The Berhampur Co-operative Urban Bank Ltd., Berhampur V. DCIT, Berhampur Circle, Berhampur

ITA 279/CTK/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 4364 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 15-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Assessee Lawyers: P R MOHANTY
• Keywords: Reopening of assessment; Search and seizure; Tangible material; Difference of opinion; Assessment record; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 147; 148; 37; 144

Judgement Text

1 ITA NO.279/CTK/2016 ASSESSMENT YEAR : 2010 - 2011 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 279 /CTK/2016 ASSESSMENT YEAR : 2010 - 2011 THE BERHAMPUR CO - OPERATIVE URBAN BANK LTD., URBAN BANK ROAD, BERHAMPUR VS. DCIT, BERHAMPUR CIRCLE, BERHAMPUR PAN/GIR NO. AAAAT 9253 B (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI P.R.MOHANTY, AR REVENUE BY : SHRI D.K.PRADHAN, DR DATE OF HEARING : 3 1 / 01 / 201 8 DATE OF PRONOUNCEMENT : 3 1 / 0 1/ 201 8 O R D E R PER PAVAN KUMAR GADALE, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) - 1, BHUBANESWAR DATED 1.4.2016 FOR THE ASSESSMENT YEAR 2010 - 2011. 2. IN GROUND NO.2 OF THE APPEAL, THE ASSESSEE HAS CHALLENGED THE INITIATION OF REASSESSMENT PROCEEDINGS U/S 147 OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS IN THE BUSINESS OF BANKING. THE ORIGINAL ASSESSMENT IN THIS CASE WAS COMPLETED U/S.143(3) OF THE ACT ON 11.3 .2013 AT A TOTAL INCOME OF RS.22,80,380/ - . SUBSEQUENTLY, IT WAS FOUND BY THE ASSESSING OFFICER THAT THE ASSESSEE IN ITS PROFIT AND LOSS ACCOUNT HAS DEBITED A SUM OF RS.35,65,000/ - UNDER 2 ITA NO.279/CTK/2016 ASSESSMENT YEAR : 2010 - 2011 DIFFERENT PROVISIONS BUT WHILE COMPUTING THE TOTAL INCOME, THE ASSESS EE HAS ADDED TO TOTAL INCOME THE PROVISIONS MADE FOR NPA AND STANDARD ASSETS OF RS.5,15,000/ - BUT HAS NOT CONSIDERED FOR ADDITION OF OTHER PROVISIONS OF RS.30,50,000/ - . SINCE THE ADDITION WAS NOT MADE IN THE ORIGINAL ASSESSMENT DUE TO OVERSIGHT, THE ASSE SSING OFFICER INITIATED REASSESSMENT PROCEEDINGS U/S.147 OF THE ACT AND ISSUED NOTICE U/S.148 OF THE ACT ON 27.6.2014 . IN RESPONSE TO NOTICE U/S.148, THE ASSESSEE DID NOT FILE THE RETURN OF INCOME BUT FILED A PETITION ON 11.7.2014 ASKING THE REASONS RECOR DED FOR INITIATION OF REASSESSMENT PROCEEDINGS. THE ASSESSING OFFICER IN HIS LETTER DATED 15.7.2014 HAS SUPPLIED THE REASONS RECORDED FOR REASSESSMENT PROCEEDING U/S.147 OF THE ACT AS UNDER: 'ON VERIFICATION OF RECORDS, IT IS FOUND THAT IN THE PROFIT & LO SS ACCOUNT FOR THE YEA R ENDING 31.03.2010, THE ASSESSEE HAS DEBITED A SUM OF RS.36,40,062/ - UNDER DIFFERENT PROVISIONS. IN THE COMPUTATION OF INCOME STATEMENT, THE ASSESSEE HAS ADDED THE PROVISIONS MADE FOR NPA AND STANDARD ASSETS AMOUNTING TO RS.5,15,000/ - BU T PROVISION MADE FOR OTHER HEADS/ITEMS AMOUNTING TO RS.30,50,000/ - HAS NOT BEEN ADDED TO THE TOTA L INCOME. ' AS PER THE PROVISIONS OF SECTION 37 OF THE INCOME TAX ACT, 1961, PROVISION MADE IN THE ACCOUNTS FOR AN ACCRUED OR KNOWN L IABILITY IS AN ADMISSIBLE DEDUCTION WHILE OTHER PROVISIONS MADE DO NOT QUALIFY FOR DEDUCTION. HENCE, THE PROVISION MADE FOR RS.30,50,000/ - IS REQUIRED TO BE ADDED TO THE TOTAL INCOME.' THE ASSESSING OFFICER COMPLETED THE REASSESSMENT ORDER U/S.147 R.W.S 144 OF THE ACT, DETERMINING THE TOTAL INCOME AT RS.53,30,380/ - , INTER ALIA, MAKING ADDITION OF RS.30,50,000/ - . 3 ITA NO.279/CTK/2016 ASSESSMENT YEAR : 2010 - 2011 4. ON APPEAL, THE CIT(A) CONFIRMED THE REASSESSMENT ORDER U/S.147 OF THE ACT AND UPHELD THE ADDITION MADE BY THE ASSESSING OFFICER. 5. BEFOR E US, LD A.R. OF THE ASSESSEE SUBMITTED THAT ALL THE MATERIALS FACTS WERE FURNISHED BEFORE THE ASSESSING OFFICER DURING THE ORIGINAL ASSESSMENT. . IT WAS FURTHER SUBMITTED THAT NO NEW MATERIAL HAD COME TO THE KNOWLEDGE OF THE ASSESSING OFFICER AFTER FRAMIN G OF ASSESSMENT U/S.143(3) OF THE ACT ON 11.3.2013 , WHICH MAY AFFORD REASON TO BELIEVE THAT INCOME OF THE A SSESSEE HAD ESCAPED ASSESSMENT. IT WAS SUBMITTED THAT THE ASSESSING OFFICER FROM THE SAME SET OF DOCUMENTS WHICH WERE AVAILABLE DURING THE ORI GINAL ASSESSMENT PROCEEDINGS, HAS EXPRESSED A DIFFERENT VIEW, WHICH TENTAMOUNTS TO REVIEW OF HIS OWN JUDGEMENT IN ABSENCE OF ANY OTHER MATERIAL EVIDENCES FOR INVOCATION OF SECTION 148 OF THE ACT. 6. CONTRA, LD D.R. SUBMITTED THAT AS THE ASSESSEE HAS NOT DISCLOSED IN THE RETURN OF INCOME AN AMOUNT OF RS.30,50,000/ - AND LATER ON WHEN THE ASSESSING OFFICER VERIFIED THE PROFIT AND LOSS ACCOUNT, IT CAME TO HIS KNOWLEDGE THAT INCOME HAS ESCAPED ASSESSMENT AND, THER EFORE, THE ASSESSMENT WAS RIGHTLY REOPENED BY THE ASSESSING OFFICER. D D.R. SUBMITTED THAT MERE PRODUCTION OF THE ACCOUNTS WOULD NOT RELIEVE THE ASSESSEE OF THE RESPONSIBILITY OF SHOWING THAT THE ASSESSEE HAD MADE A FULL AND TRUE DISCLOSURE OF ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT IN THE FIRST ROUND OF THE ASSESSMENT PROCEEDINGS. 4 ITA NO.279/CTK/2016 ASSESSMENT YEAR : 2010 - 2011 7. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE REASONS FOR REOPENING THE ASSESSMENT AS RECORDED B Y THE ASSESSING OFFICER ON 15.7.2014 READS AS UNDER: 'ON VERIFICATION OF RECORDS, IT IS FOUND THAT IN THE PROFIT & LOSS ACCOUNT FOR THE YEA R ENDING 31.03.2010, THE ASSESSEE HAS DEBITED A SUM OF RS.36,40,062/ - UNDER DIFFERENT PROVISIONS. IN THE COMPUTATION OF INCOME STATEMENT, THE ASSESSEE HAS ADDED THE PROVISIONS MADE FOR NPA AND STANDARD ASSETS AMOUNTING TO RS.5,15,000/ - BU T PROVISION MADE FOR OTHER HEADS/ITEMS AMOUNTING TO RS.30,50,000/ - HAS NOT BEEN ADDED TO THE TOTA L INCOME. ' AS PER THE PROVI SIONS OF SECTION 37 OF THE INCOME TAX ACT, 1961, PROVISION MADE IN THE ACCOUNTS FOR AN ACCRUED OR KNOWN LIABILITY IS AN ADMISSIBLE DEDUCTION WHILE OTHER PROVISIONS MADE DO NOT QUALIFY FOR DEDUCTION. HENCE, THE PROVISION MADE FOR RS.30,50,000/ - IS REQUIRED TO BE ADDED TO THE TOTAL INCOME.' ON PERUSAL OF ABOVE RECORDED REASONS SHOWS THAT THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT BY ISSUING NOTICE U/S.148 OF THE ACT ON THE GROUND THAT ON PERUSAL OF PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDING 31.3.2010, THE ASSESSEE HAS DEBITED A SUM OF RS.36,40,062/ - UNDER DIFFERENT HEADS AND IN THE COM PUTATION OF INCOME, THE ASSESSEE HAS ADDED PROVISIONS MADE FOR NPA AND STANDARD ASSETS OF RS.5,15,000/ - BUT PROVISIONS MADE FOR OTHER HEAD/ITEMS OF RS.30,50,000/ - HAS NOT BEEN ADDED TO THE TOTAL INCOME OF THE ASSESSEE AND, THEREFORE, THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. WE HAVE ALSO PERUSED THE ASSESSMENT ORDER U/S.143(3) OF THE ACT AND FIND THAT THE ASSESSEE HAS DISCLOSED ALL THE MATERIALS FACTS WHICH ARE DEBITED IN ITS PROFIT 5 ITA NO.279/CTK/2016 ASSESSMENT YEAR : 2010 - 2011 AND LOSS ACCOUNT DULY AUDITED AND ACCEPTED BY HIM AND NO NEW TANGIBLE MATERIAL HAD COME TO THE KNOWLEDGE OF THE ASSESSING OFFICER TO EVIDENCE THE FACT OF ESCAPEMENT OF INCOME CHARGEABLE TO TAX OF THE ASSESSEE. 8 . T HE HONBLE SUPREME COURT IN THE CASE OF CIT VS. KELVINAT OR OF INDIA LTD., 320 ITR 561 (SC) HAS HELD THAT T HE CONCEPT OF CHANGE OF OPINION MUST BE TREATED AS AN IN - BUILT TEST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFICER. HENCE, AFTER 1ST APRIL, 1989, THE ASSESSING OFFICER HAS POWER TO REOPEN AN ASSESSMENT , PROVIDED THERE IS 'TANGIBLE MATERIAL' TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF. IN THIS CONTEXT, THE OBSERVATIONS OF HONBLE APEX COURT AT PAGE 564 ARE VERY RELEVANT, WHICH ARE REPRODUCED AS FOLLOWS: THEREFORE, POST - 1ST APRIL, 1989, POWER TO RE - OPEN IS MUCH WIDER. HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS 'REASON TO BELIEVE' FAILING WHICH, WE ARE AFRAID, SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO RE - OPE N ASSESSMENTS ON THE BASIS OF 'MERE CHANGE OF OPINION', WHICH CANNOT BE PER SE REASON TO RE - OPEN. WE MUST ALSO KEEP IN MIND THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REVIEW AND POWER TO REASSESS. THE ASSESSING OFFICER HAS NO POWER TO REVIEW; HE HAS THE PO WER TO RE - ASSESS. BUT REASSESSMENT 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 OF RE - OPENING THE ASSESSMENT, REVIEW WOULD TAKE PLA CE. ONE MUST TREAT THE CONCEPT OF 'CHANGE OF OPINION' AS AN IN - BUILT TEST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFICER. HENCE, AFTER 1ST APRIL, 1989, ASSESSING OFFICER HAS POWER TO RE - OPEN, PROVIDED THERE IS 'TANGIBLE MATERIAL' TO COME TO THE CONCLUSIO N THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF. 6 ITA NO.279/CTK/2016 ASSESSMENT YEAR : 2010 - 2011 9 . THUS, WE FIND THAT IN THE INSTANT CASE, THERE WAS NO TANGIBLE MATERIAL WITH THE ASSESSING OFFICER BEFORE REOPENING OF ASSESSMENT TO SHOW THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. T HE AUDITED ACCOUNTS WERE ALREADY AVAILABLE WITH THE A SSESSING OFFICER AND FORMED PART OF THE ASSESSMENT RECORD. IT IS OBSERVED THAT TH E REOPENING HAS BEEN MADE ON THE BASIS OF VERY SAME SET OF MATERIAL TO HOLD THAT PROVISIONS MADE FOR OTHER HEAD/ITEMS OF RS.30,50,000/ - HAS NOT BEEN ADDED TO THE TOTAL INCOME OF THE ASSESSEE AND, THEREFORE, THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT, WHICH IS C LEARLY A CHANGE OF OPINION AND IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA LTD (SUPRA), REASSESSMENT IS NOT PERMISSIBLE IN LAW AS IT TANTAMOUNT TO REVIEW OF THE ORDER. HENCE, WE HOLD THAT THE REOPENING OF ASSESSM ENT IN THE INSTANT CASE BY ISSUANCE OF NOTICE U/S.148 OF THE ACT IS BAD IN LAW AND CONSEQUENTLY, REASSESSMENT ORDER DATED 26.9.2014 PASSED U/S.14 4 /147 IS ALSO BAD IN LAW AND HENCE WE CANCEL THE SAME AND ALLOW THIS GROUND OF APPEAL. 10. IN THE RESULT, APPEA L FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 3 1 / 01 /201 8 . S D / - S D / - ( N.S SAINI) ( PAVAN KUMAR GADALE) A CCOUNTANT MEMBER JUDICIALMEMBER CUTTACK; DATED 3 1 / 01 /201 8 B.K.PARIDA, SPS 7 ITA NO.279/CTK/2016 ASSESSMENT YEAR : 2010 - 2011 COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, CUTTACK 1. THE APPELLANT : THE BERHAMPUR CO - OPERATIVE URBAN BANK LTD., URBAN BANK ROAD, BERHAMPUR 2. THE RESPONDENT :DCIT, BERHAMPUR CIRCLE, BERHAMPUR 3. THE CIT(A) - 1, BHUBANESWAR 4. PR.CIT - 1, BHUBANESWAR 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//