Income Tax Appellate Tribunal - Delhi
Nehru Place Hotels Ltd.,, New Delhi vs Department Of Income Tax on 30 June, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH ' E' NEW DELHI)
BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER
And
SHRI SHAMIM YAHYA, ACCUNTANT MEMBER
ITA No. 5244 / Del/ 2012
(Assessment Year 2004-05 )
DCIT, Circle 6, Vs. M/s. Nehru Place Hotels Ltd.
New Delhi S-1, American Plaza,
International Trade Tower,
Nehru Place, New Delhi
PAN : AAACN3230C
(Appellant) (Respondent)
Assessee by: Shri Pradeep Dinodia & Shri R K Kapoor, CAs
Revenue by: Shri Sameer Sharma, Sr. DR
ORDER
PER I. C. SUDHIR, JUDICIAL MEMBER:
The revenue has questioned the first appellate order on the following grounds:
"1. The order of Ld. CIT(A) is not correct in law and facts.
2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding that the re-opening of assessment is not correct without appreciating that the fact that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment.
3. On the facts and in the circumstances of the case, the Ld . CIT(A) has further erred in holding that since the re-opening of assessment is not considered to be correct, therefore, the other ground are not adjudicated upon.2 I.T.A. No.5244 /DEL/2012
2. We have heard and considered the arguments advanced by the parties in view of the orders of authorities below, material available on record and the decisions relied upon.
3. The relevant facts are that the return of income filed on 01.11.2004 declaring an income of Rs.17,02,35,021/- was processed u/s 143(1) of the Act. The case was later on selected for scrutiny and the assessment u/s 143(3) of the Act was framed on 27.10.2006 at the total income of Rs.17,02,94,270/-. Subsequently, a search and seizure operation on Eros group was conducted on 14.11.2006. Notice u/s 153A was issued in compliance of which the assessee furnished a letter enclosing therein copy of acknowledgement of the original return of income. The assessment u/s 153A/143(3) was framed on 31.12.2008 at the total income of RS.17,05,01,049/-. Subsequent to these assessments, it came to the notice that in the return of income, the assessee has claimed some expenses which were allowed in the assessment but the same were in the nature of capital expenditure. Reassessment proceedings u/s 147 for the assessment year 2004-05 under consideration were initiated and notice u/s 148 was issued and served upon the assessee calling for the return of income for the year. In response, the return of income filed on 01.11.2004 was adopted. On request of the assessee, the reasons on the basis of which the proceedings u/s 147 were initiated, were also supplied vide letter dated 30.06.2011 to the assessee. The assessee objected the notice with respect to its validity which was not accepted by the A.O.
4. Before Ld. CIT(A), the assessee questioned the validity of initiation of reassessment proceedings on the basis that the reassessment was framed after the expiry of the period of more than four years for the relevant assessment year and there was no failure on the part of the assessee to 3 I.T.A. No.5244 /DEL/2012 disclose all the facts truly and fully in respect of the issues involved. Being satisfied with the allegation of the assessee in this regard the Ld. CIT(A) has allowed the objection of the assessee on the basis that the A.O. has nowhere pointed out the failure or omission on the par of the assessee in disclosing all the facts truly and fully in respect of the issues involved.
5. In support of the ground Ld. D.R. has basically placed reliance on the assessment order. He submitted that Ld. CIT(A) has failed to appreciate the fact that there was failure on the part of the assessee to disclose wholly and fully all material facts necessary for the assessment. He referred the assessment order dated 27.10.2006, which was initially framed u/s 143(3) of the Act with this contention that no question on the issue raised in response to the initiation of reopening proceedings, has been discussed by the A.O. in the assessment order nor any questionnaire in this regard was issued by the A.O. to the assessee. There was a failure on the part of the assessee to disclose the nature of the expenses. He submitted further that the escaped chargeable income shown in the reasons recorded thus remained to be examined by the A.O. in the assessment framed on 27.10.2006.
6. Ld. A.R. on the other hand tried to justify the first appellate order on the issue of validity of initiation of reopening proceedings as the same was barred by limitation under the provision to Section 147 of the Act. He submitted that the reassessment has been framed after the period of more than four years from the end of the assessment year to which the case pertains. In the reasons recorded for the initiation of reopening proceedings, there is no whisper that there was failure on the part of the assessee to disclose all the facts truly and fully in respect of the issue involved. Ld. CIT(A) has thus rightly held the action of initiation of reopening proceedings invalid. He submitted further that in the assessment order dated 4 I.T.A. No.5244 /DEL/2012 12.12.2011 framed u/s 147 of the Act, there is no any allegation that there was failure on the part of the assessee to disclose all the facts truly and fully in respect of the escaped income for the assessment. He submitted further that in the assessment order dated 12.12.2011 framed u/s 147 of the Act. There is no allegation but there was failure on the par of the assessee to disclose all the facts truly and fully in respect of escaped income from the assessment. He submitted further that in earlier and subsequent assessment years, the royalty expenses have been allowed by the Department itself as revenue in nature. Besides the decisions relied upon before the authorities below, the Ld. A.R. has also placed reliance on the following decisions:
a) BLB Ltd. Vs ACIT (2012) 343 ITR 129 (Del.)
b) Tatanor Components Ltd. Vs ACIT (2012) 343 ITR 183 (Bom.)
c) DIL Ltd Vs ACIT (2012) 343 ITR 296 (Bom.)
d) CIT Vs. Indian Farmers Fertilizers Co-operative Ltd. (2008)
171 Taxman 379 (Del.)
e) National Dairy Development Board Vs. DCIT (2011) 242 CTR
302 (Guj.).
f) Commercial Co-operative Bank Ltd. V. ITO (2011) 336 ITR
196 (Guj.).
g) CIT Vs Living Media India, 2013-TIOL-413-HC-Delhi-IT
7. Having gone through the above cited decisions, we find that the Hon'ble jurisdictional Delhi High Court in the case of BLB Ltd. (supra) has held the reassessment proceedings invalid with this observation that the reasons recorded did not disclose or state that there was failure or omission to disclose fully and truly all material facts. The Hon'ble Bombay High Court in the case of Tatanor Components Ltd. Vs ACIT (supra) has decided the issue in favour of the assessee with this finding that the A.O. has not recorded the failure on the part of the petitioner to fully and truly disclose all the material facts necessary for the assessment year. What was recorded was 5 I.T.A. No.5244 /DEL/2012 that the petitioner had wrongly claimed certain deductions which he was not entitled to. The reassessment proceedings initiated were held as not valid. Again in the case of DIL Ltd Vs ACIT (supra), the Hon'ble Bombay High Court has been pleased to hold that the reasons recorded did not indicate the formation of an opinion that there was a failure on the part of the assessee to disclose fully and truly all material facts - a requirement for jurisdiction beyond four years time limit. In the case of CIT Vs Indian Farmers Fertilizers Co-operative Ltd (supra), the Hon'ble Delhi High Court has held that there was no allegation in the reasons recorded for reopening that the assessee had failed to disclose fully and truly all material facts necessary for assessment. It was held that the A.O. was unjustified in taking the action u/s 147/148 of the Act after the expiry of four years from the end of the relevant assessment year. Again in its recent decision, the Hon'ble Gujarat High Court in the case of Parley Sales & Services Pvt. Ltd. (supra) has held the notice issued u/s 148 of the Act reopening of the assessment u/s 147 as invalid with this observation that in the entire reasons recorded, there was nothing to indicate that there was any failure to disclose fully and wholly all material facts on the part of the assessee. It was held that the basic requirement in invoking the provisions of Section 147 after the expiry of a period of four years from the order of the relevant assessment year, was not satisfied. The Hon'ble Delhi High Court in its recent decision dated 26.04.2013 in the case of CIT Vs Living Media India (supra) has been pleased to hold that the additional reasons recorded after the date of issue of notice u/s 148 of the Act cannot be looked into for the purpose of determining the validity of the proceedings initiated under section 147 of the Act. Keeping in view these ratios of the cited decisions, when we examine the present case, especially the reasons recorded for initiation of reopening 6 I.T.A. No.5244 /DEL/2012 proceedings, we find that here is no whisper about the allegation of any failure on the part of the assessee to disclose fully and truly all the material facts in the reason recorded for the reopening. For ready reference, the reasons communicated to the assessee vide letter dated 30.06.2011 by the DCIT made available at page 16 of the paper book are being reproduced here under:
"The reason recorded for issuing notice u/s 148 of I T Act are as under:-
In our case return of income was filed on 01.11.2004 showing total income at Rs.17,02,35,021/-. The assessment was completed u/s 143(3) ON
27.10.2006 at a total income of Rs.17,02,94,270/-. In the return the assessee company claimed following expenses which were allowed in the assessment but the same were in the nature of capital expenditure and hence, were no admissible as revenue expenditure:-
1. Incorrect allowance of "Royalty expenses' of Rs.80,95,206/-. As this would give en-during benefit to the business of the assessee, the same was required to be capitalized and depreciation @ 25% was only allowable. After depreciation excess allowance comes to Rs.60,71,405/- on this account.
2. Incorrect allowance of 'Franchise expenses' of Rs.56,14,090/-. As the expenditure was incurred to acquire intangible assets, the same was required to be capitalized and depreciation @ 25% was only allowable. After depreciation excess allowance comes to Rs.42,10,568/- on this account.
3. Incorrect allowance of 'Operating equipments written off' of Rs.27,92,064/-. As operating equipments are capital assets, writing off of the same is not correct.
Accordingly, sum of Rs.1,30,74,037/- being total of the above three admissible expenditures, have escaped assessment.
On the basis of the reasons stated above, the belief that income has escaped assessment for assessment year 2004-05 in your case, was formed. Accordingly, notice u/s 48 of the I T Act was issued in your case with the prior approval of Ld. CIT (c)-I, New Delhi in accordance with provisions contained in section 147 to 151 of I T Act."
7 I.T.A. No.5244 /DEL/20128. Even in the assessment order framed u/s 143(3) read with section 147 of the Act on 12.12.2011 there is no whisper about the allegation of failure on the part of the assessee to disclose all the facts truly and fully in respect of escaped assessable income. Under these facts and circumstances, we are of the view that Ld. CIT(A) has rightly held that the initiation of reopening proceedings in the present case was invalid. The same is upheld. The grounds involving the issue are thus rejected.
9. In the result, the appeal of the revenue stands dismissed.
10. Order pronounced in the open court on ...... July, 2013.
(SHAMIM YAHYA) (I. C. SUDHIR) Accountant Member Judicial Member Dated: day of July, 2013. Sp. Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) - II,, New Delhi AR, ITAT, 5. CIT(ITAT), New Delhi NEW DELHI