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TMI Blog2000 (6) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... ing interest under section 215 of the Act. 3. The appellant is a Co-operative Society carried on the business of marketing, agricultural produce of its members. The return of income was filed on 4-8-1985 declaring the total income of Rs. 11,07,230. The regular assessment was made on 28-3-1988 on an income of Rs. 27,16,600. This order was revised under section 154 on 14-9-1998 and accordingly the total income was determined at Rs. 15,57,223. On giving effect to learned CIT (Appeals)'s order, the income was further revised to Rs. 9,49,746. During the previous year relevant to assessment year under consideration, the assessee received capital grants from National Dairy Development Board, Anand (for short-'NDDB') amounted to Rs. 16,72,632 for procurement of agricultural equipments. The capital amounts have been shown under the head 'Reserve and Surplus' in the Balance Sheet. The capital grants were not deducted from the cost/written down value of any asset for the purpose of claiming depreciation in the original assessment. Therefore, the Assessing Officer reopened the assessment under section 147(b) of the Act and issued a notice under section 148 of the Act dated 27-3-1990. In resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and details were thereon record at the time of original assessment. The reopening, therefore, is a change of opinion as no new information was in possession of the Assessing Officer consequent upon which he could have reason to believe that income chargeable to tax has escaped assessment. Therefore, he contended that the order passed in consequence of reopening the assessment is bad in law. According to him, the audit party can point out any mistake of fact, but it is not competent to give interpretation of law. The learned counsel of the assessee relied on the following court cases to support his contention:-- (I) Atul Products Ltd. v. ITO [1980] 125 ITR 452 (Guj.) (II) Rajan Silk v. ITO [1985] 154 ITR 474 (Guj.) (III) Rajath Leasing Finance Ltd v. Asstt. CIT [1996] 217 ITR 115(Guj.) (IV) Indian Eastern Newspaper Society v. CIT [1979] 119 ITR 9964 (SC). 7. The learned Counsel further relied on the following cases to support his contention that reopening under section 147(b) was bad in law. (A) VXL India Ltd v.Asstt.CIT [1995] 215 ITR 295 (Guj.) (B) Birla VXL Ltd. v. Asstt. CIT [1996] 217 ITR 1 (Guj.) (C) Garden Silk Mills Ltd. v. Dy. CIT (No. 2) [1996] 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstalment with interest @ 10.5 per cent compounded half yearly." 9. The learned Counsel also invited our attention to the various agreements with the NDDB placed at pages 25,33 and 72 of the compilation. The learned Counsel, thus, contended that it is quite obvious from the various documents referred above that the grant was not given for the purchase of any specific asset. 10. Regarding the interest charged under section 139(8), the learned Counsel contended that the return was filed within the time limit, which was extended up to 16-8-1985. Therefore, no interest under section 139(8) is payable. 11. Regarding interest under section 215, the learned Counsel submitted that there was no default in payment of advance tax. He further stated that the assessee was to pay interest only because certain unexpected additions/disallowances of the claim had been made. He relied on the following cases:-- (a) Asstt. CIT v. Manmohan D. Mehta [1996] 57 ITD 461 (Ahd.) (b) CIT v. Gordhanbhai Jethabhai [1994] 205 ITR 279 (Guj.). 12. The learned Departmental Representative contended that the reopening of the assessment under section 147(b) of the Act has been validly done. According to hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctly or by observation or study or derived inferentially or from communication from others as laid down in the case of CIT v. Jagan Nath Maheshwary [1957] 32 ITR 418 (Punj.). 15. In the above case, the Assessing Officer had suspicion of concealment at the time of original assessment, but he did not pursue the inquiry. The reopening of assessment later, on information received from another Assessing Officer was held to be proper and valid. The Hon'ble High Court also held that word "information" is synonymous with knowledge or awareness in contradiction to apprehension, suspicion or misgiving. In Kalyanji Mavji Co. v. CIT [1976] 102 ITR 287, the Hon'ble Supreme Court observed that "information" is of the widest amplitude and comprehends a variety of factors. Nevertheless, the power of reassessment, however, wide it may be, is not plenary, because the discretion of the Assessing Officer is controlled by the words "reason to believe". The word "information" cannot be construed in universal sense as observed by the Supreme Court in the case of A.N. Lakshman Shenoy v. ITO [1958] 34 ITR 275. Its meaning must depend upon and must necessarily vary with the circumstances of each case. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Officer which have already been referred to. Turning to information from external sources, the cases abound in instances of factual information received from outside sources. These informations received in various forms such as survey report, general information circulated by the Directorate of Income-tax and other Authorities, information received from other Assessing Authorities, Expert Reports, Valuation Reports, subsequent returns and admission by the assessee himself, fact discussed during assessment proceedings of a subsequent year, tangible, anonymous information and so on. So also decision and information of Appellate Authorities or Higher Forum in the case of the same assessee or connected assessee will constitute "information" in R.B. Bansilal Abirchand Firm v. CIT [1968] 70 ITR 74 (SC). There was a firm of four partners and three minors were financing another firm 'B' in which an outsider was partner at 50 per cent share and four partners of the firm 'A' held the balance 50 per cent. Interest paid by 'B' was disallowed by the Assessing Officer as interest paid to partners, but the Tribunal allowed the same. Original assessment of 'A' did not include interest paid by ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer at the time of original assessment, which were duly verified before the assessment was made. He also contended that reopening of assessment was based on mere change of opinion. This contention of the learned Counsel is also without any substance. The assessee-company received capital grants from NDDB, Anand, amounting to Rs. 85,24,749 for its Jamnagar Project and Rs. 16,72,632 for procurement of agriculture equipment. This capital grant was not deducted from the cost/written down value of the asset for the purpose of claiming depreciation as per the provisions of Section 43(1) of the Act. This information was received by the Assessing Officer from the Audit Party, subsequent to the passing of the original order. This information was sufficient to resort to the provisions of Section 147(b) of the Act. The Assessing Officer while framing the original assessment ignored the provisions of Section 43(1) and the depreciation on the cost/written down value of the assets was allowed without deducting the capital as grant received by the assessee for such capital assets. Thus, the Assessing Officer while passing the original order overlooked the legal provisions of Section 43(1) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s case were applicable, but ignorantly these provisions have not been invoked. The provisions of Section 43(1) of the Act were overlooked by the Assessing Officer while passing the original order. Therefore, this was not mere change of opinion on the interpretation of a particular provision, but the Assessing Officer obviously missed to take note of the law laid down in the statute. Therefore, the Assessing Officer was having information in his possession and on the basis of that information, he formed a belief that a certain income has escaped assessment. His belief was based on the information received subsequent to the passing of original assessment order. Therefore, he was fully justified in resorting to the provisions of Section 147(b) of the Act. 21. The facts of the case, Birla VXL Ltd. relied upon by the learned Counsel are also totally different from the facts of the present case. In the above case, essential requirement for initiating proceedings under section 148 of the Act was not satisfied. There was no sufficient material for holding the belief that income has escaped assessment. There was only a change of opinion that excessive loss or depreciation had been allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court relied upon by the learned Counsel have no application to the facts of the present case. In the case of Atul Products Ltd., it was found that the audit party has based its objection on its own interpretation of the provisions of the Income-tax Act and the C.B.D.T. Circulars and had not drawn attention to any authoritative source of law, namely, either to Legislature enactment or to an interpretation by a Court of a quasi-judicial Tribunal. On that basis, the Hon'ble High Court quashed the proceedings. But in the present case, the audit party had not interpreted the law, but had drawn the attention of the Assessing Officer to the authoritative source of law i.e. the provisions of Section 43(1) of the Act. Therefore, it was not interpretation of law, but the Assessing Officer was made aware of the law, which was already on the statute. In the case of Rajan Silk also the Gujarat High Court held that the opinion of an internal audit party of the Income-tax Department on a point of law cannot be regarded as information within the meaning of Section 147(b) of the Income-tax Act, 1961. For the purpose of reopening an assessment, since a statement by a person or body not competent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that the word 'information' in SC 17(1)(b) of the Wealth-tax Act, 1957, has the widest amplitude and comprehends variety of factors. "Information" may come from external sources or even from the materials already on the record. It may be consist of oversight or inadvertent mistake committed by the WTO or he may discover an error on the face of record from further enquiry or research into the facts of law. Similarly in the case of P.V.S. Beedies (P.) Ltd. relied upon by the Department, the Hon'ble Supreme Court has held that the reopening of the case on the basis of factual error pointed out by the internal audit party is permissible under the law. 28. In view of the detailed discussion above, the case of the assessee is fully covered with the various cases referred in the preceding paragraphs. The Assessing Officer was having information in his possession and this information came to its possession subsequent to the making of original assessment order. On the basis of information in his possession, he formed a belief that income has escaped assessment. Therefore, he correctly resorted to the provisions of Section 147(b) of the Act. Therefore, the contention of the learned Coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning of the section is that it shall be. But the real question is as to the character and nature of subsidy whether it was really intended to subsidize the cost of the capital or was intended as an incentive to encourage enterprises to move to backward areas and establish an industry; the specified percentage of the fixed capital cost which is the basis for determining the subsidy being only a measure adopted under the scheme to quantify the financial aid. The contention is that it is not a payment directly or indirectly to meet any portion of the "actual cost" but intended as an incentive to entrepreneurs, its quantification determined as a percentage be of the fixed capital assets". Hence the deductibility of subsidy will depend on the character and nature of the subsidy i.e. whether it was intended to subsidize the cost of capital or it was intended to encourage entrepreneurs to move to backward areas etc. Thus, the subsidy received from the Central Government or State Government need not be deducted in all cases or circumstances specially when the same is granted to the entrepreneurs to move to the backward areas. In all other cases, the subsidy received for purchasing the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t utilized in accordance with the agreed stipulation and condition or within the permitted time limit, this cost will be liable to be refunded to the NDDB (O.V.O.W.) in one instalment with interest @ 10.5 per cent compounded half yearly." The above two conditions laid down by the NDDB make it abundantly clear that the entire grant was made for purchasing the plant, machinery and other capital assets. 32. We would now like to refer to the agreement dated 10th January, 1984, made between the assessee and the NDDB, which is placed at page 29 of the compilation filed by the learned Counsel during the course of hearing. The clauses 2 and 3 of this agreement reads as follows:-- "2. Subject to para (3), the grant amounts as indicated below will be disbursed to the Borrower alongwith the loan under the loan agreement in such a manner that out of every amount disbursed, 70 per cent will be the loan and 30 per cent will be the grant: ----------------------------------------------------------------------------- Item Cost Amount of grant 30% of cost ---------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed period, the interest charged should be treated as deleted. 37. The final ground of appeal is regarding charging of interest under section 215 of the Act. 38. According to the learned Counsel of the assessee no default in payment of advance tax was committed by the assessee. Only because of certain unexpected additions/disallowances of the claims were made, the assessee was required to pay taxes. The learned Counsel of the assessee relied upon the following court cases:-- (i) Gordhanbhai Jethabhai (ii) ITO v. Maniklal Harilal Spg. Mfg. Co. Ltd. [I.T. Appeal No. 2491 (Ahd.) of 1985 dated 16-9-1987]. The learned Departmental Representative, however, fully relied on the orders of the authorities below. 39. We have considered the submissions made by both the parties. In the case of Modi Industries Ltd. v. CIT [1995] 216 ITR 759, it was held by the Apex Court that the expression "regular assessment" means and refers to the original assessment made under section 143/144. In view of the above Supreme Court decision, we find sufficient force in the arguments of learned Counsel that interest under section 215 has to be paid up to the date of the regular assessment only. This ..... X X X X Extracts X X X X X X X X Extracts X X X X
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