M/S. INDIAN METALS & FERRO ALLOYS LIMITED, BHUBANESWAR vs. DCIT, CORPORATE CIRCLE-1(1), BHUBANESWAR

1 Indian Metals & Ferro Alloys Ltd

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER

ITA No.311/CTK/2016 Assessment Year : 2009-2010

Indian Metals & Ferro Vs. DCIT, Corporate Circle 1(1), Alloys Ltd.,IMFA Building, Bhubaneswar. Bomikhal, Rasulgarh. Bhubaneswar. PAN/GIR No.AAACI 4818 F (Appellant) .. ( Respondent)

ITA No. 341/CTK/2016 Assessment Year : 2009-2010

DCIT,Corporate Circle 1(1), Vs. Indian Metals & Ferro Bhubaneswar. Alloys Ltd.,IMFA Building, Bomikhal, Rasulgarh. Bhubaneswar PAN/GIR No. .AAACI 4818 F (Appellant) .. ( Respondent)

Assessee by : Shri Sachit Jolly, AR Revenue by : Shri Saad Kidwai, CIT DR

Date of Hearing : 24/04/ 2018 Date of Pronouncement : 25 /04/ 2018

O R D E R Per N.S.Saini, AM

These are cross appeals filed by the assessee and the revenue

against the order of the CIT(A)- -1, Bhubaneswar dated 13.6.2016 for the

assessment year 2009-2010.

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the following grounds:

“1. That on facts and circumstances of the case and in law, the Commissioner of Income tax (Appeals) ["CIT(A)"] erred in confirming the action of the assessing officer ('AO") in initiating reassessment proceedings under Section 147 of the Income Tax Act, 1961 ('the Act') on mere change of opinion and without there being any valid reason to believe that the income has escaped assessment.

1 .1 That on facts and circumstances of the case and in law, the CIT(A) erred in not appreciating that the re-assessment proceedings had been initiated on a change of opinion as the original assessment had been completed under Section 143(3) of the Act after detailed scrutiny and no tangible material had come to the knowledge of the AO thereafter justifying initiation of proceeding under Section 147/148 of the Act.

business of manufacturing & sale of Ferro Alloys like charge chrome/high

carbon ferro chrome and ferro silicon. The original assessment

u/s.143(3) of the Act was completed on 31.12.2011 at a total income of

Rs.246,97,30,469/-. This was revised u/s.154/251 of the Act at

Rs.212,65,80,804/- while giving effect order of the CIT(A). Thereafter,

the Assessing officer issued notice u/s.148(2) of the Act on 19.2.2014 for

reopening of the assessment for the following reasons:

“Further verification of assessment records, it is revealed that as per the information available in the record that the assessee company has incurred and debited an expenditure of Rs.20,057 lakhs towards import expenditure, Rs.93.26 lakhs towards legal consultancy and commission on which no tax was deducted u/s.195(1) would not be eligible for deduction under the head

3 Indian Metals & Ferro Alloys Ltd

“profit and gains of business or profession u/s.40(a)(ia) of the I.T.Act, 1961. Besides the above on verification of assessment record, it has been revealed that the closing stock of chrome ore was 251,977 MT in compliance to the query raised by the AO, that the assessee has submitted the particulars in which the closing balance of chrome ore at 1,83,304 MT. Apparently there was a suppression of closing stock by 68,673 MT” 4. The assessee unsuccessfully contested the reopening of assessment

before the CIT(A), who dismissed the grounds of appeal of the assessee

for the reason that in the scrutiny assessment completed, applicability of

section 195 of the Act on payments made in foreign currency on certain

imports and other expenditures and consequential disallowance

u/s.40(a)(i) were not considered. The CIT(A) observed that in his

opinion, the assessment was not reopened on mere change of opinion.

According to him, only if on certain issues, the Assessing Officer has

already taken a conscious decision and the same is evident from the

assessment order, then initiation of proceedings u/s.147 on the same

issue disagreeing with the conclusion of the Assessing Officer would

tantamount to change of opinion and not otherwise.

reopening of assessment on the very same facts which were before the

Assessing Officer at the time of assessment proceedings amounts to

change of opinion and, therefore, the reopening is bad in law for which he

supported his arguments by relying on the decision of Hon’ble Supreme

Court in the case of CIT vs. Kelvinator of India Ltd., 320 ITR 561 (SC).

4 Indian Metals & Ferro Alloys Ltd

He also relied on the decision of this Bench of the Tribunal rendered in the

case of the assessee itself in ITA Nos.47 & 48/CTK/2014 and ITA Nos.73

& 74/CTK/2014 for the assessment years 2007-08 and 2008-09 order

dated 25.10.2017 and argued that on the very same set of facts, the

Tribunal has cancelled the reassessment order passed u/s.147/143(3) of

the Act. He urged that following the same, the assessment order for the

year under appeal should also be cancelled.

available on record and orders of lower authorities. We find from the

copy of recorded reasons for reopening of assessment by issuance of

notice u/s.148 of the Act for the assessment year under appeal, the

Assessing Officer has noted as under:

“Further verification of assessment records, it is revealed that as per the information available in the record that the assessee company has incurred and debited an expenditure of Rs.20,057 lakhs towards import expenditure, Rs.93.26 lakhs towards legal consultancy and commission on which no tax was deducted u/s.195(1) would not be eligible for deduction under the head “profit and gains of business or profession u/s.40(a)(ia) of the I.T.Act, 1961. Besides the above on verification of assessment record, it has been revealed that the closing stock of chrome ore was 251,977 MT in compliance to the query raised by the AO, that the assessee has submitted the particulars in which the closing balance of chrome ore at 1,83,304 MT. Apparently there was a suppression of closing stock by 68,673 MT”

tangible information, which came to the notice of the Assessing Officer after

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completion of assessment under section 143(3) on 31.12.2011 for the

assessment year 2009-10 and before recording of aforesaid reasons. Rather,

the recorded reasons show that the reasons have been recorded based on very

same materials which were already available before the Assessing Office prior to

completion of assessment u/s.143(3) on 31.12.2011. It shows that on the basis

of very same materials, the Assessing Officer has now formed a different

opinion. In our considered view, the above action of the Assessing Officer

cannot be sustained. In this connection, it is noticed that the Hon’ble Supreme

Court in the case of CIT vs. Kelvinator of India Ltd., 320 ITR 561 (SC) has held

that the concept of “change of opinion” must be treated as an in-built test to

check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, the

Assessing Officer has power to reopen an assessment, 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.

In this context, the observations of Hon’ble apex Court at page 564 are very

relevant, which are reproduced as follows:

“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" 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 re-open. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to re-assess. But reassessment 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. One must treat the concept of "change of opinion" as an in-built

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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. “ 10. The opinion of the CIT(A) is that simply because the Assessing

Officer latter on formed a belief that in scrutiny assessment, the

application of section 195 of the Act on the payments made in foreign

currency on certain imports and other expenditure and consequential

disallowance u/s.40(a)(i) were not considered and difference in closing

stock of chrome ore, which were available before the Assessing Officer at

the time of making original assessment will empower the Assessing

Officer to reopen the assessment even in absence of fresh tangible

material. In our considered view, it is contrary to the above stated

decision of Hon’ble Supreme Court in the case of Kelvinator of India

Limited (supra).

for the assessment year under appeal and allow the appeal of the

assessee.

the other grounds of appeal of the assessee on merits of the additions

have become infructuous and hence not adjudicated upon,

appeal, the appeal filed by the revenue is dismissed.

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of the revenue is dismissed.

Order pronounced in the open court on 25 /04/2018. Sd/- sd/- (Pavan Kumar Gadale) (N.S Saini) JUDICIALMEMBER ACCOUNTANT MEMBER Cuttack; Dated 25 /04/2018 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : /Assessee: Indian Metals & Ferro Alloys Ltd.,IMFA Building, Bomikhal, Rasulgarh. Bhubaneswar. 2. The Respondent. /Revenue: ACIT, Circle 2(1), Bhubaneswar. 3. The CIT(A)- II, Bhubaneswar 4. Pr.CIT- II, Bhubaneswar 5. DR, ITAT, Cuttack 6. Guard file. //True Copy// BY ORDER,

SR.PRIVATE SECRETARY ITAT, Cuttack