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TMI Blog2012 (11) TMI 538X X X X Extracts X X X X X X X X Extracts X X X X ..... ). Since the outcome of Revenue's appeals depends on our decision on assessee's cross objections, therefore, we frame following issues for adjudication of the case in the right perspective:- i) Whether the of reopening in question taken recourse to by the Assessing Officer vide notice dated 7.5.2008 under sec.148 of the Act and upheld by CIT(Appeals), is liable to be confirmed or modified per respective stands of the parties? ii) If first issue is decided against the assesse, then, whether the order of CIT(Appeals) on merits limiting the disallowance u/s.14A of the Act made by Assessing Officer from Rs.21,61,600/- to Rs.7,23,719/- is to be upheld or not? 3. The relevant facts qua both the inter connected issues are that the assessee (a company engaged in the business of finance, property development and software) filed its return on 31.10.2002 for Asst. Year 2003-04, declaring loss of Rs.3,73,69,044/-. The Assessing Officer, vide order dated 31.3.2005 completed assessment u/s.143(3) of the Act and assessed the loss as Rs.3,02,01,092/-. 4. Thereafter, on 7.5.2008, the Assessing Officer issued reopening notice u/s.148 read with sec.147 of the Act stating therein that asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its by observing that the assessee's disclosure of income was full but not true and there were reasons to believe that its income had escaped assessment. 8. Further, by placing reliance on a catena of case laws namely ITAT(SB) Mumbai in CIT V. Daga Capital Management Mexopp Investments Ltd. V. ACIT (ITA No.183/Del/2005) and M/s. Cheminvest Ltd. V. DCIT (ITAT No.2048/Del/2005), the Assessing Officer held that assessee had failed to justify the correctness of claim. Therefore, Assessing Officer invoked sec.14A of the Act and re-computed the assessee's income as under:- "Amount of expenditure attributable to exempt income Nil (1) Interest payments (A) 22,59,992 (2) Average value of investment Opening balance 371549403 Closing balance 361123180 (B) 36,63,36,291 (3) Average value of total assets Opening balance 2311724795 Closing balance 2707187521 (C) 250,94,56,158 A X B/C Rs.3,29,919 0.5% of Average Investments (0.5% of Rs.36,63,36,291/-) Rs.18,31,681/- Total Rs.21, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice. In the light thereof, principle contention of the Authorised Representative is that in the instant case, the Asst. Year is 2002-03. The period of 4 years from the end of relevant Asst. Year is upto 31.3.2007 whereas in the present case, the re-opening notice is time barred since it was issued on 7.5.2008. His further submission is that the notice is invalid because as per proviso, it has to be either after satisfaction of Chief Commissioner or Commissioner only which has not been done in the instant case. The case relied upon by Authorised Representative in support of this argument are 60 TTJ 748 Shanti Vijay & Co. v. ITO (Delhi High Court) and 252 ITR 1 CIT v. Anjum M Ghaswala and 335 ITR 234 (Gujarat) AayojAn Developers v. ITO. (b) The 2nd line of A.R's argument is that u/s.147 (1st Proviso) of the Act which reads as under:- [Income escaping assessment. 147. If the [Assessing] Officer [has reason to believe] that any income chargeable to tax has escaped assessment15 for any assessment year, he may, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,59,992/- (supra) as under :- Expense Head Amount Purpose Bank Charges Rs.48,572/- Expenses incurred during the coursRs.of business Interest AMEX Bonds Rs.11,22,888/- Loan was taken in FY 1999-00 Repayment of loan is out of internal accruals Interest on Hire Purchase Rs.3,67,056/- Vehicle Hire Purchase Interest OD Interest Rs.1,15,921/- Expenses incurred during the course of business IL&FS Loan Rs.4,13,719/- Interest on Sales Tax Rs.34,362/- Expenses incurred during the course of business Interest on TDS Rs.1,55,065/- On belated payment of TDS. Disallowed in computation. Total Rs.22,59,992/- In the light thereof, his argument is that there was no occasion based on any evidence/material so as to support the findings of A.O. In view of these arguments, the Authorised Representative has prayed for acceptance of the cross objections and rejection of appeal. 11. The Departmental Representative representing Revenue has submitted that plea challenging jurisdiction of Assessing Officer qua reopening has not been specifically raised in grounds. and prayed for rejection of Cross Objections filed by assessee. Further, he has also placed reliance on CIT(Appeals)'s or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, 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, we are afraid, 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. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review ; he has the power to reassess. But reassessment has to be based on fulfilment of certain preconditions and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, the Assessing Officer has power to reopen, provided there is "tangible material" to come to the conclusio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egarding the acquisition of various machinery and assets and the details regarding the leasing out of those machinery and items to other parties. The assessee had also furnished the details of lease rent received out of those lease agreements. The assessee had also furnished the detailed computation of depreciation mentioning therein the written down value of machinery and assets before and after claiming the depreciation allowance for the impugned assessment years. It is a factual finding by the Tribunal that the assesse company had fully and truly disclosed all material facts necessary for working out the quantum of depreciation allowance and completed the assessment accordingly. The Tribunal is right in following the judgment of the learned single judge of this court reported in Fenner (India) Ltd. v. Deputy CIT [2000] 241 ITR 672. In the said judgment, the learned single judge considered the scope of the proviso to section 147 of the Income-tax Act in detail and held as follows (page 677) : "The pre-condition for the exercise of the power under section 147 in cases where power is exercised within a period of four years from the end of the relevant assessment year is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record that any one or all the circumstances referred to in the proviso existed before the issue of notice under section 147. After an assessment has been made, in the normal circumstances, there would be no reason for anyone to doubt that the assessment has been made on the basis of all relevant facts. If the Assessing Officer chooses to entertain the belief that the assessment has been made in the background of the assessee's failure to disclose truly and fully all material facts, it is necessary for him to record that fact, and in the absence of a record to that effect, it cannot be held that a notice issued without recording such a fact is capable of being regarded as a valid notice. As to whether the material facts disclosed by the assessee are full and true is always a question of fact and unless the facts disclosed had been examined in relation to the extent of failure if any on the part of the assessee, it is not possible to form the opinion that there had been a failure on the assessee's part to truly and fully disclose the material facts. A notice issued without a record of the Assessing Officer's reasonable belief that there was such failure on the part of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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