The DCIT, Circle-1(1),, Baroda v. M/s. Gujarat State Fertilisers & Chemicals Ltd., Baroda

ITA 3112/AHD/2011 | 1987-1988
Pronouncement Date: 30-04-2015 | Result: Dismissed

Appeal Details

RSA Number 311220514 RSA 2011
Assessee PAN AAACG7996C
Bench Ahmedabad
Appeal Number ITA 3112/AHD/2011
Duration Of Justice 3 year(s) 4 month(s) 22 day(s)
Appellant The DCIT, Circle-1(1),, Baroda
Respondent M/s. Gujarat State Fertilisers & Chemicals Ltd., Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2015
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 30-04-2015
Date Of Final Hearing 28-04-2015
Next Hearing Date 28-04-2015
Assessment Year 1987-1988
Appeal Filed On 08-12-2011
Judgment Text
ITA NO.3113/AHD/2011 ASSESSMENT YEAR: 1994-95 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD [CORAM: PRAMOD KUMAR AM AND S.S. GODARA JM] ITA NO.3113/AHD/2011 ASSESSMENT YEAR: 1994-95 DY. COMMISSIONER OF INCOME TAX ............... APPELLANT CIRCLE 1(1) BARODA VS. GUJARAT STATE FERTILIZERS & CHEMICALS LTD. ..... ............RESPONDENT FERTILIZER NAGAR 391 750 DISTT. BARODA [PAN: AAACG 7996 C] APPEARANCES BY: SUBHASH BAINS ALONG WITH DINESH SINGH FOR THE APPELLANT Y.G. SHAH FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : APRIL 28 2015 DATE OF PRONOUNCING THE ORDER : APRIL 30 2015 O R D E R PER PRAMOD KUMAR AM: BY WAY OF THIS APPEAL THE ASSESSING OFFICER HAS CH ALLENGED CORRECTNESS OF THE ORDER DATED 29 TH SEPTEMBER 2011 PASSED THE LD. CIT(A) IN THE MATT ER OF ASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 1 47 OF THE INCOME TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR THE ASSESSMENT YEAR 1994-95 ON THE FOLLOWING GROUNDS :- 1(A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(APPALS) ERRED IN QUASHING THE ORDER U/S. 14 3(3) READ WITH SECTION 147 TREATING THE SAME AS BAD-IN-LAW ON THE GROUND DUE TO THE ASSESSMENT BEING REOPENED BEYOND PERIOD OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR IN QUESTION AND WITHOU T SATISFYING ITA NO.3113/AHD/2011 ASSESSMENT YEAR: 1994-95 PAGE 2 OF 7 CONDITIONS AS PER PROVISO TO SECTION 147 OF THE ACT AND THEREBY ALLOWED RELIEF OF THE FOLLOWING ADDITIONS: (I) THE INCOME OF RS.1281.38 LACS EARNED DURING THE PRE - COMMISSIONING STAGE OF SA-IV PLAN WAS TREATED AS IN COME OF THE YEAR AS INCOME FROM OTHER SOURCES. (II) DISALLOWANCE OF DEPRECIATION @ 100% ON METAL C APS AND MACHINERY PARTS THE COST OF WHICH WAS LESS RS.5 00 0/- PURCHASED AND USED IN BULK IN VIEW OF PROVISIONS OF SECTION 32 OF THE ACT. (IV) ADDITION OF RS.14.40 LACS TOWARDS EXCISE DUTY REFUND RECEIVABLE BY THE ASSESSEE IN THE PREVIOUS YEAR RELEVANT TO AS SESSMENT UNDER CONSIDERATION FROM THE EXCISE DEPARTMENT TREA TING THE SAME AS THE INCOME OF THE YEAR SINCE THE ASSESSEE I S FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. 1(B) THE LD. CIT(A) ERRED IN NOT DECIDING THE APPEA L ON THE ABOVE ISSUES ON MERITS AND NOT APPRECIATING THE FACT THAT PROCEEDINGS UNDER SECTION 148 WERE INITIATED WITHIN THE STATUTORY TIM E LIMIT OF 7 YEARS AS PER THE PROVISIONS OF SECTION 149(1)(B) OF THE ACT AND AFTER TAKING APPROVAL OF THE APPROPRIATE AUTHORITY AS THE INCOME ESCAPED IN THIS CASE WAS MORE THAN RS.50 THOUSAND 2. TO ADJUDICATE ON THIS APPEAL ONLY A FEW MATERIA L FACTS NEED TO BE TAKEN NOTE OF. IT IS A CASE OF REOPENED ASSESSMENT AND T HERE IS NO DISPUTE THAT REASSESSMENT PROCEEDINGS WERE INITIATED BEYOND THE EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR CONCERNED. THE REAS ONS RECORDED BY THE ASSESSING OFFICER ON 22 ND JANUARY 1998 FOR REOPENING THE ASSESSMENT WERE AS FOLLOWS :- ON EXAMINATION OF RECORDS IN THIS CASE ASSESSEE H AS FILED RETURN OF INCOME FOR AY 1994-95 SHOWING TOTAL LOSS OF RS.12 2 6 75 495/- AND ASSESSMENT WAS FINALISED ON TOTAL LOSS OF RS.44 22 90 410/-. 2. IT IS SEEN FROM THE RECORDS THAT THE ASSESSEE HA D CAPITALISED INCOME OF RS.1281.38 LACS BY WAY OF DEDUCTING THE S AME FROM PREOPERATIVE EXPENSES CAPITALISED. INCOME TAX ACT DOES NOT PROVIDE FOR CAPITALISATION OF INCOME BY DIRECTLY REDUCING F ROM PREOPERATIVE EXPENDITURE WHICH IS CAPITAL EXPENDITURE ARE GIVEN BELOW : ITA NO.3113/AHD/2011 ASSESSMENT YEAR: 1994-95 PAGE 3 OF 7 1. CAPITIVE CONSUMPTION OUT OF TRIAL RUN 1133.04 LACS PRODUCTION 2. STOCK AND WORK IN PROCESS 1.77 LACS TRANSFERRED TO COMMERCIAL STOCK 3. INTEREST (GROSS) ON DEPOSITS 146.57 LACS 1281.38 LACS INCOME TAX ACT 1961 DOES NOT PROVIDE FOR CAPITALI SING INCOME BY DIRECTLY REDUCING FROM PREOPERATIVE EXPENDITURE WHI CH IS CAPITAL EXPENDITURE. FURTHER SUPREME COURT IN THE CASE OF S.G. MERCANTILE CORP (P) LTD. V. CIT (1972) 83 ITR 700 AND BIHAR ST ATE CO-OP. BANK LTD. V CIT (1960) 39 ITR 114 THAT IF NONE OF THE S PECIFIED HEADS IS APPLICABLE TO INCOME IN QUESTION IT IS TO BE CLASSI FIED AS ANOTHER INCOME. FURTHER RECEIPTS OF RS.219.82 LACS ON ACCO UNT OF CAPITITIVE CONSUMPTION FROM PROJECTS UNDER EXECUTION ASSESSEE HAS SHOWN IN ACCOUNTS AS OTHER INCOME AND OFFERED FOR TAX WHEREA S INCOME FROM OTHER PROJECTS (NOT PUT TO USE AND EXPENSES CAPITAL ISED) AS MENTIONED ABOVE HAS BEEN TAKEN AS REDUCTION OF EXPENDITURE. THE IRREGULARITY OF REDUCING THE PREOPERATIVE EXPENSES BY INCOME HAS RE SULTED INTO ESCAPEMENT OF INCOME OF RS.1281.83. 3. EXCESS CLAIM OF DEPRECIATION: ASSESSEE HAS CLAIMED DEPRECIATION AND WAS ALLOWED A T 100% ON PURCHASE OF METAL COPS AT RS.S21 31 690/-. IT IS HELD BY ITAT MADRAS IN THE CASE OF ITO FIRST LEASING CO. OF INDI A LTD 20-ITD-449 THAT WHEN PURCHASE IS MADE IN BULK AND ALSO USED IN BULK THE PROVISION OF PROVISO TO SECTION 32 OF INCOME TAX AC T 1961 ARE NOT APPLICABLE. HENCE DEPRECIATION ON METAL COPS IS AD MISSIBLE AT ORDINARY RATE OF 25%. EXCESS ALLOWANCE OF DEPRECIA TION OF RS.15 98 767/- (2139690 532923 AT 25%) HAS RESULT ED INTO ESCAPEMENT OF INCOME OF RS.1598767. 4. INCORRECT COMPUTATION OF BUSINESS INCOME ASSESSEE HAS SHOWN DEPOSIT PAID TO CENTRAL EXCISE CUSTOMS AND OTHER DEPARTMENTS OF RS.272.73 LACS. IT IS SEEN THAT THI S AMOUNT (AS PER NOTES ON BALANCE SHEET) INCLUDES RS.14.40 LACS BEIN G EXCISE REFUND DUE BUT NOT RECEIVED. AS ASSESSEE IS MAINTAINING ACCOU NTS ON MERCANTILE SYSTEM AMOUNT DUE IN PREVIOUS YEAR BUT NOT RECEIVED IN PREVIOUS YEAR WAS REQUIRED TO BE TREATED AS INCOME. INCORRECT AC COUNTING OF AMOUNT ITA NO.3113/AHD/2011 ASSESSMENT YEAR: 1994-95 PAGE 4 OF 7 DUE UNDER DEPOSIT WITH GOVT HAS RESULTED INTO ESCAP EMENT OF INCOME OF RS.14.40 LACS. IN VIEW OF THE ABOVE FACTS I HAVE REASON TO BELIEV E THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THE AY 94-95 DUE TO THE OMISSION ON THE PART OF THE ASSESSEE TO FURNISH THE TRUE AND CORRECT AFFAIRS OF THE COMPANY WITHIN THE MEANING OF SECTIO N 147 OF THE I.T. ACT. ACCORDINGLY THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND HENCE THE ASSESSMENT FOR THE AY 1994 -95 IS REQUIRED TO BE REOPENED U/S 147 OF THE ACT FOR ESCAPEMENT OF IN COME OF RS.1312.21 LACS (1281.83 + 15.98 + 14.40). 3. ON THESE FACTS THE CIT(A) QUASHED THE REASSESSM ENT PROCEEDINGS ON THE GROUND THAT EVEN THOUGH REASSESSMENT HAS BEEN INITI ATED BEYOND FOUR YEARS AND AS SUCH FIRST PROVISO TO SECTION 147 IS APPLI CABLE ON THE FACTS OF THIS CASE THERE IS NOT EVEN AN ALLEGATION OF ANY FAILURE ON T HE PART OF THE ASSESSEE. WHILE HOLDING SO THE LEARNED CIT(A) HAS OBSERVED AS FOLL OWS:- AS SUCH INCOME ALLEGED TO HAVE ESCAPED ASSESSMENT AS PER REASONS RECORDED EVEN IF IT HAD ESCAPED ASSESSMENT WAS NOT ON ACCOUNT OF APPELLANTS FAILURE TO DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS DURING ORIGINAL ASSESSMENT PROCEEDINGS. GUJA RAT HIGH COURT IN THE CASE OF SAYAJI INDUSTRIES LTD. [2011] 13 TAXMAN N.COM 218 (GUJARAT) HAS HELD THAT NO SATISFACTION HAVING BEEN RECORDED BY AO AS REGARDS FAILURE ON PART OF ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS ASSUMPTION OF JURISDICTION UNDER SE CTION 147 WAS WITHOUT JURISDICTION. FURTHER ITAT AHMEDABAD IN APPELLANTS CASE IN ITA NO.4237/AHD/2003 THROUGH ORDER DT. 20.08.2010 H ELD THAT PROVISO BELOW SECTION 147 WOULD COME INTO OPERATION ONLY WH EN AO POINTED OUT AS TO WHAT WAS NOT DISCLOSED BY THE ASSESSEE IN THE ORIGINAL ASSESSMENT ONCE A CHARGE OF FAILURE IS IMPUTED ON THE ASSESSEE. ITAT IN APPELLANTS CASE HELD AS UNDER :- IN OUR CONSIDERED VIEW THE ROLE OF EXAPLANATINO-1 TO SEC.147 AS RELIED BY THE LD. CIT(A) OR BY LD. D.R. WOULD COME INTO OPERATION ONLY WHEN AO HAS POINTED OUT AS TO WHAT HAS NOT BEEN DIS CLOSED BY THE ASSESSEE IN THE ORIGINAL ASSESSMENT. ONCE A CHARGE OF FAILURE IS IMPUTED ON THE ASSESSEE THEN ASSESSEE HAS TO SHOW T HAT SUCH FACTS WERE ALREADY DISCLOSED. ONCE AN EXPLANATION IS RENDERED BY THE ASSESSEE THAT CERTAIN FACTS AS ALLEGED BY THE AO ARE ALREADY DISCLOSED THEN EXPLANATIN-1 WOULD COME TO THE RESCUE OF THE AO AND IN THAT EVENT MERELY PRODUCTION OF BOOKS OF ACCOUNT AS RELEVANT E VIDENCE BEFORE THE ITA NO.3113/AHD/2011 ASSESSMENT YEAR: 1994-95 PAGE 5 OF 7 AO WOULD NOT TANTAMOUNT TO DISCLOSURE WITHIN THE ME ANING OF PROVISO TO SECTION 147. HERE THE AO HAS NOT DISCHARGED THE PRIMARY ONUS LYING O HIM FOR REOPENING THE ASSESSMENT AS HE HAS NOT MA DE ANY ALLEGATION ABOUT THE FAILURE OF THE ASSESSEE TO DISCLOSE ANY P ARTICULAR MATERIAL NECESSARY FOR THE ASSESSMENT. THUS WE HOLD THAT R EOPENING OF THE ASSESSMENT WAS NOT JUSTIFIED WITHIN THE MEANING OF PROVISO TO SECTION 147. WE ALLOW THE APPEAL OF THE ASSESSEE. IN THE REASSESSMENT UNDER APPEAL AO HAS AGAIN NOT DISCHARGED THE PRIMARY ONUS LYING ON HIM FOR REOPENING THE ASSESSM ENT AS HE HAS NOT MADE ANY ALLEGATION ABOUT FAILURE OF APPELLANT TO D ISCLOSE ANY PARTICULAR MATERIAL NECESSARY FOR ASSESSMENT. THE PRESENT MATTER IS THEREFORE COVERED SQUARELY BY ITATS DECISION AS AB OVE AND ALSO GUJARAT HIGH COURTS DECISION IN THE CASE OF SAYAJI INDUSTRIES LTD. FOLLOWING WHICH AND FACTS OF THE CASE DISCUSSED AS ABOVE IT IS HELD THAT REOPENING OF THE ASSESSMENT WAS NOT JUSTIFIED DUE T O ASSESSMENT BEING REOPENED BEYOND PERIOD OF 4 YEARS FROM THE END OF A SSESSMENT YEAR IN QUESTION WITHOUT SATISFYING CONDITIONS AS PER PROV ISO TO SECTION 147. GROUND NO.1OF APPEAL IS ALLOWED. 4. THE ASSESSING OFFICER IS AGGRIEVED BY THE RELIEF SO GRANTED BY THE CIT(A) AND IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF T HE APPLICABLE LEGAL POSITION. 6. WE FIND THAT WHILE THE IMPUGNED REASSESSMENT HAS BEEN QUASHED ON THE SHORT GROUND THAT AS PER REASONS RECORDED THERE I S NOT EVEN AN ALLEGATION OF FAILURE ON THE PART OF THE ASSESSEE WHICH HAS RESUL TED IN ESCAPEMENT EVEN IF ANY OF INCOME LIABLE TO BE TAXED EVEN THOUGH THE ASSES SMENT WAS ADMITTEDLY REOPENED BEYOND FOUR YEARS FROM THE END OF THE RELE VANT ASSESSMENT YEAR. THE ASSESSEE HAS CHALLENGED THE CORRECTNESS OF CIT(A)S SO QUASHING THE REASSESSMENT PROCEEDINGS BUT NEITHER HE HAS CALLED INTO QUESTION APPLICATION OF FIRST PROVISO TO SECTION 147 TO THE FACTS OF THIS C ASE NOR HAS HE APPOINTED OUT ANY ITA NO.3113/AHD/2011 ASSESSMENT YEAR: 1994-95 PAGE 6 OF 7 FAILURE ON THE PART OF THE ASSESSEE. THE GROUNDS R AISED BEFORE US REFER TO CERTAIN OTHER THINGS BUT NOT THE CORE ISSUE ON THE BASIS OF WHICH IMPUGNED RELIEF WAS GRANTED BY THE CIT(A). WHEN WE POINTED THIS OUT TO THE LEARNED DEPARTMENTAL REPRESENTATIVE HE SUBMITTED THAT ALL THE RELEVANT FACTS WERE NOT DISCLOSED BY THE ASSESSEE. IT WAS ALSO SUBMITTED THAT WE CAN ON LY EXAMINE EXISTENCE OF MATERIAL RATHER THAN ADEQUACY OF MATERIAL FOR COM ING TO THE CONCLUSION THAT INCOME HAS ESCAPED ASSESSMENT. RELIANCE WAS PLACED ON THE JUDICIAL PRECEDENTS ON THE CASES OF RAKESH AGARWAL VS. ACIT 225 ITR 49 6 AND S. NARAYANAPPA & OTHERS VS. CIT 63 ITR 219. WE HOWEVER SEE NO LE GALLY SUSTAINABLE MERITS IN THIS DEFENCE BY THE LEARNED DEPARTMENTAL REPRESENTA TIVE. WHILE EXAMINING CORRECTNESS OF THE REASONS RECORDED FOR REOPENING O F ASSESSMENT IT IS NOT OPEN TO US TO GO TO ANYTHING BEYOND THE REASONS ACTUALLY RECORDED FOR REOPENING THE ASSESSMENT. AS HELD BY HONBLE BOMBAY HIGH COURT I N THE CASE OF HINDUSTAN LEVER LIMITED VS. R B WADKAR (268 ITR 332) ...... ... THE REASONS ARE REQUIRED TO BE READ AS THEY WERE RECORDED BY THE ASSESSING OFFI CER. NO SUBSTITUTION OR DELETION IS PERMISSIBLE. NO ADDITIONS CAN BE MADE TO THOSE REASONS. NO INFERENCE CAN BE ALLOWED TO BE DRAWN ON THE BASIS O F REASONS NOT RECORDED. IT IS FOR THE ASSESSING OFFICER TO DISCLOSE AND OPEN HIS MIND THROUGH THE REASONS RECORDED BY HIM. SUCH BEING THE LEGAL POSITION AN D IN VIEW OF UNDISPUTED FACT THAT THE ASSESSING OFFICER HAS NOT POINTED OUT TO A NY FAILURE OR LAPSES ON THE PART OF THE ASSESSEE THE CONCLUSIONS ARRIVED AT BY THE LEARNED CIT(A) CANNOT BE FAULTED. WE APPROVE THE SAME AND DECLINE TO INTERF ERE IN THE MATTER. 7. IN THE RESULT THE APPEAL IS DISMISSED. PRONOUN CED IN THE OPEN COURT TODAY ON THE 30 TH DAY OF APRIL 2015. SD/- SD/- S. S. GODARA PRAMOD KUM AR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD THE 30 TH DAY OF APRIL 2015 ITA NO.3113/AHD/2011 ASSESSMENT YEAR: 1994-95 PAGE 7 OF 7 COPIES TO: (1) THE APPELLANT (2) THE RESPOND ENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT/DEPUTY REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES AHMEDABAD