Dy.CIT, Circle-1, Khammam V. Sri Popuri Ankineedu, Khammam

ITA 865/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74610 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 27-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JEEVAMLAL LAVIDIYA
• Assessee Lawyers: S RAMA RAO
• Keywords: Reopening of assessment; Depreciation; Tangible material; Difference of opinion; Reason to believe; Change of opinion
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.865/HYD/13 : ASSTT. YEAR 2006 - 07 ITA NO.866/HYD/13 : ASSTT. YEAR 2007 - 08 DY. COMMISSIONER OF INCOME - TAX CIRCLE 1, KHAMMAM V/S. SHRI POPURI ANKINEEDU, KHAMMAM ( PAN - AGJPP 5770 B ) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI JEEVAMLAL LAVIDIYA DR RESPONDENT BY : SHRI S.RAMA RAO DATE OF HEARING 7.1.2014 DATE OF PRONOUNCEMENT 12.2.2014 O R D E R PER SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER: THESE TWO APPEALS BY THE REVENUE ARE DIRECTED AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME - TAX(APPEALS) VIJAYAWADA DATED 11.3.2013 FOR THE ASSESSMENT YEAR S 2006 - 07 AND 2007 - 08. SINCE ISSUES INVOLVED IN THESE APPEALS ARE COMMON, THE Y ARE BEING DISPOSED OF WITH THIS COMMON ORDER FOR THE SAKE OR CONVENIENCE. 2. THE ONLY ISSUE INVOL VED IN THE GROUNDS AS WELL AS THE ADDITIONAL GROUNDS RAISED BY THE REVENUE IN THESE APPEALS RELATES TO LEGALITY AND VALIDITY OF THE REOPENING OF THE ASSESSMENT UNDER S.147 OF THE ACT, BY THE ASSESSING OFFICER, AND THE CORRECTNESS OF THE VIEW TAKEN BY THE C IT(A) THAT THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE IN FURNISHING THE INFORMATION, AND CONSEQUENTLY, INITIATION OF PROCEEDINGS UNDER S.147 AFTER A PERIOD OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR, ITSELF IS NOT VALID . 3. BRIEF FACTS OF THE CASE, COMMON IN BOTH THESE APPEALS, AS TAKEN FROM THE FOLDER FOR ASSESSMENT YEAR 2006 - 07 , ARE THAT THE ASSESSEE IS PROPRIETOR OF I TA NO. 865 - 866/ HYD/2013 SHRI POPURI ANKINEEDU, KHAMMAM 2 M/S. POPURI ENGINEERING AND CONSULTANCY SERVICES AND ENGAGED IN CARRYING OUT CIVIL WORK AND SUPPLY AND ERECTION OF MACHINE RY TO THE SPONGE IRON INDUSTRIES. THE ASSESSEE HAD FILED RETURN OF IN C OM E FOR THE ASSESSMENT YEAR 2006 - 07 ON 28 .3.2008, ADMITTING AN INCOME OF RS .1,97,14,067. THE CA S E WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLETED UNDER S.143(3) ON A TOTAL INCO ME OF R S .2,20,67,830. THEREAFTER, THE CASE WAS R E - OPENED BY ISSUANCE OF NOTICE UNDER S.148 OF THE ACT. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE FILED LETTER DATED 20.8.2012, R EQUESTING TO TREAT THE RETURN FIL E D ON 28.3.2008 AS THE RETURN FILED IN RES PONSE TO NOTICE UNDER S.148 OF THE ACT. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE CLAIMED 100% (80% NORMAL RATE + 20% ADDITIONAL) DEP RE C I ATION IN RESPECT OF WIND P OW E R P ROJ E CT THAT WAS MORE THAN THE ELIGIBLE DEPRECIATION @ 7.69%. TH E R E FORE, THE AS SESSING OFFICER DISALLOWED THE DIFFERENTIAL AMOUNT OF DEPRECIATION C LAIMED AND MADE AN ADDITION OF RS.3,13,85,401 TO THE INCOME DETERMINED IN THE EARLIER ASSESSMENT ORDER DATED 26.12.2008. T HE ASSESSING OFFICER ALSO NOTICED FROM T DS CERTIFICATES FILED BY THE ASSESSEE T HAT THE CONSU L TANCY CHARGES RECEIVED BY TH E ASSESSEE DURING THE YEAR RELEVANT TO ASSESSMENT YEAR 2006 - 07 WORK OUT TO R S .5,44,20,246 AS AGAINST T HE INCOME OFFERED UNDER THIS HEAD OF RS.4,66,99,216. HE BROUGHT TO TAX THIS DIFFERENTIAL AMOUNT OF RS.77,21,030 AS WELL, BY MAKING AN ADDITION IN THAT BEHALF. W ITH THE SE TWO ADDITIONS, THE ASSESSING OFFICER COMPLETED THE RE - ASSESSMENT ON A TOTAL INCOME OF RS.6,11,74,260, VIDE ORDER OF ASSESSMENT DATED 2 6.10.2012 P A SSED UNDER S.143(3) READ WITH S.147 OF THE ACT. 4. FACTUAL BACKGROUND FOR THE ASSESSMENT YEAR 2007 - 08 IS IDENTICAL EXCEPT FO R T HE AMOUNTS INVOLVED. THE ASSESSING OFFICER DISALLOW ED THE EXCESS AMOUNT OF DEPRECIATION CLAIMED; AND MAKING FURTHER ADDITION OF RS.3,01,63,949, ON ACCOUNT OF SHORT ADMISSION OF CONTRACT RECEIPTS, WORKED OUT ON THE BASIS TDS CERTIFICATES , COMPLETED THE RE - ASSESSMENT ON A TOTAL INCOME OF R S .4,15,50,190, AS AGAINST THE INCOME ASSESSED EARLIER OF R S .1,37,99,780, V IDE ORDER OF RE - ASSESSMENT DATED 26.10.2012, PASSED UNDER S.143(3) READ WITH S.147 OF THE ACT. I TA NO. 865 - 866/ HYD/2013 SHRI POPURI ANKINEEDU, KHAMMAM 3 5 . ON APPEAL, THE CIT(A) OBSERVING THAT THERE WAS NO FAILU R E ON THE PART OF THE ASSESSEE IN DISCLOSING THE MATERIAL FACTS, AND THE ASSESSING OFFICER A T THE TIME OF REGULAR ASSESSMENT, MADE THE DISALLOWANCES OUT OF THE AMOUNTS OF DEPRECIATION CLAIMED BY THE ASSESSEE ONLY AFTER CONSIDERING ALL THE MATERIAL FACTS AVAILABLE ON RECORD, CONCLUDED THAT THE CASE OF THE ASSESSEE DOES NOT FALL WITHIN THE SCOPE OF PROVISO TO S.147 OF THE ACT. EVEN WITH REGARD TO SHORT - ADMISSION OF CONSULTANCY CHARGES, THE CIT(A) NOTED THAT ALL THE MATERIAL WAS AVAILABLE BEFORE THE ASSESSING OFFICER AT THE TIME OF MAKING THE REGULAR ASSESSMENT UNDER S.143(3) OF THE ACT. THE CIT(A ), THEREFORE CONCLUDED THAT THE ASSESSMENT MADE UNDER S.143(3) READ WITH S.147 IS NO T VALID . EVEN ON THE MERITS OF THE ADDITIONS MADE IN THE RE - ASSESSMENT, THE CIT(A) AGREED WITH THE CONTENTIONS OF THE ASSESSEE, AND ACCORDINGLY ALLOWED THE APPEALS OF THE ASSESSEE, VIDE HIS SEPARATE ORDERS DATED 11.3.2013, IMPUGNED IN THESE APPEALS. 6. AGGRIEVED BY THE ABOVE ORDERS OF THE CIT(A), REVENUE IS IN APPEAL BEFORE US. 7 . THE LEARNED DEPARTMENTAL REPRESENTATIVE, STRONGLY SUPPORTING THE ACTION OF THE ASSESS ING OFFICER SUBMITTED THAT THE CIT(A) IS NOT JUSTIFIED IN HOLDING THAT INITIATION OF PROCEEDINGS UNDER S.147 ARE INVALID. HE SUBMITTED THAT WHEN THERE IS A FACTUAL ERROR IN THE CONCLUSIONS ARRIVED AT BY THE EARLIER ASSESSING OFFICER, THE ISSUE OF NOTICE UNDER S.148 IS VALID. IN SUPPORT OF THIS PROPOSITION, HE RELIED ON THE FOLLOWING DECISIONS - ( A ) CIT V/S. USHA INTERNATIONAL LTD. (348 ITR 485) - DEL. ( B ) DR. AMINS PATHOLOGY LABORATORY V/S. JCIT (252 ITR 673) ( C ) DATT BUILDERS P.LTD. V/S. DCIT ( 98 ITD 78 ) ( D ) INDIAN HU ME PIPE CO. LLTD. V/S. ACIT ( 245 CTR 3 1 ) HE ALSO RELIED ON THE DECISION OF DELHI COURT IN THE CASE OF HONDA SIEL POWER PRODUCTS L TD. V/S. DCIT ( 340 ITR 53 ), AND SUBMITTED THAT THE ASSESSING OFFICER WAS JUSTIFIED IN REOPENING THE ASSESSMENTS MADE EARLIER. I TA NO. 865 - 866/ HYD/2013 SHRI POPURI ANKINEEDU, KHAMMAM 4 8. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, STRONGLY RELIED ON THE ORDER OF THE CIT(A) AND SUBMITTED THERE WAS NO ESCAPEMENT OF INCOME ON ACCOUNT OF ANY FAILURE ON THE PART OF THE ASSESSEE, SINCE ALL THE MATERIAL WAS ALREADY AVAILABLE ON RECORD, AND THE ASSESSING OFFICER COMPLETED THE REGULAR ASSESSMENTS UNDER S.143(3). SINCE THE ASSESSING OFFICER MADE AFTER DUE APPLICATION OF MIND , DULY MAKING CERTAIN ADDITIONS IN THAT PROCESS, THE REOPENING OF ASSESSMENT HAS BEEN MADE ON MERE CHANGE OF OPINION, AND THEREFORE, IT IS NOT LEGAL OR VALID. HE PLACED RELIANCE ON THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CA S E OF RANJIT REDDY VS. DY. CIT, HYDERABAD (144 I T D 361), WHEREIN THE TRIBUNAL HAS REFERRED TO A NUMBER OF DECISIONS ON THE SCOPE OF REOPENING OF ASSESSMENT, AND HELD THAT REOPENING OF ASSESSMENT IS NOT PERMISSIBLE WHEN THERE IS NO TANGIBLE MATERIAL TO ARRIVE AT THE CONCLUSION THAT THE INCOME HAS ESCAPED ASSESSMENT. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MAT ERIAL ON RECORD, INCLUDING THE PAPER - BOOK. WE HAVE GONE THROUGH THE WRITTEN SUBMISSIONS AND THE CASE - LAW RELIED UPON BY THE PARTIES. WE HAVE ALSO GONE THROUGH PAPER - BOOK FILED BY THE ASSESSEE . IT IS AN ADMITTED FACT THAT IN THESE CASES, REGULAR ASSESSMENT S HAVE BEEN MADE UNDER S.143(3) OF THE ACT, MAKING CERTAIN ADDITIONS. BY THE IMPUGNED ASSESSMENTS UNDER S.143(3) READ WITH S.147 OF THE ACT, THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAD CLAIMED EXCESS DEPRECIATION THAN THE ELIGIBLE DEPRECIATION, AND A CCORDINGLY DISALLOWING THE AMOUNTS OF EXCESS DEPRECIATION CLAIMED MADE THE ADDITIONS FOR BOTH THE YEARS. THE ASSESSING OFFICER ALSO NOTICED DIFFERENCE IN THE INCOME S DECLARED BY THE ASSESSEE AND AS REFLECTED IN THE TDS CERTIFICATES, AND ACCORDINGLY BROUG HT TO TAX THE DIFFERENTIAL AMOUNT OF INCOME, PROCEEDING ON THE BASIS OF TDS CERTIFICATES. IT IS THE CASE OF THE ASSESSEE THAT BOTH THE ADDITIONS MADE AS ABOVE, HAVE BEEN MADE ON THE BASIS OF VERY SAME MATERIAL, WHICH WAS ALREADY AVAILABLE EVEN AT THE TIM E OF REGULAR ASSESSMENT, AND IT IS MERE CHANGE OF OPINION THAT THE ASSESSMENTS COMPLETED EARLIER HAVE BEEN REOPENED. WE FIND FORCE IN THIS CONTENTION OF THE ASSESSEE. WE FIND THAT IN THE PRESENT CASE, THERE IS NO NEW MATERIAL THAT HAS LED TO THE ASSESS ING OFFICER TO COME TO THE CONCLUSION THAT I TA NO. 865 - 866/ HYD/2013 SHRI POPURI ANKINEEDU, KHAMMAM 5 THERE WAS ESCAPEMENT OF INCOME. FOR THE CONCEPT OF CHANGE OF OPINION , WE MAY REFER TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. (2010) 320 ITR 561 , WHEREIN IT HAS BEEN HELD AS FOLLOWS : 'THE CONCEPT OF 'CHANGE OF OPINION' ON THE PART OF THE ASSESSING OFFICER TO REOPEN AN ASSESSMENT DOES NOT STAND OBLITERATED AFTER THE SUBSTITUTION OF SECTION 147 OF THE INCOME TAX ACT, 1961, BY THE DIRECT TAX LAWS ( AMENDMENT) ACTS, 1987 AND 1989. AFTER THE AMENDMENT, THE ASSESSING OFFICER HAS TO HAVE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, BUT THIS DOES NOT IMPLY THAT THE ASSESSING OFFICER CAN REOPEN AN ASSESSMENT ON MERE CHANGE OF OPINION. THE CONCEPT OF 'CHANGE OF OPINION' MUST BE TREATED AS AN IN - BUILT TEST TO CHECK THE ABUSE OF POWER. HENCE, AFTER APRIL 1, 1989, THE ASSESSING OFFICER HAS POWER TO REOPEN AN ASSESSMENT, PROVIDED THERE IS 'TANGIBLE MATERIAL' TO COME TO THE CONCLUSION THAT THERE WAS ESC APEMENT OF INCOME FROM ASSESSMENT. REASON MUST HAVE A LINK WITH THE FORMATION OF THE BELIEF. DECISIONS OF THE DELHI HIGH COURT IN CIT V. KELVINATOR OF INDIA LTD. (2002) 256 ITR 1 (FB) AND CIT V. EICHER LTD. (2007) 294 ITR 310 AFFIRMED.' 10. SIMILARLY, IN THE CASE OF GANGA SARAN & SONS PVT. LTD. VS. ITO (1980) 130 ITR 1 (SC), THE APEX COU R T INTERPRETING THE WORDS HAS REASON TO BELIEVE AS APPEARING IN S.147(A ) OF THE ACT, HELD AS FOLLO W S - 'THE IMPORTANT WORDS UNDER S. 147(A) ARE 'HAS REASON TO BELIEVE' AND THESE WORDS ARE STRONGER THAN THE WORDS 'IS SATISFIED'. THE BELIEF ENTERTAINED BY THE ITO MUST NOT BE ARBITRARY OR IRRATIONAL. IT MUST BE REASONABLE OR IN OTHER WORDS IT MUST BE BASED ON REASONS WHICH ARE RELEVANT AND MATERIAL. THE COURT, OF COURSE, CANNOT INVESTIGATE INTO THE ADEQUACY OR SUFFICIENCY OF THE REASONS WHICH HAVE WEIGHED WITH THE ITO IN COMING TO THE BELIEF, BUT THE COURT CAN CERTAINLY EXAMINE WHETHER THE REASONS ARE RELEVANT AND HAVE A BEARING ON THE MATTERS IN REGARD TO WHICH HE IS REQUIRED TO ENTERTAIN THE BELIEF BEFORE HE CAN ISSUE NOTICE UNDER S. 147(A). IF THERE IS NO RATIONAL AND INTELLIGIBLE NEXUS BETWEEN THE REASONS AND THE BELIEF, SO THAT, ON SUCH REASONS, NO ONE PROPERLY INSTRUCTED ON FACTS AND LAW COULD REASONABLY EN TERTAIN THE BELIEF, THE CONCLUSION WOULD BE INESCAPABLE THAT THE ITO COULD NOT HAVE REASON TO BELIEVE THAT ANY PART OF THE INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT AND SUCH ESCAPEMENT WAS BY REASON OF THE OMISSION OR FAILURE ON THE PART OF THE ASSESSE E TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS AND THE NOTICE ISSUED BY HIM WOULD BE LIABLE TO BE STRUCK DOWN AS INVALID'. I TA NO. 865 - 866/ HYD/2013 SHRI POPURI ANKINEEDU, KHAMMAM 6 FOLLOWING THE RATIO LAID DOWN BY THE APEX COURT IN THE ABOVE CASES , IT HAS BEEN CONSISTENTLY HELD BY VARIOUS HIGH COURTS, INCLUDING THE JURISDICTIONAL HIGH COURT IN THE CASE OF MAHALAKSHMI MOTORS LTD. V/S. DCIT (265 ITR 53) AND THE COORDINATE BENCHES OF THE TRIBUNAL IN SIMILAR MATTERS , THAT WHEN ALL THE FACTS HAVE BEEN FULLY DISCLOSED BY THE ASSESSEE, THE NOTICE OF RE - OF ASSESSMENT IS NOT VALID. IN THE CASE OF RANJIT REDDY (SUPRA), IT HAS BEEN HELD BY THE COORDINATE BENCH OF THIS TRIBUNAL THAT AND UNLESS THERE IS TANGIBLE NEW MATERIAL BASED ON WHICH IT COULD BE BELIEVE D THERE WAS ESCAPEMENT OF INCOME, ISSUANCE OF NOTICE UNDER S.148 OF THE ACT IS NOT VALID. AS AGAINST THESE DECISIONS, THE CASE - LAW RELIED UPON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, NOTED ABOVE, ARE DISTINGUISHABLE FROM THE FACTS OF THE PRESENT CASE. 11. IN THE FACTS OF THE PRESENT CASE, ALL THE MATERIAL FACTS HAVE BEEN DISCLOSED BY THE ASSESSEE, AND REGULAR ASSESSMENTS UNDER S.143(3) OF THE ACT MAKING CERTAIN ADDITIONS, HAVE BEEN COMPLETED BASED ON THOSE VERY MATERIAL, AND CONSEQUENTLY, THE REOPENIN G OF ASSESSMENTS IN THESE CASES IS NEITHER LEGAL NOR VALID. IN THIS VIEW OF THE MATTER, RESPECTFULLY FOLLOWING THE DECISIONS OF THE APEX COURT AND THE JURISDICTIONAL HIGH COURT NOTED ABOVE, BESIDES THE DECISIONS OF THE COORDINATE BENCHES OF THE TRIBUNAL I N SIMILAR MATTERS, WE FIND NO INFIRMITY IN THE IMPUGNED ORDERS OF THE CIT(A). WE ACCORDINGLY UPHOLD THE SAME AND REJECT THE GROUNDS OF THE REVENUE IN THESE APPEALS. 12 . IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 12 TH FEBRUARY, 2014 SD/ - SD/ - (CHANDRA POOJARI ) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DT/ - 12 TH FEBRUARY, 2014 I TA NO. 865 - 866/ HYD/2013 SHRI POPURI ANKINEEDU, KHAMMAM 7 COPY FORWARDED TO: 1. SHRI POPURI ANKINEEDU, C/O. POPURI ENGG & CONSULTANTS, D.NO.1 - 5 - 19/8, SARADHI NAGAR, KHAMMAM 2 . DY. COMMISSIONER OF INCOME - TAX CIRCLE 1 HYDERABAD 3. COMMISSIONER OF INCOME - TAX(APPEALS) , VIJAYADAWADA 4. COMMISSIONER OF INCOME - TAX VIJAYAWADA 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S