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TMI Blog2020 (12) TMI 1079X X X X Extracts X X X X X X X X Extracts X X X X ..... second respondent - Assessing Officer. The assessment years, which are subject matter of consideration, are 1995-96, 1996-97 and 1997- 98. Since the facts are identical for all the three assessment years, it would suffice to refer to the facts relating to the assessment year 1995-96. 4. The assessee filed the return of income for the assessment year 1995-96, in which, transactions relating to purchase of assets, lease back of the assets to the seller, availing hire purchase finance, acquiring the said assets from various financial companies were disclosed by the assessee in the audited financial statements for the year ended March 31.3.1995. A search was conducted in the premises of the assessee on 08.7.1996 and a block assessment was framed for the period from 01.4.1986 to 08.7.1996. The block assessment was concluded by order dated 31.7.1997 wherein the depreciation claimed by the assessee was held to be an undisclosed income. The assessee challenged the said order dated 31.7.1997 before the Income Tax Appellate Tribunal, Chennai 'B' Bench (for brevity, the Tribunal), which, by order dated 18.2.2002, allowed the appeal and held that the claim of depreciation would not f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a party, by a common judgment dated 03.12.2013, allowed the said appeals filed by the assesee and held that the CIT fell in error in invoking the power under Section 263 of the Act. The said common judgment dated 03.12.2013 attained finality. 8. It is thereafter the notices under Section 148 of the Act were issued to the assessee for all the three assessment years dated 13.3.2002, 13.3.2002 and 04.7.2002. The assessee submitted a representation seeking to furnish reasons for reopening for the assessment year 1995-96, but was not favoured with any reply. A similar request was made for the assessment year 1997-98, for which, the assessee was informed by the Department that there was no necessity to divulge the reasons to the assessee. This stand was taken on account of the fact that at the relevant point of time, the decision of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. Vs. ITO [reported in (2003) 259 ITR 19], was not available. 9. Be that as it may, the assessee stated that the issuance of notice for reopening was not tenable and it was a clear case of change of opinion. However, they did not file any return of income pursuant to the notice issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. 16. In the affidavits filed in support of the said writ petitions, the assessee raised factual and legal contentions. The facts remained uncontroverted till the writ petitions were dismissed largely on the ground that a writ petition challenging the notice under Section 148 of the Act was premature. After the dismissal of the said writ petitions, the Department furnished reasons for reopening to the assessee and the reasons have now been set out in the counter affidavit filed on behalf of the respondents by the Assistant Commissioner of Income Tax, Circle-I, Namakkal, who is the Assessing Officer of the assessee. 17. The argument of Mr.A.P.Srinivas, learned Senior Standing Counsel appearing for the Department is that though the reassessment proceedings had been proposed after a period of four years, yet, it was within the period of six years, that sufficient material was available with the Department gathered during investigation and that the Proviso to Section 147 of the Act stood attracted. It is further submitted that the impugned orders in the said writ petitions were only notices and that the assessee having not filed a return of income pursuant to such notices, they are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith regard to effect of the order passed by the Tribunal in respect of block assessment, we have carefully gone through the order passed by the Tribunal. On going through the order, we find that the Department was not right in contending that the merits of the matter were not considered by the Tribunal. This is evident from the order passed by the Judicial Member dated 06.9.2000, which ultimately stood confirmed by the third Member resulting in the order dated 18.2.2002 quashing the block assessment. The order passed by the Tribunal, in depth, analyzed the transactions done by the assessee and in this regard, it would be relevant to extract paragraphs 4.29, 4.30, 4.31, 4.33 and 4.35 of the said order, which read as hereunder : "4.29 : There is no dispute about the fact that the transactions, which are subject of consideration, are all reflected in the books of accounts. The agreements, the insurance documents, the sales tax records, the confirmation of the finance broker, confirmation of the parties providing finance are a part of record and support the version depicted by entries in books of account. Excepting five parties who have denied the transaction, all other parties ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transactions. The said pages only contain an example. The accounting entries include, capitalization of fixed assets, reflection of the higher management fees, reflection of lease management fees, receivables from the party, entries containing assignment of the lease management fee to the financier; the fact that initial payment has been made to the financier, the fact that lease rents have been received and the fact that lease rent is adjusted against the H P instalments and last but not the least, transfer of proportionate amount from the unexpired finance charges to finance charges account. .... 4.33 : In view of the overwhelming evidence, it is not possible to accept the argument of the Department that there exists undisclosed income in the present case. The argument of the D.R., that a case where taxable income has not been properly disclosed comes within the purview of undisclosed income is not tenable. .... 4.35 : In the absence of undisclosed income, there was complete lack of jurisdiction with the Department to proceed under Chapter XIV-B in the form of a block assessment. The exercise not being warranted by facts and law has to be declared invalid as such. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessment years 1995-96 and 1996-97. The Division Bench of this Court, to which one of us (TSSJ) was a party, considered the entire matter including the findings recorded by the Tribunal qua the block assessment, allowed the appeals filed by the assessee and quashed the proceedings, the relevant portions of which read thus : "26. A reading of the order of the learned Senior Vice President reveals that he concurred with the views of the Vice President that the seized materials did not disclose any concealed income, as the transactions were very much available in the books of accounts of the assessee. He further pointed out that the crux of the allegation, namely, the transactions were only in form but not in substance was not considered necessary because the only issue was whether the transactions could have resulted in undisclosed income. He further pointed out that the learned Vice President had touched upon the documents seized and on the facts found in the books of accounts, learned Vice President held that except to make allegation on the depreciation claim as false and not allowable under the provisions of the Act, there was no evidence to suggest that the entries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, as far as the facts in the case on hand is concerned, as is evident from the notice of revision, the basis disclosed in the notice is the block assessment proceedings, wherein, lease and buy back transactions were found to be bogus. Consequently, the Commissioner viewed that the assessee was not entitled to deduction on margin money and hire management fee, apart from the grant of 100% depreciation. 29. The Revenue does not deny the fact that the block assessment was a subject matter of appeal before the Tribunal and the majority view had become final. Even though the Revenue made strenuous argument that the depreciation was not the subject matter, we fail to understand such a line of argument, since the order of the Tribunal as well as the block assessment order clearly point out that the claim on depreciation was also considered on account of doubt on the genuineness of the transactions. We may also point out herein that the assessee in its reply specifically pointed out that the claim on depreciation in respect of 13 transactions were disallowed leaving out M/s.Morgan Industries Limited. Thus, the Department had consciously allowed the claim of the assessee on depreciatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essity for them to divulge the reasons for reopening. Nevertheless, the said decision in the case of GKN Driveshafts (India) Ltd., has come into force and it binds both the Department as well as the assessee. 28. The endeavour of the learned Senior Standing Counsel appearing for the Department is to convince us not to exercise our jurisdiction on the ground that the assessee should be asked to file their objections to the reasons for reopening, which had already been furnished after the dismissal of the said writ petitions and thereafter work out their remedies in accordance with law. 29. Under normal circumstances, this Court might have considered such a plea raised by the Revenue. But, the case on hand has a chequered history from the year 1996. The assessee has been successful in obtaining orders not only quashing the block assessment, but also in the proceedings initiated under Section 263 of the Act. Therefore, if there are materials available before this Court as to what are the reasons for reopening, it cannot be stated that the Court cannot look into those reasons and see as to whether there was any justification for reopening the assessments. 30. Even assuming that we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Wing of the Department made certain inquiries and investigation to verify the genuineness of the transactions relating to purchase and lease back of the machineries from the above stated parties and the corresponding claim of depreciation in respect of those assets could not be accepted. Thus, the five transactions, which have been referred to as the reasons for reopening the assessment, were, indeed, the very same transactions, which formed part of the 14 transactions, which were considered in the block assessment as well as in the proceedings under Section 263 of the Act. 34. In this regard, we have perused the return of income filed by the assessee for the relevant assessment years, in which, the claim for depreciation had been disclosed. Therefore, it is clear that the assessee disclosed all material information to the Assessing Officer. That apart, there is no allegation made by the Department against the assessee that they failed to truly and fully disclose all relevant material. Thus, without any such allegation against the assessee, the Department would not be justified in reopening the assessment by exercising its power by issuing notices under Section 148 of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning proceedings, which were initiated after the judgment in the decision of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd., and in that case, there was no earlier round of litigation culminating in a judgment in tax case appeals as in the cases on hand. 39. Therefore, on facts, the said decision is distinguishable. That apart, the assessee in the said case, on certain assumptions, sought to canvass the issue that the reopening was bad in law. The Court considered the fact situation, directed that the assessee should submit his objections to the reasons for reopening and then proceed in accordance with law. Therefore, on the fact situation, which was prevailing in the decision in the case of T.V.Mylsamy, the decision rendered by this Court was correct. Nevertheless, when it comes to reopening of assessment, the Court has to consider totality of the circumstances especially when the assessee contends that the reopening of the assessment is without jurisdiction. 40. Hence, the Department need not have any apprehension that interference with a notice under Section 148 of the Act even without a return being filed by the assessee would open a flood gate of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ni Sugars & Chemicals Ltd.; (ii) Prakash Industries Ltd. (three transactions); and (iii) Oloklin Plants & Equipments. These transactions formed part of 14 such transactions done by the assessee and the genuineness of the transactions were examined by the Tribunal while considering the validity of the block assessment and it was noted that there was no denying the fact that all transactions were done through banking channels, the entries in the bank documents confirmed the position and the Department could not rebut the contentions made on behalf of the assessee. 43. It appears that five of the parties denied the transactions. This was also considered by the Tribunal and it was noted that they had been proceeded against by way of a civil suit and the outcome of the civil suit was awaited. The Tribunal further noted that though the parties denied the transactions, they declared the commission received from the transactions as their income from undisclosed sources and they admitted to have signed the documents. Therefore, the Tribunal held that the mere fact that some of the parties denied the transaction could not lead to existence of undisclosed income especially when all the part ..... X X X X Extracts X X X X X X X X Extracts X X X X
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