TELCO CO OPERATIVE SOCIETY LTD THROUGH ITS SECRETARY SHRI AMITESH PANDEY V. COMMISSIONER OF INCOME TAX

WPC/2020/2022

AI Insights

The case involves multiple writ petitions filed by the Telco Co-operative Society Ltd. against the Income Tax authorities challenging the re-assessment and penalty orders for the assessment years 2013-2014 and 2014-2015. The petitions were dismissed on the grounds that the petitioner did not exhaust the available statutory remedies and filed the petitions after the statutory period for appeal had expired. The court also addressed the merits of the re-assessment, noting that it was based on the non-disclosure of material facts by the petitioner, which justified the reopening of the assessment under section 147 of the Income-tax Act, 1961.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 673090 (HC-JHARKHAND)
• Appeal Type: Others
• Pronouncement Date: 11-06-2024
• Assessment Year: misc
• Other Referred Cases: Ravindra Kumar (HUF) vs. CIT, Kerla State Cooperative Agriculture and Rural Development Bank Limited vs. Assessing Officer, CIT vs. Reliance Petro Products Private Limited, Techspan India Pvt. Ltd. vs. ITO, Glaxo Smith Kline Consumer Health Care Ltd. vs. Assistant Commissioner
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: KUMAR VAIBHAV; ANURAG VIJAY
• Assessee Lawyers: D V PATHY; HIRESH KARAN; ABHISHEK KUMAR
• Keywords: Change of opinion; Deduction under section 80P; Income Tax; Penalty under section 271(1)(c); Penalty under section 271(1)(c); Re-assessment; Mechanical grant of sanction
• Section: 147; 148; 143(2); 271(1)(c); 44AD; 80P; 144B; 44AA

Judgement Text

" 1 IN THE HIGH COURT OF JHARKHAND AT RANCHI W.P. (T) No. 393 of 2022 …… Telco Co-operative Society Ltd., through its Secretary Shri. Amitesh Pandey …. Petitioner -Versus- 1.Commissioner of Income Tax, Jamshedpur, P.O. +P.S- Bistupur, District, Jamshedpur. 2.Asst. Commissioner of Income Tax, National Faceless Assessment Centre, Delhi. 3.Income Tax Officer, Ward 3(2), Jamshedpur, P.O.+P.S. Bistupur, District-Jamshedpur. ….. Respondents with W.P. (T) No. 438 of 2022 …… Telco Co-operative Society Ltd., through its Secretary Shri. Amitesh Pandey …. Petitioner -Versus- 1.Commissioner of Income Tax, Jamshedpur, P.O. +P.S- Bistupur, District, Jamshedpur. 2.Asst. Commissioner of Income Tax, National Faceless Assessment Centre, Delhi. 3.Income Tax Officer, Ward 3(2), Jamshedpur, P.O.+P.S. Bistupur, District-Jamshedpur. ….. Respondents with W.P. (T) No. 2020 of 2022 …… Telco Co-operative Society Ltd., through its Secretary Shri. Amitesh Pandey …. Petitioner -Versus- 1.Commissioner of Income Tax, C.H, Area, P.O. & P.S- Bistupur, Jamshedpur, District-East Singhbhum. 2.Asst. Commissioner of Income Tax, National Faceless Assessment Centre, Delhi. 3.Income Tax Officer, Ward 3(2), Jamshedpur, P.O. & P.S- Bistupur, Jamshedpur, District-East Singhbhum. ….. Respondents with W.P. (T) No. 2022 of 2022 …… 2 Telco Co-operative Society Ltd., through its Secretary Shri. Amitesh Pandey …. Petitioner -Versus- 1.Commissioner of Income Tax, C.H, Area, P.O. & P.S- Bistupur, Jamshedpur, District-East Singhbhum. 2.Asst. Commissioner of Income Tax, National Faceless Assessment Centre, Delhi. 3.Income Tax Officer, Ward 3(2), Jamshedpur, P.O. & P.S- Bistupur, Jamshedpur, District-East Singhbhum. ….. Respondents …… CORAM: HON’BLE MR. JUSTICE RONGON MUKHOPADHYAY HON’BLE MR. JUSTICE DEEPAK ROSHAN For the Petitioner : Mr. D.V.Pathy, Advocate Mr. Hiresh Karan, Mr. Abhishek Kumar, Adv. For the Respondent : Mr. Kumar Vaibhav, Sr. S.C. Mr. Anurag Vijay, Jr. S.C. …… CAV On.30.04.2024 Delivered on.11.06.2024 J U D G M E N T Per Deepak Roshan, J: Heard learned counsel for the parties. 2. Since all these writ applications involve common question of law and are of same Assessee for different assessment years; as such with consent of the parties all were heard together and disposed of by this common order. 3. The aforesaid writ petitions which pertains to A.Y. 2013- 2014 and 2014-2015; have been preferred by the Petitioner- Assessee, challenging respective notices issued u/s 148 of the Income-tax Act, 1961 (herein after to be referred as the “Act”), the respective assessment orders passed u/s 147 read with section 144B of the Act, the consequent notices for demand, the notice for penalty u/s 271(1)(c) of the Act, the penalty orders u/s 271(1)(c) of the Act and consequent demand notices for penalty, for both the assessment years. 4. The brief fact of the case is that the petitioner is a Co- operative Society registered under the Co-operative Societies 3 Act. The case of the petitioner is that he has maintained proper books of accounts in accordance with Section 44 AA of the Act and has got the same audited by his Chartered Accountant. The petitioner had filed the audit report for the relevant assessment years along with accompanying profit and loss account and balance sheet and also filed return of income which discloses receipt of interest from providing credit facilities to its members and also interest on fixed deposit. The petitioner has also claimed deduction under section 80 P of the Act. The return filed by the petitioner-organization was selected for scrutiny under Section 143(2) of the Act and pursuant thereto, the petitioner has submitted the entire documents and detailed disclosure before the original assessing authority and finally the order of assessment was passed by the then A.O. making addition under Section 44AD of the Act for both the assessment years. Being aggrieved, the petitioner filed appeal on the ground inter alia that estimate of profits under section 44 AD of the Act is not justified. Pursuant thereto; the CIT (Appeal) allowed the respective appeals preferred by the petitioner. Subsequently, notice under section 148 of the Act for the relevant assessment years were issued to the petitioner on 09.07.2019 on the ground inter alia that the A.O has reason to believe that the income chargeable to tax has escaped assessment within the meaning of Section 147 of the Act. The petitioner duly filed return pursuant to the notice under section 148 of the Act on 08.02.2021 and had also filed a detailed explanation that the deduction under Section 80 P of the Act was allowable both in respect of interest earned from its member and the same was duly allowed by the first A.O in the first assessment proceeding. Thereafter, the respondent no.3 issued another notice under section 143(2) read with Section 147 of the Act. In the 4 said notice, the A.O. divulged the reasons recorded for reopening the assessment. Pursuant thereto, the respondent no.3 issued show cause notice directing the petitioner to show cause as to why the variation proposed in the notice should not be added. As per the petitioner the said two notices as aforesaid could not be complied as the same were posted on the website of the I.T. Department. Finally, the order of assessment was passed by the A.O for the respective assessment years re-assessing the original assessment orders. 5. Mr. D.V.Pathy, learned counsel for the petitioner assisted by Mr. Abhishek Kumar, learned advocate submits that the re-assessment proceedings are time-barred since for the relevant assessment year, the Assessee was subjected to scrutiny assessment u/s 143(3) of the Act and hence as per the first proviso to the un-amended section 147 of Act, in absence of any omission or failure on part of the Assessee to make a disclosure, no re-assessment proceedings can be initiated after lapse of four years from the end of the relevant assessment year. He further submits that re-assessment resorted to by the Revenue is based on change of opinion since in garb of re- assessment, the Revenue is seeking to disallow two deductions which were allowed in the original assessment proceedings and hence, there is no reason to believe for any income escaping assessment and hence the very assumption of jurisdiction for re-assessment is wholly illegal and bad in law. He further submits that the re-assessment is based on mechanical grant of sanction by the superior authority and hence is illegal and without jurisdiction. The assessment which stood merged in the order of Commissioner of Income-tax (Appeals) cannot be re-opened. 5 On merits of re-assessment proceedings, it is the case of the petitioner that in absence of stipulation for obtaining a statutory audit under the Jharkhand Co-operative Societies Act in section 80-P of the Act, the Revenue cannot disallow a statutory claim of deduction under section 80-P of the Act, more so, in view of allowance of similar deduction in preceding and succeeding assessment years to the Petitioner-Assessee. 6. Learned counsel further submits on the penalty proceedings u/s 271(1)(c) of the Act that penalty cannot be imposed solely on the basis of findings in the assessment order without considering the issue of imposition of penalty afresh in the penalty proceedings. He reiterated that imposition of penalty is bad in law since in absence of stipulation for obtaining a statutory audit under the Jharkhand Co-operative Societies Act in section 80-P of the Act, the Revenue cannot disallow a statutory claim of deduction under section 80-P of the Act, more so, in view of allowance of similar deduction in preceding and succeeding assessment years to the Petitioner- Assessee. It has been contended that the respective penalty orders have been passed without proper consideration of the issues, without considering the written submissions filed and without opportunity of being heard. 7. Referring the book on interpretation of statute, Mr. Pathy contended that in fiscal legislation a transaction cannot be taxed from its legal signification, for a subject is not liable to tax on supposed “spirit of the law” or “by inference or by analogy”. In refuting the doctrine of „the substance of the matter‟ Lord TOMLIN observed: “It is said that in revenue cases there is a doctrine that the court may ignore the legal position and regard what is called „the substance of the matter‟. This supposed doctrine seems to rest for its support upon a misunderstanding of language used in some earlier cases. 6 Mr. Pathy further relied upon the judgment passed in the case of Ravindra Kumar (HUF) @ Ravindra Kumar (HUF) versus CITreported in (2019) 419 ITR 308 (Pat); wherein it has been held that; A power to reopen an assessment would vest in the Assessing Officer only if there is tangible material in his possession for coming to a conclusion that there was escapement of income chargeable to tax, from assessment and the reasons with the Assessing Officer must have a live link with the formation of belief. He further referred to the judgment passed in the case of Kerla State Cooperative Agriculture and Rural Development Bank Limited Versus Assessing Officer reported in 2023 SCC online SC 1164; wherein at para 37 and 38 it has been held as under:-- \"37. In Mavilayi Service Co-operative Bank, it has been observed that Section 80P of the Act is a beneficial provision which was enacted in order to encourage and promote the growth of the co- operative sector generally in the economic life of the country and therefore, has to be read liberally in favour of the assessee. That once the assessee is entitled to avail of deduction, the entire amount of profits and gains of business that are attributable to any one or more activities mentioned in subsection (2) of Section 80P must be given by way of deduction vide Citizen Co-operative Society. This is because sub-section (4) of Section 80P is in the nature of a proviso to the main provision contained in subsections (1) and (2) of Section 80P. The proviso excludes co-operative banks, which are co-operative societies which must possess a licence from the Reserve Bank of India to do banking business. In other words, if an entity does not require a licence to do banking business within the definition of banking under Section 5(b) of the BR Act, 1949, then it would not fall within the scope of sub- section (4) of Section 80P. 38. While analysing Section 80P of the Act in depth, the following points were noted by this Court: i) Firstly, the marginal note to Section 80P which reads “Deduction in respect of income of co-operative societies” is significant as it indicates the general “drift” of the provision. ii) Secondly, for purposes of eligibility for deduction, the assessee must be a “co-operative society”. iii) Thirdly, the gross total income must include income that is referred to in sub-section (2). 7 iv) Fourthly, sub-clause (2)(a)(i) speaks of a co-operative society being “engaged in”, inter alia, carrying on the business of banking or providing credit facilities to its members. v) Fifthly, the burden is on the assessee to show, by adducing facts, that it is entitled to claim the deduction under Section 80P. vi) Sixthly, the expression “providing credit facilities to its members” does not necessarily mean agricultural credit alone. It was highlighted that the distinction between eligibility for deduction and attributability of amount of profits and gains to an activity is a real one. Since profits and gains from credit facilities given to non-members cannot be said to be attributable to the activity of providing credit facilities to its members, such amount cannot be deducted. vii) Seventhly, under Section 80P(1)(c), the co-operative societies must be registered either under Co-operative Societies Act, 1912, or a State Act and may be engaged in activities which may be termed as residuary activities i.e. activities not covered by sub-clauses (a) and (b), either independently of or in addition to those activities, then profits and gains attributable to such activity are also liable to be deducted, but subject to the cap specified in sub-clause (c). viii) Eighthly, sub-clause (d) states that where interest or dividend income is derived by a co-operative society from investments with other co-operative societies, the whole of such income is eligible for deduction, the object of the provision being furtherance of the co-operative movement as a whole.\" 8. On the question of penalty learned counsel referred judgment passed in the case of CIT Vs. Reliance Petro Products Private Limited, reported in 2010 (322) ITR 158 SC; wherein the Hon‟ble Apex Court has held that making incorrect claim does not amount to concealment of particulars. 9. Per contra, Mr. Vaibhav learned Sr. Standing Counsel assisted by Mr. Anurag Vijay, Advocate representing the respondents has submitted that the instant writ petitions ought not to be entertained as the petitioner did not avail the statutory remedy of appeal as contained in the Act. It has been contended that the Act is a complete code in itself and contains a structured mechanism for challenging assessment /penalty orders. The petitioner, neither availed the remedy of appeal under the Act, nor has the petitioner in the entire writ petition even whispered any reason either for not availing the appellate remedy, or, as to why the appellate remedy available to the Petitioner under the Act is not an efficacious remedy. It has 8 been further submitted that the Petitioner has invoked the writ jurisdiction of this Court only after expiry of the period of limitation for filing appeal as prescribed under the Act. 10. It has been submitted by Mr. Vaibhav that the initiation of reassessment proceedings is in accordance with law and is not hit by the limitation of 4 years as prescribed in the first proviso to section 147 (un-amended) of the Act as the facts in this case clearly demonstrate that there was failure on part of the petitioner to disclose fully and truly all material facts necessary for his assessment. Original Assessment Order itself records (at para 3.3) that the Assessee did not produce any books of accounts or supporting evidence to justify amounts paid to contractor; further Form 3CA filed by Assessee was issued by the same CA who issued Form 3CD in utter disregard to the provisions of the Jharkhand Co-operative Societies Act read with section 80-P of the Act read with section 44AB of the Act. He further contended that the instant case is not a case of change of opinion, inasmuch as, in the original assessment order, there is no finding/discussion by the A.O about the issue i.e. whether the deduction u/s section 80-P claimed by the petitioner was rightfully claimed, whether the petitioner has fulfilled the condition of statutory audit under the provisions of the Jharkhand Co-operative Societies Act read with section 80-P of the Act read with section 44AB of the Act, etc. He lastly submitted that all these writ applications may be dismissed without interfering with the assessment/penalty order passed for the respective assessment years 11. Having heard learned counsel for the rival parties and after going through the documents annexed with the respective affidavits and the averments made therein; at the outset it is noted that the petitioner has challenged the re-assessment 9 notice dated 09.07.2019 in the year 2022; that also after the re-assessment order was passed on 28.09.2021 and moreover after lapse of time for filing statutory appeal as these writ applications were filed on 27.01.2022 i.e. about four months from the passing of the re-assessment orders. It further transpires that the conduct of the petitioner disentitles him from invoking the extraordinary writ jurisdiction of this Court in the instant cases due to delayed filing of return in response to notice u/s 148 of the Act, as the petitioner did not comply either with notice u/s 142(1) in the re-assessment proceedings or with the show-cause notice proposing the claim of deduction, as clearly stated in paragraphs 4.3 and 4.4 of the impugned assessment order itself. It further appears that the petitioner never challenged either the re-assessment notice, or the reasons to believe as furnished to the petitioner, or the sanction granted u/s 151 of the Act on either jurisdictional grounds, or on any other grounds; whatsoever, and now when the re-assessment proceedings stands concluded resulting in passing of assessment orders, the petitioner without preferring the statutory appeal as per the Act, after the expiry of prescribed limitation period, has invoked the writ jurisdiction of this Court. 12. The instant matters require factual adjudication which is beyond the scope of proceedings under Article 226 of the Constitution of India. Such factual aspects being whether at all there was delay in statutory audit by the State Government or whether at all the State Government failed to appoint auditors under the Jharkhand Co-operative Societies Act for the A.Y. 2013-14 and A.Y. 2014-15, or whether petitioner at all requested the State Government for statutory audit under the Jharkhand Co-operative Societies Act; whether petitioner 10 prepared statement of accounts, etc. and submitted to the Registrar under Rule 58 of the Jharkhand Co-operative Societies Rules, 1959. All these facts were never brought on record by the petitioner in course of the re-assessment proceedings. The aforesaid factual aspects do not make this matter fall within any of the exceptions which would justify the Petitioner in invoking the extra-ordinary writ jurisdiction of this Court having not availed the alternative appellate remedy as provided for under the Act. In this regard it would be profitable to refer following judgments: - (i) In the case of CIT v. Chhabil Dass Agrawal reported in (2014) 1 SCC 603, the Hon‟ble Apex Court in paragraphs 16 & 17 has held as under:- “16. In the instant case, the Act provides complete machinery for the assessment/re-assessment of tax, imposition of penalty and for obtaining relief in respect of any improper orders passed by the Revenue Authorities, and the assessee could not be permitted to abandon that machinery and to invoke the jurisdiction of the High Court under Article 226 of the Constitution when he had adequate remedy open to him by an appeal to the Commissioner of Income Tax (Appeals). The remedy under the statute, however, must be effective and not a mere formality with no substantial relief. In Ram and Shyam Co. vs. State of Haryana, [(1985) 3 SCC 267] this Court has noticed that if an appeal is from “Caesar to Caesar’s wife” the existence 5 of alternative remedy would be a mirage and an exercise in futility. 17. In the instant case, neither has the assessee-writ petitioner described the available alternate remedy under the Act as ineffectual and non-efficacious while invoking the writ jurisdiction of the High Court nor has the High Court ascribed cogent and satisfactory reasons to have exercised its jurisdiction in the facts of instant case. In light of the same, we are of the considered opinion that the Writ Court ought not to have entertained the Writ Petition filed by the assessee, wherein he has only questioned the correctness or otherwise of the notices issued under Section 148 of the Act, the reassessment orders passed and the consequential demand notices issued thereon.” (ii) In the case of Anshul Jain v. PCIT &Anr. reported in [2022 SCC OnLine SC 1756, the Hon‟ble Apex Court in paragraphs 1 & 2 has held as under:- “1. What is challenged before the High Court was the reopening notice under Section 148A(d) of the Income Tax Act, 1961. The notices have been issued, after considering the objections raised by the petitioner. If 11 the petitioner has any grievance on merits thereafter, the same has to be agitated before the Assessing Officer in the re-assessment proceedings. 2. Under the circumstances, the High Court has rightly dismissed the writ petition.” (iii) In the case of Assistant Commissioner v. Glaxo Smith Kline Consumer Health Care Ltd. reported in [(2020) 19 SCC 681, the Hon‟ble Apex Court in paragraphs 14, 15, 19, 22 & 25 has held as under:- “14. In the backdrop of these facts, the central question is: whether the High Court ought to have entertained the writ petition filed by the respondent? As regards the power of the High Court to issue directions, orders or writs in exercise of its jurisdiction under Article 226 of the Constitution of India, the same is no more res integra. Even though the High Court can entertain a writ petition against any order or direction passed/action taken by the State under Article 226 of the Constitution, it ought not to do so as a matter of course when the aggrieved person could have availed of an effective alternative remedy in the manner prescribed by law...... 15. We may usefully refer to the exposition of this Court in Titaghur Paper Mills Co. Ltd. &Anr. Vs. State of Orissa &Ors., wherein it is observed that where a right or liability is created by a statute, which gives a special remedy for enforcing it, the remedy provided by that statute must only be availed of.... .................................................................... 19. ......................................In a given case, the assessee may approach the High Court before the statutory period of appeal expires to challenge the assessment order by way of writ petition on the ground that the same is without jurisdiction or passed in excess of jurisdiction - by overstepping or crossing the limits of jurisdiction including in flagrant disregard of law and rules of procedure or in violation of principles of natural justice, where no procedure is specified. The High Court may accede to such a challenge and can also non-suit the petitioner on the ground that alternative efficacious remedy is available and that be invoked by the writ petitioner. However, if the writ petitioner choses to approach the High Court after expiry of the maximum limitation period of 60 days prescribed under Section 31 of the 2005 Act, the High Court cannot disregard the statutory period for redressal of the grievance and entertain the writ petition of such a party as a matter of course. Doing so would be in the teeth of the principle underlying the dictum of a three-Judge Bench of this Court in Oil and Natural Gas Corporation Limited (supra). In other words, the fact that the High Court has wide powers, does not mean that it would issue a writ which may be inconsistent with the legislative intent regarding the dispensation explicitly prescribed under Section 31 of the 2005 Act. That would render the legislative scheme and intention behind the stated provision otiose...... ..................................... 22. .............. The remedy of appeal is creature of statute. If the appeal is presented by the assessee beyond the extended statutory limitation period of 60 days in terms of Section 31 of the 2005 Act and is, therefore, not entertained, it is incomprehensible as to how it would become a case of violation of fundamental right, much less statutory or legal right as such...... ................................ 12 25. Taking any view of the matter, therefore, the High Court ought not to have entertained the subject writ petition filed by the respondent herein. The same deserved to be rejected at the threshold. ..............................” The contention of the petitioner that the case of M/s Glaxo Smith (supra) will not be applicable in the instant cases because the said case dealt with the issue of GST where a person cannot file any case after the period of limitation is also not acceptable to this court, inasmuch as, the aforesaid case may be referred in the case of GST but the principle laid down by the Hon‟ble Apex Court is squarely applicable in the instant case. 13. Further, on the question of change of opinion, the Hon‟ble Apex Court in the case of ITO versus Techspan India Pvt. Ltd. reported in (2018) 6 SCC 603, has held in paragraph 18 as under:- “18. Before interfering with the proposed re-opening of the assessment on the ground that the same is based only on a change in opinion, the court ought to verify whether the assessment earlier made has either expressly or by necessary implication expressed an opinion on a matter which is the basis of the alleged escapement of income that was taxable. If the assessment order is non-speaking, cryptic or perfunctory in nature, it may be difficult to attribute to the assessing officer any opinion on the questions that are raised in the proposed reassessment proceedings. Every attempt to bring to tax, income that has escaped assessment, cannot be absorbed by judicial intervention on an assumed change of opinion even in cases where the order of assessment does not address itself to a 10 given aspect sought to be examined in the re- assessment proceedings...” 14. Further, the contention of the petitioner on the doctrine of merger is also misconceived, inasmuch as, the original assessment proceedings which was assailed before the CIT(A) was not on the aspect whether the deduction u/s section 80-P claimed by the petitioner was rightfully claimed, whether the petitioner has fulfilled the condition of statutory audit under the provisions of the Jharkhand Co-operative Societies Act read with section 80-P of the Act read with section 44AB of the Act, etc; rather the reassessment proceedings are on the basis 13 of the aforesaid aspects, and hence, there will be no application of the doctrine of merger in the instant case. 15. We are conscious that though the petitioner has not availed the appellate jurisdiction and the time for the same has already expired but the limitation can be condoned by the competent appellate authority, if the statutory appeal will be filed before it for the relevant assessment years. Accordingly, we are refraining from giving any opinion on the merits of the case regarding audit under the provisions of Jharkhand Co- operative Societies Act etc. 16. Having regard to the aforesaid discussions and the judgments referred to herein above, we are of the considered opinion that the petitioner has failed to make out any case for interfering with the respective re-assessment/penalty orders avoiding the alternative remedy given to the petitioner and accordingly all these writ applications are hereby, dismissed. However, the petitioner would be at liberty to challenge the respective re-assessment orders/penalty orders before the competent appellate authority and if the petitioner assails the same along with the petition for condonation of delay, the learned appellate authority should decide the application for condonation of delay in accordance with law and keeping in view the fact of pendency of these writ applications before this Court. 17. Accordingly, all these writ applications are dismissed. Pending I.As., if any, are also disposed of. (Rongon Mukhopadhyay, J) (Deepak Roshan, J) Jharkhand High Court Dated/11/06/2024 Amardeep/AFR "