DCIT CORPORATE CIRCLE 1(2), CHENNAI vs. CHENNAI RADHA ENGINEERING WORKS PVT LTD., CHENNAI

Both the appeals filed by the Revenue are directed against the common order of the ld. Commissioner of Income Tax (Appeals) 1, Chennai, dated 29.03.2019 relevant to the assessment years 2009-10 and 2010-11. Considering the common ground raised in both the assessment years, the appeals were heard together and being disposed off by this common order for the sake of brevity.

Both the appeals filed by the Revenue are delayed by two days in filing the appeal, for which, the Revenue has filed petitions for condonation of the delay, to which; the ld. Counsel for the assessee has not raised any serious objection. Consequently, since the Revenue was prevented by sufficient cause, the delay of two days in filing of the appeals stands condoned and the appeals are admitted for adjudication.

Facts are, in brief, that the assessee is a company, engaged in the business of manufacturing of components & spares for conveyer systems and filed its return of income for the assessment year 2009-10 on 30.09.2009 admitting total income of ₹.8,40,88,420/-. The case was selected for scrutiny and notice under section 143(2) of the Income Tax Act, 1961 [“Act” in short] was issued on 20.08.2010. Subsequently, after obtaining the final accounts, audit report and other records, notice under section 142(1) of the Act dated 09.11.2011 was also issued. In response to the same, the AR of the assessee appeared before the Assessing Officer and provided complete set of details as required by notice under section 142(1) of the Act. After examining the details furnished by the assessee, the Assessing Officer has completed the assessment under section 143(3) of the Act dated 16.12.2011. Subsequently, the Assessing Officer issued a notice under section 148 of the Act on the ground that the assessee has claimed depreciation at 30% and the same was allowed by the Assessing Officer, whereas, the assessee is only eligible for 15% and thereby, there is an escapement of income. By calling the explanation of the assessee, the Assessing Officer has completed the assessment under section 143(3) r.w.s. 147 of the Act dated 02.11.2016 by disallowing excess depreciation claimed by the assessee for the assessment year 2009-10.

On appeal before the ld. CIT(A) for the assessment year under consideration, the assessee has challenged reopening of assessment. The ld. CIT(A), by considering the entire facts of the case and case law, quashed the reassessment proceedings and on merits also, the ld. CIT(A) deleted the addition made by the Assessing Officer.

Aggrieved, the Revenue is in appeal and raised common grounds for both the assessment years and the revised concise of grounds of appeal

The ld. DR has further submitted that as per section 143(2) of the Act, the assessee has to file all the details and no details are filed in respect of fixed assets and also submitted that as per explanation of sub- section (1) to section 148 of the Act, it is a clear case of escapement of income. Thus, the reopening of assessment is valid.

On the other hand, the ld. Counsel for the assessee has submitted that the Assessing Officer has completed the assessment under section 143(3) of the Act dated 16.12.2011 after examining all the details. He also submitted that reopening of assessment is invalid, which is beyond four years for the reason that there is no failure on the part of the assessee to disclose all the details. The ld. Counsel pointed from paper book page 4 that the Assessing Officer has issued notice under section 143(2) of the Act dated 20.08.2010 calling all the details in respect of the claim made by the assessee. He further submitted that the Assessing Officer asked the assessee to produce fixed assets schedule as per the provisions of Income Tax Act (paper book page No. 6) and also annual reports such as Directors report, tax audit report in form 3CB/3CD along with annexures, balance sheet along with breakup of schedules, profit and loss account along with breakup of schedules, etc. He also pointed out from paper book page 8, in response to notice under section 143(2) of the Act dated 09.11.2011, Proof of addition to fixed assets at S. No.5 and Fixed Assets Schedule as per the provisions of Income Tax Act S. No.18 have been filed by the assessee before the Assessing Officer. He also pointed out from paper book page 10, a letter dated 15.11.2011, S. No. 4 page No. 11, which shows that the C.A. of the assessee has filed the details of addition to fixed assets i.e., copy of fixed assets schedule with addition, deletion, depreciation and closing written down value (WDV) along with the copies of invoices for the fixed assets purchased during the year.

We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. In this case, the Assessing Officer has completed the assessment under section 143(3) of the Act dated 16.12.2011. Subsequently, the assessment was reopened on the ground that there is an escapement of income i.e., the assessee has claimed depreciation on “equipment at site” at 30% instead of 15% and at the time of scrutiny assessment proceedings, details pertaining to the claim of depreciation were not made available. Detailed reasons for reopening were supplied to the assessee vide letter dated 11.08.2016. From the reasons furnished by the Assessing Officer, the case of the Department is that the assessee is eligible to claim depreciation @ 15% and whereas, the assessee has claimed 30% depreciation, thus, there is an escapement of income.

The assessee has also filed fixed asset details by letter dated 15.11.2011 as per page 10 & 11 of the paper book. By examining all the details furnished by the assessee, the Assessing Officer has completed the assessment under section 143(3) of the Act dated 16.12.2011. We find that the reopening of assessment in this case is beyond four years. As per proviso to section 147 of the Act, there must be failure on the part of the assessee to disclose fully and truly all the material facts for completing the assessment. In this case, by considering the paper book page 4, 5, 6, 9 & 11, we of the considered opinion that the assessee has filed all the details in respect of depreciation claim made by the assessee. Therefore, it cannot be said that there is failure on the part of the assessee to disclose fully and truly all the material facts for completing the assessment. The Assessing Officer, in the reasons recorded, simply mentioned that there is a failure on the part of the assessee. The Assessing Officer has not able to establish that there is a failure on the part of the assessee. Thus, in our considered opinion, the notice issued under section 148 of the Act is invalid.

In view of the above facts and circumstances, we hold that the notice issued under section 148 of the Act in this case is invalid and thus, the ld. CIT(A) has rightly quashed the reassessment proceedings. Accordingly, the ground raised by the Revenue is dismissed.

The grounds and facts of the case for the assessment year 2010-11 are similar to that of the assessment year 2009-10. Thus, the ground raised by the Revenue for the assessment year 2010-11 also stands dismissed.

So far as merits of the case is concerned, as the reopening of assessment has been held as invalid, there is no need for further adjudication on merits or it would be of mere academic.

In the result, both the appeals filed by the Revenue are dismissed. Order pronounced on 31st January, 2023 at Chennai.