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2016 (7) TMI 310 - ITAT HYDERABAD

2016 (7) TMI 310 - ITAT HYDERABAD - TMI - Reopening of assessment - Held that:- Reopening of assessment in the impugned AY is bad in law. The issues considering the merits are purely academic in nature and therefore it is not necessary to consider the disallowance/ addition made by the AO in the assessment. Considering the above facts and the law on the issue, the orders of AO and CIT(A) are set aside. Assessee’s grounds on reopening is accepted and appeal is accordingly allowed in favour of ass .....

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. As issues are common, these appeals are heard together and decided by this common order. 2. The assessees in this group are connected to Sri Ramalinga Raju, Ex.MD/Chairman of Satyam Technologies Ltd. On the basis of confessional statement given by Shri Raju, assessments in this group are reopened u/s. 147 after four years from the end of relevant assessment year on the reason of examining the transactions which are supposed to be fraudulent. AO recorded reasons, made additions which are confir .....

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puter Services Ltd. In light of the confessional statement dt. 07-01-2009 made by Shri Ramalinga Raju about fudging of accounts and manipulation of book results for the past so many years of that company, the associates of Satyam group comprising of various companies and family members came under a cloud. The AO had discussed these issues in para 2, 3 & 4 on pages 1 to 5 of the assessment order and issued notice u/s. 148 of the Act after rejecting the objections of assessee. The issuance of .....

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ussed in para 11 of the assessment order on page 9. As this was income offered by assessee herself originally, there are no grounds of appeal on protective assessment and therefore not discussed further. 4. Assessee challenged the reopening of assessment after four years from the end of relevant assessment year and the action of AO in making addition. The detailed contentions as rendered before Ld. CIT(A) are as under: 4.2. (a) The appellant has filed exhaustive written submissions challenging t .....

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tioned in para 2 of the asst. Order is a description with a twist of basic fact that were there in the voluntary confession of Sri Ramalinga Raju. The relevance of that statement to the reopening of the appellant was not established even in the assessment made. It was submitted that the reasons recorded were not germane to the appellant's case. The appellant also stated that the additions made in the assessment were not the additions based on the reasons recorded. It was submitted that in th .....

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ds by investigating agencies and hence its inability to produce "records". It was also stated that with the availability of whatever was available, the appellant tried to reconstruct the accounts and filed the balance sheet and because of the incompleteness of the records, there was variation from what was filed originally and what was now submitted in response to the notice issued under section 147. b) In the original assessment order done u/s 143(3), all the issues were examined but .....

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assessment was bad in law, but also the additions made were unjustified . 5. Ld. CIT(A) however, rejected these contentions by stating as under: 5.1 The legality of the re-opening is considered first. The assessing officer had considered the objections to the reopening of the assessment in the assessment order and gave a summary of the objections and his detailed reasons in the assessment order itself. At the outset, the AO stated that sufficiency of reasons to believe, which have been duly rec .....

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147 of the I.T.Act. The AO had cited the following case laws in his support:- (a) United Electrical Co (P) Ltd Vs CIT - 258 ITR 317 (Del). (b) 257 ITR 539(Del). no names mentioned appears to be wrong citation. (c) Raymond Woolen Mills Ltd Vs ITO . 236 ITR 34 (SC). (d) ITO Vs Lakshmi Mewal Das - 103 ITR 437 (SC). (e) ACIT Vs Rajesh Jhaveri Stock brokers (P) Ltd . 291 ITR 500 (SC) 5.2 The statement dated 07/01/2009 of the Chairman/promoter of the iconic Co. of Andhra Pradesh, M/s Satyam computers .....

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by the AO. Consequently, all the companies and entities with whom Sri B Ramalinga Raju was associated had a Question mark over their transactions and the individuals and family members too had a Question mark over their investments. Whether the AO had explicitly mentioned this aspect or not, this coming of all the related companies and individuals of M/s Satyam group under the cloud, is a fact that cannot be brushed under the carpet and the legality of reopening cannot be examined in isolation .....

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concile the differences in balances disclosed in different returns. 6. At the outset, Ld. Counsel submitted that the issue of reopening of assessments concluded under 143(3) in the group was exclusively discussed in various Co-ordinate Bench decisions and relied on these orders: 1. M/s Danishta Farms Pvt. Ltd., Vs. ACIT and others , ITA No. 535/Hyd/14 and others dated 12/12/2014. 2. M/s Rohini Biotech (P) Ltd. Vs. ITO and others in ITA Nos. 1233/Hyd/2011 and others, dated 31/12/2013. 3. M/s SRSR .....

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inga Raju is warranted. As seen from the additions made, there is no live-link with the reasons recorded and the additions made. In fact, all the issues have been examined at the time of original assessment as scrutiny assessment has been completed in this case earlier. 8.1 Similar issues came up for consideration before the coordinate bench in the group case (M/s SRSR Advisory Services Pvt. Ltd.) of the assessee where the coordinate bench after examining the issues, gave the following findings: .....

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lowance was made. The main issue to be considered in all these appeals is whether the reopening of assessment on the basis of the so called statement of Shri Ramalinga Raju is warranted. Similar issue was examined in other group companies by the Co-ordinate Bench wherein, the following findings were given. (ITA No. 1233/Hyd/2011 and batch dt. 31-12-2013). "18. To conclude, I. The recording of reasons before the issue of notice under section 148 has absolutely no nexus with the assessment ma .....

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y and Mis. Satyam Computer Services Limited, which was not established in the reassessment to justify the reopening . V. As can be seen from the assessment order, the assessment completed has no relation at all with the reasons for reopeninq. Even though assessee belongs to Satyam Group of Companies, there is no evidence of siphoning of funds or escapement of income. What the Assessing Officer has done in the assessment is denial of the explanations given by the assessee with reference to variou .....

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ssment has been reopened beyond the period of 4 years when there is no failure on the part of the assessee to fully and truly disclose all material facts in the original assessment itself, and there being 'no tangible material' for the reopening of the assessment the CIT(A) erred in confirming the order of the Assessing Officer. We, therefore, hold that the reopening of the jurisdiction under section 147 is bad in law and is to be quashed. 20. Following the principles on the above issue .....

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to 484/Hyd/2014, 489/Hyd/2014, 492 & 493/Hyd/2014, 495 to 497/Hyd/2014, 519 to 524/Hyd/2014 dt. 10-10-2014, Co-ordinate Bench 'B' (wherein one of us AM is party) has considered the issue and held as under vide para 9, 10 and 11: "9. We have heard both the parties. We find that the assessment has already been completed under section 143(3) after scrutiny which has become final. Therefore reopening the assessment after four years from the end of assessment year can only be done o .....

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of "change of opinion" on the part of the Assessing Officer to reopen an assessment does not stand obliterated after the substitution of section 147 of the Income Tax Act, 1961, by the Direct Tax Laws (Amendment) Acts, 1987 and 1989. After the amendment, the Assessing Officer has to have reason to believe that income has escaped assessment, but this does not imply that the Assessing Officer can reopen an assessment on mere change of opinion. The concept of "change of opinion" .....

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escaping assessment.-If the AO has reason to believe that any income me chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of ss. 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the asses .....

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t April, 1989), they are given a go by and only one condition has remained, uiz., that where the AO has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post 1st April, 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, s. 147 would give arbitrary powers to the AO to reopen assessments on the basis of "mere change of .....

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ot;change of opinion" as an in-built test to check abuse of power by the AD. Hence, after 1st April, 1989, AO has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief Our view gets support from the changes made to s. 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words .....

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ot;7.2 Amendment mode by the Amending Act, 1989, to reintroduce the expression 'reason to believe' in s. 147. A number of representations were received against the omission of the words 'reason to believe' from s. 147 and their substitution by the 'opinion' of the AD. It was pointed out that the meaning of the expression, 'reason to believe' had been explained in a number of Court rulings in the post and was well settled and its omission from s. 147 would give arb .....

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er as to costs . 10. We also find that CIT(A) erred in holding that the Assessing Officer had valid reasons to reopen the assessment of Assessee-company to examine the veracities and financial implications between Assessee company and M/s. Sat yam Computer Services Limited. We find there is no rationale nexus with such statement by Sri Ramalinga Raju and reassessment made. As seen from the order of AO even though the assessment was reopened to examine the transaction between M/s Satyam computers .....

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e "reasons" and the "belief'; so that on such reasons the AD. cannot have reason to believe that any part of the income of the assessee has escaped assessment and such escapement was by reason of omission or failure on the part of the assessee to disclose fully and truly all material facts. The notice issued by the A. O. is to be struck as invalid. As there is no rational nexus between the ''reasons I' and the "belief'; and on such reasons the A.O. cannot .....

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