THE PR. COMMISSIONER OF INCOME TAX -6 vs. MOSER BAER INDIA LTD.

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ITA/106/2019HC DelhiDLHC01009152201901 February 2019Bench: HON'BLE MR. JUSTICE S. RAVINDRA BHAT,HON'BLE MR. JUSTICE PRATEEK JALAN2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the impugned order of the Tribunal was sound and reasonable and in accordance with the Supreme Court's judgment in CIT v. Kelvinator of India Ltd. The Court noted that the original scrutiny assessment had already examined the taxability of the amounts in question. Therefore, the Assessing Officer could not revisit the same issue under the guise of reassessment proceedings, especially when the alleged oversight of a binding decision was the sole basis for reopening. The Court also referred to its own decision in Xerox Modicorp Ltd. v. DCIT, where similar reassessment proceedings initiated on the ground of expenditure wrongly allowed in ignorance of Southern Switchgears were held to be unauthorized by law. Consequently, no substantial question of law arose, and the appeal was dismissed.

What were the facts?

The assessee, Moser Baer India Ltd., is in appeal against an order of the Income Tax Appellate Tribunal (ITAT). The Revenue is the appellant before the High Court. The assessment year in question is AY 2002-03. The challenge is to the ITAT's order which rejected the Revenue's appeal against the assessee's reassessment proceedings initiated under Sections 147/148 of the Income Tax Act, 1961. The original assessment under Section 143(3) was completed on 28.07.2004, allowing a capital expenditure claim of ₹39,57,72,326/-. Reassessment was initiated on the grounds that the original assessment overlooked a Supreme Court decision in Southern Switchgears Ltd. v. CIT. The Assessing Officer added back the amounts, and the CIT(A) upheld this. The ITAT, however, quashed the reassessment.

What were the issues?

1. Whether the reassessment proceedings initiated under Sections 147/148 of the Income Tax Act, 1961, for AY 2002-03 were valid, when the reasons for reopening amounted to a second opinion or review of the previous view expressed during scrutiny assessment under Section 143(3)? Assessee's contention: The assessee argued that the reassessment proceedings were invalid because the Assessing Officer was essentially seeking a second opinion on an issue that was already examined and decided during the original scrutiny assessment. The assessee relied on the Supreme Court decision in CIT v. Kelvinator of India Ltd. and this Court's decision in Xerox Modicorp Ltd. v. DCIT. Revenue's contention: The Revenue contended that the original assessment was completed in ignorance of a binding decision of the Supreme Court in Southern Switchgears Ltd. v. CIT, justifying the reopening.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 143(3),Section 37(1)

AI-generated summary — verify with the full judgment below

$~52 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 106/2019

THE PR. COMMISSIONER OF INCOME TAX -6..... Appellant

Through : Sh. Puneet Rai, Advocate.

versus

MOSER BAER INDIA LTD.

..... Respondent

Through : Sh. Aniket. D. Agrawal, Advocate.

CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE PRATEEK JALAN

O R D E R %

01.02.2019

The Revenue is aggrieved by the order of the Tribunal rejecting its appeal. The assessee had questioned the reassessment proceedings under Sections 147/148 of the Income Tax Act, 1961 [hereafter “the 1961 Act”] on the ground that the reasons to re-open the assessment proceedings for AY 2002-03 amounted to a second opinion or review of the previous view expressed. The assessee was subjected to scrutiny proceedings under Section 143(3) of the Act and the original assessment was completed on 28.07.2004. Its claim under Section 37(1) for allowance of capital expenditure by way of royalty to the tune of `39,57,72,326/- in lieu of technical knowledge and depreciation of fixed assets was allowed. Later, reassessment proceedings were initiated on the premise that the scrutiny assessment originally completed, was in ignorance of a Page 1 of 2

binding decision of Supreme Court in Southern Switchgears Ltd. v. CIT 1998 (232) ITR 359 (SC). The reassessment was completed and the amounts were added back. The assessee appealed, both on merits and on the issue of reopening. The CIT(A) concurred with the view of the Assessing Officer (AO). However, the Tribunal, following the decision of the Supreme Court in CIT v. Kelvinator of India Ltd. 320 (ITR) 561 (SC) and other decisions was of the view that since this scrutiny assessment had gone into the taxability of amounts in question, the AO could not have revisited the same issue on the pretext that a binding decision was overlooked. This Court is of the opinion that the impugned order is sound and reasonable and in accord with the judgment of the Supreme Court. Further, in somewhat circumstances, where reassessment proceedings were sought to be initiated on the ground of expenditure wrongly allowed in ignorance or overlooking Southern Switchgears (supra), this Court in Xerox Modicorp Ltd. v. DCIT 2013 (350) ITR 308 (Del) held that reassessment proceedings were unauthorised by law. No substantial question arises. The appeal is accordingly dismissed.

S. RAVINDRA BHAT, J

PRATEEK JALAN, J FEBRUARY 01, 2019/ajk

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