9911796707
|
Home
Issues Involved:
1. Legality of action taken under section 147/148 of the Income Tax Act. 2. Addition made on account of profits earned from controlled commodities. 3. Addition made on account of interest income. Issue-wise Detailed Analysis: 1. Legality of action taken under section 147/148 of the Income Tax Act: The assessee challenged the legality of the action taken under sections 147/148, which pertain to the reopening of assessments. The Assessing Officer (AO) reopened the assessments based on an audit objection after the period to issue notice under section 143(2) had expired. The Tribunal noted that the AO had initially accepted the assessee's claims under section 143(1)(a) and had also accepted similar incomes as exempt under section 80P(2) in earlier assessment years 1994-95 and 1997-98. The Tribunal concluded that the reopening of assessments was merely due to a change of opinion, which is not permissible. Consequently, the notices issued under section 148 were quashed. 2. Addition made on account of profits earned from controlled commodities: The AO added profits earned from the sale of controlled commodities, arguing that such income is not exempt under section 80P. The Tribunal examined the nature of the assessee's activities, which included the sale of levy wheat, levy sugar, and other consumer items as directed by the State Government, a member of the society. The Tribunal referred to the Supreme Court's decision in Kerala State Cooperative Marketing Federation Ltd. & Ors. vs. CIT, which held that income derived from marketing agricultural produce belonging to members is exempt. The Tribunal concluded that the assessee's activities fell under section 80P(2)(a)(iii), as the agricultural produce marketed belonged to its members. Therefore, the income from the sale of controlled commodities was deemed fully exempt, and the AO's additions were deleted. 3. Addition made on account of interest income: The AO categorized interest income as "income from other sources" and excluded it from business income. The assessee argued that the interest was earned from advances to members and FDRs purchased from sale proceeds of members' goods. The Tribunal noted that the interest earned was directly related to the assessee's business activities, such as providing credit facilities to its members. Citing various judicial precedents, including CIT vs. Tirupati Woollen Mills Ltd., the Tribunal held that interest income earned from investing surplus funds is incidental to the main business and should be treated as business income. Consequently, the interest income was considered exempt under section 80P(2)(a)(i). Additional Ground: Charging of Interest under section 234B: The last issue pertained to the charging of interest under section 234B. The Tribunal noted that the charging of interest under this section is mandatory and consequential. Therefore, the assessee was granted consequential relief. Conclusion: In summary, the Tribunal allowed the appeals partly by quashing the notices issued under section 148, deleting the additions made on account of profits from controlled commodities, and treating the interest income as exempt under section 80P(2)(a)(i). The charging of interest under section 234B was deemed mandatory and consequential relief was granted.
|
