2013 (9) TMI 201 - AT - Income Tax

Tribunal decision: reassessment quashed, penalties deleted, deductions upheld.

M/s. Taher Ali Industries & Projects (P) Ltd. Versus The ACIT Circle-2(3) Hyderabad

The tribunal quashed the reassessment for A.Y. 2004-05, citing no failure to disclose material facts. The disallowance of depreciation on plant and ... Reassessment u/s 147 - Notice u/s 148 - Reassessment after 4 four years - Held that:- Department has no material to show that the income which is said to have been escaped is on account of failure on the part of the assessee so as to reopen the assessment when the original assessment was completed u/s. 143(3) of the Act. Provisions of section 147 prescribed that no action should be taken u/s. 147 after the expiry of four years from the end of the relevant assessment year, unless income chargeable to tax has escaped assessment for such assessment year by reason of failure on the part of the assessee to make a return u/s. 139 or in response to notice issued under subsection (1) of section 147 or section 148 or to disclose fully and truly all material facts necessary for its assessment for that assessment year. Department was not able to point out applicability of these provisions to assessee's case. Unless these conditions are fulfilled assessment cannot be held to be valid - initiation of re-assessment proceedings for the assessment year 2004-05 by means of notice u/s. 148 dated 25.2.2011 after a period of more than 4 years is clearly barred by time limit - Decided in favour of assessee. Penalty u/s 271(1)(c) - Disallowance of depreciation on plant and machinery - Held that:- The facts remain that the assessee is having bona-fide belief that it is entitled for depreciation as per the lease agreement and the assets have been duly reflected in the Balance Sheet. The assessee has furnished the entire facts relating to this issue which was not found favourable with the Department. The Revenue authorities rejected the claim of granting of depreciation. It was up to the Revenue authorities to accept or reject the claim of the assessee. Merely because it was rejected, it does not lead to the conclusion that the assessee is liable for penalty - Decided in favour of assessee. Deduction u/s. 80IA - business of manufacturing of pipes for water supply and sewerage scheme and turnkey contractors in infrastructure sector, claimed deduction u/s. 80IA. - CIT allowed the deduction holding that the business of the assessee was that of a developer of infrastructure facility as envisaged in the provisions of section 80IA of the Act. - Held that:- Order of CIT(A) confirmed - deduction allowed. Issues Involved:1. Reopening of assessment.2. Disallowance of depreciation on plant and machinery.3. Disallowance of liquidated damages.4. Ad-hoc disallowance towards unvouched expenditure.5. Levy of penalty under section 271(1)(c) of the Income-tax Act.6. Deduction under section 80IA of the Income-tax Act.Detailed Analysis:1. Reopening of Assessment:The assessee challenged the reopening of the assessment for the A.Y. 2004-05, arguing it was done based on an audit objection without new material. The original assessment was completed under section 143(3) on 15.12.2006, and the reassessment notice under section 148 was issued on 25.2.2011, beyond the four-year limit. The tribunal quashed the reassessment, citing that there was no failure on the part of the assessee to disclose material facts and the reopening was barred by time limits as per sections 147 and 149.2. Disallowance of Depreciation on Plant and Machinery:For A.Y. 2008-09 and 2009-10, the assessee contested the disallowance of depreciation on machinery acquired under a finance lease. The CIT(A) did not adjudicate this issue. The tribunal noted that this issue was previously decided against the assessee in earlier years but remitted the issue back to the CIT(A) for fresh consideration based on the assessee's argument that the facts for these years were different.3. Disallowance of Liquidated Damages:The assessee claimed that liquidated damages were charged by contractee departments due to delays in execution and were not penal actions. The tribunal noted that this ground was not raised before the CIT(A) and remitted the issue back to the CIT(A) for consideration.4. Ad-hoc Disallowance Towards Unvouched Expenditure:The assessee contested an ad-hoc disallowance of Rs. 80 lakhs for unvouched expenditure. The CIT(A) did not adjudicate this issue. The tribunal remitted the issue back to the CIT(A) for adjudication.5. Levy of Penalty Under Section 271(1)(c):For A.Y. 2003-04 and 2004-05, penalties were levied for disallowance of depreciation and unvouched expenditure. The CIT(A) deleted the penalty for unvouched expenditure but sustained it for depreciation disallowance. The tribunal deleted the penalty for depreciation disallowance, stating that the assessee had a bona fide belief in claiming depreciation based on the lease agreement. The tribunal also confirmed the deletion of the penalty for unvouched expenditure, noting that the disallowance was made on an ad-hoc basis without conclusive proof of inaccurate particulars or concealment of income.6. Deduction Under Section 80IA of the Income-tax Act:The Revenue contested the CIT(A)'s decision to grant deduction under section 80IA for various assessment years, arguing that the assessee was a mere contractor and not a developer. The tribunal, following precedents and the decision in Sushee Hitech Constructions Pvt. Ltd., upheld the CIT(A)'s order, stating that the assessee was indeed a developer and not merely a contractor. The tribunal dismissed the Revenue's appeals and the assessee's COs supporting the CIT(A)'s order became infructuous.Conclusion:- Assessee's appeal in ITA No. 1425/Hyd/2012 was allowed.- Assessee's appeals in ITA Nos. 1426/Hyd/2012 and 1427/Hyd/2012 were partly allowed for statistical purposes.- Assessee's appeals in ITA Nos. 129/Hyd/2013 and 130/Hyd/2013 were allowed.- Revenue's appeals in ITA Nos. 104/Hyd/2013 and 105/Hyd/2013 were dismissed.- Assessee's COs in CO Nos. 15/Hyd/2013 and 16/Hyd/2013 were dismissed.- Revenue's appeals in ITA Nos. 1483 to 1488/Hyd/2012 and assessee's COs in CO Nos. 153 to 158/Hyd/2012 were dismissed.