Ita/67/2021 Of Pr Commissioner Of Income Tax-7 v. M/S Tata Power Solar Systems Limited

Digitally signedby ANUSHA VLocation: HIGHCOURT OFKARNATAKA IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 20 DAY OF FEBRUARY, 2023 PRESENT THE HON'BLE MR. JUSTICE P.S.DINESH KUMAR AND THE HON'BLE MR. JUSTICE RAMACHANDRA D. HUDDAR INCOME TAX APPEAL NO. 67 OF 2021C/WINCOME TAX APPEAL NO. 309 OF 2022 IN I.T.A No.67 OF 2021 BETWEEN: 1.PR. COMMISSIONER OF INCOME TAX-7BMTC COMPLEX, KORMANGALA BANGALORE BMTC COMPLEX, KORMANGALA BANGALORE 2.DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-7(1)(1) BANGALORE …APPELLANTS (BY SHRI. E.I. SANMATHI, SENIOR STANDING COUNSEL) AND: M/S. TATA POWER SOLAR SYSTEMS LIMITED UNIT I, 78, ELECTRONIC CITY PHASE I, HOSUR ROAD BANGALORE-560 100 PAN NO: …RESPONDENT (BY SHRI. T. SURYANARAYANA, SENIOR ADVOCATE FOR MS. TANMAYEE RAJKUMAR, ADVOCATE) THIS ITA IS FILED UNDER SECTION 260-A OF INCOME TAX ACT, 1961, ARISING OUT OF ORDER DATED 28.06.2019 PASSED IN ITA NO.3186/BANG/2018, FOR THE ASSESSMENT YEAR 2008-2009 PRAYING TO DECIDE THE FOREGOING QUESTION OF LAW AND /OR SUCH OTHER QUESTION OF LAW AS MAY BE FORMULATED BY THE HON’BLE COURT AS DEEMED FIT AND SET ASIDE THE APPELLATE ORDER DATED 28.06.2019 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL A BENCH, BENGALURU, IN APPEAL PROCEEDINGS IN ITA NO.3186/BANG/2018 (ANNEXURE-A) FOR THE ASSESSMENT YEAR 2008-2009 AS SOUGHT FOR IN THIS APPEAL, AND TO GRAND SUCH OTHER RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE. IN I.T.A No.309 OF 2022 BETWEEN: TATA POWER SOLAR SYSTEMS LIMITED UNIT I, 78, ELECTRONIC CITY PHASE I, HOSUR ROAD BANGALORE-560 100 REPRESENTED HEREIN BY ITS MANAGER TAXATION MR. SURESH KUMAR GOENKA PAN NO: …APPELLANT (BY SHRI. T. SURYANARAYANA, SENIOR ADVOCATE FOR MS. TANMAYEE RAJKUMAR, ADVOCATE) AND: 1. DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-7(1)(1), 7 FLOOR BMTC BUILDING, 80 FEET ROAD KORAMANGALA BANGALORE -560 095 2. PRINCIPAL COMMISSIONER OF INCOME-TAX, 7 FLOOR BMTC BUILDING, 80 FEET ROAD KORAMANGALA 6 BLOCK BANGALORE -560 095 …RESPONDENTS (BY SHRI. E.I. SANMATHI, SENIOR STANDING COUNSEL) THIS ITA IS FILED UNDER SECTION 260-A OF INCOME TAX ACT, 1961, ARISING OUT OF ORDER DATED 28.06.2019 PASSED IN ITA NO.3186/BANG/2018, FOR THE ASSESSMENT YEAR 2008-2009 PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND ALLOW THE APPEAL AND SET ASIDE THE IMPUGNED ORDER PRONOUNCED ON 28.06.2019 BY THE TRIBUNAL IN ITA NO.3186/BANG/2016 FOR ASSESSMENT YEAR 2008-2009 (ANNEXURE-G) TO THE EXTENT QUESTIONED HEREIN AND ETC. THESE ITAs, COMING ON FOR FINAL HEARING, THIS DAY, P.S.DINESH KUMAR, J., DELIVERED THE FOLLOWING: JUDGMENT ITA No.67/2021 by the Revenue and ITA No.309/2022 by the Assessee, both directed against order dated 28.06.2019 in ITA No.3186/Bang/2018 on the file of ITAT[1] “A” Bench, Bangalore, have been admitted to consider following substantial questions: ITA NO. 67/2021 Whether on the facts and circumstances of the case, the Tribunal is right in law in restoring back the matter to the file of Commissioner of Income-tax (Appeals) for fresh decision after admitting the additional evidences when the same was not produced before the assessing authority at the time of assessment proceedings and the same was rightly rejected by the Commissioner of Income Tax (Appeals) in his orders? ITA NO. 309/2022 1. Whether the Tribunal was right in upholding the validity of the re-assessment order passed under Section 147 of the Act the re-assessment order passed under Section 147 of the Act 1 Income Tax Appellate Tribunal when there was no tangible material which could lead to the conclusion that income had escaped assessment and the Assessing Officer had formed an opinion earlier on the very issue? ITA NO. 309/2022 1. Whether the Tribunal was right in upholding the validity of the re-assessment order passed under Section 147 of the Act the re-assessment order passed under Section 147 of the Act 1 Income Tax Appellate Tribunal when there was no tangible material which could lead to the conclusion that income had escaped assessment and the Assessing Officer had formed an opinion earlier on the very issue? 2. Whether the Tribunal was right in upholding the reassessment proceedings initiated on the basis of a revenue audit objection? 3. Whether the Tribunal was right in holding that the Appellant ought to demonstrate that the advances/deposits had become bad and that the claim towards write off of deposits/advances can be allowed only in the year in which they have become bad? 2. Heard Shri E.I.Sanmathi, learned Standing Counsel for the Revenue and Shri T.Suryanarayana, learned Senior Advocate for the Assessee. 3. Shri Suryanarayana submitted that for the Assessment Year 2008-09, the assessment order was passed under Section 143(3) of the Act[2]on 25.09.2012. Subsequently, the Director of Audit has raised an objection and the same was forwarded to the assessee. The assessee filed its reply dated 21.12.2012. In furtherance thereof, the 2 Income Tax Act, 1961 A.O.[3] has written to the Director of Audit on 18.01.2013 reiterating the principal objection submitted by the assessee and ultimately stated that objection raised by the audit was not accepted and therefore, he had requested the Director of Audit to withdraw the same and to treat the matter as settled. Subsequently, for the reasons best known, the A.O. has issued notice under Section 148 of the Act. The assessee submitted it’s reply on 02.04.2013 but did not file it’s returns. The A.O. has passed reassessment order on 31.01.2014 in consonance with the audit The CIT (A)[4] and the ITAT have confirmed the view taken by the A.O. objections. 4. Shri Suryanarayana further submitted that after accepting assessees’s objections to the audit query, the A.O. had written to the Director of Audit to withdraw the audit query and to treat the matter as settled. Thus, the matter had attained finality. Further, the A.O. has noted that in response to the notice under Section 148 of the Act, the 3 Assessing Officer 4Commissioner of Income Tax (Appeals) assessee had filed it’s reply and filing of fresh returns was not warranted. Hence, there was no reason for the A.O. to reopen the case as it would amount to change of opinion without there being any fresh material. With these submissions, he prayed for allowing assessee’s appeal. 5. Shri Sanmathi argued opposing the appeal contending inter alia that A.O. has issued notice, since the conditions to issue notice were satisfied and further in the original assessment order dated 25.09.2012, the A.O. had not formed any opinion with regard to the issue in question. With these submissions, he prayed for allowing revenue’s appeal. 6. We have carefully considered rival submissions and perused the records. 7. Undisputed facts of the case are, the Director of Audit raised certain query and the same was answered by the assessee. In furtherance thereof, the A.O. has written to the Director of Audit on 18.01.2013 to treat the matter as settled. The communication reads as follows: “No. DCIT-7(3)/Audit/2012-13 To, The Director of Audit (ITRA) Audit Bhavan, Plot No.C-25 Bandra Kurla Complex Bandra (E) Mumbai-400 051. Date: 18/01/2013 (Through proper channel) Sir, Sub:- Revenue audit objection in the case of Tata Power Solar Systems Ltd, for A.Y. 2008-09 (AQ No.14 51[st] Cycle) Systems Ltd, for A.Y. 2008-09 (AQ No.14 51[st] Cycle) ------ Please refer to the above. The audit has pointed out that assessee had claimed and allowed deduction of Rs.3,50,76,954/- towards provision for EMD deposit and advances. On verification it is found as under:- The assessee has written off Rs. 3,50,76,954/- as EMD (Earnest Money Deposit) which consists of the following:- “No. DCIT-7(3)/Audit/2012-13 To, The Director of Audit (ITRA) Audit Bhavan, Plot No.C-25 Bandra Kurla Complex Bandra (E) Mumbai-400 051. Date: 18/01/2013 (Through proper channel) Sir, Sub:- Revenue audit objection in the case of Tata Power Solar Systems Ltd, for A.Y. 2008-09 (AQ No.14 51[st] Cycle) Systems Ltd, for A.Y. 2008-09 (AQ No.14 51[st] Cycle) ------ Please refer to the above. The audit has pointed out that assessee had claimed and allowed deduction of Rs.3,50,76,954/- towards provision for EMD deposit and advances. On verification it is found as under:- The assessee has written off Rs. 3,50,76,954/- as EMD (Earnest Money Deposit) which consists of the following:- a)Earnest Money Deposit (EMD) is made by the company for participating in the tenders floated by customers. Subsequently depending on the outcome of the bids, the EMD is refunded back if the assessee is not qualified for executing the order. In the process, while assessee could get the EMD refunded, for most of them, there were some EMD which could not be collected. Since these EMD receivable were more than 5-7 years old, the assessee made a provision towards the same in A.Y. 2006-07. However, after lot of efforts, the assessee identified that Rs.94,49,065/- was not recoverable and hence the provision made earlier written off as bad in A.Y. 2008-09. The working of the same is enclosed herewith for your ready reference.participating in the tenders floated by customers. Subsequently depending on the outcome of the bids, the EMD is refunded back if the assessee is not qualified for executing the order. In the process, while assessee could get the EMD refunded, for most of them, there were some EMD which could not be collected. Since these EMD receivable were more than 5-7 years old, the assessee made a provision towards the same in A.Y. 2006-07. However, after lot of efforts, the assessee identified that Rs.94,49,065/- was not recoverable and hence the provision made earlier written off as bad in A.Y. 2008-09. The working of the same is enclosed herewith for your ready reference. b)Duty drawback is claimed towards the exports by the assessee company. As and when the application is made with the Customs Authorities for duty draw back, assessee has taken it as income and offered for tax during the years 1999-2000 to 2004-05. However, the actual realization was less than what claimed by the assessee. In view of this, as a matter of prudent accounting practice, the assessee made provision towards duty drawback receivable from A.Y.2004-05 to 2007-08 totalling to Rs.2,47,22,527/-. In A.Y. 2008-09, the company. As and when the application is made with the Customs Authorities for duty draw back, assessee has taken it as income and offered for tax during the years 1999-2000 to 2004-05. However, the actual realization was less than what claimed by the assessee. In view of this, as a matter of prudent accounting practice, the assessee made provision towards duty drawback receivable from A.Y.2004-05 to 2007-08 totalling to Rs.2,47,22,527/-. In A.Y. 2008-09, the assessee has written off Rs.2,40,87,488/- as it was not collectible. The working of the same is enclosed herewith for your ready reference. In view of the above, the objection is not acceptable and it is requested that the same may be withdrawn and treated as settled under intimation to this office. Sd/- (PRASOON KABRA) Dy. COMMISSIONER OF INCOME-TAX-7(3)” assessee has written off Rs.2,40,87,488/- as it was not collectible. The working of the same is enclosed herewith for your ready reference. In view of the above, the objection is not acceptable and it is requested that the same may be withdrawn and treated as settled under intimation to this office. Sd/- (PRASOON KABRA) Dy. COMMISSIONER OF INCOME-TAX-7(3)” (Emphasis Supplied) 8. Subsequently, the AO has issued notice under Section 148 of the Act. It is not disputed by the Revenue that reassessment is on those aspects which were subject matter of audit objections. Therefore, we find force in the argument of Shri. Suryanarayana that having written to the Director of Audit to treat the matter as settled, the A.O. could not have issued notice under Section 148 of the Act on the very same aspect. This would certainly amount to change in the opinion. Hence, reassessment order is not valid in law. For the said reason, the view taken by the CIT(A) and ITAT confirming A.O’s view are also unsustainable in law. Therefore, the appeal filed by the assessee merits consideration and hence the following: ORDER i)I.T.A.No.309/2022 is allowed; ii)Questions No.1 & 2 are answered in favour of the assessee and against the revenue; the assessee and against the revenue; iii)So far as the third question is concerned, learned advocates on both sides agree that the learned advocates on both sides agree that the question is rendered academic in view of the finding on questions No.1 and 2 raised by the assessee. assessee. iv)ITA No.67/2021 filed by the Revenue is rendered infructuous and it is accordingly rendered infructuous and it is accordingly dismissed. No costs. Sd/-JUDGE Sd/- JUDGE