TMI Blog2015 (9) TMI 1642X X X X Extracts X X X X X X X X Extracts X X X X ..... iry of four years from the end of the relevant assessment year. Hence it is imperative on the part of the assessing officer to show that the conditions specified in the first proviso to sec. 147 are complied with. However, the AO has failed to show that there was failure on the part of the assessee to disclose fully and truly all material facts. We are of the view that the reassessment proceeding under section 147 has not been validly initiated because the same has been initiated merely on a change of opinion without any fresh material coming into the possession of the AO. We, therefore, hold that the reassessment proceedings are invalid and consequently the order of reassessment is quashed. - Decided in favour of assessee - I.T.A. No.5972/M/2012, Cross objection 254/Mum/2013 - - - Dated:- 23-9-2015 - SHRI B.R.BASKARAN,AM AND LALIT KUMAR, JM For The Appellant : Ms.Anu Aggarwal For The Respondent : Shri Arvind Sonde ORDER Per Lalit Kumar,JM: The appeal has been filed by the revenue against the order dated 30/05/2012 passed by Ld CIT(A) for the assessment year 1999-2000 on the ground that the Ld CIT(A) has erred in allowing the loss on sale of assets. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e only on change of opinion. Accordingly he contended that reassessment is liable to quashed. 6. The Ld D.R, on the contrary, submitted that the assessee s claim was allowed in the original proceeding on the belief that there was a contractual liability. Later it was found that there was no contractual liability and hence the assessing officer has reopened the assessment. 7. We heard the parties on this legal issue. We notice that the assessing officer, during the course of original assessment proceedings, has asked the following two questions besides other questions, vide his letter dated 30-01-2002: Q.14. Give the details of loss on sale of assets of ₹ 2,65,78,977; Q.15. Give details of custom duty on plant machinery debited by you in the P L A/c since the asset is not existing during the current year. Why his custom duty should be allowed? 8. The assessee, vide its letter dated 28-02-2002, submitted the reply as under: ..We purchased the SCADA System from Sonal Electronics, which was installed at the control room located at Patalganga and at various points of the pipeline. Therefore, this SCADA System became an integral part of the liquid transport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of SCADA was the liability of the assessee under the contractual terms and accordingly the assessee has claimed the same as deduction. After receiving the reply from the assessee the assessing officer passed the original assessment order on 26-03-2002 allowing the deduction of customs duty referred above. 10. Thereafter, the AO has reopened the assessment by issuing notice u/s 148 dated 29-03-2006. The reasons recorded by the assessing officer for issuing notice u/s 148 was communicated to the assessee, vide letter dated 01-09-2006, and the same reads as under: On perusal of the records, it is seen that the assessee company had been contracted to transport petroleum and products from Chember to Patalganga to Reliance Industrial plants through pipe lines. The quantity of liquid products moving through pipeline installed by the Assessee Company is on monitored by SCADA (Supervising control and Date acquisition) system, fitted on the line, which had been assembled from components imported, by M/s. Eastern Peripherals Ltd., SEEPZ, Andheri. The system manufactured by the SEEPZ unit had been first sold to M/s. Sonal Electronics from whom the Assessee Company had purchased ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m which in turn would have disrupted the business activities of the assessee. 7. As explained earlier, we have taken on lease the SCADA system from RCL vide Lease Agreement dt. 30.03.1993. Clause 7.1 of the Agreement categorically provides that the Lessee (assessee) shall bear all the imports, charges and other duties, taxes, penalties, etc. levied from time to time by the Government or any other authority in respect of the said system. The relevant extract of the Lease Agreement is as under .: We respectfully submit that section 37(1) of the I.T. Act allows an expenditure as deductible expenditure if the said expenditure is laid out or expended wholly and exclusively for the purposes of the business . The term for the purposes of business is of wide connotation and includes all expenditure incurred for business out of commercial expediency. The term commercial expediency means everything that serves to promote commerce and includes every means suitable to that end. The expenditure incurred out of commercial expediency will be taken to be for the purpose of the business even though not supported by any prevailing practice. We further submit that the expression wholl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant's case are completely different and contrary to the facts of reopening of assessment. It is evident that there is no case of change of opinion as the claim of contractual liability on account of custom duty paid for import of Supervising Control and Acquisition System (SCADA) was never examined during the scrutiny proceedings u/s.143(3) of the Act. On perusal of the materials on record, it is clear that new set of facts and tangible material have come on record after the completion of original assessment, and the AO after considering these new materials and facts on record, has form the view that income of the appellant had escaped assessment. Thus, in my considered view the reopening of assessment u/s.147 of the IT Act, 1961 is completely justified. Accordingly this ground of appeal is therefore dismissed. However, on merits, the CIT(A) allowed the expenditure incurred by the assessee on payment of customs duty . 13. The ld A.R invited our attention to the decision rendered by Hon ble Delhi High Court in the case of Kelvinator India Ltd (320 ITR 561),wherein the Delhi High Court has held the assessment cannot be reopened on the basis of change of opinion. He a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time the matter reaches the Court, on the strength of affidavit or oral submission advanced The Ld A.R also relied upon the judgment of the Bombay High Court in the case of Bhor Industries Ltd vs ACIT 267 ITR 161 (Bom) wherein the Hon.Bombay High Court has held as under: By virtue of the proviso to section 147 no action can be taken for reopening after four years unless the Assessing Officer has reason to believe that income had escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts. Explanation 2 to section 147 is required to be read with section 147 in its entirety including the proviso. That, if one reads Explanation 2 to section 147 including the proviso then it is clear that in cases where the Department reopens the assessment within a period of four years, it can do so on the round of income having escaped assessment. However, in cases of reopening after four years, the Assessing Officer must have reason to believe that income has escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts. Explanation 2 cannot be read without reading the proviso to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation of expenses between the units eligible for deduction. The Hon'ble Bombay High Court held that reopening was on change of opinion and the same is not permissible. The relevant observations made by Hon ble Bombay High Court are extracted below:- 13. In the present facts, the Petitioner had along with its Return of Income filed its Computation of Income wherein claim for deduction under Section 801A/IB of the Act was made. Besides the Auditor's certificate as required under Section 80IA(8) of the Act to claim to deduction was also filed along with a note indicating the basis of allocation of expenditure amongst its three manufacturing units was also filed. These were all primary documents which would not normally escape examination during the scrutiny proceedings. This is also evident from the fact that during assessment proceedings, the Assessing Officer had by letter dated 27th December, 2004 called upon the Petitioner to furnish details with regard to its claim for deduction under Section 801A/IB of the Act including the method/manner of allocation of expenditure amongst its three manufacturing units. The Petitioner by its letter dated 25th January, 2005 submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between various units belonging to the Petitioner for claiming deduction under Section 80lAtlS of the Act. This is a further indication of the fact that the Assessing Officer had during the regular assessment proceedings for Assessment Year 2002- 03 sought information in respect of the allocation of expenses and the explanation offered by the Petitioner was found to be satisfactory. This is evident from query dated 27th December, 2004 and the Petitioner's response to the same on 25th January, 2005 explaining the manner of distribution of common expenses for delaying the process of claiming deduction under Section 80lAlIB of the Act. All this would indicate that Assessing Officer had formed an opinion while passing the order dated 9th March, 2005. This Court in Aroni Commercials Ltd. v. Assistant Commissioner of Income Tax MANU/MH/1838/20140: 367 ITR 405 had occasion to consider somewhat similar submission made by the Revenue and negatived the same by holding that when a query has been raised with regard to a particular issue during the regular assessment proceedings, it must follow that the Assessing Officer had applied his mind and taken a view in the matter as is reflected in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not permissible for the AO to resort to proceedings u/s 147 merely on change of opinion. 17. Further, we notice that the AO has reopened the assessment after expiry of four years from the end of the relevant assessment year. Hence it is imperative on the part of the assessing officer to show that the conditions specified in the first proviso to sec. 147 are complied with. However, the AO has failed to show that there was failure on the part of the assessee to disclose fully and truly all material facts. 18. In view of the foregoing discussions, we are of the view that the reassessment proceeding under section 147 has not been validly initiated because the same has been initiated merely on a change of opinion without any fresh material coming into the possession of the AO. We, therefore, hold that the reassessment proceedings are invalid and consequently the order of reassessment is quashed. 19. Since we have quashed the reassessment proceedings itself, we do not find it necessary to adjudicate the issues raised by the revenue in its appeal. 20. In the result, the appeal of the revenue is dismissed and the Cross Objection filed by the assessee is allowed Order pronoun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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