Madan Mohan Nayak, Jajpur V. ACIT, Circle-1(1), Cuttack, Cuttack

ITA 104/CTK/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8379 (ITAT-CUTTACK)
• Duration Of Justice: 3 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 11-01-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 19-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASIT KUMAR MOHAPATRA
• Assessee Lawyers: B K MAHAPATRASH A K SABAT
• Keywords: Principle of natural justice; Reason to believe
• Section: 43B; 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK , BENCH CUTTACK BEFORE SHRI R.C.SHARMA , A M & SHRI PARTH A SARATHI CH A UDHURY , JM ./ ITA NO . 286 / CTK /20 1 3 ( [ [ / ASSESSMENT YEAR : 20 05 - 20 06 ) NATIONAL ALUMINIUM COMPANY LIMITED, NALCO BHAVAN, P/1, NAYAPALLI, BHUBANESWAR VS. DY CIT, CIRCLE - 2(2), BHUBANESWAR ./ ./ PAN/GIR NO. : A A ACN 7449 M ( / APPELLANT ) .. ( / RESPONDENT ) [ /ASSESSEE BY : SHRI B.K.MAHAPATRA/SH.A.K.SABAT /REVENUE BY : SHRI ASIT KUMAR MOHAPATRA / DATE OF HEARING : 12 / 01 / 201 6 / DATE OF PRONOUNCEMENT 10/ 05 /2016 / O R D E R PER R.C.SHARMA (A.M) : TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - II , BHUBANESWAR FOR THE ASSESSMENT YEAR 20 05 - 2006 , IN THE MATTER OF ORDER PASSED U/S.14 3(3) R.W.S147 OF THE I.T.ACT, WHEREIN FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE : - 1. THAT THE ORDER DA TED 21.02.2013 PASSED BY THE LEARNED CIT(APPEALS) IN ITA NO.0020 / 2011 - 12 FOR AY 2005 - 06 IN NOT ALLOWING THE APPEAL OF THE ASSESSEE IS CONTRARY TO FACTS, ARBITRARY, UNJUSTIFIED, ERRONEOUS, AND BAD IN LAW. 2. THAT WITHOUT PREJUDICE TO GROUNDS 1 ABOVE, THE ORDER DATED 21.02.2013 PASSED BY THE LEARNED CIT(APPEALS) IN ITA NO.0020/2011 - 12 IS CONTRARY TO THE PROVISIONS SECTION 25.1(1) OF THE IT ACT. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) OUGHT TO HAVE HELD THAT TH E ISSUE OF NOTICE U/ S.148 FOR RE - OPENING THE ASSESSMENTS UJS.147 OF THE ACT IS UNJUSTIFIED, ERRONEOUS, BAD IN LAW, WITHOUT/LACK OF JURISDICTION AND LEGALLY UNTENABLE. ITA NO. 286/13 2 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) OU GHT TO HAVE HELD THAT THE ORDER DATED 30.03.2011 U / S.147/ 143(3) OF THE ACT PASSED BY THE LEARNED 'DY. CIT' IS ARBITRARY, UNJUSTIFIED, ERRONEOUS, BAD IN LAW AND LEGALLY UNSUSTAINABLE. 5. DISALLOWANCE UNDER: (I)'INTEREST ON UNPAID ELECTRICITY DUTY' - RS. 13,97,67,820 A. THAT THE LEARNED CIT(APPEALS) HAS MISCONSTRUED/MIS - APPRECIATED THE FACTS AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE NON DELETION OF ADDITION OF RS.13,97,67 ,820 UNDER 'INTEREST ON UNPAID ELECTRICITY DUTY' MADE THE LEARNED 'D Y. CIT' IS BASED ON IRRELEVANT CONSIDERATIONS, PRESUMPTIONS, CONJECTURES AND SURMISES, WITHOUT ANY MATERIAL EVIDENCE ON RECORD AND IS AGAINST NATURAL JUSTICE, CONTRARY TO FACTS, ARBITRARY, UNJUSTIFIED, ERRONEOUS AND BAD IN LAW. B. THAT ON THE FACTS AND I N THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) IS UNJUSTIFIED, ARBITRARY AND HAS ERRED IN CONCLUDING THAT THE 'INTEREST ON UNPAID ELECTRICITY DUTY' IS NOT A STATUTORY OBLIGATION (LIABILITY). C. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) THE LEARNED CIT(APPEALS) IS UNJUSTIFIED, ARBITRARY AND HAS ERRED IN CONCLUDING THAT THE ISSUE OF 'INTEREST ON UNPAID ELECTRICITY DUTY' FOR THE YEAR UNDER CONSIDERATION IS NOT COVERED UNDER THE ORDERS PASSED BY THE HON'BLE IT AT. (II) 'WATER CHARGES' RS. 11 ,06,76,123 A. THAT THE LEARNED CIT(APPEALS) HAS MISCONSTRUED/MIS - APPRECIATED THE FACTS AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE NON DELETION OF ADDITION OF RS.11,06,76,123 UNDER 'WATER CHARGES' MADE THE L EARNED D Y. CIT' IS BASED ON IRRELEVANT CONSIDERATIONS, PRESUMPTIONS, CONJECTURES AND SURMISES, WITHOUT ANY MATERIAL EVIDENCE ON RECORD AND IS AGAINST NATURAL JUSTICE, CONTRARY TO FACTS, ARBITRARY, UNJUSTIFIED, ERRONEOUS AND BAD IN LAW. B. THAT ON THE FAC TS AND IN THE C IRCUMSTANCES OF THE CA SE, THE LEARNED CIT(APPEALS) IS UNJUSTIFIED, ARBITRARY AND HAS ERRED IN CONCLUDING THAT THE 'WATER CHARGES' IS NOT A STATUTORY OBLIGATION (LIABILITY) . (III) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) IS UNJUSTIFIED, ARBITRARY AND HAS ERRED IN NOT FOLLOWING THE ORDERS PASSED BY THE HON'BLE ITAT IN RESPECT OF PAST ASSESSMENT YEARS IN ASSESSEE'S OWN CASE WHEREIN, IN SIMILAR CIRCUMSTANCES, IT HAS BEEN HELD THAT INTEREST ON UNPAID ELECT RICITY DUTY AND WATER CHARGES IS FULLY ALLOWABLE UFS.37 OF THE ACT AND PROVISIONS UFS.43B OF THE ACT FOR DISALLOWANCE IS NOT ATTRACTED. ITA NO. 286/13 3 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A PUBLIC SECTOR COMPAN Y ENGAGED IN THE BUSINESS OF MINING OF BAUXITE, EXTRACTIONS OF ALUMINIUM ALONG WITH GENERAL OF POWER FROM ITS CAPTIVE PLANT AND SELLING OF THE SURPLUS POWER TO THE GRID. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE AO DISALLOWED ASSESSEES CLAIM FOR INTE REST ON UPAID ELECTRICITY DUTY AND WATER BILL ON THE PLEA THAT WHEN PRINCIPAL AMOUNT OF DUTY ITSELF IS NOT ASCERTAINED AND UNDER DISPUTE, THE INTEREST THEREON IS AN UNASCERTAINABLE LIABILITY. 3. BY THE IMPUGNED ORDER THE CIT(A) CONFIRMED THE ACTION OF TH E AO . 4. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT ISSUE UNDER CONSIDERATION IS COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE VIDE ORDER DATED 20 - 7 - 2012 FOR THE ASSESSMENT YEAR 2006 - 07 & 2007 - 08, WHEREIN THE TRIBUNAL ON MERIT ALLOW E D SUCH INTEREST AFTER OBSERVING AS UNDER : - 6.1 WITH RESPECT TO THE INTEREST ON ELECTRICITY DUTY PROVIDED FOR BY THE ASSESSEE WAS IN CONSEQUENCE TO THE PREFERENCE AND NOT CLAIMED AS PRIOR PERIOD EXPENSES ON THE BASIS OF STATUTORY AUDITORS POINTING OUT THAT THE AMOUNT HELD BY THE ASSESSEE TO BE PAID AS STATUTORY DUTY IN A BANK WAS FOR EARNING INTEREST. 'THEREFORE; CORRESPONDING PAYMENT OF INTEREST WAS TO BE PROVIDED FOR. WHEN THE ISSUE IS SUBJUDICE, NEITHER THE ASSESSEE NOR THE DEPARTMENT MAY SIT ON THE JUDG MENT TO AWARD INTEREST. THEREFORE, INTEREST BEING A PERIOD PAYMENT FOR THE IMPUGNED YEAR, HAS BEEN PROVIDED FOR IN THE IMPUGNED ASSESSMENT YEAR CANNOT BE SUBJECTED TO DISALLOWANCE FOR CLAIMING DEDUCTION U/ S .37. THE ASSESSING OFFICER AFTER HAVING APPLIED H IS MIND ALLOWED THE CLAIM IN THE IMPUGNED. ASSESSMENT YEAR ON BOTH THESE ISSUES THEREFORE CANNOT BE THRUST UPON BY T HE LEARNED C I T HOLDING A VIEW OTHER THAN THE VIEW WHICH WAS LEGITIMATELY ACCEPTED BY THE ASSESSING OFFICER BUT ON THE BASIS OF ARITHMETICAL FINDING OF THE LEARNED C I T WHICH RATHER LEANS IN FAVOUR OF THE ASSESS EE. 5. THE ISSUE UNDER CONSIDERATION ARE SAME, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL, WE DIRECT THE AO TO ALLOW ASSESSEES CLAIM OF ITA NO. 286/13 4 INTEREST INSOFAR AS ASSESSEE IS ALSO OFF ERING INTEREST ON THE AMOUNT DEPOSITED IN THE BANK ACCOUNT AS PER THE DIRECTION OF THE HONBLE HIGH COURT. WHEN INTEREST ON SUCH DEPOSIT IS BROUGHT TO TAX, THERE IS NO REASON FOR DISALLOWING INTEREST PAYABLE TO GOVERNMENT FOR NON - PAYMENT OF SUCH DUTY IN GO VERNMENT ACCOUNT. 6. THE REASONING GIVEN BY THE AO FOR DISALLOWING INTEREST ON NON/DELAYED PAYMENT OF WATER CHARGES ARE THAT IT WAS A CONTINGENT LIABILIT Y. WE FOUND THAT TRIBUNAL IN ASSESSEES OWN CASE IN EARLIER YEARS HAD ALLOWED THIS CLAIM UNDER SIMILAR CIRCUMSTANCES AND HELD THAT INTEREST ON UNPAID ELECTRICITY DUTY AND WATER CHARGES IS FULLY ALLOWABLE U/S.37 OF THE ACT AND PROVISIONS OF SECTION 44A OF THE ACT FOR DISALLOWANCE IS NOT ATTRACTED. 7. IT IS PERTINENT TO MENTION HERE IN THAT THE ITAT CUTTACK BENCH IN THE CASE OF NALCO IN THE COMBINED ORDER DATED 30 - 11 - 2005 HAS HELD THAT INTEREST ON DISPUTED ELECTRICITY DUTY, ARE ALLOWABLE U/S.37 OF THE ACT AND FURTHER, THE INTEREST ON ELECTRICITY DUTY, EVEN IF A STATUTORY LIABILITY, THE SAME DO NOT FALL UNDER THE AMBIT OF SECTION 43B OF THE ACT AND THEREFORE, EVEN IF SUCH INTEREST IS NOT PAID THE SAME IS NOT TO BE DISALLOWED UNDER SECTION 43B. 8. FOLLOWING THE REASONING GIVEN HEREINABOVE WITH REGARD TO THE INTEREST ON DELAYED PAYMENT OF ELECTRICITY BILL, WE DIRECT THE AO TO ALLOW INTEREST ON THE WATER BILL. WE DIRECT ACCORDINGLY. 9. SO FAR AS GROUND TAKEN BY THE ASSESSEE FOR REOPENING U/S.147 IS CONCERNED, WE FOUND THAT AFTER PASSING THE ORDER U/S.143(3)/251 , THE AO, ITA NO. 286/13 5 WHILE PERUSING SCHEDULE - S OF P&L ACCOUNT FOR THE YEAR NOTICED THAT THE ASSESSEE HAD DEBITED A SUM OF RS.25.04 CRORES AS INTEREST ON DISPUTED GOVERNMENT DUES ETC. THIS AMOUNT ALSO FIGURED IN THE COST AUDIT REPORT ANNEXED TO THE TAX AUDIT REPORT IN FORM NO.3CD. C ONSIDERING THE NATURE OF DISPUTED IN TEREST, THE AO FORMED A BELIEF THAT THERE WAS A VALID CASE TO TAKE ACTION U/S.147 AND THUS ISSUED N OTICE U/S.148 ON 17.02.2011. T HE REASONS FOR REOPENING WERE ALSO MADE AVAILABLE TO THE ASSESSEE ON REQUISITION. THEREAFTER, THE AO CONSIDERED THE EXPLANATION OF THE ASSESSEE IN REGARD TO THE CLAIM OF DISPUTED INTEREST , AND REOPENED THE ASSESSMENT BY ISSUE OF NOTICE U/S.148. WE FOUND THAT THERE WAS SUFFICIENT REASON TO BELIEVE THAT THERE WAS ESCAPEMENT OF INCOME. ACCORDINGLY, WE UPHOLD THE REOPENING OF THE ASSE SSMENT. 10 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 10 / 05 / 201 6 . SD/ - SD/ - ( PARTH A SARATHI CH A UDHURY ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER CUTTACK ; DATED 10 /05 /201 6 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( SENIOR PRIVATE SECRETARY ) , / ITAT, CUTTACK 1. / THE APPELLANT 2. / THE RESPONDEN T. 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT, CUTTACK 6. [ / GUARD FILE. //TRUE COPY//