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Income Tax Appellate Tribunal, DELHI BENCH “G”: NEW DELHI
Before: SHRI H.S.SIDHU & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M. 1. This appeal is filed by assessee against the order of the Commissioner of Income Tax (Appeals) – X I, New Delhi dated 19/1/2010 for assessment year 2001 – 02 raising following grounds of appeal:- “1. That on the facts and in the circumstances of the case, the CIT(A) failed to appreciate that the order passed by the Assessing Officer under section 144/147 dated 28.11.2008 was bad in law, void ab initio and liable to be quashed.
2. That on the facts and in the circumstances of the case, the CIT(A) failed to appreciate that the Assessing Officer had not satisfied the pre-conditions mentioned in section 147 and 148 of the Act before issuing notice u/s 148 of the Act.
3. That on the facts and in the circumstances of the case, the CIT(A) failed to appreciate that the notice issued u/s 148 by the Assessing Officer was bad in law, void ab initio and liable to be quashed.
4. That on the facts and in the circumstances of the case, the CIT(A) failed to appreciate that the notice issued u/s 148 by the Assessing Officer was not served on the appellant.
5. That on the facts and in the circumstances of the case the ld CIT(A) failed to appreciate that order u/s 144/ 147 dated 28.11.2008 was passed by the Assessing Officer without giving proper opportunity of hearing to the appellant. 6. that on the facts and in the circumstances of the case, CIT(Appeals) erred in upholding the action of the Assessing Officer of treating interest income as income from other sources.”
Subh Engineering Ltd Vs. DCIT, (Assessment Year: 2001-02) 2. During the course of the hearing of the appeal, the Ld. authorised representative of the assessee submitted that he does not want to press ground No. 4 and 5 of the appeal. Therefore, they are treated as dismissed.
Ground No. 1 to 3 of the appeal is challenging the reassessment proceedings initiated by the Ld. Assessing Officer and ground No. 6 of the appeal of the assessee is against the order of the Ld. CIT (A) upholding the action of the Ld. Assessing Officer of treating interest „income as income from other sources‟ instead of „business income‟ offered by the assessee.
Briefly stated the facts of the case are that the assessee company is engaged in the business of providing after sale services in respect of IFB machine/appliances. During the assessment year 2001-02, the company filed the return of income on 25.10.2001. During the assessment proceeding the assessee furnished necessary details as required by the Ld. Assessing Officer with respect to the interest income and it adjustment with the brought forward business losses. Consequently, AO passed order Under Section 143(3) on 19/3/2004 accepting the contention of the assessee regarding the adjustment of interest income with brought forward business losses. Subsequently, the Ld. Assessing Officer issued notice under section 148 of the act on 28/03/2008 and thereafter an order Under Section 144 read with section 147 on 19/01/2010 was passed holding that interest income of Rs. 1223700/- from security deposit as „income from other sources‟ and not as „business income‟ therefore, denying the setoff of the brought forward business losses against the interest income shown by the assessee as business income. The assessee preferred an appeal before the Ld. CIT (A) against the order of the Ld. Assessing Officer who per order dated 28/11/2008 upheld the action of the Ld. Assessing Officer on both the initiation of reassessment proceedings as well as treating the interest income from security deposit as income from other sources. Therefore, assessee is in appeal before us challenging the assessment proceedings on the issue of reopening of assessment as well as that interest income is chargeable to tax as „business income‟ and not as „income from other sources‟ as treated by the Ld. Assessing Officer .
The Ld. Authorised Representative submitted before us following arguments:- a. That the impugned notice under section 148 dated 28/03/2008 was issued, but not received by the appellant. b. The assessment is reopened beyond 4 years but within 6 years but Ld. Assessing Officer has not stated that failure is on part of the assessee to fully and truly disclosed all material facts necessary for assessment. c. The assessment has been reopened due to the change of opinion because the appellant at the time of assessment Under Section 143 (3) submitted all the necessary details Page | 2 Subh Engineering Ltd Vs. DCIT, (Assessment Year: 2001-02) and documents requisitioned by the Ld. Assessing Officer. It was further stated that the enquiry letter dated 09/10/2003 at Serial No. 13, had requisitioned the details of the interest income and it adjustment with the business losses as referred at page No. 58 and 59 of the paper book. The assessee submitted reply on 12/02/2004. In the form of confirmation letter from the customers of the appellant who confirmed receipt of security deposit against appellants appointment of services and interest paid thereon. The AO after proper examination of the details submitted applying his mind allowed the claim of the assessee and passed the order under section 143 (3) dated 19/03/2004. Therefore, it was submitted that it is a mere change of opinion by the subsequent Assessing Officer . d. On the merits of the issue of the interest on security deposit he pressed into service the principles of consistency stating that during the year the assessee has earned interest income of Rs. 1223700/- from security deposit and treated the said interest income as income from business and adjusted the same against the brought forward business losses incurred by the company in prior years. It is further stated that the company followed it consistently over the years in treating such interest received as business income. Since such interest income is ancillary to the business of the appellant. It is further stated that such interest income had been regularly held as business income of the appellant in the prior years as is evident from the assessment order passed by the Ld. Assessing Officer for the assessment year 1998-99, which are placed at page No. 2 to 63 of the paper book. Therefore, he submitted that there is consistency in the stand of the revenue, which is now being upset by issue of the notice. e. On the merits of the cases he relied upon the decision of the Bombay High Court in case of CIT Vs. Paramount premises private limited reported at 190 ITR 259 and the decision of the Hon‟ble Supreme Court in CIT Vs. Govinda Choudhary and sons 203 ITR 881. He further relied upon the several decisions on the each of the above arguments raised before us.
Ld. departmental representative also vehemently supported the order of the Ld. Assessing Officer and submitted that there is neither a change of opinion nor the principle of consistency apply in the present case because the interest income earned by the assessee cannot be treated as business income as it does not have any connection with the business of the assessee. He further stated that the order of the Ld. CIT (A) is sustainable under the law.
Subh Engineering Ltd Vs. DCIT, (Assessment Year: 2001-02) 7. We have carefully considered the rival contention and perused the orders of the lower authorities. Only reason for which the reopening of the assessment has been made by the Ld. Assessing Officer is that the assessee has received interest income of Rs. 1223700/- which was to be assessed under the head „income from other sources‟ against the „business income‟. It is an established fact that the assessee was assessed Under Section 143(3), as per order dated 19/03/2004 at Nil income. During the course of assessment proceedings, the Ld. Assessing Officer issued letter dated 09/10/2003 to the assessee wherein at serial No. 13 of the very letter it was asked that the by the interest income is Rs. 1223700/- has been adjusted with business loss. This question was replied by the assessee and accepted by the Ld. Assessing Officer while framing its order Under Section 143(3) of the Income Tax Act. Despite the categorical finding given during the original assessment proceedings, a case of the assessee was reopened by the Ld. Assessing Officer by issue of notice Under Section 148 of the Income Tax Act. Admittedly, the reassessment has been initiated after 4 years of the assessment, but before the 6 years. In the present case the assessment has been reopened merely on the basis of the appreciation of the same facts and available before the Ld. Assessing Officer while framing the original assessment. Ld. Assessing Officer in the order has also not justified what tangible material it has received other than the appreciation of the same facts available before him in the original assessment for reopening of the assessment proceedings. As held by the Hon‟ble Supreme Court in case of CIT Vs. Kelvinator of India Ltd, 320 ITR 561, wherein it has been held that the assessment has to be based on fulfillment of certain preconditioning and if the concept of change of opinion is removed as contention of the Department then in the garb of reopening of the assessment „review‟ would take place. Exactly same thing has happened in this particular case. Assessing Officer has already applied his mind during the course of the original assessment proceedings and satisfied himself while computing the income of the assessee while framing order Under Section 143(3) of the Income Tax Act. However, on appreciation of the same evidence, assessment has been reopened. In our opinion, it is merely a change of opinion of the Ld. Assessing Officer and reopening on that particular premises cannot be sustained. In view of this we quash the reopening proceedings initiated by the Ld. Assessing Officer and confirmed by the Ld. CIT (A) in the present case and therefore, on the issue of reopening the appeal of the assessee is allowed. In the result ground No. 1 to 3 of the appeal of the assessee are allowed.
As appeal of the assessee is allowed on the issue of the reopening we do not think it necessary to adjudicate on the issue of the allowability of the setting off of the loss against the interest income earned by the assessee offered as „business income‟, which is treated by Page | 4