THE PRINCIPAL COMMISSIONER OF INCOME TAX V. KERALA STATE ELECTRICITY BOARD

ITA/20/2020

AI Insights

The case involves an appeal by the Principal Commissioner of Income Tax, Thiruvananthapuram against the Kerala State Electricity Board concerning the reassessment of income for the assessment year 2005-06. The primary legal contention was whether the Assessing Officer could reopen the assessment under Section 147 of the Income Tax Act, 1961, despite the issues being previously addressed in an appeal before the Commissioner of Income Tax (Appeals). The Tribunal and the High Court found that the reopening was not permissible as the subject matter was under appeal, thus invoking the protection under the second proviso to Section 147.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 770362 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 06-09-2021
• Assessment Year: misc
• Other Referred Cases: Kerala State Electricity Board V. Deputy Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: M GOPIKRISHNAN NAMBIAR; K JOHN MATHAI; JOSON MANAVALAN; KURYAN THOMAS; PAULOSE ABRAHAM; RAJAKANNAN
• Assessee Lawyers: CHRISTOPHER ABRAHAM
• Keywords: Assessment Year 2005-06; Electricity Duty; Income tax appeal; Jurisdiction; Reassessment; Interest on Government Loan
• Section: 147; 148; 143(3); 115JB; 260A

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE VIJU ABRAHAM MONDAY, THE 6TH DAY OF SEPTEMBER 2021 / 15TH BHADRA, 1943 ITA NO. 20 OF 2020 AGAINST THE ORDER/JUDGMENT IN ITA 52/2019 OF I.T.A.TRIBUNAL,COCHIN BENCH, ERNAKULAM APPELLANT/APPELLANT/RESPONDENT/REVENUE: THE PRINCIPAL COMMISSIONER OF INCOME TAX THIRUVANANTHAPURAM BY ADV CHRISTOPHER ABRAHAM RESPONDENT/RESPONDENT/APPELLANT/ASSESSEE: KERALA STATE ELECTRICITY BOARD PATTOM, THIRUVANANTHAPURAM REP BY ITS MANAGING DIRECTOR BY ADVS. SRI.M.GOPIKRISHNAN NAMBIAR SRI.K.JOHN MATHAI SRI.JOSON MANAVALAN SRI.KURYAN THOMAS SRI.PAULOSE C. ABRAHAM ADV RAJA KANNAN FOR RSPDT THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 06.09.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA NO. 20 OF 2020 -2- J U D G M E N T S.V.BHATTI,J. Heard Mr.Christopher Abraham and Adv.Raja Kannan for parties. 2. The Principal Commissioner of Income Tax, Thiruvananthapuram/Revenue is the appellant. The Kerala State Electricity Board, Pattom, Thiruvananthapuram/Assessee is the respondent. The subject appeal is at the instance of Revenue under Section 260A of the Income Tax Act, 1961 (for short, 'the Act') from the order of Income Tax Appellate Tribunal (for short, the Tribunal) Cochin Bench in I.T.A No.52/Coch/2019 dated 08.08.2019. The controversies canvassed in the appeal are relate to the return filed for the assessment year 2005-06. 3. The appeal is filed by raising the following substantial questions of law: “1) Is the Hon'ble Tribunal right in holding that the issues ITA NO. 20 OF 2020 -3- were subject matter of appeal before the CIT(A) in the case of original assessment and hence the Assessing Officer cannot re-visit the same by re-opening the assessment u/s 147 of the Act and also in view of second proviso to section 147, especially when a) the reassessment proceedings u/s 147 was initiated as per explanation 2 c (iii) & (iv) given under provisos to section 147 whereby excessive relief allowed and excessive loss or any other allowance admitted are deemed to be a case where income chargeable to tax has escaped assessment b) the appeal against order u/s 143(3) was filed on the issue involved and not on the quantum of addition and hence proviso to 148 does not apply. 2) Is the Hon'ble Tribunal right in confirming the decision of the Commissioner of Income Tax(Appeals) and quashing the assessment order dated 30/12/2010, thereby deleting the addition of Rs.1,39,50,19,000/- on electricity duty and Rs. 15,83,00,000/- short provision of interest on Government loan, made u/s 43B, relying on the jurisdictional High Court's decision in the assessee's own case for earlier years, especially when the SLP filed by the department against the said decision is pending adjudication before the Hon'ble Supreme Court ?” 4. Question No.2 is covered by the judgment of this Court in Kerala State Electricity Board V. Deputy Commissioner of Income Tax1 against the Revenue and in favour of Assessee. Hence, Question No.2 is answered against the Revenue and in favour of the Assessee. 5. Question No.1 deals with the jurisdiction and power of Assessing Officer to invoke Section 147 of the Act on the 1 [2010]329 ITR 91(KER) ITA NO. 20 OF 2020 -4- ground that the income of Assessee escaped assessment in the subject Assessment year. As noted earlier we are concerned with the return filed by the Assessee for the Assessment year 2005-06. The Assessing Officer on 24.12.2007 completed the assessment under Section 143(3) of the Act, . The said decision of the Assessing Officer was appealed before the Commissioner of Income Tax (Appeals) (for short, ‘CIT(Appeals)’. The notice under Section 147 of the Act was issued on the ground that the mistakes have occurred in the assessment order in over- assessing the business loss of Assessee, while giving effect to the order of the CIT(Appeals). The Assessing Officer through order in Annexure-A dated 30.12.2010 made re-assessment order on the Assessee. The Assessee aggrieved thereby filed appeal before the CIT(Appeals), Thiruvananthapuram. The CIT(Appeals) framed the following questions and recorded the finding as noted herein under: 4.1.3 The facts of the case, the grounds of appeal and the arguments of the Appellant have been considered. From the ITA NO. 20 OF 2020 -5- reasons stated for reopening of the assessment, it is evident that there were arithmetical errors in the computation of income in the original assessment order and the assessment was reopened for purely for correcting those arithmetical mistakes. However, while disposing the appeal against the original assessment order, the Ld. CIT(A) has discussed all these issues and decided in the appeal order passed on 26.02.2008. The appeal effect giving order was passed by the Assessing Officer on 31.03.2008 and the contents of the same are as under: Consequent on giving effect to the order of the CIT(A) referred to above the assessment order dated 24.12.2007 stands revised as under: Business income as per order dated 29.12.2006 248,32,93,478 Less Relief allowed by the CIT(A) on additions made on account of 1 Electricity duty u/s.4(1) 15,50,02,113 2 Electricity duty u/s.3(1) 54,98,40,000 3 Supply charges 5,26,62,852 4 Employees cost under prior period 11,76,34,959 Total 73,51,39,924 Additional ground of prior period expenses by the CIT(A) 240,68,68,702 314,20,08,626 Business loss (-) 65,87,15,148 Add Income from other sources 3,81,97,748 Revised total loss (-) 62,05,17,400 The CIT(A) vide above referred to above has directed to cancel the computation of book profit u/s 115 JB holding that the assessee does not come within the ITA NO. 20 OF 2020 -6- purview of section 115JB of the Income-tax Act. Hence the computation of book profit made in the assessment order stands cancelled. The following grounds are restored back to the Assessing Officer. The assessee is to produce evidence/documents etc to substantiate their claim. Provision for DA arrears 369,000,000 Interest on government loan 158,300,000 Penal interest 1,233,600,000 Incentive payable to power grid corpn. Disallowed in the order of AY 04-05 21,900,000 R.Dolly Deputy Commissioner of Income Tax Circle-1(1), Trivandrum 4.1.4 Thus, it is evident that the reopening was made on issues which were under appeal before CIT(A). The question is whether the same is valid. The relevant provisions of section 147 of the Act are as under: \"Income escaping assessment. 147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub- section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant ITA NO. 20 OF 2020 -7- assessment year\", unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts\" necessary for his assessment, for that assessment year: Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment yea)r: Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment.\" [Emphasis Supplied] 4.1.5. Therefore, per the second proviso to the section 147 of the Act, the assessment cannot be reopened on issues which are under appeal. Clearly, the reasons recorded by the Assessing Officer for reopening of assessment are subject matters of appeal before the CIT(A). In view of the same, it is held that the reopening made under section 147 of the Act by issue of notice under section 148 of the Act on 30.03.2010 is invalid. Accordingly, the additions made under this order stand deleted. The grounds raised by the Appellant on the validity of reopening are allowed. 4.2 As the legal ground raised by the Appellant is allowed, the grounds raised on merits become infructuous and therefore, not discussed. 6. The Revenue filed appeal in I.T.A No.52/Coch/2019 before the Tribunal. The appeal filed by the Revenue was dismissed. Hence the instant appeal. ITA NO. 20 OF 2020 -8- 7. The learned Standing Counsel Mr.Christopher Abraham does not dispute that the rigour of Second Proviso to Section 147 of the Act, however, tries to explain by contending that the notice under Section 147 of the Act was issued on the ground that the original assessment order resulted in over- assessing the business laws and such over-assessing business loss was more with the figures and not the subject matter of the appeal pending before the CIT(Appeals). In other words, the 2nd provision limits the power of Assessing Officer, if the same subject matter is pending before the Court/Tribunal/Appellate Authority and not the quantum of actual entitlement. 8. Adv.Raja Kannan invites the attention of the Court to the second proviso to Section 147 of the Act, which reads thus: “Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has ITA NO. 20 OF 2020 -9- escaped assessment” and argues that there was no over-assessment of business loss and in substance what was pending before the CIT(Appeals) was the very same subject matter for which, notice under Section 147 was issued. He argues that the second proviso does not make any distinction between figures and the subject matter. It is not the case of Revenue that the subject matter of the notice under Section 147 was not the subject matter before the Appellate Authority. Therefore, in all fours, the second proviso is attracted to the case on hand. 9. After the reading of the second proviso to Section 147 of the Act and the consideration by the CIT(Appeals) and the Tribunal, we are of the view that the distinction sought to be introduced by the Standing Counsel fails, for the very reasons recorded by the Authorities in the orders under appeal. We are of the view that the re-assessment proceedings in the subject assessment year, has been initiated contrary to ITA NO. 20 OF 2020 -10- second proviso to Section 147 (1) of the Act. For the above reasons and expressing full agreement with the the findings recorded by the CIT(Appeals) and Tribunal, we answer the question against Revenue and in favour of the Assessee. Appeal fails, dismissed. No order as to costs. Sd/- S.V.BHATTI JUDGE Sd/- VIJU ABRAHAM JUDGE JS ITA NO. 20 OF 2020 -11- APPENDIX APPELLANT'S ANNEXURES: ANNEXURE A TRUE COPY OF THE ORDER U/S 143(3) R.W.S 147 OF THE INCOME TAX ACT DATED 30.12.2010 ANNEXURE B TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS), TRIVANDRUM DATED 12.11.2018 ANNEXURE C TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL IN ITA NO.52 & 53/COCH/2019 DATED 08.08.2019 "