Madras High Court
M/S.Kasturi Estates Pvt. Ltd vs The Assistant Commissioner Of Income ... on 19 September, 2022
Author: Anita Sumanth
Bench: Anita Sumanth
W.P.No.35580 of 2019
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated: 19.09.2022
CORAM
THE HONOURABLE DR. JUSTICE ANITA SUMANTH
W.P.No.33580 of 2019
and
WMP.Nos.34044, 34045 ad 34047 of 2019
M/s.Kasturi Estates Pvt. Ltd.
Rep. by its Director Shri.K.Venugopal ... Petitioner
Vs
The Assistant Commissioner of Income Tax,
Company Circle – 4 (2)
121, Mahatma Gandhi Road,
Nungambakkam,
Chennai – 600 034.
... Respondent
PRAYER: Writ Petition filed under Article 226 of the Constitution of India
praying to issue a Writ of Certiorari, calling for the records on the file of the
respondent in PAN AAACK1432H and quash the impugned notice issued
under Section 148 dated 29.10.2018 and consequentially proceedings in
ITBA/COM/F/17/2019-20/1019722807(1) dated 04.11.2019 issued by the
respondent as illegal and without jurisdiction.
https://www.mhc.tn.gov.in/judis
W.P.No.35580 of 2019
For Petitioner : Mr.Veerabadran Prashanth
for Mr.R.Sivaraman
For Respondents : Mrs.Hema Muralikrishnan
Senior Standing Counsel
ORDER
Heard Mr.Veerabadran Prashanth, learned counsel for the petitioner and Mrs.Hema Muralikrishnan, learned Senior Standing Counsel for the respondents. The petitioner challenges proceedings of re-assessment under the provisions of the Income Tax Act, 1961 (in short 'Act') for assessment year (AY) 2012-13.
2. A return of income was filed by the petitioner within time and an intimation u/s 143(1) of the Act issued. Thereafter, the matter was selected for scrutiny and notice under Section 143(2) was issued on 19.08.2019 calling for verification of various issues that arose from the return of income. One of the issues in specific related to the claim of additional depreciation under Section 32(1)(iia) in relation to a wind mill owned and managed by the petitioner.
3. After considering the response of the petitioner, an order of assessment had come to be passed on 30.03.2015, wherein at internal page 2, the Assessing Authority refers to petitioner's communication dated 12.03.2015 in response to the notice issued by the officer, enclosing the depreciation schedule. The submission of the petitioner was that the acquisition and https://www.mhc.tn.gov.in/judis W.P.No.35580 of 2019 installation of the windmill had been completed prior to 31.03.2012, as a result that the petitioner was entitled to depreciation at the rate of 80% for the year in question.
4. The officer refers thereafter to a questionnaire issued under Section 142(1) dated 19.01.2015 calling upon the petitioner to justify the claim of additional depreciation on windmill.The explanation furnished by the petitioner finds reference in the order of assessment at paragraph B. Further particulars were also sought touching upon the acquisition and installation of windmill that were also supplied under cover of letter dated 12.03.2015 enclosing the commissioning certificate.
5. After considering the detailed submissions, the authority disallows the additional depreciation claimed on the ground that the statutory condition as prescribed under the proviso to Section 32(1)(iia), namely, that the asset must have been acquired and put to use prior to 31.03.2012, had not been satisfied by the petitioner. There is extensive discussion in regard to this issue spanning pages 3 to 5 of the order of assessment, extracted below:
DISALLOWANCE OF ADDITIONAL DEPRECIATION U/S 32(1)(iia) As can be seen from the working of the depreciation on windmills amounting to Rs.85,54,695/-, the assessee has claimed the additional depreciation in 2 parts. 40% claimed on the addition made during the current financial year 2011-12 @ 40% since the windmill has been purchased in the second half of the financialyear. The said amount works out to Rs.43,06,615/-. The https://www.mhc.tn.gov.in/judis W.P.No.35580 of 2019 second part of the additional depreciation is on the opening balance of the windmill block i.e. as at 01.04.2011, the same has been worked out at 10% for the second half. Based on the submissions made by the assessee, it is to be seen whether the assessee satisfies the conditions as prescribed in Section 32(1)(iia) of the IT Act allowing additional depreciation as claimed. It is seen from the provisions of section 32(1)(iia) that the new machinery or plant has to be acquired and installed as at 31.03.2012, in the instant case. Perusal of the bills furnished in support of the acquisition and installation of the machinery, shows that the assessee has furnished invoices as under:
1. Invoice dated 24.03.2012 – Amount paid on 27.03.2012 shows supply of Suzlon Turbine Generator comprising of Nacelle, Hub and sets of 3 blades, controller.
As for the said invoice, the above said equipments were dispatched by road from Pondicherry factory to the sight at Coimbatore on 27.03.2012
2. Invoice dated 24.03.2012 – Paid on 28.03.2012 has been dispatched again by road from Pondicherry factory to Coimbtaore sight by Suzlon on 28.03.2012.
3. Invoice dated 26.03.2012 paid on 29.03.2012 shows delivery originating from Vadodara, Gujarat and terminating at Coimbatore. The equipments include component and accessories of renewable energy device 1700 KVA/0.690 KV, Transformer with Oil.
4. Invoice dated 16.03.2012 paid on 27.03.2012 shows works contract from civil work including foundation and elite work amounting to Rs.47,33,000/-
5. Invoice dated 28.03.2012 paid on 28.03.2012 shows payment of Rs.22,35,781/- in respect of labour work of erection and installation of wind termine generator at Coimbatore.
6. Invoice dated 31.03.2012, payment now shown shows labour charges for final testing and commissioning.
7. Debit note dated 01.03.2012 paid on 29.03.2012 shows an amount debited of Rs.45,00,000/- in respect of registration charges, processing and supervision charges. https://www.mhc.tn.gov.in/judis W.P.No.35580 of 2019 From the above bills, it can be seen that the erection and installation alongwith civil work has been undertaken at the fag end of the financial year 2011-12. It can therefore be seen from the above that certain equipments has been only dispatched on 29.03.2012 from Pondicherry and Gujarat. It is therefore not possible for the assessee who have acquired and installed the said machinery of its sight in Coimbatore in support of the assessee's claim for grant of additonal depreciation.
In support of commissioning of the windmill, the assessee has submitted cpies of certificate issued by TANGEDCO. Perusal of the Tamil Nadu Electricity Board Commissioning Certificate shows that the same has been commissioned on 30.09.2008 for the wind electric generator of 600 KW capacity, pertaining to the period 30.09.2008 to 31.03.2009 and located at Veppilamkulam Village. Another certificate dated 09.04.2010 located at Ettankulam Village is for the period from 25.03.2010 to 29.03.2010. This therefore implies that the assessee has not been able to submit the commissioning certificate as on 31.03.2012 pertaining the current assessment year 20.12.2013. Thus the condition as prescribed in proviso to section 32(1)(iia) namely, that the asset must be acquired and put to use has not been met. Therefore, the additional depreciation claimed at Rs.85,54,695/- is disallowed and added back to the total incomeof the assessee.'
6. Challenging the disallowance made on account of additional depreciation as well as other issues, the petitioner filed a statutory appeal before the Commissioner of Income tax (Appeals) on 24.04.2015, that is stated to be pending as on date. The impugned proceedings for re-assessment have to be seen in the context of the aforesaid narration.
7. The reopening was made by issuance of notice under Section 148 of the Act dated 29.10.2018 beyond the period of four (4) years from the end of the relevant assessment year. Upon receipt of the notice, the petitioner complied with the statutory requirement of filing a return, stating that the https://www.mhc.tn.gov.in/judis W.P.No.35580 of 2019 original return of income may be treated as filed in compliance of notice under Section 148 of the Act.
8. In the meanwhile, it appears that the petitioner was in receipt of notice under Section 153C of the Act dated 23.10.2018, a copy of which is not placed on file. The response of the petitioner dated 26.08.2019 is an integrated one addressing both the notice under Section 153C as well as the impugned proceedings for re-assessment.
9. In line with the procedure set out in the case of GKN Drive Shafts (India) Pvt. Ltd. V. Income Tax Officer (259 ITR 19), the reasons for re- assessment were supplied under cover of letter dated 13.09.2019 and read as under:
'As requested by you, the reason for reopening the assessment as per record is as under.
In the assessment order passed u/s,143(3) dated 30-03-2015 additional depreciation of Rs.85,54,694/- was disallowed i.e., 10% on cost of windmills generator amounting to Rs.8,55,46,945/- on the ground that you have failed to furnish the certificate of commissioning of the machine as on 31-03- 2012 treating that the same was not put to use during the year. In such a case, you have not entitled for regular depreciation of Rs.3,42,18,778/- i.e., 40% of Rs.8,55,46,945/- (less than six months) as such income to the tune of Rs.3,42,18,778/- has escaped assessment'.
10. It is seen that the issue addressed under the proceedings for re- assessment is regular depreciation claimed by the petitioner which, according to https://www.mhc.tn.gov.in/judis W.P.No.35580 of 2019 the respondent, ought not to have been granted. Thus he comes to the conclusion that there has been income that has escaped assessment by virtue of the wrongful grant of regular depreciation.
11. However, the impugned proceedings having been initiated beyond the period of 4 years from the end of the relevant assessment year, would have to satisfy the statutory conditions set out under the proviso to Section 147, that reads as follows:
147. Income escaping assessment-
........
Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four 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 the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year.
12. Thus, in this case, seeing as the assessment framed originally was under scrutiny, the Assessing Authority could proceed to re-assess the income under Section 147, only if he is in a position to, and does, establish that the alleged escapement is on account of the petitioner having failed to make a full and true disclosure at the first instance.
https://www.mhc.tn.gov.in/judis W.P.No.35580 of 2019
13. A perusal of the reasons would indicate that there is no tangible material that has been found by the Assessing Authority, post assessment, to lead to a conclusion that the original disclosure made by the petitioner was either incomplete or untrue. In fact, the only material referred to in the reasons, is the assessment order itself in which the depreciation schedule, the rates of depreciation and the claim of the petitioner in regard to depreciation have been discussed in detail.
14. Thus, it transpires that all materials referred to in the reasons flow from the materials on record and in such circumstances, it is more than apparently clear that there has been no compliance of the statutory pre- condition as set out in the proviso to Section 147, in this case. In light of the aforesaid discussion, the impugned proceedings of assessment having been initiated beyond the period of four (4) years from the end of the relevant assessment yearare clearly barred by limitation.
15. The impugned order is set aside and this Writ Petition allowed. No costs. Connected Miscellaneous Petitions are closed.
19.09.2022 Sl Index : Yes Speaking Order https://www.mhc.tn.gov.in/judis W.P.No.35580 of 2019 To The Assistant Commissioner of Income Tax, Company Circle – 4 (2) 121, Mahatma Gandhi Road, Nungambakkam, Chennai – 600 034.
https://www.mhc.tn.gov.in/judis W.P.No.35580 of 2019 Dr.ANITA SUMANTH,J.
Sl W.P.No.33580 of 2019 and WMP.Nos.34044, 34045 ad 34047 of 2019 19.09.2022 https://www.mhc.tn.gov.in/judis