TMI Blog2014 (4) TMI 216X X X X Extracts X X X X X X X X Extracts X X X X ..... 5-06 by reason of any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment – the notice and the order are unsustainable and are liable to be set aside - There is no difference between the two – the assessee in several documents stated that it was “acting as an agent of the Government of Maharashtra” with respect to the Navi Mumbai Project - The statements were made to justify the assessee not having made any provision for the income of the Navi Mumbai project - This itself shows that the assessee's assertion was that it acted as an agent and made no provision for the income of the project. The initiation of reassessment proceedings u/s 147 of the Act was only based on a “change of opinion” which is impermissible under the Act - all disclosures were made by the assessee regarding its appointment as an agent of the Government of Maharashtra for developing the new town of Navi Mumbai - Merely because he had about six days, it cannot be presumed that he had not applied his mind to the issue - It would be unfair to the AO who made the Assessment Order, to speculate that he was either incapable of applying, or did not apply hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reasons as recorded for reopening the assessment; and (d) the belief that income has escaped assessment must not be on account of a change of opinion. According to the Petitioner, none of the aforesaid prerequisite conditions have been fulfilled and therefore no reassessment proceedings could be initiated for the A. Y. 2005 - 2006. 4. Before referring to the facts giving rise to the present controversy it is necessary to note certain aspects about the petitioner. The Petitioner, a company registered under the Companies Act, 1956, is fully owned by the Government of Maharashtra. The Petitioner has been appointed as the New Town Development Authority under section 113(3A) of the Mahrashtra Regional and Town Planning Act, 1966 (the MRTP Act) for the development of the new town of Navi Mumbai. It is the case of the Petitioner that it was appointed as the New Town Development Authority as an agent of the Government of Maharashtra. The Petitioner is also appointed as a Special Planning Authority under section 40(1)(b) of the MRTP Act, for development of new towns of New Aurangabad, New Nasik etc. The Government of Maharashtra notified the region for development of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in subsection (2), require the work of developing and disposing of land in the area of a new town to be done by any such corporation, company or subsidiary company aforesaid, as an agent of the State Government; and thereupon, such corporation or company shall, in relation to such area, be declared by the State Government, by notification in the Official Gazette, to be the New Town Development Authority for that area; 5. It is the case of the Petitioner that it maintains separate project accounts for each of the projects for which it is acting as a New Town Development Authority/Special Planning Authority. Insofar as the Navi Mumbai Project, Waluj Project and the VasaiVirar projects are concerned, the Petitioner is maintaining the Receipt and Expenditure Account, where the balance at the end of the year is shown as an amount payable to or receivable from the Government of Maharashtra. For the projects other than the ones mentioned above, the Petitioner is maintaining a separate Profit and Loss Account for each project. 6. Section 10 (20A) was omitted by the Finance Act, 2002, with effect from 01-04-2003. Prior to its omission, subsection (20A) as inserted by the Financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tra as per the provisions of section 113 (3A) of the MRTP Act. It was therefore stated that although in the return of income the Petitioner had offered some income to tax for the projects other than the Navi Mumbai Project, VasaiVirar Project Waluj Project, the Petitioner was not chargeable to tax for any of the projects carried on by the Petitioner as the New Town Development Authority. The Petitioner filed a further reply dated 17th December 2007 wherein it was reiterated that the Petitioner, being an agent of the Government of Maharashtra, was not chargeable to tax. 10. After receiving the said replies, on 26th December, 2007 Respondent No. 1 passed an assessment order under section 143 (3) of the Act inter alia holding that the Petitioner was the agent of the Government of Maharashtra for the Navi Mumbai Project. Respondent No. 1, while discussing the issue of another project namely the Oros Project stated that the status of the Petitioner for the Oros project was that of an agent of the Government of Maharashtra which was similar to the status for the Navi Mumbai Project. 11. Thereafter, for the subsequent A. Y. 2006 - 2007 (which is not the subject matter of the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssuance of the notice under section 148 of the Act. The Petitioner's stand was that since the reassessment proceedings had been initiated beyond the period of 4 years: ( i) the reassessment proceedings could be initiated only if there was a failure disclose material facts by the Petitioner and in the present case there was not even an allegation in the reasons for reopening the assessment that there was any failure to disclose any material fact in the original assessment proceedings; (ii) that in fact there was no failure on the part of the Petitioner to disclose any material fact necessary for the assessment; (iii) Respondent No. 1 could not have had any reason to believe that any income chargeable to tax had escaped assessment on the ground that the Petitioner was not the agent of the Government of Maharashtra in view of the fact that the Petitioner had been appointed as a New Town Development Authority by the State Government under section 113 (3A) of the MRTP Act read with the relevant GRs and Notifications which clearly stated that the Petitioner was the agent of the Government of Maharashtra for the Navi Mumbai Project. This was further fortified by a decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued under subsection (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: 17. Admittedly, in the present case, an assessment had been made under section 143(3) for A.Y. 2005-06. It is also admitted that the reassessment proceedings initiated for A.Y. 2005-06 was after the expiry of four years from the end of the A.Y. 2005-06. In such a scenario, no action for initiation of reassessment proceedings for A.Y. 2005-06 could be initiated unless the income chargeable to tax had escaped assessment by a reason of failure on the part of the petitioner to disclose fully and truly all material facts. As rightly submitted by Mr Dastur, the learned Senior Counsel appearing on behalf of the Petitioner, there is not even an allegation in the said reasons that there was a failure on the part of the Petitioner to disclose any material fact, let alone the details thereof. 18. It is now well settled that the reasons which are recorded by the assessing officer for reopening an assessment are the only reasons which can be considered. No substitution or deletion is permissible. No additions can be made to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upra) another Division Bench of this Court in the case of Prashant S. Joshi v/s Income Tax officer and another, reported in (2010) 325 ITR 154 (Bom), held as follows : 9. Section 147 provides that if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may subject to the provisions of sections 148 to 163, assess or reassess such income and also any other income chargeable to tax, which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under the section. The first proviso to section 147 has no application in the facts of this case. The basic postulate which underlies section 147 is the formation of the belief by the Assessing Officer that any income chargeable to tax has escaped assessment for any assessment year. The Assessing Officer must have reason to believe that such is the case before he proceeds to issue a notice under section 147. The reasons which are recorded by the Assessing officer for reopening an assessment are the only reasons which can be considered when the formation of the belief is impugned. The recording of reasons distinguishes an ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as recovery of cost and are not treated as revenue in the Books of Accounts of the Corporation. (emphasis supplied) (B) In the Annual Report under the note after Schedule 9 (which related to the Navi Mumbai Project) specifically stated as follows : 1. Navi Mumbai Project is being developed by for and on behalf of the Government of Maharashtra vide its Resolution No.CID2072U dated 11 th January 1974 and No.CID2084132016184/ UD4 of General Administration Department and Urban Development Department respectively of the Government of Maharashtra. 2. Accounts in the prescribed form were submitted to the government of Maharashtra upto the year ended 31st March 1988. No confirmation has been received to date. 3. Land admeasuring 20312.18 (20309.57) Hectares has been handed over by the Government of Maharashtra to the Corporation for the purpose of development of Navi Mumbai Project including 5289.40 (5289.40) Hectares of Government land. The payment amounting to Rs.246.00 Crore (Previous Year Rs.228.29 Crore) made by the Government of Maharashtra for land admeasuring 14461.00 (14461.00) Hectares has not been reflected in the accounts of the Corporation as the Corporatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of the Navi Mumbai Project. The Petitioner furnished the information and complied with all the requisitions. This establishes that the Assessing Officer's attention was focussed on the issue and that he applied his mind to the same before he made the Assessment Order. The facts in this regard are as follows : (A) By a notice dated 10th October 2007, the Petitioner was informed that the A.Y. 2005-06 was selected for scrutiny assessment proceedings. By the said notice, the petitioner was inter alia asked to furnish details in support of various claims of expenditure made in respect of the Navi Mumbai Project. (B) In reply thereto, the Petitioner vide its detailed replies dated 14th December 2007 and 17th December 2007 gave the entire history as to how it was appointed as a New Town Development Authority by the Government of Maharashtra for the New Town of Navi Mumbai under section 113(3A) of the MRTP Act. Specific attention of the Assessing Officer was drawn to various provisions of the MRTP Act including section 113(3A) and it was submitted that the Petitioner was a statutory agent of the Government of Maharashtra. Attention was also invited to several Government Resol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued by the Urban land Development Department. In view of the said G.R. (dated 2.1.1985), it is observed that the Government of Maharashtra gives / stipulates 'Terms Regulating Relationship of the assessee with the Government', so far as Navi Mumbai is concerned. The said G.R. Specifically stipulates that the activities of the assessee for Navi Mumbai project shall be carried out on behalf of the Government of Maharashtra. The assessee shall be agent of the state Government, as far as Navi Mumbai Project is concerned. It is also observed that no separate Profit and Loss Account is prepared by the assessee in respect of project development account and the balance surplus is adjusted against deficit brought forward from earlier years and the final balance is taken to the asset side of the balance sheet as 'deficit'. This is the accounting treatment given by assessee in its books of accounts, stated to be the existing position for all earlier years. (emphasis supplied) 26. The Government Resolutions / Letters referred to by the Petitioner in its letter dated 17th December 2007 were also reproduced in the assessment order. It is therefore clear that after calling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r that the initiation of reassessment proceedings under section 147 of the Act was only based on a change of opinion which is impermissible under the Act. As set out in detail above, all disclosures were made by the Petitioner regarding its appointment as an agent of the Government of Maharashtra for developing the new town of Navi Mumbai. The Petitioner was appointed as a New Town Development Authority under section 113(3A) of the MRTP Act. Even in the scrutiny proceedings for the A.Y. 2005-06, all disclosures were made by the Petitioner regarding its appointment as the agent of the Government of Maharashtra for developing the new town of Navi Mumbai. In fact, several Government Resolutions and letters of the Government of Maharashtra were also brought to the notice of the Assessing Officer. After considering all the material produced before him, the Assessing Officer by his order dated 26th December 2007 came to a finding / opinion that the Petitioner was appointed as an agent of the Government of Maharashtra for the development of the new town of Navi Mumbai. In view of this categorical finding, and the fact that we have already held that there was no failure on the part of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er had proceeded on a totally wrong premise because of the failure to disclose as well as on the basis of a misrepresentation and therefore, the challenge to the notice issued under section 148 of the Act was negated. The Court in the facts of that case came to a categorical finding that it was difficult to accept that the assessee had made a full and true disclosure of all material facts. In that case, the Court found that though goodwill was acquired under the agreement dated 30th March 1998, in the return, the assessee claimed that it was effectively acquired on 1st April 1998. In response to the Assessing Officer's queries, the assessee stated that the stamp duty on transfer of the goodwill was paid on 1st April 1998 and that the goodwill was effectively transferred on 25th June 1998. Accordingly, depreciation on goodwill was allowed on the basis that it was acquired on or after 1st April 1998. Under the agreement, however, the assessee had agreed to purchase the unit on an as is where is basis for Rs.23 crores plus goodwill amounting to Rs.4.30 crores with effect from 31st March 1998. The agreement provided that if any condition precedent was not fulfilled, the transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd opportunity to examine the issue is a question of fact. Merely because he had about six days, it cannot be presumed that he had not applied his mind to the issue. It would be unfair to the Assessing Officer who made the Assessment Order, to speculate that he was either incapable of applying, or did not apply his mind to the very aspects in respect of which he sought details within six days. It would also be unfair to the Petitioner to permit such a contention to be raised in the absence even of any pleading. Had this case been pleaded, the Petitioner would have had an opportunity of meeting it. There may, for instance, be cases where during the few days extensive discussions were held between the Assessing Officer and the assessee in the course of the assessment proceedings. There may be cases where during the few days the Assessing Officer was otherwise informed of all the facts and he considered the same in some manner or the other. 41. Mr Pinto then submitted that the Petitioner had failed to disclose the relevant Government Resolutions and the judgment of the learned Single Judge of this Court in the case of Percival Joseph Pareira v/s The special Land Acquisition Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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