DCIT, BHILWARA V. M/s. Balar Synthtics Pvt. Ltd., BHILWARA

ITA 279/JODH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82925 (ITAT-JODHPUR)
• Duration Of Justice: 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 02-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Difference of opinion; Change of opinion
• Section: 43B; 143(3); 147; 148; 28; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI HARI OM MARATHA , JUDICIAL MEMBER AND SHRI N.K.SAINI, ACCOUNTANT MEMBER ITA NO. 2 7 9 / JU/ 20 1 4 ASSESSMENT YEAR: 200 5 - 0 6 THE DY . C.I.T VS. M/S BALAR SYNTHETICS PVT. LTD CIRCL E 25, ANAND CLOTH MARKET , PUR ROAD BHILWARA . BHILWARA PAN NO. AAACB 9033 F (APPELLANT) (RESPONDENT) A SSESSEE B Y : SHRI U.C. JAIN SHRI RAJENDRA JAIN DEPARTMENT B Y : SHRI N.A. JOSHI , DR DATE OF H EARING : 0 4 . 0 8 .201 4 DATE OF PRONOUNCEMENT : 13 . 0 8 . 201 4 ORDER PER HARI OM MARATHA , J .M. TH IS APPEAL BY THE REVENUE IS DIRECTED A GAINST THE ORDER OF THE CIT (A) , AJMER DATED 06 . 0 2 .20 1 4 PERTAINING TO A.Y 200 5 - 20 0 6 . 2 2. FOLLOWING GROUND HA S BEEN RAISED IN T HIS APPEAL: ON THE FACTS AND IN THE PRESENT CIRCUMSTANCES OF THE CASE, THE ID. CIT(A) HAS ERRED IN TREATING THE REOPENING OF ASSESSMENT U/S 147 AS INVALID THOUGH THE CASE WAS REOPENED AFTER PREVIOUS SANCTION OF THE CIT U/S 151 OF THE I.T. ACT. 2.1 TH E FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME [ROI] FOR A.Y. 2005 - 06 ON 31 .0 8 .200 8 DECLARING TOTAL INCOME OF RS. 8,84,240 / - . ASSESSMENT ORDER WAS MADE U/S 143(3) OF THE INCOME - TAX ACT, 1961 ['THE ACT' FOR SHORT] ON 20.11.20 06 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 12 ,17,886/ - . THIS ORDER WAS REOPENED BY ISSUING NOTICE U/S 148 ON 16.01.2012 AFTER RECORDING REQUISITE REASONS. THE ASSESSEE DISPUTED THE INITIATION OF PROCEEDINGS U/S 147 R.W.S. 148 OF THE ACT. THE A.O HAS RECORDED THE FOLLOWING REASONS FOR REOPENING OF THE ASSESSMENT D ATED 20.11.2006 AS UNDER: IT IS NOTICED THAT A SUM OF 31,11,074/ - ON ACCOUNT OF INTEREST OF TERM LOAN PAID TO RIICO AND ANOTHER SUM OF 22,44,036/ - WAS DEBITED IN P&L ACCOUNT. FROM TH E PERUSAL OF ABOVE INTEREST ACCOUNTS IT NOTI CED THAT INTEREST ON TERM LOAN 31,11,074/ - WAS PAID TO RIICO THROUGH BOB CC3 ACCOUNT (I.E. WORKING CAPITAL LOAN ACCOUNT) AND INTEREST ON 3 CC LIMIT WAS DEBITED IN THE SAME ACCOUNT WHICH WAS NOT ACTUALLY PAID. UNDER THE CLAUSE(E) OF SECTION 43B OF IT. ACT, 1961, A DEDUCTION OTHERWISE ALLOWABLE UNDER THIS ACT IN RESPECT OF ANY SUM PAYABLE BY THE ASSESSEE AS INTEREST ON ANY LOAN OR ADVANCES FROM A SCHEDULED BANK IN ACCORDANCE WITH TERMS AND CONDITIONS OF THE AGREEMENT GOVERNING SUCH LOAN OR ADVANCES, SHALL BE ALLOWED (IRRESPECTIVE OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE ASSESSEE ACCORDING TO THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY HIM) ONLY IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 OF THAT PREVIOUS YEAR IN WHICH SUCH SUM IS ACTUALLY PAID BY HIM EXPLANATION 3D, THERE IN IT HAS BEEN CLARIFIED THAT, A DEDUCTION OF ANY SUM, BEING INTEREST PAYABLE UNDER CLAUSE(E) OF THIS SECTION. SHALL BE ALLOWED IF SUCH INTEREST HAS BEEN ACTUALLY PAID AND ANY INTEREST REFERRED TO IN THAT CLAUSE WHICH HAS BEEN CONVERTED INTO A LOAN OR ADVANCE SHALL NOT BE DEEMED TO HAVE BEEN ACTUALLY PAID. IN THIS CASE IN THE END OF YEAR 2004 - 05 BOB WORKING CAPITAL LOAN ACCOUNT WAS INCREASED FROM 51,88,82 7/ - TO 1,54,55,668/ - AND BOB BANK DEBITED ACCOUNT FROM 1000000 TO 10500000). THE PAYMENT OF INTEREST TO RIICO ON TERM LOAN ACCOUNT THROUGH BOB CC3 ACCOUNT WAS MERELY CONVERSION OF LOAN INTO FRESH LOAN. HOWEVER INTEREST PAYMENT ON THE BOB WORKING CAPITAL LO AN ACCOUNT (CC ACCOUNT) IS ALLOWABLE ON ACTUAL PAYMENT WHICH WAS ONLY DEBITED IN CC ACCOUNT BUT NOT ACTUALLY PAID.' 4 HOWEVER, THE A.O WAS NOT AGREEABLE AND FRAMED THE REASSESSMENT ORDER . 3. BEFORE THE LD. CIT(A), THE ASSESSEE CHALLENGED THE LEGALITY OF NOTI CE U/S 147 OF THE ACT STATING THAT INTEREST AMOUNT OF RS. 13,11,074/ - HAD BEEN PAID BY ISSUING CHEQUES TO RICCO LTD ON THE TERM LOAN TAKEN THEREFROM AND THESE CHEQUES WERE DEBITED IN THE BANK OF BARODA CC ACCOUNT AND RICCO WAS PAID OFF. IT WAS FURTHER S T A TED THAT THE INTEREST LIABILITY OF CC ACCOUNT WAS ALSO DEBITED BY THE BANK OF BARODA AND THERE WAS NO OUTSTANDING INTEREST LIABILITY. IT WAS CLAIMED THAT THE REOPENING OF THE ASSESSMENT BY ISSUING NOTICE U/S 148 ON 16.1.2012 IS AFTER THE EXPIRY OF FOUR YE ARS FROM THE END OF THE RELEVANT A.Y. THE LD. CIT(A) QUASHED THE REASSESSMENT ORDER AFTER HOLDING THAT THE REOPENING WAS BASED ON CHANGE OF OPINION OF THE A.O WHICH IS NOT PERMISSIBLE IN THE EYES OF LAW. THE LD. CIT(A) HAS ALSO DELETED THE ADDITION MADE ON ACCOUNT OF MERITS. 3.1 THE REVENUE IS AGGRIEVED AND HAS FILED THIS APPEAL BY CHALLENGING THE LEGAL FINDING GIVEN IN RELATION TO HOLDING THE ASSESSMENT ORDER MADE U/S 147 R.W.S 148 OF THE ACT BUT HAS NOT CHALLENGED THE DELETION MADE ON MERITS OF THE CA SE. 5 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAREFULLY PERUSED THE RELEVANT MATERIAL ON RECORD. SINCE THE REVENUE HAS NOT CHALLENGED THE DELETION ON MERITS, WE WILL ALSO NOT TOUCH THE MERITS OF THE CASE. HOWEVER, ON THE LEGAL ISSUE, IT WAS ARGUED BY THE LD. D.R THAT THE A.O HAS REOPENED THE ASSESSMENT AFTER OBTAINING PREVIOUS SANCTION OF THE LD. CIT U/S 151 OF THE ACT. 5. ON THE OTHER HAND, THE LD. A.R HAS RELIED ON THE ORDERS OF THE LD. CIT(A) IN THIS REGARD. WE HAVE FOUND THAT THE ASSESSEE HA D MADE FULL AND TRUE DISCLOSURE OF ITS INCOME. THE A.O HAS ISSUED NOTICE OF REOPENING U/S 148 AFTER EXPIRY OF FOUR YEARS. THE A.O HAS NOT RECORDED ANY REASONS THAT ESCAPEMENT OF ANY INCOME CHARGEABLE TO TAX WAS ON ACCOUNT OF FAILURE ON THE PART OF THE AS SESSEE TO FILE RETURN OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR MAKING ASSESSMENT OF THE RELEVANT A.Y. EVEN IF THE REASONS ARE PROPERLY RECORDED AND APPROVAL OF THE LD. CIT IS OBTAINED U/S 151 OF THE ACT, LIMITATION PROVIDED IN THE AC T CANNOT BE INCREASED. NOTICE U/S 148 IS FOUND TO BE CLEARLY BEYOND FOUR YEARS OF THE COMPLETION OF THE REGULAR ASSESSMENT ORDER WHCH WAS MADE ON 20.11.2006, WHEREAS THE NOTICE OF REOPENING U/S 148 WAS ISSUED ON 16.1.2012 I.E. AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT A.Y. IT IS FOUND FOR A FACT THAT NO 6 NEW MATERIAL OR INFORMATION HAS COME TO THE KNOWLEDGE OF THE A.O. THE A.O HAS TO INTERPRET THE FACTS OF THE CASE BY STATING THAT THE PAYMENT OF INTEREST ON RICCO LOAN HAS BEEN CONVERTED INT O FRESH LOAN FROM BANK OF BARODA BY WAY OF ENHANCE CC LIMIT WHICH HE HAS THOUGHT IS DISALLOWABLE U/S 43B OF THE ACT. WE HAVE FOUND THAT THE INTEREST OF THE BANK IS NOT OUTSTANDING LIABILITY IN THE BALANCE SHEET OF THE ASSESSEE. THE ENTIRE EXERCISE UNDERT AKEN BY THE A.O AMOUNTS TO CHANGE OF HIS OPINION WHICH LAW DOES NOT PERMIT HIM TO DO SO. THE LD. A.R SHRI U.C. JAIN HAS RELIED ON VARIOUS DECISIONS INCLUDING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT RENDERED IN THE CASE OF BANSWARA SYNTEX LTD REPORTED IN 272 ITR 154 [RAJ] IN WHICH IT HAS BEEN HELD THAT IF THE ESCAPEMENT OF INCOME BELIEVED BY THE A.O IS NOT ATTRIBUTABLE TO ANY FAILURE ON THE PART OF THE ASSESSEE IN FILING RETURN U/S 139 OR 148 OR TO FAILURE ON THE PART OF THE ASSESSEE TO DISCLO SE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, THE PROCEEDINGS FOR ASSESSMENT OR REASSESSMENT OF ANY A.Y. CANNOT BE INITIATED AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE A.Y. FOR WHICH ASSESSMENT OR REASSESSMENT IS SOUGHT TO BE MADE U/S 147 OF THE ACT. THEREFORE, IN VIEW OF THE AVAILABLE FACTS OF THIS ISSUE AS WELL AS SUPPORTING JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT APART FROM OTHER DECISIONS RELIED ON THE SAME ISSUE BY THE LD. A.R, COPIES OF 7 JUDGMENT ARE FILED IN PAPER BOOK FROM PAGES TO 35, WHICH ALSO HAVE BEARING ON THE SUBJECT, WE CANNOT ALLOW THE APPEAL OF THE REVENUE ON THIS LEGAL ISSUES. ACCORDINGLY WE CONFIRM THE FINDING MADE BY THE A.O ON THIS LEGAL ISSUE AND DISMISS THE APPEAL OF THE REVENUE. 6 . IN THE RESU LT, THE APPEAL OF THE REVENUE IN ITA NO. 279 /JU/2014 STANDS DISMISSED. ORDER PRON OUNCED IN THE COURT ON 13 TH AUGUST , 2014. SD/ - SD/ - (N.K.SAINI) [HARI OM MARATHA] ACCOUNTANT M EMBER JUDICIAL MEM B ER DATED : 13 TH AUGUST , 201 4 VL/ - COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT BY ORDER 4. THE CIT(A) 5. THE DR SENIOR PRIVATE SECRETARY I TAT, JODHPUR