I.T.A. No. 720/Mds/2015, (Assessment Year: 2008-2009). Case: Chennai Petroleum Corporation Ltd. Vs The Deputy Commissioner of Income Tax. High Court of Kerala (India)

Case NumberI.T.A. No. 720/Mds/2015, (Assessment Year: 2008-2009)
CounselFor Appellant: R. Vijayaraghavan, Advocate and For Respondents: M.N. Maurya, IRS, CIT
JudgesChandra Poojari, Member (A) and G. Pavan Kumar, Member (J)
IssueIncome Tax Act, 1961 - Sections 142(1), 143, 143(2), 143(3), 147, 148, 154, 250, 30, 31, 37(1)
Judgement DateFebruary 26, 2016
CourtHigh Court of Kerala (India)

Order:

G. Pavan Kumar, Member (J), (ITAT Chennai 'C' Bench)

  1. The appeal filed by the assessee is directed against order of the Commissioner of Income-tax (Appeals)-VII, Chennai in ITA No. 30/2013-14/LTU(A), dt 13.02.2015 for the assessment year 2008-2009 passed u/s. 143 r.w.s. 147 and 250 of the Income Tax Act, 1961 (herein after referred to as 'the Act').

  2. The assessee has raised two substantive grounds against Commissioner of Income Tax (Appeals) confirmed the reopening of assessment due to change of opinion and Commissioner of Income Tax (Appeals) erred in confirming the disallowance of expenditure of ` 40,98,880/- on construction of compound wall in place of replacement of Barbed wire fencing as capital expenditure.

  3. The Brief facts of the case that the assessee company is a subsidiary of Indian Oil Corporation Limited which holds 51.89% equity shares of assessee company and also a Miniratna of Central Public Sector Enterprise and was formerly known as Madras Refineries Limited and the assessee company shares are also held by Government of India. The assessee company is the second largest refinery in South India and has two refineries, one at Manali and second being Cauvery basin at Nagapattinam and in the business of refining crude into petroleum & petro-chemical products. The assessee company being Government Company is subject to supplementary audit of the financial statements under Sec. 619(3)(b) of the Companies Act. For the assessment year 2008-09, the assessee filed e-return of income on 29.09.2008, declaring gross income of ` 1659,19,70,683/- and after considering deductions u/s. Chapter VIA, taxable income worked out to ` 858,63,68,998/- and Assessment u/s. 143(3) of the Act was completed on 30.11.2010. Further assessee income was determined under u/sec. 143(3) r.w.s 154 of the Act by order dated 20.01.2011 at ` 1696,65,08,090. On appeal to CIT(A), consequential order giving effect to Commissioner of Income Tax (Appeals) order, the total income was determined at ` 887,13,47,945/- on 17.11.2011. Subsequently, the Department noticed the income escaping assessment and notice u/s. 148 dated 28.03.2013 was issued and in compliance to notice the assessee filed e-return of income on 11.04.2013 declaring the same income offered in the original return of income and further notice u/s. 143(2) and 142(1) of the Act was issued. The Assessing Officer has recorded reasons for reopening of assessment at page No. 2 of the order as under:--

    In the case of M/s. Chennai Petroleum Corporation Limited, for A.Y.2008-09, it was observed from the computation statement for Income tax purpose that claim of Rs. 40,98,880 was made as expenditure on replacement of fencing which was not debited to P&L account. The expenditure being a value addition to the asset building, the same requires to be capitalised for income-tax purpose also and only depreciation at applicable rates is to be allowed.

    In response to the notice, the assessee filed a reply and objections for reopening of assessment at page No. 2 as under:--.

    It is submitted that CPCL has disclosed all material facts fully and truly for the purpose of assessment in respect of expenditure towards replacement of fencing of RS. 40,98,880 by disclosing it as an item of deduction in the statement of income for income tax purpose produced to the Department during the scrutiny assessment. Thus, the primary facts necessary for assessment were fully and truly disclosed and there was no concealment of facts. The Assessing Officer who has originally assessed our assessment has consciously considered the facts and arrived at a decision. Hence, the reassessment proceedings cannot be taken merely because the subsequent AO changes his opinion or takes a different view.

    But the ld.Assessing Officer relied on the Apex Court decisions and also objections of the assessee and disposed off by order dated 22.01.2014. Subsequently, the assessee's ld. Authorised Representative and Chief Manager(Finance) and Sr. Officer (Finance) attended the hearing proceedings and the assessee company...

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