M/S.MALLIKARJUNA RICE INDUSTRIES V. THE INCOME TAX OFFICER

ITTA/128/2006

AI Insights

The case revolves around the reopening of an income tax assessment for the assessment year 1998-99 concerning Mallikarjuna Rice Industries. Initially, the assessment was completed under Section 143(3) of the Income Tax Act, 1961, and later reopened under Section 148 based on the assessing officer's change of opinion regarding the treatment of Rural Development Cess (RDC) as income. The appellant contested the reopening, arguing that all material facts were disclosed during the original assessment, and the RDC should not be treated as income. The Income Tax Appellate Tribunal upheld the reopening, leading to the appeal in the High Court of Telangana.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 753043 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 15-02-2023
• Assessment Year: misc
• Other Referred Cases: CIT v. Kelvinator of India Ltd, Dhanodhar L. Shah v. Asst. CIT
• Laws Referred To: Income Tax Act, 1961, Rural Development Cess Act, 1996
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: J V PRASAD
• Assessee Lawyers: A V A KARTIKEYA
• Keywords: Change of opinion; Income Tax; Reopening of assessment; Rural Development Cess
• Section: 147; 148; 143(3); 154; 260A; 142

Judgement Text

"I I I i ! : I ; l ,' : i : 5 I ! t i i I I I IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD WEDNESDAY ,THE FIFTEENTH DAY OF FEBRUARY TWO THOUSAND AND TWENryTHREE PRESENT THE HON'BLE THE CHIEF JUSTICE UJJAL BHUYAN AND THE HON'BLE SRI JUSTICE N.TUKARAMJI INCOME TAX TRIBUNAL APPEAL NO: 128 0F 2006 Appeal Under Section 260 A of the tncome Tax Act, 1961 aggrieved by the order of the lncome Tax Appellate Tribunal, Hyderabad Bench _ B Hyderabad dated 28-07 -2005 in ITA No. 783 t Hydt 2oo4 ( Assessment year 1998-99 ) preferred against the order of the commissioner of rncome Tax ( Appeals )Vl, 12th Floor, Gagan Vihar, M.J. Road, Hyderabad dated 29-07- 2004 in Appeat No. 0193M-2, NLG/ crr (A) -vu 2oo3-04 preferred against the order of the Income Tax Officer, Ward -2, Nalgonda, dated 31-.10_2003 in pAN / GIR No. M-584 Between: tV/S.tVlallikarjuna Rice lndustries, Choutappal Mandal,Nalgonda ...APPELLANT AND The lncome Tax Officer, Watd-2, Nalgonda The lTO., Ward_2, Nalgonda ...RESPONDENT Counsel for the Appettant: SRI. A. V. A. SIVA KARTIKEYA Counsel for the Respondents: J V PRASAD (SC FOR INCOME TAX) The Court delivered the following: JUDGMENT + Trrr llQMt!=E IHEcIlI! [. tCE U AL BII - .AN ANI) T II i-l=[()N'_rtl.r . sR I J r_,S',t',rcF N.Tt' K. RAI U I I.T.T.A. No- 128 .tt 2006 IIIDCMENT 'PL.rtt't ttt t'/t '/,, ( t,Jt I,'tt.\" t ,t,t/ Ittut t) Hear llr4r. A.V,A.Siva Kanikeya, leamed cor'6el for the appellant; md Nk. J.V.Prasad, learned Srandirp; Cbunsel, Income Ta l)epanment ior the respondenr 2. This appellant u (briefly dated 28.C Tribunal F hereinafter) year 7998-l rppi'al has Lreen preier-red by the rss3s,see as the rder Secticrr 260,4. oi rhe Incon.re Tar. Acc, 196L he' Act' lrereinafter) against tl:re order 'z.11005 pmsecl bv ttre Incornr: Ta:< Appellate yclerabad Bench 'ii. I Iyclerabad (brief tv 'Tribunal' in I.-[.A.No.Z8.l/t li.r]/2004 ior the assessmenr t9). 3. Thou;h the :rp,peel ;rc'lnritted on 14.()3,.20,16, no 'as substantial prestion c,i l.ru'urrs l-renred. I{posed the followrng t o questions ;rs srrbstenri;rl qLrestions of )aw 2 I I I I I i I I i i I i I : ! I z I i r t I I I I I a) Vherher on rhe facts and in rie circurnsances of rhe case, Tribunal is reopenins or asscssment J:::,:#'l;ti * Acr panicularly *,hen rhe original a55655m6ng q/as conrpleted under Section 143(3) of the Act ? b) Vhether the amount of Rural Development Gss reinrbuned by the Food Corporadon of India in :rccordance wirh the provisiors of Ap.Rural Dcvelopmcnr Ccss Act, 1996 .s atrade receipt and is ;r-sscssable as income rvhen the assqssee did not dcbit the liabiliry to pay cess to the p6cl_ Account ? 4. First question is whether Tribunal was jwtified m sr.lsratnutg the reopening of assessment under Section 14g of the Act when rhe original assessment was completed under Secrion 1a-l(l) ol the Act. 5. Appcllant befbre us rs a pannership firm and is an assessec rurcle r rhe Act. Appellant is engaged in the business of rice irrclrrstries. For rhe assessmen t year 199g-99, appellant had filed rcrrrrl of incomc which was subjected to scrutiny whereattcr, irssessnlcnr undcr Secrion 1a3e) ofthe Acr was conrpleted on 2J.Cg.1999 determining total income of the appellant .rr Its.4O,94l.OO. Subscquencly, ir was noticed by the U 3 'tt ! : t a t t ! i assessing o['rc(]r that in the list oi creditors iil:d by the appellant alt ng with the retr'rnr o[ income' an rntot'nt o[ Rs.11.,30,465 0() rvas shown as otrtstanc{ing Rural Dt\"u':lopment Crss (RD ( :s$, which is leviet-l untler the l':rdlr::r P:adesh Rural Deve ol)nrcnt l ct' 1996' fusessing offict': took the view that e: P()ndittlre on accorrnt oi RD O'ss is al'otable in computing tl-e income o[ th:rt pt-cvious yL'ar lII rvl.rch the amount ls ctually paid. It rvas ior'rnd in tlut c'rse tlrat liabiliry rlss w,rs incurretl b,v the appellanr during the previor'rs 1 :ar- relevant to the xssessnrent ye'1r L91rl3'99 but the said amor ot renuined outst;rrtclirrg i1s the xpPe lirnt lrad not arne during thc 1.rn'r'iotts rc:rr' -l'llr' -':!on\" tt was a iiabiliry in thc [''rl'rrrcr' sheet' r sst':'sing officer vi,ru' that this etrlotrtrr shotrlcl luve t't t'rr disallowed d b;rck to the t()r-'il itrcotlre oi tl-ie rs scs';ee u4rile rq the assessmctrt tttrtle r Scctior i4ll'' t o1 the Act' v.Snotdorrc'lsscsstlrgo[licerrsstre.lri<.ticetlnder 1li4 oi the Act on l6'01'lCCl ro ihe;rppe[ant Lg to adcl the otrt st 'rritlir lg :llrlottrlt of U ) ( bss to the to pay RT paid the shown as took the and add, conrpleti As this Section ,zproposi F r ii4 tohl income. In response thereto, appellant filed reply contending that rhe amounr reccived towards RD Gss was neither credited to the profit and loss accounr nor claimed as expenditure but a separare account was mainrained and shown in the balance sheet. It was contended that this amounr was received from Food Crlporation ol'India to which appellant had sold the ricc. 6. Considering rhe rcply of the appellanr, assessing officer dropped the proposal under Scction 154 of the Act. It was thereafter that noticc under Section 14g of the Act was issued following whiclr rhe assessrr]e nr was r-eopened and completed under Sectiort 147 of thc Act wtereaiter assessment order dated 31.10.200J uas passecl r.rndcr Section 1a3(3) of the Act read with Section 142 thcreol'. By the aforesaid order, the RD Cess amounr was adc-lcd to the income of the appellant. 7. On the objcction raiscd by the appellant that all material facts were disclosc-d bcibri: the asscssing officer at the time of original assessllrcrlr:rnd the rt,l'orc, the reopening was sought to 5 be done or the basis of change of opinion, assessing officer took tlre vi :q.that the reopening was being done \",,ithin for,rr yrars f rom .h: end ol the relevant assessment ea., t[r(]re[ore, the questi< n of esc,rpement of income f op rir>n ' is rerno.,ed, as contended on behelf ':rf the Dep,rttment. then, in the ga6 of reopelr ng rhe r;scsstlent, reviet' *ould ta[u. lre ruould xcertain and asr r::;s inc, n,e rhat hes escaped assessment and reope n the ir-sse;snrenL or if that is not requrred tlr,:.r me: :l',. r,> recti.l-y rlie misrrken result on the b:uis of r re erjsting rccord. I[ he chooses to resofl tr) the I ormer, t. !. , secrion 147 reed uith secl orr 148 proceedings, he cannot lt,_. con pr'lkd ro rcsorr ro section 154 becaue tbat not lci inrpinge upon his subjective satisfact on rrrrd ,r section 117. But if he resorts c,:) scct crr 1-r.1 oh rlle glound thar the mistake ir the rnicr-rrpp.ucnr trour rlre record has resukr,:l in sc.rpernenr s'hich could be recr ified b,z erne rjection was raisec '[-hcn'rrlter. he h:rc] issucd rhc rr,rrice under Section 14 t,l thc A,-'t ;rr-rd caniec{ out the rr::rssc: s rner.t under Section l, 7 ol thc i ct. In oru- opini<,n, t[,rs is clearly imperrniss rl,:. ::16:: 17. Consequently, we answer the fint substantial qtrestion of law framed above in favour of the appellant-assessee and against the respondent-revenue. In view of ans wer to the first question, the second question need not be gone into. 18. Appeal is accordinglyallowed. No costs. As a sequel, misce[aneous petitions, pgnding if any, stand closed. .-/ Sd/-C.V.MALLIKARJ U NA VARMA JOINT REGISTRAR SECTION OFFICER //TRUE COPY// To 1. The lncome Tax Appellate Tribunal, Hyderabad Bench - B Hyderabad(with records if any) 2. The Commissioner of lncome Tax (Appeals ) Vl, 12rh Floor, Gagan Vihar, Ivl.J. Road, Hyderabad 500 001 3- The lncome Tax Officer, Ward-2, Nalgonda 4. One CC to SRl. A. V. A SIVA KARTIKEYA, Advocate [OPUC] 5. One CC to SRI J V PRASAD (SC FOR INCOME TAX) Advocate [OPUCI 6. Two CD Copies y l l i t. HIGH COUR'- DATED:1 510,).12023 Judgment ITTA.No.128 of 2006 ALLOWING THE IT 111. '$/ff HOt. T COSTS -'':- ::- -' \"-' ,- :.' .., . {'.r- \" -, , i'. ;T 'tl I t..l i .: /t s, , ., N ,f ) L) i rl !i '1. .) 11.; til ' :--.--- * -.,? --r/ ' €l \" i "