Income Tax Appellate Tribunal - Kolkata
D.C.I.T.,Cc-3(3), Kolkata vs Shri Loknath Prasad Gupta, Titagar on 19 August, 2020
I.T.A. No.162/KOL/2020
Assessment Year: 2013-2014
Shri Loknath Prasad Gupta
IN THE INCOME TAX APPELLATE TRIBUNAL,
KOLKATA 'A' BENCH, KOLKATA
(Virtual Court Hearing)
Before Shri P.M. Jagtap, Vice-President
and Shri Satbeer Singh Godara, Judicial Member
I.T .A. No. 162/KOL/2020
Assessment Year: 2013-2014
Deputy Commissioner of Income Tax,........ .............................Appellant
Central Ci rcle-3 (3),Kolkata,
Aayakar Bhawan Po orva, 4 t h Floor, Roo m No. 416,
110, Shanti Pally, Ko lkata-700107
-Vs.-
Shri Loknath Prasad Gupta,....................... .............................Respondent
31, B.P. Road, Ramkrishna Dev Path,
Titagar, North 24-Parganas,
Kolkata-700119
[PAN:ADUPG5810F]
Appearances by:
Shri Ram Bilash Meena, CIT, D.R. , for the Appella nt
Shri Ashok Tulsyan, A.R., fo r the Responde nt
Date of concluding th e hearing : Au gust 03, 2020
Date of pronouncing the order : Au gust 19, 2020
O R D E R
Per Shri P,M. Jagtap, Vice-President:
This appeal is preferred by the Revenue against the order of ld. Commissioner of Income Tax (Appeals)-21, Kolkata dated 11.11.2019, whereby he deleted the disallowance of Rs.12,96,62,086/- made by the Assessing Officer on account of assessee's claim for deduction towards interest on excise duty pertaining to earlier years.
2. The assessee in the present case is an individual, who filed his return of income for the year under consideration originally under section 139 of the Income Tax Act, 1961 on 28.09.2016 declaring a loss of 1 I.T.A. No.162/KOL/2020 Assessment Year: 2013-2014 Shri Loknath Prasad Gupta Rs.4,76,64,751/-. The said return was selected for scrutiny by the Assessing Officer and a notice under section 143(2) of the Act was issued by him on 04.09.2014. In assessee's case, an order dated 10.06.2015 in ITA No. 645/KOL/2014 was passed by the Tribunal for A.Y. 2009-10 confirming the disallowance of Rs.12,93,62,086/- made by the Assessing Officer on account of interest on excise duty pertaining to earlier years and claimed for A.Y. 2009-10 on payment basis observing that the same was liable to be allowed either in A.Y. 2008-09 or A.Y. 2013-14 in which the matter relating to central excise had reached finality. Since the assessment proceedings initiated by the Assessing Officer under section 147/148 for A.Y. 2008-09 were open, a petition dated 01.09.2015 was filed by the assessee requesting the Assessing Officer to allow the deduction of Rs.12,93,62,086/- in A.Y. 2008-09. The assessee also filed a revised computation of income for A.Y. 2013-14 on 04.09.2015 as the regular assessment proceedings for the said year were initiated by the Assessing Officer vide notice issued under section 143(2) of the Act on 04.09.2014. The assessment for A.Y. 2008-09 under section 147/143(3) of the Act was completed by the Assessing Officer vide an order dated 15.01.2016, wherein the deduction of Rs.12,93,62,086/- claimed by the assessee on account of interest on excise duty was disallowed by the Assessing Officer observing that the same would be considered in A.Y. 2013-14. Meanwhile a search and seizure operation was conducted in the cases belonging to Raja Group including the case of the assessee on 22.09.2015. As a result of the said action, proceedings under section 153A were initiated by the Assessing Officer and consequently the regular assessment proceedings initiated by the Assessing Officer for A.Y. 2013- 14 by issuing notice under section 143(2) on 04.09.2014, which were pending on the date of search, got abated and merged with the proceedings under section 153A initiated for A.Y. 2013-14 in pursuant to the search. In response to the notice issued under section 153A of the Act, the return for A.Y. 2013-14 was filed by the assessee on 28.09.2016 declaring a loss of Rs.17,70,26,837/- after claiming the deduction of 2 I.T.A. No.162/KOL/2020 Assessment Year: 2013-2014 Shri Loknath Prasad Gupta Rs.12,93,62,086/- on account of interest on excise duty pertaining to earlier years as per the direction given by the Tribunal in the appellate order dated 10.06.2015 for A.Y. 2009-10. In the assessment completed under section 153A/143(3) of the Act vide an order dated 31.12.2017, the income declared by the assessee in the return was wrongly taken by the Assessing Officer as Rs.5,77,80,260/- and after making additions/disallowances of Rs.1,42,899/-, the total income of the assessee was determined by him at Rs.5,78,92,590/-. He thus did not consider the claim of the assessee for deduction of Rs. 12,93,62,086/- on account of interest paid on central excise pertaining to earlier years. The assessee, therefore, moved a petition under section 154 before the Assessing Officer on 05.03.2018 seeking rectification of the said mistake. The Assessing Officer passed rectification order on 19.06.2019 determining the total income of the assessee at a loss of Rs.4,75,52,490/- thereby taking the returned income of the assessee at a loss of Rs.4,76,64,751/- but not allowing the claim of the assessee for deduction on account of interest paid on central excise amounting to Rs.12,93,62,086/-.
3. Meanwhile the assessee filed an appeal against the order dated 31.12.2017 passed by the Assessing Officer for the year under consideration, i.e. A.Y.2013-14 under section 153A/143(3) of the Act challenging, inter alia, the disallowance made by the Assessing Officer on account of his claim for deduction on account of interest on excise duty pertaining to earlier years. During the course of appellate proceedings before the ld. CIT(Appeals), the following submissions were made on behalf of the assessee in support of his case on this issue:-
"The claim is made pursuance to the ITA T order fo r allowing the claim in AY 2008-09 or 2013-14 when the matter reached finalit y;
(ii) Before the dat e of search, assessment proceedings for 2013-
14 was initiated vide notice u/s 143(2) dat ed 04.09.2014;
3I.T.A. No.162/KOL/2020 Assessment Year: 2013-2014 Shri Loknath Prasad Gupta
(iii) Claim was made before the AO in th e course of regul ar assessment proceedings along with revise co mputation of income on 04 .09.2015;
(iv) A search & seizure took place against the assessee and his group on 22.09.2015;
(v) As per section 15 3A, the assessment proceedings fo r 2013- 14 gets abat ed and merged with 153A proceedings. Assessee has intimated the AO about the search and abat ement of assessment proceedings vide letter dated 3 0.11.2015;
(vi) The order for AY 2008-09 was passed u/s 1471143(3) on 15.01.2016 in which t he said claim of Interest paid on excise duty was not allowed and held as under:
"14. The submission o f the assessee were examined in the light of records and submissions of the assessee filed in the course of the assessment proceedings as above. In view of the Order dated 10.06.2015 by t he Hon'ble ITAT in IT A No 645/KOL/2014 (discussed above) th e assessee claims th e entire amount of interest of Rs.19,58,8 9,924/-, in AY 2008-09 (i.e, in the year in which the order of the Excise Settlement Commission was passed) However, since the liability to wards interest was finally determined by the Hon'ble'Delhi High Court vide order dated 13.04.2012 ( in AY 2013-14) the same may be allowed in the year of the pro nouncement of th e order given by Hon'ble Delhi High Court as adjudicated by th e Hon'ble ITAT Kolkata subject to verificatio n of the facts. Further, the depart ment had filed an appeal befo re Hon'ble Calcutta High Court for the A. Y.- 2009-10 against th e order of ITAT , Ko lkata in I.T.A . No. 1096/KOL/2014 dt. 10.06.2015 in respect of disallowance of Excise duty and interest thereon, which is yet to be disposed off. "
The said issue was no t disputed by the assessee as evident from the o rder of ld. C IT(A) and Hon'ble ITAT passed against this order of AO (co py enclosed).
Hence, considering t he above facts, the AO was wrong in holding that it is a fresh cl aim u/s 153 A which is factually wrong and incorrect . The claim was al ready there prio r to search and only due t o merger of abated proceedings with th e proceedings u/s 153A, th e same cannot be treated as a fresh claim made by the assessee and be disallowed. The said fact h as been held by Hon'ble Delhi High Court in the case of C IT vs Kabul Chawl a in 380 ITR 573 as under:
"37. On a conspect us of Section 153A(1) o f the Act , read with the provisos thereto , and in the light of t he law explained in the aforementioned decisions, the legal position th at emerges is as under:4
I.T.A. No.162/KOL/2020 Assessment Year: 2013-2014 Shri Loknath Prasad Gupta i. Once a search takes place under Section 1 32 of the Act, notice under Sect ion 153A(1 ) will h ave to be mandatorily issued to th e person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the A Y in which the search takes pl ace.
ii. Assessment s and reassessments pending on the date of th e search sh all abat e. T he total income for such AYs will h ave to be computed by th e AOs as a fresh exercise.
iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant A Y in which the search takes place. The AO has th e power to assess and reassess the 'total income' of th e aforementioned six years in separat e assessment orders fo r each of the six years. In other wo rds there will be one assessment order in respect of each of the six AYs "in which both the disclosed and undisclosed income would be brought to tax".
iv. Although Section 1 53A does not say th at additio ns should be strictly made on th e basis of evidence found in the course of the search, o r other post - search material o r information available with the AO wh ich can be related to th e evidence found, it does not mean th at the assessment "can be arbit rary o r made without any relevance or nexus with t he seized mate rial. Obviously an assessment has to be made under this section onl y on the basis of seized material.
v. In absence of any incriminating mat erial, the completed assessment can be reiterated and the abated assessment o r reassessment can be made. The wo rd 'assess' in Section 153 A is relat able to abated proceedings (i. e. those pending on the date of search) and the word ' reassess' to completed assessment proceedings.
vi. Insofar as pending assessments are co ncerned, th e jurisdiction to make the o riginal assessment and the assessment under Section 153A merges into one. Onl y one assessment shall be made separately for each AY on the basis of the findings of the search and any other material e xisting o r brought on th e record of the AO.
vii. Completed assessment s can be interfered with by the AO while making the assessment under Sectio n 153A onl y on the basis of some incriminating material unearthed during the course of search or requisition of documents o r undisclosed income o r propert y discovered in the co urse of search which were not produced o r not already disclosed or made known in the course of o riginal assessment .
3.9.2 In view of the above facts, we woul d like to submit th at the claim should be allowed to the assessee since the same is a genuine claim made by the assessee in accordance with the 5 I.T.A. No.162/KOL/2020 Assessment Year: 2013-2014 Shri Loknath Prasad Gupta direct ion of the Hon'ble ITAT . Since the cl aim was not allowed to the assessee in AY 2008-09, the assessee claimed the same is AY 2013-14 in the return filed u/s 153A. However, the AO did not allow the claim of the assessee.
3.10. In th is regard, we woul d like to submit th at the claim made by the assessee is a genuine claim and h as to be allowed to the assessee by th e A0 himself since th e same is as per the direct ion of the o rder of the Hon'bIe ITAT. Therefo re, the assessee should not be denied the benefit of deduct ion/exemption under the Act fo r which the ass essee is eligible legally. On t his issue the assessee seeks reliance from the various judicial pronouncements" .
4. In support of the above contentions, reliance was placed on behalf of the assessee on the following judicial pronouncements:-
(i) SAIL, DSP -vs.- Employees Association (1998)-vs.- Union of India & Ors [2003] 262 ITR 638 (Cal.);
(ii) In Maynak Poddar (HUF) -vs.- Wealth Tax Officer [2003] 262 ITR 633 (Cal.)
(iii) CIT -vs.- Bhaskar Mitter (1994) 73 Taxman 437 (Cal.);
(iv) DCIT -vs.- Sanmukhdas Wadhwani (2003) 85 ITD 734 (Nag.).
5. The ld. CIT(Appeals) found merit in the contentions raised on behalf of the assessee and allowed the claim of the assessee for deduction of Rs. 12,93,62,086/- on account of interest on excise duty pertaining to earlier years by observing as under:-
"Many important legal issues emerged out of submission made by the assessee read with direction of Hon'ble ITAT in ITA No. 645/KOL/2014:-
1 s t Question: Whether in proceedings u/s 153A a fresh claim can be allowed or not.
The assessee has stated that at the time of search, it was a pending assessment as notice u/s 143(2) was already issued. Therefore, in my opinion the asessee's claim can be entertained as it is a case of pending assessment and not of completed assessment.
2 n d Question: For consideration is whether interest would be allowable in the AY 2013-14.
6I.T.A. No.162/KOL/2020 Assessment Year: 2013-2014 Shri Loknath Prasad Gupta Since the interest expenditure has crystallized in AY 2013-14 as per Delhi High Court Order, therefore, interest expenditure will be allowable in AY 2013-14. Therefore, the AO is directed to allow interest expenditure in AY 2013-14".
6. Aggrieved by the order of the ld. CIT(Appeals), the Revenue has preferred this appeal before the Tribunal on the following grounds:-
"(1) That on the facts and in the circumstances of the case, ld. CIT(A) has erred in allowing appeal of the assessee by holding that the interest expenditure on central excise has crystallized in AY 2013-14.
(2) That on the facts and in the circumstances of the case, ld. CIT(A) has erred by violating the order of the Hon'ble ITAT, Kolkata in ITA No. 645/KOL/2014 dated 10.06.2015 wherein it has been clearly mentioned that liability accrued during assessment year 2008-09".
7. We have heard the arguments of both the sides and also perused the relevant material available on record. The only contention raised by the ld. CIT(D.R.) is that the ld. CIT(Appeals) has passed a very cryptic order, wherein he has allowed a substantial relief to the assessee on the issue under consideration without giving any cogent or convincing reason. In support of this contention, he has relied on the provision of sub-section 6 of section 250, whereby it was incumbent upon by the ld. CIT(Appeals) to dispose of the appeal of the assessee by an order in writing stating the points for determination, the decision thereon and the reason for the decision. He has contended that the impugned order passed by the ld. CIT(Appeals) does not satisfy these statutory requirements and urged that the matter may be remitted back to the ld. CIT(Appeals) for disposing of the appeal of the assessee afresh by passing a well discussed and well reasoned order in accordance with the sub-section 6 of section
250. We find some merit in the contention of the ld. CIT(D.R). In our opinion, the ld. CIT(Appeals) would have been right to entertain the claim of the assessee for deduction on account of interest on excise duty pertaining to earlier years in the year under consideration keeping in 7 I.T.A. No.162/KOL/2020 Assessment Year: 2013-2014 Shri Loknath Prasad Gupta view the observations made by the Tribunal in its order dated 10.06.2015 (supra) passed in assessee's case for A.Y. 2009-10 and the fact that the assessment proceedings initiated by the Assessing Officer for the year under consideration under section 143(2) had got merged as a result of search with the proceedings under section 153A, which were open. Moreover, inspite of taking note of the order of the Hon'ble Delhi High Court dated April 13, 2012 on the basis of which the liability of the assessee on account of interest in question was taken as crystallized by him in the year under consideration, the ld. CIT(Appeals) failed to take note of a very relevant and material fact that the interest charged by Customs and Central Excise Settlement Commission (in short 'CCESC') at Rs.25.87 crores was reduced by the Hon'ble Delhi High Court to Rs.19.56 crores and the liability of the assessee on account of the said interest after adjusting the amount of Rs.13 crores already paid by the assessee was reduced to Rs.6.56 crores as against Rs.12.87 crores. This clearly shows the non-application of his mind by the ld. CIT(Appeals) to the relevant and material facts having a direct bearing on the quantum of liability of the assessee on account of interest in question. We, therefore, set aside the impugned order passed by the ld. CIT(Appeals) on this limited issue only and remit the matter back to him for deciding the same afresh by passing a well discussed and well reasoned order after giving the assessee a proper and sufficient opportunity of being heard.
8. In the result, the appeal filed by the Revenue is treated as allowed for statistical purposes.
Order pronounced in the open Court on August 19, 2020.
Sd/- Sd/-
(Satbeer Singh Godara) (P.M. Jagtap)
Judicial Member Vice-President
Kolkata, the 19 t h day of August, 2020
Copies to : (1) Deputy Commissioner of Income Tax, Central Ci rcle-3 (3),Kolkata, 8 I.T.A. No.162/KOL/2020 Assessment Year: 2013-2014 Shri Loknath Prasad Gupta Aayakar Bhawan Po orva, 4 t h Floor, Roo m No. 416, 110, Shanti Pally, Ko lkata-700107 (2) Shri Loknath Prasad Gupta, 31, B.P. Road, Ramkrishna Dev Path, Titagar, North 24-Parganas, Ko lkata-700 119 (3) Commissioner of Income Tax (Appeals)-21, Kolkata, (4) Commissio ner of Income Tax , (5) The Depart ment al Represent ative (6) Guard File By order Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S. 9