ITA NOS. 4134&4135/Del/2010
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "G ", NEW DELHI
BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER
AND
SHRI J.S. REDDY, ACCOUNTANT MEMBER
I.T.A.No.4134/Del/2010
A.Y. : 2002-03
DCIT, Circle 7(1), M/s Samtel Color Limited,
New Delhi VS. 6th floor, TDI Centre,
Room No. 312, 3rd floor, CR Distt. Centre,
Building, IP Estate, New Delhi Jasola, New Delhi
(PAN: AAACS6589D)
(APPELLANT) (RESPONDENT)
AND
I.T.A.No.4135/Del/2010
A.Y. : 2002-03
DCIT, Circle 7(1), M/s Samcor Glass Ltd.,
New Delhi VS. 6th floor, TDI Centre,
Room No. 312, 3rd floor, CR Distt. Centre,
Building, IP Estate, New Delhi Jasola, New Delhi
(PAN: AAACS6589D)
(APPELLANT) (RESPONDENT)
Department by : Sh. BRR Kumar, Sr. DR
Assessee by : Sh. D.C. Garg, CA
Date of Hearing : 12-02-2015
Date of Order : 17-02-2015
ORDER
PER H.S. SIDHU : JM
These Appeals have been filed by the Revenue against the
impugned orders both dated 02/06/2010 passed by the Ld.
Commissioner of Income Tax (Appeals)-X, New Delhi. Since the
legal issue is common and identical, therefore, we are disposing of
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ITA NOS. 4134&4135/Del/2010
these Appeals by this consolidated order for the sake of
convenience, by dealing with ITA No. 4135/Del/2010 (A.Y. 2002-03).
2. The grounds raised in ITA No. 4134/Del/2010 read as under:-
(i) Ld. CIT(A) erred in law and on the facts and
circumstances of the case, in holding that the reopening
of the assessment u/s. 147 of the I.T. Act was incorrect
and invalid while the AO reopened the case after due
application of mind and following the due procedure or
reopening the case.
(ii) The appellant craves to amend, modify, alter, add or
forego any ground of appeal at any time before or during
the hearing of this appeal.
3. The grounds raised in ITA No. 4134/Del/2010 read as under:-
(i) On the facts and circumstances of the case and in law Ld.
CIT(A) erred in holding that reopening of the assessment
u/s. 147 was incorrect and invalid, while the AO reopened
the case by recording valid reasons and following due
procedure.
(ii) On the facts and circumstances of the case and in law the
Ld. CIT(A) erred in deleting the addition of Rs. 13,03,988/-
being interest income accrued on fixed deposits.
(iii) On the facts and circumstances of the case and in law the
Ld. CIT(A) erred in not adjudicating issue of addition of
Rs. 40,24,338/- being expenditure on capital spares
consumed being capital in nature, on merits.
4. The brief facts of the case are that the assessee is a limited
company engaged in the business of manufacturing of Glass Shells,
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Panels and Funnels for black & White and Color Picture Tubes and
trading. The Original assessment in this case was completed under
section 143(3) of Income-tax Act vide order dated 28.03.2005 at NIL
income after adjustment of depreciation for current year at
Rs.23,77,27,956/-. Balance depreciation remained unabsorbed
amounting to Rs.5,68,51,301/- was allowed to carry forward for
subsequent year. Subsequently vide order dated 18.08.2008 u/s 154
of Income-tax Act, depreciation allowable was calculated at Rs.
23,94,35,051/-. After adjustment of depreciation of current year
balance depreciation of Rs.5,51,44,206/- was allowed to carry
forward for subsequent year. The Assessing Officer perused the
assessment record and observed that the Assessee Company has
claimed excess amount under the following heads:-
"1. As per schedule-9, page-16 of the audit report, the
assessee has shown interest on fixed deposits for
Rs. 13,03,988/- has not been shown as income as
per schedule-14 of the audited account. Income of
an amount of Rs 13,03,988/- has escaped
assessment on account of interest accrued on fixed
deposit, which should be taken as income.
2. The assessee had paid technical assistance fee for
Rs.26,94,333/-. Though technical information
acquired by the assessee was to have contributed
to benefit of enduring nature end therefore,
required to have been treated as capital
expenditure. Income of an amount of Rs.26,94,333/-
has escaped assessment as that amount has been
paid as technical assistance fee. Since the assessee
is deriving a benefit of enduring nature and
therefore, should be treated as capital expenditure.
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3. The assessee has claimed expenditure for
Rs.40,24,338/- on capital spares consumed (vide
assessment order calculation sheet) is of capital
nature, which should have been disallowed. This
mistake resulted under-assessment of income by
Rs. 40,24,338/-. An income of amount of
Rs.40,24,338/- has escaped assessment as the
expenditure incurred on capital spares consumed is
of capital nature rather than revenue."
4.1 In view of the above, the AO have reason to believe that the
taxable income to the tune of Rs. 80,22,659/- has escaped
assessment within the meaning of section 147 of the I.T. Act, 1961.
After recording the reasons to believe in writing and after approval
from the Ld. CIT(A), Delhi-III, New Delhi u/s. 151(1) of the I.T. Act,
the then AO issued notice u/s. 148 of the I.T. Act, 1961 on
25.3.2009. The reasons recorded were provided to the assessee
vide letter dated 17.8.2008. In response to the same, the assessee
provided letter dated 4.9.2009, as submitted that no income has
escaped assessment and therefore, the assessee requested to drop
the reassessment proceedings. The objections of the assessee was
also considered and rejected by the AO, vide order dated 7.10.2009
before issuing the notice u/s. 148 of the I.T. Act and case of the
assessee was fixed for hearing on 16.10.2009. On 16.10.2009
various Authorised Representative of the Assessee appeared. After
considering all the documentary evidence and the submission of the
assesssee. AO completed the assessment u/s. 147/143(3) of the I.T.
Act vide order dated 29.10.2009.
5. Aggrieved with the same, assessee filed the Appeal before the
Ld. CIT(A) by raising various grounds including challenging the
reopening of the assessment u/s. 147 of the Act, who vide impugned
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ITA NOS. 4134&4135/Del/2010
orders both dated 2.6.2010 allowed the appeals of both the
Assessees on legal issue as well as on merits.
6. Now the Revenue is in appeal before the Tribunal.
7. At the time of hearing Ld. DR relied upon the order passed by
the AO u/s. 147/143(3) of the I.T. Act and the contention raised by
the Revenue in the Grounds of Appeal. Ld. DR filed a small Paper
Book containing pages 1 to 59 in which he has attached the various
documentary evidences relating to the assessment record as well
as the record of the Ld. First Appellate Authority.
8. Ld. Counsel of the assessee controverted the arguments
advanced by the Ld. DR and relied upon the order passed by the Ld.
CIT(A).
9. We have heard both the parties and perused the relevant
records, especially the orders passed by the Revenue Authorities
alongwith the Paper Book filed by the Ld. DR. We are of the view
that it is an admitted case that assessee is a limited company
engaged in the business of manufacturing of Glass Shells, Panels
and Funnels for black & White and Color Picture Tubes and trading.
The Original assessment in this case was completed under section
143(3) of Income-tax Act vide order dated 28.03.2005 at NIL income
after adjustment of depreciation for current year at
Rs.23,77,27,956/-. Balance depreciation remained unabsorbed
amounting to Rs.5,68,51,301/- was allowed to carry forward for
subsequent year. Subsequently vide order dated 18.08.2008 u/s 154
of Income-tax Act, depreciation allowable was calculated at Rs.
23,94,35,051/-. After adjustment of depreciation of current year
balance depreciation of Rs.5,51,44,206/- was allowed to carry
forward for subsequent year. AO perused the original assessment
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ITA NOS. 4134&4135/Del/2010
and observed that the assessee company has claimed excess
amount under the following heads:-
"1. As per schedule-9, page-16 of the audit report, the
assessee has shown interest on fixed deposits for
Rs. 13,03,988/- has not been shown as income as
per schedule-14 of the audited account. Income of
an amount of Rs 13,03,988/- has escaped
assessment on account of interest accrued on fixed
deposit, which should be taken as income.
2. The assessee had paid technical assistance fee for
Rs.26,94,333/-. Though technical information
acquired by the assessee was to have contributed
to benefit of enduring nature end therefore,
required to have been treated as capital
expenditure. Income of an amount of Rs.26,94,333/-
has escaped assessment as that amount has been
paid as technical assistance fee. Since the assessee
is deriving a benefit of enduring nature and
therefore, should be treated as capital expenditure.
3. The assessee has claimed expenditure for
Rs.40,24,338/- on capital spares consumed (vide
assessment order calculation sheet) is of capital
nature, which should have been disallowed. This
mistake resulted under-assessment of income by
Rs. 40,24,338/-. An income of amount of
Rs.40,24,338/- has escaped assessment as the
expenditure incurred on capital spares consumed is
of capital nature rather than revenue."
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9.1 Keeping in view of the aforesaid reasons, the AO have reason
to believe that the taxable income to the tune of Rs. 80,22,659/-
has escaped assessment within the meaning of section 147 of the
I.T. Act, 1961 and he recorded the reasons to believe which was
supplied to the assessee. In response to the same, assessee filed
objection, which was considered and rejected vide order dated
7.10.2009. Thereafter, AO issued notice u/s. 148 of the I.T. Act on
25.3.2009. In response to the same, Authorised Representative of
the assessee appeared and after hearing him, the AO completed the
assessment on 29.10.2009 u/s. 143(3) by making the various
additions.
9.2 As per the impugned order, Ld. CIT(A) has stated that the
assessee vide his letter dated 4.9.2009 raised certain objections
against reopening of the assessment which was disposed of by the
AO on 7.10.2009, which Ld. CIT(A) has reproduced at pages 3 and
4 of the impugned order. The assessee has made additional
grounds including the legal ground before the Ld. CIT(A), which the
Ld. CIT(A) has mentioned at pages no. 5 and 6 of the impugned
order.
9.3 Ld. CIT(A) has dealt with the ground in which the assessee has
challenged the reopening of the assessment by submitting that the
AO has reopened the assessment merely on the basis of the change
of opinion as there was no tangible material available to have
reason to believe that income has escaped assessment. In support
of his contention, the assessee cited the decisions of the Hon'ble
Supreme Court of India in the case of CIT vs. Kelvinator of India
Limited in Appeal Nos. 2009-2011 of 2003 and in the case of CIT vs.
Foramer France (264 ITR 566) and the decision of the Hon'ble
Jurisdictional High Court in the case of Sita World Travels (India) Ltd.
vs. CIT (274 ITR 186).
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9.4 We have gone through the facts and circumstances of the
present case as well as the case laws cited by the Ld. Counsel of the
assessee before the Revenue Authorities as well as before us. We
are of the view that the AO has no fresh material to form his opinion
regarding escapement of assessment and he has also not found any
tangible material to record the reasons for reopening of the
assessment of the assessee. It is merely a change of opinion which
is not permissible under the law as well as according to the various
decisions rendered by the Hon'ble Supreme Court of India in the
case of CIT vs. Kelvinator of India Limited in Appeal Nos. 2009-2011
of 2003 and in the case of CIT vs. Foramer France (264 ITR 566) and
the decision of the Hon'ble Jurisdictional High Court in the case of
Sita World Travels (India) Ltd. vs. CIT (274 ITR 186).
9.5 In view of the aforesaid facts and circumstances, as explained
above, we are of the view that the Ld. CIT(A) has passed a well
reasoned order in the case of both the aforesaid assesses on the
basis of the material available before him as well as on the basis of
the decisions of the Hon'ble Supreme Court of India in the case of
CIT vs. Kelvinator of India Limited in Appeal Nos. 2009-2011 of 2003
and in the case of CIT vs. Foramer France (264 ITR 566) and the
decision of the Hon'ble Jurisdictional High Court in the case of Sita
World Travels (India) Ltd. vs. CIT (274 ITR 186) and rightly held that
the issue reopening of assessment is incorrect and invalid.
Therefore, no interference is called for in the well reasoned order
passed by the Ld. CIT(A), hence, we uphold the impugned order
passed by the Ld. CIT(A) by dismissing the appeals filed by the
Revenue.
9.6 Since Ld. CIT(A) in the case of both the assesseess has rightly
held that the reopening of assessment was incorrect and invalid,
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therefore, in our considered opinion, there is no need to adjudicate
the issues on merits.
10. In the result, both the appeals of the Revenue are dismissed.
Order pronounced in the Open Court on 17/02/2015.
Sd/- Sd/-
[J.S. REDDY] [H.S. SIDHU]
ACCOUNTANT MEMBER JUDICIAL MEMBER
Date 17/02/2015
"SRBHATNAGAR"
Copy forwarded to: -
1. Appellant -
2. Respondent -
3. CIT
4. CIT (A)
5. DR, ITAT
TRUE COPY
By Order,
Assistant Registrar, ITAT, Delhi Benches
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