TMI Blog2020 (5) TMI 482X X X X Extracts X X X X X X X X Extracts X X X X ..... which as per settled jurisprudence, cannot be sustained and notice so issued u/s 148 seeking to reopen the assessment is liable to be set-aside. Another contention which has been raised by AR is that in the reasons so recorded, the Assessing officer has not alleged that there is failure on the part of the assessee to disclose fully and trully all material facts and where the powers u/s 147 have to be exercised by the AO after a period of four years, there has to be a failure to disclose fully and truly all material facts and information by the assessee which is not alleged by the AO in the instant case. These are all primary facts as to the treatment done by the assessee in its books of accounts of the compensation so paid by it which are duly disclosed and where on appreciation of such primary facts, the AO is of the view that such expenditure is in nature of capital expenditure and not revenue expenditure, it is his inference and analogy which has drawn basis review of such primary facts. As far as onus on the assessee to disclose the primary facts are concerned, the same has been satisfied and there is no such failure and infact, in the reasons so recorded, there is no all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that the assessee is engaged in the business of real estate and filed its return of income on 28.09.2011 declaring loss of ₹ 27,04,932/- and the assessment was completed U/s 143(3) on 14.03.2014 at NIL income. Subsequently, notice u/s 148 was issued on 28.3.2018 after recording the reasons and seeking appropriate approvals. In response, the assessee filed its return of income declaring NIL income, subsequently, notice u/s 148 was supplied to the assessee and objections so received from the assessee were disposed off vide order dated 13.12.2018. Thereafter, notice u/s 143(2) and 142(1) were issued and after considering the submissions of the assessee, the reassessment was completed at an assessed income of ₹ 52,77,832/- disallowing compensation paid to plot owners amounting to ₹ 52,72,012/- and another disallowance of ₹ 50,820/- was made under section 40(a)(ia) of the Act. Being aggrieved, the assessee carried the matter in appeal before CIT(A) who has upheld the re-opening of assessment u/s 148 as well as sustained the disallowances made by the Assessing officer. Against the said findings, the assessee is in appeal before us. 3. In Ground no. 1 2, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eplied by the assessee along with name of the person to whom payment has been made, amount of payment, date of payment etc. These details have also been reproduced by the AO in the reasons recorded and therefore, this being also a case of change of opinion. 6. It was further submitted that the AO while making the reassessment u/s 147 had infact, taken note in para 5.4 of his order, the submission made on the issue under consideration during the original assessment proceedings u/s 143(3) and the same reads as under: In addition to the above, in one of its replies made during the assessment proceedings u/s 143(3), the assessee has stated that the compensation has been given to save the goodwill of the company, thus clearly the position taken in regard to such expenditure by the assessee himself is in nature of capital expenditure. The said expense is, alternatively, to be treated as an expense to enhance the goodwill of the company. Such expense has the nature of a capital expense. of the order under consideration. The compensation paid to the buyer were claimed in the Profit Loss Account. 7. It was further submitted that as the reopening of the assessment has been do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT vs Vaishali Avenue (2014) 48 Taxmann.com 289 (Raj), CIT vs Hindustan Zinc Limited (2016) 70 Taxmann.com 262 (Raj) and CIT vs Kelvinator of India Ltd (2010) 187 Taxman 312. 10. Per contra, the ld DR submitted that the AO reopened the assessment proceedings after recording the due reasons and due satisfaction after following due process. The case of the assessee was reopened in the light of information/documents to the extent which were available with the AO. The material before the Assessing Officer was relevant and affords a live link or nexus to the formation of the prima facie belief that income chargeable to tax has escaped assessment in the hands of the assessee. The sufficiency and correctness of material need not be looked at the initial stage at the time of reopening of the case. While considering whether commencement of reassessment proceedings was valid, the Courts have held that what has to seen is whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not to be considered at that stage. The reasons to believe would mean cause or justification. If the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot holders for the enhanced value. This increase in value of land would go on to increase the cost of the closing stock. In view of this matter, instead of debiting the expenditure as revenue, the expenditure ought to have been capitalized which would have gone to increase the closing stock. by the relevant amount. In one of its reply, the assessee has stated that the compensation has been given to save the goodwill of the company, thus clearly the position taken in regard to such expenditure by the assessee himself is in nature of capital expenditure. Further in the case of Asst. Commissioner Vs Seven Arts Films (2014) 33 ITR Trib. 694 (Chennai), it has been held that the compensation paid to save the goodwill of he company was capital in nature. Also it is pretinent to mention here that the compensation paid to such plot owners is to be made part of the cost of plots itself and not to treat the same as revenue expenditure. Thus in view of above there shall be made addition of ₹ 52,27,012/- in the income of the assessee for the year under consideration. 12. On perusal of the reasons so recorded by the Assessing officer, it is noted that the material and information on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and compensation paid against booking cancellation were duly examined by the Assessing officer during the original assessment proceedings. Therefore, the facts that there was compensation paid on account of HT Line and compensation was paid against booking cancellation and debited in the profit/loss account were available on record at the time of original assessment proceedings and the Assessing officer was duly ceased of such factual position and claim of the assessee company and basis examination thereof, the claim of the assessee company was allowed by the Assessing officer while completing the original assessment proceedings under section 143(3) of the Act. It is therefore clearly a case of change of opinion where on the same facts and material on record, the Assessing officer wishes to take a different view than the view already taken by his predecessor and such change of opinion cannot be a basis for reopening as the AO has the power to reassess but no power to review his or his predecessor order, as held by the Hon ble Supreme Court in case of Kelvinator of India ltd (supra) where affirming the full Bench decision of the Hon ble Delhi High Court, it was held as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to reintroduce the expression 'reason to believe' in section 147. -A number of representations were received against the omission of the words 'reason to believe' from section 147 and their substitution by the 'opinion' of the Assessing Officer. It was pointed out that the meaning of the expression, 'reason to believe' had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989 , has again amended section 147 to reintroduce the expression 'has reason to believe' in place of the words 'for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new section 147, however, remain the same. 13. Similarly, in case of Hindustan Zinc (supra), the Hon ble Rajasthan High Court has held as under: 12. In the instant case, it is to be noticed that the assessee had made true and full disclosure of all relevant facts relating to the claim of additional depreciation and also in respect of claim for grant of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, the Assessing officer has not alleged that there is failure on the part of the assessee to disclose fully and trully all material facts and where the powers under Section 147 of the Act have to be exercised by the Assessing officer after a period of four years, there has to be a failure to disclose fully and truly all material facts and information by the assessee which is not alleged by the Assessing officer in the instant case. In this regard, we note that the original assessment was completed u/s 143(3) vide order dated 29.02.2016 for the impugned assessment year 2011-12 wherein the returned income declaring total income at NIL was accepted and subsequently, the notice u/s 148 was issued on 28.03.2018 which is clearly after the expiry of four years from the end of the relevant assessment year and as per proviso to section 147 of the Act, for assumption of jurisdiction in such cases, additional requirement which has to be satisfied is that there has to be a failure on part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. In this regard, the observations of the Hon ble Delhi High Court in case of CIT v. Multi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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