9911796707
TMI Blog2016 (11) TMI 597X X X X Extracts X X X X X X X X Extracts X X X X ..... e agreed terms & conditions Further, the assessee firm was also entitled to retain the sale proceeds of land over and above the guideline value of sub-registrar in as much as the additional amount represented the value of amenities provided by the assessee firm. The assessee firm has received a sum of Rs. 5,61,60,203/- being the surplus over the guideline value of the subregistrar from out of total receipts of Rs. 6,95,00,000/-. A survey was taken place at the business premises of the assessee firm on 12.3.2005 and note book was found wherein the details of the receipts by way of sale of flats and the details of the expenditure incurred were recorded. As per the said note book, the total receipts were Rs. 6,12,26,833/- up to the date of survey. Thereafter, the assessee had filed a return of income by admitting total income of Rs. 11,39,850/-. The return of income filed by the assessee was belated one, to regularize the same, a notice u/s 148 of the Act was issued to the assessee on 2.11.2007. In response to the said notice, the assessee filed a letter dated 5.11.2007 stating that the return filed by the assessee originally be treated as in response to notice issued. In the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssued u/s 148 of the Act by the assessing officer is invalid and liable to be quashed. It was also submitted that the reopening is done by the A.O. based on the change of opinion and it is not permissible under the law. The Ld. CIT(A) after considering the explanation of the assessee has observed that the A.O. on perusal of the information available to him found that the assessee had shown sale of only 203 flats, whereas the Managing Partner admitted in the course of survey of as many as 330 flats had been sold. Based on the above information, A.O. has a reason to believe that income chargeable to tax has escaped assessment. With the Ld. Commissioner's approval the assessment was reopened by issuing a notice u/s 148 on 25.3.2011 and upheld the re-opening of the assessment done by the A.O. The Ld. CIT(A) further observed that there is nothing on the record to show that income tax statement filed by the land owner has been considered by the A.O. in the course of original assessment proceedings. To that extent of it, it cannot be said that the re-assessment proceedings were initiated by the present A.O. based solely on change of opinion on the same set of facts considered in the cours ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sclose all the true particulars before the A.O. if the A.O. has not raised any allegation in the reasons recorded, the re-opening is bad and notice has to be quashed. To support his argument, he has relied on the following judgements: 1. General Motors India (P) Ltd. Vs. DCIT (2014) 360 ITR 527 (Guj) 2. Dynacraft Air Controls Vs. Smt. Sneha Joshi and others (2013) 355 ITR 102 (Bom) 3. Mahalakshmi Motors Ltd. Vs. DCIT 265 ITR 53. 4. Sri Sena Vaibagh Sahakari Vs. DCIT (2016) 69 Taxman.com 245 (Gujarat) 5. Sadhbhavana Engineering Ltd. Vs. DCIT (2011) 333 ITR 483 (Gujarat) 6. Grindwell Norton Ltd. Vs. Jagadish Prasad Jangid, ACIT & others 267 ITR 673 (Bom.) 7. Pennar India Ltd. Vs. DCIT 241 ITR 672 (Mad.) 8. Hindustan Lever Ltd. Vs. RB Wadekar 268 ITR 332 (Bom.) 7. The Ld. Counsel for the assessee has raised a further legal issue that the assessee has filed all the details before the A.O., in the course of original assessment proceedings, the A.O. after considering the entire details, he has estimated the income of the assessee on the basis of very same information, the A.O. again issued a notice on the ground that there is an escapement of income and submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipts by way of sale of flats and the details of expenditure incurred were recorded. As per said note book, the total receipts are of Rs. 6,12,26,833/- upto the date of survey. Thereafter, the assessee has filed a return of income for A.Y. 2005-06 admitting total income of Rs. 11,39,850/-. In the assessment order, the A.O. has observed that though the gross receipts of the assessee are at Rs. 6.9 crores, the return of income filed is not accompanied with the audit report u/s 44AB of the Act. The assessee neither filed profit & loss account nor balance sheet. Only a receipt and expenditure statement is enclosed to the return of income. It is submitted before the A.O. that no complete and regular books of accounts were maintained by the assessee, hence no audit is required u/s 44AB of the Act would be conducted. He further stated that on the basis of the register maintained by the assessee with regard to the sale of flats and amount of consideration received, expenditure incurred and other information available the assessee filed a return of income. He pleaded before the A.O. that in the absence of complete and regular books of accounts, the income of the assessee may be determined on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comes to Rs. 1,87,11,360/- [21360x876]. Thus, the entire suppressed receipts of Rs. 3,35,07,876/- [Rs.147965156 + 18711360] have to be brought to tax for the Asst. year 2005-06. In view of the above, income chargeable to tax has escaped assessment within the meaning of section 147 of the I.T. Act, 1961. This is for your kind information. Yours faithfully, Sd/- (D. SUNDARA RAO) Income Tax Officer, Ward-3, Rajahmundry" 10. In so far as first objection raised by the Ld. Counsel for the assessee is that the notice was issued beyond 4 years and submitted that the proviso to section 147 of the Act will come into play. 11. For the sake of convenience, proviso to section 147 of the Act is extracted as under: "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 und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority to decide what inference can be reasonably be drawn and what legal inferences to be drawn ultimately. It is to be noted whether full and true disclosure of the facts was done by the assessee, the department cannot re-open the assessment even after there is a loss of revenue or even after legal inference drawn by the assessing authority was erroneous in the first place. Even mere change of opinion by the assessing authority is not enough to re-open the assessment in view of the various decisions of the Hon'ble Supreme Court. 16. In the case of Sri Sena Vaibagh Sahakari Vs. DCIT (supra) the Hon'ble Gujarat High Court has considered the similar issue and has held that in the absence of any failure on the part of the assessee to disclose all the material facts necessary for assessment, assessing officer could not initiate re-assessment proceedings after expiry of 4 years from the relevant assessment year. 17. In the case of Sadbhavana Engineering Ltd. (supra) the Hon'ble Gujarat High Court has held that on plain reading of the reasons recorded it was apparent that they were totally silent as regards any failure on the part of the assessee to disclose fully and truly all mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te any proceedings u/s 147 of the Act after the expiry of 4 years from the end of the assessment. The A.O. must necessarily record not only his reasonable belief that income has escaped assessment but also the default or failure committed by the assessee. Failure to do so would vitiate notice and the entire proceedings. Whenever a notice is issued by the A.O. beyond a period of 4 years from the end of the relevant assessment year, such a notice being issued without recording the reasons for his belief that income escaped assessment, it cannot be presumed in law that there is also a failure on the part of the assessee to file the returns referred to in the proviso or a failure to fully and truly disclose all material facts. The reasons referred to in the main part of section 147 of the Act would, in cases where the proviso is attracted, including reasons referred to in the proviso and it is necessary for the A.O. to record that any one or all circumstances referred to in the proviso exist before the issue of notice u/s 147 of the Act. If A.O. choses to entertain the belief that the assessment has been made in the background of assessee's failure to disclose truly and fully all mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, thus, the notice is quashed and consequently held that the assessment is invalid. 22. So far as another legal issue raised by the assessee is that the assessee has filed all the details and the A.O. after considering all the details he has estimated the income of the assessee. Subsequently on the basis of same material, the A.O. after issuing a notice u/s 148 of the Act re-assessed the income and submitted that it is a change of opinion which is not permissible in accordance with law. So far as this issue is concerned in the course of assessment proceedings, the A.O. has called various details i.e. joint development agreement, what are the flats sold, what are the flats unsold and lay out, and all other details and also A.O. inspected personally the lay out and also considered the other assessees i.e. Bijapuri Township, Rajahmundry and M/s. Suma Enclave carrying similar lines of business, he has estimated income of the assessee. On the basis of very same information, the A.O. is of the opinion that there is an escapement of income. There is nothing on the record to suggest that some material came to the notice of the A.O. and accordingly reopening was made. When the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority, it is for the assessing authority to decide what inference can be reasonably be drawn and what legal inferences to be drawn ultimately. It is to be noted whether full and true disclosure of the facts was done by the assessee, the department cannot re-open the assessment even after there is a loss of revenue or even after legal inference drawn by the assessing authority was erroneous in the first place. Even mere change of opinion by the assessing authority is not enough to re-open the assessment in view of the various decisions of the Hon'ble Supreme Court. 23. In the case of Kelvinator of India Ltd. (supra) the Hon'ble Supreme Court has held that after 1st April, 1989, A.O. has power to reopen the assessment u/s 147 of the Act provided A.O. has reasonably believed that income has escaped assessment and there must be a tangible material to come to such conclusion that there is an escapement of income. That mere change of opinion cannot be per se reason to re-open. Keeping in view of the facts and circumstances of the case and by following the Hon'ble jurisdictional High Court as well as the judgement of the Hon'ble Supreme Court, we hold that the re-opening done by the A.O ..... X X X X Extracts X X X X X X X X Extracts X X X X
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