TMI Blog2015 (8) TMI 517X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Assessee. - Decided against revenue. - ITA 415/2015 - - - Dated:- 10-8-2015 - S. Muralidhar And Vibhu Bakhru,JJ. For the Appellant : Ms. Suruchi Aggarwal, Senior Standing counsel with Ms. Lakshmi Gurung, Advocate. For the Respondent : Dr. Rakesh Gupta with Ms. Poonam Ahuja and Mr. Rohit Kumar Gupta, Advocates. ORDER Dr. S. Muralidhar, J. 1. This appeal under Section 260A of the Income Tax Act, 1961 ( Act ) by the Revenue is directed against the order dated 29th August 2014 passed by the Income Tax Appellate Tribunal ( ITAT ) in ITA No. 2140/Del/2011 for the Assessment Year ( AY ) 2003-04. 2. The question of law that the Revenue seeks to urge is whether in the facts and circumstances of the case the ITAT was justified in holding that the reassessment proceedings under Section 147/148 of the Act were not legally initiated? 3. The Respondent Assessee filed a return of income on 2nd December 2003 showing a loss of ₹ 96,19,890. The return was processed under Section 143 (1) of the Act at the return amount. An order for refund of ₹ 20,16,957 was issued. Subsequently, the Assessing Officer ( AO ) passed an order recording reasons for b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e objections to the reopening order with a speaking order, the CIT (A) committed an error in not quashing the reopening order and the consequent assessment. 7. The CIT (A) in the order dated 28th January 2011 proceeded to examine on merits the challenge by the Assessee (in Ground No.4) to the order of the AO disallowing the management service fee. The CIT (A) agreed with the submissions of the Assessee and held that in view of the 'Nil' withholding certificate issued by the DDIT Circle 1 (2) of the International Tax Division in favour of the Assessee in terms of the Double Taxation Avoidance Agreement ( DTAA ) between the India and the USA, there was no need for the Assessee to charge tax or withhold tax under Section 195 of the Act. Therefore, on merits the CIT (A) deleted the disallowance of the above deduction. The CIT (A) also noted that the said expenses were not disallowed in AY 2004-05 even when the assessment for the said order so completed with the disallowance of this order. 8. The above findings on merits in Ground 4 by the CIT (A) in favour of the Assessee, was not challenged by the Revenue before the ITAT in ITA No. 2140/Del/2011 for 2003-04. With the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the AO came across so as to have reasons to believe that the income had escaped assessment . 13. As far as the legal requirement is concerned, the Court finds that the decision in CIT v. Orient Craft Ltd. (supra) answers the question squarely in favour of the Assessee in the facts of the present case. In Orient Craft Ltd. this Court considered the decisions of the Supreme Court in CIT v. Kelvinator India Ltd. (2010) 320 ITR 561 and Rajesh Jhaveri Stock Brokers P. Ltd. (supra). 14. The question examined by the Court in CIT v. Orient Craft Ltd. (supra) is identical to the one sought to be projected by the Revenue in this appeal viz., whether the Tribunal was right in law in holding that in the absence of any tangible material available with the AO to form the requisite belief regarding escapement of income, the reopening (under Section 147/148) of the assessment made under Section 143 (1) was bad in law? 15. In CIT v. Orient Craft Ltd. (supra) the Revenue sought to argue, placing reliance on Rajesh Jhaveri Stock Brokers P. Ltd. (supra) that intimation could not be equated with assessment . The Court observed that the decision in Rajesh Jhaveri Stock Brokers P. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to adopt different standards while interpreting the words reason to believe vis- -vis Section 143(1) and Section 143(3). We are unable to appreciate what permits the Revenue to assume that somehow the same rigorous standards which are applicable in the interpretation of the expression when it is applied to the reopening of an assessment earlier made under Section 143(3) cannot apply where only an intimation was issued earlier under Section 143(1). It would in effect place an assessee in whose case the return was processed under Section 143(1) in a more vulnerable position than an assessee in whose case there was a full-fledged scrutiny assessment made under Section 143(3). Whether the return is put to scrutiny or is accepted without demur is not a matter which is within the control of assessee; he has no choice in the matter. The other consequence, which is somewhat graver, would be that the entire rigorous procedure involved in reopening an assessment and the burden of proving valid reasons to believe could be circumvented by first accepting the return under Section 143(1) and thereafter issue notices to reopen the assessment. An interpretation which makes a distinction between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urged in the present appeal by the Revenue that the decision in CIT v. Orient Craft Ltd. was erroneously decided and requires reconsideration. During the course of arguments it was submitted that having regard to the decision of the Full Bench in CIT-VI v. Usha International Ltd. (2012) 348 ITR 485, the question should be re-examined by the Court. 20. In the first place, it requires to be noted that the decision in Orient Craft Ltd. was delivered after the decision of the Full Bench in Usha International Ltd. (supra). Secondly, the subsequent decision in Madhukar Khosla noted the decision in Usha International Ltd. and reiterated the dictum in Orient Craft Ltd. Again in a decision dated 28th January 2015 in Mohan Gupta (HUF) v. Commissioner of Income Tax-XI (2014) 366 ITR 115 (Del) the Court reiterated the decision in Orient Craft Ltd. Thirdly, the Court finds that the questions framed for consideration by the Full Bench in Usha International Ltd. as set out in para 1 of the said judgment did not pertain to reopening of an assessment under Section 143 (1) of the Act. The four questions referred to the Full Bench were as under: (i) What is meant by the term change of opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X
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