TMI Blog2016 (10) TMI 351X X X X Extracts X X X X X X X X Extracts X X X X ..... tax has escaped assessment. The facts with regard to the freight charges and quantum of purchases for the previous year and the earlier previous year were available with the AO when the concluded the first assessment proceedings. There is no other conclusion possible except the conclusion that the reopening of assessment is not based on tangible material which came into possession of the AO after conclusion of the original assessment proceedings. On the facts and circumstances of the present case, we are of the view that initiation of reassessment proceedings has been merely on the basis of change of opinion and in view of the law laid down by the Hon’ble Supreme Court in the case of Kelvinator of India Ltd. (2010 (1) TMI 11 - SUPREME COURT OF INDIA ), initiation of reassessment proceedings has to be held as not proper. Before us, the ld. DR had placed strong reliance on the order of the CIT(Appeals) on the issue of validity of initiation of reassessment proceedings. - Decided in favour of assessee. - ITA No. 909/Kol/2013 - - - Dated:- 8-7-2016 - Shri N.V.Vasudevan, JM And Shri M.Balaganesh, AM For the Appellant: Shri B.C.Jain, AR For the Respondent: Shri Niraj Ku ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c.147 of the Act and therefore the AO propose to re-assess the income for the said AY. The AO called upon the Assessee to file return of income in response to the said notice. Before issue of notice u/s.148 of the Act, the AO has recorded the following reasons for proceeding u/s.147 of the Act. In response to notice u/s.148, the assessee company M/s. West Bengal Essential Commodities Supply Corporation Ltd. (PAN: AAACW2986M) filed its return of income for the above assessment year on 01-02-2008 declaring a total income of ₹ 41,78,301/-. The assessment was completed vide order u/s.143(3)/147 dated 2312- 2008 on a total income of Rs. Nil but calculation of tax was made on a Book Profit of ₹ 47,35,090/- u/s.115JB of I. T. Act, 1961 and refund of ₹ 73,99,016/- was issued vide cheque No.980315 dated 11-05-2009. On scrutiny of assessment records for the above assessment year, it is revealed that the assessee was engaged in trading of essential commodities as per direction of the Govt. of West Bengal. During this financial year the assessee debited ₹ 110,94,58,668/- towards Carriage Inward in respect of purchase of 569,29,90,826/-, whereas an amount of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the exports of non-essential commodities were made based on a suo moto proposal by the Managing Director of the Assessee without approval of the Board of Directors of the Assessee in a non transparent manner and in violation of the basic principles of financial propriety and regularity. The AO has also referred to the fact that the said report also mentions that associates and shipping agents were also appointed in a non transparent manner without verifying their credentials and without entering into formal agreements and also that vessels were contracted through these agents without floating market tenders as is the mandatory norm with Government undertakings. 8. The AO thereafter referred to the fact that cement clinker and iron ore were exported by the Assessee through shipping agents who were not selected through competitive tender bidding and therefore the freight rates quoted by them were excessive. The Assessee had claimed expenditure on sea freight charges of ₹ 257,61,59,728 for export of iron ore and ₹ 32,24,67,459 for export of cement clinker. The AO computed the excess freight charge paid of ₹ 14,04,36,698 on export of iron ore and ₹ 6,44, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er (2009) 315 ITR 84 the Hon'ble Bombay High Court has held that if the Assessing Officer during the course of assessment proceeding has not applied his mind on an issue than he can reopen the assessment on that issue. The relevant portion from para 10(page 90) of the report is reproduced:- We have perused the assessment order passed under section 143(3) of the Income Tax Act, 1961, on January 9, 1998. The Assistant Commissioner of Income Tax, Circle 2(1), Dhule, while passing the assessment order observed in paragraph 3 that the assessee has sold his right to purchase and deed in respect to right to purchase executed by the builders were f led on record. After saying so the Assistant Commissioner observed that subject to the above remarks the total income was computed as per the chart mentioned in the order. From the perusal of the order we do not find any application of mind on the part of the Assistant Commissioner of Income-Tax to the facts of the case, the issue to be dealt with and the reasons for passing the order. The value of the land was not with and the reasons for passing the order. The value of the land was not determined by the revenue. The issue relating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n initiated in conformity to the provision of law and accordingly the action of the AO is upheld and the grounds of appeal of the appellant are dismissed. 11. On the merits of the addition made by the AO, the CIT(A) upheld the action of the AO. The following were the relevant observations of the CIT(A): iv) Due to non-co-operative attitude of the appellant the AO relying on the average sea freight rate available on public record has held that 'average sea freight rate of US $ per 20 per WMT and has worked out the excess freight payment of ₹ 14,04,36,698/- on iron-ore and has also worked out excess sea freight payment of ₹ 6,44,93,491/- on cement clinker. The A/R has submitted that the AO has not informed about the information collected during the course of assessment proceeding. The AO has informed that the information used by him is available in public record. It is further submitted that the Ld AR has not disputed with any material evidence the correctness of the rate adopted by the AO. On the contrary the AR in his submission has admitted that excess payment has been made. The relevant portion from the submission of the AIR is reproduced h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sess 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 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: 14. It was submitted by him that as per the proviso to section 147 of the Act, where an assessment u/s. 143(3) of the Act has been made in an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment proceedings, it was not possible for the AO to change or form a different opinion on the same set of facts and resort to reopening of a completed assessment. According to him, doing so will result in the AO reviewing his own order which is not legally permissible. According to him even assuming that there was a failure on the part of the AO in this regard, the appropriate action can only be under section 263 of the Act. It was his submission that the law is well settled that to assume jurisdiction u/s. 147 of the Act, there should be reason to believe that income chargeable to tax has escaped assessment. Such reason to believe cannot be on a mere change of opinion. According to him this position is well settled by the decision of the Hon ble Supreme Court in the case of CIT v. Kelvinator of India Ltd., 320 ITR 561 (SC). 16. The learned DR relied on the order of the AO and submitted that the present proceedings u/s.147 of the Act were initiated on the basis of audit query dated 20.7.2010 pointing out the abnormal increase in the carriage inward expenses claimed by the Assessee by 5274% compared to the earlier year when purchases have increased only 21%. The department ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose fully and truly all material facts necessary for the assessment of that assessment year. It is for the Assessing Officer to disclose and open his mind through reasons. He has to speak through his reasons. It is for the Assessing Officer to reach the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the-concerned assessment year. It is for the Assessing Officer to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose, his mind. The reasons are the manifestation of the mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide the link between conclusion and evidence. The order passed by the Assessing Authority did not state anywhere that there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that year. All that has been stated in the order is that the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect that income has escaped assessment on account of any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment. Even while considering the objections raised by the assessee and replying to the assessee, there was no such case pleaded on behalf of the revenue even in the Affidavit-in-reply filed, there was no allegation of any such failure on the part of the assessee. The AO was not in a position to satisfy the Court with respect to compliance / satisfaction of the requirement of the proviso to section 147 of the Act. Under the circumstances, it was apparent that the requirement of the proviso to section 147 was not satisfied. Secondly, in absence of any satisfaction having been recorded by the Assessing Officer that the income has escaped by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the Assessment Year under consideration, assumption of jurisdiction u/s 147 of the Act was failure and therefore, the impugned notice u/s 147 of the Act, cannot be sustained. Identical question came to be considered by the Division Bench of this Court in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined belief that income of assessee chargeable to tax has escaped assessment. The facts with regard to the freight charges and quantum of purchases for the previous year and the earlier previous year were available with the AO when the concluded the first assessment proceedings. The Hon ble Bombay High Court in the case of Hindusthan Lever Ltd. (supra) has held that validity of initiation of reassessment proceedings have to be judged on the basis of reasons recorded by the AO and not by looking into any extraneous material. The following were the relevant observations of the Court: The reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the Assessing Officer to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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