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Income Tax Appellate Tribunal, ‘D’ BENCH : CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI ABRAHAM P. GEORGE]
आदेश / O R D E R
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER
Assessee through these appeals, assail the reopening of the assessment done for the impugned assessment orders, apart from assailing the merits of the additions made.
Ld. Counsel for the assessee submitted that assessee was 2. engaged in the business of mobile construction equipments hiring, and ITA Nos.1393 to 1395/2017 :- 2 -: labour contract. As per the ld. Authorised Representative, assessee had filed her return for the impugned assessment years declaring income of �2,98,215 for assessment year 2008-09, �4,95,203/- for assessment year 2009-10 and �10,73,156/- for assessment year 2010- 2011. As per the ld. Authorised Representative, original assessments were completed u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961 (in short ‘’the Act’’) after verifying the books of accounts, bank account statements and other details which were called for by the ld. Assessing Officer. Contention of the ld. Authorised Representative was that ld. Assessing Officer had in the original assessment also examined the reason for selecting of assessee’s case for scrutiny and clearly expressed that there were no special features which could be noticed on examination.
Continuing his submissions, the ld. Authorised Representative submitted that assessee surprisingly received notice u/s.148 of the Act on 30.03.2015 for assessment years 2008-09 and 2009-2010, and on 26.03.2015 for assessment year 2010-2011. As
per the ld. Authorised Representative the reassessments initiated for assessment years 2008-09 and 2009-2010 were after four years from the end of the impugned assessment years, whereas that for assessment year 2010-2011 was within four years. According to him,
ITA Nos.1393 to 1395/2017 :- 3 -: assessee had thereupon requested the ld. Assessing Officer to furnish the reasons for the reopening. Contention of the ld. Authorised Representative was that reasons supplied by the ld. Assessing Officer mentioned difference in gross hire charges shown by the assessee in its profit and loss account and what was shown in form 16A. As per the ld. Authorised Representative, ld. Assessing Officer also mentioned higher claim of depreciation at the rate of 30% on mobile line pump against 15% allowable as per the provisions of the Act. Reasons given for assessment year 2008-09, as per the ld. Authorised Representative also mentioned about rental receipts not offered as income.
Ld. Authorised Representative submitted that assessee objected to the reopening attempted by the ld. Assessing Officer pointing out the earlier scrutiny assessments for all these years, which were done after obtaining all details. As per the ld. Authorised Representative, assessee also brought to the notice of the ld. Assessing Officer that the reopening based on audit objection was not sustainable. However, as per the ld. Authorised Representative, ld. Assessing Officer rejected these objections and proceeded with the reassessments taking a view that assessee had not followed principles of matching concept and had claimed depreciation for mobile line pump at a rate more than allowed under the Rules. Contention of ITA Nos.1393 to 1395/2017 :- 4 -:
the ld. Authorised Representative was that assessee in its appeal before the ld. Commissioner of Income Tax (Appeals) had challenged the reopening, but the ld. Commissioner of Income Tax (Appeals) held the reopening to be valid, taking a view that during the course of original assessment proceedings, there were no questionnaire issued by the ld. Assessing Officer with regard to depreciation allowable on mobile line pump or any verification done on the income shown by the assessee in its profit and loss account with the TDS certificates. As per the ld. Authorised Representative, ld. Commissioner of Income Tax (Appeals) took an erroneous view that none of the issues were discussed in the original assessment order and there was no true and full disclosure by the assessee. According to him, ld. Commissioner of Income Tax (Appeals), erred in holding that the reopening for the impugned assessment years were validly done.
Continuing his submissions, ld. Authorised Representative submitted that reliance placed by the lower authorities on the judgment of Jurisdictional High Court in the case of CIT vs. Popular Borewells Services, 194 ITR 12, while holding that mobile line pump was eligible for depreciation, only at the rate of 15% was incorrect.
According to him, Jurisdictional High Court was considering depreciation allowable to a rig and compressor mounted on a lorry
ITA Nos.1393 to 1395/2017 :- 5 -: whereas in the case of the assessee mobile line pump was an integral part of the ready mix concrete mixer mounted on trucker chassis.
Reliance was placed on a decision of Nagpur Bench of the Tribunal in the case of ACIT vs. M/S. GST Infrastructure MAK, (ITA Nos. 95 & 96/Nag/2012, dated 6.02.2013). As per the ld. Authorised Representative, the question raised before the Tribunal in the above case, was whether concrete mixers for pumps mounted on trucks which were called transit mixers was eligible for depreciation at a higher rate. As per the ld. Authorised Representative, the Tribunal had held that such concrete mixer was to treated as a motor lorry and was eligible for higher depreciation. According to him, ld. Assessing Officer had examined all the issues in the original assessment and assessee had furnished all the information called by the ld. Assessing Officer.
As per the ld. Authorised Representative, the reassessment attempted was based on a mere change of opinion. Relying on the judgments of Hon’ble Apex in the case of CIT vs. Foramer France,(2003) 264 ITR 566 and CIT vs. Kelvinator of India Ltd, (2010) 320 ITR 561 and that of Jurisdictional High Court in the case of Mobis India Ltd vs. DCIT, (2016) 380 OTR 170 and that of CIT vs. Premier Mills Ltd, (2008) 296 ITR 157, ld. Authorised Representative argued that reopening done for the impugned assessment years were bad in law.
ITA Nos.1393 to 1395/2017 :- 6 -:
Per contra, ld. Departmental Representative strongly supporting the orders of the authorities below submitted that judgment of Hon’ble Jurisdictional High Court in the case of Popular Borewells Services (supra), which dealt with question of higher depreciation claim on truck mounted equipment was squarely in favour of the Revenue. According to her, ld. Assessing Officer in the original assessment had not made any examination of the rate of depreciation allowable to mobile line pump attached to a concrete mixer. According to her, this was an independent machinery and could not be given higher depreciation available to heavy motor vehicle. In any case, as per the ld. Departmental Representative by virtue of Explanation (1) to Sec. 147 of the Act, production of accounts books and other evidence, before the ld. Assessing Officer from which material evidence could with due diligence be discovered would not amount to a disclosure within the meaning of first proviso to Section 147 of the Act. In any case, as per ld. Departmental Representative for assessment year 2010-2011, the reassessment was done within four years from the end of the said assessment year and first proviso to Section 147 of the Act did not apply at all.
We have considered the rival contentions and perused the 7. orders of the authorities below. Reason given for reopening for all the ITA Nos.1393 to 1395/2017 :- 7 -: assessment years are similar except for assessment year 2008-09.
Notice for the latter year includes one more item mentioned as rental receipts not shown by the assessee in her return of income. Reasons given for reopening the assessment for assessment year 2008-2009 is taken as a representative sample and is reproduced hereunder:-
‘’It is observed from the Form 15A, that the gross receipts received by you from M/s. Grasim Industries Ltd was Rs. 1,83,88,589/. As per the P&L alc you have admitted the gross hire charges as Rs.1,74,OO,748/- Hence there is a shortfall of Rs. 9,87,841/- which has to be brought to tax as per the provisions of the I T Act, 1961. Please clarify along with submission / Justification if any, in support of this.
Rental receipts received by you amounts to Rs.4 lakhs during the year as per the TDS claimed made in the R/I. The apparent receipts are not offered to tax in vis -a - vis TDS of the same is to brought to tax as per I T Act. Your submission is any on this claim may explain with supporting proof /justification if any.
3. As per the claim of depreciation made on mobile line Pump you have claimed @ 30 % instead of 15 % allowable as per the provision of the I T Act. You are requested to justify your claim of support or Proof if any, failing on which the excess claimed amount of Rs.15,50,511/- will be disallowed’’.
For the other two years paras 1 and 3 of the above reasons appear as para 1 & 2. Except for the change in the figures all the notices were more or less typically worded. Now the question before us is whether
ITA Nos.1393 to 1395/2017 :- 8 -: the items mentioned in the reasons was within the contemplation of the Assessing Officer, while he was doing the original assessment and whether he had considered it. For deciding this we need to look at the original assessment orders for the impugned assessment years. In the original assessment for all the years, it is clearly mentioned that assessee had produced books of accounts, details of bank accounts, vouchers/bills for expenses, details of sundry creditors and other details. What was mentioned by the ld. Assessing Officer in the assessment order for assessment years 2008-09, 2009-2010 and 2010- 2011 are reproduced hereunder:-
Assessment year 2008-2009:-
The authorised representative has produced the books of accounts, bills /vouchers for the expenses claimed. invoices for purchase of new assets, confirmation from sundry creditors like M/s.Avon Hydroulics Engi. Pvt. Ltd .. M/s.Saran Agencies, M.s Revathi Equipment Ltd., M/s. Sterling Industries, M/s. Universal Industrial Corporation, M/s.Schwing Stetter India Pvt.Ltd., M/s.v.S.v.Engineering, ete, Payment details of ESI and PF, bank account details and statements. The details produced were verified.
Assessment year 2009-2010:-
‘’The assessee's representative produced books of account, details of bank accounts, vouchers/bills for the expenses claimed in the trading and profit & loss account, details of sundry creditors, details of gift receipt from his son, service tax payment details, and other details called for. Confirmations from the ITA Nos.1393 to 1395/2017 :- 9 -: sundry creditors were obtained. All the details were verified’’.
Assessment year 2010-2011:- In response to the above notice, Shri T. Krishnan, FCA., the authorized representative of the assesse appeared from time to time and produced books of accounts, details of bank accounts and statements and other details as called for and the case was discussed. The reason for selection of this case for scrutiny was examined during the course of assessment proceedings and no special features were noticed. The assessment is completed under Section 143(3 ) of the Income Tax Act, 1961, accepting the loss returned’’.
If we look at the narrations given in the assessment orders and the reasons cited for reopening the assessments, we cannot say that Assessing Officer having made a detailed verification of books and records produced by the assessee and having received all details which were called for, was oblivious of the issues, mentioned as reasons for reopening. What is mentioned in the reasons are items which any prudent Assessing Officer will verify when he is doing an assessment of a person engaged in the business of mobile construction equipment and labour contracts. Ld. Assessing Officer having examined all facts relating to the assessment, including the reasons why the returns were taken up for scrutiny itself, we cannot say that he was not aware to 1395/2017 :- 10 -: of the form 16A and the receipts shown by the assessee in the Profit and Loss account. Viz-a-viz depreciation claimed for mobile line pump, we cannot say the Assessing Officer erred in allowing the claim at the rate of 30%. For resorting to a reopening, where the original assessment was done after examining all details, in our opinion, Revenue has to show that such reopening was not based on a change of opinion. There were no new material available with the Revenue other than records filed by the assessee during the course of the original assessment. At this juncture, it would be apposite to have a look at the observation of the Hon’ble Apex Court in the case of Kelvinator of India Ltd (supra).
‘’4. On going through the changes, quoted above, made to section 147 of the Act, we find that, prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under the above two conditions and fulfilment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act (with effect from 1st April, 1989), they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-1st April, 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words " reason to believe" failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of " mere change of opinion", which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review ; he has the power to reassess. But reassessment has to be based on fulfilment of certain preconditions and if the to 1395/2017 :- 11 -: concept of " change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of " change of opinion" as an in- built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, the Assessing Officer has power to reopen, provided there is " tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words " reason to believe" but also inserted the word " opinion" in section 147 of the Act. However, on receipt of representations from the companies against omission of the words " reason to believe", Parliament reintroduced the said expression and deleted the word " opinion" on the ground that it would vest arbitrary powers in the Assessing Officer. We quote hereinbelow the relevant portion of Circular No. 549 dated October 31, 1989 ([1990] 182 ITR (St.) 1, 29), which reads as follows : " 7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression ' reason to believe' in section 147.—A number of representations were received against the omission of the words ' reason to believe' from section 147 and their substitution by the ' opinion' of the Assessing Officer. It was pointed out that the meaning of the expression, ' reason to believe' had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression ' has reason to believe' in place of the words ' for reasons to be recorded by him in writing, is of the to 1395/2017 :- 12 -: opinion' . Other provisions of the new section 147, however, remain the same."
Their lordships had affirmed the judgment of Delhi High 8.
Court in the case of CIT vs. Kelvinator of India Ltd, (2002) 123 Taxman 433 (Delhi) and CIT vs. Eicher Ltd, 294 ITR 310. In the case of Eicher Ltd (supra), the reopening attempted was within four years from the end of the concerned assessment year. Thus, in our opinion once the original assessment were completed after considering all details filed by the assessee, unless there is tangible material which is outside of what was filed by the assessee which can justify a reopening there cannot be a valid reopening. As for Explanation 1 to Sec.147 of the Act, assessee having produced profit and loss account, in which it had claimed depreciation, we cannot say that any specific diligence was required in verifying the correctness of the claim of depreciation or correctness of the receipts shown by the assessee in such profit and loss account vis-à-vis its TDS certificates. We are of the opinion that in such cases, Explanation 1 to Section 147 of the Act will not help the Revenue. We thus find that reopening for all the years were invalid. Ex-consequenti, the reassessment orders are set aside. Since appeals are allowed on legal grounds, merits of the to 1395/2017 :- 13 -: additions are not dealt with.
In the result, the appeals of the assessee are allowed. 9.
Order pronounced on Thursday, the 5th day of April, 2018, at Chennai.