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Income Tax Appellate Tribunal, KOLKATA BENCH ‘B’, KOLKATA
Before: Shri P.M. Jagtap, AM & Shri S.S. Viswanethra Ravi, JM]
IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH ‘B’, KOLKATA [Before Shri P.M. Jagtap, AM and Shri S.S. Viswanethra Ravi, JM] I.T.A. No. 431/Kol/2016 Assessment Year: 2007-08 M/s. Jai Raj Ispat Ltd...................................…………………………....................................Appellant S.L. Kochar, Advocate, 86, Canning Street, Kolkata. [PAN : AAACJ 6859 P] DCIT CIRCLE 3(1) Kolkata..…………………………………………………………................Respondent Aayakar Bhawan, P-7, Chowringhee Square, Kolkata – 700 069. Appearances by: Shri Anil Kochar, Advocate appearing on behalf of the Assessee. Shri S. Dasgupta, Addl. CIT (DR) appearing on behalf of the Revenue. Date of concluding the hearing : April 05, 2018 Date of pronouncing the order : June 15, 2018 ORDER Per P.M. Jagtap, AM This appeal filed by the assessee is directed against the order of Ld. CIT(A) – 1, Kolkata dated 04.02.2016.
The assessee in the present case is a company which is engaged in the business of manufacturing of MS Billets TMT Bars. The return of income for the year under consideration was filed by it on 24.09.2009 declaring a total income of Rs. 7,75,827/-. In the assessment originally completed under section 143(3) vide an order dated 17.12.2009, the total income of the assessee was determined by the AO at Rs. 81,70,940/-. Subsequently the AO came to notice that the claim of the assessee of additional depreciation on certain assets was wrongly allowed in the assessment completed under section
2 I.T.A. No. 431/Kol/2016 Assessment Year: 2007-08 M/s. Jai Raj Ispat Ltd. 143(3). He, therefore, reopened the said assessment and issued the notice under section 148 after recording the reasons. The assessee did not file any return of income in response to the notice under section 148 and also failed to comply with the notices issued by the AO during the course of assessment proceedings requiring it to explain the issue relating to the additional depreciation wrongly allowed in the original assessment. The AO, therefore, was left with no option but to complete the assessment ex-parte to the best of his judgement on the basis of material available on record. In the assessment so completed under section 147/144 of the Act vide an order dated 03.02.2015, he made an addition of Rs. 1,02,43,827/- to the total income of the assessee on account of disallowance of excess depreciation on building, plant and machinery and office equipment.
Against the order passed by the AO under section 147/144, an appeal was preferred by the assessee before the Ld. CIT(A) challenging the validity of the said assessment as well as disputing the addition made by the AO therein on account of disallowance of the alleged excess depreciation. One of the contentions raised on behalf of the assessee before the Ld. CIT(A) by relying on the proviso to section 147 was that the reopening of assessment originally completed under section 143(3) beyond a period of 4 years from the end of the relevant assessment years without pointing out any failure on the part of the assessee to disclose fully and truly of material necessary for the assessment was barred by limitation. The Ld. CIT(A) did not entertain this contention of the assessee as, according to him, the assessment in the case of the assessee was reopened by the AO within a period of 4 years. He also rejected other contentions raised by the
3 I.T.A. No. 431/Kol/2016 Assessment Year: 2007-08 M/s. Jai Raj Ispat Ltd. assessee challenging the validity of the assessment as well as disputing the addition on merit and dismissed the appeal of the assessee. Aggrieved by the order of the Ld. CIT(A), the assessee has preferred this appeal before the Tribunal.
We have heard the arguments of both the sides and also perused the relevant material available on record. While supporting the case of the assessee on the preliminary issue challenging the validity of assessment made by the AO under section 147/144, the learned counsel for the assessee has contended before us that the assessment originally completed by the AO under section 143(3) was reopened on 31.03.2014 that is after a period of 4 years from the end of the assessment year under consideration. In this regard, he has relied on the first proviso to section 147 which stipulates that where an assessment u/s 143(3) has been made for the relevant assessment year, no action shall be taken u/s 147 after the expiry of 4 years from the end of the relevant assessment year unless any income chargeable to tax has escaped assessment for such assessment year by reason of failure on the part of the assessee inter alia to disclose fully and truly all material facts necessary for his assessment for that assessment year. He has contended that there was no such failure on the part of the assessee that was pointed out by the AO in the reasons recorded and although this contention was raised specifically by the assessee before the Ld. CIT(A), the later brushed aside the same on the basis of wrong presumption that the assessment was reopened by the AO within a period of 4 years. In order to appreciate this contention raised on behalf of the assessee, it is relevant to refer to the reasons
4 I.T.A. No. 431/Kol/2016 Assessment Year: 2007-08 M/s. Jai Raj Ispat Ltd. recorded by the AO for reopening the assessment which are reproduced as under: “On careful examination of the accounts, assessment order for the assessment year of the assessee company, if reveals that the assessee company had capital WIP of Rs. 5,28,53,472/- at the beginning of the year and Capital WIP of Rs. 2,29,155/- at the end of the year. The assessee company made addition to fixed assets of Rs. 6,51,68,839/- including capitalisation of Capital WIP during the previous year. As per details of Addition of Fixed Assets, addition of Rs. 45,28,639/- made to building, Rs. 5,85,56,051/- to Plant & Machinery and Rs. 20,84,148/- to vehicles. It further revealed from the details of addition (Direct) to Fixed Assets as per Capitalisation Register, addition of Rs. 45,28,639/- was made to building on 18.11.2006 and addition of Rs. 5,84,01,426/- and Rs. 1,18,520/- was made to Plant & Machinery on 18.11.2006 & 31.03.2007 respectively. The assessee company claimed 50% rate of normal as well as 50% rate of additional depreciation only on plant & machinery costing Rs. 14,99,914/- and full rate of normal depreciation claimed on addition of Rs. 45,28,639/- to building and full rate of normal as well as full rate of additional depreciation claimed on addition of Rs. 5,70,20,033/- in Plant & Machinery, which were put to use after 30.09.2006 i.e. assets were put to use for less than 180 days. Further it revealed that the assessee company claimed additional depreciation of Rs. 38,890/- on the amount of addition to Office Equipment and the same was allowed in the assessment. As per provisions of section 32 of the IT Act additional depreciation is not allowable on Plant & Machineries installed in Office Premises. Hence the same was required to be disallowed and added back.
Hence excess depreciation of Rs. 2,26,432/- (5% on Rs. 45,28,639/-) claimed on building, excess depreciation of Rs. 99,78,505/- [(7.5% + 10%) on Rs. 5,70,20,032] claimed on Plant & Machinery and excess depreciation of Rs. 38,890/- claimed on Office Equipment was required to be disallowed and added back. Mistake in doing so there was under assessment of income of Rs. 1,02,43,827/- and consequent tax effect of Rs. 34,48,072/-.
Further, the assessee company filed return not within the due date of filing return as per section 139(1), hence the assessee company was liable to pay interest u/s 234A but the same was not levied in the assessment.
The above omission resulted in undercharge of tax of Rs. 34,48,072/-.
5 I.T.A. No. 431/Kol/2016 Assessment Year: 2007-08 M/s. Jai Raj Ispat Ltd. In view of the above, remedial measure is required to be taken u/s 147 to issue notice u/s 148.” 5. A perusal of the reasons recorded by the AO clearly shows that the assessment originally completed in the case of the assessee under section 143(3) was reopened by him after the expiry of four years from the end of the assessment year under consideration without pointing out that any income chargeable to tax had escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment and even the learned DR has not been able to dispute this position clearly evident from the reasons recorded by the AO. We, therefore, find that the condition stipulated in first proviso to section 147 for reopening the assessment originally completed under section 143(3) after the expiry of 4 years from the end of the relevant assessment year is not satisfied by the AO and such reopening made by him without satisfying this statutory condition is invalid being barred by limitation. We, therefore, cancel the assessment made by the AO u/s 147/144 in pursuance of such invalid reopening by holding the same is bad in law and allow the appeal of the assessee on this preliminary issue.
In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 15th June, 2018. Sd/- Sd/- (S.S. Viswanethra Ravi) (P.M. Jagtap) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 15/06/2018 Biswajit, Sr. PS
6 I.T.A. No. 431/Kol/2016 Assessment Year: 2007-08 M/s. Jai Raj Ispat Ltd.
Copy of order forwarded to: 1. M/s. Jai Raj Ispat Ltd., S.L. Kochar, Advocate, 86, Canning Street, Kolkata. 2. DCIT, Circle 3(1), Kolkata – 69. 3. The CIT(A) 4. The CIT 5. DR True Copy, By order, Sr. P.S. / H.O.O. ITAT, Kolkata