ABB India Ltd, Bangalore V. Joint Commissioner of Income tax(LTU), Bangalore

ITA 1124/BANG/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9426 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 11 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 12-07-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 01-09-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: T SURYANARAYANA
• Keywords: Difference of opinion; Change of opinion
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, BANGALORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO. 1124/ BANG/20 1 4 (ASSESSMENT YEAR: 20 08 - 09 ) M/S. ABB INDIA LTD. (FORMERLY KNOWN AS ABB LTD.) 21 FLOOR, WORLD TRADE CENTRE, BRIGADE GATEWAY,NO.26/01, DR.RAJKUMAR ROAD MALLESWARAM WEST, BANGALORE - 560055. PAN: AAACA 3834 B VS. APPELLANT JOINT COMMISSIONER OF INCOME - TAX (LTU), BANGALORE. RESPONDENT APPELLANT BY : SHRI T.SURYANARAYANA, ADVOCATE. RESPONDENT BY : SHRI SANJAY KUMAR, CIT(DR). DATE OF HEARING : 12/07/2016 DATE OF PRONOUNCEMENT : 26 /08/2016 O R D E R PER I NTURI RAMA RAO, AM : THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE OR DER OF THE CIT(A). LTU, BANGALORE, DATED 30/5/2014 FOR THE ASSESSMENT YEAR 2008 - 09. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS: ITA NO . 1124 /BANG/201 4 PAGE 2 OF 10 3. BRIEFLY FACTS OF THE CASE ARE AS UNDER: THE APPELLANT - ASSESSEE IS A COMPANY DULY INCORPORATED UNDER THE PRO VISIONS OF THE COMPANIES ACT, 1956. IT IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF VARIOUS ELECTRICAL AND ENGINEERING EQUIPMENTS. IT FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008 - 09 ON 28/9/2008 DECLARING A TOTAL INCOME OF RS.795,41,41,782 / - . AGAINST THE SAID RETURN OF INCOME, ASSESSMENT WAS COMPLETED U/S 143(3) OF THE INCOME - TAX ACT,1961 [ THE ACT FOR SHORT] VIDE ORDER DATED 16/11/2011 AT A TOTAL INCOME OF RS.849,71,54,003/ - . SUBSEQUENTLY, THE ASSESSING OFFICER [AO] HAD COME TO KNOW DURI NG THE COURSE OF ASSESSMENT ITA NO . 1124 /BANG/201 4 PAGE 3 OF 10 PROCEEDINGS FOR THE ASSESSMENT YEAR 2009 - 10 THAT THE ASSESSEE CLAIMED EXEMPTION OF INTEREST - FREE TAX BONDS OF RS.105,00,450/ - UNDER THE PROVISIONS OF SECTION 10(23G) OF THE ACT FOR THE ASSESSMENT YEAR 2008 - 09. SINCE PROVISIONS O F SEC.10(23G) OF THE ACT WERE OMITTED BY THE FINANCE ACT, 2006 W.E.F. 1/4/2007, THE AO FORMED A BELIEF THAT INCOME ESCAPED ASSESSMENT FOR THE ASSESSMENT YEAR 2008 - 09 AND ACCORDINGLY RE - OPENED THE ASSESSMENT U/S 147 OF THE ACT AFTER RECORDING REASONS AND A NOTICE U/S 148 OF THE ACT DATED 21/3/2013 WAS ISSUED AND SERVED ON THE ASSESSEE - COMPANY. IN RESPONSE TO SAID NOTICE, ASSESSEE - COMPANY HAD STATED VIDE ITS LETTER DATED 23/4/2013 THAT R/ ORIGINALLY FILED U/S 139(1) ON 28/9/2013 BE TREATED AS RETURN IN RESPO NSE TO NOTICE U/S 148 OF THE ACT. FURTHER, THE ASSESSEE HAS SOUGHT REASONS FOR REOPENING THE ASSESSMENT AND THE SAME WERE INTIMATED VIDE AO S LETTER DATED 7 TH MAY 2013. AFTER ISSUING NOTICE U/S 143(2) DATED 24/5/2010, ASSESSMENT WAS COMPLETED BY THE AO A T A TOTAL INCOME OF RS.853,57,05,824/ - AFTER DISALLOWING TAX - FREE INTEREST CLAIMED, AS EXEMPT U/S 10(23G) OF RS.105,00,550/ - AND AN AMOUNT OF RS.6,06,79,000/ - WAS ALSO ADDED BACK AS NO TAX AT SOURCE WAS DEDUCTED ON PAYMENTS TO CONTRACTORS AND PROFESSIONALS ON TECHNICAL FEE. ROYALTIES, TRADE MARK ETC. AND AN AMOUNT OF RS.14,21,28,000/ - WAS ADDED BACK AS BEING IMPORT DUTY PAID ON THE CLOSING STOCK. ITA NO . 1124 /BANG/201 4 PAGE 4 OF 10 4. BEING AGGRIEVED, AN APPEAL WAS FILED BEFORE THE CIT(A). IT WAS CONTENDED BEFORE THE CIT(A) THAT THE V ERY INITIATION OF RE - ASSESSMENT PROCEEDINGS U/S 147 IS BAD IN LAW AS THE FACT OF CLAIM OF EXAMINATION OF INTEREST INCOME WAS DULY DISCLOSED IN THE RETURN OF INCOME AND THERE ARE NO REASONS TO BELIEVE THAT INCOME ESCAPED ASSESSMENT PROCEEDINGS. IN SUPPORT OF THIS CONTENTION, ASSESSEE - COMPANY RELIED UPON PLETHORA DECISIONS WHICH ARE AS FOLLOWS: THE ABOVE SUBMISSIONS HAVE BEEN NEGATIVE BY THE CIT(A) BY HOLDING THAT THERE WAS NO OPINION FORMED BY THE AO AT THE TIME OF FRAMING ORIGINAL ASSESSMENT AND THEREFO RE THE RE - ASSESSMENT PROCEEDINGS ARE NOT VITIATED BY CHANGE OF OPINION AND THEREBY CONFIRMED THE VALIDITY OF THE RE - ASSESSMENT PROCEEDINGS. AS REGARDS THE DISALLOWANCE OF CLAIM FOR EXEMPTION U/S 10(23G) WAS CONFIRMED BY THE CIT(A). THE CIT(A), WHILE DEAL ING WITH DISALLOWANCE OF DEDUCTION ON REVERSE OF PROVISIONS OBSERVED AS FOLLOWS: ITA NO . 1124 /BANG/201 4 PAGE 5 OF 10 5. BEING AGGRIEVED, ASSESSEE - COMPANY IS BEFORE US IN THE PRESENT APPEAL. 5.1 LEARNED COUNSEL FOR ASSESSEE - COMPANY CONTENDED THAT THE VERY CLAIM OF EXEMPTION OF TAX - FREE INTEREST UNDER THE PROVISIONS OF SECTION 10(23G) OF THE ACT WAS VERY MUCH AVAILABLE BEFORE THE AO AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS. THERE WAS NO FRESH INFORMATION SUGGESTING THAT THE CLAIM IS INADMISSIBLE. THEREFORE, IT IS A CASE OF C HANGE OF OPINION. APPLYING THE L AW LAID ITA NO . 1124 /BANG/201 4 PAGE 6 OF 10 DOWN BY THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD., ( 320 ITR 561) RE - ASSESSMENT PROCEEDINGS SHOULD BE DECLARED AS NULL AND VOID. HE PLACED RELIANCE ON THE DECISION OF THIS TRIBUNA L IN T HE CASE OF FIBRES & FABRICS INTERNATIONAL PVT. LTD. VS. DCIT IN ITA NO.1352/BANG/2014 DATED 10/2/2016 FOR THE PROPOSITION THAT AN ERRONEOUS ORDER PASSED BY THE ORIGINAL AO DOES NOT GIVE JURISDICTION FOR RE - ASSESSMENT PROCEEDINGS. THUS, HE SUBMITTED THAT THE VERY RE - ASSESSMENT PROCEEDINGS ARE NOT VALID IN LAW. WITHOUT PREJUDICE TO THIS, LEARNED COUNSEL FOR ASSESSEE - COMPANY SUBMITTED THAT THAT THE CLAIM FOR DEDUCTION OF PROVISION OF WRITTEN BACK WAS ALLOWABLE AS IN THE YEAR IN WHICH PROVISION WAS CREATED THE SAME WAS OFFERED TO TAX AS NO TAX HAD BEEN DEDUCTED AT SOURCE UNDER THE PROVISIONS OF SECTION 40A(IA) OF THE ACT. 5.2 ON THE OTHER HAND, LEARNED CIT(DR) VEHEMENTLY CONTESTED THAT RE - ASSESSMENT PROCEEDINGS ARE VALID INITIATED AS THE AO HAD COME TO KNOW THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2009 - 10 THAT EXEMPTION WAS WRONGLY ALLOWED U/S 10(23G) OF THE ACT WHICH WAS NO LONGER IN VOGUE. THE FACT THAT THE PROVISIONS OF SECTION 10(23G) OF THE ACT OMITTED BNY THE FINANCE ACT, 2 006 W.E.F. 1/4/2007, WERE BROUGHT TO THE NOTICE OF THE AO ONLY DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2009 - 10. DISCOVERY OF THIS INFORMATION ENABLED THE AO TO FORM OPINION THAT INCOME HAD ESCAPED ASSESSMENT. THEREFORE, THE RA TIO OF THE DECISION OF THE ITA NO . 1124 /BANG/201 4 PAGE 7 OF 10 HON BLE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA LTD., (SUPRA) CANNOT BE APPLIED. AS REGARDS MERITS, THE CIT(DR) SUBMITTED THAT THE ASSESSEE - COMPANY HAD FAILED TO DISCHARGE THE ONUS OF PROVIDING THAT REVERSAL OF PROVISIO N WAS OUT OF THE AMOUNT DISALLOWED IN THE EARLIER YEAR. THEREFORE, NO CLAIM CAN BE ALLOWED ON MERE SUBMISSIONS WITHOUT EVIDENCE. HE PRAYED FOR SUSTENANCE OF THE ADDITION MADE. 6. WE HEARD RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. WE SHALL, AT THE FIRST INSTANCE, DEAL WITH GROUNDS OF APPEAL CHALLENGING RE - ASSESSMENT PROCEEDINGS. THE CONTENTION OF THE ASSESSEE - COMPANY THAT THERE WAS NO FRESH INFORMATION WHICH ENABLED THE AO TO FORM OPINION THAT INCOME ESCAPED ASSESSMENT CANNOT BE ACCEPTED , A S INFORMATION HAD COME TO THE KNOWLEDGE OF AO THAT THE PROVISIONS OF SECTION 10(23G) WERE OMITTED W.E.F. 1/4/2007 DURING THE COURSE OF SUBSEQUENT ASSESSMENT PROCEEDINGS . A S HELD BY THE HON BLE BOMBAY HIGH COURT IN THE CASE OF MULTISCREEEN MEDIA (P) LTD. V S. UNION OF INDIA & ANOTHER (324 ITR 54). EVEN THE HON BLE SUPREME COURT IN THE CASE OF ESS KAY ENGINEERING P.LTD. VS. CIT (247 I T R 818) PHOOL CHAND BAJRANG LAW & ANOTHER VS. CIT ( 203 ITR 456) HELD THAT INFORMATION OBTAINED IN SUBSEQUENT ASSESSMENT PROCE EDINGS COULD LEAD TO A BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT EVEN THOUGH THE TRANSACTION IN QUESTION HAD BEEN EXAMINED DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS. ITA NO . 1124 /BANG/201 4 PAGE 8 OF 10 RELIANCE PLACED BY THE LEARNED COUNSEL FOR ASSESSEE - COMPANY ON THE DECISION IN THE CASE OF KELVINATOR OF INDIA LTD., (SUPRA) IS MISPLACED, AS THERE IS NO OPINION FORMED IN THE ORIGINAL ASSESSMENT PROCEEDINGS ON THE ISSUE OF CLAIM OF EXAMINATION OF TAX FREE INTEREST U/S 10(23G) OF THE ACT. THEREFORE, WE HOLD THAT I NITIATION OF RE - ASSESSMENT PROCEEDINGS U/S 147 IS VALID IN LAW. 7. NOW, COMING TO MERITS OF THE ADDITION OF RS.5,27,67,000/ - ON ACCOUNT OF REVERSAL OF PROVISION FOR ROYALTY, FEES FOR TECHNICAL SERVICE ETC., OF RS.79,12,000/ - ON ACCOUNT OF REVERSAL OF P ROVISION FOR CONTRACTOR AND PROFESSIONAL FEE ETC., IT IS THE CLAIM OF THE ASSESSEE - COMPANY THAT THESE AMOUNTS WERE DISALLOWED U/S 40A(IA) SUO MOTU FOR NON - DEDUCTION OF TAX AT SOURCE. IN THE YEAR UNDER CONSIDER CONSIDERATION, THE VERY PROVISION CREATED WAS REVERSED AND THEREFORE THE SAME SHOULD BE ALLOWED AS A DEDUCTION. THERE IS NO QUARREL ON THIS PROPOSITION BUT THE CLAIM CAN BE ALLOWED ONLY ON SATISFYING THE AO THAT THE PROVISION WAS REVERSED OUT OF AMOUNT DISALLOWED EARLIER. THE CIT(A) HAS RECORDED A C ATEGORICAL FINDING THAT THE ASSESSEE HAS F A ILED TO LINK PROVISION REVERSED WITH THE AMOUNT OF PROVISION ORIGINALLY CREATED AND DISALLOWED. THE CIT(A) ALSO OBSERVED THAT THE ASSESSEE - COMPANY HAD EXPRESSED ITS HELPLESSNESS TO ESTABLISH THE LINK BETWEEN ORIG INAL PROVISION AND REVERSAL PROVISION DURING THE YEAR UNDER CONSIDERATION. IN THE CIRCUMSTANCES, THE CIT(A) HAS CONFIRMED THE ADDITION. EVEN BEFORE US, ASSESSEE - COMPANY HAD NOT MADE ANY ATTEMPT TO PROVE NEXUS BETWEEN AMOUNT OF ITA NO . 1124 /BANG/201 4 PAGE 9 OF 10 PROVISION CREATED WHICH WAS DISALLOWED IN EARLIER YEARS AND THE AMOUNT OF PROVISION REVERSED DURING THE YEAR UNDER CONSIDERATION. THE ONUS OF PROVING THE CLAIM ALWAYS LIES WITH THE ASSESSEE. THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. IMPERIAL CHEMICAL INDUSTRIES (INDIA) LTD., (74 ITR 17)(SC) HAS UNEQUIVOCALLY HELD THAT BURDEN OF PROVIDING THAT TH E CLAIM IS ALLOWABLE LIES ON THE ASSESSEE. DISCHARGE OF BURDEN HAS TO BE EFFECTIVE AND MEANINGFUL AND NOT TO COVER UP THE BOOK ENTRIES AND PAPER WORK. IN VIEW OF FAILURE BY THE ASSES SEE - COMPANY TO PROVE NEXUS BETWEEN AMOUNT DISALLOWED SUO MOTU, PROVISIONS OF SECTION 40A(IA) AND THE AMOUNT REVERSED DURING THE YEAR UNDER CONSIDERATION, WE HAVE NO OPTION BUT TO CONFIRM THE ACTION OF THE AO MAKING THE ADDITION ON THE SAME . 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH AUGUST , 2016 SD/ - SD/ - (VIJAY PAL RAO) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE : BANGALORE D A T E D : 26 /0 8 /2016 SRINIVASULU, SPS ITA NO . 1124 /BANG/201 4 PAGE 10 OF 10 COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) - II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL BANGALORE