The DCIT. Gandhinagar Circle, Gandhinagar V. Gujarat State Petroleum Corporation Limited, Gandhinagar

ITA 2595/AHD/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9372 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 19-01-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 01-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Earning of tax free income; Proportionate interest; Difference of opinion; Change of opinion
• Section: 143(3); 14A; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.2595/AHD/2013 (ASSESSMENT YEAR:2007-08) ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-12, AHMEDABAD APPELLANT VS. GUJARAT STATE PETROLEUM CORPORATION LIMITED GSPC BHAVAN, SECTOR-11, GANDHINAGAR RESPONDENT PAN: AABCG4502F /BY REVENUE : SHRI JAMES KURIAN, SR. D.R. /BY ASSESSEE : SHRI S. N. SOPARKAR, A.R. /DATE OF HEARING : 19.01.2017 /DATE OF PRONOUNCEMENT : 20.01.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2007-08 A RISES AGAINST CIT(A), GANDHINAGARS ORDER DATED 22.08.2013 PASSED IN APPEAL NO. CIT(A)/GNR/228/2012-13 QUASHING THE IMPUGNED REOPEN ING AS WELL AS DELETING SECTION 14A R.W. RULE 8D DISALLOWANCE AMOU NTING TO RS.1,51,91,395/- AS MADE BY THE ASSESSING OFFICER, IN PROCEEDINGS U/S.143(3) R.W.S. 148 OF THE INCOME TAX ACT, 1961; IN SHORT T HE ACT. 2. WE STRAIGHTWAY COME TO RELEVANT FACTS FIRST. TH E RESPONDENT-ASSESSEE IS A GOVERNMENT COMPANY EXPLORING, EXPLOITING AND P RODUCING MINERAL OIL. ITA NO. 2595/AHD/2013 (ACIT VS. GUJARAT STATE PETR OLEUM CORPN. LTD.) A.Y. 2007-08 - 2 - THE ASSESSING OFFICER IN ITS CASE COMPLETED A REGUL AR ASSESSMENT ON 20.11.2009 DETERMINING TOTAL INCOME AT RS.433,85,17 ,228/-. HE THEREAFTER FORMED REASONS TO BELIEVE THAT ASSESSEES TAXABLE I NCOME LIABLE TO BE ASSESSED HAD ESCAPED ASSESSMENT. HIS MAIN REASON WAS THAT T HE ASSESSEE HAD DERIVED EXEMPT INCOME OF RS.1248.32 LACS FROM DIVIDEND AND INTEREST. RULE 8D APPLICATION THEREUPON WAS STATED TO BE RESULTING IN DISALLOWANCE OF 152 LACS. THE ASSESSEE HAD PAID INTEREST EXPENDITURE OF RS.63 .36LACS AS AGAINST ITS TOTAL INVESTMENT DURING THE YEAR OF RS.285.52 CRORE AS PE R BALANCE SHEET FOLLOWED BY TOTAL ASSETS OF RS.2323.95 CRORE. THE ASSESSING OFFICER THEREAFTER FRAMED THE IMPUGNED RE-ASSESSMENT ON 09.01.2013 COMPUTING SECTION 14A DISALLOWANCE R.W. RULE 8D OF RS.1,51,91,395/- IN QU ESTION. 3. THE ASSESSEE PREFERRED APPEAL. THE CIT(A) ACCEP TS ITS CHALLENGE MADE TO VALIDITY OF REOPENING AS UNDER: 4.1 I HAVE GONE THROUGH THE FACTS OF THE CASE, ASS ESSMENT ORDER, REASSESSMENT ORDER, THE REASONS RECORDED FOR REOPENING THE ASSES SMENT AND THE SUBMISSION MADE BY THE APPELLANT. AFTER GOING THROUGH THE SUBM ISSIONS, I FIND THAT IDENTICAL ISSUE WAS DECIDED IN THE CASE OF THE APPELLANT FOR AY 2005-06 BY PREDECESSOR IN THE CASE OF THE APPELLANT IN APPEAL NO. CIT(A)-GNR/ 66/2010-11 DATED 19/03/2012 AS FOLLOWS: '5.1 I HAVE CONSIDERED THE FACTS OF THE CASE, SUBMI SSION OF THE ASSESSEE, THE ORIGINAL ASSESSMENT ORDER, THE QUESTIONNAIRE IS SUED AND THE REPLIES FILED IN THE REGULAR ASSESSMENT PROCEEDINGS, THE REASONS RECORDED FOR REOPENING AND THE RE-ASSESSMENT ORDER. THE FOLLOWING PERTINEN T OBSERVATIONS ARE MADE WHICH EMERGE FROM THEIR EXAMINATION: A) THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) AFTER ISSUING DETAILED QUESTIONNAIRE AND FILING OF SUBMIS SIONS AND EVIDENCES BY THE APPELLANT. THE CASE HAS BEEN REOPE NED WITHIN 4 YEARS. B) IT IS TRUE, AS CONTENDED BY THE APPELLANT, THA T THE AO IN ORIGINAL ASSESSMENT PROCEEDINGS, AT THE TIME OF ORI GINAL ASSESSMENT PROCEEDINGS U/S. 143(3) 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 SHARES/BONDS OF DIFFERENT CONCERNS AS WEL L AS ITA NO. 2595/AHD/2013 (ACIT VS. GUJARAT STATE PETR OLEUM CORPN. LTD.) A.Y. 2007-08 - 3 - SUBSIDIARY COMPANY. SINCE THE PROSPECTIVE RETURNS O UT OF SUCH INVESTMENTS WOULD BE TAX-FREE INCOME, THEREFOR E, PLEASE EXPLAIN THAT THE PROPORTIONATE INTEREST WORKED OUT ON SUCH INVESTMENT YIELDING TAX-FREE INCOME SHOULD NOT BE DISALLOWED AS YOU HAVE MADE INTEREST PAYMENT OF RS. 57.93 LACS ON UNSECURED AND OTHER LOANS OBTAINED DURING T HE YEAR.' THE APPELLANT HAS REPLIED TO THE ABOVE VIDE LETTER DATED 16-11-07. C) NO ADDITION WAS MADE IN THE ORIGINAL ASSESSMENT U/S 14A, ALTHOUGH SPECIFIC QUERIES WERE RAISED AS ABOVE. IT IS CLEAR THAT THE CASE HAS BEEN REOPENED ON THE BASIS OF OPINION ON THE INFORMATION ALREADY ON RECORD. NO NEW INFORM ATION HAS COME TO THE NOTICE OF THE AO. IT IS NOT EVEN A CASE WHERE IT CA N BE PLEADED THAT THERE WAS NO CONSCIOUS CONSIDERATION OF THE MATERIAL ON R ECORD. IN FACT IT HAS BEEN PROVED THAT SPECIFIC QUERIES HAS BEEN RAISED A ND REPLIES FILED WHICH HAVE BEEN CONSIDERED. IT IS A CLEAR CASE OF CHANGE OF OPINION ON THE BASIS OF INFORMATION ALREADY ON RECORD AND NO NEW INFORMATIO N 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 I N VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF M/S. KE LVINATOR OF INDIA LTD 320 ITR 561. IN SIMILAR FACTS AND CIRCUMSTANCES, TH E JURISDICTIONAL HIGH COURT IN THE CASE OF TULSI DEVELOPERS VS DCIT REPOR TED AT 59 DTK 351 (GUJ) HAS HELD THAT THE REOPENING WAS INVALID. IN V IEW OF THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT AS ABOVE, THE REOPENING IN THIS CASE HAS TO BE DECIDED AS A CASE OF MERE CHANGE OF OPINI ON AND BAD IN LAW. THE RE-ASSESSMENT PROCEEDINGS ARE THEREFORE DIRECTED TO BE ANNULLED.' I FIND THAT THE CASE OF THE APPELLANT IS IDENTICAL TO THAT DECIDED BY MY PREDECESSOR FOR AY 2005-06 DATED 19/03/2012, REPROD UCED ABOVE. AFTER GOING THROUGH THE FACTS OF THE CASE, I DO NOT FIND ANY RE ASON TO DEVIATE FROM THE DECISION TAKEN BY MY PREDECESSOR AND THE REASSESSMENT PROCEE DINGS U/S.143(3) RWS 148 INITIATED AND COMPLETED BY THE AO ARE THEREFORE, DI RECTED TO BE ANNULLED. THIS GROUND OF APPEAL IS THEREFORE, ALLOWED. 4. WE HAVE HEARD BOTH THE PARTIES. RELEVANT FINDING S PERUSED. LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY SEEKS TO REVIV E ASSESSING OFFICERS ACTION INVOKING SECTION 14A R.W. RULE 8D DISALLOWAN CE. LEARNED COUNSEL REPRESENTING ASSESSEE QUOTES HONBLE JURISDICTIONAL HIGH COURTS DECISION IN CIT VS. AURA SECURITIES (P) LTD. (2015) 55 TAXMANN. COM 450 (GUJARAT) FOR ASSESSMENT YEAR 2006-07 HOLDING THAT ONCE RULE 8D I S NOT APPLICABLE THEREIN, ITA NO. 2595/AHD/2013 (ACIT VS. GUJARAT STATE PETR OLEUM CORPN. LTD.) A.Y. 2007-08 - 4 - A REGULAR ASSESSMENT OUGHT NOT TO BE SUBJECTED TO S ECTION 263 REVISIONAL JURISDICTION. HE THEN FILES TRIBUNALS ORDER IN IT A NO.1302/AHD/2012 IN ASSESSEES CASE ITSELF FOR ASSESSMENT YEAR 2005-06 (SUPRA) DECIDED ON 28.10.2016 UPHOLDING CIT(A)S ORDER DATED 19.03.201 2 HEREINABOVE AFTER CONCLUDING THAT INITIATION OF REOPENING PROCEEDINGS IS NOT SUSTAINABLE FOR INVOKING SECTION 14A R.W. RULE 8D AS PER HONBLE JU RISDICTIONAL HIGH COURTS DECISION IN HEAVY METAL & TUBES LTD. VS. DCIT 364 I TR 609 (GUJARAT). LD. DEPARTMENTAL REPRESENTATIVE FAILS TO PINPOINT ANY D ISTINCTION THERETO VIS--VIS THE RELEVANT FACTS INVOLVED IN THE INSTANT APPEAL. WE THUS FIND NO REASON TO INTERFERE WITH THE CIT(A)S ORDER UNDER CHALLENGE Q UASHING THE IMPUGNED REOPENING. 5. THIS REVENUES APPEAL IS DISMISSED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 20 TH DAY OF JANUARY, 2017.] SD/- SD/- ( MANISH BORAD ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL M EMBER AHMEDABAD: DATED 20/01/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 / GUARD FILE. BY ORDER / . // . /0