TMI Blog2020 (12) TMI 565X X X X Extracts X X X X X X X X Extracts X X X X ..... pon the documentation accompanying the return and no material extraneous to that already on record or anew, has been discovered by the respondent indicating income that had escaped taxation. This is the position both as regards the lease income as well as the claim of administrative expenses. In such circumstances, the escapement of income, if any, cannot be attributed to the assessee. A full and true disclosure has been made in so far as all material germane to the computation of income forms part of the return of income. AY 2015-16 - The mere fact that the respondent had not originally taken the return up for scrutiny by issuing notice under Section 143(2) would not debar the Department from initiating proceedings for re-assessment. The impugned proceedings for re-assessment are, according to the reasons for re-assessment as well as the counter filed by the respondent, based upon certain discrepancies noted in the figure of bad and doubtful debts in the statement of computation of income and the financials. Thus, find no legal infirmity in the initiation of proceedings for re-assessment in this case. Re-assessment, be it within or beyond four years, has to be based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Y) 2000-2001 accompanied by all necessary financials. An intimation under section 143(1) had been issued on 27.12.2001 and no proceedings for assessment had been taken up thereafter. 4. In the return of income filed, the petitioner had not offered any lease/rental income from Wind Turbine Generator (WTG) and hence the respondent officer was of the view that income chargeable to tax had escaped assessment. Thus, a notice under Section 148 dated 22.11.2006 was issued proposing to re-assess the petitioner for AY 2000-01, beyond a period of 4 (four) years as stipulated under Section 147(1) but within six (6) years as stipulated in the proviso to Section 147(1) of the Act. 5. The petitioner had purchased two WTGs, one in AY 1996-97 and the other in 1997-98 under a hire purchase agreement from a group of companies referred to as REPL Group and had leased the WTGs back to the same group. According to the petitioner it had come to know thereafter that the assets, the WTGs, were non-existent and, since the transaction of the sale and lease back was fraudulent and not tenable, the company had voluntarily withdrawn the claim as per its income tax returns for AYs 1996-97 and 1997-98 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dure set out in GKN Drive Shafts V ITO (259 ITR 1), the petitioner filed objections to the assumption of jurisdiction in February, 2007 relying on the decision of the Madras High Court in Bapalal Co. Exports (289 ITR 37) and Apollo Hospitals and Enterprises Ltd. (287 ITR 25). As regards the second reason for re-assessment which was a claim of administrative expenditure, the petitioner pointed out that no material has been pointed out as to why the claim was incorrect and thus the reason itself only indicated a roving enquiry, impermissible under Section 147/148 of the Act. 9. The objections were rejected on 07.03.2007, challenging which the petitioner is before this Court. Mr.Sivaraman, arguing that the assumption of jurisdiction was bad in law, also places reliance upon the decision of this Court in the case of Tanmac India V. Deputy Commissioner of Income-tax, Circle I, Pondicherry (78 Taxmann.com 155). 10. Both in the reasons as well as in the impugned order of rejection of objections, the Officer makes it clear that no subsequent or new material has been found upon which he relies and the basis of the re-assessment is only the notes of account forming par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts year as well, that is, for AY 2008-09 to 2013-14, and the assessment for those years are stated to be pending in appeal before the Appellate Authority. The question that arose was whether the deduction should be restricted to the computation as prescribed in Section 36(1)(a) or the provision for bad and doubtful debts made in the books of accounts. This would involve an interpretation of Rule 6BAA, which utilizes the phrase amount of advances made by each rural branch as outstanding at the end of the last date of each month , as to whether, the amount would be represented by the entirety of the advances made by the branch or the outstanding amount of advances made during the month. 14. There is no necessity to advert in further detail to the merits of the matter as the issue is pending resolution before the Appellate Authority for the previous years. Suffice it to note the following events in relation to the impugned proceedings. Intimation under Section 143(1) dated 15.12.2016 was issued after the return was electronically processed by the Central Processing Centre (CPC), Bangalore. No notice under Section 143(2) was issued. This was followed by a notice under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Return of Income. Therefore, the excess deduction of ₹ 13,57,11,846 claimed by the assessee need to be disallowed. Regarding, the computation of aggregate average advances made by the rural branches of such bank, assessee had taken entire cumulative outstanding balance of aggregate average rural advance at the end of the year instead of the fresh aggregate average rural advance made during the year under Rule 6ABA. The aggregate average rural advance made during the year need to be worked out. The approval for assessment u/s 147 has been obtained from the Joint Commissioner of Income Tax, Villupuram Range. Any objection in this regard may kindly be intimated on or before 14/03/2018. 15. The proceedings for re-assessment were objected to by the petitioner relying on the decision of this Court in the case of Tanmac India (supra). By communication dated 26.03.2018, the Officer replies in the following terms: Your response to the reason for re-opening for the A.Y.2015-16 is duly considered and the same cannot be accepted due to the following reasons: i) Assessee had claimed that the reasons recorded for re-opening was already part of the ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn 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: . . . . 18. As regards Indian Syntans, the notice for re-opening in relation to AY 2000-01 was issued beyond a period of four years. The proviso to Section 147 would thus swing into operation. The proviso grants the benefit of an extended limitation of six years as against four years provided in the main Section in three situations (i) where a return of income has not been filed under Section 139 (ii) where a return of income has not been filed in response to notice under Section 142(1) (iii) if the escapement is attributable to the failure of the assessee in not having made a full and true disclosure of income in the return of income. 19. The return of income filed by Indian Syntans was accompanied by financials that contained a note explaining the lease transaction and a perusal of the reasons for re-assessment make it clear that the reasons are based entirely upon the documentation accompanying the return and no material extraneous to that already on recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as, in a case where proceedings are initiated beyond four years from the end of the relevant financial year where the proviso to Section 147 stood attracted and whether the reasons indicate the existence of any material beyond what was available on record to test the validity of the proceedings. 25. In Kelvinator India Ltd. Vs. Income Tax Officer (320 ITR 561) the Hon ble Supreme Court considered the case of a re-assessment that has been initiated within four years. The reasons for re-opening merely reiterated material that was already on record as a result that the Bench came to the conclusion that the proceedings were not one of re-assessment but one of review, impermissible under the Act. The conclusion of the Supreme Court to this effect is extracted below: . . . . On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, re-opening could be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act [with effect from 1st April, 1989], they are given a go-by and onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs 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. For the afore-stated reasons, we see no merit in these civil appeals filed by the Department, hence, dismissed with no order as to costs. 26. The above settled position has been reiterated ad nauseum by Courts, indisputably settling the proposition that a re-assessment, be it within or beyond four years, has to be based on tangible material dehors that which is available on record, that has come to the notice of the Assessing Officer. Thus, once an intimation has been issued, be it manually by the Assessing Officer or electronically by CPC, the mechanism for selection of returns for assessment must be robust, ensuring that issues requiring scrutiny are picked up promptly and addressed in time. If the Department ..... X X X X Extracts X X X X X X X X Extracts X X X X
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