IN THE HIGH COURT OF KARNATAKA AT BENGALURU ON THE 4TH DAY OF DECEMBER 2019 BEFORE THE HON'BLE MR. JUSTICE RAVI MALIMATH AND THE HON'BLE MR. JUSTICE ASHOK S. KINAGI INCOME TAX APPEAL No.506 OF 2007 BETWEEN:
1. THE COMMISSIONER OF INCOME TAX C R BUILDING, QUEENS ROAD BENGALURU.
2. THE JOINT COMMISSIONER OF INCOME TAX SPECIAL RANGE-4 C R BUILDING, QUEENS ROAD BENGALURU.
…APPELLANTS (BY SRI. K V ARAVIND, ADVOCATE) AND:
M/S I G PETROCHEMICALS LIMITED D-4, JYOTHI COMPLEX, INFANTRY ROAD BENGALURU-560 001.
….RESPONDENT (BY SRI. S PARTHASARATHI, ADVOCATE) THIS APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED: 28.12.2006 PASSED IN ITA No. 18/BANG/2001, FOR THE ASSESSMENT YEAR: 1992-
1993.
THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR JUDGMENT ON 24.10.2019, COMING ON FOR PRONOUNCEMENT THIS DAY, ASHOK S. KINAGI J, DELIVERED THE FOLLOWING:
JUDGMENT This is an appeal filed by the Revenue against the order dated 28.12.2006 passed by the Income Tax Appellate Tribunal, Bangalore in ITA No.18/BANG/2001 confirming the order of the Appellate Authority and confirm the order passed by the Joint Commissioner of Income Tax, Special Range - 4, Bangalore.
2. Brief facts of the case are as follows:
That the original assessment was completed under Section 143(3) of the Income Tax Act, 1961 (for short ‘the Act’) on 30.09.1994. The Assessing Officer after making a detailed inquiry, accepted the return of Rs.39,17,534/-, and the loss which was on account of unabsorbed depreciation which was allowed to be carried forward. Subsequently, on 30.04.1997, notice was issued under Section 148 of the Act for re-opening of assessment which was passed in the case of the respondent while reframing the assessment. In the course of re- assessment proceedings, the Assessing Officer disallowed the depreciation and other expenses in respect of running of a boiler and turbine while computing the income under the head ‘other sources’ on the ground that there were strong indication that neither the boiler nor the turbine were ready for the use up to 31.03.1992. He also held that agreements entered into between the respondent-company and M/s. Mysore Petrochemicals for hiring out the boiler and turbine and the evidence produced in support of the same, were generated with the sole purpose to prove that boiler and turbine have been hired out. Accordingly, Assessing Officer determined the total income of the assessee at Rs.1,42,36,688/- under the head ‘income from other sources’ vide order dated 30.03.2000.
The respondent aggrieved by the order dated 30.03.2000, passed by the Joint Commissioner of Income Tax, Special Range-4 Bangalore, preferred appeal No.ITA.18/SR-4/CIT(A)II/2000-01 before the Commissioner of Income Tax (Appeals)-II, Bangalore. The Appellate Authority allowed the appeal on 06.09.2000, holding that the re- assessment done by the Assessing Officer is liable to be annulled. The appellant aggrieved by the order dated 06.09.2000, passed by the learned Commissioner of Income Tax (Appeals), preferred ITA No.18-BANG/2001 before the Income Tax Tribunal. The Tribunal, by order dated 28.12.2006, dismissed the appeal filed by the appellant.
The appellant aggrieved by the Income Tax Appellant Tribunal confirming the order of the Appellate Commissioner, has filed this appeal.
3. Heard the arguments of learned counsel for the parties.
4. This court admitted the appeal on the following substantial questions of law :
“i. Whether the Appellate Authorities were correct in holding that re-opening of assessments was barred by limitation in view of proviso to Section 147 of the Act as the assessee has disclosed the claim of depreciation in respect of boiler and turbine and other assets in the return filed by the assessee?
ii. Whether the Appellate Authorities were correct in not taking into consideration Section 149 of the Act prescribing limitation as the assessee had failed to disclose that the said assets over which depreciation was claimed was not utilized in the course of its business as the same was being setup during the current assessment year and therefore the re- opening was fully justified?”
5. The income tax returns for the relevant year was originally filed in time. The assessment was made under Section 143(3) of the Act. The respondent has furnished all the primary material for completion of assessment and the assessment was completed after seeking various clarifications and details by issuing notice under Section 142(1) and 143(2) of the Act. Original assessment was completed and notice under Section 148 of the Act was issued for re-opening of the assessment on 03.04.1997, i.e., after expiry of 4 years from the end of the relevant assessment year. Unless any income chargeable to the tax has escaped assessment, for such assessment year by reason of failure on part of the assessee to disclose fully and truly all the material facts necessary for its assessment in that assessment year, reopening of assessment is not permissible. The assessee has disclosed all the primary materials for the said assessment year. He has not suppressed any material before the Assessing Authority. The Tribunal, in para 2.2 observed that the reason for re-opening was not available for verification and also recorded the submission of learned Dr. Smt.
Swathi S. Patil, that all the details in respect of hiring of boiler and turbine were furnished earlier and no new facts have been brought on record by the Assessing Officer. The Assessing Officer relied on the very same material which were available on record and which were duly considered by the earlier Assessing Officer, while framing original assessment on 30.09.1994. Thus, in terms of proviso to Section 147 of the Act, no action can be taken beyond the period of 4 years from the end of relevant assessment year, when the original assessment is completed under Section 143(3) of the Act. The proviso declares that where the original assessment was made under Section 143(3) of the Act, after scrutiny of the records, no action shall be taken after the expiry of 4 years from the end of relevant assessment year, unless the case attracts the exceptions provided by proviso to Section 147 of the Act. It is not the case of the Assessing Officer that material facts were either not disclosed or even after the same were sought for, were not furnished, and no new facts have been brought on record by the Assessing Officer.
6. As observed above, the respondent has disclosed fully and truly all the material facts necessary for the assessment by way of disclosing the hire income for the boiler and turbine and the interest cum income on deposits on share application money as well as claiming depreciation in respect of hired out boiler and turbine and by way of furnishing necessary documents before the Assessing Officer. The Commissioner of Income Tax and the Appellate Tribunal, after considering the material on record have rightly held that notice under Section 148 of the Act issued on 03.04.1997, is bad in law as the same is not in accordance with the provisions of Section 147 of the Act.
7. We have also considered the submission made by learned Dr. Smt. Swathi S. Patil, before the Tribunal, as observed by the order of the Tribunal dated 28.12.2006, in para 2.2, which is as under:
2.2: Learned DR Smt. Swathi S Patil fairly submitted in the spite of repeated requests to the Assessing Officer, the record was not made available. Thus, the reasons for re-opening are not available for verification. She accordingly submitted that the finding of learned CIT(A) that all necessary details in respect of hiring of boiler and turbine were furnished earlier and no new facts has been brought on record by the assessing officer, cannot be now questioned. She was therefore unable to defend the assessment order.
8. The appellant has not made out any grounds to interfere with the impugned order. After considering the entire material on record, we answer the substantial questions of law in favour of the assessee. Appeal disposed off accordingly.
Sd/- JUDGE Sd/- JUDGE RD