M/S Dr. Reddy'S Laboratories Ltd.,, ... vs Department Of Income Tax

ITA No.150/Hyd/2014 : Asst. Year 2003-04 ITA No.151/Hyd/2014 : Asst. Year 2004-05

Dy. Commissioner of Income- V/s. M/s. Dr Reddy's Laboratories Ltd., tax, Circle 1(2), Hyderabad Hyderabad

( PAN - AAACD 7999 Q )

(Appellant) (Respondent)

Appellant by : Shri Parneet S.Sachdev

Respondent by : Shri P.S.R.V.V.Surya Rao

Date of Hearing 20.01.2015 Date of Pronouncement 20.01.2015

ORDER

Per D.Manmohan, Vice President

These two appeals by the Revenue are directed against the orders passed by the Commissioner of Income-tax(Appeals) II, Hyderabad referable in respect of the assessment year 2003-04 and 2004-05. Since the issues involved in both the appeals are common, we proceed to dispose of the same by a common order, for the sake of convenience.

2. In respect of assessment year 2003-04, the Revenue raised the following grounds-

"i. The ld. CIT(A) ought to have reckoned the limitation of time from the order passed u/s. 143(3) r.w.s. 254 dated 30.12.2011 and not the order passed u/s 154 on 22.06.2006.

ii. The ld. CIT(A) failed to observe that the order had been passed out of audit objection raised by the Revenue Audit 2 ITA No.150-151/Hyd/2014 M/s. Dr Reddy's Laboratories Ltd., Hyderabad

party and the issue is covered by exception laid down in the Board's instruction No.3 of 2011.

iii. Any other ground that may be urged at the time foe hearing."

Similarly, for the assessment year 2004-05, the following grounds are raised before us.

"i. The ld. CIT(A) ought to have reckoned the limitation of time from the order passed u/s. 143(3) r.w.s. 263 dated 13.2.2009 and not the order passed u/s 154 on 26.02.2007.

ii. The ld. CIT(A) failed to observe that the order had been passed out of audit objection raised by the Revenue Audit party and the issue is covered by exception laid down in the Board's instruction No.3 of 2011.

iii. Any other ground that may be urged at the time foe hearing."

3. At the outset, it may be noticed that in S.154 proceedings, the Assessing Officer sought to make certain disallowances, which were challenged by the assessee on the following ground-

The Assessing Officer has erred in law and facts of the case to issue the order under S.154 based on renewed interpretation of law and change of interpretation.

4. The assessee also raised objection with regard to the validity of the proceedings under S.154 on the ground that it is time barred and even on merits, the assessee is eligible to weighted deduction. In para 4.1 and 4.2, the learned CIT(A) proceeded to dispose of the preliminary issue by succinctly referring to the fact that the proceedings under S.154 were initiated consequent to Revenue audit objection, and whether a particular expenditure is allowable or not involves application of mind and any mistake incurred in this connection cannot be considered as mistake 3 ITA No.150-151/Hyd/2014 M/s. Dr Reddy's Laboratories Ltd., Hyderabad

apparent from record. Placing reliance upon the decision of the Hon'ble Supreme Court in MEPCO Industries Ltd. V/s. CIT (319 ITR 205), the learned CIT(A) concluded as under-

"4.3. In view of the above decision, an issue which needs application of mind, cannot be treated as mistake apparent from the record therefore, the issue does not fall under the purview of section 154. Therefore, this ground of appeal is allowed."

The learned CIT(A) has also decided other grounds in favour of the assessee by holding that the proceedings under S.154 are barred by limitation, etc.

5. As may be noticed form the grounds of appeal urged before us by the Revenue, the issue concerning the validity of proceedings under S.154, when such proceedings are based on mere change of opinion, was not agitated in these appeals. The grounds of appeal are already extracted above, which clearly show that the Revenue is contesting only the issues concerning the period of limitation for passing an order under S.154; and also with regard to the exceptions provided for filing an appeal even where there was no tax effect, but the issue concerning validity of initiating proceedings under S.154 on the renewed interpretation of law was conspicuously absent in the grounds of appeal. In other words, the order of the learned CIT(A) with regard to the issue concerning validity of proceedings under S.154 for the reason that the Assessing Officer having applied his mind at the assessment stage, is not entitled to initiate proceedings under S.154 based on change of opinion, has attained finality. In such an event of the matter, grounds filed before us, even if a decision has to be rendered, are of academic importance. Having regard to the circumstances of the case and upon hearing rival submissions, we are of the view that the appeals filed by the Revenue 4 ITA No.150-151/Hyd/2014 M/s. Dr Reddy's Laboratories Ltd., Hyderabad

deserve to be dismissed on the ground that the issues raised herein are of academic importance, since the order passed under S.154 has no legs to stand on the limited ground that it is based on change of opinion, and on this aspect of the matter has attained finality.

6. As pronounced in the open court, the appeals filed by the Revenue are dismissed.

Order pronounced in the Court on 20th January, 2015

(P.,M.Jagtap) (D.Manmohan) Accountant Member Vice President

Dt/- 20th January, 2015

Copy forwarded to:

1. M/s. Dr Reddy's Laboratories Ltd., 7-1-27, Ameerpet, Hyderabad 500 016

2. Dy. Commissioner of Income-tax Circle 1(2), Hyderabad

3. Commissioner of Income-tax(Appeals)-II , Hyderabad

4. Commissioner of Income-tax I, Hyderabad

5. Departmental Representative, ITAT, Hyderabad.

B.V.S

1. ुतलेख क तार ख Date of Dictation 20.1.2015

2. वह तार ख िजसको टाइप कया ुतलेख दे ने वाले सद य के सम तुत कया अ य सद य के सम तुत करने क तार ख Date on which the typed draft is placed before the Dictating Member Date on which placed before the other Member

3. वह तार ख िजसको अनुमो दत ा ट व र ठ नजी स चव/ नजी स चव के पास आया Date on which the approved draft comes to the Senior P.S.

4. वह तार ख िजसको संसो धत आदे श ुतलेख नेने वाले सद य के सम अजनपन के लए तुत कया गया 20.1.2015

Date on which the fair order is placed before the dictating Member

5. वह तार ख जब संसो धत आदे श व र ठ नजी सक चव/ नजी स चव के पास वापस आया है Date on which the fair order goes to the Sr. P.S.

6. वह तार ख जब फ़ाइल यायपीठ ल पक के पास भाजी गई Date on which the file goes to the Bench Clerk.

7. वह तार ख जब फ़ाइल मु य ल पक के पास गई Date on which the file goes to the Head Clerk

8. वह तार ख जब फ़ाइल आदे श पर ह ता र के लए सहायक पंजीकार के पा गई Date on which the file goes to the Assistant Registrar

9. आदे श शीत करने क तार ख Date of the despatch of the Tribunal Order 5 ITA No.150-151/Hyd/2014 M/s. Dr Reddy's Laboratories Ltd., Hyderabad