WHEELS INDIA LTD.,CHENNAI V. ACIT LTU-1, CHENNAI

ITA 696/CHNY/2025

AI Insights

The case involves M/s. Wheels India Ltd., which appealed against the order of the Commissioner of Income Tax (Appeals) concerning the reopening of their assessment for the Assessment Year 2012-13. The primary legal contention was that the reopening was beyond the permissible four-year period and lacked new material, thus constituting a mere change of opinion. The Tribunal examined the submissions and evidence presented, including the original and revised returns filed by the assessee, and the notices issued during the assessment proceedings. The Tribunal concluded that the issues raised in the reopening were already addressed during the original assessment, and no new material had come to light that justified the reopening of the assessment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 772754 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2012-2013
• Other Referred Cases: JCIT Vs Mukund Ltd., GAIL India Ltd. Vs JCIT, CIT Vs Rane Brake Linings Ltd., Govind Sugar Mills Ltd Vs CIT, CIT Vs Kelvinator of India Ltd., CIT Vs P.V.S. Beedied Pvt. Ltd., CIT Vs Schwing Stetter India (P.) Ltd., M/S. Tanmac India Vs DCIT, Pradeep Stainless Steel India P Ltd. Vs The DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAUTHAMI MANIVASAGAM
• Assessee Lawyers: R. VIJAYARAGHAVAN
• Keywords: Set aside; Difference of opinion; Change of opinion; Revised return; Revenue expenditure; Question of law; Depreciation; Reopening of assessment; Reason to believe
• Section: 147; 148; 143(3); 139

Judgement Text

"आयकर अपीलीय अिधकरण, ‘बी’ यायपीठ, चे नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH: CHENNAI एमएस। प\u0007ावती एस, लेखा सद\u0007 एवं एवं एवं एवं ी मनु क ुमार िग\u0014र, \u0015ाियक सद\u0018 क े सम\u001a BEFORE MS. PADMAVATHY. S, ACCOUNTANT MEMBER AND SHRI MANU KUMAR GIRI, JUDICIAL MEMBER आयकर अपील सं./ITA No.696/Chny/2025 िनधा\u0017रण वष\u0017/Assessment Year: 2012-13 M/s. Wheels India Ltd., No.21, Annasalai Patullos Road, Chennai-600 002. v. The ACIT, Large Taxpayer Unit-1, Chennai. [PAN: AAACW 0315 K] (अपीलाथ\u001b/Appellant) ( यथ\u001b/Respondent) अपीलाथ\u001b क ओर से/ Appellant by : Mr.R. Vijayaraghavan, Advocate यथ\u001b क ओर से /Respondent by : Ms. Gauthami Manivasagam, JCIT सुनवाईक तार\"ख/Date of Hearing : 04.08.2025 घोषणाक तार\"ख /Date of Pronouncement : 26.08.2025 आदेश / O R D E R PER MANU KUMAR GIRI, JM: The captioned appeal filed by the assessee is directed against order of the Ld. Commissioner of Income Tax (Appeals), ADDL/JCIT (A)-1, Mumbai [‘CIT(A)’ in short] dated 14.01.2025 for Assessment Year 2012-13. 2. At the outset the ld. counsel has raised the following legal grounds: 1. The order of Commissioner of Income Tax (Appeal) is contrary to law, facts and in the circumstances of the case. 2. The CIT(Appeals) erred confirming the reopening of assessment. Printed from counselvise.com ITA No.696/Chny/2025 (AY 2012-13) M/s. Wheels India Ltd. :: 2 :: 2.1 The CIT(Appeals) should have appreciated that the reopening was beyond 4 years and there was no mention in the reason for reopening of what the Assessee omitted to disclose due to which income has escaped assessment. 2.2 The CIT(Appeals) should have appreciated that the entire reopening was based on materials already available at the time of original assessment and hence the reopening was purely based on change opinion and therefore requires to be set aside. 2.3 The CIT(Appeals) should have appreciated that the appellant having disclosed the fully and Truly all material required for completion of assessment and assessment having been made under section 143(3) after scrutiny, the same cannot be reopened beyond 4 years as there was no omission on the part of the appellant to disclose fully and truly all material required for assessment. 3. Brief facts of the case are as under: The assessee company filed its original e-return of income for the A.Y.2012- 13 on 30.11.2012 admitting a total income of Rs.44,15,53,220/- and e-filed a revised return of income on 06.02.2013 admitting a total income of Rs.35,18,85,140/- and again e-filed a second revised return of income on 05.12.2013 admitting a total income of Rs.27,16,01,390/- and book profit u/s115JB of Rs.54,16,69,978/-. Subsequently, the case was selected for scrutiny under CASS and notice U/s.143(2) dated 12.08.2013 was duly served on the assessee. Further, notice U/s.142(1) was also issued to the assessee. In response to the notices issued from this office, Shri Anand and Smt. Seethalakshmi, from the assessee company appeared from time to time and submitted the details called for. On the basis of the same, the assessment is completed on 30.01.2025 u/s.143(3) of the Act by making various additions. Thereafter, the AO reopened the assessment dated 30.01.2015 u/s.143(3) of the Income Tax Act, 1961 (‘Act’ in short) on the following reasons recorded: Return of income disclosing taxable income of Rs.44,15,53,220/- for AY 2012-13 was filed on 30-11-2012. This was received on 06-12- 2013 with income of Rs.35,18,85,140/- and gain on 05-12-13 with income of Rs. 27,16,01,390. The case was selected for scrutiny and Printed from counselvise.com ITA No.696/Chny/2025 (AY 2012-13) M/s. Wheels India Ltd. :: 3 :: assessment u/s 143(3) was made on 30-01-2015 determining taxable income at Rs. 75,07,87,929/-. 1.) It is seen that assessee had debited sum of Rs. 5,48,767 in the P&L a/c as lease premium amortized and did not add back the same along with depreciation as per books of accounts in the Income Computation statement. Though lease rent paid is allowable as deduction, lease premium paid is capital in nature and cannot be allowed as deduction while computing taxable income since assessee got an advantage of enduring nature. This view was held in the following divisions: * JCIT Vs Mukund Ltd. (ITAT, SB-Mum) 106ITD 231 * GAIL India Ltd. Vs JCIT (Del) 211 Taxman 587 * CIT Vs Rane Brake Linings Ltd. (Mad) 106 DTR 296 * Govind Sugar Mills Ltd Vs CIT (SC) 232 ITR 319 2.) In the Income Computation statement assessee claimed deduction of Rs.22,24,819 with the narration \"Realized loss FY 2011-2012 indigenous capital loss\". Similar deduction of Rs. 73,32,596 was claimed for AY 2011-2012. As per para. 19 of the letter filed by assessee on 11-12-14, this represents the realized loss on account of exchange fluctuation at the time of repayment of foreign currency loan borrowed for acquiring indigenous capital goods. Since the expenditure was incurred in connection with acquisition of capital goods, it cannot be allowed as revenue expenditure as held by Hon’ble Supreme Court in ACIT vs. Elecon Engineering Co. Ltd. (322 ITR 20). Para. 8 of the order reads as under: \"8. Before analyzing the section quoted above, by way of preface, we need to state the exchange differences are required to be capitalized if the liabilities are incurred for acquiring the fixed asset, like plant and machinery. It is the purpose for which the loan is raised that is of prime significance. Whether the purpose of the loan is to finance the fixed asset or working capital is the question which one needs to answer and in order to ascertain that purpose, the facts and circumstances of the case, including the relevant loan agreement and the correspondence between the parties concerned are required to be looked into. In view of the above, the assessee company had not disclosed all the material facts fully and truly before the tax authorities for the purpose of assessment for AY 2012-13. Hence, I have reason to believe that income chargeable to tax has escaped assessment and accordingly, the assessment needs to be reopened u/s 147 of the Income-tax Act. Printed from counselvise.com ITA No.696/Chny/2025 (AY 2012-13) M/s. Wheels India Ltd. :: 4 :: 4. The Ld. Counsel for the assessee pleaded that there are two reasons for the reopening of the completed assessment. The ld. Counsel described the two issues for the reopening as under: i) Lease premium of Rs.5,48,767/-; ii) Exchange loss on repayment of foreign currency loan borrowed for purchase of indigenous capital Goods Rs.22,24,819/-. The ld. Counsel submitted that the information in respect of Lease premium amounting to Rs.5.49 Lakhs has been given during the course of assessment proceedings itself. The ld. Counsel referred pages 4-6 of the paper book and submitted that both the issues viz; the ‘Lease Premium’ and ‘Exchange loss on repayment of foreign currency loan borrowed for purchase of indigenous capital Goods’ were duly replied dated 12.08.2019 pursuant to the notice dated 27.05.2019 during the original assessment proceedings. The ld. Counsel further pointed out the pages 10-14 of paper book which contains detailed reply with regard to the ‘Exchange loss on repayment of foreign currency loan borrowed for purchase of indigenous capital Goods’ and memo of income adjusted for income tax purposes. He further contended that the AO from very ‘P&L a/c’ and ‘Computation statement’ has reopened the assessment originally made. He furthermore contended that without any new material or information received into the hands of the AO, the AO reopened the assessment which not permissible under the provisions of the section 148 of the Act. He further submitted that it is a case of change of opinion. He also referred the following case laws: i. CIT Vs Schwing Stetter India (P.) Ltd. [2015] 61 taxmann.com 19 (Madras)/378 ITR 380 (Madras); Printed from counselvise.com ITA No.696/Chny/2025 (AY 2012-13) M/s. Wheels India Ltd. :: 5 :: ii. M/S. Tanmac India Vs DCIT [Tax Case(Appeal) No.1426 of 2007 dated 29.06.2007]; iii. Pradeep Stainless Steel India P Ltd. Vs The DCIT [TCA No.492 of 2016 5. Per Contra, the Ld.DR for the Revenue has submitted that the AO identified the escapement of income due to incorrect claims of lease premium (Rs.5,48,767/-) and foreign exchange loss (Rs.22,21,819/-) as revenue expenditure, not examined in the original assessment and relied upon the judgment of the Hon’ble Supreme Court of India in the case of CIT Vs Kelvinator of India Ltd. [2010] 320 ITR 561 (SC). She further submitted that the assessee failed to disclose the capital nature of these claims, justifying reopening beyond four years and relied upon the judgment of the Hon’ble Supreme Court of India in the case of CIT Vs P.V.S. Beedied Pvt. Ltd. [1999] 237 ITR 13 (SC). She furthermore contended that this is not a case of ‘change of opinion’ for the reason that the AO did not consciously evaluate these issues earlier, making reopening valid. 6. We have heard the rival submissions of the parties. We have also perused the case law citations referred by the parties. We find that assessee during the original assessment proceedings had duly replied on both the issues viz; ‘Lease Premium’ and ‘Exchange loss on repayment of foreign currency loan borrowed for purchase of indigenous capital Goods’ vide reply dated 12.08.2019 and 10.12.2019. It can be discernible form the paper book pages 4-6 and 7-14. We note that both the issues were duly scrutinized vide notice dated 27.05.2019 during the original assessment proceedings. We also Printed from counselvise.com ITA No.696/Chny/2025 (AY 2012-13) M/s. Wheels India Ltd. :: 6 :: observe that no ‘new information or material’ came in the hands of AO to invoke jurisdiction u/s 148 of the Act. We further find that the AO from very ‘P&L a/c’ and ‘Computation statement’ has reopened the assessment originally made. 7. The jurisdictional High Court in the case of Commissioner of Income-tax, Chennai Vs. Schwing Stetter India (P.) Ltd. [2015] 61 taxmann.com 19 (Madras) held as under: 19. In an identical circumstance, a learned single Judge of this Court had considered the issue in the decision in Fenner (India) Ltd. v. Dy CIT [2000] 241 ITR 672/[1999] 107 Taxman 53 (Mad.) wherein wherein, it was observed as follows: 'The pre-condition for the exercise of the power under section 147 in cases where power is exercised within a period of four years from the end of the relevant assessment year is the belief reasonably entertained by the Assessing Officer that any income chargeable to tax has escaped assessment for that assessment year. However,when the power is invoked after the expiry of the period of four years from the end of the assessment year, a further pre-condition for such exercise is imposed by the proviso namely, that there has been a failure on the part of the assessee to make a return under section 139 or in response to a notice issued under section 142 or section 148 or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. Unless, the condition in the proviso is satisfied, the Assessing Officer does not acquire jurisdiction to initiate any proceeding under section 147 of the Act after the expiry of four years from the end of the assessment year. Thus, in cases where the initiation of the proceedings is beyond the period of four years from the end of the assessment year, the Assessing Officer must necessarily record not only his reasonable belief that income has escaped assessment but also the default or failure committed by the assessee. Failure to do so would Printed from counselvise.com ITA No.696/Chny/2025 (AY 2012-13) M/s. Wheels India Ltd. :: 7 :: vitiate the notice and the entire proceedings. The relevant words in the proviso are, \". . . . unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee . . . . .\" Mere escape of income is insufficient to justify the initiation of action after the expiry of four years from the end of the assessment year. Such escapement must be by reason of the failure on the part of the assessee either to file a return referred to in the proviso or to truly and fully disclose the material facts necessary for the assessment. Whenever a notice is issued by the Assessing Officer beyond a period of four years from the end of the relevant assessment year, such notice being issued without recording the reasons for his belief that income escaped assessment, it cannot be presumed in law that there is also a failure on the part of the assessee to file the returns referred to in the proviso or a failure to fully and truly disclose the material facts. The reasons referred to in the main paragraph of section 147 would, in cases where the proviso is attracted, include reasons referred to in the proviso and it is necessary for the Assessing Officer to record that any one or all the circumstances referred to in the proviso existed before the issue of notice under section 147. After an assessment has been made, in the normal circumstances, there would be no reason for anyone to doubt that the assessment has been made on the basis of all relevant facts. If the Assessing Officer chooses to entertain the belief that the assessment has been made in the background of the assessee's failure to disclose truly and fully all material facts, it is necessary for him to record that fact, and in the absence of a record to that effect, it cannot be held that a notice issued without recording such a fact is capable of being regarded as a valid notice. As to whether the material facts disclosed by the assessee are full and true is always a question of fact and unless the facts disclosed had been examined in relation to the extent of failure if any on the part of the assessee, it is not possible to form the opinion that there had been a failure on the assessee's part to truly and fully disclose the material facts. A notice issued without a record of the Assessing Officer's reasonable belief that there was such failure on the part of the assessee would be indicative of a failure on the part of the Assessing Officer to apply his mind to material facts, and on that ground also the notice issued would be vitiated. The reasons actually recorded and as set out by the officer in the counter affidavit are such that even after close scrutiny they do not establish even prima facie a failure on the part of the assessee to fully and truly disclose the material facts for the assessment. ** ** ** Printed from counselvise.com ITA No.696/Chny/2025 (AY 2012-13) M/s. Wheels India Ltd. :: 8 :: The duty of an assessee is limited to fully and truly disclosing all the material facts. The assessee is not required thereafter to prepare a draft assessment order. If the details placed by the assessee before the Assessing Officer were in conformity with the requirements of all applicable laws and known accounting principles, and material details had been exhibited before the Assessing Officer, it is for the Assessing Officer to reach such conclusions as he considered was warranted from such data and any failure on his part to do so cannot be regarded as the assessee's failure to furnish the material facts truly and fully. Any lack of comprehension on the part of the Assessing Officer in understanding the details placed before him cannot confer a justification for reopening the assessment, long after the period of four years had expired. On the facts of this case, it is clear that the escapement of income, if any, on this account is not on account of any failure on the assessee's part to disclose the material facts fully and truly. The notice issued by the Assessing Officer in exercise of his power under section 147, therefore, cannot be sustained.' [Emphasis supplied by us] 8. In the case of M/s.TANMAC India Vs Deputy Commissioner of Income Tax [Tax Case (Appeal) No.1426 of 2007 dated 19.12.2016], the Hon’ble jurisdictional High Court has answered the following substantial question of law in favour of the assessee as below: 2. Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the Assessing Officer is justified in reopening the assessment by issuance of notice under section 148 of the Act when no new material was unearthed justifying the re-opening of the assessment? 9. The cases relied upon by the revenue is based on their own facts. However, in the present case no new material/information came in the hands of the AO which is necessary requisite for reopening the completed assessment. Hence, we set aside the notice u/s 148 dated 21.03.2019 and all consequently orders. Printed from counselvise.com ITA No.696/Chny/2025 (AY 2012-13) M/s. Wheels India Ltd. :: 9 :: 10. In the result, appeal filed by the assessee is allowed. Order pronounced on the 26th day of August, 2025, in Chennai. Sd/- (प\u0007ावती एस) (PADMAVATHY .S) लेखा सद)य/ACCOUNTANT MEMBER Sd/- (मनु क ुमार िग\u0014र) (MANU KUMAR GIRI) याियक सद)य/JUDICIAL MEMBER चे नई/Chennai, *दनांक/Dated: 26th August, 2025. TLN 1. अपीलाथ /Appellant 2. \u000eथ /Respondent 3. आयकरआयु\u0014/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय ितिनिध/DR 5. गाड फाईल/GF Printed from counselvise.com "