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TMI Blog2018 (2) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of re-assessment proceedings u/s 147 of the Act on the ground that the re-assessment is based on mere change of opinion and it is fresh application of mind to the same set of facts. 3. Briefly stated facts are that assessee is a limited company and engaged in business of merchant banking, underwriting, fund mobilization and project consultancy. The assessee for the year under consideration filed its return of income on 01.10.2008 disclosing loss of Rs.1,35,95,472/- which was processed u/s 143(1) of the Act dated 18.09.2009. 4. Subsequently, the AO observed that the assessee has claimed excessive bad debt to the tune of Rs.90 lakh which was allowed u/s 143(1) of the Act. Accordingly, the AO found his belief that the income of the assessee has escaped assessment under section 147 of the Act and accordingly issued notice under section 148 of the act after recording the reasons as detailed under:- "8.07.10. On examination of assessment records and perusal of the profit and loss accounts reveals that the assessee debited a sum of Rs. 3.32 crore on account of bad debts. From the balance sheet it appears that there was sundry debtors of Rs. 9,77,790/- (exceeding 6 months) and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) has applied his mind on the same set of facts / material which were available on record. Thereafter AO changed his opinion from the same set of information and initiated proceedings u/s. 147 of the Act. Ld. AR in support of assessee's claim has relied on the following orders:- i) CIT vs. Orient Craft Ltd (2013) 354 ITR 536 (Del) wherein the Hon'ble Delhi High Court after considering the decision in the case of ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Lt. (2007 291 ITR 500 (Hon'ble Supreme Court)Sec. 147 makes no distinction between an order passed u/s. 143(3) and the intimation u/s. 143(1) it is not permissible to adopt different standards while interpreting the words "reason to believe" vis-a-vis Sec. 143(1) and Sec. 143(3). ii) Where the reason for reassessment discloses that the AO has formed his belief on the basis of the return of income, it is nothing but a review of earlier proceedings, not permissible in view of Apex Court decision in CIT vs. Kelvinator of India Ltd. (2010) 320 ITR 561 (SC) iii) Recently jurisdictional ITAT in the case of Vesuvius India Ltd. vs. DCIT IT No.2138/Kol/2013 held that reassessment pursuant to intimation u/s. 143(1) is not per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned (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 e 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 nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India,, chargeable to tax, has escaped assessment for any assessment year:] [Provided [also] that the Assessing Officer may assess or reassess such income, other than the income involving mattes which are the subject matters of any appeal, reference or revision, which is chargeabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial gathered by the AO for initiating the proceedings u/s. 147 of the Act. In holding so, we find guidance and support from the judgment of Hon'ble Delhi High Court in the case of CIT vs. Orient Craft Ltd. (2013) 354 ITR 536 (Del) wherein after considering the judgment of Hon'ble Supreme Court in the case of ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (2007) 291 ITR 500 (SC), wherein the Hon'ble court has held:- "Finality of intimation under section 143(1) can be disturbed only if Assessing Officer has 'reason to believe' * The assessee's contention that even an assessment made under section 143(1) of the Act can be reopened under section 147 if the Assessing Officer has 'reason to believe' that income chargeable to tax has escaped assessment, is sound. It is true that no assessment order is passed when the return is merely processed under section 143(1) and an intimation to that effect is sent to the assessee. However, it has been recognized by the Supreme Court itself in Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500/161 Taxman 316 (SC), that even where proceedings under section 147 are sought to be taken with refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a distinction between the meaning and content of the expression 'reason to believe' in cases where assessments were framed earlier under section 143(3) and cases where mere intimations were issued earlier under section 143(1) may well lead to such an unintended mischief. It would be discriminatory too. An interpretation that leads to absurb results or mischief is to be eschewed. [Para 13] * The Supreme Court in Rajesh Jhaveri Stock brokers (P.) Ltd.'s case (supra) has held that the strict requirements of section 147 can be compromised. On the contrary, from the observations it would appear clear that the court reiterated that 'so long as the ingredients of section 147 are fulfilled' an intimation issued under section 143(1) can be subjected to proceedings for reopening. The Court also emphasized that the only requirement for disturbing the finality of an intimation is that the Assessing Officer should have 'reason to believe' that income chargeable to tax has escaped assessment. The expression 'reason to believe' cannot have two different standards or sets of meaning, one applicable where the assessment was earlier made under section 143(3) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of jurisdiction by the ld. AO for the Asst. Years under a, we reframe in to give our opinion on the merits of the additions made in the reassessment. We hold that the reassessment proceedings are held to be invalid for the Asst. years 2000-01, 2001-02 and 2002-03 in view of the aforesaid findings, we also refrain to give our opinion on the other aspect of argument of the ld. AR that, the ld. AO did not dispose of the objections for reasons recorded by way of passing a speaking order thereby depriving the assessee of legitimate right of preferring writ jurisdiction against the said order. The arguments advanced in this regard by the ld. AR and judicial precedents relied thereon are left open. Accordingly, the grounds raised by the assessee for the Asst. Years under appeal are allowed." Besides the above, we also rely on the judgment of Hon'ble Apex Court in the case of CIT Vs. Kelvinator of India Limited reported in 320 ITR 561 (SC) wherein it was held as under : "Prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under two conditions, viz., if (a) the ITO had reason to believe that, by reason of the omission or failure on the part of an assessee to m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etween the tangible material and the formation of the reasons to believe that income had escaped assessment. In the case on hand the information of bad debts/ advance written off is very much emanating from the audited financial statement available with the AO. Thus the reopening on the basis of financial statement per se does not refer to the tangible material gathered from independent sources. Thus we find that the manner of recording satisfaction remains the same even in the case where no scrutiny assessment was conducted. Therefore respectfully following the co-ordinate Bench order and other judgments as discussed above, we hold that the re-assessment was not valid and in view of above CO filed by assessee is allowed.
Coming to Revenue's appeal in ITA No.2196/Kol/2014.
7. Since we have already held the re-assessment as illegal, the appeal filed by the Revenue has become academic and therefore it is dismissed as infructuous.
8. In the result, Revenue's appeal is dismissed as infructuous.
9. In the result, CO of assessee stands allowed and that of appeal of
Revenue stands dismissed as infructuous.
Order pronounced in the open court 22/09/2017 X X X X Extracts X X X X X X X X Extracts X X X X
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