Shri. G. Mallikarjuna Naidu, Bangalore V. Income Tax Officer, Ward- 7(2)(4), Bangalore

ITA 78/BANG/2020

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 6385 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 16-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYADARSHI MISHRA
• Keywords: Reopening of assessment; Depreciation; Tangible material; Reason to believe; Reassessment proceedings; TDS; Set aside
• Section: 143(3); 142(1); 234B; 40(a)(ia); 113; 194A; 147; 131; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI. CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.78/BANG/2020 ASSESSMENT YEAR : 2009-10 SHRI G MALLIKARJUNA NAIDU, NO.2455, 9 TH MAIN, BSK 2 ND STAGE, BENGALURU-560 070. PAN ADHPM 4253 H VS. THE INCOME-TAX OFFICER, WARD-7(2)(4), BENGALURU. APPELLANT RESPONDENT APPELLANT BY : SHRI V SRIDHAR, C.A RESPONDENT BY : SHRI PRIYADARSHI MISHRA, ADDL.CIT (DR) DATE OF HEARING : 18-01-2021 DATE OF PRONOUNCEMENT : 01-02-2021 ORDER PER BEENA PILLAI, JUDICIAL MEMBER THE PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAIN ST ORDER DATED 25/11/2019 PASSED BY LD.CIT(A), BANGALORE-10 FOR ASSESSMENT YEAR 2009-10 ON FOLLOWING GROUNDS OF APP EAL: 1. THE ORDER OF CIT-A IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. THE CIT-A ERRED IN HOLDING THAT REOPENING IS VAL ID WHICH IS REOPENED BEYOND 4 YEARS AFTER COMPLETION OF ORIGINAL ASSESSM ENT U/S 143(3), WITHOUT RECORDING IN THE REASONS FOR REOPENING THAT THERE WAS FAILURE ON THE PART OF THE APPELLANT TO DISCLOSE TRULY FULLY A LL MATERIALS FACTS NECESSARY FOR ASSESSMENT IS NOT CORRECT. PAGE 2 OF 9 ITA NO.78/BANG/2020 3. THE ORDER OF CIT-A HOLDING THAT REOPENING IS VAL ID BASED ON THE SAME FACTS WHICH ALREADY AVAILABLE IN RECORD AND NO NEW MATERIAL HAS COME IN POSSESSION AFTER COMPLETION OF ASSESSMENT U/S 143(3 ). 4. THE ORDER OF CIT-A IN NOT FOLLOWING CBDT INSTRUC TIONS NO-1425, DT.I6.I.3.98 WITH RESPECT TO HIRE CHARGES WHICH INC LUDES INTEREST PAYABLE DOES NOT COME UNDER PURVIEW OF INTEREST U/S 2(28A) OF THE I.T. ACT FOR CONSEQUENT DISALLOWANCE U/S 40(A)(IA). 5. THE ORDER OF CIT-A IN HOLDING THAT FORM 26A IS N OT COMPLETE WITH RESPECT TO RULE 31ACB OF THE I.T. RULES IS NOT CORRECT SINC E, THE APPELLANT REQUESTED TIME TO FILE THE REQUISITE FORM IN THE AB SENCE OF ALLOTMENT OF TAN. 6. THE CIT-A WHOSE POWER IS CO-TERMINUS WITH THAT O F THE ASSESSING OFFICER COULD HAVE EXERCISED THE POWER U/S 131 OR U/S 133(6 ) OF THE I.T. ACT TO ASCERTAIN THE ACCOUNTING OF INCOME AND PAYMENT OF I NTEREST BY M/S. GE CAPITAL 8 RELIANCE CAPITAL AND GRANTED BENEFIT OF P ROVISION OF SECTION 40(A)(1A) AFTER HOLDING THAT THE PROVISION OF SECTI ON 40(A)(IA) IS RETROSPECTIVE. 7. THE CIT-A ERRED IN CONFIRMING THE LEVY OF INTERE ST U/S 234A, 234B & 234C OF THE ACT AND FURTHER CALCULATION OF INTEREST U/S 234A, B & C OF THE ACT IS NOT ACCORDANCE WITH LAW SINCE THE RATE METHO D OF CALCULATION IS NOT DISCENARABLE FROM THE ORDER OF THE ASSESSMENT ON TH E FACT AND CIRCUMSTANCE OF THE CASE. 8. THE APPELLANT CRAVES, LEAD TO ADD, ALTER, AMEND, SUBSTITUTE, CHANGE AND DELETE ANY GROUNDS OF APPEAL 9. FOR THE ABOVE AND OTHER GROUNDS THAT MAY URGED A T THE TIME OF HEARING, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED. BRIEF FACTS OF THE CASE ARE AS UNDER: 2. ASSESSEE IS AN INDIVIDUAL AND FILED HIS RETURN O F INCOME FOR YEAR UNDER CONSIDERATION ON 26/09/2009 DECLARING TO TAL INCOME OF RS.15,66,560/-. THE CASE WAS SELECTED FOR SCRUTI NY AND ASSESSMENT UNDER SECTION 143(3) WAS CONCLUDED ON 30 /12/2011 ACCEPTING THE RETURNED INCOME. SUBSEQUENTLY, THE AS SESSMENT WAS REOPENED BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT ON 09/10/2014. FURTHER, NOTICE UNDER SECTION 129 OF TH E ACT DATED 10/12/2014 WAS ALSO ISSUED ALONG WITH NOTICE UNDER SECTION 142(1) OF THE ACT. ASSESSEE THROUGH HIS AUTHORISED REPRESENTATIVE FILED LETTER DATED 18/02/2015 ON 19/02/2015, WHEREI N IT WAS PAGE 3 OF 9 ITA NO.78/BANG/2020 MENTIONED THAT ASSESSEE IS IN THE BUSINESS OF C&F A GENCY FOR CEMENT COMPANIES LIKE M/S INDIA CEMENT INDIA LTD., AND M/S. ZUARI CEMENTS LTD. LD. AO NOTED THAT, AS PER PROVIS IONS OF SECTION 194A OF THE ACT, ASSESSEE WAS REQUIRED TO D EDUCT TDS FOR PAYMENT OF INTEREST ON NONBANKING FINANCIAL COMPANI ES, AND HENCE DISALLOWANCE OF INTEREST PAYMENT AS PER PROVI SIONS OF SECTION 40 (A) (IA) OF THE ACT WAS MADE. THE LD.AO ALSO RESTRICTED DEPRECIATION CLAIMED AT 15% AS AGAINST 30% CLAIMED BY ASSESSEE. 3. AGGRIEVED BY THE ORDER OF LD.AO, ASSESSEE FILED APPEAL BEFORE LD.CIT(A). 4. BEFORE LD.CIT(A), ASSESSEE ALLEGED THAT LD.AO HA S NOT RECORDED SATISFACTION IN THE REASONS RECORDED BY HI M THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASON OF FAILURE ON PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MA TERIAL FACTS NECESSARY FOR ASSESSMENT, TO ASSUME JURISDICTION UN DER SECTION 147 OF THE ACT. ADDITIONS ON MERITS WERE ALSO CHALL ENGED BY ASSESSEE. 5. LD.CIT(A) WHILE PASSING THE APPELLATE ORDER REJE CTED THE CONTENTION THAT THERE IS A NON APPLICATION OF MIND IN REASONS RECORDED BY LD.AO. ON MERITS, LD.CIT(A) CONFIRMED THE ADDITION PARTLY. LD. CIT (A) GRANTED RELIEF TO ASSESSEE IN R ESPECT OF DEPRECIATION ON VEHICLES AT 30%. AGGRIEVED BY ORDER OF LD.CIT(A) ASSESSEE IS IN APP EAL BEFORE US NOW. 5. GROUND NO. 1 IS GENERAL IN NATURE AND THEREFORE DO NOT REQUIRE ADJUDICATION. PAGE 4 OF 9 ITA NO.78/BANG/2020 6. GROUND NO. 2-3 HAS BEEN RAISED CHALLENGING VALIDITY OF THE NOTICE ISSUED UNDER SECTION 148, WHICH IS BEYOND 4 YEARS. AT THE OUTSET, THE LD.AR SUBMITTED THAT, NO NEW MAT ERIAL FACTS WERE AVAILABLE FOR THE ASSESSMENT TO BE REOPENED BE YOND 4 YEARS. HE SUBMITTED THAT, THE MANDATE OF 1 ST PROVISO IS TO SECTION 04/01/1947 IS THAT, WHEN ASSESSMENT HAS BEEN COMPLE TED UNDER SECTION 143 (3) FOR YEAR UNDER CONSIDERATION, NO AC TION SHALL BE TAKEN AFTER EXPIRY OF 4 YEARS FROM THE END OF THE R ELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TA X HAS ESCAPED ASSESSMENT BY REASON OF FAILURE ON PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECE SSARY FOR ASSESSMENT. HE PLACED RELIANCE ON FOLLOWING DECISIO N: PCIT VS L&T REPORTED IN (2020) 113 TAXMANN.COM 47, WHICH IS UPHELD BY HONBLE SUPREME COURT BY DISMISSING TH E SLP FILED BY REVENUE IN PCIT VS L&T LTD., REPORTED IN ( 2020) 268 TAXMAN 390. DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS CHAITANYA PROPERTIES PVT. LTD., IN ITA NO. 205/2016 BY ORDER DATED 16/02/2016 7. ON THE CONTRARY, THE LD.SR.DR SUBMITTED THAT, TH E CASE WAS REFERRED FOR LIMITED SCRUTINY, AND THEREFORE THE IS SUES THAT WERE TO BE CONSIDERED BY THE LD.AO ARE NOT AVAILABLE. HE T HEREFORE SUPPORTED THE ORDERS PASSED BY AUTHORITIES BELOW. 8. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. PAGE 5 OF 9 ITA NO.78/BANG/2020 9. IT IS ESTABLISHED LAW THAT TO REOPEN AN ASSESSME NT BEYOND A PERIOD OF 4 YEARS, WHERE THE ORIGINAL ASSESSMENT HA S BEEN COMPLETED UNDER SECTION 143 (3) OF THE ACT, THE REA SONS RECORDED HAS TO SHOW THE ESCAPEMENT OF INCOME, IS DUE TO FAI LURE ON PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MAT ERIAL FACTS NECESSARY FOR THE ASSESSMENT FOR THE YEAR UNDER CON SIDERATION. THERE MUST BE A LIVE LINK BETWEEN THE REASON RECORD ED AND THE FORMATION OF THE BELIEF THAT INCOME CHARGEABLE TO T AX HAS ESCAPED ASSESSMENT BECAUSE OF THE FAILURE ON THE PART OF TH E ASSESSEE. BOTH THE CONDITIONS MUST COEXIST IN ORDER TO CONFER JURISDICTION ON THE ASSESSING OFFICER. 10. IN THE PRESENT FACTS OF THE CASE THE REASONS RE CORDED BY THE LD.AO ARE AS UNDER: THE ASSESSEE PAID INTEREST TO LOAN BORROWED FROM M /S. GE CAPITAL AND MIS. RELIANCE CAPITAL DURING THE YEAR AMOUNT TOTALI NG TO RS. 15,28,009/-. THESE FINANCIAL INSTITUTIONS ARE NOT REGISTERED WIT H RBI AND NOT REGULATED BY THE PROVISIONS OF BANKING REGULATION ACT. THEREF ORE, THE ASSESSEE IS REQUIRED(J TO DEDUCT TAX ON INTEREST PAID TO THESE COMPANIES AS PER PROVISIONS OF SECTION 194.A OF THE ACT. WHEREAS THE ASSESSEE HAS NOT DEDUCTED TAX ON THE INTEREST PAID TO ABOVE NBFCS AN D THEREFORE, THE INTEREST PAID REQUIRES TOBE DISALLOWED II/S 40(A)(I A) OF IT ACT. THE ASSESSEE IS A PROPRIETOR OF BUSINESS CONCERNS N AMELY M/S. SRINIVASA ENTERPRISES (C&F AGENTS OF INDIA CEMENTS), USHODAYA SALES CORPORATION (CEMENT TRADING) AND SRINIVASA- TRANSPORTS (TRANSPO RTATION ACTIVITY). THESE BUSINESS CONCERNS ARE INTERLINKED. THEREFORE, THE ASSESSEE HAS USED TRUCKS/LORRIES TO HIS OWN BUSINESS. HE HAS NOT REND ERED TRUCKS/LORRIES FOR HIRING BUSINESS DURING THE YEAR. INSTEAD HE HAS USE D THESE VEHICLES FOR HIS OWN BUSINESS PURPOSE. BUT, HE HAS CLAIMED DEPRECIAT ION 30% ON THESE VEHICLES. AS PER INCOME TAX RULES HIGHER RATE OF DE PRECIATION I.E. 30% CAN BE CLAIMED FOR MOTOR BUSES, MOTOR LORRIES AND MOTO R TAXIS USED IN A BUSINESS OF RUNNING THEM ON HIRE ONLY. IN THE ASSES SEE CASE, TRUCKS (MOTOR LORRIES) WERE USED FOR HIS BUSINESS. THEREFORE, THE ASSESSEE IS ELIGIBLE TO CLAIM DEPRECIATION @ 15% ONLY AND NOT AT HIGHER RAT E @ 30%. PAGE 6 OF 9 ITA NO.78/BANG/2020 THEREFORE, I HAVE REASON TO BELIEVE THAT INCOME CHA RGEABLE TO TAX HAS ESCAPED FOR THE A.Y. 2009-10 IN THE ASSESSEE'S CASE WITHIN THE MEANING OF SECTION 147 OF THE I.T. ACT. IN VIEW OF THE ABOVE, KIND APPROVAL MAY BE ACCORDED TO REOPEN ASSESSMENT IN THE ASSESSEE CASE FOR THE A.Y. 2009-1 0 AND ISSUE NOTICE U/S 148 OF THE I.T. ACT. 11. ON PERUSAL OF THE ABOVE REASONS RECORDED, CLEAR LY REVEALS THAT THE LD.AO PROCEEDED ON THE MATERIAL ALREADY AV AILABLE ON RECORD. SECONDLY, WE NOTE THAT, THERE IS NO SATISF ACTION RECORDED BY THE LD.AO THAT THE INCOME HAS ESCAPED ASSESSMENT DUE TO FAILURE ON PART OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT OF YEAR UND ER CONSIDERATION. 12. THE LD.AR REFERRED TO THE AUDITED ACCOUNTS PLAC ED AT PAGE 9-38 OF PAPER BOOK. HE SUBMITTED THAT, INTEREST IS DISCLOSED BY ASSESSEE AT PAGE 25, AND THE BREAKUP OF SCHEDULED 1 0 IS PLACED AT PAGE 28, WHEREIN, THE FINANCE CHARGES AMOUNTING TO RS.2,337,983/- HAS BEEN DISCLOSED. IT WAS SUBMITTE D THAT THERE WAS NO NEW MATERIAL AVAILABLE WITH THE LD.AO FOR RE OPENING THE ASSESSMENT. 13. IN RESPECT OF THE ISSUE OF DEPRECIATION THE LD. AR REFERRED TO PAGE 19, WHEREIN THE FIXED ASSET CHART WAS PLACED SHOWING THE RATES APPLIED FOR THE TRUCKS AT 30%. ON MERITS, WE NOTE THAT, THE LD.CIT(A) DELETED THE ADDITION OF DEPRECIATION DIS ALLOWED BY THE LD.AO 14. AT THIS JUNCTURE WE PLACE RELIANCE ON DECISION OF HONBLE SUPREME COURT IN CASE OF CIT VS KELVINATOR OF INDIA LTD., REPORTED IN (2010) 320 ITR 561 WHEREIN HONBLE COURT HELD INITIATION OF PAGE 7 OF 9 ITA NO.78/BANG/2020 REASSESSMENT PROCEEDINGS TO BE NOT PROPER, WHEN NO TANGIBLE MATERIAL CAME TO THE POSSESSION OF THE LD.AO. HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS HARDWARE TRADING & CO. REPORTED IN 248 ITR 673 HAS FOLLOWED THE SAID RATIO OF HONBLE SUPREME COURT IN CASE OF CIT VS KELVINATOR OF INDIA LTD (SUPRA). BEFORE US, LD. A.R. PLACED RELIANCE ON DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF INFOSYS LTD VS DCIT REPORTED IN (2019) 416 ITR 226, WHEREIN CANTEEN OF DECISIONS OF HONBLE HIGH COURTS AND HONBLE SUPREME COURT HAVE BEEN REFERRED TO AN IDENTICAL PROPOSITION. 15. IN THE PRESENT CASE, THE REASONS RECORDED CLEAR LY REVEALS THAT ALL FACTS WERE AVAILABLE BEFORE THE LD.AO, WHE N HE COMPLETED THE ORIGINAL ASSESSMENT PROCEEDINGS UNDER SECTION 1 43(3) OF THE ACT, AND NO NEW MATERIALS WERE AVAILABLE ON RECORD FOR REOPENING THE PRESENT ASSESSMENT AFTER EXPIRY OF 4 YEARS. 16. WE ARE THEREFORE OF THE VIEW THAT INITIATION OF REASSESSMENT PROCEEDINGS BEYOND 4 YEARS WILL HAVE TO BE HELD INV ALID FOR THE REASON THAT THE REASONS RECORDED BY THE LD.AO, DO N OT SPELL OUT THAT THE ESCAPEMENT OF INCOME WAS DUE TO ASSESSEE N OT FULLY AND TRULY DISCLOSING ALL MATERIAL FACTS NECESSARY FOR C OMPLETION OF ASSESSMENT FOR RELEVANT ASSESSMENT YEARS. IN FACT, IN THE PRESENT CASE WE HAVE ALSO SEEN THAT THE EVIDENCES WERE RAIS ED BEFORE THE LD.AO AND THE COURSE OF ORIGINAL ASSESSMENT PROCEED INGS UNDER SECTION 143(3) OF THE ACT AND THE SAME WAS NOT CHOS EN TO DRAW ANY CONCLUSION. THEREFORE IN THE GIVEN CIRCUMSTANCE S WE ARE OF THE VIEW THAT EXPLANATION 1 CANNOT BE RESORTED BY THE REVENUE. THEREFORE, IN THE ABSENCE OF THE STATUTORY REQUIREM ENT OF INCOME PAGE 8 OF 9 ITA NO.78/BANG/2020 CHARGEABLE TO TAX HAVE ESCAPED ASSESSMENT DUE TO FA ILURE ON PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIA L FACTS, THE NOTICE OF REOPENING OF ASSESSMENT STANDS INVALID. ACCORDINGLY WE ALLOW GROUND 2-3 RAISED BY ASSESSEE. 17. AS WE HAVE QUASHED THE NOTICE UNDER SECTION 148 ISSUED BY THE LD.AO, THE ASSESSMENT ORDER PASSED IN CONSEQUEN CE THEREOF STANDS SET ASIDE AND QUASHED. ACCORDINGLY THE ADDITION MADE THEREOF STANDS DELETE D. IN THE RESULT APPEAL FILED BY ASSESSEE STANDS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST FEBRUARY, 2021 SD/- SD/- (CHANDRA POOJARI) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL ME MBER BANGALORE, DATED, THE 1 ST FEBRUARY, 2021. /VMS/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE PAGE 9 OF 9 ITA NO.78/BANG/2020 DATE INITIAL 1. DRAFT DICTATED ON ON DRAGON SR.PS 2. DRAFT PLACED BEFORE AUTHOR -2-2021 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER -2-2021 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. -2-2021 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS -2-2021 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON -2-2021 SR.PS 7. DATE OF UPLOADING THE ORDER ON WEBSITE -2-2021 SR.PS 8. IF NOT UPLOADED, FURNISH THE REASON -- SR.PS 9. FILE SENT TO THE BENCH CLERK -2-2021 SR.PS 10. DATE ON WHICH FILE GOES TO THE AR 11. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 12. DATE OF DISPATCH OF ORDER. 13. DRAFT DICTATION SHEETS ARE ATTACHED NO SR.PS