Income Tax Appellate Tribunal - Delhi
Uttarakhand Van Vikas Nigam , Dehradun vs Assessee on 11 March, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'H
'H' : NEW DELHI
BEFORE SHRI G.D.AGRAWAL,
G.D.AGRAWAL, VICE PRESIDENT AND
SHRI KUL BHARAT,
BHARAT, JUDICIAL MEMBER
ITA Nos.7074/Del/2014,
Nos.7074/Del/2014, 7075/Del/2014 & 7076/Del/2014
Assessment Years
Years : 2002
2002-03, 2003-
2003-04 & 2004-
2004-05
M/s Uttarakhand
Uttarakhand Van Vikas Vs. Assistant Commissioner of
Nigam, Income Tax,
Aranya-
Aranya-Vikas Bhawan, Circle-
Circle-II, Aayakar Bhawan,
73, Nehru Road, Subhash Road,
Dehradun - 248 001. Dehradun.
PAN : AAALU0009M.
(Appellant) (Respondent)
Appellant by : Shri R.B. Shukla, Shri Ashish Raj
Shukla and Shri P.C. Agarwal,
Advocates.
Respondent by : Shri Shahid Nasir Ali, CIT-DR.
Date of hearing : 09.03.2015
Date of pronouncement : 11.03.2015
ORDER
PER G.D.AGRAWAL, G.D.AGRAWAL, VP :
These appeals by the assessee are directed against the order of learned CIT-I, Dehradun dated 9th October, 2014 for the AY 2002-03 to 2004-05.
2. Ground Nos.1 to 5 of the assessee's appeals are against the validity of issue of notice under Section 148 of the Income-tax Act, 1961.
3. At the time of hearing before us, it is submitted by the learned counsel that the assessee is an undertaking of Uttarakhand Government. That the assessment years under consideration are AY 2002-03 to 2004-05 while the notice under Section 148 was issued on 6th March, 2013. Thus, the notice was issued well beyond the period of 2 ITA-7074 to 7076/Del/2014 limitation prescribed under Section 149 for reopening of assessment. The Assessing Officer has issued the notice by taking recourse to the provisions of Section 150(1) which permits the issue of notice under Section 148 at any time. He, however, pointed out that under Section 150(1), notice can be issued in consequence of or to give effect to any finding or direction contained in an order passed by any authority by way of appeal, reference or revision. That in the notice under Section 148, the Assessing Officer has mentioned that the notice is being issued to give effect to the directions of the ITAT in the case of Uttar Pradesh Forest Corporation (hereinafter referred to as 'UPFC') wherein the ITAT held that 54% of the interest earned on the FDRs belonged to the assessee i.e. Uttarakhand Forest Development Corporation (hereinafter referred to as 'UFDC'). It is stated by the learned counsel that the Assessing Officer who gave effect to the order of the ITAT in the case of UPFC did not reduce 54% of the interest from the income of UPFC. Thus, initiation of proceedings under Section 148 in the case of the assessee for taxability of 54% interest earned on the FDRs cannot be said to be in consequence or to give effect to the finding of the direction of the ITAT. He further stated that Explanation (3) after Section 153 provides that where by an order any income is excluded from the total income of one person and held to be the income of another person, then an assessment of such other person for the purpose of Section 150 be deemed to be made in consequence of the direction contained in the said order provided such other person was given an opportunity of being heard before the said order was passed. He stated that no opportunity to the assessee was given by the ITAT before passing the order in the case of UPFC. In support of this contention, he relied upon the following decisions:-
(i) Rani Rajendra Kumari BA Vs. Income Tax Officer, B-Ward, Allahabad - 130 ITR 708.
(ii) Rural Electrification Corporation Ltd. Vs. CIT - 355 ITR 345.
3 ITA-7074 to 7076/Del/2014
(iii) Rural Electrification Corporation Ltd. Vs. CIT - 355 ITR 356.
(iv) CIT Vs. Goel Brothers - 135 ITR 511.
4. He, therefore, submitted that the notice issued under Section 148 being barred by limitation should be quashed.
5. Learned DR, on the other hand, supported the orders of the authorities below. He stated that the ITAT, Lucknow Bench in the case of UPFC in paragraph 26 has held in clear terms that 54% of the FDRs and interest thereon pertains to UFDC and therefore, the same is required to be assessed in their hands. Thus, the Assessing Officer of UFDC rightly relied upon the order of the ITAT and issued notice under Section 148 in consequence to the observation/direction contained in the order of the ITAT. He further submitted that the Hon'ble Lucknow High Court has upheld the order of the ITAT vide its order dated 30th September, 2013. Thus, the order of the ITAT dated 6th March, 2009 having been upheld by the Hon'ble High Court, the Assessing Officer of the assessee i.e. UFDC was fully justified in reopening of assessment in the case of the assessee to give effect to the directions of the ITAT. He further submitted that there was a division of Uttaranchal State from Uttar Pradesh. Consequentially, the assets of UPFC were to be distributed between the forest corporation of two states. As per the division of states w.e.f. 1.4.2001, 54% of the FDRs made by UPFC were held to be belonging to UFDC and therefore, UFDC was entitled to 54% interest accrued on such FDRs. However, there was some dispute between the two State Governments about the allocation of the FDRs and other assets of the UPFC. The matter was in dispute administratively as well as judicially, therefore, the Assessing Officer of UPFC to protect the interest of the Revenue, while giving effect to the order of the ITAT in the case of UPFC, had taxed the 100% of interest on FDRs in the hands of UPFC. Nevertheless, the order of the ITAT is very clear, unambiguous and having been upheld by the Hon'ble High 4 ITA-7074 to 7076/Del/2014 Court, the Assessing Officer of UFDC was fully justified in issuing notice under Section 148 in terms of the provisions of Section 150. Therefore, the notice issued under Section 148 should be sustained.
6. We have carefully considered the submissions of both the sides and perused relevant material placed before us. The assessment years under consideration are AY 2002-03, 2003-04 & 2004-05. The notices under Section 148 have been issued on 6th March, 2013. Thus, the notices have been issued well beyond the period of six years which is the time limit prescribed under Section 149(1)(b). As per Revenue, the notices have been issued under Section 150(1) wherein there is no time limit. Section 150(1) reads as under:-
"Provision for cases where assessment is in pursuance of an order on appeal, etc.
150. (1) Notwithstanding anything contained in section 149, the notice under section 148 may be issued at any time for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision [or by a Court in any proceeding under any other law]."
7. Thus, as per Section 150, notice under Section 148 can be issued at any time provided the notice is issued in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceedings under this Act by way of appeal, reference or revision. As per Revenue, the notices have been issued to give effect to the order of the ITAT in the case of UPFC dated 6th March, 2009. It would be evident from the reasons recorded for issuing notice under Section 148 which is reproduced below for ready reference:-
5 ITA-7074 to 7076/Del/2014 "Reason for issuance for notice u/s 148 of the Act in the case of M/s Uttaranchal Forest Development Corporation, Dehradun for A.Y. 2002-03 The Hon'ble Income Tax Appellate Tribunal Lucknow, Bench- 'A' Lucknow has passed an order against M/s U.P. Forest Corporation, Lucknow vide ITA No.785/LUC/05, 243/LUC/06 & 619/LUC/07 for the A.Y. 2002-03, 2003-04 and 2004-05. Vide settlement of the Ministry of Home Affairs dated 28-07-2004 assets (held by U.P. Forest Corporation) and liabilities of erstwhile UPFC were divided between UPFC and UFDC (Uttaranchal Forest Development Corporation) in the ratio of 46.54%. The Hon'ble ITAT vide above appeal in ITA No.785/LUC/05, 243/LUC/06 & 619/LUC/07 for the A.Y. 2002-03, 2003-04 and 2004-05 held that the interest earned on FDRs is taxable in the hands of UPFC, Lucknow to the extent of 46% of total interest.
The ITAT further held that the balance 54% of interest earned on such FDRs belonged to UFDC and is to be assessed in its hands. The ITAT further directed to initiate action in the hands of UFDC in accordance with law.
The details of interest received on FDRs is as under:
S.No. Assessment Invested in FDRs Interest received 54% share in Year interest of UFDC
1. 2002-03 3,49,14,34,174 34,69,96,162 18,73,77,927
2. 2003-04 3,36,63,61,515 35,07,59,940 18,94,10,368
3. 2004-05 41,61,38,83,943 50,37,63,843 27,20,32,475 Thus the 54% share in interest belonging to the assessee works out to Rs.18,73,77,927/-, which has not been shown by the assessee in its return of income. I have, therefore, reason to believe that income to the extent of Rs.18,73,77,927/- for A.Y. 2002-03 has escaped assessment and it is a fit case for issuance of notice u/s 148 of the I.T. Act, 1961. Issue notice u/s 147 read with section 148 of the I.T. Act for the Assessment Year 2002-03."
8. Identical reasons have been recorded in AY 2003-04 and 2004-
05. The assessee has furnished before us the order of the Assessing 6 ITA-7074 to 7076/Del/2014 Officer of UPFC dated 31st December, 2010 by which he has given effect to the order of the ITAT dated 6th March, 2009. However, we find that while giving effect to the order of the ITAT, he did not reduce the 54% of the interest on FDRs. The Revenue cannot be permitted to take different stand in the case of UPFC and UFDC. In the case of UFDC, the Assessing Officer is of the opinion that out of the interest on FDRs, only 46% is taxable in the case of UPFC and balance 54% in the case of UFDC. But, while giving effect to the same order of the ITAT, the Assessing Officer of UPFC has assessed the 100% income on FDRs. Even if there are two different Assessing Officers, they are not permitted to take contrary stand while interpreting and giving effect to the same order of the ITAT. The whole purpose of Section 150 is that if the income is excluded from the hands of one person to give effect to the appellate order, then the income which is to be excluded from one person should be assessed in the hands of the person to whom such income belonged. However, in the case under appeal before us, the Revenue has assessed 100% income in the hands of UPFC while giving effect to the order of the ITAT, at the same time, initiated proceedings under Section 148 in the case of UFDC to assess 54% of the interest. This contrary view of the Revenue cannot be permitted.
9. Further, Explanation (3) after Section 153 reads as under:-
"Explanation 3. - Where, by an order [referred to in clause (ii) of sub-section (3)], any income is excluded from the total income of one person and held to be the income of another person, then, an assessment of such income on such other person shall, for the purposes of section 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order, provided such other person was given an opportunity of being heard before the said order was passed."
10. That Hon'ble Allahabad High Court in the case of Rani Rajendra Kumari BA (supra) held as under:-
7 ITA-7074 to 7076/Del/2014 "Where a notice under s. 148 was issued on the assessee in order to give effect to a finding by the Tribunal in an appeal by the assessee's husband that the income of the assessee could not be included in the total income of her husband under the provisions of s.
64(iii), but the assessee was not given an opportunity to be heard before either the AAC or the Tribunal."
11. Similar view was reiterated by their Lordships of Allahabad High Court in the case of Goel Brothers (supra) wherein it was held as under:-
"Held, that no opportunity of being heard, as contemplated by Expln. 3 to s. 153, was given to the assessee before the order was passed by the Tribunal in the appeal by K. The order of the Tribunal passed in the case of K clearly indicated that no direction was given by the Tribunal that the income earned from the business carried on by the assessee should be assessed in the hands of the assessee. The Tribunal only expressed the view that no inference of benami could be drawn from the facts and circumstances on the record and the income of the assessee could not, therefore, be included in the income of K. While disposing of the appeal there was neither any occasion for the Tribunal, nor could it be legally held in the absence of the assessee, that the income should be assessed in the hands of the assessee. Hence, it could not be contended that the notices to the assessee were issued in consequence of or to give effect to any finding or direction contained in the Tribunal's order. As s. 150(1) was not applicable to the case, the proceedings initiated under s. 148 were barred by limitation."
12. That Hon'ble Delhi High Court in the case of Rural Electrification Corporation Ltd. (supra) held as under:-
"Before a notice under section 148 of the Income-tax Act, 1961, can be issued beyond the time limits prescribed under section 149, the ingredients of Explanation 3 to section 153 have to be satisfied. Those ingredients require that there must be a finding that income which is excluded from the total income of 8 ITA-7074 to 7076/Del/2014 one person is income of another person. The second ingredient is that before such a finding is recorded, such other person should be given an opportunity of being heard."
13. No contrary decision is brought to our knowledge. Admittedly, while passing the order of UPFC, the ITAT Lucknow Bench has not given any opportunity of hearing to UFDC. Thus, as per Explanation (3) after Section 153 and the decision of Hon'ble Allahabad High Court and Hon'ble Delhi High Court, action under Section 148 cannot be taken in the case of UFDC. In view of the totality of above facts and legal position and relying upon the decision of Hon'ble Allahabad High Court in the case of Rani Rajendra Kumari BA (supra), Goel Brothers (supra) and of Hon'ble Delhi High Court in the case of Rural Electrification Corporation Ltd. (supra), we hold that the notices issued by the Assessing Officer under Section 148 in the case of UFDC are barred by limitation. Therefore, we quash the same and consequentially, the assessments completed in pursuance to such notices under Section 148 are also quashed.
14. Since we have already quashed the assessment order passed in pursuance to notice under Section 148, the other grounds of appeal which are against the merit of the various additions and disallowances do not survive for adjudication.
15. In the result, all the appeals of the assessee are allowed as above.
Decision pronounced in the open Court on 11th March, 2015.
Sd/- Sd/-
(KUL BHARAT)
BHARAT) (G.D.AGRAWAL)
(G.D.AGRAWAL)
JUDICIAL MEMBER VICE PRESIDENT
VK.
9 ITA-7074 to 7076/Del/2014
Copy forwarded to: -
1. Appellant : M/s Uttarakhand Van Vikas Nigam,
Aranya-
Aranya-Vikas Bhawan, 73, Nehru Road,
Dehradun - 248 001.
2. Respondent : Assistant Commissioner of Income Tax, Circle-
Circle-II, Aayakar Bhawan, Subhash Road, Dehradun.
3. CIT
4. CIT(A)
5. DR, ITAT Assistant Registrar