S.RAVINDRA BHAT - (1.) IN this appeal, the assessee impugns an order of the Income Tax Appellate Tribunal (ITAT) ITA No. 1/Del/2008. The questions of law urged and pleaded for consideration are: (i) Did the Tribunal fall into error in upholding the order of the CIT (A) that the reopening of assessment was legal, and; (ii) Whether the conclusion of the Tribunal and lower authorities that the real nature of the transaction was not hire-purchase, justified in the circumstances.
(2.) THE assessee is a Non-Banking Finance Company (NBFC), licensed by the Reserve Bank of India (RBI) and regulated by the provisions of law. The appellant had filed its return for the assessment year 2000-01, declaring net interest chargeable to tax amounting to Rs.75,530/-. The Assessing Officer (AO) sought to initiate reassessment proceedings under Section 10 of the Interest Tax Act, stating that he had reason to believe that the assessee had not brought to tax amounts under the enactment. The assessee objected through representation and letter dated 10.03.2006. The AO confirmed the order, directing that the amount of Rs. 3,10,82,350/- was in fact interest and not hire-purchase and, therefore, taxable under Section 2(7) of the Interest Tax Act. The assessee's appeal was considered by the Commissioner, who took into account the assessment proceedings which culminated in the order of ITAT for the previous years, wherein it was held that the assessment for the present year, by bringing to tax amount of Rs.3,09,86,822/- was justified under the circumstances. The appellate commissioner noticed that the AO had recorded the following reasons for issuance of notice under Section 10: "In the appellant's case, the Hon'ble ITAT in Interest Tax appeal numbers 15, 16, 17, 18 and 19/Agra/2002 and Interest Tax Appeal No. 01/Agra/2002 for the A. Yrs. 1994-95, 1995-96, 1996-97, 1997-98 and 1999-2000 and 1998-99 has held that "the appellant company is engaged in financing business and only advancing loan on interest and by no stretch of imagination it can be considered a hire purchase company. Thus, we dismiss all the three grounds of appeal of the appellant company and uphold the order of CIT(A)-II, Agra for the A. Yrs. 1994-95, 1995-96, 1996-97, 1997-98 and 1999- 2000." "[F]urther in the light of Board's circular and the ratio laid down by the Hon'ble Supreme Court in the case of Sundram Finance Ltd. and in view of the various decisions discussed therein, it would be evident that the transactions of the appellant company were in the nature of loan and not hire purchase." Similar nature of business transactions involve in subsequent year 2000-2001. The hire purchase charges are nothing but interest charged on money financed to hirers, therefore, the hire charges come in the definition of chargeable interest u/s 5 read with section 2(7)/2(5B) of the Interest Tax Act, 1974. As per this office record, no return has been filed by the appellant for the AY 2000-01. Keeping in view the above, I have reason to believe that income chargeable under Interest Tax Act, 1974 has escaped assessment for the AY 2000-01. Accordingly notice u/s 10 of the Interest Tax Act, 1974 is issued for the AY 2000-01."
(3.) THE appellate commissioner, on considering the records, held that the AO issued notice on 13.11.2003 under Section 10 and that despite its service upon the appellant, the latter did not file any return of income. The appellant, however, in a subsequent letter, took the position that it had already filed return on 30.09.2001. The appellate commissioner, therefore, concluded that the AO had issued notice under Section 10 on 13.11.2003, within four years of the end of assessment year 2000-01. The appellate commissioner also held that the information in possession of the AO was specific, direct and relevant that the interest chargeable to tax for the relevant assessment year 2000-01 had escaped assessment. The appellate commissioner relied on the decisions of the Supreme Court in ITO v. Saradbhai. M. Lakhani & Anr., (2000) 243 ITR 1 and Raymond Woollen Mills Ltd. v. ITO, (1999) 236 ITR 34. On these grounds, the appellate commissioner held that there was no infirmity in the reassessment proceedings which were validly initiated.;