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Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI RAVISH SOOD & SHRI ARUN KHODPIA
आदेश / ORDER PER RAVISH SOOD, JM:
The present appeal filed by the assessee company is directed against the order passed by the Commissioner of Income-Tax (Appeals), NFAC, dated 23.08.2022 which in turn arises from the order passed by the A.O u/ss. 143(3) r.w.s. 147 of the Income-tax Act, 1961 (for short ‘Act’), dated 26.12.2018 for A.Y. 2013-14. The assessee company has assailed the impugned order on the following grounds of appeal before us:
“1. Ground 1 : That the Ld. AO do not have valid jurisdiction to reopen the case hence Assessment Proceeding is bad in law.
2. Ground 2 : That on the facts and on the circumstances of the case and in law, Ld. Assessing Officer had disallowed privilege fee amounting to Rs.40,00,00,000/-. The disallowance is bad in law, against law of natural justice and uncalled for and may kindly be deleted.
3. Ground 3 :That on the facts and on the circumstances of the case Ld.AO erred it making disallowance without appreciating the submissions and explanation of the assessee. The disallowance is bad in law, against law of natural justice and uncalled for and may kindly be deleted.
4. Ground4: That assessee has filed declaration under Vivad se Viswas Scheme against the appeal No. CIT(A), Raipur- 1/13451/2015-16. No order under Vivad se Viswas Scheme has been issued against original appeal no. CIT (A), Raipur- 1/10783/2018-19. Ld. Hon. CIT(A) has dismissed the appeal on incorrect contention which is bad in law, against law of natural justice and uncalled for. Thus either the original Appeal no. CIT(A), Raipur-1/10783/2018-19 be reinstituted or delete the addition made by Ld. AO.
5. Ground 5: The assessee craves leave to add, urge, alter or withdraw any ground/s before or at the time of hearing of this appeal.
3 Chhattisgarh State Beverages Corporation LimitedVs. DCIT, Circle-3(1), Raipur
III. RELIEF SOUGHT That above-mentioned disallowance amounting to Rs. 40,00,00,000/- made by Ld. Assessing Officer may kindly be deleted.”
Succinctly stated, the assessee company which is engaged in the business of wholesale trading of foreign/Indian made liquor/wine/beer, had e-filed its return of income for A.Y.2013-14 on 05.02.2014, declaring an income of Rs.13,79,81,570/-. The return of income filed by the assessee company was initially processed as such u/s.143(1) of the Act. Subsequently, the case of the assessee company was selected for scrutiny assessment u/s. 143(2) of the Act.
Original assessment was framed by the A.O vide his order passed u/s. 143(3) dated 08.02.2016 determining the income of the assessee company at Rs.14,44,96,140/-.
Aggrieved with the order passed by the A.O u/s. 143(3) of the Act, dated 08.02.2016 the assessee company filed an appeal before the CIT(Appeals). As the assessee had opted for the Direct Tax Vivad Se Vishwas Act, 2020 as regards its appeal pending before the CIT(Appeals) against the order passed by the. A.O u/s. 143(3) dated 08.02.2016, therefore the said appeal was on the said count itself dismissed by the CIT(Appeals), NFAC, Delhi vide his order dated 09.09.2022, Page 68-69 of APB.
4 Chhattisgarh State Beverages Corporation LimitedVs. DCIT, Circle-3(1), Raipur
Thereafter, the case of the assessee company was reopened by the A.O vide notice issued u/s. 148 of the Act dated 10.10.2017 on the basis of the following “reasons to believe”, Page 33 of APB :
“Subject: Providing of reason for reopening the case/issuing notice u/s.148 of the Income Tax Act, 1961 for the A.Y.2013-14-reg. Ref.- Your letter date 09.04.2018 In this regard, as per your request, reason for reopening/re- assessment of the case u/s.147 of the IT Act for the A.Y.2013-14 is furnished as below:- On perusal of the case record, it is noticed that during the year under consideration i.e. F.Y.2012-13 (relevant to A.Y.2013-14), the assessee has debited Rs.40,00,00,000/- in P/L account on account of privilege fees. Given the provisions of section 37, it can clearly be seen that these sums paid are not for the purpose of earning income. The privilege fees is paid to State Government profits of company after debiting all expenses. The fact is further substantiated by the judicial decision held in case of Andhra Pradesh Beverage Corporation Ltd. v. Income tax Officer, Ward-1(1), Hyderabad, [2014] 46 taxman.com 91 (Hyderabad-Trib.) that Payment of privilege fee made by assessee, a wholesale distributor of alcoholic products, to State government in terms of section 23A of Excise Act, 1968, was merely an application of income and, thus, it could not be allowed as business expenditure under section 37(1). Therefore, I have reason to believe that the income to the tune of Rs. 40,00,00,000/- chargeable to tax has escaped assessment for the A.Y. 2013-14 within the meaning of Explanation -2(c) ofSection 147 of the I.T. Act, 1961. Hence, accordingly after obtaining prior approval from the JCIT, Range-3, Raipur vide letter F. No.JCIT/R-3/RPR/Re- opening/2017-18/ dated 13.09.2017, notice u/s.148 of the Act has been issued. You are requested to file the reply on or before 23.07.2018 positively on the reason given above. Sd/- PRIYANKA PATEL CIRCLE 3(1), RAIPUR (In case the document is digitally signed please refer Digital Signature at the bottom of the page)
5 Chhattisgarh State Beverages Corporation LimitedVs. DCIT, Circle-3(1), Raipur Assessment was thereafter framed by the A.O vide his order passed u/s. 143(3) r.w.s 147 of the Act dated 26.12.2018, wherein after disallowing the claim of the assessee company for deduction u/s 37 of the Act “Privilege fees” of Rs. 40 crore its income was reassessed at Rs. 53,79,81,570/-.
Aggrieved the assessee assailed the order passed by the A.O u/s. 143(3) r.w.s 147 of the Act dated 26.12.2018 before the CIT(Appeals). Ostensibly, the CIT(Appeals), NFAC, Delhi vide his order dated 23.08.2022 dismissed the appeal of the assessee by treating the same as infructuous for the reason that the assessee company had opted for Direct Tax Vivad Se Vishwas Act, 2020 vide its application dated 29.12.2020 and had made full payment of taxes in terms of “Form 5” dated 25.01.2022. For the sake of clarity the observations of the CIT(Appeals) are culled out as under:
“2. It is noted that the appellant opted for the Vivad Se Vishwas Scheme vide application dated 29.12.2020. Pursuant thereto, the Pr. CIT, Raipur-1 certified the full and final payment of Rs. Nil as taxes in terms of Form No.5 dated 25.01.2022. In view of the above, the appeal is treated as infructuous as per Section 4(2) of the Direct Tax Vivad Se Vishwas Act, 2020.”
The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us.
At the very outset of hearing of the appeal, it was submitted by Shri Praveen Jain, Ld. Authorized Representative (for short ‘AR’) for the assessee company that the CIT(Appeals) had on the basis of perverse
6 Chhattisgarh State Beverages Corporation LimitedVs. DCIT, Circle-3(1), Raipur observations dismissed the assessee’s appeal. Elaborating on his aforesaid contention, it was submitted by the Ld. AR that the CIT(Appeals) had wrongly observed that the assessee company had opted under the Direct Tax Vivad Se Vishwas Act, 2020 as regards the reassessment framed in its case u/s.143(3) r.w.s. 147 of the Act dated 26.12.2018. It was submitted by the Ld. AR that though the assessee company had opted under Direct Tax Vivad Se Vishwas Act, 2020 w.r.t the assessment order passed in its case u/s.143(3) dated 08.02.2016, but the CIT(Appeals) had wrongly observed that it had opted for the same w.r.t the reassessment framed in its case u/s. 143(3) r.w.s. 147, dated 26.12.2018. Carrying his contention further, it was averred by the ld. AR that dismissal of the appeal filed by the assessee company against the reassessment order passed by the AO u/s 143(3) r.w.s 147, dated 26.12.2018 by the CIT(Appeals) on the basis of misconceived facts vide his order dated 23.08.2022 was liable to be set- aside.
Apart from that the Ld. AR placed his contentions as regards the merit of the case. The Ld. AR assailed the validity of the reopening of the concluded assessment of the assessee company by the A.O u/s.147 of the Act. It was submitted by Shri Praveen Jain, Ld. AR that as the very basis for reopening of assessee’s case i.e. allowability of assessee’s claim for deduction of “Privilege expenses” of Rs.40 crore had been queried and accepted after necessary verifications/deliberations by the A.O while
7 Chhattisgarh State Beverages Corporation LimitedVs. DCIT, Circle-3(1), Raipur framing the original assessment vide his order passed u/s.143(3) of the Act dated 08.02.2016, therefore, he had clearly traversed beyond the scope of his jurisdiction for reopening such concluded assessment on the basis of a mere “change of opinion”. Ld. AR in support of his aforesaid contention had relied on the judgment of the Hon’ble Supreme Court in the case of CIT Vs. Kelvinator of India Ltd. (2010) 320 ITR 561 (SC) a/w host of other judicial pronouncements.
Per contra, the Ld. Departmental Representative (for short ‘DR’) relied on the orders of the lower authorities.
We have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions.
As stated by the Ld. AR and, rightly so, it is a matter of fact borne from record that the assessee company had vide its application dated 29.12.2020 opted under the Direct Tax Vivad Se Vishwas Act, 2020 w.r.t its appeal pending before the CIT(Appeals) against the original assessment order passed in its case u/s.143(3) of the Act dated 08.02.2016, Page 70- 72 of APB. As the assessee had not opted under Direct Tax Vivad Se Vishwas Act, 2020 w.r.t the reassessment order passed in its case u/s. 8 Chhattisgarh State Beverages Corporation LimitedVs. DCIT, Circle-3(1), Raipur 143(3) r.w.s 147 of the Act dated 26.12.2018, therefore, we concur with the Ld. AR that the order passed by the CIT(Appeals), NFAC Delhi on the basis of misconceived facts suffers from a serious perversity on the basis of which the appeal had been dismissed by him.
We, thus, in terms of our aforesaid observations set-aside the order of the CIT(Appeals) and restore the same to his file with a direction to re- adjudicate the appeal after affording a reasonable opportunity of being heard to the assessee company. As we have restored the matter to the file of the CIT(Appeals), therefore, we refrain from adverting to the contentions advanced by the Ld. AR on the basis of which he has assailed the validity of the jurisdiction assumed by the A.O for reopening of the assessee’s case u/s.147 of the Act, which the assessee would be at a liberty to raise in the course of the aforesaid set-aside proceedings.
In the result, appeal of the assessee is allowed for statistical purposes in terms of our aforesaid observations.
Order pronounced in open court on 03rd day of August, 2023.