Feedback   New User   Login      
Tax Management India. Com TMI - Tax Management India. Com
Acts / Rules Notifications Circulars Tariff/ ITC HSN Forms Case Laws Manuals Short Notes Articles SMS News Highlights
        Home        
Extracts
Home List
← Previous Next →

Section -147 Reopening of Assessment / Reassessment

Income Tax - Direct Tax Code - DTC - By: - CA ombir Singh Panwar - Dated:- 14-6-2015 Last Replied Date:- 14-6-2015 - Horrendous journey for assessee! The provisions of section 147 empower the Assessing Officer, to reopen an assessment if he has reason to believe that income has escaped assessment. The important words under section 147 are has reason to believe these words are stronger than the words is satisfied . Income escaping assessment. As per sec 147 If the AO has reason to believe that an .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ctions 148 to 153 referred to as the relevant assessment year) : Let s have brief understanding of the section in detail word by word: I. A.O. has Reason to Believe There should be reasons and belief . Reasons refer to the cause like document, statement, third party confirmation etc and belief refers to the conclusion. The reason to believe is different from reason to suspect or from to have an opinion . Belief of A.O. only (Not of CIT/ex-officer) Sheo Narain v ITO 1988 (12) TMI 108 - PATNA Hi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

MI 323 - PUNJAB AND HARYANA HIGH COURT No New Tangible Material even within 4 years, reopening not valid. NDT systems v. ITO 2012 (12) TMI 874 - BOMBAY HIGH COURT In Income Tax Officer Vs. Saradbhai M. Lakshmi, 1999 (2) TMI 10 - SUPREME Court, the Supreme Court held that the decision of the High Court would constitute information and the initiation of reassessment proceeding on the basis of the decision of the High Court has been justified. Instance of Invalid Reason to Believe In ACIT Vs. Dhar .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ELHI HIGH COURT Applying one of the different legally permissible methods to assess larger income. CIT v. Simon Carves Ltd. 1976 (8) TMI 4 - SUPREME Court Eg. Calculation of ALP. Statement by an unconnected person. Praful Chunilal Patel vs. M.J. Makwana, ACIT 1998 (2) TMI 538 - GUJARAT High Court Where only a s. 143(1) Intimation is passed, no reopening merely to scrutinize the return or verify the expenditure. Inductotherm (India) v. DCIT 2012 (9) TMI 16 - Gujarat High Court. Notice enquiri .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Parikh v. DCIT) 2013 (5) TMI 330 - GUJARAT HIGH COURT Opinion of audit party on a point of law cannot be regarded an information. Indian & Eastern Newspaper Society v. CIT, 1979 (8) TMI 1 - SUPREME Court. No reassessment can be made on the basis of Tax Audit Report/Accounts/Transfer pricing report because no new tangible material come into possession of AO. CIT Vs Modipon Ltd., reported in 2011 (1) TMI 323 - Delhi High Court. CHANGE OF OPINION (Discussed infra) There should be Valid Reaso .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t be NEW tangible material, and it should not be change of opinion. Mere suspicion of escapement of income does not give power to AO to reopen the assessment. There is no written procedure but as law evolved in past years a practise has been developed and laid down by the apex court (GKN Driveshafts) for the sake of natural justice which is to be mandatorily followed during the course of reopening. This procedural requirement includes the Recording of Reasons , Requesting for reasons and disposa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

for the Assessing Officer to disclose and open his mind through reasons recorded by him; It is for the Assessing Officer to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year; The reasons recorded should be clear and unambiguous and should not suffer from any vagueness; The reasons recorded should be self explanatory and should not keep the assessee gu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

al link is the safeguard against arbitrary reopening of the concluded assessment; The reasons recorded by the Assessing Officer cannot be supplemented by filing an affidavit or making an oral submission; Request for Reasons Recorded, Filing Objections & its disposal Reasons need not accompany the notice. Assessee After filing return can request for copy of reasons recorded to be made available to him. If Assessee desires, objections to reopening can be filed. A comprehensive order dispo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

order GKN Driveshafts (India) Ltd. 2002 (11) TMI 7 - SUPREME Court AO to wait for 4 weeks to begin assessment after disposing off the objections. Asian Paints Ltd. v. DCIT 296 ITR 1 (Bom) Disposal of objections to be linked with recorded reasons. Reasons recorded on the basis of survey/search evidences subsequently disposed off by referring to investigation carried out by sales tax department is unsustainable in law. Interestingly Court has given fresh opportunity to AO to dispose off the obj .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Failure to comply with the procedure prescribed in K.N. Drive Shaft (India) Ltd. vs. ITO 2002 (11) TMI 7 - SUPREME Court renders the assessment order invalid & void ab initio. (Suresh Chandra v. ITO 44(1) (Delhi-ITAT) [2015] IT no. 3061/2012 (Unreported) Garden Finance Ltd. v. ACIT 2003 (10) TMI 17 - GUJARAT High Court held that the assessee preferably file a revision before the Commissioner u/s 264 first then he can file writ petition. This is the single decision which is not in terms wi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

change of opinion. AO has no power to review his order. Order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding without anything further, the same would amount to giving premium to an authority exercising quasi-judicial function to take benefit of its own wrong. Change of Opinion v. No Opinion 143(1) ACIT v.s. Rajesh Jhaveri 2007 (5) TMI 197 - SUPREME Court, however reopening relying on information .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

.) 348 ITR 299 (Bom) Reopening based on auditor s note in his audit report. NYK Lines (India) Ltd. v. DCIT 2012 (2) TMI 282 - BOMBAY HIGH COURT Change in rate of depreciation from 25% to 20% is mere change of opinion. Aventis Pharma Ltd. vs. ACIT 2010 (3) TMI 317 - BOMBAY HIGH COURT Initially holding transfer of equity shares as capital gain but on reassessment as business. Ritu Investments P. Ltd. v. DCIT 2010 (12) TMI 61 - DELHI HIGH COURT. No addition made by AO during original assessment .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

a scrap of paper & AO is expected to have applied his mind. Reopening on ground of oversight, inadvertence or mistake is not permissible. CIT.v. Jet Speed Audio Pvt Ltd (Bombay High Court) (Unreported) Reopening cannot be done on carelessness of AO. New Excelsior theatre v ITO 1990 (3) TMI 25 - BOMBAY High Court. information gathered to be verified by AO for reopening? Mere information on the website may not constitute information, however if, based on the same, the return of the assessee .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ke Sales Tax, Excise or DG(Inv.) and does not record his own satisfaction re-opening held as bad. 313 ITR(Raj)231, SLP dismissed(St)27, 135 ITD(Ahd)1, 220CTR Mad 335 & (Raj)361 & (Del)531 125 TTJ(Del)816, 236 CTR(Del)362 Notice issued after 4 years on the basis of information supplied by DIT(Inv.) about bogus entries, No application of his own mind by AO- Invalid. (CIT v. Kamdhenu steel and alloys Ltd. & Ors. (2012) 248 CTR 33. What is more important for reopening on this basis is t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ls produced is not genuine, valid reopening. (Nickunj Enterprises Pvt. LTd. v. ACIT (2014) 107 DTR 69 (Bom) (HC). Reopening on the basis of AIR Information? Other sources may be for reopening from AIR (Annual information return). These may provide information about money spending from Credit card, cash deposited in Bank and many others information which forms part of AIR. Can AO do reopening on such basis? No, he cannot do so, because on this information he has merely just a suspicion that inco .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

urt decision cannot be the basis for Reopening: The ITO cannot seek to reopen an assessment under section 147 on the basis of the Supreme Court decision in a case where assessee had disclosed all material facts. Indra Co. Ltd. V. ITO (1971) 80 ITR 559 (Cal.), 305 ITR 156 Where revenue did not file appeal against an order granting relief to the assessee, the assessment cannot be reopened on same issue following a supreme court judgement. (CIT v Ramachandra Hatcheries 305 ITR 117) Further it is .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t decision does not mean failure on part of an assessee to disclose fully and truly all material facts. SESA Goa ltd v/s CIT (2007) 294 ITR 101 BOM. Opinion: Yes it is possible if within the time frame of 4 years. Beyond 4 years only if failure is on part of assessee. Income chargeable to tax has escaped assessment This was all about R2B which we have discussed in depth, now second precondition for reopening is that there must be income chargeable to tax and which should have escaped assessment. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

an flavours India Pvt. Ltd. DCIT 2011-TIOL-195-ITAT-MUM It is immaterial that the income was charged or included in some other assessment. (CIT v Vednath 8 ITR 222) Explanation-2 to Section 147 (Deemed Income escaped ) No return of income is filed. Return of income has been furnished by the taxpayer but no assessment has been made and it is noticed by the AO that the taxpayer has understated the income or has claimed excessive loss, deduction, allowance or relief in the return. Faile .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

wever, for reopening there should be reason to believe as well. There must be certain information leading to belief that income has escaped assessment. By the way of explanation the AO itself not got any blanket power to reopen the assessment. Even to invoke explanation information has to be fresh from outside. CIT Vs. Feather Foam 296 ITR 342 (Del.) Can AO reopen the assessment on the basis of Audit Objection? It has been held by the Supreme Court in the case ofIndian & Eastern Newspaper S .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

assessment or reassessment1 under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148. Assess or Reassess such Income AND ALSO any other Income Reassessment can be done N No. of times. Kunal Or .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e object that he cannot reassess the income for which no reasons are recorded. Thereafter this explanation 3 is introduced which empower the AO to reassess such income even without recording reasons. The important thing to note that AO can reassess other income now, but he cannot make sole addition on such other income assessed unless there is any addition on income for which reasons are recorded. Let s see how Bombay high court decision under CIT vs. Jet Airways (I) Ltd. (2011) 331 ITR 236 (Bom .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssue independently; the words and also are used in a conjunctive and cumulative sense indicating that the other escaped incomes can be assessed only in conjunction with the escaped incomes on the basis of which notice u\s 148 had been issued. b) Explanation 3 to s. 147 was inserted to supersede the judgements inVipinKhanna 255 ITR 220 (P&H) &Travancore Cements 305 ITR 170 (Ker) where it was held that the AO could not assess income in respect of issues unconnected with the issue for which .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

easons. However,it does not and cannot override the substantive part of s. 147 that the income for which the notice was issued must be assessable. d) Hence this judgement clearly states that AO has vested with powers (to assess other income) but within the Sphere of the authority i.e. the limits within which the vested power can be exercised. (Hotel Regal International &Anr. Vs. ITO (2010) 320 ITR 573 (Cal.), ITO v Bidbhanjan Investment & Trading CO (P ) Ltd ( 2011) 59 DTR 345 ( Mum) (Tr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the most important part here for reopening beyond 4 years is FAILURE ON PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS . Let s understand what it means: Deduction u/s 80IB once allowed after considering audit report in Form 10CCB and other details during the assessment u/s 143(3) Purity Techtextile (P) Ltd. v. ACIt (2010) 325 ITR 49 (Bom.) Claim for Bad debts allowed during original assessment after receiving explanation claim was allowed, later on reopening made on bad debts .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ences that what is right or what is wrong. Calyon Bank v. DCIT 54 SOT 111 (Mum) (URO) (2012). Adhoc expenses claimed which is withdrawn during the assessment u/s 143(3) cannot be reopened within 4 years by forming belief that it is unexplained expenditure u/s 69. No new tangible material. CIT v. Amitabh Bachchan [2013] 349 ITR 76 2nd Proviso to Section 147: This proviso states the case where reopening can be done beyond 4 years without any failure on part of assessee. 3rd Proviso to Section 147 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ith the purpose to elaborate lines written at the end of the first proviso to the section 147 i.e. Omission of failure…..to disclose fully and truly all material facts . This explanation empowers AO to reopen the case beyond four years by taking the advantage of this explanation and stating that there was not proper disclosure by the assessee during assessment hence it is the failure on part of assessee. But one must have to note the important words in explanation i.e. not necessarily whi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ppropriately. (CIT v KrishnakuttyMenon 181 ITR 237) Words not necessarily places the burden equally on the AO to exercise due diligence in examining the record (account books or evidence) produced before him in the light of declarations made in the return or responses (to the notices, questionnaire etc.) Donaldson India Filters Systems Pvt Ltd.v.DCIT (Delhi HC) (Unreported) Section-148 Issue of Notice Introduction: Reopening of the assessment can be done only when proper notice has been issued .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

return, whether issue of notice u/s 143(2) necessary? (ITO v. D.D. Ahuja 158 TTJ 54). Reference to Section 139(1). AO to record reasons before issuing notice u/s 148. To issue - Meaning- Notice signed on 31/3/2010 sent to speed post on 7/4/2010 - Notice issue after Six years for the relevant Kanubhai M. Patel (HUF) vs. HIren Bhatt (2010) 43 DTR 329 (Guj.) Issue of 2nd Notice during pendency of proceedings consequent to 1st SB Jain v. ITO [1972] 83 ITR 104 (SC). Can notice u/s 148 be issued .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

48 for different years, invalid. Mohd. Ayub v. ITO 254 CTR 314. Section-149, 150, 151 & 153 I. Time Limit for issue of Notice Introduction: Section 148 prescribes about the Notice for commencing the reassessment proceedings while section 149 prescribes the time limit for issuing notice. It is the most important part as we know that if the notice is invalid than reassessment is also invalid. Section 151 put the precondition to the notice u/s 148 that it cannot be send in some cases without ob .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ion done by AO should be done in AY 1999-00, Whether AO can reopen the assessment for AY 1999-00 on 25.03.2013? In given situation, on 31.03.2007, reopening for 1999-00 could not have been initiated as 6 years had already elapsed. Hence on 25.03.2013, AO cannot reopen AY 1999-00. II. Time limit for completion of the reassessment (Section 153): 1 year from the end of the financial year in which notice u/s 148 is SERVED . It is 2 year if reference is made to TPO u/s 92CA. III. Relevant case laws r .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Act. Central India Electric Supply Co. Ltd. vs. ITO (2011) 51 DTR 51 (Del.) Merely stating Approved is not sufficient sanction of CIT and renders reopening void. Commissioner has to apply mind and due diligence before according sanction to the reasons recorded by the AO. ITAT Delhi in ITO10(3) v. Direct Sales (P) Ltd. 2015. Sanction of commissioner instead of JCIT renders reopening is void. Ghanshyam K. Khabrani v. ACIT (2012) 346 ITR 443 (Bom)(High Court) Non-mentioning in the reasons that .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

th Products 2007 (6) TMI 254 - ITAT LUCKNOW-B it is held that fresh deduction can be claimed subject to it does not reduced below the originally assessed income. It is held that it is fresh deduction and asssessee is not reagitiating the the old issues. Can Reassessment is available for benefit of revenue only? Since the proceedings under section 147 are for the benefit of the revenue and in the assessee, and are aimed at gathering the escaped income of the revenue and an assessee and are aimed .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

uise and seek relief in respect of items earlier rejected, or claim relief inrespect of items not claimed in the original assessment proceedings unless relatable to the escaped income and reagitate concluded matters. Allowance of such a claim in respect of escaped assessment in the case of reassessment has to be limited to the extent to which they reduce the income to that originally assessed. Sudhakar S. Shanbhag V. ITO 1999 (8) TMI 36 - BOMBAY High Court (Asst yr 1987-1989) Assessee having no .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. 15455 OF 2012 Ganesh Housing Corporation Ltd. v. Dy. CIT (Guj) (High Court Reopening BEYOND 4 Years - NO Denish Industries Ltd. Vs. ITO 2004 (7) TMI 72 - GUJARAT High Court (346) SLP dismissed Commissioner of Income-Tax Versus Nestle India Limited 2005 (2) TMI 41 - DELHI High Court CIT Vs Aashni Leasing & Finance Ltd. 2010-TIOL-661-HC-AHM-IT Voltas Ltd. v. ACIT 2013 (4) TMI 116 - Bombay High Court, CIT v. Avadh Transformers (P) Ltd. 51 Taxmann.com 369 (SC) IV. Section 147 vs. 154 vs. 2 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

itself oust jurisdiction to reassess if the reasons as a whole implies a failure to disclose material facts. (Allanasons Ltd. v. DCIT CC1(1)) (Bom- HC) Bald statement that assessee has failed to make a full & true disclosure of material facts not sufficient. Details must be given as to which fact was not disclosed. (Bombay Stock Exchange Ltd. v. DDIT-1(2) (Bom-HC) After the expiry of the time limit for issue of s. 143(2) notice, the AO has no jurisdiction to make a reference to the TPO. Th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

Discussion Forum
what is new what is new
 


Share:            

|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version