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Income Tax Appellate Tribunal, IN THE INCOME TAX APPELLATE TRIBUNAL
Before: SHRI G.S. PANNU BEFORE SHRI G.S. PANNU & BEFORE SHRI G.S. PANNU & SHRI K. NARASIMHA CHARY SHRI K. NARASIMHA CHARYSHRI K. NARASIMHA CHARY SHRI K. NARASIMHA CHARY
PER G.S. PANNU PER G.S. PANNU, , , , VP PER G.S. PANNU PER G.S. PANNU VP VP : VP This appeal by the Revenue is directed against the order of learned CIT(A)-23, New Delhi dated 17th August, 2016 which in turn has arisen from the order of the Assessing Officer passed under Section 147 read with Section 143(3) of the Income-tax Act, 1961 (in short ‘the Act’) dated 31st March, 2015 for the assessment year 2007-08.
The Grounds of appeal raised by the Revenue read as under :-
“1. The order of Ld.CIT(A) is not correct in law and on facts.
2. On the facts and circumstances of the case, the ld.CIT(A) has erred in law in deleting the addition of 2 ITA-5600/Del/2016
`34,47,86,260/- made by the AO on account of disallowance of depreciation and added to the capital WIP of the assessee and not substituting the correct amount of depreciation which was claimed by the assessee as per Income Tax Act, 1961.
The appellant craves leave to add, amend any/all the ground of appeal before or during the course of hearing of the appeal.”
3. Before us, at the outset, the learned representatives for the respondent pointed out that the appeal filed by the Revenue is quite misconceived inasmuch as the Revenue has not challenged the action of the CIT(A) in holding that the reopening of assessment under Section 147/148 of the Act was not sustainable in law. In order to appreciate the aforesaid preliminary point, the following discussion is relevant.
4. The respondent-assessee is a company incorporated under the provisions of the Companies Act, 1956 and, is inter alia, engaged in the business of construction, developers, colonizers and contractors in the field of residential and commercial complexes and townships. For the instant assessment year, in pursuance to a return of income filed on 29th October, 2007, an assessment under Section 143(3) of the Act was finalized by the Assessing Officer on 30th December, 2009 determining a loss of `164,02,44,875/-. Subsequently, the assessment was reopened by invoking Section 147/148 of the Act on 30th March, 2014. In response to the notice issued under Section 148 of the Act, assessee filed a return of income on 30th April, 2014 declaring a loss of `116,64,66,061/-. In the ensuing assessment finalized under Section 143(3) read with Section 147 of the Act dated 31st March, 2015, the Assessing Officer assessed the income at a loss of `164,02,44,875/- as assessed originally under Section 143(3) of the Act (supra). However, in the course of the impugned reassessment proceedings, the 3 ITA-5600/Del/2016 Assessing Officer noted that a depreciation of `68.96 crores claimed in the profit & loss account was not allowable as the same was required to be capitalized. As per the Assessing Officer, the assets on which the depreciation was claimed were simultaneously used for the purposes of project work-in-progress (WIP) as well as for revenue generating activity. Accordingly, the Assessing Officer treated 50% of the depreciation claimed of `68,95,72,519/-, i.e., a sum of `34,47,86,260/- as relatable to capital work-in-progress and disallowed the same. At the same time, the Assessing Officer noted that the aforesaid would not affect the total income of the current year but it was to be taken into account as and when assessee claims depreciation as expenditure relating to work-in-progress. Be that as it may, the aforesaid action of the Assessing Officer was carried in appeal before the CIT(A).
5. Before the CIT(A), assessee challenged the order of the Assessing Officer on facts as well as on point of law. On the point of law, assessee challenged the initiation of proceedings under Section 147/148 of the Act. Even on merit, the assessee sought to challenge the action of the Assessing Officer. The CIT(A) has since found the action of the Assessing Officer of initiation of proceedings under Section 147 of the Act to be not sustainable in law, and he has quashed the reassessment proceedings. In this context, we are reproducing paragraph 4.2.4 of the order of the CIT(A) :-
“4.2.4 On the conspectus of facts in my opinion the reopening of assessment u/s 147 of the Act was not based on cogent reasons and there was no new material available to the AO which could indicate that there was failure on the part of the appellant to fully and truly disclose all material facts for the purpose of assessment as is the condition in cases originally assessed u/s 143(3) of the Act. It is settled law that assessments u/s 143(3) or 147 cannot be reopened u/s 147 of the Act based on the same facts and material already on record and based on change of 4 ITA-5600/Del/2016 opinion. In this case even the change of opinion is non- existent in as much as all the grounds taken in the reasons recorded are either assumptions or observations of lack of details on file which too falls on perusal of the assessment order where no such deficiency has been noted in respect of any account. Even the addition on account of depreciation is based on estimate and presumption and not on relevant facts which could suggest that depreciation had indeed been claimed on the WIP capitalized in the accounts. In this view of the matter the reopening of assessment u/s 147 of the Act is not sustainable and the reassessment order is accordingly quashed.”
A perusal of the aforesaid shows that the CIT(A) has not only upheld the point of law raised by the assessee but also found the addition to be not maintainable on merits also. In this background, we may now peruse the Grounds of appeal raised by the Revenue, which we have reproduced in the earlier part of this order.
7. It is pointed out by the learned representative of the respondent- assessee that the Revenue has not challenged the decision of the CIT(A) in setting aside the initiation of proceedings under Section 147 of the Act as not being sustainable in law. In fact, in the matter of reopening of assessment under Section 147 of the Act, the reassessment order has been quashed. Learned CIT-DR Shri Sanjay Goel, who appeared for the Revenue quite fairly agreed to the aforesaid infirmity sought to be pointed out by the learned representative, which is quite evident from a perusal of Grounds raised by the Revenue in the Memo of appeal, which have been reproduced by us in the earlier part of this order.
Ostensibly, in the Grounds of appeal, the only challenge by the Revenue is with regard to the action of the CIT(A) in deleting the addition which was made by the Assessing Officer on account of depreciation, but no Ground has been raised challenging the 5 ITA-5600/Del/2016 unsustainability of the initiation of proceedings under Section 147/148 of the Act. Thus, for the sake of argument, even if we were to take up the Ground of the Revenue and the Revenue was to succeed, it would have no impact on the ultimate conclusion of the CIT(A) in quashing the assessment, since invalidity of the initiation of proceedings under Section 147/148 of the Act has not been challenged. On this plea itself, we find that the appeal, as preferred by the Revenue, deserves to be dismissed. We hold so.
In the result, the appeal of the Revenue is dismissed. Above order was dictated and pronounced in the open Court in the presence of both the parties at the conclusion of the hearing on 9th October, 2019.