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Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH
Before: Shri Rajpal Yadav & Shri Amarjit Singh
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH Before: Shri Rajpal Yadav, Judicial Member And Shri Amarjit Singh, Accountant Member ITA No. 2637/Ahd/2014 Assessment Year 2006-07
Gujarat State Financial The ACIT, Corporation, Circle-4, Block No. 10, Vs Ahmedabad Sector 11, (Respondent) Udhyog Bhavan, Gandhinagar-382017 PAN: AABCG2924M (Appellant)
Revenue by: Shri Anshu Prakash, CIT-D.R. Assessee by: Shri P.F. Jain, A.R.
Date of hearing : 04-06-2019 Date of pronouncement : 04-06-2019 आदेश/ORDER PER : RAJPAL YADAV, JUDICIAL MEMBER:-
The present appeal is directed at the instance of assessee against the order of ld. CIT(A) dated 1st July, 2014 passed for assessment year 2006-07. Though the assessee has taken five grounds of appeal but its grievance revolves around two issues namely; (a) ld. CIT(A) has erred in upholding
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reopening of assessment and (b) ld. CIT(A) has erred in upholding the addition of Rs. 159,46,05,271/-.
The brief facts of the case are that assessee has filed its return of income on 27th Dec, 2006 declaring loss of Rs. 137,02,37,406/-. This return was processed u/s. 143(1) and an intimation was issued on 9th April, 2007 without any changes in returned income. An assessment order was passed u/s. 143(3) on 16-12-2008 at Rs. (-)12,00,85,426/-. The ld. assessing officer thereafter recorded reasons and reopened the assessment. The assessee objected to reopening of the assessment but the ld. assessing officer rejected its contention.
Appeal to ld. CIT(A) did not bring any relief to the assessee.
The ld. counsel for the assessee while impugning the order of the CIT(A) contended that notice u/s. 148 was issued after expiry of 4 years from the end of the relevant assessment year. The original assessment order in the case of the assessee was passed u/s. 143(3) on 16-12-2008. The proviso attached to section 147 contemplates that an assessment order cannot be reopened in a case where scrutiny assessment order u/s. 143(3) was passed and four year have expired from the end of the relevant assessment year. In such cases, the assessing officer cannot reopen the assessment unless it is established that taxable income has escaped assessment on account of failure of the assessee to disclose all material facts fully and truly. He pointed out that assessee has disclosed all material facts fully and truly and an inquiry was conducted on the issue for which
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assessment is being reopened. He drew our attention towards page no. 4 to 6 of paper book where questionnaire issued u/s. 142(1) is placed on record. He drew our attention towards question nos. 4 and 11 raised by the assessing officer in the notice u/s. 142(1). On the strength of these details, he contemplated that reopening of the assessment is bad in the eyes of law and same be quashed.
Ld. CIT-D.R. on the other hand contended that basically loan liability of the assessee has been ceased and this remission in the loan liability ought not to be treated a capital receipt rather it is taxable u/s. 41(1). The assessing officer has rightly reopened the assessment for escapement of income. He further relied upon the orders of revenue authorities.
We have heard the rival contentions and gone through the records carefully. In order to appreciate the controversy, we deem it pertinent to note the reasons for reopening which read as under:- “In this case, income tax. e-return was filed on 27.12.2006 declaring total loss Rs. l,37,02,37,406/- for A.Y.2006-07. The assesses is doing the business of providing financial assistance, to industrial units. The assessment for A.Y.2006-07 was finalized u/s. 143(3) on 16.12.2008 determining total income at. Rs. 12,00,85,426/-. 2. During the course of assessment proceedings, for A.Y.2009-10, it was noticed that the assessee is having capital reserve of Rs. l82,87,27,18 4/-. On verification it was noticed that the assessee had entered one time, settlement agreement with following banks 1. Bank of India 2. Dena Bank 3. SIDBIREFI 4. SIDBI RTDM 5. SIDBI LOC 6. PSB (NG)-III 7. PSB (NG)-IV 8. PSB (NG)-V 9. Indian Bank 10. IDBI LOC Because of the settlement, the amount of Rs.159,46,05,271/- payable by the assessee is ceased to be payable to those, institutions in F.Y.2005-06 relevant to A.Y.2006-07. The amount of Rs. 159,46,05,271/- was credited to capital reserve by the assessee in F.Y. 2005-06 relevant to;A.Y.2006-07. The amount is written off by these institutions in their books of accounts.
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Therefore, this amount cannot be said as capital receipt of the assessee. The amount is to be taxed u/s 41(1) of the Income Tax Act, 1961. This amount is not offered, to tax nor the same was added to the income of the assessee. Hence income of the assessee was under assessed by amount of Rs. 159,46,05,271/- In view of above facts, I have reason to believe that the income of the assessee is under assessed by amount of Rs. 159,46,05,271/-Therefore, permission may be accorded to re-open the case u/s 147 of the income-tax Act 1961. Issued notice u/s. 148 of the I.T. Act, 1961.”
Before adverting the other details, it is imperative upon us to take note of question nos. 4 and 11 asked by the assessing officer in the questionnaire issued u/s. 142(1) vide letter dated 25th Nov, 2008. Such questions read as under:- “(4) You have reported capital Reserve --Gain on restructuring of Principal debts of Rs. 1,59,46,05,271/- Submit compete detail thereof with its impact on total income. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx (11) Submit complete details of following income credited to your P & L A/c: a) Interest on loan and advances b) Int. sacrifice on restructuring c) Interest on term loan d) Lease Income e) Lease Rental income”
The interdiction provided in the proviso appended to section 147 creates an embargo on the powers of assessing officer to reopen an assessment where scrutiny assessment has been passed and four years have expired from the end of the relevant assessment year. The assessing officer cannot reopen assessment unless it is established that on account of failure of assessee to disclose all material facts fully and truly income has escaped assessment. A perusal of the reasons would reveal that assessing officer has nowhere recorded that on account of failure of the assessee to disclose all material facts fully and truly, income has escaped assessment. He was unable to lay his hands on any new information, he has only re-appreciated the information already possessed by him and considered in the scrutiny
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assessment. There is no allegation against the assessee for withholding of any information. In such situation, the reopening of assessment is not justifiable. Therefore, we allow the appeal and quashed the re-assessment order. Order pronounced in the open court on 04-06-2019
Sd/- Sd/- (AMARJIT SINGH) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 04/06/2019 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद