M/s. Siddhi Vinayak Aeromatics Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 828/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3000 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 01-06-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 13-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Keywords: Depreciation; Audit objection; Tangible material; Assessment record; Reassessment proceedings
• Section: 142(1); 14A; 32; 147; 68; 148; 132

Judgement Text

I 1 ITA NO. 828/DEL/2014 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI MS SUCHITRA KAMBLE, JUDICIAL MEMBER AND SH. PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 828/DEL/2014 ( A.Y 2004-05) SIDDHI VINAYAK AEROMATICS PVT. LTD. (AMALGAMATING COMPANY OF AMALGAMATED COMPANY M/S. SURYA VINAYAK HOSPITALITY PVT. LTD, 11, PREM SADAN, RAJENDRA PLACE NEW DELHI AAECS6671A (APPELLANT) VS ACIT CENTRAL CIRCLE-25 NEW DELHI (RESPONDENT) APPELLANT BY SH. RAJIV SAXENA, ADV RESPONDENT BY SH. S. S. RANA, CIT DR ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER DATED 28/11/2013 PASSED BY CIT(A)-I, NEW DELHI. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. THAT ON THE FACT AND CIRCUMSTANCES OF THE CASE, THE CIT (A) HAS GROSSLY ERRED IN CONFIRMING THE REASSESSMENT DONE U/S 148 O F THE ACT INITIATED ON THE BASIS OF AUDIT OBJECTIONS RAISED BY THE DEPARTMENT WHICH IS NOT ONLY ILLEGAL BUT ALSO WHIMSICAL AND HENCE THE ACTION OF THE LD.CIT(A ) IS LIABLE TO BE QUASHED. 2. BECAUSE THE LD.CIT(A) HAS GROSSLY ERRED IN CONFIRM ING THE WHIMSICAL DISALLOWANCES MADE U/S 24(A) OF THE ACT BY DISALLOW ING A SUM OF- DATE OF HEARING 07.03.2018 DATE OF PRONOUNCEMENT 23.03.2018 I 2 ITA NO. 828/DEL/2014 RS.10,08,000/- . IN THE VIEW OF FOLLOWING:- A) RENT AGREEMENT ENTERED INTO BY THE ASSESSEE COMPAN Y AND BY THE TENANT COMPANY MENTIONS THE RENTING OF LAND AND BUILDING A ND NO WHERE DOES IT MENTIONS THE RENTING OF PLANT AND MACHINERY. B) THE PRESUMPTION OF LD.CIT(A) THAT THE ASSESSEE COM PANY HAS ALSO RENTED OUT PLANT AND MACHINERY IS OUT OF HIS FICTIONS ONLY AND NOT AS PER THE FACTS AS ADDUCED IN THE ASSESSMENT AND IN THE COURSE OF HEAR ING OF THE APPEAL BEFORE THE LD.CIT(A). C) THAT THE PRESUMPTIONS OF LD.CIT(A) THAT CHARGING O F DEPRECIATION ON PLANT AND MACHINERY WITHOUT USING THEM LEADS TO THE CONCL USION THAT IT HAS BEEN USED BY THE TENANT IS ALSO WHIMSICAL IN THE VIEW OF THE FACT IT IS MANDATORY TO CHARGE DEPRECIATION ON PLANT AND MACHINERY AS PER COMPANIE S ACT TO MEET OUT WEAR AND TEAR AND AFFLUX DUE TO THE TIME AND WHICH CANNOT BE DENIED EVEN IN THE COURSE OF SHUT DOWN OF THE BUSINESS. 3. BECAUSE THE LD. CIT(A) HAS GROSSLY ERRED IN C ONFIRMING DISALLOWANCE OF DEPRECIATION ON PLANT AND MACHINERY TO THE TUNE OF RS.9,989/- IN VIEW OF PRINCIPAL NO BUSINESS NO EXPENSES IS ERRONEOUS BE CAUSE OF THE FOLLOWING FACTORS:- A) CHARGE OF DEPRECIATION IS NOT AN EXPENSE BUT IS AN ALLOWANCE ONCE THE PLANT AND MACHINERY IS PUT TO USE AND KEPT READY FO R THE PRODUCTION, THE ALLOWANCE OF DEPRECIATION IS MANDATORY AS PER PROVI SIONS OF SECTION 32 OF THE ACT. B) DEPRECIATION IS NOT AN EXPENSE BUT IS AN ALLOWANCE WHICH THE LD CIT (A) HAS ERRED IN COMPARING THE TWO AS AN EXPENSE. 4. THE APPELLANT CRAVES LEAVE FOR ADDITION, MODIFIC ATION, ALTERATION, AMENDMENT OF ANY OF THE GROUNDS OF APPEAL. 3. THERE IS A DELAY OF 4 DAYS IN FILING. THE ASSES SEE HAS FILED AFFIDAVIT EXPLAIN THE DELAY. THE DR OBJECTED FOR CONDONATION OF DELAY. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AFTER GOING THROUGH THE AFFIDAVIT OF THE ASSESSEE, THE DELAY IN FILING APPEAL APPEARS TO BE GENUINE. THEREFORE, THE DELAY OF FOUR DAYS IS COND ONED. 4. THE ASSESSEE FILED ITS RETURN OF INCOME ON 01.11.20 04 DECLARING INCOME I 3 ITA NO. 828/DEL/2014 OF RS.22,27,194/- AND THE SAME WAS PROCESSED U/S 14 3(1). ON 20.03.2007 THERE WAS A SEARCH ACTION ON THE ASSESSEE U/S 132 O F THE INCOME TAX ACT, 1961. WHILE PASSING THE ORDER U/S 153C OF THE ACT D ATED 24/12/2009, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT AT INCOM E OF RS. 84,35,280/- AND MADE THE FOLLOWING ADDITIONS: *ADDITION U/S 68 OF THE I.T ACT OF RS.55,00,000/- O N ACCOUNT OF SHARE APPLICATION MONEY RECEIVED; *DISALLOWANCE OF RS.5,55,415/- ON ACCOUNT OF DISALL OWANCE U/S 14A OF THE INCOME TAX ACT AND *DISALLOWANCE U/S 35D OF RS.43,700/-. 5. AGGRIEVED BY THE ADDITIONS AND DISALLOWANCES, AS SESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). THE CIT(A) DELETED THE AD DITION MADE U/S 68 OF RS.55,00,000 IN RESPECT OF SHARE A PPLICATION MONEY RECEIVED AND DELETED THE DISALLOWANCE OF RS.5,05,415/- OUT OF THE TOTAL DISA LLOWANCE OF RS.555,415/- U/S 14A OF THE INCOME TAX ACT. THE CIT(A) ALSO CONF IRMED THE DISALLOWANCE OF RS.50,000/- AND FURTHER CONFIRMED THE DISALLOWANCE U/S 35D TO THE TUNE OF RS.43,700. SUBSEQUENTLY THE INCOME WAS REVISED AT R S.24,29,870/- AFTER APPEAL EFFECT AS PER ORDER U/S 250 DT. 17.06.2011. AGAINST THE ADDITIONS DELETED BY THE CIT(A), THE REVENUE FILED AN APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL VIDE ORDER DATED 7/12/2017 UPHELD THE ORDE R OF CIT(A. THE CASE WAS RE-OPENED U/S 148 AFTER RECORDING REASONS AND NOTIC E U/S 148 DATED 30/03/2011 WAS ISSUED AND SERVED ON THE ASSESSEE. IN RESPONSE TO NOTICE THE ASSESSEE COMPANY FILED ITS RETURN DECLARING TOTAL I NCOME OF RS.23,31,952/- ON 18/11/2011. NOTICE U/S 143(2), 142(1) ALONG WITH Q UESTIONNAIRE WERE ISSUED AND SERVED. THE ASSESSEES REPRESENTATIVE ATTENDED THE PROCEEDINGS AND FILED REQUISITE DETAILS. THE ASSESSING OFFICER ADDED REN TAL INCOME AMOUNTING TO RS.33,60,000/- AND CHARGED IT TO TAX UNDER INCOME F ROM OTHER SOURCES AND DEDUCTION @ 30% U/S 24 WAS DISALLOWED. THE ASSESSI NG OFFICER FURTHER DISALLOWED RS.9,989/- AS DEPRECIATION CLAIMED BY TH E ASSESSEE. THE I 4 ITA NO. 828/DEL/2014 ASSESSMENT ORDER WAS PASSED ON 29/12/2011. 6. BEING AGGRIEVED BY THE ASSESSMENT ORDER TH E ASSESSEE FILED APPEAL BEFORE THE CIT (A). THE CIT (A) DISMISSED THE APPEAL BEF ORE THE ASSESSEE. 7. THE LD. AR SUBMITS THAT IN THE INSTANT CASE, THE ASSESSING OFFICER INITIATED THE REASSESSMENT PROCEEDINGS U/S 147 OF T HE ACT BY ISSUING A NOTICE U/S 148 OF THE ACT 30.03.2011 ON THE BASIS OF THE A LLEGED REASONS TO BELIEVE RECORDED ON 30.03.2011. THE LD. AR SUBMITTED THAT F OR THE INSTANT ASSESSMENT YEAR, ASSESSMENT WAS ALREADY FRAMED U/S 153C/143(3) OF THE ACT ON 24.12.2009 AND APPEAL FILED BY THE ASSESSEE AGAINST AFORESAID ORDER WAS ALLOWED BY THE CIT(A) ON 25.11.2011, WHICH ORDER OF THE CIT(A) WAS UPHELD BY THE TRIBUNAL VIDE ITS ORDER DATED 07.12.2017. THE LD. AR FURTHER SUBMITTED THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDING S U/S 153C OF THE ACT, ASSESSEE FILED COMPLETE DETAILS AS REQUIRED IN THE ASSESSMENT PROCEEDINGS, AND AFTER COMPLETE VERIFICATION OF THE DETAILS ASSESSME NT WAS FRAMED U/S 153/143(3) OF THE ACT. THE LD. AR SUBMITTED THAT IN THE ORDER OF ASSESSMENT, THE ASSESSING OFFICER SPECIFICALLY NOTED THAT MAJOR SOURCE OF INCOME EARNED DURING THE YEAR IS RENTAL OF THE PROPERTY, AND AS S UCH, AFTER DUE VERIFICATION, DEPRECIATION CLAIMED ON THE BUILDING AND RENTAL INC OME OFFERED AS INCOME FROM HOUSE PROPERTY WAS ACCEPTED. IN VIEW OF THIS OBSERV ATION OF THE ASSESSING OFFICER, THE LD. AR SUBMITTED THAT ONCE THE ASSESSM ENT IS FRAMED U/S 153C/143(3) OF THE ACT, UNLESS THERE IS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS, REOPEN ING OF THE ASSESSMENT BEYOND A PERIOD OF FOUR YEARS FROM THE RELEVANT ASSESSMENT YEAR, WITHOUT ANY FRESH TANGIBLE MATERIAL AND MERELY ON THE BASIS OF THE RE VIEW OF THE ASSESSMENT RECORD IS UNSUSTAINABLE IN LAW. THE LD. AR FURTHER SUBMITTED THAT FROM THE PERUSAL OF THE REASONS TO BELIEVE, IT WOULD BE SEEN THAT APART FROM THE REVIEW OF THE ASSESSMENT RECORD, NO MATERIAL MUCH LESS ANY TA NGIBLE MATERIAL REFERRED FOR THE FORMATION OF THE ALLEGED BELIEF THAT DEPREC IATION CLAIMED ON THE FIXED ASSETS TO THE TUNE OF RS. 1,14,747/- HAS ESCAPED AS SESSMENT. THE LD. AR WHILE I 5 ITA NO. 828/DEL/2014 CITING THE CASE LAWS SUBMITTED THAT IN FACT IN THE IDENTICAL CIRCUMSTANCES IN THE CASE OF RANJIT HOSIERY MILLS VS. ACIT REPORTED IN 215 ITR 8 67, HONBLE HIGH COURT OF GUJARAT HAS QUASHED THE REOPENING OF THE A SSESSMENT WHEREIN ALSO NOTICE U/S 148 WAS ISSUED TO DISALLOW THE CLAIM OF DEPRECATION ON BUILDING GIVEN ON RENT. 8. THE LD. DR RELIED UPON THE ORDER OF THE ASSESSIN G OFFICER AND CIT(A). THE LD. DR ALSO RELIED UPON THE DECISIONS OF THE H ON'BLE SUPREME COURT AND HON'BLE HIGH COURT. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE RE-ASSESSMENT DONE U/S 148 INITIATED ON THE BASIS OF AUDIT OBJECTIONS RAISED BY THE DEPARTMENT. THE AUDIT OBJ ECTIONS THEREAFTER, WAS SETTLED BY THE ACIT. AFTER GOING THROUGH THE REASO NS RECORDED U/S 148, THERE WAS NO NEW MATERIAL TAKEN BY THE ASSESSING OFFICER. THE ASSESSMENT U/S 143 WAS COMPLETED ON THE SAME LINES TO THE ASSESSMENT P ASSED U/S 153C. THE REASONS FOR ISSUANCE OF NOTICE U/S 148 OF THE INCOM E TAX ACT WAS SPECIFICALLY MENTIONED THAT THE ASSESSEE WAS ASKED TO SUBMIT THE DETAILS OF DEPRECIATION DURING THE ASSESSMENT PROCEEDINGS UNDER 153C/143(3) OF THE INCOME TAX ACT, BUT THE ASSESSEE FAIL TO SUBMIT THE SAME. THE LD. AR RELIED UPON THE ORDER OF THE HON'BLE HIGH COURT OF GUJARAT IN CASE OF RANJIT HOSIERY MILLS VS. ACIT (INVESTIGATION) HELD THAT THE PROCEEDINGS HAVING B EEN INITIATED BY THE AUTHORITY WITHOUT THEIR BEING ANY EXISTING CONDITION PRECEDEN T FOR INVOKING SUCH JURISDICTION ARE VOID AND DESERVE TO BE QUASHED. IT IS PERTINENT TO NOTE THAT 153C PROCEEDINGS WERE CONCLUDED BY PASSING ASSESSME NT ORDER DATED 24/12/2009. THE SAID ORDER WAS THEREAFTER CHALLENGE D BEFORE THE CIT(A) AND ORDER OF THE CIT(A) ALLOWING THE APPEAL OF THE ASSE SSEE WAS UPHELD BY THE TRIBUNAL VIDE ORDER DATED 07/12/2017. THE LD. DR RE LIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN CASE OF R. K. MALHOTRA VS. KASTURBA BHAI LAL BHAI 109 ITR 537 WHEREIN IT IS HELD THAT THE EXPRES SION INFORMATION IN THE COUNTERS WITH ME INSTRUCTION OR KNOWLEDGE DERIVED F ROM AN EXTERNAL SOURCE I 6 ITA NO. 828/DEL/2014 CONCERNING FACTS OR PARTICULARS OR AS TO LAW RELATI NG TO A MATTER BEING ON THE ASSESSMENT. THE AUDIT DEPARTMENT IS THE PROPER MAC HINERY TO SCRUTINIZE THE ASSESSMENT OF THE INCOME TAX OFFICER AND POINT OUT THE ERRORS IF ANY IN LAW AND THUS HOLD THAT THE INCOME TAX OFFICER IN THE CIRCUM STANCES IS ENTITLED TO REOPEN THE ASSESSMENT U/S 147B OF THE INCOME TAX AC T BUT THE DECISION OF THE HONBLE APEX COURT WILL NOT BE APPLICABLE IN THE PR ESENT CASE AS IT IS NOT JUST AUDIT REPORT BUT THE ENTIRE INVESTIGATION RELATING TO PROCEEDINGS U/S 153C WAS CONCLUDED BY THE REVENUE ON THE SAME LINE BEFORE RE OPENING THE CASE U/S 148/147. THUS, THERE WAS NOTHING CONCRETE BEFORE T HE REVENUE AUTHORITIES TO REOPEN THE CASE AFRESH THE MATTER WAS CONTESTED TIL L THE LEVEL OF TRIBUNAL WHEREIN THE CIT(A) ALLOWING ASSESSEES APPEAL WAS U PHELD BY THE TRIBUNAL. THUS, THE INITIATION OF REASSESSMENT UNDER 148 IS B AD IN LAW. THE APPEAL OF THE ASSESSEE IS ALLOWED. 10. IN RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD MARCH, 2018 . SD/- SD/- (PRASHANT MAHARISHI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 23/03/2018 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI I 7 ITA NO. 828/DEL/2014 DATE 1. DRAFT DICTATED ON 08/03/2018 PS 2. DRAFT PLACED BEFORE AUTHOR 09/03/2018 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2018 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 23.03.2018 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 2 3 .03.2018 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.