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Income Tax Appellate Tribunal, CUTTACK BENCH, CUTTACK
Before: S/SHRI N.S SAINI & PAVAN KUMAR GADALE
1 ITA No .279/ CTK/ 2016 Asse ssment Year : 20 10- 201 1
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.279/CTK/2016 Assessment Year : 2010-2011
The Berhampur Co- Vs. DCIT, Berhampur Circle, operative Urban Bank Ltd., Berhampur Urban Bank Road, Berhampur PAN/GIR No.AAAAT 9253 B (Appellant) .. ( Respondent)
Assessee by : Shri P.R.Mohanty, AR Revenue by : Shri D.K.Pradhan, DR
Date of Hearing : 31 /01/ 2018 Date of Pronouncement : 31 /01/ 2018
O R D E R Per Pavan Kumar Gadale, JM This is an appeal filed by the assessee against the order of the
CIT(A)-1, Bhubaneswar dated 1.4.2016 for the assessment year 2010-
2011.
In Ground No.2 of the appeal, the assessee has challenged the
initiation of reassessment proceedings u/s 147 of the Act.
The brief facts of the case are that the assessee is in the business of
banking. The original assessment in this case was completed u/s.143(3)
of the Act on 11.3.2013 at a total income of Rs.22,80,380/-.
Subsequently, it was found by the Assessing Officer that the assessee in
its profit and loss account has debited a sum of Rs.35,65,000/- under
2 ITA No .279/ CTK/ 2016 Asse ssment Year : 20 10- 201 1 different provisions but while computing the total income, the assessee
has added to total income the provisions made for NPA and standard
assets of Rs.5,15,000/- but has not considered for addition of other
provisions of Rs.30,50,000/-. Since the addition was not made in the
original assessment due to oversight, the Assessing Officer initiated
reassessment proceedings u/s.147 of the Act and issued notice u/s.148 of
the Act on 27.6.2014. In response to notice u/s.148, the assessee did
not file the return of income but filed a petition on 11.7.2014 asking the
reasons recorded for initiation of reassessment proceedings. The
Assessing Officer in his letter dated 15.7.2014 has supplied the reasons
recorded for reassessment proceeding u/s.147 of the Act as under:
"On verification of records, it is found that in the Profit & Loss account for the year ending 31.03.2010, the assessee has debited a sum of Rs.36,40,062/- under different provisions. In the computation of income statement, the assessee has added the provisions made for NPA and Standard Assets amounting to Rs.5,15,000/- but provision made for other heads/items amounting to Rs.30,50,000/- has not been added to the total income. "
As per the provisions of Section 37 of the Income tax Act, 1961, provision made in the accounts for an accrued or known liability is an admissible deduction while other provisions made do not qualify for deduction. Hence, the provision made for Rs.30,50,000/- is required to be added to the total income."
The Assessing Officer completed the reassessment order u/s.147 r.w.s
144 of the Act, determining the total income at Rs.53,30,380/- , inter
alia, making addition of Rs.30,50,000/-.
3 ITA No .279/ CTK/ 2016 Asse ssment Year : 20 10- 201 1 4. On appeal, the CIT(A) confirmed the reassessment order u/s.147
of the Act and upheld the addition made by the Assessing Officer.
Before us, ld A.R. of the assessee submitted that all the materials
facts were furnished before the Assessing Officer during the original
assessment.. It was further submitted that no new material had come to
the knowledge of the Assessing Officer after framing of assessment
u/s.143(3) of the Act on 11.3.2013 , which may afford ‘ reason to believe’
that income of the assessee had escaped assessment. It was submitted
that the Assessing Officer from the same set of documents which were
available during the original assessment proceedings, has expressed a
different view, which tentamounts to review of his own judgement in
absence of any other material evidences for invocation of section 148 of
the Act.
Contra, ld D.R. submitted that as the assessee has not disclosed in
the return of income an amount of Rs.30,50,000/- and later on when the
Assessing Officer verified the profit and loss account, it came to his
knowledge that income has escaped assessment and, therefore, the
assessment was rightly reopened by the Assessing officer. D D.R.
submitted that mere production of the accounts would not relieve the
Assessee of the responsibility of showing that the Assessee had made a
full and true disclosure of all material facts necessary for the assessment
in the first round of the assessment proceedings.
4 ITA No .279/ CTK/ 2016 Asse ssment Year : 20 10- 201 1 7. We have heard the rival submissions, perused the orders of lower
authorities and materials available on record. The reasons for reopening
the assessment as recorded by the Assessing Officer on 15.7.2014 reads
as under:
"On verification of records, it is found that in the Profit & Loss account for the year ending 31.03.2010, the assessee has debited a sum of Rs.36,40,062/- under different provisions. In the computation of income statement, the assessee has added the provisions made for NPA and Standard Assets amounting to Rs.5,15,000/- but provision made for other heads/items amounting to Rs.30,50,000/- has not been added to the total income. "
As per the provisions of Section 37 of the Income tax Act, 1961, provision made in the accounts for an accrued or known liability is an admissible deduction while other provisions made do not qualify for deduction. Hence, the provision made for Rs.30,50,000/- is required to be added to the total income."
On perusal of above recorded reasons shows that the Assessing Officer
has reopened the assessment by issuing notice u/s.148 of the Act on the
ground that on perusal of profit and loss account for the year ending
31.3.2010, the assessee has debited a sum of Rs.36,40,062/- under different
heads and in the computation of income, the assessee has added provisions
made for NPA and standard assets of Rs.5,15,000/- but provisions made for
other head/items of Rs.30,50,000/- has not been added to the total income of
the assessee and, therefore, the income chargeable to tax has escaped
assessment within the meaning of section 147 of the Act. We have also
perused the assessment order u/s.143(3) of the Act and find that the
assessee has disclosed all the materials facts which are debited in its profit
5 ITA No .279/ CTK/ 2016 Asse ssment Year : 20 10- 201 1 and loss account duly audited and accepted by him and no new tangible
material had come to the knowledge of the Assessing Officer to evidence the
fact of escapement of income chargeable to tax of the assessee.
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 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. “
6 ITA No .279/ CTK/ 2016 Asse ssment Year : 20 10- 201 1 9. Thus, we find that in the instant case, there was no tangible
material with the Assessing Officer before reopening of assessment to
show that income chargeable to tax has escaped assessment. The audited
accounts were already available with the Assessing Officer and formed
part of the assessment record. It is observed that the reopening has
been made on the basis of very same set of material to hold that
provisions made for other head/items of Rs.30,50,000/- has not been added to
the total income of the assessee and, therefore, the income chargeable to tax
has escaped assessment within the meaning of section 147 of the Act, which
is clearly a change of opinion and in view of the decision of Hon’ble
Supreme Court in the case of Kelvinator of India Ltd (supra),
reassessment is not permissible in law as it tantamount to review of the
order. Hence, we hold that the reopening of assessment in the instant
case by issuance of notice u/s.148 of the Act is bad in law and
consequently, reassessment order dated 26.9.2014 passed u/s.144/147 is
also bad in law and hence we cancel the same and allow this ground of
appeal.
In the result, appeal filed by the assessee is allowed.
Order pronounced on 31 /01/2018.
Sd/- sd/- (N.S Saini) (Pavan Kumar Gadale) ACCOUNTANT MEMBER JUDICIALMEMBER Cuttack; Dated 31 /01/2018 B.K.Parida, SPS
7 ITA No .279/ CTK/ 2016 Asse ssment Year : 20 10- 201 1 Copy of the Order forwarded to : 1. The Appellant : The Berhampur Co-operative Urban Bank Ltd., Urban Bank Road, Berhampur 2. The respondent :DCIT, Berhampur Circle, Berhampur 3. The CIT(A)-1, Bhubaneswar 4. Pr.CIT-1, Bhubaneswar 5. DR, ITAT, Cuttack 6. Guard file. //True Copy// BY ORDER,
SR.PRIVATE SECRETARY ITAT, Cuttack