DCIT, NEW DELHI vs. M/S. GLOBAL ONE INDIA PVT. LTD., GURGAON

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “C”, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER

ITA No. 2088/Del/2014 A.Y. : 2005-06 DCIT, CIRCLE 12(1), M/S GLOBAL ONE INDIA PVT. LTD., 7TH FLOOR, TOWER-C, DLF New Delhi VS. INFINITY TOWER, PHASE-II, SECTOR 25-A, GURGAON (AABCG2558B)

(APPELLANT) (RESPONDENT)

Department by : Sh. Amrit Lal, Sr. DR

Assessee by : Ms. Geetika Gupta & Sh. Ravi Sharma, CAs

Date of Hearing : 15-09-2016 Date of Order : 03-10-2016

ORDER PER H.S. SIDHU : JM

The Revenue has filed the present appeal against

the impugned order dated 20/12/2013 passed by the Ld.

Commissioner of Income Tax (Appeals)-XV, New Delhi on the

following grounds:-

ITA NO. 2088/DEL/2014

circumstances of the case and in law in deleting the

addition of Rs. 1,00,10,209/- made by AO on account

of disallowance of Network and other Equipment cost?

circumstances of the case and in law in quashing the

proceedings initiated u/s. 148 of the Act in this case?

ground of appeal raised above at the time of the

hearing.

on 27.10.2005 declaring loss of Rs. 36,03,300/-. Later on, a revised

computation was filed on 10.10.2008 showing loss of

Rs. 7,23,56,799/-, which was on the ground that the assessee could

not finalise accounts as on the date of filing the original return. The

case was picked up for scrutiny under section 143(3) and an order

under section 143(3) was passed on 30.12.2008, in which as

against the loss of Rs. 7,23,56,799/- the total income was assessed

at Rs. 7,86,86,783/-. The main ground of disallowance in the

original assessment order was disallowance of ‘Circuit Expenses’ of

Rs. 14,18,24,935/-. The additions made were deleted by the earlier

Ld. CIT(A) vide his order dated 2.6.2010 which was also upheld by

ITA NO. 2088/DEL/2014

the ITAT. Thereafter, the AO issued notice u/s. 148 on 20.3.2012

and assessment was reopened by recording the following reasons.

“In this case assessment under section 143(3) for

the assessment year 2005-06 was completed

determining an income of Rs. 78,68,673/- as

against the written (should be returned) loss of Rs.

36,03,300/-. On examination of the file and

documents placed on the record it is seen that

assessee has debited a sum of Rs. 100,10,209/- for

Network Other Equipment costs in the provisional

income and expenditure account. Since the said

expenditure is capital in nature, it is not allowable

as revenue under the provisions of section 37 of

the Income Tax Act. Therefore, I have reason to

believe that income of Rs. 1,00,10,209/- had

escaped assessment under the meaning of section

issued in this case.”

2.1 In response to the aforesaid notice, assessee vide letter dated

15.5.2012 has submitted his reply, which was not accepted by the

AO and accordingly, the AO treated the addition of

ITA NO. 2088/DEL/2014

Rs. 1,00,10,209/- vide his order dated 29.8.2012 passed u/s.

143(3)/147 of the I.T. Act, 1961.

appeal before the Ld. CIT(A), who vide his impugned order dated

20.12.2013 has deleted the addition and quashed the reassessment

thereby allowing the appeal of the Assessee.

filed the present appeal before the Tribunal.

and reiterated the contentions raised by the Revenue in the grounds

and requested that Appeal of the Revenue may be allowed.

the order of the Ld. CIT(A) and stated that Ld. CIT(A) has passed a

well reasoned order which does not need any interference on our

part, hence, the same may be upheld and accordingly, the appeal of

the Revenue may be dismissed.

especially the impugned order passed by the Ld. CIT(A). We find

that Ld. First Appellate Authority has elaborately discussed the issue

in dispute by considering the submissions of the assessee and

ITA NO. 2088/DEL/2014

adjudicated the issue vide para no. 5.2 to 5.3 at pages 10 to 11 of

the impugned order. The said relevant paras are reproduced as

under:-

“5.2 I find that while recording the reasons for initiating

proceedings under Section 147, the AO has taken the

amount of returned income at Rs. 78,68,673/- and

amount of assessed loss at Rs. 36,03,300/-. Both these

figures are factually incorrect, as the Ld. AO in the

original assessment under section 143(3) had assessed

the income at Rs. 7,86,86,783/-. Further, the appellant

had, during the course of original assessment

proceedings, revised the computation of income as the

original computation was based on provisional financial

account and accordingly, claimed the loss of Rs."

7,23,56,799. The Ld. AO in the original assessment

proceedings took, cognizance of the financial accounts

and made an addition of Rs.15,1O,43,582 of the the

aforesaid revised computation of income in which loss of

Rs.7,23,56,799 was claimed and based on this, the

income under Section 143(3), was assessed at

Rs.7,86,86,783. I also find that the main observation of

the AO that the appellant had claimed 'Network and

ITA NO. 2088/DEL/2014

Other Equipments Cost' as 'Circuit Expenses, which were

clubbed under the, head revenue expenses, is also

factually incorrect. Such mistakes possibly occurred as

the AO did not bother to go through the revised

computation of income, which was placed before the AO

in the original assessment proceedings and which was

accepted by him while passing order under Section

143(3), In view of the above, it is evident that the main

grounds on which the reassessment proceedings were

initiated were factually incorrect observation of the Ld.

AO. Moreover, the assessment was reopened after four

years and in which already an order under Section

143(3) was passed, therefore, the reopening of

assessment could have been justified only where it was

proved that the appellant had failed to make ‘full and

true disclosure' of material facts. Further, I find that the

Ld. AO himself has, while recording the reasons

mentioned that the observation that the appellant had

claimed 'Network and Other Equipment Cost' as revenue

expenses, was based on examination of 'file and

documents placed on record'. Since there was no

independent source of such information and the AO only

ITA NO. 2088/DEL/2014

re-examined the file and documents, which was already

subject matter of scrutiny under Section 143(3), it is

evident that the action of the AO was clearly in the

nature ‘change of opinion', on which reassessment

cannot be sustained as was held by the Hon'ble High

Court in. the case of (IT Vs. Usha International ltd. (ITA.

No.2026/2010) (20l2). Moreover, the AO has alleged that

such 'Network and Other Equipment Cost' was booked

under the head 'Circuit Expenses'. Further, in the original

assessment proceedings under Section 143(3),

disallowance was primarily made in respect of such

'Circuit Expenses' only. After the assessment under

Section 143(3), the matter travelled upto the ITAT, which

gave relief to the appellant. The CIT(A) had also deleted

the addition made by the AO, which was under section

40(a)(ia). The CIT(A) has all the powers of an income tax

authority and even while allowing original disallowance

under section 40(a)(ia), the CIT(A) was fully empowered

to determine such expenses as capital in nature and

would have disallowed it accordingly. However, no such

finding was given by the CIT(A). Moreover, the finding of

ITA NO. 2088/DEL/2014

the AO while recording the reasons, was based on

factually incorrect facts.

5.3 Keeping in view the above, the re-assessment order

passed by the AO is bad in law, without jurisdiction, and

is required to be quashed. On the merit of the case as

well, no, addition is called for.”

7.1 After going through the findings of the Ld. CIT(A), as

aforesaid, we are of the considered view that AO while recording

the reasons for initiating proceedings under Section 147, has taken

the amount of returned income at Rs. 78,68,673/- and amount of

assessed loss at Rs. 36,03,300/-. Both these figures are factually

incorrect, as the AO in the original assessment under section 143(3)

had assessed the income at Rs. 7,86,86,783/-. Further, the

assessee had, during the course of original assessment proceedings,

revised the computation of income as the original computation was

based on provisional financial account and accordingly, claimed the

loss of Rs.7,23,56,799. The AO in the original assessment

proceedings took, cognizance of the financial accounts and made an

addition of Rs.15,10,43,582 of the aforesaid revised computation of

income in which loss of Rs.7,23,56,799 was claimed and based on

this, the income under Section 143(3), was assessed at

ITA NO. 2088/DEL/2014

Rs.7,86,86,783. We also find that the main observation of the AO

that the assessee had claimed 'Network and Other Equipments Cost'

as 'Circuit Expenses, which were clubbed under the, head revenue

expenses, is also factually incorrect. Such mistakes possibly

occurred as the AO did not bother to go through the revised

computation of income, which was placed before the AO in the

original assessment proceedings and which was accepted by him

while passing order under Section 143(3). In view of the above, it is

evident that the main grounds on which the reassessment

proceedings were initiated were factually incorrect observation of

the AO. Moreover, the assessment was reopened after four years

and in which already an order under Section 143(3) was passed,

therefore, the reopening of assessment could have been justified

only where it was proved that the assessee had failed to make ‘full

and true disclosure' of material facts. Further, I find that the AO

himself has, while recording the reasons mentioned that the

observation that the assessee had claimed 'Network and Other

Equipment Cost' as revenue expenses, was based on examination of

file and documents placed on record. Since there was no

independent source of such information and the AO only re-

examined the file and documents, which was already subject matter

of scrutiny under Section 143(3), it is evident that the action of the

ITA NO. 2088/DEL/2014

AO was clearly in the nature ‘change of opinion', on which

reassessment cannot be sustained as was held by the Hon'ble High

Court in the case of (ITO Vs. Usha International ltd. (ITA.

No.2026/2010) (20l2). Moreover, the AO has alleged that such

'Network and Other Equipment Cost' was booked under the head

'Circuit Expenses'. Further, in the original assessment proceedings

under Section 143(3), disallowance was primarily made in respect of

such 'Circuit Expenses' only. After the assessment under Section

143(3), the matter travelled upto the ITAT, which gave relief to the

assessee. The CIT(A) had also deleted the addition made by the AO,

which was under section 40(a)(ia). The CIT(A) has all the powers of

an Income Tax Authority and even while allowing original

disallowance under section 40(a)(ia), the CIT(A) was fully

empowered to determine such expenses as capital in nature and

would have disallowed it accordingly. However, no such finding was

given by the CIT(A). Moreover, the finding of the AO while recording

the reasons, was based on factually incorrect facts. In view of the

above, Ld. CIT(A) has rightly held that re-assessment order passed

by the AO is bad in law, without jurisdiction, and is required to be

quashed. On the merit of the case as well, no, addition is called for.

7.2 In the background of the above facts and circumstances of the

case, we are of the considered view that the Ld. CIT(A) has passed

ITA NO. 2088/DEL/2014

a well reasoned order which does not need any interference on our

part, hence, we uphold the same and reject the grounds raised by

the Revenue.

Order pronounced in the Open Court on 03/10/2016.

SD/- SD/- [L.P. SAHU] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER

Date 03/10/2016

“SRBHATNAGAR” Copy forwarded to: - 1. Appellant - 2. Respondent - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY By Order,

Assistant Registrar, ITAT, Delhi Benches