M/S KAMUTHI AGRICULTURAL PRODUCTS CO OPERATIVE MARKETING SOCIETY LIMITED,RAMNAD vs. ITO WARD 1 (1), RAMANATHAPURAM

आदेश / O R D E R

PER G. MANJUNATHA, ACCOUNTANT MEMBER:

2. The learned CIT (Appeals) ought to have cancelled the entire reassessment proceedings as reopening of assessment is not permissible based on change of opinion in the absence of indicating the tangible material which came to his possession of the assessing officer, which necessitated change of opinion.

3. The learned CIT (Appeals) failed to see that the Assessing officer reopened the assessment based on internal audit objection without applying his independent mind as seen from the reasons recorded in the assessment order.

5. Without prejudice to the above, the learned CIT (Appeals) ought to have given adequate time to produce evidences for the credit of subsidy to the extent of Rs.17,82,000/- in the bank account of the assessee.

The assessee had filed its return of income for the AY 2010-11 on 02.02.2011 admitting ‘nil’ total income after claiming deduction u/s.80P(2) of the Act, for Rs.10,53,904/-. The assessment has been completed u/s.143(3) of the Act, on 05.12.2012 and assessed ‘nil’ total income by accepting deduction claimed u/s.80P(2) of the Act. The case has been subsequently re-opened u/s.147 of the Act, for the reasons, as per which, income chargeable to tax had been escaped assessment on account of excess deduction allowed u/s.80P(2) of the Act. The assessment has been completed u/s.143(3) r.w.s.147 of the Act, and determined taxable income of Rs.19,14,392/- by making additions towards disallowance of proportionate deduction claimed u/s.80P(2)(a) of the Act, and also additions towards interest income earned from other cooperative societies u/s.80P(2) of the Act.

4. Being aggrieved by the assessment order, the assessee preferred an appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assessee has challenged re-opening of assessment on the ground that the AO has re- opened the assessment on ‘change of opinion’. The assessee had also challenged disallowance of deduction claimed u/s.80P(2) of the Act. The Ld.CIT(A) after considering relevant submissions of the assessee and also by following the decision of the Hon’ble Supreme Court in the case of CIT v. A. Raman & Co., reported in [1968] 67 ITR 11 (SC) upheld the re- opening of assessment on the ground that the AO has re-opened the assessment on the basis of fresh tangible materials which suggest escapement and thus, the question of change of opinion does not arise.

The Ld.CIT(A) had also upheld disallowance of proportionate deduction claimed u/s.80P(2) of the Act, on the ground that the assessee is entitled for deduction for only in respect of income derived from purchase and sale of agricultural commodities, but not on income derived from sale of other essential commodities to its members. As regards subsidy received by the assessee for the FY 2007-08 and credited for the impugned assessment year, the Ld.CIT(A) after considering relevant evidences filed by the assessee, has allowed partial relief where he had deleted the additions of Rs.16,88,000/- towards subsidy received on 13.05.2008, but sustained balance amount of Rs.17,82,000/- because, the assessee could not produce any evidences for having credited subsidy to its bank account. Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before us.

5.1 The Ld.DR, on the other hand, supporting the order of the Ld.CIT(A) submitted that the question of ‘change of opinion’ does not arise only when the issue has been considered by the AO during the course of assessment proceedings. In case, the AO does consider and express any opinion on the issue, then the question of change of opinion does arise. In this case, the AO has accepted deduction claimed u/s.80P(2) of the Act, even though, assessee has claimed excessive deduction u/s.80P(2) of the Act, on non- eligible income. Therefore, the AO has rightly re-opened assessment.

5.2 We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. It is an admitted fact that the assessment cannot be re-opened merely on change of opinion and this legal position has been, time and again, laid down by various Courts, including the Hon’ble Supreme Court way back in the year 2010 in the case of CIT v. Kelvinator of India Ltd. (supra). But, facts remains that whether the assessment has been re-opened on the basis of formation of reasonable belief of escapement of income or merely on change of opinion, has to be decided on the basis of facts of each case. In this case, the assessee has claimed deduction u/s.80P(2) of the Act, towards income derived from its business activity of purchasing and selling agricultural produce from its members and also selling essential commodities to its members like manure and cement. As per provisions of Sec.80P(2)(a)(i) of the Act, an Agricultural Marketing Co-operative Society can claim deduction towards income derived from purchase and sale of agricultural produce from its members. In this case, the assessee has derived income from purchase and sales of agricultural produce from its members and also income from sale of essential goods like manure and cement. Admittedly income derived from sale of manure and cement, is not entitled for deduction u/s.80P(2)(a) of the Act. However, in original assessment proceedings, the AO has allowed the claim of deduction u/s.80P(2) of the Act. Therefore, subsequent re-opening of assessment to deny excess claim of deduction, on non-eligible income on the basis of reasonable belief of escapement of income, cannot be considered as change of opinion. In our considered view, the question of concept of change of opinion does arise only in a case where the AO has expressed an opinion on any issue in the original assessment proceedings and re-open the assessment on the very same issue in absence of fresh tangible materials. In this case, since the AO does not express any opinion on the issue of deduction u/s.80P(2) of the Act, the question of change of opinion does not arise and thus, we are of the considered view that the assessment has been rightly re-opened u/s.147 of the Act, and hence, we reject the ground taken by the assessee challenging validity of re-opening of assessment.

6. The next issue that came up for our consideration from Ground No.5 of the assessee’s appeal is disallowance of proportionate deduction u/s.80P(2)(a) of the Act, and assessment of subsidy received from government towards losses incurred by the assessee. The assessee claims to have received subsidy of Rs.35,31,534/- for the FY 2007-08 and such subsidy has been received in the Financial Years 2008-09 & 2009-10. The assessee further claimed that subsidy received from government is exempt income and thus, same needs to be excluded from total income. The Ld.CIT(A) has accepted the arguments of the assessee and has allowed partial relief of Rs.16,88,000/- towards subsidy received on 13.05.2008 on the basis of orders of the Joint Registrar of Ramanathapuram Regional Cooperative Societies. However, sustained balance amount of Rs.17,82,000/- subsidy claim to have been received on 24.03.2009 in absence of evidences. The assessee claim that it could not file necessary evidences including copies of the orders of the government granting subsidy, relevant bank account where subsidy amount has been credited, and also reconciliation between books of accounts and banks to establish receipt of subsidy during the impugned assessment year. The Ld.Counsel for the assessee referred to a letter dated 11.12.2017 and claimed that the assessee has explained the amount received by the assessee with necessary evidences, but the Ld.CIT(A) did not consider the explanation of the assessee. We find that the so called letter referring to by the Ld.Counsel for the assessee is dated 11.12.2017, whereas the appellate commissioner has passed order on 30.11.2017. Therefore, the question of assessee explaining the balance amount of subsidy received from Government with necessary evidences and the Ld.CIT(A) considering said explanation does not arise, because the assessee claims to have filed a letter on 11.12.2017 subsequent to the date on which the Ld.CIT(A) has passed its order. Therefore, we are of the considered view that the assessee could not able to explain balance amount of subsidy claims to have been received for the FY 2007-08 from the government with necessary evidences and thus, we are of the considered view that there is no error in the reasons given by the Ld.CIT(A) and thus, we reject the arguments of the assessee on the issue of subsidy received from Government of Tamil Nadu.