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February, 18th 2014
$~8 & 9

%                                Date of decision: 22nd January, 2014

+     ITA 308/2013
+     ITA 309/2013

      CENTRAL WAREHOUSING CORPORATION           ..... Appellant
                  Through: Mr. M. S. Syali, Sr. Advocate with
                           Ms. Husnal Syali Nagi and Mr.
                           Harkunal Singh, Advocates.


      CIT                                               .....Respondent
                            Through:   Mr. Rohit Madan with Mr. P.
                                       Roychaudhuri, Advocates.



      The assessee by way of this appeal impugns the order of the

Income Tax Appellate Tribunal (ITAT) dated 09.09.2011. The impugned

order dismissed the appeal preferred by the assessee.

2.    The brief facts of the case are that the appellant, a statutory

corporation, claimed the benefit of Section 10(29) contending that its

income was exempted from taxation as it carried on warehousing and

ITA 308/2013 & 309/2013                                       Page 1 of 6
storage activity. The original assessment for AY 1995-96 was made on

22.01.1998. The assessee's contentions were accepted in respect of a

portion of its income which was held to be exempted under Section

10(29) of the Income Tax Act, 1961. At that time the prevailing law had

been declared by the Supreme Court in UOI vs. UP State Warehousing

Corporation, (1991) 187 ITR 54. The eligibility of corporations and

companies carrying on warehousing activities to claim benefit of Section

10(29) was finally pronounced by the Supreme Court in Orissa State

Warehousing Corporation vs. CIT, (1999) 237 ITR 589 (SC).             The

Supreme Court held that the question of exemption would arise and

pertain to that part of income which is derived by letting out of godowns

and warehouses for the purposes of Section 10(29) and the other income

would not be eligible for such benefits. The assessing officer issued

notice under Section 147/ 148 claiming that he has reasons to believe that

income had escaped assessment for AY 1995-96. The reasons to believe,

inter alia, cited the decision of Supreme Court in Orissa Warehousing

(supra). The appellant felt aggrieved by the reopening of assessment and

approached this Court which in its judgment and order dated 14.01.2011

in ITA Nos.464-465 and 473/2010 remitted the matter for reconsideration

by the Tribunal. The operative portion of this Court's directio ns are as

follows: -
ITA 308/2013 & 309/2013                                       Page 2 of 6
      "33. The Tribunal has thus justified the action of the
      Assessing Officer only on the basis of that judgment of
      Supreme Court in the case of Orissa Warehouse (supra)
      provided fresh opinion. The question as to whether this very
      issue was discussed in the original assessment proceedings
      or not has not even been touched upon. As far as these
      assessment years are concerned, assessment was done under
      Section 143(3) of the Act. Therefore, the argument of the
      assessee that it was a case of change of opinion has not been
      addressed at all by the Tribunal which should have been
      gone into when it was so specifically raised by the assessee.
      For this reason alone, we set aside the order of the Tribunal
      and remit the case back to the Tribunal for fresh
      consideration limiting its discussion only on the aspect as to
      whether the reason given by the Assessing Officer for
      reopening of the reassessment was the aspect considered
      earlier in the original assessment proceedings and it would
      be a case of mere change of opinion or this aspect was not
      considered at all and, therefore, provided proper ground for
      reopening the assessment.

      34. We are remitting the case back for this limited
      purpose for obvious reason that in so far as other grounds
      raised by the assessee for challenging the validity of notice
      under Section 147/ 148 of the Act are concerned, we have
      concurred with the views expressed by the ITAT
      hereinabove. The appeals stand disposed of in the aforesaid

3.    By the impugned order the assessee's appeal has been rejected.

The grievance articulated by the petitioner is that the Tribunal has not

followed the directions that were spelt out in the order made by this Court

on 14.01.2011. It is contended that para 33 was specific as to whether the

question urged i.e. that the "reasons to believe" was based upon a mere

change of opinion, but has not been addressed at all despite a direction in

ITA 308/2013 & 309/2013                                        Page 3 of 6
that regard.

4.    Counsel for the revenue urged that the Tribunal's order cannot be

faulted and the relevant aspects arising out of the assessee's contention

and specifically with respect to eligibility for exemptions under Section

10(29) has been suitably discussed and a reasoned order given by the

ITAT which does not require disturbance of this Court.

5.    The impugned order in paras 1 to 5 notes the contentions of the

parties. The operative portion which discusses the relevant contentions

and concludes the issues against the assessee reads as follows: -

      "We have heard rival contentions and perused the relevant
      material available on record. We find merit in the argument
      of learned DR. It is undisputed that Hon'ble Supreme Court
      delivered its judgment in the case of Orissa State
      Warehousing Corporation (supra) on 01.04.1999. The
      original assessment orders for A.Y. 1995-96 & 1996-97
      were framed by the AO dates mentioned above, prior to the
      pronouncement of the judgment of the Hon'ble Supreme
      Court. With the Hon'ble Supreme Courts decision it was
      incumbent on AO to examine whether the claim allowed by
      him u/s 10(29) during the original assessment proceedings
      was in conformity with the same. We are unable to accept
      the proposition advanced by the learned counsel that AO
      had already exercised his opinion in respect of the matter
      which is subsequently decided by the Hon'ble Supreme
      Court was going to hold in Orissa State Warehousing
      Corporation (supra). The Hon'ble Allahabad High Court in
      the case of Kartikeya International (supra), has held that
      subsequent Supreme Court judgment constitutes law of the
      land and accordingly the AO's reassessment with
      satisfaction that exemption u/s 10(29) has been granted to
ITA 308/2013 & 309/2013                                        Page 4 of 6
      assessee which was at variance of Hon'ble Supreme Court
      judgment and income had escaped assessment is justified.
      The exercise of power u/s 148 by AO was to implement
      Supreme Court judgment and not change of his opinion.
      Therefore, the reopening was valid and sustainable. In our
      view, the judgment in the case of Kartikeya International
      (supra) is squarely applicable to assessee's facts.
      Respectfully following the same we hold that the theory of
      reassessment based on change of opinion is not applicable
      to assessee's case as the AO was implementing the law of
      the land as declared by the Hon'ble Supreme Court. Thus,
      we find no force in the contention raised by the assessee in
      its cross objections for both the assessment years in
      question. Thus, we decide the issue of re-opening of
      assessments in favour of revenue and against the assessee.

            Consequent to our decision, the result of revenue's
      appeals and assessee's C.Os for A.Y. 1995-96 & 1996-97
      will remain as held in ITAT's consolidated order dated
      31.0.2008 viz.

            i.     Revenue's appeals are partly allowed for
                   statistical purposes.
            ii.    Assessee's C.Os are partly allowed for
                   statistical purposes."

6.    We are afraid that the Tribunal has misdirected itself as to the

scope of remand. Though in the earlier portion of the impugned order the

Tribunal extracted this Court's directions which specifically require the

Tribunal to go into the question as to whether the "reasons to believe"

under Section 147/ 148 in this case were based upon mere change of

opinion, no opinion has been recorded or arrived at; the order ex facie

discloses complete non-application of mind to the directions of this

ITA 308/2013 & 309/2013                                      Page 5 of 6
Court, resulting in a remand to ensure application of mind to the

assessee's contention in this regard. This Court is also mindful of the

circumstance that the question whether the reasons to believe constitute a

change of opinion is essentially for discussion in every case of where the

assessee challenges the notice under Section 148, in view of the dicta of

the Supreme Court in Kelvinator, 320 ITR 561 (SC).

7.    For the above reasons the matter requires fresh consideration.

Accordingly, the matter is remitted for fresh consideration of the ITAT so

that the directions in the previous order of this Court are duly complied

with and specific findings recorded in respect of the fact whether the

reasons to believe constitute a change of opinion.

8.    The appeal is allowed in the above terms.

                                             S. RAVINDRA BHAT

                                                  R.V. EASWAR
JANUARY 22, 2014

ITA 308/2013 & 309/2013                                       Page 6 of 6
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