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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI C.N. PRASAD & SHRI RAMIT KOCHAR
आयकर अपील"य अ"धकरण “E” "यायपीठ मुंबई म"। IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A. No. 5406/Mum/2013 ("नधा"रण वष" / Assessment Year : 2005-06) D.C.I.T. Cir. 7(1), M/s Sheth Financial बनाम/ Room No. 622, Services P. Ltd., v. Aayakar Bhavan, (Formerly known as P L M.K. Road, Research & Development Churchgate, Pvt. Ltd., Mumbai -400020. Sadhna House, 3 rd floor,, 570 P.B. Marg, Behind Mahindra Tower, Worli, Mumbai – 400 018. "थायी लेखा सं./PAN : AABCP4312L .. (अपीलाथ" /Appellant) (""यथ" / Respondent)
Revenue by Ms. Beena Santosh,DR Assessee by : Shri Hiro Rai
सुनवाई क" तार"ख /Date of Hearing : 22-08-2016 घोषणा क" तार"ख /Date of Pronouncement : 28-10-2016 आदेश / O R D E R PER RAMIT KOCHAR, Accountant Member
This appeal, filed by the Revenue, being ITA No. 5406/Mum/2013, is directed against the appellate order dated 28th May, 2013 passed by learned Commissioner of Income Tax (Appeals)- 13, Mumbai (hereinafter called “the CIT(A)”), for the assessment year 2005-06, the appellate proceedings before the learned CIT(A) arising from the assessment order passed by the learned Assessing Officer (hereinafter called “the AO”) u/s 143(3) r.w.s. 147 of the Income Tax Act,1961 (Hereinafter called “the Act”).
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The grounds of appeal raised by the Revenue in the memo of appeal filed with the Income Tax Appellate Tribunal, Mumbai (hereinafter called “the Tribunal”) read as under:-
“(i) The Learned CIT(A) has erred on facts and in law in quashing the assessment order u/s 143(3) r.w.s.147,without properly appreciating the factual and legal matrix as clearly brought out by the Assessing Officer in reason recorded for reopening the Assessment.
(ii) The Learned CIT(A) has erred on facts and in law in extending the scope of " change of opinion" to a case where no opinion was formed by the Assessing Officer and therefore presumed deemed formation of opinion.
(iii) The Learned CIT(A) has erred on facts and in law in not appreciating that this is a case where no opinion was formed by the Assessing Officer and therefore reopening was outside the scope of change of opinion.
(iv) The Learned CIT(A) has erred on facts and in law in deleting the disallowance of Rs. 54,70,747/- on account of depreciation claimed u/s 32 of IT Act,1961 without properly appreciating the factual and legal matrix as clearly brought out by the Assessing Officer.
(v) The Learned CIT(A) has erred on facts and in law in deleting the disallowance of Rs. 54,70,747/- on account of depreciation claimed u/s 32 of IT Act,1961, holding that the reassessment proceeding is bad in law.”
The brief facts of the case are that it was observed by the AO from the records that the assessee has claimed depreciation of Rs. 54,70,747/- on assets. The AO observed that the assessee has not carried out any business during the year which is reflected from the original assessment order passed by the AO u/s 143(3) of the Act on 26th December, 2007, and hence it was observed by the AO that consequently the assessee is not entitled for depreciation of Rs.54,70,747/- . (The original assessment order is placed on record vide paper book page No. 6 to 8.)
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The case of the assessee was reopened by the AO u/s. 147/148 of the Act after recording the reasons for reopening of the assessment and after obtaining the approval from the learned Commissioner of Income Tax. Notice u/s 148 of the Act was issued on 3rd February, 2011 and served upon the assessee. Further, notice u/s 148 and 143(2) of the Act were issued on 26.08.2011 The reasons recorded are placed in paper book page No. 10 which are reproduced below:-
“ M/s P L Research & Development Pvt. Ltd.
Assessment was completed in this case u/s 143(3) of the IT Act on 26.12.2007 at a total loss of Rs. 52,17,342/-.
The assessee has not conducted any business during the year under consideration but it has claimed depreciation of Rs. 54,70,747/- on assets, all of which were added during the year under consideration as can be seen from the depreciation statement attached with the ROI. Therefore, the assessee was not entitled to depreciation of Rs.54,70,747/- as it had not commenced business during the year. Thus I have reason to believe that the depreciation to the extent of Rs. 54,70,747/- has been allowed in excess in this case in terms of the provisions of section 147 of the IT Act 1961. 3. In view of the provision of section 151(2) of the IT Act 1961, the approval of CIT is solicited for re-opening of the case A.Y. 2005-06 by way of issue of notice u/s 148.”
The assessee submitted its reply on 22nd March, 2011 , wherein the assessee raised objection against the re-opening of the assessment which was rejected by the A.O. in his assessment order dated 20-12-2011 passed u/s 143(3) r.w.s. 147 of the Act, whereby it was observed by the AO that the AO in original assessment order dated 26.12.2007 u/s 143(3) of the Act has observed that the assessee has not conducted any business during the year under consideration , but while passing the order dated 26.12.2007
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u/s.143(3) of the Act, the A.O failed to disallow the depreciation claimed by the assessee in respect of assets transferred to the assessee by Prabhudas Liladhar Pvt. Ltd. and hence the re-assessment proceedings initiated u/s 147/148 of the Act against the assessee were held to be valid as per the provisions of the Act.
The A.O. observed that during the year under consideration , the assessee has shown purchases of various depreciable assets from M/s Prabhudas Liladhar Pvt. Ltd. on 27th March, 2005 for a total consideration of Rs.4,22,49,466/-. The assessee has also received total deposits of Rs. 2.4 crores from Prabhudas Liladhar Pvt. Ltd. and it is seen from the narration in the ledger account that the said deposits is received towards furniture of office. The A.O. observed that the assessee had received the above security deposits amounting to Rs. 2.22 crores till 24th March, 2005 even though assessee did not have any such assets. These assets were actually transferred from Prabhudas Liladhar Pvt. Ltd. to the assessee on 27th March, 2005 wherein the assessee acquired the assets and it is not known whether these assets were put to use or not. The AO had scrutinized u/s 143(3) of the Act r.w.s. 143(2) of the Act while framing original assessment order and after verification of details, the AO has held that the assessee has not carried out any business activity during the year. The A.O. observed that the assessee has only furnished reply stating that the assessee has received service center receipts from M/s. Prabhudas Liladhar Pvt. Ltd. and contended that its claim of depreciation is correct but the assessee has not produced any documentary evidence to show that it has carried out any business activity involving the use of the assets acquired by it on 27th March, 2005 , and accordingly the A.O. disallowed the claim of depreciation which was held to be not allowable and the claim of the assessee was rejected by the AO vide assessment order dated 20-12-2011 passed by the AO u/s. 143(3) of the Act read with Section 147 of the Act.
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4.Aggrieved by the assessment order dated 20-12-2011 passed by the A.O. u/s. 143(3) read with Section 147 of the Act, the assessee filed first appeal before the ld. CIT(A).
Before the ld. CIT(A), the assessee submitted that the assessment had been reopened on the ground that no business has been carried out by the assessee during the year under consideration and hence depreciation u/s 32 of the Act was wrongly allowed. The assessee submitted that this was incorrect as is evident from the material on record. It was submitted that the assessee carried on the business during the year and had shown business service centre charges i.e. income of Rs. 1,44,657/- in the P&L account. It was submitted that though no income was earned in respect of factoring business, the required explanation was furnished by the assessee vide letter dated 24th December, 2007. It was submitted that with regard to the business service centre, all the details were provided during the course of original assessment proceedings u/s 143(3) r.w.s. 143(2) of the Act in respect of acquisition of fixed assets and computation of depreciation. Relevant disclosures were also made in notes appended to the statement of depreciation. The issues of business service centre business and depreciation on fixed assets used for the business service centre business were discussed at length during the original assessment proceedings u/s 143(3) r.w.s. 143(2) of the Act and after careful consideration of the aforesaid material, the A.O accepted the assessee’s claim and allowed depreciation u/s.32 of the Act during the original assessment proceedings. It was submitted that the A.O. in the original assessment order had made remarks that the assessee had not conducted any business during the year, the assessee submitted that the A.O could not have and has not recorded any finding of the fact that the assessee did not carry out any business during the year. Though the A.O. mentioned so but in altogether different context while justifying addition he made on ITA 5406/Mum/2013 6
account of increase in debtors. As per the original assessment order dated 26.12.2007 , sundry debtors had increased during the year by Rs.3,89,943/- but the additions were made only on account of increase in sundry debtors relating to factoring business amounting to Rs. 2,45,286/- and no additions were made on account of increase in sundry debtors attributable to business of service centre business amounting to Rs.1,44,657/- implying thereby that the AO has impliedly accepted the carrying of running of business service centre business during the year. In the original assessment order dated 26.12.2007 u/s. 143(3) of the Act, the A.O. made the addition on the basis of increase in debtors relating to factoring business which could not have increased during the year without there being any factoring charges business during the year. It was submitted that the AO mentioned in that context in the original assessment order dated 26.12.2007 u/s. 143(3) of the Act that the assessee did not carry out any business during the year by mentioning that the AO's intention was that the assessee did not carry out factoring business during the year which is a clear evidence that the A.O. had accepted that the assessee was engaged in the business of running business service centre. Thus , the reopening had been made on wrong assumption that assessee did not carry on business of business service centre business whereas in original assessment order dated 26.12.2007 u/s 143(3) of the Act itself the A.O had accepted that one of the businesses i.e. business service centre business was carried on by the assessee. The assessee further submitted that it had disclosed fully and truly all material facts necessary for the assessment during the original assessment proceedings u/s 143(3) of the Act. The original assessment was framed u/s 143(3) of the Act vide assessment orders dated 26.12.2007. It was submitted that the reopening of the assessment u/s 147/148 of the Act has been made after four years from the end of assessment year and therefore proviso to section 147 of the Act is applicable. It was the say of the assessee that the full and proper disclosure of business service centre charges income was disclosed in the audited P&L
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Account. It was submitted that the full and proper disclosure of receivables in respect of above business amounting to Rs. 1,14,409/- was made in the balance sheet. Similarly, full and true disclosure of security deposit of Rs.2.4 crore was also made in the balance Sheet. The full details in respect of claim of depreciation of Rs. 54,70,747/- was also made in the statement of depreciation allowance attached to the return of income. Similarly full disclosure was made about the acquisition of business assets from an associate concern and making the same available to them as part of the business centre services. Thus, the assessee requested that the reopening of assessment u/s 147 of the Act was bad in law and the reassessment order based thereon was also invalid and null and void.
The ld. CIT (A) considered the submissions of the assessee and observed that the assessee has furnished full details to the AO in respect of assessee’s business of factoring business, service centre business, claim of depreciation and acquisition of assets from group concerns. In the original assessment order dated 26-12-2007 u/s. 143(3) of the Act , the A.O. discussed the issue of increase in debtors in respect of business service centre charges and factoring business and mentioned that assessee has not conducted any business, hence, addition of Rs. 2,45,286/- was made in respect of excess amount/ increase in debtors with respect to factoring business, although no addition was made with respect to increase in debtors of Rs.1,44,657/- pertaining to business service centre business . However, the A.O. allowed assessee’s claim of depreciation u/s. 32 of the Act w.r.t. business service centre business. The A.O. reopened the assessment u/s 147 of the Act on the ground that there was no business during the year, the assessee was not entitled for depreciation u/s 32 of the Act and the A.O. issued notice u/s.148 of the Act dated 3rd February, 2011 which was issued beyond four years from the end of assessment year under consideration and thus proviso to Section 147 of the Act is applicable. Since original assessment was made u/s 143(3)
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of the Act, hence proviso to section 147 of the Act is clearly applicable. The ld. CIT(A) observed that the assessee has filed full details during the original assessment proceedings u/s 143(3) read with Section 143(2) of the Act with respect to all the issues and there was no failure on the part of the assessee to disclose fully and truly all material facts required for the completion of the assessment and under these circumstances the assessee’s case could not be reopened u/s 148 of the Act was the contention of the assessee. It was also observed that the A.O. has examined the assessee’s claim of depreciation on assets while framing original assessment order u/s 143(3) of the Act.
From the facts, the ld. CIT(A) noticed that the assessee has two types of business source. The A.O. in the original assessment order mentioned that there was no business during the year but even then the A.O. allowed depreciation on the assets acquired during the year, hence, disallowing the depreciation in the reassessment order amounts to change of opinion which is not permissible under the law. The ld CIT(A) observed that the details of such acquisition of assets were before the AO duly filed during the original assessment proceedings. The ld. CIT(A) accordingly held that reopening of assessment u/s 148 of the Act was bad in law and hence re-assessment order based thereon disallowing depreciation in the re-assessment proceedings was also bad in law and therefore was annulled by the learned CIT(A) vide appellate orders dated 28-05-2013 passed by learned CIT(A).
Aggrieved by the appellate orders dated 28-05-2013 passed by the ld. CIT (A), the Revenue is in appeal before the Tribunal.
The ld. D.R. submitted that the assessee has accepted the original assessment order passed u/s 143(3) of the Act which has not been challenged before the higher authorities. Thus, it was submitted by the learned DR that the assesssee accepted the findings of the AO that there is no business
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carried on by the assessee. Depreciation was allowed to the assessee to the extent of Rs. 54,70,747/- which was a mistake on the part of the AO , but the A.O. made addition of Rs. 2,45,286/- towards increase in debtors on the ground that the assessee has not carried out any business. The ld. D.R. submitted that there is a change in the name of the assessee i.e. formerly known as P L Research & Development Pvt. Ltd. and the new name is M/s Sheth Financial Services Pvt. Ltd. It was submitted that the assessee purchased depreciable assets from M/s Prabhudas Liladhar Pvt. Ltd. on 27- 03-2005 which is an associated concern of the assessee. Payments were received from M/s Prabhudas Liladhar Pvt. Ltd. . No business was carried on by the assessee and also no declaration of the asset was made by the assessee.It was submitted that learned CIT(A) erred in holding that reopening of the assessment u/s 147/148 of the Act is bad in law. The learned DR relied on the assessment order passed u/s 143(3) r.w.s. 147 of the Act.
The ld. Counsel for the assessee submitted that the original assessment order u/s 143(3) of the Act was passed on 26th December, 2007. The assessee has claimed depreciation amounting to Rs. 54,70,747/- which was allowed by the AO while framing the original assessment order u/s 143(3) of the Act, although finding of fact was recorded that the assessee has not carried on any business as per the original assessment order. The case was reopened and notice u/s 148 of the Act was issued to the assessee on 3rd February, 2011 which is beyond four years from the end of the assessment year and proviso to Section 147 of the Act is applicable and the assessment can be re-opened only if there is failure on the part of the assessee to truly and fully disclose all the material facts of the case necessary for making the assessment . It was submitted that the Depreciation was claimed u/s 32 of the Act whereby full disclosure was made by the assessee at the time of filing of return of income for which the computation of income is placed at paper book page 1 to 3 wherein note has been given which is as under:-
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“Depreciation allowance in respect of assets, if any, used for less than 180 days during the year is calculated @ 50% of the respective rates of depreciation indicated in the above table.
The adjustment in the cost of acquisition is required in respect of Modified Value Added Tax credit in respect of assets required on or after 1st March, 1994, change in rate of exchange if currency, and subsidy or grant or reimbursement, by whatever name called.
Additions during the year include inter alia certain assets acquired during the year from an associate concern namely Prabhudas Liladhar Pvt. Ltd. (PLPL). These assets were in turn made available to PLPL under the business service centre agreement. Consequently WDV of such assets as computed under the provisions of the Income Tax Act in the hands of PLPL as on the date of sale to the assessee is taken to be the cost of acquisition despite such WDV being lower than the value at which the same have been purchased by the assessee. Depreciation is thus claimed on the reduced amount as required by Explanation (4A) to section 43(1).”
It is submitted that depreciation was claimed on the reduced amount as per Explanation 4A to Section 43(1) of the Act. Copy of profit and loss account for the year ended 31st March, 2005 was placed at paper book page 5 wherein the business service centre charged received were Rs. 144,657/- under the head ‘Income’ , which is offered for taxation. It is submitted that the asset was acquired on 27th March, 2005 and they were put to use and income for 5 days were included in the return of income filed with the Revenue which is assessed to tax in original assessment as well re-assessment. The original assessment order passed u/s 143(3) of the Act by the Revenue is placed on paper book filed with the Tribunal at page 6-8 . The benefit of depreciation was disallowed to the assessee in the assessment framed u/s 143(3) read with Section 147 of the Act on the ground that there was no business conducted by the assessee. The assessee was engaged in the business of running business service centre. Our attention was drawn to the replies
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submitted before the authorities below which are placed in paper book/page 11-12 and 14-15 , it was submitted that even business service center agreement entered into by the assessee for earning business service centre charges was also submitted before the AO in original assessment proceedings. As per the assessment order though sundry debtors had increased during the year by Rs. 3,89,943/-, additions were made only on account of increase in sundry debtors relating to factoring business of Rs. 2,45,286/- and no addition was made on account of increase in sundry debtors attributable to business service centre Rs. 1,44,657/-. The A.O. has accepted that assessee has incurred business loss and an amount of Rs. 52,17,342/- was allowed to be carry forward (paper book page 7) in the original assessment framed u/s 143(3) of the Act. The ld. Counsel has come with several proposition to defend the case. It is submitted that there was no failure on the part of the assessee to disclose true and full details with respect to the acquisition of asset and earning of service centre business charges and all the material were placed before the AO during original assessment proceedings. The computation of income was filed before the A.O. along with the return of income filed with the Revenue. The ld. Counsel also drew our attention to paper book page No. 1 to 3 and also paper book page 6 to 8 whereby the computation of income and original assessment order dated 26th December, 2007 was placed on record. There is no escapement of income was the contention of the learned counsel for the assessee which could be brought to tax during re-assessment proceedings u/s 147/148 of the Act. The ld. Counsel submitted that the original assessment was framed u/s 143(3) of the Act vide assessment order dated 26.12.2007. Section 147 of the Act has no application as the assessee has truly and fully disclosed all the material facts necessary for the assessment and the assessment is sought to be re-opened after four years from the end of the assessment year and proviso to Section 147 of the Act is applicable. No incriminating tangible material has come to the possession of the A.O. which could lead to formation of reasons to believe that the income
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has escaped assessment. There is no such allegation in the reasons recorded by the Revenue which is placed on record vide paper book page 9 & 10. No failure is there on the part of the assessee to truly and fully disclose all material facts necessary for framing the assessment and it was submitted that the re-opening u/s 147/148 of the Act was bad in law. There is no tangible material which has come into possession of the A.O. that the income has escaped assessment. The ld. Counsel also invited our attention to the original assessment order dated 26.12.2007 passed u/s 143(3) of the Act whereby depreciation was allowed to the assessee with respect to the assets acquired for business service centre. It was submitted that when the AO stated that there is no business carried on by the assessee in the original assessment order he meant that the assessee has not conducted factoring business and hence debtors to the tune of Rs. 2,45,286/- were added and sundry debtors to the tune of Rs.1,44,657/- pertaining to business service centre business were not added, while the total increase in debtors was to the tune of Rs.3,89,943/- . Thus, it was submitted that the AO has applied his mind while framing the original assessment order dated 26.12.2007 passed u/s 143(3) of the Act . The ld. Counsel also invited our attention to page No. 13 /paper book whereby the Revenue has rejected the objection raised by the assessee to the re-assessment proceedings vide orders dated 23-11-2011. This order of the Revenue dated 23-11-2011 was stated to be served on the assessee on 15th December, 2011 , while the reassessment was framed u/s 147/148 of the Act on 20th December, 2011. It was submitted that the re- assessment was framed within four weeks of service of order rejecting the objections of the assessee which is contrary to the decision of the Hon’ble Bombay High Court in the case of Asian Paints Ltd. DCIT, (2008) 296 ITR 90 (Bom) and also in the case of Aroni Commercials Ltd. v. DCIT, (2014) 362 ITR 403 (Bom). It was submitted by learned counsel for the assessee that the assessee cannot be burdened with the re-assessment for the mistakes committed by the AO as the re-opening is done beyond four years from the ITA 5406/Mum/2013 13
end of the assessment year and proviso to Section 147 of the Act is applicable and the re-opening of the assessment can be done when there is a failure on the part of the assessee to truly and fully disclose all the material necessary for framing the assessment. It was submitted that there is no allegation of any failure on the part of the assessee to truly and fully disclose all material facts necessary for making the assessment. He drew our attention to page 10 of paper book wherein reasons recorded for re-opening the assessment are placed and it is submitted that there is no mention of any failure on the part of the assessee to truly and fully disclose all material facts necessary for the assessment. It was submitted that the AO failed to disallow the depreciation in the original assessment framed u/s 143(3) of the Act. It was also submitted that no new tangible material has to come to the possession of the AO whereby he could have reasons to believe that the income has escaped assessment rather it is stated by the AO that it is seen form the records as could be seen from the reasons recorded for re-opening and also the re- assessment order framed u/s 143(3) read with Section 147 of the Act that it is a case of change of opinion as now the AO is drawing different conclusions from the same records which were before him while framing original assessment u/s 143(3) of the Act. Further, it is submitted that the re- assessment is framed within four weeks from the rejection order dated 23-11- 2011 which was served on the assessee on 15-12-2011, of the objections filed by the assessee while re-assessment order is dated 20-12-2011 passed u/s 143(3) r.w.s. 147 of the Act . It was submitted that the rejection of the objection by the AO of the assessee’s objection was dated 23.11.2011 which was served on the assessee only on 15-12-2011, while re-assessment order passed u/s 143(3) read with Section 147 of the Act is dated 20-12-2011. It was submitted that the said re-assessment order dated 20-12-2011 is bad in law as the AO cannot proceed within four weeks from the date of order rejecting the assessee’s objection as laid down by the Hon’ble Bombay High Court in the case of Asian Paints Limited v. DCIT 296 ITR 90(Bom.) and Aroni
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Commercials Limited v. DCIT 362 ITR 403(Bom.). it was submitted that the learned CIT(A) has not decided the appeal on merits and has quashed the re- assessment proceedings. It was submitted that if the arguments of the assessee are not accepted, then the matter can go back to the authorities below to decide the issue on merits.
The learned DR submitted in rejoinder and drew our attention to reasons recorded for re-opening placed at page 10/paper book and submitted that the assessee has not conducted any business during the financial year as there are only 3 days left in financial year when the assessee acquired the depreciable assets from Prabhudas Liladhar Private Limited.
We have considered the rival contentions and also perused the material available on record including the case laws relied upon. We have observed that the assessee has acquired the depreciable assets from M/s Prabhudas Liladhar Pvt. Ltd. on 27th March, 2005. The assessee has made the disclosure of the same in the return of income filed with the revenue whereby notes were given by the assessee which is as under:- “Depreciation allowance in respect of assets, if any, used for less than 180 days during the year is calculated @ 50% of the respective rates of depreciation indicated in the above table.
The adjustment in the cost of acquisition is required in respect of Modified Value Added Tax credit in respect of assets required on or after 1st March, 1994, change in rate of exchange if currency, and subsidy or grant or reimbursement, by whatever name called.
Additions during the year include inter alia certain assets acquired during the year from an associate concern namely Prabhudas Liladhar Pvt. Ltd. (PLPL). These assets were in turn made available to PLPL under the business service centre agreement. Consequently WDV of such assets as computed under the provisions of the Income Tax Act in the hands of PLPL as on the date of sale to the assessee is taken to be the cost of ITA 5406/Mum/2013 15
acquisition despite such WDV being lower than the value at which the same have been purchased by the assessee. Depreciation is thus claimed on the reduced amount as required by Explanation (4A) to section 43(1).”
We have observed that the A.O. framed the original assessment order, which is placed at paper book page No. 6 to 8 whereby he discussed the fact that the balance debtors amount was Rs. 3,27,45,000/- in the assessment year 2004- 05 and in the assessment year 2005-06 , the balance debtors amount was Rs. 3,31,34,943/- wherein there is an increase of debtors to the tune of Rs.3,89,943/-, which included Rs. 1,44,657/- debts in respect of business service centre charges received. We have observed that the said amount is reflected under the head income from business service centre charges, which is duly reflected in the P&L account, copy placed at paper book page No. 5 and the said sum is offered for taxation by the assessee in the return of income filed with the Revenue. The original assessment was framed u/s 143(3) of the Act vide orders dated 26-12-2007 , whereby the claim of depreciation was allowed to the assessee with respect to the business service centre business. The increase amount of debtor to the tune of Rs. 2,45,286/- relating to factoring business were added to the income of the assessee in the original assessment order dated 26-12-2007 framed u/s 143(3) of the Act , although there was total increase in debtors amount by Rs. 3,89,943/-, which includes Rs. 1,44,657/- being debtors arising from business service centre charges which were not added by the AO while framing original assessment order. Thus, it cannot be said that the assessee has not carried out any business as the assets were acquired from M/s Prabhudas Liladhar Pvt. Ltd. on 27-03-2005 and the revenue of Rs.1,44,657/- was offered for taxation in the return of income filed with the Revenue. The business service center agreement entered into by the assessee was also placed before the AO in the original assessment proceedings u/s 143(3) read with Section 143(2) of the Act and the said income also suffered
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tax. The said business service centre charges of Rs.1,44,657/- was subjected to tax deducted at source under Chapter XVII-B of the Act by the payer. No new fresh tangible incriminating material has come into possession of the AO incriminating the assessee which could have led to formation of the reasons to believe that income has escaped assessment which could be brought to tax u/s 147/148 of the Act. It was alleged by the Revenue that there was reason to believe that income has escaped assessment as the A.O. wrongly allowed the depreciation whereas the facts emanating from the original assessment order dated 26.12.2007 u/s 143(3) of the Act clearly reveals that the AO was fully aware that the assessee is claiming to be engaged in the business of factoring and also business of business service centre business. The AO came to the conclusion during original assessment proceedings u/s 143(3) read with Section 143(2) of the Act that the assessee has not carried out factoring business during the relevant previous year and hence made additions of Rs.2,45,286/- which was towards increase in debtors of factoring business. No disallowance of increase in debtors of Rs.1,44,657/- was made which was towards business service centre business and also depreciation towards depreciable assets acquired for business service centre business was also allowed. The business service centre agreement and all other details connected with the said business such as acquisition of depreciable assets of business service centre business , declaration of income from business service centre business in the Profit and Loss account as well in return of income filed with the Revenue , claim of depreciation on the business service centre busiess etc. were all before the AO during the original assessment proceedings u/s 143(2) read with Section 143(3) of the Act. Thus, the AO being fully aware of the businesses of factoring as well business service centre business has made a finding of fact that the assessee is not carrying out any business was in context of factoring business which could be gathered from the reading of the assessment order dated 26.12.2007 passed u/s. 143(3) of the Act. There is clearly a change of opinion as the AO has duly considered
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the claim of the assessee while framing original assessment whereby increase in sundry debtors to the tune of Rs.1,44,657/- on account of business service center business was not added to the income of the assesse and also depreciation on assets of business service centre business were allowed. Section 147 of the Act is not applicable in the instant case as the re-opening is done after four years from the end of the assessment year and also the original assessment was framed u/s 143(3) of the Act , which re-opening could have been made after four years from the end of assessment year if there is a failure on the part of the assessee to truly and fully disclose all relevant material to frame assessment keeping in view the proviso to Section 147 of the Act. The ratio of the decision of Hon’ble Supreme Court in the case of CIT v. Kelvinator of India Ltd. (2010) 320 ITR 561(SC) is directly applicable. We have observed that there is no failure on the part of the assessee in making a true and fully disclosure during the course of original assessment proceedings . The assessee has rightly relied on the following decisions:-
ICICI Bank v. DCIT, 268 ITR 203(Bom) 2. Ador Technopack Ltd. v. DCIT, 271 ITR 50 (Bom) 3. Supreme Treves P. Ltd. v. DCIT, 323 ITR 323(Bom) 4. Betts India P. Ltd. v. DCIT, 235 Taxmann 77 (Bom)
It was also observed that there was no escapement of income due to failure on the part of the assessee to truly and fully disclose all the material for framing of the original assessment , while during original assessment proceedings u/s 143(3) read with Section 143(2) of the Act. Under these circumstances , we are of the considered view that the ld. CIT(A) has rightly quashed the re- assessment order dated 20-12-2011 passed by the AO u/s 148 read with Section 143(3) of the Act and we do not find any infirmity in the order passed by the ld. CIT(A) which we sustain / affirm.We order accordingly.
ITA 5406/Mum/2013 18
In the result, the appeal filed by the Revenue in ITA No. 5406/Mum/2013 for the assessment year 2005-06 is dismissed.
Order pronounced in the open court on 18th October, 2016. आदेश क" घोषणा खुले "यायालय म" "दनांकः 28-10-2016 को क" गई । sd/- (C.N. PRASAD) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER मुंबई Mumbai; "दनांक Dated 28-10-2016 [ व."न.स./ R.K. R.K. R.K., Ex. Sr. PS R.K.
आदेश क" ""त"ल"प अ"े"षत/Copy of the Order forwarded to : 1. अपीलाथ" / The Appellant 2. ""यथ" / The Respondent. 3. आयकर आयु"त(अपील) / The CIT(A)- concerned, Mumbai 4. आयकर आयु"त / CIT- Concerned, Mumbai "वभागीय ""त"न"ध, आयकर अपील"य अ"धकरण, मुंबई / DR, ITAT, Mumbai “E” Bench 5. 6. गाड" फाईल / Guard file. आदेशानुसार/ BY ORDER, स"या"पत ""त //// उप/सहायक पंजीकार (Dy./Asstt.