DCIT, CHENNAI v. M/s. ALPUMP Ltd., CHENNAI

ITA 32/CHNY/2013 | 2005-2006
Pronouncement Date: 27-10-2016 | Result: Partly Allowed

Appeal Details

RSA Number 3221714 RSA 2013
Assessee PAN AAACA5365M
Bench Chennai
Appeal Number ITA 32/CHNY/2013
Duration Of Justice 3 year(s) 9 month(s) 23 day(s)
Appellant DCIT, CHENNAI
Respondent M/s. ALPUMP Ltd., CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 27-10-2016
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted B
Date Of Final Hearing 05-08-2016
Next Hearing Date 05-08-2016
Assessment Year 2005-2006
Appeal Filed On 04-01-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B B ENCH CHENNAI . . . . & BEFORE SHRI N.R.S.GANESAN JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER ./ I.T.A.NOS.30 TO 33/MDS/2013 & C.O.NO.45/MDS/2013 (IN ITA NO.30/MDS/2013) ( / ASSESSMENT YEARS:2003-04 TO 2006-07) THE DEPUTY COMMISSIONER OF INCOME TAX COMPANY CIRCLE-I(1) CHENNAI-600 034. VS M/S. ALPUMP LTD. 170-172 INDUSTRIAL ESTATE PERUNGUDI CHENNAI-96. PAN: AAACA5365M ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. K.N.DHANDAPANI JCIT /RESPONDENT BY : MR. R.VIJAYARAGHAVAN ADVOCATE /DATE OF HEARING : 5 TH AUGUST 2016 /DATE OF PRONOUNCEMENT : 27 TH OCTOBER 2016 / O R D E R PER A. MOHAN ALANKAMONY AM: ALL THESE FOUR APPEALS AND THE CROSS OBJECTION ARE FILED BY THE REVENUE AND THE ASSESSEE RESPECTIVELY AGGRIE VED BY THE ORDERS OF THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS)-IX CHENNAI ALL DATED 28.09.2012 IN ITA NOS.123 124 125 & 41/11-12/A-IX PASSED UNDER SECTI ON 143(3) R.W.S 147 & 250(6) OF THE ACT FOR THE ASSES SMENT YEARS 2003-04 2004-05 2005-06 & 2006-07 RESPECTIV ELY. SINCE THE ISSUES INVOLVED IN THESE APPEALS ARE IDEN TICAL AND 2 ITA NOS. 30 TO 33 /MDS/2013 & & C.O.NO.45/MDS/2013 SIMILAR THEY ARE HEARD TOGETHER AND DISPOSED OFF B Y THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE REVENUE HAS RAISED SEVERAL GROUNDS IN ITS AP PEALS HOWEVER THE CRUXES OF THE COMMON ISSUES ARE AS FOL LOWS:- ITA NO.30/MDS/2013 (A.Y.2003-04): I) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN HOLDING THAT REOPENING OF ASSESSMENT MADE BY THE LEARNED ASSESSING OFFICER IS BAD IN LAW AS THE REOPENING IS BARRED BY LIMITATION AND MERE BASED ON CHANGE OF OPINION. II) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN GRANTING RELIEF WITH REGARD TO BROUGHT FORWARD LOSS BY HOLDING THAT FORM NO.62 FILED DURING THE REASSESSMENT PROCEEDINGS AS VALID. III) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER IN REGARD TO SURPLUS OF ASSETS OVER THE FACE VALUE OF SHARES AS TAXABLE UNDER SECTION 28(IV) OF THE ACT FOR THE ASSESSMENT YEAR 2003-04. ITA NOS.31 32 & 33/MDS/2013 (A.Y.2004-05 TO 2006-0 7:) I) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN HOLDING THAT REOPENING OF ASSESSMENT MADE BY THE LEARNED ASSESSING OFFICER IS BAD IN LAW AS THE REOPENING IS BARRED BY LIMITATION AND MERE BASED ON CHANGE OF OPINION. 3 ITA NOS. 30 TO 33 /MDS/2013 & & C.O.NO.45/MDS/2013 II) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN GRANTING RELIEF WITH REGARD TO BROUGHT FORWARD LOSS BY HOLDING THAT FORM NO.62 FILED DURING THE REASSESSMENT PROCEEDINGS AS VALID. 3. IN THE CROSS OBJECTION THE ASSESSEE HAS RAISED THREE GROUNDS TWO IN SUPPORT OF THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND THE OTHER FOR CONSIDERING THE ALTERNATE GROUND RAISED BY HIM WITH RESPECT TO UNABSORBED DEPRECIATION. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY FILED ITS RETURNS OF INCOME FOR THE RELEVANT ASSESS MENT YEARS AS FOLLOWS:- ASSESSMENT YEAR DATE OF FILING OF RETURN INCOME / LOSS 2003-04 01.12.2003 LOSS ` 53 59 880 2004-05 29.10.2004 NIL 2005-06 28.10.2005 NIL 2006-07 21.11.2006 ` 42 28 914 INITIALLY THE ASSESSMENTS WERE COMPLETED UNDER SEC TION 143(1) OF THE ACT AND SUBSEQUENTLY THE ASSESSMENTS WERE REOPENED AND ORDERS WERE PASSED UNDER SECTION 143(3 ) R.W.S. 147 OF THE ACT FOR THE ALL THE RELEVANT ASSE SSMENT YEARS. 4 ITA NOS. 30 TO 33 /MDS/2013 & & C.O.NO.45/MDS/2013 ITA NOS.30 TO 33 /MDS/2013 (A.Y.2003-04): GROUND : VALIDITY OF REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT: 5. THE ASSESSMENT WAS REOPENED BY THE LEARNED ASSESSING OFFICER FOR THE ASSESSMENT YEARS 2003-04 TO 2005- 06 FOR THE REASON BECAUSE IT WAS REVEALED THAT THE ASSESSEE HAS NOT COMPLIED WITH THE PROVISIONS OF SECTION 72A OF THE ACT AND HAD NOT FURNISHED CERTIFICATE IN FORM 62 AS PRE SCRIBED UNDER SECTION 72A(2)(III) R.W.R 9C(B) OF THE RULES. THE LD.CIT(A) HELD THE ISSUE IN FAVOUR OF THE ASSESSEE RELYING IN THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. KELVINATOR INDIA LTD. (2010- TIOL 06-SC-IT-LB) WH EREIN IT WAS HELD THAT THE ASSESSING OFFICER CAN REOPEN THE ASSESSMENT ONLY IF THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME AND N OT MERELY BY CHANGE OF OPINION. RELIANCE WAS ALSO PLAC ED IN THE CASE CARLTON OVERSEAS PVT.LTD. VS. ITO REPORTED IN 318 ITR 295 (DEL) WHEREIN IT WAS HELD THAT THE REASSESSMENT PROCEEDINGS CANNOT BE INITIATED BY THE ASSESSING OF FICER WHEN HE HAS ACCEPTED THE MATTER IN THE ORIGINAL ASS ESSMENT 5 ITA NOS. 30 TO 33 /MDS/2013 & & C.O.NO.45/MDS/2013 THEREFORE RESULTING IN MERE CHANGE OF OPINION. FURT HER RELIANCE WAS PLACED FOR THE ASSESSMENT YEAR 2003-04 IN THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF CIT VS. CHOLAMANDALAM INVESTMENTS & FINANCE CO. REP ORTED IN 309 ITR 110(MAD) WHEREIN IT WAS HELD THAT THE LE ARNED ASSESSING OFFICER CANNOT REOPEN THE ASSESSMENT BEYO ND 4 YEARS FROM THE END OF THE ASSESSMENT YEAR IF THE AS SESSEE HAD FILED ALL THE PARTICULARS NECESSARY FOR MAKING ASSESSMENT. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WH ILE HOLDING THE ISSUE IN FAVOUR OF THE ASSESSEE FOR THE ASSESSMENT YEARS 2003-04 / 2004-05 AND 2005-06 / 20 06-07 RESPECTIVELY OBSERVED AS UNDER:- 2003-04 / 2004-05: IN VIEW OF THE FACTUAL POSITION AND JUDICIAL PRECE DENT I AM OF THE CONSIDERED OPINION THAT THERE WAS NO FAILURE ON THE PART OF THE APPELLANT DISCLOSE FULLY AND TRULY AND THE MATERIAL FACTS NECESSARY FOR THE REASSESSMENT ON THE FIRST O CCASION AND THEREFORE THE PRESENT REASSESSMENT AFTER FOUR Y EARS IS BASED ON CHANGE OF OPINION. ACCORDINGLY THE SAME I S NOT VALID AND SUSTAINABLE IN LAW. 2005-06 & 2006-07: IN VIEW OF THE FACTUAL POSITION AND JUDICIAL PRECE DENT I AM OF THE CONSIDERED OPINION THAT THERE WAS NO FAILURE ON THE PART OF THE APPELLANT DISCLOSE FULLY AND TRULY AND THE MATERIAL FACTS NECESSARY FOR THE REASSESSMENT ON T HE FIRST OCCASION AND THEREFORE THE PRESENT REASSESSMENTS AR E BASED ON CHANGE OF OPINION. ACCORDINGLY THE SAME I S NOT VALID AND UNSUSTAINABLE IN LAW. 6 ITA NOS. 30 TO 33 /MDS/2013 & & C.O.NO.45/MDS/2013 6. WE DO NOT SUBSCRIBE TO THE VIEW OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). IN ALL THE FO UR ASSESSMENT YEARS ASSESSMENTS WERE REOPENED BECAUSE IT WAS REVEALED THAT THE ASSESSEE HAD NOT FURNISHED TH E CERTIFICATE IN FORM 62 AS PRESCRIBED UNDER SECTION 72A(2)(III) R.W.R 9C(B) OF THE RULES WHICH THE ASSESSEE HAS TO MANDATORILY COMPLY TO CLAIM THE DEDUCTION. THE REAS ON FOR REOPENING WAS ALSO CONVEYED TO THE ASSESSEE AND THE OBJECTION OF THE ASSESSEE WAS DISPOSED OFF BY THE L EARNED ASSESSING OFFICER BY SPEAKING ORDER IN ACCORDANCE W ITH THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F GKN INDUSTRIES. THEREFORE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED ASSESSING OFFICER. ACCORDINGLY THIS ISSUE IS DECIDED IN FAVOUR OF THE REVENUE FOR ALL THE RELEVA NT ASSESSMENT YEARS UNDER CONSIDERATION. GROUND NO.2: GRANTING OF RELIEF WITH RESPECT TO BR OUGHT FORWARD LOSSES BY HOLDING THAT FORM NO.62 FILED DU RING THE REASSESSMENT PROCEEDINGS IS VALID: 7. DURING COURSE OF REASSESSMENT PROCEEDINGS THE ASSESSEE HAD FILED FORM NO. 62 AS PER THE PROVISION S OF 7 ITA NOS. 30 TO 33 /MDS/2013 & & C.O.NO.45/MDS/2013 SECTION 72A AND RULE 9C. SINCE THE CBDT IN ITS CIRC ULAR NO.689 DATED 24.8.2004 HAD CLARIFIED THAT INFORMATI ON AT THE TIME OF FILING OF RETURN IF SUBSEQUENTLY FILED THE SAME SHOULD BE ACCEPTED AND RELIEF HAS TO BE GRANTED AND THE DE CISION IN THE CASE OF CIT VS. VALLI COTTON TRADERS REPORTED IN 288 ITR 400(MAD) AND THE OTHER CASE CITED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) SUPPORTS THE C ASE OF THE ASSESSEE THE LEARNED COMMISSIONER OF INCOME T AX (APPEALS) DIRECTED THE LEARNED ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE. ON MERITS WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AS HE HAS RIGHTLY RELIED IN THE CIRCULAR OF THE CBDT AND THE DECISIONS CITED IN HIS ORDER. THEREFORE TH IS GROUND RAISED BY THE REVENUE DOES NOT HAVE ANY MERIT. GROUND NO.3 : DISALLOWANCE OF THE SURPLUS OF ASSETS OVER THE FACE VALUE OF SHARES ISSUED AND CONSIDERATION P AID IN THE SCHEME OF AMALGAMATION: 8. M/S. GREY CAST PVT. LTD. HAD AMALGAMATED WITH TH E ASSESSEE COMPANY BY TRANSFERRING ALL ITS ASSETS & L IABILITIES AS DETAILED HEREIN BELOW:- 8 ITA NOS. 30 TO 33 /MDS/2013 & & C.O.NO.45/MDS/2013 FIXED ASSETS AS AT 01.04.2002 : 4 12 66 555 SCHED ULE 5 OF ADD: ADDITION ON 01.04.2002 : 66 26 052 A/CS M/S. GR EY REVALUATION SURPLUS :3 79 75 317 CAST P.LTD. INVENTORIES : 64 85 240 SCHEDULE 6 SUNDRY DEBTORS :1 32 91 671 SCHEDULE 7 CASH & BANK BALANCES : 4 37 302 SCHEDULE 8 LOANS & ADVANCES : 15 93 401 SCHEDULE 9 TOTAL ASSETS 10 76 75 538 LESS: SCHEDULE 3-SECURED LOANS: 2 12 21 363 SCHEDULE 4-UNSEC.LOANS : 83 17 632 SCHEDULE10-CURRENT LIABILI: 4 29 74 470 7 25 13 465 ___________ NET ASSET VALUE TAKEN OVER BY M/S.ALPUMP P.LTD. 3 51 62 073 (A) CONSIDERATION ACCOUNTED FOR: BY ISSUE OF SHARES 22900 SHARES @ 100 EACH : 22 90 000 AMOUNT DUE TO M/S.ALPUMP LTD. (PARA 13(A) NOTES ON A/CS. OF M/S. ALPUMP P.LTD. AS AT 31.3.03 2 43 80 186 (B) _ THE EXCESS OVER CONSIDERATION PAID BY M/S.ALPUMP P.LTD DUE TO AMALGAMATION : 84 91 887 (A-B) 9. THE LEARNED ASSESSING OFFICER WAS OF THE VIEW TH AT THE EXCESS OVER THE CONSIDERATION PAID BY THE ASSESSEE COMPANY OF RS.84 91 887/- HAS TO BE TREATED AS INCOME OF TH E ASSESSEE. HOWEVER ON APPEAL THE LEARNED COMMISSIO NER OF INCOME TAX (APPEALS) HELD THAT SUCH SURPLUS IS ONLY IN THE NATURE OF SHARE PREMIUM AND HENCE NOT ACCEPTABLE UN DER SECTION 28(IV) OF THE ACT BY RELYING IN THE DECISI ON OF THE CASE DECIDED BY THE CHENNAI BENCH OF THE TRIBUNAL IN SPE NCER & 9 ITA NOS. 30 TO 33 /MDS/2013 & & C.O.NO.45/MDS/2013 COMPANY LTD. VS. ACIT IN ITA NO.440/MDS/2011. WE F IND MERIT IN THE ORDER OF THE LEARNED COMMISSIONER OF I NCOME TAX (APPEALS) ON THIS ISSUE BECAUSE THE SURPLUS ENJOYED BY THE ASSESSEE IN THE SCHEME OF AMALGAMATION FOR ISSUE OF EQUITY SHARE WILL ONLY AMOUNT TO PREMIUM ON SHARES ALLOTTE D WHICH WILL FALL UNDER THE CAPITAL FIELD. FURTHER THE LEA RNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ONLY DECID ED THE ISSUE FOLLOWING THE DECISION OF THE CHENNAI BENCH O F THE TRIBUNAL. THEREFORE WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDER OF THE LEARNED COMMISSIONER OF INCOM E TAX (APPEALS) ON THIS ISSUE. ACCORDINGLY THIS GROUND R AISED BY THE REVENUE DOES NOT HAVE ANY MERIT. CROSS OBJECTION:- 10. SINCE WITH RESPECT TO THE ISSUE OF REOPENING WE HAVE HELD THE MATTER IN FAVOUR OF THE REVENUE THIS GROU ND RAISED BY THE ASSESSEE IN ITS CROSS OBJECTION DOES NOT SUR VIVE. 11. THE ISSUE WITH RESPECT TO GRANTING THE BENEFIT OF UNABSORBED DEPRECIATION UNDER SECTION 72A OF THE AC T IS 10 ITA NOS. 30 TO 33 /MDS/2013 & & C.O.NO.45/MDS/2013 ALLOWED IN FAVOUR OF THE ASSESSEE HENCE THIS GROUN D RAISED BY THE ASSESSEE IN ITS CROSS OBJECTION IS ALLOWED. 12. SINCE WE HAVE ALLOWED THE ISSUE WITH RESPECT TO GRANTING THE BENEFIT OF UNABSORBED DEPRECIATION UND ER SECTION 72 OF THE ACT THE ALTERNATE GROUND RAISED BY THE A SSESSEE FOR ADDING IT TO THE WDV OF THE ASSET DOES NOT SURVIVE. 13. IN THE RESULT ALL THE APPEALS OF THE REVENUE ARE PARTLY ALLOWED AND CROSS OBJECTION FILED BY THE ASSESSEE I S ALSO PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 27 TH OCTOBER 2016 SD/- SD/- ( . . . ) ( . ) (N.R.S.GANESAN) ( A.M OHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI ( /DATED 27 TH OCTOBER 2016 SOMU *+ + /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF .