M/s. G.S. Atwal & Company (Engineers) Pvt. Ltd., , Kolkata V. DCIT, Circle - 11(1) , Kolkata

ITA 2115/KOL/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 6394 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 12-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Reason to believe; Set aside
• Section: 147; 148; 54F; 251; 48

Judgement Text

ITA Nos. 2114/KOL/2019 Assessment Year-2007-2008 & ITA Nos. 2115/KOL/2019 Assessment Year-2008-2009 M/s. G.S. Atwal & Co. (Engg.) Pvt. Ltd. 1 IN THE INCOME TAX APPELLATE TRIBUNAL, ‘C’ BENCH, KOLKATA Before Shri Rajpal Yadav, Vice-President (KZ) & Shri Girish Agrawal, Accountant Member I.T.A. Nos. 2114 & 2115/KOL/2019 Assessment Years: 2007-2008 & 2008-2009 M/s. G.S. Atwal & Co. (Engg.) Pvt. Ltd.......................................Appellant 4B, Little Russell Street, Kolkata-700071 [PAN: AABCG0816E] -Vs.- Deputy Commissioner of Income Tax,......................................Respondent Circle-11(1), Kolkata, P-7, Chowringhee Square, Aayakar Bhawan, Kolkata-700069 Appearances by: Sri Soumitra Choudhury, Advocate, appeared on behalf of the assessee Shri Divakar Chakraborty, Addl. CIT, appeared on behalf of the Revenue Date of concluding the hearing : March 15, 2022 Date of pronouncing the order: March 22, 2022 O R D E R Per Rajpal Yadav, Vice-President (KZ):- The present two appeals are directed at the instance of the assessee against the separate orders of ld. Commissioner of Income Tax (Appeals)- 20, Kolkata dated 18.06.2019 passed in A.Ys. 2007-08 and 2008-09. The assessee has taken 16 grounds of appeal in each year. But the ld. counsel for the assessee at the very outset submitted that the first issue involved in both the years relates to a jurisdictional issue, wherein the assessee has contended that reopening of the assessment in both the years is bad in the eyes of law. ITA Nos. 2114/KOL/2019 Assessment Year-2007-2008 & ITA Nos. 2115/KOL/2019 Assessment Year-2008-2009 M/s. G.S. Atwal & Co. (Engg.) Pvt. Ltd. 2 2. With the assistance of ld. representatives, we have gone through the record carefully. It emerges that the facts on all vital points are common in both the years therefore, for the facility of reference; we are taking up the facts mainly from A.Y. 2007-08. 3. Brief facts of the case are that the ld. Assessing Officer had issued notices under section 148 of the Income Tax Act simultaneously in both the years on 09.10.2013. He reopened both these assessment years. There is no dispute with regard to the fact that these notices issued on 09.10.2013 in both the years are beyond four years from the end of the relevant assessment years, i.e. A.Y. 2007-08 and 2008-09. The four years would end on 31.03.2013 at the most for A.Y. 2008-09. Ld. Counsel for the assessee took us through the reasons recorded for reopening. Such reasons are available on page no. 48 of the paper book (A.Y. 2008-09). The reasons read as under:- “G.S. Atwal & Co. (Engg.) Pvt. Ltd. PAN: AABCG0816F A.Y. 2008-09 0 9 . 1 0 . 2 0 1 3 : I n this case, the High court vide its order dated: 17.04.2008 had directed HSCL to pay interest to the assessee for the period 28.11.1998 to 31.03.2008 i.e. for the period of delay in payment from the date when the original award was awarded on the amount of Award delivered on 28.11.1998. The enhanced interest received by virtue of High Court order amounting to Rs.10,58;25,030/- was not offered for tax in the A. Y. 2009-10. The CIT(A) in his findings vide order in Appeal No.67/CC-XX/ClT(A)C- III/11- 12/Kol dated 20:07.2012 stated that such interest income should - be taxed as income of the respective assessment year for which it accrued. j As such, the total interest - income of Rs.10,58,25,030/- to be divided equally in 10(ten) assessment year from A. Y. 1998-99 to 2008-09. As this income of Rs.1,05,82,503/- was not offered to tax by the assessee in respective assessment year, the income has escaped assessment . I have reason to believe that income has escaped assessment. Issue Notice u/s 148 of the I.T. Act to the assessee. Sd/-“ ITA Nos. 2114/KOL/2019 Assessment Year-2007-2008 & ITA Nos. 2115/KOL/2019 Assessment Year-2008-2009 M/s. G.S. Atwal & Co. (Engg.) Pvt. Ltd. 3 Ld. Counsel for the assessee further submitted that verbatim same reasons were recorded by the ld. Assessing Officer in A.Ys. 2005-06 and 2006-07. The challenge to the reopening travelled upto the Tribunal in these assessment years. The Tribunal has allowed the appeals of the assessee vide its order dated 18.06.2021. The Tribunal has quashed the assessment order. In order to demonstrate the parity on facts, he took us through the reasons recorded in A.Y. 2005-06, the copy of such reasons have been placed on page no. 30 of the paper book. 4. We have gone through these reasons and found that these are similar to the reasons recorded for these two years. Ld. Counsel for the assessee thereafter took us through the order of the Tribunal in A.Ys. 2005-06 and 2006-07 and pointed out that the reasons for those years have been reproduced in paragraph no. 6 of the impugned order. Ld. Counsel for the assessee in this way demonstrated the parity on facts in both these years. On the other hand, ld. D.R. relied upon the orders of revenue authorities. 5. On due consideration of the above facts, we find that long back there was some civil dispute of the assessee on account of that it had received an arbitration award, who directed payment of interest also. The dispute arose with regard to year of taxability of the interest income. Ld. Assessing Officer has taxed that amount in the year of receipt, whereas first appellate authority has held that it is to be taxed on accrual basis, because the assessee was following mercantile system of accounting. Taking a clue from the finding of the ld. CIT(Appeals) in A.Y. 2009-10, the Assessing Officer has reopened these assessment years, i.e. A.Y. 2005-06, 2006-07, 2007-08 and 2008-09. He recorded identical reasons in all these four years. The Tribunal has earlier considered this issue in A.Ys. 2005- ITA Nos. 2114/KOL/2019 Assessment Year-2007-2008 & ITA Nos. 2115/KOL/2019 Assessment Year-2008-2009 M/s. G.S. Atwal & Co. (Engg.) Pvt. Ltd. 4 06 and 2006-07. The Tribunal has recorded the following finding on this issue:- “6. The sole issue that arises for our adjudication is whether the reopening of assessments is bad in law. The reasons for reopening of assessments u/s 147 of the Act read as follows: “In this case, the High court vide its order dated: 17.04.2008 had directed HSCL to pay interest to the assessee for the period 28.11.1998 to 31.03.2008 i.e. for the period of delay in payment from the date when the original award was awarded on the amount of Award delivered on 28.11.1998. The enhanced interest received by "virtue of High Court order amounting to Rs. l0,58,25,030/- was not offered for tax in the A. Y. 2009-10. The CIT(A) in his findings vide order in Appeal No.67/CC- XX/CIT(A)C-III/11-12/Kol dated 20.07.2012 stated that such interest income should be taxed as income of the respective assessment year for which it accrued. As such, the total interest income of Rs. 10,58,25,030/- to be divided equally in 10(ten) assessment year from A. Y. 1998-99 to 2008-09. As this income of Rs. 1,05,82,503/- was not offered to tax by the assessee in respective assessment year, the income has escaped assessment. I have reason to believe that income has escaped assessment. Issue Notice u/s 148 of the I.T. Act to the assessee.” 6.1. Ld. CIT(A) in his order dated 20.07.2012 for the AY 2009-10 has, in this case held as follows: “I have carefully perused the assessment order and submissions of the assessee. In the assessment order the A.O. himself has analyzed the law relating to taxability of interest received on delayed payments of compensation and agreed that amendment to section 145A, which provides for taxation of interest received by assessee on compensation or on enhanced compensation’ as income of the year in which it is received, is applicable from A.Y. 2010-11 and was not applicable for the assessment year under appeal. However, he was of the view that under such a situation a substantial part of interest income would not be taxed at all. He was of the view that no tax mechanism or provision can ever allow an income to escape assessment and that since the present case falls outside the period from which the amendment to section 145A was effective, the same was to be dealt with on merits. ITA Nos. 2114/KOL/2019 Assessment Year-2007-2008 & ITA Nos. 2115/KOL/2019 Assessment Year-2008-2009 M/s. G.S. Atwal & Co. (Engg.) Pvt. Ltd. 5 According to the A.O. the assessee’s claim to receive principal and interest had accrued only when the favourable Court verdict was delivered on 17.04.2008 and the assessee could not have accounted for receipt of interest prior to the Court verdict because the right to receive interest came into being only with passing of the Court order. The A.O. further stated that interest was not an item of compensation for the period 28.11.1998 to 31.03.2008, i.e., for the period of delay in payment from the date when the original Award was awarded nor was it in consideration for the work done by the assessee. Payment of interest was provided by the Court on account of delay in payment of compensation by HSCL. Therefore, he was of the view that the interest income got crystallized in the hands of the assessee only during the year under appeal, hence, that amount also was taxable in the year under appeal. According to the A.O., the facts of the present case are totally distinguishable from the decision of the cases of Rama Bai Vs. CIT (supra) and C.I.T. Vs. TNK Gobindarajulu Chetty (supra). In Rama Bai v. CIT (supra) and C.I.T. Vs. TNK Gobindarajulu Chetty (supra) the Supreme Court has laid down that interest on enhanced compensation for land compulsorily acquired awarded by the Court has to be taken to have accrued not on the date of the order of the Court granting such compensation but as having accrued year after years from the date of delivery of the land till the date of such order and such interest cannot be assessed to income- tax in one lump-sum . in the year in which the order is made. In the instant case the award of Rs.7,78,13,692/- (Libyan Dinar 22,50,000/- + Rs.39,00,000/-) was awarded by the Arbitrators by an Arbitration Award dated 28.11.1998. The High Court vide its order dated 17.04.2008 directed HSCL to pay interest to the assessee for the period 28.11.1998 to 31.03.2008, i.e., for the period of delay in payment from the date when the original Award was awarded on the amount of Award delivered on 28.11.1998. Since, the interest in question was on account of delay in payment of Award money and the Court had specified that such interest was awarded for the period 28.11.1998 to 31.03.2008, as per law laid down by Supreme Court Rama Bai v. CIT (supra) and C.I.T. v. TNK Gobindarajulu Chetty (supra), such on delayed payment of awarded amount cannot be assessed to income-tax in one lump-sum in the year in which the same was received, rather it is to be assessed in the respective years in which the same had accrued. Accordingly, the entire interest of Rs. 10,58,25.030/- awarded by the Court cannot be assessed as assessee’s income of the year under appeal since, the interest was awarded by the Court for the period 28.11.1998 to 31.03.2008, no part of such interest accrued during the assessment year under appeal, therefore, no part of such income is assessable as income of the assessment year 2009-lO. ITA Nos. 2114/KOL/2019 Assessment Year-2007-2008 & ITA Nos. 2115/KOL/2019 Assessment Year-2008-2009 M/s. G.S. Atwal & Co. (Engg.) Pvt. Ltd. 6 As regards amended section 145A it is observed that the same has been amended by the Finance Act, 2009 with effect from 01.04.2010 wherein in sub-clause (b) this has been inserted as under: “Interest received by an assessee on compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the year in which it is received.” CBDT has issued Circular No. 05/2010 dated 3rd June, 2010, wherein Para 46 it has in Para 46.4 clarified: “This amendment has been made applicable with effect from 1st April, 2010, and will accordingly apply in relation to assessment year 2010-11 and subsequent assessment years.” Following the above referred to judgements as well as the amendment of Sec. 145A and the CBDT’s Circular, it is amply clear that the interest on delayed payment of Arbitration Award amount cannot be assessed to income-tax in one lump-sum in the year under appeal in which the same was received, rather it is to be assessed in the respective years in which the same had accrued. Hence, the A.O. is directed to delete the addition of Rs. 10,58,25,030/- made by him. Grounds No.2, 3 and 4 are, thus, allowed.” 6.2. We do not find any directions in this order of the ld. CIT(A). Only the issue of year of taxability of interest income was decided. 6.3. The issue is whether the reopening of assessments for both the assessment years is legally valid on the facts and circumstances of the case, based on the deletion of an addition of ₹10,58,25,030/- by the ld. CIT(A) in this order for the AY 2009-10. There was no direction in this order of the ld. CIT(A). The reasons for reopening are based on this order of the ld. CIT(A). We examine the legal position on this issue. 6.4. The Hon’ble Kolkata High Court in the case of R.H. Dave (supra) held as follows: “Whether, on the facts and in the circumstances of the case, the Tribunal having held that the Appellate Assistant Commissioner had no juridiction to direct the Income-tax Officer to bring the amount to tax in an assessment year not involved in the appeal before him, was justified in law in refusing to delete such direction given by the Appellate Assistant Commissioner? ITA Nos. 2114/KOL/2019 Assessment Year-2007-2008 & ITA Nos. 2115/KOL/2019 Assessment Year-2008-2009 M/s. G.S. Atwal & Co. (Engg.) Pvt. Ltd. 7 Here, we are not concerned with Clauses (b) and (c) to Sub- section (1) of Section 251. The Tribunal, as we have mentioned before, came to a categorical finding that the AAC had no jurisdiction to direct the ITO to bring the amount to tax in the correct assessment year, for, he could only decide the matter relating to the assessment year before him and not otherwise. This view of the Tribunal is corroborated by several decisions of the Supreme Court We may refer to the latest decision of the Supreme Court in the case of Rajinder Nath v. CIT , where the Supreme Court categorically observed that the expressions "finding" and "direction", in Section 153(3) were limited in meaning. The Supreme Court observed that a finding given in an appeal, revision or reference, arising out of assessment must be a finding necessary for the disposal of the particular case, that is to say, in respect of the assessee and in relation to the particular assessment year; to be a necessary finding, the Supreme Court observed, that it must be directly involved in the disposal of the case ; it was possible in certain cases that in order to render a finding in respect of A, a finding in respect of B might be called for; for instance where the facts showed that the income could belong to either A or B and to none else, a finding that it belonged to B or did not belong to B, would be determinative of the issue as to whether it could be taxed as A's income ; a finding respecting B was initially involved as a step in the process of reaching the ultimate finding respecting A; if, however, the finding as to A's liability could be directly arrived at without necessitating a finding in respect of B, then a finding made in respect of B was an incidental finding only and it was not a finding necessary for the disposal of the case pertaining to A. Here, we have noticed the language of Clause (a) of Sub- section (1) of Section 251, which empowers the AAC to set aside the assessment and refer the case back to the ITO for making a fresh assessment in accordance with the direction given by the AAC. This power must be limited to the assessment year in question. In view of the categorical ratio of the Supreme Court in the aforesaid decision, in our opinion, the Tribunal having already held that the AAC had no jurisdiction to direct the ITO to bring the amount to tax in the correct assessment year, the Tribunal was in error in declining to delete the direction, because the ITO, according to the Tribunal, had the same power under Section 153(3) of the Act. Whether the AAC has the power under that section is another matter but if the authority holds that the AAC had no jurisdiction to come to a finding that the income could be taxed in a particular year, then whether that amount could be brought to tax by resort to some other provisions, irrespective of the finding of the AAC is, in our opinion, irrelevant. ITA Nos. 2114/KOL/2019 Assessment Year-2007-2008 & ITA Nos. 2115/KOL/2019 Assessment Year-2008-2009 M/s. G.S. Atwal & Co. (Engg.) Pvt. Ltd. 8 In that view of the matter, we are of the opinion, that the Tribunal was in error in coming to the finding, as we have mentioned, and to decline to delete the direction contained in the AAC's order.” 6.5. This decision was followed by the Kolkata ‘D’ Bench of the Tribunal in the case of Shalini Agarwal (supra). The bench held as follows: “9. We have heard the arguments of both the sides on this issue and also perused the relevant material available on record. It is observed that the ld. CIT(Appeals) after having allowed the claim of the assessee for deduction under section 54F to the extent of Rs.77,94,104/- and after having found that the construction of the house property of the assessee was not completed within the prescribed period, was of the view that the deduction allowed under section 54F was liable to be withdrawn in assessment year 2015-16 in which three years had expired from the date of transfer. He accordingly directed the Assessing Officer to tax the capital gains of Rs.77,94,104/- in the hands of the assessee for A.Y. 2015-16 by initiating the proceedings under section 147 of the Act. As submitted by the Id. Counsel for the assessee, the said direction given by the Id. CIT[Appeals] for A.Y. 2015-16, which was not in appeal before him while disposing of the appeal of the assessee for A.Y. 2013-14 is beyond his power and jurisdiction. Although the Id. D.R. has sought to justify the direction given by the Id. CIT(Appeals) by relying on subsection (1] of section 150, we find that the said provisions is not relevant in the context of the powers of the Id. CIT(Appeals), since the said powers are governed by section 251 of the Act, which is relevant. In the case of R.S. Davey -vs.-CIT [140 ITR 1035], a similar issue relating to scope of powers of first appellate authority had arisen for the consideration of Hon’ble Calcutta High Court and it was held by the Hon'ble Calcutta High Court that the Id. CIT(Appeals) was not competent to give to the Assessing Officer the direction in respect of an assessment year which was not in appeal before him. Respectfully following the said decision of the Hon’ble jurisdictional High Court, we cancel the direction given by the Id. CIT(Appeals) to the Assessing Officer in respect of the assessment year 2015-16, which was not in appeal before him and allow Ground No. 3 of the assessee's appeal.” 6.6. In the case of Sri Biswajit Chatterjee (supra) the Kolkata ‘C’ Bench of the Tribunal held as follows: “11. Now the Revenue has agitated before us that Ld. CIT(A) erred in not giving direction to reopen the case of earlier years of the assessee in which investments were ITA Nos. 2114/KOL/2019 Assessment Year-2007-2008 & ITA Nos. 2115/KOL/2019 Assessment Year-2008-2009 M/s. G.S. Atwal & Co. (Engg.) Pvt. Ltd. 9 made. In this regard, we find that Ld. CIT(A) has been given power u/s. 251 of the Act to confirm the order of AO reduce, enhance or annul assessment order under the provision of Act there is no power available to Ld. CIT(A) to give direction to AO for reopening the case of other years. The Income Tax Act provides different schemes wherein the AO is empowered to assess or re-assess the income which has escaped assessment. So at the most, if the Revenue wishes to tax the escapement of income then it has followed the scheme provided under the Act. The relevant provisions for taxing the escape income are given u/s 147/263 of the Act. In holding so, we find support and guidance from the judgment of Hon'ble Supreme Court in the case of ITO vs. Murlidhar Bhaghubabu reported in 52 ITR 335 (SC). The relevant extract of the judgment is reproduced below:- “Section 33(4) of 1922 Act only refers to a finding or direction made by an appellate authority and does not itself confer any power on an appellate authority to make a finding or direction. Indeed, section 34 of 1922 Act deals with entirely a different aspect, that of empowering an ITO to bring to assessment escaped income, and has no concern with the powers of an appellate authority. The provision which deals with the powers of an appellate authority is section 31 of 1922 Act.” Respectfully following the judgment of Hon'ble Supreme Court in the case of Murlidhar Bhaghubabu (supra) we conclude that Ld. CIT(A) has no power under the provision of law for giving any direction to AO for reopening of assessment. 'The appeal before Ld. CIT(A) is confined to the particular assessment year which is before him. Thus, in view of the above proposition, we dismiss the ground of Revenue’s appeal. Consequently, Revenue’s ground is dismissed.” 7. Applying the propositions of law laid down in this various case laws to the facts of the case, we hold that the ld. CIT(A) has no power to give directions to the AO to reopen the assessments for the assessment years which are not before him. We also do not find any direction given by the ld. CIT(A) in his order for AY 2009-10. The ld. CIT(A) applied the ratio of the judgement of the Hon’ble Supreme Court in the case of Rama Bai (supra) and deleted the interest added in the AY 2009-10. The other assessment years were not before him i.e. AY 2005-06 and 2006-07. The proposition of law laid down in the case law referred above is that the ld. CIT(A) has no power under the provision of law to give direction to the AO for reopening of assessment. Thus the reasons recorded for reopening of assessments is bad in law. ITA Nos. 2114/KOL/2019 Assessment Year-2007-2008 & ITA Nos. 2115/KOL/2019 Assessment Year-2008-2009 M/s. G.S. Atwal & Co. (Engg.) Pvt. Ltd. 10 8. Thus we hold that the reopening of the assessments is bad in law. Hence we quash the same and allow the appeal of the assessee for both the assessment years. 9. In the result, both the appeals of the assessee are allowed. Kolkata, the 18 th June, 2021”. 6. On due consideration of the above, we find that there is no disparity on facts. Tribunal has already considered this issue in A.Ys. 2005-06 and 2006-07. Therefore, respectfully following the order of the Tribunal, we allow the first preliminary ground of appeal and quash the reopening in both the years. Since we have quashed the reopening of assessment, therefore, we do not deem it necessary to adjudicate other issues on merit. 7. In the result, both the appeals of the assessee are allowed. Order pronounced in the open Court on March 22 nd , 2022. Sd/- Sd/- (Girish Agrawal) (Rajpal Yadav) Accountant Member Vice-President (KZ) Kolkata, the 22 nd day of March, 2022 Copies to : (1) M/s. G.S. Atwal & Co. (Engg.) Pvt. Ltd., 4B, Little Russell Street, Kolkata-700071 (2) Deputy Commissioner of Income Tax, Circle-11(1), Kolkata, P-7, Chowringhee Square, Aayakar Bhawan, Kolkata-700069 (3) Commissioner of Income Tax (Appeals)-20, Kolkata, (4) Commissioner of Income Tax- , (5) The Departmental Representative (6) Guard File TRUE COPY By order Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S.