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Income Tax Appellate Tribunal, “A” BENCH: KOLKATA
Before: Shri P.M. Jagtap, AM & Shri K. Narasimha Chary, JM]
1 ITA No. 357 & 1320/Kol/2013 Coal India Limited., AY 2004-05 IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH: KOLKATA [Before Shri P.M. Jagtap, AM & Shri K. Narasimha Chary, JM]
I.T.A No. 357/Kol/2013 Assessment Year: 2004-05 Coal India Limited Vs. Joint Commissioner of Income-tax (OSD) (PAN:AABCC3929J) Circle-5, Kolkata. (Appellant) (Respondent) & I.T.A. No.1320/Kol/2013 Assessment Year: 2004-05
Deputy Commissioner of Income-tax, Vs. Coal India Limited Circle-5, Kolkata. (Appellant) (Respondent)
Date of hearing: 20.09.2016 Date of pronouncement: 28.09.2016
For the Assessee: Shri Akash Mansingka, For the Respondent: Shri Angan Shaiza, CIT ORDER Per Shri K. Narasimha Chary, JM: Both these appeals by assessee and revenue are arising out of common order of CIT(A)-VI, Kolkata vide Appeal No. 255/CIT(A)-VI/Cir-5/11-12/Kol dated 12.12.2012. Assessment was framed by JCIT (OSD), Circle-5, Kolkata u/s. 143(3)/147 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) for AY 2004-05 vide his order dated 30.12.2011. For the sake of convenience, both these appeals are disposed of together.
Brief facts of this case are that the assessee is a Public Sector Undertaking formed by the Central Government order dated 27.09.1975. For AY 2004-05, return of income was filed on 25.10.2004 by the assessee declaring a total income of Rs. Nil and book profit of Rs.289.77 cr. An order u/s. 143(3) of the Act was passed on 24.01.2006. The AO made an addition of Rs.105,99,93,000/- u/s. 14A of the Act, aggrieved by which the assessee carried the matter in appeal before the Ld. CIT(A) in Appeal No. CIT(A)-5/Kol/163/Cir-5/09-10, and by way of an order dated 04.06.2008 the Ld. CIT(A) deleted the additions made by the AO on account of section 14A of the Act.
2 ITA No. 357 & 1320/Kol/2013 Coal India Limited., AY 2004-05 3. While the matter stood thus, on 21.03.2011 the AO issued a notice u/s. 148 of the Act and by an order dated 30.12.2011 the AO concluded that there was under assessment of income to a tune of Rs.98.49 cr. and to that extent income had escaped assessment. Challenging this order reopening the assessment, the assessee carried the matter in appeal before the Ld. CIT(A) vide Appeal No. 255/CIT(A)-VI/Cir-5/11-12/Kol, and the Ld. CIT(A) by order dated 12.12.2012 i.e. the impugned order held that the reopening of assessment u/s. 147 of the Act was bad in law. However, he also held that any disallowance u/s. 14A of the Act has to be added back u/s. 115JB of the Act. Hence, challenging the said findings, both the assessee and revenue approached this Tribunal in these appeals. Challenging the quashing of reassessment, Revenue filed ITA No. 1320/Kol/2013 whereas challenging the finding of Ld. CIT(A) that the disallowance made u/s. 14A of the act is liable to be added while computing book profit u/s. 115JB of the Act, the assessee filed ITA No. 357/Kol/2013 on the following grounds:
Revenue’s Ground of appeal
“1. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in law in quashing the reassessment made u/s. 147/143(3), treating the same as bad in law.” Assessee’s ground of appeal
“1(a) That on the facts and circumstances of the case, the Ld. CIT(A) has erred in holding that disallowance under section 14A of the Act is liable to be added while computing book profits under section 115JB of the Act. 1(b) That the finding of the Ld. CIT(A) is contrary to the facts and circumstances of the case.” 4. At the time of hearing Ld. AR argued that the reassessment proceedings initiated after four years from the end of relevant assessment year are bad and since there is no tangible material or information that has come to the possession of the AO subsequent to the orders u/s. 143(3) of the Act, the reassessment proceedings are void ab initio. He further contended that since the addition u/s. 14A of the Act was the issue directly and substantially involved in the appeal before the Ld. CIT(A) after conclusion of such an appeal the AO does not have jurisdiction for reassessment in so far as section 14A of the Act is concerned. He further submitted that since the reassessment itself is bad the observations of Ld. CIT(A) that whatever may be the additions that are sought to be made u/s. 14A of the Act have to be added back u/s. 115JB of the Act cannot be countenanced.
The Ld. DR vehemently relied on the order of the Ld. AO.
3 ITA No. 357 & 1320/Kol/2013 Coal India Limited., AY 2004-05 6. Now the questions that arise for our consideration are –
(i) Whether the Ld. CIT(A) is justified in holding that the reassessment framed u/s. 14A of the Act is bad in law and liable to be quashed? And (ii) Whether the amount so disallowed u/s. 14A of the Act has to be added back u/s. 115JB of the Act? Issue No. (i)
As could be seen from the record, in this matter, the assessee filed its return of income on 25.10.2004 and an order u/s. 143(3) of the Act was passed on 24.01.2006. Appeal preferred against such an order was disposed of on 04.06.2008 and such an order attained finality. However, the AO issued a notice u/s. 148 of the Act on 21.03.2011, i.e., almost six years after the end of the relevant assessment year, and disposed of the matter by order dated 30.12.2011 with the following observations:
"During the course of scrutiny assessment expenses attributable to dividend income u/s.14A was disallowed of Rs.10599.93 lacs. In the computation interest expenses was taken as Rs.2750.18 lakhs which as per Schedule-l3, attached with the P&L A/c, was not the total expenses, Rs..3716.01lacs and Rs.12373.99 lacs were deducted from the total interest expenses on account of interest received from deposits and interest recovered from subsidiaries. Thus the actual interest expenses would be increased by Rs.16090.00 lacs (Rs.3716.01 + Rs.12373.99) lacs. As a result the total common expenses would also be increased by the same amount since the common expenses would include total interest expenses and thus the expenses pertaining to dividend would be &.20441.80 lacs. Total common expenses would be Rs.(17329.33 + 16090.00) lacs i.e. Rs.33419.33 lacs Expenses pertaining to dividend income would be Rs.48527.52 *33419.33 Rs.20441.80 lacs 79335.35 Thus there was an under assessment of income for Rs.9841.87 Iacs Therefore, 1 had reason to believe that 'income chargeable to tax' for AY: 2004-05 has escaped assessment ". 8. It is pertinent to note that there is no averments or allegations that the assessee has not furnished any particulars in his original return of income or that any new material or information has come to light or possession of the AO. On the other hand, the AO in his order further observed that while computing the disallowance u/s. 14A of the Act the total interest expenses was not considered by mistake, so no new view was being taken in the order u/s. 147 of the Act, but to compute the actual expenses relating to investment as provided in Rule 8D(2) of the Rules read with section 14A of the Act, the exercise u/s. 147
4 ITA No. 357 & 1320/Kol/2013 Coal India Limited., AY 2004-05 of the Act was taken up. So it makes the things crystal clear that the AO wanted to rectify the mistake apparent from record.
Ld. AR placed reliance on the decision reported in Hindustan Unilever Ltd. Vs. DCIT (2010) 325 ITR 0102 (Bom.) for the principle that proceedings u/s. 147 of the Act cannot be initiated to rectify mistake which are apparent from record. Section 147 of the Act clearly reads that if the AO has reason to believe that no income chargeable to tax has escaped assessment for any assessment year he assessed 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 proceedings. On this aspect the judicial pronouncements are to the effect that for taking an action u/s. 147 of the Act it is necessary for the AO to have valid reasons for reopening the assessment and such reasons should not be based merely on change of opinion but they have to be based concretely on the basis of some tangible information or documents that have come to his possession subsequent to the completion of proceedings u/s. 143(3) of the Act. Where no new facts are brought on record, any new inference that is drawn by the AO on the existing set of facts would amount to change of opinion which is not permissible. This principle has been judicially accepted by several courts including the Hon’ble Apex Court in the following cases:
(i) CIT Vs. Kelvinator India Ltd. 320 ITR 561 (SC), (ii) Coca-Cola Export Corporation Vs. ITO (1990) 231 ITR 200 (SC), (iii) CIT Vs. Bhanji Lavji (1971) 79 ITR 582 (SC), (iv) Mercury Travels Ltd. Vs. DCIT 258 ITR 533 (Cal) and (v) Ballarpur Paper & Straw Board Mills Ltd. 101 ITR 55 (Cal).
Here, in this case, the order of the AO itself reads that it was apparent that while computing the disallowance u/s. 14A of the Act the total interest expenses was not considered by mistake. It goes without saying that the mistake is not attributable to the conduct of the assessee either in not furnishing the information or furnishing any inaccurate information. But it was the mistake on the part of the AO not to consider effectively the material facts available on record. In such a situation, reopening of assessment u/s. 147 of the Act is impermissible.
It is also borne on record that on the order dated 04.06.2008 in the appeal preferred by the assessee on account of additions of Rs.105.99 cr., the Ld. CIT(A) considered the additions u/s. 14A of the Act. When the matter was disposed of on 04.06.2008 and attained
5 ITA No. 357 & 1320/Kol/2013 Coal India Limited., AY 2004-05 finality almost three years thereafter on 21.03.2011 the AO issued notice u/s. 148 of the Act again to consider the very same aspect of disallowance u/s. 14A of the Act.
Proviso 3 to section 147 of the Act speaks that the AO may assess or reassess the income other than in the income involving matters which are the subject of any appeal, reference or revision which is chargeable to tax and has escaped assessment. Ld. AR placed reliance on a decision reported in Prashant Projects Ltd. Vs. ACIT (2011) 333 ITR 0368 (Bom) for AY 2002-03 wherein it is clearly held that when the very issue on which the assessment is sought to be reopened was canvassed in appeal and was determined in the appellate proceedings by the Ld. CIT(A) in terms of proviso to section 147 of the Act, the assessment could not have been reopened. This proviso clearly ousts jurisdiction of the AO to invoke the provisions u/s. 147 r.w.s. 148 of the Act.
Lastly, it is a clear case of the AO invoking the provisions of section 147 of the Act after four years from the end of the relevant assessment year, that too without any new tangible information or material coming into his possession subsequent to either the order passed u/s. 143(3) of the Act or the appellate order. The first proviso to section 147 of the Act clearly stipulates that no action u/s. 147 of the Act shall be taken 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 a reason of failure on the part of the assessee to make a return u/s. 139 or in respect to a notice under sub-section (1) of section 142 or section 148 of the Act or to disclose fully and truly all material facts necessary for his assessment for that assessment year. None of these conditions is satisfied in this matter so as to enable the AO to invoke section 147 of the Act after expiry of four years from the end of the relevant assessment year. The order of the AO clearly reads that the AO considered whatever the particulars that were already furnished earlier and found that by mistake total expenses were not considered. This goes without saying that the full and true particulars were furnished by the assessee along with the return of income, but the mistake that occurred was attributable to the AO but not to the assessee. No new facts have come to the possession of the AO, therefore, the reassessment proceedings are bad under first proviso to section 147 of the Act. This principle of law has had judicial acknowledgement in following cases:
(i) Calcutta Discount Co. Ltd. Vs. ITO (1961) 41 ITR 191 (SC), (ii) Jay Shree Tea & Industries Ltd. Vs. DCIT 245 ITR 567 (Cal),
6 ITA No. 357 & 1320/Kol/2013 Coal India Limited., AY 2004-05 (iii) Tantia Construction Co. ltd. Vs. DCIT (2002) 257 ITR 0084 (Cal), (iv) Prashant Proje cts ltd. Vs. ACIT (2011) 333 ITR 0368 (Bom) and (v) IPCA Laboratories Ltd. Vs. DCIT (2001) 251 ITR 0416 (Bom).
Viewed from any angle, the reopening of assessment u/s. 147 of the Act by the AO in this matter cannot be sustained. The reasoning given by the Ld. CIT(A) to reach a conclusion that the reassessment was liable to be quashed as they were bad in law is impeccable and based on sound factual and legal propositions. We, therefore, uphold the finding of the Ld. CIT(A) on the aspect of legality of section 147 proceedings and dismiss the appeal of the revenue.
Issue No. (ii):
In view of our finding on Issue no. (i) in respect of proceedings u/s. 147 of the Act are nonest in the eye of law as stated all other contentions like their eligibility to be added back u/s. 115JB of the Act for two grounds and any discussion on that aspect would be simply academic and not necessary. We answer the issue accordingly in favour of the assessee.
In the result, the appeal of revenue is dismissed and that of the assessee is allowed.
Order pronounced in the open court on 28.09.2016
Sd/- Sd/- (P. M. Jagtap) (K. Narasimha Chary) Accountant Member Judicial Member
Dated : 28th September, 2016
Jd.(Sr.P.S.) Copy of the order forwarded to: APPELLANT – Coal India Limited, 10, Netaji Subhas Road, Kol- 1. 700001. Respondent –JCIT (OSD), Cir-5, Kolkata. 2 The CIT(A), Kolkata 3. 4. CIT , Kolkata 5. DR, Kolkata Benches, Kolkata /True Copy, By order,
Asstt. Registrar.