2014 (8) TMI 235 - AT - Income Tax

Cancellation of order u/s 250(6) and u/s 154 Held that - CIT (A) had observed that the appeal arises from the order of the D.C.I.T., Panchkula u/s 154 of the Act, meaning thereby that the appeal was filed before the CIT (A) against the order passed u/s 154 of the Act which was dated 31.3.2010 - While deciding the appeal the CIT (A) had referred to the order passed u/s 250(6) of the Act dated 28.3.2006, against which the assessee is not in appeal - the CIT (A) has erred in canceling the order dated 28.3.2006 while deciding the appeal against the order passed u/s 154 of the Act dated 31.3.2010 - the order of the CIT (A) in canceling the order passed under section 250(6) of the Act dated 28.3.2006 is to be set aside Decided in favour of Revenue. Non -charging of interest u/s 234D Held that - The interest is chargeable w.e.f. AY 2004 -05 as the provisions had been inserted w.e.f. 1.6.2003 and the provisions are not applicable retrospectively - the claim of the assessee with regard charging of interest u/s 234D of the Act is upheld Decided in favour of Assessee. Reopening of assessment u/s 147 Held that - CIT(A) without appreciating the provisions of proviso to section 147 held that notice u/s 148 issued by the AO was barred by time - there was failure on the part of the assessee to disclose fully and truly all material facts which were necessary for his assessment, for that assessment year - The AO had validly initiated re-assessment proceedings by recording reasons and thereafter issuing notice u/s 147/148 of the Act which had been recorded within the prescribed period u/s 149(1)(b) of the Act and there being no case of change in opinion, the orders of the authorities below is upheld Decided against Assessee. Actual payment of Pension out of pension fund Held that - As decided in assessee s own case for the earlier assessment year, it has been held that the assessee is entitled to the claim of expenditure incurred on payments being made to the pensioners as revenue expenditure - the total contribution to the pension fund was ₹ 34,09,048/-out of ₹ 56,33,188/- were actually disbursed to the pensioners -the allowance of expenditure is restricted in the hands of the assessee to ₹ 34,09,048 Decided partly in favour of Assessee.

Summary

Issues Involved:
1. Validity of the order under Section 154 of the Income Tax Act.
2. Barred by limitation claim.
3. Addition of Rs. 27,45,447 to the income.
4. Charging of interest under Section 234D.
5. Reopening of assessment under Section 147.
6. Disallowance of pension fund payment.

Detailed Analysis:

1. Validity of the Order under Section 154
The issue raised in the cross-appeals pertains to the order passed under Section 154 of the Income Tax Act dated 31.03.2010. The assessee argued that the order was barred by limitation, as no order under Section 154 can be passed after four years from the end of the assessment year in which the order was passed. The Commissioner of Income Tax (Appeals) rejected this claim, stating that the order dated 31.03.2010 was in reference to an order dated 28.03.2006, which was within the four-year limit.

2. Barred by Limitation Claim
The assessee contended that the order passed under Section 154 was barred by limitation since it referred to an order dated 25.08.1988. However, the Commissioner of Income Tax (Appeals) clarified that the order under Section 154 dated 31.03.2010 was in reference to an order dated 28.03.2006, which was within the permissible four-year period. Thus, the claim of the assessee was dismissed.

3. Addition of Rs. 27,45,447 to the Income
The core issue was the addition of Rs. 27,45,447 to the income, which the Assessing Officer had already reduced in an earlier order dated 25.08.1988. The Assessing Officer, while giving appeal effect on 28.03.2006, did not consider this reduction, resulting in double relief. Subsequently, the order under Section 154 dated 31.03.2010 rectified this error by adding back Rs. 27,45,447 to the income. The Commissioner of Income Tax (Appeals) directed the Assessing Officer to re-examine the claim that the returned income included an amount already taxed on an accrual basis and take necessary action accordingly.

4. Charging of Interest under Section 234D
The assessee argued that interest under Section 234D was wrongly charged, as the section was inserted w.e.f. 01.06.2003 and applicable from the assessment year 2004-05. The Commissioner of Income Tax (Appeals) did not adjudicate this issue, as the order under Section 154 had been canceled. However, the Tribunal found merit in the assessee's claim and held that interest under Section 234D is chargeable only from the assessment year 2004-05.

5. Reopening of Assessment under Section 147
The assessee challenged the reopening of the assessment under Section 147, arguing that no reasons were supplied, and it was a case of change of opinion. The Tribunal noted that reasons were recorded and supplied to the assessee. The reopening was within the six-year limit as per Section 149(1)(b), and the amount involved exceeded Rs. 1,00,000. The Tribunal upheld the reopening, citing that there was no change of opinion and the Assessing Officer had validly initiated the proceedings.

6. Disallowance of Pension Fund Payment
The assessee claimed a deduction for actual payments made out of an unrecognized pension fund. The Tribunal, referring to earlier decisions, allowed the claim for actual payments made to pensioners as revenue expenditure. For the year under consideration, the Tribunal restricted the allowance to Rs. 34,09,048, subject to verification by the Assessing Officer.

Conclusion:
- The appeals of the Revenue were allowed, and the order under Section 250(6) dated 28.03.2006 was reinstated.
- The appeals of the assessee were partly allowed, confirming the rectification under Section 154 and allowing the claim under Section 234D.
- The reopening of assessments under Section 147 was upheld.
- The claim for pension fund payments was allowed as revenue expenditure, subject to verification.