Loading judgment…
No AI summary yet for this case.
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGHAND SHRI MANOJ KUMAR AGGARWAL
सुनवाई की तारीख/ : 21.07.2022 Date of Hearing घोषणा की तारीख / : 03.08.2022 Date of Pronouncement आदेश / O R D E R PER MAHAVIR SINGH, VICE PRESIDENT:
This appeal by Revenue is arising out of the order of Commissioner of Income Tax (Appeals), Puducherry in vide order dated 27.02.2020. Assessment was framed by ACIT, Cuddalore Circle, Cuddalore for AY 2008-09 u/s. 143(3) r.w.s. 147 of the ITA No: 703/Chny/2020 - 2 - Income-tax Act, 1961 (herein after referred to as ‘the Act’) vide order dated 31.03.2016.
At the outset, it is noticed that the appeals filed by assessee are barred by limitation by 85 days. The assessee has filed condonation petition along with affidavit stating that the orders of CIT(A) dated 27.02.2020, were received by Revenue only on 05.03.2020 but the appeals were filed only on 22.07.2020 due to Covid-19 pandemic. It means that there is a delay of 85 days. The ld.DR before us stated that this delay is due to pandemic period of Covid 19 and subsequent events and the Hon’ble Supreme Court in Miscellaneous Application No.665 of 2021 vide order dated 23.03.2020 has given directions that the delay are to be condoned during this period 15.03.2020 to 14.03.2021 and they have condoned the delay up to 28.02.2022 in Miscellaneous Application No.21 of 2022 vide order dated 10.01.2022. Since the Hon’ble Supreme Court has condoned the delay during the said period, respectfully following the same we condone the delay and admit the appeal.
The only issue in this appeal of Revenue is as regards to the order of CIT(A) quashing the re-opening of assessment on the reasoning that the original assessment order completed u/s. 143(3) of the Act and re- opening is after four years and without any failure shown on the part of the assessee to disclose fully and truly old material facts necessary for ITA No: 703/Chny/2020 - 3 - assessment of income of relevant assessment year of the assessee. For this, the Revenue has raised various grounds which are argumentative in nature and hence need not to be reproduced.
Brief facts are that the assessee is a cooperative society, a district central cooperative bank filed its return of income on 26.09.2008 for the relevant assessment year 2008-09. Subsequently, the assessee’s case was re-opened for assessment u/s. 143(3) r.w.s. 147 of the Act and assessment was framed vide order dated 06.03.2015, after disallowing the claim of deduction u/s. 36(1)(viia) of the Act in respect of 5% of bad and doubtful assets or loss assets to the extent of Rs. 2,06,92,310/-. Subsequently, notice u/s. 148 of the Act dated 31.03.2015 was issued and in response to this notice, he filed reply dated 24.08.2015 stating that the return of income filed electronically on 26.09.2008 may be treated as return filed in response to notice u/s. 148 of the Act. The Assessing Officer in the re-assessment order made additions of Rs. 17,35,72,752/- on account of reserve for overdue interest and Rs. 22,24,150/- on account of OTS-interest waiver. The assessee preferred appeal against this assessment order and the CIT(A) vide order dated 19.09.2016 dismissed the assessee’s appeal. The assessee preferred appeal before the Tribunal and one of the ground raised before Tribunal was against re-opening u/s. 147 r.w.s. 148 of the Act dated 31.03.2015 ITA No: 703/Chny/2020 - 4 - and Tribunal vide order dated 24.01.2019 set aside the order of the CIT(A) and remanded the matter back to the file of the CIT(A) stating that the entire grounds raised in appeal are required to be adjudicated. Thereafter, the CIT(A) taken up this grounds and quashed the re- assessment proceedings by observing in Para 5.3, 5.3.1 & 5.3.2 read as under: 5.3 I have considered the matter. In the reason for re-opening narrated in the assessment order, the AO stated that on verification of records, such and such receipts were found to be credited in the P & L account. The AO had re-examined the P & L account and balance sheet which were already furnished during the first round of re- opening. At para nos. 2 & 2.1 the AO stated at several places that, information were found from P & L account, computation of income, Balance sheet etc. He did not point out any new tangible material in his possession which was not available with him at the time of first round of re-opening of assessment. I have seen the notice u/s 142(1) & questionnaire issued on 06.02.2015 during first round of assessment. Extensive details regarding content of audited accounts were asked for and the assessee had duly replied to the questionnaire. In the first reassessment order, the AO stated that details were called for and assessment was completed after going through the details furnished. This shows that details already filed during 1 round of 147 proceedings were examined and order was passed on 06.03.2015. Thereafter on 31.03.2015 i.e barely after lapse of 24 days, the AO issued notice u/s 148 for re-assessment of the case. 5.3.1 At this stage, it will be in the fitness of things if relevant provision of section 147 of the act is looked into. The same is extracted as under. ……….. ………… ………… ……….. From plain reading of the statute as extracted above, it is seen that if scrutiny assessment u/ s 143(3) was already completed and if four years have already elapsed from the end of the assessment year, reopening can be resorted to only if there is failure on the part of assessee to furnish return u/ s 139 or in response to notice u/s ITA No: 703/Chny/2020 - 5 - 142(1) or section 148 or to disclose fully and truly, all material facts necessary for assessment of income for the year. In case of present assessee for this assessment year, return was filed on 26.09.2008. Order u/s 143(3)/ 147 was completed on 06.03.2015. In assessment proceeding, whatever records asked for by the AO were furnished to him. Though explanation (1) to section 147 states that production of books of accounts will not necessarily amount to disclosure of full material facts necessary for assessment, it may be stated that in absence of new cogent materials in possession of the AO which was not disclosed by the appellant, on same sets of facts already available to the AO in course of original scrutiny assessment, reopening is not permissible in view of safeguards given in first proviso to section 147 of the Act. 5.3.2. In this year, assessee filed return u/s 139(1) of the Act. In response to notice u/s 148 dated, 31.03.2015, assessee informed the AO that return filed on 26.09.2008 may be treated as return filed in response to notice u/s 148. There was no failure on part of assessee to comply with notices issued by the AO. Hence, the reopening cannot be held to be good in law. There is plethora of Gase laws 'wherein it is held that reopening u/s147 on same set of materials after elapse of 4 years and where order u/ s 143(3) was already passed are held to be bad in law. They need not be mentioned here. Appellant had relied on the order of the Hon'ble Jurisdictional High Court in the case of TANMAC India ( supra). In case of present assessee, it is seen that reopening was resorted to on same sets of materials available before the AO during earlier rounds of assessment. Hence the reopening is bad in law. The order stands quashed. Other grounds taken are not adjudicated upon. Appeal is allowed. Order is passed u/s. 250(6) of the Act.” Aggrieved, now Revenue is in appeal before Tribunal.
We have heard rival contentions and gone through the facts and circumstances of the case. We noted that from the reasons recorded, which are extracted in the assessment order as well as in the order of the CIT(A) that the reasons recorded are from the assessment records i.e., for making disallowance on overdue interest reserve related during the year and also OTS-interest waiver amounting to Rs. 17,35,72,752/- ITA No: 703/Chny/2020 - 6 - and Rs. 22,24,150/-, respectively. The relevant reasons recorded read as under: “QUOTE: Subsequently, on verification of records it came to light that the assessee had shown the following interest income in the profit and loss account: Interest Income Rs.34,77,86,940/- Commission & Brokerage Rs.53,49,042/- Other Receipts Rs.18,55,22,645/- Total Rs.53,86,58,629/- The other receipts includes "Release of Overdue Interest Reserve" to the extent of Rs. 17,35,72,752/-. From the Balance sheet, the position of Reserve for Overdue Interest was shown as follows: Reserve for overdue Interest as on 31.03.2007 Rs.21,57,86,589/- Reserve for overdue Interest as on 31.03.2008 Rs.4,22,13,837/- Overdue Interest Reserve Released during the year Rs. 17,35,72,752/- In the statement of computation, while computing the taxable income, the assessee had excluded the " Release of overdue Interest Reserve" to the extent of Rs. 17,35,72,752/- treating the same as not to be treated as income. It was seen from the Profit and Loss account and the statement of computation of Income for the A. Y 2007-08 to 2009-10, the assessee's treatment of creation of Reserve for NA, reserve for standard Assets, Reserve for non-statuary reserve, Reserve for overdue Interest were as follows- Debited in & LA/ c as A.Y A.Y A.Y Treatment Reserve for 2007-08 2008-09 2009-10 Computation Statement NPA 9,73,47,092 5,99,70,049 1,04,515 Added back Standard Asset 2,08,000 4,69,63,000 19,51,73,118 Added back No Statuary Reserves 15,73,543 73,17,087 4,03,22,217 Added back Not Added Overdue Interest 6,85,78,856 0 2,50,70,217 back From the above, it is seen that the Reserve for overdue Interest created and debited in profit and Loss account was not added back by the assessee in the Computation Statement treating it as an allowable deduction. However, the Release of Overdue Interest Reserve created in the profit and loss account to· the extent of Rs.17,35,72,752/- and excluded as not taxable income is not allowable. "2.1 From the profit & % loss account, it was observed that the assessee has debited an amount of Rs.34,45,35,907/- towards interest ITA No: 703/Chny/2020 - 7 - on deposits, borrowings etc. The details of the expenditures are shown as: Interest on deposits 30,40,87,808/- Excess Interest reversed (-)48,33,741/- Interest on borrowings 4,30,57,691/- OTS- Interest Waiver 22,24,150/- Total 34,45,35,907/-“
From the above reasons extracted, it is clear that these reasons are from the statement of computation of assessee filed along with the return of income and from the accounts of the assessee, the details filed during the course of scrutiny assessment of which the assessee has already filed all the details. The Assessing Officer during the first round asked many details and relevant documents as under: i. Annual report ii. Audit report along with audited accounts and all enclosures iii. Advance recoverable account iv. Statuary reserve account and any other reserve account v. Long term and short term investment vi. Expenses claimed in P&L account vii. Provisional statement of total income viii. Provision for bad and doubtful debt.
We noted that in the reasons recorded that the Assessing Officer no where pointed out any failure of the assessee to declare any item of expenditure or any income, but assessee has filed complete particulars and there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for this assessment year. Admittedly, the original assessment was completed u/s. 143(3)
ITA No: 703/Chny/2020 - 8 - u/s. 147 of the Act dated 06.03.2015. The second re-opening was done by the AO on perusal or verification of assessment records and the evidences filed by assessee vide issuing notice dated 31.03.2015. The relevant assessment year is 2008-09 and it is clearly beyond four years. Assessee’s case is fully covered by proviso to section 147 of the Act and the relevant proviso reads as under: “Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year:”
We noted that these are sufficient details and sufficient disclosure for framing of assessment because these details were available before AO during original assessment proceedings. Once assessment is framed u/s.143(3)/147 of the Act originally for assessment year 2008-09 and reopening notice dated 31.03.2015, which is beyond 4 years and there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment, the reopening cannot be held to be valid. This proposition is supported by the decision of Hon’ble Supreme Court in the case of CIT vs. Foramer France, (2003) 264 ITR 566, wherein the Supreme Court has affirmed the decision of Hon’ble Allahabad High Court in the case of Foramer France vs. CIT, (2001) 247 ITA No: 703/Chny/2020 - 9 - ITR 436. The decision of Hon’ble Allahabad High Court, affirmed by Hon’ble Supreme Court, in the case of Foramer France, supra is as under:- 14. Having heard learned counsel for the parties, we are of the view that these petitions deserve to be allowed.
It may be mentioned that a new Section substituted Section 147 of the Income-tax Act by the Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, 1989. The relevant part of the new Section 147 is as follows : "147. If the Assessing Officer, has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this Section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under Sub-section (3) of Section 143 or this Section has been made for the relevant assessment year, no action shall be taken under this Section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under Sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year."
This new Section has made a radical departure from the original Section 147 inasmuch as clauses (a) and (b) of the original Section 147 have been deleted and a new proviso added to Section 147.
In Rakesh Aggarwal v. Asst. CIT (1997] 225 ITR 496, the Delhi High Court held that in view of the proviso to Section 147 notice for reassessment under Section 147/148 should only be issued in accordance with the new Section 147, and where the original assessment had been made under Section 143(3) then in view of the proviso to Section 147, the notice under section 148 would be illegal if issued more than four years after the end of the relevant assessment year. The same view was taken by the Gujarat High Court in Shree Tharad Jain Yuvak Mandal v. ITO [2000] 242 ITR 612.
ITA No: 703/Chny/2020 - 10 - 18. In our opinion, we have to see the law prevailing on the date of issue of the notice under Section 148, i.e., November 20, 1998. Admittedly, by that date, the new Section 147 has come into force and, hence, in our opinion, it is the new Section 147 which will apply to the facts of the present case. In the present case, there was admittedly no failure on the part of the assessee to make a return or to disclose fully and truly all material facts necessary for the assessment. Hence, the proviso to the new Section 147 squarely applies, and the impugned notices were barred by limitation mentioned in the proviso.” 7.2 Furthermore, the ld.AR relied on the decision of Hon’ble Madras High Court in the case of CIT vs. RPG Transmissions Ltd., [2014] 48 taxmann.com 57, wherein it was held as under:- “22. We find from the reasons set out in the assessment orders that the assessee has explained an disclosed the entire facts which would constitute a full disclosure and, therefore, we have no hesitation to hold that the reopening of assessment is barred by the proviso to section 147. Further, the facts which emerge from the assessment order as well as the order of Commissioner of Income-tax(Appeals) are well founded and in terms of the principles laid down by the apex court. For the aforesaid reasons, we find that the Tribunal has correctly appreciated the facts in holding that the reopening of the assessment orders are barred by limitation. We find that the Commissioner of Income-tax (Appeals) as well as the Tribunal has concurrently held from the facts that the proviso to section 147 would not apply to the facts of this case and since it is a finding of fact that too which is essentially based on the principles which are gathered from the judgments referred to above, we find that the Assessing Officer has departed from the said principles in arriving at a conclusion that the proviso to section 147 would apply in the instant case. We see no reason to deviate from the finding of fact and, hence, the appeal of the Revenue fails on this ground. Therefore, the first part of the substantial question of law No. 1 in T. C. (A.) Nos. 310 to 312 of 2007 with regard to the invocation of extended period of time under the proviso to section 147 is answered in the affirmative and in favour of the assessee.”
In view of the above facts and circumstance of case law of Hon’ble Supreme Court in the case of M/s. Foramer France and Jurisdictional High Court in the case of M/s. RPG Transmissions Ltd., supra, we are of the view that there is no whisper in the reasons recorded that there is failure ITA No: 703/Chny/2020 - 11 - on the part of the assessee to disclose fully and truly all material facts necessary for its assessment and the assessment was framed u/s.143(3) of the Act and reopening beyond 4 years which is against the provisions of the Act. Accordingly, we confirm the order of the CIT(A) quashing the reassessment proceedings and dismiss the appeal of the Revenue.
In the result, the appeal of the Revenue is dismissed.
Order pronounced on 3rd August, 2022.