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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
आयकर अपीलीय अधिकरण “A” न्यायपीठ म ुंबई में। IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI श्री महावीर स िंह, उपाध्यक्ष एविं श्री राजेश कुमार, लेखा दस्य के मक्ष । BEFORE SRI MAHAVIR SINGH, VP AND SRI RAJESH KUMAR, AM आयकर अपील िं./ (निर्ाारण वर्ा / Assessment Year 2007-08) Vodafone Idea Limited The Asst. Commissioner of (Successor to Aditya Birla Telecom Income Tax Limited) Aayaker Bhavan, M.K. Road, बिाम/ 10th Floor, Birla Centurion, Century Churchgate, Mumbai Vs. Mills Compound, Pandurang Budhkar Marg, Worli, Mumbai (अपीलार्थी / Appellant) (प्रत्यर्थी/ Respondent) स्र्थायी लेखा िं./PAN No. AAACB2100P अपीलार्थी की ओर े/ Appellant by : Shri Yogesh Thar, AR प्रत्यर्थी की ओर े/ Respondent by : Shri Michael Jerald, SR.DR ुिवाई की तारीख / Date of hearing: 22.07.2020 घोर्णा की तारीख / Date of pronouncement: 11.08.2020 आदेश / O R D E R महावीर स िंह, उपाध्यक्ष / PER MAHAVIR SINGH, VP: This appeal of assessee is arising out of the order of the Commissioner of Income Tax (Appeals)]-9, Mumbai, [in short CIT(A)], in appeal No. CIT(A)-9/AC-5(1)/453/2011-12 dated 20.12.2012. The assessment was framed by the Asst. Commissioner of Income Tax (in short ACIT/AO) for the A.Y.
The first issue in this appeal of assessee is against the reopening of assessment under section 147 of the Act by stating that the reopening is merely on change of opinion. For this, assessee has raised the following grounds: -
“1. On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in upholding the action of the Assistant Commissioner Of Income-tax - 5(1), Mumbai ('the AO') that the reopening of assessment under section 147 of the Act was justified and in accordance with the provisions of the law.
2. The Appellant prays that it be held that the reopening of assessment under section 147 of the Act is void ab-initio and/or otherwise bad-in-law.”
Briefly stated facts are that the assessee filed its e-return of income on 30.10.2007. The case of the assessee was selected for scrutiny assessment by issuing notice under section 143(2) of the Act and assessment was completed originally under section 143(3) of the Act vide order dated 21.12.2009. Subsequently, the Assessing Officer issued notice under section 148 of the Act on 03.09.2010, which was served on the assessee on 21.09.2010. This notice u/s 148 of the Act is within four years from the end of relevant assessment year. For “Reasons recorded for issue of Notice under section 148 of the IT Act
The records of the Assesses Company for the above Assessment Year show that an amount of Rs. 4,64,92,579/- being interest paid on Loans was deducted from the Interest Income received to arrive at the Total Income.
A further perusal of the records reveals that this amount of Interest was paid for Loans taken which were fully used for the purchase Shares of Idea Cellular Limited.
Since the borrowed funds were fully utilized for procuring Shares, which is a Capital Asset, the Interest paid on these funds cannot be claimed as a revenue expenditure and hence, have reasons to believe that an amount of Ps. 4,64192,579/- has escaped assessment within the meaning of section 147 and needs to be brought to the tax net, Hence Notice u/s 148 is Issued.”
Consequently, the AO framed reassessment under section 143(3) r.w.s 147 of the Act vide order dtd. 23.12.2011. The assessee before AO during the course of assessment proceedings has objected for reopening of assessment firstly on the ground that there is change of opinion as the assessee has
The CIT(A) also confirmed the action of the AO by observing in para 5.2 as under :
“5.2.1. Having considered the rival submissions, it is not disputed that in this case, previous assessment was mode under section 143(3) of the Act. It is not disputed that the notice under section 148 of the Act has been issued within four years from the relevant assessment year. It is also not disputed that the LAO had recorded reasons for initiation of reassessment proceedings under section 147 of the Act. It is also not 5.2.2 Undisputedly, original assessment in this case was framed on 29/12/208. Subsequently the LAO received information and formed reason to believe that income chargeable to tax escapted assessment. He relied on decision in the case of Praful Chunilal Patel 236 ITR 832 (Bhuj) and held that a particular item even though reflected on the record was not subjected to the assessment and was left out while computing the taxable income in the final assessment order. Hon’ble Gujarat High Court has held that in such case the LAO assumed jurisdiction to initiate the reassessment proceedings irrespective of the question of nondisclosure of material fact by the assessee. He also relied on the Supreme Court decision in the case of CIT v/s. Sun Engineering Works (P.) Ltd. (1992) 198 ITR
5.2.3. Regarding the LAPs alternate argument that the reassessment was at the behest of revenue audit party, it is noted that the Hon’ble Supreme Court in the case of CIT vs. PVS Beedees Pvt. Ltd. (1999) 237 ITR 13 (SC) has held that reopening of assessment on the basis of factual error pointed out by the internal audit party was valid.
5.2.4. Secondly in the case of Phoolchand Bajranglal vs. ITO (1973) 203 ITR 456 (SC) cash loans claimed to be taken from a company and accepted as genuine in the original assessment were subsequently found to be bogus. Hon’ble Supreme Court held that it was a case of escapement on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment within the meaning of sec.147 (a) of the Act. Admittedly, in the present case notice u/s.148 was issued on 28/3/2011 which was within four years from the end of the relevant
5.2.5 Thirdly, the LAO had disposed off objections to the issuance of notice under section 148 of the Act during the reassessment proceedings. Having regard to the facts and circumstances of the case and in the light of Apex Courts decisions in the case of Phoolchand Bajraglal, Raymond Woolen Mills Ltd. Vs. ITO (supra), Indo Adden Salt manufacturing and Trading Co. pvt. Ltd. (1986) 159 ITR 624 (SC) and Hon’ble Supreme Court in the decision of CIT Vs. PVS Beedees Pvt. Ltd. (supra). Ground of appeal No. I is dismissed.”
Aggrieved, assessee preferred appeal before Tribunal.
We have heard the rival contentions and gone through the facts and circumstances of the case. We noted from the arguments of learned Counsel for the assessee the facts of the case that the case of the assessee was selected for the scrutiny under section 143(3) of the Act and AO passed the Assessment Order under section 143(3) of the Act on 21.12.2009 i.e. the Original Assessment Order. Subsequently, the AO issued a notice under section 148 of the Act on 03.09.2010 and reassessment was framed under section 143(3) read with section 147 of the Act determining the total income at Rs.2,84,35,310/- after making certain additions/ disallowances. Learned Counsel explained the facts that the AO while framing
The learned Counsel took us through reasons, which are reproduced in above para 3 and argued that the AO has merely relied on the assessment records of the assessee available with him to re-open the assessment. The AO has not objectively brought out as to why: i. The Idea Shares were Capital Assets of the assessee; and ii. Despite there being a clear nexus between the interest income and interest expense, the latter
In this regard, it was argued that order passed under section 143(3) read with section 147 of the Act on the same sets of facts available with the AO is clearly amounts to a change of opinion and hence, the reassessment order passed is bad and void. The learned Sr. DR on the other hand relied on the order of CIT(A).
We noted that the assessee during the course of assessment proceedings before the AO assessee made full and true disclosure in respect of the interest expense in its audited financial statement, ROI and the Original Assessment proceedings. This is explained by the assessee before us in the following paragraphs:
(a) Schedule 9 to the Audited Financial Statements disclosed the total interest expenditure and interest income accrued to the assessee;
(b) Note 6 (IV) to the Audited Financial Statements discloses the fact of sale of the Idea Shares to "Holding Co. ABNL" ;
(c) The Computation of Income showed the deduction claimed under section 57 of the Act in respect of interest expenditure against interest income;
(d) By letter dated October 6, 2009, the assessee had submitted the Demat Account with the Depository in which the fact of purchase and sale of the Idea Shares was reflected;
(e) By letter dated October 23, 2009, the assessee submitted the Loan Confirmation from Aditya Birla Nuvo Limited, Transwork Information Services Limited, Birla Global Finance Co. Limited, etc. which companies had taken ICDs;
(f) By letter dated November 6, 2009 the assessee submitted the loan confirmations from Hindalco Industries Limited, Grasim Industries Limited and Essel Mining Limited from which parties it had taken ICDs and also explained the transaction of purchase the Idea Shares;
(g) By the Letter date November 6, 2009, the assessee also submitted letters between Birla TMT Holdings and itself on the transaction of purchase and sale of the Idea Shares and other related facts.
After considering the aforesaid details/information, the AO had passed the original assessment order under section 143(3) of the Act in which he allowed the deduction under section 57 of the Act. Thus, all the facts pertaining to the transaction of Idea
We also noted that the assessee had filed complete details and claimed by a note dated 06.11.2009, which is being reproduced from the letter as under:- “Regarding interest income, we wish to bring to your honour's kind notice the following facts: During the year, vide letter dated 18.05.2006, the company had requested Birla TMT Holdings Private Ltd ("Birla TMT") to purchase 16,94,64,540/- equity shares of Idea-Cellular Ltd on behalf of the company at a price of Rs.40.50 per share from the Tata group and made 100% advance payment of Rs.686,33,13,870/- towards the total consideration for purchase of said shares with the instruction to deposit the entire amount in interest bearing account till effectual payment is made to Tata Group and pass on the interest received on the aforesaid advance in the interim period to the company and transfer the aforesaid shares to the company immediately after getting the vide letter dated 20.06.2006, Birla TMT informed the company that it has said shares on behalf of the company that it has acquired said shares on behalf of the company at a price of ₹40.50/- per share on 20.06.2006 and has instructed Depository Participant viz. Citi bank NA to transfer the shares to the company. Copy of the letter received from Birla TMT is attached as Annexure 4.
Vide letter dated 08.11.2006 Birla TMT informed the company that it has received on behalf of the company Gross interest ₹24,670,808/- less TDS ₹55,36,130/-, net interest being ₹19,134,678/- from Citi Bank by deploying ₹686,33,13,870/- with Citi Bank in an interest bearing account from the date it received funds from the company and till the date those funds got utilized to pay Tata Group for acquiring shares of Idea. Birla TMT had incurred some expenses on purchase of said shares and therefore remitted ₹18,000,000/- as on account part payment. Copy of the letter received from Birla TMT is attached as Annexure 5.
Vide letter dated 22.11.2006, Birla TMT Rs. 8,42,503/- in respect of acquisition of Rs.16,94,64,540/- shares of Idea and after
Vide letter dated 23.01.2007, Birla TMT informed the company that it has received the original TDS certificate dated.23.01.2007 from Citi Bank NA for Rs. 55,36,130/- in theft favour and also confirmed that entire interest amount Rs.24,670,808/ - and TDS Rs. 55,36,130/- belongs to the company since Birla TMT was acting on behalf of the company. Birla TMT confirmed that they have not claimed/shall not claim any TDS credit/benefit of the same. Since the aforesaid TDS certificate was issued by Citibank in favour of Birla TMT, to enable the company to claim the aforesaid TDS credit, Birla TMT and the company jointly signed a certificate confirming that Birla TMT is not the beneficial owner of the interest Rs 2,46,70,808 since they were merely acting on behalf of the company and Birla TMT has not claimed/shall not claim any TDS credit of the aforesaid TDS. They further confirmed that company is the beneficial owner of interest and hence, is rightfully entitled to claim the said TDS credit of Rs 55,36,130. Copy of the letter and 23.1.2007, certificate issued by Citibank and a certificate jointly signed by In view of the above facts, we submit that since the company is the beneficial owner of interest Rs 2,46,70,808 and has therefore also offered this interest income to tax in its return of income, the-company is rightfully entitled: to claim the corresponding TDS credit Rs 55,36,130. The company had borrowed interest bearing loans 'from various fellow group companies for advancing payment to Birla TMT Holdings Private Ltd for purchase of equity shares of Ide/Cellular Ltd. As the company had earned interest of Rs. 24,670,808/- for the period 18.05.2006 to 19.06.2006 on depositing Rs.686,33,13,870/- as mentioned under Point no. 3, it had claimed the interest expense incurred for the same period on loan borrowed from various group companies. Details of Interest expenses Rs. 46,42,579/- claimed in the return of income is attached as Annexure 8. ”
From the above facts it is clear that the AO had gone through this note and also taken note of the same in assessment order, where the fact regarding expenditure on interest incurred and income received is reflected, which is as under:-
3. Interest Income 2,78,37,789 Less: Interest expenses 4,64,92,579 (1,86,54790) Gross Total Income (1,80,57,265) Less: Loss under the head “Income from other” 1,80,57,265 Total Income NIL In view of the above facts it is clear that in the original assessment proceedings AO has considered the aspect interest expenses and considered in the body of assessment order as well as in the computation of income specifically and after considering the same, the AO allowed the interest expenses. It means that the AO has applied his mind and formed an opinion for allowance of this interest expenses while framing original assessment. Now, reopening on the very same issue tantamount to change of opinion which is not permissible in law. Let’s discuss the case laws relied on by both the sides.
We have taken note of the case law relied on by Ld Counsel for assessee in the case the case of CIT vs. Kelvinator of India Ltd. (2002) 256 ITR 1 (Delhi), the Hon'ble High Court has observed as under:
This decision in the case of Kelvinator of India Ltd. (supra) has now been affirmed by the Hon'ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd [2010] 320 ITR 561 (SC) with the following observations:
"We must keep in mind the conceptual difference between power to review and
Further, in the case of Asian Paints Ltd. vs. DCIT [2009] 308 ITR 195 (Bombay) Hon'ble Bombay High Court has been held that the initiation of reassessment proceedings would amount to change of opinion of the AO as it was merely a fresh application of mind by the AO to the same set of facts and that since the AO had failed to apply his mind to the relevant material while framing the assessment order under section 143(3), he could not take advantage of his own wrong and reopen the assessment under section 147 of the Act. This was the case where the AO had reopened the assessment within four years from the end of the Assessment Year under appeal. Even in the case of in the case of Legato Systems (India) Pvt.
In the case of Asteriods Trading & Investments Pvt. Ltd. vs. DCIT [2009] 308 ITR 190 (Bombay) Hon'ble Bombay High Court, being the jurisdictional High Court in the Appellant's case, has been held that the Assessee had fully disclosed material facts necessary for claiming deduction under section 80M of the Act and there was application of mind by the AO in allowing the deduction claimed by the Assessee in the assessment order. Though the notice u/s. 148 of the Act was issued on the ground that there was reason to believe that income had escaped assessment, there was neither any change of law nor had any new material been brought on record between the date of the assessment order and the date of formation of opinion by the AO. It was merely a fresh application of mind by the officer to the same set of facts and the reassessment proceedings initiated based on the change of the opinion of the officer is bad in law. This was the case where the AO had reopened the assessment within four years from the end of the Assessment year. Hence, the reasons recorded for