9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (9) TMI 114 - AT - Income TaxReopening of assessment - addition u/s 115JB and directed to levy tax @30% and not @10% - Held that - Reopening has been made on perusal of the schedule P under the head other income. The original assessment u/s 143(3) of the Act was completed on 15.10.2009 at an income of ₹ 4096000/- in the original return of income. The assessee has shown the total income of ₹ 31323000/- and out of which ₹ 27227000/- as transfer of IEDC and ₹ 4096000/- was offer for taxes @ 10%. The claim of the Revenue is that the assessee should have offered the entire sum of ₹ 2727272000/- as total income of the assessee as interest income. However, in the assessment proceedings only ₹ 4096000/- was made. In view the above we carefully considered the orders of the lower authorities and we are of the view the above addition of ₹ 4096000/- u/s 115JB of the Act would required to be deducted tax @10% only. In view of this appeal of assessee is allowed.
Issues Involved:
1. Validity of proceedings under Section 147 and Section 148. 2. Reopening of assessment based on change of opinion. 3. Taxation rate applicable on the income of ?40,96,000. 4. Treatment of interest earned during the construction period. Detailed Analysis: 1. Validity of proceedings under Section 147 and Section 148: The assessee contended that the initiation of proceedings under Section 147 was invalid as the conditions were not satisfied, nor was the procedure prescribed under the statute complied with. The CIT(A) upheld the reassessment proceedings, stating they were in accordance with law. The Tribunal noted that the AO had reopened the case alleging that the entire interest income was taxable under the head "income from other sources" and thus, ?2,72,27,000 had escaped assessment. However, the reassessment proceedings were completed at the income of ?40,96,000 only, without adding the alleged escaped income. The Tribunal referenced judicial pronouncements, including the Delhi High Court's decision in Ranbaxy Laboratories Ltd. v. CIT, which held that if the AO accepts the contention of the assessee that the income initially believed to have escaped assessment has not escaped, he cannot independently assess other income without issuing a fresh notice under Section 148. 2. Reopening of assessment based on change of opinion: The assessee argued that the reopening was based on a mere change of opinion, which is not permissible under the law. The Tribunal agreed, citing the Supreme Court's judgment in CIT v. Kelvinator of India Ltd., which emphasized that the AO has no power to review but only to reassess based on tangible material indicating escapement of income. The Tribunal found that the AO had previously assessed the income under Section 115JB at a 10% tax rate and had applied his mind multiple times, including during the rectification process. Therefore, the reopening was deemed a change of opinion and invalid. 3. Taxation rate applicable on the income of ?40,96,000: The AO had directed that the income of ?40,96,000 be taxed at the normal rate of 30%, contrary to the assessee's claim under Section 115JB at a 10% rate. The CIT(A) upheld this view. The Tribunal, however, concluded that the income should indeed be taxed at the 10% rate under Section 115JB, as initially declared by the assessee. The Tribunal noted that the AO's action to tax the income at 30% was not justified and was based on a change of opinion. 4. Treatment of interest earned during the construction period: The assessee claimed that the interest earned during the construction period should be deducted from the cost incurred during the construction, as it was capital in nature. The AO initially reopened the case to tax the entire interest income but later accepted the assessee's contention that the interest income of ?2,72,27,000 was rightly deducted from the construction cost. The Tribunal upheld this view, emphasizing that the AO had no basis to reassess the income differently after accepting the assessee's explanation. Conclusion: The Tribunal allowed the appeal, holding that the reassessment proceedings were invalid due to being based on a change of opinion. The income of ?40,96,000 should be taxed at the 10% rate under Section 115JB, and the interest earned during the construction period should be deducted from the construction cost. The reassessment order and the CIT(A)'s decision were thus quashed.
|
