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TMI Blog2014 (12) TMI 559X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of proceeding initiated u/s 147 of the Act and assessment order passed consequent thereto. 3. As facts are identical in all the appeals, for the sake of brevity, we will refer to the facts as involved in ITA No. 500/Hyd/2014. 4. Briefly the facts are, assessee is a company carrying on agricultural and allied activities. Assessee is one amongst a number of companies established by Shri B. Ramalinga Raju, erstwhile Chairman of Satyam Computer Services Ltd., and his family members. For the AY under dispute, assessee filed its return of income on 01/11/02, declaring total income of Rs. nil. Return of income filed by assessee was subjected to scrutiny and assessment was completed u/s 143(3) of the Act vide order dated 27/08/2004. 4.1. On 7.01.2009 Shri B. Ramalinga Raju, the then Chairman of Satyam Computers Ltd. confessed to having fudged the accounts of that Company over the last so many years with an intention to defraud the public at large. Shri B. Ramalinga Raju and his family members have floated more than 350 companies and Assesseecompany is one of them. As per the annual report of Assesseecompany for the year 2001-02, Smt. B. Jhansi Rani and Sri N. Rama Raju were its Dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quarely covered by the order passed by the coordinate bench of this Tribunal in case of other group companies for the same assessment year. Copies of the orders were also placed before the Bench by ld. AR. 8. We have heard the parties and perused the relevant materials on record as well as orders of revenue authorities. As can be seen the reasons for reopening assessment as recorded by AO are as under: On 7th January, 2009, Sri B.Ramalinga Raju, Ex-Chairman of M/s,SCSL in his letter sent to the Board of Directors with a copy marked to SEBI has stated that Books of accounts have been fudged for the last several years. He further stated that the revenues and profits were manipulated by falsification of accounts for the last several years. Sworn statement of B Ramalinga Raju was recorded under sec.131 of the I. T.Act, 1961 on 21-02-2009 in the Central prison, Chanchalguda, Hyderabad. During the course of interrogation he has confirmed and reiterated the facts and figures that were stated in his letter dated 07. 01. 2009 addressed to the Board of Directors. Meaning thereby, Sri B Ramalinga Raju has confessed to the fact that the books of accounts have been fudged systematically for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in case of other group companies for the self-same assessment year in ITA Nos. 1233/Hyd/2011 and others dated 31/12/2013, held reopening of assessment to be invalid on the following finding: 18. To conclude, (i) The recording of reasons before the issue of notice under section 148 has absolutely no nexus with the assessment made. (ii) That the assessment made under sec.143(3) cannot be reopened under sec. 148 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. (iii) The Assessing Officer had no tangible material to come to the conclusion that there was escapement of income from the original assessment. (iv) 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. (v) As can be seen from the assessment order, the assessment completed has no relation at all with the reasons for reopening. Even though assessee belongs to Satyam Group of Companies, there is no evidence of siphoning of funds or escapement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Off icer has to have reason to believe that income has escaped assessment, but this does not imply that the Assessing Off icer can reopen an assessment on mere change of opinion. The concept of "change of opinion" must be treated as an in-built test to check the abuse of power. Hence, af ter April 1, 1989, the Assessing Off icer has power to reopen an assessment, provided there is "tangible material" to come to the conclusion that there was escapement of income from assessment. Reason must have a link with the formation of the belief . Decisions of the Delhi High Court in Cit v. Kelvinator of India Ltd. (2002) 256 ITR 1 (FB) and CIT v. Eicher Ltd. (2007) 294 ITR 310 aff irmed." "147. Income escaping assessment.-If the AO has reason to believe that any income me chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of ss. 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eads as follows : "7.2 Amendment made by the Amending Act, 1989, to re-introduce the expression 'reason to believe' in s. 147. A number of representations were received against the omission of the words 'reason to believe' from s. 147 and their substitution by the 'opinion' of the AO. 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 s. 147 would give arbitrary powers to the AO to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended s. 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 s. 147, however, remain the same." 5. For the afore-stated reasons, we see no merit in these civil appeals filed by the Department, hence, dismissed with no order as to costs. 10. We also find that CIT(A) erred in holding that the Assessing Officer had valid reasons to reopen the assessment of Assessee-company to examine the veracities and financial implications between Assessee-company an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 conf irming the order of the Assessing Off icer. We, therefore, hold that the reopening of the assessment under section 147 is bad in law and is to be quashed." As facts and issues in the present appeal is materially same, respectfully following the decisions of coordinate benches, referred to hereinabove, we hold that reopening of assessment u/s 147 of the Act in the present case beyond the period of four years from the end of relevant AY is invalid. Consequentially, assessment order passed u/s 143(3) read with section 147 of the Act has to be quashed. Accordingly, we do so. Thus, grounds raised by assessee challenging the validity of the proceeding initiated u/s 147 of the Act, are allowed. 11. As the facts and issues in ITA Nos. 535, 537, 538, 539 and 501/Hyd/2014 are materially identical to that of ITA No. 500/Hyd/2014 (supra), following the conclusions/decision therein, we quash the assessment orders passed u/s 143(3) read with section 147 of the Act, in all the aforementioned appeals 12. As we have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost of acquisition development can be taken up as and when the lands are sold in a finding direction not necessary for the disposal of the appeal and therefore is to be deleted. ii. The direction of CIT(A) at paragraph 7.4 of his order directing the appellant to file complete details of the expenses and supporting evidences to the notice of the appellate authority by 15th February, 2014 in a finding which is not necessary for the disposal of the appeal and therefore to be deleted." 20. Briefly the facts are, during the scrutiny assessment proceeding, it was noticed by AO that assessee has made addition to the fixed assets by making investments in land amounting to Rs. 3,20,425. As alleged by AO, the said addition claimed to be on account of development expenses incurred in respect of land could not be substantiated by assessee by filing any supporting evidence. AO, therefore, treated the said addition to the fixed assets as unexplained investment of assessee in terms with section 69 of the Act and added the said amount to the total income of assessee for the impugned AY while completing assessment u/s 143(3) of the Act vide order dated 24/12/2009. Being aggrieved of the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , before the learned CIT(A), the source was explained, and the same was accepted by the learned CIT(A). Having accepted the source of funds, there cannot be any addition made in this year and even in the subsequent year, i.e. in the year of sale, the source of investment cannot be disputed. Therefore, the learned CIT(A) is not justified in giving direction to the Assessing Officer to consider the source of investment in the year of sale. In these circumstances, we set aside the directions of the learned CIT(A) and hold that it is not a fit case for making the addition under S.69 of the Act." This decision was also followed by a Division Bench of this Tribunal in ITA No. 498/Hyd/14 dated 24/09/14 in case of M/s Punarvasu Greenfileds Pvt. Ltd. while setting aside similar direction of ld. CIT(A). Therefore, respectfully following the decisions of the coordinate benches as aforesaid, we set aside the directions given by ld. CIT(A) for considering the sources of investment in the year of sale and allow the ground raised by assessee in all these appeals." Since the issue is identical in the present case, respectfully following the decision of the Tribunal in the aforesaid case, we allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration, hence, preoperative expenses, whatever has been incurred, have to be capitalized as there was no business income earned during the year against which it can be set off. In the aforesaid facts and circumstances, assessee's claim of expenditure/allowances could not have entertained. In the aforesaid view of the matter, we do not find any infirmity in the order of ld. CIT(A). Accordingly, we uphold the order of ld. CIT(A) dismissing the ground raised by assessee. 28. In the result appeal in ITA No. 502/Hyd/14 is dismissed. 29. The only effective ground raised by the department is that ld. CIT(A) erred in deciding the appeal of the assessee without according an opportunity to the AO for the verification of the fresh evidences produced before him during the appellate proceedings. 30. Briefly the facts are, during the assessment proceeding, AO while examining the balance sheet noticed that there is increase in unsecured loan to the tune of Rs. 18,90,696 during the year. By alleging that assessee has not furnished any evidence to explain the source of unsecured loan, he treated it as unexplained credit u/s 68 and added to the income of the year. Assessee challenged the add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred appeal before ld. CIT(A). 37. Before the first appellate authority, it was submitted by assessee that land was given on lease for agricultural purposes, hence, lease rental income received by assessee has to be treated as agricultural income. Ld. CIT(A), however, did not accept the claim of assessee for the reason that assessee itself did not claim it as agricultural income and has shown it as business receipt. He, therefore, found no infirmity in the assessment order for treating lease rental income as income from other sources. As regards assessee's claim of administrative expenses of Rs. 18,729, ld. CIT(A) after verifying the details of expenditure, held that the fees relating to certain statutory obligations like audit, filing of returns and registration fees and filing fees before ROC are allowable expenditure. Accordingly, out of total expenditure of Rs. 18,729, he allowed expenditure to the extent of Rs. 8,000 thereby sustaining the disallowance of Rs. 10,729. 38. We have heard the parties and perused the orders of revenue authorities as well as other materials on record. After going through the observations of ld. CIT(A) in the context of facts and materials on reco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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