Income Tax Appellate Tribunal - Amritsar
The Asstt. Commissioner Of Income Tax, ... vs M/S Gurdaspur Co-Op. Sugar Mills Ltd.,, ... on 15 September, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH; AMRITSAR.
BEFORE SH. T. S. KAPOOR, ACCOUNTANT MEMBER
AND SH. N.K. CHOUDHRY, JUDICIAL MEMBER
I.T.A No. 639/(Asr)/2015
Assessment Year: 2008-09
PAN: AAAAT0586H
Asstt. C. I. T., Vs. M/s. The Gurdaspur Co-op.
Circle-VI, Sugar Mills Ltd., Vill. Paniar,
Pathankot Gurdaspur.
(Appellant) (Respondent)
Appellant by : Sh. Rahul Dhawan (D. R.)
Respondent by: Sh. Padam Bahl (C. A.)
Date of Hearing: 09.08.2017
Date of Pronouncement: 15.09.2017
ORDER
PER T. S. KAPOOR (AM):
This is an appeal filed by revenue against the order of Ld. CIT(A), Amritsar dated 23.09.2015 for Asst. Year: 2008-09.
2. The revenue has taken the following grounds of appeal:
"1. Whether, in the facts and circumstances of the case, the Ld. CIT(A)-II, Amritsar has deleted the addition of Rs.2,88,02,795/- and Rs.68,18,000/- on the ground that the RDF is not covered u/s 43B of the Income Tax Act, 1961. However, the fact is that the RDF is established under the Act (Rural Development Act, 1987) of the Government of Punjab. Actual payment as mentioned in this section is intended to cover payments to Government. Appeal on this issue already pending before the Hon'ble High Court for the Assessment Year 2007-08.
2. On the facts and law, the Ld. CIT(A)-II, Amritsar has erred in quashing the assessment reopened u/s 148.
3. Appellant craves leave to amend or add any or more grounds of appeal."2 ITA No. 639(Asr)/2015
Assessment Year: 2008-09
3. At the outset, the Ld. DR submitted that Ld. CIT(A) has wrongly deleted the additions which the Assessing Officer had made on account of earlier year interest on Rural Development Fund. The Ld. DR submitted that Ld. CIT(A) has wrongly held that RDF was not covered under the provisions of section 43B of the Act whereas the fact remains that RDF was established under the Rural Development Act, 1987 of the Government of Punjab and actual payments as mentioned in this section are intended to cover payments to Government also.
4. The Ld. DR further submitted that the Ld. CIT(A) had quashed the assessment order which was reopened under the provisions of section 148 of the Act by holding that the Assessing Officer had already applied his mind and there was no failure on the part of assessee to disclose all the material fact. The Ld. DR submitted that the Ld. CIT(A) should not have quashed the assessment order as the income of assessee had escaped assessment on the basis of audit report. Reliance in this respect was placed on the following case laws:
(i) Commissioner of Income Tax Vs. P.V.S. Beedies (P) Ltd. 237 ITR 0013 Supreme Court of India.
(ii) Haryana Agro Industries Corporation Ltd. Vs. Commissioner of Income Tax Punjab & Haryana High Court.
5. The Ld. DR submitted that Hon'ble Supreme Court in the case of Commissioner of Income Tax Vs. P.V.S. Beedies has clearly held that 3 ITA No. 639(Asr)/2015 Assessment Year: 2008-09 reopening of assessment was possible on the basis of a factual error which had escaped during the original assessment proceedings.
6. The Ld. AR on the other hand submitted that in the case of assessee itself, the Punjab & Haryana High Court has held that the interest on RDF was not covered under the provisions of 43B of the Act and therefore on merits the addition made by Assessing Officer was not sustainable.
As regards the quashing of assessment, the Ld. AR submitted that in the case laws relied on by Ld. DR, there was different issue and in which the assessments were reopened on the basis of material pointed out by internal audit party of the department whereas in the present case, there was no objection pointed out by internal audit team of the department and therefore these case laws are not applicable to the facts and circumstances of the case as in the present case all the material facts relating to interest on RDF were examined by Assessing Officer during original assessment proceedings and after considering these facts, Assessing Officer had not disallowed any interest.
7. The Ld. AR submitted that reasons for reopening are placed in P.B. page 2 which clearly demonstrate that no fresh material had come into the possession of Assessing Officer and all the material facts were already available in the return of income and computation of income itself. The Ld. AR further submitted that the assessee during original assessment proceedings had given details of interest accrued on secured 4 ITA No. 639(Asr)/2015 Assessment Year: 2008-09 loans and temporary loan and a copy of reply was placed at P.B. page 43 and after considering reply of assessee, the Assessing Officer had noted in para 7 that detail of interest paid and interest received has been obtained and no adverse inference is called for. In view of these facts and circumstances, the Ld. AR submitted that Assessing Officer had applied his mind in the original assessment proceedings and the reopening was not permitted under these circumstances. Reliance in this respect was placed on the following case laws:
"(i) Techspan India Pvt. Ltd. Vs. ITO 283 ITR 212 (Del.).
(ii) German Remedies Ltd. Vs. Deputy Commissioner of Income Tax 285 ITR 26 (Bom.)
(iii) Commissioner of Income Tax Vs. Corporation Bank Ltd. 254 ITR 791 (SC).
(iv) Commissioner of Income Tax Vs. Kelvinator of India Ltd. 320 ITR 561 (SC).
(v) ICICI Prudential Life Insurance Co. Ltd. Vs. Assistant Commissioner of Income Tax 325 ITR 471 (Bom.)
(vi) Commissioner of Income Tax Vs. Usha International Ltd. 210 Taxman 188 (Delhi.)."
8. We have heard the rival parties and have gone though the material placed on record. We find that the Ld. CIT(A) has not decided the issue on merits and has quashed the assessment order, therefore the first ground taken by revenue is not coming out if the order of Ld. CIT(A) as he has not deleted the additions on merits and therefore ground no. 1 of the appeal is dismissed.
5 ITA No. 639(Asr)/2015
Assessment Year: 2008-09 As regards ground no. 2 relating to quashing of assessment, we find that Assessing Officer during assessment proceedings vide para 7 has noted as under:
"7. Detail of regarding stock finished goods, raw material and packing material quantities wise and price wise has been received. Detail of the member of the Co-op Society has been obtained. Detail of interest paid and interest received have been obtained. No adverse inference is called for."
We further find that assessee in the computation of income placed at P.B. page 33 itself has claimed interest on RDF loan of previous year and current year. This computation of income was available with the Assessing Officer during original assessment proceedings. We further find that during assessment proceedings the assessee on a query from Assessing Officer had replied to the query relating to interest accrued and due on secured loans, a copy of the said reply is placed at P.B. page
43. Therefore from the above it is apparent that during original assessment proceedings, the Assessing Officer had completely applied his mind. From the copy of reasons recorded placed at P.B. page 2, we find that the Assessing Officer from the computation of income filed by assessee during original assessment proceedings had observed that the incomes had escaped assessment. Relevant reasons recorded by Assessing Officer are reproduced below:
"The assessment was completed u/sl43(3) at loss of Rs.1,48,37,959/- and agriculture income Rs.1,35,447/-. However, in the computation sheet filed alongwith revised return on 29/09/2009, the assessee has claimed expenses on interest paid on RDF loan of previous year of Rs.2,88,02,795/-. The Audit has certified that (mentioned along with Balance Sheet and Profit and Loss account vide point 3). "The Mills has not accounted for interest on RDF loan amounting to Rs.2,88,02,795/- on required vide letter No. PFSA- 04/RDF/90/3046 dated 25/08/2006 6 ITA No. 639(Asr)/2015 Assessment Year: 2008-09 wherein Punjab Government has decided interest the charged @ 7% p.a.) As the assessee is following mercantile system of accounting interest should has been claimed in the respective Financial Year 2006-07 relevant to Assessment Year 2007-08. The earlier year expenses amounting to Rs.2,88,02,795/- claimed in the current yellf as it has nqf been accrued in this current financial year. This Rs.2,88,02,795/- has escaped assessment.
In the computation sheet filed alongwith revised return on 29/09/2009, the assessee has also claimed expenses of interest paid on RDF loan of current year of Rs.68,18,000/-. There is no evidence oh record to prove that the payment of interest was made in the Financial Year under consideration. Hence, Rs.68,18,000/- has escaped assessment."
The above reasons do not disclose that the Assessing Officer had made his opinion regarding escapement of income on the basis of objection by some audit team of department and he has formed his belief on the basis of his computation sheets which were already available with the Assessing Officer during original assessment proceedings on which the auditors of the assessee had commented regarding interest. Therefore this is a case of change of opinion which is not permissible under the provisions of law as held by various courts. The Hon'ble Supreme Court of India in the case of CIT Vs. Kelvinator of India Ltd. 320 ITR 0561 has held as under:
"Prior to Direct Tax Laws (Amendment) Act, 1987, reopening could be done under two conditions and fulfillment of the said conditions alone conferred jurisdiction on the AO to make a back assessment, but in s. 147 (w.e.f. 1st April, 1989), they are given a go by and only one condition has remained, viz., that where the AO has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. 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" failing which, s. 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. The conceptual difference between power to review and power to reassess should also to be kept in mind. The AO has no power to review; he has the power to reassess. But reassessment has to be based on fulfillment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, 7 ITA No. 639(Asr)/2015 Assessment Year: 2008-09 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, 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. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in s. 147. 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. Appeals are therefore dismissed--CIT vs. Kalvinator of India Ltd. (2002) 174 CTR (Del)(FB) 617 and CIT vs. Eicher Ltd. (2007) 213 CTR (Del) 57 affirmed."
The above order of Hon'ble Supreme Court clearly lays down the law that Assessing Officer is not permitted to reopen a case on the basis of change of opinion. In the present case, there is no fresh material and instead of it is case of change of opinion which is not permitted as per the above said case law and as per various case laws relied on by Ld. AR.
9. In view of the above facts and circumstances, we do not find any infirmity in the orders of Ld. CIT(A), therefore ground no. 2 is also dismissed.
10. In nutshell, the appeal filed by the revenue is dismissed.
Order pronounced in the open court on 15.09.2017 Sd/- Sd/-
(N. K. CHOUDHRY) (T. S. KAPOOR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 15.09.2017.
/GP/Sr. Ps.
Copy of the order forwarded to:
(1) The Assessee:
(2) The
(3) The CIT(A),
(4) The CIT,
8 ITA No. 639(Asr)/2015
Assessment Year: 2008-09
(5) The SR DR, I.T.A.T.,
True copy
By Order