TMI Blog2010 (12) TMI 890X X X X Extracts X X X X X X X X Extracts X X X X ..... y for the assessment - Decided in favor of the assessee - IT Appeal No. 899 (Ahd.) of 2000 - - - Dated:- 30-12-2010 - G.D. Agarwal,; T.K. Sharma, N.S. Saini, JJ. J.P. Shah and M.J. Shah for the Appellant Alok Johri and Sanjay Rai for the Respondent ORDER G.D. Agarwal, Vice-President (As a Third Member):- 1. The Hon'ble President, ITAT has nominated the Vice-President (AZ/KZ) vide UO No. F. 13-Cent., JD(AT)/2010, dated 24-3-2010 as Third Member to resolve the following point of difference under section 255(4) of the Income-tax Act in the above appeal. "Whether in the facts and in the circumstances of the case, the re-opening of the assessment framed under section 143(3) on 28-3-1989 to tax alleged escapement of capital gain of Rs. 10,13,359 and profit under section 41(2) amounting to Rs .8,16,559 is justified?" Accordingly, I proceeded to hear the parties. 2. At the time of hearing before me, it is stated by the learned counsel that the assessment year under consideration is 1986-87 and notice under section 148 for reopening of the assessment was issued on 27-3-1997. That the original assessment was completed under section 143(3) vide orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the firm there is no transfer of assets. Similarly, the deeming provision of sub-section (4) of section 45, came with effect from 1-4-1988. Therefore, in the assessment year 1986-87, on the dissolution of the firm, there was no deemed transfer of the assets, and therefore, the question of any liability to capital gain tax on the dissolution of the firm did not arise. Once there was no liability, there is no question of any escapement of income. 3. The learned DR, on the other hand, stated that the assessee-firm was dissolved on 31-12-1985 and the entire assets and liabilities were taken over by one of the partners, viz., "ILBPL". That "ILBPL" claimed depreciation on the revalued amount of assets. The Assessing Officer in the assessment of he "ILBPL" did not allow depreciation on the revalued amount against which "ILBPL" had filed appeal before the CIT(A). That the CIT(A) vide order dated 4-3-1994 for assessment years 1988-89 and 1989-90 held that as per the decision of A.L.A. Firm's case (supra), the firm. M/s. Industrial Lining, i.e., the assessee was liable to pay capital gain tax on the difference between the market value of the assets and the WDV and the proceedings under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice under section 148 for reopening of the assessment under section 147 was issued on 27-3-1997. The original assessment was completed under section 143(3) vide order dated 28-3-1989. The section 147 reads as under:- "Explanation 3:- For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148." From the above, it is evident that as per proviso to section 147 where the assessment has been made under section 143(3) no action can be taken for reopening of such assessment after the expiry of four years from the end of the relevant assessment years unless the income chargeable to tax has escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. Admittedly, in this case, the original assessment was completed under section 143(3) and the notice for reo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year):- Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year:- Provided further that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject-matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1:- Production before the Assessing Officer of account books or other evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to disclose fully and truly all the material facts necessary for his assessment. The Assessing Officer has referred the dissolution of the firm, revaluation of the assets before the dissolution, credit of the difference between the original cost and re-valued cost to the partners' account, creation of sell-generated assets and the credit of the same to the partners account. As per the Assessing Officer in view of above facts, the assessee was liable for capital gain tax under section 45 read with section 50 of the Income-tax Act. Since no capital gain tax was charged in the original assessment, there was escapement of income. However, the Assessing Officer nowhere alleged that there was failure on the part of the assessee to disclose any relevant facts. Now in the paper book, the assessee has produced before me the documents which were produced before the Assessing Officer in the original assessment. At page No. 3 of the paper book, there is a computation of the income of the relevant year and at page No. 5 there is note forming part of the computation of income. This note reads as under:- "2. The assessee has revalued land, building and plant and machinery as on 31-12-1985. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets during the captioned assessment year are because of revaluation of the assets as per the Government Approved valuer's report. The working of goodwill is enclosed herewith for Rs. 5,62,800. The details of machineries sold during the year with profit under section 41(2) are enclosed herewith." At page No. 46 there is a working of the goodwill of Rs. 5,62,800. From these facts, it is abundantly clear that the assessee has duly disclosed the fact of revaluation of the assets, creation of self-generated assets viz., goodwill and also that the difference between the cost and the revalued amount of the assets is transferred to the partners' capital account. The fact of the dissolution of the firm as well as deed of dissolution was also furnished. Therefore, all primary facts were duly disclosed by the assessee in the original assessment proceedings itself. It is contended by the learned DR that the assessee has not disclosed the fact that the "ILBPL" will claim the depreciation on the revalued amount of the assets. In my opinion, on what amount depreciation will be claimed by the buyer of the assets is not the discretion of the assessee and moreover, so far as the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all primary facts. Once all the primary facts were before the assessing authority, it was for him to decide what inferences of fact could be reasonably drawn and what legal inferences had ultimately to be drawn. It was not for anybody else far less the assessee to tell the assessing authority what inferences, whether of facts or law, should be drawn." The above decision was by the Five members Constitutional Bench of the Hon'ble Apex Court and it is not pointed out by the learned DR that such decision is overruled by any subsequent decision of the Hon'ble Apex Court. Similar view is taken by the Hon'ble Apex Court in the case of Corporation Bank Ltd. (supra) wherein Their Lordships held as under:- " .....affirming the decision of the High Court, that since the assessee had furnished particulars pertaining to the sum of Rs. 54,485, as not recoverable and had filed statements along with the original return disclosing full details of the interest suspense account, there was no failure on the part of the assessee to disclose fully and truly material facts necessary for the assessment; and section 147(a) had no manner of application and was not attracted to the facts of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reopened and the said order of the CIT(A) has become final. Therefore, now the assessee cannot challenge the validity of reopening the assessment. In my opinion, any observation or finding in the case of any other persons, would not debar the assessee for claiming that reopening of the assessment in his case is barred by the limitation as per the provisions of the Act. The observation and finding given in the case of "ILPBL" by the CIT(A), even it had become final, would be binding in the case of the "ILPBL" only and not other assessees. 9. In view of the above, I hold that on the facts and in the circumstances of the case, the reopening of the assessment framed under section 143(3) of the Act on 28-3-1989 was not justified. Thus, I agree with the learned Accountant Member. 10. The appeal will now go back to the Division Bench for passing order in accordance with majority view. N.S. Saini, Accountant Member:- In this appeal there arose a difference of opinion between the Members of the Division Bench hearing the appeal. Therefore, the matter was referred to the Third Member. Hon'ble Vice-President acting as Third Member has agreed with the view of the ld. Accounta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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