Income Tax Appellate Tribunal - Delhi
M/S Saket Motors Pvt. Ltd.,, New Delhi vs Acit, New Delhi on 9 February, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "G", NEW DELHI
BEFORE SH. BHAVNESH SAINI, JUDICIAL MEMBER
AND
SH. L.P.SAHU, ACCOUNTANT MEMBER
ITA No. 5093/Del/2013
(Assessment Year: 2004-05)
Saket Motors Pvt. Ltd., ACIT
Plot No. 71, Block-B-2, Circle7(1),
MCIE, New Delhi
Badarpur, Mathura Road,
Vs.
New Delhi
PAN : AAACS2566E
(Appellant) (Respondent)
Assessee by : Sh. V. Raja Kumar, Adv.
Revenue by : Sh. Koushtendra Tewari, Sr. DR.
Date of hearing : 22.11.2017
Date of pronouncement : 09.02.2018
ORDER
PER L.P.SAHU, ACCOUNTANT MEMBER :
This is an appeal filed by the assessee against order dated 08.08.2013 passed by the ld. CIT(A)-X, New Delhi for assessment year 2004-05 on the following grounds of appeal :-
"1) Confirming the action of the Assessing Officer in passing the order u/s 147/148 of the Act.
2) confirming the action of the Assessing Officer in passing order u/s 147/143(3) of the Act.
3) not deleting additions made by the Assessing Officer on account of claim of depreciation on energy saving device and UPS and only issuing directions to examine whether the revenue has filed SLP 2 ITA No. 5093.Del.2013 against the judgment of the Hon'ble Rajasthan High Court in the case of Agarwal Transformers Pvt. Limited 258 ITR 251."
2. The brief facts of the case are that the assessee filed his return of income on 29th October, 2004 by declaring income of Rs. 5,09,40,572/-. Later on, original assessment u/s 143(3) was completed on 30.03.2006 at the taxable income of Rs.
5,11,42,180/-. The case was re-opened u/s 147/148 and ld. Assessing Officer issued notice on 28.03.2011 after recording reasons which is as under :-
" The assessee has claimed depreciation at higher rate on certain items viz, printer and 25 Kva silent DG set which resulted claiming excess depreciation by Rs. 8,65,926/-.
2. The assessee is a dealer in car and during the year has purchased and sold mutual funds, thereby earning a profit of Rs. 6,91,410/-. This amount of Rs. 6,91,410/- should have added to the total Income. I have, therefore, reason to believe that an amount of Rs. 15,57,336/- (865926+691410) has escaped assessment within the meaning of section 147© of the IT Act, 1961."
3. In response to notice issued by the assessing officer, the assessee submitted that the return filed u/s 139(1) may be treated as a return filed in response to notice of u/s 148. Later on, the statutory notices were issued to the assessee. The assessee filed objections regarding reopening of the case which is placed on record. The objections raised by the assessee were disposed of by the assessing officer and after relying some case laws by the assessing officer.
4. During the course of re-assessment proceedings, the ld. Assessing officer observed that the assessee has purchased a new generator etc. the observations of the assessing officer is as under :
3 ITA No. 5093.Del.2013"It is observed from the depreciation chart as per the Income-tax Act, that the assessee has purchased a new generator set of 25KVA on 07.06.2003 for Rs.2,99,000/-. The assessee had the opening WDV of Rs.7,35.778/- under the head Power generating Sets (Block-IV (100%). During the year the assessee has charged 100% depreciation on the WDV and the set which has been purchased during the year by it. Whereas the depreciation allowable to the assessee was only 25%. Therefore, whereas the depreciation of Rs.2,58,694/- should have been claimed by the assessee, it claimed a depreciation of Rs. 10,34,778. Thus it claimed extra depreciation of Rs.7,76,084/-. The assessee has contested that the depreciation has been rightly claimed at the rate 100% electric generating sets in terms of item 3(xiii)m of the Appendix I of the income Tax Rules, 1962 wherein it is clearly provided that the depreciation is 100%. The assessee also claimed that higher depreciation is based on the decision in the case of C1T v. AGARWAL TRANSFORMERS P. L ID.(2002) 258 ITR 251 IB. On perusal it is noticed that the assessee had relied on the Appendix applicable for earlier years, even if the case of the assessee is covered by Old Appendix I which is applicable for assessment years 2003-04 to 2005-06 part III-8(xiii)(m) the rate of depreciation is only 80% and not 100% as claimed by the assessee. Now the question arises whether the case of the assessee is covered by the above said rate of depreciation which has been allowed for the Renewable energy devices. The relevant para of the order of Hon'ble Rajasthan High Court is cited as under:
"...In order to appreciate the controversy involved, it will be convenient to extract the relevant entry at clause (xiii) of item (10A) of Appendix I appended to the Income-tax Rules, which reads as follows:
"Any special devices including electric generators and pumps running on wind energy. "
According to the rules of construction, where two or more words which are susceptible of analogous meaning are coupled together noscitur a sociis, they are understood to be used in their cognate sense. They take, as it were, their colour from each other, the meaning of the more general being restricted to a sense analogous to that of the less general. Thus, in our view, the words electric generator must be construed ejusdem generis. The electric generator by itself generates electricity and therefore does not fall within the renewable energy devices. It is different from pumps run on wind energy, which falls within the renewable energy devices. Thus, it is erroneous to say that the condition "run on wind energy" is also attached to electric generators . Even grammatically neither , nor the word "both" is used after the word" pumps" in the relevant entry and this also clarifies that the condition running on wind energy is only attached to the word" pump"
and not to the electric generators. A further reading of the entry shows that it is inclusive, it refers to two different items, namely electric generators and, secondly, the pumps running on wind energy. Thus, in our view, electric generator clearly falls under renewable energy devices and the Income-tax Appellate Tribunal has rightly allowed the depreciation at the rate of 30 per cent on the basis of item (10A), clause (xiii) of Appendix 1 to the Income-tax Rules 1962.
It is noticed that the Hon'ble Court has contradicted itself by first holding that the electric generator by itself generates electricity and therefore does not fall within the renewable energy devices and also that it is different from pumps run on wind energy, which falls within 4 ITA No. 5093.Del.2013 the renewable energy devices. Thereafter the court has come to the conclusion that the electric generator clearly falls under the renewable energy devices. Respectfully disagreeing with the reasoning given in the judgment of the Hon'ble High Court of Rajasthan it is noticed that the provisions are meant for the renewable energy devices and various entries are given so as to explain the meaning of renewable energy devices. The rules of construction implies that all the entries are to be read/construed ejusdem generis. The electric generator must be a device which does not run on diesel/petrol but it should be of such a nature which is covered by renewable energy device i.e. running on water, air, solar energy etc. The words used side by side i.e. special devices including electric generators and pumps running on wind energy are to be understood in their cognate sense and they have to take . as it were, their colour from each other. In this background the electric generator should be a special device which runs on wind energy and not the generator used by the assessee which runs on diesel. Thus by no stretch of imagination a device which is not a renewable energy device and which is not running on wind energy can find place here. The Hon'ble Court has clearly lost site of the words Special Devices used in the entry which includes electric generators and pumps or any other device but the condition is that the same has to be running on wind energy. Accordingly the amount of excess depreciation of Rs.7,76,084/- is being disallowed and added back to the taxable income of the assessee.
I have further reasons to believe that assessee has furnished inaccurate particulars of its income, therefore, penalty proceedings u/s 271 (l)(c) are initiated separately. (Addition Rs.7,76,084/-)
i) Depreciation on UPS:
It is noticed that the fixed assets of the assessee purchased during the year under the head Computer the assessee has included UPS amounting to Rs. 1900/- on 02.05.2003 & Rs.2860/- on 09.09.2003 on which the assessee has claimed depreciation @60%. Thus the assessee claimed excess depreciation of Rs.2142/-. Merely being related to "computers" does not qualify them to be treated so for claiming depreciation @ 60%. While defining "computer", the Act never intended that all the accessories related to computer or in any way- facilitating the working on computer can be treated as "computer " for the purpose of depreciation. In view of this fact the excess depreciation claimed by the assessee is being disallowed and added back to the income of the assessee.
I have further reasons to believe that assessee has furnished inaccurate particulars of its income, therefore, penalty proceedings u/s 271(1 )(c) are initiated separately. (Addition Rs.2142/-)"
5. The ld. Assessing Officer made addition by observing as above of Rs. 7,78,226/-. Aggrieved by the order of the assessing officer, the assessee appealed before the CIT(A). The assessee raised legal issue for reopening of the assessment u/s 147/148 as well as on merits of the case. The Ld. CIT(A) justified 5 ITA No. 5093.Del.2013 the reopening by the assessing officer u/s 147/148. The ld. CIT(A) partly allowed the appeal of the assessee.
6. Aggrieved by the order of the CIT(A), the assessee appealed before the ITAT. The ld. AR submitted that during the course of assessment proceeding u/s 143(3) all the materials were placed before the assessing officer. The assessee had disclosed fully and truly all material facts necessary for assessment. Since, the assessment had been completed u/s 143(3) of the IT Act, 1961 and since four years have already been elapsed. All the replies were submitted as per the requirements of the assessing officer. The assessee had discharged his liability cast upon him at the time of original assessment . This is a complete change of opinion by the assessing officer which is not permitted under the Act. There was no failure on the part of the assessee. Merely having a reason to believe that income had escaped assessment is not sufficient to reopen the completed assessment beyond the four years period. He also submitted reassessment proceedings under section 147 read with 148 of the act cannot be initiated merely based on the audit report . An audit is principally intended for the purpose of satisfying the auditor with regard to sufficiency of rules and procedures prescribed for the purpose of securing an effective check on the assessment , collection and proper allocation of revenue . As per para (3) of the circular issued by the Board on july 28, 1960, also an audit department should not in any way substitute itself for the revenue authorities in the performance of their statutory duties . It is necessary condition for overcoming the bar set up by the proviso to section 147. If this condition is not satisfied the bar would operate and no action u/s 147 could be taken the depreciation charge was duly annexed with the tax audit report u/s 44AB as Annexure II to the form 3CD where the in the depreciation has been clearly shown at the rate prescribed in item 3(xiii)m of the Appendix I of the Income Tax Rules, 1962 on electric generators it 6 ITA No. 5093.Del.2013 was duly considered by the assessing officer at the time of the assessment u/s 143(3). Further submitted that the UPS is a part and parcel of the computer and which is included under the depreciation of computer peripherals. Therefore, it is eligible for depreciation at the prescribed rate of 60%. He also reiterated submissions made before the lower authorities.
7. On the other hand the ld. DR relied on the order of the lower authorities and he submitted that the ld. Assessing Officer was justified to reopen the case u/s 147/148. The case laws relied by the lower authorities are squarely applicable in the assessee's case.
8. After hearing both the sides and perusing the materials available on the record, the ground no. 1 and 2 relates to reopening of the case , in this regard the ld. CIT(A) has decided this issue at para no. 2.3 of his order which is as under :-
"2.3. After going through the facts of the case, observations of the A.Q., submissions of the A.R. of the appellant and various judicial pronouncements on the issue, these grounds are being decided after making the following observations:
(a) On going through the arguments of the A.R. of the appellant it is observed that the main argument was that issue regarding claim of depreciation at higher rate on DG sets, had been earlier examined by the assessing officer at the time of original assessment u/s 143(3) of the I.T. Act. The A.R. has submitted copies of letters filed before the A.O. in February and March, 2006 where it was contended that the issue of higher rate of depreciation on DG sets haye been examined by the assessing officer and no adverse inference had been drawn. As per the copy of letter filed by the A.R. of the appellant dt. February 27, 2006, as per pa'a 15 zetails of all the additions to fixed assets alongwith copies of b Us a no the assets being put to use was submitted by the assessee in support of its claim of depreciation.
(b) The A.R. has also submitted a copy of the letter filed before the A.O. dt. March 9, 2006 where in para 7 the A.R. of the assessee had submitted that the depreciation on electrical DG set had been 7 ITA No. 5093.Del.2013 correctly claimed @100% in terms of Item 3(xiii)(m) of the Appendix I of the I.T. Rules, 1962.
On the basis of these letters it appears that this issue had been addressed ano examined by the assessing officer at the time of original assessment u/s 143(3) of the I.T. Act. From the records it is also dear that action u/s 148 had been undertaken on the basis of an audit objection raised by the audit party. However, it appears that the issue had been broadly examined by the assessing officer and on the basis of the submissions filed by the appellant.
(c) Reliance has been placed upon the decision of Usha International Ltd. (supra) where it has been held that if an issue has specifically been looked into by the assessing officer at the time of fresh material, there would be no justification for taking action u/s 147/148 of the I.T. Act, as this was amount to change of opinion. The relevant portion of the decision in the case of Usha International is being reproduced as under:
It is, therefore, clear from the aforesaid position that:
(1)Reassessment proceedings will be invalid in case the assessment order itself records that the issue was raised and is decided in favour of the assessee. Reassessment proceedings in the said cases will be hit by the principle of "change of opinion".
(2) Reassessment proceedings will be invalid in case the assessment order itself records that the issue was raised and is decided in favour of the assessed. Reassessment proceedings in the said cases will be hit by the principle of "change of opinion."
(3) Reassessment proceedings will be invalid in case an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the Assessing Officer does not make any addition in the assessment order. In such situations it should be accepted that the issue was examined but the Assessing Officer did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion.
The reassessment will be invalid because the Assessing Officer had formed an opinion in the original assessment, though he had not recorded his reasons."
8 ITA No. 5093.Del.2013(d) In this regard the A.R. of the appellant has strongly relied upon the decision of Maruti Suzuki Ltd. 34 taxman.com (Del)(2013), NTPC v. DCLT 215 Taxman and Kelvinator India Ltd. 174 CTR (Del) to argue that since the issue has been clearly examined by the assessing officer and an opinion has already been formed, there is no case for reopening the assessment u/'s 147/148 of the I.T. Act. The assessment record in this case was also called for from the assessing officer and the same were examined. On going through the records it was found that the letters dt. February 27, 2006 and March 9, 2006 had been filed by the appellant before the assessing officer.
(e)On going through the letter dt. February 27, 2006, it is observed that as per Item No. 15, the assessee had only submitted details of addition to fixed assets and the assets which were put to use during the year. In the letter dt. 09-03-2006 as per Para 7 it was mentioned that depreciation had been correctly claimed on electrical generating sets. However, from the records it couid never be ascertained whether the assessing officer had raised any query regarding this particular issue and whether any opinion has been formed by him regarding the higher rate of depreciation claimed. Therefore, there is nothing available from the assessment record to establish that the issue had been considered by the assessing officer and any opinion had been formed regarding the higher rate of depreciation. In view of these facts it is difficult to accept the contention of the appellant that the issue had been already examined and an opinion had been formed by the assessing officer at the time of original assessment. Therefore, keeping in view the decision of Usha International (supra) there was adequate reason for the assessing officer to take action u/s 147/148 of the I.T. Act. As a result, this action of the assessing officer is upheld and the ground of the appellant is treated as dismissed."
9. We observed from the above findings of the ld. CIT(A) that the assessing officer is fully justified to reopen the case u/s 147/148 of the IT Act. The paper books submitted by the assessee before us which is on placed and at page no. 79 and 80 in two sets, the contents of the letter submitted before the Assistant Commissioner of Income Tax, Circle 7(1), the contains of both sets of paper books 9 ITA No. 5093.Del.2013 are different at serial no. 7 and 8 also. Therefore the ground No. 01 and 02 is decided against the assesseee. Further in respect of ground no. 3 raised by the assessee regarding claim of depreciation on energy saving device. The ld. CIT(A) has also decided this issue and he had directed to Assessing Officer for verification of filing of SLP filed before the Supreme Court against the order of the Rajasthan High Court in case of CIT vs. AGARWAL TRANSFORMERS P. LTD. (2002) 258 ITR 251 IB. The finding of the CIT(A) is as under :-
3.3, Aafter going through the facts of the case, observations of the assessing officer and submissions of the authorised representative of the appellant, this ground is being finalised after making the following observations;
(a) On going through the arguments of the authorised representative of the appellant it is observed that the authorised representative has strongly relied upon the decision of Agarwal Transformers (supra) where higher rate of depreciation was allowed on generator set by treating it as renewable energy device as per class (xiii) of appendix I of I. T. Rules , 1962.
(b) The authorised representative has strongly contended that the revenue has accepted this decision of the Rajasthan High Court and no SLP had been filed against this decision.
(c) On going through the assessment order the assessing officer has argued that the decision of the Rajasthan High Court has not appreciated the full facts and has lost sight of the words "special devices" used in the entry which includes electric generators and pumps or any other device but the condition is that the same has to be running on wind energy. Accordingly, the assessing officer has argued that the decision of the Rajasthan High Court was not acceptable and the higher rate of depression should not be allowed.
(d) After considering the rival contentions, the most important aspect which is to be ascertained is that whether the decision has been accepted by the revenue and no SLP has been filed on this issue as contended by the authorised representative of the plant.
(e) The assessing officer is directed to ascertain if no SLP has been filed on the issue and the decision has been accepted by the Department, in such a situation, the matter has to be decided in favour of the appellant as it would be a covered matter favour of the appellant . However if the decision 10 ITA No. 5093.Del.2013 has not been accepted by the Department, on merits, the assessing officer does have a ground that the higher rate of depreciation only meant for special devices of a particular type which included electric generators and pumps running on wind energy. Therefore, the addition made by the assessing officer should be deleted if no SLP has been filed by the Department and the decision has been accepted . However , if that is not the case, I am inclined to agree with the findings of the assessing officer, accordingly, this ground is treated as allowed subject to verification.
10. During the course of hearing before the bench, we also asked to the ld.
departmental representative regarding the status of the order of the Hon'ble Rajasthan High Court in the case of CIT vs. Agarwal Transformers P. Ltd. (supra) whether the SLP has been filed before the apex cour or it has been accepted by the department t. In this regard the ld. D.R. filed a letter . The contents of the letter is as under :-
"File No. Sr. DR/ITAT/2017-18/384 Dated : 22.11.2017 In above mentioned case the hon'ble bench has been directed to examine whether the revenue has filed SLP against the judgment of the Hon'ble Rajasthan High Court in the case of Agarwal Transformers Pvt. Ltd. 258 ITR 251. In this regard, the information is sought from the department but as such no information is communicated to the undersigned till date. So undersigned is unable to make the clarification regarding SLP is filed or not in the case of Agarwal Transformers Pvt. Ltd. in Supreme Court."
11. The ld. CIT(A) has also directed to the assessing officer regarding the above noted judgment and no any contrary outcome has been reported against the above judgment till the date as well as the Departmental Representative has also produced the above letter before us , therefore, after considering the facts and 11 ITA No. 5093.Del.2013 circumstances of the case , we are respectfully following the above judgment (supra ), therefore, in the light of the above judgment, the assessee had correctly claimed depreciation on the renewable energy device . In view of above findings , this issue is decided in favors of the assessee. Further the ld. CIT(A) has not decided in respect of depreciation on UPS claimed by the assessee of Rs. 2142/-
therefore, this issue is sent back to the ld. CIT(A) for deciding a fresh whether the assessee is eligible for depreciation at the rate of 60% on the UPS or lower rate .
Therefore, this issue is allowed for statistical purposes.
12. In the result, appeal of assessee is partly allowed.
Order pronounced in the Open Court on 09/02/2018.
Sd/- Sd/-
(BHAVNESH SAINI) (L.P.SAHU)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Date: 09.02.2018
Binita
copy of order to: -
1) The Appellant;
2) The Respondent;
3) The CIT;
4) The CIT(A)-, New Delhi;
5) The DR, I.T.A.T., New Delhi;
True Copy
By Order
ITAT, New Delhi
12 ITA No. 5093.Del.2013
S.No. Details Date
1 Draft dictated on 07.02.2018
2 Draft placed before author 08.02.2018
Draft proposed & placed before
3
the Second Member
Draft discussed/approved by
4
Second Member
Approved Draft comes to the Sr.
5
PS/PS
6 Kept for pronouncement on
7 File sent to Bench Clerk
Date on which the file goes to
8
the Head Clerk
Date on which file goes to the
9
A.R.
10 Date of Dispatch of order
13 ITA No. 5093.Del.2013