Dy. CIT v. I P Rings Ltd. - Taxpublishers.in

SUBSCRIBE FOR FULL CONTENT


The Tax Publishers2013 TaxPub(DT) 1370 (Chen-Trib) : (2013) 051 (II) ITCL 0377 INCOME TAX ACT, 1961 --Reassessment--Full and true disclosure Notice under section 148 issued after expiry of four years--Assessee was in business of manufacturing and sale of piston rings for assessment year 2000-01. Assessment order was passed under section 143(3) on 11-3-2003. Assessee was found to have paid certain amount as royalty payment to M/s. 'N' of Japan under an agreement which was claimed as revenue expenditure. Assessing officer, after completion of original assessment order, issued notice under section 148 on 29-3-2007 and passed assessment order under section 147 on 17-9-2007 after treating royalty expenses as capital in nature and allowing depreciation at the rate of 25 per cent disallowed the balance payment as capital expenditure. Commissioner (Appeals) concluded to treat reassessment proceedings to be not valid and declined to decide issue on merits. *Held:* Not sustainable. As point or issue on basis of which reassessment proceedings were initiated, could not be discussed in original assessment, reassessment under section 147 was therefore, valid and Commissioner (Appeals) is directed to decide issues on merits. Assessing officer in the original orders passed under 143(3) on 11-3-2003 and 19-3-2004 for the assessment years 2000-01 and 01-02 respectively has neither discussed nor considered the point on the basis of which proceedings under section 147 have been initiated. [Para 11] Impugned reopening of the assessments by the assessing officer for both the years is justified and proper. So, the order of the Commissioner (Appeals) is set aside for both the years in this regard and that of the assessing officer is restored. Since the Commissioner (Appeals) has not considered the case on merits, therefore, the matter on merits for both the years is restored back on his file to re-decide the appeal on merits afresh for both the years after giving due opportunity to the assessee as well as to the assessing officer. [Para 13] Income Tax Act, 1961, Section In the ITAT, Chennai C Bench U.B.S. Bedi, J.M. & Abraham P. George, A.M. Dy. CIT v. I P Rings Ltd. ITA Nos. 1545 & 1546/Mds/2010 A.Y.s. 2000-01 & 2001-02 9 September, 2011 Income Tax Act, 1961, S. 147 & 143(3) *Decision:* Against the assessee. Revenue by : Clement Ramesh Kumar Assessee by : R. Vijayaraghavan & Shri Saroj Kumar Parida ORDER *U. B. S. Bedi,. J.M.* These two appeals of the Department are directed against separate orders passed by the learned Commissioner (Appeals) III, Chennai both dated 28-6-2010 relevant to the assessment years 2000-01 and 2001-02 respectively. 2. These appeals pertain to same assessee, involve identical facts and similar issues, therefore being disposed off by this single order for the sake of convenience. 3. We shall discuss facts for the assessment year 2000-01 in Appeal No.1545/Mds/2010, which in brief are that the assessee is engaged in the business of manufacturing and sale of piston rings. It filed its return of income on 28-11-2000 declaring a total income of Rs. 2,07,22,840. The assessment was completed under section 143(3) on 11-3-2003 determining total income at Rs. 214,43,710. The assessee has paid a sum of Rs. 58,93,677 as royalty to M/s. Nippon Piston Ring Co. Ltd., Japan, under an agreement entered into with the Japanese company. The assessee claimed deduction of royalty payments as revenue expenditure. The assessing officer issued notice under section 148 on 29-3-2007 and thereafter passed an order under section 143(3) read with section 147 dated 17-9-2007 determining the taxable income at Rs. 2,58,36,878. While completing the reassessment, the assessing officer treated the royalty expenses as capital in nature and disallowed expenditure amounting to Rs. 44,20,258, which is after allowing a depreciation of 25% i.e. Rs. 58,93,677 Rs.14,73,419. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 1370 (Chen-Trib) : (2013) 051 (II) ITCL 0377

INCOME TAX ACT, 1961

--Reassessment--Full and true disclosure Notice under section 148 issued after expiry of four years--Assessee was in business of manufacturing and sale of piston rings for assessment year 2000-01. Assessment order was passed under section 143(3) on 11-3-2003. Assessee was found to have paid certain amount as royalty payment to M/s. 'N' of Japan under an agreement which was claimed as revenue expenditure. Assessing officer, after completion of original assessment order, issued notice under section 148 on 29-3-2007 and passed assessment order under section 147 on 17-9-2007 after treating royalty expenses as capital in nature and allowing depreciation at the rate of 25 per cent disallowed the balance payment as capital expenditure. Commissioner (Appeals) concluded to treat reassessment proceedings to be not valid and declined to decide issue on merits. Held: Not sustainable. As point or issue on basis of which reassessment proceedings were initiated, could not be discussed in original assessment, reassessment under section 147 was therefore, valid and Commissioner (Appeals) is directed to decide issues on merits.

Assessing officer in the original orders passed under 143(3) on 11-3-2003 and 19-3-2004 for the assessment years 2000-01 and 01-02 respectively has neither discussed nor considered the point on the basis of which proceedings under section 147 have been initiated. [Para 11] Impugned reopening of the assessments by the assessing officer for both the years is justified and proper. So, the order of the Commissioner (Appeals) is set aside for both the years in this regard and that of the assessing officer is restored. Since the Commissioner (Appeals) has not considered the case on merits, therefore, the matter on merits for both the years is restored back on his file to re-decide the appeal on merits afresh for both the years after giving due opportunity to the assessee as well as to the assessing officer. [Para 13]

Income Tax Act, 1961, Section

In the ITAT, Chennai C Bench

U.B.S. Bedi, J.M. & Abraham P. George, A.M.

Dy. CIT v. I P Rings Ltd.

ITA Nos. 1545 & 1546/Mds/2010

A.Y.s. 2000-01 & 2001-02

9 September, 2011

Income Tax Act, 1961, S. 147 & 143(3)

Decision: Against the assessee.

Revenue by : Clement Ramesh Kumar

Assessee by : R. Vijayaraghavan & Shri Saroj Kumar Parida

ORDER

U. B. S. Bedi,. J.M.

These two appeals of the Department are directed against separate orders passed by the learned Commissioner (Appeals) III, Chennai both dated 28-6-2010 relevant to the assessment years 2000-01 and 2001-02 respectively.

2. These appeals pertain to same assessee, involve identical facts and similar issues, therefore being disposed off by this single order for the sake of convenience.

3. We shall discuss facts for the assessment year 2000-01 in Appeal No.1545/Mds/2010, which in brief are that the assessee is engaged in the business of manufacturing and sale of piston rings. It filed its return of income on 28-11-2000 declaring a total income of Rs. 2,07,22,840. The assessment was completed under section 143(3) on 11-3-2003 determining total income at Rs. 214,43,710. The assessee has paid a sum of Rs. 58,93,677 as royalty to M/s. Nippon Piston Ring Co. Ltd., Japan, under an agreement entered into with the Japanese company. The assessee claimed deduction of royalty payments as revenue expenditure. The assessing officer issued notice under section 148 on 29-3-2007 and thereafter passed an order under section 143(3) read with section 147 dated 17-9-2007 determining the taxable income at Rs. 2,58,36,878. While completing the reassessment, the assessing officer treated the royalty expenses as capital in nature and disallowed expenditure amounting to Rs. 44,20,258, which is after allowing a depreciation of 25% i.e. Rs. 58,93,677 Rs.14,73,419.