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Income Tax Appellate Tribunal, HYDERABAD BENCHES “A”, HYDERABAD
Before: SHRI INTURI RAMA RAO & SHRI K.NARASIMHA CHARY
आयकर अपीलीय अधिकरण, हैदराबाद पीठ में IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “A”, HYDERABAD BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER & SHRI K.NARASIMHA CHARY, JUDICIAL MEMBER आ.अपी.सं / ITA No. 22/Hyd/2020 (निर्धारण वर्ा / Assessment Year: 2013-14) Deputy Commissioner of M/s. NSL Properties Private Income Tax, Vs. Limited, Circle-16(1), Hyderabad Hyderabad [PAN No. AACCN7387G] (अपीलधर्थी / Appellant) (प्रत् यर्थी / Respondent)
सी.ओ./ C.O. No. 14/Hyd/2022 (Arising out of ITA Nos. 22/Hyd/2020) निर्धारण वर्ा / Assessment Years: 2013-14 M/s. NSL Properties Private Deputy Commissioner of Limited, Vs. Income Tax, Hyderabad Circle-16(1), [PAN No. AACCN7387G] Hyderabad (क्रॉस ऑब्जेक्टर / Cross-Objector) (प्रत् यर्थी / Respondent) निर्धाररती द्वधरध/Assessee by: Shri A.V.Raghuram, AR रधजस् व द्वधरध/Revenue by: Shri Rajendra Kumar, CIT-DR सुिवधई की तधरीख/Date of hearing: 01/11/2022 घोर्णध की तधरीख/Pronouncement on: 28/12/2022 आदेश / ORDER PER K. NARASIMHA CHARY, JM: Challenging the order dated 9/10/2019 passed by the learned Commissioner of Income Tax (Appeals)-4, Hyderabad (“Ld. CIT(A)”), in the
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case of M/s. NSL Properties Pvt. Ltd (“the assessee”), for the assessment year 2013-14, Revenue preferred this appeal.
Though the assessee preferred cross objections, there was a delay of 498 days in filing the same by the assessee. Appeal memo in this case was served on the assessee on 05/02/2021 and the cross objections should have been filed on or before 07/03/2021. But actually the cross objections were filed on 18/07/2022 thereby making a delay of 498 days. However, in view of the order dated 10/01/2022 passed by the Hon'ble Supreme Court in the Suo Motu proceedings in the case of M.A.No. 21/2022 in M.A.No. 665/2021 in SMW(C) No.3 of 2020 wherein it was held that, in cases where the limitation would have expired during the period between 15/03/2020 and 28/02/2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01/03/2022, and in the event of actual balance period of limitation remaining with effect from 01/03/2022 is greater than 90 days, that longer period shall apply. Even such extended period of limitation expires by the end of May, 2022.
The cross objections filed on 18/07/2022 are clearly barred by limitation. Assessee made no attempt to comply with the objection taken by the Registry on the aspect of delay and no explanation is forthcoming. We, therefore, find no option but to dismiss the cross objections as barred by limitation, and proceed to dispose of the appeal.
Brief facts of the case are that the assessee is in the business of leasing of IT parks. For the assessment year 2013-14 they have filed their return of income on 30/9/2013 declaring a total income of Rs. 5,33,33,350/-. By order dated 23/11/2015 assessment was complete by computing the income of the assessee at Rs. 7,51,77,901/-.
Subsequently, on a perusal of record, the learned Assessing Officer noticed that the assessee had long term borrowings of Rs. 142.9 crores
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and paid interest thereon at Rs. 19.66 crores whereas the assessee was advancing interest free advances to related parties to the tune of Rs. 104.77 crores, and directed the entire interest pertaining to the borrowings against the income from house property; whereas the interest income pertaining to the income from house property only is allowable against the “income from house property”. On this premise, according to the learned Assessing Officer an amount of Rs. 8,17,02,757/- escaped assessment. Learned Assessing Officer, therefore, reopen the proceedings under section 147 of the Income Tax Act, 1961 (for short “the Act”). By order dated 28/12/2018 learned Assessing Officer made an addition of Rs. 8,17,02,507/- to the income of the assessee as the proportionate interest attributable to the interest free advances made by the assessee to its related parties.
Assessee preferred appeal before the learned CIT(A) and contended that the original assessment was complete under section 143(3) of the Act and, therefore, the assessment can be done only where there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment.
Learned CIT(A) agreed with the assessee and reached a factual conclusion that the learned Assessing Officer without bringing any new material on record to show that there was an escapement of income justifying the reopening of the assessment under section 147 of the Act, reopen the concluded assessment and since it amounts to change of opinion, the same is impermissible under law. Learned CIT(A), therefore, held that the reopening is not justified and consequently allowed the appeal.
Revenue is therefore, aggrieved by such a finding of the learned CIT(A) and came in this appeal stating that in the original assessment proceedings the learned Assessing Officer did not form any opinion on the issue in respect of the interest free loans/advances given to
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M/s. Seren Properties to the tune of Rs. 99.1 crores and there was no discussion in the assessment order on this aspect. Ld. DR submits that in as much as there was no opinion that was formed by the learned Assessing Officer on the aspect of interest free loans at the time of the original assessment proceedings, no question of change of opinion arises and consequently the findings returned by the learned CIT(A) has to be reversed.
Per contra, the submissions on behalf of the assessee are twofold. Firstly it is contended by the Ld. AR that under proviso to section 147 of the Act as it stood at relevant time, in case of assessment under section 143(3) of the Act, no action shall be taken under section 147 after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a written under section 139 to disclose fully and truly all material facts necessary for the assessment for the assessment year. In this case the notice under section 148 of the Act was issued on 28/3/2018 which is beyond the period of four years from the expiry of the relevant assessment year. Further according to him there was an enquiry by the learned Assessing Officer as to the interest free loans during the original assessment proceedings, the assessee furnished the requisite details and it is only after satisfying with the explanation of the assessee, the learned Assessing Officer did not proceed further on this aspect of interest free loans. For these reasons the AR submitted that the action of the learned CIT(A) is justifiable one. Assessee also filed Cross Objection No. 14/Hyd/2022 in support of their contentions.
We have gone through the record in the light of the submissions made on either side. In the reasons for reopening the assessment, the learned Assessing Officer recorded that,-
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“as per the information available the assessee has long term borrowings of Rs. 142.79 crores and paid interest thereon at Rs. 19.66 crores. It is observed that the assessee has advanced interest free advances to related parties to the tune of Rs. 104.77 crores. It had deducted entire interest pertaining to borrowings against the house property income which is admissible to the extent of borrowings used for the purpose of house property. The excess claim of interest relating to interest free advances to related party works out to Rs. 8,17,02,507/-.” 11. The above reasons recorded by the learned Assessing Officer, proposing to reopen the concluded assessment clearly show that such proposed re-opening is not based on any tangible material that was brought on record. It is only on reading the material available on record at the time of the original assessment proceedings. For that matter, our attention is invited to page No. 21 of the paper book containing the copy of the notice dated 14/07/2015 where under vide Sr. No. 5, the learned Assessing Officer directed the assessee to furnish the information relating to the loans and advances where no interest was charged or chargeable and also the purpose of such loan and advance and to the reply of the assessee to be found at page No. 14 of the paper book to the effect that the assessee gave loan to M/s. Highend Properties Pvt. Ltd., on which no interest was charged and the said loan comprised of the advances made to the subsidiary of the assessee on which no interest was charged.
It is evident from the impugned order that on an appraisal of these facts in the light of the case law, learned CIT(A) found that the mere fact that a discovery of under assessment was made, would not justify the learned Assessing Officer to take action under section 147 of the Act inasmuch as the information received by the learned Assessing Officer to re-open the concluded proceedings must be based on new tangible material in view of the language employed in such section. Learned CIT(A) accordingly concluded that the re-opening of assessment in this matter under section 147 of the Act is not justified as it is only change of opinion. To reach this conclusion, learned CIT(A) placed reliance on the decisions of
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various Hon'ble High Courts and also the Hon’ble Apex Court in ITO v. TechSpanIndia (P.) Ltd. [2018] 92 taxmann.com 361 (SC).
On this aspect, it is relevant to refer to the decision of the Hon'ble Apex Court in the case of CIT Vs. Kelvinator of India Ltd. [2010] 187 Taxman 312 (SC). In this case, Hon'ble Apex Court while dealing with the amendment brought into force with effect from 01/04/1989 to section 147 of the Act held that,-
“4. On going through the changes, quoted above, made to section 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987 , re- opening could be done under above two conditions and fulfilment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act [with effect from 1-4-1989], they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re-open the assessment. Therefore, post 1-4-1989 , power to reopen is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of "mere change of opinion", which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of re-opening 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 Assessing Officer. Hence, after 1-4-1989 , Assessing Officer 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. Our view gets support from the changes made to section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987 , Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in section 147 of the Act. However, on receipt of representations from the Companies against omission of the words "reason to believe", Parliament re-introduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the Assessing Officer.
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We quote hereinbelow the relevant portion of Circular No. 549, dated 31- 10-1989, which reads as follows : "7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression 'reason to believe' in section 147. — A number of representations were received against the omission of the words 'reason to believe' from section 147 and their substitution by the 'opinion' of the Assessing Officer. It was pointed out that the meaning of the expression, 'reason to believe' had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989 , has again amended section 147 to reintroduce the expression 'has reason to believe' in place of the words 'for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new section 147, however, remain the same." [Emphasis supplied] 5. For the aforestated reasons, we see no merit in these civil appeals filed by the Department, hence, dismissed with no order as to costs.” 14. It is also relevant for the sake of completeness to refer to the observations of the Hon’ble Apex Court in TechSpanIndia (P.) Ltd. (supra), which read thus,-
“The language of Section 147 makes it clear that the assessing officer certainly has the power to re-assess any income which escaped assessment for any assessment year subject to the provisions of Sections 148 to 153. However, the use of this power is conditional upon the fact that the assessing officer has some reason to believe that the income has escaped assessment. The use of the words 'reason to believe' in Section 147 has to be interpreted schematically as the liberal interpretation of the word would have the consequence of conferring arbitrary powers on the assessing officer who may even initiate such re-assessment proceedings merely on his change of opinion on the basis of same facts and circumstances which has already been considered by him during the original assessment proceedings. Such could not be the intention of the legislature. The said provision was incorporated in the scheme of the IT Act so as to empower the Assessing Authorities to re-assess any income on the ground which was not brought on record during the original proceedings and escaped his knowledge; and the said fact would have material bearing on the outcome of the relevant assessment order.
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Section 147 of the IT Act does not allow the re-assessment of an income merely because of the fact that the assessing officer has a change of opinion with regard to the interpretation of law differently on the facts that were well within his knowledge even at the time of assessment. Doing so would have the effect of giving the assessing officer the power of review and Section 147 confers the power to re-assess and not the power to review. 10. To check whether it is a case of change of opinion or not one has to see its meaning in literal as well as legal terms. The word change of opinion implies formulation of opinion and then a change thereof. In terms of assessment proceedings, it means formulation of belief by an assessing officer resulting from what he thinks on a particular question. It is a result of understanding, experience and reflection. 11. It is well settled and held by this court in a catena of judgments and it would be sufficient to refer CITv. Kelvinator of India Ltd. [2010] 320 ITR 561/187 Taxman 312 (SC) wherein this Court has held as under:— '5….where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re- open the assessment. Therefore, post-1st April, 1989, power to re-open is much wider. However, one needs to give a schematic interpretation to the words "reason to believe"….. Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of "mere change of opinion", which cannot be per se reason to re-open. 6. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to re-assess. But re- assessment 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, then, in the garb of re- opening the assessment, review would take place. 7. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to re-open, 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.'
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Before interfering with the proposed re-opening of the assessment on the ground that the same is based only on a change in opinion, the court ought to verify whether the assessment earlier made has either expressly or by necessary implication expressed an opinion on a matter which is the basis of the alleged escapement of income that was taxable. If the assessment order is non-speaking, cryptic or perfunctory in nature, it may be difficult to attribute to the assessing officer any opinion on the questions that are raised in the proposed re-assessment proceedings. Every attempt to bring to tax, income that has escaped assessment, cannot be absorbed by judicial intervention on an assumed change of opinion even in cases where the order of assessment does not address itself to a given aspect sought to be examined in the re- assessment proceedings.” 15. There is no dispute in this case that all the material papers which the learned Assessing Officer made a basis to reopen the concluded assessment were available with the learned Assessing Officer at the time of original assessment itself. From the record is also evident that the learned Assessing Officer noticed from the P&L Account and Balance Sheet that during the year the assessee incurred interest expenditure on long- term borrowings and the amount of interest free advances to related parties, by specifically asking the assessee to furnish the information relating to the loans and advances where no interest was charged/chargeable. It is only after the assessee furnished the information, the assessment was complete after scrutiny considering the income only under “house property” and “other sources”, and loss from business was not allowed observing that as there remains no business income/activity, the expenditure is not allowed to be set of against income computed under other heads.
In these circumstances, we are of the considered opinion that the original assessment under section 143(3) of the Act was concluded after noticing all the relevant facts which forms basis for issuance of the notice under section 148 of the Act, and, therefore, the opinion formed by the learned Assessing Officer on subsequent perusal of the record is nothing
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but change of opinion and in view of the decisions of the Hon’ble Apex Court in the cases of Kelvinator of India Ltd (supra) and Techspan India (supra) such a course is impermissible.
In view of this factual and legal position, we do not find anything illegality or irregularity in the findings of the learned CIT(A) and, therefore, decline to interfere with the same.
In the result, appeal of Revenue and cross objection of the assessee are dismissed.
Order pronounced in the open court on this the 28th day of December, 2022.
Sd/- Sd/- (INTURI RAMA RAO) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated: 28/12/2022 TNMM
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