TMI Blog2013 (8) TMI 187X X X X Extracts X X X X X X X X Extracts X X X X ..... essment proceedings were on account of failure on the part of the assessee to furnish true and correct particulars of income, reopening of assessment cannot be said to be valid in law. Under these circumstances we quash the reassessment proceedings. Since the notice issued under section 148 is held to be bad in law, other issues urged by the assessee in its appeal as well as the grounds urged by the Revenue in the cross appeal do not survive for consideration. In favour of assessee. - ITA No.2111/Mum/2011, ITA No.2224/Mum/2011 - - - Dated:- 17-5-2013 - Shri D. Manmohan And Shri N. K. Billaiya,JJ. For the Petitioner : Shri Ronak G. Doshi For the Respondent : Shri Surinder Jit Singh ORDER Per D. Manmohan, V. P. These cross appeals are directed against the order dated 12.01.2011 passed by the CIT(A), Visakhapatanam and they pertain to A.Y. 2001-02. 2. In the appeal filed by the assessee a preliminary issue concerning the validity of reopening of assessment under section 148 of the Income Tax, 1961 was raised. 3. Facts necessary for disposal of the appeals are stated in brief. In the year under consideration the assessee company was engaged in the business of de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Profit Loss account enclosed to the Return of Income, the company had STIP unit at Visakhapatnam and two non-STPI units, one at Visakhapatnam and other at Mumbai. The STPI unit at Mumbai was engaged in Research and Development work and loss of Rs.3,38,49,429/- was declared from the unit. It is seen from the Profit Loss account of non-STPI that the company had credited interest income (other income) of Rs.1,92,328/- and debited expenditure of Rs.3,40,41,756/- and arrived at loss of Rs.3,38,49,429/-. No business income was offered from Mumbai non- STPI unit. Further, the unit being R D unit and the expenditure claimed had no connection with STPI, Visakhapatnam, the same was to be capitalized in the absence of commencement of business by the unit and income from the business thereof was to be disallowed." 6. Thereupon the assessee contended that the reassessment proceedings are bad in law. In this regard it was stated that in the notice issued under section 148 of the Act no reasons were recorded for reopening and even in the reasons subsequently communicated it is not the case of the Revenue that there was failure to disclose true facts at the time of making original asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed the expenditure incurred on R D Unit as revenue in nature. The main focus of the assessee was that all the evidences were produced before the AO at the time of making regular assessment and the then AO has noted the non-STPI losses claimed by the assessee in the first paragraph of the order passed under section 143(3) of the Act and the AO having also admitted that the books of account, bills and vouchers, information and documents were produced before him for verification, it cannot now be stated that the AO had no knowledge of the expenditure claimed by the assessee, so as to reopen the assessment by holding that income has escaped assessment. 7. The AO as well as the CIT(A) rejected the contention. The AO observed that the then AO had not called for specific details of expenditure incurred in the non-STPI unit located at Mumbai - the assessment order under section 143(3) discussed about the allowability of exemption under section 10A/10B and nowhere a mention was made about the non-STPI unit. With regard to the claim of the assessee that the AO in the first paragraph of his original assessment proceedings noted about the losses incurred by the non- STPI unit, in the rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the reassessment proceedings are valid since it was only during such proceedings it has come to light that though the assessee treated the project expenditure in respect of Mumbai operations as a net loss from an independent unit but from subsequent years it sought to set off similar expenditure in respect of Mumbai operations against the profits of its Visakhapatnam unit. In the opinion of the learned CIT(A) the assessee has thus been blowing hot and cold on different times contradicting its own stand taken earlier which in turn highlights that the assessee failed to make full and true disclosure of all material facts relating to its Mumbai operations for A.Y. 2001-02 and 2002-03. 9. Further aggrieved, assessee company is in appeal before us. The learned counsel appearing on behalf of the assessee adverted our attention to Pages 1-4, 16, 19, 27, 29, 34, 36, 37 and 56 to 74 of the paper book in support of his contention that the assessee furnished sufficient material before the AO with regard to the STPI Unit as well as the non-STPI units at Visakhapatnam and Mumbai and whatever details were called for were produced before the AO. The AO verified the claim of the assessee wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Hindustan Lever Ltd. (supra) observed that once the reasons were recorded by the AO they cannot be supplemented by filing an affidavit or making an oral submission. In other words, reassessment proceedings should be directly based upon reasons recorded. Adverting out attention to page 54 of the paper book the learned counsel for the assessee submitted that the notice was issued under section 148 only on the ground that income chargeable to tax escaped assessment but there is no whisper with regard to the issue as to whether there is failure on the part of the assessee to disclose fully and truly all material facts relevant for making assessment and hence at a later stage the AO is not entitled to substitute the reason. It was thus strongly contended that the reassessment proceedings are invalid in law. 11. Without prejudice to ground No. 1 urged before us, the assessee company raised two grounds, i.e. allowability of deduction under section 10B of the Act and correctness of the interest charged under section 234B and 234C of the Act. At the time of hearing the learned counsel submitted that in the event of deciding the first issue in favour of the assessee company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reafter the assessee was communicated the reasons recorded by the AO wherein the AO has not specified that the reassessment proceedings were initiated because of failure on the part of the assessee to furnish fully and truly all material facts necessary for making assessment. In the instant case computation of total income alongwith annexures as well as the details furnished during the course of regular assessment proceedings clearly indicate that the assessee furnished all the details necessary for the purpose of making an assessment and in the absence of recording a reason that reassessment proceedings were on account of failure on the part of the assessee to furnish true and correct particulars of income, reopening of assessment cannot be said to be valid in law. Under these circumstances we quash the reassessment proceedings. Since the notice issued under section 148 of the Act is held to be bad in law, other issues urged by the assessee in its appeal as well as the grounds urged by the Revenue in the cross appeal do not survive for consideration. 14. In the result, the appeal filed the assessee is treated as allowed whereas the appeal filed by the Revenue is dismissed Orde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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