TMI Blog2016 (11) TMI 537X X X X Extracts X X X X X X X X Extracts X X X X ..... decisions, it is noted that there is no material brought on record by the Assessing Officer evidencing that the amount received by the assessee from the employers as well as from the workers are not voluntary. In the absence of any contrary material and it has been accepted that the contribution of workers are exempt under section 10(24). Similar is the situation in respect of amounts received from counterparty, being employer, in pursuant to settlement / resolution of disputes, as exempt under section 10(24) of the Act. Following the aforesaid order, we are of the view that the amounts so received by the assessee cannot be treated as business or profession, consequently should have been treated as exempt under section 10(24) of the Act as well as on the principle of mutuality being distributed among the members. - Decided in favour of assessee Addition on account of workers aid - addition made on the plea that the assessee could not produce vouchers, evidencing payments and merely filed affidavit of nine persons only - Held that:-So far as, non-production of vouchers is concerned, the assessee has filed affidavit from Shri N.R. Agrawal & Company, who audited the account of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1373/Mum/2013), order dated 25/02/2015 and also another decision of the Indore Bench of the Tribunal in the case of ACIT vs. Coordination Committee of SPM Unions Hosangabad (ITA No.239 to 246/Ind/2012) order dated 25/10/2012. This factual matrix was not controverted by ld.DR. 2.1. We have considered the rival submissions and perused the material available on record. Before coming to any conclusion, we are reproducing hereunder the relevant portion of the order dated 25/02/2015 in the case of M/s Engineering Mazdoor Sabha vs ACIT (case of a sister concern) for ready reference and analysis:- These seven appeals by the assessee out of which six appeals are arising from the assessment framed u/s 153A for the A.Y. 2005-06 to 2010-11 and one appeal for the A.Y. 2003-04 is arising from the reopening of assessment based on search seizure operation u/s 132. The facts as well as the issues raised in all these appeals are identical. Therefore, for the sake of convenience all these appeals are heard together and are being disposed off by this Composite order. For the A.Y. 2003-04, the assessee has raised following grounds:- 1 The Ld. CIT(Appeals) erred in confirming the additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income returned by the assessee. The Assessing Officer made the addition with respect to the donations/contribution received by the assessee from workers as well as from the employers and assessed the same as professional income of the assessee. 3. The assessee challenged the action of Assessing Officer before the CIT(A) including the validity of reopening u/s 147 of the Act. The CIT(A) though confirmed the action of Assessing Officer in assessing the contribution /donation received by the assessee from employers as income from professional services, however, the Assessing Officer was directed to allow the expenditure pertaining to earning the said income apart from deleting the addition on account of subscription received from the members. Thus the CIT(A) has granted the relief to the extent of subscription received by the assessee form the Members and further allowing the expenditure incurred for earning the income being contribution by the employers on account of settlement of disputes 4. Before us, the Ld. Authorized Representative of the assessee has submitted that the assessee is a trade union registered with the Government of Maharashtra. The assessee union was formed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t agreement. Thus he has submitted that the donation received by the assessee is only to achieve the object of the assessee s union and not for any profit motive activity. In support of his contention, he has relied upon the order of Indore Benches of this Tribunal in the case of Asstt. Commissioner of Income Tax Vs. Coordination Committee of SPM Unions Hoshangabad In ITA nos. 239 to 246/Ind/2012, and submitted that an identical issue has been considered by the Tribunal in the said case and it was held that the 15% incentive bonus payable to workers was contributed by them to the association/union to meet all sort of the expenditure in respect of the disputes between the workers and the employers, therefore, there was clear concept of mutuality. The Ld. Authorized Representative has submitted that in the case of the assessee the constitution provides that on dissolution excess fund to be paid to the member workers. He has further submitted that the amounts are paid to the workers every year under the head worker s bonus/compensation. Therefore, the excess fund is paid to the workers which means that the contribution made by the workers is again going to the workers after meeting th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The payment is contractual payment as per the settlement agreement and not voluntary donation, therefore, it is in the nature of consideration received for rendering the professional services to the corporate entities which has been claimed as voluntary contribution. He has relied upon the order of Assessing Officer and CIT(A). The Ld. DR has further submitted that principle of mutuality is not applicable in the case of the assessee. He has further submitted that the decisions relied upon by the assessee are not applicable in the facts of the present case. The assessee has not produced any record In support of the expenditure claimed. 6. We have considered the rival submissions as well as relevant material on record. There is no dispute that during the search seizure operation, the department has not recorded even a statement or seized any document from the place of the assessee. Thus it is clear that neither any incriminating record nor any information was gathered by the department as a result of search seizure action in the case of the assessee. Once there is no document either seized or found and even no statement was recorded during the search proceedings then the addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the pre-dominant object of the activity of the assessee is to arrive at a settlement of disputes between the workers and the management in the interest and welfare of the workers and not to earn any income or profit then the contribution received from the employers on account of the settlement between the workers and the employers cannot be said to be the business/professional or occupational income of the assessee. Therefore, the said amount of contribution received from the employers at the most would be the income of the assessee as income from other sources and cannot be regarded as business income and accordingly exempt u/s 10(24) of the Income Tax Act. Apart from the contribution received by the assessee from workers, the fund received by the assessee from employers is otherwise for the purpose of achieving the objects being a welfare body of the workers and excess fund if any after meeting out the expenses incurred on account of activity performed by the assessee, are refunded to the members as bonus then the said consideration received on account of settlement cannot be treated as business income earned by the assessee. An identical issue was considered by the Indore Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 40a(ia) of the Act. 7. We find that in the case of the assessee the amount received is as per the settlement agreement which was signed by all the parties, therefore, there is no material or any fact brought on record by the Assessing Officer to indicate that the amount received by the assessee from workers as well as from the employers are not voluntary but under coercion or force. If the Assessing Officer doubted the voluntary contribution made by the workers and employers then he could have conducted a proper enquiry. In the absence of any contrary fact or evidence found during the search or gathered during the assessment proceedings, the allegation of the authorities below are merely based on assumptions and not on any substance or material. On the contrary the assessee has produced the confirmation letters from the employers who paid the contribution as well as from the workers in whose cases the matters/disputes were settled through the assessee and the contribution was made as per the settlement agreement between the parties. Therefore, the assessee has produced the relevant evidence in support of its claim that this is a voluntary contribution. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest u/s. 234B of the Act. Since the levy of interest u/s 234B is mandatory, the general ground raised in this regard is not entertained. However, if there is any grievance with respect to the charging of interest u/s 234B, the appellant is required to approach the A.O. by filing an application u/s. 154 of the Act. 12. The assessee has already filed a petition u/s 154 before the Assessing Officer in this respect. Accordingly, we direct the Assessing Officer to decide this issue as per law after considering the decision of this Tribunal in the case of Datamatics Ltd. Vs. ACIT (supra). 13. Ground no. 3 is regarding validity of reopening. 14. We have heard the Ld. AR as well as Ld. DR and considered the relevant material on record. The assessment was reopened based on the search seizure operation u/s 132 carried out at the place of the assessee. As we have discussed while dealing with the ground no. 1 that neither any record of material was seized during the search proceedings nor any statement was recorded, therefore, it is manifest that no fresh information or tangible material came to the knowledge of the Assessing Officer to indicate that the income assessable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A. This issue has been raised by the assessee in the additional ground, which reads as under:- That the Hon ble CIT(A) erred in not considering/applying the provision that completed assessment will hold good if no material is seized during search for additions made by A.O. on account of donations and disallowance of compensation/workers aid paid to workers in all five years from A.Y. 2005-06 to A.Y. 2010-11. 20. It is a settled proposition of law that a notice u/s 153A is a necessary consequence of search u/s 132 and thereby the Assessing Officer shall assess or re-assess any assessment order falling within the period of six years from the date of initiation of search u/s 132 or requisition u/s 132A. So far as the assessments pending on the date of search, the same shall be abated and, therefore, the proceedings u/s 153A would be in the nature of assessment. For the assessment years for which the assessment was already completed on the date of initiation of search u/s 132, the proceedings would be in the nature of re-assessment. The addition for the assessment years, where the assessment was completed on the date of search can be made only when some incriminating material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s appeal for A.Y. 2003-04 and in view of our finding this issue is set aside to the record of Assessing Officer for deciding the same as per law after considering the decision of this Tribunal in the case of Datamatics Ltd. Vs. ACIT (Supra). 25. It is to be noted that since identical issues involved for A.Y. 2005-06 to 2010-11, hence, all the appeals are disposed off in terms of finding for A.Y. 2005-06 26. In the result, appeals of the assessee are allowed in part. 2.2. We are also reproducing hereunder the order dated 25/10/2012 of the Indore Bench of the Tribunal in the case of ACIT vs Coordination Committee of SPM Unions Hoshangabad (ITA No.239 to 246/Ind/2012) for ready reference and analysis:- 2. The facts, in brief, are that the employees of M/s Security Paper Mill, Hoshangabad, had formed a coordination committee of the Security Paper Mill Unions of Hoshangabad with Shri N.K. Saxena as General Secretary. There was a dispute among the management and the Employee s Unions regarding the Group Incentive Scheme. The Coordination Committee was formed for supervising and coordinating the legal proceedings on various appellant forms. Shri N.K. Saxena was orally nomin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the benefits of section 10(24) of the Act. The AO s conclusions in this regard are confirmed and appellant s grounds of appeal relating to the exemption claimed u/s 10(24) of the Act, are dismissed. 4. The contention of the assessee that its income was not assessable under the head business/profession was not accepted by the AO and the action of the AO was confirmed by the CIT(A) after having the following observations:- 3.3 The aforementioned submissions have been carefully considered with reference to the facts obtaining from the record. As rightly concluded by the AO, all these assertions could not absolve the income of the appellant to be charged to IT. Provisions of section 28(iii) of the Act are attracted in the case of the appellant. Income derived by a trade professional or similar association from specific services performed for its members is chargeable to tax under the head income from business or profession . This is an exception to the general principle that a surplus arising to mutual association could not be regarded as income chargeable to tax. Every trade, professional or similar association which renders specific services to its own members for remunera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bers for these services; and there must also be a connection between the remuneration and the services rendered (Chagla C.J. in Ismailia Grain Merchants Association Ltd. V. CIT (1957) 31 ITR 433 437 (Bom); South Indian Planting and Commercial Representation Fund v. CIT (1957) 32 ITR 513-518 (Mad.) the statute does not require that before income of such association would be chargeable to tax, it should have been earned because of some trade activities by association(CIT vs. Hill Goods Truck Owners Union (1980) 124 ITR 224 (Punj.). This clause is in the nature of a charging provision. It is applicable on its own terms. Income of a trade association not falling within section 28(iii) is not necessarily exempt (CIT vs. Shree Jari Merchants Association (1977) 106 ITR 542 (Guj.) 3.4 The word specific only means definite, distinctly formulated or stated with precision. T he words performing specific services in this clause means conferring particular benefits , that is, conferring on the members some tangible benefit which would not be available to them unless they paid the specific fees charged for such benefits (CIT vs. Calcutta Stock Exchange Association Ltd. (1959) 36 ITR 222 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or profession . Since the High Court in WP No. 5696/98 directed payment of 50% of the incentive to the workers, after discussion with employees, all the employees gave in writing to the management to recover 15% of the incentive, that is being paid to them, to be given to the Coordination Committee, for meeting expenses and in the presence of this written authority letter, the AO was of the view that there is no provision for balance, if any, to be refunded to employees. On the basis of individual applications made by all the employees, management of SPM deducted 15% of incentive and paid to the Coordination Committee of SPM Union. The claim of the appellant that the impugned sums were deposits to be refunded to the employees after meeting all the incidental expenses, in the absence of formal or third party evidence, was not accepted by the AO. 3.7 For the reasons extensively enumerated in subsequent paras, the contention of the appellant that its income was not assessable either under the head business or under the head profession , is only academic and the grounds relating to this issue, raised by the appellant in all the appeals, under consideration, are accordingly dismisse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration, is upheld and the grounds raised against the said addition for all the assessment years, under consideration, are accordingly dismissed. 6. The AO also made addition in respect of interest income from M/s Kachnar Builders. By the impugned order, the CIT(A) partly confirmed the addition by observing as under :- In this view of the matter, I am of the considered view that taxation of interest on the said loan in each of the assessment years, under consideration, should not have been more than that credited by the debtor viz. Kachhnar Builders. For these reasons, the addition made by the AO in each of the assessment years, under consideration, is reasonably restricted to the sums of interest credited by the debtors. The AO is directed to work out and allow relief to the appellant, on this basis, for each of the assessment years, under consideration. 7. The addition made by the AO on account of estimated undisclosed income presumed to have been earned from investment made outside the books of accounts was deleted by the learned CIT(A) after observing as under :- 7.5 In the given facts and circumstances of the case, the Assessing Officer was not entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 30 crores from the management of SPM as incentive bonus; that the amount received by the employees during the period from 17.02.1999 to 08.05.2002 represented only 50% of the incentive bonus decreed in favour of the employees and balance 50% was to be paid later on after the final disposal of the case. An amount of ₹ 4,27,09,595/- @ 15% of the amount received by the employees) was deducted from the payments made to individual employees and handed over to the Co-ordination Committee as per the consent of the employees on the direct ion of the MP High Court. This amount was treated as professional receipt received as consideration for the services rendered by the Coordination Committee to the employees for fighting their cases. The excess of income over the expenditure, for the AY 2000-01, was worked out by the AO from Page Nos.20 to 25/Para No.6.4 of the assessment order appealed against and such excess income over expenditure was brought by the Assessing Officer to tax in the assessment year 2000-01. According to the Assessing Officer, in subsequent assessment years i.e. from AY 2001-02 to 2003-04, the excess income over expenditure comes in negative. Since the appellant h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endency of the disputes, on the basis of settlement in June I 973 and award dated 02.09.1998 several thousand cases were filed before various courts such as under Payment of Wages Act, under 33(c)(1) and 33 (c)(2) of ID Act before various Authorities. Coordination committee used the services of several lawyers and mediators for bringing about the settlement and to lend the disputes. During the pendency of Writ Petition No 5696/98, the MP High Court directed payment of 50% of the incentive. Management flied repeated SLI~s before the Supreme Court. These SLPs were dismissed. The Supreme Court in SLP No. 12189/99 by order dated 08.10.1999 directed that the workmen will have to give an undertaking to refund the amount if the petition of the management of SPM is allowed. On the strength of documentary evidence available on record, the appellant established the fact that various amounts were paid by the management from 1999 as per the direction of the MP High Court and Supreme Court and after hearing the arguments at length, the Supreme Court dismissed the SLP on 08.12.2006. From the sequence of facts enumerated above, the impugned deduction of 15% of the incentive and depositing the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 10,000/- for AY 2007-08 are deleted. The appellant accordingly gets relief of ₹ 10,23,000/- for these assessment years. 12. In the A.Ys. 2005-06, 2006-07 and 2007-08 the AO had made disallowance u/s 40(a)(ia) of the Act. The AO disallowed ₹ 26,85,000/- for the A.Y. 2005-06; ₹ 11,55,000/- for the AY 2006-07; and ₹ 2,69,90,000/- for the AY 2007-08. According to the AO huge amount was paid by the appellant to Shri P.S. Nair and the members of his family in the assessment years 2005-06 to 2007-08. Shri N.K. Saxena, the General Secretary of the appellant Coordination Committee, when confronted by the AO, was not able to explain why these payments were made to the family members of Shri P./S. Nair. The AO was of the view that, if the amount paid to Shri P.S. Nair represents his professional fee, then the appellant was liable to deduct tax at source u/s 194F of the Act and substantial payments made to various lawyers were without deduction of tax at source. When confronted by the AO to explain reasons for non-deduction of tax at source, it was submitted that provisions of section 490(a)ia) of the Act were not applicable in the present case because there was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sk of repetition, the recipients were explained to have paid the tax due on the aforementioned payments received from the appellant and since the tax had already been paid by the recipient, in my considered view, the same sum, which stood suffered tax, in the hands of the recipient, could not once again be brought to tax in the hands of the payer viz. the appellant. This issue stands clarified by the Circular No. 275/201/95-IT(B) dated 29.01.1997 issued by the CBDT. It is undisputed that the circulars issued by the CBDT are binding on all the tax administrators coming within the jurisdiction of CBDT. 10.6 The impugned section seeks to deduct the income of the payee in the hands of the payer. By virtue of the said disallowance provided u/s 40(a)(ia) of the Act, the entirety of the expenses incurred by way of payment to the aforementioned parties, was disallowed on which the appellant failed to deduct TDS but even the income which was received by the aforementioned third party, was treated as the income of the appellant. An outgoing from the appellant s books, which was offered for tax as receipt in the hands of the recipient, before close of the relevant previous year, could by no s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defending/prosecuting various cases of employees. Record evidences the fact that several thousands of cases were filed, prosecuted and defended by the Coordination Committee on behalf of the employees. The fact, that amount recovered from employees was a deposit, and it was made clear, to the General Secretary of the Coordination Committee in January 1999 that the workers had deposited 15% of the amount and to treat this merely as a deposit with a view to meet all sorts of expenditure including lawyer's fees, TA/DA, typing, stenography, court fees and all other incidental expenses and balance, if any, be refunded to the deserving employees. Facts obtaining from the record evidences the fact that substantial amount was already refunded to employees in the years 1999 and 2000 after meeting the expenditure. Had the impugned deposits made by the workers were in the nature of income, as erroneously presumed by the AO, then, in my considered view, there would have been absolutely no question or justification for refunding any amount to the workers. 8.3. Facts obtaining from the record, also demonstrate that nearly 2500 employees were working in the Security Paper Mill and incentiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etween workmen and workmen. 18.2 The Finance (No.2) Act, 1996, in line with the above, provide similar exemption to an association of trade unions of the nature specified under the existing provisions of clause (24) of section 10 16. After perusing the various documents filed before the AO, we find that since 4.12.1979 SPM management, Union of India, Ministry of Labour, Ministry of Law, have all treated SPM Coordination Committee as an association of registered trade union. Furthermore, the Court orders also indicate the assessee as coordination committee of SPM Union. We also find that when the Union of India through their management challenged the award of the Tribunal dated 2.9.1998 in the High Court inW.P. No. 5698/1998, only coordination committee was made a party. 17. In view of the above facts, we are inclined to agree with the learned counsel for the assessee, Shri Sumit Nema, that the assessee as a coordination committee was an association of trade union, therefore, eligible for claim of exemption u/s 10(24) in respect of its income falling under the heads of income from other sources . We direct accordingly. 18. Once it is held that the assessee is eligible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee was not doing any business activity and as such the application of provisions of section 40a(ia) was not justified. For application of section 40a(ia) firstly there must be some business/professional income against which an expenditure has been claimed. In the instant case before us, since there is no business or professional income in the hands of the association, the AO was not justified in invoking the provisions of section 40a(ia) of the Act. 2.3. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order as well as aforementioned orders of the Mumbai and Indore Benches of the Tribunal, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, the issue before us is with respect to addition of ₹ 76,65,304/-, received by the assessee as donation and treated by the Assessing Officer as professional income. The assessee entered into agreements with various companies on behalf of workers for settling industrial disputes or arbitrating between employers employees. As per the agreement, the union will look after the rights and benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per Constitution. The amount received by the assessee from the employers/employees has a direct nexus with the negotiation and settlement arrived at between the parties. Thus, the activity of the assessee cannot be generalized in the nature of professional services simplicitor. The contribution from the employer is received as per agreement and incidental to the activities of the services rendered by the assessee in resolving the disputes between the member workers and the employers with the intention of welfare of the members/workers. Thus, following the aforesaid decisions, it is noted that there is no material brought on record by the Assessing Officer evidencing that the amount received by the assessee from the employers as well as from the workers are not voluntary. In the absence of any contrary material and it has been accepted that the contribution of workers are exempt under section 10(24). Similar is the situation in respect of amounts received from counterparty, being employer, in pursuant to settlement / resolution of disputes, as exempt under section 10(24) of the Act. Following the aforesaid order, we are of the view that the amounts so received by the assessee can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld and were absorbing waters. Before us, the assessee filed affidavit of following persons:- i. N. R. Agarwal Company, Auditors, ii. Shri D. K. Netrawal, General Secretary of Union iii. Shri Krishna M. Mane, Secretary of the Union iv. Shri Babu P. Tummala, Accountant of the Union, v. Shri Guru Prasad B. Verma, Secretary of the Union vi. Three affidavits of the workers as a sample copy vii. Detailed charts with names of each worker viii. Resolution of the Managing committee. Our attention was invited to pages 90 to 95 of the paper book containing the list of workers and the amounts paid to them and also page-96 of the paper book containing the extract of meeting of general council held on 13/08/2005. It was explained that such expenses are authorized by the constitution of the union and the aid was paid to the workers when the units were own strike and such workers were unable to meet there house hold expenditure due to absence of salary/wages. On the other hand, the ld. DR contended that in the absence of vouchers, such expenses cannot be allowed. The ld. counsel for the assessee in reply, explained that, identically no addition was made on this accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Yusuf Gulab Shaikh 20,000.00 6 Suresh L. Tondwalkar 20,000.00 7 Kisan R. Kshirsagar 20,000.00 8 K. Kampa Swami 20,000.00 9 N.S. Tulaskar 20,000.00 10 S.P. Chaliah 20,000.00 11 S.T. Attarde 20,000.00 12 C.N.Devadiga 20,000.00 13 Indravijay Talasikar 20,000.00 14 Mohd. Mustafa 20,000.00 15 N.S. Murudkar 20,000.00 16 D.M. Narsule 20,000.00 17 Shankar Aba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20,000.00 42 V.R. Khot 20,000.00 43 Natha D. Kadam 20,000.00 44 Vanvasi S. Yadav 20,000.00 45 Anand B. Yadav 20,000.00 46 Ashok A More 3,280.00 963,280.000 Hindustan Ciba Geigy Ltd. V.G.S. Pissurlekar 10,000.00 10,000.00 Babubhai Jagjivandas 1 Vinod Smpat 20,000.00 2 Sanjay K. Dutia 20,000.00 3 Abdul Karim A. Siragi 20,000.00 4 Mahadeo D. Pawar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 A.B. Ushir 18,000.00 3 T.S. Balan 18,000.00 4 Yeshwant M. Kulkarni 18,000.00 5 S.C. Sonawane 18,000.00 6 K.P. Kele 18,000.00 7 S.I.Kale 18,000.00 8 M.D. Avhad 18,000.00 9 Vasant D.Shelar 18,000.00 10 N.H. Borate 18,000.00 11 B.Y. Agiwale 18,000.00 12 D.B. Singh 18,000.00 13 Dilip D. Pagare 18,000.00 14 P.S. V. Pillai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000.00 Business Combine Ltd. 1 Santosh T.C. 20,000.00 2 L.B. Gite 20,000.00 3 Viajy B. Pawar 20,000.00 4 Krishan L. Chawanke 20,000.00 5 D.N. Kapadnis 20,000.00 6 Bharat E. Umale 20,000.00 7 W.S. Bagul 20,000.00 8 Jibhau Borse 20,000.00 9 B.K. Zankar 20,000.00 10 D.R. Bharati 20,000.00 11 Ashok V. Pund 20,000.00 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 16 V.S. Naikre 20,000.00 17 P.H. Solanki 20,000.00 18 C.N. Balachandran 20,000.00 19 Karmala Fernandes 20,000.00 20 Tejaswani Pawar 20,000.00 21 C.D. Todankar 20,000.00 22 N.R. Sarale 20,000.00 23 K. Balasubramaniam 20,000.00 24 B.S. Chivalkar 20,000.00 25 Yeshwant R. Mate 20,000.00 26 Kishan More 20,000.00 27 Shankar K. Jadhav 20,000.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,000.00 53 Anuradha V. Limaye 20,000.00 54 Shital A. Parab 20,000.00 55 Roshni R. Patil 20,000.00 56 Ramdas Pisal 20,000.00 57 R. Pande 20,000.00 58 R.B. Mishra 20,000.00 59 R. B. Mali 20,000.00 60 Mahadev B. Naikre 20,000.00 61 Manjula P Shroff 20,000.00 1,220,000.00 4,066,280.00 EXTRACT OF MEETING OF GENERAL COUNCIL COMMITTEE OF MUMBAI MAZDOOR SABHA HELD ON 13TH AUGUTST 2005 AT 5:30 P.M. AT THE REGISTERED OFFICE OF THE SABHA SITUATED AT KENNEDY HSOUE, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee Assessment years was made under section 143(3) of the Act and no addition was made as is evident from pages 88 89 of the paper book. Considering the totality of facts, this ground of the assessee is allowed. This view of ours will cover identical ground raised in ITA No.354 355/MUM/2014. 7. So far as ground no.4 with respect to charging of interest u/s 234B (3) of the Act was not pressed by the ld. counsel for the assessee, therefore, this ground is dismissed as not pressed. 8. The last ground i.e. No.5, raised by the assessee pertains to confirming the reopening of assessment u/s 147/148 of the Act after a lapse of four years. The stand of the assessee is that there is no failure on the part of the assessee to disclose the material facts fully and truly and confirmation of order of the Assessing Officer, passed u/s 143(3) r.w.s 147 of the Act, by the Ld. Commissioner of Income Tax (Appeal) and that too without disposing off the objections, raised by the assessee is not justified. It was explained that no addition was made in Assessment year 2003-04, which is also based upon the same facts. It was also claimed that original assessment or earlier three years was made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment order. If new facts, material or information comes to the knowledge of the Assessing Officer, which was not on record or not made available by the assessee, during assessment proceedings, the principle of change of opinion will apply. The reason is that opinion is formed on facts. Opinion formed or based on wrong and incorrect facts or which are belied and untrue do not get protection and cover under the principle of change of opinion . Factual information or material which was incorrect or was not available with the Assessing Officer at the time of original assessment would justify initiation of reassessment proceedings. The requirement in such cases is that the information or material available should relate to material facts. The expression material facts means those facts which if taken into account would have an adverse effect on the assessee by a higher assessment of income than the one actually made. They should be proximate and not have a remote bearing on the assessment. The omission to disclose may be deliberate or inadvertent. The question of concealment is not relevant and is not a precondition which confers jurisdiction to reopen the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no evidence or proof. (i) Assessments cannot be validly reopened under section 147 of the Act even within four years, if an assessee had furnished full and true particulars at the time of original assessment with reference to the income alleged to have escaped assessment, if the original assessment was made under section 143(3). So long as the assessee has furnished full and true particulars at that time of original assessment and so long as the assessment order is framed under section 143(3) of the Act, it matters little that the Assessing Officer did not ask any question or query with respect to one entry or note but had raised queries and questions on other aspects. (ii) Section 114(e) of the Act can be applied to an assessment order framed under section 143(3) of the Act, provided there has been a full and true disclosure of all material and primary facts at the time of original assessment. In such a case if the assessment is reopened in respect of a matter covered by the disclosure, it would amount to change of opinion. The ratio laid down in the following cases usefully throw lights on the issue in hand:- A. L. A. Firm v. CIT [1976] 102 ITR 622 (Mad) (pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Makwana (M. J.)/Asst. CIT [1999] 236 ITR 832 (Guj) (para 21) Snowcem India Ltd. v. Deputy CIT [2009] 313 ITR 170 (Bom) (para 31) Sri Krishna P. Ltd. v. ITO [1996] 221 ITR 538 (SC) (paras 56, 58) Suresh Budharmal Kalani v. State of Maharashtra [1998] 7 SCC 337 (para 29) Union of India v. Suresh C. Baskey [1996] AIR 1996 SC 849 (para 20) United Mercantile Co. Ltd. v. CIT [1967] 64 ITR 218 (Ker) (para 9) (i) What is meant by the term 'change of opinion' ? (ii) Whether assessment proceedings can be validly reopened under section 147 of the Act, even within four years, if an assessee has furnished full and true particulars at the time of original assessment with reference to income alleged to have escaped assessment and whether and when in such cases reopening is valid or invalid on the ground of change of opinion ? (iii) Whether the bar or prohibition under the principle 'change of opinion' will apply even when the Assessing Officer has not asked any question or query with respect to an entry/note, but there is evidence and material to show that the Assessing Officer had raised queries and questions on other aspects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; (c) where an assessment has been made, but- (i) income chargeable to tax has been under assessed ; or (ii) such income has been assessed at too low a rate ; or (iii) such income has been made the subject of excessive relief under this Act ; or (iv) excessive loss or depreciation allowance or any other allow ance under this Act has been computed. Explanation 3.-For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub- section (2) of section 148. 12. For reopening an assessment made under section 143(3) of the Act, the following conditions are required to be satisfied:- (i) the Assessing Officer must form a tentative or prima facie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns formation of belief by an Assessing Officer resulting from what he thinks on a particular question. It is a result of understanding, experience and reflection to use the words in Law Lexicon by P. Ramanatha Aiyar. The question of change of opinion arise when an Assessing Officer forms an opinion and decides not to make an addition or holds that the assessee is correct and accepts his position or stand. In Hari Iron Trading Co. v. CIT [2003] 263 ITR 437 (P H), a Division Bench of the Hon ble Punjab and Haryana High Court observed that an assessee has no control over the way an assessment order is drafted. It was observed that, generally, the issues which are accepted by the Assessing Officer do not find mention in the assessment order and only such points are taken note of on which the assessee's explanations are rejected and additions/disallowances are made. Applying the principles laid down by the Full Bench of this court as well as the observations of the Punjab and Haryana High Court, we find that if the entire material had been placed on record by the assessee before the Assessing Officer at the time when the original assessment was made and the Assessing Officer applied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lent as to the reasons for the conclusion it has drawn, it can well be said that the authority has not applied its mind to the issue before it nor formed any opinion. The principle that a mere change of opinion cannot be a basis for reopening completed assessments would be applicable only to situations where the Assessing Officer has applied his mind and taken a conscious decision on a particular matter in issue. It will have no application where the order of assessment does not address itself to the aspect which is the basis for reopening of the assessment, as is the position in the present case. It is in that view inconsequential whether or not the material necessary for taking a decision was available to the Assessing Officer either generally or in the form of a reply to the questionnaire served upon the assessee. What is important is whether the Assessing Officer had based on the material available to him taken a view. If he had not done so, the proposed reopening cannot be assailed on the ground that the same is based only on a change of opinion. 16. From the foregoing discussion, the clear position emerges as under: (1) Reassessment proceedings can be validly ini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct on the assessee by a higher assessment of income than the one actually made. Correct material facts can be ascertained from the assessment records also and it is not necessary that the same may come from a third person or source, i.e., from source other than the assessment records. However, in such cases, the onus will be on the Revenue to show that the assessee had stated incorrect and wrong material facts resulting in the Assessing Officer s proceeding on the basis of facts, which are incorrect and wrong. The reasons recorded and the documents on record are of paramount importance and will have to be examined to determine whether the stand of the Revenue is correct. A decision of from Hon ble Delhi High Court dated September 26, 2011 in Dalmia P. Ltd. v. CIT [2012] 348 ITR 469 (Delhi) and another decision from Hon ble jurisdictional High Court dated November 8, 2011, in Indian Hume Pipe Co. Ltd. v. Asst. CIT [2012] 348 ITR 439 (Bom.) are two such cases, which throws light on the issue. In the first case, the Assessing Officer in the original assessment had made addition of ₹ 19,86,551 under section 40(1) on account of unconfirmed sundry creditors. The reassessment procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the subjective opinion formed by the Assessing Officer regarding escapement of income. At the same time, it is not the requirement that the Assessing Officer should have finally ascertained escapement of income by recording conclusive findings. The final ascertainment takes place when the final or reassessment order is passed. It is enough if the Assessing Officer can show tentatively or prima facie on the basis of the reasons recorded and with reference to the documents available on record that income has escaped assessment. This brings us to the observations of the Delhi High Court in Kelvinator of India Ltd. [2002] 256 ITR 1 (Delhi) [FB] which read as under (page 18): The Board in exercise of its jurisdiction under the aforementioned provisions had issued the circular on October 31, 1989. The said circular admittedly is binding on the Revenue. The authority, therefore, could not have taken a view, which would run counter to the mandate of the said circular. 19. From a perusal of clause 7.2 of the said circular it would appear that in no uncertain terms it was stated as to under what circumstances the amendments had been carried out, i.e., only with a view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due to the 'oversight, inadvertence or mistake' of the Income-tax Officer must fall within section 34(1)(b) of the Indian Income-tax Act, 1922. It appears to us, with respect, that the proposition is stated too widely and travels farther than the statute warrants in so far as it can be said to lay down that if, on reappraising the material considered by him during the original assessment, the Income-tax Officer discovers that he has committed an error in consequence of which income has escaped assessment it is open to him to reopen the assessment. In our opinion, an error discovered on a reconsideration of the same material (and no more) does not give him that power. That was the view taken by this court in Maharaj Kumar Kamal Singh v. CIT [1959] 35 ITR 1 (SC), CIT v. A. Raman and Co. [1968] 67 ITR 11 (SC) and Bankipur Club Ltd. v. CIT [1971] 82 ITR 831 (SC), and we do not believe that the law has since taken a different course. Any observations in Kalyanji Mavji and Co. v. CIT [1976] 102 ITR 287 (SC) suggesting the contrary do not, we say with respect, lay down the correct law. 22. In A. L. A. Firm (supra), the Hon ble Apex Court explained that there was no differenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to tax. But, on further research into law he finds that there was a direct decision holding that category of receipt to be an income receipt. He would be entitled to reopen the assessment under section 147(b) by virtue of proposition (4) of Kalyanji Mavji. The fact that the details of sales of house properties were already in the file or that the decision subsequently come across by him was already there would not affect the position because the information that such facts or decision existed comes to him only much later. What then, is the difference between the situations envisaged in propositions (2) and (4) of Kalyanji Maviji's case [1976] 102 ITR 287 (SC). The difference, if one keeps in mind the trend of the judicial decisions, is this. Proposition (4) refers to a case where the Income- tax Officer initiates reassessment proceedings in the light of 'information' obtained by him by an investigation into material already on record or by research into the law applicable thereto which has brought out an angle or aspect that had been missed earlier, for e.g., as in the two Madras decisions referred to earlier. Proposition (2) no doubt covers this situation also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment. Where, however, the Income-tax Officer had not considered the material and subsequently came by the material from the record itself, then such a case would fall within the scope of section 147(b) of the Act'. (emphasis supplied) The aforesaid observations are a complete answer to the issue that if a particular subject-matter, item, deduction or claim is not examined by the Assessing Officer, it will nevertheless be a case of change of opinion and the reassessment proceedings will be barred. 23. We are conscious of the fact that the aforesaid observations have been made in the context of section 147(b) with reference to the term information and conceptually there is difference in scope and ambit of reopening provisions incorporated with effect from April 1, 1989. However, it was observed by the Hon ble Apex Court in Kelvinator of India Ltd. [2010] 320 ITR 561 (SC) that the amended provisions are wider. What is important and relevant is that the principle of change of opinion was equally applicable under the un-amended provisions. The Supreme Court was, therefore, conscious of the said principle, when the observations mentioned above in A. L. A. Firm [199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible in spite of complete disclosure of material facts. The primary condition of reasonable belief having nexus with the material on record is still operative. However, we are of the view, that mere fresh application of mind to the same set of facts or mere change of opinion does not confer jurisdiction to the Assessing Officer even under the post 1989 section 147 of the Act. Our view find support from the decision from Hon ble Delhi High court in Jindal Photo Films Ltd. vs DCIT (1998) 234 ITR 170 (Del.), Garden Silk Mills Pvt. Ltd. vs DCIT (1999) 151 CTR (Guj.) 533, Govind Chhapabhai Patel vs DCIT 240 ITR 628, 630 (Guj.), Foramer vs CIT (2001) 247 ITR 436 (All.), affirmed in CIT vs Foramer Finance (2003) 264 ITR 566, 567 (SC), Ipica Laboratories vs DCIT (2001) 251 ITR 416 (Bom.), Ritu Investment Pvt. Ltd.(2012) 345 ITR 214 (Del.), Ketan B. Mehta vs ACIT (2012) 346 ITR 254 (Guj.), Ms. Praveen P. Bharucha vs DCIT (2012) 348 ITR 325 (Bom.), CIT vs Usha International Ltd. 348 ITR 485 (Del.), Agricultural Produce Market Committee vs ITO (2013) 355 ITR 348 (Guj.), B.B.C. World News Ltd. vs Asst. DIT (2014) 362 ITR 577 (Del.). Identical ratio was laid down in CIT vs Malayala Manorma Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Information for the purposes of section 34(1)(b) of the 1922 Act (which corresponds to section 147(b) of the 1961 Act) the Hon ble Apex Court in CWT vs Imperial Tobacco Company Ltd. (1966) 61 ITR 461 has noted such divergence of opinion on the point. Hon ble jurisdictional High Court in CIT vs Sir Mohammad Yusuf Ismail (1944) 12 ITR 8 (Bom.) held that mere change of opinion on the same facts are on question of law or mere discovery of mistake of law is not sufficient information and that in order to sustained action u/s 34 by further holding that reassessment is not permissible. The Hon ble Apex Court in Simon Carves Ltd. (1976) 105 ITR 212 held that errorless legally correct order cannot be reopened, therefore, it is settled law that without any new information and on the basis of mere change of opinion, reopening of assessment is not permissible. As was held in CIT vs TTK Prestige ltd. (2010) 322 ITR 390 (Karn.) SLP dismissed in 2010 322 ITR (St.) 14 (SC). Reference also made to Asian Paints ltd. vs DCIT (2009) 308 ITR 195 (Bom.), Andhra Bank Ltd. vs CIT (1997) 225 ITR 447 (SC). The observations of the Supreme Court are a protection against the abuse of power; they also protec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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