TMI Blog2014 (8) TMI 235X X X X Extracts X X X X X X X X Extracts X X X X ..... . Reopening of assessment u/s 147 – Held that:- CIT(A) without appreciating the provisions of proviso to section 147 held that notice u/s 148 issued by the AO was barred by time - there was failure on the part of the assessee to disclose fully and truly all material facts which were necessary for his assessment, for that assessment year - The AO had validly initiated re-assessment proceedings by recording reasons and thereafter issuing notice u/s 147/148 of the Act which had been recorded within the prescribed period u/s 149(1)(b) of the Act and there being no case of change in opinion, the orders of the authorities below is upheld – Decided against Assessee. Actual payment of Pension out of pension fund – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the assessee is entitled to the claim of expenditure incurred on payments being made to the pensioners as revenue expenditure - the total contribution to the pension fund was ₹ 34,09,048/-out of ₹ 56,33,188/- were actually disbursed to the pensioners -the allowance of expenditure is restricted in the hands of the assessee to ₹ 34,09,048 – Decided partly in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. That on the facts and in the circumstances of the case the learned CIT(A) Panchkula has erred in law and facts in cancelling the order dated 31.03.2010 against the appeal of the assessee that the learned AO has erred in taking the appeal effect order dated 28.03.2006 against the rectification order 25.08.1988 being barred by limitation and be declared that the appeal effect order dated 28.03.2006 is actually against the order dated 16.07.1999 only and has no linkage with the order dated 25.08.1988 at this stage. 4. That on the facts and in the circumstances of the case the learned CIT (A) Panchkula has erred in law and facts in cancelling the order dated 31.03.2010 and not passing any order against the appeal of the assessee that the learned AO has charged interest amounting to ₹ 13,66,209/-under Section 234D wrongly when Section 234D has been inserted w.e.f. 01.06.2003 and is applicable from assessment year 2004-05. 5. The revenue has raised the following grounds of appeal : 1. Whether on the facts and the circumstances of the case, the Ld. CIT(A) has erred in cancelling the order u/s 250(6) dated 28.03.2006? 2. Whether on the facts and circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 25.08.1988. As the order dated 28.02.1996 was set aside by the CIT(A), a fresh assessment was made vide order dated 16.07.1999 and the income was determined with reference to the income determined vide order u/s 154 dated 25.08.1988. In all these orders, the amount debited in interest suspense account was treated as taxable on accrual basis. On an appeal by the appellant, the issue was restored to the Assessing Officer with specific directions by the Tribunal. 8. Further, while giving effect to the order of Tribunal in ITA No.711/Chandi/2000 dated 24.11.2004, the Assessing Officer vide order dated 28.03.2006 reduced the amount of interest of ₹ 65,64,213/- credited to suspense account from ₹ 1,22,58,760/- and added the amount of interest of ₹ 2,01,047/- chargeable to tax in view of directions of Tribunal. 9. The AO noted that though it is apparent from perusal of assessment records that vide order dated 25.08.1988, an amount of ₹ 27,45,447/- on account of interest credited to the suspense account was already reduced. But while giving appeal effect vide order dated 28.03.2006, the Assessing Officer did not consider this fact that out of the total a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal is dismissed. 13. The second issue raised before the Commissioner of Income Tax (Appeal) was against the quashing of the order passed under section 154 of the Act. The assessee had furnished written submissions before the Commissioner of Income Tax (Appeals) which are incorporated under para 7 at pages 6 7 of the appellate order. The Commissioner of Income Tax (Appeals) vide para 7.6 at pages 10 -11 after deliberating upon the sequence of events and the various orders passed against the assessee held that Therefore, on careful perusal of the facts and the history of the case, it is observed that the Assessing Officer while passing the order under section 143(3) dated 16.07.99 and while giving appeal effect vide order dated 28.03.2006 wrongly took the figure of assessed income at ₹ 1,22,58,760/-. Therefore, the order under section 250(6) dated 28.03.2006 needs to be corrected. In view of the above facts, the order under section 250(6) is cancelled with the directions to the Assessing Officer to pass it afresh keeping in view the above observations. Further directions were given by the Commissioner of Income Tax (Appeals) vide para 7.7 and 7.8 which are as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2011 filed no objection in this regard. As per the calculation sheet filed by the appellant during the course of appellate proceedings, the appellant is eligible for deduction u/s 36(1)(viii) amounting to ₹ 46,08,904/-as against ₹ 56,26,664/-allowed vide order dated 13.03.87. Thus, the appellant has admitted that deduction u/s 36(1)(viii) amounting to ₹ 10,17,760/-needs to be withdrawn. The Assessing Officer is therefore directed to recalculate the deduction u/s 36(1)(viii) and withdraw the excess deduction allowed to the appellant while passing the order u/s 250(6) of the I.T.Act. 16. Both the assessee and the revenue are in appeal against the order of Commissioner of Income Tax (Appeals) because of the reliefs/additions made by the Commissioner of Income Tax (Appeals). 17. The grievance of the revenue is two -fold i.e. against the cancellation of the order under section 250(6) dated 28.03.2006 and also against the cancellation of order passed under section 154 dated 31.3.2010. The assessee by way of revised grounds of appeal has raised the following issues : a) Rejection of the claim of the assessee that the order passed under section 154 was barre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is at S.No. 4. The perusal of the said details reflect that the assessment order dated 13.01.1983 was passed by the Assessing Officer determining the income as under : S.No. 4 Gross Income ₹ 140,66,6 60/- Deduction under section 36(1 ) ( viii) Rs . 40, 19,045/- Net Income Rs.100,47,620/- 21. The second document to be considered is at Sr.No. 7 i.e. the order passed under section 154 of the Act and also giving effect to order under section 263 154 of the Act, details of the income are as under: Sr. No. 7 Income as picked up From Sr. No. 4 ₹ 140,66,660/- Add : on account of the Interes tin suspense account ₹ 65,64,213/- Net Income Rs.206,30,873/- Deduct : under section 36(1)(viii) ₹ 56,26,664/- Net Income(Balance) Rs.150,04,210/- 22. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v) Deduct : Deduction u/s 36(1)(viii) (-) ₹ 56,26,644/- vi) Balance income Rs.122,58,762/- vii) Deduct : Interest in Suspense account (-) ₹ 65,64,213/- viii) Add : Interest as per directions of ITAT (+) ₹ 201,047/- ix) Balance income ₹ 58,95,596/- x) Add back the relief allowed to the assessee on account of interest income (taxed twice) ₹ 27,45,447/- xi) Balance income after Deduction under section 36(1)(vii) ₹ 86,41,047/- xii) Taxable income ₹ 86,41,047/- 26. The perusal of the seriatum orders passed against the assessee reflect that after making addition on account of interest in suspense account of ₹ 65,64,213/-, relief was allowed to the assessee on account of interest taxed earlier but not deducted out of suspense account of ₹ 27,45,447/-. Further deduction under section 36(1)(vii) of the Act of ₹ 56,26,644/- was allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er years. Therefore, in the interest of justice, it is felt that the appellant's claim in this regard needs to be examined afresh and necessary relief if admissible needs to be given. The AO is therefore directed to examine the claim of the appellant that the returned income included an income of ₹ 27,45,447/-which had already been taxed on accrual basis and take necessary action accordingly. The appellant is directed to make available all the details to the Assessing Officer with reference to his claim. As regards the order u/s 154 against which the appellant is in appeal, the same is also cancelled in view of the directions given above. 29. The CIT (Appeals) was of the view that the claim of the assessee that returned income included sum of ₹ 27,45,447/- had already been taxed on accrual basis and the Assessing Officer was directed to examine the claim of the assessee. In view thereof, the order passed under section 154 of the Act, against which the assessee was in appeal was also cancelled. 30. We have noted in the paras hereinabove that vide order passed under section 154 of the Act dated 31.3.2010 the income of the assessee has correctly been rectified an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w of our upholding the order passed under section 154 of the Act dated 31.3.2010, we proceed to decide the charging of interest under section 234D of the Act. 34. We find merit in the plea of the assessee that the said interest is chargeable w.e.f. assessment year 2004 -05 as the said provisions had been inserted w.e.f. 1.6.2003 and the said provisions are not applicable retrospectively. In view thereof, we allow the claim of the assessee with regard charging of interest under section 234D of the Act. However, charging of interest under section 234A of the Act is consequential in nature. ITA No.411 412/Chd/2011 :: Revenue s Appeal Assessment Years : 1982 -83 1983 -84 35. The issues raised in ITA Nos.411 412/Chd/2011 are identical to the issues raised by the Revenue in ITA No.353/Chd/2011 and our decision in ITA No.353/Chd/2011 shall apply mutatis mutandis to the issues raised in ITA Nos.411 412/Chd/2011. ITA No.416 417/Chd/2011 :: Assessee s Appeal Assessment Years : 1982 -83 1983 -84 36. The issues raised in ITA Nos.416 417/Chd/2011 are similar to the issue raised by the Revenue in ITA No.388/Chd/2011 and our decision in ITA No.388/Chd/2011 shall app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. 40. The issue raised in the present appeal is against the invoking of jurisdiction under section 147 of the Income Tax Act. 41. The brief facts of the case are that the original assessment in the case was completed vide order passed under section 143(3) of the Act dated 10.10.2005. Thereafter, reasons were recorded under section 147 of the Act for issue of notice under section 148 of the Act. The reasons recorded are reproduced at page 2 3 of the assessment order. In response to the said notice under section 148 of the Act, the assessee furnished return of income declaring net loss of ₹ 2.13 Cr. However, in the original return of income, the assessee had declared loss at ₹ 3.32 Cr. The assessee vide letter dated 27.05.2009 sought the reasons to believe for re-assessment and also sought certain information. The Assessing Officer vide letter dated 22.07.2010 supplied the copy of reasons for the issue of notice under section 148 of the Act, to the assessee. On the date of hearing next fixed, the counsel for the assessee insisted that the information as asked for vide letter dated 27.05.2009 be supplied to him. Vide the said communication, the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act was issued. Further, the Assessing Officer observed that the said notice under section 148 of the Act was issued during the time allowed under the provisions of section 149(1)(b) of the Income Tax Act, as per which, notice under section 148 of the Act could be issued within six years from the end of the assessment year if the income escaped is likely to amount to ₹ 1,00,000/- or more. In view of the abovesaid, the Assessing Officer observed that the re -assessment proceedings had been validly initiated. Further addition of sum of ₹ 3,89,000/- on account of forfeiture of shares was made holding the same to be revenue receipt. 42. The Commissioner of Income Tax (Appeals) dismissed the ground of appeal raised by the assessee as he approved the reasoning given by the Assessing Officer and also as per the Commissioner of Income Tax (Appeals), the issue of time limitation had become academic since the matter was already decided on merits by holding the said forfeiture of shares to be capital receipt. 43. The ld. AR for the assessee furnished the order of the Tribunal relating to assessment year 2002 -03 and pointed out that the issue was decided against the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... speaking order. 47. Further, there is no merit in another plea of the assessee that the said re -opening was bad in law as notice under section 148 had been issued after the expiry of four years from the end of the assessment year. Under the provisions of section 149(1)(b) of the Income Tax Act, notice could be issued within six years from the end of the assessment year wherein the income escaped is likely to exceed an amount of ₹ 1,00,000/- or more. In the facts of present case, the escapement of income was ₹ 389,000/- and hence the proceedings for re -assessment were validly initiated within the prescribed period. 48. The next issue raised by the assessee is that the said recording of reasons for re-assessment amounted to change of opinion. However, the Assessing Officer has given a finding that the assessee had declared the amount on account of forfeiture of shares under the head liability in the balance sheet and the Assessing Officer in the original assessment proceedings had not considered the same. In view thereof, it cannot be said that the re -assessment proceedings were a case of change of opinion and we find merit in the order of Assessing Officer in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Assessing Officer was barred by time. In the instant case, the case of the Revenue falls under the exception mentioned in the proviso to section 147 namely there was failure on the part of the assessee to disclose fully and truly all material facts which were necessary for his assessment, for that assessment year. In the reasons recorded for reopening of the assessment, the Assessing Officer categorically stated that I have reasons to believe that ₹ 2,25,87,000/-has escaped assessment on account of assessee's failure to disclose fully the material facts of his income as it was clubbed under the head 'liabilities' in the balance sheet. The case, therefore, be reopened within the meaning of section 147 of the Income Tax Act, 1961 . The CIT(A) has not given any findings to this effect that there was no failure on the part of the assessee to make a return u/s 139 or in response to a notice under sub section to section |42 or section 148 or to disclose fully and truly all material facts necessary for assessment for that assessment year. In absence of such findings, the CIT(A) was not justified in holding that the notice issued u/s 148 was barred by limitation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of the authorities below in upholding the addition regarding the amount contributed to pension fund maintained for the employees. The said contribution to pension fund was not allowed as deduction in the hands of the assessee as the pension fund was not recognized. The Tribunal in ITA Nos.56 369/Chd/2006 relating to assessment year 2002 -03 and 2003 -04 vide order dated 30.9.2008 vide paras 4 and 5 observed that the contribution made by the assessee to its PF scheme was allowable expenditure. However, as the pension scheme had been scrapped and the amount had been paid over to P.F. scheme,, the implication thereof was required to be viewed and as the said aspect has not been considered by either of the authorities below, the matter was remitted back to the Assessing Officer to examine the claim of the assessee afresh and to pass an order in accordance with law. 12. The claim of the assessee before the Assessing Officer in the second round of proceedings was that the said amount was first not contributed to a recognized pension scheme and was also not contributed to the P.F. scheme. However, the assessee during the year under consideration had made actual payments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... INTEREST CHARGED ON PENSION FUND FOR THE YEAR ENDED ON 31.3.2002. (AS PER ANNEXURE-IV) 15,04,795,00 8. TOTAL : 4,13,16,323.51 (B) 1. VARIOUS PAYMENTS MADE TO PENSIONERS DURING THE YEAR ENDED ON 31.3.2002 AS PER ANNEXURES-V, VI VII ATTACHED. 22,89,137,00 2. BANK BALANCE 3,000.00 3. BALANCE OUTSTANDING ,75,24,186.51 4. ICICI BONDS OF ₹ 1.15 CRORES 1,15,00,000.00 TOTAL 4,13,16,323.51 13. Similarly in assessment year 2003-04 the pension fund balance Sheet was filed on record and the status as on 31.3.2003 was as under: A) (RS.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion contribution for the assessment year 2002 -03 was ₹ 1,21,97,699/- and the payments made to the pensioners as per Annexures-V,VI and VII totaled to ₹ 22,89,137/-. In assessment year 2003 -04, the total contribution to the pension fund was ₹ 32,07,989/- and the payments made to the pensioners as per AnnexureV and VI totaled to ₹ 56,33,188/-. We find merit in the claim of the assessee that the expenditure incurred on payments being made to the pensioners is allowable in the hands of the assessee as revenue expenditure. In assessment year 2002-03 the total contribution to the pension fund during the year was ₹ 1.22 crores out of which ₹ 22,89,137/- were actually disbursed to the pensioners and hence the said expenditure of ₹ 22,89,137/- is allowable as an expenditure in the hands of the assessee for assessment year 2002 -03. In assessment year 2003-04 the total contribution to the pension fund was ₹ 32,07,989/-. However, the payments made to the pensioners totaled to ₹ 56,33,188/-. We restrict the allowance of the expenditure in the hands of the assessee to the extent of pension contribution i.e. ₹ 32,07,989/- in assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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