TMI Blog2014 (10) TMI 649X X X X Extracts X X X X X X X X Extracts X X X X ..... sion that there was escapement of income from the original assessment. The assessment made u/s 143(3) has been wrongly reopened u/s 147 beyond period of 4 years, as there is no failure on the part of the assessee to disclose fully and truly all the material facts in the original assessment itself - The reopening was on wrong foundation of reasoning of the financial implication between the assessee-company and M/s. Satyam Computer Services Limited, which was not established in the reassessment to justify the reopening – thus, there being no nexus or live-link with the reasons recorded and the ‘formation of belief’ to come to a conclusion that there was escapement of income and also since the assessment has been reopened beyond the period of 4 years when there is no failure on the part of the assessee to fully and truly disclose all material facts in the original assessment itself, and there being ‘no tangible material’ for the reopening of the assessment, the CIT(A) erred in confirming the order of the AO – hence, the reopening of the assessment u/s 147 is bad in law and is to be quashed – Decided in favour of assessee. - ITA. No. 482/Hyd/2014, 483/Hyd/2014 484/Hyd/2014 489/Hyd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the reason that the fudging of accounts by Sri B. Ramalinga Raju would have a direct impact on the case and Revenues recorded and the expenditure debited in this case are manipulated to evade Income Tax. Accordingly, notice u/s. 148 of the I.T. Act dated 26.3.2009 was issued which was served on Assessee on the same date. In response to the notice, Assessee filed a return on 26.05.2009. The total income as per the return was ₹ 17,16,010. 3.2. Assessee objected to issue of notice under section 148 stating that the assessment cannot be reopened after expiry of 4 years unless there is omission or failure on the part of Assessee to disclose fully and truly all the material facts necessary for assessment. It was further submitted that there is no record or evidence that any income of Assessee was siphoned off nor there is any evidence that any particular income has escaped assessment. The Assessing Officer however, rejected the contention and examined the accounts which were already accepted under section 143(3), thereby making additions of investments made in the land, credits in the bank account, unsecured loans and addition to fixed assets thereby both the credits and debit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) cannot be reopened u/s. 148 beyond a period of four years as there is no failure on the part of the appellant to disclose fully and truly all the material facts relevant for the assessment made originally and therefore ought to have quashed the reassessment proceedings. (iv) The learned CIT(A)-VII, Hyderabad failed to note that the Assessing Officer had no tangible material to come to the conclusion that there was escapement of income from the original assessment and therefore the issue of notice u/s.148 and the assessment made thereon is invalid, without jurisdiction and therefore must be quashed. 3. The learned CIT(A)-VII, Hyderabad failed to note that there was no application of mind by the Assessing Officer to the reasons recorded ought to have noticed from the records that the entire reopening of the assessment was under the direction of superior officers and therefore the entire assessment suffers from legal infirmity and is totally contrary to the statutory provisions and hence must be quashed. 4. The learned CIT(A)-VII, Hyderabad, failed to note that the Assessing Officer was fully aware of the existence of the companies which were not fictitious companies and neith ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leted the entire additions mentioned in ground Nos. 6 and 7. 13. The appellant denies its liability to be assessed to the levy of interest u/s.234A and 234B. 14. Any other ground or grounds that may be urged at the time of hearing. 7. The learned Counsel for Assessee Shri K.C. Devidas reiterated the submissions made before the CIT(A). The Ld. Counsel for Assessee relied on the decision of the Coordinate Bench of the Hyderabad Tribunal in the case of M/s. Rohini Biotech (P) Ltd., Hyderabad vs. ITO (OSD)-2 and others, Central Range-1, Hyderabad in ITA.No.1233/Hyd/2011 for the A.Y. 2002- 03 dated 31.12.2013. 8. The learned D.R. relied on the Order of the CIT(A) and submitted that the reply given by the Assessing Officer for reopening under section 147 is exhaustive and reiterated the same. He relied on the orders of AO and CIT(A) on the issue. 9. We have heard both the parties. We find that the assessment has already been completed under section 143(3) after scrutiny which has become final. Therefore reopening the assessment after four years from the end of assessment year can only be done only when there is failure on the part of assessee to disclose fully and truly a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they are given a go by and only one condition has remained, viz., that where the AO 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, s. 147 would give arbitrary powers to the AO 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 AO has no power to review; he has the power to reassess. But reassessment has to be based on fulfillment of certain pre-condition 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 AO. Hence, after 1st April, 1989, AO has power to reopen, provided there is tangible material to come to the conclusion that there is escapement of income from assessment. Reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de in the guise of escapement of income. We rely upon the decision of the Hon ble Supreme Court in the case of Ganga Saran Sons P. Ltd. vs. ITO and others 130 ITR 1 (SC) for the proposition that if there is no rational nexus between the reasons and the belief , so that on such reasons the A.O. cannot have reason to believe that any part of the income of the assessee has escaped assessment and such escapement was by reason of omission or failure on the part of the assessee to disclose fully and truly all material facts, the notice issued by the A.O. is to be struck as invalid. As there is no rational nexus between the reasons and the belief , and on such reasons the A.O. cannot have reason to believe that any part of the income of Assessee has escaped assessment and such escapement was by reason of omission or failure on the part of Assessee to disclose fully and truly all material facts, the notice issued by the A.O. is to be struck down as invalid. The Assessing Officer had no tangible material to come to the conclusion that there was escapement of income from the original assessment. The assessment made under sec. 143(3) has been wrongly reopened under sec. 147 beyond per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is denial of the explanations given by Assessee with reference to various investments made through the books of accounts, various credits and loans obtained and also addition to fixed assets on the reason that the evidences have not been filed. Thus as can be seen from the order, there is no nexus at all with reference to the reasons for reopening and the assessment completed. 19. Hence, there being no nexus or live-link with the reasons recorded and the formation of belief to come to a conclusion that there was escapement of income and also since the assessment has been reopened beyond the period of 4 years when there is no failure on the part of Assessee to fully and truly disclose all material facts in the original assessment itself, and there being no tangible material for the reopening of the assessment, the CIT(A) erred in confirming the order of the Assessing Officer. We, therefore, hold that the reopening of the jurisdiction under section 147 is bad in law and is to be quashed. 13. Following the principles on the above issue, as discussed and the facts as concluded above in paras No.18 and 19 in the above case, we allow assessee s grounds on the issue of reopeni ..... X X X X Extracts X X X X X X X X Extracts X X X X
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