TaxTMI 
TaxTMI 
2024 (9) TMI 1825
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....ble business computed under the head "Profits and gains of business or profession" after making deductions under all other clauses of section 36(1) which includes the claim of deduction u/s. 36(1)(viia)(c) also?" 3. The facts of the case, in brief, are that the assessee is a Public financial institution, engaged in the business of functioning as a Principal financial institution for promoting, financing and development of MSMEs and to coordinate the functions of institutions engaged in similar activities. The assessee company filed its original return of income on 29-09-2016 declaring total income at Rs. 1552,64,02,200/-.The Assessee filed revised return of income on 31-03-2018 revising income at Rs. 1551,39,88,720/-. In this case, original assessment was completed u/s 143(3) on 28-12-2018 at a total income of Rs. 1646,52,55,744/-. Thereafter, the case was reopened u/s 147 of the Income Tax Act, 1961 and a notice u/s 148 of the Income Tax Act, 1961, was issued to the assessee vide ITBA/AST/S/148/2020-21/1031805240(1) on 26.03.2021. The reasons for reopening of assessment are as under: 1. "In this case, assessment u/s. 143(3) was completed on 28/12/18 asse....
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....h has escaped assessment." 4. In response to the above notice issued u/s 148 of the Act, the Assessee filed return of income on 22.04.2021 declaring total income of Rs. 1536,44,28,460/- Thereafter notice u/s 143(2) and u/s. 142(1) were issued to assessee from time to time. Assessee filed objections against reassessment proceedings on 02.08.2021 as under: - "The objections raised by the assessee are being summarized as under: i. The documents filed during the assessment proceedings were verified by the AO by applying his mind and hence there was no tangible material to form a view that income has escaped the assessment. ii. It is a clear case of change of opinion. iii. The AO has no power to review, he has the power to reassess The assessee relied upon following case laws in support of his contention: * CIT vs. Kelvinator of India Ltd. 320 ITR 561 * CIT vs. Kapil Dev (2009) 177 Taxman 6 (Del) * G.N. Shavo (Wine) (P) Ltd. vs. ITO & Anr (2003) 206 ITR 513 (Cal) * Sita World Travels (India) Ltd. vs. CIT (2005) 274 ITR 186 (Del) * Gujarat Fluoro chemicals Ltd. vs. DCIT (2008) 15 DTR (Guj) ....
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....determination that the amount in question represented the income of the assessee. 3. The Hon'ble Supreme Court in the case of Sri Krishna (P.) Ltd. v ITO (1996) 221 ITR 538, held that the enquiry at the stage of finding out whether the reassessment notice is valid is only to see whether there are reasonable grounds for the Income-tax Officer to believe and not whether the omission/ failure and the escapement of income is established. 4. It was held by the Hon'ble Delhi High court in AGR Investment Ltd. v. Addl. CIT 333 ITR 146 that "...... The words 'reason to believe' cannot mean that the 'Assessing Officer' should have finally ascertained the facts by legal evidence. They only mean that he forms a belief from the examination he makes and if he likes, from any information he receives. If he discovers or finds or satisfies himself that the taxable income has escaped assessment, it would amount to saying that he has reason to believe that such an income has escaped assessment..." 5. It was held by the Hon'ble Jurisdictional Allahabad High court in Pankaj Hospital Ltd. v. CIT (2014) 44taxmann.com 230 that The expression 'reas....
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....rdingly" 6. The AO issued notice u/s 142(1) of the Act to the assessee on 28.02.2022 asking the assessee to explain why the deduction u/s. 36(1)(vii) has not been deducted from the total income before computing the deductions u/s. 36(1) (viia). 7. In response to that the assessee vide its reply filed on 07.03.2022 submitted as under: "As per the letter dated 16.07.2021, wherein you have intimated the reasons recorded it is seen that in the assessment order passed on 28.12.2018 the deduction u/s 36(1)(viia) was allowed at Rs. 72,67,53,405/-. Itis pertinent to mention that assessee had claimed deduction u/s 36(1) (viia) to the tune of Rs. 81,67,02,587/- and the very fact that the then Assessing Officer reduced it to Rs. 72,67,53,405/- clearly show that there was application of mind by the then Assessing Officer and if now the Assessing Officer claims that even this calculation was wrong, then it means the Assessing Officer is reviewing the order of earlier Assessing Officer or it is a case of change of opinion, which is not permissible in law. For this proposition the assessee relies on the jurisdictional High Court of Bombay order in the case of Aventis....
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....pening of assessment, that the assessee computed the proportionate profit from long term financing activities on the adjusted profit and gains of business or profession before reducing deduction not related to long term financing activities. Assessee, itself, computed the deduction u/s. 36(1) (viii) of the Act after reducing the income not related to long term financing during A.Y. 2014-15. For the sake of consistency, assessee should have followed the same during the relevant year also. Thus, the excess allowance of deduction amounting to Rs. 1,43,07,033/- is being disallowed and added to the total income of the assessee. Penalty proceedings u/s 271(1)(c) of the Income-tax Act, 1961, for furnishing inaccurate particulars of income was also initiated. 9. Aggrieved by the order of the Ld. AO, the assessee filed appeal before the Ld. CIT (A). The Ld. CIT (A) vide the impugned order ITBA/NFAC /S/250/2023-24/1053796425(1) Dated 19/06/2023 has decided as under:- "Decision on Ground No. 1 & 2: 1) The Learned Assessing officer has erred in reopening the assessment completed u/s. 143(3) of the Income Tax Act, 1961, without considering the facts and circumstan....
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....(1)(viia). However, this was not done and therefore the same has resulted in underassessment of income and the same has escaped assessment." Reason for reopening of this case is that the appellant has income under the head Income from Other Sources and Capital Gain amounting to Rs. 143,07,03,231/- and as per section 36(1) (viia), the deduction is to be computed before making deduction under this clause and chapter VIA of the Act and so, Ld. A.O. has reduced the 5% of the said amount as deduction u/s 36(1)(viia) before calculating the deduction available to the assessee u/s 36(1)(viii) of the I.T. Act, 1961. The Ld. A.O. has calculated the deduction allowable u/s 36(1)(viii) after reducing the deduction u/s 36(1) (viia) from the total income and disallow the sum of Rs. 1,43,07,033/- as excess allowance of deduction u/s 36(1)(viii). Since, this issue is already decided in the favour of appellant in the earlier assessment year by Hon'ble Jurisdictional ITAT, Mumbai in the appellant's own case in ITA No. 4045/Mum/2011 in which the Hon'ble Jurisdictional ITAT Mumbai has directed the Assessing Officer to calculate the deduction allowed u/s 36(1) (viii)....
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....on admissible u/s 36(1) (viia) (c) of the Act. In this manner, before the lower authorities, assessee had sought to defend the deduction allowable u/s 36(1) (vii) of the Act as made in the original assessment. The Assessing Officer as well as the CIT (A) have not concurred with the assessee on this aspect as, according to them, the respective provisions were clear and the deduction u/s 36(1) (viii) of the Act has to be calculated after reducing the deduction allowable u/s 36(1)(viia) (c) of the Act from the profits eligible for the benefits of u/s 36(1) (viii) of the Act. In this background, assessee is in appeal before us. Ostensibly, the dispute raised before us stems from the interplay between the provisions of Sec. 36(1)(viia) (c) of the Act vis-a-vis Sec. 36(1) (viii) of the Act. At the time of hearing, the learned representative for the assessee has taken us through the history of assessment on this aspect. Firstly, it is pointed out that similar issue cropped-up in Assessment Year 2010-11 and the CIT (A) allowed the stand of assessee, which has since been accepted by the Revenue as no appeal was filed before the Tribunal. Subsequently, in Assessment Year 2011-12, wh....
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....sue was before the Hon'ble Supreme Court in the case of CIT vs Kerala State Ind. Development Corporation, 233 ITR 197 (SC) wherein the issue has been decided in favour of the assessee. In terms of the said decision, the Assessing Officer is directed to calculate the deduction allowed u/s 36(1)(viii) of the Act on the total income before deduction of the amount allowable under the section. Thus, on this aspect, assessee succeeds." The Hon'ble Jurisdictional ITAT, Mumbai in the appellant's own case, for the earlier assessment year, has clearly mentioned that consistency and uniformity should be ensured in approach on the same issue for the different assessment year. In the assessment year 2010-11, when a similar issue is decided in the favour of appellant by the Ld. CIT (A) has been accepted by the Revenue as no appeal was filed before Tribunal. In the assessment year 2011-12, when the Ld. CIT (A) has decided the appeal in favour of the Appellant, The Revenue has filed an appeal before Tribunal but no ground was raised against the decision of the Ld. CIT(A). This clearly shows that the Revenue has accepted the decision of the Ld. CIT (A) in the earlier assessment....