9911796707
TMI Blog2012 (10) TMI 368X X X X Extracts X X X X X X X X Extracts X X X X ..... centering, revenue in nature, thus following the principles of consistency, the CIT(A) allowed the claim for deduction of expenditure on wooden shuttering and centering on consumption basis as revenue expenditure - in favour of assessee. - ITA Nos. 897,1878 &1879/Del/2012 - - - Dated:- 1-10-2012 - SHRI HARI OM MARATHA, SHRI A.N. PAHUJA, JJ. Revenue by Shri Anuj Tiwari, AR Assessee by Shri Pirthi Lal, DR O R D E R A.N. PAHUJA:- These three appeals filed by the Revenue on 22.02.2012 against an order dated 7.12.2011 for the AY 2005-06 ; on 24.04.2012 against an order dated 07.02.2012 for the AY 2006-07 and on 24.4.2012 against an order dated 27.2.2012 of the AY 2007-08 of the ld. CIT(A)-V, New Delhi, raise the following grounds: I.T.A. No.897/D/2012 1. The ld. CIT(A) has erred on facts and in law in treating the reopening of the case u/s 147 of the I.T. Act as invalid and cancelling the order passed u/s 147/143(3) of the I.T. Act. 2. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any grounds of appeal at any time before or during the hearing of this appeal. I.T.A. No.1878/D/2012 1. The ld. CIT(A) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2005 declaring an income of Rs.1,10,50,707/- and the assessment was completed u/s 143(3) of the Act on 5.12.2007 at an income of Rs.1,10,87,180/-. On perusal of assessment records, it is detected that during the previous year relevant to assessment year 2005-06, the assessee company had debited an amount of Rs.2,60,28,512/- on account of shuttering and centering expenses which includes wooden shuttering and centering as well as steel shuttering and centering. Out of total expenses of Rs.2,60,28,512/-, the assessee company had claimed expenses amounting to Rs.2,42,56,947/- on account of wooden shuttering and centering and an expenses of Rs.17,71,565/- on account of steel shuttering and centering. Only an amount of Rs.17,71,565/- being steel shuttering and centering was taken as capital expenditure and Rs.2,42,56,947/- as revenue expenditure, whereas, the whole amount i.e. Rs.2,60,28,512/- should have been taken as capital expenditure and only depreciation at the prescribed rate i.e. @ 25% on Rs.2,42,56,947/- to be allowed. In view of the above, I have reason to believe that an amount of Rs.2,42,56,947/- chargeable to tax has escaped assessment for the assessment year 2005-06 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing depreciation @25% on the amount of wooden shuttering and centering. 4. On appeal, the assessee questioned the validity of reopening of the assessment, relying, inter alia, on the decision of Hon ble Apex Court in CIT Vs. PVS Beedies Pvt. Ltd. 237 ITR 13 (SC) and CIT Vs. Simbaoli Sugar Ltd. (2011) 333 ITR 470(Del.). The assessee pointed out that the original return filed by them was selected for scrutiny and the AO required the assessee to submit the following details:- 1) Copy of ledger a/c of centering and shuttering wood, purchased during the year under reference; 2) Copy of ledger a/c of steel shuttering, purchased during the year under reference. 3) Copy of ledger a/c of centering, shuttering and scaffolding consumed during the year ended 31.3.2005 along with working thereof. 4.1 The assessee having submitted complete details vide letter dated 15.10.2010, there was complete disclosure of facts relating to claim of expenses on wooden shuttering centering, scaffolding etc. Since the assessee had already disclosed the primary facts, relying upon decisions in CIT Vs. Bhaji Lavji, 79 ITR 582; Income-tax Officer Vs. Lakhmani Mewal Das, 103 ITR 437 (SC); CIT Vs. Mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t this submission is fallacious and the Full Bench decision of the Delhi High Court has also been confirmed by the Supreme Court in CIT Vs. Kelvinator of India Ltd., (2010) 320 ITR 521 (Supreme Court). It is also seen that the department has been consistently following its earlier orders of treating the expenditure on wooden shuttering and centering and scaffolding on a consumption basis and capitalizing the expenditure of steel shuttering and centering and allowing depreciation thereon. This is a settled issue, as the assessee has also accepted the same. In view of the facts of the present case and various decisions on the issue, I find that the primary facts were before AO and the same has been considered and discussed in the original assessment order. Since the re-assessment has been completed on the same set of facts, the reopening is held to be invalid. Consequently, the order u/s 143(3) read with section 148 stands annulled. Since the reopening u/s 147 has been held to be invalid and order passed in pursuance to reopening stands cancelled, the grounds on merit have become only of academic nature and requires no specific comments. 5. The Revenue is now in appeal bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of sect ion 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under sect ion 147(a), two conditions were required to be satisfied- firstly the AO must have reason to believe that income, prof its or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement occur red due to reason of either omission or failure on the part of the taxpayer to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the AO could have jurisdiction to issue notice under sect ion 148 read with sect ion 147(a).But under the substituted section 147, existence of only the first condition suffices. In other words if the Assessing Officer, for whatever reason, has reason to believe that income has escaped assessment, it confers jurisdiction to reopen the assessment. However, both the conditions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hips in Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191. The court observed: "There can be no doubt that the duty of disclosing al l the primary facts relevant to the decision of the quest ion before the assessing authority lies on the assessee." The court further said: "Does the duty, however, extend beyond the full and truthful disclosure of all primary facts? In our opinion, the answer to this quest ion must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else far less the assessee- to tell the assessing authority what inferences, whether of facts or law, should be drawn." 6.1 Again in the case of Patidar Oil Cake Industries Vs. DCIT, 270 ITR 347(Guj), Hon ble Guj rat High Court held;- In the light of the fact that the assessments have been sought to be reopened after a period of four years from the end of each of the assessment years in quest ion, the provisions of sect ion 147 of the Act mandate that the Assessing Officer sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77 (Guj) also not ices under sect ion 148 read with section 147 of the Act were quashed by the Hon ble High Court, there being no whisper in the reasons recorded by the AO about failure on the part of the assessee to disclose truly and fully all material facts. 6.6 In CIT Vs. DCM Ltd. , (2009) 24 DTR(Del. ) 72,Hon ble jurisdictional High Court found that there was no allegation in the reasons recorded by the AO that the assessee had failed to file its return or that it had failed to disclose fully and truly all material facts in its return nor was there any allegation by the Assessing Officer that the assessee had failed to disclose fully and truly all material facts in its return of income nor even there was any allegation regarding escapement of income. In these circumstances, Hon ble High Court upheld that findings of the Tribunal that notice u/s 148 of the Act, having been issued after four years, the reopening of the assessment was not valid. 6.7 In CIT Another Vs. Foramer France, 264 ITR 566 (SC), Hon ble Apex Court upheld the order of the Hon ble Delhi High Court in concluding that when there was admittedly no failure on the part of the assessee to make a return or to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry of four years from the end of the relevant assessment year were without jurisdiction and cannot be sustained. 6.13 In Mihir Textiles Ltd. vs. Jt . CIT [2010] 43 DTR 11 (Guj), Hon ble High Court held that the petitioner having submitted audited books of accounts, P L a/c, and balance sheet along with notes and also made a specific disclosure in the form of a note regarding transfer of its undertaking, it cannot be said that the petitioner is guilty of not making full and true disclosure and, therefore, notice under s. 148 issued after the expiry of four years from the end of the relevant assessment year is quashed and set aside. 6.14 Similar view was taken in decision dated 28.11.2011 in CIT vs. Purolator India Limited in ITA no. 489/Del./2011 and decision dated 1.12.2011 in BLB Limited vs. ACIT in WPC 6884/2010, JSRS Udyog Limited Another vs. ITO,313 ITR 321(Del.); Wel Intertrade Private Limited vs. ITO,308 ITR 22(Del.) and in a recent decision dated 11.11.2011 in ITA no.87 /2010 in Atma Ram Properties Pvt. Ltd. vs. DCIT by the Hon ble jurisdictional High Court . 6.15 In Haryana Acryl ic Manufacturing Co., 308 ITR 38 (Del.), Hon ble jurisdictional High Court, inter ali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it would not, in any case, create an embargo or a ban on the competent officer to exercise powers under the amended section 147 of the Income-tax Act, 1961, as prima facie, there could not be "change of opinion" in that factual scenario. It has also not been shown to us on behalf of an assessee. If conscious application of mind is made to the relevant facts and material available or existing at the relevant point of time while making assessment and again a different or divergent view is sought, it would tantamount to "change of opinion", whereas, in the case of existing material, no conscious attempt has been made, it would tantamount to mistake in not considering the relevant point or proposition and it would not be a "change of opinion". 6.17 As regards change of opinion, we may reiterate that the assessee made disclosure of wooden shuttering and centering expenses during the course of original assessment proceedings, when the AO raised a specific query relating to these expenses and indisputably, the assessee submitted a detailed reply dated 15.10.2007. These facts have not been disputed before us. In this context, we find that Hon ble Apex Court while affirming the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber 31, 1989 ([1990] 182 ITR (St.) 1, 29), which reads as follows :"7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression reason to believe' in section 147.-A number of representations were received against the omission of the words .reason to believe' from section 147 and their substitution by the 'opinion' of the Assessing Officer. It was pointed out that the meaning of the expression, reason to believe' had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression 'has reason to believe' in place of the words for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new section 147, however, remain the same." For the aforestated reasons, we see no merit in these civil appeals filed by the Department; hence, dismissed with no order as to costs. 6.18 The aforesaid observations of the Hon ble Apex Court when viewed in the light of facts and circumstances in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. To sum up, in the instant case, as is apparent from the facts narrated in the impugned orders, the AO reopened the assessment completed on 5.12.2007 u/s 143(3) of the Act merely on the basis of facts already available before him at the time of original assessment proceedings. Not even a whisper is evident from the reasons recorded or the facts narrated in the impugned order as to whether or not there was any failure on the part of the assessee in disclosing fully and truly all material facts necessary for his assessment. The reasons do not indicate why and how the assessee failed to make full and true disclosure of material facts in relation to royalty expenses. We are of the opinion that any such failure as is envisaged in the proviso to sec. 147 of the Act, is a matter of fact alone and there can be no deemed failure. In these circumstances, in absence of any failure on the part of the assessee to disclose fully and truly al l material facts necessary for its assessment for the assessment year under consideration, the not ice under sect ion 148 of the Act having been issued after the expiry of a period of four years from the end of the relevant assessment year, the very ini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,31,96,085/-, the assessee company had claimed expenses amounting to Rs.2,15,89,571/- on account of wooden shuttering and centering and an expenses of Rs.16,06,514/- on account of steel shuttering and centering. Only an amount of Rs.16,06,514/- being steel shuttering and centering was taken as capital expenditure and Rs.2,15,89,571/- as revenue expenditure, whereas, the whole amount i.e Rs.2,31,96,085/- should have been taken as capital expenditure and only depreciation at. the prescribed rate i.e. @15% on Rs.2,15,89,571/- to be allowed. In view of the above, I have reason to believe that an amount of Rs.2,15,89,571/- chargeable to tax has escaped assessment for the assessment year 2006-07 and, hence, clearly attracts the provisions of clause (c) of Explanation 2 to Section 147 of the I.T. Act. Therefore, notice u/s 148 of the Act is issued. 8.1 Accordingly, the AO Issued a notice U/s 148 of the Act on 2nd July, 2010. In response, the assessee filed return on 9th August, 2010.For similar reasons as were adduced in his order for the AY 2005-06,the AO after rejecting objections of the assessee against reopening of the assessment, treated the amount of Rs.2,15,89,571/- on wooden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, the original assessment in this case was completed on 27th May, 2008 determining income of Rs.1,32,63,670/- in terms of order u/s 143(3) of the Act in pursuance to return declaring income of Rs.1,25,33,804/- filed on 20.11.2006. Thereafter, the AO reopened the assessment on 2nd July, 2010 u/s 147 of the Act on the ground that wooden shuttering and centering expenses were capital in nature, even when during the course of original assessment proceedings, issue had been examined by the AO in para 4 of the assessment order after raising queries and amount was allowed as revenue expenditure. As pointed out by the learned CIT(A), the AO, following his orders of earlier years has consistently been treating the expenditure on wooden centering and scaffolding as revenue in nature on consumption basis and capitalizing the expenditure of steel shuttering centering while allowing depreciation thereon. Accordingly, the ld. CIT(A) concluded that reopening of the assessment on a mere change of opinion on the same set of facts is contrary to law. As already stated in Gruh Finance Ltd. (supra), Hon ble Gujrat High Court observed in their decision that if conscious application of mind is ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... established in view of the aforesaid judgment of the Hon ble Supreme Court in M/s. Kelvinator of India Limited (supra). Same view has been reiterated in D. T. T. D. C. Ltd. v. ACIT, 324 ITR 234 (Del.); Asteroids Trading Investment P. Ltd. vs DCIT, (2009) 308 ITR 190 (Bom) ; ICICI Prudential Life Insurance Co. Ltd. (2010) 325 ITR 471 (Bom); Bhavesh Developers vs. A.O. (2010) 224 CTR 160 (Bom) and Aventis Pharma Ltd. vs. Astt. CIT (2010) 323 ITR 570 (Bom) (577). 11.2 In view of the foregoing, especially when the ld. DR did not place any material before us so as to enable us to take a different view in the matter, we are of the opinion that the very initiation of proceedings under sect ion 147 of the Act stands vitiated and as such cannot be sustained, the ingredients of sect ion 147 having not been fulfilled. It is well-settled that if a notice under sect ion 148 of the Act has been issued without the jurisdictional foundation u/s 147 of the Act being available to the AO, the notice and the subsequent proceedings will be without jurisdiction and thus, liable to be struck down . In view thereof, we have no hesitation in upholding the findings of the ld. CIT(A) in quashing the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g commission payment by the appellant to M/s Brainstreet Marketing (P) Ltd. has been that the department has not accepted the order of CIT(A)-VI, New Delhi, in which the CIT(A) has held the commission receipt by M/s Brainstreet Marketing (P) Ltd. from the appellant as a genuine transaction and has directed the same to be accepted as business income of M/s Brainstreet Marketing (P) Ltd. as against the same being assessed as other income by the AO; otherwise the AO has not brought anything on record to show that the transaction was bogus. ii) For a commission payment to be treated as genuine, identity of the payee should be established, there should be no doubt as to the services rendered, there should be direct nexus between the services rendered and the business activity of the appellant; and payment should be reasonable keeping in view the business line of the appellant and further there should be no doubt as to the payment of money. The AO has not brought anything on record to show that any of the aforesaid conditions is not fulfilled. iii) The undersigned has seen the assessment record. Orders from as many as 12 parties were arranged by M/s Brainstreet Marketing (P) Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not place before us any material, controverting the aforesaid findings of the ld. CIT(A) so as to enable us to take a different view in the matter, we are not inclined to interfere. Therefore, ground no.1 in the appeal f the Revenue for the AY 2007-08 is dismissed. 16.. Ground no.2 in the appeal of the Revenue for the AY 2007-08 relates to disallowance of expenditure of Rs.1,38,76,932/- on wooden shuttering and centering. Relying upon his own orders for preceding AYs 2005-06 2006- 07, the AO disallowed the claim of wooden shuttering and centering, treating the same capital in nature. Accordingly, the AO after allowing depreciation, restricted the disallowance to Rs.67,19,302/-. 17. On appeal, the ld. CIT(A), following the decision of Hon ble Punjab Haryana High Court in the case of CIT Vs. Random Constructors Pvt. Ltd. (2010) 186 Taxman 303 (P H), deleted the disallowance in the following terms:- 4.2 The issue involved and submissions made by the appellant have been considered. Department has been consistently following its earlier orders of treating the expenditure on wooden shuttering and centering and scaffolding on a consumption basis and capitalizing the expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
