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Income Tax Appellate Tribunal, HYDERABAD ‘A’ BENCH, HYDERABAD
Before: S/SHRI A .MOHAN ALANKAMONY & CHANDRA MOHAN GARG
Per Bench This is an appeal filed by the assessee against the order u/s.263 of the Act of the Pr. CIT-4, Hyderabad dated 20.3.2019 for the assessment year 2014-15.
The appeal is time barred by 244 days. The assessee has filed condonation petition dated 26.2.2021 supported with affidavit sworn by Shri Venkata Subash Lingareddy, Managing Director of the assessee company. The contents of the petition read as under:
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“I, Venkata Subash Lingareddy, Managing Director of M/s. Ocimum Bio Solutions India imited hereby state that, I am acquaint with the facts of the case in respect of appeal which has been filed with the ITAT in respect of the Assessment Year 2014-15, and I state that: The order u/s. 263 of the Act in respect of the Assessment Year 2014-15 has been passed on 20.03.2019 setting aside the original assessment and directing the Assessing Officer to redo the assessment and the same was served on 01.04.2019. And the time for filing of the appeal before the Tribunal was to expire on 31.05.2019. However, the order was served on staff member who received the above order and misplaced the same and has not brought it to the notice of the person concerned. Incidentally the Managing Director was also out of station during that time. Therefore no appeal could be filed at that time against the above order u/s 263 of the act. Subsequently, a request letter was filed by the assessee with ITO Ward-16(2) to provide the order passed u/s263 of the act dated 20.03.2019 and the same has been received on 23.01.2020. On receipt of the above order on 23.01.2020, the appeal could be filed on 30.01.2020 with the delay of 244 days as the appeal was due for filing on 31.05.2019 and instead of that the same has been filed on 30.01.2020.. In view of the above reasons, the delay may please be condoned and the appeal may please be considered due to circumstances which were beyond the control of the assessee. “
Reiterating the condonation petition, ld A.R. submitted that there was sufficient cause in filing the appeal belatedly. Therefore, the delay may be condoned and the appeal may be adjudicated on merits.
On the other hand, ld CIT DR opposed the condonation petition.
After considering the condonation petition and hearing the parties, we are convinced that there was reasonable and sufficient cause for not
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filing the appeal within the stipulated period by the assessee. Therefore, we condone the delay of 244 days and admit the appeal for adjudication.
Facts of the case are that the assessee company filed the return of income electronically on 29.11.2014 declaring total income at Nil and current year loss at Rs.16,13,26,268/-. The book loss was declared u/s.115JB at Rs.6,49,83,879/-. The Assessing Officer completed the assessment u/s.143(3) of the Act accepting return of income filed by the assessee.
Thereafter, Ld. Pr. CIT on verification of the details of depreciation statement annexed to the balance sheet filed alongwith the return of income for A.Y. 2014-15, noticed that the assessee has claimed an amount of Rs.11,60,61,439/- towards depreciation on Intangibles. He further observed that in the assessment made u/s.143(3) for the assessment year 2015-16, the depreciation on intangible asset of Rs.8,15,12,877/- was disallowed on the ground that the intangible asset-USA asset is not used for the purpose of the business or profession and the assessee could not furnish any corroborative evidence to support its claim that the asset is owned wholly or partly by it. Similarly, for the assessment year 2014-15, the depreciation on intangible asset amounting to Rs.11,60,61,439/- was to be disallowed. Ld Pr. CIT also observed that the assessee at para No.6(iii) in his submissions made on 3.1.2019 under the head “intangible asset is used for the purposes of business or profession’ has stated that the “ P a g e 3 | 10
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intangible asset acquired has been used for the purpose of assessee’s business and it shall be eligible for depreciation. He, accordingly, issued show cause notice u/s.263 of the Act dated 10.12.2018 to the assessee to explain as to why the assessment order is not erroneous and prejudicial to the interest of the revenue in not disallowing the depreciation claimed for the assessment year 2014-15. The assessee replied vide letter dated 3.1.2019. After considering the reply of the assessee, the Pr. CIT observed that since the depreciation was disallowed in the assessment year 2015-16, the same need to be examined by the AO in the assessment year 2014-15. Hence, he opined that the order for the assessment year 2014-15 by the AO is erroneous and prejudicial to the interest of the revenue and, accordingly, set aside the same and directed the AO to re-do the assessment after thorough examination of the issue of claim of depreciation on intangible asset after giving an opportunity to the assessee.
We have heard the arguments of both the sides and perused the relevant materials placed on the record of the Tribunal, including a paper book spread over 103 pages and another case laws paper book containing 201 pages.
Ld A.R. of the assessee submitted that the ld Pr. CIT is not justified in assuming the assessment order is erroneous both on facts and in law. He submitted that ld. Pr. CIT ought not to have held that the fact that the AO has erred in allowing the amount of Rs.11,60,61,439/- towards P a g e 4 | 10
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depreciation claimed by the assessee on the intangible assets. He submitted that the Pr. CIT ought to have fairly accepted that the AO has correctly accepted the fact that the asset in question was acquired by the assessee company and the same was used wholly and exclusively for the purpose of business of the assessee company by which the assessee is eligible to claim depreciation on the above asset in accordance with the provisions of section 32 of the Act. Ld A.R. submitted that the assessee had put to use the asset in question for the purpose of its business during the present assessment year i.e 2014-15 and the income thereon was admitted by the assessee in its return of income. Ld A.R. submitted that the AO has duly verified the said issues and he was fully satisfied with the explanation of the assessee and it is not mandatory on his part to record his satisfaction. Ld A.R. submitted that without considering the above fact, ld Pr. CIT has erred in passing the revisionary order by taking a different staff on an issue from that of considered view already taken by the AO in the course of original scrutiny assessment, therefore, order of the ld pr. CIT u/s.263 be rejected.
Replying to above, ld CIT DR drew our attention towards assessment order dated 26.12.2016 for assessment year 2014-15 and order passed by ld. Pr. CIT u/s.263 of the Act dated 20.3.2019 and submitted that the AO while passing the order for assessment year 2015-16 has disallowed the same since intangible asset-USA asset is not used for the purpose of
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business or profession of the assessee, which is requisite for claiming depreciation as per provisions of section 32 of the Act. Ld CIT DR pointed out that the assessee could not furnish corroborative evidence in support of its claim that the assessee is owned wholly or partially by it and it was put to use for the purposes of its own business. Ld CIT DR submitted that the AO has orally asked queries regarding claim of depreciation by the assessee, which was replied by the assessee vide reply dated 26.12.2016 in a short manner without any supporting documents. Therefore, it s clear case of insufficient and inadequate enquiry, which also falls in the ambit of no enquiry, therefore, ld. Pr. CIT was right in exercising revisionary powers u/s.263 of the Act available to him.
Placing rejoinder to above, ld A.R. submitted that the AO has made enquiry during assessment proceedings, which is sufficient, therefore, ld. Pr. CIT was not justified and correct in directing the AO to examine the issue. He also submitted that the assessee has not accepted the assessment order for assessment year 2015-16 and appeal has been filed before the higher forum, therefore, no adverse inference can be drawn against the assessee on the basis of such assessment order, which has not attained finality against the assessee.
On careful consideration of above rival submissions, we are of the considered view that in the notice u/s.263 of the Act, Ld. Pr. CIT has agitated the sole issue and stated that the AO while passing the assessment P a g e 6 | 10
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order u/s.2014-15 has not examined the allowability of depreciation of intangible asset. He also noted that on the same issue for assessment year 2015-16, an order u/s.143(3) of the Act was passed on 27.7.2017 disallowing the claim of depreciation on intangible asset-USA asset. Therefore, the issue has not been properly examined by the AO while passing the order for the assessment year 2014-15 on 26.12.2016.
From the copy of the reply of the assessee submitted to the AO on 26.12.2016, it is clear that the AO asked some information from the assessee during the hearing and in para 2, the assessee replied as follows:
“Ocimum Bio Solutions Inc, a wholly owned subsidiary of the company (“Ocimum US”) filed for a voluntary petition for relief under Chapter-11 of the United States Code and subsequently also filed a reorganization plan with the District Court of Delaware (“The Court”). The management has identified the intangible asset in Ocimum Bio Solutions Inc., for an amount of Rs.50,28,55,503/- and recognized as intangible asset during the financial year 2012-13 and claimed depreciation for the A.Y. 2014-15.” 14. From the careful reading of the assessment order, we clearly observe that there is no deliberation by the AO on this issue while passing the assessment order. Undisputedly, as per reply filed by the assessee before Ld. Pr. CIT vide dated 3.1.2019 in para 6.2(iii) has also noted by Pr. CIT in para 5.2 of the impugned order and reply vide dated 26.12.2016 (supra) submitted by the assessee before the AO during assessment proceedings, it is clear that this huge claim of depreciation of Intangible Asset –USA Asset was first time recognized during the financial year 2012-13 relevant to
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assessment year 2013-14 and thereafter in the present assessment year under consideration i.e. 2014-15. Therefore, we are of the considered opinion that the AO has merely conducted a formal enquiry without any verification and examination of the issue of allowability of depreciation of Intangible Asset –USA Asset and to examine the veracity and sustainability of the claim of the assessee on Intangible Asset acquired by it, therefore, reorganization or merger of a wholly owned subsidiary company situated at USA. In our considered opinion, it is a clear case of insufficient and inadequate enquiry and thus, it is a clear case of no enquiry by the AO on an issue.
Ld A.R. has relied on various case laws to allege that the AO has considered the issue and direction of Ld Pr. CIT to examine the issue is a change of opinion. For this proposition, ld A.R. has relied on the following judgments:
i) Spectra Shares & Scrips Pvt ltd (2013) 36 taxmann.com 348 (AP) ii) Development Credit Bank Ltd(2011) 196 Taxman 329 (Bom) iii) Visu International Limited in ITA No.394/Hyd/2016(ITAT Hyderabad) 16. On carefully, vigilant and respectful perusal of above judgments, we are of the considered view that the facts and circumstances of the present case are distinguishable from the factual matrix of these cases as in the present case, the AO has not made any enquiry, examination or verification
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of allowability of claim of depreciation of Intangible Asset. Therefore, it is a clear case of no enquiry and thus, when the AO has not made any opinion by way of proper and sufficient enquiry then the allegation of change of opinion cannot be held as sustainable.
Ld A.R. has also relied on various orders of Co-ordinate Benches of ITAT including the orders of ITAT Hyderabad in the case of SPR Publications Pvt Ltd., in ITA No.351/Hyd/2015 and ITAT Ahmedabad in the case of Bodal Chemicals Ltd., in ITA No.1439/Ahd/2011 to allege that the opening WDV cannot be disturbed but these facts may be relevant for the purpose of merits of the claim of the assessee but in the instant case, as we have already in earlier part of this order, it is a clear case of insufficient and inadequate enquiry, which falls within the ambit of no enquiry, therefore, the benefit of these prepositions is not available to the assessee in the present case.
On the basis of foregoing discussions, we reach to a logical conclusion that Pr. CIT was right in holding that the assessment order is erroneous and prejudicial to the interest of the Revenue being passed without making any verification/examination on the issue of allowability of depreciation of Intangible Asset-USA asset, which was acquired by the assessee company on merger of its subsidiary situated at USA. Therefore, we are compelled to hold that ld Pr. CIT was correct, justified and reasonable in directing the AO to redo the assessment after thorough P a g e 9 | 10
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examination of the issue of claim of depreciation on Intangible asset-USA asset after giving an opportunity to the assessee.
In the result, appeal of the assessee is dismissed.
Order pronounced u/s. 34(4) of I.T.A.T.Rules, 1963 on 06/01/2022.
Sd/- Sd/- (A .MOHAN ALANKAMONY) (CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad ; Dated 06/01/2022 B.K.Parida, SPS (OS) Copy of the Order forwarded to : 1. The Appellant : M/s. Ocimum Bio Solutions India Ltd, C/O. P Murali & Co., CA, 6-3-655/2/3, Samajiguda, Hyderabad 2. The Respondent. ITO, Ward-16(1), Hyderabad 3. The CIT(A)-, Hyderabad 4. Pr.CIT-4, Hyderabad 5. DR, ITAT, Hyderabad 6. Guard file. //True Copy// By order
Sr.Pvt.secretary ITAT,Hyderabad
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