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Income Tax Appellate Tribunal, ‘’ D’’ BENCH, AHMEDABAD
Before: Ms SUCHITRA KAMBLE & SHRI WASEEM AHMED
आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned two appeals have been filed at the instance of the assessee against the separate orders of Learned Commissioner of Income Tax (Appeals)-I, Baroda, arising in the matter of assessment order passed under s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Years 1998-1999 & 1999-2000.
First, we take up AY 1998-99, an appeal by the assessee.
& 3050/Rjt/2010 A.Y.s 1998-99 & 1999 & 2000 2
It is a re-called matter before us. The ITAT in the Miscellaneous Application filed by the revenue in MA Nos. 255, 256 and 258/AHD/2017 for the AYs 1998- 1999, 1999-2000 & 1997-1998 vide order dated 10/03/2023, has recalled its order for limited purpose i.e. adjudication of ground number 1 wherein the validity of the proceedings-initiated u/s 147 of the Act have been challenged.
In the present case, the proceedings u/s 147 of the were initiated after recording the reason that interest income amounting to Rs. 66,33,963/- has escaped assessment. However, the AO during the assessment proceedings found that there were certain incomes which were not derived from the business of generation and distribution of power and therefore the same were not eligible for deduction while calculating the book profit u/s 115JA of the Act. Thus, the AO calculated book profit considering such income.
4. The assessee carried the matter before the Ld. CIT(A) challenging the validity of the initiation of the proceeding’s u/s 147 of the Act. However, the Ld. CIT(A) dismissed the ground of appeal of the assessee by observing as under:
The first ground of appeal is against the reopening of the assessment u/s 147 of the Act. 4.1 It was noticed by the AO that as per schedule 15 of the annual accounts, the assessee had shown other income of Rs. 7,54,66,000/- comprising of dividends, interest, liquidated damages, etc. which were chargeable to tax u/s 115JA. The assessee falled to disclose any income u / s 115JA in its return of income. Having reason to believe that Income had escaped assessment, the AO reopened the assessment by issue of notice u/s 148. 4.2 In appeal, it is contended that the AO has no power to reassess or review his order and he can reassess provided there is tangible material to conclude escapement of income. The decision in the case of Kelvinator India Ltd 187 Taxman 313 (SC) was relied upon. 4.3 I have carefully considered the facts of the case, the submissions of the appellant and the assessment order. In this case return of income was filed on 30.11.1998 and the case was reopened by issuing notice u / s * 148 on 12.8.02 i.e. within 4 years of the relevant assessmerit year. The case was reopened to add back the other Income of Rs. 7, 54 ,66,000/- to book profit as the same was, in the opinion of the AO not related to main business of power generation of the appellant. It is an admitted fact that during the reassessment there is not a whisper about re-computation of books profit by the AO. In fact there is no discussion about it in the assessment order and certainly there no formation of opinion on the said issue. In the case of Praful Chunilal Patel vs. M.J.Makwana, & 3050/Rjt/2010 A.Y.s 1998-99 & 1999 & 2000 3
Assistant Commissioner of Income Tax (1999) 236 ITR 832 (Guj), Hon'ble Gujarat High Court has held as under:- “....... Since the Assessing Officer at the first assessment in the year 1991-92 never really formed an opinion on the question whether there was a transfer on September 19, 1990, of the land in question to the firm and that the amounts credited to the accounts of the partners who had contributed the lands to the firm, were meant to be the price of the land which was to be actually paid from the collections received by the firm from membership fees as soon as received, as was envisaged admittedly in paragraph 11 of the partnership deed, there was no question of any change of opinion wheri on the relevant facts being found the Assessing Officer while protectively assessing the petitioner-assessee for the year 1993-94, noted that this was a case for issuance of a notice under section 148, which came to be issued thereafter. When the amount of taxable income and of the tax payable thereon were not ascertained at all by the Assessing Officer in respect of the transfer made by the assessee in favour of the firm on September 19, 1990, there obviously was no opinion formed in that regard and, consequently, there would not arise any question of a mere change of opinion. In cases where the Assessing Officer had overlooked something at the first assessment, there can, in our opinion, be no question of any change of opinion when the income which was chargeable to tax is actually taxed as it ought to have been under the law but was not, due to an error committed at the first assessment." (emphasis supplied) 4.3.1 Similar view has been taken by Hon'ble Allahabad High Court in the case of Renu Sagar Power Company v ITO 117 ITR 719(Alla) wherein it was observed "question of change of opinion would arise only when the same has already been expressed on the materials of record. If the materials, were not before the Assessing Officer the question of change of opinion does not arise." 4.3.2 Similar was the observation in the case of ITO vs. Mahadeo Lal Tulsyan 111 ITR 25(Cal). "The formation of opinion is a positive act on the part of Assessing Officer and the opinion is said to be formed where there is application of mind with reference to material on record and the provisions of the statute and in case in earlier proceedings no such opinion is formed It cannot be contended that the reassessment proceedings were initiated on mere change of opinion. Mere assessment in routine manner did not lead to inference that the opinion was formed in respect of issues involved in the assessment." 4.3.3 Now the Issue is if prima facie character of income is Income from other sources, it should have been separately treated and so added to the book profit and shown not as business income In the case of Raymond Woollen Mills vs ITO 236 ITR 34 (SC), the Hon. Apex court was of the view that for commencement of proceeding u/s 147 what was to be seen was only the prima facle material and the sufficiency of correctness of material is not a thing to be considered at that stage, In the case of Pandian Chemicals Ltd the Hon. Apex court had held that the word derived from must be understood to as referring to something which has a direct of immediate nexus with the assessee's undertaking. In the case of Vijay Laxmi Sugar Mills v CIT 191 ITR 641 (SC) the Hon. Supreme Court has held that the interest on deposit accrues sui generis and assessable under the head income from other sources. Similarly in the case of Tuticorin Alkalies the Interest earned on surplus funds during pre-commencement period was held to be assessable as Income from other sources.
& 3050/Rjt/2010 A.Y.s 1998-99 & 1999 & 2000 4
4.3.4 It is also pertinent to mention here that the appellant had filed a TDS certificate on 22.8.2001 before the AO claiming TDS for Instant assessment year Indicating Interest Income of Rs. 66 ,33,863/- for overline AY 98-99 Implying thereby the Income had escaped assessmnetand that it has no objection if Interest income be taxed for AY 98-99 and corresponding TDS credit be allowed. 5. Being aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us.
The Ld. AR for the assessee before us filed a paper book running from pages 1 to 33 and contended that there was no tangible material available with the AO for initiating the proceedings u/s 147 of the Act.
The Ld. AR further contended that all the details of other income were available at the time of original assessment proceedings and therefore proceedings u/s 147 of the Act, cannot be initiated after referring the same set of documents. As per the Ld. AR the reopening is based on the change of opinion which is not permissible under the provisions of law.
On the other hand, the Ld. DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that the proceedings were initiated in the case of the assessee on the reason as reproduced below: The assessee company has come forward with its letter dated 4-4-2002 at the instance of this office letter dated 14-02-2002. The assessee follows mercantile system of accounting and under the provisions of IT Act also it was required to disclose the above mentioned interest income in its return of income. Thus, this is clear cut case of understatement of income for AY 1998-99. 9.1 During the assessment proceedings, the AO comes to know that there was other income chargeable to tax which has escaped assessment and therefore he has taken into consideration certain incomes while calculating the book profit. As & 3050/Rjt/2010 A.Y.s 1998-99 & 1999 & 2000 5 such the basis of re-opening i.e. non-disclosure of interest income has not been disputed by the Ld.AR for the assessee. The provision of section 147 of the Act, clearly empowers the AO to assess the escaped income which comes to his knowledge during the proceedings though the same was not part of the reason recorded. Accordingly, we hold that the assessment framed by the AO after making adjustment in the book profit u/s 115JA of the Act, is within the framework of law. As such there is no need to have any tangible material for calculating the book profit qua the income not derived from the activities of the generation and distribution of power.
9.2 Likewise, we also note that the Ld. CIT(A), has clearly spelt out that there was no discussion qua the book profit in original assessment proceedings u/s 143(3) of the Act. Once there was no discussion by the AO during the original assessment proceedings, the question of change of opinion does not arise. In view of the above, we do not find any infirmity in the order of the Ld. CIT(A). Hence, the ground of appeal of the assessee is hereby dismissed.
9.3 In the result, the appeal filed by the assessee is hereby dismissed.
Coming to the for AY 1999-2000, an appeal by the assessee
At the outset, we note that the issue raised by the assessee in its Ground of appeal in for the AY 1999-2000 is identical to the issue raised by the assessee in ITA bearing No. 3049/AHD/2010 for the assessment year 1998-99. Therefore, the findings given in shall also be applicable to the present case i.e. ITA No. 3050/AHD/2010 for the AY 1999-2000. The appeal of the assessee bearing No. 3049/AHD/2010 for the assessment year 1998-99 has been decided by us vide paragraph No. 9 of this order against the assessee. The learned AR and the DR & 3050/Rjt/2010 A.Y.s 1998-99 & 1999 & 2000 6 also agreed that whatever will be the findings for the 1998-99 shall also be applied to the for the AY 1999-2000. Hence, the appeal filed by the assessee is dismissed.
In the result, the appeal filed by the assessee is hereby dismissed.
In the combined result, both the appeals filed by the assessee are hereby dismissed.
Order pronounced in the Court on 15/03/2024 at Ahmedabad.