ABT Limited, CHENNAI V. DCIT, Coimbatore

ITA 893/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5779 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 12-04-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA IRS
• Assessee Lawyers: S SRIDHAR
• Keywords: Depreciation; Capital expenditure
• Section: 143(3); 14A; 115JB; 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . . . , !' . #$#% , & '' ( [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ] ./I.T.A. NO.893/MDS/2017 / ASSESSMENT YEAR : 2012-2013. M/S. ABT LIMITED, NO.180, RACE COURSE ROAD, COIMBATORE 641 018. [PAN AABCA 8398K] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE I, COIMBATORE ( )* / APPELLANT) ( +,)* /RESPONDENT) / APPELLANT BY : SHRI. S. SRIDHAR, ADVOCATE /RESPONDENT BY : SHRI. S. VIJAYAPRABHA, IRS, JCIT. /DATE OF HEARING : 09-11-2017 ! /DATE OF PRONOUNCEMENT : 27 -11-2017 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER THROUGH THIS APPEAL ASSESSEE ASSAILS AN ORDER DA TED 30.03.2017 PASSED BY THE LD. COMMISSIONER OF INCOME TAX-I, COIMBATORE U/S. 263 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. FACTS APROPOS ARE THAT ASSESSEE CARRYING ON BUSIN ESS OF PASSENGER, PARCEL SERVICE, MARUTI DEALERSHIP & SER VICE STATION, PETROL ITA NO. 893/MDS/2017 :- 2 -: BUNK ETC HAD FILED ITS RETURN OF INCOME FOR THE IMP UGNED ASSESSMENT YEAR DECLARING AN INCOME OF RS.19,05,23,190/- UNDER NORMAL PROVISIONS AND BOOK PROFIT OF RS.14,40,52,949/- U/S. 115JB OF THE ACT. ASSESSEE HAD CLAIMED A SUM OF RS.3,14,86,158/- AS REVENUE E XPENDITURE UNDER THE HEAD CONSTRUCTION OF BUILDING ON LEASEHOLD LAN D, WHICH WAS DISALLOWED BY THE LD. ASSESSING OFFICER. LD. ASSESS ING OFFICER TOOK A VIEW IN THE ORIGINAL ASSESSMENT COMPLETED UNDER SEC TION 143(3) OF THE ACT THAT THIS WAS A CAPITAL EXPENDITURE. ASSESSEE S CLAIM FOR DEPRECIATION AT THE RATE OF 50% ON COMMERCIAL VEHI CLES WAS ALSO NOT ALLOWED IN SUCH ASSESSMENT. 3. ON 17.03.2017, LD. CIT ISSUED A SHOW CAUSE NOTICE U/S. 263 OF THE ACT. AS PER THE LD. COMMISSIONER OF INCOME TAX (APPEALS), ASSESSEE HAD TAKEN MAT CREDIT ON SURCHARGE AND EDUC ATION CESS WHICH WAS NOT AVAILABLE U/S. 115JAA(1A) OF THE ACT. FURTH ER, AS PER THE LD. CIT, ASSESSEE HAD CLAIMED EXEMPT DIVIDEND INCOME OF RS.93,28,301/- AS EXEMPT BUT DISALLOWANCE U/S. 14A OF THE ACT WHIC H WAS WORKED OUT BY THE ASSESSEE AT RS.93,283/- WAS ACCEPTED WITHO UT VERIFICATION. AS PER THE LD. CIT THERE WAS A SHORT DISALLOWANCE OF R S.2,81,63,908/- U/S. 14A OF THE ACT. 4. REPLY OF THE ASSESSEE ON THE ABOVE WAS THAT MAT C REDIT WHICH WAS TO BE CARRIED FORWARD HAD TO BE COMPUTE D BY DEDUCTING ITA NO. 893/MDS/2017 :- 3 -: TAX PAYABLE ON TOTAL INCOME UNDER NORMAL PROVISIONS FROM TAX PAYABLE U/S.115JB OF THE ACT. AS PER THE ASSESSEE ITS TREA TMENT OF MAT CREDIT WAS CORRECT AND THERE WAS NO ERROR IN THE ASSESSMEN T ORDER. 5. VIZ-A-VIZ DISALLOWANCE U/S.14A OF THE ACT, EXPLANAT ION OF THE ASSESSEE WAS THAT EXPENDITURE WHICH WAS NOT CLAIME D AS DEDUCTIBLE COULD NOT BE DISALLOWED U/S. 14A OF THE ACT. 6. LD. CIT ACCEPTED THE REPLY OF THE ASSESSEE, IN SO F AR AS THE ISSUE OF MAT CREDIT WAS CONCERNED. HOWEVER, ON THE ISSUE OF DISALLOWANCE U/S. 14A OF THE ACT, HE WAS OF THE OPI NION THAT ASSESSEE HAVING INCURRED FINANCE COST RS.28,06,86,000/-, SE COND AND THIRD LIMB OF RULE 8D OF THE INCOME ACT RULES, 1962 WOULD CLEA RLY APPLY. AS PER THE LD. CIT, LD. ASSESSING OFFICER HAD ACCEPTED THE SUO-MOTU DISALLOWANCE OF RS.93,283/- MADE BY THE ASSESSEE W ITHOUT ANY VERIFICATION, AND HENCE THE ASSESSMENT ORDER WAS ER RONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE SET ASIDE THE ASSESSMENT AND DIRECTED THE LD. ASSESSING OFFICER TO EXAMINE A FRESH THE ISSUE OF DISALLOWANCE REQUIRED U/S. 14A OF THE ACT AND PASS FRESH ORDER AFTER CARRYING OUT INDEPENDENT VERIFICATION. 7. NOW BEFORE US, THE LD. AUTHORISED REPRESENTATIVE STRONGLY ASSAILING THE ORDER OF THE LD. COMMISSIONER OF INCO ME TAX SUBMITTED ITA NO. 893/MDS/2017 :- 4 -: THAT ASSESSEE HAD MADE A SUO MOTU DISALLOWANCE O F RS.93,283/- U/S. 14A OF THE ACT. AS PER THE LD. AUTHORISED REPRESEN TATIVE, LD. ASSESSING OFFICER HAD NOT MADE ANY FURTHER DISALLOWANCE U/S. 14A OF THE ACT BECAUSE HE WAS SATISFIED WITH THE SUO-MOTU DISALLOW ANCE MADE BY THE ASSESSEE. ACCORDING TO HIM, THE ASSESSMENT ORDER D ID NOT HAVE IN IT ANY ERROR WHICH WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 8. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE STRONG LY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. A READING OF THE ASSESSMENT ORDER SHOW THAT ONLY DISALLOWANCES CONSIDERED BY THE LD. ASSESSING OFFICER WERE ON THE CLAIM OF EXPENDITURE ON CONSTRUCTION OF BUILDING ON LEASEHOLD LAND AND ON EXCESS DEPRECATION FOR COMM ERCIAL VEHICLES. THERE IS NOT EVEN A WHISPER IN THE ASSESSMENT ORDE R REGARDING THE COMPUTATION OF DISALLOWANCE U/S.14A OF THE ACT. IT HAS NOT BEEN DISPUTED BY THE LD. AUTHORISED REPRESENTATIVE THAT ASSESSEE HAD CLAIMED EXEMPT DIVIDEND INCOME OF RS.93,28,301/-. LD. ASSESSING OFFICER HAD NOT EXAMINED AT ANY TIME THE CORRECTNES S OF THE SUO-MOTU DISALLOWANCE OF RS.93,283/- DONE BY THE ASSESSEE U /S.14A OF THE ACT. OBVIOUSLY, DISALLOWANCE MADE BY THE ASSESSEE WAS BY TAKING ONE ITA NO. 893/MDS/2017 :- 5 -: PERCENT OF THE DIVIDEND INCOME AS THE EXPENDITURE I NCURRED IN RELATION TO SUCH DIVIDEND INCOME. THIS IS A PURE ESTIMATE AND WHETHER SUCH ESTIMATE SATISFIED THE REQUIREMENTS OF LAW WAS NEVE R EXAMINED BY THE LD. ASSESSING OFFICER. HONBLE APEX COURT IN THE CA SE OF TOYOTA MOTOR CORPORATION VS. CIT, 306 ITR 52, AFTER CONSIDERING THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. TOYOTA MOTOR CORPORATION, 306 ITR 49 HAD CLEARLY HELD THAT ORDER WHICH IS SILENT AND CRYPTIC IS ERRONEOUS AND PREJUDICIAL TO THE INTERE ST OF THE REVENUE. ESPECIALLY SO WHEN LD. ASSESSING OFFICER HAD NOT MA DE ANY ENQUIRY ON THE CLAIM OF THE ASSESSEE DURING THE COURSE OF ASS ESSMENT PROCEEDINGS. WHAT WAS HELD BY HONBLE DELHI HIGH COURT AND LATER BY HONBLE APEX COURT ARE REPRODUCED HEREUNDER:- CIT VS. TOYOTA MOTOR CORPORATION 306 ITR 49 (DELHI HC ) 9. WE FIND FROM THE ORDER PASSED BY THE TRIBUNAL THAT IT HAS COME TO THE CONCLUSION THAT THE AO HAD CARRIED OUT DUE VERIFICATION OF RELEVANT FACTS AND THE ASSESSEE HAD ALSO SHOWN ITS BONA FIDES AND ITS REASONABLE BELIEF IN N OT DEDUCTING TAX AT THE APPROPRIATE STAGE. THE PENALTY PROCEEDINGS WERE NOT DROPPED CASUALLY BY THE AO BUT AFTER VERIFICATION OF FULL FACTS DISCLOSED BY THE ASSESSE E IN THE REPLY. 10. WE ARE UNABLE TO APPRECIATE THIS REASONING GIVE N BY THE TRIBUNAL SIMPLY BECAUSE THAT THE AO HIMSELF DID NOT SAY ANY SUCH THING IN HIS ORDER. THERE IS NO DOUBT THAT THE PROCEEDINGS BEFORE THE AO ARE QUASI JUDICIAL PROCEE DINGS AND A DECISION TAKEN BY THE AO IN THIS REGARD MUST BE SUPPORTED BY REASONS. OTHERWISE, EVERY ORDER, SUCH AS THE ONE PASSED BY THE AO, COULD RESULT IN A THEORETICAL POSSIBILITY THAT IT MAY BE REVISED BY THE CIT UNDER S. 263 OF THE ACT. SUCH A SITUATION IS CLEARLY IMPERMISSIBLE. ITA NO. 893/MDS/2017 :- 6 -: 11. IT IS ALSO NECESSARY FOR THE PARTIES TO KNOW TH E REASONS THAT HAVE WEIGHED WITH THE ADJUDICATING AUTHORITY I N COMING TO A CONCLUSION. THE ORDER PASSED BY THE AO SHOULD BE A SELF-CONTAINED ORDER GIVING THE RELEVANT FACTS AND REASONS FOR COMING TO THE CONCLUSION BASED ON THOSE FACTS A ND LAW. 12. WE FIND THAT THE ORDER PASSED BY THE AO IS CRYP TIC, TO SAY THE LEAST, AND IT CANNOT BE SUSTAINED. THE TRIB UNAL CANNOT SUBSTITUTE ITS OWN REASONING TO JUSTIFY THE ORDER PASSED BY THE AO WHEN THE AO HIMSELF DID NOT GIVE A NY REASON IN THE ORDER PASSED BY HIM. 13. UNDER THE CIRCUMSTANCES, WE ANSWER THE QUESTION IN THE AFFIRMATIVE, IN FAVOUR OF THE REVENUE AND AGAINST T HE ASSESSEE AND REMAND THE MATTER BACK TO THE FILE OF THE AO TO DECIDE THE ISSUE AFRESH IN TERMS OF THE ORDER PA SSED BY THE CIT UNDER S. 263 OF THE ACT. TOYOTA MOTOR CORPORATION VS CIT 306ITR52 (SC) 4. WE ARE NOT INCLINED TO INTERFERE WITH THE IMPU GNED ORDER OF THE HIGH COURT. THE HIGH COURT HAS HELD THAT THE AO HAD DISPOSED THE PROCEEDINGS STATING THE PENALTY PROCEE DINGS INITIATED IN THIS CASE UNDER S. 271C R/W S. 274 OF THE IT ACT, 1961 ARE HEREBY DROPPED. ACCORDING TO THE HIGH COUR T, THERE WAS NO BASIS INDICATED FOR DROPPING THE PROCE EDINGS. THE TRIBUNAL REFERRED TO CERTAIN ASPECTS AND HELD T HAT THE INITIATION OF PROCEEDINGS UNDER S. 263 OF THE IT AC T, 1961 (IN SHORT, THE 'IT ACT') WAS IMPERMISSIBLE WHEN CONSIDE RED IN THE BACKGROUND OF THE MATERIALS PURPORTEDLY PLACED BY THE ASSESSEE BEFORE THE AO. WHAT THE HIGH COURT HAS DON E IS TO REQUIRE THE AO TO PASS A REASONED ORDER. THE HIG H COURT WAS OF THE VIEW THAT TRIBUNAL COULD NOT HAVE SUBSTI TUTED ITS OWN REASONINGS WHICH WERE REQUIRED TO BE RECORDED B Y THE AO. ACCORDING TO THE ASSESSEE ALL RELEVANT ASPECTS WERE PLACED FOR CONSIDERATION AND IF THE OFFICER DID NOT RECORD REASONS, ASSESSEE CANNOT BE FAULTED. 5. WE DO NOT THINK IT NECESSARY TO INTERFERE AT THI S STAGE. IT GOES WITHOUT SAYING THAT WHEN THE MATTER BE TAKEN U P BY THE AO ON REMAND, IT SHALL BE HIS DUTY TO TAKE INTO ACCOUNT ALL THE RELEVANT ASPECTS INCLUDING THE MATERIALS, I F ANY, ALREADY PLACED BY THE ASSESSEE, AND PASS A REASONED ORDER. ITA NO. 893/MDS/2017 :- 7 -: WE CANNOT THEREFORE FAULT THE ORDER OF THE LD. CIT HOLDING THAT ASSESSMENT WAS ERRONEOUS AND PREJUDICIAL TO THE IN TEREST OF THE REVENUE ON THE ASPECT OF DISALLOWANCE U/S.14A OF TH E ACT. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED ON MONDAY, THE 27TH DAY OF NOVEMB ER, 2017, AT CHENNAI. SD/- SD/- ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( !' . #$#% ) (ABRAHAM P. GEORGE) & / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED:27TH NOVEMBER, 2017 KV &' ()*) / COPY TO: 1 . / APPELLANT 3. +,' / CIT(A) 5. )-. / / DR 2. / RESPONDENT 4. + / CIT 6. .01 / GF