NXP India Private Limited Vs ACIT (ITAT Bangalore)
In this case AO passed a combined order giving effect to earlier orders of Tribunal with regard to original assessment and also reassessment order u/s. 143(3) r.w.s. 147 of the Act which is incorrect. The AO must have passed distinct and separate orders giving effect to the Tribunal’s orders which is emanating from the assessment order passed u/s. 143(3) and fresh reassessment order which is emanating from reassessment notice dated 23.3.2016. As such, we vacate the combined assessment order dated 29.12.2016 passed u/s. 143(3) r.w.s. 147 r.w.s. 254 of the Act and direct the AO to pass distinct and separate assessment orders one in respect of order giving effect to the Tribunal’s orders emanating from the assessment order u/s. 143(3) and another in respect of reassessment order u/s. 143(3) r.w.s. 147 of the Act. Accordingly, the issue in dispute is remitted in its entirety to the file of Assessing Officer to pass separate assessment orders as directed above, after giving opportunity of being heard to the assessee.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal by the assessee is against the order of the CIT(Appeals)-5, Bengaluru dated 22.02.2019 for the assessment year 2009-10.
2. The assessee has raised the preliminary ground on the reassessment proceedings as follows:-
“3. Initiation of reassessment proceedings under section 147 of the Act is without authority of law and jurisdiction
3.1 The learned CIT (A) has erred in law & facts in upholding the action of the AO in initiating reassessment proceedings under section 147 of the Act beyond the period of 4 years, when the Appellant has filed/ submitted/ disclosed all requisite facts and material during the original assessment proceedings under section 143(3) of the Act
3.2 The learned CIT (A) has failed to appreciate that the initiation of reassessment proceedings was made based on audit objection, which amounts to change of opinion, therefore the order is not sustainable under law.
3.3 The learned CIT(A) has erred in law and on facts in applying principles in the case of Kalyanji Mavji & Co vs CIT (S) 102 ITR 287 while upholding the action of the AO so far as it relates to initiation of reassessment proceedings under section 147 of the Act.
3.4 The learned CIT(A) has failed to appreciate that the order passed by the learned AO is bad in law in as much as the learned AO has passed the re-assessment order without disposing of the objection of the assessee which goes to the root of the matter and therefore the order passed by the learned AO is ought to be quashed.
3.5 The learned CIT(A) and the learned AO has erred in facts in not considering the return filed by the appellant in reply to the notice under section 148 of the Act.”
3. The assessee has also filed petition for admission of additional grounds stating that certain observations of the CIT(Appeals) came to the notice of assessee pursuant to filing of the appeal before the Tribunal which was inadvertent bonafide mistake on the part of assessee and prayed that the same may be admitted for adjudication. The additional grounds are as follows:-
“8. The learned AO/CIT(A) has erred in law and facts in not giving the benefit of short term capital loss amounting to Rs. 24,97,62,558 as computed by the Appellant in the return of income.
9. The learned AO/CIT(A) has erred in law and facts by not allowing the carry forward of short term capital loss amounting to Rs. 24,97,62,558 as claimed in the return of income by the Appellant.
10. The learned AO/CIT(A) has erred in law and facts in adding the apportioned cost of goodwill amounting to 32,76,86,270, to the income of the Appellant, arbitrarily without any basis and rationale.”
4. The DR opposed admission of additional grounds.
5. We have heard both the In our opinion, the under a bonafide belief that it had raised all the grounds before the Tribunal inadvertently committed an error in not raising the grounds which are now sought to be raised by way of additional grounds. There is no necessity of investigation into fresh facts so as to adjudicate the same. Accordingly by following the Hon’ble Supreme Court decision in the case of National Thermal Power Corporation v. CIT, 229 ITR 383 (SC), we admit the additional grounds for adjudication.
6. The assessee filed its original return on 30.9.2009 declaring total income of 47,88,62,424 and claimed short term capital loss of RS.24,97,62,558 on slump sale of its wireless division to NF Wireless India Pvt. Ltd. [NFWIPL]. Assessment was completed u/s. 143(3) r.w.s. 144C of the Income-tax Act, 1961 [the Act] on 14.3.2013. The assessee went in appeal against the original assessment order before the CIT(Appeals). The AO issued final assessment order on 30.4.2013 wherein the following adjustments/disallowances were made after due verification of the submissions made by the assessee:-
(i) Considering networking equipments, active components and computer server racks (or 19 inch heavy racks) as ‘plant and machinery’ instead of ‘computers’, applied lower rate of depreciation of 15% on the adjusted opening balance, thus disallowing depreciation amounting to 22,31,232.
(ii) TP adjustments amounting to Rs.281,131,440 pursuant to the order of TPO dated 1.2013.
7. Since the AO passed the impugned assessment order u/s. 143(3) r.w.s. 147 r.w.s. 254 of the Act, the assessee filed appeal before the CIT(Appeals). The CIT(Appeals) in his ex parte dismissed all the grounds of appeal raised by the assessee. Against this, the assessee is in appeal before us.
8. The assessee’s main grievance is with regard to initiation of reassessment proceeding u/s. 147 of the Act without any authority of law It was submitted that the assessment was reopened by recording the following reasons:-
“” The assessee company has made Slump sale during the year to M/s.N.F.Wireless India Private Limited for a consideration of Rs.13,96,91,650/-. After making adjustment towards assets and liabilities the net worth is arrived at Rs.38,94,54,208/-. In the computation of capital gains on slump sale the assessee has reduced Rs.38,94,54,208/-. In the computation of capital gains on slump sale the assessee has reduced Rs.32,76,86„270/- being “goodwill allocated based on form 3cn”. As per the Local Business Transfer Agreement dated: 22.07.2008, Goodwill is not treated as a part of consideration in the Business Transfer Agreement. Hence, the assessee had made a wrong claim of Rs.32,76,86,370,1- as goodwill in the computation of capital gains. 1 therefore, have reason to believe that income of Rs.32,76,86,370/- has escaped assessment within the meaning of section 147 of the Income Tax Act, ig6i which requires re- opening of the case. Therefore, I have reason to believe that income chargeable to tax has escaped assessment within the meaning of section 147 of the Income-tax Act, 1961.”
9. The AR submitted that all the material facts including the financial statements, tax audit report, computation of short term capital loss, copy of business transfer agreement, details of assets & liabilities of slump sale, etc. in connection with slump sale of wireless division to NF India was furnished by the Assessee during the proceedings and no adjustments were made in the order passed under section 143(3) of the Act in this regard after due scrutiny of the information filed. However, the assessment was reopened merely based on the change of opinion on the same set of facts which were already furnished during the scrutiny assessment. submit that no income has escaped assessment and the reasons provided for initiation of the subject proceedings under Section 147 of the Act are not valid for taking up the case for reassessment. Without prejudice to the merits of the case, it was submitted that initiation of reassessment proceedings u/s. 147 of the Act is without authority of law and jurisdiction. The ld. AR relied on the following decisions:-
