Cwp No._14178 Of 2014 v. Gurbax Singh201

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH CWP No.14178 of 2014Date of decision: 23.7.2014 M/s The Yamuna Nagar Central Coop. Bank Limited Vs, ceeee Petiti Commissioner of Income lax, Aayakar Bhawan, Karnal ..... Respond CORAM: HON BLE MR. JUSTICK AJAY KUMAR MITTALHON BLE MR. JUSTICE JASPAL SINGH Present: Mr. S.K.Mukhi, Advocate for the petitioner. Ajay Kumar Mittal,J, 1.Prayer in this petition filed under Article 226 of theConstitution of India 1s for quashing the notice dated 24.3.2014, AnnexureP.6 under section 148 of the Income Tax Act, 1961 (in short, “the Act’) in|view of objections to the reasons recorded dated 5.6.2014 (Annexure P.9)and consequential order dated 30.6.2014, Annexure P.I1 rejecting theobjections dated 11.6.2014, Annexure P.10 raised by the petitioner. ? A few facts relevant for the decision of the controversyinvolved as narrated in the petition may be noticed. The petitioner is acooperative society registered under the Societies Registration Act, 1860. Itis engaged in the business of banking as Cooperative Bank at YamunaNagar. The amount of payment/premium of Group Gratuity Scheme of=2,20,18,280/- was intact the balance of the amount of Group GratuityGURBAX SINGH2014.08.16 12:16I attest to the accuracy andintegrity of this documentHigh Court Chandigarh CWP No._14178 of 2014 Payment with LIC. The petitioner bank having taken the said scheme fromLIC in the previous year 1.e. Assessment year 2008-09, a premium paymentof|TL2,85,00,000/- was made to the LIC and an amount of)TL64,81,720/- waspaid by the LIC out of group Gratuity Scheme to the retiring employees ofthe petitioner bank. The amount of|L2,20,18,280/- being the balance of thepremium payment out of=a2,85,00,000/- paid in assessment year 2008-09was depicted both on the liability as well as asset side of the balance sheetfor the assessment year 2009-10 and thus being a contra entry was neitherclaimed as expenditure in the assessment year in question nor allowed bythe Assessing Officer in the scrutiny assessment under Section 143(3) of theAct. Accordingly, notice under section 148 of the Act was issued to thepetitioner bank on the issue of payment of Group Gratuity to LIC to theextent ofan2,20,18,280/-. The petitioner filed income tax return for theassessment year 2009-2010 on 30.9.2009 declaring income at41,59,93,730/- which was processed under section 143(1) of the Act. Noticeunder section 143(2) of the Act was issued on 23.8.2010. The assessmentunder Section 143(3) of the Act was completed on 25.11.2011 wherein theAssessing officer accepted the return of income by duly accepting the issueof retirement benefit and Group gratuity scheme amount. The petitionerreceived notice dated 24.3.2014 under section 148 of the Act. It filed replydated 27.3.2014 and requested the Assessing Officer to provide the copy ofreasons recorded. The Assessing Officer issued notice under section 142(1)of the Act dated 26.5.2014, Annexure P.7 which was served on the petitioneron 29.5.2014. The petitioner submitted reply to the notice. The Assessingofficer provided copy of reasons recorded to the petitioner wherein it was CWP No._14178 of 2014 stated that the assessee society had created provision for retiring benefits ofan14,20,035/- and group gratuity scheme of an2,20,18,280/-. Since theprovisions of retiring benefits and group gratuity scheme were notdeductible under the Income Tax Act, the same were to be disallowed beingprovisions of unascertained liabilities. Omission to do so resulted inescapement from assessment to the tune of=a2,34,38,315/- in the hands ofthe assessee. The petitioner submitted reply dated 11.6.2014, Annexure P.10to the reasons recorded. The Assessing Officer vide order dated 30.6.2014,Annexure P.11 rejected the objections raised by the petitioner. According tothe petitioner, there was change of opinion and the Assessing Officer hadinitiated reassessment proceedings on the basis of audit objection whichcannot be the ground of reopening the assessment. Hence the instantpetition by the petitioner. 3)Learned counsel for the petitioner submitted that the Assessingofficer has sought to reopen the completed assessment on mere change ofopinion which was violative of judgment of the Apex Court inCommissioner ofIncome Tax, Delhi Vs. Kelvinator ofIndia Ltd,(2010)320 ITR 561. Challenge was also laid with the contention that auditobjection could not form valid basis for reopening a concluded assessment,Reliance was also placed on judgments inCartini [ndiq Limited vs.Additional Commissioner of Income Tax and Others, (2009) 224 CTR(Bom) 82, CIT vs. Lucas TVS Limited,(2001) 17 STC 289 (SC),CarltonOverseas Pvt. Limited vs. ITO and another» (2010) 229 CTR (Del) 439,Satnam Overseas Limited and another vs. Additional Commissioner ofIncome lax, (2010) 228 CTR (Del.) 121, Radhasoami Satsang vs. CIT, CWP No._14178 of 2014 (1991) 100 CTR (SC) and|Parashuram Pottery Works Co. Limited vs. [TOAIR 1977 SC 49 in support of the submission. 4 After hearing learned counsel for the petitioner, we do not find any merit in the writ petition. 4]The Assessing Officer had issued notice under Section 148 ofthe Act on the ground that the claim on the part of the assessee had resultedin escapement of income amounting to |Ly14,20,035/- on account ofprovisions created for retiring benefits andLC2,20,18,280/- on account ofprovisions created for Group Gratuity Scheme. According to the AssessingOfficer, the provisions of retiring benefits and Group Gratuity Scheme werenot deductible under the Act. The Assessing Officer had recorded thefollowing reasons for reopening the assessment:- “Return of income in this case was filed under section 139(1)of the Income Tax Act, 1961 on 30.9.2009 declaring totalincome at.a1,59,93,730/-. Assessment under Section 143(3) ofthe Income Tax Act, 1961 has been framed vide order dated25.11.2011 at an Income of.=a1,59,93,730/- making additionsunder various heads. Scrutiny of other liabilities forming part of the balancesheet revealed that the assessee society had created provisionsfor retiring benefits of|LV14,20,035/- and for group gratuityscheme ofLy2,20,18,280/-. Since the provisions of retiringbenefits and group gratuity scheme are not deductible underthe Income Tax Act, the same were to be disallowed beingprovisions for unascertained liabilities. Omission to do soresulted in escaped from assessment to the tune of |=2,34,38,315/- in the hands of the assessee. Under the Income Tax Act, provisions made in theaccounts for unascertained liabilities are not deductible. Keeping in view the facts narrated above, I am of theopinion that this 1s a fit case to issue notice under Section 1481n the case. Issue notice under Section 148 of the Income Tax Act,1961.” Relying upon Explanation | to Section 147 of the Act, the objections raisedby the assessee for issuance of notice under Section 148 of the Act wererejected. 6.Explanation I to Section 147 of the Act which 1s relevant foradjudication of the present petition reads thus:- Production before the Assessing Officer of account books orother evidence from which material evidence could, with duediligence, have been discovered by the Assessing Officer willnot necessarily amount to disclosure within the meaning of theforegoing proviso.’ Tq According to the aforesaid explanation, the mere production ofaccount books or other evidence from which material evidence with duediligence could have been discovered by the Assessing officer, would notamount to disclosure within the meaning of the said section. A perusal of theassessment order shows that there 1s no such discussion made by theAssessing officer while framing assessment under Section 143 of the Act. Thus, the Assessing Officer while recording reasons for issuing notice undersection 148 of the Act had rightly held that there was no true and fulldisclosure and initiation of proceedings within four years from the end ofthe assessment year 2009-10 was valid. Further, the plea that reopening wasbased on audit objection is dispelled from the perusal of the reasonsrecorded. CWP No._14178 of 2014 % Thus, the Assessing Officer while recording reasons for issuing notice undersection 148 of the Act had rightly held that there was no true and fulldisclosure and initiation of proceedings within four years from the end ofthe assessment year 2009-10 was valid. Further, the plea that reopening wasbased on audit objection is dispelled from the perusal of the reasonsrecorded. CWP No._14178 of 2014 % § In view of the above, we do not find any merit in thecontentions of the learned counsel for the appellant. In all fairness, takingnotice of the judgments referred to above, those were the cases whereExplanation | to section 147 of the Act was not subject matter of decisionand were based on their own facts involved therein. Therefore, thejudgments relied upon by the learned counsel for the petitioner do notadvance the case of the petitioner. Q Consequently, finding no merit in the petition, the same 1s hereby dismissed. (Ajay Kumar Mittal)sudge July 23, 2014>,#9 (Jaspal Singh)vudge