DCIT, Cir-5(1), Kolkata, Kolkata V. M/s. Coal India Ltd., Kolkata

ITA 638/KOL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 1154 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-03-2020
• Assessment Year: 2008-2009
• Appeal Filed On: 04-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM BILASH MEENA
• Keywords: Invalid notice; Wholly owned subsidiary; Reason to believe; Reassessment proceedings
• Section: 143(3); 274; 48; 147; 148

Judgement Text

1 ITA NO.638/KOL/2017 & CO .38/KOL/2017 COAL INDIA LTD. AY 2008-09 , A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA ( )BEFORE . , /AND . # . $ , ) [BEFORE SHRI J. SUDHAKAR REDDY, AM & SHRI A. T. VAR KEY, JM] I.T.A. NO. 638/KOL/2017 ASSESSMENT YEAR: 2008-09 DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-5(1), KOLKATA VS. M/S. COAL INDIA LTD. (PAN: AABCG3929J) APPELLANT RESPONDENT & C.O. NO. 38/KOL/2017 I.T.A. NO. 638/KOL/2017 ASSESSMENT YEAR: 2008-09 M/S. COAL INDIA LTD. VS DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-5(1), KOLKATA. CROSS OBJECTOR RESPONDENT DATE OF HEARING 03.03.2020 DATE OF PRONOUNCEMENT 29.05.2020 FOR THE APPELLANT REVENUE SHRI RAM BILASH MEENA, CI T, DR FOR THE ASSESSEE CROSS OBJECTOR SHRI HARISH AGARWAL , AR ORDER PER SHRI A.T.VARKEY, JM BOTH THESE APPEAL AND CROSS OBJECTION FILED BY THE REVENUE AND ASSESSEE RESPECTIVELY AGAINST THE ORDER OF LD. CIT(A)-17, KO LKATA DATED 20.12.2016 FOR AY 2008- 09. 2. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT IN THE IMPUGNED ORDER THE LD. CIT(A) HAS GIVEN RELIEF TO THE ASSESSEE BY DECI DING THE APPEAL ON MERITS WHEREAS HE HAS NOT ADJUDICATED THE LEGAL ISSUE IN RESPECT OF T HE VALIDITY OF THE SECOND NOTICE ISSUED BY AO UNDER SECTION 148 OF THE INCOME-TAX ACT, 1961 (H EREINAFTER REFERRED TO AS THE ACT) WITHOUT COMPLETING THE REASSESSMENT AFTER ISSUANCE OF THE FIRST SECTION 148 OF THE ACT 2 ITA NO.638/KOL/2017 & CO .38/KOL/2017 COAL INDIA LTD. AY 2008-09 NOTICE FOR REOPENING. ACCORDING TO LD. COUNSEL, SI NCE THIS LEGAL ISSUE WHICH IS BEING RAISED IF DECIDED IN FAVOUR OF THE ASSESSEE THEN TH E MERITS OF THE APPEAL CHALLENGED BY THE REVENUE BEFORE US WOULD BECOME ACADEMIC IN NATURE. THEREFORE, TAKING INTO CONSIDERATION THE SUBMISSIONS MADE BY THE LD. AR AND AFTER GOING THROUGH THE LEGAL ISSUE RAISED BY THE ASSESSEE, WE NOTE THAT THE ISSUE REGARDING THE LEGA L VALIDITY OF THE ACTION OF AO IN ISSUING THE SECOND NOTICE U/S. 148 OF THE ACT, WHEN THE FIR ST NOTICE ISSUED BY AO U/S. 148 OF THE ACT CONSEQUENT TO WHICH THE ASSESSEE HAVING FILED T HE RETURN, THE AO HAVING NOT PASSED THE REASSESSMENT ORDER, IF FOUND TO BE CORRECT WILL GO TO THE ROOT OF THE MATTER AND, THEREFORE, WE ARE INCLINED TO ACCEPT THE SUBMISSION OF THE LD. AR AND WE WOULD LIKE TO ADJUDICATE FIRST OF ALL THE CROSS OBJECTION OF THE ASSESSEE. 3. GROUND OF APPEAL RAISED BY THE ASSESSEE IN THE C ROSS OBJECTION IS AGAINST THE ACTION OF THE AO IN ISSUING THE SECOND NOTICE U/S. 148 OF THE ACT ON 19.3.2013 WHICH CULMINATED IN THE SECOND REASSESSMENT ORDER DATED 29.03.014[ I MPUGNED ACTION] WHEN THE FACT REMAINS THAT WHILE THE SECOND NOTICE U/S. 148 OF TH E ACT DATED 19.03.2013 WAS ISSUED, THE AO HAD NOT PASSED THE REASSESSMENT ORDER AFTER HAV ING ISSUED THE FIRST NOTICE U/S. 148 OF THE ACT ON 19.10.2011, WHICH CULMINATED IN REASSESS MENT ORDER ONLY ON 25.03.2013. IN OTHER WORDS, THE LEGAL CHALLENGE IS AGAINST THE ISS UE OF SECOND NOTICE U/S. 148 OF THE ACT. AS PER THE ASSESSEE, THE AO HAD ISSUED FOR THIS AY 2008-09 THE FIRST REOPENING NOTICE U/S. 148 OF THE ACT ON 19.10.2011 AND THE AO THEREAFTER WITHOUT FRAMING THE REASSESSMENT PURSUANT TO THE ASSESSEE FILING THE RETURN ON 17.11 .2011, THE AO HAD ISSUED THE SECOND NOTICE U/S. 148 ON 19.03.2013 WHICH ACTION OF AO IS BAD IN LAW. 4. BRIEF FACTS OF THE CASE ARE THAT AS PER THE DECI SION TAKEN BY THE MINISTRY OF COAL, GOVT. OF INDIA, THE ASSESSEE HAD SET UP A SHIFTING AND REHABILITATION FUND FOR THE PURPOSE OF SHIFTING AND REHABILITATION, DEALING WITH FIRE AND STABILIZATION OF THE AREAS UNDER ITS WHOLLY OWNED SUBSIDIARY COMPANIES M/S. EASTERN COALFIELDS LTD. AND M/S. BHARAT COKING COAL LTD. FOR THAT PURPOSE, THE ASSESSEE HAD COLLECTED C ONTRIBUTION FROM THE SUBSIDIARY COMPANIES WHICH WAS UTILIZED AS PER THE ACTION PLA N ORDERED BY MINISTRY OF COAL. THE CONTRIBUTION MADE TOWARDS THE FUND WAS TO THE TUNE OF RS.194.75 CR. WHICH WAS SHOWN IN SCHEDULE C WITH THE AUDITED ACCOUNTS. THE ORIGINAL ASSESSMENT WAS CARRIED OUT UNDER 3 ITA NO.638/KOL/2017 & CO .38/KOL/2017 COAL INDIA LTD. AY 2008-09 SCRUTINY U/S. 143(3) OF THE ACT WAS FRAMED BY THE A O VIDE ORDER DATED 02.12.2010. THEREAFTER, THE AO ISSUED THE FIRST REOPENING NOTIC E U/S. 148 OF THE ACT DATED 19.10.2011 TO THE ASSESSEE, IN RESPONSE TO THE SAME THE ASSESS EE FILED LETTER DATED 17.11.2011 ALONG WITH THE RETURN OF INCOME. THE REASON FOR REOPENIN G WAS THAT THE INTEREST EARNED FOR CONTRIBUTION TO SHIFTING AND REHABILITATION HAS ESC APED ASSESSMENT. 5. WHILE THE FIRST REOPENING NOTICE U/S. 148 OF THE ACT DATED 19.10.2011 WAS PENDING BEFORE HIM, THE AO WITHOUT PASSING THE REASSESSMENT ORDER PURSUANT TO THE FIRST REOPENING DATED 19.10.2011, THE AO ISSUED THE SECOND REOPENIN G NOTICE U/S. 148 OF THE ACT ON 19.03.2013 CITING THE REASON THAT THE CONTRIBUTION FOR SHIFTING AND REHABILITATION FUND OF RS.194.74 CR. WAS DIRECTLY CREDITED BY THE ASSESS EE TO THE BALANCE SHEET INSTEAD OF CREDITING THE P&L ACCOUNT AND ACCORDING TO AO, SIN CE THE ASSESSEE HAS NOT MADE ANY ALLOWABLE EXPENDITURE OUT OF THE SAID FUND THE SAME NEED TO BE TREATED AS INCOME AND ACCORDINGLY, THIS HAS RESULTED IN UNDER-ASSESSMENT OF INCOME. ASSAILING THE ACTION OF AO THE LD. AR SUBMITTED THAT THE SECOND NOTICE U/S. 14 8 OF THE ACT ISSUED ON 19.03.2013 WHICH HAD RESULTED IN FRAMING THE SECOND REASSESSME NT ORDER BY THE AO DATED 29.03.2014 IS A FALL OUT OF AN INVALID NOTICE AND THEREFORE, T HE IMPUGNED ACTION IS VOID. ACCORDING TO LD. AR, THE AO HAD NO JURISDICTION TO ISSUE THE SE COND REOPENING NOTICE U/S. 148 OF THE ACT DATED 19.03.2013 SINCE THE AO HAD NOT PASSED HI S REASSESSMENT ORDER PURSUANT TO THE FIRST REOPENING NOTICE U/S. 148 OF THE ACT DATED 19 .10.2011 WHEREIN THE ASSESSEE HAD FILED THE RETURN OF INCOME ON 17.11.2011. ACCORDING TO T HE LD. COUNSEL, WITHOUT DISPOSING OF THE RETURN OF INCOME FILED IN PURSUANCE OF THE FIRS T NOTICE U/S. 148 OF THE ACT DATED 19.10.2011, THE AO OUGHT NOT TO HAVE ISSUED THE SEC OND NOTICE OF REOPENING U/S. 148 OF THE ACT. FOR THE AFORESAID PROPOSITION OF LAW HE CITED THE DECISION OF THE HONBLE MADRAS HIGH COURT IN A.S.S.P & CO. VS. CIT REPORTED IN (19 88)172 ITR 274 (MAD.) WHEREIN A SIMILAR ISSUE AROSE AND THE HONBLE HIGH COURT WAS PLEASED TO HOLD THAT THE SECOND NOTICE ISSUED FOR REOPENING WHEN THE FIRST NOTICE FOR REOP ENING PURSUANT TO WHICH THE ASSESSEE HAD FILED THE RETURN HAS NOT BEEN DISPOSED OF THEN, THE SECOND NOTICE OF REOPENING COULD NOT HAVE BEEN ISSUED BY THE AO AND, THEREFORE, IT W AS FOUND THAT THE AO HAD NO JURISDICTION TO ISSUE THE SECOND NOTICE AND THE REA SSESSMENT FRAMED PURSUANT TO THE SECOND 4 ITA NO.638/KOL/2017 & CO .38/KOL/2017 COAL INDIA LTD. AY 2008-09 NOTICE WAS QUASHED. THE LD. AR ALSO CITED THE DEC ISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF INDIAN TUBES CO. LTD. VS. ITO (2005) 272 ITR 439(CAL) WHEREIN THE HONBLE HIGH COURT HELD THAT SO LONG AS THOSE RETURNS WERE NOT ASSESSED IN ACCORDANCE WITH LAW, THERE WAS NO SCOPE FOR ISSUING FURTHER NOTICE UNDER SECTION 148. THEREFORE, SECOND NOTICE U/S. 148 OF THE ACT ISSUED BY THE AO WAS QUASHED. THEREFORE, THE LD. AR URGED BEFORE US THAT FRAMING OF REASSESS MENT ORDER DATED 29.03.2014 (SECOND REASSESSMENT ORDER) PURSUANT TO THE SECOND REOPENIN G NOTICE U/S. 148 ISSUED ON 19.03.2013 IS BAD IN LAW AND WITHOUT JURISDICTION AND NEED TO BE QUASHED. 6. PER CONTRA, THE LD. DR CONTENDED THAT THIS ISSUE HAS NOT BEEN CONSIDERED BY THE LD. CIT(A), THEREFORE, THIS ISSUE SHOULD BE REMANDED TO THE FILE OF LD. CIT(A) TO GIVE A DECISION ON IT. HOWEVER, HE SUPPORTED THE ACTION O F THE AO THAT WHEN THE AO FINDS DURING THE REASSESSMENT PROCEEDINGS PURSUANT TO THE FIRST REOPENING NOTICE DATED 19.10.2011 THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, HE HAS ALL AUTHORITY TO ISSUE NOTICE IN RESPECT OF THE ESCAPED INCOME AND, THEREFORE THE SE COND NOTICE U/S. 148 ISSUED ON 19.03.2013 WITHOUT AWAITING THE EVENT OF FRAMING RE ASSESSMENT AFTER REOPENING NOTICE DATED 19.10.2011 WAS ISSUED IS VALID IN THE EYES OF LAW AND NEED NOT BE DISTURBED. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE ASSESSEE IS A PUBLIC SE CTOR UNDERTAKING AND THE ORIGINAL SCRUTINY ASSESSMENT ORDER FOR AY 2008-09 WAS FRAMED UNDER SECTION 143(3) OF THE ACT ON 02.10.2010. THEREAFTER, THE AO ISSUED THE FIRST RE OPENING NOTICE U/S. 148 OF THE ACT DATED 19.10.2011 PURSUANT TO WHICH ASSESSEE DULY FILED TH E RETURN OF INCOME DATED 17.11.2011 WHICH CULMINATED IN FIRST REASSESSMENT ORDER BEING PASSED ON 25.03.2013. BEFORE FRAMING OF THE FIRST REASSESSMENT ORDER DATED 25.03.2013, T HE AO ISSUED THE SECOND REOPENING NOTICE U/S. 148 ON 19.03.2013 WHICH CULMINATED IN T HE FRAMING OF SECOND REASSESSMENT ORDER DATED 29.03.2014 WHICH IS THE IMPUGNED RE-AS SESSMENT ORDER, WHICH WAS CHALLENGED BY THE ASSESSEE BEFORE THE LD. CIT(A) WHO WAS PLEAS ED TO GIVE RELIEF TO THE ASSESSEE ON MERITS AGAINST WHICH THE REVENUE IS IN APPEAL AND T HE ASSESSEE HAS PREFERRED THE CROSS OBJECTION CHALLENGING THE ACTION OF THE LD. CIT(A) IN NOT ADJUDICATING THE LEGAL ISSUE RAISED BY THE ASSESSEE WHICH IS NOW BEING DISCUSSED SUPRA. THE MAIN CONTENTION OF THE 5 ITA NO.638/KOL/2017 & CO .38/KOL/2017 COAL INDIA LTD. AY 2008-09 ASSESSEE IS THAT THE AO AFTER ISSUING THE FIRST REO PENING NOTICE U/S. 148 DATED 19.10.2011 PURSUANT TO WHICH THE ASSESSEE HAD FILED THE RETURN OF INCOME ON 17.11.2011, WITHOUT DISPOSING OF THAT RETURN BY ANY REASSESSMENT ORDER, THE IMPUGNED SECOND NOTICE U/S. 148 OF THE ACT DATED 19.03.2013 WAS INVALID. WE NOTE THAT THE AO HAD ISSUED FIRST REOPENING NOTICE U/S. 148 DATED 19.10.2011 AND WHEN THE REASS ESSMENT PROCEEDINGS WERE PENDING BEFORE THE AO, HE ISSUED THE SECOND REOPENING NOTIC E U/S. 148 DATED 19.03.2013. WE NOTE THAT PURSUANT TO THE FIRST REASSESSMENT NOTICE U/S. 148 DATED 19.10.2011 WHEREIN THE ASSESSEE FILED THE RETURN OF INCOME ON 17.11.2011, THE REASSESSMENT ORDER WAS PASSED ONLY ON 25.03.2013 WHICH MEANS THE RETURN OF INCOME FILE D BY THE ASSESSEE PURSUANT TO THE FIRST NOTICE IS OF REOPENING DATED 19.10.2011 WAS STILL P ENDING BEFORE HIM WHEN HE (AO) ISSUED THE SECOND NOTICE U/S. 148 OF THE ACT ON 19.03.201 3 WHICH WAS UNDISPUTEDLY WITHOUT DISPOSING OF THAT RETURN FILED ON 17.11.2011 BY ANY REASSESSMENT ORDER IS BAD IN LAW AND IS LIABLE TO BE QUASHED AS HELD BY THE HONBLE MADRAS HIGH COURT IN A.S.S.P & CO., SUPRA AND THE HONBLE CALCUTTA HIGH COURT DECISION IN IND IAN TUBE CO. LTD. SUPRA WHEREIN THE HONBLE HIGH COURTS HAVE FOLLOWED THE RATIO LAID BY THE HONBLE SUPREME COURT IN CIT VS. RAMAN CHETTIAR (1965) 55 ITR 630 (SC), WHICH W E WILL DISCUSS INFRA. 8. THUS, WE NOTE THAT SECTION 148 OF THE ACT DOES N OT AUTHORIZE THE AO TO ISSUE FRESH NOTICE WHEN PROCEEDINGS ON A PREVIOUS NOTICE U/S. 1 48 OF THE ACT ARE STILL PENDING AND HAVE NOT BEEN FINALLY DISPOSED OF. SIMILAR VIEW WAS TAKEN BY THE HONBLE ALLAHABAD HIGH COURT IN COMMERCIAL ART PRESS VS. CIT (1978) 115 IT R 876 WHEREIN IT WAS HELD THAT WHEN REASSESSMENT PROCEEDINGS COMMENCE FOLLOWING THE ISS UE OF A NOTICE UNDER SECTION 148 AND THE SAME ARE PENDING, NO FRESH NOTICE CAN BE ISSUED UNDER THE SAME PROVISION. THE HONBLE MADRAS HIGH COURT WHILE DISPOSING OF THE OR DER IN A.S.S.P. & CO. (SUPRA) OBSERVED THAT THERE COULD ALSO BE NO DISPUTE THAT A FTER THE REASSESSMENT ORDER IS MADE IN PURSUANCE OF THE FIRST NOTICE ISSUED UNDER SECTION 148, IF THE ITO HAS ANY REASON TO BELIEVE THAT THERE IS ANY ESCAPEMENT OF THE INCOME WHICH WI LL BE COVERED UNDER SECTION 147 OF THE ACT, HE CAN ISSUE FRESH PROCEEDINGS WITH REFERENCE TO THE ASSESSMENT ORDER ALREADY MADE IN PURSUANCE OF THE NOTICE UNDER SECTION 148 AND IN TH AT WAY HE CAN MAKE ANY NUMBER OF TIMES REVISED ORDER BUT THAT CANNOT AFFECT THE POSI TION THAT WHEN A RETURN HAS BEEN MADE IN 6 ITA NO.638/KOL/2017 & CO .38/KOL/2017 COAL INDIA LTD. AY 2008-09 PURSUANCE OF THE NOTICE UNDER SECTION 148, TILL THA T RETURN IS DISPOSED OF BY ANY ASSESSMENT ORDER OR REASSESSMENT ORDER, NO FURTHER NOTICE CAN BE ISSUED UNDER SECTION 148 OF THE ACT. 9. IT IS NOTED THAT THE HONBLE CALCUTTA HIGH COURT HAS RELIED ON THE ORDER OF THE HONBLE SUPREME COURT IN THE CASE OF S. RAMAN CHETT IAR (SUPRA). THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF INDIAN TUBE CO. LTD. (SUP RA) HAD FRAMED THE QUESTION AS UNDER: THE ONLY QUESTION THAT ARISES FOR DETERMINATION, THEREFORE, IN THIS WRIT APPLICATION IS WHETHER THE INCOME TAX OFFICER COULD INITIATE FRESH PROCEEDING UNDER SECTION 148 OF THE ACT ON MARCH 29, 1983, WHEN PURSUANT TO THE EARLIER INV ALID NOTICE DATED FEBRUARY 11, 1983, THE PETITIONER HAD ALREADY SUBMITTED THE RETURNS. AND AFTER REFERRING TO THE DECISION OF THE HONBLE SUPREME COURT IN S. RAMAN CHETTIAR (SUPRA), THE HONBLE CALCUTTA HIGH COURT HAS HELD A S UNDER: APPLYING THE AFORESAID PRINCIPLES TO THE FACTS OF T HE CASE, IT IS CLEAR THAT WHEN THE PETITIONER FILED RETURNS IN COMPLIANCE WITH THE INVALID NOTICE DATED FEBRUARY 11,1983, UNDER SECTION 148 OF THE 1961 ACT, THOSE RETURNS SHOULD BE TREATE D AS RETURNS AND AS SUCH BEFORE MAKING ASSESSMENT ON THE BASIS OF THOSE RETURNS, NO FURTHE R NOTICE UNDER SECTION 148 OF THE ACT COULD BE PASSED. 10. THEREFORE, WE FIND FORCE IN THE CONTENTION OF T HE LD. AR OF THE ASSESSEE THAT THE SECOND NOTICE U/S. 148 WITHOUT DISPOSING OF THE RET URN FILED PURSUANT TO THE FIRST REOPENING NOTICE DATED 19.10.2011 IS INVALID AND, THEREFORE, ALL THE CONSEQUENTIAL ACTION WHICH HAS CULMINATED IN THE ASSESSMENT ORDER DATED 29.03.2014 IS NULL IN THE EYES OF LAW AND RESULTANTLY VOID, THEREFORE, IS QUASHED. SINCE THE LEGAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE, THE REVENUE APPEAL AGAINST THE DECISI ON OF THE LD. CIT(A) WHO WAS GIVEN RELIEF TO THE ASSESSEE ON MERITS BECOME ACADEMIC AN D, THEREFORE, DISMISSED. 11. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISS ED AND THE CROSS OBJECTION OF ASSESSEE IS ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 29TH MAY, 2020 SD/- SD/- (J. SUDHAKAR REDDY) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 29TH MAY, 2020 JD.(SR.P.S.) 7 ITA NO.638/KOL/2017 & CO .38/KOL/2017 COAL INDIA LTD. AY 2008-09 COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT DCIT, CIRCLE-5(1), KOLKATA. 2 RESPONDENT M/S. COAL INDIA LTD., 10, N. S. ROAD, KOLKATA-700 001. 3 . THE CIT(A)-17, KOLKATA(SENT THROUGH E-MAIL) 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .