Pentafour Products Limited, CHENNAI V. ACIT, CHENNAI

ITA 924/CHNY/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8200 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 16-12-2015
• Assessment Year: 1998-1999
• Appeal Filed On: 11-04-2014
• Court: TRIBUNAL
• Department Lawyers: DR B NISCHAL
• Assessee Lawyers: R VENKATESH
• Keywords: Reopening of assessment; Depreciation; Wrong claim; Block assessment; Revenue expenditure; Reassessment proceedings
• Section: 43B; 143(3); 148; 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , ! ' ! # . $ , % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ ITA NO. 924/MDS/2014 / ASSESSMENT YEAR : 1998-99 PENTAFOUR PRODUCTS LIMITED, CHITRA TOWERS, 332/2, ARCOT ROAD, KODAMBAKKAM, CHENNAI 600 024. PAN AAACP3474C APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE-V(2), CHENNAI 34. RESPONDENT) / APPELLANT BY : SHRI R. VENKATESH, FCA / RESPONDENT BY : DR. B. NISCHAL, JCIT ! / DATE OF HEARING : 16.12.2015 '# ! / DATE OF PRONOUNCEMENT: 20.01.2016 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DATED 12 .12.2013 - - ITA 924// 14 2 FOR THE ASSESSMENT YEAR 1998-99. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LD. CIT(A) IN ITA NO.698/753/1 3- 14(A)-V IS ERRONEOUS IN LAW CONTRARY TO FACTS AND UNTENABLE. 2.1 THE LD. CIT(A) GROSSLY ERRED IN LAW IN HOLDING THAT THE REOPENING OF THE ASSESSMENT U/S.147 BEYOND THE TIME ALLOWED UNDER THE ACT WAS TENABLE ACTION AND WRONGLY HELD IT TO BE RIGHT AND THUS FAILED TO APPR ECIATE THAT THE NOTICE U/S.148 DATED 31.03.2011 WAS TIME BARRED AND WITHOUT JURISDICTION. 2.2. THE LD. CIT(A) BY MISTAKEN VIEW ON LAW, ERRED IN HOLDING THAT THE REASSESSMENT WAS VALID FOR THE REASONS FOR REOPENING GIVEN BY THE LD. AO WERE UNTENABLE AS IN THE ORIGINAL ASSESSMENT U/S.143(3) COMPLETED ON 12.11.2001, THE ENTIRE DISALLOWANCE U/S.43B AS PER THE SPECIAL AUDIT REPORT WAS MADE. 2.3. THE LD. CIT(A) HAD GROSSLY MISTAKEN IN CONCLUD ING THAT THE OBSERVATION OF THE HONBLE ITAT IN THEIR O RDER IN ITA NO.70/MDS/2004 IN RESPECT OF THE BLOCK ASSESSMENT CAN BE TAKEN AS DIRECTIONS IN RESPECT OF DISALLOWANCE U/S.43B, THUS EXTENDING THE JURISDICTI ON U/S.150 OF THE ITACT, 1961. 3.1 THE LD. CIT(A) GROSSLY ERRED IN CONFIRMING THE DISALLOWANCE OF ` 7,02,87,355/- U/S.43B IN RESPECT OF INTEREST. 3.2. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE ADDITION OF ` 7,02,87,355/- COULD NOT BE MADE IN THE IMPUGNED REASSESSMENT AFTER HAVING RIGHTLY OBSERVED IN PARA8, PAGE 9 OF HIS ORDER THAT IN THE ORIGINAL ASSESSMENT U/S.143(3) MADE ON 12.11.2001, THE THEN AO HAD FULL AUDITED DETAILS OF THE INTEREST UNPAID FROM - - ITA 924// 14 3 THE SPECIAL AUDIT REPORT U/S.142(2A) DATED 20.09.20 01 RESULTING THEREIN THE DISALLOWANCE OF ` 13,29,74,324/- U/S.43B. 4. THE LD. CIT(A) FURTHER GROSSLY ERRED IN STATING THAT THE LEGAL CONTENTIONS OF THE APPELLANT AS AGAINST T HE REOPENING CANNOT BE ACCEPTED IN TOTO, THUS LEAVING STILL ANOTHER VIEW IN HIS MIND AS THE LD.CIT(A) SEEMS TO BE IN DOUBT. 5. THE LD. CIT(A) HAD FURTHER GROSSLY ERRED IN HOLD ING THAT THE AO HAVING ALREADY REJECTED THE RECTIFICATI ON APPLICATION, THE SAME CANNOT BE ADJUDICATED AGAIN, THUS FAILING TO ADJUDICATE THE GROUNDS RAISED IN TH E APPEAL FILED IN THE 154 PROCEEDINGS IN ITA NO.753/2013-14. 3. AT THE TIME OF HEARING, THE LD. AR STATED THAT T HE ASSESSEE IS NOT INTERESTED TO PRESS GROUND NO.5. ACCORDINGL Y, GROUND NO.5 IS DISMISSED AS NOT PRESSED. 4. THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMP ANY IS A LISTED COMPANY, FILED ITS RETURN OF INCOME ON 30.11 .1996 ADMITTING THE INCOME OF ` 2,96,120/-. THE ASSESSEE COMPANY SINCE 2001 IS NOT ENGAGED IN ANY BUSINESS. AN ASSE SSMENT U/S.143(3) WAS MADE ON 12.11.2001 AFTER CONSIDERATI ON OF SPECIAL AUDIT REPORT U/S.142(2)(A) BY WHICH THE LOS S WAS DETERMINED AT ` 2,30,17,865/-. IT IS SEEN THAT WHILE DETERMINING THE LOSS, THE THEN AO AMONG MANY OTHER ADDITIONS HA D - - ITA 924// 14 4 DISALLOWED ` 13,29,74,324/- U/S. 43B RELATING TO INTEREST DEBIT ED IN THE P&L ACCOUNT TOWARDS FINANCIAL INSTITUTIONS A ND BANKS. THE ADDITIONS IN THE SAID ASSESSMENT WERE BASED ON THE FINDINGS IN THE SPECIAL AUDIT REPORT U/S.142(2A). DATED 20.09.2 001. WHILE NOT ALLOWING THE DETERMINED LOSS TO BE CARRIED FORW ARD, THE TAXABLE INCOME OF THE ASSESSEE WAS TAKEN BY THE AO AT ` 3,00,000/- AS DECLARED IN THE RETURN OF INCOME FILED. IT IS STATED BY THE ASSESSEE AND SEEN FROM THE PROCEEDINGS THAT THIS ORDER WAS NOT AVAILABLE WITH THE ASSESSEE AND COPY OF THE ORDER UPON REQUEST OF THE ASSESSEE WAS GIVEN BY THE AO ON 21.11.2011 AFTER THE PASSING OF THE IMPUGNED ASSESS MENT ORDER ON 11.11.2011. THERE IS NO MATERIAL TO SHOW THAT AS SESSEE HAS PREFERRED AN APPEAL AGAINST THE SAID ASSESSMENT ORD ER. CONSEQUENT TO THE SEARCH U/S, 132 IN THE ASSESSEE'S PREMISES ON 11.01.1999, A BLOCK ASSESSMENT ORDER U/ S 158BC OF THE ACT WAS PASSED ON 30.05.2001. IN THE SAID BLOCK ASSESSMENT FOR AY 1998-99, THE THEN AO, AMONG MANY ADDITIONS ALSO MADE DISALLOWANCE OF ` 7,02,87,355/- U/S 43B BEING INTEREST DEBITED TO THE P&L ACCOUNT AS PAYABL E TO FINANCIAL INSTITUTIONS. THIS BLOCK ASSESSMENT WAS TAKEN IN AP PEAL AND THE - - ITA 924// 14 5 TRIBUNAL, CHENNAI BENCH B IN ITS ORDER DT. 05.06. 2009 IN ITA NO. 70/MDS/2004 DELETED THE ADDITION MADE U/S 43B ON TH E GROUND THAT SUCH ADDITIONS CANNOT BE MADE IN THE BLOCK ASS ESSMENT. 4.1 THE ASSESSEE PREFERRED A RECTIFICATION PETITION U/S 154 ON 29.12.2011 AFTER RECEIVING FROM THE AO THE COPY OF THE ORIGINAL ASSESSMENT ORDER DT 12.11.2001 PASSED U/S 143(3) RE QUESTING THAT THE ISSUE OF DISALLOWANCE OF INTEREST U/S 43B CANNOT BE CONSIDERED AGAIN IN THE IMPUGNED ASSESSMENT REOPENE D U/S 148 AS IN THE ORIGINAL ASSESSMENT THE ISSUE WAS CONSIDE RED AND THAT THE SAID ASSESSMENT HAS REACHED FINALITY. THEREFORE THERE IS MISTAKE IN AGAIN CONSIDERING THE ISSUE U/S 43B FOR ADDITION IN THE IMPUGNED ASSESSMENT. IN HIS COMMUNI CATION DATED 06.01.2012 (WHICH IS ALSO IN APPEAL) THE AO HAS REFUSED TO CONSIDER THE PLEA FOR RECTIFICATION STATING THA T, 'IN THE NORMAL ASSESSMENT ORDER THOUGH THE AO ARRIVED AT A LOSS A FTER TAKING INTO ACCOUNT THE DISALLOWANCE U/S. 43B, HE CONCLUDE D AND ESTIMATED THE INCOME AT ` 3,00,000, I.E., THE LOSS ARRIVED WAS IGNORED. THEREFORE, THE QUESTION ON DISALLOWANCE U /S 43B WHICH IS ALREADY BEEN CONSIDERED IN THE NORMAL ASSESSMENT ORDER IS NOT CORRECT. - - ITA 924// 14 6 5. ON APPEAL, THE CIT(APPEALS) OBSERVED THAT IT IS NOT IN DISPUTE THAT THE REGULAR ASSESSMENT U/S 143(3) WAS EARLIER MADE IN THIS CASE ON 12.11.2001 (FOR BREVITY CALLED ORIGINAL ASSESSMENT). THE OBSERVATIONS OF THE THEN AO THEREI N IN RESPECT OF THE ADDITIONS ARE CLEAR AND UNAMBIGUOUS. IN THE ORIGINAL ASSESSMENT ADDITION OF ` 13,29,74,324/- U/S 43B TOWARDS UNPAID INTEREST TO BANKS AND FINANCIAL INSTITUTIONS DEBITE D TO THE P&L ACCOUNT WAS MADE. THE QUANTUM OF DISALLOWANCE WAS BASED ON THE FINDINGS AND ELABORATE DETAILS IN THE SPECIAL A UDIT REPORT DT. 20.09.2001 U/S 142(2A). IN THE BLOCK ASSESSMENT ORD ER PASSED SUBSEQUENTLY ON 30.05.2001, PRIOR TO THE ORIGINAL A SSESSMENT, AN ADDITION OF ` 7, 02, 87,355 WAS MADE U/S 43B, WITH THE NOTINGS THAT INTEREST OF ` 8,42,38,418 WAS DEBITED TO THE P&L ACCOUNT AS PAYABLE TO FINANCIAL INSTITUTIONS REMAINED UNPAI D AND AFTER DEDUCTING ` 1,39,51,063, BEING INTEREST DISALLOWED U/S 43B IN THE EARLIER YEAR PAID DURING THE YEAR, THE BALANCE IS D ISALLOWED U/S 438 FOR AY 1998-99. THE CIT (APPEALS) FURTHER OBSER VED THAT WHEN THE BLOCK ASSESSMENT WAS PASSED IN, MAY 2001, THE THEN ASSESSING OFFICER DID NOT HAVE THE SPECIAL AUDIT RE PORT U/S 142(2A). THE ADDITIONS U/S 43B MADE IN THE BLOCK AS SESSMENT - - ITA 924// 14 7 WERE FROM THE SEIZED MATERIALS AND OTHER MATERIALS WITH THE AO. IN THE ORIGINAL ASSESSMENT U/S 143(3) MADE ON 12.11.2001, THE THEN AO HAD THE FULL AUDITED DETAIL S OF THE INTEREST UNPAID ON ALL LOANS AS ON 31.03.1998 FROM THE SPECIAL AUDIT REPORT DATED 20.09.2001. ACCORDING TO THE CI T(APPEALS) EVEN THOUGH THE AR OF THE ASSESSEE HAS OBJECTED FOR REOPENING THE ASSESSMENT AND MADE AN ADDITION OF ` 7,02,87,355/- ON ACCOUNT OF UNPAID INTEREST U/S 43B TO FINANCIAL IN STITUTIONS, THE ASSESSING OFFICER IS JUSTIFIED IN REOPENING THE ASS ESSMENT FOLLOWING THE DIRECTIONS GIVEN BY THE TRIBUNAL VIEW ITS ORDER IN ITA NO.70/MDS/2004 PASSED IN THE BLOCK ASSESSMENT, MADE AN OBSERVATION THAT THOSE DISALLOWANCES ARE NOT MATTER OF FALSE CLAIM AND ARE MATTER OF REGULAR ASSESSMENT AS THEY MAY BE HIT BY THE PROVISIONS OF SEC. 43B. THUS THE ASSESSING O FFICER HAS TAKEN THE ITAT ORDER AS A DIRECTION U/S 150 OF THE IT ACT AND THEREFORE ISSUED A NOTICE U/S 148 FOR REOPENING THE ASSESSMENT. FURTHER, THE CIT(APPEALS) OBSERVED THAT ONCE ASSESSMENT HAS BEEN REOPENED ON THE DIRECTIONS OF A HIGHER JUDICIAL AUTHORITY WHICH IS BINDING ON THE A SSESSING OFFICER EVEN THOUGH THERE IS NO SPECIFIC DIRECTION AND THE - - ITA 924// 14 8 ASSESSING OFFICER IS NOT DEBARRED FROM REOPENING TH E ASSESSMENT ACCORDINGLY. ACCORDING TO THE CIT(APPEA LS), THE AO HAS CORRECTLY REOPENED THE ASSESSMENT BY ISSUING A NOTICE U/S 148 AND, THEREFORE, HE DISMISSED THIS GR OUND OF APPEAL. FURTHER, KEEPING IN VIEW OF THE FINDINGS O F THE SPECIAL AUDIT REPORT AS WELL AS THE ASSESSEE COULD NOT DIST INGUISH THE ADDITION MADE U/S 43B AT ` 7.02 CRORES BEING UNPAID INTEREST HAS ALREADY BEEN TAKEN CARE IN THE INTEREST DISALLO WED U/S 43B IN THE ORIGINAL ASSESSMENT ORDER PASSED U/S 143 (3) ON 12.11.2001, THE CIT(APPEALS) THAT THE ASSESSING OFF ICER HAS CORRECTLY REOPENED THE ASSESSMENT PROCEEDINGS U/S.1 48 FOLLOWING THE OBSERVATIONS OF THE TRIBUNAL AND ACCO RDINGLY MADE THE ADDITION AT ` 7.02 CRORES IN THE REOPENING ASSESSMENT U/S 43B. THUS THE CONTENTION O F THE AR OF THE ASSESSEE CANNOT BE ACCEPTED IN TOTO FOR R EOPENING THE ASSESSMENT AS WELL AS ADDITION MADE ON ACCOUNT OF UNPAID INTEREST U/S 43B AT ` 7.02 CRORES. IN THIS REGARD, THE CIT(APPEALS) OBSERVED THAT SINCE THE AS SESSING OFFICER HAS ALREADY REJECTED THE RECTIFICATION APPL ICATION FILED BEFORE HIM, THE SAME CANNOT BE ADJUDICATED AGAIN AF RESH - - ITA 924// 14 9 KEEPING IN VIEW OF THE OBSERVATION MADE REGARDING T HE REOPENING OF THE ASSESSMENT AS WELL AS CONFIRMING T HE ADDITION MADE U/S 43B AT ` 7.02 CRORES. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. IT IS SEEN FROM THE ABOVE THAT THE ASSE SSMENT FOR THE YEAR 1998-99 WAS REOPENED ON THE BASIS OF THE FINDI NGS OF THE TRIBUNAL IN ITA NO.70/MDS/2004 DATED 5.6.2009. THE TRIBUNAL OBSERVED THAT THE ADDITION U/S.43B CANNOT BE MADE I N BLOCK ASSESSMENT. IN ORDER TO GIVE EFFECT TO THE ABOVE F INDINGS OF THE TRIBUNAL, THE ASSESSING OFFICER INITIATED PROCEEDIN GS U/S.147 OF THE ACT BY DULY ISSUING NOTICE U/S.148 OF THE ACT O N 30.3.2011. THE SEC.149 OF THE ACT PRESCRIBES TIME LIMIT FOR IS SUE OF NOTICE U/S.148 OF THE ACT. THIS SECTION WAS AMENDED BY TH E FINANCE ACT, 2001 W.E.F. 1.6.2001 DESCRIBING DIFFERENT TIME LIMITS THAN THOSE PRESCRIBED PRIOR TO THE SAID DATE. DIFFERENT TIME LIMITS HAVE BEEN PRESCRIBED DEPENDING UPON THE AMOUNT, INCOME CHARGEABLE TO TAX THAT HAS ESCAPED ASSESSMENT. SEC .150 MAKES PROVISION FOR CASES WHERE AN ASSESSMENT MADE IN PURSUANCE OF AN ORDER ON APPEAL, REFERENCE OR REVIS ION OR AN - - ITA 924// 14 10 ORDER OF A COURT IN ANY PROCEEDING UNDER ANY OTHER LAW. SUB- SEC.(1) OF SEC.150 SAYS THAT THE TIME LIMITS PRESCR IBED IN S.149 WILL NOT APPLY, WHICH MEANS THAT A NOTICE U/S.148 M AY BE ISSUED AT ANY TIME FOR THE PURPOSE OF MAKING AN ASSESSMENT OR REASSESSMENT OR RECOMPUTATION IN CONSEQUENCE OF OR TO GIVE EFFECT TO ANY FINDING OR DIRECTION CONTAINED IN ANY ORDER PASSED UNDER THE ACT BY WAY OF APPEAL, REFERENCE OR REVISI ON OR BY A COURT IN ANY PROCEEDINGS UNDER ANY OTHER LAW. HAVI NG THUS REMOVED THE TIME LIMITS FOR ISSUING NOTICE U/S.148 IN SUCH CASES, SUB-SEC.(2) OF SEC.150 HASTENS TO ADD THAT WHERE AN Y APPEAL, REFERENCE OR REVISION OR AN ORDER OF A COURT IN ANY PROCEEDINGS UNDER ANY OTHER LAW IS SOUGHT TO BE MADE IN RESPECT OF AN ASSESSMENT YEAR WHERE SUCH AN ORDER OF ASSESSMENT, REASSESSMENT OR RECOMPUTATION COULD NOT HAVE BEEN M ADE AT THE TIME THE ORDER, WHICH WAS THE SUBJECT MATTER OF THE APPEAL, REFERENCE OR REVISION, AS THE CASE MAY BE, WAS MADE BY REASON OF ANY OTHER PROVISION LIMITING THE TIME WITHIN WHI CH ANY ACTION FOR ASSESSMENT, REASSESSMENT OR RECOMPUTATION MAY BE TA KEN, THEN NO NOTICE U/S.148 CAN BE ISSUED. THE RATIONAL BEHI ND THIS PROVISIONS IS NOT TO CONFER UPON THE AO THE JURISDI CTION TO REOPEN - - ITA 924// 14 11 AN ASSESSMENT WHICH THE ACT DID NOT OTHERWISE POSSE SS. IT SAYS THAT WHERE THE REASSESSMENT PROCEEDINGS WOULD HAVE BEEN BARRED BY TIME EVEN AT THE POINT OF TIME WHEN THE O RDER WHICH BECAME SUBJECT MATTER OF THE APPEAL, REVISION ETC., WAS PASSED, RESORT CANNOT BE MADE TO SUB-SEC.(1) OF SEC.150. 7. AN EXAMPLE MAY MAKE THE POSITION CLEAR. SUPPOSI NG FOR THE ASSESSMENT YEAR 1999-2000 THE AO INCLUDES AN IT EM OF INCOME WHICH ON APPEAL IS HELD TO RELATE TO THE ASS ESSMENT YEAR 1998-99. THIS FINDING ON APPEAL CAN BE UTILIZED TO REOPEN THE ASSESSMENT FOR THE ASSESSMENT YEAR 1998-99 WITHOUT ANY TIME LIMIT BY VIRTUE OF THE PROVISIONS OF SEC.150(1), TH E REASON BEING THAT HAD THE AO BEEN AWARE EVEN WHEN HE COMPLETED T HE ASSESSMENT FOR THE ASSESSMENT YEAR 1999-2000 THAT T HE INCOME WAS ASSESSABLE IN THE ASSESSMENT YEAR 1998-99, HE W OULD AND COULD HAVE INCLUDED THE INCOME IN THAT ASSESSMENT Y EAR ITSELF. THIS IN TURN POSTULATES THAT AN ASSESSMENT OR REASS ESSMENT FOR THE ASSESSMENT YEAR 1998-99 WOULD HAVE BEEN PERMISS IBLE AT THE POINT OF TIME WHEN THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 1999-2000 WAS PASSED. THAT IS THE REASON WHY SUB-SEC.(2) OF SEC.150 PROVIDES THAT THE ENLARGEMENT OF TIME PR OVIDED IN SUB- - - ITA 924// 14 12 SEC.(1) WILL NOT BE AVAILABLE WHERE, EVEN ON THE DA TE WHEN THE ASSESSMENT WAS COMPLETED, AN ASSESSMENT OR REASSESS MENT OF THE INCOME FOR THE ASSESSMENT YEAR 1998-99 (IN THIS EXAMPLE) WOULD HAVE BEEN BARRED BY TIME. 8. KEEPING IN VIEW OF THE ABOVE, LET US EXAMINE THE FACTS OF THE PRESENT CASE. THE ASSESSMENT FOR THE BLOCK PER IOD 1989-90 TO 1999-2000 WAS COMPLETED U/S.158BC VIDE ORDER DAT ED 30.5.2001. THE ASSESSMENT U/S.143(3) R.W.S.147 OF THE ACT FOR THE ASSESSMENT YEAR 1998-99 WAS PASSED ON 11.11.201 1. THE ASSESSMENT FOR THE BLOCK PERIOD WAS SUBJECT MATTER OF APPEAL BEFORE THE TRIBUNAL AND THE TRIBUNAL IN ITS ORDER D ATED 5.6.2009 OBSERVED THAT THE IMPUGNED PAYMENT MAY BE HIT BY TH E PROVISIONS OF SEC.43B, BUT THE SAME CANNOT BE TREAT ED AS FALSE BECAUSE THE EXPENDITURE HAVE ALREADY DUE AND WERE R ECORDED IN THE BOOKS OF ACCOUNT AS PER THE ACCOUNTING STANDARD , AS THE ASSESSEE IS FOLLOWING THE MERCANTILE METHOD OF ACCO UNTING. AS SUCH THE EXPENDITURE, WHICH BECAME DUE AND WERE REC ORDED IN THE BOOKS OF ACCOUNT, MAY NOT BE ALLOWABLE AS PER T HE PROVISIONS OF THE I.T.ACT. - - ITA 924// 14 13 9. THE QUESTION FOR CONSIDERATION IS WHETHER 30.5.2 001, THE DATE ON WHICH THE BLOCK ASSESSMENT WAS FRAMED, THE AO COULD HAVE TAKEN ACTION BY ISSUE OF NOTICE U/S.149(1)(B)( III) OF THE ACT FOR THE A.Y. 1998-99. AS IT STOOD ON 30.5.2001, NO NOTICE U/S.148 SHALL BE ISSUED FOR THE RELEVANT ASSESSMENT YEAR, I F SEVEN YEARS BUT NOT MORE THAN TEN YEARS FROM THE END OF THE REL EVANT ASSESSMENT YEAR. THUS, ON 30.5.2001, THE AO COULD HAVE ISSUED NOTICE U/S.148 IN RESPECT OF ASSESSMENT YEAR 1998-99. THEREFORE, THE AO COULD HAVE VALIDLY ISSUED NOTICE U/S.148 ON 31.3.2011 TAKING ADVANTAGE OF THE DIRECTION ISSUED BY THE TRIBUNAL IN THE APPEAL FOR THE BLOCK ASSESSMENT. S UCH A NOTICE IS SAVED BY SUB-SEC.(1) OF SEC.150 AND THE PROVISIO NS OF SUB- SEC.(2) OF SEC.150 ARE NOT APPLICABLE. THE CONTEN TION OF THE LD. AR IS THAT THE PROVISIONS OF SEC.149(1)(B) IS APPLI CABLE, ACCORDING TO WHICH ASSESSMENT OF SIX YEARS WOULD HAVE BEEN L APSED FROM THE ASSESSMENT YEAR 1998-99 TO THE DATE OF SERVICE OF NOTICE ON 31.3.2011. WE ARE UNABLE TO ACCEPT THE CONTENTION OF THE LD. AR BECAUSE SEC.150(2), THE TIME LIMIT WITHIN WHICH NOT ICE U/S.148 COULD BE ISSUED BY THE AO HAS TO BE RECKONED, IN TH E VERY NATURE OF THINGS, UNDER THE PROVISIONS OF SEC.149, AS THEY STOOD ON - - ITA 924// 14 14 30.5.2001. AS IT CLEAR FROM THE WORDS ASSESSMENT YEAR IN RESPECT OF WHICH ON ASSESSMENT, REASSESSMENT OR RECOMPUTATION COULD NOT HAVE BEEN MADE AT THE TIME THE ORDER WHICH WAS THE SUBJECT MATTER OF THE APPEAL, REFEREN CE OR REVISION, AS THE CASE MAY BE, WAS MADE BY REASON OF ANY OTHER PROVISION LIMITING THE RECOMPUTATION MAY BE TAKEN. IN THE VERY NATURE OF THINGS, SUCH OTHER PROVISION LIMITING THE TIME FOR ISSUE OF NOTICE U/S.149 HAS TO BE RECKONED WITH ONLY ON THE DATE ON WHICH THE ASSESSMENT ORDER FOR THE BLOCK ASSESSMENT WAS PASSED, WHICH WAS ON 30.5.2001 RESPECTIVELY. THE AO COULD HAVE ISSUED NOTICE U/S.148 WITHIN THE TIME LIMIT AS PROV IDED BY SEC.149(1)(B)(III) OF THE ACT AS STOOD ON 30.5.2001 . THEREFORE, THIS CONTENTION OF THE LD. AR CANNOT BE ACCEPTED. THE AO IS VERY WELL WITHIN THE TIME LIMIT TO ISSUE NOTICE U/S .148 OF THE ACT FOR THE AY 1998-99 AS ON THE DATE OF BLOCK ASSESSMENT O RDER DATED 30.5.2001. SINCE THERE IS A DECISION OF THE TRIBUN AL IN THE BLOCK ASSESSMENT THAT THE ADDITION U/S.43B CANNOT BE MADE IN THE BLOCK ASSESSMENT, IN VIEW OF THE PROVISIONS OF SEC .150(2) OF THE ACT, THE EXTENDED TIME IS AVAILABLE TO ISSUE NOTICE U/S.148 FOR THE AY 1998-99. THUS, NOTICE FOR REOPENING OF ASSESSME NT ISSUED - - ITA 924// 14 15 ON 31.3.2011 FOR THE ASSESSMENT YEAR 1998-99 AS THE BLOCK ASSESSMENT PASSED ON 28.12.2006 WAS JUSTIFIED. REA DING OF SEC.150(2) SHOWS THAT SUCH REOPENING OF ASSESSMENT IS NOT BARRED BY LIMITATION AND THE PROVISIONS OF SUB-SEC. (1) OF SEC.150 CAME TO THE ASSISTANCE OF THE DEPARTMENT. WHEN THE TRIBUNAL OBSERVED THAT THE ADDITION U/S.43B CANNOT BE MADE A S IT RECORDED IN THE BOOKS OF ACCOUNTS, THE CONTENTION O F THE ASSESSEE THAT THERE IS NO FINDING OR DIRECTION OF T RIBUNAL IN ITS ORDER CITED SUPRA, IS NOT CORRECT. IT IMPLIES THAT IF THE INCOME IS EXCLUDED FROM THE TOTAL INCOME FOR ONE ASSESSMENT Y EAR UNDER APPEAL THEN IT IS NATURAL THAT IT IS OPEN TO THE AS SESSING OFFICER TO BRING THE DELETED INCOME BY THE APPELLATE AUTHORITY TO TAXATION IN ANOTHER ASSESSMENT YEAR TO WHICH ASSESSMENT YEAR IT IS RELATED. 10. BEING SO, WHEN THE TRIBUNAL DELETED THE ADDITI ON IN THE BLOCK ASSESSMENT PERIOD AND OBSERVED THAT IT CANNOT BE ADDED IN THE BLOCK ASSESSMENT, THE AO HAS RIGHTLY BROUGH T TO TAX THE SAME IN THE ASSESSMENT YEAR 1998-99. THIS VIEW OF OUR IS SUPPORTED BY THE JUDGMENT OF THE KARNATAKA HIGH COU RT IN THE CASE OF DY CIT VS. SPENCES HOTEL (P) LTD. (208 CTR 224), WHEREIN IT WAS HELD THAT NOTICE UNDER S. 148 FOR AS ST. YEAR 1976- - - ITA 924// 14 16 77 ISSUED ON 17 TH NOV., 1998, ON THE BASIS OF THE FINDING OF THE TRIBUNAL IN ITS ORDER FOR ASST. YEAR 1980-81 THAT CERTAIN INCOME WAS ASSESSABLE IN ASST. YEAR 1976-77 WAS NOT BARRED BY LIMITATION UNDER S. 149 IN VIEW OF OVERRIDING PROVI SIONS OF S. 150(1). IT WAS OBSERVED: THE TRIBUNAL IN ITS ORDER DT. 26 TH JUNE, 1998 HELD THAT THE ESCAPED TAX SHALL BE ASSESSED FOR THE YEAR 1976-77. THAT ORDER HAS BECOME FINAL AND THE SAME WAS WITHIN THE KNOWLEDGE OF THE APPELLANT. ON THE BASIS OF THI S FINDING OF THE TRIBUNAL IN ITS ORDER REGARDING ESCA PED INCOME OF THE ASSESSE, NOTICE UNDER S. 148 WAS ISSU ED ON 17 TH NOV., 1998. THE PROVISION OF S. 150(1) BEGINS WITH THE WORDS NOTWITHSTANDING ANYTHING CONTAINED IN S. 149 AND IT STATES THAT NOTICE MAY BE ISSUED AT AN Y TIME TO GIVE EFFECT TO ANY FINDING CONTAINED IN ANY ORDE R PASSED BY ANY AUTHORITY IN ANY PROCEEDING UNDER THE ACT. THE NOTICE ISSUED TO THE ASSESSE WAS PURSUANT TO TH E FINDING OF THE TRIBUNAL REFERRED TO SUPRA REGARDING THE ESCAPED INCOME FOR ASSESSMENT OF INCOME-TAX. THEREFORE, THE SINGLE JUDGE COMMITTED AN ERROR IN L AW BY QUASHING THE SAME, AS THE SAME IS CONTRARY TO THE FINDING RECORDED BY THE TRIBUNAL WITH REGARD TO THE ESCAPED TAXABLE INCOME DERIVED BY THE ASSESSE. THE LEGAL SUBMISSION MADE BY THE COUNSEL PLACING RELIAN CE UPON S. 150(2) IN JUSTIFICATION OF THE ORDER OF THE SINGLE JUDGE IS MISPLACED FOR THE REASON THAT THE ABOVE PROVISION IS NOT APPLICABLE TO THE CASE ON HAND. THUS, IN OUR OPINION, WHEN BY AN ORDER OF THE TRIBU NAL, THE INCOME IS EXCLUDED FROM THE TOTAL INCOME OF THE ASS ESSEE FOR THE BLOCK ASSESSMENT, THEN THE ASSESSMENT OF SUCH INCOM E FOR THE ASSESSMENT YEAR 1998-99 SHALL BE DEEMED TO BE ONE M ADE IN - - ITA 924// 14 17 CONSEQUENCE OF, OR TO GIVE EFFECT TO ANY FINDING OR DIRECTION IN THAT ORDER (IN APPEAL) FOR THE PURPOSE OF LIFTING T HE BAN OF LIMITATION UNDER EXPLANATION 2 TO SEC.153(3). RELI ANCE IS PLACED ON THE FOLLOWING JUDGMENTS : (I) KAMLAPATH MOTILAL VS. CIT (SC) 193 ITR 338 (II) MAHADEO PRASAD RAIS (DECD. BY LRS.) VS. ITO (S C) 192 ITR 402 (III) ASHWANI DHINGRA V. CCIT (ALL.) 141 TAXMAN 651 ). IN VIEW OF THE ABOVE, IN OUR OPINION, THE PROVISION S OF SEC.150(1) ARE APPLICABLE. THUS, GROUND OF THE ASSESSEE IN IT S APPEAL IS DISMISSED. 11. REGARDING THE MERIT OF ADDITION, THE CONTENTION OF THE ASSESSEE IS THAT THE ASSESSEES INCOME HAS BEEN COM PUTED AT ` 3 LAKHS AND THERE WAS NO DISALLOWANCE U/S.43B AT ` 7,02,87,355/- AND AS SUCH, THIS AMOUNT CANNOT BE CO NSIDERED FOR ADDITION BY REOPENING THE CONCLUDED ASSESSMENT. ACCORDING TO THE LD. AR, THE INCOME WAS DETERMINED IN THE ORI GINAL ASSESSMENT DATED 12.11.2001 AFTER TAKING INTO ACCOU NT ALL ADMISSIBLE EXPENSES INCLUDING DEPRECIATION AND THE DISALLOWANCES TOWARDS INADMISSIBLE EXPENSES SUCH AS DONATION, - - ITA 924// 14 18 INCOME-TAX, EXPENSES NOT PAID BEFORE DUE DATE AS PE R SEC.43B, PROVISION TOWARDS GRATUITY, COMMISSION TO MANAGING DIRECTOR ETC, UNDER THE ACT. ONCE IT IS OBSERVED AS ABOVE, IT ME ANS THAT THERE IS NO ESCAPEMENT OF INCOME SO AS TO REOPEN THE ASSE SSMENT AND MAKE ADDITION TO THAT EXTENT. FURTHER, HE SUBM ITTED THAT THE ASSESSING OFFICER COMPUTED THE INCOME AS PER RETURN OF INCOME BY ADDING THIS AMOUNT AS FOLLOWS : 6.1 THEREFORE, THE INCOME ASSESSABLE IS DETERMINE D AS UNDER : LOSS AS PER P&L A/C ` 47,64,96,893/- (I)ADDL. SALES AS PER SALES TAX ORDER ` 26,84,26,432/- (II)DISALLOWANCE U/S 43B ` 13,29,74,324/- (III)DEFERRED REVENUE EXPENDITURE ADDED BACK ` 1,21,32,210/- (IV)NCD ISSUE EXPENSES ADDED BACK ` 12,00,000/- (V)SHARE ISSUE EXPENSES ADDED BACK ` 32,36,000/- (VI)LEASE RENTALS ADDED BACK ` 3,14,36,899/- (VII)SCIENTIFIC RESEARCH & DEVELOPMENT EXPENSES DISALLOWED ` 18,06,000/- (V)DISALLOWANCE U/S 43B ` 4,78,834/- (VI)PROVISION TOWARDS GRATUITY AND COMMISSION TO MG. DR. DIMINUTION IN VALUE OF INVESTMENTS ` 17,88,329/- ` 45,34,79,028/- TOTAL LOSS ` 2,30,17,685/- ============== - - ITA 924// 14 19 FURTHER HE SUBMITTED THAT LOSS OF ` 2,30,17,865/- IGNORED BY THE A.O. AND HE ADOPTED INCOME OFFERED BY THE ASSESSEE AS PER HIS OWN ADMISSION AT ` 3 LAKHS. SO, ACCORDING TO THE LD. AR, THERE IS NO ESCAPEMENT OF INCOME. ACCORDING TO THE LD. AR, AS PER THE RETURN OF INCOME, ` 13,29,74,324/- WAS DISALLOWED U/S.43B, WHICH INCLUDES A SUM OF ` 7,02,87,355/- AND THE SAME WAS DISALLOWED IN RE-ASSESSMENT AND THERE CANNOT BE ANY FURTHER DISALLOWANCE IN THE REOPENED ASSESSMENT. IN OUR OP INION, THIS ARGUMENT OF THE LD. AR IS HAVING NO MERIT. THE ASS ESSMENT WAS NOT COMPLETED AS PER RETURN OF INCOME FILED BY THE ASSESSEE, WHEREAS IT IS COMPLETED ON THE INCOME ADMITTED BY T HE ASSESSEE ON ITS OWN ADMISSION AS THE ASSESSEE HAS MADE VARIO US CLAIM U/S.10B, 80IA ETC. WHICH APPEARS TO BE MERELY TO OF FSET THE EXCESS INCOME BOOKED IN THE WINDOW DRESSED PROFIT & LOSS ACCOUNT. THE DISALLOWANCES U/S.43B WERE TAKEN CARE OF WHILE MAKING OWN ADMISSION BY THE ASSESSEE THAT THE INCOM E IS ` 3 LAKHS. BEING SO, THE ASSESSMENT WAS REOPENED TO CO NSIDER THE DISALLOWANCE OF ` 7,02,87,355/- U/S.43B OF THE ACT. IN OUR OPINION, THE PROVISIONS OF SEC.43B ARE APPLICABLE O N THIS AMOUNT AND THERE IS NO DISPUTE AND THE SAME TO BE ADDED IN THE RE- - - ITA 924// 14 20 ASSESSMENT ORDER, WHICH IS CONFIRMED. THIS GROUND OF APPEAL IS DISMISSED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 20 TH OF JAN, 2016 AT CHENNAI. SD/- SD/- ( $ % . & '( ) ( ) * + , ) DUVVURU RL REDDY - ./012304556037- 8 9: /JUDICIAL MEMBER ! 9:;<<5=1>01>?@AB@3 )8 /CHENNAI, C9 /DATED, THE 20 TH JAN., 2016. MPO* 9D EFGF /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H- /CIT(A) 4. H /CIT 5. FIJ K /DR 6. J(L /GF.