ADITYA BIRLA TELECOM LTD, MUMBAI V. ASST CIT 5(1), MUMBAI

ITA 2350/MUM/2013

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9205 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 25-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MICHAEL JERALD
• Keywords: Reopening of assessment; Capital asset; Bonafide belief; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings; Capital expenditure; TDS
• Section: 143(3); 195; 143(2); 13; 148

Judgement Text

A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI , , BEFORE SRI MAHAVIR SINGH, VP AND SRI RAJESH KUMAR , AM ./ ITA NO. 2350 / M UM/ 2013 ( / ASSESSMENT YEAR 2007 - 08 ) VODAFONE IDEA LIMITED (SUCCESSOR TO ADITYA BIRLA TELECOM LIMITED) 10 TH FLOOR, BIRLA CENTURION, CENTURY MILLS COMPOUND, PANDURANG BUDHKAR MARG, WORLI, MUMBAI / VS. THE ASST. COMMISSIONER OF INCOME TAX AAYAKER BHAVAN, M.K. ROAD, CHURCHGATE, MUMBAI ( / APPELLANT) ( / RESPONDENT) . / PAN NO. AAACB 2100 P / APPELLANT BY : SHRI YOGESH THAR, AR / RESPONDENT BY : SHRI MICHAEL JERALD, SR.DR / DATE OF HEARING : 22.07. 2020 / DATE OF PRONOUNCEMENT : 11 . 0 8 .2020 / O R D E R , / PER MAHAVIR SINGH, VP : THIS APPEAL OF ASSESSEE IS ARISING OUT OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)] - 9 , MUMBAI , [ IN SHORT CIT(A) ] , IN APPEAL NO. CIT(A) - 9/AC - 5(1)/453/2011 - 12 DATED 20.12.2012 . THE ASSESSMENT WAS FRAMED BY THE ASST. COMMISSIONER OF INCOME TAX (IN SHORT A CIT /AO ) FOR THE A.Y. PAGE | 2 ITA NO . 2350 /MUM/ 2013 VODAFONE IDEA LIMITED ; AY 07 - 08 2007 - 08 VIDE ORDER DA TED 23.12.2011 UNDER SECTION 143(3) R.W.S 147 OF THE INCOME - TAX ACT, 1961 (HEREINAFTER THE ACT). 2. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINST THE REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT BY STATING THAT THE REOPENING IS MERELY ON CHA NGE OF OPINION . FOR THIS, ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN UPHOLDING THE ACTION OF THE ASSISTANT COMMISSIONER OF INCOME - TAX - 5(1), MUMBAI ('THE AO') THAT THE REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT WAS JUSTIFIED AND IN ACCORDANCE WITH THE PROVISIONS OF THE LAW. 2. THE APPELLANT PRAYS THAT IT BE HELD THAT THE REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT IS VOID AB - INIT I O AND/OR OT HERWISE BAD - IN - LAW. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE FILED ITS E - RETURN OF INCOME ON 30.10.2007. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT BY ISSUING NOTICE UNDER SECTION 143(2) OF THE ACT AND ASSESSMENT WAS COMPLETED ORIGIN ALLY UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 21.12.2009. SUBSEQUENTLY, THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 148 OF THE ACT ON 03.09.2010, WHICH WAS SERVED ON THE ASSESSEE ON 21.09.2010 . THIS NOTICE U/S 148 OF THE ACT IS WITHIN FOUR YE ARS FROM THE END OF RELEVANT ASSESSMENT YEAR. F OR PAGE | 3 ITA NO . 2350 /MUM/ 2013 VODAFONE IDEA LIMITED ; AY 07 - 08 ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT , T HE ASSESSING OFFICER RECORDED THE FOLLOWING REASONS: - REASONS RECORDED FOR ISSUE OF NOTICE UNDER SECTION 148 OF THE IT ACT THE RECORDS OF THE ASSESSES COM PANY FOR THE ABOVE ASSESSMENT YEAR SHOW THAT AN AMOUNT OF RS. 4,64,92,579/ - BEING I NTEREST PAID ON LOANS WAS DEDUCTED FROM THE INTEREST INCOME RECEIVED TO ARRIVE AT THE TOTAL INCOME. A FURTHER PERUSAL OF THE RECORDS REVEALS THAT THIS AMOUNT OF INTEREST WA S PAID FOR LOANS TAKEN WHICH WERE FULLY USED FOR THE PURCHASE SHARES OF IDEA CELLULAR LIMITED. SINCE THE BORROWED FUNDS WERE FULLY UTILIZED FOR PROCURING SHARES, WHICH IS A CAPITAL ASSET, THE INTEREST PAID ON THESE FUNDS CANNOT BE CLAIMED AS A REVENUE EXP ENDITURE AND HENCE, HAVE REASONS TO BELIEVE THAT AN AMOUNT OF PS. 4,64192,579/ - HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 AND NEEDS TO BE BROUGHT TO THE TAX NET, HENCE NOTICE U /S 148 IS ISSUED. 4. CONSEQUENTLY, THE AO FRAMED REASSESSMENT UNDER SECTION 143(3) R.W.S 147 OF THE ACT VIDE ORDER DTD . 23.12.2011. THE ASSESSEE BEFORE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS OBJECTED FOR REOPENING OF ASSESSMENT FIRSTLY ON THE GROUND THAT THERE IS CHANGE OF OPINION AS THE ASSESSEE HAS PAGE | 4 ITA NO . 2350 /MUM/ 2013 VODAFONE IDEA LIMITED ; AY 07 - 08 DIS CLOSE D ALL THE NECESSARY FACTS BEFORE THE AO DURING ORIGINAL ASSESSMENT PROCEEDINGS IN REGARD TO AN AMOUNT OF 4,64,92,579/ - BEING INTEREST PAID ON LOAN WHICH WAS DEDUCTED FROM INTEREST INCOME RECEIVED FOR ARRIVING AT THE TOTAL INCOME OF ASSESSEE. BUT THE AO DURING REASSESSMENT PROCEEDINGS HAS CONFIRMED THE REOPENING OF THE ASSESSMENT AS VALID AND HELD THAT THE RE OPENING IN THE EXTANT CASE UNDER SECTION 147 OF THE ACT, HE HAD MATERIAL FACTS AVAILABLE ON RECORD TO SHOW THAT INCOME HAD ESCAPED ASSESSMENT. ACCORDINGLY, THE AO FRAMED REASSESSMENT AND ADDED THE CLAIM OF EXPENSES DEBITED TO P&L ACCOUNT ON ACCOUNT OF INT EREST PAID ON BORROWED FUNDS FOR PURCHASE OF SHARES TREATING THE SAME AS CAPITAL EXPENDITURE. AGGRIEVED AGAINST THE REASSESSMENT ORDER PASSED BY AO CONFIRMING THE REOPENING OF ASSESSMENT DESPITE CHANGE OF OPINION, THE ASSESSEE PREFERRED APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). 5. THE CIT(A) ALSO CONFIRMED THE ACTION OF THE AO BY OBSERVING IN PARA 5.2 AS UNDER : 5.2.1. HAVING CONSIDERED THE RIVAL SUBMISSIONS, IT IS NOT DISPUTED THAT IN THIS CASE, PREVIOUS ASSESSMENT WAS MODE UNDER SECTION 143 (3) OF THE ACT. IT IS NOT DISPUTED THAT THE NOTICE UNDER SECTION 148 OF THE ACT HAS BEEN ISSUED WITHIN FOUR YEARS FROM THE RELEVANT ASSESSMENT YEAR. IT IS ALSO NOT DISPUTED THAT THE LAO HAD RECORDED REASONS FOR INITIATION OF REASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT. IT IS ALSO NOT PAGE | 5 ITA NO . 2350 /MUM/ 2013 VODAFONE IDEA LIMITED ; AY 07 - 08 DISPUTED THAT SUCH REASONS RECORDED BEFORE THE ISSUE OF NOTICE UNDER SECTION 148 OF THE ACT WAS COMMUNICATED TO THE APPELLANT. ON SIMILAR FACTS, HON'BLE SUPREME COURT IN THE CASE OF INDO ADEN SALT MANUFACTURING AND TR ADING CO. P LTD. (1986) 159 ITR 624 (SC) HELD THAT THE ASSESSING OFFICER COULD REASONABLY BE SAID TO HAVE MATERIAL TO FORM THE BELIEF THAT THERE WAS UNDER ASSESSMENT OWING TO FAILURE FROM AN OMISSION ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT WITHIN THE MEANING OF SECTION 147(A) OF THE ACT [NOW PROVISO TO SECTION 147 OF THE ACT]. THE PRESENT APPEAL IS A BETTER CASE FOR REVENUE BECAUSE IN THE PRECEDING CASE, IT WAS AFTER MORE THAN 4 YEARS; WHEREAS THE PRESENT APPEAL INVOLVES NOTICE ISSUED WITHIN 4 YEARS FROM THE RELEVANT ASSESSMENT YEAR. AFTER THE AMENDMENT OF SECTION OF THE ACT W.E.F. 1.04.1989, WIDE POWER HAS BEEN GIVEN TO THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT EVEN IN THE CASE WHERE THE A SSESSEE HAD FULLY DISCLOSED THE MATERIAL FACTS. THE ONLY CONDITION IS THAT THE ASSESSING OFFICER SHOULD HAVE REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IN THE INSTANT CASE, THE APPELLANT HAS NOT OFFERED INTEREST INCOME OF R S.2,46 , 70,8 0 8/ - TO TAX. THEREFORE, THERE IS NO ILLEGALITY IN THE REOPENING OF THE ASSESSMENT. STRONG RELIANCE PAGE | 6 ITA NO . 2350 /MUM/ 2013 VODAFONE IDEA LIMITED ; AY 07 - 08 IS PLACED ON THE DECISION IN THE CASE OF JAWAND SONS VS CIT (2010) 326 ITR 39 (PH). THE HON'BLE SUPREME COURT IN THE CASE OF RAYMOND WOO//EN MILLS LTD VS ITO (1999) 236 ITR 34 (SC) HAS HELD THAT IN DETERMINING WHETHER THE COMMENCEMENT OF PROCEEDINGS UNDER SECTION 147(A) WAS VALID, WHAT WAS TO BE SEEN WAS ONLY THE PRIMA FADE MATERIAL: THE SUFFICIENCY OR THE CORRECTNESS OF THE MATERIAL WAS NOT A THING TO BE CONSIDERED AT THAT STAGE. 5.2.2 UNDISPUTEDLY, ORIGINAL ASSESSMENT IN THIS CASE WAS FRAMED ON 29/12/208. SUBSEQUENTLY THE LAO RECEIVED INFORMATION AND FORMED REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX ESCAPTED ASSESSMENT. HE RELIED ON DECISION I N THE CASE OF PRAFUL CHUNILAL PATEL 236 ITR 832 (BHUJ) AND H ELD THAT A PARTICULAR ITEM EVEN THOUGH REFLECTED ON THE RECORD WAS NOT SUBJECTED TO THE ASSESSMENT AND WAS LEFT OUT WHILE COMPUTING THE TAXABLE INCOME IN THE FINAL ASSESSMENT ORDER. HON BLE GUJARA T HIGH COURT HAS HELD THAT IN SUCH CASE THE LAO ASSUMED JURISDICTION TO INITIATE THE REASSESSMENT PROCEEDINGS IRRESPECTIVE OF THE QUESTION OF NONDISCLOSURE OF MATERIAL FACT BY THE ASSESSEE. HE ALSO RELIED ON THE SUPREME COURT DECISION IN THE CASE OF CIT V/ S. SUN ENGINEERING WORKS (P.) LTD. (1992) 198 ITR PAGE | 7 ITA NO . 2350 /MUM/ 2013 VODAFONE IDEA LIMITED ; AY 07 - 08 297(SC) AND SHEO NATH SINGH VS. AAC (1971) 82 ITR 147 AND ITO VS. SELVTED BALURBAND COAL CO. PVT. LTD., 217 ITR 597 (SC). UNDER THE CIRCUMSTANCES, THIS IS NOT A CASE OF CHANGE OF OPINION BUT A VALID CASE OF SUBSEQUENT DEVELOPMENTS. THE LAO, THEREFORE, VALIDLY ASSUMED THE JURISDICTION TO ISSUE NOTICE UNDER SECTION 148 OF THE ACT. 5.2.3. REGARDING THE LAPS ALTERNATE ARGUMENT THAT THE REASSESSMENT WAS AT THE BEHEST OF REVENUE AUDIT PARTY, IT IS NOTED THAT TH E HONBLE SUPREME COURT IN THE CASE OF CIT VS. PVS BEEDEES PVT. LTD. (1999) 237 ITR 13 (SC) HAS HELD THAT REOPENING OF ASSESSMENT ON THE BASIS OF FACTUAL ERROR POINTED OUT BY THE INTERNAL AUDIT PARTY WAS VALID. 5.2.4. SECONDLY IN THE CASE OF PHOOLCHAND BA JRANGLAL VS. ITO (1973) 203 ITR 456 (SC) CASH LOANS CLAIMED TO BE TAKEN FROM A COMPANY AND ACCEPTED AS GENUINE IN THE ORIGINAL ASSESSMENT WERE SUBSEQUENTLY FOUND TO BE BOGUS. HONBLE SUPREME COURT HELD THAT IT WAS A CASE OF ESCAPEMENT ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT WITHIN THE MEANING OF SEC.147 (A) OF THE ACT. ADMITTEDLY, IN THE PRESENT CASE NOTICE U/S.148 WAS ISSUED ON 28/3/2011 WHICH WAS WITHIN FOUR YEARS FROM T HE END OF THE RELEVANT PAGE | 8 ITA NO . 2350 /MUM/ 2013 VODAFONE IDEA LIMITED ; AY 07 - 08 A.Y 2006 - 07. THE CASE LAWS CITED BY THE LAP ARE DISTINGUISHABLE ON THE FACTS. 5.2.5 THIRDLY, THE LAO HAD DISPOSED OFF OBJECTIONS TO THE ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT DURING THE REASSESSMENT PROCEEDINGS. HAVING REGAR D TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LIGHT OF APEX COURTS DECISIONS IN THE CASE OF PHOOLCHAND BAJRAGLAL, RAYMOND WOOLEN MILLS LTD. VS. ITO (SUPRA), INDO ADDEN SALT MANUFACTURING AND TRADING CO. PVT. LTD. (1986) 159 ITR 624 (SC) AND HONB LE SUPREME COURT IN THE DECISION OF CIT VS. PVS BEEDEES PVT. LTD. (SUPRA). GROUND OF APPEAL NO. I IS DISMISSED. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE TRIBUNAL. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE C ASE. WE NOTED FROM THE ARGUMENTS OF LEARNED COUNSEL FOR THE ASSESSEE THE FACTS OF THE CASE THAT T HE CASE OF THE ASSESSEE WAS SELECTED FOR THE SCRUTINY UNDER SECTION 143(3) OF THE ACT AND AO PASSED THE ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT ON 21 . 12. 2009 I.E. THE ORIGINAL ASSESSMENT ORDER. SUBSEQUENTLY, THE AO ISSUED A NOTICE UNDER SECTION 148 OF THE ACT ON 0 3 .09. 2010 AND REA SSESSMENT WAS FRAMED UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT DETERMINING THE TOTAL INCOME AT RS.2,84,35,310/ - AFTER MAKING CERTAIN ADDITIONS/ DISALLOWANCES. L EARNED COUNSEL EXPLAINED THE FACTS THAT THE AO WHILE FRAMING PAGE | 9 ITA NO . 2350 /MUM/ 2013 VODAFONE IDEA LIMITED ; AY 07 - 08 REASSESSMENT H AS TREATED THE INTEREST EXPENSE OF RS. 4,64,92,579/ - ON INTER CORPORATE DEPOSITS ('ICDS') AS CAPITAL IN NATURE ON THE GROUND THAT IT WAS INCURRED ON ACQUISITION OF SHARES OF IDEA CELLULAR LTD. ('IDEA SHARES'). THEREBY, THE AO HAS DENIED THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 57(III) OF THE ACT IN RESPECT OF SUCH INTEREST EXPENSE. IN THIS REGARD, HE ARGUED THAT EVEN AFTER TH E AMENDMENT MADE IN SECTION 147 OF THE ACT BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987 W.E.F. 01.04.1989 REASSESSMENT CAN BE COMMENCED ONLY IF AO HAS 'REASON TO BELIEVE' THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE EXPRESSION 'REASON TO BELIE VE', POSTULATES A BONAFIDE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT AND THE EXISTENCE OF OBJECTIVE REASONS FOR THAT BELIEF. FURTHER, THE FOREGOING EXPRESSION ALSO DOES NOT MEAN A PURELY SUBJECTIVE SATISFACTION OF THE AO OR PRETENCE BASED ON SUSPICION AND CONJECTURE, BUT MUST BE A BELIEF HELD IN GOOD FAITH AND FOUNDED ON MATERIAL THAT IS NOT IRRELEVANT OR ARBITRARY. 7. THE LEARNED COUNSEL TOOK US THROUGH REASONS, WHICH ARE REPRODUCED IN ABOVE PARA 3 AND ARGUED THAT THE AO HAS MERELY RELIED ON THE ASSESSMENT RE CORDS OF THE ASSESSEE AVAILABLE WITH HIM TO RE - OPEN THE ASSESSMENT. THE AO HAS NOT OBJECTIVELY BROUGHT OUT AS TO WHY: I. THE IDEA SHARES WERE CAPITAL ASSETS OF THE ASSESSEE; AND II. DESPITE THERE BEING A CLEAR NEXUS BETWEEN THE INTEREST INCOME AND INTEREST EXPE NSE, THE LATTER PAGE | 10 ITA NO . 2350 /MUM/ 2013 VODAFONE IDEA LIMITED ; AY 07 - 08 WAS NOT DEDUCTIBLE UNDER SECTION 57(III) OF THE ACT IN THE HANDS OF THE ASSESSEE. 8. IN THIS REGARD, IT WAS ARGUED THAT ORDER PASSED UNDER SECTION 143 (3) READ WITH SECTION 147 OF THE ACT ON THE SAME SETS OF FACTS AVAILABLE WITH THE AO IS CLEA RLY AMOUNTS TO A CHANGE OF OPINION AND HENCE, THE REASSESSMENT ORDER PASSED IS BAD AND VOID. THE LEARNED SR . D R ON THE OTHER HAND RELIED ON THE ORDER OF CIT(A). 9. WE NOTED THAT THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE AO ASSESSEE M ADE FULL AND TRUE DISCLOSURE IN RESPECT OF THE INTEREST EXPENSE IN ITS AUDITED FINANCIAL STATEMENT, ROI AND THE ORIGINAL ASSESSMENT PROCEEDINGS. THIS IS EXPLAINED BY THE ASSESSEE BEFORE US IN THE FOLLOWING PARAGRAPHS: (A) SCHEDULE 9 TO THE AUDITED FINAN CIAL STATEMENTS DISCLOSED THE TOTAL INTEREST EXPENDITURE AND INTEREST INCOME ACCRUED TO THE ASSESSEE; (B) NOTE 6 (IV) TO THE AUDITED FINANCIAL STATEMENTS DISCLOSES THE FACT OF SALE OF THE IDEA SHARES TO 'HOLDING CO. ABNL' ; (C) THE COMPUTATION OF INCOM E SHOWED THE DEDUCTION CLAIMED UNDER SECTION 57 OF THE ACT IN RESPECT OF INTEREST EXPENDITURE AGAINST INTEREST INCOME; PAGE | 11 ITA NO . 2350 /MUM/ 2013 VODAFONE IDEA LIMITED ; AY 07 - 08 (D) BY LETTER DATED OCTOBER 6, 2009, THE ASSESSEE HAD SUBMITTED THE DEMAT ACCOUNT WITH THE DEPOSITORY IN WHICH THE FACT OF PURCHASE AND SALE OF THE IDEA SHARES WAS REFLECTED; (E) BY LETTER DATED OCTOBER 23, 2009, THE ASSESSEE SUBMITTED THE LOAN CONFIRMATION FROM ADITYA BIRLA NUVO LIMITED, TRANSWORK INFORMATION SERVICES LIMITED, BIRLA GLOBAL FINANCE CO. LIMITED, ETC. WHICH COMPANIES HAD TAKEN ICDS; (F) BY LETTER DATED NOVEMBER 6, 2009 THE ASSESSEE SUBMITTED THE LOAN CONFIRMATIONS FROM HINDALCO INDUSTRIES LIMITED, GRASIM INDUSTRIES LIMITED AND ESSEL MINING LIMITED FROM WHICH PARTIES IT HAD TAKEN ICDS AND ALSO EXPLAINED THE TRANSACTION OF PURCHASE THE IDEA SHARES; (G) BY THE LETTER DATE NOVEMBER 6, 2009, THE ASSESSEE ALSO SUBMITTED LETTERS BETWEEN BIRLA TMT HOLDINGS AND ITSELF ON THE TRANSACTION OF PURCHASE AND SALE OF THE IDEA SHARES AND OTHER RELATED FACTS. 10. AFTER CONSIDERING THE AFORESAID DETAILS/INFORMATION, THE AO HAD PASSED THE O RIGINAL A SSESSMENT O RDER UNDER SECTION 143(3) OF THE ACT IN WHICH HE ALLOWED THE DEDUCTION UNDER SECTION 57 OF THE ACT. THUS, ALL THE FACTS PERTAINING TO THE TRANSACTION OF IDEA PAGE | 12 ITA NO . 2350 /MUM/ 2013 VODAFONE IDEA LIMITED ; AY 07 - 08 SHARES WERE AVAILABLE BE FORE THE AO WHEN HE PASSED THE O RIGINAL A SSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT. WE NOTED THAT A FTER THE ORIGINAL ASSESSMENT, THE AO DID NOT FIND ANY FRESH INFORMATION/MATERIAL IN RESPECT OF THE TRANSACTION OF PURCHASE/ SALE OF THE IDEA SHARES. TH IS IS EVIDENT FROM THE REASONS RECORDED BY THE AO. YET, THE AO RE - OPENED THE ASSESSMENT UNDER SECTION 147 OF THE ACT AND DISALLOWED THE SAID INTEREST EXPENSE CLAIMED UNDER SECTION 57 OF THE ACT BY THE ASSESSEE. 11. WE ALSO NOTED THAT THE ASSESSEE HAD FILED CO MPLETE DETAILS AND CLAIMED BY A NOTE DATED 06.11.2009, WHICH IS BEING REPRODUCED FROM THE LETTER AS UNDER: - REGARDING INTEREST INCOME, WE WISH TO BRING TO YOUR HONOUR'S KIND NOTICE THE FOLLOWING FACTS: DURING THE YEAR, VIDE LETTER DATED 18.05.2006, T HE COMPANY HAD REQUESTED BIRLA TMT HOLDINGS PRIVATE LTD ('BIRLA TMT') TO PURCHASE 16,94,64,540/ - EQUITY SHARES OF IDEA - CELLULAR LTD ON BEHALF OF THE COMPANY AT A PRICE OF RS.40.50 PER SHARE FROM THE TATA GROUP AND MADE 100% ADVANCE PAYMENT OF RS.686,33,13, 870/ - TOWARDS THE TOTAL CONSIDERATION FOR PUR CHA S E OF SAID SHARES WITH THE INSTRUCTION TO DEPOSIT THE ENTIRE AMOUNT IN INTEREST BEARING ACCOUNT TILL EFFECTUAL PAYMENT IS MADE TO TATA GROUP AND PASS ON THE INTEREST RECEIVED ON THE AFORESAID ADVANCE IN THE I NTERIM PERIOD TO THE COMPANY AND TRANSFER THE AFORESAID SHARES TO THE COMPANY IMMEDIATELY AFTER GETTING THE PAGE | 13 ITA NO . 2350 /MUM/ 2013 VODAFONE IDEA LIMITED ; AY 07 - 08 DELIVERY OF THE SAME. COPY OF THE LETTER IS ATTACHED AS ANNEXURE 3. VIDE LETTER DATED 20.06.2006, BIRLA TMT INFORMED THE COMPANY THAT IT HAS SAID S HARES ON BEHALF OF THE COMPANY THAT IT HAS ACQUIRED SAID SHARES ON BEHALF OF THE COMPANY AT A PRICE OF 40.50/ - PER SHARE ON 20.06.2006 AND HAS INSTRUCTED DEPOSITORY PARTICIPANT VIZ. CITI BANK NA TO TRANSFER THE SHARES TO THE COMPANY. COPY OF THE LETTER RECEIVED FROM BIRLA TMT IS ATTACHED AS ANNEXURE 4. VIDE LETTER DA TED 08.11.2006 BIRLA TMT INFORMED THE COMPANY THAT IT HAS RECEIVED ON BEHALF OF THE COMPANY GROSS INTEREST 24,670,808/ - LESS TDS 55,36,130/ - , NET INTEREST BEING 19,134,678/ - FROM CITI BANK BY DEPLOYING 686,33,13,870/ - WITH CI T I BANK IN AN INTEREST BEAR ING ACCOUNT FROM THE DATE IT RECEIVED FUNDS FROM THE COMPANY AND TILL THE DATE THOSE FUNDS GOT UTILIZED TO PAY TAT A GROUP FOR ACQUIRING SHARES OF IDEA. BIRLA TMT HAD INCURRED SOME EXPENSES ON PURCHASE OF SAID SHARES AND THEREFORE REMITTED 18,000,000/ - AS ON ACCOUNT PART PAYMENT. COPY OF THE LETTER RECEIVED FROM BIRLA TMT IS ATTACHED AS ANNEXURE 5. VIDE LETTER DATED 22.11.2006, BIRLA TMT RS. 8,42,503/ - IN RESPECT OF ACQUISITION OF RS.16,94,64,540/ - SHARES OF IDEA AND AFTER PAGE | 14 ITA NO . 2350 /MUM/ 2013 VODAFONE IDEA LIMITED ; AY 07 - 08 ADJUSTING THE SAID EXPENSE AMOUNT AGAINST THE NET INTEREST RECEIVED RS.19,134,678/ - REMITTED THE BALANCE AMOUNT RS.2,92,175/ - . COPY OF THE LETTER IS ATTACHED AS ANNEXURE 6. VIDE LETTER DATED 23.01.2007, BIRLA TMT INFORMED THE COMPANY THAT IT HAS RECEIVED THE ORIGINAL TDS CERTIFICATE DATED. 23.01.2007 FROM CITI BANK NA FOR RS. 55,36,130/ - IN THEFT FAVOUR AND ALSO CONFIRMED THAT ENTIRE INTEREST AMOUNT RS.24,670,808/ - AND TDS RS. 55,36,130/ - BELONGS TO THE COMPANY SINCE BIRLA TMT WAS ACTING ON BEHALF OF THE COMPANY. BIRLA TMT CONFIRMED THAT TH EY HAVE NOT CLAIMED/SHALL NOT CLAIM ANY TDS CREDIT/BENEFIT OF THE SAME. SINCE THE AFORESAID TDS CERTIFICATE WAS ISSUED BY CITIBANK IN FAVOUR OF BIRLA TMT, TO ENABLE THE COMPANY TO CLAIM THE AFORESAID TDS CREDIT, BIRLA TMT AND THE COMPANY JOINTLY SIGNED A C ERTIFICATE CONFIRMING THAT B IRLA TMT IS NOT THE BENEFICIAL OWNER OF THE INTEREST RS 2,46,70,808 SINCE THEY WERE MERELY ACTING ON BEHALF OF THE COMPANY AND BIRLA TMT HAS NOT CLAIMED/SHALL NOT CLAIM ANY TDS CREDIT OF THE AFORESAID TDS. THEY FURTHER CONFIRMED THAT COMPANY IS THE BENEFICIAL OWNER OF INTEREST AND HENCE, IS RIGHTFULLY ENTITLED TO CLAIM THE SAID TDS CREDIT OF RS 55,36,130. COPY OF THE LETTER AND 23.1.2007, CERTIFICATE ISSUED BY CITIBANK AND A CERTIFICATE JOINTLY SIGNED BY PAGE | 15 ITA NO . 2350 /MUM/ 2013 VODAFONE IDEA LIMITED ; AY 07 - 08 BIRLA AND THE COMPANY IS ATTACHED AS ANNEXURE 7. IN VIEW OF THE ABOVE FACTS, WE SUBMIT THAT SINCE THE COMPANY IS THE BENEFICIAL OWNER OF INTEREST RS 2,46,70,808 AND HAS THEREFORE ALSO OFFERED THIS INTEREST INCOME TO TAX IN ITS RETURN OF INCOME, THE - COMPANY IS RIGHTFULLY ENTITLED: TO CLAIM THE CORRESPONDING TDS CREDIT RS 55,36,130. THE COMPANY HAD BORROWED INTEREST BEARING LOANS 'FROM VARIOUS FELLOW GROUP COMPANIES FOR ADVANCING PA YMENT TO BIRLA TMT HOLDINGS PRIVATE LTD FOR PURCHASE OF EQUITY SHARES OF IDE/ CELLULAR LTD. AS THE COMPA NY HAD EARNED INTEREST OF RS. 24,670,808/ - FOR THE PERIOD 18.05.2006 TO 19.06.2006 ON DEPOSITING RS.686,33,13,870/ - AS MENTIONED UNDER POINT NO. 3, IT HAD CLAIMED THE INTEREST EXPENSE INCURRED FOR THE SAME PERIOD ON LOAN BORROWED FROM VARIOUS GROUP COMPANI ES. DETAILS OF INTEREST EXPENSES RS. 46,42,579/ - CLAIMED IN THE RETURN OF INCOME IS ATTACHED AS ANNEXURE 8. 12. FROM THE ABOVE FACTS IT IS CLEAR THAT THE AO HAD GONE THROUGH THIS NOTE AND ALSO TAKEN NOTE OF THE SAME IN ASSESSMENT ORDER , WHERE THE FACT REGARD ING EXPENDITURE ON INTEREST INCURRED AND INCOME RECEIVED IS REFLECTED, WHICH IS AS UNDER : - PAGE | 16 ITA NO . 2350 /MUM/ 2013 VODAFONE IDEA LIMITED ; AY 07 - 08 II. IF THE ASSESSEE INCURRED EXPENDITURE BY WAY OF INTEREST WHICH IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME. INTEREST PAID X AVERAGE INVESTMENT AVERA GE OF ASSETS. 5,05,09,945 X 61,60,633 = 29,22,035/ - 10,64,91,974 13. FURTHER THE AO IN THE COMPUTATION OF INCOME HAS PARTICULARLY CONSIDERED THE INTEREST EXPENSES OF 4,64,92,579/ - AS UNDER: - 3. INTEREST INCOME 2,78,37,789 LESS: INTEREST EXPENSES 4,64,92,579 (1,86,54790) GROSS TOTAL INCOME (1,80,57,265) LESS: LOSS UNDER THE HEAD INCOME FROM OTHER 1,80,57,265 TOTAL INCOME NIL IN VIEW OF THE ABOVE FACTS IT IS CLEAR THAT IN THE ORIGINAL ASSESSMENT PROCEEDINGS AO HAS CONSIDERED THE ASPECT INTEREST EXPENSES AND CONSIDERED IN THE BODY OF ASSESSMENT ORDER AS WELL AS IN THE COMPUTATION OF INCOME SPECIFICALLY AND AFTER CONSIDERING THE SA ME, THE AO ALLOWED THE INTEREST EXPENSES. IT MEANS THAT THE AO HAS APPLIED HIS MIND AND FORMED AN OPINION FOR ALLOWANCE OF THIS INTEREST EXPENSES WHILE FRAMING ORIGINAL ASSESSMENT. NOW, REOPENING ON THE VERY SAME ISSUE TANTAMOUNT TO CHANGE OF OPINION WHICH IS NOT PERMISSIBLE IN LAW. LETS DISCUSS THE CASE LAWS RELIED ON BY BOTH THE SIDES. 14. WE HAVE TAKEN NOTE OF THE CASE LAW RELIED ON BY LD COUNSEL FOR ASSESSEE IN THE CASE THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. ( 2002 ) 256 ITR 1 (DELHI) , THE HON'BLE HIGH COURT HAS OBSERVED AS UNDER: PAGE | 17 ITA NO . 2350 /MUM/ 2013 VODAFONE IDEA LIMITED ; AY 07 - 08 AN ORDER OF ASSESSMENT CAN BE PASSED EITHER IN TERMS OF SUB - SECTION (1) OF SECTION 143 OR SUB - SECTION (3) OF SECTION 143. WHEN A REGULAR ORDER OF ASSESSMENT IS PASSED IN TERMS OF THE SUB - SECTION (3) OF SECTION 143 A PRESUMPT ION CAN BE RAISED THAT SUCH AN ORDER HAS BEEN PASSED ON APPLICATION OF MIND. IT IS WELL KNOWN THAT A PRESUMPTION CAN ALSO BE RAISED TO THE EFFECT THAT IN TERMS OF CLAUSE (E) OF SECTION 114 OF THE INDIAN EVIDENCE ACT JUDICIAL AND OFFICIAL ACTS HAVE BEEN REG ULARLY PERFORMED. IF IT BE HELD THAT AN ORDER WHICH HAS BEEN PASSED PURPORTEDLY WITHOUT APPLICATION OF MIND WOULD ITSELF CONFER JURISDICTION UPON - THE ASSESSING OFFICER TO REOPEN THE PROCEEDING WITHOUT ANYTHING FARTHER, THE SAME WOULD AMOUNT TO GIVING A PR EMIUM TO AN AUTHORITY EXERCISING QUASI - JUDICIAL FUNCTION TO TAKE BENEFIT OF ITS OWN WRONG. HENCE, IT IS CLEAR THAT SECTION 147 OF THE ACT DOES NOT POSTULATE CONFERMENT OF POWER UPON THE ASSESSING OFFICER TO INITIATE REASSESSMENT PROCEEDINGS UPON MERE CHANG E OF OPINION.' 15. TH IS DECISION IN THE CASE OF KELVINATOR OF INDIA LTD. (SUPRA) HAS NOW BEEN AFFIRMED BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD [2010] 320 ITR 561 (SC) WITH THE FOLLOWING OBSERVATIONS: 'WE MUST KEEP IN MIND THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REVIEW AND PAGE | 18 ITA NO . 2350 /MUM/ 2013 VODAFONE IDEA LIMITED ; AY 07 - 08 POWER TO RE - ASSESS. THE ASSESSING OFFICER HAS NO POWER TO REVIEW; HE HAS THE POWER TO RE - ASSESS. BUT RE - ASSESSMENT HAS TO BE BASED ON FULFILLMENT OF CERTAIN PRE - CONDITION AND IF THE CONCEPT OF 'CHANGE OF OPINION IS REMOVED, AS CONTENDED ON BEHALF OF THE DEPARTMENT, THEN, IN THE GARB O F RE - OPENING THE ASSESSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF 'CHANGE OF OPINION' AS AN IN - BUILT TEST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFIC ER. HENCE, AFTER 1 ST APRIL, 1989, ASSESSING OFFICER HAS POWER TO RE - OPEN, PROVIDED THERE IS 'TANGIBLE MATERIAL' LO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF.' 16. FURTHER, I N THE CASE OF ASIAN PAINTS LTD. VS. DCI T [2009] 308 ITR 195 (BOMBAY) HON'BLE BOMBAY HIGH COURT HAS BEEN HELD THAT THE INITIATION OF REASSESSMENT PROCEEDINGS WOULD AMOUNT TO CHANGE OF OPINION OF THE AO AS IT WAS MERELY A FRESH APPLICATION OF MIND BY THE AO TO THE SAME SET OF FACTS AND THAT SINCE THE AO HAD FAILED TO APPLY HIS MIND TO THE RELEVANT MATERIAL WHILE FRAMING THE ASSESSMENT ORDER UNDER SECTION 1 43(3), HE COULD NOT TAKE ADVAN TA GE OF HIS OWN WRONG AND REOPEN THE ASSESSMENT UNDER SECTION 14 7 OF THE ACT. THIS WAS THE CASE WHERE THE AO HAD REOPENED THE ASSESSMENT WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR UNDER APPEAL. EVEN IN THE CASE OF I N THE CASE OF LEGATO SYSTEMS (INDIA) PVT. PAGE | 19 ITA NO . 2350 /MUM/ 2013 VODAFONE IDEA LIMITED ; AY 07 - 08 LTD. VS. DCIT [2010] 187 TAXMAN 294 (DELHI) , H ON'BL E DELHI HIGH COURT HAS HELD THAT PROCEEDINGS UNDER SECTION 147/148 OF THE ACT VIS - - VIS COMPLETED ASSESSMENTS CANNOT BE REOPENED, ON A MERE CHANGE OF OPINION I.E. ON THE BASIS OF THE SAME SET OF FACTS AND MATERIAL WHICH WERE IN THE KNOWLEDGE OF THE AO, AND THAT THE PROCEEDINGS FOR REOPENING OF ASSESSMENT ON THE GROUND OF INCOME ESCAPING ASSESSMENT IS AN EXCEPTION TO THE FINALITY OF THE PROCEEDINGS ARRIVED AT UNDER SECTION 143(3) OF THE ACT DURING THE REGULAR ASSESSMENT PROCEEDINGS OF THE ASSESSMENT YEARS. 17. IN THE C ASE OF ASTERIODS TRADING & INVESTMENTS PVT. LTD. VS. DCIT [2009] 308 ITR 190 (BOMBAY) H ON'BLE BOMBAY HIGH COURT, BEING THE JURISDICTIONAL HIGH COURT IN THE APPELLANT'S CASE, HAS BEEN HELD THAT THE ASSESSEE HAD FULLY DISCLOSED MATERIAL FACTS NECESS ARY FOR CLAIMING DEDUCTION UNDER SECTION 80 M OF THE ACT AND THERE WAS APPLICATION OF MIND BY THE AO IN ALLOWING THE DEDUCTION CLAIMED BY THE ASSESSEE IN THE ASSESSMENT ORDER. THOUGH THE NOTICE U/S. 148 OF THE ACT WAS ISSUED ON THE GROUND THAT THERE WAS REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT, THERE WAS NEITHER ANY CHANGE OF L AW NOR HAD ANY NEW MATERIAL BEEN BROUGHT ON RECORD BETWEEN THE DATE OF THE ASSESSMENT ORDER AND THE DATE OF FORMATION OF OPINION BY THE AO. IT WAS MERELY A FRESH APPLICATION OF MIND BY THE OFFICER TO THE SAME SET OF FACTS AND THE REASSESSMENT PROCEEDINGS I NITIATED BASED ON THE CHANGE OF THE OPINION OF THE OFFICER IS BAD IN LAW. THIS WAS THE CASE WHERE THE AO HAD REOPENED THE ASSESSMENT WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. HENCE, THE REASONS RECORDED FOR PAGE | 20 ITA NO . 2350 /MUM/ 2013 VODAFONE IDEA LIMITED ; AY 07 - 08 REOPENING REFLECT A MERE CHANGE IN T HE OPINION BY THE AO. ACCORDINGLY, WE QUASH THE REOPENING AND ALLOW THE JURISDICTIONAL ISSUE IN FAVOUR OF THE ASSESSEE. 18. SINCE, WE HAVE ALLOWED THE JURISDICTIONAL ISSUE IN FAVOUR OF ASSESSEE AND QUASHED THE REOPENING, WE NEED NOT TO GO INTO THE OTHER GROUN DS RAISED BY ASSESSEE ON MERITS. 19. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 . 0 8 . 2020 . SD/ - SD/ - ( / RAJESH KUMAR) ( / MAHAVIR SINGH ) ( / ACCOUNTANT MEMBER ) ( / VI CE PRESIDENT ) , / MUMBAI, DATED: 11 . 0 8 . 2020 , . / SUDIP SARKAR, SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / (ASSTT. REGISTRAR) , / I TAT, MUMBAI