THE ACIT-2(1), Bhopal V. M/s. M. P. Laghu Udyog Nigam Ltd., Bhopal

ITA 270/IND/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2222 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 16-02-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 28-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHD JAVED
• Assessee Lawyers: ANIL KUMAR KHAA
• Keywords: Reopening of assessment; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 147; 148

Judgement Text

ACIT2(1)BHOPAL V. M/S. M.P. LAGHU UDYOG NIGAM LTD. / I.T.A. NO.270 /IND/2016/& CO. NO.151/IND/2016/A.Y .:08-09 PAGE 1 OF 8 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER ASSISTANT COMMISSIONER OF INCOME TAX 2(1) BHOPAL M/S. M.P. LAGHU UDYOG NIGAM LTD. V. M/S. M.P. LAGHU UDYOG NIGAM LTD. T. T. NAGAR, BHOPAL ASSISTANT COMMISSIONER OF INCOME TAX 2(1) / APPELLANT / RESPONDENT . . ./ PAN: AABCM 1366 K / APPELLANT BY SHRI MOHD. JAVED, SR. D.R. / RESPONDENT BY SHRI ANIL KUMAR KHABYA, CA DATE OF HEARING 09 - 05 - 2017 DATE OF PRONOUNCEMENT 1 5 - 05 - 2017 / O R D E R PER O.P. MEENA, ACCOUTANT MEMBER. 1. THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-I, BHOPAL [IN SHORT THE CIT(A)] DATED 21-01-2016 PE RTAINING TO ASSESSMENT YEAR 2008-09, WHICH IN TURN HAS ARISEN FROM THE ORDER DA TED 30-03-2014 PASSED BY THE ACIT-2(1)BHOPAL (IN SHORT THE AO ) UNDER SECTION 143 (3) OF INCOME TAX ACT,1961 ( IN SHORT THE ACT)WHEREBY TAKING FOLLOWING GROUND OF APPEAL:- DELETING THE ADDITION OF RS. 78, 82, 705/- ON ACCO UNT OF ADVANCES RECEIVED FROM CUSTOMERS WHICH HAVE BEEN TRANSMITTED TO THE SUPPLIER? . . ./ I.T.A. NO. 270/IND/2016 & C.O. NO.151/IND/2016 !# # / ASSESSMENT YEAR: 2008-09 ACIT2(1)BHOPAL V. M/S. M.P. LAGHU UDYOG NIGAM LTD. / I.T.A. NO.270 /IND/2016/& CO. NO.151/IND/2016/A.Y .:08-09 PAGE 2 OF 8 2. SUCCINCTLY, FACTS AS CULLED OUT FROM THE ORDERS OF LOWER AUTHORITIES ARE THAT THE ASSESSEE COMPANY IS 100% OWNED GOVERNMENT UNDERTAKI NG OF MP GOVERNMENT AND IS ENGAGED IN PROMOTION OF SSI GOODS IN THE STATE O F MP UNDER THE ORDERS OF STATE GOVERNMENT. IT WAS NOTICED FROM RECORD THAT THE ASS ESSEE HAD RECOVERED AN AMOUNT OF RS. 78,82,705/- FROM SSI UNITS AND PAID TO WCL O N ACCOUNT OF GS TV AND SAME IS SHOWN UNDER HEAD ADVANCE RECEIVED FROM CUSTOMER T OWARDS MPGSTV. IT WAS EXPLAINED THAT THE ASSESSEE PURCHASE COAL FROM THE COAL COMPANIES SUCH AS WESTERN COAL FIELD. THESE COMPANIES LEVIES IN THEI R BILL TAX TOWARDS MPGSTV. THIS TAX HAS BEEN CHALLENGED IN THE COURT OF LAW. THE CO AL COMPANIES ARE RECOVERING THIS AMOUNT FROM THE ASSESSEE BUT THEY ARE KEEPING THE M ONEY AS ADVANCE IN THEIR BOOKS PENDING FINAL JUDGEMENT. IN TURN, THE ASSESSE E, IS ALSO RECOVERING THIS AMOUNT FROM THE CUSTOMERS AND KEEPING THE SAME AS ADVANCE RECEIVED FROM CUSTOMERS. HOWEVER, THE AO DID NOT SATISFY WITH EXPLANATION, H ENCE, SAID AMOUNT WAS ADDED TO TOTAL INCOME. 3. IN APPEAL BEFORE CIT(A), IT WAS EXPLAINED THAT THE SAID AMOUNT CONTAINED OPENING BALANCE OF RS. 43,04,266/-, HENCE, BALANCE AMOUNT OF RS. 35,78,439/- WAS AS FRESH ADVANCE AMOUNT RECOVERED DURING THE YEAR F ROM THE CUSTOMERS, HENCE, IF ANY ADDITION IS TO BE MADE, THEN THE AMOUNT OF RS. 35,78,439/- IS REQUIRED TO BE ADDED ONLY. THE LD. CIT (A) NOTED THAT THIS AMOUNT REPRESENTS TAXES LEVIED IN THE SUPPLY BILL BY THE COAL COMPANIES. HOWEVER, THIS LE VY OF TAX IS UNCONSTITUTIONAL AND THE MATTER IS NOW PENDING BEFORE THE HON`BLE SUPREM E COURT. THEREFORE, THE COAL COMPANIES ARE KEEPING THIS MONEY AS ADVANCE IN THEI R BOOKS OF ACCOUNTS PENDING FINAL JUDGEMENT. THE ASSESSEE IS ALSO NOT CLAIMING THIS AS EXPENDITURE IN ITS PROFIT & LOSS ACCOUNT AS THE MATTER IS PENDING IN COURT. THE SE FACTS HAVE BEEN DISCLOSED BY WAY OF NOTES ON ACCOUNTS. THE ASSESSEE SUBMITTED TH AT IF THE TRANSACTION OF RECEIPT ACIT2(1)BHOPAL V. M/S. M.P. LAGHU UDYOG NIGAM LTD. / I.T.A. NO.270 /IND/2016/& CO. NO.151/IND/2016/A.Y .:08-09 PAGE 3 OF 8 OF ADVANCE FROM CUSTOMER IS TREATED AS INCOME THEN, THE AMOUNT PAID TO THE SUPPLIERS HAS ALSO TO BE ALLOWED AS EXPENDITURE RES ULTING IN NIL INCOME IS THIS PARTICULAR TRANSACTION. IT WAS ALSO SUBMITTED THAT THE ASSESSEE WAS FOLLOWING THIS ACCOUNTING TREATMENT FOR PAST SEVERAL YEARS, HOWEVE R, NO SUCH ADDITION WAS MADE IN PAST AND IN SUBSEQUENT ASSESSMENT YEARS. IN VIEW O F THESE FACTS, THE LD. CIT (A) HAS DELETED THE ADDITION. 4. BEING AGGRIEVED, THE REVENUE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LD. SR. D.R. SUPPORTED THE ORDER OF THE AO. 5. THE LEARNED COUNSEL FOR THE ASSESSEE, SUBMITTED TH AT NO SUCH ADDITION WAS MADE IN PREVIOUS YEARS NOR IN SUBSEQUENT YEARS THOU GH THE ASSESSEE HAS BEEN FOLLOWING THIS ACCOUNTING TREATMENT FOR SEVERAL YEA RS. FURTHER, THIS AMOUNT RECEIVED FROM CUSTOMERS TOWARDS LEVY OF TAX LEVIED BY THE CO AL COMPANIES, HENCE, IF ADDITION IS MADE THEN CORRESPONDING DEDUCTION BE ALLOWED AGA INST THE PAYMENTS MADE. CONSEQUENTLY, THERE IS NO ESCAPEMENT OF INCOME CHAR GEABLE TO TAX. HENCE, THE FINDING OF CIT (A) ARE SUSTAINED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PAR TIES AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS SEEN THAT THE AMOUNT RECEIVED FROM CUSTOMERS IS BECAUSE OF RECOVERY MADE AS TAX BY COAL COMPANIES F ROM THE ASSESSEE, WHICH IS SHOWN AS ADVANCE IN THE BOOKS OF ACCOUNTS, AS THE M ATTER IS UNDER DISPUTE BY THE ASSESSEE AGAINST COAL SUPPLIERS. THE ASSESSEE HAS A LSO PAID THIS AMOUNT TO COAL COMPANIES, WHO IN TURN SHOWING IT AS ADVANCES IN TH EIR BOOKS OF ACCOUNTS. IF REVENUE WANTS TO TAX THIS AMOUNT IN THE HANDS OF THE ASSESS EE, THEN, THE ASSESSEE BE ALLOWED DEDUCTION ON ACCOUNT TAXES PAID TO COAL COM PANIES. IF THE COURTS DECIDES THE ISSUE IN FAVOUR OF THE ASSESSEE, THEN THE ASSES SEE WOULD HAVE TO RETURN THIS AMOUNT TO CUSTOMERS. THIS BEING SO, THERE IS NO REA L INCOME IN THE HANDS OF THE ACIT2(1)BHOPAL V. M/S. M.P. LAGHU UDYOG NIGAM LTD. / I.T.A. NO.270 /IND/2016/& CO. NO.151/IND/2016/A.Y .:08-09 PAGE 4 OF 8 ASSESSEE. IN VIEW OF THIS MATTER, WE FIND THAT THE FINDING OF LD. CIT (A) AS CORRECT , THEREFORE, NO INTERFERENCE IS CALLED FOR. ACCORDING LY, THIS GROUNDS OF APPEAL OF REVENUE IS DISMISSED. 7. CO NO. IND/2016 BY THE ASSESSEE 8. IN THE CO, THE ASSESSEE HAS CHALLENGED THE ISSUE O F NOTICE UNDER SECTION 148 OF THE ACT ON THE GROUND THAT REOPENING OF ASSESSME NT IS NOT JUSTIFIED AS ALL MATERIAL WAS DISCLOSED BY WAY OF NOTES ON ACCOUNTS IN AUDITE D BALANCE SHEET AND ACCOUNTS, HENCE, ORDER PASSED IS WITHOUT JURISDICTION AND BAD -IN-LAW. 9. WE HAVE CONSIDERED THE FACTS OF THE CASE. AS WE HAV E DISMISSED THE REVENUE`S GROUNDS OF APPEAL, THEREFORE, THE CROSS O BJECTION OF THE ASSESSEE BECOMES INFRUCTUOUS AND ACADEMIC IN NATURE. HOWEVER , THE LD. A.R. OF THE ASSESSEE INSISTED BEFORE US DURING HEARING TO ADJUDICATE THE ISSUE OF REOPENING OF ASSESSMENT, HENCE, SAME IS BEING CONSIDERED AND DECIDES. THE LD . A.R. SUBMITTED THAT MATERIAL FACTS WAS AVAILABLE ON THE FILE OF THE AO HENCE, IS SUE OF NOTICE U/S.148 AMOUNTS TO CHANGE OF OPINION , HENCE, REASSESSMENT PROCEEDINGS ARE INVALID. WE FIND THAT THE ASSESSMENT YEAR INVOLVE UNDER CONSIDERATION IS A.Y. 2008-09. THE NOTICE UNDER SECTION 148 WAS ISSUED IN THIS CASE ON 28-03-2013 I .E. BEFORE EXPIRY OF 4 YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR. AS PER THE MAN DATE OF SECTION 147 IF THE AO HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PRO VISIONS OF SECTIONS 148 TO 153, ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER I NCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTIC E SUBSEQUENTLY IN THE COURSE OF THE REASSESSMENT PROCEEDINGS. ACCORDINGLY, WE FI ND THAT THE AO HAS SATISFIED THE REQUIRED CONDITIONS LAID DOWN IN THE STATUTE FOR TH E ISSUANCE OF NOTICE UNDER SECTION 148 AND THERE IS NO INFIRMITY IN HIS ORDER ON THIS COUNT. NOTICE UNDER SECTION 148 ACIT2(1)BHOPAL V. M/S. M.P. LAGHU UDYOG NIGAM LTD. / I.T.A. NO.270 /IND/2016/& CO. NO.151/IND/2016/A.Y .:08-09 PAGE 5 OF 8 WITHIN FOUR YEARS CAN BE ISSUED EVEN IF THERE IS NO FAILURE ON THE PART OF ASSESSEE TO DISCLOSE ALL MATERIAL TRULY AND FULLY NECESSARY FOR ASSESSMENT. THUS NOTICE U/S 148 IS AS PER LAW. THIS VIEW IS ALSO SUPPORTED BY DECISION OF HB BOMBAY HIGH COURT IN THE CASE OF GRIND WELL NORTON LTD. V JAGDISH PRASAD JAN GID ACIT AND OTHERS 267 ITR 673(BOM) WHEREIN IT WAS OBSERVED BY THE HONBLE HIG H COURT AS UNDER: IF ONE READS EXPLANATION 2 TO SECTION 147 OF THE IT ACT INCLUDING THE PROVISO THEREFORE THEN IT IS CLEAR THAT WHERE THE DEPARTMEN T RE-OPENS ASSESSMENT WITHIN A PERIOD OF 4 YEARS, IT CAN DO SO ON THE GRO UND OF INCOME HAVING ESCAPED ASSESSMENT. EVEN IF THERE IS NO FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. HOWEVE R IN THE CASES OF REOPENING AFTER 4 YEARS, THE A.O. MUST HAVE REASON TO BELIEVE THAT THE INCOME HAD ESCAPED ASSESSMENT BY REASON OF FAILURE ON THE PART OF THE ASSESSEE IS DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS, EXPLAN ATION 2 CANNOT BE READ WITHOUT READING THE PROVISO TO SEC. 147. IN THIS CASE MERE INFORMATION REGARDING CLAIM U/S. 80I AND 80IA HAD BEEN PROVIDE TO A.O. WHILE CO MPLETING THE ORIGINAL ASSESSMENT AND THERE WAS NO FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY MATERIAL FACTS THE RE-OPENING BEYOND 4 Y EARS WAS NOT VALID.. 10. THE POWER TO MAKE ASSESSMENT OR REASSESSMENT WITHIN FOUR YEARS OF THE END OF THE RELEVANT ASSESSMENT YEAR WOULD BE ATTRACTED EVEN IN CASES WHERE THERE HAS BEEN A COMPLETE DISCLOSURE OF ALL RELEVANT FACTS UP ON WHICH A CORRECT ASSESSMENT MIGHT HAVE BEEN BASED IN THE FIRST INSTANCE, AND WH ETHER IT IS AN ERROR OF FACT OR LAW THAT HAS BEEN DISCOVERED OR FOUND OUT JUSTIFYING TH E BELIEF REQUIRED TO INITIATE THE PROCEEDINGS. THE WORDS ESCAPED ASSESSMENT, WHERE THE RETURN IS FILED, COVER THE CASE OF DISCOVERY OF A MISTAKE IN THE ASSESSMENT CA USED BY EITHER AN ERRONEOUS CONSTRUCTION OF THE TRANSACTION OR DUE TO ITS NON-C ONSIDERATION, OR CAUSED BY A MISTAKE OF LAW APPLICABLE TO SUCH TRANSFER OR TRANS ACTION EVEN WHERE THERE HAS BEEN A COMPLETE DISCLOSURE OF ALL RELEVANT FACTS UPON WH ICH A CORRECT ASSESSMENT COULD HAVE BEEN BASED. IN CASES WHERE THE ASSESSING OFFIC ER HAD OVER-LOOKED SOMETHING ACIT2(1)BHOPAL V. M/S. M.P. LAGHU UDYOG NIGAM LTD. / I.T.A. NO.270 /IND/2016/& CO. NO.151/IND/2016/A.Y .:08-09 PAGE 6 OF 8 AT THE FIRST ASSESSMENT, THERE CAN BE NO QUESTION O F ANY CHANGE OF OPINION, WHEN THE INCOME WHICH WAS CHARGEABLE TO TAX IS ACTUALLY TAXE D AS IT OUGHT TO HAVE BEEN UNDER THE LAW, BUT WAS NOT, DUE TO AN ERROR COMMITTED AT THE FIRST ASSESSMENT. 11. THE WORD REASON IN THE PHRASE REASON TO BELIEVE WOULD MEAN CAUSE OR JUSTIFICATION. IF THE ASSESSING OFFICER HAS A CAUSE OR JUSTIFICATION TO THINK OR SUPPOSE THAT INCOME HAD ESCAPED ASSESSMENT, HE CAN BE SAID TO HAVE A REASON TO BELIEVE THAT SUCH INCOME HAD ESCAPED ASSESSMENT. THE WORDS REASON TO BELIEVE CANNOT MEAN THAT THE ASSESSING OFFICER SHOULD HAVE FINALLY ASCERTAINED THE FACTS BY LEGAL EVIDENCE. UNLESS THE GROUND OR THE MATERIAL ON WHIC H HIS BELIEF IS BASED, IS FOUND TO BE SO IRRATIONAL AS NOT TO BE WORTHY OF BEING CALLE D A REASON BY ANY HONEST MAN, HIS CONCLUSION THAT IT CONSTITUTES A SUFFICIENT REASON, CANNOT BE OVERRIDDEN. IF THE ASSESSING OFFICER HONESTLY COMES TO A CONCLUSION TH AT A MISTAKE HAS BEEN MADE, IT MATTERS NOTHING SO FAR AS HIS JURISDICTION TO INITI ATE THE PROCEEDINGS UNDER SECTION 147 IS CONCERNED, THAT HE MAY HAVE COME TO AN ERRONEOUS CONCLUSION WHETHER ON LAW OR ON FACTS. THE COURT WILL NOT IN EXERCISE OF ITS EXT RAORDINARY JURISDICTION UNDER THE CONSTITUTION, EXAMINE THE SUFFICIENCY OF THE REASON WHICH LED THE ASSESSING OFFICER TO BELIEVE THAT THE INCOME HAD ESCAPED ASSESSMENT A S HELD IN THE CASE OF SHRI PRAFUL CHUNILAL PATEL 236 ITR 832(GUJ). 12. WE FURTHER RELY IN THE CASE OF DR. AMINS PATHOLOGY LABORATORY 252 ITR 673 (BOM) THE HON`BLE HIGH COURT OBSERVED THAT AFTER THE AMENDMENT, THE ONLY RESTRICTION PUT IN THE SECTION IS REASON TO BELIEV E. THAT REASON HAS TO BE A REASON OF A PRUDENT PERSON. THAT REASON SHOULD BE FAIR AND NO T NECESSARILY DUE TO FAILURE OF THE ASSESSEE TO DISCLOSE FULLY OR PARTIALLY SOME MATERI AL FACTS RELEVANT FOR ASSESSMENT. HOWEVER, WHERE A PERIOD OF FOUR YEARS HAS ELAPSED T HE PROVISO TO SECTION 147 OF THE INCOME-TAX ACT, 1961, COMES INTO THE PICTURE. UNDER THE SAID PROVISO, NO ACTION CAN ACIT2(1)BHOPAL V. M/S. M.P. LAGHU UDYOG NIGAM LTD. / I.T.A. NO.270 /IND/2016/& CO. NO.151/IND/2016/A.Y .:08-09 PAGE 7 OF 8 BE TAKEN AFTER FOUR YEARS UNLESS ANY INCOME CHARGEA BLE TO TAX HAS ESCAPED ASSESSMENT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. UNDER EXPLANATION 1 TO THE PROVISO, MERE PRODUCTION OF ACCOUNT BOOKS FROM WHIC H MATERIAL EVIDENCE COULD HAVE BEEN DISCOVERED BY THE ASSESSING OFFICER WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE PROV ISO. THEREFORE, MERE PRODUCTION OF THE BALANCE-SHEET, PROFIT AND LOSS AC COUNT OR ACCOUNT BOOKS WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEA NING OF THE PROVISO. 13. ADVERTING TO THE FACTS OF INSTANCE CASE, WE FIND TH AT THE ASSESSEE HAS RECOVERED AN AMOUNT OF RS. 78,82,705/- FROM SSI UNI TS AND PAID TO WCL ON ACCOUNT OF GSTV AND SAME HAS BEEN SHOWN UNDER THE HEAD ADVA NCE RECEIVED FROM CUSTOMERS , HENCE, THERE WAS PRIMA-FACIE CASE OF RE ASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. FURTHER R ELIANCE PLACED IN THE CASE OF RAYMOND WOOLEN MILLS LTD. VS. ITO [1999] 236 ITR 34 (SC): WHEREIN IT WAS OBSERVED THAT IN DETERMINING WHETHER COMMENCEMENT OF PROCEEDINGS U/S 147(A) WAS VALID, WHAT WAS TO BE SEEN WAS ONLY THE PRIMA FACIE MATERI AL; THE SUFFICIENCY OR CORRECTNESS OF THE MATERIAL WAS NOT A THING TO BE CONSIDERED AT THAT STAGE. REOPENING OF THE ASSESSMENT OF THE PRECEDING YEAR ON THE BASIS OF IN FORMATION OBTAINED IN THE SUBSEQUENT YEAR'S PROCEEDINGS REGARDING UNDERVALUAT ION OF INVENTORIES RESULTING IN UNDER- STATEMENT OF PROFITS WAS HELD VALID UNDER SE CTION 147(A). IN THE CASE OF KALAYNJI MABJI & COP. V. CIT 9(1097) 102 ITR 287 (S C) IT WAS HELD THAT REASSESSMENT CAN BE INITIATED EVEN IF INFORMATION MAY BE OBTAINED FROM RECORD OF ORIGINAL ASSESSMENT. ACIT2(1)BHOPAL V. M/S. M.P. LAGHU UDYOG NIGAM LTD. / I.T.A. NO.270 /IND/2016/& CO. NO.151/IND/2016/A.Y .:08-09 PAGE 8 OF 8 14. IN THE LIGHT OF ABOVE FACTS, THE REOPENING OF ASSES SMENT IS PERFECTLY IN ACCORDANCE WITH LAW HENCE SAME IS UPHELD. THIS GROU ND OF APPEAL OF THE ASSESSEE IS THEREFORE DISMISSED. 15. IN THE RESULT, THE APPEAL OF THE REVENUE AND CROSS APPEAL OF ASSESSEE STANDS DISMISSED. 16. THE ORDER PRONOUNCED IN THE OPEN COURT ON 15.5.2017 SD/- SD/- ( C.M. GARG) JUDICIAL MEMBER ( O. P. MEENA) ACCOUNTANT MEMBER & / DATED: 15 TH MAY, 2017 OPM