Income Tax Appellate Tribunal - Delhi
Container Corporation Of India Ltd., ... vs Department Of Income Tax on 10 October, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'B', NEW DELHI
BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER
&
SHRI H.S. SIDHU, JUDICIAL MEMBER
ITA No. 184/Del/2013
Assessment Year: 2004-05
DCIT, vs. Container Corporation of India Ltd.
Circle 3(1), C-3, Mathura Road,
New Delhi. Opp. Apollo Hospital,
New Delhi.
AAACC1205A
(Appellant) (Respondent)
Appellant by : Smt. Parwinder Kaur , Sr. DR
Respondent by : Sh. K. Sampath, Adv., Sh. Raj Kumar, Adv.
ORDER
PER H.S. SIDHU, J.M.
The Revenue has filed the present appeal against the impugned order dated 17.10.2012 passed by the Commissioner of Income Tax (Appeals)-VI, New Delhi for A.Y. 2004-05.
2. The assessee is a company filed its return of income on 01/11/2004 and the AO completed the same u/s 143(3) of the Income Tax Act, 1961 (hereinafter called the Act) on 28/02/2006 at the income of Rs. 435,03,14,230/-. On the appeal filed by the assessee, the assessee got certain relief and appeal affect u/s 143(3)/250/154 was given by the AO on 09/04/2008.
3. The assessee company is a Government of India Undertaking working under the administrative control of Ministry of Railways. It is engaged in the business of handling and transportation of containerized cargo. Its operating activities are mainly carried out at its Inland ITA No. 184/D/2013 - Container Corporation of India Ltd. 2 Container Depots (ICDs). Container Freight Stations (CFS) and Port Side Container Terminals (PSCTs) spread all over the country. Its wagons are running on Indian Railways System for carriage of container traffic. The appellant is engaged in developing, operating and maintaining infrastructure facilities, income from which is eligible for deduction u/s 80IA of the Income Tax Act.
4. Subsequently, the case of the assessee company was reopened u/s 147 of the Income Tax Act and a notice u/s 148 was issued to the assessee company on 28/03/2011. The Assessing Officer finally completed the reassessment u/s 143(3)/147 of the Act at total income of Rs. 361,31,42,947/- vide order dated 20/12/2011. In the reassessment u/s 143(3)/147 of the Act, the AO made the following additions:
a) Disallowance of Performance Linked Incentive (PLI) Rs. 1,87,00,000
b) Disallowance of depreciation on plant & machinery on Account of exchange variation Rs. 21,08,326/-
c) Disallowance of software development expenses Rs. 18,43,759/-
5. Aggrieved by the aforesaid additions the assessee filed an appeal before the ld. First Appellate Authority who vide impugned order dated 17/10/2012 allowed the appeal filed by the assessee and quash the re- assessment order passed u/s 147 in pursuance to the notice u/s 148 of the Act by holding that notice has been issued after the expiry of four years from the end of relevant assessment years which is barred by limitation and beyond the jurisdiction.
6. The Revenue feels aggrieved against the impugned order dated 17/10/2012 passed by the CIT(Appeals)-VI, New Delhi filed the present appeal.
7. Ld. DR relied on the order passed by the AO u/s 143(3)/147 dated 20/12/2011 and the contention raised by the Revenue in its grounds of appeal.
ITA No. 184/D/2013 - Container Corporation of India Ltd. 38. Ld. Counsel for the assessee controverted the argument advanced by ld. DR and relied upon the impugned order passed by the ld. First Appellate Authority. He had also filed a small paper book containing page 1 to 37 in which he has attached (i) written submissions filed before CIT(A) dated 07.08.2012, (ii) copy of submission made before AO u/s 132(2) regarding the claim of Productivity Linked Incentive (PLI) and Depreciation on P&M, (iii) copy of submissions made before AO during reassessment proceedings u/s 147/148, (iv) copy of reasons recorded by DCIT for reopening the case u/s 148, (v) copy of CBDT Circular No. 549 dated 31.10.1989 explaining scope of amended section 147, (vi) copy of CIT(A) order u/s 263 for A.Y. 2005-06 regarding Productivity Linked Incentive.
9. At the time of hearing he has also filed a synopsis to support the impugned order and requested that the appeal filed by the Revenue may be dismissed.
10. We have heard both the parties and perused the orders passed by the Revenue authorities along with the documentary evidence filed by the assessee and we are of the view that the AO completed the assessment u/s 143(3) of the Act at an income of Rs. 435,03,14,230/- and on appeal filed by the assessee the ld. First Appellate Authority has also given some relief to the assessee and appeal effect u/s 143(3)/250/154 was also given by the AO on 09/04/2008. Subsequently, the case of the assessee was reopened u/s 147 of the Act and a notice u/s 148 was issued to the assessee on 28/03/2011. The AO finally completed the reassessment u/s 143(3)/147 of the Act at total income of Rs. 361,31,42,947/- vide order dated 20/12/2011 by making three additions on account of disallowance of Performance Linked Incentive (PLI) amounting to Rs. 1,87,00,000/-, disallowance of depreciation on plant and machinery on account of ITA No. 184/D/2013 - Container Corporation of India Ltd. 4 exchange variation of Rs. 21,08,326/- and disallowance of software development expenses amounting to Rs. 18,43,759/-.
11. Before the ld. First Appellate Authority assessee pleaded that necessary pre-conditions for initiating the re-assessment proceedings has not been fulfilled in the case of assessee because the assessee disclose full details and facts regarding aforesaid claims in course of original assessment completed u/s 143(3) of the Act. The original assessment was completed u/s 143(3) of the Act after examining the relevant details regarding aforesaid claims. In fact the AO also asked the appellant to file documentary evidence in support of the aforesaid claims in response to which the assessee filed the details and evidences. After considering the relevant facts and details and evidences, the AO came to the conclusion that the claims were genuine and allowable under the law. Accordingly, he allowed the claims in the regular assessment completed u/s 143(3) of the Act. The assessee also pleaded that the AO did not have any fresh material or information about the said claims. He had no material or information apart from change of opinion to have reason to believe that income has escaped assessment in the case of the assessee. It is a well settled that where the reasons recorded by the AO disclosed no more than mere change of opinion, the re-assessment proceedings are allowable to be quashed. Even under the provisions of section 147 of the Act w.e.f. 01/04/1989, initiation of re-assessment proceeding on mere change of opinion is not sustainable. The assessee also cited the decision of Hon'ble Delhi High Court in the case of CIT vs. Kelvinator India Limited, 256 ITR 1 in which the Hon'ble High Court had held that section 147 of the Act does not postulate conferment of power upon the AO to initiate reassessment proceedings upon his mere change of opinion. The Hon'ble Court also took into account Circular No. 549 dated 31/10/1989 issued by the CBDT explaining the scope of amended section 147 of the ITA No. 184/D/2013 - Container Corporation of India Ltd. 5 I.T. Act. To support the aforesaid contention the ld. CIT has also cited the decision of Hon'ble Delhi High Court in the case of CIT vs. Eicher Ltd. 294 ITR 310 & DT & TDC Ltd. vs. ACIT, 324 ITR 234, reiterated the earlier decisions and held that reassessment based on mere change of opinion, where material facts were already on record, is bad in law. After thoroughly going through the impugned order, we are of the view that assessee has filed its written submissions on legal issue as well as on merit of the case with the support of various decisions rendered by the Hon'ble Jurisdictional High Court as well as the Hon'ble Supreme Court of India along with the relevant provision of law. The ld. First Appellate Authority has thoroughly considered each and every submission of the assessee and has given its finding in para no. 5 page 11 to 22. In our considered view the ld. First Appellate Authority has passed a well reasoned order on the basis of various decisions on the issues in dispute.
12. As discussed above, in the reassessment order passed u/s 143(3)/147 of the Act, the AO made the three additions namely:
a) Disallowance of Performance Linked Incentive (PLI) Rs. 1,87,00,000
b) Disallowance of depreciation on plant & machinery on Account of exchange variation Rs. 21,08,326/-
c) Disallowance of software development expenses Rs. 18,43,759/-
13. After perusing the reasons recorded which the assessee has attached in the paper book page 26 & 27. We are of the view that AO vide his letter dated 20/12/2005 during the course of original assessment proceeding raised specific query regarding change in accounting policy and the assessee filed its reply dated 12/01/2006 with support of documentary evidence. The AO has considered the same and accepted the explanation given by the assessee. Even otherwise the claim of PLI has also been accepted by the CIT in the proceeding u/s 263 for A.Y. 2005-06 vide his order dated 03/03/2009. Keeping in view of aforesaid discussion, we are of the view that the AO has dealt upon the issue of Performance Linked Incentive (PLI) during the course of original ITA No. 184/D/2013 - Container Corporation of India Ltd. 6 assessment. The assessee company has duly disclosed the change in accounting policy regarding Productivity Linked Incentive before the AO at the time of original assessment.
14. Similarly on the second issue regarding exchange variation of Rs. 84,32,302/- the depreciation chart reducing the cost of fixed assets were submitted by the assessee in the original assessment proceeding as well as in the reassessment proceedings. Therefore, there is no occasion to add back Rs. 24,08,326/- as depreciation on account of exchange variation of Rs. 84,32,302/- capitalized in the cost of fixed assets that the third issue of disallowances of software development expenses we have seen that this issue has been decided in favour of the assessee by the Spl. Bench of ITAT Delhi in ITA No. 72/Del/2006 in the case of M/s Amway India Enterprises vs. DCIT that software development expenses are revenue in nature. The Hon'ble Jurisdictional High Court vide its order dated 04/11/2011 in the case of CIT vs. Asahi India Safety Glass Ltd. (ITA No. 1110/2006 & 1111/2006) has also held that the software development expenses are revenue in nature. The details of software expenses has already been furnished by the assessee during the course of original assessment which is not denied by the Revenue Authority in their orders.
15. We have thoroughly gone through the impugned order on the legal issue also in which the ld. First Appellate Authority has quashed the reassessment order which has been passed after the expiry of four years from the end of assessment years. It is matter of record that the year in question is A.Y. 2004-05 which means any notice u/s 148 issued after 31/03/2009 is not sustainable in the eye of law. It can only be sustainable if it passes the test of proviso, namely that the escapement of income should be on account of failure on the assessee's part to disclose fully and truly all material facts relevant to its income. When the AO is able to demonstrate that escapement of income therein is occasioned by ITA No. 184/D/2013 - Container Corporation of India Ltd. 7 incompetence or inaccuracy in the assessee disclosure. Ld. First Appellate Authority has discussed in detail that in the impugned order query raised by the AO on the additions in dispute has fully been met by the assessee with the support of documentary evidence at the time of original assessment. Therefore, the reassessment order is not sustainable in the eye of law and the AO assumed his jurisdiction u/s 147 of the I.T. Act as it was a case of change of opinion and in our considered view the AO has not brought on record any fresh material or information for assuming jurisdiction u/s 147 of the Act. We are of the considered view that ld. First Appellate Authority has passed a well reasoned order on merit as well as on legal issue on the basis of various decisions rendered by the Hon'ble Jurisdictional High Court and the Hon'ble Supreme Court of India. Therefore, no interference is called for in the impugned order. Be uphold the impugned order dated 17/10/2012 passed by the ld. First Appellate Authority by dismissing the appeal filed by the Revenue.
16. In the result, the Revenue's appeal is dismissed.
The order is pronounced in the open court on 10/10/2014 Sd/- Sd/-
(S.V. MEHROTRA) (H.S. SIDHU)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 10/10/2014
*Kavita, P.S.
Copy forwarded to: -
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT
TRUE COPY
By Order,
ASSISTANT REGISTRAR
ITA No. 184/D/2013 - Container Corporation of India Ltd. 8