ORDER
R.M. Mehta, Accountant Member
1. These appeals are directed against the consolidated order passed by the CIT(Appeals) confirming the reassessment framed by the ITO by resort to the provisions of Section 147(a)/148.
2. The assessment years involved are 1976-77 and 1982-83, the original assessments in respect of which were completed on 28-2-1977 and 28-1-1983 respectively. In the course of these assessments, the assessee’s claim for deduction under Section 80HH was allowed on the basis of the calculation made in the returns of income. To clarify the matter further, interest income was also a part and parcel of the computation of the said deduction.
3. The ITO subsequently opined that excess deduction under Section 80HH had been allowed to the assessee since income on account of interest had to be excluded as the same was taxable under the head “Income from other sources” and not under the head “Business”. He, accordingly, issued notices under Section 148 on 30-3-1985 for the assessment year 1976-77 and on 15-3-1985 for the assessment year 1982-83.
4. In response to the aforesaid notices, the assessee filed returns of income for both the years once again on the same lines on the basis of which the assessments had already been finalised. During the course of reassessment proceedings, the assessee stated that it had disclosed all primary and material facts at the time of filing the original returns. Attention was invited to the fact that the interest received and paid had been duly reflected in the Profit and Loss Account filed along with the returns and it was also explained that the interest received had been rightly shown as part of the business income. A reference in this connection was made to the assessment order for 1974-75, wherein the AO had accepted a similar claim as also the order of the CIT(Appeals) for the assessment year 1979-80. The gist of the submissions made, in other words, was that the proceedings under Section 147(a) were not warranted on the facts of the case.
5. The ITO, however, rejected the aforesaid arguments, being of the view that interest income was required to be shown in the return of income under the head “Income from other sources” and since it was not so separately shown, the provisions of Section 147(a) were attracted. According to him, there had been an omission and failure on the part of the assessee to disclose fully and truly all material facts necessary for the completion of the assessments. He also turned down the plea to the effect that although the interest income had not been separately stated in the return itself, the same was duly reflected in the various enclosures to the returns. After a detailed discussion on the legal aspects of the matter as also the relevant provisions, the ITO withdrew the ‘excess deduction’ allowed under Section 80HH of the Income-tax Act, 1961 in the original assessments.
6. Being aggrieved with the orders passed by the ITO, the assessee filed appeals before the CIT(Appeals). In the course of these proceedings, detailed arguments were advanced, but it would suffice if we summarise these as follows:
(a) That reasons for initiation of reassessment proceedings were not made available in spite of a specific request.
(b) That the assessee had furnished fully and truly all material facts necessary for completion of the assessments and there was no failure or omission on its part.
(c) That although the quant inn of income from interest had not been mentioned separately in the returns, the assessee had furnished relevant information along with the said returns.
(d) That the assessee was under no obligation to inform the ITO about the possible inference that could be drawn.
(c) That the withdrawal of the deduction allowed at the time of the original assessments, amounted to a change of opinion, which was not permissible under the law.
(f) That the department had already accepted the stand taken by the assessee vis-a vis the income from interest in the assessment years 1974-75 and 1979-80 and there was no justification to take a different view.
(g) That, as an alternative contention, the interest paid was required to be reduced from the interest received for calculating the amount to be disallowed.
The CIT(Appeals) rejected the aforesaid arguments expressing his view on each of the points as follows:
(1) That the ITO was not under any obligation to supply copies of the reasons recorded and there was sufficient compliance with the provisions of law in ease these were shown to the assessee during the course of reassessment proceedings and which, in fact, was done.
(2) That it was obligatory on the part of the assessee to show interest income under the relevant head in the return of income itself and since tins was not done, the returns were incorrect and incomplete.
(3) That the arguments pertaining to the ‘inference’ would have been justified in case the assessee had furnished complete and true information at the time of the original assessments.
(4) That the ITO was fully justified in invoking the provisions of Section 147(a) since the opinion originally formed by him was based on incorrect and incomplete particulars.
(5) Although the assessee’s stand had been accepted in the assessment years 1974-75 and 1979-80, the ITO was justified in taking a different view since the principle of res judicata did not apply. That apart, the provisions of Section 80HH were absolutely clear, inasmuch as they provided for deduction at the rate of 20 per cent of the profits and gains derived from an Industrial Undertaking and this could not include income derived from any other sources such as interest.
(6) That the alternative submission was also not tenable since the interest paid related to the business of the Industrial Undertaking and could not be allowed as a deduction against the interest income which was apparently assessable under the head ‘Income from other sources’.
In the final analysis, the CIT (Appeals) confirmed the reassessment orders framed under Section 147(a)/148.
7. The learned Counsel for the assessee advanced detailed arguments before us and more or less on the lines as tendered before the first appellate authority. He, however, highlighted the following:
(i) That the provisions of Section 147(a) had been wrongly invoked, inasmuch as, there was no failure on the part of the assessee to disclose primary and relevant facts at the time of original proceedings.
(ii) That the assessee was not obliged to show interest income under the head “Income from other sources” since its stand all along was that the same was a part and parcel of the business income and such a position having been accepted by the department in the preceding and succeeding assessment years, and some of the assessments having been finalised prior to the date of the reopening of the present assessments.
(iii) That the interest earned on the surplus money available with the assessee and invested with banks and public sector undertakings was taxable as business income and not as income from other sources and such a position having been accepted by the department itself and duly supported by the various authorities.
(iv) That the reopening itself was invalid, inasmuch as the ITO had not recorded any reasons, but had merely mentioned some calculations on the order-sheet.
(v) That it was a case of ‘change of opinion’ on the same set of facts and, accordingly, not permissible.
8. As an alternative submission it was contended that the interest paid be adjusted against the income from interest while calculating the add back. In support of the aforesaid arguments, the learned Counsel placed reliance on the following decisions:
(1) Dunlop Rubber Co. Ltd. (London) v. ITO [1971] 79 ITR 349 (Cal.)
(2) Genl. Mrigendra Shum Sher Jung Baiiadur Rana v. ITO [1980] 123 ITR 329 (Delhi)
(3) ITO v. Madnani Engg. Works Ltd. [1979] 118 ITR 1 (SC)
(4) CIT v. Balvantrai S. Jain [1969] 72 ITR 59 (Born.)
(5) Gemini Leather Stores v. ITO [1975] 100 ITR 1 (SC)
(6) Sohan Singh Basi v. Union of India [1991] 192 ITR 431 (Delhi)
(7) CWT v. Manilal C. Desai [1973] 91 ITR 135 (MP)
(8) Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1 (SC)
(9) CIT v. A.P. Industrial Infrastructure Corpn. Ltd. [1989] 175 ITR 361 (AP)
(10) Snam Progetti S.P.A. v. Addl. CIT [1981] 132 ITR 70 (Delhi)
(11) CIT v. Dalmia Dadri Cement Ltd. [1970] 77 ITR 410 (Punj. & Har.).
9. The learned Departmental Representative, on the other hand, supported the order passed by the CIT(A). The subsequent arguments advanced by him were a reiteration of the reasons recorded by the first appellate authority in confirming the reassessment orders. He, however, highlighted the following:
1. That the details of interest paid, filed by the assessee in the course of the original assessment proceedings, did not reflect the nature of the deposits, whether short term or otherwise, as also the nature of interest income.
2. The filing of the aforesaid details was not a sufficient disclosure within the meaning of the relevant provision, inasmuch as it could not enable the ITO to arrive at a decision.
3. That the principle of resjudicata did not apply, inasmuch as each year was a separate and independent one and the AO was entitled to take a view different to the one which he had taken in the preceding assessment years.
In support of the aforesaid arguments, as also in support of the order of the CIT (Appeals), the learned Departmental Representative placed reliance on the following decisions:
(1) ITO v. Sudhir Kumar Bhose [1972] 84 ITR 60 (Cal.)
(2) R.B. Ram Rattan Prem Nath v. CIT [1969] 71 ITR 624 (All.)
(3) Kantamani Venkata Narayana & Sons v. First Addl. ITO [1967] 63 ITR 638 (SC).
10. In his short reply, the learned Counsel stated that an assessee was bound to disclose the mere fact that it had earned interest and nothing more and it was up to the ITO to draw his own conclusions. As regards the question of resjudicata, the learned Counsel stated that there could be a departure only if fresh facts existed and which were not there in the other years. In support of the aforesaid submissions, he placed reliance on the decision of the Punjab & Haryana High Court in the case of Dalmia Dadri Cement Ltd. (supra).
11. We have examined the rival submissions and have also perused the material on record to which our attention was invited by the parties. The decisions cited at the bar have also been duly considered.
12. In the present case, the assessee filed along with the returns the audited accounts where the factum of earning interest and making deposits with banks and other institutions was duly reflected. There is no dispute between the parties that details of the interest received and paid were also filed with the ITO for both the years. These two facts if viewed in isolation may lead to the conclusion that the disclosure of facts was not proper and adequate but when these are examined in the light of the fact that in some of the assessment years finalised prior to the issue of notices under Section 148 and also in certain assessment years prior to assessment year 1976-77 the ITO himself had allowed deduction under Section 80HH on the assessee’s gross income which included interest, the conclusion which is arrived at is that there was adequate disclosure of primary facts. It is also an accepted fact that in the assessment year 1979-80 the CIT(A) allowed the claim in toto and his order was accepted by the revenue.
13. The principle of resjudicata, no doubt, does not apply to income-tax proceedings but its non-applicability depends on a revelation of fresh facts as compared to other years but there are none brought on record by the revenue.
14. The stand of the department is that there is no proper disclosure since the assessee has not shown interest income under the head “Income from other sources” in the returns of income. In our opinion, this view is incorrect as the assessee reflected interest income as a part of its business profits since that is what it had been consistently doing in the assessment years prior to assessment year 1976-77 as also those prior to assessment year 1982-83. As already stated earlier, the ITO had accepted assessee’s viewpoint in some of the years under Section 154 and the CIT(A) in 1979-80 in appellate proceedings. In our opinion, the assessee was not expected to act against its own interest by showing interest income under the head “Income from other sources”. We are also of the view that an issue which was good enough to be accepted by the ITO under Section 154 having been taken out of the realm of debate could not be good enough for action under Section 147(a)/148, without there being any fresh material on record to justify a departure, from the past. In the final analysis, we cancel the reassessment orders for both the assessment years under appeal being of the view that proceedings under Section 147(a)/148 were not validly initiated.
15. The appeals are allowed.
