Income Tax Appellate Tribunal - Amritsar
Amphar Laboratories (P) Ltd. vs Deputy Commissioner Of Income Tax on 22 February, 2006
Equivalent citations: (2007)109TTJ(ASR)290
ORDER
Bhavnesh Saini, J.M.
1. This appeal by the assessee is directed against the order of the CIT(A), Jammu, with headquarters at Amritsar dt. 29th May, 1998 for the asst. yr. 1990-91.
2. The appeal is time-barred by one day, which is condoned.
3. The facts as taken from the record are that the assessee company filed its return of income 31st Dec., 1990 declaring loss at Rs. 12,70,080. The return was duly accompanied by the copies of trading accounts, balance sheet, etc., which was processed under Section 143(1)(a) vide intimation dt. 27th March, 1991. At the (time) of processing, prima facie adjustment to the tune of Rs. 6,791 on account of donation and claim of depreciation on land and land development was made. Thereafter, a notice under Section 148 was issued after recording the reasons for reopening of the case and the said notice on 8th April, 1992. In response to this notice, the assessee filed return of income. This loss was duly processed at Rs. 12,63,290 and the prima facie adjustments made at the time of original processing were again made and the loss was recomputed at Rs. 12,63,290. Thereafter, the case was selected for scrutiny and statutory notices were issued to the assessee. The AO made the addition on account of share capital investment in a sum of Rs. 31,660 and addition on account of unsecured loans at Rs. 1,09,000. The WDV in respect of the building was adopted at Rs. 4,74,000 for the purpose of depreciation as against shown by the assessee at Rs. 6,92,205 on the basis of valuation report obtained from the Valuation Officer, Amritsar. Reasons recorded for reopening the assessment are as under:
2.1 Return of loss was filed by the assessee company on 30th Dec, 1990 showing net loss of Rs. 12,70,080. The return was processed under Section 143(1)(a) on 23rd March, 1991 at a net loss of Rs. 12,63,290 by making prima facie adjustment of Rs. 6,791.
It is seen that during the year the assessee company received Central investment subsidy of Rs. 9,32,634. However, while claiming depreciation on Central assets the amount of subsidy was not reduced from the cost of respective assets as held by the Punjab & Haryana High Court in the case of CIT v. Jindal Bios. Rice Mills . The assessee thus claimed excess depreciation, resulting into underassessment. Further, no evidence regarding purchase of fixed assets including plant and machinery was filed with the return. Investment allowance and depreciation also have been wrongly allowed in the absence of necessary evidence/voucher of purchases of fixed assets.
I have, therefore, reasons to believe that income chargeable to tax has escaped assessment. Proceedings under Section 147 are, therefore, initiated. Issue notice under Section 148 for the asst. yr. 1990-91.
4. The assessee challenged the initiation of the proceedings under Section 148 of the IT Act and submitted that the reasons are not valid because there was conflict of judicial opinion on the subject of claim of depreciation on Central investment subsidy. The CIT(A), however, was of the view that the case laws referred to by the counsel of the assessee pertain to the period prior to the amendment in 1989 and there is a difference in language of Section 147. Therefore, the case laws are not applicable. The CIT(A) was also of the view that the only requirement is that the AO should have reasons to' believe that income has escaped assessment. The contention of the assessee with regard to the validity of the initiation of the proceedings under Section 148 was rejected. On merits also, the addition has been confirmed.
5. However, with regard to the issue of the value of the building, the matter was restored to the file of the AO to reconsider the same. It is interesting to mention here that with regard to reducing the cost of subsidy from the cost of building and plant and machinery for the purpose of depreciation, the CIT(A) relied upon the decision of the Hon'ble Supreme Court in the case of CIT v. P.J. Chemicals Ltd. and the AO was directed not to reduce the Central subsidy from the WDV of the building and plant and machinery for the purpose of depreciation.
6. The assessee is in appeal on the ground of challenging the initiation of the proceedings under Section 148 of the IT Act as well as for deleting the additions on merits.
7. The learned Counsel for the assessee, at the outset, submitted that the reasons for reopening under Section 148 do not exist in view of the decision of the Hon'ble Supreme Court in the case of P.J. Chemicals (supra). He has further submitted that there is no requirement to furnish evidence regarding purchase of fixed assets along with the return in respect of investment allowance and depreciation. Therefore, reopening of the assessment is bad in law and the AO has not assumed the jurisdiction properly in the matter. The learned Counsel for the assessee relied upon the decisions of the Hon'ble Punjab & Haryana High Court in the case of CIT v. Atlas Cycle Industries , in the case of Vipan Khanna v. CIT in the case of CIT v. M.P. Iron Traders (2004) 189 CTR (P & H) 154 : (2004) 136 Taxman 520 (P & H) and CIT v. Smt. Binda Devi (2005) 197 CTR (P & H) 447 : (2006) 150 Taxman 95 (P & H). The learned Counsel for the assessee further submitted that the AO cannot make further enquiry into the matter and as such assume jurisdiction. The learned Counsel for the assessee submitted that since the reasons (for) reopening the assessment do not exist, therefore, the AO cannot make further additions on the issue upon which reopening is not made. He has further submitted that proper details are filed before the authorities below and as such addition on merits is not proper.
8. On the other hand, the learned Departmental Representative relied upon the orders of the authorities below and submitted that the AO recorded proper reasons for reopening the assessment and as such the AO assumed jurisdiction in accordance with law and that additions on merits are justified.
9. We have considered the rival submissions and material available on record. The first issue arises for consideration is validity of the reopening of the assessment under Section 148 of the IT Act. The AO by relying upon the decision of the Hon'ble Punjab & Haryana High Court in the case of CIT v. Jindal Bros. Rice Mills formed his opinion that the assessee has claimed excessive depreciation. The AO further formed his opinion for reopening the assessment on the basis that no evidence regarding purchase of fixed assets was filed with the return and that the investment allowance and depreciation have been allowed in the absence of necessary evidence/vouchers of purchases of fixed assets. The CIT(A) in the impugned order by relying upon the decision of the Hon'ble Supreme Court in the case of P.J. Chemical (supra), directed the AO not to reduce the Central subsidy from the WDV of the building and plant and machinery for the purpose of depreciation. Therefore, it stands that the decision of the Hon'ble Punjab & Haryana High Court in the case of Jindal Bros. Rice Mills (supra) was no longer a good law because of the decision pronounced by the Hon'ble Supreme Court in the case of P.J. Chemicals (supra) in which it was held that the amount of subsidy is not to be deducted from the actual cost under Section 43(1) for the purpose of calculation of the depreciation. The CIT(A), therefore, should have considered this decision while deciding the issue of reopening of the assessment. On the face of it and considering the decision of the Hon'ble Supreme Court in the case of P.J. Chemicals Ltd. (supra) and finding of the CIT(A) himself on the issue of depreciation, it is clear that the reason for reopening the assessment no longer exists. Full Bench of the Hon'ble Punjab & Haryana High Court in the case of CIT v. Smt. Aruna Luthrn held that "the power under Section 154 can be invoked even when an issue is decided by the jurisdictional High Court or a superior Court after the order had been passed."
10. Therefore, it is clear that the judgment of the Supreme Court or the High Court would relate back to the date when a particular section was inserted in the statute and the provision of Section 154 would be applicable even though such judgment did not exist on the date when the order is passed. In this view of the matter, it is clear that the reasons recorded by the AO for reopening the assessment were not justified in ignoring such principle while deciding with the issue at the appellate stage. The Hon'ble Punjab & Haryana High Court in the matter of CIT v. Atlas Cycle Industries (supra) held that the reassessment notice on basis of two grounds, both grounds found to be incorrect reassessment proceedings cannot continue.
11. The Hon'ble Punjab & Haryana High Court in the case of Vipan Khanna (supra) held that the notice of reassessment on the ground that excessive depreciation had been granted-matter unconnected with depreciation cannot be considered in the assessment proceedings. It was further held that in the proceedings under Section 147, the AO cannot be allowed to make fishing enquiries to probe if any other income had escaped assessment or not. Such enquiries can only be permitted if in the first instance some material comes to his notice to suggest that some other item of income may have escaped assessment or had been underassessed.
12. Same view is taken by the Hon'ble Punjab & Haryana High Court in the cases of CIT v. M.P. Iron Traders (supra) and CIT v. Smt. Binda Devi (supra). We may also mention here that while filing the return of income there is no requirement under the law to file evidence regarding purchase of fixed assets, etc. for claiming depreciation. Section 143(2) gives powers to the AO to direct the assessee to produce the evidence or particulars specified in the return or return of income on (which) the assessee may rely in the respect of such claim. This power could be exercised only at the time of proceedings of regular assessment under Section 143(3) of the IT Act. Therefore, both the reasons recorded by the AO for the purpose of reopening the assessment are not valid and were nonexistent. We may also mention here that the AO apart from these above two reasons for reopening the assessment has proceeded to make the fishing enquiries into the matter with regard to the other issues. Those issues have also been considered and decided in the earlier proceedings. The assessee has filed all the details on the issue of share capital investment and enhanced loss upon which no additions have been made earlier. Therefore, the AO was not authorised to make fishing enquiry to probe such issues because he was not having any material in his possession to form his opinion that income escaped on those issues. In this view of the matter and considering the above discussion and the case law referred to above, we are of the view that the AO has not validly assumed jurisdiction under Section 147/148 of the IT Act. Resultantly, the initiation of the proceedings under Section 147/148 is quashed along with the impugned orders.
13. In view of the above orders, there is no need to decide the issue on merits because of academic interest only.
14 An a result, the appeal of the assessee is allowed.