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Income Tax Appellate Tribunal, BENCH, NAGPUR
Before: SHRI D. KARUNAKARA RAO, AM & SHRI PARTHA SARATHI CHAUDHURY, JM
आदेश / ORDER
PER BENCH :
These four appeals preferred by the Revenue emanates from the orders of the Ld. CIT(Appeals)-I/II, Nagpur dated 28.10.2014, 24.08.2015 and 09.07.2015 respectively for the assessment years 2009-10, 2010-11 and 2011-12 as per the grounds of appeal on record for each of the assessment years.
These cases were heard together. Since issues common and facts are similar, these cases are being disposed of vide this consolidated order.
3. At the time of hearing, one adjournment petition has been filed in all these appeals and the same was rejected and cases were heard on merits after recording the submissions of the Ld. DR since neither the assessee nor his Authorized Representative was present before us.
4. The Ld. DR submitted that arising out of the regular assessment u/s.143(3) of the Income Tax Act, 1961 ( hereinafter referred to as „the Act‟) for assessment year 2009-10; ITA No.284/NAG/2015 arising out of the regular assessment u/s.143(3) of the Act for assessment year 2010-11 and ITA No.34/NAG/2015 arising out of regular assessment u/s.143(3) of the Act for the assessment year 2011-12 pertains to the issue on disallowance u/s.14A r.w.r 8D of the Income Tax Rules, 1962. The Ld. DR further submitted that is arising out of reassessment proceedings u/s.143(3) r.w.s.147 of the Act for assessment year 2009-10 pertains to the issue of determination of book profit u/s.115JB of the Act.
First, we would take up Revenue‟s appeal in ITA No.283/NAG/2015 and ITA No.284/NAG/2015 for the assessment years 2011-12, 2009-10 & 2010-11 for adjudication which pertains to the issue of disallowance u/s.14A r.w.r.8D of the Income Tax Rules, 1962.
ITA No.34/NAG/2015 (A.Y.2011-12) (A.Y.2009-10) ITA No.284/NAG/2015 (A.Y. 2010-11)
In order to adjudicate these appeals mentioned aforesaid, we would take up the facts as appearing in for the assessment year 2009-10 as lead case and more so, for all these appeals, the issues, facts and circumstances are common.
Coming to the facts of the lead case (ITA No.283/NAG/2015), we find on perusal of the order of the Ld. CIT(Appeals) at Para 3.4 & 3.5, the Ld. CIT(Appeals) has applied the decision of the ITAT, Nagpur Bench in assessee‟s own case for assessment year 2008-09 wherein the Tribunal has held as follows:
“11. We have considered other cases also and found that they are in support of the case of the assessee. Therefore, we hold that disallowance of expenditure under section 14A r.w. Rule 8D was not justified because the assessee has its own sufficient funds which were invested in the shares and were utilized for incurring the various other expenses and no interest has been paid on these surplus funds available with the assessee. Accordingly, we delete the disallowance of Rs.1,40,06,686/- sustained by the learned CIT(A).”
In terms of these findings by the Tribunal for assessment year 2008-09 in assessee‟s own case, the First Appellate Authority for assessment years 2009-10 & 2010-11 provided relief to the assessee on the same issue. Similarly for other assessment year 2011-12 in we find that the Ld. CIT(Appeals) has given relief to the assessee following the decision of the Tribunal in assessee‟s own case for assessment year 2008-09 by holding that “the disallowance of expenditure u/s.14A read with rule 8D is not justified in view of the fact that the appellant has its own sufficient funds which were invested in the shares and were utilized for incurring the various other expenses and no interest has been paid on these surplus funds available with the appellant.”
That however, the Ld. DR at the very outset submitted that with regard to the order of the Tribunal for assessment year 2008-09 in assessee‟s own case, the Revenue had preferred an appeal before the Hon‟ble Jurisdictional High Court and the Hon‟ble High Court also had given relief to the assessee. That being further aggrieved, the Revenue had preferred an appeal before the Hon‟ble Supreme Court and the Hon‟ble Supreme Court had passed an ex- parte order wherein the findings of the Hon‟ble High Court and the Tribunal was reversed and the issue was decided in favour of the Revenue. That further the said order being ex-parte, the assessee had filed an curative petition before the Hon‟ble Supreme Court and the Hon‟ble Supreme Court had recalled the ex-parte order to be now heard on merits and had directed for listing the said appeal. Thereafter, whether the Hon‟ble Supreme Court had heard the appeal or decided the appeal on merits is not coming out from the facts on record nor the Ld. DR was in a position to state the correct legal scenario. The Ld. DR vehemently contended that technically as on date, the matter stands in favour of the Revenue. However, it has to be ascertained whether after recalling the ex-parte order, the Hon‟ble Supreme Court had heard the appeal on merits or not or has passed any order that has to be considered since it will have the effect on all these appeals. More so, as evident from the aforesaid facts after decision of the Tribunal for assessment year 2008-09, lot of events has taken place and these events and the legal developments have to be ascertained before arriving at any decision.
In view of the above facts and circumstances and in our considered view, in the interest of justice, we, therefore, set aside the respective orders of the Ld. CIT(Appeals) in respect of all these assessment years and remit the matter back to their respective files for adjudicating the issue after taking into consideration recent legal developments specifically the order passed by the Hon‟ble Supreme Court on merits, if any, and the Ld. CIT(Appeals) shall adjudicate the issue after complying with the principles of natural justice. The assessee is directed to file copy of order passed by the Hon‟ble Supreme Court, if any, regarding recalled matter and other relevant documents before the Ld. CIT(Appeals) so that the First Appellate Authority can appreciate and decide the case on merits.
In the result, appeals of the Revenue in ITA No.283/NAG/2015 and ITA No.284/NAG/2015 for the assessment years 2011-12, 2009-10 & 2010-11 are allowed for statistical purposes.
Now, we would take up the appeal in 2009-10 in respect of book profit determined u/s.115JB of the Act. The grounds raised by the Revenue in this appeal reads as under:
“1. Whether on the facts and circumstances of the case and in law, the CIT(A) was correct in holding that the re-opening of the case u/s.147 of the I.T. Act, 1961 was bad in law ignoring the facts that the addition to the book profit u/s.115JB was made in terms of statutory provisions of clause (f) of explanation (1) of sub section (2) to section 115JB of the I.T. Act, 1961 as the same remained to be done in the assessment order dated 24.11.2011 u/s.143(3) of the I.T. Act, 1961 and therefore to comply with the provisions of the Act the re-opening was proper and justified? 2. Any other ground that may be raised during the course of hearing of appeal.”
The brief facts in this case are that the return of income declaring income of Rs.4,12,49,500/- was filed on 27.09.2008. The case was taken up for scrutiny and assessment was finalized on 24.11.2011 determining total income of Rs.6,97,07,570/- and book profit u/s.115JB at Rs.38,76,87,470/-. Subsequently, the Assessing Officer issued notice u/s.148 of the Act on 16.09.2014 and re-opened the assessment as he had reasons to believe that income chargeable to tax has escaped assessment. During the course of reassessment proceedings, the assessee objected to the said action of the Assessing Officer and submitted that since the original assessment has been completed u/s.143(3) of the Act and the same is sought to be reopened after 4 years from the end of the relevant year, the assessment cannot be reopened unless it is established that the alleged escapement of income was due to failure of the assessee to disclose fully and truly all the material facts necessary for assessment. The Assessing Officer however, did not agree with the submissions of the assessee and came to the conclusion that the disallowance u/s.14A read with rule 8D has to be considered while computing the income of the assessee u/s.115JB of the Act.
That on perusal of the order of the Ld. CIT(Appeals) at Para 3.3 of his order, we find that the Ld. CIT(Appeals) on perusal of the reasons recorded for reopening the assessment, has observed that there was no failure on the part of the assessee with regard to disclosing any material facts necessary for completion of assessment. Thus, reopening is beyond four years and there is no allegation in the reasons recorded that there is failure on the part of the assessee to disclose fully and truly all material facts and hence, the re- opening was held as bad in law.
The Ld. CIT(Appeals) has referred binding decisions of the Hon‟ble Jurisdiction High Court and Tribunal in the following cases:
i) IPCA Vs. Gajanand Meena (2001) 251 ITR 416 (Bom.) ii) Bhavesh Developers Vs. Assessing Officer (2010) 329 ITR 0249 ( Bom.) iii) Sir Warana Sahakari Dudh Utpadak Prakriya Sang Vs. ACIT (2005) 199 CTR 24 (Bom.) iv) Bank International Indonesia Vs. DDIT (International Taxation) ITA No.1083/Mum/2006.
The Ld. CIT(Appeals) further placed reliance on the decision of the Hon‟ble Bombay High Court in the case of Aventis Pharma Ltd. Vs. ACIT reported at 323 ITR 570 wherein the Hon‟ble High Court dealt with a case where the Revenue sought to reopen an assessment in order to withdraw a deduction allowed while computing long term capital loss and also to revise the rate of depreciation disallowed earlier. The Court held that where the material facts relating to these issues were already before the Assessing Officer at the time of the completion of the original assessment, such reopening would amount only to change of opinion.
That further in the case of Asteroids Trading & Investments (P) Ltd. Vs. DCIT (2009) 223 CTR (Bom) 144, the Hon‟ble Jurisdictional High Court held that reopening of the assessment within a period of 4 years from the end of the assessment year where earlier assessment was completed u/s.143(3) of the Act is not tenable in case of change of opinion. That further, it was held by the Hon‟ble Court that the legislature has not conferred power on the Assessing Officer to review his order.
Thus, the Courts have uniformly held that the provisions of section 147 of the Act cannot be used to review the order. Where, between the date of the order of assessment sought to be reopened and the date of formation of opinion by the Assessing Officer, nothing new has happened, no new material has come on record, no new information has been received, it is merely a fresh application of mind by the Assessing Officer to the same set of facts and the reason that has been given is that some material which was available on records while assessment order was made, was inadvertently excluded from consideration, it will amount to re-opening of the assessment merely because there is change of opinion.
In the case of Cartini India Ltd. Vs. Addl. CIT & Anr. (2009) 314 ITR 275 ( Bom.), wherein the Court observed that what section 147 of the Act contemplates, is the existence of material on record on the basis of which a prima facie opinion could be formed by the Assessing Officer that any income chargeable to tax has escaped assessment and not the material on record on the basis of which a final decision has already been taken at the time of assessment under section 143(3) of the Act. The legislature has imbibed the expression “reason to believe” with reference to any income chargeable to tax which has escaped assessment. Therefore, it automatically follows that in order to take recourse to the provisions of Section 147, the Assessing Officer should have reason to believe that any income chargeable to tax has escaped assessment. The expression „reason to believe‟ imbibed in section 147, pre- supposes some objectivity of the Assessing Officer and not mere subjective satisfaction or any suspicion about the escapement of income. A mere suspicion of the Assessing Officer about the escapement of income cannot justify the action u/s.147 /148 of the Act.
Reverting to the facts of the present case, the Ld. CIT(Appeals) observed that the information on which the reopening is based was before the Assessing Officer at the time of the original assessment u/s.143(3) of the Act. Thereafter, no new material has come on record. Thus, assessment has been reopened on a review of the information that was already on record which is not permissible in law and accordingly, the Ld. CIT(Appeals) quashed reassessment order as per reasons recorded at Para 5 of his order. At Para 6.1, the Ld. CIT(Appeals) further observed that the issue of determination of book profits u/s.115JB of the Act was in respect to the reassessment proceedings completed u/s.143(3) r.w.s.147 of the Act. Since reassessment proceeding itself was declared in valid in law and hence, quashed and therefore, it was held by the Ld. CIT(Appeals) that the issue of book profits u/s.115JB of the Act becomes merely academic in nature.
In view of the entire examination of facts on record and the judicial pronouncements, it is absolutely clear that there was no new material in front of the Assessing Officer to form „reason to believe‟ that any income has escaped assessment. The power of the Ld. CIT(Appeals) is co-terminus with that of the Assessing Officer and he has made statement on record that there was no new material before the Assessing Officer so to resort to the provisions of section 147/148 of the Act. Even before us, the Ld. DR could not bring any material on record to controvert these facts nor could place before us any case laws in support of the revenue. The binding judicial pronouncements as on record have also been considered and are equally applicable to the facts of the present case. That further, once reassessment proceedings and the consequent order passed is declared void-ab-initio as per law and hence, quashed, the issue of book profits determined u/s.115JB of the Act becomes academic in nature. Therefore, we do not find any infirmity with the findings of the Ld. CIT(Appeals) and the same is hereby upheld.
In the result, appeal of the Revenue in is dismissed.
To sum up, appeals of the Revenue in ITA No.283/NAG/2015 and ITA No.284/NAG/2015 for the assessment years 2011-12, 2009-10 & 2010-11 are allowed for statistical purposes and appeal of the Revenue in 2009-10 is dismissed.
Order pronounced on 16th day of January, 2020.
Sd/- Sd/- D. KARUNAKARA RAO PARTHA SARATHI CHAUDHURY ACCOUNTANT MEMBER JUDICIAL MEMBER ऩुणे / Pune; ददनाांक / Dated : 16th January, 2020. SB आदेश की प्रनिलऱपप अग्रेपषि / Copy of the Order forwarded to : अऩीऱाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2.
The CIT(Appeals)-II, Nagpur.