Income Tax Appellate Tribunal - Chennai
Saipem Aban Drilling Co. Pvt. Ltd., ... vs Department Of Income Tax on 5 January, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
'A' BENCH, CHENNAI
BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER
AND SHRI GEORGE MATHAN, JUDICIAL MEMBER
I.T.A. No. 2151/Mds/2010
(Assessment Year : 2003-04)
M/s Saipem Aban Drilling Co.
The Assistant Commissioner Pvt. Ltd.,
of Income Tax, v. Janpriya Crest,
Company Circle VI(1), No.96, Pantheon Road,
Chennai - 600 034. Egmore, Chennai - 600 008.
PAN : AAECS5065L
(Appellant) (Respondent)
Appellant by : Shri K.E.B. Rangarajan,
Junior Standing Counsel
Respondent by : Shri T. Banusekar, CA
Date of Hearing : 05.01.2012
Date of Pronouncement : 05.01.2012
O R D E R
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER :
In this appeal filed by the Revenue, it assails the order dated 5.10.2010 of Commissioner of Income Tax (Appeals)-V, Chennai, in which he held that reopening done for the impugned assessment year to be invalid, and deleted the adjustment done by the Assessing 2 I.T.A. No. 2151/Mds/10 Officer by reworking the book profit, setting off brought forward depreciation/loss.
2. Short facts apropos are that assessee engaged in oil drilling, had filed return of income which was processed under Section 143(1) of Income-tax Act, 1961 (in short "the Act"). Thereafter, the return was selected for scrutiny and the assessment completed under Section 143(3) of the Act on 3.3.2006. On 25.3.2008, a notice under Section 148 of the Act was issued for a reason that there was escapement of income on account of wrong adjustment of carried forward business loss/depreciation, whichever was lower, for the purpose of computation of book profit under Section 115JB of the Act. In the reassessment proceedings, assessee submitted that the earlier computation of book profit was correct and reiterated the correctness of such computation. Nevertheless, the Assessing Officer was of the opinion that computation of book profit under Section 115JB of the Act was incorrectly done by the assessee and according to him, against brought forward loss of ` 12,24,86,294/- claimed by the assessee for setting off against the book profit, what was actually allowable in accordance with clause (iii) of Explanation 1 to Section 115JB of the Act was only ` 4,30,97,010/-.
3 I.T.A. No. 2151/Mds/10
3. Assessee, aggrieved by the reopening done for the impugned assessment year as well as re-computation of book profit, filed an appeal before ld. CIT(Appeals). Argument of the assessee before ld. CIT(Appeals) was that along with its computation, it had filed detailed working of the book profit under Section 115JB and audit report in Form 29B from statutory auditors. Once, according to assessee, the original assessment was completed by the Assessing Officer based on such working of the book profit, the reopening now done was only on a change of opinion. As per the assessee, all the facts relevant to the computation were available before Assessing Officer and Assessing Officer having passed a speaking order without any fresh material on record, invoking Section 147 of the Act was uncalled for. Reliance was placed on the decision of Hon'ble Apex Court in the case of CIT v. Kelvinator of India Ltd. (320 ITR 561) which, according to him, upheld the decision of full Bench of Delhi High Court in the case of CIT v. Kelvinator of India Ltd. (256 ITR 1). Ld. CIT(Appeals) was appreciative of these contentions. According to him, Assessing Officer while doing assessment under Section 143(3) originally, was having all the material with regard to computation of book profit under Section 115JB of the Act and by reopening, he was only attempting to 4 I.T.A. No. 2151/Mds/10 do a review of the assessment order. Ld. CIT(Appeals) held that a reopening could not be done on change of mind, when the primary facts were already before the Assessing Officer. It was also held by ld. CIT(Appeals) that the adjustment specified in clause (iii) of Explanation 1 to Section 115JB was correctly done by the assessee in so far as setting off of carried business loss/depreciation was concerned. According to him, the position as on a particular date could not be assumed to be static and no methodology or mode of adjustment, that was to be followed was prescribed for calculating the unadjusted carried forward losses/depreciation remaining, after set- off pertaining to years prior to that. According to him, the method of adjustment done by the assessee while computing the book profit to absorb earlier business loss/depreciation could not be brushed aside, without pointing out any specific mistake therein. The Assessing Officer had reworked the brought forward loss/depreciation for adjustment without showing where the assessee went wrong in the methodology adopted by it. He, therefore, held that on merits also assessee was to succeed.
4. Now before us, learned D.R., strongly assailing the order of ld. CIT(Appeals), submitted that when original assessment was done by 5 I.T.A. No. 2151/Mds/10 the Assessing Officer, he had not applied his mind to the computation of book profit under Section 115JB of the Act. According to him, original assessment placed at paper-book pages 18 to 23 clearly showed that this issue was not at all considered. According to the learned D.R., assessee had not produced any evidence to indicate that the issue regarding calculation of book profit under Section 115JB MAT was ever considered in the original assessment proceedings. When there was no discussion on the issue in the assessment order and when no details were called for by the Assessing Officer during the course of original assessment proceedings, there was no opinion ever formed and hence, there could be no question of change of opinion. As per the D.R., there was no opinion formed by the Assessing Officer in the first place and therefore, decisions relied on by ld. CIT(Appeals) for holding that reassessment proceedings were initiated simply on change of opinion, was incorrect. According to learned D.R., clause (iii) of Explanation 1 to Section 115JB of the Act was not correctly applied by the Assessing Officer in the original assessment. Assessee had in assessment year 2000-01 itself adjusted substantial part of its book losses excluding depreciation and later in assessment year 2002-03 6 I.T.A. No. 2151/Mds/10 also substantial part of book losses were adjusted against the book profits. The result, therefore was, that there was a substantial deduction in book loss without considering depreciation and for the impugned assessment year, such carried forward book loss was much lesser than the carried forward depreciation. The Assessing Officer in the original assessment completed ignored this aspect and accepted whatever was computed by the assessee in its computation of income, and this clearly demonstrated non-appliance of mind.
5. Ad libitum reply of the learned A.R. was that the issue was covered by the decision of Hon'ble Apex Court in the case of Kelvinator of India Ltd. (supra). According to him, the Assessing Officer clearly gave the computation of book profit under Section 115JB of the Act in the assessment done under Section 143(3) of the Act and it would be naïve to argue that there was no application of mind. Especially so, when assessee has given the working of book profit in its original return of income as well as in the computation of income along with audit reports certified by the statutory auditors.
6. In his rejoinder, learned D.R. once again submitted that the reopening was valid. Relying on the decision of a co-ordinate Bench 7 I.T.A. No. 2151/Mds/10 of this Tribunal in the case of Lakshmi Machine Works Ltd. v. ACIT (126 ITD 343), he argued that incorrect computation of brought forward loss/depreciation for application of clause (iii) of Explanation 1 to Section 115JB was a relevant reason for reopening of the assessment within four years from the end of the assessment year and here, in this case, the reopening was well within the time-frame of four years. Reliance was also placed on the following decisions:-
1. Kalyanji Mavji & Co. v. CIT (SC) 102 ITR 287
2. Ess Kay Engineering Co. (P) Ltd. v. CIT (SC) 247 ITR 818
3. Revathy C.P. Equipments Ltd. v. DCIT & Ors. (Mad) 241 ITR 856
4. A.L.A. Firm v. CIT (Mad) 102 ITR 622
5. ITO v. Purushottam Das Bangur & Anr. (SC) 224 ITR 362
6. Family of V.A.M. Sankaralinga Nadar v. CIT (Mad) 48 ITR 314
7. Indo-Aden Salt Mfg.& Trading Co. P. Ltd. v. CIT (SC) 159 ITR 624
8. ACIT v. Mahindra Holidays & Resorts (India) Ltd. (ITAT, SB-Chennai) 3 ITR (Trib) 600
7. Issue on merits will become relevant only after dealing with the dispute regarding jurisdictional aspect of the reopening. There is no dispute that the reopening was within four years and therefore, first proviso to Section 147 had no application. The argument of the Revenue is that in the original assessment proceedings, there was no application of mind whatsoever by the Assessing Officer with regard to computation of book profit for the purpose of MAT levy and therefore, no question of any change of opinion at all. In our opinion, 8 I.T.A. No. 2151/Mds/10 if it can be established that a reopening was done on the basis of a change of opinion, with reference to the original assessment done by the A.O. under Section 143(3) of the Act, even if such reopening was done within four years, in view of the decision of Hon'ble Apex Court in the case of Kelvinator of India Ltd. (supra), it can not be upheld. In that case also a reopening was resorted to within 4 years and the original assessment was done u/s 143(3) of the Act. No doubt, it was held by co-ordinate Bench of this Tribunal in the case of Lakshmi Machine Works Ltd. (supra) that a wrong computation of carried forward business loss/depreciation under clause (iii) of Explanation 1 to Section 115JB was a relevant reason for reopening of assessment at that point of time. When the Tribunal was deciding the case of Lakshmi Machine Works Ltd. (supra), the decision of Hon'ble Apex Court in the case of Kelvinator of India Ltd. (supra) was not available.
The decision of Hon'ble Apex Court in the case of Kelvinator of India Ltd. (supra) was dated 18th January, 2010, whereas, the co-ordinate Bench of this Tribunal gave its decision in the case of Lakshmi Machine Works Ltd. (supra) on 27th March, 2009. So, once Hon'ble Apex Court affirmed the decision of Full Bench of Delhi High Court in the case of Kelvinator of India Ltd. (supra), we have to decide the 9 I.T.A. No. 2151/Mds/10 issue based on the law laid down by the Full Bench of Delhi High Court in the case of Kelvinator of India Ltd. (supra). Now, coming to the facts relevant to the case in hand, undisputedly, assessee had in its computation of income given the work-out of book profit under Section 115JB of the Act and a copy of this, which is placed Department's paper-book page No.12 clearly demonstrates that the claim of set off book loss ` 122,486,294/- was arrived at based on a break-up for various years prior to that, in which assessee had considered book loss before depreciation and after depreciation. It was also stated in such computation that it was done in line with Guidance Note on Section 115JB issued by Institute of Chartered Accountants of India. It is also not disputed that assessee had filed audit report in Form No.29B in support of such computation. Now, if we have a look at the assessment order dated 3.3.2006, in the last page of the order, under the signature of the Assessing Officer, a computation as per Section 115JB has been given and this is reproduced hereunder for brevity:-
10 I.T.A. No. 2151/Mds/10
Computation as per Section 115JB Book Profit 3,35,61,594 Tax @ 7.5% of the above 25,17,120 S.C __1,25,856 26,42,976 TDS 4,71,677 A.T 58,00,000 62,71,677 36,28,701 Interest u/s 234C Chargeable __48,855 35,79,846 Add: Int. u/s 244A _2,49,154 38,29,000 Less: Refund determined as per order u/s 143(1) dt 16/03/04 38,29,000 NIL
8. Assessee having filed the details of the computation of book profit u/s.115JB and the Assessing Officer having himself prepared a computation and made it a part of assessment order, it will not be possible to say that there was no application of mind by the Assessing Officer. The reason why we can say so is clear from the decision of Hon'ble Delhi High Court in Kelvinator of India Ltd.'s case.
It is clearly mentioned therein that the Assessing Officer can be presumed to have applied his mind and formed an opinion, as per Section 114(e) of Evidence Act, even where no specific reference to the point of enquiry was there in the assessment order. It is also observed by their Lordships that no reason was necessary to specify why a particular amount was allowed. Assessing Officer having 11 I.T.A. No. 2151/Mds/10 himself set out the computation u/s.115JB in his assessment order, and assessee having given break-up of carried forward losses/depreciation, along with its return, and that too along with an audit report, in our opinion, application of mind by the Assessing Officer was pregnant. Just because there was no discussion on such computation in the body of assessment order, we cannot come to a conclusion that there was no application of mind by the Assessing Officer. Various decisions relied on by the learned D.R. in this regard pale into insignificance in view of the decision of Hon'ble Apex Court in the case of Kelvinator of India Ltd. (supra), which affirmed the Full Bench decision of Hon'ble Delhi High Court decision in the same case.
9. As already mentioned by us, so far as decision of Lakshmi Machine Works Ltd. (supra) of co-ordinate Bench of this Tribunal relied on by learned D.R. is concerned, it was given prior to the date on which the Apex Court rendered their decision in the case of Kelvinator of India Ltd. (supra). Nothing has been brought before us to show that any new material came into the possession or any tangible evidence was available with Assessing Officer which was not available at the time of original proceedings that could throw light on 12 I.T.A. No. 2151/Mds/10 any escapement of income for the impugned assessment year. Therefore, in our opinion, ld. CIT(Appeals) was correct in holding that reopening done was invalid. Since we have affirmed the decision of Ld.C.I.T.(A) with regard to jurisdictional aspect, the merits of the adjustment which also has been decided by ld. CIT(Appeals) in favour of assessee, is not adjudicated.
10. In the result, appeal filed by the Revenue stands dismissed. Order pronounced in the open court after conclusion of hearing on 5th January, 2012.
sd/- sd/-
(George Mathan) (Abraham P. George)
Judicial Member Accountant Member
Chennai,
Dated the 5th January, 2012.
Kri.
Copy to: (1) Appellant
(2) Respondent
(3) CIT(A)-V, Chennai-34
(4) CIT, Chennai-III, Chennai
(5) D.R.
(6) Guard file