Bharathotelsltd v. Assistantcommissionerofincome-Tax&Anr

$~1 *INTHEHIGHCOURTOFDELHIATNEWDELHI Dateofdecision:02.08.2018 +W.P.tCI7117/2017&CMAPPL.29526-29527/2017 LTD.....PetitionerThrough:Mr.AjayVohra,Sr.AdvocatewithMr.GauravJainandMr.AdityaVohra,Advocates. BHARATHOTELSLTD. versus ASSISTANTCOMMISSIONEROFINCOME-TAX&ANR. ....RespondentsThrough:Mr.RaghvenderSingh,Advocate. CORAM:HON'BLEMR.JUSTICES.RAVINDRABHATHON'BLEMR.JUSTICEA.K.CHAWLA HON'BLEMR.JUSTICES.RAVINDRABHAT(ORAL) % Thepetitioner/assesseecomplainsthatthereassessmentnoticeissuedtoitunderSections147/148oftheIncomeTaxAct,1961(‘theAct’hereinafter)isillegalandunsustainable. 2.Theassesseehad,duringtherelevantAssessmentYear(A.Y.)(i.e.2010-11)andforotherperiods,importedanaircraft,whichitclaimed,atthestageofimportationthatitwasneededforcharterhire.SincetheCustomsAuthoritieshadissueswiththatclaimandwishedtovaluetheimporteditemsatahigherrate,thepetitionerapproachedtheSettlementCommission,whichultimatelymadeitsorderon 02.03.2012.Inthemeanwhile,thepetitioner’sclaimfordepreciation-inrespectoftheaircraft(whichitclaimedwasusedforbusinesspurposes)wasasubjectmatterofassessmentforA.Y.2010-11,whichwascompletedon30.03.3012underSection143(3)oftheAct.Thepetitionerallegesthatinitsreturnsandthesupportingdocuments,theclaimforbusinessuseoftheaircraftwasmade,whichentitledittodepreciationat^5.21Crores.ItisalsoallegedthattheAssessingOfficermadeproperenquiries,whichincludedelicitingofappropriatedocuments,afterwhichitcompletedthescrutinyassessmenton30.03.2012.Inthisbackground,whenthepetitionerreceivedtheimpugnedreassessmentnoticedated31.03.2017,itapproachedtheCourt.TheRevenue’scommunicationsettingout“thereasonstobelieve”,whichimpelledittore-opentheassessment,interalia,statesthatinformationwasreceivedbytheinvestigationuniton22.03.2016whichstatedthattheSettlementCommissionshadimposedapenaltyhavingregardtotheevasionofcustomsdutyontheillegalimportofaircraft,whichledtodeeperexaminationandthatuponenquirytheassesseestatedthattheaircraftwasusedforitsbusinesspurposes..TheinvestigationwingoftheRevenuescrutinisedtheITDdatabaseanddiscernedthatfortheappropriateorder,theincomeclaimedbytheassesseinitsreturnwasnilandthatithadclaimed?52.95 croresasdepreciation@40%.Onthebasisofthesebackgroundfacts,thecommunicationunderSection147oftheActsetoutthereasonsasfollows:- “2.Simultaneously,enquirieswereconductedbyDirectorateofInvestigation,Delhitoexaminetheissue fromincometaxangle.Inthisregard,theassesseecompanywasrequiredtoexplaintheutilizationofaircraftforthebusinesspurposeandalsothedetailsofdepreciationclaimedontheasset. 3.TheobservationmadebyADIT(Inv.)isasbelow:- "Theassesseecompanyinitsreplyhadclaimedthattheaircraftwasexclusivelyusedonlyforbusinesspurposebychairperson/directors/executivedirectorsoftheassesseecompany.TheflyingdetailsoftheaircraftEmbraerLegacy-600EMB-1358Jweresubmittedclaimingtobeusedforbusinesspurpose.FurthertheassesseecompanyinitssubmissionhadclaimedthatthebusinesstripswereundertakenbythechairmancummanagingDirector/Director/ExecutiveDirectors/Officers/Associatestothehotelsunderconstruction,hotelsunderoperationandtoexplorenewbusinessopportunitiesfordevelopingdestination.However,theanalysisofthesubmissionfiledbytheassesseecompanyshowsthatthereplyfiledisgeneralandvagueinnature.Nowherethereplyofassesseementionsthebusinessresponsibilitiesofthepersonwhowasundertakingthesetrips.Theassesseecompanyhasalsofailedtoprovidethedocumentaryevidenceinsupportoftheclaimofthebusinessactivitiesundertakenbytheseemployeesduringsuchtrips.IthasalsobeensubmittedthatastheaircraftwasbroughttoIndiainJuly2009andthedepreciationontheaircraftwasclaimedforAY2010-11and2011-12@40%.Hence,theassesseefailedtosubstantiatetheutilizationofEmbraerLegacy-600EM-135BJaircraftforthebusiness purposeandclaimofdepreciationandotherexpensesontheassetduringtheF.Y2009-10." XXXXXXXXX 6.Certainnewfactshavecomeonrecordwhichisasfollows:- i.InthiscasepenaltywasimposedontheissueofcustomdutyevasiononthepurchaseofaircraftbySettlementCommission. purposeandclaimofdepreciationandotherexpensesontheassetduringtheF.Y2009-10." XXXXXXXXX 6.Certainnewfactshavecomeonrecordwhichisasfollows:- i.InthiscasepenaltywasimposedontheissueofcustomdutyevasiononthepurchaseofaircraftbySettlementCommission. a.TheaircraftwaspurchasedbytheassesseecompanyinF.Y.2008-09andtheassesseecompanyhasreceivedsharecapitalduringA.Y2008-09fromforeignentityDubaiVentureGroupbasedinDubaiandregisteredinCaymanIslands. 7.Inviewoftheabovementionedfactsandfindings,itisevidentthattheaircraftEmbraerLegacy-600EM-135BJwasnotusedforbusinesspurposeandtheamountofRs.52,95,54,449/-claimedasdepreciationbyassesseecompanyisdisallowableandhasescapedtaxation.Hence,IhaveareasontobelievethatincomeofRs.52,95,54,449/-asperaforesaidhasescapedassessmentinthecaseofassesseerelevanttoA.Y.2010-11.” 3.Mr.Vohra,learnedseniorcounselurgesthatgiventhestatutorymandatethatthereshouldbefailureonthepartoftheassesseeasajurisdictionalpre-conditionbyvirtueofprovisotoSection147oftheAct,there-openingoftheassessmentinthiscase,isfraughtandillegal.mandatethatthereshouldbefailureonthepartoftheassesseeasajurisdictionalpre-conditionbyvirtueofprovisotoSection147oftheAct,there-openingoftheassessmentinthiscase,isfraughtandillegal. 4.ItwassubmittedthatalltherelevantmaterialsweredisclosedtotheRevenueinthereturnsandintheduecourseofassessmentforthetheRevenueinthereturnsandintheduecourseofassessmentforthe concernedA.Y.2010-11,whichultimatelycrystallizedtheorderunderSection147(3)oftheAct,therefore,giventhenatureofthewordingoftheprovisotoSection147(1)oftheAct,theRevenuecouldnothavere-openedtheassessment. 5.LearnedcounselfortheRevenue,ontheotherhand,pointsoutthattheinvestigationreportaswellasthematerialswhichtriggerediti.e.thepaymentofhighercustomsdutyandpenalty,ledtothereportsubmittedtotheRevenueAuthoritieson22.03.2016.Onthebasisofthis,theRevenueexaminedtheoriginalreturnsandfoundthatthedepreciationwasexcessive.LearnedcounselreliedupontheExplanation2(c)(iv)tothesecondprovisotoSection147oftheActandsubmittedthatinthecaseofexcessivelossordepreciationclaims,theprovisohastobeappropriatelyandharmoniouslyconstrued,therefore,thereassessmentnoticewaslegal. 6.Giventhefactualnarrative,thereisnodoubtthattheassesseehaddisclosedinitsreturnsandperhapsintherelevantdocumentsaboutthedepreciationclaimsandthejustificationtoit.Nevertheless,theAOhadnooccasiontoexamineit.Furthermore,theCourtnoticesthatattherelevanttime,inthereturns,theassesseeclaimed“nilreturns”.Thetwoeventssubsequenttotheorderofscrutinytheassessmenttookplace;first,theSettlementCommissionorder,whichimposedbothpenaltyandahigherrateofcustomsdutyandsecond,theinvestigationreport.Inviewofthesefacts,clearlytherewastangiblematerialpointingoutthatperhapstheassesseehadmadeanexcessiveandimpermissibleclaimfordepreciationwhichwentunadjudicated.ThisCourtinproceedingsunderArticle226ofthe ConstitutionofIndiahastodealwithastothenatureofthedisclosure-whetheritwasfairlymadeorthedetailsofdepreciationweresoprovidedthattheRevenuecouldnot,inthecircumstances,goneintoitatthefirststageoftheproceedings. 7.PhoolChandBajrangLaivs.Income-TaxOfficerandanother;1993203ITR4.56SCisanauthorityforthepropositionthatitisnoteveryclaimthatmerecircumstanceoffinalityofaproceedingwouldperseexcludeinvocationofpowertoreassessmentbutthataclaimwhichistaise,canbethegroundforavalidre-openingoftheassessment. 8.Havingregardtothesefacts,theCourtissatisfiedthatnocauseofinterferencewiththereassessmentnoticeandfurtherproceedingshasbeenmadeout.Thewritpetitionisaccordinglydismissedalongwiththependingapplications. S.RAVINDRABHAT,J AUGUST02,2018nn lit A.K.CHAWLA,J