TMI Blog2014 (8) TMI 1140X X X X Extracts X X X X X X X X Extracts X X X X ..... cer lacked jurisdiction to reopen the assessment proceedings by virtue of operation of 1st proviso to Sec.147 and accordingly reopening was rightly held as not valid. - Decided against revenue. - ITA No.2476/PN/2012, ITA No.680/PN/2013 - - - Dated:- 28-8-2014 - SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI R.K. PANDA, ACCOUNTANT MEMBER Assessee by : Shri Kishore Phadke Department by : Shri B.C. Malakar ORDER PER SHAILENDRA KUMAR YADAV, J.M: Both the appeals pertain to the same assessee filed by the Revenue against the respective orders of Commissioner of Income Tax (Appeal)-V, Pune for A.Ys. 2003-04 and 2007-08. 2. In ITA No.2476/PN/2012, the Revenue has filed the appeal on the following grounds. 1. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in holding that the reopening of assessment in this case was not valid when the assessee has not made full and true disclosure of all material facts necessary for its assessment. 2. Whether the on the facts and circumstances of the case and in law, the CIT(A) was justified in holding that the assessee company has made full and true disclosure of materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut appreciating that, during A.Y. 2003-04, entire shareholding of the company is held by the persons who were the same persons who held the entire shareholding of the company during A, Y. 1998-99 earlier. 3. The learned AO erred in law and on facts in invoking the provisions of Section 79 of Income-tax Act 1961 irrespective of the fact that the majority shareholder of the appellant company is a company listed on the stock exchange outside India and as such, it is protected by Article 24(4) of the DTAA between India Germany. 4. Alternatively and without prejudice to the above ground no.2 3 the learned AO erred in law and on facts in not confining the alleged disallowance of set-off of carried forward business loss to an amount of ₹ 2,00,80,465 instead of ₹ 7,28,84,073/-. He ought to have appreciated that the entire balance loss of ₹ 5,28.03,608 (i.e. ₹ 7,28,84,073 - ₹ 2,00,80,465) was, in fact, unabsorbed depreciation of past years which is outside the ambit of section 79. 5. The appellant craves leave to add, alter, amend and/or delete all or any of the grounds of appeal. 5.1 The assessee also has made the following submissions befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year As such, the matter is required to be examined on the tests laid down in the proviso to section 147 of the ITA, 1961. Considering the specific discussion in the original order and considering the transparent and elaborate mentions in the Notes to Accounts of the Annual Report, the issue of change in shareholding is always stated with requisite transparency. As such, there was nothing like any failure on the part of the appellant to disclose all material facts. Hence, the appellant's case gets squarely covered under the first proviso to section 147, which creates a fetter and grants safeguard to the assessee against the AO in assumption of 147 jurisdiction. It is submitted, the jurisdiction assumed by the learned AO, by issuance of notice u/s 148 is incorrect. 5.2 Having considered the same, the CIT(A) has turned down the re-assessment vide para 11 of its order as under: 11. In the present case, as the facts narrated in the original assessment order regarding change of share holding pattern which has been acknowledge by the Assessing Officer in Para 2 of the Assessment Order dated 24.03.2006 it is clear that all the necessary facts were di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cquired Lemmerz Werke GMBH Germany. In August, 1998, the Hayes Group increased its holding in Kalyani Lemmerz Ltd to 85% by acquiring additional 60% of equity held by Kalyani Group. There has been a change in the share holding pattern of more than 51% holding in A.Y. 1999-2000. Set off of brought forward losses of A.Y. 1997-98 and 1998-99 was not admissible against income of the assessee in view of provisions of sec. 79 of the I.T. Act. Thought the Assessing Officer has discussed the shareholding pattern in the assessment order, the applicability of provisions of section 79 of the Act has not been considered by the Assessing Officer. It was found from the record that that the losses amounting to ₹ 7,28,84,073/- pertaining to A.Y. 1997-98 and the part of loss pertaining to A.Y. 1998-99 has been allowed to be set off. It was not in order in view of provisions of section 79 of the Act. According to the Assessing Officer, an amount of ₹ 7,28,84,073/- has escaped assessment and this was fit case for issue of notice u/s.148 of the Act. In this background, it was required to appreciate the original assessment passed u/s.143(3) of the Act on 24.03.2006. The relevant issue has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of sec. 79 of Income-tax Act was not considered by the Assessing Officer. The duty of the assessee extends to the furnishing of true and full material facts necessary for the purpose of assessment but it could not be said to be extended to what opinion he should form on the basis of above information, or what inferences can be derived or as to what decision he should take considering the relevant provisions of the Income-tax Act. It is not for the assessee to lead or instruct the Assessing Officer as to what inferences could be taken from the full and true material facts submitted before him. Inferences of facts and law from the disclosed facts and applicability of the relevant provisions of the statute is the domain of the Assessing Officer. The assessee cannot be blamed for not informing or indicating the Assessing Officer as to what inferences he could draw or what provisions of the statute he should apply provided the assessee has submitted full and true material facts before the Assessing Officer. The Hon'ble Supreme Court in the case of Calcutta Discount Company Ltd. Vs. ITO [1961] 41 ITR 191(SC) has observed as under: There can be no doubt that the duty of disclosi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ningless to demand that the assessee must disclose what inferences-whether of facts or law- he would draw from the primary facts. If from primary facts more inferences than one could be drawn, it would not be possible to say that the assessee should have drawn any particular inference and communicated it to the assessing authority. How could an assessee be charged with failure to communicate an inference, which he might or might not have drawn ? It may be pointed out that the Explanation to the subsection has nothing to do with 'inferences' and deals only with the question whether primary material facts not disclosed could still be said to be constructively disclosed on the ground that with due diligence the Income-tax Officer could have discovered them from the facts actually disclosed. The Explanation has not the effect of enlarging the section, by casting a duty on the assessee to disclose 'inferences'- to draw the proper inferences being the duty imposed on the Income-tax Officer. We have, therefore, come to the conclusion that while the duty of the assessee is to disclose fully and truly all primary relevant facts, it does not extend beyond this. 6.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merit of the issue at hand. In view of this, the order of CIT(A) is upheld. As a result, the appeal filed by the Revenue is dismissed. 7. In ITA No.680/PN/2013 for A.Y. 2007-08, the Revenue has filed the appeal on the following grounds. 1. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in directing the A.O. to allow set-off of brought forward losses as well as unabsorbed depreciation after giving effect to the appellate order passed in the case of the assessee for A.Y. 2003-04, when in A.Y. 2003-04 set off of brought forward losses of A.Y. 1997-98 1998-99 were not admissible in view of provisions of sec.79 of the I.T. Act. 2. The appellant craves leave to addition, amend or alter any of the above grounds of appeal 8. The Assessing Officer has decided the taxable income of the assessee under the normal provisions of Income Tax, while the assessee company had filed return of income under the MAT provisions. The assessee grievance was on account of denial of set-off of brought forwarded losses / unabsorbed depreciation on the basis of assessment order passes u/s.143(3) r.w.s. 147 of the Act in 2003-04. In appeal, the CIT(A) has h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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