ASSISTANT COMMISSIONER OF INCOME-TAX, SATARA CIRCLE,, SATARA vs. PRATAPGAD SAHAKARI SAKHAR KARKHANA LTD,, SATARA

आदेश / ORDER PER ANIL CHATURVEDI, AM :

Assessee is a Co-operative Society engaged in the business of manufacturing of sugar and running Petrol Pump. Assessee filed its return of income for A.Y. 2005-06 on 30.10.2005 declaring total loss of Rs.6,11,13,286/-. The case was selected for scrutiny and thereafter assessment was framed u/s 143(3) of the Act vide order dated 08.08.2007 and the total loss was determined at Rs.6,11,13,286/-.

Thereafter, notice u/s 148 of the Act was issued on 22.03.2010 which was served on the assessee. To which assessee inter-alia submitted that the return of income filed by the assessee on 30.10.2005 be treated as return of income filed in response to notice u/s 148 of the Act. Thereafter, the case was taken up for scrutiny and consequently, assessment was framed u/s 143(3) r.w.s. 147 of the Act vide order dated 03.12.2010 and the total loss was determined at Rs.15,70,893/-. Aggrieved by the order of AO, assessee carried the matter before Ld.CIT(A), who vide order dated 27.06.2019 (in appeal No.PN/CIT(A)-13/DCIT Satara Circle, Satara/203/2010-11) held the assessment order passed u/s 143(3) r.w.s. 147 of the Act to be bad-in- law and therefore, directed the AO to cancel it. The relevant observations and findings of Ld.CIT(A) are as under :

“2.4 I have considered the facts of the case. In this case, an assessment order u/s 143(3) was passed on 08.08.2007 determining the appellant's total loss at Rs (-) 6,11,13,286/- wherein depreciation loss of Rs.5,95,42,393/- was allowed. Thereafter, a notice u/s 263 was served upon the appellant by the CIT-3, Pune on the ground that the assessment order dated 08.08.2007 was erroneous and prejudicial to the interest of the revenue. In response to such notice, the appellant made written submission before the Ld CIT-3, Pune wherein the appellant submitted that during the year under consideration, the appellant could not crush sugarcane because of the non-availability of the same. However, its factory/unit was working throughout of year incurring all its routine expenses. Further, the appellant relied upon various case laws to substantiate the fact that appellant's claim for depreciation cannot be disallowed merely on the basis that it did not carry out manufacturing activity during the year. The appellant then stated that the same was brought to the notice of its assessing officer who had given due consideration to this issue and assessed the appellant's income thereof. The appellant's these arguments were accepted by the Ld CIT-3, Pune, who, In turn, held that the given case was not fit for cancellation/ rectification. The relevant para of said order u/s 263 dtd 22.02.2010 is reproduced as hereunder:

"7. In view of the above, it cannot be said that there were no enquiries in this regard conduced by the Assessing Officer. The relevant portion of the assessment Order dt. 08. 08.2007 is reproduced as under:

"Considering the fact that there was no sugar cane crushing during the year which is the dominant activity of a Sugar Factory and there was income declared from the sale of the stored sugar of A. Y. 2004-05 and small quantity of Molasses and baggase besides small sale in petrol Pump, the loss declared in the return of income of Rs. 6,11,13,2861- is assessed for this year."

2.5 Subsequently, the appellant was issued notice u/s 148 on 22.03.2010 which was followed by reassessment proceedings wherein the appellant was assessed u/s 143(3) rws 147 of the Act disallowing the appellant's claim for depreciation loss. Now, as it is clear from the above that once an order u/s 263 was passed wherein it was clearly stated that the given case was not fit for cancellation/ rectification, then, there was no question of issuing notice u/s 148 of the appellant. Thus, I am of the opinion that by issuing notice u/s 148 in the above circumstances is nothing but "change of opinion" as held by the Hon'ble Bombay High Court in the case of Sanghvi Swiss Refills Pvt Ltd Vs ACIT (2008) 300 ITR 276 (Bom) and Hon'ble Supreme Court in the case of CIT Vs Kelvinator of India Ltd (2010) 320 ITR 561. Therefore, I hold that the assessment order passed u/s 143(3) rws 147 is bad in law and therefore Ld AO is directed to cancel it. Accordingly, I agree with the appellant and allow this ground of appeal. Since the reopening has been quashed and decided in favour of the appellant, all the other Grounds of appeal have become academic and hence need not be adjudicated upon.”

3. Aggrieved by the order of Ld.CIT(A), Revenue is now in appeal and has raised the following grounds.

“1. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in allowing the assessee's ground regarding change of opinion, ignoring the fact that the assessment has been re-opened after obtaining the necessary approval from the competent authority who had also recorded his satisfaction before re-opening the assessment, and therefore it is a case of formation of opinion and not the matter of change of opinion.

2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in not deciding on merits of inadmissibility of claim of depreciation for not carrying out any manufacturing activity for business purpose when the assessee itself admitted in the written submission dated 29/11/2009 furnished before the A.O. as discussed in para 5 of the subject assessment order u/s 143(3) r.w.s. 147 of the Act dated 03/12/2010.

Order pronounced on 23rd day of January, 2020.