DCIT CC-47, MUMBAI v. GALAXY ENTERTAINMENT CORPORATION LTD, MUMBAI

ITA 5755/MUM/2009 | 2001-2002
Pronouncement Date: 30-07-2010 | Result: Dismissed

Appeal Details

RSA Number 575519914 RSA 2009
Bench Mumbai
Appeal Number ITA 5755/MUM/2009
Duration Of Justice 9 month(s) 1 day(s)
Appellant DCIT CC-47, MUMBAI
Respondent GALAXY ENTERTAINMENT CORPORATION LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-07-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 30-07-2010
Date Of Final Hearing 28-07-2010
Next Hearing Date 28-07-2010
Assessment Year 2001-2002
Appeal Filed On 29-10-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI PRAMOD KUMAR (AM) AND SMT. ASHA VIJAYARAGHAVAN (JM) ITA NO.5755/MUM/2009 ASSESSMENT YEAR- 2001-02 THE DC.CC.47 AAYAKAR BHAVAN MUMBAI-400 020 VS. M/S. GALAXY ENTERTAINMENT CORPN. LTD. 17-C & D PHOENIX MILLS COMPOUND SENAPATI BAPAT MARG LOWER PAREL MUMBAI-400 013 PAN-AABCG2464J (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI A.K. NAYAK RESPONDENT BY: SHRI K. SHIVARAM & SHRI AJAY SINGH O R D E R PER SMT. ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AG AINST THE ORDER DATED 12.8.2009 PASSED BY THE LD. CIT(A)-C-III FOR THE AS SESSMENT YEAR 2001-02. 2. THE ASSESSEE COMPANY IS CARRYING ON BUSINESS OF LEISURE AND ENTERTAINMENT. IT HAS FILED ITS ORIGINAL RETURN O F INCOME ON 31.10.2001 DECLARING LOSS AT RS.2 80 95 880/-. THE ASSESSMEN T WAS COMPLETED U/S.143(3) ON 29.03.2004 DETERMINING THE LOSS AT RS.2 36 90 08 8/-. ON VERIFICATION OF THE RECORD THE ASSESSING OFFICER NOTICED THAT THE ASSE SSEE HAD WRONGLY CLAIMED EXCESS DEPRECIATION TO THE EXTENT OF RS.1 15 51 328 /- BY TAKE OVER AND SUCCESSION OF THE LEISURE AND ENTERTAINMENT BUSINES S OF THE ASSESSEES SISTER CONCERN M/S. GALAXY ENTERTAINMENT (I) LTD. (GEIL) W.E.F. 01.04.2000. AS THERE WAS ESCAPEMENT OF INCOME DUE TO EXCESS ALLOWANCE OF DEPRECIATION THE ASSESSMENT WAS RE-OPENED U/S.147 OF THE I.T. ACT B Y ISSUANCE OF NOTICE U/S.148 ON 27.03.2008 AFTER OBTAINING APPROVAL FROM THE COM MISSIONER OF INCOME TAX. ITA NO.5755/M/09 2 3. THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE ASSESSEES ARGUMENTS AND DISALLOWED THE EXCESS CLAIM OF DEPRECIATION AND RE-ASSESSED THE INCOME AT TOTAL LOSS OF RS.1 21 39 552/-. 4. AT THE TIME OF HEARING THE AR CHALLENGED THE RE -OPENING OF ASSESSMENT. THE RELEVANT SUBMISSIONS MADE BY THE AR ARE REPRODU CED AS BELOW:- THE PROVISIONS OF SECTION 47 (AS SUBSTITUTED WIT H EFFECT FROM 01.04.1989) SPECIFICALLY PROVIDES THAT REASSESSMENT PROCEEDINGS CANNOT BE INITIATED BEYOND THE PERIOD OF FOUR YEARS FROM T HE END OF ASSESSMENT YEAR WHERE SCRUTINY ASSESSMENT IS MADE U/S.143(3) U NLESS THE ESCAPEMENT OF INCOME IS ATTRIBUTABLE TO THE ASSESSE ES FAILURE TO MAKE A RETURN U/S.139 OR SECTION 142(1) OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSME NT FOR THAT ASSESSMENT YEAR. THE ASSESSEE COMPANY HAD FILED ITS RETURN OF INCOM E ON 31.10.2001 ALONG WITH AUDITED ACCOUNTS DIRECORS REPORT AND A LL RELEVANT ANNEXURE DECLARING A TOTAL LOSS OF RS.2 80 95 884/-. THE R ETURN WAS PROCESSED ON 28.06.2002 U/S.143(1) ACCEPTING THE RETURNED INCOME . SUBSEQUENTLY THE ASSESSMENT WAS COMPLETED U/S.143(3) VIDE ORDER DATE D 29.03.2004 ASSESSING THE TOTAL LOSS AT RS.2 36 90 880/-. WHILE PASSING THE ASSESSMENT ORDER U/S.143(3) THE ALLOWABILITY OF DEPRECIATION HAS BEEN EXAMINED BY THE ASSESSING OFF ICER IN DETAILS AS ALL THE SUBMISSIONS WITH RESPECT TO DEPRECIATION WERE M ADE TO THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS AND ACCOR DINGLY THE ASSESSMENT ORDER WAS PASSED. ALL THE DOCUMENTS NA MELY AUDITED BALANCE SHEET DIRECTORS REPORT AND NOTES TO ACCOUN TS WERE ON THE RECORD AND HENCE AS FAR AS THE INCOME TAX DEPARTME NT IS CONCERNED THE ABOVE ISSUE HAS BEEN CONSIDERED AND ACCEPTED BY THE DEPARTMENT. THE ASSESSING OFFICER IN ITS ASSESSMENT ORDER U/S. 147 HAS NOWHERE MENTIONED THAT THERE WAS A FAILURE ON THE PART OF A SSESSEE COMPANY TO MAKE A RETURN U/S.139 OR SECTION 142(1) OR SECTION 148 NEITHER THE ASSESSEE COMPANY HAS FAILED TO DISCLOSE FULLY AND T RULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YE AR. ON GOING THROUGH THE REASONS FOR RE-OPENING THE AS SESSMENT ORDER YOUR HONOUR WILL FIND THAT THE ASSESSING OFFICER IN ITS REASONS FOR RE- OPENING HAD RELIED ON NOTES TO ACCOUNTS OF THE BALA NCE SHEET AND ITA NO.5755/M/09 3 DIRECTORS REPORT WHICH WERE ALL SUBMITTED ALONG WI TH RETURN OF INCOME AND WHICH WERE DULY EXAMINED IN DETAIL WHILE PASSIN G THE ASSESSMENT ORDER. YOUR HONOUR WILL APPRECIATE THAT IN THIS CASE NOTI CE FOR RE-OPENING OF THE ASSESSMENT HAS BEEN ISSUED AFTER THE EXPIRY OF FOUR YEARS FROM THE ASSESSMENT YEAR. THE ASSESSMENT CAN BE RE-OPENED ONLY WHEN THERE IS A FAILURE ON THE ART OF THE ASSESSEE TO DISCLOSE FU LLY AND TRULY ALL THE MATERIAL FACTS. THERE IS NOTHING WHICH SHOWS THAT THERE IS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AL L THE MATERIAL FACTS IN THE RETURN. HENCE THE RE-OPENING OF THE ASSESSMENT I S NOT VALID. IN THIS RESPECT WE PUT OUR RELIANCE ON THE FOLLOWING JUDIC IAL PRECEDENTS: A) M J PHARMACEUTICALS LTD. VS. DCIT & ANR -297 ITR 11 9 (BOM)(2008) B) SIEMENS INFORMATION SYSTEM LTD. VS. ACIT & ORS. 295 ITR 333(BOM)(2007) C) IL & FS INVESTMENT MANAGER LTD. VS. ITO & ORS. 298 ITR 32 (BOM)(2008) D) DEVIDAYAL ROLLING MILLS & ANR. VS. ACIT & ORS. 285 ITR 514 (BOM)(2006) E) GODREJ AGROVET LTD. VS. ACIT & ORS 290 ITR 252 (BOM )(2007) F) IDEAL CELLULAR LTD. VS. DCIT & ORS 3 DTR (BOM) 179 & 215 CTR (BOM) 288 (2008) G) NIBA INDIA & ANR. VS. ACIT & ORS. 300 ITR 283 (BOM) (2008) H) BANSWARE SYNTEX LTD. VS. ACIT (2004) 188 CTR (RAJ) 457 I) BHAGWATI SAKHAR KARKHANA LTD. VS. DCIT AND OTHER (2 004) 188 CTR (BOM) 393. J) ICICI BANK LTD. VS. K J RAO DCIT & ANR(2004) 188 C TR (BOM) 380. K) ASTEROIDS TRADING AND INVESTMENTS (P) LTD. VS. DCIT 308 ITR 190 (BOM) L) ASIAN PAINTS LTD. VS. DCIT & ANR. 308 ITR 195 (BOM) IN THE ABOVE DECISION THE HONBLE HIGH COURT HAS H ELD THAT RE- ASSESSMENT MERELY ON ACCOUNT OF CHANGE OF OPINION O N THE SAME FACTS WHICH WERE AVAILABLE AT THE TIME OF PASSING T HE ORIGINAL ASSESSMENT ORDER IS NOT VALID; HENCE RE-OPENING OF THE ASSESSMENT IS NOT PERMISSIBLE. THE COURTS HAVE ALSO RELIED O N THE FULL BENCH DECISION OF CIT VS. KELVINAOR INDIA LIMITED 256 ITR 1 (DELHI)(FB). IN VIEW OF THE ABOVE FACTS AND JUDICIAL PRECEDENTS MENTIONED ABOVE RE-OPENING OF THE ASSESSMENT U/S.147 IS NOT VALID AND BAD IN LAW HENCE THE ASSESSMENT ORDER PASSED U.S.147 IS TO BE QUASHED. 5. THE AR CONTENDED THAT JUDGMENT IN THE CASE OF SR I KRISHNA PVT. LTD. VS. ITO & ORS. RELIED UPON BY THE ASSESSING OFFICER FOR RE-OPENING OF ASSESSMENT IS NOT APPLICABLE TO THE FACTS OF THE CASE. WHILE DO ING THE ASSESSMENT FOR SUBSEQUENT ASSESSMENT YEAR THE ASSESSING OFFICER I N THAT CASE FOUND THAT SOME ITA NO.5755/M/09 4 OF THE HUNDI LOANS WHICH WERE SHOWN IN THE EARLIER ASSESSMENT WERE NOT GENUINE AND HENCE RE-OPENING OF THE ASSESSMENT WAS HELD TO BE VALID. 6. THE AR SUBMITTED THAT IN THE PRESENT CASE ALL F ACTS AND DETAILS WERE SUBMITTED BEFORE THE ASSESSING OFFICER WHO HAD EXAM INED THEM AT THE TIME OF ORIGINAL ASSESSMENT AND THEREAFTER THE CLAIM OF DE PRECIATION WAS ALLOWED. THUS RE-OPENING OF ASSESSMENT U/S.147 WAS BASED MERELY O N CHANGE OF OPINION AND THE SAME WAS NOT JUSTIFIED. THE AR HEAVILY RELIED ON THE BOMBAY HIGH COURT IN THE CASE OF ICICI BANK LTD. VS. K J RAO DCIT & ANR (2004) 188 CTR (BOM) 380 WHEREIN THE ASSESSEE HAD CLAIMED DEPRECIATION AT DI FFERENT RATE FOR DIFFERENT VEHICLES INCLUDING DEPRECIATION ON LEASED VEHICLE @ 40%. THE ASSESSING OFFICER AFTER DETAILED SCRUTINY FOUND THAT DEPRECIATION CLA IMED @40% WAS PROPER. HOWEVER DEPRECIATION CLAIMED ON ITEMS @ 100% WAS NO T PROPER WHICH WAS DISALLOWED. HENCE DEPRECIATION DISALLOWED @40% ON LEASED VEHICLE WAS A CONSCIOUS DECISION THEREON BY THE ASSESSING OFFICER IN THE FINAL ASSESSMENT. THE HIGH COURT HELD THAT ON THE SAME SET OF FACTS ASSESSING OFFICERS ARRIVING AT A CONCLUSION THAT DEPRECIATION ON LEASED VEHICLE WA S ALLOWABLE @ 20% AND NO @ 40% WAS ONLY A CHANGE OF OPINION AND EXCESS RELIEF GRANTED CANNOT BE THE CASE OF FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULL AND TRUE MATERIAL FACTS. 7. THE AR FURTHER RELIED ON THE MUMBAI ITAT JUDGMEN T IN THE CASE OF AUM CHEMICALS VS. ACIT PALGHAR CIRCLE PALGHAR IN IT A PPEAL NO.3156 (2009) 119 ITD 21 (MUM) WHEREIN THE ITAT HELD THAT THE ASSESSMENT PROCEEDINGS CANNOT BE INITIATED BEYOND THE PERIOD OF FOUR YEARS FORM THE END OF THE ASSESSMENT YEAR WHERE SCRUTINY ASSESSMENT WAS MADE U/S.143(3) UNLE SS ESCAPEMENT OF INCOME WAS ATTRIBUTABLE TO ASSESSEES FAILURE TO MAKE THE RETURN U/S.139 OR SEC.142(1) OR SEC.148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT YEAR. ITA NO.5755/M/09 5 8. THE AR CONTENDED THAT UNDER THE FACTS OF THE PRE SENT CASE RE-OPENING OF ASSESSMENT U/S.147 WAS BASED ON CHANGE OF OPINION A ND THEREFORE THE RE- OPENING WAS WITHOUT JURISDICTION. 9. THE LD. CIT(A) HELD AS FOLLOWS: I HAVE CONSIDERED THE FACTS AND SUBMISSIONS. IT I S SEEN THAT ASSESSEE COMPANY HAD FILED ALL THE NECESSARY DOCUME NTS AUDITED BALANCE SHEET AND P & L ACCOUNT DIRECTORS REPORT ALL RELEVANT ANNEXURES. DETAILED INFORMATION WITH REGARD TO PU RCHASE OF LEISURE AND ENTERTAINMENT BUSINESS OF GEIL BY WAY OF SLUMP SALE WAS AVAILABLE IN THE DOCUMENTS AND NOTES TO ACCOUNTS FO RMING PART OF ANNUAL REPORT. AT THE TIME OF ORIGINAL ASSESSMENT COMPLETED U/S.143(3) IT SEEMS THE ASSESSING OFFICER HAD EXAMI NED ALL THE RELEVANT DETAILS AS IN PARA 7 OF THE ASSESSMENT ORD ER HE HAS MADE SOME DISALLOWANCE ON ACCOUNT OF EXCESS AND UNREASON ABLE PAYMENT OF BUSINESS CONDUCTING CHARGES AFTER PERUSA L OF NOTES TO ACCOUNTS. IN MY OPINION THE ARS CONTENTION IS C ORRECT THAT THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCL OSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT AS ALL MATERIAL INFORMATION WAS ALREADY AVAILABLE ON RECORD. THE RE-OPENING OF ASSESSMENT ADMITTEDLY HAS BEEN DONE AFTER A PERIOD OF FOUR YEARS. SUCH RE-OPENING OF ASSESSMENT U/S.147 BEYOND A PERI OD OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR IN THE AB SENCE OF ASSESSEES FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS WAS WITHOUT JURISDICTION. THE ARS RELIANCE ON THE VA RIOUS JUDGMENTS INCLUDING THE JURISDICTIONAL HIGH COURT JUDGMENT IN THE CASE OF ICICI BANK LTD. VS. K.J. RAO DCIT & ANR.(2004) 188 CTR ( BOM) 380 SUPPORTS THE ASSESSEES CLAIM. THE JUDGMENT OF IT AT MUMBAI IN THE CASE OF AUM CHEMICALS VS. ACIT PALGHAR CIRCLE PALGHAR (119 ITD 21 (MUM) ALSO LENDS EQUAL SUPPORT TO THE ASSESS EES CLAIM. IT WOULD BE RELEVANT TO REFER TO THE FOLLOWING OBSERVA TIONS IN THE LATER DECISION. ON A PLAIN READING OF PROVISIONS OF SEC.147 IT IS CLEAR THAT THE PROVISO TO SEC.147 AS SUBSTITUTED WITH EFFECT FROM 01.04.1989 SPECIFICALLY OF 4 YEARS FROM THE END OF THE ASSESSM ENT YEAR WHERE SCRUTINY ASSESSMENT IS MADE U/S.143(3) UNLESS THE ESCAPEMENT OF INCOME IS ATTRIBUTABLE TO THE ASSESSEES FAILURE TO MAKE A RETURN U/S.139 OR SEC.142(1) OR SEC.148 OR TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THAT ASSESSMENT YEAR. IN THE INSTANT CASE THE ASSESSING OFFICER HAD REOPENED THE ASSESS EES ASSESSMENT SECOND TIME ON SAME SET OF FACTS BEYOND 4 YEARS. ITA NO.5755/M/09 6 THE RECORD SHOWED THAT THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE. IT HAD DISCLOSED FULLY AND TRULY ALL MA TERIAL FACTS NECESSARY FOR ITS ASSESSMENT AT THE TIME OF ASSESSM ENT PROCEEDINGS WHEN FIRST TIME ASSESSMENT WAS REOPENED . THE ASSESSING OFFICER WHILE MAKING FIRST REOPENING ASSE SSMENT NOTICED THAT THE ASSESSEE HAD TRANSFERRED ITS ENTIRE BUSINE SS TO THE COMPANY A AND ON THE SAME REASON THE ASSESSING OF FICER WANTED TO RE-OPEN THE ASSESSMENT SECOND TIME TO TAKE A DIF FERENT VIEW WHICH WAS NOT PERMISSIBLE IN LAW. THEREFORE THE S ECOND TIME RE- OPENING OF COMPLETED ASSESSMENT WAS BAD IN LAW AN D LIABLE TO BE QUASHED. 10. AGGRIEVED REVENUE IS IN APPEAL BEFORE US. 11. THE LD. DR RELIED ON THE ORDER OF THE AO. 12. THE LD. COUNSEL FOR THE ASSESSEE SHRI K.SHIVRAM REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A). 13. WE HEARD BOTH THE PARTIES. THE REASSESSMENT U/ S. 148 OF THE ACT IS ON A CHANGE OF OPINION BEYOND THE PERIOD OF 4 YEARS WIT HOUT BRINGING IN ANY NEW MATERIAL ON RECORD. ALL THE DETAILS HAVE BEEN VERI FIED IN THE ORIGINAL ASSESSMENT PROCEEDINGS AND THE AO HAS APPLIED HIS MIND NOT TO MAKE ANY ADDITION/DISALLOWANCES. THE ASSESSEE HAS ALSO REPLI ED TO THE AUDIT QUERY IN THE YEAR 2004 AND THEREAFTER THE REOPENING HAS BEEN MAD E IN THE YEAR 2008. RELYING ON THE DECISION IN THE CASE OF CIT VS KELVI NATOR OF INDIA 320 ITR 561(SC). GERMAN REMEDIES VS DCIT 285 ITR 26 (BOM) GODREJ AGROVET LTD. VS ACIT 290 ITR 252 (BOM) WE HOLD THAT THE AO CANNOT REOPEN THE ASSESSMENT BY MERE CHANGE OF OPINION OR BY DRAWING A DIFFERENT IN FERENCE FROM SAME FACTS AS WERE EARLIER AVAILABLE. 14. FURTHER REOPENING MERELY ON BASIS OF AUDIT O BJECTION IS NOT VALID AS HELD IN THE CASE OF TRANSWORLD INTERNATIONAL INC. VS JT. CIT 273 ITR 242. WE ALSO FIND THAT IN THIS CASE SINCE APPEAL IS PENDING FOR ORIGINAL ASSESSMENT ORDER REASSESSMENT CANNOT BE DONE AS THE ORDER HAS MERGED WITH THE ORDER OF HIGHER ITA NO.5755/M/09 7 AUTHORITIES. APPLYING THE RATIO OF THE DECISION IN THE CASE OF METRO AUTO CORPN. VS ITO 286 ITR 618 (BOM) WE HOLD THAT THE REASSES SMENT IS BAD IN LAW AND CONFIRM THE ORDER OF THE LD. CIT(A). 15. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 30 TH DAY OF JULY 2010 SD/- SD/- (PRAMOD KUMAR ) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED 30 TH JULY 2010 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR G BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR I.T.A.T MUMBAI ITA NO.5755/M/09 8 DATE INITIALS 1 DRAFT DICTATED ON: 27.7.2010 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 28.7.2010 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: _________ ______ 9. DATE OF DISPATCH OF ORDER: _________ ______