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TMI Blog2018 (4) TMI 1828X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 1985-86 that the assessee has shifted to financial year being its previous year. Undisputedly, for the twelve month period relevant to assessment year 1984-85 the assessee has drawn up its accounts as year ending December 31, 1983 Assessee has validly, exercised its option as envisaged in section 3(1)(b) of the Act. We, therefore, find considerable merit in the additional ground of appeal and the same is, therefore, allowed. AO is accordingly directed to assess the taxable total income of the assessee for the assessment year 1984-85 with taking the previous year as on January 1, 1983 to December 31, 1983 and considering the effective date of settlement agreement as January 1, 1984. Assessing Officer is given the liberty to take necessary remedial steps as per law for assessment of compensation flowing to the assessee under the settlement agreement in the appropriate assessment year - entire issues raised before us by both the parties will also have to be necessarily re- examined afresh by the Assessing Officer. Accordingly, all the issues raised by both the parties are also restored to the file of the Assessing Officer to be decided afresh in terms of our observati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to receive a sum of USD 6 million in consideration of the final settlement of all the claims, rights and interests in connection with or in relation to the execution, fulfilment and nullification of the joint structure agreement. Article 2 of the settlement agreement further provided that for the period commencing from January 1, 1979 up to the effective date of the settlement, a further amount towards delayed payment charge at LIBOR one year base would also be paid to the assessee. Article 5 of the settlement agreement made the agreement subject to the approval of the appropriate authority of the parties who were signatories to the settlement agreement. The approval was received by the parties on January 1, 1984. 1.1 The Assessing Officer framed the assessment on March 20, 1987 after making the following additions : (Rs.) Profit under section 41(2) 17,40,43,120 Profit on sale of exploration store stock and development store stock 47,77,375 Profit on sale of crude oil stock 27,37,525 Amount of sold oil 6,01,693 Expenditure on account of rentals taxable u/s 41(1) 15,38,072 Interest (delayed payment charge) 5,41,92,736 1.2 Aggrieved, the assessee filed an appeal before the first appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal to consider the additional ground that ought to have been considered by it, in the first instance. The only caveat being, that the assessee shall not be allowed to move any application to rely upon material other than that which is already on record before the Tribunal. 7.1 Needless to say that this would also not entitle the assessee to seek indulgence of the Tribunal for further investigation, by which we mean gathering material apart from that which is already on record. In so far as the material which is already on record is concerned, the Tribunal will most certainly consider the same in deciding the additional ground. 1.8 It is in this background that we are now proceeding to hear both the parties. 2. At the outset, a preliminary objection was raised by the learned Commissioner of Income-tax (Departmental representative) that the hon'ble High Court has remanded the matter back to the Income-tax Appellate Tribunal for a de novo adjudication and, therefore, the Bench should first decide whether the additional ground is to be admitted or not. 3. On the other hand, the learned authorised representative, relying upon the order of the hon'ble High Court, submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... previous year is adopted as financial year ending on March 31, 1984, then date of January, 1984 falls in the assessment year 1984-85. So the year of assessment adopted by the tax authorities having not been objected at any stage and there is no evidence of that on record. Therefore, this additional ground cannot be admitted. Further, it will necessitate investigation of facts. In view of this, the additional ground is rejected. 4.3 In our considered opinion, a plain reading of the order passed by the hon'ble High Court makes it clear that the hon'ble High Court has categorically held that in the original round of proceedings the Tribunal had erred in not admitting and adjudicating upon the additional ground of appeal. In this regard, we would like to reproduce the following findings/ directions issued by the hon'ble High Court : 3.5 A reading of the reasoning supplied by the Tribunal would show that while the Tribunal does not dispute that the previous year of the assessee was the calendar year which ended on December 31, 1983, it chose to bring it within the ambit of the assessment year 1984-85 by supplying what according to us is a specious reasoning that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter. There may be several factors which may justify raising of a new plea in the appeal and that each case had to be considered on its own facts and that the appellate authority should exercise its discretion in accordance with 'law' and 'reason'. The fact that the ground raised is bona fide and that while raising the ground the applicant should be able to demonstrate good reasons as to why the ground was not raised earlier, will not by itself be a disabling factor since, the appellate authority is required to take into account the entire gamut of facts and circumstances obtaining in case. 5.7 In the Jute Corporation case (supra), the additional ground related to claim for deduction based on the judgment of the Supreme Court which was rendered prior to the assessment being framed. Despite this circumstance, the Supreme Court neither doubted the bona fides of the applicant/assessee nor felt that the reasons supplied were not good enough, for the Tribunal to have entertained the additional ground. The Supreme Court in the said case, as a matter of fact, remitted the case to the Tribunal for a fresh consideration. 6. The situation is no different in the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r book at pages 78 to 81 and the learned authorised representative specifically invited our attention towards the following articles of the settlement agreement : This settlement agreement is made on October 6, 1962 corresponding to day of December 26, 1983 between National Iranian Oil Company, a company duly incorporated under the laws of the Islamic Republic of Iran and having its registered office at Ayatollah Taleghni Ave, Tehran (hereinafter referred to as 'NIOC'), as first party. and Hydrocarbons India Limited, a company duly incorporated under the laws of India having its registered office at Bank of Baroda Building, Parliament Street, New Delhi (hereinafter referred to as 'HIL'), as second party. Whereas Oil and Natural Gas Commission, India together with certain other entities entered into with National Iranian Oil Company that certain joint structure agreement dated January 17, 1965, the effective date of which was February 13, 1965, pursuant to which a joint stock company called Iranian Marine International Oil company had been established and the supplemental agreements related thereto (hereinafter collectively referred to as the 'IMINOCO agreements& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities of the parties. National Iranian Oil Company shall forthwith notify HIL of the obtainment of approval of its appropriate authorities. The date of such approval shall be the effective date of this settlement agreement. HIL shall notify National Iranian Oil Company of the obtainment of the approval of the appropriate authorities within fourteen (14) days from the date of signing this settlement agreement. 5.1 It was submitted by the learned authorised representative that the effective date of settlement agreement, undisputedly, is January 1, 1984. In this regard, inviting our attention to page 154 of the paper book it was sub mitted that a fax message was sent to the assessee from Iran conveying as under : The effective date of the S.A. is January 1, 1984 please inform us the name and address of the bank to transfer the amount to the account No. nominated by you regards Dr. A. Honardoos. 5.2 The learned authorised representative also submitted that for the assessment years 1981-82, 1982-83, 1983-84 and 1984-85 the books of account of the assessee were prepared on calendar year basis with the year ending on December 31. The learned authorised representative also referred to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e other hand, vehemently opposed the above submissions. In this regard, in her written note it has been submitted by the learned Commissioner of Income-tax (Departmental representative) as under : Date of settlement Notwithstanding the objections raised to admission of additional ground vide separate written submissions, the issue of settlement date is also discussed below : Date of settlement ascertained by various authorities The date of settlement has never been in doubt, throughout the proceedings before the Assessing Officer and the Commissioner of Income-tax (Appeals) and also has not been a part of the original appeal before the Income-tax Appellate Tribunal. Before the Assessing Officer The Revenue submits that there was no dispute with regard to date of agreement dated December 26, 1983 consequent upon which National Iranian Oil Company paid an amount of 6 million U.S. dollars (which was payable on January 1, 1979) to HIL along with further payment of 5.056 million US dollars described as delayed payment (in the nature of interest from January 1, 1979 up to effective date of agreement). This is clearly detailed in para 2/page 2 of the assessment order. Before the Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to in note 7 have been treated as capital receipts. From a perusal of the above, it is clear that the settlement entries are reflected in the assessment year 1984-85 by the assessee-company itself. By raising the issue of settlement date, the assessee-company is attempting to get an approval for revising his books of account for the assessment year 1984-85 and assessment year 1985-86. This is not allowed under any accounting policy or under the provisions of any Act. GM 1979, 1983 and 2002 issued by ICAI allows revision of only certain issues and within a period of nine months of completion of financial year. The assessee does not fall within the scope of the said conditions and revision is being envisaged after 33 years. Documents to ascertain date of settlement for purpose of taxability Letter dated October 4, 1983 (Page 149/assessee's paper book) . . . . To have a settlement, if book value is taken as basis of settlement, we can agree to figure shown by Iranian authorities . . . . Settlement dated December 26, 1983 There is no dispute that the settlement is dated December 26, 1983. The assessee simply claims that the effective date is January 1, 1984 and not Decembe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he board of directors in the case of a company, and, by the corresponding approving authority in the case of any other entity. Two types of events can be identified : (a) those which provide further evidence of conditions that existed at the balance-sheet date ; and (b) those which are indicative of conditions that arose subsequent to the balance-sheet date. 7.1 It was further submitted by the learned authorised representative that the questions whether a receipt of money is taxable or not or whether certain deductions from that receipt are permissible in law or not, have to be decided according to the principles of law and not in accordance with the accountancy practice. In support he relied upon the judgment of the hon'ble apex court in case of Tuticorin Alkali Chemicals and Fertilizers Ltd. v. CIT reported in [1997] 227 ITR 172 (SC). 8. We have heard the rival submissions and have also perused the material on record. The learned Commissioner of Income-tax (Departmental representative) has raised, an objection that the effective date of settlement agreement is not January 1, 1984. We are unable to concur with her on this fact. It is worth noting that even before the hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been taken earlier. The Tribunal had, thus, opined that the ground raised was not bona fide. The hon'ble High Court, however, did not find any merit in this finding given by the Tribunal in original proceedings and held as under : . . . . The fact that the ground raised is bona fide and that while raising the ground the applicant should be able to demonstrate good reasons as to why the ground was not raised earlier, will not by itself be a disabling factor since, the appellate authority is required to take into account the entire gamut of facts and circumstances obtaining in case. 5.7 In the Jute Corporation case (supra), the additional ground related to claim for deduction based on the judgment of the Supreme Court which was rendered prior to the assessment being framed. Despite this circumstance, the Supreme Court neither doubted the bona fides of the applicant/assessee nor felt that the reasons supplied were not good enough, for the Tribunal to have entertained the additional ground. The Supreme Court in the said case, as a matter of fact, submitted the case to the Tribunal for a fresh consideration. 6. The situation is no different in the present case. The Tribunal having f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee have been made up to a date within the said financial year, then, at the option of the assessee, the twelve months ending on such date ; 8.7 It has been held by the hon'ble Madras High Court in the case of CIT v. B. C. Kothari reported in [1986] 160 ITR 27 (Mad) that the option referred to in sub-clause (b) to section 3(1) of the Income-tax Act can be exercised by the assessee by a statement made in the return of income. Moreover, we find that the hon'ble Punjab and Haryana High Court in the case of CIT v. Patiala Sales Corporation Pvt. Ltd. reported in [1970] 77 ITR 443 (P H) has held that the option given by the statutory provisions of section 3(1)(b) is to the assessee and not to the Department and once such an option is exercised the Department has no alternative but to assess the income in accordance with the option so exercised. The learned authorised representative has highlighted the facts of the case from the computation of income filed by the assessee. In the computation/s for the assessment years 1981-82 to 1984-85, the assessee has categorically mentioned its accounting year/previous year as ending with the calendar year. It is only with effect from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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