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TMI Blog2009 (9) TMI 647X X X X Extracts X X X X X X X X Extracts X X X X ..... ch public are substantially interested, is engaged in the business of investment in movable and immovable properties since last several years. The AO completed the assessment under s. 143(3) of the IT Act, 1961 (in short 'the Act') on 12th March, 1998 determining the total income at Rs. 17,87,790. Thereafter, notice under s. 148 was issued by the AO for the following reasons: "It has been noticed that interest and financial charges debited to the P&L a/c are inclusive of the interest pertaining to earlier assessment year amounting to Rs. 15,30,000 as per note at serial No. 9 of para B of Sch. XIV. While passing order under s. 143(3) of the Act on 12th March, 1998, total income was determined at Rs. 17,87,790. While passing the said order, financial charges aggregating to Rs. 39,25,919 were allowed as claimed by you. The said financial charges include interest pertaining to earlier year amounting to Rs. 15,30,000. There is underassessment of income of Rs. 15,30,000 while passing, the order under s. 143(3) of the Act dt. 12th March, 1998." 3.1 The AO issued a letter dt. 8th July, 2002 communicating the above reasons for reopening and asking the assessee as to why addition of Rs. 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground of appeal observing as under: "3.3 I have considered the submission made by the appellants and the observation of the AO. The original order under s. 143(3) was passed on 12th March, 1998 whereas the notice under s. 148 was issued on 20th March, 2002 and the same was served upon the assessee on 28th March, 2002, i.e., within four years from the end of the assessment order in which order under s. 143(3) was passed. With effect from 1st April, 1989 an order passed under s. 143(3) can be reopened within four years. Only restriction made by the proviso of s. 147 is that no action shall be taken under this section after the expiry of four years unless any income chargeable to tax has escaped assessment by the reasons of the failure on the part of the assessee to disclose fully and truly all material. This condition does not apply if the reopening is done within four years. As' per Expln. 2, cl. (c) sub-cl. (1), if the income chargeable to tax is under-assessed then as per the deeming clause of Expln. 2, it is a case of income having escaped assessment. In view of this reason, the reopening is in order and this ground of appeal is dismissed." 6. Before us, Shri J.P. Shah, the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . He further submitted that during the course of original assessment, the details in respect of interest payable on deposit were also furnished vide letter dt. 18th Feb., 1998. In the said letter, it was clearly submitted in the form of a Table, that details of interest and the interest provided include Rs. 15,30,000 pertaining to asst. yr. 1994-95 i.e., financial year 1993-94. The fact that the same was clearly disclosed and specific information was submitted at the time of original assessment proceedings, therefore, the assessment cannot be reopened due to change in the opinion of the subsequent assessment by the AO. Shri J.P. Shah, the learned counsel for the assessee also drew our attention to p. 2 of the original assessment order where the AO himself stated that "on further scrutiny of the balance sheet and note appended to the statement of total income and account, it. is seen that the assessee has not charged interest on closing balance of loan." Shri J.P. Shah, the learned counsel for the assessee submitted that from the above statement, it is clear that the AO has seen notes to account also which he himself referred i.e., note No. 11 and the disclosure of debited interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... original assessment, the details in respect of interest payable on deposit were also furnished vide letter dt. 18th Feb., 1998 which reads as under: "(4) Interest payable on deposits Rs. 44,06,629: Amount (Rs.) Interest payable to Gokrna Inv. (P) Ltd. (1994-95) 11,78,100.00 Interest payable to Gokrna Inv. (P) Ltd. (1993-94) 15,30,000.00 Interest payable on deposit (Harada) (1994-95) 4,725.00 Interest payable on deposit (old) 75,698.87 Interest payable on deposit (1989-90) 3,26,205.00 Interest payable on deposit (Bombay) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of four years from the end of the assessment year. We have also perused the original assessment order dt. 12th March, 1998 passed under s. 143(3) of the Act. We find that at p. 2 of the assessment order, the AO has himself stated that "on further scrutiny of the balance sheet and notes appended to the statement of total income and account, it is seen that the assessee has not charged interest on closing balance of loan." From the above, it is clear that the AO has seen notes on account also which he himself referred i.e., note No. 11 and the disclosure of debited interest on loan of Rs. 15,30,000 is clearly there in note No. 9 above note No. 11. In our considered view, the assessee has submitted all the details in respect of loan and also clearly making full disclosure to the interest including interest of Rs. 15,30,000 pertaining to the asst. yr. 1994-95. 9. Now, we will examine the relevant provisions of law. Proviso 1 to s. 147 reads as under: 147. If the AO has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of ss. 148 to 153, assess or reassess such income and also any other income charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but also the default or failure of assessee to disclose fully and truly all material facts; notice issued under s. 148 after expiry of four years cannot be sustained as escapement of the income, if any, is not on account of any failure on the part of the assessee to disclose the material facts fully and truly. 10.2 In the case of Duli Chand Singhania vs. Asstt. CIT (2004) 188 CTR (P&H) 90 : (2004) 269 ITR 192 (P&H), the Hon'ble High Court held that in the absence of any allegation in the reasons recorded of failure on assessee's part to disclose fully and truly all material facts necessary for the assessment, no action under s. 147 could be taken after the expiry of four years from the end of the relevant assessment year in view of the proviso to s. 147 of the Act. 10.3 In the case of Haryana Acrylic Manufacturing Co. vs. CIT & Anr. (2008) 220 CTR (Del) 450 : (2008) 15 DTR (Del) 274 : (2009) 308 ITR 38 (Del), the Hon'ble Delhi High Court held that there being no whisper in the reasons supplied to the assessee that income escaped assessment by way of reason of assessee's failure to make full and true disclosure of all material facts necessary for notice under s. 147 issued beyond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equential order passed under s. 143(3) r/w s. 147 of the Act dt. 30th Sept., 2002 is liable to be quashed. We accordingly cancel the impugned order passed under s. 143(3) r/w s. 147 of the Act. Thus, the ground of appeal of the assessee is allowed. 13. In view of our decision above, we do not think it necessary to decide the other grounds of appeal i.e., ground on merits. ITA No. 1833/Ahd/2009: 14. This appeal by the assessee is directed against the order of CIT(A), Surat, in confirming the penalty of Rs. 6,57,900 levied under s. 271(1)(c) of the Act for the asst. yr. 1995-96. 15. Heard. In our view, ordinarily, penalty cannot stand if the assessment itself is set aside. While deciding ITA No. 1832/Ahd/2009, we have cancelled the reassessment proceedings and quashed the order of CIT(A) and, therefore, penalty does not survive. It is well-settled law that where an order of assessment or reassessment on the basis of which penalty has been levied on the assessee has itself been finally set aside or cancelled by the Tribunal or otherwise, the penalty cannot stand by itself and the same is liable to be cancelled. In view of the settled law, we cancel the impugned penalty. 16. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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