The Asstt. Commissioner of Income Tax, Pathankot V. M/s Gurdaspur Co-op. Sugar Mills Ltd., Gurdaspur

ITA 639/ASR/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7806 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 09-08-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 11-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PADAM BAHL
• Keywords: Reopening of assessment; Difference of opinion; Revised return; Reason to believe; Change of opinion
• Section: 43B; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. T. S. KAPOOR, ACCOUNTANT MEMBER AND SH. N.K. CHOUDHRY, JUDICIAL MEMBER I.T.A NO. 639/(ASR)/2015 ASSESSMENT YEAR: 2008-09 PAN: AAAAT0586H ASSTT. C. I. T., CIRCLE-VI, PATHANKOT VS. M/S. THE GURDASPUR CO-OP. SUGAR MILLS LTD., VILL. PANIAR, GURDASPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SH. RAHUL DHAWAN (D. R.) RESPONDENT BY: SH. PADAM BAHL (C. A.) DATE OF HEARING: 09.08.2017 DATE OF PRONOUNCEMENT: 15.09.201 7 ORDER PER T. S. KAPOOR (AM): THIS IS AN APPEAL FILED BY REVENUE AGAINST THE ORDE R OF LD. CIT(A), AMRITSAR DATED 23.09.2015 FOR ASST. YEAR: 2008-09. 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF A PPEAL: 1. WHETHER, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-II, AMRITSAR HAS DELETED THE ADDITION OF RS.2,88,02,795/- AND RS.68,18,000/- ON THE GROUND T HAT THE RDF IS NOT COVERED U/S 43B OF THE INCOME TAX ACT, 1 961. HOWEVER, THE FACT IS THAT THE RDF IS ESTABLISHED UN DER THE ACT (RURAL DEVELOPMENT ACT, 1987) OF THE GOVERNMENT OF PUNJAB. ACTUAL PAYMENT AS MENTIONED IN THIS SECTION IS INTENDED TO COVER PAYMENTS TO GOVERNMENT. APPEAL ON THIS ISSUE ALREADY PENDING BEFORE THE HON'BLE HIGH COURT FOR THE ASSESSMENT YEAR 2007-08. 2. ON THE FACTS AND LAW, THE LD. CIT(A)-II, AMRITSAR HAS ERRED IN QUASHING THE ASSESSMENT REOPENED U/S 148. 3. APPELLANT CRAVES LEAVE TO AMEND OR ADD ANY OR MO RE GROUNDS OF APPEAL. ITA NO. 639(ASR)/2015 ASSESSMENT YEAR: 2008-09 2 3. AT THE OUTSET, THE LD. DR SUBMITTED THAT LD. CI T(A) HAS WRONGLY DELETED THE ADDITIONS WHICH THE ASSESSING OFFICER H AD MADE ON ACCOUNT OF EARLIER YEAR INTEREST ON RURAL DEVELOPMENT FUND. THE LD. DR SUBMITTED THAT LD. CIT(A) HAS WRONGLY HELD THAT RDF WAS NOT COVERED UNDER THE PROVISIONS OF SECTION 43B OF THE ACT WHER EAS THE FACT REMAINS THAT RDF WAS ESTABLISHED UNDER THE RURAL DEVELOPMEN T ACT, 1987 OF THE GOVERNMENT OF PUNJAB AND ACTUAL PAYMENTS AS MENTION ED IN THIS SECTION ARE INTENDED TO COVER PAYMENTS TO GOVERNMENT ALSO. 4. THE LD. DR FURTHER SUBMITTED THAT THE LD. CIT(A) HAD QUASHED THE ASSESSMENT ORDER WHICH WAS REOPENED UNDER THE PROVI SIONS OF SECTION 148 OF THE ACT BY HOLDING THAT THE ASSESSING OFFICE R HAD ALREADY APPLIED HIS MIND AND THERE WAS NO FAILURE ON THE PART OF AS SESSEE TO DISCLOSE ALL THE MATERIAL FACT. THE LD. DR SUBMITTED THAT THE LD . CIT(A) SHOULD NOT HAVE QUASHED THE ASSESSMENT ORDER AS THE INCOME OF ASSESSEE HAD ESCAPED ASSESSMENT ON THE BASIS OF AUDIT REPORT. RE LIANCE IN THIS RESPECT WAS PLACED ON THE FOLLOWING CASE LAWS: (I) COMMISSIONER OF INCOME TAX VS. P.V.S. BEEDIES ( P) LTD. 237 ITR 0013 SUPREME COURT OF INDIA. (II) HARYANA AGRO INDUSTRIES CORPORATION LTD. VS. C OMMISSIONER OF INCOME TAX PUNJAB & HARYANA HIGH COURT. 5. THE LD. DR SUBMITTED THAT HON'BLE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. P.V.S. BEEDIES HAS C LEARLY HELD THAT ITA NO. 639(ASR)/2015 ASSESSMENT YEAR: 2008-09 3 REOPENING OF ASSESSMENT WAS POSSIBLE ON THE BASIS O F A FACTUAL ERROR WHICH HAD ESCAPED DURING THE ORIGINAL ASSESSMENT PR OCEEDINGS. 6. THE LD. AR ON THE OTHER HAND SUBMITTED THAT IN T HE CASE OF ASSESSEE ITSELF, THE PUNJAB & HARYANA HIGH COURT HA S HELD THAT THE INTEREST ON RDF WAS NOT COVERED UNDER THE PROVISION S OF 43B OF THE ACT AND THEREFORE ON MERITS THE ADDITION MADE BY ASSESS ING OFFICER WAS NOT SUSTAINABLE. AS REGARDS THE QUASHING OF ASSESSMENT, THE LD. AR SUBMITTED THAT IN THE CASE LAWS RELIED ON BY LD. DR, THERE WAS DIF FERENT ISSUE AND IN WHICH THE ASSESSMENTS WERE REOPENED ON THE BASIS OF MATERIAL POINTED OUT BY INTERNAL AUDIT PARTY OF THE DEPARTMENT WHERE AS IN THE PRESENT CASE, THERE WAS NO OBJECTION POINTED OUT BY INTERNA L AUDIT TEAM OF THE DEPARTMENT AND THEREFORE THESE CASE LAWS ARE NOT AP PLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE AS IN THE PRESENT CAS E ALL THE MATERIAL FACTS RELATING TO INTEREST ON RDF WERE EXAMINED BY ASSESSING OFFICER DURING ORIGINAL ASSESSMENT PROCEEDINGS AND AFTER CO NSIDERING THESE FACTS, ASSESSING OFFICER HAD NOT DISALLOWED ANY INTEREST. 7. THE LD. AR SUBMITTED THAT REASONS FOR REOPENING ARE PLACED IN P.B. PAGE 2 WHICH CLEARLY DEMONSTRATE THAT NO FRESH MATE RIAL HAD COME INTO THE POSSESSION OF ASSESSING OFFICER AND ALL THE MAT ERIAL FACTS WERE ALREADY AVAILABLE IN THE RETURN OF INCOME AND COMPU TATION OF INCOME ITSELF. THE LD. AR FURTHER SUBMITTED THAT THE ASSES SEE DURING ORIGINAL ASSESSMENT PROCEEDINGS HAD GIVEN DETAILS OF INTERES T ACCRUED ON SECURED ITA NO. 639(ASR)/2015 ASSESSMENT YEAR: 2008-09 4 LOANS AND TEMPORARY LOAN AND A COPY OF REPLY WAS PL ACED AT P.B. PAGE 43 AND AFTER CONSIDERING REPLY OF ASSESSEE, THE ASSESS ING OFFICER HAD NOTED IN PARA 7 THAT DETAIL OF INTEREST PAID AND INTEREST RECEIVED HAS BEEN OBTAINED AND NO ADVERSE INFERENCE IS CALLED FOR. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, THE LD. AR SUBMITTED THAT ASSESSING OFFICER HAD APPLIED HIS MIND IN THE ORIGINAL ASSESSMENT PROCEEDINGS AND THE REOPENING WAS NOT PERMITTED UNDER THESE CIRCUMSTANCES. RELIANCE I N THIS RESPECT WAS PLACED ON THE FOLLOWING CASE LAWS: (I) TECHSPAN INDIA PVT. LTD. VS. ITO 283 ITR 212 ( DEL.). (II) GERMAN REMEDIES LTD. VS. DEPUTY COMMISSIONER O F INCOME TAX 285 ITR 26 (BOM.) (III) COMMISSIONER OF INCOME TAX VS. CORPORATION BA NK LTD. 254 ITR 791 (SC). (IV) COMMISSIONER OF INCOME TAX VS. KELVINATOR OF I NDIA LTD. 320 ITR 561 (SC). (V) ICICI PRUDENTIAL LIFE INSURANCE CO. LTD. VS. AS SISTANT COMMISSIONER OF INCOME TAX 325 ITR 471 (BOM.) (VI) COMMISSIONER OF INCOME TAX VS. USHA INTERNATIO NAL LTD. 210 TAXMAN 188 (DELHI.). 8. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH OUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE LD. CIT(A) HAS N OT DECIDED THE ISSUE ON MERITS AND HAS QUASHED THE ASSESSMENT ORDER, THE REFORE THE FIRST GROUND TAKEN BY REVENUE IS NOT COMING OUT IF THE OR DER OF LD. CIT(A) AS HE HAS NOT DELETED THE ADDITIONS ON MERITS AND THER EFORE GROUND NO. 1 OF THE APPEAL IS DISMISSED. ITA NO. 639(ASR)/2015 ASSESSMENT YEAR: 2008-09 5 AS REGARDS GROUND NO. 2 RELATING TO QUASHING OF AS SESSMENT, WE FIND THAT ASSESSING OFFICER DURING ASSESSMENT PROCE EDINGS VIDE PARA 7 HAS NOTED AS UNDER: 7. DETAIL OF REGARDING STOCK FINISHED GOODS, RAW M ATERIAL AND PACKING MATERIAL QUANTITIES WISE AND PRICE WISE HAS BEEN RE CEIVED. DETAIL OF THE MEMBER OF THE CO-OP SOCIETY HAS BEEN OBTAINED. DETA IL OF INTEREST PAID AND INTEREST RECEIVED HAVE BEEN OBTAINED. NO ADVERSE IN FERENCE IS CALLED FOR. WE FURTHER FIND THAT ASSESSEE IN THE COMPUTATION O F INCOME PLACED AT P.B. PAGE 33 ITSELF HAS CLAIMED INTEREST ON RDF LOAN OF PREVIOUS YEAR AND CURRENT YEAR. THIS COMPUTATION OF INCOME WAS AV AILABLE WITH THE ASSESSING OFFICER DURING ORIGINAL ASSESSMENT PROCEE DINGS. WE FURTHER FIND THAT DURING ASSESSMENT PROCEEDINGS THE ASSESSE E ON A QUERY FROM ASSESSING OFFICER HAD REPLIED TO THE QUERY RELATING TO INTEREST ACCRUED AND DUE ON SECURED LOANS, A COPY OF THE SAID REPLY IS PLACED AT P.B. PAGE 43. THEREFORE FROM THE ABOVE IT IS APPARENT THAT DU RING ORIGINAL ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAD C OMPLETELY APPLIED HIS MIND. FROM THE COPY OF REASONS RECORDED PLACED AT P.B. PAGE 2, WE FIND THAT THE ASSESSING OFFICER FROM THE COMPUTATIO N OF INCOME FILED BY ASSESSEE DURING ORIGINAL ASSESSMENT PROCEEDINGS HAD OBSERVED THAT THE INCOMES HAD ESCAPED ASSESSMENT. RELEVANT REASONS RE CORDED BY ASSESSING OFFICER ARE REPRODUCED BELOW: THE ASSESSMENT WAS COMPLETED U/SL43(3) AT LOSS OF RS.1,48,37,959/- AND AGRICULTURE INCOME RS.1,35,44 7/-. HOWEVER, IN THE COMPUTATION SHEET FILED ALONGWITH REVISED RETURN ON 29/09/2009, THE ASSESSEE HAS CLAIMED EXPENSES ON INTEREST PAID ON R DF LOAN OF PREVIOUS YEAR OF RS.2,88,02,795/-. THE AUDIT HAS CERTIFIED T HAT (MENTIONED ALONG WITH BALANCE SHEET AND PROFIT AND LOSS ACCOUNT VIDE POINT 3). THE MILLS HAS NOT ACCOUNTED FOR INTEREST ON RDF LOAN AMOUNTIN G TO RS.2,88,02,795/- ON REQUIRED VIDE LETTER NO. PFSA- 04/RDF/90/3046 DA TED 25/08/2006 ITA NO. 639(ASR)/2015 ASSESSMENT YEAR: 2008-09 6 WHEREIN PUNJAB GOVERNMENT HAS DECIDED INTEREST THE CHARGED @ 7% P.A.) AS THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF A CCOUNTING INTEREST SHOULD HAS BEEN CLAIMED IN THE RESPECTIVE FINANCIAL YEAR 2006-07 RELEVANT TO ASSESSMENT YEAR 2007-08. THE EARLIER YEAR EXPENS ES AMOUNTING TO RS.2,88,02,795/- CLAIMED IN THE CURRENT YELLF AS IT HAS NQF BEEN ACCRUED IN THIS CURRENT FINANCIAL YEAR. THIS RS.2,88,02,795/- HAS ESCAPED ASSESSMENT. IN THE COMPUTATION SHEET FILED ALONGWITH REVISED RE TURN ON 29/09/2009, THE ASSESSEE HAS ALSO CLAIMED EXPENSES OF INTEREST PAID ON RDF LOAN OF CURRENT YEAR OF RS.68,18,000/-. THERE I S NO EVIDENCE OH RECORD TO PROVE THAT THE PAYMENT OF INTEREST WAS MADE IN T HE FINANCIAL YEAR UNDER CONSIDERATION. HENCE, RS.68,18,000/- HAS ESCA PED ASSESSMENT. THE ABOVE REASONS DO NOT DISCLOSE THAT THE ASSESSI NG OFFICER HAD MADE HIS OPINION REGARDING ESCAPEMENT OF INCOME ON THE BASIS OF OBJECTION BY SOME AUDIT TEAM OF DEPARTMENT AND HE H AS FORMED HIS BELIEF ON THE BASIS OF HIS COMPUTATION SHEETS WHICH WERE A LREADY AVAILABLE WITH THE ASSESSING OFFICER DURING ORIGINAL ASSESSMENT PR OCEEDINGS ON WHICH THE AUDITORS OF THE ASSESSEE HAD COMMENTED REGARDIN G INTEREST. THEREFORE THIS IS A CASE OF CHANGE OF OPINION WHICH IS NOT PE RMISSIBLE UNDER THE PROVISIONS OF LAW AS HELD BY VARIOUS COURTS. THE HO N'BLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. 320 ITR 0561 HAS HELD AS UNDER: PRIOR TO DIRECT TAX LAWS (AMENDMENT) ACT, 1987, RE OPENING COULD BE DONE UNDER TWO CONDITIONS AND FULFILLMENT OF THE SAID CO NDITIONS ALONE CONFERRED JURISDICTION ON THE AO TO MAKE A BACK ASSESSMENT, B UT IN S. 147 (W.E.F. 1ST APRIL, 1989), THEY ARE GIVEN A GO BY AND ONLY ONE C ONDITION HAS REMAINED, VIZ., THAT WHERE THE AO HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, CONFERS JURISDICTION TO REOPEN THE ASSE SSMENT. THEREFORE, POST 1ST APRIL, 1989, POWER TO REOPEN IS MUCH WIDER. HOW EVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS 'REASO N TO BELIEVE' FAILING WHICH, S. 147 WOULD GIVE ARBITRARY POWERS TO THE AO TO REOPEN ASSESSMENTS ON THE BASIS OF 'MERE CHANGE OF OPINION ', WHICH CANNOT BE PER SE REASON TO REOPEN. THE CONCEPTUAL DIFFERENCE BETW EEN POWER TO REVIEW AND POWER TO REASSESS SHOULD ALSO TO BE KEPT IN MIN D. THE AO HAS NO POWER TO REVIEW; HE HAS THE POWER TO REASSESS. BUT REASSESSMENT HAS TO BE BASED ON FULFILLMENT OF CERTAIN PRE-CONDITION AN D IF THE CONCEPT OF 'CHANGE OF OPINION' IS REMOVED, AS CONTENDED ON BEH ALF OF THE DEPARTMENT, ITA NO. 639(ASR)/2015 ASSESSMENT YEAR: 2008-09 7 THEN, IN THE GARB OF REOPENING THE ASSESSMENT, REVI EW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF 'CHANGE OF OPINION' A S AN IN-BUILT TEST TO CHECK ABUSE OF POWER BY THE AO. HENCE, AFTER 1ST AP RIL, 1989, AO HAS POWER TO REOPEN, PROVIDED THERE IS 'TANGIBLE MATERI AL' TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BEL IEF. UNDER THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, PARLIAMENT NOT ONLY DEL ETED THE WORDS 'REASON TO BELIEVE' BUT ALSO INSERTED THE WORD 'OPI NION' IN S. 147. HOWEVER, ON RECEIPT OF REPRESENTATIONS FROM THE COMPANIES AG AINST OMISSION OF THE WORDS 'REASON TO BELIEVE', PARLIAMENT REINTRODUCED THE SAID EXPRESSION AND DELETED THE WORD 'OPINION' ON THE GROUND THAT IT WO ULD VEST ARBITRARY POWERS IN THE AO. APPEALS ARE THEREFORE DISMISSEDC IT VS. KALVINATOR OF INDIA LTD. (2002) 174 CTR (DEL)(FB) 617 AND CIT VS. EICHER LT D. (2007) 213 CTR (DEL) 57 AFFIRMED. THE ABOVE ORDER OF HON'BLE SUPREME COURT CLEARLY L AYS DOWN THE LAW THAT ASSESSING OFFICER IS NOT PERMITTED TO REOP EN A CASE ON THE BASIS OF CHANGE OF OPINION. IN THE PRESENT CASE, THERE IS NO FRESH MATERIAL AND INSTEAD OF IT IS CASE OF CHANGE OF OPINION WHICH IS NOT PERMITTED AS PER THE ABOVE SAID CASE LAW AND AS PER VARIOUS CASE LAW S RELIED ON BY LD. AR. 9. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDERS OF LD. CIT(A), THEREFORE GR OUND NO. 2 IS ALSO DISMISSED. 10. IN NUTSHELL, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15.09.2017 SD/- SD/- (N. K. CHOUDHRY) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 15.09.2017. /GP/SR. PS . COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, ITA NO. 639(ASR)/2015 ASSESSMENT YEAR: 2008-09 8 (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER