9911796707
TMI Blog2020 (6) TMI 469X X X X Extracts X X X X X X X X Extracts X X X X ..... URT] the reopening of assessment is bad in law. We note that there is change in opinion as the assessee has disclosed all the material facts in its return of income, wherein, balance sheet along with annexures, bills vouchers, invoices were filed and the Assessing Officer had considered the same while completing the original assessment u/s 143(3) of the Act dated 28.12.2011. Merely having a reason to believe that income had escaped assessment, is not sufficient to reopen assessments beyond the four year period, as explained above. The escapement of income from assessment must also be occasioned by the failure on the part of the assessee to disclose material facts, fully and truly. - Decided in favour of assessee. Set off of derivative loss against the addition made on account of unexplained cash credit - HELD THAT:- The entire amount has been credited in the books of the assessee. Therefore, it can be implied that these receipts are in the nature of business receipts. This view is supported by the decision of Hon ble Supreme Court in the case of Lakhmichand Baijnath vs. CIT [ 1958 (11) TMI 3 - SUPREME COURT] where sums found credited in the books of the assessee were treat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... multiple ground of appeals, but at the time of hearing the solitary grievance of the assessee has been confined to the issue of re-opening of the assessment u/s 147 / 148 of the Act. The assessee has challenged the reopening stating that four years have elapsed and assessee has disclosed fully and truly all material facts at the time of original assessment hence reopening is only on account of change of opinion therefore it should be quashed. 4. The appeal arises this way. The assessee filed its Return of income for A.Y. 2009-10 originally on 25.09.2009 showing loss of (-) ₹ 17,64,85,826/-. The said Return of Income was processed u/s 143(1) of the Act on 07.10.2010. Later on, the assessee`s case was selected for scrutiny under section 143(2) of the Act. The scrutiny assessment was completed and an order u/s 143(3) of the Act dated 28.12.2011 was passed on assessed total income at ₹ 2,53,11,440/- after disallowing derivative loss of ₹ 20,17,97,265/-. Afterward, the assessee`s case was reopened u/s 147 of the Act on the basis of a report / information made available by Income Tax Investigation Wing, Kolkata. The said report stated that a search seizure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tant guidelines of the Apex Court in the case of GKN Driveshafts (India) Ltd. Vs Income Tax Officer. The assessee was issued a show cause notice dated 24.10.2016 alongwith the notice u/s. 142(1) of the Act which were served in person on 26.10.2016. The information/details as required in the said show cause letter are as under: ....However, on perusal of records and relevant information revealed that the amount of ₹ 14,85,00,000/- has been brought in by you in your books of account through accommodation entry. As per your submission, the said amount constitutes sale proceeds of shares of M/s. Prudential Sugar Corporation Ltd. for ₹ 12,35,00,000/- and ₹ 2,50,00,000/- out of sale of shares of M/s. Bag Infotainment Pvt. Ltd. during the year. It is further made in your submission that the shares of M/s. Prudential Sugar Corporation was sold to M/s. Mandapam commercial Ltd. In this connection it is worth to mention that during the course of enquiry in respect of various accommodation provider companies, the department examined all the related bank account of web of companies engaged in providing accommodation entries, transaction contained therein, cash trail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in trading in shares in the companies of Prudential Sugar and Bag Infotainment for which it had to spend ₹ 1.80 crore( 1.30 + 0.50) only. Therefore, AO held that the assessee company had adopted merely a colourable device, therefore AO made addition of ₹ 14,85,00,000/- u/s 68 as unexplained cash credit. 7. Aggrieved by the order of the Assessing Officer the assessee carried the matter in appeal before the ld. CIT(A) who has treated the reopening of assessment u/s 147 /148 of the Act as valid observing the following: I have perused the submission of the assessee and facts of the case. In this case there was definite information that the assessee has received ₹ 14.85 crores from M/s Mandapam Commercial Ltd. Mr. Manoj Sharma Shri Mantosh Kumar Yadav, the Directors of Mandapam Commercial Limited have on oath admitted that they are receiving cash from various beneficiaries and after routing the cash through the web of paper companies they are transferring the money to the beneficiaries in form of share capital/ share premium/ unsecured loan. The fact that assessee has received ₹ 14.85 crore from these dubious parties on sell of shares oflittle known com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssary. xi) 271 ITR 56 (Hyderabad) (AT)-Amended provision of 147 provides ample power to the Assessing Officer to start reassessment proceedings when he is of the opinion that income chargeable to tax has escaped assessment. In view of the above discussion ground no. 1 of original ground and ground no. 1 of additional ground is hereby dismissed. 8. Aggrieved by the order of ld. CIT(A) the assessee is in appeal before us. 9. The ld. Counsel for the assessee, Shri Subash Agarwal, begins by pointing out that if an assessment for any year has been completed u/s 143(3), then no action shall be taken u/s 147 after the expiry of 4 years from the end of relevant assessment year unless income chargeable tax has escaped assessment by reason of the failure on the part of the assessee on account of the following reasons - (a) to file a return u/s 139 or in response to notice u/s 142(1) or u/s 148; or (b) to disclose fully and truly all material facts necessary for that assessment year. In the assessee`s case the original assessment was completed under section 143(3) of the Act on 28.12.2011 and at the time of original assessment, assessee had disclosed fully and truly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We note that there is change in opinion as the assessee has disclosed all the material facts in its return of income, wherein, balance sheet along with annexures, bills vouchers, invoices were filed and the Assessing Officer had considered the same while completing the original assessment u/s 143(3) of the Act dated 28.12.2011. 12. We note that on identical facts, the Coordinate Bench in the case of M/s Beekay Steel Industries Ltd. vs. DCIT in ITA NO. 105/Kol/2015, for A.Y. 2005-06, order dated 31.05.2017 has held that since the re-opening was beyond a period of four years and the original assessment was completed u/s 143(3) of the Act, and there was no any failure by the assessee to disclose fully and truly all material facts necessary for the assessments hence the reopening of assessment is bad in law. The findings of the Coordinate Bench are given below: 4. After hearing the rival contentions, considering the materials on record and perusal of the orders of the authorities below we hold as follows: 4.1. The reasons recorded by the Assessing Officer for re-opening of the assessment are extracted hereinbelow for ready reference:- Reasons for issue of notice u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not done. e. The assessee company has paid a sum of ₹ 19,17,876/- towards 'Rent and maintenance charges' in the previous year to M/s Manvik Estates; Annexure VIII of the tax audit report shows details of TDS on various items. It appears that no tax has been deducted at source on such payout. As such it should have been disallowed u/s 40(a)(ia) of the IT Act 1961, which was not done. f. The assessee has not paid sum of ₹ 24,52,623/- on a/c of Central Excise (1994-96) and ₹ 2,54,96,800/- on a/c of Entry tax (AY 2002-03 to 2004-05). It has not been disallowed u/s 43B in the assessment. g. Prior period expenses of ₹ 94,683/-, debited to the profit/loss a/c has not been disallowed. h. Hon'ble Apex Court in the ease of M/s Saraswati Industrial Syndicate Ltd.186 ITR 278 has held that The High Court was in error in holding that even after amalgamation of the two companies; the transferor company did not become non -existent. Instead it continued its entity in blended form with the appellant company. The High Court's' view that on amalgamation there is no complete destruction of corporate personality of one with anothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interpretation of accounts by the Assessing Officer. The recorded reasons do not speak of any omission or failure on the part of the assessee. Thus, admittedly there was no failure on the part of the assessee to disclose fully and truly all material facts in the assessments. In my view, incorrect interpretation of accounts by the Assessing Officer cannot confer jurisdiction on the Assessing Officer to issue notices under Section 148 for reopening the assessments as sought to be made in the instant case. 9. Moreover, I accept the submission of Mr. Datta that incorrect interpretation of accounts by the Assessing Officer cannot be a ground for issuing a notice under Section 148 since the Supreme Court in Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR. 1, while dealing with the action of the Assessing Officer to rectify a mistake and seeking to recompute and reassess the depreciation which was allowed in excess of the permissible limit, held as follows (page 9) : When an Income-tax Officer relies upon his own records for determining the amount of depreciation and makes a mistake in doing so, we fail to understand as to how responsibility for that mistake can be as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the Petitioner at the time of disposing of the objections. Once this was not the basis for issuance of notice for Reassessment, it cannot be held against the Petitioner that the Petitioner had failed to make a true and full disclosure. It will have to be held that the Petitioner did not fail to make full and true disclosure of all material facts. The jurisdictional requirement for carrying out the reassessment, after the expiry of period of four years, is not fulfilled in the present case. 4.5. The Hon ble Bombay High Court in the case of Sound Casting (P) Ltd. v. Dy. CIT reported in 250 CTR 119 (Bom.) (HC), has held that there is no allegation in the reasons which have been disclosed to the assessee that there was any failure on his part to fully and truly disclose material facts necessary for assessment and therefore reopening beyond four years was not vaild. (A.Y. 2005-06). 4.6. The Hon ble Delhi High Court in the case of CIT vs. Orient Craft Ltd. reported in [2013] 354 ITR 356 (Del.)(HC) has held as follows: The reasons recorded by the Assessing Officer in the present case do confirm our apprehension about the harm that a less strict interpretation of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. If it is also found that the petitioner had disclosed fully and truly all material facts necessary for its assessment, then no action under section 147 could have been taken after the four year period indicated above. So, the key question is whether or not the petitioner had made a full and true disclosure of all material facts ? 29 In the reasons supplied to the petitioner, there is no whisper, what to speak of any allegation, that the petitioner had failed to disclose fully and truly all material facts necessary for assessment and that because of this failure there has been an escapement of income chargeable to tax. Merely having a reason to believe that income had escaped assessment, is not sufficient to reopen assessments beyond the four year period indicated above. The escapement of income from assessment must also be occasioned by the failure on the part of the assessee to disclose material facts, fully and truly. This is a necessary condition for overcoming the bar set up by the proviso to section 147. If this condition is not satisfied, the bar would operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as no tangible material has come to the possession of the Assessing Officer, we quash the assessment and allow the appeal of the assessee. 13. After perusing the above referred order of Coordinate Bench, we note that in the assessee`s case in the reasons supplied to the assesseee, as noted in above para, there is no whisper, what to speak of any allegation, that the assessee had failed to disclose fully and truly all material facts necessary for assessment and that because of this failure there has been an escapement of income chargeable to tax. Merely having a reason to believe that income had escaped assessment, is not sufficient to reopen assessments beyond the four year period, as explained above. The escapement of income from assessment must also be occasioned by the failure on the part of the assessee to disclose material facts, fully and truly. This is a necessary condition for overcoming the bar set up by the proviso to section 147 of the Act. If this condition is not satisfied, the bar would operate and no action under section 147 could be taken. We have already mentioned above that the reasons supplied to the assessee does not contain any such allegation. Consequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aged in the business of trading in shares, investments and financing of loan. ii) The assessee did share trading in future and option segment of N.S.E. and incurred derivative loss of ₹ 20.17 crores. The said loss was claimed as a business loss in the return of income and it was disallowed by the A.O. in the original order dated 28.12.2011. The assessee preferred an appeal against the order. The Ld. C.I.T(A) deleted the addition and the deletion of addition was confirmed by the Tribunal. iii) It is a fact that the assessee had claimed derivative loss as a business loss in the original return and there is no adverse finding on this issue in the original assessment order by the A.O. There is no finding on this issue in the order of the C.I.T(A) and in the order of Tribunal as well. Therefore, in the 1st ground there is no challenge to the treatment of the derivative loss as business loss by the department. U/s.43(5) sub-clause(d) derivative transactions are not treated as speculative transactions. Therefore, the claim of the assessee of derivative loss on shares is in the nature of business loss. These facts remain undisputed. iv) The A.O. in the remand report ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
