TMI Blog2016 (11) TMI 597X X X X Extracts X X X X X X X X Extracts X X X X ..... nsequently held that the assessment is invalid. 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 - Decided in favour of assessee - I.T.A. No. 243/Vizag/2014, C. O. 29/Vizag/2014 - - - Dated:- 9-9-2016 - Shri V. Durga Rao, Judicial Member And Shri G. Manjunatha, Accountant Member Appellant by : Shri G.V.N. Hari, AR Respondent by : Shri T.S.N. Murthy, DR ORDER Per V. Durga Rao, Judicial Member This appeal filed by the revenue is directed against the order of CIT(A)-11, Mumbai Camp Office at Visakhapatnam dated 19.3.2014 for the assessment year 2005-06 and the cross objection filed by the assessee is challenging the notice issued u/s 148 of the Income Tax Act, 1961 (hereinafter called as 'the Act'). 2. Facts are in brief that the assessee is a firm carrying on the business of real estate. The firm had entered into an agreement with M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee thereafter after comparing the other cases in the similar line of business such as Bijapuri Township, M/s. Suma Estates, he has estimated income of the assessee at ₹ 80 lakhs. Accordingly, assessment was completed u/s 143(3) of the Act. Subsequently, the A.O. had issued a notice u/s 148 of the Act dated 25.3.2011 on the ground that income chargeable to tax has escaped assessment. Before A.O. the assessee has submitted that assessment in its case already completed u/s 143(3) of the Act by considering all the facts and the A.O. has estimated the income and submitted that the subsequent notice issued u/s 148 of the Act dated 25.3.2011 is not legal and invalid. However, the assessing officer by following the decision of the Supreme Court in the case of ACIT Vs. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 291 ITR 500, he has observed that the power to reopen the proceedings whether to assess, re-assess or recompute the income, it has predicted on a test where a reasonable person would form a belief that there was relevant material for initiating the proceedings u/s 147 of the Act. He further observed that it is in the discretion of the A.O. to reopen the proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the original assessment order would come to ₹ 24,77,204/- addition to that extent in the re-assessment order is hereby sustained and the balance is directed to be deleted. 5. On being aggrieved, revenue as well as assessee filed cross appeals before the Tribunal i.e. on merits revenue is in appeal. So far as legal issue of re-opening is concerned, assessee filed a cross objection. The cross objection filed by the assessee is reproduced as under: (1) (a) The learned Commissioner of Income Tax (Appeals) is not justified in holding that the notice issued u/s 148 is a valid notice. (b) The learned Commissioner of Income Tax (Appeals) ought to have quashed the notice issued u/s 148 as illegal and consequently held that the entire reassessment proceedings are void-ab-initio. (2) Without prejudice to the above, the learned Commissioner of Income Tax (Appeals) is not justified in holding that the profit was under assessed in the original assessment proceedings. (3) Without prejudice to the above, the profit estimated by the learned Commissioner of Income Tax (Appeals) is on a higher side. (4) Any other grounds that may be urged at the time of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iginal assessment order, he has considered all the details such as profit loss account (paper book page no.12) capital introduction by the partners at page no.13 and other details about lay out approval, expenditure capital introduction at paper book page nos.15 16 and the A.O. after considering the other assessees who are involved in the real estate business particularly Bijapuri Township, Rajahmundry M/s. Suma Estate, Rajahmundry estimation was made. Subsequently, on the very basis of some material another A.O. came to a conclusion that there is escapement of income which is not permissible, which amounting to change of opinion. 8. On the other hand, the Ld. D.R. has pointed out that the assessee has failed to disclose fully, truly all material to complete the assessment, therefore, the A.O. has issued a notice u/s 148 of the Act and reassessed the income of the assessee which is according to law. The Ld. D.R. has strongly supported the order passed by the CIT(A) in respect of re-opening and submitted that the re-opening orders passed by both the authorities below may be upheld. 9. We have heard both the parties, perused the materials available on record and gone thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Associates Developers, Rajahmundry, for the A.Y. 2005-06 Intimation regarding. Ref: Your letter dt. 9.1.2012 received in this office on 11.1.2012 *** With reference to the above, the reasons for issue of notice u/s 148 of the I.T. Act, 1961 in the above mentioned case are as under: On verification of records, it is noticed that the sales admitted by the assessee upto 13.3.2005 i.e. upto the date of survey, out of VDRE land are 125 plots with an extent of 31,147 sq.yards and on-money receipts which fall to the share of the assessee were shown at ₹ 2,71,12,917/- while the sale details as per the statements furnished by M/s. VDRE show that 170 of its plots comprising 48,037 sq.yards were sold for the same period. The difference in the land area of these 45 plots in 16891 sq.yards and at the average on-money receipts per sq.yard working out to ₹ 876/- per yard, concealment of receipts by the assessee works out to ₹ 1,47,96,516/-. Similarly, there is a vast discrepancy in respect of the land belonging to the other land owner, Sri A. Satyanarayana. Assessee s Managing Partner had admitted in the sworn statement that 330 of the total 38 ..... 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 his assessment for that assessment year. The proviso to section 147 of the Act has been considered by various courts and the relevant case laws are discussed, which are as under. 13. In the case of General Motor India Pvt. Ltd. (supra), the Hon ble Gujarat High Court has held that when the notice issued by the A.O. after 4 years, the A.O. not recorded a satisfaction that income has escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment, notice is not valid. In the absence of any satisfaction having been recorded by the A.O. 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 hereunder consideration assumption of jurisdiction u/s 147 of the Act is failure and therefore, the impugned notice u/s 148 of the Act cannot be sustained. 14. In the case of Dynacraft Air Controls (supra) the Hon ble Bombay High Court has observed that once A.O. has issued a notice after 4 years, the condition precedent is that the A.O. has to state that there w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 47 of the Act should vitiated and could not be sustained. 18. In the case of Grindwell Norton Ltd. (supra) the Hon ble Bombay High Court has held that nowhere in the reason recorded by the A.O., it is stated that there is a failure on the part of the assessee to disclose material facts in the return filed by the assessee. It is not in dispute that in the present case, the re-opening of the assessment is beyond the period of 4 years from the end of the relevant assessment year. In the absence of any failure on the part of the assessee to disclose fully and truly all material facts, the re-opening of the assessment beyond the period of 4 years cannot be sustained. 19. In the case of Pennar India Ltd. (supra) the Hon ble Madras High Court has considered the application of proviso to section 147 of the Act and held that the pre-condition for the exercise of power u/s 147 of the Act, in cases where power is exercised within a period of 4 years from the end of the relevant assessment year is a belief reasonably entertained by A.O. that any income chargeable to tax has escaped assessment for that assessment year. However, when the power is invoked after the expiry of the period of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on the part of the assessee would be indicating the AO s failure to apply his mind to material facts and on that ground the notice issued could be vitiated and held that notice issued by the A.O. u/s 147 of the Act cannot be sustained. 20. In the case of Hindustan Lever Ltd. (supra) the Hon ble Bombay High Court has observed that reasons recorded by the A.O. nowhere stating that there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment, re-opening of assessment made u/s 143(3) of the Act after expiry of 4 years from the end of the relevant assessment year was invalid. 21. In the present case the re-opening notice was issued after 4 years, relevant to the assessment year. The assessing officer has recorded the reasons for re-opening, he has not alleged that there is a failure on the part of the assessee to disclose fully, truly all material facts relevant to complete the assessment in that assessment year. Therefore, as per the proviso to section 147 of the Act when the assessment is re-opened beyond 4 years, it is necessary to allege that there is a failure on the part of the assessee to disclose fully and truly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent case the assessment was completed u/s 143(3) of the Act and notice u/s 148 of the Act was issued after 4 years, therefore, proviso to section 147 of the Act comes into operation. The A.O. without considering the factual matrix of the case simply by following the judgement of the Supreme Court rejected the objection raised by the assessee. On appeal, though the Ld. CIT(A) has considered proviso to section 147 of the Act, he failed to consider the reason recorded by the assessee, wherein any allegation is made against the assessee that the assessee has failed to disclose truly all material facts to complete the assessment for the assessment year, without considering simply confirmed the order of the A.O. In our opinion, there is nothing on the record to suggest that there is any material came to the light of the A.O. to come to the conclusion that there is an escapement of income. In the original assessment order, in the absence of books of accounts A.O. came to the conclusion that after examining the entire project came to a conclusion that estimation is reasonable in this case, accordingly he has estimated ₹ 80 lakhs as the income of the assessee. The A.O. in the re-asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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