TMI Blog2012 (12) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment for the assessment year under consideration, the notice u/s 148 having been issued after the expiry of a period of four years from the end of the relevant assessment year, the very initiation of proceedings u/s 147 stands vitiated and as such cannot be sustained - Decided against Revenue - ITA No.4033/Del/2011 - - - Dated:- 20-7-2012 - SHRI U.B.S.BEDI, SHRI A.N. PAHUJA, JJ. Assessee by Shri Sandeep Sapra, AR Revenue by Shri S. Mohanty, DR ORDER A.N.Pahuja:- This appeal filed on 05.09.2011 by the Revenue against an order dated 14.06.2011 of the ld. CIT(A)-VII, New Delhi, raises the following grounds:- 1. "The order of the CIT(A) is erroneous and contrary to facts and law. 2. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in holding that the Assessing Officer could not have assumed valid jurisdiction u/s 147 of the Income-tax Act, 1961 and thus notice u/s 148 issued by him cannot be sustained. 2.1 The learned CIT(A) has erred and ignored that Explanation 2(iv) to Sec. 147 provides that excessive loss or depreciation allowance or any other allowance under this Act shall also be deemed to be case whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dity of notice u/s 148 of the Act, the ld. CIT(A) disposed of the issue as under:- "4. Ground of appeal No.1 which relates to the legality and validity of issuing notice u/s 148 of the Act and subsequent completion of the reassessment order u/s 147 read with section 143(3) of the Act, is not being adjudicated as the appeal has already been decided on the merits of the case. Accordingly, this ground is treated as dismissed." 4. On further appeal against the aforesaid order of the ld. CIT(A), the ITAT vide order dated 15.10.2010 in I.T.A. no. 3810/Del./2010 restored the issue regarding validity or other wise of the reassessment proceedings to the file of the ld. CIT(A) with the directions to adjudicate the issue after giving reasonable opportunity to the assessee. In terms of these directions of the ITAT, the ld. CIT(A) quashed the notice u/s 148 of the Act in the following terms:- "3.1 I have considered the written submission on behalf of the appellant, the findings of the Assessing Officer in the assessment order and the facts on record. I have also perused the case laws cited by the appellant. It is also observed that the notice u/s 148 of the Act was issued on 22.7.2008 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Ltd. Vs. DCIT (2006) 285 ITR 26 and Asteriods Trading and Investment (P) Ltd. Vs. DCIT (2009) 308 ITR 190 (Bombay) wherein it has been held that there being no new material in the hands of revenue leading to the view that there was reason to believe that there was escapement of assessment, there was mere change of opinion and hence notice u/s 148 is liable to be quashed. 3.2 Reliance is also placed on the decision of Hon'ble Delhi High Court in the case of DT and TDC Ltd. Vs. ACIT (2010) 324 ITR 234 (Delhi), wherein the decision of the Supreme Court in CIT Vs. Kelvinator of India Ltd. (2010) 228 CTR(SCt)488: (2010) 34 DTR (SC) 49: (2010) 320 ITR 561 (Supreme Court) was also referred. In DT TDC Ltd. Vs. ACIT (supra) it was held as under:- "10. The position that a mere change of opinion would not entitle an Assessing Officer to reopen a completed assessment is well settled. The latest decision being of the Supreme Court in Civil Appeal Nos. 2009-2011 of 2003 and Civil Appeal No. 2520 of 2008 decided on January 18, 2010 (CIT Vs. Kelvinator of India Ltd. (2010) 320 ITR 561 (SC) which approves this court's Full Bench decision in the case of CIT Vs. Kelvinator of India Ltd. (20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hi). It was pointed out that in the preceding AY 2001-02, no disallowance of depreciation on goodwill was made in the order dated 29th October,2001 u/s 143(1) of the Act. Similarly in the order dated 24.3.2003 u/s 143(3) of the Act for the AY 2001-02 no such disallowance was made. In the AY 6 ITA no.4033/Del./2011 2002-03, disallowance made by the AO was deleted by the ld. CIT(A) and Revenue's appeal was dismissed vide order dated 16th October, 2009 in I.T.A. no.1155/Del./2010. The said order of the ITAT was subsequently upheld by the Hon'ble Jurisdictional High Court vide their order dated 30.03.2012 in ITA no.1151/2010. Likewise, in the AY 2003-04, an identical disallowance made was deleted by the ld. CIT(A) vide order dated 23.06.2010 and appeal of the Revenue was dismissed vide order dated 15th October, 2010 in I.T.A. no.604/2011. The said order of the ITAT has also been upheld by the Hon'ble Jurisdictional High Court vide order dated 21st September, 2011 in I.T.A. no. 604/2011. The AO did not make any disallowance on account of depreciation on goodwill in his order dated 20th December, 2006 u/s 143(3) of the Act in the AY 2004-05 while in the AY 2005-06, disallowance made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly, after expiry of 4 years from the end of the assessment year, that would not confer any jurisdiction on the AO to issue notice u/s 148 of the Act. The scope and effect of section 147 as substituted with effect from April 1, 1989, as also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under section 147(a), two conditions were required to be satisfied- firstly the AO must have reason to believe that income, profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement occurred due to reason of either omission or failure on the part of the taxpayer to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the AO could have jurisdiction to issue notice under section 148 read with section 147(a).But under the substituted section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scope of the assessee's duty to disclose fully and truly all material facts necessary for assessment in the context of the provisions of section 34 of the Indian Income-tax Act, 1922, has been succinctly stated by the Supreme Court by their Lordships in Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191. The court observed: "There can be no doubt that the duty of disclosing all the primary facts relevant to the decision of the question before the assessing authority lies on the assessee." The court further said: "Does the duty, however, extend beyond the full and truthful disclosure of all primary facts? In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn." 7.1 Again in the case of Patidar Oil Cake Industries Vs. DCIT, 270 ITR 347(Guj), Hon'ble Gujrat High Court held:- "In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , that would not confer any jurisdiction on the AO to issue notice u/s 148 of the Act. Similar view was taken in ACIT vs. Jagdishbhai Nanubhai Tekrawala (2008) 12 DTR (Guj) 270, 7.5 In Vareli W eavers Pvt. Ltd. vs. DCIT (1999) 240 ITR 77 (Guj) also notices under section 148 read with section 147 of the Act were quashed by the Hon'ble High Court, there being no whisper in the reasons recorded by the AO about failure on the part of the assessee to disclose truly and fully all material facts. 7.6 In CIT Vs. DCM Ltd.,(2009) 24 DTR(Del.) 72,Hon'ble jurisdictional High Court found that there was no allegation in the reasons recorded by the AO that the assessee had failed to file its return or that it had failed to disclose fully and truly all material facts in its return nor was there any allegation by the Assessing Officer that the assessee had failed to disclose fully and truly all material facts in its return of income nor even there was any allegation regarding escapement of income. In these circumstances,Hon'ble High Court upheld that findings of the Tribunal that notice u/s 148 of the Act ,having been issued after four years, the reopening of the assessment was not valid. 7.7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the notice of the AO leading to the conclusion that income had escaped assessment, the ingredients of the proviso to s. 147 are not satisfied and, therefore, entire proceedings under s. 147 initiated pursuant to the impugned notice after expiry of four years from the end of the relevant assessment year were without jurisdiction and cannot be sustained. 7.13 In Mihir Textiles Ltd. vs. Jt. CIT [2010] 43 DTR 11 (Guj),Hon'ble High Court held that the petitioner having submitted audited books of accounts, P L a/c, and balance sheet along with notes and also made a specific disclosure in the form of a note regarding transfer of its undertaking, it cannot be said that the petitioner is guilty of not making full and true disclosure and, therefore, notice under s. 148 issued after the expiry of four years from the end of the relevant assessment year is quashed and set aside. 7.14 Similar view was taken in decision dated 28.11.2011 in CIT vs. Purolator India Limited in ITA no. 489/Del./2011 and decision dated 1.12.2011 in BLB Limited vs. ACIT in WPC 6884/2010,JSRS Udyog Limited Another vs. ITO,313 ITR 321(Del.);Wel Intertrade Private Limited vs. ITO,308 ITR 22(Del.) and in a recen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of sundry creditors of Rs.52,84,058/-, the AO added only an amount of Rs.19,86,551/- u/s 41(1) of the Act and there was no explanation why no addition was made for the amount of Rs.32,97,507/- while the assessee failed to furnish details of all the creditors. On these facts, the Hon'ble High Court upheld the reopening of assessment while referring to decision in Honda Siel Power Products Ltd.(supra).In this latter decision, Hon'ble High Court found that as per clause 20 of the form no. 3CD,profit amounting to Rs.107.70 lacs was shown in annexure-VII u/s 41 of the Act but only Rs.9.23 lacs on account of provision for warranties no longer required was shown under other income and remaining amount of Rs.98.46 lacs was not offered to tax .Besides the assessee claimed gross dividend income exempt instead of net dividend income and expenses relating to tax free income were not offered to tax. Accordingly, the Hon'ble High Court upheld the reopening of assessment on the ground that there was failure on the part of the assessee during the assessment proceedings in not offering to tax expenses in relation to tax free income by virtue of provisions of sec. 14A of the Act. But such are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted take has been committed, it would not, in any case, create an embargo or a ban on the competent officer to exercise powers under the amended section 147 of the Income-tax Act, 1961, as prima facie, there could not be "change of opinion" in that factual scenario. It has also not been shown to us on behalf of an assessee. If conscious application of mind is made to the relevant facts and material available or existing at the relevant point of time while making assessment and again a different or divergent view is sought, it would tantamount to "change of opinion", whereas, in the case of existing material, no conscious attempt has been made, it would tantamount to mistake in not considering the relevant point or proposition and it would not be a "change of opinion". 7.18 As regards change of opinion, we may reiterate that the assessee made disclosure of goodwill in the accounts for the year under consideration. Besides, during the course of assessment proceedings the AO raised a specific query relating to goodwill and indisputably, the assessee submitted a detailed reply dated 21.12.2005 placed on page 26 of the paper book. These facts have not been disputed before us. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. We quote hereinbelow the relevant portion of Circular No. 549 dated October 31, 1989 ([1990] 182 ITR (St.) 1, 29), which reads as follows :"7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression .reason to believe' in section 147.-A number of representations were received against the omission of the words reason to believe' from section 147 and their substitution by the opinion' of the Assessing Officer. It was pointed out that the meaning of the expression, reason to believe' had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression .has reason to believe' in place of the words .for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new section 147, however, remain the same. For the aforestated reasons, we see no merit in these civil appeals filed by the Department ; hence, dismissed with no order as to costs." 7.19 The aforesaid observations of the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court on the proposition of law laid down therein." 8. To sum up, in the instant case, as is apparent from the facts narrated in the impugned orders, the AO reopened the assessment completed on 24.1.2006 u/s 143(3) of the Act merely on the basis of facts already available before him at the time of original assessment proceedings. Not even a whisper is evident from the reasons recorded or the facts narrated in the impugned order as to whether or not there was any failure on the part of the assessee in disclosing fully and truly all material facts necessary for his assessment. The reasons do not indicate why and how the assessee failed to make full and true disclosure of material facts in relation to depreciation on goodwill. W e are of the opinion that any such failure as is envisaged in the proviso to sec. 147 of the Act, is a matter of fact alone and there can be no deemed failure. In these circumstances, in absence of any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the assessment year under consideration, the notice under section 148 of the Act having been issued after the expiry of a period of four years ..... X X X X Extracts X X X X X X X X Extracts X X X X
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