Appeal against Reassessment Proceeding u/s. 148 (of Income Tax Act, 1961) for A.Y. 2009-10 by M/s. Bharat Electronics Ltd.

Case Name:

M/s. Bharat Electronics Ltd. vs. The Assistant Commissioner of Income Tax, LTU, Circle – 1, Bangalore (ITAT Bangalore)

Key Takeaways:

1. The Ld.Advocate for the assessee argued on the maintainability of the proceeding initiated u/s. 148 (of Income Tax Act, 1961), citing that the Assessing Officer proceeded with the reassessment without disposing of the objections raised by the appellant.

2. It was argued that the issues raised during the reopening of the assessment were already dealt with during the original assessment proceeding, and no new material came to the knowledge of the Assessing Officer subsequent to the original assessment proceedings.

3. The Ld.AR relied on the judgment passed by the Hon’ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd., emphasizing that reopening the assessment on the basis of mere change of opinion, in the absence of any new evidence/material, is void-ab-initio and bad in law.

Case Synopsis:

The provided is a legal order from the Income Tax Appellate Tribunal ‘B’ Bench in Bangalore, regarding the case of M/s. Bharat Electronics Ltd. for the assessment year 2009-10. The case involves an appeal filed by the assessee against the order passed by the NFAC, Delhi, arising out of the order dated 28.03.2016 passed by the Ld.DCIT, Large Tax Payers Unit, Circle – 1, Bangalore u/s. 143(3) (of Income Tax Act, 1961) r.w.s. 147 (of Income Tax Act, 1961).

The appeal challenges the addition made in the reassessment proceeding u/s. 148 (of Income Tax Act, 1961) for the A.Y. 2009-10, which has been confirmed. The document contains detailed arguments presented by the Ld.Advocate representing the assessee, as well as the response from the Ld.DR representing the revenue. The judicial members, Shri Chandra Poojari and Ms. Madhumita Roy, considered the arguments and made their decision.

The main points of contention in the appeal are as follows:

1. The maintainability of the proceeding initiated u/s. 148 (of Income Tax Act, 1961).

2. The issues raised during the reopening of the assessment were already dealt with during the original assessment proceeding.

3. Whether the reassessment proceeding initiated u/s. 148 (of Income Tax Act, 1961) is without jurisdiction and not maintainable in the eye of law.

The judicial members thoroughly examined the arguments, the relevant materials available on record, and the orders passed by the authorities below in different stages. They also considered the judgments cited by the Ld.Advocate. After careful consideration, the judicial members made the following observations and conclusions:

The Ld.Advocate argued that the reassessment proceeding was not maintainable as the Assessing Officer proceeded with the reassessment without disposing of the objections raised by the appellant.

The Ld.Advocate also argued that the issues raised during the reopening of the assessment were already dealt with during the original assessment proceeding, and no new material came to the knowledge of the Assessing Officer subsequent to the original assessment proceedings.

The judicial members referred to the judgment passed by the Hon’ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd. and observed that the reopening of the assessment on the basis of mere change of opinion, in the absence of any new evidence/material in the hands of the revenue on the same set of information which was available at the time of the original assessment, is found to be void-ab-initio, bad in law, and thus, the entire proceeding is quashed.

In conclusion, the appeal filed by the assessee was allowed, and the reassessment proceeding initiated u/s. 148 (of Income Tax Act, 1961) was found to be void-ab-initio and quashed.

FAQ

Q1: What were the objections raised by the appellant regarding the maintainability of the reassessment proceeding?

A1: The appellant raised objections regarding the maintainability of the proceeding initiated u/s. 148 (of Income Tax Act, 1961), arguing that the Assessing Officer proceeded with the reassessment without disposing of the objections raised by the appellant.

Q2: What was the argument regarding the issues raised during the reopening of the assessment?

A2: It was argued that the issues raised during the reopening of the assessment were already dealt with during the original assessment proceeding, and no new material came to the knowledge of the Assessing Officer subsequent to the original assessment proceedings.

The instant appeal filed by the assessee is directed against the order dated 29.03.2023 passed by the NFAC, Delhi arising out of the order dated 28.03.2016 passed by the Ld.DCIT, Large Tax Payers Unit, Circle – 1, Bangalore u/s. 143(3) (of Income Tax Act, 1961) r.w.s. 147 (of Income Tax Act, 1961) (hereinafter referred to as “the Act”) for A.Y. 2009-10 whereby and whereunder the addition made in the reassessment proceeding u/s. 148 (of Income Tax Act, 1961) for the A.Y. 2009-10 has been confirmed.

2. At the very threshold of the matter, the Ld.Advocate appearing for the assessee advanced her argument on the very point of the maintainability of the proceeding initiated u/s. 148 (of Income Tax Act, 1961). The crux of the submission of the Ld.Advocate appearing for the assessee is on two fold.

According to her, though upon receipt of the notice u/s. 148 (of Income Tax Act, 1961) dated 01.10.2014 alleging escapement of assessment in regard to a sum of Rs.48,47,73,370/- being the deduction towards the provision for customer disallowances and disallowance u/s. 35(2AB) (of Income Tax Act, 1961) to the extent of Rs.1,02,76,500/-, the appellant duly made objections dated 28.10.2014 before the Ld.AO on merit on two counts as raised by him, the Ld.AO proceeded with the reassessment proceeding without first disposing of the said application preferred by the assessee dated 28.10.2014. As the Assessing Officer is bound to dispose of the said objection by passing a speaking order but proceeded to pass the order of assessment, the entire proceeding is not in terms of the statutory provisions and the impugned order is, therefore, bad in law and liable to be quashed. Secondly, it was argued by the Ld.Advocate appearing for the assessee that the issues as raised by the Ld.AO while reopening assessment u/s. 148 (of Income Tax Act, 1961) were already been dealt with during the original assessment proceeding. Upon examining the documents furnished by the assessee in support of the claim made out the original assessment was framed and in the absence of any new material given to the knowledge of the assessing officer subsequent to the original assessment proceedings, reopening on the same set of facts was a clear case of change of opinion and the same is not, therefore, permissible. In this regard she has relied on very many following judgments including the judgment passed by the Hon’ble Supreme Court in case of CIT vs. Kelvinator of India Ltd. reported in (2010) 187 Taxman 312 (SC): 

CIT v. Kelvinator of India Ltd [2010] 187 Taxman 312 (SC) 

Deepak Extrusions (P.) Ltd. vs. Deputy Commissioner of Incometax, Central Circle 1(4), Bangalore [2017] 80 taxmann.com 77 (Karnataka) 

Hewlett Packard Financial Services (India) (P.) Ltd. vs. Deputy Commissioner of Income-tax [2023] 152 taxmann.com 559 (Karnataka) 

M/s. Mahindra Electric Mobility Ltd. v. ACIT [IT Appeal No. 641 (Bang.) 

Provimi Animal Nutrition India Pvt. Ltd. v. Principal Commissioner of Income Tax, Bangalore [2021] 124 taxmann.com 73

3. The ultimate prayer made by the Ld.AR is, therefore, to quash the impugned reassessment proceeding initiated u/s. 148 (of Income Tax Act, 1961) as without jurisdiction and not maintainable in the eye of law. On the other hand, the Ld.DR relied upon the order passed by the authorities below.

4. We have heard the rival submissions made by the respective parties, we have also perused the relevant materials available on record including the orders passed by the authorities below in different stages.

5. The brief facts leading to this case is this that the appellant filed its original return of income declaring total income at Rs.1004,29,76,670/-. Notice u/s. 143(2) (of Income Tax Act, 1961) was issued and served upon the appellant; followed by a revised return on 18.03.2011 declaring total income at Rs.1004,00,57,290/-. The appellant duly complied with all the notices by furnishing required information and documents as called for by and under the submissions dated 09.06.2011. By and under a further notice dated 07.06.2011 u/s. 142(1) (of Income Tax Act, 1961), the assessee was directed to submit the information relating to the deduction claimed u/s. 35(2AB) (of Income Tax Act, 1961), provision for customer disallowance, enhanced depreciation and disallowance u/s. 14A (of Income Tax Act, 1961). The said assessment proceeding was completed with the following addition:

a) Enhanced Depreciation of Rs.7,59,02,526/-

b) Disallowance of Rs.6,00,425/- u/s. 14A (of Income Tax Act, 1961) r.w.Rule 8D of the Income Tax Rules, 1962

6. During the appellate proceedings, the disallowance of expenditure u/s. 14A (of Income Tax Act, 1961) stood upheld but the enhanced depreciation was allowed. Further that the TDS credit after due verification was also partly allowed whereupon the appeal before the Tribunal was filed by the appellant which was finalised upon allowing the whole TDS credit after due verification.

7. Thereafter on 01.10.2014 a notice u/s. 148 (of Income Tax Act, 1961) seeking to reopen the assessment was served upon the assessee. The assessee was also served with the copy of the reasons as asked for; On 28.10.2014, the assessee made his submissions explaining the issues before the Ld.AO with a prayer for dropping of the proceeding initiated u/s. 148 (of Income Tax Act, 1961). We have gone through the objection dated 28.10.2014 preferred by the assessee to the DCIT, Bangalore, a copy whereof has been submitted before us which is also reproduced here in below:

8. The case of the assessee is this that this particular submissions is nothing but objection of the proceeding Page 7 of 19 ITA No. 420/Bang/2023 initiated by the Ld.AO u/s. 148 (of Income Tax Act, 1961); the same was not disposed of at the very threshold of the matter in terms of the provisions of the law, instead, the Ld.AO proceeded with the reassessment proceeding and finalised the same with the order as above. Upon perusal of the order passed by the Ld.AO, it appears that the Ld.AO duly mentioned the said objection dated 28.10.2014 made by the appellant to the initiation of the proceeding u/s. 148 (of Income Tax Act, 1961); such observation is appearing at page 2, paragraph 3 of the assessment order. Once the Assessing Officer has taken note of the said objection filed by the appellant and mentions the same in the assessment order itself, we do not find any reason to undo the reassessment proceeding merely because of the observation has not been made independently before proceeding with the reassessment proceeding by the Ld.AO. In fact, we decline to accept such contention made by the assessee that since the objection has not been dealt with and disposed of at the very threshold by the Ld.AO, the entire proceeding is vitiated and thus liable to be set aside. Rather once the objection was taken into consideration in its proper perspective which is also reflecting while dealing with the matter on merit, by the Ld.AO upon consideration of the said objection dated 28.10.2014, in our considered opinion the same is not causing any prejudice to the appellant and therefore, the said ground is found to be devoid of any merit and thus dismissed.

9. So far as the maintainability of the reopening on the same set of facts is concerned, we find that the assessee was issued a notice u/s. 142(1) (of Income Tax Act, 1961) dated 07.06.2011, the copy whereof has been annexed in the paper book filed before us. The same is reproduced here in below.