TMI Blog2015 (11) TMI 1306X X X X Extracts X X X X X X X X Extracts X X X X ..... ears unless the AO is able to demonstrate that there was failure on the part of the assessee in disclosure of material facts - Decided in favour of assessee - ITA No. 5858/Mum/2012, ITA No. 5859/Mum/2012 - - - Dated:- 28-10-2015 - Shri Saktijit Dey, JM and Shri Ashwani Taneja, For The Appellant : Shri S.C.Gupta (AR) For The Respondent: Shri Vachaspati Tripathi (DR) ORDER Per Ashwani Taneja (AM) : ITA No.5858/Mum/2012 : Asst. Year 2005-2006 This appeal is filed by the assessee-company against the order of learned Commissioner of Income-tax (Appeals) (in short CIT(A) ) dated 28.06.2012, passed against the assessment order u/s 143(3) r.w.s. 147 dated 23.12.2011 for assessment year 2005-2006. The assessee-company has filed numerous grounds. However, during the course of hearing, the learned Counsel appearing on behalf of the assessee-company, emphasized that this case is covered in favour of the assessee on the legal ground itself. Therefore, we shall first dispose the legal ground raised by the assessee. 2. At the outset, it was pointed out by the learned Counsel that there was a delay on the part of the assessee in filing of the appeal by 16 day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court of India in the case of CIT v. Avadh Transformers (P.) Ltd. 51 Taxmann.com 369 (SC), wherein the judgment of the Hon ble Allahabad High Court reported at 33 Taxmann.com 24 was upheld by the Hon ble Supreme Court. 5. On the other hand, the learned Departmental Representative has supported the orders of the lower authorities and requested that the reopening should be held as valid. In response to our query that whether there was any failure on the part of the assessee in disclosure of material facts or whether there was any fresh material coming into the possession of the Assessing Officer, the learned Departmental Representative was not able to put forth any factual material to controvert the arguments of the learned Counsel of the assessee. 6. We have considered the facts and circumstances of the case as well as judgments relied upon by the learned Counsel and gone through the orders of the lower authorities. The brief facts are that in this case original assessment proceedings were done u/s 143(3) vide order dated 28.12.2007 determining the total income at nil, after set off of brought forward business loss of ₹ 7,82,88,126 and brought forward unabsorbed deprec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est on bank borrowings / debentures, etc. written back consequent to settlement reached as the same was disallowed u/s. 43B, and as such, not claimed as expenditure in earlier assessment (considered by statutory Auditor while computing income chargeable u/s. 41(1) 11,94,70,524 Add Income chargeable u/s. 41(1) on account of concession in interest on bank borrowings / debentures etc., written back consequent to settlement reached, as the same was claimed as expenditure in earlier assessment. 10,72,88,467 EFFECT OF ADJUSTMENTS ON ACCOUNT OF EXCEPTIONAL ITEMS AND INCOME U/S. 41(1) 5,84,72,398 Liabilities in respect of principal amount of loans and interest thereon no longer payable written back on their negotiated settlements 15,44,01,003/- Add: Liabilities in respect of luxury tax written back: Under amnesty scheme In terms of Supreme Court judgment 1,58,39,988/- 5,65,18,000/- Total 22,67,58,991/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company. On none of the issues we could find reference to any fresh tangible material in the possession of the AO to make a belief about escapement of income. In our considered view, the law in this regard is now well settled. As relied upon by the learned Counsel also, recently Hon ble Mumbai Bench of the Tribunal in the case of Motilal R.Todi (ITA No.2910/Mum/2013, order dated 22.09.2015) has analyzed the entire law available on this issue, and thereafter it was held by the Hon ble Bench that reopening was invalid in the absence of fresh tangible material. The Hon ble Bench has relied upon the judgment of the Hon ble Bombay High Court in the case of Bombay Stock Exchange Limited, writ petition No.2468 dated 12.06.2014 reported at 89 CCH 118 and judgment of Hon ble Delhi High Court in the case of Pr.CIT v. Tupperware India Pvt. Ltd. (ITA No.415 of 2015, order dated 10.08.2015). The relevant parts of this judgment are reproduced here under for the sake of ready reference :- 6.6 . In the present case, it was noticed by us that the case of the assesse is that there was no fresh tangible material in the possession of AO at the time of recording of impugned reasons. A perusal of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent No.1 to come the said conclusion/belief. This is clear from the use of the words on perusal of the records it is noticed........ , further perusal of statement 2 enclosed with the computation of income shows....... and it is further noticed...... in the impugned notice. 6.10. In the case of CIT vs. Orient Craft Ltd. 354 ITR 536, it was observed by Hon ble Delhi High Court that in the said case, Reasons for reassessment disclosed that AO reached belief that there was escapement of income on going through the return of income filed by assessee after he accepted return u/s. 143(1) without scrutiny, and nothing more. In these facts, it was held by the Hon ble High Court that it was nothing but review of earlier proceedings and abuse of power by AO. It was further held that since there was no whisper in reasons recorded, of any tangible material which came to possession of AO subsequent to issue of intimation, therefore, it was an arbitrary exercise of power conferred u/s 147. Thus, reopening was held to be invalid on this ground itself. 6.11. In the case of Mohan Gupta (HUF) vs. CIT 366 ITR 115, same view has been followed by Hon ble Delhi High Court. 6.12. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch enables the authority to legitimately re-open the completed assessment. In absence of this objective trigger , the AO does not possess jurisdiction to reopen the assessment. It is at the next stage that the question, whether the re-opening of assessment amounts to review or change of opinion arises. In other words, if there are no reasons to believe based on new, tangible materials , then the reopening amounts to an impermissible review. Here, there is nothing to show what triggered the issuance of notice of reassessment no information or new facts which led the AO to believe that full disclosure had not been made (Kelvinator of India Ltd [(2010)320 ITR 561 (SC)] and Orient Craft Ltd [(2003)354 ITR 536 (Delhi)] followed, Usha International [(2012)348 ITR 485 (Del) (FB)] referred) 6.15. In the case of CIT vs Jyoti Devi 218 CTR 264, Hon ble Rajasthan High Court held that since Revenue could not point out any information or material which had subsequently come to the notice of the AO to enable him to form the requisite belief that any income liable to be assessed had escaped assessment, therefore, the initiation of reassessment proceedings was not valid. 6.16. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it is at the next stage when the question, whether the reopening of assessment amounts to review or change of opinion arises. In other words, if there are no new tangible materials , then there would be no reasons to believe , and consequently reopening would be an impermissible review. Under these circumstances there would not arise any need to go the next stage to examine the next question, i.e., whether there was review or change of opinion . The condition with respect to availability of new tangible material is step anterior to the condition of no change of opinion or review . 6.20 Thus, in view of judgments directly on the issue under consideration, as discussed in paras 6.7 to 6.18, above, reopening done by Ld. AO in the absence of fresh tangible material, is invalid and bad in law. Therefore, the initiation of reassessment proceedings was not valid. Thus, re-assessment order framed in pursuance to invalid reopening is illegal; the same is hereby quashed. Since assessment order has been quashed on jurisdictional ground itself, other grounds are not being adjudicated. 6.4 In view of the above discussion by the Hon ble Bench, we find that the issue stan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee in disclosure of material facts. We place our first reliance upon the judgment of Hon ble Bombay High Court in the case of Tata Business Support Services Ltd. v. DCIT 232 Taxman 702. Relevant para is reproduced here under:- In the present case, when the Revenue alleges failure to make full and true disclosure of material facts, then, the term failure has some specific legal connotation. Here, material facts are pertaining to the expenses under the head management fees . It is apparent that the words employed are material facts. It is not just facts but material facts. The word material in the context means important, essential, relevant concerned with the matter, not the form of reasoning (see Oxford Dictionary Concise Eighth Edition). Just as disclosure of every fact would not suffice but for proceeding under section 147 non disclosure ought to be of a material fact. 7.2 We also rely upon the judgment of the Hon ble Bombay High Court in the case of Titanor Components Limited, supra, and CIT v. Shri Shailesh S.Shah, supra. Further, reliance is placed by us on the judgment of the Hon ble Supreme Court in the case of CIT v. Avadh Transformers (P.) Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s beyond four years from the end of the relevant assessment year the condition that there has been a failure on the part of the Assessee to truly and fully disclose all material facts must be concluded with certain level of certainty. 6. Secondly, the Court finds that at lease in respect of one of the issues, viz., payment of interest on fixed deposits, the Assessees drew the attention of the Assessing Officer (`AO ) to the fact that the amount has already been offered to tax and tax had been paid and yet, in the order disposing of the objections, the AO is completely silent as regards this objection. 7. The Court is of the view that notwithstanding several decisions of the Supreme Court as well as this Court clearly enunciating the legal position under Section 147/148 of the Act, the reopening of assessment in cases like the one on hand give the impression that reopening of assessment is being done mechanically and casually resulting in unnecessary harassment of the Assessee. 8. The Court would have been inclined to impose heavy costs on the Revenue for filing such frivolous appeals but declines to do so since the appeals are being dismissed ex parte. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50/-, being Long Term Capital Gain, after set off business loss and depreciation against the current year s business income. Irregular allowance of Depreciation: It is seen from depreciation statement as per Income Tax Act, the assessee has claimed depreciation of ₹ 57,62,993/- on `Time Sharing Unit Property . The property is on lease for a period of 99 years and also the right to property is acquired prior to 01/04/1998, as such, the assessee is not eligible for depreciation either under the category of intangible assets or other. Omission to disallow the same has resulted into underassessment of ₹ 57,62,993/-. In view of the above, I have reasons to believe that, on the above issue, the income chargeable to tax of ₹ 57,62,993/- on account of depreciation, has escapement assessment within the meaning of section 147 of the I.T.Act. Therefore, the case is reopened by issue of notice u/s 148 of the Income Tax Act, after getting approval from the Hon ble CIT-8, Mumbai. Issue notice u/s 148 of the I.T.Act. 10. The perusal of these `Reasons would show that, again, these `Reasons have been recorded by the AO by making examination of records, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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