The C.D. Co-operative Credit Society Ltd, Mandi V. ACIT, Mandi

ITA 1075/CHANDI/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6962 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-02-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 04-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI SARANGA L
• Assessee Lawyers: AJAY JAIN CA B M MONGIA
• Keywords: Business income; Business expenditure; Tangible material; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 143(3); 148; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE MS. DIVA SINGH, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NOS.1075/CHD/2014 (ASSESSMENT YEAR : 2008-09) THE C.D. CO-OPERATIVE CREDIT SOCIETY LTD., VS. THE A.C.I.T., HO GOHAR, PO CHAIL CHOWK, CIRCLE MANDI, BHIULI, TEH. CHACHIOT, DISTT. MANDI, DISTT. MANDI, MANDI. MANDI. PAN: AAABT2301D ITA NOS.1076/CHD/2014 (ASSESSMENT YEAR : 2009-10) THE C.D. CO-OPERATIVE CREDIT SOCIETY LTD., VS. THE D.C.I.T., HO GOHAR, PO CHAIL CHOWK, CIRCLE MANDI, BHIULI, TEH. CHACHIOT, DISTT. MANDI, DISTT. MANDI, MANDI. MANDI. PAN: AAABT2301D ITA NOS.1077/CHD/2014 (ASSESSMENT YEAR : 2010-11) THE C.D. CO-OPERATIVE CREDIT SOCIETY LTD., VS. THE D.C.I.T., HO GOHAR, PO CHAIL CHOWK, CIRCLE MANDI, BHIULI, TEH. CHACHIOT, DISTT. MANDI, DISTT. MANDI, MANDI. MANDI. PAN: AAABT2301D AND ITA NOS.1078/CHD/2014 (ASSESSMENT YEAR : 2011-12) THE C.D. CO-OPERATIVE CREDIT SOCIETY LTD., VS. THE D.C.I.T., HO GOHAR, PO CHAIL CHOWK, CIRCLE MANDI, BHIULI, TEH. CHACHIOT, DISTT. MANDI, DISTT. MANDI, MANDI. MANDI. PAN: AAABT2301D (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI AJAY JAIN, CA B.M. MONGIA, CA & ROHIT KAURA, ADV. RESPONDENT BY : SHRI RAVI SARANGAL, CIT DR DATE OF HEARING : 13.07.2017 DATE OF PRONOUNCEMENT : 03.08.2017 2 O R D E R PER BENCH : THIS BUNCH OF FOUR APPEALS RELATE TO THE SAME ASSESSEE AND HAS BEEN FILED AGAINST SEPARATE ORDER S OF LD.CIT(APPEALS), SHIMLA, ALL DATED 04.09.2014, RELA TING TO ASSESSMENT YEARS 2008-09 AND 2011-12. 2. IT WAS COMMON GROUND BETWEEN BOTH THE PARTIES THAT THE ISSUE RAISED IN ALL THE APPEALS WAS IDENTI CAL AND, THEREFORE, THEY WERE ALL HEARD TOGETHER AND ARE BEI NG DISPOSED OFF BY THIS COMMON ORDER. FOR THE SAKE OF CONVENIENCE WE SHALL BE DEALING WITH THE FACTS IN T HE CASE OF ITA NO.1075/CHD/2014 ITA NO.1075/CHD/2014 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN DECLARING GROSS INCOME OF RS.38,50,773/- W HICH WAS CLAIMED TO BE DEDUCTIBLE U/S 80P(2)(A)(I) OF TH E INCOME TAX ACT,1961 WHICH PROVIDES DEDUCTION TO A COOPERAT IVE SOCIETY OF WHOLE OF THE PROFITS AND GAINS ATTRIBUTA BLE TO CARRYING ON OF BUSINESS ACTIVITIES OF BANKING OR P ROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE ASSESSMENT U/ S 143(3) OF THE ACT IN THIS CASE WAS COMPLETED ON 16.11.2010 ,AND IT WAS HELD THAT THE ASSESSEE DID NOT QUALIFY FOR DED UCTION U/S 80P(2)(A)(I) SINCE THOUGH IT WAS A COOPERATIVE SOCIETY PROVIDING CREDIT FACILITIES TO ITS MEMBERS, IT HAD EARNED INCOME FROM BANK INTEREST. ALSO IT WAS FOUND THAT T HE ASSESSEE HAD PROVIDED LOANS OTHER THAN FOR AGRICULT URAL 3 PURPOSES AND THUS IT DID NOT QUALIFY AS A PRIMARY AGRICULTURAL CREDIT SOCIETY .THE AO ALSO FOUND THAT THE ASSESSEE DID NOT QUALIFY AS A PRIMARY COOPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK ALSO. THUS THE ASSESSEES CLAIM OF DEDUCTION U/S 80P(2)(A)(I) WAS D ENIED. ON APPEAL THE DISALLOWANCE MADE WAS UPHELD BY THE CIT(APPEALS). THE ASSESSEE AGREED TO THE DECISION O F CIT(APPEALS) THAT INCOME FROM BANK INTEREST HAS TO BE TAXED U/S 56 OF THE I.T. ACT, 1961 AND NO FURTHER APPEAL WAS FILED. THEREAFTER NOTICE U/S 148 ISSUED TO THE ASSESSEE FO R THE REASON THAT WHILE MAKING DISALLOWANCE OF THE INTERE ST INCOME, THE SAME WAS NOT COMPUTED AS PER SECTION 56 AND BUSINESS EXPENSES HAD BEEN DEDUCTED. IT WAS FOUND THAT INCOME FROM OTHER SOURCES WAS FOUND SUBJECTED TO EX CESSIVE DEDUCTION THUS RESULTING IN ESCAPEMENT OF INCOME. N OTICE U/S 148 OF THE ACT WAS ISSUED TO THE ASSESSEE IN RE SPONSE TO WHICH THE ASSESSEE DID NOT REVISE THE RETURN AND STATED THAT RETURN FILED EARLIER MAY BE TREATED AS RETURN FILED. THE ASSESSING OFFICER, AFTER A DETAILED DISCUSSION, CO NCLUDED THAT DEDUCTION U/S 80P (2) (A) (I) IS AVAILABLE ONL Y IN RESPECT OF INTEREST FROM THE MEMBERS WHICH IS THE INCOME FR OM THE ACTIVITY OF PROVIDING CREDIT FACILITIES TO THE MEMB ERS AND INTEREST INCOME FROM THE DEPOSITS WITH BANKS WAS NO T ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF TOTGARS COOPERATIVE S ALES LTD. VS ITO AND DECISION OF CIT(APPEALS) IN ASSESSE E'S OWN CASE. THE ASSESSING OFFICER THEREAFTER COMPUTED THE BUSINESS INCOME OF THE ASSESSEE UNDER TWO SUB-HEAD I.E. 4 INCOME ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I), AND THAT WHICH IS NOT ELIGIBLE. AFTER DETAILED DISCUSSION MA DE IN THE ASSESSMENT ORDER FROM PAGE 2 TO 11, THE INCOME WHIC H WAS NOT ELIGIBLE FOR DEDUCTION 80P(2)(A)(I) WAS WORKED OUT AT RS.7,74,844/-.FURTHER THE ASSESSING OFFICER DISALLOWED THE BANK INTEREST INCOME U/S 57(III) AT RS.48,13,027/- ,AND UNEXPLAINED INCREASE IN THE RESERVE AT RS.7,54,643/ - AND UNEXPLAINED INCREASE IN THE PROVISIONS AT RS.39,09, 398/- WERE ALSO ADDED TO THE TOTAL INCOME OF THE ASSESSEE DURING 143(3)/148 PROCEEDINGS. 4. AGGRIEVED BY THE SAME THE ASSESSEE FILED PRESEN T APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS: 1. THAT THE LEARNED CIT(A) HAS ERRED IN LAW AS WEL L AS ON FACTS IN NOT ADJUDICATING THE ISSUE THAT THE REASSESSMENT PROCEEDINGS ARE WITHOUT JURISDICTION, ILLEGAL AND BAD IN LAW. 2. THAT THE ORDER OF THE LD. CIT(A) IS ARBITRARY IN NOT CONSIDERING THAT THE ALLEGED REASONS RECORDED FOR REOPENING LACK REASONS TO BELIEVE' AND HENCE INVALID. 3. THAT THE LD. CIT(A), HAS GROSSLY ERRED IN NOT CONSIDERING THAT THE ALLEGED REASON RECORDED FOR REOPENING LACK QUANTUM OF INCOME HAVING ESCAPED ASSESSMENT THUS MAKING REASONS WITHOUT COGENT AND TANGIBLE MATERIAL. 4. THAT THE LEARNED CIT(A) IS NOT JUSTIFIED IN UPHO LDING THE REASSESSMENT ORDER OF THE AO BECAUSE THERE WAS NO NEW/FRESH MATERIAL THAT HAD COME TO THE POSSESSION OF THE AO, AND IT WAS ONLY A CASE OF 'CHANGE OF OPINION' AND NOT PER SE REASONS TO BELIEVE'. 5. THAT THE LD. CIT(A), HAS ERRED IN NOT CONSIDERING THAT THE NOTICEU/S148HAS BEEN ISSUED MECHANICALLY MERELY ON THE BORROWED OPINION OF THE ORDER OF CIT(A), WITHOUT THE APPLICATION OF MIND BY THE AO HIMSELF ON THE MATERIAL ALREADY ON RECORD WHICH IS ILLEGAL AND DOES NOT CONFER VALID JURISDICTION UPON THE AO TO FRAME REASSESSMENT. 5 6. THAT THE LEARNED CIT(A) IS NOT JUSTIFIED IN UPHO LDING THE REASSESSMENT ORDER BECAUSE IN THE ALLEGED REASONS RECORDED' THE TERM 'PRIMA FACIE' DENOTES THAT THE REOPENING IS FOR VERIFICATION INSTEAD OF THERE BEIN G ANY REASONS TO BELIEVE' ON ANY CONVINCING MATERIAL. 7. THAT THE LEARNED CIT(A), IS NOT JUSTIFIED IN UPH OLDING THE RE-ASSESSMENT ORDER OF THE ASSESSING OFFICER AS THE REASSESSMENT ORDER HAD AGAIN BEEN MADE ON THE SAME FACTS AND CIRCUMSTANCES AND ON THE SAME MATERIAL ALREADY ON RECORD WHICH TANTAMOUNT TO REVIE W NOT PERMISSIBLE UNDER LAW. 8. THAT THE LEARNED CIT(A), IS NOT JUSTIFIED IN UPHOLDING THE DENIAL OF DEDUCTION TO THE APPELLANT U/S 80P(2)(A)(I), TO WHICH THE APPELLANT-ASSESSEE IS ENTITLED AS PER LAW. 9. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROUNDS OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD AND DISPOSED OFF. 5. SUBSEQUENTLY THE ASSESSEE FILED REVISED/ADDITION AL GROUNDS OF APPEAL VIDE ITS LETTER DATED 8.2.2017 S TATING AS UNDER: IT IS HUMBLY PRAYED THAT THE ABOVE NOTED APPEAL IS F IXED FOR HEARING BEFORE THE HON'BLE ITAT, CHANDIGARH BENCH O N 15 TH FEBRUARY, 2017. WE RESPECTFULLY SUBMIT, THAT WE WAN T TO TAKE THE FOLLOWING ADDITIONAL/ REVISED GROUNDS OF APPEAL. 1. THAT THE LEARNED ASSESSING OFFICER HAS WRONGLY I NVOKED THE PROVISIONS OF SECTION 147/148 SOLELY ON THE BAS IS OF CIT(A) ORDER FOR A.Y.2007-08AND THAT TOO ON WRONG F ACTS AND WITHOUT HAVING ANY FRESH MATERIAL AND THEREFORE THE REASSESSMENT ON THE BASIS OF CHANGE OF OPINION IS N OT PERMISSIBLE UNDER LAW. 2. THAT THE LEARNED CIT(A), IS NOT JUSTIFIED IN UPHOL DING THE DENIAL OF DEDUCTION TO THE APPELLANT U/S 80P(2)(A) (I), TO WHICH THE APPELLANT-ASSESSEE IS ENTITLED AS PER LAW, AND JUDGMENT IN THE CASE OF TOTGARS, CO-OPERATIVE SALE SOCIETY LTD., 322 ITR 283 (SC), IS NOT APPLICABLE TO THE CAS E OF THE APPELLANT SOCIETY. 3. THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE ADDITION OF RS.7,54,643/- AND RS.39,09,398/- ON ACCOUNT OF UNEXPLAINED INCREASE IN RESERVES AND PROVISIONS BY TAKING THE WRONG FIGURES OF OTHER FUNDS AND WITHOUT CONSIDERING THE FACTS AND REPLY OF THE ASSESSEE. 4. WITHOUT PREJUDICE TO THE GROUND OF APPEAL NO. 2, AND STRICTLY IN THE ALTERNATIVE, IF THE INCOME OF TH E 6 APPELLANT IS CONSIDERED U/S 56 AS INCOME FROM OTHER SOURCES THEN THE LEARNED AO & CIT(A) HAS ERRED BY NOT ALLOWING DEDUCTION U/S 57(III) ON ACCOUNT OF INTEREST PAID ON BORROWED AMOUNT. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND T HE GROUNDS OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD AND DISPOSED OFF. WE ALSO SUBMIT THAT GROUNDS NO. 1 & 4 WERE NOT TAKEN BEFORE THE CIT(A) AND THESE GROUNDS ARE PUREL Y LEGAL GROUNDS AND THEREFORE WE REQUEST YOUR HONOUR TO ADM IT THE GROUNDS NO. 1 & 4 IN VIEW OF WELL SETTLED LAW THAT THE LEGAL GROUND CAN BE RAISED ANY TIME AS PER THE RATIO LAID D OWN BY THE HON'BLE SUPREME COURT IN THE CASE OF NTPC LTD. V S. CIT, 229 ITR 383, THEREFORE, WE REQUEST YOUR HONOURS TO ADMIT THE ABOVE LEGAL GROUNDS. 6. BEFORE US LD COUNSEL FOR THE ASSESSEE RELYING UPON ITS ABOVE APPLICATION REQUESTED THAT THE REVISED/ADDITIONAL GROUNDS BE ADMITTED. 7. WE HAVE HEARD BOTH THE PARTIES. WE FIND THAT GROUND NO.1 & 4 RAISED IN THE ABOVE APPLICATION OF THE ASSESSEE, CHALLENGING THE VALIDITY OF THE REASSESSM ENT PROCEEDINGS AND CLAIMING ALLOWANCE OF EXPENSES AS PER SECTION 57(3) OF THE ACT, HAS BEEN RAISED FOR THE F IRST TIME BEFORE US, HAVING NOT BEEN CHALLENGED/CLAIMED BEFO RE THE LD.CIT(A). SINCE THESE ARE LEGAL GROUNDS WHICH CAN BE DECIDED ON THE BASIS OF FACTS ALREADY ON RECORD WE ADMIT THE SAME FOR ADJUDICATION. 8. IN GROUND NO. 3 THE ASSESSEE HAS CHALLENGED T HE ACTION OF THE LD.CIT (APPEALS) IN MAKING ADDITION O N ACCOUNT OF UNEXPLAINED INCREASE IN RESERVES. THE SA ID GROUND WAS NOT PART OF THE GROUNDS RAISED IN THE OR IGINAL MEMORANDUM OF APPEAL. BUT SINCE IT CHALLENGES THE ADDITION UPHELD BY THE CIT(A), IN THE INTEREST OF J USTICE, WE 7 ADMIT THE SAME FOR ADJUDICATION. 9. THUS ALL THE GROUNDS RAISED BY THE ASSESSEE VID E ITS SUBSEQUENT APPLICATION ARE ADMITTED FOR ADJUDIC ATION AND ARE TREATED AS THE ONLY GROUNDS TO BE ADJUDICA TED UPON, REPLACING THE ORIGINAL GROUNDS RAISED IN THE MEMORANDUM OF APPEAL. 10. FURTHER WE OBSERVE THAT THE ASSESSEE HAVING NO T RAISED THE LEGAL GROUNDS BEFORE THE CIT(A), HE DID NOT HAVE AN OCCASION TO ADJUDICATE THEM. ALSO THE ISSUES ADJ UDICATED ON MERITS WERE NOT TAKEN IN THE RIGHT PERSPECTIVE I N THE ABSENCE OF CHALLENGE TO THE LEGAL GROUNDS. THEREFOR E IN THE INTEREST OF JUSTICE WE ARE INCLINED TO SEND THE WHO LE MATTER BACK TO THE CIT(A) TO ADJUDICATE ALL ISSUES RAISED I.E. LEGAL AND ON MERITS, AFRESH AND IN ACCORDANCE WITH LAW. N EEDLESS TO ADD THAT THE ASSESSEE BE GIVEN DUE OPPORTUNITY O F HEARING. 11. THE APPEAL OF THE ASSESSEE, THEREFORE, STANDS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.1076/CHD/2014 ITA NO.1077/CHD/2014 & ITA NO.1078/CHD/2014 12. IT IS RELEVANT TO OBSERVE HERE THAT THE FACTS AND CIRCUMSTANCES OF THESE APPEALS ARE SIMILAR TO THE F ACTS AND CIRCUMSTANCES IN ITA NO.1075/CHD/2014 AND THE FINDINGS GIVEN IN ITA NO.1075/CHD/2014 SHALL APPLY MUTATIS MUTANDIS TO THESE APPEALS ALSO. 8 13. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (DIVA SINGH) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 3 RD AUGUST, 2017 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH