MERILYN SHIPPING REFUSES TO SINK
According to the ld. Advocates present in the court room no 6 of the Calcutta high court on 24 th june ,the present tax bench comprising of the hon'ble justice Indira banerjee and the hon'ble justice A. R Saraswati was not convinced with the reasoning of the earlier division bench's view in the case of CIT vs. Crescent Export Syndicate, Order dated 03.04.2013 and also in the case of CIT vs. Md. Jakir Hossain Mondal, Order dated 4.4.2013 . In these two cases, the same High Court had taken a view contrary to the view taken by ITAT , Spl. Bench in Merilyn Shipping & Transports 146 TTJ 1 (Viz) (SB), where the Spl. Bench ITAT held that the disallowance u/s 40(a)(ia) could be made only for the expenditure that is "payable" as on 31st March and not for the amounts that have already been "paid" during the year.
In keeping with the judicial discipline, the bench has referred the matter at hand, being ITAT 101/2013 in the case of CIT vs. Sk. Mahasin Ali to the hon'ble chief justice to constitute a larger bench for reconsidering the judgement rendered in the aforesaid two cases.
SECTION 119 OF THE INCOME-TAX ACT, 1961 - INCOME-TAX AUTHORITIES - INSTRUCTIONS TO SUBORDINATE AUTHORITIES - EXTENSION OF DUE DATE FOR FILING RETURNS OF INCOME REQUIRED TO BE FURNISHED BY 31-7-2013 TO 31-10-2013 IN RESPECT OF ASSESSEES RESIDING OR ASSESSED IN STATE OF UTTARKHAND
ORDER [F. NO. 225/117/2013/ITA.II], DATED 23-7-2013
Considering the large-scale devastation due to recent natural clamity in the State of Uttarakhand, the Central Board of Direct Taxes, in exercise of powers conferred under section 119 of the Income-tax Act, 1961, hereby extends the 'due-date' for filing Returns of income required to be furnished by 31st July, 2013 to 31st October, 2013, in respect of income-tax assessees residing or assessed in the State of Uttarkhand.
The Delhi High Court on Wednesday issued notice to the central government and chairman of Delhi Public School (DPS) Society on a plea alleging that one of its schools had deprived poor students of quality education by ignoring the right to education (RTE) law.
A division bench of Acting Chief Justice B D Ahmed and Justice Vibhu Bakhru also issued notice to the Delhi government and chief of the National Commission for Protection of Child Rights (NCPCR) and sought their response by September 18.
The petition sought a direction to the society's school in Noida to impart free and compulsory education to the poor students in accordance with RTE law.
The petition was filed by a group of parents of poor students of DPS sector 30 Noida.
The parents alleged that the school had segregated the poor students from the classes held for other children.
The plea alleged that the poor students were discriminated against from others on issue of text books, uniforms, library facilities and extra curricular activities.
"The school played a fraud on the petitioners to deprive their wards of quality education by totally ignoring the mandate of the RTE act that children from disadvantaged and weaker sections admitted for free education are to be provided same quality education by providing infrastructure and compliance with specific norms and standard in the school as for other students in the class," the plea said.
Separate classes for the poor students were being held after 2 p.m., old torn books were given to them and one book was to be shared between three-four students, it alleged. The plea said that contrary to the mandate of the law the school was charging monthly fee.
The petitioner said that a complaint was made to Noida police on February 2 and a representation was also given to the child rights panel on February 5, but nothing much had changed.
IT: Purpose of section 88E is to grant an assessee to a limited extent rebate in tax on account of securities transaction tax already borne by it and this rebate would be equally applicable to tax as computed under section 115JB or tax as calculated under normal provisions of Act
■■■
[2013] 35 taxmann.com 60 (Delhi)
HIGH COURT OF DELHI
Commissioner of Income-tax - II
v.
MBL & Co. Ltd.*
BADAR DURREZ AHMED AND VIBHU BAKHRU, JJ.
IT APPEAL NOS. 1181 OF 2011 & 573 OF 2012
MAY 17, 2013
Section 88E, read with sections 87 and 115JB, of the Income-tax Act, 1961 - Rebate in case of - Securities transaction tax [In MAT cases] - Assessment year 2007-08 - Assessee-company was dealing in shares and securities - During year it paid securities transaction tax - Said tax borne by assessee exceeded tax payable as computed under normal provisions of Act as well as under section 115JB - Assessee claimed that it was not liable to pay any tax, as it was entitled to rebate as per provisions of section 88E - Assessing Officer held that rebate under section 88E could only be claimed on tax payable as per normal computation under Act and this rebate was not available on tax as computed under section 115JB - Whether purpose of section 88E was to grant an assessee to a limited extent rebate in tax on account of securities transaction tax already borne by it and this rebate would be equally applicable to tax as computed under section 115JB or tax as calculated under normal provisions of Act - Held, yes - Whether, therefore, assessee would be entitled to rebate under section 88E to extent of securities transaction tax borne by it - Held, yes [Paras 10 and 11] [In favour of assessee]
FACTS
| ■ | The assessee-company was a member of the National Stock Exchange and the Bombay Stock Exchange. It was dealing in shares and securities listed on the two stock exchanges. During the year it paid securities transaction tax. The said tax borne by the assessee exceeded the tax payable as computed under the normal provisions of the Act as well as under section 115JB. The assessee claimed that it was not liable to pay any tax, as it was entitled to rebate as per provisions of section 88E. | |
| ■ | The Assessing Officer held that rebate under section 88E could only be claimed on the tax payable as per normal computation under the Act and this rebate was not available on the tax as computed under section 115JB. | |
| ■ | On appeal, the Commissioner (Appeals) held that there was nothing in the language of section 88E that limited the availability of rebate only on the tax as calculated under the normal provisions of the Act. He accordingly allowed the challenge preferred by the assessee with regard to the rebate under section 88E. | |
| ■ | On second appeal, the Tribunal held that section 87 did not differentiate between the total income computed under the regular provisions or as calculated under section 115JB. Section 115JB only provided for an alternative method of calculating taxable income and tax payable thereon in respect of those assessees, who although disclosed the book profit but nonetheless either did not pay any tax or paid a low tax as their computation of income under the normal provision was either a loss or significantly lower than the disclosed book profit. It, therefore, upheld the order of the Commissioner (Appeals). | |
| ■ | On appeal to High Court: |
HELD
| ■ | The Minimum Alternate Tax (MAT) scheme was introduced by inserting section 115J in the Act by the Finance Act, 1987. The MAT scheme was improvised further and section 115JB was introduced in the Act by the Finance Act, 2000, with effect from 1-4-2001. The purpose of introducing the MAT scheme was to tax profitable companies, who otherwise were not liable to pay tax on account of various deductions and higher depreciation available to them in computing the taxable income under the normal provisions of the Act. The import of section 115JB is to provide an alternative method of computation of tax by accepting the book profit as shown by the assessee, albeit with certain adjustments as specified in Explanation 1 of section 115JB(2) and levying tax on the same as alternative to the tax computed under the other provisions of the Act. Thus in cases where the assessee's taxable income, as computed under various provisions of the Act, results in the tax payable thereon being lower than the tax as computed under section 115JB, the tax under the MAT scheme would be payable. [Para 8] | |
| ■ | It is also relevant to consider the scheme of the Act. Section 4 provides for the basis of charge of Income-tax with respect to the total income and is the charging section. Section 5 provides for the scope of total income of a person. Chapter III provides for certain income and certain entities whose incomes are not liable to be included in the total income which is eligible to tax. Chapter IV provides for computation of income under various heads of income. Chapter V provides for income of the persons which are to be clubbed while computing the income of an assessee. Chapter VI provides for the aggregation set off and carry forward of losses. Chapters IV, V and VI thus provide for the machinery provision for computing the total income of an assessee. Chapter VIA provides for deductions, which are allowable from the total income of an assessee as computed under chapters IV, V and VI. The resulting income is taxable under the Act. The Act has other machinery provisions in aid for computing, collection and recovery of tax. Chapter VIII provides for rebates and reliefs in respect of tax payable by an assessee. It can be seen from the scheme of the Act that there are extensive machinery provisions for computing the total income of an assessee and the tax payable thereon. The tax as determined is subject to rebate as may be available under chapter VIII. Section 87(1) provides that the rebate as available under sections 88, 88A, 88B, 88C, 88D and 88E will be allowed to an assessee in computing the income-tax payable by him on the total income of the assessee. There is a clear distinction in the scope of chapter VIII and other provisions which specify deductions that are available to an assessee in computing his total income. Whereas deductions allowed in computing the total income are a part of the machinery section to determine the total income of the assessee, the rebates under chapter VIII provide for certain deductions from the tax payable as computed on the total income of an assessee. [Para 9] | |
| ■ | Section 115JB provides for computation method for determining the total income of an assessee as an alternative to the total income as computed under chapters IV,V,VI, VIA and under other provisions of the Act. Section 115JB also specifies the rate at which tax is payable on the income as determined under the said section. Section 88E provides for remission of tax to the extent of securities transaction tax as paid by the assessee provided the condition specified therein is satisfied, namely, the income of the assessee includes income chargeable under the head 'profits and gains of business or profession', arising from taxable securities transactions, and the assessee furnishes along with the return of income, evidence of payment of securities transaction tax in the prescribed form. There is no reason why the remission in tax which is available under section 88E to an assessee be not available on the tax as computed under the MAT scheme, as both section 115JB as well as the other provisions of the Act have been enacted to provide the machinery for computing total income of an assessee which is exigible to income-tax. The rebate under section 88E provides for certain rebates available on the tax payable by an assessee. There would be no rationale to limit the plain words of section 88E and hold that the rebate in payment of the tax is only applicable to tax as determined under the normal provisions of the Act and not available with respect to MAT as computed under section 115JB. The purpose of section 88E is to grant an assessee to a limited extent rebate in tax on account of securities transaction tax already borne by him in respect of the business carried out by him in dealing in securities. This rebate would be equally applicable to tax as computed under section 115JB or as calculated under the normal provisions of the Act. [Para 10] | |
| ■ | Therefore, the provisions of section 88E would apply to the total income computed under section 115JB and the assessee would be entitled to a deduction to the extent of the securities transaction tax borne by it during the course of business in the relevant previous year. [Para 11] |
CASES REFERRED TO
Apollo Tyres Ltd. v. CIT [2002] 255 ITR 273/122 Taxman 562 (SC) (para 8) and CIT v. Horizon Capital Ltd. [2012] 204 Taxman 59/17 taxmann.com 8 (Kar.) (para 10).
N.P. Sahni for the Appellant. Salil Aggarwal, Ajay Wadhwa and P.C. Yadav for the Respondent.
JUDGMENT
Vibhu Bakhru, J. - These are appeals filed by the revenue under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the "said Act'') challenging the decisions of the Income Tax Appellate Tribunal. The Tribunal has held that rebate available to an assessee under Section 88E of the Act was liable to be adjusted from the tax as payable irrespective of whether the tax was computed under the provisions of Section 115JB of the Act or under the normal provisions of the Act. Both the appeals raise a common question of law, which has been framed as under:-
"Whether the Income Tax Appellate Tribunal is correct in holding that for the purpose of Section 115JB of the Act rebate under Section 88E of the Act cannot be taken into consideration or is not relevant/material?"
2. As the issue involved in both these appeals similar they are being disposed of together.
3. In ITA No.573/2012, the assessee company is a member of the National Stock Exchange and the Bombay Stock Exchange and is, inter-alia, engaged in the business of dealing in shares and securities listed on the two Stock Exchanges. The assessee filed a return of income for the assessment year 2007-2008 declaring an income of Rs. 3,66,77,400/- which was calculated as per normal provisions of the Act. The tax payable on such income was calculated at Rs. 3,17,981/- under the Act. The assessee had during the year paid Security Transaction Tax amounting of Rs. 1,07,19,814/- and hence claimed a rebate as per the provisions of Section 88E of the Act on that count. Accordingly, the net tax payable was claimed to be Nil. The profit and loss account of the assessee disclosed an income of Rs. 3,55,71,182/- and under the Minimum Alternative Tax scheme, the tax payable as per section 115JB of the Act was calculated at Rs. 35,57,118/-. The assessee claimed that even if tax was computed under the provisions of Section 115JB of the Act, no tax was payable as the assessee was entitled to claim a credit of Rs. 1,07,19,814/- under Section 88E of the Act being the Security Transaction Tax borne by the assessee.
4. The return filed by the assessee was taken up for scrutiny and the Assessing Officer framed an assessment calculating the tax on book profits under Section 115JB of the Act at Rs. 39,09,336/-. The Assessing Officer further declined to admit any rebate under Section 88E of the Act as he was of the view that rebate under Section 88E of the Act could only be claimed on the tax payable as per normal computation under the Act and this rebate was not available on the tax as computed under Section 1.15JB of the Act.
5. Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before CIT (Appeals). The CIT (Appeals) passed an order dated 25.06.2010, inter-alia, allowing the challenge preferred by the assessee with regard to the rebate under Section88E of the Act. The CIT (Appeals) held that a taxing statute needs to be interpreted strictly and there was nothing in the language of Section 88E of the Act that limited the availability of rebate only on the tax as calculated under the normal provisions of the Act. The revenue preferred an appeal before the Income Tax Appellate Tribunal. The Tribunal also did not accept the contention on behalf of the revenue that rebate under Section 88E of the Act would not be available against the tax as computed under Section 115JB of the Act. The Tribunal held that Section 87 of the Act did not differentiate between the total income computed under the regular provisions or as calculated under Section 115JB of the Act. Section 115JB only provides for an alternative method of calculating taxable income and tax payable thereon, in respect of those assessee's who although they disclosed a book profit but nonetheless, either did not pay any tax or paid a low tax as their computation of income under the normal provision was either a loss or significantly lower than the disclosed book profits.
6. The facts in the case of ITA No.1181/2011 are similar. In this case also, the assessee is a member of the National Stock Exchange and the Bombay Stock Exchange and carries on the business of dealing in securities listed on the said Stock Exchanges. The assessee disclosed an income of Rs. 8,12,68,281/- as per the normal computation provisions under the Act. The book profits of the assessee were higher and the income liable to tax under the MAT scheme was disclosed as Rs. 8,17,58,465/-. The assessee had borne Security Transaction Tax of Rs. 3,37,07,299/- whereas the tax payable under the normal computational provisions of the Act worked out to be Rs. 2,43,80484/-. The tax payable in terms of Section 115JB of the Act was computed as Rs. 81,75,847/-. Since the Security Transaction Tax borne by the assessee exceeded the tax payable as computed under the normal provisions of the Act as well as under Section 115JB of the Act, the assessee declared that it was not liable to pay any tax. The Assessing Officer passed an Assessment Order dated 22.12.2009 for the relevant assessment year, 2007-2008, holding that the rebate under Section 88E was not available to the assessee while determining the tax payable as computed under the provisions of Section 115JB. An appeal was preferred by the assessee before CIT (Appeals) challenging the aforesaid view of the Assessing Officer, which was allowed by the order dated 29.03.2010. The revenue preferred an appeal before the Income Tax Appellate Tribunal. Tribunal upheld the decision of the CIT (Appeals) and found that there was no basis for declining the rebate under Section 88E to the assessee with respect to the tax computed under Section 115JB.
7. Before proceeding to consider the rival contentions, it is appropriate to quote the relevant provisions of the Act. Section 115JB, Section 87 and Section 88E of the Act are quoted below-
''115JB - Special provision for payment of tax certain companies - (1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee, being a company, the income-tax, payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 2007, is less than ten per cent of its book profit, [such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of ten per cent].''
| ** | ** | ** |
"87. Rebate to be allowed in computing income-tax - (1) In computing the amount of income-tax on the total income of an assessee with which he is chargeable for any assessment year, there shall be allowed from the amount of income-tax (as computed before allowing the deductions under this Chapter), in accordance with and subject to the provisions of sections 88, 88A, 88B, 88C, 88D and 88E, the deductions specified in those sections.
(2) The aggregate amount of the deductions under section 88 or section 88A or section 88B or section 88C or section 88D or section 88E shall not, in any case, exceed the amount of income-tax (as computed before allowing the deductions under this Chapter) on the total income of the assessee with which he is chargeable for any assessment year.''
| ** | ** | ** |
"88E. Rebate in respect of Securities Transaction Tax - (1) Where the total income of an assessee in a previous year includes any income, chargeable under the head "Profits and gains of business or profession", arising from taxable securities transactions, he shall be entitled to a deduction, from the amount of income-tax on such income arising from such transactions, computed in the manner provided in sub section(2), of an amount equal to the securities transaction tax paid by him in respect of the taxable securities transactions entered into in the course of his business during that previous year:
Provided that no deduction under this sub-section shall be allowed unless the assessee furnishes alongwith the return of income, evidence of payment of securities transaction tax in the prescribed form:
Provided further that the amount of deduction under this sub-section shall not exceed the amount of income-tax on such income computed in the manner provided in sub-section (2).
(2) For the purposes of sub-section (1), the amount of income-tax on the income arising from the taxable securities transactions, referred to in that sub-section, shall be equal to the amount calculated by applying the average rate of income-tax on such income.
Explanation. - For the purposes of this section, the expressions, "taxable securities transaction" and "securities transaction tax" shall have the same meanings respectively assigned to them under Chapter VII of the Finance (No 2) Act, 2004.'' I
8. Minimum Alternate Tax (MAT) scheme was introduced by inserting section 115J in the Act by the Finance Act, 1987. The Finance Minister in his speech indicated the object of introducing the said scheme as under:
''It is only fair and proper that the prosperous should pay at least some tax. the phenomenon of so-called ''zero tax'' highly profitable companies deserves attention. In 1983, a new section 80VVA was inserted in the Act so that all profitable companies pay some tax. this does not seem to have helped and is being withdrawn. I now propose to introduce a provision whereby every company will have to pay a ''minimum corporate tax'' on the profits declared by it in its own accounts. Under this new provision, a company will pay tax on at least 30 percent of its book profit. In other words, a domestic widely held company will pay tax of at least 15 percent of its book profit. This measure will yield a revenue gain of approximately Rs 75 crores.''
The MAT scheme was improvised further and section 115JB was introduced in the Act by the Finance Act, 2000 w.e.f. 01.04.2001. At the material time, the rate of MAT was prescribed at 7.5%. The purpose of introducing the MAT scheme was to tax profitable companies who otherwise were not liable to pay tax on account of various deductions and higher depreciation available to them in computing the taxable income under the normal provisions of the Act. The import of Section 115JB of the Act is to provide an alternative method of computation of tax by accepting the book profits as shown by the assessee, albeit with certain adjustments as specified in Explanation 1 of Section 115 JB (2) of the Act and levying tax on the same as alternative to the tax computed under the other provisions of the Act. Thus, in cases where assessee's taxable income, as computed under various provisions of the Act, results in the tax payable thereon being lower than the tax as computed under Section 115JB, the tax under the minimum alternative tax scheme as contained in Section 115JB would be payable. As held by the Supreme Court in the case of Apollo Tyres Ltd. v. CIT [2002] 255 ITR 273/122 Taxman 562, the Assessing Officer while computing the tax payable under Section 115J of the Act was not required to make any assessment as to the profits of the assessee but was required to accept the audited final accounts and compute the tax at the rate specified.
9. It is also relevant to consider the scheme of the Act. Section 4 of the Act provides for the basis of charge of Income Tax with respect to the total income and is the charging section. Section 5 of the Act provides for the scope of total income of a person. Chapter III of the Act provides for certain income and certain entities whose incomes are not liable to be included in the total income which is eligible to tax. Chapter IV of the Act provides for computation of income under various heads of income. Chapter V of the Act provides for income of the persons which are to be clubbed while computing the income of an assessee. Chapter VI of the Act provides for the aggregation set off and carry forward of losses. Chapters IV, V and VI of the Act thus provide for the machinery provision for computing the total income of an assessee. Chapter VI A of the Act provides for deduction which are allowable from the total income of an assessee as computed under the Chapters IV, V and VI of the Act. The resulting income is taxable under the Act. The Act has other machinery provisions in aid for computing, collection and recovery of tax. Chapter VIII of the Act provides for rebate and reliefs in respect of tax payable by an assessee. It can be seen from the scheme of the Act that there are extensive machinery provisions for computing of total income of an assessee and the tax payable thereon. The tax as determined is subject to rebate as may be available under the Chapter VIIIA of the Act. Section 87(1) of the Act provides that the rebate as available under Sections 88, 88A, 88B, 88C, 88D and 88E will be allowed to an assessee in computing the income tax payable by him on the total income of the assessee. There is a clear distinction in the scope of chapter VIIIA of the Act and other provisions which specify deductions that are available to an assessee in computing his total income. Whereas deductions allowed in computing the total income are a part of the machinery section to determine the total income of the assessee, the rebates under the Chapter VIIIA of the Act provide for certain deductions from the tax payable as computed on the total income of an assessee.
10. Section 115JB of the Act provides for computation method for determining the total income of an assessee as an alternative to the total income as computed under Chapters IV, V, VI, VIA of the Act and under other provisions of the Act. Section 115JB also specifies the rate at which tax is payable on the income as determined under the said section. Section 88E provides for remission of tax to the extent of Securities Transaction Tax as paid by the assessee provided the condition specified therein is satisfied, namely, the income of the assessee includes income chargeable under the head "Profits and gains of business or profession", arising from taxable securities transactions, and the assessee furnishes alongwith the return of income, evidence of payment of securities transaction tax in the prescribed form. We find that there is no reason why the remission in tax which is available under Section 88E of the Act to an assessee be not available on the tax as computed under the Minimum Alternative Tax scheme as both Section 115JB of the Act as well as the other provisions of the Act referred above have been enacted to provide the machinery for computing total income of an assessee which is exigible to income tax. The rebate under Section 88E of the Act provides for certain rebates available on the tax payable by an assessee. In our view, there would be no rationale to limit the plain words of Section 88E of the Act and hold that the rebate in payment of the tax is only applicable to tax as determined under the normal provisions of the Act and not available with respect to minimum alternative tax as computed under Section 115JB of the Act. The purpose of Section 88E of the Act is to grant an assessee, to a limited extent, credit in tax on account of Security Transaction Tax already borne by him in respect of the business carried out by him in dealing in securities. This rebate would be equally applicable to tax as computed under Section 115JB of the Act as under the normal provisions of the Act. A division bench of the High Court of Karnataka has, in the case of Commissioner of Income Tax v. Horizon Capital Ltd. [2012] 264 Taxman 59/ 17 taxmann.com 8, held that the rebate under Section 88E of the Act would be available to tax as payable under Section 115JB of the Act. The relevant extract from the said judgment is quoted below:-
15. Under Section 88E, where the total income of an assessee in a previous year includes any income chargeable under the head "Profits and gains of business of profession", arising from taxable securities transactions, he shall be entitled to a deduction, from the amount of income-tax on such income arising from such transactions. Section also provides the limit to which deductions shall be given.
16. Therefore, it is clear that the assessee is liable to pay Securities Transaction Tax when he enters into securities transaction. Tax is payable simultaneously after realizing the consideration. However, if that transaction is included in the total income of the assessee where the total income is assessed either under the provisions of the Act or under Section 115JB when tax chargeable on such income is arrived at, he is given the benefit of tax deductions of the amount, which he has paid under section 88E by virtue of Section 87. When under Section 82A, the assessee is made liable to pay tax with an assurance that it will be deducted and 87 of the Act gives effect to such promise made under the statute. That is the reason why the word used to rebate. The amount paid is handed back to the assessee. In other words, payment of tax twice on the same income is avoided.
17. Therefore, the contention that this benefit is not available to the assessee whose total income is assessed under Section 115JB has no substance. In other words, when the total income is assessed and the tax chargeable is computed, it is from that tax which is chargeable, the tax paid under Section 88E is given deduction, by way of rebate, under Section 87 of the Act. This is the legislative intent. That is a promise to give deduction of the tax already paid. This is the mode in which tax already paid is handed back at the time of final computation. Therefore, the judgment referred by the Tribunal is strictly in accordance with law and does not suffer from any legal infirmity, which called for interference. We do not see any substantial question of law involved in this appeal, which merits admission. The appeal is dismissed.''
11. We are also of the view, and accordingly hold, that the Income Tax Appellate Tribunal was correct in holding that the provisions of Sections 87 and 88E of the Act apply to the total income computed under Section 115JB of the Act and the assessee would be entitled to a deduction to the extent of the Security Transaction Tax borne by him during the course of business in the relevant previous year.
12. The question framed in the present appeals is answered against the revenue and appeals are dismissed. No order as to cost
2013-TIOL-623-ITAT-AHM
IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH 'A' AHMEDABAD
BENCH 'A' AHMEDABAD
ITA No.2412/Ahd/2010
Assessment Year: 2005-06
Assessment Year: 2005-06
ASSTT COMMISSIONER OF INCOME TAX
(OSD), CIR-9, PRATYAKSH KAR BHAVAN
1st FLOOR, OPP SAHAJANAND COLLEGE
PANJRAPOLE, AMBAWADI, AHMEDABAD
(OSD), CIR-9, PRATYAKSH KAR BHAVAN
1st FLOOR, OPP SAHAJANAND COLLEGE
PANJRAPOLE, AMBAWADI, AHMEDABAD
Vs
SHRI NARENDRABHAI P PATEL
C-27, SURJIT SOCIETY, NR
VIDYANAGAR ROAD
THAKARBAPANAGAR
AHMEDABAD
PAN NO:AASPP5751D
C-27, SURJIT SOCIETY, NR
VIDYANAGAR ROAD
THAKARBAPANAGAR
AHMEDABAD
PAN NO:AASPP5751D
G C Gupta, VP and A Mohan Alankamony, AM
Dated: May 10, 2013
Appellant Rep by: Shri Shelley Jindal, Sr. DR
Respondent Rep by: None
Respondent Rep by: None
Income Tax - Section 271(1)(c) – Whether non-deposition of TDS in time is a technical breach of provisions of the Act, and hence penalty u/s 271(1)(c) is not leviable.
Assessee had filed its return of income declaring substantial income. During the course of assessment proceedings Assessing Officer while going through the Tax Audit Report observed that TDS deducted on certain payments in respect of certain expenses were not deposited in time. Accordingly, he had disallowed deduction of those expenses under provisions of Section 40(a)(ia) of the Act stating that TDS deducted was not paid within the stipulated date. He had also initiated penalty u/s 271(1)(c) of the Act. In appeal filed against the aforesaid addition the CIT(A) affirmed the order of AO in view of relevant provisions of Section 40(a)(ia) of the Act. In this backdrop Assessing officer levied penalty u/s 271(1)(c) of the Act. The CIT(A) deleted the penalty taking note that though addition was sustained in appeal, late deposit of TDS of the assessee caused no loss to Revenue. It was only a technical breach of provisions where it had delayed in depositing the TDS to government account.
On appeal, the ITAT held that,
++ the learned AO could find the discrepancy with regard to the short remittance of TDS in the government treasury. Thus, the assessee has not furnished any inaccurate particulars of income in his return of income as pointed out by the learned AO. The ITAT Ahmedabad "D" Bench has taken a view on this issue in ITA No.228/Ahd/2010 in the case of DCIT Vs M/s. L. G. Chaudhary (2012-TIOL-205-ITAT-AHM) for the assessment year 2006-07 vide order dated 16-03-2012 that in similar situation, penalty cannot be levied;
++ placing reliance on the case laws relied upon by the learned CIT(A) and the decision rendered by ITAT Ahmedabad Benches, we hereby delete the penalty levied by the learned AO for disallowance of expenditure u/s 40(a) (ia) of the Act of Rs.59,40,914/-
Assessee had filed its return of income declaring substantial income. During the course of assessment proceedings Assessing Officer while going through the Tax Audit Report observed that TDS deducted on certain payments in respect of certain expenses were not deposited in time. Accordingly, he had disallowed deduction of those expenses under provisions of Section 40(a)(ia) of the Act stating that TDS deducted was not paid within the stipulated date. He had also initiated penalty u/s 271(1)(c) of the Act. In appeal filed against the aforesaid addition the CIT(A) affirmed the order of AO in view of relevant provisions of Section 40(a)(ia) of the Act. In this backdrop Assessing officer levied penalty u/s 271(1)(c) of the Act. The CIT(A) deleted the penalty taking note that though addition was sustained in appeal, late deposit of TDS of the assessee caused no loss to Revenue. It was only a technical breach of provisions where it had delayed in depositing the TDS to government account.
On appeal, the ITAT held that,
++ the learned AO could find the discrepancy with regard to the short remittance of TDS in the government treasury. Thus, the assessee has not furnished any inaccurate particulars of income in his return of income as pointed out by the learned AO. The ITAT Ahmedabad "D" Bench has taken a view on this issue in ITA No.228/Ahd/2010 in the case of DCIT Vs M/s. L. G. Chaudhary (2012-TIOL-205-ITAT-AHM) for the assessment year 2006-07 vide order dated 16-03-2012 that in similar situation, penalty cannot be levied;
++ placing reliance on the case laws relied upon by the learned CIT(A) and the decision rendered by ITAT Ahmedabad Benches, we hereby delete the penalty levied by the learned AO for disallowance of expenditure u/s 40(a) (ia) of the Act of Rs.59,40,914/-
Revenue's appeal dismissed
ORDER
Per: A Mohan Alankamony:
This appeal is preferred by the Revenue aggrieved by the order of the learned CIT(A)-XV, Ahmedabad dated 31st May, 2010, for the assessment year 2005-06 in Appeal No. CIT(A)-XV/ACIT(OSD)/Cir.9/30/10-11, challenging the deletion of penalty u/s 271(1) (c) of the IT Act on account of disallowance made u/s 40 (a) (ia) of the IT Act of Rs.59,40,914/-.
2. Briefly, the facts of the case are that the assessee filed return of income declaring income of Rs.15,05,881/- on 31-10-2005, for the assessment year 2005-06. It was noticed by the learned AO from the audit report filed with the return of income that the assessee had not remitted the tax deducted at source with respect to payment made for an amount of Rs.2,65,50,066/- in the government treasury within the stipulated date. Therefore, the learned AO disallowed expenditure of the aforesaid sum and added to the income of the assessee invoking the provisions of section 40(a) (ia) of the Act and also initiated penalty proceedings u/s 271 (1) (c) read with 274 of the Act for furnishing inaccurate particulars of income on 20-12-2007. However, the learned CIT(A) vide his order dated 04-12-2008 sustained an addition of Rs.1,76,49,772/- in view of the amendment brought in the section vide Finance Act, 2008. Thereafter, the learned AO levied penalty u/s 271 (1) (c) of the Act vide his order dated 30-03-2010 for an amount of Rs.59,40-,914/- being 100% of the tax evaded on the addition sustained by the learned CIT(A) of Rs.1,76,49,772/-. On appeal before the learned CIT(A), the penalty was deleted. The relevant portion of the order of the learned CIT(A) is reproduced herein below for reference:
"Even the addition which was sustained in appeal on that amount TDS had been deposited in the government account in June 2005 and August 2005, though it should have been deposited by March 2005. Thus there was no loss to revenue only a slight delay in deposit of TDS in government account.Thus after going through rival submissions I am of the opinion that there was technical breach on the part of the appellant with respect to delay in deposit of TDS in the government account for which penalty u/s 271 (1) (c) is not leviable in view of following Hon'ble Supreme Court decisions:i. Hindustan Steel Limited v. State of Orissa – 83 ITR 27(SC) = (2002-TIOL-148-SC-CT): wherein it has been held that the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act.ii. Union of India v. Rajasthan Spinning & Weaving Mills(2009) 224 CTR (SC) 1 =(2009-TIOL-63-SC-CX) wherein Hon'ble Supreme Court has discussed the decision delivered by their Lordships in the case of Union of India v. Dharmendra Textile Processors and have observed as under:"21. From the above, we fail to see how the decision I Dharmendra Textile can be said to hold that section 11AC would apply to every case of non-payment or shot-payment of duty regardless of the conditions expressed mentioned in section for its application.23. the decision in Dharmendra Textile must, therefore, be understood to mean that though the application of section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section, once the section is applicable in a case the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section(2) of section 11A. That is what Dharmendra Textile decides."It was argued that the decision in Rajasthan Spinning & Weaving Mills was in line with the earlier decisions of Supreme Court wherein it was held that wilful concealment or wilful furnishing of inaccurate particular is essential ingredient for attracting penalty u/s. 271(1) (c) which is not the case here. The AO is directed to delete the penalty imposed of Rs.59,40,914."
3. Though the learned AR did not appear before the Bench at the time of hearing, since the issue had been already decided by the Tribunal Ahmedabad Benches consistently, the case was taken up for hearing. The learned DR supported the order of the learned AO and prayed his order may be sustained.
4. We have heard the learned DR and carefully perused the materials on record. From the facts of the case it is apparent that the assessee has furnished the details of the TDS deducted and amount remitted in the government treasury before the revenue as annexure to the tax audit report along with the return of income filed. Only from this information furnished by the assessee, the learned AO could find the discrepancy with regard to the short remittance of TDS in the government treasury. Thus, the assessee has not furnished any inaccurate particulars of income in his return of income as pointed out by the learned AO. The ITAT Ahmedabad "D" Bench has taken a view on this issue in ITA No.228/Ahd/2010 in the case of DCIT Vs M/s. L. G. Chaudhary = (2012-TIOL-205-ITAT-AHM) for the assessment year 2006-07 vide order dated 16-03-2012 that in similar situation, penalty cannot be levied. The relevant Para of the order is reproduced herein below:
"4. We have heard the rival submissions and perused the orders of the authorities below. The learned DR relied on the order of the AO. On the other hand, the learned AR submitted before us that the issue under consideration is covered by the decision of ITAT Ahmedabad "A" Bench dated 30-07-2010 in ITA Nos. 789 to 791/Ahd/2007 in the case of DCIT Vs Mazdal Ltd. and the decision of ITAT "D" Bench dated 22-02-2011 in ITA No.2865/Ahd/2010 in the case of ACIT Vs M/s. Saraswati Construction Co., wherein the issue has been decided by the Tribunal in favour of the assessee by dismissing the departmental appeals, copy of which were placed on record. The Tribunal in its order dated 22-02-2011 in the case of M/s. Saraswati Construction Co. (supra) in Para 5 Page 6 has held as under:"5. In the present case before us, the facts are undisputed that the assessee had deducted TDS from gross contact payment to catering contractor but the same was not deposited into govt. exchequer before expiry of time prescribed under sub-section 1 of section 2000 of the Act in view of section 40(a) (ia) of the Act. We find that this is not allowable as deduction while computing the income chargeable under the head "profit & gains of business or profession" for the year. We find from the orders of the lower authorities that there is no allegation that the payment of catering expenses on which TDS is deducted but not paid to Govt. exchequer is non-genuine or bogus. It is also a fact that the lower authorities have not brought anything or not disputed that the payment is excessive or unreasonable. The disallowance is simply made either for non-deduction of TDS in view of provisions of Section 40(a) (ia) of the Act or nonpayment of TDS deducted to the govt. exchequer. In view of the above discussion, that the legal fiction crated by Section 40(a) (ia) will not apply to the provisions of Section 271 (1) (c) of the Act, the disallowance made simply by invoking the provisions of Section 40(a) (ia) of the Act will not attract penalty for furnishing of inaccurate particulars of income because there is no inaccurate particulars of income in the return. Accordingly, we confirm the order of CIT(A) deleting the penalty and this issue of Revenue's appeal is dismissed."The learned AR further pleaded that the assessee is not liable for penalty as is held by the learned CIT(A) and the same be upheld by the Tribunal.4.1 On perusal of the records, we find that the addition on account of disallowance of Rs.5,85,87,521/- was made by the AO due to non-payment of TDS in time which is technical in nature. Hence, the same does not amount to concealment of income or furnishing of inaccurate particulars of income by the assessee. Further, the addition of Rs.1,03,222/- on account of disallowance of expenses was made on estimate basis. It is also settled law that addition made on estimate basis does not attract penalty. The learned CIT(A) on proper appreciation of facts has rightly deleted the penalty made by the AO on both the above issues. The learned DR also has not produced any material on record to controvert the findings of the learned CIT(A).4.2 The same issue has also been decided in favour of the assessee by the ITAT Ahmedabad "B" Bench vide order dated 13-03-2012 in ITA No.1041/Ahd/2010 for AY 2006-07 in the case of M/s. Lucky Star International by dismissing the departmental. The findings of the Tribunal in Para 6 to 8 are reproduced as under:"6. We have heard the learned both the parties, perused the orders of the authorities below and considered the materials on record. During the course of hearing of the appeal the learned DR relied upon the order of the authorities below. On the other hand, the learned AR referring to Para 3 and 4 of the penalty order, submitted that all the additions in respect of commission expenses of Rs.10,46,163/-, clearing and forwarding expenses of Rs.2,01,037/- and fees and legal expenses of Rs.1,10,200/- (totalling to Rs.13,57,400/-) have been disallowed holding that the assessee has violated the provisions of section 40(a) (ia) of the IT Act and that the AO has levied penalty on the said amount being fully satisfied that the assessee has furnished inaccurate particulars of its income to the extent of Rs.13,57,400/- and treating it to be a fit case for levying penalty. The assessee also submitted that the issue is covered by the decision of the Hon'ble Supreme Court in the case of CIT Vs Reliance Petro Producs Pvt. Ltd., 2010-TIOL-21-SC-IT in SLP(C) NO.27161 of 2008 dated 17th March, 2010 (PB-4) wherein it has been held as under:"Income tax – 271 (1) (c) – Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, attract penalty under Section 271(1) (c): By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars."6.1 The assessee further referred to the decision of ITAT Delhi "A" Bench in the case of DCIT Vs Asian Hotels Ltd., 2011-TIOL-795-ITAT-DEL(ITA No.3820/Del/2010 dated January,7, 2011 (PB-1) wherein it has been held as under:"Income Tax – Sections 40(a) (ia), 271 (1) (c) – Whether penalty is leviable in a case where the substantial returned income proves the bonafide of assessee vis-à-vis disallowance of 40(a) (ia).Assessee Company filed its return of income on 22nd December 2003 declaring an income of Rs.6.32 Crores. An assessment was passed u/s 143(3) on 30th March 2006 whereby total income of the assessee has been determined at Rs.11.53Crores. During the course of assessment proceeding Ld. AO found that the assessee had made the provisions in respect of certain foreign payments and claimed these provisions without deducting corresponding TDS. AO disallowed this claim of assessee and levied penalty under section 271(1)(C) relying upon the decision of Reliance 2010-TIOL-21-SC-ITCIT(A) deleted the penalty - Matter reached to the ITAT."After hearing the parties the ITAT held as under,++ there is no doubt that the claim made by the assessee is in respect of business expenses. Had the assessee deducted the TDS and paid it to the Govt. amount then its deduction could be allowed. According to the assessee it has paid the tax also in the next year for the sum of Rs.7,07,294/- and even thereafter deduction was not granted to it. Ld. First Appellate Authority has accepted the plea of assessee that it was a bonafide error;++ taking into consideration the overall facts and circumstances particularly the amount of disallowance vis-a-vis the returned income, we are of the view that it is a bonafide lapse at the end of the assessee. There is no deliberate attempt to conceal the particulars of income. Ld. CIT(A) has rightly appreciated the facts and circumstances we do not see any reason to interfere in his order."The assessee further submitted that the facts in the above case are identical to that of the present case of the assessee and the issue is covered by the above decision.6.2 The assessee further submitted that the issue is also covered by the decision of ITAT Hyderabad "A" Bench dated 17th June, 2010 in the case of ACIT Vs M/s. Seaways Shipping Ltd. in ITA No.80/H/2011 for AY 2005-06 (PB 9 to 11) wherein also identical issue has been decided by the Tribunal in favour of the assessee and against the Revenue vide Para 5 of its order by holding as under:"At the time of hearing on 16.6.2011, none appeared on behalf of the assessee. We heard the DepartmentalRepresentative. In this case, penalty is levied for disallowance of expenditure u/s 40(a) (ia) of the Income Tax Act. Non deduction of TDS by the assessee was resulted in disallowance of expenditure u/s 40(a) (ia), that itself cannot be construed as furnishing inaccurate particulars of income or concealment of income. The assessee has failed to deduct TDS which resulted in disallowance of expenditure. In our opinion, the mistake committed by the assessee was compensated by disallowing the expenditure. Further, the Revenue cannot penalise the assessee by levying penalty u/s 271 (1) (c) of the Act. In order to levy penalty u/s 271 (1) (c) of the Act, there has to be concealment of particulars of income of the assessee or the assessee must have furnished inaccurate particulars of its income. Present is not the case of concealment of income or it is not the case of Revenue that the assessee has furnished inaccurate particulars of income. The department has not found out that the assessee has furnished any factual incorrect information and the assessee is not guilty of furnishing of inaccurate particulars of income. In our opinion, the conditions laid down in section 271(1) (c) of the Act is not complied with. Being so, levy of penalty is not justified merely because the assessee has claimed certain expenditure that expenditure is not eligible in view of the provisions of section 40(a) (ia) of the Act and for that reason, expenditure is disallowed. Penalty cannot be levied for mere making of a claim of expenditure which is not sustainable and deletion of penalty by the learned CIT(A) is justified. We place reliance on the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Reliance Petro Products (P) Ltd. (322 ITR 158 (SC) =(2010-TIOL-21-SC-IT). Accordingly the ground raised by the revenue holds no merit."6.3 The learned DR in his rejoinder has not produced any material to controvert the aforesaid submissions of the assessee.7. In view of above discussions and the decisions cited by the assessee, we find force in the submissions of the assessee. We are of the view that the learned CIT(A) on proper appreciation of the facts of the case, considering the submissions of the assessee and the citations referred to by the assessee before him, has rightly deleted the penalty and we find no justification to interfere in the order of the learned CIT(A) deleting the penalty in the matter in the absence of any material produced by the learned DR to controvert the same. We confirm his findings. There is no merit in the ground of appeal of the Revenue. The same is accordingly dismissed.8. In the result, the appeal of the revenue is dismissed."4.3 Considering the facts of the case and in view of the above discussions, we do not find any justification to interfere with the findings of the learned CIT(A). We confirm his findings. There is no merit in this departmental appeal. Accordingly, we dismiss the appeal of the Revenue."
4.1 Thus, placing reliance on the case laws relied upon by the learned CIT(A) and the decision rendered by ITAT Ahmedabad Benches, we hereby delete the penalty levied by the learned AO for disallowance of expenditure u/s 40(a) (ia) of the Act of Rs.59,40,914/-.
5. In the result, the appeal of the revenue is dismissed.
(Order pronounced in the open Court on 10/05/2013)
2013-TIOL-640-ITAT-MUM
IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH 'I' MUMBAI
BENCH 'I' MUMBAI
ITA Nos.167 And 223/Mum/2010
Assessment Year: 2002-03
Assessment Year: 2002-03
INFRASTRUCTURE LEASING AND FINANCIAL SERVICES LTD
FINANCIAL CENTRE, PLOT NO C-22,
G BLOCK, BANDRA-KURLA COMPLEX,
BANDRA (E), MUMBAI-400051
PAN NO: AAACI0989F
FINANCIAL CENTRE, PLOT NO C-22,
G BLOCK, BANDRA-KURLA COMPLEX,
BANDRA (E), MUMBAI-400051
PAN NO: AAACI0989F
Vs
DCIT
RANGE 10(1), MUMBAI
RANGE 10(1), MUMBAI
DCIT
RANGE 10(1), MUMBAI
RANGE 10(1), MUMBAI
Vs
INFRASTRUCTURE LEASING AND FINANCIAL SERVICES LTD
FINANCIAL CENTRE, PLOT NO C-22,
G BLOCK, BANDRA-KURLA COMPLEX,
BANDRA (E), MUMBAI-400051
PAN NO: AAACI0989F
FINANCIAL CENTRE, PLOT NO C-22,
G BLOCK, BANDRA-KURLA COMPLEX,
BANDRA (E), MUMBAI-400051
PAN NO: AAACI0989F
B R Mittal, JM And Rajendra, AM
Dated: July 3, 2013
Appellant Rep by: Mr P V Lakhani
Respondent Rep by: Mr Giraja Dayal, CIT (DR)
Respondent Rep by: Mr Giraja Dayal, CIT (DR)
Income Tax – Sections 115JB, 143(3), 147, 148(2) – Whether the AO can review his concluded assessment by invoking reassessment proceedings – Whether role of the Audit parties is to point out factual mistakes and not to advise the AO on legal matters – Whether, if an AO, reopens the assessment on the legal advice of the audit party, it cannot be held as the formation of an independent opinion for the purpose of section 147.
Assessee-company, engaged in the business of leasing and investment banking, filed its original return that was assessed u/s 143(3) of the Act on 25.02.2005. AO determined the total income of the assessee at Rs.90,48,86,939/-under the normal provisions and at Rs. 85,99,59,539/- u/s.115JB of the Act. While passing order u/s 143(3) of the Act, AO made the additions on account of leasing equalisation reserve was added to the total income of the assessee, while computing the income under the normal provisions of the Act, but while computing the book profit u/s 115JB of the Act, AO did not add the said amount. Similarly, provision for investment valuation was considered by the AO for computing income as per the provisions of section 115JB of the Act, but same was not considered for computing income under normal provisions of the Act.
Subsequently, AO re-opened the case u/s 147 of the Act as he was of the opinion that there were reasons to believe that certain income chargeable to tax had escaped assessment. Accordingly, a notice u/s 148 of the Act was issued. The assessee vide his letter dated 05.01.2006 stated that the original return filed by it should be taken as the return filed in response to notice issued u/s 148.
During re-assessment proceedings, the AO asked for various details from the assessee and after considering the explanation of the assessee certain additions/disallowances were made in the assessment order passed u/s 143(3) r.w. section 147 of the Act. CIT(A) upheld the action of the AO in initiating reassessment proceedings.
On further appeal, the ITAT held that,
++ reopening of a completed assessment, is governed by certain principles. One of the settled principles, in this regard, is that the assessing authority cannot keep improving his case from time to time and that the reassessment proceedings have to stand or fall on the basis of what is stated in the reasons recorded u/s.148(2) and nothing more. Secondly, it can hardly be disputed that once the AO notices a certain claim made by the assessee in the return filed, has some doubt about eligibility of such a claim and, therefore, raises queries, extracts response from the assessee, thereafter in what manner such claim should be treated in the final order of assessment, is an issue on which the assessee would have no control whatsoever. Whether the AO allows such a claim, rejects such a claim or partially allows and partially rejects the claim, are all options available with the AO, over which the assessee beyond trying to persuade the AO, would have no control whatsoever;
++ if the AO on his own for reasons best known to him, chooses not to assign reasons for not rejecting the claim of an assessee after thorough scrutiny, it can hardly be stated by the Revenue that the AO cannot be seen to have formed any opinion on such a claim. Such a contention, would be devoid of merits. If a claim made by the assessee in the return is not rejected, it stands allowed. If such a claim is scrutinised by the AO during assessment, it means he was convinced about the validity of the claim. His formation of opinion is thus complete. Merely because he chooses not to assign his reasons in the assessment order would not alter this position. It may be a non-reasoned order but not of acceptance of a claim without formation of opinion. In other words, in a situation where the AO during scrutiny assessment, notices a claim of exemption, deduction or such like made by the assessee, having some prima facie doubt raises queries, asking the assessee to satisfy him with respect to such a claim and thereafter, does not make any addition in the final order of assessment, he can be stated to have formed an opinion whether or not in the final order he gives his reasons for not making the addition;
++ jurisdictional High Court, in the case of Export Credit Guarantee Corporation of India Ltd. (2013-TIOL-56-HC-MUM-IT), has held that when an assessment is sought to be reopened within a period of four years from the end of the relevant assessment year, the test to be applied is whether there is tangible material to do so. What is tangible is something which is not illusory, hypothetical or a matter of conjecture. Something which is tangible need not be something which is new. Thus, the most important factor to issue notice u/s.148 of the Act is existence of tangible material;
++ the AO even within a period of four years cannot reopen an assessment merely on the basis of a change of opinion. The AO has no power to review an assessment which has been concluded. But, where he has tangible material to come to the conclusion that there is an escapement of income from assessment, the power to reopen can be exercised. In the case under consideration only tangible material referred to by the AO is his errors in including/excluding certain items of income while calculating the income of the assessee under the normal provisions or under MAT provisions;
++ reassessment proceedings were initiated by the AO after objections were received from the internal audit party, the dates of audit objections and the dates of issue of notice u/s. 148 establish the fact that there was nexus between the two. From the sequence of the events it is clear that the AO had issued the notice for reopening after considering the issues raised by the audit party. The items involved in the audit objections find place in the reasons recorded by the AO. While passing the original assessment order, AO had called for the details about lease equalisation reserve as well as about the writing off of non- performing assets. Question No. 16 & 18 of the questionnaire issued by the AO on 16.11.2004 is about these two issues. After considering the submissions of the assessee, AO decided that lease equalisation reserve and provision of diminution in investment has to be given particular treatment. One of the items was taxed under normal provisions and not under MAT provisions, whereas the other item was considered for MAT provisions and not for computation under normal provisions of the Act. Thus, an informed decision was taken by the AO about both the items. In these circumstances, if AO decided to issue a fresh notice for reopening the completed assessment, it has to be treated as change of opinion. It can also be said that the order of assessment that was passed by the AO u/s 143(3) is not silent in respect of points on the basis of which the assessment was sought to be reopened. There is merit in the contention which has been urged on behalf of the assessee that queries had been raised during the course of the assessment and the assessment order would ex facie disclose that the AO had applied his mind to the points on the basis of which the assessment was now sought to be reopened. Thus, no tangible material existed to reopen the assessment in the present case;
++ role of the Audit parties is to point out the factual mistakes and not to advise the AO on legal matters. Therefore, if an AO, reopens the assessment on the legal advice of the audit party, it cannot be held forming of an independent opinion. Whether a particular item has to be added or not while computing the income under normal provisions or MAT provisions is an issue to be decided by the AO. He is the only person to interpret the law pertaining to computation of income as per the provisions of section 115 JB of the Act. It is not the case that AO had not called for any details from the assessee in this regard. He analysed the pieces of information supplied by the assessee about both the issues and later on decided to assess the income in a particular manner. It is noteworthy that order was passed by a senior officer of the department i.e. by Additional CIT in the case under consideration an experienced officer has taken a view after considering the relevant facts and law.He has not initiated reassessment proceedings on his own. As stated earlier, 148 notice was issued after receiving objection from audit party. It is true that, while initiating 147 proceedings, he has not mentioned that reason for reopening was not the audit objections. But, if we consider the surrounding circumstances it is clear that trigger point was the objections raised by the audit party;
++ Considering the particular facts and circumstances of the case under consideration, reopening was result of change of opinion. Fact that the AO did not record reasons for computing income under normal/MAT provisions, would be of no consequence. Therefore, the notice u/s. 148 in the present case was issued without jurisdiction.
Assessee-company, engaged in the business of leasing and investment banking, filed its original return that was assessed u/s 143(3) of the Act on 25.02.2005. AO determined the total income of the assessee at Rs.90,48,86,939/-under the normal provisions and at Rs. 85,99,59,539/- u/s.115JB of the Act. While passing order u/s 143(3) of the Act, AO made the additions on account of leasing equalisation reserve was added to the total income of the assessee, while computing the income under the normal provisions of the Act, but while computing the book profit u/s 115JB of the Act, AO did not add the said amount. Similarly, provision for investment valuation was considered by the AO for computing income as per the provisions of section 115JB of the Act, but same was not considered for computing income under normal provisions of the Act.
Subsequently, AO re-opened the case u/s 147 of the Act as he was of the opinion that there were reasons to believe that certain income chargeable to tax had escaped assessment. Accordingly, a notice u/s 148 of the Act was issued. The assessee vide his letter dated 05.01.2006 stated that the original return filed by it should be taken as the return filed in response to notice issued u/s 148.
During re-assessment proceedings, the AO asked for various details from the assessee and after considering the explanation of the assessee certain additions/disallowances were made in the assessment order passed u/s 143(3) r.w. section 147 of the Act. CIT(A) upheld the action of the AO in initiating reassessment proceedings.
On further appeal, the ITAT held that,
++ reopening of a completed assessment, is governed by certain principles. One of the settled principles, in this regard, is that the assessing authority cannot keep improving his case from time to time and that the reassessment proceedings have to stand or fall on the basis of what is stated in the reasons recorded u/s.148(2) and nothing more. Secondly, it can hardly be disputed that once the AO notices a certain claim made by the assessee in the return filed, has some doubt about eligibility of such a claim and, therefore, raises queries, extracts response from the assessee, thereafter in what manner such claim should be treated in the final order of assessment, is an issue on which the assessee would have no control whatsoever. Whether the AO allows such a claim, rejects such a claim or partially allows and partially rejects the claim, are all options available with the AO, over which the assessee beyond trying to persuade the AO, would have no control whatsoever;
++ if the AO on his own for reasons best known to him, chooses not to assign reasons for not rejecting the claim of an assessee after thorough scrutiny, it can hardly be stated by the Revenue that the AO cannot be seen to have formed any opinion on such a claim. Such a contention, would be devoid of merits. If a claim made by the assessee in the return is not rejected, it stands allowed. If such a claim is scrutinised by the AO during assessment, it means he was convinced about the validity of the claim. His formation of opinion is thus complete. Merely because he chooses not to assign his reasons in the assessment order would not alter this position. It may be a non-reasoned order but not of acceptance of a claim without formation of opinion. In other words, in a situation where the AO during scrutiny assessment, notices a claim of exemption, deduction or such like made by the assessee, having some prima facie doubt raises queries, asking the assessee to satisfy him with respect to such a claim and thereafter, does not make any addition in the final order of assessment, he can be stated to have formed an opinion whether or not in the final order he gives his reasons for not making the addition;
++ jurisdictional High Court, in the case of Export Credit Guarantee Corporation of India Ltd. (2013-TIOL-56-HC-MUM-IT), has held that when an assessment is sought to be reopened within a period of four years from the end of the relevant assessment year, the test to be applied is whether there is tangible material to do so. What is tangible is something which is not illusory, hypothetical or a matter of conjecture. Something which is tangible need not be something which is new. Thus, the most important factor to issue notice u/s.148 of the Act is existence of tangible material;
++ the AO even within a period of four years cannot reopen an assessment merely on the basis of a change of opinion. The AO has no power to review an assessment which has been concluded. But, where he has tangible material to come to the conclusion that there is an escapement of income from assessment, the power to reopen can be exercised. In the case under consideration only tangible material referred to by the AO is his errors in including/excluding certain items of income while calculating the income of the assessee under the normal provisions or under MAT provisions;
++ reassessment proceedings were initiated by the AO after objections were received from the internal audit party, the dates of audit objections and the dates of issue of notice u/s. 148 establish the fact that there was nexus between the two. From the sequence of the events it is clear that the AO had issued the notice for reopening after considering the issues raised by the audit party. The items involved in the audit objections find place in the reasons recorded by the AO. While passing the original assessment order, AO had called for the details about lease equalisation reserve as well as about the writing off of non- performing assets. Question No. 16 & 18 of the questionnaire issued by the AO on 16.11.2004 is about these two issues. After considering the submissions of the assessee, AO decided that lease equalisation reserve and provision of diminution in investment has to be given particular treatment. One of the items was taxed under normal provisions and not under MAT provisions, whereas the other item was considered for MAT provisions and not for computation under normal provisions of the Act. Thus, an informed decision was taken by the AO about both the items. In these circumstances, if AO decided to issue a fresh notice for reopening the completed assessment, it has to be treated as change of opinion. It can also be said that the order of assessment that was passed by the AO u/s 143(3) is not silent in respect of points on the basis of which the assessment was sought to be reopened. There is merit in the contention which has been urged on behalf of the assessee that queries had been raised during the course of the assessment and the assessment order would ex facie disclose that the AO had applied his mind to the points on the basis of which the assessment was now sought to be reopened. Thus, no tangible material existed to reopen the assessment in the present case;
++ role of the Audit parties is to point out the factual mistakes and not to advise the AO on legal matters. Therefore, if an AO, reopens the assessment on the legal advice of the audit party, it cannot be held forming of an independent opinion. Whether a particular item has to be added or not while computing the income under normal provisions or MAT provisions is an issue to be decided by the AO. He is the only person to interpret the law pertaining to computation of income as per the provisions of section 115 JB of the Act. It is not the case that AO had not called for any details from the assessee in this regard. He analysed the pieces of information supplied by the assessee about both the issues and later on decided to assess the income in a particular manner. It is noteworthy that order was passed by a senior officer of the department i.e. by Additional CIT in the case under consideration an experienced officer has taken a view after considering the relevant facts and law.He has not initiated reassessment proceedings on his own. As stated earlier, 148 notice was issued after receiving objection from audit party. It is true that, while initiating 147 proceedings, he has not mentioned that reason for reopening was not the audit objections. But, if we consider the surrounding circumstances it is clear that trigger point was the objections raised by the audit party;
++ Considering the particular facts and circumstances of the case under consideration, reopening was result of change of opinion. Fact that the AO did not record reasons for computing income under normal/MAT provisions, would be of no consequence. Therefore, the notice u/s. 148 in the present case was issued without jurisdiction.
Assessee's appeal allowed
ORDER
Per: Rajendra:
Cross appeals have been by the assessee and the Assessing Officer (AO) challenging the order dt.30-10-2009 of CIT(A)-10,Mumbai,raising following Grounds of Appeal:
Grounds of appeal filed by the assessee read as under :
The Learned Commissioner of Income-Tax(Appeals) has erred in concluding that the reassessment proceedings are validly initiated. On the facts and circumstances of the case the appellant submits that the conditions of Sec 147 are not satisfied and issue of notice u/s 148 is bad in law. The reassessment proceedings are not validly initiated. On the facts and circumstances of the case appellant submits that the reassessment order passed is not valid and additions made may be deleted.2.The appellant submits that issues dealt with by learned Assessing Officer in reassessment proceedings have been dealt with and have been adjudicated upon by the Assessing Officer during the original assessment proceedings. There is change of opinion without bringing on record any new facts or evidences. The reassessment proceedings initiated based on change of opinion are bad in law.3.The Learned Assessing Officer has issued notice based on audit objections raised by the audit party. The appellant submits that reassessment proceeding based on audit objections are bad in law.4.The Learned Commissioner of Income Tax(Appeals) has erred in confirming the disallowance of the claim of depreciation of Rs.69,22,568/-in respect of residential properties. On the facts and circumstances of the case the appellant submits that the disallowance of depreciation of Rs.69,22,568/- is not justified and the said disallowance may be deleted.5.The Learned Commissioner of Income Tax(Appeals) has erred in invoking provisions of Section 14A read with Rule 8D and confirming the disallowance as per the rule. The appellant prays that the disallowances confirmed as per Rule 8D is not justified and is bad in law and be deleted.6.Without prejudice to Ground No. 5. the appellant prays that on the facts and circumstances of the case the Learned Assessing Officer has erred in clubbing the disallowances made in respect of exempt income earned under 3 different sections namely section 10(23G), 10(34) & Section 10(35). The appellant prays that the Learned Assessing Officer was obliged to compute the disallowance under each of the respective sections. The combine disallowances made by the Learned Assessing Officer is not correct and is not justified. The appellant prays that confirmation of the disallowance under Rule 8D to be deleted.7.The Learned Commissioner of Income Tax(Appeals) has erred in confirming the levying of interest u/s 234-B. On the facts & circumstances of the case the appellant denies the liability for payment of interest u/s. 2348.8.The appellant craves the permission to add, alter or amend the grounds of appeal at the time of hearing.
AO has filed following grounds of appeal:
1.On the facts and in the circumstances of the case, the Ld. CIT(A) erred in holding that the provisions of Section 234D are applicable w.e.i AY 2004-05 onwards without appreciating thata.the section was introduced w.e.f. 01.06.2003 and hence was applicable in all the cases where on the said date, intimation u/s 143(1) was already issued but regular assessment was pending;b.the said section provided to levy interest in every case where refund was issued u/s 143(1) of the Act and on regular assessment, either there was a demand or the amount of refund had reduced from the amount of refund as per intimation u/s.143(1) of the Act;2.On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 113.73 crores, made to the Book Profit u/s 1 15JB in respect of the lease equalization reserve, ignoring the fact that as per clause (b) of Explanation to Section 1 15JB, the net profit as per P&L a/c has to be increased by the amounts carried to any reserves by whatever name called, other than a reserve specified u/s 33AC and lease equalization reserve is not a reserve specified u/s 33AC.The appellant prays that the order of CIT(A) on the above ground be set side and that of the A.O. be restored.The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary.
ITA No.167/Mum/2010 :
2.Assessee-company,engaged in the business of leasing and investment banking, filed its original return that was assessed u/s 143(3) of the Act on 25.02.2005.AO determined the total income of the assessee at Rs.90,48,86,939/-under the normal provisions and at Rs. 85,99,59,539/- u/s.115JB of the Act. While passing order u/s 143(3) of the Act, AO made the following additions to the total income of the assessee:
Particulars | Addition under normal provisions of Act. | Addition for the purpose of book profit u/s. 115JB |
| Payments to clubs | 7,94,443/- | -nil- |
| Depreciation on leasing transactions | 21,22,23,544/- | -nil- |
| Lease equalisation reserve | 113,73,83,896/- | -nil- |
| Deduction u/s.35D | 19,22,953/- | -nil- |
| Provision for non-performing assets | -nil- | 5,18,49,391 |
| Provision for investment valuation | -nil- | 4,58,35,875 |
From the above it is clear that the amount of leasing equalisation reserve was added by him to the total income of the assessee, while computing the income under the normal provisions of the Act, but while computing the book profit u/s 115JB of the Act,he did not add the said amount. Similarly, provision for investment valuation was considered by the AO for computing income as per the provisions of section 115JB of the Act, but same was not considered for computing income under normal provisions of the Act. Subsequently,AO re-opened the case u/s 147 of the Act as he was of the opinion that there were reasons to believe that certain income chargeable to tax had escaped assessment. Accordingly, a notice u/s 148 of the Act was issued. The assessee vide his letter dated 05.01.2006 stated that the original return filed by it should be taken as the return filed in response to notice issued u/s 148.
2.1.During re-assessment proceedings, the AO asked for various details from the assessee and after considering the explanation of the assessee for allowing additions/disallowances were made in the assessment order passed u/s 143(3) r.w. section 147 of the Act.
| a. | Income from house property | Rs. 85,90,888/- |
| b. | Depreciation on house property | Rs. 69,22,568/- |
| c. | Amortization of lease hold land | Rs. 26,99,594/- |
| d. | Amount set aside for investment valuation | Rs. 4,24,35,875/- |
| e. | Disallowance u/s. 14A | Rs. 67,28,54,440/- |
| f. | Disallowance u/s. 40A(3) | Rs. 1,37,400/- |
| g. | Lease equalization (addition only for the purpose of u/s.115JB | Rs. 113,73,83,896/- |
3. Assessee preferred an appeal before the First Appellate Authority (FAA).After considering the submissions of the assessee and the re-assessment order,he held that AO had in his possession documents/information about escapement of income by the assessee, that documents/piece of information could be received by him from any source i.e. from person inside/outside the department or from any other agency,that the requirement of the Act was that AO should apply his mind on the information available, that in the case under consideration, the AO had received information from the Audit party in respect of three issues in the month of March/April 2005, that the AO had applied his mind and reached to a prima facie belief that income chargeable to tax had escaped assessment, that the notice u/s.148 was issued in December, 2005,that the time leg between receipt of information and issue of notice proved that the AO had applied his mind and formed a belief, that basic conditions stipulated u/s.147 were satisfied and the proceedings were validly initiated by him.He further held that AO had received information in respect of three item, that on account of lease equalisation reserve the AO had made addition in the original assessment order of the same amount in the normal provisions of Act, that he did not consider the same for computing book profit as per the provisions of section 115JB, that similarly the matter of investment revaluation AO had considered the same for disallowance for computing income u/s 115JB,but he did not consider it for computing income under normal provisions of the Act, that the AO in the original assessment order had formed an opinion that these two items were of disallowable nature, that inadvertently both the items were left to be considered either under the provisions of section 115JB or as per the normal provisions of levying tax,that the AO had not formed his belief only receipt of audit objection, that in the case under consideration such belief was already formed while passing the original assessment orders, that the audit note acted as a reminder to the AO,that in the reassessment proceedings there was no change of opinion,that the opinion already formed during the original assessment proceedings was given effect in reassessment proceedings. Relying upon the order of Rajesh Jhaveri Stock Brokers P. Ltd.(291 ITR 500-SC) = (2007-TIOL-95-SC-IT), Jai Bharat Maruti Ltd.(180 Taxman 192-Delhi High Court) = (2009-TIOL-192-HC-DEL-IT), he held that in the case under consideration,the AO was in possession of some material on the basis of which he formed a prima-facie opinion that income chargeable to tax had escaped assessment,that the AO issued notice u/s.148 of the Act and had duly complied with the requirement of section 147 of the Act.
4. Before us,Authorised Representative (AR) submitted that internal audit party had raised audit objections about the lease equalization fund,investment valuation and payment made in contravention of Sec.40(A)(3) of the Act,that while recording the reasons for re-opening AO had mentio - ned these three issues, that at the time of original assessment,AO had made queries about lease equalisation,that after applying his mind and considering the submissions made by the AO assessee was that under normal provisions and not under the provisions of section 115JB,that on the basis of objection raised by the audit party he changed his opinion, he referred to page No. 35 and 16 of the paper book.With regard to provision for investment valuation amounting to Rs.4. 58 Crores,he referred to page No.17 of the paper book and submitted that amount in question was added to the income of the assessee under MAT provisions,that no fresh material was available with the AO for invoking section 147.He further submitted that Rs. 6.87 lacs paid in cash by the assessee were related court fees paid in cash, that matter was pending before the Hon'ble High Court of Madras,that in the Tax Audit Report in para-17(h) the amount was shown as paid in cash,that in the reasons recorded the AO had referred to the Tax Audit Report, that there was change of opinion,that 147-poroceedings were not valid,that the re-assessment was based on audit objections. AR relied upon the cases of Asian Paints Ltd.(308 ITR 195) = (2008-TIOL-698-HC-MUM-IT), ICICI Home Finance Ltd.(210 Taxman 67), and Kelvinator of India Ltd. (320 ITR 561) = (2010-TIOL-06-SC-IT). Departmental Representative (DR) submitted that AO had nowhere discussed the issue of lease equalisation, provision for investment valuation, that AO had forgotten to add the amounts while calculating the income under normal provisions/ under MAT provisions, that it was not a case of change of opinion, that AO had not applied his mind and had committed mistake.
4.1. Ground of appeal No. 4 to 7 are about depreciation of residential premises,disallowances to be made u/s 14A r.w. Rule 8D and interest to be charged u/s 234B.
4.2. In our opinion,before deciding the issue at Ground No.4 to 7 issue of validity of re-assessment proceedings has to be decided, as it goes to the very roots of the assessment itself.
5. We have heard the rival submissions and perused the material.In this case original assessment was completed u/s.143(3)of the Act and AO had reopened the assessment as he was of the opinion that income had escaped assessment. Reopening of a completed assessment, is governed by certain principles.One of the settled principles, in this regard, is that the assessing authority cannot keep improving his case from time to time and that the reassessment proceedings have to stand or fall on the basis of what is stated in the reasons recorded u/s.148(2) and nothing more. Secondly,it can hardly be disputed that once the AO notices a certain claim made by the assessee in the return filed,has some doubt about eligibility of such a claim and, therefore, raises queries, extracts response from the assessee, thereafter in what manner such claim should be treated in the final order of assessment, is an issue on which the assessee would have no control what so - ever. Whether the AO allows such a claim, rejects such a claim or partially allows and partially rejects the claim, are all options available with the AO, over which the assessee beyond trying to persuade the AO, would have no control whatsoever. Therefore,while framing the assessment, allowing the claim fully or partially, in what manner the assessment order should be framed, is totally beyond the control of the assessee. If the AO therefore, after scrutinizing the claim minutely during the assessment proceedings, does not reject such a claim, but chooses not to give any reasons for such a course of action that he adopts, it can hardly be stated that he did not form an opinion on such a claim.It is not unknown that assessments of larger corporations in the modern day, involve a large number of complex claims,voluminous material, numerous exemptions and deductions.If the AO is burdened with the responsibility of giving reasons for several claims so made and accepted by him, it would even otherwise cast an unreasonable expectation which within the short frame of time available under law would be too much to expect him to carry. Irrespective of this, in a given case, if the AO on his own for reasons best known to him,chooses not to assign reasons for not rejecting the claim of an assessee after thorough scrutiny, it can hardly be stated by the Revenue that the AO cannot be seen to have formed any opinion on such a claim.Such a contention, in our opinion, would be devoid of merits. If a claim made by the assessee in the return is not rejected, it stands allowed. If such a claim is scrutinised by the AO during assessment,it means he was convinced about the validity of the claim.His formation of opinion is thus complete. Merely because he chooses not to assign his reasons in the assessment order would not alter this position.It may be a non-reasoned order but not of acceptance of a claim without formation of opinion.In other words, in a situation where the AO during scrutiny assessment,notices a claim of exemption,deduction or such like made by the assessee, having some prima facie doubt raises queries,asking the assessee to satisfy him with respect to such a claim and thereafter,does not make any addition in the final order of assessment,he can be stated to have formed an opinion whether or not in the final order he gives his reasons for not making the addition.
5.1. Hon'ble jurisdictional High Court, in the case of Export Credit Guarantee Corporation of India Ltd.(350 ITR 650) = (2013-TIOL-56-HC-MUM-IT), has held that when an assessment is sought to be reopened within a period of four years from the end of the relevant assessment year,the test to be applied is whether there is tangible material to do so.What is tangible is something which is not illusory, hypotheti -cal or a matter of conjecture. Something which is tangible need not be something which is new. Thus,the most important factor to issue notice u/s.148 of the Act is existence of tangible material. Referring to the judgment of Hon'ble apex court delivered in the case of Kelvinator of India Ltd. (supra),it was held that where the assessment was sought to be reopened within a period of four years from the end of the relevant assessment year, the governing test has been formulated in the said judgment of the Supreme Court.Hon'ble Bombay High Court relied upon the following portion of the order of theKelvinator of India Ltd. (supra):
"Therefore, post 1st April, 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words 'reason to believe' falling which, we are afraid, section 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. We must also keep in mind the conceptual difference between power to review and power to reassess. The AO has no power to review ; he has the power to reassess. But reassessment has to be based on fulfilment of certain precondition and if the concept of 'change of opinion' is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of 'change of opinion' as an in-built test to check abuse of power by the AO. Hence, after 1st April, 1989, the AO has power to reopen, provided there is 'tangible material' to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words 'reason to believe' but also inserted the word "opinion" in section 147 of the Act. However, on receipt of representations from the companies against omission of the words 'reason to believe', Parliament reintroduced the said expression and deleted the word 'opinion' on the ground that it would vest arbitrary powers in the AO."
From the above discussion it is clear that the AO even within a period of four years cannot reopen an assessment merely on the basis of a change of opinion.The AO has no power to review an assessment which has been concluded. But,where he has tangible material to come to the conclusion that there is an escapement of income from assessment, the power to reopen can be exercised. In the case under consideration only tangible material referred to by the AO is his errors in including/excluding certain items of income while calculating the income of the assessee under the normal provisions or under MAT provisions.
We find that reassessment proceedings were initiated by the AO after objections were received from the internal audit party, the dates of audit objections and the dates of issue of notice u/s. 148 establish the fact that there was nexus between the two.From the sequence of the events it is clear that the AO had issued the notice for reopening after considering the issues raised by the audit party.The items involved in the audit objections find place in the reasons recorded by the AO.We find that while passing the original assessment order, AO had called for the details about lease equalisation reserve as well as about the writing off of non- performing assets. Question No. 16 & 18 of the questionnaire issued by the AO on 16.11.2004 is about these two issues.We further find that after considering the submissions of the assessee,AO decided that lease equalisation reserve and provision of diminution in investment has to be given particular treatment.As stated earlier,one of the items was taxed under normal provisions and not under MAT provisions, whereas the other item was considered for MAT provisions and not for computation under normal provisions of the Act.Thus,an informed decision was taken by the AO about both the items. In these circumstances, if AO decided to issue a fresh notice for reopening the completed assessment,it has to be treated as change of opinion.It can also be said that the order of assessment that was passed by the AO under section 143(3) is not silent in respect of points on the basis of which the assessment was sought to be reopened. There is merit in the contention which has been urged on behalf of the assessee that queries had been raised during the course of the assessment and the assessment order would ex facie disclose that the AO had applied his mind to the points on the basis of which the assessment was now sought to be reopened. Thus, no tangible material existed to reopen the assessment in the present case.
5.2. Here, we would also like to mention that role of the Audit parties to point out of the factual mistakes and not to advise the AO on legal matters. Therefore, if an AO, reopens the assessment on the legal advice of the audit party,it cannot be held forming of an independent opinion. Whether a particular item has to be added or not while computing the income under normal provisions or MAT provisions is an issue to be decided by the AO.He is the only person to interpret the law pertaining to computation of income as per the provisions of section 115 JB of the Act. It is not the case that AO had not called for any details from the assessee in this regard.He analysed the pieces of information supplied by the assessee about both the issues and later on decided to assess the income in a particular manner. It is noteworthy that order was passed by a senior officer of the department i.e. by Additional CIT in the case under consideration an experienced officer has taken a view after considering the relevant facts and law.He has not initiated reassessment proceedings on his own. As stated earlier, 148 notice was issued after receiving objection from audit party. It is true that, while initiating 147 proceedings, he has not mentioned that reason for reopening was not the audit objections. But, if we consider the surrounding circumstances it is clear that trigger point was the objections raised by the audit party.We also find in the appellate proceedings, FAA had allowed the appeal of the assessee with regard to provision for investment valuation (4.58 Crores) and court fee paid in cash (Rs. 6.87 lacs) and department had accepted his decision.
5.3 Considering the particular facts and circumstances of the case under consideration, we are of the opinion that reopening was result of change of opinion. Fact that the AO did not record reasons for computing income under normal/MAT provisions, would be of no consequence. Therefore,we are of the opinion that the notice u/s. 148 in the present case was issued without jurisdiction.
Therefore,we decide ground 1-3 in favour of the assessee. Remaining grounds, filed by the assessee, do not require any adjudication.
ITA No.223/Mum/2010:
6. In the appeal filed by the AO there are two effective grounds of appeal,arising out of the order of the FAA.We have already held that reopening of the assessment by the AO was not based on any tangible material. Therefore, grounds of appeal filed by the AO have to be dismissed.
In the result, appeal filed by the assessee stands allowed and the appeal of the AO is dismissed.
(Order pronounced in the open court on 03.7.2013)
Regards,
Pawan Singla
BA (Hon's), LLB
Audit Officer
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