TMI Blog2019 (8) TMI 1485X X X X Extracts X X X X X X X X Extracts X X X X ..... iled by the assessee. There was no fresh or tangible material available with the Assessing Officer to reopen the proceedings. Therefore, we have no hesitation to conclude that the reopening of the assessment beyond four years was clearly a case of change of opinion. For all the above reasons, substantial questions of law No.1 to 3 are liable to be answered against the Revenue and consequently, it is held that the reopening of the reassessment is bad in law and is liable to be set aside. Decided against the Revenue. - Tax Case Appeal No.117 of 2009 - - - Dated:- 5-8-2019 - THE HONOURABLE MR. JUSTICE T.S. SIVAGNANAM And THE HONOURABLE MRS.JUSTICE V. BHAVANI SUBBAROYAN For the Appellant : Mr.Karthik Ranganathan, SSC S. Rajesh For the Respondent : Mr. Vikram Vijayaraghavan for M/s. Subbaraya Aiyar Padmanabhan JUDGMENT T.S. Sivagnanam, J This appeal, filed by the Revenue under Section 260-A of the Income Tax Act, 1961 ('the Act' for brevity), is directed against the order dated 30.05.2008 passed by the Income Tax Appellate Tribunal Madras 'C' Bench (for short, the Tribunal) in ITA. No.582/Mds/2005 for the Assessment Year 1996-97. 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 47 of the Act and in doing so, the Assessing Officer pointed out that it was noticed that other income relating to Sankar Nagar Unit was ₹ 6,16,51,948/-, that while computing the deductible amount under Section 80-I of the Act, the assessee had excluded certain items of other income and that the entire other income had not been excluded from the profit of the business to derive the deductible amount under Section 80-I of the Act. The Assessing Officer held that under Section 80-I of the Act, the income derived from the undertaking alone could be allowed. It was further pointed out that in case of other income, the nexus between the profits and gains and the industrial undertaking if not direct, but incidental, such income could not have been regarded as having been derived from the industrial undertaking. Thus, the Assessing Officer excluded other income while determining the deductible profit under Section 80-I of the Act. 5. Further, the Assessing Officer pointed out that assessee received dividend income from the Unit Trust of India and interest income from the then Tamil Nadu Electricity Board, that those two receipts were made out of investments and that the same shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mponents of the gross total income could not be examined for limiting deduction under Section 80-I of the Act, that the CIT(A) failed to appreciate that when a particular item of income was not considered for computing deduction under Section 80-I of the Act, the same could not be considered for limiting the deduction under the Section 80-I of the Act and that without prejudice to the above grounds, the Revenue contended that the CIT(A) erred in rejecting the proposal for enhancement made by the Assessing Officer in the course of appeal proceedings for withdrawing the entire deduction under Section 80-I of the Act, as there was loss of business of ₹ 4.12 Crores in the relevant year. 9. Before the Tribunal, the assessee contended that the CIT(A) had not gone into the correctness of the reopening under Section 147 of the Act, because the CIT(A) allowed the appeal on merits. By referring to Rule 27 of the Appellate Tribunal Rules (hereinafter referred to as 'the Rules'), the assessee submitted that they had a right to agitate the issue regarding reopening of the assessment before the Tribunal. In this regard, it was submitted that the original assessment was completed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal held that the particulars regarding dividends and short term capital gains were clearly available before the Assessing Officer during the original assessment proceedings and that the Revenue had not brought any material before it, which was not disclosed by the assessee in the original return of income. Thus, the Tribunal concluded that there was no failure on the part of the assessee to disclose any material fact relevant for the reassessment and that the assessment could not have been reopened. Following the decisions in the case of Elgi Finance Ltd. and Premier Mills Ltd., the reopening of the assessment was annulled. 13. In our view, the Tribunal need not have proceeded further in the matter because having wholly annulled the reassessment, nothing more remains to be considered. Nevertheless, the Tribunal proceeded to take a decision on merits and affirmed the order passed by the CIT(A). 14. Challenging the order passed by the Tribunal, the Revenue preferred this appeal, which was admitted on 31.3.2009 on the aforementioned substantial questions of law. 15. The substantial questions of law framed can be bunched up together, as they pertain to the interpretat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 1997 207 80 (Madras)]; (ii) IPCA Laboratory Ltd. Vs. Deputy Commissioner of Income Tax [reported in (2004) 135 taxmann 594 (SC)], (iii) CIT, Thiruvananthapuram Vs. K.Ravindranathan Nair [reported in (2007) 165 taxmann 282 (SC)]; (iv) Liberty India Vs. CIT [(2009) 183 taxman 349 (SC)]; and (v) Reliance Trading Corporation Vs. ITO [reported in (2015) 61 Taxmann.com 267 (Rajasthan) (FB)]. 19. Mr.Vikram Vijayaraghavan, learned counsel appearing for the respondent assessee, while seeking to sustain the order passed by the Tribunal with regard to the validity of the reassessment, placed reliance on the decisions in the cases of (i) CIT Vs. Abdul Rahman Sait [reported in (2008) 306 ITR 0142 (Madras)]; (ii) Deep Chand Kothari Vs. CIT [reported in (1998) 171 ITR 0381 (Madras)]; (iii) Dahod Sahakari Kharid Vechan Sangh Ltd. Vs. CIT [reported in (2006) 282 ITR 0321 (Gujarat)]; (iv) Tanmac India Vs. Deputy Commissioner of Income Tax [reported in (2016) 97 CCH 0189 (CHEN)(HC)]; and (v) CIT Vs. Kelvinator of India Limited [reported in (2010) 320 ITR 0561 (SC)]. 20. To sustain the finding rendered by the Tribunal on the entitlement of the assessee for relief u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellate Commissioner, who did not touch on the said point nor decided the appeal on merits in favour of the assessee. It was held that it would be deemed that the Appellate Commissioner decided the point of jurisdiction against the assessee and the point of jurisdiction was raised before the Tribunal therein referring to Rule 27 of the Rules. It was further pointed out that Rule 27 of the Rules provides that the respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him. Thus, it was held that the assessee was entitled to support the order of the Appellate Commissioner for not clubbing the said two incomes on the said ground of lack of jurisdiction. The Court noted the decision in the case of CIT Vs.S.Nelliappan [reported in (1967) 66 ITR 722 (SC)], wherein it was held that the Tribunal may allow new grounds to be urged before it. 24. In the decision in the case of Dahod Sahakari Kharid Vechan Sangh, wherein one of the substantial questions of law framed for consideration was as to whether, the Tribunal was right in law in holding that it was necessary for the assessee to file cross-objection in spite of fully su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal was accepted as a correct proposition, it would render Rule 27 of the Rules redundant and nugatory and it was not possible to interpret the provision in such manner and that the right granted to the respondent by the Rules could not be taken away by the Tribunal by referring to the provisions of Section 253(4) of the Act. 28. We respectfully agree with the proposition laid down in the aforementioned two decisions. The language employed in Rule 27 of the Rules is clear and it deals with cases where the respondent may support the order on the grounds decided against him. Rule 27 of the Rules states that though the respondent may not have appealed, he may support the order appealed against on any of the grounds decided against him. As pointed out by us earlier, the CIT(A) has recorded that the validity of the reassessment proceedings was hotly debated before him. However, the CIT(A) proceeded to take up the issue relating to the relief, which the assessee would be entitled to under Section 80-I of the Act and proceeded to grant the same on the close of its order and the CIT(A) would state that since the appeal has been allowed on merits under Section 80-I of the Act, there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t proceedings, which was concluded on 15.02.1999 under Section 143(3) of the Act. Furthermore, the Tribunal, on facts, recorded that the Department did not bring any material fact before it, which was not disclosed in the original return of income. 32. Even in this appeal, no such fact has been brought to our notice nor pleaded in the memorandum of grounds of appeal and presumably that is the reason why the Revenue had raised the substantial questions involving the interpretation of Rule 27 of the Rules and conveniently was not focusing on the issue as to whether the reopening of assessment was on account of change of opinion. A reading of the reassessment order dated 31.03.2004 will clearly reveal that all facts and figures were gathered by the Assessing Officer only from the original return of income filed by the assessee. There was no fresh or tangible material available with the Assessing Officer to reopen the proceedings. Therefore, we have no hesitation to conclude that the reopening of the assessment beyond four years was clearly a case of change of opinion. For all the above reasons, substantial questions of law No.1 to 3 are liable to be answered against the Revenue and ..... 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