Income Tax Appellate Tribunal - Kolkata
Chem Crown Exports Ltd. vs Income Tax Officer on 24 January, 2005
Equivalent citations: (2005)93TTJ(KOL)710
ORDER
G.C. Gupta, J.M.
1.These three appeals by the assessee for the asst. yrs. 1995-96, 1996-97 and 1997-98 are directed against the orders of the CIT(A). These are being disposed of with this consolidated order.
2. The main issue in these appeals is regarding the validity of the reassessment proceedings under Section 147 of the Act. The learned counsel for the assessee submitted that the reassessment proceedings under Section 147 of the Act in this case for all the three assessment years are bad in law. He argued that the reopening is based only on change of opinion and there is no subsequent information with the Department to reopen the completed assessments. He argued that the assessments for the asst. yrs. 1995-96 and 1996-97 were, originally framed in scrutiny case under Section 143(3) of the Act wherein after due consideration, the AO allowed the claim of the assessee under Sections 80-I and 80HH of the Act. He argued that the notice of reassessment under Section 147 for the asst. yr. 1995-96 is dt. 25th Oct., 2000, which is beyond the statutory period of 4 years and, therefore, is void. He relied on a series of decisions in support of his arguments reported in Tantia Construction Co. Ltd. v. Dy. CIT (2002) 257 ITR 84 (Cal), Jayshree Tea Industries Ltd. v. Dy. CIT (2000) 245 ITR 567 (Cal), Garden Silk Mills (P) Ltd. v. Dy. CIT (1999) 237 ITR 668 (Guj), Foramer v. CIT and Anr. (2001) 247 ITR 436 (All), IPCA Laboratories Ltd. v. Gajanand Meena, Dy. CIT and Ors. (2004) 251 ITR 416 (Bom), Surat City Gymkhana v. Dy. CIT (2002) 254 ITR 733 (Guj) and Mercury Travels Ltd. v. Dy. CIT (2002) 258 ITR 533 (Cal). He argued that even for the asst. yr. 1997-98, there is no fresh material brought on record by the Revenue to justify the reassessment proceedings. He argued that no material has been brought on record to show that the interest earned by the assessee is not derived from the industrial activity of the assessee and, therefore, the very basis for reopening the assessment is not sustainable. He relied on the decisions in CIT v. The Madras Motors Ltd. (2002) 257 ITR 60 (Mad), CIT v. Pandian Chemicals Ltd. (1998) 233 ITR 497 (Mad), Dy. CIT v. Transpower (P) Ltd. (2001) 72 TTJ (Gau) 867 : (2002) 80 ITD 1 (Gau), Rollatainers Ltd. v. Dy. CIT (2000) 69 TTJ (Del) 8, CIT v. Ahmedabad Electricity Co. Ltd. (1993) 203 ITR 521 (Bom), CIT v. United Carbon India Ltd (1991) 190 ITR 622 (Bom) and CIT v. Kelvinator of India Ltd. (2002) 256 ITR 1 (Del). He argued that in any case since the interest income has been earned on business assets and the expenses thereof have to be allowed and the amount of interest paid by the assessee is more than the interest earned by it, hence, there is no question of escapement of income. He argued that the ratio of the decision of the Special Bench in the case of Lalsons Enterprises v. Dy. CIT (2004) 82 TTJ (Del)(SB) 1048 : (2004) 89 ITD 25 (DeI)(SB) is clearly applicable to the facts of the case.
3. The learned Departmental Representative argued that the reopening of the assessment for the asst. yrs. 1996-97 and 1997-98 is not beyond the period of 4 years and is, therefore, valid. He argued that the provision of Clause (c) of Explanation to Section 147 is applicable to the facts of the case. He argued that the onus is on the assessee to prove that there is a nexus between the interest earned by the assessee and the industrial activities undertaken by it. He argued that no such nexus was established by the assessee in spite of opportunity given to it and, therefore, the income has escaped assessment and since the case has been reopened within 4 years, it is quite valid and justified.
4. We have heard the rival submissions. We find that for the asst. yr. 1995-96, the original assessment was completed in scrutiny assessment under Section 143(3) of the Act and notice under Section 147 was issued on 25th Oct., 2000, which is admittedly beyond the statutory period of 4 years and, there being no failure on the part of the assessee to file return of income or to disclose fully and truly all material facts necessary for the assessment for that assessment year, we hold that the reassessment proceedings initiated by the Revenue are not valid and accordingly the grounds of appeal of the assessee for the asst. yr. 1995-96 are allowed.
5. For the asst. yrs. 1996-97 and 1997-98, we find that the assessment for the asst. yr. 1996-97 was completed in scrutiny assessment under Section 143(3) of the Act. The notice under Section 147 for reassessment of income for both the asst. yrs, 1996-97 and 1997-98 was issued within the statutory period of 4 years. However, the only reason for reopening of the assessments in this case is that as per the Revenue, the deductions under Sections 80-I and 80HH have not been properly computed since the assessee has also some interest income, which was not considered at the time of original assessment We find that the assessee has disclosed all the material facts at the time of original assessment made in its case. The case of the assessee is that its interest income is also derived from activities of industrial undertaking. We find that at the time of reopening the assessment under Section 147 of the Act, a definite satisfaction has to be arrived at by the AO that income liable to tax has escaped assessment. The completed assessment cannot be reopened on a mere change of opinion. The assessee has claimed deduction which was granted by the AO and there was no omission or failure on the part of the assessee to disclose any material facts necessary for its assessment. We find the case of the assessee is that the interest income has been earned on the business assets and is, therefore, business income and the expenses thereof have to be allowed and since, after allowing the same, there is no positive income, no income has escaped assessment. The case of the assessee is that the interest paid by it in both the asst. yrs. 1996-97 and 1997-98 is more than the amount of interest earned by the assessee. The Revenue has not contradicted this contention of the assessee that the interest paid by it in both these assessment years is more than the interest earned by it. The issue of netting of interest payment with interest earned by the assessee is covered in favour of the assessee with the decision of the Delhi Special Bench in the case of Lalsons Enterprises v. Dy. CIT (supra), wherein, while deciding the issue of deduction under Section 80HHC(4B), it was held that it is only 90 per cent of the net interest remaining after allowing a set off of interest paid, that can be reduced from the business profit of the assessee. In this case, since after allowing the netting of interest payment with interest earned by the assessee, there remains no positive income in both the asst. yrs. 1996-97 and 1997-98, we hold that no income liable to tax has escaped assessment and accordingly the reassessment proceedings started by issuing notice under Section 147 of the Act are not valid. Accordingly, the ground of appeal of the assessee challenging the validity of the reassessment notice under Section 147 of the Act for both the asst. yrs. 1996-97 and 1997-98 is allowed.
6. In the result, the appeals of the assessee for all the asst. yrs. 1995-96, 1996-97 and 1997-98 are allowed.