DCIT, Circle - 8, Kolkata, Kolkata v. M/s. ITC Limited, Kolkata

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH - B KOLKATA ( ) BEFORE . . SHRI B.R.MITTAL JUDICIAL MEMBER. /AND . . SHRI C.D. RAO ACCOUNTANT M EMBER . / I.T.A.NO. 1507/KOL/2009 / ASSESSMENT YEAR 2001 - 02 DCIT CIRCLE 8 KOLKATA. - - - VERSUS - . M/S.ITC LTD. 37 J L NEHRU ROAD KOLKATA 700 071 AAACI 5950 L ( / A PPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI M.H.PANDAV DR / FOR THE RESPONDENT : / SHRI R.K.MITRA AR / ORDER . . SHRI B.R.MITTAL JUDICIAL MEMBER. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST ORDER DT .18.6.2009 OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) VIII KOLKATA FOR THE ASSESSMENT YEAR 2001 - 02. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ON 31.10.2001 DECLARING TOTAL INCOME OF RS.1498 55 01 580 AND THE ASSESSMENT U/S.143(3) WAS COMPLETED ON 31.3.2004 ASSESSING THE INCOME OF RS.1504 35 23 270. THEREAFTER ORDER U/S.254/251/143 WAS PASSED ON 23.9.2005 ASSESSING TOTAL INCOME AT RS.1497 03 57 493. ASSESSMENT WAS REOPENED U /S.148 OF THE ACT AND THE SAME WAS COMPLETED ON 26.12.2008 AND MADE VARIOUS DISALLOWANCE AND ADDITIONS AS UNDER: 1 . ALLOWANCE OF FINANCIAL DEPRECIATION OF RS.1 22 73 487 INCLUDED IN R & D EXPENSES. 2 . EXCESS ALLOWANCE OF DEPRECIATION OF RS.5 89 53 739 3 . EXCESS AL LOWANCE OF DEDUCTION U/S.43B RS.7 22 39 575 4 . LOSS ON SALE OF CURRENT INVESTMENT RS.2.45 CRORES 5 . DISALLOWANCE OF EXPENDITURE TOWARDS LEGAL EXPENSES OF RS.28.86 LAKHS HOLDING THE SAME CAPITAL EXPENDITURE. (HOWEVER THE ASSESSING OFFICER ALLOWED TAX DEPRECIATION O N THE SAME @25%). / I.T.A.NO.1507/KOL/2009 2 6 . DISALLOWANCE OF EXPENSES U/S.14A RS.18 13 739 AGGRIEVED THE ASSESSEE FILED A PPEAL BEFORE THE LEARNED CIT(A). 3. BESIDES DISPUTING THE VARIOUS ADDITIONS BEFORE THE LEARNED CIT(A) THE ASSESSEE ALSO DISPUTED THE RE - OPENING OF ASSESSMENT AFTER MORE THAN FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2001 - 02 TO BE BAD IN LAW. IT WAS ALSO CONTENDED BEFORE THE LEARNED CIT(A) THAT THE ASSESSEE HAD DISCLOSED ALL MATERIAL FACTS FOR THE ORIGINAL ASSESSMENT AND THE SAID ORIGINAL ASSESSMENT U/S.143(3) WAS DULY COMPLETED EARLIER. THE ASSESSEE RELIED VARIOUS DECISIONS INTER ALIA ON THE DECISIONS OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF MERCURY TRAVELS LTD V. DCI [258 ITR 533 541 (CAL)] FOR THE PROPOSITION THAT WHER E REASSESSMENT PROCEEDINGS ARE INITIATED U/S.147 OF THE ACT AFTER THE LAPSE OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR IN A CASE WHERE REGULAR ASSESSMENT HAS BEEN DONE U/S.143(3 OF THE ACT FOR THE SAID ASSESSMENT YEAR THE ASSESSING OFFICER IS REQUIRED TO BRING OUT THE ALLEGATION IN THE RECORDED REASONS U/S.148(2) OF THE ACT THAT INCOME HAD ESCAPED ASSESSMENT INTER ALIA DUE TO THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS FAILING WHICH THE ASSUMPTIO N OF JURISDICTION U/S.147 OF THE ACT WOULD BE AB INITIO VOID. FOR THE PROPOSITION THAT AN ASSESSMENT CANNOT BE REOPENED ON A CHANGE OF OPINION BEFORE AND AFTER AMENDMENT BY THE DIRECT TAX LAWS (AMEN DMENT) ACT 1987 OF SECTION 147 THE ASSESSEE RELIED ON T HE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT V. FORAMER FRANCE (264 ITR 566). FURTHER FOR THE PROPOSITION THAT WHERE THE ITO ATTEMPTS TO REOPEN AN ASSESSMENT BECAUSE THE OPINION FORMED EARLIER BY HIM WAS IN HIS OPINION INCORRECT THE REOPENING C OULD NOT BE DONE THE A SSESSEE RELIED ON THE DECISION OF HONBLE CALCUTTA HIGH COURT N THE CASE OF MERCURY TRAVELS V. DCIT (258 ITR 533); OF HONBLE GUJARAT HIGH COURT IN THE CASE OF GARDEN SILK MILLS PVT. LTD. (237 ITR 668) AND OF FULL BENCH OF HONBLE D ELHI HIGH COURT IN THE CASE OF CIT V. KELVINATOR OF INDIA LTD (256 ITR 1). THE LEARNED CIT(A) EXAMINED IN DETAIL THE GROUNDS FOR REOPENING OF ASSESSMENT AND MAKING ADDITIONS BY DEALING WITH EACH OF THE ADDITIONS IN QUESTION AND CAME TO CONCLUDE THAT AN ASS ESSMENT CANNOT BE REOPENED AFTER FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. THE OBSERVATIONS AND CONCLUSION OF THE LEARNED CIT(A) AS APPEARING IN PARAGRAPHS 4.1 AND 4.8 ARE REPRODUCED HERE UNDER. / I.T.A.NO.1507/KOL/2009 3 4.1. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE SUBMISSION OF THE APPELLANT. I ALSO CALLED FOR ASSESSMENT FOLDER FROM ASSESSING OFFICER DURING THE APPELLATE PROCEEDINGS. 4.2 . IN RESPECT OF THE GROUND OF REOPENING OF NOT ADDING BACK THE FINANCIAL DEPRECIATION ON ACCOUNT OF R & D I.E. SCIENTIFIC RESEAR CH OF RS. 1 22 73 487/ - TO THE TOTAL INCOME THE PRIMARY FACTS ARE AVAILABLE ON RECORDS OF ASSESSING OFFICER IN TAX AUDIT REPORT WHERE IT IS CLEARLY MENTIONED THAT REVENUE EXPENDITURE ON SCIENTIFIC RESEARCH IS RS 4 84 16 319/ - EXCLUDING FINANCIAL DEPRECI ATION OF RS. 1 22 73 487/ - . THERE IS NO MATERIAL OR DUE DILIGENCE ON PART OF ASSESSING OFFICER AVAILABLE ON THE RECORDS TO SHOW THAT REVENUE EXPENDITURE OF RS. 6 06 89 806/ - AND NOT RS. 4 84 16 319/ - ON SCIENTIFIC RESEARCH WAS CLAIMED IN P&L A / C BY THE A PPELLANT. SIMILARLY THERE IS NO MATERIAL OR DUE DILIGENCE ON PART OF ASSESSING OFFICER AVAILABLE ON THE RECORDS TO SHOW THAT THE DEPRECIATION OF RS 1 22 73 487/ - WAS NOT PART OF THE TOTAL BOOK DEPRECIATION OF RS. 134 04 11 853/ - WHICH WAS ADDED BACK TO TOTAL INCOME IN THE REGULAR ASSESSMENT ORDER AND COMPUTATION OF INCOME SUBMITTED BY THE APPELLANT. THEREFORE AN ASSESSMENT CANNOT BE REOPENED ON THIS GROUND AFTER FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. 4.3 . IN RESPECT OF THE GROUND OF REOPENING OF NOT ADDING BACK EXCESS ALLOWANCE OF DEPRECIATION OF RS.5 89 53 739/ - TO THE TOTAL INCOME THE PRIMARY FACTS ARE AVAILABLE ON RECORDS OF ASSESSING OFFICER IN AN AUDIT CERTIFICATE WHICH WAS FILED WITH THE RETURN OF INCOME WHERE IT IS CLEARLY MENTIONED T HAT THE DEPRECIATION OF RS 139 93 65 592/ - IS CHARGED TO PROFIT AND LOSS ACCOUNT IN BOOKS. IT IS ALSO MENTIONED IN THE AUDIT CER TIFICATE THAT RS 5 89 53 739/ - OF DEPRECIATION CHARGED IN EARLIER YEARS IS WRITTEN BACK AS INCOME IN SCHEDULE - 14 OF P&L ACCOUNT AUDITOR HAS INDIRECTL Y CERTIFIED THAT RS 5 89 53 739/ - REQUIRED TO BE TAXED FOR THE PURPOSES OF INCOME TAX AND THEREFORE THE AUDITOR HAS CERTIFIED THAT ONLY RS 134 04 11 853/ - OF FINANCIAL DEPRECIATION AND NOT RS 139 93 65 592/ - AS APPEARING IN P&L A/C IS R EQUIRED TO BE ADDED BACK TO TOTAL INCOME IN COMPUTATION OF INCOME FOR THE PURPOSE OF TAXATION UNDER INCOME TAX ACT. THERE IS NO MATERIAL OR DUE DILIGENCE ON PART OF ASSESSING OFFICER AVAILABLE ON THE RECORDS TO SHOW THAT THE REVERSAL OF DEPRECIATION OF R S 5 89 53 739/ - CHARGED AS PER BOOKS IN EARLIER YEARS WAS REQUIRED TO BE TAXED FOR THE PURPOSES OF INCOME TAX ALSO. THEREFORE AN ASSESSMENT CANNOT BE REOPENED ON THIS GROUND AFTER FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. / I.T.A.NO.1507/KOL/2009 4 4.4 . IN RESPECT OF THE GROU ND OF REOPENING OF NOT ADDING BACK EXCESS ALLOWANCE OF DEDUCTION UNDER SECTION 43B BEING THE DIFFERENCE BETWEEN THE BALANCE LYING IN PERSONAL LEDGER ACCOUNT (PLA) WITH CENTRAL EXCISE AS ON 1 ST APRIL 2000 AND 31ST MARCH 2001 OF RS 7 22 39 575/ - TO THE TO TAL INCOME THE PRIMARY FACTS ARE AVAILABLE ON RECORDS OF ASSESSING OFFICER IN STATEMENT 16 ATTACHED WITH COMPUTATION OF INCOME WHICH WAS SUBMITTED WITH THE RETURN OF INCOME. APPELLANT HAS SHOWN A CLAIM OF DEDUCTION OF RS 39 69 40 233/ - ON ACCOUNT OF PAYME NT MADE TO PLA A/C DURING THE YEAR AND HAS REVERSED THE CLAIM OF DEDUCTION OF RS. 32 47 00 658/ - MADE IN ASSESSMENT YEAR 2000 - 01 THEREBY CLAIMING A NET DEDUCTION OF RS. 7 22 39 575/ - . THIS FACT IS A PRIMARY FACT WHICH WAS DISCLOSED WITH THE RETURN OF INCOM E ITSELF. THEREFORE AN ASSESSMENT CANNOT BE REOPENED ON THIS GROUND AFTER FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. 4.5 . IN RESPECT OF THE GROUND OF REOPENING OF NOT ADDING BACK LOSS ON SALE OF CURRENT INVESTMENTS TO THE TOTAL INCOME THE PRIMARY F ACTS ARE AVAILABLE ON RECORDS OF ASSESSING OFFICER IN COMPUTATION OF INCOME AND SCHEDULES OF P&L A/C WHERE THE NET LOSS OF SALE OF INVESTMENT IS ADDED BACK TO THE TOTAL INCOME AND THE PROFIT AND LOSS FROM INVESTMENT ARE SEPARATELY MENTIONED. THERE IS NO MA TERIAL OR DUE DILIGENCE ON PART OF ASSESSING OFFICER AVAILABLE ON THE RECORDS TO SHOW THAT THE CAPITAL LOSS OF RS 92 72 817/ - AS SHOWN IN COMPUTATION OF INCOME WAS REPRESENTING THE NET LOSS ON CURRENT INVESTMENT OF RS 2.45 CRORE AND NOT A NET FIGURE OF T HIS LOSS AND PROFIT / INCOME FROM LONG TERM AND CURRENT INVESTMENTS INCLUDED IN SCHEDULE - 14 OF P&L A/C. THEREFORE AN ASSESSMENT CANNOT BE REOPENED ON THIS GROUND AFTER FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. 4.6 . IN RESPECT OF THE GROUND OF REOPE NING OF NOT ADDING BACK CAPITAL EXPENDITURE TOWARDS LEGAL EXPENSES TO THE TOTAL INCOME THE PRIMARY FACTS ARE AVAILABLE ON RECORDS OF ASSESSING OFFICER AS PART OF DETAILS SUBMITTED BY THE APPELLANT DURING THE REGULAR ASSESSMENT PROCEEDINGS VIDE ITS SUBMISS ION DATED 5/2/2004 WHERE UNDER THE DETAILS O F LEGAL EXPENSES APPELLANT HAD SUBM ITTED THE EXPENDITURE ON PATENT TRADEMARKS AS RS . 28.86 LAKH. THERE IS NO MATERIAL OR DUE DILIGENCE ON PART OF ASSESSING OFFICER AVAILABLE ON THE RECORDS TO SHOW THAT THIS EXP END ITURE OF RS. 28 LAKH ON PATENT TRADE MARK IS NOT A REVENUE EXPENDITURE AFTER ACCEPTING THE SAME AS REVENUE EXPENDITURE IN REGULAR ASSESSMENT. THEREFORE AN ASSESSMENT CANNOT BE REOPENED ON THIS GROUND AFTER FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. / I.T.A.NO.1507/KOL/2009 5 4.7 . IN RESPECT OF THE GROUND OF REOPENING OF NOT ADDING BACK PROPORTIONATE MANAGEMENT EXPENSES U/S 14A TO THE TOTAL INCOME THE ASSESSING OFFICER IS BARRED BY THE PROVISO OF SECTION 14A ITSELF TO REOPEN THE ASSESSMENT FOR ASSESSMENT YEAR UNDER CONSIDERA TION. THEREFORE AN ASSESSMENT CANNOT BE REOPENED ON THIS GROUND. 4.8 . I FIND THAT ASSESSING OFFICER HAS MENTIONED IN THE ASSESSMENT ORDER THAT ON SCRUTINY OF ASSESSMENT RECORDS THE REASSESSMENT PROCEEDINGS WERE REOPENED. NOWHERE IS IT MENTIONED BY THE AS SESSING OFFICER IN THE ASSESSMENT ORDER THAT THERE WAS ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY THE MATERIAL FACTS. ALL THE MATERIAL FACTS WERE DISCLOSED BY THE APPELLANT EITHER IN THE RETURN OF INCOME OR IN THE SUBMISSIONS MADE DURING THE REGULAR ASSESSMENT PROCEEDINGS. THERE IS ALSO NO EVIDENCE TO SHOW THAT ASSESSING OFFICER APPLIED ANY DUE DILIGENCE TO ARRIVE AT THE CONCLUSION THAT INCOME HAS ESCAPED ASSESSMENT. ALL THE GROUNDS OF REOPENING RELATE TO THE PRIMARY FACTS WHICH WER E ALREADY DISCLOSED BY THE APPELLANT TO THE ASSESSING OFFICER. SINCE THE ASSESSMENT WAS COMPLETED U/S 143(3) OF I.T.ACT IT CANNOT BE REOPENED U/S 147 AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AS THERE WAS NO FAILURE ON THE PAR T OF THE APPELLANT TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT AND THEREFORE REOPENING OF ASSESSMENT U/S 147 IS BAD IN LAW. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL RAISING THE FOLLOWING GROUND : THAT LD. CIT( A) ERRED ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THAT THE REASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE INCOME - TAX ACT 1961 IS INVALID N THE GROUND THAT THE ASSESSING OFFICER COULD NOT FIND ANY NEW MATERIAL WHICH WAS NOT DISCLOSED EARLIER BY THE ASSESSEE. 4. DURING THE COURSE OF HEARING THE LEARNED DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. ON THE OTHER HAND THE LEARNED AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE LEARNED CIT(A). FURTHER THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT THE ORDER OF THE LEARNED CIT(A) IS ALSO SUPPORTED BY THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT V. KELVINATOR OF INDIA LTD [2010) 320 ITR 561 (SC)]. / I.T.A.NO.1507/KOL/2009 6 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LEARNED CIT(A) HAS DEALT ELABORATELY WITH THE ADDITIONS IN RESPECT OF EACH POINT MADE IN THE REOPENED ASSESSMENT MADE U/S.147 OF THE INCOME - TAX ACT AND DEDUCED A FACTUAL CONCLUSION THAT A LL THE MATERIAL FACTS WERE DISCLOSED BY THE APPELLANT EITHER IN THE RETURN OF INCOME OR IN THE SUBMISSIONS MADE DURING THE REGULAR ASSESSMENT PROCEEDINGS. THERE IS ALSO NO EVIDENCE TO SHOW THAT ASSESSING OFFICER APPLIED ANY DUE DILIGENCE TO ARRIVE AT THE CONCLUSION THAT INCOME HAS ESCAPED ASSESSMENT. ALL THE GROUNDS OF REOPENING RELATE TO THE PRIMARY FACTS WHICH WERE ALREADY DISCLOSED BY THE APPELLANT TO THE ASSESSING OFFICER. THE LEARNED DR COULD NOT CONTROVERT THE FINDINGS AS WELL AS THE ABOVE CONCLUSION OF FACTS. WE FIND THAT THE IMPUGNED ORDER OF THE LEAR NED CIT(A) IS SELF - EXPLANATORY AND WELL REASONED ORDER AND AS SUCH WE MAKE THE SAME AS PART OF OUR ORDER. LAW IS WELL SETTLED THAT W HEN THE PRIMARY FACTS NECESSARY FOR ASSESSMENT ARE FULLY AND TRULY DISCLOSED THE ITO WILL NOT BE ENTITLED ON CHANGE OF OP INION TO COMMENCE PROCEEDINGS FOR REASSESSMENT. SIMILARLY IF HE HAS RAISED A WRONG LEGAL INFERENCE FROM THE FACTS DISCLOSED HE WILL NOT ON THAT ACCOUNT BE COMPETENT TO CO MMENCE REASSESSMENT PROCEEDINGS. ([SEE - CIT V. BHANJI LAVJI [1971] 79 ITR 582 (SC) ] . WHERE IT WAS CLEAR FROM THE ORIGINAL ASSESSMENT ORDERS AS WELL AS ORDER MADE BY THE APPELLATE AUTHORITY THAT THE ASSE SSING OFFICER WAS WELL AWARE ABOUT THE PRIMARY FACTS VIZ. THE CLAIM MADE BY THE ASSESSEE THE CIRCUMSTANCES UNDER WHICH THE CLAIM WAS MADE AND THE PROVISIONS OF LAW WHICH COULD BE APPLIED WHILE GRANTING THE BENEFITS AND THE ASSESSING OFFICER CONSCIOUSL Y CONSIDERED THE FACTS AND ARRIVED AT A DECISION THE ASSESSMENT CANNOT BE REOPENED MERELY BECAUSE SUBSEQUENTLY THE ASSESSING OFFICER CHANGES HIS OPINION OR SOME OTHER OFFICER TAKES A DIFFERENT VIEW. A DECISION IS RIGHT OR WRONG IS NONE OF THE CONCERN OF T HE SUBSEQUENT OFFICER. IF THE PRIMARY FACTS WERE NOT AVAILABLE OR THERE WAS CONCEALMENT OR THERE WAS NO APPLICATION OF MIND AT ALL THEN A CASE FOR REOPENING THE ASSESSMENT COULD BE MADE OUT . IN THIS RESPECT REFERENCE CAN BE MADE TO THE DECISION OF HONBL E DELHI HIGH COURT IN THE CASE OF SITA WORLD TRAVEL (INDIA) LTD. V. CIT [2004] 140 TAXMAN 381 (DELHI). THEREFORE CONSIDERING THE FACTS OF THE CASE AND IN THE LIGHT OF VARIOUS DECISIONS DISCUSSED ABOVE INCLUDING THAT IN THE CASE OF CIT V. KELVINATOR OF INDIA LTD. (320 ITR 561) AND THE DECISIONS RELIED ON / I.T.A.NO.1507/KOL/2009 7 BY THE ASSESSEE BEFORE THE LEARNED CIT(A) AS ALREADY NOTICED EA RLIER WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER OF THE LEARNED CIT(A). WE THEREFORE CONFIRM THE IMPUGNED ORDER OF THE LEARNED CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. 6. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 30.04.2010 SD/ - SD/ - ( . . ) ( C.D. RAO ) ACCOUNTANT MEMBER ( . . ) ( B.R.MITTAL ) JUDICIAL MEMBER ( ) DATE : 30.04.2010 - COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT : DCIT CIRCLE 8 KOLKATA. 2 / THE RESPONDENT - M/S.ITC LTD. 37 J L NEH RU ROAD KOLKATA 700 071 3. / THE CIT 4. ( )/ THE CIT(A) 5. / DR KOLKATA BENCH 6. GUARD FILE . / TRUE COPY / BY ORDER / DEPUTY REGISTRAR . ( /) H.K.PADHEE / SNR.PRIVATE SECRETARY.