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2016 (5) TMI 546 - ITAT MUMBAI

2016 (5) TMI 546 - ITAT MUMBAI - TMI - Reopening of assessment - whether CIT(A) erred in holding that the proceeding u/s.147 as bad in law in spite of the fact that the set off of carried forward losses are not in existence as per section 72 of the Act for A.Y.1999-2000? - Held that:- The cojoint reading of all the documents goes to show that the assessee has disclosed fully and truly all material facts necessary for assessment, for that assessment year and as per the documents it is only the un .....

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rectified u/s 154, it would be arbitrary for the AO to reopen the entire assessment u/s 147. Further, the error in the order was not attributable to a fault or omission on the part of the assessee and the assessee cannot be penalized for a fault of the AO; Secondly when one or more modes of assessment or remedies are available to the taxing Authority, the Authority must adopt that remedy which causes least prejudice to the assessee. - Decides against revenue - ITA No.6498/Mum/2013 - Dated:- 6-4- .....

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fact that the set off of carried forward losses are not in existence as per section 72 of the Act for A.Y.1999-2000. 2. On the facts and circumstances of the case and in law, the impugned order of the ld. CIT(A) is contrary to law and consequently merits to be set aside that of the Assessing officer be restored. 2. Brief facts giving rise to this appeal are that the assessee is engaged in the business of NBFC and trading in shares and securities. The assessee filed its return of income declaring .....

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appeal, the CIT(A) allowed the appeal of the assessee holding that reopening of the assessment was bad in law. Now, the revenue is in appeal before us against the aforesaid findings of CIT(A) with the grounds mentioned above. 3. Ld. DR before us submitted that the reopening of the assessee was just and proper as the assessee had sold its business assets consisting of four industrial units during assessment year 1998-99 and thereby discontinued the business for which the loss was originally comp .....

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isclosure of primary facts at the time of original assessment and assessment being framed u/s.143(3) of the Act and such reassessment is void ab initio. Reliance was placed on the decision of Hon ble Supreme Court in the case of Kelvinator India Limited, 320 ITR 361 and Hon ble Bombay High Court in the case of Hindustan Uniliver Ltd., 325 ITR 102. He further submitted that the order passed by the CIT(A) is based on the material facts available on record and, hence, no interference is called for. .....

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s of the case and the argument of the appellant. After the introduction of the new provisions of Section 147, several High Courts considered the scope of the new provisions. The Delhi High Court (Full Bench) in the case of CIT Vs. Kelvinator of India Ltd. (2002) 174 CTR (Del)(FB) 617: (2002) 256 ITR 1 (Del)FB) observed that when a regular order of assessment is passed in terms of the said sub-section (3) of section n143, a presumption can be raised that such an order has been passed on applicati .....

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functions to take benefit of its own wrong. 2.4.2 The Hon'ble Supreme Court while affirming aforesaid decision of the' Delhi High Court reported at (2010) 228 CTR (SC) 488, held that prior to Direct Tax Laws (Amendment) Act, 1987, reopening could be done under two conditions and fulfillment of the said conditions alone conferred jurisdiction on the AO to make a back assessment, but in s. 147 (w.e.f. 1st April, 1989), they are given a go by and only one condition has remained, viz., that .....

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iew and power to reassess should also to be kept in mind. The AO has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of "change of opinion" as an in- built test to check abuse of power by the AO. Hence, after 1s .....

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son to believe", Parliament re-introduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the AO. 2.4.3 The Bombay High Court in the case of Asian Paints Ltd. vs. Dy. CIT (2009) 308 ITR 195 (Bom) agreed with the above decision and observed that legislature has not conferred power on the Assessing Officer to review his own order. Therefore, the power under section 147 cannot be used to review the order. Where between the date .....

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pening of the assessment merely because there is change of opinion. 2.4.4 The Court reiterated the above view in the case of Cartini India Ltd. vs. Addl. ClT & Anr (2009) 314 ITR 275 (Born) and observed that what section 147 of the Act contemplates is the existence of material on record on the basis of which a prima facie opinion could be formed by the Assessing Officer that any income chargeable to tax has escaped assessment and not the material on record on the basis of which a final decis .....

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er s. 147, subject to the provisions of ss. 148 to 153. The AO cannot assume power to initiate reassessment proceedings on his ipse dixit. In order to take recourse to the provisions of s. 147, the AO should have reason to believe that any income chargeable to tax has escaped assessment. The expression reason to believe' employed in the section, presupposes some objectivity of the AO and not mere the subjective satisfaction or any suspicion about the escapement of income. A mere suspicion of .....

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ssment. Clause (a) deals with the situation in which no return of income has been furnished by the assessee although the total income in respect of which he is assessable exceeded the maximum amount which is not chargeable to tax. Clause (b) deals with the situation in which the return of income has been furnished by the assessee but no assessment has been made and it is noticed by the AO that the assessee has understated the income. Clause (c), which is relevant for our purpose, deals with a si .....

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his opinion. In other words if while finalizing the original assessment he had applied his mind to a particular item of income or expenditure and accepted the claim of the assessee positively, then he cannot take the assistance of s. 147 for such items unless something new comes to his notice after the completion of assessment which belies the assessee's claim on that item. Again it is pertinent to mention that there should be positive application of mind by the AO on a particular item of in .....

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overed by the AO will not necessarily amount to disclosure. When Expln. 2 is read in juxtaposition to Expln. 1 and the main provision of s. 147, it becomes crystal-clear that, subject to other provisions, in a case where the original assessment was framed under s. 143(3) and subsequently it comes to the notice of the AO that still some income chargeable to tax has escaped assessment, he can get the assistance of the provisions of s. 147 provided it does not amount to the change of opinion. 2.4.7 .....

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vs. Former Finance (2003) 264 ITR 566 (SC) 2.4.8 Notice after expiry of four years, it is imperative for the revenue to allege in the reasons for failure to disclose material facts necessary for assessment reopening beyond four years, in case no such allegation is made the action of reopening cannot be held to be valid. In the case of Sound Casting (P) Ltd v. Dy.CIT (2012) 250 CTR 119 (Bom.), wherein the assessment was completed under section 143 (3) on 14th December, 2007 accepting the melting .....

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acts necessary for assessment and therefore reopening beyond four years was not valid. (AY.2005-06) 2.1.9, In the case of CIT vs. Amitabh Bachchan (Bombay High Court), fur AY 2002-03, the assessee filed a ROI declaring income of ₹ 14.99 crores. A revised ROI was then filed claiming 30% adhoc expenses (Rs. 6.31 crores) and offering income of ₹ 8.11 crores. When the AO asked the assessee to substantiate the expenses, he withdrew the claim. The AO passed a s. 143(3) assessment determini .....

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al by the department to the High Court, held dismissing the appeal that the assessee had made a claim for 30% adhoc expenditure. This was withdrawn by the assessee when asked by the AO to substantiate. The reopening on the basis that the said adhoc expenditure constituted "unexplained expenditure" u/s 69 was based on the same material. There was no fresh tangible material before the AO to reach a reasonable belief that the income liable to tax has escaped assessment: It is a settled po .....

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ssary for claiming deduction under s. 80M. The AO after applying his mind to the relevant records had made a specific order allowing the deduction. Though, in the notice respondent No. 1 has used the phrase "reason to believe", admittedly between the date of the order of assessment sought to be reopened and the date of forming of opinion by respondent No.1, nothing new has happened and there is no change of law, no new material has come on record, no information has been received. It i .....

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has escaped assessment. The expression used in this section is 'reason to believe', which are quite different from the phrase 'reason to suspect'. 'Reason to believe' has been the matter of judicial scrutiny by the Apex Court in several cases. In the case of Calcutta Discount Co. Ltd. v. ITO 41 ITR 191 (SC), it was observed that it is the duty of the assessee to disclose all the primary facts which have a bearing on the liability of the income earned by the assessee bein .....

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open the assessment under section 147. Discovery of new and important matters or knowledge of fresh facts which were not present at the time of original assessment would constitute a 'reason to believe that income had escaped assessment' within the meaning of section 147. Similar view has been taken by the apex court in the following cases:- (i) Phool Chand Bajrang Lal v. ITa 203 ITR 456,477; (ii) ALA Firm v. CIT 189 ITR 285, 298; (iii) Indian and Eastern Newspaper Society v . CIT 119 IT .....

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d truly all material facts necessary for re-assessment for that assessment year. Having failed to do so, invoking of provisions of section 147 is bad in law. The same is accordingly held to be bad in law. These ground of appeal are allowed. 6. In the case of Cholamandalam Investment and Finance Co. Limited -2007 (10) TMI 276 - MADRAS HIGH COURT it was held that after expiry of four years from the relevant assessment year, where the assessee had disclosed fully and truly all primary facts in rela .....

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income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment , for that assessment year. In order to make this criteria ld. AR drawn our attention to paper book which contains 1-98 documents the details of those documents have been me .....

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