TMI Blog2019 (9) TMI 313X X X X Extracts X X X X X X X X Extracts X X X X ..... to provide the assessee an opportunity to put forth his submission. This is in the light of the fact that reopening of a concluded assessment after a period of assessment is a very serious matter. This would be evident from the observations of the Hon'ble Apex Court in Kelvinator of India Ltd. [ 2010 (1) TMI 11 - SUPREME COURT] wherein, it was held that post 1st April, 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words reason to believe failing which, Section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of mere change of opinion , which cannot be per se reason to reopen. As pointed out that the conceptual difference between the power to review and power to reopen is to be kept in mind; the Assessing Officer has no power to review; he has the power to re-assess, but the re-assessment has to be based on fulfilment of certain pre-condition and if the concept of change of opinion is removed in the garb of reopening the assessment, review would take place. The Hon'ble Supreme Court in GKN Driveshafts (India) Ltd. (supra) had clarified that when a notice under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income to invoke jurisdiction to reopen u/s 147. T.C.A.No.584 of 2009 :- (i) Whether on the facts and circumstances of the case, the Tribunal was right in dismissing the appeal of revenue as infructuous. (ii) Whether on the facts and circumstances of the case, the Tribunal was right in dismissing the Department's appeal with respect to CIT(A)'s direction to allow proportionate expenditure against corpus receipt of ₹ 9.25 lakhs as revenue expenditure, as infructuous on the ground that the amounts received by the assessee towards its corpus was not treated as income. 3.The decision to be rendered in T.C.A.Nos.582 and 583 would cover the entire proceedings, if we uphold the order of the Tribunal. This is so because, if we uphold the order of the Tribunal, the re-assessment proceedings under Section 147 of the Act would be held to be invalid for those two years. In such an event, there may not be any necessity to answer the substantial questions of law framed in T.C.A.No.584 of 2009. If, on the other hand, we take a decision in favour of the Revenue in T.C.A.Nos.582 and 583 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer drew a conclusion that the assessee failed to disclose fully and truly all material facts necessary for the assessment. 7.The assessee submitted their reply dated 12.09.2005, firstly pointing out that the proposal to reopen the assessment is an outcome of a change of opinion and is impermissible. Further, the contribution received from time to time was with a specific direction to be invested in shares of group companies and only the income therefrom, viz., dividends, should be applied for the objects of the assessee company. 8.It was further submitted that the corpus receipts have the character of capital receipts and it is definitely not income. Reliance was placed on the decision in the case of CIT vs. Shaw, Wallace Co. reported in (1932) 34 BOMLR 1033. These objections were dated 12.09.2005 and 19.09.2005 for the two assessment years respectively. Subsequently, another submission was made before the Assessing Officer on 16.12.2004 stating that the expenses incurred were exclusively for cricket matches, which is one of the recreational facilities provided by the company. 9.The Assessing Officer passed the re-asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15.It is submitted that the factual position in the instant case is that the employees of the Pentafour Group of Companies are to be provided certain facilities for which, the assessee company was incorporated under Section 25 of the Companies Act, 1956, but for the said objectives, the assessee would not have been provided with such corpus by Pentafour Group of Companies. Since the amount received by the assessee towards corpus is required to be treated as income, which is escaped to assessment income tax, the reopening of assessments is valid. 16.In support of his contention that the receipt income is required to be viewed from the stand point of the person who receives it, reliance was placed on the decision of the Hon'ble Supreme Court in P.Krishnan Menon vs. CIT (1959) 35 ITR 48 (SC); Dr.K.George Thomas vs. CIT (1985) 156 ITR 0421; and Boeing vs. CIT reported in (2001) 250 ITR 0667 (Madras). This decision was pressed into service to explain as to what is income and how the Court has interpreted the definition of income as defined under Section 2(24) of the Act. 17.With regard to the validity of the reopening proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment orders passed under Section 143(3) of the Act, submitted that all the documents were placed before the Assessing Officer and there is no failure on the part of the assessee to fully and truly disclose the materials and therefore, the reopening of the assessments is a clear case of change of opinion. 20.Furthermore, it is submitted that though the assessee had given elaborate objections for the reopening of the assessments, the objections were not disposed of as mandated by the Hon'ble Supreme Court in GKN Driveshafts (India) Ltd., vs. Income Tax Officer reported in (2003) 259 ITR 19 (SC). 21.The learned counsel placed reliance on the decisions of the Hon'ble Supreme Court in CIT vs. Kelvinator of India Ltd., reported in (2010) 320 ITR 0561 (SC); CIT Anr. vs. Foramer France reported in (2003) 264 ITR 0566 (SC); CIT vs. S.R.M.T. Staff Association reported in (1996) 221 ITR 0234 (AP); and the decision of the Delhi Bench of the Tribunal in Income Tax Officer (Exemption) vs. Smt.Basanti Devi Shri Chakhan Lal Garg Education Trust, I.T.A.No.5082 (Del)2010, dated 19.01.2011, which was affirmed by the Hon'ble High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Ledger copy for the following: a) Corpus Fund b) Non-Trade-Quoted-At Cost Investments in i. Pentafour Communications Ltd.; ii. Pentafour Products Limited; iii. Pentafour Solec Technologies Ltd.; iv. Pentafour Software Exports Ltd. 4. Details for Current Liabilities; 5. Copy of invoices for furniture and computed acquired during the year. From the above, it is seen that one of the documents called for was the ledger copy of the corpus fund. 26.The assessee's case was that, it received voluntary contribution from three companies towards the corpus fund of the assessee company with a condition that, it should be invested in shares and securities and only the income from such investment is to be spent for achieving the objects of the assessee. The copies of the letters given by the companies, which extended the voluntary contributions were enclosed. The copy of the ledger account for the corpus fund was enclosed for the entire period along with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. 29.Having held so, it may not be necessary for us to refer to the decisions referred to by the Revenue, viz., P.Krishnan Menon (supra) and Dr.K.George Thomas (supra), nor go into the aspect as what would be the definition of income , as such a situation does not arise for consideration, as we have held that the reopening is bad in law. One more issue, which was pointed out by the assessee was that no order has been passed by the Assessing Officer after the assessee gave their objections to the reopening proceedings, vide their objections dated 12.09.2005, 19.09.2005 and 16.12.2004. 30.The learned Senior Standing Counsel for the Revenue pointed out that the objections given by the assessee were dealt with by the Assessing Officer in the re-assessment orders and even assuming that a separate speaking order was not passed by the Assessing Officer after objections were received from the assessee, that would at best be a curable defect and on that ground, the assessments cannot be nullified. In this regard, the learned counsel referred to the decision in the case of Areva T D India Ltd. (supra). The Court while approving th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclusion has been overruled by the Hon'ble Supreme Court in ACIT vs. Hotel Blue Moon reported in (2010) 321 ITR 362(SC), which has been followed by the Division Bench in N.Ahamed Ali vs. Income Tax Officer in Tax Case (Appeal) No.766 of 2014, dated 19.11.2014. Apart from that, reliance was also placed on the decision of the Division Bench of the High Court of Andhra Pradesh in the case of B.F.Dittia vs. Appellate Authority, Income Tax Department and the Income Tax Officer (Public Relations) reported in (2008) 307 ITR 158 (A.P) in which, the decision of the Hon'ble Supreme Court in Sona Builders vs. Union of India reported in (2001) 10 SCC 280 (SC) was followed holding that an order in violation of principles of natural justice deserves to be quashed and not set aside and remanded. Further, it was pointed out that the decision in the case of Sona Builders (supra) was not considered by the Division Bench of this Court in Areva T D India Ltd. 35.Further, reliance was placed on the decision of the Division Bench of this Court in the case of Sterlite Industries (India) Ltd. vs. Assistant Commissioner of Income Tax and another reported i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... give arbitrary powers to the Assessing Officer to reopen assessments on the basis of mere change of opinion , which cannot be per se reason to reopen. 38.Further, it was pointed out that the conceptual difference between the power to review and power to reopen is to be kept in mind; the Assessing Officer has no power to review; he has the power to re-assess, but the re-assessment has to be based on fulfilment of certain pre-condition and if the concept of change of opinion is removed in the garb of reopening the assessment, review would take place. It was further held that one must treat the concept of change of opinion as an in-built test to check abuse of power by the Assessing Officer and therefore, after 01.04.1989, the Assessing Officer has power to reopen, provided there is tangible material to come to the conclusion that there is escapement of income from assessment and reasons must have live link with the formation of the belief. 39.The Hon'ble Supreme Court in GKN Driveshafts (India) Ltd. (supra) had clarified that when a notice under Section 148 of the Act is issued, the proper course of action for the noticee is to file a ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... businessmen were voluntary contributions. 43.The assessee filed appeal before the Commissioner of Income-tax (Appeals), who held that the amounts paid by the businessmen towards advertisements could not be considered as donations . On appeal to the Tribunal, the Tribunal following the judgment of the Bombay High Court in CIT vs. Trustees of Visha Nima Charity Trust reported in (1982) 138 ITR 564 (Bom) , held that the amounts received by the society could not be treated as trading receipts and they were mere voluntary contributions. Further, the Tribunal confirmed the finding recorded by the authorities that the society was not a charitable institution. When the matter was carried on appeal to the Bombay High Court, the question referred was whether the Tribunal was correct in holding that the amount received by way of advertising charges are voluntary contributions or donations and are not trading receipts. After taking note of Section 2(24) of the Act, it was held that the assessee society has been held as not a charitable institution and it is not also one of the institutions which are satisfied under Section 2(24) of the Act which are trea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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