Court In Kerala State Electricity Board v. Deputy

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE VIJU ABRAHAM MONDAY, THE 6 DAY OF SEPTEMBER 2021 / 15TH BHADRA, 1943 ITA NO. 20 OF 2020 AGAINST THE ORDER/JUDGMENT IN ITA 52/2019 OF I.T.A.TRIBUNAL,COCHIN BENCH, ERNAKULAM APPELLANT/APPELLANT/RESPONDENT/REVENUE: THE PRINCIPAL COMMISSIONER OF INCOME TAXTHIRUVANANTHAPURAM BY ADV CHRISTOPHER ABRAHAM RESPONDENT/RESPONDENT/APPELLANT/ASSESSEE: KERALA STATE ELECTRICITY BOARDPATTOM, THIRUVANANTHAPURAM REP BY ITS MANAGING DIRECTOR BY ADVS.SRI.M.GOPIKRISHNAN NAMBIARSRI.K.JOHN MATHAISRI.JOSON MANAVALANSRI.KURYAN THOMASSRI.PAULOSE C. ABRAHAM ADV RAJA KANNAN FOR RSPDT THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 06.09.2021, THE COURTON THE SAME DAY DELIVERED THE FOLLOWING: ITA NO. 20 OF 2020 -2- J U D G M E N T S.V.BHATTI,J. Heard Mr.Christopher Abraham and Adv.Raja Kannan forparties. 2.The Principal Commissioner of Income Tax,Thiruvananthapuram/Revenue is the appellant. The KeralaState Electricity Board, Pattom, Thiruvananthapuram/Assesseeis the respondent. The subject appeal is at the instance ofRevenue under Section 260A of the Income Tax Act, 1961 (forshort, 'the Act') from the order of Income Tax AppellateTribunal (for short, the Tribunal) Cochin Bench in I.T.ANo.52/Coch/2019 dated 08.08.2019. The controversiescanvassed in the appeal are relate to the return filed for theassessment year 2005-06. 3.The appeal is filed by raising the followingsubstantial questions of law: “1) Is the Hon'ble Tribunal right in holding that the issues ITA NO. 20 OF 2020 -3- were subject matter of appeal before the CIT(A) in the caseof original assessment and hence the Assessing Officercannot re-visit the same by re-opening the assessment u/s147 of the Act and also in view of second proviso to section147, especially whenof original assessment and hence the Assessing Officercannot re-visit the same by re-opening the assessment u/s147 of the Act and also in view of second proviso to section147, especially when a) the reassessment proceedings u/s 147 was initiatedas per explanation 2 c (iii) & (iv) given under provisosto section 147 whereby excessive relief allowed andexcessive loss or any other allowance admitted aredeemed to be a case where income chargeable to taxhas escaped assessmentas per explanation 2 c (iii) & (iv) given under provisosto section 147 whereby excessive relief allowed andexcessive loss or any other allowance admitted aredeemed to be a case where income chargeable to taxhas escaped assessment b) the appeal against order u/s 143(3) was filed on theissue involved and not on the quantum of additionand hence proviso to 148 does not apply.issue involved and not on the quantum of additionand hence proviso to 148 does not apply. 2) Is the Hon'ble Tribunal right in confirming the decisionof the Commissioner of Income Tax(Appeals) and quashingthe assessment order dated 30/12/2010, thereby deletingthe addition of Rs.1,39,50,19,000/- on electricity duty andof the Commissioner of Income Tax(Appeals) and quashingthe assessment order dated 30/12/2010, thereby deletingthe addition of Rs.1,39,50,19,000/- on electricity duty and Rs. 15,83,00,000/- short provision of interest onGovernment loan, made u/s 43B, relying on thejurisdictional High Court's decision in the assessee's owncase for earlier years, especially when the SLP filed by thedepartment against the said decision is pendingadjudication before the Hon'ble Supreme Court ?”Government loan, made u/s 43B, relying on thejurisdictional High Court's decision in the assessee's owncase for earlier years, especially when the SLP filed by thedepartment against the said decision is pendingadjudication before the Hon'ble Supreme Court ?” Rs. 15,83,00,000/- short provision of interest onGovernment loan, made u/s 43B, relying on thejurisdictional High Court's decision in the assessee's owncase for earlier years, especially when the SLP filed by thedepartment against the said decision is pendingadjudication before the Hon'ble Supreme Court ?”Government loan, made u/s 43B, relying on thejurisdictional High Court's decision in the assessee's owncase for earlier years, especially when the SLP filed by thedepartment against the said decision is pendingadjudication before the Hon'ble Supreme Court ?” 4.Question No.2 is covered by the judgment of this Court in Kerala State Electricity Board V. Deputy Commissioner of Income Tax[1] against the Revenue and infavour of Assessee. Hence, Question No.2 is answered againstthe Revenue and in favour of the Assessee. 5.Question No.1 deals with the jurisdiction and powerof Assessing Officer to invoke Section 147 of the Act on the1[2010]329 ITR 91(KER)1[2010]329 ITR 91(KER) ITA NO. 20 OF 2020 -4- ground that the income of Assessee escaped assessment in thesubject Assessment year. As noted earlier we are concernedwith the return filed by the Assessee for the Assessment year2005-06. The Assessing Officer on 24.12.2007 completed theassessment under Section 143(3) of the Act, . The said decisionof the Assessing Officer was appealed before the Commissionerof Income Tax (Appeals) (for short, ‘CIT(Appeals)’. The noticeunder Section 147 of the Act was issued on the ground that themistakes have occurred in the assessment order in over-assessing the business loss of Assessee, while giving effect tothe order of the CIT(Appeals). The Assessing Officer throughorder in Annexure-A dated 30.12.2010 made re-assessmentorder on the Assessee. The Assessee aggrieved thereby filedappeal before the CIT(Appeals), Thiruvananthapuram. TheCIT(Appeals) framed the following questions and recorded thefinding as noted herein under: 4.1.3 The facts of the case, the grounds of appeal and thearguments of the Appellant have been considered. From the ITA NO. 20 OF 2020 -5- reasons stated for reopening of the assessment, it is evidentthat there were arithmetical errors in the computation ofincome in the original assessment order and the assessmentwas reopened for purely for correcting those arithmeticalmistakes. However, while disposing the appeal against theoriginal assessment order, the Ld. CIT(A) has discussed allthese issues and decided in the appeal order passed on26.02.2008. The appeal effect giving order was passed by theAssessing Officer on 31.03.2008 and the contents of the sameare as under: Consequent on giving effect to the order of the CIT(A)referred to above the assessment order dated 24.12.2007stands revised as under: The CIT(A) vide above referred to above hasdirected to cancel the computation of book profit u/s 115JB holding that the assessee does not come within the ITA NO. 20 OF 2020 -6- purview of section 115JB of the Income-tax Act. Hence thecomputation of book profit made in the assessment orderstands cancelled. The following grounds are restored back to theAssessing Officer. The assessee is to produceevidence/documents etc to substantiate their claim.Provision for DA arrears369,000,000 R.Dolly Deputy Commissioner of Income TaxCircle-1(1), Trivandrum 4.1.4 Thus, it is evident that the reopening was made onissues which were under appeal before CIT(A). The questionis whether the same is valid. The relevant provisions ofsection 147 of the Act are as under: "Income escaping assessment. ITA NO. 20 OF 2020 -6- purview of section 115JB of the Income-tax Act. Hence thecomputation of book profit made in the assessment orderstands cancelled. The following grounds are restored back to theAssessing Officer. The assessee is to produceevidence/documents etc to substantiate their claim.Provision for DA arrears369,000,000 R.Dolly Deputy Commissioner of Income TaxCircle-1(1), Trivandrum 4.1.4 Thus, it is evident that the reopening was made onissues which were under appeal before CIT(A). The questionis whether the same is valid. The relevant provisions ofsection 147 of the Act are as under: "Income escaping assessment. 147. If the Assessing Officer has reason to believethat any income chargeable to tax has escapedassessment for any assessment year, he may,subject to the provisions of sections 148 to 153,assess or reassess such income and also any otherincome chargeable to tax which has escapedassessment and which comes to his noticesubsequently in the course of the proceedingsunder this section, or recompute the loss or thedepreciation allowance or any other allowance, asthe case may be, for the assessment yearconcerned (hereafter in this section and insections 148 to 153 referred to as the relevantassessment year): Provided that where an assessment under sub-section (3) of section 143 or this section has beenmade for the relevant assessment year, no actionshall be taken under this section after the expiryof four years from the end of the relevant ITA NO. 20 OF 2020 -7- assessment year", unless any income chargeable totax has escaped assessment for such assessmentyear by reason of the failure on the part of theassessee to make a return under section 139 or inresponse to a notice issued under sub-section (1)of section 142 or section 148 or to disclose fullyand truly all material facts" necessary for hisassessment, for that assessment year: Provided further that nothing contained in thefirst proviso shall apply in a case where anyincome in relation to any asset (including financialinterest in any entity) located outside India,chargeable to tax, has escaped assessment for anyassessment yea)r: Provided also that the Assessing Officer mayassess or reassess such income, other than theincome involving matters which are the subjectmatters of any appeal, reference or revision, which is chargeable to tax and has escapedassessment." [Emphasis Supplied] 4.1.5. Therefore, per the second proviso to the section 147 ofthe Act, the assessment cannot be reopened on issues whichare under appeal. Clearly, the reasons recorded by theAssessing Officer for reopening of assessment are subjectmatters of appeal before the CIT(A). In view of the same, it isheld that the reopening made under section 147 of the Act byissue of notice under section 148 of the Act on 30.03.2010 isinvalid. Accordingly, the additions made under this orderstand deleted. The grounds raised by the Appellant on thevalidity of reopening are allowed. 4.2 As the legal ground raised by the Appellant is allowed, thegrounds raised on merits become infructuous and therefore,not discussed. 6.The Revenue filed appeal in I.T.A No.52/Coch/2019 before the Tribunal. The appeal filed by the Revenue wasdismissed. Hence the instant appeal. ITA NO. 20 OF 2020 -8- 4.2 As the legal ground raised by the Appellant is allowed, thegrounds raised on merits become infructuous and therefore,not discussed. 6.The Revenue filed appeal in I.T.A No.52/Coch/2019 before the Tribunal. The appeal filed by the Revenue wasdismissed. Hence the instant appeal. ITA NO. 20 OF 2020 -8- 7.The learned Standing Counsel Mr.ChristopherAbraham does not dispute that the rigour of Second Proviso toSection 147 of the Act, however, tries to explain by contendingthat the notice under Section 147 of the Act was issued on theground that the original assessment order resulted in over-assessing the business laws and such over-assessing businessloss was more with the figures and not the subject matter ofthe appeal pending before the CIT(Appeals). In other words,the 2[nd] provision limits the power of Assessing Officer, if thesame subject matter is pending before theCourt/Tribunal/Appellate Authority and not the quantum ofactual entitlement. 8.Adv.Raja Kannan invites the attention of the Courtto the second proviso to Section 147 of the Act, which readsthus: “Provided also that the Assessing Officer may assess orreassess such income, other than the income involvingmatters which are the subject matters of any appeal,reference or revision, which is chargeable to tax and has ITA NO. 20 OF 2020 -9- escaped assessment” and argues that there was no over-assessment of business loss and in substance what was pending before the CIT(Appeals)was the very same subject matter for which, notice underSection 147 was issued. He argues that the second proviso doesnot make any distinction between figures and the subjectmatter. It is not the case of Revenue that the subject matter ofthe notice under Section 147 was not the subject matter beforethe Appellate Authority. Therefore, in all fours, the secondproviso is attracted to the case on hand. 9.After the reading of the second proviso to Section147 of the Act and the consideration by the CIT(Appeals) andthe Tribunal, we are of the view that the distinction sought tobe introduced by the Standing Counsel fails, for the veryreasons recorded by the Authorities in the orders underappeal. We are of the view that the re-assessment proceedingsin the subject assessment year, has been initiated contrary to ITA NO. 20 OF 2020 -10- second proviso to Section 147 (1) of the Act. For the abovereasons and expressing full agreement with the the findingsrecorded by the CIT(Appeals) and Tribunal, we answer thequestion against Revenue and in favour of the Assessee. Appealfails, dismissed. No order as to costs. Sd/-S.V.BHATTIJUDGE Sd/-VIJU ABRAHAMJUDGE JS ITA NO. 20 OF 2020 -11- APPENDIX APPELLANT'S ANNEXURES: ANNEXURE A TRUE COPY OF THE ORDER U/S 143(3) R.W.S 147 OF THE INCOME TAX ACT DATED 30.12.2010 ANNEXURE B TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS), TRIVANDRUM DATED 12.11.2018 ANNEXURE C TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL IN ITA NO.52 & 53/COCH/2019 DATED 08.08.2019