TMI Blog2020 (8) TMI 357X X X X Extracts X X X X X X X X Extracts X X X X ..... tax has escaped assessment in the impugned assessment year by reason of failure on the part of assessee to disclose fully and truly all the material facts, necessary for the assessment. In the present case, reading of the reasons for reopening does not suggest that the reopening of assessment beyond four years is a result of failure on the part of assessee to disclose fully and truly all material facts necessary for the assessment. The present case does not fall within any of the conditions set out in proviso to section 147 of the Act for initiating reassessment proceedings. Ergo, the reassessment is liable to be quashed on this ground as well. Approval for issue of second notice under section 148 - Authorized Representative of the assessee has drawn our attention to the communication dated 18/03/2011 as addressed by the Assessing Officer to the CIT. The Assessing Officer has clearly brought the fact to the notice of CIT that the reassessment proceedings are time barred on 31/03/2009 itself and hence, reassessment order under section 143(3) r.w.s. 147 was not passed within time barring limit, the case cannot be opened again. CIT has granted permission to the AO for init ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the subsistence of first reassessment proceedings. The ld. AR contended that the assessee filed its return of income on 01/11/2004. The assessment u/s. 143(3) was completed on 28/11/2006. The first notice under section 148 of the Act was issued to the assessee on 02/07/2008. The assessee filed reply to the said notice on 23/07/2008 and filed return on 30/07/2008. No action was taken by the Assessing Officer on the reply and the return filed in response to the notice. Later on, after a gap of almost three years, second notice under section 148 was issued to the assessee on 29/03/2011. The ld. AR asserted that where the proceedings from first notice issued for reopening assessment are still pending, second notice issued u/s 147/148 of the Act for reopening is bad in law. To support his contentions the ld. AR placed reliance on the following decisions: (1) A.S.S.P. Co. vs. CIT 172 ITR 274 (Mad) (2) CIT vs. P. Krishnankutty Menon, 181 ITR 237 (Ker) 3.1. The second plank of argument against reopening of assessment by the ld. AR of the assesse is, that the second notice for reopening was issued beyond the period of four years. The assessee complied with the second notice. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment year 1999-2000 to assessment year 2005-06 (at page 374 of paper book). The ld. Authorized Representative of the assessee submitted that a perusal of the chart would show that in assessment year 2001-02 and 2003-04 there was short provision for royalty. Additional provision was made to cover short provision in the subsequent assessment years. The excess provision for royalty made in assessment year 2004-05 was reversed in assessment years 2005-06 and 2007-08. The ld. Authorized Representative of the assessee submitted that by the time second notice for reopening was issued to the assesse, assessment for assessment years 2005-06 and 2007-08 were already completed. Thus, excess provision made during 2004-05 was tax neutral. The ld. Authorized Representative of the assessee pointed that the royalty was paid in accordance with Agreement dated 14/3/2002 (relevant extract at pages 375 to 377 of the Paper Book). 4. Per contra, Shri Akhtar H. Ansari, representing the Department vehemently defended the impugned order and the action of Assessing Officer in reopening assessment. The ld. Departmental Representative submitted that the assessee had made excess provision for royalty as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 148 of the Act on 2/07/2008, no action whatsoever was taken by the Assessing Officer to complete the reassessment proceedings. The Department went into slumber for almost three years and, thereafter, reinitiated reassessment proceedings in March, 2011 by issuing second notice u/s 148 on 29/3/2011. Issuance of second notice under section 148 of the Act without completing pending assessment proceedings U/s. 147 of the Act is illegal. The Hon'ble Kerala High Court in the case of CIT vs. P. Krishnankutty Menon (supra) has held that the Income Tax Officer is not authorised to initiate successive reassessment proceedings when assessment proceedings are already pending. The relevant extract of the judgment on this issue is reproduced herein below:- 4. Having heard the rival contentions, we are of the view that the Tribunal was justified in holding that the reassessments are illegal and unsustainable. It is common ground that the ITO issued notices under section 147(b) to Ambika R. Menon, Devaki Thampuran and Echukutty Menon on 31-3-1975. The notice was served on 11-4- 1975. Under section 153(2)(b)(ii ) of the Act the assessments, based on this notice, should have been completed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 7. Thus, from the reading of above two decisions rendered by Hon ble High Courts, it is explicitly clear that where second notice under section 148 of the Act is issued during the subsistence of earlier reassessment proceedings, the subsequent reopening is invalid. In the present case, reassessment proceedings initiated in pursuance to notice issued under section 148 of the Act on 02/07/2008 were still alive. The Assessing Officer issued second notice under section 148 of the Act on 29/03/2011. The second notice was evidently not in consonance with the law set out by the Hon ble High Courts. Thus, the second notice issued u/s 148 of the Act on 29/3/2011 is bad in law and the subsequent proceedings arising therefrom are vitiated. 8. We further observe that second reassessment proceedings were initiated after the expiry of four years from the end of the relevant assessment year. The second notice u/s 148 of the Act was issued on 29/3/2011. Proviso to section 147 mandates that reassessment proceedings can be initiated after the expiry of four years only if one of the following conditions are satisfied: (1) The assessee has failed to file return of income u/s. 139 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required 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 manifestation of mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LTU, Mumbai (Through Proper Channel) Sub: Reopening-in the case of M/s. Johnson Johnson Ltd- A.Y. 2004-05-reg. ******* Please refer to the above. 2. This case had been received on transfer from DCIT-5(2), Mumbai dated 06/05/2010. As per transfer Memo, DCIT-52(2), Mumbai intimated that the case for A.Y.2004-05 was reopened U/s.148 dated 02/07/2008 and served upon assessee who asked for reason of reopening vide letter dated 23/07/2008. However, no further action is seen on records after that and even letter dated 16/04/2010 of DCIT-5(2), Mumbai to CIT-5, Mumbai brings out this fact. The reason for reopening was that ITO(TDS)-International Taxation -3, Mumbai had written dated 06/05/2008 to ACIT-5(2), Mumbai that assessee had made excess provision for royalty of ₹ 2,85,66,130/- in its books which was more than the actual royalty paid u/s.195 during A.Y. 2004-05. Now, case had been time barred on 31/03/2009 itself u/s 148, long before case was transferred to LTU-Mumbai. Even later on the office of DCIT-5(2), did not take any further action till case transfer to LTU on 06/05/2010. 3. In my opinion, since case had been reopened u/s 148 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is a settled position in law that grant of the sanction by the Commissioner of Income Tax under Section 151 of the Act, is not a mechanical act on his part but it requires due application of mind to the reasons recorded before granting the sanction. This has been so provided as to safeguard against issue of reopening notice (which seek to disturb the settled position) to ensure that assessee is not troubled with reopening issues without satisfactory reasons. Therefore, it must pass muster of the Superior Officer in the context of Sections 147 and 148 of the Act, before it is issued to the party. 13. In the present case, we observe that the CIT has granted permission to the Assessing Officer for initiating reassessment proceedings without properly examining reasons for reopening. The reassessment proceedings were initiated beyond period of four years and nowhere in the reasons it has been brought out that the assessee has failed to disclose fully and truly all material facts necessary for the assessment. The CIT has not recorded his satisfaction on the reasons recorded by the Assessing Officer for reopening. Further, the Assessing Officer had brought the fact to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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