TMI Blog2023 (6) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... lso bad in law. A conclusion may be drawn that the reopening was made beyond a period of 4 years without recording satisfaction by the CIT. The satisfaction/approval reproduced hereinabove have been accorded by the authorities in a mechanical manner on 19.03.2011, without looking into the proposal dt. 26.03.2011 by the ACIT and without considering the proposal of the AO dt.19.03.2012. Firstly, there was no reason for the ACIT to recommend the case of the AO for reopening u/s 147 - CIT was duty bound to independently apply his mind and come to the satisfaction that the said case was a fit case for reopening of the assessment beyond a period of 4 years. The satisfaction as contemplated u/s 151 of the Act is not an empty formality as the authorities have to apply their mind and record satisfaction. When the authorities were not oblivious to the date of proposal then it cannot be said that they have applied their mind or considered the proposal of the AO in its right earnest. In our view, if the officers have not even seen the date when it was proposed by the AO, the question of examining other record at the time of recording the satisfaction does not arise and hence, we can safe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest of Rs. 27,69,422/-. 5. The ld.CIT(A) erred in confirming the addition of difference of prior period income of Rs. 1,26,71,371/-. 3. The grounds raised by the Revenue in ITA No. 930/Hyd/2016 read as under : 1. The order of ld.CIT(A) is erroneous in law and on facts of the case. 2. The ld.CIT(A) erred in deleting the disallowance of depreciation on discarded assets of Rs. 21,25,929/-. 3. The ld.CIT(A) erred in deleting the addition of Rs. 1,42,37,594/- made by the Assessing Officer on account of assets discarded or written off. 4. The ld.CIT(A) erred in simply accepting the contention of the assessee and in not passing a speaking order on the issue of deletion of addition of Rs. 1,42,37,594/- an expenditure claimed towards assets discarded/written off under prior period expenditure. 4. The brief facts of the case are that assessee is a company engaged in the business of civil contracts, filed its return of income for A.Y. 2006-07 on 23.11.2006 declaring total income of Rs. 7,79,88,094/-. The return of income was processed u/s 143(1) of the Act on 10.03.2008 and thereafter, the assessment was completed u/s 143(3) of the Act by making disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r month works out to approx. Rs. 40 lakhs. As per balance sheet under the head current liabilities, salaries, wages (sch-8) an amount of Rs. 91,01,161/- and an amount of Rs. 1,35,755/- under the head PF is due, which clearly indicates that the liability is for more than two months as against normal trend of one month. (v) The shares of Rockwell India ltd were sold at two different rates of Rs. 7 Rs. 5.25 per share. The breakup is not available on record. By applying the rate at Rs. 7 per share the understatement of sale proceeds of Rs. 50.14, attracts long term capital gain tax. 4.3. It was submitted by the ld.AR that from the notice, it is clear that the said notice was issued without obtaining the satisfaction of the CIT-II, Hyderabad/CBDT. The contention of ld.AR was that the notice was issued as if the re-opening was done within 4 years under clause (1) of section 147 of the Act. It was the contention that if the reopening is done by the Revenue beyond a period of 4 years, then satisfaction of the Commissioner of Income Tax is necessary. 4.4. The assessee after receipt of notice u/s 148 had also received notice u/s 143(2) and 142(1) of the Act. In response theret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the part of the Assessee, as it had disclosed fully and truly all material facts necessary for its assessment. 2. The AO had issued the notice u/s 148 only due to the change of opinion, and not based on any new information that has come to his notice. The appellant placed reliance on CIT Vs. Munjal Showa Ltd. (2012) 205 Taxman 351 (Delhi)(HC) where in it was held that reassessment due to change of opinion when there is no failure on part of Assessee in disclosing the full facts is not valid. 3. AO has no information on record to show that income chargeable to tax has escaped assessment due to the failure of the Assessee to disclose fully and truly all the material facts necessary for the assessment. 4. What prompted the Assessing Officer to issue the notice u/s 148 is the Audit objection raised by the AG office auditors. It was claimed that it is a settled law that audit objections cannot be the ground to issue the notice u/s 148. 5.1. The ld.CIT(A) though had noted down the objections raised by the assessee and submissions of the assessee, however, without any elaborate reasonings had dismissed the grounds of the assessee by reasoning given vide 6.10 and 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1993)69 Taxmann 565 (AP) 3. Without prejudice to the above, it is to submit that it becomes clear from above report of the AO that the approval of the CIT for the issue of Notice U/s 148 of the IT Act was obtained on 27.03.2012. From the records, it is seen that the Proforma proposal for re-opening of assessment was submitted by the Additional CIT, vide his letter dated 26.03.2012 (In the Form for recording reasons thereof, it appears that the date has been inadvertently typed as 19.03.2011 instead of 19.03.20 12). Copies of the Proforma, the said forwarding letter of the Addl. CIT, communication of the approval by the ITO (HQ) dated 27.03.20 12 and a copy of the Notice U/s 148 of the IT Act dated 28.03.2012 are enclosed herewith as Annexure II 4. The Assessee has claimed LTCG as exempt U/s 10(38). In this regard, the Assessee vide his Letter dated 16.04.2008 has fraudulently claimed before the AO, during the original assessment proceedings that STT has been paid with regards to the said LTCG and the details there of will be provided to the Department separately. This is a clear case of falsity to avoid payment of taxes (copy enclosed as Annexure III). 5. In view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 4 years, is a jurisdictional ground. Similarly, whether there was any satisfaction in the eyes of law, recorded by the ld.CIT vide note dt. 19.03.2011 was also a question of law as the proposal was mooted by the ACIT only on 26.03.2012. Therefore, both the additional grounds raised by the assessee are legal in nature and therefore, are required to be admitted. Suffice to say, Hon'ble Apex Court s landmark decision in National Thermal Power Co. Ltd., Vs., CIT [229 ITR 383] (SC); as considered in Tribunal s Special Bench s decision All Cargo Global Logistics Ltd., Vs. DCIT (2012) [137 ITD 217](SB) (Mumbai), holds that the Tribunal can very well entertain a new ground going to root of the matter so as to determine correct tax liability of a taxpayer provided all the relevant facts are already on record. Respectfully, following the decisions cited supra, we accept that the assessee s petition seeking to raise additional grounds. Further, as the additional grounds raised by the assessee are legal in nature and directly emanate from the order contested, the same are required to be admitted. 10. Both the decisions relied upon by the ld. DR deals with the issue of admission of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment was taken place beyond a period of 4 years and the Assessing Officer has not recorded that there was any omission or failure on the part of the assessee to disclose fully and truly all the material facts for the completion of assessment. It was further submitted that notice for re-opening was issued on 20.03.2012 and however, for the reasons to re-open the assessment were mentioned as under : Reasons for the belief that Income has escaped assessment. (i) As per the computation on Long Term Capital Gains the assessee had sold 29000 shares Rs. 7/- per share and 28,65,500/- shares @ 5.25 per share on 31.07.2005 and claimed the profit on sale of investment of Rs. 64,47,895/- as exempt u/s 10(38) on the reason that the shares are listed shares and that Securities Transaction Tax (SIT) has already been deducted. Though in, its letter Dt: 16.04.2008, the assessee stated that the details of STT paid would be provided separately, the same have not been found on record. Further, under the current circuit breaker norms of Stock Exchanges, it is not possible that the prices Rs. 5.25 and Rs. 7.00 could be quotations on the same day i.e.. 31.07.2005. In view of the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stries Vs. ACIT reported in 267 ITR 161 and also jurisdictional High Court in the case of PCIT Vs. Lanco Hills Technol Park (I.T.T.A No. 326 of 2022) decided on 13.12.2022 whereby both the High Courts have held as under : 7. Revenue preferred appeal before the Tribunal against the aforesaid order of CIT(A) dated 30.03.2019. By the order dated 07.09.2021, Tribunal dismissed the appeal of the revenue by upholding the order of CIT(A). Tribunal held as follows: 4. We have heard rival pleadings and perused the case file. We note first of all that the Assessing Officer recorded the following reasons for forming his opinion that the assessee's taxable income had escaped assessment: it is gathered from the information available with this office that the assessee was debited an amount of Rs. 113,19,93,808/ - towards 'Reversal on account of cancellation and price revision; and finally reported a book loss of Rs. 38,28,51,371/-. The reduction of Rs. 113,19,93,828/ - towards Reversal on account of cancellation and price revision 'from the Profit and Loss Account for the year ended 31.03.2010 is irregular, the same need to be brought to tax. In view of the above, I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re change of opinion. 9. We are in agreement with the views expressed by the Tribunal. 10. The fact that the reopening of assessment was ordered on mere change of opinion has been upheld by two lower appellate authorities. It is evident that respondent had disclosed fully and truly all material facts to the assessing officer during the assessment proceeding on the basis of which assessment order dated 27.12.2012 was passed under Section 143(3) of the Act. By .change of opinion holding that reduction of Rs. 113,19,93,808.00 towards reversal on account of cancellation and price revision and deducting the same from the profit and loss account was irregular thereby having reason to believe that taxable incorrect had escaped assessment, the concluded assessment could not have been reopened. At the stage of third round of appeal we do not find any substantial question of law for interference by the High Court under Section 260A of the Act. We are, therefore, of the view that there is no merit in this appeal. In view of the decisions cited hereinabove, it is clear that unless there is a failure on the part of the assessee to disclose fully and truly all the material facts, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since the reopening of the assessment was beyond the period of four years, there was no omission or failure on the part of the Appellant to disclose fully and truly all the material facts necessary for the completion of assessment. 4. The original assessment U/s. 143(3) was completed on 23/4/2008. 5. One of the grounds raised by the Appellant was that the notice U/s. 148 was issued without obtaining necessary sanction of the Commissioner of Income Tax, as this sentence was struck down by the Assessing Officer in the notice issued U/s. 148 on 28/03/2012. The Appellant pleaded for the sanction accorded by the Commissioner in relation to the facts called for and the Learned Departmental Representative was asked to furnish a copy, which was done. On a perusal of the Form for recording the reasons in initiating the proceedings U/s. 147 of the Act, for obtaining the approval, of the CIT given on 19th March, 2011 reveals the following:-. (i) The proposal itself is a revised proposal as could be seen from the Head Note of the Form of approval . (ii) The Pr. CIT noted that he was satisfied that the recording of reasons of the proposals that were put to him arose out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.1 Referring to provisions of section 114(a) of the Indian Evidence Act, he submitted that all statutory officers are deemed to have performed their duty as expected of them. He submitted that since the AO had passed the original order u/s. 143(3) on 7.12.2010 on the basis of the return of income filed along with the audited accounts and there is absolutely no failure on the part of the assessee to disclose fully and truly all material facts, therefore in view of the proviso to section 147 of the I.T.Act, the assessment could not have been reopened beyond the period of four years form the end of the relevant assessment year. He submitted that by merely mentioning that there is failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment is not sufficient. The AO has to bring on record some tangible material to show as to which part of the income was not disclosed fully and truly by the assessee so as to invoke the provision of section 148 beyond the period of four years. 11.2 Referring to the decision of Hon'ble Supreme Court in the case of ITO vs Kayathwal Estate Pvt.Ltd reported in 442 ITR 507, he drew ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecessary for the assessment is bad in law and void. i. CIT v. Chaitanya Properties (P.) Ltd (240 Taxman 659 (Kar.HC) ii. Jal Hotels Co. Limited v. ACIT (184 Taxman 1) (Del.HC) iii. Legato Systems (India) Pvt. Ltd v. DCIT (187 Taxman 294) (Del.HC) iv. Purity Techtextile (P.) Ltd. v. ACIT (325 ITR 459/189 Taxman 21) (Bom.HC) v. Asteroids Trading Investment P. Ltd. v. DCIT (308 ITR 190), (Bom.HC) vi. Heavy Metal and Tubes Ltd. v. DCIT 364 ITR 609) (Guj.HC) vii. Gowri Gopal Hospital (P.) Ltd. v. Income-tax Officer [2015] 55 taxmann.com 335 (Hyderabad - Trib.) viii. CIT, Patiala v. State Bank of Patiala [2016] 70 taxmann.com 36 (SC) 14. Referring to the following decisions, he submitted that reopening based on mere change of opinion is bad in law. i. CIT v. Kelvinator of India Ltd. (FB) (256 ITR 1) (Del.HC) ii. CIT v. Kelvinator of India Ltd (320 . ITR 561) (SC) iii. ACIT vs. ICICI Securities Primary . Dealership Ltd. (348 ITR 299) (SC) iv. Ganga Saran Sons (P.) Ltd. v. ITO 1 [(1981) 130 ITR 1] (SC) v. Kohinoor Hatcheries (P.) 1 Ltd. v. Deputy Commissioner of Income-tax [2016] 76 taxmann.com 150 (AP.HC) vi. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India [2018] 96 taxmann.com 250(Ker. HC) ii. Instnat Holdings Ltd. vs. DCIT [2014] 44 taxmann.com 386 (ITAT, Mumbai) iii. CIT vs. Nova Promoters Finlease(P.) Ltd.[201] 18 taxmann.com 217(Del. HC) 18. So far as the disallowances of the project expenses written off as revenue expenses is concerned, the ld. DR submitted that the pre-operative expenses is capital expenditure in nature and therefore, the same cannot be allowed as deduction. For the above proposition, he relied on the following decisions: i. CIT v. Omer Khayyam Wineries (P.) Ltd. [1979] 120 ITR 859 (AP.HC) ii.Eimco K.C.P.Ltd. vs CIT [2000] 109 taxman 151(SC) (SC) iii. CIT vs. Mohan Steel Ltd. [2005] 273 ITR 479 (Alahabad HC) iv.MAC Industrial Products Ltd. ACIT,CC [2006] 101 ITD 191 (ITAT, Chennai) v.CIT vs. Reinz Talbros (P.) Ltd. [2001] 119 taxman 739 (Del.HC) 19. He accordingly submitted that the order of the ld.CIT(A) being in accordance with law has to be upheld and the grounds raised by the assessee should be dismissed. 20. We have considered the rival arguments made by both the sides, perused the orders of the AO and Ld.CIT(A) and paper book filed on behalf of the assessee. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment. Under these circumstances, we have to see as to whether the reopening of the assessment beyond a period of four years from the end of the relevant assessment year in absence of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment can be made when the initial assessment was completed u/s. 143(3) of the I.T.Act, 1961. 22. We find the Hon'ble Supreme Court in the case of ACIT vs ICICI Securities Primary Dealership Ltd reported in 320 ITR 561 has held that where accounts had been furnished by assessee when called upon and thereafter assessment was completed u/s. 143(3), subsequently on a mere re-look of said account earlier furnished by assessee it is not permissible u/s. 147 to reopen assessment of assessee on ground that income has escaped assessment 23. We find the Hon'ble Madras High court in the case of CIT vs. RPG Transmission Ltd. reported in 359 ITR 653 has held that reopening was not justified where AO had actually before him all relevant material at the time of original assessment itself. The relevant observation of the Hon'ble High Court at para 30 of the order read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciated the finding of the Commissioner of Income- tax (Appeals) and applied the law in this regard in coming to such a conclusion. Arguments were advanced to the effect that it was a concurrent finding of facts by the commissioner of Income-tax (Appeals) and the Tribunal and. therefore, no substantial question of law arises for consideration and we are, in the facts and circumstances of the case, in agreement with the findings of the' Tribunal and the Commissioner of Income-tax (Appeals), which are essentially final fact finding authorities. It is not as if this court in exercise of its power under section 260A of the Act cannot examine the correctness of such concurrent findings. It is, however, to be borne in mind that while examining the orders of the Tribunal and the Commissioner of Income tax (Appeals) when it is found that the findings were perverse or contrary to the law in this regard, we would have no hesitation to interfere. However, from an overall conspectus of the facts and law that emerges from the judgments referred to supra, we find no reasons to interfere with the findings of the Tribunal, which in turn confirmed the findings of the commissioner of Income-tax(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pened the assessment. 18. We have heard the rival submissions and perused the material on record. In the present case, the ACIT vide letter dt.26.03.2012 had forwarded the proposal dt.19.03.2012 to the CIT-II vide letter dt.26.03.2012. The letter of the ACIT is reproduced hereinbelow. Along with the letter, ACIT also enclosed the Form for recording the reasons for initiating proceedings u/s 147 of the I.T. Act for obtaining the approval of the CIT, which is as under : 19. Assuming the contention of the ld. DR that the proposal given by the Assessing Officer was 19.03.2012 and not 19.03.2011, in that eventuality, the re-opening has been made by the Assessing Officer beyond a period of 4 years, as the assessment in the present case was completed by the Assessing Officer on 23.04.2008. The law on the reopening beyond a period of 4 years is fairly settled and it is the mandatory requirement of law that the Assessing Officer should record that there is a failure on the part of the assessee to disclose fully and truly all the material facts necessary for completion of the assessment and further the CIT should record his satisfaction and grant approval for reopening of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and also by the CIT, as both the said senior officials had failed to take cognizance of the proposal dt. 19.03.2012, wrongly typed as 19.03.2011 on Page 2 reproduced hereinabove. In fact, 19.03.2011 would fall within a period of 4 years whereas 19.03.2012 would fall beyond the period of 4 years. In case of any re-assessment was made beyond a period of 4 years, then recording of satisfaction by the CIT is a must under the Income Tax Act, 1961. Section 151 of the Income Tax Act, 1961 provides that no notice shall be issued by the Assessing Officer after expiry of 4 years unless the Principal Chief Commissioner or the Commissioner of Income Tax is satisfied on the reasons recorded by the Assessing Officer that it is a fit case for issuing such notice. 22. The satisfaction as contemplated under Section 151 of the Act is not an empty formality as the authorities have to apply their mind and record satisfaction. When the authorities were not oblivious to the date of proposal then it cannot be said that they have applied their mind or considered the proposal of the Assessing Officer in its right earnest. In our view, if the officers have not even seen the date when it was proposed by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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