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2022 (2) TMI 1038 - BOMBAY HIGH COURTValidity of Reopening of assessment u/s 147 - notice beyond period of four years - eligibility of reasons to believe - Addition of expenses towards leased assets repurchase - HELD THAT:- The reasons recorded by the Assessing Officer,singularly lack the element of satisfaction recorded by the Assessing Officer that the escapement of income was on account of the failure on the part of the petitioner to make a true and full disclosure. Nay, there is no assertion that there was a failure to disclose on the part of the petitioner. the causal connection between alleged escapement and failure to disclose is simply non-existent. The petitioner had made a full and true disclosure of the material, which forms the basis of the alleged reasons to believe escapement of income, and there was also a conscious consideration of the said material by the Assessing Officer during the course of scrutiny assessment under Section 143(3) of the Act, 1961, also appears to be borne out by the material on record. Expenses towards leased assets repurchase - The situation which is obvious is that during the course of the scrutiny assessment under Section 143(3) of the Act, 1961, the Assessing Officer had made specific query as regards leased assets repurchase expenses and solicited explanation and documents. In compliance thereto, the petitioner furnished the requisite information and documents. It is true that in the assessment order dated 18th December, 2008, the Assessing Officer did not specifically advert to the said aspect of the matter and in terms record that the explanation so furnished was accepted and allowance upheld. However, this factor is not of decisive significance. It is trite law that once a query is raised and the assessee furnishes explanation thereto, the Assessing Officer is presumed to have applied his mind to the question so raised and the fact that the Assessing Officer had not specifically dealt with the said aspect in the assessment order does not justify an inference that the Assessing Officer did not consider the same. On the contrary, it would be justifiable to assume that the Assessing Officer was satisfied with the explanation so furnished by the assessee. Once it becomes evident that the Assessing Officer had raised the query and reply thereto was furnished by the assessee, the endeavour on the part of the revenue to reopen the assessment is fraught with two infirmities. One, it cannot be said that the income escaped assessment on account of failure to make a true and full disclosure of the material facts (in cases where the proviso operates). Two, the exercise would then fall in the realm of mere change of opinion on the basis of the very same material, which is legally impermissible. Further, it cannot be said that there is a “tangible material” which would justify recourse to the provisions contained in Section 147 Non-application of mind - The second leg of the alleged escapement of income to the tune of ₹ 1,78,05,149/- towards ‘assets written off (irregular spares)’, is not at all borne out by the material on record. The claim of the petitioner that in the return submitted by the petitioner, the said amount of ₹ 1,78,05,149/- came to be added back, finds support in the computation of income submitted along with the tax audit report. Evidently, the Assessing Officer had not at all adverted to the fact that the petitioner had not claimed the said amount of ₹ 1,78,05,149/- as deduction towards the revenue expenses. Failure to take cognizance of the fact that the said amount of ₹ 1,78,05,149/- came to be added back as income erodes not only the sanctity of the reasons recorded by the Assessing Officer but also the sanction accorded by the Principal Commissioner, under Section 151 of the Act, 1961. As contextually relevant to note that the rejection of the objections to the reopening also suffers from a familiar error, which the notices for reopening usually manifest. The Assessing Officer in the impugned order recorded that though the details of the expenses were called for and brought on record, no further inquiry regarding the expenses was conducted and, thus, the Assessing Officer (during the course of the scrutiny assessment) cannot be said to have applied his mind and recorded a finding as to the allowability or otherwise of the said expenses. These reasons betray a clear change of opinion on the same material. Thus the impugned notice under Section 148 and the consequent action are required to be quashed - Decided in favour of assessee.
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