Mr. T.k. Satapathy, Senior Standing Counsel v. ….Indian Metals & Ferro Alloys Ltd

Order No. 02. IN THE HIGH COURT OF ORISSA AT CUTTACK ITA No.10 of 2021 …. Appellant Principal Commissioner of Income Tax-1, Bhubaneswar Mr. T.K. Satapathy, Senior Standing Counsel -versus- ….Indian Metals & Ferro Alloys Ltd. Respondent Mr. Sachit Jolly, Advocate CORAM: THE CHIEF JUSTICE JUSTICE M.S. RAMAN ORDER 30.01.2023 1. The present appeal by the Revenue is directed against an order dated 9[th] September 2020 passed by the Income Tax Appellate Tribunal, Cuttack Bench, Cuttack (ITAT) dismissing the Revenue’s appeal i.e., ITA No.399/CTK/2018 for the assessment year (AY) 2011-12. 2. The question that the Revenue urges the Court to examine is whether the ITAT was justified in rejecting the plea of the Revenue that the re-assessment order for the AY 2011-12 could not be said to be vitiated on account of absence of any new tangible material to justify the reopening of the assessment. 3. The original assessment took place for the AY in question i.e., 2011-12 as a scrutiny assessment under Section 143 (3) of Income Tax Act, 1961 (Act). The Assessing Officer (AO), in the first instance, passed the assessment order dated 14[th] March 2014 determining a total income of approximately Rs.409 crores. In appeal, this was stood revised by the order dated 7[th] November 2014 of the Commissioner of Income Tax (Appeals)-1, Bhubaneswar [CIT (A)] to Rs.209,26,24,384/-. 4. The AO subsequently observed that the Assessee had showed expense of Rs.3.59 crores in foreign currency towards ‘others’ and that tax was required to be deducted under Section 195 (1) of the Act from payments of Rs.8.08 crores made by the Assessee. Further, the Assessee had not filed any application for non-deduction or lesser deduction of tax under Section 195 (2) of the Act. On this basis, the AO opined that a sum of Rs.8.08 crores was required to be added to the total income of the Assessee under Section 40 (a) (i) of the Act. 5. This led to the notice under Section 148 of the Act being issued to the Assessee. The re-assessment was completed under Section 143 (3)/147 of the Act on 30[th] December 2016 determining a total income at Rs.217,37, 15,780/- disallowing the expense of Rs.8,07,91,391/- under Section 40(a) (i) of the Act. 6. In this round of proceedings, the question was whether the reopening of the assessment was, in the above circumstances, justified? 7. The CIT (A) agreed with the Assessee that there was no new tangible material to justify the reopening of the assessment and that it was based merely on a change of opinion. It was this order of the CIT (A) which was upheld by the ITAT by dismissing the Revenue’s appeal. 8. Mr. Sachit Jolly, learned counsel appearing for the Assessee in advance notice has placed before the Court the order of this Court dated 14[th] March 2022 in ITA 31 of 2018 (Principal Commissioner of Income Tax-I, Bhubaneswar v. Indian Metals & Ferro Alloys Ltd., Rasulgarh, Bhubaneswar), where for the AY 2008-09 against a similar order, this Court dismissed the Revenue’s appeal referring to the judgment of the Supreme Court of India in CIT v. Kelvinator of India Ltd. 320 ITR 561 (SC) . 9. On the other hand, Mr. T.K. Satapathy, learned Senior Standing Counsel for the Department has placed reliance on the decision of the Gujarat High Court in Yogendra Kumar Gupta v. ITO, MANU/GJ/1345/2014 stating that even though the books of account may have been produced at the time of the original assessment, it would still be open to the AO to reopen the assessment if it was felt that any taxable sum had escaped assessment. 10. The facts of that case reveal that the unsecured loan obtained by the creditor for the material supplied by them was a result of “accommodation entry” in the forms of loans and advances and in those circumstances, it was held that it could not be said that there was no new tangible material leading to the reopening of the assessment. 9. On the other hand, Mr. T.K. Satapathy, learned Senior Standing Counsel for the Department has placed reliance on the decision of the Gujarat High Court in Yogendra Kumar Gupta v. ITO, MANU/GJ/1345/2014 stating that even though the books of account may have been produced at the time of the original assessment, it would still be open to the AO to reopen the assessment if it was felt that any taxable sum had escaped assessment. 10. The facts of that case reveal that the unsecured loan obtained by the creditor for the material supplied by them was a result of “accommodation entry” in the forms of loans and advances and in those circumstances, it was held that it could not be said that there was no new tangible material leading to the reopening of the assessment. 11. However, in the present case, the admitted position is that there was in fact no new tangible material. By looking at the same books of accounts, the AO has come to the conclusion regarding escapement of taxable income. S.K. Guin 12. In the considered view of the Court, the dictum of Supreme Court of India in CIT v. Kelvinator of India Ltd. (supra) would squarely apply in the facts of the present case. Consequently, concurring with the view taken by the CIT (A) and the ITAT, this Court declines to frame the questions urged by the Revenue. The appeal is dismissed. (Dr. S. Muralidhar) Chief Justice (M.S. Raman) Judge