DCIT, New Delhi V. M/s. Gillette Diversified Operations Pvt. Ltd., New Delhi

ITA 907/DEL/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3124 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 13-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AGAINST DATED PASSED
• Keywords: Reopening of assessment; Depreciation; Business expenditure; Difference of opinion; Change of opinion; Revenue expenditure; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C: NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT ME MBER ITA NO.:- 907/DEL/2015 ASSESSMENT YEAR: 2005-06 O R D E R PER AMIT SHUKLA, THE AFORESAID APPEAL HAS BEEN FILED BY THE R EVENUE AGAINST ORDER DATED 14.11.2014, PASSED BY LD. CIT(APPEALS) XV, NEW DELHI FOR THE QUANTUM OF ASSESSMENT PASSED U/S147/143(3) FOR THE AS SESSMENT YEAR 2005-06. IN THE GROUNDS OF APPEAL REVENUE HAS R AISED FOLLOWING GROUNDS:- 1. WHETHER ON THE FACTS & CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT (A) IS RIGHT IN HOLDING THE REOPENING O F THE CASE AND REASSESSMENT U/S 147 BAD IN LAW WHEN THE AO IN THE REASONS TO DCIT, CIRCLE 10 (1) NEW DELHI. VS. M/S. GILLETTE DIVERSIFIED OPERATIONS PVT. LTD. 34, OKHLA INDUSTRIAL ESTATE, NEW DELHI 110 020 (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI AMIT JAIN, SR. DR ASSESSEE BY : SHRI P. DINODIA, CA DATE OF HEARING 26/02/2018 DATE OF PRONOUNCEMENT /02/2018 ITA NO. 907/DEL/2015 DCIT VS. M/S. GILLETTE DIVERS IFIED OPERATIONS PVT. LTD. 2 BELIEVE HAS ALREADY MENTIONED THAT INCOME HAD ESCAP ED ASSESSMENT WITHIN THE MEANING OF SECTION 147. 2. WHETHER IN VIEW OF THE SPECIFIC REASONS RECOR DED BY THE AO & IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE ID. CIT(A) IS RIGHT IN IGNORING THE AO'S MENTIONING WIT HIN MEANING OF SECTION 147 AND CONCLUDING THAT THE SAME DOES NOT T ANTAMOUNT TO HIS TAKING CARE OF THE REQUIREMENT OF THE PROVISION TO SECTION 147. 3. WHETHER ON FACTS AND CIRCUMSTANCE OF THE CASE & IN LAW, THE ID. CIT (A) IS RIGHT IN HOLDING THAT THE FACT THAT THE AO HAD GIVEN THE EXACT COMPUTATION OF THIS AMOUNT AT THE TIME OF REC ORDING OF REASONS WAS TANTAMOUNT TO THE FACT THAT 'THERE WAS NO MATERIAL FACT IN POSSESSION OF THE AO TO SUGGEST THAT INCOME HAD ESCAPED ASSESSMENT' AND THEREBY DELETING THE ADDITION OF RS . 1,46,23,965/- MADE ON ACCOUNT OF DEPRECIATION OF DE -LEASED ASSETS. 4. THE APPELLANT CRAVES LEAVE, TO ADD, ALTER OR AME ND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF THE HEARING. 2. THE BRIEF FACTS QUA THE ISSUE RELATING TO VALIDITY OF REASSESSMENT ARE THAT, ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF TRADING AND EXPORT OF VIDE RANGE OF PRODUCTS FOR PERSONAL CARE. T HE RETURN OF INCOME WAS FILED U/S 139(1) ON 27.10.2005 AND SAID RETURN OF INCOME WAS SUBJECTED TO SCRUTINY BY ISSUANCE OF NOTICE U/S 1 43(2). AFTER DETAILED SCRUTINY OF BOOKS OF ACCOUNTS AND MATERIAL ON RECORD, ASSESSMENT U/S 143(3) WAS COMPLETED VIDE ORDER DATED 16.12.2008. LATER ON AFTER THE EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, ASSESSEES CASE HAS BEEN SOUGHT TO B E REOPENED U/S 147, VIDE NOTICE DATED 20.3.2012 ISSUED U/S 148. THE REASONS RECORDED FOR REOPENING THE ASSESSMENT READS AS UNDE R:- ITA NO. 907/DEL/2015 DCIT VS. M/S. GILLETTE DIVERS IFIED OPERATIONS PVT. LTD. 3 THE ASSESSMENT WAS COMPLETED U/S 143(3) IN DECEMBE R2008, AT NIL INCOME AFTER SETTING OFF BROUGHT FORWARD LOSSES OF RS. 91,44,563. ON EXAMINATION OF THE FILE AND DOCUMENTS PLACED ON THE RECORD, IT IS SEEN THAT THE ASSESSEE COMPANY HA S LEASED SOME ASSETS INCLUDING PLANT AND MACHINERY TO OTHER COMPA NY. IT RECEIVES THE RENTAL INCOME W.R.T. THOSE ASSETS AND CHARGES DEPRECIATION ON THOSE ASSETS IN THE PROFIT AND LOSS ACCOUNT. DURING THE YEAR UNDER CONSIDERATION, SUBSTANTIAL ASSETS WE RE DE-LEASED AND CERTAIN MACHINERIES WERE REMOVED FROM THE LEASE WHICH RESULTED IN REDUCTION OF INCOME FROM RENT OF THESE ASSETS. HOWEVER, DEPRECIATION WAS CHARGED ON FULL VALUE OF THE ASSETS LEASED. THEREFORE, THE PROPORTIONATE AMOUNT OF DEPR ECIATION SHOULD HAVE BEEN DISALLOWED. FURTHER, FULL DEPRECIATION WA S CHARGED AND ALLOWED ON NEWLY ACQUIRED ASSETS THOUGH THESE WERE USED FOR LESS THAT 180 DAYS. SUCH A CLAIM WAS OF RS. 1,46,23,965. THEREFORE, I HAVE REASONS TO BELIEVE THAT INCOME TO THIS EXTENT HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147. NOTIC E UNDER SECTION 148 IS THEREFORE REQUIRED TO BE ISSUED. 3. THE ASSESSEE AGAINST THE SAID REOPENING, RAIS ED DETAILED OBJECTIONS BEFORE THE AO VIDE LETTER DATED 27.8.2012, WHICH HAS BEEN DISPOSED OF BY THE AO VIDE ORDER SHEET DATED 7.8.2012 . THEREAFTER, AFTER DETAILED DISCUSSION, HE DISALLOWED THE DEPRECI ATION OF RS. 1,46,23,965/- ON THE LEASED ASSETS. 4. LD. CIT (A) HAD QUASHED THE REASSESSMENT AFTER OBSERVING AND HOLDING AS UNDER:- ITA NO. 907/DEL/2015 DCIT VS. M/S. GILLETTE DIVERS IFIED OPERATIONS PVT. LTD. 4 0N CAREFUL CONSIDERATION, IT IS EVIDENT THAT IN TH E ORIGINAL ASSESSMENT ORDER UNDER SECTION 143(3) DATED 16.12.2 008, NO ADDITION ON ACCOUNT OF DISALLOWANCE OUT OF DEPRECIA TION ALLOWANCE WAS MADE. HOWEVER, IT IS EVIDENT THAT DURING THE CO URSE OF ORIGINAL ASSESSMENT PROCEEDINGS, THE AO HAD CALLED FOR DETAI LS REGARDING ADDITION TO PLANT AND MACHINERY AND ALSO IN RESPECT OF INCOME EARNED ON OPERATING LEASE. VIDE QUESTIONNAIRE DATED 21.11.2008, THE APPELLANT WAS SPECIFICALLY ASKED TO EXPLAIN AS TO WHY THE RENTAL INCOME WAS REDUCED FROM RS.1,50,92,383 IN F. Y.2003-04 TO RS.81,37,941 DURING F.Y.2004-0S. IN RESPONSE, VIDE LETTER DATED 01.12.2008, THE APPELLANT HAD GIVEN DETAILED REASON S FOR EXPLAINING DECLINE IN THE RENTAL INCOME DURING THE YEAR WHICH SHOWS THAT CERTAIN ASSETS RELATING TO BRAUN CATEGOR Y WERE DE- LEASED WHILE THE APPELLANT HAD LEASED OUT CERTAIN O THER ASSETS. SIMILARLY, DETAILED EXPLANATION VIDE POINT NO.L0 OF THE SAID LETTER WAS GIVEN ON CLAIM OF DEPRECIATION OF PLANT AND MAC HINERY GIVEN ON LEASE. COPIES OF SUCH LETTERS WERE FILED BEFORE ME. KEEPING IN VIEW THE ABOVE FACTS, IT IS EVIDENT THAT HAVING RAI SED A SPECIFIC QUERY IN THE ORIGINAL ASSESSMENT PROCEEDING, THE AO HAD 'FORMED AN OPINION' IN THE MATTER IN THE ORIGINAL ASSESSMEN TS ON CONSIDERATION OF THE REPLY GIVEN BY THE APPELLANT T HAT THE CLAIM OF DEPRECIATION ALLOWANCE OF THE APPELLANT IN RESPECT OF THE ASSETS LEASED OUT WAS AS PER LAW, EVEN THOUGH THE LEASE RE NTAL INCOME MAY HAVE BEEN REDUCED, SINCE THE NEW ADDITIONS WERE LEASED OUT FROM 01.03.2005 ONLY. KEEPING IN VIEW THE ABOVE, IT IS EVIDENT THAT WHEN THIS ISSUE WAS ALREADY CONSIDERED BY THE AD AT LENGTH AND DECIDED IN FAVOUR OF APPELLANT, REOPENING OF THE AS SESSMENT ON THE SAME GROUND BY DISREGARDING THE ORIGINAL OPINION FO RMED- BY-THE ITA NO. 907/DEL/2015 DCIT VS. M/S. GILLETTE DIVERS IFIED OPERATIONS PVT. LTD. 5 AO IN THE ORIGINAL ASSESSMENT WAS NO MORE THAN A 'C HANGE OF OPINION'. KEEPING IN VIEW THE ABOVE, IN VIEW OF THE DECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS USHA INTERNA TIONAL LTD. (SUPRA), REASSESSMENT IS HELD TO BE BAD IN LAW. 6.3 SECONDLY, I FIND THAT EVEN THOUGH THE REASSESSM ENT PROCEEDINGS WERE INITIATED FIVE YEARS AFTER THE END OF THE ASSESSMENT YEAR, WHILE ORIGINAL ASSESSMENT WAS MADE UNDER SECTION 143(3), THE AO HAS NOT SPECIFICALLY RECORDE D IN THE REASONS THE FINDING THAT 'INCOME HAD ESCAPED ASSESSMENT AS A RESULT OF THE APPELLANT 'NOT MAKING FULL AND TRUE DISCLOSURE OF MATERIAL FACTS' IN THE RETURN OF INCOME'. IN VIEW OF THE ABOVE, FOL LOWING THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF RURAL ELECTRIFICATION CORPORATION LTD. VS. CIT (SUPRA) RE OPENING OF ASSESSMENT IS HELD TO BE BAD IN LAW. 5. BEFORE US THE LD. DR STRONGLY RELYING UPON THE O RDER OF THE AO SUBMITTED THAT, AO WAS JUSTIFIED NOT ONLY REOPENING TH E CASE U/S 147, BUT ALSO HAS DISALLOWED THE DEPRECIATION ON THE GROUND THAT LEASED ASSETS WERE NOT USED FOR THE ENTIRE YEAR AND LEASE RENTA L INCOME WAS SHOWN ONLY FOR ONE MONTH IN RESPECT OF THE LEASE OUT A SSETS AS PER THE AGREEMENT DATED 1.3.2005 AND ASSESSEE COULD NOT GIVE DETAILS OF DE- LEASED ASSETS. 6. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSES SEE NARRATING THE ENTIRE FACTS SUBMITTED THAT, FIRSTLY, NO FAILURE HAS BEEN ASCRIBED BY THE AO IN THE REASONS RECORDED AND HE HAS RELIED UPON THE SAME MATERIAL ITA NO. 907/DEL/2015 DCIT VS. M/S. GILLETTE DIVERS IFIED OPERATIONS PVT. LTD. 6 FACTS WHICH HAVE BEEN EXAMINED BY THE AO DURING THE C OURSE OF ORIGINAL ASSESSMENT PROCEEDINGS U/S 143(3). THEREFOR E, WITHIN THE SCOPE OF PROVISO TO SECTION147, REOPENING COULD NOT HAVE BEEN DONE BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE RE LEVANT ASSESSMENT YEAR. APART FROM THAT, HE SUBMITTED THAT DURIN G THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, ASSESSEE HAS GIVEN SPECIFIC REPLY DATED 1.12.2008, IN RESPONSE TO THE QUERY RAISE D BY THE AO VIDE LETTER DATED 21.11.2008. THE RELEVANT QUERY RAISED BY THE AO AND THE REPLY SUBMITTED BY THE ASSESSEE WERE AS UNDER:- DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDIN GS, THE AO HAD ISSUED A QUERY LETTER DATED 21.11.2008. THE RELEVAN T QUERIES WERE RELATING TO ADDITIONS TO MACHINERY AND PLANT, DECRE ASE IN RENTAL INCOME AND LEASE OF PLANT AND MACHINERY, FUTURE AND FIXTURE ETC. THE RELEVANT QUERIES 8, 9 AND 13 ARE REPRODUCED HER EIN BELOW:- 'Q.8 YOU HAVE SHOWN ADDITION OF RS.29698756/- IN PL ANT AND MACHINERY IN THE SCHEDULE OF FIXED ASSETS AS PER CO MPANIES ACT, 1956 AND RS~30946867/- IN THE SAME AS PER INCOME-TA X ACT, 1961. PLEASE EXPLAIN THE DIFFERENCE. Q.9 YOUR RENTAL INCOME HAS REDUCED FROM RS.15092383/- D URING FINANCIAL YEAR 2003-04 TO RS.8137941/- DURING FINAN CIAL YEAR 2004-05. PLEASE EXPLAIN THE SAME ALONG WITH DETAILS AND NECESSARY SUPPORTS. Q.13 AT S.NO. 7 OF SCHEDULE 18 TO THE ACCOUNTS, YO U HAVE STATED THAT A PART OF PLANT AND MACHINERY AND FUTURE & FIX TURE HAS BEEN GIVEN ON OPERATING LEASE. PLEASE SUBMIT THE DOCUMEN TARY EVIDENCE ITA NO. 907/DEL/2015 DCIT VS. M/S. GILLETTE DIVERS IFIED OPERATIONS PVT. LTD. 7 FOR THE SAME. ALSO EXPLAIN WHERE THAT LEASE INCOME HAS CREDITED. GIVE A DETAILED NOTE ON YOUR SUBMISSIONS.' THE ASSESSEE'S REPLY VIDE LETTER DATED DECEMBER 1, 2008 ON LEASE RENTAL INCOME (POINT NO.9 AND 13), DEPRECIATION ON PLANT AND MACHINERY GIVEN ON LEASE (POINT NO.10) IS ALSO REPR ODUCED HERE BELOW TOGETHER WITH LEASE DETAILS AND LEASE AGREEME NT WITH DETAILS OF LEASED ASSETS AND EFFECTIVE DATE OF LEAS E RENT: - '1. LEASE RENTAL INCOMES RECEIVED BY THE COMPANY DUR ING THE YEAR (POINT NO. 9 AND 13) AS DETAILED IN OUR SUBMISSIONS DATED OCTOBER 24,200 8 AND NOVEMBER 28,2008, THE ASSESSEE COMPANY HAS SUB LEAS ED ITS BUILDING AND HAS GIVEN PLANT AND MACHINERY, MOULDS AND FURNITURE ON OPERATING LEASE ON WHICH IT HAS EARNED LEASE RENTAL INCOME OF RS. 81,37,9411/-. THE SAID AMOUNT INCLUDE S RS. 78,18,161/- BEING LEASE RENTAL INCOME EARNED FROM L EASE OF PLANT AND MACHINERY TO M/S. RIALTO ENTERPRISES PRIV ATE LIMITED (GROSS BILLING INCLUSIVE OF TAXES RS. 85,01,571/-. DURING THE YEAR UNDER CONSIDERATION THE RENTAL INCOME EARNINGS OF THE COMPANY HAS REDUCED FROM RS. 150,92,383/- TO RS. 81,37,941/-. THE RENTAL INCOME IS REDUCED DUE TO CE RTAIN ASSETS BEING DE-LEASED PARTICULARLY THOSE PERTAINING TO TH E BRAUN PRODUCTION. HENCE THERE IS REDUCTION IN LEASE INCOM E. DETAIL OF AGREEMENT WISE LEASE RENTAL INCOME RECEIVED FROM HA S ALREADY BEEN SUBMITTED WITH OUR SUBMISSIONS DATED NOVEMBER 28,2008ALONG WITH COPIES OF THE DEBIT NOTES FOR SOM E OF THE PERIODS. ITA NO. 907/DEL/2015 DCIT VS. M/S. GILLETTE DIVERS IFIED OPERATIONS PVT. LTD. 8 THOUGH CERTAIN ASSETS RELATED TO BRAUN WERE DE-LEAS ED, BUT THE ASSESSEE COMPANY ALSO LEASED OUT CERTAIN ASSETS AND EXECUTED FOLLOWING AGREEMENTS. ORAL B CATEGORY 1. AGREEMENT DATED 01-07-2004 FOR MANUFACTURE OF TO OTH BRUSHES. 2. AGREEMENT DATED 01-03-2005 FOR MANUFACTURE OF TO OTH BRUSHES. BRAUN CATEGORY 1. AGREEMENT DATED 01-03-2005 FOR MANUFACTURE OF SH AVER BRUSH WE ARE ATTACHING THE FOLLOWING DOCUMENTARY EVIDENCE S FOR YOUR REFERENCE AND CO-RELATION. 1. CONFIRMATION OF LEASE RENTAL FROM M/S. RIALTO ENTERPRISES PVT. LTD. -REFER EXHIBIT' 1'. 2. UPDATED EQUIPMENT LEASE AGREEMENT DATED MARCH 01 , 2005 IN RESPECT OF BRAUN ASSETS ON LEASE (YOUR GOOD SELF WOULD NOTE THE ADDITION OF MANUFACTURE OF SHAVER BRUSH EFFECTI VE MARCH 1, 2005). REFER EXHIBIT '2'. 3. UPDATED EQUIPMENT LEASE AGREEMENT DATED MARCH 01 , 2005 IN RESPECT OF ORAL B ASSETS ON LEASE (YOU GOOD SELF WOULD NOTE THE ADDITION OF MANUFACTURE OF TOOTH BRUSHES OF A V ARIANT EFFECTIVE JULY 01, 2004 AND MARCH 1, 2005). REFER E XHIBIT '3'. IT IS FURTHER CONFIRMED THAT THE LEASE INCOME IS CR EDITED UNDER THE HEAD 'RENTAL INCOME' AND IS DISTINCTLY APPEARIN G AND SHOWN IN SCHEDULE 13 OF THE AUDITED STATEMENT OF ACCOUNTS . THE TAXES ITA NO. 907/DEL/2015 DCIT VS. M/S. GILLETTE DIVERS IFIED OPERATIONS PVT. LTD. 9 ON LEASE RENTALS ARE CREDITED UNDER A SEPARATE HEAD (LIABILITY SIDE) AND DEPOSITED WITH THE REVENUE AUTHORITIES. 2. DEPRECIATION ON PLANT AND MACHINERY GIVEN ON LEASE( POINT NO. 10) IT IS CONFIRMED THAT THE ASSESSEE COMPANY HAS NOT D ONE ANY MANUFACTURING AS IS ALSO EVIDENT FROM THE AUDITED S TATEMENT OF ACCOUNTS. THE ASSESSEE COMPANY HAS LEASED OUT ALL I TS PLANT AND MACHINERY AND MOULDS AND HAS EARNED LEASE RENTAL IN COME ON SUCH ASSETS. THE ACTIVITY OF LEASE RENTAL IS EFFECT IVE FROM 03.06.1997 I.E. MORE THAN 10 YEARS AND EVERY YEAR T HERE ARE SOME ADDITIONAL ASSETS WHICH ARE ADDED AND CERTAIN ASSET S WHICH ARE DELETED FROM THE LEASE AGREEMENTS. AS ALL THE ASSETS OF PLANT AND MACHINERY AND MOULDS HAVE BEEN LEASED OUT, THE DEPRECIATION ON THE SAME ARE BEING CLAIMED AND ALLOWED AS DEDUCTION AS PER THE PROVISIONS OF THE I NCOME TAX ACT, 1961. FURTHER YOUR GOOD SELF HAS ASKED AS TO WHY THE DEPRECIATION CLAIM BE ALLOWED AS DEDUCTION. IN THIS REGARD, AS EXPLAINED ABOVE, THE DEPRECIATION IS CLAIMED ON THE ASSETS GIVEN ON LEASE AND IT DOES NOT PERTAIN TO OWN MANUF ACTURING ACTIVITY OF THE COMPANY. ALSO IT IS IMPORTANT TO MENTION THAT THERE IS NO CHANGE IN THE FACTS OF BUSINESS ACTIVITY OF T HE ASSESSEE COMPANY DURING THE YEAR. THE LEASE BUSINESS ACTIVIT Y OF THE ASSESSEE COMPANY IS CONTINUING SINCE 1997 AND LEASE RENTAL BEING ONE OF THE MAIN BUSINESS ACTIVITIES OF THE CO MPANY, THE LEASE INCOME HAS ALWAYS BEEN DECLARED AND ASSESSED AS BUS INESS ITA NO. 907/DEL/2015 DCIT VS. M/S. GILLETTE DIVERS IFIED OPERATIONS PVT. LTD. 10 INCOME AND THE RELATED EXPENSES INCLUDING DEPRECIAT ION AS BUSINESS EXPENDITURE. IT IS HOWEVER DURING THE YEAR THE DEPRECATION IS HI GHER AS COMPARED WITH THE PREVIOUS YEARS AS THE COMPANY HAS SUBSTANTIALLY ACQUIRED CERTAIN ASSETS OF PLANT AND MACHINERY {ASSETS RELATED TO SHAVER BRUSH (BRAUN) AND TOOTH B RUSHES (ORAL B)}AND GIVEN THEM ON LEASE. HOWEVER THE LEASE RENTA L AGREEMENTS HAVE COMMENCED FROM 01-03-2005, THEREFORE THE LEASE RENTAL INCOME EARNED IS LESS AS COMPARED WITH THE CLAIM OF DEPRECIATION AS PER THE INCOME TAX ACT. THE DEPRECIATION CLAIMED AS PER THE PROVISION OF THE INCOME TAX ACT, ON PLANT AND MACHI NERY AND MOULDS IS AT @ 25% / 12.5% AND 40% / 20%. ASSETS RA TE OF DEP RECI ATIO N MORE THAN 180 DAYS LESS THAN 180 DAYS TOTAL ADDITIONS DEPRECIATION ON ASSETS ACQUIRED FOR MORE THAN 180 DAYS DEPRECIATION ON ASSETS ACQUIRED FOR LESS THAN 180 DAYS DEPRECIATION ON ADDITIONS MADE PLANT AND MACHINERY MOULDS 25% 40% 9,486,844 23,806,857 14,327,449 3,807,707 23,814,293 6,614,564 2,371,711 1,122,743 1,790,931 761,541 4,162,642 1,884,284 TOTAL 12,293,701 18,135,156 30,428,857 3,494.454 2 ,552,473 6,046,926 YOUR GOOD SELF WOULD THEREFORE NOTE THAT THE DEPREC ATION CLAIMED IS RS. 60,46,926/- ON ADDITIONS MADE DURING THE YEA R. HOWEVER THE LEASE RENTAL INCOMES EARNED IN RESPECT OF ADDIT IONAL ASSETS GIVEN ON LEASE IS AS UNDER. BRAUN - SHAVER BRUSH ITA NO. 907/DEL/2015 DCIT VS. M/S. GILLETTE DIVERS IFIED OPERATIONS PVT. LTD. 11 01-03-2005 RS. 296,953/- {RS. 15,440/- AND RS. 281, 513/-} (FALLING DUE ON HALF YEARLY BASIS). ORAL CARE PRODUCTS- TOOTH BRUSHES 01-07-2004 RS. 400,013/- {RS. 122,650/- AND RS. 277 ,363/-} (FALLING DUE ON HALF YEARLY BASIS). 01-03-2005 RS. 631,779/- {RS. 90,731/- AND RS. 541, 048/-} (FALLING DUE ON HALF YEARLY BASIS). WE SHALL BE PLEASED TO SUBMIT ANY OTHER DETAILS IN THIS REGARD. WE ALSO REQUEST YOU TO REFER TO NOTE 7 OF NOTES TO ACCOUNTS FORMING PART OF THE FINANCIAL STATEMENTS WHEREIN THE COMPLETE CARRYING COST OF ASSETS GIVEN ON LEASE IS PROVIDED. YOUR GOODSELF WOULD NOTE THAT OUT OF 12 CRORES OF GROSS COST OF PLANT AND MACHINE RY (INCLUDES MOULDS) ALMOST 11 CRORES IS GIVEN ON LEASE. IN VIEW OF ABOVE SUBMISSIONS, THE DEPRECATION CLAIM OF THE ASSESSEE IS FULLY ALLOWABLE AS THE SAME IS IN ACCOR DANCE WITH PREVIOUS YEARS AND WORKED OUT EXACTLY AS PER THE PR OVISIONS OF THE INCOME TAX ACT, I 961. 6. THUS, THIS ISSUE HAS BEEN EXAMINED BY THE AO AND THEREFORE, FIRSTLY , THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DI SCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELEVANT FOR THE ASSESSMENT; AND SECONDLY , THE REOPENING WOULD BE BASED ON CHANGE OF OPINION WHICH IS IMPERMISSIBLE. IN SUPPORT, HE RELIED UPON VARIOUS J UDGMENTS OF THE HONBLE HIGH COURT INCLUDING THAT OF HONBLE SUPREME COURT IN THE CASE OF: I) CIT VS. KELVINATOR OF INDIA (2010) 320 ITR 561 (SC); II) RURAL ITA NO. 907/DEL/2015 DCIT VS. M/S. GILLETTE DIVERS IFIED OPERATIONS PVT. LTD. 12 ELECTRIFICATION CORPORATION LTD. VS. CIT (2013)355 ITR 356 (DEL.); III) E.I. DUPONT INDIA PVT. LTD. AND ANOTHER VS. DCIT, (201 3) 351 ITR 299 (DEL); IV) BLB LIMITED VS. ACIT, (2012) 343 ITR 129 (DEL) 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AN D ALSO THE RELEVANT MATERIAL PLACED ON RECORD QUA THE LEGAL ISSUE RAISED BEFORE. HERE IN HIS CASE THE REOPENING HAS BEEN SOUGHT TO BE DONE U/S 147 BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASS ESSMENT YEAR AND THEREFORE, THE SCOPE OF VALIDITY OF REASSESSMENT PROCE EDINGS HAS TO BE SEEN WITH REFERENCE TO PROVISO TO SECTION 147 AS THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3). THE REASONS RE CORDED FOR REOPENING THE ASSESSMENT HAS ALREADY BEEN INCORPORATE D ABOVE. FROM A BARE PERUSAL OF THE SAME, IT CAN BE SEEN THAT AO IS R EFERRING TO THE SAME DOCUMENTS WHICH WERE PLACED ON RECORD DURING THE COURSE OF ORIGINAL PROCEEDINGS AND FROM THERE HE DERIVES THE IN FERENCE THAT PROPORTIONATE AMOUNT OF DEPRECIATION SHOULD HAVE BEEN DISALLOWED BECAUSE CERTAIN ASSETS WERE DE-LEASED WHICH HAS RESUL TED INTO REDUCTION OF INCOME FROM RENT OF THESE ASSETS AND DEPRE CIATION OF ASSETS HAS BEEN USED FOR LESS THAN 180 DAYS. FIRST OF ALL, WE FIND THAT THE ISSUE OF DEPRECIATION ON PLANT AND MACHINERY WAS SPECIFICALLY ASKED AND ENQUIRED UPON BY THE AO IN THE ORIGINAL ASS ESSMENT PROCEEDINGS INCLUDING THE RENTAL INCOME RECEIVED FROM LEASE OF ASSETS; AND IN RESPONSE TO THAT ASSESSEE HAS FILED A DETAILED REPLY WHICH HAS ITA NO. 907/DEL/2015 DCIT VS. M/S. GILLETTE DIVERS IFIED OPERATIONS PVT. LTD. 13 ALREADY BEEN INCORPORATED ABOVE. LD. CIT (A) TOO HAS GIVEN THIS FINDING THAT THIS PRECISE ISSUE WHICH HAS BEEN RAISED BY THE A O IN THE REASONS RECORDED HAS BEEN DEALT BY THE AO IN THE ORI GINAL ROUND OF ASSESSMENT PROCEEDINGS. THUS, ON THE PRESENT FACTS IT C ANNOT BE HELD THAT THERE IS ANY FAILURE ON PART OF THE ASSESSEE TO DIS CLOSE FULLY AND TRULY ALL MATERIAL FACTS RELEVANT FOR THE ASSESSMENT AND WITHOUT ASCRIBING ANY SUCH FAILURE ON PART OF THE ASSESSEE, TH E REOPENING U/S 147 IS CLEARLY BARRED BY LIMITATION. IT IS A WELL SETTL ED PROPOSITION OF LAW AS LAID DOWN IN THE AFORESAID JUDGMENTS AS RELIED UPON BY THE LD. COUNSEL THAT IF THERE IS NO ALLEGATION IN THE REASONS RECORDED THAT ASSESSEE HAS FAILED TO DISCLOSE FULLY AND TRULY ALL M ATERIAL FACTS NECESSARY FOR ASSESSMENT, THEN ACTION U/S 147 AFTER TH E EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR IS UNSUSTAINABLE. THE RELEVANT RATIO LAID DOWN IN THE FOLLOWING JUDGMENTS OF THE HIGH COURT:- (1) RURAL ELECTRIFICATION CORPORATION LTD. VS. CIT, (2013) 355 ITR356 (DEL.) 'THAT THERE WAS NO WHISPER IN THE PURPORTED REASONS OF THE ASSESSEE HAVING FAILED TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT. THEREFORE, THE NECESSARY INGREDIENTS OF THE PROVISIONS OF SECTION 147 WERE N OT SATISFIED. THEREFORE, THE REVENUE COULD NOT ALSO RAISE THE GRO UND WITH REGARD TO THE EXPENSES BEING A CAPITAL NATURE, WHER EAS THE ASSESSEE HAD CLAIMED IT AS REVENUE EXPENDITURE. THE LIMITATION OF ITA NO. 907/DEL/2015 DCIT VS. M/S. GILLETTE DIVERS IFIED OPERATIONS PVT. LTD. 14 REOPENING OF THE ASSESSMENT PERTAINING TO THE ASSES SMENT YEAR 2004-05 DID NOT HAVE THE BACKING OF LAW. CONSEQUENT LY, THE NOTICE UNDER SECTION 148 AFTER FOUR YEARS AND ALL PROCEEDI NGS PURSUANT THERETO, INCLUDING THE ASSESSMENT ORDER PASSED PURS UANT THERETO WERE LIABLE TO BE SET ASIDE.' (2) E.I. DUPONT INDIA PVT. LTD. AND ANOTHER VS. DCIT, (2013) 351 ITR 299 (DEL.) 'HELD, ALLOWING THE PETITION, SINCE THE CASE OF THE ASSESSEE WAS A CASE OF PROPOSED REOPENING OF ASSESSMENT AFTER FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR 2005-06, IT WAS INCUMBENT UPON THE ASSESSING OFFICER TO DEMONSTRATE THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO FULLY AN D TRULY DISCLOSE ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT. TH E REASONS DID NOT EVEN ALLEGE THAT THERE HAD BEEN A FAILURE ON TH E PART OF THE ASSESSEE TO DISCLOSE ANY MATERIAL FACTS. IN FACT, E VEN IN THE ORDER REJECTING THE OBJECTIONS OF THE ASSESSEE THERE WAS NO MENTION OF WHAT FACTS THE ASSESSEE HAD FAILED TO DISCLOSE WHIC H WERE NECESSARY FOR THE ASSESSMENT. FAILURE TO DISCLOSE A LL MATERIAL FACTS NECESSARY FOR ASSESSMENT IS A CONDITION PRECEDENT F OR REOPENING OF AN ASSESSMENT BEYOND THE PERIOD OF FOUR YEARS FROM THE DATE OF ASSESSMENT. THEREFORE, THE NOTICE AND THE ORDER REJ ECTING THE OBJECTIONS WERE LIABLE TO BE QUASHED.' (3) BLB LIMITED VS. ACIT, [2012] 343 ITR 129 (DEL) 'HELD, ALLOWING THE PETITION, THAT ASSESSEE HAD DIS CLOSED FULLY AND TRULY ALL MATERIAL FACTS RELEVANT FOR THE ASSESSMEN T. THE REASONS RECORDED DID NOT DISCLOSE OR STATE THAT THERE WAS F AILURE OR OMISSION TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS. THERE WAS ITA NO. 907/DEL/2015 DCIT VS. M/S. GILLETTE DIVERS IFIED OPERATIONS PVT. LTD. 15 NO INDICATION AND IT WAS NOT ALLEGED THAT THERE WAS SOME MATERIAL OR INFORMATION AVAILABLE ON RECORD WHEN REASONS TO REOPEN WERE RECORDED, TO SHOW THAT THE ASSESSEE HAD CONCEALED O R HAD NOT DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS. IN TH E ORIGINAL ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAD CO NSIDERED AND EXAMINED WHETHER OR NOT THE NON-COMPETE FEE PAY MENT WAS OF CAPITAL OR REVENUE NATURE. THE ASSESSING OFFICER ACCEPTED THE STAND OF THE ASSESSEE AND TREATED THE NON-COMPETE F EE AS A REVENUE EXPENDITURE. THE REASSESSMENT PROCEEDINGS C OULD NOT, THEREFORE, BE INITIATED ON THE GROUND THAT THE ASSE SSING OFFICER WAS WRONG AND HAD MISAPPLIED AND WRONGLY UNDERSTOOD THE LAW/LEGAL POSITION. 8. ACCORDINGLY, WE DO NOT FIND ANY REASON TO DE VIATE FROM THE FINDING AND THE CONCLUSION DRAWN BY THE LD. CIT(A) THA T THE REASSESSMENT PROCEEDINGS IS BARRED BY LIMIT AND BAD I N LAW, BOTH IN TERMS OF PROVISO TO SECTION 147 AND ALSO ON ACCOUNT OF CHANGE OF OPINION IS NOT ONLY CORRECT ON THE FACTS BUT ALSO IN LA W AND THEREFORE, APPEAL OF THE REVENUE IS DISMISSED. IN THE RESULT APPEAL FILED BY THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH FEBRUARY, 2018. SD/- SD/- (PRASHANT MAHARISHI) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: /02/2018 ITA NO. 907/DEL/2015 DCIT VS. M/S. GILLETTE DIVERS IFIED OPERATIONS PVT. LTD. 16 VEENA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI