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2016 (11) TMI 537 - ITAT MUMBAI

2016 (11) TMI 537 - ITAT MUMBAI - TMI - Addition treating the donation received as professional income - settlement of the disputes between the workers and their employers - Held that:- As in the case of the sister concern of the assessee, the settlement of the disputes between the workers and their employers was negotiated by the assessee to avoid any stand of between the employers and the workers by playing a vital role. The contribution received by the assessee is only in respect of and on ac .....

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een 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 respec .....

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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 assessee and has duly confirmed that they saw the vouchers at the relevant time and due to reasons stated before us as well as before the Ld. Commissioner of Income Tax (Ap .....

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orkers are unable to meet their household expenditure. It is also noted that no such addition was made for Assessment year 2003-04 which is also based on similar facts. The original assessment for earlier three Assessment years was made under section 143(3) of the Act and no addition was made - Decided in favour of assessee - Reopening of assessment after a lapse of four years - Held that:- Since, there was no new tangible material available with the Assessing Officer while resorting to sect .....

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r For The Assessee : Shri N.R. Agrawal For The Revenue : Shri Mohammed Rizwan-DR ORDER Per Joginder Singh (Judicial Member) This bunch of seven appeals is by the assessee as well as Revenue against the order all dated 20/12/2013 of the Ld.First Appellate Authority, Mumbai. 2. First, we shall take up appeal of the assessee, (ITA No.1371/Mum/2013). First ground pertains to confirming the addition treating the donation, received by the assessee, amounting to ₹ 76,65,304/- as professional inco .....

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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 o .....

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penses. 2 The Ld. CIT(Appeals) erred in confirming the charging of interest u/s 234B(3) of the Act. 3. The Ld. CIT(Appeals) erred in confirming the order passed the learned Assessing Officer u/s 143(3) r.w.s 147 without disposing off the objections of the assessee for reopening of the assessment & Reopening u/s 148 after four years particularly when assessee has not concealed any thing. 2. The assessee is a trade union registered with Government of Maharashtra. The assessee union was formed .....

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eived from the workers, the assessee is also receiving the contribution from the employers on settlement of the claim/disputes between the employers and workers. The assessee s role is to negotiate the claims and rights of the workers on their behalf with the management/employers and, therefore, when the dispute is finally resolved through the negotiation an agreement of settlement is signed by the employer, worker as well as by the assessee. As per the terms of agreement, a certain percentage o .....

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claimed exemption of tax u/s 10(24) of the Income Tax Act in respect of the income from house property and income from other sources. The assessment u/s 143(3) r.w.s 147 of Income Tax Act, was completed determining the total income at ₹ 1,14,46,210/- as against the Nil 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 in .....

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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 with the object to secure an e .....

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assessee assists the workers and employers in fulfillment of the respective obligations and right as well as to resolve the disputes between the parties. During the year under consideration the assessee received a donation of ₹ 1,10,07,306/- out of which ₹ 71,07,533/- was received from the employer United motors and balance was received from the workers. The scope of the assessee s object includes to seek redressal of grievances of the members and to secure as far as possible settlem .....

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by the employers on settlement of disputes arrived between the parties. He has also referred section 27(2) of the Trade Union Act and submitted that all contribution are voluntary, therefore, the contribution received by the assessee cannot be treated as income when the object of the assessee is to work for the welfare of members. The Ld. Authorized Representative has submitted that no incriminating material was found during the search & seizure action and, therefore, the addition made by t .....

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nion 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 th .....

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bution made by the workers is again going to the workers after meeting the necessary expenditures. 4.1 On query from the Bench on the point of the amount received from employers as contribution under the tripartite agreement should not be treated differently than the contribution received from workers who are members of the assessee union. The Ld. Authorized Representative has submitted that the contribution is received in the process of settlement of disputes between the employer and workers, t .....

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ive the colour of profession, business or occupation. There is no profit motive in the assessee s activity and the contribution received from the employer is incidental to the services provided to the members of the assessee. In support of his contention he has relied upon the following decisions:- (i) CIT Vs. Standing Conference of Public Enterprises (Scope) 319 ITR 179 (ii) CIT Vs. Bus Operators Association 344 ITR 268 (Ker) (iii) Additional CIT Vs. Surat Art Silk Manufacturers Association 121 .....

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ons of section 10(24) of the Act. Therefore, the said income received by the assessee is taxable as income for rendering the services to these companies. He has further submitted that the payments on settlement of disputes is not voluntary but the assessee is extracting or forcing these companies to make the payments, therefore, these are not voluntary donation and was rightly treated as income of the assessee assessable to tax. The payment is contractual payment as per the settlement agreement .....

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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 .....

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d employers through assesses s union. It is one of the objects of the assessee as per the constitution of the assessee union to seek redressal of grievances of the members and to secure the settlement of disputes between the employer and the employees by negotiation and by mutual consultation. Therefore, the negotiation on behalf of the workers and to arrive at a settlement in the interest and welfare of the workers as well as for the employers to avoid any stand off between the employers and wo .....

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of the workers for settlement of disputes between the worker and the employers is limited only in respect of the disputes between the member workers and employers. Therefore, the activity of the assessee cannot be generalized in the nature of professional service or occupational service open to general public but it is, otherwise, permitted under the by laws and constitution of the assessee as well as Trade Union Act. Though the contribution from employer is received as per the tripartite agreem .....

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by laws of the assessee. Therefore, when 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 contribut .....

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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 Benches of this Tribunal in the case of Asstt. Commissioner of Income Tax Vs. Coordination Committee of SPM Unions Hoshangabad (supra), in para 20 and 21 as under:- 20. From the record we find that 15% of incentive bonus payable to workers was contributed by them t .....

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xpenditure was not in the nature of income in the hands of the assessee being a coordination committee but was merely in the nature of deposit which was meant for meeting expenditure for defending/prosecuting various cases of employees. From record we find that the assessee was not merely representing its workers but in fact a party to all the litigation either as a petitioner or respondent. The management of SPM, Hon ble High Court and Supreme Court accepted the status of the assessee as an ass .....

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surplus accruing to it cannot be regarded as income, profits or gains for the purpose of income tax. 21. As discussed hereinabove, the amount received by the assessee was not in the nature of income and the assessee 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 .....

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tary 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 t .....

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y the counter party being employer in pursuant to the settlement/resolution of disputes, is also exempt u/s 10(24) of the Income Tax Act. As per section 27(2) of the Trade Union Act 1926, even the rule of trade unions do not provide for distribution of funds of the trade unions on dissolution, the registrar shall divide the funds amongst the members in such manner as may be prescribed, therefore, in any case the funds available with the assessee shall be distributed among the members either as p .....

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union. 8. Ground no. 2 is regarding levy of interest u/s 234B(3) of the Income Tax Act. 9. We have heard the Ld. AR as well as Ld. DR and considered the relevant material on record. The Ld. Authorized Representative of the assessee has submitted that the assessee filed return of income and claimed refund of ₹ 53,288/-. He has further submitted that the assessee filed a rectification petition u/s 154 before the Assessing Officer in respect of levy of interest u/s 234B(3), however, the Asses .....

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relevant material on record, we note that this issue was raised by the assessee before the CIT(A) which was disposed off in para 15 a under:- The additional ground of appeal pertains to the charging of 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 applicatio .....

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eizure 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 the tax has escaped assessment. Accordingly, we are of the considered view that the Assessing Officer has .....

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; contribution by employers ₹ 71,07,533/- as both funds are spent by assessee for the benefit of workers & employer only in spite of the fact that mutuality principal as accepted by the Hon ble CIT(A) for monthly subscription /contribution by employees. 16. This ground is not a fresh ground but the part of ground no. 1, accordingly in view of our finding in ground no. 1 of the assessee s appeal, the additional ground filed by the assessee stands disposed off. 17. For A.Y. 2005-06 to 20 .....

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es paid by the appellant of ₹ 82,57,250/-. 4. the Ld. CIT(A) erred in confirming the of the interest u/s 234B(3) of the Act. 18. Ground no. 1 and 2 is regarding treatment of contribution /donation received by the assessee as income from business/profession. 19. The merits of this ground has already been discussed by us in ground no. 1 of the assessee s appeal for A.Y. 2003-04, therefore, in view of our finding in ground no. 1 for A.Y. 2003-04, we hold that the contribution received by the .....

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r 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 th .....

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case in hand, there is no dispute that neither any information/material was found or seized nor any statement was recorded. Therefore, it is a case where the additions were made by the Assessing Officer without having found or seized any incriminating material during the search or any admission on the part of the assessee. When no undisclosed income was found during the search then no addition can be made in the proceedings u/s 153A for the A.Ys in which the assessment was already completed and .....

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iminating material/facts either during the search or during the course of assessment proceedings which could lead to the conclusion that the donation/contribution received by the assessee on account of settlement of disputes between the workers and the employers through the settlement agreement is not voluntary contribution connected with the activity of the assessee to achieve the objects then the treatment of such receipt as income from business/profession is not sustainable. We have already d .....

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r finding in ground no. 1 and 2 this ground of the assessee s appeal becomes infructuous. 23. Ground no. 4 is regarding levy of interest u/s 234B. 24. We have heard the Ld. AR as well as Ld. DR and considered the relevant material on record. An identical issue has been discussed by us while dealing with the ground no. 2 of assessee 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 .....

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d/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. Saxe .....

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he sum of ₹ 4.27 Cr. Was acquired on account of the written consent of the employees of SPM after deduction of a sum of 15% out of the incentive bonus payable. The AO found that the assessee has not furnished its income tax returns within the time period specified under section 139 for the A.Ys. 200-01 to 2003-04 though it was having income chargeable to tax. On the basis of information on record, after recording reasons, notice u/s 148 of the Act was issued for filing of income tax return .....

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,183/- for the A.Y. 2006-07 and ₹ 2,82,54,285/- for the A.Y. 2007-08. The assessee s claim for exemption u/s 10(24) of the Act was declined by the AO. 3. By the impugned order, the CIT(A) confirmed the AO s action after having the following observations :- I am in complete agreement with the findings of the A.O. that registration under the Trade Union Act is mandatory in so far as the Trade Unions are concerned. It is incomprehensible to interpret that the association of the registered tra .....

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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 .....

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trade, professional or similar association which renders specific services to its own members for remuneration related to those services, in my considered view, falls within the purview of this sub-section. For this proposition, the AO correctly placed reliance on the decision in Indian Tea Planter s Association Ltd. V. CIT (1971) 82 ITR 322 (Cal) wherein it was held that : A trade association, rendering specific services to its own members for remuneration will come within section 10(6) of the .....

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by the P&H High Court in CIT vs. Hill Goods Truck Owners Union (1980) 124 ITR 224 (P&H). The concept behind section 28(iii) is to cut at the mutuality principle being relied on in support of a claim for exemption, when the appellant was actually deriving income for making profits as a result of rendering specific services for its members in a commercial way. This clause creates a statutory fiction (CIT vs. South Indian Film Chamber of Commerce (1981) 129 ITR 22-26 (Mad.). This clause ap .....

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Planteers Association v. CIT (1971) 82 ITR 322 (Cal). Every trade, professional or similar association which renders specific services to its own members for remuneration related to those services would come within the purview of section 28(iii) (Indian Tea Planter s Association v. CIT (1971) 82 ITR 322 (Cal.). In order to bring an income within this clause, two essential facts have to be established viz. That the association rendered specific services to its members and that remuneration was pa .....

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ods 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, conferr .....

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s expenses through its General Secretary, Shri N.K. Saxena. Thus, as rightly concluded bythe AO, both the conditions laid down in Ismaillia Grain Merchants Association Ltd. V. CIT (1957) 31 ITR 433 (Bom) viz. The association rendered specific services to its members and remuneration was paid by the members for these services, in my considered view, were fulfilled. It is settled position that it is not necessary that business/profession must be carried on by the assessee himself. It could be carr .....

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ial part is mental rather than manual (ii) commitment to moral principles which go beyond the general duty of honesty and a wider duty to community which may transcend the duty to a particular client or patient (iii) Professional association which regulates admission and seeks to uphold the standards of the profession through professional codes on matters of conduct and ethics and (iv) high status in the community (Indian Medical Association v. V.P. Santha AIR (1996) (SC) 550-558 (1338). Viewed .....

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er deduction of expenses, net receipts were chargeable to tax as income under the head income from business 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 th .....

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merated 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 dismissed. 5. The AO also made addition on the plea that the assessee was maintaining books of accounts on mercantile basis. Accordingly, interest income was added under the head income from other sources .....

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heques for payment, he recorded the same as expenditure incurred and cheques received from SPM management, deposited in bank account, were accounted for and entered as income in the cash book. Since the entries for the income and expenditure, on the basis of issuance and receipt of cheques, without clearance of the same, were made in the so called cash book, it is evident that the appellant regularly followed mercantile system of accounting. Viewed in this perspective, the aforementioned asserti .....

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, under consideration. This was not offered for tax, as according to the learned counsel for the appellant the same was claimed as exempt u/s 10(24) of the Act. For the reasons extensively enumerated above, it was already held in unambiguous terms that the claim of the appellant for exemption u/s 10(24) was not maintainable and that the income of the appellant was not entitled for exemption under the said section. Therefore, I am in complete agreement with the conclusions of the AO that the impu .....

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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 .....

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sing Officer presumed that the appellant had in fact suppressed the impugned income, from being disclosed to the department, then, it was incumbent upon the Assessing Officer, to have conducted the needed investigation to bring corroborative evidence on record, to substantiate such allegations. Record evidences the fact that this needed exercise was not carried out. In Dhakeswari Cotton Mills Ltd. v. CIT (1954) 26 ITR 775 (SC), it was held that: The AO is not entitled to make a pure guess and ma .....

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to justify taxation is upon the authorities." Since this was not proved against the appellant 'on the strength of evidence, the AO's action in this regard is opposed to the legal standards enumerated above. The Hon'ble SC has reaffirmed its earlier stand in CIT v. K.Y. Pilliah & Sons (1967) 64 ITR 411 (SC) wherein it was decided that any lump sum add backs to the income shown, if found justified, must be done in proper exercise of discretion objectively and judiciously on th .....

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/- for each of the assessment years 2000-01 to 2003-04. 8. For the A.Y. 2000-01 the AO also estimated and made addition presuming the same to be undisclosed income earned from professional receipts. According to the AO, as a result of the litigation, the employees won the case and got about ₹ 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 i .....

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o 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 had .....

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discussion with employees, all the employees had given in writing to the management to recover 15% of the incentive that was being paid to them to be deposited with the Co-ordination Committee for meeting the expenditure and 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 deposited the same with Co-ordination Committee of SPM Union. This amount, in my considered view, was not income o .....

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ry 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 .....

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usand 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 .....

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of facts enumerated above, the impugned deduction of 15% of the incentive and depositing the same with the Co-ordination Committee of SPM Union, could by no stretch of imagination, be construed and presumed as income of the appellant. In my considered view, that was only a deposit meant for meeting expenditure for defending/prosecuting various disputes of the employees. 10. The disallowance was made by the AO out of expenses claimed : Disallowance of ₹ 9,83,000 for the AY 2000-01; ₹ .....

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re according to the AO, was not allowable. Hence, the same was disallowed and added to the income of the assessee. 11. By the impugned order, the CIT(A) gave part relief after having the following observations :- For the reasons extensively enumerated in the immediately preceding paragraph, I have already held that the impugned deposit received from the employees constituted remuneration for the professional services rendered by the appellant, through its team of legal professionals and the same .....

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ce in the preceding paras 8.8, it has been concluded that the amounts received by the Coordination Committee was a deposit which cannot be treated as professional receipt, there remains no professional income and as such remains no ground for disallowance of expenses since any disallowance require income in the profit and loss account. Thus, the disallowance of ₹ 9,83,000/- made by the AO in the AY 2000-01; ₹ 10,000/- in AY 2005-06, ₹ 20,000/- for AY 2006-07 and ₹ 10,000/ .....

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-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 .....

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having the following observations :- 10.5 As such, I am of the considered view that provisions of section 40(a)(ia) of the Act are not applicable to the impugned payments made by the appellant to the legal professional named in the assessment orders, under consideration. The disallowance, if any, required to be made should have been restricted to the extent of the sum shown in the balance sheet as payable at the end of the year i.e. on the balance sheet dates. However, this was not the case in t .....

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ned but the word paid is defined in section 43(2) to mean actually paid or incurred. Hence, by implication the word payable does not include paid . In any case, since the appellant had made actual payment to the legal professionals and the same having been subjected to tax in the case of the recipients, since the genuineness of the impugned transactions were proved beyond all shadows of doubt and the same having not been proved by the AO as bogus transactions, respecting the intention of the law .....

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e recovered once again from the appellant/payer. To reiterate at the risk 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-I .....

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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 stretch of imagination, be construed as the income assessable in the hands of the appellant. Section 2(24) of the Act defined the term income . It included only profits or gains of business or profession and the disallowance provi .....

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and find from record that the assessee is an association of registered trade union wherein deduction of 15% of incentive bonus payable to workers of security paper mill was deposited with the assessee. The assessee was coordinating the deposit of the workers and was also incurring expenses of litigation in connection with cases of the management of SPM management Vs. Employees of SPM. The assessee was also distributing the claim of workers in accordance with the directions of M.P. High Court. Th .....

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and after discussion with employees, all the employees had given in writing to the management to recover 15% of the incentive that was being paid to them to be deposited with the Co-ordination Committee for meeting the expenditure and 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 deposited the same with Co-ordination Committee of SPM Union. This amount, in my considered view, was no .....

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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 depo .....

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veral 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 SLIs before the Supreme Court. These SLPs were dismissed. The Supreme Cour .....

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equence of facts enumerated above, the impugned deduction of 15% of the incentive and depositing the same with the Co-ordination Committee of SPM Union, could by no stretch of imagination, be construed and presumed as income of the appellant. In my considered view, that was only a deposit meant for meeting expenditure for defending/prosecuting various disputes of the employees. Under the provisions of section 10(24)(b) income of an association of registered union as referred to in sub-clause (a) .....

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t, 1926 (16 of 1926) under the heads income from house property and Income from other sources is exempt from income tax if such trade union is formed primarily for the purpose of regulating the relations between workmen and employer or between 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 do .....

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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 for exemption u/s 10(24), the income earned by the assessee in the form of in .....

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t. 20. From the record we find that 15% of incentive bonus payable to workers was contributed by them to the association. This amount was deposited with the association to meet all sorts of expenditure including lawyers fee, TA/DA, typing, stenographic charges, court fee and all other incidental expenses. The balance out of such contribution was to be refunded to the deserving employees. From record we find that substantial amount received from the employees was refunded to them in the years 199 .....

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e management of SPM, Hon ble High Court and Supreme Court accepted the status of the assessee as an association consisting of workers and, therefore, allowed it to contest in its own name instead of putting up the names of individual workers. There was a clear concept of mutuality. No-one can make profit out of himself. When a member agrees to contribute funds for a common purpose, the amount of funds not so required for common purpose and refunded to such individual, cannot be treated as income .....

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siness/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, materia .....

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s and benefit of the workers for settling any dispute with the management, thereby, avoiding undue hardship both the employers and employees. The assessee union is registered under the Trade Unions Act, 1926. The assessee received contribution/donation of ₹ 76,65,304/- during the relevant period to Assessment Year 2003-04 from various companies for industrial dispute settlement. The agreement and the confirmations from the concerned companies were filed before the Assessing Officer with th .....

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t by force c) It is not in the nature of income but capital receipt or worse taxable under the head of Income from Other Sources. d) Contribution/Donations are received as per agreements entered on behalf of workers. e) Such agreements are supervised approved by Commissioner of Labour under Trade Union Act f) Union is registered under Indian Trade Union act, Functions under constitution registered with Registrar of Trade Union Act & approved by Government. g) Such contribution is authorized .....

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mbai Bench of the Tribunal in the case of the sister concern of the assessee, the settlement of the disputes between the workers and their employers was negotiated by the assessee to avoid any stand of between the employers and the workers by playing a vital role. The contribution received by the assessee is only in respect of and on account of its activities in achieving the objects, as per Constitution. The amount received by the assessee from the employers/employees has a direct nexus with th .....

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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 .....

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n discussed / deliberated upon bias while concluding ground No.1 (supra). 4. So far as grounds no. 3 & 4 with respect to charging of interest u/s 234B(3) of the Act and confirming the order u/s 143(3) r.w.s. 147 for reopening of assessment is concerned, these were not pressed by the ld. counsel for the assessee, therefore, both these grounds are dismissed as not pressed. 5. So far as additional ground raised by the assessee is concerned, since we have decided ground No.1 & 2 in favour of .....

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in favour of the assessee. 6.1 Ground no.3 is with respect to confirming the addition of ₹ 41,11,280/- on account of workers aid. This addition was made by the ld. Assessing Officer on the plea that the assessee could not produce vouchers, evidencing payments and merely filed affidavit of nine persons only. Before us, the ld. counsel for the assessee, Mr. Agarwal, contended that compensation/aid was paid by the assessee to the workers and claimed such expenses under the head compensation/a .....

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. 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 .....

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e of vouchers, such expenses cannot be allowed. The ld. counsel for the assessee in reply, explained that, identically no addition was made on this account for Assessment year 2003-04, whereas, identically aid was given to such workers. MUMBAI MAZDOOR SABHA WORKERS AID PAID TO THE WORKMEN FOR THE A.Y.-2005-06 Mulla & Mulla Craigie Blunt & Caroe 1 Shirley James 20,000.00 2 Dalpat Patel 20,000.00 3 Aloo M. Bhathena 20,000.00 4 S. Subramanium 20,000.00 5 Krishna K. Shivalkar 20,000.00 100,0 .....

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suf 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 20,000.00 18 Shashikant Shinde 20,000.00 19 Rajaram G. Tambe 20,000.00 20 T.Y. Keni 20,000.00 21 Namita N. Satardekar 20,000.00 22 J.R. Kosambia 20, .....

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D. Shinde 20,000.00 40 Suresh K. Engawale 20,000.00 41 Prakash Sawant 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 20,000.00 5 Mayur M. Mahajan 20,000.00 6 Yogesh K. Khira 20,000.00 7 Rajsingh K. M .....

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0 25 Madansingh Rajpurohit 20,000.00 26 Vasant Shah 20,000.00 520,000.00 BCL Forgings Ltd. 1 C.S. Jadhav 18,000.00 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 18,000.00 15 Chandrakant R. Rahatal 18,000.00 16 Subhash Shantra .....

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V.D.Shewale 20,000.00 4 S.B. Moharil 20,000.00 5 S.M. Gulve 20,000.00 6 A.T. Pagare 20,000.00 7 S.D. Jagtap 20,000.00 140,000.00 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 Dattatray Kisan Ugale 20,000.00 13 Balkrishna Waman Survade .....

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.00 11 Vilas Sawant 20,000.00 12 Balram Pawar 20,000.00 13 A.P. Kadam 20,000.00 14 Arjun Gholap 20,000.00 15 Dattaram N. Kerkar 20,000.00 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 28 Sadanand Patil 20,0 .....

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hagwan R. Mali 20,000.00 48 Gopal Khadke 20,000.00 49 R.K. Jadhav 20,000.00 50 Ramdular Bari 20,000.00 51 F. D Souza 20,000.00 52 Elsie D Costa 20,000.00 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 .....

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00,000/- vii. Hindustan Ciba-Geigy: Rs.3,00,000/- viii. Parsee Gen. Hospital: Rs.1,00,000/- ix. K.V. Cotton & Ginning: Rs.2,00,000/- x. Babubhai Jagjivandas: Rs.1,00,000/- Was read out and the same be and is hereby authorised by this General Council Body in the absence of any objection from the present Council Members. 6.2. We have considered the rival submissions and perused the material available on record. So far as, non-production of vouchers is concerned, the assessee has filed affidavi .....

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ovided, resolution of the Managing commission etc. It is also noted that such expenses are authorized by the Constitution of the Union and such aid is paid to the workers when the units of a particular union of workers are on strike and such workers are unable to meet their household expenditure. It is also noted that no such addition was made for Assessment year 2003-04 which is also based on similar facts. The original assessment for earlier three Assessment years was made under section 143(3) .....

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ertains 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 .....

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of general council held on 13/08/2005 at 5:30 P.M. at the registered office of the sabha. The crux of argument on behalf of the assessee is that reopening was made beyond four years. It was explained that notice under section 148 was issued on 29/03/2012 and four years ends on 31/03/2010, thus, reopening was made in the sixth year i.e. 2012. It was contended addition was based upon suspicion as necessary material on same facts was available with the Assessing Officer even in Assessment year 200 .....

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e validity of reopening of assessment. Considering the totality of facts, we find that reassessment proceedings will be invalid, in case, the assessment order itself records that the issue was raised and is decided against the assessee, therefore, the reassessment proceedings in this case is hit by the principle of change of opinion because reassessment proceedings will be invalid as notices along with detailed questionnaire were issued, query was raised and answered by the assessee in original .....

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e Assessing Officer subsequent to the passing of 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 opini .....

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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. Correct material facts can be ascertained from the assessment records also and it is not necessary that the same 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 t .....

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nd, therefore, it is a case of change of opinion . When at the first instance, in the original assessment proceedings, no opinion is formed, the principle of change of opinion cannot and does not apply. There is a difference between change of opinion and failure or omission of the Assessing Officer to form an opinion on a subject-matter, entry, claim, deduction, etc. When the Assessing Officer fails to examine a subject-matter, entry, claim or deduction, he forms no opinion. It is a case of no o .....

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e relevant. 10. Section 114 of the Evidence Act, 1872, is permissive and not a mandatory provision. Nine situations by way of illustrations are stated. These are by way of example or guidelines. As a permissive provision it enables to judge to support his judgment but there is no scope of presumption when facts are known. Presumption of facts under section 114 is rebuttable. The presumption raised under illustration (e) to section 114 of the Act means that when an official act is proved to have .....

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ished 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 prima .....

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[1971] 82 ITR 831 (SC) (para 34) Barium Chemicals Ltd. v. CLB [1966] 36 Comp Cas 639 (SC) (para 56) BLB Ltd. v. Asst. CIT [2012] 343 ITR 129 (Delhi) (para 14) Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 (SC) (para 45) CIT v. A. Raman and Co. [1968] 67 ITR 11 (SC) (paras 9, 34) CIT v. Chase Bright Steel Ltd. (No. 1) [1989] 177 ITR 124 (Bom) (para 21) CIT v. DLF Power Ltd. [2012] 345 ITR 446 (Delhi) (para 14) CIT v. Eicher Ltd. [2007] 294 ITR 310 (Delhi) (paras 10, 28) CIT v. Kelvinator of .....

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. Ltd. v. CIT [2012] 348 ITR 469 (Delhi) (para 17) G. R. Ramachari and Co. v. CIT [1961] 41 ITR 142 (Mad) (paras 38, 61) Hari Iron Trading Co. v. CIT [2003] 263 ITR 437 (P&H) (para 10) ITO v. Habibullah (S. K.) [1962] 44 ITR 809 (SC) (para 50) Indian and Eastern Newspaper Society v. CIT [1979] 119 ITR 996 (SC) (paras 34, 35) Indian Hume Pipe Co. Ltd. v. Asst. CIT [2012] 348 ITR 439 (Bom) (para 17) 3i Infotech Ltd. v. Asst. CIT [2010] 329 ITR 257 (Bom) (para 26) International Woollen Mills v. .....

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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 proce .....

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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 ? (iv) Whether and in what circumstances section 114(e) of the Evidence Act can be applied and it can be held that it is a case of change of opinion ?" 11. To explain the aforementioned position of the law, we are reproducing hereunder the relevant provision of section 147 of the Act. "147. Income escaping assessment.-If the Assessing O .....

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(hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to ma .....

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Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to Income-tax ; (b) where a return of income has been furnished by the assessee .....

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r 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 .....

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the documents available on record must show a nexus or that in fact they are germane and relevant to the subjective opinion formed by the Assessing Officer regarding escapement of income. (v) In cases where the first proviso applies, there is an additional requirement that there should be failure or omission on the part of the assessee in disclosing full and true material facts. The Explanation to the section stipulates that mere production of books of account or other documents from which the .....

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hould have formed an opinion at the first instance, i.e., in the proceedings under section 143(3) and thereafter, with the initiation of the reassessment proceeding, the Assessing Officer proposes or wants to take a different view. The word "opinion" is derived from the latin word "opinari" which means "to believe", "to think". The word "opinion" as per the Black's Law Dictionary means a statement by a judge or a court of a decision reached b .....

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. they are as a result of reading, experience and reflection". 14. In the context of assessment proceedings, it means 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 a .....

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e. 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 his mind to that material and accepted/rejected the view canvassed by the assessee, then merely because he did express this in the assessment order, that by itself would not .....

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to above, which are binding upon us and the observations made by the High Court of Gujarat with which we find ourselves in respectful agreement, the action initiated by the Assessing Officer for reopening the assessment cannot be said to be either incompetent or otherwise improper to call for interference by a writ court. The Assessing Officer has in the reasoned order passed by him indicated the basis on which income exigible to tax had in his opinion escaped assessment. The argument that the .....

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een held in favour of the assessee is too far-fetched a proposition to merit acceptance. There may indeed be a presumption that the assessment proceedings have been regularly conducted, but there can be no presumption that even when the order of assessment is silent, all possible angles and aspects of a controversy had been examined and determined by the Assessing Officer. It is trite that a matter in issue can be validly determined only upon application of mind by the authority determining the .....

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licable 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 r .....

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sessment is undertaken. In such cases there is no change of opinion. (2) Reassessment proceedings will be invalid in case the assessment order itself records that the issue was raised and is decided in favour of the assessee. Reassessment proceedings in the said cases will be hit by the principle of "change of opinion". (3) Reassessment proceedings will be invalid in case an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the Asse .....

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r comes to a wrong conclusion and income chargeable to tax has escaped assessment, resort may be made through section 263 of the Act. But initiation of reassessment proceedings will be invalid on the ground of change of opinion. Here a distinction has to be drawn between erroneous application/interpretation/ understanding of law and cases where fresh or new factual information comes to the knowledge of the Assessing Officer subsequent to the passing of the assessment order. If new facts, materia .....

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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. Correct material facts can be ascertained from the assessment r .....

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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 .....

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guished from cases where the material facts on record are correct but the Assessing Officer did not draw proper legal inference or did not appreciate the implications or did not apply the correct law. The second category will be a case of "change of opinion" and cannot be reopened for the reason that the assessee, as required, has placed on record primary factual material but on the basis of legal understanding, the Assessing Officer has taken a particular legal view. However, as state .....

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SC), the apex court held that the audit party can point out a fact, which has been overlooked by the Income-tax Officer in the assessment. Though there cannot be any interpretation of law by the audit party, it is entitled to point out a factual error or omission in the assessment and reopening of a case on the basis of factual error or omission pointed out by the audit party is permissible under law. As the Tribunal has rightly noticed, this was not a case of the Assessing Officer merely acting .....

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he 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. Th .....

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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 to allay the fears that the omission of the expression 'reason to believe' from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessment on mere change of opinion. It is, therefore, evident that even according to the CBDT a mere change of opinion cannot form the basis for reopening a completed assessment. 20 .....

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d to be unconstitutional. We are, therefore, of the opinion that section 147 of the Act does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceeding upon mere change of opinion. 21. The Hon ble Apex Court thereafter referred to the subsequent decision in Indian and Eastern Newspaper Society v. CIT [1979] 119 ITR 996 (SC) wherein it was observed that some of the observations made in Kalyanji Mavji (supra) were far too wide and the statute did not permit re .....

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had, when he made the original assessment, considered the provisions of sections 9 and 10. Any different view taken by him afterwards on the application of those provisions would amount to a change of opinion on material already considered by him. The Revenue contends that it is open to him to do so, and on that basis to reopen the assessment under section 147(b). Reliance is placed on Kalyanji Mavji and Co. v. CIT [1976] 102 ITR 287 (SC), where a Bench of two learned judges of this court obser .....

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mitted 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 cours .....

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;We have pointed out earlier that Kalyanji Maviji's case [1976] 102 ITR 287 (SC) outlines four situations in which action under section 34(1)(b) can be validly initiated. The Indian Eastern Newspaper Society's case [1979] 119 ITR 996 (SC) has only indicated that propo sition (2) outlined in this case and extracted earlier may have been somewhat widely stated ; it has not cast any doubt on the other three propositions set out in Kalyanji Mavji's case. The facts of the present case squ .....

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ed by proposition (4) set out in Kalyanji Maviji's case [1976] 102 ITR 287 (SC). This proposition clearly envisages a formation of opinion by the Income-tax Officer on the basis of material already on record provided the formation of such opinion is consequent on 'information' in the shape of some light thrown on aspects of facts or law which the Income-tax Officer had not earlier been conscious of. To give a couple of illustrations ; suppose an Income-tax Officer, in the original as .....

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into facts not originally undertaken. Again, suppose the Income-tax Officer accepts the plea of an assessee that a particular receipt is not income liable 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 .....

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oceedings 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 but it is so widely expressed as to include also cases in which the Income-tax Officer, having considered all the facts and law, arrives at a particular .....

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39;bare or mere change of opinion' where the Income-tax Officer (very often a successor officer) attempts to reopen the assessment because the opinion formed earlier by himself (or, more often, by a predecessor Income- tax Officer) was, in his opinion, incorrect. Judicial decisions had consistently held that this could not be done and the Indian and Eastern Newspaper Society's case [1979] 119 ITR 996 (SC) has warned that this line of cases cannot be taken to have been overruled by Kalyan .....

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326. Even making allowances for this limitation placed on the observations in Kalyanji Mavji, the position as summarised by the High Court in the following words represents, in our view, the correct position in law (at page 629 of 102 ITR) : The result of these decisions is that the statute does not require that the information must be extraneous to the record. It is enough if the material, on the basis of which the reassessment proceedings are sought to be initiated, came to the notice of the I .....

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id 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 .....

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rovisions of section 147, an assessment can be reopened if the Assessing Officer has "reason to believe" that income chargeable to tax has escaped assessment; but if he wants to do so after a period of four years from the end of the assessment year, he can do so only if the assessee has fallen short of his duty to disclose fully and truly all material facts necessary for his assessment. It does not follow that he cannot reopen the assessment even within the period of four years as afor .....

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essing Officer is enabled to compute the correct amount of income on which the assessee shall pay tax. The position has been further clarified by the proviso itself in a case where assessment under sub-section (3) of section 144 of the Act or this section has been made for the relevant assessment year, no action shall be taken after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such year by the reason of fail .....

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be governed by the provisions of section 147 to 151 as substituted (amended) w.e.f. 01/04/1989. Still, power u/s 147 of the Act, though very wide but no plenary. We are aware that Hon ble Gujarat High Court in Praful Chunilal Patel: Vasant Chunilal Patel vs ACIT (1999) 236 ITR 82, 840 (Guj.) even went to the extent that action under main section 147 is possible in spite of complete disclosure of material facts. The primary condition of reasonable belief having nexus with the material on record i .....

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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.). Id .....

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rimary or material facts are for the Assessing Officer to draw in order to complete the assessment and it is not for the assessee to advise him, for obvious reasons. The Explanation, however, cautions the assessee that he cannot remain smug with the belief that since he has produced the books of account before the Assessing Officer from which material or evidence could have been with due diligence gathered by him, he has discharged his duty. It is for him to point out the relevant entries which .....

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can be laid down. It was observed by the Hon ble Apex Court, in various cases that there should be some "tangible material" coming into the possession of the Assessing Officer in such cases to enable him to resort to section 147 of the Act. Despite being a case of full and true disclosure, tangible material coming to the possession of the Assessing Officer after he made the original assessment under section 143(3), would influence the opinion, formed or presumed to have been formed ea .....

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formation 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 .....

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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 protect the Revenue which can, in the light of subsequent coming into light of facts or law, reopen the assessment. In the light of the aforesaid discussion, since, there was no new tangible material available with the Assessing Officer while resorting to section 147/148 of the Act, more specifically, while fr .....

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