KOTAK SECURITIES LTD, MUMBAI V. DCIT RG 4(3), MUMBAI

ITA 881/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7741 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 08-12-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 10-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM GAUR
• Keywords: Depreciation; Audit objection; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 143(3); 251; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: MUMBAI BEFORE SHRI R K GUPTA, JUDICIAL MEMBER AND SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER ITA NO 881/MUM/2009 (ASSESSMENT YEAR: 2001-02) KOTAK SECURITIES LIMITED , 1ST FLOOR, BAKTHAWAR, 229 NARIMAN POINT, MUMBAI -400 121 PAN: AAACK 3436 F VS DCIT -4(3), AAYAKAR BHAVAN, M K ROAD, MUMBAI -400 020 APPELLANT RESPONDENT APPELLANT BY: SHRI FARROKH IRANI RESPONDENT BY: SHRI VIKRAM GAUR ORDER PER PRAMOD KUMAR 1. THIS IS AN APPEAL FILED BY THE ASSESSEE AND IS D IRECTED AGAINST THE ORDER DATED 10TH DECEMBER 2008 PASSED BY THE CIT (A) IN A MATTE R OF ASSESSMENT U/S 143(3) R.W.S. 147 OF THE INCOME-TAX ACT, 1961 FOR THE ASSE SSMENT YEAR 2001-02. 2. GRIEVANCES RAISED BY THE ASSESSEE ARE AS FOLLOWS : GROUND NO.I INVALID REASSESSMETN PROCEEDINGS 1. THE COMMISSIONER OF INCOME TAX (APPEALS) XIV, M UMBAI (HEREINAFTER REFERRED TO AS THE CIT (A) ERRED IN INITIATING RE ASSESSMENT PROCEEDINGS U/S 147 OF THE INCOME TAX ACT, 1961 (THE ACT), MERELY ON THE BASIS OF AUDIT OBJECTIONS. 2. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THAT : A. THE REASONS MENTIONED IN THE REOPENING NOTICE WE RE MERELY A CHANGE OF OPINION BASED ON THE COMMENTS OF THE AUDIT PARTY AN D THE FACTS AND DETAILS WERE ALREADY SUBMITTED DURING THE COURSE OF REGULAR ASSESSMENT PROCEEDINGS. B. THE REASONS MENTIONED IN THE REOPENING NOTICE AR E MERELY REASONS TO SUSPECT OR ARE BASED ON CONJECTURES AND SURMISES WITHOUT A NY APPLICATION OF MIND. ITA NO 881/MUM/2009 KOTAK SECURITIES LIMITED 2 C. THE REGULAR ASSESSMENT WAS COMPLETED ON 25.03.20 04, WHERE IN ALL THE INFORMATION WAS AVAILABLE WITH THE AO WHO PASSED TH E ORDER AFTER GOING THROUGH ALL THE DETAILS AND SATISFYING HIMSELF FULL Y. D. AT THE TIME OF REGULAR ASSESSMENT PROCEEDINGS IN FORMATION REGARDING DEPRECIATION ON UPS WAS GIVEN TO THE AO VIDE APPELL ANTS LETTER DATED 13.10.2003. E. THERE WAS NO FRESH MATERIAL ON RECORD AND ONCE A N OPINION IS GIVEN IN THE ASSESSMENT, IT CAN NOT BE REOPENED EXCEPT ON FR ESH MATERIAL / EVIDENCE. 3. SO FAR AS FIRST SET OF GRIEVANCES, IE AGAINST CI T (A)S UPHOLDING THE VALIDITY OF REASSESSMENT PROCEEDINGS ARE CONCERNED, THE RELEVAN T MATERIAL FACTS ARE LIKE THIS. THE ASSESSMENT U/S 143(3) WAS COMPLETED ON 15TH MAR CH 2004 BUT VIDE NOTICE DATED 15TH MARCH, THE ASSESSMENT WAS REOPENED BY THE ASSE SSING OFFICER. IN THE REASONS RECORDED FOR REOPENING THE ASSESSMENT, IT WAS INTER ALIA , OBSERVED BY THE ASSESSING OFFICER THAT ON ON PERUSAL OF RECORDS, IT IS OBSERVED THAT THE ASSESSEE COMPA NY HAS CLAIMED RS 4,36,27,144/- AS DEPRECIATION ADMISSIBLE UNDER I.T. ACT OUT OF WHICH DEPRECIATION OF B.S.E. CARD OF RS 66,00,000/- WAS D ISALLOWED AND ADDED BACK BY THE AO. ON WORKING OF DEPRECIATION, IT REVEALS THAT TH E ASSESSEE HAS CLAIMED 100% DEPRECIATION ON UPS AND BATTERIES TREATING THEM AS AUTOMATIC VOLTAGE CONTROLLER. IT WAS ALSO NOTED IN THE REASONS RECORDED THAT FR OM THE DETAILS OF ADDITION IT WAS NOTICED THAT THE ITEMS CLASSIFIED AS AUTOMATIC VOLT AGE CONTROLLERS WERE NOTHING BUT UPS AND BATTERIES AND THE SHOULD HAVE BEEN CLASSI FIED AS ELECTRICAL EQUIPMENTS AND CHARGED DEPRECIATION AT 25% AND NOT AT 100% APPLICA BLE TO AUTOMATICS VOLTAGE CONTROLLERS. AGGRIEVED, INTER ALIA , FOR THE INITIATION OF THE REASSESSMENT PROCEEDING S THE ASSESSEE CARRIED THE MATTER INTO APPEAL BEFORE THE CIT (A). IT WAS POINTED OUT BY THE ASSESSEE THAT THE REASSESSMENT PROCEEDINGS HAVE BEEN INITIATED AFTER FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND SI NCE THERE IS NO LAPSE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MAT ERIAL FACTS NECESSARY, THE REASSESSMENT PROCEEDINGS ARE NOT IN ACCORDANCE WITH THE SCHEME OF THE ACT. THE LEARNED CIT (A), HOWEVER, REJECTED THE PLEA OF THE ASSESSEE AND OBSERVED THAT THE REASSESSMENT PROCEEDINGS HAVE BEEN INITIATED WITHIN FOUR YEARS FROM THE DATE OF THE ORIGINAL ASSESSMENT ORDER U/S 143(3) I.E. 15TH MARC H 2004. THE CIT (A) UPHELD THE ITA NO 881/MUM/2009 KOTAK SECURITIES LIMITED 3 INITIATION OF THE REASSESSMENT PROCEEDINGS. AGGRIE VED, INTER ALIA , BY THE STAND SO TAKEN BY THE ASSESSEE, THE ASSESSEE IS IN FURTHER A PPEAL BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS PERUSED THE MATE RIAL ON RECORD AND DULY CONSIDERED THE FACTUAL MATRIX AS WELL AS THE APPLIC ABLE LEGAL POSITION. 5. AS SHRI IRANI, LEARNED COUNSEL FOR THE ASSESSEE, RIGHTLY POINTS OUT THE RELEVANT DATE FOR COMPUTATION OF FOUR YEARS TIME LIMIT IS NO T THE DATE OF PASSING OF ORDER U/S 143(3), AS HAS BEEN ADOPTED BY THE CIT (A), BUT THE END OF THE RELEVANT ASSESSMENT YEAR. IT IS, THUS, BEYOND DISPUTE OR CONTROVERSY T HAT THE CIT (A) HAS CLEARLY ERRED IN ADOPTING WRONG BASIS FOR COMPUTATION OF FOUR YEARS TIME LIMIT, WHICH IS RELEVANT INASMUCH AS WHEN REASSESSMENT PROCEEDINGS ARE INITI ATED AFTER THE FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR WHERE ASSES SEE HAS DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, TH E REASSESSMENT PROCEEDINGS CANNOT BE SAID TO BE GOOD IN LAW. EVEN PLAIN READING OF T HE REASONS RECORDED FOR REOPENING WOULD SHOW THAT ALL THE RELEVANT INFORMATION WAS AV AILABLE ON RECORD AND IT IS BASED ON THAT INFORMATION ITSELF THAT REASSESSMENT PROCEE DINGS ARE INITIATED. THERE IS ALSO NO DISPUTE THAT THE REASSESSMENT PROCEEDINGS WERE I NITIATED AFTER FOUR YEARS FROM THE RELEVANT ASSESSMENT YEAR. WE MAY, IN THIS REGARD A LSO REFER TO THE FOLLOWING OBSERVATIONS MADE BY HONBLE JURISDICTIONAL HIGH CO URT IN THE CASE OF ICICI BANK LTD VS K J RAO AND ANOTHER 268 ITR 203: UNDER SECTION 147 OF THE INCOME-TAX ACT, CONCLUDED ASSESSMENTS CAN BE REOPENED BEYOND A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEARS ONLY IF THERE IS FAILURE ON THE PA RT OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR TH E PURPOSE OF ASSESSMENT. HAVING FURNISHED ALL MATERIAL FACTS EVEN IF AN ASSE SSEE ERRONEOUSLY CLAIMS HIGHER DEPRECIATION, IT WILL NOT BE A CASE OF FAILU RE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. AT WHAT RATE THE DEPRECIATION IS T O BE CLAIMED IS A MATTER OF LEGAL INFERENCE TO BE DRAWN FROM THE MATERIAL FACTS . IF THE LEGAL INFERENCE DRAWN FROM THE MATERIAL FACTS IS ERRONEOUS IT CANNO T BE SAID THAT THERE IS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE MAT ERIAL FACTS. IN THE PRESENT CASE, ON THE MATERIAL FACTS DISCLOSED, THE ASSESSEE HAD CLAIMED DEPRECIATION AT 40 PER CENT AND SAME WAS ALLOWED BY THE ASSESSING O FFICER. IT IS NOT THE CASE OF THE REVENUE THAT THE FACTS DISCLOSED BY THE ASSE SSEE WERE INCORRECT OR THAT THERE WERE ANY OTHER FACTS WHICH WERE MATERIAL FOR THE ASSESSMENT WHICH HAVE NOT BEEN DISCLOSED BY THE ASSESSEE. UNDER THE CIRC UMSTANCES, IF THERE IS NO FAILURE TO DISCLOSE MATERIAL FACTS, THEN, EVEN IF T HERE IS EXCESS RELIEF GRANTED, ITA NO 881/MUM/2009 KOTAK SECURITIES LIMITED 4 THE ASSESSMENTS CANNOT BE REOPENED BEYOND THE PERIO D OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEARS. THIS COURT I N THE CASE OF IPCA LABORATORIES LTD [2001] 251 ITR 416 AND IN THE CASE OF BHOR INDUSTRIES LTD [2004] 267 ITR 161 (BOM) HAS HELD THAT NOTICE FOR R EOPENING OF THE ASSESSMENT CANNOT BE ISSUED AFTER A PERIOD OF FOUR YEARS UNLESS THE ESCAPEMENT OF INCOME IS ON ACCOUNT TO FAILURE ON TH E PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. IT HA S BEEN FURTHER HELD THAT THE EXPLANATION TO SECTION 147 OF THE INCOME-TAX ACT HA S TO BE READ WITH SECTION 148 OF THE INCOME-TAX ACT IN ITS ENTIRETY. IN THE LIGHT OF THE AFORESAID DECISIONS, IN THE PRESENT CASE, THERE BEING NO FAIL URE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS, THE IMPUGNED NOTICES ISSUED BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEARS, ARE LIABLE TO BE HELD TO HAVE BEE N ISSUED IN CONTRAVENTION OF THE PROVISION OF THE INCOME-TAX ACT. IN VIEW OF THE ABOVE DISCUSSION AND BEARING IN MIND THE ENTIRETY OF THE CASE, WE HOLD THAT THE REASSESSMENT PROCEEDINGS WERE INDEED VITIA TED IN LAW AND ACCORDINGLY WE QUASH THE SAME. GROUND NO.I IS ACCORDINGLY ALLOWED IN THE TERMS INDICATED ABOVE. 6. AS REGARDS SECOND SET OF GRIEVANCES, THESE GRIEV ANCES ESSENTIALLY DEALS WITH THE MERITS OF THE ADDITION MADE IN THE COURSE OF RE ASSESSMENT PROCEEDINGS. HOWEVER, SINCE WE HAVE QUASHED THE REASSESSMENT PRO CEEDINGS, THESE ISSUES ARE RENDERED ACADEMIC AND CALLED FOR NO ADJUDICATION. WE, THEREFORE, DISMISS THESE GRIEVANCES AS INFRUCTUOUS, WHICH DO NOT REQUIRE OUR ADJUDICATION. GROUND NO.2 IS THUS DISMISSED AS INFRUCTUOUS. 7. IN THE RESULT, APPEAL IS ALLOWED IN THE TERMS IN DICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT TODAY ON THE 26 TH FEBRUARY 2010. SD/- (R K GUPTA) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI, DATE: 26TH FEBRUARY 2010 ITA NO 881/MUM/2009 KOTAK SECURITIES LIMITED 5 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)-XIV, MUMBAI. 4) THE CIT MC-14, MUMBAI. 5) THE D.R. A BENCH, ITAT, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR CHAVAN* I.T.A.T., MUMBAI ITA NO 881/MUM/2009 KOTAK SECURITIES LIMITED 6 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 25.2.2010 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 25.2.2010 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS 7 FILE SENT TO THE BENCH CLERK SR.PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER