TMI Blog2020 (1) TMI 1318X X X X Extracts X X X X X X X X Extracts X X X X ..... ion on the findings of the Audit Team which in our view cannot be a ground for reopening the assessment. Reassessment proceedings after expiry of four years - A notice under Section 148 was issued in the month of March 2019 pertaining to the assessment year 2012-13, therefore, it is clearly beyond the period of four years and against the proviso to Section 147 of the Act. Full and True Disclosure - In the instant case the Notice refers to a failure on the part of the Petitioner to disclose fully and truly all material facts, but, the same does not indicate the exact nature of non-disclosure on the part of the Petitioner. Such a notice is erroneous in law. The contents of the notice if tested with the contents of the counter would show that all the particulars were in-fact disclosed at the time of assessment proceedings and the same was also accepted, which is evident not only from the order of assessment, but, also from the reply given to the audit party. Therefore, it cannot be said that, there was any failure on the part of the Petitioner in disclosing fully and truly all material facts Reassessment based on mere change of opinion being invalid - If the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment year 2012-2013, four years after it was finalized and accepted under Section 147 of the Income Tax Act, on the ground that for the assessment year 2012-2013 certain items escaped the assessment within the meaning of Section 147 of the Act. 2) The facts, in issue, are as under: i) For the Assessment Year 2012-13, the Petitioner herein filed its income tax returns on 27.09.2012, which was processed under Section 143(1) of the Income Tax Act, 1961 [the Act ] accepting the income returns. Later on, details were called for by the 1st Respondent, by issuing a Notice under Section 142(1) of the Act. In response to the Notice dated 15.09.2014, the Petitioner herein submitted all the documents before the Respondent from time-to-time, more particularly, the details of shares bought back by the Petitioner and the shares acquired by SPI Power Private Limited [ SPIPPL ] from Covanta Energy India (Balaji) Limited [ CEIBL ]. It is to be noted that, the basis on which the assessment was reopened already formed part of the assessment records and was fully disclosed in Note 1(a) to Note 1 (c) of the financial statements for the year ending on 31.03.2012, filed as part of sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found that there was an audit objection by the Office of the Director General of Audit on 15.09.2016, wherein, the issue of taxability under Section 56(2)(viia) was raised. A reply came to be given by the Respondent to the audit party on 11.10.2016, stating that, there was no escapement of income under Section 56(2)(viia) and therefore no further action against the Petitioner is required. However, the objections raised by the Petitioner for reopening of the assessment, four [04] years later was rejected by the Impugned Order, dated 17.09.2019, on the ground that there is failure on the part of the Petitioner to disclose fully and truly all the material facts during the course of their assessment without again referring to the actual nature of the failure on the part of the Petitioner. Challenging the same, the present Writ Petition came to be filed on various grounds. 3) (i) Learned Senior Counsel Sri R.V. Eswar, representing Sri.D. Satya Siva Darshan, Advocate, would contend that, since all the material facts were furnished along with the original assessment itself, reviewing of the same without any new material and coming to different conclusion is erroneous. According to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cipal Commissioner of Income Tax vide proforma, dated 06.03.2019 and after recording reasons for the same. (ii) It is urged that, a Notice under Section 148 of the Act was issued to the assessee, which was received through e-mail on the same day. The reasons recorded for reopening the assessment were duly supported by the satisfaction of the authorities as per the provisions of Section 151 of the Act and the objections raised were duly considered and rejected by way of a speaking Order, dated 17.09.2019. (iii) Though the details of shares bought back by the Petitioner and the shares acquired by SPIPPL from CEIBL were disclosed in Note 1(a) to Note 1 (c) and Note 27 of the financial statements for the year ending 31.03.2012 forming part of the assessment records, the mere foot note in the cash flow statement would not amount to disclosing fully and truly all material facts necessary for assessment. (iv) It is further submitted that the evidence in support of transfer of shares on buy back should have been substantiated in detail so as to come to a conclusion whether there was escapment of income or not. It is pleaded that, even if no additions are made in relation to Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Comptroller and Auditor General of India. In the interests of revenue, the Assessing Officer is left with no other option except to initiate a suitable remedial action on the findings of the audit team. In support of the same, the learned Counsel relied upon the judgment in CIT v. PVS Beedies P Limited (SC) 237 ITR 13 ; CIT v. First Leasing Company of India Limited (Mad) 241 ITR 248 . 6) The short question that arises for determination is, whether the 1st Respondent was right in reopening the assessment based on audit objections, four [04] years after acceptance of assessment for the financial year 2012-13? 7) It may not be necessary to refer to all the facts in issue once again. 8) Before proceeding further, it would be appropriate to extract the reason recorded for reopening of the assessment, which is as under: On verification of assessment record for the A.Y. 2012-13, it is noticed that there is an income of ₹ 80,41,23,351/- u/s 56(2)(viia) which has not been routed through P L Account and the above income u/s 56(2)(viia) has not been considered either in the returned income or in the assessed income for the purpose of computing book profit or for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into by duly intimating the same to the audit party . 11) Section 147 of the Income Tax Act, 1967 states that if the assessing officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may subject to provisions contained in Section 148 to 153 assess or re-assess such income or any other income chargeable to tax which has escaped assessment and which has come to his notice subsequently in the course of the proceedings under this section, or recomputed the loss or the depreciation allowance or any other allowance, as the case may be. Proviso to sub-section postulate that where an assessment under sub-section (3) of Section 143 of this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on which the assessment was reopened being that income of ₹ 80,41,23,351/- u/s 56(2)(viia) was not routed through P L Account and the said income was not considered either in the returned income or in the assessed income for the purpose of computing book-profits or for arriving at income under normal provisions of the Act. As stated earlier, objection was raised by the audit party for which a reply was given by the assessing authority to the audit authorities to drop the proceedings with regard to Half Margin Audit. Therefore, the contingency for reopening/ reassessing in case of an audit objection came to be rejected by the Assessing Officer himself by giving an appropriate reply in the month of October itself. In-fact, in paragraph 16 of the counter it is stated that, in the interests of revenue, the Assessing Officer is left with no option except to initiate a suitable remedial action on the findings of the Audit Team which in our view cannot be a ground for reopening the assessment. 16) Issue No. 2 Reassessment proceedings after expiry of four years. i) In Commissioner of Income Tax v. Foramer France [2003] 129 Taxman 72 (SC) the Hon ble Apex Court was dealin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat extent. The same was found to be beyond the period of limitation, as it is in violation of proviso to Section 147. The relevant portion in the Judgment is as under:- [9] We have considered these submissions and we are inclined to agree with the submissions made by the learned counsel for the petitioner. The proviso to Section 147 reads as under:- Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub- section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. A plain reading of the said proviso makes it more than clear that where the provisions of Section 147 are being invoked after the period of four years from the end of the relevant assessment year, in addition t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 143(3) read with Section 153A. After completion of the assessment, the Assessing Officer reopened the assessment under Section 147 by issuing notice under Section 148. On appeal, the Commissioner (Appeals) allowed the appeal of assessee. On further appeal, the Tribunal rejected the revenue s appeal. The same was challenged before the High Court. It was held that, processing of return was done twice. No reassessment could be initiated taking refugee under Section 147 and accordingly upheld the finding of the Tribunal stating that the case would not fall within the purview of the proviso to Section 147. iv) Similar such view was expressed by a Division Bench of the Delhi High Court in Bharti Infratel Limited v. Deputy Commissioner of Income-tax [2019] 101 taxmann.com 285 (Delhi) as under: 32. In view of the aforesaid discussion, the writ petition has to be allowed as the jurisdictional pre-conditions in the form of proviso to Section 147 is not satisfied in the facts of the present case. Explanation 1 would not apply as all primary facts were disclosed, stated and were known and in knowledge of the Assessing Officer. Further, this would be a case of ‗change of op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequently found to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening the assessment. In fact in the said judgment, the Department has submitted that the petitioner had shown differential cost proportionately in the declarations relating to assessment years filed under KVS scheme and that itself would furnish legitimate basis for re-assessment. But, the Court rejected the contention holding that it cannot go beyond the reasons recorded, nor can it take into account any supplementary reasons which did not enter the mind of the assessing authority at the time of issuing the re-assessment notice. Therefore, mere change in opinion cannot lead to reassessment. 19) Issue No. 5 Reassessment based on audit objections invalid. i) In Indian Eastern Newspaper Society v. Commissioner of Income-tax [1979] 2 Taxman 197 (SC) the three Judge Bench of the Hon ble Supreme Court dealt with a case, where the assessee was established with the principal object of promoting the welfare and interest of all newspapers. The assessee owns a building in which a conference hall and rooms were let out on rent to its members as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that since re-assessment came to be opened on the basis of the audit objection, the same, according to him, is patently illegal. As seen from the record, the audit party has raised an objection with regard to the claim made by the petitioner in his assessment for the year 2012- 13. The objections raised by the audit party came to be explained by the assessing authority in his letter dated 11.10.2016 and affirmed the view taken earlier by the assessing officer, meaning thereby, no tax can be levied on the income which is reflected under Section 56(2)(viia). The fact that re-assessment came to be re-opened is also evident from the contents of the counter filed by the Department. Subsequent thereto notice came to be issued and the impugned order came to be passed. iv) The issue is whether the authorities were justified in ordering re-assessment basing on audit objections. v) The Judgment in Calcutta Discount Co. Limited v. Income-tax Officer [1961] 41 ITR 191 (SC) was relied upon not only by the Petitioner but also by the Respondents. In the said case, the Constitution Bench dealt with a case where, the Appellant Company was assessed to income tax and orders were respective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents in our view are helpful to the Petitioner as well. 20) In Commissioner of Income-tax v. Lucas T.V.S., Limited [2001] 117 Taxman 366 (SC) a three Judge Bench of the Hon ble Apex Court held as under: The assessee claimed deduction under Section 35 during the assessment year 1972-73 for the building for which construction was started during assessment year 1970-71 and completed during assessment year 1972-73. In original assessment the Assessing Officer allowed the entire expenditure. However, on basis of report by audit party who had pointed out that under Section 35(1)(iv), read with Section 35(2), only the expenditure incurred for the construction of the building in that assessment year alone can be allowed as deduction and the expenditure incurred in the previous year cannot be allowed in the present assessment year, the Assessing Officer initiated reassessment proceedings. The Tribunal cancelled the order of reassessment. On reference, the High Court held that apart from the information furnished by the audit party, the Assessing Officer had no other information for reopening the assessment under Section 147(b). The opinion expressed by the audit party would go to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest along with the return filed by it and the Income-tax Officer had accepted the return and excluded that amount in the assessment order which was completed on October 4, 1969. The Notice under Section 147(a) of the Act depicts that the assessment was reopened and a sum of ₹ 54,485/- was subjected to tax on the ground that the interest accrued and due on the loans advanced by the bank was the income of the bank for the relevant assessment year and the assessee has failed to disclose this income in the return filed earlier. Two questions were raised and answered before the High Court as under:- 1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in holding that the provisions of Section 147(a) are not attracted ? 2. Whether, on the facts and in the circumstance of the case, the Income-tax Appellate Tribunal is right in law in holding that the interest of ₹ 54,485 taken directly to interest suspense account is not assessable to income-tax? 6. So far as the second question is concerned, the High Court recorded that the matter need not be gone into by reason of the circular dated October 6, 1952, ..... 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