Income Tax Appellate Tribunal - Mumbai
Dcit Ltu , Mumbai vs The Tata Finance Ltd, Mumbai on 22 March, 2017
आयकर अपीलीय अधिकरण "ई" न्यायपीठ मुंबई में।
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH "E ", MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER Income Tax Appeal No.2961/Mum/2014 (धििाारण वर्ा / Assessment Year : 2003-04) Dy. Commissioner of Income Tax Vs. M/s Tata Finance Ltd Large Tax Payer Unit (now merged with Tata Motors Centre -1, 29th Floor Ltd.) World Trade Centre Bombay House 24 Cuffe Parade Homi Mody Street Mumbai - 400 005 Mumbai - 400 001 PAN : AAACT1629F (अपीलार्थी / Appellant) (प्रत्यर्थी / Respondent) Income Tax Appeal No.296 2/Mum/2014 (धििाारण वर्ा / Assessment Year : 2005-06) Dy. Commissioner of Income Tax M/s Tata Motors Ltd.
Large Tax Payer Unit Bombay House, 24 Centre -1, 29th Floor Homi Mody Street World Trade Centre Mumbai - 400 001 Cuffe Parade PAN : AAACT2T27Q Mumbai - 400 005 (अपीलार्थी / Appellant) (प्रत्यर्थी / Respondent)
अपीलार्थी की ओर से / Appellant by : Smt S Padmaja & Smt Mahva Sarkar प्रत्यर्थी की ओर से / Respondent by : Shri Dinesh Vyas & Shri Manish Haria सुनवाई की तारीख / Date of Hearing : 30/12/2016 घोषणा की तारीख / Date of Pronouncement : 22/03/2017 आदे श / O R D E R PER C.N.PRASAD (J.M.) :
These two appeals are filed by the Revenue against the order of the Ld. CIT (Appeals)-6, Mumbai dated 27.01.2014 for the assessment years 2 Tata Finance Ltd. (now merged with Tata Motors Ltd) ITA No.2961 & 2962/Mum/2014, A.Ys.2003-04 & 2005-06 2003-04 and 2005-06 arising out of the reassessment orders passed u/s 143(3) read with section 147 of the Act in the cases of Tata Finance Ltd (since merged with Tata Motors Ltd.) and Tata Motors Ltd., respectively.
2. Briefly stated, the facts for the assessment year 2003-04 are that the Assessee is engaged in the business of providing loans, hire purchase, leasing, bill discounting and generation of power, filed its return of income on 31.10.2003 declaring loss of Rs.25,11,97,400/- which was revised on 17.02.2005 declaring loss at Rs.46,38,77,040/-. The Assessing Officer completed the assessment u/s 143(3) on 29.03.2006 determining loss at Rs.15,26,07,113/-. Subsequently, the assessment was reopened by issue of notice u/s 148 dated 23.03.2010 and reassessment was completed u/s 143(3) r.w.s. 147 on 16.12.2010 disallowing the loss on assignment of lease rentals of Rs.2,99,88,342/- and depreciation of Rs.11,43,84,250/- claimed in respect of amount received on assignment of receivables holding that income escaped assessment.
3. Similarly, for the assessment year 2005-06 the Assessee filed its return of income on 31.10.2005 declaring income of Rs.851,02,26,690/- under normal provisions of the IT Act and Rs.1488,30,82,446 u/s 115JB of the Act. The assessment was completed u/s 143(3) on 26.12.2008 determining the income of the Assessee at Rs.912,03,47,640/- under normal provisions of the Act. Subsequently assessment was reopened by issue of notice u/s 148 dated 18.02.2011 and completed the reassessment u/s 143(3) r.w.s.147 dated 28.12.2011 disallowing the software expenditure treating it as capital 3 Tata Finance Ltd. (now merged with Tata Motors Ltd) ITA No.2961 & 2962/Mum/2014, A.Ys.2003-04 & 2005-06 expenditure and further deduction u/s 80GGB was denied in the course of reassessment proceedings.
4. The Assessee contended that all the information regarding lease rentals receivables on assignment has been disclosed by the Assessee in the return of income. It was disclosed in the note no.3 of the significant accounting policies and notes of accounts to schedule XVIII to the financial statements filed along with the return of income. It was also contended that the amount received by the Assessee against the assignment of the receivables was booked as revenue income and not reduced from the WDV of block of assets consisting of the lease asset and was disclosed in the Exhibit I to the tax audit report. It was also further contended that in the course of assessment proceedings on a specific query raised by the Assessing Officer with respect to the claim of loss on account of assignment of lease rentals, detailed submissions were made on allowability of loss through letter dated 24.03.2006. It was contended that the submissions were considered by the Assessing Officer and no addition was made while completing the assessment u/s 143(3) of the Act.
5. Similarly for the assessment year 2005-06, the Assessee contended that assessment was reopened to disallow deduction claimed on account of contribution to superannuation fund and software expenses claimed as revenue expenditure. The Assessee contended that return of income filed for assessment year 2005-06 contains the detailed information vide note 7 to the computation of income regarding software expenses and the details 4 Tata Finance Ltd. (now merged with Tata Motors Ltd) ITA No.2961 & 2962/Mum/2014, A.Ys.2003-04 & 2005-06 of software expenses claimed is also enclosed at page 268 of the set of documents filed with the return of income. Deduction on account of payment to superannuation fund was also disclosed in the computation of total income, copy of the receipt of payment of superannuation contribution was enclosed at page no.266 of set of documents filed along with return of income. It was further submitted that in the course of assessment proceedings, the Assessing Officer has issued questionnaire specifically asking for details in regard to software expenses by letter dated 26.09.2008 to which the Assessee has filed its reply by letters dated 20.10.2008 and 18.12.2008 giving the details of software expenses and a note on allowability of the said expenses as revenue. Therefore, it was contended that after examining the details, the Assessing Officer completed the assessment u/s 143(3) of the Act and hence there is no escapement of income.
6. The Assessee therefore contended that necessary details in respect of the disallowances proposed in the reasons for reopening were all furnished in the case of original assessment proceedings either along with the return or in the course of original assessment proceedings before the Assessing Officer and therefore there is no failure on the part of the Assessee in furnishing the necessary information required for completion of assessment. It was contended that the assessments reopened by the Assessing Officer beyond 4 years are bad in law as the first proviso to section 147 of the Act is attracted.
5Tata Finance Ltd. (now merged with Tata Motors Ltd) ITA No.2961 & 2962/Mum/2014, A.Ys.2003-04 & 2005-06
7. However, the Assessing Officer rejected the contentions of the Assessee and completed reassessments for the assessment years 2003-04 and 2005-06 disallowing excess depreciation, disallowing loss claim on assignment on lease rental and depreciation on account of lease rentals for the assessment year 2003-04 and disallowing software expenses and denied deduction u/s 80GGB inspite of payment to electoral trust. On appeal, the Ld. CIT (Appeals) held that the reopening of assessments u/s 147 are bad in law for both these two assessment years. The Revenue is in appeal before us.
8. The Ld. DR vehemently supports the reopening of assessments by the Assessing Officer u/s 147 of the Act.
9. The Ld. Counsel for the Assessee Shri Dinesh Vyas submits that necessary details in espect of the additions, disallowances proposed in the notice issued for reopening the assessments i.e. reasons for reopening were either filed along with the return of income or in the course of original assessment proceedings before the Assessing Officer. The Ld. counsel submits that the original assessments were completed by Assessing Officer after examining the details furnished by the Assessee and accepted the contentions of the Assessee. Therefore, the Ld. Counsel submits that there is no escapement of income within the meaning of provisions of Section 147 of the Act.
6Tata Finance Ltd. (now merged with Tata Motors Ltd) ITA No.2961 & 2962/Mum/2014, A.Ys.2003-04 & 2005-06
10. The Ld. Counsel for the Assessee further submits that the assessment for these two assessment years were reopened beyond a period of 4 years from the end of the assessment years and therefore by virtue of first proviso to Section 147, reopening of assessments are bad in law for the reason that the Assessee has furnished / disclosed fully and truly all the material facts necessary for completion of assessments and therefore since there is no failure on the part of the Assessee, the assessments made beyond the period of 4 years are bad in law. For this proposition, the Ld. Counsel for the Assessee places reliance on the following decisions wherein it has been held that there can be no reopening beyond a period of 4 years when an assessment has taken place u/s 143(3) of the Act unless there is failure on the part of the Assessee to disclose fully and truly all material facts necessary for completion of assessment.
i) M/s Tata Communication Ltd. V Addl. CIT (1TA No. 3417/M /2009 & CO No.201/M/2012)
ii) DCIT v Aristocrat Luggage Ltd. (ITA No.5422/M/2013) (ITAT Mumbai)
iii) Hindustan Lever Limited v R. B. Wadkar (268 ITR 332) (Bom.)
iv) Hindustan Lever Limited v R. B. Wadkar (268 ITR 339) (Bom.)
v) Kimplas Trenton Fittings V. ACIT (340 ITR 299) (Bom.)
vi) Idea Cellular Ltd. v. DCIT (301 ITR 407) (Bom.)
vii) IPCA Laboratories Ltd v DCIT (251 ITR 416) (Bom.)
viii) Bhor Industries Limited v ACIT (267 ITR 161)(Bom)
ix) ICICI Bank Limited v DCIT (268 ITR 203)(Bom.)
x) CIT v Daimler Chrysler India (P.) Ltd. (33 taxmann. com
419)(Bom)
xi) NYK Line (India) Ltd. v DCII (346 ITR 355)(Bom.) 7 Tata Finance Ltd. (now merged with Tata Motors Ltd) ITA No.2961 & 2962/Mum/2014, A.Ys.2003-04 & 2005-06
xii) Bhavesh Developers v AO (188 Taxman 123)(Bom.)
xiii) Own case - Bombay High Court order dated 16.11.2011 A.Y.1992-93 (Appeal No.6036 of 2010)
xiv) Own case - ITAT order dated 23.08.2006 for A.Y.1992-93 (ITA No.961/Mum/03)
xv) Own case - ITAT order dated 08.05.2008 for A.Y.1997-98 (ITA No.5368/Mum/05) xvi) Own Case - ITAT order dated 7.2.2006 for A.Y.1990-91 & A.Y.1991-92 (ITA No.1676-1677/Mum/03)
11. The Ld. Counsel for the Assessee further submits that the reasons recorded by the Assessing Officer do not allege that there was failure on the part of the Assessee to disclose fully and truly all material facts necessary for completion of assessment. He submits that the reasons recorded by the Assessing Officer nowhere stated that there was failure on the part of the Assessee to disclose fully and truly all material facts necessary for the assessment. The Ld. Counsel submits that if there is no such allegation in the reasons recorded for reopening beyond a period of 4 years then reassessment is bad in law and liabile to be quashed. For this proposition he places reliance on the following judicial precedents.
i) Hindustan Lever Limited v R. B. Wadkar (268 ITR 332) (Bom.)
ii) Hindustan Lever Limited v R. B. Wadkar (268 ITR 339) (Bom.)
iii) Titanor Components Ltd. v ACIT (243 CTR 520) (Bom.)
iv) United Shippers Ltd. v. ACIT (371 ITR 441) (Bom.)
v) Tao Publishing (P.) Ltd. v DCIT (370 ITR 135)(Bom.)
vi) Crompton Greaves Ltd. v ACIT (275 CTR 49) (Bom.)
vii) Business India v JCIT (370 ITR 154) (Bom.)
viii) Sound Casting (P.) Ltd. v DCIT (250 CTR 119) (Bom.)
ix) Priya Blue Industries (P.) Ltd. v DCIT (30 taxmann.com 68) (Guj) 8 Tata Finance Ltd. (now merged with Tata Motors Ltd) ITA No.2961 & 2962/Mum/2014, A.Ys.2003-04 & 2005-06
12. The Ld. Counsel for the Assessee further submits that the reassessments were not made based on new information or fresh facts but was made merely on a change of opinion and therefore they are bad in law. The Ld. Counsel for the Assessee submits that the reasons recorded for reopening the assessment is based on information already on record and it is merely a reappraisal of the same set of facts. The claim of the Assessee was specifically disclosed as a part of notes on accounts to the financial statements, specific submissions in this regard were made vide letter dated 24.03.2006 during the course of original assessment proceedings. The Ld. Counsel submits that since the primary facts necessary for assessment are disclosed to the Assessing Officer and details were submitted during the course of assessment proceedings to the satisfaction of the Assessing Officer, the Assessing Officer is not entitled to commence reassessments on change of opinion in the absence of any new information or change in facts. He places reliance on the following decisions for this proposition.
i) CIT V Kelvinator of India Ltd. (256 ITR 1)(Del)(FB) affirmed in CIT v Kelvinator of India Ltd. (320 ITR 561)(SC)
ii) CIT v Usha International (348 ITR 485)(Del)(FB)
iii) Idea Cellular Ltd. v DCIT (301 ITR 407) (Bom.)
iv) Cartini India Limited v ACIT (314 ITR 275) (Bom.)
v) CIT v Prima Paper & Engg. Ltd. (364 ITR 222) (Bom.)
vi) Siemens Information Systems Ltd. v. ACIT (295 ITR 333) (Bom.)
vii) CIT v ICICI Bank Ltd. (349 ITR 482) (Bom.)
viii) NYK Line (India) Ltd. v DCIT (346 ITR 361)(Bom.)
ix) Aroni Commercials Ltd. v ACIT (377 ITR 405)(Bom.)
x) GKN Sinter Metals Ltd. v ACIT (371 ITR 225) (Bom.)
xi) Rabo India Finance Ltd. v DCIT (346 ITR 528)(Bom.) 9 Tata Finance Ltd. (now merged with Tata Motors Ltd) ITA No.2961 & 2962/Mum/2014, A.Ys.2003-04 & 2005-06
13. We have heard the rival submissions, perused the orders of the authorities below and case laws relied on. On a perusal of the reasons for reopening for both these assessment years, it is very much clear that the reasons were recorded based on the information which was already available in the records of the Assessee. There was no external information which has come to record suggesting that there is escapement of income in these two assessment years. No new information or tangible materials came to the possession of the Assessing Officer after completion of the original assessments to form a belief that income has escaped assessment or has been under assessed. The submissions of the Assessee that all the information regarding disallowances or the reasons for reopening assessments were very much forming part of the returns, its annexures, tax audit report and further letters submitted on the enquiries made by the Assessing Officer in the original assessment proceedings. These facts are not been controverted by the revenue at any stage. The Assessee furnished/disclosed fully and truly all the necessary details relevant for completion of assessment in respect of the additions/disallowances which were proposed in the reasons for reopening the assessments. Therefore, we are of the view that it is a mere change of opinion by the Assessing Officer to make additions/disallowances based on the same set of facts which is not permissible under law. We also observe from the assessment order as well as the order of the Ld. CIT (Appeals) that in fact Ld. Commissioner issued notice u/s 263 for the assessment year 2003-04 seeking to disallow the loss claimed on account of assignment of receivables and a detailed reply was furnished by the Assessee and the Ld. CIT dropped 10 Tata Finance Ltd. (now merged with Tata Motors Ltd) ITA No.2961 & 2962/Mum/2014, A.Ys.2003-04 & 2005-06 the proceedings initiated u/s 263 vide letter dated 22.08.2007. Therefore it cannot be said that the Assessing Officer wanted to reopen the assessment based on fresh materials.
14. We find that almost similar situation arose in Tata Communications Ltd which is a group concern of the Assessee for the assessment year 2001-02, wherein the details were furnished in the course of original assessment proceedings and the Assessing Officer having examined all these materials and formed an opinion while accepting the Assessee claim, he reopened the assessment on the basis of very same material. The Coordinate Bench of this Tribunal in ITA No.3417/M/2009 & CO No.201/M/2012, ITA No.3326/M/2009 dated 29.02.2016 held that reopening of assessment on the basis of very same material amounted to review of earlier order on a mere change of opinion observing as under:
"14. We have patiently heard the Ld. Counsels and carefully considered the submissions made by them on the basis of facts and materials on record and relevant case laws. The sum and substance of the argument from assessee's side is the reopening of assessment is invalid as no new information/tangible material came to the possession of the AO after completion of original assessment to form a belief that income has escaped assessment or has been under assessed.
15. The second contention from the assessee's side is, AO having examined all these materials and formed an opinion while accepting assessee's claim of depreciation in the original assessment, the reopening on basis of very same material amounts to review of the earlier order passed on a mere change of opinion which is not permissible under law. For examining the validity/acceptability of the above said contentions of the assessee it is necessary to examine the facts on record to ascertain whether the AO in course of the original assessment proceeding has examined assessee's claim of depreciation on GDS and interconnect TAS and whether subsequent to the completion of original assessment there is any fresh information/tangible material available with the AO to form a belief that assessee has claimed excess depreciation by treating the GDS and interconnect TAS as computer instead of plant & machinery thereby causing 11 Tata Finance Ltd. (now merged with Tata Motors Ltd) ITA No.2961 & 2962/Mum/2014, A.Ys.2003-04 & 2005-06 escapement of income or under assessment of income. As could be seen, the assessee along with the return of income filed has submitted a tax audit report from the statutory auditor in compliance to the provisions of section 44AB of the Act. Further, reference to the tax audit report reveals that in the statement of depreciation forming part of the tax audit report assessee has disclosed all informations relating to the depreciation claimed for the relevant assessment year. There is no dispute to the fact that in course of original assessment proceeding along with the return of income the above said tax audit report was available before the AO. Further a careful reading of the assessment order demonstrates that the AO has extensively referred to assessee's claim of depreciation on different items of fixed assets. Therefore, it cannot be accepted that claim of depreciation on GDS and interconnect TAS would have escaped the attention of the AO as in the statement of depreciation the assessee has specifically mentioned the claim of depreciation under different heads. In addition to the information disclosed in the tax audit report, it is observed that in letter dated 19.11.03 assessee in response to query raised by the AO during the original assessment proceeding has specifically explained the justification of claim of depreciation at 60% on GDS by treating it as computer. The aforesaid facts would clearly suggest that in course of original assessment proceeding under section 143(3) of the Act the AO has examined not only assessee's claim of depreciation on GDS and interconnect TAS but has accepted the claim after application of mind. Whether the acceptance of assessee's claim by the AO is proper or improper is a different issue. But, facts remain the AO has examined the issue and completed the assessment. That being the case in absence of any fresh/tangible material coming to the possession of the AO, the reopening of assessment on the basis of very same material would amount to review of the earlier order passed on a mere change of opinion as the AO has already formed an opinion with regard to assessee's claim of depreciation, whether rightly or wrongly. Though a catena of decisions have been cited by Ld. Counsels, it is not necessary to deal with each one of them. Suffice to say, we would prefer to discuss the principles laid down in some of the judicial precedents placed before us. In case of Ranbaxy Laboratories Ltd. vs. DCIT (supra) the Hon'ble Delhi High Court referring to explanation 1 of section 147 observed that disclosure made by the assessee in a tax audit report is in the nature of statutory disclosure hence cannot be considered to be a piece of evidence which was hidden in some books of account which the AO could have possibly with due diligence discovered. It was held that the tax audit report having placed before the AO along with the return which the AO was duty bound to go through before completing the assessment will not fall in the category of material as referred to in explanation 1 to section 147. The Hon'ble Bombay High Court in case of 3 I Infotech Ltd. vs. CIT (supra) after examining the true import of 12 Tata Finance Ltd. (now merged with Tata Motors Ltd) ITA No.2961 & 2962/Mum/2014, A.Ys.2003-04 & 2005-06 explanation 1 to section 147 and the legislative intent expressed similar view. The Hon'ble Supreme Court in much referred case of CIT vs. Kelvinator of India Ltd. 320 ITR 561 has in clear terms held that even after the amendment of section 147 of the Act by the Direct Tax Laws Amendment Act, 1987 it cannot be construed that the AO has been given a wider power to reopen the assessment by giving go bye to the two basic conditions for reopening the assessment viz. there must be tangible material in possession of AO indicating escapement of income and there must be a live link between such material and formation of belief. The Hon'ble Court held, unless a schematic interpretation is given to the words 'reason to believe' it will give arbitrary power to AO to reopen assessment on mere change of opinion. The Hon'ble Supreme Court thereafter proceeded to hold that unless there are tangible material coming to the possession of the AO to show that income has escaped assessment, the assessment cannot be reopened on a mere change of opinion. In case of Asian Paints 308 ITR 195 the Hon'ble Jurisdictional High Court held that when an assessment is completed under section 143(3) of the Act it is to be presumed that the AO has completed such assessment after taking into consideration all facts and materials on record. Therefore, on the very same set of facts and circumstances assessment cannot be reopened as it will amount to change of opinion. In contrast, the decisions cited by Ld. CIT DR are found to inapplicable to the present case. On perusal of these decisions it was seen that most of them are in the context of true and full disclosure of all material facts by the assessee in terms of proviso to section 147, which is not an issue in the present appeal. Moreover, none of the decisions lay down the proposition that in absence of any tangible material assessment can be reopened on mere change of opinion. Be that as it may, on examination of facts and materials on record in the light of the principles laid down in the judicial precedents referred to above it is found that there is no fresh/tangible material in the possession of the AO while recording his reasons for reopening of the assessment. It is evident that action under section 147 has been initiated by revisiting/re-appreciating the very same materials on the basis of which original assessment under section 143(3) of the Act was completed. As the AO while completing the original assessment has examined these facts and materials and passed the assessment order after application of mind, the reopening of assessment on the very same set of facts and materials would tantamount to review of the assessment order passed earlier that too on a mere change of opinion which is not permissible under law. Accordingly, in our considered opinion issuance of notice under section 148 of the Act in the present case is invalid. As a natural consequence the assessment order passed in consequence thereof also has to be declared as invalid and accordingly is to be quashed. Before parting, we may make it clear that the decision rendered by us as above is purely in 13 Tata Finance Ltd. (now merged with Tata Motors Ltd) ITA No.2961 & 2962/Mum/2014, A.Ys.2003-04 & 2005-06 the context of validity of reopening of assessment under section 147 of the Act and cannot be considered to be a precedent for assessee's claim of depreciation on GDS and interconnect TAS at the rate of 60% by treating them as a computer. That issue has to be decided according to its own merit in an appropriate case. As we have quashed the assessment order while considering the issue raised in the additional ground, the grounds raised on merits are of mere academic interest, hence there is no necessity to adjudicate them."
15. In the present case before us also, the Assessing Officer examined the details in respect of the proposed additions / disallowances mentioned in the reasons for reopening the assessments, while completing the original assessments u/s 143(3) of the Act. The Assessee in the course of original assessment proceedings furnished necessary details, disclosed in the return, its annexures, tax audit report which were all considered and completed the assessments by the Assessing Officer. Therefore, the assessments cannot be reopened to disallow such examined issue on same set of facts. Respectfully following the above decision of the Co-ordinate Bench in the Assessee's own case, we hold that reassessments for A.Y.s 2003-04 and 2005-06 made u/s 147 of the Act are bad in law.
16. In the result, appeals of the Revenue are dismissed.
14Tata Finance Ltd. (now merged with Tata Motors Ltd) ITA No.2961 & 2962/Mum/2014, A.Ys.2003-04 & 2005-06 Order pronounced in the open court on the 22nd day of March 2017.
Sd/- Sd/- RAMIT KOCHAR C.N.PRASAD ले खा सदस्य / न्याधयक सदस्य / ACCOUNTANT MEMBER JUDICIAL MEMBER मुुंबई / Mumbai; दिनाुं क / Dated 22/03/2017 LR, SPS
आदे श की प्रधिधलधप अग्रे धर्ि / Copy of the Order forwarded to :
1. अपीलार्थी / The Appellant
2. प्रत्यर्थी / The Respondent.
3. आयकर आयुक्त(अपील) / The CIT(A), Mumbai.
4. आयकर आयुक्त / CIT
5. दवभागीय प्रदतदनदि, आयकर अपीलीय अदिकरण, मुुं बई / DR, ITAT, Mumbai
6. गार्ड फाईल / Guard file.
सत्यादपत प्रदत //True Copy// आदे शािसार/ BY ORDER, सहायक पुं जीकार (Asstt. Registrar) आयकर अपीलीय अधिकरण, मुुं बई / ITAT, Mum