W.B. Engineers International Pvt.Ltd, Pune V. Dy. Commissioner of Income Tax - (HQ)-IV, Pune

ITA 755/PUN/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7088 (ITAT-PUNE)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 11-03-2020
• Assessment Year: 2006-2007
• Appeal Filed On: 15-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ARISES OUT OF PASSED
• Keywords: Depreciation; Additional depreciation; Capital expenditure
• Section: 143(3); 208; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT . / ITA NO. 755/PUN/2019 / ASSESSMENT YEAR : 2006-07 W.B. ENGINEERS INTERNATIONAL PVT. LTD., ROOM NO.3, GRAM PANCHAYAT AT MILKAT PROP. NO.480, SHIKRAPUR, TAL. SHIRUR, PUNE 412 208 PAN AAACW1016H VS. DCIT (HQ)-IV, PUNE (APPELLANT) (RESPONDENT) / ORDER PER R.S.SYAL, VP : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSE D BY THE CIT(A)-5, PUNE ON 30-11-2018 IN RELATION TO THE ASSESSMENT YEAR 2006-07. 2. FIRST ISSUE RAISED IN THIS APPEAL IS A CHALLENGE TO THE INITIATION OF RE-ASSESSMENT PROCEEDINGS. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSE E FILED ITS RETURN DECLARING LOSS OF RS.47,70,227/-, WHICH WAS APPELLANT BY SHRI NIKHIL PATHAK RESPONDENT BY SMT. VRANDA U. MATKARI DATE OF HEARING 04-02-2020 DATE OF PRONOUNCEMENT 05-02-2020 ITA NO. 755/PUN/2019 W.B. ENGINEERS INTERNATIONAL PVT. LTD., 2 REVISED TO LOSS OF RS.37.75 LAKH. THE ASSESSING OFFICER (AO) COMPLETED THE ASSESSMENT U/S. 143(3) OF THE INCOME-TAX AC T, 1961 (HEREINAFTER ALSO CALLED `THE ACT) VIDE ORDER DATED 30 -06- 2008. THEREAFTER, THE AO INITIATED THE INSTANT PROCEEDINGS BY MEANS OF NOTICE U/S.148 AND MADE THE DISALLOWANCE OF THE ADDITIONAL DEPRECIATION CLAIMED @10% ON STONE CRUSHING EQUIPMENT ACQUIRED DURING THE YEAR AMOUNTING TO RS.41,54,127/-. THE ASSESSEE CHALLENGED THE ORDER BEF ORE THE LD. CIT(A) BUT WITHOUT SUCCESS. 4. I HAVE HEARD BOTH THE SIDES AND PERUSED THE RELEVAN T MATERIAL ON RECORD. THE FIRST ISSUE IS AGAINST THE INITIATION O F RE-ASSESSMENT PROCEEDINGS. IT IS NOTICED THAT THE ORIGINAL ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT ON 30-06- 2008. NOTICE U/S.148 OF THE ACT WAS ISSUED ON 22-03-2013 , WHOSE COPY HAS BEEN PLACED ON PAGE 1 OF THE PAPER BOO K. COPY OF THE REASONS HAVE BEEN PLACED AT PAGE 3 OF THE P APER BOOK, WHICH READ AS UNDER : AS PER THE PROVISION OF SECTION 32(II) OF THE IT ACT, ADDITIONAL DEPRECIATION ALLOWABLE AT SPECIFIED RATE ON PLANT AND MACHINERY ACQUIRED AND PUT TO USE DURING THE YEAR TO AN ASSESSEE WHO ARE ENGAGED IN THE MANUFACTURING AND OR PROCESSING OF AN ARTICLE OR THING. FURTHER, IT IS JUDICIALLY HELD IN THE CASE OF M/S. BEHRAGHAT ITA NO. 755/PUN/2019 W.B. ENGINEERS INTERNATIONAL PVT. LTD., 3 MINERAL LTD. VS. CIT (246 ITR 230) THAT CRUSHING OF STONE DOES NOT TANTAMOUNT TO MANUFACTURING. THE ASSESSEE COMPANY ENGAGED IN THE BUSINESS OF TRADING OF SPARE PART OF EARTH MOVING EQUIPMENTS AND DURING THE YEAR STARTED THE BUSINESS OF CRUSHING OF STONE. THE ASSESSEE COMPANY CLAIMED ADDITIONAL DEPRECIATION OF RS.41,54,127/- @10% ON STONE CRUSHER EQUIPMENTS ACQUIRED DURING THE YEAR AND PUT TO USE FOR LESS THAN 180 DAYS DURING SCRUTINY ASSESSMENT THE ASSESSING OFFICER ALLOWED THE CLAIM. IN VIEW OF APEX COURT DECISION REGARDING CRUSHING OF STONE DOES NOT TANTAMOUNT TO MANUFACTURING PROCESSING ALLOWANCE OF ADDITIONAL DEPRECIATION IS NOT CORRECT AND HAS RESULTED IN EXCESS ALLOWABLE OF DEPRECIATION OF RS.41,54,127/-. I HAVE REASONS TO BELIEVE THAT INCOME OF RS.41,54,127/- HAS ESCAPED ASSESSMENT. APPROVAL FROM CIT-IV FOR REOPENING THE CASE HAS BEEN RECEIVED VIDE HIS LETTER DATED 22.3.2013 ISSUE NOTICE U/S.148. 5. IT IS SEEN FROM THE ABOVE REASONS THAT THE ENTIRE FOCUS OF THE AO WAS TO DISALLOW ADDITIONAL DEPRECIATION ON PLANT AND MACHINERY ACQUIRED AND PUT TO USE DURING THE YEAR QUA STONE CRUSHING FACILITY. FIRST PROVISO TO SECTION 147 PROVIDES THAT WHERE AN ASSESSMENT HAS BEEN MADE U/S.143(3) OF THE AC T, THEN NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIR Y OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASO N, INTER ALIA, OF THE FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. INSTA NTLY, ITA NO. 755/PUN/2019 W.B. ENGINEERS INTERNATIONAL PVT. LTD., 4 I AM CONSIDERING THE ASSESSMENT YEAR 2006-07. ORIGINAL ASSESSMENT IN THIS CASE WAS COMPLETED U/S. 143(3) ON 30-0 6- 2008. PERIOD OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR EXPIRED ON 31-03-2011. NOTICE U/S.148 W AS ISSUED ON 22-03-2013, WHICH IS OBVIOUSLY AFTER THE EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. IN SUCH FACTUAL BACKGROUND, THE RE-ASSESSMENT COULD HAVE BEEN VA LIDLY INITIATED ON FAILURE ON THE PART OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. NOW THE QUESTION ARISES AS TO WHETHER THE ASSESSEE MADE FULL AND P ROPER DISCLOSURE OF THE CLAIM FOR ADDITIONAL DEPRECIATION? 6. I HAVE GONE THROUGH THE ASSESSEES ANNUAL ACCOU NTS. PAGE 33 OF THE PAPER BOOK IS SCHEDULE OF FIXED ASSETS. A NOTE HAS BEEN APPENDED AT THE FOOT OF SUCH SCHEDULE READIN G: ADDITIONAL DEPRECIATION @ 20% HAS BEEN CLAIMED U/S.32, 9 TH PROVISO . IT, THEREFORE, SHOWS THAT THE ASSESSEE DID MAKE A DISCLOSURE OF THE CLAIM OF ADDITIONAL DEPRECIATION. NOT ONLY THAT, THE AO WHILE FINALISING THE ASSESSMENT, DID TAKE NOTE OF THIS FACT WHICH IS BORNE OUT FROM PAGES 2 AND 3 OF THE ASSESSMENT ORDER IN WHICH HE DID NOT ALLOW TRAVELLING EXPENS ES ITA NO. 755/PUN/2019 W.B. ENGINEERS INTERNATIONAL PVT. LTD., 5 INCURRED FOR PURCHASE OF NEW PLANT AND MACHINERY AND TR EATED SUCH AMOUNT AS CAPITAL EXPENDITURE. HE NOT ONLY ALLOWED DEPRECIATION BUT ALSO ADDITIONAL DEPRECIATION ON SUCH AMOUNT CAPITALISED BY NOTING: HOWEVER, I ALLOW DEPRECIATION U/S.32(1)(II) AT RS.26,734/- AND ADDITIONAL DEPRECIATION U/S.32(1)(IIA) AT RS.35,642/- ON THE SAME . IT IS, THEREFORE, ABUNDANTLY CLEAR THAT NOT ONLY THE ASSESSEE MADE DISCLOSURE OF THE CLAIM OF ADDITIONAL DEPRECIATION IN THE ORIGINAL RETURN OF INCOME BUT THE AO WAS ALSO CONSCIOUS OF THE SAME FACT AND DID ACCEPT/ALLOW SUCH CLAIM. AS REASONS FOR THE RE-ASSE SSMENT ARE FOUNDED ONLY ON THE QUESTION OF ALLOWABILITY OF CLAIM OF THE ADDITIONAL DEPRECIATION, FOR WHICH THE ASSESSEE HAD MADE FULL AND TRUE DISCLOSURE, I AM OF THE CONSIDERED OPINION, THE CASE IS COVERED BY FIRST PROVISO TO SECTION 147. I, THEREF ORE, SET-ASIDE THE INITIATION OF RE-ASSESSMENT PROCEEDINGS AND THE CONSEQUENTIAL ASSESSMENT ORDER. 7. IN VIEW OF MY DECISION ON THE INITIATION OF RE-ASSESSMENT PROCEEDINGS, THERE IS NO NEED TO DISCUSS THE MERITS OF THE ADDITION WHICH AUTOMATICALLY GETS ALLOWED DUE TO ALLOWING OF ITA NO. 755/PUN/2019 W.B. ENGINEERS INTERNATIONAL PVT. LTD., 6 THE GROUND CHALLENGING THE INITIATION OF RE-ASSESSMENT PROCEEDINGS. 8. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05 TH FEBRUARY, 2020. SD/- (R.S.SYAL) / VICE PRESIDENT PUNE; DATED : 05 TH FEBRUARY, 2020 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT (APPEALS)-5, PUNE 4. THE PR. CIT-4, PUNE 5. , , SMC / DR SMC, ITAT, PUNE; 6. / GUARD FILE. // TRUE COPY // / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE ITA NO. 755/PUN/2019 W.B. ENGINEERS INTERNATIONAL PVT. LTD., 7 DATE 1. DRAFT DICTATED ON 04-02-2020 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 04-02-2020 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER -- JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. -- JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *