DCIT CC-2(1), CHENNAI V. M/S FUSO GLASS INDIA (P) LIMITED, CHENNAI

ITA 966/CHNY/2020

AI Insights

The case involves an appeal by the Revenue against the order of the Commissioner of Income Tax (Appeals)-6, Chennai, which had deleted the disallowance of interest made by the Assessing Officer (AO) under section 37(1) of the Income Tax Act, 1961. The appeal was initially barred by limitation but was admitted following the Supreme Court's directions to condone delays due to the COVID-19 pandemic. The main contention in the appeal was the validity of the reassessment under sections 147 and 148 of the Act, which the CIT(A) had annulled on the grounds that there was no failure on the part of the assessee to disclose material facts necessary for the assessment. The Revenue argued that the CIT(A) erred in law by not appreciating the applicability of Explanation 1 to section 147, which pertains to the non-disclosure of material facts by the assessee. The CIT(A)'s decision was challenged on the grounds that the reassessment was based on an audit objection without an independent application of mind by the AO.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134866 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 08-05-2023
• Assessment Year: 2008-2009
• Appeal Filed On: 07-12-2020
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Audit objection; Bad and doubtful debts; Reason to believe
• Section: 147

Judgement Text

आयकर अपीलीय अिधकरण, ‘ए’ ᭠यायपीठ,चे᳖ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI ᮰ी महावीर ᳲसह, उपा᭟यᭃ एवं ᮰ी मंजुनाथ. जी, लेखा सद᭭य के समᭃ BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENTAND SHRI MANJUNATHA.G, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.: 966/CHNY/2020 िनधाᭅरण वषᭅ/Assessment Year: 2008-09 The DCIT, Corporate Circle – 2(1), Chennai – 34. vs. M/s. Fuso Glass India (P) Ltd., No.91, P.H. Road, Chennai – 600 084. PAN: AABCM 9798H (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮ कᳱ ओर से/Appellant by : Shri AR.V. Sreenivasan, Addl.CIT ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Shri I. Dinesh, Advocate सुनवाई कᳱ तारीख/Date of Hearing : 09.05.2023 घोषणा कᳱ तारीख/Date of Pronouncement : 09.05.2023 आदेश /O R D E R PER MAHAVIR SINGH, VICE PRESIDENT: This appeal by the Revenue is arising out of the order of the Commissioner of Income Tax (Appeals)-6, Chennai in ITA No.183/CIT(A)-6/2013-14 dated 23.03.2020. The assessment was framed by the ACIT, Company Circle IV(4), Chennai for the assessment year 2008-09 u/s.144 r.w.s.148 of the Income Tax Act, 1961 (hereinafter the ‘Act’), vide order dated 29.11.2013. 2 ITA No. 966/Chny/2020 2. At the outset, it is noticed that this appeal by Revenue is barred by limitation by 120 days. The Revenue received the impugned appellate order on 12.06.2020 and appeal was to be filed on or before 12.08.2020 but actually it was filed on 08.12.2020 thereby there was a delay of 120 days. The ld.DR stated that this delay is due to pandemic period of Covid 19 and subsequent events and the Hon’ble Supreme Court in Miscellaneous Application No.665 of 2021 vide order dated 23.03.2020 has given directions that the delay are to be condoned during this period 15.03.2020 to 14.03.2021 and they have condoned the delay up to 28.02.2022 in Miscellaneous Application No.21 of 2022 vide order dated 10.01.2022. Since the Hon’ble Supreme Court has condoned the delay during the said period, respectfully following the same we condone the delay and admit the appeal. 3. The only issue in this appeal of Revenue is as regards to the order of CIT(A) deleting the disallowance made by AO being disallowance of interest u/s.37(1) of the Act. 4. At the outset, the ld. Senior DR pointed out that the CIT(A) has quashed the reassessment i.e., reopening of assessment u/s.147 r.w.s. 148 of the Act for the reason that there is no failure on the part of the assessee to disclose fully and truly all material 3 ITA No. 966/Chny/2020 facts for completion of assessment for the relevant assessment year. He drew our attention to the finding recorded by CIT(A) which reads as under:- “Respectfully following the above decisions, I am of the considered view that inasmuch as there was no failure on the part of the appellant to disclose fully and truly all facts necessary for assessment, the invocation of section 147 is bad in law and the impugned assessment is therefore annulled. This ground of appeal is allowed.” The ld.Senior DR then took us through the additional grounds raised by Revenue for quashing of reopening of assessment which reads as under:- “2.1. The Ld.CIT(A) erred in holding that the re-assessment proceedings were invalid as there was no failure on the part of the assessee to disclose fully all material facts necessary for making the assessment without appreciating the fact that the Explanation 1 below the proviso to section 147 is applicable to the facts of the case of the assessee. 2.2 The Ld.CIT(A) failed to take into account Explanation 1 of section 147 which makes it clear that production before the Assessing Officer of books of account or other evidence from which material evidence could with due diligence have been discovered by the AO will not necessarily amount to disclosure.” The ld. Senior DR stated that the assessment year involved is AY 2008-09 and notice for reopening u/s.148 of the Act dated 19.03.2013 was issued to the assessee, which is within four years from the end of the relevant assessment year and hence, the proviso to section 147 of the Act i.e., there is failure on the part of the assessee to disclose fully and truly all facts necessary for assessment will not apply, which is the basis of CIT(A) order. 4 ITA No. 966/Chny/2020 Hence, he requested that order of CIT(A) be reversed and matter be remanded back to the file of the CIT(A) for adjudication on merits. 5. In reply, the ld.counsel for the assessee Shri I. Dinesh filed memo on behalf of respondent assessee and raised the issue of proviso u/s.151 of the Act as well as that no reason to believe for reopening of assessment is there and the reopening is merely on the basis of audit objection. Hence, these two facets of reopening was not adjudicated by CIT(A). He requested that these two facets also needs to be adjudicated. For this, he supported the order of CIT(A) on following grounds:- Approval u/s.151 of the Act defective: 6. The notice u/s. 148 of the Act dated 19.03.2013 is inherently defective and thus void ab-initio. The AO had obtained approval of the Commissioner of Income whereas section 151 of the Act mandates that the said approval was to be obtained only from the Joint Commissioner of Income Tax. 7. The notice u/s.148 of the Act and the consequential reassessment order is illegal and the reopening has been rightly quashed by the ClT(A). No reason to believe: 8. The CIT(A) further erred in upholding the reopening of the assessment as the same had been done by the A0 merely on the receipt of Audit Objection without independent application of mind. Reopening based on borrowed satisfaction without any application of mind is unsustainable in law and the CIT(A) ought to have quashed the same on this count also. 9. The absence of reason to believe on the part of the AO is further evidenced by the facts that: a. There is no communication from the AO accepting the Revenue Audit Objection, and b. In the remand report dated 28.01.2019 the AO has accepted that the disallowance of interest cannot be sustained in full and disallowance of bad debts can only be sustained to the extent of Rs.58,05,327/-., 5 ITA No. 966/Chny/2020 6. Both, ld.counsel for the assessee as well as the ld. Senior DR agreed that in any case after setting-aside of CIT(A)’s order, matter has to be remanded back to the file of the CIT(A) for adjudication on the balance two issues of reopening i.e., reason to believe as well as sanction u/s.151 of the Act and also on merits in case reopening is held to be valid. In term of the above, we agree with the plea of both the sides and hence, set-aside the order of CIT(A) and remand the matter back to the file of the CIT(A) for fresh adjudication on merits as well as on reopening on the basis of reason to believe as well as sanction u/s.151 of the Act. In term of the above, appeal of the Revenue is set aside and allowed for statistical purposes. 7. In the result, the appeal filed by the Revenue is allowed for statistical purposes. Order pronounced in the open court on 9 th May, 2023 at Chennai. Sd/- Sd/- (मंजुनाथ. जी) (MANJUNATHA.G) लेखा सद᭭य/ACCOUNTANT MEMBER (महावीर ᳲसह ) (MAHAVIR SINGH) उपा᭟यᭃ /VICE PRESIDENT चे᳖ई/Chennai, ᳰदनांक/Dated, the 9 th May, 2023 RSR आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy to: 1. अपीलाथᱮ/Appellant 2. ᮧ᭜यथᱮ/Respondent 3. आयकरआयुᲦ /CIT 4. िवभागीय ᮧितिनिध/DR 5. गाडᭅ फाईल/GF.