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2016 (4) TMI 242 - ITAT MUMBAI

2016 (4) TMI 242 - ITAT MUMBAI - TMI - Reopening of assessment - Held that:- Reopening is bad in law for the reason that there are no tangible materials to form reason to believe that income has escaped assessment and the reopening is bad in law for the reason that the assessment cannot be reopened based on the same set of facts which were already on record. Thus, we hold that the reopening is bad in law. - Decided in favour of assessee. - ITA No. 1118/Mum/2014 - Dated:- 5-2-2016 - C. N. Prasad, .....

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of the Act and also sustaining the additions made in the reassessment order. 3. Brief facts are that the assessee M/s. Gas and Power Investment Pvt. Ltd (hereinafter referred to as GPICL) is a company set up as a special purpose vehicle (SPV) for the specific purpose of settlement of debt claims of offshore lenders of Dabhol Power Co. Ltd. , (DPC), as envisaged under a comprehensive restructuring plan for revival of the DPC's power project finalized by the Indian lenders of DPC under the aeg .....

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reassessment was completed on 8.12.2011 u/s. 143(3) r.w. Sec. 147 of the Act. While completing the reassessment, the Assessing Officer disallowed expenses of ₹ 13,07,890/- treating it as capital expenditure, disallowance u/s. 43B(e) in respect of interest to financial institutions and disallowance u/s. 40A(ia) for non deduction of TDS. 3.1. The assessee contended before the AO that the reopening is bad in law and the additions and disallowances made in the reassessment order are not justif .....

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has been discussed or examined or decided and therefore there is no change of opinion and the reopening of assessment is valid. He also sustained the disallowances made in the reassessment order by dismissing the appeal of the assessee. 5. The Ld. Counsel for the assessee at the outset submits that reopening of assessment is bad in law as there is no tangible material which has come on record after completion of assessment to reopen the assessment and making disallowances. Inviting our attentio .....

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and the profit and loss account and without having any tangible material coming on record after completion of assessment to suggest that these expenses are not allowable expenses. 5.1. The Ld. Counsel for the assessee further inviting our attention to Page-3 of the Paper Book submits that in the course of original assessment proceedings vide letter dated 6.11.2008, the AO required the assessee to furnish bill-wise details of franking charges and stamp duty with supporting evidences and explain .....

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ials coming on record, the reopening is bad in law. He further placing reliance on the decision of Hon'ble Supreme Court in the case of India Cements Ltd Vs CIT (60 ITR 52) submits that amount spent towards stamp duty, registration fees etc., in obtaining loan is not capital expenditure but it was only business expenses laid out wholly and exclusively for the purpose of business. Therefore, he submits that there is no question of reopening the assessment. 5.2. Placing reliance on the decisio .....

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IA was raised by the AO to which the assessee has responded by filing its submissions and which was accepted originally. It was held by the Hon'ble Bombay High Court that reopening of assessment on premise that deduction was wrongly allowed and that issue not discussed in assessment order is not material. It was held that the reopening is bad in law and not permissible. Placing reliance on the decision of the Hon'ble Bombay High Court in the case of Asian Paints Vs DCIT and Another (308 .....

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wances. 7. Heard both sides, perused the material available on record. The original assessment in this case was completed by the AO on 8.12.2011 accepting the loss of ₹ 30,93,56/- returned by the assessee. Later on notice u/s. 148 was issued. The reasons for reopening was furnished as under: "On perusal of the assessment records, it reveals that as per the profit and loss A/c, the assessee has claimed Franking Charges of ₹ 11,01,870/- under Administrative & operating expense .....

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are to be capitalized and not allowable as revenue expenses. Thus, the income of ₹ 13,07,890/- (Rs.11,01,87+ ₹ 2,06,020) has escaped income." 7.1. As it could be seen from the above reasons, the assessment was reopened to disallow franking charges under Administrative and operating charges and expenses incurred if any pertaining to non convertible bonds treating them as capital expenditure not allowable as revenue expenditure. We also find from the reasons that the AO came to th .....

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rnished details by letter dated 21.11.2008. The explanation was accepted by the AO in the original assessment proceedings. Now the reopening was made solely on the basis of materials already available on record at the time of original assessment. Even for the other additions which were made in the reassessment order, there is no tangible material which has come on record subsequent to completion of assessment or at the time of recording reasons for reopening. 7.2. On a reading of the reassessmen .....

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the Co-ordinate Bench analysed various case laws and held as under: Thus, coming back to the facts and circumstances of the case before us, we are required to examine the first thing first i.e. whether, in this case, there was any fresh tangible material in the possession of the AO at the time of recording of the 'Reasons'. In case, the first condition is fulfilled, then we are required to examine the compliance of prescribed conditions at the next step, and so on. In case, the first con .....

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O at the time of recording of impugned reasons. A perusal of the 'Reasons' recorded by the AO in this case reveals that at the time of recording of these 'Reasons' the AO had examined original assessment records only and no fresh material had come in the possession of the AO. In response to our specific query also, Ld DR could not point out any fresh material available with the AO at the time of reopening of the case of the assessee. Thus, assertion of the assessee that there was .....

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e of CIT vs. Kelvinator India Ltd. 320 ITR 561 (SC), laying down that for reopening of the assessment, the AO should have in its possession 'tangible material'. The term 'tangible material' has been understood and explained by various courts subsequently. There has been unanimity of the courts on this issue that in absence of fresh material indicating escaped income, the AO cannot assume jurisdiction to reopen already concluded assessment. Recently, Hon'ble Delhi High Court i .....

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8), Hon'ble Bombay High Court observed as under: "It is pertinent to note that Respondent No.1 has not set out in the reasons which fact or other material was not disclosed by the Petitioner that led to income escaping assessment. In fact, on going through the reasons, we find that Respondent No.1 has come to the conclusion/belief that income had escaped assessment on the basis of the material already before him and no new tangible material has been relied upon by Respondent No.1 to com .....

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ef 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 .....

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sessment notice, the AO has to be satisfied on the basis of tangible material or information subsequently available to him that the assessee had not made full and true disclosure which led to income escaping assessment at the stage when the original assessment was completed. Short of that a re-appreciation of the existing materials which really amounts to review is impermissible. The Tribunal, in the circumstances of this case was justified in concluding that re-assessment proceedings themselves .....

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ned and described nature of the receipt under a non-compete agreement-Reasons for issuance of notice u/s 147 nowhere mentioned that revenue came up with any other fresh material warranting reopening of assessment-Mere conclusion of proceedings u/s 143(1) ipso facto does not bring invocation of powers for reopening assessment-Reopening of assessment was unjustified-Revenue's appeal dismissed." Further reliance can be placed on the detailed judgment in the case of Madhukar Khosla vs. ACIT .....

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on or a link with an objective fact, in the form of information or facts external to the materials on the record. Such external facts or material constitute the driver, or the key which 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 reopening of assessment amounts to "review" or "change of o .....

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International [(2012) 348 ITR 485 (Del) (FB)] referred)" 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. Hon'ble Madras High Court in the case of Bapalal & C .....

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ew material. Hon'ble Bench has relied upon third member judgment from Mumbai Bench 17 Motilal R. Todi of ITAT in the case Telco Dadajee Dhackjee Ltd vs DCIT ( ITA No 4613/Mumbai/2013 dt 12-5- 2010), in support of this view. Similar view has been expressed by Hon'ble Delhi Bench of ITAT in the case of M/s Nexgen School of Business Vs. Deputy Commissioner of Income Tax, [ITA No. 5609/DEL/2010] holding that the Assessing Officer was not justified to initiate the reopening proceedings in abs .....

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ssue that in absence of any fresh material, whether AO can proceed to record Reasons, was not before Hon'ble High Court, therefore Hon'ble High court had decided the issue of Change of opinion in that case. In the case before us, as discussed above, we are not going into that issue. In our considered opinion, at this stage, we need not go into the other aspect i.e. whether there was change of opinion or not. This issue has been aptly clarified by Hon'ble High Court in the case of Mad .....

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