VGA Digital Printers Pvt.Ltd, Pune V. DCIT, Pune

ITA 734/PUN/2010

• Counselvise Citation: 73424514 RSA 2010
• Duration Of Justice: 3 year(s) 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 18-09-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 12-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MODI
• Keywords: Depreciation; Bad and doubtful debts; Difference of opinion; Change of opinion
• Section: 148; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.734/PN/2010 (A.Y. 2004-05) VGA DIGITAL PRINTERS PVT. LTD., OFFICE NO.9, 2 ND FLOOR, SIDDHARTH CHAMBERS, 27-B, BUDHWAR PETH, PUNE PAN: AABCV7000K APPELLANT VS. DY. CIT, CIRCLE-7, PUNE RESPONDENT APPELLANT BY : SHRI M.K. KULKARNI RESPONDENT BY : SHRI A.K. MODI DATE OF HEARING : 28-11-2013 DATE OF PRONOUNCEMENT : 29-11-2013 ORDER PER SHAILENDRA KUMAR YADAV, JM: THIS APPEAL FILED BY REVENUE AGAINST THE ORDER OF CIT(A)-I, NASHIK DATED 21-08-2012 FOR THE A.Y. 2004-05. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE ASSESSMENT IS VITIATED IN LAW AS THE LD. A .O. FAILED TO PASS A 'SPEAKING ORDER' ON THE OBJECTIONS RAIS ED AGAINST THE RE-OPENING OF THE ASSESSMENT AS MANDATED BY THE HON'BLE SUPREME COURT IN GKN'S CASE. THE LD. C.I .T. (A) WAS NOT JUSTIFIED TO UPHOLD ACTION OF THE ASSESSING OFFICER. THE ASSESSMENT BE ANNULLED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE RE-ASSESSMENT MADE U/S.147 IS ALSO VITIATED IN LAW SINCE IT AMOUNTS TO CHANGE OF OPINI ON ONLY AS ORIGINAL ASSESSMENT WAS MADE U/S.143(3) R.W.S.14 7 OF THE ACT DT. 16-12-2008. THE ASSESSMENT THEREFORE, BE ANNULLED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW IT TRANSPIRES THAT THE ACTION TO RE-OPEN THE ASSESSMENT WAS BASED ON THE INFORMATION/ OPINION OF THE AUDIT PARTY. THIS CANNOT BE TERMED AS 'INFORMATION TO BELIEVE' I N ACCORDANCE WITH THE PROVISIONS OF S.147 OF THE ACT AND THEREFORE ASSESSMENT IS BAD IN LAW AND IT BE ANNULLED. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE PROPRIETARY CONCERN WAS CONVERTED INTO PRIVATE LIMITED COMPANY FOLLOWING THE PROVISION OF S. 47 (XIV) OF T HE ACT. THE STATUTE HAS GRANTED THIS LEGAL CONCESSION AND THERE FORE DID NOT AMOUNT TO 'TRANSFER. IT BE HELD ACCORDINGLY. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW AND IN VIEW OF THE LEGAL POSITION EXPLAINED BY HON' BLE ITAT AHMEDABAD BENCH IN THE CASE OF AMIN MACHINARY PVT. LTD. 114 ITD 413, THE ASSESSING OFFICER WAS NOT JUSTIFIE D IN REJECTING THE CLAIM OF DEPRECIATION OF THE ASSESSEE . THE ASSESSEE-COMPANY WAS ENTITLED TO CLAIM DEPRECIATION INDEPENDENTLY AS THE ASSETS WERE USED BY IT FOR MOR E THAN 180 DAYS. THE LD. C.I.T. (A) WAS NOT JUSTIFIED IN C ONFIRMING THE ORDER OF THE ASSESSING OFFICER. THE DEPRECIATIO N BE ALLOWED ACCORDINGLY. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. A.O. ERRED IN DISALLOWING THE CLAIM OF BAD DEBTS OF RS.11,67,897/- AS THE ASSESSEE COMPANY TOOK OVER TH E ENTIRE BUSINESS TRANSACTIONS COMMENCING FROM 01-04-2003 AN D ENDING AS ON 31.03.2004 WHICH INCLUDED THE PRE- INCORPORATION PERIOD OF THE ASSESSEE COMPANY. HAVIN G ACCEPTED SUCH AND HAVING DISCLOSED THE INCOME PERTA INING TO EARLIER PERIOD AND HAVING ACCEPTED THE ENTIRE ASSET S AND LIABILITIES OF THE PROPRIETARY CONCERN AND ALSO HAV ING DECLARED INCOME OUT OF RECOVERY OF BAD DEBTS CLAIMED THE ASS ESSEE COMPANY WAS ENTITLED TO A CLAIM OF BAD DEBTS U/S. 3 6 (1)(VII) OF THE ACT. THE LD. C.I.T. (A) WAS NOT JUSTIFIED IN CONFIRMING THE ORDER OF ASSESSING OFFICER. THE CLAIM BE ALLOWE D. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. A.O. IS NOT JUSTIFIED IN LEVYING INTEREST 2 34-B AND 234-C OF THE ACT AND THE SAME BE QUASHED. 8. THE APPELLANT CRAVES TO LEAVE, ADD/AMEND OR ALTER A NY OF THE ABOVE GROUNDS OF APPEAL. 2. THE ASSESSEE FILED RETURN OF INCOME ON 01.11.200 4 DECLARING TOTAL LOSS OF RS.21,42,692/-. ASSESSMENT U/S.143(3 ) R.W.S. 147 WAS COMPLETED ON 30.10.2006 DETERMINING TOTAL LOSS OF R S.20,67,692/-. SUBSEQUENTLY, THE ASSESSING OFFICER NOTICED THAT TH E ASSESSEE COMPANY CAME INTO EXISTENCE IN JULY, 2004 AFTER CON VERSION OF ITS SOLE PROPRIETARY CONCERN AND THEREFORE, ON APPORTIO NMENT OF DEPRECIATION AS PER THE IT ACT FROM THE PERIOD BEFO RE 01.7.2004 AND FROM AND AFTER JULY, 2004, THE DEPRECIATION FROM TH E PREDECESSOR WAS RS.28,06,571/- AND THAT FOR THE SUCCESSOR COMPANY W AS RS.84,19,715/-. THE ASSESSING OFFICER ALSO NOTICED THAT THE BAD DEBTS WRITTEN OFF AMOUNTING TO RS.11,67,897/- WERE ALLOWED EVEN THOUGH THE SAME WERE NOT CREATED AFTER EXISTENCE OF THE BUSINESS OF THE COMPANY AS REQUIRED IN THE SAID PROVISION. THE ASSESSING OFFICER WAS OF THE VIEW THAT ON ACCOUNT OF EXCESSIVE CLAIM OF DEPRECIATION AND BAD DEBTS MADE BY THE COMPANY, THE INCOME CHARG EABLE TO TAX FOR THE YEAR UNDER CONSIDERATION HAD ESCAPED ASSESS MENT. ACCORDINGLY, THE ASSESSING OFFICER INITIATED REASSE SSMENT PROCEEDINGS BY ISSUING NOTICE U/S 148 AND PASSED TH E REASSESSMENT ORDER AFTER DISALLOWING ASSESSEE'S CLAIM OF DEPRECI ATION OF RS.28,06,571/- AND BAD DEBTS RS.11,67,897/-. MATTE R WAS CARRIED BEFORE FIRST APPELLATE AUTHORITY, WHEREIN, THE ISSU E DECIDED AGAINST THE ASSESSEE ON THE ISSUE OF RE-OPENING AS WELL AS MERIT. 2.1 BEFORE US, LEARNED AUTHORIZED REPRESENTATIVE SU BMITTED THAT ASSESSMENT WAS VITIATED IN LAW AS ASSESSING OFFICER FAILED TO PASS A SPEAKING ORDER ON OBJECTIONS RAISED AGAINST RE-OPEN ING OF THE ASSESSMENT AS MANDATED BY HONBLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS PVT. LTD., AND CIT(A) WAS NOT JUSTI FIED IN UPHOLDING THE ACTION OF ASSESSING OFFICER. IN FACT AND CIRCU MSTANCES OF THE CASE AND IN LAW, RE-ASSESSMENT MADE U/S.147 WAS VITIATED IN LAW SINCE IT AMOUNTS TO CHANGE OF OPINION ONLY AS ORIGINAL ASSES SMENT WAS MADE U/S.143(3) R.W.S.147, DATED 16.12.2008. LEARNED AU THORIZED REPRESENTATIVE SPECIFICALLY SUBMITTED THAT HE HAS F ILED OBJECTIONS BEFORE ASSESSING OFFICER AS DETAILED AT PAGE NOS.1- 10 OF THE PAPER BOOK AND SUBMITTED THAT THESE OBJECTIONS HAVE NOT B EEN TAKEN INTO CONSIDERATION WHILE PASSING IMPUGNED ORDER. IT AMO UNTS TO NON- SPEAKING ORDER BY LOWER AUTHORITIES. MAIN THRUST O F THE LEARNED AUTHORIZED REPRESENTATIVE IS THAT OBJECTIONS TO THE REASONS RECORDED FOR RE-OPENING RAISED HAVE NOT BEEN DISPOSED OFF BY WAY OF SPEAKING ORDER, WHICH IS NOT JUSTIFIED. 2.2 FINDING FORCE IN THE CONTENTION OF THE LEARNED AUTHORIZED REPRESENTATIVE, WE SET ASIDE THE MATTER TO ASSESSIN G OFFICER WITH A DIRECTION TO DECIDE THE ISSUE AT HAND INCLUDING ON THE POINT OF OBJECTIONS RAISED ON BEHALF OF ASSESSEE WITH REGARD TO REASONS RECORDED AND AS PER FACTS AND LAW AFTER PROVIDING D UE OPPORTUNITY OF HEARING TO THE ASSESSEE. SINCE WE ARE RESTORING TH E ISSUE TO THE ASSESSING OFFICER ON PRELIMINARY ISSUE, WE ARE REFR AINING TO COMMENT ON THE MERIT OF THE ISSUE AT HAND. 3. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSES AS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS THE 29 TH DAY OF NOVEMBER, 2013. SD/- SD/- (G.S. PANNU) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED 29 TH NOVEMBER, 2013 GCVSR COPY TO:- 1) ASSESSEE 2) DEPARTMENT 3) THE CIT(A)-III, PUNE 4) THE CIT-III, PUNE 5) THE DR, B BENCH, I.T.A.T., PUNE 6) GUARD FILE //TRUE COPY// BY ORDER SENIOR PRIVATE SECRETARY ITAT PUNE BENCHES, PUNE