Income Tax Appellate Tribunal - Pune
Sandvik Steel Asia Pvt.Ltd.,, Pune vs Acit., Circle-8,, Ahmedabad on 24 March, 2017
आयकर अपील�य अ�धकरण "ए" �यायपीठ पुणे म� IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH "A", PUNE सु�ी सुषमा चावला, �या�यक सद�य एवं �ी मनोज कुमार अ�वाल, लेखा सद�य के सम� I BEFORE MS. SUSHMA CHOWLA, JM AND SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं. / ITA No. 1047/Ahd/2007 �नधा�रण वष� / Assessment Year : 2001-02 Sandvik Steel Asia Pvt. Ltd., (Now merged with Sandvik Asia Ltd.) Plot No.1174, Village : Rajpur, Tal. Kadi, Dist. Mehsana, Gujarat. .... अपीलाथ�/Appellant PAN: AA CCS0299N Vs. The Asst. Commissioner of Income Tax, Circle - 8, Ahmedabad .... ��यथ� / Respondent अपीलाथ� क� ओर से / Appellant by : Shri Jehangir D. Mistri ��यथ� क� ओर से / Respondent by : S/Shri Rajeev Kumar, CIT and Suhas Kulkarni सुनवाई क� तार�ख / घोषणा क� तार�ख / Date of Hearing : 23.03.2017 Date of Pronouncement: 24.03.2017 आदे श / O R D E R Per Manoj Kumar Aggarwal (Accountant Member)
1. The captioned appeal by assessee for Assessment Year [AY] 200 1-02 assails the order of Ld. Commissioner of Income Tax (Appeals)-XIV, Ahmedabad dated 08/01/2007 on the following grounds of appeal:-
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1. The CIT(A) failed to appreciate that the jurisdictional conditions precedent to reopening of the assessment under section 147 were not satisfied by the learned Assessing Officer ('AO') and, therefore, the reopening of the assessment by the AO is bad in law. Accordingly, the Appellant prays that the reassessment proceedings should be quashed and consequent addition made to the total income of the Appellant for AY 2001-2002 merits to be deleted.
2. Without prejudice to the above, the CIT(A) erred in law in confirming the order of the AO of reducing the loss for AY 2001 -2002 by Rs.7,302,824, being the difference in interest income accounted by the appellant in its books of account and the interest amount disclosed in the relevant TDS certificates. Accordingly, the Appellant prays that the above mentioned addition of interest of Rs.7,302,824 (which interest never accrued to the Appellant nor was received by the Appellant) to the total income of the Appellant for AY 2001-2002 merits to be deleted.
2. Briefly stated, the assessee, being corporate assessee, was subjected to an assessment u/s 143(3) read with Section 147 of the Income Tax Act, 1961 vide Assessing Officer [AO] order dated 28/02/2006 wherein total loss of the assessee was determined at Rs.28,10,61,030/- after making an adjustment for differential interest income of Rs.73,02,824/-. The original assessment for impugned AY was framed u/s 143(3) vide AO order dated 26/03/2004 where the loss was finally determined at Rs.28,83,63,850/- after giving effect to order of Ld. CIT(A). The statutory notice u/s 148 was duly served on the assessee on 23/03/2005 in response to which the assessee requested the AO to treat the original return filed by him as return in response to notice u/s 148. The reassessment proceedings were initiated primarily upon noticing a difference of Rs.73,02,824/- in interest figures reflected in the TDS certificates issued in favor of assessee vis-à-vis interest income offered by the assessee in his Profit & Loss Account. The assessee explained that certain interest income accrued to him during the year but as the same was in dispute, the assessee reversed the disputed interest income to the extent of Rs.73,02,824/- in his books of account and offered the correct interest income earned by him. Since the payer deducted Tax at source [TDS] on the gross amount including the disputed 3 amount, the interest income received by the assessee was reduced to the extent of TDS and therefore, the assessee was entitled for full TDS credit. However, not convinced with the contentions of the assessee, AO concluded that the assessee claimed full credit of TDS but did not offer the corresponding income and unilaterally reversed the said disputed income without adducing any evidence to substantiate his claim and hence the differential interest income, being escaped income, was liable for tax. Accordingly, treating the differential interest as income of the assessee, he reduced the loss figures of the assessee to that extent and finalized the assessment. The stand of AO was assailed without any success before Ld. CIT(A) vide order dated 08/01/2007 where the assessee raised similar contentions but Ld. CIT(A), while upholding reassessment proceedings, turned down the various pleas of the assessee on the ground that the assessee was obliged to offer full interest income under mercantile system of accounting and income was to be taxed on accrual basis. The stand of Ld. CIT(A) has been assailed before us where the reassessment has been contested on legal ground as well as on merits.
3. The Ld. Counsel for assessee [AR], Shri J.D.Mistry, first of all, contested reassessment proceedings on legal ground on the premises that no new tangible material came in to the possession of AO so as to justify reassessment proceedings as held by Hon'ble Apex Court in the case of CIT Vs. Kelvinator of India Ltd. [320 ITR 561] and also Hon'ble Bombay High Court in ICICI Prudential Life Insurance Co. Ltd. Vs. ACIT [325 ITR 471]. Further, on merits, our attention was drawn to the fact that the assessee never earned the disputed interest income from the payer and therefore, correctly reversed the disputed amount in his books of account as he was obliged to offer only the real income earned by him. The payer deducted TDS on the gross amount and paid the same to the credit of central government, nevertheless, the 4 same constitute tax payment on behalf of the assessee and further, the net income received by the assessee got reduced to the extent of TDS amount and therefore, the assessee was entitled for full TDS credit, whatever the figures were. If the contention of the revenue that TDS credit would be available only when the corresponding income were offered by the assessee, were to be accepted then in such a scenario, the assessee would never be able to claim the credit of the same since whatever income accrued to the assessee was already offered to tax.
4. Per contra, Ld. DR while contending that since the reopening has been done within the period of four years from the end of relevant AY, the only requirement to initiate reassessment proceedings were that the AO had 'reasons to believe' that any income chargeable to tax had escaped assessment. This impugned issue was never examined by AO during original assessment proceedings and hence there was neither application of mind nor formation of any opinion on the issue and subsequently, upon noticing the escapement of income, AO rightly acquired reassessment jurisdiction and hence the same were validly initiated. On merits, it was argued that the assessee never adduced any evidence to show corresponding reversal of the disputed amount by the payer and unilateral act of reversal of interest could not absolve the assessee from tax liability and therefore, rightly suffered the said addition.
5. We have heard the rival contentions and perused relevant material on record. So far as legal objection to initiation of reassessment proceedings are concerned, we find strength in the arguments of Ld. DR that since no opinion was formed during original assessment proceedings, it was not a case of 'change of opinion' rather it was a case of 'no opinion' at all. The Ld.AR could not adduce any material to 5 support the contention that the impugned issue was discussed in any manner during the original assessment proceedings and merely assails the reassessment proceedings on the ground that no new tangible material came into possession of AO so as to justify reopening, which in our opinion, is not tenable. We find that the only requirement to be fulfilled so as to initiate reassessment was that there was no change of opinion and further the AO was in possession of relevant material at the time of issuance of notice u/s 148 so as to justify reopening, which prima-facie have been fulfilled in the present case and hence, we reject the contentions of the Ld. AR on this ground. The case laws relied upon by the assessee could not help him on the facts and circumstances of the case as no opinion was formed in the present case and the AO was in possession of relevant material which justifies the reopening. The legal ground raised in the appeal is, therefore, dismissed.
6. Going further on merits, we find that the Ld. AR has vehemently argued that the assessee never earned the income reflected in the TDS certificates and it offered the correct income to tax and TDS was paid on behalf of assessee and hence, assessee rightly claimed full Tax credit. We agree with this contention of the Ld. AR that the assessee was obliged to offer only the real income to tax, notwithstanding the method of accounting followed. The lower authorities simply rejected the contentions of the assessee on the ground that it failed to prove corresponding reversal of disputed interest by the payer, when the authorities themselves were vested with the power to call for further information / confirmations from the respective parties by issuance of notice u/s 133(6) which prima facie has not been done and therefore weakens the stand of the revenue. Therefore, without delving much deeper into the controversy, on the facts and circumstances of the case, we are inclined to remit the matter back to the file of Assessing Officer for the limited 6 purpose of verifying whether the assessee has offered the TDS amount as reflected in the TDS certificates to tax and if so, the impugned additions shall stand deleted. The Assessee is directed to substantiate his claim forthwith in this regard before the Ld. AO failing which the AO shall be at liberty to decide the matter on the basis of material available on record. Needless to say, the amount of carried forward / set off of business losses, if any, shall also be adjusted accordingly in the light of the final findings / conclusions.
7. The assessee's appeal partly succeeds for statistical purposes.
Order pronounced on 24th day of March, 2017.
Sd/- Sd/-
(Sushma Chowla) (Manoj Kumar Aggarwal)
�या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER
पुणे / Pune; �दनांक / Dated : 24th March, 2017
आदे श क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to :
1. अपीलाथ� / The Appellant.
2. ��यथ� / The Respondent.
3. आयकर आयु�त (अपील) / The CIT(A)-XIV, Ahmedabad
4. आयकर आयु�त / The CIT, Ahmedabad
5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, "ए" ब�च, पुणे / DR, ITAT, "A" Bench, Pune.
6. गाड� फ़ाइल / Guard File.
// आदे शानुसार / BY ORDER, स�या�पत ��त //True Copy// सहायक पंजीकार / Assistant Registrar, आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune