Lauls Private Limited vs Assessing Officer

“1.

That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and in facts in confirming the assessment made by Ld. AO by completely ignoring the jurisdictional defects in the assessment/notice u/s 148.

2.

Based on facts and circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in confirming the disallowance made by Ld. AO regarding claim of depreciation 2 of Rs 94,58,605 on commercial vehicles given on hire for transportation of goods of Tata Steel Limited by restricting the claim of depreciation to 15 percent as against 30 percent claimed by the Appellant ignoring facts of the case.

3.

Based on facts and circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in confirming the demand 3 raised by AO of Rs 5,49,82,890 on addition of Rs 94,58,605 by incorrectly considering the total income at Rs 15,79,23,370 as against income of Rs 8,53,89,055 assessed by him

4.

The Appellant craves leave to add further grounds OR to amend 4 OR alter the existing grounds of appeal on OR before the date of hearing.”

“ FACTS AND SUBMISSIONS

1. Brief Facts

 The Appellant filed its Return of Income for Assessment Year 2015-16 declaring total income of Rs.7,50,91,500/-. The assessment was completed under section 143(3) at an income of Rs.7,59,30,450/-.

 During original assessment u/s 143(3) Appellant duly produced books of account, financial statements and all relevant detail. The business activities of the Appellant were

(a) Sale of Goods

(b) Transportation Services

Transportation handling services rendered to Tata Steel Limited were fully disclosed and reflected in the books of account and audited financials where depreciation on Commercial Vehicles was claimed and allowed @ 30%.

 Subsequently there was change of opinion of AO and accordingly notice under section 154 was issued to restrict the depreciation on Transportation Services @ 15% instead of 30%, where ultimately No rectification order u/s 154 was passed. However, notice under section 148 was issued solely on the ground that depreciation on commercial vehicles had been claimed at 30% whereas according to the AO issuing 148 such depreciation ought to have been restricted to 15%, which is the only issue for issue of 148.

2.

Jurisdictional Defect in Issue of Notice under Section 148, where Notice under Section 148 and Assessment under Section 147 are Based on Mere Suspicion, Contrary to Facts, Doctrine of Consistency and Without Any New Material

(a) Reopening Based Merely on Change of Opinion WHEN Full and True Disclosure Made by the Appellant

 The assessment for the year under consideration was originally completed under section 143(3). All material facts relating to depreciation, transportation activity, fixed assets and financial statements were fully disclosed.

 No new tangible material came into possession of the Assessing Officer after completion of the original assessment. The reopening is therefore based merely upon a different opinion regarding the applicable rate of depreciation and consequently amounts to a mere change of opinion, which is impermissible in law.

Reliance:- Kelvinator of India Ltd. (320 ITR 561) (SC)

The reasons recorded seek to invoke Explanation 1 to Section 147 by alleging that relevant facts were embedded in the accounts. The Appellant disclosed all primary facts including nature of transportation, activity, Transportation receipts, Financial statements, Depreciation schedules, Details of commercial vehicles. Once all primary facts are fully disclosed, it is for the Assessing Officer to draw appropriate inferences. Explanation 1 cannot be invoked merely because the Assessing Officer failed to draw a particular inference from the disclosed material.

Reliance:- Calcutta Discount Co. Ltd. v. ITO (41 ITR 191) (SC)

(b) Notice under Section 148 Issued Merely on Suspicion and Without Any Fresh Material

It is respectfully submitted that there was absolutely no fresh material, information, investigation report, 3rd party statement or subsequent discovery of fact available with the Assessing Officer after completion of assessment under section 143(3). The reopening has been initiated merely on re-appreciation of material already available on assessment records. The entire exercise therefore amounts to a review of an earlier concluded assessment which is impermissible under law as confirmed by Hon'ble Supreme Court in Kelvinator of India Ltd. (320 ITR 561)

The issue had already been examined in proceedings initiated under section 154. Subsequently reopening was initiated on the very same material. Reliance is placed on Mahinder Freight Carriers v. DCIT (56 DTR 247), wherein.it was held that reassessment cannot be resorted to merely because the Assessing Officer changes his perception on the same material.

Particulars	Position
Original Assessment u/s 143(3)	Completed
Depreciation Claim	On record
Fixed Asset Schedule	On Record
Transportation Receipts	On Record
Section 154 Proceedings	Initiated
Fresh Material Post Assessment	Nil

(c) Reopening Beyond Four Years

The notice under section 148 has been issued after expiry of four years from the end of the relevant assessment year. In the absence of any failure on the part of the Appellant to disclose fully and truly all material facts necessary for assessment, the jurisdictional conditions prescribed under the first proviso to section 147 are not satisfied. Accordingly, the reassessment proceedings deserve to be quashed on this ground alone.

The Appellant discharged its obligation by disclosing all primary facts. As held by the Hon'ble Supreme Court in Calcutta Discount Co. Ltd. v. ITO (41 ITR 191), once primary facts are disclosed, failure of the Assessing Officer to draw a particular inference cannot justify reopening.

Since notice under section 148 has been issued beyond four years, reopening is permissible only if there is failure on the part of the assessee to disclose fully and truly all material facts. Reliance is placed on Haryana Acrylic Manufacturing Co. Ltd. v. CIT (308 ITR 38).

3. Covered Matter

The issue regarding allow ability of depreciation at the rate of 30% on commercial vehicles is not a new issue. It is well settled that where fundamental facts continue to remain identical, consistency should be maintained unless there is a material change in facts or law. Neither AO nor CIT(A) has pointed out any change in facts, contractual arrangement, business model, transportation activity or applicable law as compared to the earlier years.

For CIT(A) order AY 2009-10 refer Page No 48.

For CIT(A) order AY 2014-15 refer Page No 72.

Particulars	Earlier Years	AY 2015-16
Tata Steel Contract	Yes	Yes
Transportation Activity	Yes	Yes
Commercial Vehicles	Yes	Yes
Transportation Charges	Yes	Yes
Loading/Unloading Charges	Yes	Yes
Depreciation @ 30%	Allowed	Disallowed

Reliance is placed upon:-

Radhasoami Satsang v. CIT (193 ITR 321) (SC)

CIT v. Excel Industries Ltd. (358 ITR 295) (SC)

Both of the above decisions of Apex Court states hat consistency must prevail where facts remain identical.

4. Arbitrary Addition Ignoring Apparent Facts - Substance Must Prevail Over Nomenclature

(a) AO'S OWN FINDINGS OF FACTS SUPPORT THE APPELLANT CLAIM

In the concluding part of the assessment order, the learned Assessing Officer himself records that transportation of goods from Faridabad to various locations of customers of Tata Steel Limited and its associates constitutes a major business activity of the Appellant.

After accepting that transportation is one of the principal business activities of the Appellant, the Ld AO has nevertheless denied depreciation at the higher rate by drawing an artificial distinction between transportation activity and running vehicles on hire.

The addition done is in contradiction of factual conclusion drawn by AO himself when he specifically concludes that transportation is one of the major activity of business of assessee.

(b) Transportation Receipts Were Specifically Available on Record

Sample transportation invoices were produced before the AO, these invoices clearly establish that:-

Invoice to Tata Steel Limited is for transportation services and accordingly Service Tax was paid under RCM by recipient, which once again conclusively establishes that Appellant was engaged in transportation activity through its commercial vehicles.

(c) Transportation Business and Running Vehicles on Hire are not Mutually Exclusive Concepts

The entire addition proceeds on an incorrect assumption that transportation of goods for customers and running vehicles on hire are mutually exclusive concepts. The commercial vehicles were owned by the Appellant where such Commercial Vehicles were deployed for transportation of goods to Tata Steel Limited and its customers and accordingly nature of Services was Transportation in nature. It is matter of fact that vehicles were not used for transportation of goods belonging to the Appellant.

Every commercial transporter necessarily undertakes such obligations. If the interpretation adopted by Revenue is accepted, every transporter carrying goods for third parties under a transportation contract would cease to qualify as a person running vehicles on hire. Such an interpretation is contrary to commercial reality and defeats the very purpose of allowing higher depreciation on motor lorries used in the business of running them on hire.

5. Facts of Composite Obligations

(a) Nature of Services under Contract

Ld CIT(A) at para 5.1 page-17 (refer paper book page No. 24) has unduly stretched the Composite nature of Contract whereby Appellant was responsible for loading, unloading, safeguarding of goods, deployment of drivers, maintenance of vehicles, statutory compliances and arrangement of alternate vehicles. It is respectfully submitted that these responsibilities are inherent incidents of transportation activity itself and such obligations do not convert nature of services being transportation to 3rd party.

There was no dispute that vehicles owned by the Appellant were not carrying goods belonging to the Appellant. The vehicles were carrying goods belonging to Tata Steel Limited and its customers for transportation consideration. Therefore, the vehicles were being commercially exploited for transportation of third-party goods and squarely fall within the expression "used in the business of running them on hire".

(b) Substance Must Prevail Over Accounting Nomenclature

The addition has also been influenced by the observation that receipts were reflected under the accounting head "Handling Charges" instead of "Hiring Charges". The allowability of depreciation cannot depend upon nomenclature adopted in books of account. Tax consequences must be determined on the basis of the true nature of the activity carried on by the assessee and not on the basis of accounting descriptions.

The transportation contracts, invoices, transportation receipts and actual conduct of business clearly establish that the Appellant was engaged in transportation of goods to Tata Steel Limited through its own fleet of commercial vehicles and was earning transportation charges for the same.

6. Prayer

In light of above said submission and facts of the case, your honour is prayed to delete the additions, accept the returned income and oblige.”