M/S AUTOLITE INDIALTD V. DY COMMISSIONER OF INCOME TAX ANR

CW/7312/2014

AI Insights

The case involves Autolite (India) Ltd., which challenged the notice and subsequent order issued by the Income Tax Department regarding the disallowance of interest on loans given to sister concerns for the assessment year 2009-10. The petitioner argued that the issue had been previously decided in their favor for the assessment year 2006-07, and thus, the same should apply to 2009-10. The respondents contended that the failure to consider the opening balance while calculating interest constituted an escape assessment, warranting the issuance of the notice under Section 147 of the Income Tax Act, 1961. The court examined the arguments, the previous judgments, and the facts presented to conclude that the notice and order were unjustified.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 750954 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 17-07-2017
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax Vs. Kelvinator of India Ltd. (2010) 320 ITR 561 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: NIKHIL SIMLOTE
• Assessee Lawyers: SANJAY JHANWAR
• Keywords: Assessment Year 2006-07; Assessment Year 2009-10; Disallowance of interest; Escape assessment; Review of order
• Section: 147; 148

Judgement Text

"HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR S.B. Civil Writ Petition No. 7312 / 2014 Autolite (India) Ltd, having its Registered Office at D-469, Road No. 9A, Vishwakarma Industrial Area, Jaipur through its General Manager (Finance) Sh. M. S. Shekhawat S/o Late Shri K.S. Shekhawat, aged about 65 Years. ...Petitioner Versus 1. Deputy Commissioner of Income Tax, Circle-4, Jaipur, Income Tax Department, Statute Circle, Jaipur. 2. Commissioner of Income-Tax, Jaipur, Income Tax Department, Statute Circle, Jaipur. ...Respondents _____________________________________________________ For Petitioner(s) : Mr. Sanjay Jhanwar For Respondent(s) : Mr. Nikhil Simlote for Mr. RB Mathur _____________________________________________________ HON'BLE MR. JUSTICE M.N.BHANDARI Judgment 17/07/2017 By this writ petition, a challenge is made to the Notice dated 29.01.2014 and the order dated 02.06.2014 under Section 147/148 of the Income Tax Act, 1961 (for short “the Act of 1961”). Learned counsel for the petitioner submits that a Notice under Section 147 of the Act of 1961 was served on 29.01.2014 for the assessment year 2009-2010. Reasons to believe were supplied vide letter dated 12.05.2014. The perusal of the reasons shows nothing but review of the order passed by the Assessing Authority. It is stated that while disallowing the interest, it was not calculated on the opening balance. Though, all the relevant facts and figures were available with Assessing Authority thus it cannot be said to be a case of escape assessment but review of the order. It is also stated that for the assessment year 2006-07, the very same issue was decided by the Assessing Authority in the same manner. The assessee preferred an appeal before the Commissioner of Income Tax (for short “the CIT” (Appeals) and remained successful. The appeal was then preferred by the revenue before the Appellate Tribunal, Income Tax. It was dismissed and, thereupon, the revenue preferred an appeal before the High Court. It has also been dismissed thus for the assessment year 2006-07, the issue of dis-allowance of interest has been decided in favour of the assessee and it has attained finality. The respondents have yet taken up the same issue for the subsequent assessment year 2009-10 leaving it for the assessment year 2007-08 and 2008-09. In view of the above, the impugned Notices deserves to be set aside. Learned counsel for the respondents submits that the writ petition to challenge the Notice under Section 147/148 of the Act of 1961 is not maintainable in a case where reasons to believe have been recorded and conveyed to the petitioner. A response was given but has not been accepted. So far as the fact for assessment year 2006-07 are concerned, he is not in know of the decision by the High Court. In any case, it is a case of escape assessment for the reasons that Assessing Authority failed to take into account the opening balance for determination of interest thus Notice under Section 147 of the Act of 1961 was given. It cannot be said to be a case of review but of escape assessment. In the light of the aforesaid, writ petition deserves to be dismissed. I have considered rival submissions of the parties and perused the record. The petitioner was served with the Notice under Section 147 of the Act of 1961 followed by the order dated 12.05.2014 where the reasons to believe have been recorded. The reasons given therein are quoted hereunder for ready reference:- “In this case during the assessment the AO has disallowed interest free loans given to sister concern namely Autopal Industries Ltd., Anushaka & Pal Soft Info systems Ltd. for the reasons that the loan was not for the purpose of business of the assessee, therefore, interest @ 15% was disallowed which worked out Rs. 47,08,830/- While disallowing the said interest the amount was considered only for the pruposes of disallowance which was bebited/advanced during the year under reference but the continued huge outstanding opening balance to Autopal Industries Ltd. Rs. 9,23,95,796/-, Autopal Ltd. Rs. 2,43,57,300/-, Anushka, Autolite Ltd. Rs. 5,30,50,298/-, Pal Soft Infosystms Ltd Rs. 1,07,93,656/- totaling to Rs. 18,05,97,050/- was ignored while making the above disallowance. This amount was outstanding during the whole year and interest @ 15% on this amount works out to Rs. 2,70,89,557/- which was chargeable to tax but not charged. This resulted in under computation of income by Rs. 2,54,70,510/-. The income chargeable to tax amounting to Rs. 2,54,70,510/- remained untaxed. Therefore, I have reasons to believe that income of Rs. 2,54,70,510 has escaped assessment. Accordingly proceedings u/s 147 of the Act are initiated.” It reveals that for the assessment year 2009-10, the Assessing Officer has disallowed interest on the loans given to the sister concerned as it was not for the business purpose. The total interest therein was worked out to be Rs. 47,08,830/-. It is said to be a case of escape assessment as opening balance was ignored while working about the interest. The petitioner gave reply to it vide letter dated 26th May, 2014 but it was rejected vide letter dated 02.06.2014. It is stated that similar issue regarding dis-allowance of interest was challenged by the assessee by maintaining an appeal before the CIT (Appeals) for the assessment year 2006-07. The appeal was allowed. The revenue preferred an appeal before the Appellate Tribunal, Income Tax but it was dismissed. Further appeal before the High Court remained unsuccessful. In view of the above, for the assessment year 2006-07 dis- allowance of interest was held to be illegal by CIT (appeals) and further appeals of revenue were dismissed. In the light of the aforesaid, the revenue was expected to govern itself by the order passed for assessment year 2006-07. It is moreso when the issue aforesaid was not raised for the assessment year 2007-08 and 2008-09. It has again been taken up for the assessment year 2009-10. If the dis-allowance of interest itself goes, the opening balance or, for it, other balance become irrelevant. It is also a fact that before the Assessing Authority, all the details were available and assessment was made thereupon thus it cannot be said to be a case of escape assessment. The view aforesaid is supported by of the judgment of the Apex Court in the case of Commissioner of Income Tax Vs. Kelvinator of India Ltd. (2010) 320 ITR 561 (SC). In the light of the discussion made above, the impugned notice dated 29.01.2014 and the order dated 02.06.2014 are set aside. The writ petition is allowed. It is limited to the issue of dis- allowance of the interest without touching any other issue. (MN BHANDARI) J. sunita/55 "