TMI Blog2011 (1) TMI 1186X X X X Extracts X X X X X X X X Extracts X X X X ..... d it would be a case of mere change of opinion or this aspect was not considered at all and, therefore provided proper ground for reopening the assessment, appeals stand disposed of - ITA NO. 464 of 2010 ITA NO. 465 of 2010 ITA NO. 473 of 2010 - - - Dated:- 14-1-2011 - MR. JUSTICE A.K. SIKRI, MR. JUSTICE SURESH KAIT, JJ. For APPELLANT: Mr. M.S. Syali, Sr. Advocate with Ms. Mahua Kalra, Mr. Mayank Nagi, Ms. Husnal Syali and Mr. Sumit K. Singh, Advocates. For RESPONDENT: Ms. Prem Lata Bansal, Sr. Standing Counsel. A.K. SIKRI, J 1. Appellant in all the three appeals is Central Warehousing Corporation (hereinafter referred as the assessee‟). All these three appeals raise common questions of law. Three appeals are because of the reason that these common questions arise in three different assessment years namely, 1995-96, 1996-97, 1997-98. However, the Tribunal has decided these appeals by common order dated 31st March, 2008. Therefore, it is this decision of the Tribunal which is under challenge in all these three appeals and that was the reason to hear these three appeals together which are being decided by this common judgment. 2. Before we take note o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ite of the appellant/assessee submitting vide its letter dated 7th March, 2002 the list of ICD/CFS and date of its operation which clearly mentioned as September, 1982. The Assessing Officer further held that since the appellant is incorporated and constituted under Warehousing Corporations Act, 1962 and as per the provision of Section 10 (29) of the Act read with Section 11B of the Warehousing Corporations Act, 1962, the appellant income is exempted only to the extent it is derived from letting of godowns of warehousing for storage, processing or facilitating the marketing of agricultural products and notified commodities, the activities of running CFS/ICD do not constitute statutory functions under the Warehousing Act of 1962. The profit generated therefrom does not qualify for exemption under Section 10 (29) of the Act. The Assessing Officer also did not allow exemption under Section 10 (29) of the Act on the receipts of interest on fixed deposit, agency commission and miscellaneous receipts. The Assessing Officer also alleged non-cooperation in bifurcating income exempt and not-exempt as such application of Section 14A could not be applied. The entire exemption was disallowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... housing Corporation 237 ITR 589. The CIT (A) held as under:- Coming to the first ground relating to the validity of the reopening of assessment proceedings; it is pertinent that the appellant has vehemently contended that the AO erred in reopening the assessment U/s 148 because reassessment was not possible beyond the time limit of 4 years. The appellant further contended that all the relevant material to enable the AO to determine the income was already forming part of the assessment record and there had been no failure on the part of the appellant to disclose fully and truly all the material facts necessary for the assessment. The crux of the matter is that the provision of Section 10 (29) have been subjected to interpretation by the Hon‟ble Supreme Court in the case of Orissa State Warehousing Corporation Vs. CIT in 237 ITR 589, as per which it has been held that the entire income of the Corporation cannot be exempted as income derived from the letting out of godowns only qualifies for exemption U/s 10 (29) OF THE INCOME-TAX ACT, 1961. On the basis of the decision of the Hon‟ble Supreme Court in the case of Orissa State Warehousing Corporation, income in the natur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration (supra) is the first decision of the Supreme Court laying down the law that the exemption of income of a Warehousing Corporation is exempt only in respect of letting out of godowns for specified purposes and the Apex Court has distinguished its decision in the case of UOI Vs. UP State Warehousing Corporation (supra) on facts. The Tribunal thereafter held as under:- It is a settled law that the decision declared by the Apex Court is applicable from the date when a particular statute came into existence. Therefore, decision of apex Court laying down a legal proposition will be a material on record on the basis of which an assessment can be reopened or rectified under Section 154 of the Act provided the relevant conditions specified relating thereto are satisfied. In other words for reopening of assessment in the cases falling in the main provisions of Section 147, the assessments can be reopened within the period of four years from the end of assessment year in which the income was first assessable. In the cases falling in proviso to Section 147 i.e. beyond the period of four years, there should be failure on the part of assessee to disclose fully and truly all material fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s year was also processed under Section 143 (1) (a) of the Act under similar circumstances and for same reasons assessment for this year was reopened and by common order of CIT (A) as well as ITAT , the validity of notice of reopening the assessment has been upheld. Therefore, the question of law which arises for this year is also the same. 16. Mr. Syali, learned Senior Counsel appearing for the assessee submitted that notice under Section 147 read with Section 148 of the Act was unsustainable in law. For this purpose, he referred to the Reasons to Believe‟ recorded by the Assessing Officer as per which reasons for reopening the assessment was on the premise that Container Freight Station of the assessee is a separate business. He argued that this very fact was specifically discussed in the original assessment and after due application of mind, the Assessing Officer in the original assessment order had come to the conclusion that the assessee was entitled to exemption under Section 10 (29) of the Act. He argued that the assessee has as many as eight activities in respect of the Container Freight Station business but the Assessing Officer had granted exemption under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he other. According to Mr. Mitra the transactions relating to the shares could have been easily separated from the other business of the company and therefore there is no inter-connection; equally there is no inter-lacing because the share transaction business does not dovetail itself into the other business of the assessee company. Further there is neither inter-dependence or unity between the two businesses. The concepts of inter-connection and inter-lacing, inter-dependence and unity are not free of ambiguity. But this Court has laid down certain objective tests for finding out the existence of inter-connection, inter-lacing interdependence and unity between two or more businesses. In Commissioner of Income-tax, Madras v. Prithvi Insurance Co. Ltd. [1967] 63 ITR 632 this Court ruled that inter-connection, inter-lacing, inter-dependence and unity were furnished by the existence of common management, common business organisation, common administration, common fund and a common place of business. This conclusion was reiterated by this very bench in Produce Exchange Corporation Ltd. v. Commissioner of Income-tax, (Central Calcutta), [1970] 77 ITR 739. Therein the assessee company ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the part of the Assesses to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profits or gains chargeable to income-tax has escaped assessment. He may start reassessment proceedings either because some fresh facts had come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information., Since the belief is that of the Income-tax Officer, the sufficiency of reasons for forming the belief is not for the court to judge but it is open to an asses- see to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extent, the court may look into the conclusion arrived at by the Income-tax Officer and examine whether there was any material available on the record fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Apart from relying upon the reasons given by the CIT (A) as well as ITAT in conforming the authority of the notice under Section 147 read with Section 148 of the Act, she emphasized that while examining validity of proceeding u/s 147 of the Act, it is only to be seen by the Hon‟ble court as to whether there was any material before the AO to form a belief based on reasons that any income chargeable to tax in the case of assessee had escaped assessment. Since the action had been taken by the AO within 04 years, it is not necessary to see as to whether income chargeable to tax had escaped assessment due to failure on the part of assessment to make a return or to disclose fully and truly all material facts necessary for his assessment. She also argued that in such cases the court was not supposed to go into the sufficiency of grounds as held by the Apex Court in the case of ITO Vs. Lakhmani Mewal Dass, 103 ITR 437:- The grounds or reasons which lead to the formation of the belief contemplated by Section 147(a) of the Act must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses incurred by the assessee cannot be apportioned between the taxable and non-taxable income.(ii) The Supreme Court in the case of Orissa State Warehousing Corporation Vs. CIT, 237 ITR 589 have held that as per the provisions of Section 10 (29), exemption is available only to that part of income which is derived from letting of godowns or the warehouses, if the income is derived from any other sources then it would not possibly come within the ambit of Section 10 (29). Since the assessee was having more than one business i.e. warehousing and Container Freight Station (CFS), the expenses are to be apportioned. Income from CFS, being the separate business cannot be said to be rental receipt from warehousing. Accordingly, in view of the judgment of Supreme Court, AO had reason to believe that income of assessee from CFS had escapement and that the entire expenses were allowed only against taxable income without apportioning the same between taxable and non-taxable receipts; hence he had issued notice u/s 148 of the Act. 22. Refuting the plea of the assessee predicated on change of opinion‟, Ms. Bansal submitted that CFS facility was started by the assessee only w.e.f. AY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect to apportion the expenses between the taxable and nontaxable receipts. Hence the entire expenditure claimed by the assessee I each of the years under consideration was deductible. It is now gathered that a substantial part of assessee‟s business is with regard to handling of Container Freight Stations at various ports in India. The assessee has wrongly shown the receipts from this business as part of receipt from warehousing in its accounts and claimed exemption u/s 10 (29) on the same. The Supreme Court in the case of Orissa State Warehousing Corpn. Vs. CIT and Rajasthan Warehousing Corpn. Vs. CIT (237 ITR 589, 1999) has clearly held as under:- Having due regard to the language used (in Section 10 (29) ), the question of exemption would arise pertaining to that part of the income only which arises or is derived from the letting of godown or the warehouses and for the purposes specified in Section 10 (29) of the IT Act . if income is derived from any other sources, then and in that even such an income cannot possibly come within the ambit of Section 10 (29). It is now clear that the assessee is having more than one business i.e. warehousing and Container Freight S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the Supreme Court in Orrisa Ware Housing (supra) wherein it was held that receipt not derived from Warehousing were taxable thereby implying that expenses were to be apportion between the taxable and non-taxable receipts, inasmuch as the assessee was having more than one business i.e. Warehousing Business and also Container Freight Stations. For this reason, the computation made by the assessee in the light of ITAT decision was incorrect. This has resulted in income from Container Freight Station escaping the assessment. 26. We may point out at this stage that as far as business of handling of container Freight Station is concerned, that was started by the assessee in the year 1985. This becomes clear from the report of the Board of Directors for the year 1984-85. Therefore, the Assessing Officer was right in observing that the ITAT orders in respect of assessment years 1976-77 and 1977-78 and 1979-80 which was made as the basis for seeking exemption was not proper. 27. We would also like to observe at this stage that judgment of the Court can be a valid basis for reassessment proceedings by issuing notice under Section 147 of the Act. This is so held in Shard Bhai (supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it must be proved that the income derived by an authority constituted for the marketing of commodities is income which is derived from the letting of godowns or warehouses for the purposes specified in Section 10(29), which are storage, processing or facilitating the marketing of commodities. If the letting of godowns or warehouses is for any other purpose, or if income is derived from any other source, then such income is not exempt under that clause. 26. Further reliance was placed on the decision of this Court in the case of Commissioner of Income Tax v. P.J. Chemicals [1994]210 ITR 830. In our view, however, reliance thereon is totally misplaced and the same has relevance whatsoever. The decision of the Allahabad High Court in the case of Commissioner of Income Tax v. U.P. State Warehousing Corporation [1992] 195 ITR 273 in a similar vein also does not advance the case of the assessee any further, as such we need not dilate much on this excepting however recording that the same does not lend any assistance to the submissions of assessee-appellants. Having due regard to the language used, question of exemption would arise pertaining to that part of the income only which arise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... using Corporation (supra) observed as under:- Further reliance was also placed on the decision of the Allahabad High Court I the case of U.P. State Warehousing Corporation V/s I.T.O. (1974) 94 ITR 129. We, however, are not in a position to obtain support in any form whatsoever by reason of the fact that the said matter pertains to the issue as to whether the assessee was an authority within the meaning of section 10 (29) of the Act and the High Court‟s judgment pertains to the same. This decision was, however, subject to scrutiny before this court as well and while it is true that there is concurrence of views but the same was, however, by reason of the factual status and not by reason of any interpretation of law as such, as would be evident from the observations in Union of India V/s U.P. State Warehousing Corporation (1991) 187 ITR 54, Suppl. 2 SCC 730 as below (page 56) The third test with regard to the exemptable income being in respect of letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities presents no difficulty because it stands undisputed that the income derived by the assessee was from letting of godowns or ware ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of Hon‟ble Supreme Court in the case of Orissa State Warehousing Corporation (supra) constituted information in the possession of assessing officer to initiate proceedings u/s 147 of the Act. Hon‟ble Calcutta High Court in the case of Indra Company Ltd. (supra) held that the department would have been perfectly justified in taking proceedings u/s 147 (b) within four years from the end of assessment year, as undoubtedly, the decision of Supreme Court was information within that clause eve where the assessments were made u/s 143 (3) of the Act. The existing provisions of Section 147 were substituted by the Direct Tax Laws (amendment) Act, 1987, w.e.f. 1.4.1989. Clause (a) of old provisions of Section 147corresponds to the existing proviso and clause (b) to the main provisions of Section 147. Therefore, the assessing officer was justified to initiate the reassessment proceedings for assessment years 1995-96 and 1996-97 on the basis of decision of Hon‟ble Supreme Court in the case of Orissa State Warehousing Corporation (supra) being fresh information in his possession. 33. The Tribunal has thus justified the action of the Assessing Officer only on the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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