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TMI Blog2015 (9) TMI 1642X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction. The AO further noticed that the said claim pertained to the customs duty paid in respect of a Plant & Machinery, which had already been sold in the assessment year 1993-94. The AO took the view that the said claim is not allowable. Accordingly, he re-opened the assessment by issuing notice dated 29.3.2006 u/s 148 of the Act in order to disallow the above said claim. 5. The Ld Senior Counsel appearing for the assessee submitted that the AO has re-opened the assessment after expiry of four years from the end of the relevant assessment year and hence the first proviso to sec. 147 of the Act shall apply to the facts of the present case. He submitted that the AO has reopened the assessment without proving that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of original assessment proceeding. He further submitted that the assessing officer did make enquiries about the impugned claim during the course of original assessment proceedings and the assessee also gave a detailed reply. The assessing officer, after considering the explanations of the assessee in support of the impugned claim, accepted the same and h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow Cause Notice issued to the importers of the equipment. Irrespective of the outcome of the final decision of the Customs Department and consequential time taking and costly litigation with the department, there was every likelihood of the equipment being confiscated by the Department as per the provisions of the Customs Act. In the meantime, Kar Vivad Samadhan Scheme (KVSS) was launched by the Customs Department to settle the pending disputes. The amount payable under such schemes was substantially low if compared with the final amount payable in case of adverse final decision taken by the Appellate Authorities. This scheme became very popular and large number of people settled the dispute and paid the additional duty to buy peace of mind and to avoid expenses on further litigation. Considering these facts, it was agreed between the assessee company and M/s Eastern Peripherals Ltd. that they will file declaration under KVSS 1998, subject to the condition that concessional financial damage of duty payable will be borne by us. It was financially prudent act of acceptance of this condition as otherwise the equipment could have been confiscated and thereby stopping the flow of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y." 3. In this connection, it is seen that the SCADA system had been purchased by Assessee Company from M/s. Sonal Electronics and not from the Manufacturers M/s Eastern Peripherals Ltd. Hence Assessee Company had no privity of contract with M/s. Eastern Peripherals to bear the Additional duty If the manufacturer raised a demand against M/s Sonal Electronics and latter approached assessee then only any occasion to consider the requirement of bearing any profits of the additional cost, actually could arise. 4. Further the Assessee Company had sold the asset to M/s. Reliance Capital Ltd and was not utilizing the same in the capacity as a lessee. Hence assessee Company was either not the party who should have borne the additional cost, or after bearing the same could have passed on it to M/s. Reliance Capital Lid., the present owner of the system. In either case, the expense was not finally required to be borne by Assessee Company and hence not to be claimed/allowed in the Assessee Company's assessment of income." 11. In reply, the assessee, vide its letter dated November 16, 2006, has submitted that the additional customs duty paid by the assessee has been allowed as deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assigned a meaning according to the circumstances of each case. An expenditure may be incurred "for the purposes of business" even though it may not help the assessee to earn the income or increase his income". The assessee submitted that the impugned customs duty claim was allowed u/s 37(1) of the Act in the original assessment proceedings, on the basis of the above submissions. 12. The assessing officer did not accept the contentions of the assessee and accordingly completed the re-assessment proceedings by disallowing the impugned claim. The CIT(A) also confirmed the validity of re-opening by observing as under:- "5.6 I have considered the A.O's order as well as the appellant's submission. Having considered both, I find that the appellant during the course of assessment proceedings before the AO has not seriously challenged the re-opening of the assessment and has also not filed any valid during the course of assessment proceeding. In my considered view, the reasons recorded by the AO are valid as mere filing of details or mentioning something in the return of income does not alone constitute that it should be deemed to have been considered by the AO. The Appellant i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the Assessing Officer to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the Assessing Officer to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestations of mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to justify ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld A.R relied upon the judgement of the Delhi High Court in the matter of Eicher Ltd (2007)294 ITR 310 wherein, the Delhi High Court after referring to the judgement passed by the Division Bench of the Punjab & Haryana High Court has laid down the ratio in the following manner: "Applying the principles laid down by the Full Bench of this court as well as the observations of the Punjab and Haryana High Court, we find that if the entire material had been placed by the assessee before the Assessing Officer at the time when the original assessment was made and the Assessing Officer applied his mind to that material and accepted the view canvassed by the assessee, then merely because he did not express this in the assessment order, that by itself would not give him a ground to conclude that income has escaped assessment and, therefore, the assessment needed to be reopened. On the other hand, if the Assessing Officer did not apply his mind and committed a lapse, there is no reason why the assessee should be made to suffer the consequences of that lapse." He further submitted that identical views have been expressed by Hon'ble jurisdictional Bombay High Court in the case of Idea Cell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of allocation of expenses amongst the three manufacturing units for deduction under Section 80lAtlS of the Act while passing an order of assessment on 9th March, 2005. 14. However, Mr. Chhotrary, learned Counsel appearing for the Revenue submits that there has been no formation of opinion on allocation of expenditure amongst the three manufacturing units by the Assessing Officer as the Assessment Order dated 9th March, 2005 passed under Section 143(3) of the Act contains no discussion on the same. According to the Revenue, it could only be when the assessment order contains discussion with regard to particular claim can it be said that the Assessing Officer had formed an opinion with regard to the claim made by the assessee. This Court in Idea Cellular Ltd. v. Deputy Commissioner of Income Tax MANU/MH/0169/2008 : 301 ITR 407 has expressly negatived on identical contention on behalf of the Revenue. The Court held that once all the material was placed before the Assessing Officer and he chose not to refer to the deduction/claim which was being allowed in the assessment order, it could not be contended that the Assessing Officer had not applied his mind while passing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings and the Petitioner has responded to the query to the satisfaction of the Assessing Officer as is evident from the fact that the Assessment Order dated 9th March, 2005 accepts the Petitioner's claim for deduction under Section 80lA/IB of the Act. It must follow that there is due application of mind by the Assessing Officer to the issue raised. 15. Therefore, as there is a change of opinion in issuing the impugned notice having regard to the opinion formed while passing the assessment order under Section 143(3)of the Act, the Assessing Officer would cease to have any reason to believe as held by the Supreme Court in Kelvinator of India (supra). Moreover, the power to reassess under Section 147/148 of the Act is not a power to review an order of assessment passed under section 143(3) of the Act." 16. We have considered the rival submissions. In our view the re-assessment proceedings are liable to be quashed for the reason that the proceedings u/s 147 of the Act has been initiated merely on change of opinion. We have already seen that, while completing the original assessment, the AO has made enquiries with regard to the details of loss on sale of assets and further the d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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