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Income Tax Appellate Tribunal, “A” BENCH, CHENNAI
Before: SHRI CHANDRA POOJARI & SHRI G. PAVAN KUMAR
आदेश /O R D E R
PER G. PAVAN KUMAR, JUDICIAL MEMBER:
The Revenue has filed an appeal against the Commissioner of Income Tax (Appeals) - 8, Chennai dated 11.12.2015, passed u/s. 143 r.w.s. 147 and 250 of the Act.
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The Revenue has raised the following grounds:
2.1 The CIT(A) erred in quashing the re-assessment proceedings and thereby deleting the disallowance of Rs. 1.6 crores on estimated recompense amount treated as contingent liability.
2.2 The CIT(A) failed to take note that Explanation 3 to Section 147 is for the benefit of Revenue and not assessee and is aimed at garnering the escaped income of the assessee.
2.3 Having regard to the Hon'ble Karnataka High Court decision in the cases of N. Govindaraju Vs. Income Tax Officer Ward-8(2),
Bangalore [60 Taxmann.com333 (2015)], wherein it is held that addition can be made on all grounds or issues even though the reason for notice for 'such income' which may have escaped assessment, may not survive, the CIT(A) ought to have upheld the action of the AO in reopening of assessment and disallowance on estimated recompenses amount payable.
The Brief facts of the case that the assessee company is engaged in the business of manufacture, supply and erection of Transmission lines and electrification of railways and filed the Return of income on 01.10.2008 with total income of Rs. 12,67,49,030/- and Return of income was processed u/s. 143(1) of the Act. Subsequently, the case was selected for scrutiny and notice u/s. 143(2) was issued. The assessee also filed the revised return on 29.03.2010 with :-3-: I.T.A. No. 431/Mds/2016 income of Rs. 13,64,12,100/- claiming the refund. The Assessing Officer passed order u/s. 143(3) with total income of Rs. 22,61,65,343/- on 15.12.2010.
Subsequently, Assessing Officer has reopened the assessment based on the information in Form 3CD in respect of, set off of unabsorbed depreciation and issued notice u/s. 148 of the Act. In compliance to the notice, assessee filed the letter dated 05.04.2013 to considered the revised return filed on 29.03.2010 and reasons for re-opening of assessment were furnished to the assessee. The Ld. AR of the assessee appeared from time to time and the case was discussed. The Assessing Officer verified the brought forward loss and depreciation claimed by the assessee. The assessee company has claimed an amount of Rs. 1.6 crores debited to profit and loss account as interest. On verification of the findings and submissions, the Ld. AO found the said amount is towards the provision Estimated Recompense Amount payable to lenders under provisions of CDR (Corporate Debt Restructuring) package and no actual amount was paid during the period up to 30.09.2007. The Assessing Officer proposed disallowance of provision of interest and the Ld. AR filed the objections for disallowance through letter dated 27.09.2013 as referred at Page 2 and 3 of the order. The Ld. AO found that the assessee company was merged with M/s. KEC International Ltd., under the scheme of amalgamation sanctioned by the Hon'ble High Court of Madhya Pradesh by order dated 24.01.2008 w.e.f. 01.10.2007 and the company has filed an application for exit from the purview of the Corporate Debt Restructure mechanism which was not approved as on 30.09.2007. And the Assessing Officer presumed that recompensed amount payable Rs. 1.6 crores is :-4-: I.T.A. No. 431/Mds/2016 only contingent liability and not accrued interest liability. But the Assessing Officer, However considered the claim of recompensed amount of Rs. 1.43 crores which was paid before the end of the financial year as on 31.03.2008 and disallowed Rs. 1.6 crores and passed order u/s. 143 r.w.s. 147 of the Act dated 31.01.2014.
Aggrieved by the order, the assessee has filed an appeal with CIT(A). In the Appellate proceedings, the Ld. AR challenged the proceedings of re-opening of assessment, as the Assessing Officer has not furnished the material considered to re-open the assessment and any use of intangible material would amount to change of opinion relying on the Apex Court decision of CIT Vs. Kelvinator India Ltd., 321 ITR 566(SC). The Ld. AR also supported his arguments with the decision of the Bombay High Court CIT Vs. Jet Airways (I) Ltd., 331 ITR 236 (Bmb) and on merits, the Assessing Officer erred in disallowing the recompense amount payable of Rs. 1.6 crores in the hands of assessee considered it as contingent liability as on 30.09.2007 and overlooked the facts of CDR package of debt and prayed for allowing the appeal.
The Ld. CIT(A) considered the grounds and submissions of the assessee in respect of re-assessment proceedings and on the disallowance of Rs. 1.6 crores. The Ld. CIT(A) dealt on the re-opening of assessment at Page 3 and 4 of his order and recompensing amount paid to bank on exit from CDR Rs. 1.6 crores and judicial decisions cited. The Ld. CIT(A) perused findings of the :-5-: I.T.A. No. 431/Mds/2016 Assessing Officer and also the submissions of the assessee and relied on the decision of Jet Airways (I) Ltd., (Supra) and Delhi High Court decision of Ranbaxy Laboratories Ltd., Vs. CIT, 331 ITR 136(Del) on re-assessment proceedings and is of the opinion that an amount of Rs. 1.6 crores cannot be a contingent liability and directed the Assessing Officer to delete the addition and allowed the appeal.
Aggrieved by the order, the Revenue has filed an appeal with the Tribunal. Before us, the Ld. DR argued the grounds and submitted that the CIT(A) erred in set aside of the re-assessment proceedings and deleted Rs. 1.6 crores being estimated recompensed amount and has not considered the explanation 3 to section 147 of the Act and Ld. DR relied on the decision of Karnataka High Court in case of N. Govindaraju Vs. Income Tax Officer, 60 Taxmann.333 were in respect of re-assessment proceedings the addition could be made on other grounds irrespective of reason for issuing notice and prayed for setting aside of the CIT(A) order. Contra, the Ld. AR of the assessee relied on the order of the CIT(A) and the judicial decisions.
We heard the rival submissions, perused the material on record and judicial decisions. The Sole crux of the disputed issue raised by the Ld. DR that the CIT(A) quashing the re-assessment proceedings u/s. 147 of the Act, irrespective of the fact that the Assessing Officer has power to re-open the assessment on the other issues and the order of CIT(A) is not in accordance with law where the assessee claimed provision of amount on Rs. 1.6 crores interest
:-6-: I.T.A. No. 431/Mds/2016 payable to lender under CDR package. We also perused the lower authorities order where the Ld. CIT(A) has quashed the re-assessment proceedings and also directed the Assessing Officer to delete the addition of Rs. 1.6 crores made in the re-assessment proceedings. We find that the original assessment proceedings were completed u/s. 143(3) on 15.12.2010 with total income of Rs. 22,61,65,343/- and the assessment was re-opened on claim of recompense amount payable to lenders. The Assessing Officer has provided reasons for re- opening of assessment to the assessee. But the fact that the assessee company was amalgamated and cease to exist and the assessment has been re-opened in connection with estimated recompense amount payable to lender under Corporate Debt Restructuring (CDR) package and the Assessing Officer has treated same as the contingent liability and there was no clarification with findings of the CIT(A) in respect of recompense amount of CDR package, as their assessment was quashed.
We perused the judicial decisions and material on record and are of the opinion that the Assessing Officer is entitled to tax the entire income in re- assessment proceedings and support our view relying on the decision of N.
Govindaraju Vs. Income Tax Officer 377 ITR 0243, where it has held
" Once proceedings had been initiated on valid notice, it becomes duty of AO to levy tax on entire income that may have escaped assessment and comes to his notice during course of proceedings initiated u/s. 147."
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We considering the Apparent facts, material on record and judicial decisions are of the opinion that the re-assessment proceedings are valid and order of CIT(A) is set aside as there is no proper findings on the disputed issue and accordingly, we remit the entire issue to the file of the CIT(A) and to pass the order on merits with speaking order and assessee shall be provided an adequate opportunity of hearing before the disposal of the appeal.
In the result, the Revenue appeal is allowed for statistical purpose
Order pronounced on Thursday, the 29th day of December, 2016 at Chennai.