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2017 (3) TMI 143 - ITAT KOLKATA

2017 (3) TMI 143 - ITAT KOLKATA - TMI - Reopening of assessment - Prior period expenditure - disallowance contribution to superannuation fund - Held that:- As seen the question whether contribution to superannuation fund ought to be disallowed or not has already been gone into by the AO while concluding the original assessment proceedings. The Tax Audit Report which was referred to by the AO in the reasons recorded before issuing notice u/s 148 was very much available when the original assessmen .....

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ome chargeable to tax. AO has come to a different conclusion on the material already available on record while concluding the assessment proceedings u/s 143(3) of the Act and merely on the change of opinion on the same set of facts. Such action of the AO has been held to be illegal and not valid in law by the decisions referred to by the assessee before CIT(A). We, therefore, hold that the initiation of proceedings u/s 147 of the Act was not valid and therefore order of reassessment has to be an .....

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tment : Shri Anand Kumar Sinha, JCIT For The Assessee : Shri Mayank Singhania, ACA ORDER Per N.V.Vasudevan, JM ITA No.1524/Kol/2013 is an appeal filed by the Revenue against the order dated 15.02.2013 of CIT(A)-XX, Kolkata relating to A.Y 2003-04. The assessee has filed a cross objection being C.O. 99/Kol/13 against the very same order of CIT(A). 2. The Assessee is a company engaged in the business of manufacturing of jute goods. For A.Y.2003-04 the assessee filed return of income on 01.12.2003 .....

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O in his letter was as follows :- 5. From item no.14 of notes on account in schedule 8 it is seen that contribution to superannuation scheme for ₹ 36,41,496/- has been debited to Profit & Loss Account although the approval of Commissioner of Income-tax was not obtained. Please explain why this claim should not be disallowed. 3. The assessee addressed a reply dated 20.01.2006 in which the assessee submitted that a sum of ₹ 36,41,496/- debited in the profit and loss account was a c .....

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as no addition made by way of disallowance of payment made to Superannuation fund. 5. The AO however issued a notice u/s 148 of the Act for assessing income of Assessee that has escapement assessment within the meaning of section 147 of the Act. The AO had recorded the following reasons :- Reasons for issue of notice u/s 148 It is seen from schedule 18 of Annual Report that the assessee co. introduced a superannuation scheme for certain employees w.e.f. 1st march, 1990 and a sum of ₹ 36,41 .....

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tribution from 1st March, 1990 to March, 2001 is prior period expenses which is disallowable/not allowable expenditure. I, have, therefore, reason to believe that income chargeable to tax has escaped asstt. By ₹ 36,41,496/- within the meaning of section 147 of the Il.T.Act, and such escapement is attributable to the assessee who claimed inadmissible expenses. Notice u/s 148 is issued accordingly. 6. In response to the notice u/s 148 of the Act the assessee by letter dated 06.09.2006 reques .....

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w.e.f. 06.03.2003 and the contribution by the assessee, as an employer, to the said fund was paid on 10.03.2003 though the approval of the Commissioner of Income Tax was obtained only by order dated 16.11.2004. The assessee pointed out that since the approval was operative from 06.03.2003 the contribution to the fund made by the assessee on 10.03.2003 was a contribution to the superannuation fund and was to be allowed as deduction u/s 36(1)(iv) of the Act. The AO however, rejected the explanatio .....

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1,496/- on 10.03.03 to Birla Sunlife Insurance Company Ltd there was no approval of the Superannuation Fund to which the contribution was made. (iii)As per the Audit Report the petition for approval of the Superannuation Fund by the CIT-I, Kol was filed on 27.03.03 much after the actual payment made on 10.03.03. Therefore, the contribution of 36,41,496/- on account of Superannuation Fund charged to revenue is not allowed to be deducted from revenue account and added back for computing the total .....

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eopen a completed assessment purely the basis of a change of opinion which was not permissible in law. In this regard the assessee placed reliance on the decision of the Hon ble Delhi High Court in the case of CIT vs Kelvinator of India Ltd. 256 ITR 1 (Delhi)(FB) and also the CBDT Circular No.549 dated 31.10.1989 which explained the scope of section 147 and made it very clear that a mere change of opinion cannot form the basis for reopening a completed assessment. Attention was also drawn to the .....

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and answered by the assessee in original assessment proceedings but thereafter the AO does not make any addition in the assessment order. The fact that the assessment order is silent will not be relevant in determining whether or not there is 'change of opinion' because the assessee cannot have any control over the way an order is written. (ii) Decision of the Hon'ble Mumbai ITAT in Third Member Bench-in the case of ACIT ,-vs.- Rolta India Ltd (2011) 132· ITO 98 (Mum) wherein .....

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penses were allowable as revenue expenditure. Hence, in the absence of any tangible material which could persuade the AO to form the belief that income chargeable to tax had escaped assessment by reason of the allowance of the expenses, he cannot issue notice u/s 148 even though the notice has been issued within the period of four years from the end of the A.Y. 1998-99. 9. As far as the merits of the addition made by the AO is concerned, the Assessee drew attention of the AO to the provisions of .....

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fund, as the case may be; and subject to such conditions as the Board may think fit to specify in cases where the contribution are not in the nature of annual contributions of fixed amounts or annual contributions fixed on some ·definite basis by reference to the income chargeable under the head "Salaries" or to the contributions or to the number of members of tile fund;" It was submitted that perusal of the provisions of section 36(1)(iv) of the Act would show that deduct .....

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ution to superannuation fund on 10-03-2003 vide cheque no. 906990 drawn on SBI. Copy of the above approval and the receipt evidencing payment of the same was also filed. Reference was also made to the provisions of Sec. 438 of the Act which are as under:- "43B. Certain deductions to be only on actual payment. Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of- (b) any sum payable by the assessee as an employer .....

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ned in this section shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable. in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year In which he liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return. " It was submitted that on reading of the aforesaid provision, a deduction with regard to the ex .....

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a gratuity scheme is introduced for the first time, the gratuity payable to the existing employees who have already rendered some years of service and are still in service shall have to be considered ,to make a provision, because the gratuity payable depends on the entire length of service of an employee. The provision for gratuity has to value the liability with reference to 15 years of service, but this is distributed entire 15 years, out of which, when the scheme comes into force , a part of .....

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of initiation of re-assessment proceedings, however deleted the addition made by the AO observing as follows :- 5.2. I have perused the assessment order and considered the submission of the appellant. The fact of the case is that the A.O. disallowed the claim of the appellant towards contribution to superannuation fund on the ground that tie contribution was not related to the FY 2002-03 but the same was related to the period prior to 1st April 2002. At the time of payment on 10-03-2003 to Birl .....

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td. amounting to ₹ 36,41,396/- was made on 10.03.2003. As per section 43B, the same is allowable on payment basis. To support their argument, they relied upon various judgments of the Honble ITAT/High Courts. After careful consideration of the facts and circumstances of the case and also the various judgments cited by the appellant, I find merit in their argument, therefore, the appeal on this ground is allowed. 11. Aggrieved by the order of CIT(A) the revenue has preferred the present app .....

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s null and void, the assessee has filed cross objection in which the following grounds have been raised. :- (a). That on the facts and in the circumstances of the case, initiation of reassessment proceedings and passing of the order u/s 143 r.w.s 147 dated 24-12- 2007 by the A.O. is unjustified, erroneous and needs to be summarily cancelled. (b). That on the facts and in the circumstances of the case, the issues raised under re-assessment proceedings were already examined by the A.O. during the .....

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f the ld. Counsel for the assessee, who reiterated the submissions as made before CIT(A). 14. We have given a very careful consideration to the submissions of the ld. DR, who reiterated the stand of the AO as is reflected in the order of assessment. We are of the view that the initiation of re-assessment proceedings was not legally valid. As we have already seen the question whether contribution to superannuation fund ought to be disallowed or not has already been gone into by the AO while concl .....

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