×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
This appeal by the assessee is directed against the order dated 20th November, 2018 of ld CIT (A), Ajmer for the assessment year 2005-06. The assessee has raised the following grounds :-
“ 1. The ld. CIT (A) has erred on facts and in law in upholding the validity of the order passed by AO u/s 147 of the IT Act, 1961.
2. The ld. CIT (A) has erred on facts and in law in confirming the addition of Rs. 26.52 crores on account of accrued interest on deferred subvention receivable from State Government by holding that since there is no change in the facts as compared to the facts of earlier AYs, there cannot be any justification for accounting the interest on cash basis during the year as against accrual basis in the earlier years.
3. The assessee craves to amend, alter and modify any of the grounds of appeal.
4. The appropriate cost be awarded to the assessee.
Ground No. 1 is regarding validity of reopening of the assessment under section 147/148 of the IT Act.
2. The assessee is a State Government Undertaking and engaged in generation of power. The assessee filed its return of income for the year under consideration on 29.10.2005 declaring total income at NIL. Scrutiny assessment under section 143(3) was completed on 14.06.2007 by making various additions to the tune of Rs. 121,85,97,423/- though the total income was assessed at NIL after setting off of brought forward unabsorbed depreciation to the extent of available income. Subsequently the AO noted that dur ng the previous year relevant to assessment year under consideration the assessee was following mercantile system of accounting and from the current year the method of accounting on deferred subvention receivable from Government of Rajasthan was changed from accrual basis to cash basis. This change of method of account on a particular item of income has resulted understatement of income of Rs. 24.59 crores. Accordingly, the AO proposed to reopen the assessment by issuing a notice under section 148 in the month of March, 2012. The assessee objected to the addition proposed by the AO on account of interest on deferred subvention receivable from State Government as well as challenged the validity of notice under section 148 of the IT Act on the ground that the AO has reopened the assessment on the basis of information already available on record. The AO did not accept the contention of the assessee and made an addition of Rs. 26.52 crores on account of interest on subvention receivable from Government of Rajasthan. The assessee challenged the action of the AO before the ld. CIT (A) but could not succeed.
3. Before us, the ld. A/R of the assessee has submitted that the original assessment was completed on 14.06.2007 under section 143(3) and the reopening of the assessment is after 4 years from the end of the assessment year under consideration, therefore, when there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment, the reopening is bad in law as barred by limitation as per the provision to section 147 of the IT Act.
The ld. A/R has pointed out that the AO in the reasons recorded has mentioned that on perusal of the record and particularly from the audit report he noticed that the assessee has changed the method of accounting in respect of interest on deferred subvention receivable from State Government. This fact itself shows that the entire facts and record was available with the AO at the time of original assessment order passed under section 143(3) and, therefore, it cannot be said that the assessee has failed to disclose fully and truly all material facts necessary for its assessment. From the above provisions it can be noted that assessment u/s 147 in respect of original assessment completed u/s 143(3) can be reopened after 4 years only when there is failure on the part of the assessee to disclose fully and truly all material facts. In the present case, the AO has reopened the assessment on the basis of change in accounting policy. It is submitted that while filing return of income assessee has disclosed all the material facts fully and truly. The facts relating to change in aforesaid accounting policy has been specifically mentioned in para 5 of Schedule 28
– Notes on Accounts as under :-
“ During the year change has been made in the policy regarding accounting of the interest on the deferred subvention receivable from State Government. Previously the same was being accounted for accrual basis and interest @ 5% was accounted for, but from now onwards interest is being accounted for on actual cash basis due to this change, other income of the current year is lower by Rs. 24.59 crores.”