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TMI Blog2016 (7) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... reafter, recorded reasons and issued notice under section 148 on 22.3.2010. He was of the opinion that assessee has made payment of interest to a non-resident without deducting TDS, and therefore, it is not eligible for interest expenditure. 4. It emerges out from the record that the assessee-company imported certain machineries from Barmag AG-Germany. The said machineries were financed by Landesbank Baden Wurttemberg, (LBBW), Stuttgart, Germany. It is a German company and resident of Germany. The assessee was of the opinion that the loan was export credit guarantee by the German Federal Government and interest on such loan is not taxable in India, and therefore, no TDS is required to be deducted by the assessee. Somehow, the AO was of the opinion that the TDS ought to be deducted, therefore, the AO recorded reasons to reopen the assessment. The reasons recorded by the AO read as under: "REASONS FOR RE-OPENING ASSESSMENT U/s.147 OF THE I.T. ACT, 1961 Reg.: NOVA PETROCHEMICALS LTD. A.Y.: 2003-04 The assesses company had filed return on 29.11.2003 showing loss at Rs. 10,39,752. The assessment u/s. 143(3) was finalized on 08.03.2006, determining total-income at Rs. 1,85,44,720/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which comes to his notice subsequently in the course of the proceedings under this section, or recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any 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; [Provided further that the AO may assess or reassess such income other than the income involving matters which are the subject matters of any appeal, reference or revision which is chargeable to tax and has escaped assessment]. The requirements of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sclose fully and truly all material facts necessary for his assessment and no observation has been made in this regard, On the basis of the same material which was available on record, the assessing authority was of the view that the deduction had been wrongly allowed under section 36(1)(viii) of the Act. The Tribunal observed that the assessee had furnished the requisite details in respect of leasing income and upfront fee as received in the assessment year under consideration and the same was duly disclosed in the audited profit and loss account, as is evident from pages 4 and 5 of the paper book read with page 23 of the paper book and also computation of income filed along with return, a copy of which is placed at pages 33 to 35 of the paper book. This finding of the Tribunal has not been disputed by raising any question and during the course of the argument by the learned counsel for the appellant. Therefore, we are of the view that on the facts and circumstances, no substantial question of law arises for consideration by this court. Learned counsel for the appellant cited a decision of the Bombay High Court in the ease of Dr. Amin's Pathology Laboratory v. P. M. Prosad, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for its assessment for assessment year 2002-03. Significantly, the reasons that had been disclosed to the assessee did not contain a finding to the effect that there was a failure to fully and truly disclose all necessary facts, necessary for the purpose of assessment. In these circumstances, the condition precedent to a valid exercise of the power to reopen the assessment, after a lapse of four years from the relevant assessment year, was absent in the present case. The notice was not valid and was liable to be quashed." Hon. Supreme Court in the case of ITO vs. Lakhmani Mewal Das (1976) 103 ITR 437 (SC) held that where assessment is sought to be reopened after expiry of four years reasons for belief must show live link between the material and belief. There should be a rational connection or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the ITO and the formation of the belief that there is an escapement of income of the assessee for that particular year because of his failure to disclose fully and truly all material facts. Even though Court cannot go in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 147 would come into play. It stipulates three conditions and one of those conditions is showing omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. When we go through the reasons recorded and as mentioned above we do not find any reference to such failure on the part of the assessee to disclose any material fact necessary for assessment and in fact narration given in the reasons do not show any such failure which could be inferred even if not so mentioned specifically in the reasons. In our considered view when neither there is any allegation of failure nor the AO has brought any material on record to suggest escapement of income then it is only a change of opinion and therefore assessment cannot be reopened after expiry of four years." 8. In the light of the above, if I examine the facts of the present case, then, it would reveal that the AO had issued a detailed questionnaire which was duly replied by the assessee. It has furnished statutory audit accounts under the Companies Act as well as audit report in Form No.3CA and 3CD along with return. The assessee has submitted all other details called for b ..... 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