Income Tax Appellate Tribunal - Delhi
Srf Ltd., Gurgaon vs Acit, New Delhi on 3 April, 2018
1 ITA No. 4651/Del/2010
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'G' NEW DELHI
MS SUCHITRA KAMBLE, JUDICIAL MEMBER
AND
SH. PRASHANT MAHARISHI, ACCOUNTANT MEMBER
ITA No. 4651/DEL/2010 ( A.Y 2003-04)
SRF Ltd. Vs ACIT
Block-C, Sector-45 Circle-9(1)
Gurgaon C. R. Building
AACS0206P New Delhi
(APPELLANT) (RESPONDENT)
Appellant by Sh. Satyea Sethi & A. T.
Panda, Adv
Respondent by Sh. Kaushlendra Tiwari, SR.
DR
Date of Hearing 05.03.2018
Date of Pronouncement 03.04.2018
ORDER
PER SUCHITRA KAMBLE, JM
This appeal has been filed by the assessee against the order dated 25/08/2010 passed by CIT(A)-XII, New Delhi.
2. The grounds of appeal are as under:-
"1. That the assessment u/s 147 is bad in law as well as on the facts and circumstances of the case.
2. That on the facts and circumstances of the case and in law, the learned CIT(A) has erred in upholding that the learned AO was justified in initiating the proceedings u/s 147 of the I.T. Act which is wholly without any/in excess of jurisdiction.
3. That on the facts and circumstances of the case and in law the learned CIT(A) has erred in not appreciating the fact that the reopening of the 2 ITA No. 4651/Del/2010 assessment proceedings is a mere change of opinion for reviewing and/or reconsidering the decision and/or order of predecessor and is bad in law.
4. That on the facts and circumstances of the case, the learned CIT(A) has erred in upholding the order of the learned AO in withdrawing deduction of Rs.2,30,75,650/-, in respect of amount paid to various banks towards advisory fees, processing, upfront fees and other charges, rightly allowed in the original assessment.
5. That on the facts and circumstances of the case, the learned CIT(A) (A) has erred in upholding the order of the learned AO in withdrawing deduction of Rs.1,90,00,000/- paid to ICICI bank towards advisory fees .
6. That on the facts and circumstances of the case and in law, the Learned CIT(A) has erred in upholding the order of the learned AO in holding the amount of Rs 2,30,75,650/- paid towards advisory fees & processing, upfront fees and other charges as capital expenditure giving enduring benefits to the appellant.
7. That on the facts and circumstances of the case and in law, the learned CIT(A) has erred in restoring the matter to the learned AO to examine whether the expenses amounting to Rs 40,75,650/- paid to various banks for working capital requirements , has been used to purchase capital assets.
8. That on the facts and circumstances of the case, the learned CIT (A) has erred in upholding the order of the learned AO in withdrawing deduction of Rs.2,80,46,251/-, in respect of amount paid to ICICI Bank towards prepayment fees, rightly allowed in the original assessment.
9. That on the facts and circumstances of the case and in law, the Learned CIT(A) has erred in upholding the order of the learned AO in holding the amount of Rs 2, 80, 46,251/- paid towards prepayment fees paid to ICICI Bank as capital expenditure giving enduring benefits to the appellant.
That the appellant company craves leave to add, to alter, amend and/or withdraw all or any of the aforesaid grounds at or before the hearing of the appeal."
3. The assessee company is engaged in the business of Nylon Tyre Cord Fabric/Nylon Industrial Yarn/Fanric, Flurochemicals and chloremethanes. Assessment in this case was completed u/s 143(3) on 28/03/2006 at an income of Rs.61,02,68,408/- under normal provision of the Act and the taxable income was taken up Nil after adjusting b/f losses of Rs. 61,02,68,408/-. Since, the tax payable under section 115JB of the Act was higher than the tax payable on normal income, taxable income was taken at 3 ITA No. 4651/Del/2010 Rs. 62,82,65,111/- being book profits u/s 115JB of the Act. The normal income was further reduced to Rs. 59,70,20,699/- and the income u/s 115JB was reduced to Rs. 40,67,73,076/- vide order u/s 250/143(3) dated 13/02/2007.
4. Subsequently proceedings u/s 147 were initiated after recording proper reasons and obtaining necessary approval of the then CIT-III, Delhi. Notice u/s 148 was issued on 25.03. 2008. In response the assessee filed a letter on 18.06.2008 but did not make proper "compliance of-the notice issued u/s 148. The Assessee demanded the copy of reasons. A notice u/s 142(1) along with a letter was sent to the assessee on 10/09/2009 reminding to make compliance of the notice u/s 148 by filing return of income as desired in the said notice. The assessee was also asked to produce a documentary' evidence if any compliance of the notice u/s 148 had been made. In respect of demand of copy of reasons the assessee was intimated that first he should make compliance of the notice u/s 148. In response Authorised Representative of the assessee company appeared on 21.10.2009 and filed a letter intimating that the return of income filed on 31.03.2005 may be treated as return in response to the notice u/s 148. He also requested to supply copy of reasons which were supplied to him on the same date. The Assessing Officer completed the Assessment on 23.12.2009 by making addition of Rs. 2,30,75,650/- paid towards advisory fees for rescheduling of loans, processing fee and other changes which is described by the Assessing Officer as are in the nature of capital expenditure. The Assessing Officer further made addition of Rs.2,80,46,251/- towards pre-payment fees paid to ICICI Bank Ltd. and held the same as capital expenditure. The Assessing Officer further made addition of Rs. 5,04,01,000/- being diminution in value of investment while computing the book profit.
5. Being aggrieved by the order of the Assessing Officer, the assessee filed appeal before the CIT (A). The CIT (A) partly allowed the appeal of the assessee.
4 ITA No. 4651/Del/20106. The Ld. AR submitted that the assessment u/s 147 is bad in law as the initiation of the proceedings u/s 147 of the I.T. Act was without any jurisdiction. The reopening of the assessment proceedings is a mere change of opinion for reviewing and reconsidering the decision and is bad in law. The Assessing Officer was not correct in withdrawing deduction of Rs.2,30,75,650/- in respect of amount paid to various banks towards advisory fees, processing, upfront fees and other charges, rightly allowed in the original assessment. The Assessing Officer was incorrect in withdrawing deduction of Rs.1,90,00,000/- paid to ICICI bank towards advisory fees. The Assessing Officer was not correct in treating the advisory fees as pre-payment fees. The Assessing Officer was incorrect in holding the amount of Rs 2,30,75,650/- paid towards advisory fees & processing, upfront fees and other charges as capital expenditure giving enduring benefits to the assessee. The Assessing Officer was not right in withdrawing deduction of Rs.2,80,46,251/-, in respect of amount paid to ICICI Bank towards prepayment fees, rightly allowed in the original assessment. The Assessing Officer was not right in holding that the amount of Rs 2, 80, 46,251/- paid towards pre-payment fees paid to ICICI Bank as capital expenditure giving enduring benefits to the appellant. The Assessing Officer was not justified in making an addition of Rs 5,04,01,000 on account of provision in diminution of the value of investments, while computing the book profits u/s 115JB of the Income Tax Act. The Assessing Officer failed to appreciate that the provision for diminution in the value of investments debited to the profit and loss account is the actual loss in the value of investments though shown under the head provision. The Ld. AR further submitted that the issues raised in the reopening was already examined in the audit objections and vide letter dated 14.05.2008, the Assessing Officer has submitted that the audit observation be treated as settled.
5 ITA No. 4651/Del/20107. The Ld. DR relied upon the order of the Assessing Officer and CIT(A). The Ld. DR relied upon the decision of the Hon'ble Supreme Court in case of CIT Vs. PVS Beedis Pvt. Ltd 237 ITR 13
8. We have heard both the parties and perused the material available on record. It is pertinent to note that the issues raised in the reopening was already examined in the audit objections and vide letter dated 14.05.2008, the Assessing Officer submitted that the audit observation be treated as settled. Thereafter on the same issues, the reasons for re-opening were recorded on 23.05.2008. Thus, the reopening itself is not on any tangible material. The entire record was examined during the regular assessment and the CIT(A) has not properly examined this aspect. Thus the finding of the CIT(A) regarding re- opening u/s 147 is not correct. The Ld. DR relied upon the decision of the Hon'ble Supreme Court in case of CIT Vs. PVS Beedis Pvt. Ltd 237 ITR 13 wherein it is held that re-opening of case u/s 147 (B) on basis of factual information given by internal audit party was valid in law. It is pertinent to note that the Hon'ble Supreme Court ratio is not applicable in the present case as in the present case audit objection was finally settled by the Assessing Officer on the issue where the assessee was asked questionnaire under regular assessment. The factual aspect of the Hon'ble Supreme Court decision is totally different from this particular case. The audit objection raised by the Assessing Officer was dealt by the Assessing Officer by giving the finding that the issue is settled, it will no more remain as audit objection. In this particular case despite settling audit objection the Assessing Officer again by giving reasons on the same issue in a different manner amounts to change of opinion. Therefore, the CIT(A) is not correct in holding that the re-opening is justified. Since the re-opening itself is bad, we are not deciding the issues contested before us on merit. Thus, the appeal of the assessee is allowed.
6 ITA No. 4651/Del/20109. In result, appeal of the assessee is allowed Order pronounced in the Open Court on 03rd April, 2018.
Sd/- Sd/-
(PRASHANT MAHARISHI) (SUCHITRA KAMBLE)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 03/04/2018
R.N*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
7 ITA No. 4651/Del/2010
Date
1. Draft dictated on 06/03/2018 PS
2. Draft placed before author 07/03/2018 PS
3. Draft proposed & placed before .2018 JM/AM
the second member
4. Draft discussed/approved by JM/AM
Second Member.
5. Approved Draft comes to the PS/PS
Sr.PS/PS 3.04.2018
6. Kept for pronouncement on PS
7. File sent to the Bench Clerk 3.04.2018 PS
8. Date on which file goes to the AR
9. Date on which file goes to the
Head Clerk.
10. Date of dispatch of Order.