DCIT, Bangalore V. M/s Vijay Samaraj Hotels P. Ltd., Bangalore

ITA 264/BANG/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89950 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-04-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 24-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DHIVAHAR J
• Assessee Lawyers: CHANDRASHEKAR
• Keywords: Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 115JB; 147; 148; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO. 26 4/BANG/2014 (ASSESSMENT YEAR: 200 5 - 06 ) DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE 12(5), BANGALORE. APPELLANT VS. M/S.VIJAY SAMRAJ HOTELS P.LTD. 18, 3 RD MAIN ROAD, GANDHINAGAR, BANGALORE - 9. RESPONDENT PAN: AABCV4731B A PPELLANT BY: SHRI P.DHIVAHAR, JCIT(DR). RE SPONDENT BY: SHRI CHANDRASH EKAR, ADVOCATE. DATE OF HEARING : 1 6 /04/2015 DATE OF PRONOUNCEMENT: 11 /0 6 /2015 O R D E R PER SMT. P.MADHAVI DEVI, JM: THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF THE CIT(A) - III, BANGALORE, DATED 27/11/2013 IN HOLDING THAT THE REOPE NING OF ASSESSMENT IS INVALID AND THUS DELETING THE CONSEQUENTIAL ADDITION FOR THE ASSESSMENT YEAR 2005 - 06. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE - COMPANY FILED ITS RETURN OF INCOME ON 30/10/2005 DECLARING TOTAL INCOME IT A NO . 26 4 /BANG/201 4 M/S.VIJAY SAMRAJ HOTELS P.LTD. PAGE 2 OF 6 OF RS.NIL AFTER S ETTING OFF OF THE BROUGHT FORWARD LOSS OF RS.38,84,610/ - UNDER REGULAR PROVISIONS OF THE INCOME - TAX ACT,1961 AND RS.NIL UNDER 115JB OF THE ACT. SUBSEQUENTLY, THE ASSESSING OFFICER OBSERVED THAT THERE WAS UNDER - ASSESSMENT OF INCOME UNDER MAT PROVISIONS. HE, THEREFORE, RECORDED REASONS FOR REOPENING AND ISSUED NOTICE U/S 148 ON 15/3/2012. SUBSEQUENTLY, DURING THE RE - ASSESSMENT PROCEEDINGS U/S 147 OF THE ACT, THE AO RECALCULATED THE BOOK PROFITS AND THE CLAIM OF R EDUCTION OF RS.3,49,85,584/ - REPRESENTING THE INTEREST ON TERM LOAN WAIVED BY THE FINANCIAL INSTITUTION WAS NOT ALLOWED FROM THE BOOK PROFITS U/S 115JB OF THE ACT. 3. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WHO HELD THE RE - ASSESSMENT TO BE BAD IN LAW AND DELETED THE CONSEQUE NTIAL DISALLOWANCES AND THE ADDITIONS MADE BY THE AO. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE AO WHILE THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT REOPENING OF THE ASSESSMENT HAS BEEN DONE AFTER A LAPSE OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND THEREFORE UNLESS THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR ASSESSMENT OF ASSESSEE S INCOME, THE REOPENING IS NOT VALID AS IS THE CASE BEFORE US . IT A NO . 26 4 /BANG/201 4 M/S.VIJAY SAMRAJ HOTELS P.LTD. PAGE 3 OF 6 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSMENT YEAR BEFORE US IS 2005 - 06 WHEREAS THE NOTICE U/S 148 WAS ISSUED ON 15/3/2012 , I.E. AFTE R THE LAPSE OF MORE THAN 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THEREFORE, AS RIGHTLY HELD BY THE CIT(A), UNLESS THERE IS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR THE ASSESSMENT OF ITS INCOME, THE ASSESSMENT COMPLETED U/S 143(3) CANNOT BE REOPENED. THE CIT(A), IN PARAS 3.4 TO 3.6 OF HIS ORDER HAS CLEARLY BROUGHT OUT THAT THE ASSESSEE HAD DISCLOSED ALL RELEVANT FACTS FOR THE PURPOSE OF THE ASSESSMENT OF ASSESSEE S INCOME DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT. THE RELEVANT PARAS ARE REPRODUCED HEREUNDER FOR READY REFERENCE: 3.4 I HAVE CAREFULLY CONSIDERED THE ISSUE BEFORE ME. THE BASIC CONTENTION OF THE APPELLANT IS THAT THE RE - OPENING IS HIT BY THE FIRST P ROVISO TO SECTION 147 BY VIRTUE OF WHICH WHEN THE ASSESSMENT IS MADE U/S 143(3) NO ACTION SHALL BE TAKEN TO RE - OPEN THE ASSESSMENT AFTER FOUR YEARS UNLESS THERE IS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR THE ASSESSMENT. THE APPELLANT HAS POINTED OUT THAT THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) IN THE COURSE OF WHICH ALL RELEVANT F A CTS WERE MADE AVAILABLE TO THE AO. ACCORDING TO THE APPELLANT IN THE COURSE OF THE SCRUTINY ASSESSMENT WHICH W AS COMPLETED ON 30/11/2007 DETAILS REGARDING THE SUM OF RS.3,49,85,584/ - BEING INTEREST WAVED BY THE TERM LENDING INSTITUTIONS NAMELY KFSC & KSIIDC ON ACCOUNT OF A ONETIME SETTLEMENT WERE IT A NO . 26 4 /BANG/201 4 M/S.VIJAY SAMRAJ HOTELS P.LTD. PAGE 4 OF 6 AVAILABLE WITH THE AO. AR HAS ALSO POINTED OUT THAT EVEN DURING AY 04 - 05 DETAILS OF THE AMOUNT OF RS.5,47,36,695/ - BEING OUTSTANDING LIABILITY WHICH WAS THE TERM LOAN ALONG WITH OVERDUE INTEREST WAS AVAILABLE. FOR THE AY 2005 - 06 IN THE NOTES TO THE FINANCIAL STATEMENTS, NOTE NO.16, THE FOLLOWING INFORMATION WAS AVAILABLE IN TERMS OF ONETIME SETTLEMENT AT THE STATE LEVEL TERM LENDING INSTITUTIONS COMPANY HAS LIQUIDATED IN FULL DUES TO LENDING INSTITUTIONS. CONSEQUENTLY COMPANY COULD AVAIL WAIVER OF INTEREST INCLUDING PENAL INTEREST LEVIED EARLIER AMOUNTING TO RS.3,49,85, 584/ - . IT IS ALSO POINTED OUT THAT IN THE COMPUTATION OF INCOME THE WAIVER OF INTEREST ON TERM LOANS AMOUNTING TO RS.3,49,85,584/ - HAS BEEN SEPARATELY MENTIONED AND REDUCE D FROM THE TOTAL INCOME. FURTHER, IN THE COMPUTATION IN FORM 29B RELATING TO PROV ISIONS OF SECTION 115JB THE INTEREST ON TERM LOAN WAIVED HAS BEEN REDUCED. THIS HAS BEEN PART OF THE RETURN FILED BEFORE THE AO. IT IS, THEREFORE, EVIDENT THAT THE ASSESSEE HAS DISCLOSED ALL THE RELEVANT FACTS FOR THE PURPOSE OF THE ASSESSMENT. IT IS AL SO SEEN THAT ON 06/11/2008 A NOTICE U/S 154 HAS BEEN ISSUED BY THE AO PROPOSING TO ADD BACK THE AMOUNT OF INTEREST ON TERM LOAN AMOUNTING TO RS.3,49,85,584/ - WAIVED BY THE FINANCIAL INSTITUTIONS TO THE BOOK PROFITS COMPUTED U/S 115JB. THIS ACTION OF THE A O ITSELF STRENGTHENS THE APPELLANT S CASE THAT ALL THE MATERIAL FACTS TO BE TAKEN INTO ACCOUNT FOR COMPUTATION OF INCOME OF THE APPELLANT WERE AVAILABLE ON RECORD AND THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ANY MATERIAL FACTS. IT THU S EMERGES THAT THERE WAS NO OMISSION ON THE PART OF THE ASSESSEE TO FURNISH ANY INFORMATION OR FACT. 3.5 AS THERE IS NO NEW MATERIAL BASED ON WHICH THE RE - OPENING WOULD BE WARRANTED IT IS CLEAR THAT THE AO S ACTION TANTAMOUNT TO A CHANGE OF OPINION. IT IS AN UNDISPUTABLE IT A NO . 26 4 /BANG/201 4 M/S.VIJAY SAMRAJ HOTELS P.LTD. PAGE 5 OF 6 THAT THE FACT OF THE WAIVER AND QUANTUM INVOLVED HAS BEEN HIGHLIGHTED BY THE ASSESSEE IN THE FINANCIAL STATEMENTS AND IN THE COMPUTATION OF INCOME. THE MATERIAL AVAILABLE ON RECORD WAS OF SUCH NATURE THAT THE AO WAS IN A POSITION TO TAKE A VIEW REGARDING THE TAXABILITY OR OTHERWISE OF THE AMOUNT. IN THE DECISION REPORTED IN 320 ITR 561 THE HON BLE SUPREME COURT HAS HELD THAT FOR A RE - OPENING TO BE VALID, THE AO SHOULD HAVE A REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AND ME RE A CHANGE OF OPINION CANNOT BE A REASON TO REOPENING THE ASSESSMENT. IT HAS ALSO HELD THAT THE AO HAS NO POWER TO REVIEW UNDER THE GARB OF RE - OPENING BUT HAS ONLY A POWER TO RE - ASSESS. I HAVE ALSO PERUSED THE REASONS RECORDED BY THE AO TO RE - OPEN THE A SSESSMENT U/S 147. THIS IS AS FOLLOWS: THE ASSESSMENT ORDER U/S 143(3) FOR AY 2005 - 06 WAS CONCLUDED ON 30/11/2007 ON A TOTAL INCOME OF RS.NIL. THE ASSESSEE COMPANY WHILE COMPUTING THE PROFIT U/S 115JB HAS REDUCED A SUM OF RS.3,49,35,584/ - BEING THE INTER EST WAIVED BY FINANCIAL INSTITUTIONS. AS PER THE SECTION 115JB, THERE IS NO PROVISION TO REDUCE THE INTEREST AS WAIVED BY THE FINANCIAL INSTITUTIONS. THUS, AN AMOUNT OF RS.3,49,35,584/ - WAS UNDER ASSESSED. THEREFORE, I HAVE REASON TO BELIEVE THAT INCOME TO THE EXTENT OF RS.3,49,35,584/ - HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF S 147 OF THE IT ACT, 1961. 3.6 IT IS EVIDENT FROM THE ABOVE REASONS THAT THERE IS NO IMPUTATION OF ANY FAILURE BY THE ASSESSEE TO DISCLOSE THE RELEVANT MATERIAL FOR THE P URPOSE OF ASSESSMENT. UNDER THE PROVISO TO SECTION 147 FOR A RE - OPENING TO BE VALID BEYOND FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR THERE IS A STATUTORY REQUIREMENT, THAT THE FAILURE ON THE PART OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE M ATERIAL FACTS MUST BE ASCERTAINABLE BEFORE INVOKING THE SECTION. IN IT A NO . 26 4 /BANG/201 4 M/S.VIJAY SAMRAJ HOTELS P.LTD. PAGE 6 OF 6 THIS CASE, AS IT IS EVIDENT FROM THE NOTES TO THE ACCOUNTS, COMPUTATION OF INCOME, FORM 29B, AVAILABLE WITH THE AO WHILE COMPLETING THE ASSESSMENT U/S 143(3) AND WHILE ISSUING THE NOTICE U/S 154 DATED 06/11/2008, ALL THE MATERIAL FACTS WERE AVAILABLE WITH THE AO. THE REOPENING IS THEREFORE IN CONTRAVENTION OF THE FIRST PROVISO TO SECTION 147. SINCE THERE IS NO NEW MATERIAL BROUGHT ON RECORD BY THE AO NOR ANY FAILURE ON THE PART OF THE AS SESSEE TO DISCLOSE PRIMARY OR MATERIAL FACTS THE REOPENING CANNOT BE CONSIDERED VALID. THERESE GROUNDS ARE THEREFORE, ALLOWED. THE REVENUE HAS NOT BEEN ABLE TO REBUT THE ABOVE FINDINGS OF THE CIT(A) WITH ANY EVIDENCE IN ITS SUPPORT. THEREFORE, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). 6. IN THE RESULT, THE REVENUE S APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 11 TH JUNE , 2015. SD/ - SD/ - (PRAMOD KUMAR) (SMT. P.MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER EKSRINIVASULU COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL BANGALORE.