The ACIT,GNR Circle, Gandhinagar V. M/s. Gujarat State Petroleum Corpn.Ltd., Gandhinagar

ITA 1302/AHD/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0139 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 18-08-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 14-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VILAS V SHINDE
• Assessee Lawyers: S N SOPARKAR WITH PARIN SHAH
• Keywords: Earning of tax free income; Proportionate interest; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 143(3); 14A

Judgement Text

I.T.A. NO. 1302 /AHD/201 2 ASSESSMENT YEAR: 200 5 - 06 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND S S GODARA JM ] I.T.A. NO. 1302 /AHD/201 2 ASSESSMENT YEAR: 20 0 5 - 06 ASSTT. COMMISSIONER OF INCOME TAX, GANDHINAGAR. . . . APPELLANT VS. GU JARAT STATE PETROLEUM CORPORATION LTD., ...... ... .. RESPONDENT G SPC BHAVAN, SECTOR 11, GANDHINAGAR 382 011 . [PAN: AA BCG 4502 F ] APPEARANCES BY: VILAS V. SHINDE FOR THE APPELLANT S.N. SOPARKAR WITH PARIN SHAH FOR THE RESPONDENT DATE OF C ONCLUDING THE HEARING : 18 .0 8 .2016 DATE OF PRONOUNC ING THE ORDER : 28 .1 0.2016 O R D E R PER PRAMOD KUMAR , AM : 1. BY WAY OF THIS APPEAL, THE APPELLANT HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 19 TH MARCH 2012 PASSED BY THE LEARNED CIT(A) IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT,1961, FOR THE ASSESSMENT YEAR 2005 - 06. 2. GRIEVANCE OF THE APPELLANT IS THAT LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN TREATING THE REOPENING OF THE CASE AND ASSESSMENT PROCEEDINGS INVALID . 3. BRIEFLY, THE RELATED MATERIAL FACTS ARE AS FOLLOWS. THE ASSESSEE BEFORE US IS A STATE PUBLIC SECTOR UNDERTAKING AND ITS ASSESSMENT UNDER SECTION 143(2) WAS COMPLETED I.T.A. NO. 1302 /AHD/201 2 ASSESSMENT YEAR: 200 5 - 06 PAGE 2 OF 4 ON 28.12.2007. ON 22 ND MARCHE 2010, HOWEVER, THE ASSESSMENT WAS REOPENED BY RECORDING THE FOLLOWING REASONS: 4. IT IS SEEN THAT THE ASSESSEE HAS SHOWN DIVIDEND INCOME OF RS 36,97,000 WHICH IS EXEMPT FROM TAX. NO DISALLOWANCE FOR EARNING THE EXEMPT INCOME HAS BEEN MADE. EXPENSES ON SUCH INCOME, AS PER RULE 8D, WORKS OUT TO RS 1,35, 03,159. 5. THEREFORE, I HAVE REASONS TO BELIEVE THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT TO THE EXTENT OF RS 1,35,03,159 HAS ESCAPED ASSESSMENT, WITHIN THE MEANINGS OF SECTION 147 OF THE INCOME TAX ACT, 1961 6 . THE ASSESSEE DID RAISE OBJECTION AG AINST THE REOPENING BUT FOR NO AVAIL. WHEN MATTER FINALLY TRAVELLED IN THE FIRST APPEAL, LEARNED CIT(A) QUASHED THE REASSESSMENT BY OBSERVING AS FOLLOWS: 5.1 I HAVE CONSIDERED THE FACTS OF THE CASE, SUBMISSION OF THE ASSESSEE, THE ORIGINAL ASSESSMENT ORD ER, THE QUESTIONNAIRE ISSUED AND THE REPLIES FILED IN THE REGULAR ASSESSMENT PROCEEDINGS, THE REASONS RECORDED FOR REOPENING AND THE RE - ASSESSMENT ORDER. THE FOLLOWING PERTINENT OBSERVATIONS ARE MADE WHICH EMERGE FROM THEIR EXAMINATION: A) THE ORIGINA L ASSESSMENT WAS COMPLETED U/S 143(3) AFTER ISSUING DETAILED QUESTIONNAIRE AND FILING OF SUBMISSIONS AND EVIDENCES BY THE APPELLANT. THE CASE HAS BEEN REOPENED WITHIN 4 YEARS. B) IT IS TRUE, AS CONTENDED BY THE APPELLANT, THAT THE AO IN ORIGINAL ASSESSMEN T PROCEEDINGS, AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS U/S. 143(31 BY NOTICE DATED 06 - 08 - 07 WHERE IN AT QUESTION NO. 9 THE THEN LEARNED A.O HAS ASKED AS UNDER 'QUESTION NO. 9 AS PER SCHEDULE 'F', YOU HAVE MADE INVESTMENT OF RS. 281.77 CRORES IN S HARES/BONDS OF DIFFERENT CONCERNS AS WELL AS SUBSIDIARY COMPANY. SINCE THE PROSPECTIVE RETURNS OUT OF SUCH INVESTMENTS WOULD BE TAX - FREE INCOME, THEREFORE, PLEASE EXPLAIN THAT THE PROPORTIONATE INTEREST WORKED OUT ON SUCH INVESTMENT YIELDING TAX - FREE INCOM E, SHOULD NOT BE DISALLOWED AS YOU I.T.A. NO. 1302 /AHD/201 2 ASSESSMENT YEAR: 200 5 - 06 PAGE 3 OF 4 HAVE MADE INTEREST PAYMENT OF RS.57.93 LACS ON UNSECURED AND OTHER LOANS OBTAINED DURING THE YEAR.' THE APPELLANT HAS REPLIED TO THE ABOVE VIDE LETTER DATED 16 - 11 - 07. C) NO ADDITION WAS MADE IN THE ORIGINAL ASSES SMENT U/S 14A, ALTHOUGH SPECIFIC QUERIES WERE RAISED AS ABOVE. IT IS DEAR THAT THE CASE HAS BEEN REOPENED ON THE BASIS OF OPINION ON THE INFORMATION ALREADY ON RECORD. NO NEW INFORMATION HAS COME TO THE NOTICE OF THE AO. IT IS NOT EVEN A CASE WHERE IT CAN BE PLEADED THAT THERE WAS NO CONSCIOUS CONSIDERATION OF THE MATERIAL ON RECORD. IN FACT IT HAS BEEN PROVED THAT SPECIFIC QUERIES HAS BEEN RAISED AND REPLIES FILED WHICH HAVE BEEN CONSIDERED. IT IS A CLEAR CASE OF CHANGE OF OPINION ON THE BASIS OF INFORMAT ION ALREADY ON RECORD AND NO NEW INFORMATION COMING INTO THE NOTICE OF THE AO. IN THE TOTALITY OF THESE FACTS, IT CAN BE SAID THAT THIS IS A CASE OF A MERE CHANGE OF OPINION AND REOPENING IS NOT VALID IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT I N THE CASE OF M/S. KELVINATOR OF INDIA LTD 320 ITR 561. IN SIMILAR FACTS AND CIRCUMSTANCES, THE JURISDICTIONAL HIGH COURT IN THE CASE OF TULSI DEVELOPERS VS DOT REPORTED AT 59 DTR 351 (GUJ) HAS HELD THAT THE REOPENING WAS INVALID. IN VIEW OF THE JUDGMENT O F THE HON'BLE JURISDICTIONAL HIGH COURT AS ABOVE, THE REOPENING IN THIS CASE HAS TO BE DECIDED AS A CASE OF MERE CHANGE OF OPINION AND BAD IN LAW. THE RE - ASSESSMENT PROCEEDINGS ARE THEREFORE DIRECTED TO BE ANNULLED. 7 . THE ASSESSING OFFICER IS AGGRIEVED O F THE RELIEF SO GRANTED BY THE CIT(A) AND IS IN APPEAL BEFORE US. 8 . WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 9 . WE HAVE NOTED THAT THE MATTER R EGARDING DISALLOWANCE UNDER SECTION 14A WAS DULY EXAMINED BY THE ASSESSING OFFICER AT THE ORIGINAL ASSESSMENT STAGE AND, APPARENTLY SATISFIED BY THE EXPLANATION OF THE ASSESSEE, HE DID NOT MAKE ANY DISALLOWANCE. NO NEW INFORMATION HAS COME TO THE KNOWLEDGE OF THE ASSESSING OFFICER. IN THE LIGHT OF THE LAW LAID DOWN BY HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF HEAVY METAL AND TUBES LTD VS DCIT (364 IITR 609), INITIATION OF REASSESSMENT PROCEEDINGS, EVEN WITHIN FOUR YEARS, IN NOT PERMISSIBLE IN SUCH C IRCUMSTANCES. IN ANY I.T.A. NO. 1302 /AHD/201 2 ASSESSMENT YEAR: 200 5 - 06 PAGE 4 OF 4 EVENT, AS IS THE SETTLED LEGAL POSITION BY NOW, RULE 8D HAS NO APPLICATION IN THE ASSESSMENT YEAR BEFORE US. THE VERY BASIS OF HOLDING THAT INCOME HAS ESCAPED THE ASSESSMENT IS APPLICATION OF RULE 8D BUT, BEYOND ANY DISPUTE OR CONTROV ERSY, THE SAID RULE IS APPLICATION ONLY WITH EFFECT FROM THE ASSESSMENT YEAR 2008 - 09. IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE UPHOLD THE FINDINGS OF THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 10 . IN THE RESULT , THE APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT TODAY ON 28 TH DAY OF OCTOBER, 2016. SD/ - SD/ - S S GODARA PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: 28 TH DAY OF OCTOBER , 2016. COP IES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD