IS A JUST RE APPRAISAL OF THE BALANCE SHEET AND P&L A/C OF THE ASSESSEE ON THE BASIS OF W HICH THE OPINION HAS BEEN FORMED FOR THE PURPOSE OF RE-OPENING. THIS IS NOT PERMISSIBLE, THIS VIEW OF OUR FINDINGS SUPPORT FROM THE DECISION OF T HE HONBLE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA REFERRED T O SUPRA. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE RE-OPENI NG AS HAS BEEN DONE BY RECORDING THE REASONS AND THE ISSUANCE OF SHOW C AUSE NOTICE U/S.148 DATED 28.03.2011 FOR THE AY 2004-05 IS UNSUSTAINABL E IN LAW AND ITA NO.663/MDS/2016 & CO NO.80/MDS/2016 :- 6 -: CONSEQUENTLY WE QUASHED THE SAME. AS WE HAVE QUASH ED THE RE-OPENING, THE OTHER ISSUES RAISED IN THE CROSS-OBJECTION FILE D BY THE ASSESSEE NO MORE SURVIVE. SIMILARLY, AS WE HAVE QUASHED THE RE -OPENING, THE REVENUES APPEAL IN ITA NO.663/MDS/2016 WOULD NOT S URVIVE AND THE SAME STANDS DISMISSED AS INFRUCTUOUS. 8. IN THE RESULT, THE CROSS-OBJECTION FILED BY THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON OCTOBER 24, 2017, AT CHENNAI. SD/- SD/- ( . ) ( A. MOHAN ALANKAMONY ) ! /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) ! /JUDICIAL MEMBER /CHENNAI, 0 /DATED: OCTOBER 24, 2017. TLN * '12 32 /COPY TO: 1. & /APPELLANT 4. 4 /CIT 2. '(& /RESPONDENT 5. 2 ' /DR 3. 4 ( ) /CIT(A) 6. /GF