Income Tax Appellate Tribunal - Indore
The Acit-2(1), Bhopal vs M/S. M. P. Laghu Udyog Nigam Ltd., Bhopal on 15 May, 2017
ACIT2(1)Bhopal v. M/s. M.P. Laghu Udyog Nigam Ltd./ I.T.A. No.270 /Ind/2016/& CO. No.151/Ind/2016/A.Y.:08-09 Page 1 of 8 आयकर अपील य अ धकरण, इंदौर यायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER आ.अ.सं./ I.T.A. No. 270/Ind/2016 & C.O. No.151/Ind/2016 !नधा#रण वष# /Assessment Year: 2008-09 Assistant Commissioner of M/s. M.P. Laghu Udyog Nigam Ltd.
Income Tax 2(1) v. T. T. Nagar, Bhopal
Bhopal Assistant Commissioner of
M/s. M.P. Laghu Udyog Nigam Income Tax 2(1)
Ltd.
अपीलाथ /Appellant यथ /Respondent
था.ले.सं./PAN: AABCM 1366 K
अपीलाथ क ओर से/Appellant by Shri Mohd. Javed, Sr. D.R.
यथ क ओर से/Respondent by Shri Anil Kumar Khabya, CA
Date of hearing 09-05-2017
Date of pronouncement 15-05-2017
आदे श /O R D E R
PER O.P. MEENA, ACCOUTANT MEMBER.
1. This appeal by the Revenue and Cross objection by the assessee are directed against the order of Learned Commissioner of Income-tax (Appeals)-I, Bhopal [in short "the CIT(A)"] dated 21-01-2016 pertaining to Assessment Year 2008-09, which in turn has arisen from the order dated 30-03-2014 passed by the ACIT-2(1)Bhopal (in short "the AO" ) under section 143 (3) of Income Tax Act,1961 ( in short 'the Act')whereby taking following ground of appeal:-
"Deleting the addition of Rs. 78, 82, 705/- on account of advances received from customers which have been transmitted to the supplier?""
ACIT2(1)Bhopal v. M/s. M.P. Laghu Udyog Nigam Ltd./ I.T.A. No.270 /Ind/2016/& CO. No.151/Ind/2016/A.Y.:08-09 Page 2 of 8
2. Succinctly, facts as culled out from the orders of lower authorities are that the assessee company is 100% owned government undertaking of MP Government and is engaged in promotion of SSI Goods in the State of MP under the orders of State Government. It was noticed from record that the assessee had recovered an amount of Rs. 78,82,705/- from SSI units and paid to WCL on account of GS TV and same is shown under head "Advance received from customer" towards MPGSTV. It was explained that the assessee purchase coal from the coal companies such as Western Coal Field. These companies levies in their bill tax towards MPGSTV. This tax has been challenged in the court of law. The coal companies are recovering this amount from the assessee but they are keeping the money as advance in their books pending final judgement. In turn, the assessee, is also recovering this amount from the customers and keeping the same as advance received from customers. However, the AO did not satisfy with explanation, hence, said amount was added to total income.
3. In appeal before CIT(A), it was explained that the said amount contained opening balance of Rs. 43,04,266/-, hence, balance amount of Rs. 35,78,439/- was as fresh advance amount recovered during the year from the customers, hence, if any addition is to be made, then the amount of Rs. 35,78,439/- is required to be added only. The Ld. CIT (A) noted that this amount represents taxes levied in the supply bill by the Coal Companies. However, this levy of tax is unconstitutional and the matter is now pending before the Hon`ble Supreme Court. Therefore, the coal companies are keeping this money as advance in their books of accounts pending final judgement. The assessee is also not claiming this as expenditure in its Profit & Loss Account as the matter is pending in Court. These facts have been disclosed by way of Notes on Accounts. The assessee submitted that if the transaction of receipt ACIT2(1)Bhopal v. M/s. M.P. Laghu Udyog Nigam Ltd./ I.T.A. No.270 /Ind/2016/& CO. No.151/Ind/2016/A.Y.:08-09 Page 3 of 8 of advance from customer is treated as income then, the amount paid to the suppliers has also to be allowed as expenditure resulting in Nil income is this particular transaction. It was also submitted that the assessee was following this accounting treatment for past several years, however, no such addition was made in past and in subsequent assessment years. In view of these facts, the Ld. CIT (A) has deleted the addition.
4. Being aggrieved, the Revenue has filed this appeal before the Tribunal. The Ld. Sr. D.R. supported the order of the AO.
5. The learned Counsel for the assessee, submitted that no such addition was made in previous years nor in subsequent years though the assessee has been following this accounting treatment for several years. Further, this amount received from customers towards levy of tax levied by the Coal Companies, hence, if addition is made then corresponding deduction be allowed against the payments made. Consequently, there is no escapement of Income chargeable to tax. Hence, the finding of CIT (A) are sustained.
6. We have heard the rival submissions of both the parties and have perused the material available on record. It is seen that the amount received from customers is because of recovery made as tax by Coal companies from the assessee, which is shown as advance in the books of accounts, as the matter is under dispute by the assessee against coal suppliers. The assessee has also paid this amount to coal companies, who in turn showing it as advances in their books of accounts. If revenue wants to tax this amount in the hands of the assessee, then, the assessee be allowed deduction on account taxes paid to coal companies. If the Courts decides the issue in favour of the assessee, then the assessee would have to return this amount to customers. This being so, there is no real income in the hands of the ACIT2(1)Bhopal v. M/s. M.P. Laghu Udyog Nigam Ltd./ I.T.A. No.270 /Ind/2016/& CO. No.151/Ind/2016/A.Y.:08-09 Page 4 of 8 assessee. In view of this matter, we find that the finding of Ld. CIT (A) as correct , therefore, no interference is called for. Accordingly, this grounds of appeal of revenue is dismissed.
7. CO No. Ind/2016 BY THE ASSESSEE
8. In the CO, the assessee has challenged the issue of notice under section 148 of the Act on the ground that reopening of assessment is not justified as all material was disclosed by way of Notes on Accounts in audited balance sheet and accounts, hence, order passed is without jurisdiction and bad-in-law.
9. We have considered the facts of the case. As we have dismissed the Revenue`s grounds of appeal, therefore, the Cross Objection of the assessee becomes infructuous and academic in nature. However, the Ld. A.R. of the assessee insisted before us during hearing to adjudicate the issue of reopening of assessment, hence, same is being considered and decides. The Ld. A.R. submitted that material facts was available on the file of the AO hence, issue of notice u/s.148 amounts to change of opinion , hence, reassessment proceedings are invalid. We find that the assessment year involve under consideration is A.Y. 2008-09. The notice under section 148 was issued in this case on 28-03-2013 i.e. before expiry of 4 years from the end of relevant assessment year. As per the mandate of section 147 if the AO has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the reassessment proceedings. Accordingly, we find that the AO has satisfied the required conditions laid down in the statute for the issuance of notice under section 148 and there is no infirmity in his order on this count. Notice under section 148 ACIT2(1)Bhopal v. M/s. M.P. Laghu Udyog Nigam Ltd./ I.T.A. No.270 /Ind/2016/& CO. No.151/Ind/2016/A.Y.:08-09 Page 5 of 8 within four years can be issued even if there is no failure on the part of assessee to disclose all material truly and fully necessary for assessment. Thus notice u/s 148 is as per law. This view is also supported by decision of hb Bombay High Court in the case of Grind well Norton Ltd. v Jagdish Prasad Jangid ACIT and Others 267 ITR 673(Bom) wherein it was observed by the Hon'ble High Court as under:
" If one reads explanation 2 to section 147 of the IT Act including the proviso therefore then it is clear that where the Department re-opens assessment within a period of 4 years, it can do so on the ground of income having escaped assessment. Even if there is no failure on the part of assessee to disclose fully and truly all material facts. However in the cases of reopening after 4 Years, the A.O. must have reason to believe that the income had escaped assessment by reason of failure on the part of the assessee is disclose fully and truly all material facts, explanation 2 cannot be read without reading the proviso to sec. 147. In this case mere information regarding claim u/s. 80I and 80IA had been provide to A.O. while completing the original assessment and there was no failure on the part of assessee to disclose fully and truly material facts the re-opening beyond 4 years was not valid.."
10. The power to make assessment or reassessment within four years of the end of the relevant assessment year would be attracted even in cases where there has been a complete disclosure of all relevant facts upon which a correct assessment might have been based in the first instance, and whether it is an error of fact or law that has been discovered or found out justifying the belief required to initiate the proceedings. The words "escaped assessment", where the return is filed, cover the case of discovery of a mistake in the assessment caused by either an erroneous construction of the transaction or due to its non-consideration, or caused by a mistake of law applicable to such transfer or transaction even where there has been a complete disclosure of all relevant facts upon which a correct assessment could have been based. In cases where the Assessing Officer had over-looked something ACIT2(1)Bhopal v. M/s. M.P. Laghu Udyog Nigam Ltd./ I.T.A. No.270 /Ind/2016/& CO. No.151/Ind/2016/A.Y.:08-09 Page 6 of 8 at the first assessment, there can be no question of any change of opinion, when the income which was chargeable to tax is actually taxed as it ought to have been under the law, but was not, due to an error committed at the first assessment.
11. The word "reason" in the phrase "reason to believe" would mean cause or justification. If the Assessing Officer has a cause or justification to think or suppose that income had escaped assessment, he can be said to have a reason to believe that such income had escaped assessment. The words "reason to believe" cannot mean that the Assessing Officer should have finally ascertained the facts by legal evidence. Unless the ground or the material on which his belief is based, is found to be so irrational as not to be worthy of being called a reason by any honest man, his conclusion that it constitutes a sufficient reason, cannot be overridden. If the Assessing Officer honestly comes to a conclusion that a mistake has been made, it matters nothing so far as his jurisdiction to initiate the proceedings under section 147 is concerned, that he may have come to an erroneous conclusion whether on law or on facts. The court will not in exercise of its extraordinary jurisdiction under the Constitution, examine the sufficiency of the reason which led the Assessing Officer to believe that the income had escaped assessment as held in the case of Shri Praful Chunilal Patel 236 ITR 832(Guj).
12. We further rely in the case of Dr. Amin's Pathology Laboratory 252 ITR 673 (Bom) the Hon`ble High Court observed that after the amendment, the only restriction put in the section is "reason to believe". That reason has to be a reason of a prudent person. That reason should be fair and not necessarily due to failure of the assessee to disclose fully or partially some material facts relevant for assessment. However, where a period of four years has elapsed the proviso to section 147 of the Income-tax Act, 1961, comes into the picture. Under the said proviso, no action can ACIT2(1)Bhopal v. M/s. M.P. Laghu Udyog Nigam Ltd./ I.T.A. No.270 /Ind/2016/& CO. No.151/Ind/2016/A.Y.:08-09 Page 7 of 8 be taken after four years unless any income chargeable to tax has escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Under Explanation 1 to the proviso, mere production of account books from which material evidence could have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the proviso. Therefore, mere production of the balance-sheet, profit and loss account or account books will not necessarily amount to disclosure within the meaning of the proviso.
13. Adverting to the facts of instance case, we find that the assessee has recovered an amount of Rs. 78,82,705/- from SSI units and paid to WCL on account of GSTV and same has been shown under the head advance received from customers , hence, there was prima-facie case of reason to believe that income chargeable to tax has escaped assessment. Further reliance placed in the case of Raymond Woolen Mills Ltd. vs. ITO [1999] 236 ITR 34 (SC): wherein it was observed that in determining whether commencement of proceedings u/s 147(a) was valid, what was to be seen was only the prima facie material; the sufficiency or correctness of the material was not a thing to be considered at that stage. Reopening of the assessment of the preceding year on the basis of information obtained in the subsequent year's proceedings regarding undervaluation of inventories resulting in under- statement of profits was held valid under section 147(a). In the case of Kalaynji Mabji & Cop. V. CIT 9(1097) 102 ITR 287 (SC) it was held that reassessment can be initiated even if information may be obtained from record of original assessment.
ACIT2(1)Bhopal v. M/s. M.P. Laghu Udyog Nigam Ltd./ I.T.A. No.270 /Ind/2016/& CO. No.151/Ind/2016/A.Y.:08-09 Page 8 of 8
14. In the light of above facts, the reopening of assessment is perfectly in accordance with law hence same is upheld. This ground of appeal of the assessee is therefore dismissed.
15. In the result, the appeal of the Revenue and Cross Appeal of Assessee stands dismissed.
16. The order pronounced in the open Court on 15.5.2017 Sd/- Sd/-
( C.M. GARG) ( O. P. MEENA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
&दनांक /Dated: 15th May, 2017
OPM