A trust was not registered u/s 12A of the income tax Act, 1961 even than donations towards corpus being capital receipts weren't taxable :AGRA ITAT
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CIT vs. HCIL Kalindee ARSSPL (Delhi High Court)
S. 271(1)(c) penalty is valid even if claim is disclosed and as per CA certificate
The assessees claimed deduction u/s 80IA on the ground that it has executed an eligible infrastructure project. A copy of Form No.3CB, 3CD and Form No.10CCB was filed with the return in support of the claim. In the assessment order, the AO denied 80-IA deduction on the ground that the assessee had not executed the work but had given a sub-contract to another party and that it was not eligible u/s 80-IA(13). The assessee accepted the denial of the claim. The AO levied penalty u/s 271(1)(c) for filing inaccurate particulars of income which was upheld by the CIT(A). The Tribunal relied onReliance Petroproducts 322 ITR 158 (SC) and deleted the penalty on the ground that the claim for deduction u/s 801A was on the basis of a certificate of the CA, was bona fide and all the material facts relevant thereto had been furnished. On appeal by the department to the High Court, HELD reversing the Tribunal:
While it is true that the Income-tax Act, 1961 is one of most vexed and complicated legislation and requires highest degree of interpretative skills and there are divergent views on interpretation of its provisions and while it is also true that penalty for concealment cannot be imposed merely because assessee’s interpretation or claim is rejected, such cases have to be distinguished from cases where the claim of the assessee is farcical or farfetched. Dubious and fanciful claims under the garb of interpretation, are a mere pretense and not bona fide. Absurd or illogical interpretations cannot be pleaded and become pretense and excuses to escape penalty. “Bona fides” have to be shown and cannot be assumed. The fact that the claim for deduction u/s 80IA was duly supported by the Chartered Accountant’s Certificate and prescribed forms signed by the CA cannot absolve and protect an assessee who furnishes in-accurate particulars because then in all cases where a form/certificate is furnished by the CA but a wrong claim of deduction is made, no penalty u/s 271(1)(c) can be imposed. Merely because the assessee complies with the statutory procedural requirement of filing the prescribed form and certificate of the Chartered Accountant cannot absolve the assessee of its liability if the act or attempt in claiming the deduction was not bona fide. On facts, the assessee’s claim was not tenable due to the Explanation to s. 80IA (13) which stipulates that benefit is not available to a contractor carrying on a works contract. The assessee has not shown any “tangible material” or basis as to why a clear statutory provision which excludes works contracts was ignored.
Vaghjibhai S. Bishnoi vs. ITO (Gujarat High Court)
Department’s practice of not giving prompt & full credit for TDS condemned
The assessee filed a return of income in which he claimed a refund of Rs. 2.11 lakhs. An intimation u/s 143(1) was issued by the CPC Bangalore in which credit for certain TDS certificates was omitted to be given. The assessee filed a rectification application u/s 154 before the AO which was not acted upon. The assessee filed a writ petition to challenge the neglect of the AO to give proper TDS credit. Before the High Court the AO argued inter alia that as the details of the e-return had not been transferred to him by the CPC, he was not authorized to accede to any request of the assessee. It was also claimed that the assessee had not filed full details relating to the claim. HELD by the High Court allowing the Petition:
Form 26AS, available on the department’s website, clearly reflects the assessee’s entitlement to credit for TDS. Instead of giving credit for the TDS, the department has adamantly continued to take the stand that there is a failure on the part of the assessee to furnish details. We are not impressed with such a stand. Computerization is with the object to facilitate easy access to the assessee and make the system more viable and transparent. In the event of any shortcoming of software programme or any genuine mistake, the Department is expected to respond to such inadvertence spontaneously by rectifying the mistake and give corresponding relief to the assessee. Instead of that, even when it is being brought to the notice of the Department by the assessee, by a rectification application and subsequent communication, not only it has chosen not to rectify the mistake, but, the lack of inter departmental coordination has driven the assessee to this Court for getting his legitimate due. This attitude for sure does not find favour with the Court, as more responsive and litigant centric system is expected; particularly in the era of computerization. Tax payers friendly regime is promised in this electronic age. For want of necessary coordination between the two departments, the assessee cannot be expected to be sent from pillar to the post. If the Centralized Processing Center meant for return processing, accounts, refund, storage of data etc. adds to the difficulties of the Tax payers, due to lack of distribution of work between back office and front office, and that too, after having been pointed out the actual error, a serious re-look is expected.
IT : Where amount surrendered during survey was not reflected in books of account and no source from where it was derived was declared by assessee, it was assessable as deemed income of assessee under section 69A and not business income
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[2013] 35 taxmann.com 456 (Punjab & Haryana)
HIGH COURT OF PUNJAB AND HARYANA
Kim Pharma (P.) Ltd.
v.
Commissioner of Income-tax*
ADARSH KUMAR GOEL AND AJAY KUMAR MITTAL, JJ.
IT APPEAL NO. 106 OF 2011†
APRIL 27, 2011
Section 69A, read with section 28(i), of the Income-tax Act, 1961 - Unexplained moneys [Amount disclosed at survey] - Assessment year 2006-07 - Whether where amount surrendered during survey was not reflected in books of account and no source from where it was derived was declared by assessee, it was assessable as deemed income of assessee under section 69A and not business income - Held, yes [Paras 7 & 9][In favour of revenue]
CASE REVIEW
Fakir Mohmed Haji Hasan v. CIT [2001] 247 ITR 290/[2002] 120 Taxman 11 (Guj.) (para 7) followed.
CIT v. S.K. Srigiri & Bros. [2008] 298 ITR 13/171 Taxman 264 (Kar.) (para 8) distinguished.
CASES REFERRED TO
CIT v. S.K. Srigiri & Bros. [2008] 298 ITR 13/171 Taxman 264 (Kar.) (para 4) and Fakir Mohmed Haji Hasan v. CIT [2001] 247 ITR 290/[2002] 120 Taxman 11 (Guj.) (para 6).
Aman Bansal for the Appellant.
JUDGMENT
Ajay Kumar Mittal, J. - This appeal has been preferred by the assessee under section 260A of the IT Act, 1961 (in short "the Act") against the order dt. 30th April, 2010 passed by the Income-tax Appellate Tribunal, Chandigarh Bench "SMC", Chandigarh (hereinafter referred to as "the Tribunal") in ITA No. 189/Chd/2010, for the asst. yr. 2006-07, claiming the following substantial questions of law :
| "A. | Whether the impugned orders passed by the learned authorities below are legally sustainable in the eyes of law ? | |
| B. | Whether the action on the part of the learned authorities below to segregate the surrendered income from business income and treat it as deemed income and taxing the same after refusing set off under ss. 70 and 71 of the Act is legally sustainable in the eyes of law ? | |
| C. | Whether the action on the part of the learned authorities below not to treat the income surrendered during survey as 'income from business and adjustable against the business losses determined for the year, is legally sustainable in the eyes of law ?" |
2. Briefly stated, the facts necessary for adjudication as narrated in the appeal are that a survey was conducted under s. 133A of the Act at the business premises of the assessee on 1st Sept., 2005. During the course of search, a cash amount of Rs. 5,00,000 was found and the books of account for the year under consideration were not found to be complete up-to-date. The assessee surrendered additional income of Rs. 10,00,000 relating to the asst. yr. 2005-06 and Rs. 5,00,000 for the asst. yr. 2006-07. The AO vide order dt. 26th Dec, 2008 made additions on account of certain disallowances and the total loss declared by the assessee at Rs. 5,37,300 was reduced to Rs. 2,22,765. The said loss was assessed as 'income from business' and the surrendered income was assessed as an income under s. 69A of the Act. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who videorder dt. 16th Dec, 2009 dismissed the appeal. On further appeal by the assessee, the Tribunal vide order dt. 30th April, 2010 upheld the order of the CIT(A) and dismissed the appeal which gave rise to the assessee to approach this Court by way of the instant appeal.
3. We have heard learned counsel for the assessee.
4. Learned counsel for the assessee submitted that the amount surrendered by the assessee was business income and assessable as such. He relied upon a decision of the Karnataka High Court in CIT v. S.K. Srigiri & Bros. [2008] 298 ITR 13/171 Taxman 264.
5. The point for determination in this appeal is, whether Rs. 5,00,000 which was surrendered by the assessee during the course of survey under s. 133A of the Act would form part of business income or was assessable under s. 69A of the Act. The AO, the CIT(A) and the Tribunal after considering the factual aspect noticed that the amount surrendered during the survey was not reflected in the books of account and no source from where it was derived was declared by the assessee and, therefore, it was, deemed income of the assessee under s. 69A of the Act. The findings recorded by the Tribunal in this regard are as under:
"In the facts of the present case, we find that assessee during the course of survey had surrendered the income as income from other sources though a plea has been raised by the assessee that the income was surrendered as income from job work but no evidence to prove the stand of the assessee has been brought on record. The assessee had also surrendered additional income of Rs. 10 lakhs in asst. yr. 2005-06 on account of sundry credits, repairs to building and advances to staff, which being relatable to business carried on by assessee was included as income from business. However, in respect of cash found during survey, which was not reflected in the books of account, no source was declared by the assessee and in the absence of nature of source of cash being proved, the same is not assessable as income from business. In the circumstances, we uphold the order of the CIT(A) in including the additional income as deemed income under s. 69A of the Act and not allowing the benefit of the business losses determined against the said deemed income. The grounds of appeal raised by the assessee are dismissed."
6. The Tribunal had relied upon a decision of the Gujarat High Court in Fakir Mohmed Haji Hasan v. CIT [2001] 247 ITR 290/[2002] 120 Taxman 11. In that case, interpreting the scope and describing the scheme of ss. 69, 69A, 69B and 69C of the Act, it was observed :
"The scheme of ss. 69, 69A, 69B and 69C of the IT Act, 1961, would show that in cases where the nature and source of investments made by the assessee or the nature and source of acquisition of money, bullion etc., owned by the assessee or the source of expenditure incurred by the assessee are not explained at all, or not satisfactorily explained, then, the value of such investments and money or the value of articles not recorded in the books of account or the unexplained expenditure may be deemed to be the income of such assessee. It follows that the moment a satisfactory explanation is given about such nature and source by the assessee, then the source would stand disclosed and will, therefore, be known and the income would be treated under the appropriate head of income for assessment as per the provisions of the Act. However, when these provisions apply because no source is disclosed at all on the basis of which the income can be classified under one of the heads of income under s. 14 of the Act, it would not be possible to classify such deemed income under any of these heads including income from 'other sources' which have to be sources known or explained. When the income cannot be so classified under any one of the heads of income under s. 14, it follows that the question of giving any deductions under the provisions which correspond to such heads of income will not arise. If it is possible to peg the income under any one of those heads by virtue of a satisfactory explanation being given, then these provisions of ss. 69, 69A, 69B and 69C will not apply, in which event, the provisions regarding deductions etc. applicable to the relevant head of income under which such income falls will automatically be attracted.
The opening words of s. 14 'save as otherwise provided by this Act' clearly leave scope for 'deemed income' of the nature covered under the scheme of ss. 69, 69A, 69B and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from 'other sources' because the provisions of ss. 69, 69A, 69B and 69C treat unexplained investments, unexplained money, bullion etc. and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Therefore, in these cases, the source not being known, such deemed income will not fall even under the head 'Income from other sources'. Therefore, the corresponding deductions which are applicable to the incomes under any of these various heads, will not be attracted in the case of deemed incomes which are covered under the provisions of ss. 69, 69A, 69B and 69C of the Act in view of the scheme of those provisions."
7. The said decision fully applies to the facts of the present case.
8. In S.K. Srigiri & Bros. case (supra) before the Karnataka High Court, a finding of fact was recorded that the assessee received additional income from business only and, therefore, it was entitled to deduction on account of remuneration paid to the partners. Such is not the situation here.
9. In view of the above, no substantial question of law arises in this appeal. The appeal is accordingly dismissed.
IT : Where appeal of petitioner against assessment order along with stay application was pending, no coercive action could be taken against petitioner for enforcing recovery till decision on application
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[2013] 35 taxmann.com 455 (Madhya Pradesh)
HIGH COURT OF MADHYA PRADESH
H.K. Kalchuri Education Trust
v.
Assistant Commissioner of Income-tax, 2(1)*
KRISHN KUMAR LAHOTI AND M.A. SIDDIQUI, JJ.
W.P. NOS. 19627, 19634, 20018, 20024 AND 20028 OF 2012
FEBRUARY 14, 2013
Section 222 of the Income-tax Act, 1961 - Collection and recovery of tax - Certificates proceeding [General] - Assessment years 2004-05 to 2010-11 - Case of petitioner was that in view of findings recorded by Tribunal, petitioner was not liable for payment of income tax but Assessing Officer had imposed income tax - Against order passed by Assessing Officer, appeal against assessment order alongwith stay application was pending, therefore, petitioner had prayed High Court for a direction to Assessing Officer not to enforce order of imposing tax till decision of Commissioner (Appeals) - Division Bench of High Court in Satya Narayan Sharma v. Asstt. CIT [W.P. No. 17145 of 2012, dated 8-11-2012], has inter alia directed that till decision on application is pending no coercive action shall be taken against petitioner for recovery - Whether as question raised by petitioner was identical, petition was to be disposed of in view of directions issued by Division Bench in case of Satya Narayan Sharma (supra) - Held, yes [Para 5] [In favour of assessee]
FACTS
| ■ | The case of the petitioner was that the petitioner by an order passed by the Tribunal was found entitled for exemption from payment of income-tax but the Assessing Officer had again imposed income-tax for the assessment years in question. Against the order passed by the Assessing Officer, an appeal along with the stay application was pending. So, the petitioner had prayed for a direction to the Assessing Officer not to enforce the order of imposing tax till the decision by the Commissioner (Appeals). |
HELD
| ■ | A division bench of High Court in Satya Narayan Sharma v. Asstt. CIT [W.P. No. 17145 of 2012, dated 8-11-2012], has disposed of the petition with the following directions :- |
| - | The Petitioner to file an application in all the appeals for hearing on stay application and also for early hearing of the appeal. If any such prayer is made by the appellant within a period of two weeks before respondent, respondent shall consider and decide the application for stay expeditiously as far as possible within a period of 30 days from the date of such applications. | |
| - | So far as the appeals are concerned, the respondent shall make an endeavour to decide the aforesaid appeals expeditiously as far as possible within a period of four months. So far as the recovery against the petitioner is concerned. It is directed that for a period of one month or till the decision on the applications, whichever is later, no coercive action shall be taken against the petitioner for enforcing recovery in question. |
| ■ | As at present, the question raised by the petitioner is identical, the petition is disposed of in view of the directions issued by the Division Bench inSatya Narayan Sharma (supra). | |
| ■ | However, liberty is granted to the petitioner that in case application for stay is rejected or some order is passed against the petitioner, petitioner shall be entitled to assail the aforesaid order before an appropriate forum. [Para 5] | |
| ■ | With the aforesaid directions, the petition is finally disposed of. [Para 6] |
CASE REVIEW
Satya Narayan Sharma v. Asstt. CIT [W.P. No. 17145 of 2012, dated 8-11-2012] followed.
CASES REFERRED TO
Satya Narayan Sharma v. Asstt. CIT [W.P. No. 17145 of 2012, dated 8-11-2012] (para 3).
Sumit Nema for the Petitioner. Sanjay Lal for the Respondent.
ORDER
1. As identical question is involved in W.P.No.19634/2012- Hai Hay Kshetriya Education Society v. Asstt. CIT W.P.No.19627/2012- H.K. Kalchuri Education Trust v. Asstt. CIT W.P.No.20018/2012- Jai Narayan Shiksha Samiti v. Asstt. CIT W.P.No.20024/2012-
Petitioner has sought for following reliefs:-
| "1. | To quash the order dated 8.11.2012 (P/4) passed by the respondent no.1. | |
| 2. | To direct the respondent no.3 to decide the appeals of the petitioner for the assessment years 2004-05, 2005-06, 2006-07, 2007-08, 2008-09, 2009-10 & 2010-11 expeditiously and judicially. | |
| 3. | To issue any other writ, order or direction as this Hon'ble Court deems just and fair in the facts and circumstances of the case to give relief to the petitioner." |
2. The case of the petitioner is that the petitioner, by an order passed by the ITAT before the assessment years in question, was found entitled for exemption from payment of income tax but the assessing officer has again imposed income tax from assessment years 2004-05 to 2010-11, which orders were assailed by the petitioner before the CIT (A). It is submitted that in view of the findings recorded by the ITAT earlier, petitioner is not liable for payment of income tax but inspite of this, a liability has been imposed upon the petitioner. It is submitted that against the order passed by the assessing officer, an appeal alongwith stay application is pending, but the stay application has not been decided till date, so petitioner has prayed to this Court for a direction to the assessing officer not to enforce the order of imposing tax till the decision by the CIT(A) in appeal.
3. Shri Sanjay Lal, learned counsel for respondents submits that an identical question has been decided by a Division Bench of this Court in Satya Narayan Sharma v. Asstt. CIT W.P. No. 17145 of 2012 decided on 8.11.2012, and similar directions may be issued. It is further submitted by him that in this case, there is an additional feature which deserves to be brought on record that after the earlier order passed by the ITAT there were search and seizure in the premises of the petitioner and because of this, the assessing officer had passed the aforesaid order, so the petitioner is not entitled for exemption and is liable to payment of income tax. Aforesaid contention is refuted by Shri Nema who has submitted that the order of the ITAT was after the search and seizure. Be that it may be, we are not deciding aforesaid question as the matter is sub-judice before the CIT(A) who has to hear and decide the matter in accordance with law and being an expert of the subject is in a position to consider and decide the controversy between the parties.
4. In Satya Narayan Sharma (supra), a Division Bench of this Court considering the controversy held thus:-
"Petitioner has sought following reliefs:
| 1. | To direct the respondent No.1 & 3 to decide the stay applications of the petitioner. | |
| 2. | To direct respondent No.3 to hear the appeals of the petitioner for the AY 2004-05 to 2010-11 expeditiously. | |
| 3. | To issue any other writ, order or direction as this Hon. Court deems just and fair in the facts and circumstances of the case to give relief to the petitioner. |
Learned counsel for the petitioner submitted that the petitioner's appeal along with stay applications for the assessment year 2004-05 to 2010-11 are pending before respondent No. 3 who may be directed to decide the appeal expeditiously.
Learned counsel for the appellant also submitted that in these appeals prayer of the petitioner for staying recovery proceedings are also pending but these applications have not been considered till date. It is submitted by Shri Agrawal that respondent No. 3 may be directed to hear and decide the application for stay and appeal also expeditiously. Reliance is placed to a judgment of Division Bench in W.P. 3488/11.
Shri Lal, learned counsel for the respondent submitted that so far as appeals are concerned, these appeals involves block assessment for 7 assessment years which would take sufficient time as the assessments are to be made as per the search and seizure. It is also submitted by him that the application for stay was not filed alongwith the appeal in the month of January,2012 but they have been filed some where in the month of May,2012 so a reasonable time be allowed to respondent No.3 to consider and decide the aforesaid application and appeal.
Considering the fact that the stay application is pending with respondent No. 3 for consideration, we find it appropriate to dispose of this petition with certain directions.
Petitioner to file an application in all the appeals for hearing on stay application and also for early hearing of the appeal. If any such prayer is made by the appellant within a period of two weeks before respondent No. 3, respondent No. 3 shall consider and decide the application for stay expeditiously as far as possible within a period of 30 days from the date of such applications.
So far as the appeals are concerned, the respondent No. 3 shall make an endeavour to decide the aforesaid appeals expeditiously as far as possible within a period of four months, as stated by Shri Lal. So far as the recovery against the petitioner is concerned. It is directed that for a period of one month or till the decision on the applications, whichever is later, no coercive action shall be taken against the petitioner for enforcing recovery in question.
With the aforesaid directions, this application is disposed of."
5. As at present, we find that the question raised by the petitioners is identical, so we dispose of these petitions in view of the directions issued by the Division Bench in Satya Narayan Sharma case (supra). Aforesaid directions shall be applicable in all the petitions as far as they are applicable. However, liberty is granted to the petitioners that in case application for stay is rejected or some order is passed against the petitioners, petitioners shall be entitled to assail the aforesaid order before an appropriate forum.
6. With the aforesaid directions, these petitions are finally disposed of, with no order as to costs.
2013-TIOL-688-ITAT-DEL
IN THE INCOME TAX APPELLATE TRIBUNAL
BENCHES 'B' NEW DELHI
BENCHES 'B' NEW DELHI
ITA No.4349/Del/2011
Assessment Year: 2005-06
Assessment Year: 2005-06
DEPUTY COMMISSIONER OF INCOME TAX
CIRCLE-10(1), NEW DELHI
CIRCLE-10(1), NEW DELHI
Vs
DLF UTILITIES LTD
SUCCESSOR OF DLF SERVICES LTD
9th FLOOR, DLF CENTRE
SANSAD MARG, NEW DELHI
PAN NO:AABCD8494M
SUCCESSOR OF DLF SERVICES LTD
9th FLOOR, DLF CENTRE
SANSAD MARG, NEW DELHI
PAN NO:AABCD8494M
A D Jain, JM and J Sudhakar Reddy, AM
Dated: July 19, 2013
Appellant Rep by: Ms Shumana Sen, CIT-DR
Respondents Rep by: Shri Pradeep Dinodia, CA & Shri R K Kapoor, CA
Respondents Rep by: Shri Pradeep Dinodia, CA & Shri R K Kapoor, CA
Income Tax Act, 1961 - Sections 115JB, 143(3) & 147 - change of opinion - reassessment.
Whether the subsequent reversal of the legal position by the Supreme Court authorizes the Revenue to reopen the assessment which stood closed on the basis of the law, as it stood at the relevant time.
The assessee company is engaged in the business of real estate, development and providing services relating to real estate and it had filed return of income declaring 'nil' income under the regular provisions and profit under section 115 JB. The AO accepted the profit under section 115JB. However, the AO reopened assessment under section 147 and the provision for doubtful debts was added to the profit under section 115JB.
The First Appellate Authority held that that the reopening was bad in law for the reason that the reopening was done on a change of opinion which was not permissible in law and the reopening was also not possible merely by reason of a retrospective amendment to Sec.115 JB.
On appeal by the Revenue, the ITAT held that,
++ the AO had examined the computation of book profits under section 115 JB and on the date of completion of original assessment the legal position was in favour of the assessee as regards adjustment of provision for bad debts. Hence it can be safely presumed that the AO had not suggested any adjustment under section 115 JB on account of diminution in the value of an asset i.e. provision for bad debts;
++ the assessment order was originally passed under section 143(3) on 31.12.2007. By that date the Delhi High Court in the case of CIT Vs. Eicher Ltd. has held the issue in favour of the assessee. The judgment of the High Court was delivered on 29.08.2006. In view of the binding judgement of the jurisdictional High Court the AO, presumably has not made an adjustment under section115 JB on the issue of provision for doubtful debts. Thus we are convinced with the order of the CIT(A) that the reopening was on a mere change of opinion and hence is bad in law;
++ the Supreme Court in the case of DCIT and others Vs. Simplex Concrete Piles (India Ltd.)held that:- “the subsequent reversal of the legal position by the judgment of Supreme Court does not authorize the department to reopen the assessment which stood closed on the basis of the law, as it stood at the relevant time.”;
++ the Court was considering the case where, at the relevant time when the assessment order got completed, the law as declared by the jurisdictional High Court was in favour of the assessee. This judgement was subsequently reversed by the Supreme Court. Such reversal of law by the Supreme Court, was held as that, which does not authorize the AO to reopen the assessments. This proposition is applicable to the facts of the case.
Revenue's appeal dismissed
Cases followed:
JCIT vs. Usha Martine Industries Ltd. (2006-TIOL-256-ITAT-KOL-
CIT Vs. M/s. Eicher Ltd. (2006-TIOL-315-HC-DEL-IT)
CIT vs. HCL Comnet Systems and Services Ltd. (2008-TIOL-182-SC-IT)
DCIT and others Vs. Simplex Concrete Piles (India Ltd.) (2012) 254 CTR (SC) 221
Cases distinguished:
Bawa Abhai Singh vs. CIT, 117 Taxman 12
Rakesh Aggarwal vs. ACIT, 87 Taxman 306
ORDER
Per: J Sudhakar Reddy:
This is an appeal filed by the Revenue directed against the order of the Ld.CIT(A)-XIII, New Delhi dated 08.05.2012 pertaining to the Assessment Year 2005-06.
2. Facts in brief:- The assessee company is engaged in the business of real estate, development and providing services relating to real estate. In this case the return of income was filed on 31.10.2005 declaring ‘Nil’ income. Under the regular provisions of the Income Tax Act, 1961 and Rs.3,42,10,351/- u/s 115 JB of the Act. The original assessment u/s 143(3) was made on 31.12.2007 and the profit declared u/s 115JB of Rs.3,42,10,351/- was accepted. Thereafter, the assessment was reopened u/s 147 of the Act on the ground that during the course of original assessment, the Assessing Officer did not add back the provision for doubtful debts of Rs.28,39,451/- while computing the profit u/s 115JB of the Act. Therefore, notice u/s 148 was issued on 19.01.2010. The reassessment was passed u/s 143(3) r.w.s. 147 on 28.12.2007 computing the book profit at Rs.3,70,40,800/-, wherein the provision for doubtful debts was added to the book profit u/s 115JB.
3. As stated the original assessment was completed u/s.143(3) on 31.12.2007. During the course of original assessment the Ld.AO sought answers for the following questions from the assessee.
“Questionnaire dt. 10.12.2007 issued by the Assessing Officer 10(2), New Delhi:Q.No:20:- File copies of reports of actuarial analysis of provision of gratuity and leave encashment as given at Note 7 on accounting. Why the amount of Rs.54,39,526/- minus from 115JB calculation?Q.No.21: As per schedule 23 item (d) – excess of Rs.2.72 crore has been taken to reserve that has been generated on transfer of capital of transferor company. Give reason why said amount was not added back u/s 115JB?In response the above queries, the appellant filed its reply dt. 20.12.2007. The replies filed for query no.20 and 21 were as under:Answer to query no.20: Details of provision for gratuity and leave encashment stand already filed vide item no.7 of our letter dt. 20.11.2007. As regards the amount of Rs.54,39,526/- reduced in the calculation of book profit u/s 115JB of the Act, it is submitted that the same has been reduced as per clause (iii) of s.115JB which is reproduced below for your ready reference:-(iii) the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account.Answer to query no.21:- The assessee has prepared its profit and loss account for the year under assessment in accordance with the provisions of Part II and Part VI to the Companies Act, 1956 and Rs. 2.72 crores taken to the Reserve a/c as per Schedule 23 of item (d) of the Balance Sheet has not been transferred from the profit and loss account. Therefore, the question of adding back of the reserve u/s 115JB does not arise.”
4. The income returned by the assessee was accepted thereafter. The assessment was reopened on the following reasons:-
“Proceedings u/s 147 of the Income Tax Act, 1961 were initiated vide notice dated 19.01.2010 by the ITO, Ward 10(2), New Delhi as per following reasons:-“The assessment in the case of M/s DLF Services P.Ltd. for the Assessment Year 2005-06 was completed u/s 143(3) of the Act on 31.12.2007 determining ‘Nil’ income after setting off b/f losses/depreciation. Under normal provisions and at an income of Rs. 3,42,10,351/- u/s 115JB of the Act. It has been noticed that the assessee company had debited Rs.28,39,451/- to the profit and loss account as provision for doubtful debts, which was added back in the computation under normal provision. But while calculating the book profit u/s 115JB the same provision was not added back.”
5. The assessee raised objections. The A.O. disputes the objections by holding as follows:-
a. This is not a case where the case is reopened on the basis of retrospective amendment to the act. Prior to the amendment explanation I (c) of Sec. 115 JB of the IT act clearly provide that the net profit should be increased by the provision made for any unascertained liability.b. This is not a case where the reopening is on a change of opinion as the Ld.A.O. has not formed any opinion at the time of original assessment.c. That the claim of the assessee that provision for bad debts is an ascertained liability is incorrect, as this is just a contingent liability.
6. The assessee carried the matter in appeal. The First Appellate Authority upheld the contentions of the assessee that the reopening is bad in law for the reason that :-
a. The reopening was done on a change of opinion which is not permissible in law ;b. The reopening is also not possible merely by reason of a retrospective amendment to Sec.115 JB of IT Act.
7. Aggrieved the revenue is in appeal before us on the following grounds:-
1. Whether the Ld.Commissioner of Income Tax (Appeals) under the facts and circumstances of the case and in law was justified in quashing the reopening of the assessment u/s 147 of the Act when the Jurisdictional High Court in the case of Bawa Abhai Singh vs. CIT, 117 Taxman 12 and Rakesh Aggarwal vs. ACIT, 87 Taxman 306, has also held that under the amended provisions of s.147 the power to reopen is much wider and can be exercised even after the assessee has disclosed fully and truly all material facts.2. The appellant craves leave, to add, alter or amend any ground of appeal raised above at the time of hearing.”
8. We have heard Ms.Shumana Sen, the Ld.Sr.D.R. on behalf of the Revenue and Mr. Pradeep Dinodia, the Ld.Counsel on behalf of the assessee.
9. On a careful consideration of the facts and circumstances of the case and on perusal of the papers on record and orders of the authorities below, case laws cited, we hold as follows.
10. A perusal of the questionnaire issued by the AO to the assessee and the replies of the assessee demonstrate that the AO has examined the computation of book profits u/s. 115 JB of the Act. As on the date of completion of original assessment the legal position was in favour of the assessee as regards adjustment of provision for bad debts. Hence it can be safely presumed that the Assessing Officer had not suggested any adjustment to book profits u/s 115 JB on account of diminution in the value of an asset i.e. provision for bad debts.
10.1. The Special Bench of the ITAT (Calcutta) in the case of JCIT vs. Usha Martine Industries Ltd. (2007) 105 TTJ 543 (SB) = (2006-TIOL-256-ITAT-
10.2. The assessment order was originally passed u/s. 143(3) on 31.12.2007. By that date the Hon'ble Delhi High Court in the case of CIT Vs. Eichir Ltd. (supra) has held the issue in favour of the assessee. The judgment of the High Court was delivered on 29.08.2006.
11. In view of the binding judgement of the jurisdictional High Court the AO, presumably has not made an adjustment u/s. 115 JB of the Act on the issue of provision for doubtful debts. Thus we are convinced with the order of the Ld.CIT(A) that the reopening was on a mere change of opinion and hence is bad in law.
12. The Hon'ble Supreme Court in the case of DCIT and others Vs. Simplex Concrete Piles (India Ltd.) (2012) 254 CTR (SC) 221 at para 3 held as follows:-
“the subsequent reversal of the legal position by the judgment of Hon'ble Supreme Court does not authorize the department to reopen the assessement which stood closed on the basis of the law, as it stood at the relevant time.”
13. The Hon'ble Court was considering the case where, at the relevant time when the assesement order got completed, the law as declared by the jurisdictional High Court was in favour of the assesse. This judgement was subsequently reversed by the Hon'ble Supreme Court. Such reversal of law by the Hon'ble Supreme Court, was held as that which does not authorize the AO to reopen the assessments. This proposition is applicable to the facts of the case.
14. Thus, for all these reasons we uphold the order of the First Appellate Authority and dismiss this appeal by the revenue.
15. In the result the appeal of the Revenue is dismissed.
(Order pronounced in the Open Court on 19.7.2013.)
The Hon,ble Rajasthan High court in case of JAI STEEL(India) v/s ACIT,(2013) 88 DTR 1
"IN AN ASSESSMENT UNDER S.153A , IT IS NOT OPEN TO THE ASSESSEE TO SEEK DEDUCTION OR CLAIM RELIEF NOT CLAIMED BY IT IN THE ORGINIAL ASSESSMENT WHICH ALREADY STANDS COMPLETED BEFORE THE DATE OF INITIATION OF THE SEARCH ORMAKING OF REQUISTION.
[2013] 32 taxmann.com 133 (Chennai - Trib.)
IN THE ITAT CHENNAI BENCH 'A'
Assistant Commissioner of Income-tax, Central Circle -1(3), Chennai
v.
V.N. Devadoss*
DR. O.K. NARAYANAN, VICE-PRESIDENT
AND VIKAS AWASTHY, JUDICIAL MEMBER
AND VIKAS AWASTHY, JUDICIAL MEMBER
IT APPEAL NOS. 1219 TO 1223 (MDS.) OF 2012
[ASSESSMENT YEARS 2008-09 TO 2010-11]
[ASSESSMENT YEARS 2008-09 TO 2010-11]
FEBRUARY 4, 2013
I. Section 80-IB, read with sections 80AC, 132, 139 and 153A, of the Income-tax Act, 1961 - Deductions - Profits and gains from industrial undertakings other than infrastructure development undertakings [Housing projects] - Assessment years 2008-09 to 2010-11 - Whether to avail benefit of deduction under section 80-IB(10) it is necessary that assessee must file return of income before due date prescribed under section 139(1) - Held, yes - Whether a return filed in pursuance of a notice issued under section 153A is as good as a return filed under section 139 and more particularly under section 139(1) - Held, yes - Whether deduction claimed under section 80-IB(10) in a return filed under section 153A can be denied on ground that claim was not made earlier in a return filed under section 139(1) - Held, no [Paras 26 to 42] [In favour of assessee]
Regards,
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