DCIT, CHENNAI V. M/s. Hyundai Motor India Ltd., Kancheepuram

ITA 704/CHNY/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 4472 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 14-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P B SEKARAN
• Assessee Lawyers: S HARI HARAN
• Keywords: Depreciation; Difference of opinion; Change of opinion; Capital expenditure
• Section: 143(3); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH B CHENNAI BEFORE SHRI ABRAHAM P. GEORGE AND SHRI GEORGE MATHAN, JUDICIAL MEMBER .. I.T.A. NO. 704/MDS/2010 ASSESSMENT YEAR : 2003-04 THE DY. COMMISSIONER OF INCOME-TAX, LARGE TAXPAYER UNIT, CHENNAI. VS. M/S. HYUNDAI MOTOR INDIA LTD., PLOT NO. H-1, SIPCOT INDUSTRIAL PARK, IRRUNGATTUKOTTAI, SRIPERUMPUDURTALUK, KANCHEEPURAM DT. PIN :602105, PAN : AAACH2364M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.B. SEKARAN, CIT-DR RESPONDENT BY : SHRI S. HARI HARAN O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER : THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(APPEALS), LTU, CHENNAI IN APPEAL NO. I.T.A. NO. 73/08-09/LTU(A) DATED 26- 02-2010 FOR THE ASSESSMENT YEAR 2003-04. I.T.A. NO.704/MDS/2010 2 2. SHRI P.B. SEKARAN, LEARNED CIT-DR REPRESENTED ON BEHALF OF THE REVENUE AND SHRI S. HARI HARAN, CHARTERED ACCOUNTANT REPRES ENTED ON BEHALF OF THE ASSESSEE. 3. IN THE REVENUES APPEAL THE REVENUE HAS RAISED T HE FOLLOWING GROUNDS: 1. THE ORDER OF THE LD. CIT(A) IS CONTRARY TO LAW AND FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD. CIT(A) ERRED IN HOLDING THAT THE REOPEN ING OF ASSESSMENT MADE IN THIS CASE IS INVALID. 2.1. HAVING REGARD TO PROVISIONS OF EXPLANATION 1 TO SECTION 147 TO THE EFFECT THAT PRODUCTION BEFORE TH E AO OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD WITH DUE DILIGENCE HAVE BEEN DISCOVE RED BY THE AO WILL NOT NECESSARILY AMOUNT TO DISCLOSURE, H ELD. CIT(A) OUGHT TO HAVE UPHELD THE ACTION OF THE AO. 2.2. IT IS SUBMITTED THAT THE FOLLOWING DECISIONS SUPPORT THE ACTION OF THE AO IN REOPENING OF THE ASSESSMENT MADE IN THIS CASE. (A) CONSOLIDATED PHOTO & FINVEST LT. V. A.C.I.T. (2006) 281 ITR 394) (DELHI HIGH COURT). (B) SRI KRISHNA (P) LTD. VS. I.T.O. (1996) (221 ITR 538 ) (SUPREME COURT ) (C) CALCUTTA DISCOUNT COMPANY. LTD. VS. I.T.O. (196 1) (41 ITR 19 (SUPREME COURT). (D) BAWA ABHAI SINGH VS. DCIT (2001) (117 TAXMANN 12- D DELHI). 3. IT IS PRAYED THAT IN THE EVENT OF ALLOWING THE A BOVE GROUND IN FAVOUR OF THE REVENUE THE LEARNED CIT(A) MAY BE DIRECTED TO DISPOSE OF THE ISSUE ON THE ALLOWABILIT Y OF TECHNICAL KNOW HOW FEES ON MERITS. 4. THE LEARNED CIT(A) ERRED IN DELETING LEVY OF INT EREST U/S. 234D ON THE GROUND THAT SECTION 234D IS APPLICABLE ONLY PROSPECTIVELY FROM THE A.Y. 2004-05. I.T.A. NO.704/MDS/2010 3 4.1. HAVING HELD THAT THE REOPENING OF THE ASSESSME NT ITSELF IS INVALID, THE LEARNED CIT(A) ERRED IN DECIDING THE I SSUE IN RESPECT OF LEVY OF INTEREST U/S. 234D ON MERITS. 4.2. THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE ISSUE RELATING TO LEVY OF INTEREST U/S. 234D HAS ALSO BEC OME ACADEMIC CONSEQUENT TO HIS HOLDING THAT THE REOPENI NG OF THE ASSESSMENT IS INVALID. (AS HAS BEEN DONE BY HIM ON THE ISSUE RELATING TO TECHNICAL KNOW HOW FEES). 5. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED HAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE AO RESTORED . IT WAS SUBMITTED BY THE LEARNED D.R. THAT THE ASSES SEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE, EXPORT AND SALE OF PAS SENGER CARS. THE ASSESSMENT HAD ORIGINALLY BEEN COMPLETED U/S 143(3) OF THE INCOME TAX ACT, 1961 ON 17-03-2006. IT WAS THE SUBMISSION THAT THE ASSESSMENT HAD BEEN REOPENED U/S 147 BY ISSUE OF NOTICE U/S. 148 ON 28- 03-2008. IT WAS THE SUBMISSION THAT THE ASSESSMENT HAD BEEN REOPENED WI THIN THE PERIOD OF 4 YEARS. IT WAS THE SUBMISSION THAT IT WAS NOTICED THAT THE ASSESSEE WAS PAYING ROYALTY OF NEARLY RS. 9.63 CRORES AND THE AO WAS OF THE VIEW T HAT THE SAID ROYALTY PAID WAS A CAPITAL EXPENDITURE. IT WAS THE SUBMISSION THAT THE AO HAD ALLOWED 25% DEPRECIATION ON THE SAID PAYMENT FOR THE TECHNICAL KNOW HOW BY HOLDING IT AS AN INTANGIBLE ASSET WITHIN THE MEANING OF SECTION 32(1 )(II) OF THE ACT. IT WAS THE SUBMISSION THAT THE LEARNED CIT(A) HAD QUASHED THE REOPENING BY HOLDING THAT THE REOPENING WAS ON THE BASIS OF A CHANGE OF OPINI ON AND THAT THE ACTION OF THE I.T.A. NO.704/MDS/2010 4 AO RESULTED IN THE REVIEW OF THE EVIDENCES ALREADY SUBMITTED IN THE COURSE OF THE ORIGINAL ASSESSMENT. IT WAS SUBMITTED BY THE LEARN ED D.R. THAT THE ORDER OF THE LEARNED CIT(A) WAS UNSUSTAINABLE INSOFAR AS THE REA SSESSMENT HAD BEEN DONE WITHIN THE PERIOD OF 4 YEARS AND IN THE ORIGINAL AS SESSMENT ORDER THERE WAS NO DISCUSSION IN RESPECT OF PAYMENT MADE TOWARDS ROYAL TY AND TECHNICAL KNOW FEES. HE VEHEMENTLY SUPPORTED THE ORDER OF THE AO. 4. IN REPLY, THE LEARNED AUTHORIZED REPRESENTATIVE OF THE ASSESSEE DREW OUR ATTENTION TO PAGE 4 PARA 5.2 OF THE ORDER OF THE LE ARNED CIT(A). IT WAS THE SUBMISSION THAT THE DETAILS PERTAINING TO THE LUMP SUM PAYMENT OF TECHNICAL FEES HAD ALREADY BEEN SUBMITTED BY THE ASSESSEE IN THE O RIGINAL ASSESSMENT PROCEEDINGS ON 26-12-2005 AND AFTER CONSIDERING THE EVIDENCES SUBMITTED THE ORIGINAL ASSESSMENT HAD BEEN PASSED. IT WAS THE SU BMISSION THAT THE REOPENING OF THE ASSESSEE WAS NOT ON THE BASIS OF ANY TANGIBL E MATERIAL WHICH HAD COME TO THE ATTENTION OF THE AO AND IT WAS ONLY ON THE BASI S OF THE REAPPRAISAL OF THE EVIDENCES ALREADY SUBMITTED IN THE COURSE OF THE OR IGINAL ASSESSMENT PROCEEDINGS AND WHICH HAD ALSO BEEN CONSIDERED IN T HE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS. HE VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT(A). I.T.A. NO.704/MDS/2010 5 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ASSESSMENT ORDER CLEARLY SHOWS THAT THE ORIGINAL ASSESSMENT HA D BEEN COMPLETED U/S 143(3) OF THE INCOME TAX ACT, 1961 ON 17-03-2006. IT IS A LSO NOTICED THAT THE ASSESSEE HAS CHALLENGED THE REOPENING. IT IS FURTHER NOTICE D THAT THE AO HAS OVERRULED THE ASSESSEES OBJECTION REGARDING THE VALIDITY OF THE REOPENING ON THE GROUND THAT THE ISSUE OF THE PAYMENT OF ROYALTY AND TECHNICAL K NOW FEES BEING TREATED AS A CAPITAL EXPENDITURE HAD NOT BEEN DEALT WITH IN THE ORIGINAL ASSESSMENT ORDER AND THE REOPENING HAD BEEN DONE WITHIN 4 YEARS AND CONS EQUENTLY THE PROVISO TO SECTION 147 WAS NOT APPLICABLE. A PERUSAL OF THE O RDER OF THE LEARNED CIT(A) CLEARLY SHOWS THAT THE DETAILS PERTAINING TO THE LU MP SUM PAYMENT OF TECHNICAL KNOW FEES, THE COPY OF THE AGREEMENT ETC. WERE ALRE ADY SUBMITTED IN THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS ON 26-12-200 5. THE FACT THAT THE AO IN THE COURSE OF THE ORIGINAL ASSESSMENT HAS CALLED FO R THE SAID DETAILS AND HAS EXAMINED THEM AND HAS ACCEPTED THE CLAIM OF THE ASS ESSEE IN THE COURSE OF THE ORIGINAL ASSESSMENT SHOWS THAT THERE IS NO DEFAULT ON THE PART OF THE ASSESSEE. OBVIOUSLY, THE ASSESSEE IS NOT EXPECTED TO ADVISE T HE AO AS TO THE COURSE OF ACTION HE HAS TAKE IN THE ASSESSMENT. THE AO CALLS FOR THE DETAILS AND EXPLANATIONS FROM THE ASSESSEE. THE ASSESSEE IS EX PECTED TO GIVE THE DETAILS AND THE EXPLANATION CALLED FOR. THE AO HAS TO CONS IDER THE EXPLANATION AND THEN MAKE THE ASSESSMENT. JUST BECAUSE HE HAS NOT DISCU SSED ANYTHING REGARDING THE EXPLANATIONS CALLED FOR FROM THE ASSESSEE IN TH E ASSESSMENT ORDER DOES NOT I.T.A. NO.704/MDS/2010 6 MEAN THAT THE ISSUE HAS NOT BEEN CONSIDERED BY THE AO OR THAT HE HAS NOT FORMED AN OPINION ON THE ISSUE. OBVIOUSLY, THE AO WOULD DISCUSS ISSUES IN THE ASSESSMENT ORDER ON WHICH THERE ARE DISPUTES BETWEE N THE AO AND THE ASSESSEE. WHERE THE AO ACCEPTS THE EXPLANATION OF THE ASSESSE E NORMALLY SUCH ISSUES WOULD NOT BE DISCUSSED IN THE ASSESSMENT ORDER. TH E FACT THAT THE AO HAS CALLED FOR THE DETAILS IN THE COURSE OF ORIGINAL ASSESSMEN T PROCEEDINGS IS NOT DISPUTED. ONCE THE DETAILS ARE CALLED FOR AND THEY ARE SUBMIT TED IT IS PRESUMED THAT THE AO HAS APPLIED HIS MIND TO THE ISSUES FOR WHICH THE DE TAILS HAVE BEEN CALLED FOR. THE FACT THAT NO DISCUSSIONS OR ADDITIONS OR DISALL OWANCES HAVE BEEN MADE IN THE COURSE OF THE ASSESSMENT ORDER PASSED ORIGINALLY WO ULD SHOW THAT THE AO HAS FOUND THE CLAIM OF THE ASSESSEE TO BE REASONABLE AN D ACCEPTABLE. THUS THE AO HAS ALREADY FORMED AN OPINION ON THE BASIS OF THE E VIDENCES FILED IN THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS. BY RE-EXAM INING THE SAME AND DRAWING A DIFFERENT INFERENCE IT WOULD ONLY MEAN THAT THERE IS A CHANGE OF OPINION. THIS IS NOT PERMISSIBLE FOR REOPENING. THIS VIEW IS SUP PORTED BY THE DECISION OF THE HON'BLE SUPREME COURT IN CIT V. KELVINATOR OF INDIA LTD. REPORTED IN 320 ITR 561. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE REOPENING OF THE ASSESSMENT AS DONE BY THE AO IS BAD IN LAW. IT IS ALSO NOTICED THAT THE LEARNED CIT(A) HAS FOLLOWED THE DECISION OF THE HON'BLE SUP REME COURT IN THE CASE OF KELVINATOR INDIA LTD., REFERRED TO SUPRA, TO HOLD THAT THE AO HAS NO POWER TO REVIEW AND HAS THE POWER ONLY TO DO REASSESSMENT AN D THAT THE REOPENING DONE I.T.A. NO.704/MDS/2010 7 IN THE PRESENT CASE IS ON A CHANGE OF OPINION. IN THE CIRCUMSTANCES, THE FINDING OF THE LEARNED CIT(A) ON THIS ISSUE STANDS CONFIRME D. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. 7. THE ORDER WAS PRONOUNCED IN THE COURT ON 23-07-2 010. SD/- SD/- (ABRAHAM P. GEORGE) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 23 RD JULY, 2010. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE