ACIT Co. Cir-3(1), V. Central Ware housing,

ITA 2865/DEL/2003

• Counselvise Citation: 286520114 RSA 2003
• Duration Of Justice: 11 year(s) 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 18-12-2014
• Assessment Year: 1995-1996
• Appeal Filed On: 29-05-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A MISRA
• Assessee Lawyers: S SAMPATH
• Keywords: Reopening of assessment; Search and seizure; Earning of tax free income; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 147; 148; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A , NEW DELHI) BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NOS.2865 & 2866 /DEL/2003 ASSESSMENT YEAR : 1995-96 1996-97 ACIT, CO. CIRCLE 3(1), VS. M/S. CENTRAL WAREHOUSI NG NEW DELHI CORPORATION LTD., 4/1, SIRI INSTITUTIONAL AREA, KHEL GAON MARG, NEW DELHI GIR / PAN:AAACC1206D C.O. 111 & 112/DEL/2006 (ASSESSMENT YEAR 1995-96 & 1996-97) M/S. CENTRAL WAREHOUSING VS. ACIT, CO. CIRCLE 3(1 ), CORPORATION LIMITED, NEW DELHI 4/1, SIRI INSTITUTIONAL AREA, KHEL GAON MARG, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A MISRA, CIT DR RESPONDENT BY : SHRI S. SAMPATH, CA ORDER PER T.S. KAPOOR, AM: THESE ARE TWO APPEALS FILED BY REVENUE AGAINST TWO SEPARATE ORDERS OF LD. CIT(A) BOTH DATED 28.03.2003 AND THE GROUNDS OF APPEAL TAKEN BY REVENUE IN BOTH THESE APPEALS ARE IDENTICAL. THE A SSESSEE HAS ALSO FILED CROSS OBJECTIONS AGAINST THE APPEALS FILED BY REVENUE. F OR THE SAKE OF CONVENIENCE, THE GROUNDS TAKEN IN I.T.A. NO. 2865/D EL/2003 FOR ASSESSMENT YEAR 1995-96 ARE REPRODUCED BELOW: I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) IS NOT JUSTIFIED IN HOLDING THAT THE PROFITS FROM T HE ACTIVITIES OF ITA NO.2865,2866/DEL/2003 C.O.111 & 112/DEL/2003 2 CFS/ISD QUALIFY FOR EXEMPTION UNDER SECTION 10(29) DESPITE THE FACT THAT THE ASSESSEE ITSELF HAS STATED THAT ITS ACCOUN TS ARE INDIVISIBLE FOR ALL THE ASSESSMENT YEARS. THE A.O. GAVE OPPORTUNIT Y TO THE ASSESSEE TO GIVE NECESSARY EXPLANATION, BUT, THE ASSESSEE DID N OT FILE ANY DETAILS AT THE ASSESSMENT STAGE. II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) IS NOT JUSTIFIED IN DIRECTING HT A.O. TO WORK OUT T HE INTEREST CHARGEABLE UNDER SECTION 234B, IF THERE IS POSITIVE INCOME, FO R THE ASSESSMENT YEAR 1989-90, 90-91, 1994-95, 1995-96, 1996-97 AND 1999-2000 AFTER ACCORDING OPPORTUNITY TO THE ASSESSEE. 2. GROUNDS OF C.O. TAKEN BY ASSESSEE ARE ALSO SIMIL AR IN THESE TWO YEARS, THE GROUNDS OF CROSS OBJECTIONS IN 1995-96 ARE REPR ODUCED BELOW: I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE BOT H ON FACTS AND ON LAW, THE REASSESSMENT PROCEEDINGS IS BEYOND THE TIME LIMIT PRESCRIBED UNDER THE ACT, ACCORDINGLY THE REASSESSM ENT FRAMED IS VOID AND BAD IN LAW. II) WHETHER THE CHANGE EFFECTED BY THE JUDGEMENT OF THE SUPREME COURT COULD BE ATTRIBUTED AS OF FAILURE ON THE PART OF THE ASSESSEE IN THE CONTEXT OF ESCAPEMENT OF INCOME. III) THE GROUND NO.1 RAISED BY DEPARTMENT IS NOT AR ISING OUT OF THE ORDER OF THE CIT(A), ACCORDINGLY SHOULD NOT BE ENTE RTAINED. THE CIT(A) IN HIS ORDER HAS NEVER HELD THAT PROFITS FRO M THE ACTIVITIES OF CFS/ICD QUALIFY FOR EXEMPTION. ON THE CONTRARY IT WAS HELD BY THE CIT(A) THAT THE WAREHOUSING RECEIPTS OF CFS/ICD SHA LL QUALIFY U/S 10(29). 3. THESE APPEALS AND CROSS OBJECTIONS WERE HEARD TO GETHER AND THEREFORE FOR THE SAKE OF CONVENIENCE, COMMON AND CONSOLIDATE D ORDER IS BEING PASSED. THE FACTS ABOUT THESE CASES ARE THAT THE A SSESSMENTS FOR ASSESSMENT YEAR 1988-90 TO 1996-97 WERE REOPENED U/S 147 AND A DDITIONS WERE MADE ON THE BASIS THAT CERTAIN INCOME HAD ESCAPED ASSESS MENT. AGAINST SUCH REOPENING OF ASSESSMENTS, THE ASSESSEE FILED APPEAL S BEFORE LD. CIT(A) AND CONTESTED BOTH ON MERITS AND LEGAL GROUNDS. LD. CI T(A) PASSED CONSOLIDATED ITA NO.2865,2866/DEL/2003 C.O.111 & 112/DEL/2003 3 ORDER AGAINST WHICH DEPARTMENT FILED APPEALS BEFORE HONBLE ITAT. THE ASSESSEE ALSO FILED CROSS OBJECTIONS. THE HONBLE ITAT IN THESE TWO ASSESSMENT YEARS 1995-96 & 1996-97 HELD THE REOPENI NG AS VALID IN LAW AND THEREFORE, ASSESSEE FILED APPEAL BEFORE HON'BLE HIGH COURT AGAINST CONFIRMATION OF REOPENING IN THESE TWO YEARS BY ITA T. HON'BLE HIGH COURT REMITTED BACK THESE TWO CASES TO THE TRIBUNAL WITH THE DIRECTION; TO DETERMINE AS TO WHETHER THE REASON TO BELIEVE CONST ITUTED CHANGE OF OPINION OR NOT VIDE ITS ORDER DATED 14.01.2011 AND TRIBUNAL AGAIN VIDE ORDER DATED 09.09.2011 DECIDED AGAINST ASSESSEE AGAINST WHICH A SSESSEE AGAIN FILED APPEAL BEFORE HON'BLE HIGH COURT AND HON'BLE HIGH C OURT VIDE ITS ORDER DATED 22.01.2014 AGAIN REMITTED BACK THE ISSUE TO T RIBUNAL WITH ITS DIRECTIONS AS CONTAINED IN PARA 5 & 6. THE HON'BLE HIGH COURT IN PARA 5 HAS REPRODUCED THE FINDINGS OF TRIBUNAL AND IN PARA 6 H AS GIVEN THE DIRECTIONS WHICH ARE REPRODUCED AS UNDER: 5. THE IMPUGNED ORDER IN PARAS 1 TO 5 NOTES THE C ONTENTIONS OF THE PARTIES. THE OPERATIVE PORTION WHICH DISCUSSES THE RELEVANT CONTENTIONS AND CONCLUDES THE ISSUES AGAINST THE AS SESSEE READS AS FOLLOWS: - 'WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RE LEVANT MATERIAL AVAILABLE ON RECORD. WE FIND MERIT IN THE ARGUMENT OF LEARNED DR. IT IS UNDISPUTED THAT HON'BLE SUPREME COURT DELIVERED ITS JUDGMENT IN THE CASE OF ORISSA STATE WAREHOUSING CORPORATION (S UPRA) ON 01.04.1999. THE ORIGINAL ASSESSMENT ORDERS FOR A.Y. 1995-96 & 1996- 97 WERE FRAMED BY THE AO DATES MENTIONED ABOVE, PRI OR TO THE PRONOUNCEMENT OF THE JUDGMENT OF THE HON'BLE SUPREM E COURT. WITH THE HON'BLE SUPREME COURTS DECISION IT WAS INCUMBE NT ON AO TO EXAMINE WHETHER THE CLAIM ALLOWED BY HIM U/S 10(29) DURING THE ORIGINAL ASSESSMENT PROCEEDINGS WAS IN CONFORMITY W ITH THE SAME. WE ARE UNABLE TO ACCEPT THE PROPOSITION ADVANCED BY TH E LEARNED COUNSEL THAT AO HAD ALREADY EXERCISED HIS OPINION IN RESPEC T OF THE MATTER WHICH IS SUBSEQUENTLY DECIDED BY THE HONBLE SUPREM E COURT WAS GOING TO HOLD IN ORISSA STATE WAREHOUSING CORPORATI ON (SUPRA). THE ITA NO.2865,2866/DEL/2003 C.O.111 & 112/DEL/2003 4 HON 'BLE ALLAHABAD HIGH COURT IN THE CASE OF KARTIK EYA INTERNATIONAL (SUPRA), HAS HELD THAT SUBSEQUENT SUPREME COURT JUD GMENT CONSTITUTES LAW. OF THE LAND AND ACCORDINGLY' THE AO'S REASSESS MENT WITH SATISFACTION THAT EXEMPTION U/S 10(29) HAS BEEN GRA NTED TO ASSESSEE WHICH WAS AT VARIANCE OF HON'BLE SUPREME COURT JUDG MENT AND INCOME HAD ESCAPED ASSESSMENT IS JUSTIFIED. THE EXE RCISE OF POWER U/S 148 BY AO WAS TO IMPLEMENT SUPREME COURT JUDGMENT A ND NOT CHANGE OF HIS OPINION. THEREFORE, THE REOPENING WAS VALID AND 'SUSTAINABLE. IN OUR VIEW, THE JUDGMENT IN THE CASE OF KARTIKEYA INT ERNATIONAL (SUPRA) IS SQUARELY APPLICABLE TO ASSESSEE'S FACTS. RESPECTFULLY FOLLOWING THE SAME WE HOLD THAT THE TH EORY OF REASSESSMENT BASED ON CHANGE OF OPINION IS NOT APPL ICABLE TO ASSESSEE'S CASE AS THE AO WAS IMPLEMENTING THE LAW OF THE LAND AS DECLARED BY THE HON 'BLE SUPREME COURT. THUS, WE FI ND NO FORCE IN THE CONTENTION RAISED BY THE ASSESSEE IN ITS CROSS OBJE CTIONS FOR BOTH THE ASSESSMENT YEARS IN QUESTION. THUS, WE DECIDE THE I SSUE OF RE-OPENING OF ASSESSMENTS IN FAVOUR OF REVENUE AND AGAINST THE ASSESSEE. CONSEQUENT TO OUR DECISION, THE RESULT OF REVENUE'S APPEALS AND ASSESSEE'S C.OS FOR A.Y J995-96 & 1996-97 WILL REMA IN AS HELD IN ITAT'S CONSOLIDATED ORDER DATED 31.0.2008 VIZ. I. REVENUE'S APPEALS ARE PARTLY ALLOWED FOR STATIST ICAL PURPOSES. II. ASSESSEE'S C. AS ARE PARTLY ALLOWED FOR STATIS TICAL PURPOSES. ' 6. WE ARE AFRAID THAT THE TRIBUNAL HAS MISDIRECTE D ITSELF AS TO THE SCOPE OF REMAND. THOUGH IN THE EARLIER PORTI ON OF THE IMPUGNED ORDER THE TRIBUNAL EXTRACTED THIS COURT'S DIRECTION S WHICH SPECIFICALLY REQUIRE TO GO INTO THE QUESTION AS TO WHETHER THE ' REASONS TO BELIEVE' UNDER SECTION 147/ 148 IN THIS CASE WERE BASED UPON MERE CHANGE OF OPINION. NO OPINION HAS BEEN RECORDED OR ARRIVED AT EX FACIE DISCLOSES COMPLETE NON- APPLICATION OF MIND TO THE DIRECTIONS OF THIS COURT, INSISTING A REMAND TO ENSURE APPLICATION OF MIND TO THE ASSESSEE'S CONTENTION IN THIS REGARD. THIS COURT ALSO MINDFUL OF THE CIRCUMSTANCE THAT THE QUESTION WHETHER THE REASONS TO BELIEVE CO NSTITUTE A CHANGE OF OPINION IS ESSENTIALLY FOR DISCUSSION IN EVERY CASE OF AWARE AND ASSESSEE CHALLENGES IN VIEW OF THE DICTA OF THE SUP REME COURT IN KELVINATOR, 320 ITR 561 (S.C.). ITA NO.2865,2866/DEL/2003 C.O.111 & 112/DEL/2003 5 7. FOR THE ABOVE REASONS THE SUBSTANTIAL QUESTION O F LAW FRAMED REQUIRES FRESH CONSIDERATION. ACCORDINGLY, THE MATTER IS REMITTED FOR FRESH CONSIDERATION OF THE ITAT IN VIE W OF THE FACT THAT PREVIOUS ORDER OF THIS COURT ARE DULY COMPLIED WITH SPECIFIC FINDINGS RECORDED IN RESPECT OF THE FACTS WHETHER THE REASON S TO BELI4EVE CONSTITUTE A CHANGE OF OPINION. 8. THE APPEAL IS ALLOWED IN ABOVE TERMS. 4. IN VIEW OF ABOVE DIRECTIONS OF HON'BLE HIGH COUR T, BOTH THE PARTIES ARE BEFORE US. THEREFORE, AS PER THE DIRECTIONS OF HON'BLE HIGH COURT, WE ARE TO DECIDE AS TO WHETHER THE REASONS TO BELIEVE CONS TITUTES CHANGE OF OPINION OR NOT. LD. A.R. AT THE OUTSET ARGUED THAT REOPENI NG WAS NOT JUSTIFIED AS THE REASON TO BELIEVE CLEARLY INDICATES THAT THERE WAS A CHANGE IN OPINION AND WAS NOT PERMISSIBLE UNDER LAW. RELIANCE IN THIS R ESPECT WAS PLACED ON THE FOLLOWING CASES: I) 321 ITR 526 IN THE CASE OF CIT VS BATRA BHATIA C OMPANY (DEL.) II) 294 ITR 310 IN THE CASE OF CIT VS EICHER LTD. III) 320 ITR 561 IN THE CASE OF KELVINATOR OF INDI A (S.C.) 5. LD. A.R. SUBMITTED THAT WHILE PASSING ORIGINAL A SSESSMENT ORDER FOR THE ABOVE YEAR, THE A.O. HAD ALLOWED EXEMPTION U/S 10(29) ONLY IN RESPECT OF WAREHOUSING ACTIVITIES OF THE ASSESSEE AND HAD A DDED BACK THE CLAIM OF EXEMPT INCOME IN RESPECT OF OTHER ACTIVITIES AND IN THIS RESPECT, HE INVITED OUR ATTENTION TO PAPER BOOK PAGES 125-129 OF THE PA PER BOOK AND PAGE 6&7 WHERE COPIES OF ASSESSMENT ORDERS FOR RESPECTIVE YE ARS WERE PLACED. THEREFORE, IT WAS SUBMITTED THAT EVEN IN THE ABSENC E OF HON'BLE SUPREME COURT DECISION AS RELIED UPON BY A.O. FOR REOPENING OF CASES, THE A.O. HAD NOT ALLOWED EXEMPTION U/S 10(29) FROM OTHER ACTIVI TIES OF THE ASSESSEE. THEREFORE, IT WAS ARGUED THAT EVEN IN THE ABSENCE O F HON'BLE SUPREME COURT DECISION, THE ASSESSEE WAS BEING ALLOWED EXEMPTION U/S 10(29)IN RESPECT OF ITA NO.2865,2866/DEL/2003 C.O.111 & 112/DEL/2003 6 WAREHOUSING ACTIVITIES ONLY. HE FURTHER ARGUED THA T THE ASSESSEE WAS BEING ALLOWED EXEMPTION IN RESPECT OF WAREHOUSING ACTIVIT IES ON GROSS BASIS IN VIEW OF THE FACT THAT THE TRIBUNAL IN ASSESSMENT YE AR 1976-77 TO 1979-80 AND 1991-92 TO 1995-96 HAD DECIDED IN FAVOUR OF THE ASSESSEE FOR THE PROPOSITION THAT EXPENSES INCURRED BY ASSESSEE WERE INDIVISIBLE IN RESPECT TO EXEMPT ACTIVITIES AND OTHER ACTIVITIES. IN THIS RE SPECT, HE INVITED OUR ATTENTION TO AN OFFICE NOTE WRITTEN IN ASSESSMENT YEAR 1996-9 7 AS PLACED IN PAPER BOOK PAGE 7. THEREFORE, IT WAS SUBMITTED THAT REOP ENING ON THE BASIS OF HON'BLE SUPREME COURT DECISION IN THE CASE OF ORISS A STATE WAREHOUSING CORPORATION AS REPORTED IN 237 ITR 589 WAS NOT JUST IFIED AS THE INCOME OF THE ASSESSEE WAS ALREADY BEEN ASSESSED IN ACCORDANC E WITH HON'BLE SUPREME COURT DECISION AND ISSUE OF APPORTIONMENT OF EXPENS ES WAS NOT THERE IN THE SAID HON'BLE SUPREME COURT ORDER. IN VIEW OF ABOVE , IT WAS SUBMITTED THAT THE REOPENING DONE ON THE BASIS OF SUCH HON'BLE SUP REME COURT DECISION WAS A MERE CHANGE IN OPINION. 6. LD. D.R. ON THE OTHER HAND INVITED OUR ATTENTION TO THE OFFICE NOTE AS PLACED IN PAPER BOOK PAGE 7 FOR ASSESSMENT YEAR 199 6-97, AND SUBMITTED THAT THE A.O. HAD JUST FOLLOWED ITAT ORDER FOR NOT SETTING OFF OF EXPENSES FOR DETERMINING THE EXEMPT INCOME U/S 10(29). IT W AS FURTHER SUBMITTED THAT THE DECISION OF HON'BLE SUPREME COURT IN THE CASE O F ORISSA STATE WAREHOUSING CORPORATION 237 ITR 589, HAD DISLODGED THE CLAIM OF THE ASSESSEE REGARDING ALLOWING OF TOTAL EXPENSES AGAIN ST TAXABLE INCOME AS THE HON'BLE SUPREME COURT HAD HELD THAT ASSESSEE WAS EL IGIBLE FOR EXEMPTION FOR WAREHOUSING ACTIVITIES ONLY AND AS THE ASSESSEE WAS NOT DECLARING SEPARATE EXPENSES AGAINST EXEMPT INCOME AND TAXABLE INCOME A ND THEREFORE, THE INCOME OF ASSESSEE TO THE EXTENT OF CLAIM OF EXPENS E RELATING TO EXEMPT ITA NO.2865,2866/DEL/2003 C.O.111 & 112/DEL/2003 7 INCOME HAD ESCAPED ASSESSMENT AND THEREFORE, THE RE OPENING CANNOT BE SAID TO BE ON THE BASIS OF CHANGE OF OPINION. 7. WE HAVE HEARD RIVAL PARTIES AND HAVE GONE THROUG H THE MATERIAL PLACED ON RECORD. THE BRIEF FACTS OF THE CASE ARE THAT TH E ASSESSEE IS A CENTRAL GOVERNMENT UNDERTAKING AND IS ENGAGED IN THE BUSINE SS OF WAREHOUSING AND OTHER ACTIVITIES AND ITS INCOME FROM WAREHOUSING AC TIVITIES IS EXEMPT U/S 10(29) OF THE ACT. THE ASSESSEE WAS BEING ALLOWED EXEMPTION FOR THE EXEMPTED INCOME FROM WAREHOUSING ACTIVITIES ON GROS S BASIS I.E. WITHOUT DEDUCTING THE EXPENSES RELATING TO EXEMPT INCOME AN D SUCH EXEMPTION ON GROSS BASIS WAS BEING ALLOWED TO ASSESSEE ON ACCOUN T OF DECISION OF THE TRIBUNAL IN THE CASE OF THE ASSESSES FOR ASSESSMENT YEAR 1976-77 TO 1979- 1980 AND FROM ASSESSMENT YEAR 1990-91 TO 1995-96 AS THE HONBLE TRIBUNAL HAD HELD THAT EXPENSES OF ASSESSEE WERE IN DIVISIBLE BETWEEN RELATING TO EXEMPT INCOME AND TAXABLE INCOME. THE ASSESSMENT IN THE PRESENT CASE WAS ALSO COMPLETED U/S 143(3) BY FOLLO WING THE ABOVE SAID TRIBUNAL ORDER. THE CASES OF THE ASSESSEE WERE REO PENED IN VIEW OF HON'BLE SUPREME COURT DECISION IN THE CASE OF ORISSA STATE WAREHOUSING CORPORATION VS CIT, 237 ITR 589 WHEREIN HON'BLE SUP REME COURT HAD HELD THAT THE ASSESSEE WAS ELIGIBLE FOR EXEMPTION U/S 10 (29) ONLY IN RESPECT OF WAREHOUSING ACTIVITIES AND WAS NOT ENTITLED FOR EXE MPTION FOR OTHER ACTIVITIES INCOME. TO DECIDE THE ISSUE UNDER APPEAL, FIRST OF ALL LET US HAVE A LOOK AT THE REASONS RECORDED FOR REOPENING OF THE CASES. F OR READY REFERENCE, REASONS RECORDED FOR ASSESSMENT YEAR 1995-96 ARE RE PRODUCED BELOW ON PERUSAL OF ASSESSEES RETURN, IT IS SEEN THAT TH E ASSESSEE HAS CLAIMED EXEMPTION U/S 10(29) AMOUNTING TO RS.151416 8354/- AGAINST THE BOOK PROFIT OF RS.380013987/-. THE RETURN OF I NCOME HAS BEEN COMPUTED AT A LOSS OF RS.1078366678/-. THE ASSESSE E HAS AT THE TIME OF COMPUTATION, SET OFF THE ENTIRE BUSINESS EXPENSE S AGAINST THE ITA NO.2865,2866/DEL/2003 C.O.111 & 112/DEL/2003 8 TAXABLE INCOME OF RS.54910026/-. THE METHOD OF COM PUTATION BEING FOLLOWED BY THE ASSESSEE WAS BASED UPON THE DECISIO N OF THE ITAT C BENCH, DELHI, IN I.T.A. NO. 696, 697, 698 & 699/DEL /1983 FOR ASSESSMENT YEAR 1996-97 TO 1979-80. IN THE SAID DE CISION, THE ITAT HAD HELD THAT AS THE BUSINESS OF THE ASSESSEE WAS I NDIVISIBLE. HENCE, IT WAS NOT CORRECT TO APPORTION THE EXPENSES BETWEEN T HE TAXABLE AND NON TAXABLE RECEIPTS. HENCE, THE ENTIRE EXPENDITUR E CLAIMED BY THE ASSESSEE IN EACH OF THE YEARS UNDER CONSIDERATION WAS DEDUCTIBLE. IT IS NOW GATHERED THAT A SUBSTANTIAL PART OF ASSESSEE S BUSINESS IS WITH REGARD TO HANDLING OF CONTAINER FREIGHT STATIONS AT VARIOUS PORTS IN INDIA. THE ASSESSEE HAS WRONGLY SHOWN THE RECEIPTS FROM THIS BUSINESS AS PART OF RECEIPT FROM WAREHOUSING IN ITS ACCOUNTS, AND CLAIMED EXEMPTION U/S 10(29) ON THE SAME. THE SU PREME COURT IN THE CASE OF ORISSA STATE WAREHOUSING CORPN. VS CIT AND RAJASTHAN WAREHOUSING CORPN. VS CIT (237 ITR 589) (1999) HAS CLEARLY HELD AS UNDER: HAVING DUE REGARD TO THE LANGUAGE USED (IN SECTION 10(29), THE QUESTION OF EXEMPTION WOULD ARISE PERTAINING TO THAT PART OF THE INCOME ONLY WHICH ARISES OR IS DERIVED FROM THE LEADING OF GODOWN OR THE WAREHOUSES AND FOR THE PURPOSES SPECI FIED IN THE SECTION 10(29) OF THE I. T. ACT, 1961 INCOME IS DER IVED FROM ANY OTHER SOURCE THEN AND IN THAT EVENT SUCH AN INCOME CANNOT POSSIBLE COME WITHIN THE AMBIT OF SECTION 10(29). IT IS NOW CLEAR THAT THE ASSESSEE IS HAVING MORE TH AN ONE BUSINESS I.E. WAREHOUSING AND CONTAINER FREIGHT STATIONS. CONSEQ UENTLY, THE COMPUTATION MADE BY THE ASSESSEE, IN THE LIGHT OF I TAT DECISION, IS INCORRECT. THE ASSESSEE HAS THEREFORE, WRONGLY COM PUTED THE TOTAL INCOME BY NOT CORRECTLY DISCLOSING THE FACT THAT IT WAS HAVING A SEPARATE BUSINESS IN THE SHAPE OF CONTAINER FREIGHT STATION. HOWEVER, IN THE LIGHT OF THE ABOVE DECISION OF SUPREME COURT , THE RECEIPT FROM CONTAINER FREIGHT STATION BUSINESS IS NOT ELIGIBLE FOR DEDUCTION U/S 10(29) AS THIS CANNOT BE SAID TO BE RENTAL RECEIPT FROM WAREHOUSING. IT IS ALSO SEEN FROM THE PERUSAL OF 143(3) ORDER DA TED 22.01.98 THAT INCOME AMOUNTING TO RS.248240042/- (54910026+193254 161) HAS ALREADY BEEN TREATED AS NOT EXEMPT U/S 10(29). KEE PING IN VIE THE ABOVE FACT THAT ASSESSEE IS HAVING MORE THAN ONE DI STINGUISHABLE BUSINESS. THE EXPENSES CANNOT BE WHOLLY SET OFF AG AINST THE TAXABLE ITA NO.2865,2866/DEL/2003 C.O.111 & 112/DEL/2003 9 RECEIPT OF RS.248240042/- PLUS THE RECEIPTS FROM CO NTAINER FREIGHT STATIONS WHICH NEEDS TO BE QUANTIFIED. HENCE, I HAVE REASON TO BELIEVE THAT INCOME CHARGEA BLE TO TAX, AMOUNTING TO RS.248240042/- PLUS INCOME FROM CONTAI NER FREIGHT STATION HAS ESCAPED ASSESSMENT ON ACCOUNT OF THE FA ILURE OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY THE MATERIAL F ACT THAT IT WAS HAVING MORE THAN ONE DISTINGUISHABLE BUSINESS DURING THE P REVIOUS YEAR. EVEN OTHERWISE, THE SUPREME COURT IN ITS DECISION, CITED SUPRA, HAS HELD THAT RECEIPTS NOT DERIVED FROM WAREHOUSING WER E TAXABLE, THEREBY IMPLYING THAT EXPENSES WERE TO BE APPORTIONED BETWE EN THE TAXABLE AND THE NON TAXABLE RECEIPTS. 8. FROM THE ABOVE REASONS RECORDED, WE FIND THAT TH E REVENUE HAS REOPENED THE CASES TO DISALLOW THE EXPENSES RELATIN G TO EXEMPT INCOME AS ASSESSEE WAS BEING ALLOWED SET OFF OF ENTIRE BUSINE SS EXPENSES AGAINST TAXABLE INCOME AND FOR DISALLOWANCE OF THESE EXPENS ES, THE REVENUE HAS RELIED UPON HON'BLE SUPREME COURT DECISION IN THE C ASE OF ORISSA STATE WAREHOUSING CORPORATION (SUPRA). 9. THEREFORE, BEFORE WE PROCEED FURTHER, LET US EX AMINE THE CRUX OF HON'BLE SUPREME COURT DECISION IN THE CASE LAW CITE D ABOVE, WHICH IS AS UNDER: ON A PLAIN READING OF SECTION 10(29) OF THE INCOME- TAX ACT, 1961, IT APPEARS THAT THE PRE-REQUISITE ELEMENT FOR THE ENTI TLEMENT AS REGARDS THE CLAIM FOR EXEMPTION IS THE INCOME WHICH IS DERI VED FROM LETTING OUT OF GODOWNS OR WAREHOUSES FOR STORAGE, PROCESSING OR FACILITATING MARKETING OF COMMODITIES AND NOT OTHERWISE. THE LEG ISLATURE HAS BEEN CAREFUL ENOUGH TO INTRODUCE IN THE SECTION ITS ELF, A CLARIFICATION BY USING THE WORDS 'ANY INCOME DERIVED THEREFROM', MEANING THEREBY OBVIOUSLY FOR MARKETING OF COMMODITIES BY LET- TING OUT OF GODOWNS OR WAREHOUSES FOR STORAGE, PROCESSING OR FACILITATING THE SAME. IF THE LETTING OUT OF GODOWNS OR WAREHOUSES IS FOR ANY OTH ER PURPOSE THE QUESTION OF EXEMPTION WOULD NOT ARISE. SECTION 10(2 9) IS CATEGORICAL IN ITS LANGUAGE AND THIS EXEMPTION IS APPLICABLE ON LY IN THE CIRCUMSTANCES AS ENVISAGED UNDER THE SECTION. THE W ORD 'ANY INCOME' ITA NO.2865,2866/DEL/2003 C.O.111 & 112/DEL/2003 10 AS APPEARING IN THE BODY OF THE STATUTE IS RESTRICT IVE IN ITS APPLICATION BY REASON OF THE USER OF THE EXPRESSION 'DERIVED FR OM'. SECTIONS 10(20A), 10(21), 10(22B), AND SECTION 10(27) SHOW T HAT WHEREVER AS A MATTER OF FACT THE LEGISLATURE WANTED AN UNRESTRICT IVE EXEMPTION THE SAME HAS USED 'ANY INCOME' WITHOUT ANY RESTRICTION SO, AS TO MAKE IT EXPLICIT THAT THE ENTIRE INCOME OF THE ASSESSEE WOU LD BE EXEMPT. HAVING DUE REGARD TO THE LANGUAGE USED, THE QUESTIO N OF EXEMPTION WOULD ARISE PERTAINING TO THAT PART OF TH E INCOME ONLY WHICH ARISES OR IS DERIVED FROM THE LETTING OF GODO WNS OR THE WAREHOUSES AND FOR THE PURPOSES SPECIFIED IN SECTIO N 10(29). THE STATUTE HAS BEEN RATHER CATEGORICAL AND RESTRICTIVE IN THE MATTER OF GRANT OF EXEMPTION: STORAGE, PROCESSING OR FACILITA TING THE MARKETING OF THE COMMODITIES ARE DEFINITELY REGARDED AS THREE DIFFERENT FORMS OF ACTIVITIES WHICH ARE ENTITLED TO EXEMPTION IN THE E VENT: OF THERE BEING ANY INCOME THEREFROM. IN THE EVENT THE LETTING OF G ODOWNS OR WAREHOUSES IS FOR ANY OTHER PURPOSE OR IF INCOME IS DERIVED FROM ANY OTHER SOURCE, THEN AND IN THAT EVENT SUCH AN INCOME CANNOT POSSIBLY COME WITHIN THE AMBIT OF SECTION 10(29) OF THE ACT AND IS THUS NOT EXEMPT FROM TAX. A FISCAL STATUTE SHALL HAVE TO BE INTERPRETED ON TH E BASIS OF THE LANGUAGE USED THEREIN AND NOT DE HORS THE SAME. NO WORDS OUGHT TO BE ADDED AND ONLY THE LANGUAGE USED OUGHT TO BE CON SIDERED SO AS TO ASCERTAIN THE PROPER MEANING AND INTENT OF THE LEGI SLATION. THE COURT IS TO ASCRIBE THE NATURAL AND ORDINARY MEANING TO T HE WORDS USED BY THE LEGISLATURE AND THE COURT OUGHT NOT, UNDER ANY CIRCUMSTANCES, SUBSTITUTE ITS OWN IMPRESSION AND IDEAS IN PLACE OF THE LEGISLATIVE INTENT AS IS AVAILABLE FROM A PLAIN READING OF THE STATUTORY PROVISIONS. BY REASON OF THE CLARITY OF EXPRESSION, THE QUESTIO N OF THERE BEING ANY INTEGRATED ACTIVITY BEING EXEMPT WITHIN THE MEANING OF SECTION 10(29) OF THE ACT DOES NOT AND CANNOT ARISE. THE ORISSA STATE WAREHOUSING CORPORATION RECEIVED A SUM OF RS. 1,74,383 AS INTEREST ON FIXED DEPOSITS FOR THE ASSESSMENT YEAR 1983-84 AND SINCE DURING THE RELEVANT PERIOD THE AS SESSEE HAD TO PAY THE TOTAL INTEREST OF RS.1,08,063 TO THE BANKS, A S UM OF RS. 66,320 WAS ADDED TO THE INCOME OF THE ASSESSEE AS THE INCOME-T AX OFFICER WAS OF THE VIEW THAT THE RESULTANT DIFFERENCE OF INCOME BE ING RS. 66,320 COULD NOT BE SAID TO BE AN 'INCOME EXEMPT' WITHIN THE MEA NING OF SECTION 10(29) OF THE ACT. THE COMMISSIONER OF INCOME-TAX ( APPEALS), ORISSA, IN THE APPEAL BY THE ASSESSEE UPHELD THE ORDER OF T HE INCOME-TAX ITA NO.2865,2866/DEL/2003 C.O.111 & 112/DEL/2003 11 OFFICER BUT THE TRIBUNAL ON A FURTHER APPEAL, CAME TO A DIFFERENT CONCLUSION TO THE EFFECT THAT THE INCOME IN QUESTIO N WAS EXEMPT UNDER SECTION 10(29). THE HIGH COURT, HOWEVER, HELD THAT THE INTEREST WAS NOT EXEMPT UNDER SECTION 10(29). THE ASSESSEE APPEALED TO THE SUPREME COURT: HELD, DISMISSING THE APPEAL, THAT THE INTEREST RECE IVED BY THE ASSESSEE FROM BANKS ON FIXED DEPOSITS WAS NOT EXEMP T UNDER SECTION 10(29). HELD ALSO, THAT INCOME DERIVED FROM PROCUREMENT OF GRAIN FOR FCI/STATE GOVERNMENT AND MISCELLANEOUS INCOME ARE N OT EXEMPT UNDER SECTION 10(29). 10. FROM THE ABOVE FINDINGS OF HON'BLE SUPREME COUR T WE FIND THAT DECISION OF THE COURT ENTIRELY GOES TO DETERMINE TH E NATURE OF INCOME EXEMPT U/S 10(29) AND IN NO WAY RELATES TO APPORTIONMENT O F EXPENSES RELATES TO EXEMPT INCOME AND TAXABLE INCOME. 11. THE A.O. IN THE ORIGINAL ASSESSMENT ORDER DATED 22.01.1998 PASSED U/S 143(3) PLACED AT PAPER BOOK PAGES 124-129, WITHOUT THE BENEFIT OF HON'BLE SUPREME COURT DECISION HAD ALLOWED THE ASSESSEE BEN EFIT U/S 10(29) RELATING TO ONLY WAREHOUSING INCOME AND WAREHOUSING INCOME F ROM CFS AND HAS NOT ALLOWED THE CLAIM OF EXEMPT INCOME FROM OTHER BUSIN ESS SUCH AS AGENCY COMMISSION, HANDLING LABOUR, SALE PROCEEDS OF TENDE R DOCUMENTS, INTEREST AND SHORT TERM DEPOSITS ETC. IN THIS RESPECT, THE FINDINGS OF A.O. IN ASSESSMENT YEAR 1995-96 AS CONTAINED VIDE PARA 4 AR E IMPORTANT, WHICH ARE REPRODUCED BELOW: 4. THE PERUSAL OF THE NATURE OF INCOME AS MENTIONE D ABOVE WILL SHOW THAT THESE INCOMES CANNOT BE TREATED AS HAVING BEEN DERIVED FROM THE SOURCES ENUMERATED IN SECTION 10(29). THE WORD DERIVED MEANS THAT THERE SHOULD BE A DIRECT NEXUS BETWEEN T HE INCOME EARNED AND CLAIMED TO BE EXEMPT AND THE INCOME REFERRED TO IN SEC. 10(29). IN VIEW OF THIS, THE AFORESAID INCOME CANNOT BE SAI D TO BE INCOME FROM LETTING OF GODOWNS AND WAREHOUSES, PROCESSING OR FA CILITATING THE ITA NO.2865,2866/DEL/2003 C.O.111 & 112/DEL/2003 12 MARKETING OF COMMODITIES. ACCORDINGLY, ONLY WHERE HOUSING CHARGE AND INCOME FROM PUNJAB SWC (JOINT VENTURE) ARE ALLO WED AND THE REMAINING AMOUNT OF RS.19,32,54,161/- IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 12. SIMILARLY, IN ASSESSMENT YEAR 1996-907, VIDE AS SESSMENT ORDER DATED 19.02.1999, THE A.O. HAD DISALLOWED THE INCOME CLAI MED U/S 10(29) FROM OTHER SOURCES AND THE FINDINGS OF A.O. IN ASSESSMEN T YEAR 1996-97 ARE REPRODUCED BELOW: THE ASSESSEE HAS CLAIMED NON TAXABLE INCOME U/S 10 (29) , OF IT ACT, AMOUNTING RS.199,81,89,123/. UNDER SECTION 10(29) O F IT ACT, INCOME DERIVED. FROM THE WAREHOUSING ACTIVITIES OF THE ASS ESSEE IS EXEMPT FROM INCOME TAX. AS PER DETAILS FILED BY THE ASSESSEE IT WAS SEEN THAT APART FROM WAREHOUSING CHARGES, THE ASSESSEE HAS CLAIMED EXEMP TION U/S 10(29) ON THE FOLLOWING INCOMES ALSO :- SURPLUS OF MARKET FACILITATING SERVICES. RS.19,75 ,90,816/- -DO- RS.10,10,766/- INTEREST ON SHORT TERM-DEPOSITS. RS.10,49,26,1 73/- DESS CHARGES. RS.96,10,777/- FUMIGATION CHARGES RS.48,38,626/- MANAGEMENT CHARGES. RS.1,22,164/- TENDER FEE CHARGES. RS.2,02,504 TOTAL. RS.31,83,01,803/- THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THES E EXPENSES SHOULD NOT BE DISALLOWED IN VIEW OF THE ADDITIONS MADE ON THIS ACCOUNT IN THE EARLIER YEARS. THE ASSESSEE HAS FILED ITS REPLY VIDE LETTER DATED 15.9.98. AFTER GOING THROUGH THE REPLY, I AM DISINCLINED TO AGREE WITH T HE ARGUMENTS GIVEN BY THE ASSESSEE ON THE GROUND THAT DEDUCTION U/S 10(29) IS PERMISSIBLE ONLY ON THE WAREHOUSING ACTIVITIES. THE ABOVE MENTIONED RECEIPT S ARE NOT DERIVED FROM WAREHOUSING BUSINESS OF THE ASSESSEE. THEY CAN ONLY BE INDIRECTLY LINKED TO THE WAREHOUSING ACTIVITIES. THERE IS NO DIRECT NEXUS BETWEEN THE WAREHOUSING AC TIVITIES AND THE ABOVE MENTIONED INCOMES. ON PERUSAL OF THE ORDER FOR ASS ESSMENT YEAR 1995-96, I FIND THAT THESE EXPENSE WERE DISALLOWED IN THAT YEA R. I ALSO FIND THAT THE ITA NO.2865,2866/DEL/2003 C.O.111 & 112/DEL/2003 13 ASSESSEE HAS NOT FILED ANY APPEAL AGAINST THE SAID DISALLOWANCES IN ASSESSMENT YEAR 1995-96. IN FACT, FOR ASSESSMENT Y EAR 1991-92 THE CIT(A) HAS CONFIRMED THE SAID DISALLOWANCES. IN VIEW OF THE ABOVE FACTS OF THE CASE, TOTAL INCO ME/LOSS OF ASSESSEE IS COMPUTED AS UNDER : LOSS AS PER INTIMATION U/S 143(1)(A) (-)RS.114,78 ,34,260/- LESS: INCOME CLAIMED AS EXEMPT U/S 10(29) DISALLOWED, AS DISCUSSED ABOVE. RS.31,83,01,803/ - NET LOSS: (-)RS.82,95,32,457/- 13. FROM THE ABOVE FINDINGS OF A.O. DURING ORIGINAL ASSESSMENT PROCEEDINGS, WE FIND THAT A.O. HAD ALREADY DISALLOW ED THE CLAIM OF THE ASSESSEE U/S 10(29) FOR OTHER BUSINESS AND HAD ALLO WED CLAIM ONLY IN RESPECT OF WAREHOUSING ACTIVITIES AND THEREFORE, WE CONCLUD E THAT EVEN IN THE ABSENCE OF HON'BLE SUPREME COURT DECISION IN THE CA SE OF ORISSA STATE WAREHOUSING CORPORATION (SUPRA), THE A.O. HAD ALREA DY ALLOWED THE CLAIM IN ACCORDANCE WITH HON'BLE SUPREME COURT DECISION. TH EREFORE HON'BLE SUPREME COURT DECISION AS RELIED UPON BY A.O. CANNO T BE SAID TO BE A FRESH MATERIAL FOR REOPENING OF THE CASES AND THE CASES W ERE REOPENED ONLY ON THE BASIS OF CHANGE OF OPINION WHICH IS NOT PERMISSIBLE UNDER LAW AS HELD BY HON'BLE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA LTD. AS REPORTED IN 320 ITR 561 RELIED UPON BY THE ASSESSEE. THE RELEVA NT PORTION IS REPRODUCED BELOW: THE CONCEPT OF CHANGE OF OPINION ALL THE PART OF THE ASSESSING OFFICER TO REOPEN AN ASSESSMENT DOES NOT STAND OBLI TERATED AFTER THE SUBSTITUTION OF SECTION 147 OF THE INCOME-TAX ACT, 1961, BY THE DIRECT TAX LAWS (AMENDMENT) ACTS, 1987 AND 1989. AFTER THE AMENDMENT, THE ASSESSING OFFICER HAS TO HAVE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, BUT THIS DOES NOT IMPLY THAT TH E ASSESSING OFFICER CAN REOPEN AN ASSESSMENT ON MERE CHANGE OF OPINION. THE CONCEPT OF II CHANGE OF OPINION II MUST BE TREATED AS AN IN-BU ILT TEST TO CHECK THE ABUSE OF POWER. HENCE AFTER APRIL I, 1989, THE ASSE SSING OFFICER HAS ITA NO.2865,2866/DEL/2003 C.O.111 & 112/DEL/2003 14 POWER TO REOPEN AN ASSESSMENT, PROVIDED THERE IS 'T ANGIBLE MATERIAL' TO COME TO THE CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASON MUST HAVE A LINK WITH THE FORMAT ION OF THE BELIEF. 14. IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES, WE FI ND MERITS IN THE ARGUMENT OF LD. A.R. THAT THE REOPENING WAS ONLY BE CAUSE OF CHANGE OF OPINION AND THEREFORE, WE QUASH THE ASSESSMENT ORDE RS AND CONSEQUENTLY THE APPEALS FILED BY REVENUE ARE DISMISSED. 15. LD. A.R. HAS NOT PRESSED THE CROSS OBJECTIONS A ND THE SAME ARE DISMISSED AS NOT PRESSED. 16. IN NUTSHELL, APPEALS FILED BY REVENUE AND THE C .O. FILED BY ASSESSEE ARE DISMISSED. 17. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD JAN., 2015. SD./- SD./- ( I. C. SUDHIR) (T.S. KAPOO R) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 23 RD JAN., 2015 SP COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). ITA NO.2865,2866/DEL/2003 C.O.111 & 112/DEL/2003 15 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 6/1 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 7,8,8, SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS 23/1 SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 23/1 SR. PS/PS 7 FILE SENT TO BENCH CLERK 23/1/2015 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER