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Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI
Before: SHRI GEORGE MATHAN, & SHRI A. MOHAN ALANKAMONY
आदेश / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER:
No.80/Mds/2016 is a Cross-Objection filed by the assessee in Revenue’s appeal No.663/Mds/2016 against the Order of the Commissioner of Income Tax (Appeals)-1, Chennai, in (New ITA74/CIT(A)-1/2011-12 dated 08.12.2015 for the AY 2004-05.
Mr.ARV Sreenivasan, JCIT CIT represented on behalf of the Revenue and Mr.Ravi Sharma, CA, represented on behalf of the assessee.
3. It was submitted by the Ld.AR that in the Cross-Objection, the assessee has challenged the re-opening of assessment. As the Cross- Objection goes to the root of the assessment, the Cross-Objection is adjudicated first. It was submitted by the Ld.AR that the assessee had filed its return of income originally on 31.10.2004 and the assessment came to be completed u/s.143(3) on 08.12.2006. It was a submission that subsequently notice u/s.148 came to be issued on 28.03.2011 and the assessment came to be completed on 28.12.2011. The Ld.AR drew our attention to Page No.19 of the Paper Book which is a copy of the notice issued u/s.148. The reasons recorded at Page No.20, wherein the reasons are mentioned as follows: & CO No.80/Mds/2016 :- 3 -:
Government of India Office of the Assistant Commissioner of Income Tax Company Circle-I(4), 121, Mahatma Gandhi Road, Aayakar Bhavan, New Block VI Floor, Chennai-34
PAN No.AAACM 4878 K Dt: 24.05.2011
To M/s.Doosan Power Systems India P Ltd., (Formerly known as Doosan Babcock Energy India P. Ltd.), 5th Floor, Gee Gee Universal, 2 Mc Nichols Road, Chetpet, Chennai-31.
Sirs, Sub: Reasons for re-opening the case u/s.1486 – AY 2004-05 – Reg.
Ref: 1. This Office Notice dated 28.03.2011. 2. Your letter dated 11.05.2011 **** Please refer to the above.
The reasons for re-opening your case for the ÀY 2004-05 is communicated as under:
“The assessee has claimed Rs.92,00,000/- towards loss provision (contract expenses). Provision towards an unascertained liability is not allowable under the Act and therefore It has to be disallowed.
In the P&L Account, the assessee has credited Rs.73,82,11S/- as seen from Sch. 10 ‘Other Income”, under the head “Liabilities No longer required written back’. However, in the income computation statement, instead of deducting only this amount, the assessee has deducted an amount of Rs.3,05,12,806/- as provisions written back. Thus, there is an excess deduction by the asessee towards provision written back viz., 2,31,30,691/.”
Yours faithfully,
Sd/- (R.Mukundan) Asst. Commissioner of Income Tax Company Circle-1(4), Chennai-34 4. The Ld.AR further drew our attention to Page No.21 of the Paper Book which is a copy of the letter from the assessee to the DCIT, Company Circle-6(1), New Delhi dated 09.11.2006 wherein at Page No.22 in Para No.3 & 4 as extracted below:
Movement of Provision for liquidated damages: S. Particulars Amount Remarks No. 1 Opening balance as on 6,09,01,428 Refer Schedule 8 of the Financials 01.04.2003 2 Provision made during - - the year 3 Provision reversed during 2,51,30,222 Provision for LD for Godavari project amounting the year to Rs.1,66,00,000 and for Talcher 123 Project amounting to Rs.85,30,222 adjusted. 4 Closing balance as on 3,57,71,206 Refer Schedule 8 of the financials 31.03.2004 & CO No.80/Mds/2016 :- 4 -:
The provision for liquidated damages, adjusted during the year, was created during the FY 2002-03 and the same was added back while computing the taxabale income for AY 2003- 04 (refer copy of tax computation for AY 2003-04 attached as Annexure-4 for your reference), Since theprovision for liquidated damages, when created was not allowed as deduction while computing taxable income, the same has been claimed as deduction on reversal.
Note on loss provision of Rs.92,00,000/-: During FY 1999-2000, the assessee was awarded contract for engineering supply, erection, testing & commissioning of steam generator and auxiliaries on a total turnkey basis by BSES Ltd., for its customer the Godavari Sugars. Later on the BSES Ltd., was acquired by Reliance Energy Ltd. (REL).
The issues which have been raised in the reasons recorded in the opening had already been considered in the course of the original assessment. It was a submission that in view of the decision of the Hon’ble Supreme Court in the case of Kelvinator of India reported 320 ITR 561 (SC), the re-opening having been done beyond four years and the issue on which the re-opening was proposed had already been considered in the regular assessment, re-opening was bad in law. It was a submission that there was no tangible material available with the AO to come to the conclusion that there was an escapement of income from assessment. It was a submission that the re-opening was liable to be quashed.
In reply, the Ld.DR vehemently supported the order of the AO on the issue of re-opening. The Ld.DR drew our attention to Para No.5 of the order of the Ld.CIT(A) to support the issue of re-opening. It was a submission that the Explanation to Sec.147 came to the rescue of the Revenue and assessment made on income which is under-assessed or assessed at too low rate of tax or where excess relief given or where & CO No.80/Mds/2016 :- 5 -: excessive loss or depreciation allowed would be such cases where income chargeable to tax would be deemed to have escaped assessment. It was a submission that the re-opening was liable to be upheld.
We have considered the rival submissions. Admittedly, this is a case where the re-opening has been done beyond four years from the end of the relevant assessment year. The first proviso clearly specifies that for the purpose of re-opening in such cases, there must be a failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year. In the present case, a perusal of the reasons recorded shown that there is no such findings by the AO that there has been a failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the relevant assessment year. Further on perusal of the reasons recorded shows that no fresh material has come to the possession of the AO for the purpose of re-opening, much less any tangible material is being referred to. The reasons recorded clearly shows that it is a just reappraisal of the balance sheet and P&L A/c of the assessee on the basis of which the opinion has been formed for the purpose of re-opening. This is not permissible, this view of our findings support from the decision of the Hon’ble Supreme Court in the case of Kelvinator of India referred to supra. In these circumstances, we are of the view that the re-opening as has been done by recording the reasons and the issuance of show cause notice u/s.148 dated 28.03.2011 for the AY 2004-05 is unsustainable in law and & CO No.80/Mds/2016 :- 6 -: consequently we quashed the same. As we have quashed the re-opening, the other issues raised in the Cross-Objection filed by the assessee no more survive. Similarly, as we have quashed the re-opening, the Revenue’s appeal in would not survive and the same stands dismissed as infructuous.
In the result, the Cross-Objection filed by the assessee is partly allowed and the appeal filed by the Revenue stands dismissed.
Order pronounced in the Open Court on October 24, 2017, at Chennai.