Surabhi Souharda Credit Co-operative Limited , Bangalore V. Income Tax Officer Ward-7(2)(5), Bangalore

ITA 206/BANG/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8386 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 04-02-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: B S BALACHANDRA
• Keywords: Tangible material; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 142(1); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO. 206/BANG/2019 ASSESSMENT YEAR : 2014-15 SURABHI SOUHARDA CREDIT CO-OPERATIVE LIMITED, 270, I FLOOR, SAIRAM COMPLEX, 5 TH BLOCK, KORAMANGALA, BENGALURU [PAN: AAFAS0815D] VS. INCOME TAX OFFICER, WARD-7(2)(5), BENGALURU APPELLANT RESPONDENT APPELLANT BY : SHRI B.S. BALACHANDRA, ADVOCATE RESPONDENT BY : SHRI R.N. SIDDAPPAJI, ADDL.CIT DATE OF HEARING : 10-04-2019 DATE OF PRONOUNCEMENT : 12-04-2019 O R D E R PER N V VASUDEVAN, VICE PRESIDENT : THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 14-12-2018 OF THE COMMISSIONER OF INCOME TAX (APPEA LS)-7, BENGALURU, RELATING TO ASSESSMENT YEAR 2014-15. 2. THE FIRST ISSUE THAT ARISES FOR CONSIDERATION IN THIS APPEAL IS WITH REGARD TO VALIDITY OF INITIATION OF PROCEEDINGS U/S . 147 OF THE INCOME TAX ACT [ACT]. THE FACTS NECESSARY FOR ADJUDICATIO N OF THE AFORESAID : 2 : ITA NO. 206/BANG/2019 GROUND OF APPEAL ARE THAT THE ASSESSEE, WHICH IS A CO-OPERATIVE SOCIETY, FILED ITS RETURN OF INCOME FOR THE AY. 2014-15 ON 2 7-08-2014. THE SAID RETURN WAS ACCEPTED BY WAY OF AN ACKNOWLEDGEMENT. NO NOTICE U/S. 143(2) OF THE ACT WAS ISSUED WITHIN THE PERIOD PRES CRIBED BY THE PROVISO TO SECTION 143(2) OF THE ACT I.E., ON OR BE FORE 30-09-2015. THEREFORE, THE ASSESSMENT FOR THE AY 2014-15, SHOUL D BE DEEMED TO HAVE BEEN CONCLUDED. FOR RE-OPENING OF ASSESSMENT FOR THE AY 2014- 15, THE REQUIREMENTS OF EXISTENCE OF REASON TO BELI EVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED INCOME SHOULD EXIST A ND IT SHOULD ALSO BE SEEN THAT WHETHER THE RE-ASSESSMENT PROCEEDINGS HAV E BEEN INITIATED PURELY ON THE BASIS OF CHANGE OF OPINION, WHICH IS NOT PERMISSIBLE IN LAW. 3. WITH THIS BACKGROUND, WE SHALL EXAMINE THE REASO NS RECORDED BY THE AO FOR INITIATION OF PROCEEDINGS U/S. 148 OF TH E ACT. THE SAME READS AS FOLLOWS: REASONS FOR THE BELIEF THAT INCOME HAS ESCAPED ASS ESSMENT: THE ASSESSEE IS A CREDIT CO-OPERATIVE SOCIETY CARRY ING ON THE BUSINESS OF LENDING LOANS TO ITS MEMBERS WHICH IS IN THE NAT URE OF BANKING ACTIVITY. THE ASSESSEE HAS EARNED INTEREST OF RS. 1,53,81,509/- ON THE LOANS GIVEN TO ITS MEMBERS AND HAS CLAIMED THE SAME AS EXEMPT U/S. 80P. SINCE THE ASSESSEE IS NOT ENTITLED FOR THE AB OVE EXEMPTION, THE SAME HAS BEEN EXCESSIVELY CLAIMED BY THE ASSESSEE. THEREFORE, I HAVE REASONS TO BELIEVE THAT AN AMOUNT OF RS. 1,53,81,509/- LAKHS WHICH SHOULD HAVE BEEN OFFERED TO TAX, HAS ESCAPED ASSESSMENT. HENCE, I PROPOSE TO RE-OPEN TH E ASSESSMENT BY INVOKING THE PROVISIONS OF SECTION 147 OF THE I.T. ACT. : 3 : ITA NO. 206/BANG/2019 3.1. IT WAS SUBMITTED BY THE LEARNED COUNSEL FOR TH E ASSESSEE THAT IT IS CLEAR FROM THE PERUSAL OF THE REASONS RECORDED THAT NO TANGIBLE MATERIAL HAS COME INTO THE POSSESSION OF THE AO, BASED ON WH ICH HE ENTERTAINED A BELIEF REGARDING ESCAPEMENT OF INCOME. HE PLACED RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CI T VS. KELVINATOR OF INDIA LTD., [320 ITR 561] (SC). IT WAS HIS CONTENTION THAT IN THE SAID DECISION, THE HON'BLE SUPREME COURT TOOK THE VIEW T HAT - THE AO DOES NOT HAVE A POWER TO REVIEW HIS OWN ORDER. IF, WITH OUT TANGIBLE MATERIAL COMING TO HIS POSSESSION AFTER THE CONCLUS ION OF AN ASSESSMENT, THE AO IS ALLOWED TO INITIATE RE-ASSESS MENT PROCEEDINGS, THEN THAT WOULD AMOUNT TO GIVING POWER TO THE AO TO REVIEW HIS OWN ORDER. HE SUBMITTED THAT THE HON'BLE SUPREME COURT HELD THAT IF POWER IS GIVEN TO THE AO, TO DO SO, THEN, THAT WOULD BE G IVING POWER TO THE AO TO INITIATE RE-ASSESSMENT PROCEEDINGS PURELY ON A CHANGE OF OPINION, WHICH IS NOT PERMISSIBLE IN LAW. 4. WHEN THE AFORESAID DECISION WAS CITED BY THE ASS ESSEE BEFORE THE CIT(A) AND WHEN IT WAS CONTENDED THAT THE INITIATIO N OF RE-ASSESSMENT PROCEEDINGS IS CONTRARY TO THE JUDICIAL PRONOUNCEME NTS OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD., (SUPRA), THE LD.CIT(A) UPHELD THE INITIATION OF RE-ASSESSMEN T PROCEEDINGS WITH THE FOLLOWING OBSERVATIONS: 6.3. AS REGARDS THE CONTENTION OF THE APPELLANT T HAT THE REASSESSMENT PROCEEDINGS IS ON REAPPRAISAL OF EVIDENCE/CHANGE OF OPINION, IT IS OBSERVED THAT THERE WAS NO REGULAR ASSESSMENT IN CA SE OF THE ASSESSEE PRIOR TO ISSUE OF NOTICE U/S. 148 AND THE RETURN WA S ONLY PROCESSED U/S. : 4 : ITA NO. 206/BANG/2019 143(1). THUS, WHEN THERE WAS NO OCCASION FOR THE AO TO FORM ANY OPINION AT FIRST PLACE, THE QUESTION OF CHANGE OF O PINION DOES NOT ARISE. THE HON'BLE HIGH COURT OF KARNATAKA IN CASE OF RINK U CHAKRABORTHY [2012] 20 TAXMANN.COM 609 (KARNATAKA) HAVE HELD THA T IF IN THE ORIGINAL ASSESSMENT THE INCOME LIABLE TO TAX HAS ES CAPED ASSESSMENT DUE TO OVERSIGHT AND INADVERTENCE OR A MISTAKE COMM ITTED BY THE ITO, THE ITO HAS THE JURISDICTION TO REOPEN THE ORIGINAL ASSESSMENT. IT IS NOT NECESSARY THAT FOR SUCH REOPENING OF SUCH ASSESSMEN T THE INFORMATION IS TO BE DERIVED FROM EXTERNAL SOURCE OF ANY KIND O R DISCLOSURE OF NEW AND IMPORTANT MATTERS SUBSEQUENT TO THE ORIGINAL AS SESSMENT. EVEN IF THE INFORMATION IS OBTAINED FROM THE RECORD OF THE ORIGINAL ASSESSMENT AFTER A PROPER INVESTIGATION FROM THE MATERIAL ON R ECORD OR THE FACTS DISCLOSED THEREBY OR FROM ANY ENQUIRY OR RESEARCH I NTO FACTS OR LAW, REASSESSMENT IS PERMISSIBLE. INCOME MAY ESCAPE ASSE SSMENT AS A RESULT OF LACK OF VIGILANCE OF THE ITO OR DUE TO PERFUNCTO RY PERFORMANCE OF HIS DUTIES WITHOUT DUE CARE AND CAUTION. EVEN IN A CASE WHERE A RETURN HAS BEEN SUBMITTED TO THE ITO WHO ERRONEOUSLY FAILS TO TAX A PART OF THE ASSESSABLE INCOME, IT IS A CASE OF THE SAID PART OF THE INCOME AS HAVING ESCAPED ASSESSMENT AND THE ASSESSING OFFICER HAS JU RISDICTION UNDER SECTION 147 TO REOPEN THE ASSESSMENT AND BRING TO T AX THE INCOME THAT HAS ESCAPED ASSESSMENT. A TAXPAYER CANNOT BE ALLOWE D TO TAKE ADVANTAGE OF ANY OF THOSE LAPSES, AS ULTIMATELY IF SUCH AN ADVANTAGE IS ALLOWED, IT WOULD BE PREJUDICIAL TO THE INTEREST OF THE REVENUE AND PUBLIC INTEREST. THIS IS ALSO TO NOTE THAT THE HONO URABLE JURISDICTIONAL HIGH COURT HAS GIVEN THE CATEGORICAL AND EMPHATIC D ECISION IN CASE OF RINKUCHAKRABORTHY (SUPRA) AFTER REFERRING AND DISCU SSING VARIOUS LANDMARK DECISIONS OF THE HONOURABLE SUPREME COURT ON THE ISSUE, SUCH AS; KELVINALOR OF INDIA LTD. [2010] 228 CTR (S C) 488, KALYANJI MAVJI& CO. V. CIT 1976 CTR (SC) 85, MAHARAJ KUMAR K AMAL SINGH V. CIT[1959] 35 ITR I (SC), DINESH CHANDRA HON'BLE SHA H & ORS. [1972] 3 SCC 231. 6.4 IN THIS CASE, THE AO HAS RECORDED REASON AS REG ARDS ESCAPEMENT OF INCOME AND HAS ISSUED NOTICE U/S 148 ISSUED. THE ASSESSEE HAS RESPONDED TO THE NOTICE BY SUBMITTING THAT THE RETU RN OF INCOME FILED ON 27-08-2014 SHOULD BE CONSIDERED AS COMPLIANCE TO TH E NOTICE U/ S 148. THE ASSESSEE HAS ALSO REQUESTED FOR REASONS RECORDE D WHICH HAS BEEN PROVIDED BY THE AO ON 21-09-2017. SUBSEQUENT TO ISS UE OF NOTICES U/S. : 5 : ITA NO. 206/BANG/2019 143(2) AND 142(1), THE APPELLANT HAS PARTICIPATED I N THE ASSESSMENT PROCEEDINGS. THUS, IT IS FOUND THAT THE AO HAS FOLL OWED THE PROCEDURE AS LAID DOWN BY THE HONORABLE SC IN THE CASE OF GKN DRIVESHAFT 125 TAXMAN 965 AND THERE IS NO INFIRMITY IN THE ACTION OF THE AO. THE DELHI HIGH COURT VIDE ITS ORDER DATED 23-02-2017 IN THE CASE OF MEGA CORPORATION LTD HAS HELD THAT IN THE LIGHT OF SECTI ON 124(3)(A) OF THE IT ACT AN ASSESSEE IS NOT ENTITLED TO QUESTION THE JUR ISDICTION OF AN ASSESSING OFFICER AFTER EXPIRY OF ONE MONTH FROM TH E DATE ON WHICH HE IS SERVED A NOTICE U/S 142(1) OR 143(2) OR AFTER TH E COMPLETION OF ASSESSMENT, WHICHEVER IS EARLIER. 6.5 THUS, IT IS HELD THAT THE ACTION OF THE AO IN I SSUING NOTICE U/S 148 AND SUBSEQUENT ASSESSMENT U/S 147 ARE LEGAL AND VAL ID. HENCE, THE GROUNDS OF APPEAL BY THE APPELLANT CHALLENGING THE VALIDITY OF REASSESSMENT ARE NOT SUSTAINABLE. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE PLAC ED RELIANCE ON A DECISION OF THE ITAT, BANGALORE IN THE CASE OF M/S. SOBHA SUBURBIA APARTMENTS OWNERS WELFARE ASSOCIATION VS. ITO IN IT A NOS. 627 & 628/BANG/2014, FOR THE AYS. 2008-09 & 2009-10, DT. 23-09-2016, WHEREIN THE HON'BLE TRIBUNAL AFTER NOTICING THE DEC ISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ORIENT CRAF T LTD., [354 ITR 536] (DEL) IN WHICH THE DECISION OF THE HON'BLE SUP REME COURT IN THE CASE OF RAJESH JHAVERY STOCK BROKERS P. LTD., (2007 ) [291 ITR 500], CAME TO THE CONCLUSION THAT INITIATION OF RE-ASSESS MENT PROCEEDINGS EVEN IN THE CASE OF ISSUE OF AN INTIMATION U/S. 143 (1) OF THE ACT, WHERE NO NOTICE U/S. 143(2) OF THE ACT WAS ISSUED WITHIN THE TIME PERMITTED UNDER THE PROVISO TO SECTION 143(2) OF THE ACT SHOU LD BE BASED ON TANGIBLE MATERIAL. : 6 : ITA NO. 206/BANG/2019 6. LD.DR PLACED RELIANCE ON THE ORDER OF THE CIT(A) . 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT IN VIEW OF THE DECISION OF THE HONBLE KARNATAKA HI GH COURT IN THE CASE OF RINKU CHAKRAVARTHY (SUPRA), THE ARGUMENT RA ISED BY THE ASSESSEE CANNOT BE ACCEPTED. THEREFORE INITIATION OF RE-ASSESSMENT PROCEEDINGS IN THE PRESENT CASE EVEN THOUGH IT IS W ITHOUT ANY TANGIBLE MATERIAL COMING INTO THE POSSESSION OF THE AO, AFTE R CONCLUSION OF THE ORIGINAL ASSESSMENT, THE INITIATION OF REASSESSMENT PROCEEDINGS HAVE TO BE UPHELD. 7.1. AS FAR AS THE OTHER GROUNDS OF APPEAL ARE CONC ERNED, THE SAME ARE IN RELATION TO DEDUCTION U/S.80P OF THE ACT, ON INC OME FROM PROVIDING CREDIT FACILITIES TO MEMBERS AND INTEREST ON FIXED DEPOSITS. WITH RESPECT TO THESE DISPUTES, THE LEARNED DR SUBMITTED THAT WHETHER THE ASSESSEE IS A COOPERATIVE SOCIETY OR NOT, HAS TO BE EXAMINED AND IN THIS REGARD SUBMITTED THAT SOUHARDA IS A COOPERATIVE BUT NOT A CO OPERATIVE SOCIETY UNDER THE ACT AND HENCE, NOT ELIGIBLE FOR D EDUCTION U/S.80P. HE HAS ALSO RELIED ON A RECENT ORDER IN THE MATTER OF M/S. UDAYA SOUHARDA CREDIT CO OPERATIVE SOCIETY LTD [ITA NO.28 31/BANG/2017, DT.17-08-2018], WHEREIN IT WAS OBSERVED THAT KARNA TAKA STATE HAS NOTIFIED KARNATAKA CO-OPERATIVE SOCIETIES ACT, 1959 AS WELL AS THE KARNATAKA SOUHARDA SAHAKARI ACT, 1997 AND BOTH ACTS ARE IN FORCE. THEREFORE, CONVERSION FROM ONE INTO ANOTHER IS POSS IBLE. THEREAFTER THE TRIBUNAL HELD THAT THE DEDUCTION U/S.80P CAN ONLY B E APPLIED TO A COOPERATIVE SOCIETY REGISTERED UNDER THE KARNATAKA CO-OPERATIVE : 7 : ITA NO. 206/BANG/2019 SOCIETIES ACT, 1959 AND THEREAFTER THE MATTER WAS R ESTORED BACK TO THE AO FOR FRESH DECISION AFTER MAKING NECESSARY ENQUIR Y AND INVESTIGATION. IN THE PRESENT CASE, THE FACTS ARE I DENTICAL. 7.2. IN VIEW OF THE ABOVE WE ALSO RESTORE THE MATTE R BACK TO THE FILE OF THE AO TO EXAMINE THE FACTS OF THE PRESENT CASE IN THE LIGHT OF THE DECISION OF THE TRIBUNAL IN UDAYA SOUHARDA CREDIT C O-OPERATIVE SOCIETY LTD (SUPRA). THE ISSUE WITH REGARD TO DED UCTION U/S.80P(2) OF THE ACT AS CLAIMED BY THE ASSESSEE IN THE GROUNDS O F APPEAL BEFORE THE TRIBUNAL ARE LEFT OPEN AS THE SAME IS DEPENDENT ON THE CONCLUSIONS REGARDING THE STATUS OF THE ASSESSEE IN THE SET ASI DE PROCEEDINGS. 8. IN THE RESULT, THE APPEAL OF ASSESSEE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF APRIL, 2019 SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEV AN) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED, THE 12 TH APRIL, 2019. TNMM : 8 : ITA NO. 206/BANG/2019 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE