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2015 (8) TMI 49 - ITAT HYDERABAD

2015 (8) TMI 49 - ITAT HYDERABAD - TMI - Validity of initiation of proceeding u/s 147 - Held that:- From the reasons recorded, it is very much clear that AO was not having in his possession any fresh tangible material which could demonstrate escapement of income. Only on revisiting/reviewing the materials/informations already available on record at the time of original assessment and on reappraisal of the same, AO has formed belief that income has escaped assessment. Therefore, reopening of asse .....

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Act purely on the basis of objections raised by the internal audit party. AO has merely followed the dictat of the internal audit party without independently applying his mind to know whether income has escaped assessment. In our view, for this reason initiation of proceeding u/s 147 of the Act is incorrect. See DCIT Vs. Lee Pharma Pvt. Ltd.(2012 (11) TMI 310 - ITAT, HYDERABAD ). - Decided in favour of assessee. M/s. Gayatri Sugars Ltd. Versus Asst. Commissioner of Income-tax [2014 (12) TMI 3 - .....

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6, assessee has challenged the validity of proceeding initiated u/s 147 of the Act. Ground Nos. 7 to 12 are on the merits of various additions made by AO and sustained by ld. CIT(A). 3. At the outset, we propose to deal with the legal issue relating to validity of initiation of proceeding u/s 147 of the Act as raised in ground Nos. 2 to 6. 4. Briefly the facts are, assessee is a company, For the AY under consideration, assessee filed its return of income on 29/08/2008 declaring nil income under .....

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AO initiated action u/s 147 of the Act by issuing a notice u/s 148 of the Act to assessee calling upon it to furnish its return of income. In response to the said notice, assessee filed a letter requesting to treat the return originally filed to be a return in response to notice u/s 148. Though, assessee objected to initiation of proceeding u/s 147 of the Act, but, AO completed the assessment u/s 143(3) read with section 147 of the Act vide order dated 21/11/2013 by determining total income at & .....

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record, it cannot be said that reopening u/s 147 is invalid. Ld. CIT(A) referring to the decision of Hon ble Delhi High Court in case of Consolidated Photo & Finvest Ltd. Vs. ACIT 281 ITR 394 observed that principle of change of opinion can be applied only where AO applied his mind and took a conscious decision on the issue, but, where AO did not address the issue, the concept of change of opinion will not apply. Further, ld. CIT(A) observed that audit party has raised several objections in .....

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sed u/s 143(3) read with section 147 of the Act would clearly reveal that reopening is on the basis of the materials/documents submitted by assessee itself along with return of income or in course of original assessment proceeding on the basis of which assessment was originally completed u/s 143(3) of the Act. Thus, ld. AR submitted, there being no tangible material before AO to form his belief that income has escaped assessment, action u/s 147 is invalid. Ld. AR referring to the reasons recorde .....

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inator India Ltd., 320 ITR 561 submitted, when AO in the original assessment has considered all these materials and thereafter completed the assessment, reopening of the assessment on the basis of the very same material would amount to change of opinion. In support of such contention, he relied upon the decision of ITAT, Hyderabad Bench in case of M/s Gayatri Sugars Ltd. Vs. ACIT in ITA Nos. 1728 to 1731/Hyd/2011 dated 26/11/2014. Ld. AR submitted, only on the basis of objections raised by inter .....

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esult of which, income chargeable to tax has escaped assessment. Therefore, reopening of assessment u/s 147 is valid. He submitted, only because the materials on the basis of which AO reopened assessment are available on record when original assessment was made that will not lead to the conclusion that AO while completing the original assessment has examined the issues relating to escapement of income. Ld. DR submitted, if there are patent and obvious mistakes committed while completing original .....

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n mind to such informations and forms belief that there is escapement of income. Thus, it was submitted by ld. DR, assessee s contention on the validity of proceeding u/s 147 should not be accepted. 8. We have considered the submissions of the parties and perused the material on record. At the outset, it needs to be mentioned that in the present case reopening of assessment u/s 147 of the Act is within four years from the end of the relevant AY. Therefore, proviso to section 147 does not apply. .....

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issues on which AO has initiated action are pertaining to certain expenditure debited to P&L A/c or item forming part of balance sheet, which according to AO is not allowable for various reasons. It is evident from the reasons recorded that issues on which AO has reopened assessment u/s 147 are relating to matters which were part of the original assessment proceeding and information relating to such issues were already available before AO while completing original assessment. Moreover, it is .....

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praisal of the same, AO has formed belief that income has escaped assessment. Therefore, reopening of assessment on re-appreciation or reappraisal of the materials/informations available on record on the basis of which original assessment was completed is legally invalid as it amounts to change of opinion. The ITAT, Hyderabad Bench while considering the issue of identical nature, in case of Gayatri Sugars Ltd Vs. ACIT (supra) after following the decisions of Hon ble Supreme Court in case of CIT .....

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or formation of belief that income has escaped assessment. As it appears on review/reappraisal of same facts and materials which were available on record and on the basis of which original assessments were completed, action for reopening of assessment u/s 147 has been taken. 15. The Hon ble Supreme Court in case of CIT Vs. Kelvinator of India Ltd. (supra) after taking note of the amendments made to section 147 of the Act, held as under: The concept of change of opinion on the part of the AO to r .....

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ssessment, 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. 16. The full Bench of Hon ble Delhi High Court in case of CIT Vs. Usha International Ltd. (supra)on a conspectus of various decisions of Hon ble Supreme Court, including CIT Vs. Kelvinator of India Ltd. (supra), and as well as different high courts, while expressing the majority view held as under: 39. In view of t .....

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Such cases have to be examined individually. Some matters may require examination of the assessment order or queries raised by the Assessing Officer and answers given by the assessee but in others cases, a deeper scrutiny or examination may be necessary. The stand of the Revenue and the assessee would be relevant. Several aspects including papers filed and submitted with the return and during the original proceedings are relevant and material. Sometimes application of mind and formation of opin .....

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umstances of each case. 17. Applying the tests laid down in case of CIT Vs. Usha International Ltd. to the facts of the present case, it can be seen that assessee in all these assessment years has disclosed full particulars relating to debiting of interest to interest suspense account. Evidences brought on record, at least in some of the assessment years also make it clear that AO after examining the issue and due application of mind to the issue has completed the assessment, though there may no .....

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ust have applied his mind on the claim of assessee. The allegation by the department that as in the original assessments the AO has overlooked or not examined the issue, there cannot be any formation of opinion which will amount to change of opinion while reopening, in our view, is unacceptable. As can be seen, original assessments for the assessment years under consideration have been completed after scrutiny u/s 143(3) not by the same AO but by different AOs. It is highly improbable that each .....

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nts completed after scrutiny. 18. Once an assessment order is passed u/s 143(3) after scrutiny of books of account and other materials, it has to be presumed that AO has examined all facts and materials and concluded assessment after due application of mind. Therefore, unless there is tell tale evidence that AO has passed the order ignoring material facts on record or overlooking provisions of law or unless further tangible material comes to possession of AO indicating escapement of income, acti .....

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