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Income Tax Appellate Tribunal, MUMBAI BENCH “ E ”, MUMBAI
आयकर अपील�य अ�धकरण मुंबई पीठ “ई ” �ी बा�करण बी . आर . , लेखा सद�य एवं �ी �वकास अव�थी, �या�यक सद�य के सम� IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “ E ”, MUMBAI BEFORE SHRI BASKARAN B.R , ACCOUNTANT MEMBER & SHRI VIKAS AWASTHY, JUDICIAL MEMBER आअसं. 1355/मुं/2021 (�न.व. 2009-10) ITA NO. 1355/MUM/2021(A.Y.2009-10) ACIT-1(3)(1), Room No.540, 5th Floor, Aaykar Bhavan, M.K.Road, Mumbai – 400 020 ...... अपीलाथ� /Appellant बनाम Vs. M/s. Tilaknagar Industries Limited. 3rd Floor, Indl.Assurance Bldg. JD Tata Marg, Churchgate, Mumbai 400 020 PAN:AAACT-6047-R ..... ��तवाद�/Respondent अपीलाथ� �वारा/ Appellant by : Shri Rajesh Damor ��तवाद� �वारा/Respondent by : Dr. K.Shivram, Sr. Advocate with Ms. Neelam Jadhav सुनवाई क� �त�थ/ Date of hearing : 04/07/2022 घोषणा क� �त�थ/ Date of pronouncement : 29/09/2022 आदेश/ ORDER PER VIKAS AWASTHY, JM: This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-47, Mumbai [in short ‘the CIT(A)] dated 04/01/2021 for the assessment year 2009-10.
The brief facts of the case as emanating from records are: The assessee is engaged in manufacturing and selling of Indian made Foreign Liquor. The
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assessee filed its return of income for A.Y 2009-10 declaring total income of Rs.29,19,12,503/- on 30/09/2009. The assessment order u/s. 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) was passed on 07/12/2011. Thereafter, the Assessing Officer issued notice u/s. 154 of the Act dated 18/03/2013 to rectify the alleged mistake in assessment order on two counts:
(i) Excess depreciation has been allowed to the assessee in respect of Multiple Effect Evaporator Plant(MEEP)
(ii)Short deduction of TDS on payment of rent, hence, payment of rent is to be disallowed under section. 40 (a)(ia) of the Act.
The assessee furnished detailed reply to the said notice on 11/07/2013. Thereafter, the Assessing Officer initiated reassessment proceedings for the impugned assessment year and issued notice u/s. 148 of the Act on 17/02/2014. The Assessing Officer passed order u/s. 143(3) r.w.s. 147 of the Act on 20/03/2015. Thereafter, the Assessing Officer issued fresh notice u/s. 154 of the Act to revive the rectification proceedings and passed order u/s. 154 of the Act on 19/03/2017. Aggrieved against the rectification order passed u/s.154 of the Act, the assessee filed appeal before the CIT(A) The CIT(A) vide impugned order accepted appeal of the assessee and quashed the order passed u/s. 154 of the Act, on the ground that the issued raised u/s. 154 of the Act is beyond the scope. Hence, the present appeal by the Department.
Shri Rajesh Damor representing the Department vehemently defending the order of Assessing Officer passed u/s. 154 of the Act submitted, that the assessee has claimed excessive depreciation on MEE Plant. During the course of assessment proceedings the Assessing Officer accepted the calculation of
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depreciation furnished by the assessee. Subsequently, it transpired that the assessee has claimed excessive depreciation which was sought to be rectified by the Assessing Officer in proceedings u/s. 154 of the Act. Allowing depreciation at higher rate of MEE Plant was a mistake apparent from record which the Assessing Officer rectified in proceedings under section 154 of the Act. Similarly, in respect of short deduction of TDS on payment of rent the Assessing Officer found that disallowance under section 40(a)(ia) was required to be made. During assessment proceedings the claim of TDS was inadvertently accepted, later on the Assessing Officer rectified the mistake in proceedings under section 154 of the Act. The ld.Departmental Representative submitted that rectification proceedings are continuation of the proceedings initiated vide notice dated 18/03/2013, hence, the order passed u/s. 154 of the Act is within the period of limitation as mandated under the Act.
Per contra, Dr. K.Shivram appearing on behalf of the assessee vehemently defended the impugned order. The ld. Authorized Representative of the assessee submitted that in the first instance the issue raised by the Assessing Officer u/s.154 of the Act is debatable, therefore, it could not have been rectified u/s. 154 of the Act. In support of this contention the ld. Authorized Representative of the assessee placed reliance on the following decisions:
(i) ITO vs. Volkart Brothers, 82 ITR 50(SC)
(ii) CIT vs. Reliance Industries Ltd.228 Taxman 184 (Bombay)(MAG).
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The ld. Authorized Representative of the assessee raised an alternate argument that the order passed u/s. 154 of the Act is barred by limitation as specified u/s. 154(7) of the Act. As per the provisions of the Act, the limitation for initiating proceedings u/s. 154 of the Act is 4 years from the end of the Financial Year, in which the order sought to be amended was passed. In the present case the limitation for passing order under section 154 of the Act expires on 31/03/2016. The Assessing Officer initiated fresh proceedings u/s. 154 of the Act vide notice dated 10/03/2017. Thus, the order passed u/s. 154 of the Act is clearly beyond time and in violation of the provisions of the Act. In support of his submissions the ld. Authorized Representative of the assessee placed reliance on the decision in the case of Karnataka Power Corporation Ltd. Vs. ACIT, 85 ITR 518 (Bang-Trib).
The ld. Authorized Representative of the assessee made alternate submission challenging the validity of proceedings u/s. 154 of the Act; the LR submitted that the assessment for assessment year 2009-10 was reopened vide notice u/s. 148 dated 17/02/2014. The Assessing Officer initiated two parallel proceedings, one u/s. 147 and another u/s. 154 of the Act. The same case cannot be a subject matter of two parallel proceedings for the same assessment year under the Act. If the Assessing Officer was of the view that during original assessment proceedings something has been left out for examination, the Assessing Officer could have examined the same in reassessment proceedings.
On merits of the issue, the ld. Authorized Representative of the assessee Submitted that the assessee had claimed higher deprecation on MEE Plant installed during the period relevant to the assessment year under appeal
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The MEE Plant contribute in reducing pollution, hence, the assessee was legitimately claiming depreciation at higher rate i.e. at 80%. The ld. Authorized Representative of the assessee referred to the letter dated 08/08/2008 from Maharashtra Pollution Control Board (at page 73 of the paper book) directing the assessee to install advanced technology to meet “zero discharge”. The assessee in response to the aforesaid communication informed the Pollution Control Board that MEE Plant and other equipment have been installed to achieve zero discharge and reduce the level of pollution (Letter dated 08/01/2009 at page 80 of paper book). The ld. Authorized Representative of the assessee submitted that MEE Plant falls within the meaning of Pollution Control equipment eligible for higher rate of depreciation @ 80% whereas, according to the Assessing Officer the said equipment does not help in pollution control and is not eligible for higher rate depreciation. The Assessing Officer examined assessee’s claim of depreciation during the course of scrutiny assessment proceedings and allowed the same. Now, on change of opinion the Assessing Officer is disallowing assessee’s claim of higher depreciation. The issue is highly debatable and hence, cannot be subject matter of proceedings u/s. 154 of the Act.
6.1 In respect of second issue raised by the Assessing Officer under section 154 of the Act i.e. short deduction of TDS on payment of rent, the ld. Authorized Representative of the assessee submitted that rent paid was merely a reimbursement of licence fee paid to the Government. The assessee paid for D-2 Licence as reimbursement charges. The ld. Authorized Representative of the assessee stated that without prejudice to the first arguments the provisions of section 40(a)(ia) would not get attracted as the
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parties to whom rent has been paid has offered the same to tax. The ld. Authorized Representative of the assessee in support of his submissions placed reliance on the decision in the case of CIT vs. Ansal Lankmark Township Pvt. Ltd., 377 ITR 635 (Del).
We have heard the submissions made by rival sides and have examined the orders of authorities below. The primary issue in appeal before us is :
(i) whether the order passed under section 154 of the Act is barred by limitation; and
(ii) whether the alleged rectification made by Assessing Officer in proceedings under section 154 of the Act are on debatable issue.
The provisions of section 154 empowers the Assessing Officer to rectify any mistake apparent from record in an order passed under the provisions of the Act. However, the Assessing Officer does not enjoy unfretted powers to rectify the mistake apparent from record. Section 154(7) specifies the time limit within which the Assessing Officer can amend the assessment order to rectify the mistake. The provisions of sub- section(7) are reproduced hereunder:
Sub-section -(7) to section 154: “ Save as otherwise provided in section 155 or sub- section (4) of section 186, no amendment under this section shall be made after the expiry of four years [from the end of the financial year in which the order sought to be amended was passed.]” A bare perusal of above provisions would show that the rectification/amendment in the order cannot be made after the expiry of 4 years from the end of Financial Year in which the order was passed. In the instant case the order sought to be rectified is assessment order passed under
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section 143(3) of the Act dated 07/12/2011. Therefore, under provisions of section 154 of the Act, the mistake, if any, in the original assessment order could have been rectified on or before 31/03/2016. Whereas, in the instant case, the Assessing Officer initially issued notice under section 154 of the Act on 18/03/2013. Thereafter, the Assessing Officer chose not to proceed under section 154 of the Act and issued notice under section 148 of the Act albeit on different grounds. Notice issued under section 148 of the Act was issued to the assessee on 17/02/2014 and the assessment order under section 147 r.w.s. 143(3) was passed on 20/03/2015. Two years thereafter the Assessing Officer vide notice dated 10/03/2017 revived the proceedings under section 154 of the Act by referring to the earlier notice issued under section 154 dated 18/03/2013. The Assessing Officer after having initiated proceedings under section 154 of the Act cannot leave the proceedings in hibernation indefinitely so as to revive it after “n” years. In our considered view the notice dated 10/03/2017 under section. 154 of the Act was a fresh notice which was clearly barred by limitation. Even if, it is presumed to be continuation of initial proceedings, the amendment to the original assessment order could not have been made after expiry of four years from the end of Financial Year in which the said order was passed. Hence, the order passed under section 154 of the Act is non-est.
Another argument raised by the assessee is that the issued raised by assessee before Assessing Officer in 154 proceedings are debatable, hence, cannot be subject matter of rectification. The Assessing Officer initiated proceedings under section 154 on two counts (i) rejecting assessee’s higher rate of depreciation on MEE Plant; (ii) short deduction of TDS.
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The assessee has furnished copy of letter addressed to Maharashtra Pollution Control Board, wherein it is mentioned that MEE Plant is an advanced technology plant to control pollution. The equipment which could be used for greater efficiency which also results in reduction of pollution whether such equipment can be categorized as pollution control equipment requires consideration and debate. Thus, MEE Plant whether eligible for higher rate of depreciation is a subject matter of debate which could not have been settled in rectification proceedings under section 154 of the Act.
The other issue is short deduction of TDS on payment of rent. The Hon’ble Calcutta High Court in the case of CIT vs. S.K.Tekriwal, 361 ITR 432 has held that where there is shortfall in deduction of TDS no disallowance can be made by invoking the provisions of section 40(a)(ia). Thus, in the light of above decision no disallowance under section 40(a) (ia) could have been made in the case of assessee.
In the light of our above findings, we see no infirmity in the impugned order warranting interference. The same is upheld and appeal by Revenue is dismissed being devoid of any merit.
Order pronounced in the open court on Thursday the 29th day of September, 2022.
Sd/- Sd/- ( BASKARAN B.R ) (VIKAS AWASTHY) लेखाकार सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER मुंबई/ Mumbai, �दनांक/Dated 29/09/2022 Vm, Sr. PS(O/S)
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��त�ल�प अ�े�षतCopy of the Order forwarded to :
अपीलाथ�/The Appellant , 2. ��तवाद�/ The Respondent. 3. आयकर आयु�त(अ)/ The CIT(A)- 4. आयकर आयु�त CIT 5. �वभागीय ��त�न�ध, आय.अपी.अ�ध., मुबंई/DR, ITAT, Mumbai 6. गाड� फाइल/Guard file.
BY ORDER, //True Copy// (Dy./Asstt. Registrar) / Sr.Private Secretary ITAT, Mumbai